AMIT H. PATEL (HUF), MUMBAI V. INCOME TAX OFFICER 20 (1) (1), MUMBAI

ITA 7243/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78677 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Capital asset; Additional evidence
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7243/MUM/2010 ( / ASSESSMENT YEAR: 2006-07) AMIT H. PATEL (HUF) A-503, GIADIOLI, OFF YARI ROAD, ANDHERI (W), MUMBAI-400 061 / VS. INCOME TAX OFFICER, WARD 20(1)(1), PIRAMAL CHAMBERS, 7 TH FLOOR, LOWER PAREL, MUMBAI-400 051 ./ ./PAN/GIR NO. AAAHA 0838 C ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI NISHIT GANDHI !' # $ / RESPONDENT BY : SHRI M. L. PERUMAL % &'( # )* / DATE OF HEARING : 20.02.2014 +,- # )* / DATE OF PRONOUNCEMENT : 17.04.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-31, MUMBAI (CIT(A) FOR SH ORT) DATED 03.08.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 VIDE ORDER DATED 16.10.2008. 2. THE APPEAL RAISES TWO ISSUES, WHICH WE SHALL TAK E UP IN SERIATIM. THE FIRST ISSUE IS QUA THE ADDITION IN THE SUM OF RS.8,50,000/-, STATED TO BE AGAINST SALE OF FURNITURE, SOLD BY THE ASSESSEE ALONG WITH A BUNGLOW. THE ASSESSEE, A 50% CO-OWNER IN A BUNGLOW SITUATE AT 2 ITA NO. 7243/MUM/2010 (A.Y. 2006-07) AMIT H. PATEL (HUF) VS. ITO AHMEDABAD, SOLD THE SAME DURING THE RELEVANT YEAR A T RS.38,50,000/-, DISCLOSING THE PROPORTIONATE CONSIDERATION (RS.19.25 LACS) PER HIS RETURN OF INCOME (ROI) FOR THE YEAR FILED ON 28.07.2006. HIS BANK ACCOUNT, HOWEVER, REV EALED CREDIT FOR RS.1 LAC (ON 06.12.2005) AND RS.7.50 LACS (ON 25.02.2006), I.E., AT A TOTAL OF RS.8.50 LACS. THE SAME WAS EXPLAINED TO BE TOWARD CONSIDERATION FOR THE SA LE OF FURNITURE AT THE BUNGLOW, HAVING BEEN SOLD ALONG WITH. THE REASON FOR THE NON-DISCLO SURE IN THE ROI WAS STATED TO BE ON ACCOUNT OF THE FACT THAT THE SAME WAS USED FOR PERS ONAL PURPOSES AND, THUS, NOT A CAPITAL ASSET U/S. 2(14) OF THE ACT. THE SAME DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER (A.O.). THERE WAS, FIRSTLY, NO DOCUMENT SUPPORTING THE SAID SALE. TWO, THERE WAS NOTHING TO EVIDENCE THE USER OF THE SAME BY THE ASSESSEE, W HICH ONLY WOULD ENTITLE IT TO BE CONSIDERED AS AN ASSET HELD FOR PERSONAL PURPOSES A ND, THUS, A PERSONAL ASSET BY DEFINITION, EXCLUDED U/S.2(14). THE ASSESSEE GOT POSSESSION OF THE BUNGLOW ON 17.06.1996. THE SAME WAS GIVEN ON LEASE IN THE YEAR 1999. THERE WAS NO M ENTION IN THE LEASE DEED OF THE FURNITURE BEING LET ON HIRE ALONG WITH, OR OTHERWIS E OF IT (BUNGLOW) BEING A FURNISHED ONE (ALSO REFER LEASE DEED EXECUTED IN THE YEAR 2005, A T PB PGS. 104-109 ). THE FURNITURE WAS PURCHASED IN MUMBAI, AND THERE WAS NOTHING TO SHOW OF IT HAVING BEEN TRANSPORTED TO AHMEDABAD AND, FURTHER, FURNISHING THE ASSESSEES B UNGLOW UNDER REFERENCE THEREAT. THE ASSESSEE CLAIMS THE COST THEREOF TO BE AT RS.4.45 L ACS. HOWEVER, THE BILLS OF JUNE 1997, AS PRODUCED BY HIM, WERE ONLY FOR A TOTAL OF RS.2,22,3 55/-. AFTER ALL THESE YEARS OF USER, THE FURNITURE, EVEN ASSUMING SO, SHOULD HAVE BEEN SOLD FOR A FRACTION OF ITS COST, RATHER THAN AT A MULTIPLE THEREOF. THE ASSESSEES CLAIM WAS, ACCOR DINGLY, NOT ACCEPTED, WHICH VIEW FOUND CONFIRMATION AT THE END OF THE LD. CIT(A) AFT ER A DETAILED EXAMINATION OF THE ASSESSEES CASE AND THE MATERIAL ON RECORD. THE ASS ESSEES BID TO PRODUCE LORRY RECEIPT FOR THE TRANSPORT OF FURNITURE FROM MUMBAI TO AHMEDABAD WAS NOT ACCEPTED AS ADDITIONAL EVIDENCE IN THE ABSENCE OF ANY COGENT REASON FOR BE ING NOT ABLE TO PRODUCE THE SAME BEFORE THE A.O. DESPITE SUFFICIENT OPPORTUNITY BEFO RE HIM. THE ASSESSEES CLAIM WAS CONSIDERED AS BOGUS, MADE WITH A VIEW TO EVADE TAX AT RS.8.50 LACS, WHICH SUM HAD THUS RIGHTLY BEEN CONSIDERED AS A PART OF THE SALE OF TH E BUNGLOW, WITHOUT ANY CORRESPONDING RELIEF TOWARD COST OF FURNITURE. AGGRIEVED, THE ASS ESSEE IS IN SECOND APPEAL. 3 ITA NO. 7243/MUM/2010 (A.Y. 2006-07) AMIT H. PATEL (HUF) VS. ITO 3. LIKE CONTENTIONS WERE RAISED BEFORE US BY BOTH T HE SIDES, WITH THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ORDERS BY THE RE VENUE AUTHORITIES. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THERE IS NO EVIDENCE OF THE USER OF THE BUNGLOW BY THE ASSESSEE FOR THE PURPOSE OF HIS RESIDENCE OR EVEN HIS FAMILY. THE ACTUAL USER WOULD LEAVE OR GEN ERATE A HOST OF EVIDENCE IN ITS TRAIL, AS E.G. THE PAYMENT OF ELECTRICITY, WATER BILLS, ETC. THEN THERE WOULD BE A PHONE (LAND LINE) CONNECTION FOR COMMUNICATION, AS ALSO BILLS TOWARD ITS ACTUAL USE. THE FURNITURE BILLS (WHICH ARE FOR RS.4,44,711/-/PB PGS.45-53 ) ARE, SAVE FOR RS.45,154/-, TOWARDS PURCHASES FROM MUMBAI. IN THE ABSENCE OF THE TRANSPORTATION B ILL, WHAT IS THERE TO SHOW OF THE FURNITURE HAVING BEEN MEANT FOR AND USED AT THE AHM EDABAD BUNGLOW ? THE ASSESSEES PRINCIPAL PLACE OF STAY, AS IT APPEARS, IS AT MUMBA I, SO THAT THE FURNITURE MAY WELL HAVE BEEN USED AT MUMBAI. THE ASSESSEES ACCOUNTS REFLEC T FURNITURE AT RS.2,22,355/50 (AS ON 31.03.1998/PB PG.96 ). THE SAME COULD BE FOR THE REASON THAT THE ASSESS EE IS A 50% CO- OWNER OF THE BUNGLOW AND, THEREFORE, ALSO OF THE FU RNITURE PLACED THEREAT TO THAT EXTENT. BUT, THEN, HAVING RECEIVED RS.8.50 LACS IN HIS BANK ACCOUNT (ALSO REFER PB PGS.32- 33, 38- 39 ), IT IMPLIES THE TOTAL SALE CONSIDERATION OF FURNI TURE, ASSUMING SO, TO BE TWICE THE SAME, I.E., RS.17 LACS, AGAIN MAKING IT HIGHLY IMPROBABLE AND HIGH PITCHED, GIVING CREDENCE TO THE REVENUES CLAIM OF THE SAID AMOUNT HAVING BEEN ATTRIBUTED TO FURNITURE ONLY TO EVADE TAX. NO DISCLOSURE QUA THE SAME, IT IS TO BE NOTED, ACCOMPANIED THE ASSESS EES RETURN/COMPUTATION OF INCOME FOR THE RELEVANT YEAR. HOWEVER, THE ASSESSEE HAS ALSO ENCLOSED A CONFIRMATION DATED 23.02.2006, DULY NOTO RIZED, QUA THE SALE OF FURNITURE AND CORRESPONDING RECEIPT, WHICH IS FOR RS.8.50 LACS AN D IN FAVOUR OF BOTH THE ASSESSEE AND THE OTHER CO-OWNER, SMT. NITA AMIT PATEL (PB PGS.102-10 3 ). HOW IS IT THEN THAT THE ASSESSEE, A 50% OWNER OF THE BUNGLOW, HAVING INVESTED 50% OF THE COST OF THE FURNITURE, BEEN PAID THE ENTIRE SALE CONSIDERATION THEREOF? THE SAME IS, IN ANY CASE, ALMOST TWICE THE PURCHASE PRICE OF THE FURNITURE, RATHER THAN AT A FRACTION T HEREOF. THE DETAILS OF THE FURNITURE AND FIXTURE, FORMING PART OF THE CONFIRMATION AFORE-SAI D, WAS BROWSED DURING HEARING ITSELF TO FIND ONLY THREE ITEMS (OUT OF 14), I.E., AT SR. NO. 9, 10, 12, TO BE OF FURNITURE; THE BALANCE BEING QUA ELECTRICAL FITTINGS AND FANS (WHICH ARE ONLY A PART OF BUILDING); AIR 4 ITA NO. 7243/MUM/2010 (A.Y. 2006-07) AMIT H. PATEL (HUF) VS. ITO CONDITIONERS; FRIDGE, TV, ETC., SO THAT THE LD. AUT HORIZED REPRESENTATIVE (AR) CONCEDED DURING HEARING TO ONLY A PART OF THE CONSIDERATION AS BEING TOWARD FURNITURE. THE DESCRIPTION OF THE SAID FURNITURE, I.E., SOFA SET/C HAIRS, BEDS, SISAM FURNITURE, AGAIN DOES NOT MATCH THAT STATED IN THE BILLS ADDUCED. WE HAVE ALR EADY NOTED THAT NO EVIDENCE FOR TRANSPORT OF FURNITURE FROM MUMBAI TO AHMEDABAD STO OD FURNISHED; THE LD. CIT(A) HAVING NOT ACCEPTED THE ADDITIONAL EVIDENCE SOUGHT TO BE ADDUCED BEFORE HIM, AND TOWARD WHICH NO ARGUMENT OR GROUND STOOD RAISED BEFORE US. FURTHER, THERE IS NO EVIDENCE WITH REGARD TO THE USER OF THE BUILDING FOR THE PURPOSE OF OWN RESIDENCE AND, THUS, OF THE SAID ASSETS BEING HELD FOR PERSONAL USER, SO AS TO BE EX CEPTED FROM THE DEFINITION OF A CAPITAL ASSET U/S.2(14). ON THE CONTRARY, THERE ARE INSTANC ES OF THE PROPERTY BEING LEASED, ONCE IN 1999 AND ALSO IN 2005. THE ASSESSEE, HOWEVER, SHALL BE ENTITLED TO SOME RELIEF FOR THE COST OF THE SAID ASSETS, WHICH THEREFORE ARE TO BE ONLY CONSIDERED AS CAPITAL ASSETS. WE ESTIMATE THE SAME AT RS.2 LACS. THE SAME, IT SHALL BE NOTED, HOWEVER, WORKS TO OVER 25% OF THE COST OF THE BUNGLOW AS REFLECTED IN THE ASSESSEES BOOKS. THE ACQUISITION OF THE SAID ASSETS IS TAKEN AS DURING THE YEAR 1999, I.E., THE TIME TH E BUNGLOW WAS GIVEN ON LEASE FOR THE FIRST TIME. AS SUCH, WHILE THE TOTAL SALE CONSIDERATION O F RS.27.75 LACS (RS.19.25 LACS + RS.8.50 LACS) SHALL CONTINUE TO BE ASSESSED AS THAT AGAINST FURNISHED BUNGLOW, ITS COST SHALL BE INCREASED BY RS. 2 LACS, TAKEN AS EXPENDED DURING T HE F.Y. 1999-00, CONSIDERING THEM AS A PART OF THE CAPITAL ASSETS SOLD ALONG WITH. THE ASS ESSEES CLAIM, RATHER THAN BEING CONSIDERED AS BOGUS, AS BY THE REVENUE, STANDS ACCE PTED TO THAT EXTENT. WE DECIDE ACCORDINGLY, AND THE ASSESSEE GETS PART RELIEF. 5. THE SECOND ISSUE IS IN RESPECT OF A CREDIT FOR H OUSE-HOLD/LIVING EXPENSES. A CREDIT OF RS.60,000/- TO THE ASSESSEES ACCOUNT IN THE BOO KS OF ACCOUNT OF M/S. UNIVERSAL CHEMPHOUR MANUFACTURING CORP. (UC FOR SHORT) FOR THE RELEVANT YEAR TOWARD THE SAME WAS OBSERVED BY THE A.O. THE SAME WAS EXPLAINED TO BE BY WAY OF TRANSFER FROM AN ACCOUNT, SIMILARLY MAINTAINED, BY UC OF SHRI HARIHA R C. PATEL (KARTA), THE ASSESSEES FATHER. THE ASSESSEE HAVING INCURRED ALL THE HOUSEH OLD EXPENSES, A CREDIT BY WAY OF TRANSFER FROM THE ACCOUNT OF THE FATHERS HUF, AS I TS CONTRIBUTION TO THE LIVING EXPENSES OF THE FAMILY, WAS MADE TO THE ASSESSEES ACCOUNT. THE SAME WAS FOUND NOT ACCEPTABLE 5 ITA NO. 7243/MUM/2010 (A.Y. 2006-07) AMIT H. PATEL (HUF) VS. ITO AND THE EXPLANATION REJECTED. IF THE FATHER INDEED HAD TO CONTRIBUTE, AS IS THE PURPORT OF THE CORRESPONDING DEBIT TO HIS ACCOUNT, HE COULD EITHER TRANSFER FUNDS THROUGH THE BANKING CHANNEL TO THE ASSESSEE OR DIRECTLY WITHDRAW FROM I TS ACCOUNT, WITH EITHER BANK OR UC ITSELF. THE CREDIT WAS, ACCORDINGLY, ADDED AS AN UN EXPLAINED CREDIT U/S.68, AND ALSO CONFIRMED FOR THE SAME REASONS. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE FIND THE REVENUES CASE AS WHOLLY UNSUSTAINABLE. THE NATURE AND SOURCE OF THE CREDIT TO THE ASSESSEES ACCOUNT HAS BEEN EXPLAINED. THE QUANTUM OF THE LIVING EXPENSES INCURRED BY THE ASSESSEE FOR THE RELEVANT YEAR HAS NOT BEEN QUE STIONED. NO ENQUIRY HAS BEEN MADE TO ASCERTAIN IF THE ASSESSEE IS INDEED LIVING WITH HIS FAMILY, I.E., AS A JOINT FAMILY, AND WHETHER THEIR TOTAL HOUSEHOLD EXPENSE, I.E., AS INC URRED BY THE ASSESSEE (OR EVEN BY OTHER FAMILY MEMBERS), IS IN CONSONANCE WITH THE NEEDS AN D THE LIVING STANDARDS OF THE EXTENDED/JOINT FAMILY. WHAT, THEN, IS THE BASIS OF THE REJECTION OF THE AS SESSEES EXPLANATION ? THE REVENUE CANNOT MERELY BY REJECTING AN EXPLANA TION CONVERT A GOOD EXPLANATION INTO A BAD ONE. THE SOURCE OF THE CREDI T IS AGAIN ADMITTEDLY A CORRESPONDING DEBIT TO THE ACCOUNT OF THE FATHER IN THE BOOKS OF UC, A FAMILY PARTNERSHIP CONCERN. IT IS NOT NECESSARY FOR THE ASSESSEE TO MAINTAIN A LOAN A CCOUNT OF HIS FATHER, WHICH IS AN IRRELEVANT CONSIDERATION. NO CASE FOR THE NON-ACCEP TANCE OF THE ASSESSEES EXPLANATION IS IN OUR VIEW MADE OUT. THE IMPUGNED ADDITION IS ACCO RDINGLY DELETED. WE DECIDE ACCORDINGLY. 7. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY AL LOWED. /-)0 &12/) # 3. ' 4 ) # ) 56 ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 17, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 7& DATED : 17.04.2014 '.&../ ROSHANI , SR. PS 6 ITA NO. 7243/MUM/2010 (A.Y. 2006-07) AMIT H. PATEL (HUF) VS. ITO ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 8) ( ) / THE CIT(A) 4. % 8) / CIT - CONCERNED 5. ;'<= !)&>1 , * >1- , % ( / DR, ITAT, MUMBAI 6. =?2 @( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI