DCIT, Chandigarh V. Smt. Jaswant Kaur, Mohali

ITA 896/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0088 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Cost of acquisition
• Section: 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 896/CHD/2013 ASSESSMENT YEAR: 2009-10 THE DCIT, CENTRAL CIRCLE-1, VS. SMT. JAWANT KAUR, CHANDIGARH MOHALI PAN NO. ACLPK6637Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANOJ MISHRA(CIT-DR) RESPONDENT BY : SH. SUDHIR SEHGAL DATE OF HEARING : 14.03.2016 DATE OF PRONOUNCEMENT : 18.04.2016 . ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)- CHANDIGARH DATED 7.6.2013 RELATING TO ASSESSMENT YE AR 2009-10. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL, READS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS. 1,98,96,509/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN OVER & ABOVE DECLARED BY ASSESSEE. 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SSESSEE IS EARNING INCOME FROM HOUSE PROPERTY, SHORT TERM CAPITAL GAIN ON S ALE OF PLOT AND INCOME FROM OTHER SOURCES. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAIN OF RS. 1,33,99,833/- ON ACC OUNT OF SALE OF PLOT NO. 500, SECTOR 90-91, MOHALI. WHEN THE ASSESSING OFFICER RA ISED QUERY IN THIS REGARD, THE ASSESSEE VIDE HER LETTER DATED 26.9.2011 STATE D THAT PLOT NO. 500 MEASURING 6216.67 SQUARE YARDS WAS PURCHASED FROM S. BALWINDE R SINGH S/O SH. PRITAM SINGH WHO IS STATED TO BE AN NRI. SHRI BALWINDER SI NGH HAD PURCHASED THIS PLOT FROM M/S JANTA LAND PROMOTERS LTD. (M/S JLPL) BY WA Y OF ALLOTMENT LETTER. THE SAID PLOT WAS FURTHER PURCHASED BY THE ASSESSEE ALO NG WITH OTHER CO-OWNERS NAMELY SH. MANPREET SINGH AND SMT. MANJIT KAUR. IT WAS CLAIMED BY THE ASSESSEE THAT THE PLOT IN QUESTION WAS PURCHASED BY WAY OF TRANSFER LETTER FROM SHRI BALWINDER SINGH IN HER FAVOUR AND OTHER CO-OWN ER. THE ASSESSEE MADE PAYMENT OF RS. 2,03,03,847/- AS HER SHARE IN PURCHA SE OF SAID PLOT NO. 500. SUBSEQUENTLY, THE PLOT WAS FURTHER SOLD OUT TO M/.S BROOKS LABORATORY LTD., SCO 37, MANIMAJRA, CHANDIGARH FOR A SALE CONSIDERAT ION OF RS. 3,37,03,680/- ON WHICH SHORT TERM CAPITAL GAIN OF RS. 1,33,99,833/- WAS SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT AS PER SECTION 195 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), IT WAS MANDATORY TO DEDU CT TDS FROM PAYMENTS MADE TO THE NRIS. THE ASSESSEE ADMITTED BEFORE THE ASSES SING OFFICER THAT TDS AS PER THE PROVISIONS OF SECTION 195 OF THE ACT TDS HAD NO T BEEN DEDUCTED OUT OF THE PAYMENT MADE TO SHRI BALWINDER SINGH WHO HAD PURCHA SED THE PLOT IN QUESTION FROM M/S JLPL. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER CALLED FOR INFORMATION U/S 133(6) OF THE AC T FROM M/S JLPL AND NOTICED THAT THIS PLOT WAS ALLOTTED ON 14.8.2007 TO SHRI BA LWINDER SINGH IN EXCHANGE OF AN EARLIER PLOT NO. 169, ALLOTTED ON 7.6.2006. THE TOTAL AMOUNT OF SALE CONSIDERATION INCLUDING INTEREST WAS AT RS. 1,65,29 ,347/-. THE ALLOTMENT LETTER WAS SENT TO SHRI BALWINDER SINGH BY REGISTERED POST AT HIS USA ADDRESS. THE ASSESSING OFFICER OBSERVED THAT SHRI BALWINDER SING H DID NOT FURNISH HIS ADDRESS 3 AND PHONE NUMBERS IN THE APPLICATION FORM AND EVEN THE ADDRESS OF THE NOMINEE WAS NOT MENTIONED IN THE APPLICATION FORM. FURTHER, THE ASSESSING OFFICER ALSO MADE SOME ENQUIRIES FROM THE BANK, FROM WHERE MONEY HAD BEEN TRANSFERRED TO JLPL FOR PURCHASE OF AFORESAID PLOT. AFTER GATHERI NG INFORMATION FROM VARIOUS SOURCES, THE ASSESSING OFFICER ISSUED A LETTER TO T HE ASSESSEE WITH A DIRECTION TO FURNISH THE INFORMATION ABOUT THE SELLERS OF THE PL OT SHRI BALWINDER SINGH. THE ASSESSING OFFICER FINALLY CAME TO THE CONCLUSION TH AT SHRI BALWINDER SINGH WAS A DUMMY APPLICANT OF THE ASSESSEE AND M/S JLPL AND IT WAS A SHAM TRANSACTION ENTERED INTO BETWEEN M/S JLPL AND SHRI BALWINDER SI NGH TO INFLATE THE COST OF ACQUISITION OF PLOT NO. 500, SECTOR 82, MOHALI TO R EDUCE THE AMOUNT OF SHORT TERM CAPITAL GAIN TAX. CONSEQUENTLY, THE ASSESSING OFFICER WORKED OUT THE SHORT TERM CAPITAL GAIN AT RS. 3,32,96,342/- AS AGA INST THE SHORT TERM CAPITAL GAIN DECLARED IN THE RETURN OF INCOME AT RS. 1,33,9 9,833/- BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER MADE THE ADDITI ON OF RS. 1,98,96,509/- (RS. 3,32,96,342 RS. 1,33,99,833/-) AND THE SAME WAS A DDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSER VING AS UNDER:- 5.2 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL. THE ASSESSING OFFICER WORKED OUT THE COST IN THE HANDS OF THE JLPL AT RS. 9,32,550/- AND HAS WORKED OUT THE COST OF 44.16% SHARE OF THE APPELLANT AT RS. 4,11,8 14/- WHICH HAS BEEN SUBSTITUTED FOR THE COST OF ACQUISITION OF RS. 1,71,19,363/- TAKEN BY THE APPELLANT. AT THE OUTSET , THE COST OF ACQUISITION IN THE HANDS OF JLPL CANNOT BE TAKEN AS COST OF ACQUISITION IN THE HANDS OF THE APPELLANT SINCE THA T WAS TO BE TAKEN FOR COMPUTING CAPITAL GAIN IN THE HANDS OF TH E JLPL. SH. BALWINDER SINGH IS A GENUINE PERSON, SINCE HE P OSSESSES A PASSPORT AND THE BANK ACCOUNT OPENING FORM HAD BEEN ATTESTED BY THE AUTHORITIES OF STATE BANK OF INDIA. MOREOVER, COPY OF TRANSFER LETTER DULY ATTESTED BY NOTARY PUB LIC OF 4 CALIFORNIA, LOS-ANGELES WAS ALSO PRODUCED TO ESTABL ISH THE GENUINENESS OF TRANSACTION OF APPELLANT WITH SH. BA LWINDER SINGH. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, I DON'T HESITATE IN HOLDING THAT THE ASSESSING OFFICER WAS NOT RIGHT TO CONCLUDE THAT SH. BALWINDER SINGH WAS A DUMMY APPLI CANT OF THE APPELLANT AND OF JLPL. IN FACT, IF ONE HOLDS TH AT THE TRANSACTION BETWEEN THE APPELLANT AND SH. BALWINDER SINGH IS A SHAM TRANSACTION, THEN THE TRANSACTION BETWEEN JL PL AND SH. BALWINDER SINGH WILL ALSO BE A SHAM TRANSACTION IPSO- FACTO. THE TRANSACTIONS BETWEEN JLPL 65 SH. BALWIND ER SINGH AND SH. BALWINDER SINGH & APPELLANT ARE THROUGH BAN KS AND- THE ASSESSING OFFICER HAS NOT BROUGHT ANY COGENT MA TERIAL ON RECORD TO PROVE THAT THE TRANSACTION WERE NOT GENUI NE. HENCE, THE ASSESSING OFFICER WAS NOT RIGHT IN CONCLUDING T HAT SH. BALVINDER SINGH WAS BROUGHT IN THE LOOP TO REDUCE T HE TAX LIABILITY. I AM ENTIRELY IN AGREEMENT WITH THE APPE LLANT THAT IF THE APPELLANT HAD TO INFLATE THE COST PRICE, THEN T HERE WAS NO NEED FOR HIM TO DECLARE THE INCOME OF RS. 1,00,00,0 00/- UNDER THE HEAD 'INCOME FROM OTHER SOURCES' TO PAY TAX @ 3 0%. 5.2.1 JLPL WAS REQUIRED TO PAY TAX ON SALE OF IMPUGNED LAND TO SH. BALWINDER SINGH AND ACTION SHO ULD BE INITIATED AGAINST JLPL IF TAX HAS NOT BEEN PAID BY JLPL. REVENUE MAY ALSO VERIFY WHETHER SH. BALWINDER SINGH HAS PAID CAPITAL GAINS TAX ON THE SALE OF LAND TO THE A PPELLANT AND OTHER CO-OWNERS. 5.2.2 IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE FINDING OF THE ASSESSING OFFICER THAT THE IMPUG NED TRANSACTION IS A SHAM TRANSACTION IS NOT CORRECT. I T IS ALSO HELD THAT THE ASSESSING OFFICER WAS NOT RIGHT IN DI STURBING THE COST OF ACQUISITION DECLARED BY THE APPELLANT AND I N INCREASING THE SHORT TERM CAPITAL GAIN DECLARED BY THE APPELLANT. THE ADDITION MADE BY THE ASSESSING OFFIC ER IS ACCORDINGLY DELETED. GROUNDS OF APPEAL NOS. 2 AND 3 ARE ALLOWED. 5 5. WE HAVE HEARD SHRI MANOJ MISHRA, LD. CIT-DR AND SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE AT LENGTH. WE HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS APPARENT FROM THE RECORD S THAT CONTENTION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT OUT OF TOTAL PAYMENT OF RS. 2,35,29,347 /- PAYMENT FOR RS. 70 LAKHS WAS RECEIVED BY WAY OF PA YEE ACCOUNT CHEQUE FROM SHRI BALWINDER SINGH FROM HIS SAVING BANK ACCOUNT MAINTAINED WITH STATE BANK OF INDIA, NRI BRANCH, SECTOR 17-B, CHANDIGARH BY THE COMPANY M/S JLPL. IT WAS ALSO EXPLAINED BY THE ASSESSEE BEF ORE THE LOWER AUTHORITIES THAT PAYMENT OF RS. 42 LAKHS WAS RECEIVED FROM SAVING BA NK ACCOUNT OF SHRI BALWINDER SINGH ON 21.7.2005 THROUGH CHEQUE NO. 582 230 AND FURTHER PAYMENT OF RS. 28 LAKHS THROUGH CHEQUE NO. 414365 I.E. 31.3 .2006. THE ABOVE PAYMENTS HAVE BEEN MADE BY SHRI BALWINDER SINGH TO M/S JLPL LTD. IT IS ALSO A MATTER OF RECORD THAT PLOT NO. 169 ORIGINALLY ALLOTTED TO SHR I BALWINDER SINGH WAS LATER ON CHANGED TO PLOT NO. 500, SECTOR 82, MOHALI. SHRI S UDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT M/S JLPL SOLD THE PLOT TO THE ORIGINAL ALLOTTEE I.E. SHRI BALWINDER SINGH FOR RS. 2,35,29,347/- AND HAD BOOKED THE SALE PROCEEDS IN IT BOOKS OF ACCOUNT AT RS. 2,60,95,711 /- IN THE YEAR 2009-10. A COPY OF THE LEDGER ACCOUNT OF M/S JLPL WAS FILED BEFORE US. SHRI SUDHIR SEHGAL LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT M /S JLPL HAS ALREADY PAID THE AMOUNT OF TAX UNDER THE HEAD BUSINESS INCOME BY T AKING INTO CONSIDERATION THE BASIC PRICE OF LAND AT RS. 7 LAKHS PER ACRE. SHRI S UDHRI SEHGAL, LD. COUNSEL FOR THE ASSESSEE CLAIMED THAT THE REVENUE HAS ACCEPTED THE TRANSACTION BETWEEN M/S JLPL AND SHRI BALWINDER SINGH AND, THEREFORE, THE A SSESSING OFFICER WAS NOT CORRECT IN HOLDING THAT SHRI BALWIDNER SINGH WAS A DUMMY APPLICANT OF THE ASSESSEE AND OF M/S JLPL. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, IN FACT, IF ONE HOLDS THAT TRANSACTION BETWEEN THE ASSESSEE AND SHRI BALWIDNER SINGH IS A SHAM TRANSACTION THEN THE TRANSACTION BETWEEN M/S J LPL AND SHRI BALWIDNER SINGH WILL ALSO BE A SHAM TRANSACTION IPSO FACTO. I N OUR OPINION, WHEN THE REVENUE HAS ACCEPTED THE TRANSACTION BETWEEN M/S JL PL AND SHRI BALWIDNER 6 SINGH REGARDING PLOT NO. 500, SECTOR 82, MOHALI THE N THERE WAS NO OCCASION FOR THE REVENUE TO HOLD THAT SHRI BALWINDER SINGH WAS A DUMMY APPLICANT OF THE ASSESSEE M/S JLPL. WE FULLY ACCEPT THIS OBSERVATIO N OF THE CIT(A) THAT SHRI BALWINDER SINGH IS A GENUINE PERSON, SINCE HE POSSE SS A PASSPORT AND BANK ACCOUNT OPENING FORM HAD BEEN ACCEPTED BY THE AUTH ORITIES OF STATE BANK OF INDIA. BESIDES ABOVE, A COPY OF TRANSFER LETTER DU LY ATTESTED BY NOTARY PUBLIC OF CALIFORNIA WAS ALSO PRODUCED BEFORE THE AUTHORITIES BELOW TO ESTABLISH THE GENUINENESS OF THE TRANSACTION OF THE ASSESSEE WITH SHRI BALWINDER SINGH. IT IS ALSO A MATTER OF RECORD THAT THE PLOT IN QUESTION W AS PURCHASED BY THE ASSESSEE ALONG WITH TWO OTHER CO-OWNERS FROM SHRI BALWINDER SINGH, BY WAY OF A TRANSFER LETTER FROM SHRI BALWINDER SINGH IN FAVOUR OF THE ASSESSEE AND OTHER CO-OWNER NAMELY SHRI MANPREET SINGH AND SMT. MANJIT KAUR. L D. COUNSEL FOR THE ASSESSEE PRODUCED A COPY OF THE ORDER PASSED BY THE CIT(A) CHANDIGARH DATED 7.6.2013 IN THE CASE OF SHRI MANPREET SINGH, WHO IS A CO-OWNER OF THE PROPERTY IN QUESTION. IN THE CASE OF SHRI MANPREET SINGH, T HE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE I.E. SHRI MANPREET SINGH. TH E REVENUE HAS ACCEPTED THE ORDER OF CIT(A), CHANDIGARH PASSED IN THE CASE OF S HRI MANPREET SINGH AND NO APPEAL HAS BEEN PREFERRED BY THE REVENUE BEFORE THE TRIBUNAL. WHILE DECIDING THE APPEAL OF SHRI MANPREET SINGH, THE CIT(A) HAS C ATEGORICALLY HELD THAT THE TRANSACTION BETWEEN M/S JLPL AND SHRI BALWIDNER SIN GH AND SHRI BALWINDER SINGH AND SHRI MANPREET SINGH ARE THROUGH BANK AND THE ASSESSING OFFICER HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO PROVE THAT THE TRANSACTIONS WERE NOT GENUINE. HE FURTHER HELD THAT ASSESSING OFFICER HAS NO RIGHT TO CONCLUDE THAT SHRI BALWINDER SINGH WAS A DUMMY APPLICANT OF SHRI MANPREET SINGH AND M/S JLPL. 7 6. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.04.2016 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 18 TH APRIL, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR