The ACIT, Central Circle-2(4), Ahmedabad V. Shri Minesh M.Shah, Ahmedabad

ITSSA 369/AHD/2011

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6405 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Business income; Validity of assessment
• Section: 153A; 132

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER IT(SS)A NO.369/AHD/2011 WITH CO NO.147/AHD/2011 / ASSTT.YEAR : 2006-2007 A N D IT(SS)A NO.370/AHD/2011 WITH CO NO.146/AHD/2011 / ASSTT.YEAR : 2007-2008 ACIT, CENT.CIR.2(4) AHMEDABAD. VS. MINESH M. SHAH F/2. CHITRA AMIT APARTMENT OPP: LA GAJJAR CHAMBERS ASHRAM ROAD, AHMEDABAD. PAN : AFGPS 3056 P ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI O.P. SHARMA, CIT-DR ASSESSEE BY : SHRI S.N. SOPARKAR, SR. ADVOCATE WITH SHRI MS.URVASHI SHODHAN, AR / DATE OF HEARING : 17/07/2019 / DATE OF PRONOUNCEMENT: 15/10/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE LD.CIT(A) HAS DECIDED TWO APPEALS OF ASSESSEE F OR ASSESSMENT YEARS 2006-07 AND 2007-08 VIDE ORDER DATED 24-2-201 1. DISSATISFIED WITH THIS ORDER, REVENUE HAS FILED APPEAL BEARING NO.367 AND 370/AHD/2011. ON RECEIPT OF NOTICE IN BOTH THE APPEALS, THE ASSES SEE HAS FILED CROSS IT(SS)A NO.369/AHD/2011 & 3 ANS. 2 OBJECTION BEARING NOS.147 AND 146/AHD/20112. SINCE COMMON ISSUES ARE INVOLVED, THEREFORE, WE HEARD BOTH THE APPEALS, AND DEEM IT APPROPRIATE TO DISPOSE OF THESE APPEALS BY WAY OF THIS COMMON ORDE R. 2. SHORT QUESTION INVOLVED IN ALL THESE APPEALS REL ATES TO, WHETHER ON SALE OF MANDAVA LAND PROFIT ELEMENT IS TO BE ADDED IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED INCOME OR, WHICH IS TO BE R ESTRICTED TO BROKERAGE INCOME ON SUCH TRANSACTION ? 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT ON THE ASSESSEES AS WELL AS IN THE CASE OF SEJAL MAHENDRA GROUP OF CASES ON 25.7.2007. A NOTI CE UNDER SECTION 153A WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPON SE TO THE NOTICE, THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 18.9.200 9 DECLARING TOTAL INCOME AT RS.24,140/- IN THE ASSTT.YEAR 2006-07, AND RS.13 ,290/- IN THE ASSTT.YEAR 2007-08. ACCORDING TO THE AO, DURING THE COURSE OF SEARCH AT THE RESIDENCE OF THE ASSESSEE AS WELL AS AT PREMISES OF SEJAL SHA H, IT REVEALED THAT AN AGREEMENT WAS EXECUTED ON 11.5.2005 BETWEEN MANIBHA DRA TRADELINK P. LTD., (MANIBHADRA FOR SHORT) AND MINESH SHAH. AC CORDING TO THIS AGREEMENT FOLLOWING UNDERSTANDING WAS ARRIVED AT: (A) MINESH SHAH ALONG WITH HIS FAMILY MEMBERS/ ASSOCIATES OWN AND HOLDS AGRICULTURAL LAND MEASURING 100 ACRES AT VILLAGE MHATROLI (B) MANIBHADRA IS TO DEVELOP A SCHEME OF FARM H OUSES THROUGH A SEPARATE ENTITY ESTABLISHED BETWEEN MANIBHADRA AND MARUTI REALTOR PVT. LTD. (C) MINESH SHAH HAS POWER OF ATTORNEY 7 AUTHORI TY IN RESPECT OF THE LANDS AND HE SHALL BE RESPONSIBLE AND ENSURE TH AT ALL THE RELATIVES/ ASSOCIATES SHALL EXECUTE ALL THE DOCUMEN TS/AGREEMENTS. IT(SS)A NO.369/AHD/2011 & 3 ANS. 3 (D) IT IS AGREED THAT LAND WOULD BE CONSIDERED AS SOLD FOR THE TOTAL CONSIDERATION OF RS.7.02 CRORES. AMOUNT OF RS.5,26, 50,000/- BEING 75% OF TOTAL CONSIDERATION SHALL BE PAID WITHIN A P ERIOD OF SIX MONTHS. (E) THE BALANCE OF RS. 1,75,50,000/- BEING 25% OF TOTAL CONSIDERATION FOR THE LAND WOULD HE CONSIDERED AS A . CONTRIBUTION BY MINESH SHAH TOWARDS ORGANIZING DEVELOPING AND MARKE TING OF THE SCHEMES. (F) MANIBHADRA IS TO ARRANGE TOTAL FUND OF RS.2 5 CRORES FOR THE PROJECT TO BE IMPLEMENTED ON THE LAND. (G) IT IS AGREED UPON THAT MINESH SHAH OR PERSO N NOMINATED BY MINESH SHAH SHALL BE RESPONSIBLE FOR AND DO THE MAN AGEMENT OF SCHEME. (H) MANIBHADRA SHALL BE ENTITLED TO 75% OF THE PROF IT AND MINESH SHALL BE ENTITLED TO 25% OF THE PROFIT. 4. SOMEHOW, THEIR COMMON PROJECT DID NOT MATERIALIS E. OUT OF HUNDRED ACRE OF LAND, IT REVEALED THAT ONLY 62.325 ACRES I. E. 2493 GUNTHAS WERE BEING ARRANGED BY SHRI MINESH SHAH AND SOLD TO SHRI SEJAL SHAH. ACCORDING TO THE AO, AS PER THIS AGREEMENT, TOTAL SALE CONSIDERA TION WAS DETERMINED AT RS.7,02,000/- PER ACRE. THE AO FURTHER OBSERVED FR OM THE DETAILS OF EVIDENCE FOUND DURING THE COURSE OF SEARCH FROM HAR D-DISC OF COMPUTER OF SHRI SEJAL SHAHS OFFICE REVEALED THAT CHEQUE PAYME NTS AS WELL AS CASH PAYMENTS WERE MADE. THE LD.AO HAS WORKED THE TOTAL CONSIDERATION AS UNDER: AREA OF LAND SOLD BY ASSESSEE : 62.325 ACRES I.E. 2 493 GUNTHAS CONSIDERATION ON ABOVE LAND : 62.325 X RS.7,02,000/ - = RS.4,37,52,150/- 5. THE AO FURTHER OBSERVED THAT IN F.Y.2005-06, 717 GUNTHAS I.E. WAS SOLD THROUGH REGISTERED SALE DEED. THE PRICE AGREE D BETWEEN THE PARTIES AT THE RATE OF RS.7,02,000/- PER ACRE FOR THIS LAND WO ULD COME TO IT(SS)A NO.369/AHD/2011 & 3 ANS. 4 RS.1,25,83,350/-, WHEREAS AS PER THE SALE DEED, THE CONSIDERATION RECEIVED WAS SHOWN AT RS.53,77,500/- IN THE ASSTT.YEAR 2007- 08, THE ASSESSEE HAS SOLD REMAINING 44.4 ACRES OF LAND WHOSE CONSIDERATI ON AS PER RATE AGREED BETWEEN THE PARTIES WOULD COME OUT TO RS.3,11,68,80 0/-, WHEREAS DOCUMENTED SALE CONSIDERATION IN THE SALE DEED SHOW N AT RS.1,15,18,500/-. THUS, THERE IS DIFFERENCE OF RS.1,96,49,500/-. THI S DIFFERENCE I.E. RS.72,05,850/- IN THE ASSTT.YEAR 2006-07 AND RS.1,9 6,49,500/- IN THE ASSTT.YEAR 2007-08 HAS BEEN CONSIDERED BY THE AO AS PROFIT OF THE ASSESSEE. THE REASONS ASSIGNED BY THE AO IS THAT C ASH PAYMENT HAS BEEN SHOWN IN THE ACCOUNTS MAINTAINED AT THE OFFICE OF S HRI SEJAL SHAH, HENCE, ACCORDING TO HIM, THE CASH COMPONENT IS BEING RETAI NED BY THE ASSESSEE IN THE SHAPE OF PROFIT ON THE SALE AND DOCUMENT PRICE REFLECTED IN THE SALE DEED WAS PASSED TO THE ORIGINAL LAND OWNER FROM WHOM THE LAND HAS BEEN ARRANGED BY SHRI MINESH SHAH. ACCORDINGLY, THE AO HAS MADE ADDITION OF RS.72,05,850/- AND RS.1,96,49,500/- IN THE ASSTT.YE AR 2006-07 AND 2007- 08 RESPECTIVELY. 6. ON APPEAL, THE LD.CIT(A) HAS OBSERVED THAT ROLE OF THE ASSESSEE WAS ONLY OF MIDDLEMAN WHO HAS ARRANGED THE LAND. IF AC TUAL SALE CONSIDERATION REFLECTED IN THE SALE DEED IS BEING CONSTRUED AS GI VEN TO THE LANDLORD, THEN THE CASH COMPONENT IS ALSO TO BE CONSIDERED GIVEN T O THESE PERSONS. THE ASSESSEE AT THE MOST COULD RETAIN THE COMMISSION BE ING A MIDDLEMAN. THE LD.CIT(A) HAS RESTRICTED THIS ADDITION TO RS.7,87,0 00/- IN THE ASSTT.YEAR 2006-07, AND RS.1,97,000/- IN THE ASSTT.YEAR 2007-0 8. THE REVENUE IS IMPUGNING THE DELETION OF ALLEGED PROFIT ON SALE OF LAND FROM THE HANDS OF THE ASSESSEE BY THE LD.CIT(A) IN ITS APPEAL; WHEREA S THE ASSESSEE IS CHALLENGING ESTIMATION OF COMMISSION INCOME IN HIS HAND IN BOTH THE YEARS. IT(SS)A NO.369/AHD/2011 & 3 ANS. 5 AT THIS STAGE, WE DEEM IT APPROPRIATE TO TAKE NOTE OF THE FINDING OF THE LD.CIT(A) RECORDED IN PARA-5.8, WHICH READS AS UNDE R: 5.8. I AGREE WITH THE AR THAT THE APPELLANT HAS SO LD THE LAND OF HIS RELATIVES IN THE CAPACITY OF AN AGENT WHO HAD GIVEN POWER OF ATTORNEY TO SELL THE LAND ON THEIR BEHALF. THEREFORE, THE UN DISPUTED FACT REMAINS THAT THE LAND IN QUESTION SOLD TO SEJAL SHA H GROUP IS OWNED BY THE RELATIVES OF THE APPELLANT AND NOT BY HIM. T HEREFORE, THE SALE PROCEEDS OF THE LAND SOLD BY THE APPELLANT ON THEIR BEHALF WAS ALSO ASSESSABLE IN THEIR RESPECTIVE HANDS. IT IS ALSO HE LD THAT THE SALE PRICE OF THE SAID LAND WAS RUPEES 7.02 LACS PER ACRE AS PER THE DEVELOPMENT AGREEMENT BETWEEN THE APPELLANT AND SEJAL SHAH GROU P. THEREFORE, NOT ONLY THE DOCUMENTED PRICE IS TO BE ASSESSED IN THE HANDS OF THE LANDOWNERS BUT ALSO THE CASH AMOUNT. IN MY OPINION, THE AO WAS NOT JUSTIFIED IN TREATING THE DOCUMENTED PRICE IN THE H ANDS OF THE LANDOWNERS AND THE DIFFERENCE OF THE AGREED PRICE A S PER. THE DEVELOPMENT AGREEMENT AND THE DOCUMENTED PRICE IN T HE HANDS OF THE APPELLANT AS BUSINESS RECEIPT. IT MAY BE MENTIONED THAT THE INTEREST OF THE APPELLANT IN THE PROJECT WAS TO EARN 25% PROFIT AFTER 100 ACRES OF LAND WAS ACQUIRED FOR THE PROJECT, IT WAS DEVELOPED FOR FARMHOUSES AND SOLD AS FARMHOUSES. TILL THE TIME, AS PER THE DEVEL OPMENT AGREEMENT, THE SCHEME OF FARMHOUSES IS FLOATED BY THE APPELLAN T JOINTLY WITH SEJAL SHAH GROUP, THERE IS NO INTEREST OF THE APPELLANT P ARTICULARLY IN THE SALE OF 100 ACRES OF LAND. SINCE THE APPELLANT HAD ONLY THE POWER OF ATTORNEY AND NONE OF SUCH POWER OF ATTORNEYS IS IRREVOCABLE, IT WOULD BE PRESUMED THAT THE LAND WAS SOLD BY THE APPELLANT ON BEHALF OF HIS RELATIVES IN THE CAPACITY OF AN AGENT. SINCE NO LAN D BELONGING TO THE APPELLANT HAS BEEN SOLD TO SEJAL SHAH GROUP IN THE . PROJECT, IN MY OPINION, IT WOULD NOT BE PRUDENT TO TAX THE PART OF SALE PROCEEDS IN THE HANDS OF THE APPELLANT AND PARTLY IN THE HANDS OF T HE LANDOWNERS. EVEN IF, THE APPELLANT HAS RECEIVED ANY CONSIDERATION IN CLUDING CASH AMOUNT ON THE SALE OF THE LAND OF HIS RELATIVES, IT WOULD BE PRESUMED THAT THE CASH AMOUNT WAS RECEIVED BY HIM ON BEHALF OF HIS RE LATIVES. THIS VIEW IS SUPPORTED BY THE ITAT AMRITSAR AS MENTIONED IN T HE WRITTEN SUBMISSION OF THE APPELLANT. IN OTHER WORDS, IT IS HELD THAT THE SALE PROCEEDS OF THE LAND SOLD BY THE APPELLANT ON BEHAL F OF HIS RELATIVES IS TAXABLE IN THE HANDS OF THE RESPECTIVE OWNER OF THE LAND AND NOT IN THE HANDS OF THE APPELLANT. HOWEVER, AT THE MOST IT CAN BE STATED THAT THE APPELLANT HAS WORKED AS-AN AGENT ON BEHALF OF HIS R ELATIVES AND THEREFORE HE WAS ENTITLED TO SOME BROKERAGE ON THE SALE OF SUCH LAND. AS PER THE MARKET PRACTICE, THE BROKERAGE VARIES FR OM 1.5% TO 2.5% DEPENDING UPON THE VOLUME OF THE BUSINESS. IN THIS CASE, SINCE THE IT(SS)A NO.369/AHD/2011 & 3 ANS. 6 APPELLANT HAS ONLY SOLD 56.3 ACRES OF LAND AT THE R ATE OF RUPEES 7.02 LACS PER ACRE TOTAL AMOUNTING TO RUPEES 3.95 CRORES, IT IS HELD THA T THE APPELLANT HAS EARNED BROKERAGE AT THE RAT E OF 2.5% AMOUNTING TO RUPEES 9.85 LAKHS IN THIS TRANSACTION. AT THE MOST, THE INCOME TO THE EXTENT OF RUPEES 9.85JAKHS CAN BE ASS ESSED IN THE HANDS OF THE APPELLANT' AS BROKERAGE INCOME. SINCE IN ASSESSMENT YEAR 2006-2007, ONLY 45 ACRES OF LAND WAS SOLD, THE PROPORTIONATE BROKERAGE INCOME OF RUPEES 7.87 LACS IS ASSESSABLE IN ASSESSMENT YEAR 2006-2007 AND THE BALANCE AMOUNT OF RUPEES 1.9 7 LACS IN ASSESSMENT YEAR 2007-2008. IN OTHER WORDS, THE ADDI TION OF RUPEES 7.87 LACS IN ASSESSMENT YEAR 2006-2007 AND RUPEES 1 .97 LACS IN ASSESSMENT YEAR 2007- 2008 IS SUSTAINED AND THE BAL ANCE ADDITION IS DIRECTED TO BE DELETED. 7. WITH THE ASSISTANCE OF THE LD.REPERSENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE RECORD WOUL D INDICATE THAT ORIGINALLY A MEMORANDUM OF UNDERSTANDING WAS ARRIVED AT BETWEE N SEJAL SHAH GROUP AND THE ASSESSEE FOR DEVELOPMENT OF FARM-HOUSE PROJ ECT, AFTER PURCHASE OF 100 ACRE LAND. THE SHARE OF PROFIT IN THE HANDS OF THE ASSESSEE WAS 25%. FINANCE WAS TO BE ARRANGED BY SEJAL SHAH GROUP, AND THE ASSESSEE WAS TO ARRANGE 100 ACRES OF LAND, WHICH WAS TO BE PURCHASE D BY MANIBHADRA REPRESENTED BY SHRI SEJAL SHAH. THE LD.AO HAS NOT DISPUTED THAT THIS PROJECT WAS NOT MATERIALIZED. 100 ACRE LAND COULD NOT BE PURCHASED. OUT THAT 100 ACRES ONLY 62.325 ACRES WAS PURCHASED. TH US, THE QUESTION REMAINED, WHETHER ON THIS ARRANGEMENT OF 62.325 ACR ES OF LAND, THE ASSESSEE HAS EARNED PROFIT REPRESENTED BY ALLEGED C ASH PAYMENT, AND REQUIRED TO BE ASSESSED IN HIS HAND OR HE HAS JUST ACTED AS MIDDLEMAN ON THE STRENGTH OF POWER OF ATTORNEY, REPRESENTING HIS REL ATIVES FOR SALE OF THIS LAND. WE COULD APPRECIATE THE OBJECTION OF THE AO IF HE HAS ASSESSED THE CHEQUE PAYMENT REFLECTED IN THE SALE DEED IN THE HA NDS OF THE ASSESSEE. IN OTHER WORDS, THE PROFIT ELEMENT INVOLVED IN THE CON SIDERATION REFLECTED IN THE SALE DEED, IF ASSESSED IN THE HANDS OF THE ASSE SSEE. THE ACTUAL IT(SS)A NO.369/AHD/2011 & 3 ANS. 7 CONSIDERATION IS BEING CONSIDERED AS RECEIVED BY TH E LANDOWNER ON WHOSE BEHALF THE ASSESSEE WAS JUST ACTED AS POWER OF ATTO RNEY HOLDER. THE POWER OF ATTORNEY HOLDER ONLY EXERCISE HIS RIGHTS AUTHORI ZED IN THIS BEHALF ON BEHALF OF THE ACTUAL OWNER. IT COULD NOT BE ASSUME D THAT OUT OF SALE CONSIDERATION, THE CASH COMPONENTS COULD BE RETAINE D BY THE POA AND SALE CONSIDERATION REFLECTED IN THE SALE DEED WENT TO TH E ACTUAL OWNER. THIS INTERPRETATION IS BASED ON THE ASSUMPTION OF THE AO . THE LD.CIT(A) HAS RIGHTLY NOT APPRECIATED THIS CONSTRUCTION OF FACTS IN THE FINDING EXTRACTED (SUPRA). AS FAR AS ESTIMATION OF PROFIT IN THE SHA PE OF BROKERAGE IS CONCERNED, THE LD.CIT(A) HAS RIGHTLY WORKED OUT AND HAS RIGHTLY ASSESSED IN THE HANDS OF THE ASSESSEE. THUS, IN THIS FOLD OF G RIEVANCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD.CIT( A), AND THIS GROUND OF APPEAL RAISED BY THE REVENUE AS WELL AS GROUND NO.2 IN THE CO OF THE ASSESSEE FOR THE ASSTT.YEAR 2006-07 AND 2007-08 ARE REJECTED. 8. IN GROUND NO.1, IN BOTH THE YEARS, THE ASSESSEE HAS CHALLENGED VALIDITY OF ASSESSMENT ORDER PASSED UNDER SECTION 1 53A OF THE ACT, BUT NO ARGUMENTS WERE ADVANCED ON THIS ISSUE. HENCE, THIS GROUND IS ALSO REJECTED. 9. IN THE RESULT, APPEALS OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 15 TH OCTOBER, 2019 AT AHMEDABAD. S D / - (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 15/10/2019 IT(SS)A NO.369/AHD/2011 & 3 ANS. 8 !' #$%&'( )*'$ / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A) 5. *+, $-- , / DR, ITAT, 6. ,/0 1 / GUARD FILE. + , / BY ORDER, -(/,./! (012! ( DY./ASSTT.REGISTRAR) /! )(2&3/ )4!, ).67 / ITAT, AHMEDABAD 1. DATE OF DICTATION- 15.10.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 15-10-2019 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. DATE OF DESPATCH OF THE ORDER