The Deputy Commissioner of Income Tax, Central Circle, Panaji., Panaji V. Shri Prakash Kittur., Panaji

ITSSA 54/PAN/2016

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2433 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRASHANT GADEKAR LD
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Unexplained investment; Capital asset; Cost of acquisition

Judgement Text

- 1 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI NARENDRA SINGH SAINI, HONBLE ACCOUNTANT MEMBER AND GEORGE MATHAN, HONBLE JUDICIAL MEMBER IT(SS)A NO 40 & 54 /PAN/ 201 6 : (ASST. YEAR : 2006 - 07, 07 - 08 ) DEPUTY COMMISSIONER OF INCOME TAX VS. SHRI PRAKASH KITTUR, CENTRAL CIRCLE PANAJI . (L/H OF VENKAREDDY KITTUR , C - 1, SPARSHA LA MARVEL COLONY, NEAR NIO, DONAPAULA, GOA PAN : AJNPK3964H (APPELLANT) (RESPONDENT) & CO NO. 48 & 49/PAN/2016 : (ASST. YEAR : 20 06 - 07, 07 - 08 ) (ARISING OUT OF IT(SS)A NO 40 & 54 /PAN/2016) SHRI PRAKASH KITTUR, DEPUTY COMMISSIONER OF INCOME TAX (L/H OF VENKAREDDY KITTUR , CENTRAL CIRCLE PANAJI . C - 1, SPARSHA LA MARVEL COLONY, NEAR NIO, DONAPAULA, GOA PAN : AJNPK3964H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRINIVAS NAYAK, CA DEPARTMENT BY : SHRI PRASHANT GADEKAR , LD. D.R. DATE OF HEARING : 09 /08 /2016 DATE OF ORDER : 09 /08 /2016 O R D E R PER GEORGE MATHAN, J.M : IT(SS)A 40/PAN/2016 IS THE APPEAL FILED BY THE REVENUE AND CO 48/PAN/2016 IS THE CROSS OBJECTION FILED BY THE ASSESSEE IN REVENUES APPEAL AGAINST THE ORDER OF THE LD CIT (A) PANAJI 2 IN ITA NO 37/CIT(A) - 2/PNJ/2014 - 15 DT. 28/02/2016 FOR THE A.Y 2006 - 07 - 2 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 2. IT(SS)A 54/PAN/2016 IS THE APPEAL FILED BY THE REVENUE AND & CO 49/PAN/2016 IS THE CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL AGAINST THE ORDER OF THE LD CIT (A), PANAJI 2 IN ITA NO 38/CIT (A) - 2/PNK/2014 - 15 DT. 28/03/2016 FOR THE A.Y 2007 - 08. 3. AS BOTH THE APPEALS AND CROSS OBJECTIONS ARE RELATED TO THE SAME ASSESSEE THERE BEING DISPOSED OF BY THIS COMMON ORDER. SHRI PRASHANT GADEKAR LD. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI SHRINIVAS NAYAK CA REPRESENTED ON BEHALF OF THE ASSESSEE. IT(SS) 40/PAN/2016 & CO 48/PAN/2016 4. IN THE REVENUES APPEAL IN GROUND NO. 1 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN REDUCING THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENTS FROM RS. 25,43,300/ - TO RS. 1043300/ - THEREBY GRANTING THE ASSESSEE RELIEF OF RS.,15,00000/ - . IN THE CO THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN SUSTAINING THE A DDITION OF RS. 10,43300/ - . IT WAS SUBMITTED BY THE LD. DR THAT THERE WAS A SEARCH ON THE PREMISES OF THE ASSESSEES SON SHRI PRAKASH KITTUR ON 16/04/2010. IT WAS THE SUBMISSION THAT ON THE BASIS OF THE SEIZED MATERIAL IT WAS NOTICED THA T THE ASSESSEE HAS P URCHASED A PROPERTY MEASURING 1780 SQ. METERS AT CALANGUTE, GOA ON 03/05/2005 FOR A TOTAL CONSIDERATION OF RS. 25,43300/ - . AS THE ASSESSEE HAD NOT FILED HIS BALANCE SHEET NOR MAINTAINED THE PROFIT AND LOSS ACCOUNTS OR BOOKS OF ACCOUNTS, THE AO HAD TREATED THE SAID INVESTMENT AS UNEXPLAINED INVESTMENT. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD TAKEN INTO CONSIDERATION THAT THE ASSESSEE WAS AN EMPLOYEE OF THE GOVERNMENT OF KARNATAKA FROM 1954 TO 1993 AND IN 1993 HE HAD RECEIVED THE RETIREMENT BENEFITS OF 7.3 LAKHS AND PENSION OF NEARLY RS. 10,000/ - PER MONTH. IT WAS THE SUBMISSION THAT CONSEQUENTLY THE LD. CIT (A) HAD ESTIMATED THE AVAILABLE FUNDS WITH THE ASSESSEE AT RS. 15,00000/ - . IT WAS THE SUBMISSION THAT NO EVIDENCE FOR THE SAID AMOUNT OF RS. 15,0000 0/ - HAVE BEEN PRODUCED. IT WAS THE SUBMISSION THAT THE ORDER OF THE CIT (A) WAS LIABLE TO BE REVERSE. 5. IN RESPECT OF GROUND NO 2 WHICH WAS AGAINST THE ACTION OF THE LD.CIT (A) IN ALLOWING THE EXPENDITURE ON CONSTRUCTION AND LAND COST AT RS. 1,51,82,300 / - , THE LD. DR SUBMITTED THAT THE ASSESSEE HAD CONSTRUCTED 32 FLATS ON THE SAID LAND AND HAD SOLD THE SAME ON 14/03/2006 TO M/S SAILENT REAL ESTATE - 3 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 DEVELOPERS INDIA PVT. LTD FOR A TOTAL CONSIDERATION OF RS. 1,70,00000/ - . IT WAS THE SUBMISSION THAT THE ASSE SSEE HAD OFFERED A PROFIT OF RS. 18,17,640/ - . IT WAS THE SUBMISSION THAT AO HAD DISALLOWED THE DIFFERENCE BETWEEN THE SALE CONSIDERATION OF RS. 1,70,00000/ - AND THE PROFIT DISCLOSED BY THE ASSESSEE OF RS. 18,17,640/ - TOTALLING TO RS. 1,51,82,360/ - ON THE G ROUND THAT THE ASSESSEE HAD NOT PROVED THE EXPENDITURE. IT WAS THE SUBMISSION THAT LD CIT (A) HAD DELETED THE DISALLOWANCE IN ITS ENTIRETY ON THE GROUND THAT ALL THE TRANSACTION WERE THROUGH THE BANK. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT (A) WAS LIABLE TO BE REVERSE. 6. IN REPLY THE LD. AR SUBMITTED THAT IN RESPECT OF GROUND NO. 1 OF THE REVENUES APPEAL THAT THE ASSESSEE HAD EXPIRED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AND CONSEQUENTLY SUCH DETAILS AS WERE AVAILABLE WERE PRODUCED BEF ORE THE AO. IT WAS THE SUBMISSION THAT IN ANY CASE THE DETAILS OF THE RETIREMENT BENEFITS AND THE PENSION WERE AVAILABLE. THE ASSESSEE ALSO HAD 5 ACRES OF AGRICULTURE LAND WHICH WAS BEING CULTIVATED BY HIM IN HUBLI. IT WAS THE SUBMISSION THAT THE GROUND NO 1 COULD NOT SURVIVE ESPECIALLY IN VIEW OF THE FACTS THAT THE AO WHEN MAKING THE DISALLOWANCE OF RS. 1,51,82,360/ - WHICH IS THE ISSUE IN GROUND NO 2 HAS DISALLOWED THE PURCHASE COST OF THE LAND ITSELF IN SO FAR AS THE SALE CONSIDERATION OF RS. 1,70,00000/ - WAS IN RESPECT OF THE LAND AND 32 FLATS CONSTRUCTED ON THE SAID LAND. IT WAS THE SUBMISSION THAT THE ASSESSEE HAVING OFFERED THE PROFIT OF RS. 18,17,640/ - IN RESPECT OF THE SAID TRANSACTION NO FURTHER DISALLOWANCES WAS CALLED FOR. IT WAS THE FURTHER SUBMI SSION THAT THE LD.CIT (A) IN RESPECT OF GROUND NO. 2 HAS CATEGORICALLY RECOGNIZED IN PARA 5.5 OF HIS ORDER THAT THE PERMISSION HAD BEEN OBTAINED TO CONSTRUCT THE APARTMENTS AND THE APARTMENTS WERE ACTUALLY CONSTRUCTED AS NOTICED FROM THE SCH EDULE ATTACHED TO THE SALE DEED. FURTHER THE LD. CIT(A) HAS ALSO RECOGNIZED THE FACT THAT ALL THE PAYMENTS HAD BEEN ROUTED ONLY THROUGH THE BANK ACCOUNTS. THE BIFURCATION OF THE EXPENSES HAD ALSO BEEN PRODUCED. THE EXPENDITURE IN RESPECT OF THE CONSTRUCTION HAS BEEN SPEC IFICALLY QUANTIFIED AT RS. 1,26,39,060/ - WHICH COMES TO NEARLY RS. 7,100/ - PER SQ. METERS. THE LD. CIT (A) HAS ALSO RECOGNIZED THAT ALL THE PAYMENTS WERE PROVED TO BE MADE BY CHEQUES, EVIDENCES IN THE BANK STATEMENTS AND THE SOURCES OF THE FUNDS WAS FROM T HE ADVANCES RECEIVED FROM THE VENDOR. IT WAS THE SUBMISSION THAT CONSEQUENTLY THE ADDITION CONFIRMED BY LD. CIT (A) TO THE EXTENDS OF RS - 4 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 10,43,300/ - WAS LIABLE TO BE DELETED IN RESPECT OF GROUND NO 1 OF THE REVENUES APPEAL AND CROSS OBJECTION FILED BY THE ASSESSEE AND GROUND NO 2 OF THE REVENUES APPEAL LIABLE TO BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY A PERUSAL OF THE ISSUE OF THE SALE OF THE SAID LAND ALONG WITH THE SUPERSTRUCTURE CONSISTING 32 FLATS SHOWS THAT THE PURCHASE CO ST OF THE LAND AT RS. 25,43,300/ - HAS ALREADY BEEN TAKEN INTO CONSIDERATION WHILE ARRIVING AT THE PROFIT OF RS. 18,17,640/ - . THIS IS BECAUSE SALE CONSIDERATION RS. 1,70,00,000/ - LESS COST OF CONSTRUCTION RS. 1,26,39,060/ - LESS COST OF LAND RS. 25,43,300/ - = 18,17,640/ - . THE REVENUE HAS NOT BEEN ABLE TO DISLODGE THE FINDING OF THE LD. CIT (A) THAT ALL THE EXPENSES IN RESPECT OF THE COST OF CONSTRUCTION HAS BEEN ROUTED THROUGH THE BANK ACCOUNTS AND SOURCED FROM THE ADVANCES RECEIVED. ADMITTEDLY THE ASSESSEE HAVING EXPIRED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE EVIDENCE FOR THE SOURCE OF THE PURCHASE OF THE LAND HAS NOT BEEN FULLY EXPLAINED. BOTH THE AO AND LD. CIT (A) HAS HAD TO RELY ON ESTIMATION. THE ASSESSEES REPRESENTATIVE/LR IS ALSO RELYING ONL Y ON AN ESTIMATION OF THE SOURCES OF THE FUNDS FOR THE PURCHASE OF THE LAND. IN THESE CIRCUMSTANCES AS IT IS NOTICE THAT THE ASSESSEE IS HAVING A HABIT OF TRANSACTING THROUGH BANK ACCOUNTS ONLY AND THERE IS NO EVIDENCE FOUND OF THE ASSESSEE HAVING DEALT WI TH CASH WE ARE OF THE VIEW THAT AS THE PROFITS DECLARED BY THE ASSESSEE OF RS 18,17,640/ - IN RESPECT OF THE CONSOLIDATED TRANSACTION A SEPARATE ADDITION OF RS. 10,43,300/ - AS UNEXPLAINED INVESTMENT IN THE PURCHASE OF THE LAND IS NOT CALLED FOR AND THE SAME IS TO BE TELESCOPED. 8. GROUNDS NO 3 & 4 OF THE REVENUES APPEAL ARE GENERAL IN NATURE. IN THE RESULT THE APPEALS FILED BY THE REVENUE STANDS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. IT(SS)A 45 /PAN/2016 & CO 4 9 /PAN/2016 9. IN THE REVENUES APPEAL THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN CONSIDERING THE LOLIEM LAND AS AGRICULTURE LAND AS AGAINST THE FINDING OF THE AO THE SAID LAND WAS A CAPITAL ASSET AND AGAINST THE ACTION OF THE LD. CIT (A) ESTIMATING THE INCOME AT 12% OF TOTAL RECEIPTS. IN THE CO THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN ESTIMATING THE PROFITS OF THE 12% OF THE TOTAL RECEIPTS AS AGAINST 8% DISCLOSED BY THE ASSESSE E. - 5 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 10. IT WAS SUBMITTED BY THE LD. DR THAT THE ASSESSEE HAD ACQUIRED RIGHTS TO 12 LAKHS SQ. METERS OF LAND AT LOLIEM, CANCONA GOA FROM M/S CANDOLIM DEVELOPERS PVT. LTD VIDE IRREVOCABLE POWER OF ATTORNEY DT. 15/06/2006 AND HAD PAID RS. 25,00,000/ - FOR THE S AME. HE SUBSEQUENTLY ASSIGNED THE SAID RIGHTS VIDE A DEED OF ASSIGNMENT DT. 23/06/2006 FOR A CONSIDERATION OF RS 2,00,20,000/ - . IT WAS THE SUBMISSION THAT THE ASSESSEE FURTHER RECEIVED A SUM OF RS. 1,32,00,000/ - FROM M/S HANDSEL GOA PVT. LTD AND RS. 1,27, 0 0,000/ - FROM M/S GOLD RESORTS AND HOTELS PVT. LTD TOWARDS THE SETTLEMENT OF TENANTS, ENCROACHMENTS, ROADS, BOUNDARY WALL AND OTHER INFRASTRUCTURE OF THE PROPERTY. IT WAS THE SUBMISSION THAT THE AO HAD TREATED THE AMOUNT RECEIVED BY THE ASSESSEE FROM BOTH H ANDSEL GOA PVT. LTD AND GOLD RESORTS AND HOTELS PVT. LTD AS THE INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE EXPENSES. IT WAS THE SUBMISSION THAT THE LD. CIT (A), ON APPEAL HELD THAT THE PROPERTY WAS AN AGRICULTURE PROPERTY AND IN REGARD TO THE EXPENDITURE CLAIMED BY THE ASSESSEE ESTIMATED THE INCOME OF THE ASSESSEE AT 12% OF THE TOTAL RECEIPTS. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT (A) WAS LIABLE TO BE REVERSED. 11. IN REPLY THE LD. AR SUBMITTED THAT T HE PROPERTY IS SITUATED BEYOND 8 KM S FROM MUNICIPAL LIMITS OF CANCONA MUNICIPALITY AND AS PER FORM 1 & 14 THE PROPERTY WAS AGRICULTURE LAND. HE DREW OUR ATTENTION TO THE FORM 1 & 14 AT PAGE 10 TO 12 OF THE PAPER BOOK. IT WAS THE SUBMISSION THAT THE PROPERT Y WAS SITUATED BEYOND 15 KMS. IT WAS THE FURTHER SUBMISSION THAT EVEN AS PER THE FORM 1 & 14 A NUMBER OF OCCUPANTS HAVE BEEN SHOWN HOLDING RIGHTS IN THE SAID PROPERTY. IT WAS THE SUBMISSION THAT THE LD. CIT (A) HAS FOLLOWED THE DECISION OF THE HONBLE JURI SDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF DEBIE ALEMAO REPORTED IN 331 ITR 59 WHEREIN IT HAS BEEN HELD THAT WHERE THE LAND IS SHOWN BY THE GOVERNMENT AS AGRICULTURE LAND AND THE LAND IS NEVER USED AS NON AGRICULTURE LAND TILL IT W AS SOLD, THE N THE LAN D SHALL BE TREATED AS AGRICULTURE LAND. IT WAS ALSO THE SUBMISSION THAT THE LD. CIT (A) HAD RELIED UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT K. LEELAVATI REPORTED IN 341 ITR 287 WHEREIN IT HAS BEEN HELD THAT THE LAND SOLD BY THE ASSESSEE RETAINED ITS AGRICULTURAL CHARACTER TILL THE DATE OF THE ORDER PERMITTING NON AGRICULTURAL USE AND WOULD BE TREATED AS CAPITAL ASSETS ONLY THEREAFTER. IT WAS THE SUBMISSION THAT THE SAID LAND HAS NEVER BEEN USED FOR NON AGRICULTURAL - 6 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 PURPOSES, IT HAS NOT BEEN CONVERTED AND EVEN TODAY THE LAND CONTINUES TO BE AGRICULTURAL AS PER THE REVENUE RECORDS. IT WAS THE SUBMISSION THAT THE LD. CIT (A) HAVING FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT OF BOMBAY TO HOLD THE SAID LAND AS AGRICULTU RAL LAND AND NOT THE CAPITAL ASSET OUGHT NOT TO HAVE ESTIMATED THE INCOME OF THE APPELLANT IN RESPECT OF THE TRANSACTION ENTERED INTO BY THE APPELLANT FOR THE PURPOSE OF REMOVING THE ENCUMBRANCES IN THE FORM OF TENANTS AND THE PUTTING UP OF THE COMPOUND WA LL/ FENCE AND LAYING OF INTERNAL ROADS/PATHS. IT WAS THE SUBMISSION THAT IN ANY CASE THE ESTIMATION AS DONE BY THE CIT (A) WAS EXCESSIVE AND LIABLE TO BE REDUCED SUBSTANTIALLY. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE ORDER OF THE CIT (A) CLEARLY SHOWS THAT THE LD. CIT (A) HAS FOLLOWED JUDICIAL DISCIPLINE AND HAS FOLLOWED THE PRINCIPLES LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY WHEN HE HELD THAT THE LAND IN QUESTION WAS AGRICULTURE LAND AND NOT THE CAPITA L ASSET . THE REVENUE HAS NOT BEEN A BLE TO DISLODGE THIS FINDING NOR IS IT ABLE TO SHOW THAT THE LAND WAS WITHIN THE 8 KMS LIMITS OF CANCONA MUNICIPALITY OR THAT THE LAND HAS BEING CONVERTED OR IS NOT AN AGRICULTURAL LAND. THIS BEING SO WE ARE OF THE VIEW THAT THE FINDI NG OF THE LD. CIT (A) ON THIS ISSUE IS ON RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. COMING TO THE ISSUE OF THE ESTIMATION OF THE INCOME IT IS NOTICED THAT BOTH HANDSEL GOA PVT. LTD AND GOLD RESORTS AND HOTELS PVT. LTD HAVE PROVIDED THE FUNDS TO THE ASSESSEE FOR VERY SPECIFIC PURPOSES. HERE THE ASSESSEE HAS FUNCTIONED AS CONTRACTOR/MEDIATOR ON BEHALF OF THE SAID TWO CONCERNS. THE ASSESSEE IS ADMITTEDLY UNABLE TO PRODUCED VOUCHERS AND ALL THE DETAILS IN RESPECT OF THE TRANSACTIONS. IT IS UNDER THE SE CIRCUMSTANCES THE LD. CIT (A) HAS ESTIMATED THE INCOME OF THE ASSESSEE IN RESPECT OF THE RECEIPTS OF RS. 2,58,80,000/ - DURING THE ASSESSMENT YEAR AT 12%. HOWEVER CONSIDERING THE FACTS THAT THERE IS SUBSTANTIAL EXPENDITURE OUTGO ON ACCOUNT OF THE VACATIN G OF THE TENANTS AND LAYING OF THE ROADS AND SECURING THE PROPERTY BY PUTTING UP COMPOUND WALL/FENCES AND TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSEE IS ACTING AS THE FACILITATOR WHO WOULD NORMALLY GET A COMMISSION FOR SUCH WORK, THE ESTIMATE OF 1 2% AS MADE BY THE LD. CIT (A) IS REDUCED TO 10%. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. - 7 - IT(SS)A NO 40 & 54 /PAN/2016, CO NO. 48,49/PAN/2016 13. IN THE RESULT T HE APPEALS FILED BY THE REVENUE STAN DS DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 9 .08 .2016. SD/ - (N.S. SAINI) ACCOUNTANT MEMBER SD/ - (GEORGE MATHAN) JUDICIAL MEMBER PLACE: PANAJI - GOA DATED : 0 9 /08 /2016 * NANU * COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI BENCH, PANAJI