M/s Kothari Constructions, Hyderabad V. ACIT., Circle-5(1), Hyderabad

MA 230/HYD/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0247 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER M.A.NO.230/HYD/2012 ARISING OUT OF ITA.NO.919/HYD/2008 ASSESSMENT YEAR 2001-2002 M/S. KOTHARI CONSTRUCTIONS HYDERABAD. APPLICANT VS. ASST.COMMISSIONER OF INCOME TAX CIRCLE 5 (1), HYDERABAD. RESPONDENT FOR APPLICANT : SHRI A.V.RAGHURAM, A.R. FOR RESPONDENT : SHRI K.J.RAO. DATE OF HEARING : 22.02.2013 DATE OF PRONOUNCEMENT : 17.04.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. THE ABOVE APPEAL WAS DECIDED ON 24.12.2012. THE AS SESSEE MOVED MISCELLANEOUS APPLICATION STATING THAT THE TRIBUNAL HAS NOT CONSIDERED THE GROUND NOS. 7 TO 9 RAISED IN THE GROUNDS OF APPEAL BEFORE THE ITA T. AS IT IS CORRECT, WE PROCEED TO DEAL WITH THOSE GROUNDS. THE GROUNDS RAISED BY THE ASSES SEE READS AS UNDER: 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTICE THAT THE SALE AGREEMENTS WITH SHRI PARASMAL JAIN AND SMT . GULAB BAI KOTHARI WERE ENTERED INTO BY THE ASSESSEE FIRM ON THE FIRST DAY OF THE PREVIOUS YEAR I.E. 01.04.2000 AND WHATEVER BE THE DATES OF PAYMENT OF CONSIDERATION BY THEM, RENTAL INCOME ACCRUED TO THE BUYERS UNDER THE TERMS OF THE AGREEMENTS FROM 01.04.2000 AND THE ASSESSEE WAS NOT LIABLE TO PAY TAX FOR THE A.Y.2001-02 IN RESPECT OF THE SAME. 2 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE TO APPRECIATED THAT EXPECT FOR SMT. RATAN BAI KOTHARI; THE OTHER CREDITORS WERE ALL IT ASSESSES AND THEY HAVE CONFIRMED HAVING LENT THE AMOUNTS IN QUESTION. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT THE ASSESSEE HAS IDENTIFIED THE CREDITORS AND PROVED TH E GENUINENESS OF THE LOAN TRANSACTIONS AND AS THEY HAPPEN TO BE INCOME TAX AS SESSEES, THEY SHOULD EXPLAIN THE SOURCE OF THE LOANS ADVANCED IN THEIR HANDS AND CONSIDERATION OF THE SAME IN ASSESSES HANDS IS AGAINST THE SPIRIT OF SECTION 68, UNJUST AND ARBITRARY. THE ORDER OF THIS TRIBUNAL IN ITA NO.919/H/2008 DATED 24.12.2012 IS RECTIFIED AS UNDE R: THE PARAGRAPH AFTER THE EXISTING PARAGRAPH NO 11 HA S BEEN WRONGLY NUMBERED AS 10. HENCE THE PARAGRAPH AFTER THE EXISTING PAR NO 11 IS RENUMBERED AS 11. THE FOLLOWING PARAGRAPHS SHALL BE ADDED AS PARAGRAP HS 12 AND 13 OF THAT ORDER (AFTER THE RENUMBERED PARA NO 11) AND SHALL FORM PART OF THE O RDER OF ITA NO 919/H/2008 DATED 24.12.2012. 12. . AS REGARDS GROUND NO.7, REGARDING INCLUSION OF RENTAL INCOME FROM 1.4.2000 TO MARCH 2001 FROM THE PROPERTY AGREED TO BE SOLD CIT (A) HAS HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE FACTS OF THE CASE. HOWEVER, I DO NOT AGREE THE CONTENTIO N OF THE LEARNED AR. WHILE REFERRING TO THE SALE AGREEMENT DATED 01.01.2 000 ENTERED INTO WITH PARASMAL JAIN AND OTHERS FOR 5,400 SFT. ON SECOND F LOOR OF THE COMPLEX, THE ASSESSING OFFICER HAS NOTED THAT THE SALE CONSI DERATION OF RS.8,00,000 WAS PAID THROUGH CHEQUES IN MARCH, 2001. THUS, EVE N IF THE SALE AGREEMENT IS STATED TO BE 01.04.2000, WHEN THE VEND EE HAS PAID THE SALE CONSIDERATION ONLY IN MARCH, 2001, THE VENDEE WOULD BE ABLE TO ENJOY THE RENT FROM THE SAID PREMISES ONLY AFTER MARCH, 2001. FURTHER, THE ASSESSING OFFICER HAS NOTED THAT WHEN THE ENTIRE AG REEMENT IS TYPED ONE, THE DATE OF AGREEMENT, I.E., 1 ST APRIL 2000, IS WRITTEN IN INK. AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER IT IS A CLEAR DEVICE TO EVADE THE TAX LIABILITY IN THE HANDS OF THE APPELLANT BY INSERTIN G CLAUSE 22 WHICH SAATES THAT THE INTENDING SELLER IS READY TO PAY THE RENT FROM 01.04.2000 TO 31.03.2001 TO THE INTENDING PURCHASER. IN THE CASE OF CH.ATCHAIAH (SUPRA), THE HONBLE SUPREME COURT HELD THAT MERELY BECAUSE A WRONG PERSON IS TAXED WITH RESPECT TO A PARTICULAR INCOME , THE ASSESSING OFFICER IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME. SINCE IN RESPECT OF THE ABOVE PREMISES SOLD TO SRI PARASMAL JAIN AND OTHERS, THE APPELLANT HAS RECEIVED THE SALE CONSIDE RATION VIDE CHEQUES TOWARDS THE FAG END OF MARCH 2001, HAVING REGARD TO THE RATIO OF THE ABOVE DECISION, IN MY VIEW, THE ASSESSING OFFICER W AS FULLY JUSTIFIED IN TAXING RENTAL INCOME OF RS.2,15,280 IN RESPECT OF T HE SAID PREMISES FOR THE PERIOD FROM APRIL 2000 TO MARCH 2001, IN THE HANDS OF THE APPELLANT. 3 SIMILARLY, IN RESPECT OF THE PREMISES LOCATED ON TH E THIRD FLOOR OF THE BUILDING, WHICH WAS SOLD TO SMT. GULAB BAI KOTHARI AND OTHERS, AS THE APPELLANT HAS RECEIVED THE SALE CONSIDERATION DURIN G SECOND HALF OF JANUARY 2001, THE ASSESSING OFFICER WAS JUSTIFIED I N TAXING THE RENTAL INCOME AMOUNTING RS.1,49,500 FOR THE PERIOD FROM AP RIL 2000 TO JANUARY 2001 IN THE HANDS OF THE APPELLANT. ACCORDINGLY, B OTH THE ABOVE ADDITIONS OF RS.2,15,280 AND RS.1,49,500 TOWARDS RENTAL INCOM E AS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ARE UPHELD. HE NCE, THE GROUNDS OF APPEAL ON THIS ACCOUNT ARE REJECTED. IN VIEW OF THE CLEAR FINDING OF THE CIT(A) THAT THE TRANSFER OF PROPERTY CAN BE DEEMED TO HAVE TAKEN PLACE ONLY JANUARY/MARCH 2001 THE RENTAL INCOME FOR THE PERIOD 1.4.2000 TO MARCH 2001 ACCRUES AND WAS RIGHTLY ASSESSED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS HOWEVER SUBMITTED THAT THE PURCHASERS GHEVARCHA ND JAIN GROUP HAVE DECLARED THE RENTAL INCOME FROM THE PREMISES IN THEIR INDIVIDUAL RETURNS AND PAID THE TAXES. THE SALE OF IMMOVABLE PROPERTY IS COMPLETED ONLY WHEN POSSES SION IS HANDED OVER PURSUANT TO AGREEMENT TO SALE. IN THE PRESENT CASE THE ASSESSE E HAS STATED THAT THE AGREEMENT TO SALE HAS BEEN ENTERED INTO ON 1.4.2000. CLAUSE 22 IN TH E AGREEMENT FOR SALE PROVIDES THAT THE INTENDING SELLER IS READY TO PAY THE RENT FROM 1.4. 2000 TO 31.3.2001 TO THE INTENDING PURCHASER. THERE IS ALSO NOTHING ON RECORD TO SHOW THAT THE PURCHASER WAS HANDED OVER POSSESSION ON 1.4.2000. THERE IS NOTHING ON RECORD TO SHOW THAT THE TENANT WAS AWARE OF THE CHANGE IN OWNERSHIP AND HAD AGREED FOR PAYING T HE RENT TO THE INTENDED PURCHASER. IN FACT THE AGREEMENT FOR SALE REQUIRES THE VENDOR ( T HE ASSESSEE HEREIN) TO OBTAIN IT CLEARANCES AND HAS ALSO PROVIDED FOR OBLIGATION ON THE PART OF PURCHASER TO MAINTAIN THE PROPERTY IN GOOD CONDITION TILL SUCH TIME. IF THE INTENTION WAS TO HAND OVER THE OWNERSHIP RIGHTS FROM 1.4.2000, THEN SUCH CLAUSES REQUIRING T HE INTENDED PURCHASER TO KEEP THE PROPERTY IN GOOD CONDITION AND THE VENDOR/ ASSESSEE TO OBTAIN IT CLEARANCES WOULD NOT HAVE BEEN INCLUDED IN THE AGREEMENT FOR SALE. AS PO INTED OUT EARLIER THERE IS NO PROOF THAT POSSESSION HAS BEEN HANDED OVER TO THE PURCHASER. IN THE CIRCUMSTANCES THE CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE CONTINUES TO BE A OW NER OF THE PROPERTY ATLEAST TILL MARCH 2001 WHEN THE CONSIDERATION WAS PAID AND HENCE THE RENTAL INCOME FROM 1.4.2000 TO MARCH 2001 SHOULD BE ASSESSED IN THE HANDS OF THE A SSESSEE. AS PER SEC. 60 TO 63 OF I.T. ACT. THE ASSESSEE CANNOT MERELY TRANSFER THE RIGHT TO RECEIVE INCOME WHEN THE TRANSFER OF 4 UNDERLYING ASSET.IN THE CIRCUMSTANCES WE UPHOLD THE ORDER OF CIT(A) ON THIS GROUND AND DISMISS THE ASSESSEES APPEAL ON THIS ISSUE.. 13. THE NEXT GROUND OF APPEAL IS REGARDING THE A DDITION U/S.68. THE AO HAS ADDED RS.7,30,000 AS UNEXPLAINED CREDIT U/S.68 OF THE ACT . THE ENTIRE AMOUNT HAS BEEN CREDITED TO THE ACCOUNTS OF THE PARTNERS. THE ASSESSEE SUBM ITTED THAT ALL THE PARTNERS OTHER THAN SMT. RATAN BAI KOTHARI ARE ASSESSED TO TAX AND THE AMOUNTS ARE REFLECTED IN THEIR INDIVIDUAL BOOKS OF ACCOUNTS. THE AO EXAMINED THE SUBMISSIONS OF ALL THE PARTNERS AND CAME TO THE CONCLUSION THAT THE INTRODUCTION OF CAP ITAL IN RESPECT OF PARTNERS WHO ARE ASSESSED TO TAX HAVE NOT BEEN REFLECTED IN THE RETU RNS. IN THE CASE OF SMT. RATAN BAI KOTHARI INTRODUCTION OF RS.1,90,000 CANNOT BE SUSTA INED AS SHE HAD NOT GIVEN REASONABLE PROOF OF THE SOURCE OF HER SAVINGS. THIS HAS BEEN FURTHER EXAMINED BY THE CIT(A) AND THE ADDITION WAS CONFIRMED. THERE WAS NO FURTHER DETAI LS SUBMITTED IN THE COURSE OF THE HEARING TO PERSUADE US TO TAKE A DIFFERENT VIEW. IN THE CIRCUMSTANCES THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS DISMISSED. CONSEQUENTLY THE LAST PARAGRAPH NUMBERED AS 6 IN TH E ORDER SHALL BE RENUMBERED AS NO 14. THE MA IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL, 2013 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 17 TH APRIL, 2013. VBP/- COPY TO 1. M/S. KOTHARI CONSTRUCTIONS, 5-2-58, KOTHARI CHAMBER S, JAMBAUG, HYDERABAD. 2. THE ACIT 5 (1), HYDERABAD 3. THE CIT (A)-V, HYDERABAD 4. THE CIT-IV, HYDERABAD 5. D.R. A BENCH, I.T.A.T. HYDERABAD 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, I.T.A.T. HYDERABAD.