TaxTMI 
TaxTMI 
2015 (7) TMI 565
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....the fact that the payment of Rs. 3 crores has been made to Shri.Sanjay Nemichand Lohade on behalf or at the instance of the assessee as it is the assessee who has entered into MOU dated 16.05.2007 with Fullmoon Housing Pvt. Ltd. and Shri.Sanjay Nemichand Lohade was only the constituted attorney on behalf of Shri.Dorje for withdrawing the civil suit. (3) The learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that except the payment made to the members of Kadam family as land owners, the remaining payment ought to have come in the hands of the assessee and not any other person and as such, out of total consideration of MOU of Rs. 9,26,46,600/- after deducting Rs. 3,40,00,000/- paid to the land owners, the remaining amount has been received by assessee either on behalf of or at the instance of the assessee." 3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of trading in land and property development. He filed his return of income on 25-09- 2008 declaring total income of Rs. 3,14,36,020/-. During the course of assessment proceedings the Assessing Officer noted that a survey action u/s.133A of the I.T. Act wa....
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.... Rs. 31,50,000/-. The money has been paid to the various parties as per the MOU and he has correctly offered to tax the cash received by him of an amount of Rs. 2,11,46,600/- which was declared by him during the course of survey. 5. However, the AO was not satisfied with the above explanation of the assessee. He observed that the MOU dated 16-05-2007 executed between M/s. Full Moon Housing Pvt. Ltd, the purchaser and the assessee as the seller whereby the purchaser agreed to purchase 41 Ares of land at S.No 5/1-A for a total consideration of Rs. 9,26,46,600/- in the following manner: Sl.No. Amount Particulars 1 Rs. 3,40,00,000/- To Kadam sisters (Original owners of the land) 2 Rs. 25,00,000/- For expenses as stamp duty etc. 3 Rs. 50,00,000/- To Shri. Kailash B Wani, the appellant/ as compensation) 4 Rs. 3,00,00,000/- To Shri. Sanjay N Lohade (For surrendering rights) 5 Rs. 2,11,46.600/- To be paid to the assessee in cash Rs. 9,26,46,600/- Total 5.1 The Assessing Officer further noted that during the assessment proceedings in order to examine the veracity of the MOU dated 16-05-2007 the statement of the persons mentio....
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....1 when Shri Pradeep Dhorje signed the power of attorney in favour of Sanjay Lohade there was no right created in favour of Shri. Sanjay Lohade. Neither there is any mention about the consideration to be paid to him. 9) Even in the transfer of land, his role is only limited to withdrawing the Civil Suit from the court in terms of special powers of attorney and except that said Lohade has done nothing." 6. Before the CIT(A) the assessee submitted that Mr. Pradeep Kumar Dhorje had initially i.e. vide agreement on 1-10-1995 agreed to purchase the entire land of 81 Ares at S.No 5/1A as well as land measuring 80 Area at S.No.5/1B totalling to 161 Ares from the original land owners namely Kadam sisters/family. However, despite the existing agreement, the Kadam sisters/family sold 80 Ares of land of both the aforesaid Survey nos. to 8 different buyers each one buying 10 Ares. It was submitted that Mr. Pradeep Dhorje held the deal to be illegal because of the existing MOU dated 01-10-1995, being in his favour and since Kadam family could not have executed the sale deed on 08-12-1995, therefore, Mr. Dhorje filed the suit No 1006/1996 against the Kadam family and the eight buyers. It was ....
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....d the assessee agreed to enter into the MOU dated 16-05-2007 and accordingly Mr. Lohade agreed to give up his right of obtaining the development agreement. It was submitted that in view of the aforesaid fact and circumstances that the purchaser M/s. Full Moon Housing Pvt. Ltd agreed to pay the necessary compensation of Rs. 3 crores to Mr. Sanjay Lohade and, therefore, the Assessing Officer's observation that the payment being made to Mr. Lohade at the behest of the assessee is factually not correct. It was further contended that the Assessing Officer's noting that Mr. Sanjay Lohade did not enjoy or had any right in the property transacted and eventually sold the same to M/s. Full Moon Housing Pvt. Ltd. is not correct. It was explained that Assessing Officer's observation that Mr. Lohade had no locus stand! is equally incorrect and wrong as Mr. Lohade was given not only the power of attorney but also the right to obtain the development agreement and purchase the land in his name. It was submitted that Mr. Lohade besides having the right in the property though not in presentee but on attaining and getting the civil suit concluded which took six years to settle the issue a....
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....learly mentioned that the assessee would be responsible to pay the amount to Mr. Lohade for withdrawing the civil suit along with his rights, title in the property and accordingly out of the total consideration of Rs. 9,26,46,600/- it was agreed that Rs. 3 crores would be paid to Mr. Lohade. Accordingly the purchaser paid the aforesaid amount directly to Mr. Lohade. The assessee accordingly requested the CIT(A) to delete the addition. 7. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition made by the AO by observing as under : "5.2 The facts brought on record indicate that a survey action u/s 133A was carried out on the appellant on 12-3-2008 wherein the Memorandum of Understanding or the MOU dated 16-05-2007 was found and impounded. The said MOU was executed between Full Moon Housing Pvt Ltd (FMHPL) and the appellant, and the purchaser and the appellant as the seller of 41 Ares of land at S.No 5/1A for a total consideration of Rs. 9,26,46,600/-, the details of which are as under: 1. Rs. 3,40,00,000/- To Kadam sisters (Original owners) 2. Rs. 25,00,000/- For expenses as stamp duty 3. Rs. 50,00,000/- To Sh....
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.... 19.11.2010 & 29.11.2010 of Shri. Lohade and Shri. Arvind Jain, the Director of the Company Full Moon Housing Pvt. Ltd the purchaser. The responsibilities fixed upon Shri. Lohade could not be totally disregarded in the given facts of the case. The MOU dated 16-7-2001 has not been considered by the Assessing Officer and has not examined the same during the assessment proceedings as Shri. Lohade had been given the right to obtain the development agreement and purchase of the said land in his name apart from attending the litigation involved in civil suit No. 1006/1996 at his own cost and responsibility, thus the observation of the Assessing Officer that Shri. Lohade had no locus standi is factually not correct. The purchaser i.e. Full Moon Housing Pvt. Ltd was also fully aware of the facts of the case before the MOU dated 16-05-2007 was executed. In the statement recorded u/s 131 of Shri. Arvind Jain, the Director of the purchaser company before the Assessing Officer, it has never denied regarding the payment to Shri. Sanjay N Lohade rather reference to the negotiation for the settlement of the amount to be paid to Shri.Lohade has been mentioned as Shri. Lohade was expecting an amoun....
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.... Shri. Lohade and thus, the role of Shri. Lohade inthe transaction has not been denied. In the appeal preferred by Shri. Lohade before the CIT(A)-I Pune, in its appellate order dated 02-11-2012, the Ld. CIT has upheld the addition .made by the Assessing Officer treating the receipts of the amount of Rs. 3 crores as taxable and treated as earnings from commission and brokerage by the Assessing Officer. Thus, the contention of the appellant has considerable force that the factual points stated in the MOU found during survey, the A.O. has accepted the contents as true and correct for making the addition of Rs. 2,11,46,600/- and when the MOU is considered to be true and genuine, to hold the payment of Shri Lohade to be for non-business consideration is totally incorrect. The document found during survey has to be considered as a whole and those facts which favour the appellant cannot be totally ignored and the notings on the document cannot be overlooked. The facts brought on record do indicate that the purchaser, FMHPL after evaluating the interest in the lands of Shri Lohade and after negotiating for the amount, paid the amount on their own behest as against the same held to be paid ....
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....de agreed to obtain the development rights and/or to purchase the said land at Survey No.5/1A from the Kadam faily either in his own name or in the name of his nominees. Mr. Pradeep Dhorje accorded his consent and agreed to execute the required deeds and documents as may be necessary for Mr.Sanjay Lohade in respect of said land at Survey No.5/1A. The respondent also agreed for the transactions to be entered into by the said Kadam family with Mr.Sanjay N. Lohade for the said land. In addition to this MOU, Mr. Sanjay Lohade has also been given the specific power of attorney on 16/07/2001 i.e. on the same date. In due course said Mr. Sanjay Lohade did everything necessary in the matter in negotiating the land deal as well as agreed to withdraw the said special civil suit No. 1006/1996 without which further finalization of deal would not have not been possible. The respondent had purchased 9 Ares out of 81 Ares of S. No. 5/1A from Smt. Satam Sulbha on 11/8/2005 and also executed development agreement with the said Smt. Sulbha Satam on 08/05/2006, for the agreed consideration of Rs. 31,50,000/-. The respondent also purchased 32 Ares from Mr. Pradeep Dhorje on 11/10/2000 as stated earlie....
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....the AO. The only dispute is regarding the amount of Rs. 3 crores paid to Mr. Sanjay Nemichand Lohade for surrendering his rights. He submitted that the assessee sold the land to M/s. Full Moon Housing Pvt. Ltd. who wanted to purchase the plot free of any defect. Therefore, it was the purchaser who itself has decided the terms of payment including the amount to be paid to Kadam family, Mr.Sanjay Lohade and to the assessee. He submitted that the observation of the AO that Mr.Sanjay Lohade had no locus standi is completely wrong because he was given not only the power of attorney but was also given the right to obtain the development agreement and purchase the said land in his name. The AO completely ignored the civil suit pending vide Civil Suit No.1006/1996. Since Sanjay Lohade has effective control over the entire litigation as well as the land and since the respondent could not have entered into MOU with M/s. Full Moon Housing Pvt. Ltd. and since all those complicated issues involved in the civil suit including bringing the Kadam family to the settlement terms are finally set at rest, therefore, it is incorrect to say that the amount of Rs. 3 crores paid to Sanjay Lohade was at th....
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....icer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case a survey action u/s.133A of the I.T. Act was conducted in the business premises of the assessee during which an MOU dated 16-05-2007 was impounded. As per the said MOU land admeasuring 41 Ares is to be purchased by M/s. Full Moon Housing Pvt. Ltd. for a total consideration of Rs. 9,26,46,600/- from the assessee. The bifurcation of payment of Rs. 9,26,46,600/- is as under : 1. Rs.3,40,00,000/- To Kadam sisters (Original owners) 2. Rs.25,00,000/- For expenses such as stamp duty etc. 3. Rs.50,00,000/- To Shri Kailash B. Wani (as mobadla) 4. Rs.3,00,00,000/- To shri Sanjay Nemichand Lohade (For surrendering rights) 5. Rs.2,11,46,600/- To be paid to the assessee in cash TOTAL Rs.9,26,46,600/- The amount of Rs. 2,11,46,600/- which was received by the assessee in cash was offered as additional income in the statement of the assessee recorded during the course of survey. So far as the other 4 items are concerned the AO accepted the items 1, 2 and 3 above as genuine while he doubted the ....
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....hould not be held as genuine as business expenditure when the same was paid to Mr. Lohade for surrendering his rights as per the MOU. Further, the same amount has been paid by account payee cheque and the amount has been taxed as brokerage/commission income in the hands of Mr. Sanjay N. Lohade as per the direction of the Addl.CIT and upheld by the CIT(A). 13.3 We find clause 9 of the MOU dated 16-07-2001 reads as under where Party No.3 is Mr. Sanjay N. Lohade and Party No.2 Is the assessee ,i.e. Mr. Kailash Babulal Wani : "9. Similarly, further negotiation took place between the Party No.2 of the one part, the Party No.3 of the second part and said Kadam of the third part and accordingly, the Party No.3 decided to obtain development rights and/or purchase the said Plot-A from said Kadam, either in his name or in the names of his nominees, at the sole discretion of the Party No.3". 13.4 We further find that Mr. Arvind Jain, Director of M/s. Full Moon Housing Pvt. Ltd. in his statement recorded u/s.131 on oath on 29-11-2010 in his reply to Question No.25 recorded u/s.131 on oath on 29-11-2010 has answered as under : "Q.25 I hope that with the break you may have remembered the fa....
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....n sheet filed is my intention to revise the return and to offer the money to tax in the year ended on 31-03-2008. Q.25. have you signed any deed/agreement/document etc. in favour of Shri Kailash Wani and if yes when and produce copy of such document? Ans. No and never." 13.6 The above replies clearly and categorically point one thing that the land in question was not free from litigation and civil suit was pending. Therefore, we find force in the argument of the Ld. Counsel for the assessee that the purchaser M/s. Full Moon Housing Pvt. Ltd. after evaluating the interest in the land of Mr. Sanjay N. Lohade and after negotiating for the amount paid the amount of Rs. 3 crores on their behalf and not on behalf of the assessee. It was the purchase who itself decided the terms of payment including the amount to be paid to Kadam Family, Mr. Sanjay N. Lohade and to the respondent and therefore the AO's observation that the said purchaser made the payment to Mr. Sanjay N. Lohade at the behest of the respondent, in our opinion, is incorrect. Further, in view of the above facts, the observation of the AO that Mr. Sanjay N. Lohade had no locus standi is also incorrect since Mr. Sanjay N....
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.... Unique Chambers, F.C. Road, &nbs....
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.... Pune - 411005 ....
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....nd peaceful possession of the land to M/s. Full Moon Housing Pvt. Ltd. the said amount would have been allowed as deduction from the hands of Shri Kailash Babulal Wani, i.e. the assessee. Therefore, in our opinion, it is immaterial as to whether the amount has been paid to Mr. Sanjay N. Lohade by M/s. Full Moon Housing Pvt. Ltd. at the instance of the assessee or the assessee has paid directly to Mr. Sanjay N. Lohade from the total consideration. As mentioned earlier in the preceding paragraphs, the MOU was impounded, therefore, the contents of the MOU has to be considered and accepted as a whole. The revenue cannot be permitted to use a part of the MOU as correct and the other part as incorrect. Since the document impounded from the premises of the assessee shows payment of Rs. 3 cores to Mr. Sanjay N. Lohade which has been assessed in his hands as commission income and which has been upheld by the CIT(A), therefore, we find no infirmity in the order of the CIT(A) deleting the addition of Rs. 3 crores from the hands of the assessee. In this view of the matter and in view of the detailed reasonings given by the CIT(A) while deleting the addition we find no infirmity in his order an....