TaxTMI 
TaxTMI 
TaxTMI 
2013 (1) TMI 756
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....of the IT Act, 1961. 2. On the facts and in the circumstances of the case, Ld CIT (A) erred in confirming addition of Rs. 20 lacs made by AO u/s 69 of IT Act, 1961 ignoring the fact that this amount was paid on 5.4.2007 pertaining to AY 2008-2009 and the same was offered to tax in AY 2008-09." 2. Briefly stated relevant facts of the case are that assessee is a pensioner and derived income from pension and interest etc filed return declaring total income of Rs. 2,69,042/-. AO processed the same and determined the total taxable income of Rs. 1,27,63,105/-. It includes long term capital gain of Rs. 1,03,44,063/-, income from other sources Rs. 1,65,312/-, addition u/s 69 of Rs. 20,00,000/- and undisclosed income of Rs. 1 lacs. During the course of assessment proceedings, AO noticed that assessee claimed deduction u/s 48 of the Act amounting to Rs. 60 lacs as the same amount was paid to his three sisters (Rs. 15 lacs to each one 3 X Rs. 15 lacs= Rs. 45 lacs) and three nieces (Rs. 5 lakhs to each one 3 x Rs. 5lacs=Rs. 15 lacs). Assessee claimed the said deduction out of the sale consideration of an ancestral house property located at Nagpur. In this regard, assessee relied on the decis....
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....t after his death his legal heirs would have no claim to the property. The appellant's contention is that the payment of Rs. 15 lacs by Shri K.M. Moghe is due to the fact that Shri K.M. Moghe had to pay Rs. 5 lacs each to his 3 nieces (daughters of late Mr. P.M. Moghe) namely Mrs. Dev, Ms. Moghe and Mrs. Jothar towards their proportionate share in undivided land on which the bungalow is constructed and which was not given by Mr. P.M. Moghe to his sisters by his WILL. This statement is not in consonance with the facts narrated above. 3.7 I am in agreement with the findings of the AO. The payments made to his nieces by Shri K.M. Moghe are not in accordance with the will of his late mother, Smt. Kamlabai Moghe. In fact, it is very clear from the will of Smt. Kamlabai Moghe that in the absence of any male heirs to her sons, the property would be inherited by her daughters. It is in accordance with this will that the assessee's brother, late Shri P.M. Moghe was bequeathed his share of the property to the three sisters. Therefore, the daughters of Shri P.M. Moghe did not have any claim on the property and the payments to them are not on account of any claim on the property. The payments....
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....plication as there is no relinquishment of any right for which the amount is claimed to have been paid. Therefore, we are of the considered opinion that the decision of CIT (A) in upholding the disallowance made by the AO does not call for any interference. Accordingly ground no.1 raised in assessee's appeal is dismissed. 7. Ground no.2 relates to addition of Rs. 20 lacs u/s 69 of the Act. Relevant facts are that the assessee sold his property for a sum of Rs. 1.3 cr in the FY 2006-2007 and earned capital gains. In this regard, assessee furnished computation of capital gains at NIL after claiming (i) deduction u/s 54 of the Act amounting to Rs. 29 lakhs; and (ii) investment of sum of Rs. 22 lakhs as per the provisions of section 54EC of the Act. The impugned addition of Rs. 20 lakhs is part of the aforesaid investment of Rs. 29 lacs in an house property purchased from M/s. Shri Appaswami Infrastructures (SAI). During the assessment proceedings, in support of such purchase, assessee submitted a copy of the 'agreement of sale' dated 7.7.2006. As per the said agreement, the manner and the details of payment of sale consideration are as under: "MANNER OF PAYMENT i) Rs. 20,00,000/- ....
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....ue) and another cash payment of Rs. 5 lacs paid in cash on 7.4.2007 and opined that these cash payments are different from that of the payments made in 2006 ie prior to the payment of Rs. 9 lakhs made by way of cheque dated 7.7.2006. It is the claim of the assessee that a sum of Rs. 20 lacs was not paid in compliance with the terms as per the sale agreement dated 7.7.2006 and this sale agreement was cancelled in view of the delayed payment and the actual payment of Rs. 20 lacs was paid only in the month of April 2007 ie relevant for the AY 2008-2009. Therefore, as per the assessee, no addition is called for AY 2007-2008, hence, the addition of Rs. 20 lacs should be deleted. On considering the above submissions, the CIT (A), considering the expression "paid by cash", which immediately precedes the payment of Rs. 9 lakhs vide the cheque dated 7.7.2006, which is relevant to the AY 2007- 2008, confirmed the addition for the AY 2007-2008. CIT(A) dismissed the assessee's argument which has the support of the developer that impugned sum of Rs. 20 lakhs relates to the cash payment for the AY 2008-09 mentioning that they are two different cash transactions. Further, CIT (A) is of the opinio....
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....rding the payment of cash of 25 lakhs (Rs 20 lakhs plus Rs. 5 lakhs) in April 2007 relevant for the AY 2008-09, Ld DR is of the opinion these payments are nothing but the part of the assessee's attempts to escape from the addition in this AY and penalties if any. Thus, as per the Ld DR, the order of the AO / CIT (A) is required to be confirmed without any amendments. Decision of the Tribunal: 11. We have heard both the parties, perused the orders of the Revenue Authorities and the papers filed before us. The case of the assessee is that the assessee earned capital gains on sale of his property and intended to avail to take benefits of the provisions of sections 54 and 54EC of the Act. Regarding exemption u/s 54 of the Act, assessee undisputedly entered into an agreement with SAI for purchase of a flat and the sale agreement dated 7.7.2006 is relevant here. The same was acted upon for Rs. 9 lakhs paid on 7th July, the date of the agreement and not acted upon vis a vis the undated condition of cash payment of Rs. 20 lakhs. Asssessee cancelled said agreement on 15th January, 2008 during the assessment proceedings. Only in April 2007, assessee made the payments of cash of Rs. 25 lakh....
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....nbsp; Unanswered question are: 14. On perusal of the facts, we find that there are many unanswered question here and some of them are: Regarding clause 2 of the agreement dated 7th July 2006: why the expression "paid" is used when the same is not "actually paid"; How does the assessee explains that the 'paid ' does not mean either 'to be paid' or 'never to be paid' or 'to be paid belatedly'; of the three conditions mentioned in clause 2, only the first condition is not complied and other two are complied; why he not complied with the first condition relating to cash payment; why the assessee furnished the return with the claim of deduction u/s 54 when he has to cancel the agreement; why the assessee has not paid the cash but only paid the cheque of Rs. 9 lakhs; but for the likely problems from the Income tax department, why he had to cancel the agreement; how events of the cancellation, refunds to the assessee, repayments by the assessee, are not a case of an afterthought and it is only to safeguard the assessee from many legal problems attached to the additions as well as penalties; why the assessee rebooked the flat from the same developer/builder in the subsequent assessment y....
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....shall take up discussion on the confirmation of the seller of the flat. 17. Analysis of the confirmation letter from SAI : during the assessment proceedings, AO received a letter from M/s SAI and the contents of the same are as under: "Mr. K.M. Moghe desired to purchase a flat from us. Therefore, an Agreement of sale dated 7th July, 2006 was entered into with Mr. Moghe. In the said agreement it is mentioned that we have received Rs. 20 lacs in cash but the date of receipt was not mentioned. As Mr. Moghe delayed the payment and the said amount was actually received by us subsequently from Mr. Moghe on 5.4.2007 in cash. We have duly recorded the same in our books on that date. Again Mr Moghe cancelled the agreement on 15.1.2008. And we have refunded the entire amount received from them by cheque dated 18.1.2008 wide cheque number 242771 and 242772. As there is no income for the firm in the said transaction and again the amount is paid back in the AY 2007-2008 you are requested not to add the amount in the income of my firm." 18. From the above, it is the submission of the developer who sold the flat and signatory to the impugned agreement to sale dated 7th July 2006 that it is at....
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....e claim of section 54 made in the return of income filed, the assessee himself filed this 'Agreement to Sale' in his submission dated 13.11.2009. the assessee claimed exemption u/s 54 of Rs. 29 lacs relying on this agreement 29 lacs was claimed as 20 + 9 lacs paid according to the 'Agreement to Sale'. Therefore, it is obvious that the amount of Rs. 20,00,000/- has been paid." 6.5 Appellant's contention that addition is to be made for AY 2008-09 may be considered by the AO during the course of assessment proceedings for AY 2008-09. There is no case made out that the amount paid to the builder on 5.4.2007 and the amount of Rs. 20 lakhs shown as paid in the agreement of sale are one and the same amount. Further, there is no infirmity in the action of the AO in assessing the amount in this year. This ground is dismissed." 20. The above paragraphs extracted from the orders of the CIT(A) and AO provide that it is the assessee's own submission that the sum of Rs. 20 lakhs was paid in cash and the same in support of his claim of deduction u/s 54 of the Act. Agreement to sale is a valid document and the assertions of the parties relating to cash payment of Rs. 20 lakhs is true considering....
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....y considered the facts of the case and the submissions of the appellant. It is not disputed that appellant's sisters have a residuary right on the property appellant inherited from his mother. The fact remains to be considered is whether the appellant's sisters had any over riding title in the property and whether the payments made to them can be treated as an expenditure in connection with the transfer. 4.2. The fact that emerges is that the three sisters had an inherent claim on the property vested by the WILL of the mother. Smt. Kamlabai Moghe's will has clearly stated that the property would be passed on to her two sons and three daughters and not to any other legal heirs. As is seen from the narration of events the sisters duly received their share of the property from the elder brother, Shri P.M. Moghe who bequeathed his share of the property to the three sisters in accordance with the will of his late mother. The original will was made Smt. Kamlabai Moghe in Marathi and her intention as to who should inherit and enjoy the property has been made abundantly clear. It is true that Smt. Kamlabai Moghe in her will has not spelt out the terms and conditions that are to be adhered....
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....e the concerned officer who has jurisdiction over the cases of the three sisters, Mrs. Indu Kale, Late Mrs. Sindhu Sinha and Mrs. Veena Wadekar to initiate necessary action to bring the amount to tax in the hands of the recipients. This ground is partly allowed." 24. We have heard both the parties and perused the orders of the Revenue Authorities. It is true that the three sisters of the assessee possess residuary rights in the property, which was sold by the assessee and therefore, they are entitled to the part consideration and therefore, the said payments of Rs. 45 lakhs made to three sisters at the rate of Rs. 15 lakhs each, is the expenditure wholly and exclusively in connection with the transfer of the property. Considering the above settled position in the judgment of Hon'ble jurisdictional High Court, we are of the opinion that the order of CIT (A) does not call for any interference. Accordingly, ground no.1 raised by the Revenue is dismissed and the issue is decided in favour of the assessee. 25. Ground no.2 relates to the eligibility to invest Rs. 22 lacs in Capital Gain Bonds of Rural Electrification Corporation Ltd u/s 54EC of the Act. Brief facts in this regard are t....