TaxTMI 
TaxTMI 
2018 (1) TMI 927
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....I have perused the facts of the case as enumerated by A.O. and as submitted by appellant. I have perused the case laws relied on by A.O. as well as appellant. After careful consideration of facts, submission and contention of both A.O. as well as of appellant, ground wise adjudication is as follows: 5.1. Before adjudication of grounds following facts requires consideration: (1) There is a notarized M.O.U. dated 06.03.2007 between Navratna Township Pvt.Ltd.and appellant to act as facilitator in view of- (I) M/s. Navratna Group is engaged in the activities of purchasing and selling lands, building and construction of such building. (ii) A plotting scheme comprising inter-alia various residential and non-residential building, golf course and a club is proposed by M/s.Navratna Group at land situated at Sanand, and at Vsana lyava for which land had already identified by M/s.Navratna group. Negotiations are already made from land owner but in view of the land in question being agricultural land it will take time to get it converted into non-agricultural land and M/s.Navratna Group is not entitled to purchase agricultural land. (iii) The appell....
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....r of attorney Srr Piyush Bhanuprasad Trivedi(Shri Piyush Bhanuprasad Trivedi was witness for the MOU) and Sagar Sanand Infrabuild Pvt. Limited(PAN AALCS3683F) for a consideration of Rs. 2,47,23,000, the purchaser paid stamp duty :" Rs. 28,85,300 (1211500 + 1673800). The appellant received Rs. 24,72,3CC vide ch.No.244916 dated 01.10.2009 drawn on HDFC Bank, Navrangpura. (5) The appellant submitted ledger account of land held for Navratna group where apart from appellant share for cost of purchase of Rs. 22,81,211 and share of sale consideration of Rs. 24,72,300, appellant debited share of stamp charges for purchase of Rs. 1,11,802, Regd. expenses of Rs. 22,857 and N.A.charge,s M Bs.50,295 resulting into profit on sale of land at Rs. 6135. (6) A copy of statement recorded by A.O. of Smt.Sejalben Bipinbhai Amin u/s. 131 of the Act dated 01.11.2012. reflect that appellant admitted in reply to Q.No.5 that her name as facilitator was used in dealing of land by Sagar Sanand Infrabuild Pvt. Limited which is a company in which her husband Shri Devang D Shah is one of the directors. She stated categorically that al! the transactions of money are related to company. ....
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....rther, all the funds required for purchase of land on behalf of the Company including all charges, expenses and outflows were to be borne by the Navratna Group. It was also understood that all risk, rewards and obligations including compliance of legal provisions were to be done by the Navratna Group. (v) The Assessee was also under obligation to sell the said land after its conversion to non-agricultural status to the Navratna Township Pvt Limited or any of its Group Companies. (vi) All the above were mutually understood by way of a memorandum of understanding entered by the Assessee with Navratna Township Pvt Limited in- 2006-07, the copy of which is enclosed vide Annexure -3 for your ready reference. 3.1 In view of the above and taking into consideration the Memorandum of Understanding entered the Assessee was being provided the necessary funds for purchase of land on behalf of Navratna Township Pvt. Limited. The copy of the ledger account is also submitted to Your Good serves vide communication dated 16th January, 2013 and for the sake of convenience the same is not repeated. These funds were utilized in making payment to the farmers for purchase of a....
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.... Assessee requests Your Goodselves that; all facts having been truly and correctly stated, no penalty proceedings be initiated, if it is treated differently." From the Memorandum of Understanding entered by the assessee with Navratna Township Pvt. Limited, filed by the assessee, it was seen that vide para No. 2(j) the assessee was to receive a compensation of Rs. 15,000 per conveyance or any other amount as was mutually decided. During the assessment year, a total of seven conveyance deeds were executed and accordingly, the income which had accrued to the Assessee was Rs. 1,05,000/-. Against the same, the assessee has shown income of Rs. 30,771/- only under the head "Capital Gain". The income of Rs. 30,771/- has been computed after considering all the cost and expenses towards the purchase of land on behalf of Navratna Township Pvt. Limited." The A.O. held as follows: "I have duly considered the submission of the assessee. On verification of the MOU filed by the assessee, it is proved that the assessee has acted as a facilitator in the entire transaction for and on behalf of Navratna Group. All the lands have been purchased with the funds provided by Navr....
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.... immovable property held by you." After considering various details and explanation the A.O. held that- "I have duly considered the submission of the assessee. On verification of the MOU filed by the assessee it is seen that the assessee's business is of purchase of agricultural land for the entities ~ ho cannot purchase the same because of legal constraints The assessee had purchased the agriculture land from the owners of the agricultural land i.e. the farmers on behalf of Navratna Group during the course of business of real estate development of that group for the reason that the Company was unable and legally not eligible to purchase the agricultural land from the farmers in its name till the same was converted into non-agricultural land. On detailed reading of the Memorandum of Understanding together with the submission filed by the assessee, it is seen that the assessee has purchased the land with borrowed funds of Navratna Township Pvt Ltd. on behalf of them which in turn have been used for making payment to the farmers. All the legal work and the verification process have been carried out by Navratna Group. The assessee was also under obligation to sel....
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....n though, this amount has been shown in the Balance Sheet yet it cannot be denied that the assessee is in possession of the cash at her hand and some of this amount may be utilised by her for other personal purposes also. Meaning thereby is that the assessee may he receiving the amount over and above the agreed amount has stated in the Memorandum of Understanding, Hence, the assessee ought to have shown business income of Rs. 2,01,679/- [1% (1,97,78,400 + 3,89,500)] as against the income of Rs, 30,000/- and accordingly, difference of Rs. 1,71,679,- (2,01,679 - 30,000) is added to the business income of the assessee, Since the assessee has furnished inaccurate particulars of income and thereby concealed his income penalty proceedings u/s.27 1(1 )(c) of the I.T. Act is being initiated." 5.2. Now coming to adjudication of various grounds of appeal as follows: (A) Ground No.1 to 3 are interlinked and against the computation of short term capital gain of Rs. 3606950 by invoking provisions of section 50C of the Act for transaction of land purchase and sale. The A.O. rejected appellant's explanation of being a facilitator of land purchase and sale on behalf ....
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....business transactions. But, on the other side, as per ratio of asstt.order in the case of other co-owner as well as from the MOU also, appellant has not disclosed the amount of Rs. 15,000 as facilitation charges per conveyance. It is therefore, when conveyance deed is completed, such amount accrued to appellant in previous year. This amount of Rs. 15,000 is therefore required to be treated as business income of appellant and to be added as enhancement of income on this issue. In reference to invocation of section 50C of the Act in the case of appellant, the AO is not justified on the facts of the case. The A.O. of other co-owners also not taken such view. It is therefore addition of Rs. 36,06,948 being 10% share of appellant out of total capital gain of Rs. 3,60,69,489 taking recourse to section 50C is directed to be deleted. The appellant gets relief of Rs. 36,06,948. In conclusion, all these grounds are treated as partly allowed with an enhancement of Rs. 15,000 for appellant's facilitating income accrued and arised in previous year. (B) Ground No.4 is against the initiation of penalty u/s.271(1)(c) of the Act. This issue is now consequential in vie....