TaxTMI 
TaxTMI 
2019 (2) TMI 1836
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....ubmitted that the amount of Rs. 1.05 crore and odd paid to Sh. Surendera Agarwal and Sh. Narendra Agarwal (hereinafter also referred to as `the Agarwal Brothers') was wrongly depicted as "Commission", whereas it was, in fact, in the nature of their share in the sale consideration. Background facts were revealed that the Government of Maharashtra formed an authority called Pimpri Chinchwad New Township Development Authority (hereinafter also called as 'the Authority') which formulated a scheme for acquisition of land from farmers for the purpose of development of township and in lieu of such acquisition, farmers were to be given developed area of land equivalent to 12.5% of their total land area acquired and that the farmers had the option of selling such 12.5% developed area. Since several Government procedures were involved, two sets of parties, namely, the Sane family and Sh. Subhash Anand entered into separate Memorandum of Understandings (MOUs) with the assessee on different dates for transfer of their 12.5% area of the developed land to the assessee, in advance, at a pre-determined price. In respect of Gut No.1259, the Sane family agreed to transfer 66336 sq.ft. developed land....
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....ined the addition, against which the assessee has approached the Tribunal. 4. Having heard both the sides and gone through the relevant material on record, it is seen that the assessee acquired 12.5% share in the developed lands of the Sane family and Sh. Subhash Anand as a result of MOUs entered into with them at the rate of Rs. 201.42 per sq. ft. and Rs. 237.00 per sq. ft. respectively. This part of the transaction is undisputed. The fact that the assessee sold his 50% share in both the pieces of the developed land to Patel Brothers and others at the rate of Rs. 548.72 per sq. ft and Rs. 620.76 per sq. ft. respectively is also not disputed. The controversy rotates around the remaining 50% share in both the developed plots. Whereas the claim of the assessee is that he transferred his 50% share in both the developed lands earlier to the Agarwal brothers at the rate of Rs. 335 per sq. ft., the Revenue has made out a case that this alleged transaction of transfer to the Agarwal brothers is fake and has been shown with a view to reduce the incidence of tax in the hands of the assessee. We will analyze both the sets of land transactions, one by one. 5. Firstly, we espouse the tra....
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....6 sq.ft. at a consideration of Rs. 335/- per sq.ft., the AO has observed that the MOU with Sh. Agarwal for transfer of such an area at the stated price was apparently entered into on 01.9.2008, that is, just one day prior to the date of actual sale, which was an attempt to defraud the Revenue by transferring profit to Sh. Agarwal. The vital point taken out by the AO is that when the ultimate sale was made on 02-09-2008 for Rs. 3.64 crore against the actual allotment of land on 28-08-2008, how the assessee could transfer 50% of his share to Sh. Agarwal by means of an agreement dated 01-09-2008. In this regard, it is pertinent to note that reference to the MOU dated 01.09.2008 is missing in the Chart given by the ld. AR, as reproduced above. First thing to be decided is that if, at all, the MOU dated 1.9.2008 exists or the AO's exercise, based on such an MOU, was in the air. On a specific query, the ld. AR admitted that an MOU was entered into on 01.09.2008. He however claimed that another MOU was executed on 21.8.2007 as well. Copies of both the MOUs along with their english translations were placed on record. If we go with the second MOU dated 1.9.2008, as has been referred to by t....
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....ust a pretense and not a genuine one. 8. When the position of the assessee became awkward before the AO in the face of the MOU with Sh. Agarwal executed just one day prior to the date of sale, the assessee came out with another explanation. This time contending that MOU was actually entered into on 21.8.2007 and the later MOU dated 1.9.2008 was just a renewal of the earlier MOU. We have gone through the English Translation of both the MOUs dated 21-08-2007 and 01-09-2008. The first MOU gives description of right, namely, 12.5% of the developed land totaling 66336 sq.ft., out of which 50% area was the subject matter of this MOU. Clause (3) of this MOU provides that the transferor due to his financial and family constraints and to settle the dues has decided to sell the rights in the property at Sl.No.1 at a price of Rs. 335/- per sq.ft. This clause further provides that the assessee and Sh. Surendra Agarwal have executed this MOU at the price of Rs. 1.11 crore and "accordingly it is decided to execute the sale/development agreement". The second MOU dated 01-09-2008 has the first clause again giving description of property and the area, which is similar to the first MOU. Second cl....
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....eason has been adduced as to why second MOU was executed when the first MOU was already in existence. It is, therefore, held that the first MOU dated 21-08-2007 has no sanctity and the same was executed just in furtherance of the motive of diverting income to Sh. Agarwal. 12. In view of the foregoing discussion, we are not inclined to accept the version given by the assessee that he genuinely transferred 33168 sq. ft. of the developed land to Sh. Agarwal at Rs. 335/- per sq.ft. It is, therefore, held that the entire sale consideration of Rs. 3.64 crore belongs to the assessee and the alleged amount shown as `commission' or part of sale consideration to Sh. Agarwal, pertains to the assessee himself. 13. Now we switch over to the second transaction as per which the assessee acquired 24325 sq.ft. of the developed land, being 12.5% of the land holding of Sh. Subhash Anand, out of which 12162.50 sq. ft was claimed to have been transferred to Sh. Agarwal. The ld. AR has placed on record a chart giving chronology of the events qua this transaction, which is reproduced as under : S.No. Date Particulars Remarks 1 19-11-1976 Date of acquisition by PCNTDA ....
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....ansaction where the assessee tried to make out a case that the first MOU was actually entered into on 21.08.2007 as against the second MOU on 01.09.2008, for the extant transaction there is reference to only one MOU dated 18-10-2008. Here again, we are at loss to comprehend and it is against all human probabilities that a person in the business of land dealings would sell his right in land at 54% of the price which he is going to get from the regular sale just after a couple of days. Further, it is relevant to appreciate that the same is not an isolated transaction of the land sale by the assessee. He made actual sale transaction in respect of the first developed land at the rate of Rs. 548.72 per sq.ft. to Patel brothers etc. on 02.09.20008. It is totally unacceptable and against the normal human conduct that a better land, which actually fetched the rate of Rs. 620.76 per sq.ft., would be sold by the assessee to Sh. Agarwal at Rs. 335 per sq.ft. on 18.10.2008, that is, after the first actual sale transaction taking place at an earlier date on 02.09.2008 at the rate of Rs. 548.72 per sq.ft. Following the reasoning given for the first transaction, we hold that the second transactio....
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....one year, the price negotiated with the Agarwal brothers remained fixed at Rs. 335/- per sq. ft., even though the land under the second transaction was more commercial, as ultimately sold to Patel brothers at Rs. 620.76 per sq.ft. against the land under the first transaction at Rs. 548.72 per sq.ft. In a normal commercial parlance, the price of the second transaction should have been higher than the first one, which is actually not the case here because of the simple façade of the genuine nature of both the transactions of sale of right in the developed land to the Agarwal brothers, which are actually not genuine transactions. This factor also jeopardizes the bona fides of the MOUs and the resultant genuine involvement of Agarwal brothers in the transactions. 19. In view of the foregoing discussion, we are satisfied that the authorities below were justified in making and sustaining addition of Rs. 1,05,64,282/-, which is hereby upheld. This ground fails. 20. The only other ground which survives in this appeal is against the confirmation of disallowance of commission expense of Rs. 8,80,000/- paid by the assessee to his wife Smt. Chhaya Mane. 21. The facts concerning....