2011 (4) TMI 1522

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.... erred in law and on facts in deleting the addition made of Rs. 4,55,000/- in the case of Shri Rakesh Karsanbhai Patel and Shri Karsanbhai Khodidas Patel on account of income from House property in the hands of the assessee instead of in the case of Karsanbhai Khodidas Patel (HUF). 4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income tax (A)-XI, Ahmedabad ought to have upheld the order of the Assessing Officer. 5. It is therefore prayed that the order of the Ld. Commissioner of Income tax (A)-XI, Ahmedabad may be set aside and that of the Assessing Officer be restored." . Since similar issues were involved , these appeals were heard simultaneously for the sake of convenience and are being disposed of through this common order. 2. Adverting first to ground nos. 1 & 2 in these appeals, facts, in brief, as per relevant orders in the case of Shri Rakeshbhai K Patel are that return declaring income of Rs. 1,82,06,190/- filed on 31-08- 2005 by the assessee, deriving income from salary, long term capital gains, interest & dividend etc. besides agricultural income, after being processed on 18.11.2005 u/s 143(1) of the Income-tax Act, ....

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.... the A.O. is deleted." 3.1. Likewise in the case of Karsanbhai K Patel, the ld. CIT(A) following his own order for the AY 2004-05 accepted the claim of the assessee in the light of decision dated 2.11.2007 of the ITAT in ITA no.1850/Ahd./2007 in the case of Kisan Discretionary Family Trust.. 4. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). At the outset, both the parties agreed that issue is squarely covered by the decision dated 2.11.2007 of the ITAT in the case of Shri Rakeshbhai K Patel in ITA no. 1855/Ahd./2007 for the AY 2003-04,followed in the AY 2004-05. 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of the ITAT. We find that the ITAT while adjudicating a similar issue in the case of Shri Rakeshbhai K Patel for the AY 2004-05 in their decision dated 3.10.2008 in ITA no.1804/Ahd/2008, followed an earlier decision dated 02-11-2007 in the assessee's own case for AY 2003-04 in ITA no.1855/Ahd/2007, and concluded as under:- "4. We have carefully considered the rival submissions and, perused the material on record along with the order of the tax authorities bel....

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....d any change in system of accounting thereafter, either in regular returns of income or in the return of undisclosed income furnished under Chapter XIV-B of the Act, there was no reasons for the Authorities to adopt the system of accounting as "mercantile" system without making out a case that either the assessee was, in fact, not following the cash system of accounting or having followed in AY 1995-96 or at the most in AY 1999-2000 had not following the same consistently in subsequent years, though, from the facts on records, we find that Revenue has not based its decision on these grounds. The Revenue's case, as has been observed from paragraph No.2.1 of assessment order for AY 2002-03 as well as the AY 2003-04, for adopting the system of accounting as "mercantile" in AY 2002-03 and AY 2003-04 is the mentioning of system of accounting as "mercantile" in assessment for block period which admittedly, was for the period 01-04-1995 to 27-09-2001. Since mentioning of accounting period in block assessment, in our opinion, (as has been discussed in the case of Kisan Discretionary Family Trust) could not be a reason for adopting system of accounting as "mercantile" in subsequent assessme....

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....ted in the balance sheet for the year under consideration. To a query by the AO, the assessee replied that the said properties had been transferred to Karsanbhai Khodidas Patel,HUF and the Farm House and its Furniture were transferred to Shri Karsanbhai Khodidas Patel. In support, the assessee filed an affidavit. Accordingly, it was contended that the addition made in the earlier AY 2004-05 under the head Income from House Property, cannot be made during the current year as these properties no longer belonged to the assessee. The assessee also submitted a working of computation of Long Term Capital Loss, which was otherwise not claimed in the return, besides details of payment through two cheques dated 6.10.2005 for an amount of Rs. 32,34,227/- & Rs. 14,68,750/-. After considering the reply of the assessee, the AO observed as under:- "5.2 The assessee's above contention was examined carefully and the same was found not acceptable for the following reasons. (i) Though the assessee has claimed that the properties have been transferred and shown in the annual accounts, however, from the return of income, it was transpired that the assessee has not furnished ....

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....en supported with other circumstantial evidences thereto. Moreover, an immovable property cannot be transferred simply on an affidavit or oral agreement as the Transfer of Property Act stipulates not only written agreement to this effect, but also payment of requisite stamp duty on such transaction, for registration of such transaction. (vi) The assessee also did not furnish the balance sheet and copy of return of Shri Karsanbhai K. Patel (HUF) to prove that Nima House has been reflected therein, as claimed. 5.3 From the above facts and circumstances what appears is that the assessee has not transferred the property to other related entities as such, but has resorted to a paper exercise just to avoid or circumvent the provisions of section 23 of the Act. In absence of any supporting legal documents and other information, it is held that the assessee's contention is nothing but an eyewash or afterthought to avoid the legitimate tax liability in respect of the additional house property being owned by him and liable for the deemed property income u/s 23(4)(b) of the Act. Accordingly assessee's contention is rejected while holding that the property under consi....

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.... property is transferred and no longer in possession of the assessee, he was not justified in deleting the addition. On the other hand, the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 10. We have heard both the parties and gone through the facts of the case. As is apparent from the findings in the relevant assessment orders, these assessees did not furnish any evidence or details before the AO, evidencing that the aforesaid immovable properties had indeed been transferred or possession handed over to Shri Karsanbhai Khodidas Patel (HUF) or Shri Karsanbhai Khodidas Patel. According to the AO, the properties being immovable, could be transferred to another person by way of proper agreement to that effect and by paying proper stamp duty towards registration of such agreement with the Registrar of Transfer of Property . However, these assesssees did not submit any such documents/records before him. Even in the return of income such a transaction was not reflected nor the assessees provided details of the total consideration for the transfer of property and the amount received on such transaction, working of capital gain etc and nor even co....