TaxTMI 
TaxTMI 
2023 (4) TMI 194
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.... Shri A.A. Balachandran, Shri P. Manoj, Shri K.J. Thomas and the assessee, of the second part (as sellers), for sale of 384.5 cents of land at Village Ayyanthole, Pukunnam, Puzhakkal Road, Thrissur, at the rate of Rs. 2,24,000 per cent, i.e., for a sum of Rs. 861.28 lacs, was found and seized from the residence of Dr. Ramakrishna Ambadi (PB-1, pgs. 17-25). The sale consideration per the registered sale deeds in respect thereof, executed subsequently, was however at Rs. 170.27 lacs. There was, thus, an escapement of income from assessment at Rs. 691.01 lacs. Per the instant assessment, initiated u/s. 153C, income in respect of 276.87 cents of this land, registered (separately) in the name of the four sellers, i.e., other than the assessee, is brought to tax, which has been done by the Revenue substantively in the hands of the assessee and protectively in the hands of the respective sellers. 3. The matter being principally factual, we shall proceed by discussing the evidences that led the Assessing Officer (AO) to his adjudication and, then, to that by the ld. CIT(A) in deleting the same, and which stands impugned before us. 4.1 The Bench observing that the capital gain assesse....
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....matter, we further observe, had been adjourned in the past on the request of the assessee to enable adjudication by the first appellate authority in the case of the sellers, assessed protectively. The same stand since decided following adjudication by the first appellate authority in the assessee's case for AY 2007-08, i.e., qua quantum. As regards ownership, there is no definite finding by the ld. CIT(A) vide his near identical orders dated 03/2/2021 (PB-2), merely directing the AO to adopt the rate of rs.1 lac per cent, i.e., as in the case of the assessee. While two sellers have accepted the same, the other two (P.M. Vijayan & A.A. Balachandran) have kept the matter alive by preferring second appeal before the Tribunal, whose order in the instant case, being represented, again, by Sh. Warrier, would equally apply thereto. The stand of the parties, as explained, being the same, hearing in the matter was proceeded with, with the consent of the parties, on this premise. 4.3 The issue/s that therefore survives, and on which it was contested, is: a) the person/s in whose hands income on sale of land is to substantially assessed; b) the quantum of capital gains. ....
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.... transaction. This is the only reason why the receipts have not gone through bank accounts in respect of the other persons. In fact, during the assessment proceedings for the Assessment Year 2009-10, the issue of sale of land and assessment of capital gains had cropped up. (xxiv) In view of the above, assessee was the real owner of 384.5 cents of land, part of which he apportioned among his own benamidars with the intention of suppression of income. Therefore, I am justified to treat the assessee as the real owner of 384.5 cents of land the capital gains arising from the transaction of property during the year is assessed substantively in the hands of the assessee and protectively in the hands of the persons by whom the documents have been registered, viz. Sri. KJ Thomas, Sri. P Manoj, Sri. AA Balachandran and Late PM Vijayan, for the Assessment Year 2008-09, sale value taken @ 2,24,000/- per cent as per copy of the signed agreement seized.' 4.4 Long-term capital gain was accordingly assessed by reducing from the sale consideration of Rs. 620.19 lacs, i.e., @ Rs. 2.24 lac per cent, the indexed cost of acquisition for each of the four sellers, at Rs. 6,13,25,694 (Rs. 613....
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....rt (the) assessee's contention. Big chunks of land were given to Shri. K.J. Thomas and Shri. P. Manoj. In view of submission of the assessee and facts of this case, in my opinion, the Assessing Officer was not justified in treating these four people as benamidars of the appellant and assessing the whole of capital gains in the hands of the appellant on substantive basis. The addition is hereby deleted. The appeal is allowed.' The same stands assailed before us, raising the following grounds: '1. The Commissioner of Income Tax (Appeals) erred in deleting additions of Rs.6,13,25,694/- on account of capital gains arising from the sale of 276.87 cents of land at Ayyanthole by four benamidars in the hands of Shri T.G. Chandrakumar. 2. The Commissioner of Income Tax(Appeals) overlooked that an agreement dated 03/01/2007 was seized during search which showed that property having areas 384.5 cents at Ayyanthole, of which the properties in the name of the 4 individuals were a part, was agreed to be sold to Dr. P.H. Abdul Majeed and Smt. Laxmi Devi Gopinathan for a consideration of 2.24 lakhs per cent. 3. The Commissioner of Income Tax (Appeals) ove....
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....in character, are satisfied. The other grounds highlight the various factual aspects of the case. 5. Before us, Shri Warrier was at pains to emphasize that the Agreement dated 03/01/2007 was cancelled soon-after, i.e., on 17/01/2007, on the buyer realising that a part of the subject land was 'puramboku', i.e., land not in the name of any person, right over which therefore vests with the Government. The deal was, accordingly, settled at Rs. 1 lac per cent, for which a revised agreement was entered into on 07/3/2007, with sale for 107 cents being registered vide sale deed dated 28/05/2008 for Rs. 107 lacs, of which Rs. 50 lacs was received by the assessee on 16/3/2007 on delivery of possession of 50 cents. 6.1 Our first observation in the matter is that the ld. CIT(A) has not met any of the observations/findings by the AO vide para 9 [(i) to (xxiv)/pgs. 4-16] of his order, part of which is reproduced hereinbefore, and it is this that, as afore-noted, stands sought to be highlighted by the Revenue per its various Grounds, save Gd. 8, which assails the admission of additional evidences by him as being without following the procedure prescribed in its respect. There is, further, n....
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....nt, as that dated 03/1/2007, is entered into, it has a legal effect (CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC)). The same can be ignored only at the peril of an adverse inference and, two, can be changed only with the mutual consent of all concerned. Both the Menon family and Dr. Majeed, as well as the four sellers other than the assessee-respondent, are conspicuous by their absence in the new Agreement, and neither is there anything to suggest the presence of the three brokers, and which cannot be. As afore-noted, there is no evidence of the cancellation of the earlier Agreement. In fact, it stands acted upon, with all but one sale deed (for 107 cents) being executed within the validity period of the Agreement (04/10/2007), with time being not of essence. Further, the entire advance of Rs. 100 lacs, admittedly paid on entering it on 03.1.2007, is paid cash, as is it's return, stated to be on its cancellation on 17.01.2007. Likewise, for the payment of commission to the brokers at Rs. 10 lacs, again, a no mean sum. Why, one may ask, if it was indeed meant to be disclosed? There are no answers, and at any stage, to these questions. There is, further, no recording of this cash recei....
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....ITR 323 (SC); Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC)). We may though hasten to add that the burden to prove that the apparent is not real is on the Revenue (CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349)). 6.3 That the three stated Brokers were involved in the deal is not denied, even as it stands confirmed on the basis of the letter by Dr. Abdul Majeed to the Circle Inspector, East Nadar PS, in 2007. Each of them per their statements u/s. 131, i.e., dated 09/01/2014 (Shri C.R. Joseph), 10/01/2014 (Shri K.K. Sunil) and 20/01/2014 (Shri Ratheesh Vega), i.e., during the period the search proceedings were on, and the final part of which stands extracted earlier, confirmed as under:- a) the negotiations for transfer of the subject land (384.5 cents) at Ayyanthole, which is a single plot, were done in their presence; b) these negotiations were between Dr. Abdul Majeed and TGC, the assessee, at the latter's residence at Punkunnam, Thrissur, as a single transaction; c) that the subject land belonged to the assessee; d). that they did not know any of the other sellers; e) a rate of Rs. 2.50 lac per cent was initially proposed by t....
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....their share amounted to Rs. 130 lacs which, after adjusting accounts between them, was pooled by them. This was also confirmed by Dr. RM, who represented the Menon family, further confirming: a) that the property purchased from TGC, the assessee, though was held in the names of various persons; b) that the property was purchased in the name of Sh. Arun Majeed, s/o Dr. Abdul Majeed, and LG, his sister. (para 9(xii)/pg.9 of the assessment order) This was also confirmed by Dr. Majeed per his statement u/s. 131 dated 15/1/2015, who had not only represented the buyers in negotiations with the assessee-seller, but also admittedly handled the entire financial aspect of the transaction, both on behalf of his son, Shri Arun Majeed (refer answer to Q.5 of his statement dated 07/1/2015), as well as the Menon family (as had indeed been confirmed earlier by LG on 06/02/2014 in answer to Q.7), also giving details of the consideration paid (Rs. 729.12 lac) in respect of 325.5 cents registered in the name of his son. The assessee, on being confronted therewith, and exten....
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....) himself has decided this aspect of the assessee's case for AY 2007-08, relied upon by the assessee before us. His own findings, being in respect of the same transaction, would equally apply for the current assessment year as well. The basis of the rate of Rs. 1 lac per cent, i.e., as per the subsequent sale deed, is the return of advance on 17/01/2007 on cancellation (PB-1, pg.26). To what effect, one may ask, the same when there is, in the first place, no evidence of receipt of Rs. 100 lac as advance on 03/01/2007, which is being refunded back on 17/01/2007? The production of receipt of Rs. 100 lacs dated 17/01/2007 on 'cancellation' of agreement would be of no consequence in view of the restoration of agreement on 20/01/2007. We have already stated that the theory of cancellation of the agreement and execution of new one on 07/03/2007 is no more than a hoax, an afterthought. None of the brokers retracted their statements qua sale consideration, with, rather, Dr. Majeed stating of restoration of the Agreement on 20/01/2007, so that it obtains. There is in fact no question of any retraction on this aspect, as the rate of Rs. 2.24 lac per cent is admitted, and it is only subsequen....
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....of the figures could be correct. Both being less than 384.5 cents agreed for sale, this perhaps explains 'puramboku', i.e., to that extent. Per contra, the very fact of sale deeds having been subsequently registered for 383.87 cents, brought to tax, disproves the plea of 'parumboku' except perhaps on 0.63 cents of land. We are conscious that land at 107.63 cents is ascribed to the assessee (TGC), and 326.5 cents to Arun Majeed, eliminating the difference. We are only stating the extent to which, if at all, the defect of puramboku could be possible; the sale deed executed by the assessee (not on record) on 28/05/2008 being stated to be for 107 cents. 6.6 We are also conscious that for two sellers (i.e., A.A. Balachandran (151 cents) and P.M. Vijayan (116 cents)), the sale deeds were executed at Rs. 0.20 lac per cent, while that for other three, i.e., P. Manoj (5.4 cents); K.J. Thomas (4.47 cents); and the assessee (107 cents), at Rs. 1 lac per cent. The land, map of which is drawn in the separate appellate orders dated 03/2/2021 of the four sellers (PB-2), is confirmed by the Brokers as a single plot, and the agreement, a single transaction. Two commercial buildings were being pl....
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....India and Gem Electricals and Sanitary Works. He owns 90% share in Gemco Rubber Pvt. Ltd. and owns plantation at Kannabra, Palakkad. Besides, he has shares in Micro Pipes Pvt. Ltd. and Kanjirappilly Amusement Park Pvt. Ltd. That is, is an influential and wealthy man. Shri P. Manoj (5.4 cents), a family man, aged 34 years, admitted vide a sworn statement dated 07/1/2014 to working as an office boy in Gemco Rubber Pvt. Ltd., earning Rs. 80,000 annually. He had, admittedly, no means to buy land, which was transferred to him by the assessee on 18/12/2006 for Rs. 1.02 lacs. He, on being questioned, had no clue of the sale details, further stating of having been informed by the assessee of purchasing about 5 cents of land at Ayyanthole in his name, sold in fy 2007-08, as had indeed been the case for the other three sellers. His subsequent retraction, unevidenced, is per written submissions furnished by the assessee on 15/12/2014. The same is to be per his sworn affidavit, which could then be subject to cross examination. Two, no reason is given for 'retraction' inasmuch as stating the earlier statement as having been given under the influence of alcohol, only needs to be stated to be rej....
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....e., even prior to setting up his concern, Trust Rubber. Specific facts in relation thereto are discussed separately, as follows. Sh. Balachandran admits in his statement u/s. 132(4) dated 07/1/2014 (PB-1, pgs. 97-105), to be closely associated with the assessee, working as a foreman in his company, Gwmco Rubber, drawing a monthly salary of Rs. 12,000, besides Rs. 8,000 p.a. as bonus. He further states of having purchased land from Kallada Group for Rs. 2,400 per cent (appx.), though could not tell the name of the person who represented the said Group in the said purchase. The sale deed, however, revealed the land to have been purchased instead from: - Jacob V. Elias and John V. Elias, sons of xxxxxx, 25 cents for Rs. 57,500, i.e., at the rate of Rs. 2300 per cent and; - Dilip s/o xxxx, 75 cents at Rs. 69,000, i.e., at the rate of Rs. 920 per cent. Or, at an average rate of Rs. 1265 per cent. None of them are stated, much less shown, to be of Kallada Group. He is thus unaware of the person/s from whom, as well as the rate at which, he purchased the land, he is stated to be the owner of, some years ago. How could this be? Further, though he admits to signing the ....
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.... rs. 39 lacs; again, a huge sum for a man of his means, particularly considering his financial distress; the balance-sheet (as on 31/3/2008) of Trust Rubber on record (PB-1, pgs. 79-83) exhibiting capital at meagre rs. 0.20 lacs. The same removes any doubt that one may have harboured as to the truth of what stands stated. Even as its receipt in cash is unexplained, the entire stated sale consideration (rs. 30.20 lacs) is withdrawn through the capital account on 25.8.2007, the sale date. That is, the day it is deposited in the firm. The withdrawal of money immediately makes its deposit in the first place as of no consequence. The same is only a book entry, made with an ulterior purpose of depicting cash receipt. The business of the firm stands ceased much earlier, and the cash has not gone to swell his capital in the firm. That is, one is still clueless about the destination of cash. No creditor is paid despite liabilities as on 31/3/2008 being at rs. 18.48 lacs, nor is it banked. In fact, the bank account on record (PB-1, pg. 91) was opened only later on 26/9/2007, i.e., after and closure of the firm, as well as the sale on 25/8/2007. Further still, even the capital-gains tax of....
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.... to during hearing, there was no occasion to seek any clarification in the matter. Why, it cannot, for that reason, be in law regarded as part of the Tribunal's record. Cash at rs. 14.50 lacs is entered in it's accounts on 01/4/2008, so that the balance cash (rs. 15.70 lacs) is admittedly unexplained. This is quizzical in view of reflection of cash-in-hand as on 31/3/2008 in the cash statement (PB-1, pg. 107) at Rs. 28.45 lacs. Even the cash entered in accounts gets reflected at rs. 12.94 lacs as on 31/3/2009, so that it remains unutilized even after over 19 months of receipt! Reflecting cash-in-hand, rather, proves its non-utilization. It is only a cash flow statement, including cash receipt from all sources, including odd jobs, and that expended, paid, or deposited, that would qualify to be a proper account of cash, and exhibit it's utilization toward proving the beneficial ownership of cash. Why, even this would stand to be verified for its veracity, examining the various persons to whom it is, not routed through bank, stated as paid. The money trail is completely missing. 6.11 We next consider the case of Sh. P.M. Vijayan, represented, in view of his demise, by his wife, Smt....
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.... as the said firm, as explained in the assessment proceedings (pgs. 115- 119), stood closed in March, 2005 due to financial crises, and no part of it is used to discharge creditors. Further, his capital therein as on 31/3/2008, which can be in view of closure of business, safely regarded as on 31/3/2005, is at rs. 0.86 lacs, as against outstanding liabilities at rs. 21.61 lacs, i.e., nearly 25 times! Sure, there are matching assets, but it is clear that they are not realizable as else they would not continue outstanding years after closure of business. The difference of rs. 2 lacs, though not material, is not understood, even as the same having not been referred to during hearing, there was no occasion to seek explanation in its respect. In short, the destination of 'cash receipt' of rs. 23.20 lacs remains unknown, even as he is debt ridden, and even as such a sum, as the AO also observes, would make a drastic change in their life. The same is included in the cash flow statement (pg. 116) at rs. 3.58 lacs instead of rs. 23.20 lacs. Why? Reflecting it, in whole or in part, as cashin- hand, stated at rs. 4 lacs (as on 31/3/2008), is of no consequence; rather, confirms non-utilization....
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....nst the registered holder of the property. The AO has vide para 9(vii) clarified that the Agreement dated 03/1/2007 bears full mention of the said civil suit resulting in Sh. Vijayan being allowed custody over 116 cents of land. Not only, thus, the argument is false; it, even if true, would have no bearing on the value as the same is in the knowledge of the parties entering the contract. The entire case is a made-up. In sum 7.1 The issue arising, in sum, is the validity of the deletion of the impugned addition in law, in the facts and circumstances of the case. The matter was examined from the stand-point of both - the ownership of the subject land by the assessee, in whose hands substantive assessment stands made, as well as the quantum of the capital gains. Qua the latter aspect, in the absence of any finding per the impugned order, reliance was placed by the assessee-respondent on the order by the first appellate authority, being incidentally the same person, in the assessee's own assessment for AY 2007-08 (refer para 4.2), which in turn stands followed by the first appellate authority for the current year in case of the ostensible sellers, assessed protectively. There is,....
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....admittedly owns the land that fronts the road, and through which access to the land of other four could be had, for coming together for the sale of land. Not surprisingly, the land is sold, in all four cases, on the same date, i.e., 25/8/2007. Contrast this with, and in any case, it needs to be noted that this land was subsequently sold at Rs. 6.70 lacs per cent, i.e., in February, 2010 (refer assessment order dated 28/03/2016 of Shri K.J. Thomas for AY 2008-09/PB-2, pgs.85-96). Even if subsequently scaled down to Rs. 4.80 lacs per cent, as Dr. Majeed clarifies (vide his statement u/s. 132(4) dated 18/12/2013 / PB-1, pgs.27-36); the said difference not concerning us here, the lower figure again represents a 114% increase over the agreed price of Rs. 2.24 lacs per cent within 3 years of the Agreement dated 03/1/2007, justifying the same. The return of the capital gain by two sellers is of no consequence; the same being only be give effect to the benami transitions (refer: ITO v. Rattan Lal [1984] 145 ITR 183 (SC); Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 (SC)). Why, the money to pay the tax is itself either unexplained (Rs. 3.45 lacs) or comes from the assessee (or his f....