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2023 (9) TMI 747
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....g decision on the point of difference between the Members constituting Division Bench. The Third Member vide his order dated 11.07.2023 has agreed with the view take by Hon'ble Accountant Member and held that the impugned addition u/s. 56(2)(vii) of the Act, is liable to be deleted. 3. In view of the majority opinion, we hold that the addition u/s. 56(2)(vii) of the Act is liable to be deleted and decided in favour of the assessee and against the revenue. 4. In the result, appeal filed by the Revenue as well as cross objection filed by the assessee are dismissed. Order pronounced in the open court on 01st September, 2023 ORDER 11-07-2023 GEORGE GEORGE K VICE PRESIDENT The Hon'ble President vide order dated 10.05.2023 has nominated me as a Third Member on the point of difference between the members of the Division Bench, under section 255(4) of the Income Tax Act, 1961 (hereinafter called 'the Act'). 2. While referring the matter to Third Member, separate questions were framed by both the Members in order to settle and finalize the question that was required to be considered and decided by the Third Member. The learned representatives of both sides were r....
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.....2015. Accordingly, the assessment was concluded under section 143(3) of the Act, vide order dated 29.12.2018. 4. Aggrieved, the assessee filed appeal before the First Appellate Authority. The CIT(A) deleted the addition made under section 56(2)(vii)(b) of the Act and partly granted relief to the assessee with reference to the addition made under the deemed rental income from house property. Out of the four units, the CIT(A) held that one unit is entitled to exemption as a self-occupied property. 5. Aggrieved by the order of the CIT(A), the Revenue filed an appeal before the Tribunal (ITA No.1088/Mum/2022) and the assessee filed a cross-objection (C.O. No.106/Mum/2022). The learned Accountant Member concurred with the view of the CIT(A) in deleting the addition made under section 56(2)(vii)(b) of the Act. The primary reason for the learned Accountant Member to concur with the view taken by CIT(A) was that the assessee had filed the payment vouchers of balance sale consideration of Rs. 2,16,00,000/- paid to the builder and thereby making good the entire sale consideration. The learned Judicial Member, however, disagreed with the learned Accountant Member. The learned Judicial ....
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....uction are members of this AOP This deed also shows profit sharing ratio between members, Shareholding Pattern as On 31-03-2016 in Mumbai Shelter Housing Development Pvt Ltd is also enclosed showing that Ms Gitika Sane, Mr Ganesh Sane are holders of 9% shares each 3. Reasons/Clarifications from builder for not enforcing the clause of penal interest for delay in payment of consideration: Certificate from M/s Neminath Mumbai Shelter enclosed 4. Rationale and Legal Basis for renting out one of the units before having obtained possession of the same. The extract of agreement to sale showing the plan and the letter from the tenant would indicate that all the four units were combined and given on rent. The rationale was that right at the inception, the units were contemplated to be given on rent. Though formal possession was received on executing sales agreement, the possession of all the premises as stock in trade was with the builder AOP of which Ms Gitika Sane as a shareholder and director could access and hence with mutual consent of both members of AOP entered into the Leave and License agreement to enable the tenant to make necessary modifications to the office un....
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....ssessee anchored a new defense for the first time after conclusion of the assessment as well as the first appellate proceedings. The learned judicial member as well as the Assessing Officer are of the opinion that since possession was obtained by the assessee before discharging the entire consideration, it is certain that the balance consideration was paid by the assessee in cash (unaccounted money). 13. In this context, it is worthy to note the decision of the Hon'ble Supreme Court in Umacharan Shaw & Bros. (1959) 37 ITR 271 (SC) wherein it has been held that suspicion howsoever strong cannot take place of proof. From the entire appreciation of the evidence, I note that the Assessing Officer has failed to establish that the assessee had paid unaccounted money/cash to the developer. The Supreme Court in the case of Kishanchand Chellaram Vs. CIT[1980] 125 ITR 713 has observed that "It was for the revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the revenue". 14. It was the duty of the Assessing Officer to bring on record sufficient evidences and material to prove assess....
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....22 for the A.Y.2016-17. 2. Brief facts of the case are, assessee filed her return of income on 05.08.2016 declaring total income of Rs..6,56,170/-. The return of income was processed u/s. 143(1) of Income-tax Act, 1961 (in short "Act"). The case was selected for Limited Scrutiny under the category CASS and subsequently, notice u/s. 143(2) of the Act was issued and served upon the assessee. 3. The assessee is an individual and during the year under consideration having income from salaries, income from house property and income from other sources. During the assessment proceedings Assessing Officer observed that assessee had purchased office premises Nos. 101, 102, 103 and 104 at Siddharth Nagar Chaitanya CHS Society Ltd., vide agreement for sale dated 26.08.2015 for total purchase consideration of Rs..2,17,00,000/- and during the course of assessment proceedings, assessee was asked to submit the source of purchase of property vide notice u/s 142(1) of the Act. In response, Authorised representative of the assessee vide letter dated 12.11.2018 has submitted that the cost of property is Rs..2,17,00,000/- but have paid Rs..1,00,000/- and balance is still payable to the builder. ....
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....ll consideration for the particular transaction. 5) In this case, the total consideration for the property is Rs. 2.17.00.000, out of this Rs. 1,00,000 was paid and the possession was given without payment of fall consideration. The assessee purchased the property from M/s. Neminath Mumbai Shelter in which the assessee's husband is the one of the partner and M/s. Mumbai Shelter housing development Pus. Lad is the another partner in which Mr Neminathjain the share holder and director. 6) The assessee claimed that the joint venture still in existence and her husband yet so receive the share of profit and the balance payable will be adjusted against the share of prof receivable. The assessee failed to appreciate the fact that the assessee and his husband are separate entity. There is connection between the property was given to the assessee at throw away prices and share of profit yet to be received by the assessee 1 husband if the property is sold to the third party the possession will be given only after getting the entire sale consideration. In this transaction, since the assessee is wife of Mr Neminath Jain who is having substantial interest in the seller ent....
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.... between consideration as per agreement and consideration adopted for stump duty purposes and difference between total consideration as per agreement and the consideration seemed to have been paid: b) any immovable property.- (ii) for a consideration which is stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp value such property as exceeds such consideration: Since the crux of the deification it the "consideration" understanding the term consideration is very important. The Income Tax Act has not defined the term "consideration in respect of a contract by which an asset is purchased/sold. Hence the term consideration as per contract act is to be seen. According to Section 2(d) of Indian Contract Act, 1872 Consideration is defined as: "When at the desire of the promisor, the promise or any other person has done or abstained from doing or does or abstains form doing, or promises to de abstain from doing something such act abstinence promise is called consideration for the promise." Here the seller is considered as Promise to transfer the flat - The consideration is the payment already made or the Promi....
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.... of full consideration. The assessee purchased the property from M/s. Neminath Mumbai Shelter in which the assessee's husband is the one of the partner and M/s. Mumbai Shelter housing development Pvt. Ltd is the another partner in which the assessee is holding nine percentage shares and the assessee's husband Mr. Neminathjain is the share holder and director. 7) The AR has relied on the decision of Honourable Bombay High Court in the case of Keshub Mahindra vs. CIT. The AR failed to appreciate the fact that the said case law is supporting revenue stand rather than the assessee's argument. The AR relied on the particular paragraph of the said decision that substance of the particular commercial transaction is more important than form of the particular commercial transaction. In this case, the form of the transaction is that the remaining consideration of Rs. 2,16,00,000/- was shown as payable whereas the substance of the transaction is that the remaining consideration was paid as cash Further, the AR submitted that the liability to pay Rs. 2,16,00,000/- is still exist, therefore the agreement is not entered for lesser consideration than the market value....
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....ransaction, since the assessee is wife of Mr.Neminath Jain, who is having substantial interest in the seller entity M/s. Neminath Mumbai Shelter, the property was transferred to the assessee at the throw away price of Rs 1.00 000/- which is lesser than the market value of the property. 9) Therefore, the difference between the market value of the property and consideration paid is to be assessed as income from other sources us. 56 (2) (vii)(b)(ii) of the IT Act, 1961. For better understanding of the provision the same is reproduced as follows: "For a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration." From the above facts of the case, this clear that the transaction which was entered by the assessee is the co-lovable device by way of purchasing the property lower than the market value of the property and evade the payment of tax by way of understating the source for purchase of the property. Without payment of full consideration, the seller would not sell the property therefore it is understood that the remaining considerati....
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....or 2.17 crores and I could get possession by paying only 1 lac, * Not believing business interest that the company in which I am a shareholder and director had, with the seller due to a joint venture for re-development, share of profit of JV lying with builder (seller) being the comforting factor for him if I default after taking possession * Not believing many documents that both the buyer and the seller provided and making baseless allegation that balance amount is paid in cash. Made addition U/s 56(2)(vii)(b) which reads as: (vii) where an individual or a HUF receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017. (b) any immovable property- 1. without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; 2. for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Thus this section proposes to tax the difference between consideration a....
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....al area mentioned in Point 4 of the Sale Agreement which is 1002 sq ft. You may kindly verify the fact from the tenant Mr. Ravindra Bhatia whose address is as per rental agreement - His telephone no. is 9892361600. We also enclose certificate from the tenant to state the same" If Rs 60000/- Is considered as Rent for one unit of 250 sqft carpet Per sqft would work out as Rs 240/-which is absolutely unrealistic in a suburb like Goregaon of Mumbai. We enclose data on comparative rent from same locality - i.e. Sidharth Nagar, Goregaon West Mumbai. It may be observed that the rent per sqft is no where near 240/- derived by AO by considering rent of 60000/- for 250 SQ FT as against 1002 sq ft. I enclose documents furnished to AO to show that while registering stamp duty payment was made by mentioning all 4 units, and confirmation given by tenant furnished to AO. Without prejudice to my above contentions state that AO failed to follow procedure laid down by Hon'ble Bombay High Court in (2014) CIT v. Tiptop Typography, (2014) 48 Taxmann.com 191 (Bom. HC) for determination of deemed rent and hence respectfully following decision of jurisdictional Bomb....
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....sse It is very clear that the terms and conditions laid down in the agreement has not been honoured by the assessee. Further, it is also seen from the leave and licence agreement dated 10.07 2015 submitted during the course of assessment proceedings that the assessee has let out the office unit no 102 in Chaitanya CHS Ltd to Ravindra Bhatia for twelve month commencing from 05/06/2015 to 04/06/2016 The date of leave and licence agreement itself a documentary evidence that the assessee has taken the possession of the office unit even without entering in to agreement with M/S Neminath Mumbai Shelters. From the above discussion, following facts have emerged. a. In the normal circumstances, the transfer was completed only when the entire consideration was paid for the property and the possession was given to the buyer only after payment of all consideration for the particular transaction. b. In this case, the total consideration for the property is Rs 2 17 00 000 out of this Rs. 1,00,000 was paid and the possession was given without payment of full consideration. The assessee purchased the property from M/s. Neminath Mumbai Shelter in which the assessee's husband i....
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.... transaction and the remaining consideration of Rs. 2,16,00,000/- was paid as cash from the unaccounted income of the assessee. Though, there is no direct evidence for payment of cash, from the surrounding circumstances and human probabilities, It is understood that the remaining consideration of Rs. 2,16,00,000/- was paid as cash. The above principle was upheld by the Honourable Supreme Court in the case of CIT VS Durga Prasad More (82 ITR 540] and in the case of Sumati Dayal Vs CIT [214 ITR 801) d. The assessee claimed that the joint venture still in existence and her husband yet to receive the share of profit and the balance payable will be adjusted against the share of profit receivable. The assessee failed to appreciate the fact that the assessee and his husband are separate legal entity. There is connection between the property was given to the assessee at throw away prices and share of profit yet to be received by the assessee's husband If the property is sold to the third party, the possession will be given only after getting the entire sale consideration. In this transaction, since the assessee is wife of Mr. Neminath Jain, who is having substantial i....
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....pellant (reproduced fully in Para 4 supra) being relevant for adjudication of the impugned addition of Rs. 2,16,00,000 are as under- i. That Ld. AO could not appreciate the fact that agreement was for 2 17 crores and the appellant could get possession by paying only 1 lac. ii. That Ld. AO could not understand business interest that the company in which the appellant lady was a shareholder and director, due to a joint venture for re- development, had with the seller, share of profit of JV lying with builder (seller) being the comforting factor for him if the appellant defaulted after taking possession. iii. That Ld AO did not believe many documents that both the buyer and the seller provided and made baseless allegation that balance amount was paid in cash. iv. That Section 56(2)(vii)(b) of the Act proposes to tax the difference between consideration as per agreement and consideration adopted for stamp duty purposes. It was further submitted that as per enclosed Index -2 consideration 2 17 crores could be seen to be higher than the stamp duty value of the property of Rs 2,16,91,000. Since the Income Tax Act did not define the term 'considerati....
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....not advance her a loan and hence she was unable to make balance payment. 5.1.5 At the end of letter it was also mentioned that since the said concern (Neminath Mumbai Shelter) was fully secured as share of profit of her company was still with it, which would cover her liability request was made not to cancel the transaction related to the purchase of the Immovable property (the office premises). 5.1.6 In light of above discussion made from Para no. 5.1 to 5 15 of this appeal order, the appellant gets relief for which she is found to be entitled. Ld. AO is directed to delete the impugned addition of Rs. 2,16,00,000 and Ground No. 1 is allowed." 12. With regard to additional rent, Ld.CIT(A) gave relief on the ground that one of the property is self-occupied by the assessee and the rental agreement referred by the Assessing Officer for making the addition is only for the period of July 15 to June 16. Therefore, for the period of July 2015 to March 2016 the relevant interest to be considered only for nine months. Accordingly, Ld.CIT(A) worked out the deemed rental income by adopting the same rent of Rs. 60,000/- per month for two properties. i.e, 60000 X 2....
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....9, 16.02.2019, 18.02.2019 and 22.03.2019 and also in support of the same assessee has filed the copy of the bank statement in support of the above said claim and prayed that the transaction is genuine and assessee has properly remitted the payments after receipt of share of profit from the company. 17. Considered the rival submissions and material placed on record, we observe from the record that assessee has actually paid Rs..1,00,000/- as consideration at the time of registration whereas stamp duty of the property is Rs..2,17,00,000/- crores in support the claim Ld. AR of the assessee has submitted that assessee's husband is one of the director of the Seller company namely M/s. Neminath Mumbai Shelter and the project has not completed and assessee's husband is due to receive share of profit from the company which will compensate the purchase consideration due to be paid. We observe that assessee has filed payment vouchers to the extent of Rs..2.16 crores paid to the builder on various dates and relevant receipts are filed as part of Paper Book and assessee also brought on record bank statement in support of the above claim that assessee has subsequently settled all the payment....
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....er passed by Hon'ble Accountant Member, Shri S. Rifaur Rahman, I propose to pass a separate order which is as under: 2. For the sake of brevity aforesaid appeal and cross objections emanated from same impugned order passed by Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] are being taken up for disposal by way of composite order. 3. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: by virtue of the agreement for sale dated 26.08.2015, the cross objector, Mrs. Gitika Ganesh Sane (hereinafter referred to as 'the assessee') has purchased office premises No.101, 102, 103 & 104 at Siddharth Nagar Chaitanya CHS Soc. Ltd. for a total sale consideration of Rs. 2,17,00,000/- by making payment of Rs. 1,00,000/- and thereafter got the same registered with sub-registrar concerned by making payment of stamp duty on the total sale consideration of Rs. 2,17,00,000/-. The assessee has rented out the property in question vide leave licence agreement dated 10.07.2015 even prior to agreement to sale dated 05.06.2015. During the scrutiny proceedings the assessee was called upon to explain, to which she has filed compreh....
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....cence agreement dated 10.07.2015 the assessee has rented out office premises No.102 on first floor of the building in question to Mr. Ravindra Bhat at the rent of Rs. 60,000/- per month. 7. In the backdrop of the aforesaid undisputed facts questions arise for determination by the Bench are: (I) As to whether sale transaction qua the property in question by virtue of the sale agreement (supra) in favour of the assessee for a sale consideration of Rs. 2,17,00,000/- only by making payment of Rs. 1,00,000/- is a prudent commercial transaction or a colourable devise to evade the payment of taxes on the remaining sale consideration of Rs. 2,16,00,000/-? (II) As to whether the assessee has rented out entire property in question viz. office premises No.101, 102, 103 & 104 or only one of her unit No.102 vide leave licence agreement (supra) to Mr. Ravindra Bhat at the rate of Rs. 60,000/- per month? Question No.1 8. In order to decide the first question framed, the Ld. CIT(A) deleted the addition by returning following findings: "5.1.4 In light of the above discussion and after duly considering all the facts and circumstances and applicable law related to ....
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....s never been proved to have been paid till passing of the assessment order dated 29.12.2018 nor any such balance payment made by the assessee has been proved or discussed by the Ld. CIT(A) during the first appellate proceedings. 11. I am unable to agree with the findings returned by Hon'ble Accountant Member that "it may not look prudent commercial transaction, however the assessee and family members are the owners of the company through which she has acquired certain properties and that she has made the settlement subsequently which proves the transaction as genuine", because, the entire issue raised in the present appeal as well as cross objection is centered around contract entered into between the vendor and the vendee (Assessee) and licensor and the licensee (Assessee) by virtue of the agreement to sale dated 26.08.2015 and leave licence agreement dated 10.07.2015 respectively. Since "a contract includes understanding and action in concert by both the parties" out of which nothing can be added or deleted, the Bench is required to examine the entire issue in the light of the contents and intentions of the parties to the contract. So my reasons for dissenting with order passe....
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....een Lacs only) which consideration amount shall be paid by the purchaser/s to the Developer in the manner given below. a) Rs. 1,60,000/- on or before execution of these agreement b) Rs. _____ /-on or before completion of plinth. c) Rs. _____/- on or before completion of 1st slab d) Rs. _____/- on or before completion of 2nd slab e) Rs. _____/- on or before completion of 3rd slab f) Rs. _____/- on or before completion of 4th slab g)Rs. _____/- on or before completion of 5th slab h) Rs. _____/- on or before completion of 6th slab i) Rs. _____/- on or before completion of 7th slab j) Rs. _____/- on or before completion of 8th slab k) Rs. _____/- on or before completion of 9th slab 1) Rs. _____/- on or before completion of Terrace m)Rs. 2,16,00,000/- on or before handing over posession Total 2,17,00,000/= (Time Being essence of this Agreement) 5) The purchaser's herein had agreed to purchase the said shop/office on lump sum basis and same shall have no bearing on the area mentioned herein above and purchasers herein has agree not t....
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....ion." (v) that perusal of para 4 of the agreement to sale shows that on the date of agreement for sale Rs. 1,00,000/- was paid by the assessee and remaining sale consideration of Rs. 2,16,00,000/- was to be paid on or before handing over the possession. (vi) that perusal of para 4 of the agreement to sale (supra) further shows that since the time was made "essence of agreement to sale" the balance sale consideration of Rs. 2,16,00,000/- was paid by the assessee through unexplainable channel before taking over the possession of the property in question as is evident from the leave licence agreement (supra). Leave licence agreement (supra) proves that the assessee took the possession of the property in question on 10.07.2015. (vii) that but it is admitted fact on record that even prior to this agreement to sale the assessee took the possession of the property in question and rented out the same to one Mr. Ravindra Bhat by virtue of the leave licence agreement (supra) meaning thereby amount of Rs. 2,16,00,000/- was paid by the assessee in cash at the time of taking possession of the property in question. (viii) that para 8 of the agreement for sale ....
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....tant Member that the transaction in question is a genuine transaction, so the impugned order passed by the Ld. CIT(A) is not sustainable in the eyes of law, hence set aside and assessment order passed by the AO is restored, resultantly the question framed is answered in favour of the Revenue. Question No.2 13. I am also not in agreement with the findings returned by the Hon'ble Accountant Member dismissing the cross objections filed by the assessee by holding that "with regard to the cross objections filed by the assessee also dismissed for the reason that main appeal filed by the Revenue is dismissed". Because cross objections filed by the assessee are also required to be decided on merits and are not to be dismissed merely because of the fact that the appeal filed by the Revenue is dismissed. 14. So far as the second question framed in the preceding para as to making addition by the AO for an amount of Rs. 15,12,000/- as income from house property and confirmed by the Ld. CIT(A) is concerned, I am of the considered view that the addition has been made by the AO in accordance with leave licence agreement wherein it is categorically mentioned in para 1 & 2 that the office ....