Ganeshchandra A Rackvi (Huf), Mumbai vs Department Of Income Tax

, BEFORE SHRI I. P. BANSAL, JM & SHRI R.C.SHARMA, AM ITA No.1520/Mum/2011 ( Assessment Year :2006-07) ITO WD 20(1)(2), Mumbai Vs. Ganeshchandra A Rackvi (HUF), 203-3, Asmita Mogra CHS Ltd. Near Sher-E-Punjab Colony, Andheri (E), Mumbai PAN/GIR No. : AACHG 7714 H ( Appellant) .. ( Respondent) AND ITA No.2002/Mum/2011 ( Assessment Year :2006-07) Ganeshchandra A Rackvi Vs. ITO WD 20(1)(2), Mumbai (HUF), 203-3, Asmita Mogra CHS Ltd. Near Sher-E-Punjab Colony, Andheri (E), Mumbai PAN/GIR No. : AACHG 7714 H ( Appellant) .. ( Respondent)

/Revenue by : Shri Akhilendra Yadav /Assessee by : Shri Subodh Ratnaparkhi

Date of Hearing : 2nd March, 2015 Date of Pronouncement 11th March,2015

ORDER

PER R.C.SHARMA (A.M):

These are the cross appeals filed by the assessee and revenue

against the order of CIT(A) for the assessment year 2006-07, in the

matter of order passed u/s.143(3) r.w.s147 of the Act. 2

ITA Nos.1520&2002/11

2. The assessee in its appeal (i.e. ITA No.2002/M/2011) is aggrieved

by the action of AO for addition of Rs.43,50,000/- as long term capital gain

on sale of his share in the property at Bhyayander, by assuming that

assessee was in receipt of cash consideration in excess of price quoted in

the sale deed. The AO based his conclusion on the plea that one of the

co-owners have sold his shares in the said land for a higher

consideration, as compared to the consideration shown by assessee.

3. Rival contentions have been heard and record perused. Facts in

brief are that the assessee is an individual having income from capital

gain on sale of land and income from other sources during the relevant

assessment year. During the course of assessment, the AO has observed

that the assessee an HUF is the co-owner along with 4 other HUFs each

having equal share in their ancestral land bearing old Survey Nos.661,

675,689,691,692,693,695,696,702 and 689 situated at revenue village:

Bhayander, TaL & Distt. Thane. All these HUFs (including the assessee)

are represented by 5 brothers namely Shri Ganeshchandra A. Rakvi (the

assessee), Shri Bhalchandra A. Rakvi, Shri . Vinayak A. Rakvi, and Shri

Moreshwar A. Rakvi. The 5th brother Shri Ganpat A. Rakvi, expired about

20 years back and accordingly, his share of property is transferred in the

names of his sons Shri Rajeev G. Rakvi and Shri Amol G. Rakvi. During

the relevant assessment year the assessee has sold his share of the

property along with three other co-owners namely Shri Bhalchandra A.

Rakvi (HUF) Shri Vinayak A. Rakvi (HUF) , Shri Moreshwar A. Rakvi 3 ITA Nos.1520&2002/11

(HUF) for a total consideration of Rs.2.66 crores to Shri Sanjay M.

Punamiya of M/s. Sandhya Enterprises and M/s Sankeshwar Enterprises

vide agreement dated 31.10.2005. Therefore, out of the total ancestral

land holdings of five brothers, the 4/5lh share of the property belonging to

four brothers appearing in the name of their respective HUFs was sold to

Shri Sanjay Punamiya on 31.10.2005 for a net sales consideration of

Rs.2.66 crores. The balance 1/51h share of the land belonging to' Rajeev

U. Rakhvi (HUF) was also separately sold to Shri Sanjay M. Punamiya

vide a separate agreement for sale dated 25.10.2005 for a net

consideration of Rs.1.10 crores. Therefore, in view of the same the

assessee's share being 1/4'" in the above land of 4/5'" share of Rs.2.66

crores works out to Rs.66,50,000-. With this background, the AO has

observed that the long term capital gain on sale of the land was not

disclosed by the assessee in its return of income filed for the relevant

assessment year. Accordingly, the full value of the sale consideration in

the hands of the assessee amounting to Rs.1.10 crores was added in the

hands of the assessee as on date of transfer for the computation of LTCG

on sale of land. Accordingly, the AO held that the assessee's share of

long term capital gain arisen on sale of land amounting to Rs.1.10 crores

is fully taxable in the hands of the assessee in the relevant assessment

year.

4. By the impugned order, the CIT(A) confirmed the action of the AO

and the assessee is further appeal before us.

4

ITA Nos.1520&2002/11

5. It was contended by ld. AR that the assessee along with other 3

other co-owners namely Vinayak a. Rakvi (HUF), Bhalchandra a. Rakvi

(HUF) and Moreshwar A. Rakvi (HUF) have only received Rs.2.66 crores

as shown in the sale agreement dated 31.10.2005. It was submitted that

beyond this, no other consideration was received either in cash or in kind.

Therefore, according to the AR, the consideration in the hands of the

assessee on sale of land cannot be as assessed at more than Rs.66.50

lakhs for the computation of long term capital gain. Regarding, the higher

sale price shown by Rajiv G. Rakvi (HUF) on the same land at the same

point of time, the AR has submitted that the same is due to the coercive

tactics resorted to by Shri Rajiv G. Rakvi and his brother Shri Arnol O.

Rak.vi with the said builder. It was further submitted that as the sale

deeds are separately executed on different dates, therefore, it cannot be

held that the sale consideration in the hands of Rajiv G. Rakvi (HUF)

would be the same as shown in case of the assessee. 'Further, he has

also filed a confirmation from the purchaser Shri Sanjay M Punamiya

confirming that he has paid Rs.66.50 lakhs each to the assessee and 3

other co-owners namely Shri Vinayak A. Rakvi (HUF), Bhalchandra A.

Rakvi(HUF) and Shri Moreshwar A. Rakvi(HUF); whereas, he has paid

Rs.1.10 crores to Shri Arnol O. Rakvi. (HUF).

6. On the other hand, ld. DR relied on the findings recorded by lower

authorities.

5

ITA Nos.1520&2002/11

7. We have considered rival contentions, gone through the orders of

the authorities below and found from the record that the assessee along

with 3 other co-owners viz Vinayak A. Rakvi,(HUF) Bhalchandra A. Rakvi

(HUF) and. Moreshwar A. Rakvi (HUF) have sold 4/5th share of their

property as discussed above to Shri Sanjay M. Punamiya of Mls.Sandhya

Enterprises and MIs Sankeshwar Enterprises for a consideration of

Rs.2.66 crores as per the agreement dated 31.10.2005. The balance 1/5th

part of the land belonging to Rajiv G. Rakvi (HUF) (son of 5th brother of

the earlier mentioned four co-owners) has sold its share in the same land

for Rs.l.I0 crores. to the same party vide agreement dated 25.10.2005.

We found that the assessee has disclosed 1/4th share amounting to

Rs.66.50 lakhs in the suspense account in its balance sheet. It is also

clear from record that Rajiv G. Rakvi (HUF) has sold his property only 5

days prior to the sale of property or land by the assessee and its other 3

co-owners. The properties sold are the same property, the sellers are

closely related parties. the buyer is also the same party, therefore, it is

highly unbelievable that the sale consideration received by assessee was

only at Rs.66.50 lakhs; whereas amount received by Rajiv G. Rakhvi

(HUF) for the same share of very same property was Rs.1.10 crores. In

the appeal filed before us, assessee is aggrieved for the addition of

Rs.43.50 lakhs which is the amount considered by the AO as having been

received by cash over and above the sale consideration received through

cheque. The conclusion of the lower authorities that assessee was in 6 ITA Nos.1520&2002/11

actual receipt of Rs.1.10 crores in respect of 1/4th share in his property

was based on the fact that other co-owners of the very same property

received a sum of Rs.1.10 crores in consideration of sale of his share in

the property which was effected just 5 days prior to the sale of property by

the assessee and its three co-owners.

8. It appears that out of addition of Rs.1.10 crores, the assessee has

conceded for capital gain of Rs.66.50 lakhs which was received through

cheque, therefore, assessee is not in appeal for the consideration as

worked out on the basis of its sale deed, but is disputed the extra sale

consideration taken by the AO on the basis of sale deed executed by

other co-owner of the very same property namely Rajiv G. Rakvi (HUF).

We found that without making any independent enquiry from the market,

the AO has assumed that assessee has received the same amount of

sale consideration as was received by other co-owners. No cogent

material was brought on record to substantiate its stand by the AO, nor

the CIT(A) to the effect that assessee has actually received sale

consideration more than what has been mentioned in the sale deed. In

the interest of justice and fairplay, we restore this ground back to the file

of AO with a direction to the AO to make enquiry so as to find out any sale

consideration received by the assessee in excess of sale consideration

mentioned in the sale deed. It is pertinent to mention here that as per

contention of ld. AR the sale consideration received by the assessee as

per the sale deed was more than the registration value determined by the 7 ITA Nos.1520&2002/11

sub-registrar, therefore, it is more important to bring cogent material on

record for arriving at a definite conclusion with regard to the excess

amount received on sale which has not been recorded in the books of

account. We direct accordingly.

9. In the result appeal of the assessee is allowed for statistical

purposes.

10. In the revenue's appeal i.e. ITA No.1520/M/2011, the deletion of

addition of Rs.10,13,000/- on account of sale consideration of land has

been agitated by the Revenue. The CIT(A) deleted the addition by

observing that in the absence of any concrete evidence brought on record

by the AO, the addition made on this account is not justified. Furthermore,

the tax effect in the appeal filed by the revenue is below Rs.3 lakhs,

therefore, in view of the CBDT INSTRUCTION NO. 3/2011 [F. NO.

279/MISC. 142/2007-ITJ], DATED 9-2-2011, the appeal of the revenue is

not maintainable and the same is hereby dismissed.

11. In the result, appeal of the assessee (ITA No.2002/M/2011) is allowed

for statistical purposes and appeal of the revenue (ITA No.1520/M/2011) is

dismissed.

Order pronounced in the open court on this 11/03/2015.

Sd/- Sd/-

( ) ( ) (I. P. BANSAL) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER Mumbai; Dated 11/03/2015 /pkm, PS 8 ITA Nos.1520&2002/11

Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. / BY ORDER, 3. / The CIT(A), Mumbai. 4. / CIT (Asstt. Registrar) 5. / DR, ITAT, Mumbai / 6. Guard file. ITAT, Mumbai

//True Copy//