Shaum Janak Hatheesing, Ahmedabad vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.511 /AHD/2011 (Assessment Year: 2006-07)

Income-tax Officer Ward- V/S Shri Shaum Janak Hatheesing 8(2), Ahmedabad 3rd Floor, Ratan Apartment Opp. Police Stadium Shahibaug, Ahmedabad (Appellant) (Respondent)

PAN: AAGPH9665N

Appellant by : Smt. Sonia Kumar, Sr. D.R. Respondent by : Shri Tushar P. Hemani, A.R.

(आदे श)/ORDER

Date of hearing : 29-04-2015 Date of Pronouncement : 15-05-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Revenue is against the order of CIT(A)-XIV, Ahmedabad dated 25.11.2010 for A.Y. 2006-07.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is an individual and Director of S.J.H. Mazda Resort and Entertainment Ltd. and having salary income. Assessee filed his return of income for A.Y. 2006-07 on 20.02.2007 declaring total income of Rs. 5,40,000/-. The case was selected for scrutiny and thereafter the assessment 2 ITA No 511/AHD/2011 . A.Y. 2006-07 was framed under section 143(3) vide order dated 10.12.2008 and the total income was determined at Rs. 64,63,175/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 25.11.2010 allowed the appeal of the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us and has raised the following effective ground;-

1. The Ld. CIT(A)-XlV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.53,00,000/- made by the Assessing Officer on account of relinquishment of right to reside in the bungalow which come within the definition of transfer u/s.2(47)(ii) of the IT. Act.

2. The Ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.2,22,195/- made by the Assessing Officer on account of unexplained cash credit u/s.68 of the IT. Act.

3. The Ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.4,00,980/- made by the Assessing Officer on account of unexplained cash deposit in bank account.

4. 1st ground is with respect to addition of Rs. 53,00,000/- on account of relinquishment of rights.

5. During the course of assessment proceedings, A.O noticed that Assessee has received Rs. 53,00,000/- from Smt. Jigna Patel, managing Trustee of Firdos Memorial Charity and Education Trust and it was not offered to tax by the Assessee. Assessee was asked to explain as to why the amount should not be considered as income of the Assessee to which A.O noted that no details were filed by the Assessee. A.O on perusal of the agreement carried out by the Assessee with Jigna Patel noted that the amount was given to Assessee towards relinquishment of rights and to hand over the possession of the premises at Shahibaug, Ahmedabad. He was of the view that relinquishment of rights to reside was income which accrued to the Assessee u/s. 2(47)(ii) of the Act. He therefore considered the same to be income. Aggrieved by the 3 ITA No 511/AHD/2011 . A.Y. 2006-07 order of A.O., Assessee carried the matter before ld. CIT(A) who after considering the submissions of the Assessee, the remand report and the valuation report submitted by the Assessee deleted the addition by holding as under:-

2.1 The A.O.'s contention for the addition was that it was a relinquishment of rights in capital assets; hence chargeable to tax u/s. 2(47)(ii)of the I.T. Act.

Remand report was called for as the A.R. had submitted fresh evidence of Valuation Report of the property which was given up by the assessee. The A.O. has given in his remand report that as per the Valuation Report, the valuer himself has admitted that he cannot value one antique of Rs.7,00,000/- out of total assets of Rs.68,65,000/-. 2.2 The A.R. has submitted that already a copy of the breakup of the furniture fixtures handed over at the time of giving away the possession of the premises was submitted to the A.O. which totaled to Rs.45.53 lakhs. The A.R. has further narrated the following para as per the agreement dated 30-6-2005.

" 1. That the parties of second part, more particularly Smt.Nina T. Sepai and her son Shri Shaum J. Hutheesing, had a right to reside in the bungalow situated in Cantonment, Shahibaug, Ahmedabad and have their Belongings furnitures, fixtures, etc. Said Smt. Nina T.Sepai and Shri Shaum J. Hatheesing have agreed to relinquish their rights and have also agreed to hand over possession of the premises and to permanently relinquish the right to reside, use and be entitled to continue to use said property and have also agreed to hand over possession of the said premises as well as possession of the furniture, fixtures, etc.

2.----------of any nature with respect to any of the properties of the Trust of the right to reside or right to use furniture, fixture etc. and! Whereas the party of the second part have surrendered, relinquished and given up their right to litigate in an ___________."

The A.R. has submitted a notarised copy of the Valuation Report of the property dated 1998 alongwith calculation of capital gains. If either of the two values are adopted i.e. Rs.45.53 lakhs or Rs.61.65 lakhs (Rs.68.65 lakhs less Rs.7 lakhs of antique), both calculation alongwith indexation results in a loss to the assessee. The plain reading of the two agreements date 30-6-2005, clearly shows that assessee had given up the property alongwith the Furniture, Fixtures and the entire deal alongwith the assessee's mother Shri Nina Sepai was for:-

a) giving away: the possession of the property.

b) giving up the right to litigate

c) to withdraw all suits filed against each other pending in any courts.

d) handover the management of the trust and the school.

It is clear from the above that the assessee had handed over the premises alongwith all the furniture and fixtures for which he had paid. Hence, the same needs to be given cognizance while calculating the taxable income. As per the calculation submitted by the A.R. it results in a loss.

2.3 The contention of the A.R. has been considered, I have gone through the agreements, Valuation Report and I find that the A.O. has wrongly made this addition 4 ITA No 511/AHD/2011 . A.Y. 2006-07 without going into the details furnished by the assessee at the time of assessment proceedings. Hence the addition is deleted.

6. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us.

7. Before us, ld. D.R. supported the order of A.O. Ld. A.R. on other hand reiterated the submissions made before CIT(A) and further submitted that the amount was received on account of relinquishment of right to reside in the Bungalow and for the furnitures and fixtures and of which the Assessee's share was Rs. 53,00,000/-. He submitted that as per the valuation report, the value of the Bungalow was 68,65,000/-and the cost of Antiques was Rs. 7,00,000/-. As per the calculation submitted by the Assessee which is placed in the paper book, the Assessee has incurred long term capital loss and therefore no amount could have been taxed as capital gains in the hands of the Assessee. He thus supported the order of ld. CIT(A).

8. We have heard the rival submissions and perused the material on record. We find that Ld. CIT(A) after considering the valuation report and the calculation submitted by the Assessee has given a finding that the calculation of the income earned on sale of property shows a loss as against the taxable income considered by the A.O. He therefore deleted the addition made by the A.O. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed.

5 ITA No 511/AHD/2011 . A.Y. 2006-07

9. 2nd ground is with respect to addition of Rs. 2,22,195/- made on account of unexplained cash credit.

10. During the course of assessment proceedings, A.O noticed that Assessee had received Rs. 2,22,195/- by cheque. The Assessee was asked to explain the source to which it was submitted by the Assessee that it was received on account of sale of old furniture. A.O noted that in the absence of supporting evidence the submission of the Assessee could not be accepted and that Assessee has failed to prove the genuineness of transaction. He accordingly considered the amount as unexplained cash credit u/s. 68 and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who after considering the submissions of the Assessee deleted the addition by holding as under:-

3. The second point of appeal is regarding addition of Rs.2,20,195/ under section 68 as unexplained cash credit.

3.1 The AO has stated in the assessment order that the assessee has failed to prove the genuineness of transaction. The assessee merely stated that the amount pertains to sale of furniture and without any basis. Therefore, the amount of Rs.2,22,195/- is treated as unexplained cash credit u/s.68 and added to the total income. 3.2 The AR of the appellant has submitted that the amounts received by the assessee, were by cheques only and the break up was as under.

Break up of the amount is as follows:

Rs. 37,195/- dated 20.05.2005 Rs. 1,50,000/- dated 30.05.2005 Rs. 35,000/- dated 20.10.2005 The assessee had further vacated his house in this year and had produced correspondence with parties whom he has sold furniture. Also, all amounts were received by cheques only; and the A.R. has cited the following judgment in support of the claim.

Addl. C1T v. Bahri Bros. [P.) Ltd. [1985] 154 ITR 244 (Pat.) 6 ITA No 511/AHD/2011 . A.Y. 2006-07 3.3 I have gone through the details of the submissions made and the assessment order and I find the A.R.'s contention is found to be correct and therefore the addition ofRs.2,20,195/-is deleted.

11. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us.

12. Before us, ld. D.R. supported the order of A.O. Ld. A.R. on other hand reiterated the submissions made before CIT(A) and further submitted that the amount was received by cheque on account of sale of old furniture. He thus supported the order of ld. CIT(A).

13. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while deleting the addition has noted that Assessee had produced correspondence with the parties to whom the furniture was sold by the Assessee and further all the amounts were received in cheques. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A), we therefore find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed.

14. Ground no. 3 is with respect to addition of Rs. 4,00,980/- deposited in the bank.

15. A.O on perusing the cash book noticed that every month cash on Rs. 33,415/- was credited on account of salary and that there was no documentary evidence in support of the receipts. He was of the view that onus was on the Assessee to prove the genuineness of transaction. He 7 ITA No 511/AHD/2011 . A.Y. 2006-07 therefore considered the aggregate salary of Rs. 4,00,980/- received by the Assessee as unexplained cash credit and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who after considering the submissions of the Assessee deleted the addition by holding as under:-

4.2 The A.R of the appellant has submitted that the assessee had deposited the cash from cash on hand which he was having at that time.

4.3 I have gone through the representation and the submission by the A.R. wherein the closing cash balance of the cash book is Rs. 7,27,015/- which is more than the receipt of salary. Hence he did not need cash on hand to tally the books.

In view of the explanation given and the cash account verified, the addition on account of unexplained cash deposit is not required. Hence, the disallowance of Rs. 4,00,980/- made by the A.O is deleted and the appeal is allowed.

16. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us.

17. Before us, ld. D.R. supported the order of A.O. Ld. A.R. on other hand reiterated the submissions made before A.O. and ld. CIT(A) and supported the order of ld. CIT(A).

18. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) after considering the submissions of the Assessee has noted that the closing cash balance of the cash book was in excess of the receipts of salary and therefore Assessee did not need any cash on hand to tally the books. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A), we therefore find no reason to 8 ITA No 511/AHD/2011 . A.Y. 2006-07 interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed.

19. In the result, the appeal of Revenue is dismissed.

Order pronounced in Open Court on 15 - 05 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad