Sudhirbhai Govindbhai Oza, Ahmedabad vs Assessee

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. 1454/AHD/2011 (Assessment Year: 2008-09)

Sudhirbhai Govindbhai Oza V/S Income-tax Officer Ward Ram Line, Panchwati, 2nd 10(4), Ahemdabad lane, Gulbai Tekera Ellisbridge, Ahmedabad

(Appellant) (Respondent)

PAN: AAAPO7475K

Appellant by : Shri G.A. Mehta, A.R. Respondent by : Smt. Sonia Kumar, Sr. D.R.

(आदे श)/ORDER

Date of hearing : 04-06-2015 Date of Pronouncement : 25 -06-2015

PER ANIL CHATURVEDI, ACCOUNTANT MEMBER.

1. This appeal filed by the Assessee is against the order of CIT(A)-XVI, Ahmedabad dated 28.04.2011 for A.Y. 2008-09.

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

3. Assessee is an individual stated to be having income from interest. Assessee filed his return of income for A.Y. 2008-09 on 28.07.2008 declaring total income of Rs. 1,36,040/- including agricultural income of Rs. 8,000/-. The 2 ITA No 1454/AHD/2011 . A.Y. 2008-09 case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 13.12.2010 and the total income was determined at Rs. 37,91,537/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 28.04.2011 granted partial relief to the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. The grounds raised by the Assessee, which have been later modified, reads as under:-

1. The appellant submits the Id CIT(A) has erred in confirming the taxing of the capital gain of Rs. 19,74,272/- u/s 50C of I.T Act by the AO as against the claim of Rs. 1,45,000/- as capital loss by the appellant.

1.1The appellant further submits that the Ld CIT(A) has erred in confirming the order of the AO rejecting the claim of the appellant u/s 50 C (2) of I.T. Act to refer the valuation of the capital asset to Valuation officer and adopt the value so assessed by such authority.

1.2 The appellant further submits that the Id CIT(A) has erred in rejecting the claim of the appellant that as the possession of the said property was already handed over to the purchaser on 17-05-91 against the earnest money of Rs. 50,000/- received on 17-05-91 as per copy of Deed of Agreement to sale dated 17-05-91, and as mentioned in the sale deed dated 14-02-2008, the transfer of the said property had taken place in A.Y. 1992-

1993 as per section 45(1) r.w.s 2(47)(i) and (v) of I.T. Act and hence the computation of the capital gain at Rs. 19,74,272/- u/s 50 C of I.T. Act by the AO for A.Y. 2008-2009 is illegal and not valid in law.

2. The appellant submits that the Id CIT(A) has erred in confirming the addition of Rs. 3,33,146/- (Rs. 15,85,1 79/- Rs. 12,52,033/-) as unaccounted investment though all credit entries of ICIC1 Bank Account were explained 2.1 The appellant further submits that the Id CIT(A) has erred in confirming the order of the AO rejecting the claim of the appellant that the said account belonged to Sudhirbhai Govindbhai Oza HUF and not to appellant as " Individual"

3.The appellant submits that the Id CIT(A) has erred in confirming the addition of Rs. 88,050/- being interest income of F.D with ICICI Bank made by the AO as undisclosed income rejecting the claim of the appellant that the said interest income belonged to Sudhibhai G Oza HUF and it was declared in the return of HUF of A.Y 2008-2009.

4.The appellant submits that the Id CIT(A) has erred in confirming the addition of Rs. 8,000/- by the AO as taxable income as against the claim of the appellant that it was agricultural income.

5.The appellant submits that the Id CIT(A) has erred in confirming the interest of Rs. 3,04,632/- charged u/s 234-B by the AO

4. Ground no. 1 and its sub grounds are with relation to denial of claim of capital gains computed by the Assessee.

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5. During the course of assessment proceedings, A.O noticed that Assessee had sold one old property at Plot No. 490 admeasuring 1299 Sq. Mtr. of land with 250 Sq. M. of "Kachha" construction for Rs. 3,50,000/-. Assessee while computing the capital gains, considered the purchase value of the property at Rs. 90,000/-, being the fair market value as on 01.04.1981, and after indexation determined the value of the property at Rs. 4,95,900/- and thus worked out long term capital loss of Rs. 1,45,000/-. A.O on perusing the registered sale deed noticed that the Assessee had paid stamp duty of Rs. 1,10,000/- and the Jantry value of the property was Rs. 22,22,222/-. A.O has noted that Assessee had failed to produce any document proving the source of acquisition, mode of acquisition nor had produced any valuation report to prove the basis of working of fair market value as on 01.04.1981 at Rs. 90,000/-. He also noticed that Assessee had not made any attempt to challenge the price determined by the State Government authority for the purpose of valuation. He accordingly considering the value of property as per the provisions of Section 50C and worked out the long term capital gain at Rs. 19,74,272/- as against the capital loss worked out by Assessee. Aggrieved by the order of A.O, Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:-

3.2 I have considered the submission made by the appellant and observation of the AO. The appellant has admitted that the sale deed is dated 14/02/2008. Prior to that the appellant has stated that earnest money of Rs. 50,000 was received and the property was handed over to the purchaser in 1991. No prudent man would hand over such huge property by taking Rs. 50,000/- only when deed value is Rs. 3.5 lac. The appellant has brought no material on record to show as to why the sale deed has been registered on 14/02/2008 after 18 years. Therefore, as per the government account the transfer has taken place only when the sale deed has been made and major amount of money Rs. 3 lakh out of Rs. 3.5 lakh has been paid on the execution of the sale deed. Therefore, not only the major amount of money has passed at this time, but the sale deed has also been executed only at this time. Hence, the transfer has taken place only on 14.02.2008 and therefore, the action of A.O is correct. This ground of appeal is dismissed.

4 ITA No 1454/AHD/2011 . A.Y. 2008-09

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

7. Before us, ld. A.R. reiterated the submissions made before A.O and ld.

CIT(A) and further submitted that Assessee had entered into deed of agreement to sale the property for which agreement dated 17.05.1991 was entered and as per the agreement, Assessee had received earnest money of Rs. 50,000/-. On receipt of the earnest money, Assessee had handed over the possession and the transfer of the property had thus taken place in A.Y. 92-

93. He therefore submitted that since the transfer had taken place in A.Y. 92- 93, A.O had erred in calculating capital gains by invoking the provisions of Section 50C of the Act in the year under consideration. He pointed to the copy of the Banakat entered into by the Assessee. He also pointed to the copy of the sale deed which was placed on record from page 21 to 38 of the paper book and pointed to page 27 of the paper book wherein it was clearly stated that the possession of the property was handed over by the Assessee on 17.05.1991. He further submitted that provisions of Section 50C could not be applied to the sale agreement since Section 50C was introduced after the sale agreement has been entered into by the Assessee. He further submitted that "transfer" u/s. 2(47) includes any transaction which allows possession to taken/retained in part performance of a contract of the nature referred to Section 53A of the Transfer of Property Act , 1882 and the any transaction entered into in a manner which has the effect to transferring or enabling the enjoyment of immovable property, the capital gains would be taxable in the year in which such transaction are entered into even if the transfer of immovable property is not effective or complete under the 5 ITA No 1454/AHD/2011 . A.Y. 2008-09 general law. He therefore submitted that the addition made by the A.O be set aside. Ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

8. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to computation of capital gain on sale of property. It is a fact that assessee had entered into an agreement for sale in 1990 to sell the property for Rs. 3,50,000/- and pursuant to the agreement Assessee was paid only 50,000/- on 17.05.1993. It is also a fact that the possession of the property was handed over by the Assessee on the receipt of earnest money of Rs. 50,000/-. The agreement for sale and Banakat which has been entered into by the Assessee have been placed on record and have not been disputed by the Department. Before us, Revenue has not brought any material on record to demonstrate that the possession of the property was handed over by the Assessee in the year under consideration and not in the year 1990, being the year in which the Assessee had entered into a Banakat. We further find that Section 50C, being the special provision for the purpose of calculation of capital gains in certain cases, was inserted by Finance Act, 2002 with effect from 01.04.2003 and was therefore not applicable to the year when the Assessee had entered into the Banakat. We further find that Hon'ble Bombay High Court in the case of Chaturbhuj Dwarakadas Kapadja vs. CIT (2003) 260 ITR 491 (Bom) has held that the capital gains would be taxable in the year in which the transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. Before us, Revenue has not brought any material on record to controvert the submissions made by ld. A.R. nor has brought any contrary binding decision in its support. We are therefore of the view that in the present case the provisions of Section 50C 6 ITA No 1454/AHD/2011 . A.Y. 2008-09 could not be applied. We therefore direct the deletion of addition made by A.O. Thus the ground of Assessee is allowed.

Ground no. 2 & 3 are interconnected and therefore considered together and is with respect to confirming the addition on account of unaccounted investment.

9. On perusing the copy of the bank account maintained by the Assessee with ICICI Bank, A.O noticed that Assessee had earned interest income of Rs. 88,050/- which was not disclosed by the Assessee in the computation of income. In response to query of A.O., it was submitted by the Assessee that the said bank account belongs to Sudhir Oza (HUF) and was reflected in the income of HUF. The submission of the Assessee was not found acceptable to the A.O for the reason that the bank, in response to notice u/s. 133(6), has stated that the bank account was in the joint name of Assessee and his wife and the PAN number of the Assessee was submitted while opening the account. He also noticed that the bank account was utilized by the Assessee as his own account in the individual capacity. A.O has also noted that despite the show cause notice, Assessee had not furnished detailed narration for the debit and credit entries appearing in the bank account. In the absence of any clarification, A.O considered the aggregate of the deposits (including interest of Rs. 88,050/-) amount of Rs. 16,73,229/-, as unaccounted investment and added to the income. Aggrieved by the order of A.O, Assessee carried the matter before ld. CIT(A) who decided the issue by holding as under:-

3.3 I have considered the submission made by the appellant and observation of the A.O. The argument of the appellant that the account belongs to HUF is not acceptable for the detailed reasons given by the A.O and which has been quoted above. The bank account is in the name of the appellant In the individual capacity and jointly held with his wife.

7 ITA No 1454/AHD/2011 . A.Y. 2008-09

The bank has clearly stated that the account is not in the name of HUF. The PAN Number of bank account is PAN number of the assessee as individual and not in the capacity of HUF. The appellant has used this account for individual purpose which is clear from the fact that the sale proceeds of Rs. 3 lakh from the execution of property mentioned in ground number one has been credited in this account. The property was held in the individual capacity without any doubt and if is not disputed by the appellant. Therefore this account definitely belongs to the assessee in the individual capacity and not in the capacity of HUF. As regards, the claim of the assessee that the deposit of Rs. 10,49,722/- and Rs. 2,02,31 I/- are explained, as stated above it is seen that these are additional evidences not given to the AO. The AO is therefore directed to verify these documents, and if these documents are found to be genuine, and the entries are correct, the AO is directed to allow the amount to the extent it is found to be correct. This ground of appeal is therefore partly allowed subject to the above verification. 4.1 This is regarding addition of Rs. 88050/-of interest income. In the assessment order the AO has stated that the interest income of Rs. 88050/-in the ICICI bank is added back to the assessee's undisclosed income because this bank account was not disclosed by the assessee in his individual capacity. For the reasons discussed about this account has been held to be the account of the assessee in the individual capacity and not in the HUF capacity as claimed.

4.2 During 'the appellate proceeding the appellant has simply stated that the account belongs to HUF and therefore this income should not be added as it has already been shown in the HUF account. As discussed above, this account belongs to the assessee in the individual capacity and not in the HUF capacity and since the assessee has not shown this interest income in the individual capacity and therefore the addition made by the AO is correct. The addition made by the AO is confirmed. This ground of appeal is dismissed

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

11. Before us, ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted that the amount on deposits in the bank account includes "autosweep" which cannot be considered as deposits as the same have been transferred from the fixed deposits maintained by the Assessee from earlier years. He also pointed to the copy of the bank statement placed at page 54 to 57 of the paper book. He therefore submitted that the addition made be deleted and in the alternate, he submitted that the A.O be directed to exclude the amount of "auto-sweep" which has been 8 ITA No 1454/AHD/2011 . A.Y. 2008-09 considered while making the additions. Ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

12. We have heard the rival submissions and perused the material on record. With respect to addition of Rs. 88,050/- on account of interest, we find that Assessee has not placed any material on record to controvert the findings of ld. CIT(A) and therefore to that extent we find no reason to interfere with the order of ld. CIT(A). With respect to the addition on account of remaining amount of 15,85,179/- (Rs. 16,73,229/- less Rs. 88,050/-) is concerned, we find that in the absence of any submission of details by the Assessee before A.O, he considered the aggregate of amounts appearing in the credit side of the bank account with ICICI Bank as unexplained investment. Before us, Assessee has placed on record the copy of the bank statement which shows that various amounts have been debited and credited under "auto-sweep"

and "revese-sweep". We further find that there is no finding with respect to the "auto-sweep and "reverse-sweep" by both the authorities. We therefore restore the issue back to the file of A.O to re-work the amount of addition after considering the explanation of the Assessee with respect to "auto- sweep" and "reverse-sweep" and in accordance with law. The Assessee is also directed to co-operate by furnishing the necessary evidence as called for by A.O. Needless to state that A.O shall grant adequate opportunity of hearing to the Assessee. In the result, the ground of Assessee is partly allowed for statistical purposes.

Ground no. 4 is with respect to addition on account of agricultural income.

9 ITA No 1454/AHD/2011 . A.Y. 2008-09

13. A.O noticed that Assessee has claim to have earned agricultural income of Rs. 8,000/-. The Assessee was asked to substantiate its claim of having earned agricultural income in response to which Assessee furnished copy of 7/12 and Form 8A. The submission of the Assessee was not found acceptable to the A.O for the reason that Assessee had not furnished any other details apart from the copy of 7/12 and 8A and he therefore included the agricultural income of Rs. 8,000/- as the total income of the Assessee. Aggrieved by the order of A.O, Assessee carried the matter before ld. CIT(A) who upheld the addition made by the A.O by holding as under:-

5.2. During the appellate proceeding the appellant has simply stated that it is agriculture income no evidence has been given. In the absence of any evidence the claim cannot be accepted. Form number 7/12 and 8A do not prove that the agriculture produce was sold and that the agriculture income was earned. And hence the addition made by the AO is correct and this ground of appeal is dismissed.

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

15. Before us, ld. A.R. reiterated the submissions made before A.O and ld.

CIT(A) and further submitted that Assessee owns land of around 3 bighas and from it agricultural income of Rs. 8,000/- earned by the Assessee was quite reasonable. He therefore submitted that the addition be deleted. Ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

16. We have heard the rival submissions and perused the material on record. We find that before A.O, Assessee had furnished the copy of 7/12 extract and Form 8A and from the land Assessee has stated to have earned agricultural 10 ITA No 1454/AHD/2011 . A.Y. 2008-09 income. The holding of agricultural land by the Assessee has not been doubted by the Revenue. Before us, Revenue has also not placed any material on record to substantiate that Assessee could not have earned any agricultural income from the land held by him. Considering the aforesaid and considering the holding of agricultural land and the smallness of amount of agricultural income, we are of the view that no addition is called for in the present case. We therefore direct its deletion. In the result, this ground of Assessee is allowed.

17. In the result, the appeal of Assessee is partly allowed for statistical purposes.

Order pronounced in Open Court on 25 - 06 - 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