TMI Blog2014 (10) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account of the creditor, establishing not only identity, but also the credit-worthiness of the creditor and the genuineness of the transaction – the order of the CIT(A) is set aside – Decided in favour of assessee. Capital gains addition – Whether the capital gains arising out of a property given for development are liable to be taxed - Held that:- Year of assesability of capital gains arising out of a development agreement, depends more importantly terms and conditions of the development agreement and flow of consideration in terms of the development agreement - the development agreement has not envisaged any consideration to be passed on to the land owner, viz. the assessee, at the time of signing of the development agreement - The development agreement categorically declared the assessee and his wife to be the owners of the property being developed until the completion of all the development work and till the handing over of the completed portion coming to the share of the assessee and his wife, with the title in relation to the other constructed areas being transferred by the assessee himself, to the nominees of the developer - The development agreement has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 – Held that:- The wills of testament on which reliance was placed by the assessee for explaining the jewellery have been found/furnished by the assessee at the time of search - The wills found at the time of search may not be registered documents - But non-registration of the will by itself does not warrant any adverse inference against the assessee - the fact that a will was found at the time of search itself, leaves no scope for implying it to be a fabricated or non-genuine document, and being a document produced spontaneously to substantiate the contention of the assessee while explaining the jewellery found, leads one to believe it to be an authentic one, in the absence of any material found to suggest the non-genuineness of such a document - That reasoning given is also not correct because the averments made in the will, free English translation of which has been furnished to us, speak otherwise and state that the assessee is only grand-daughter of the deponent, Dr. G. Lakshmamma - The other averments made such as the Lakshmamma, on account of her old age, staying with the assessee, who alongwith other family members, including her husband, Dr. K. Ramachandra and daughter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.374/Hyd/14 : Assessment year 2003-04 3. Only effective grievance of the assessee in this appeal relates to an addition, by way of unexplained credit, of ₹ 3,00,000 made by the Assessing Officer under S.68 of the Act, which has been sustained by the CIT(A). 4. During the course of assessment, the Assessing Officer noticed from the capital account and the balance sheet that year after year, huge amounts of gifts and unsecured loans are credited and the same has been explained as the souces for investment of several properties purchased by the assessee. Taking note of the total income and the personal drawings returned by the assessee prior to the date of search and seizure operations, and also several cash credits in the form of gifts and unsecured loans received and introduced in the books of account year after year, the Assessing Officer observed that majority of the loans and gifts are allegedly received from NRIs, and the gifts and loans are received and credited in the books of account and balance sheet of the assessee, did not appear to be genuine on account of several reasons. After analysing the evidence and the seized material, and the explanation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Before the CIT(A), it was submitted that Smt.Sujatha had gone to USA, where her son was employed, and hence, her husband had signed the confirmation letter filed before the Assessing Officer. It was also submitted that the loan transaction in question was reflected in her financial statement field alongwith her return of income. The CIT(A), however, taking further note of the fact that the income disclosed by the creditor Smt.K.Sujatha in earlier years was less than the income disclosed in the assessment year 2003-04 of ₹ 95,444, concurred with the view taken by the Assessing Officer that she has no creditworthiness to give a loan of ₹ 3,00,000 to the assessee. 8. On careful consideration of the matter, we find that there is no dispute with regard to the identity of the creditor, from whom the assessee claimed to have received the loan in question. There is also no dispute that the alleged creditor is an income-tax assessee , and the amount of loan of ₹ 3,00,000 has been received through banking channels. It may be true that this is only an isolated transaction in the relevant bank account, but as far as the assessee is concerned, it is demonstrated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax Range- 1 Tirupati. In the said return, it was noticed that the income returned was only ₹ 82,000, and through a balance sheet as on 31.3.2004 enclosed to the said return, assessee tried to explain the source of funds in the hands of K.Venkateswarlu (HUF) by way of capital account brought forward, agricultural income and sundry loans. Not convinced as to the creditworthiness of the alleged creditor, the Assessing Officer treated the above amount of ₹ 2,00,000 as unexplained cash credit and accordingly made addition under S.68 of the Act. 12. On appeal, the CIT(A), not convinced with regard to the genuineness of the transactions as well as the source of funds in the hands of the HUF, upheld the addition made by the Assessing Officer. 13. Aggrieved by the sustenance of the above addition of ₹ 2,00,000, assessee is in second appeal before us on this issue. 14. We heard both sides and perused the impugned orders of the Revenue authorities and other material on record. The impugned addition of ₹ 2,00,000 is made with regard to the said amount claimed to have been received by the assessee from Shri K.Venkateswarlu (HUF). Since S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e built up area coming to their share. The assessee as well as his wife offered capital gains on the same, in the returns of income filed by them for the assessment year 2007-08. However, the Assessing Officer held that the property was transferred on 2.8.2003, when the possession was handed over to the builder, and hence capital gains has arisen in the assessment year 2004-05 and not 2007-08, and accordingly brought to tax the capital gains in the assessment year 2004-05 itself, computing the same at ₹ 41,72,782, and making additions of that amount in the hands of the assessee as well as his wife, while completing the assessments under S.143(3) of the Act, vide orders of assessment dated 29.12.2010. 17. On appeal before the CIT(A), the learned Authorised Representative for the assessee relying on various clauses of the development agreement emphasized that the land owner continued to be the owner of the land till the completion and handing over of the constructed apartments in full shape and no right and interest in any portion of the land has been passed with the permission given to the developer for the development of the land and no shield of S.53A of the Transfer of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the development agreement, admittedly, has not envisaged any consideration to be passed on to the land owner, viz. the assessee, at the time of signing of the development agreement. The development agreement categorically declared the assessee and his wife to be the owners of the property being developed until the completion of all the development work and till the handing over of the completed portion coming to the share of the assessee and his wife, with the title in relation to the other constructed areas being transferred by the assessee himself, to the nominees of the developer. The development agreement has specifically provided that the possession handed over to the developer by the land owners was only a permissive one, for the limited purpose of developing the property in terms of the agreement, and the same shall not be construed or treated as part performance of the agreement under S.53A of the Transfer of property Act. Notwithstanding these express terms of the development agreement, which clearly assert that the title over the property continues to rest with the land owners irrespective of handing over of the possession to the developer, and passes from the land owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains are liable to be taxed, viz. the year in which the development agreement was signed, viz. assessment year 2004-05 or the year in which constructed area coming to the share of the assessee was handed over by the developer. Facts and circumstances of the case are identical to the ones considered by us in the context of the appeal of the assessee s husband, Dr.K.Ramachandra, in ITA No.375/Hyd/2014, hereinabove. Hence, for the detailed reasons discussed in that context in para 19 hereinabove, we hold that the capital gains in question have to be brought to tax only in the assessment year 2007-08, when the development of the property in terms of the development agreement has been completed and the constructed area coming to the share of the land owners has been handed over by the developer. Consequently, we set aside the impugned orders of the Revenue authorities, and delete the addition of ₹ 41,72,782 made by the Assessing Officer on this count. Assessee s grounds on this issue are allowed. 24. In the result, this appeal of the assessee for assessment year 2004-05, being ITA no.376/Hyd/2014, is allowed. ITA No.377/Hyd/2014 : Assessment year 2006-07 25. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in the case of Merilyn Shipping Transports (2012) 016 ITR 0001) has been kept in abeyance and subsequent decisions of the Calcutta High Court in the case of CIT V/s. Crescent Exports Syndicate and the Gujarat High Court in the case of CIT vs. Sikander Khan Tunvar Tax Appeal No. 905 and Ors of 2012 order dated 2.05.2013 are in favour of the Revenue. 28. Aggrieved by the order of the Commissioner of Incometax( Appeals) on this issue, assessee is in second appeal before us. 29. We have considered the rival submissions and perused the impugned orders of the Revenue authorities and other material available on record. There is a change in the version of the assessee as to the nature of the payment made by her to Dr.K.Ramchandra. While the said payment was claimed in the first instance as consultancy charges, and the same stood disallowed in the original assessment proceedings under S.40(a)(ia) of the Act, in the return filed in response to the notice under S.153A of the Act, the said disallowance has not been offered to tax, and in the assessment proceedings that ensued assessee came with the plea that what was paid was by way of fixed amount of salary and not consultancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight of jewellery found in the locker was quantified into 2031.480 grams. The approved valuer had also determined net weight of this gold jewelery at 1856.660 grams and it was valued at ₹ 27,84,990/-. None of the members of the assessee family are assessed to wealth tax. The assessee was asked to explain sources of the same. In her sworn statement she had stated that part of the jewellery belongs to her late grand mother who had bequeathed it through a will to herself, her daughter and her mother. Her mother and father also cohabitate at the same residence and part of the jewellery belongs to them. She further stated that she along with her daughter had inherited a part of the gold jewellery belonging to her late mother-in-law Smt.K.Venkatamma. However, the copies of these wills were produced before the ADIT(Inv) on 26.02.2009. It is noticed that they are registered will. The will produced by the assessee are not appears to be genuine. It is also noticed that in the balance sheet as on 31.3.2008 of Dr.K.Ramachandra reflects ownership of 400 grams of gold jewellery only. The Assessing Officer, thus accepted 514 grams in the hands of Dr.K.Ramchandra, Miss Chetana and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, assessee is in second appeal before us. 35. We have considered the rival submissions and perused the orders of the Revenue authorities and other material available on record. Admittedly, the wills of testament on which reliance was placed by the assessee for explaining the jewellery in question, have been found/furnished by the assessee at the time of search. The wills thus found at the time of search may not be registered documents. But non-registration of the will by itself does not warrant any adverse inference against the assessee. In fact, the fact that a will was found at the time of search itself, leaves no scope for implying it to be a fabricated or non-genuine document, and being a document produced spontaneously to substantiate the contention of the assessee while explaining the jewellery found, leads one to believe it to be an authentic one, in the absence of any material found to suggest the non-genuineness of such a document. One of the reasons given for doubting the genuineness of the will of grandmother of the assessee, Smt. G.Lakshmamma was that she was not the only grand-daughter, and consequently, she could not have given her entire jewellery to only one gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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