TMI Blog2008 (8) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,21,44,400 by making addition of Rs. 71 lakhs as short-term capital gain on sale of Hotel Park and by treating the same as diversion of income made it liable to be taxed in the hands of the assessee. Besides this, an addition of Rs. 45,000 was made on account of commission paid in cash in the backdrop of the fact that action under s. 132 was taken on 11th March, 2005 on the group companies of one Shri Gajendra Porwal who had entered into an agreement dt. 1st July, 1998 to purchase the property of Hotel Park held by the assessee. During the course of search proceedings, Shri Gajendra Porwal had admitted before the AO that he indulged in providing accommodation entries by taking cash equivalent to the amount of accommodation entries and the same were deposited into the bank account of concerns of Porwal Group and thereafter, immediately the cheques for accommodation entries were issued to the concerned parties. Shri Gajendra Porwal also identified bank accounts in which cash amounts were deposited and through which accommodation entries were provided by him. He also admitted that huge cash deposits on various dates in the bank accounts of his group persons and concerns as na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Porwal recorded under s. 131 on 21st March, 2005 wherein he had stated that JTFSPL has shown bogus profit on sale of property for Rs. 70 lakhs in turn, adjusted the said profit against the bogus loss so as to avoid any tax liability thereon. As regards an outstanding amount of Rs. 65 lakhs shown in the balance sheet from M/s Swastik Enterprises (P) Ltd. as on 31st March, 1999 and shown to have been received in the subsequent years is also merely a book entry. Likewise, a cheque of Rs. 6 lakhs received in the financial year 1998-99 from the assessee concern was factually withdrawn in cash an distributed amongst partners of this firm. In such transactions, he has received Rs. 40 to 45,000 as commission. 5. During the course of assessment proceedings, the assessee vide his letter dt. 5th Oct., 2006 has set out the fact stating therein that Hotel Park belonging to it was factually sold at a consideration of Rs. 80 lakhs to JTFSPL and an agreement to this effect was duly executed between the two parties. An advance of Rs. 1 lakh was also received from JTFSPL. On this sale consideration, a short-term capital gain of Rs. 49,99,400 has been worked out and declared as short-term capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration in terms of sale deed at Rs. 151 lakhs was treated as short-term capital gain in the hands of the assessee which it has diverted to JTFSPL. Besides that, an addition of Rs. 45,000 was made on account of commission made in cash to JTFSPL. 6. The assessee carried the issue of additions in appeal before the learned CIT(A), Udaipur who, after considering the entire material and evidence before him accepted that the agreement existing between the assessee and JTFSPL is a genuine agreement. It was also accepted that an amount of Rs. 70 lakhs was received as full and final payment by JTFSPL out of which Rs. 42.75 lakhs were received through cheques and balance of Rs. 27.25 lakhs were received in cash on different dates. The learned CIT(A). at internal p. 18 of the order found that the appellant had paid cash amounting to Rs. 27.25 lakhs to JTFSPL from 1st April, 1999 to 5th Nov., 1999. On scrutiny of bank statement of that concern, available on record, he found that Rs. 20 lakhs and Rs. 4 lakhs have been deposited in cash on 6th Nov., 1999 and 23rd Nov., 1999 and out of this deposit, there are transfer entries on 6th Nov., 1999 and Rs. 4 lakhs have been cleared to Shri S.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of Rs. 35.75 lakhs presuming that the amount to that extent paid through cheques has been returned to the assessee even though no material or evidence has been laid on record for such an allegation by the Department. It was, therefore, urged that the addition so sustained needs to be deleted by rejecting the ground in appeal raised by the Revenue. 8. On the other hand the learned Departmental Representative contends that the sale deed executed for the transfer of property reveals the sale consideration at Rs. 1,51,00,000. This amount was received by the assessee and has gone to its bank account. The purported agreement dt. 1st July, 1998 between the assessee and JTFSPL is part of modus operandi described by Shri Gajendra Porwal during his statement taken under s. 131 of the Act wherein he has clearly admitted that he is engaged in the business of providing accommodation entries for a consideration of commission of 0.5 per cent to 2 per cent. In his statement under s. 131 of the Act, he has also confirmed that the transaction with the assessee is the part of his modus operandi and that whatever amount was received by his company stands returned to the assessee. The AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation entries as narrated by Shri Gajendra Porwal as a part of his modus operandi which could have raised prima facie doubts in the minds of the assessing authority that the transactions of the assessee are also of that nature, but the same could not have been taken as conclusive evidence to reach the conclusion that the property which the appellant assessee agreed to sell to JTFSPL through a valid agreement executed on non-judicial paper of Rs. 100 duly signed and verified in presence of witnesses for a consideration of Rs. 80 lakhs by receiving an advance of Rs. 1 lakh was a sham document unless the onus to prove the allegation so made by the assessing authority has been discharged. The AO brought no material to prove his allegation by either examining the stamp vendor Shri Mahesh Kothari from whom the stamp paper was purchased under serial No. 2700 on 30th April, 1998 nor the Notary Public Ms. Sushila Kothari who has attested the said agreement under a seal of Notary, Udaipur District on 2nd July, 1998. Witnesses to the agreement were also not examined. It is not the case of the assessing authority that this agreement has factually not been executed between the parties. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is apparent that there was a transaction of sale between the assessee and JTFSPL executed through an agreement to sell dt. 1st July, 1998 which being binding upon the parties in the eyes of law was duly acted upon as well. It is, therefore, to be construed that what was apparent is real unless otherwise had been proved by the assessing authority by bringing on record some cogent and reliable material in support of his allegation. In CWT vs. Arvind Narottam (Individual) (1988) 72 CTR (SC) 94 : (1988) 173 ITR 479 (SC), the principle laid in this respect reads favourable to the assessee inasmuch as there was a right present in the property in favour of JTFSPL after it had entered into an agreement With the appellant on 1st July, 1998 at agreed consideration of Rs. 80 lakhs by paying an advance of Rs. 1 lakh. That is how the learned CIT(A) has reached a finding of fact that the agreement existing between the assessee and JTFSPL is a genuine agreement. This finding of fact has also not been challenged by the Revenue in appeal before us. We also do not find any merit or justification in the action of the assessing authority in discarding the documentary evidence brought on record by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ik Enterprises under peculiar facts was under obligation to divert the amount of difference between the amount of sale consideration of Rs. 151 lakhs and agreed sale consideration of Rs. 80 lakhs to JTFSPL as there was an overriding obligation. 12. The test laid down in CIT vs. Sitaldas Tirathdas (1961) 41 ITR 367 (SC) clearly shows that it is not every obligation to apply income in a particular way that results in diversion of income before it reaches the assessee. In that case, it was held as under: "In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income. The matter in the present case would have been different if such an overriding charge had existed either upon the property or upon its income, which is not the case." 13. Keeping in view the overall conspectus of the case, we find that the amount of Rs. 71 lakhs, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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