TMI Blog2012 (4) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, it would be difficult for us to accept that the value of the entire share holdings of Khandelwas in Span Properties Private Limited could have been less than Rs 6.35 crore minus the liabilities of the company - AO was justified in making the addition being the difference between the apparent consideration and real value of the assets – against assessee. - ITA 334/2009, ITA No. 82/2009 - - - Dated:- 23-4-2012 - V.K. JAIN, J. For the Petitioner : Mr N.P. Sahni with Mr Ruchesh Sinha For Respondent : Mr P.S. Khandelwal in person for Mr Karan Khandelwal 1. By this common judgment, we shall dispose of both the appeals referred above. ITA No.334/2009 is directed against the order dated 25.04.2008 passed by the Income Tax Appellate Tribunal (herein after referred to as the Tribunal‟), dismissing ITA No.454/del/07 filed by the Revenue, in respect of assessment of the respondent Sh. Karan Khandelwal, for the assessment year 2003-04. ITA No.82/09 is directed against the order dated 09.05.2008 passed by the Tribunal dismissing the ITA No.2008/del/06 filed by the revenue in respect of the assessment of the respondent Sh. Sunil Bedi, for the assessment year 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties shall comply with the terms and conditions of the MOU dated 22.03.2000. It was further agreed that in case necessary permission/license/approval of Government of Haryana is not given till 31.03.2001, the entire understanding shall be nullified and shall have no effect. In that case, the seller was obliged to refund the advance money, which it had received from the purchaser. 3. A Collaboration Agreement dated 15.07.2002 was then executed between Span Properties Pvt. Ltd. on one hand and Ajay Chaudhary and Smt. Savita on the other hand. It would be pertinent to note that Sh. Ajay Chaudhary was the same person through whom Fashion Flare Pvt. Ltd. had entered into the MOU dated 19.12.2008 with Span Properties Pvt. Ltd. Under the Collaboration Agreement, the Choudharys‟ were to pay Rs.1 crore 40 lakh to Span Properties Pvt. Ltd as security deposit. They agreed to construct a Central Air Conditioned Multistoried Building on the aforesaid land and transfer half of the built up area (2760 sq. feet) to Span Properties (Pvt.) Ltd. free of any cost. Before execution of this Collaboration Agreement, Span had already obtained permission from Town and Country Planning Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, the entire share holding of Khandelwals in Span Properties Private Limited was transferred to Shri Sunil Bedi. 6. Vide assessment order dated 13.03.2006, the Assessing Officer of Shri Karan Khandelwal held that the total worth of Span Properties Private Limited was Rs 6.35 crore, whereas Shri Sunil Bedi and Shri Pinki Bedi had paid Rs 5 crore, including loan liabilities of Span Properties Private Limited. He added Rs 60 lakh to the aforesaid amount of Rs 5 crore on account of brokerage and commission. The Assessing Officer was of the view that difference of Rs 75 lakh was nothing, but the amount paid by Shri Sunil Bedi for acquiring Span Properties Private Limited and that amount had not been recorded in the account books. He accordingly made addition of Rs 74,58,375/- to the income declared by Shri Karan Khandelwal in his return and also initiated penalty proceedings against him. Vide assessment order dated 31.03.2005, the Assessing Officer of Shri Sunil Bedi took an identical view and made an addition of Rs 75 lakh to the income declared by Shri Sunil Bedi on the ground that the aforesaid amount represented the cash consideration paid to Khandelwas which had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been paid by Span Properties Private Limited before it entered into the Collaboration Agreement dated 28.08.2002 with JMD Promoters Private Limited. The relevant clauses of the said agreement read as under:- AND WHEREAS the Owners had applied to the Town Country Planning Department of State of Haryana, vide its letter dated 31.12.2001, agreed to change of land use for development of Commercial Building on the said Plot subject to the fulfillment of the conditions mentioned therein and thereafter the CLU (bearing No. G-1313-8DP-2002/2424 dated 8.2.2002 with the validity up to 8.02.2004) was granted to the Owners on the terms mentioned in the CLU/Licence and in the Annexures thereto on receipt of Rs 46,32,031/- on account of conversion charges, Rs 27,34,375/- on account of additional conversion charges, sum of Rs 64,47,656/- on account of external development charges and Rs 11,76,875/- on account of internal development charges. All enhancement in the aforesaid charges shall be borne by the Owners till the occupation/completion certificate. AND WHEREAS the owners have also entered into an Agreement on 30.01.2002 in Form CLU-II (under rule 26(d) of Rules framed under the Punja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead evidence before the Assessing Officer to prove that the permissible FAR at the time of execution of MoUs was 2. If the permissible FAR on land in question at the time of execution of the MoUs, was 2, it could have been easily proved by the assessee before the Assessing Officer, by filing the relevant building bye-laws or summoning an official from the office of concerned Authorities in Haryana. Since neither the MoU gives any indication that the FAR in contemplation of the parties at the time of execution of these documents was 2 nor has any evidence been produced to this effect, we are unable to accept the plea that at the time MoUs were executed, the parties were under an impression that permissible FAR on land in question was 2. No other ground has been taken by the assessees to explain the alleged erosion in the market value between December, 2000 and November, 2002. We, therefore, are of the view that the Assessing Officer was justified in taking a view that the value of the land in question at the time of sale of the shares of Span Properties Private Limited to Shri Sunil Bedi was Rs 6.35 crore. 11. It is true that the transaction which ultimately materialized in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Delhi-110 054 till 31st March, 2001 in any manner whatsoever. If requisite permission as applied by the FIRST PARTY to the concerned Authority of the Government of Haryana is granted to the FIRST PARTY then the entire share holding of Ms Span Properties Pvt. Ltd. 12 Jamuna Road, Civil Lines, Delhi-110 054, shall be transferred by Shri Prem Shanker Khandelwa, Shri Niraj Khandelwal and their heirs to the SECOND PARTY in terms and conditions of the Memorandum of Understanding dated 22nd March, 2000 and the parties shall religiously comply with all the terms and conditions as recorded in the Memorandum of Understanding dated 22nd March, 2000. If the entire share holding of Span Properties Private Limited on 19.12.2000, after grant of requisite permissions to Span Properties Private Limited for construction of a commercial building on land in question, was valued at Rs 6.35 crore on 19.12.2000, the Assessing Officer was justified in taking the same to be the true consideration for sale of this same share holding to Shri Sunil Bedi in November, 2002, unless it can be shown that on account of factors such as erosion in the value of the assets of the company, the market value of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or determination by the Supreme Court turned on the true interpretation of Section 52(2) of the Act which provided that if in the opinion of the Assessing Officer, the fair market value of a capital asset transferred by the assessee, as on the date of the transfer, exceeded the full value of the consideration declared by him, by an amount of not less than 15% of the value declared, the full value of the consideration for such market asset shall be taken to be its fair market value on the date of the transfer. The argument of the revenue was that the only condition for attracting the applicability of sub-Section 2 of Section 52 was that the fair market value of the capital asset transferred by the assessee as on the date of transfer should exceed the full value of the consideration declared by the assessee by an amount not less than 15% of the declared value. Rejecting the contentions, the Supreme Court inter-alia observed as under:- There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature. Take, for example, a case where A agrees to sell his property to B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 15%. Many other similar situations can be contemplated where it would be absurd and unreasonable to apply Section 52 Sub-section (2) according to its strict literal construction. We must therefore eschew literalness in the interpretation of Section 52 Sub-section (2) and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation But the scope of Sub-section (1) of Section 52 is extremely restricted because it applies only where the transferee is a person directly or indirectly connected with the assessee and the object of the under-statement is to avoid or reduce the income-tax liability of the assessee to tax on capital gains. There may be cases where the consideration for the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of under-statement of the consideration is unconnected with tax on capital gains. Such cases would not be within the reach of Sub-section (1) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bonafide transaction and there may be no under-statement of the consideration. The fulfilment of the second condition has therefore to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before Sub-section (2) can be invoked and the burden of doing so is clearly on the Revenue. It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and the second condition being as much a condition of taxability as the first, the burden lies on the Revenue to show that there is understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely, that he did not receive any cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r set aside by CIT (Appeals) and his order was maintained by the Tribunal. Considering the appeal filed by the revenue, it was noted by this Court that the revenue did not examine the father of the assessee with respect to contents of the documents which admittedly were in his handwriting, the mother of the assessee had denied having paid any amount to the seller, over and above the disclosed amount, some flat owners who had purchased the properties in the same building had disclosed more or less the same price and even the sellers who were examined had denied having received any consideration over and above the amount disclosed in the conveyance deed. In these circumstances, this Court was of the view that the view taken by CIT (Appeals) and the Tribunals were unexceptionable. In Naresh Khatter (Supra), it was noticed by this Court that the only basis for making the addition to the income of the assessee was the submission of the learned senior advocate in Civil Court with respect to the investment made by the assessee and, therefore, the only question for consideration before this Court was as to whether the Tribunal was justified in taking a view that mere statement of counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information and could not be relied upon without the books of accounts being rejected which had not been done in that case. 9. The aforesaid principle of law has been reaffirmed in CTT v. Naveen Gera 328 ITR 516stating that opinion of the District Valuation Officer per se was not sufficient and other corroborated evidence is required. Mr. Maratha, learned Counsel appearing for the Revenue submitted that the judgment of the Supreme Court in K.P. Varghese (supra) has been explained by the Rajasthan High Court in the case of. Smt. Amar Kumari Surana v. Commissioner of Income Tax : [1997] 226 ITR 344 (Raj.). In P.V. Kalyanasundaram (supra) the assessee purchased certain land for a sum of Rs.4.10 lakh. During a search, certain notes on loose sheets, allegedly in the hands of the assessee were found and seized. The department recorded the statement of the vendor who confirmed that he had in fact received a total sum of Rs.34.85 lakh, Rs.4.10 lakh by way of a Demand Draft and the balance in cash. The vendor later retracted from his statement and filed an affidavit deposing that the sale price was Rs.4.10 lakh only and the statements given earlier were incorrect. In a subsequent stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer to the income of the Assessee. The addition was, however, deleted by CIT (Appeal) and the order passed by him was maintained by the Tribunal. Dismissing the appeal filed by the Revenue, this Court accepted the contention that in absence of any incriminating evidence that anything had been paid over and above than the stated amount, the primary burden was on the Revenue to show that there had been an understatement or concealment of income and it is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the District Valuation Officer. In Prem Nath Nagpal (supra), the assessee claimed to have acquired property in question for a consideration of Rs.18.5 lakh and spent Rs.29,29,162/- on its development. The District Valuation Officer however, valued the property at Rs.3,04,62,000/-. Based upon the valuation report, the Assessing Officer made an addition of Rs. 1,87,33,000/- in respect of understatement of the cost of acquisition and additions of Rs.51,44,838/- in respect of understatement of expenditure on its development. The addition was however deleted by CIT (Appeal) and the appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the actual consideration received by the assessee from the sale of the property was higher than the ostensible consideration. However, this onus, placed on the Revenue, need not necessarily be discharged by producing direct evidence of the assessee having received more than the consideration disclosed in the sale documents. We appreciate the contention of the Revenue that the Assessing Officer may not always be in a position to produce direct evidence to this effect. In our view, the onus placed upon the Revenue can be discharged by establishing facts and circumstances, from which it can be reasonably inferred that the ostensible consideration was not the real consideration, and that the assessee had, in fact, received an amount higher than the amount disclosed by him in the sale documents, and consequently there was understatement or concealment of the consideration. This is also the view taken by Supreme Court in K.P. Varghese (supra). Whether the onus placed upon the assessee has been discharged or not in a given case, would depend on the facts and circumstances of each case. 16. In the case of Karan Khandelwal, the Tribunal while dismissing the appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been controverted by the revenue and, therefore comparatively lower sale value could be expected in case of the assessee. Under the circumstances, unless there is material to establish that the assessee had paid any consideration, over and above the consideration mentioned in the agreement, addition would not be justified. We see no infirmity in the order of CIT (A), deleting the addition and the same is, therefore, upheld. 17. It would thus be seen that the Tribunal failed to give due consideration to the fact that in the MoU dated 23.2.2000 as well as in the MoU dated 19.12.2000, the consideration agreed between the parties was Rs.6.35 crore, subject to the seller obtaining requisite clearances for construction of a commercial building on the land in question and that by the time agreement dated 30.11.2002 was executed between Khandelwals and Shri Sunil Bedi, all the requisite clearances, including change of land use, had been duly obtained by the seller, at its own cost, without any contribution from the purchaser. The Tribunal also failed to take note of the fact that vide MoU dated 19.12.2000 M/s Fashion Flair International Private Limited had agreed to pay Rs.6.35 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
