TMI Blog2013 (12) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... onor to gift such a substantial amount of her wealth could not be established - The donor was the resident of Dubai which is a tax-free country - No return of income or any other tax document could be produced in respect of her business - The assessee's explanation as to the nature and source of the credit be considered as not reasonable - Decided in favour of Revenue. - I.T.A. No. 5059/Mum/2011 - - - Dated:- 22-11-2013 - Shri B. R. Mittal, JM And Shri Sanjay Arora, AM,JJ. For the Appellant : Shri P. K. Singh For the Respondent : Dr. K. Shivaram ORDER Per Sanjay Arora, A. M. This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-34, Mumbai ('CIT(A)' for short) dated 15-4-2011, partly allowing the assessee's appeal contesting its assessment under section 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the Assessment Year (A.Y.) 2007-08 vide order dated 30-12-2009. The appeal raises three issues, which we shall take up in seriatim. 2.1 The first issue is in respect of assessment of income as Short Term Capital Gains ('STCG' in short) by the Assessing Officer (AO) at Rs.27,93,103/-, since deleted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood deleted. The AO, in view of the learned CIT(A), had misled himself. There was no transfer of ownership of or beneficial rights in the property. The possession had been allowed only for the limited purpose of its development, i.e., to execute and give effect to the development agreement by constructing the proposed building. Even if construed as a transfer, the same could not result in any again on the same date. No development work had been done and, further, no amount received either by the ABPL or by the assessee during the year, i.e., from a third party. There was as such neither any generation of revenue nor any dilution of ownership rights. Accordingly, no transfer and, consequently, no gain had arisen in the facts and circumstances of the case. The addition being deleted, the Revenue is in appeal. 3. We have heard parties, and perused the material on record. 3.1 Before us, the Revenue's case was that the assessee has agreed to transfer his interest in property (to the extent of 50% of the land) for a consideration, though in kind, allowing possession to the transferee. Capital gain had thus accrued. The consideration has been reasonably valued, adopting the ready re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at Rs.1.21 crores. That is, the cost of the assessee's share in the project, being 50% of the total construction (which would thus also include 50% of the land) would be Rs.1.21 crores. One could have considered of the land being a capital asset in the assessee's hands, with 50% of it (and not the entire, as assumed by the AO) being transferred to the builder for a consideration, if in the facts and circumstances of the case there had been an indication to that effect, as where it is attended by a time lag, so as to be considered as a case of conversion (of a capital asset) into stock-in-trade u/s. 45(2) of the Act. The acquisition of land, which is again from a developer, and the development agreement being almost simultaneous, we find no scope for application of section 45(2) in the facts and circumstances of the case. Further, even if a value was to be ascribed to the transfer of 50% of the property in land (by the assessee) and, correspondingly, to 50% of the construction (by the builder), i.e., forming consideration for each other. The two may not be at par, giving the impression of a profit/loss arising to the parties, which would be equal and opposite. However, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed transaction, we found it relevant to firstly characterize the transaction on a consideration of the conspectus of the case. The assessee has, in our view, only sought to exploit the market potential of his land, buying it from one developer and contracting it to another for construction. The only difference is that the consideration for the same, rather than being in cash, is in kind, i.e., a defined share in the area to be constructed. That, further, would on that account, neither preclude the transfer (which though would only be as 50% of the total land area) nor the concomitant capital gain. The valuation, however difficult, is to be made, working as fair an estimate as the circumstances made admit (refer A.R. Krishnamurthy vs. CIT [1989] 176 ITR 417 (SC)), even as was admitted to by the ld. AR during hearing. However, as observed earlier, we found the transaction to be more in the nature of a joint effort to commercially exploit the land, each party agreeing to share the risk and reward from the activity, leveraging its advantage and deploying its resources; the assessee in the form of a suitably located land, and the Developer, its construction apparatus/expertise. Each par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus to establish the genuineness and, consequently, to prove a credit under section 68 is on the assessee, and the same extends to establishing the identity and capacity (of the creditor) and the genuineness (of the credit transaction). The only document furnished by the assessee is a confirmation from the creditor, and which would admittedly only establish the identity of the creditor. No doubt the AO has not verified the same. That, however, would not make anything it more than a confirmation and, thus, would not lead to establishing the capacity of the creditor or the genuineness of the transaction. The only implication of its non-verification by the AO would of the acceptance of the confirmation as such, and which, as aforesaid, would only confirm the identity of the creditor, and no further. Further, despite an adverse report by the AO, neither any material before the ld. CIT(A) nor before us, i.e., in the appellate proceedings, despite lapse of another two and-a-half years, has been furnished. The Revenue's reliance of section 102 of Evidence Act is also apposite. Under the circumstances, we are of the clear view that the assessee has failed to discharge the burden of proof c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to the date of transfer, i.e., on 25-11-2006. The source of the same was explained to be the realization proceeds of FDR credited along with interest. In the view of the ld. CIT(A), the AO had doubted the transaction due to the non-production of the evidence to substantiate the explanation with regard to it being the proceeds of a FDR. The same is not toward the source of credit but the source of source. Even sections 56(2)(v) and 56(2)(vi) were not applicable as the credit/gift was from a relative, i.e., sister. No addition was accordingly called for. Aggrieved, the Revenue is in appeal. 7. We have heard parties, and perused the material on record. 7.1 The Revenue has impugned the credit only to the extent of 1,00,000 Dirham, claimed as representing the sale proceeds of fixed deposit/s, i.e. at Rs.12.11 lakhs, out of total credit of Rs.30 lakhs (2,47,650 Dirham). The sum has without doubt been transferred to finance the assessee's purchase of the Jaipur plots. In fact, even the donor's bank account with Bank of Baroda, Dubai main branch, from which the funds stand remitted, stood opened only for the said purpose, i.e., on 22.11.2006, a few days prior to the remission (PB p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As such, there is nothing to show that the same represents the transferor's own money, which only would make the explanation of the same being a gift valid. Further, this is despite the fact that the AO expressed reservation with regard to the source of the credit (1,00,000 Dh.); the same in fact forming the basis of his objection per the remand report (PB pg.166), whereat only evidence in relation to credits was adduced by the assessee, and the further fact that the Revenue is in appeal. Apart from the onus to substantiate its case being on the assessee, the absence of the same would entitle the Revenue to take an adverse view (refer section 102 of the Evidence Act as also CIT vs. Krishnaveni Ammal [1986] 158 ITR 826 (Mad.). The ld. CIT(A) has not expressed any contrary finding. His stating that the same amounts to seeking or requiring to prove the source of source is misconceived. A bank account by itself is only a channel for transferring/routing funds. Only when the funds deposited therein are shown to be of the account holder, can the same be said to represent the account holder's money or asset, so that his capital becomes the source of the credit under reference. That being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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