TMI Blog2015 (7) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts as per the MOU. The land in question was not free from litigation and civil suit was pending. Therefore, we find force in the argument of the Ld. Counsel for the assessee that the purchaser M/s. Full Moon Housing Pvt. Ltd. after evaluating the interest in the land of Mr. Sanjay N. Lohade and after negotiating for the amount paid the amount of ₹ 3 crores on their behalf and not on behalf of the assessee. It was the purchase who itself decided the terms of payment including the amount to be paid to Kadam Family, Mr. Sanjay N. Lohade and to the respondent and therefore the AO’s observation that the said purchaser made the payment to Mr. Sanjay N. Lohade at the behest of the respondent, in our opinion, is incorrect. Further, in view of the above facts, the observation of the AO that Mr. Sanjay N. Lohade had no locus standi is also incorrect since Mr. Sanjay N. Lohade was given not only Power of Attorney but was also given the right to obtain the development agreement and purchase the said land in his name and for that purpose the entire litigation involved in Civil Suit No.1006/1996 was also required to be attended by him at his own cost and responsibility. Even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleting the receipt of ₹ 3 crores through Shri.Sanjay Nemichand Lohade without appreciating the fact that out of land of 41 ares, 9 ares land belonged to the assessee and for the balance 32 ares the assessee had entered into Memorandum of Understanding (MOU) with Shri.Pradeep Dorje in the year 2000 and the MOU for the entire 41 ares has been signed by the assessee as consenting party, the sellers being the Kadam family members and the purchaser being M/s.Fullmoon Housing Pvt. Ltd. (2) The learned Commissioner of Income-tax (Appeals) erred in failing to appreciate the fact that the payment of ₹ 3 crores has been made to Shri.Sanjay Nemichand Lohade on behalf or at the instance of the assessee as it is the assessee who has entered into MOU dated 16.05.2007 with Fullmoon Housing Pvt. Ltd. and Shri.Sanjay Nemichand Lohade was only the constituted attorney on behalf of Shri.Dorje for withdrawing the civil suit. (3) The learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that except the payment made to the members of Kadam family as land owners, the remaining payment ought to have come in the hands of the assessee and not any other person a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Original owners) 2. Rs.25,00,000/- For expenses such as stamp duty etc. 3. Rs.50,00,000/- To Shri Kailash B. Wani (as mobadla) 4. Rs.3,00,00,000/- To shri Sanjay Nemichand Lohade (For surrendering rights) 5. Rs.2,11,46,600/- To be paid to the assessee in cash TOTAL Rs.9,26,46,600/- The AO therefore asked the assessee to explain with supporting evidences about the payments made to others by assessee or else to explain why the entire amount should not be added to the income of the assessee. 4.1 The assessee submitted that Smt. Sulabha Satam had assigned her rights in the property admeasuring 09 Ares to assessee for a consideration of ₹ 31,50,000/-. The money has been paid to the various parties as per the MOU and he has correctly offered to tax the cash received by him of an amount of ₹ 2,11,46,600/- which was declared by him during the course of survey. 5. However, the AO was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer S. No. 5/1A admeasuring 41 Ares to M/s. Full Moon Housing Pvt. Ltd for aggregate consideration of ₹ 9,26,43,600/-. 2) There was special power of attorney executed by Pradeep Dhorje on 16/07/2001 in favour of Shri. Sanjay Lohade constituting him as his attorney for Civil Suit No. 1006/1996. As per Assessing Officer his appointment was made at the behest of the assessee. 3) The MOU signed by the assessee, Shri. Pradeep Dhorje, Shri Sanjay N Lohade on 16/07/2001 did not mention any amount to be paid to Shri. Sanjay Lohade either by Pradeep Dhorje or the assessee. 4) As per the statement recorded u/s. 131 on 18/11/2010 Shri. Sanjay N Lohade has stated that he was to receive ₹ 5 Lacs from the assessee for some kind of services done by him, relating to requirement of PMC. Albeit, mention of this is not found anywhere in any document 5) The assessee brought Shri. Sanjay Lohade into the picture to deal with the Civil Suit bearing 1006/96 filed by Shri. Pradeep Dhorje against the land owners. 6) The said Sanjay Lohade only filed documents, applications for withdrawing the said Civil Suits from the court. 7) Shri. Sanjay Lohade stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the said land and Mr. Lohade was also given specific power of attorney on 16-07-2001 itself. Thus, the assessee after purchasing 32 Ares from Mr. Dhorje on 11-10- 2000 purchased 9 Ares out of the 81 Ares of S.No.51/1A from Smt.Satam Sulbha on 11-08-2005 for total consideration of ₹ 31,50,000/- and also executed development agreement. Thus, the entire land of 41 Ares was the subject matter of civil suit No 1006/1996 and without its settlement the assessee could not have sold the land and the Kadam family were seriously contesting the civil suit. The assessee as well as Mr. Dhorje found themselves incapable to continue with the legal battle which was consuming both time and money and thus out of business prudence Mr. Sanjay Lohade was brought into the matter who assured to do everything necessary including attending the complicated litigation and also obtained the development rights in respect of the land under suit. It was in such a situation that the assessee and Mr. Pradeep Dhorje executed the power of attorney as well as MOU dated 16-07- 2001 by which Mr. Lohade acquired control over the civil suit as well as the land involved in the suit. The assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree for payment of such purchase consideration to the original land owners i.e. the Kadam family and to Mr. Lohade who had vested interest in the property because of the circumstances of the case. It was contended that the Assessing Officer has accepted the payment of ₹ 3,40,00,000/- made to the Kadam family who was also stated to have been given at the behest of the assessee and the same answer given in the case of payment to Mr. Lohade has been erroneously interpreted by the Assessing Officer. The assessee drew the attention of CIT(A) to the MOU between the assessee and Full Moon Housing Pvt. Ltd which was found during the course of survey which also included payment of ₹ 2,11,46,600/- which was not reflected in the final sale agreement, which the Assessing Officer has taxed in the hands of the assessee on the basis of the aforesaid MOU and considered the same as true and genuine. The assessee drew attention of Ld.CIT(A) to para 2 of the MOU which indicated that the assessee and Mr. Dhorje had assigned all their rights, title and interest to Mr.Sanjay Lohade vide the MOU dated 16-07- 2001 along with the rights and powers of civil suit no. 1066/1996. It was according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. The Assessing Officer has not questioned the genuineness of the payments made to the persons against whom the aforesaid amount had been mentioned except that of Shri. Sanjay N. Lohade who was paid ₹ 3 crores by the purchasers. The Assessing Officer held the aforesaid payment lawfully belonged to the appellant and that the purchasers had made the payment on behalf of the appellant. The Assessing Officer after examining the MOU s for the said property and other related documents inferred that in the transfer of land, the role of Shri Lohade was limited to the withdrawal of the civil suit from the court in terms of the power of attorney. The fact brought on record do indicate the existence of litigation for the said property and which has continued for a pretty long time of nearly 12 years during which several negotiations and MOU's were executed by Shri. Pradeep Dhorje and the appellant, through which Sanjay N Lohade was given the power of attorney and also the development right by Shri. Dhorje and the appellant. The appellant, it appears had agreed to the inclusion of Shri. Lohade so as to solve the complicated litigation ongoing since a few years with Kadam family, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sanjay Lohade. Thus the inference drawn by the Assessing Officer that the payment to Shri. Lohade was made at the behest of the appellant is apparently not correct. The aforesaid land which is the subject matter of the issue involved had a history which has not been looked into and considered by the Assessing Officer while drawing the inference regarding Shri Lohade. The fact on record do indicate that Shri. Lohade had interest in the property and in clause 3 of the MOU dated 16-7-2001 it is clearly mentioned that the appellant could be responsible to pay to Shri. Lohade for withdrawal of the civil suit and the rights / title in the said property. It is also relevant to point out the fact that the MOU dated 16-5-2007 found during the course of survey action u/s 133A has formed the basis of the declaration of additional income by the appellant, the receipt of which was not recorded in the final sale agreement. The purchaser M/s FMHPL has made the payment to Shri. Lohade by way of cheque on different dates and which had also been confirmed by Shri. Lohade during the assessment proceedings. Moreover, the Assessing Officer has also accepted the contents of the MOU as true and correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ep Dhorje on 01- 10-1995 who agreed to purchase the entire land of 81 Ares situated at Survey No.5/1 as well as entire land of 80 Ares situated at Survey No.5/1B Ares totaling to 161 Ares from the Kadam family. Inspite of this existing agreement the members of the Kadam family sold 80 Ares of land on Survey No.5-1/B on 08-12-2005 to 8 different buyers each one buying 10 Ares. Mr.Pradeep Dhorje filed a civil suit bearing No.1006/1996 against the Kadam family as well as those 8 buyers for specific performance on the basis of MOU dated 01-10-1995 as according to him the deal was illegal in view of the MOU dated 01-10-95 and the Kadam family could not have executed the sale deeds on 08-01-1995. Thereafter on 18-08-1999 on the basis of MOU a settlement was arrived between Pradeep Dhorje and 8 buyers who together had purchased the land at Survey No.5/1B totaling to 80 Area by which Mr.Pradeep Dhorje gave up his right of specific performance in respect of said land in Survey No. 5/1B admeasuring 80 Ares. The civil suit however continued with respect to the remaining land at Survey No. 5/1A, i.e. 81 Ares. In the existence of this special suit Mr. Pradeep Dhorje agreed to sell 32 Ares of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and Mr. Pradeep Dhorje had to bring in Mr. Sanjay Lohade who assured to do everything necessary for attending the complicated litigation i.e. Civil Suit No. 1006/1996 including to deal with the original land owners i.e. Kadam family. Mr. Sanjay Lohade had also agreed to obtain the development right in respect of the land under suit. The respondent and Mr. Pradeep Dhorje accordingly executed power of attorney as well as MOU on 16/07/2001 by which Mr. Sanjay Lohade virtually acquired irrevocable control over the said Civil Suit as well as the land involved in the said Suit. In due course, i.e. after a period of 6 years Mr. Sanjay Lohade could bring the Kadam family to amicable settlement in the year 2007 and simultaneously respondent agreed to enter into MOU dated 16/05/2007. Mr. Sanjay Lohade accordingly withdrew the said Civil Suit No. 1006/1996. Mr. Sanjay Lohade also agreed to give up his right of obtaining development agreement in his favour as agreed by the respondent and Mr. Pradeep Dhorje as per MOU dated 16/07/2001. 12. The Ld. Counsel for the assessee drew the attention of the Bench to the MOU dated 16-05-2007 which was found during the course of survey on 12-03-2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the AO has accepted the contents of the MOU found during the course of survey as true and correct for making the addition and also allowed the payment to other related persons to the transaction except payment made to Sanjay Lohade. He submitted that the amount of ₹ 3 crores has been taxed in the hands of Sanjay Lohade as per the direction of the Addl.CIT, Ahmednagar u/s.144. The same has been upheld by the CIT(A) vide appeal order dated 02-11-2012. He submitted that the document found during the course of survey has to be considered as a whole and those points which favour the assessee cannot be totally ignored and the notings on the document cannot be overlooked. For the above proposition he relied on the decision of the Pune Bench of the Tribunal in the case of Chander Mohan Mehta Vs. ACIT reported in 71 ITD 245 where it has been held that the statement had to be considered and accepted as a whole and Revenue could not be permitted to use that part of statement which was beneficial to it and reject the other part of statement which was detrimental to it. The Ld. Counsel for the assessee also relied on the following decisions : i. Ahmed G.H. Ariff Vs. CWT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the AO Mr. Sanjay Nemichand Lohade did not enjoy or had any right in the property transacted which was eventually sold to M/s. Full Moon Housing Pvt. Ltd. According to the AO in the transfer of land the role of Mr. Sanjay N. Lohade was limited to the withdrawal of the civil suit from the court in terms of the powers of attorney. It is also the contention of the AO that Mr. Sanjay N. Lohade had no locus standi and he had no effective control over the entire litigation as well as the land. In view of the above and in view of the reasonings given in the preceding paragraphs the AO added the amount of ₹ 3 crores in the hands of the assessee. 13.1 We find the Ld.CIT(A) deleted the addition on the ground that the AO had erroneously interpreted the MOU as well as the statements of Mr. Arvind Jain, Director of M/s. Full Moon Housing Pvt. Ltd., i.e. the purchaser and the statement given by Mr. Sanjay N. Lohade. According to the Ld.CIT(A) when the AO has accepted the other contents of the MOU as genuine he should not have doubted the payment made to Mr. Sanjay N. Lohade as for non business consideration. Further, the CIT(A) also observed that the amount of ₹ 3 crores receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find Mr. Sanjay N. Lohade in his reply to Question Nos. 16, 17, 22, 23, 24 and 25 has replied as under : Q.16 Give details of Spl.Civil Suit No.1006/1996 before the Civil Judge, Sr. Division, Pune? Ans. This case was filed by Shri Pradeep Dorje against Mrs. Kadam and Mr. Dorje had given rights to me to continue or withdraw the suit. Q.17 What was the Civil Suit? Ans. Mr. Pradeep Dorje had MOU duly signed by Mrs. Kadam and other owners of the property in respect of the property mentioned at Q.No.7 and the owners were not signing the documents required for transfer of such property to Mr. Dorje. Accordingly, Mr. Dorje had filed the civil suit against the property owners. Q.22 The property in question finally has been purchased by Foolmoon Housing Pvt. Ltd. Please state as to what you have received from Foolmoon Housing Pvt. Ltd. and the mode of receipt of money by you? Ans. ₹ 3 crores received by account payee crossed cheque. The money was received from 2007 to 2010. Q.23 For receipt of aforesaid money, what did you do as quit-proquo? Ans. I filed affidavit for withdrawal of civil suit which was pending before the Civil Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that purpose the entire litigation involved in Civil Suit No.1006/1996 was also required to be attended by him at his own cost and responsibility. 13.7 In case of transactions in immovable properties the purchaser will always try to buy the property free of litigation. When the land in question is not free from litigation and a civil suit is pending, a fact not disputed by the AO himself, therefore, the payment to Mr. Sanjay N. Lohade by M/s. Full Moon Housing Pvt. Ltd. either at the instance of the assessee or otherwise has to be allowed as deduction from the sale proceeds. 13.8 Further, Mr. Sanjay N. Lohade vide his letter dated 20-10- 2010 addressed to the Addl.CIT Range-3, Pune has stated that he has received an amount of ₹ 3 crores on various dates by cheque for releasing all rights and for withdrawing the Civil Special Court Suit No.1006/1996 for Sy.No.5, Baner. The contents of the said letter reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... releasing all rights and for withdrawing the civil Special Court Suit No.1006/1996 for S.No.5 Baner. Thanking you, Yours Truly, Sd/- Sanjay Lohade 13.9 The Hon ble Bombay High Court in the case of CIT Vs. Sales Magnesite Pvt. Ltd. has held that to decide whether the expenditure is incurred for the purpose of the business and allowable as deduction u/s.37 of the I.T. Act, it is not essential that it should be necessary, legally or otherwise, to incur the same or that it should directly and immediately benefit the business of the assessee. Even expenditure incurred voluntarily on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business would be deductible u/s.37. The question whether it was necessary for commercial expediency or not is a question that has to be decided from the point of view of the businessman and not by the subjective standard of reasonableness of the revenue. The question must be viewed in the larger context of business interest or commercial expediency. No abstract or pedantic view can be taken in the matter. In the instant case, the assessee is engaged in the business of trading in lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's documents of registration of land as per Index II showed an amount of registration fee to the tune of 17 lakhs and ₹ 2.5 lakhs and registration charges of ₹ 30,000/- for two registrations, which totalled to ₹ 20,10,000/-. For balance amount of ₹ 4,90,000/ - the assessee did not offer any explanation. The Assessing Officer therefore held the same to be unspent and added the same to the total income of the assessee. 16. Before CIT(A) the assessee submitted that during the assessment proceedings vide letter dated 28-10-2010 the details of the expenditure incurred on stamps, registration etc., were submitted the details of which are as under : Particulars Amount (in Rs.) Siddharth Raajagadia Document Franking 2,50,010 Siddharth Raajagadia's Document Registration 30,000 Mohit Astekar's Document Franking 5,40,628 Sudhir Yeole's Document Registration 5,94,691 Sunil Wani's Document Registration Franking 5,94,691 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
