Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (7) TMI 799 - ITAT HYDERABAD

2015 (7) TMI 799 - ITAT HYDERABAD - TMI - Validity of proceeding initiated under section 153C - Disallowance of 50% out of the expenditure claimed on the commission income - Held that:- When the assessee has furnished the names of the persons to whom payments were made and the payments are through cheques, the details of which were before the A.O., nothing prevented him from making enquiry to ascertain the correctness of assessee’s claim or genuineness of the expenditure. Moreover, when the A.O. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t on account of expenditure incurred for earning the commission income or they are bogus. There being no enquiry whatsoever by the A.O. in this regard, the addition made cannot be sustained. The Ld. CIT(A), in our view, while confirming the addition made by the A.O. instead of deciding the merits of the addition on the basis of facts has deliberated more on the issue, whether such addition can be made in a proceeding under section 153C of the Act. Therefore, there being no valid reason behind di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

department has selectively relied upon the seized material while making the addition. While department has relied upon the unsigned letter dated 19.09.2010 and the receipts, it has completely ignored the agreement of sale, cancellation agreement and the undertaking by assessee and his wife to return back the money to Mr. Suresh Chand Agarwal, receipt executed by Mr.Suresh Chand Agarwal, which were also part of the seized material. Keeping aside for the moment assessee’s claim that he never rece .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

alize and agreement of sale was cancelled. Therefore, the amount of ₹ 2.66 crores being a debt due to Mr. Suresh Chand Agrwal cannot be treated as income of assessee and his wife. Moreover, it is neither expected nor believable that inspite of the fact that the transaction fell through and property was ultimately sold to a third party, Mr. Suresh Chand Agarwal would have given up his right over such a substantial amount of money and kept quite without recovering it from the assessee. One c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

herefore, the amount in question cannot be brought to tax even under the Head ‘Capital Gain’ as the sale is not complete. Thus, looked at from any angle the amount of ₹ 1,33,00,000 is not taxable at the hands of the assessee. Accordingly, we direct the A.O. to delete the addition. This ground is allowed. - Decided in favour of assessee. - ITA.No.1783, 1784, 1785, 1786, 1787/Hyd/2014, ITA.No.1801 & 1802/Hyd/2014,ITA.No.1788, 1789, 1790/Hyd/2014 ,ITA.No.1887 & 1888/Hyd/2014 - Dated:- 22-7-20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n all these appeals are more or less identical and issues raised are also common, these appeals are clubbed together and disposed of by this consolidated order for the sake of convenience. ITA.Nos. 1783 to 1787/Hyd/2014 & 1801 & 1802/Hyd/ 2014 - Mr. Saral Talwar 2. The assessee has basically raised three issues in all these appeals which are as under : (i) Validity of proceeding initiated under section 153C of the Act. (ii) Disallowance of 50% out of the expenditure claimed on the commis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fly the facts are the assessee an individual is a Director of M/s. Talwar Mobiles P. Ltd., and M/s. Talwar Auto Garages P. Ltd., That apart assessee also derives income from commission. A search and seizure operation under section 132 of the Act was conducted in case of Mr. Suresh Chand Agarwal and others in the group on 29.10.2010. During the search and seizure operation, certain documents were seized which revealed a transaction relating to sale of property named as The Trails at Plot No.6, Ga .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Declared Income (Rs.) 2005-2006 8,44,195 2006-2007 12,83,900 2007-2008 24,33,573 2008-2009 31,03,380 2009-2010 37,17,726 2010-2011 47,11,830 2011-2012 58,34,576 3.1. During the assessment proceedings, the A.O. while verifying the computation of income of the assessee filed along with returns of income noticed that the assessee has claimed certain amounts in different assessment years towards expenses incurred on commission income as under : Assessment Year Expenses of Commission (Rs.) 2005-2006 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee has not established the fact that the expenditure was laid out or expended wholly and exclusively for the purpose of assessee s business in terms with section 37 of the Act. The A.O. referring to certain judicial authorities held that as the assessee has not discharged the onus caste upon him, 50% of the expenditure claimed has to be disallowed. Accordingly, the A.O. after disallowing 50% of the expenses claimed in different assessment years made addition to the income returned by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Act without referring to any incriminating material. 5. The learned D.R. on the other hand, justified the disallowances. 6. We have considered the submissions of the parties and also perused the orders of the revenue authorities as well as other materials on record. As can be seen, the A.O. made an adhoc disallowance of 50% of expenditure claimed to have been incurred in earning commission income, primarily for the reason that assessee has not been able to explain fully that the expenditur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

equired for the purpose of business or not before making adhoc disallowance of 50% of the expenditure. When the assessee has furnished the names of the persons to whom payments were made and the payments are through cheques, the details of which were before the A.O., nothing prevented him from making enquiry to ascertain the correctness of assessee s claim or genuineness of the expenditure. Moreover, when the A.O. accepted 50% of the expenditure claimed, there cannot be any doubt with regard to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bogus. There being no enquiry whatsoever by the A.O. in this regard, the addition made cannot be sustained. The Ld. CIT(A), in our view, while confirming the addition made by the A.O. instead of deciding the merits of the addition on the basis of facts has deliberated more on the issue, whether such addition can be made in a proceeding under section 153C of the Act. Therefore, there being no valid reason behind disallowance of 50% out of the expenditure claimed, we delete the additions made on t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agir Village, Rajendranagar Mandal, Ranga Reddy District owned by the assessee and his wife Smt. Radhika Talwar. On verifying the seized document, it was found that the said seized documents contain an agreement of sale dated 18.08.2008 between the assessee, his wife and Mr. Suresh Chand Agarwal towards sale of the property The Trails at Plot No.6, Gated Community, Manikonda Jagir Village, Rajendranagar Mandal, Ranga Reddy District admeasuring 514 sq. yards and having built-up area of 4500 sq. f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n cash on different dates on account of sale consideration of the property owned by him in addition to the amount of ₹ 36,00,000 received in cheque. The A.O. observed that in the course of post search proceeding when the assessee was confronted with the seized material, in statement dated 08.11.2011, the assessee admitted that signature on the receipts appears to be his, but, at the same time, he expressed that he had no knowledge of the contents of the receipts. The assessee however denie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee accepts the signature in the receipts to be his, he cannot deny the contents of the receipts. He further observed that since the assessee is an educated person and running a successful business, it cannot be believed that he has put his signature without knowing the contents of the receipts. Thereby, disbelieving the statement of the assessee to the effect that he has not received amount of ₹ 2.30 crores in cash, the A.O. formed an opinion that the assessee has received total amo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Being aggrieved of such addition, assessee preferred appeal before the first appellate authority. In course of hearing of appeal before the first appellate authority, the assessee s contention broadly are as under: (1) No addition can be made on the basis of an unsigned agreement. (2) The transaction between the assessee and Mr. Suresh Chand Agarwal did not materialize. Hence, the agreement of sale was ultimately cancelled on 04.10.2010. (3) The property was ultimately sold to Mrs. B. Sarada Ka .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ther name of Mr. Suresh Chand Agarwal is reflected in the encumbrance certificate or not is not of any relevance as the registration of the property was not completed. However, according to the Ld. CIT(A), when signed receipts of the assessee forming part of the seized document clearly indicate that the assessee has received cash of ₹ 2.30 crores along with cheque payment of ₹ 36 lakhs, the claim of the assessee that no such payments have been received cannot be accepted. Finally, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. (iii) There were documents showing the total payments made both in cash and cheque and the appellant s claiming that only the cheque payments were the total consideration cannot be accepted because the document as a whole needs to be considered and cannot own part of it and disown the inconvenient one. (iv) The intending purchaser admitted to have paid on-money consideration of ₹ 2.30 crores to the appellant and his wife in cash and he paid taxes on the undisclosed income on account of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ale of the property. He submitted that though the assessee in the statement recorded from him stated that the signatures in the receipts appear to be his, but he never accepted the contents of the receipts. Further, it was submitted that the entire addition has been made by the A.O. on the basis of an unsigned letter/agreement found in the premises of Mr. Suresh Chand Agarwal. Therefore, no addition can be made on the basis of an unsigned document which has no evidentiary value. Learned A.R. sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ll through remained in possession of the assessee till it was sold to a third party, Smt. B. Sarada Kalyani through registered sale deed executed on 30.04.2011 for a consideration of ₹ 1,45,00,000 and the assessee and his wife have also disclosed capital gain/loss on account of such sale in A.Y. 2012-2013. In this context, the assessee drew reference to the assessment orders passed in the case of assessee and his wife Smt. Radhika Talwar for A.Y. 2012-2013. The learned A.R. submitted when .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r section 69A of the Act, money, bullion and jewellery has to be found in possession of the assessee whereas in the present case, no money was found with the assessee to attract the provisions of section 69A. He therefore submitted that the addition made in violation of the statutory provision and also not based on any evidence has to be deleted. 11. Learned D.R. on the other hand submitted before us that the seized documents having clearly established the fact that assessee has received an amou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n be made under section 57 of the Act and mentioning a wrong provision would not vitiate the validity of the addition. Learned D.R. further submitted that Mr. Suresh Chand Agarwal at the time of search has stated that he has paid an amount of ₹ 2.66 crores towards purchase of the property of the assessee and his wife which included cash payment of ₹ 2,30,00,000 and accordingly he made a declaration of ₹ 2.50 lakhs towards additional income in A.Y. 2009- 2010. In this regard, le .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to Mr. Suresh Chand Agarwal. In this context, a reference to the seized materials, copies of which have been submitted in assessee s paper book, would reveal that assessee and his wife had entered into an agreement of sale with Mr. Suresh Chand Agarwal in August, 2008 (no date mentioned) for sale of the property named The Trails at Plot No.6, Gated Community, Manikonda Jagir Village, Rajendranagar Mandal, Ranga Reddy District for a total consideration of ₹ 1.31 crores. The said agreement o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and Agarwal has paid an amount of ₹ 2,35,00,000 by way of cash to the assessee and his wife apart from cheque payments. Of-course, there are receipts purportedly signed by assessee indicating cash payments which also forms part of the seized documents. These receipts and the unsigned letter dated 19th November, 2009 are the primary evidence on the basis of which additions have been made at the hands of the assessee and his wife. Therefore, the preliminary issue to be decided is, whether on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vely prove that the assessee has actually received the amount of ₹ 2.66 crores from Mr. Suresh Chand Agarwal. On a plain reading of Section 69A, it is very much evident that the said section can be invoked only in a case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery, article, which is not recorded in the books of accounts and further assessee offers no explanation with regard to such money, bullion, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er, assessee has also disowned the document. Further, though the department has alleged that the assessee has accepted the signature in the receipts to be his but on a perusal of the statement recorded from assessee under section 131, it is very much evident that while expressing his ignorance about the contents of the receipts, what the assessee has stated is signature in the receipts closely matches his. He never stated that it was 100% his signature. Though, Learned D.R. submitted before us t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ement of assessee under section 131 of the Act, during the post search proceeding it is absolutely clear, assessee categorically denied of having received any thing in cash from Mr.Agarwal. Even, accepting the contents of the receipts to be true, what it indicates is assessee and his wife have received certain amount towards part sale consideration for sale of their immovable property to Mr. Suresh Chand Agarwal in pursuance to an agreement of sale. Therefore, as the receipt of money is linked t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er the Head Capital Gains . For this purpose, it will be relevant to look into some other documents which also form part of the seized material. Amongst them is a letter dated 22.01.2010 (probably date is wrong) which speaks of returning the amount of ₹ 2,61,00,000 to Mr. Suresh Chand Agarwal by assessee and his wife. Of course, this document is again an unsigned one. There is an undertaking by the assessee and his wife for returning the amount of ₹ 1,90,00,000 to Mr. Suresh Chand Ag .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

#8377; 3,21,00,000. One of the clause in cancellation deed also specifies that if the property is sold for less than the market value of ₹ 3,21,00,000, the vendors will adjust a maximum amount of ₹ 15 lakhs from the amount received by them towards part of the sale consideration from Mr. Suresh Chand Agarwal and refund the balance amount to him. Finally, there is a receipt dated 04.10.2010 executed by Shri Suresh Chand Agarwal acknowledging receipt of an amount of ₹ 40 lakhs fro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is a witness to the aforesaid registered sale deed. Learned A.R. has also brought to our notice that, assessee has declared such transaction in A.Y. 2012-2013 and the A.O. in assessment order passed under section 143(3) has accepted the capital loss shown by assessee. On consideration of aforesaid facts, it is to be understood, though assessee might have received the part sale consideration of ₹ 2.66 crores from Mr. Suresh Chand Agarwal, but the said amount automatically will not become h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t proves such fact. That being the case, cash received by the assessee from Mr. Suresh Chand Agarwal, cannot be the income of the assessee as the assessee has to return back the money to Mr. Suresh Chand Agarwal since the transaction did not materialize. 14. Reading of the assessment order as well as order of Ld. CIT(A) gives an impression that department has selectively relied upon the seized material while making the addition. While department has relied upon the unsigned letter dated 19.09.20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onsideration of the entire seized material as a whole, the situation which emerges is, though the assessee might have received an amount of ₹ 2.66 crores from Mr. Suresh Chand Agarwal towards part sale consideration of the property but he was supposed to return back the money to Mr. Suresh Chand Agarwal once the transaction did not materialize and agreement of sale was cancelled. Therefore, the amount of ₹ 2.66 crores being a debt due to Mr. Suresh Chand Agrwal cannot be treated as i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e amount of ₹ 2.66 crores from Mr. Suresh Chand Agarwal towards sale of property, it must be equally true that assessee has refunded back the money to Mr. Suresh Chand Agarwal on cancellation of agreement of sale. Receipt executed by Mr. Suresh Chand Agarwal, copy of which is at page No.23 of the paper book bears testimony to this fact. Therefore, the amount in question cannot be brought to tax even under the Head Capital Gain as the sale is not complete. Thus, looked at from any angle the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eceived consideration of ₹ 1,45,00,000 on sale of the property in question to Smt. Sarada Kalyani. Therefore, if the department can establish on record that assessee, in fact, has retained a part of the advance received from Mr. Suresh Chand Agarwal, such amount can be deducted from the cost of acquisition in terms with section 51 of the Act while computing capital gain in the assessment year in which asset was transferred. 16. In view of our decisions in the preceding paragraphs on the me .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version