TMI Blog2015 (7) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this account in different assessment years. This ground in all the appeals are therefore allowed. Addition under section 69A of the Act - whether the amount allegedly received by the assessee from Shri Suresh Chand Agarwal towards sale of immovable property can be assessed under the Head “Capital Gains”? - Held that:- 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 19.09.2010 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees are against two separate orders, both dated 20.10.2014, of the Ld. CIT(A)-I, Hyderabad. Appeals pertaining to Mr. Saral Talwar are for A.Ys. 2005-2006 to 2011-2012, whereas, appeals pertaining to Smt. Radhika Talwar are for A.Y. 2006-2007 to 2009-2010 and 2011- 2012. Since facts involved in 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 commission income. (iii) Addition of ₹ 1,33,00,000 under section 69A of the Act. 2.1. While issue No.(i) and (ii) are common in all the appeals, issue No.(iii) is specific to A.Y. 2009-2010 only. 3. At the outset, we propose to deal with the merits of the additions made on account of disallowance of 50% of expenditure of commission income as well as addition under section 69A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. in the assessment order, when the assessee was asked to furnish evidences for the expenditure incurred such as vouchers, details of commission payees and the nature of expenditure, the assessee did not furnish any evidence except a list containing the names, cheque numbers and amounts of commission paid. The A.O. therefore, was of the view that 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 the assessee. Being aggrieved of such disallowance made by the A.O. assessee challenged the same before the Ld. CIT(A). The Ld. CIT(A) also confirmed the disallowance made by the A.O. 4. The learned A.R. submitted before us that when the assessee has maintained all evidences and also furnished the same before the A.O. in respect of the expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 this account in different assessment years. This ground in all the appeals are therefore allowed. 7. The only other issue of addition of an amount of ₹ 1,33,00,000 under section 69A arises in A.Y. 2009- 2010. 8. Briefly, the facts relating to this issue are, as stated earlier, during the search and seizure operation in the residential premises of Mr. Suresh Chand Agarwal documents were seized pertaining to transactions of property namely The Trails at Plot No.6, Gated Community, Manikonda Jagir 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 Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his wife, the A.O. treated an amount of ₹ 1,33,00,000 as assessee s share in the unexplained money and added it to his income for the year under consideration. 9. 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 Kalyani through a registered sale deed on 30.04.2011 for a consideration of ₹ 1,45,00,000. (4) The Encumbrance Certificate clearly shows that Mr. Suresh Chand Agarwal was never owner of the property. 9.1. Ld. CIT(A), however, did not find merit in the submissions of the assessee. She observed that if the assessee s contention that unsigned agreement of sale was never acted upon is to be accepted, then there was no need for cancellation of the agreement dated 04.10.2010. She observed that whether name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arwal. Therefore, no addition can be made on the basis of an unsigned document which has no evidentiary value. Learned A.R. submitted, though initially the assessee and his wife on 18.08.2008 has entered into an agreement of sale with Mr. Suresh Chand Agarwal for sale of the property owned by them but subsequently the said agreement was cancelled on 04.10.2010 as the deal could not be materialized. Therefore, when the deal itself did not materialized, there is no question of assessee having received any payment from Mr. Suresh Chand Agarwal towards sale of the property. Learned A.R. submitted, the property in question all 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 the property was not sold to Mr. Suresh Chand Agarwal and the authenticit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and his wife Smt. Radhika Talwar 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 of sale also mentions that the vendee (Mr.Suresh Chand Agarwal) has paid a sum of ₹ 31 lakhs to the vendor (Mr. Saral Talwar and Smt. Radhika Talwar). As it appears from the perusal of the agreement of sale, it is signed by all the parties. However, letter dated 19th November, 2009, which also forms part of the seized document, is an unsigned letter purportedly written by Sri. Saral Talwar and Smt. Radhika Talwar to Mr. Suresh Chand Agarwal, the contents of which indicate that Mr. Suresh Chand 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 purported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment accepting the payment of ₹ 2.66 crores to assessee and has also declared it as his undisclosed income, however, on perusal of record we find, this fact was neither discussed by the A.O. or by Ld. CIT(A) in their orders. Also, there is nothing on record to suggest that such statement of Mr. Agarwal was ever confronted to assessee or he was allowed to crossexamine Mr. Agarwal. On the other hand, on going through the statement 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 to transfer of an immovable property, the only way it can be brought to tax, if at all, is under the Head Capital Gains provided, transfer is complete in all respects. Under no circumstances, it can be brought to tax under section 69A of the Act, much less unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 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 his income unless the sale is finalized. At best, it can be treated as advance received by the assessee towards sale of his property. This fact is further corroborated from the cancellation deed dated 04.10.2010 and other seized material including the undertaking which indicate that the assessee is required to return back the money received from Mr. Suresh Chand Agarwal. Seizure of receipt executed by Mr.Suresh Chand Agarwal acknowledging receipt of ₹ 40 lakhs from assessee to a great extent 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 depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wife can retain a maximum amount of ₹ 15 lakhs from the advance received from Mr. Suresh Chand Agarwal, if the property is sold at a price lesser than the market value of ₹ 3,21,00,000. Admittedly, as per registered sale deed assessee has received 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 merits of the additions made by A.O., the other grounds, including the additional ground raised by assessee on the legal issue of validity of proceeding initiated under section 153C are of mere academic interest, hence not required to be adjudicated upon. 17. In the result, appeals of the assessee are partly allowed. ITA.Nos.1788, 1789, 1790/H/2014, ITA.No.1887 1888/H/2014 Smt. Radhika Talwar 18. The facts and issues involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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