TMI Blog2013 (1) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... the considered opinion that the decision of CIT (A) in upholding the disallowance made by the AO does not call for any interference. - Decided against assessee. Addition made by AO u/s 69 - Held that:- As extracted from the orders of the CIT(A) and AO provide that it is the assessee’s own submission that the sum of ₹ 20 lakhs was paid in cash and the same in support of his claim of deduction u/s 54 of the Act. Agreement to sale is a valid document and the assertions of the parties relating to cash payment of ₹ 20 lakhs is true considering their signatures in the presence of the witness. We are in agreement with the views of the CIT(A)/AO and the contents of the clause relating to manner of payment have to be either correct or incorrect and they cannot be partly correct (condition (ii); and partly incorrect (condition (i) as being attempted by the assessee. Will the flat-seller sign on any agreement affirming the receipt of cash of ₹ 20 lakhs when they same is not actually received by him? In our opinion, the answer is negative. Therefore, we are of the opinion that the order of the CIT (A) on this issue needs no interference. Regarding the argument that the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2007-08 and they are filed against the order of same CIT (A)-II, Nagpur dated 4.11.2010. The appeal wise and ground wise adjudication is given in the following paragraphs. Firstly, we shall take up assessee s appeal and the assessee raised the following grounds which read as under: 1. On the facts and in the circumstances of the case, Ld CIT (A) erred in confirming disallowance of ₹ 15 lacs made by AO, which was paid to his 3 nieces towards settlement of their interest in the property and was claimed as deduction u/s 48(i) of the IT Act, 1961. 2. On the facts and in the circumstances of the case, Ld CIT (A) erred in confirming addition of ₹ 20 lacs made by AO u/s 69 of IT Act, 1961 ignoring the fact that this amount was paid on 5.4.2007 pertaining to AY 2008-2009 and the same was offered to tax in AY 2008-09. 2. Briefly stated relevant facts of the case are that assessee is a pensioner and derived income from pension and interest etc filed return declaring total income of ₹ 2,69,042/-. AO processed the same and determined the total taxable income of ₹ 1,27,63,105/-. It includes long term capital gain of ₹ 1,03,44,063/-, income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowable sum of ₹ 15 lakhs, paras 3.6 to 3.7 of the impugned order are relevant in this regard and the same are reproduced here under: 3.6 I have thoroughly considered the facts of the case, the assessment records and the appellant s submissions. As for the payments to the nieces of Shri K.M. Moghe, AO has held that the amount of ₹ 15 lacs is not in accordance with the will of Smt. Kamlabai Moghe because she has clearly stated in her will that this property should be given to my legal heirs two sons, their sons or to my daughters . Further, accordingly to the AO late Shri P.M. Moghe vide his will have also stated that after his death his legal heirs would have no claim to the property. The appellant s contention is that the payment of ₹ 15 lacs by Shri K.M. Moghe is due to the fact that Shri K.M. Moghe had to pay ₹ 5 lacs each to his 3 nieces (daughters of late Mr. P.M. Moghe) namely Mrs. Dev, Ms. Moghe and Mrs. Jothar towards their proportionate share in undivided land on which the bungalow is constructed and which was not given by Mr. P.M. Moghe to his sisters by his WILL. This statement is not in consonance with the facts narrated above. 3.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d certain amounts to someone to settle the claims, who had no right, title or interest in the properties in question, they cannot be considered to have been paid wholly and exclusively in connection with the transfer of property and the amount cannot be claimed as deduction u/s 48(i) of the Act. The ratio is applicable in the instance case as the three nieces to whom the assessee had paid an amount of ₹ 15 lacs did not have any legal claim over the property and therefore, the amount paid to them cannot be said to have been made in connection with transfer of the property. The decision relied upon by the assessee in the case of CIT vs. C.V. Soundararajan has no application as there is no relinquishment of any right for which the amount is claimed to have been paid. Therefore, we are of the considered opinion that the decision of CIT (A) in upholding the disallowance made by the AO does not call for any interference. Accordingly ground no.1 raised in assessee s appeal is dismissed. 7. Ground no.2 relates to addition of ₹ 20 lacs u/s 69 of the Act. Relevant facts are that the assessee sold his property for a sum of ₹ 1.3 cr in the FY 2006-2007 and earned capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O rejected the above explanation of the assessee and treated the same as act of afterthought . The matter travelled to the CIT (A). This time, the assessee filed a letter from the developer- SAI addressed to the ITO informing not only about the cancellation of the agreement but also about non-receipt of the said cash of ₹ 20 lacs. The contents of the said letter placed at page 30 of the paper book and the same is reproduced in later paragraphs of this order. We find that the said letter differs entirely in contents qua the contents of the agreement to sale and it is signed this time by the developer. The same was remanded to the AO for his comments in view of the principles of natural justice. AO examined the above contents that the amount of ₹ 20 lacs was paid only on 5.4.2007 and not prior to July 2006 (before the payment of ₹ 9 lakhs by cheque) and another cash payment of ₹ 5 lacs paid in cash on 7.4.2007 and opined that these cash payments are different from that of the payments made in 2006 ie prior to the payment of ₹ 9 lakhs made by way of cheque dated 7.7.2006. It is the claim of the assessee that a sum of ₹ 20 lacs was not paid in com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is paid; why did the assessee cancelled the agreement to sale only in 15.1.2008 ie during the assessment proceedings that to after AO is already seized up with this issue of cash payment of ₹ 20 lakhs; why did the SAI wrote letter to the ITO if not for avoiding the likely additions in their hands too and to escape from the likely penal provisions etc. As per the DR, these cancellations of sale agreement dated 7th July and payment of cash of 25 lakhs in April 2007 are effects of afterthought and self serving which must be dismissed outright. Ld DR summed up stating that the said amount of ₹ 20 lakhs was paid on or before 7th July in accordance with the practice of this real estate industry ie cash is paid in advance and ₹ 9 lakhs was paid in cheque dated 7th July, the date of the agreement. The letter of confirmation signed by the SAI-developer is a self serving papers and therefore, they should be dismissed. Regarding the payment of cash of 25 lakhs (Rs 20 lakhs plus ₹ 5 lakhs) in April 2007 relevant for the AY 2008-09, Ld DR is of the opinion these payments are nothing but the part of the assessee s attempts to escape from the addition in this AY and penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be accepted as paid and nothing else. 13. We have understood the rival stands and analysed the available facts relating to this issue. This issue consists of various events namely event of entering the agreement, giving effect to the terms and conditions, scrutiny proceedings, filing of the agreement, show cause notice, retraction of claims of deduction u/s 54, cancellation of agreement, refunds of the earlier payments, repayments of the consideration etc. Some of the dates relevant are as follows. Relevant dates: Date of sale of the property Date of entering into agreement 7th July 2006 Date of payment of cash of ₹ 20 lakhs nil Date of payment of ₹ 9 lakhs 7th July 2006 Vide Cheque no. 111745 Date of issue of Notice u/s143(2) SC letters to the assessee Date of cancellation of agreement 15.1.2008 Date of Refunds of ₹ 9 lakhs others 18.1.2008 Cheque No 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Branch, Nagpur-10. iii) ₹ 11,00,000/- To be paid from time to time as per the progress of construction before the possession of the above said apartment 16. The above clause contains three conditions relating to the payment of sale consideration of ₹ 40 lakhs which consists of 50:50 cash and cheque payments. It refers to ₹ 20 lakhs of cash in one installment and ₹ 20 lakhs by way of cheque in two installments. Undisputedly the first instalment of ₹ 9 lakhs was paid and there are no issues on this and also about the payment of ₹ 11 lakhs. Thus, so far as the expressions paid by cheque and to be paid by cheque are concerned, there are no disputes. Dispute is only with regard to the first condition of paid by cash of ₹ 20 lakhs. It is the contention of the assessee before the AO is that the condition at (i) above is not complied with and the condition at (ii) is complied. It is not the case of the assessee there is NO such practice payment of portion of the consideration in cash in the real estate market at Nagpur and therefore, the payment of cash does not arise and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acie, in our view, the said letter is self serving document for both the parties of the agreement. Now we shall focus on the discussion given by the CIT(A) in his order on this issue. Finding of the CIT(A): 19. CIT(A) gave his decision on this issue and the contents of Paras 6.4 and 6.5 of the CIT (A) order are relevant in this regard and the same are reproduced here under: 6.4 I have considered all the relevant material on record. As stated by AO that an amount of ₹ 20,00,000/- is stated to have been paid by cash in the agreement of sale. When assessee was asked to explain the source of amount, the assessee has merely stated that there was no payment of such an amount of ₹ 20,00,000/- as no date of payment was noted against this and the agreement of sale was subsequently cancelled. AO has considered the explanation of the assessee and held as follows. As reproduced above, it is clear that entry of cash in payment details is written before the entry of cheque stated above, which is enacted upon. Therefore, with common sense and understanding, it can be conveniently inferred that when it is written paid , it means that the sum must have already been paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny case, it is a settled principle that the same amount of ₹ 20 lakhs cannot be added twice in two different AYs when the flat in question is singular in number. Accordingly, ground no.2 raised by the assessee is dismissed. 21. In the result, the appeal of the assessee is dismissed. 22. In this appeal Revenue raised the following grounds read as under: 1. Whether on the facts and the circumstances of the case, the Ld CIT (A) erred in allowing the deduction of ₹ 45 lacs claimed u/s 48(i) of the IT Act, 1961. 2. Whether on the facts and the circumstances of the case, the Ld CIT (A) erred in allowing deduction claimed u/s 54EC for ₹ 22 lacs invested in purchase of Capital Gain Bonds of Rural Electrification Corporation Ltd. 23. Facts related to ground no.1 are already discussed while dealing with the groud no 1 of the assessee s appeal. Briefly, the assessee claimed deduction of ₹ 60 lakhs while working out the capital gains. While ₹ 15 was paid to his nieces at the rate of ₹ 5 lakhs per head, the assessee also paid ₹ 45 lacs to his three sisters (Rs. 15 lacs to each one) basing on the family settlement. Before us, Ld c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain a clear title of the property. Therefore, the act of Shri K.M. Moghe in seeking to compensate each to his three sisters is in accordance with the will of the mother and is an expenditure incurred in connection with the transfer. The payment made in accordance with the terms of the family settlement dated 7.7.2006 ensured that Shri K.M. Moghe could transfer the property along with a clear, marketable and valid title. 4.3 The decision of the Bombay High Court in CIT vs. Shkuntala Kantilal 190 ITR 56 relied upon by the AR is relevant. In the said decision it has been held as follows. So far as clause (i) of section 48 is concerned, the expression used by the legislature in its wisdom is wider than the expression for the transfer. The expression used is the expenditure incurred wholly and exclusively in connection with such transfer. The expression in connection with such transfer is, certainly wider than the expression for the transfer. Here again, any amount the payment of which is absolutely necessary o effect the transfer will be an expenditure covered by this clause. In other words, if, without removing any encumbrance including the encumbrance of the type involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order is relevant in this regard which reads as under: I have gone through the facts of the case. The AO has stated that the assessee has invested the amount on 27.1.2007, which is beyond the time limit of six months within which the investment is to be made. The appellant s representative has stated the reasons for delay of one month in investing in the REC Bonds are that the REC Bonds were not available. According to the assessee, he was prevented from making the investment within the time limit as the REC Bonds were available till 22.1.2007. The decision of the Hon ble Bombay Tribunal in the case of Celle Plast vs. DCIT [2010] TIOL 60 ITAT (Mum) supports the assessee s case. The Hon ble Tribunal has held that the delay in purchase due to non availability of bonds was a reasonable cause and the appellant was held to been titled to exemption u/s 54EC on the amount of ₹ 22 lacs. However, as pointed out by AO in assessment order as full value of capital gain is not invested claimed by the assessee, the exemption would be restricted proportionately. This ground in allowed. 27. Aggrieved with the order of the CIT (A) on this issue, Revenue filed an appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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