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2016 (5) TMI 806 - ITAT CHANDIGARH

2016 (5) TMI 806 - ITAT CHANDIGARH - TMI - Capital gain liability - assessee charged commission from the original owners for executing sale deeds as GPA holder - Held that:- The character of transaction would not change even if commission charged or not. Considering the above facts, it is clear that when revenue has accepted contention of the assessee in subsequent assessment year 2008-09 that assessee acted as GPA holder only and no capital gain is chargeable in his hands, therefore, on identic .....

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ital gains in his hands. Addition, therefore, is wholly unjustified and shall have to be deleted. We, accordingly, set aside the orders of authorities below and delete the addition - Decided in favour of assessee

Addition in respect of advance money received from the buyers - Held that:- According to the agreement, the buyer shall have to get Sale Deed registered and to pay the balance amount by 05.01.2007. It is admitted fact that no sale deed was executed and terms of the agreement .....

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of the assessee. - Decided against assessee

Addition on account of 15% disallowance out of development charges - Held that:- No merit in this ground of appeal of the assessee. The assessee pleaded before ld. CIT(Appeals) that he is not investigating agency and has no power to call any person for investigation. The explanation of the assessee shows that assessee has no evidence or material to rebut findings of authorities below. This ground of appeal has no merit, the same is dismisse .....

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Disallowance of proportionate interest on account of interest free loans for non business purposes - Held that:- Restore this issue to the file of Assessing Officer with direction to re-decide this issue after verifying the facts of availability of the capital and reserve funds with the assessee and direct Assessing Officer to re-decide this issue in the light of decision of Hon'ble Supreme Court in the case of Hero Cycles P. Ltd. (2015 (11) TMI 1314 - SUPREME COURT OF INDIA ).

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Shri Manjit Singh, DR ORDER Per Bhavnesh Saini, JM This appeal by assessee has been directed against the order of ld. CIT(Appeals) Karnal dated 05.10.2010 for assessment year 2007-08. 2. We have heard ld. Representatives of both the parties, perused the findings of authorities below and considered the material available on record. 3. On ground No. 1, 2 and 3, assessee challenged the addition of ₹ 45,57,569/-. Ground Nos. 2 and 3 are argumentative in nature therefore, these have not been pr .....

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hich included four transactions relating to purchase of the land and 57 transactions relating to the sale of land. On perusal of the copies of Registration Deed, the Assessing Officer noted that 17 transactions of sale of land, situated at Azad Nagar, Darra Khera (Thanesar) were made by the assessee as General Power of Attorney of Shri Bhupinder Pal, Ishwar Dayal, Ved Parkash, all sons of Shri Jyoti Parsad and Shri Ghansham and Shri Babu Ram S/o Shri Bhupinder Pal village Sehla Tehsil Barara, Di .....

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number and assessments of these persons, assessee submitted that same may be summoned by issuing summons. The Assessing Officer noted that though burden to prove the genuineness of the transactions made as General Power of Attorney lay with the assessee, yet on the request of the assessee, Assessing Officer issued summons under section 131 of the Income Tax Act but neither of these persons attended the proceedings before Assessing Officer. The assessee was confronted with these facts and assess .....

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10 out of 17 purchasers gave in writing that deal was made with the assessee and the payment was also made to him before Sub Registrar, Thanesar. They also admitted that they do not know the owners of these plots. The Assessing Officer recorded the statement of the assessee and the assessee in his statement stated that he was given Power of Attorney to get these plots registered in the office of Sub Registrar, Thanesar but the rest of the work like agreement, receiving payment etc. have been don .....

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tor through whom field enquiries were got conducted. The Inspector mentioned in his report that these persons are not man of means and verbally they have denied to have made any purchase and sale of land at Kurukshetra. Even they have denied knowing the assessee. The Assessing Officer reproduced the report of the Inspector in the assessment order. The Assessing Officer summarized these facts in the assessment order and held that land measuring 18 K and 16 M in Darra Khera, Kurukshetra was purcha .....

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the same facts as were pleaded before A.O. and also submitted that the assessee conducted the transactions as General Power of Attorney holder. The assessee is not benami owner of the properties. The persons have confirmed the assessee being GPA holder before Sub Registrar in their replies. The assessee performed the acts and obligations as General Power of Attorney holder only and there was no element of profit involved in the transactions carried out by the assessee. The Assessing Officer did .....

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s incorrect and the details have been noted in the impugned order to show that the owners have also conducted other dealings in the properties. The details furnished before Sub Registrar were also furnished in which ownership of the property vests with the owners and assessee was appointed only as GPA holder. It is unbelievable that assessee would make huge investments in the names of the strangers. The assessee, therefore, submitted that statements of the owners were false and motivated. The as .....

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r of Attorney to sell or mortgage or transfer the property. The assessee could not file any confirmation of the owner of the properties and they have not been produced before Assessing Officer for examination. The ld. CIT(Appeals), therefore, confirmed the finding of the Assessing Officer that properties have been purchased benami in the name of thee persons and on the same reasoning as have been given by the Assessing Officer, dismissed this ground of appeal of the assessee. 6. The ld. counsel .....

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005. PB-51 to 73 are the sale deeds executed by the assessee as GPA holder on behalf of the owners of the property and ld. counsel for the assessee submitted that there is no evidence on record that the sale consideration received on behalf of the owners have been used by the assessee as owners of the properties. The Assessing Officer issued summons under section 131 of the Act against the owners but they did not appear before the Assessing Officer and Assessing Officer has not taken any coerciv .....

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and registration of the Power of Attorney by them in favour of the assessee. Same facts were also brought to the notice of Sub Registrar, Kurukshetra. The report of the Inspector was not confronted to the assessee and the report of the Inspector, as noted in impugned order, are vague and shows that even Inspector has not personally contacted the owners of the properties under sale. Purchasers' written reply before Assessing Officer were also not confronted to the assessee and no right of cr .....

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ee, therefore, submitted that when JCIT dropped the penalty proceedings against owners of the property under sale, no fault could be attributed against the assessee for not producing these owners before A.O. The Department could have recorded their statement at that time when penalty proceedings were dropped against them. It would also prove that all the owners of the properties are existing and genuine persons. PB-20 is reply before Assessing Officer in which assessee explained that assessee ac .....

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sale deeds executed by assessee were neither as owner nor seller and many sale deeds have been executed by the sellers Shri Bhupinder Pal etc. The ld. counsel for the assessee, therefore, submitted that the authorities below, without any reasons, made the addition against the assessee. 6(ii) PB-200 is reasons recorded for re-opening of the assessment in subsequent assessment year 2008-09 in which on the same basis of assessee's selling the property as GPA holder, the assessment was reopened .....

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se of the assessee in which returned income of ₹ 96,970/- have been accepted and no addition have been made on account of capital gain for selling the properties on behalf of the original owners above as GPA holder. He submitted that on principle of consistency, no addition should be made against the assessee in the assessment year under appeal. 7. On the other hand, ld. DR submitted that assessee is colonizer and developer of the properties. There was no relation between assessee and the .....

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explained GPA was executed in Madhya Pradesh in his favour without his consent. The properties belong to Kurukshetra but GPA has been registered at Bhind Muraina (MP). The authorities below shall have to consider the issue in the light of human probabilities by considering the surrounding circumstances. The ld. DR relied upon decision of the Supreme Court in the case of D.D.More 82 ITR 540 and submitted that all money have been received by assessee as benami owner, therefore, addition was right .....

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es and perused the material available on record. PB- 30 is GPA executed by the owners of the properties in favour of the assessee for selling the land in question. The GPA is registered in which the owners have specifically mentioned that they are owner and in possession of the properties in question and with their consent, they have executed the Power of Attorney in favour of the assessee giving him the right to sell, mortgage the property etc. and it was also stated that all the acts done by t .....

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in question. Copies of the sale deeds executed in the names of original owners are filed in the Paper Book which are of October,2005 and it is clearly mentioned in the sale deeds that the owners of the properties out of their own funds and sources, purchased the properties from different parties. There is no mention of name of assessee in the sale deed in their favour. No evidences have been brought on record to prove that assessee in fact purchased the properties in October,2005 in his own righ .....

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fically pleaded before the authorities below that report of the Inspector was not confronted to the assessee. The report of the Inspector is noted in the impugned order in which he has explained that he made local enquiries only. It appears from the report that he did not even meet the owners of the property. There is no mention in the impugned orders if the report of the Inspector was confronted to the assessee or any right to cross-examine the Inspector was given to the assessee. Similarly, so .....

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Appeals) (PB-26) specifically explained that addition is made on the basis of the report of the Inspector and statements of the purchasers recorded at the back of assessee. But, Assessing Officer did not confront or supply these documents to the assessee. These facts, therefore, clearly show that no report of the Inspector and statement of purchasers were confronted to the assessee and no right have been given to allow cross-examination of the Inspector and the purchasers on behalf of the assess .....

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er would not be greater than that of the owners. No evidence have been brought on record if the sale consideration was used and appropriated by assessee as owner of the property or misappropriated against consent of the owners of the property. PB-34 is the letter issued by Sub Registrar, District Bhind, Madhya Pradesh in the names of original owners Shri Bhupinder Pal etc. in which their confirmation is sought for executing and registering Power of Attorney in favour of the assessee. PB-37 is re .....

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he assessee for specific purposes as mentioned in the GPA. The assessee, on execution and registration of the GPA would not become owner of the property. 9(ii) The authorities below have drawn adverse presumption against the assessee because assessee failed to produce the owners of the properties before Assessing Officer for examination or for filing confirmation or affidavits by the owners of the properties, thereby issuing summons under section 131 of the Act. PB-83 to 84 are the penalty order .....

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but the JCIT was satisfied with their explanation for not complying with the summons under section 131 of the Act. Therefore, no fault could be attributed against the assessee for not producing these persons before Assessing Officer for confirming the transactions in the matter conducted by the assessee as GPA holder only. Such circumstance could not be read adverse against the assessee for the purpose of making addition. The ld. CIT(Appeals) in para 2.05 has noted various deals of sales/purcha .....

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owners on the basis of GPA executed in his favour. The assessee did not own any capital asset, therefore, there is no question of transfer of any capital asset by assessee so as to attract the provisions of capital gains. There is no evidence on record to prove that assessee transferred any capital asset for the purpose of earning capital gains. The findings of authorities below are merely based on presumptions and inferences only. 10. The assessee further brought on record that in subsequent as .....

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of the properties for selling their properties as GPA holder. The Assessing Officer accepted the explanation of the assessee in regular assessment order under section 143(3)/147 vide order dated 20.04.2015 and no addition on account of capital gain of the similar nature as have been made in assessment year under appeal, have been made and returned income of ₹ 96,970/- have been accepted. 10(i) It is well settled law that Income Tax authorities shall have to follow rule of consistency. We .....

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08, no commission have been charged, therefore, facts are distinguishable. We do not accept contention of ld. DR because facts are identical as have been considered in assessment year under appeal 2007-08 and subsequent assessment year 2008-09 because it was found that assessee sold the properties as GPA holder on behalf of the same original owners. Therefore, the character of transaction would not change even if commission charged or not. Considering the above facts, it is clear that when reven .....

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he view assessee is not owner of the properties of which he has acted as GPA holder only. No profit arises on executing Sale Deed by assessee as GPA holder. There is also no transfer of capital asset by assessee so as to attract the provisions of capital gains in his hands. Addition, therefore, is wholly unjustified and shall have to be deleted. We, accordingly, set aside the orders of authorities below and delete the addition of ₹ 45,57,569/-. Ground No. 1 of the appeal of the assessee is .....

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o produce the buyer for examining the transaction that when the advance was treated as forfeited, why addition should not be made against the assessee. The assessee contended that earnest money of ₹ 50,000/- was returned back and assessee did not forfeit this amount. The Assessing Officer, however, did not accept contention of the assessee because assessee did not furnish any evidence in support of the contention. The Assessing Officer noted that since it has been admitted by assessee that .....

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brother-in-law Shri Mohinder Sharma and assessee returned the money and noted the same facts in the cash book. 12(i) The ld. CIT(Appeals) did not accept contention of the assessee. As per agreement, "in case the buyers do not pay balance amount on the fixed date, advance money will be treated as forfeited". However, assessee claimed to have returned advance of ₹ 50,000/- to the buyer but no evidence has been filed therefore, according to agreement, when amount is forfeited, the .....

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the buyer shall have to get Sale Deed registered and to pay the balance amount by 05.01.2007. It is admitted fact that no sale deed was executed and terms of the agreement were not complied with. The assessee claimed to have refunded advance money of ₹ 50,000/- to the buyer but no evidence have been produced in support of the contention that actually assessee refunded amount of ₹ 50,000/- to the buyer. Mere entry in the cash book without supporting document is not enough to prove th .....

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ring assessment proceedings, assessee filed copies of the bills/vouchers in respect of these expenses. The Assessing Officer noted from some of the vouchers that the same did not contain signature of the recipient and did not mention their complete address. The assessee was asked to produce these persons with their identity in order to verify payment of development charges. The assessee failed to establish genuineness of the expenditure therefore, 15% expenses were disallowed. The ld. CIT(Appeal .....

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dismissed. 15. On ground No. 4(c), assessee challenged addition of ₹ 12,000/- on account of commission paid for sale of plot for ₹ 5 lacs. The assessee sold plot for ₹ 5 lacs and after deducting commission of ₹ 12,000/-, net sale consideration of ₹ 4,88,000/- was shown as sale. However, assessee failed to produce any evidence in support of the payment of the commission. No name and complete address of the agent etc. were filed. In the absence of any evidence on reco .....

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appeal of the assessee. The same is dismissed. 16. On ground No. 4(d), assessee challenged addition of ₹ 2,58,004/- made out of interest of ₹ 8,94,340/- by disallowing proportionate interest on account of interest free loans for non business purposes. It is noted by the authorities below that assessee claimed interest of ₹ 8,94,340/-. During assessment proceedings, Assessing Officer noted that assessee made interest free loans to some persons for non business purposes. The Asse .....

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aryana High Court in the case of Abhishek Industries 205 CTR 304 dismissed this ground of appeal of the assessee. The assessee pleaded before ld. CIT(Appeals) that he owns his capital of ₹ 18 lacs and can well manage to advance interest free advance to his wife. 17. After considering rival submissions, we are of the view matter requires re-consideration at the level of the Assessing Officer. The ld. counsel for the assessee contended that assessee's capital was of ₹ 18 lacs and h .....

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