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Amol C. Shah (HUF) Versus ITO, 21 (1) (1) , Piramal Chambers, Mumbai

2016 (10) TMI 102 - ITAT MUMBAI

Nature of income - capital gain or income from other sources - nature of possession in the property - assessee HUF has claimed that it has got capital rights in the shape of tenancy rights in the premises in question and that it has got the consideration of ₹ 50 lakhs for surrender of those tenancy rights and hence the income in the hands of the assessee was in the nature of capital gains - Held that:- As put a specific query to the Ld. A.R. whether there was any evidence to show that the .....

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that the same was occupancy rights. - However, there is no evidence on the file as to under what circumstances and under what right or contract the assessee has come into possession of the property in question. It is pertinent to note here that the karta of the assessee HUF namely Mr. Amol C. Shah is also the director of the payer company M/s. Carlton Coats Pvt. Ltd. along with another director Mr. Milind C. Shah. The entire stress of the assessee has been on the copy of memorandum of under .....

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e of possession in the property in question of the assessee HUF and how or under what rights the assessee HUF come into the possession of the property. We have perused the copies of the income tax returns and have found that the assessee had shown certain income from the activity of stacking/cutting/cloning of papers at Apti Khalapur. However, it is not sufficient to prove that the said address is of the property in question at Apti Khalapur. There may be any other property being used by the ass .....

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the director of the payer company and under such circumstances the heavy burden is cast upon the assessee to prove that the above transaction is not a sham transaction. The assessee has miserably failed to prove that it was owning any capital rights in the property in question which was purchased by the company. Under such circumstances, we do not find any infirmity in the order of the Ld. CIT(A) in upholding the additions made by the AO.In our view, the amount received by the assessee HUF is n .....

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rred to as the CIT(A)] relevant to assessment year 2009-10. 2. The assessee has taken the following grounds of appeal: On the facts & the circumstances of the case, the Ld. CIT (A) - 33 erred in : - 1. confirming an addition of ₹ 50 Lacs under the head 'Income From Other Sources' as against under the head 'Income From Long Term Capital Gains' as offered by the Appellant. 2 confirming the above addition of ₹ 50 Lacs under the head 'Income From Other Sources' .....

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with the Appellant with respect to the property, the sale of which had given rise to long term capital gains in the hands of the appellant. Your Appellant craves leave to add, alter, modify or delete all or any of the grounds of appeal. 3. The brief facts of the case are that the return of income for the year under consideration was filed by the assessee on 28.07.2009 declaring total income of ₹ 42,000/-. The assessment was completed under section 143(3) on 23.12.2011 making an addition of .....

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4EC was not allowed. The assessee filed appeal before the Ld. CIT(A) who also confirmed the order of the AO stating that in the absence of any legal agreement confirming any right or interest of the assessee in the property, it cannot be accepted that assessee has received ₹ 50 lakhs from M/s. Carlton Coats Pvt. Ltd. on account of sale of any capital asset and rejected the claim of exemption u/s.54EC of the Act as there was no income earned as capital gain. The assessee filed appeal before .....

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received from the said payer- company in its' (assessee's) hands, being the sole matter arising in this appeal, restore the same back to the file of the Assessing Officer, who had in fact assessed this sum as unexplained credit u/s. 68 for a de novo considerat ion, to be decided, keeping in view of the facts and circumstances of the case, including the findings in the case of the said company (which, it was brought to the notice is assessed under a different word), in accordance with th .....

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e Revenue in being not consistent would only be acting to its own detriment. Again, needless to add, that we have not examined the issue at all, and may not be construed as having expressed any opinion on merits, even prima facie, in the matter. On the contrary, our passing any order on merits would amount to setting at naught the order by the tribunal in the case of the payer-company, so that our order is consistent therewith. We decide accordingly. 4. In the set aside proceedings, the AO again .....

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rlton Coats Pvt. Ltd. was taxed in the hands of the company and the amount of ₹ 50 lakhs received by the assessee was just an income received without any consideration and has to be considered as income from other sources. He therefore treated the nature of receipts of the assessee as income from other sources and denied the claim of deduction under section 54EC of the Act to the assessee. Being aggrieved by the above order of the AO, the assessee preferred appeal before the Ld. CIT(A). 5. .....

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have carefully considered the submissions of the appellant, observations of the Hon'ble ITAT in its order dated 10.06.2013, f indings of the AO in the impugned assessment order, conclusion arrived at by the Ld. CIT(A) in the order dated 11.02.2013 and facts on record. My observations are as under: 10. The issue to be decided has been summarized by the Honble Tribunal in para 2 of the order dated 10-06-2013, which is assessability to tax of the sum of ₹ 50 laos received by the assessee .....

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g the current appellate proceedings before the undersigned, the appellant has consistently taken the plea that during the set a-side assessment proceedings before the AO, it has produced additional evidences in the form of returns of income of earlier years of the HUF, where income from activities carried out from the property sold, was reflected. But the AO has not considered these additional evidences while concluding the assessment & treating the receipt of ₹ 50 lac from investment .....

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also shows that the assessee HUF has not any business from the premises owned by the said company where Shri Amol C Shah is director and other directors are his family members. In the returns, the assessee HUF has merely disclosed income from "Other Sources". In response to notice u/s 142(1), during the course of assessment proceedings, the assessee has stated that the Income shown under the head "Income from Other Sources" is the income the assessee has earned from staking a .....

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of the AO was already before the Hon'ble Tribunal. However, the AR of the appellant admitted before the Hon'ble Bench that no proof was adduced by the appellant before the AO to establish occupancy and/ or occupancy rights in the property, rent receipts, etc. implying that such past period returns of income and income shown therein cannot be treated as documentary evidences. Therefore, I find no merit in the argument of the appellant that the AO did not take into account the additional e .....

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from Other Sources". (i) The relevant property was purchased by M/s. Carlton Coats Pvt. Ltd. on 1.7.2002 from Maharashtra State Financial Corporation Mumbai. In this purchase agreement there is no mention of the appellant HUF as a eo-buyer. Even there is no reference of appellant having any right, interest or title in this property. If appellant had any legal right in that property, the same should have been mentioned in the legal agreement. (ii) In the sale agreement dated 18.7.2008 entere .....

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mall amount and appellant has received ₹ 50,00,000/- from the M/s.Carlton Coats Pvt. Ltd. on the pretext of surrendering its rights in this property. In such a case, should there have been a mention in the sale agreement about this fact that in lieu of surrendering its rights and interest in the property, appellant HUF was to be paid ₹ 50,00,000- by M/s. Carlton Coats Pvt. Ltd. (iii) T h e o n l y d o c ume n t o n wh i c h a p p e l l a n t i s r e l y i n g i s t h e Memorandum of .....

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the property. Once appellant has not acquired any legal right in the property how it can sell or surrender this nonexistent right to any person. The two documents on which appellant has relied are notice issued by Chief Judicial Magistrate Alibaugh, Raighad and summons issued by Alibaug Court. As stated in the assessment order, these notices and summons have been issued to Shri Amol C. Shah in his individual capacity and not in HUF capacity. Shri Amol C Shah is a Director in the company named M .....

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er of M/s. Carlton Coats Pvt. Ltd. All these facts only prove the existence of factory premises of M/s. Carlton Coats Pvt. Ltd. on this property. From no angle these evidences can be used to prove that the appellant HUF was having the possession of any part of relevant property. (vi) During appellate proceedings, appellant has again relied on few judgments. Ongoing through these judgments it is seen that in these cases the issue was whether surrender of tenancy rights is liable to capital gains .....

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assessment proceedings nor appellate proceedings appellant has been able to tell the date since when appellant had any right over this property. In the absence of any legal agreement confirming any right or interest of the appellant in the property, it is clear that appellant has not received ₹ 50,00,000/-from M/s Carlton Coats Pvt. Ltd. on account of sale of any capital asset. (vii) Appellant's object that Assessing Officer first issued show cause proposing addition uls.68 and later .....

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ore, Assessing Officer was justified in not allowing deduction u/s 54EC of the IT. Act." 13. I find no change in the facts of the case in the present appellate proceedings vis-a-vis that before my predecessor Ld.CIT(A) notwithstanding an opportunity given by the Hon'ble Tribunal to the appellate to submit before the AG-any proof or evidence in support of its claim of occupancy and/ or occupancy rights in the property, rent receipts, etc. vis-à-vis the impugned sum received. It is .....

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observations of the Ld. CIT(A) in para no. 12 (i)-(vii) still holds true. Therefore, taking a consistent stand it is held that ₹ 50,00,000/- is definitely a receipt from M/s Carlton Coats Pvt. Ltd. in the hands of the appellant. However, the appellant has fai led miserably to establish that this is a receipt related to sale of capital assets whether in the form of any rights or interest in the said property owned & sold by M/s Carlton Coats Pvt. Ltd. It is further observed that Hon' .....

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s under occupation of Amol C Shah(HUF). However, no where Hon'ble Tribunal has given any finding that any right/title was vested with the assessee HUF with respect to the property, the sale of which has given rise to LTCG in hands of the appellant. Therefore, the receipt of ₹ 50,00,000/- can only be treated as "income from Other Sources" & will be taxed accordingly in the hands of the appellant. Further, the appellant will be eligible for deduction u/s 54 EC of the IT. Ac .....

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has got the consideration of ₹ 50 lakhs for surrender of those tenancy rights and hence the income in the hands of the assessee was in the nature of capital gains. 8. We have put a specific query to the Ld. A.R. whether there was any evidence to show that the assessee was inducted as a tenant in the premises but the Ld. A.R. could not show us any such evidences. Further, a query was raised whether the assessee had ever paid any rent to M/s. Carlton Coats Pvt. Ltd. but the Ld. A.R. has been .....

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ere that the karta of the assessee HUF namely Mr. Amol C. Shah is also the director of the payer company M/s. Carlton Coats Pvt. Ltd. along with another director Mr. Milind C. Shah. The entire stress of the assessee has been on the copy of memorandum of understanding vide which the company has agreed to pay ₹ 50 lakhs to Mr. Amol C. Shah (HUF) wherein it has been mentioned that the said Mr. Amol C. Shah (HUF) claims share right title and interest on certain portions of the said property. I .....

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in it has been claimed that the address of the assessee HUF mentioned in the income tax returns is that of the premises in question. We have perused the copies of the income tax returns and have found that the assessee had shown certain income from the activity of stacking/cutting/cloning of papers at Apti Khalapur. However, it is not sufficient to prove that the said address is of the property in question at Apti Khalapur. There may be any other property being used by the assessee HUF at Apti K .....

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