TMI Blog2019 (2) TMI 1836X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of ₹ 3.64 crore belongs to the assessee and the alleged amount shown as `commission or part of sale consideration to Sh. Agarwal, pertains to the assessee himself. `Business income shown by the Agarwal Brothers at ₹ 3.34 lakh and ₹ 3.76 lakh respectively is no match to the income of ₹ 1.05 crore which should have been taxed in the hands of the assessee but was sought to be transferred to them. The amount of income transferred by the assessee through these dubious transactions to the Agarwal brothers, was adjusted by them, thereby denying the rightful taxability of ₹ 1.05 crore and odd in the hands of the assessee. Assessee claimed to have transferred his 50% share in both the pieces of the developed lands to the Agarwal brothers at the uniform rate of ₹ 335/- per sq. ft. However, the interesting point is that the MOU for the first transaction was claimed to have been entered into on 21.8.2007 and for the second transaction on 18.10.20008. Albeit rate of consideration is static at ₹ 335/- per sq. ft., but there is a difference of more than one year in the two MOUs, meaning thereby, that despite a gap of more than one year, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect expenses . During the course of assessment proceedings, the Assessing Officer (AO) observed that the said commission amount included a sum of ₹ 1,05,64,282/-. On being called upon to explain the nature of such commission, the assessee submitted that the amount of ₹ 1.05 crore and odd paid to Sh. Surendera Agarwal and Sh. Narendra Agarwal (hereinafter also referred to as `the Agarwal Brothers ) was wrongly depicted as Commission , whereas it was, in fact, in the nature of their share in the sale consideration. Background facts were revealed that the Government of Maharashtra formed an authority called Pimpri Chinchwad New Township Development Authority (hereinafter also called as the Authority ) which formulated a scheme for acquisition of land from farmers for the purpose of development of township and in lieu of such acquisition, farmers were to be given developed area of land equivalent to 12.5% of their total land area acquired and that the farmers had the option of selling such 12.5% developed area. Since several Government procedures were involved, two sets of parties, namely, the Sane family and Sh. Subhash Anand entered into separate Memorandum of Underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt as Commission , as was reflected by the assessee in his Annual accounts. Considering the fact that the entire arrangement was mala fide and no services of any kind were offered by the Agarwal Brothers, the AO made disallowance of commission payment of ₹ 1,05,64,282/-. The ld. CIT(A) sustained the addition, against which the assessee has approached the Tribunal. 4. Having heard both the sides and gone through the relevant material on record, it is seen that the assessee acquired 12.5% share in the developed lands of the Sane family and Sh. Subhash Anand as a result of MOUs entered into with them at the rate of ₹ 201.42 per sq. ft. and ₹ 237.00 per sq. ft. respectively. This part of the transaction is undisputed. The fact that the assessee sold his 50% share in both the pieces of the developed land to Patel Brothers and others at the rate of ₹ 548.72 per sq. ft and ₹ 620.76 per sq. ft. respectively is also not disputed. The controversy rotates around the remaining 50% share in both the developed plots. Whereas the claim of the assessee is that he transferred his 50% share in both the developed lands earlier to the Agarwal brothers at the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 31 to 141 6. The ld. AR explained the nature of transaction by stating that the assessee actually entered into MOU with the Sane family on 25-11-2005 (though in the above chart such a date has been shown as 2.8.2006) for purchase of their entire 12.5% rights in the developed land to be transferred to them, at a predetermined price of ₹ 201.42 per sq.ft. The Sane family was given the leasehold rights in 12.5% developed land admeasuring 66336 sq.ft. vide lease deed dated 28-08-2008. Actual sale of 66336 sq.ft. to Patel brothers etc. took place on 02-09-2008 @ ₹ 548.72 per sq.ft. for a total consideration of ₹ 3.64 crore, which is again not disputed. Whereas, the assessee claimed that he entered into an MOU with Sh. Agarwal on 21.8.2007 transferring 50% of 66336 sq.ft. developed area, that is, 33,166 sq.ft. at a consideration of ₹ 335/- per sq.ft., the AO has observed that the MOU with Sh. Agarwal for transfer of such an area at the stated price was apparently entered into on 01.9.2008, that is, just one day prior to the date of actual sale, which was an attempt to defraud the Revenue by transferring profit to Sh. Agarwal. The vital point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. It was further observed that an inference should be drawn on the basis of the circumstances available on the record. Considering the circumstances of the transaction in that case, the Hon ble Supreme Court has held that an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event and the authorities were right in drawing an adverse inference against the assessee. On testing the facts of the extant case on the touchstone of human probability, the inevitable conclusion which follows is that the transaction of the alleged sale of 33166 sq. ft. to Sh. Agarwal was just a pretense and not a genuine one. 8. When the position of the assessee became awkward before the AO in the face of the MOU with Sh. Agarwal executed just one day prior to the date of sale, the assessee came out with another explanation. This time contending that MOU was actually entered into on 21.8.2007 and the later MOU dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the fact that the actual sale took place on the immediately next day. 10. There is another significant facet of the first MOU. It provides through clause (3) that : `it is decided to execute the Sale/development agreement with the price of ₹ 1,11,11,280 . The ld. AR was asked whether any sale/development agreement was executed pursuant to this MOU, the answer to which was given in negative. The ld. AR fairly conceded that none of the two MOUs was registered with the competent authority and these were executed on simple stamp paper of ₹ 500/-. 11. When we note the contents of both the MOUs, it becomes vivid that there is no difference in any of the relevant clauses except for providing a token amount of ₹ 1,001/- in the latter MOU, veracity of which we have discussed and rejected hereinabove. These MOUs were admittedly not registered as well and further no reason has been adduced as to why second MOU was executed when the first MOU was already in existence. It is, therefore, held that the first MOU dated 21-08-2007 has no sanctity and the same was executed just in furtherance of the motive of diverting income to Sh. Agarwal. 12. In view of the foreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same date, namely, 16-09-2008, the assessee entered into an MOU with Sh. Subhash Anand for purchasing his right at ₹ 237/- per sq.ft. Entire land was actually transferred on 10- 11-2008 @ ₹ 620.76 per sq.ft. to Patel Brothers through POA executed by the assessee for the full area, that is, 24325 sq. ft. of the developed land. These aspects of the transaction are not disputed. The controversy is on the alleged transaction dated 18.10.2008, through which the assessee apparently entered into MOU with Sh. Narendra Agarwal transferring 50% of his share in the developed land at the rate of ₹ 335/- per sq.ft. The Revenue has not accepted this transaction as genuine by holding that it was an attempt by the assessee to divert profit to Sh. Agarwal. 15. It can be seen that the sequence of events for this transaction is mutatis mutandis similar to that of the first transaction discussed above. The assessee allegedly transferred 12162.5 sq. ft of the developed land to Sh. Agarwal on 18.10.2008, being, 50% share in the developed land, just a couple of days prior to the ultimate sale to Patel brothers. For the instant transaction also, the assessee alone executed POA in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 lakh. Similar is the position regarding Sh. Surendra Agarwal, who declared total income of ₹ 41.29 lakh for the year under consideration. Out of such income, there is salary income of ₹ 3.87 lakh and `Income from other sources at ₹ 36.04 lakh and the `Business income is only ₹ 3.96 lakh. Thus, it is manifest that the `Business income shown by the Agarwal Brothers at ₹ 3.34 lakh and ₹ 3.76 lakh respectively is no match to the income of ₹ 1.05 crore which should have been taxed in the hands of the assessee but was sought to be transferred to them. The amount of income transferred by the assessee through these dubious transactions to the Agarwal brothers, was adjusted by them, thereby denying the rightful taxability of ₹ 1.05 crore and odd in the hands of the assessee. 18. It is further relevant to note that the assessee claimed to have transferred his 50% share in both the pieces of the developed lands to the Agarwal brothers at the uniform rate of ₹ 335/- per sq. ft. However, the interesting point is that the MOU for the first transaction was claimed to have been entered into on 21.8.2007 and for the second transaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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