TMI Blog2021 (3) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax on account of sale of property by non-resident - Addition holding assessee as an agent of the non-resident as he is holding a power of attorney and the property is sold by the assessee and the money is transferred to the non-resident owner - HELD THAT:- Provisions of Section 161 provides that every representative assessee as regards the income in respect of which he is a representative assessee shall be subject to the same duties, responsibilities and liabilities as if income is received by or accruing to or in favour of him beneficially and shall be liable to assessment in his own name in respect of that income but such assessment shall be deemed to be made upon him in his representative capacity only. The tax subject to other provisions of the income tax act be levied upon and recovered from him in like manner and to the same extent as would be leviable upon and recoverable from the person represented by him. Therefore, the assessing officer should have passed a separate assessment order from the income of the assessee with respect to the income of the non-resident holding the assessee as a representative of a non-resident. In the present case, the assessing officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capacity of being treated as agent and thus has violated the principles of natural justice. 6. That without admitting, even otherwise the Assessing Officer and consequently the Ld. CIT(A) has erred in not framing the separate assessment in the name of assessee in representative capacity of nonresident Mr Ashok Tyagi. Therefore, the order passed by the Assessing Officer is contrary to provisions of section 161(1) of the Income Tax Act. Hence, the same is liable to be set aside. 7. That the Ld. CIT(A) has erred in law and on facts in assessing the capital gain belonging to the non-resident Mr Ashok Tyagi in the hands of assessee in his Individual capacity. 8. That the Assessing Officer and consequently the Ld. CIT(A) has erred in not giving benefit of section 54F of the Income Tax Act in respect of capital gain of ₹ 56,55,874/-. 9. That the Assessing Officer and the Ld. CIT(A) have erred in not treating the land sold by Mr Ashok Tyagi (non-resident) as agricultural land so as to be outside the ambit of capital asset defined in section 2(14) of the Income Tax Act. 10. That the Assessing Officer and the Ld. CIT(A) have erred in not taking into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so filed. Assessee has further deposited cash in his bank account with Syndicate Bank which represented the repayment of loan from Shri Pankaj Kumar to whom the loan was given on 13.10.2010. The copies of the bank accounts were also furnished. Assessee also furnished the confirmation of Shri Pankaj Kumar of the loan and its repayment, confirmation of Shri Ashok Tyagi towards the receipt of above sum stating that Shri Ashok Tyagi has authorized assessee to sale the parental agricultural land in village Burari, Delhi, received sale proceeds from the assessee. The assessee also explained that the balance sum was out of opening cash available with the assessee and sale of Honda City car. For sale of Honda City car in cash, the assessee submitted confirmation and PAN No of the buyer and documents of transfer of car. The assessee therefore, submitted that total cash deposited in his bank account are fully explained. The ld AO after considering the professional receipt and other income and thereafter reducing the expenditure and investment found with assessee as only balance available with him of ₹ 1,81,234/- and therefore, he could not have deposited the cash in his bank account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is chargeable to tax in the hand of the assessee. He therefore, held that Shri Manish Tyagi is a representative assessee of Shri Ashok Tyagi u/s 160(2) of the Act. He proceeds to assessee the capital gain in the hands of Assessee. He computed the capital gain of sale consideration of plot of land of ₹ 1,05,20,000/-, granted deduction of the cost of acquisition of ₹ 18,27,554/- computed long term capital gain of ₹ 86,92,446/-. With respect to the purchase of residential properties of Shri Ashok Tyagi amounting to ₹ 94,54,893/-. He granted deduction of only ₹ 36,75,000/- on one property to the assessee for which sale deed was available. He refused to give deduction u/s 54F in another property of ₹ 57,79,893/- stating that there was no allotment letter in the name of Shri Ashok Tyagi and no agreement exists for sale of property and the payment have been made to one Shri Pankaj Tyagi, property was neither registered in the name of Ashok Tyagi till date nor possession was given. Accordingly, the long term capital gain of ₹ 56,55,874/- was determined in the hands of the assessee and total income of the assessee was assed at ₹ 66,38,001/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain the source of cash deposit of ₹ 13,20,000/- in syndicate bank on various dates. c) Vide letter-dated 04.10.2013, assessee furnished the cash flow statement for the year ended 31.03.2011 and stated that all the entries of the bank have been incorporated in the cash flow statement. d) Vide letter-dated 17.10.2013, assessee explained that he was having opening cash in hand of 75,17,397/- out of which 73.80 lakh had been deposited on 08.04.2010, 75 lakh deposited on 14.05.2010, and 72 lakh each were deposited on 07.06.2010 and 24.11.2010. 740,000/- were deposited on 28.03.2010. Assessee also explained that 75 lakh were deposited out of total consideration of 75.5 lakh received through sale of car and other deposits were made out of internal accruals i.e. professional receipts and bank withdrawals. Assessee also furnished all the evidences regarding sale of car. e) Vide letter dated 29.10.2013, assessee furnished cash flow statement for the year ended 31.03.2010 reflecting cash in hand at 75,17,397/- as on 31.03.2010. f) However, Assessing Officer made his own calculation, did not point out any discrepancy in the documentary evidence filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,70,000/- in the hands of the assessee on account of cash deposit in Syndicate Bank. The assessee has deposited a cash of ₹ 13,20,000/- in Syndicate Bank on various dates. In the cash flow statement, the assessee has incorporated all the entries of the cash withdrawal and deposit. The claim of the assessee is that he was having an opening cash hand of ₹ 517397/- and has also sold a motor car for ₹ 5,00,000/- and therefore the total deposit covers the above sum after considering the current year income. . Therefore, the assessee tried to explain the total deposit of ₹ 13,20,000/- in the bank account. The ld AO accepted the fact that the cash received of sale of car of ₹ 5 lakhs however the opening balance of ₹ 573397/- was not believed and hence not considered. No reason were given by ld AO for the same. The learned CIT A also did not believe the same stating that the assessee could not have past and current savings of the magnitude in view of the fact that out of the gross receipt of ₹ 662,041 the net income was too meager. However, we do not find any reason to ignore the above opening balance as well as the amount of cash availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, we do not find any justification for addition of all the above sum of ₹ 7,70,000/- in the hands of the assessee. In view this ground No. 2 of the appeal of the assessee is allowed. 11. Ground number 3 is with respect to the addition of ₹ 5,655,874 in the hence of the assessee on account of long-term capital gain chargeable to tax on account of sale of property by 13 Mr Asoka Tyagi, non-resident, in the hence of the assessee holding assessee as an agent of the non-resident as he is holding a power of attorney and the property is sold by the assessee and the money is transferred to the non-resident owner. 12. The learned authorised representative contested the above addition on several counts raising 4 different grounds as Under:- Ground No.3 to 7 - Treating the assessee as agent of nonresident 3. That the Ld. CIT(A) has erred in law and on facts in treating the assessee as representative assessee of Shri Ashok Tyagi u/s 160 of the Income Tax Act. Infact, the provisions of section 160(1 )(i) are not applicable and therefore, assessment was to be framed by the Assessing Officer directly in the name of non-resident Mr Ashok Tyagi. 4. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a person who is treated as an agent u/s 163. By virtue of section 160(2) a representative assessee is deemed to be an assessee. b) Section 161(1), in defining the liability of a representative assessee, makes him subject to the same duties, responsibilities and liabilities, in respect of that income, as if the income were income received by or accruing to or in favour of him beneficially. He is liable to be assessed in his own name in respect of that income, but separately from the assessment of his own other income because the assessment, in respect of other s income, is to be deemed to have been made upon him in his representative capacity. Tax is levied and recovered from the representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. Kindly see Arundhati Balkrishna vs CIT (1989) 177 ITR 275 (SC). c) A representative assessee cannot be assessed in his Individual capacity in respect of the income of the person represented by him. Where the Trust deed has authorized the trustee(s) to do business as a proprietor or as a partner of a firm and such trustee(s) becomes / beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to a nori-resident. The Assessing Officer has relied upon subclause (c) of clause (1) of section 163 which includes any person in India from or through whom the non-resident is in receipt of any income whether directly or indirectly. Section 163(1 )(c) requires only that the non-resident should receive income directly or indirectly from or through any person in India. b) In CIT vs T.I. M. Ltd. (1978) 114 ITR 59 (Cal), it is held that as ordained by section 163(2), no person can be treated as the agent of non-resident unless he had an opportunity of being heard given by the Assessing Officer as to his liability for being treated as such. Until and unless one is appointed a statutory agent in this manner, one cannot be fastened with any liability whatsoever including payment of advance tax, because doing so will amount to giving retrospective effect to these provisions which is not warranted in the absence of express provisions in this regard. c) In CIT vs Express Newspapers (P) Ltd. (1978) 111 ITR 347 (Mad), it is held that Keeping in view the provisions of section 163(2) regarding opportunity of being heard to be given to the agent as also those of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Kanahiya Lai Gurmukh Singh wherein it was observed that the obvious intention of the legislature in providing an appeal under clause (g) of section 246 against an order u/s 163 was that a person who is treated as an agent could challenge the matter so as to avoid further botheration to himself in facing the assessment. Tribunal has also relied upon the judgement of Madras High Court in the case of Express Newspapers Pvt. Ltd. wherein no order had been passed by the Assessing Officer u/s 163 treating TESA as an agent of the assessee company and therefore, the notice issued u/s 148 as well as subsequent proceeding culminating into passing off assessment order were held to be bad- in-law. In the present case also the Assessing Officer had not passed any order u/s 163 treating the assessee as an agent of the non-resident person and therefore, the assessment framed in the hands of assessee is bad-in-law. g) In the present case, Assessing Officer have committed a mistake by passing the combined order in the hands of assessee, without passing a separate order treating the assessee as an agent of a non-resident Shri Ashok Tyagi. Hence, the assessment order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tating that the assessee has not contested the finding of the Assessing Officer that impugned land is a capital asset subject to capital gain taxation. When the assessee had challenged the addition of ?56,55,874/- as a whole. D) Ground No. 10 - Disallowance of cost of Improvement 10. That the Assessing Officer and the Ld. CIT(A) have erred in not taking into consideration the cost of improvement incurred by Mr Ashok Tyagi in FY 1992-93 and 2000-01 in respect of land sold by him, while computing the amount of capital gain and therefore the calculation made by the Assessing Officer is contrary to the provisions of section 48 of the Income Tax Act. Assessee had declared cost of improvement as under: a) Khasra No. 201 (4-13) In FY 1992-93 : ₹ 2,10,900/- In FY 2000-01 : ₹ 5,88,000/- b) Khasra No. 247 (4-1), 256 (4-16) 257 (4-161 In FY 1992-93 3,85,000/- In FY 2000-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer vide reply dated 10.02.2014. Claim u/s 54F a) As per section 45 any profits or gains arising from the transfer of a capital asset, subject to section 54 etc., be chargeable to income tax under the head Capital Gains and shall be deemed to be the income of the P.Y. in which the transfer took place. b) Section 54F deals with the exemptions, it lays down that, where capital gain arises from the transfer of any Long term capital asset and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after the date constructed a residential house, then the capital gain shall not be chargeable if entire sale consideration in respect of original asset is invested in new asset or if the cost of new asset is less than the net consideration in respect of original asset than proportionate capital gain. c) In the present case, the allotment letter was assigned in favour of assessee by Shri Pankaj Kumar Sharma for a consideration of ?50,90,000/- and thereafter, assessee had made the payments of ?6,92,160/- directly to M/s Omaxe Buildhome Pvt. Ltd. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction u/s 54 and 54F of the Act. h) In the present case Shri Pankaj Sharma was covered by Circular No.471 r/w Circular No.672 and therefore, his deal was to be treated as construction. By way of signing endorsement form in favour of assessee, Mr. Pankaj Sharma had assigned all his rights to him in the flat and in the record of Omaxe Buildhome Pvt. Ltd., the name of the assessee had been substituted. Therefore, deal of the assessee with Pankaj Sharma and the builder was to be treated as construction. Assessee had produced all the evidences reflecting payment to the Co. as well as to Mr. Pankaj Sharma. It is not out of place to mention here that payment of 76,92,160/- was the part of original agreement. It cannot be segregated only for the purpose of denying the claim of the assessee. Allotment letter is crystal clear that allottee is liable to pay the basic sale price, preferential location charges and the additional charges. i) Even if that deal of assessee with Mr. Pankaj Sharma is not treated as construction then also it falls within the ambit of purchase. Purchase involves transfer in relation to a capital asset. Section 2(47) states that relinquishment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of purchase of property. CIT(A) confirmed the order of Assessing Officer, however, ITAT allowed benefit of section 54 to the assessee holding that section 54 is a piece of beneficial legislation being incentive provision which need to be strictly construed for bringing within its hold the entitlement of the taxpayer to the said benefit, but once the taxpayer establishes his entitlement to the benefit u/s 54, then section 54 is to be liberally construed to grant the benefit to the assessee to fulfill the mandate of legislation which is to promote investment in residential housing construction rather than in the manner which may frustrate the object. I) In BB Sarkar vs CIT (1981) 132 ITR 150 (Cal), Calcutta High Court held that where a taxpayer spends capital gain partly for purchase of another house and partly for further construction on it, he is still entitled to exemption u/s 54. Section 54 contemplates fulfillment of two alternate conditions viz purchase or construction, but where both the conditions are fulfilled within the time stipulated, the taxpayer would also be entitled to the relief. High Court observed that the expression used in a statute should ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that time. Later, the assessee could not take possession as he was out of India and therefore, could not complete the formalities of possession. In view of Circular No.471 dated 15.10.1986 and Circular No.672 dated 16.12.1993, allotment of flat by the builder is sufficient to entitle the assessee to claim benefit u/s 54F. Assessee had paid full amount of consideration and the builder had also offered possession, deduction u/s 54F cannot be denied to the assessee. b) In CIT vs R L Sood (2000) 245 ITR 727 (Del), it is held that on payment of substantial amount in terms of purchase agreement within 04 days of sale of his old house, assessee acquired substantial domain over new residential flat within specified period, it could be said that assessee complied with requirements of section 54. Merely because builder failed to handover possession of the flat within specified period, assessee could not be denied benefit of benevolent provision of section 54. c) In ACIT vs Sudhakar Ram (2011) 16 Taxmann.com 175, Mumbai Bench of ITAT have held that where assessee invested amount of capital gain on sale of shares in purchase of flat before expiry of statutory period, benefit of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had already invested a sum of T18.60 lakh in the residential property under construction within the time limit prescribed u/s 54F of the Act. 13. The ld DR extensively read the order of the ld AO and ld CIT(A). He submitted that assessee is an agent of the non-resident, granted an opportunity of hearing by the learned AO holding that why he should not be considered as an agent of the non-resident, considered the nature of the assets transferred and its taxability and thereafter computed the taxable income arising in the hence of the non-resident as income of the assessee Under the head capital gain. Thus, There is no infirmity in the order passed by the lower authorities. He submitted that the assessee has been given a proper opportunity of hearing before all the authorities and therefore there is no reason for not upholding the order of the lower authorities. 14. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee has contested ground No. 3 to 7 of the appeal which deals with the addition on account of sale of property of Shri Ashok Tyagi a non resident in the hands of the assessee as representative assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to other provisions of the income tax act be levied upon and recovered from him in like manner and to the same extent as would be leviable upon and recoverable from the person represented by him. Therefore, the assessing officer should have passed a separate assessment order from the income of the assessee with respect to the income of the non-resident holding the assessee as a representative of a non-resident. In the present case, the assessing officer has passed an order in the name of the assessee without specifying that the above income is chargeable to tax in the hands of the assessee as a representative assessee of a non-resident i.e. not passing a separate order but adding the income of the non-resident in the hands of the assessee is not in accordance with the provisions of Section 161 of the act. The learned AO has also charged the tax in the hands of the assessee in the residential status of resident and not non-resident. On this score, the addition made by the learned assessing officer of the income of the non-resident Under the head capital gain of ₹ 5,655,874/ is required to be deleted. Thus, ground number 7 of the appeal of the assessee is allowed. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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