TMI Blog2023 (6) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated in the sale deed inclusive of alleged on-money consideration cannot be accepted for the reason that the effect of the sale deed should be considered with reference to the sale consideration stipulated in the sale deed. Therefore, there is no merit in the grounds of appeal nos.1 and 2 filed by the Revenue. Payment of On-money consideration at the time of purchase of property - assessee firm had paid on-money consideration in cash over and above the sale consideration stated in sale deed based on the information received from the ACIT, CC, Kolhapur - HELD THAT:- From the contents of letter received from ACIT, CC, Kolhapur, it is clear that there was no reference to any document or loose sheets suggesting the payment of on-money consideration. AO had neither proved nor had brought on record any corroborative, independent evidence in support of such allegation of on-money consideration, as well as, no independent enquiries were conducted by the AO. It is very well settled position of law that no addition can be made merely based on the information received from another AO without any independent corroborative evidence on record. No illegality and perversity in the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Keyur Patel AND Shri Ramnath P. Murkunde ORDER PER INTURI RAMA RAO, AM: These are the cross appeals filed by the assessee as well as by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Kolhapur [ the CIT(A) ] dated 06.03.2020 for the assessment year 2014-15. The Cross Objection filed by the assessee against the appeal of the Revenue. 2. Briefly, the facts of the case are as under: The assessee is a partnership firm engaged in the business of real estate. The Return of Income for the assessment year 2014-15 was filed on 23.02.2015 declaring total income of Rs. 8,30,500/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2(1), Sangli ( the Assessing Officer ) vide order dated 30.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 ( the Act ) at a total income of Rs. 13,19,96,790/-. While doing so, the Assessing Officer made addition of Rs. 3,58,69,978/- on account of alleged gains on undisclosed sale of immovable property, namely, Magnolia Prime Site , Kolhapur to M/s. Prarthana Infra, Kolhapur for a consideration of Rs. 8,53,00,000/- as per Sale Deed registered on 14.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further brought to the notice of the Assessing Officer that full value of consideration was received during the previous year relevant to the assessment year 2016-17 and the gains arising on sale of property was offered to tax in the said assessment year i.e. A.Y. 2016-17. The assessee firm also placed reliance on the provisions of section 42, 54 and 55 of the Transfer Property Act, 1882. 3. The Assessing Officer rejected the above contentions of the assessee firm and proceeded to hold that there is a transfer of property giving rise to the taxable profits in terms of provisions of section 53A of the Transfer of Property Act, 1882 r.w.s. 2(47) of the Income Tax Act, 1961. 4. Subsequently, the Assessing Officer had also received a letter dated 23.12.2016 from the Assistant Commissioner of Income Tax, Central (Circle), Kolhapur ( the ACIT, CC, Kolhapur ) passing on information of receipt of on-money consideration of Rs. 8,47,00,000/- on the sale of the said property. The copy of this letter addressed to the Assessing Officer by the ACIT, CC, Kolhapur is extracted by the Assessing Officer in para 4.7 of the assessment order. The substance of the said letter is that the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had concluded that the assessee firm was paid on-money consideration of Rs. 8,47,00,000/- in cash by said M/s. Prarthana Infra and, accordingly, brought to tax a sum of Rs. 8,47,00,000/- as unexplained money u/s 69A of the Act, apart from the profits of Rs. 3,58,69,978/- arrived at by deduction of cost of acquisition of Rs. 4,94,30,022/- from the sale consideration sated in the sale deed of Rs. 8,53,00,000/-. 8. The Assessing Officer also received information from the ACIT, CC, Kolhapur that during the course of search and seizure operations in the case of M/s. Ramsina Group of cases, it is found that M/s. Anand Developers i.e. assessee firm had purchased a property bearing R.S.No.948/3, 948/7 and 948/10 at Kasaba Bavada, Kolhapur from one Ulpe Family for a consideration of Rs. 2.76 crores. However, in the sale deed was executed and registered on 21.06.2011 for a consideration of Rs. 1,70,20,000/- only mentioned. Based on this information, the Assessing Officer summoned the partner of the assessee firm, namely, Mr. Vihang Ashok Shah and recorded the statement. When this information was confronted, he denied having paid any on-money payment at the time of purchase of the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record to establish that the assessee firm had received on-money consideration on sale of said property. Without prejudice to the above, it is contended that there was no evidence to say that on-money was paid during the year under consideration placing reliance on the decision of the Hon ble Bombay High Court in the case of Addl. CIT vs. Miss Lata Mangeshkar, 97 ITR 696 (Bom.), wherein, the Hon ble High Court held that no addition can be made merely based on the entries found in the books of the third party without any corroborative evidence. 12. Similarly, as regard to the addition of Rs. 1,05,80,000/- being the alleged on-money paid at the time of purchase of property at Kasaba Bavada, Kolhapur from Ulpe Family over and above, the apparent consideration of Rs. 1,70,20,000/-, it was argued that no addition can be made in the absence of any documentary evidence merely based on the information received from the ACIT, CC, Kolhapur. Without prejudice to the above, it is further argued that no addition can be made for the year under consideration, as the addition if at all is required to be made, it is only in the year in which the property was purchased. 13. The ld. CIT(A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Rs. 1,05,80,000/- made u/s 69C of the Act. 16. Being aggrieved by that part of the order of the ld. CIT(A), wherein, gains arising on sale of Magnolia Prime Site of Rs. 3,58,69,978/- cannot be brought to tax as the transaction of sale of the property was not completed during the year under consideration, deleting the addition of Rs. 1,05,80,000/- being the alleged on-money consideration paid at the time of purchase of property, the Revenue is in appeal before us in the present appeal in ITA No.67/PUN/2021. 17. The assessee is in appeal in ITA No.458/PUN/2020 challenging the decision of the ld. CIT(A) confirming the addition on account of on-money consideration on sale of property of Rs. 6,97,00,000/-. 18. The Cross Objection in C.O. No.15/PUN/2023 was filed by the assessee challenging the very validity of proceedings of the assessment on the ground that no approval of the Pr. Commissioner of Income Tax was obtained for converting the limited scrutiny assessment to complete scrutiny assessment etc. ITA No.67/PUN/2021 By Revenue : 19. Now, we shall take up the appeal of the Revenue in ITA No.67/PUN/2021. 20. The Revenue raised the following grounds of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d facts of the case are that the assessee firm is engaged in the business of real estate development. It had sold the work-in-progress of project titled as Magnolia Prime Site , which is shown as work-in-progress in other words stock-in-trade in the books of accounts and the said immovable property was sold to one firm called M/s. Prarthana Infra vide sale deed dated 14.03.2014 for apparent consideration of Rs. 8,53,00,000/-. It is an admitted position that the entire sale consideration of Rs. 8,53,00,000/- was not received as on 31.03.2014 but received only of Rs. 2.97 crores, the balance of Rs. 5,56 crores was outstanding. It is contention of the assessee firm that in terms of clause 2.3 of the sale deed, it is a conditional sale, as the transfer is complete only upon the receipt of full value of consideration as well as passing on the possession of the property. According to the assessee firm, the full value of consideration was received only during the previous year relevant to the assessment year 2016-17. Therefore, the profits arising on sale of said property were offered to tax for the assessment year 2016-17 which is not disputed by the Assessing Officer. However, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration was received during the previous year relevant to the assessment year 2016-17, in which year the assessee firm had offered the profits arising on sale of said property to tax. In this context, it is relevant to extract clause 2.3 of the sale deed dated 14.03.2014 :- 2.3 Even though the amount of consideration to be paid by party No. 1 to party No. 2 is in a phased manner on installment basis by postdated cheques, still Party No. 2 has given a limited right of development to Party No. 1. Party No. 1 is responsible for payment given by post-dated cheques on said dates to party No. 2. After receipt of payment to party No. 2, party No. 1 will get possession of said property and, for the same, separate Possession document is to be executed. 26. On perusal of the clause 2.3 as well as relevant clauses of the sale deed, it would reveal that the sale consideration was to be discharged by post-dated cheques in installments. The buyer of the property had only limited rights of development i.e. license to commence the work and the possession of the property to be handed over to the buyers only upon the receipt of the entire consideration. It is further stipulated vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1919] 29 CLJ 250, wherein while referring to section 54 of the Transfer of Property Act, it has been held that, sale is a transfer of ownership in exchange for a price paid or promised or part paid and part-promised. The true test is, what is the intention of the parties to the transaction. If the intention is that title should pass immediately, even though the consideration has not been paid, title passes, that is, failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it should take effect only if the consideration is first paid. In the case of Panchoo Sahu v. Janki Mandar, reported in AIR 1952 Patna 263, it has been held that title does not pass on the mere execution and registration of the sale deed and the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah v. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386. There is a catena of decisions of this court as well as of other High Courts taking a similar view. 28. To the same effect of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de addition of Rs. 1,05,80,000/- by alleging that the assessee firm had paid onmoney consideration in cash over and above the sale consideration stated in sale deed based on the information received from the ACIT, CC, Kolhapur. When this information was confronted to the assessee firm, the partner of the said firm, namely, Shri Vihang Shah had denied having paid any on-money consideration over and above the sale consideration stated in the sale deed. However, disbelieving the said contention of Shri Vihang Shah, partner of the assessee firm, the Assessing Officer had proceeded to make the addition of Rs. 1,05,80,000/- u/s 69C of the Act. On appeal before the ld. CIT(A), the ld. CIT(A) deleted the addition by holding that the Assessing Officer had not brought any material on record except the information received from ACIT, CC, Kolhapur, he further observed that the ACIT, CC, Kolhapur had not brought on any evidence on record except the purchase deed dated 21.06.2011, wherein, the consideration of Rs. 1,70,20,000/- alone stated. The ld. CIT(A) further observed that the property was purchased by the assessee firm on 21.06.2011 and the addition, if any, is required to be made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee firm raised the following grounds of appeal :- 1. On the facts and circumstances of the case and in law the assessment order is bad in law inasmuch as the same is passed beyond the prescribed time limit and is thus barred by limitation and hence needs to be annulled. 2. On the facts and circumstances of the case and in law the assessment order is bad in law inasmuch as the ITO has, in violation of Instruction of CBDT has travelled beyond his jurisdiction and made additions on other grounds which were not in the reasons for selection of the case for Limited Scrutiny without prior approval of the Pr.CIT. 3. On the facts and circumstances of the case and in law the Ld CIT (A) erred in rejecting the contention of the appellant that the basic record (in the form of hand written diary written by a partner of the firm forming the very basis of the addition) not being bearing the names of the persons, in particular assessee or his partners, it is incorrect to make addition in the hands of the appellant of huge amount of Rs. 8.47 Crores merely on surmises and conjunctures. 4. On the facts and circumstances of the case and in law the Ld CIT(A) erred in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliminary issue that since the assessment order is invalid in law for the reason that the Assessing Officer cannot make addition in relation to those items which had not formed the basis for scrutiny the case under limited scrutiny assessment. He further submits that without converting the case into complete scrutiny, no other addition can be made except the addition should be restricted to the relevant items which formed the basis for selected the case for scrutiny assessment without approval of the Pr.CIT for converting the case to complete scrutiny. The submissions of the assessee firm have carefully perused. Admittedly, in this case, the case was selected under CASS for limited scrutiny for the following reasons :- - Large increase in sundry creditors w.r.t. turnover as compared to last year. - Sale consideration of the property in ITR is less than sale consideration of the property reported in ITR. 43. The transaction of alleged receipt of on-money consideration on sale of immovable property falls within the ambit and scope of sale consideration of the property in ITR is less than sale consideration of the property reported in ITR . Further, no material was pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hana Infra, namely, Mr. Sachin Abhaykumar Oswal and the partner as well as employee of assessee firm, namely, Mr. Vihang Shah and Mr. Anand Shah respectively. In the statements, recorded from the partner of M/s. Prarthana Infra, it is stated in reply to question no.6 that the notings are made in his handwriting, but the notings were recorded as per information given by his partners. He further stated that the amount might have been handed over to M/s. Anand Developers by his partner. However, he failed to recollect about the name of the partner, who had informed him to make the notings and also the partner, who was stated to have made the said payments. On cross-examination, Mr. Vihang Shah, who is partner of the assessee firm, had denied having received any onmoney consideration. However, the Assessing Officer had disbelieved this statement and considering the information received from ACIT, CC, Kolhapur had made addition of Rs. 8,47,00,000/- on account of alleged receipt of on-money consideration u/s 69A of the Act. On appeal before the ld. CIT(A), the ld. CIT(A) held that there was sufficient evidence of receipt of on-money consideration of Rs. 8,47,00,000/- but, however, dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d paid on-money consideration for the period from 01.04.2013 to 08.12.2014 of Rs. 8,47,00,000/- to the assessee firm. On receipt of the information, the Assessing Officer had summoned the partner of the said firm, M/s. Prarthana Infra as well as Mr. Vihang Shah and Mr. Anand Shah, partner of the assessee firm and employee of the assessee firm respectively. During the course of examination u/s 131, one of the partners of M/s. Prarthana Infra, namely, Mr. Sachin Abhaykumar Oswal had admitted that this notings were made in the books of account by him. He further stated in reply to question no.6 that he had not paid said money to the partners or M/s Anand Developers. Thus, on consideration of the entire statement given by said, Mr. Sachin Abhaykumar Oswal, which is extracted by the Assessing Officer at page no.22 and 23 of the assessment order, it would be clear that he had nowhere stated that he had paid on-money consideration to the assessee firm herein or its partners. When this statement was confronted with Mr. Vihang Shah and Mr. Anand Shah, they had denied having received any on-money consideration. Thus, it is clear that there is no evidentiary value of the statement given by sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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