Income Tax Appellate Tribunal - Hyderabad
Late M.P. Chary, Hyderabad vs Assessee on 31 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 1661/Hyd/2012
Assessment year 2005-06
Late Sri M.P. Chary vs. The Asst. CIT
Legal Heir: Sri M.A. Chary Central Circle-6
Hyderabad Hyderabad
PAN: ACYPC4731E
Appellant Respondent
Appellant by: Sri C.P. Ramaswami
Respondent by: Sri Kiran Katta
Date of hearing: 04.08.2014
Date of pronouncement: 31.10.2014
ORDER
PER ASHA VIJAYARAGHAVAN, J.M.:
This appeal by the assessee is directed against the order of the CIT(A)-I, Hyderabad dated 30.08.2012 for A.Y. 2005-06.
2. The assessee filed his return of income for A.Y. 2005-06 originally on 28.7.2005 admitting an income of Rs. 8,91,500 and agricultural income of Rs. 84,600. The Assessing Officer passed assessment order u/s. 143(3) of Income-tax Act, 1961 on 20.12.2007 determining the income at Rs. 10,29,270 (including long term capital gains of Rs. 1,37,775). Subsequently, a search & seizure operation u/s. 132 of the Act was conducted at the residential premises of Sri M.A. Chary, son of the assessee, on 28.8.2008 and in the case of M/s. Elbit Medical Diagnostic Centre Ltd., founded by the assessee. During the course of search at the residence of the son of 2 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== the assessee certain documents indicating receipt of on- money by the assessee on the sale transaction of land were found and, therefore, notice u/s. 153C was issued calling for returns of income for A.Ys. 2003-04 to 2008-
09. In response to the said notice, the assessee's son Sri M.A. Chary informed that his father expired on 26.9.2005 and filed return of income in the capacity of legal heir of Sri M.P. Chary on 21.5.2010 declaring income of Rs. 10,29,270 and agricultural income of Rs. 84,600. The AR of the assessee appeared in response to the notices issued u/s. 143(2) and 142(1 and furnished information called for.
3. During the course of search at the residential premises of the son of the assessee, Sri M.A. Chary, certain sale documents in the name of the assessee were found and seized and marked as Annexure A/EMD/P01/4. Pages 4 and 5 of this annexure are the sale agreement dt. 25th August, 2004 for sale of plot No. 564-A-22-III in Survey N. 403/1 (old), Survey No. 120 (new) of Shaikpet village, admeasuring 2677 square yards (sqy) by Late Sri M.P. Chary to Sri M.S. Prasad. The total consideration for the sale of this property as mentioned on this agreement is Rs. 3.06 crores and on the other hand, pages 6 to 43 of this annexure, are three Agreements of Sale Cum GPA dated 18th November, 2004 between Sri M.P. Chary and Sri T. Narendra Choudary and Sri M. Srinivas Prasad for the same above mentioned plot of land showing the total consideration as only Rs. 1,47,23,500/-.
4. When the difference of consideration between the Sale Agreement (Rs. 3.06 crores) and the Sale Deed (Rs.
3ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== 1.47 crores) was put to Sri M.A. Chary, he has accepted vide his sworn statement recorded on 29.9.2008 that the total consideration for the said property was Rs. 3.06 crores. Subsequently, in his statement recorded on 13.10.2008, Sri M.A. Chary changed his stand on this issue and stated that the figure of Rs. 3.06 crores is not correct since his late father had quoted this figure in the initial negotiation, but since there was some problem with the property regarding Urban Land Ceiling (ULC), the vendees did not agree to pay the figure quoted by his late father and argued that the total consideration was only Rs. 1.47 crores and not Rs. 3.06 crores. He has further stated that the agreement referred to was only an unsigned draft prepared for own guidance before finalizing the transaction and because of the problems linked with the land like high-tension wires going through the land, ULC problem and others, the purchaser did not agree with the terms of the said agreement and, therefore, the sale was made as mentioned in the registered Sale Deed at Rs. 147.23 lakhs and not Rs. 3.06 crores. The later submissions of the assessee were not accepted by the Assessing Officer and holding the same to be an afterthought, he has assessed the difference of Rs. 1,58,76,500/- between the Agreement of Sale and Sale Deeds as undisclosed Long Term Capital Gain. Aggrieved, the assessee preferred an appeal before the CIT(A).
5. In the course of appellate proceedings, the AR of the assessee filed written submissions and contended that the income on the sale of plot of land after claiming necessary exemption in accordance with the provisions of section 54F of the Act, has already been assessed vide 4 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== assessment order u/s. 143(3) dated 20.12.2007. Now after search as against the above long term capital gains admitted, the Assessing Officer has wrongly determined the capital gains of Rs. 1,40,14,275 adopting sale consideration of Rs. 3.06 crores and adoption of the said amount of sale consideration has no basis. It was submitted that the agreement relied upon by the Assessing Officer was only an unsigned draft agreement prepared by the assessee for the purpose of discussion and negotiation. It was further submitted that the said agreement has no legal sanctity and the same cannot be enforced in law.
6. It was also pointed out that Late Sri M.P. Chary was looking after all the transactions till his death and Sri M.A. Chary being his son and legal heir was not aware of the transactions and it was only after discussion with the family members after the search operation that the son of the assessee came to know about the details of the transaction. Information was given by the family members of the assessee that the property under reference was having legal and other problems such as ULC, boundary dispute, HT electric line and occupation by the hut dwellers and also dispute with R & B Department. It was submitted that the proposed buyers had agreed for higher price provided the problems are solved by the assessee and as the assessee was not agreeable for the same, the proposed buyers had discounted the property value and after negotiations, the sale consideration was finally fixed at Rs. 147.23 lakhs and the sale deal was executed.
5ITA No.1 661/Hyd/2012 Late Sri M.P. Chary ===================
7. The learned AR, therefore, submitted that the sale consideration was only Rs. 147.23 lakhs and the capital gains was accordingly computed and admitted by the assessee. The AR submitted that the assessee wanted to get rid of the property for a discounted price of Rs. 147.23 lakhs instead of Rs. 3.06 crores. The AO assessed the difference of Rs. 1,58,76,500 between the Agreement of Sale and Sale Deed as undisclosed long term capital gains. It was pleaded that the AO is not correct to assume the sale consideration mentioned on the unsigned sale agreement as the real consideration for computing the long term capital gains on sale of the property. The CIT(A) accepted that the property was burdened with various issues such as ULC, replacement of HT electric pole, boundary dispute, etc., which has to be cleared before sale of the property.
8. However, the CIT(A) observed that as per the agreement the vendee paid an advance of Rs. 9 lakhs vide cheque No. 142514 dated 25.8.2004 drawn on SBH, Jubilee Hills, Hyderabad . It was further observed by the CIT(A) that the vendee agreed further to pay further Rs. 41 lakhs before 1st September, 2004 and the registration of the plot will be completed by 1st November, 2004. Thereafter on 18.11.2004, the said property in question was sold to Sri M.S. Prasad and T. Narendra Chowdary vide three Agreements of Sale cum GPA. The AR could not explain properly about the need for registering the same property in three different agreements. It was pointed out by the CIT(A) that land admeasuring 1,071 sqy was sold for a consideration of Rs. 58,90,500, land admeasuring 765 sqy was sold for Rs. 42,07,500 and land 6 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== admeasuring 841 sqy was sold for Rs. 46,25,500, thereby totalling to Rs. 1,47,23,500 which was disclosed in the books as against agreed consideration of Rs. 3.06 crores as per sale agreement found in the premises of Sri M.A. Chary and the said document found in the possession of Sri M.A. Chary at the time of search cannot be ignored as a dumb document due to the fact that the contents of the letter are independently corroborated. It was further noticed by the CIT(A) that the property mentioned in the sale agreement was ultimately sold to the same vendee as agreed in the month of November, 2004. The amount of advance paid by cheque by Sri M.S. Prasad, to the assessee was not in doubt. Therefore, the CIT(A) held that such document could not have been discarded as having no evidentiary value attached to it and at the time of agreement itself it has been identified and recorded in writing about the issues of ULC clearance, boundary disputes, disputes with R & B Department and Housing Society in respect of the property in question. The CIT(A) observed that these problems have not cropped up subsequently and the assessee has to take the responsibility of clearing those issues and it has been very clearly and categorically deduced in writing by the assessee to fasten the responsibility of clearing the problems on the vendee and agreed for a consideration of Rs. 3.06 crores. The CIT(A) pointed out that the assessee never attempted to resolve the issues before sale of the property and it is always his intention to get rid of the property along with the problems attached to this property. The CIT(A) held that the AR was not correct to contend that the agreed sale consideration was reduced because of the shifting of the burden of resolving the 7 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== disputes on the property to buyers and in the instant case, the buyers are very much in the knowledge of problems attached to the property and along with the problems they acquired the property, therefore, the said contention of the AR has no force. The CIT(A) opined that the assessee could not rebut the evidence found and the contention of the AO on this issue with any cogent or reasonable evidences. The CIT(A) held that the document of sale agreement found In the residential premises of Sri M.A. Chary is a valid document in view of the contemporaneous evidence to the contents of this agreement. Further, the CIT(A) held that on the day of search, Sri M.A. Chary deposed that his father sold plot for Rs. 3.06 crores as per agreement. Subsequently i.e., after a gap of two months he retracted from the original statement. But the fact of receipt of advance as per the agreement by his late father could not be rebutted by Shi M.A. Chary, legal heir of the assessee. The CIT(A) pointed out that statement recorded on the day of search is primary statement and it was given on confronting various documents and material found during search. It was further pointed out by the CIT(A) that the deponent would not have ventured to state anything which is not in his knowledge, whereas in the instant case, it has been clearly stated about the fact of sale of property and quantum of consideration received and hence the subsequent retraction could not be considered as a valid retraction and it is only an afterthought. The CIT(A) referred to the decision of Mumbai Bench of the Tribunal reported in 83 ITD 102 and also the Hon'ble Gauhati High Court where retraction was made after a gap of 3 months and it was held that such retraction is not allowable as 8 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== reported in 263 ITR 169 in the case of Green View Restaurant vs. ACIT. Following judicial decisions were also taken as support by the CIT(A) for disallowing the subsequent retraction of Sri M.A. Chary.
(a) R.C. Gupta & Co., 122 ITR 547 (Raj).
(b) 169 ITR 589 (MP)
(c) 66 ITD 441 (Delhi) in the case of Vasanthi Sethi vs. ACIT,
(d) 219 ITR 235 (Kerala)
(e) 168 ITR 375 (Bombay). The CIT(A) dismissed the appeal of the assessee.
9. Aggrieved, the assessee is in appeal before us. The learned counsel for the assessee, Sri C.P. Ramaswami submitted that the Revenue authorities had erred in relying on the unsigned draft agreement dated 25.8.2004 for adopting the sale consideration at Rs. 306 lakhs. It was further submitted that the unsigned agreement was merely typed on the letterhead of the assessee which was prepared by the assessee himself for his guidance before negotiating the sale transaction. It was further submitted that the son and legal heir of the assessee had accepted the sale consideration of Rs. 3.06 crores in a state of utter confusion and without knowing the facts regarding the sale transaction he had stated in the sworn statement that the sale consideration is at Rs. 306 lakhs as appearing in the agreement. The son and legal heir of the assessee was not aware of the transaction of sale and he was not a party to it and his late father Sri M.P. Chary was only looking after the transaction till his death and only after discussion with the family members consequent to the search operation, the son and legal heir of the assessee came to know that the sale consideration of the plot was only Rs. 147.23 lakhs. Because of lack of knowledge of the facts of the transaction, the assessee's 9 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== son did not raise any objection during the course of statement recorded on 29.9.2008.
10. It was submitted by the learned counsel for the assessee that since there were problems connected with the plot of land such as obtaining ULC, etc., the plot had to be sold only for Rs. 147.23 lakhs and not at Rs. 306 lakhs as found in the draft agreement. The learned counsel for the assessee relied on the additional evidence being the copy of return of income of the vendee wherein no addition has been made in the hands of the vendee which proves that there has not been any on-money receipt. Further, the Department has also recorded sworn statement from the vendee which was produced at pages 21 and 22 of the Paper Book. It was also stated by Sri M.S. Prasad (the vendee) that it took more than 5 years to get settled the problems connected with the plot of land such as ULC, changing of HT electric pole, etc., and brought to order. The learned counsel for the assessee relied on the decision of DCIT vs. Krishna Yadav (12 taxmann.com 4) (Hyd) and in the case of M/s. Pratima Educational Society in ITA No. 1768/Hyd/2011 dated 8th November, 2013. The learned counsel for the assessee also relied on the decision in the case of 291 ITR 172 in the case of CIT vs. Ashok Kumar with respect to retraction by the assessee's son.
11. The learned counsel for the assessee also stated that the assessee had not retracted with respect to all the statements made by him and pointed out to page 18 of the Paper Book that the assessee had made a voluntary disclosure of Rs. 4.50 crores spread over the period of FY 10 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== 2003-03 to FY 2008-09 and had not retracted from the same. The counsel pointed out that this shows that the assessee's retraction with respect to the agreed sale price is a bona-fide one as the assessee is not retracting all the statements which he had made.
12. The learned counsel for the assessee distinguished the case-law relied on by the CIT(A) i.e., 168 ITR 375 (Bom) with the facts of the present case and relied on the decision in the case of Padmasundara Rao v. State of Tamil Nadu (255 ITR 147) (SC) wherein the Apex Court held as under:
"... There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Harrington v. British Railways Board [1972] 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases...."
Therefore, the observations of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd's case (supra) on which reliance has been placed by the learned Counsel cannot be read in isolation. The judgment deserves to be read in its entirety to cull out the law laid down by the Hon'ble Supreme Court. If so read, it is quite evident that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue. If the order sought to be revised under Section 263 suffers from any of the aforesaid vices, it cannot be said that the Assessing Officer has "adopted", in such an order, a course permissible in law or 11 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== "taken" a view where two or more views are possible."
13. The assessee's counsel also relied on the decision in the case reported 219 ITR 235 (Kerala). He also pointed out that the Explanation to section 132 is not applicable in the present case. The learned counsel for the assessee submitted that ground No. 3 has been raised as a legal ground wherein it has been argued that the value u/s. 50C can be enhanced at most to the guideline value and the AO had no power to enhance the value to a figure more than the guideline value.
14. The DR submitted that it is not in dispute about the location of the property situated in posh commercial area of Jubilee Hills in Hyderabad. Because of its prime location, the property in dispute definitely fetches higher value than the value disclosed in the sale deeds by the assessee. The fact that the sale agreement is still available with the legal heir of the assessee even after lapse of considerable time, clearly demonstrates the value and the importance of such document. Such circumstantial evidence cannot be brushed aside. Therefore, it is difficult to ignore such evidence while computing the total income of the assessee. Therefore, the CIT(A) has rightly held that the total amount received by the assessee is Rs. 3.06 crores only and confirmed the action of the AO in computing the total income of the assessee by taking into account full value of consideration of Rs. 3.06 crores and rejected the contention of the assessee.
15. We have heard both the parties. We find that when the difference of consideration between the sale 12 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== agreement (Rs. 3.06 crores) and the sale deed (Rs. 1.47 crores) was put to Sri M.A. Chary, he has accepted vide his sworn statement recorded on 29.9.2008 that the total consideration for the said property was Rs. 3.06 crores. Subsequently, in his stated recorded on 13.10.2008, Sri M.A. Chary changed his stand on this issue and stated that the figure of Rs. 3.06 crores is not correct since there was some problem with the property recording Urban Land Ceiling and the vendees did not agree to pay the figure quoted by his late father. It was stated by him that the total consideration was only Rs. 1.47 crores and not Rs. 3.06 crores and it was further stated that the agreement referred to was only an unsigned draft prepared for own guidance before finalising the transaction. The Assessing Officer did not accept the argument of the assessee and in our opinion the Assessing Officer was right in holding his view as the fact is that as per the agreement the vendee paid an advance of Rs. 9 lakhs vide cheque No. 142514, dated 25.8.2004 drawn on SBH, .Jubilee Hills, Hyderabad. The vendee agreed further to pay further Rs. 41 lakhs before 1st September, 2004 and the registration of the plot will be completed by 1st November, 2004. Thereafter on 18.11.2004, the said property in question was sold to Shri M.S. Prasad and T. Narendra Chowdary vide three Agreements of Sale cum GPA. As held by the CIT(A), the AR could not explain properly about the need, for registering the same property in three different agreements. Land admeasuring 1,071 square yards was sold for a consideration of Rs. 58,90,500, land admeasuring 765 sq. yards was sold for Rs. 42,07,500 and land admeasuring 841 sq. yards was sold for Rs.
13ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== 46,25,500 thereby totalling to Rs. 1,47,23,500/- was disclosed in the books as against agreed consideration of Rs. 3.06 crores as per sale agreement found in the premises of Shri M.A. Chary.
16. We are in agreement with the order of the CIT(A) and the reasons given by the CIT(A) for dismissing the assessee's appeal are very well reasoned and clinching. We confirm the order of the CIT(A) and extract the relevant portion which has persuaded us to confirm the order of the CIT(A). The relevant portion is as follows:
"The said document found in the possession of Shri M.A. Chary at the time of search cannot be ignored as a dumb document due to the fact that the contents of the letter are independently corroborated. The property mentioned in the sale agreement was ultimately sold to the same vendee as agreed in the month of November 2004. The amount of advance paid by cheque by Shri M.S. Prasad to the assessee was not in doubt. Therefore, such document could not have been discarded as no evidentiary value attached to it. At the time of agreement itself it has been identified and recorded in writing about the issues of ULC clearance, boundary disputes, disputes with R&B department and Housing Society in respect of the property in question. It is not that these problems have been cropped up subsequently and the assessee had to take the responsibility of clearing those issues. It has been very clearly and categorically deduced in writing by the assessee to fasten the responsibility of clearing the problems on the vendee and agreed for a consideration of Rs. 3.06 crores. The assessee never attempted to resolve the issues before sale of the property. It is always his intention to get rid of the property along with the problems attached to this property. The AR is not correct to contend 14 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== that the agreed sale consideration was reduced because of the shifting of the burden of resolving the disputes on the property to buyers. In the instant case, the buyers are very much in the knowledge of problems attached to the property and along with the problems they acquired the property. Therefore, the said contention of the AR has no force. The assessee could not rebut the evidence found and the contention of the AO on this issue with any cogent or reasonable evidences. The document of sale agreement found in the residential premises of Shri M.A. Chary is a valid document in view of the contemporaneous evidence to the contents of the agreement. On the day of search Shri M.A. Chary deposed that his father sold plot for Rs 3.06 crores as per agreement. Subsequently i.e., after a gap of two months he retracted from the original statement. But the fact of receipt of advance as per the agreement by his late rather could not be rebutted by Shri M.A. Chary legal heir of the assessee. Statement recorded on the day of search is primary statement and it was given on confronting various documents and material found during search. The deponent would not have ventured to state anything which is not in his knowledge. Whereas in the instant case, it has been clearly stated about the fact of sale of property and quantum of consideration received. The subsequent retraction could not be considered as a valid retraction and it is only an afterthought. Reference is invited to this decision of Mumbai ITAT reported in 83 ITD 102. Similarly, the Hon'ble Gauhati High Court had an occasion to examine a case where a retraction was made after gap of 3 months and held that such retraction is not allowable as reported in 263 ITR 168 in the case of Green View Restaurant vs. ACIT."
17. Further, we note that the property is situated in a posh commercial area of Jubilee Hills, Hyderabad and because of its prime location it will definitely fetch higher value than that was disclosed by the assessee. We are also aware that the buyer of the property will be having 15 ITA No.1 661/Hyd/2012 Late Sri M.P. Chary =================== the registered document and hence the unsigned agreement being in the possession of the seller viz., the assessee would not amount to "dumb document". In the instant case, the circumstantial evidence cannot be brushed aside particularly when going through the process of the agreement, we find that all the clauses in the agreement have been followed. We also note that the property was registered by way of three different agreements of which the agreement dated 18.11.2004 mentioned consideration of sale consideration of Rs. 42,07,500 without bringing out the schedule of payment whereas in the other two documents payment schedules have been mentioned which only throws suspicion that the consideration has been consciously reduced. Hence, we confirm the order of the CIT(A) and hold that the total amount received by the assessee is Rs. 3.06 crores only.
18. In the result, appeal of the assessee is dismissed.
Pronounced in the open court on 31st October, 2014 Sd/- Sd/-
(B. RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated the 31st October, 2014 tprao Copy to:
1. Late Sri M.P. Chary, c/o. Sri C.P. Ramaswami, Advocate, Flat Nos. 102/203, Gitanjali Apts., Plot No. 108, Srinagar Colony, Hyderabad-500 073.
2. The Asst. CIT, Central Circle-6, Hyderabad.
3. The CIT(A)-I, Hyderabad.
4. The CIT (Central), Hyderabad.
5. The DR, A-Bench, ITAT, Hyderabad.