Income Tax Appellate Tribunal - Bangalore
Sri. B.M. Mumdaz Ali, vs Dcit, on 26 February, 2018
ITA.937/Bang/2013 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'A', BENGALURU
BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A No.937/Bang/2013
(Assessment Year : 2008-09)
Shri. B. M. Mumtaz Ali,
"Showkath Manzil", 8th Block, Chokkabettu,
Suratkal, Mangaluru .. Appellant
PAN : ADDPA6613B
v.
Deputy Commissioner of Income-tax,
Central Circle -2(3), Bengaluru .. Respondent
Assessee by : Shri. Narendra Sharman, Advocate
Revenue by : Shri. Sundar Rao Chitala, CIT - DR-1
Heard on : 28.11.2017
Pronounced on : 26.02.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
This is an appeal filed by the assessee against the order of the CIT (A), Mysuru, dt.20.03.2013, for the assessment year 2008-09, on the following effective grounds :
ITA.937/Bang/2013 Page - 2 The remaining grounds including ground no 2 are general or consequential. Therefore we are not adjudicating them.
02. Ground no.3 pertains to the undisclosed investment in Ullala Plant. In this regard the assessee has submitted that the AO has ITA.937/Bang/2013 Page - 3 made an addition of Rs.11 lakhs as undisclosed investment in the partnership firm, namely M/s. Mangalore Lime & Marine Industries at Ullala plant. It is the case of the AO that the assessee has made investment of Rs.5 lakhs through cheque which was recorded in the books of account, beside that assessee made payment of cash of Rs.11 lakhs which was not recorded in the books of account. The assessee has submitted that the partners of the assessee, namely Mustafa and Faisal, Moidden Bava have not made investment of Rs.11 lakhs in the said project and the actual investment was only Rs.5 lakhs. The assessee denied signing any document recovered during the search proceedings carried out by the Revenue in the premises of the assessee on 17.01.2008 showing the investment as 16 lacs . It was the case of the assessee that Yossuf, who was holding the port licence for the land and factory proposed the idea of doing the business. However the land had no CRZ and no legal titles and therefore land was found to be unfit for procuring loan from the banks. Therefore the sale consideration of the plant was reduced from Rs.24 lakhs to Rs.12 lakhs and accordingly only a sum of Rs.5 lakhs which is reflected in the books was invested in the project.
03. On the other hand the Ld. DR for the Revenue has submitted that the story narrated by the Ld AR for the assessee cannot be relied as the material was received from the premises of the assessee and the said piece of document duly reflected the payment of Rs.5 lakhs. It is not disputed by the assessee that Rs.5 lakhs was ITA.937/Bang/2013 Page - 4 paid. However what is disputed is only the additional investment made of Rs.11 lakhs in the said project.
04. We have heard the rival contentions and perused the record. In the assessment order the AO has reproduced the document recovered from the premises of the assessee which shows that the total investment in the concern was Rs.16 lakhs. However only Rs.5 lakhs was shown to have invested in the books of account. During the assessment the assessee has submitted that the document is neither in his handwriting nor the document was seized during the search u/s.132 of the Act. In our view, the Revenue was able to establish that the document was impounded from the business premises during the search and was found in the possession and control of the assessee and there was denial of recovery of document. In the light of the above it is for the assessee to rebut the presumption as mentioned u/s.118 of the Evidence Act that the document was found in possession of the assessee did not belong to him. In our considered opinion, no plausible explanation was given by the assessee during the assessment proceedings except baldly denying that it did not have his handwriting. Therefore the reasoning given by the AO in Para 6.3 of the assessment order and in Para 6.4 of the CIT (A) order are required to be upheld. Accordingly we dismiss ground no.3 of the assessee.
05. Ground no.4 is with respect to unaccounted capital gains for sale of property at Iddya village. In this regard the assessee has submitted that the agreement dt.07.08.2007 showing the total consideration as Rs.26 lakhs though it was impounded during the ITA.937/Bang/2013 Page - 5 course of search, however that agreement was entered by the assessee with the purchaser for the purpose of enabling the purchaser, namely, B. A. Sheikh Unni, to take the loan from the bank and that agreement was not entered for any other purpose.
06. The Ld. AR has drawn our attention to the agreement dt.07.08.2007 entered between the parties for a total consideration of Rs.16 lakhs which was subsequently registered by way of sale deed dt.12.07.2007, on which the assessee had paid the capital gains tax. Further it was the case of the assessee that the assessee has also filed an affidavit during the assessment proceedings of B. A Sheikh Unni, stating therein that he had paid only the sale consideration of Rs.16 lakhs and therefore the basis of making the addition by the lower authorities on the basis of impounded document was not correct.
07. On the other hand the Ld. DR has submitted that the argument of the Ld. AR is not correct as there was no loan agreement filed on the record and the submission made by the assessee during these proceedings were not appearing in the records of the CIT (A).
08. We have heard the rival contentions and perused the record. The sale deed filed before us showing the registration of the property on 12.09.2007 at page 106 of the paper book clearly shows that the purchaser, B. A Sheikh Unni had availed a housing loan of Rs.9.6 lakhs from Syndicate Bank, Suratkal and therefore the argument of the Ld. DR that there was no loan argument was not correct. In fact, the loan agreement was there which is also clear ITA.937/Bang/2013 Page - 6 from the agreement placed on record showing the loan as Rs.9.8 lakhs. Moreover in our view, merely the recovery of a document in the premises of the assessee for the amount of Rs.26 lakhs, raises a presumption in favour of the Revenue and that presumption is rebutted by the assessee by filing the affidavit of the purchaser, B. A. Sheikh Unni, explaining the circumstances under which the agreement for Rs.26 lakhs was entered for the purposes of obtaining the loan. The AO in the assessment order has neither denied the furnishing of the affidavit by the said person, nor had he examined such person, nor has he made addition of Rs.10 lakhs over and above the sale consideration, in the hands of the said person. In our considered opinion, as per Section 114(g) of the Indian Evidence Act, the presumption is required to be drawn against the Revenue (AO) and as the AO has not produced evidence which could have been produced by him, contradicting the affidavit of B. A. Sheikh Unni nor AO had examined B. A. Sheikh Unni, therefore it would be presumed that AO was having anything to say on it or it was unfavourable to the Revenue. In the light of the above, we find merit in the contention raised by the assessee. Accordingly we allow ground no.4 of the assessee.
09. Ground nos.5 and 6 pertains to disallowance of depreciation on Skoda car of Rs.2,29,440/- and Rs.95,339 as short-term capital gains on sale of Skoda car, totalling to Rs.3,24,779/-. In this regard it is the contention of the assessee before the CIT (A) that the sale had not materialised subsequent to agreement and hence the vehicle is still in the possession of the assessee. Further it was the ITA.937/Bang/2013 Page - 7 contention of the assessee that Skoda car is forming part of the block of assets and therefore the assessee is claiming the depreciation and further submitted that there cannot be short-term capital gains on the movable asset, i.e., Skoda car, which is forming part of the block of assets.
10. On the other hand the Ld. DR has drawn our attention to para 10 of the assessment order where the AO has recorded that the agreement dt.11.09.2007 was entered into between the assessee and U. K. Bawa for sale of Skoda car for a total consideration of Rs.16,25,000/- and further at para 2 of the agreement it is mentioned that the assessee has received Rs.8,50,000/- on the date of entering into agreement, as part of the sale consideration. The assessee has submitted that the car is still in the possession of the assessee. However no documentary evidence contradicting the agreement dt.11.09.2007 was brought on record by the assessee. However the assessee has filed extract of the register maintained by the Regional Transport Authority showing that the vehicle still stands in the name of the assessee. However, as the assessee has failed to dislodge the agreement and prove that the car is still in the custody of the assessee before the AO, therefore claim of depreciation was denied by AO and included the amount as short- term capital gain.
11. We have heard the rival contention and perused the record. Section 2(30) of the Motor Vehicles Act, defined the owner to mean a person in whose name the vehicle stands registered in the record of transport Authority and not the person in possession of the ITA.937/Bang/2013 Page - 8 vehicle. As is clear from the definition of the term 'owner' under the Motor Vehicles Act, the assessee will continue to be the owner of the vehicle as long as the name of the assessee is reflected in the records of the RTO. In the present case, it is undisputed that the name of the assessee continued to be reflected in the records of RTO as noted by the AO in para 10.2. Moreover it is also a matter of fact that the Skoda car continues to be a part of the block of assets shown by the assessee in its list of fixed assets filed by the assessee. Therefore, in our view as per the provisions of Section 32 of the IT Act, if an asset continues to be a part of the block of assets, assessee is entitled to depreciation on such asset. In the present case ownership of the Skoda car in the records of RTO continues to be in the name of the assessee therefore reliance on the agreement dt.11.09.2007 by the AO is unfounded and is not correct. We like to further to add that even on the date of 24.10.2009, as per the copy of the B Register Extract at page 86 of the paper book, assessee is shown as the owner of the Skoda car and therefore the argument of the Revenue that the possession and the title of the Skoda car was transferred on 17.01.2008 is not correct. In this context we may refer to the judgment of the Hon'ble Supreme Court in the matter of Naveen Kumar v. Vijay Kumar in CA No.1427 of 2018, dt.06.02.2018, wherein it is held that the person in whose name the vehicle is registered will be liable to pay the compensation to the accident victim. Accordingly we have no hesitation to allow the relief as sought by the assessee. We hold that the assessee is entitled to depreciation on the book value of the movable asset.
ITA.937/Bang/2013 Page - 9 As we have decided the issue of depreciation in favour of the assessee, therefore the question of short-term capital gains on the sale does not arise. We delete the addition on account of short-term capital gain. Ground nos.5 and 6 of the assessee are allowed.
12. In the result, assessee's appeal is partly allowed .
Order pronounced in the open court on 26th day of February, 2018.
Sd/- Sd/-
(JASON P. BOAZ) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 26.02.2018
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By Order
SENIOR PRIVATE SECRETARY
ITAT, BENGALURU