Income Tax Appellate Tribunal - Mumbai
Acit Cir 1, Thane vs Ashok Murji Faria, Thane on 14 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIALMEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA no.3708/Mum./2013
(Assessment Year: 2009-10)
ACIT, Circle 1, Thane
Vardaan Bldg, Lower Ground Floor, Wagle ................ Appellant
Indl. Estate., MIDC, Thane 400604
v/s
Ashok Murji Faria,
601, Konark Tower Opp. Saibaba Temple,
Ghantali Madir Rd., Naupada, Thane ................ Respondent
PAN ACEPS9353E
Assessee by : Shri. Subodh Ratna Parakhi
Revenue by : Shri. Rajesh Kumar Yadav
Date of Hearing -29.03.2017 Date of Order -14.06.2017
ORDER
PER: RAJESH KUMAR.
This appeal filed by the revenue is directed against order of the CIT(A), Mumbai, dated 15.01.2013, and it pertains to the assessment year 2009-10.
Ashok Murji Faria, ITA no.3708/Mum./2013
2. The brief facts of the case are that the assessee is an individual derived income of business, income from capital gain and income other sources, filed his return of income for the assessment year 2009-10 on 28.03.2010 declaring total income of Rs.16,64,463/-. The case of the assessee was selected for scrutiny under CASS and accordingly, notices u/s. 143(2) and 142(1) of the Act, were issued. In response to notices, Shri. Bimal V. Shah CA, appeared from time to time and furnished the relevant information as called for.
3. During the course of assessment proceedings, the assessing officer noticed that during the financial year relevant to assessment year 2009-10, the assessee has sold immovable property vide sale deed dated 27.08.2008. The A.O further, observed that the assessee and his brother Nitin M. Faria, acquired the said property from one Shri. Rajiv Ganpat Rakvi, for a consideration of Rs.68,83,930/-, including stamp duty and registration charges vide sale deed dated 11.05.2007. The A.O further observed, the said property has been sold to M/s. Ishwar Land Pvt. Ltd., vide sale deed dated 27.08.2008 for a consideration of Rs.3,42,78,125/-. It was further observed that since, short term capital gain admitted by the assessee is inconsistent with purchase and sale amounts of property, the A.O issued a show cause notice and asked the assessee to furnish necessary details of short term capital gain along with copies of sale deed to justify computation of short term capital gain. 2
Ashok Murji Faria, ITA no.3708/Mum./2013
3. In response to show case notice, the assessee vide letter dated 31.08.2011 submitted that he had purchased a plot of land along with his brother Nitin M. Faria, from one Shri Rajiv Ganpat Rakvi, vide sale deed dated 11.05.2007 for consideration of Rs.68,83,930/-. The said property has been sold to one Shri Praveen H. Thakkar, vide memorandum of understanding dated 29.07.2008 for consideration of Rs. 1 crore. The assessee further submitted that he had sold the property to Mr. Praveen H. Thakkar, and computed short term capital gain of Rs. 31,16,070/-, after reducing cost of acquisition and expenses of transfer and the resultant capital gain has been offered by myself and my brother. The assessee further submitted that the said property has been sold to M/s. Ishwar Land Pvt. Ltd., vide sale deed dated 27.08.2008, for a consideration of Rs. 3,42,78,125/- and consideration over and above Rs. 1 crore has been received by Shri. Praveen H. Thakkar, and the resultant profit has been offered to tax by Shri Praveen H. Thakkar. The intermediate transaction between purchase and sale of property with Mr. Praveen H. Thakkar, is entered because the finance for purchase of said property has been arranged by Shri Praveen H. Thakkar, and the property has been registered in our name, because there is some restrictions as per the provisions of land revenue Act, applicable in the State of Maharashtra, as per which neither could the agricultural land be purchased in the name of Shri. 3 Ashok Murji Faria, ITA no.3708/Mum./2013 Praveen H. Thakkar, directly, nor could be agreement for transfer of this said land in the name of Shri. Praveen H. Thakkar, be registered. Since, the transaction has been financed by Shri. Praveen H. Thakkar, and also agreed between myself and my brother with Shri. Praveen H. Thakkar, that the said property will be transferred to his name, we had entered into a MOU and transferred the said land for consideration of Rs. 1 crore. Therefore, the profit raised from said transaction has been properly computed and offered to tax.
4. The A.O after considering the explanation of the assessee and also documents available on record, observed that the assessee has sold the impugned land in favour of M/s. Iswar Land Pvt. Ltd., vide sale deed dated 27.08.2008, for total consideration of Rs.3,42,78,125/-, whereas computed short term capital gain by adopting consideration of Rs. 1 crore. The A.O further observed that, admittedly the purchase as well as sale deeds of the property are registered, whereas the MOU claims to have been entered with Shri. Praveen H. Thakkar, is unregistered. The claim of the assessee that he had sold the property to Shri. Praveen H. Thakkar, for consideration of Rs. 1 crore, cannot be accepted. Since, the intermediary transaction with Shri Praveen H. Thakkar, is not a legally enforceable contract, if not sham transaction, the capital gain of Rs.2,31,44,125/-, claimed to belong to Shri. Praveen H. Thakkar, is held to result in application of income without any over riding title to Shri. 4 Ashok Murji Faria, ITA no.3708/Mum./2013 Praveen H. Thakkar. The fact that, Shri. Praveen H. Thakkar, has considered the short term capital gain of Rs.2,31,44,125/- , as is income and accepted the tax liability cannot by itself change the legal position. With these observation, recomputed short term capital gain by taking into account sale consideration of Rs.3,42,78,125/-.
5. Aggrieved by the assessment order, the assessee proffered an appeal before the CIT(A). Before the CIT(A), the assessee has reiterated his submission made before the A.O. The assessee further submitted that he had properly computed short term capital gain from sale of land as per the documents evidencing transfer of land in favour of Shri. Praveen H. Thakkar, for a consideration of Rs. 1 crore. The assessee further submitted that he had furnished necessary documents evidencing consideration of remaining amount of sale consideration and resultant profit in the hand of Shri. Praveen H. Thakkar. The assessee also filed an affidavit from Shri. Praveen H. Thakkar, stating that he had considered the entry sale consideration and computed short term capital gain. All the evidences filed before the A.O are clearly established the fact that there is a intermediary transaction before sale of land to M/s. Iswar Land Pvt. Ltd., and the A.O ignored all evidences to recompute short term capital gain by considering sale deed executed in favour of M/s. Iswar Land Pvt. Ltd. The assessee also made an alternative submission and 5 Ashok Murji Faria, ITA no.3708/Mum./2013 claims that, in case where the entire sale consideration recorded in the sale deed with M/s. Iswar land Pvt. Ltd., is required to be adopted for determining short term capital gain, then in such a situation, reduction of amount fall to the share of Shri. Praveen H. Thakkar, would be required to be deducted in working out short term capital gain on the sale of said land. The assessee also made second alternate argument and claims that the said land is agricultural land outside the ambit of the term capital asset as defined u/s. 2(14) of the Act, and hence the question of payment of any capital gain tax on profit from sale of impugned land would not arise.
6. The CIT(A), after considering submission of the assessee and also perusal of sale deeds and MOU, observed that undisputedly the MOU between the assessee and Shri. Praveen H. Thakkar, established that the assessee has sold impugned land and Shri. Praveen H. Thakkar for consideration of Rs. 1 crore. It is also an undisputed fact that the source of finance for purchase of impugned land is arranged by Shri. Praveen H. Thakkar. The amount financed by Shri. Praveen H. Thakkar, is duly reflected in his balance sheet and also in the balance sheet of the assessee. Shri. Praveen H. Thakkar, was also examined in this regard by the A.O, during the course of assessment proceeding u/s. 143(3). In his statement dated 21.12.2010, Shri. Praveen H. Thakkar, deposed before the A.O, that he had financed the purchase of land and also agreed to purchase 6 Ashok Murji Faria, ITA no.3708/Mum./2013 the said land for consideration of Rs. 1 crore, and accordingly, enterd into a memorandum of understating by paying initial amount of Rs. 11 lakh, and agreed to pay balance amount of Rs. 89,00,000/-, at a time of registration of said land. The CIT(A) further, observed that sale consideration received from M/s. Iswar Land Pvt. Ltd., has also gone to Shri. Praveen H. Thakkar, over and above of Rs.1 crore, as agreed upon. Shri. Praveen H. Thakkar has computed short term capital gain on the said sale consideration and offered to tax in his return of income filed for the relevant assessment year. All these facts were not disputed by the A,O. The A.O, computed short term capital gain by considering sale deed between the assessee and M/s. Iswar Land Pvt. Ltd., merely on the ground that intermediary MOU between the assessee and Shri. Praveen H. Thakkar, was unregistered. The CIT(A) further, observed that merely because the agreement dated 29.07.2008, between the assessee and Shri Praveen H. Thakkar, was unregistered, no inference can be drawn in view of the other documentary evidences available on record which are capable of verification. With these observations, directed the A.O to delete additions made towards recomputation of short term capital gain. The other two alternate grounds raised by the assessee has been rejected in view of the fact that the assessee has succeed in ground no. 1. Aggrieved by the CIT(A) appeal order, the revenue is in appeal before us.
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Ashok Murji Faria, ITA no.3708/Mum./2013
7. The Ld. D.R submitted that the Ld. CIT(A) erred in deleting additions made by the A.O for Rs.1,31,30,098/-, towards recomputation of short term capital gain on sale of impugned land to M/s. Iswar Land Pvt. Ltd. The D.R further, submitted that the A.O brought out clear facts to the effect that the intermediary transaction by way of unregistered MOU between the assessee and Shri. Praveen H. Thakkar, is not enforceable under law, therefore, the A.O has rightly computed short term capital gain in the hands of the assessee towards sale of land to M/s. Iswar Land Pvt. Ltd., by taking into account the sale consideration of Rs.3,42,78,125/-. The CIT(A), without appreciating the facts has observed that MOU between the assessee and Shri. Praveen H. Thakkar, is a valid document for transfer of impugned land which entails the assessee for computation of short term capital gain on sale consideration of Rs. 1 crore, ignoring the finding of the A.O which clearly proves that the MOU is not enforceable in law. On the other hand, the A.R for the assessee strongly supported order of the CIT(A).
8. We have heard both the parties and perused material available on record. The factual matrix of the case which leads to impugned additions are that the assessee has purchased a plot of land for a consideration of Rs.68,86,930/-. The said land has been sold to one Shri. Praveen H. Thakkar, for a consideration of Rs.1 crore, vide MOU dated 29.07.2008. Thereafter, the said 8 Ashok Murji Faria, ITA no.3708/Mum./2013 land has been sold to M/s. Iswar Land Pvt. Ltd., vide sale dated 27.08.2008 for a total consideration of Rs.3,42,78,125/-. The assessee has computed short term capital gain by taking into account sale consideration of Rs. 1 crore, as per the MOU with Shri. Praveen H. Thakkar. The assessee filed necessary details to prove that the remaining consideration over and above Rs 1 crore has been considered by Shri. Praveen H. Thakkar, in his income tax returns and offered to tax. The assessee also filed an affidavit from Shri. Praveen H. Thakkar, wherein he stated that he had considered sale consideration over and above Rs. 1 crore and resultant profit has been offered to tax. The A.O made impugned addition on the ground that the intermediary transaction between the assessee and Shri. Praveen H. Thakkar, by way of unregistered MOU is not legally enforceable contract, if not a sham transaction and hence, the capital gain of Rs.2,31,44,125/-, claimed to belong to Shri. Praveen H. Thakkar, is held to result in application of income without any over riding title to Shri. Praveen H. Thakkar. The fact that the Shri. Praveen H. Thakkar, has considered short term capital gain in his individual capacity, cannot by itself change the legal position. Therefore, opined that the assessee is liable to pay capital gain on the total sale consideration received from M/s. Iswar Land Pvt. Ltd.
9. It is the contention of the assessee that he had rightly computed short term capital gain by taking into account sale consideration as per MOU with 9 Ashok Murji Faria, ITA no.3708/Mum./2013 Shri. Praveen H. Thakkar. The assessee further contended that he had sold the impugned land for a consideration of Rs. 1 crore by way of MOU dated 29.07.2008, in turn the said land has been sold to M/s. Iswar land Pvt. Ltd., for consideration of Rs.3,42,78,125/-. The assessee further, contended that he had considered sale consideration of Rs. 1 crore and the remaining sale consideration of Rs.2,42,78,125/-, has been considered by Shri. Praveen H. Thakkar. The assessee has filed all the details evidencing the above transaction. The assessee also filed an affidavit from Shri. Praveen H. Thakkar.
10. Having heard both the sides and considered material on record, we find that the assessee has entered into an unregistered MOU with Shri. Praveen H. Thakkar, and sold the impugned land for a consideration of Rs. 1 crore. As per Clause no. 12 of the said MOU, the parties agreed that any sale consideration received on subsequent sale of the said property over and above Rs. 1 crore could be retained by Shri. Praveen H. Thakkar. Accordingly, the assessee has computed short term capital gain by taking into account sale consideration of Rs. 1 crore, and after reducing the cost of acquisition and expense of transfer, computed short term capital gain of Rs.31,16,070/-, and disclosed 50% in his 10 Ashok Murji Faria, ITA no.3708/Mum./2013 return of income. We further observed that the assessee has filed necessary details and also an affidavit from Shri. Praveen H. Thakkar, which indicates that Shri. Praveen H. Thakkar has considered remaining consideration and offered resultant profit for taxation in his return of income. As per the details available on record, we find that the entire sale consideration of Rs.3,42,78,125/- is suffered to tax in the hands of the assessee and Shri. Praveen H. Thakkar.
11. We further noticed that from the impugned transactions there is no loss of revenue due to the Govt. exchequer. The A.O ignored intermediary MOU between the assessee and Shri. Praveen H. Thakkar, merely on the ground that the said MOU is unregistered. We do not agree with the findings of the A.O, for the reason that merely because the MOU is unregistered, no adverse inference can be drawn in view of other documentary evidences supplied by the assessee which are capable of verification. The assessee has filed all evidences to prove the transaction in his hands as well as in the hands Shri. 11 Ashok Murji Faria, ITA no.3708/Mum./2013 Praveen H. Thakkar. Assessee's version is also strengthened from the fact that at the time initial purchase of land by the assessee and his brother Shri. Pravin H. Thakkar had advanced loan to the assessee's brother Shri. Nitin M. Faria. This fact was accepted by the Tribunal while deciding the appeal in ITA No. 526/Mum/2012 dated 01.03.2013. In these factual scenario, the A.O was completely erred in ignoring the evidences filed by the assessee to recompute the short term capital gain by taking into account total sale consideration received from M/s. Iswar Land Pvt. Ltd. The CIT(A) after considering relevant details, has rightly deleted additions made by the A.O towards recomputation of short term capital gain. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the CIT(A) order and dismissed appeal filed by revenue.
12. In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the Open Court on 14.06.2017
Sd/- Sd/-
(SAKTIJIT DEY) (RAJESH KUMAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, DATED: 14.06.2017
12
Ashok Murji Faria,
ITA no.3708/Mum./2013
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
By Order
Nishant Verma
Sr. Private Secretary
(Dy./Asstt.Registrar)
ITAT, Mumbai
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Ashok Murji Faria,
ITA no.3708/Mum./2013
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