Income Tax Appellate Tribunal - Panji
Sadiq Shaikh, Panaji vs Assessee on 3 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PANAJI BENCH, PANAJI
BEFORE SHRI P.K. BANSAL, HON'BLE ACCOUNTANT MEMBER
AND SHRI D.T. GARASIA, HON'BLE JUDICIAL MEMBER
ITA NOS. 234/PNJ/2013 : (ASST. YEAR : 2009-10)
Mr. Sadiq Sheikh Vs. Dy. Commissioner of Income Tax,
FR 5, 4th floor, Souza Towers, Central Circle, Panaji, Goa
Opp. Municipal Garden, Panaji, (Respondent)
Goa - 403 001 (Appellant)
PAN : AMFPS2073J
ITA NOS. 235/PNJ/2013 : (ASST. YEAR : 2009-10)
Mrs. Sadia Sheikh Vs. Dy. Commissioner of Income Tax,
FR 5, 4th floor, Souza Towers, Central Circle, Panaji, Goa
Opp. Municipal Garden, Panaji, (Respondent)
Goa - 403 001 (Appellant)
PAN : AKQPS9076A
Appellant by : V.Y. Vaidya, Adv. &
S.C. Anvekar, CA
Respondent by : Smt. Asha Desai, DR
Date of Hearing : 03/09/2013
Date of Pronouncement : 27/09/2013
ORDER
PER P.K. BANSAL :
1. Since both the appeals have common grounds of appeal and relate to spouse of each other, therefore, both the appeals are being disposed off by this common order. The Assessee is governed by the provisions of Sec. 5A of the Income Tax Act and 50% of the income is apportioned in the 2 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) hands of his wife. Both the appeals have been filed against the common order of CIT(A) dt. 2.8.2013 by taking the following effective grounds of appeal :
1. On the facts and circumstances and in law the learned C.I.T (A) erred in confirming the addition of Rs.4,78,40,628/- (50% of Rs.9,56,81,255/- as per provisions of section 5A of I.T Act 1961) in an order passed u/s 153A r.w.s 143(3) of I.T. Act 1961.
2. The learned CIT(A) erred in making an addition of Rs.1,70,91,150/- in respect of 9 flats in Cabo Project which were surrendered to M/s Landscapre Developers vide agreement dated 26.03.2010 due to share of escalated cost of construction.
3. The learned CIT(A) failed to appreciate that 9 flats as above were subsequently sold by M/s Landscape Developers and entire consideration in respect of these 9 flats was received and accounted by them.
4. Without prejudice to the above the learned CIT(A) erred in making addition in the hands of the assessee of 9 flats sold and accounted by M/s Landscape Developers resulting in to double taxation.
5. The learned CIT(A) erred in confirming addition of Rs.7,85,90,105/- as alleged undisclosed receipts from sale of Cabo project by relying on loose sheet which were mere projections.
6. The learned CIT(A) failed to appreciate that the fact of projections was also deposed by the assessee on 25.03.2010.
7. The learned CIT(A) erred in not appreciating that the sale of flats in Cabo Project surrendered to M/S Landscape Developers was accounted by them on the basis of actual sale by them and there was no consideration or part thereof received by the assessee.
8. The learned CIT(A) failed to appreciate that amount of Rs.7,72,00,000/- was given to Mr. Dinar Tarkar by assessee for a separate transaction and the same was received back and both the entities have accounted and disclosed the same.
9. The learned CIT(A) erred in confirming the addition of Rs.7,85,90,105/- on the basis of other unrelated facts and relying on reply of Mr. Dinar Tarkar without cross examining the same. There was no evidence of assessee actually receiving any consideration or part thereof as alleged.
2. The brief facts of the case are that a search and seizure action has been taken in the case of the Assessee u/s 132 of the Income Tax Act at their residential premises on 25.2.2010. The return was filed by the Assessee originally declaring loss of Rs.12,46,907/-. In response to the notice u/s 153A, the Assessee filed return on 2.8.2011 by declaring total income at Rs.16,76,364/- in each case. The Assessment was completed by making 3 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) addition of Rs.Rs.4,78,40,628/- in each case of the Assessee in respect of the following :
i) On account of claim of surrender of 9 flats to M/s. Landscape Developers - Rs.1,70,91,150/-,
ii) Undisclosed receipt from sale of flats in Cabo project -
Rs.7,85,90,195/-.
When the matter went before CIT(A), CIT(A) confirmed both the additions.
3. Ground no. 1 since relates to total addition of Rs.4,78,40,628/- confirmed by CIT(A) in case of each assessee and since the Assessee has taken separate grounds in respect of each addition made which is included in the sum of Rs.4,78,40,628/-, in our opinion, this ground does not require any adjudication and is general in nature.
4. Ground nos. 2, 3 and 4 relates to one issue relating to the sustenance of the addition of Rs.1,70,91,150/- made by the AO and confirmed by the CIT(A). The facts relating to this grounds are that the Assessee had entered into an agreement dt. 5.10.2002 with M/s. Landscape Developers for the sale of part and portion of the property admeasuring 16140 sq. mtr. alongwith all its development rights for a consideration of Rs.2,52,40,000/-. The said sale consideration has to be paid to the Assessee in the form of super built-up area of 5884 sq. mtr. + 211 sq. mtr. terrace alongwith undivided share of the land proportionate to the said super built-up area. On the basis of the super built-up area, the Assessee was entitled to receive 42 flats alongwith 42 parking slots. As per the agreement to sale dt. 19.7.2004, the Assessee agreed to assign all the 42 flats in favour of Mr. Atanasio Teofilo Martins Monserrate. This agreement was subsequently amended by way of addendum dt. 5.3.2008 and according to that, Mr. Atanasio Monserrate was to receive 11 flats and accordingly the 4 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) builder, M/s. Landscape Developers confirmed the same and balance 31 flats were to be allotted to the Assessee. These 11 flats were as under :
11 flats allotted to Atanasio Monserrate 1 D-202 117.32 2 D-204 112.72 3 D-205 246.89 4 D-206 246.89 5 E-102 155.96 6 E-205 250.04 7 E-206 250.04 8 E401/501 (2 flats) 321.22 116.00 9 E-402 152.85 166.08 10 E-502 168.04 2021.97 232.08 50% of terrace 116.04 2138.01 Subsequently, agreement between the Assessee and Developer dt. 5.10.2002 got amended as per their verbal agreement on 4.4.2008 which was subsequently put into writing on 26.3.2010 and as per the amended agreement, it was agreed between the Assessee and M/s. Landscape Developers that the Assessee will allot 9 flats out of balance 31 flats to the Developer i.e. M/s. Landscape Developers and the Assessee shall not claim against these flats. These were as under :
5 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) 9 Flats 1 D-201 108.76 2 D-203 107.14 3 E-001 155.96 4 E-002 155.96 5 E-101 155.96 6 E-201 109.51 7 E-202 118.54 8 E-303 109.51 9 E-304 118.54 1139.88"
The Assessee was thus entitled for 22 flats details as under :
22 Flats 1 E-203 109.51 2 E-204 118.54 3 E-301 109.51 4 E-302 118.54 5 F-001 156.05 6 F-002 155.50 7 F-101 155.50 8 F-102 155.50 9 F-201 107.98 10 F-202 113.75 10.72 11 F-203 109.60 8.36 12 F-204 118.80 13 F-205 253.96 14 F-206 253.96 15 F-301 107.98 16 F-302 109.75 17 F-303 109.60 18 F-304 114.80 19 F401/501 316.78 117.33 20 F402/502 318.44 117.11 3114.05 253.52 50% of terrace 126.76 3240.81 Total area as per addendum 6518.70"
6 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) Thus, the total area of these 42 flats got increased to 6518.70 sq. mtr. in place of 5989.5 sq. mtr. as originally agreed. The relevant clauses of the said agreement are reproduced as under :
"NOW THIS AGREEMENT W1TNESSETH AS UNDER:
1) That under a agreement for Sale and Development dated 5th October, 2002 entered by and between the VENDOR and the DEVELOPER/PURCHASER, the VENDOR had agreed to/sell to the PURCHASER all that part and portion of the property admeasuring 16140 M2 (hereinafter referred to as the SAID PROPERTY) described in Schedule II hereinunder with the reservation of all the undivided share of land proportionate to the super built up area of 5884 M2 + 211 M2 (Terrace) i.e saleable area 5989.50 M2 situated at Taleigao within the limits of village Panchayat, Taleigao, for a total consideration of Rs.2,52,40,000/- (Rupees Two Crores Fifty Two Lakhs Forty Thousand only).
2) That it was agreed under the said agreement dated 5th October, 2002 that the DEVELOPER/PURCHASER will construct in the said property for the VENDORS a total super built up area of 5884 M2+ 211 M2 (Terrace) i.e saleable area 5989.50 M2 in terms of units, details of which are given in schedule IV of the said agreement dated 5th October, 2002 collectively valued at Rs. 2,52,40,000/- (Rupees Two Crores Fifty Two Lakhs Forty Thousand only) which amount will be set off towards the total consideration payable by the DEVELOPER/ PURCHASER to the VENDORS for the sale of the said property described in Schedule II therein.
3) That during the actual course of construction, the parties hereto realized that the actual soil conditions and the difficult terrain which forced, the DEVELOPER/PURCHASER to incur heavy extra costs of constructing R.C.C. toe wall, retaining wall for extra protection and also due to the exorbitant escalation in the cost of the construction material such as cement, steel, the cost of constructing the said property increased manifold and thus resulted in loss of income to the DEVELOPER/PURCHASER.
4. That in view of the above the parties hereto renegotiated the terms and by a verbal Agreement dated 4th April 2008, it was agreed between the parties hereto that the VENDOR shall allot nine flats as shown in schedule III hereinunder alongwith 9 (Nine) parking slots to the DEVELOPER/PURCHASER and that the DEVELOPER/PURCHASER shall be free to enter into agreement with any third party for the sale of the said flats at the price as shall be decided by the DEVELOPER/PURCHASER.
7 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10)
5. That the VENDORS do hereby confirm the said verbal agreement entered by and between the parties hereto and do hereby declare that the VENDORS shall have not any claim against said Flats shown in the schedule II hereinunder or the DEVELOPER/PURCHASER concerning the said Flats.
6. The VENDORS declare that the VENDORS have full consent to the Agreements entered by the DEVELOPER/PURCHASER, with the third parties for the sale of (the said Flats listed in schedule III hereinunder and that the said agreements are signed and executed in pursuance to the verbal agreement arrived between the VENDORS and the DEVELOPER/PURCHASER.
8. This Addendum shall be read along with the said Agreement dated 5th October, 2002 and the schedule IV of the said Agreement dated 5th October, 2002, is amended as schedule IV of this addendum and out of, which the parties hereto admit that the fiats identified in schedule V of this agreement are allotted by the VENDORS to Mr. Atanasio Teofilo Martins Monserrate for surrendering his rights to residential house and the undivided land admeasuring 5960 M2 a part of the subject property, under an agreement dated 19th July 2004 read with addendum dated 5th March 2008 entered by the parties hereto with said Mr. Atanasio Teofilo Martins Monserrate."
Alongwith both the agreements dt. 5.10.2002 and 26.3.2010, the Assessee has enclosed the schedule mentioning therein the super built-up area and the flats which are to be received by the Assessee (including those to be allotted to Atanasio Monserrate). The AO observed that during the search it was noticed that 9 flats out of the share of Shri Sadiq Sheikh in the project 'Cabo' were sold for a consideration of Rs.2,28,31,505/- during the impugned assessment year and the Assessee has not disclosed this sale consideration. On the basis of the statement recorded with reference to the question no. 16 and answer thereto, even though the Assessee stated that these flats relate to M/s. Landscape Developers and does not belong to the Assessee, the AO took the view that the Assessee has sold these flats and took the view that the Deed of Addendum dt. 26.3.2010 executed was only a colourable device adopted by the Assessee to benefit M/s. Landscape Developers and on that basis, the AO computed the gain on the consideration of Rs.2,28,31,505/- at Rs.1,70,91,150/- and added the same 8 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) in the income of both the Assessees (50% each). The Assessee went in appeal. The CIT(A) confirmed the addition.
4.1 Before us, the ld. AR vehemently contended that as per the agreement dt. 5.10.2002 the Assessee has sold 50% of the land admeasuring 16140 sq. mtr. being part and parcel of land admeasuring 1,28,826 sq. mtr. identified as 'Odxell' situated at Galeigao within the limits of Panaji Municipal Council, Tal. Tiswadi to M/s. Landscape Developers for a total consideration of Rs.2,52,40,000/-. As per the agreement the consideration has to be received by the Assessee in the shape of super built-up area of 5884 sq. mtr. + 211 sq. mtr. (terrace) i.e. saleable area of 5989.50 sq. mtr. It was estimated that this area will come for 42 flats. The number as well as the super built-up area of each flat was duly mentioned in Schedule-IV of the agreement. Subsequently, M/s. Landscape Developers contacted the Assessee and pointed out that there is a change in the super built-up area of the flats and even the prices of cement, steel etc. have also increased. Therefore, the value of 42 flats will be much more than Rs.2,52,40,000/- and therefore, the Assessee orally agreed with M/s. Landscape Developers to take only 33 flats, the super built-up area of which was more than 5989.5 sq. mtr. out of which 11 flats, the assessee has assigned in favour of Atanasio Monserrate vide agreement dt. 19.7.2004 and addendum thereto dt. 5.3.2008. The Assessee accordingly agreed and written agreement was executed as an addendum to the agreement of 5.10.2002 on 26.3.2010 mentioning therein this fact. For this, our attention was drawn towards Schedule III, IV and V to the agreement dt. 26.3.2010, copy of which is available at pg. 84-94 of the paper book. Our attention was also drawn towards the statement of the Assessee recorded u/s 131 just after the search by the DDIT (Inv.), Panaji. It was pointed out by referring to question no. 16, 17, 18, 19 to 22 that the agreement for assignment of rights in respect of 9 flats which the builder, M/s. Landscape Developers entered into, were found during the course 9 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) of search. These were duly registered before the revenue authorities by M/s. Landscape Developers in favour of Mr. Shabbar H. Khan, Mr. Mujiboddin H. Khan and Mr. Abdul Rehman Khan (Hyder Khan family). Copy of the agreement registered with the Sub-Registrar was placed before us. It was stated that while the DDIT asked in respect of these agreements in question no. 16, the Assessee clearly stated that these agreements does not relate to his part of built- up area and it belongs to M/s. Landscape Developers. Neither the AO nor the CIT(A) looked into these agreements which were duly registered with the Sub- Registrar but treated as if Assessee has sold these flats. Since these flats were not to be allotted to the Assessee as per the understanding between the builder and the Assessee, therefore, M/s. Landscape Developers transferred these flats in favour of buyers for consideration stated in respect of each of the flats. The total consideration for the 9 flats which is stated in the registered agreements to sell is Rs.2,28,31,505/-. The AO was not correct in treating the agreement entered into between the Assessee and M/s. Landscape Developers dt. 26.3.2010 to be a colourable device and being entered into to avoid tax in the hands of the Assessee. It was submitted that the sale consideration received in respect of these flats has duly been shown by M/s. Landscape Developers in its income chargeable to tax and M/s. Landscape Developers has duly paid the tax. Since the flats did not belong to the Assessee and were not received by the Assessee, the income arising from the sale of these flats should not be added in the hands of the Assessee. Had these flats gone to the share of the Assessee, M/s. Landscape Developers would not have transferred these flats to Hyder Khan and family and the vendor would have been the Assessee. Thus, it was contended that the addition so made must be deleted.
4.2 The ld. DR, on the other hand, relied on the order of the authorities below.
10 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) 4.3 We have carefully considered the rival submissions and perused the matter on record alongwith the order of the tax authorities below. We have also gone through the documents which have been referred to during the course of hearing before us. It is an undisputed fact that the Assessee has entered into agreement dt. 5.10.2002 with M/s. Landscape Developers in respect of land admeasuring 16,140 sq. mtr. which is part and portion of land admeasuring 1,28,826 sq. mtr. identified as 'Odxell' situated at Taleigao within the limits of Panaji Municipal Council, Tal. Tiswadi. As per the said agreement, the Assessee agreed to sell to M/s. Landscape Developers property admeasuring 16,140 sq. mtr. as described in Schedule - VI thereto alongwith all its development right for a consideration of Rs. 2,52,40,000/-. It was agreed that M/s. Landscape Developers will construct a total super built-up area of 5,884 sq.mtr. + 211 sq. mtr. (terrace) i.e. saleable area of 5,989.5 sq. mtr. in terms of units and set off same against the total consideration payable by M/s. Landscape Developers to the Assessee. The details of the units were given in Schedule - IV which consists of 42 units as well as 42 parking slots. Subsequently, M/s. Landscape Developers and the Assessee re-negotiated the terms and conditions and the Assessee by oral agreement dt. 4.4.2008 agreed that 9 flats alongwith parking slots shall be allotted to M/s. Landscape Developers and to give effect to this oral agreement, the agreement dt. 26.3.2010 was executed as an addendum to the agreement for sale and development dt. 5.10.2002. As per this addendum, the total consideration remains to be at Rs. 2,52,40,000/- but the same has to be set off against 33 flats, details of which are given in Schedule - IV. The Assessee waived 9 flats having super built-up area of 1,139.88 to M/s. Landscape Developers on re-negotiation. We noted that in the statement recorded u/s 131 subsequent to the search by DDIT (Inv.), questions were asked in respect of sale of these 9 flats in respect of which the income was added in the hands of the Assessee. The relevant questions and answers are reproduced as under :
11 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) Q.No.16 The following are the details of the agreements assignment of rights in respect of 9 flats in the project Cabo.
Sl. Date of Name of Buyer Consideration Flat no.
No. agreement (in Rs.)
1 24.04.2008 Mr. Shabbar H. Khan 2175200 D-201
2 24.04.2008 Mr. Shabbar H. Khan 2142800 D-203
3 24.04.2008 Mr. Shabbar H. Khan 2339400 E-001
4 28.04.2008 Mr. Shabbar H. Khan 4678800 E-001/101
5 28.04.2008 Mr. Mujiboddin H. Khan 2339400 E-002
6 28.04.2008 Mr. Mujiboddin H. Khan 1642650 E-201
7 28.04.2008 Mr. Mujiboddin H. Khan 1778100 E-202
8 29.09.2008 Mr. Abdul Rehman Khan 1697405 E-303
9 29.09.2008 Mr. Abdul Rehman Khan 4037750 E-302
Total 22831505
22831505 should not
Please explain why the above consideration of Rs 2,28,31,505 be brought to tax in your hands for AY 2009-10 in the year of assignment of your rights.
Ans. As per the agreement between M/s Land Scape Developers and me, portion does not come into my part of built up area and it to that of the builders, i.e, M/s Land Scape Developers. The above flats sold is from the share of the built up area of M/s Land scape Developers have nothing to do with the above sale agreements.
Q.No.17 Please let me know the details of the Flat Nos ear marked for you as consideration as per the development agreement.
Ans: The flats which are ear marked against the built up area, I am to receive are as per Schedule 2 of the addendum dated: 19.07.2004 me and Sri.Antatio Monseratte. Totally there are 42 flats out of which 11 flats have been assigned to Sri.Monseratte.
The 7 flat Nos. from 'D1 Block are 201 to 206.
17 flats from 'E1 Block Flat Nos. 002, 101, 102, 201 to 206, 301 to 304, 401, 402, 501 and 502.
From „F‟ Block 18 flats Nos. 001, 002, 101, 102, 201 to 206, 301 to 304, 401, 402, 501 & 502.
12 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) Q. No.l8 Please refer to the above two questions, the 9 flats referred in the question above are D-201, 203, E-001, 002, 101, 201, 202, 301 & 302. All these flats are out of those flats ear marked to you in your answer to Q. No. 16 and 17. Please reconcile your answers in the light of facts that have emerged.
Ans: I stand by the answers given in my answers to Question Nos 16 & 17. The answer to question No.16 & 17 is also correct, but there has been a modification to the agreement in respect of the built up area to be given to me in view of the escalator project cost. Hence, we relinquished our rights on 833 Sq.mtrs. equivalent to 9 flats which are referred in answer to Question No.16 & 17. Hence, the agreement is between the purchaser and the developers and we are not beneficiary of this particular transaction. Hence, there is no question of bringing to tax any amount in our hands.
Q.No.19 Please let me know, is there any document to substantiate your stand that you have surrendered 833 Sq.mtrs to the developers.
Ans: There is no agreement has drawn still. It is only an oral agreement.
Q.No.20 Please let me know whether you have entered into any oral with anybody which is subsistence today which has not been today.
Ans: I don't remember.
Q.No.21 From the above answers it can be seen that out of the 42 flats you were
entitle to receive as a consideration for giving your property for development. Out of that 11 flats have been earmarked as a consideration to sri. Monseratte for relinquishing his claim or giving possession of his control over the property. 9 flats have been surrendered in lieu of escalated cost of project. 18 flats have been agreed to sold to M/s Audi Construction Pvt. Ltd., Please let me know the status of the remaining 4 flats in the project Cabo forming part of your share of built up area.
Ans. The 4 flats are under my possessions which have been handed over to me. The flat Nos. are E-203, 204, 301 and 302.
Q.No.22 Please let me know when these flats were handed over to you.
Ans: These flats are handed over to me in the month of December 2009/January 2010."
From question no. 16 it is apparent that there were 9 agreements for assignment of the rights in respect of 9 flats. The total consideration as per these 13 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) agreements were Rs. 2,28,31,505/-. When the Assessee was asked in respect of these agreements, the Assessee clearly stated that these agreements do not relate to his part of the built-up area and it belongs to M/s. Landscape Developers. The Assessee has nothing to do with these sale agreements. Copy of these agreements was filed before us. We noted that these agreements had duly been registered in the office of the Sub-Registrar on the date as has been mentioned in question no. 16. The DDIT while recording the statement did not point out who is the seller or the vendor but has simply given the names of the buyers. From the agreements, we noted that each of the agreement for sale was registered by M/s. Landscape Developers in favour of the respective buyers as mentioned in question no. 16 for a consideration as has been mentioned in question no. 16. In none of the sale deeds, we noted, the Assessee is the vendor. Had the Assessee been the owner of these flats, the Assessee would have transferred these flats by executing these sale deeds before the Sub-Registrar office in favour of the respective buyers. From the registered agreements, it is apparent that it is M/s. Landscape Developers who has sold these flats to the various buyers against the consideration stated therein. We noted while going through the agreements that the description in respect of the agreements entered into between the Assessee and the vendor dt. 5.10.2002 has been referred to and the super built-up area was also referred to. This is apparent from Flat E-1, pg.
13. The Agreement for sale so registered nowhere states that each of the flat sold by M/s. Landscape Developers comes to the share of the Assessee or belonged to the Assessee. The first registered agreement for sale is dt. 24.4.2008. This clearly proves that there was an oral agreement entered into between the Assessee and M/s. Landscape Developers according to which it was agreed that these 9 flats will not come to the share of the Assessee. If these flats would have belonged to the Assessee, the registered agreement for sale would have not been executed by M/s. Landscape Developers, but by the Assessee. The AO and CIT(A) while making this addition preferred not to 14 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) disclose this fact, otherwise the addition could not have been made in the hands of the Assessee. While deciding whether the flats belonged to the Assessee, in our opinion, mentioning of the names of the buyers was not as relevant as mentioning the names of the vendor was relevant to decide to whom the income accrues. These agreements were very much in existence during the course of search clearly proves without any doubt that the Assessee had agreed not to take the super built-up area belonging to these 9 flats and therefore, addendum to the agreement dt. 5.10.2002 executed on 26.3.2010, in our opinion, cannot be regarded to be a colourable device to avoid the imposition of the tax on the Assessee. The income tax is leviable on the real income. If the income has not accrued to the Assessee, in our opinion, no tax can be levied on the Assessee. It is a settled law in view of the decision of the Hon'ble Supreme Court in the case of Parimisetti Seetharamamma vs. CIT, 57 ITR 532 in which it was held that when a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision. Where, however, receipt is of the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the Assessee. We are of the firm opinion that in this case what the revenue has done is that they have simply assessed income on the sale of the 9 flats which does not belong to the Assessee on the basis of suspicion. It is a settled law that suspicion, whatsoever strong it may be, it cannot take place of actuality. Since the flats do not belong to the Assessee as per the terms and conditions agreed between the Assessee and the Developer and the material found during the course of the search by way of agreement registered by M/s. Landscape Developers, we are of the firm view that no income has arisen or accrued to the Assessee out of the sale consideration of Rs. 2,28,31,505/- in respect of the 9 flats. We, accordingly, delete the addition amounting to Rs. 1,70,91,150/- (50% in case of each of the Assessee).
15 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10)
5. Ground nos. 5, 6, 7, 8 & 9 relates to the common issue relating to addition of Rs. 7,85,90,105/- (50% being added in the hands of each of the Assessee). The brief facts relating to these grounds are that during the course of search at the office of M/s. ESAR Builders, folder A/E/3 was seized from pg. 46-48. The pg. 46-48 contains details regarding Cabo project constructed by M/s. Landscape Developers. It was noted by the revenue from pg. 48 that the sale consideration for flats sold at Cabo was received partly in cash and partly by cheque. The relevant part of the sheet is reproduced as under :
Sq. mts. Rate Cheque Cash Total
1 2 Bed Room (Non Seaview) 108.00 50000 20000 30000 5400000
Shabbar 107.00 50000 20000 30000 5350000
228.50 75000 15000 60000 17137500
A 3 Bed Room (Seaview) 153.96 85000 15000 70000 13086600
3 Bed Room (Seaview) 153.96 85000 15000 70000 13086600
2 3 Bed Room (Seaview)
Manoj 153.96 85000 15000 70000 13086600
2 Flats 228.50 75000 15000 60000 17137500
3 2 Flats Ref 303/304 228.50 75000 15000 60000 17137500
1362.38 101421700
From pg. 46 of the seized material states as under :
"*Area as per first agreement of 05-10-02 5989.50 Less : Area sold by Babush 1920.50 4069.00 Less : Area Sold to Audi Constructions 2657.95 1411.05 Less : Area sold to Hyder Khan Family 1362.38 Balance Area 48.67 Due to revised list of increased area after the Agreement of Babush Balance available Area in „E‟ Block = 228.50 Less 48.67 Surplus Area 179.83"
On the basis of these seized papers, it was analysed that pg. 46 corroborates with the built-up area of 1920.50 given to Mr. Babush (Atanasia Monserrate) as per agreement dt. 5.10.2002. As per agreement with M/s. Audi Construction 16 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) Pvt. Ltd., the built-up area of 2657.95 was sold for consideration of Rs. 15.15 crores and the income arising from the said transaction is being proposed to be declared by the Assessee for A.Y 2011-12. The built-up area of 1362.38 mentioned as 'area sold to Hyder Khan family' is also a true transaction. It was observed that the total area mentioned as sold to Hyder Khan family at pg. 46 is 1362.38 which is the same area as has been mentioned in pg. 48 as sold to Hyder Khan family and therefore, Hyder Khan family has paid consideration of Rs.10,14,21,700/- for a super built-up area of 1362.38. When this paper was confronted to Sadiq Sheikh, Sadiq Sheikh stated in the statement recorded on 25.3.2010 that this was only projections and these figures will not appear in any documents. The AO took the view that the Assessee has not disclosed the sale consideration of Rs. 10,14,21,700/- for which Assessee has sold flats to Hyder Khan family. It was also noticed by him that the next part of the seized paper, pg. 48 reads as under :
B Flat given to Parvez 10,14,21,700
C Flat - forest dept 20,00,000
15,00,000
D 2 Flats given to Adam 40,00,000
E Flat allotted to Azim Mohidiri 50,00,000
11,39,21,700
Add: 15 interest -April 2008 to August 2,15,52,111.3
2009( on item A)
Add: 15 interest on 7,72,00,000 April 08 1,15,80,000
to March 2009
(Amount refunded) 14,70,53,811
Less : Cancellation of 2 flats sold to Mujib
1.71,37,500
Khan retained By Sadiq Sheikh
12.99.16.311"
The AO on the basis of this paper noticed that the Assessee invested Rs. 8.25 crores in the flat given to Parvez, Forest Department, Adam and Azim Mohidiri and this is the same amount which has been declared under the head 'unexplained expenditure' for the project 'Cabo' by the Assessee vide letter dt.
17 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) 10.4.2010 and in the statement recorded u/s 131 dt. 12.4.2010. The Assessee has given the money to Mr. Dinar Tarkar and his concerns amounting to Rs.7.72 crores which was re-paid by Mr. Dinar Tarkar and his concerns subsequently and this amount has been shown as amount refunded and against the same, interest @ 15% worked out for the period April, 8 to March, 9 at Rs. 1,15,80,000/-. There is a mention of cancellation of two flats sold to Mujib Khan which is retained by Sadiq Sheikh amounting to Rs.1,71,37,500/-. These flats, E-303 and E-304 was sold by Sadiq Sheikh to Abdul Rehan Khan vide sale deed dt. 26.3.2010. There is mention of above flats in pg. 33 of NEB/3 and pg. 47 of Annexure A/EB/4 wherein the second column appears to be the cash portion received on sale of the above flats which matched with the cash portion mentioned on pg. 48 of A/EB/3. The AO after affording an opportunity to the Assessee made the addition in respect of sum of Rs. 7,85,90,195/- after reducing the sum of Rs. 2,28,31,505/- being the sale consideration of 9 flats sold to Hyder Khan family. The Assessee went in appeal before CIT(A). The CIT(A) also confirmed the addition by observing as under :
"I find that the appellant has failed to substantiate the surrender of 9 flats to Landscape Developers for which agreements to sale have already been entered into 2008 while the said modification to the development agreement has been shown to have been entered much later, on 26.03.2010, that is after the search proceedings in the case of the appellant and after bringing on record that proceeds from these sale agreements/sale deeds have not been declared by the appellant. Moreover, it is seen that the appellant has failed to establish any details with regard to the escalation cost for which these flats are stated to have been surrendered to builder.
No evidence with regard to the cost of construction of the flats in respect of Cabo project has been brought on record despite repeated queries even during the course of appeal with regard to A.Y. 2008-09 (Refer Appellate Order in ITA No.181/DCIT,CC, Panaji/CIT(A)-VI/B'lore/2011-2012 of Mr Sadiq Sheikh and ITA No.176/DCIT,CC, Panaji/CIT(A)-VI/B'lore/2011-2012 of Mrs Sadia Sheikh of even date). In such circumstances, there is no justification that these 9 flats had to be surrendered on account of increase in cost of construction. Under such circumstances, the appellants' claim that these 9 flats were surrendered to M/s 18 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) Landscape Developers for the purpose of increased cost of construction cannot be accepted. In such circumstances, the appellant is eligible to receive the consideration (in terms of number of completed flats) he has received as per the agreements to sell and is therefore liable for tax on the same.
It is clear that the transfer of these 9 flats to M/s Landscape Developers is a business deal in which the appellant has earned income in respect of cash component and the cheque component is stated to be accounted in favour of the developer. This foregoing of right over the 9 flats by the appellant is for this consideration received by the appellant in cash.
It is clear therefore that the value of the flats is `10.14 crore as evidenced by the seized documents mentioned above which has accrued to the appellant. Merely because he has entered into an agreement to give the flats to the builder, subsequent to the findings of the search action, does not make the said transaction a genuine one. The sum of `10.14 crore is therefore taxable as the income of the appellant after giving credit to the cost of acquisition. No separate addition on account of surrender of flats to the builder being a notional income is necessary. This takes care of the issue at (1) as well.
6. The appeal is disposed of with the above findings."
5.1 The ld. AR before us vehemently contended that the Assessee has got to do nothing with these papers. It is merely a rough paper and had the paper belonged to the Assessee, at pg. 48 the Assessee would have not mentioned his name while mentioning 'cancellation of 2 flats sold to Mujib Khan retained by Sadiq Sheikh'. Nobody will mention his name while keeping the record. The flats to Hyder Khan family has been sold by M/s. Landscape Developers and not by the Assessee. The registered sale deed has been executed by the Developer and not by the Assessee. This fact has duly been accepted when Mr. Dinar Tarkar, the key person of M/s. Landscape Developers was summoned u/s 131 and his statement on oath was recorded on 25.11.2011. In this regard, attention was drawn towards question no. 29 and answer thereto was relevant. On the basis of this question it is apparent that the cheque portion of the sale has duly been received by M/s. Landscape Developers and this fact has also been accepted by the tax authorities. A document has to be accepted in toto. If the 19 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) cheque portion has been received by M/s. Landscape Developers, how the Assessee can receive the cash portion? The cash, if any, has been received on the sale of these flats which belonged to M/s. Landscape Developers and should have been assessed in the hands of M/s. Landscape Developers. The Assessee has not received any such cash at all. It was stressed that this relates to the same 9 flats which were not allotted by M/s. Landscape Developers to the Assessee in view of the oral agreement dt. 4.4.2008 subsequently put into writing on 26.3.2010. The Sale Deed in respect of these flats has been executed by M/s. Landscape Developers. M/s. Landscape Developers even tried to sell two flats belonging to the Assessee for which the Assessee did not agree. Therefore, the area is mentioned as 1362.38 sq. mtr. If the area of 228.5 sq. mtr. in respect of 2 flats belonging to the Assessee is reduced, the area will come to 1133.88 sq. mtr. Our attention was drawn to the details of the 9 flats. It was pointed out that the difference of 6 mtr. is in respect of 3 flats bearing nos. E-001, E-002 and E-101. The area as agreed, as stated in the schedule and in the agreement dt. 26.3.2010 was 155.96 sq. mtr. each while on the paper bearing page no. 48 of the seized document A/EB/3 mentions 153.96 sq. mtr. each. Thus, the area as mentioned is tallying in respect of the total area of the flat sold by M/s. Landscape Developers as detailed in question no. 16 and these 9 flats are the same flats to which ground nos. 2, 3 and 4 relate. The CIT(A), therefore, preferred to dispose off both the grounds together. The ld. AR even submitted written submission as under :
"There was a search in the office of M/S Essar Builders of which Mr.Sadiq Sheikh is Managing Director and during search certain loose sheets were found and seized which are reproduced on pages 5,6 and 9 of CIT (A) order. The addition is made by taxing the cash portion in respect of 9 flats sold by M/S Landscape Developers on the basis of these loose sheets.
1. The addition was made merely on the basis of loose sheet and the assessee claimed that it was a mere projection, there has to be circumstantial evidence about the same. Mere entries in seized 20 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) material are not sufficient to prove that the assessee has indulged in such a transaction. Reliance is placed on the decision in the case of CIT v Maulikkumar K Shah 307 ITR 137 (Guj). In the said decision the Hon'able High Court considered the decisions in the case of S.K.Gupta v DCIT 63 TTJ 532 (Del) wherein on similar facts it was held that the addition can not be made merely on the basis of diary found during search without any circumstantial evidence. It also considered the decision in the case of CIT v Durga Prasad More 82 ITR 540 ( SC ) wherein it was held that," The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look in to the surrounding circumstances to find out the reality of the recitals made in those documents."
In the case of CIT v Badar Durrez Ahmed and Rajiv Shakdher 308 ITR 230 the Hon'able Delhi High Court has held that no addition can be made when there was no corroborative or direct evidence to presume that the notings/jottings recorded in the said two diaries had materialised in to transactions giving rise to income which has not been disclosed in regular assessment in regular books of account.
2. There was no circumstantial evidence found in the form of extra cash or unexplained investment to the extent of Rs.7.85 cr. and cash found of Rs.2.50 lakh was explained and accepted. Reliance is placed on the decision in the case of S.P.Goyal v DCIT 82 ITD 85 ( Mum ) In the case of ACIT v Kences Foundation (P) Ltd 289 ITR 509 (Mad) it was held that, " Whether since at time of search except for said documents, no other material was found to hold that assessee received any cash from the purchasers for sale of built up area, documents seized from premises of assessee could not be said to be a conclusive proof to arrive at undisclosed income.
In the case of Nirmal Fashions (P) ltd v DCIT 25 SOT 387 (Kol) while considering applicability of section 292C r.w.s 132 of I.T.Act 1961 it was held that when addition was made on the basis of loose papers by making certain presumptions which are found to be unteanable as no significant asset outside the books or no evidence of ostensible expenditure outside the books was found, the addition deserves to be deleted.
3. The assessee in oath statement in reply to Q.No.69 and 71 also specifically stated that these are mere projections. Reliance is placed on the decision in the case of Krupeshbhai N Patel v DCIT 25 taxmann.com 443 ( Ahd ) wherein it was held that in absence of any 21 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) direct evidence about receiving on money, it was to be concluded that loose papers were merely in the nature of offer which was made to the assessee.
4. As referred in loose sheet the very fact that interest calculations were made indicates that this transaction did not materialize.
5. The very fact that M/S Landscape Developers have accounted the sale of these 9 flats indicates that no payment in respect thereof was received by the assessee.
6. In any case sale of 9 flats surrendered by the assessee to M/S landscape Developers and sold, accounted by them cash portion can not be added in assessee's hand merely on the basis of loose sheet without any circumstantial evidence.
7. The assessee has been first unjustifiably taxed on the surrender of flats to M/S Landscape Developers at its value. Besides the same flats when sold by M/S Landscape Developers have been again taxed in the hands of the assessee. Taxing of income in the hands of assessee at every incidence clearly indicates non application of mind while making the addition.
8. On page 5 of the assessment order addition has been made as undisclosed receipts from sale of flats in Cabo where as on page 20 in Computation part it is held as unexplained investment in Cabo project indicating non application of mind in making the addition.
9. The CIT (A) has referred to transaction of payment of Rs.7.72 cr by assessee to Mr. Dinar Tarkar for acquiring stake in Minescape Group of companies. The transaction was normal business transaction through banking channel. The said amount was subsequently refunded to the assessee as the said stake could not be allotted. The payment and refund through banking channel by the assessee is properly accounted and disclosed.
10. While making the addition the CIT (A) has referred to statement on oath of Mr. Dinar Tarkar wherein the sale of 9 flats by M/S Landscape developers is clearly established. In the said statement Mr. Dinar Tarkar accepted the sale of 9 flats but denied receipt of cash portion as stated in loose sheet. However no cross examination of the purported payer was done.
22 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) In the case of Prakash Chand Nahta v CIT 301 ITR 134/170 Taxman 520 (MP) it was held that, "in the absence of affording a reasonable opportunity of cross examination the addition could not be sustained. In the present case addition is done without any cross examination which was required to be done in the interest of natural justice. This was also pressed before the Hon CIT Appeals VI, in point no 7 of submission dated 24.07.2013 filed and acknowledged by the CIT (A), Bangalore which was totally brushed
11. In view of the above and coupled with the facts that i) M/S Landscape Developers have sold these 9 flats and accounted sale proceeds, ii) no extra cash or investment outside books was found iii ) cash of Rs.2.50 lakhs found was explained and accepted, iv ) addition is made on the basis of loose sheet without any circumstantial evidence, the addition of Rs.7.85 deserves to be deleted."
5.2 The ld. DR, on the other hand, relied on the order of the tax authorities below.
5.3 We have heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. We have also gone through the case laws as relied by the ld. AR. We noted that we have deleted the addition in respect of sale of 9 flats by giving the finding that the flats do not belong to the Assessee but belong to M/s. Landscape Developers and these flats have duly been transferred by M/s. Landscape Developers. We have gone through the seized papers 46, 47 and 48, copy of which is available on record in the paper book at pg. 118 to 120, Annexure E/EB/4 and Folder A/E/3. As reproduced in the brief facts, from these papers it appears that it contains the details of 11 flats and 2 flats and it is mentioned that the sale of 2 flats cancelled sold to Mujib Khan retained by Sadiq Sheikh. Thus, there remain only 9 flats sold. This paper gives measurement of each of the flat and also the rate per sq. metre and details of cheque and cash of the total consideration in respect of each flat sold has been mentioned. From the area of the flat which is 1362.38 sq. mtr. if we reduce the area of 2 flats belonging to the Assessee which were cancelled, the area comes to 1133.88 sq. mtr. We also noted that in respect of 3 flats, the area 23 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) mentioned is 153.96 sq. mtr. in this table while as per the schedule attached to the agreement, the area is 155.96 sq. mtr. each. Therefore, we agree with the ld. AR that these papers relate only in respect of the sale of 9 flats. This fact is also apparent from the statement of Mr. Dinar Tarkar, the key person of M/s. Landscape Developers, whose statement was recorded by the revenue on 25.11.2011 and in reply to question no. 29 & 30, he stated as under :
"Q.29. Now, I am drawing your attention to Page No.48 of the seized inventory, numbered A/EB/4, a copy of which has already been served on Landscape Developers. The said inventory indicates both consideration by cheque and cash. After detailed verification, it was found that the cheque portion has been accounted in your firm, Landscape Developers. I am showing you the said inventory once again, please go through the same and confirm whether the cash element mentioned therein are accounted or not? You are requested to furnish documentary evidence in support of the transaction.
Ans. On going through the papers numbered A/EB/4, portion A, it appears that Mr. Sadiq Sheikh had a sub deal with these parties. I have come to know about this for the first time and I am shocked at this revelation. All my doubts are getting more and more clear. Landscape developers has nothing to do with this statement found in the premises of Sadiq Sheikh.
0.30. It is true that the said paper is found and inventoried from the premises of Mr. Sadiq Sheikh. However, the properties mentioned there in are sold by M/s Landscape Developers and stated to have accounted in the books of accounts, ie. Amount received by cheque as reflected in the said inventory. When you are accepting the receipt of cheque portion mentioned in the inventory there are entries regarding the cash in the same inventory? How can you deny the receipt of cash and what is basis for the same.
Ans. The cash portion mentioned in the subject paper is either a private deal of Mr. Sadiq Sheikh or another story like the letter to Shri. Armando. I have personally not spoken to Mr.Sadiq Sheikh for almost three years and I have no idea of what he is meaning with this calculation sheet. I want categorically state that myself or M/s Landscape Developers has not received single amount in cash and the responsibility of this paper lies solely and fully with Mr. Sadiq Sheikh."
Since these flats belong to M/s. Landscape Developers and have duly been sold by M/s. Landscape Developers as is apparent from the registered sale deed, 24 ITA NOS. 234 & 235/PNJ/2013 (ASST. YEAR : 2009-10) copy of which are placed on record and about which we have mentioned while disposing off ground nos. 2, 3 and 4, in our opinion, if any cash is received in respect of this transaction, that would have been received only by M/s. Landscape Developers and not by the Assessee. Had the Assessee received the cash, the Assessee would have not mentioned about the cheque and it is not the case of the revenue that these flats have been sold by the Assessee by taking the cheque. The revenue also accepted that the cheque has been received by M/s. Landscape Developers and has duly been accounted for by them. We do not agree with the revenue that while these flats have been sold, the cash would have been received by the Assessee and the Assessee would have given the cheque to M/s. Landscape Developers. Therefore, we are of the firm view that the cash received in respect of the 9 flats belonged to M/s. Landscape Developers and the revenue is directed to assess the said amount in the hands of M/s. Landscape Developers. We, therefore, set aside the order of CIT(A) and delete the addition made in this regard with the direction that the cash portion as stated at pg. 48, if the Department choses, may treat as income of M/s. Landscape Developers. Thus, ground nos. 5, 6, 7, 8 & 9 stands allowed.
6. In the result, both the appeals filed by assesses are allowed.
7. Order pronounced in the open court on 27/09/2013.
Sd/- Sd/-
(D.T.Garasia) (P.K. Bansal)
Judicial Member Accountant Member
Place : PANAJI / GOA
Dated : 27/09/2013
*SSL*
25 ITA NOS. 234 & 235/PNJ/2013
(ASST. YEAR : 2009-10)
Copy to :
(1) Appellant
(2) Respondent
(3) CIT, Panaji
(4) CIT(A), Panaji
(5) D.R
(6) Guard file
True copy, By order
Sr. Private Secretary
ITAT, Panaji, Goa