Income Tax Appellate Tribunal - Mumbai
Dcit 3(3)(2), Mumbai vs Trinity Infratech P.Ltd, Mumbai on 6 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI
BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM
ITA No.2721/Mum/2017
(Assessment Year: 2012-13)
Dy. CIT-3(3)(2) M/s. Trinity Infratech Pvt. Ltd.
Room No. 609, 6th Floor, 171, 17th Floor,
Vs.
Aayakar Bhavan, M. K. Road, C Wing, Mittal Cout,
Mumbai-400 020 Nariman Point, Mumbai-400 021
PAN/GIR No. AAACT 3869 K
(Appellant) : (Respondent)
Appellant by : Shri D. G. Pansari
Respondent by : Shri Malav P. Sheth
Date of Hearing : 28.11.2018
Date of Pronouncement : 06.02.2019
ORDER
Per Shamim Yahya, A. M.:
This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-8, Mumbai ('ld.CIT(A) for short) dated 2012-13 and pertains to the assessment year (A.Y.) 2012-13.
2. The grounds of appeal read as under:
"1. Whether on the facts and circumstances and in law, the Ld.CIT(A) was right in deleting the addition of Rs.1,00,00,000/- made by the AO on account of being a beneficiary of accommodation entry, without appreciating the fact that during the search conducted by the Investigation Wing, Mumbai, it has been categorically admitted by Shri Praveen Kumar Jain and others that the formalities of issuing cheques is duly followed, but subsequently, the entire amounts are repaid in cash by the entry providers.
2. Whether on the facts and circumstances and in law, the Ld.CIT(A) was justified in accepting the assessee's computation of long term capital gains at Rs.1,61,00,375/-instead ofRs.2,30,44,395/- as computed by theAO, without appreciating the fact that if the value of the property valued by the Stamp Duty Authorities is more than the sale proceeds received by the assessee the capital gains on such transfer of property is to be recomputed on the basis of the rates taken by the Stamp Duty Authority as per the amended provisions of section 50C of the I.TAct, 1961.
Apropos ground no. 1 - Addition on account of accommodation entry:
3. Brief facts of the case are as under:2 ITA No.2721/Mum/2017
The Assessing Officer noted in the assessment order that the information has been received from the Director General of Income Tax (Investigation), Mumbai [DGIT(Inv), Mumbai] vide letter No.DGIT(Inv)/ Information/PJ/2013-14 dated 07.04.2014 intimating that the assessee company is one of the beneficiaries in the accommodation entry operation carried out by Shri Praveen Jain in Mumbai. That as per said information, the beneficiaries took the entries in the nature of sales, unsecured loans and share application money. That in the case of the assessee, it is informed that the has accepted accommodation entry amounting to Rs.1,00,00,000/- from M/s.Josh Trading Co. P. Ltd., during the previous year relevant to A.Y.2012-13.
4. That in the assessment proceedings, the assessee company has been asked to furnish complete details along with a note on the nature of transaction etc. That in response, the assessee company submitted a note, which is reproduced as under;
"With reference to your enquiry in respect of receipt of Rs.1 crore from M/s.Josh Trading Co. Pvt. Ltd, it is submitted that this amount was received as advance payment for payment towards Flat 202 in our proposed building, Laxminarayana Kripa on B.V road, Vile Parle (W). Flats second floor of the said building were subject to NOC from Charity Commissioner as the land flats on second floor belongs to Laxminarayan Trust and advance payment was made by the party subject to receipt of the NOC as per their letter dated 02.08.2011. As the said NOC was not received, the party demanded the advance payment back and the same was refunded in June 2012."
5. However, the A.O. was not convinced. He referred to the information received from the Investigation Wing that M/s. Josh Trading Co. Pvt. Ltd. was one of the concerned floated for giving accommodation entries and was found to having been run by Shri Praveen Kumar Jain Group. The A.O. referred to the search in the case of Shri Praveen Kumar Jain Group for the proposition that the bogus entry operation business was done by Shri Praveen Kumar Jain Group. Hence, the A.O. rejected the explanation of 3 ITA No.2721/Mum/2017 the assessee as an afterthought. Though the A.O. accepted that the assessee was having a project under progress wherein the assessee was constructing residential building and has received an advances from other payee also. However, he held that the assessee's submissions is wrong and the assessee has applied colour to the entry taken from Shri Praveen Kumar Jain Group run concern as advance. Hence, he added the impugned amount as unexplained accommodation entry.
6. Upon the assessee's appeal, the ld. CIT(A) noted that the assessee has submitted letter along with the confirmation of accounts from M/s. Josh Trading Co. Pvt. Ltd. ('JTC' for short)and evidence that the amount was received through RTGS towards advance against sale of flats. He noted his ledger narration says, "towards advance against sale on flat". Similar ledger account confirmation from JTC was filed to the A.O. showing the advance was subsequently returned in A.Y. 2013-14 towards cancellation of flat. The ld. CIT(A) further noted that JTC had given its PAN, address in its confirmation. Hence, the ld. CIT(A) opined that the letter from JTC clearly establishes the nature of the said transaction.
7. The ld. CIT(A) further observed that the A.O. has not disputed these facts that these details were sufficient for assessing officer to have made any further inquiries from JTC but he failed to do so. That nothing has been brought on record to establish that the above transaction was "accommodation entry" and it is seen that the assessing officer already had the confirmation that the amount was returned by the assessee not in cash but through cheques. That the fact that this was done by cheques on 07.06.2012 & 09.06.2012 & 09.06.2012, which was even before the assessing officer received 4 ITA No.2721/Mum/2017 information from Investigation Wing on 07/04/2014 also strongly indicates that the above transaction cannot be treated as "accommodation entry" in absence of any other proof. That it is trite law that suspicion of the highest order cannot take place of evidence. That in the instant case, the assessing officer has simply relied on the information received from Investigation Wing and reached his conclusions on suspicion formed from that. That in [2015] 59 taxmann.com 65 (Mumbai -Trib.) ITAT MUMBAI BENCH 'C' Cannon Industries (P.) Ltd. v. Deputy Commissioner of income-tax it was held:
In absence of any direct evidence showing non - genuineness of purchases, addition made on account of bogus purchases by merely relying on statements of third parties recorded under survey proceedings, was not sustainable.
8. Thereafter, the ld. CIT(A) placed reliance upon the following case laws for the proposition that the addition made on the basis of the presumption cannot be sustained:
a) CIT V Roman& Co (1968) 67 ITR 11 (SC)
b) CIT v Calcutta Discount Co Ltd (1973) 91 ITR 8 (SC)
c) Omar Salay Mohamed Sait vs CIT 1959 37 ITR 151 (SC)
d) DhirajlalGirdharilal v CIT (26 ITR 734)(SC)
e) Dr Anita Sahai v DIT (266 ITR 97)(AII)
f) MODI Creations Pvt Ltd v/s. ITO [2011] 13 taxmann.com 114 (Delhi)
g) CIT-IV v Shree Rama Multi Tech Ltd [2013 34 taxmann.com 32 (Gujarat)
h) CIT v Divine Leasing & Finance Ltd 158 Taxmann 440 (Delhi) (2007)
i) Nemichand Kothari v CIT (136 Taxman 216) (Gau)(2004).
j) CIT v value capital services (P) Ltd 307 ITR 334 (Delhi)(2008).
k) Parmit Textiles v ITO (ITA No. 4012 to 405 and 4020 to 2041/Mum/2012.
9. Further, the ld. CIT(A) referred to the case law for the proposition that the income assessed by the A.O. without supporting the material is not justified:
• CIT v Bhuvanendra 303 ITR235(Mad) • VinodSolanki Vs UOI (233) ELT 157(SC) • CIT v Kashiram Textile Mills (P) Ltd [2006] 284 ITR 61 (GUJ) • Saraswathi Oil Traders v CIT [2000] 254 ITR 259 (SC) • CITvsPVKalyanasundram (203 CTR 499) 5 ITA No.2721/Mum/2017
10. Accordingly, the ld. CIT(A) held that he did not find any merit in the action of the A.O. in treating the impugned transaction as "accommodation entry" and the addition of Rs.1,00,00,000/- is deleted.
11. Against the above order, the Revenue is in appeal before us.
12. We have heard both the counsel and perused the records. We have gone through the submissions of the parties along with the case laws relied upon. The ld. Departmental Representative (ld. DR for short) submitted that the addition was made on the basis of the information gathered from the search in Shri Praveen Kumar Jain Group companies. He submitted that the concerned party from whom the assessee has obtained the said advance was controlled by Shri Praveen Kumar Jain Group. Hence, he submitted that the presumption that the said accommodation entry is bogus, has been correctly gathered by the A.O.
13. Per contra, the ld. Counsel of the assessee submitted that the assessee has genuinely received an advance for flat purchased with all documentary evidence. He submitted that the A.O. has not disputed the fact that the assessee is engaged in the construction business and he is constructing multy story building. He further submitted that the A.O. is accepting that the assessee is receiving advances from customers for flat.
However, he submitted that the present advance has been not accepted by the A.O. only on the ground that the information was received that the entity giving the advances was related to Shri Praveen Kumar Jain Group. The ld. Counsel of the assessee pleaded that the confirmation, the address, PAN number and all the other details of the entity from whom the advances was received have been duly submitted and no defect has been 6 ITA No.2721/Mum/2017 pointed out in that. He further submitted that later on, on non fructification of the deal, the advances were returned also. This is also prior to the date of information receipt from Investigation Wing. The receipt and the repayment both were through banking channel. Hence, he submitted that the addition has been rightly deleted by the ld. CIT(A).
14. Upon careful consideration, we note that it is undisputed fact that the assessee is engaged in the construction of multi storage building. In the usual course of business, the assessee was receiving the advances for flats. The advance from M/s. Josh Trading Co. Pvt. Ltd. was also received in the usual course. The assessee has given the address, PAN number and confirmation of the parties. The advance was received through banking channel. Thereafter, when the deal did not materialize, the advance was returned also by banking channel. All these facts are not disputed by the Revenue. In fact, the A.O. has not made any enquiry himself to rebut the submission of the assessee. It is not the case that the address given by M/s. Josh Trading Co. Pvt. Ltd. is bogus or that the A.O. has made an enquiry and the said M/s. Josh Trading Co. Pvt. Ltd. has not responded. In these circumstances, in our considered opinion, the assessee has discharged the onus cast upon him. The A.O. has not brought on record any cogent material for the proposition that the advance received was bogus. It is settled law that the addition based upon surmise and conjecture de hors any enquiry whatsoever is not sustainable. Hence, in our considered opinion, there is no infirmity in the order of the ld. CIT(A). Accordingly, we uphold the same.
Apropos ground no.2: Addition on account of long term capital gain (LTCG for short):
15. Brief facts of the case on this issue are as under:
7ITA No.2721/Mum/2017
On this issue, the A.O. observed that from the Statement of Profit & Loss for the year ended 31.03.2012, the assessee has credited an amount of Rs.2,01,58,300 on account of Gain on Sale of Asset. From the computation of income, it is noticed that the assessee has worked out the Long Term Capital Gain as under:
Sale consideration Rs.3,00,00,000
Less: Transfer Expenses Rs.2,86,500
Less: Indexed Cost of acquisition [Year 2007] Rs.1,36,13,125
Long Term Capital Gain Rs.1,61,00,375
16. The A.O. further noted that during the assessment proceedings, the assessee has been requested to furnish the details and documentary evidences in relation to said income. That on perusal of the details submitted, it is noticed that the assessee has sold Tenement No.B 38 /149 situated at Sunder Nagar, Kalina, Santacruz (East), Mumbai -
400 098 on 05.08.2011 for a consideration of Rs.2,20,00,000 and as Stamp Duty Registration, market value of said property was Rs.1,37,37,500/-.
17. From the details submitted, the A.O. further noticed that the assessee has entered into another agreement with the purchasers for transfer of rights/of piece or parcel of tit-
bit plot admeasuring 331.15 sq.mtrs adjacent to Tenement No.B38/149. He noted that the assessee has considered the sale value for said plot at Rs.80,00,000 and therefore, taken the entire sale consideration at Rs.3,00,00,000 and computed Long Term Capital Gain accordingly. The market value of the said property as per Registration documents is mentioned as Rs.1,64,75,600 as against the value received by the assessee of Rs.80,00,000.
8ITA No.2721/Mum/2017
18. The assessee was asked by the A.O. to explain as to why the tit-bit land was transferred at a lower price than the stamp duty value. Further, taking into consideration the fact that the market value of the transaction of lease rights was Rs.1,64,75,600 and the assessee has received only Rs.80,00,000, which is less by Rs.84,75,600 the assessee was also asked to furnish its explanation as to why the difference should not be added to its income.
18. In response, the assessee company submitted as under;
'"There are 2 agreements for considerations for Rs.2,20,00,000 (stamp duty market value as on 05.08.2011 is Rs.1,37,37,500) and Rs.80,00,000 (stamp duty market value as on 22.07.2014 is Rs.1,64,75,600.
First agreement of Rs.2,20,00,000 is for Tenement No.B 38/149 situated at Sunder Nagar, Kalina, Santacntz (East), Mumbai-400098. Second agreement of Rs.80,00,000 is for piece or parcel of fit-bit plots of land admeasuring 331.15 sq. mts adjacent to Tenement No.B 38/149., but due to dispute with the purchaser the second agremeent was registered in 2014 instead of 2011. Since we had already received the whole consideration in July 2011, we have shown the sale consideration as Rs.3,00,00,000 (Rs.2,20,00,000 + Rs.80,00,000) in financial year 2011-12. Hence, we request you to consider the sales consideration of Rs.3,00,00, 000 instead of Rs.3,02,13,100 (Rs.1,37,37,500 + Rs.1,64,75,600), as the second agreement was registered in 2014 only because of dispute, hence showing a higher valuation of Rs.1,64,75,600.
19. The assessee further submitted as under:
"We had received total amount of Rs.3,00,00,000 from Rucha & Shirish Sanke for both, Kalina plot and lease rights in the said plot in F.Y.2011-12, when Agreement for plot dated 6th day of July 2011 for a consideration of Rs.2,20,00,000. However, it is submitted that the lease agreement was registered on 22.07.2014, payment for which of Rs.80 lakhs was received by us in 2011 itself. The value taken at the time of registration in 2014 of Rs.1,65,75,600 is the value of land already considered in in 2011. You will kindly appreciate that this enhanced value was taken at the time of registration in 2014. It was related only to the time the agreement was put in for registration."
20. The assessee further submitted that as per clause (i) of original lease agreement dated 03.04.2000 with MHADA, the tit bit area along the tenement No.B38/ 149 and not separately, in case of transfer of tenement, the tit-bit area will automatically stand transferred and as per clause 6, tit bit land allotted to lessee can be amalgamated with 9 ITA No.2721/Mum/2017 land previously conveyed by Kalina Cooperative Housing Society and therefore, the lease right in tit bit plot cannot be taken as a separate asset from tenement. The assessee submitted that due to dispute with purchaser the second agreement was registered in 2014 instead of 2011, but whole consideration has been received in FY 2011-12. In view of the above, the assessee was asked to furnish the market value/value for stamp duty purposes of said tit bit plot as on 31.03.2012. The assessee submitted that the stamp duty value for FY 2011-12 for said tit-bit land was ^1,49,44,020 and submitted the copy of ready reckoner for relevant period and calculation of stamp duty for FY 2011-12. The assessee requested to treat the entire transaction as a single transaction though two sale deeds were entered for technical reasons.
21. However, the A.O. was not satisfied. He rejected the assessee's contention by holding as under:
9.7. The submission of the assessee has been considered, however, the same is not acceptable. It is seen that both the transactions are different as vide first agreement the Tenement No.B38/149 situated at Sunder Nagar, Kalina, Santacruz (East), Mumbai was sold and vide second agreemenet is for piece or parcel of tit-bit plots of land admeasuring 331.15 sq. mtrs adjacent to Tenement No.B38/149.. but as pe the seaprate clauses in the first agreemnt the tit bit areas and the tenement are held to be not separate and in case of transfer of tenement, the tit bit area will automatically stand transferred. Even in the case both the transactions are considered to be one, the diference in the market value of the property and the actual sale proceeds received by the assessee is required to be taxed as assessee's income. Since the assessee has received the sale consideration and offered the same to tax in the year under consideration in respect of both the transactions, the capital gain on such sale is to be taxed in this year only.
9.8. As per the amended provisions of Sec.56C of the Income Tax Act, 1961, the full value of sale consideration shall be the value so adopted or assessed by the Stamp Duty Authority for the purpose of stamp duty. In the instant case, the assessee has received Rs.80,00,000 for transfer of lease rights of tit bit lands as against the market/stamp duty value as on 31.03.2012 of Rs.1,49,44,020. Since, the value of the property valued by the Stamp Duty Authorities is more than the sale proceeds received by the assessee, the capital gain on such transfer of property is to be re-computed on the basis of the rates taken by the Stamp Duty Authority as per amended provisions of section 50C of the Act.
Accordingly, the Long Term Capital Gain on sale of property i.e., Tenement No.B38/149 10 ITA No.2721/Mum/2017 as well as Titbit land adjacent to it, as per above two separate agreements is computed as under:
Sale Consideration for Tenement No.B38/ 149 Rs.2,20,00,000 Sale Considering for Transfer of Lease rights of adjacent tit bit land Sale Proceeds received Rs.80,00,000 Market Value/Stamp Duty Value Rs.1,49,44,020 Rs.1,49,44,020 Total Sale Consideration Less:
Cost of Transfer 2,86,500
Indexed cost of acquisition 1,36,13,125 Rs.1,38,99,625
Long Term Capital Gain Rs.2,30,44,395
22. From the above working, the Long Term Capital Gain on sale of above property works out to Rs.2,30,44,395/- as against the Long Term Capital Gain declared in the return of Rs.1,61,00,375/-. Therefore, the Long Term Capital Gain of the assessee determined at Rs.2,30,44,395 is hereby taxed in the hands of the assessee company.
23. Against the above order, the assessee appealed before the ld. CIT(A).
24. The ld. CIT(A) deleted the addition by holding as under:
5.5.3 A perusal of the deed of lease dated 22.07.2014 on page 3 shows that "As per the terms of Lease Agreement the leased tit-bit land is to be held by the lessee only along with the tenement No. 838/149 and not separately. In the case of transfer of tenement the tit-bit area will be automatically stand transferred." Thus, it can be seen that despite there being different agreements, the tenement and titbit area were required to be sold together. The total consideration received for the entire property was Rs. 3 crore against stamp duty valuation of Rs1,37,37,500/- for tenement and Rs.1,49,44,020/- for titbit plot adding to Rs. 2,86,81,520/-.
There is no dispute on these figures. Thus it is seen that the total sales consideration is higher than the valuation adopted by Stamp Duty Valuation Authority. 5.5.4 Section 50C of the Act can be invoked when there is "transfer by an assessee of a capital asset, being land or building or both". It cannot be invoked if what is being transferred is not "capital asset". In this context, the appellant has relied on jurisdictional case laws including Atul G Puranik vs ITO [2011] 11 taxmann.com 92 (Mumbai), which clearly hold that section 50C cannot be invoked on transfer of leasehold rights. Since there is no dispute that the impugned titbit plots were held under lease, the decisions of jurisdictional courts relied upon by the appellant have to be respectfully followed. Accordingly, this ground of appeal is allowed.
25. We have heard both the counsel and perused the records. We have gone through the submissions and the precedents relied upon. We find that in this case, the assessee 11 ITA No.2721/Mum/2017 had sold Tenement No.B 38 /149 situated at Sunder Nagar, Kalina, Santacruz (East), Mumbai- 400 098 to the purchaser and also right of piece or parcel of tit-bit plot adjacent to the said tenement to the same purchaser. The tenement and the land were sold through two agreements. This was because there were some disputes with the purchaser. The agreement of the lease deed shows that as per the terms of the lease agreement, the lease tit-bit land is to be held by the leaseee only along with the tenement and not separately. In the case of transfer of tenement, the tit-bit area will automatically get transferred. The above makes it abundantly clear that the tit-bit land was to be sold along with the tenement and it was only due to some dispute that the agreement for the tit-bit land was entered later on. The A.O. has found difference in the stamp valuation of the tit-bit land at the time of registration.
The assessee has received the entire consideration in July 2011. The stamp valuation of tit bit land as on 31.03.2012 was Rs.1,49,44,020/-. Hence, if both the agreements are considered in cohesive manner, it will be found that the total stamp duty valuation comes to Rs.1,37,37,500/- and Rs.1,49,44,020/- as compared to the sale consideration received by the assessee totaling to Rs.2,20,000/- + Rs.80,000/-. If this is considered, the sale value received is higher than the combined stamp duty value of the property. On this account, the ld. CIT(A) is correct in deciding the issue in favour of the assessee.
26. The assessee succeeds on another count also because in this case, the A.O. has invoked the provision of section 50C in the context of tit-bit leasehold land. It is admitted that it is a lease hold land and it has been held by the ITAT, Mumbai Bench in the case of Atul G Puranik vs ITO [2011] 11 taxmann.com 92 (Mumbai) that section 50C cannot be 12 ITA No.2721/Mum/2017 invoked on transfer of lease hold rights. Since there is no dispute that the impugned tit bit land was under lease, this decision fully applies and the application of section 50C in this case by the A.O. is not justified.
27. Accordingly, in the background of the aforesaid discussion and precedent, we do not find any infirmity in the order of the ld. CIT(A). Accordingly we uphold the same.
28. In the result, this appeal by the Revenue stands dismissed.
Order pronounced in the open court on 06.02.2019
Sd/- Sd/-
(Ram Lal Negi) (Shamim Yahya)
Judicial Member Accountant Member
Mumbai; Dated : 06.02.2019
Roshani, Sr. PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT - concerned
5. DR, ITAT, Mumbai
6. Guard File
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai