Income Tax Appellate Tribunal - Hyderabad
Acit, Circle - 4(1), Hyderabad vs K Pratap Reddy (Huf),, Hyderabad on 30 November, 2017
THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos. 641/Hyd/2014
Assessment Year: 2006-07
Shri K. Pratap Reddy, vs. The Asst. Commissioner of
(HUF), Hyderabad. Income Tax, Central
Circle-4(1), Hyderabad.
PAN - AAEHP5655G
(Appellant) (Respondent)
ITA Nos. 1353/Hyd/2014
Assessment Year: 2006-07
The Asst. Commissioner of vs. Shri K. Pratap Reddy,
Income Tax, Central (HUF), Hyderabad
Circle-4(1), Hyderabad. PAN - AAEHP5655G
(Appellant) (Respondent)
Assessee by : Shri A. Srinivas
Revenue by : Smt Shalani Bhargava
Kaushal
Date of hearing : 06-11-2017
Date of pronouncement : 30-11-2017
ORDER
PER P. MADHAVI DEVI, J.M.:
Both are cross appeals for the A.Y 2006-07, filed by the assessee as well as the Revenue.
2. Brief facts of the case are that the assessee, an HUF, filed its return of income for the A.Y 2006-07 on 28-07- 2006 declaring total income of Rs. 1.27 crores under the head 'short term capital gains'. Later, the A.O came to 2 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
know that the assessee has received cash of Rs. 1 crore from one T.C Ashok as per the agreement of sale deed dated 22-08-2005, and that the assessee has not offered it to tax. Therefore, the assessment was reopened by issuance of a notice u/s 148 of the IT Act, dated 31-03- 2012. In response to the same, the assessee filed a letter dated 09-05-2012, requesting the A.O to treat the return of income filed on 28-07-2006 as the return of income filed in response to the notice u/s 148 of the Act.
3. During the assessment proceedings u/s 143(3) r.w.s 147 of the IT Act, the A.O observed that during the course of search and seizure operation in the case of Shri T.C Ashok, plot No. 63, Road No. 72, Prashasan Nagar, Jubilee Hills, Hyderabad, it was noticed that Shri T.C Ashok entered into various transactions with the assessee and as per the agreement of sale for 5 acres of land at Kukatpally village, the assessee has received Rs. 1 crore from Shri T.C Ashok on 22.08-2005. Therefore, the assessee was asked to show cause as to why the said amount of Rs. 1 crore should not be added to the total income of the assessee. The assessee vide letter dated 07-12-2013 submitted his explanation. But, not convinced with assessee 3 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
explanation the A.O made Rs. 1 crore to the return income of the assessee.
4. Thereafter, the A.O also proceeded to consider the correctness of the 'short term capital gain' admitted by the assessee. From the computation of capital gain, he observed that the assessee has claimed Rs. 3,66,35,775/- to be the cost of acquisition. The assessee was asked to file the details of sale consideration and the cost of acquisition. The assessee, vide its letter dated 27-03-2012, filed the copies of sale deed and submitted that the assessee received an amount of Rs. 1.27 crores as short term capital gain as it has entered into the agreement of sale along with M/s Kashthofa Corporation, as GPA holder, and that it was Kashthofa Corporation which sold certain lands in Gachibowli village, Serilimgampalli, RR District for a total sum of Rs. 4.93 crores. Further, vide letter dated 08-03-2013, assessee further explained that there was a litigation in r/o these lands sold by M/s Kashthofa Corporation and that some of the land owners approached the assessee to settle the matter between the owners and buyers and the matter went up to the Hon'ble Andhra Pradesh High Court, for adjudication and the Hon'ble Court 4 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
has decided the matter in October 2005 and the assessee collected the sale consideration from the purchasers and handed it to M/s Kashthofa Corporation and various other tenants totaling to Rs. 3.67 crores. The assessee submitted that he was only a consenting party and for this purpose, he has received a net compensation of amount Rs. 1.27 crores. The A.O, however was not convinced about the payment of Rs. 3.66 crores by the assessee to M/s Kashthofa Corporation. He observed that the assessee has furnished the list of 20 parties along with their addresses and the details of the amount paid to them and has claimed Rs. 12,35,775/- as expenses incurred on registration. A.O observed that the addresses of the parties are not complete and therefore directed the assessee to produce all the parties before him on 18-03- 2013. Since none appeared before the A.O nor any information was furnished to him on 18-03-2013, the A.O held that the entire expenditure i.e Rs. 3.66 crores is to be disallowed and added to the total income. Further, he also held that the amount of Rs. 4.93 crores received by the assessee is an amount for settlement of disputes between the parties and therefore it takes the character of windfall 5 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
income which is taxable under the head 'income from other sources' u/s 56 of the IT Act. He therefore brought the entire amount of Rs. 4.93 crores to tax in the hands of the assessee.
5. In addition to the above, the A.O also verified the documents filed along with the return of income and observed that the assessee has claimed to have received (i) a sum of Rs. 50 lakhs as advance towards sale of plot at Banjara Hills, Green City Estate Pvt Ltd.; (ii) a sum of Rs. 90 lakhs returned by the owners from the advances paid by the assessee earlier; (iii) sum of Rs. 55,00,000/- as amount received from Punna Reddy and Kota Reddy, and; (iv) sum of Rs. 45,00,000/- received from Apurupa Constructions. In reply to the show cause notice, the assessee filed confirmation letter for the sum of Rs. 45 lakhs but could not substantiate with any evidence in respect of the credits of Rs. 50 lakhs, 90 lakhs and 55 lakhs. AO therefore treated the same as unexplained cash credits u/s 68 of the IT Act and brought it into tax.
6. Aggrieved, the assessee preferred an appeal before the CIT(A), who granted partial relief to the assessee by deleting (i) the addition of Rs. 1 crore and; (ii) the 6 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
disallowance of Rs. 3.66 crores. With regard to the addition of Rs. 55 lakhs and 50 lakhs, CIT(A) remitted the issue to the A.O to verify the claim of the assessee and to allow the same if found to be correct. However, he confirmed the addition of Rs. 90 lakhs for lack of substantiating evidence.
7. Aggrieved by the relief granted by the CIT(A) in deleting the addition of Rs. 3.66 crores only, the Revenue is in appeal before us, while against the confirmation addition of Rs. 90 lakhs, the assessee is in appeal before us.
8. We find that the substantial addition is being challenged by the Revenue, and therefore, the Revenue's appeal is taken up for adjudication first.
9. The first ground is in support of addition of Rs. 3.66 crores. The Ld. DR supported the order of the A.O and submitted that the assessee has failed to substantiate the necessity of making payment of Rs. 3.66 crores to various parties and therefore, according to him, the entire receipts being income of the assessee, are rightly brought to tax in its hands.
7
ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
10. The Ld. Counsel for the assessee, on the other hand, submitted that the parties whose names are reflected in the assessment order are all parties before the Hon'ble High Court of Andhra Pradesh wherein they have claimed to be protected tenants and therefore cannot be ousted from their possession of the property. He submitted that the Hon'ble High Court has confirmed their rights as protected tenants and has held that the assessee and M/s Kashthofa Corporation are not owners of the property. Since persons through whom, the assessee has purchased and sold the property does not belong to those persons, as held by the Hon'ble High Court of Andhra Pradesh and subsequently confirmed the Hon'ble Supreme Court, the property cannot be treated as the property of the assessee and any income therefrom cannot be treated as assessee's income. He submitted that consequent to the judgment of the Hon'ble Supreme Court (supra) it is imperative that the assessee has to collect the money back from the vendors and has to return the same to vendees and therefore no part of the money received is income of the assessee. However, he conceded that the assessee himself has offered Rs. 1.17 crores as his 'short term capital gain' and therefore the 8 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
assessee cannot withdraw his claim and since he has already paid taxes thereon, the order of the CIT(A) needs to be confirmed to that extent only.
11. Having regard to the rival contentions and the material on record, we find that the assessee has been shown as a consenting party in the agreement of sale for sale of certain lands at Gachibowli. It is also not in dispute that the parties to the sale deed have claimed their right in the property before the Revenue authorities, which issue has travelled to the Hon'ble High Court, and Hon'ble High Court has accepted that they are the protected tenants and that the parties to the sale agreement have no right to sell. Therefore, the said agreement becomes null and void. In such circumstances, whether it can be said that the entire receipt of Rs. 4.93 crores is assessee's income? The assessee would be entitled to entire sale consideration, provided, it is the owner of the property. There is no finding of the A.O that the assessee is the owner of the property and that he is entitled to receive the entire sale consideration. The fact that all the parties to the sale deed have participated in the proceedings before the Hon'ble High Court of Andhra Pradesh and that the 9 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
Hon'ble High Court has held that they are not owners of the property itself proves that the assessee is not the title holder of the property and, therefore, cannot retain the entire sale consideration for itself. Before the litigation, the assessee was required to make payment to the alleged property owners and the assessee has claimed to have made the payment of Rs. 3.66 crores. The A.O has not questioned the quantum of payment but has only questioned the requirement of making the payment. We find that the CIT (A) has considered the factual position and also the judgment of the Hon'ble High Court of Andhra Pradesh as well as the Supreme Court of India to hold that the entire amount of Rs. 4.93 crores is not the income of the assessee. Therefore, we see no reason to interfere with the order of the CIT(A) in deleting the addition of Rs. 3.66 crores and accordingly, the appeal of the revenue is dismissed.
12. Coming to the assessee's appeal against the confirmation of Rs. 90 lakhs, we find that the assessee claimed to have received a sum of Rs. 90 lakhs from the protected tenants, which was disclosed in the 'receipts and payments account' but since the assessee did not furnish 10 ITA No. 641 & 1353/Hyd2014 Shri K. Pratap, (HUF), Hyderabad.
any evidence to substantiate his claim of receiving the sum of Rs. 90 lakhs from the advance paid by him earlier, the CIT(A) has confirmed the addition. Even before us, the ld. Counsel for assessee has not filed any evidence in support of the assessses's contentions. In view of the same, we see no reason to interfere with the order of the CIT(A) on this issue also and accordingly the appeal of the assessee is dismissed.
13. In the result, both the appeals of the assessee as well as the Revenue are dismissed.
Pronounced in the open court on 30th November , 2017.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 30th November, 2017. KRK 1 Shri K. Prathap Reddy, (HUF), 2-2-25P/5/1, D.D. Clolony, Baghamberpet, Hyderabad.
2 ACIT, Central Circle-4(1), Hyderabad. 3 CIT(A)-V, Hyderabad 4 Addl. CIT, Range-4, Hyderabad.
5 The DR, ITAT Hyderabad 6 Guard File