ARJAN K. RAMANAI, MUMBAI v. ITO 9(1)-3, MUMBAI

ITA 2815/MUM/2011 | 2007-2008
Pronouncement Date: 30-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 281519914 RSA 2011
Assessee PAN ADQPR4676L
Bench Mumbai
Appeal Number ITA 2815/MUM/2011
Duration Of Justice 7 month(s) 19 day(s)
Appellant ARJAN K. RAMANAI, MUMBAI
Respondent ITO 9(1)-3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-11-2011
Date Of Final Hearing 21-11-2011
Next Hearing Date 21-11-2011
Assessment Year 2007-2008
Appeal Filed On 11-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI G.E. VEERBHADRAPPA PRESIDENT AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.2815/MUM/2011 (ASSESSMENT YEAR: 2007-08) SHRI ARJAN K. RAMANAI FLAT NO.7 SEA VIEW PALACE NARGIS DUTT ROAD 48 PALI HILL BANDRA MUMBAI -400 050 ....... APPELLANT VS ITO WARD NO.9(1)-3 MUMBAI ..... RESPONDENT PAN: ADQPR 4676 L APPELLANT BY: SHRI ASHWIN S. CHHAG RESPONDENT BY: SHRI P.K. B. MENON DATE OF HEARING: 21.11.2011 DATE OF PRONOUNCEMENT: 30.11.2011 O R D E R PER R.S. PADVEKAR JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-19 MUMBAI DATED 04.02.2011 FOR T HE A.Y. 2007-08. 2. THE FIRST ISSUE IS IN RESPECT OF ADDITION OF ` 88 86 700/- MADE BY THE A.O. U/S.41(1) WHICH WAS CONFIRMED BY THE LD. CIT (A) BUT TREATING THE SAME AS BENEFIT OR PERQUISITE U/S.28(I V) OF THE ACT. 3. A) THE FACTS PERTAINING TO THE ISSUE WHICH REVE ALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS CONSULTANT IN THE REAL ESTATE BUSINESS AND ALSO DIRECTOR IN THE COMPANIES NAMELY M/S. DHANKRISHNA ENTERPRISES PVT. LTD. SANA HOLIDAYS RES ORTS PVT. LTD. DHANKRISHNA ESTATES PVT. LTD. AND DARBARI CONSTRUCT IONS PVT. LTD. SO ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 2 FAR AS ASSESSMENT YEAR 2007-08 IS CONCERNED THE AS SESSEE DECLARED THE INCOME FROM BROKERAGE AGRICULTURE INCOME SALA RY VEHICLE HIRE CHARGES RENT HIGHER CHARGES AND INTEREST INCOME E TC. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143(3). ON THE PERUSAL OF THE BALANC E-SHEET IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS SHOWN AN OUTSTANDING LIABILITY OF ` 88 86 700/- CLAIMED TO BE PAYABLE TO MRS. PRATIMA W AGH. THE A.O. SOUGHT THE DETAILS OF THE SAID LIABILITY. THE ASSESSEE STATED BEFORE THE A.O. THAT HE ENTERED INTO A MEMORANDUM O F UNDERSTANDING (MOU) FOR SALE OF HIS AGRICULTURE LAND WITH MRS. PRATIMA WAGH AND MR. RAJESH WAGH AND RECEIVED AN ADVANCE AMOUNT OF ` 69 26 700/- (ON VARIOUS DATES TILL OCTOBER 2001). THE SAID AD VANCE WAS TOWARDS PART OF SALE CONSIDERATION OF AGRICULTURAL LAND OWN ED BY THE ASSESSEE IN WHICH IT WAS PROPOSED TO DEVELOP HOLIDAY RESORT BUT SAID PLAN WAS CANCELLED. THE MOU WITH MRS. PRATIMA WAGH WAS CANC ELLED ON 18.3.2003. THE AMOUNT RECEIVED FROM MRS. PRATIMA W AGH COULD NOT BE RETURNED DUE TO SEVERE FINANCIAL PROBLEMS BUT PA RT AMOUNT HAD BEEN PAID TO MRS. WAGH FROM TIME TO TIME. HE FURTH ER STATED THAT SOME OF THE GROUP COMPANYS CONTROLLED BY HIM AND H IS FAMILY MEMBERS HAD DEFAULTED THE REPAYMENT OF LOANS TAKEN FROM MARATHA MANDIR CO-OPERATIVE BANK LTD. AND IN VIEW OF THE AB OVE THE SAID BANK HAD ATTACHED ALL THE FAMILY PROPERTIES INCLUDING TH AT OF THE COMPANIES. HENCE THE LIABILITY OF MRS. PRATIMA WAGH COULD NOT BE REPAID. HE FURTHER REQUESTED TO THE A.O. THAT THE AMOUNT PAYAB LE TO MRS. PRATIMA P. WAGH AS OF 31.3.2007 SHOULD BE TREATED AS UNPAID LIABILITY AND SAME SHOULD BE CONSIDERED FOR TAX PURPOSE. B) THE A.O. TREATED THE ENTIRE OUTSTANDING LIABIL ITY OF THE ASSESSEE AT ` 88 86 700/- AS AN INCOME OF THE ASSESSEE U/S.41(1) BY TREATING CESSATION OF LIABILITY IN TERMS OF PROVISI ONS OF SEC.41(1) OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ADDITION BEF ORE THE LD. CIT (A) THE LD. CIT (A) WAS OF THE OPINION THAT THE A.O. WA S NOT JUSTIFIED IN TREATING THE SAID AMOUNT FOR THE PURPOSE OF ADDITIO N TO THE TOTAL ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 3 INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS O F SEC.41(1) OF THE ACT AS THE SAID LIABILITY WAS NOT WRITTEN OFF IN T HE BOOKS OF THE ASSESSE. BUT AT THE SAME TIME THE LD. CIT (A) WAS OF THE OPINION THAT THE SAID AMOUNT HAS TO BE TREATED AS BENEFIT OR PER QUISITE CONTEMPLATED U/S.28(IV) OF THE ACT FOR THE REASON T HAT THE ASSESSEE WAS ALSO IN THE HOSPITALITY BUSINESS AND HAD ENTERE D INTO A MOU WITH MRS. PTATIMA P. WAGH FOR THE PURPOSE OF DEVELOPING PROPERTY INTO HOLIDAY RESORT HENCE THE SAID AMOUNT WAS RECEIVED AS A TRADE ADVANCE TO FACILITATE RUNNING OF ITS HOSPITALITY BU SINESS. THE LD. CIT (A) WAS ALSO REFERRED TO A DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. T. V. SUNDARAM IYANGAR & SONS 222 ITR 344. IN SUM AND SUBSTANCE THOUGH THE ADDITION WAS CONFIRMED BY THE LD. CIT (A) BUT U/S.28(IV) OF THE ACT . NOW THE ASSESSEE IS I N APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES A ND PERUSED THE RECORDS. THE LD. COUNSEL VEHEMENTLY SUBMITS THAT T HE AMOUNT WAS RECEIVED AS AN ADVANCE TOWARDS LAND DEAL AND THE SA ID AMOUNT CANNOT BE TAXED AS BENEFIT OR PERQUISITE U/S.28(IV) OF THE ACT. HE SUBMITS THAT AS PER THE MOU THE ASSESSEE AGREED TO SALE HIS AGR ICULTURAL LAND IN VILLAGE: KARLA TALUKA: MAVAL DISTRICT: PUNE FOR T HE CONSIDERATION OF RS.1 44 68 467/-. SUBSEQUENTLY THE SAID AGREEMENT COULD NOT BE MATERIALISED AS THE PURCHASER DID NOT PAY THE BALAN CE AMOUNT AS PER THE TERMS OF THE MOU AND HENCE THE AMOUNT REMAINED OUTSTANDING. HE SUBMITS THAT THERE IS NO BUSINESS DEAL AND HENCE NO ADDITION CAN BE MADE. THE LD. COUNSEL RELIED ON THE FOLLOWING D ECISIONS TO SUPPORT HIS ARGUMENT THAT NO ADDITION CAN BE MADE U/S.24(I) OF THE ACT. (I) CIT VS. T.V. SUNDARAM IYANGAR & SONS LTD. - 222 ITR 344 (SC); (II) SOLID CONTAINER VS. DY CIT -178 TAXMAN 192; (III) HELIOS FOOD IMPROVERS P. LTD. -14 SOT 546 (MUM); (IV) MAHINDRA & MAHINDRA LTD. VS. CIT -261 ITR 501 (BOM); (V) G.P. INTERNATIONAL LTD. -186 TAXMAN 229 (P &H) ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 4 5. WE HAVE ALSO HEARD THE LD. D.R. WE FIND THAT TH E ASSESSEE IS A DIRECTOR IN M/S. DHANKRISHNA ENTERPRISES PVT. LTD. M/S. SANA HOLIDAYS RESORTS PVT. LTD. M/S. DHANKRISHNA ESTATE S PVT. LTD. AND DARBARI CONSTRUCTIONS PVT. LTD. AS PER THE COPY OF MOU DATED 17.10.2001; MRS. PRATIMA P. WAGH AND MR. RAJESH P. WAGH (PAGES 22 23 24 25 26 & 27) THE ASSESSEE WAS THE OWNER OF THE AGRICULTURAL LAND BEARING SURVEY NO.73 AT VILLAGE KARLA TALUKA MAVAL DIST. PUNE ADMEASURING 20080 SQ. MTRS. AND THE ASSESSEE AGREED TO SALE THE SAID LAND TO MRS. PRATIMA P. WAGH AND MR RAJESH P. WAGH FOR THE SALE CONSIDERATION OF RS. 1 44 68 467/- AS PER THE CLAU SE 4 OF THE SAID MOU THE ASSESSEE AGREED TO COMPLETE ALL THE FORMAL ITIES FOR TRANSFERRING THE POSSESSION OF THE SAID LAND ON OR BEFORE 17.10.2002. THE TERMS OF THE PAYMENT OF CONSIDERATION ARE MENTI ONED IN CLAUSE 6 OF THE MOU. IN SUM AND SUBSTANCE THE MOU IS NOTHI NG BUT IT IS AN AGREEMENT TO SALE THE AGRICULTURAL LAND OF THE ASSE SSEE. AT THE TIME OF EXECUTION OF THE MOU THE ASSESSEE RECEIVED RS.69 2 6 700/- THE ASSESSEE HAS FILED THE COPIES OF THE CONFIRMATION F ROM MRS. PRATIMA WAGH FOR THE ACCOUNTING YEAR 2001-02 2002-03 2003 -04 2004-05 & 2005-06. AS PER THE CONFIRMATION LETTERS THE ASSE SSEE HAS MADE THE REPAYMENT OF THE FOLLOWING AMOUNTS:- (I) 31.3.2002 ` 1 45 000/- (II) 17.6.2003 ` 1 07 000/- (III) 18.7.2003 ` 40 000/- (IV) 11.9.2003 ` 3 00 000/- (V) 29.3.2003 ` 2 00 000/- (VI) 13.9.2005 ` 50 000/- (VII) 25.10.2005 ` 25 000/- (VIII) 28.11.2007 ` 50 000/- (IX) 20.03.2007 ` 50 000/- (X) 29.11.2007 ` 1 00 000/- (XI) 14.12.2007 ` 1 00 000/- (XII) 12.02.2008 ` 4 00 000/- ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 5 6. THE ASSESSEE HAS ALSO FILED A COPY OF THE BALANC E-SHEET FOR THE YEAR ENDING 31 ST MARCH 2007. IN THE CURRENT LIABILITY (SCHEDULE I) OUTSTANDING LIABILITY TO MRS. PRATIMA WAGH IS SHOWN AT ` 87 86 700/. 7. WE FURTHER FIND THAT AS PER THE CONFIRMATION LET TER SIGNED BY THE ASSESSE THE BALANCE IS SHOWN AT ` 90 86 700/- AS ON 31.03.2007. THOUGH THE LD. CIT (A) HAS OBSERVED THAT THE ASSESS EE HAS ALSO IN THE HOSPITALITY BUSINESS AND HENCE HE ENTERED INTO A M OU WITH MRS. PRATIMA P. WAGH WITH THE OBJECT TO DEVELOP THE PROP ERTY INTO HOLIDAY RESORT BUT AS PER THE DOCUMENTS ON RECORD WE FIN D THAT THE ASSESSEE RECEIVED THE AMOUNT AS PART OF THE SALE CONSIDERATI ON TOWARDS MOU TO SALE THE AGRICULTURAL LAND. BOTH THE AUTHORITIES B ELOW HAVE NOT DISPUTED THE GENUINENESS OF THE TRANSACTION. 8 THE PRINCIPLES LAID DOWN IN THE CASE OF SOLID C ONTAINER (SUPRA) ARE APPLICABLE IN THE SITUATION WHERE THE ADVANCES OR LOAN IS TAKEN DURING THE COURSE OF THE BUSINESS. BUT IN THE PRE SENT CASE AS PER THE EVIDENCE ON RECORD THE ASSESSEE HAD RECEIVED THE S AID SUM AS A PART OF THE SALE CONSIDERATION OF THE AGRICULTURAL LAND AND IN OUR OPINION THE PROVISIONS OF SEC.28(IV) ARE NOT APPLICABLE. T HE REVENUE HAS NOT CHALLENGED THE FINDING OF THE LD. CIT (A) THAT THER E IS NO CESSATION OF THE LIABILITY AND HENCE PROVISIONS OF SEC.41(1) AR E NOT APPLICABLE. IN THIS CASE WE FIND THAT THE ASSESSEE HAS GIVEN CONFI RMATIONS TO MRS. PRATIMA P. WAGH FROM TIME TO TIME AND THAT WILL EXT END THE PERIOD OF LIMITATION ALSO UNDER LIMITATION ACT. MOREOVER TH E ASSESSEE HAS NOT WRITTEN OFF THE AMOUNTS IN HIS BOOKS OF ACCOUNT. 9. AFTER CONSIDERING THE TOTALITY OF THE FACTS WE ARE OF THE OPINION THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN TREATING THE OUTSTANDING LIABILITY OF MRS. PRATIMA P. WAGH AS A BENEFIT OR P ERQUISITE WITHIN THE MEANING OF SEC.28(IV) OF THE AC. WE THEREFORE DELE TE THE SAID ADDITION. ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 6 10. THE NEXT ISSUE IS IN RESPECT OF COMPUTATION OF THE CAPITAL GAIN ON SALE OF PROPERTY AT PANCHGANI. THE ASSESSEE SOL D PROPERTY AT PANCHGANI FOR SALE CONSIDERATION OF ` 11 LAKHS. THE ASSESSEE HAS CLAIMED THE DEDUCTION OF ` 3 78 968/- ON ACCOUNT OF COST OF DEVELOPMENT. THE A.O. REJECTED THE CLAIM OF THE AS SESSEE BY GIVING THE REASON THAT NO DETAILS WERE FILED AND HENCE GENUIN ENESS OF THE SAID CLAIM COULD NOT BE VERIFIED. THE ASSESSEE CHALLENG ED THE FINDINGS OF THE A.O. BEFORE THE LD. CIT (A). THE LD. CIT (A) AS KED THE ASSESSEE TO FILE THE EVIDENCE TO PROVE THE CLAIM BUT AS NOTED B Y THE LD. CIT (A) THE ASSESSEE PLEADED HIS INABILITY TO PRODUCE THE SAME AS WAS NOT AVAILABLE DUE TO EFFLUX OF TIME. THE ASSESSEE RELI ED ON THE DIFFERENT DECISIONS. THE LD. CIT (A) WAS OF THE OPINION THAT IF ANY CLAIM OF EXPENDITURE IS MADE THEN ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF ITS CLAIM AND ACCORDINGLY THE LD. CI T (A) REJECTED THE CLAIM OF THE ASSESSEE FOR WANT OF PROOF. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR DS. THE LD. COUNSEL REITERATED HIS SUBMISSIONS ADVANCED BEFORE THE LD. CIT (A). THE BENCH PUT SPECIFIC QUERY TO THE LD. COUNSEL WH ETHER ANY SUPPORTING EVIDENCE IS FILED TO PROVE THE CLAIM? I N REPLY THE LD. COUNSEL SUBMITS THAT THERE IS NO DIRECT EVIDENCE B UT AS PER THE PURCHASE DEED AND SALE DEED OF THE PROPERTY IN QUES TION IT IS PLEADED THAT THE ASSESSEE HAS CARRIED ON THE CONSTRUCTION O N THE SAID PLOT OF LAND. IN OUR OPINION THE SAID PLEA OF THE ASSESSE E CANNOT BE ACCEPTED AS RIGHTLY OBSERVED BY THE LD. CIT (A). THE ONUS I S ON THE ASSESSEE TO PROVE THE CLAIM BY FILING THE RELEVANT EVIDENCE IN RESPECT OF COST INCURRED AS NOTHING HAS BEEN FILED BEFORE US ALSO T O PROVE THE CLAIM. IN OUR OPINION NO INTERFERENCE IS REQUIRED IN THE FINDINGS OF THE LD. CIT (A) WHICH ARE SELF-EXPLANATORY. WE ACCORDINGLY DISMISS GROUND NO.2 12. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH NOVEMBER 2011. SD/- SD/- ( G.E. VEERBHADRAPPA ) PRESIDENT ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE : 30TH NOVEMBER 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- 19 MUMBAI. 4) THE CIT-9 MUMBAI. 5) THE D.R. A BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 2815/MUM/2011 SHRI ARJAN K. RAMANAI 8 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 21.11.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 22.11.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER