2013 (4) TMI 576 - AT - Income Tax

Inclusion of rental income from the property in the hands of assessee - period from 1.4.2000 to March 2001 - Held that - As assessee stated that the agreement to sale has been entered into on 1.4.2000. Clause 22 in the agreement for sale provides that the intending seller is ready to pay the rent from 1.4.2000 to 31.3.2001 to the intending purchaser. There is nothing on record to show that the purchaser was handed over possession on 1.4.2000 & the tenant was aware of the change in ownership and had agreed for paying the rent to the intended purchaser. In fact the agreement for sale requires the vendor (the Assessee herein) to obtain IT clearances and has also provided for obligation on the part of purchaser to maintain the property in good condition till such time. Thus CIT(A) has rightly held that the assessee continues to be a owner of the property atleast till March 2001 when the consideration was paid and hence the rental income from 1.4.2000 to March 2001 should be assessed in the hands of the Assessee - dismiss the Assessee s appeal on this issue. Addition u/s.68 - Held that - The AO examined the submissions of all the partners and concluded that the introduction of capital in respect of partners who are assessed to tax have not been reflected in the returns. In the case of Smt. Ratan Bai Kothari introduction of Rs.1,90,000 cannot be sustained as she had not given reasonable proof of the source of her savings. This has been further examined by the CIT(A) and the addition was confirmed. There was no further details submitted in the course of the hearing to persuade a different view. In the circumstances appeal of the assessee dismissed.

Summary

Issues:
1. Inclusion of rental income for the period 1.4.2000 to March 2001.
2. Addition under section 68 for unexplained credit.

Inclusion of Rental Income:
The appellant raised grounds regarding the inclusion of rental income from 1.4.2000 to March 2001, arguing that the rental income accrued to the buyers under sale agreements entered into by the assessee firm. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision to tax the rental income in the hands of the appellant. The CIT(A) reasoned that the sale consideration was paid by the buyers towards the end of March 2001, allowing them to enjoy the rent only after that period. The CIT(A) also noted discrepancies in the agreement dates and highlighted that possession was not handed over to the purchasers by 1.4.2000. The tribunal agreed with the CIT(A)'s findings, emphasizing that ownership rights were not transferred until the consideration was paid, and upheld the assessment of rental income in the assessee's hands.

Addition under Section 68:
The Assessing Officer added Rs.7,30,000 as unexplained credit under section 68 of the Income Tax Act. The entire amount was credited to the accounts of the partners, except for one partner, Smt. Ratan Bai Kothari. The AO concluded that the introduction of capital by partners who were assessed to tax was not reflected in their returns. Regarding Smt. Ratan Bai Kothari, the AO found her introduction of Rs.1,90,000 unsupported by reasonable proof of the source of savings. The CIT(A) confirmed the addition after examining the submissions, and the tribunal dismissed the appeal on this issue due to lack of additional details presented during the hearing.

In conclusion, the tribunal upheld the inclusion of rental income for the specified period and the addition under section 68, as decided by the Commissioner of Income Tax (Appeals) and the Assessing Officer, respectively. The Miscellaneous Application was treated as allowed, and the order was rectified accordingly.