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2015 (7) TMI 565 - AT - Income TaxDisallowance of expenditure - ₹ 3 crores paid to Mr. Lohade for withdrawing the civil suit along with his rights, title in the property - survey action u/s.133A of the I.T. Act was conducted - CIT(A) deleted the addition on the ground that the AO had erroneously interpreted the MOU as well as the statements of Mr. Arvind Jain, Director of M/s. Full Moon Housing Pvt. Ltd., i.e. the purchaser and the statement given by Mr. Sanjay N. Lohade - Held that - No infirmity in the order of the CIT(A) deleting the addition. As mentioned earlier, the MOU was found during the course of survey. Out of the 5 entries totalling to ₹ 9,26,46,600/- the amount of ₹ 2,11,46,600/- received by the assessee in cash was offered by him as additional income during the course of survey. The assessee has honoured this and included the same in his return of income. The Ist 3 items are accepted by the AO as genuine, therefore, we fail to understand as to how and why the amount of ₹ 3 cores should not be held as genuine as business expenditure when the same was paid to Mr. Lohade for surrendering his rights as per the MOU. The land in question was not free from litigation and civil suit was pending. Therefore, we find force in the argument of the Ld. Counsel for the assessee that the purchaser M/s. Full Moon Housing Pvt. Ltd. after evaluating the interest in the land of Mr. Sanjay N. Lohade and after negotiating for the amount paid the amount of ₹ 3 crores on their behalf and not on behalf of the assessee. It was the purchase who itself decided the terms of payment including the amount to be paid to Kadam Family, Mr. Sanjay N. Lohade and to the respondent and therefore the AO s observation that the said purchaser made the payment to Mr. Sanjay N. Lohade at the behest of the respondent, in our opinion, is incorrect. Further, in view of the above facts, the observation of the AO that Mr. Sanjay N. Lohade had no locus standi is also incorrect since Mr. Sanjay N. Lohade was given not only Power of Attorney but was also given the right to obtain the development agreement and purchase the said land in his name and for that purpose the entire litigation involved in Civil Suit No.1006/1996 was also required to be attended by him at his own cost and responsibility. Even if the amount of ₹ 3 crores would have been paid by the assessee to Mr. Sanjay N. Lohade for giving free and peaceful possession of the land to M/s. Full Moon Housing Pvt. Ltd. the said amount would have been allowed as deduction from the hands of Shri Kailash Babulal Wani, i.e. the assessee. Therefore, in our opinion, it is immaterial as to whether the amount has been paid to Mr. Sanjay N. Lohade by M/s. Full Moon Housing Pvt. Ltd. at the instance of the assessee or the assessee has paid directly to Mr. Sanjay N. Lohade from the total consideration. As mentioned earlier in the preceding paragraphs, the MOU was impounded, therefore, the contents of the MOU has to be considered and accepted as a whole. The revenue cannot be permitted to use a part of the MOU as correct and the other part as incorrect. Since the document impounded from the premises of the assessee shows payment of ₹ 3 cores to Mr. Sanjay N. Lohade which has been assessed in his hands as commission income and which has been upheld by the CIT(A), therefore, we find no infirmity in the order of the CIT(A) deleting the addition of ₹ 3 crores from the hands of the assessee - Decided against revenue. Unexplained expenditure - CIT(A) delted part addition - Held that - The assessee has given the details of expenditure of ₹ 25,00,000/- the details of which are already given above at para 16. It is not known from where the Assessing Officer had taken the figure of ₹ 4,10,000/-. We find except the other expenses/legal fees of ₹ 14,970/- the balance expenses are related to document franking and document registration demand draft. The legal expenses of ₹ 14,970/- is very nominal considering the transactions in question. We therefore, do not find any infirmity in the order of the CIT(A) deleting the addition of ₹ 4,10,000/-. - Decided against revenue.
Issues Involved:
1. Deletion of Rs. 3 crores received by Shri Sanjay Nemichand Lohade. 2. Deletion of Rs. 4,90,000/- unaccounted expenses out of Rs. 25 lakhs. Issue-Wise Detailed Analysis: 1. Deletion of Rs. 3 crores received by Shri Sanjay Nemichand Lohade: The Revenue challenged the deletion of Rs. 3 crores by the CIT(A), arguing that the payment was made on behalf of the assessee and should be included in the assessee's income. The facts reveal that the assessee, involved in trading land and property development, had entered into an MOU with Full Moon Housing Pvt. Ltd. to sell land for Rs. 9,26,46,600/-. The MOU specified payments including Rs. 3 crores to Shri Sanjay Nemichand Lohade for surrendering his rights. The AO doubted this payment, asserting it belonged to the assessee and was made on his behalf. The assessee argued that the payment was genuine and necessary to settle a long-standing civil suit involving the land. Shri Sanjay Nemichand Lohade played a crucial role in negotiating and settling the litigation, which was essential for the sale. The CIT(A) observed that the AO had accepted other payments mentioned in the MOU but erroneously interpreted the payment to Shri Lohade. The CIT(A) noted that the Rs. 3 crores were taxed as brokerage/commission income in Shri Lohade's hands, supporting the genuineness of the transaction. The Tribunal upheld the CIT(A)'s decision, emphasizing that the MOU found during the survey must be accepted in its entirety. The Tribunal found no infirmity in the CIT(A)'s order, noting that the payment was essential for resolving the litigation and facilitating the sale. The Tribunal also highlighted that the payment was made by account payee cheque and taxed in Shri Lohade's hands, further validating its legitimacy. 2. Deletion of Rs. 4,90,000/- unaccounted expenses out of Rs. 25 lakhs: The AO added Rs. 4,90,000/- to the assessee's income, stating that only Rs. 20,10,000/- of the Rs. 25 lakhs provided for registration and stamp expenses were explained. The assessee provided detailed expenses, including document franking, registration, and legal fees, totaling Rs. 25 lakhs. The CIT(A) deleted the addition, noting that the AO did not examine the details provided by the assessee and made the addition without proper inquiry. The Tribunal upheld the CIT(A)'s decision, finding that the assessee had adequately explained the expenses. The Tribunal observed that the legal fees of Rs. 14,970/- were nominal and justified, and the AO's figure of Rs. 4,90,000/- was unexplained. The Tribunal found no merit in the Revenue's appeal on this ground. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of both the Rs. 3 crores received by Shri Sanjay Nemichand Lohade and the Rs. 4,90,000/- unaccounted expenses. The decisions were based on a thorough examination of the facts, legal principles, and the genuineness of the transactions involved.
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