2016 (5) TMI 806 - AT - Income Tax

Capital gain liability - assessee charged commission from the original owners for executing sale deeds as GPA holder - Held that - The character of transaction would not change even if commission charged or not. Considering the above facts, it is clear that when revenue has accepted contention of the assessee in subsequent assessment year 2008-09 that assessee acted as GPA holder only and no capital gain is chargeable in his hands, therefore, on identical facts, revenue cannot direct to charge capital gains in the hands of the assessee for selling properties by the assessee as GPA holder on behalf of the owners of the properties. The Revenue authorities shall have to follow rule of consistency. Assessee is not owner of the properties of which he has acted as GPA holder only. No profit arises on executing Sale Deed by assessee as GPA holder. There is also no transfer of capital asset by assessee so as to attract the provisions of capital gains in his hands. Addition, therefore, is wholly unjustified and shall have to be deleted. We, accordingly, set aside the orders of authorities below and delete the addition - Decided in favour of assessee Addition in respect of advance money received from the buyers - Held that - According to the agreement, the buyer shall have to get Sale Deed registered and to pay the balance amount by 05.01.2007. It is admitted fact that no sale deed was executed and terms of the agreement were not complied with. The assessee claimed to have refunded advance money of ₹ 50,000/- to the buyer but no evidence have been produced in support of the contention that actually assessee refunded amount of ₹ 50,000/- to the buyer. Mere entry in the cash book without supporting document is not enough to prove the return of the amount in question, therefore, authorities below as per agreement, rightly inferred that amount in question have been forfeited and as such had become income of the assessee. - Decided against assessee Addition on account of 15% disallowance out of development charges - Held that - No merit in this ground of appeal of the assessee. The assessee pleaded before ld. CIT(Appeals) that he is not investigating agency and has no power to call any person for investigation. The explanation of the assessee shows that assessee has no evidence or material to rebut findings of authorities below. This ground of appeal has no merit, the same is dismissed. - Decided against assessee Addition on account of commission paid for sale of plot - Held that - No merit in this ground of appeal of the assessee. The assessee failed to produce any evidence of payment of the commission. No particulars were given and no evidence have been filed as to what services have been rendered by the agent on behalf of the assessee. In the absence of any evidence, we do not find any merit in this ground of appeal of the assessee.- Decided against assessee Disallowance of proportionate interest on account of interest free loans for non business purposes - Held that - Restore this issue to the file of Assessing Officer with direction to re-decide this issue after verifying the facts of availability of the capital and reserve funds with the assessee and direct Assessing Officer to re-decide this issue in the light of decision of Hon ble Supreme Court in the case of Hero Cycles P. Ltd. (2015 (11) TMI 1314 - SUPREME COURT OF INDIA ). Addition being 1/5th of several expenses i.e. petrol expenses, car repair, driver s salary and telephone expenses etc. confirmed No specific details have been produced before us to prove that these expenses have not been used by assessee and his family members for personal purpose - Decided against assessee

Issues Involved:
1. Addition of ?45,57,569/- on account of capital gains.
2. Addition of ?50,000/- in respect of advance money received from buyers.
3. Disallowance of ?3,17,712/- out of development charges.
4. Addition of ?12,000/- on account of commission paid for sale of plot.
5. Disallowance of ?2,58,004/- out of interest on account of interest-free loans for non-business purposes.
6. Disallowance of ?20,010/- being 1/5th of several expenses like petrol, car repair, driver's salary, and telephone expenses.

Detailed Analysis:

1. Addition of ?45,57,569/- on account of capital gains:
The assessee, engaged in the purchase and sale of land, sold land worth ?80,27,109/- during the year. The Assessing Officer (AO) received information from the Investigation Wing and the Commissioner of Income Tax, Karnal, indicating that the assessee carried out 61 transactions, including 4 purchases and 57 sales. The AO noted that 17 transactions were made by the assessee as a General Power of Attorney (GPA) holder for certain individuals. The AO summoned these individuals, but they did not appear. Some purchasers confirmed that deals were made with the assessee and payments were made to him. The AO inferred that the assessee was the real owner of the property, purchased in benami names, and added ?45,57,569/- as capital gains.

The CIT(A) upheld the AO's findings, noting that the assessee failed to produce confirmations from the property owners. The assessee contended that he acted only as a GPA holder and did not own the properties. The Tribunal found that the GPA did not prove ownership by the assessee and that the report of the Inspector and statements of purchasers were not confronted to the assessee, violating principles of natural justice. The Tribunal also noted that in the subsequent year, the AO accepted the assessee's explanation that he acted as a GPA holder, following the rule of consistency. Thus, the addition of ?45,57,569/- was deleted.

2. Addition of ?50,000/- in respect of advance money received from buyers:
The AO added ?50,000/- as the assessee failed to provide evidence of returning the advance money to the buyer after the deal was canceled. The CIT(A) upheld the addition, noting that according to the agreement, the amount should be forfeited if the sale did not proceed. The Tribunal found no evidence supporting the assessee's claim of refunding the money and upheld the addition.

3. Disallowance of ?3,17,712/- out of development charges:
The AO disallowed 15% of development charges due to lack of signatures and addresses on some vouchers. The CIT(A) upheld the disallowance. The Tribunal found no merit in the assessee's appeal, noting the failure to establish the genuineness of the expenses, and upheld the disallowance.

4. Addition of ?12,000/- on account of commission paid for sale of plot:
The AO added ?12,000/- as the assessee failed to provide evidence of commission payment. The CIT(A) upheld the addition. The Tribunal found no merit in the assessee's appeal, noting the lack of evidence and particulars, and upheld the addition.

5. Disallowance of ?2,58,004/- out of interest on account of interest-free loans for non-business purposes:
The AO disallowed proportionate interest as the assessee made interest-free loans for non-business purposes. The CIT(A) upheld the disallowance, relying on a High Court decision. The Tribunal noted that the Supreme Court overruled the High Court decision in a subsequent case, emphasizing the need to consider the availability of capital and reserves. The Tribunal set aside the orders and remanded the issue to the AO for reconsideration in light of the Supreme Court decision.

6. Disallowance of ?20,010/- being 1/5th of several expenses:
The AO disallowed 1/5th of expenses like petrol, car repair, driver's salary, and telephone expenses due to the possibility of personal use. The CIT(A) upheld the disallowance. The Tribunal found no specific details to prove the expenses were not used for personal purposes and upheld the disallowance.

Conclusion:
The Tribunal partly allowed the appeal, deleting the addition of ?45,57,569/- on account of capital gains and remanding the issue of interest disallowance for reconsideration. The other additions and disallowances were upheld.

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