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2020 (2) TMI 714 - AT - Income TaxDisallowance selling expenses incurred in respect of sale of land - payment was made in cash in violation of the provision of sec. 269SS and 269ST - payment was made to avoid any legal dispute - period for filing the suit for specific performance under Specific Relief Act, 1963 - case of the assessee before us that the amount of ₹ 36.00 lakhs was paid to Kisan S. Kharat on account of settlement entered between the assessee and Kisan S. Kharat with a view to improve the title of the assessee - HELD THAT - In accordance with the law, the period for filing the suit for specific performance under Specific Relief Act, 1963 is provided for three years from the date of agreement. In the present case, the agreement was entered into between Aruna G. Jadhav and Bhausaheb R. Katore and Kisan S. Kharat on 16-3-2009 and therefore, the period of limitation ends on 16-3-2012. Meaning thereby a suit for specific performance and declaration filled by Shri Kisan S. was maintainable upto 16-3-2012, as per Article 54 of the Limitation Act 1961. If we look into the amendment made in the suit, there is no reference of encumbrances on the property purchased by the assessee and there is no claim for recovery of damages etc. for ₹ 36,00,000/- - the compromise document dated 3-12-2012, it is clear that the suit filed by shri Kisan S. Kharat was unconditionally withdrawn and therefore, there was no occasion of making the payment of ₹ 36.00 lakhs to Kisan S. Kharat made by the assessee. From contents of compromise document, it is crystal clear that the suit was withdrawn by Kisan S. Kharat unconditionally and there was no reference of making of the payment by the assessee Shri Hirabai Katore. Besides Hirabai Katore there are other co-defendants in the suit and it is not clear which of the defendants have entered into the compromise with the plaintiff. Moreover, in the sale document, there is clear stipulation that the property is free from any kind of encumbrances. There is one more reason to dis-agree with the contention of the learned A.R. that the amount of ₹ 36.00 Lakhs were paid pursuant to the agreement vide receipt dated 4-12-2012. On cursory glance of the document, it is clear that stamp paper on which the affidavit was made, was purchased by Bhausaheb R. Katore and details of alleged payment of ₹ 36 Lakhs in installment given to Kisan S. Kharat, as on 16-6-2012, 3-12-2012 and 4-12-2012 for an amount of ₹ 12.50 lakhs, ₹ 12.50 lakhs and ₹ 11.00 lakhs respectively. The Bench is unable to accept that the payment of ₹ 12.50 lakhs was given on 16.06.2012 by the assessee in cash even prior to institution of the suit by Kisan S. Kharat and admittedly the suit was filed on 8-12-2012 only i.e much after making the payment and purchase of property by the assessee. The evidence relied upon before us by the assessee in the form of affidavit at page 48 cannot be considered and is required to be rejected being self serving document and contrary to normal circumstances. We are of the opinion that the amount of ₹ 36.00 lakhs was allegedly paid in cash and the assessee has not been able to disclose the source for making the alleged payment to Shri Kisan S. Kharat. Even otherwise, if a person makes the payment in cash beyond the stipulated amount as provided by the Act then there is a violation of the said provision of sec. 269SS of the Act. If Shri Kisan S. Kharat admitted to have received the amount in cash from the assessee then he is liable for violation of provision u/s 269ST of the Act. In respect of other payment allegedly paid by the assessee to Bharat B. Choudhari for an amount of ₹ 25.00 lakhs, we are of the opinion that firstly, Shri Bharat B. Choudhari had sold the property along with Katore viz. Hirabai B. Katore on 13-7-2012 for a total consideration of ₹ 50.00 lakhs. Secondly, being the owner of the property, the entire sale consideration falling to his share had already been received and admitted by Shri Bharat B. Choudhari in the sale document executed on 30.07.2012. Therefore, there was no reason or logic for paying unauthorized amount of ₹ 25.00 lakhs on the date hereinabove mentioned by the assessee in cash. In our view, the payment was made in cash in violation of the provision of sec. 269SS and 269ST. There was no improvement in the title of the assessee or the improvement in the property as no evidence was led before us showing that Shri Bharat B. Chowdhury had contributed substantially either before the Collector or before the Civil Court. Further, we may record that the Collector had issued the certificate on 14/12/2011 i.e. much prior to the purchase of property by the assessee on 30.07.2012, hence, there was necessity to make the payment to this person as well. In view of the above, the findings recorded by the lower authorities are in order and no interference is called for. Appeal of the assessee is dismissed.
Issues Involved:
1. Disallowance of selling expenses amounting to ?36,00,000/- paid to Mr. Kisan Kharat. 2. Disallowance of selling expenses amounting to ?25,00,000/- paid to Mr. Bharat Chaudhari. 3. Classification of ?61,00,000/- as selling cost to be reduced from the sales consideration. Detailed Analysis: 1. Disallowance of selling expenses amounting to ?36,00,000/- paid to Mr. Kisan Kharat: The assessee claimed that ?36,00,000/- was paid to Mr. Kisan Kharat to settle a civil suit for specific performance, which was necessary to clear encumbrances on the property and facilitate its sale. The Assessing Officer (AO) and the CIT(A) disallowed this expense, stating that there was no evidence linking the payment to the acquisition cost of the land. The Tribunal noted that the suit was filed after the purchase of the property and was withdrawn unconditionally without mentioning any payment. The Tribunal found the payment to be unrelated to the acquisition of the land and dismissed the claim, citing lack of evidence and violation of provisions under Section 269SS of the Income Tax Act. 2. Disallowance of selling expenses amounting to ?25,00,000/- paid to Mr. Bharat Chaudhari: The assessee contended that ?25,00,000/- was paid to Mr. Bharat Chaudhari for his assistance in litigation before the Collector and Civil Court. The AO and CIT(A) disallowed this expense, arguing that Mr. Chaudhari had no standing in the matter and had already received his share of the sale consideration. The Tribunal upheld this finding, noting that the payment was made in cash, violating Section 269SS and 269ST of the Income Tax Act. The Tribunal concluded that there was no substantial contribution by Mr. Chaudhari in improving the title of the property. 3. Classification of ?61,00,000/- as selling cost to be reduced from the sales consideration: The assessee argued that the total amount of ?61,00,000/- paid to Mr. Kharat and Mr. Chaudhari should be considered as selling cost and deducted from the sales consideration. The AO and CIT(A) rejected this claim, stating that the payments were not related to the acquisition or improvement of the property. The Tribunal agreed, emphasizing that the payments were made in cash and lacked proper documentation and justification. The Tribunal also noted that the payments were disproportionate to the sale consideration and appeared to be an afterthought to reduce tax liability. Conclusion: The Tribunal dismissed the appeal, affirming the disallowance of ?61,00,000/- as selling expenses. The Tribunal found that the payments lacked proper documentation, were made in cash, and did not contribute to the acquisition or improvement of the property. The Tribunal upheld the findings of the AO and CIT(A), concluding that the claims were an attempt to inflate the cost of acquisition and reduce taxable short-term capital gains.
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