2024 (3) TMI 305 - AT - Income Tax

Assessment u/s 153C - agreement depicting the payment was found and seized during the search seizure operation was carried out u/s 132 - real beneficiary v/s facilitator - Addition u/s 56 as income from other sources made with the remark since the assessee has not furnished any cogent explanation with respect to the cash received and the same has been received as an advance in respect of the immovable property and the transaction has not materialized as far as the assessee is concerned, the amount is being added to the income of the assessee - HELD THAT - Since the said property was never owned by the assessee, it was not eligible /entitled to keep the money having been received by way of earnest money part sale consideration in respect of the said property from the prospective buyer. The assessee has also filed an affidavit before the ld. CIT(A) stating that after having received of the aforesaid payment as an advance, the said payment was handed over to one of the Owner i.e. Mr. Aseem Doomra, as Mr. Narender Kapoor was in Auckland (Newzealand).The assessee was not the real beneficiary and he had acted like a facilitator only. Since the money which was received by it from M/s Kritunairu, actually belonged to Mr. Narender Kapoor Mr. Aseem Doomra, there was no reason for the assessee to record such transaction in its books of account. The contents of the seized document being agreement to sell purchase were required to be considered in entirety, not in piece meal. Hence, the view formed by the lower authorities to treat the assessee as real beneficiary is arbitrary and cannot be affirmed. Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in the judgment are the initiation of proceedings under section 153C, addition of Rs. 25,00,000/- and Rs. 19,00,000/- under section 56 of the Income Tax Act, 1961, and the role of the assessee as a facilitator in a property transaction.

Initiation of Proceedings under Section 153C:
The appeals were filed by the assessee against the orders of the ld. CIT(A)-23, New Delhi dated 28.08.2023. The grounds raised by the assessee included challenging the initiation of proceedings under section 153C, specifically questioning the lack of providing a copy of the 'Satisfaction recorded by the AO of the searched person.' The assessee argued that the proceedings under section 153C were not justified as there was no connection established between the seized items and the assessee. The tribunal found merit in the arguments raised by the assessee and held that the proceedings under section 153C should not have been initiated.

Addition of Rs. 25,00,000/- and Rs. 19,00,000/- under Section 56:
The addition of Rs. 25,00,000/- and Rs. 19,00,000/- under section 56 of the Income Tax Act, 1961 was made by the AO and sustained by the CIT(A). The amounts were received by the assessee in a property transaction but the assessee was not the owner of the property. The tribunal noted that the assessee was merely a facilitator between the actual owners and the buyer, and the money received belonged to the joint owners, not the assessee. The tribunal concluded that the additions made by the authorities were arbitrary and not justified, leading to the deletion of the additions under section 56.

Role of the Assessee as a Facilitator:
The assessee's role in the property transaction was that of a facilitator between the joint owners of the property and the buyer. The agreement to sell and purchase clearly indicated that the assessee was acting on behalf of the actual owners. The tribunal emphasized that the money received by the assessee was not for its benefit but was handed over to one of the owners. The tribunal also highlighted that since the property was never owned by the assessee, there was no basis for treating the received money as income for the assessee. Therefore, the tribunal held that the assessee was not the real beneficiary and acted as a facilitator, leading to the allowance of the assessee's appeals.