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TMI Blog2015 (4) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... lfilled. The learned Commissioner of Income-tax (Appeals) has committed an error in considering the evidence on the merits without giving an opportunity of hearing to the Assessing Officer. - Decided in favour of revenue. Advance received towards site sale - CIT(A) deleted the addition - Held that:- On perusal of the statement of Shri H. B. Krishnappa suggest that he has responded to the query of the Assessing Officer and explained that he has advanced sum of ₹ 5 lakhs. The defects pointed out by the Assessing Officer based on circumstances are not directly flowing from the transaction. His grievance is why the assessee has not mentioned the name of the person in the books of account against the amount. To our mind, this is not a defect which is of such a nature which can falsify the claim of the transaction because the assessee has mentioned the amount as advance. Similarly the Assessing Officer has alleged that why the assessee failed to explain about this issue on August 9, 2010. This amount was taken before the closure of the assessment year 200304, the learned Assessing Officer wants an instant reply in the year 2010. Further the assessee has a right to analyse the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided against revenue. Loan from Shri P. Ramesh - CIT(A) deleted the addition - whether is to be treated as unexplained credit under section 68 of the Income-tax Act or not? - Held that:- The case of the assessee is that during investigation, Shri P. Ramesh was called by the Assistant Director of Income-tax and his statement was recorded. He was little confused as to why he had been called again by the Income-tax Officer. Before the Assistant Director of Income-tax, he had confirmed the transaction. Thus, his identity is not in dispute. The next ingredient is his creditworthiness. He paid the amount to the assessee through account payee cheque and his bank account was disclosed to the Assessing Officer. He is assessed to tax also. Particulars of his assessment were also given to the Assessing Officer. Thus his creditworthiness cannot be doubted because the money was given through account payee cheque and he is an Income-tax assessee. The genuineness of the transaction was also not doubtful because both parties have confirmed the transaction and it is through banking channel. The assessee has already repaid a sum of ₹ 15 lakhs just after one month of the receipt. The rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2005. Thereafter the assessee did not make payment and a dispute arose that led to cancellation of the agreement vide legal notice dated November 10, 2006. The new agreement was executed on January 2, 2007. The assessee had started making payments thereafter. He has returned this amount to Dr. Y. S. Manjunath on July 25, 2007. Therefore we do not find any nexus between this loan, vis-a- vis investment in the property. The findings of the CIT(Appeals) is set aside. This amount of ₹ 7 lakhs is not to be included in the cost of acquisition. - Decided in favour of revenue. Liquidated damages paid to Gurushree Properties as expenses towards earning the short-term capital gain on the sale of J. C. Road property - Liquidated damages paid to Gurushree Properties ₹ 10,00,000 as held by CIT(A) or ₹ 30 lakhs - Held that:- There is no dispute about the transaction and the payment made by the assessee. The only dispute is the quantum. The Assessing Officer is giving credit of ₹ 20 lakhs, whereas the assessee claimed that he has paid ₹ 30 lakhs. To our mind, the Assessing Officer failed to collect the conclusive evidence suggesting that only ₹ 20 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated August 22, 2011 passed for the assessment years 2003-04 to 2006-07 and 2009-10. Since common issues are involved, therefore, we heard all the appeals together and deem it appropriate to dispose of them by this common order. 2. The grounds of appeal filed by the Revenue originally were argumentative and not in consonance with the rule 8 of the Income-tax (Appellate Tribunal) Rules. These grounds have been revised. On perusal of the grounds in all the years, we find that the first three grounds of appeal are common. In these grounds, the Revenue has pleaded that the learned Commissioner of Income-tax (Appeals) has entertained additional evidence in violation of rule 46A and failed to give an opportunity of representation to the Assessing Officer. It also pleaded that the learned Commissioner of Income-tax (Appeals) has erred in not examining the evidence available on record. Before adverting to the specific grievance of the Revenue in each assessment year, first we take these legal grounds of appeal raised by the Revenue. I. T. A. No. 1008/Bang/2011-assessment year 2003-04 3. Though the facts on all vital points are common in all the assessment years, but for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue No. 495971 of Vijaya Bank dated October 31, 2002. According to the assessee Dr. Prabhakar Shetty is a renowned cardiologist of international repute and was working in the U.S. He had NRE account bearing No. 56. Out of that account, this amount was given to the assessee as a gift. He could not produce Dr. Shetty before the Assessing Officer, but now Dr.Shetty came back from the U.S. and presently working as Interventional Cardiologist, Chief of Cardiology Department in Columbia Asia Hospital, Bangalore. Therefore, a confirmation from Dr. Shetty was sought to be placed on record by way of an additional evidence. The application under rule 46A was moved. Dr. Shetty appeared before the learned Commissioner of Income-tax (Appeals) along with the assessee and confirmed the gift made by him to the assessee. 5. The learned Commissioner of Income-tax (Appeals) called for a remand report from the Assessing Officer and thereafter entertained the additional evidence. He accordingly deleted the addition of ₹ 18 lakhs. 6. The learned Departmental representative while impugning the order of the Commissioner of Income-tax (Appeals) contended that the learned first appellate authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271. 9. On a bare perusal of this rule would suggest that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) in such situation ought to have directed the parties to appear before the Assessing Officer for cross-examination. If his statement was recorded by the Commissioner of Income-tax (Appeals) under sub-rule (4), then probably there could not be any violation. He appeared along with the assessee as a witness for the assessee, in such a situation, the requirement of sub-rule (3) remained unfulfilled. The learned Commissioner of Income-tax (Appeals) has committed an error in considering the evidence on the merits without giving an opportunity of hearing to the Assessing Officer. Therefore, to this extend ground Nos. 1 and 2 of the Revenue's appeal in the assessment year 2003-04 is allowed. We set aside the order of the Commissioner of Income-tax (Appeals) and remit this issue for readjudication. The learned first appellate authority shall call for a remand report from the Assessing Officer on merit. 12. Now we take the Revenue's other grounds of appeal in the assessment year 2003-04. In ground No. 4, the Revenue has pleaded that the Commissioner of Income-tax (Appeals) has erred in accepting the explanation of the assessee with regard to the gift received from Dr. Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee has not mentioned the advance for sale of site, in the books of account. Therefore, his explanation is not acceptable. On appeal the learned Commissioner of Income-tax (Appeals) reappreciated the controversy and deleted the addition. 16. The learned Departmental representative relied upon the order of the Assessing Officer. She also filed written submission and took us through her submission. She emphasised that if circumstantial evidence is taken into consideration, then it would reveal that the assessee had introduced a story after being caught by the Assessing Officer. On the other hand learned counsel for the assessee relied upon the order of the Commissioner of Income-tax (Appeals). He pointed out that Shri H. B. Krishnappa was produced before the Assessing Officer and his statement was recorded. He has explained the transaction. 17. We have duly considered the rival contentions and carefully gone through the record. The learned first appellate authority noticed the following important aspects with regard to this transaction. (i) Mr. H. B. Krishnappa is an agriculturist and has confirmed having advanced a sum of ₹ 5 lakhs towards purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er wants an instant reply in the year 2010. Further the assessee has a right to analyse the details and then respond. It is not such a serious issue. Thus we are of the view that the learned first appellate authority has appreciated the facts and circumstances in right perspective on this issue and no interference is called for. As far as ground Nos. 6 and 7 are concerned, they are general grounds of appeal, not specifically emerging out from the assessment order. Hence no specific finding is to be recorded. 19. In the result, the appeal in 2003-04 is partly allowed for statistical purposes. I. T. A. No. 1009/Bang/2011-assessment year 2004-05 20. As far as ground Nos. 1, 2 and 3 are concerned, they verbatim same as taken in the assessment year 2003-04. In these grounds, the Revenue has pleaded that the learned Commissioner of Income-tax (Appeals) has entertained additional evidence in violation to rule 46A. In the light of the discussions made in the assessment year 2003-04, we have perused the records in this year. We find that no additional evidence was produced by the assessee in this year. Therefore, these grounds are not relevant. 21. In ground Nos. 4 and 5 same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in touch with your appellant, who is having humanitarian attitude for saving the family members during accident'. This statement itself indicates that the amount received is in the nature of professional receipts and the appellant had rendered services in the form of treating the family members of the donor, though some years back and the claim of gift has an element of professional receipts. Though the appellant could argue that they have produced the donor, his permanent account number his income tax records, his address for communication and other relevant records, even if it is considered as money's received from him, it cannot be regarded as gift since it has an element of pro fessional receipts as some services were rendered by the appellant some years back by treating the injured members of the family in an accident and hence it is held as professional charges received by the appellant. Accordingly this addition is confirmed as receipts are in the nature of professional charges and not necessarily as bogus gifts . 24. Since the learned Commissioner of Income-tax (Appeals) did not accept the contention of the assessee and found as a matter of fact that it was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed the money for investing in site, whereas the trust had deposed that it was an advance given to buy some specialised equipment. Therefore, there is inherent contradiction between the statements of the trust vis-avis the claim of the assessee. He also observed that Dr. Krishna has not made any addition to the nursing home for the past 8 years except for small addition during one year. Therefore, he cannot render any help to the trust. In this way the learned Assessing Officer treated this amount of ₹ 30 lakhs as unexplained cash credit of the assessee and added back to the assessee's total income. On appeal the learned Commissioner of Income-tax (Appeals) deleted the addition by observing as under : 5.3 After considering the appellant's arguments on this issue, it is held as under : (I) M/s. Shivappa Nayaka Institute of Medical Sciences is an established trust and it has given a sum of ₹ 30 lakhs by cheque to the appellant. (II) It was also stated that the above amount was given for purchase of hospital equipment through Dr. Krishna as Dr. Krishna was well experienced in this field who is a gynaecologist having 20 years of experienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging trustee was asked to furnish the names and addresses, he had only stated that he had the details which would be produced later and that itself does not amount to not having the details as the trans actions was in March 2005 and the statement was recorded on December 9, 2010 after 5 years 9 months. Obviously, for furnishing names and addresses he had to look into the records and he could not remember the names and addresses of the persons who had given money to the trust. As the appellant has produced confirmation and M/s. Shivappa Nayaka Institute of Medical Sciences has confirmed having given the advance and the transaction is through cheque and part of the money amounting to ₹ 12 lakhs was also repaid on July 26, 2005 by cheque and in a detailed statement before the Assessing Officer, the managing trustee Sri M. S. Sridhar had confirmed having given the money, existence of the creditor and genuineness of the transaction is established. As regards, the dona tions, etc., from the trustees and other persons received by the trust which has no relationship with the appellant, it is for the trust to establish the identity and the creditworthiness of the donors and not for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e started. The facts ought to have been appreciated keeping in view these circumstances. The learned first appellate authority has appreciated the facts in right perspective and we do not find any error in the order of the learned Commissioner of Income-tax (Appeals), hence this appeal is also dismissed. I. T. A. No. 1011/Bang/2011-assessment year 2006-07 31. In this year the assessee has filed original return of income under section 139(1) on January 31, 2006 declaring an income of ₹ 23,26,433. In response to the notice received under section 153A, the assessee has filed the return on April 23, 2009 declaring an income of ₹ 23,76,833. The Assessing Officer has passed assessment order on December 30, 2010 and determined the taxable income of the assessee at ₹ 53,26,430. He made two additions with the aid of section 68 namely : (a) Borrowing from Shri P. Ramesh ₹ 25.00 lakhs (b) Borrowing from Hospitech Ind. ₹ 5.00 lakhs 32. The assessee challenged the order of the Assessing Officer before the Commissioner of Income-tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 15 lakhs much before the date of search, i.e., on June 25, 2005 vide cheque No. 00052002 of SBM, SMC Branch, Jayanagar 4th Block, Bangalore. (v) The balance borrowed amount was also repaid to the extent of ₹ 10 lakhs on February 26, 2011 vide cheque No. 35405 of SBM, SMC Branch, Jayanagar, 4th Block Bangalore. (vi) The statement recorded by the Assistant Director of Income- tax when he summoned Sri P. Ramesh is not brought on record. (vii) The ill health, the repetitive direction for appearing before the authorities and strained relationship between the borrower and the lender had led to his non-appearance before the Assessing Officer again as he had already appeared before the Assistant Director of Income-tax. Since the appellant has produced details of the creditor and his assessment particulars who is assessed with the Deputy Commissioner of Income-tax, Circle 2(2), Bangalore and has produced the lender before the Assistant Director of Income-tax, the transaction is through banking channels by cheque and since the amount to the extent of ₹ 15 lakhs was already repaid and the balance ₹ 10 lakhs is now repaid, there was no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered by the learned first appellate authority before deleting this addition. On due consideration of the record, we do not find any error in the order of the learned Commissioner of Income-tax (Appeals). This ground of appeal is rejected. No other substantial ground has been raised. Hence appeal for this year is dismissed. I. T. A. No. 1012/Bang/2011-assessment year 2009-10 38. In this year the first three grounds taken by the Revenue are verbatim same as taken in the assessment year 2003-04. The Revenue has pleaded that the learned Commissioner of Income-tax (Appeals) has erred in entertaining additional evidence in violation of rule 46A. It is further pleaded that the learned Commissioner of Income-tax (Appeals) has passed the order without scrutinising the evidence available on the record. It was demonstrated before us that no application leading additional evidence was filed in this year. Therefore, these grounds are not emerging out from the record. As far as the plea taken in ground No. 3 that the Commissioner of Income-tax (Appeals) has passed the order without scrutinising the evidence available on record is concerned, we will deal with this aspect along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. To this extent, there is no dispute between the parties. 40. The assessee while computing the capital gain on sale of this property has alleged that he has to pay ₹ 50 lakhs to M/s. Blue Cross, because as per the agreement ₹ 11,82,50,000 was to be paid by the assessee, whereas it has paid only ₹ 11,32,50,000. The difference of ₹ 50 lakhs is the cost of acquisition and it is to be deducted from the sale consideration while computing the capital gain. Apart from this one item, the assessee has filed revised return on December 14, 2010 and claimed the following expenses : (a) Liquidated damages to Manjunath ₹ 7,00,000 (b) Liquidated damages to Gurushree Prop. ₹ 30,00,000 (c) Interest capitalised ₹ 15,59,000 The Assessing Officer did not allow the claim of the assessee with regard to interest expenses paid to Dr. Manjunath. With regard to the payment of ₹ 30 lakhs made to Gurushree Properties, the learned Assessing Officer has allowed only ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument running into 24 pages and nowhere it has been mentioned that the Blue Cross Builders in the capacity of vendor would receive ₹ 50 lakhs apart from the consideration received from the assessee. The other important factor is what executionable cause is available to the vendor after executing the specific power of attorney as well as the sale deed to recover the amount of ₹ 50 lakhs from the assessee except bald assertion of the assessee to say that he would have to pay ₹ 50 lakhs to Blue Cross Builders, there is no corroborative material on the record. Therefore, the learned Commissioner of Income-tax (Appeals) has erred in holding that ₹ 50 lakhs be added in the cost of acquisition. The learned Assessing Officer has rightly did not grant any benefit of ₹ 50 lakhs to the assessee towards the cost of acquisition while computing the capital gain on sale of the capital asset. The findings of the learned Commissioner of Income-tax (Appeals) is set aside and that of the Assessing Officer is restored on this issue. 43. The next item is of ₹ 7 lakhs. According to the assessee he has received a sum of ₹ 30 lakhs from Dr. Y. S. Manjunath. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 29, 2005 and the second on June 3, 2005. The assessee had entered into an agreement for purchasing this property on June 1, 2005. The schedule of the payment is available in clause (i) of the first agreement. The assessee had paid a sum of ₹ 2 crores through account payee cheque by May 31, 2005 meaning thereby the amount received on June 3, 2005 did not travel towards payment made for this property. The first cheque is dated May 5, 2005 and last May 31, 2005. Thereafter the assessee did not make payment and a dispute arose that led to cancellation of the agreement vide legal notice dated November 10, 2006. The new agreement was executed on January 2, 2007. The assessee had started making payments thereafter. He has returned this amount to Dr. Y. S. Manjunath on July 25, 2007. Therefore, from the details available on the record, we do not find any nexus between this loan, vis-a- vis investment in the property. The assessee has not filed any fund flow statement demonstrating how he has received this amount and how that went to the investment. The learned first appellate authority erred in reversing the findings of the Assessing Officer. The findings of the learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10 lakhs was payable on March 31, 2009 which was paid on June 25, 2009. 7.3.3. After considering the appellant's arguments on this issue, it is held as under : '(i) There is no doubt that the appellant has paid ₹ 460 lakhs as against ₹ 430 lakhs invested by M/s. Gurushree Properties. (ii) Out of the above ₹ 30 lakhs (Rs. 460 lakhs ₹ 430 lakhs) ₹ 20 lakhs was paid much before March 31, 2009 and a further sum of ₹ 10 lakhs was payable as on March 31, 2009 which was subsequently paid on June 25, 2009 vide cheque No. 803154 of SBM, Mandya Branch of the appellant. This amount is also reflected in the SBM account No. 54008875338 of SBM, Mandya wherein the appellant's account is debited to the extent of ₹ 10,01,750 the balance ₹ 1,750 is towards demand draft commission/bank charges. In view of the same, the appellant's liability was to the extent of ₹ 30 lakhs out of which ₹ 20 lakhs was already paid before March 31, 2009 and the balance amount of ₹ 10 lakhs was paid on June 25, 2009, the Assessing Officer is directed to allow the full amount of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the borrowing as well as the payment of interest. His doubt is that the assessee failed to prove direct nexus between the borrowed fund and ultimate investment. He also made observation that the assessee had made investment at Banashankari site. The assessee failed to prove that money was specifically borrowed for making investment in the J. C. Road property. The learned Commissioner of Income-tax (Appeals) has deleted the additions by observing as under : 7.4.3 After considering the appellant's arguments on this issue, it is held as under : (i) The Assessing Officer has not doubted the borrowings from banks and interest payment thereon. (ii) The Assessing Officer has not doubted the payment of interest of ₹ 15,59,000. (iii) The property at 5/1, 1st cross, J. C Road was transacted during the period from May 5, 2005 to June 30, 2007 as recorded by the Assessing Officer in page 4 and borrowings were made during this period. (iv) In page 12, the Assessing Officer herself has recorded as under: 'The money has been brought into his regular books through which it has gone to the regular business and profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is that the assessee must have used the money in purchase of some other property but he has not pin pointed out, whether that property was purchased or not. He also observed that money has not been borrowed with any specific purpose. It is difficult to bring demonstrative proof of this nature. The assessee had borrowed the money and used it. It is for the Assessing Officer to demonstrate that this borrowed money was used somewhere else and not for purchase of the property. While disallowing the claim of the assessee with regard to the interest paid to Shri Manjunath, we have observed that money paid by the assessee for purchase of the property was prior to the loan taken by him and that money was not used. Therefore, we did not allow addition of that amount in the cost of acquisition. But here no evidence is available to dispel the claim of the assessee. Therefore, we do not see any error in the findings of the Commissioner of Income-tax (Appeals). The assessee will be entitled to claim this expenditure as a part of cost of acquisition while computing the capital gain. The appeal of the Revenue is partly allowed. 51. We summarise the result as under : (i) I. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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