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TMI Blog2017 (11) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... olding period of the property is less than 36 months and hence, the AO has rightly computed income from sale of house property as short term capital gain - Decided against assessee Cost of acquisition of the property - sum paid by assessee’s husband towards purchase of property - Held that:- Once addition has been made towards unexplained investment in the hands of the assessee’s husband, the source available in the form of investment towards property cannot be denied as cost of acquisition. Insofar as balance amount of ₹ 4,24,900 the assessee has paid cash for purchase of property out of cash balance available in the books of account which fact has not been disputed by the lower authorities. The CIT(A) has though accepted the fact that the ITAT has accepted as such in its order, disallowed the cost incurred by the assessee by holding that the additions made in the hands of the assessee during block period on protective basis has already been deleted, cannot again be claimed by the assessee now. We do not find any merit in the findings of the CIT(A) for the reason that since substantive addition has been made in the hands of the assessee’s husband, addition made on protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against order of CIT(A)-33, Mumbai dated 15-02-2011 and it pertains to AY 2007-08. The assessee raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of the Ld. Assessing Officer of treating the capital gains on sale of property as Short Term Capital Gain instead of Long Term Capital Gain. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in not allowing deduction u/s. 49(1) of ₹ 8,51 835/- being the cost of acquisition of property paid by appellant's husband, in spite of the clear finding of fact reached by the Honorable ITAT in Order for Block period 01-04-89 to 14-07-99 in appellant's and her husband's own case. 3. Without prejudice to Ground No. 2, on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding the cost of acquisition of the property sold as ₹ 2,71400/-, instead of ₹ 8,79,000/- as paid by the appellant in spite of the clear finding of fact reached by the Honorable ITAT in Order for Block period 01-04-89 to 14-07-99 in appellant's and her husband's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opposed admission of additional grounds. 4 Having heard both the sides and considered material on record, we find that the assessee has raised an additional ground challenging the finding of the Ld.CIT(A) in not allowing deduction of ₹ 4,24,900 being part of the cost of acquisition of the property paid by the assessee in cash, in spite of the clear finding of fact reached by the ITAT in its order for the block period 01-04-1989 to 14-07-1999. We find that the additional grounds raised by the assessee is emanating from the facts already on record and no new facts or evidences are brought on record to support the additional grounds. Therefore, we deem it appropriate to admit the additional grounds raised by the assessee and proceed to dispose of on merits. 5. The brief facts of the case are that the assessee is an individual and filed her return of income for the assessment year 2007-08 on 26-09-2007 declaring total income at ₹ 5,21,524. The case was selected for scrutiny and statutory notices issued u/s 143(2) and 142(1). In response to the notices, authorized representative of the assessee attended from time to time and furnished the details as called for. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Sheetal Builders Pvt Ltd. The AO was of the opinion that the assessee became owner of the property in the financial year 2004-05 which is evident from the fact that she got right over the property by virtue of a tripartite agreement dated 27-10-2004 between CIDCO, Sheth Akshay Harshadrai and M/s Keki Consultants Pvt Ltd. We find force in the finding of the AO for the reason that the assessee has entered into an agreement for purchase of property on 27-10- 2004 by virtue of a tripartite agreement. We further notice that in the sale agreement dated 05-07-2006 for conveying the title of the property to the seller, in the preamble of the sale deed it was categorically stated that the original licencee Sheth Akshay Harshadrai has transferred and assigned flat No.28 to M/s Keki Consultants Pvt Ltd through its directors, Mr. Anu D Lohana and others by tripartite agreement dated 27-10-2004 and deed of confirmation dated 05-08-2005 duly registered with Sub Registrar, Thane. Though assessee claims that she had got right over the property in the financial year 1995-96 by virtue of an allotment letter from M/s Sheetal Builders Pvt Ltd, the said arrangement between parties is a mere willingne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT in the block assessment. 9. Having heard both the sides and considered material on record, we find force in the argument of the assessee for the reason that the CIT(A) himself has discussed the fact that a sum of ₹ 8,51,835 has been paid by assessee s husband towards purchase of property for which a separate addition has been made in the hands of assessee s husband for the block period which is evident from the fact that the same has been upheld by the ITAT in its order dated 23- 03-2007 in IT (SS) a No.699/Mum/2002). Once addition has been made towards unexplained investment in the hands of the assessee s husband, the source available in the form of investment towards property cannot be denied as cost of acquisition. Insofar as balance amount of ₹ 4,24,900 the assessee has paid cash for purchase of property out of cash balance available in the books of account which fact has not been disputed by the lower authorities. The CIT(A) has though accepted the fact that the ITAT has accepted as such in its order, disallowed the cost incurred by the assessee by holding that the additions made in the hands of the assessee during block period on protective basis has alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards payables u/s 68 of the Income-tax Act, 1961. However, we set aside the issue to the file of the AO for verification of the fact with regard to the cost of improvement and payables shown by the assessee in the balance-sheet. Hence, we direct the AO to verify the claim of the assessee and if the payable shown in the balance-sheet is on account of cost of improvement already disallowed while computing capital gain, then addition made u/s 68 cannot be sustained in the eyes of law and it should be deleted. 12. The next issue that came up for our consideration is addition of ₹ 10,99,955 towards difference in capital account as per balance-sheet enclosed alongwith letter dated 16-06-2009 and balance-sheet enclosed alongwith letter dated 09-10-2009. During the course of assessment proceedings, the AO observed that there is a difference in capital account shown by the assessee in the balance-sheet as on 31-03-2007. Therefore, he asked the assessee to show cause as to why the difference shall not be added as unexplained credit u/s 68 of the Act. In response to show cause notice, the assessee submitted that difference in the capital account balance as pointed out by the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account and so section 68 will not be applicable, is not acceptable. It is incumbent upon every assessee doing business to maintain proper books of account. It may be of any form. However, the assessee has not done so, so he cannot be allowed to take advantage of his own wrong. Burden lies on the assessee to show from where he has received the amount and what is the nature. Unless these facts are explained, he cannot claim deduction of the same amount from income-tax u/s 68 of the Act. Therefore, we are of the view that the assessee has failed to explain the difference in capital account as per two balance-sheets filed before the AO and also considering the fact that the assessee has inflated the capital account to explain the assets appearing in balance-sheet, the AO was right in treating difference in capital account as unexplained cash credit u/s 68 of the Act. This proposition is further strengthened by the latest decision of the Bombay High Court, in the case of ShriArunkumar J Muchhala vs CIT in Incometax Appeal No.363 of 2015 judgement dated 24-08-2017 wherein the Hon ble High Court categorically held that the assessee cannot take advantage of his own wrong done by not mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of ₹ 9,00,000/- f rom M/s. PoojaCorporation, ₹ 7,00,000/- from M/s. Pooja Enterprises, ₹ 24,00,000/- f rom Shri . Ashok Mehta, ₹ 18,00,000/- f rom Mr. Ajay Shah. No document was produced in respect of these t ransact ions nor the amounts have been confirmed from those persons, who are shown to have lent them. The authorities below have therefore, rightly held that nature of the transaction has not been properly shown by the Appellant. 12. The rat io of the author i t ies rel ied by the learned Counsel appearing for Appellant is not applicable here. In those cases, either the ent r ies were conf i rmed by the par t ies in whose name they were standing or books of accounts were showing the cash credits from undisclosed source. Here in this case, at no earlier point of time, a firm stand was taken by the Appellant that he has not maintained books of account. Whenever a direction was given to produce the same in any form, it was replied by the Appellant that he wants time to prepare. Many opportuni t ies were given by the As sessing Of f icer for the production of relevant documents including books of account in the form of ledger, balance sheet, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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