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TMI Blog2018 (11) TMI 1336X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had claimed as source from sale of various items of the tile factory, namely timber, machinery etc. - The consideration shown in the agreement was for the building also. Before the sale was concluded, the assessee had obtained possession of the property and had also demolished the buildings and dismantled the plant and machinery and sold the same. The assessee submits that the same cannot be treated as his income. However, if the said amounts has to be treated as a source of income for the purpose of consideration, this definitely should be treated as an income at the hands of the assessee. At least, to the extent, it was treated as a source. In such circumstances, the same has to be treated as an undisclosed income for which the assessee would be liable to pay tax. Capital gains - There was a surrender of the land and buildings to the assessee on the basis of the agreement, since before the sale was concluded, the buildings were demolished and the plant and machinery dismantled and sold. The assessee, who had obtained possession of the land and building, had also effected sale of the same and had obtained ₹ 1,19,75,000/- which is treated as income for the previous as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue raised is with respect to the transaction concerning the sale of the properties of M/s. Commonwealth Trust India Limited (hereinafter referred to as the Trust ). The Assessing Officer (A.O for brevity) made additions of undisclosed income, finding the source of the payments made by the assessee to the Trust having not been fully revealed. The First Appellate Authority reduced the additions made by the A.O and there was an appeal filed from that order of the First Appellate Authority before the Tribunal by the Revenue. The assessee also filed appeals with respect to the additions as confirmed by the First Appellate Authority. The Tribunal modified the said additions made by the First Appellate Authority and confined it to ₹ 50,00,000/- distributed between the three years at the rate of ₹ 15,00,000/- for the first two years and ₹ 20,00,000/-for the last year. The Revenue has filed the six appeals seeking restoration of the order of the A.O. The questions of law raised on that count are re-framed by us as follows. We specifically notice the Revenue having raised a question on the perversity of the findings which we incorporate here: 1.Whether the Tribunal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence recovered as to the income generated from outside businesses. The Assessing Officer merely assumed, from the fact that the appellant had been frequently visiting Abu Dhabi that there would have been an income generated. An estimation was made computing the income at ₹ 20,00,000/- in each of the assessment years. The first appellate authority reduced it to ₹ 10,00,000/-. The Tribunal deleted it in toto . We do not find any reason to sustain the said addition. We see that the Assessing Officer had proceeded on mere surmises and conjectures and had also stated that the assessee was not able to prove that the businesses abroad had not generated any income. The assessee cannot be asked to prove the negative. No material was recovered as to any income having been generated from the businesses abroad. We do not think that an estimation would be proper without any evidence at all. We, hence, uphold the order of the Tribunal deleting the addition from the income generated from Abu Dhabi. We immediately observe that the source found from such income, by the first appellate authority would however have to be reduced in view of the said finding; while considering the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who had obtained possession of the land and building, had also effected sale of the same and had obtained ₹ 1,19,75,000/- which is treated as income for the previous assessment year. In such circumstances, the order of the Tribunal deleting the assessment with respect to capital gains has also to be set aside. We notice the judgement of the Honourable Supreme Court in (2017) 398 ITR 0531 (SC) [Commissioner of Income Tax v. Balbir Singh Maini], which found part-performance to be possible only if there is a registered document, which was on account of the amendment to the Registration Act in 2011 which was long after the assessment years, which are subject herein. The amendment would have only prospective effect and in such circumstances, the registration or non-registration of the sale deed would not regulate the part-performance as discernible from the definition clause extracted herein above applied to the facts as available for the subject assessment years. The question of law herein above is answered upholding the order of the Tribunal only to the extent of deletion of addition of income estimated as said to have been received from Abu Dhabi. On the deletion of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... madhavan on 28.06.2004. Subsequently on the assessee's request, which again was at the instance of Sethumadhavan, the Trust executed sale deeds in favour of various persons selling the property as small extends. The assessee sought to substantiate the source from various documents produced in each of the years asserting loans availed and so on and so forth as also the amounts received from Sethumadhavan, the second party of the agreement dated 28.06.2004. The assessee also claimed that certain amounts were paid by the purchasers of small extends directly to the Trust, which stood adjusted in the name of the assessee. Fact Findings in the Financial Year 2002-2003(AY 2003-04):- 9. For the assessment year 2002-03, the assessment order lists out the admitted payments made by the assessee to the Trust. A total of ₹ 1,00,00,100/- was paid on various dates between 27.01.2003 and 25.03.2003. The assessee was required to explain the source of payment but no response was received. However, during the course of proceedings under Section 144A of the Income Tax Act, 1961; the assessee submitted that during the previous year relevant to the assessment year, the assessee, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the Trust. The A.O however, reduced ₹ 5,25,000/- as the cost of old machinery, furniture etc. which even as per the agreement dated 24.09.2004 (Annexure-I produced in I.T.A 252 of 2010) was to be paid to the Trust. The agreement was one of purchase of machinery, furniture, fittings including electrical and other sundry assets and scrap for a consolidated amount of ₹ 5,25,000/-. Hence the source was accepted of ₹ 1,19,75,000/-. There was a further contention that the assessee's NRI account with Vijaya Bannk Perinthalmanna shows remittances from abroad of ₹ 15,00,000/- on August,2003 and ₹ 10,00,000/- in October 2003. It was contended that the said amounts were also utilised by the assessee for payment to the Trust. On a perusal of the pass book, the Assessing Officer found that ₹ 14,00,000/- was debited in the name of two strangers; of ₹ 7,00,000/- each. ₹ 14,00,000/- hence was declined to be accepted as source for payments made to the Trust. The withdrawal of ₹ 5,00,000/- for Self , in the bank statement was accepted as a payment to the Trust and the total source accepted was ₹ 1,24,75,000/-. The addition sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of ₹ 10,99,000/- which was not identified. Setting off that amount from ₹ 14,00,000/- given credit to in first appeal, the reduction made to the the income of the year was confined to ₹ 3,01,000/-. The income from real estate being and ₹ 6,00,000/- was directed to be set off from the payments to the Trust. The first appellate authority hence fixed the addition at ₹ 55,47,200/- giving additional credit of ₹ 9,01,000/-. As we noticed the Tribunal fixed the income of the subject year at ₹ 20,00,000/- and also deleted the income from business in Abudhabi. The Consideration:- 13. The learned Senior Counsel would specifically take us through the counter affidavit filed in ITA No.224/2010 and argue on the basis of the various documents produced therein to further substantiate the source from which the payments were made to the Trust. It is the specific contention that a number of documents were produced before the Tribunal which showed the agreements executed with various persons selling smaller extends of property from the larger extend which was the subject of the transaction between the assessee and the Trust. It is conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal amount of ₹ 3,03,39,600/- [1,00,00,100 (in 2003-04) + 2,03,39,500/- (in 2004-05)]. In the assessment year 2005-06 the assessee had made further payments of ₹ 28,49,200/- before 28.06.2004. Hence before the agreement with Sethumadhavan the assesee had paid a total consideration of ₹ 3,31,88,800/- to the Trust and what was remaining for payment out of the total of ₹ 4,34,97,000/- was ₹ 1,03,08,200/-. 16. For the first of the years under consideration, ie: 2003-04 the first appellate authority has granted a relief of ₹ 1,00,000/- on the ground of arithmetical error and ₹ 50,000/- as expenditure incurred. The addition accepted as modified by the First Appellate Authority is hence ₹ 89,55,100/-. We notice the affidavit filed by the assessee before the ITAT. For the assessment year 2003-04 the assessee does not have any contention other than the contention with respect to the loan availed of ₹ 28,00,000/-. Out of ₹ 28,00,000/- claimed, ₹ 9,95,000/- was allowed by the A.O himself. We see that the confirmation letters from the other parties were filed before the Tribunal. We permit the balance loan amounts, for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumably the amounts due to the assessee by way of sale of two properties having separate extends of 10 and 25 cents, carried out on 01.04.2004 and 14.05.2004, as seen from Annexure R1(d), produced in I.T.A. No. 239 of 2010. 19. We find that the First Appellate Authority had erred insofar as finding that there is no addition made of a payment of ₹ 10,99,000/- reducing the credit to be further given as ₹ 3,01,000/-. We see from the assessment order that the total undisclosed income for the assessment year 2005-06 was determined at ₹ 64,48,200/- out of a total payment of ₹ 1,09,48,200/-. The further allowance made of ₹ 14 lakhs in first appeal has to be fully allowed. This would bring the figure to ₹ 50,48,200/-. As in the previous years there was an allowance of ₹ 6,00,000/- made as income received from real estate which addition stood sustained by the Tribunal. There was also an allowance towards expenditure made in the previous years of ₹ 50,000/- which has to be allowed this year too. The figure hence would come to ₹ 43,98,200/-. We have to take note of the agreement with Sethumadhavan, produced at Annexure J in ITA No.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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