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TMI Blog2021 (7) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... e clear pieces of evidence in support of known sources of receipts which cannot be ignored in absence of any other contradictory and compelling documentary evidence brought on record. Therefore, as far as addition u/s 68 is concerned, there is no legal basis for such addition in hands of the assessee society which has been assessed as a separate assessable person in the status of AOP and the same is hereby directed to be deleted. Why the amount of sale consideration has been received by the assessee society and not retained by individual members who have executed the impugned sale deeds and in whose name the flats were initially allotted ? - We find that where there is an understanding between the individual members and the assessee society that the latter shall carry out the construction on behalf of the former and the former will bear the cost, it is clearly an obligation on part of the individual members to pay to the assessee society towards the cost of construction. In the instant three cases, we find that the respective members have not fully discharged their obligation towards the assessee society in the past in terms of cost of construction and the amount received on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise in his hands and even addition towards undisclosed investment therefore deserve to be deleted. In the result, both the additions are deleted - ITA No. 923/JP/2019, ITA No. 677/JP/2019, ITA No. 678/JP/2019, ITA No. 679/JP/2019 - - - Dated:- 28-6-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : Ms. Pallavi Joshi (Adv.) For the Revenue : Smt. Runi Pal (Addl.CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. These are four appeals filed by the aforesaid assessees against the respective orders of ld. CIT(A), Ajmer dated 25.02.2019 for AY 2009-10. Since common issues are involved, all these appeals were heard together and are being disposed off by this consolidated order. ITA No. 923/JP/2019 2. With the consent of both the parties, the case of the assessee in ITA No. 923/JP/2019 is taken as the lead case for the purposes of present discussion wherein the assessee has taken the following grounds of appeal:- On the facts and in the circumstances of the case:- 1. The Ld CIT has erred in not appreciating the assessee s reply and in not holding that the assessee society was working on mutuality b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - were being made in hands of Sh. Anil Singhal on protective basis. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has since confirmed the said additions. Against the said findings, the assessee is now in appeal before us. 5. During the course of hearing, the ld. AR submitted that Jaipur Development Authority (JDA) allotted Plot No. 10/1/1, Sector 10, Vidhyadhar Nagar, Jaipur measuring 682.76 Sq. meters on lottery basis to the 8 members under the banner of VIP Group Housing Society for a consideration of ₹ 2,76,542/- on 23.11.1990. Subsequently, the lease deed was executed after 15 years of allotment on 18.07.2005 in which the list of Members (i.e. owners of the flat) along with their respective flat numbers were mentioned. Flats cannot be constructed separately by each member of the society therefore the flats were constructed by the society on the principle of mutuality. It was submitted that main purpose of the society was to construct flats on the said plots as directed by the JDA on behalf of the members on the principle of mutuality. For the purposes, the assessee society executed a flat construction agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as under:- G.O.A-1 On the facts and in the circumstances of the case the Ld CIT has erred in not appreciating the assessee s reply and in not holding that the assessee society was working on mutuality basis and such principle of mutuality was applicable SUBMISSION It is admitted fact that due to modernization, people are living in complexes and townships with many other persons sharing many common areas. Gone are the days, when people were living in own houses in a single piece of land. Now, a single piece of land is shared by many house owners. This is when the concept of Group Housing Scheme, Resident Welfare Association (RWA) or Apartment Owners Association has come into existence. In the present case of the assessee, the above concept is applicable. The Jaipur Development Authority (JDA) allotted Plot No. 10/1/1, Sector 10, Vidhayadhar Nagar, Jaipur measuring 682.76 Sq. meters on lottery basis to the 8 members under the banner of society (VIP Group Housing Society) for the consideration of ₹ 2,76,542/- on 23-11-1990 through letter of allotment number 2149. Copy of Allotment Letter is enclosed and marked as Annexure-A. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. However, if the unregistered Society is considered as AOP then the Principle of Mutuality will be applicable, in case of AOP as well as in case of Unregistered Society. Reliance is placed on State of West Bengal Ors V/S Calcutta Club Limited 311 CTR 121 (2019)(SC) wherein it was held that the doctrine of mutuality continues to be applicable to incorporated and unincorporated members clubs after the 46th Amendment adding Art. 366(29A) to the Constitution of India. As it is an admitted fact that No man can make a profit out of himself which is the touchstone of mutuality concept. Reliance is placed on the decision of CIT vs West Godavari District Rice Millers Association (150 ITR 395) The A.P. High Court held that it is well settled that the surplus accruing to a mutual association is no income or profit at all for purpose of income tax, the test of mutuality being complete identity between the contributors and participants. The assessee society was working on the concept of mutuality with an object of not for profit. Flats cannot be constructed separately by each member of the society therefore the flats were constructed by the society on the Principle of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and, therefore, the society, to cater to the needs of the members, has constructed the shops and no outside consumers are allowed to the complex of the society. The shops were built after obtaining proper certificate from the concerned engineer. In this factual matrix, the Tribunal has held that the principle of mutuality would apply to the above income. As regards the interest derived from the deposits made by the society out of the contributions made by the members of the society, the Tribunal placing reliance on the decision in All India Oriental Bank of Commerce Welfare Society (supra) has expressed the view that once the identity of the contributor to the fund of recipients is accepted, the principle of mutuality would get attracted. It is also noticeable that there is nothing on record to show that the amount collected by the respondent has been diverted for any other purpose. In view of the aforesaid analysis, we concur with the conclusion of the Tribunal and accordingly, the appeal stands dismissed in limine. G.O.A-2 On the facts and in the circumstances of the case the AO/ CIT(A) wrongly added/confirmed the entire sale proceed in the hands of society w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 13,60,000/- was received on 17.09.2008 at the time of execution of sale deed. Annexure-E (Pg 26 to 32 of Paper book) 13,60,000/- 16-03-2009 2 VIP SHREE SANJAY KALA SHREE RAKESH KUMAR MISHRA / SHREE RAMDAYAL SHARMA Sale consideration was ₹ 17,00,000/- out of which ₹ 1,51,000/- was received on 10.02.2009, ₹ 15,49,000/- was received on 17.03.2009 at the time of execution of sale deed. Annexure-F (Pg 33 to 44 of Paper book). 17,00,000/- 16-03-2009 8 VIP SHREE KHUSHI RAM SMT. SEEMA JINDAL / SHREE ANIL JINDAL Sale consideration was ₹ 16,00,000/- out of which ₹ 51000/- was received on 11.03.2009, ₹ 13,60,000/- was received on 13.03.2009 and ₹ 1,89,000/- was received on 16.03.2009 at the time of execution of sale deed. Annexure- G (Pg 45 to 55 of Paper book) 16.00,000/- Total amount received during F.Y. 2008-09 46,60,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUBMISSION During the year under consideration the assessee society has received the contribution from three members out of sale consideration of their respective flats. The Ld. AO made the addition of ₹ 46,60,000/- u/s 68 of the IT Act and on the same amount made another addition of ₹ 6,99,000/- towards undisclosed profit which was calculated @ 15% of ₹ 46,60,000/- on arbitrary basis and Ld. CIT (A) confirmed the same. If principle of mutuality was ignored then CIT(A) might apply rate of 8% mentioned u/s 44AD although the same is not applicable in the present case. 9. Per contra, the ld. DR submitted that the assessee society is an unregistered group housing society consisting of only 8 members and the same cannot be classified as a legal entity. It was submitted that these 8 members formed a group and got a plot from JDA in guise of a group housing, constructed flats thereon and which were later on sold in open market. There is no element of mutual benefit amongst the members. It is therefore a case of an unregistered group housing society which has been formed without any partnership deed and has rightly been assessed in the status of associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Shri Anil Singhal as power of attorney holder of Shri Shyam Sundar Bhargav who was allotted the flat, the assessee society through its president, Shri Anil Singhal, and Smt Rinku Maharshi, the buyer of the flat for a total consideration of ₹ 16,40,000/-. Out of total consideration, an amount of ₹ 13,60,000/- has been received at the time of execution of sale deed i.e, during the financial year 2008-09 relevant to impugned assessment year. In this regard, it is also noted that the said sum of ₹ 13,60,000 has been paid to the assessee society in terms of impugned sale deed. 12. Similarly, on perusal of sale deed for flat no. 2, it is noted that the same has been executed on 16.03.2009 among Smt Seema Jindal as power of attorney holder of Shri Sanjay Kala who was allotted the flat, the assessee society through its president Shri Anil Singhal and Shri Rakesh Kumar Misra, the buyer of the flat for a total consideration of ₹ 17,00,000/- out of which has been received during the financial year 2008-09 relevant to impugned assessment year. It is noted that said amount of ₹ 17,00,000/- has been paid to the assessee society in terms of impugned sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the society and to discharge their past unfulfilled obligation, they have paid the amount out of sale consideration so received on sale of individual flats. In support of his contentions, he has relied on the contents of the sale deeds which carries a similar narration of facts as also admitted by the parties to the sale deeds, copy of construction agreement entered into between the assessee society and the contractor, and details of cost of land and construction as per financial statements of the assessee society as per particulars below: Following are the summary of Cost of land and cost of construction year wise:- Financial Year Particulars Amount (In Rs.) Cumulative Cost Upto Cost of Land 4,83,660/- 4,83,660/- 2005-06 Construction cost 32,52,037/- 37,35,697/- 2006-07 Construction cost 41,55,307/- 78,91,004/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see society from its members towards the cost of construction incurred by it on behalf of respective members. Once the assessee society has been assessed as a separate person, it carries its identity distinct from its members and revenues in the hands of members need not be revenues in the hands of the society. Even if we were to consider the receipts as revenues in the hands of the society, no basis has been spelt out as to how the 15% profit percentage has been arrived at by the AO or where any third party comparable data has been considered, the details of such data. In contrast, we find that we have the construction cost figures as per the assessee s society financial statements before us. If we look at the cumulative construction cost of ₹ 1,24,46,381/- as on the close of the financial year 2008-09 relevant to impugned assessment year, proportionate cost of construction for three flats out of total eight flats comes to ₹ 46,67,392/- as against total receipts of ₹ 46,60,000/- received during the year resulting in shortfall of ₹ 7,392/. Therefore, in absence of any surplus, the question of taxability doesn t arise for consideration and addition of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s explanation and without stating how the appellant/assessee is real owner. We are enclosing herewith the Written Submission filed before the CIT (A) and marked as Annexure A (Pg 10 to 11 of Paper book). Kindly refer to Para 5.3 of the order of the Ld. CIT(A), which is reproduced as under for your kind perusal:- 5.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submissions carefully. It is seems that either during the course of assessment proceedings or appellate proceedings the appellant has not been able to produce any documents evidences in support of the submission made MI the appellant. Therefore, the contentions raised in the written submission are not accepted. In view of the facts discussed by the AO in the assessment order, addition of ₹ 6,99,000/- (15% of ₹ 46,60,000/-) and addition of ₹ 46,60,000/- are hereby confirmed. The appellant/assessee was president of Society and working on honorary basis. He was involved in day to day working of society in the capacity of president and not in his individual capacity to earn any income. The appellant/assessee neither invested any fund f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ton Mills Ltd. V/S CIT (1954) 26 ITR 775(SC) wherein it was held by the Apex Court that the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under s. 23(3) . (ii) Lalchand Bhagat Ambika Ram Vs CIT (1959) 37 ITR 288 (SC) wherein it was held by the Apex Court that It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and this court in entitled to interfere. The Jaipur Development Authority (JDA) is a statutory body formed by Government of Rajasthan. The JDA has never objected or questioned that society formed was unregistered society and not eligible to get the aforesaid plot allotted in scheme, if it was mandatory condition then JDA would not allot the Plot. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person. Kindly refer the assessment order of M/s VIP Group Housing Society Para no 7 at Page No. 6 the list of original It appears that flats were constructed a group of persons lead by the assessee after allotment of plot from JDA in the name of society. It is not an irregularity because the society was working on the principle of mutuality and being assessee was President of the society, therefore, it was the responsibility of the assessee to perform his duties assigned by all the members. Total 8 residential units/flats were constructed over this land and sold out bq the assessee in different year as POA holder. Return of income of M/ s VIP Group Housing Co-operative Society has not been filed u/ s 139. The Jaipur Development Authority (JDA) allotted Plot No. 10/1/1, Sector 10, Vidhayadhar Nagar, Jaipur measuring 682.76 Sq. meters on lottery basis to the 8 members under the banner of society (VIP Group Housing Society) for the consideration of ₹ 2,76,542/- on 23-11-1990 through letter of allotment number 2149. The lease deed was executed after 15 years on 1807-2005. Since there was long time gap between allotment and execution of lease deed, some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee. Reliance is also placed on decision of Hon'ble Madras High Court in the case of CIT Vs Shri C.Sugumaran Tax case (Appeal) No 840 of 2014 order dated 03-112014 {2014 (11) TMI 320) where in it was held that:- 11. In the present case we find that there is no transfer to or enabling enjoyment of property in favour of the assessee in any manner and therefore, sub-clause (vi) of Section 2(47) of the Income Tax Act does not get attracted. Clause 21 of the power of attorney, which has been already referred to supra, clearly reveals that no consideration was received from the power agent for appointing him as power of attorney. It also emphasised therein that the property right has not been handed over to the power agent. We are, therefore, unable to accept the plea of the Revenue that there was an element of transfer or enabling enjoyment in favour of the assessee. The letter of the land owner subsequently issued does not come to the aid of the Department. It is the duty of the power of attorney holder to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portion of the decision is reproduced herein below:- 12. The admitted fact is that the appellant after correction of revenue record and recording the said land measuring 0.30 hect. in the name of Shri Bharat Singh and Shri Vijay Pal Singh, sold the same to Smt. Radha Devi Khatoria vide sale deed dated 19/ 12/2007 placed at assessee's paper book pages 49 to 54. The said sale deed has been executed by the appellant in his capacity as a power of attorney of Shri Bharat Singh and Shri Vijay Pal Singh for a sale consideration of ₹ 4.11 lacs. Smt. Radha Devi Khatoria happens to be wife of the appellant. The enquiries conducted by the Assessing Officer reveals that Shri Suraj Narain Khatoria, the appellant has not returned or made payment of the aforesaid sale consideration of ₹ 4.11 lacs to Shri Bharat Singh and Shri Vijay Pal Singh as the same is stated to have been denied categorically by them, but appellant's case is that the said payment stood made to Smt. Manju Yadav as is evidenced by the sale deed executed by the appellant. For such a controversy, the remedy lies somewhere else. The Sub- Registrar, in this case has adopted value of this property at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edents, on the issue under consideration. We are unable to sustain the finding of the Ld. CIT(A). Hence, the AO is directed to delete the addition however, he is free to take action against the real owners as per law. The ground no. 2 of the assessee's appeal is allowed. Flats cannot be constructed separately by each member of the society therefore the flats were constructed by the society on the Principle of Mutuality. The assessee on behalf of Society executed a Flat Construction Agreement with Contractor to construct flats according to the approved map on the basis of per square feet rate with material and labour. Copy of agreement between society and contractor is enclosed and marked as Annexure- D (Pg 35 to 38 of Paper book). The assessee/appellant look after the construction activities on behalf of the society. Kindly refer Pg 37 of Paper book and we are reproducing the relevant extract of the Construction Agreement as under:- Due to above clauses of construction agreement it was liability of the society to make the payment to the contractor therefore assessee/appellant has signed the sale deed on behalf of the society to collect the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by JDA to M/s VIP Housing society along with original allottees of respective flats continue to remain valid and pursuant thereto, the sale deeds have been executed. Further, there is nothing on record that the sale consideration has been received by the assessee in his personal capacity rather as we have noted above, the sale consideration has been paid by respective members to M/s VIP Group Housing Society towards discharge of their past obligations towards cost of construction. Therefore, in light of the aforesaid discussion, there is no basis to hold the assessee as liable to discharge any tax obligation in his individual capacity on profits on sale of the flats amounting to ₹ 6,99,000/. We find that the decision of the Coordinate Bench in case of Suraj Narain Khatoria (supra) wherein it was held that being a power of attorney holder, the person acquires only a delegated right and not an independent right over of the property also supports the case of the assessee Further, as we have noted above, the amount of sale consideration has been credited in individual members accounts in the books of M/s VIP Group Housing Society and not in the individual account of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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