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TMI Blog2023 (4) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, leads to a unequivocal finding of the assessee being the owner of the subject land, a contiguous piece; the executor of it s sale per a single transaction; and the beneficiary of the sale proceeds. The common factor between all the four sellers is the assessee; they being employees in his different concerns, or that of his son - The capacity (to purchase) by the sellers, absence of which is apparent, is completely un demonstrated, with two (of four) being transferred land by the assessee at less than 10% of the obtaining price, with a view to, as stated, help them! In the absence of any explicit or implicit authority, his sole presence in the negotiation with the buyers, being represented by Dr. Abdul Majeed, is a significant indicator of the de facto ownership of the land. Of no less import is not-knowing any of the other sellers by the three brokers, who would rather contact them in the first place. The statement of the brokers, as indeed the sellers themselves, are a complete give-away; the latter having little clue of the transaction, much less of its finer details. The retractions, months later, are unsubstantiated nor backed by corroborative material, i.e., are fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to tax NTPC v. CIT [ 1996 (12) TMI 7 - SUPREME COURT ]. This, despite the fact that there is nothing on record to show, nor even a claim at any stage, that the subject land, located at a commercially prime location in Thrissur, had been used in the two years prior to it s sale for any agricultural activity. That would form the subject matter of adjudication on merits. Working of the capital gain in the case of Shri P. Manoj Shri K.J. Thomas would not be as short-term capital gain, as made in their protective assessments, but as long-term capital gains, ignoring the purchase dated 18/12/2006, i.e., substituting it with the actual cost (and date) of acquisition by the assessee (TGC). We, in view of the foregoing, find no merit in the assesse s case, while surely in that of the Revenue, both as regards the beneficial owner of the subject land, the capital asset, as well as the quantum of the sale consideration, which thus finds our approval, vacating the findings per the impugned order. Appeal by the Revenue is allowed. - ITA No. 67/Coch/2018 - - - Dated:- 3-4-2023 - Shri Sanjay Arora, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent year, qua 276.87 cents, having been sold on 25/8/2007. We find this as apposite. There was admittedly no delivery of possession per the sale agreement dated 03/1/2007, which is also not a registered document. In any case, we observe no dispute as to the year of assessment in respect of the transfer/s under reference. 4.2 Our second preliminary observation is that the matter at hand cannot be regarded as covered in favour of the assessee, as contended before us by Shri Warrier with reference to the order by the first appellate authority in the assessee s case for AY 2007-08, which has attained finality in view of the dismissal of the Revenue s appeal there-against by the Tribunal, taking us through the respective orders (PB-3, pgs.1-5, 6-35, 36-50). The income, he explained, returned by the assessee for AY 2009-10 on the basis of the sale deed dated 28/05/2008, i.e., qua 107 cents of land, was sought to be assessed for AY 2007-08 for 50 cents on the basis of delivery of it s possession during the relevant previous year. The transaction being admitted, the assessee got part-relief on the basis of the value declared in the sale deed, i.e., Rs. 1 lac per cent, as against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, u/s. 131 of the Act in assessment proceedings. It is these statements, which were duly confronted to the assessee, as well as the surrounding facts and circumstances, which form the basis of the impugned assessment; the AO s findings, summed up at para 9 (xxii) to (xxiv), reading as under: (pgs. 15-16) (xxii) The following facts are revealed from an analysis of the facts relating to the so-called sellers of the property: a) All the four persons, viz. Sri. KJ Thomas, Sri. P Manoj, Sri. A. A. Balachandran and Late PM Vijayan, were closely connected with Sri. T G Chandrakumar, and are/were his employees. b) Two of the persons who had a major share of the property in their names had business concerns which were stopped due to losses during the FY 2004-05. However, the sale proceeds are claimed to have been routed through the books of the concern which had stopped functioning three or more years prior to the sale of land . c) No part of the sale proceeds is routed through bank accounts of the concerned persons. Even for receipt of advance and the claim of refund of the same no entry in bank statement is seen. d) With reference to the statements from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Shri. K.J. Thomas, were closely associated with the appellant, Shri. T. G. Chandrakumar, and because, it was the appellant who negotiated the sale of land on behalf of everyone. The Assessing Officer also held that the other four persons were men of little or no means and that they neither interested in the land nor earned any share of profit. The Assessing Officer also alleged that the transactions were not routed through bank accounts of these four people. Even though subsequently retracted , the Assessing Officer placed reliance on the statements of these people recorded during the course of the search. Ultimately, the Assessing Officer concluded that four people mentioned above were benamidars of the appellant. Shri. T.G. Chandrakumar and, therefore, assessed the capital gains in the hands of the appellant on substantive basis and (in) the hands of four other people on protective basis. The learned Authorized Representative of the appellant has objected to the action of the Assessing Officer and has given evidences to rebut the facts narrated by the Assessing Officer. It is seen that Shri. P.M Vijayan and Shri. A.A. Balachandran are income-tax assessees since 1985. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the brokers, Shri C.R. Joseph, Shri K.K. Sunil and Shri Ratheesh Vega, who were involved in the deal also stated under oath the land belonged to Shri T.G. Chandrakumar. 6. The Commissioner of Income Tax (Appeals) overlooked that Shri P.K. Ramachandran, power of attorney holder of Smt. Laxmidevi Gopinathan (one of the purchasers) admitted that 384.5 cents of land was purchased from Shri Chandrakumar although the land was held in the name of various persons. 7. The Commissioner of Income Tax (Appeals) overlooked (that) no part of the sale proceeds is routed through the bank accounts of the concerned persons thus proving that they were only name lenders. 8. It was claimed during appeal stage that a few of the sellers received money from the purchasers. The CIT (Appeals) has discussed the same in the appellate order as ground for deleting this addition. However, this is a new piece of evidence and the Assessing Officer should have received an opportunity to comment on the same. However, the opportunity was not afforded to the AO. 9. The Commissioner of Income Tax (Appeals) erred in giving credence to retraction filed by the sellers of land and brokers. The CIT(A) over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und during search, has evidentiary value u/s. 292-C of the Act. In fact, none of signatories denied signing it; rather, confirm their signatures. That apart, there is nothing either found during search or brought on record evidencing it s cancellation, so that the said plea is backed only by a bald statement, leading to, as we find, several inconsistencies. In fact, cancellation of, as indeed any modification to the Agreement, as where the time for making payment thereunder is extended, or monies stipulated thereunder paid, etc. would stand to be recorded therein, either on it s back, as specified in Cl. 4 thereof, as indeed stated by Dr. Majeed, or as addendum thereto, with the parties signing in token of their acceptance. In the instant case, on the contrary, as observed, the new Agreement dated 07/3/2007 (PB- 1, pgs. 49-57) is by and between the assessee and Sh. Arun Majeed, acting for themselves, i.e., is not signed by all the original signatories, which only would make it valid. Its perusal reveals as under: a) it is an agreement for 107 cent of the subject land, between Shri T.G. Chandrakumar (TCG), the assessee, and Sh. Arun Majeed s/o Dr. A Majeed; b) it bears no refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the date of Agreement, and in the name of Dr. Majeed, the buyer, as is usually the case. No response was forthcoming from Sh. Arun Majeed on being confronted therewith (Q.7 of his statement u/s. 131, dated 07/1/2015 (PB- 1, pgs. 47-48)). We find no explanation for this state of affairs, which is bizarre inasmuch as the new agreement, on which the assessee relies, is founded only on the cancellation of the earlier Agreement. The reference to payment vide cheque dated 07/03/2007 therein is again a pointer to it having been written subsequently, even as admitted by Dr. Majid on 15/01/2015, inasmuch as only a cheque prior to that date could be encashed on 07/03/2007. The second Agreement is only a make-believe . 6.2 We, next, discuss the other evidences. In our view, the statements of the three real estate agents who brokered the transaction, being independent, have a higher evidentiary value . This is as both the purchasers and sellers are, in contradistinction, interested parties, having an interest in projecting the disclosed transactions as the real state of affairs. While the sellers would be liable to tax on capital gains on, the buyers would have to show the source of, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., Smt. Laxmi Devi Gopinathan (LG), either herself or through her power of attorney Dr. P.K. Ramachandran Menon (RM), her brother, was not present during the negotiations. That the purchase rate was Rs. 2.24 lac per cent was also confirmed by RM vide his statement u/s. 131 dated 07/01/2014. This was again confirmed by LG, one of the signatories to the agreement, vide her statement u/s. 131 dated 06/02/2014, as well as by her sister, Smt. Rani Menon (vide her statement u/s. 132(4) dated 10/02/2014) (pgs.6-8 of the assessment order for AY 2007-08). And, further, that LG represented the Menon siblings, whose share in the subject land was 58 cents, valued at Rs. 1.30 crore. None of this is in fact denied by the assessee, whose case, as afore-noted, is the cancellation of the Agreement dated 03/01/2007 , soon after, on 17/01/2007, returning the advance in view of the stated defect of puramboku , resulting in downscaling the purchase price to Rs. 1 lakh per cent. 6.4 With this factual background, we may take up the aspect of sale rate first (see para 4.3(b)); the two issues being in fact inter-related. We find little merit in the assessee s case qua the rate of Rs. 1 lac pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination, which took place on 18/03/2015, whereat, besides Dr. Majeed and his son, Arun Majeed, brokers Sh. K.K. Sunil and Sh. C.R. Joseph were also present. Dr. Majeed would state that though the agreement was cancelled on 17/01/2007, it was with the help of mediators restored on 20/01/2007. He further admits to being compelled to state so (i.e., the truth), as it was no longer possible for him to reiterate his earlier statements (dated 18/12/2013, 14/02/2014 25/03/2014), as LG, who had one copy of agreement, had documented the sale consideration of Rs. 2.24 lac per cent and, in fact, transferred Rs. 1.30 cr. to Dr. Majeed s bank account, as had been confirmed by him on 14/2/2014. The restoration of the agreement renders it s cancellation, itself sans any evidence, or the return of cash, as of no consequence. The assessee did not cross-examine Arun Majeed, while the two brokers present also confirmed their earlier statements in principle (para 21, pgs. 11-13 of the assessment order). The cancellation of the Agreement dated 03/01/2007, which is a very detailed Agreement, would, where so, be backed by various materials and incidences; rather, being noted therein itself. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier, if anything, disproves the plea of cancellation (see para 7.2). 6.5 As regards the defect per se , stated to be the reason for the cancellation, there is firstly nothing on record to demonstrate it. The subject land is in front of the residence of Dr. Menon, and it is this that may have led the Menons to become interested in it s purchase. How could he be not aware of a part of the land belonging to the Corporation? Further, even as the AO puts it, Dr. Majeed is a regular dealer in lands, so that he could not possibly have lost sight thereof (para 9(vi)). The stated defect, i.e., a part (unspecified) of land being puramboku , is in fact not substantiated by any material, and at any stage. How, and why, one may ask, is the same then agreed to be purchased at a lower rate of Rs. 1 lac inasmuch as that would not by itself remove the defect ? There is nothing on record to exhibit, or even a claim, of the defect being removed, much less by 20/01/2017, the date on which the agreement is stated to be, after cancellation on 17/01/2017, restored. How, in any case of the matter, then, the subsequent agreement or sale deeds executed ? In fact, Dr. Majeed himself states on 14/02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement dated 03/01/2007 was for bank purposes, where is the actual Agreement for Rs. 1 lac, which would be entered between the parties before or latest by 03/01/2007? The same was not found. There is in fact no whisper of this actual Agreement. There is further no application made to the Bank by the buyer/s. Why, it is not even shown that bank finance was involved in purchase. The argument also misses the point that LG herself is a signatory to the Agreement and, therefore, would be a signatory to the actual Agreement as well, i.e., either herself, or through her POA, RM. She couldn t be duped, a serious charge. Where, finally, is the question of Agreement dated 03/01/2007 being cancelled, when it is, as being canvassed, not the actual Agreement, but only one meant for an ulterior purpose ? 6.7 For the reasons afore-stated, in our view, the rate of Rs. 2.24 lac per cent stands conclusively established. (also refer para 7.1) 6.8 Next, we consider the issue of ownership of the subject property, i.e., to the extent of 276.87 cents (para 4.3(a)). The basis of the assessee s challenge, as aforenoted, is the retraction of their stand by the sellers and, further, of evidences fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 6.9 The case of the second person, i.e., Sh. K.J. Thomas, is on the same lines. Working as a manager in M/s. Gem Lights, belonging to the assessee s son, is again a family man of no means, returning, as in the case of P. Manoj, a meagre income (rs. 0.66 lacs) u/s. 153C. 4.47 cents of land stands transferred to him by the assessee, again on 18.12.2006, i.e., days prior to it being agreed for sale for rs. 2.24 lac per cent, for a stated consideration of Rs. 90,000, ostensibly with a view to help him. The arrangement stares one in the face. Much less proving the capacity, there is nothing to show of saving being accumulated, or even expended, nor indeed is there anything to show receipt of sale consideration by the ostensible seller. There has been no rebuttal of these primary facts at any stage nor indeed any explanation for the sale days after the purchase, which is surely not at market value, whether reckoned at rs. 2.24 lac or even rs. 1 lac per cent. As apparent, negotiations for sale, culminating into an agreement on 03/01/2007, were on at the relevant time, i.e., of purchase . The transaction is clearly motivated with an ulterior purpose of saving on tax, leading to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completely unevidenced, making the purchase of land by him in 2001 itself as most improbable. Why, he states, without evidence though, of receiving cheque for rs. 29 lacs (Qs. 8, 9), even as the sale amount of rs. 30.20 lacs stands paid cash . To most of the questions, his answer is: I don t remember . The facts speak for themselves, and unmistakingly point to he being an owner only in the name. All he, stated to be an income-tax assessee, needed to do was to produce the balance-sheets of his firm, Trust Rubber , which would exhibit the source of the purchase as well as incurring losses over the years, as well as the utilization of the sale proceeds. Why, he would have filed returns for the said period, claiming losses, which are again conspicuous by their absence. Further, he would have sure obtained receipts from the creditors on settlement of the dues incurred on suffering losses for years; rather paid them through bank. In fact, incurring losses for over a decade itself suggests abundance of capital, either own or borrowed, which only would enable running the proprietary firm for years at a loss, raising substantial doubts as to the source of this capital and, in turn, abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy 2004-05, he was not working for the assessee at the relevant time. That is, was without work, doing odd jobs. In short, in dire straits. Yet, he does not remember what he did with rs. 30.20 lacs received cash on 25.8.2007. In fact, these odd incomes were not returned per the original return on 31.7.2008, but only per the sec. 153C return, filed subsequently on 25/8/2014, and tax thereon (Rs. 26,953) deposited on 21.01.2011 on service of the notice of demand pursuant to assessment dated 31/12/2010. It is thus clear that neither the books of account nor the balancesheet (as on 31/3/2008) of Trust Rubber was available at the time of filing the return on 31/7/2008 . And stand made only for being produced at the time of assessment, proceedings in which, commencing with the issue of notice u/s. 143(2) on 22/9/2008, ended with hearing on 10/11/2010. We have already noted that recording of cash in the books of Trust Rubber is only by way of a book-entry, with a view to create a semblance of evidence of it being accounted. The assessee has also placed the balance-sheet (as on 31/3/2009) of M/s. Astro Treads , another proprietary firm, in his compilation (PB-1, pgs. 86-90). The firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er . Filing tax return on the basis of the sale deed, even otherwise incumbent, is only in discharge of a legal obligation. We have in fact already opined that returning capital gains on the subject land would be by itself of little consequence; rather, in sync with the scheme to project the apparent as the real. Not so doing, as appears from the assessment order u/s. 153C r/w s.143(3) dated 28/3/2016, which mentions only of return u/s. 153C dated 30/1/2015 (PB-2, pgs. 1-9), rather defeats the case of the parties, the buyers and the sellers, which entails substantial tax savings for both, at the threshold . The said return reflects a regular income of pension (rs. 32,682) and salary (from Gemco Rubber) at rs. 66,600, i.e., barely sufficient to meet two ends meet. The capacity to purchase land in 2001 is thus not demonstrated, which only required filing the return and balance-sheet for that year. Like-wise, for the stated improvements to land in fys. 2002-03 2003-04, at rs. 60,000 each. No wonder, the same were not accepted in assessment dated 28/3/2016, assessing capital gain protectively. As it's perusal shows, his wife, is not aware of the purchase of the subject land, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Though stated to be present at the time of negotiation for sale, i.e., as per the retracted statement dated 26.3.2015 by one of the brokers, Sh. Ratheesh Vega, the same contradicts his earlier statement as well as that by the other two brokers taken in 2015 and, besides, does not explain the reason for his stating otherwise initially, whereat his statement was in agreement with that by the other two, stating of none of the four sellers, i.e., other than the assessee, being present for negotiations, and which remains unchanged. Sure, it may here be relevant to state that the said absence would only be indicative, as it could be that they had given authority to the assessee to transact on their behalf, which would itself only be where all of them have complete trust in him, developed over years, suggesting a long and continuing association, involving finance in all likely-hood. However, none has stated so; there being in fact no whisper of any such authority being given. Rather, the brokers admitted to not know him, as also the other 3 sellers, and which is inconceivable if they are the actual owners selling their land/s inasmuch as, where so, they would be contacted by the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between all the four sellers is the assessee; they being employees in his different concerns, or that of his son, Shri T.C. Praveen. The capacity (to purchase) by the sellers, absence of which is apparent, is completely un demonstrated, with two (of four) being transferred land by the assessee at less than 10% of the obtaining price, with a view to, as stated, help them! In the absence of any explicit or implicit authority, his sole presence in the negotiation with the buyers, being represented by Dr. Abdul Majeed, is a significant indicator of the de facto ownership of the land. Of no less import is not-knowing any of the other sellers by the three brokers, who would rather contact them in the first place. The statement of the brokers, as indeed the sellers themselves, are a complete give-away; the latter having little clue of the transaction, much less of its finer details. The retractions, months later, are unsubstantiated nor backed by corroborative material, i.e., are factually and legally untenable, as opposed to that by the principal buyer, duly cross-examined, bringing parity between the different statements. There being a complete absence of money trail, the sellers h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, rather, defeating the assessee s case. 7.2 As regards the assessee s claim u/s. 54B, made for AY 2009-10, the same stood denied by the AO stating the same as applicable only where the agricultural land purchased is subsequent to the transfer of the land being used for agricultural purposes by the assessee, while in the instant case the same stands purchased earlier on 17/04/2007. This would equally apply for the current year; the subject land having been sold on 25/8/2007. We state this as, where otherwise valid, we would have, despite absence of any claim for the current year, restored the matter to the file of the AO for an examination thereof on merits, i.e., in the interest of justice. This is as, without doubt, it is a correct income that is liable to be assessed and brought to tax ( NTPC v. CIT [1998] 229 ITR 383 (SC)). This, despite the fact that there is nothing on record to show, nor even a claim at any stage, that the subject land, located at a commercially prime location in Thrissur, had been used in the two years prior to it s sale for any agricultural activity. That would form the subject matter of adjudication on merits. The claim, its merit apart, in fact impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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