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02-07-2019, Lt. Cdr. Chunni Lal (Deceased), Section 148, 69, Tribunal Amritsar

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3 months 1 week ago #9990 by amit
Section - 148, 69, 48, 150, 153
Order Date - 02-07-2019
Favouring - Revenue Partly
Court - Tribunal Amritsar
Appellant - ITO
Respondent - Lt. Cdr. Chunni Lal (Deceased)
Citation - 719Taxpundit80
Appeal No. - I. T. A. No. 297/Asr/2015
Asstt. Year - 2009-10


PER : Sanjay Arora, AM

This is an Appeal by the Revenue directed against the order by the Commissioner of Income Tax (Appeals), Jammu (‘CIT(A)’ for short) dated 27.03.2015, allowing the Assessee’s appeal contesting his assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 08.03.2013 for Assessment Year (AY) 2009-10.

2. In this case the authorization on record was in favour of CA Joginder Singh by one, Sh. Suresh Kumar, as the legal heir of the assessee, since deceased, dated 27.12.2015. As the certificate from the Assessing Officer (AO) dated 26/2/2018 (copy on record) mentioned only Smt. Jeeto Devi, wife of late assessee, as his legal heir, who therefore was unrepresented, i.e., as against only Sh. Sursesh Kumar, earlier (vide letter dated 31/01/2017/coy on record), Sh. Singh was, vide order sheet dated 30.01.2019, required to obtain authorization in his favour from Jeeto Devi. An affidavit dated 23.9.2017 from Smt. Jeeto Devi, confirming of her being the only legal heir of the late assessee, as well as power of attorney dated 08.04.2019 in favour of Sh. Joginder Singh, stands since placed on record. The hearing was accordingly proceeded with.

3. The issue arising in this appeal is the sustainability in law, in the facts and circumstances of the case, of the addition in the sum of Rs.70,88,240 received by or on behalf the assessee during the relevant year (i.e., f.y. 2008-09) from one, Sh. Sharad Madan, since deleted by the ld. CIT(A).

4.1 The facts of the case, which are not disputed, are that the assessee, a retired Naval Officer, returned his income for the relevant year on 30.7.2009 at Rs.1,31,179. Reassessment proceedings were initiated vide notice u/s. 148 dated 23.9.2011 on the basis of the information with the Revenue as to the assessee, a beneficiary of Adarsh Co-operative Housing Society Ltd., Mumbai, having been allotted a residential flat by the said society in a building at Colaba, Mumbai (i.e., Flat No.1402, 14th Floor, Block No.6, Plot-652, Cuffe Parade, Colaba, Mumbai) on payment of Rs.60.39 lacs, confirmed by the assessee before the AO on 26.7.2011. The assessee responded (to the notice u/s. 148) by declaring an income of Rs. 1,82,210 (besides agricultural income at Rs. 45,000) vide return furnished on 20/12/2011. An examination of the source/s of the payment/s of Rs. 60.39 lacs to the society during assessment proceedings, it transpired that the assessee had received a total of Rs.81,78,240 from one, Sh. Sharad Madan, a NRI, resident of UK, of which Rs.21,78,240, detailed as under, was in fact direct to the housing society, for and on behalf of the assessee, forming part of the cost of the flat (at Rs.60,39,240):

That a part, Sh. Sharad Madan (SM) had paid Rs.60 lacs to the assessee by way of security deposit (Rs.35 lacs) and for furnishing the said flat (Rs.25 lacs) vide cheque No.12789 dated 27.6.2008 (drawn on HSBC Bank, New Delhi). All these payments were stated to be made by SM in pursuance of a leave and license agreement dated 25/06/2008 (‘LLA’ hereinafter) (at PB pages 4-13), reserving a rent (license fee) of Rs.35,000/- per month for a period of 60 months commencing the date of the receipt of the occupation certification (OC) by the society and furnishing of the licensed premises, the assessee’s flat (clause 2(a) of the LLA). No furnishing of the flat was, however, done, on the receipt of the OC much later on 01/10/2009. In fact, the transaction could not be carried out because of the ensuing litigation in relation to these flats, though no amount, whether paid to the assessee or directly to the society (for and on behalf of the assessee), by the licencee/s, was repaid to him by the assessee.

4.2 The AO did not find the same as representing a genuine transaction. The initial payment was made on 29/5/2008 i.e., even as the LLA was executed only on 25.6.2008, which was an unregistered agreement. Then, again, the parties being unrelated, why would anyone pay to another without security and interest, i.e., without consideration? Further, why did not SM recall his money, i.e., on the assessee having not, and indeed unable to deliver possession of said flat, much less furnish the same? The amount received during the year, i.e., Rs.70,88,240/- (Rs.60,00,000 + Rs.10,88,240/-) was brought ot tax by the AO for the current year. The balance two payments of Rs.5.45 lacs each were brought to tax by him for the relevant years, i.e., AY 2010-11 and AY 2011-12.

4.3 In appeal, the assessee explained Sharad Madan, a British citizen, to be a London-based business-man, in readymade garments business. He frequented India for his business and was, accordingly, interested for a guest house for his company – XTC Clothing Co. Ltd. (‘XTC’ for short). The security deposit and advance for furnishing was justified on the basis of the low rental reserved, i.e., Rs. 35,000/- p.m. It was further not unusual to pay a token amount in advance, and which explained the payment of Rs.5.38 lacs on 29.5.2008. The registration of the LLA was, in terms of the agreement itself, only on the handing over the possession, which did not materialize as, soon after the issue of occupation certificate on 01/10/2009, litigation started and, resultantly, water and electricity was withdrawn from the said premises. Additional evidence towards the creditworthiness of the licencee, SM, being the financial statements of XTC for the years ending 30/6/2005, 30/6/2006, 31/12/2007 to 31/12/2010, as well as affidavit-cumdeclaration dated 25.11.2014, duly notarized, confirming to have entered into a leave and license agreement dated 25.6.2008 with the assessee, paying Rs.81,78,240 – detailed therein (including the purpose for which the different

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