Ita/541/2014 Of Dr H Krishna v. The Deputy Commissioner Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1/ DAY OF NOVEMBER 2070. PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASADLT.A.§ NOCO.541 OF 20 BETWEEN: DR. H. KRISHNA|S/O HONNEGOWDAAGED ABOUT 52 YEARS.KAVERI NURSING HOME|NO.1132, 3RD MAIN ROAD1ST CROSS, ASHOKNAGARMANDYA-5/1401. (BY SRI. CHYTHANYA K.K. ADV.,) ... APPELLAN| AND* THE DEPUTY COMMISSIONER INCOME TAXCENTRAL CIRCLE, NO.55/1|SHILPASHREE BUILDING1ST FLORR, OPP.STERLING TALKIESVISHWESWARANGAR, MYSORE-5/0008. .. RESPONDENT| (BY SRI. K.V. ARAVIND, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,|1961L ARISING OUT OF ORDER DATED 08.08.2014 PASSED IN ITANO.1012/BANG/2011 FOR THE ASSESSMENT YEAR 2009-10,PRAYING TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF.THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU 'C' BENCHIN ITA NO.1012/BANG/2011, DATED 08-08-2014 FOR THEASSESSMENT YEAR 2009-10. THIS|LIACOMING|ONFOR.HEARING,THISDAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment year 2009-10.The appeal was admitted by a bench of this Court videorder dated 20.04.2015 on the following substantial|questions of law:| (1)Whether on the facts and in the circumstances of tne case, tneHonourable Tribunal was right in not)considering Rs.50,00,000/- as_ part ofcost of acquisition ignoring (a) the actual|SaleconsiderationaS|pertheSaleagreement, (b) actual payments and (c)|assessment in the hands of seller. (11)Whetner on the facts and Inthe circumstances of tne case, tne Honourable Tribunal was right in denying|the capitalization of the interest onborrowed funds, ignoring that the amount|borrowed actually funded the payment ofpurchase consideration as established in|the bank statement. (111)Whether on the facts and inthe circumstances of the case, theHonourable Tribunal’s finding as regards|purchase consideration and utilization of|borrowed funds is perverse being based|on irrelevant consideration and being de-hors the relevant consideration. 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a Doctor by profession,and runs a nursing home at Mandya in the name andstyle of M/s Kaveri Nursing Home, which is a proprietaryconcern. The assessee entered into an agreement for|purchase of a property situate at J.C.Road, Bangalore on01.06.2005 with one M/s Blue Cross Builders andsInvestors Ltd. For a consideration of Rs.9,92,75,000/-.. Thereafter, on 02.01.2007 a supplemental agreement.Wasexecuted,|In|whichsaleconsiderationWaSmentioned as Rs.11,82,50,000/-. Thereafter, M/s Blue)Cross Builders and Investors Ltd. executed a Power Of |Attorney on 01.09.2007 in favour of the assessee. The.assessee soled the aforesaid property on 10.04.2008 to.one Rajendra Kumar Jain and the amount of sale.considerationmentionedInthesaledeedWaSRs.18,50,00,000/-. The assessee however, declared the)saleconsiderationIn|thereturn|ofincomeas|Rs.21,75,00,000/-. The assessee filed the return of|income on 29.04.2009 for the Assessment Year J2JOO10,In|which income.ofRs.10,227,22,2/0/-.WaSdeclared. Thereafter, a notice under Section 143(2) ofthe Act was issued on 14.09.2009 for’ scrutinyassessment. A notice under Section 142(1) was alsoissued, by which the assessee was asked to furnish thedetails. The Assessing Officer passed an order ofassessment on 30.17.7010. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who.by an order dated 22.08.2011 partly allowed the appealpreferred by the assessee. The revenue thereupon.approachedtheIncomeTax!AppellateTribunal|(hereinafter referred to as the tribunal’ for short). Thetribunal by an order dated 08.08.2014 inter alia held.that there is no corroborative material on record to'demonstrate that tne assessee has to pay a sum ofRs.50,00,000/- to M/s Blue Cross’ Builders and|Investors Ltd. except bald assertion of the assessee thathe has to pay Rs.50,00,000/- to M/s Blue Cross Buildersand Investors Ltd. and denied the claim of deduction of Rs.11,82,50,000/- as part of cost of acquisition of theproperty. Tne capitalization of interest of Rs.7 Lakhs.paid on borrowed fund for purchase of the property was.also denied. In the result, the appeal preferred by the.revenue was partly allowed. In the aforesaid factual.Dackground, the assessee Nas approacned this court. 4Learned counsel for the assessee submittedthat the tribunal erred in holding that there is no.material on record that the assessee has to pay a sum.of Rs.50,00,000/- to M/s Blue Cross Builders andInvestors Ltd. except the bald assertion of the assessee.In this connection, our attention has been invited to listof documents, which was filed before the tribunal. It isfurther submitted that the tribunal ought to Nave!appreciated that M/s Blue Cross Builders and Investors.Ltd. in response to the notice under Section 133(6) of.the Act had filed copy of its return of income and copy ofledger accounts of the assessee, wherein the balance of Rs.50,00,000/- was shown as outstanding. It is also.argued that the tribunal ougnt to nave appreciated tnatsale consideration of Rs.21,75,00,Q00/- was adopted as—against the amount of Rs.18,50,00,000/- as mentioned|in the sale deed for stamp duty valuation and therefore,the Assessing Officer ought to have considered the value.of cost of acquisition as Rs.11,82,50,000/-. It is further submitted that the revenue cannot be permitted to blow.hot and cold. It is also urged that the tribunal ought tohave appreciated that there was an oral agreement.between the assessee and Dr.Manjunath under which|the amount was borrowed and assessee was required to.pay interest on the aforesaid amount and even oralagreement is binding between the parties. It is further|submitted that the findings recorded by the tribunal are|perverse. In support of aforesaid submissions, reliance.has been placed on'"'ASHISH PLASTIC INDUSTRIESVS.ACIT,2015-TIOL-51-SC-IT,'M.BASHEERAHAMED VS. CIT, (2013) 352 ITR 157 (MAD), ‘CITVS. GEORGE HENDERSON & CO. LTD’, (1967) 66)ITR 622 (SC), PR. CIT VS. QUARK MEDIA HOUSE.INDIA (P.) LTD., (2017 391 ITR 145 (P & H),and"HIRA LAL RAM DAYAL VS. CIT’, (1980) 122 ITR461 (P&H). 5.|On the other nand, learned counse! for tnerevenue submitted tnat the assessee nad mentioned tne. cost of acquisition as Rs.11.32 Crores in the SpecialPower Of Attorney, which is a registered document. It isfurther submitted that the assessee in fact is attemptingto adjust a sum of Rs.50,00,000/- from unaccountedcash of Rs.3.75 Crores, which was seized from him. It is.further pointed out that schedule of payments given by the assessee as mentioned in para 6 of the order of.assessment does not refer to a sum of Rs.50,00,000/-,.which is payable. It is further submitted that from.perusal of details of payment as tabulated in para 4 ofthe order of assessment, the liability to the vendor viz.,.M/s Blue Cross Builders and Investors Ltd. is onlyRs.11.32 Crores and not Rs.11.82 Crores as claimed by.the assessee. It is also pointed out that documents.referred to the by the assessee are contrary to tneregistereddocumentandhave|beenpreparedsubsequently and have no bearing on the issue. It is|also urged that the assessee has failed to establishaccrual of borrowing for acquisition of the property in- question and the receipt of loan was made after advancepayment was made and admittedly, after receipt of loan,no advance was paid. It is also urged that the finding of fact has been recorded by the tribunal and is based on.the documents produced by the assessee himself and.therefore, the same cannot be termed as perverse. 6.|We have considered the submissions made.by learned counsel for the parties and have perused therecord. From perusal of the details of payments.furnished by the assessee on 09.08.2010, which ismentioned in para 6 of the order of assessment, it is.evident tnat tnere Is no mention of amount oOfRs.50,00,000/-, whicn is said to be payable to M/s Blue.Cross Builders and Investors Ltd. It is also pertinent tomention here that M/s Blue Cross Builders and|Investors Ltd. had furnished an explanation beforecompletion of the assessment, in which it was statedtnat the deal was complete on 31.08.2007 and M/s Blue.Cross Bulliders and Investors Ltd. is not concerned| about any subsequent events. It has further beenstated that further consideration, if any, in respect of.the aforesaid property has been received by theassessee and the tax liability is also on the assessee.The Assessing Officer has taken note of the reply filed bythe assessee and has held that the stand of the'assessee cannot be accepted as no details regarding|exact dates and notes of payments between the partiesconcerned were furnished at any time during thestatements recorded under Section 131 of the Act at thetime of investigation. It is also noted that there is no|mention of any amount payable to M/s Blue Cross.Builders and Investors Ltd. in the return of income for.the Assessment Year 2009-10 and at no point of time,pefore issuance of notice dated 01.10.2010 tne assesseehas accepted that any amount was payable to M/s Blue.Cross Builders and Investors Ltd. Accordingly, the|Assessing Officer has added Rs.50,00,000/- under thenead of snort term capital gains to the income of the assessee. It has also been held that there was no'agreement with Dr.Manjunath with regard to any.amount borrowed from him or with regard to any'payment of interest and assessee has invested entiremoney towards purchase of five sites in the same year.It has also been held that the money was repaid toDr.Manjunath on 25.07.2007 and property has been soldon 10.04.7008 and offered to tax in Assessment Year|2009-10 and the events have taken place in differentfinancial years. Therefore, the amount of Rs.7,00,000/-.cannot be allowed as expenses under the head of shortterm capital gains. The tribunal has held that in the|Power Of Attorney executed in favour of the assessee,there is no mention that it has to pay a sum of.Rs.50,00,000/-. The tribunal has agreed with thefindings recorded by the Assessing Officer and has held|that the Assessing Officer has rightly not granted the|benefit of Rs.50,00,000/- to the assessee towards cost)of acquisition. It has further been held that there is no. direct nexus between the loans advanced to the'assessee by Dr.Manjunath and investment made by the.assessee in the property in the same year and themoney has been repaid to Dr.Y.S.Manjunath prior to.sale of the property. The tribunal has therefore held thatthe amount of Rs.7,00,000/- cannot be included in thecost of acquisition. The findings recorded by the tribunalare based on meticulous appreciation of evidence on.record wnicn by no stretch of imagination can be said to.be perverse.Even otherwise,the matterstands.concluded against the assessee by findings of fact,|which are based on meticulous appreciation of evidenceon record. The findings of fact do not suffer from any.perversity warranting interference of this court inexercise of powers under Section 260A of the Act. |:SEE: SYEDA RAHIMUNNISA VS. MALAN BI BYL.RS. AND ORS. (2016)10 SCC 315and|PRINCIPALCOMMISSIONER OF INCOME TAX, BANGALORE &ORS. VS. SOFTBRANDS INDIA P. LTD., (2018) 406 ITR 513|.