Ita/76/2014 Of Shri. M.a. Azeez v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY ,THE 21ST DAY OF FEBRUARY 2019 / 2ND PHALGUNA, 1940 ITA.No. 76 of 2014 AGAINST THE ORDER/JUDGMENT IN ITA 243/COCH/2012 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 30-08-2013 APPELLANT/APPELLANT/ASSESSEE: SHRI. M.A. AZEEZ"MAHALI HOUSE", MUTTIKULANGARA, PUTHUPARIYARAM PALAKKAD DISTRICT. BY ADVS.SRI.T.M.SREEDHARAN (SR.)SMT.BOBY M.SEKHARSMT.DIVYA RAVINDRANSRI.V.P.NARAYANAN RESPONDENT/RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAXCENTRAL, C.R.BUILDINGS, I.S.PRESS ROAD, COCHIN-682018. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.JOSE JOSEPH SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA 76/14 -2- ITA No.76 of 2014 Vinod Chandran, J. JUDGMENT The only question arising in the above appeal is as to whether the addition of Rs.78lakhs on the assessee-appellant; with respect to asale agreement of a property in Menonpara atPalakkad can be sustained or not. Essentially, thequestion is on facts and we have to look atwhether the findings are perverse or not. 2.Admittedly, a search was conductedunder Section 132 of the Income Tax Act, 1961 (“Act” for short), including the residence of theassessee and certain others who were togetherinvolved in real-estate transactions. From theresidence of one Babu, who is a member of thegroup, an agreement was recovered which showed itto be an agreement for purchase of a property at ITA 76/14 Menonpara for a total consideration of Rs.150lakhs. Sri.Babu in his deposition said that therewas a building at Akathethara, which was also apart of the transaction and exchange of thatproperty was fixed at a value of Rs.72 lakhs. Thebalance Rs.78 lakhs is said to have been receivedby cash by Sri.Babu from the assessee. Theassessee also endorsed the agreement, but howeverhad a different version with respect to thetransaction. His version, which we find from thestatement recorded under Section 132(4), is asfollows:- “8. Explain your dealings with Mr.Babu? Ans.:I, along with Mr.C.H.Hussain,have made an agreement to purchase 18acres of land in Menonpara, from Mr.Babu,at the rate of Rs.12,000/- per cent. Wehave paid Rs.1.5 crores to him in thisregard. For this purpose, the 13 centplot and building in Akathethara, whichwas in my name was given to Mr.Babu forRs.50 lakhs. Apart from this, I had paidRs.50 lakhs in cash (this includes Rs.25lakhs payable to Mr.C.H.Hussain in -4- respect of Petrol pump). The remainingRs.50 lakhs was paid by Mr.C.H.Hussain.” 3.The Assessing Officer (AO) valued theproperty at Akathethara at a far lesser price andalso took into account the contributions made byBabu and Hussain, the last one; yet another memberof the group. The AO made an addition ofRs.1,16,68,000/- being the undisclosed investmentof the assessee-appellant. 4.The first appellate authority howeverinterfered with the addition finding that thestatements recorded indicate a property havingvalue of Rs.72 lakhs was agreed to be exchanged asa part of the transaction. Only the balance waspaid in cash, was the finding. This was upheld bythe Tribunal. Counsel for the assessee would contend that therewas nothing to show that the assessee had paid the ITA 76/14 -5- entire amounts. It is also submitted that thefirst appellate authority had clearly found thatthe exchange of other property had occurred andhence what remains was only Rs.78 lakhs, which wasthe share of all the three members and not theassessee alone. It is also contended that theagreement did not materialise at all and theproperty still is in the hands of the originalowner. Counsel for the assessee would contend that therewas nothing to show that the assessee had paid the ITA 76/14 -5- entire amounts. It is also submitted that thefirst appellate authority had clearly found thatthe exchange of other property had occurred andhence what remains was only Rs.78 lakhs, which wasthe share of all the three members and not theassessee alone. It is also contended that theagreement did not materialise at all and theproperty still is in the hands of the originalowner. 6.Whether the agreement materialised ornot, is not relevant for consideration of theaddition made by the AO as confirmed by the firstappellate authority. There is no appeal from theorder of the first appellate authority and theTribunal had confirmed the addition of Rs.78lakhs. It is an admitted fact that such an agreement was entered into. Even admitting thefact that the total consideration excluded thevalue of the property sought to be exchanged, what -6- remained was Rs.78 lakhs. Whether the saidamounts were disclosed in the cash flow statementof the assessee is the crucial point which has tobe considered. Even if the agreement did notmaterialise in a sale and conveyance of theproperty, the fact that an amount had passed outfrom the assessee, indicates existence of the saidsum, in cash, in the hands of the assessee andnecessitates it to be reflected in the cash flowstatement. If not so reflected then it isunaccounted and becomes unexplained investment.The amount having not figured in the cash flowstatement, we are of the opinion that necessarily,an addition has to be made as an undisclosedinvestment; which if the transaction has notmaterialised would have been returned to theassessee and would have been invested elsewhere. the agreement being exchange of a building atAkathethara, had actually taken place. If theexchange was part of the transaction of sale ofthe property at Menonpara, the assessee will haveto explain why the further sale and conveyance didnot take place. When the exchange is said to bean inextricable part of the agreement, theassessee cannot resile from that and take adifferent contention. In any event, we havealready found that how the transaction concludedis not material since the existence ofunaccounted cash in the hands of the assessee isestablished. 8.We however notice from the extractedportion of the specific answer to the question putby the Officer and recorded under Section 132(4)that the assessee agreed to having paid Rs.50lakhs in cash. It is also an admitted fact thatthere were two others, Babu and Hussain, involved in the property transaction; all of whom figuredin the agreement also. Hence, going by theagreement recovered and the specific admission ofthe assessee that he had paid Rs.50 lakhs in cash,the same has to be made an addition. In suchcircumstances, we modify the order of the Tribunalto the effect that the addition has to be confinedto Rs.50 lakhs and not Rs.78 lakhs. The IncomeTax Appeal would stand partly allowed. No orderas to costs. Sd/- K.VINOD CHANDRAN JUDGE jg Sd/- ASHOK MENONJUDGE ITA 76/14 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-ACOPY OF RETURN FOR THE ASSESSMENT YEAR 2009-10 ALONG WITH COMPUTATION OF INCOME.10 ALONG WITH COMPUTATION OF INCOME. ANNEXURE-BCOPY OF ASSESSMENT ORDER DATED 31.12.2010 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR.PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR. ANNEXURE-CCOPY OF COMMON APPELLATE ORDER NO.ITA NOS.169TO 173/10-11 DATED 27.4.2012.TO 173/10-11 DATED 27.4.2012. ANNEXURE-DCOPY OF APPELLATE TRIBUNAL'S ORDER IN ITA NO.243/COCH/2012 DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2009-10.NO.243/COCH/2012 DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2009-10. Sd/- K.VINOD CHANDRAN JUDGE jg Sd/- ASHOK MENONJUDGE ITA 76/14 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-ACOPY OF RETURN FOR THE ASSESSMENT YEAR 2009-10 ALONG WITH COMPUTATION OF INCOME.10 ALONG WITH COMPUTATION OF INCOME. ANNEXURE-BCOPY OF ASSESSMENT ORDER DATED 31.12.2010 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR.PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR. ANNEXURE-CCOPY OF COMMON APPELLATE ORDER NO.ITA NOS.169TO 173/10-11 DATED 27.4.2012.TO 173/10-11 DATED 27.4.2012. ANNEXURE-DCOPY OF APPELLATE TRIBUNAL'S ORDER IN ITA NO.243/COCH/2012 DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2009-10.NO.243/COCH/2012 DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2009-10. ANNEXURE-ECOPY OF PETITION FOR RECTIFICATION DATED 13.11.2013 FILED BY THE PETITIONER BEFORE THEINCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.13.11.2013 FILED BY THE PETITIONER BEFORE THEINCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE-FCOPY OF ORDER DATED 4.7.2014 IN MISCELLANEOUSAPPLICATION NO.137/COCH/2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.APPLICATION NO.137/COCH/2014 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE-GCOPY OF PROCEEDINGS DATED 29.4.2014 PASSED BYTHE INCOME TAX OFFICER, WARD-I, PALAKKAD.THE INCOME TAX OFFICER, WARD-I, PALAKKAD. jg [True Copy]