S.N. Rotho, Accountant Member -
(1.) THIS appeal has been filed by the department against the order dated 16-2-1981 of the Commissioner (Appeals) relating to the assessment year 1975-76 The relevant previous year was the year ending 31-3-1975. the assessee is an individual deriving incojme from house property.
(2.) During the previous year under consideration, on 3-7-1974, the assessee sold a flat in 'Cuffe Castle' held by him to Batliboi & Co. for Rs. 2,25,000. This flat had been earlier acquired by the assessee by an agreement dated 7-3-1969 with the builders before the multi-storeyed building was constructed. Subsequently, when the building was ready for occupation, the assessee had occupied the same in August 1971 in accordance with the terms of the original agreement dated 7-3-1969. The assessee calculated the capital gains on the sale of the flat and showed the same in the return. The ITO did not agree with the computation of capital gains returned by the assessee on two points. According to the assessee, the asset sold by him on 3-7-1974 was held by him right from 7-3-1969, i.e., the date of agreement under which the said asset was acquired by the assessee. Accordingly, the assessee claimed that he held the asset for more than sixty months and so it became a long-term capital asset. The ITO did not agree. According to him, the assessee acquired the flat only on the day when he took possession of the same, i.e., in August 1971 and not before. If that be so, then the period for which the assessee held the asset was less than sixty months and so, it became a short-term capital asset. This was the first dispute between the assessee and the ITO. The second dispute related to the quantum of the sale proceeds received by the assessee. According to the assessee, he received only a sum of Rs. 2,25,000 and nothing more. However, the ITO found from a statement by B.T. Mirchandani, partner of T.M. Bhagwandas & Sons, who acted as brokers for the sale of the assessee's flat to Batliboi & Co., that another sum of Rs. 68,000 was paid in cash to the assessee as a part of the sale proceeds of the flat. The assessee, of course, denied any such receipt. Nevertheless, the ITO held that the assessee must have received the sum of Rs. 68,000 alleged by the broker to have been paid to the assessee over and above the sum of Rs. 2,25,000 mentioned in the conveyance deed and paid by cheque. This was the second dispute between the ITO and the assessee. Thus, the claim of the assessee was that the asset sold by him was a long-term capital asset and the sale proceeds thereof was only Rs. 2,25,000 ; while, according to the ITO, the asset sold was a short-term capital asset and the sale-proceeds amounted to Rs. 2,93,000. The ITO computed the capital gains at a higher figure and completed the assessment accordingly.
The assessee appealed to the Commissioner (Appeals) and contended that the ITO erred in his action on both the points. Regarding the first point, it was contended that the assessee acquired a right to occupy the flat under the agreement dated 7-3-1969 and it was only that right to occupy the flat that was sold by him on 3-7-1974. Consequently, it was urged that the date of taking possession of the flat by the assessee was of no consequence at all. Reliance was placed on certain decisions of the Tribunal, namely, IT Appeal No. 1232 (Bom.) of 1968-69 and IT Appeal No. 648 (PN.) of 1979. The Commissioner (Appeals) found that the Tribunal in the above cases had considered a similar point and have also held that for all practical purposes, the date of the purchase of the flat is the date on which the agreement to purchase is signed. It may be that the payment for the flat is made subsequently or that the possession of the flat was taken much later or the co-operative society to manage the entire building was formed later and membership therein was acquired at a much later date. These facts, according to the Tribunal, would not affect the original date of purchase because the buyer rightly considered himself to be the owner of the flat the moment he signed the agreement to buy the flat. Respectfully following the aforesaid decisions of the Tribunal, the Corrtrnissioner (Appeals) decided the first point in dispute in favour of the assessee. In other words, she held that the assessee acquired the asset, sold during the previous year, on the signing of the agreement on 7-3-1969 and so it was a long-term capital asset.
(3.) COMING to the second point in dispute, it was urged before her that the statement of Shri Mirchandani was not at all reliable and was absolutely untrue. Certain alleged discrepancies were pointed out in the statement dated 27-3-1978 of Shri Mirchandani before the ITO. It was pointed out that Shri Mirchandani had no evidence whatsoever in support of his claim of paying such a huge amount of Rs. 68,000 to the assessee in cash. At one stage, Shri Mirchandani had stated that the amount was paid in the presence of Shri Dhaimade, a representative of the buyer, Batliboi & Co. ; but Shri Dhaimade had not corroborated this allegation of Shri Mirchandani. It is true that there were entries in the books of Bhagwandas & Sons showing as if they paid a sum of Rs. 68,000 to the assessee, but it was urged by the assessee that mere entries in the books regarding the payments, were not sufficient, as there was no guarantee that the entries were genuine, vide decision in the case of Addl. CIT v. Lata Mangeshkar  97 ITR 696 (Bom.). Further, it was point out that the same brokers had alleged similar cash payments, without receipt, over and above the regular cheque payments in respect of two other flats negotiated and sold on behalf of Amalgamated Construction Co. The ITO assessing the said Amalgamated Construction Co. started investigations relying on similar statements by this very broker. However, after detailed investigations, the ITO found no basis whatsoever to support the vague allegation made by this broker and so, the assessment of the said Amalgmated Construction Co. was completed on the basis that no extra money in the form of cash, as alleged by this broker, was ever received by the seller. Besides, it was pointed out that the sale-proceeds shown by the assessee at Rs. 2,25,000 was very reasonable and in fact it is more than the market value of the flats at Cuffe Parade as accepted by the Commissioner, Bombay, City-Ill, in case of Venus and Jupiter buildings. In fact, the sale proceeds shown by the assessee at Rs. 2,25,000 is about Rs. 25,000 more than the amount accepted by the Commissioner as fair and reasonable in respect of similar buildings in the same locality. Hence, it was urged that there was no question of receiving any extra amount over and above the sale-proceeds shown in the conveyance deed. The Commissioner (Appeals) agreed with the contention of the assessee and held that there was no material to support the assumption of the ITO to the effect that the assessee must have received a sum of Rs. 68,000 over and above the declared consideration of Rs. 2,25,000. Hence, she decided the second point in dispute also in favour of the assessee.;