TMI Blog2014 (9) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... ome – cash basis of accounting - Held that:- The amount was never paid to the assessee and the fact has been recorded in the agreement dated 25.09.2008 – assessee contended that she follows the cash system of amount and the amount was taxable only on its receipt - the assessee has not received this amount or the interest till date - assessee as admitted that he was following the cash system of accounting and hence the amounts in question cannot be taxed as the same was not received - the assessee has never received the amount of ₹ 2.90 crores and as he also could not controvert the claim of the assessee, that she follows the cash system of accounting and also the fact that the assessee had offered to tax the balance consideration of ₹ 8.00 crores in the year 2009-10 for the transfer of the property at 25-A, Akbar Road, New Delhi in the A.Y. 2009-10 - the amount of ₹ 2.90 crores and interest thereon cannot be taxed in the hands of the assessee during the block period - No addition can be made on account of accrued interest thereon - as regards, the amount which pertains to undisclosed interest income on IDBI bonds for the AYs 1997-1998 to 1999-2000, no arguments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akbar Road, New Delhi, a property belonging to the Appellant. (ii) Since the collaboration agreement could not be given effect to, on 5.1.1986 an agreement was entered into with Smt. Nirmal Verma, partner of Gopal Das Sons, which owned 28, Barakhamba Road, New Delhi and had entered into an agreement with Gopal Das Estate Housing Pvt. Ltd. to develop 28, Barakhamba Road, New Delhi. In terms of the agreement dated 5.1.1986, Appellant's rights under the collaboration agreement dated 30.6.1982 were taken over by Smt. Nirmal Verma and the Appellant in exchange of 25-A, Akbar Road agreed to take 3400 sq. ft. area in a building to be constructed by Gopal Das Estate Housing Pvt. Ltd. Possession of 3400 sq. ft. area was to be handed over to Appellant on or before 31.3.90. (iii) Out of 3400 sq. ft area, the Appellant for consideration of ₹ 2.80 Cr. surrendered 1400 sq. ft. to Gopal Das Estate Housing Pvt. Ltd., in terms of MOU dated 3.6.1996. (iv) Independent of the above, Gopal Das Estate Housing Pvt. Ltd. agreed to pay ₹ 2.90 Cr. as compensation for delay in handing over the possession of 3400 sq. ft. area. 5. Mr. Ashok Verma was the Managing Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi partly confirmed the order of the Assessing Officer. Aggrieved the assessee filed this appeal on the following grounds:- 1. That on facts and in law, the learned Commissioner of Income Tax (Appeals) (herein referred to as CIT(A) erred in not adjudicating upon and quashing search as illegal, on reasoning of lack of jurisdiction to do so. 2. That on facts and in law, without prejudice, the CIT(A) erred in not adjudicating upon, and in granting requisite relief on the grounds submission that there was no undisclosed income. 3. The on facts and in law, the CIT(A) erred in not appreciating that there is no estoppal against a statute. 4. That on facts and in law, the CIT(A) erred in upholding of addition in respect of: (a) ₹ 4,32,000 (b)Rs.2,90,00,000/- and (c) ₹ 43,04,710. 5. That on facts and in law, the CIT(A) erred in: (1) Upholding taxation of capital gains. (11) on gross receipt of 2.8 crores and in taxation @ 60% under section 158BA. (111) not allowing long term capital loss set off against long term capital gain. (iv) not considering indexing of long term capital assets (shares) 6. That on facts and in law, the CIT(A) erred in uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for the assessment years 1994-95, 1995-96, 1996-97 and 1997-98, it is evident that the Appellant is following cash system of accounting. 5. Amount of ₹ 2.90 Cr. was never paid to the Appellant. Settlement agreement dated 25.9.2004 records this fact. 6. Without prejudice, the basis of addition of ₹ 2.90 Cr. was the statement of Mr. Ashok Verma recorded u/s 132(4). Mr. Ashok Verma did not represent the Appellant and the premises searched actually belonged to Mr. Ashok Verma. Books of account also belonged to Gopal Dass Estate Housing Pvt. Ltd and not the Appellant. 7. Without prejudice, no installment plan was prescribed in the MOU. All that was provided was that amount of ₹ 2.90 Cr. will be paid in installments, within a period of 5 years. Interest @ 18% was to accrue if payment was not made in 3 years. On account of uncertainty of payment of ₹ 2.90 Cr., the amount of ₹ 2.90 Cr. did not accrue to the Appellant on 3.6.1996. Since interest was to accrue after 3 years, therefore, the interest can be said to have accrue on the last date of the previous year ended on 31.3.2000 i.e. after the search. 11. The submissions of the Revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein the disputed amount before the date of search. The Judgment of the Madras High Court in the case of Noorsingh Vs Union of India Others (249 ITR 378) is authority for this proposition. The Madras Bench of the Tribunal wrongly distinguished this judgment in the case of Smt. Sivabala Devi (supra). The assessee did not follow up the statement made u/s 131 by writing any letter to the income-tax authorities inviting them to issue notice u/s 148 in order to bring to tax the receipt of ₹ 2.80 Crores. On the basis of the above arguments, the learned CIT, DR strongly contended that the requirements of sec.158B(b) are satisfied and the amount was rightly brought to tax in the block assessment. 12. We have carefully considered the submissions of Shri Satyen Sethi, ld. counsel for the assessee and Shri Gunjab Prasad ld. C.I.T(D.R) on behalf of the Revenue. We have perused the papers on record, the orders of the authorities below, as well as the case laws cited. We hold as follows:- (i) The first issue that has to be adjudicated is whether the amount of ₹ 2.80 crores being consideration received by the assessee on surrendered of 1400 sq.ft. area from out of 3000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee on this issue. The plea of the assessee was that the authorities were in know of the transaction prior to the search and hence the transaction in question cannot be brought tax in the block assessment, does not have any merit for the reason that the assessee filed the regular return of income for the A.Y. 1997-98 on 12.01.1999, which is after the date of search and in this return of income, she did not declare this receipt of ₹ 2,80,00,000/-, while declaring this amount in her block return of income. 16. For all this reason, we dismiss these arguments of the assessee as devoid of merit. 17. The second issue that arises for consideration is the addition of (a) ₹ 2,90,00,000/- (b) ₹ 43,04,710/- and (c) ₹ 4,32,000/-. The Hon ble High Court records para 7 as follows:- 7. Under these circumstances we are of the view that this aspect should be remitted back to the Income Tax Appellate Tribunal to go into the aforesaid question. We may also note at this stage that Mr. M.S. Syali, learned senior counsel appearing for the assessee had produced the copy of the settlement agreement dated 25th September, 2008 arrived at between the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is to be paid within a period of 5 years from now. Interest will accrue at simple interest at the rate of 18% per annum if payment is not made in three years (3years) from this date on the reducing balance. 3. The parties have further agreed that the cause of action for payment shall continue day to day till the entire payment is made and the second party acknowledges its liability for such payment. 20. The contention of the assessee is that the basis of the addition of ₹ 2.90 crores was the statement of Mr. Ashok Verma recorded under Section 132(4) of the Act and that Mr. Ashok Verma did not represent the assessee and the premises search actually belonged to Mr. Ashok Verma and the books in question belongs to M/s. Gopal Dass Estates Housing Pvt. Ltd. It is further submitted that no installment plan was prescribed in the MOU and it was only stated that the payment should be made if the period of three years and in default interest at the rate of 18% was to accrue after three years and hence there is no accrue of income. It was further submitted that the very receipt of the amount of compensation in question and interest thereon was doubtful and in fact the asses ..... 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