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TMI Blog2012 (8) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,76,253-00 made on this account, without a proper basis and without appreciating the facts and circumstances under which the additions were made by the Assessing Officer. 3. The learned CIT(A) has erred in deleting the addition made on account of unaccounted scrap sales without considering the fact that the alleged unaccounted scrap sales was found in the course of survey and the assessee could not produce any evidence for the argument that the same is included in the scrap sales already shown in the books of accounts. 4. Without prejudice to the above, the CIT(A) is not correct in holding, after considering the facts and statement of Sri Ajmera, who was interrogated during the course of survey, that the Assessing Officer has not disputed the statement of Sri Ajmera. 5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT (A) be reversed in so far as the above mentioned issue is concerned and that of the assessing officer be restored. 6. The appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the appeal." 5. From the above grounds, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. However, the assessing officer alleged that there was no proof provided by the appellant company to accept the statement of Sri.Ajmeera. Having held, the assessing officer had made the addition of Rs.25,76,253/-. In this regard, it is submitted that undisputedly the appellant company had declared scrap sales to the tune of Rs.31,45,974/- in the books of accounts and offered for taxation. The alleged unaccounted scrap sales was found in the course of survey which was nothing but the sales made for which the amounts were received. It may be noticed that the various dates of sale recorded vary from April to December 2006 and January 2007. The party to whom such sales were made, had also been noted. It may kindly be appreciated that the sales have been recorded in the books of accounts were also with the same party. In other words, all these sales have been recorded in the books of accounts which form part of the total sales of Rs.31,45,984/- as declared. The variations in dates were only on account of the dates of dispatch or delivery and the dates on which the amounts were received. In the circumstances, the impugned addition as made are totally uncalled for and the same was requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the reasons are the link between the material on record and the conclusion thereafter by the Court/Appellate authority. In our view the Ld. CIT(A) should have properly considered the arguments of the assessee as well as findings given by the Assessing Officer and thereafter he should have made independent findings either in favour or against the assessee. Considering the entire facts, we are of the opinion that the Ld. CIT(A) had not passed a proper order in the eyes of law. At this stage, we may refer to the decision of ITAT Ahmedabad Bench in the case of Gujarat Themis Biosyn Ltd. Vs. J.C.I.T., (2000) 74 ITD 339 (Ahd). The ITAT Ahmedabad Bench, while interpreting the provisions of section 250(6) of the I.T. Act, 1961 held as under: "The provisions of section 250(6) provides that the appellate orders of the Commissioner (Appeals) are to state the points arising in the appeal, the decision of the authority thereon and the reasons for such decision. The underlying rationale of the provisions is that such orders are subject to further appeal to the Tribunal. Speaking order would obviously enable a party to know precise points decided in his favour or against him. Absence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held : "Recording of reasons is a part of fair procedure. Reasons are the harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. Failure to give reasons amounts to denial of justice." 19. As we have already pointed out that in the present case, the ld. CIT(A) has not recorded any reason in support of his decision, therefore, the failure to give reasons amounts to denial of justice as per the ratio laid down by the Hon'ble Supreme Court in the aforesaid case, therefore, the present case requires readjudication at the level of the AO. Considering the totality of the facts as narrated hereinabove, we are of the opinion that this issue requires readjudication at the level of the AO because one of the reasons for making the addition was that the assessee did not furnish any evidence to substantiate its claim that the income had already been offered to tax in the earlier years. However, in the present case it is not clear as to whether the earlier record which was available with the AO had been considered while taking a view that no evidence was produced by the assessee. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the area, out of which the profit derived by the appellant was offered for taxation and in the circumstances the capital gains as determined by the assessing authority was opposed to law and the impugned addition in this regard was liable to be deleted. 10. Without prejudice the capital gains computation as computed by the assessing authority was upheld by the learned Commissioner (A) is required to be sustained, then the expenditure towards cost of improvement as claimed by the appellant was required to be allowed in full. 11. The learned Commissioner (A) further ought to have appreciated that the capital gains as computed by the assessing authority having been sustained, the additional income offered out of Rs.5 crores consideration by the appellant in its total income is liable to be deleted. 12. The learned Commissioner (A) erred in upholding the computation of capital gains in respect of alleged transaction with M/s.IDEB. 13. The learned Commissioner (A) ought to have appreciated that the joint development agreement proposed with IDEB had not been effected and the agreement entered into between the parties were not acted upon and consequently there was no transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(DR) could not controvert the aforesaid contention of the assessee. 26. After considering the submissions of both the parties and material available on record, it is noticed that similar issue having identical facts was also involved for the A.Y. 2006-07 in ITA No.1056/Bang/2010 in assessee's own case, in the said year vide order dated 23.03.2012 the matter has been remanded back to the Assessing Officer for fresh adjudication and the relevant findings have been given in para 9 of the aforesaid referred to order which read as under:- "9. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is noticed that the AO made the disallowance by observing that the directors and their spouses travelled abroad and that travel was personal in nature. On the other hand, the claim of the assessee is that the director of the company travelled for business purposes and his wife accompanied him. In the present case, the facts are not clear as to whether the director traveled for the business purposes, even there is contradiction in the stand taken by both the parties since the AO mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to on 29.11.2006 for an amount of Rs. 14 crores due to reduction in area of land and building. The AO pointed out that the said sale agreement was split into two parts i.e., Rs. 9 crores towards land and Rs. 5 crores towards sale of improvement and a separate agreement was entered into for sale of improvement. The AO also pointed out that the assessee offered to tax a capital gain of Rs. 5,55,31,547 which was worked out as under:- "Consideration a) Value of consideration for Land : Rs.7,20,00,000 b) Value of consideration for Bldg : Rs.1,80,00,000 TOTAL : Rs.9,00,00,000 Cost a) Value of Land : Rs.1,39,78,550 b) Value of Building as per Bldg Block (reduced from block of asset) : Rs.1,80,00,000 c) Indexed cost of land : Rs.1,42,47,093 d) Brokerage and Legal charges : Rs.22,21,360 Capital Gain : Rs.5,55,31,547" 31. The AO observed that the assessee had shown expenditure of Rs. 1,63,70,521 on the amount of Rs. 5 crores and the balance amount was offered to tax and that Shri S.K. Ajmera, G.M. (Finance) was asked to furnish supporting evidence for the expenditure during the course of survey, but no supporting evidence was produced. The AO considered the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain at Rs. 10,55,31,547 instead of Rs. 5,55,31,547 offered by the assessee. 34. The assessee carried the matter to the ld. CIT(Appeals) and the submissions made before him as mentioned in para 7 of the impugned order is reproduced verbatim as under:- " With regard to the capital gains on account of transfer of property consisted of land and industrial building, there was an agreement found dated 11.08.2006 for the transfer for a consideration of Rs.19,44,38,720/-. However, the said transaction did not materialize and a revised agreement was executed on 29.11.2006 for an amount of Rs.14.00 crores due to reduction in the area of land and building. The consideration of Rs. 14.00 crores was split into two parts, i.e., Rs.9.00 crores for the land and Rs.5.00 crores for the improvements. Rs.9.00 crores was further bifurcated into Rs.7.20 crores for the land and Rs. 1.80 crores for the building. Accordingly, the capital gain on land and building was offered at Rs.5,55,31,547/-. With regard to the balance Rs.5.00 crores, the appellant company offered the same for taxation as it was for the improvements after the expenditure of Rs. 1,63,70,521/-: The assessing officer was of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received from M/s. Gopalan Enterprises was actually the sale consideration camouflaged as the development expenses. He further observed that the assessee's business was bus body building and not real estate development and that the assessee would not be having any plant and machinery to venture into the task of land development which was a totally different line of business from that of the assessee. Therefore the receipt of Rs. 5 crores in the name of "development expenses" had rightly been treated by the AO as part & parcel of sale consideration. He accordingly confirmed the addition made by the Assessing Officer. Now the assessee is in appeal. 36. The ld. counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO although considered the receipt by the assessee for land development, but had not taken into consideration the expenses incurred by the assessee for land development. He further submitted that the ld. CIT(A) without considering the facts of the case in the right perspective confirmed the action of the AO. It was submitted that the matter may be sent back to the AO for proper examination and verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 crores from M/s. IDEB Investments Pvt. Ltd. (IDEB) and it was found that the assessee had entered into a joint development agreement with M/s. IDEB on 30.3.07. He further observed that during the course of survey, following three registered agreements/documents were found: (i) Joint Development Agreement between assessee-company and M/s. IDEB, dated 30.3.2007. (ii) Agreement for sale between the assessee-company and M/s. IDEB dated 30.3.2007. (iii) General Power of Attorney executed by the assessee company in favour of M/s. IDEB dated 30.3.2007. 41. The AO discussed the contents of the aforesaid documents in paras 8.4 to 8.6 of the assessment order dated 17.4.09, at the cost of repetition the same are not reproduced in this order. The explanation of the assessee before the AO was that the amount had been received as advance and once the sale deeds get executed, it will be taken as capital gains. The assessee submitted to the AO as under:- "The monies so received by the assessee are in the nature of advances only. The capital gain on this transaction shall arise only after the constructed area is physically handed over to the assessee. Further, till date the entire land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adia v. CIT (2003) 260 ITR 491 (Bom) (ii) Re. Jasbir Singh Sarkaria [2007] 164 Taxman 108 (AAR, New Delhi) 44. The assessee carried the matter to the ld. CIT(A) and the submissions of the assessee as mentioned in para 16 of the impugned order are reproduced verbatim as under:- "iv) a) Issue of Capital Gains: The learned assessing officer had alleged that there was transfer of capital asset in favour of M/s.IDEB on account of the joint developmental agreement executed between the appellant company and the said company and has computed the capital gains at Rs.43,61,72,341/-. The facts related to the said transaction are as follows: The appellant executed three registered agreements / documents with M/s.IDEB which were as follows: i) Joint Developmental Agreement between the appellant company and M/s.IDEB dated 30.03.2007. ii) Agreement for Sale between the appellant company and M/s.IDEB dated 30.03.2007. iii) General Power of Attorney executed by the appellant company in favour of M/s.IDEB dated 30.03.2007. On a perusal of these documents, the assessing officer was of the opinion that there was transfer of the land, to be developed, to M/s.IDEB during the relevant year in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer by misapplying the ratio cited in the assessment order had come to the conclusion that there was transfer as provided u/s.2(47)(v) of the Act to justify the addition of income by way of Capital Gains. He held that the cases cited by the appellant were distinguishable. In fact the judgement of the Hon'ble High Court of Madras reported in 256 ITR 282 cited was also not considered wherein the significance of the possession had been taken notice by the Hon'ble High Court. It is not anybody's guess that the appellant had given possession of the disputed property to M/s.IDEB during the relevant year. Nor did the revenue bring any evidence to suggest that M/s.IDEB was in possession of the asset in pursuance of the various agreements executed. In fact, as stated earlier, the entire transaction was not put through. In the circumstances, it is totally unjustified in computing the capital gains on transaction which did not exist in the relevant assessment year. Thus, the impugned addition is required to be cancelled. In fact the assessing officer's apprehension that the transaction involving allotting portion of immovable property taken or retained in part performance of the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 2(47)(v) of I.T. Act, the basic requirement of such transfer is that it should be an agreement in writing, even if not registered between the parties, signed by the parties, it should pertain to transfer of property and the transferee should have taken possession over the property. Thus; what is crucial in such case is the transfer of possession over the transferred property to the transferee. As to the year of taxability, if the agreement specifies a date, such date is conclusive as to the taxability of the capital gains from such transfer. If it does not mention the date, such date is to be gathered and inferred from the terms of agreement or acts of the parties to the agreement. If it is a JDA and such JDA only authorized the builder to enter the properties to develop the property and construct flats thereon only it cannot be treated as transfer at all because the effective title and possession over the property still remained with the transferor. However, though the terms of JDA remain silent about the transfer of possession, if it is later on corroborated by an irrevocable power of attorney authorizing the developer to deal with different persons and authorities to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled. He accordingly supported the order of the ld. CIT(A). 49. We have considered the submissions of both the parties and gone through the material available on record. In the present case, it is noticed that clause 6.7 of the agreement clearly stated that the owner will continue to be in possession of the schedule property till such time the developer completes the construction of the said complex and deliver their areas infra. In the present case, nothing is brought on record to substantiate that the possession of the land was delivered to the developer or the land was not in assessee's possession. The claim of the assessee was that amount was received as an advance, would be offered for taxation when the sale deed gets executed. In the present case, it is not clear as to whether the 3 agreements were cancelled or sale deeds were executed in lieu of those agreements, particularly when there is no discussion in this regard either in the assessment order or in the impugned order passed by the ld. CIT(A). Therefore, considering the totality of the facts, we are of the view that this issue requires fresh adjudication since the facts relating to the transfer of the property are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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