TMI Blog2015 (2) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... afresh in the light of the observations made in this judgment. - Decided in favour of revenue for statistical purposes. Agricultural income - Assessing Officer expressed doubt about the genuineness of this income from agriculture and having so observed did not accept the said claim and brought it to tax - appellate authority deleted the said addition as undisclosed income for the block period - Held that:- It appears from the record and so also the orders passed by the appellate authority and the Tribunal that the agricultural income for 1995-96 was accepted by the Assessing Officer. Further, the income of ₹ 3,50,000 for the assessment year 1996-97, was deleted being undisclosed income for the block period. We do not find any reason to interfere with the orders passed by the appellate authority and the Tribunal, more particularly, in view of the fact that the agricultural income from the very same agriculture lands for the assessment year 1995-96 was accepted by the Assessing Officer. Hence, we confirm the findings of fact recorded by the appellate authority and the Tribunal. - Decided in favour of assessee. Deduction under section 54 and section 54F - what the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in favour of revenue for statistical purposes. Undisclosed income of the assessee during the block period - Tribunal held that the amounts standing to the credit of G. Anand having not been claimed as expenditure cannot be treated as undisclosed income of the assessee during the block period - Held that:- Find ourselves in agreement with the findings recorded by the Assessing Officer and the appellate authority, which observed that the amount of ₹ 10,00,000 remained unexplained and treating the same as undisclosed income. It is also pertinent to note that the assessee has not only not disclosed the said amount but failed to file the return of income for the assessment year 1998- 99 before the search. In other words, he did not file the return of income for this assessment year within the time stipulated under section 139(1) and (4) of the Act. He also failed to maintain the books of account for the said assessment year and in this backdrop, the said amount of ₹ 10,00,000 has rightly been brought to tax. The Tribunal did not consider the materials on record in a proper perspective and has simply by single sentence in the order set aside the concurrent finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common judgment. 2. The assessees, namely, M. J. Siwani and H. J. Siwani, are the partners of M/s. H. M. Constructions, which, at the relevant time, was engaged in the business of development, and were also real estate agents. Their source of income was from interest on capital, salary from firm, rental income and income from other sources. 3. On May 29, 2001, a search operation under section 132 of the Act was carried out at the residential premises of both the assessees and their business premises, viz., M/s. H. M. Constructions. In the course of search, certain books/documents pertaining to the assessees were seized. On scrutiny thereof, it was revealed that the assessees had taxable income during the assessment years 1994-95, 1996-97 and 1997-98, and that they had filed return of income for these assessment years on May 17, 1996, December 18, 1998, and December 18, 1998, respectively. Though the return were filed, before the search, they were admittedly filed beyond the dates prescribed under section 139(4) of the Act. Similarly, it was also revealed that for the assessment years 1998-99, 1999-2000, 2000-2001, the returns of income were filed by the assessees after the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned 48,548 Crystal Springs Project 46,31,987 Agricultural income 6,00,000 Credits in the name of Shri G.Anand 10,00,000 62,80,445 1999-2000 Loss 6,24,092 Agricultural income 6,50,000 Forfeiture amount 16,50,000 16,75,908 2000-2001 Loss 4,43,106 Unexplained credits 21,50,000 Agricultural income 6,50,000 23,56,894 Undisclosed income 2,06,99,361 Tax @ 60% 1,24,19,616 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee ? IV. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the valuation of clos ing stock of immovable properties should be treated as nil, as claimed by the assessee in view of the fact that the said properties were involved in litigation ? V. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the amount standing to the credit of G. Anand having not been claimed as expense cannot be treated as undisclosed income of the assessee during the block period ? VI. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the sum of ₹ 50,000 NSE discovered during the course of search cannot be treated as the undisclosed income of the assessee in the block period as the same is not claimed as deduction ? 7. The first two substantial questions of law arise in I. T. A. Nos. 218 and 219 of 2007 while the remaining the four are raised in I. T. A. Nos. 216 and 217 of 2007. Since the facts and circumstances against which the impugned orders ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158B of the Act. 9. To consider the first substantial question of law raised by the Revenue and to appreciate the submissions of learned counsel for the parties, we would like to look into the relevant provisions of the Act, in particular, Chapter XIV-B thereof. Section 132 of the Act provides for search and seizure. For evaluation of the material seized under section 132 of the Act, the provisions contained in Chapter XIV-B stand attracted. Chapter XIV-B in the Act, consisting of section 158B to section 158BH, was inserted by the Finance Act, 1995, with effect from July 1, 1995. This Chapter deals with special procedure for assessment of search cases. It was inserted for the assessment of undisclosed income determined as a result of search carried out under section 132 of the Act. 10. From a bare perusal of Chapter XIV-B, it is clear that the condition precedent for invoking a block assessment is a search conducted under section 132 of the Act. The Supreme Court in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC) ; [2010] 188 Taxman 113 , while explaining the purport of Chapter XIV-B of the Act, has observed that a search is the sine qua non for the block assessment. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents or transactions, where such money, bullion, jewellery or other valuable article, thing, entry in the books of account or other document or transaction repre sents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false. 12.1. A glance at the definition of undisclosed income , as occur in section 158B(b), it is clear that the Legislature has clearly carved out two situations for income to be deemed as undisclosed : (i) where the income has clearly not been disclosed, and (ii) where the income would not have been disclosed. 13. Section 158BA empowers the Assessing Officer to assess the undisclosed income in accordance with the provisions of this Chapter, after the search under section 132 of the Act. It further provides that the total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r documents or assets are requisitioned under section 132A, in the case of any person, then,- (a) the Assessing Officer shall- (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days ; . . . (b) the Assessing Officer shall proceed to determine the undis closed income of the block period in the manner laid down in sec tion 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be apply ; 17. Section 158BD deals with undisclosed income of any other person, other than the person with respect to whom a search was made under section 132 of the Act. 18. Section 158BD and section158BC, along with the other provisions in Chapter XIV-B, would apply only in the event of discovery of undisclosed income of an assessee and that undisclosed income signifies income not stated in the return filed. Recently, the Supreme Court in A. R. Enterprise (supra), had an occasion to deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, every person who is assessable under the Act, must file a return declaring his or her total income during the previous year on or before the due date, for assessment under section 143 of the Act. Hence, the 'dis closure of income' is the disclosure of the total income in a valid return under section 139, subject to assessment and chargeable to tax under the provisions of the Act. It is important to bear in mind that total income is distinct from the estimated income, upon the basis of which, advance tax is paid by an assessee. Advance tax is based on estimated income, and, hence, it cannot result in the disclosure of the total income assessable and chargeable to tax. (emphasis supplied) 19. Under sub-section (1) of section 139, return of income should be filed on or before 31st of July and if it is so filed, the income disclosed therein, in any case cannot be treated as undisclosed income. Sub-section (4) of section 139 provides for further period to file return, if not filed before 31st of July. From a plain reading of these provisions, in our opinion, the last date for filing the return under section 139 of the Act would be the period prescribed under sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account or documents or such other materials or information as are avail able with the Assessing Officer. Thus, the income assessable in the block assessment under Chapter XIV-B is the income not disclosed but found and determined as a result of search under section 132 or requisition under section 132A of the Act. 21. The Assessing Officer is obliged to serve a notice on the person whose premises has been searched requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice. A return in the prescribed form need to be filed and then verified in the same manner as a return under clause (i) of sub-section (1) of section 142 setting forth his total income including undisclosed income for the block period. The assessment for the block period can be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. The assessment made under this Chapter is in addition to the regular assessment in respect of each previous year included in the block period. Similarly, the total of the undisclosed income relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the light of the settled position of law. The income that has been disclosed by the assessee in the returns of income, other than the income unearthed as a result of search, cannot be treated as undisclosed income while assessing the income during the block period. In this view of the matter we remand these appeals to the Tribunal to consider the appeals afresh in the light of the observations made in this judgment in so far as the first substantial question of law is concerned. 24. The second substantial question of law pertains to agricultural income declared by the assessee. The Assessing Officer brought the income of ₹ 3,50,000 for the assessment year 1996-97 to tax as non-agricultural income. The assessee had credited ₹ 3,50,000 as agricultural income and since he could not and did not maintain any books of account in respect thereof and that he was mainly involved in the business of real estate, and sale and purchase of lands, the Assessing Officer expressed doubt about the genuineness of this income from agriculture and having so observed did not accept the said claim and brought it to tax. As against this, the appellate authority deleted the said additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brother Shri H J Siwani for a consideration of ₹ 15,00,000 and spent towards con struction on the above property an amount of ₹ 83,50,000. The total amount reinvested being ₹ 98,50,000 claimed as exemption . 25.1. Similarly, in case of H. J. Siwani, in the return of income filed by him, the long-term capital gain, as was shown in the assessment order is as under : LTCG of H. J. Siwani Shops at Alankar North Road, Bangalore 86,773 Property at No. 27 Davis Road Bangalore 19,79,324 50% share of property at No. 15/1 Binny Crescent Road, Benson Town, Bangalore 3,51,121 Total 24,17,218 Less : Exemption under section 54 24,17,218 Balance Nil The assessee has entered into an agreement to purchase 50 per cent. of undivided right and interest of property at No. 15/1 Binny Crescent Road, Benson Town, Bangalore from his brother Shri H J Siwani for a consideration of ₹ 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis Road, Bangalore but 28, Davis Road, Bangalore. This property was purchased by Shri M. J. Siwani and Shri H. J. Siwani jointly by way of four purchase deeds dated January 28, 1991, January 2, 1991, May 6, 1991, and September 16, 1991. While purchasing, the properties were numbered as No. 28, 28/1, 28/2 and 28/3. This premises as per the narration in the deeds had an old building and in each of the deeds, a portion of constructed area has been shown. Post-purchase, on an application to the corporation authorities, the premises is renumbered and identified as No. 28, Davis Road, Ban galore. This information is as per the copies of the purchase deeds filed by the assessee. The seized material A 3/HMC/14 consisting of pages 01 to 34 has original agreement to sell between Shri H. J. Siwani, Shri M. J. Siwani with Joseph Gerard Jude Rigo with reference to undivided interest in land at No. 28, Davis Road, Bangalore, a construction agreement between Shri Joseph Gerard Jude Rigo with H. M. Constructions to construct a flat bearing apartment No. 01 in the ground floor. These documents furnish the following information. (a) M/s. H. M. Constructions being the developer, formulated a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate authority, were attracted. Under this provision, the asses see should not be in possession of a residential house on the date on which the transaction resulting in long-term capital gains takes place. On the date of transaction, that is, the sale of undivided shares in the landed property the assessees were having two residential houses having one-half share each therein. It is in this backdrop, the Assessing Officer as well as the appellate authority refused to grant any benefit either under section 54 or under section 54F of the Act in respect of capital gains income derived by the assessees. 25.5. The Tribunal, however, reversed the findings of fact recorded by the authorities below holding that a residential house means complete residential house and would not include shared interest in a residential house. In other words, where the properties are owned by more than one person it cannot be said that any one of them is the owner of the property. Such property, as observed by the Tribunal, continued to be of co-owners and that such joint ownership is different from the absolute ownership. Such interpretation is made by the Tribunal in the light of the language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee to value the land as nil. There is no dispute that as on the date of assessment the assessee was in possession of a registered document in respect of the said land. It is equally true that the assessee had a choice to value the stock at cost or at market price, whichever is lower. There is nothing on record to show what was the market price of the land in question, being the land in litigation. In view thereof, the Assessing Officer as well as the appellate authority held that in any case, the value of the land would not be nil at the end of the accounting year, i.e., March 31, 1998. Thus, the Assessing Officer as well as the appellate authority made computation of income from the said land (Crystal Springs Project) at ₹ 92,63,795 by taking the difference between the sale price of the sites sold and cost of such sites and since the assessee was having only 50 per cent. share therein, apportionment of the income was made at 50 per cent. each, i.e., ₹ 46,31,897 in the hands of the assessee. This view of the authorities below was not accepted by the Tribunal, which remanded the matter observing that the amount received may include both capital as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the assessees and G. Anand, their proposal to run the business together was fizzled out. At one stage, it appears, the Assessing Officer got in touch with G. Anand, who sought an adjournment but thereafter failed to appear before the authority. It is in this backdrop, we have considered all the three orders passed by the Assessing Officer, appellate authority and the Tribunal and we find ourselves in agreement with the findings recorded by the Assessing Officer and the appellate authority, which observed that the amount of ₹ 10,00,000 remained unexplained and treating the same as undisclosed income. It is also pertinent to note that the assessee has not only not disclosed the said amount but failed to file the return of income for the assessment year 1998- 99 before the search. In other words, he did not file the return of income for this assessment year within the time stipulated under section 139(1) and (4) of the Act. He also failed to maintain the books of account for the said assessment year and in this backdrop, the said amount of ₹ 10,00,000 has rightly been brought to tax. The Tribunal did not consider the materials on record in a proper perspective and has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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