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Asstt. Commissioner of Income Tax, Circle 1, and Income Tax Officer, Ward 1 (3) , Nashik Versus Shamsundar Laxman Jagtap

Penalty levied u/s. 271(1)(c) - reopening of assessment - addition of the entire on-money amount in the hands of the assessee - CIT(A) deleted penalty - Held that:- In the present case, reassessment proceedings were initiated on the basis of incriminating document found against the assessee during search proceedings in the case of Luthra Group. Thus, the right course of action for the Revenue is to initiate proceedings u/s. 153C and not u/s. 148 of the Act. Our view is supported by the decision .....

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ve customers of the plots is to be taxed in the year of sale of plots. We do not find any error in the findings of the Commissioner of Income Tax (Appeals). - Decided in favour of assessee. - ITA No. 1278/PN/2013, ITA No. 1333/PN/2013 - Dated:- 21-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Appellant : Shri Nikhil Pathak For The Respondent : Shri Rajesh Damor ORDER PER VIKAS AWASTHY, JM : These three appeals have been filed by the Revenue against the orders of Commissioner of In .....

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2.50 Crores as per registered purchase deed from Luthra family. The assessees had plan to sale the aforesaid land after plotting. The assessees collected advances from the prospective customers for sale of plots in the aforestated land. The assessees paid ₹ 2.80 Crores in cash to Luthra family for the purchase of land. There was allegedly some dispute between the assessees and Luthra family, therefore, the deal could not be finalized. Due to scraping of the land deal, litigation arose bet .....

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. 148 to the assessees on 13-02-2009. The Assessing Officer made addition of the entire on-money amount in the hands of the assessees, i.e. ₹ 46,66,666/- in the case of each assessee. The Assessing Officer also imposed penalty u/s. 271(1)(c) on the assessees. The amounts of penalty imposed by the Assessing Officer in each case vide separate orders of even date i.e. 28-03-2012, is as under: ITA No. Name of the assessee Penalty 1278/PN/2013 Shamsundar Laxman Jagtap Rs.15,72,384/- 1333/PN/201 .....

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d in the year of receipt as offered to tax and taxed by the A.O. The said cash advances are to be taxed in the year of sale of plot and, hence, the advances received in cash have been taxed in incorrect year. This contention of the appellant is supported by the decision of Hon ble Bombay High Court in the case of CIT, Central, Nagpur Vs. Karda Constructions Pvt. Ltd. (Supra) and Hon ble ITAT, Pune in the cases of Dhanvarsha Builders and Developers (P) Ltd. Vs. DOT, 102 ITD 375 and Golani Brother .....

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her in ITAT or High Court and has paid tax and interest on assessment. Against these findings of the Commissioner of Income Tax (Appeals), the Revenue has come in appeal. 4. Shri Rajesh Damor, representing the Department submitted that during search proceedings in the case of Luthra family certain incriminating documents were seized from which it was found that the assessees had paid total consideration of ₹ 5.30 Crores for purchase of land. The sale price as per the registed document was .....

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admit the receipt of cash payment to the tune of ₹ 2.80 Crores from the assessees and Shri Shailesh D. Musale. Accordingly, notices u/s. 148 r.w.s. 147 were issued to the assessees. The on-money component was added in the income returned by the assessees on proportionate basis. The assessees filed appeal against assessment order before the Commissioner of Income Tax (Appeals). However, the same was withdrawn. Thus, the additions made during the assessment proceedings were accepted by the .....

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from whom the alleged on-money was accepted nor there is any record of transactions with respect to advance on-money in the books of account. Thus, the assessees have not been able to establish their bonafide in respect of cash transaction and the source of payments. During appellate proceedings in penalty appeals, the assessees raised the question of validity of proceedings u/s. 148 and year of taxation of amount. The contentions of the assessees that action should have been taken against the a .....

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itted that the alleged documents on the basis of which reassessment proceedings were initiated, were found during search proceedings in the case of Luthra Group. If any incriminating material is found against the assessees, the right course of action would have been to initiate proceedings u/s. 153C of the Act and not u/s. 148 of the Act. The provisions of section 153C over ride the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act. Thus, the reassessment proceedings are in itsel .....

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tomers in cash as on-money. The Assessing Officer has taxed the said money in the year of receipt. It is a well settled law that the advance received is not to be taxed in the year of receipt, but is to be taxed in the year of sale of plot in respect of which the on-money has been received as advance. The total sale consideration includes on-money. After deducting the cost of plot and expenditure thereon, from total consideration, the net amount is to be taxed. Since, there was dispute between t .....

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for dismissing the appeals of the Revenue. 6. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the ld. AR of the assessees have placed reliance. During the course of search action u/s. 132 in case of Luthra Group, it was found that the assessees have made cash payment of ₹ 2.80 Crores for purchase of land. Reassessment proceedings were initiated against the assessees .....

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sing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person. 7. Thus, a perusal of Sub-section (1) of Section 153C would show that where any documents is seized dur .....

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nue is to initiate proceedings u/s. 153C and not u/s. 148 of the Act. Our view is supported by the decision of Amritsar Bench of Tribunal in the case of ITO Vs. Arun Kumar Kapoor (supra), wherein, under similar circumstances the Tribunal has held that the proceedings u/s. 148 are illegal and void ab initio. The relevant extract of the order in the case of ITO Vs. Arun Kumar Kapoor (supra) is as under: 7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case o .....

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proceedings before the CIT(A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO under s. 148 are illegal and void ab initio. In the instant case, the learned CIT(A) has correctly observed that the AO should have issued notice under s. 153C of the Act and should have framed the assessment under s. 153C r/w s. 153A of the Act. Sec.153C of the Act reads as under : 153C. Notwithstanding anything contained in s. 139, s. 147, s. 148, .....

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assess income of such other person in accordance with the provisions of s. 153A. 8. On a perusal of the above provisions, it would be clear that the provisions of s. 153C of the Act were applicable, which supersedes the applicability of provisions of ss. 147 and 148 of the Act. As we have already noted hereinabove that the documents were seized during the search under s. 132 of the Act and the same were sent to the assessee s AO at Amritsar by the officer at Delhi in our view, the learned CIT(A) .....

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t, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A .....

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(P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order .....

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