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2017 (5) TMI 775 - ITAT DELHI

2017 (5) TMI 775 - ITAT DELHI - [2017] 55 ITR (Trib) 612 - Validity of assessment u/s 153A - downward revision of the cost of acquisition - Held that:- No incriminating material was found in the course of search which could justify downward revision of the cost of acquisition from ₹ 58.52 to ₹ 40 per square metre. Moreover, the findings recorded by the learned Commissioner of Income-tax (Appeals) have not been controverted by the Department. If the very premise on which the addition .....

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ssessee. The learned counsel pointed out that the business model of M/s. R. B. Enterprises is entirely different from the assessee since no evidence had been found in the case of the assessee suggesting receipt of on-money over and above is stated consideration. Therefore, the addition was rightly deleted by the learned Commissioner of Income-tax (Appeals). - Sale of plots - valid transfer u/s 2(47) - Held that:- The terms of memorandum of understanding with Aggarwal Associates Ltd. are not .....

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7 - S. V. Mehrotra (Accountant Member) And Suchitra Kamble (Judicial Member) For the Department : S. S. Rana, Commissioner of Income-Tax-Departmental Representative For the Assessee : Salil Kapoor and Sumit Lalchandani, Advocates ORDER S. V. Mehrotra (Accountant Member) 1. The captioned appeal has been filed by the Revenue against the order dated March 4, 2013 passed by the Commissioner of Income-tax (Appeals)-1, Dehradun, under section 153A(1)(b) read with section 143(3) of the Income-tax Act, .....

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was carried out in the premises of the assessee on March 4, 2009. Accordingly, notice under section 153A(1)(a) of the Act was issued on January 18, 2010. In response to this notice, the assessee filed his return of income on October 20, 2010 declaring a total income of ₹ 19,30,160. On the basis of seized material and the return originally filed under section 139, a questionnaire and notice under section 142(1) of the Act dated October 6, 2010 was served upon the assessee. A notice under s .....

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ilok at ₹ 10,62,472 as under : Income from house property Loss from house property (SOP) (-) 1,50,000 Business income 1,52,51,423 Profit on Sailok sale of land at Manakmau 5,74,450 Expenditure on the above land of Manak Mau and Sailok 5,35,807 Rem./Intt. from partnership firm 38,643 Batta Bros 1,08,000 R. B. Coal Co. 1,20,000 R. B. Brick Co. 2,58,000 4,86,000 Addition on account of sale of plot No. 91 to Aggarwal Associates Ltd. as per memorandum of understanding as discussed above. 20,00, .....

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appeal, confirmed the addition in principle on account of sale of plot No. 91 to Aggarwal Associates Ltd. and deleted the addition in regard to profit of business in regard to Sailok land. Being aggrieved, the Department is in appeal before the Tribunal and the assessee has filed cross-objection. 5. First, we take up the Department's appeal. The Department has taken the following grounds of appeal : "1. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts .....

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lected during the search is an admissible evidence. 3. That the order of the learned Commissioner of Income-tax (Appeals) being erroneous in law and on facts which needs to be vacated and the order of the Assessing Officer be restored. 4. That the appellant craves leave to add or amend any one or more of the ground of appeal as stated above as and when need for doing so may arise." 6. Brief facts apropos ground No. 1 are that in the course of assessment proceeding, it was found that the ass .....

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ectively. Accordingly, on the basis of these costs, the assessee had calculated the capital gain per square metre chargeable in the year of sale at ₹ 119.72 per square metre. The Assessing Officer noticed that the land had been acquired by the assessee prior to April 1, 1981. He referred to the assessment years 2003-04 and 2004-05 and pointed out that the land was also situated at Mauja Niranajanpur where the other lands of the assessee were also situated and the fair market value of all s .....

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ndex as on April 1, 2004 is 480) on date conversion per square metre. 192 Total available area 20,400 sq. mts. Total indexed cost of acquisition On the date of conversion 39,16,800 Saleable area on conversion into stock-in-trade as per approval of MDDA 13,260 sq. mts. Indexed cost of acquisition of saleable area on conversion into stock-in-trade 295.38 Fair market value on the date of conversion 600 per sq. mt. Capital gains per square metre chargeable in the year of sale (600-295.38) 304.62 Are .....

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at ₹ 40 and, accordingly, determined the capital gains at ₹ 10,19,430 against the capital gains of ₹ 4,00,641 disclosed by the assessee. He further added the capital gains on conversion of plot in the year of sale which was assessed at ₹ 43,042. The learned Commissioner of Income-tax (Appeals) deleted the addition for the following reasons : (a) Cost of acquisition of the property was shown at ₹ 58.50 per square metre in the original returns of income for the assess .....

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sessing Officer. Thus, the down ward revision was based on the assessee's own figure which pertained to another piece of land. 8. We have considered the submissions of both the parties and perused the record of the case. Admittedly, no incriminating material was found in the course of search which could justify downward revision of the cost of acquisition from ₹ 58.52 to ₹ 40 per square metre. Moreover, the findings recorded by the learned Commissioner of Income-tax (Appeals) hav .....

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case of R. B. Enterprises, which is a firm where the family of his brother Shri Rakesh Batta is a partner, during the course of assessment for the assessment year 2007-08, it was found from the search material that the sales were being made over and above the amounts disclosed in the registered sale deeds. He observed that these sale rates were as per the prevailing sale prices in that area and, accordingly, the same were charged from the buyers. He noted that a total of 129 plots had been carve .....

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considerations ranging between ₹ 1,309 per square metre to ₹ 2,938 per square metre within the same colony at Sailok. There is a staggering diversity in the sale rate within the same colony and within the same financial year. Your attention is invited to the case of R. B. Enterprises in the assessment year 2006-07. As per the details of the seized material, the actual sale rates in the Sailok has been discussed in the show-cause notice issued to that firm in respect of the plots fal .....

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r income'." 10. The assessee replied as under : "Regarding Sai Lok and your contention of taking the sale rates as charged by R. B. Enterprises we would like to point out that the plots are sold as per the condition of demand and supply, location of the plot, direction of the plot with reference to the conditions of sun, wind and vastu. As each plot and each buyer is different the rates are also different keeping in view the personal preferences of the purchasers and the quality of .....

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your assessee and different in the case of M/s. R. B. Enterprises. As there is no common platform between the two entities the results/rates, etc. cannot be compared. As such there is no justification in applying any rate other than the rates as reflected in the sale deeds." 11. After considering the assessee's reply, the Assessing Officer, inter alia, observed that though both are the different entities but the facts that emerge is that the evidence have been found which suggested the .....

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Enterprises are discussed hereunder in order to substantiate the extent of the prevailing rates in Sailok . . . . ." 12. Thus, on the basis of evidence found in the course of R. B. Enterprises, the Assessing Officer worked out the gross sales at ₹ 2,91,15,072 and after allowing the rebate of 35 per cent. and expenditure of ₹ 20,07,937 as cost of conversion of property into stock-in-trade and further expenditure of ₹ 16,65,437 on account development expenditure, determined .....

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of flats, which were adjacent to the assessee's flats. This could at best give rise to suspicion but, unless confirmed by the independent evidence, could not be a valid basis for addition. (c) The assessee had also shown that there were instances of sale of plots of land in the same vicinity at rates, which were much lower than that shown by the assessee. The incriminating evidence found in the case of M/s. R. B. Enterprises was not applied in those cases. (d) The business model and busines .....

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lso the statements of various persons he has also filed written submissions in support of his plea that under section 153A, the Assessing Officer is empowered to assess or reassess the total income of the assessee. His submissions are reproduced hereunder : Before the hon ble Members Income-tax Appellate Tribunal, F-Bench, New Delhi In the case of Ramesh Batta Appeal No. 3966/Del/2013 and C.O. No. 242/Del/2013 Assessment year 2007-08 Date of hearing 25-01-2017 May it please your honours Sub : Su .....

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terial. Post-search reassessment in respect of all the six years can be made even if the original returns are already processed under section 143(1)(a). The Assessing Officer has power under section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the returns for these years have already been processed under section 143(1)(a). Even if the assessment order had already been passed in respect of all or .....

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ions need not be restricted or limited to incriminating material, found during course of search. 3. CIT v. St. Francis Clay Decor Tiles [2016] 385 ITR 624 (Ker) Where the hon'ble Kerala Court held that the notice issued under section 153A-return must be filed even if no incriminating documents discovered during search. 4. CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2016] 380 ITR (St.) 80 (SC) ; [2015] 64 taxmann.com 34 ; [2015] 235 Taxman 568 Where the hon'ble Supreme .....

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Where the hon'ble Kerala High Court held that the assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against the interest of the assessee including making additions even without any incriminating material being available against the assessee in a search under section 132 on the basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering the cases of CIT v. Continental Warehousing Corporation (Nha .....

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; 70 taxmann.com 234 (Ker) (paragraph 5) and CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker) (paragraph 5). 2. CIT v. St. Francis Clay Decor Tiles [2016] 385 ITR 624 (Ker) (copy enclosed) Where the hon'ble Kerala High Court held that notice issued under section 153A-return must be filed even if no incriminating documents discovered during search. 3. Smt. Dayawanti v. CIT [2017] 390 ITR 496 (Delhi) ; [2016] 75 taxmann.com 308 (copy enclosed) Where the hon'ble Delhi High Court held that wh .....

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o R. B. Enterprises except that his brother is partner in R. B. Enterprises. He pointed out that it is not disputed that the entire addition has been made on the basis of the seized material found in the case of R. B. Enterprises and not in the case of the assessee. Therefore, in the absence of any incriminating material being found in the case of the assessee, addition could not be made in view of the decision of the hon'ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR .....

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l Kumar Bhatia (supra) and Filatex India Ltd. (supra), the learned counsel submitted that these decisions have been considered by the hon'ble Delhi High Court in the case of Kabul Chawla (supra). In this regard, he referred to paragraphs 20 and 28, which reads as under (page 582) : "As regards the material unearthed during the search the court in CIT v. Anil Kumar Bhatia (supra) observed that (page 509 of 352 ITR): 'if it is not in dispute that the document was found in the course o .....

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, therefore, express no opinion as to whether section 153A can be invoked even in such a situation. That question is therefore left open.. . .' In Filatex India Ltd. v. CIT (supra), one of the questions framed was whether the Income-tax Appellate Tribunal erred on facts and in law in not holding that recomputation of book profit, dehors any material found during the course of search, in the order passed under section 153A of the Act was without jurisdiction, being outside the scope of procee .....

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need not be restricted or limited to the incriminating material, which was found during the course of search'. Consequently even if no incriminating material was found for the addition under section 115JB of the Act since there was some incriminating material found which would sustain additions made and since the 'total income' had to be computed, they were sustained by the High Court." 16. The learned counsel further pointed out that the decision of Special Bench of the Mumbai .....

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decision of the hon'ble jurisdictional High Court on this issue and then since two views are possible, therefore, a view in favour of the assessee should be taken as has been held in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) and CIT v. Vatika Township P. Ltd. [2014] 367 ITR 466 (SC) ; [2014] 49 taxmann.com 249. He pointed out that three High Courts, viz. the hon'ble Delhi High Court, the hon'ble Bombay High Court and the hon'ble Gujarat High Court have taken view in .....

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to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search was conducted. In the present case, the search was conducted on March 4, 2009, therefore, the Assessing Officer was required to assess or reassess the total income of six assessment years preceding the assessment year 2009-10. The first proviso to section 153A mandates that the Assessing Officer shall assess or reassess the total income in r .....

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under section 132 is pending then the same will abate. This implies that the Assessing Officer will have to make the assessment in the case of such assessment year de novo. The object of the second proviso is evident that in the case of those assessments or reassessments, which have not abated, the assessment is not to be made de novo and it is in such cases only that the addition can be made only on the basis of incriminating material though the Assessing Officer is required to make the assess .....

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rom the end of the assessment year in which the income was first assessable. However, if no notice under section 143(2) was issued within the time limit prescribed under section 143(2) then it cannot be said that the assessment was pending. We find that in the assessment order nothing has been mentioned in regard to original assessment proceedings. The learned counsel for the assessee made a statement at the Bar that notice under section 143(2) could be issued up to October 31, 2008 but no such .....

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aid decision is not at all applicable to the facts of the case because in that case the assessee surrendered income and the son's statement taken at the time of search was ratified by the assessee. Therefore, the said decision is not applicable to the facts of the present case. Even otherwise we find that the Assessing Officer at page 9 of his order, inter alia, observed as under : "There are other many instances in the case of M/s. R. B. Enterprises and these are discussed in detail an .....

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s is entirely different from the assessee since no evidence had been found in the case of the assessee suggesting receipt of on-money over and above is stated consideration. Therefore, the addition was rightly deleted by the learned Commissioner of Income-tax (Appeals). 19. In the result, the appeal of the Department is dismissed. 20. Now, we take up the cross-objection of the assessee. The assessee has taken the following grounds of cross-objection : "1. That the learned Commissioner of In .....

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the provisions of section 292C, the document collected during the search is an admissible evidence. 3. That the order of the learned Commissioner of Income-tax (Appeals) being erroneous in law and on facts which needs to be vacated and the order of the Assessing Officer be restored. 4. That the appellant craves leave to add or amend any one or more of the ground of the appeal as stated above as and when need for doing so may arise." 21. Brief facts apropos ground No. 3 are that in the cour .....

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Ltd. The plot No. 91 falls in the share of the assessee. Against this the said company had paid ₹ 50 lakhs and the amount falling in the share of the assessee's plot was ₹ 20 lakhs. The assessee had not disclosed this income in its return of income. The assessee contended that the amount represented as advance as no sale deed has been executed. The Assessing Officer noticed that the other part of ₹ 50 lakhs, i.e. ₹ 30 lakhs had been disclosed in its return of income .....

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onsideration in the memorandum of understanding and the areas falling therein were now not available to the assessee as its stock-in-trade for sale or any other development or alienation except as per the terms and reference of the memorandum of understanding. He pointed out that going by the conditions contained in the memorandum of understanding there could never be outright sale to M/s. Aggarwal Associates Ltd. at any point subsequently as after passing through these plots the other lands of .....

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