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TMI Blog2020 (3) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) - IV, Ahmedabad erred in treating a duly registered transaction of purchase of impugned land as a 'colorable device'. 3. The learned Commissioner of Income-tax (Appeals) - IV, Ahmedabad erred in holding that the appellant reduced short term capital gain in his hands by increasing the cost of acquisition of land. 4. The learned Commissioner of Income-tax (Appeals) - IV, Ahmedabad failed to appreciate that the actual cost of acquisition of land in F.Y. 2009-10 which was duly disclosed in the books has come to be accepted by the Department as part of assessment for A.Y. 2010-11 vide order u/s. 153A of the Act and hence the same could not have been altered by the Assessing Officer in the year of sale of the impugned land by the appellant. 5. The learned Commissioner of Income-tax (Appeals) - IV, Ahmedabad erred in not granting credit for cash of Rs. 15,00,000/- seized on 24-06-2010 as and by way of advance tax payment for the assessment year 2011-12. 6. The learned Commissioner of Income-tax (Appeals) - IV, Ahmedabad erred in directing Assessing Officer to charge interest u/s. 234B of the Act. The appellant craves leave to add, amend, alter and withdraw any g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of such land after the plotting. In view of the above the AO sought clarification from the assessee for substituting the cost of acquisition declared by the assessee with the Jantri Value. 3.3. The assessee in response submitted that the land in question was adjacent to Metoda GIDC - an area which was under the development. Therefore the price of the land has gone manifold high than the Jantri value. Accordingly, the assessee claimed that he has sold the impugned land at an average rate of Rs.2000 per square meters despite the Jantri Value is at Rs. 800 square meters which was offered to tax as short-term capital gain. 3.4. The assessee also claimed that he has also purchased the impugned land from the non-related party being the wife of his friend Smt. Kavita H Goswami holding major share in the impugned land i.e. 67%. As such, there was no reason for the assessee to purchase the impugned land at a higher value from the unrelated party. 3.5. The assessee also submitted that there is no provision under the Act under which the cost of the acquisition for the impugned land can be disturbed. 3.6. The assessee also justified the purchase price of the impugned land by compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed that cost of acquisition of the land cannot be doubted merely on the ground that the income from the sale of such agricultural land would generate tax free income. 4.2. Similarly, the assessee also furnished the details of the adjacent lands where these lands were sold more than the Jantri Value. 4.3. The assessee also contended that the AO before altering the cost of acquisition claimed by the assessee should have referred the matter to the DVO for the determination of the prevailing market rate at the time of acquisition of the impugned land. But the AO has not done so. 4.4. The assessee also claimed that the amount of loan taken from the husband of Smt. Kavita H Goswami cannot be compared with the purchase of the land as both are different transaction and cannot be compared. 4.5. The learned CIT(A) after considering the submission of the assessee deleted the addition made by the AO in part by observing as under: "(x) The contention of the appellant appears to be correct partly as the wife of the appellant is only 33% owner of the relevant land in question, the remaining 67% is owned by Smt. Kavita H. Goswami wife of appellant's friend Shri Hiteshgiri Goswami who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of sale was disclosed and exempt gain as disclosed at documented value is not disbelieved by same A.O. in same circle [23 - 26] - stamp duty was paid by purchaser. [See order of Smt. Kavita Hiteshgiri Goswami on page no. 25] In case of one seller who is non-relative, there can't be a colourable device. Due stamp - duty at higher value is paid by assessee-buyer. Transaction is within four corners of law, because law itself treated the sale as exempt income - there is nothing to show the transaction as sham or bogus [326 ITR 0001 - SC]. Wife had minority share in land. The funds received by assessee from husband of joint-seller are refunded in later years on which even interest was paid in one of the years. CIT(A) has given a finding that he had enough capital to advance. Assessee bought impugned land at higher than stamp duty value. But he bought adjoining land one year later also at higher than Jantri value. Even his sale of impugned land is at higher than Jantri value." 6. On the other hand, the learned DR before us vehemently supported the order of the Authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under the statute cannot be used to hold that the transaction was a colorable device to escape from the tax liability until and unless the Revenue proves based on documentary evidence. As such we strongly feel that the onus was on the Revenue to prove that the market rate prevailing at the time of purchase of land by the assessee was at par with the Jantri Value. Thus in the absence of such necessary details, we are not impressed with the finding of the authorities below. 8. The main allegation/finding of the AO, which was later confirmed by the ld. CIT(A), that assessee has used this transaction as a colorable device to reduce its tax liability by diverting the income. Regarding this we note that Honorable Supreme court in case of McDowell & Co. Ltd vs. Commercial tax officer (154 ITR 148) dated 17-4-1985 observed that tax planning within the law is permitted, but colorable devices cannot be part of tax planning. 8.1. In the case of McDowell & Co, the assessee was not collecting the sales tax liability on the excise duty even after the amendment in the distillery rules 76 & 79 w.e.f. 4-8-1981. As such before the amendment in the rules, i.e., distillery rules 76 & 79 w.e.f. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment was to become part of its cost of commodity sold by it and to become part of its selling price to the buyers, was as a result of arrangement between the seller and buyer split into two, namely - duty so far paid separately directly to the tax authorities and the balance so paid to the seller; the arrangement was existing solely for the purpose of not paying the tax and it is not a transaction in reality of receiving less price than the one on which it was marketing. The Court no where said, that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell's case (supra). Ratio of any decision has to be understood in the context it has been made. The facts and circumstances which led to McDowell's decision (supra) leaves us in no doubt that the principle enunciated in the above case has not affected the freedom of citizen to act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orable device, a dubious method or subterfuge to avoid tax and can be ignored if the acts are unambiguous and bona fide, merely on the ground that treating those as deliberate would result in tax liability in future. While the planning adopted as a device to avoid tax had been deprecated, principle cannot be read as laying down the law that a person is to arrange his affairs so as to attract maximum tax liability, and every act which results in tax reduction, exemption of tax or not attracting tax authorised by law is to be treated as device of tax avoidance." 8.4. However, we further note that before applying the aforesaid principles laid down by the Hon'ble Apex court in case of McDowell (supra) to the case on hand certain facts needs to be considered for arriving at a finding whether a particular series of the transactions is a colourable device or not. In such situation the onus is on the AO to find out: (i) whether the parties to the transactions have concealed or hidden any fact and/or whether what is shown to be done could have actually happened in different time or at different place; Ans: Regarding the facts of the transactions, we note that all the necessary facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the amount of tax liability determined on the completion of the assessment as per the provisions of section 132B of the Act. As there was no tax liability as on the day of the search, therefore the cash seized cannot be treated as an advance tax payment. Being aggrieved by the order of the Ld.CIT (A) assessee is in appeal before us. 12. The Ld.AR, before us, reiterated the submission as made before the Ld.CIT (A). 13. On the other hand the Ld. DR vehemently supported the order of authorities below. 14. We have heard the rival contentions and perused the materials available on record. In the instant case search and seizure operation was carried out under section 132 of the Act, at the premises of the assessee dated 24-06-2010. During the search, a sum of Rs. 15,00,000/-was found which was seized. The 1st controversy before us arises for our adjudication whether the cash seized during the assessment proceedings can be treated as advance tax paid by the assessee. 14.1. The provisions for the adjustment of seized cash against the tax liability are contained under the provisions of section 132B of the Act. As per the provision, the cash seized during the search and seizure oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission. If the seized cash can be adjusted against an existing liability, there is no reason why the seized cash cannot be adjusted against a liability which arose in future because in that the seized cash would amount to some sort of advance payment. We are as such unable to find any merit in the contention of Mr. Ghutghutia. Mr. Ghutghutia lastly submitted that if such adjustment is permissible, then interest would be payable by the assessee. But that question was not raised before the learned Tribunal. The learned Tribunal, therefore, had no occasion to express any option with regard thereto. In the facts of the case, it is not possible for us to say that the impugned judgment and order of the learned Tribunal is erroneous in law." 15.1. It is settled law if there are different rulings of the non-jurisdictional High Court and there is no judgment on the issue by the Hon'ble jurisdictional High Court, then the view favoring the assessee will prevail. In this regard, we find support and guidance from the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Vegetable products Ltd reported in 88 ITR 192 wherein it was held as under: "if two reasonable constructions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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