TMI Blog2012 (10) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sum of ₹ 5,00,000/- as non-refundable deposit. 2. The firm did not function its business and came to be dissolved on 01.12.1994. Krishna Reddy and sons on 02.12.1994 have entered into another joint development agreement with same firm M/s.Pranam Foundation. The search was conducted in the premises of the assessees who are sons of Krishna Reddy on 26.09.2000. The incriminating document was found regarding grant of land to Krishna Reddy and also Partnership Deed, Joint Development Agreement and Dissolution Deed were traced. In the course of search, Registered Partition Deed dated 20.04.1999 was found. There was reference to oral partition on 10.07.1996. The search is conducted subsequent to the Registered Partition Deed. 3. The Assessing Officer initiated proceedings for block assessment. The Assessing Officer has found that the property is a landed property granted to Krishna Reddy is individual grant and does not constitute a joint family property. The transfer of 3 acres of land by Krishna Reddy and his 3 sons who were partners to the firm, attracts capital gains. Accordingly, the tax was levied. Later on, the penalty proceedings are also initiated. 4. The Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e insertion of the amendment by ignoring the provisions of the Finance Act which clearly contemplated such a levy. 7. In I.T.A.Nos.1022/2008, 1023/2008 and 1024/2008, the following questions of law have been framed for consideration:- 1. Whether the Tribunal was correct in holding that the Authorities in assessment proceedings had not taken the correct status of the assessee as an HUF despite the same having been adjudicated upon and held against the assessee? 2. Whether the Tribunal was correct in setting aside the penalty levied U/s.158BFA(2) of the Act? 8. In the facts narrated above, the question whether contribution of land by Krishna Reddy and sons as partners to their firms attracts capital gain U/s.45(3) is a independent question irrespective of the fact whether the property is joint family property or otherwise. In this regard, it is necessary to consider provisions of Section 45(3) which reads as follows:- 45(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a cooperative society) in which he is or become s partner or member, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come not disclosed but found and determined as the result of search under section 132 or requisition under section 132A of the Act. 10. The ratio laid down in the said decision makes it clear that the Assessing Authority A.O. while making block assessment has not called for any records from the assessee for the assessment. He has relied only on the seized material. The firm had not maintained any books of accounts. The A.O. has called for books of accounts of assessee and found that in the year 1998, they have sold the property in question. The A.O. has taken sale value of the property in the year 1998 as the value of the property in the year 1994 and has assessed the capital gain U/s 45(3) of I.T. Act. The procedure followed by the A.O. was totally impermissible U/s 45(3) of the I.T.Act. In this regard, the contention of the counsel for the assessee Sri A Shankar that when books of accounts are not maintained, the A.O. cannot assess the capital gains U/s.45(3), but however, the A.O. has power to assess the transaction U/s.147 of I.T. Act or can tax the firm U/s.45(4) when it transfers the asset to third party or on dissolution on the basis of the market value. Even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the year 1994 to levy capital gains. The said method is totally illegal and impermissible because it is permissible U/s.45(3) of the I.T. Act for the partner to transfer the asset to the firm at zero value and it is also permissible for the firm to show in the books of account the zero value, then only a specific value is shown in the books of account. Only on the basis of such value, the capital gains has to be worked out but not on the inference of subsequent sale value or the market value. In that view, the finding of the Tribunal is sound and proper. The questions are answered against the revenue. 13. In respect of the appeals preferred by the assessee, it is necessary to point out whether land granted in favour of Krishna Reddy is a joint family grant or personal property. 14. It is the contention of the revenue that in the partnership deed and in the dissolution deed there is no mention that the property is a joint family property of Krishna Reddy and his son. In the said document, Mr.Krishna Reddy and his sons have described themselves as co-owners of property in question. In the joint development agreement also they have described the property as their co-owners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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