TMI Blog2022 (3) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... 07. There is no incriminating materials seized during the course of search, which can be linked to the three additions made in the assessment completed u/s 143(3) r.w.s. 153A of the I.T.Act. Hence, in view of the Hon ble jurisdictional High Court judgment in the case of CIT v. IBC Knowledge Park (P) Ltd. [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT] and Pr.CIT v. Delhi International Airport Pvt. Ltd. [ 2021 (11) TMI 928 - KARNATAKA HIGH COURT] these additions cannot be sustained. - Decided in favour of assessee. - ITA No.107/Bang/2012 And ITA No.202/Bang/2012 - - - Dated:- 2-3-2022 - Shri George George K, JM And Ms.Padmavathy S, JM For the Revenue : Smt.Priyadarshini Besaganni, JCIT-DR For the Assessee : S/Sri. G.S.Prashanth, CA and Narendra Sharma, Advocate ORDER PER GEORGE GEORGE K, JM These cross appeals are directed against CIT(A) s order dated 30.11.2011. The relevant assessment year is 2005- 2006. The order of CIT(A) arises out of assessment order dated 31.12.2010 passed u/s 143(3) r.w.s. 153A of the I.T.Act. 2. The brief facts of the case are as follows: The assessee is a private limited company. It was established to carry on business of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further submitted that the other additions made on account of disallowance of selling expenses and disallowance u/s 40(a)(ia) of the Act is not based on any incriminating material and consequently no addition could have been made by the Assessing Officer in a proceedings completed u/s 153A of the Act. In support of the above submission, the learned AR relied on the following judicial pronouncements:- (i) CIT v. IBC Knowledge Park (P) Ltd. reported in 385 ITR 346 (Karnataka) (ii) Pr.CIT v. Delhi International Airport Pvt. Ltd. in ITA No.322/2018 (judgment dated 29.09.2021) (iii) CIT v. Kabur Chawla reported in 380 ITR 537 (Delhi) (iv) PCIT v. Ms.Lata Jain 384 ITR 543 (Delhi) (v) PCIT v. Devangi Alias Rupa 394 ITR 184 (Guj.) (vi) CIT v. Mechmen 380 ITR 591 (MP) (vii) CIT v. RRJ SEcuriites 380 ITR 612 (Delhi) (viii) CIT v. Ramesh Kumar 338 ITR 126 (P H) (ix) CIT v. Lata J.Chandrashekar (HUF) 338 ITR 61 (Mad.) 5.1 The learned Standing Counsel appearing for the assessee submitted that as regards the nature of addition of sale of land and relinquishment of Rights, the same has been rightly taxed under business income. It was submitted that during the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Park Pvt. Ltd. v. CIT (supra). The relevant finding of the Hon ble jurisdictional High Court in the case of Pr.CIT v. M/s.Delhi International Airport Pvt. Ltd. (supra), reads as follow:- 30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143(3) of the Act, ordinarily cannot disturb the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Coordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd. supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good .. 5.3 The judgment of the Hon ble Delhi High Court in the case of CIT v. Kabul Chawla reported in (2016) 380 ITR 573 (Delhi) had summarized the legal position as regards assessment u/s 153A of the Act, as follows:- 37. On a conspectus of Section. 153A(1) of the Act, read with the provisos thereto, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 5.4 The Hon ble jurisdictional High Court in the case of Pr.CIT v. M/s.Delhi International Airport Pvt. Ltd. (supra) had also referred to the judgment of the Hon ble Delhi High Court in the case of CIT v. Kabul Chawla (supra) (Refer para 20 of the Karnataka High Court judgment). From the above judicial pronouncements, cited supra, it is clear that the assessments which are not pending and hence does not abate, the addition can be made only on the basis of incriminating material found during the course of search. In the instant case, the original assessment was already completed vide order dated 28.12.2007 passed u/s 143(3) of the I.T.Act and further appeal was preferred to ITAT and the Hon ble High Court. Therefore, the assessment for assessment year 2005-2006 was not pending as on the date of search (date of search 26.08.2008), and hence, does not abate. Therefore, for the addition to be made in the assessment to be completed u/s 153A of the I.T.Act necessarily has to be based on incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a copy of opinion given by senior advocate Shri S.Parthasarthy dated 20.08.2005, the opinion is given on the queries about the taxability of sale of land and rights on the facts recorded in the preamble .. (vi) Copy of memorandum of company giving the objects as all types of construction and development work in all its branches such as canal, roads, hotel, hospital, Dharmshala, housing project . 11. The above documents are vital evidences to determine the chargeability of the income of the assessee. At the cost of repetition it may be stated here that these documents were not available before the Assessing Officer at the time of concluding proceedings u/s 143(3). 5.6 At this point, it is necessary to elaborate on the facts with regard to the issue of treatment of consideration received on sale of land and relinquishment of rights of ₹ 18,58,08,412. The assessee had entered into a MOU with Shri. Pradeep Kumar Sharma on 22.05.1995 for jointly developing 9 Acres of land at Sy. Nos. 19 20 of Ambalipura Village, Varthur Hobli, Bangalore and a formal agreement dated 12.07.1995 was entered between the parties as per which the assessee was entitled to receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land, could be considered as transferred to the ADP in the year in which assessee entered the principal agreement. This happened much before the impugned assessment year. Even if we consider that assessee could have introduced this capital in the ADP only after acquiring the property, even this happened much before the currency of the relevant previous year. Resultantly there was no capital gains on account of land being introduced by the assessee into the ADP, during the relevant previous year. 27 ........... . It is clear from Section 45(4) of the Act, that profits and gain if any, arising on transfer of capital by way of distribution of capital assets is assessable in the hands of the AOP only and not in the hands of its members. The settlement deed practically put an end to the AOP and transfer of title in the land to M/s. PDP was nothing but distribution of the capital assets of the AOP on its dissolution .. 30. No doubt, assessee itself had returned capital gains in the impugned assessment year, considering the land to have been transferred by it, in the relevant previous year. In our opinion, however this cannot help the case of revenue just because an err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in the original return of income under the head capital gains (subsequently enhanced to ₹ 6,29,67,000 u/s 154 of the Act). In the assessment concluded u/s 153A r.w.s. 143(3) of the I.T.Act, the Assessing Officer had brought to tax the aforesaid amount as business income mainly on the basis of a written opinion of a Senior Advocate found during the course of search in which he opined that the receipt on sale of land and relinquishment of rights is taxable under business income. It is settled position of law that taxes are not be collected or paid on the basis of opinion of expert. No addition can be based on an opinion which is even not put to the assessee for his rebuttal during the course of assessment proceedings. Without prejudice, it is also to be mentioned that the assessee had taken opinion from others and the same has not been considered by the Assessing Officer. If there was an opinion in favour of the assessee, would be the Assessing Officer followed the same instead of one against the assessee. The answer would be certainly `no . Therefore, the assessment should be framed only on the basis of evidence gathered and not on the basis of opinion of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to regroup /reclassify the figures of the previous year so as to make them comparable with current year figures in the financial statements. It is pertinent to state that, the assessee had offered capital gains even after reclassification and it was not disputed by the Assessing Officer in the order dated 28.12.2007. Therefore, on the facts of the instant case, there is no incriminating materials seized during the course of search, which can be linked to the three additions made in the assessment completed u/s 143(3) r.w.s. 153A of the I.T.Act. Hence, in view of the Hon ble jurisdictional High Court judgment in the case of CIT v. IBC Knowledge Park (P) Ltd. (supra) and Pr.CIT v. Delhi International Airport Pvt. Ltd. (supra), these additions cannot be sustained. 5.12 In the result, the appeal filed by the assessee is allowed. ITA No.202/Bang/2012 (Revenue s appeal) 6. In Revenue s appeal, the solitary issue that is challenged is the decision of the CIT(A) wherein he changed the head of income from business income to the capital gains, with reference to the asessability of receipt on sale of land and relinquishment of rights. Since we have already held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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