9911796707
TMI Blog2022 (3) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... r u/s 143(3) r.w.s. 153A of the I.T.Act vide order dated 31.12.2010 for the assessment year 2005-2006. The A.O. considered the income arising on sale of land and relinquishment of Rights as business income as against the assessee's treatment as part of income as receipt from capital gains and part of it as capital receipt not exigible to tax. Accordingly, a sum of Rs. 18,58,08,412 was assessed as business income (in the assessment order completed u/s 143(3), the same was considered as capital gains and assessed). Besides the above addition, selling expenses of Rs. 1,40,48,960 was added and also a sum of Rs. 9,65,175 was disallowed u/s 40(a)(ia) of the I.T.Act. 3. Aggrieved by the assessment order completed u/s 143(3) r.w.s. 153A of the I.T.Act, the assessee preferred an appeal before the first appellate authority. The appeal was disposed of vide the impugned order dated 30.11.2011. The CIT(A) granted partial relief to the assessee. The CIT(A) held that the income from sale of land and relinquishment of Rights be taxed under the head `capital gains'. 4. Aggrieved by the order of the CIT(A), the assessee has filed this appeal to the Tribunal on 24.01.2012 and the Department has fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of the proceeds under the head `business income' and relied on following documents:- (a) Directors Report for the year ending 31.03.2004 to share holder where in according to Boards resolution land was agreed to be converted into stock in t4rade as the company. (b) Copy of the Notes forming part of accounts as on 03.03.2004. (c) Audited balance sheet for A.Y. 2004-05 where the land was shown as stock in trade. (d) Seized document containing opinion of Shri S.Parthasarathy, Sr.Advocate. (e) Copy of Memorandum of assessee company. It was stated by the Standing Counsel that the A.O. considered the assessee's submissions vis-à-vis above documents and concluded that the considerations received on sale of land and relinquishment of rights are business income and quantified business income at Rs. 18,58,08,412 (in the original assessment it was taxed under the head Capital Gains). The A.O. also stated in para 11 of his order that the above documents were not available before the A.O. at the time of concluding assessment u/s 143(3). With regard to the additions of selling expenses and disallowance u/s 40(a)(ia) of the Act, the learned Standing Counsel was unable to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the search. takes place. ii. Assessments and reassessments pending on the date of the search shall abate The total income for such AYs will have to be computed by the AOs as afresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income of the aforementioned six years In separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax". iv. Although. Section. 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information. available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (see para 21 of the assessment order) (iii) Section 40(a)(ia) of the I.T.Act (see para 22 of the assessment order) 5.5 On a careful perusal of the assessment order, it is clear that the seized material pertains to only the first addition mentioned above. The relevant observation of the A.O. with reference to the seized material, reads as follows:- "10. During the course of present assessment proceedings, the issue of chargeability of the proceeds arising out of the sale of land and rights is examined in the light of the following documents seized during the course of search proceedings u/s 132 documents found during the course of assessment proceedings. These were not available to the Assessing Officer at the time of concluding proceedings u/s 143(3). The same are listed herewith: (i) Directors Report to the Shareholders part of ninth annual accounts as at 31.03.2004 dated 7th September 2004 filed with the return of income in compliance to section 153A for the previous A.Y. 2004-95. Relevant para is extracted as follows: "It was decided in the Board Resolution passed at the Board Meeting held on 31.03.2003 (wrongly as against 31.03.2004) it has been decided to convert th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DPL. Subsequently, serious differences cropped up between the parties leading to assessee cancelling the GPA on 12.03.2004 and M/s. PDPL filed a suit in the Court of the City Civil Judge, Bangalore in as No. 2224/2004 on 25.03.2004 seeking nullification of the cancellation of power of attorney. During the pendency of the suit, the parties reached a settlement on 02.04.2004 and the assessee through the settlement agreement agreed to forego all their rights and interests as per the development agreement & also agreed to convey the subject property to M/s PDPL. The consideration as per the settlement was Rs. 20 crore, which was split by the parties into Rs. 14 crore for foregoing their rights and Rs. 6 crore for conveying the subject property. While filing the return of income for the impugned assessment year, assessee declared a long term capital gain on a sum of Rs. 6 crore and Rs. 14 crore was not offered to tax as it was a capital receipt. However, the assessing officer considered the entire sum of Rs. 20 crore as taxable under the head 'Capital Gains' and completed the assessment vide order dated 28.12.2007 passed u/s 143(3) of the Act. Subsequently a rectification order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court dismissed the appeal vide judgment dated 02.03.2016 in ITA No.541/3015. The relevant portion of the judgment reads as follows :- "4. The aforesaid shows that the Tribunal mainly considered two aspects. At the time of Association of Person (hereinafter referred to as the 'AOP,) was formed, the said AOP could have been considered for the taxation purpose on the ground of capital gain. But, the said AOP neither filed return nor was assessed for the purpose of taxation. The AOP was formed in the year 1995. The activities of the AOP were also continued for some time and it is only in the year 2004, on account of dispute, settlement was entered into between the members of AOP and the properties were distributed. It has been held by the Tribunal that when distribution of assets takes place the same is not transfer of assets. Further, the Tribunal has taken note of the fact that the assessment at Rs. 14 Crore is on the basis of 20% share of the profit which the assessee would have earned in future. The Tribunal has taken note of the fact that the share of the income is not taxable in the hands of the members. Ultimately, the Tribunal found that the addition of Rs. 14 Crore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders as on 31.03.2004, the Board has decided to convert the land into stock-in-trade and sought legal opinion regarding taxability of transaction. The Assessing Officer alleged that the assessee on receiving such legal opinion in order to evade taxes reflected the land as capital asset. During the course of hearing before the Tribunal on 22.02.2022, the learned Standing Counsel had contended that the Director's Report to shareholders, note forming part of accounts as on 31.03.2004, audited balance sheet for the year ending 31.03.2004 was found during the course of search u/s 132 of the I.T.Act and these are incriminating materials. Further, he contended that the balance sheet filed for assessment years 2004-2005 and 2005-2006 (as comparative) is different from the balance sheet filed before the Assessing Officer. This contention of the learned Standing Counsel is contrary to the facts of the case. The assessment u/s 143(3) of the I.T.Act was completed by the Assessing Officer vide letter dated 28.12.2007 and copies of the financial statements for the assessment years 2004- 2005 and 2005-2006 dated 07.09.2004 and 07.09.2005, respectively were available before the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
