2021 (8) TMI 235 - AT - Income Tax

Tribunal affirms CIT(A)'s decision on LTCG taxation, dismisses Revenue's appeals

The Tribunal dismissed the Revenue's appeals for both AY 2011-12 and AY 2013-14, upholding the CIT(A)'s decisions to delete the additions and affirming ... Assessment u/s 153A - absence of incriminating material found during the course of search - time limit for issuance of notice under section 143(2) - HELD THAT:- The additions made by Assessing Officer in assessment for AY 2011-12 are not based on any evidence, belonging to the assessee found during the search. All the additions are based on the copy of drafts of Statakhat (agreement) of different lands which were impounded during the course of survey under section 133A from the premises of A Sai Leela Associate, 302, SNS House-3 Athwalines, Surat. - no addition made on the basis of document which were believed to belonging to the assessee while recording satisfaction. There is no dispute that the assessee filed his return of income for AY 2011-12 on 27.03.2013 under section 139(4). The time limit for issuing notice under section 142(3) was expired on 30.092013. The assessing officer after recording satisfaction, issued notice under 153C dated 16.09.2014. Admittedly, no assessment for AY 2011-12 was pending when notice under section 153C was served on the assessee. Additions made by Assessing Officer in assessment for AY 2011-12 are not based on any evidence, belonging to the assessee found during the search. It is settled law that no addition can be made in the unabated assessment in absence of evidence found during the search. During the hearing before us, no evidence or material was brought to our notice that any of the addition either on substantive or on protective is based on evidence found during the search. We further find that the order of ld CIT(A) is in consonance with the decisions of Jurisdictional High Court in Saumya construction (P) Ltd. [2016 (7) TMI 911 - GUJARAT HIGH COURT], Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and Continental Warehousing (Nhava Sheva) Ltd [2015 (5) TMI 656 - BOMBAY HIGH COURT] which we affirm. Thus, in view of the aforesaid discussions, we do not find any merits in the grounds of appeal raised by the revenue. LTCG - year of assessment - capital gain in the hand of other coowners - Transfer of asset u/s 2(47) - AO while passing the assessment order for AY 2011-12 withdrew the LTCG and directed to tax it in AY 2013-14 - revenue vehemently submitted that no performance of transfer of land in AY 2011-12 as held by CIT-A and that the sale deed of the impugned land was executed during the period falls in AY 2013-13 - HELD THAT:- DRB Ravani builder stared project on the land introduced by the assessee and his co-owners and Ravani family. During the search the partner of the DRB Ravani Developer undisclosed income and paid due tax on the said discloser. The revenue accepted the discloser and accepted the tax in assessment order dated 22.03.2013. DRB Ravani Builder also had shown the land in their books of account, which is neither doubted nor disturbed by the revenue. Further all the co-owner of the assessee also offered similar Capital gain in AY 2011-12, which was accepted by the revenue. The revenue has not made re-opening of any of those co-owners, which has attained finality. Thus, in view of the aforesaid discussions, we accept the submission of the ld CIT(A), in addition to affirm the order of ld CIT(A) on this issue. Year of assessment/ taxability - sale deed of the impugned land was executed during the period falls in AY 2013-13 and that the assessee cannot choose the year of taxability as per his choice - Considering the facts that the revenue has accepted the capital gain in the hand of other coowners in AY 2011-12, the possession of the land was handed over on 01.11.2010, the land was introduced as capital contribution in the Firm. The Firm started its development activities and offered income for taxation. The assessee received part consideration in AY 2011-12. Further, the assessee and his co-owners were prevented from executing the sale deed in favour of the purchaser, due to injunction of Civil Court. Thus, the land was substantially transferred to the purchasers in AY 2011-12. Issues Involved:1. Jurisdiction of AO under Section 153A r.w.s. 153C.2. Deletion of additions in the absence of incriminating documents.3. Allowance of additional grounds of appeal by CIT(A).4. Reliance on precedents by CIT(A).5. Withdrawal of Long Term Capital Gain (LTCG) and its reassessment in different AY.6. Validity of assessment proceedings under Section 153C.7. Taxability of LTCG in AY 2011-12 vs. AY 2013-14.Detailed Analysis:1. Jurisdiction of AO under Section 153A r.w.s. 153C:The Revenue challenged the CIT(A)'s deletion of additions, arguing that the AO had jurisdiction to make additions under Section 153A r.w.s. 153C even in the absence of incriminating documents found during search proceedings. The Tribunal upheld the CIT(A)'s decision, emphasizing that no incriminating material was found during the search, thus the AO had no jurisdiction to make such additions.2. Deletion of Additions in the Absence of Incriminating Documents:The CIT(A) deleted the additions made by the AO, stating that the additions were not based on any incriminating documents found during the search. The Tribunal affirmed this view, noting that the additions were based on copies of drafts of agreements impounded during a survey, not during the search itself. The Tribunal cited precedents from the Jurisdictional High Court and other High Courts to support this decision.3. Allowance of Additional Grounds of Appeal by CIT(A):The Revenue contended that CIT(A) erred in allowing additional grounds of appeal raised by the assessee. The Tribunal found that the CIT(A) had rightly admitted the additional grounds, as the additions were not based on any incriminating material found during the search, and no assessment was pending at the time of the search.4. Reliance on Precedents by CIT(A):The CIT(A) relied on various precedents, including the decisions of the Hon'ble Special Bench of ITAT, Mumbai in the case of All Cargo Global Logistics Ltd. vs. DCIT, and the Jurisdictional High Court in Saumya Construction (P) Ltd. The Tribunal upheld this reliance, affirming that the CIT(A)'s decision was in consonance with established legal principles.5. Withdrawal of Long Term Capital Gain (LTCG) and Its Reassessment in Different AY:The AO withdrew the LTCG shown by the assessee in AY 2011-12 and reassessed it in AY 2013-14. The CIT(A) directed the deletion of this addition in AY 2013-14, holding that the capital gain was taxable in AY 2011-12. The Tribunal affirmed this decision, noting that the possession of the land was handed over in AY 2011-12, and the land was introduced as capital in the partnership firm during that year.6. Validity of Assessment Proceedings under Section 153C:The assessee objected to the notice under Section 153C, arguing it was served 21 months after the search, beyond the prescribed time limit. The Tribunal found that the assessment was completed within the prescribed time and upheld the CIT(A)'s decision that the additions were not based on any incriminating material found during the search.7. Taxability of LTCG in AY 2011-12 vs. AY 2013-14:The Tribunal found that the LTCG was rightly offered in AY 2011-12 as the possession of the land was handed over, and the land was introduced as capital in the partnership firm in that year. The Tribunal noted that the revenue had accepted similar capital gains from other co-owners in AY 2011-12, and the development activities on the land had commenced in that year. Thus, the Tribunal dismissed the Revenue's appeal for both AY 2011-12 and AY 2013-14.Conclusion:The Tribunal dismissed the Revenue's appeals for both AY 2011-12 and AY 2013-14, upholding the CIT(A)'s decisions to delete the additions and affirming that the LTCG was taxable in AY 2011-12. The Tribunal emphasized the absence of incriminating material found during the search and the validity of the CIT(A)'s reliance on established legal precedents.