TaxTMI 
TaxTMI 
TaxTMI 
2009 (4) TMI 538
X X X X Extracts X X X X
X X X X Extracts X X X X
....o start with, the former two appeals are taken up. In this regard, the assessees filed the concise grounds as well as an additional ground. The concise grounds and the additional ground filed by one of the assessees are reproduced as under :- I. "1. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) erred in confirming the order of the Assessing Officer by treating the capital gains on the sale of property at Ernakulam as short-term capital gains instead of long-term capital gains. 2. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) erred in holding that the property at Ernakulam belonged to the partnership firm, namely, M/s. Bhavana Metals, and it was only the assessment year 1997-98 that the property was transferred to the assessee and therefore, the capital gains arising on the sale of property in the assessment year 1999-2000 is short-term capital gains. 3. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) failed to appreciate that the assessee and his brother had purchased the said property in their individual names, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re partners in M/s. Kataria Tube and M/s. Harish Industrial Corporation, Mumbai. Further, they are also the partners in the M/s. Bhavana Metals, Ernakulam since assessment year 1989-90. During assessment proceedings, Assessing Officer found that the assessee have disclosed long-term capital gains in their returns and claimed the benefit of exemption under section 54 of the Act. The capital asset in question is the property measuring 1.75 Cents, Survey No. 655/2 of Ernakulam Village. Initially, the said property was purchased by the firm-M/s. Bhavana Metals by making the payment of the purchase consideration (Rs. 1.85 lakhs each) from its account. However the property was registered in names of the partners, the brother- assessees, with 50 per cent share in the said property. Assessing Officer also noticed that property was disclosed in the audited balance-sheet of M/s. Bhavana Metals as on 31-3-1993, 1994, 1995, 1996 and 1997 successively. However, these properties are reflected in the balance sheets of the assessees as on 31-3-1998 as their assets declaring the cost of the asset at Rs. 1.85 lakhs each. The capital accounts of the partners with the M/s. Bhavana Metals for the year ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1997, the year of transfer of the property to the accounts of the brother-assessees. On having regard to the transfer entries in the books of the firm and in the capital accounts of the partners in the books of the firm, Assessing Officer confirmed that the ownership starts only from 1-4-1997 only at the rate of the original value of Rs. 1.85 lakhs each. Further, the Assessing Officer qualified his finding stating that the firm could also own the property and relied on various judicial pronouncements in this regard. Further, Assessing Officer made out a case stating that the said property was held by the partners only for the period of 23 months before it is transferred for the consideration of Rs. 53 lakhs. Consequently, Assessing Officer denied the claim of exemption under section 54 as such exemptions are not available in respect of the short-term capital gains. 7. Thus, as per the Assessing Officer, the assessee was not the owner prior to 1-4-1997 and the owner of the said property was Bhavana Metals during that period. The period of ownership of the said property is only for the period less than 23 months and accordingly, the said asset has to be short- term capital asset in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idered opinion that the same should be admitted. 9. On the main issues, Ld. Counsel for the assessee has argued mostly repeating the submissions made in the past before the revenue authorities. Further, the Counsel has argued stating that on considering the ownership of the said land, the municipal authorities have given their approval for development of said property in the names of the assessees only. Otherwise all the other arguments are already given in the preceding paragraphs. On the other hand, the Ld. CIT DR for revenue argued vehemently stating that the said property in question is short-term capital asset and the decisions of the Assessing Officer/CIT(A) are required to be confirmed. 10. We have heard both the parties and perused the relevant orders as well as the records before us. In our opinion, the above facts, discussions and arguments generate the following issues. They are :- (i)Regarding the ownership of the asset, who is the owner of the asset during the period from 1993 to 1997, A.whether it is firm - M/s. Bhavana Metals, because (a) it has paid the consideration; and (b) the asset is reflected in books of the firm as its asset till March 1997; or B.whether....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al gains' head of income and clauses (29A), (42A) and (42B) of section 2 of the Act. Therefore, considering all the facts and circumstances of the present case, we are of the considered opinion that the assessee-firm is the original owner of the impugned capital asset and not the partners till 31-3-1997. 12. But for the above rival view points, otherwise, there is no dispute on the (a) period of holding of 23 months only from 1-4-1997 to 17-2-1999 in the hands of the partners; (b) nature of impugned property being the 'short-term capital asset' in view of the provisions of section 2(42A) relating to the definition of the 'short-term capital asset'; (c) non-availability of the claim of exemption under section 54F(1) in respect of the 'short-term capital gains'. Thus, regarding the period of holding or nature of asset, whether it is long-term capital asset or short-term in the hands of the owners, considering our decision above as well as in view of the events and entries in the books of the firm and capital accounts of the partners, the holding period in the hands of the partners starts from 1-4-1997 only and not from the date of registration in 1993. Further, the definition of cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing Officer. Under these circumstances, we are of the considered opinion that the additional ground must be referred to the files of the Assessing Officer for fresh adjudication after giving the reasonable opportunity of being heard to the assessee. Thus, the additional ground raised by the assessees is set aside. 14. In the result, both the appeals (ITA Nos. 2798 and 2799/Mum./2003) filed by the assessees are partly allowed. 15. So far, we have decided the appeals on the regular assessments. Now, we shall proceed to adjudicate on the grounds raised by the revenue in the appeals in respect of the block assessments of both the assessee-brothers in the succeeding paragraphs. 16. These are the two appeals filed by the revenue against the commonly dated two different orders dated 24-10-2003 of the common CIT(A)-XV. The grounds are similar in both the appeals and for the sake of convenience, the grounds from one of the appeals are reproduced as under :- "1. On the facts and circumstances of the case the Learned CIT(A) erred in holding that the Short Term Capital Gain arising from the transfer of property should not be included in the Block Assessment. 2. The Learned CIT(A) ought t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f sale consideration was received by the assessee and agreements were signed on 3-8-1998, which falls within the block period (date of search on 17-9-1998), the transaction fall in the block period. Subsequently, the Assessing Officer made a fresh assessments dated 31-3-2003 after making the additions as per the review of the CIT-XV, Mumbai. The said order of the CIT-XV dated 31-1-2002 was accepted by the assessee and therefore, there is no issue on the jurisdiction of the CIT under section 263 of the Act. 18. During the fresh assessment proceedings, the Assessing Officer held that the date of transfer since fallen within the block period, the relatable capital gains must be considered as per the block assessment provisions and concepts of undisclosed income. Further, he mentioned that the multiple agreements found during the search and fact of receiving 85 per cent of the sale consideration from Shri Iqbal confirm the completion of the sale transaction. Consequently, the chargeability of the said gains at the rate of 60 per cent applicable to the 'undisclosed income' is as per the search and seizure provisions. Accordingly, in the fresh assessments, the undisclosed incomes were d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....avour of the assessee. The CIT(A) kept his reliance on the provisions of section 269UC and 269UL for the proposition that there cannot be any registration of the property unless certificate from the Appropriate Authority is obtained and the same was obtained only on 25-4-1999 based on the agreement dated 17-2-1999. CIT(A) also rejected the argument relating to payment of consideration to the tune of 70 per cent to 80 per cent. Further, the property was subject- matter of proceedings before the appropriate authority in connection with the application in Form No 37-I read with section 269UL. Further, as discussed in Para 4.3 of the impugned order, the CIT(A) reasoned stating that the short-term capital gain occurring from the transfer of the said property cannot be assessed in the block assessment in view of the overriding provisions of section 269UL(1) and (2), which says that the property in question cannot be said to have been transferred before the date of search merely because of the payments to the tune of 80 per cent was made before the date of search. In this regard, the CIT(A) not only perused the relevant provisions of Transfer of Property Act but also gone through provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Officer in this regard. 22. Per contra, the Ld. Counsel for the assessee has relied on the impugned order. Further, she has argued stating that the property in question is a disclosed one, the transaction of sale is incomplete as the transfer is not done during the 'block period' as defined in section 158B(a) of the Act. In summation, the figures in the seized papers are not the undisclosed income as per the provisions of section 158B(b) of the Act. She has reasoned that the agreement copies filed for the Appropriate Authorities for want clearances evidences the full consideration of Rs. 53 lakhs, which tallies with that of the figures as per the seized agreement. Further, she has argued that the alleged short-term capital gains are already taxed in the regular assessments and the same cannot be taxed twice. 23. We have heard both the parties and perused the paper book filed by the revenue. Revenue has invoked the provisions of Chapter XIV-B in view of the seized documents dated 3-8-1998 and varying figures of Rs. 15 lakhs and 53 lakhs together with the cash receipts amounting to Rs. 25 lakhs in connection with the transfer of the capital asset. We have examined these materials i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... above provisions, the law is settled that there shall not be any additions unless the same is 'on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence'. Relevant jurisdictional judgments in this regard are those in the cases of CIT v. Vinod Dhanchand Ghodawat [2001] 247 ITR 448 (Mum.), CIT v. Dr. M.K.E. Memon [2000] 112 Taxman 96 and orders of the Bombay Tribunal in the cases of Ms. Aishwarya K. Rai v. Dy. CIT [2007] 104 ITD 166 (Bom.) (TM) and Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.) apart from many others. 26. We have examined the facts of the case in the light of the above scope. Considering the facts of (i) disclosure of the alleged transactions of Rs. 53 lakhs together with the 25 lakhs of cash under the regular provisions; and (ii) the figures of Rs. 53 lakhs as appeared in the seized agreement dated 3-8-1998, the assessee cannot be deemed that he would not have disclosed the amount of Rs. 53 lakhs and therefore, the said transaction is outside the scope of undisclosed income (b) mentioned above. As ....