TaxTMI 
TaxTMI 
2014 (5) TMI 704
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....A No.235/ACIT-cc-2(3)/CIT(a)-VI/03- 04. The appeal before the CIT(A) was preferred against the assessment order dated 29th May 2003 passed by the Asst. Commissioner of Income Tax, Central Range-2(3), Bangalore (for short the "Assessing Officer") pertaining to block period from 1st April 1991 to 29th May 2001. 1.2. Since these appeals entail common substantial questions of law, as is evident from the orders passed by the Tribunal and the authorities below and that the fact situation and the parties are common, they are disposed of by common judgment. 2. The assessees namely, M.J. Siwani and H.J. Siwani are the partners of M/s. H.M. Constructions, which, at the relevant time, was engaged in the business of development, and were also real estate agents. Their source of income was from interest on capital, salary from firm, rental income and income from other sources. 3. On 29th May, 2001, a search operation under Section 132 of the Act was carried out at the residential premises of both the assessees and their business premises viz., M/s. H.M. Constructions. In the course of search, certain books/documents pertaining to t....
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.... 2,50,940 1996-1997 Regular Income 4,21,970 Agricultural Income 3,50,000 7,71,970 1997-1998 LTCG 90,13,204 Agricultural Income 3,50,000 93,63,204 1998-1999 Income returned 48,548 Crystal Springs Project 46,31,987 Agricultural Income 6,00,000 Credits in the name of Shri G.Anand 10,00,000 62,80,445 1999-2000 Loss 6,24,092 Agricultural Income 6,50,000 Forfeiture amount 16,50,000 16,75,908 2000-2001 Loss 4,43,106 Unexplained credits 21,50,000 Agricultural Income 6,50,000 23,56,894 Undisclosed Income 2,06,99,361 Tax @ 60% 1,24,19,616 Surcharge @ 2% 2,48,392 TOTAL 1,26,68,008 ADD: Interest U/s 158BBFA 12,66,800 TOTAL PAYABLE 1,39,34,808 The Assessing Officer computed undisclosed income of t....
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....od? VI. Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the sum of Rs.50,000/- NSE discovered during the course of search cannot be treated as the undisclosed income of the assessee in the block period as the same is not claimed as deduction? 7. The first two substantial questions of law arise in ITA Nos.218 and 219 of 2007 while the remaining four are raised in ITA Nos.216 and 217 of 2007. Since the facts and circumstances against which the impugned orders have been passed are similar, while dealing with the substantial questions of law which are common in all these appeals, we have recorded reasons covering both the assessees. In other words, facts of the case and heads of the income in respect of both the assessees are common, the reasons recorded are also common, covering the case of both the assessees. 8. We would now like to proceed to consider the first substantial question of law as raised by the revenue. 8.1. Mr. Aravind, learned counsel for the revenue at the outset submitted that the income disclosed in a return filed after the due date as prescribed under Section 139(1) of the....
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....nserted for the assessment of undisclosed income determined as a result of search carried out under Section 132 of the Act. 10. From bare perusal of Chapter XIV-B, it is clear that the condition precedent for invoking a block assessment is a search conducted under Section 132 of the Act. The Supreme Court in Assistant Commissioner vs. Hotel Blue Moon, [2010] 188 Taxman 113, while explaining the purport of Chapter XIV-B of the Act, has observed that a search is the sine quo non for the block assessment. It would be relevant to reproduce the observations made by the supreme court in paragraph 12 thereof. The relevant observations in the paragraph read thus: "12. Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XIVB is intended to provide a mode of assessment of undisc....
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.... Section 158BA empowers the Assessing Officer to assess the undisclosed income in accordance with the provisions of this Chapter, after the search under Section 132 of the Act. It further provides that the total undisclosed income relating to the block period shall be charged to tax, at the rate specified in Section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. 14. Explanation appended to Section 158BA is also relevant for our purpose, which reads thus: "Explanation.-For the removal of doubts, it is hereby declared that- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; ....
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....p; (ii) xxx xxx xxx (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, subsections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be apply;" 17. Section 158BD deals with undisclosed income of any other person, other than the person with respect to whom a search was made under Section 132 of the Act. 18. Section 158BD and 158BC, along with the other provisions in Chapter XIV-B, would apply only in the event of discovery of 'undisclosed income' of an assessee and that 'undisclosed income' signifies income not stated in the return filed. Recently, the Supreme Court in A.R. Enterprise (supra), had an occasion to deal with Chapter XIV-B in the Act, in particular, the provisions contained in Section 158B, 158BA, 158BB, 158BC, 158BD along with other provisions in this Chapter and the Act. The following observations made by the Supreme Court in paragraphs 18 and 26 are relevant, which read thus: &nbs....
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....the total income in a valid return under Section 139, subject to assessment and chargeable to tax under the provisions of the Act. It is important to bear in mind that total income is distinct from the estimated income, upon the basis of which, Advance Tax is paid by an assessee. Advance Tax is based on estimated income, and hence, it cannot result in the disclosure of the total income assessable and chargeable to tax." (emphasis supplied) 19. Under Sub-section (1) of Section 139, return of income should be filed on or before 31st of July and if it is so filed, the income disclosed therein, in any case cannot be treated as undisclosed income. Sub-section(4) of Section 139 provides for further period to file return, if not filed before 31st of July. From plain reading of these provisions, in our opinion, the last date for filing return under Section 139 of the Act, would be the period prescribed under sub-sections (1) and (4) thereof and if the return is filed within the time prescribed under this provision, it would be valid return. 20. Thus, the harmonious reading of the expression "undisclosed income" under Section 158B(b), the explanation appended to Section 158BA, Section....
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.... searched requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice. A return in the prescribed form need to be filed and then verified in the same manner as a return under clause (1) of sub-section (1) of Section 142 setting forth his total income including undisclosed income for the block period. The assessment for the block period can be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the Assessing Officer. The assessment made under this Chapter is in addition to the regular assessment in respect of each previous year included in the block period. Similarly, the total of undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. The income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. We make it clear, that we are not dealing with a situation, since it did not fall for our consideration, where the assessee discloses certain income in the return after se....
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....tion of law is concerned. 24. The second substantial question of law pertains to agricultural income declared by the assessee. The Assessing Officer brought the income of Rs.3,50,000/- for the assessment year 1996-97 to tax as non-agricultural income. The assessee had credited Rs.3,50,000/- as agricultural income and since he could not and did not maintain any books of account in respect thereof and that he was mainly involved in the business of real estate, and sale and purchase of lands, the Assessing Officer expressed doubt about genuineness of this income from agriculture and having so observed did not accept the said claim and brought it to tax. As against this, the Appellate Authority deleted the said addition as undisclosed income for the block period. It appears from the record and so also the orders passed by the Appellate Authority and the Tribunal that the agricultural income for 1995-96 was accepted by the Assessing Officer. Further, the income of Rs.3,50,000/- for the Assessment Year 1996-97, was deleted being undisclosed income for the block period. We do not find any reason to interfere with the orders passed by the Appellate Authority and the Tribunal, more parti....
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....purchase 50% of undivided right and interest of property at No.15/1 Binny Crescent Road, Benson Town, Bangalore from his brother Shri H J Siwani for a consideration of Rs.8,50,000/- and spent towards construction on the above property an amount of Rs.70,50,000/-. The total amount reinvested being Rs.79,00,0000/- claimed as exemption". 25.2. In this backdrop, the observations made by the Assessing Officer in the order are relevant for our purpose which read thus: "The assessee has out of the total investments, considered as investment of Rs.17,12,518/- towards long-term capital gains eligible for relief u/s. 54 and the balance of Rs.69,89,886/- as eligible for relief u/s.54F. Beyond this, no documentary evidences are filed along with the Return of Income to support the claims for relief u/s 54 & 54F. For the applicability of section 54, the asset sold should be a residential house and for the applicability of section 54F, the assessee should no be in possession of a residential house on the date on which the transaction resulting in long-term capital gains took place. During the course of search, in seized mate....
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....etween Shri Joseph Gerard Jude Rigo with H.M. Constructions to construct a Flat bearing apartment no.01 in the ground floor. These documents furnish the following information. (a) M/s. H.M. Constructions being the developer, formulated a scheme for development of the property and persons interested in owning apartment could purchase undivided share in the property. (b) The developer shall construct a multistoried building and the persons buying the undivided right and interest in the property shall get a flat constructed from the developer. (c) The undivided interest in the land as confirmed in schedule B, page 27 of the seized material shall be purchased from Shri H.J. Siwani & Shri M.J. Siwani. In view of the above facts, it is clear that what was being sold was undivided right and interest in the land at 28, Davis Road, and the assessee was not eligible for claiming relief u/s.54 in respect of the property. When this was brough....
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....tial house' means complete residential house and would not include shared interest in a residential house. In other words, where the properties are owned by more than one person it cannot be said that any one of them is the owner of the property. Such property, as observed by the Tribunal, continued to be of co-owners and that such joint ownership is different from absolute ownership. Such interpretation is made by the Tribunal in the light of the language employed in Section 54F of the Act, wherein, the expression 'a residential house' is used. The Tribunal also placed reliance upon the judgment of the Supreme Court to take such view in Seth Banarsi Dass Gupta vs. C.I.T., (1987) 166 ITR 783. In this case, the Supreme Court observed that a fractional ownership was not sufficient for claiming even fractional depreciation under Section 32 of the Act with effect from 1-4-1997 by using the expression 'owned wholly or partly'. 26. Section 54F provides that if the assessee has a residential house he cannot seek the benefit of long term capital gain. Under this provision, merely because, the words residential house are preceded by article 'a' would not, in o....
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....al Springs Project) at Rs.92,63,795/- by taking the difference between the sale price of the sites sold and cost of such sites and since the assessee was having only 50% share therein, apportionment of the income was made at 50% each i.e. Rs.46,31,897/- in the hands of assessee. This view of the authorities below was not accepted by the Tribunal, which remanded the matter observing that the amount received may include both capital as well as profit, if any. It was further observed that treating the entire amount as income would also not be correct and therefore, the matter was remanded to the Assessing Officer for fresh examination. Though the reasons recorded by the Tribunal, in our opinion, are not happily worded, we are also of the view the question as regards valuation of closing stock in respect of the land in litigation deserves to be considered afresh in the light of the settled position of law that the assessee, in such a situation, has a choice to value the stock at cost or market price whichever is lower. None of the authorities have considered this question in proper perspective. It was necessary to find out the value of the land at which it was purchased and the market ....
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....re the search. In other words, he did not file return of income for this assessment year within the time stipulated under Section 139(1) and (4) of the Act. He also failed to maintain books of account for the said assessment year and in this backdrop, the said amount of Rs.10,00,000/- has rightly been brought to tax. The Tribunal did not consider the materials on record in proper perspective and has simply by single sentence in the order set-aside the concurrent findings of fact recorded by the authorities below. The Tribunal observed that the amount standing to the credit of G. Anand was not claimed as expenses or deduction and, therefore, would fall outside undisclosed income. In our opinion, this observation/finding in view of the facts and circumstances of the case, recorded by the Tribunal, is perverse and deserve to be set-aside. Order accordingly. The fifth question, accordingly, is answered in favour of the revenue and against the assessee. 29. Insofar as the last substantial question of law is concerned, it appears that the assessee had not disclosed an investment of Rs.50,000/- towards purchase of NSC in his regular return which was explained by him stating that it was....