TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 704
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....ppeal 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 the assessees were seized. On scrutiny thereof, it w....
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....p; 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 the block period (upto to date of search), as indicated in the above table, under Section 158 BB(c) of the Act. Against the order of the Assessing Officer, the assessee preferred an appeal before the CIT (A). Against the order of the CI....
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....me 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 Act will have to be treated as undisclosed income since such return, as observed by the Supreme Court in Assistant Commissioner, Chennai vs. A.R. Enterprise [2013] 29 taxmann.com 50 (SC) is invalid income. In other words, he submitted that unless the inc....
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.... 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 undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or....
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....ged 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; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period." 14.1. From plain reading of the explanation, it is clear that block assessment is not intended to be substitute for regular assessment. Its scop....
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.... 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: "18. The genesis of the issue before us lies within the folds of this section. Sections 158BD and 158BC, along with the rest of Chapter XIV-B, find application only in the event of discovery of "undisclosed income" of an assessee. Undisclosed income is defined by Section 158B as that income "which ....
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....d 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 158BB and other relevant provisions, referred to above, of the Act show that the income unearthed 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 evide....
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....me 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 search, which has not been unearthed during the search, whether such income could be treated as undisclosed income of the block period. 22. In the present case, search under Section 132 of the Act was conducted on 29-5-2001. The block period is 1-4-1991 to 29-05-2001. During the block period undisclosed income was computed....
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....e 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 particularly, in view of the fact that the agricultural income from the very same agriculture lands for the assessment year 1995-96 was accepted by the Assessing Officer. Hence we confirm the findings of fact recorded by the appellate authority and the Tribunal. The question, in our opinion, does not arise in the appeals. 25. The t....
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....sessing 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 material A 3/HMC/14 an agreement to sale of undivided right and interest in respect of land at No.28, Davis Road, Bangalore was found. On enquiry, it is found that the long term capital gains shown against property at No.27, Davis Road, Bangalore, is a typographical error and actually it relates to property at No.28, Davis Road, Bangalore. Since the agreement to sale speaks of undivided right and i....
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....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 brought to the notice of the assessee, the assessee filed a copy of the sale deed in respect of one customer by name Smt. Sarala Bai and argued that what was sold was the property which includes land and building and therefore, section 54 is applicable". 25.3. There cannot be any dispute that for seeking exemption under Section 54 of the Act, the asset sold should be a residential house and for attracting the pro....
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....de 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 our opinion, exclude a house shared with any other person. Even if the residential house is shared by an assessee, his right and ownership in the house, to whatever extent, is exclusive and nobody can take away his right in the house without due process of law. In other words, co-owner is the owner of a house in which he has share and that his right, title and interest is exclusive to the extent of his share and that....
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.... 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 price, at the relevant time, in the light of the fact that the property was in litigation, and then fix the liability. In the circumstances, the matter insofar as this question is concerned, is remanded to the Tribunal for fresh consideration in the light of the above observations. 28. The fifth substantial question of law is whether the Tribunal was justified in holding that the amounts standing to the credit of G. ....