TaxTMI 
TaxTMI 
2014 (7) TMI 638
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....ax (appeals) erred in confirming the action of the Assessing Officer in initiating proceedings under sec. 153C of the I.T. Act. The learned Commissioner of Incometax (appeals) ought to have seen that the initiation of proceedings under sec. 153C are not valid. 3. The learned Commissioner of Income-tax (appeals) erred in holding that capital gain arises on entering into the development agreement and ought to have held that the capital gain is taxable for the assessment year 2009-10 when the constructed area was received by the appellant herein and not for the year under consideration. 4. The learned Commissioner of Income-tax (appeals) ought to have seen that all the agreements entered into with the Developer would clearly indicate that the transaction is in the nature of a sale and not that of a development agreement. The learned Commissioner of Income-tax (appeals) ought to have seen that the appellant finally received only consideration in rupees and not in constructed area. 5. Without prejudice to the above submissions, the learned Commissioner of Income-tax (appeals) erred in confirming the action of the Assessing Offi....
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....iah, Directors of M/s. Shanta Sriram Infra and Constructions Pvt. Ltd. (for short SSICPL) on 25-3-2010. A survey u/s. 133A was also conducted in the office premises of SSICPL. During the said search, incriminating material/documents belonging to the assessee company were found and seized. Accordingly, a notice u/s. 153C was issued to the assessee company. In response, the assessee filed the return of income for the A.Y. 2007-08, declaring loss of Rs. 19,215/- from business. The assessee also filed the return of income for the A.Y. 2009-10 on 9-11-2011 itself, declaring long term capital loss of Rs. 39,79,148/- on sale of 6885 square yards (sqy) of land. 6. As regards the addition of Rs. 8,69,18,511/- towards long term capital gain in A.Y. 2007-08, in the course of search, various details regarding Chippendale Project were seized from the premises of Shri Narsaiah and Sri Lingaiah, besides SSICPL. A Development Agreement-cum GPA executed by the assessee in favour of SSICPL on 27-10-2006 was also found, whereby 6885 sqy of land had been given to them for Development with a sharing ratio of 50 : 50. M/s. SSICPL had constructed a project in the name and style of Chippendale. 7. In or....
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.... builtup area measuring 70947 sft x 1829 Rs. 12,97,62,978 Less: cost of construction @ Rs. 1000 per sft Rs. 7,09,47,000 STCG Rs. 5,88,15,978 10. In his statement dated 9-7-2010, Shri M. Narsaiah had stated that the assessee company has to pay the capital gains as the holder of the land. However, all the share of the assessee company had been already acquired by him and his associates, and he was also Managing Director thereof. Besides, no evidence could be produced to the effect that the shares were sold off by him later or that he had resigned as the Managing Director. Therefore, it was concluded that the entire management of the assessee company vested with him only. Besides, the consideration of Rs. 12,97,62,978/- to be paid to the assessee company was not paid by SSICPL, but shown as liability in the books of SSICPL, even though the agreement was executed. 11. During the course of assessment proceedings, Shri M. Narsaiah was again asked to explain as to why the capital gain should not be levied in the hands of the assessee company. However, no satisfactory explanation could be submitted by him. On the other hand, he in the statement dated 9-7-2010, had already ag....
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.... the assessment year 2007-08, that it a Development Agreement cum GPA had indeed been executed by the assessee in favour of SSICPL on 27.10.2006, whereby 6885 sq. yards of land had been given for development. The sharing ratio of 50 : 50 in respect of the built up area had also been specifically provided therein and the assessee was to initially get 88,520 sq. feet in lieu of the land foregone, out of the total built up area of 1,77,040 sft. The construction was subsequently completed by SSICPL and the Developer even bought back built up area of 70,947 sft from the assessee for Rs. 12,97,62,978/- in the year 2008-09. The CIT(A) observed that in the light of the decision of the Tribunal in the case of Dr. Maya Shenoy vs. ACIT (ITA No. 266/Hyd/2005 dated 24-10-2008), there was indeed a "transfer" as contemplated u/s. 2(47)(v) of the Act read with the provisions of sec. 53A of Transfer of Property Act, 1882. 15. The CIT(A) observed that the view taken by the Tribunal finds support from the view of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarakadas Kapadia vs. CIT (2003 INDLAW MUM 47, 501) and also by the Hon'ble Authority for Advance Ruling in the case of Jasb....
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....the developer from the land owners. Therefore, no infirmity can be said to exist in the computation of total consideration by adopting the figure of 88,520 sq. feet only. 18. The CIT(A) with regard to the further claim that the market value of the impugned land as on 1-4-1981 was about Rs. 1,000/- per sq. yard, observed that the Assessing Officer adopted the rate of Rs. 50/- per sqy merely on the basis of information received from SRO, Chikkadapalli. However, in a number of judicial pronouncements, it has been held that the guideline value or the Basic Valuation has been repeatedly found to be a poor substitute to the Fair Market Value, as it lays down only guidelines, fixing the minimum and does not even bind the Registering Authority. Reference in this regard can be made to the decisions of the Hon'ble Supreme Court in the case of Jawajee Naganatham vs. RDO, Adilabad, A.P. (1994) (4 SCC 595), Prakashvati vs. Chief Controlling Revenue Authority, UP (1996) (4 SCC 657) and State of Punjab vs. Mohabir Singh (1996) (1 SCC 609). Following the said judicial pronouncements, the Tribunal in the case of G. Vijaya and Others, have held that such value cannot be adopted as the Fair Mark....
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....ission, Fees to the Municipal Corporation etc is concerned, the CIT(A) observed that since the very existence of any construction or improvement of the impugned property has not been proved, the mere submission of a receipt regarding payment cannot be considered for the purpose of computation of long term capital gains. Therefore, no deduction on this account is also held to be allowable. In the light of the above discussion, the CIT(A) directed the Assessing Officer to recompute the Long Term Capital Gains arising in the assessment year 2007-08 after considering the Fair Market Value of the impugned land @ Rs. 500/- per square yard. The CIT(A) partly allowed the issue in favour of the assessee. 22. For A.Y. 2009-10, the CIT(A) observed that, as regards the computation of short term capital gains in the assessment year 2009-10 by the Assessing Officer, it is clear that in terms of the Development Agreement, the assessee was to get 88,580 sq. feet of the built up area in the Project. Since by way of a subsequent agreement, SSICPL bought back 70,947 sq. feet of the built up area in the assessment year 2009-10, the gain resulting from the transaction has been rightly brought to tax a....
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....e assessee and notice u/s. 153 was issued after recording satisfaction. He produced a copy of satisfaction note for both the assessment years which is similar in nature as follows: (1) "ORDER SHEET Name : Shetty Pharmaceuticals & Biological Ltd. Status : COM PAN : AAHCS8943A A.Y. 2004-05 to 2009-10 ------------------------------------------------------------------- A search and seizure operation u/s. 132 was carried out in the group case of Dr. T. Yadhaiah Goud and others on 25.3.2010. During the course of search operation documents belonging to SHETTY PHARMACEUTICALS & BIOLOGICAL LTD., has been seized. Hence it is considered to initiate proceeding u/s. 153C of the I.T. Act. Sd/- 6/4/11 As directed notice u/s. 153C put up." Sd/- 6/4/11 (2) "ORDER SHEET Name : Shetty Pharmaceuticals & Biological Ltd. Status : COM PAN : AAHCS8943A A.Y. 2009-10 ------------------------------------------------------------------- A search and seizure operation u/....
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....t day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-sect....
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....equisition is made under section 132A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed : [Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or one year from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:] [Provided further that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing [on or after the 1st day of April, 2004 but before the 1st day of April, 2010],- (i) the provisions of clause (a) or clause (b) of this subsection shall have effect as if for the words "two years" the words "twenty-one months" had been substituted; &....
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....and during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the period of limitation for making the assessment or reassessment in case of such other person shall, notwithstanding anything contained in clause (ii) of the second proviso, be the period of thirty-three months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twenty-one months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:] [Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A wa....
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....ce Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under sub-section (3) of section 245R; or (vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Commissioner under sub-section (7) of section 245R; or] [(vii) the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub-section (2) of section 153A till the date of the receipt of the order setting aside the order of such annulment, by the Commissioner; [or]] [(viii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less,] [or] ....
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....er person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:] [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the ass....
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....ion u/s. 153C of the Act always depends upon the action u/s. 153A of the Act upon some other person. The AO of such person in whose case search was conducted is satisfied that the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belong to some other person, he after forming the belief to that extent regarding the same shall hand over the relevant material to the concerned AO having jurisdiction over such other person. In other words, we say that before initiating proceedings u/s 153C, the AO who has initiated proceedings for completion of assessment u/s. 153A of the Act should be satisfied that there is no undisclosed income which has been traced out when a person was searched u/s. 132 of the Act or the books of account were requisitioned u/s. 132A of the Act. Thus, in contrast to the provisions of section 148 of the Act where recording a reason in writing are sine qua non. Under Section 153C the existence of cogent and demonstrative material is germane to the assessing officers' satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of ....
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....ngs are completed u/s. 153A of the Act of the searched person. 32. Thus, the condition precedent for issuing notice u/s. 153C and assessing or re-assessing income of such other person is that, the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned should belong to such other person. If the said requirement is not satisfied recourse cannot be made to the provisions of section 153C of the Act. Thus, the provisions contained u/s. 153C of the Act can only be invoked where there was satisfaction by the AO having jurisdiction over the person searched or requisitioned u/s. 132A during the course of assessment proceedings. Therefore, the proceedings u/s. 153A of the Act always precede the proceedings u/s. 153C of the Act and without recording satisfaction note by the AO initiating proceedings for completion of assessment u/s. 153A of the Act cannot be proceeded u/s. 153C of the Act in the case of such other person not searched. Same view was taken by the Supreme Court in the case of CIT vs. Calcutta Knitwears, Ludhiana in civil appeal Nos. 3958 of 2014 (SLP) (C) No. 10542 of 2011 dated 12th March, 2014. Further it was al....