TaxTMI 
TaxTMI 
2015 (5) TMI 929
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....of the Tribunal dated 17/10/2008 (in Revenue's appeal) & 12/11/2003 (in Assessee's appeals) in IT(ss)A No.314/Ahd/2002 and IT(ss)A Nos.320 & 321/Ahd/2002 respectively appeals before the Hon'ble Gujarat High Court registered at Tax Appeal Nos.214 of 2004, 215 of 2004 and 692 of 2009. The Hon'ble Juirisdictional Gujarat High Court was pleased to quash and set aside the orders and remitted the appeals before this Tribunal vide oral judgement dated 12/08/2014 for decision afresh in accordance with law. In respect of the appeals of the assessee, the Registry of this Tribunal reconstructed the file and fixed for hearing the appeals accordingly. However, in respect of the Revenue's appeal in IT(ss)A No.314/Ahd/2002, the original file was placed before this Tribunal. 3. In Revenue's appeal, i.e.(IT(ss)A No.314/Ahd/2012), the Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A), Ahmedabad has erred in reducing the undisclosed income worked out at Rs. 3,08,01,600/-, as per the seized materials and as admitted by the working partner of the assessee firm, Shri Sunil H. Desai, to Rs. 2,29,20,847/-. 2. O....
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....unds of Appeal. 3.2. Brief facts upto the stage of the ld.CIT(A) as recorded in the impugned appellate order in the case of M/s.Ohm Developers are reproduced hereunder:- "03. Brief facts of the case are that the appellant firm is engaged in the business of construction activities. A search under section 132 of the Act took place on 29.10.1999 at the business and residential premises of the appellant which was concluded on 03.11.1999. The appellant filed a return disclosing undisclosed income of Rs. 10,86,199/- on 17.02.2000 in response to notice under section 158 BC of the Act. The appellant constructed a residential complex namely Chandan Park, City Light Road, Surat during the period relevant to block assessment. The appellant received 'on money' of Rs. 5,39,63,889/- which was detected during the search through an independent and exclusive evidence. The receipt of 'on money' and income of Rs. 3,08,01,600/- was admitted by the working partner during a statement on oath under section 132(4) of the Act. However, the appellant retracted from the statement on oath and truth of the seized material while declaring undisclosed income of Rs. 10,86,199/- only through the block ret....
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.... over to the flat owners till the date of search in all cases. He submitted that on the basis of the seized material and the statement of the partner on the said seized paper, the undisclosed income was determined at Rs. 3,08,01,600/-. The ld.CIT-DR submitted that in earlier round of litigation, this Tribunal had held that in view of section 2(47) of the Act, effective transfer is taken place and the assessee has received the net profit of Rs. 2,29,20,849/-. He placed reliance on the assessment order. 4.1. On the contrary, ld.Sr.counsel for the assessee submitted that the controversy in all these appeals is with regard to the fact whether the sale consideration received by the assessee can be subjected to tax in the year under appeal and/or otherwise same is to be taxed as declared by the assessee on the basis of registration of the sale-deed. He submitted that there is no dispute with regard to the fact that the assessee has declared 'on money' more than the 'on money' declared during the course of search. He submitted that there is no dispute with regard to the fact that the assessee is engaged in the business of purchase of land and construction, therefore the flats are shown....
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.... and the balance of the sale price which it had received in Samvat year 2028 became the profit of the assessee. He submitted that in the case in hand the facts are identical, therefore in the light of the ratio laid down in the decision of the Coordinate Bench in ITA Nos.1852 & 1853/Ahd/2003 and in the judgement of Hon'ble Gujarat High Court in the case(s) of CIT vs. Ashaland Corporation(surpa) and CIT vs. Motilal C.Patel & Co.(supra), the ld.CIT(A) was not justified in taking the undisclosed income at Rs. 2,18,34,648/-. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue as under:- "10. I have carefully considered the submissions made by the appellant and also gone into the merits of addition on account of undisclosed income. The appellant has totally retracted from the statement recorded on oath during search regard the profit from construction business and taken an altogether different stand that income in the block return has been shown as per the actual sale of flats based on execution of sale deed. However, in the face of plethora of seize....
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....chase and sale of the land. The assessee has treated the flats as stock-in-trade and the advance received from the buyers as advances. It is also the contention of the assessee that the provision of section 2(47) of the Act would not be applicable in the case in hand. Reliance is placed on the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel passed in ITA Nos.1852 & 1853/Ahd/2003(supra), wherein the Hon'ble Bench has held as under:- "12. We have heard both the sides and perused material placed before us. We find that the issue under consideration is covered by the following the decisions of the jurisdictional High Court: i) CIT Vs. Motilal C. Patel & Co., 173 ITR 666 (Guj) in which the relevant observations of the Hon'ble Court is as under: "That after correctly appreciating the position in law and holding that the only right which the agreement for sale conferred was the right to obtain another document, namely, the sale deed, the Tribunal fell into an error in reaching the conclusion that the amount of Rs. 66,066 which the assessee had received in Samvat year 2027, represented its income earned in that year. The amount which the assessee....
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....nd not purely income. The explanation of the Id. AR in this regard has to be accepted which is also supported by the statement of Shri Ravi Khandelwal when read as a whole. Thus Rs. 10 crores as such cannot be income separately taxable taking it in isolation of expenditure incurred by the assessee against such receipt. Therefore, both 'on money' as well as expenditure/investment has to be separately accounted for/added to the declared receipts and declared expenditure/investment as per books to work out total income accrued to the assessee and total expenditure/investment incurred by it. 15. The next issue comes as to when the income out of such receipt would accrue to the assessee. In our considered view receipt of 'on money' is part and parcel of money received on sale of flats by cheque. The amount received by cheque before actually transferring the flats to the purchasers will be in the nature of advance and cannot be said to have accrued to the assessee. Assessee has incurred expenditure/investment in the project in various years but income to it will accrue only when flats are sold to the buyers. Advance money received by the assessee can never be his income. It wo....
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....f law has changed and capital gains would accrue on payment of full consideration and handing over of the possession. In Meccane Industries Ltd. vs. CIT (2002) 254 ITR 175 (Mad.) Hon. Madras High Court held that capital gain would accrue in the year in which sale deed was executed. Hon.Andhra Pradesh High Court in CIT vs. Nawab Mahmood Jung Bahadur (1988) 172 ITR 592 held that capital gain would arise on transfer of asset liable to be taxed for the year in which transfer took place. Hon.Gujart High Court in CIT vs. Mormasji Mancharji Vaid (2001) 250 ITR 542 (Guj) held that transfer of immovable property is effected on the date o execution of transfer deed and registration of transfer deed is effected from the date of execution. From these authorities it follows that there should be an immovable property in existence and transfer deed is executed which is later registered. Thus capital gain would accrue or arise only when transfer deed is executed. In the present case assessee is dealing in several immovable property i.e. flats and shops which he has constructed. A single flat is a capital asset for the purchaser but for the assessee all the flats together constitute stock-in-trade.....
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.... or recorded in the books of account will not change the character which has to be decided in the light of the purpose for which it is given. Further such receipt (on money in the present case) cannot be discussed from other part of receipt through banking channels as both are integral part of sale consideration. If the amount given by cheque carries the character as an advance against sale consideration then 'on money' in cash will also carry the same character. Both types of receipts i.e. receipt through cheques and receipt through cash as 'on money' will arise as income to the assessee as soon as transfer of immovable property is executed and not before, or possession thereof is handed over and for this it is necessary that such immovable property should be in existence. Therefore, we are of the considered that 'on money' received by the assessee did not have the character of income but was only an advance like the one received through cheque. Both will become part of the sale consideration to the assessee simultaneously on either handing over the possession of the flats or on execution of transfer deed whichever happens earlier. 18. Thus on the basis of above judgments we ho....
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....ts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel in ITA Nos.1852 & 1853/Ahd/2003(supra). The provisions of section 2(47) would not be applicable. The assessee has disclosed the 'on money' in the return of income in the year in which the sale-deed was executed. The Revenue has not rebutted this contention. Therefore, in the light of the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Motilal C.Patel and Co. reported at 173 ITR 666 (Guj.), such amount can be subjected to tax when sale-deed is actually executed. Since the Hon'ble Gujarat High Court has held that the amount would become for the assessment year in which the sale transaction is completed. In the case in hand, it is not disputed that saledeeds were executed in the year subsequent to the year under appeal. Therefore, in view of the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including 'on money' ....
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....ed receipt of on money at Rs. 5,39,63,889/- in a statement under section 132(4) of the Act. Shri Shantilal Patel, partner admitted profit of Rs. 2,29,20,847/- on the basis of Annexure BS-1/11. The figures contained in income expenditure statement reproduced in para 6 above cannot be imaginary and also the appellant cannot brush aside the same by calling it a solitary paper prepared by the partner for some other purpose. The judicial pronouncement relied upon by the appellant are not helpful because i) these are not delivered in the case of block assessment, (ii) the appellant has been found in possession of 'on money' as evidenced by seized material which was not there in both the judgements and (iii) it is a case of glare tax evasion when the appellant is caught with the supporting evidence and it is not the case of applying definition of 'transaction' and (iv) the appellant has admitted certain income under section 132(4) of the Act. However, looking to the objections raised by the appellant that cost of construction worked out by the partner was not Rs. 500/- per sq.ft. But Rs. 450/- per sq.ft. And the Assessing Officer adopted Rs. 3,08,01,600/- instead of Rs. 2,08,65,000/-. The....