TaxTMI 
TaxTMI 
2014 (3) TMI 1001
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....nged the initiation of proceeding u/s 153C of the Income-Tax Act in absence of any incriminating material found at the time of search. 3. Briefly the facts relating to the issue in dispute are the assessee is an individual. On 09.01.2009 a search and seizure operation u/s 132 of the Act was conducted in case of one Sri Gadiraju Ramakrishnam Raju and M/s. Vaibhav Empire Pvt. Ltd., Visakhapatnam. As stated by the assessing officer in the assessment order, during the aforesaid search and seizure operation, certain incriminating documents relating to the assessee were found and seized, as a result of which, a notice u/s 153C of the Act was issued to the assessee on 20.09.2010 calling upon him to file his return of income for the assessment year under dispute as well as preceding assessment years starting from 2003-04. In response to the notice issued u/s 153C of the Act, the assessee filed his return of income on 21.10.2010 declaring total income of Rs. 51,15,783/- which included long term capital gain of Rs. 49,81,625/-. In course of the assessment proceedings, the assessing officer on going through the seized materials noted that the seized materials marked as Annexure- A/GRR/PO/1....
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....lue 04.01.1988 Y. Srinivasa Rao and others 490 sq.yards with a house of 832 of sq.ft. RCC roof at Vijayawada House Property Rs.1,84,900/- 12.01.1988 -do- 489 sq.yards Vacant Land Rs.1,22,500/- 4. These two properties were sold to M/s. Minerva Grand Hotels Pvt. Ltd. for a total consideration of Rs. 3 crores on 14.11.2007. He further noted that out of the sale consideration of the aforesaid properties, the assessee has purchased two assets through Possessory Sale Agreement-cum-GPA dated 22.12.2007 executed by Sri Datla Venkata Satyanarayana Raju and Shri Datla Gopi Krishnam Raju in favour of the assessee. The asset sold by above named persons are 959 Sq.yds. and 773 Sq.yds. (total 1732 Sqyds.) pertaining to the same survey number i.e. survey no.10/5A Part of Chinawaltair, Visakhapatnam with ACC shed in one part stated to have been jointly constructed by them for a sale consideration of Rs. 2,07,84,000/-. The assessing officer noted that though the two assets were sold through a single deed but the sellers Shri Datla Venkata Satyanarayana Raju and Shri Datla Gopi Krishnam Raju received the sale consideration separately amounting ....
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....other owners agreed to receive Rs. 21 crores as refundable advance in terms with the said agreement and in fact they have received Rs. 6 crores through cheques drawn on ING Vysya Bank Ltd., Visakhapatnam. From this, the assessing officer inferred that by entering into the development agreement, the assessee has intended to alienate the property for development purpose and he has no intention to construct a residential house property as intended by the Act. He therefore issued a show cause notice to the assessee proposing to disallow the claim of exemption u/s 54 of the Act. Though the assessee submitted a detailed explanation objecting to disallowance of exemption u/s 54 of the Act, the assessing officer however rejecting such explanation of the assessee disallowed the exemption claimed u/s 54 of the Act observing as under:- 1) The assessee contends that the original asset is a single unit though registered in two pieces which is not acceptable as the original properties were purchased on different dates for different sale considerations and the scheduled properties are as described in the sale deeds are one is house property and the other one is a vacant land. Hence, they....
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....n an area of 1000 sq. ft is not a residential house but only a temporary structure 4) In his submission made vide his letter dated 15.12.2010, the assessee contended that the agreement entered into with M/s. Vaibhav Gold Coast Pvt. Ltd., is not a transfer. He submitted that reinvestment was made for claiming deduction u/s.54 on 22.12.2007 in a house property and till date, I have not alienated/transferred the said property and by 22.12.2010, the said period of 3 years will be over. He submitted that the agreement with Vaibhav Gold Coast Pvt. Ltd., has not taken effect till date excepting the advances received from them by Shri Gadiraju Ramakrishnam Raju. I have neither received any advance nor have parted with any possession rights. For alienation of property, there must be a transfer within the meaning of Section 2(47). Mere intention to sell the property is not enough to deny exemption u/s.54. Since the agreement has not proceeded with further, mere intention does not preclude the assessee from claiming exemption u/s.54 or u/s.54F. The above contention of the assessee is not acceptable because after purchase of the new asset on 31.7.2008. within two days i.e., o....
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....sferred his rights over the property to the developer for construction of multi-storied commercial/residential complex on the new asset of the assessee and also the adjoing land belonging to others' who are party to the development agreement. Against the transfer the assessee family also received the advance of Rs. 6 crores from M/s. Vaibhav Gold Coast Private Limited which is a part of agreement and the money is still with the assessee till date. 5) The assessee in his submissions dated 15.12.2010 further contended that the Department in its letter pointed out that the assessee did not show income from house property in the returns of income for the earlier assessment years and the property should chargeable to tax under the head income from house property to claim exemption u/s.54 and drawn attention to the CBDT Circle No.538 dated 12.7.1989. As per the said circular, income of self-occupied residential house is chargeable under the head income from house property even though in certain circumstances such income may be computed at nil or at negative figure by virtue of Section 23(2) r.w.s.24. A person is therefore entitled to claim exemption u/s.54 even in respect of....
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....ri DVS Rau and Shri DGK Raju received their sale consideration separately amounting to Rs. 1,15,08,0007- and Rs,92,76,0007- respectively as seen from the sale deed through cheque No.692342 dated 25.11.2007 and Cheque No.692343 dated 25.11.2007 respectively). In the sale deed it was mentioned that the properties are contiguous forming a single block of the total extent of 1732 sq.yards. Subsequently, the vendors jointly got constructed a residential house and assessed to tax bearing D.No.2-48-7, Asst. No.3900071907. But, as seen from the House Tax pass book issued by the Municipal Corporation, Visakhapatnam, with Property Tax Asst.No.3900071907 from the year 2004 onwards, the property with ACC roof shed was only assessed to tax in the name of Shri D.V. Satyanarayana Raju. However, in the registered sale deed the sellers claimed to have jointly constructed a residential house and assessed to tax." 6. The Ld. A.R. submitted before us that the proceeding u/s 153C of the Act was initiated solely on the basis of the registered sale deed dated 14.11.2007 and a computation of income made by the assessee's father Sri Gadiraju Ramakrishnam Raju in case of the assessee and Smt. Bangaramma.....
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..... 8. In his rejoinder, the Ld. A.R. rebutting the contention of the departmental representatives submitted that the assessee has submitted his return of income within the time allowed under the statute. Hence, it cannot be presumed that the assessee would not have disclosed the capital gain from sale of the property. It was further contended by the Ld. A.R. that since provisions contained u/s 148 of the Act and 153C of the Act are mutually exclusive, where action can be initiated u/s 148 of the Act, the provisions of section 153C of the Act cannot be invoked. He therefore contended that the proceeding initiated u/s 153C of the Act is void. 9. We have heard the contentions of the parties and perused the orders of the revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions relied upon by the parties. It is apparent from the assessment order that the assessing officer has proceeded u/s 153C of the Act. However, we may observe that while dealing with assessee's ground on this issue in para-7 of his order extracted herein above, the CIT(A) has recorded a finding of fact that warrants were in the name of the assessee. Hence....
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....sfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A" 10. A plain reading of the aforesaid provision makes it clear that two conditions have to be satisfied for initiating proceedings under section 153C of the Act. Firstly, the AO must be satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Secondly, after being satisfied that it belongs to a person other than the persons to whom seized, he shall handover the seized material to the AO having jurisdiction over such other person and that AO shall proceed against such other person by issuing no....
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..../- from Sri K.Bangraju vide a cheque towards plot advance. Page No.32 also belongs to HNR Constructions which shows the disbursement schedule given by licensed engineer Sri K.Krishna Prasad. This pertains to HNR Constructions and it also has nothing to do with the assessee. The entire payment shown on the paper total-up to around Rs. 10 to Rs. 12 lakhs and there is nothing in this paper to show that this belongs to the assessee trust or has any connection with it. Page 61 contains certain calculations which do not suggest that it has anything to do with assessee trust. Page No. 64 is no doubt a letter signed by the Chairman and Managing Trustee of Sri Rama Educational Trust. The letter is a certificate issued to whom-so-ever it may concern, certifying that certain works of construction are entrusted to M/s.HNR construction, a proprietorship concern of Sri Tangi Hari Narayana. This though is on assessee's letter head is a general certificate which is issued to HNR Construction and there is nothing either incriminating in this document suggesting any unaccounted transactions. This certificate only says what is already declared in the books of accounts of assessee. In my opinion i....
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....article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A he shall proceed against "each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions in as much as under s. 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under s. 158BD if the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under s. 132 or whose books of account or other documents or assets were requisitioned under s. 132A, he shall proceed against such other person under s. 158BC. 13. Thus a condition precedent for issuing notice under s. 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the said requirement is not satisf....
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.... perusal of the assessment orders passed in those years would reveal the fact that the determination of income is on the basis of the impounded materials as a result of survey and not on the basis of any seized materials belonging to the assessee. In the aforesaid circumstances, the pre conditions for assuming jurisdiction under section 153C are not satisfied. So far as the decisions relied upon by ld D.R. in support of his contention, after carefully applying our mind to the ratio laid down therein, we observe that the decisions are distinguishable on facts and do not apply to the facts of the assessee's case. In that view of the matter, we do not find any infirmity in the order of the CIT(A) in holding the initiation of proceedings under section 153C to be ab initio void and consequently annulling the assessments for all the aforesaid assessment years. Accordingly, we uphold the same by dismissing the grounds taken by the department." 10. The ITAT Delhi Bench in case of V.K. Fiscal Services Pvt. Ltd. Vs. DCIT in ITA Nos.5460 to 5465/Del/2012 on a conspectus of decisions of different high courts as well as different benches of ITAT also expressed the view that in absence of inc....
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....e of exemption claimed u/s 54 of the Act. However, considering the fact that the parties were heard at length on the said issue, we think it proper to also record our finding in respect there to. The Ld. A.R. taking us through the relevant facts submitted that the assessing officer has denied exemption u/s 54 of the Act, basically on the following reasons: 1) Assessee has sold two properties (original assets) and purchased two separate properties i.e. (i) a land and another a land with house. 2) the so called house is actually a temporary structure, hence conditions of section 54 of the Act is not satisfied. 3) For claiming exemption u/s 54 of the Act the residential house must be either occupied by assessee or deriving income from house property. 4) The assessee has entered into a development agreement within 3 days of purchase of property which clearly shows the intention of the assessee is to commercially exploit the property and not to construction of a residential house. 13. Though, the CIT(A) agreed with the assessee that statutory provisions do not require that the house property sold should have been generating income in the past. However, the CIT(A) ultimate....
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....for development under development agreement, the Ld. A.R. submitted that though the final sale deed was executed during the relevant financial year but the assessee was given possession of the property on 22.12.2007 as per clause 7 of the said agreement. Therefore, the intention of the assessee that he has purchased the property for construction purposes is very much clear. It was further contended that even the development agreement also ultimately could not go through and had to be cancelled and was not acted upon. Therefore, the assessing officer was incorrect in observing that the assessee had no intention of constructing a house property on the land so as to entitle it to avail exemption u/s 54 of the Act. In support of such contention, the assessee relied upon a number of decisions which are as under: 1. V.A. Tharabai Vs. DCIT (2012) 14 ITR (Trib) 15 (Chennai) 2. ACIT Vs. Narendra Mohan Uniyal (2009) 34 SOT 152 (Del) 3. Subhash Chand Kapoor Vs. ITO (2010) 46 DTR (Agra) (Trib) 314 4. Ravindra K. Mariwala Vs. JCIT (2003) 81 TTJ (Mum) 589 15. The Ld. AR refuting the finding of the AO that assessee has purchased two separate properties (new assets), one a land and ....
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....arefully applied our mind to the decisions relied upon by the parties. On a perusal of the english version of the sale deeds of the original assets sold by the assesses, which describes the antecedents of the property sold, clearly indicates that the property in question is actually a single property initially purchased vide sale deed dated 28.6.1942 vide registered document no.2040/1942. The schedule of property at page 114 and 119 also makes it clear that the property in question is a single property though it has been sold under two separate documents. However, that by itself would not make it two separate properties. That besides the site plan of the property at page 10 of the paper book, which is part of the original sale deed, clearly shows that the property is a single property consisting of a structure facing the road and vacant land in the backyard. Therefore, it cannot be considered to be two separate properties as concluded by the assessing officer and also affirmed by the CIT(A). So far as the conclusion of the revenue authorities that it is only a temporary structure and cannot be considered as a residential house, we are not able to agree with the same. The materials ....
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....operty, being a land with building. In any case of the matter, we are of the view that, claim of exemption u/s 54 in the impugned assessment year cannot be denied considering the fact that the assessee has invested the capital gain in purchasing a property with an intention to construct a residential house. Therefore, before expiry of the period of three years as allowed u/s 54 for construction, the AO cannot deny such exemption to assessee. Therefore, considering the totality of facts and circumstances in the light of ratio decided in the decisions relied upon by the Ld. A.R., we are of the view that assessee will be entitled to exemption u/s 54 of the Act. 18. In the result, assessee's appeal is allowed. ITA No.361/Vizag/2013: 19. Ground nos.5 and 6 to 10 are identical to similar grounds raised in ITA No.360/Vizag/2013. Following our decision therein, we allow the grounds. In addition to the aforesaid grounds, Ld. A.R. in course of hearing raised one more issue by contending that while claiming exemption u/s 54 of the Act, the assessee had restricted the claim to one property purchased for Rs. 1,97,52,000/- on 31.7.2008 and did not make the claim in respect of investment....