TaxTMI 
TaxTMI 
2013 (10) TMI 1503
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....struction of residential apartments and houses apart from dealing in land, real estate and properties. Shri Dhanrajbhai Jethani is the Managing Director of the said company. The said company belongs to Rajani Builders group. The said group is also engaged in the business of construction and real estate. Shri Mansukhlal N Patel is one of the directors in M/s. Ambica Realities Pvt. Ltd. 3. Search and seizure operations u/s 132 of the Income-tax Act were carried out in Rajani Builders group of cases including the cases of M/s Ambica Realities Pvt. Ltd. and Shri Mansukhlal N Patel. It is stated in the assessment order of both the assessees that incriminating materials/documents were recovered from their premises on the basis of which profits from certain projects were worked out at Rs. 2,16,56,000/-. First block assessment was completed u/s 158BC in the case of M/s. Ambica Realities Pvt. Ltd. on 29.01.1998 by which total undisclosed income of the said company was assessed at Rs. 3,06,90,138/-, which, inter-alia, included, the aforesaid profits. First block assessment in the case of Shri Mansukhlal Patel was completed u/s 158BC on 29.12.1997 assessing his total undisclosed income at ....
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....zed during the course of the search has been discussed in detail in the said order. The order u/s 158BC dated 29.01.98 is taken as part of this order as an Annexure. Penalty Proceedings u/s 158BFA(2) are initiated separately for furnishing inaccurate particulars of income regarding the addition of Rs. 10,85,125/- and Rs. 2,16,56,000/- based on page 8 and page 10." 5. Pursuant to similar directions given by this Tribunal vide its order dated 20.06.2000 in the case of Shri Mansukhlal N Patel, a fresh order of block assessment was passed by the Assessing Officer u/s 158BC/254 on 31.03.2003 in the case of Shri Mansukhlal N Patel assessing his undisclosed income at Rs. 2,57,67,820/- including addition of Rs. 2,27,41,125/- (Rs.2,16,56,000 + Rs. 10,85,125) made by the Assessing Officer in his hands on substantive basis, with the following observations:- "The order has been approved by CIT-I Rajkot vide his DO No. CIT.R.I/HQ/158BC/MNP/2002-03 dated 31.03.2003 subject to the directions of the Addl. CIT. RR.1, Rajkot, contained in his letter No. Addl.CIT/RR.I/Scr.Asstt/2002-03 dated 31.03.2003. The contents of the letter of Addl. CIT.R.1, Rajkot of his letter dated 31.03.2003 hav....
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....his case, the same is forwarded to you for your kind approval'. In view of the directions of the CIT I, Rajkot and of Addl. CIT.R.I, Rajkot being of statutory and binding nature, the total profit therefore, comes to Rs. 2,16,56,000/- which is taxed on substantive basis as the relevant documents page No.8 & page No.10 were seized from the premises of the assessee. Accordingly the reliance on the paper is placed and the same is taxed in his hands. Similarly the profit as seen from page No.8 being derived by the assessee is Rs. 10,85,125/- substantive basis. The above profits are accordingly taxed in the hands of the assessee company on substantive basis. The Hon'ble Tribunal had directed that the appeal of both the assessee and that of Ambica Realities Pvt. Ltd. will be taken up together. The facts regarding the case have also been discussed in detail in the block assessment order of Ambica Realities Pvt. Ltd (as regards search conducted on 24.12.96) dated 31.03.2003." (*) It seems to be a typographical error. The correct figure is 6.25% 6. It is quite apparent on perusal of the block assessment orders passed by the Assessing Officer u/s 158BC/254 in bot....
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....mentioned here below:- (i) The assessment order in appeal is bad in law. (ii) The assessment not having been made is accordance with the directions of the Honourable Income Tax Appellate Tribunal is rendered a nullity. (iii) The assessment order is in violation of the principles of natural justice and is bad on this count too. (iv) The Assessing Officer has erred on facts and in law in making an addition of Rs. 9,15,000/- on account of alleged unexplained capital investment by the appellant. (v) The Assessing Officer has erred on facts and in law in making an addition of Rs. 2,25,000/- on account of alleged unexplained capital. (vi) The Assessing Officer has erred on facts and in law in making an addition of Rs. 3,20,000/- being the alleged profit. (vii) The Assessing Officer has erred on facts and in law in making an addition of Rs. 5,57,000/- on account of alleged profit. (viii) The Assessing Officer has erred on facts and in law in making an addition of Rs. 54,000/- on account of alleged profit. (ix) The Assessing Officer has erred on facts and in law in making an addition of Rs. 2,16,56,000/-....
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....td. The said addition on protective basis in the hands of Ambica Realities Pvt Ltd has also been deleted summarily. 7. Thus, a mistake has crept in the order of Hon'ble Income Tax Appellate Tribunal in IT(SS)A No.24/Rjt/2003 in so far not deciding the fate of the remaining part of profit @ 93.75% of Rs. 2,16,56,000/- as to whether the same has to be brought to the tax net and if yes, in whose hands; on substantive basis. PRAYER In view of the above, it is kindly requested to please rectify the order dated 29.07.2011 by clarifying the position of taxing the remaining part of profit @ 93.75% of Rs. 2,16,56,000/-." 7. The case of Shri Mansukhlal N Patel was represented by Shri Vimal Desai, Chartered Accountant, before us. He filed a copy of the order passed by the Hon'ble High Court on 18.03.2013 in CIT v. Shri Mansukhlal N Patel, Tax Appeal No.41 of 2012. He submitted that the order passed by this Tribunal on 29.07.2011 was challenged by the Revenue before the Hon'ble High Court. The appeal filed by the Revenue was dismissed by the Hon'ble High Court by its order dated 18.03.2013. He contended that the order passed by this Tribunal on 29.07.2011 stood merged with the afor....
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....eholder cannot have share in the profits of a company unless such profits are available with the company. In the matter before us, it has been held not only by this Tribunal but also by the Hon'ble High Court that Shri Mansukhlal N Patel has 6.25% share in the profits of M/s Ambica Realities Pvt. Ltd. Such profits have been determined at Rs. 2,16,56,000/- out of which 6.25% (i.e., Rs. 13,50,500/-) has been allocated to Shri Mansukhlal N Patel and accordingly taxed in his hands. The issue that arises for consideration is whether the allocation of the aforesaid share (6.25%) of profits in M/s Ambica Realities Pvt. Ltd. in the hands of Shri Mansukhlal N Patel requires corresponding addition in the hands of M/s Ambica Realities Pvt. Ltd. It cannot be a matter of debate that allocation of profits of a company to a shareholder necessarily entails corresponding availability of profits in the hands of the company. Nothing can be distributed or allocated out of vacuum. Two orders out of which one seeks to tax share of profits in a company in the hands of a shareholder and the other which seeks to delete such profits in the hands of the company cannot stand together. Such orders would be com....
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....t Tribunal slashed down profit to Rs. 13.53 lakhs. 5. In the result, no question of law arises. Tax Appeal is dismissed. 6. Before closing we may record that we have admitted Tax Appeal No.42/2012 which pertains to the remaining additions being made in hands of the company. Nothing stated in this order would come in way of either side in pursuing such appeal on all contentions." 13. It is thus evident that the view of this Tribunal that the share of Shri Mansukhlal N Patel in the profit amounting to Rs. 2,16,56,000/- is 6.25% has also been confirmed by the Hon'ble High Court and it is on this basis that the Hon'ble High Court has confirmed the order of this Tribunal deleting the remaining addition made by the AO in the hands of Shri Mansukhlal N Patel. Since the share of Shri Mansukhlal N Patel has already been quantified at Rs. 13,53,500/-, being 6.25% of his share in the aforesaid profits of M/s Ambica Realities Pvt. Ltd., the entire profit of Rs. 2,16,56,000/- would need to be assessed in the hands of M/s Ambica Realities Pvt. Ltd. It is only then that share in the said profits of M/s Ambica Realities Pvt. Ltd. would be available for allocation to and assess....