TaxTMI 
TaxTMI 
2021 (5) TMI 1001
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....In view of the above, we proceed to decide the appeal in the case of Smt. Abha Bansal as under: ITA. No. 383/Del./2021-Smt. Abha Bansal-A.Y. 2017-2018. 3. Briefly the facts of the case are that a search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted at the premises of M3M group on 21.07.2016. The group is controlled by two brothers, namely Sh. Roop Kumar and Sh. Basant Bansal. The Bansal family, their close relatives and associates are involved in the affairs of M3M group of companies. Sh. Pankaj Bansal is son of Sh. Basant Bansal and Smt. Abha Bansal is wife of Sh. Basant Bansal. Two main companies of the group, inter-alia, are M/s. M3M India Holding Pvt. Ltd. ('MIHPL') and M/s. M3M India Pvt. Ltd. ('MIPL'). Sh. Roop Kumar and Sh. Pankaj Bansal are Directors of MIHPL and hold 50% shares each in the company. Sh. Roop Kumar and Sh. Pankaj Bansal are Directors of MIPL. MIHPL holds 93% shares of MIPL and the balance is held by various key management personnel ('KMP') of the group. Sh. Roop Kumar, Sh. Basant Bansal, Sh. Pankaj Bansal and Smt. Abha Bansal are, inter-alia, key management personnel and their relatives.....
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....d other expenses. The amount was allegedly paid as compensation to four KMPs of MIPL and their family members namely Sh. Basant Bansal, Sh. Roop Kumar, Sh. Pankaj Bansal & Smt. Abha Bansal, who had booked four villas in one of its projects, namely M3M Golf Estate at Gurgaon for consideration of Rs. 541.51 crore (Rs. 161.59 crore from Sh. Basant Bansal, Rs. 161.59 crore from Sh. Roop Kumar, Rs. 118.43 crore from Sh. Pankaj Bansal and Rs. 118.43 crore from Smt. Abha Bansal) in FY 2009-10. The compensation was claimed to have been paid as per the Award dated 16.03.2017 granted by the Sole Arbitrator Hon'ble Justice Manmohan Singh Liberhan (Retd.) in the arbitration matter between the KMPs and MIPL. 3. From perusal of records, it is noted that the four KMPs of M3M group had earned substantial capital gains on account of sale of 10,000 shares of M/s. Dignity Buildcon Pvt. Ltd. (3000 shares each by Sh. Roop Kumar and Sh. Basant Bansal and 2000 shares each by Sh. Pankaj Bansal and Smt. Abha Bansal) on 14.10.2009 during the F.Y. 2009-10. These shares were acquired by the KMPs in November, 2007. Out of the consideration received an amount of Rs. 541 crore was invested by ....
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....s further revised w.e.f. 01.04.2015 and the revised rate also varied between Rs. 2,600 to Rs. 5,000 per sq.ft. The present circle rate in the area is also Rs. 5,500/- per sq.ft. It clearly demonstrates that the villas were booked at artificial high circle rates with the purpose to claim the deduction u/s. 54F of the Act and not to pay the tax in respect of the long-term capital gains which accrued to the KMPs on account of sale of shares. d. Further, the booking rates of M3M Golf Estate project were called for during the course of the proceedings in the case of MIPL for the purpose of working of POCM. The same is tabulated as under- Also, in the earlier search conducted on this group on 30.06.2011, certain incriminating documents indicating the rates of the project were seized as Page No. 4/ Annexure - A3/Party No. 4 (page No. 95 of annexure). The content of the document is reproduced as under for reference- Following units are available for resale as per the info collected from brokers. In lot of cases the specific unit number is not being disclosed as the broker is insisting on a face-to-face meeting for discussing the same. &....
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....herein a status quo order was passed with regard to land upon which the villas were allegedly being developed. Therefore, the KMPs were not entitled to claim any compensation as per the terms and conditions of the Buyer's Agreement dated 30.03.2010. This aspect has apparently not been considered and discussed in the arbitration award as the transaction is between interested parties which is not at arm's length. 4. From perusal of the records, it could not be ascertained whether the location of villas was subsequently changed after holding a meeting of the directors and recording its minutes. It is also not known whether these four villas were proposed to be constructed on any disputed portion of the land. It is also not known whether any building/ tower etc. has been constructed on the initially allotted/changed location of the proposed four villas. 5. A survey under section 133A of the Act was conducted in the case of M3M group on 15.10.2012 to verify genuineness of the exemption claimed u/s. 54F of the Act. During the course of survey and subsequently, the following statements, inter-alia, were recorded:- a. Statement of Sh. Ho....
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....imated cost of construction of each villa at the time of valuation varied between Rs. 1.57 crore to Rs. 1.69 crore and the total estimated cost of construction was assessed by the valuer at Rs. 6.49 crore. 5.5 On verification of the level of construction as on date of survey at the alleged new location it was found that it was a partly constructed concrete structure which was nowhere near the completion stage. The layout of the structure at the new place was also different. No separate or modified Buyer's Agreement was entered into by MIPL and Manglam with the KMPs for change in location. On verification, it was found that nominal investment of Rs. 6.49 crore in construction was made against huge amount of Rs. 541crore received as consideration for purchase of the villas. The videography and photography of these structures were also done during the course of survey proceedings. The structure had no correlation with the original layout plan of the villa. It was also difficult to know whether the structure being constructed was that of villas or four residential/ commercial towers. It was also found that these four towers which were claimed to be the villas had a c....
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..... 5.7.2 Sh. Duli Chand could not produce or submit copy of the agreement for sale/purchase of the land and the proof of giving advance of Rs. 6 lakhs to the seller. Moreover, Sh. Dulichand had never approached any other authority like jurisdictional Tehsildar, Deputy Commissioner or the police of the area so as to put forward his grievances regarding the construction by the builder company on the land which he had agreed to purchase from the seller. 5.7.3 Sh. Duli Chand is agriculturist and did not file return of income. Moreover, from 2005 till August 2012, no efforts were made by him to know the status of the sale/purchase deal of the land. No rational explanation could be forwarded by him for delay of seven years. The period of almost seven years is too long a period to mature a sale/purchase deal of a land. It appears to be an afterthought and managed. 5.7.4 In view of the above, it appears that the stay from the Civil Court, Gurgaon to stop the construction was managed with an apparent motive to show that there existed reasonable circumstances because of which the construction of the four villas was stopped. However, it is important....
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....spite the aforementioned developments the KMPs never asked for refund of the amounts paid by them to MIPL for purchase of the four villas. 5.11 It is also strange to note that the land in respect of which the status quo order was claimed to be passed is situated in the area where MIPL has launched and is constructing its biggest project M3M Golf Estate. Further, the claim of the assessee that due to the injunction order the project could not be started is not correct. On perusal of computation of revenue recognised on the basis of PoCM for various AYs it is seen that the project M3M Golf Estate is in full swing and MIPL has worked out profit on booking and sale of units in this project and offered the same for taxation in A.Y. 2017-18. A chart of booking and cancellation of units in the project M3M Golf Estate extracted from the submission furnished is as under: The working given by the assessee company in respect of project M3M Golf Estate can be reproduced as under: It may be noted that total cost incurred in respect of the project M3M Golf Estate is Rs. 1506 crore and total value of area sold is only Rs. 2176 crore whereas four villas sold ....
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....dge, Gurugram wherein a status quo order was passed with regard to land upon which the villas were being developed. Therefore, the KMPs were not entitled to claim any compensation as per the terms and conditions of the Buyer's Agreement dated 30.03.2010. This aspect has apparently not been considered and discussed in the arbitration award as the transaction is between associated concerns which is not at the arm's length. 6.4 From perusal of the minutes of the meeting of the Board of Directors of MIPL it may be noted that the subject of payment of commission was raised and deliberated in the meeting of the Board of Directors of the company wherein it was agreed to refer the matter for arbitration to pay compensation and decide the quantum of compensation. However, the conditions of the Builder Buyer Agreement dated 30.03.2010 referred to supra was nowhere discussed in the said meeting. From perusal of the copy of the plaint filed before the Sole Arbitrator and it may be noted that in the plaint filed before the Sole Arbitrator clause 54 of Builder-Buyer Agreement was reproduced (para 14 /page 9 of plaint). However, the conditions of the agreemen....
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....However, it is noted that the entire compensation paid to KMPs has been directly debited to the profit and loss account under the head other expenses as indirect expenses. It may be noted that compensation paid to other customers on buy back of the units have not been claimed as other/indirect expenses in the profit and loss account and debited as part of the project cost. 7.1 MIPL has satisfied the conditions of Accounting Guidelines, 2012 (Revised) issued by the ICAI for recognition of revenue under the PoCM in respect of the project M3M Golf Estate in FY 2015-16 relevant to AY 2016-17. However, no profit was offered in this year for taxation. In the FY 2016-17 relevant to AY 2017-18, in which the amount of consideration of Rs. 541.51 crore for booking of villas was claimed to be refunded and compensation of Rs. 441.84 crore paid to the KMPs, MIPL has itself recognised the revenue in respect of the project M3M Golf Estate under the PoCM. It is also strange to note that no actual payment of consideration as well as compensation was made to the KMPs and these amounts are still shown in the balance sheet of the MIPL as advances received from them. It only shows that t....
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....ponsibilities were as under:- i) To maintain books of account in the Oracle System. ii) To generate MIS for cash flow purposes, sales control, construction cost and projected profitability. iii) To manage various auditors and get books of accounts audited. iv) Filing of tax returns and to represent company before tax authorities. v) To deal with merger and financial transactions. 8.1 During the search, various documents were found in the computer of Sh. Gaurav Jain at his residence which were in form of power point presentations, briefs for opinion, email exchanges etc. Perusal of these documents clearly indicate that the entire scheme was designed in connivance between the company MIPL and its KMPs with the sole intention to evade the taxes. The details of these documents which are enclosed as Annexure- (page No. 1 to 82) are as under:- 8.2 The document at Sr. No. 5 in the above table is an e-mail sent on 30.11.2011 by Mr. M.P. Varshney to Mr. Basant Bansal, Roop Bansal, Pankaj Bansal, Mr. Gaurav Jain and Suresh Chawla. This email indicates various options and planning explored....
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....11 which is mentioned in the email. The relevant para 5 of this draft petition is as under- That one Sri Dull Chand, son of Sri Ramphal, who claimed to have entered into an agreement in respect of the land on which the residential property was under construction, moved the Court of the Civil Judge, Senior Division, Gurgaon in a suit for permanent injunction against the seller of the land and the Hon'ble Court on 05.09.2012, directed both the parties to the dispute to maintain status quo qua construction over the suit property. It is also interesting to read the Option 4 and 6 of email dated 27.09.2013 (S. No. 7) which is reproduced as under: "-----------Option -4: Postpone Tax liability indefinitely till stay is operative. If the decision to postpone liability of capital gains by not paying by way of advance tax or with the return to be filed under section 153A is taken, necessary stay/injunction from court/ statutory authority will have to be secured and order from CBDT will have to obtained under section 119(2)(b) on the ground of 'genuine hardship' for the period the stay is operative. However, the liability....
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....------------------------------------------------------------------------------------ Option-6: Completing part of each flat in K tower as Villas The promoters may request the company to switch the allotment of their villas to K Tower which has four vertical villas adjacent to each other in the same complex with four separate lifts comprising of six storeys with a total area of 32,000 sq.ft. This complex is under construction and the structure is ready. Necessary modifications to increase area and nature of construction for independent villa can be carried out. Once issues relating to switch over are attended, and stay is granted by a court of law or any authority, there could be a case for claiming refund of investment by the promoters from the investee company. After the amount is refunded by the company, the deduction claimed can be surrendered by promoters by getting the refunded amount taxed in the relevant A.Y. of its receipt (i.e. A.Y. 2013-14) on the strength of the case of Ranjit Narang V. CIT (Supra) by showing it in the return of income. Though tax will have to be paid by the individual promoters, this will reduce corresponding....
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....er investors. The transfer pricing may be covered under the CUP method or any other method as described in section 92C of the Act and for the same it was decided to place reliance on information documented and available with the company M Ltd., inter-alia, compensation claims paid to other investors or customers, assured returns provided under various schemes and projects to customers and escalation in market rate of project from date of investment to date of paying compensation. vi) In the problem statement it is mentioned that the PoCM can invoke/trigger tax liability on M Ltd. though the villa construction is a separate phase but carries risk to be clubbed with rest of project. It is also mentioned that the villas are no longer required, stay might get vacated at any juncture, so exit strategy need to be worked out. As per proposal the transaction would result in wealth creation in the hands of the investors, allowance of business expenditure in the hands of M Ltd. and the transaction is to be effectuated in a tax efficient manner with the understanding of the tax risk/ litigation exposure. vii) The issues for consideration were implications of sect....
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.... x) On perusal of the details it is noted that the entire scheme was planned in 2011 onwards and implemented subsequently. Sh. Gaurav Jain left M3M group in March, 2015 after working for five and half years. 9. There is no doubt that the said transaction is colourable or artificial devise adopted by the assessee to evade the taxes. The transaction is neither legitimate nor bonafide nor undertaken in the ordinary course of business. Such colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods, revenue authorities are also supposed to consider the surrounding circumstances and apply the test of human probability. In the present case also, in spite of being an apparent transaction, the same cannot be termed as "Real" in view of the surrounding circumstances of this case. Reliance is placed on the following judgments: McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) In the case of Longanathan (K.R.) v. UOI [1988] 174 ITR 645, the Hon'ble Madras High....
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....ll be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed In his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. v. Union of India [2012] 204 Taxman 408 (SC) has made it very clear that a colourable device cannot be a part of tax planning. Therefore, where a transaction is sham and not genuine as in the instant case then it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. Since in this case the transaction has been used as a mere ruse for tax evasion or to circumvent tax obligations, it is necessary to lift the veil fr....
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....lower authorities, whether by mistake or in ignorance or even by design is applicable to the facts of the case. 11. In view of the above, the assessment order passed by the AO in this case is erroneous in so far as it is prejudicial to the interest of revenue. You are hereby given an opportunity as to why proceedings u/s. 263 of the Act should not be initiated in your case for the AY 2017-18. You may file your reply in the office of the undersigned preferably by post/e-mail on or before 04.03.2021." 3.3. In response to the show cause notice, Learned Counsel for the Assessee appeared before the Learned PCIT and filed reply and Annexures in volumes to explain the issue. It was submitted that invocation of Section 263 of the I.T. Act, 1961 is without jurisdiction. The submissions of the assessee were summarized as under in the impugned order: (i) That order u/s. 153B(1)(b)/143(3) of the Act which has been passed with approval u/s. 153D of the Act cannot be subject matter of revision u/s. 263 of the Act. (ii) That without prejudice assuming for the sake of an argument that approval u/s. 153D of the Act is not valid on account of allegatio....
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.... (ix) That material seized from the residence of Sh. Gaurav Jain, Ex VP Finance cannot be relied upon in any case cannot be made a basis to reject the claim that compensation so received is not a part of the sale consideration. (x) That various allegations and adverse observation in the notice are factually incorrect, legally misconceived, and wholly untenable. (xi) That allegation that the payment of compensation of Rs. 441 crore as expenses is nothing but a colorable device to reduce the profit and diversion of income by MIPL and the allegation that there is no doubt that the said transaction is colourable or artificial devise adopted by the assessee to evade the taxes, the transaction is neither legitimate nor bonafide nor undertaken in the ordinary course of business, such colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods, revenue authorities are also supposed to consider the surrounding circumstances and apply the test of human probability, in the present case also, in spite of being an apparent transaction, the same....
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....r was set aside on the issue of taxability of compensation under the Head "Long term capital gains" at the reduced rate of 20%. The A.O. was directed to tax the amount of compensation as revenue receipts at normal tax rate applicable. The A.O. directed to modify the impugned assessment order in accordance with the directions contained in the impugned order. The findings of the Learned PCIT in Paras 3 to 18 of the impugned order are reproduced as under: 3. I have perused the reply of the assessee and considered the submissions made. In the grounds at Sr. No. (i) to (iv) the assessee has challenged the show cause on technical grounds. In the ground No. (iii) it was submitted that the impugned order dated 18.12.2018 passed u/s. 153B(1)(b) r.w.s. 143(3) of the Act is an invalid order which cannot be subject matter of revision u/s. 263 of the Act. 4. It is a settled proposition that right to file an appeal is a statutory right. As per the provisions of section 246A, the first appellate authority for filing the appeal against an order u/s. 153B(1)(b) r.w.s. 143(3) is the CIT(A), whereas as per section 253, the first appellate authority for an order u/s. 263 ....
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....of any such order, while considering the appeal filed against the order issued by the Commissioner under section 263. The assessee having not challenged the revised assessment, could not also contest validity of that proceedings before the Tribunal in an appeal filed against the order issued under section 263. The Tribunal being the second appellate authority, cannot consider validity of an assessment or reassessment order while considering the appeal filed against an order issued under section 263. So much so, the order of the Tribunal was liable to be vacated. [Para 3]" Hon'ble Madras High Court in the case of CIT v. A. Samarapuri Chetty (1992) 64 Taxman 344 held as under: "We do not think that this argument of the learned counsel for the assessee is correct. What the learned counsel for the revenue contended was even though the abovesaid second assessment order dated 11.03.1976 was void order, unless it was set aside by any process known to law, it would bind the parties in the light of the abovesaid decisions and other authorities cited by him. So, it cannot be taken that the learned counsel for the revenue conceded that the abovesaid second as....
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.... These powers are exercised by them in accordance with the provisions of the Act and the satisfaction arrived by them independently. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of CIT v. SPL'S Siddhartha Ltd. [2012] 17 taxmanrt.com 138 (Delhi) wherein it was held as under: "Section 116 also defines the Income-tax authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in the specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. [Para 7] Thus, if authority is given expressly by affirmative words upon a defined condition, the express....
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....(a) provides that an order passed by the AO shall include the following orders: (i) an order of assessment made by the ACIT/DCIT/ITO on the basis of the directions issued by the JCIT u/s. 144A; (ii) an order made by the JCIT in exercise of the powers or in the performance of the functions of an AO conferred on, or assigned to, him under the orders or directions issued by CBDT or by the Pr. CCIT/CCIT or Pr. DGIT/DGIT or Pr. CIT/CIT authorised by CBDT in this behalf u/s. 120; In view of above, it is apparent that even if an order is passed by an AO with the prior approval of the JCIT, still such an order can be considered for revision u/s. 263 provided other requisite stipulations are met. Reliance is also placed on the decision of Hon'ble Madras High Court in the case of CIT v. V.V.A. Shanmugam 236 ITR 878 in which after discussing a large number of judgments it was held as under:- "The Gauhati High Court in Tarajan Tea Company Pvt. Ltd. v. CIT [1994] 205 ITR 45 following various decisions held that the order passed by the ITO as per the direction given by the IAC under section 144B of the Act is amenable to the jurisdi....
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....ursuant to the DRP decision. One cannot go beyond the statutory provision and so also 'read' or 'add' words by the Courts while interpreting a statutory provision. Time and again, Supreme Court and other Courts have held that in a matter of interpretation of statutory provisions, Court cannot 'add any words or sentence'. Even if there is any ambiguity, at the best Court can read down or struck down such statutory provision. In the present case, reading of section 263, it is crystal clear that there is no bar for the Principal Commissioner to invoke section 263 in order to examine the final assessment order passed by the Assessing Officer pursuant to the DRP decision. [Para 18]" In view of the above, I am of the considered opinion that there is no bar for the Pr. Commissioner to invoke the proceedings u/s. 263 in respect of an assessment order passed by the Assessing Officer with the prior approval of Joint Commissioner of Income Tax u/s. 153D. 6. In respect of ground No. (ii) it was submitted by the assessee that it is well settled if the approval u/s. 153D of the Act was granted in a mechanical manner the order of assessment is....
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....the judgment of Hon'ble Karnataka High Court in the case of Rishabhchand Bhansali v. DCIT, 267 ITR 577, wherein it was held as under: "4.2...........thirdly the order passed by the Joint Commissioner granting previous approval under the proviso to section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon any rights of the assessee. The Joint Commissioner, while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV-B. 4.3 In V.C. Shukla v. State AIR 1980 SC 962, the Supreme Court gave the following example: "In cases where law requires sanction to be given by the appointing authority before a prosecution can be launched against a Government servant, it has never been suggested that the accused must be heard before sanction is accorded...." 4.4 Where a statute req....
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....r as it is prejudicial to the interest of the revenue. 7. In respect of ground No. (iv) it was submitted that since the proceedings for original assessment had not been terminated on the date of issue of notice under section 142(1) of the Act on 05.01.2018, such a notice was not a valid notice. The assessee in support of the submission that proceedings in the original return filed on 02.08.2017 had not been terminated, sought to refer to the intimation dated 18.1.2018. In other words, since the proceedings in the original return filed on 02.08.2017 were only closed or terminated on 18.1.2018, notice dated 05.01.2018 under section 142(1) of the Act was an invalid notice and therefore, the return filed in response to such an invalid notice and assessment framed in pursuance to such an invalid return and invalid notice is an invalid assessment and therefore, without jurisdiction. 7.1 I have considered the submission of the assessee. Even if the notice u/s. 142(1) issued on 05.01.2018 is taken as invalid notice then also the assessment proceedings will not get vitiated. Admittedly, in this case original return was filed by the assessee on 02.08.2017. As pe....
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.... assessee in this regard is devoid of any merit. 8. In respect of ground No. (v) it was submitted by the assessee that the AO after extensive and complete enquiries accepted the claim that compensation of Rs. 91.33 crore on cancellation of BBA forms part of sale consideration for computation of long-term capital gain on cancellation of agreement for allotment of villas by MIPL. It was submitted that the claim of the assessee that compensation received of Rs. 91.33 crore by the assessee during the FY 2016-17 relevant to AY 2017-18 forms part of sale consideration for computation of long-term capital gain on cancellation of the builder buyer agreement dated 31.03.2010 between assessee and MIPL has been accepted without application of mind is factually incorrect, legally misconceived and therefore unsustainable. 8.1 I have considered the submission of the assessee. In the show cause it was clearly brought out that the AO did not consider the facts and the circumstances in which the payment of compensation of Rs. 441 crore was made and passed the order without application of mind on wrong assumption of facts. The AO failed to consider the information and d....
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.... the entire share capital of the assessee-company was purchased by a company controlled by 'D' and the then managing agent of the assessee-company resigned their office. Under an agreement dated 29-10-1948, another company 'DCPM' controlled by 'D' was appointed selling agent with effect from 1-11-1948 for 10 years. Thereupon, another company 'V.V.' controlled by 'D' was appointed managing agent of the assessee for twenty years with effect from 1-7-1950, under an agreement dated 26-10-1950. Under the agreements it was stipulated that even the purchaser of the assets of the assessee was bound to continue these companies as selling agents and managing agents. On 27-10-1950, the assessee agreed to sell all its assets and on 31-10-1950, the purchasers took charge of the mills. On 14-2-1951, the DCPM and V.V. called upon the assessee to pay compensation for breach of their agreements, alleging that the assessee had failed to stipulate for their appointment as selling agents and managing agent, respectively, of the purchasers. The assessee agreed to pay compensation for the unexpired portion of the agency agreements. On 31-3-1951, a portion of the a....
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....nd Manglam to the allottees. d. The construction of villas at the given location was neither approved by the competent of authority nor undertaken. Subsequently, the location of villas was arbitrarily changed to a place marked as K-Block. K-Block which consisted of four towers having basement, stilt and six floors hardly resembled the villas in terms of their areas and structure. This fact was not brought on record during the arbitration proceeding. Further, the KMPs and MIPL had failed to make any submission as regards to the status of these towers and the stage of their construction at the time of arbitration proceedings. e. The construction of the K-Block was allegedly stayed by an order passed in the case of Dulichand v. Manglam on 04.09.2012. MIPL was not a party to it. The KMPs of M3M group were forced to surrender the claim of exemption of about Rs. 541 crore u/s. 54F of the Act during the AY 2013-14 as a result of survey u/s. 133A conducted by the department in the case of M3M group on 15.10.2012. But still none of the KMPs ever claimed a refund of the booking amount from MIPL. f. No effort was made by MIPL and Manglam to get the....
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....eport submitted by it cannot be considered impartial and independent. n. The submission of the assessee that the booking rates of the project M3M Golf Estate cannot be determinative for the payment of compensation is again absurd and without any substance. The assessee admitted the fact that the booking rate of the project M3M Golf Estate has remained constant over the period of six years and varied between Rs. 6,000/- to Rs. 12,500/- per sq.ft. Further, it is strange to note that the villas were booked at astronomically high rate of Rs. 16,000/- to Rs. 19,000/- per sq.ft. whereas, admittedly the circle rate of the area in which the project M3M Golf Estate is located was Rs. 2,500/- per sq.yd. equal to Rs. 277 per sq.ft. (para 9 of the Award dated 16.03.2017). Hence, the cost of land for the villa having larger area works out to approx. 5664.68 sq.m. * 1.196 * Rs. 2,500 = Rs. 1,69,37,393/- only. Further, as per the revised rate applicable w.e.f. 11.10.2010 the circle rate of multistoried residential group housing societies in similar location varied between Rs. 3,250/- to Rs. 4,000/- per sq.ft. only. The circle rate was further revised w.e.f. 01.04.2015 and the revis....
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.... These grounds are being dealt with in the subsequent paragraphs. 10.1 The meaning of record is given in clause (b) of Explanation 1 to section 263 of the Act, which includes all records relating to any proceedings under this Act available at the time of examination by the Principal Commissioner or Commissioner. The word 'record' used in section 263 has wide connotation as held in the following judgments: (i) CIT v. Shree Manjunatheswar Packing Products & Comphor Works [1998] 96 Taxman 1 (SC). (ii) CIT v. Arunaben Sumankumar [2002] 124 Taxman 57 (Guj.) In the case of Shree Manjunatheswar Packing Products & Comphor Works (supra) Hon'ble Supreme Court while explaining the meaning of 'record' for the purpose of section 263 has held as under:- "It could not be said that the correct and settled legal position, with respect to the meaning of the word 'record' till 1-6-1988, was that it meant the record which was available to the Assessing Officer at the time of passing of the assessment order. Further, such a narrow interpretation of the word 'record' was not justified, in view ....
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.... in the case of other persons." In view of the above, the submission of the assessee that while initiating the proceedings u/s. 263 the Commissioner should rely only on the record which is available in the assessment folder has no substance. The Commissioner has authority to take action u/s. 263 in the case of the assessee on the basis of the records in the case of other persons. It is well within the jurisdiction of the Commissioner to base his findings on various statements recorded and documents/ evidences collected during the search and survey conducted by the department and also during the post-search proceedings. In this case if all the evidences available on record are considered properly then there is no doubt that the impugned transaction was used as a mere ruse for tax evasion or to circumvent tax obligations. 10.2 In respect of the documents found in the computer of Sh. Gaurav Jain, Ex VP Finance of M3M group it was merely submitted that these are factually incorrect and have no relevance and has nothing to do with the allegations made in the impugned notice. These documents containing 94 pages which are basically power point presentations a....
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.... Chaturvedi is also very interesting especially the issue No. 3 on page No. 44, Option 4 'Postpone tax liability indefinitely till stay is operative' and Option 6 'Completing part of each flat in K tower as villas'. Option 6 clearly mentions that the promoters may request the company to switch the allotment of their villas to K-Tower which has four vertical villas adjacent to each other in the same complex with four separate lifts comprising of six storeys with a total area of 32,000 sq.ft. This complex is under construction and the structure is ready. Necessary modifications to increase area and nature of construction for independent villa can be carried out. It is also mentioned that once issues relating to switch over are attended, and stay is granted by a court of law or any authority, there could be a case for claiming refund of investment by the promoters from the investee company. After the amount is refunded by the company, the deduction claimed can be surrendered by promoters by getting the refunded amount taxed in the relevant AY of its receipt (i.e. AY 2013-14) on the strength of the case of Ranjit Narang v. CIT (Supra) by showing it in the....
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....rther, injunction was allegedly obtained on 04.09.2012 in respect of the project to avoid taxability of the claim of deduction u/s. 54F in AY 2010-11 and entire amount was offered for taxation in the returns filed for AY 2013-14. The entire planning was done to evade payment of taxes along with interest and avoid the penalty and prosecution had the amount of claim of deduction u/s. 54F was taxed in A.Y. 2010-11. 10.7 It is interesting to note the second part of planning which is apparent from various power point presentations. The KMPs of M3M group did not make any effort to claim the refund of booking amount of Rs. 541 crore despite the construction of K-Block which is part of the project M3M Golf Estate allegedly stayed by the injunction in FY 2012-13. The booking amount remained with MIPL and when taxability under PoCM of the project M3M Golf Estate arose in AY 2017-18 the applications for arbitration for award of compensation was filed in the month of January, 2017 and huge compensation of Rs. 441 crore was awarded to the four KMPs in the month of March, 2017. The payment of compensation was linked with the indexed cost meaning thereby that there is no payment of....
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.... annexure, the documentation for claim of compensation by the investor and evaluation/ documentation on part of MIL to rebut/ modify and accept the claim was also prepared by the officials of MIPL. On page No. 32 of annexure, it is mentioned that to justify the compensation paid by MIPL the information such as compensation claims paid to other investors, assured returns provided under various schemes and projects to customers and escalation in market rate of project from date of investment to date of paying compensation will be documented. However, on perusal of arbitral award it may be noted that no such submission was made during the arbitration proceedings implying that the reliance on such information did not justify the payment of huge compensation and would have gone against the company MIPL. 10.8 From perusal of briefs for opinion, it is noted that the various options were explored - to make payment of compensation part in cash and part in the form of debenture. Second option explored was allotment of rights in residential units in lieu of the rights in the residential villas or provide refund for the liquidation of first rights. In one of the briefs for opini....
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.... the amount was surrendered for taxation in AY 2013-14. d. It was submitted that the arbitration award entitlement of compensation has been completely dealt by the sole arbitrator and therefore adverse observation is without jurisdiction and not tenable. In any case to grant compensation or not was only in the realm of the sole arbitrator. The only issue which remained is taxability of the compensation and the same was before the Assessing Officer. The considerations which weighed with sole arbitrator cannot be judged or re-judged or even commented in the instant proceedings. It was submitted that the observations made in the show cause are without jurisdiction. In my opinion to counter the above, it is important to reiterate the observations in the judgment of Hon'ble Supreme Court in the case of Madhowji Dharamshi Mfg. Co. Ltd. v. CIT [1970] 78 ITR 62 (SC). The facts are that in this case the dispute was referred to arbitration and the arbitrators made awards to the effect that there was a breach of contract by the assessee and that the selling agents and the managing agents were entitled to compensation and that all the settlements were valid an....
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....ed opinion and as stated in the show cause notice the entire scheme to evade the tax was planned systematically and implemented subsequently. Hence, it is important to consider the facts of the case and transactions resulting into payment of compensation in the proper perspective. 11. As regards the issue in ground No. (xi) that the payment of compensation of Rs. 441 crore as expenses is nothing but a colorable device to reduce the profit and diversion of income by MIPL the assessee made a very lengthy submission in para No. 21 which are mostly reproduction of various judgments on the subject. 11.1 In this regard it is submitted that there is no doubt that the said transaction is colourable or artificial devise adopted by the assessee to evade the taxes. The transaction is neither legitimate nor bonafide nor undertaken in the ordinary course of business. Such colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods, revenue authorities are also supposed to consider the surrounding circumstances and apply the test of human probability. In t....
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....was not genuine." In the case of CIT v. Durga Prasad More [1972] 82 ITR 540 (SC), the Hon'ble Apex Court has observed as under: "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. v. Union of India [2....
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....agency was not a true reason but was merely a fake one and the whole transaction was a hoax for the purpose of evading income-tax. In other words, it was a collusive device practiced by the managed company and the assessee-firm for the purpose of evading income-tax both in the hands of the payer and of the payee. The Appellate Tribunal also found that there was only a change of personnel in the managing agency and not a change in office and that the assessee had no right of compensation for any loss of office. In a matter of this description, it was well established that the income-tax authorities are entitled to pierce the veil of corporate entity and look at the reality of the transaction. It is true that from juristic point of view the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. On the facts found in the instant case, it was manifest that the man....
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.... controlled and directed the hotel business as shareholders and directors of the company. The participation of the brothers in the running of the hotel business continued even after the formation of the company. The position of the brothers, therefore, did not change in substance after the company was formed and the company was given a right to run the business. [Para 5] Having regard to the totality of the circumstances, piercing the veil of the company was a permissible exercise which the Tribunal undertook. It is well-settled that the formation of a company and its registration does not preclude the lifting of the veil, particularly, where matters of taxation are concerned, if the circumstances of the case so warrant. The finding that the payment made by the company to the brothers was in the nature of the revenue receipt in their hands, would not negate the separate juristic existence of the company. The company continued to remain a legal entity with a right to hold property, to contract, etc. The true character of the payment made by it to the brothers who were shareholders and directors and who, as partners of the firm, owned the buildings and the equipment us....
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.... having substantial interest in the company, it will be the income of the relative of the director or of such person having a substantial interest in the company. There is no warrant for treating the value of any benefit or perquisite received by the director's relative or the relative of a person having a substantial interest in the company as the income of the director or of such person having substantial interest in the company, unless there is some legal fiction or a deeming provision by which the value of such benefit or perquisite received by a relative of the director or by a relative of a person having a substantial interest in the company is to be regarded as the income of the director or of such person having a substantial interest in the company." 12.4 Considering the true nature of transaction, it is evident that the entire transaction was sham with the intention to evade the taxes. Alternatively, the compensation paid can be taxed as interest under the head Income from other sources as cost of fund given by the KMPs to MIPL in view of the provisions section 2(28A) of the Act. 13. In respect of ground No. (xiv) it was submitted by the a....
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....case of the assessee on 15.10.2012 and also various documents found in the computer of Sh. Gaurav Jain, Ex VP Finance of M3M group during the search on 21.07.2016. Since, these were not considered by the AO during the assessment proceedings it cannot be said that the AO examined all the facts on the record, made all the enquiries and considered the transactions in proper perspective. In view of the above, the submission of the assessee is not in accordance with the law. 15. In respect of ground Nos. (xvi), (xvii) and (xviii), it is submitted that for exercising the jurisdiction u/s. 263 of the Act, PCIT is required to conduct some minimal enquiry. It was also submitted that it is not a case of lack of enquiry or lack of investigation and section u/s. 263 cannot be invoked to make deeper enquiry. 15.1 The submission of the assessee is misplaced. In the show cause notice the entire gamut of transactions has been properly analyzed and due enquiries were made after considering various documents available on record. It may be noted that the circle rates adopted for the purpose of payment of stamp duty were also obtained which discredited the huge compensati....
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....B(1)(b) r.w.s. 143(3) of the Act is erroneous in so far as it is prejudicial to the interests of the revenue. The assessment order is set aside on the issue of taxability of compensation under the head Long-term Capital Gains at the reduced rate of 20%. The AO is directed to tax the amount of compensation as revenue receipts at normal tax rate applicable. The AO is directed to modify the assessment order dated 18.12.2018 for AY 2017-18 passed u/s. 153B(1)(b) r.w.s. 143(3) of the Act in accordance with the above directions. 4. It may be noted here that the dispute primarily in the present appeal is with regard to the taxability of the compensation received by the assessee for non-delivery of the Villa under Builder-Buyer Agreement ["BBA"] through the Arbitration Award. It is relevant to note certain facts that assessee is an individual. She is shareholder in M/s. M3M India Pvt. Ltd., ["MIPL"]. On 31.03.2010 an agreement was entered into between the Assessee and MIPL for an allotment of Villa located at M3M Golf Estate of the Group Housing Colony situated at Sector-65, Urban Estate, District Gurgaon, Haryana. Copy of the BBA is placed at Pages 220-273 of the PB. The assessee in te....
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....ation of assessee before Learned PCIT and findings of Learned PCIT under section 263 of the Act are reproduced above. 5. Learned Representatives of both the Parties have argued the appeal as well as placed on record their written submissions on several points in which it is highlighted on behalf of the assessee that proceedings under section 263 of the I.T. Act could not have been initiated against the assessee on several grounds and on behalf of the Revenue. It is contended that the transaction of making investment in Villa is a 'Sham Transaction', therefore, Learned PCIT has rightly rejected the Arbitration Award and that proceedings under section 263 have been rightly initiated in the matter and that the compensation is revenue receipt in nature and as such was taxable in the hands of the assessee in assessment year under appeal on various grounds. 6. After considering the rival contentions and the points raised in the written submissions, we find that several issues have arisen for consideration with regard to validity of the proceedings under section 263 of the I.T. Act, 1961. We, therefore, decide the present appeal in various grounds in the light of submissions....
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....Chinnamma vs., DCIT 7. ITA.Nos.584-589/Hyd/2015 Dated 04.12.2015 Trinity Infraventures Ltd., vs., DCIT 8. ITA.Nos.901/Hyd/2014 S. Satyanarayana vs., Mr. Syed Rasiuddin 9. ITA.No.288/LUCK/2014 Dated 18.11.2014 Mehtab Alam vs., DCIT 10. 48 taxmann.com 53 (JP) Dharmendra Kumar Bansal 7.1. Learned Counsel for the Assessee submitted that the Learned PCIT has not accepted the contention of assessee that the decisions relied upon in the impugned order did not apply to the facts of the case. He has submitted that the decisions relied upon by the Learned PCIT are not applicable to the approval under section 153D of the I.T. Act. He has further submitted that in the absence of Revision of Order of approval under section 153D of the I.T. Act, the action under section 263 of the I.T. Act, 1961 is not permissible. Learned Counsel for the Assessee relied upon Explanation-1 to Section 263(1) of the I.T. Act and submitted that the Order of assessment passed with the approval under section 153D of the I.T. Act could not have been revised under section 263 of the I.T. Act. He has submitted that it is well settled that the Judgment is a proposition what is actua....
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....essment discussed the matter in issue with the JCIT under section 153D of the I.T. Act and after getting approval of the JCIT under section 153D of the I.T. Act passed the impugned assessment order Dated 18.12.2018. We may note that the Order under section 143(3) read with Section 153B of the I.T. Act cannot be revised without revising the approval of the JCIT. It is also an admitted fact that the Learned PCIT did not revise the approval of JCIT given under section 153D of the I.T. Act. The Hon'ble Allahabad High Court in the case of CIT vs., Dr. Ashok Kumar (supra) considered the identical issue and has reproduced the findings of the Tribunal in the Judgment as under: "5.2. In the last it is also relevant fact that the AO was fully alive about the facts of the case and that is why he got necessary approval of Addl. Commissioner before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue than the CIT would not be justified in interfering in the approval accorded by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment orders for the assessment years in quest....
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....e decisions of this Tribunal in the case of Ch. Krishna Murthy vs. ACIT, CC. 3, Hyderabad in ITA No. 766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of Mehtab Alam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263 of the I.T. Act. In view of the above decision also, we hold that the revision order under section 263 of the I.T. Act is not sustainable. Accordingly, we allow the grounds of the assessee." 27. Hon'ble Tribunal in case of Dhariwal Industries Ltd. v. CIT in ITA Nos. 1108-1113/Pn/2014 dated 23.12.2016 wherein, the Hon'ble Tribunal held as under: 9. Referring to the decision of the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. Vs. DCIT vide ITA Nos. 584 to 589/H/2015 order dated 04-12- 2015 for A.Yrs. 2005-06 to 2010-11 he submitted that the Tribunal in the ....
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.... under section 153D of the I.T. Act, therefore, following the above decisions, we are of the view that the Learned PCIT has no power to revised the Order under section 263 of the I.T. Act, without revising the approval of the JCIT under section 153D of the I.T. Act, 1961. Explanation-1 (a) (i) (ii) of Section 263(1) of the I.T. Act, 1961 is reproduced as under: "(a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include-- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120;" 9.4. It is evident from the plain reading of the afo....
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....iven to the Judgment of the Hon'ble Allahabad High Court as reproduced above. In the totality of the facts and circumstances of the case and following the decisions referred to above, we are of the view that the Learned PCIT was not having jurisdiction to proceed under section 263 of the I.T. Act, 1961 in the matter in issue and as such the Order passed by the Learned PCIT is nullity and void ab initio. We therefore, decide this issue in favour of the assessee. ISSUE No. 2-Whether the compensation received by the Assessee is capital receipt of revenue receipt? And Whether such compensation is taxable under the Head "Capital Gains"? 9.5. It is not in dispute that assessee entered into an agreement with MIPL for allotment of Villa on 31.03.2010 and assessee invested a sum of Rs. 110.18 crores. It is not in dispute that possession of the property in reference could not be handed-over to the assessee for about 07 years. It is also not in dispute that assessee filed a Plaint before the Sole Arbitrator for claiming compensation for non-delivery of the Villa under Builder-Buyer Agreement. It is also not in dispute that the Arbitrator has passed the Arbitration Award on 16.03.201....
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....the Project to be developed by the Respondent-Company are legally and lawfully entitled to demand for and receive compensation on account of non-delivery of the Villas as booked by them as per the agreed time lines being an essence of the contract." The Arbitration Award in Para-16 also noted that the possession of the Villas was to be handed-over by the Respondent-Company to the claimants within the period of 24 months from the date of commencement of the construction as per the terms of the respective Villa Agreement with a further grace period of 06 months. However it is an admitted position that there has been an inordinate delay of almost 07 years which includes the period of the contract. Section 55 of the Indian Contract Act reads as under: "55. Effect of failure to perform at fixed time in contract in which time is essential.-When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time the contract, or so much of it as has not been performed, becomes voidable at the option of the promise, if the intention of the parties wa....
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....n preceding A.Ys. 2010-2011 and 2013-2014. The Builder-Buyer Agreement was correctly executed on 31.03.2010 as earlier licenses were granted on 16.10.2007 and 28.08.2009. The Hon'ble Supreme Court in the case of CIT, Mysore vs., Canara Bank Ltd., [1966] 62 ITR 328 (SC) held as under: "Held, on the facts, that the appreciation of the money did not arise in the course of any trading operation. Assuming that the amount of Rs. 3,97,221 was originally stock-in-trade, when it was blocked and sterilised and the bank was unable to deal with that amount, it ceased to be its stock-in-trade and the increase in its value owing to exchange fluctuation was a capital receipt. If by virtue of exchange operations profits are made during the course of business and in connection with business transactions, the excess receipts on account of conversion of one currency into another would be revenue receipts. But if the profit by exchange operations comes in, not by way of business of the assessee, the profit would be capital." 9.9. The Hon'ble Delhi High Court in the case of PCIT vs., Aeren R Infrastructure Ltd., [2018] 404 ITR 318 (Del.) held as under: ....
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....cording to the assessee by a resolution of its board of directors dated October 24, 2005 it decided to commence the business of dealing in immovable property in terms of clauses 45 and 46 of "Other objects" of the memorandum of association. It stated that in view of the above decision, the assessee purchased a plot in Noida. Another freehold plot in Vasundhara, Ghaziabad was purchased on March 3, 2006. The assessee maintained that it showed these plots as "inventories" under "current assets" and as "stock" in its balance-sheet and profit and loss accounts. After a few months, the plot in Noida was sold and deducted from the stock. It was stated that the assessment for the assessment year 2008-09 during which the earlier transaction took place attained finality. The assessee stated that it showed the property, at Ghaziabad as its stock-in-trade in the subsequent year as well. Some time in December, 2008 and January, 2009, the assessee learnt that some unauthorised persons had illegally taken possession of the plot of land. The assessee stated that it lodged a complaint dated January 7, 2009 seeking help to regain peaceful possession of the property. It was claimed that since the pro....
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....compensation received by the assessee on cancellation of the Builder-Buyer Agreement is capital receipt and taxable as capital gains. The view of the A.O. was, therefore, in accordance with Law and cannot be impeached by the Learned PCIT. In view of the above, we do not subscribe to the view of the Ld. D.R. that since no compensation is mentioned in the Builder-Buyer Agreement are to be payable as per agreement, then, the compensation is revenue in nature. It is devoid of merit as discussed above. We also do not agree with the submissions of the Ld. D.R. that payment of compensation was a colourable device to evade the taxes. The Ld. D.R. referred to the emails and other papers seized from the computer of Shri Gaurav Jain, Ex-Employee of the M3M Group to support the case of the Revenue. However, we do not agree with such view and discuss this issue separately about the admissibility of the documents found from the computer of Shri Gaurav Jain. In view of the above findings, we hold that the compensation received by the assessee on account of cancellation of the Builder Buyer agreement is capital receipt and was rightly offered as capital gain in the return of income and correctly a....
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....ement and Arbitration Award given by the Sole Arbitrator. The Learned PCIT has merely disputed the transaction to be coloured and sham without assigning any valid reasons. The issue of deduction under section 54F based on BBA has already been considered in preceding A.Y. 2010-2011 and later on in A.Y. 2013-2014 which have attained finality and could not be the subject matter in assessment year under appeal i.e., 2017-2018. He has filed complete details with regard to queries raised by the A.O. and reply submitted by assessee along with all documentary evidences in A.Ys. 2010-2011 and 2013-2014 in the written submissions to show that transaction has already been examined by the A.O. in preceding A.Ys. 2010-2011 and 2013-2014 in assessment orders under section 153A(1)(b) of the I.T. Act, 1961. Therefore, the transaction could not have been considered to be sham to evade taxes. Learned Counsel for the Assessee referring to Para-9.2 of the impugned order under section 263 of the I.T. Act submitted that Learned PCIT has noted that certain facts have not been considered in the Arbitration proceedings. Learned Counsel for the Assessee referred to the written submissions in which all these....
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....e hands of assessee. Learned Counsel for the Assessee relied upon Judgment of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd., vs., CIT 124 ITR 1 (i) No adverse inference can be drawn with respect to Arbitration Proceedings. (j) The agreement was between the assessee and MIPL. Therefore, Mangalam was not party to the Arbitration Proceedings is not relevant consideration. (k) It is wrong to say that no compensation was ever paid to any allottee by MIPL. It was submitted that assessee received the compensation in pursuance of Arbitration Award Dated 16.03.2017. Copies of the Ledger A/c and Bank A/c's are filed in support of the contention. (l) The Orders for A.Ys. 2010-2011 and 2013-2014 have become final with respect to claim made under section 54F and surrendered. Therefore, it cannot be the subject matter in the present appeal. (m) & (n) The Arbitration Award is based on report of M/s. Grant Thornton India LLP which is based on comparison as to the increase in market rates, circle rate, location and compensation awarded to third party and judicial precedence which ....
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....nless the same have been revised separately under section 263 of the I.T. Act, 1961. The rates are settled by the parties. It is well settled Law that inadequacy of consideration is not relevant for entering into an agreement. The assessee has also explained that for other family Members also the booking rate was same which have not been disputed. Merely because there was no provision for compensation provided in BBA, it would not preclude the assessee from claiming compensation for non-delivery of the Villas in question because assessee would be entitled to invoke provisions of Sections 55 and 73 of the Indian Contract Act against the Builder which we have already dealt in detail on issue No. 2 and as such the Learned PCIT cannot take any adverse view against the assessee. It is not in dispute that ultimately the BBA was cancelled on account of Arbitration Award and compensation received by the assessee. M/s. MIPL was not party to the civil litigation because it did not own the land. The land was owned by Mangalam. Merely because no efforts have been made to get the stay vacated, is no ground to have any adverse view against the assessee, who has an independent title of making inv....
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....igh Court in the case of CIT vs., Ratan Lal [2006] 284 ITR 162 (All.) held as under: "Section 293 of the Income-tax Act, 1961, applies when an action or order of the income-tax authority constituted under the Act is being sought to be challenged before the civil court. A dispute of partition inter partes vis-a-vis shares and eligibility entitlement can more appropriately be adjudicated upon by the civil court and not by the income-tax authorities and, therefore, the decree and the order passed by the civil court is binding between the parties and consequential effect is to be given by the income-tax authority while passing the assessment order. A decree or order passed in a suit in which the parties do not contest or which is passed ex-parte is binding upon the parties in the same manner as a decree or order passed after contest unless it is set aside or modified in appeal or revision by a competent court of law. The assessee owned land. The land was acquired by the State Government and compensation was awarded and paid. The assessee was also awarded interest under the Land Acquisition Act. The assessing authority taxed the interest so received in the ....
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.... ultimately paid to the assessee. Issue No. 3 is, therefore, decided in favour of the assessee. ISSUE No. 4-Whether copies of documents, emails and Power Presentations found from Computer of Shri Gaurav Jain, Ex-Employee of M3M Group seized in search from his residence on 21.07.2016 is admissible in evidence? 13. According to the Learned PCIT these copies of emails and Power Presentation etc., found from the Computer of Shri Gaurav Jain, Ex-employee of M3M Group shows that M3M Group and assessee have made planning to evade taxes. Therefore, agreement and transaction are coloured and sham. It is, therefore, clear that the copies of documents, emails and Power Presentations found from the Computer of Shri Gaurav Jain were not recovered from the assessee or MIPL. These are third party documents. Therefore, it is contended that same cannot be read in evidence against the assessee, in the absence of any corroborative evidence. Learned Counsel for the Assessee submitted that the alleged material, if any, even otherwise and in the absence of corroborative evidence found from the possession of the assessee, cannot form the basis for making the addition. He has relied upon Judgments o....
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....Jain throws light on the perspective of MIPL with reference to the transactions in question which will reveal that apparent was not real and there was a planning to evade the taxes. 15. Considering the rival submissions, it is clear that the copies of the documents, emails and Power Presentations found from the Computer of Shri Gaurav Jain Ex-employee of M3M Group who is a third party. No incriminating material was found from the possession of the Assessee or MIPL. No corroborative evidence has been brought on record to support the material found from the Computer of Shri Gaurav Jain. Therefore, in the absence of any corroborative evidence, same is not admissible in evidence. Further, no Certificate under section 65B(4) of the Evidence Act have been brought on record to prove the contents of copies of documents, emails and Power Presentation found from the Computer of Shri Gaurav Jain. Therefore, same is not admissible in evidence. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. Thus, the Learned PCIT considered an inadmissible evidence in proceedings under section 263 of the I.T. Act, 1961. Therefore, ....
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..... Judgment of Hon'ble Delhi High Court in the case of CIT vs., Contimeters Electricals P. Ltd., [2009] 317 ITR 249 (Del.) in which it was held as under: "Held dismissing the appeal, that the Tribunal had arrived at the correct conclusion that the requirement of filing the audit report along with the return was not mandatory but directory and that if the audit report was filed at any time before the framing of the assessment, the requirement of section 80-IA(7) would be met. The Tribunal was also right in holding that the Commissioner did not even call for any explanation of the assessee and the issue of fulfillment of the conditions of section 80-IA had not been part of the show cause notice. Therefore, it could not form the basis for revision of the assessment order under section 263. No substantial question of law arose." 16.2. Judgment of Hon'ble Delhi High Court in the case of PCIT vs., Krishak Bharati Co-operative Ltd., [2017] 395 ITR 572 (Delhi) in which it was held as under: "Held, dismissing the appeals, (i) that the order under section 263 dealt with issues which were not covered by the show cause notice issued to the assessee. This....
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....ntary evidences filed before A.O. to show that A.O. has applied his mind to the material on record before accepting the claim of assessee made in the return of income. 18. On the other hand, the Ld. D.R. relied upon the Order of the Learned PCIT passed under section 263 of the I.T. Act, 1961 and submitted that the Learned PCIT was justified in invoking the jurisdiction under section 263 of the I.T. Act because the A.O. passed the Order without making enquiries or verification. 19. We have considered the rival submissions. Section 263 of the Income Tax Act, 1961 reads as under: "263. Revision of orders prejudicial to revenue: (1) The [Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assess....
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....by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] [(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding anything contained in subsection (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal] the High Court or the Supreme Court. Explanation. - In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 19.1. The Hon'ble Punjab & Haryana High Court in the case of CIT vs., Deepak Mittal [2010] 324 ITR 411 (P&H) in which it was held as under: "Change of opinion by reappraising the evidence is not....
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.... as under: "Every loss of revenue as a consequence of an Order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 19.4. The Hon'ble Gujarat High Court in the case of CIT vs., Amit Corporation [2012] 21 taxmann.com 64 (Gujarat) held that "Where A.O. after detailed verification of record and making enquiries had framed assessment, the CIT cannot revise under section 263 of the Income Tax Act." The Hon'ble Allahabad High Court in the case of Krishnacap Box (P) Ltd., [2015] 372 ITR 310 held that "when A.O. called for details and assessee responded, the A.O. however, did not discuss the same in the Order, no proceeding under section 263 lies." The Hon'ble Gujarat High Court in the case of Ginger Properties (P) Ltd., ....
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....inextricable link to the allotment of Villa. The Learned PCIT has referred to the rates of sales unofficially obtained from some broker in the notice. These are not relevant being unauthenticated and based on no evidence. Inadequacy of consideration in the agreement would not make the contract void or voidable under Indian Contract Act. In notice, report of Registered Valuer Mr. M.N. Bhagat in October, 2012 to the Investigation Wing for change in area/construction etc., already on record and considered in A.Y. 2013-2014 which have become final. Considering the facts of the case above, it is clear that conditions of Section 263 of the Income Tax Act are not satisfied in the present case. Therefore, the Learned PCIT was not justified in invoking the jurisdiction under section 263 of the Income Tax Act, 1961 in the matter. Issue No. 6 is decided in favour of the assessee. ISSUE No. 7-Whether cryptic Order of the assessment can be revised under section 263 of the Income Tax Act ?. 20. The Ld. D.R. submitted that since the assessment order is cryptic and is not self-contained Order giving relevant facts and reasons for coming to the conclusion, therefore, it was correctly revised ....
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....tion in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under section 263." 22.2. In the present case the issue based on BBA was coming-up from A.Y. 2010-2011 and with reference to Section 54F of the Income Tax Act, 1961, the issue have been examined by the Revenue Department in A.Ys. 2010-2011 and 2013-2014 and assessment orders have been passed under section 153A of the Income Tax Act, 1961. Those ....
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....s relied upon the Orders of ITAT, Delhi Bench in the cases of M/s. M3M India Holdings vs., DCIT 71 ITR 51 (Tribu.); Shri Sanjay Duggal vs., ACIT in ITA. No. 1813/Del./2019 Dated 19.01.2021; Rishabh Buildwell P. Ltd., vs., DCIT in ITA. No. 2122/Del./ 2018 etc., Dated 04.07.2019. Learned Counsel for the Assessee, therefore, submitted that since the approval is not valid as per Learned PCIT, therefore, assessment order is null and void and as such the same cannot be the subject matter of revision under section 263 of the I.T. Act, 1961. He has submitted that validity of the assessment proceedings can be raised in collateral proceedings and relied upon the Order of ITAT, Delhi Bench in the case of M/s. Supersonic Technologies (P) Ltd., vs., PCIT [2019] 69 ITR 585 (Tribu.-Del.) and Judgment of Hon'ble Bombay High Court in the case of PCIT vs., Smt. Shreelekha Damani [2019] 174 DTR 86 (Bom.). 24. On the other hand, the Ld. D.R. relied upon the Order of the Learned PCIT and relied upon Judgment of the Hon'ble Delhi High Court in the case of Sonia Gandhi W.P.(Civil) No. 8482/2018 in which it was held that the word "Yes I am satisfied" is sufficient to show cause the application ....
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....PCIT passed under section 263 of the Income Tax Act, 1961 and restore the assessment orders. All the appeals of the Assessees are allowed. 28. In the result, all the appeals of the Assessees are allowed. 29. To sum-up, all the appeals of the Assessees are allowed. Order pronounced in the open Court. ============= Document 1 Name of the Cost (Rs. assessee in crore) Compensation Sales Indexed (Rs. in crore) consideration cost (Rs. in Capital gains (Rs. in crore) (Rs. in crore) crore) (1) (2) (3) (2) + (3)=(4) (5) (4)-(5)=(6) Sh. Roop Kumar 161.80 129.53 291.33 279.46 11.87 को Sh. Basant Bansal 129.56 161.COME TAX DEPARTME Sh. Pankaj 110.18 Bansal 91.33 279.43 11.89 201.51 194.14 Smt. Abha Bansal 110.20 91.31 201.51 194.13 7.36 7.37 N N Total 543.95 441.73 985.68 947.16 38.48 Document 2 Name of Villa No. Super Area Land Area the allotee Basic sale price Total sale price of which exemption was claimed Document 3 Sh. Roop Kumar MGE/VA/05 84655.49 sq.ft. (7867.61 sq.ft. of su....
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....72,74,569.53 44.71 1506,51,55,340.37 1506,51,55,340.37 Document 9 Land 76,77,44,070.00 Budgeted Construction Cost 2758,40,73,000.00 Sanction 169,52,01,588.50 Admin Fin & Marketing Total Cost 126,20,72,981.03 50,88,91,902.54 3181,79,83, 542.07 % of Total Cost Total Area Area Sold कोष Tent द INCOME TAX DEPARTMENT Value of Area Sold 47.35 59,83,000.00 21,55,393.00 2176,48,92,092.42 % of Area Sold Sales to be recognised Less Recognised Till Last Year This Year Cost to be Recognised Goodwill Recognised Brokerage to be Recognised 36.03 1030,52,25,028.01 1030,52,25,028.01 542,72,65,646.76 574,13,61,668.44 Document 10 BSP per sq.ft./FY 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Maximum booking rate 12,600 13,800 13,536 13,600 12,475 12,475 Minimum booking rate 6,100 6,000 5,600 6,000 6,000 6,000 Document 11 Bill No. Description GT1314-00556 Being management consultancy services for SOP documentation GT1314-00556 Being management consultancy services for SOP documentation Invoice date Amount in Rs. 02.07.....