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2022 (5) TMI 1461
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....t year 2004-05, have been taken into consideration for deciding the above appeals en masse. 3. Grounds of appeal raised by the assessee in lead case in IT(SS)A No. 150/AHD/2015 for assessment year 2004-05 are as follows: "1) The ld. Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the action of the ld. AO of not considering the premium payable for conversion of agricultural land into non-agricultural land of Rs.17,24,800/- and Rs.6,40,00,000/- as forming part of cost of improvement of land and thereby not allowing deduction in respect thereof while calculating the capital gain in respect of transfer of land. 2) The ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in treating the amounts of conversion taxes (i.e. tax paid for the purpose of conversion of agricultural land into non-agricultural land) as land revenue and the land revenue duty representing recurring expenditure and thereby holding that the same is not allowable as deduction while calculating the capital gain in respect of transfer of land. 3) The ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in not allowing the inde....
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....lled out from the material on record, are as follows. A search action under section 132 of the Income-Tax Act, 1961 was carried out at the business as well as residential premises of the Dokania Group (Balar subgroup) of cases on 14.02.2008. In view of the above search action, a notice under section 153C of the Income Tax Act was issued on the assessee, on 09.11.2009. In response to the said notice, the assessee furnished the return of income, on 09.12.2009, declaring total income of Rs.2,67,961/-. Thereafter, a notice under section 143(2) was issued on 09.12.2009 and assessing officer framed the assessment under section 143(3) read with section 153C of the Income Tax Act, on 31.12.2009. During the assessment year under consideration, the assessee was carrying on the business of Cleaving of Diamonds on job-work basis. During the assessment proceedings, the assessing officer observed that assessee sold lands during the year and claimed Long term capital loss. The assessee had shown year of acquisition of the land in 1997 and had opening balance of the land account in his books at Rs.16,118/- as on 01.04.03. During the year, the assessee debited following expenses in the head of land....
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.... notice, the assessing officer observed that said demand notice, for premium was dated 09.09.2009 and till date no such premium had been paid by assessee. Instead, assessee filed special civil application in Gujarat High court challenging the same. Therefore, assessing officer noted that assessee neither accepted the order of payment of premium nor paid the same. Besides the notice was received only on 09.09.2009. The liability if any arose only on 09.09.2009. Therefore, further show cause notice was issued to the assessee. 9. In response to the show cause notice, the assessee submitted his explanation vide his letter dated 22.12.09, the same is reproduced below: "As your goodself is aware, the relevant provisions of sec. 48 of the Act whereby the mode of computation of income chargeable to capital gains is prescribed read as under: "The income chargeable under the head ;capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the following amounts viz;" (i) Expenditure incurred wholly and exclusively in connection with such transfer, (ii) ....
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....revenue duty 40,000 6.2.04 premium paid 39,60,000 31.03.04 Advance paid in previous year debited during the year 3,00,000 Total 1,06.29,385/- 11. The assessing officer also computed the index cost of the entire land, as follows: Right Calculation for the INDEX cost of the entire land: Opening balance from 1997 Rs 16118 So index cost (16118 x 463/331) = Rs 22,545 Total expenses incurred during the year (No indexing required) Rs. 1,06,13,267 Total Index Cost of the land Rs. 1,06,35,812 12. Thereafter, assessing officer computed Index Cost for the Land Sold, during the Year as follows: The total Index cost of the entire land comes at Rs 1,06,35,812/-. The total area of the land was 15705.859 Sq Mtr and the land sold by the assessee during the year under consideration is 5289.74 Sq Mtr. So the index cost of the land sold during the year comes as under: 1,06,35,812 X 5289.74/ 15705.859 = 35,82,234/- (Rs) 13. Sale consideration shown by assessee for Land Sold during the Year is as follows: The assessee sold land during the year under consideration is 5289.74 Sq Mtr out of the total area of the....
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....ng as follows: "19. In the revised grounds of appeal, also addition u/s 50C(1) has been challenged. However, the premiums paid / payable for conversion of land from agricultural land to non-agricultural land are claimed as 'cost of improvement' of land, rather that the expenses incurred for transfer of land. Consequently, claim of indexation on that has been made from the year of payment as mentioned in para 13 of this order. In the return filed, indexation was claimed from the Financial Year 1997-98. 20. In the revised grounds, the appellant also claimed indexation on the payment made to trusts requesting the said payments to be considered as 'cost of acquisition' of land. 21. As regards, the issue of addition u/s 50C(1), the said addition has been made due to difference in the agreement value and valuation, as per stamp duty authorities. As per section 50C(1), the stamp duty valuation is to be taken as "deemed value'' of sale consideration. A reference u/s 50C(2) of the Act may be made to the Valuation Officer, only if the appellant makes out a prima facie for such reference. The word used is 'MAY' and not 'SHALL' and a judicial discretion is to be ....
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....in the section 50C(2) of the Income Tax Act can be substituted with "SHALL" also need to be examined. The word used in section 50C(2) is "MAY". This means it is not mandatory for the assessing officer to refer every case for valuation. The next issue is can we substitute " May' with "Shall". Let us examine the words "May" and "Shall" used in different sections of the Act. The relevant portions of some such sections where word "May" is used are reproduced herein under: (A) SECTION 142(1) For the purpose of making an assessment under this Act, the Assessing Officer may serve ............ (B) SECTION 142A(1) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to ...........................is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. (C) SECTION 271(1)(C) If the Assessing Officer............ is satisfied that any person- ................... has concealed the particulars ............... he may direct that such person shall pay by way of pe....
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.....4 The above interpretation that 'May' does not mean 'Shall' is also supported by the decision of Hon'ble Supreme Court in the decision in case of Smt. P.L Noorjahan reported in 237 ITR 570 (SC). Therefore, the undersigned is under statutory obligation to follow the same. 24.5 The next issue involved is whether there is a prime facie case in this appeal for reference to the DVO? The answer is 'NO' for the reasons discussed in para 22 and 23. Without prejudice to the same, since appellant has filed Writ Petition before Hon'ble High Court, against determination of market value, the reference cannot be made even otherwise. Moreover, the appellant has not even taken a ground / argument on this issue and has not asked for such a reference to valuation officer. 25. Coming back to the facts in the case of the appellant, the rights which the appellant had were rights as 'Ganaotia' which were the rights of possession and doing agricultural operations under Bombay Tenancy and Agricultural Lands Act, 1948. Since the two trusts had claimed ownership rights over the land, the payment to the trust was required to be paid (as the decision of Hon'ble H....
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....l." The grounds of appeal in all years are identical. 28. In respect of penalty appeals, the appellant submitted that mere making of claim does not amount to 'concealment of income' and no material facts were suppressed before the Assessing Officer. The appellant submitted that the claim made was a bonafide claim and relied on a large number of judicial pronouncements in support of claim. 29. The contention of the appellant and the arguments of the Assessing Officer have been examined for both quantum appeals/ penalty appeals. 30. As regards the quantum appeals, the issue is decided as under: (a) The amount of Rs.16,118/- paid in FY 1997-98 is to be treated as 'cost of acquisition' of land and indexation is to be given in respect of the same on the basis of cost inflation index of FY 1997-98 and the year of sale on the proportionate cost, out of Rs.16,118/- (in proportion to the area sold in each assessment year and the total area of all the plots). (b) The premium of Rs.1,02,39,067 paid in the Financial Year 2003-04 is to be treated as 'cost of improvement" and proportionate cost of improvement is to be worked out in re....
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....e said liability had arisen in Asstt Year 2010-11. But at the time this liability had arisen, the statutory limitation for filing the return u/s 139(1) had expired, till Asstt Year 2008-09. The statutory limitation period for filing of return, u/s 139(4) had also expired for assessment year 2007-08. In fact for all the assessment years under appeal, no returns of income were filed u/s 139(1)/139(4) of the IT Acts except for AY.2008-09. The returns of income for the first time has been filed u/s 153C of the IT Act for these years. For A Y 2008-09 it was filed u/s 139(4). The section 153C of the Income Tax Act is similar to section 148 and has been enacted to assess re-assess an income which had escaped assessment and detected, consequent to a search u/s 132, or requisition u/s 132A. In the said return, claim of liability cannot be made which had not arisen by the time, the return of income u/s 139 (1) or 139(4) was due. Even otherwise, the appellant has not paid this amount of Rs.6,40,00,000/- till date and has disputed the same, for intimation before the Hon'ble High Court. Apparently, the levy has been stayed and the liability has not crystallized. Without prejudice to the sam....
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....egal issue, and all facts are already on record, therefore such ground can be raised at any point of time. 21. The ld Counsel further pointed out that assessing officer has not recorded the satisfaction note before issue of notice under section 153C of the Act, therefore, proceedings under section 153C becomes invalid in view of decision of Hon`ble Gujarat High Court in case of PCIT vs. Munisuvrat Corporation - Tax Appeal No. 187 of 2019. The SLP filed by the Department in Supreme Court was also dismissed in this case reported as 115 taxmann.com 265. The ld Counsel also relied on the circular no. 24 of 2015 issued by the CBDT. 22. Without prejudice to the above, Learned Counsel also submitted that addition if any can be made under section 153C of the Act, based on incriminating material found during the search. In fact, there was no incrementing material found during the course of search in respect of the assessee under consideration, therefore no addition should be made in the hands of the assessee. 23. On merits, learned Counsel submitted that assessee is following mercantile system of accounting, therefore liability in respect of premium payable of Rs.6,40,00,000/- has ....
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....was not furnished to the assessee. On appeal, the assessee has raised the grounds of appeal before ld CIT(A) challenging validity of assessment made under section 153C of the Act, however, the assessee did not press this ground hence there is no detailed adjudication by CIT(A) on this issue. We note that in brief manner, the ld CIT(A) also adjudicated the issue relating to validity of assessment made under section 153C of the Act, observing as follows: "18. Apparently, the 1st ground in the original grounds of appeal regarding validity of u/s 153C has been dropped in the revised grounds of appeal. Even otherwise, that ground was liable to be dismissed as a valid notice u/s 153C of the Act was issued, consequent to a search. The remaining grounds in the original grounds of appeal pertain to disallowance of the claim of 'Capital Loss' of the appellant and the addition u/s 50C(1) of the I.T. Act." 27. From the above findings of ld CIT(A), it is abundantly clear that issue relating to validity of assessment made, under section 153C of the Act, was there before the ld CIT(A), however, ld CIT(A) dismissed the ground of the assessee stating that valid notice under section 153C....
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....ready on record. On the other hand, Learned DR for the Revenue pleaded that at this stage the assessee cannot raise additional ground on legal issue. We note that it is purely a legal issue and all facts are already on record which goes to the root of the matter and no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), we admit the additional ground raised by the assessee, (challenging the validity of assessment under section 153C of the Act). 29. It is undisputed fact that under Article 265 of the Constitution, the State is entitled to recover or realise only that tax which is imposed in accordance with law. It is the duty of the State to see that justice is done to its citizens. The Hon'ble Supreme Court of India has held that this provision under Article 265 of the Constitution of India is applicable not only for levy but also for the collection of taxes and the expression "assessment" within its compass covers both the aspects carried out by the executive functionary.[Chottabhai ....
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....see preferred second appeal before the ITAT. The ITAT allowed the appeal of the assessee, holding the assessment to be illegal and void ab-initio. The Revenue, being dissatisfied with the order of the ITAT, has approached this Court with the present Appeal. 6. We take notice of the principal argument that was canvassed by the assessee before the ITAT. The principal argument has been noted by the ITAT in para 7, which reads as under: "7. Feeling aggrieved and dissatisfied, the assessee has come up before this Tribunal by way of this appeal. The learned counsel for the assessee submitted that section, 153C of Income Tax Act, 1961, prescribed a mandatory requirement of recording of satisfaction by the AO of seized person about the belonginess of seized material by other person. The AO of the searched person is also required to hand over such searched material to the AO of the other person who then proceed for making the assessment of other person. In the instant case, the AO of the searched person has not recorded the satisfaction in the assessment of the assessee. The assessee has raised this issue before the learned CIT(A) but learned CIT(A) has taken adverse view ....
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....atisfaction was recorded as regard to its belongingness to certain incriminating documents seized from the premises of Shir Kiritbhai M. Shah. The learned counsel for the assessee further relied in the case of Pepsi co India Holding Pvt. Ltd. V. ACIT (2015) 370 ITR 295 (Delhi) (2014) 50 taxmann.com 199 (Delhi) wherein it was observed as follows: "In the instant case, it is nobody's case that Jaipuria Group had disclaimed those documents as belonging to them. Unless and until it is established that the documents as belonging to them. Unless and until it is established that the documents do not belong to the searched person, the provisions of section 153C do not get attracted because the very expression used in section 153 C is that where the Assessing Officer is satisfied 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 other than the person referred to in section 153 A...". In view of this phrase, it is necessary that before the provisions of section 153 C can be invoked, the Assessing officer of the searched person must be satisfied that the seized material ( which inclu....
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...., which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This is even apart from the fact that there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. In the present case, there is not satisfaction that seized document belonged to the assessee. Ttherefore, proceeding initiated under section 153 C are bad in law." The similar issue had come up before the Hon'ble High Court of Madhya Pradesh int he case of CIT Vs Mechmen (2015) 60 taxmann.com 484 (MP), wherein the Hon'ble High court discussing the various judgments has held that the AO is obliged to record satisfaction (in case of the searched person) that the assets or documents do not belong to the searched person and these in fact belong to some other persons other than the searched person. This is sine quo non despite the fact that the AO of searched and non-searched person is same. Thereafter, he has to handover the material to the AO of non searched person having jurisdiction over him (may be the same AO). After receipt of the material and due verification, the AO of non-searched person ha....
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....d ab initio, as held by the jurisdictional Hon'ble Gujarat High Court in the case of Munisuvrat Corportion (supra). 32. Without prejudice to above, ld Counsel also pleaded that addition for AY 2004-05 to 2007-08 are not valid as they are not based on any material found in the course of the search. The assessment for A.Y. 2004-05 to 2007-08 were framed u/s 153C of the Act, therefore the addition should be based on incriminating material found in the course of the search where assessment is pending. It is to be noted that for all these four years no assessment were pending as no notice u/s 142(1) or 148 were issued before issue of notice u/s 153C of the Act on 09.11.2009. To support his arguments, Ld. Counsel relied on the following judgments: * PCIT vs Saumya Construction [81 taxmann.com 292] (Guj HC) * CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd [58 taxmann.com 78] (Bombay HC) * CIT vs Kabul Chawla [380 ITR 573] (Del HC)(SLP Dismissed in SC - 380 ITR (ST) 4) * CIT vs Veerprabhu Marketing Ltd.[ 388 ITR 574](Cal HC) * PCIT vs. Meeta Gutgutia [ 82 taxmann.com 287 ](Del. HC) 33. We note that following were the disp....
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....se. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment p....