TaxTMI 
TaxTMI 
2022 (5) TMI 1461
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....ration 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 indexation benefit in respect of conversion taxes paid by the appellant....
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.... 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 account, which are as under: Opening balance 16,118 01.04.03 Premium payable 17,24,800 27.05.03 Premium paid 27,59....
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....e 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) The cost of acquisition of the asset and the cost of any improvement thereto. Since as per the notice of the Deputy Collector, Choryasi Prant, Surat, the sum of Rs.6,40,00,000/- is to be paid as premium for conversion of the impugned land into non- agricultural land ch....
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....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 land was 15705.859 Sq Mtr. The total sale value shown by the assessee for this part of the land was at Rs 90,91,001/- 14. Total sale consideration as per Stamp Duty Authority ( Jantri Price ) for the Land Sold During the Year is as follows: The assessee sold land during the year under consideration is 5289.74 Sq Mtr. The jantri price or value as per Stamp duty ....
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....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 exercised to decide whether it is fit for reference to valuation officer or not. 22. The appellant in the grounds of appeal has not requested for reference of land for valuation. However, the fact that the State Government has charged hefty premium for conversion of land from agricultural land to non-agricultural land first at the market value of Rs.1,100 per sq mtr and then at the market value of Rs.4,800/- per sq mtr and lastly at th....
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.... 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 penalty (D) SECTION 142 (2A) If, at any stage of the proceedings before him, the assessing officer...............he may, ............................................. (E) 133(6) The Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals)] may, for the purposes of this Act,- ............................. (6) require any person.....................giving information in relation to such points or matters .............. (F) 133A (1) Notwithstand....
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.... 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 High Court) on the date on which, the appellant sells or transfers the land. The application for conversion of land from agricultural land to non-agricultural land was made in FYs.2002-03 and in the same year, the payment was made to the Trusts. Though it was treated as "advance" in that year and debited in the books in F Y 2003-04 when first plot was sold. The asset which has been sold is 'non-agricultural land'. In fact, the assets sold are plots having specific plot numbers and plotting scheme has been approved by the Competent Authority. Therefore, what the assessee has sold is not his right as 'Ganaotia' but various plots made out of non-agricultu....
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....uisition' 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 respect of land sold in each assessment years, in the ratio of area of land sold to the total area of all the plots taken together. (c) The indexation benefit is not to be given for AY 2004-05 in respect of premium of Rs.1,02,39,067/-. It will be given from AY 2005-06 onward on the basis of cost inflation index of F Y 2003-04 and the year of sale. (d) As regards, the amount of Rs.3,00,000 paid to the Trust as per the order of the Hon'ble Gujarat High Court, the said amount was to be paid by the appellant, if he decided to sell or transfer the land and that too in the year of sale. Therefore, technically, this was an appropriation of sale consideration of land by over riding title, in view of the decision of the Hon'bl....
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....equisition 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 same, the letter for such disputed liability was issued and received in Asstt Year.2010-11. Therefore, no deduction for this amount of Rs.6,40,00,000 is allowed as 'cost of improvement' or 'expenses' in connection with transferor both the above reasons i.e. the liability did not accrue in A.Y 2004-05 to A.Y 2008-09 and even after A.Y 2010-11 that it has neither crystallized nor paid till date. (i) Addition u/s. 50C(1) for all the years is confirmed in view of discussion from para 21 to 24 of this order. 30.1 It need to be clarified that total area of land and total area of all the plots taken together may not be the same. Due to plotting scheme, some area must have been left for roads etc. Therefore, for apportionment of cost, the area of all the plots taken to....
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....aterial 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 accrued in the hands of the assessee, hence eligible for index cost of acquisition. The ld Counsel also submitted that indexation benefit in respect of conversion taxes and amount paid to trust has not been provided to the assessee which is not acceptable in the eye of law. 24. On the other hand, the Ld. DR for the Revenue, vehemently pleaded that issue relating to satisfaction note, under section 153C of the Act was there before the assessing officer. However, during the appellate proceedings, although the assessee has raised ground relating to section 153C of the Act, but did not press,( waived the ground) hence there is no adjudication by ld CIT(A) on the issue of satisfaction note, under section 153C of the Act. Therefore, at this stage the assessee does not have right to raise this....
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....isallowance 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 was issued to the assessee. Therefore, issue relating section 153C was there before both the authorities, that is, before Assessing Officer as well as before Ld. CIT(A). We do not find merit in the arguments of ld DR for the Revenue to the effect that assessee did not press, (waived the ground) relating to the issue of satisfaction note, under section 153C of the Act, therefore, before Tribunal assessee does not have right to raise this legal issue. We note that even if the assessee waived the ground regarding validity of assessment made u/s 153C of the Act, even then, assessee has right to raise such legal issue again before the Tribunal. Such action of the assessee is permitted under the law as held by the Hon'ble Gujarat High Court in case of Ramilaben Ratilal Shah vs. CIT - 152 Taxman 37. The find....
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....he 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 Vs. Union of India 1962 SCR Supl.2 1006 ]. Therefore, it is required that whole of the process of taxation must follow the procedures which are valid under the law and must adhere to law i.e. substantive one as well as procedural one too. Therefore, in other words it is provided in the Constitution of India that every step should be taken to ensure that levy and collection of the taxes is strictly in accordance with law-not only substantive one but the procedural law, as well. The Ld Counsel contended before us that assessee was not supplied the satisfaction note recorded under section 153C of the Act despite of the request made by the assessee during the assessment stage. The Ld Counsel pointed out that it is the duty of the assessing officer to furnish the copy of the satisfaction note to the assessee, however h....
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.... 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 by holding that the AO had jurisdiction over under section 153 C of the Act as the satakhat belonged the assessee. Hence, the AO was fully empowered to initiate proceedings under section 153 C of the Act. The learned counsel for the assessee, referred the CBDT circular No. 24/2015 dated 31st December 2015 which is regarding recording of satisfaction under section 158BD/153C of the Act wherein in para 4 it was mentioned as "The guidelines of the Hon'ble Supreme Court as referred in para 2 above, with regard to recording of satisfaction note may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and "other person" is one and the same, then also he is required to record his satisfaction as held by the courts." The learned counsel for the assessee, submitted that the assessment pro....
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....s 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 included documents) does not belong to the person referred to in section 153 A, i.e., the searched person. In the satisfaction note, 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 even apart from the fact that there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned.(para 14)" 6. The Tribunal, ultimately recorded its findings as reflected in para 12 of the impugned order, which read thus: "12. We have heard the rival submissions and have perused the materials available on record. We find that the assessing officer has issued notices under section 153C of the Act based on search under section 132(1) which was carried out in the case of Shri Kirit M. Shah. The Assessing Officer issued notices under sectio....
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....earched 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 has to issue notice under section 153 C of the Act and to proceed in the matter. Thus, we are of the view that the Assessing officer of the person searched has to necessarily form a satisfaction that the item referred to in section 153 C belongs or belong to a person other than the person searched. Apparently, in the present appeals, no such satisfaction has been recorded by the Assessment officer. The learned DR has not controverted the submission of the learned counsel for the assessee that in the case of the persons searched, no satisfaction as regard to the belongingness of any document to the present assessees was recorded. The learned counsel for the assessee relied on circular No. 24/2015 dated 31.12.2015, issued by the CBDT, in which, the Board following the decision of Hon'ble Supreme Court in case of M/s Calcutta Knitwear's (civil Appeal No. 3958 of....
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....] (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 disputed expenditure: Opening balance 16,118 01.04.03 Premium payable 17,24,800 27.05.03 Premium paid 27,59,067 19.09.03 Revenue duty paid 1200 27.09.03 Revenue paid 33,000 5.12.03 Premium paid 35,20,000 6.2.04 Revenue duty 40,000 6.2.04 Premium paid 39,60,000 31.03.04 Advance paid towards land cost in last year debited during the year 3,00,000 31.03.04 Premium payable 6,40,00,000 Total cost of land 7,63,54,185 The premium was paid by the assessee by account payee cheque to the government. Taxes paid by assessee for the purpose of conversion of agricultural land to nonagricultural land cannot be incriminating material, because these taxes were paid by the assesse to the Government as per Government rules. Therefore, amount paid to Government, has already been disclosed by the assessee. The premium paid or payable to Government cannot be incriminating material, as necessary records are ....
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....ection 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 35. We also note that the Hon'ble Calcutta High Court in ITA No. 661 of 2008 Commissioner of Income Tax vs.Veerprabhu Marketing Ltd. has also held as under: "We agree with the view expressed by the Karnataka High Court that incriminating material is pre-requisite before power could have been exercised u/s 153(C) r.w Section 153(A). In the case before us, the AO has made a d....