TaxTMI 
TaxTMI 
2023 (6) TMI 1028
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....s completed by the Income Tax Officer, Ward-2(1), Sangli ('the Assessing Officer') vide order dated 30.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 ('the Act') at a total income of Rs. 13,19,96,790/-. While doing so, the Assessing Officer made addition of Rs. 3,58,69,978/- on account of alleged gains on undisclosed sale of immovable property, namely, "Magnolia Prime Site", Kolhapur to M/s. Prarthana Infra, Kolhapur for a consideration of Rs. 8,53,00,000/- as per Sale Deed registered on 14.03.2014 and allowed receipt of on-money of Rs. 8,47,00,000/- in cash. The brief facts of the case are as under : During the previous year relevant to the assessment year under consideration, the assessee firm had sold the work-in-progress of project, namely, "Magnolia Prime Site" to M/s. Prarthana Infra, Kolhapur for a consideration of Rs. 8,53,00,000/- vide Sale Deed Registration No.47/1910 dated 14.03.2014. However, the gains arising on sale of the said property were not offered to tax in the return of income filed by the assessee firm, as it is stated to be under the impression that the transaction of sale of the said property was not completed during the previous year relevant to th....
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...., the Assessing Officer had also received a letter dated 23.12.2016 from the Assistant Commissioner of Income Tax, Central (Circle), Kolhapur ('the ACIT, CC, Kolhapur') passing on information of receipt of on-money consideration of Rs. 8,47,00,000/- on the sale of the said property. The copy of this letter addressed to the Assessing Officer by the ACIT, CC, Kolhapur is extracted by the Assessing Officer in para 4.7 of the assessment order. The substance of the said letter is that the search and seizure operations u/s 132 of the Act were conducted in the residential and business premises of the M/s Ramsina Group of cases on 19.12.2014. During such search seizure operations, it was found that M/s. Prarthana Infra had made several cash payments on various dates aggregating to a sum of Rs. 8,47,00,000/- to Mr. Vihang Shah and Mr. Anand Shah as advance for purchase of land of "Magnolia Prime Site", Kolhapur, copy of the ledger account of land purchase for the period from 01.04.2013 to 01.12.2014 in the books of M/s Prarthana Infra as well as profit & loss account was also passed on to the Assessing Officer. 5. Based on this information, the Assessing Officer had issued summons u/s 131 ....
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....48/10 at Kasaba Bavada, Kolhapur from one Ulpe Family for a consideration of Rs. 2.76 crores. However, in the sale deed was executed and registered on 21.06.2011 for a consideration of Rs. 1,70,20,000/- only mentioned. Based on this information, the Assessing Officer summoned the partner of the assessee firm, namely, Mr. Vihang Ashok Shah and recorded the statement. When this information was confronted, he denied having paid any on-money payment at the time of purchase of the said property. However, disbelieving the statement given by Mr. Vihang Ashok Shah, the Assessing Officer had made addition of Rs. 1,05,80,000/-. The Assessing Officer also disallowed a sum of Rs. 16,313/- being 15% of the total expenses of Rs. 1,08,782/- incurred on office, petrol, travelling, telephone and vehicle expenses. 9. Being aggrieved by the above disallowances, an appeal was filed before the ld. CIT(A) contesting inter alia that the profits of Rs. 3,58,69,978/- on sale of immovable property had not accrued to the appellant. The Assessing Officer ought not to have made addition of Rs. 8,47,00,000/- being the alleged receipt of on-money on sale of the said property in the absence of evidence on record....
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.... Family over and above, the apparent consideration of Rs. 1,70,20,000/-, it was argued that no addition can be made in the absence of any documentary evidence merely based on the information received from the ACIT, CC, Kolhapur. Without prejudice to the above, it is further argued that no addition can be made for the year under consideration, as the addition if at all is required to be made, it is only in the year in which the property was purchased. 13. The ld. CIT(A) on due consideration of the above submissions, deleted the addition of profits arising on sale of property, Magnolia Prime Site of Rs. 3,58,69,978/- expressing agreement with the contention of the assessee firm that the sale deed entered into with M/s. Prarthana Infra is only a conditional sale deed and the transfer is completed only in the year in which the property was handed over to the purchasers and full value of consideration was received following the ratio of the decision of the Hon'ble Supreme Court in the case of Kaliaperumal (supra). Accordingly, the ld. CIT(A) held that the profits arising on sale of property cannot be brought to tax for the assessment year under consideration. 14. As regards, the addit....
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....he Cross Objection in C.O. No.15/PUN/2023 was filed by the assessee challenging the very validity of proceedings of the assessment on the ground that no approval of the Pr. Commissioner of Income Tax was obtained for converting the limited scrutiny assessment to complete scrutiny assessment etc. ITA No.67/PUN/2021 - By Revenue : 19. Now, we shall take up the appeal of the Revenue in ITA No.67/PUN/2021. 20. The Revenue raised the following grounds of appeal :- "1. On the facts and in the circumstances of the case and in law, the CIT(A) -1, Kolhapur, in respect of Ground No. 1, has erred in deleting the addition of Rs 3,58,69,978/- made on account of undisclosed sale of immovable property not offered for taxation, ignoring the facts of the case in totality i.e. while deciding the Ground No.2, the CIT(A)-1, Kolhapur held that the AO was right in making addition on account of on-money amounting to the extent of Rs 6,97,00,000/- received by the assessee for the A.Y 2014-15. Whereas in respect of Ground No 1, treated the transaction incomplete for the A.Y 2014-15 stating the major consideration was not received in that year and the assessee had no intention to transfer in the A.Y 20....
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.... complete only upon the receipt of full value of consideration as well as passing on the possession of the property. According to the assessee firm, the full value of consideration was received only during the previous year relevant to the assessment year 2016-17. Therefore, the profits arising on sale of said property were offered to tax for the assessment year 2016-17 which is not disputed by the Assessing Officer. However, the Assessing Officer rejected the above contention placing reliance on certain clauses of the sale deed i.e. clause nos.13, 16 and 17 of agreement to say that the purchaser had become the full owner of the property. Accordingly, the Assessing Officer brought to tax the profits arising on sale of the said property for the assessment year 2014-15. On appeal before the ld. CIT(A), the ld. CIT(A) concurred with the contention of the assessee firm that there was no transfer of immovable property during the previous year relevant to the assessment year under consideration. Therefore, the ld. CIT(A) held that the profits arising on sale of such property cannot be brought to tax for the assessment year under consideration. 22. Being aggrieved by the decision of the....
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....perusal of the clause 2.3 as well as relevant clauses of the sale deed, it would reveal that the sale consideration was to be discharged by post-dated cheques in installments. The buyer of the property had only limited rights of development i.e. license to commence the work and the possession of the property to be handed over to the buyers only upon the receipt of the entire consideration. It is further stipulated vide clause 2.5 of the sale deed that the name of the assessee firm continues to be entered in 7/12 extracts till the entire consideration received. 27. Having regard to the recitals made in the above clauses of the sale deed, we are now required to examine the issue of year of transfer. Admittedly, the subject immovable property was held as stock-in-trade, therefore, the definition of word "transfer" given in section 2(47) of the I.T. Act have no application in relation to the asset which is held as stock-in-trade. Therefore, the issue of transfer in relation to the immovable property held as stock-in-trade has to be decided under the general law. As the year of transfer is important to decide the year of chargeability of capital gains under general law, normally, the o....
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.... the answer to the question regarding passing of the title lies in the intention of the parties, which is to be gathered from the sale deed itself. A similar view has been taken in the case of Shiva Narayan Sah v. Baidya Nath Prasad Tiwary, reported in AIR 1973 Patna 386. There is a catena of decisions of this court as well as of other High Courts taking a similar view." 28. To the same effect of the decision of the Hon'ble Supreme Court in the case of Kaliaperumal vs. Rajgopal & Another, 2009 (4) SCC 193, wherein, the Hon'ble Supreme Court held that passing on title of execution of sale deed depends upon on the intention of the parties and such intention has to be gathered from recitals of the sale deed, and the surrounding circumstances. Nevertheless, it is equally settled position of law that mere non-payment of consideration may not prevent passing on the title, as the consideration could be payable in future also. Non-payment of consideration could stop the transfer of title, if such payment is treated as a condition precedent by the parties of the sale deed. 29. Applying the above mentioned principles to the facts of present case, on perusal of clause 2.3 of the sale deed, ....
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....except the information received from ACIT, CC, Kolhapur, he further observed that the ACIT, CC, Kolhapur had not brought on any evidence on record except the purchase deed dated 21.06.2011, wherein, the consideration of Rs. 1,70,20,000/- alone stated. The ld. CIT(A) further observed that the property was purchased by the assessee firm on 21.06.2011 and the addition, if any, is required to be made only for the purpose of assessment year 2012-13. 32. Being aggrieved by the above decision of the ld. CIT(A), the Revenue is in appeal before us. 33. The ld. CIT-DR placing reliance on the order of the Assessing Officer submits that the ld. CIT(A) ought not to have deleted the addition on account of alleged payment of purchase consideration in cash. 34. On the other hand, ld. AR submits that the order of the ld. CIT(A) is based on proper appreciation of facts as well as evidence requires no interference. 35. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the addition on account of alleged payment of on-money consideration at the time of purchase of property from Ulpe Family. The material on record clearly indicates that the....
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.... by a partner of the firm forming the very basis of the addition) not being bearing the names of the persons, in particular assessee or his partners, it is incorrect to make addition in the hands of the appellant of huge amount of Rs. 8.47 Crores merely on surmises and conjunctures. 4. On the facts and circumstances of the case and in law the Ld CIT(A) erred in confirming the addition of Rs. 8,47,00,000/- being alleged 'On-Money' paid by the buyers of the land in the years of alleged receipts of such on- money. 5. On the facts and circumstances of the case and in law the Ld CIT (A) erred in rejecting the contention of the appellant that such onmoney cannot be taxed in the year of their receipts 'On Receipt Basis' in view of the method of accounting followed by the appellant inasmuch as they same is not accrued in the years of their alleged receipts. The appellant craves leave to add to, amend, alter, modify or delete all or any of the grounds of appeal or add altogether a new ground of appeal before or at the time of hearing." 39. The assessee firm also raised the following additional grounds of appeal :- "6. Appellant contends that, since Appellant's 'Return of In....
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.... ITR is less than sale consideration of the property reported in ITR." 43. The transaction of alleged receipt of on-money consideration on sale of immovable property falls within the ambit and scope of "sale consideration of the property in ITR is less than sale consideration of the property reported in ITR". Further, no material was placed before us in support of contention that no approval of Pr. CIT was obtained. It is further contended that the assessment order is silent as to the approval accorded by the Pr. CIT to convert the limited scrutiny into complete scrutiny. The approval of the Pr. CIT need not form part of the assessment order, if it form part of the record is sufficient, the assessee firm could not discharge the onus proving that no such approval was obtained. Thus, all the contentions raised by the assessee firm are devoid of merits and, accordingly, dismissed. 44. As regards to the contention of the assessee firm that invalidity of the assessment order on the ground that since the assessment is based on the information received consequent to the search and seizure operations of third party, the assessment should be done u/s 153(C) of the Act not under regular as....
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....ng the information received from ACIT, CC, Kolhapur had made addition of Rs. 8,47,00,000/- on account of alleged receipt of on-money consideration u/s 69A of the Act. On appeal before the ld. CIT(A), the ld. CIT(A) held that there was sufficient evidence of receipt of on-money consideration of Rs. 8,47,00,000/- but, however, directed the Assessing Officer to restrict the amount received during the year under consideration i.e. Rs. 6,97,00,000/- and balance of Rs. 1,56,00,000/- directed to be assessed in assessment year 2016-16. 47. Being aggrieved by the direction of the ld. CIT(A), the assessee is in appeal before us. 48. The ld. AR contends that mere entries in the diaries found as result of search and seizure action in third party cannot be form the basis for addition without any corroborative evidence placing reliance on the decision of the Hon'ble Bombay High Court in the case of Addl. CIT vs. Miss Lata Mangeshkar, 97 ITR 696 (Bom.). He further submits that there are gaps in the evidence brought by the Department to suggest that there is an undisclosed income, therefore, the documents can be considered as dumb document and based on the dumb document, no addition can be made....
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....e had nowhere stated that he had paid on-money consideration to the assessee firm herein or its partners. When this statement was confronted with Mr. Vihang Shah and Mr. Anand Shah, they had denied having received any on-money consideration. Thus, it is clear that there is no evidentiary value of the statement given by said Mr. Sachin Abhaykumar Oswal, who is partner of M/s. Prarthana Infra, once the statement of Mr. Sachin Abhaykumar Oswal is eliminated then there remains no corroborative evidence on record to conclude that the assessee firm had received on-money consideration. The Assessing Officer had merely presumed that the assessee firm received on-money consideration based on the notings/entries made in the books of M/s. Prarthana Infra. It is trite law that a finding in the assessment of one person is not conclusive in the assessment of another person in view of the settled position of law that material gathered in the assessment proceedings of one person is not legal evidence in the assessment of another person. Reference can be made to the decision of N. S. Choodamani vs. CIT, 35 ITR 676 (Kerala). The assessment of each person is separate and distinct and an addition is t....