M/S. REAL FORTS & RESORTS PVT. LTD. vs. COMMISSIONER OF INCOME TAX

ITA/222/2012HC KeralaKLHC01024144201231 October 2017Author: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC18 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, M/s. Real Forts & Resorts Pvt. Ltd., engaged in real estate development, is appealing an order of the Income Tax Appellate Tribunal (ITAT) concerning its block period from 01.04.1966 to 29.01.2003. A search and seizure operation was conducted on the assessee on 29.01.2003, leading to a block assessment under Section 158BB of the Income Tax Act with various additions. The Commissioner of Income Tax (Appeals) granted partial relief. The Revenue appealed against this relief, and the assessee filed a cross-objection. The ITAT disposed of both by an order dated 23.03.2012, which is now under challenge before the High Court. The dispute involves additions related to profit on sale of a penthouse, undisclosed profit on sale of land and building, and unaccounted sale proceeds of City Centre space.

What did the High Court hold?

The High Court addressed the issues as follows: Regarding the profit on the sale of the penthouse (Issue 1): The Tribunal's decision to set aside the CIT(A)'s order and remit the issue to the Assessing Officer for fresh examination was upheld. The Court found the Tribunal's reasons, including the ambiguity in the assessment order regarding suppressed cost or sale receipts, and the CIT(A)'s consideration of fresh evidence without confronting the Assessing Officer, to be legally sound. Therefore, the Tribunal could not be faulted for remitting the issue. Regarding the undisclosed profit on the sale of land and building (Issue 2): Similar to the first issue, the Court found the Tribunal's reasons for remitting the matter to the Assessing Officer to be valid. These reasons involved the need to examine the terms of the agreement between the assessee and landowners and to consider seized materials properly. The Court was not persuaded to interfere with this finding. Regarding the addition of Rs. 50 lakhs as unaccounted receipt on sale of commercial space (Issues 3 & 6): The Court found significant contradictions and inconsistencies in the assessment order and supporting documents presented by the Revenue. The assessment order stated that incriminating documents were found during the survey and that the statement of Sri. Muneer was taken under Section 131. However, the Panchanama of the search did not record ORF 67 (cited in the assessment order) as containing an agreement page. Furthermore, Annexure-A (a letter from the AO) contradicted Annexure-B (Panchanama) regarding the source of incriminating documents. The Revenue's attempt to interpret "survey" as "search" was rejected as a new plea. Due to these contradictions and the lack of clear evidence linking the addition to materials found during the search, the Court held that the Tribunal's order sustaining the addition was legally untenable. The Court did not explicitly decide on the applicability of Section 158BB or the evidentiary value of the Section 131 statement in isolation, but rather on the factual inconsistencies presented. Issues 4 and 5 were not explicitly discussed or decided separately in the provided text, but the reasoning for issues 3 and 6 implicitly touches upon the evidentiary value of the statement and the applicability of precedents.

What were the issues?

The High Court had to decide the following questions of law: 1. Whether the Tribunal was correct in remanding the issue of profit on sale of a penthouse (Rs. 21,00,000/-) for fresh consideration by the Assessing Officer, despite the CIT(A) deleting the addition due to lack of seized material and the Assessing Officer being silent on this aspect, rendering the finding perverse and illegal? 2. Whether the Tribunal was correct in remanding the issue of alleged undisclosed profit on sale of land and building (Rs. 50,81,874/-) for fresh consideration by the Assessing Officer, despite the CIT(A) deleting the addition due to lack of seized material and the Assessing Officer being silent on this aspect, rendering the finding perverse and illegal? 3. Whether the Tribunal was correct in restoring/confirming the addition of Rs. 50 lakhs as undisclosed sale proceeds of City Centre space in the case of Sri. Jamaluddin and Sri. Muneer? 4. Whether the Tribunal was right in holding that a statement taken on oath under Section 131 from Sri. Muneer during a survey proceeding prior to the search has evidentiary value and can form the basis for addition in the hands of the assessee? 5. Whether the Tribunal was right in holding that the decision of the Kerala High Court in the case of Paul Mathew & Sons (263 ITR 101) is not applicable? 6. Whether the Tribunal was right in restoring/confirming the addition of Rs. 50,00,000/- made by the Assessing Officer based on a statement of Mr. Muneer taken under Section 131 during survey proceedings prior to the search, especially when no material was found during the search as held by the CIT(A) and without adjudication by the Tribunal, rendering the finding perverse and illegal? Assessee's Contentions: - For issues 1 & 2: The CIT(A) deleted the additions for valid reasons, and the Tribunal should not have interfered. The findings of the Tribunal are perverse and illegal. - For issue 3 & 6: The addition was based on materials recovered during a survey long before the search. Section 158BB, Circular No. 8 of 2002, and judgments in CIT v. K.C. Nirmal Kumar and others support the assessee's case. The Tribunal's order sustaining the addition is legally untenable. Revenue's Contentions: - For issues 1 & 2: The Tribunal's reasons for remand, including the assessment order's silence on the nature of addition and the CIT(A) considering fresh evidence without confronting the AO, are legally valid. - For issue 3 & 6: The Tribunal's finding that the statement of Sri. Muneer and other documents constituted "any other material" under Section 158BB is valid. The Revenue sought to interpret "survey" as "search" in the assessment order to support its case, but this was a new plea. The Panchanama and other documents create contradictions regarding the seized material.

Which sections of the Income-tax Act were involved?

Section 158BB,Section 131

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUE AY, THE 31ST DAY OF OCTOBER 2017/9TH KARTHIKA, 1939 ITA.No.222 of 2012 ----------------------- AGAINST THE ORDER IN IT(SS)A. No.217/2005 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 23-03-2012 ---------- APPELLANT/RESPONDENT/ASSESSEE: ------------------------------------------ M/S. REAL FORTS & RESORTS PVT. LTD. CITY CENTRE, FORT ROAD, KANNUR, REPRESENTED BY ITS MANAGING DIRECTOR, SRI.ABDULLA ZUBAIR.

BY ADV. SRI.S.ARUN RAJ RESPONDENT/APPELLANT/REVENUE: ----------------------------------------- COMMISSIONER OF INCOME TAX CALICUT.

BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX Sri.PKR MENON (SR.), SC THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 31-10-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ANTONY DOMINIC, & DAMA SESHADRI NAIDU, JJ. ------------------------------------------------ I.T.A. No.222 of 2012 ------------------------------------------------ Dated this the 31st day of October, 2017 JUDGMENT Antony Dominic, J. 1. aThis appeal is filed by the assessee against the order pass

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 158BB

All 110 judgments and leading authorities on Section 158BB →

Recent GST High Court judgments

Search GST case law →