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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI O.P. KANT
Date of hearing 24.11.2021 Date of pronouncement 26.11.2021 ORDER PER O.P. KANT, AM:
These two appeals by the assessee are directed against two separate orders dated 27/02/2017 and 28/02/2017 passed by the learned Commissioner of Income Tax (Appeals)-13, New Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2006-07 and 2012- 13 respectively. Both appeals being connected to same assessee, were herded together and disposed off by way of this consolidated order for convenience. ITA No. 3906/Del./2017 Assessment Year : 2006-07 2. First, we take up the appeal for assessment year 2006-07. The grounds raised in 2006-07 are reproduced as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessment completed u/s 153C read with section 153A of the Act is ab initio void, by applying on the ratio laid down by the Hon hie Jurisdictional High Court in the case of CIT Vs. M/s RRJ Securities Ltd. (2015) 62 taxmann.com 391 (Delhi) which has not been accepted by the department and appeal is pending before the Apex Court. Accordingly, appeal is recommended on this issue.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 39112550/- by relying on the ratio o f the judgement delivered by the Jurisdiction High Court in the case of CIT Vs. Kabul Chawla (2016) 380 ITR 573 which has not been accepted by the department and the appeal is pending before the Apex Court.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 88,71,950/- by relying on the documents furnished during the course of appellate proceedings, that were never produced before the AO so as to enable him an opportunity to examine the relevant documents filed by the assessee before the Ld. CIT(A).
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,00,000/- by relying on the documents furnished during the course of appellate proceedings, that were never produced before the AO so as to enable him an opportunity to examine the relevant documents filed by the assessee before the Ld. CIT(A).
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.6400000/- by completely ignoring the fact that the assessee could only have had cash deposits to the extent of Rs.3.29 crores and not Rs. 3.93 Cr. as just Rs. 3.29 Cr. was the only amount that was left available with it at the time of deposit since the assessee has already consumed an amount of Rs.
1.22 crores in making payment to the farmers between 21-09-2005 to 05-12-2005. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,38,40,600/- by relying on the documents furnished during the course of appellate proceedings, that were never produced before the AO so as to provide any opportunity to examine the relevant documents filed by the assessee before the Ld. CIT(A).
Briefly stated facts of the case are that during the course of the search action under section 132 of Income-tax Act, 1961 (in short ‘the Act’) at the premises of M/s. SDS Group of Companies on 25/03/2011, certain documents belonging to the assessee were seized. Accordingly, after recording satisfaction as required under the provisions of the Act, the Assessing Officer issued notice under section 153C of the Act on 20/03/2014 for the year under consideration along with other assessment years from 2005-06 and 2007-08 to 2010-11. The assessment for the year under consideration has been completed on 31/03/2015 after making certain addition/disallowances. On further appeal, the Ld. CIT(A) quashed the assessment holding to be void ab initio. The Ld. CIT(A) also deleted the additions/disallowances on merit. Aggrieved, the Revenue is in appeal before us by way of raising grounds as reproduced above. 3. Before us, the assessee has filed a paper-book. Both the parties appeared through Videoconferencing facility. We have heard rival submission of the parties on ground No.1 of the appeal.
We find that Ld. CIT(A) has quashed the assessment observing as under:
“5. The written submissions of the appellant have been carefully considered. At ground of appeal no. 1, the appellant has challenged the initiation and completion of assessment proceedings u/s 153C of the Act, for the six AYs 2005-06 to 2010-11 instead of the six AYs 2008-09 to 2013-14. It is contended that AYs 2005-06, 2006-07 and 2007-08 are beyond the limitation period of six years immediately preceding the assessment year relevant to the date of handing over/recording of satisfaction u/s 153C, as per proviso of sec. 153C(1) of the Act. The appellant has submitted that a search and seizure operation u/s 132 of the Act was carried out in the case of M/s SDS group of companies on 25.03.2011. During the search operation of the said third party, certain documents belonging to the appellant were found and seized. These documents pertain to alleged transactions of purchase ahd sale of land in District Jodhpur, Rajasthan. The AO of the searched person, vide letter dated 29.03.2013, handed over copies of the seized documents and statements recorded which were received by the AO of the appellant on 05.04.2013. In the assessment as well as in the appellate proceedings, the AR of the appellant contended that since the AO has received the satisfaction note of the AO of the searched person along with relevant seized documents only on 05.04.2013, therefore the assessment proceedings u/s 153C of the Act can be initiated only from AVs 2008-09 to 2013-14, as per the provisions of sec. 153C r.w.s. 153A of the Act. In support of the above argument, f the AR of the appellant has relied upon the decision of the jurisdictional High Court of Delhi in the case of CIT vs. M/s RRJ Securities Ltd., [2015] 62 taxmann.com 391, where it has been held that the date of handing over of material, will be construed as the reference date for initiation of action u/s 153C, as against date of search as the reference date for initiation of action u/s 153A.
5.1 It is seen that the AO of the SDS Group recorded his satisfaction that the seized documents in question belong to the appellant, and handed them over to the AO of the appellant vide letter dated 29/03/2013. From the satisfaction note recorded by the AO of the appellant, it has been noted that the same were received by him only on 05/04/2013, and subsequently the jurisdictional AO recorded his satisfaction on 20/03/2014, that the documents seized had a bearing on the determination of the total income of the appellant. As per proviso to section 153C(1) of the Act, the reference to the date of initiation of the search for taking action u/s 153C of the Act, would be 05/04/2013 in the case of the appellant, instead of the date of search i.e. 25/03/2011. Therefore, the relevant six preceding AYs in the case of the appellant would be from A.Y. 2008- 09 to A.Y. 2013-14, for initiating assessment proceedings u/s 153C r.w.s. 153A of the Act. From the above, it is observed that A.O. has wrongly issued notices u/s 153C for A.Y. 2005-06 and A.Y. 2006- 07, since the documents were handed over to the jurisdictional AO only on 05.04.2013. Therefore, the notice issued by the A.O., is beyond the limitation period of six years from the reference date, prescribed in the first proviso to section 153C(1) r.w.s. 153A of the Act. In view of the above and applying the ratio laid down by the Hon'ble jurisdictional High Court in the case of CIT vs. M/s RRJ Securities Ltd., [2015] 62 taxmann.com 391 (Delhi), I am of the considered opinion that the assessment completed u/s 153C r.w.s. 153A of the Act, is ab initio void, as the A.O. had no jurisdiction for making the assessment for A.Y. 2006-07, being beyond the period of six years prescribed. Accordingly, ground of appeal No. 1 is allowed.” 4.1 It is evident that Assessing Officer has considered six assessment years from 2005-06 to 2010-11 for assessment under section 153C of the Act corresponding to search period in the case of M/s SDS Group of Companies, i.e., six assessment years corresponding to the previous years immediately prior to the previous year in which search was conducted. Whereas, the Hon’ble Delhi High Court in the case of RRJ Securities Ltd. (supra) held that wherever seized documents belonging to third- party have been found during the course of the search, then for assessment under section 153C of the Act has to be taken for six assessment years corresponding to the previous years prior to the previous year in which such seized material/document along with satisfaction note of the Assessing Officer of the search person are received by the Assessing Officer of the assessee. In the case of the assessee, relevant seized document belonging to the assessee along with satisfaction note of the Assessing Officer of the searched person, have been received on 05/04/2013 and therefore assessment proceedings u/s 153C should have been initiated only from assessment year 2008-09 to assessment year 2013-14. Thus, assessment year under consideration was not to be completed u/s 153C of the Act. In our considered opinion, there is no error in the order of the Ld. CIT(A) in following the binding precedent of the jurisdictional High Court. Accordingly, we uphold the binding of the Ld. CIT(A) on the issue in dispute. The ground No. 1 of the appeal of the Revenue is accordingly dismissed. Since we have already upheld quashing of assessment proceedings, the other grounds raised by the Revenue are rendered only academic, and therefore, we are not adjudicating upon them. Assessment Year : 2012-13
5. Now, we take up the appeal for assessment year 2012-13. The grounds raised in ITA No. 3909/Del/2017 for assessment year 2012-13 are reproduced as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,87,19,545/- made by the AO on account of profit earned from sale of land transaction which took place- out of books by completely relying upon baseless working sheet of sale of land provided by the assessee in course of appellate proceedings and ignoring the ITS data available on record which is a reliable piece of information.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in overlooking the fact that the assessee company is the only registered owner of the land which has been sold during the year and as per the statutory provisions of law, it is only the assessee company which is liable to show the said transaction in its books of accounts and compute the tax liability accordingly. Merely by entering into the private arrangement by virtue of agreement, substantive provisions of law cannot be forfeited.
3. The Appellant craves for reserving the right to amend, modify, alter, add or forego any of the Ground(s) of Appeal at any time before or during the hearing of this appeal.
Brief facts of the case are that under the development agreement between the assessee company and another associated company M/s Parasvnath Developers Ltd., the assessee purchased certain lands at Jodhpur in the assessment year 2006-07, which were subsequently developed and sold by M/s Parasvnath Developers Ltd. The profit on sale of such land has been claimed to be declared by M/s Parasvnath Developers Ltd. in the relevant year of sale. The Assessing Officer, however, is of the view, that assessee being registered owner of the land, it was required to declare profit on sale of such land in its return of income filed. Accordingly, he after verifying sales of developed plots, made addition for profit amounting to ₹ 1,87,19,545/-, which has been computed as under: “(viii) For the above reasons the contention of the assessee is not accepted and profit from sale of this land is computed in the hands of the assessee. The assessee had bought 47 bighas of land for a total price of Rs.1,46,43,770/-. As per information gathered bigha of land consists of 3,020 sq. yds. Therefore, the cost per sq. yd. is computed below: Total no. of yds in 47 bighs -47 X 3025 = 1,42,175 Sq. yds Cost per sq. yd. -1,46,43,770/142175 =Rs.103 per sq. yd. Total area of plots sold = 1,100 sq. yds. Total cost of plot sold 3600 X 103 = Rs.370,800 As no evidence with regard to development cost has been brought on the record, Rs.3,70,800/- is taken as the cost of sale. Profit from sale of land is computed below:- Sale consideration Rs. 190,90345 Less: Cost of sales Rs. 3,70,800 Profit on sale Rs. 18719545 This profit of Rs. 1871954/- is added to the income of the assessee.”
On further appeal, the Ld. CIT(A) has deleted the addition observing as under: “5. The above written submissions have been carefully considered. Grounds of appeal nos. 1 to 3, all pertain to the addition of Rs. 1,87,19,545/- on account of estimated profit on sale of plots of land. It is submitted that the addition has been made on the basis of AIR information, without considering the fact that the sales had been made and profit had been booked by M/s Parsvnath Developers Ltd. It is further argued that the addition of Rs. 1,87,19,545/- has been made in respect of sale of 14 plots of land of a total area of 3600 sq.
yards, without considering that these plots are part of the same 47.01 bighas of land, whose sale to M/s Parsvnath Developers Ltd., has been brought to tax in the order u/s 153C for the AY 2006-07, passed on the same date.
5.1. The appellant has contended that the addition has been made in respect of developed plots sold by M/s Parsvnath Developers Ltd., in which sales the appellant is a confirming party. The AR of the appellant has stated that the appellant is an associated company of M/s Parsvnath Developers Limited and an agreement to sell dated 02.09.2005 was executed between the appellant and M/s Parsvnath Developers Limited. As per the said agreement to sell, the appellant company represented that it had made arrangement to acquire about 120 - 150 bighas of contiguous land at Dhinana, District Jodhpur, Rajasthan from various landowners / sellers. However, the said agreement did not materialize as the appellant company failed to acquire rights to the entire contiguous land, as well as conversion and clearance permissions. The AR of the appellant has submitted that the appellant purchased land ad- measuring 47.01 bighas only, for an amount of Rs 1,46,43,770/-, which was duly recorded in its books of account for the AY 2006-07. The appellant has furnished copy of the sale deeds in favour of the appellant along with details of land owners / farmers from whom such land of 47.01 bighas was purchased in the FY 2005-06 relevant to the AY 2006-07. But the land was held on behalf of M/s Parsvnath Developers Ltd., and no sale of land had been made by the appellant during the years since then, or in the year presently under consideration. The said land has continuously been shown as work in progress in the books of the appellant up until the AY 2012- 13. The appellant has affirmed that besides the said land admeasuring 47.01 bjghas, it has not purchased any other land, and also has not sold any land. The AIR information that has been received in respect of purchase and sale of land made in district Jodhpur, Rajasthan, for assessment year 2012-13 pertains to sale of plots by M/s Parsvnath Developers Ltd.
5.2. The AR has submitted that the appellant had entered into an agreement with M/s Parsvnath Developers Limited on 01.09.2006, as per which, M/s Parsvnath Developers Limited was to make an advance to the appellant company to purchase, or arrange to purchase land in village Bansi, Jodhpur. The appellant had accordingly purchased 47.01 bighas of land on behalf of M/s Parsvnath Developers Limited. The appellant, even though it was the registered owner" of the said land which was shown as stock in trade in its books of accounts, it was M/s Parsvnath Developers Ltd. which held all the rights to the said land, such as development, marketing and sale.
5.3. Moreover, it has been pointed out that the AO has made addition on account of alleged sale of 107.15 bighas, including the 47.01 bighas, to M/s Parsvnath Developers Ltd. in the AY 2006-07. The AO has again made addition on account of purchase of part of the land admeasuring 47.01 bighas in the AY 2009- 10, and on account of sale of the developed plots which are part of the same land in the AYs 2010-11 and 2012-13, on the basis of the years of registration of the plots on sale to the eventual buyers. The AO has yet again, in the AY 2013-14, made addition of estimated profit on transfer of the land of 47.01 bighas shown till then as WIP, from the appellant to M/s Parasvnath Developers Ltd., to give effect of sales made by the developer company in earlier years. Therefore, the additions made by the AO of estimated profit on sale of the same land admeasuring 47.01 bighas in the span of the assessment years 2006-07 to 2013- 14 has led to triple taxation in the hands of the appellant.
5.4. In order to verify these contentions, the appellant was required to furnish a detailed chart in terms of the years of purchase of the land and sale of plots in the hands of M/s Parsvnath Developers Ltd. In response, the appellant vide its letter dated 21.02.2017 filed u/s 250(4) of the Act, furnished the details of sale of plots from AYs 2006-07 to 2012-13 in the books of M/s Parsvnath Developers Limited, out of the said parcel of land of 47.01 bighas which was acquired by the appellant and was the subject of the development agreement with M/s Parsvnath Developers Ltd. The total saleable land out of 47.01 bighas, after plotting and development, has been disclosed at 50,875 sq. yards. M/s. Parsvnath Developers Ltd. is shown to have sold till date, 175 plots of 200-400 sq. yards, 23 villas on plots of 200-300 sq. yards, and 16 flats with share of land of 67 sq. yards. 4,151 sq. yards of land remains unsold, apart from common areas. In the case of the appellant, the situation is as below:-
AY As per appellant As per AO additions made and consequential effect of the same Purchase/Sale/ Cl. Purchase Sale Cl. WIP adjustment / WIP transfer 06-07 1,46,43,770 47.01 47.01 107.15 bigha @ 20 lacs per 1,46,43,770 bigha bigha bigha (i.e. 44 bigha 47.01 bigha and 61 biswa) on which profit of Rs 3,03,71,900 17,04,84,330/- calculated 60.15 bigha and addition was made however, development Total land rights have been alleged to be transferred to the purchased developer company 107.15 bigha 07-08 - - - - 47.01 bigha 08-09 - - - - 47.01 bigha 09-10 47.01 31,06,700/- 31,06,700/- bigha 4700 sq yds Purchase of 4700 sq yds 10-11 ' * 3600 sq yds 47.01 58,27,311/- 1100 sq yds bigha 11-12 “ - 3600 sq yds 47.01 bigha 12-13 ' " * 47.01 1,87,19,545/- 3600 sq yds bigha 13-14 Trfr to PDL 58,78,13,030 (47.01) bigha 1,46,43,770 47.01 Deemed profit on transfer bigha of 47.01 bigha land held as WIP on 01.04.2012 16,10,237/- 370 sq yards
5.5. The appellant has reiterated that it has not sold any part of the land admeasuring 47.01 bighas which continued to be shown as WIP in the books of the appellant till the AY 2012-13. The AO has evidently failed to bring on record any evidence in support of his contention that the appellant had actually sold land of 3600 sq. yards and received the consideration of Rs. 1,90,90,345/-. Further, the AO has again made addition in the Assessment Year 2013-14 as mentioned above by considering the said land of 47.01 bighas as the stock held by the appellant. On the other hand, M/s Parsvnath Developers Ltd. has [ confirmed that these sales are reflected in its books of account. In view of all the above facts, I find no material basis for the estimated addition of Rs. 1,87,19,545/- made by the AO. The appellant therefore succeeds at grounds of appeal nos. 1 to 3.”
7.1 We have heard rival submission of the parties in the light of their arguments and material available on record. We find that the Assessing Officer has not disputed the fact that M/s Parasvnath Developers Ltd. has declared profit in their books of account on sale of the land developed by them under the development agreement with the assessee, though the land remained registered in the name of the assessee. This profit declared has been assessed in substantive capacity in the case of M/s Parasvnath Developers Ltd. The Assessing Officer has simultaneously assessed income in the hands of the assessee for profit on the sale of the same land and that too on substantive basis in the case of the assessee also. In our opinion, this action of the Assessing Officer of assessing same income on substantive basis in the hands of two assessess is not justified. If the income in the hands of M/S Parasvnath Developers has been accepted by the Department, assessing again the same income in the hands of the assessee, amounts to taxing same income twice. Further, the Assessing Officer has failed to bring on record any evidence that said developed land has been sold by the assessee. In view of the above facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute, and accordingly, uphold the same. The grounds raised by the Revenue are, accordingly, dismissed.
8. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 26th November, 2021