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Income Tax Appellate Tribunal, DELHI BENCH “F”, NEW DELHI
Before: SHRI S.V. MEHROTRA & MS. SUCHITRA KAMBLE
per the sale deed executed through him. The Assessing Officer observed that in the case of R.B. Enterprises, which is a firm where the family of his brother Shri Rakesh Batta is partner, during the course of assessment for the assessment year 2007-08, it was found from the search material that the sales were being made over and above the amounts disclosed in the registered sale deeds. He observed that these sale rates were as per the prevailing sale prices in that area and, accordingly, the same were charged from the buyers. He noted that a total of 129 plots had been carved out in that colony and out of that 64 plots fell in the share of the assessee Shri Ramesh Batta and rest in the share of his brother and family through M/s R.B. Enterprises. He, inter-alia, observed as under :-
“Keeping in view the evidences of unaccounted sales found in the case of R.B.Enterprises, the assessee also was issued a show cause vide letter dt. 8.12.2010 , the relevant para is reproduced as under:- "You have sold plots at Sailok at different sale considerations ranging between Rs.1309/- per sq.mts. to Rs.2938/-per sq. mts within same colony at Sailok. There is a staggering diversity in the sale rate within the same colony and within the same financial year. Your attention is invited to the case of R.B.Enterprises in the assessment year 2006-07. As per the details of seized material, the actual sale rates in the Sailok has been discussed in the show cause issued to that firm in respect of the plots falling in the share of Shri Rakesh Batta & Others. A copy of the show cause issued to them for A.Y.2007-08 is enclosed for ready reference. From it, it is found that the rates in the F.Y.2006-07 were even more than the rates disclosed by you. You are requested to explain and show cause as to why the same rate may not be applied to the plots sold by you in the relevant financial year in the same colony and the difference amount of sale consideration added to your income.”
The assessee replied as under :-
“Regarding Sai Lok and your contention of taking the sale rates as charged by R.B Enterprises we would like to point out that the plots are sold as per the condition of Demand and supply, location of the plot, direction of the plot with reference to the conditions of sun, wind and vastu. As each plot and each buyer is different the rates are also different keeping in view the personal preferences of the purchasers and the quality of the plot. In view of the above the sale rates of the plots are different. At this stage we would like to point out that all sale deeds are executed as per the actual rates. Coming to the R.B Enterprises we would like to point out that your assessee has got nothing to with this firm. Your assessee and M/S R.B Enterprises have different plots. Your assessee sells plots whereas R.B Enterprises is into construction. The conditions effecting sales are different and separate in the case of your assessee and different in the case of M/s R.B Enterprises. As there is no common platform between the two entities the results/ rates etc cannot be compared. As such there is no justification in applying any rate other than the rates as reflected in the Sale Deeds. "
After considering the assessee’s reply, the Assessing Officer, inter- alia, observed that though both are the different entities but the facts that emerge is that the evidence have been found which suggested the actual fair market rates of the plots in that colony during the period and theses evidences could not be ignored. He, inter-alia, observed as under :-
“The assessee is having 64 plots in the approved and developed colony and accordingly the sale rates are applied in this case keeping in view the instances of actual sale consideration found in the case of M/s R.B. Enterprises where the remaining 64 plots are sold in different years. The instances of suppression of sales in the case of R.B. Enterprises are discussed hereunder in order to substantiate the extent of the prevailing rates in Sailok. ……..”
Thus, on the basis of evidence found in the course of R.B.
Enterprises, the Assessing Officer worked out the gross sales at Rs.2,91,15,072/- and after allowing the rebate of 35% and expenditure of Rs.20,07,937/- as cost of conversion of property into stock in trade and further expenditure of Rs.16,65,437/- on account development expenditure, determined the profit at Rs.1,52,51,423/- as against the profit declared by assessee at Rs.12,48,096/-. Ld. CIT(A) deleted the addition for the following reasons :-
(a) There was no evidence to rebut the assessee’s claim that he received only the sale consideration which was recorded in the sale deed.
(b) The Assessing Officer relied on incriminating evidence found in the case of M/s R.B. Enterprises suggesting receipt of unrecorded consideration on sale of flats, which were adjacent to assessee’s flats.
This could at best give rise to suspicion but, unless confirmed by the independent evidence, could not be a valid basis for addition.
(c) The assessee had also shown that there were instances of sale of plots of land in the same vicinity at rates, which were much lower than that shown by the assessee. The incriminating evidence found in the case of M/s R.B. Enterprises was not applied in those cases.
(d) The business model and business practice of assessee and R.B.
Enterprises were different.
Ld. CIT(A), however, clarified that no comments were being made about the quality of the evidence which was seized in the case of M/s R.B.
Enterprises and which was to be evaluated in that case.
Ld. DR has filed a Paper Book containing on 74 pages in which he has primarily annexed orders, notices, etc. relating to M/s R.B. Enterprises, Dehradun and also the statements of various persons he has also filed written submissions in support of his plea that u/s 153A, the Assessing Officer is empowered to assess or re-assess total income of the assessee.
His submissions are reproduced hereunder :-
BEFORE THE HON’BLE MEMBERS INCOME TAX APPELLATE TRIBUNAL, F-BENCH, NEW DELHI. In the case of : Ramesh Batta Appeal No. : 3966/Del/2013 & CO-242/Del/2013 Asstt. Year : 2007-08 Date of hearing : 25.01.2017 MAY IT PLEASE YOUR HONOURS Sub: Submission of Paperbook in the above case- reg. In the above case, kindly find enclosed 2 copies of paperbook containing 174 pages each. It is humbly submitted that the following decisions may kindly be considered: 1. CIT Vs Anil Kumar Bhatia (24 taxmann.com 98, 211 Taxman 453, 352 ITR 493) where Hon'ble Delhi High Court held that jurisdiction of AO under 153A is to assess total income for the year and not restricted to seized material. Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) – Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a). Even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search.
Filatex India Ltd Vs CIT (49 taxmann.com 465) where Hon'ble Delhi High Court held that during assessment under section 153, additions need not be restricted or limited to incriminating material, found during course of search 3. CIT Vs St. Francis Clay Decor Tiles (385 ITR 624) where Hon'ble Kerala Court held that notice issued under section 153A - return must be filed even if no incriminating documents discovered during search 4. CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd (64 taxmann.com 34, 235 Taxman 568) Where Hon'ble Supreme Court granted SLP against High Court's ruling that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding. Sd/- (S S Rana) Commissioner of Income Tax (DR) F-Bench, ITAT, New Delhi.
Ld. DR further filed following written submissions :-
“1. E.N. Gopakumar Vs CIT [(2016) 75 taxmann.com 215 (Kerala))] (Copy Enclosed) where Hon'ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering cases of CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4), Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4), CIT v. Kabul Chawla [2016] 380 ITR 573/[2015] 234 Taxman 300/61 taxmann.com 412 (Delhi) (para 4), CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264 (Kar.) (para 4), CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5).
2. CIT Vs St. Francis Clay Decor Tiles (385 ITR 624) (Copy Enclosed) where Hon'ble Delhi Kerala Court held that notice issued under section 153A - return must be filed even if no incriminating documents discovered during search.
Smt Dayawanti Vs CIT (75 taxmann.com 308) (Copy Enclosed) where Hon'ble Delhi High Court held that Where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified.”
Ld. counsel for the assessee submitted that assessee is in no way related to R.B. Enterprises except that his brother is partner in R.B.
Enterprises. He pointed out that it is not disputed that the entire addition has been made on the basis of seized material found in the case of R.B.
Enterprises and not in the case of assessee. Therefore, in the absence of any incriminating material being found in the case of assessee, addition could not be made in view of the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla & Others in & Others dated 28.08.2015. Ld. counsel pointed out that documents relied upon by the Assessing Officer have not been shown to assessee. Ld. counsel submitted that in assessee’s case purchasers were different. Ld. counsel further submitted that no enquiry was made in regard to sale consideration from assessee’s purchasers. As regards the reliance placed by ld. DR in the case of Anil Kumar Bhatia (supra) and Filatex India Ltd. (supra), ld. counsel submitted that these decisions have been considered by the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). In this regard, he referred to para 20 and 28, which reads as under :-
20. As regards the material unearthed during the search the Court in CIT v. Anil Kumar Bhatia (supra) observed that “if it is not in dispute that the document was found in the course of the search of the Assessee, then Section 153A is triggered. Once the Section is triggered, it appears mandatory for the Assessing Officer to issue notices under Section 153A calling upon the Assessee to file returns for the six assessment years prior to the year in which the search took place.
The Court clarified in para 24 as under: “24. We are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.” ………..
In Filatex India Ltd. v. CIT-IV (supra), one of the questions framed was whether the ITAT erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search, in the order passed under Section 153A of the Act was without jurisdiction, being outside the scope of proceedings under that Section? The facts of the case were that there was incriminating material found during the course of search conducted in the premises of the Assessee on 18th January, 2006 and subsequent dates. This included a statement of the General Manager (Marketing). On the basis of the said material and statement additions were made to the disclosed income under Section 115 JB although no material was found specific to such addition. The Court held that under Section 153A “the additions need not be restricted or limited to the incriminating material, which was found during the course of search.” Consequently even if no incriminating material was found for the addition under Section 115JB of the Act, since there was some incriminating material found which would sustain additions made and since the 'total income' had to be computed, they were sustained by the High Court.”
Ld. counsel further pointed out that the decision of Special Bench of Mumbai ITAT in the case of All Cargo Global Logistics Ltd. vs. DCIT (2012) 137 ITD 287 (SB) (Mum.-Trib.) has been upheld by the Hon’ble Bombay High Court in the case of CIT vs. All Cargo Global Logistic, 374 ITR 645 (Bom.). He submitted that mere admission of SLP by Hon’ble Supreme Court does not affect the ratio laid down in the judgement. Ld. counsel further submitted that there is no decision of Hon’ble Jurisdictional High Court on this issue and then since two views are possible, therefore, a view in favour of assessee should be taken as has been held in CIT vs. M/s Vegetables Products Ltd., 88 ITR 192 and CIT vs. Vatika Township, (2014)
49 taxmann.com 249. He pointed out that three High Courts viz. Hon’ble Delhi High Court, Hon’ble Bombay High Court and Hon’ble Gujarat High Court have taken view in favour of assessee. Further, the Special Bench of Mumbai ITAT in the case of Narang Overseas Pvt. Ltd. vs. ACIT (2008)
111 ITD 1 (Mum.-Trib.)(SB) has also taken a view in favour of assessee.
We have considered the submissions of both the parties and have perused the record of the case. As per the mandate of section 153A, where a search has taken a place, the Assessing Officer, as per section 153A(1)(b) is required to assess or re-assess the total income of six assessment years immediately preceding the assessment year relevant to previous year in which such search was conducted. In the present case, the search was conducted on 04th March, 2009, therefore, the Assessing Officer was required to assess or re-assess the total income of six assessment years preceding the assessment year 2009-10. The first proviso to section 153A mandates that the Assessing Officer shall assess or re-assess the total income in respect of each assessment year falling within the six assessment years. Therefore, once the search has taken place the Assessing Officer has no option but to assess or re-assess the total income of each assessment year falling within such six assessment years. The second proviso to section 153A(1) makes it clear that if any assessment or re-assessment relating to any assessment year falling within the period of six assessment year considered in this sub-section on the date of initiation of search u/s 132 is pending then the same will abate. This implies that the Assessing Officer will have to make the assessment in the case of such assessment year de- novo. The object of the second proviso is evident that in the case of those assessments or re-assessments, which have not abated, the assessment is not to be made de-novo and it is in such cases only that the addition can be made only on the basis of incriminating material though the Assessing Officer is required to make the assessment or re-assessment for all six assessment years considered with reference to the date of search. This is the position of law, we have to first find out that whether the assessment for assessment year 2007-08 was pending on the date of search or not. Admittedly, the return of income u/s 139 was filed on 25th October, 2007 and, therefore, if the Assessing Officer had issued notice u/s 143(2) then assessment could be completed as per section 153A(1)(a) within two year from the end of the assessment year in which the income was first assessable. However, if no notice u/s 143(2) was issued within the time limit prescribed u/s 143(2) then it cannot be said that the assessment was pending. We find that in the assessment order nothing has been mentioned in regard to original assessment proceedings. Ld. counsel for the assessee made a statement at Bar that notice u/s 143(2) could be issued upto 31.10.2008 but no such notice was issued. Therefore, this was a case of completed assessment. Therefore, in the absence of any incriminating material being found in the course of search on assessee, the addition could not be made. In regard to reliance placed by ld. DR on various decisions.
Ld. counsel for the assessee submitted that as far as the decision in the case of Smt. Dayawanti vs. CIT, (2016) 75 taxmann.com 308 (Delhi) is concerned, the said decision is not at all applicable to the facts of the case because in that case assessee surrendered income and son’s statement taken at the time of search was ratified by assessee. Therefore, the said decision is not applicable to the facts of the present case. Even otherwise we find that the Assessing Officer at page 9 of his order, inter-alia, observed as under :-
“There are other many instances in the case of M/s R.B. Enterprises and these are discussed in detail and were provided to the assessee as enclosure of the show cause dated 8.12.2010.”
This shows that the basis of addition was the instances found in the case of M/s R.B. Enterprises. Further, ld. CIT(A) has observed that assessee had also shown that there were instances of sale of flats in the same vicinity which were much lower than shown by the assessee. Ld. counsel pointed out that the business model of M/s R.B. Enterprises is entirely different from assessee since no evidence had been found in the case of assessee suggesting receipt of on-money over and above is stated consideration.
Therefore, the addition was rightly deleted by ld. CIT(A).
In the result, the appeal of the Department is dismissed.
Now, we take up the Cross Objection of assessee. The assessee has taken following ground of Cross Objection :-
“1. That Ld. CIT(A) has erred in law and on facts in reducing the amount of long term capital gain by Rs.6,61,831/- by re-determining the land price without appreciating the fact that the addition was made by the A.O. on the basis of the material on record.
2. That Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,40,03,327/- on account of profit on sale of land at Sailok without appreciating the fact that in term of provisions of section 292C, the document collected during the search is an admissible evidence.
3. That the order of the Ld. CIT(A) being erroneous in law and on facts which needs to be vacated and the order of the A.O. be restored.
That the appellant craves leave to add or amend any one or more of the ground of the appeal as stated above as and when need for doing so may arise.”
Brief facts apropos ground no.3 are that in the course of assessment proceedings, the Assessing Officer found that the assessee had entered into a MOU with M/s Aggarwal Associates Ltd.. As per this MOU dated 01.09.2006 between Shri Ramesh Batta, Shri Rakesh Batta and other family members, Plot No.64, 65 and 91 were allowed as the rights of passage and all kinds of privileges and easement rights to ingress and egress in Aditya Doonshire, a housing project promoted by M/s Aggarwal Associates Ltd..
The Plot No.91 falls in the share of the assessee. Against this the said company had paid Rs.50 lakhs and amount falling in the share of the assessee’s plot was Rs.20 lakhs. The assessee had not disclosed this income in its return of income. The assessee contended that the amount represented as advance as no sale deed has been executed. The Assessing Officer noticed that the other part of Rs.50 lakhs i.e. Rs.30 lakhs had been disclosed in its return of income by M/s R.B. Enterprises in assessment year 2008-09 as passage right had been allowed in respect of area falling in its shares. He pointed out that this should have been shown in assessment year 2007-08 as the payment had been received by both the assessee through bank drafts dated 05.06.2006. He assessed the sum of Rs.20 lakhs as assessee’s business income, inter-alia, observing that the plain reading of the MOU revealed that the plots under consideration in the MOU and the areas falling therein were now not available to the assessee as its stock in trade for sale or any other development or alienation except as per the terms and reference of the MOU. He pointed out that going by the conditions contained in the MOU there could never be outright sale to M/s Aggarwal Associates Ltd. at any point subsequently as after passing through these plots the other lands of the assessee were also there apart from the housing project of Aditya Doonshire. He further pointed out that as per local enquiries and site visit by the Inspector of the office, it had been disclosed that there was no motorable approach to the above discussed land and Aditya Doonshire than these plots. He, therefore, concluded that for all purposes the Plot No.91 was sold out may be in the shape of passage right for which adequate amount has been received by the assessee and, therefore, assessed the same as business income. Ld. CIT(A) confirmed the addition after considering the definition of transfer u/s 2(47) observing that the MOU had the effect of extinguishment of his rights in the plot and also had the effect of enabling the enjoyment of the property by Aggarwal Associates Ltd. and its nominee.
Ld. counsel reiterated the submissions advanced before lower revenue authorities. Ld. DR relied on the order of lower revenue authorities.
We have considered the submissions of both the parties and have perused the record of the case. The terms of MOU with Aggarwal Associates Ltd. are not at all disputed. Admittedly, the assessee had given right of passage and all kinds of privileges and rights to Aggarwal Associates Ltd. and, therefore, there was constructive transfer in favour of Aggarwal Associates Ltd.. We, therefore, do not find any reason to interfere with the order of ld. CIT(A) on this count. In the result, the Cross Objection filed by assessee is dismissed.
Resultantly, the appeal of the Department as well as Cross Objection of the assessee is dismissed. Order pronounced in the open court on this 29th day of March, 2017.