AR HOUSING PRIVATE LIMITED,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

I.T.A.No.623/Mds/2015. :- 2 -:

2. The assessee has raised the following grounds:- 1 The order of the learned CIT appeals is contrary to law and opposed to the facts of the case

2 The learned CIT appeals was erred in enhancing the assessment u/s.251 of the Income Tax Act, 1961.

3 The learned CIT Appeals was erred in concluding the assessee have earned ₹38,84,32,623/- as profit on the real estate transactions relying on the profit and loss account of the assessee.

4. The learned CIT Appeals was erred in placing reliance on the statement recorded of Shri S Nagarajan was the director of the assessee for which there is no corobrative evidence 5 The learned CIT Appeals has also erred in enhancing the assessment while correctly coming to the conclusion that the assessee was not the owner of the property. 6 The learned CIT Appeals has also erred in enhancing the assessment on a reference from the assessing officer when there was a specific injuction granted on the similar issue by the Madras High Court in W.P.No.28022 of 2014 7 The learned CIT Appeals has also erred in enhancing the assessment with a view to override or get over the limitation on the assessing officer in taking reassessment proceedings u/s.147 of the Income Tax Act, 1961’’.

I.T.A.No.623/Mds/2015. :- 3 -:

3.1 The facts of the case are that the assessee is a company dealing with the real estate business. As per the information received from the internal source of the department, the case was reopened for the assessment year 2007-2008 for the following reasons:

The A.R. Housing Pvt. Ltd., had purchased two properties at Adyar through Debts Recovery Tribunal sale on 29.8.2001 and registered it on 16.4.2003 and on 25.7.2003 respectively. On 19.12.2005, M/s A.R. Housing Pvt. Ltd., had entered into an agreement with Srri Ramachandra Educational & Health Trust for the sale of the Adyar Property for a value of �39,50,00,000/- on which Sri

Ramachandra Education & Health Trust had paid a sum of �.35,42,50,000/- on various dates starting from 19.12.2005 to 27.02.2006. Since this transaction was not crystallized upon in full, a compromise was struck between the following parties by way of tripartite agreement entered into on 21.2.2007:-

1. Shri. Ramachandran Educational & Health Trust - Party of first part 2. M/s. Viacons Infrastructure & Environmental - Party of second part 3. M/s. A.R Housing Pvt. Ltd - Confirming party As per the tripartite agreement, the Adyar property has been sold to M/s. Vicoans Infrastructure and Environmental Engg. Pvt.Ltd., for a value of �35,42,50,000/- This property in turn was sold to I.T.A.No.623/Mds/2015. :- 4 -:

Shri.Ramachandra Educational & Health Trust by M/s Viocans Infrastructure & Environmental Engg. Pvt. Ltd. As this transaction has not been disclosed to the Department by way of filing Return of Income, the case was reopened". Based on the above reason, notice u/s 148 was issued to the assessee on 28.3.2012.

3.2 In this case, the assessee had purchased property located at Door No.19, Muthulakshmi Salai , Adyar , Chennai-20 in TS No.11, Block No.21, in Urur Village, Mylapore, Triplicane Taluk, Chennai and property at Door Nos.15 and 16 , Dr.Muthulakshmi Salai, Adyar, Chennai in TS No.9/1, Block NO.21, in Urur Village, Mylapore, Triplicane Taluk, Chennai on 29.8.2001 and the DRT had subsequently registered the sale deed on 16.4.2003 & 25.7.2003 in favour of M/s A.R. Housing. It was understood that M/s A.R. Housing P. Ltd., had planned to sell the said property to M/s. Sri Ramachandra Educational & Health Trust for a consideration of �.39,50,00,000/- by way of making sale agreement on 19.12.2005. As per the sworn statement recorded from Shri.A. Nagarajan, one of the Directors of M/s A.R.

Housing Pvt. Ltd., had stated that the said sale agreement could not be executed due to various factors such as tenancy vacation etc., and hence, M/s. Ramachandra Educational & Health Trust was not I.T.A.No.623/Mds/2015. :- 5 -: interested in executing the sale agreement. As M/s Sri Ramachandra Educational & Health Trust had already paid an advance of �35,42,50,000/- to the assessee, in order to recover the money from the assessee, M/s. Sri Ramachandra Educational & Health Trust had introduced M/s Viocans Infrastructure & Environmental Engg. Pvt. Ltd. to purchase this property and this has resulted in a tripartite agreement between M/s Ramachandra Educational & Health Trust, M/s Viacons Infrastructure & Environmental Engg. Pvt. Ltd., and the assessee on 21.2.2007. The assessee was asked by the Assessing Officer to explain during the course of recording sworn statement that why the assessee should be made as a confirming Party when the property has been clearly registered in the assessee's name by DRT.

The assessee had stated that one Mrs.Meerabai Dawson was the previous owner of that land and the estates of Mrs.Meerabai Dawson filed a Writ before the High Court of Chennai regarding the ownership of the said Adyar Property. As this litigation was pending for more than four years, it had been stated by the assessee that, they have decided to close the deal by settling �20 Crores to the Estates of Mrs.Meerabai Dawson by way of executing a sale deed between the estates of Mrs.Meerabai Dawson and M/s Viacons Infrastructure & Environmental Engg. Pvt. Ltd., when M/s A.R. Housing P. Ltd., was I.T.A.No.623/Mds/2015. :- 6 -: holding a clear title of the property on the date of execution of sale deed, how can the sale deed be executed treating the estates of Mrs.Meerabai Dawson as the owner of the property and how come this has been accepted by the Sub-Registrar, Adyar. When this query was posed to the assessee by the Assessing Officer , the assessee had stated that, they have entered into a MOU with the estates of Mrs.Meerabai Dawson and various other people who were the tenants occupying the said disputed property with temporary sheds and registered the MOU with High Court of Madras. On production of this Registered MOU before the SRO, they have executed the sale deed treating M/s A.R.Housing Pvt. Ltd., ie., the assessee as confirming party. It was further stated by the assessee, that the estate of Mrs. Meerabai Dawson have paid the Capital Gain Tax of � 14,61,02,118/- towards the entire value of sale consideration i.e., �64,00,48,000/- and the assessee had stated that, since the entire tax of �.14,61,02,118/- had been paid on the entire sale consideration, by the Estates of Mrs.Meerabai Dawson, no tax had been paid by the assessee on the Adyar property. The contention of the assessee was not accepted by the Assessing Officer due to the reason that the said tripartite agreement and the settlement of �20 Crores to the estates of Mrs.Meerabai Dawson are the private arrangements made between I.T.A.No.623/Mds/2015. :- 7 -:

M/s AR.Housing P. Ltd., Estates of Mrs.Meerabai Dawson and other parties. No court or any authority had stated that the Estates of Mrs.Meerabai Dawson are the real / legal owners of the property. It was very clear as per the DRT sale that, M/s A.R.Housing P.Ltd., was the actual owner of the Adyar property. The Assessing Officer observed that on perusal of the copy of Regd. MOU submitted by the assessee, it was seen that, even as per the Registered MOU before the High Court of Madras, the Court has stated that, the Memo of Compromise between M/s A.R.Housing P. Ltd., and other parties has been recorded. Nowhere, in the Memo of compromise, the Court made any declaration about the ownership of the properties either through the Court proceedings or through any other court order.

Though, M/s A.R.Housing P.Ltd., was the actual owner of the Adyar property, since the Capital Gain Tax with regard to entire value of sale consideration has been paid by the Estate of Mrs. Meerabai Dawson, no tax was pressed in the hands in the hands of M/s. A.R.Housing P.Ltd., for the reasons that as per Sec. 45(1) of the Income Tax Act, 1961 it says, "any Profits or Gains arising from the transfer of a capital asset be chargeable to Income-tax under Capital Gains, i.e., the provision says chargeability of tax is only on account of transfer of assets and not on ownership. However, since the tax ought to have I.T.A.No.623/Mds/2015. :- 8 -: been paid by M/s. A.R. Housing P. Ltd has been paid by the Estates of Mrs. Meerabai Dawson due to various reasons a specified above, the tax which had been paid by the estates of Ms. Meerabai Dawson should be treated as the deemed income of M/s. A.R. Housing P. Ltd and should be taxed under income from Other Sources and according the income of M/s. A.R. Housing P. Ltd was computed as �14,61,02,118/- as against Nil income returned by the assessee.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals).

4. The Commissioner of Income Tax (Appeals) observed that in the assessment order the Assessing Officer has brought to �14,61,02,118/- the amount of tax paid by the Estate of Meerabai Dawson, as “Income from Other Sources’’ in the hands of the assessee since the assessee was having clear title deed in its favour and the tax liability on the guidelines value of �64 crores vests on the assessee company. During the course of appellate proceedings, the Assessing Officer vide his letter dated 19.01.2015 has brought to his notice that the assessee had filed its return of income in response to notice u/s.148 by declaring net profit as per P & L account of �38,84,32,623 and claimed exemption under AOP. As the assessee failed to prove the I.T.A.No.623/Mds/2015. :- 9 -: existence of AOP before the Assessing Officer, the net profit admitted in the return of income needs to be taxed in the hands of the assessee either under business income or under Other Sources. The Assessing Officer had also made an analysis of the balance- sheet and submitted that as on 31.3.06 Sri Ramachandra Educational & Health which was shown as creditor for �35.67 crores, for the year ended 31.3.07 there was no outstanding amount due to Sri Ramachandra Educational & Health Trust implying that the advance owed by the assessee was settled by a tripartite agreement since the buyer VIEE took over the liability of Sri Ramachandra Educational & Health. The fact that the assessee has treated M/s. Viacons Infrastructure & Environmental Engg. Pvt. Ltd. as a debtor for �30 crores as on 31.3.07 and closer of liability with Sri Ramachandra Educational & Health Trust indicates that the assessee has agreed to sell the properties for �65,67,50,000.(�30,00,00,000/- +�35,67,50,000/-). This fact was also corroborated by the sworn statement of Shri S. Nagarajan, director of the assessee company, dated 23.3.2013 recorded u/s 131 of the I.T.

Act, the relevant part of the statement is reproduced as under:-

12. How much is the sale consideration recdived from M/s. Vicoans and the mode of payment an when the sale deed was executed between you and M/s. Vicoans? Ans:- Thee is a sale deed exected as a confirming party for a value of �64,00,48,000/- out of which �20 crore directly paid I.T.A.No.623/Mds/2015. :- 10 -:

to estate of Meerabai Dawson for compensation and I.T. Payment and an amount of �35,42,50,000/- received from M/s. Ramachandra Education & Health Trust advance adjusted based on tripartite agreement. The balance amount is yet to be received. Sale deed was executed on 22.02.2007.

The Commissioner of Income Tax (Appeals) observed that the Assessing Officer had also brought to his knowledge that after the sale certificate issued by the DRT was declared "null and void" by the High Court of Madras, the Estate of Meerabai Dawson became the rightful owner of the property and the capital gain taxes were paid by Estate of Meerabai Dawson through a separate PAN in its name. Therefore, the taxes paid by Estate of Meerabai Dawson cannot be given credit in the hands of the assessee. In view of the above submissions, the AO has requested for enhancement of the taxable income. A copy of the submissions of the Assessing Officer were also given to the assessee for its comments. The ld. Authorised Representative had submitted the reply on 28.1.2015. As per the reply given by the Id.AR, when the sale certificate issued by the DRT, Chennai was quashed by Madras High Court vide its order dated 21.3.2005, the assessee has no right in the properties and when the aasessee had paid �20 crores to estate of Meerabai Dawson out of the amount of �35.42 crores received by it from Sri Ramachandra Educational & Health Trust (later this liability was owned by M/s.

I.T.A.No.623/Mds/2015. :- 11 -:

Viacons Infrastructure & Environmental Engg. Pvt. Ltd.), assessment on the same properties in the hands of the assessee uncalled for.

4.1 The Commissioner of Income Tax (Appeals) observed that the accounts produced shows that the assessee had declared the profits of �38,89,50,349/- from business of real estate for the assessment year 2007-2008 as under:-

Sale value (Guideline value) 64,00,48,000/- Less: Settlement with the legal 20,00,00,000/- owner Less: Property purchase cost 4,19,50,651/- Less: Eviction charges paid prior 84,47,000/- to 2006 Less: Legal charges paid 7,00,000/- 24,69,00651/-

38,89,50,349/- The above working was evident from the letter filed by the assessee before the Assessing Officer on 14.03.2013 and the letter dated 28.01.2015 filed before the Commissioner of Income Tax (Appeals) in response to the enhancement notice issued. The fact that the assessee had received an amount more than the settled amount with Sri Ramachandra Educational & Health Trust was also evident from the statement of director of the assessee company Shri. N. Nagarajan.

Out of �38,89,50,349/- received as profit on sale of properties, the I.T.A.No.623/Mds/2015. :- 12 -: assessee has disclosed net profit in the profit and loss filed before the Revenue authorities. Thus, the assessee had declared the net profit out of the above transactions at �38,84,32,623/- in its Profit and Loss Account and the return of income filed for the assessment year 2007-

8. As the assessee itself had admitted the net income as �38,84,32,623/- in its return of income, according to the Commissioner of Income Tax (Appeals) there was no reason as to why the assessment should not be done on this declared profits. The explanation given by the assessee in response to enhancement notice was vague and inconsistent. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to enhance the assessment by adopting �38,84,32,623/- as income from business instead of assessing the income of �14,61,02,118/- as “Income from Other Sources”. With regard to the alternative claim of giving credit for the amount of taxes paid by Estate of Meerbai Dawson to the assessee company, the Commissioner of Income Tax (Appeals) observed that would not get credit for the taxes paid by Estate of Meerabai Dawson since she had paid capital gains separately with a distinct PAN and �38,84,32,623/- disclosed by the assessee in its return of income was net profit out of the above deal as a part of its business activity on real estate, it had nothing to do with the capital gain tax paid by Estate of I.T.A.No.623/Mds/2015. :- 13 -:

Meerabai Dawson, and accordingly, the Commissioner of Income Tax (Appeals) dismissed ground of the assessee. Against this, the assessee is in appeal before us.

On account of default the property was auctioned by Debts Recovery Tribunal (DRT) vide M.A. 176/2002 in OA 271 of 2001 (DRC 45/2002) vide order dated 26.07.2002 and the same was placed at page No.1 of paper book. The assessee has obtained ownership of the property owned by Mrs. Meerabai Dawson in the auction conducted by the DRT.

The DRT had given certificate of sale deed dated 16.04.2003 by which the assessee became the owner, and the same was placed at page No.5 of paper book. Thereafter, after the demise of Mrs. Meera Bai Dawson, the executors of the will of Mrs. Meera Bai Dawson who was the original owner of the property, filed a case in the Madras High Court contesting the ownership of the asset and the case was settled out of court and the Madras High Court vide its order dated 6.12.2004 in O.P. No.192 of 2003 granted letter of administration which is placed on record at page no.14 of paper book. Meanwhile the assessee M/s.

A.R. Housing Pvt. Ltd, entered into an agreement on 19.12.2005 to sell I.T.A.No.623/Mds/2015. :- 14 -: the property to Sri Ramachandra Educational and Health Trust for a consideration of �39.85 crores which is placed in paper book at page No.36. In view of the litigation by Executor of Mrs. Meera Bai Dawson, the said agreement of sale with Sri Ramachandra Educational & Health Trust was cancelled on 9.2.2007 which is placed in paper book at page no.48. Meanwhile, writ petitions filed by the persons in possession of the property before the High Court in W.P. Nos.39649 of 2002, 27303 of 2003, 17736 and 20357 of 2004, the sale certificate dated 9.8.2002 and the order of the DRT directing dispossession of the tenants are quashed vide order dated 21.03.2005 which is placed at record at paper book at page no.19. The above order in writ petitions were subject matter of appeal. The division bench of Madras High Court in W.A.Nos.972 to 974 of 2005 stayed the order of the single judge regarding cancellation of sale certificate dated 9.8.2002 vide order dated 03.05.2005 which is placed at record at page no.32 of paper book. Meanwhile the Sri Ramachandra Educational and Health Trust agreement was cancelled vide agreement dated 09.02.2007, and the same was placed at page No.48 of paper book. Thereafter, M/s.

Vicoans Infrastructure entered into agreement with assessee and the Sri Ramachandra Educational and Health Trust, where M/s. Viacoans agreed to purchase the property from the assessee subject to litigation I.T.A.No.623/Mds/2015. :- 15 -: on 21.02.2007 which is placed at paper book at page no.52. There was memorandum of compromise executed on 21.02.2007

“ WHEREAS, THE FIRST PART, The Party of the First Part, desirous of registering the subject property in their name with the confirmation of all the parties. Whereas the parties of the first and second part have already entered in to tripartite agreement with M/s. Sri Ramachandra and education and health Trust dated 21.02.2013 for the purchase of above mentioned property and towards settlement of Estate of Meerabai Dawson and the party of the second part between whom the title disputes are existing.’ WHEREAS, THE FIRST PART, has also entered in to negotiation with the Estate of Meerabai Dawson towards settlement who have agreed to effect the sale of the property As the vendor And Whereas the party of the first part has approached the second part for registering the property in their favour, however there were litigations including the dispute of title of the property between the party of the Second Part and the Estate of Meerabai Dawson and both the parties claiming ownership rights, and in order to avoid protracted litigation, the party of the second part has agreed to be the confirming party so that the disputes are resolved amicably thereby enabling the first party to have clear and proper title on execution of the sale deed in their favour, Whereas the party of the second part is also agreeable to the same Whereas the party of the first part agree to give compensation for non-performance in a separate agreement for the party of the second part Whereas the party of the firstpart has approached the second part to pay ₹5 Crores to Estate of Meerabai Dawson, along with the capital gains on the sale of the property which is estimated at ₹.14 crores based on the prevailing guideline value of Rs .64 crores, totaling in all to ₹.20 crores as negotiated by the party of the first part with the Estate of Meerabai Dawson, out of the consideration of ₹35.42 crores already received I.T.A.No.623/Mds/2015. :- 16 -: by the party of the second part and referred to in the MOU entered into on 21-02-2007 between M/s. Sri Ramachandra and education and health Trust and the first and second parties respectively’’ Whereas the part of the second part is also agreeable to the same, subject to the condition that there would be no tax liability on this sale to party of the second part as the entire tax on the transaction is being paid on vendor’s account to facilitate the execution of sale deed’’.

Since the litigation was going on long time the parties decided to close the issue through Memorandum of Compromise between

M/s.Viacons Infrastructure & Environmental Engineering Pvt. Ltd and the assessee and another Memorandum of Compromise entered on 22.02.2007 between estate of Meera Bai Dawson and the assessee in MOC dated 21.02.2007, the assessee agreed to pay a sum of �5,00,00,000/- to the estate of Meera Bai Dawson and also agreed to pay capital gain estimated at �14,00,00,000/- as stated above. On the above MOC entered on 22.2.2007, the sale deed executed in favour of M/s.Viacons Infrastructure &

Environmental Engg. Pvt. Ltd. wherein estate of Meera Bai Dawson was vendor and the assessee was confirming party which is placed on record at page No.74 of paper book. According to the ld.

Authorised Representative for assessee, normally the assessee should have executed the sale deed as an owner and executor of I.T.A.No.623/Mds/2015. :- 17 -:

Mrs. Meera Bai Dawson should have signed as confirming party.

However, the Executors of Mrs. Meerabai Dawson citing English

Law requested that unless they signed as a Vendor the benefit of capital gain taxation will not be available in UK and for repatriation to UK. Therefore the assessee agreed that Executors of Mrs.

Meerabai Dawson will sign as a Vendor and the Assessee will sign as a confirming party. The assessee will pay the Executors of Mrs.Meerabai Dawson compensation of �5 crores and additionally

� 15 crores to meet the capital gains tax liability because they are signing as a Vendor and liable to capital gains tax will fall on them.

The assessee also agreed to withdraw all litigation against the executors of Ms. Meerabai Dawson. Accordingly, the sale deed was executed, whereby Executors of Mrs.Meerabai Dawson have signed as a Vendor and the Assessee has signed as a confirming party and in Page No. 17 of the Sale deed (document No.1073 of 2007) in clause. 10 (page No.93 of paper book) pointed out

Executors of Mrs.Meerabai Dawson has to pay the entire tax. The Writ Appeal against the order of Single Judge was disposed on 31.03.2009 on the basis of compromise arrangement dated

22.02.2007.

I.T.A.No.623/Mds/2015. :- 18 -:

2. They had agreed to pay the compensation of ₹5 crores to the Executor of Mrs.Meerabai Dawson to enable the transaction to go through. 3. The assessee had agreed that Executor of Mrs.Meerabai Dawson will sign as a Vendor

Consequently as the tax liability will be on the person signing as a vendor, the assessee has given an additional amount of �15 crores to meet the tax liability of the Executor of Mrs.Meerabai Dawson. The entire sale consideration was assessed in the hands of Executor of Mrs.Meerabai Dawson and tax on the deemed consideration of Rs.64 crores amounting to �14.61 was assessed in the hands of Executor of Mrs.Meerabai Dawson, which was paid out of the amount given by the assessee for this purpose. Now the department would like to tax

�38 crores retained by the assessee. As per the compromise agreement both the assessee and Executor of Mrs. Meerabai Dawson agreed to join together and sell the property. The assessee had given

�15 crores to Executor of Mrs.Meerabai Dawson to meet their tax liability. Thus, in the transaction the Executor of Mrs. Meerabai

Dawson are entitled to only �5 crores and �15 crores was given by the assessee to pay the tax. The sale transaction is a single transaction for transfer of land. As per agreement Executors of Ms.

I.T.A.No.623/Mds/2015. :- 19 -:

Meera Dawson has to meet the tax liability. The Capital gains on the entire transaction is Rs. 14.61 Crores and the same has been recovered from the executors of Ms. Meera Dawson. Further tax cannot be recovered from the same transaction. Without prejudice, if part of the consideration is now foisted upon the Assessee credit should also be given for the �.15 crores since assessee has passed on to the Executor of Mrs.Meerabai Dawson for payment of tax. The Department cannot once again recover the tax separately from the Assessee for part of the sale consideration on which tax has been paid. In case Mrs. Meerabai Dawson is considered as owner, then the Assessee has merely agreed not to pursue the litigation. The amount retained by the Assessee should be considered as amount paid for the restrictive covenant for not pursuing the litigation. In such a case the entire amount is a capital receipt and is not taxable in the hands of the Assessee. The ld. Authorised

Representative for assessee submitted that first of all reopening of assessment is bad in law. Thereafter, the issue considered by the Commissioner of Income Tax (Appeals) is totally different with the one considered by the Assessing Officer in his assessment order, which the Commissioner of Income Tax (Appeals) has no jurisdiction.

Further, he submitted that there was second reopening notice issued I.T.A.No.623/Mds/2015. :- 20 -: to the assessee on 31.03.2014. The reasons recorded for reopening the assessment u/s.147 of the I.T. Act for the assessment year under consideration is as follows:-

that the income has escaped assessment for the assessment year 2007-08 and it is a fit case warranting reassessment.

4. In connection with the reassessment proceedings, your was posted for hearing on 29.05.2014 at 3.00PM. However, you failed to appear in person or through your authorized representative on the said date. And you also failed to furnish the details as called for vide statutory notice(s) issued u/s.143(2)/142(1) of the I.T. Act 1961 dated 21.05.2014. Therefore, your case is again posted for hearing on 05.06.2014 at 3.00PM.

Further, ld. Authorised Representative for assessee submitted that the above reopening was stayed by the High Court in W.P.No.28022 of 2014 and M.P. No.1 of 2014. Being so, the Commissioner of Income Tax (Appeals) wanted to do things indirectly which cannot be done directly.

6. The ld. Authorised Representative for assessee submitted that the transaction already suffered tax in the hands of the executor of late Meera Bai Dawson and for the same transaction the assessee cannot be taxed again. Further, he submitted that when the matter of reopening which is subjudice before the Madras High Court, the Commissioner of Income Tax (Appeals) could have awaited final outcome of the petition. According to him, the Income Tax Department are not competent to decide the ownership of the property so as to tax in the hands of the assessee when the disputed parties agreed that Executor of Mrs. Meera Bai Dawson was the legal I.T.A.No.623/Mds/2015. :- 22 -: owner of the property and others are confirming parties. The Income Tax Department thrusted upon that the assessee is the original owner of the property and the present the assessee is liable for payment of tax.

Being so, when the AOP has not filed the return of income separately, and the same was considered in the hands of the assessee, the assessee cannot have grievance.

‘’The assessee had purchased two properties at Adyar through Debts Recovery Tribunal sale on 29.8.2001 and registered it on 16.4.2003 and on 25.7.2003 respectively. On 19.12.2005, M/s A.R. Housing Pvt. Ltd., had entered into an agreement with Sri Ramachandra Educational & Health Trust for the sale of the Adyar Property for a value of ₹39,50,00,000/- on which Sri I.T.A.No.623/Mds/2015. :- 23 -:

Ramachandra Education & Health Trust had paid a sum of ₹.35,42,50,000/- on various dates starting from 19.12.2005 to 27.02.2006. Since this transaction was not crystallized upon in full, a compromise was struck between the following parties by way of tripartite agreement entered into on 21.2.2007:- 1 Shri. Ramachandran Educational & Health Trust - Party of first part 2 M/s. Viacons Infrastructure & Environmental - Party of second part 4. M/s. A.R Housing Pvt. Ltd - Confirming party

As per the tripartite agreement, the Adyar property has been sold to M/s. Vicoans Infrastructure and Environmental Engg. Pvt.Ltd., for a value of ₹35,42,50,000/- This property in turn was sold to Shri.Ramachandra Educational & Health Trust by M/s Viocans Infrastructure & Environmental Engg. Pvt. Ltd. As this transaction has not been disclosed to the Department by way of filing Return of Income, the case was reopened". Based on the above reason, notice u/s 148 was issued to the assessee on 28.3.2012. In response to that, the assessee had filed a Return of Income on 26.4.2012 and the assessment was completed’’.

According to the Commissioner of Income Tax (Appeals), the AO I.T.A.No.623/Mds/2015. :- 24 -: requested for enhancement of taxable income and on that basis he has substituted his view in the place of the Assessing Officer. Now, the first issue for our consideration is whether the above direction of the Commissioner of Income Tax (Appeals) to the Assessing Officer is within his powers. It is needless to say that the first appellate authority is vested with very wide powers under sec 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment.

However, there is a solitary but significant limitation to the power of revision, viz., that it is not open to the First Appellate Authority to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of assessment. Applying the above well-settled principles of law to the facts of the instant case, we have to examine the present case to see whether first appellate authority had exceeded his jurisdiction. In this case, while computing the income of I.T.A.No.623/Mds/2015. :- 25 -: the assessee, the Assessing Officer considered the payment of �14.61 crores for income tax paid by estates of Mrs. Meera Bai Dawson on behalf of the assessee as the income of the assessee. According to the Assessing Officer, the assessee derived the benefit to that extent as the assessee was the owner of the capital asset who was liable to pay tax. Thus, only the matter dealt by the Assessing Officer in the assessment year was treatment of payment of income tax by estates of Meera Bai Dawson in the hands of the assessee as assessee’s income. None of the issue which was dealt by the Commissioner of Income Tax (Appeals) was considered by the Assessing Officer as seen from the records. It is evident from the order of first appellate authority that he brought into taxation income from transfer of assets.

In other words, this income considered by the Commissioner of Income Tax (Appeals) was not at all considered by the Assessing Officer at the time of framing reopened assessment. In our opinion, the addition on account of income from sale of property as business income in the hands of the assessee would not constitute the new source of income, since it was already disclosed by the assessee in its return of income as evident from the statement of income filed along with return of income :

I.T.A.No.623/Mds/2015. :- 26 -:

In the Statement of total income filed alongwith the return of income, the details were given as under:-

STATEMENT OF TOTAL INCOME

INCOME FROM BUSINESS �

Net Profit/(Loss) as per Profit and Loss A/c 38,84,32,623/- Less: AOP taxed separately 38,84,32,623/-

GROSS TOTAL INCOME Nil Less: Deduction under Chapter VI-A Nil -------------------------- TOTAL INCOME NIL -------------------------- As seen from the above, the assessee had declared the net profit out of the above transactions at �38,84,32,623/- in its Profit and Loss Account and the return of income filed for the assessment year 2007-

8. As the assessee itself had admitted the net income as �38,84,32,623/- in its return of income, the Commissioner of Income Tax (Appeals) could examine the same in his order. The first appellate authority has power and his jurisdiction is wide and cannot be curtailed. Accordingly, in our considered opinion the first appellate authority has the right to grant deduction, which the assessee is entitled to but fails to claim before the Assessing Officer and at the same time the first appellate authority has the power to enhance income, which the Assessing Officer has failed and neglected to I.T.A.No.623/Mds/2015. :- 27 -: consider certain aspects. In other words, the first appellate authority has the power to adjudicate and decide every-thing necessary to ascertain the true and correct income of the assessee. Accordingly, the proceedings before the first appellate authority cannot be restricted to only those matters considered and decided by the assessing authority. Failure on the part of the Assessing Officer to examine certain aspects can be rectified at the appellate stage, and therefore, it would be wrong to circumscribe and restrict power. In our opinion, the first appellate authority can enhance the assessment by considering the issue which was mentioned by the assessee in its return of income though not considered by the Assessing Officer in its order of appeal against the assessee and thus the first appellate authority have jurisdiction of enhancement of income. Limitation on the powers of the Commissioner of Income Tax (Appeals), however, is that he cannot travel beyond the subject matter of assessment and return of income. It is to be noted that it is not subject matter of appeal, but the subject matter of assessment, when it is said that he cannot travel beyond the subject matter of assessment what is meant in that he cannot introduce in the assessment new source as his powers of assessment enhanced is restricted only to the income which was subject matter of consideration for the purposes of assessment by I.T.A.No.623/Mds/2015. :- 28 -: the Assessing Officer. Therefore, if an income is subject matter of consideration by the Assessing Officer and even though the Assessing Officer may come to the conclusion that income is not subject to taxation, it would be open to the Commissioner of Income Tax (Appeals) to take different view and bring that income to tax. But, in doing so he cannot, include the income derived by the assessee say, from assessee’s income from the transfer of capital asset which was already subject to tax in the hands of estates of Meera Bai Dawson.

Moreover, the powers of the Commissioner of Income Tax (Appeals) are restricted to the source of income in the return and in the assessment order. Thus, the Commissioner of Income Tax (Appeals) has fullest jurisdiction in respect of it; he can include it in the assessment, even though it was excluded by the Assessing Officer, and, naturally, when included it, he must include it under one or other head. However, in the present case, the addition on account of gain on transfer of capital asset cannot be considered in the hands of the assessee as this is already suffered tax in the hands of Mrs. Meera Bai Dawson. It is therefore, not open to the Commissioner of Income Tax (Appeals) to direct the Assessing Officer to assess profit from the transfer as business income asset.

I.T.A.No.623/Mds/2015. :- 29 -:

a) A.R Housing (P) Ltd will not press any claims in respect of schedule mentioned properties whether as purchasers or otherwise in any capacity including under any sale certificate issued by DRT-1, Chennai in pursuance of OA 271 of 2001 and will withdraw Writ Appeals 972, 973 and 974 of 2005. b) The Second Party individually and jointly confirm that they have not right, title or interest in any manner whatsoever in the schedule mentioned property or in the estate of Late Mrs. Meerabai Dawson. c) A.R. Housing (P) Ltd agrees to co-operate with First party or the said purchaser to effect mutation of all revenue records pertaining to the schedule mentioned property in favour of the first party or the purchaser and the second party agrees to issue necessary letters etc., in this regard for the said purpose. d) The Second Party has on this date deposited with the said purchaser all original title deeds of the schedule A mentioned property which are in their possession, a list of which is annexed hereto as Schedule C and confirm that they are not in possession of any other title deeds whatsoever pertaining to the schedule A mentioned property. e) The First party agrees that, in view of this memo of compromise the first party shall not press any criminal proceedings, contempt application or other actions against the second party individually or jointly. The first party further confirms that it has no cause of action against the second party individually or severally in future in respect of the schedule mentioned properties. f) The First party agrees not to press the suit CS 120 of 2005 and to therefore withdraw the suit on the basis of this memorandum of comprise. g) A.R. Housing (P) ltd has deposited with the purchaser all sale certificates pertaining to the Schedule A mentioned property issued by the DRT-I, in the course of OA 271 of 2001 and confirm that there are no further sale certificate I.T.A.No.623/Mds/2015. :- 30 -: issued by the DRT-I in OA 271 of 2001 with respect to the schedule A mentioned property. h) Ahninesha Babu has also deposited with the purchaser the documents listed in Schedule B herein to be dealt with in any manner deemed fit by the purchaser. ………………….

Civil Suit under Order VII Rule I of C.P.C. 1908 (as amended) r/w Order IV Rule I of the O.S. Rules. Learned counsel for the plaintiffs makes a statement, making an endorsement in the plaint also that the suit has been settled between the parties, thereby praying, the suit may be dismissed as settled out of Court. Recording the same, the suit is dismissed as settled out of Court, ordering to refund half of the Court fee to the plaintiffs, as per the Rules. Consequently, connected applications are dismissed.

3. The parties confirm and agree that Vicoans Infrastructure and Environmental Engineering Private Limited is in absolute ownership, possession and enjoyment of the said properties as the purchase, having purchased, the same for proper and valid consideration, from the owners and the confirming party. The respondent, Andrew Yule & Co Ltd confirms that it has handed over vacant and peaceful possession of the property, as described in paras 2(i) free of its leasehold and all other claims to the said Vicoans Infrastructure and Environmental Engineering Private Limited. 4 The respondent Andrew Yule and Co Ltd and Crescent Auto repairs and services p. ltd confirms that it has handed over vacant and peaceful possession of the property as described in para 2(i) for Andrew Yule and I.T.A.No.623/Mds/2015. :- 31 -:

Co. Ltd free of its leasehold and all other claims to the said Vicoans Infrastructure and Environmental Engineering Pvt. Lit. 5.The Respondent, Meerabai Daswon Tenants Welfare Association hereby confirms that it has handed over vacant and peaceful possession of the property, free of its leasehold and all other claims to the said Vicoans Infrastructure and Environmental Engineering Pvt. Limited.

8. The parties herein therefore pray that this Hon’ble Court may be pleased to record this memo of comprise in W.P. No.972 to 974 of 2005 and pass such further or other orders, which this Hon’ble Court may deem fit and proper under the circumstances of the case thus render justice. Dated at Madras on this the 27thday of March, 2009’’ The memo of compromise entered into between the parties is recorded and the same shall form part of this proceedings. This writ appeal is disposed of in terms of the memo of comprise. No cost. Consequently, WAMP Nos. 1787 to 1789 and 1858 of 2005 are closed.

Commissioner of Income Tax (Appeals) after cancelling the assessment order is not appropriate.

‘’ 2. For the assessment year 2007-08, you had filed your income tax return(ITR) on 26.04.2012 admitting a ‘Nil’ income in response to the notice under section 148 of the I.T. Act issued on 28.03.2012. Consequently, your case was taken for scrutiny under section 143(3) r.w.s 147 of the I.T. Act 1961 and the scrutiny assessment was completed on 03.03.2013 after assessing the total income at ₹14,61,07,118/- 3. Subsequently, it was notice that the income to the tune of ₹37,95,95,157/- has escaped from assessment. Therefore, a notice under section 148 dated 31.03.2014 of the I.T. Act 1961 was issued to you to reopen the assessment for the assessment year 2007-2008. In response, you filed a letter dated 08.04.2014 before this office, with a request to treat the ITR filed on 26.04.2012 vide e-filed ack 385486441260412 as the one filed in response to the notice issued under section 148 dated 31.03.2014 and also requested for the reason for issue of the above notice u/s.

(379595157-146102118). If the gain arising out of transfer of right is brought to tax there would be a tax demand of ₹19,33,61,150/- (including interest u/s.234A & B) as against ₹11,49,24020/- . Since it is failure on the part of the assessee in not truly and fully disclosing all the material facts during the course of assessment proceedings, I have reason to believe that the income has escaped assessment for the assessment year 2007-08 and it is a fit case warranting reassessment.

Officer. The Assessing Officer showed extra interest, devised his own methodology, even after issuing second reopening notice to the assessee which was stayed by the High Court as discussed earlier. The Assessing Officer should not have requested the Commissioner of Income Tax (Appeals) to enhance the assessment as the High Court has seized of the matter. The request made by the Assessing Officer was for collateral purpose and was not bonafide. No reason is shown as to why the Assessing Officer requested the Commissioner of Income Tax (Appeals) to enhance the assessment when the same issue was stayed by the High Court. There is no convincing reason why the Assessing Officer could not have awaited for the final outcome of the issue pending before the High Court. Thus, it mean that the Revenue authorities wanted to do things indirectly which is not possible directly, which cannot be permitted. In all fairness, the Revenue authorities should have waited for the outcome of Writ petition filed by the assessee.

�5,17,726/- and thus net profit of �38,84,32,623/-. But the fact brought on record by the Commissioner of Income Tax (Appeals) in page no.6 of his order shows that the assessee stated in statement of income that the said amount was to be taxed in the hands of AOP separately. Further, even if it is admitted, the Revenue authorities cannot tax the same. The said consent of director Shri. N. Nagarajan cannot give jurisdiction to the Revenue authorities to tax the same.

The taxing authorities can act only, if there is power under the statute to do so. If there is a dual personality in one individual or person and if such person holds land then a severability is contemplated under the Act, if such a person comes up with an application of composition.

The lands held by him in his capacity as a normal person would be severed from the lands held by him in his other capacity and would be dealt with accordingly and the Revenue authorities normally has no jurisdiction to club holdings of persons who have a different status in the eye of law and who fill in different legal personalities in any one individual as held by the Jurisdictional High Court in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax, 104 ITR 381.

I.T.A.No.623/Mds/2015. :- 36 -:

It is abundantly clear from the explanation given in circular No.8 of 2002, dated 27th Aug, 2002 that the basic intention to insert sec. 50C is for the purpose of determining full value of sale consideration for the purpose of computation of capital gains under sec. 48. The issuing of notification or circular is good guide of contemporaneous exposition of the position of the law and this rule is popularly known as I.T.A.No.623/Mds/2015. :- 37 -:

‘’contemporanea expositio’’. There should not be any cloud of doubt that sec. 50C has application only to the extent of determining sale consideration for computation of capital gain under Chapter IV-E of the Act and it cannot be applied for determining the income under other heads. Therefore, when admittedly in the present case the sale of the property is treated as the business income and not as a capital gain, the provision of Sec.50C is not applicable. Being so, considering the entire facts and circumstances of this case, we are of the opinion that the Commissioner of Income Tax (Appeals) is not justified in enhancing the assessment.

Order pronounced on Friday, the 11th day of September, 2015, at Chennai.