M/s. Vascon Hadaspar Ventures, Pune V. DCIT, Central Circle 2(1), Pune

ITA 1285/PUN/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7481 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Business income; Principle of natural justice; Cost of acquisition; Tax effect
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1285/PUN/2013 / ASSESSMENT YEAR : 20 0 8 - 09 M/S. VASCON HADAPSAR VENTURES, G - 3, PHOENIX, OPP. RESIDENCY CLUB, BUND GARDEN ROAD, PUNE 411001 . / APPELLANT PAN: AA FFV8683B VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1) , PUNE . / RESPONDENT ASSESSEE BY : S /S HRI DHARMESH SHAH AND AKSHAY GARG REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 22 .0 6 . 201 7 / DATE OF PRONOUNCEMENT: 18 . 0 9 .2 01 7 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF CIT (A) CENTRAL, PUNE, DATED 11 . 11 .20 08 RELATING TO ASSESSMENT YEAR 20 08 - 09 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S.153A OF THE INCOME - TAX ACT , 1961 (I N SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FAILED TO APPRECIATE THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) R.W.SEC.153A OF THE ACT WAS BAD IN LAW A ND INVALID. ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 2 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE ASSESSMENT MADE IN THE NAME OF THE FIRM WAS INVALID AND UNJUSTIFIED. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT NO ASSESSMENT CAN BE MADE UNLESS ANY INCRIMINATING MATERIAL IS FOUND AS A RESULT OF THE SEARCH. THE ASSESSMENT MADE IN THE PRESENT CASE IS INVALID AND BAD IN LAW. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) HAS IN LAW AND IN FACTS IN PASSING THE ORDER IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING ADDITION OF RS.13,82,94,326/ - ON ACCOUNT OF INCOME FROM ALLEGED S ALE OF LAND TO M/S. SUZLON ENERGY LTD. 6. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE HELD THAT THE TAX PAID BY M/S. VASCON ENGINEERS LTD. ON THE ALLEGED INCOME ADDED SHOULD BE TREATED AS TAX PAID BY THE APPELLANT. 7. THE APPELLANT CRAV ES LEAVE OF YOUR HONOR TO ADD TO, ALTER, AMEND AND/OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 3 . THE GROUNDS OF APPEAL NO.1 TO 4 ARE NOT PRESSED, HENCE THE SAME ARE DISMISSED AS NOT PRESSED. 4 . THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST ADDITION OF RS.13,82,94,326/ - ON ACCOUNT OF INCOME FROM ALLEGED SALE OF LAND TO M/S. SUZLON ENERGY LTD. THE CONNECTED ISSUE RAISED BY WAY OF GROUNDS OF APPEAL NO.6 IS THAT IN CASE THE SAID ADDITION IS TO BE MADE IN THE HANDS OF ASSESSEE, THEN THE TAXES PAID BY M/S. VASCON ENGINEERS LTD. ON THE ALLEGED INCOME SHOULD BE TREATED AS TAXES PAID BY THE ASSESSEE. 5 . BRIEFLY IN THE FACTS OF THE CASE SEARCH ACTION UNDER SECTION 132 OF THE INCOME TAX ACT WAS CONDUCTED O N THE PANCH A SH I L GROUP OF CASES ON 11 - 09 - 2009. THE ASSESSEE BEFORE US WAS ALSO COVERED UNDER THE SAID SEARCH OPERATION ON 11 - 09 - 2009. THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME ON 16 - 09 - 2008 SHOWING LOSS OF RS.91,450/ - . IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153A OF THE A CT THE ASSESSEE AGAIN FILED THE RETURN OF INCOME ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 3 DECLARING LOSS OF RS.91,450/ - . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE FIRM HAD COME INTO EXISTENCE ON 12 - 05 - 20 0 6 WITH THE FOLLOWING PARTNERS : ( 1 ) VASCON ENG INEERS LTD. 50% SHARE ( 2 ) PANCH A S HI L REAL ESTATE CONSULTANTS PVT. LTD. 50% SHARE 6 . THE ASSESSEE ENTERED INTO A SINGLE JOINT VENTURE AGREEMENT DATED 05 - 06 - 2006 WITH M/S. SYNDICATE REALTORS. ON ACCOUNT OF THE SAID JOINT VENTURE AGREEMENT, THE ASSESSEE A CQUIRED DEVELOPMENT RIGHTS OF SOME PROPERTIES AT HADAPSAR. SUBSEQUENTLY, THE SAID PROPERTY TO BE DEVELOPED BY THE JOINT VENTURE WAS PURCHASED FROM M/S. SYNDICATE REALTORS FOR A CONSIDERATION OF RS.65 CRORES. ADDITIONAL LAND WAS ACQUIRED BY THE ASSESSEE F IRM FROM TUPE FAMILY VIDE AGREEMENT DATED 19 - 06 - 2007 FOR A CONSIDERATION OF RS.6.5 CRORES. THUS, IN ALL THE ASSESSEE ACQUIRED LAND ADMEASURING 59 , 603 SQ. MTRS. F OR A CONSIDERATION OF RS.71.50 CRORES. THE ASSESSING OFFICER FURTHER NOTED THAT SUBSEQUENTLY THE ASSESSEE ENTERED INTO AN AGREEMENT DATED 07 - 05 - 2007 TO SELL A PART OF THE LAND ADMEASURING 41,200 SQ.MTRS TO SUZLON ENERGY LTD. FOR RS.75 CRORES. THE ASSESSEE HAD NOT OFFERED ANY SUCH INCOME IN THE RETURN OF INCOME FILED FOR THE INSTANT ASSESSMENT YEA R. THUS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO CLARIFY AS TO WHY THE PROFIT ON SALE OF LAND TO SUZLON ENERGY LTD. SHOULD NOT BE BROUGHT TO TAX. IN RESPONSE THERETO, THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDER PARA 3.2 AT PAGE S 2 TO 4 OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT THE AGREEMENT TO SALE ENTERED WITH SUZLON ENERGY LTD. FOR SELLING A PART OF LAND FOR RS.75 CRORES WAS WITH THE RIDER THAT SUZLON ENERGY LTD. WAS TO PAY A SUM OF RS.65 CRORES BEFORE EXECUTION OF THE AGREEMENT AND POSSESSION WAS TO BE HANDED OVER ON FULFILLMENT OF THE SAID PAYMENT OBLIGATION. THE REMAINING RS.10 CRORES WERE TO BE PAID ON FINAL CONVEYANCE. THE ASSESSEE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 4 FURTHER POINTED OUT THAT SUZLON ENERGY LTD. PAID ONLY RS.55.40 CRORES TILL THE EXECUTION OF THE AGREEMENT AND THE BALANCE WAS NOT PAID, HENCE POSSESSION OF THE LAND WAS NOT HANDED OVER TO SUZLON ENERGY LTD. ON THE DATE OF AGREEMENT AND THE SALE WAS NOT COMPLETED ON THAT DATE. IT WA S FURTHER CONTENDED BY THE ASSESSEE BEFORE THE ASSE SSING OFFICER THAT BEFORE COMPLETING THE SALE, THE FIRM WAS DISSOLVED AND BECAME PROPRIETORSHIP CONCERN OF M/S. VASCON ENGINEERS LTD. THE C OPY OF THE DISSOLUTION DEED WAS REFERRED TO IN THIS REGARD. THE ASSESSEE POINTED OUT THAT THE SALE OF THE ABOVE PAR T OF LAND WAS RECOGNIZED IN THE BOOKS OF M/S. VASCON ENGINEERS LTD. AT THE TIME OF HANDING OVER THE POSSESSION. THE POSSESSION FOR THE SAID PROPERTY WAS GIVEN ON 29 - 06 - 2007 AFTER RECEIVING THE BALANCE CONSIDERATION AND THE SALE WAS RECOGNIZED IN THE BOOKS OF ACCOUNT OF M/S. VASCON ENGINEERS LTD. IN FINANCIAL YEAR 2007 - 08. 7. THE ASSESSING OFFICER HOWEVER DID NOT FIND THE EXPLANATION OF THE ASSESSEE AS CORRECT SINCE CERTAIN DOCUMENTS WERE FOUND WHICH SUGGESTED THE EXISTENCE OF THE FIRM EVEN AFTER THE DAT E OF DISSOLUTION, I.E. 29 - 05 - 2007. THEREFORE , ANOTHER SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE R EFERRING TO THE SEVERAL DOCUMENTS FOUND DURING THE COURSE OF SEARCH ON THE PREMISES OF THE ASSESSEE AND BUSINESS PREMISES OF PANCH A SH I L REAL ESTATE CONSUL TANTS PVT. LTD. THE SAID SHOW CAUSE IS REPRODUCED UNDER PARA 4 AT PAGES 4 TO 8 OF THE ASSESSMENT ORDER. IN RESPONSE, THE ASSESSEE FILED A REPLY WHICH IS REPRODUCED UNDER PARA 5 AT PAGES 8 TO 23 OF THE ASSESSMENT ORDER. 8 . THE ASSESSING OFFICER NOTED THA T THE ASSESSEE HAD NOT FILED THE ORIGINAL DISSOLUTION DEED AND WAS GIVEN ONE MORE OPPORTUNITY TO FILE THE SAME. THE ASSESSEE IN REPLY SUBMITTED THAT THE ORIGINAL DISSOLUTION DEED WAS NOT TRACEABLE, HOWEVER, THE NOTARI Z ED COPY OF THE SAME WAS FILED. SECOND LY TO CONFIRM THAT THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 5 DISSOLUTION DEED WAS EXECUTED ON 29 - 05 - 2007 BETWEEN THE PARTNERS , THE ASSESSEE POINTED OUT THAT IT HAD DISCLOSED THE FACT OF DISSOLUTION IN THE ANNUAL REPORT FOR THE YEAR ENDING 31 - 03 - 2008. SECOND CONTENTION RAISED BY THE ASSESSEE WAS THAT M/S. VASCON ENGINEERS LTD. HAD OFFERED THE INCOME TO TAX. THE ASSESSING OFFICER WAS OF THE VIEW THAT FROM THE VARIOUS DOCUMENTS FILED BY THE ASSESSEE, IT WAS VERY CLEAR THAT THERE WAS CONNIVANCE BETWEEN THE PARTNERS ON THE ISSUE OF SHIFTING THE IN COME OF THE FIRM TO ONE OF ITS PARTNERS, I.E. M/S. VASCON ENGINEERS LTD. THE ASSESSING OFFICER QUESTIONED AS TO WHY PROFIT UPTO 50% OF THE ENTIRE PROJECT NEEDED TO BE GIVEN TO SHRI ATUL CHORDIA, MORE SO, WHEN THE GROUP COMPANY TO WHICH HE BELONG ED HAD RET IRED FROM THE PARTNERSHIP O N 29 - 05 - 2007. THE EXPLANATION THAT SHRI ATUL CHORDIA HAD EXPERTISE IN RESIDENTIAL PROJECT AND HENCE WAS GIVEN 50% OF THE PROFITS OF THE ENTIRE PROJECT, AS PER THE ASSESSING OFFICER, APPEARED TO BE TOO ILLOGICAL FOR THE REASON TH AT M/S. VASCON ENGINEERS LTD. HAD SIMILAR EXPERTISE IN RESIDENTIAL PROJECTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DISSOLUTION DATED 29 - 05 - 2007 AND THE JOINT VENTURE AGREEMENT DATED 01 - 06 - 2007 WERE DONE WITH THE MOTIVE OF SHIFTING THE INCOME OF TH E FIRM TO ONE PARTNER, I.E. M/S. VASCON ENGINEERS LTD. AS FAR AS THE JOINT VENTURE DATED 01 - 06 - 2007 WAS CONCERNED, THERE WAS NO PROVISION OF MAKING ANY PAYMENT TO SHRI ATUL CHORDIA BEFORE COMMENCEMENT OF THE RESIDENTIAL PROJECT BUT EVEN BEFORE THE COMMENC EMENT OF THE PROJECT A SUM OF RS.8.77 CRORES WAS PAID TO HIM WHICH WAS NOTHING BUT THE SHARE OF PROFIT THAT SHOULD HAVE BEEN PAID TO M/S. PANCH A SH I L REAL ESTATE CONSULTANTS PVT. LTD. BY THE FIRM M/S. VASCON HADAPSAR VENTURE S . THE ASSESSING OFFICER REJECTE D THE OTHER CONTENTION OF THE ASSESSEE ALSO THAT M/S. SUZLON ENERGY LTD. HAD NOT PAID THE BALANCE AMOUNT. THE ASSESSING OFFICER VIDE PARA 7.5 NOTED THAT THE REAL FACT THAT THERE WAS PROFIT OF OVER RS.13.8 CRORES ON ACCOUNT OF LAND SALE DURING ASSESSMENT Y EAR 2008 - 09 AND OFFERED RS.12 CRORES ON ACCOUNT OF BUILDING CONSTRUCTION CONTRACT DURING ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 6 ASSESSMENT YEAR 2009 - 10 TO THE ASSESSEE FIRM AND SINCE VASCON ENGINEERS PVT. LTD. WAS INTENDING TO GO PUBLIC AND HENCE WAS INTERESTED IN JACKING UP ITS PROFITS WITH TH E MOTIVE OF GETTING BETTER VALUATION. THE ASSESSING OFFICER THUS HELD THAT THE PARTNER S MUTUALLY ENTERED INTO A CONSPIRACY ACCORD ING TO WHICH ONE OF THE PARTNER M/S. VASCON ENGINEERS PVT. LTD. WAS ALLOWED TO TAKE THE BENEFIT OF PROFIT OF THE FIRM, SO THAT IT CAN GET BETTER VALUATION FOR ITS SHARES. WITH SUCH A MOTIVE, THE FIRM WAS DISSOLVED ON 29 - 05 - 2007 AND THE ENTIRE PROJECT WAS SHOWN AS THAT OF M/S. VASCON ENGINEERS PVT. LTD. SUBSEQUENT TO THAT. THE ASSESSING OFFICER HELD IT TO BE A COLOURABLE DEVICE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE JOINT VENTURE AGREEMENT TO SHARE THE PROFIT OF RESIDENTIAL PROJECT WAS ONLY AN AFTERTHOUGHT AND WAS PREPARED SUBSEQUENT TO SEARCH. THE ASSESSING OFFICER THUS HELD THAT THE ARRANGEMENT WAS MADE TO SHIFT THE PR OFIT OF THE ASSESSEE FIRM TO M/S. VASCON ENGINEERS PVT. LTD. AND EVEN THE DISSOLUTION WAS MERELY AN ARRANGEMENT ON PAPER TO GIVE A COLOUR OF GENUINENESS BUT THE SAME COULD NOT BE ACCEPTED. THEREFORE, THE ASSESSING OFFICER HELD THAT THE PROFIT ON ACCOUNT OF SALE OF LAND NEEDED TO BE TAXED IN THE HANDS OF ASSESSEE WHERE THE ASSESSEE HAD BOUGHT AND SOLD THE PROPERTY. EVEN THE AGREEMENT TO SELL WA S PRIOR TO THE DATE OF DISSOLUTION OF THE FIRM , T HEREFORE THE ENTIRE INCOME ON ACCOUNT OF SALE OF PROPERTY TO SUZ LON ENERGY LTD. WA S TO BE OFFERED TO TAX IN THE HANDS OF THE ASSESSEE FIRM SINCE THE ASSESSEE ADOPTS MERCANTILE SYSTEM OF ACCOUNTING. THE PROFIT ON SALE OF LAND WAS WORKED OUT AT RS.13,82,94,326/ - AND WAS ADDED IN THE HANDS OF ASSESSEE. 9. THE CIT(A) AFT ER CONSIDERING THE DETAILED WRITTEN SUBMISSIONS OF ASSESSEE NOTED THAT THE ASSESSEE HAD FAILED TO EVEN FURNISH A CERTIFIED COPY OF THE DISSOLUTION DEED OBTAINED FROM ANY OF THE AUTHORITIES. THE SECOND CONTENTION OF THE ASSESSEE THAT THE ORIGINAL PARTNERSHI P WAS WITH PANCH A SH I L REAL ESTATE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 7 CONSULTANTS PVT. LTD. WHEREAS THE LATER JOINT VENTURE WAS WITH SHRI ATUL CHORDIA WAS ALSO REJECTED BY THE CIT(A). SHRI ATUL CHORDIA WAS THE MANAGING DIRECTOR OF ENTIRE PANCH A SH I L GROUP. THE NEXT CONTENTION OF THE ASSESSE E THAT AT THE TIME OF AGREEMENT TO SELL, PART OF THE LAND AGREED TO BE SOLD TO SU Z LON ENERGY LTD. H AD NOT EVEN BEEN PURCHASED BY THE FIRM. WHERE THE FIRM WAS CONFIDENT OF ITS ABILITY TO PROCURE THE ENTIRE LAND TO BE SOLD, THEN THE ENTIRE LAND DEAL HAD BEE N CLEARLY LINED UP BY THE AS SESSEE AND ONLY FORMAL DOCUMENTATIONS WAS REQUIRED TO BE RELIED ON . UPON THESE FACTS THE CIT(A) HELD THAT ON MERCANTILE BASIS THE INCOME COULD BE CLEARLY SAID TO HAVE ACCRUED TO THE ASSES SEE FIRM. 10. THE OTHER ISSUES AND CONT ENTIONS RAISED BY THE ASSESSEE WERE ADEQUATELY DEALT WITH BY THE ASSESSING OFFICER AND THE CIT(A) UPHELD THE SAME. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 11. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US T HROUGH THE F ACTS OF THE CASE REFERRED TO THE CHART SHOWING THE DETAILS OF PLOT OF LAND PURCHASED AND SOLD. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT PLOTS AT SL. NOS. 1 & 2 HAS NOT BEEN SOLD. THE ASSESSEE FURTHER POINTED OUT THAT THE FIRST P IECE OF LAND FOR RS.65 CRORES WAS PURCHASED FROM SHRI SUNIL TUPE AND OTHERS, I.E. SYNDICATE REALTORS FOR A SUM OF RS.65 CRORES. THE SAID TRANSACTION WAS ON 05 - 06 - 2006 , PART OF WHICH LAND WAS SOLD ON 07 - 05 - 2007 FOR RS.75 CRORES. HE FURTHER POINTED OUT THA T ANOTHER PIECE OF LAND AT SL.NOS. 13 AND 14 AS PURCHASED FROM SHRI RAMDAS TUPE AND OTHERS FOR RS.6.50 CRORES ON 19 - 06 - 2007 WHICH WAS PART OF THE SALE TRANSACTION OF RS.75 CRORES. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DIS SOLUTION OF THE ASSESSEE FIRM TOOK PLACE ON 29 - 05 - 2007 AND THE SECOND PLOT FOR RS.6.50 CRORES WAS PURCHASED AFTER THE DISSOLUTION. THE LD. AUTHORISED REPRESENTATIVE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 8 FOR THE ASSESSEE FURTHER POINTED OUT THAT SALE TO SUZLON ENERGY LTD. WAS AFTER THE DISSOLU TION OF THE FIRM AND UNDOUBTEDLY AGREEMENT TO SALE WAS EXECUTED ON 07 - 05 - 2007 WHICH WAS PRIOR TO SALE BUT THE CONVEYANCE WAS COMPLETED SUBSEQUENT TO PURCHASE OF PART OF THE LAND AFTERWARDS. HE ALSO POINTED OUT THAT THE PROFIT ON THE SALE OF ENTIRE TRANSAC TION WAS OFFERED BY VASCON ENGINEERS LTD. HE FURTHER POINTED OUT THAT THOUGH THE ORIGINAL DISSOLUTION DEED IS NOT TRACEABLE BUT THE FACT OF DISSOLUTION HAS BEEN DECLARED BY THE OTHER PARTNER, I.E. PANCH A SH I L REAL ESTATE CONSULTANTS PVT. LTD. , IN ITS BALAN CE SHEET , IN THE NOTES TO ACCOUNTS AND ALSO IN THE DOCUMENT ISSUED FOR IPO ON 14 - 11 - 2007 WHERE FACTS OF DISSOLUTION IS MENTIONED . THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE DOCUMENTS IN TH IS REGARD WHEREIN EVEN IN THE LE TTE R TO THE ASSISTANT DIRECTOR OF INCOME TAX (INVESTIGATION) DATED 04 - 12 - 2007 SUBSEQUENT TO SEARCH PLACED AT PAGE 163 OF THE PAPER BOOK , THIS FACT OF DISSOLUTION WAS MENTIONED. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO THE BOOK ENTR IES WHEREIN THE DEVELOPMENT ACCOUNT OF SUZLON ENERGY LTD. WAS TRANSFERRED TO VASCON ENGINEERS LTD. BY THE ASSESSEE PLACED AT PAGES 126 AND 127 OF THE PAPER BOOK. HE FURTHER REFERRED TO THE ENTRIES BY THE VAS C ON ENGINEERS LTD. WHEREIN THE SAID CONCERN HAS SHOWN THE SALE OF RS.75 CRORES AGAINST WHICH THE ASSESSEE IS IN APPEAL. THE COST OF THE LAND WAS RS.61.17 CRORES AGAINST WHICH M/S. VASCON ENGINEERS LTD. HAD SHOWN GAIN OF RS.13.82 CRORES. HE STRESSED THAT WHE RE THE ASSESSEE HAD BOUGHT THE WHOLE LAND FO R RS.71.50 CRORES BUT HAD SOLD THE LAND OF COST OF RS.60.11 CRORES AND BALANCE LAND OF VALUE OF RS.13.25 CRORES WAS STILL AVAILABLE WITH THE ASSESSEE, I.E. AS AGAINST THE TOTAL AREA OF 59,600 SQ.MTRS THE LAND SOLD WAS 41,200 SQ.MTRS. BALANCE LAND HAS BEEN SHOWN AS AN ASSET OF M/S. VASCON ENGINEERS LTD. WHICH WAS DEVELOPED LATER AND THE PROFIT WAS OFFERED IN ASSESSMENT YEARS 2013 - 14 & 2014 - 15. THE SALE DEED WAS EXECUTED ON 22 - 04 - 2008 BY M/S. VASCON ENGINEERS LTD. THOUGH ON BEHALF OF THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 9 PARTNERSHIP FIRM ; M ERELY BECAUSE NAME WAS USED WRONGLY AND UNLAWFULLY, DOES NOT MAKE THE FIRM ALIVE , WHICH WAS OTHERWISE DISSOLVED PRIOR TO THAT DATE. HE POINTED OUT THAT THE CASE OF THE REVENUE WAS THAT NO VALID DISSOLUTION HA D TAKEN PLACE BECAUSE THE LAND DEALS WAS IN THE NAME OF VASCON HADAPSAR VENTURES. 12. REFERRING TO THE REASONS FOR REJECTING THE CLAIM OF THE ASSESSEE BY CIT(A) THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE COPY OF DISSOLUTION DEED WAS FILED AND IT WAS ADMITTED THAT NO ORIGIN AL DEED WAS AVAILABLE. HE HOWEVER POINTED OUT THAT THE REGISTRATION WITH THE REGISTRAR OF FIRM WAS NOT MANDATORY AND IT WAS NOT SO REGISTERED. HE THEN POINTED OUT THAT THERE WAS NO CONTRADICTION IN THE TRANSACTION WHEREIN M/S. VASCON ENGINEERS LTD. HAD C ONTRACT WITH SHRI ATUL CHORDIA . FURTHER, THERE WAS A PROFIT OF RS.12 CRORES ON WHICH M/S. VASCON ENGINEERS LTD. PAID TAXES AND THE DEPARTMENT ACCEPTED. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT CIT(A) SAYS THAT SHRI ATUL CHORDIA IN SUBSEQUENT AGREEMENT HAD 50% SHARE. SO THIS AGREEMENT WAS COLOURABLE ; BUT IN FACT SHRI ATUL CHORDIA HAD ONLY 16% SHARE AND THE CONCLUSION OF THE CIT(A) IN THIS REGARD WAS INCORRECT. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS TO DECIDE THE ISSUE OF TAXABILITY OF CAPITAL GAINS: - I ) CIT VS. 1. EXCEL INDUSTRIES LTD. & 2. MAFATLAL INDUSTRIES P. LTD. (2013) 358 ITR 295 (SC) II ) CIT VS. NAGRI MILLS CO. LTD. (1958) 33 ITR 681 (BOM) III ) CIT VS. DINESH KUMAR GOEL (2011) 331 ITR 10 (DEL) IV ) CIT VS. SHRI R AM PISTONS & RINGS LTD. (2008) 220 CTR (DEL) 404 V ) ROYAL INFORMATION SYSTEMS P. LTD. VS. ITO IN ITA NO.7123/MUM/2014, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 13.07.2016 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN CONCLUSION P OINTED OUT THAT M/S. VASCON ENGINEERS LTD. HAD DECLARED THE INCOME FROM CAPITAL GAINS WHICH HAS BEEN ASSESSED IN ITS HANDS. IN OTHER WORDS, INCOME ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 10 ARISING FROM SALE OF ONE ASSET HAS BEEN ASSESSED ON SUBSTANTIVE BASIS IN THE HANDS OF TWO PARTIES I.E. THE A SSESSEE BEFORE US AND M/S. VASCON ENGINEERS LTD. HE FURTHER CLARIFIED THAT IN ANY CASE, M/S. VASCON ENGINEERS LTD. HAD SHOWN INCOME OF RS.103 CRORES AND THERE IS NO MERIT IN THE CASE OF REVENUE AUTHORITIES THAT INCOME HAS BEEN SO SHOWN TO AVOID TAXES. 1 4 . THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FILED WRITTEN SUBMISSIONS AND POINTED OUT THAT THE POSSESSION OF THE SAID LAND WAS GIVEN TO SUZLON ENERGY LTD. HOWEVER, ON PERUSAL OF THE DOCUMENTS DURING THE COURSE OF HEARING, IT WAS POINTED OUT BY US THAT THERE W ERE NO COVENANTS OF TRANSFER OF POSSESSION IN THE SAID AGREEMENT TO SALE , TO WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAD NO REPLY. HE FURTHER POINTED OUT THAT THE VARIOUS DOCUMENTS BEING REFERRED TO BY THE ASSESSEE TO ESTABLISH THE DATE O F DISSOLUTION OF THE ASSESSEE FIRM WERE SELF - SERVING DOCUMENTS , T HE ANNUAL REPORT OF PARTNER AND THE REPORTING TO SEBI ETC. HE STRESSED THAT WHERE POSSESSION WAS GIVEN ON 07 - 05 - 2007 ITSELF, THEN THE GAIN ARISING ON SALE OF THE PROPERTY COULD BE ADDED IN T HE HANDS OF THE ASSESSEE. HE S TATED THAT SOME DISSOLUTION HAD TAKEN PLACE BUT WHEN THE SAME HA D TAKEN PLACE IS NOT CLEAR. HE STRESSED THAT THE DEPARTMENT WAS NOT CONTESTING THE FACT OF DISSOLUTION BUT PROBABLY THE SAID DISSOLUTION WAS OF SUBSEQUENT DATE AND CONSEQUENTLY THE SALE OF THE BALANCE LAND WAS ASSESSED IN THE HANDS OF M/S. VASCON ENGINEERS LTD. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO VARIOUS CLAUSES OF THE AGREEMENT AND STRESSED THAT IN THE CONVEYANCE DEED DATED 22.04 .2008, THE ASSESSEE WAS A PARTY AND HAD SOLD THE ASSETS AS ITS OWNER . HE ALSO REFERRED TO THE PARA AT PAGE 118 OF THE PAPER BOOK TO POINT OUT THAT THE POSSESSION OF PROPERTY WAS GIVEN TO THE PURCHASER ON 07.05.2007 ON EXECUTION OF AGREEMENT TO SELL. IN T HE ALTERNATE, IT WAS POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 11 THAT IF THE CONTENTION OF ASSESSEE IN RESPECT OF DISSOLUTION OF FIRM IS CONSIDERED TRUE FOR A MOMENT, THE PROPERTY WAS PASSED ON TO SUZLON ENERGY LTD. ON 07.05.2007 AND HENCE, THE PROFITS ARISE ON THAT DATE AND NEED TO BE TAXED IN THE HANDS OF ASSESSEE EVEN THEN. HE THEREAFTER, RELIED ON DIFFERENT DECISIONS OF THE HON'BLE SUPREME COURT FOR THE PROPOSITION THAT THE SUBSTANCE OF ACTIVITY NEEDS TO BE LOOKED INTO AND WO ULD FORM THE BASIS FOR ARRIVING AT CONCLUSION ABOUT THE NATURE OF ACTIVITY. HE FURTHER STRESSED THAT BOTH THE SUBSTANCE AND THE FORM CLEARLY INDICATE THAT THE ASSESSEE FIRM WAS IN EXISTENCE AT THE TIME OF CONVEYANCE DEED DATED 22.04.2008 . RELIANCE WAS PL ACED ON VARIOUS DECISIONS AND THE EXTRACTS OF DECISIONS ARE AVAILABLE IN THE WRITTEN SUBMISSIONS BUT THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO PROVIDE THE COPIES OF DECISIONS, SOME OF WHICH ARE NOT REPORTED. HOWEVER, HE ALSO R E LIES ON THE RATIO LAID DOWN IN KEDARNATH JUTE MFG. CO. LTD. VS. CIT 1971 AIR 2145 FOR THE PROPOSITION THAT THE PROVISIONS OF LAW RELATING THERETO AND NOT THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN EXISTENCE OR ABSENCE OF ENTRIES IN THE BO OKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. 15 . THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT PERUSAL OF THE TERMS OF THE AGREEMENT WOULD SHOW THE FACTS OF THE CASE AND NOTHING WAS HIDDEN. EVEN AT THE TIME OF SEARCH IT WA S CLARIFIED. HE STRESSED THAT AS PER THE AGREEMENT DATED 07 - 05 - 2007 , P OSSESSION WAS NOT GIVEN. BALANCE CONSIDERATION WAS RECEIVED ON 29 - 06 - 2007, I.E. AFTER THE DATE OF DISSOLUTION WHEN THE POSSESSION WAS GIVEN TO SUZLON ENERGY LTD. HE STRESSED THAT INCA SE DISSOLUTION OF THE FIRM WAS DISPUTED, THEN WHAT ABOUT THE SUBSEQUENT EVENTS. HE STRESSED THAT THE SUBSTANCE AND F ORM ARE DIFFERENT. THE AGREEMENT THOUGH IS IN THE NAME OF VASCON HADAPSAR VENTURE S BUT ENTIRE CONSIDERATION WAS RECEIVED BY ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 12 M/S. VASCON EN GINEERS LTD. MAY BE THOUGH VASCON HADAPSAR VENTURE S BUT THE SUBSTANCE OF THE TRANSACTION PROVES THE CASE OF THE ASSESSEE. 1 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE GROUNDS OF APPEAL NO.1 TO 3 ARE NOT PRESSED AND HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. THE ISSUE VIDE GROUNDS OF APPEAL NO.4 TO 6 IS AGAINST THE ADDITION OF RS.13.83 CRORES MADE ON ACCOUNT OF INCOME ARISING ON THE ALLEGED SALE OF LAND TO M/S. SUZLON ENERGY LTD. THE QUANTIFICATION OF THE GAIN ARISING ON THE SAL E OF THE SAID LAND IS NOT DISPUTED BUT THE DISPUTE IS CENTERING AROUND THE HAND IN WHICH THE SAME IS TO BE ASSESSED TO TAX. THE ASSESSEE WAS A PARTNERSHIP FIRM CONSTITUTED OF TWO PARTNERS, I.E. M/S. VASCON ENGINEERS LTD. AND PANCH A SH I L REAL ESTATE AND CON SULTANTS PVT. LTD. THE PARTNERSHIP FIRM WAS CONSTITUTED ON 12 - 05 - 2006. ON 05 - 06 - 2006 THE AGREEMENT FOR JOINT VENTURE BETWEEN THE ASSESSEE AND SYNDICATE REALTORS ON PAYMENT WITH TOPLINE SHARING WAS ENTERED INTO. ON 28 - 04 - 200 7 A SUPPLEMENTARY AGREEMENT WI TH SYNDICATE REALTORS WAS EXECUTED WHEREIN THE TERMS OF JOINT VENTURE WERE CHANGED TO DEVELOPMENT AGREEMENT ON LUMSUM CONSIDERATION RATHER THAN TOPLINE SHARING. ON 28 - 04 - 2007 ITSELF AN MOU WAS ENTERED INTO BETWEEN THE ASSESSEE AND M/S. SUZLON ENERGY LTD. ON 07 - 05 - 2007 AN AGREEMENT TO SALE BY THE ASSESSEE WAS EXECUTED WITH SUZLON ENERGY LTD. FOR SALE OF 41,200 SQ.MTRS. OF LAND. ON THE SAID DATE M/S. VASCON ENGINEERS LTD. ENTERED INTO AN AGREEMENT WITH SUZLON ENERGY LTD, AND ALSO WITH SHRI ATUL CHORDIA FOR CONSTRUCTION OF BUILDINGS FOR SUZLON ENERGY LTD. ON 29 - 05 - 2007 PANCHASHIL REAL ESTATE CONSULTANTS PVT. LTD. RETIRED FROM THE PARTNERSHIP FIRM I.E. ASSESSEE AND M/S. VASCON ENGINEERS LTD. TOOK OVER THE RUNNING BUSINESS OF VASCON HADAPSAR VENTURE, I.E. THE ASSESSEE BEFORE US, AS GOING CONCERN. ON 01 - 06 - 2007 M/S. VASCON ENGINEERS LTD. ENTERED INTO A JOINT VENTURE WITH SHRI ATUL CHORDIA FOR PROJECT MANAGEMENT OF PROJECT OF M/S. ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 13 SUZLON ENERGY LTD. ON 19 - 06 - 2007 CERTAIN PORTIONS OF LAND BELONGING TO TUPE FAMI LY WERE AGREED TO BE PURCHASED WHICH IN TURN WERE TO BE SOLD TO SUZLON ENERGY LTD. AS PER THE AGREEMENT DATED 07 - 05 - 2007 . ON 29 - 06 - 2007 POSSESSION OF THE LAND WAS HANDED OVER TO SUZLON ENERGY LTD. AS PART OF THE SALE AGREEMENT, WHEN SUZLON ENERGY LTD. HAD PAID SUBS TANTIAL AMOUNT TO M/S. VASCON ENGINEERS LTD. THE COPY OF THE LETTER DATED 29 - 06 - 2007 UNDER WHICH VACANT POSSESSION OF PIECE OF LAND ADMEASURING 41,200 SQ.MTRS C ARVED OUT OF THE TOTAL LAND HOLDING IN CONSIDERATION WAS HANDED OVER IS PLACED ON REC ORD. THE SAID DOCUMENT IS SIGNED BY AN AUTHORIZED SIGNATORY ON BEHALF OF VASCON HADAPSAR VENTURE S . ON 23 - 04 - 200 8 CONVEYANCE DEED WAS MADE IN FAVOUR OF SUZLON ENERGY LTD. WHICH WAS SIGNED BY THE ASSESSEE BEFORE US, I.E. VASCON HADAPSAR VENTURES. ON 19 - 10 - 2008 CONSTRUCTION WAS COMPLETED BY M/S. VASCON ENGINEERS LTD. FOR SUZLON ENERGY LTD. 17. BEFORE ADDRESSING THE ISSUE RAISED, WE MAY ALSO LOOK AT THE DETAILS OF PLOT PURCHASED FOR FURTHER SALE TO M/S. SUZLON ENERGY LTD. THE ASSESSEE VIDE PURCHASE AGR EEMENT DATED 05.06.2006 HAD ACQUIRED DIFFERENT PIECES OF PLOTS OF LAND FROM M/S. SYNDICATE REALTORS CONSTITUTED OF SUNIL TUPE AND ANOTHER ADMEASURING 54,400 SQ. MTRS. OF LAND. THE COPY OF AGREEMENT IS PLACED AT PAGES 13 TO 38 OF PAPER BOOK. OUT OF THIS L AND, THE ASSESSEE HAS RETAINED 12600 SQ. MTRS. AND 5800 SQ. MTRS. OF LAND WHICH IS UNSOLD AND IS AN ASSET SHOWN IN THE HANDS OF M/S. VASCON ENGINEERS LTD. , AFTER DISSOLUTION. THE AGREEMENT TO SELL 41,200 SQ.MTRS. OF LAND WAS ENTERED INTO ON 07.05.2007 I.E . THE DATE ON WHICH ADMITTEDLY, THE ASSESSEE DID NOT HAVE COMPLETE PORTION OF LAND AVAILABLE WITH IT I.E. OUT OF PIECE OF LAND PURCHASED BY I T ADMEASURING 54,400 SQ.MTRS., THE AVAILABILITY OF LAND WAS ONLY 36,000 SQ.MTRS. THE CONTRACT WAS TO SELL 41,200 S Q. MTRS. OF LAND FOR TOTAL CONSIDERATION OF RS.75 CRORES. THE BALANCE PIECE OF LAND ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 14 WAS ACQUIRED ON 19.06.2007 ADMEASURING 5200 SQ.MTRS. FOR TOTAL CONSIDERATION OF RS.6.50 CRORES FROM RAMDAS TUKARAM TUPE AND OTHERS. THE COPY OF SAID AGREEMENT IS PLACED A T PAGES 87 TO 111 OF PAPER BOOK. THE TOTAL COST OF ACQUISITION OF LAND WAS RS.71.50 CRORES AND THE PROPORTIONATE COST OF LAND AND OTHER EXPENSES WAS WORKED OUT AT RS.61.17 CRORES. THE PROFIT ON SALE OF LAND I.E. WHERE THE SALE VALUE WAS RS.75 CRORES , WAS WORKED OUT AT RS.13.83 CRORES. IN OTHER WORDS, THERE IS NO DISPUTE AS TO THE ABOVE SAID FACTUAL ASPECTS OF ASSESSEE HAVING SOLD PORTION OF ITS LAND AND HAVING RETAINED SOME PORTION OF LAND AS UNSOLD. THE ASSESSEE CLAIMS THAT ON DISSOLUTION OF PARTNERSHI P FIRM, THE LAND WAS PASSED ON TO M/S. VASCON ENGINEERS LTD. AND THE SALE WHICH WAS INITIATED AS PER AGREEMENT TO SELL DATED 07.05.2007 WAS COMPLETED BY M/S. VASCON ENGINEERS LTD., HENCE PROFIT OF RS.13.83 CRORES IS INCLUDABLE AS INCOME IN THE HANDS OF M/S . VASCON ENGINEERS LTD. HOWEVER, THE CASE OF REVENUE IS THAT THE SAID PROFIT ON SALE OF LAND IS TO BE ASSESSED IN THE HANDS OF ASSESSEE ON THE DATE OF ENTERING INTO AGREEMENT TO SELL ITSELF . 18. THE FIRST REASON FOR NOT ACCEPTING THE CLAIM OF ASSESSEE IS THAT THE ASSESSEE WAS UNABLE TO PRODUCE ORIGINAL DISSOLUTION DEED. THE ASSESSEE CLAIMS THAT THE PARTNERSHIP FIRM WAS DISSOLVED ON 29.05.2007 AND THE RUNNING BUSINESS OF ASSESSEE FIRM WAS TAKEN OVER BY M/S. VASCON ENGINEERS LTD. THE ASSESSEE WAS DIRECT ED TO FILE THE COPY OF DISSOLUTION DEED. HOWEVER, THE ASSESSEE COULD NOT PRODUCE ORIGINAL DISSOLUTION DEED BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US. THE PLEA OF ASSESSEE IN THIS REGARD IS THAT THE SAID ORIGINAL DISSOLUTION DEED HAS BEEN MISPLACED. HOWEVER, THE FACTS OF DISSOLUTION HAVE BEEN DECLARED IN VARIOUS DOCUMENTS. THE FIRST DOCUMENT ON WHICH THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON IS THE COPY OF DISSOLUTION DEED ITSELF WHICH IS PLACED AT PAGES 72 TO 75 OF THE PAP ER BOOK. THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 15 LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE STAMP PAPERS FOR EXECUTING THE DEED OF RETIREMENT CUM DISSOLUTION WAS PURCHASED ON 15.03.2007 BUT SINCE THE ACCOUNTS WERE NOT FINALIZED, THE DATE OF RETIREMENT WAS SHIFTE D TO 29.05.2007 AND HENCE, THE ENTRIES IN HAND ON THE SAID DOCUMENT VIS - - VIS THE DATE OF DISSOLUTION. OUR ATTENTION WAS DRAWN TO CLAUSE 2 OF THE SAID DEED, WHEREIN IT WAS AGREED BETWEEN THE PARTIES THAT THE AMOUNTS OF BUSINESS OF SAID FIRM ON THE BASIS O F GOING CONCERN SHALL BE COMPLETED FOR THE PERIOD ENDING ON 15.03.2007 AS EXPEDITIOUSLY AS POSSIBLE. HOWEVER, THEREAFTER, THERE IS A MENTION OF CREDIT OR DEBIT TO THE RESPECTIVE ACCOUNTS OF PARTIES AND BALANCE SHEET AS ON 29.05.2007. VIDE CLAUSE 3 ALSO, THERE IS SIMILAR MENTION OF HANDING OVER OF THE PROPERTIES, ASSETS, BUSINESS CREDITS, STOCK - IN - TRADE, SECURITIES, ETC. INCLUDING VARIOUS RIGHTS, TRADE NAME AND GOODWILL TO M/S. VASCON ENGINEERS LTD. W.E.F. 16.03.2007. THE SECOND REFERENCE IS MADE TO THE N OTES AND ACCOUNTS TO THE BALANCE SHEET OF PANCH A S HI L REAL ESTATE CONSULTANTS PVT. LTD. AS ON 31.03.2008, WHEREIN IT CATEGORICALLY DECLARED THAT ON 29.05.2007 M/S. VASCON HADAPSAR VENTURES WAS DISSOLVED AND HENCE, THE COMPANY IS NO LONGER A PARTNER AS ON 31 .03.2008. THE SAID BALANCE SHEET IS SIGNED ON 15.07.2008 BY THE DIRECTOR AND ALSO BY THE AUDITOR. THE COPY OF THE SAME IS PLACED AT PAGES 157 TO 161 OF THE PAPER BOOK. FURTHER, IN THE NOTES TO ACCOUNTS, SIMILAR DECLARATION WAS MADE UNDER THE HEAD PARTI CULARS OF PARTNERSHIP FIRM IN WHICH THE COMPANY WAS A PARTNER DURING THE PREVIOUS YEAR. THE ASSESSEE DECLARED THAT IT WAS A PARTNER IN M/S. VASCON HADAPSAR VENTURES AND THE NAME OF THE OTHER PARTNER WAS M/S. VASCON ENGINEERS LTD. AND THE SHARING RATIO OF 50%; AND ON 29.05.2007 M/S. VASCON HADAPSAR VENTURES WAS DISSOLVED AND HENCE, THE COMPANY IS NO LONGER A PARTNER AS ON 31.03.2008 . FURTHER, THE COMPANY M/S. VASCON ENGINEERS LTD. WANTED TO COME OUT WITH IPO, SO THE DETAILS WERE FILED WITH SEBI ON 14.11.2 007, WHEREIN THE FACTUM OF DISSOLUTION ON 29.05.2007 WAS ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 16 MENTIONED AND IT WAS ALSO MENTIONED THAT THE BUSINESS OF PARTNERSHIP WAS TO BE CARRIED OUT BY M/S. VASCON ENGINEERS LTD. IT WAS FURTHER DECLARED THAT M/S. VASCON HADAPSAR VENTURES, FORMER PARTNERSHI P FIRM, IN WHICH IT WAS A PARTNER ENTERED INTO DEVELOPMENT AGREEMENT DATED 19.06.2007 WITH RAMDAS TUKARAM TUPE AND OTHERS FOR THE DEVELOPMENT OF 1.28 ACRES OF LAND LOCATED AT HADAPSAR, PUNE. UNDER THE SAID AGREEMENT, DEVELOPMENT RIGHTS FOR THE SAID LAND W ERE TRANSFERRED TO M/S. VASCON HADAPSAR VENTURES FOR LUMP SUM CONSIDERATION PAYABLE TO RAMDAS TUKARAM TUPE AND OTHERS. THE ASSESSEE FURTHER POINTED OUT THAT PURSUANT TO THE DEED OF DISSOLUTION DATED 29.05.2007, M/S. VASCON HADAPSAR VENTURES WAS DISSOLVED AND THE BUSINESS OF PARTNERSHIP FIRM WAS CARRIED OUT BY THE COMPANY. ANOTHER COMMUNICATION UNDER WHICH, THE SAID FACT OF DISSOLUTION IS MENTIONED IS IN A LETTER FILED DURING SEARCH PROCEEDINGS ON 04.12.2009 BEFORE THE ADIT (INV), UNIT II(1), PUNE, WHICH W AS WRITTEN BY M/S. VASCON ENGINEERS LTD. ON BEHALF OF M/S. VASCON HADAPSAR VENTURES I.E. ASSESSEE BEFORE US. IN THE SAID COMMUNICATION, IT WAS CLARIFIED THAT M/S. VASCON HADAPSAR VENTURES HELD THE LAND AS STOCK - IN - TRADE IN THE BOOKS OF ACCOUNT AND WAS IN THE BUSINESS OF DEVELOPMENT PROJECTS. IT WAS FURTHER POINTED OUT THAT SINCE THE BUSINESS OF PARTN ERSHIP FIRM WAS TO CARRY OUT THE BUSINESS AS BUILDER AND DEVELOPER AND THE GAIN ARISING ON SALE OF ASSET OR TRANSFER COULD BE CONSIDERED AS BUSINESS INCOME. IT WAS FURTHER POINTED OUT THAT ON 09.05.2007, AGREEMENT TO SELL WAS EXECUTED WITH M/S. SUZLON ENERGY LTD. FOR CONSIDERATION OF RS.75 CRORES ON CERTAIN TERMS AND CONDITIONS WHICH INCLUDED THE PAYMENT TO BE MADE I.E. RS.65 CRORES ON OR BEFORE EXECUTION OF A GREEMENT AND BALANCE OF RS.10 CRORES AT THE TIME OF FINAL CONVEYANCE. HOWEVER, THE PAYMENT OF RS.65 CRORES WAS MADE BY THE SAID PARTY AFTER THE DATE OF AGREEMENT AS UNDER: - ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 17 DATE AMOUNT 22.6.2006 5,00,00,000 14.2.2007 10,50,00,000 14.2.2007 9,90,47,9 83 30.4.2007 10,00,00,000 30.4.2007 20,00,00,000 20.6.2007 9,59,52,017 SUB TOTAL PAYMENT DUE ON THE DATE OF AGREEMENT 65,00,00,000 PAYMENT DUE ON THE DATE OF FINAL CONVEYANCE 22.4.2008 RECEIVED ON 26.4.2008 10,00,00,000 TOTAL 75,00,00,000 1 9 . I T WAS ALSO MENTIONED IN THAT LETTER AS PER CLAUSE 2 OF THE ABOVE AGREEMENT TO SELL THAT M/S. SUZLON ENERGY LTD. WAS REQUIRED TO PAY SUM OF RS.65 CRORES ON OR BEFORE EXECUTION OF SAID AGREEMENT AND ACCORDINGLY, THE POSSESSION WAS TO BE HANDED OVER BASED ON THE FULFILLMENT OF SAID PAYMENT OBLIGATIONS. THE REMAINING RS.10 CRORES WAS AGREED TO BE PAID ON THE FINAL CONVEYANCE. AS AGAINST THE TERMS OF AGREEMENT, M/S. SUZLON ENERGY LTD. PAID ONLY RS.55,40,47,983/ - TILL THE DATE OF EXECUTION OF AGREEMENT AND SUM OF RS.9,59,52,017/ - WHICH WAS TO BE PAID BEFORE THE DATE OF EXECUTION OF AGREEMENT WAS NOT SO PAID AND HENCE, THE POSSESSION WAS NOT HANDED OVER TO M/S. SUZLON ENERGY LTD. ON THE DATE OF AGREEMENT AND THE SALE WAS NOT COMPLETED ON THAT DATE. SUBSEQUENTLY, THE SAID AMOUNT WAS PAID ON 20.06.2007 AND ONLY AFTER THE RECEIPT OF ABOVE PAYMENT, THE POSSESSION WAS HANDED OVER AND THE SALE WAS RECOGNIZED. SO, THE SALE WAS COMPLETED ONLY ON 29.06.2007 I.E. AFTER THE FIRM WAS DISSOLVED ON 29.05.2007 AND HENCE, THE S ALE WAS RECOGNIZED BY M/S. VASCON ENGINEERS LTD. AND OFFERED TO TAX DURING ASSESSMENT YEAR 2008 - 09. IT WAS FURTHER EXPLAINED THAT DUE TO INACTIVE PARTICIPATION OF THE OTHER PARTNER, THE SAID PARTNER RETIRED FROM THE FIRM BEFORE THE TRANSACTION OF SALE OF PROPERTY WAS CONCLUDED. IT WAS ALSO POINTED OUT THAT THE ENTIRE SALE PROCEEDS WERE TAKEN AWAY BY M/S. VASCON ENGINEERS LTD., ONE OF THE PARTNER S AND THE SAME WAS NOT ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 18 OBJECTED BY THE OTHER PARTNER. THE PROFIT FROM THE SALE OF SAID VENTURE WAS OFFERED BY M /S. VASCON ENGINEERS LTD. IN ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09. IT WAS ALSO POINTED OUT THAT THE AGREEMENT WITH M/S. SUZLON ENERGY LTD. WAS SIGNED AND EXECUTED ONLY BY THE AUTHORIZED SIGNATORY OF M/S. VASCON ENGINEERS LTD. THE SALE WAS COM PLETED AFTER PAYMENT OF RS.9.59 CRORES AND THE CORRESPONDING POSSESSION BEING HANDED OVER TO M/S. SUZLON ENERGY LTD. ON 29.06.2007, THE COMPANY RECOGNIZED THE SAME IN ITS BOOKS OF ACCOUNT IN ACCORDANCE WITH ACCOUNTING STANDARDS (AS) - 9 AND THE TAXES THEREON WERE PAID DURING ASSESSMENT YEAR 2008 - 09. SO, A REQUEST WAS MADE THAT THE INCOME SHOULD NOT BE TAXED IN THE HANDS OF ERSTWHILE FIRM M/S. VASCON HADAPSAR VENTURES. THE COPY OF SAID LETTER IS PLACED AT PAGES 162 TO 164 OF THE PAPER BOOK. 20. THE ASSESS EE HAS PLACED ON RECORD THE AGREEMENT TO SELL THE RIGHTS IN LAND TO M/S. SUZLON ENERGY LTD. AT PAGES 57 TO 71 OF PAPER BOOK TO WHICH, SUNIL TUPE AND GROUP, RAMDAS TUKARAM TUPE, M/S. VASCON HADAPSAR VENTURES AND M/S. SYNDICATE REALTORS ARE THE VENDORS AND M /S. SUZLON ENERGY LTD. IS THE VENDEE. THE SAID AGREEMENT IS EXECUTED BY M/S. VASCON HADAPSAR VENTURES THROUGH ITS PARTNER M/S. VASCON ENGINEERS LTD. THROUGH ITS AUTHORIZED SIGNATORY MR. S.P. NAIR. THE COPY OF HANDING OVER OF POSSESSION IS FILED DURING TH E COURSE OF HEARING, WHICH IS LETTER DATED 29.06.2007 AND THE POSSESSION HAS BEEN HANDED OVER OF LAND ADMEASURING 41,200 SQ.MTRS. CARVED OUT OF PROPERTY. THE SAID LETTER IS SIGNED BY THE AUTHORIZED SIGNATORY FOR M/S. VASCON HADAPSAR VENTURES AND THE QUITE PEACEFUL AND VACANT POSSESSION OF THE PROPERTY HAS BEEN RECEIVED BY M/S. SUZLON ENERGY LTD. THROUGH ITS AUTHORIZED SIGNATORY. THE PROFIT ARISING ON SALE OF LAND AT RS.13.83 CRORES IS INCLUDED IN THE HANDS OF ASSESSEE AS INCOME OF ASSESSEE FOR THE INSTANT ASSESSMENT YEAR BY THE REVENUE , ON THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 19 OTHER HAND, M/S. VASCON ENGINEERS LTD. HAD DECLARED THE BUSINESS PROFIT OF RS.13.83 CRORES AS PROFIT FOR ASSESSMENT YEAR 2008 - 09, WHICH IS ALSO ASSESSED IN ITS HANDS. IT HAS BEEN POINTED OUT BY THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE BEFORE US THAT ON 01.06.2007, THERE WAS JOINT VENTURE AGREEMENT B ETWEEN M/S. VASCON ENGINEERS LTD. ON ONE SIDE AND MR. ATUL ISHWARDAS CHORDIA I.E. ONE DIRECTOR OF PANCH A S HI L REAL ESTATE CONSULTANTS PVT. LTD. FOR THE PROJEC T MANAGEMENT OF M/S. SUZLON ENERGY LTD. THE COPY OF SAID AGREEMENT IS PLACED AT PAGES 76 TO 86 OF THE PAPER BOOK. THE AGREEMENT IS DATED 01.06.2007 AND M/S. VASCON ENGINEERS LTD. HAS DECLARED ITSELF TO BE WELL AND SUFFICIENTLY ENTITLED TO OR SEIZED AND P OSSESSED OF ALL THAT PIECE AND PARCEL OF PROPERTY AT HADAPSAR AND IT IS DESIROUS OF DEVELOPING THE SAME TO SUIT CAMPUS FACILITIES TO M/S. SUZLON ENERGY LTD. ON A PORTION OF SAID PRO PERTY. MR. ATUL CHORDIA ON THE OTHER HAND, HAD EXPERIENCE IN IMPLEMENTING THE PROJECTS DEVELOPMENT AND THE PARTIES ENTERED INTO AN AGREEMENT TO JOINTLY DEVELOP THE SAID PROJECT VIDE CLAUSE 1. IT WAS FURTHER POINTED OUT THAT THE ACTIVITY CONTEMPLATED UNDER THE AGREEMENT CONSISTED OF LAND BELONGING TO CO - VENTURE NO.1 I.E. M/S. VA SCON ENGINEERS LTD., WHO WAS THE ABSOLUTE OWNER OF THE SAID PROPERTY AND HAD CLEAR AND MARKETABLE TITLE OF THE PROPERTY. IT ALS O DECLARED THAT IT HAD FULL RIGHT OF AUTHORITY TO DEAL WITH THE SAID PROPERTY. IT IS POINTED OUT HERE ITSELF THAT THE SAID JOIN T VENTURE WAS IN RESPECT OF BALANCE PROPERTY WHICH WAS NOT SOLD TO M/S. SUZLON ENERGY LTD. BUT WAS ADJACENT TO THE LAND SOLD TO M/S. SUZLON ENERGY LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT THE PROFIT ARISING ON DEVEL OPMENT OF THE SAID PROJECT HAS NOT BEEN ASSESSED IN THE HANDS OF M/S. VASCON HADAPSAR VENTURES I.E. ABOUT RS.13 CRORES WHICH HAS BEEN OFFERED BY M/S. VASCON ENGINEERS LTD. IN ASSESSMENT YEAR 2009 - 10 AND HAS BEEN ASSESSED IN ITS HANDS. OUR ATTENTION WAS FU RTHER DRAWN TO THE WORKING SHEET AT PAGES 193 AND 194 OF PAPER BOOK, WHEREIN THE FUNDS WHICH WERE RECEIVED FROM M/S. SUZLON ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 20 ENERGY LTD. WERE SHARED BETWEEN M/S. VASCON ENGINEERS LTD. AND MR. ATUL CHORDIA. IN THE FIRST YEAR, THERE WAS PROFIT OF RS.2.34 CRO RES AND MR. ATUL CHORDIA PAID THE TAXES ON THE SAID PROFITS RECEIVED BY HIM. IN THE LATER YEARS, THERE WAS BALANCE PROFIT SHOWN AND DECLARED BY THE INDIVIDUAL PARTIES. 2 1. THE CASE PUT UP BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THA T DISSOLUTION HAS TO BE SEEN FROM THE GENERAL PRINCIPLES OF LAW AND NOT FROM THE DOCUMENTATION UNDERTAKEN BY THE ASSESSEE I.E. WHILE EXECUTING THE AGREEMENT TO PURCHASE THE RIGHTS FROM TUPE FAMILY FOR THE BALANCE PORTION OF LAND, THE AGREEMENT WAS ENTERED INTO BY THE ASSESSEE EVEN AFTER THE DATE OF DISSOLUTION. ANOTHER CONTENTION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THOUGH THE ASSESSEE HAD AGREED TO SELL THE PORTION OF LAND TO M/S. SUZLON ENERGY LTD. VIDE AGREEMENT TO S ELL DATED 07.05.2007 BUT ON THE APPOINTED DATE, THE COMPLETE LAND WAS NOT AVAILABLE WITH THE ASSESSEE FOR ITS TRANSFER. CERTAIN PORTION OF LAND WAS PURCHASED VIDE AGREEMENT DATED 19 .06.2007. THE REVENUE AUTHORITIES HAS CHALLENGED THE SAID AGREEMENT DATED 19 .06.2007 BEING EXECUTED BY THE ASSESSEE THOUGH IT CLAIMS THAT THE FIRM WAS DISSOLVED ON 29.05.2007. IN OTHER WORDS, THE FIRM WAS CONTINUING, THAT IS WHY IT ENTERED INTO THE SAID AGREEMENT WITH TUPE FAMILY. THE CLAIM OF DISSOLUTION OF FIRM ON 29.05.200 7 IS CHALLENGED BY THE REVENUE ON THIS ISSUE OF ASSESSEE ENTERING INTO AN AGREEMENT WITH TUPE FAMILY ON 19.06.2007. THE REVENUE HAS ALSO NOT ACCEPTED THE EXPLANATION OF ASSESSEE FOR NON - PRODUCTION OF ORIGINAL DISSOLUTION DEED AND HAS DOUBTED THE FACTUM OF DISSOLUTION ON THIS GROUND ALSO. ANOTHER DOCUMENT WHICH HAS BEEN RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE TO REFUTE THE CLAIM OF DISSOLUTION OF ASSESSEE BY RELYING ON CONVEYANCE DEED DATED 22.04.2008 WHICH WAS EXECUTED FOR T RANSFER OF RIGHTS IN LAND TO M/S. SUZLON ENERGY LTD. THE COPY OF SAME IS PLACED AT PAGES ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 21 112 TO 125 OF THE PAPER BOOK. THE PARTIES TO THE AGREEMENT ARE SHRI SUNIL TUPE AND FAMILY, SHRI RAMDAS TUKARAM TUPE AND FAMILY, M/S. VASCON HADAPSAR VENTURES AND M/S . SYNDICATE REALTORS AS VENDORS AND M/S. SUZLON ENERGY LTD. AS THE VENDEE. VIDE CLAUSE (D) AT PAGE 116 OF PAPER BOOK, PARTIES WERE DESIROUS OF EXECUTING THE DEED OF CONVEYANCE AS AGREED IN THE DOCUMENT DATED 07.05.2007 AND THE VENDORS CONVEYED AND TRANSFE RRED TO THE PURCHASERS THE SAID LAND FREE FROM ALL ENCUMBRANCES FOR CONSIDERATION AND THE TERMS MENTIONED IN IT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO DIFFERENT TERMS OF AGREEMENT TO POINT OUT THAT THERE IS NO MERIT IN THE PL EA OF ASSESSEE THAT THE FIRM WAS DISSOLVED ON 29.05.2007 SINCE THE DEED WHICH WAS EXECUTED MUCH LATER ON 22.04.2008. THE CONVEYANCE DEED WAS MADE BY M/S. VASCON HADAPSAR VENTURES AND NOT BY M/S. VASCON ENGINEERS LTD. WH O CLAIM TO HAVE SUCCEEDED TO THE SAI D PROPERTY ON DISSOLUTION OF PARTNERSHIP FIRM. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS REFERRED TO VARIOUS TERMS I.E. OF CONSIDERATION OF RS.75 CRORES BEING PAID TO VENDOR NO.2 I.E. M/S. VASCON HADAPSAR VENTURES AND FURTHER HANDING OVE R OF POSSESSION OF EXECUTION OF AGREEMENT TO SELL DATED 07.05.2007. HERE, IT WAS VEHEMENTLY ARGUED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT SINCE THE POSSESSION HAS BEEN GIVEN ON 07.05.2007 I.E. ON THE DATE WHEN THE ASSESSEE WAS NOT DISSOLVED THEN THE PROFIT ARISING ON THAT DATE NEED TO BE TAXED IN THE HANDS OF ASSESSEE. FURTHER, REFERENCE WAS MADE TO OTHER COVENANTS OF THE AGREEMENT, WHEREIN THE VENDORS I.E. M/S. VASCON HADAPSAR VENTURES HAD ENDORSED THAT IT WAS THE ABSOLUTE AND ON LY THE OWNER OF SAID PROPERTY AND HAD CLEAR TITLE TO SELL THE SAME, ETC. HERE, IT MAY BE MENTIONED THAT THE SAID AGREEMENT IS SIGNED AND DECLARED BY THE VENDOR NO.2 M/S. VASCON HADAPSAR VENTURES THROUGH ITS PARTNER M/S. VASCON ENGINEERS LTD. THROUGH ITS A UTHORIZED SIGNATORY MR. S.P. NAIR. IN VIEW OF THE ARGUMENTS OF BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, WHEREIN ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 22 THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CLAIMS THAT SINCE THE ASSESSEE DISSOLVED THE FIRM AND HAD NOT GIVEN THE POSSESSION O N THE DATE OF EXECUTION OF AGREEMENT TO SELL, BUT HAD GIVEN THE POSSESSION ON A LATER DATE WHICH WAS AFTER THE DATE OF DISSOLUTION OF THE PARTNERSHIP FIRM, THEN THERE IS NO QUESTION OF ASSESSABILITY OF BUSINESS PROFITS ON SALE OF LAND IN THE HANDS OF DISSO LVED FIRM BUT IN THE HANDS OF PARTNER WHO HAD TAKEN OVER THE ASSETS AND LIABILITIES OF THE PARTNERSHIP FIRM. THE CASE OF REVENUE ON THE OTHER HAND, IS THAT THERE IS NO DISSOLUTION OF ERSTWHILE FIRM AND THE FIRM CONTINUES AND CONSEQUENTLY, THE PROFIT ARISI NG ON SALE OF LAND IS TO BE ASSESSED IN THE HANDS OF ASSESSEE ITSELF. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN THIS REGARD, HAS PLACED RELIANCE ON VARIOUS DECISION OF THE HON'BLE SUPREME COURT FOR THE PROPOSITION THAT SUBSTANCE OF ACTIVITIES NEEDS TO BE LOOKED INTO AND WOULD FORM THE BASIS FOR ARRIVING AT CONCLUSION ABOUT THE NATURE OF ACTIVITIES. THE HON'BLE SUPREME COURT HAS HELD THAT NEITHER THE NOMENCLATURE OF THE DOCUMENTS NOR ANY PARTICULAR ACTIVITY UNDERTAKEN BY THE PARTIES TO THE CONTRACT WOULD BE DECISIVE. IT IS WELL SETTLED PROPOSITION THAT AN AGREEMENT AND THE MITIGATING CIRCUMSTANCES HAVE TO BE CONSIDERED AS A WHOLE AND THE INTENTION OF PARTIES IS TO BE GATHERED FROM THE SAME. IT IS NECESSARY TO LOOK AT THE SUBSTANCE R ATHER THAN FORM. APPLYING THE SAID PRINCIPLE TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE FIRST AGREEMENT WHICH WAS EXECUTED WAS THE PARTNERSHIP DEED WHICH IS DATED 12.05.2006 I.E. PARTNERSHIP DEED OF THE ASSESSEE, UNDER WHICH TWO PERSONS JOINED TO CARRY ON THE BUSINESS OF DEVELOPMENT AND BUILDERS. VIDE AGREEMENT DATED 05.06.2006, THE PARTNERSHIP FIRM ACQUIRED CERTAIN LAND ADMEASURING 54,400 SQ.MTRS. AT A COST OF RS.65 CRORES FROM M/S SYNDICATE REALTORS. THE ASSESSEE HAD TO ACQUIRE THE ADJACENT LAN D ADMEASURING 5200 SQ.MTRS. FROM MR. RAMDAS TUKARAM TUPE AND OTHERS. THE ASSESSEE CLAIMS THAT BEFORE IT COULD ACQUIRE THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 23 SAID LAND, IT ENTERED INTO AN AGREEMENT WITH M/S. SUZLON ENERGY LTD. DATED 07.05.2007 TO SELL THE RIGHTS IN THE LAND ADMEASURING 36,0 00 SQ.MTRS. OUT OF 54,400 SQ.MTRS. ACQUIRED FROM M/S. SYNDICATE REALTORS ALONG WITH 5200 SQ.MTRS. OF ADJACENT LAND WHICH WAS YET TO BE ACQUIRED FROM MR. RAMDAS TUKARAM TUPE AND OTHERS. THE PERUSAL OF AGREEMENT TO SELL DATED 07.05.2007 PLACED AT PAGES 57 T O 71 OF THE PAPER BOOK REFLECTS THAT THE VENDORS FOR THE AGREEMENT TO SELL W ERE MR. SUNIL TUPE AND OTHERS ALONG WITH MR. RAMDAS TUKARAM TUPE AND OTHERS, M/S. VASCON HADAPSAR VENTURES AND M/S. SYNDICATE REALTORS. IN OTHER WORDS, THE ASSESSEE WAS CONSOLIDAT ING THE PIECE OF LAND WHICH WAS THE REQUIREMENT OF M/S. SUZLON ENERGY LTD. AND THE PARTIES ENTERED INTO AN AGREEMENT TO SELL WITH M/S. SUZLON ENERGY LTD. ON 07.05.2007. T HE INTENTION TO SELL 41200 SQ.MTRS. OF LAND TO M/S. SUZLON ENERGY LTD. WAS RENDER ED I NTO WRITING. HOWEVER, THE ASSESSEE ENTERS INTO DEVELOPMENT AGREEMENT FOR ACQUISITION OF BALANCE PORTION OF RIGHTS IN LAND FROM TUPE FAMILY ON 19.06.2007. THE SAID DEVELOPMENT AGREEMENT IS ALSO SIGNED BY M/S. VASCON HADAPSAR VENTURES THROUGH ITS PARTNER. ON THE OTHER HAND, THE ASSESSEE CLAIMS THAT THE RETIREMENT CUM DISSOLUTION DEED WAS EXECUTED ON 29.05.2007 , UNDER WHICH THE SAID ASSET WAS ACQUIRED BY M/S. VASCON ENGINEERS LTD. AND THE OTHER PARTNER PANCH A S HI L REAL ESTATE CONSULTANTS PVT. LTD. RETIRED FR OM THE PARTNERSHIP FIRM. THE POSITION OF LAW VIS - - VIS DISSOLUTION IS THAT ONCE THE PARTNERSHIP FIRM IS DISSOLVED AS PER THE AGREEMENT BETWEEN THE PARTNERS CONSTITUTING THE FIRM, THEN THE SAID FIRM IS NOT EXISTENCE IN LAW AND THE ASSETS AND THE INCOME ARI SING THEREFROM ARE TO BE ASSESSED IN THE HANDS OF PARTNER, WHO HAD ACQUIRED THE SAME. 2 3 . THE ASSESSEE BEFORE US CLAIMS THAT CONSEQUENT TO ITS DISSOLUTION, THE SAID ASSETS WERE ACQUIRED BY M/S. VASCON ENGINEERS LTD., WHO COMPLETED THE SALE AND ALSO RECE IVED THE BALANCE SALE CONSIDERATION AND HENCE, THE PROFITS ARISING ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 24 ON THE SALE OF SAID LAND ARE TO BE ASSESSED IN THE HANDS OF M/S. VASCON ENGINEERS LTD. IT MAY BE REITERATED HEREIN THAT M/S. VASCON ENGINEERS LTD. HAS DULY ACCOUNTED FOR THE PROFITS OF SAL E OF SAID LAND IN ITS BOOKS OF ACCOUNT AND HAS ALSO PAID TAXES THEREON. THE SAID INCOME HAS BEEN ASSESSED IN THE HANDS OF M/S. VASCON ENGINEERS LTD. AS DECLARED BY IT AND HAS BEEN ASSESSED IN THE HANDS OF ASSESSEE BEFORE US ALSO ON THE GROUND THAT NO DISS OLUTION OF PARTNERSHIP FIRM HAD BEEN COMPLETED. THE REASON FOR NON ACCEPTANCE OF DISSOLUTION IN THE HANDS OF ASSESSEE, FIRST IS THE NON PRODUCTION OF ORIGINAL DISSOLUTION DEED AND THE VARIOUS MARKINGS IN THE DOCUMENTS. WE HAVE ALREADY REFERRED TO THE CLA USES OF AGREEMENT IN THE PARAS HEREINABOVE AND FOR THE SAKE OF BREVITY, NOT REPEATING THE SAME. HOWEVER, MERELY BECAUSE THE ORIGINAL DISSOLUTION DEED COULD NOT BE PRODUCED DOES NOT MERIT THE STAND OF REVENUE IN NOT ACCEPTING THE FORM OF DISSOLUTION IN THE HANDS OF ASSESSEE. FIRST OF ALL, DISSOLUTION ON STAMP PAPER WHICH HAS BEEN BOUGHT PRIOR TO THE DATE OF DISSOLUTION . THE ASSESSEE HAS EXPLAINED THE VARIOUS TERMS OF SAID AGREEMENT. SECONDLY, THE FACTUM OF DISSOLUTION AS ON 29.05.2007 HAS BEEN DECLARED B Y M/S. VASCON ENGINEERS LTD. BY WAY OF DETAILS FILED BEFORE SEBI AS IT WANTED TO COME OUT WITH IPO. THE SAID DECLARATION WAS MADE ON 14.11.2007. THE SAID COMPANY CAME OUT WITH THE IPO MUCH LATER. THE OTHER RETIRING PARTNER HA D ALSO IN ITS BALANCE SHEET DECLARED THAT IT HA D RETIRED FROM THE PARTNERSHIP FIRM AND WA S NO MORE A PARTNER IN THE ASSESSEES FIRM, WHICH DECLARATION IS SIGNED ON 18.07.2008. THE REVENUE HAS ALSO OBJECTED TO THE SAID DISSOLUTION AS THE ASSESSEE HAD NOT FILED ANY INTIMATION WITH THE REGISTRAR OF FIRMS. THE EXPLANATION OF ASSESSEE IN THIS REGARD WAS THAT SINCE THE ORIGINAL PARTNERSHIP DEED WAS NOT REGISTERED, SO NO INTIMATION OF DISSOLUTION WAS GIVEN TO THE REGISTRAR OF FIRMS. HOWEVER, M/S. VASCON ENGINEERS LTD. DURING THE COURSE OF SEARCH PROCEEDINGS VIDE LETTER DATED 04.12.2009 WRITTEN ON BEHALF OF M/S. VASCON HADAPSAR VENTURES HAD EXPLAINED ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 25 THE TOTAL FACTS OF THE PROPERTY TRANSACTIONS, DISSOLUTION OF M/S. VASCON HADAPSAR VENTURES AND TAKING OVER OF ASSETS BY M/S. VASCON ENGINEERS LTD. IN THE TOTALITY OF THE ABOVE SAID COMMUNICATION BEING AVAILABLE ON RECORD, SOME OF WHICH IS WITH THE AUTHORITIES OTHER THAN THE INCOME TAX DEPARTMENT, IT CANNOT BE HELD THAT NO DISSOLUTION OF ERSTWHILE FIRM HAD TAKEN PLACE. WE REVERSE THE FINDINGS O F ASSESSING OFFICER AND THE CIT(A) IN THIS REGARD. 2 4 . NOW, COMING TO THE SECOND ASPECT OF NOT ACCEPTING THE FACT OF DISSOLUTION, WHEREIN ALL THE DOCUMENTATION EVEN AFTER THE DATE OF DISSOLUTION HAS BEEN MADE UNDER THE NAME OF M/S. VASCON HADAPSAR VENTUR ES THROUGH PARTNER M/S. VASCON ENGINEERS LTD. THE ASSESSEE HAD UNDERTAKEN TO CONSOLIDATE CERTAIN LANDS AND SELL THE SAME TO M/S. SUZLON ENERGY LTD. ON PROFIT . BUT BECAUSE OF CERTAIN CIRCUMSTANCES, THE SAID DEAL WAS NOT COMPLETED BEFORE THE DISSOLUTION OF FIRM AND CERTAIN AGREEMENTS WERE ENTERED INTO THEREAFTER AND DOCUMENTS WERE SIGNED ON THAT ACCOUNT. ADMITTEDLY, M/S. VASCON ENGINEERS LTD. HAS TAKEN OVER THE PROJECT FOR WHICH, IT WAS THE INITIAL CONTRIBUTOR AND BECAUSE THE OTHER PARTNER HAD NOT CONTRIBU TED ANYTHING FOR THE PURCHASE OF SAID ASSET, THE OTHER PARTNER RETIRED AND THE ASSETS AND LIABILITIES WERE TAKEN OVER BY M/S. VASCON ENGINEERS LTD. HOWEVER, THE LAND DEAL HAD NOT COMPLETED AND CERTAIN DOCUMENTATION HAD TO BE COMPLETED WHICH WERE SIGNED IN THE NAME OF M/S. VASCON HADAPSAR VENTURES BUT THROUGH M/S. VASCON ENGINEERS LTD. IN THE CASE OF LAND DEALINGS, WHEREIN THE ASSESSEE HAD SOUGHT TO ACQUIRE LARGE CHUNK OF LAND ADMEASURING 54,400 SQ.MTRS. PLUS 5200 SQ.MTRS., THEN THE DOCUMENTATION WAS CONTI NUED TO BE MADE IN THE NAMES OF ASSESSEE. HOWEVER, THE SAID DOCUMENTATION CANNOT DISPUTE THE FACT OF DISSOLUTION WHICH WAS INDEPENDENT ACT OF THE ASSESSEE, WHICH WAS DULY INTIMATED TO DIFFERENT AUTHORITIES AND IT CANNOT BE HELD TO BE AN AFTERTHOUGHT OF TH E ASSESSEE TO SHOW THAT THERE WAS DISSOLUTION OF FIRM. MERELY BECAUSE THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 26 DOCUMENTATION HAVE BEEN EXECUTED SUBSEQUENT TO THE DISSOLUTION OF FIRM IN THE NAME OF ERSTWHILE FIRM , IT WOULD NOT BRING THE FIRM INTO EXISTENCE WHICH BY ACT OF PARTNERS HAS BEEN DI SSOLVED AND THE RELATION BETWEEN THE PARTNERS HAS BEEN SEVERED. IN THE ABSENCE OF AGREEMENT TO CONTINUE THE PARTNERSHIP, NO BURDEN CAN BE CAST ON THE SAID FIRM WHICH ALREADY STANDS DISSOLVED , TO PAY THE TAXES , ON A VENTURE WHICH WAS COMPLETED AFTER THE DA TE OF DISSOLUTION. ACCORDINGLY, WE FIND NO MERIT IN THE STAND OF REVENUE AUTHORITIES IN THIS REGARD AND WE HOLD THAT THE AGREEMENTS WHICH WERE ENTERED INTO AFTER THE DATE OF DISSOLUTION THOUGH WERE IN THE NAME OF ERSTWHILE FIRM, BUT IN ACTUAL FACT, THE TR ANSACTION WAS NOT OF THE ASSESSEE FIRM BUT OF M/S. VASCON ENGINEERS LTD. HENCE, THE PROFIT ARISING ON SALE OF SAID LAND CANNOT BE TAXED IN THE HANDS OF DISSOLVED FIRM. IN ANY CASE, THE REVENUE AUTHORITIES HAVE MADE NO EFFORTS TO TAX THE SAID INCOME IN ON E HAND AND CONTINUES TO ASSESS THE SAID INCOME IN TWO HANDS I.E. IN THE HANDS OF ASSESSEE FIRM BEFORE US AND IN THE HANDS OF M/S. VASCON ENGINEERS LTD., WHEREIN THE SAID ENTITY HAD DISCLOSED THE INCOME AS PART OF ITS PROFITS FOR THE YEAR AT ABOUT RS.103 CR ORES. 2 5 . ANOTHER ASPECT WHICH NEEDS TO BE MET IS THE PLEA OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT SINCE THE POSSESSION OF PROPERTY WAS GIVEN ON 07.05.2007 ITSELF AS MENTIONED IN THE AGREEMENT TO SELL, THEN THE TRANSACTION OF SALE ST ANDS COMPLETED ON 07.05.2007 . WE HAVE ALREADY REFERRED IN THE PARAS HEREINABOVE THAT AS PER THE AGREEMENT, THE POSSESSION WAS TO BE GIVEN TO M/S. SUZLON ENERGY LTD. ON THE PAYMENT OF MAJOR PART OF CONSIDERATION I.E. ABOUT RS.65 CRORES AND THE BALANCE RS.1 0 CRORES HAD TO BE PAID ON THE DATE OF EXECUTION OF AGREEMENT. HOWEVER, M/S. SUZLON ENERGY LTD. FAILED TO PAY THE SAID AMOUNT BEFORE EXECUTION OF AGREEMENT AND SUM OF ABOUT RS.10 CRORES WAS PAID ON 20.06.2007 I.E. AFTER EXECUTION OF AGREEMENT TO SELL ON 0 7.05.2007. THE ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 27 ASSESSEE IN THIS REGARD EXPLAINED THAT PURSUANT TO THE SAID PAYMENT OF ABOUT RS.10 CRORES, THE POSSESSION WAS HANDED OVER ON 29.06.2007 TO M/S. SUZLON ENERGY LTD. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTRO VERT THE DOCUMENTS FILED BY THE ASSESSEE IN THIS REGARD AND IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES AND IN VIEW OF THE FACT THAT CERTAIN PORTION OF CONSIDERATION NOT BEING PAID TO THE ASSESSEE, IT CANNOT BE HELD THAT THE POSSESSION WAS HANDED OVER AND HENCE, THE DEAL WAS COMPLETED IN THE HANDS OF ASSESSEE ON 07.05.2007 ITSELF. WE REJECT THE CLAIM OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN THIS REGARD. IN ANY CASE, THE ASSESSING OFFICER HAD NOT ACCEPTED THE FACT OF DISSOLUTION OF ASSESSE E FIRM AND TAXED THE PROFITS; BUT THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS TRIED TO IMPROVE AND STATED THAT EVEN IF DISSOLUTION IS THERE, BUT POSSESSION WAS HANDED OVER ON 07.05.2007 AND HENCE, TAXABLE. WE FIND NO MERIT IN BOTH THE STAN DS. 2 6 . NOW, COMING TO THE NEXT ASPECT OF THE ISSUE . THE HONBLE BOMBAY HIGH COURT IN CIT VS. NAGRI MILLS CO. LTD. (1958) IN 33 ITR 681 (BOM) WHILE DECIDING THE ISSUE OF ALLOWABILITY OF DEDUCTION HAD OBSERVED THAT THE QUESTION AS TO THE YEAR IN WHICH THE DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO YEARS, WAS DIFFERENT BUT WHERE THE RATES CHARGEABLE ON THE ASSESSEE ARE UNIFORM, THEN WHETHER THE DEDUCTION WAS ALLOWED IN ONE YEAR OR THE OTHER YEAR SHOULD BE T HE MATTER OF NO CONSEQUENCE TO THE DEPARTMENT. 2 7 . SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CIT VS. DINESH KUMAR GOEL REPORTED IN 331 ITR 10 (DEL). ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 28 2 8 . THE HON'BLE SUPREME COURT IN CIT VS. 1. EXCEL INDUSTRIES LTD. & 2. MAFATLAL INDUSTRIES P. LTD. (2013) 358 ITR 295 (SC) HAS HELD AS UNDER: - 32. THIRDLY, THE REAL QUESTION CONCERNING US IS THE YEAR IN WHICH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN THE SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WHEN IT W AS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. 2 9 . APPLYING THE SAID PROPOSITION OF LAW TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE TAXES HAVE BEEN PAID ON THE PRO FITS ARISING ON SALE OF SAID LAND BY M/S. VASCON ENGINEERS LTD. IN THE INSTANT YEAR ITSELF AT HIGHER RATES AND NO BENEFIT HAS ARISEN TO THE SAID CONCERN ON THIS ACCOUNT. THERE IS NO MERIT IN DISTURBING THE SAME. ACCORDINGLY, WE DELETE THE ADDITION MADE I N THE HANDS OF ASSESSEE ON ACCOUNT OF SALE OF LAND AT HADAPSAR. 30 . A NOTHER ASPECT WHICH HAS TO BE CONSIDERED IS THE APPROACH OF REVENUE DEPARTMENT, WHEREIN THE BA LANCE LAND WAS ALSO DEVELOPED. IN CASE THERE IS NO DISSOLUTION OF ASSESSEES FIRM, THEN THE PROFIT ARISING ON THE DEVELOPMENT OF BALANCE LAND SHOULD HAVE BEEN ASSESSED IN THE HANDS OF ASSESSEE. HOWEVER, THEY HAVE NOT BEEN ASSESSED IN THE HANDS OF ASSESSEE. THE SAID PROFITS WERE DECLARED BY M/S. VASCON ENGINEERS LTD. AND MR. ATUL CHORDIA IN THE IR JOINT VENTURE AGREEMENT AND HAVE BEEN SO ASSESSED. BECAUSE OF INCONSISTENCY, WE FIND NO MERIT IN THE STAND OF REVENUE AND SINCE DUE TAXES HAVE BEEN PAID ON THE TRANSACTION, THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT VS. 1. EXCEL ITA NO. 1285 /P U N/20 13 M/S. VASCON HADAPSAR VENTURES 29 INDUSTRIES LTD. & 2. MAFATLAL INDUSTRIES P. LTD. (SUPRA) IS SQUARELY APPLICABLE AND WE APPLY THE SAME AND DELETE THE ADDITION IN THE HANDS OF ASSESSEE . 31 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF SEPTEMBER , 201 7 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 18 TH SEPTEMBER , 201 7 . SATISH / GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE CIT(A) CENTRAL, PUNE ; 4. THE CIT(A) - 12, PUNE 5. THE DR B , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE