, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , ,' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1380/CHNY/2018 & '& / ASSESSMENT YEAR : 2014-15 M/S RADIANCE REALTY DEVELOPERS INDIA LIMITED, C/O M/S RAMESH & RAMACHANDRAN, CHARTERED ACCOUNTANTS, NEW NO.39, OLD NO.29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI - 600 024. PAN : AACCN 5152 H V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )*-./ APPELLANT BY : SHRI Y. SRIDHAR, CA +,)*-./ RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADD L.CIT / -0' / DATE OF HEARING : 25.09.2018 12' -0' / DATE OF PRONOUNCEMENT : 12.11.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNAI, D ATED 27.02.2018 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN THIS APPEAL IS ENHANCEMENT OF ASSESSMENT TO THE EXTENT OF 11.50 CRORES. 2 I.T.A. NO.1380/CHNY/18 3. SHRI Y. SRIDHAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-COMPANY ENTERED INTO A MEMORANDUM OF UNDERSTANDING WITH LAND AGGREGATORS, NAMELY, SHRI K AMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN, TO PURCHASE 50 AC RES OF LANDED PROPERTY IN PERUMPAKKAM. REFERRING TO THE MEMORAND UM OF UNDERSTANDING, A COPY OF WHICH IS AVAILABLE AT PAGE 153 OF THE PAPER- BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASS ESSEE-COMPANY CARRIED OUT THE TRANSACTION THROUGH ITS SUBSIDIARY COMPANY, NAMELY, M/S VARUN MANIAN REALTY & CONSTRUCTION PRIVATE LIMITED. INITIALLY, ACCORDING TO THE LD. REPRESENTATIVE, AN ADVANCE OF 1.33 CRORES WAS PAID BY THE ASSESSEE ON BEHALF OF M/S VARUN MANIAN REALTY & CON STRUCTION PRIVATE LIMITED. SUBSEQUENTLY, A SUM OF 18,55,10,000/- WAS PAID BY M/S VARUN MANIAN REALTY & CONSTRUCTION PRIVATE LIMITED. ACCO RDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS ADVANCED 19,22,30,100/- TO M/S VARUN MANIAN REALTY & CONSTRUCTION PRIVATE LIMITED TO FAC ILITATE THE SUBSIDIARY COMPANY TO COMPLETE THE TRANSACTION. ACCORDING TO THE LD. REPRESENTATIVE, THIS PAYMENT OF 19,22,30,100/- REFLECTED IN THE BALANCE SHEET OF M/S VARUN MANIAN REALTY & CONSTRUCTION PRI VATE LIMITED AS ON 31.03.2012. 4. SHRI Y. SRIDHAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT SHRI KAMALESH KUMAR SHETH AND SHRI S . VENKATARAMANAN, THE LANDED AGGREGATORS OF THE ASSES SEE COULD NOT 3 I.T.A. NO.1380/CHNY/18 PURCHASE 50 ACRES OF LAND AS PROMISED. THEY COULD PURCHASE ONLY 4.73 ACRES OF LAND. SINCE THERE WAS A DISPUTE BETWEEN T HE ASSESSEE AND LAND AGGREGATORS, A CIVIL SUIT WAS FILED ON THE ORIGINAL SIDE OF THE MADRAS HIGH COURT. THE LD. REPRESENTATIVE FURTHER SUBMITTED TH AT THE MEMORANDUM OF UNDERSTANDING, COPIES OF AFFIDAVIT FILED BEFORE THE HIGH COURT, COPY OF THE MEMOOF SETTLEMENT ENTERED INTO BETWEEN THE PARTIES IN THE CIVIL SUIT AND COPY OF THE COMPROMISE DECREE PASSED BY THE HIGH CO URT ARE AVAILABLE IN THE PAPER-BOOK. AS PER THE COMPROMISE DECREE, ACCO RDING TO THE LD. REPRESENTATIVE, SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN AGREED TO PAY 14.5 CRORES TO THE ASSESSEE. OUT OF WHICH, 12 CRORES HAS TO BE PAID BEFORE THE END OF MARCH, 2 013 AND THE BALANCE 2.5 CRORES SHALL BE PAID IN SIX EQUAL INSTALMENTS S TARTING FROM 1 ST APRIL, 2013 AND ENDING ON 30 TH SEPTEMBER, 2013. A COPY OF THE ORDER OF THE HIGH COURT IS AVAILABLE AT PAGE 135 OF THE P APER-BOOK. REFERRING TO PAGE 185 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT THIS IS THE MEMO OF SETTLEMENT FILED BEFORE THE HIGH COURT. SINCE SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN COU LD NOT REPAY THE MONEY AS PER THE COMPROMISE DECREE, ACCORDING TO TH E LD. REPRESENTATIVE, THEY HAVE EXECUTED A SALE DEED IN R ESPECT OF A COMMERCIAL PROPERTY, A COPY OF WHICH IS AVAILABLE A T PAGE 227 OF THE PAPER-BOOK. IN FACT, ACCORDING TO THE LD. REPRESEN TATIVE, SHRI KAMALESHKUMAR SHETH EXECUTED A SALE DEED IN FAVOUR OF THE ASSESSEE ON 30 TH SEPTEMBER, 2013 TRANSFERRING 90726 SQ.FT. OF LAND IN SURVEY 4 I.T.A. NO.1380/CHNY/18 NO.12/1, 12/2 & 17/2A NOW R.S. NO.3, BLOCK NO.5 OF VADAGARAM VILLAGE, NO.108, EGMORENUNGAMBAKKAM TALUK AND ALSO A PROPERT Y AT LALAH TOWERS AT NELSON MANICKAM ROAD, AMINJIKARAI, WORTH 12.50 CRORES. 5. SHRI Y. SRIDHAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT IGNORING THE ORDER OF THE HIGH COURT DIRECTING SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN TO PAY 14.5 CRORES, THE CIT(APPEALS) FOUND THAT SHRI KAMALESH K UMAR SHETH RECEIVED AN ADVANCE OF 1 CRORE AND THE ASSESSEE HAS NOT PAID THE BALANCE MONEY, THEREFORE, 11.5 CRORES WAS INCOME OF THE ASSESSEE. ACCORDING TO THE LD. REPRESENTATIVE, THE CIT(APPEAL S) HAS TAKEN THE DIFFERENCE BETWEEN THE MARKET VALUE OF THE PROPERTY IN RESPECT OF WHICH SHRI KAMALESH KUMAR SHETH EXECUTED SALE DEED IN FAV OUR OF ASSESSEE- COMPANY AND THE ADVANCE OF 1 CRORE. THE CIT(APPEALS) COMPLETELY IGNORED THE ORDER OF THE MADRAS HIGH COURT WHEREIN SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN WERE DIRECTE D TO PAY 14.5 CRORES JOINTLY OR SEVERALLY TO THE ASSESSEE. THERE FORE, ACCORDING TO THE LD. REPRESENTATIVE, SINCE SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN WERE LIABLE TO PAY 14.5 CRORES TO THE ASSESSEE- COMPANY, AND IN LIEU OF PAYMENT OF 14.5 CRORES, SHRI KAMALESH KUMAR SHETH EXECUTED A SALE DEED FOR 12.5 CRORES AND HE STILL REMAINS TO PAY 2 CRORES AS PER THE ORDER OF THE HIGH COURT, THE CI T(APPEALS) IS NOT JUSTIFIED IN CONCLUDING THAT THE ASSESSEE HAS PAID ONLY 1 CRORE AND 5 I.T.A. NO.1380/CHNY/18 ACQUIRED THE PROPERTY WORTH 12.5 CRORES. HENCE, ACCORDING TO THE LD. REPRESENTATIVE, THE ADDITION OF 11.5 CRORES CANNOT STAND IN THE EYE OF LAW. 6. SHRI Y. SRIDHAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT CONSID ERED THIS SO-CALLED INCOME OF 11.5 CRORES AS ENHANCED BY THE CIT(APPEALS) IN THE ASSESSMENT ORDER. ACCORDING TO THE LD. REPRESENTAT IVE, THIS IS A NEW SOURCE OF INCOME WHICH WAS NOT CONSIDERED BY THE AS SESSING OFFICER AT ALL. REFERRING TO THE JUDGMENT OF MADRAS HIGH COUR T IN CIT V. CHAGANLAL KAILAS & CO (1984) 19 TAXMAN 536, THE LD. REPRESENT ATIVE SUBMITTED THAT THE POWER OF THE CIT(APPEALS) TO ENHANCEAN ASSESSME NT IS ONLY TO AN ITEM OF INCOME WHICH WAS CONSIDERED BY THE ASSESSIN G OFFICER FOR THE PURPOSE OF BRINGING TO TAX OR FOR GRANTING RELIEF T O THE ASSESSEE. IN THE INSTANT CASE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HAS NOT CONSIDERED THE SO-CALLED INCOME OF 11.5 CRORES IN RESPECT OF THE SALE DEED EXECUTED BY SHRI KAMALESH KUMAR SHETH. T HEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, IT IS OBVIOUS THAT THE SO-CALLED AMOUNT OF 11.5 CRORES WAS NOT THE SUBJECT MATTER OF ASSESSMEN T MADE BY THE ASSESSING OFFICER. HENCE, THE CIT(APPEALS) HAS NO JURISDICTION OR AUTHORITY TO ENHANCE THE TAXABLE INCOME. THE LD. R EPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN SRI GAJALAKSHMI GINNING FACTORY LTD. V. CIT (1952) 22 I TR 502 AND ALSO ON 6 I.T.A. NO.1380/CHNY/18 THE APEX COURT IN CIT V. RAI BAHADUR HARDUTROYMOTIL ALCHAMARIA (1967) 66 ITR 443. 7. ON THE CONTRARY, SHRI R. CLEMENT RAMESH KUMAR, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT NO DOUB T, THE ASSESSMENT OF 11.5 CRORES IN RESPECT OF THE SALE DEED EXECUTED BY SHRI KAMALESH KUMAR SHETH, WAS NOT CONSIDERED BY THE ASSESSING OF FICER AND IT WAS NOT ASSESSED AS INCOME AT ALL. HOWEVER, ACCORDING TO T HE LD. D.R., THE CIT(APPEALS), IN THE COURSE OF APPELLATE PROCEEDING , HAS EVERY RIGHT TO ASSESS THE INCOME WHICH WAS NOT ASSESSED BY THE ASS ESSING OFFICER. ACCORDING TO THE LD. D.R., THE SALE DEED EXECUTED B Y SHRI KAMALESH KUMAR SHETH WAS FOR TRANSFER OF PROPERTY THE MARKET VALUE OF WHICH IS 12.5 CRORES. THE ASSESSEE HAS PAID ONLY 1 CRORE, THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSEE HAS RECEIVE D 11.5 CRORES. HENCE, IT HAS TO BE ASSESSED AS INCOME. ON A QUERY FROM THE BENCH, CAN THE DEPARTMENT GO BEYOND THE ORDER OF THE MADRA S HIGH COURT WHEREIN IT IS STATED THAT SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN HAVE TO PAY 14.5 CRORES? THE LD. D.R. VERY FAIRLY SUBMITTED THAT HE IS PLACING RELIANCE ON THE OBSERV ATION MADE BY THE CIT(APPEALS). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE-COMPANY NOMINATED SHRI KAMALESH KUMAR SHET H AND SHRI S. 7 I.T.A. NO.1380/CHNY/18 VENKATARAMANAN AS LAND AGGREGATORS FOR ACQUIRING 50 ACRES OF LAND. SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN REC EIVED ADVANCE FROM THE ASSESSEE AND ALSO THE ASSESSEES SUBSIDIAR Y COMPANY M/S VARUN MANIAN REALTY AND CONSTRUCTIONS PVT. LTD. SIN CE THE LAND AGGREGATORS COULD NOT PROCURE THE ENTIRE LAND AND T HERE APPEARS TO BE A DISPUTE BETWEEN THE PARTIES, ULTIMATELY THE MATTER REACHED THE HIGH COURT. THE ASSESSEE-COMPANY FILED A CIVIL SUIT BEF ORE THE MADRAS HIGH COURT. DURING THE PENDENCY SUIT BEFORE THE HIGH CO URT, THERE WAS A COMPROMISE BETWEEN THE ASSESSEE AND SHRI KAMALESH K UMAR SHETH AND SHRI S. VENKATARAMANAN. A COMPROMISE ORDER / DECRE EWAS PASSED BY THE MADRAS HIGH COURT. AS PER THE COMPROMISE ORDER / DECREE, SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN HAV E TO PAY 14.5 CRORES TO THE ASSESSEE-COMPANY. OUT OF WHICH, 12 CRORES HAS TO BE PAID ON OR BEFORE 31 ST MARCH, 2013 AND THE BALANCE 2.5 CRORES SHALL BE PAID IN EQUAL MONTHLY INSTALMENTS BEFORE 30 TH SEPTEMBER, 2013. IGNORING THIS JUDGMENT OF MADRAS HIGH COURT, THE CIT(APPEALS ) FOUND THAT THE ASSESSEE-COMPANY PAID ONLY 1 CRORE AND SHRI KAMALESH KUMAR SHETH EXECUTED A SALE DEED TRANSFERRING THE PROPERTY WORT H 12.5 CRORES. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE HIGH COURT PASSED AN ORDER DIRECTING SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN TO PAY 14.5 CRORES, THE CIT(APPEALS) OR ANY OTHER OFFICER OF THE DEPARTMENT CANNOT GO BEYOND THE JUDGMENT OF MADRAS HIGH COURT. IN LIEU OF PAYMENT OF 14.5 CRORES, SHRI KAMALESH KUMAR SHETH EXECUTED A 8 I.T.A. NO.1380/CHNY/18 SALE DEED FOR 12.5 CRORES AND THE BALANCE HAS TO BE PAID BY SHRI KAMALESH KUMAR SHETH AND SHRI S. VENKATARAMANAN. T HE JUDGMENT OF MADRAS HIGH COURT CLEARLY SAYS THAT SHRI KAMALESH K UMAR SHETH AND SHRI S. VENKATARAMANAN ARE JOINTLY OR SEVERALLY LIA BLE TO PAY THE MONEY. IN COMPLIANCE WITH THE DIRECTION OF THE HIGH COURT, SHRI KAMALESH KUMAR SHETH EXECUTED THE DOCUMENTS FOR DISCHARGE OF HIS L IABILITY. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ENHANCING THE ASSESSMENT BY HOLDING THAT THE ASSESSEE HAS PAID ONLY 1 CRORE AND IT RECEIVED PROPERTY TO THE EXTENT OF 12.5 CRORES, THEREFORE, THE BALANCE OF 11.5 CRORES AS INCOME OF THE ASSESSEE. THIS OBSERVATION OF THE CIT(APPEA LS) IS CONTRARY TO THE JUDGMENT OF MADRAS HIGH COURT. THEREFORE, THIS TRI BUNAL IS UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. 9. MOREOVER, AS HELD BY MADRAS HIGH COURT IN SRI GA JALAKSHMI GINNING FACTORY LTD. (SUPRA) AND CHAGANLAL KAILAS & CO. (SUPRA) AND APEX COURT IN RAI BAHADUR HARDUTROYMOTILALCHAMARIA (SUPRA), WHEN THE ASSESSING OFFICER ADMITTEDLY HAS NOT CONSIDERED THE SOURCE OF INCOME, I.E. 11.5 CRORES, THE CIT(APPEALS) CANNOT GO INTO THAT. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CIT(APPEALS) ENHANCIN G THE ASSESSMENT TO THE EXTENT OF 11.5 CRORES IS SET ASIDE AND THE ADDITION IS DELETE D. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9 I.T.A. NO.1380/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 12 TH NOVEMBER, 2018AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 12 TH NOVEMBER, 2018. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-3, CHENNAI-34 4. PRINCIPAL CIT- 5, CHENNAI. 5. 69 +0 /DR 6. :& ; /GF.