DCIT CENT. CIR. -4(1), CENTRAL RANGE-4, MUMBAI V. M/s. RUNWAL DEVELOPERS P. LTD., MUMBAI

ITA 5969/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4522 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 21-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYASAGAR
• Keywords: Capital asset; Cost of acquisition; Wrong claim; Set aside; Capital Gains
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5969/M/2017 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL CIRCLE-4(1), CENTRAL RANGE-4, PR. CIT(C)-2, R.NO.1916, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 021 VS. M/S. RUNWAL DEVELOPERS PVT. LTD., 5 TH FLOOR, RUNWAL & OMKAR SQUARE, OFF. EASTERN EXPRESS HIGHWAY, SION (E), MUMBAI-22 PAN: AAACR 0395J (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAKESH JOSHI, A.R. REVENUE BY : SHRI DAYA SAGAR, D.R. DATE OF HEARING : 08.03.2019 DATE OF PRONOUNCEMENT : 22.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 29.06.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED THE REVENUE ARE AS UNDER: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN HOLDING RE-ASSESSMENT OF TOTAL INCOME U/S. 153A, AS INVALID ON THE GROUND THAT NO INCRIMINATING MATERIALS WERE FOUND DURING THE COURS E OF SEARCH, NOTWITHSTANDING THE FACT THAT ON SIMILAR FACTS IN ASSESSEE'S GROUP CASE, VIZ. RUNWAL PROJECTS PVT. LTD., RUNWAL HOMES PVT. LTD., THE CIT(A) HAS UPHELD THE V ALIDITY OF ASSESSMENT IN A.Y. 2009-10, 2012-13 AND 2013-14'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN ALLOWING THE EXPENSES AMOUNTING TO RS. 137 ,52,79,824/- BY HOLDING THAT ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 2 THE SAME HAS BEEN PAID BY HIM FOR ACQUISITION OF LA ND PARCEL NOTWITHSTANDING THAT THE AO HAS ESTABLISHED THAT THE SAID AMOUNT WAS PAI D BY THE ASSESSEE TO THE FIRM M/S. SPORTSFIELD CONSTRUCTION FOR BECOMING A PARTNE R IN IT AND THEREFORE IT CAN NOT BE TREATED AS PAYMENTJOR ACQUISITION OF LAND PARCEL .' 3. THE APPELLANT CRAVES TO LEAVE, TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUND OF APPEAL, IF NEED BE. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-52, MUMBAI, MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE ISSUES RAISED IN THE GROUND NO. 1 AND 2 ARE SAME AGAINST THE DELETION OF ADDITION OF RS.137.53 CR. THE ISSUE RAISED IN THE FIRST GROUND OF APPEAL IS AGAINST THE ORDER OF CIT(A) HOLDING THE RE-ASSESSMENT OF INCOME AS INVALID ON T HE GROUND THAT NO INCRIMINATING MATERIALS WERE FOUND DURING S EARCH AND ISSUE IN THE 2 ND GROUND IS AGAINST THE DELETING THE ADDITION BY LD. CIT(A) ALLOWING THE EXPENSES AMOUNTING TO RS. 137.5 3 CR BY HOLDING THAT THE SAME WERE PAID FOR THE ACQUISITION OF LAND DESPITE THE AO ESTABLISHING THAT THE SAME WERE PAID FOR BECOMING PARTNERS IN THE FIRM. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT WAS F RAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.1.2013 AT AN INCOME OF RS.27.65 CR AS AGAINST THE RETURNED INCOME OF RS. 2 5.96 CR. A SEARCH ACTION WAS CONDUCTED ON THE RUNWAL GROUP ON 17.11.2014 INCLUDING THE ASSESSEE. AFTER CENTRALISI NG THE CASES WITH CENTRAL CIRCLE, NOTICE U/S 153A OF THE ACT WAS ISSUED ON 16.11.2015. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO THE SAID NOTICE ON 27.7.2016 DECLARING AN INCOME OF RS. 25.96 CR WHICH WAS SAME AS DECLARED IN THE ORIGINAL RETUR N OF INCOME. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPE RS AND BUILDERS, RUNNING AND MAINTAINING THE MALLS. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT A SSESSEE HAS ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 3 CLAIMED RS. 137.53 CR AS EXPENSES INCURRED FOR THE PURCHASE OF LAND WRONGLY AS THE SAID PAYMENTS WERE MADE TO BECO ME PARTNER IN THE FIRM M/S SPORTS FIELD CONSTRUCTION. THE BRIE F BACKGROUND IS THAT A FIRM M/S SPORTS FIELD CONSTRUCTION WAS FO RMED IN THE YEAR 1992 TO DEVELOP THE PLOTS/LAND AND SPORTS FACI LITIES. THE FIRM WAS RECONSTITUTED UPON RETIREMENT OF SOME PART NERS AND WITH THE INDUCTION OF NEW PARTNERS. THE PIECE OF LA ND OWNED BY THE FIRM M/S SPORTS FIELD CONSTRUCTION WAS SOLD BY M/S RUNWAL DEVELOPERS PVT. LTD TO M/S RANWAL PROJECTS P VT. LTD. ON 31.12.2009 FOR A CONSIDERATION OF RS. 81.50 CR. BES IDES THE SAID AMOUNT, THE 58.50 CR WAS DEBITED TO THE LAND COST T OWARDS THE COMPENSATION FOR SETTLEMENT OF VARIOUS LIABILITIES DUE TO DISPUTES RAISED FOR THE INTEREST, RIGHTS AND TITLES THEREBY THE TOTAL COST OF LAND GOING UP TO RS. 140.00 CR. THE, AO BEFORE COMI NG TO THE CONCLUSION THAT RS.137.53 WERE PAID FOR BECOMING PA RTNERS IN THE FIRM, OBSERVED AS UNDER: 5.3 THE FACTS, TRANSACTIONS AND EVENTS ARE NAR RATED HEREUNDER: M/S. SPORTSFIELD CONSTRUCTION, A PARTNERSHIP FIRM W AS INCORPORATED BY PARTNERS ON 6/5/1992. THREE PARTNERS INTRODUCED LAND AS THEIR C APITAL CONTRIBUTION. BOOK ENTRY WAS PASSED IN THE BOOKS VALUING LAND AT RS. 1.50 CR ORE. THE PARCEL OF LAND IS LOCATED AT LOKHANDWALA, ANDHERI (W), MUMBAI. THE FIRM SPORT S FIELD CONSTRUCTION IS HOLDING THE LAND AS FIXED ASSET AT RS. 1.50 CRORE A S PER THE LAST BALANCE SHEET AVAILABLE AS AT 31.03.2008. 5.4 ALL ERSTWHILE PARTNERS OF M/S SPORTS FIELD CONS TRUCTION HAVE INDIVIDUALLY RECEIVED CONSIDERATION FROM M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) TOWARDS TRANSFER OF THEIR SHARE IN THE PARTNERSHIP FIRM - M /S SPORTS FIELD CONSTRUCTION. 5.5 M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) HAS MADE PAYMENTS TO ERSTWHILE PARTNERS OF THE M/S SPORTS FIELD CONSTRUCTION AND E NTERED INTO M/S SPORTS FIELD AS PARTNER ALONG WITH (1) SHRI SUBHASH RUNWAL, (2) SHR I SANDEEP RUNWAL AND (3) SHRI SUBOTTTI RUNWAL, VIDE DEED OF RETIREMENT AND ADMISS ION DATED 04/04/2008. THE PAYMENTS HAVE BEEN MADE AS COMPENSATION AGAINST THE IR RETIREMENT FROM THE SAID PARTNERSHIP FIRM. 5.6 CONSEQUENTLY, THE PAYMENT MADE BY M/S. RUNWAL D EVELOPERS PVT. LTD( RDPL) FOR OBTAINING SHARE IN PARTNERSHIP FIRM AMOUNTS TO PAYMENT MADE FOR THE ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 4 ACQUISITION OF A CAPITAL ASSET I.E. RIGHTS IN THE F IRM M/S SPORTSFIELD CONSTRUCTION, AND HAS TO BE ACCOUNTED FOR IN THE BOOKS OF M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) AT COST. 5.7 THE PIECE OF LAND THAT WAS INTRODUCED BY PARTNE RS IN THE FIRM AS THEIR CAPITAL CONTRIBUTION IS AN ASSET. THE OWNERSHIP OF SAID LAN D REMAINS WITH THE FIRM -M/S SPORTS FIELD CONSTRUCTION. THE SAID LAND IS REFLECT ED AS AN ASSET OF THE FIRM. HOWEVER M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) HAS SOLD AND TRANSFERRED THE OWNERSHIP LAND OF THE FIRM M/S SPORTS FIELD CONSTRUCTION IN F AVOR OF M/S. RUNWAL PROJECTS PVT. LTD.(RPPL) VIDE AGREEMENT DATED 31/12/2009. THE PAR TNERSHIP FIRM M/S SPORT FIELD CONSTRUCTION IS OWNER OF THE LAND. M/S. RUNWAL DEVE LOPERS PVT. LTD (RDPL) AND ITS DIRECTORS ARE PARTNERS OF THE FIRM SPORTS FIELD CON STRUCTION. THE FIRM HAS NOT OBJECTED TO THE SALE AND TRANSFER OF THE CAPITAL AS SET OWNED BY IT BY M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) TO M/S. RUNWAL PROJECTS PVT. LTD.(RPPL). SINCE ALL THE PARTNERS ARE PARTY TO SELL THE PROPERTY OWNED BY TH E SPORTS FIELD CONSTRUCTION, IT CAN BE STATED THAT PARTNERSHIP FIRM M/S SPORTS FIEL D CONSTRUCTION HAS RELINQUISHED ITS RIGHT IN THE SAID LAND IN FAVOUR OF PARTNER/S I .E M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) AND ITS DIRECTORS. 5.8 / IT IS OBSERVED THAT M/S. RUNWAL DEVELOPERS PV T. LTD (RDPL) HAS MADE VARIOUS FMENTS TO ERSTWHILE PARTNERS AND OTHERS IN ORDER TO ACQUIRE SHARE / RIGHT IN PARTNERSHIP FIRM. M/S. RUNWAL DEVELOPERS PVT. LTD ( RDPL) HAS ACQUIRED 100% SHARE IN PARTNERSHIP OF FIRM - M/S SPORTS FIELD CONSTRUCT ION IN CONSIDERATION OF PAYMENT TO ERSTWHILE PARTNERS. THE SAID ASSET I.E. SHARE IN PARTNERSHIP IS NEITHER SOLD NOR TRANSFERRED. THEREFORE THE FOLLOWING PAYMENTS SHALL BE ATTRIBUTED TO COST OF ACQUISITION OF SHARE IN PARTNERSHIP FIRM AND NOT TO WARDS ACQUISITION OF LAND. M/S. RUNWAL DEVELOPERS PVT. LTD (RDPL) HAS NOT TRANSFERR ED THE SHARE IN PARTNERSHIP FIRM AND SAME REMAINED IN ITS BOOKS AT COST. 5. ULTIMATELY, AO ADDED RS. 137.53 CR TO THE INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT U/S 143(3) R.W.S. 15 3A OF THE ACT BY REJECTING THE SUBMISSIONS OF THE ASSESSEE TH AT THE SAID SUM WAS PAID TOWARDS THE PURCHASE OF LAND AND SETTL ING VARIOUS CLAIMS, INTEREST ETC AND FOR TAKING PEACEFUL POSSES SION. 6. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELE TED THE ADDITIONS MADE BY THE AO OF RS. 137.53 CR ON THE GR OUND THAT ON THE DATE OF SEARCH THE ASSESSMENT IN THE INSTANT YEAR HAS ALREADY ATTAINED FINALITY AND ANY ADDITION COULD ON LY BE MADE BASED UPON THE INCRIMINATING MATERIALS SEIZED DURIN G THE SEARCH ACTION BY FOLLOWING THE DECISIONS OF THE HONBLE BO MBAY HIGH ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 5 COURT IN THE CASE OF CIT VS CONTINENTAL WAREHOUSING CORPORATION ITA 563 OF 2013 AND CIT VS ALL CARGO LOGISTICS LTD ITA NO. 1969 OF 2013 ORDER DATED 21 ST APRIL, 2015 BY OBSERVING AND HOLDING AS UNDER:- 19. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSIONS AND CONTENTIONS OF THE APPELLANT, AS ALSO THE ASSESSMENT ORDER OF THE AO. THE SUM AND SUBSTANCE OF THE ASSESSEE'S ARGUMENT IS THAT FIRSTLY NO INCRIMINATIN G MATERIAL WAS FOUND DURING THE ; COURSE OF SEARCH IN RESPECT OF PURCHASE OF LAND AT LOKHANDWALA OF RS. 137.52 CRS. AND THAT THIS ISSUE WAS ALREADY EXAMINED BY SHE THE N ASSESSING OFFICER WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S. 143(3) OF T HE ACT VIDE ORDER DATED 29/01/2013 PRIOR TO THE DATE OF SEARCH AND THEREFOR E, IN VIEW OF THE JUDGEMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF IN TERCONTINENTAL WAREHOUSING LTD. AND ALL CARGO LTD., THE AO COULD NOT HAVE REOPENED THE ISSUE. THE SECOND ARGUMENT OF THE ASSESSEE IS THAT IT NEVER BECAME PARTNER IN M / S. SPORTS FIELD CONST, AND THERE WAS NO PARTNERSHIP DEED TO THAT EFFECT AND TH EREFORE, THE AO WAS NOT JUSTIFIED IN HOLDING THAT SUM OF RS. 137.52 CRS. WA S PAID TOWARDS BECOMING THE PARTNER IN THE PARTNERSHIP FIRM M/S. SPORTS FIELD C ONSTRUCTION. THE ASSESSEE FURTHER SUBMITTED THAT IT ACTUALLY PURCHASED THE PROPERTY F ROM THE LANDOWNERS VIZ. SMT AMRITBEN MALSI, SMT. VELBHAI DEVSHI SHAH AND BIPIN T. SHAH, WHO BAD SHARES IN THE PROPERTY TO THE TUNE OF 42.84 %, 42.84% AND 14.32% AND TO WHOM AMOUNT OF RS. 11 CRS., 11 CRS. AND RS. 16.77 CRS. WERE PAID AND INDI VIDUAL SALE DEEDS TRANSFERRING THE LAND WERE EXECUTED . THE ASSESSEE HAS ALSO ARGUED T HAT AMOUNTS PAID TO OTHER PERSONS VIZ. VITHAL KAMAT WAS TO TAKE OVER THE POSS ESSION OF THE PROPERTY AND TO SECURE THE PROPERTY IN EVERY WAY. THEREFORE, THE AS SESSEE ARGUED THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT ABOVE AMOUNT WAS PAID TOWARDS BECOMING THE PARTNERS IN THE FIRM AND THEREFORE, THE A> WAS NOT JUSTIFIE D IN DISALLOWING A SUM OF RS. 137.52 CRS. IN THE HANDS OF THE ASSESSEE. 20. WITH A VIEW TO VERIFY THE ABOVE FACTS, THE MATT ER WAS REMANDED TO THE AO VIDE THIS OFFICE LETTERS DATED 12/05/2017 AND 17/05 /2017 AND THE AO WAS ASKE D WHETHER ANY INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH IN RESPECT OF PURCHASE OF THE LAND AT RS. 137.52 CRS. THE AO WAS ALSO ASKED TO FURNISH HIS COMMENTS IN RESPECT OF APPLICABILITY OF JUDGEMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASES OF INTERCONT INENTAL WAREHOUSING LTD. AND ALL CARGO LTD. THE AO WAS ALSO ASKED TO FURNISH NEC ESSARY EVIDENCE IN RESPECT OF THE APPELLANT COMPANY BECOMING PARTNER IN THE FI RM M/S. SPORTS FIELD CONSTRUCTION ALONGWITH PARTNERSHIP DEED, IF ANY. TH E AO SUBMITTED A REMAND REPORT VIDE LETTER DATED 12/06/2017 AND 22/06/2017 WHEREIN THOUGH HE ACCEPTED THAT THE ASSESSEE HAD PURCHASED PROPERTY FROM THE L ANDOWNERS, BUT STILL MAINTAINED THAT AMOUNT OF RS. 137.52 CRS. WAS PAID FOR PURCHASING SHARES IN PARTNERSHIP FIRM M/S. SPORTS FIELD CONSTRUCTION AND BECOMING PARTNER THEREOF. HOWEVER, THE AO WAS SILENT ABOUT THE FACT WHETHER A NY INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF PURCHASE OF LAND DURING THE COURSE OF SEARCH. THE AO ALSO DID NOT COMMENT ABOUT APPLICABILITY OF JURISDI CTIONAL HIGH COURT DECISION IN CASE OF ALL CARGO, CONSIDERING THE FACT THAT THIS I SSUE HAD ALREADY BEEN EXAMINED WHILE COMPLETING THE ORIGINAL ASSESSMENT PRIOR TO T HE DATE OF SEARCH. THE AO ALSO ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 6 DID NOT PRODUCE ANY EVIDENCE IN RESPECT OF ASSESSEE BECOMING PARTNER IN M/S. SPORTS FIELD CONSTRUCTION. 21. FROM THE PERUSAL OF THE DETAILS, IT APPEARS THA T THE ASSESSEE HAD PAID A SUM OF RS. 137.52 CRS. TO 22 DIFFERENT PARTIES. THE MAIN A MOUNT HAS BEEN PAID TO 3 CO- OWNERS OF THE LAND VIZ. SMT. AMRITBEN MALSI, SMT. V ELBHAI DEVSHI SHAH AND BIPIN T. SHAH, WHO HAD SHARES IN THE PROPERTY TO TH E TUNE OF 42.84 %, 42.84% AND 14.32% AND TO WHOM AMOUNT OF RS. 11 CRS,, 11 CR S. AND RS. 16.77 CRS. HAS BEEN PAID RESPECTIVELY. BESIDES, AN AMOUNT OF RS. 4 8.14 CRS. HAS BEEN PAID TO SHRI VITHAL KAMAT WHO WAS HAVING POSSESSION OF LAND AND WAS ALSO A PARTNER IN M/S. SPORTS FIELD CONSTRUCTION, WITH A VIEW TO SECURE TH E POSSESSION OF THE LAND. BESIDES, VARIOUS AMOUNTS HAVE BEEN PAID TO OTHER PE RSONS, DETAILS OF WHICH ARE TABULATED AS UNDER:- . 22. FROM THE ABOE IT MAY BE CONCLUDED THAT AH THE PAYMENTS HAVE BEEN MADE IN LIEU OF ACQUIRING THE SAID LAND PARCEL WHICH WAS THE ONLY INTENTION OF THE APPELLANT, WHICH WOULD BE APPARENT FROM ITS BUSINES S AND CONDUCT AS WELL. FURTHER NONE OF THE PAYMENTS WERE MADE TO THE PARTNERSHIP FIRM FOR THE ACQUIRING OF THE SAID LAND PARCEL. THE CONVEYANCE O F THE SAID LAND PARCEL HAS BEEN DONE BY ITS ACTUAL OWNERS WHO WERE INDEPENDENT LY COMPENSATED AND NOT BY THE SAID M/S. SPORTSFIELD CONSTRUCTION WHICH PROVES YET AGAIN THE FACT THAT THE SAID LAND WAS NEVER OWNED BY THE SAID FIRM. FURTHER THE LEARNED ASSESSING OFFICER PREFERRED TO IGNORE THE FACT THAT IN THE AS SESSMENT OF SHRI VITHAL KAMAT, THE SAID ISSUE HAD ALREADY BEEN DECIDED BY THE DEPA RTMENT BY TREATING THE SUM RECEIVED BY HIM AS CAPITAL GAINS ON TRANSFER OF RIG HT, TITLE AND INTEREST IN PROPERTY. THE SAID ORDER U/S. 143(3) OF THE ACT WAS PASSED IN HIS CASE ON 26.12.2011. COPY OF THE SAID ORDER PASSED IS AVAILA BLE WITH THE APPELLANT AND THE SAME IS ENCLOSED HEREWITH FOR YOUR HONOUR'S READY R EFERENCE AND RECORDS. ' 23. AS DISCUSSED ABOVE, THE ASSESSEE HAD PURCHASED THIS LAND AT LOKHANDWALA FROM THREE DIFFERENT PERSONS VIZ. SMT. AMRITBEN MAL SI, SMT. VELBHAI DEVSHI SHAH AND BIPIN T. SHAH. FURTHER, AT THE TIME OF PURCHASE , TILLS LAND WAS IN POSSESSION OF ONE MR. VITHAL KAMAT. IT IS GATHERED THAT MR. KAMAT HAD FLOATED A PARTNERSHIP FIRM, IN THE NAME OF M/S. SPORTS FIELD CONSTRUCTION IN WHICH THERE WERE PARTNERS. IN THE MEANWHILE, MR. KAMAT HAD ENTRUSTED THIS LAND TO ANOTHER GENTLEMAN VIZ. SHRI RAMESH SHANBAUG, WHO STARTED RUNNING A CLUB IN THE NAME 'KAMATH CLUB' AT THE SAID LAND AND MADE SEVERAL PERSONS AS MEMBER S OF THE SAID CLUB. IN BETWEEN THE ASSESSEE ENTERED INTO A MEMORANDUM OF U NDERSTANDING DATED 12/11/2003 WITH M/S. SPORTS FIELD CONSTRUCTION FOR DEVELOPMENT OF THE SAID LAND UNDER THE IMPRESSION THAT THE LAND BELONGED TO THE FIRM . HOWEVER LATER THEY DISCOVERED THAT THE FIRM ONLY HAD POSSESSION OF THE LAND AND LEGAL TITLE BELONGED TO THREE LADIES . THE ASSESSEE COMPANY AALSO REALIZ ED THAT M/S. SPORTS FIELD CONSTRUCTION DID NOT HAVE TITLE DEEDS OF THE PROPER TY AND THE ACTUAL CO-OWNERS HAD DISPUTED THE POSSESSION OF THE LAND BY SPORTS F IELD CONSTRUCTION, THEREFORE, THE ASSESSEE COMPANY THOUGHT TO BUY THIS PROPERTY D IRECTLY FROM THE LEGAL OWNERS. SINCE, THE POSSESSION OF THIS LAND WAS WITH SPORTS FIELD CONSTRUCTION, VITHAL ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 7 KAMAT AND RAMESH SHANBAUG, THE ASSESSEE PAID THEM A SUM OF RS. 4.72 CRS., RS. 48.14 CR., RS. 1.20 CR. RESPECTIVELY AND CONSEQUENT LY THEY HANDED OVER POSSESSION OF THE PROPERTY TO THE ASSESSE COMPANY A ND RELINQUISHED ALL THEIR RIGHTS IN THE SAID PROPERTY OR PARTNERSHIP. BESIDES , SOME SMALL AMOUNTS WERE PAID TO THE PARTNERS OF SPORT FIELD CONSTRUCTION VIZ. RA MESH C. RAMBHAIYYA AND SHANTILAL DUNGERSHI MAROO. THESE AMOUNTS WERE PAID WITH A VIEW TO SECURE COMPLETE TITLE AND POSSESSION OF THE PROPERTY AND W ITH A VIEW TO AVOID ANY LITIGATION LATER ON . THE ASSESSEE IN THIS REGARD H AS SUBMITTED COPIES OF SALE DEED DATED 09/04/2009, 08/04/2009 WITH AMRITBAI MALSI, S MT. VELBHAI DEVSHI SHAH AND BIPIN T. SHAH AS PER WHICH THIS LAND IS PURCHAS ED FOR A SUM OF RS. 85 CR FROM THEM. THE ASSESSEE HAS ALSO SUBMITTED A COPY OF AGR EEMENT WITH VITHAL KAMAT AND WITH RAMESH SHANBAUG. FROM THE ABOVE DETAILS, I T IS CLEAR THAT THE ASSESSEE COMPANY HAS DIRECTLY PURCHASED THIS LAND FROM ACTUA L OWNERS VIZ. AMRITBAI MALSI, SMT. VELBHAI DEVSHI SHAH AND BIPIN T. SHAH A ND HAS PAID AMOUNTS DIRECTLY TO THEM AND A SALE DEED/CONVEYANCE DEED HA S BEEN EXECUTED, WHICH IS DULY REGISTERED WITH THE SUB-REGISTRAR. THERE IS NO ROLE AS SUCH OF SPORTS FIELD CONSTRUCTION IN THE SAME. IT IS GATHERED THAT VITHA L KAMAT, SPORTS FIELD CONSTRUCTION AND RAMESH SHANBAUG HAD POSSESSION OF THIS LAND AND THEREFORE, WITH A VIEW TO TAKEOVER THE POSSESSION CERTAIN AMOU NTS HAVE BEEN PAID TO THEM. HOWEVER, THAT HAS BEEN DONE ONLY TO SECURE THE TITL E AND THE POSSESSION. 24. IN THIS REGARD IT IS ALSO RELEVANT TO DISCUSS T HE FINDING OF THE ASSESSING OFFICER IN CASE OF SRI VITHAL KAMATH WHILE COMPLETING HIS A SSESSMENT. HE MENTIONED IN PARA 6.11 OF THE ASSESSMENT ORDER DATED 26/12/2011 THAT 'DEED OF ADMISSION AND RETIREMENT' WAS APPARENTLY PREPARED TO CAMOUFLAGE T HE TRANSACTION OF TRANSFER OF THE DEVELOPMENT RIGHTS AND RIGHTS POSSESSED BY VITH AL KAMATH TO RDPL AAND INFACT THIS DOCUMENT WAS MERELY A DEVICE TO AVOID TAX. THE RELEVANT FINDING VIDE ORDER DATED 26/12/2011 FOR THE A.Y. 2O09-10 IS REPRODUCED AS UNDER :- I. THE CONDUCT OF THE PARTIES AND DOCUMENTS ENT ERED INTO BY THE VARIOUS PARTNERS INCLUDING THE APPELLANT SHOW THAT THAT THE PROPERTY AND ITS RIGHTS WERE TRANSFERRED BY THE INDIVIDUAL OWNERS IN THEIR INDIVIDUAL CAPACITY WITHOUT ANY REFERENCE TO THE PARTNERSHIP FIRM OR TH E DEED OF ADMISSION & RETIREMENT EXECUTED ON 04.04,2008. IN FACT, IT WOUL D BE APPRECIATED THAT THE PROPERTY CARD OF THE SAID PIECE OF LAND (COPY ENCLO SED) WAS ALSO RECOGNIZING THE SAID THREE PERSONS AS THE OWNERS OF THE SAID LA ND. II. EACH OF THE LANDOWNERS/HOLDERS OF THE RIGH T IN THE PROPERTY WITH THE SOLE EXCEPTION OF SHRI. VITHAL KAMAT HAS TRANSFERRE D THE PROPERTY TO M/S. RUNWAL DEVELOPERS PVT. LTD., BY WAY OF SEPARATE SA LE AGREEMENT AND NOT BY THE WAY OF DEED OF ADMISSION & RETIREMENT EXECUTED ON 04.04.2008. THE SALE DEEDS/ AGREEMENTS WERE SIGNED ON DIFFERENT DAT ES. III. THE THREE LANDOWNERS HAVE TRANSFERRED THE LAND AND RELINQUISHED THEIR RIGHTS, TITLE AND INTEREST IN THE PROPERTY AN D HANDED OVER THE POSSESSION OF THE PROPERTY. THE CONSIDERATION WAS P AID SEPARATELY TO EACH LAND OWNER BY THE APPELLANT. IV. SHRI. VITHAL KAMAT (HOLDER OF THE RIGHTS I N THE PROPERTY) HAS RECEIVED THE MONEY DIRECTLY IN HIS BANK ACCOUNT FROM THE APP ELLANT AND NOT THROUGH ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 8 THE FIRM. THIS MONEY WAS NOT RECEIVED IN THE PROFI T SHARING RATIO OF THE PARTNERS IN THE FIRM. IN FACT, THIS WAS RECEIVED A S PER THE INDIVIDUAL NEGOTIATION SKILL OF THE SELLER/TRANSFEROR. V. THE DEED OF ADMISSION & RETIREMENT DATED 04 .04.2008 WAS EXECUTED FOR RETIREMENT BY SHRI. VITHAL KAMAT. THE PROPERTY OR ITS RIGHTS WERE NEVER TRANSFERRED BY THIS DOCUMENTS AS IS VISIBLE FROM TH E FACT THAT THE PROPERTY WAS TRANSFERRED IN THE NAME OF RUNWAL DEVELOPERS PV T. LTD. VI. SHRI. VITHAL KAMAT HAD MERE RIGHT OF POSSESSION OF THE PROPERTY WHICH WAS TRANSFERRED TO M/S. RUNWAL DEVELOPERS PVT . LTD., AT A CONSIDERATION OF RS.48.15 CRORES. IN FACT SHR I. VITHAL KAMAT HAS RECEIVED THE CONSIDERATION FOR HANDING OVER OF PO SSESSION OF THE PROPERTY AND FOR TRANSFERRING /RELINQUISHING ANY RIGHTS AND INTEREST IN THE PROPERTY. THUS, THE TRANSACTION WAS PURELY IN THE NATURE OF T RANSFER OF IMMOVABLE PROPERTY BY VARIOUS INDIVIDUALS TO M/S. RUNWAL DEVE LOPERS PVT. LTD., AND THIS CONCLUSION IS FURTHER STRENGTHENED BY THE FACT THAT AFTER THE DEEDS WERE REGISTERED BY A CONVEYANCE DEED EXECUTED BY THE LAN D OWNERS ONLY AND NOT BY M/S. SPORTSFIEID CONSTRUCTION, THE PROPERTY GOT TRANSFERRED DIRECTLY IN THE NAME OF M/S. RUNWAL DEVELOPERS PVT. LTD. VII. IN FACT, IF VERSION OF THE LD. AO IS TO B E ACCEPTED THAT THE PROPERTY WAS TRANSFERRED BY WAY OF DEED OF ADMISSION AND RETIREM ENT DATED 04.04.2008, THEN THE PROPERTY SHOULD HAVE BEEN IN THE NAME OF T HE FIRM M/S. SPORTSFIEID CONSTRUCTION WHICH IS NOT THE CASE.' 25. IN VIEW OF THESE FACTS, THERE IS NO DOUBT THAT THE APPELLANT COMPANY HAS PURCHASED THIS LAND AND THE AMOUNTS HAVE BEEN PAID FOR THE PURCHASE OF LAND ONLY THAT TO DIRECTLY TO THE LANDOWNERS. NO PAYMENT AS S UCH MADE TO M/S SPORTSFIELD CONSTRUCTION EXCEPT A MONOR SUM. FURTHER MADE TO TH E LANDOWNERS HAVE NOT BEEN ROUTED THROUGH SPORTSFIELD CONSTRUCTION BUT MADE DI RECTLY TO THEM AND THAT TOO FOR PURCHASE OF LAND IN LIEU OF SALE DEED .WHATEVER PAY MENTS HAVE BEEN MADE TO VITHAL KAMATH OR RANOESH SHANBAUG HAS BEEN MADE FOR SECURI NG THE POSSESSION OF THE LAND , WHICH WAS IN THEIR POSSESSION THOUGH LEGAL T ITLE WAS WITH THE THREE LADIES. 26. FURTHER THE CLAIM OF THE AO THAT M/S RDPL BECAM E PARTNER IN M/S SPORTSFIELD CONSTRUCTION OR RUNWAL FAMILY MEMBERS BECAME PARTNE RS IS FAR FROM TRUTH . THERE IS NO EVIDENCE THAT EITHER RDPL OR SANDEEP RUNWAL ACTU ALLY BECAME PARTNER IN THE SAID FIRM . THERE IS NO PARTNERSHIP DEED OR ANY OTH ER DOCUMENT TO THAT EFFECT . IN FACT THE SO CALLED RETIREMENT CUM ADMISSION DEED IS NOT SIGNED BY ANY OTHER PARTNERS OF THE SAID FIRM EXCEPT MR VITHAL KAMATH A ND IT APPEARED TO BE ONLY A DEVICE TO SAVE TAX IN HIS OWN HANDS . 27. THEREFORE, THERE APPEARS TO BE NO TRUTH IN THE CLAIM OF THE AO THAT THE ABOVE AMOUNTS WERE PAID TOWARDS BECOMING THE PARTNER IN S PORTS FIELD CONSTRUCTION. IN FACT, NO EVIDENCE IN THIS REGARD HAS BEEN PRODUCED BY THE AO DESPITE REPEATED QUERIES FROM THE UNDERSIGNED. THERE APPEARS TO BE N O PARTNERSHIP DEED IN WHICH THE APPELLANT COMPANY OR SANDEEP RUNWAL ARE A PARTN ER. THEREFORE, THE CLAIM OF THE AO THAT THE ABOVE EXPENDITURE OF RS. 137.52 CRS . WAS MADE FOR TAKING OVER ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 9 PARTNERSHIP DOES NOT APPEAR TO BE SUBSTANTIATED. TH EREFORE, THE CONCLUSIONS DRAWN BY THE AO THAT THIS EXPENDITURE OF RS. 137.52 CRS. WAS NOT AN ALLOWABLE EXPENDITURE, DOES NOT APPEAR TO BE CORRECT OR JUSTI FIED. NEEDLESS TO SAY THAT THE GENUINENESS OF THE EXPENDITURE WAS NEVER DOUBTED BY THE AO . 28. THEREFORE CONSIDERING THE OVERALL FACTS OF THE CASE AND EVIDENCE PRODUCED BY THE ASSESSEE, THERE IS NO DOUBT THAT THIS SUM OF RS . 137.52 CRS. WAS INCURRED BY THE ASSESSEE TOWARDS PURCHASE OF THE ABOVE LAND AND SEC URING ITS COMPLETE POSSESSION AND TO REMOVE ANY INCUMBERANCE IN THIS REGARD . THE REFORE, WHILE COMPUTING THE PROFIT OF THE ASSESSEE ON SALE OF SUCH LAND TO A SI STER CONCERN SUCHCOST IS HELD TO BE AN ELIGIBLE EXPENDITURE. CONSEQUENTLY, THIS ISSU E IS ALLOWED ON MERITS ALSO IN THE FAVOUR OF THE ASSESSEE. 29. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWE D. 7. THE LD DR SUBMITTED BEFORE THE BENCH THAT ORDER OF LD. CIT(A) IS NOT CORRECT AND CONTAINS SEVERAL INFIRMIT IES AS IT HAS IGNORED THE PROVISIONS OF SECTION 158BH THE ACT THA T WHICH MAKE IT ABUNDANTLY CLEAR THAT ALL OTHER PROVISIONS OF THE ACT ARE CLEARLY APPLICABLE TO THE ASSESSMENT BEING FRAMED U /S 153A OF THE ACT. THE LD DR SUBMITTED BEFORE THE BENCH THAT WRONG CLAIM ON WHICH AO LAID HIS HANDS DURING THE COURSE OF ASS ESSMENT PROCEEDINGS NEED NOT TO BE NECESSARILY BASED UPON T HE INCRIMINATING MATERIALS SEIZED DURING THE SEARCH. T HE LD DR REFERRED TO THE DETAILS OF PAYMENTS AS TABULATED BY THE AO IN PAGE NO. 5 TO 7 OF THE ASSESSMENT ORDER AND ARGUED THAT THE SAID INFORMATION WAS GATHERED DURING THE COURSE OF SEARC H AND CONSTITUTE THE MATERIALS SEIZED DURING THE SEARCH. THE LD DR ARGUED THAT EVEN IF IT PRESUMED FOR A MOMENT THAT T HE SAID INFORMATION WAS GATHERED DURING POST SEARCH PERIOD, STILL THE ADDITION CAN BE MADE AS SECTION 158 BH OF THE ACT M AKES IT CLEAR THAT ALL OTHER PROVISIONS OF THE ACT WOULD AP PLY TO THE ASSESSMENT FRAMED U/S 153A OF THE ACT. THE LD DR RE LIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS S AJIT KUMAR C.A. NO.10164 OF 2014 DATED 2.5.2018 IN DEFE NSE OF HIS ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 10 ARGUMENTS. THE LD DR THUS ARGUED THAT EVEN ADDITION MADE ON THE EVIDENCES GATHERED POST SEARCH AS WELL AS DURIN G ASSESSMENT PROCEEDINGS CAN BE THE BASIS OF ADDITION. THE LD DR ARGUED THAT THE PAYMENT OF RS. 137.53 CR WAS MADE TO THE FORMER PARTNERS TO REPLACE THEM IN THE FIRMS AND THUS IT IS CAPITAL INVESTMENT PAID FOR BECOMING PARTNERS IN THE FIRM AND NOT RELA TED TO THE LAND PURCHASED. THE DR ALSO SUBMITTED THAT THE ISS UE OF LAND COST WAS NOT EXAMINED AT ALL IN THE ORIGINAL ASSESS MENT PROCEEDINGS AND CAME TO LIGHT ONLY DURING SEARCH OR POST SEARCH ENQUIRIES. THE LD DR FINALLY PRAYED THAT THE ORDER OF CIT(A) MAY BE REVERSED AND THAT OF THE AO MAY BE RE STORED. 8. THE LD AR, ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF CIT(A) BY SUBMITTING THAT IT IS SETTLED POSITION TH AT ANY ADDITION IN CASE OF AN ASSESSMENT YEAR WHICH HAS ATTAINED FI NALITY ON THE DATE OF SEARCH , NO ADDITION CAN BE MADE EXCEPT ON THE BASIS OF SEIZED MATERIALS DURING THE COURSE OF SEARCH. THE L D AR ARGUED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF ALL CARGO LOGISTICS LTD AND CONTINENTAL WAREHOUSING CO RPORATION (SUPRA)HAS LAID DOWN THAT THE ADDITION TO AN ASSESS MENT WHICH IS FINAL ON THE DATE OF SEARCH, CAN ONLY BE MADE B ASED UPON THE SEIZED MATERIALS DURING SEARCH AND NOT OTHERWISE. THE LD AR THEREFORE SUBMITTED THAT THE ORDER OF CIT(A) IS WEL L REASONED AND SPEAKING ONE PASSED AFTER FOLLOWING THE DECISIONS O F THE JURISDICTIONAL HIGH COURT AND NEEDS TO BE UPHELD B Y DISMISSING THE APPEAL OF THE REVENUE. 9. AFTER HEARING THE LD DR AND THE LD AR AND PERUS ING THE MATERIALS AS PLACED BEFORE US ALONG WITH THE IMPUGN ED ORDER, WE ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 11 FIND THAT IT IS UNDISPUTED THAT ON THE DATE OF SEAR CH ON THE ASSESSEE ON 17.11.2014, THE ASSESSMENT HAS ATTAINED FINALITY AS THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VID E ORDER DATED 29.01.2013. SO IT IS VERY CLEAR THAT ANY ADDI TION CAN ONLY BE MADE BASED UPON THE SEIZED MATERIALS AND NOT OTH ERWISE AS HAS BEEN HELD BY THE JURISDICTIONAL HIGH /COURT IN THE CASE OF CIT VS ALL CARGO LOGISTICS LTD. AND CIT VS CONTINENT AL WAREHOUSING CORPORATION (SUPRA). AT THE TIME OF HEA RING ON 18.1.2019 THE LD DR SPECIFICALLY REQUESTED THE BENC H TO GIVE SOME TIME TO OBTAIN INFORMATION/REPORT FROM THE AO ON THE ISSUE OF ANY MATERIALS FOUND AND SEIZED DURING SEA RCH WHICH WAS ALLOWED BY POSTING THE NEXT HEARING ON 1.2.201 9. AGAIN ON 1.2.2019 A REQUEST WAS MADE BY THE LD DR FOR FURTHE R TIME WHICH WAS ALLOWED BY ADJOURNING DATE OF HEARING TO 1.3.2019. AGAIN ON 1.3.2019 THE CASE WAS ADJOURNED AT THE REQ UEST OF LD DR TO 8.3.2019. ON THE SAID DATE THE LD DR INFORMED THE BENCH THAT HE IS RELYING ON THE ASSESSMENT ORDER AND ARG UED THAT THE ADDITION COULD BE MADE ON THE BASIS OF INFORMATION GATHER EVEN DURING POST SEARCH PERIOD. WE ARE NOT IN AGREEMENT WITH THE ARGUMENTS PRESENTED BEFORE US BY THE LD DR ON THIS ISSUE AS THE SAME WERE CONTRARY TO THE RATIO LAID DOWN BY THE HO NBLE JURISDICTIONAL HIGH COURT. UNDER THESE FACTS AND CI RCUMSTANCES, THERE IS NO REASON TO DEVIATE FROM THE FINDINGS OF LD CIT(A) WHO HAS PASSED THE APPELLATE ORDER AFTER FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT AS DISCUSSED ABOVE . ACCORDINGLY WE UPHOLD THE ORDER OF CIT(A) BY DISMIS SING THE APPEAL OF THE REVENUE. ITA NO.5969/M/2017 M/S. RUNWAL DEVELOPERS PVT. LTD. 12 10. IN RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.