AR Housing Private Limited, CHENNAI V. ITO, CHENNAI

ITA 623/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96015 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SANKARALINGAM IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Business income; Deemed to accrue or arise in india; Cost of acquisition; Reason to believe; Reassessment proceedings
• Section: 143(3); 50C; 131; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.623/MDS/2015 ( / ASSESSMENT YEAR : 2007-2008) M/S. A.R. HOUSING (P) LTD, NO.32, NATHAMUNI STREET, NADUVANKARAI, ANNA NAGAR EAST, CHENNAI 600 040. [PAN: AACCA 3847L] ( %& /APPELLANT) VS THE INCOME TAX OFFICER, COMPANY WARD I(1), CHENNAI. ( !'%& /RESPONDENT) / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI. S. SANKARALINGAM, IRS, CIT /DATE OF HEARING : 09.07.2015 /DATE OF PRONOUNCEMENT : 11.09.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHEN NAI, DATED 30.01.2015 FOR THE ASSESSMENT YEAR 2007-2008. I.T.A.NO.623/MDS/2015. :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1 THE ORDER OF THE LEARNED CIT APPEALS IS CONTRARY TO LAW AND OPPOSED TO THE FACTS OF THE CASE 2 THE LEARNED CIT APPEALS WAS ERRED IN ENHANCING THE ASSESSMENT U/S.251 OF T HE INCOME TAX ACT , 196 1 . 3 THE LEARNED CIT APPEALS WAS ERRED IN CONCLUDING THE ASSESSEE HAVE EARNED 38,84,32,623/- AS PROFIT ON THE REAL ESTATE TRANSACTIONS RELYING ON THE PROF IT AND LOSS ACCOUNT OF THE ASSESSEE. 4. THE LEARNED CIT APPEALS WAS ERRED IN PLACI NG RELIANCE ON THE STATEMENT RECORDED OF S HRI S NAGARAJAN WAS THE DIRECTOR OF THE ASSESS EE FOR WHICH THERE IS NO COROBRATIVE EVIDENCE 5 THE LEARNED CIT APPEALS HAS ALSO ERRED IN ENHANCING THE ASSESSMENT WHILE CORRECTLY COMING TO THE CONCLUSION THAT THE ASSESSEE WAS NOT THE OWNER OF THE PROPERTY. 6 THE LEARNED CIT APPEALS HAS ALSO ERRED IN ENHANCING THE ASSESSMENT ON A REFERENCE F ROM THE ASSESSING OFFICER WHEN THERE WAS A SPECIFI C INJUCTION GRANTED ON THE SIMILAR I SSUE BY THE MADRAS HIGH COURT IN W.P.NO.28022 OF 2014 7 THE LEARNED CIT APPEALS HAS ALSO ERRED IN ENHANCING THE ASSESSMENT WITH A VIEW TO OVERRIDE OR GET OVER THE LIMITATION ON THE ASSESSING OFFICER IN TAKING REASSESSMENT PROCEEDINGS U/S.147 OF THE INCOME TAX ACT, 1961. 3. THE CRUX OF THE ABOVE GROUNDS IS THAT THE COMMISSIO NER OF INCOME TAX (APPEALS) HAS NO JURISDICTION TO ENHANCE THE ASSESSMENT AS HE HAS CONSIDERED NEW SOURCE OF INCOME WHICH WAS NOT BEFORE THE ASSESSING OFFICER. AS SUCH WE ARE COLLECTIVELY ADJU DICATING ALL THE ABOVE GROUNDS. I.T.A.NO.623/MDS/2015. :- 3 -: 3.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY DEALING WITH THE REAL ESTATE BUSINESS. AS PER THE INFORMATION RECEIVED FROM THE INTERNAL SOURCE OF THE DEPARTMENT, THE CAS E WAS REOPENED FOR THE ASSESSMENT YEAR 2007-2008 FOR THE FOLLOWING REASONS: THE A.R. HOUSING PVT. LTD., HAD PURCHASED TWO PROP ERTIES AT ADYAR THROUGH DEBTS RECOVERY TRIBUNAL SALE ON 29.8. 2001 AND REGISTERED IT ON 16.4.2003 AND ON 25.7.2003 RESPECT IVELY. ON 19.12.2005, M/S A.R. HOUSING PVT. LTD., HAD ENTERED INTO AN AGREEMENT WITH SRRI RAMACHANDRA EDUCATIONAL & HEALT H TRUST FOR THE SALE OF THE ADYAR PROPERTY FOR A VALUE OF E39,50,00 ,000/- ON WHICH SRI RAMACHANDRA EDUCATION & HEALTH TRUST HAD PAID A SUM OF E.35,42,50,000/- ON VARIOUS DATES STARTING FROM 19. 12.2005 TO 27.02.2006. SINCE THIS TRANSACTION WAS NOT CRYSTALL IZED UPON IN FULL, A COMPROMISE WAS STRUCK BETWEEN THE FOLLOWING PARTIES BY WAY OF TRIPARTITE AGREEMENT ENTERED INTO ON 21.2.2007:- 1. SHRI. RAMACHANDRAN EDUCATIONAL & HEALTH TRUST - PA RTY OF FIRST PART 2. M/S. VIACONS INFRASTRUCTURE & ENVIRONMENTAL - PART Y OF SECOND PART 3. M/S. A.R HOUSING PVT. LTD - CONFIRMING PARTY AS PER THE TRIPARTITE AGREEMENT, THE ADYAR PROPERTY HAS BEEN SOLD TO M/S. VICOANS INFRASTRUCTURE AND ENVIRONMENTAL ENGG. PVT.LTD., FOR A VALUE OF E35,42,50,000/- THIS PROPERTY IN TURN WAS SOLD TO I.T.A.NO.623/MDS/2015. :- 4 -: SHRI.RAMACHANDRA EDUCATIONAL & HEALTH TRUST BY M/S VIOCANS INFRASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD. AS THIS TRANSACTION HAS NOT BEEN DISCLOSED TO THE DEPARTMENT BY WAY OF FILI NG RETURN OF INCOME, THE CASE WAS REOPENED'. BASED ON THE ABOVE REASON, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 28.3.2012. 3.2 IN THIS CASE, THE ASSESSEE HAD PURCHASED PROPE RTY LOCATED AT DOOR NO.19, MUTHULAKSHMI SALAI , ADYAR , CHENNAI-20 IN TS NO.11, BLOCK NO.21, IN URUR VILLAGE, MYLAPORE, TRIPLICANE TALUK, CHENNAI AND PROPERTY AT DOOR NOS.15 AND 16 , DR.MUTHULAKSHMI SALAI, ADYAR, CHENNAI IN TS NO.9/1, BLOCK NO.21, IN URUR VILLAGE, MYLAPORE, TRIPLICANE TALUK, CHENNAI ON 29.8.2001 AND THE DRT HAD SUBSEQUENTLY REGISTERED THE SALE DEED ON 16.4.2003 & 25.7.2003 I N FAVOUR OF M/S A.R. HOUSING. IT WAS UNDERSTOOD THAT M/S A.R. HOUSI NG P. LTD., HAD PLANNED TO SELL THE SAID PROPERTY TO M/S. SRI RAMAC HANDRA EDUCATIONAL & HEALTH TRUST FOR A CONSIDERATION OF E.39,50,00,00 0/- BY WAY OF MAKING SALE AGREEMENT ON 19.12.2005. AS PER THE SW ORN STATEMENT RECORDED FROM SHRI.A. NAGARAJAN, ONE OF THE DIRECTO RS OF M/S A.R. HOUSING PVT. LTD., HAD STATED THAT THE SAID SALE A GREEMENT COULD NOT BE EXECUTED DUE TO VARIOUS FACTORS SUCH AS TENANCY VACATION ETC., AND HENCE, M/S. RAMACHANDRA EDUCATIONAL & HEALTH TRUST WAS NOT I.T.A.NO.623/MDS/2015. :- 5 -: INTERESTED IN EXECUTING THE SALE AGREEMENT. AS M/S SRI RAMACHANDRA EDUCATIONAL & HEALTH TRUST HAD ALREADY PAID AN ADVA NCE OF E35,42,50,000/- TO THE ASSESSEE, IN ORDER TO RECOVER THE MONEY FROM THE ASSESSEE, M/S. SRI RAMACHANDRA EDUCATIONAL & HE ALTH TRUST HAD INTRODUCED M/S VIOCANS INFRASTRUCTURE & ENVIRONMENT AL ENGG. PVT. LTD. TO PURCHASE THIS PROPERTY AND THIS HAS RESULTED IN A TRIPARTITE AGREEMENT BETWEEN M/S RAMACHANDRA EDUCATIONAL & HEA LTH TRUST, M/S VIACONS INFRASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD., AND THE ASSESSEE ON 21.2.2007. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO EXPLAIN DURING THE COURSE OF RECORDING SWORN STATEMENT THAT WHY THE ASSESSEE SHOULD BE MADE AS A CONFIRMIN G PARTY WHEN THE PROPERTY HAS BEEN CLEARLY REGISTERED IN THE ASSESSE E'S NAME BY DRT. THE ASSESSEE HAD STATED THAT ONE MRS.MEERABAI DAWSO N WAS THE PREVIOUS OWNER OF THAT LAND AND THE ESTATES OF MRS. MEERABAI DAWSON FILED A WRIT BEFORE THE HIGH COURT OF CHENNAI REGAR DING THE OWNERSHIP OF THE SAID ADYAR PROPERTY. AS THIS LITIGATION WAS PENDING FOR MORE THAN FOUR YEARS, IT HAD BEEN STATED BY THE ASSESSEE THAT, THEY HAVE DECIDED TO CLOSE THE DEAL BY SETTLING E20 CRORES T O THE ESTATES OF MRS.MEERABAI DAWSON BY WAY OF EXECUTING A SALE DEED BETWEEN THE ESTATES OF MRS.MEERABAI DAWSON AND M/S VIACONS INFR ASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD., WHEN M/S A.R. HOUSIN G P. LTD., WAS I.T.A.NO.623/MDS/2015. :- 6 -: HOLDING A CLEAR TITLE OF THE PROPERTY ON THE DATE O F EXECUTION OF SALE DEED, HOW CAN THE SALE DEED BE EXECUTED TREATING TH E ESTATES OF MRS.MEERABAI DAWSON AS THE OWNER OF THE PROPERTY AN D HOW COME THIS HAS BEEN ACCEPTED BY THE SUB-REGISTRAR, ADYAR. WHEN THIS QUERY WAS POSED TO THE ASSESSEE BY THE ASSESSING OFFICER , THE ASSESSEE HAD STATED THAT, THEY HAVE ENTERED INTO A MOU WITH THE ESTATES OF MRS.MEERABAI DAWSON AND VARIOUS OTHER PEOPLE WHO WE RE THE TENANTS OCCUPYING THE SAID DISPUTED PROPERTY WITH TEMPORARY SHEDS AND REGISTERED THE MOU WITH HIGH COURT OF MADRAS. ON PR ODUCTION OF THIS REGISTERED MOU BEFORE THE SRO, THEY HAVE EXECUTED T HE SALE DEED TREATING M/S A.R.HOUSING PVT. LTD., IE., THE ASSESS EE AS CONFIRMING PARTY. IT WAS FURTHER STATED BY THE ASSE SSEE, THAT THE ESTATE OF MRS. MEERABAI DAWSON HAVE PAID THE CAPITA L GAIN TAX OF E 14,61,02,118/- TOWARDS THE ENTIRE VALUE OF SALE CONSIDERATION I.E. , E64,00,48,000/- AND THE ASSESSEE HAD STATED THAT, SINCE THE ENTIRE TAX OF E.14,61,02,118/- HAD BEEN PAID ON THE ENTIRE SAL E CONSIDERATION, BY THE ESTATES OF MRS.MEERABAI DAWSON, NO TAX HAD BEEN PAID BY THE ASSESSEE ON THE ADYAR PROPERTY. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER DUE TO THE RE ASON THAT THE SAID TRIPARTITE AGREEMENT AND THE SETTLEMENT OF E20 CROR ES TO THE ESTATES OF MRS.MEERABAI DAWSON ARE THE PRIVATE ARRANGEMENTS MADE BETWEEN I.T.A.NO.623/MDS/2015. :- 7 -: M/S AR.HOUSING P. LTD., ESTATES OF MRS.MEERABAI DAW SON AND OTHER PARTIES. NO COURT OR ANY AUTHORITY HAD STATED THAT THE ESTATES OF MRS.MEERABAI DAWSON ARE THE REAL / LEGAL OWNERS OF THE PROPERTY. IT WAS VERY CLEAR AS PER THE DRT SALE THAT, M/S A.R.HO USING P.LTD., WAS THE ACTUAL OWNER OF THE ADYAR PROPERTY. THE ASSESSI NG OFFICER OBSERVED THAT ON PERUSAL OF THE COPY OF REGD. MOU S UBMITTED BY THE ASSESSEE, IT WAS SEEN THAT, EVEN AS PER THE REGISTE RED MOU BEFORE THE HIGH COURT OF MADRAS, THE COURT HAS STATED THAT , THE MEMO OF COMPROMISE BETWEEN M/S A.R.HOUSING P. LTD., AND OTH ER PARTIES HAS BEEN RECORDED. NOWHERE, IN THE MEMO OF COMPROMISE, THE COURT MADE ANY DECLARATION ABOUT THE OWNERSHIP OF THE PRO PERTIES EITHER THROUGH THE COURT PROCEEDINGS OR THROUGH ANY OTHER COURT ORDER. THOUGH, M/S A.R.HOUSING P.LTD., WAS THE ACTUAL OWNE R OF THE ADYAR PROPERTY, SINCE THE CAPITAL GAIN TAX WITH REGARD TO ENTIRE VALUE OF SALE CONSIDERATION HAS BEEN PAID BY THE ESTATE OF MRS. M EERABAI DAWSON, NO TAX WAS PRESSED IN THE HANDS IN THE HANDS OF M/S . A.R.HOUSING P.LTD., FOR THE REASONS THAT AS PER SEC. 45(1) OF T HE INCOME TAX ACT, 1961 IT SAYS, 'ANY PROFITS OR GAINS ARISING FROM TH E TRANSFER OF A CAPITAL ASSET BE CHARGEABLE TO INCOME-TAX UNDER CAPITAL GAI NS, I.E., THE PROVISION SAYS CHARGEABILITY OF TAX IS ONLY ON ACCO UNT OF TRANSFER OF ASSETS AND NOT ON OWNERSHIP. HOWEVER, SINCE THE TAX OUGHT TO HAVE I.T.A.NO.623/MDS/2015. :- 8 -: BEEN PAID BY M/S. A.R. HOUSING P. LTD HAS BEEN PAID BY THE ESTATES OF MRS. MEERABAI DAWSON DUE TO VARIOUS REASONS A SPECI FIED ABOVE, THE TAX WHICH HAD BEEN PAID BY THE ESTATES OF MS. MEERA BAI DAWSON SHOULD BE TREATED AS THE DEEMED INCOME OF M/S. A.R. HOUSING P. LTD AND SHOULD BE TAXED UNDER INCOME FROM OTHER SOURCES AND ACCORDING THE INCOME OF M/S. A.R. HOUSING P. LTD WAS COMPUTED AS E14,61,02,118/- AS AGAINST NIL INCOME RETURNED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS BROU GHT TO E14,61,02,118/- THE AMOUNT OF TAX PAID BY THE ESTAT E OF MEERABAI DAWSON, AS INCOME FROM OTHER SOURCES IN THE HAND S OF THE ASSESSEE SINCE THE ASSESSEE WAS HAVING CLEAR TITLE DEED IN I TS FAVOUR AND THE TAX LIABILITY ON THE GUIDELINES VALUE OF E64 CRORES VES TS ON THE ASSESSEE COMPANY. DURING THE COURSE OF APPELLATE PROCEEDING S, THE ASSESSING OFFICER VIDE HIS LETTER DATED 19.01.2015 HAS BROUGH T TO HIS NOTICE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME IN RESP ONSE TO NOTICE U/S.148 BY DECLARING NET PROFIT AS PER P & L ACCOUN T OF E38,84,32,623 AND CLAIMED EXEMPTION UNDER AOP. AS THE ASSESSEE FA ILED TO PROVE THE I.T.A.NO.623/MDS/2015. :- 9 -: EXISTENCE OF AOP BEFORE THE ASSESSING OFFICER, THE NET PROFIT ADMITTED IN THE RETURN OF INCOME NEEDS TO BE TAXED IN THE HA NDS OF THE ASSESSEE EITHER UNDER BUSINESS INCOME OR UNDER OTHER SOURCES . THE ASSESSING OFFICER HAD ALSO MADE AN ANALYSIS OF THE BALANCE- SHEET AND SUBMITTED THAT AS ON 31.3.06 SRI RAMACHANDRA EDUCATIONAL & HE ALTH WHICH WAS SHOWN AS CREDITOR FOR E35.67 CRORES, FOR THE YEAR E NDED 31.3.07 THERE WAS NO OUTSTANDING AMOUNT DUE TO SRI RAMACHANDRA ED UCATIONAL & HEALTH TRUST IMPLYING THAT THE ADVANCE OWED BY THE ASSESSEE WAS SETTLED BY A TRIPARTITE AGREEMENT SINCE THE BUYER V IEE TOOK OVER THE LIABILITY OF SRI RAMACHANDRA EDUCATIONAL & HEALTH. THE FACT THAT THE ASSESSEE HAS TREATED M/S. VIACONS INFRASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD. AS A DEBTOR FOR E30 CRORES AS ON 31 .3.07 AND CLOSER OF LIABILITY WITH SRI RAMACHANDRA EDUCATIONAL & HEALTH TRUST INDICATES THAT THE ASSESSEE HAS AGREED TO SELL THE PROPERTIES FOR E65,67,50,000.(E30,00,00,000/- +E35,67,50,000/-). T HIS FACT WAS ALSO CORROBORATED BY THE SWORN STATEMENT OF SHRI S. NAGA RAJAN, DIRECTOR OF THE ASSESSEE COMPANY, DATED 23.3.2013 RECORDED U/S 131 OF THE I.T. ACT, THE RELEVANT PART OF THE STATEMENT IS REPRODUC ED AS UNDER:- 12. HOW MUCH IS THE SALE CONSIDERATION RECDIVED FRO M M/S. VICOANS AND THE MODE OF PAYMENT AN WHEN THE SALE DE ED WAS EXECUTED BETWEEN YOU AND M/S. VICOANS? ANS:- THEE IS A SALE DEED EXECTED AS A CONFIRMING P ARTY FOR A VALUE OF E64,00,48,000/- OUT OF WHICH E20 CRORE DIR ECTLY PAID I.T.A.NO.623/MDS/2015. :- 10 -: TO ESTATE OF MEERABAI DAWSON FOR COMPENSATION AND I .T. PAYMENT AND AN AMOUNT OF E35,42,50,000/- RECEIVED F ROM M/S. RAMACHANDRA EDUCATION & HEALTH TRUST ADVANCE ADJUSTED BASED ON TRIPARTITE AGREEMENT. THE BALANC E AMOUNT IS YET TO BE RECEIVED. SALE DEED WAS EXECUTED ON 2 2.02.2007. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT THE ASSESSING OFFICER HAD ALSO BROUGHT TO HIS KNOWLED GE THAT AFTER THE SALE CERTIFICATE ISSUED BY THE DRT WAS DECLARED 'NU LL AND VOID' BY THE HIGH COURT OF MADRAS, THE ESTATE OF MEERABAI DAWSON BECAME THE RIGHTFUL OWNER OF THE PROPERTY AND THE CAPITAL GAIN TAXES WERE PAID BY ESTATE OF MEERABAI DAWSON THROUG H A SEPARATE PAN IN ITS NAME. THEREFORE, THE TAXES PAID BY ESTA TE OF MEERABAI DAWSON CANNOT BE GIVEN CREDIT IN THE HANDS OF THE A SSESSEE. IN VIEW OF THE ABOVE SUBMISSIONS, THE AO HAS REQUESTED FOR ENHANCEMENT OF THE TAXABLE INCOME. A COPY OF THE SUBMISSIONS OF TH E ASSESSING OFFICER WERE ALSO GIVEN TO THE ASSESSEE FOR ITS COMMENTS. T HE LD. AUTHORISED REPRESENTATIVE HAD SUBMITTED THE REPLY ON 28.1.201 5. AS PER THE REPLY GIVEN BY THE ID.AR, WHEN THE SALE CERTIFICATE ISSUE D BY THE DRT, CHENNAI WAS QUASHED BY MADRAS HIGH COURT VIDE ITS O RDER DATED 21.3.2005, THE ASSESSEE HAS NO RIGHT IN THE PROPERT IES AND WHEN THE AASESSEE HAD PAID E20 CRORES TO ESTATE OF MEERABAI DAWSON OUT OF THE AMOUNT OF E35.42 CRORES RECEIVED BY IT FROM SRI RAM ACHANDRA EDUCATIONAL & HEALTH TRUST (LATER THIS LIABILITY WA S OWNED BY M/S. I.T.A.NO.623/MDS/2015. :- 11 -: VIACONS INFRASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD.), ASSESSMENT ON THE SAME PROPERTIES IN THE HANDS OF THE ASSESSEE UN CALLED FOR. 4.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT THE ACCOUNTS PRODUCED SHOWS THAT THE ASSESSEE HAD DECLA RED THE PROFITS OF E38,89,50,349/- FROM BUSINESS OF REAL ESTATE FOR TH E ASSESSMENT YEAR 2007-2008 AS UNDER:- SALE VALUE (GUIDELINE VALUE) 64,00,48,000/- LESS: SETTLEMENT WITH THE LEGAL OWNER 20,00,00,000/- LESS: PROPERTY PURCHASE COST 4,19,50,651/- LESS: EVICTION CHARGES PAID PRIOR TO 2006 84,47,000/- LESS: LEGAL CHARGES PAID 7,00,000/- 24,69,00651/- 38,89,50,349/- THE ABOVE WORKING WAS EVIDENT FROM THE LETTER FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER ON 14.03.2013 AND THE LETTER DATED 28.01.2015 FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) IN RESPONSE TO THE ENHANCEMENT NOTICE ISSUED. THE FAC T THAT THE ASSESSEE HAD RECEIVED AN AMOUNT MORE THAN THE SETTL ED AMOUNT WITH SRI RAMACHANDRA EDUCATIONAL & HEALTH TRUST WAS ALS O EVIDENT FROM THE STATEMENT OF DIRECTOR OF THE ASSESSEE COMPANY S HRI. N. NAGARAJAN. OUT OF E38,89,50,349/- RECEIVED AS PROFIT ON SALE O F PROPERTIES, THE I.T.A.NO.623/MDS/2015. :- 12 -: ASSESSEE HAS DISCLOSED NET PROFIT IN THE PROFIT AND LOSS FILED BEFORE THE REVENUE AUTHORITIES. THUS, THE ASSESSEE HAD DEC LARED THE NET PROFIT OUT OF THE ABOVE TRANSACTIONS AT E38,84,32,623/- IN ITS PROFIT AND LOSS ACCOUNT AND THE RETURN OF INCOME FILED FOR THE ASSE SSMENT YEAR 2007- 08. AS THE ASSESSEE ITSELF HAD ADMITTED THE NET IN COME AS E38,84,32,623/- IN ITS RETURN OF INCOME, ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS) THERE WAS NO REASON AS TO W HY THE ASSESSMENT SHOULD NOT BE DONE ON THIS DECLARED PROF ITS. THE EXPLANATION GIVEN BY THE ASSESSEE IN RESPONSE TO EN HANCEMENT NOTICE WAS VAGUE AND INCONSISTENT. THE COMMISSIONER OF INC OME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO ENHANCE THE ASSESSMENT BY ADOPTING E38,84,32,623/- AS INCOME FROM BUSINESS IN STEAD OF ASSESSING THE INCOME OF E14,61,02,118/- AS INCOME FROM OTHER SOURCES. WITH REGARD TO THE ALTERNATIVE CLAIM OF G IVING CREDIT FOR THE AMOUNT OF TAXES PAID BY ESTATE OF MEERBAI DAWSON TO THE ASSESSEE COMPANY, THE COMMISSIONER OF INCOME TAX (APPEALS) O BSERVED THAT WOULD NOT GET CREDIT FOR THE TAXES PAID BY ESTATE O F MEERABAI DAWSON SINCE SHE HAD PAID CAPITAL GAINS SEPARATELY WITH A DISTINCT PAN AND E38,84,32,623/- DISCLOSED BY THE ASSESSEE IN ITS RE TURN OF INCOME WAS NET PROFIT OUT OF THE ABOVE DEAL AS A PART OF ITS B USINESS ACTIVITY ON REAL ESTATE, IT HAD NOTHING TO DO WITH THE CAPITAL GAIN TAX PAID BY ESTATE OF I.T.A.NO.623/MDS/2015. :- 13 -: MEERABAI DAWSON, AND ACCORDINGLY, THE COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED GROUND OF THE ASSESSEE. AGAINS T THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSE E SUBMITTED THE ORIGINAL PROPERTY WAS OWNED BY MRS. MEERABAI DAWSON AND SHE HAD GIVEN THE PROPERTY AS A SECURITY TO THE LOAN TAKEN BY TRIVINI GARMENTS. ON ACCOUNT OF DEFAULT THE PROPERTY WAS AUCTIONED BY DEBTS RECOVERY TRIBUNAL (DRT) VIDE M.A. 176/2002 IN OA 271 OF 2001 (DRC 45/2002) VIDE ORDER DATED 26.07.2002 AND THE SAME WAS PLACED AT PAGE NO.1 OF PAPER BOOK. THE ASSESSEE HAS OBTAINED OWNERSHIP OF THE PROPERTY OWNED BY MRS. MEERABAI DAWSON IN THE AUCTION CONDUC TED BY THE DRT. THE DRT HAD GIVEN CERTIFICATE OF SALE DEED DATED 16 .04.2003 BY WHICH THE ASSESSEE BECAME THE OWNER, AND THE SAME WAS PLA CED AT PAGE NO.5 OF PAPER BOOK. THEREAFTER, AFTER THE DEMISE O F MRS. MEERA BAI DAWSON, THE EXECUTORS OF THE WILL OF MRS. MEERA BAI DAWSON WHO WAS THE ORIGINAL OWNER OF THE PROPERTY, FILED A CASE IN THE MADRAS HIGH COURT CONTESTING THE OWNERSHIP OF THE ASSET AND THE CASE WAS SETTLED OUT OF COURT AND THE MADRAS HIGH COURT VIDE ITS ORD ER DATED 6.12.2004 IN O.P. NO.192 OF 2003 GRANTED LETTER OF ADMINISTRA TION WHICH IS PLACED ON RECORD AT PAGE NO.14 OF PAPER BOOK. MEANWHILE T HE ASSESSEE M/S. A.R. HOUSING PVT. LTD, ENTERED INTO AN AGREEMENT ON 19.12.2005 TO SELL I.T.A.NO.623/MDS/2015. :- 14 -: THE PROPERTY TO SRI RAMACHANDRA EDUCATIONAL AND HEA LTH TRUST FOR A CONSIDERATION OF E39.85 CRORES WHICH IS PLACED IN P APER BOOK AT PAGE NO.36. IN VIEW OF THE LITIGATION BY EXECUTOR OF MR S. MEERA BAI DAWSON, THE SAID AGREEMENT OF SALE WITH SRI RAMACHANDRA EDU CATIONAL & HEALTH TRUST WAS CANCELLED ON 9.2.2007 WHICH IS PLACED IN PAPER BOOK AT PAGE NO.48. MEANWHILE, WRIT PETITIONS FILED BY THE PERS ONS IN POSSESSION OF THE PROPERTY BEFORE THE HIGH COURT IN W.P. NOS.3964 9 OF 2002, 27303 OF 2003, 17736 AND 20357 OF 2004, THE SALE CERTIFIC ATE DATED 9.8.2002 AND THE ORDER OF THE DRT DIRECTING DISPOSSESSION O F THE TENANTS ARE QUASHED VIDE ORDER DATED 21.03.2005 WHICH IS PLACED AT RECORD AT PAPER BOOK AT PAGE NO.19. THE ABOVE ORDER IN WRIT PETITIONS WERE SUBJECT MATTER OF APPEAL. THE DIVISION BENCH OF MA DRAS HIGH COURT IN W.A.NOS.972 TO 974 OF 2005 STAYED THE ORDER OF THE SINGLE JUDGE REGARDING CANCELLATION OF SALE CERTIFICATE DATED 9. 8.2002 VIDE ORDER DATED 03.05.2005 WHICH IS PLACED AT RECORD AT PAGE NO.32 OF PAPER BOOK. MEANWHILE THE SRI RAMACHANDRA EDUCATIONAL AN D HEALTH TRUST AGREEMENT WAS CANCELLED VIDE AGREEMENT DATED 09.02. 2007, AND THE SAME WAS PLACED AT PAGE NO.48 OF PAPER BOOK. THERE AFTER, M/S. VICOANS INFRASTRUCTURE ENTERED INTO AGREEMENT WITH ASSESSEE AND THE SRI RAMACHANDRA EDUCATIONAL AND HEALTH TRUST, WHERE M/S. VIACOANS AGREED TO PURCHASE THE PROPERTY FROM THE ASSESSEE S UBJECT TO LITIGATION I.T.A.NO.623/MDS/2015. :- 15 -: ON 21.02.2007 WHICH IS PLACED AT PAPER BOOK AT PAGE NO.52. THERE WAS MEMORANDUM OF COMPROMISE EXECUTED ON 21.02.200 7 WHEREAS , THE FIRST PART , THE PARTY OF THE FIRST PART, DESIROUS OF REGISTERING THE SUBJECT PROPERTY IN THEIR NAME WITH THE CONFIRMATION OF ALL THE PARTIES. WHEREAS THE PARTIES OF THE FIRST AND SECOND PART HAVE ALREADY ENTERED IN TO TRIPARTITE AGREEMENT WITH M/S . SRI RAMACHANDRA AND EDUCATION AND HEALTH TRUST DATED 21.02.2013 FOR THE PURCHASE OF ABOVE MENTIONED PROP ERTY AND TOWARDS SETTLEMENT OF ESTATE OF MEERABAI DAWSON AND THE PARTY OF THE SECOND PART BETWEEN WHOM THE TITLE DISPUTES ARE EXISTING. WHEREAS, THE FIRST PART, HAS ALSO ENTERED IN TO NEGOTIATION WITH THE ESTATE OF MEERABAI DAWSON TOWA RDS SETTLEMENT WHO HAVE AGREED TO EFFECT THE SALE OF TH E PROPERTY AS THE VENDOR AND WHEREAS THE PARTY OF THE FIRST PART HAS APPROAC HED THE SECOND PART FOR REGISTERING THE PROPERTY IN THEIR F AVOUR, HOWEVER THERE WERE LITIGATIONS INCLUDING THE DISPUT E OF TITLE OF THE PROPERTY BETWEEN THE PARTY OF THE SECOND PAR T AND THE ESTATE OF MEERABAI DAWSON AND BOTH THE PARTIES CLAIMING OWNERSHIP RIGHTS, AND IN ORDER TO AVOID PROTRACTED LITIGATION, THE PARTY OF THE SECOND PART HAS AGREED TO BE THE CONFIRMING PARTY SO THAT THE DISPU TES ARE RESOLVED AMICABLY THEREBY ENABLING THE FIRST PARTY TO HAVE CLEAR AND PROPER TITLE ON EXECUTION OF THE SALE DEE D IN THEIR FAVOUR, WHEREAS THE PARTY OF THE SECOND PART IS ALS O AGREEABLE TO THE SAME WHEREAS THE PARTY OF THE FIRST PART AGREE TO GIVE COMPENSATION FOR NON-PERFORMANCE IN A SEPARATE AGREEMENT FOR THE PARTY OF THE SECOND PART WHEREAS THE PARTY OF THE FIRSTPART HAS APPROACHED T HE SECOND PART TO PAY 5 CRORES TO ESTATE OF MEERABAI DAWSON, ALONG WITH THE CAPITAL GAINS ON THE SALE OF THE PROPERTY WHICH IS ESTIMATED AT .14 CRORES BASED ON THE PREVAILING GUIDELINE VALUE OF RS .64 CRORES, TOTALING IN ALL TO .20 CRORES AS NEGOTIATED BY THE PARTY OF THE FIRST PART WITH THE ESTATE OF MEERABAI DAWSON, OUT OF THE CONSIDERATION OF 35.42 CRORES ALREADY RECEIVED I.T.A.NO.623/MDS/2015. :- 16 -: BY THE PARTY OF THE SECOND PART AND REFERRED TO IN THE MOU ENTERED INTO ON 21-02-2007 BETWEEN M/S. SRI RAMACHANDRA AND EDUCATION AND HEALTH TRUST AND THE FIRST AND SECOND PARTIES RESPECTIVELY WHEREAS THE PART OF THE SECOND PART IS ALSO AGREEAB LE TO THE SAME, SUBJECT TO THE CONDITION THAT THERE WOULD BE NO TAX LIABILITY ON THIS SALE TO PARTY OF THE SECOND PART AS THE ENTIRE TAX ON THE TRANSACTION IS BEING PAID ON VEND ORS ACCOUNT TO FACILITATE THE EXECUTION OF SALE DEED. SINCE THE LITIGATION WAS GOING ON LONG TIME THE PAR TIES DECIDED TO CLOSE THE ISSUE THROUGH MEMORANDUM OF COMPROMISE BE TWEEN M/S.VIACONS INFRASTRUCTURE & ENVIRONMENTAL ENGINEER ING PVT. LTD AND THE ASSESSEE AND ANOTHER MEMORANDUM OF COMPROMI SE ENTERED ON 22.02.2007 BETWEEN ESTATE OF MEERA BAI D AWSON AND THE ASSESSEE IN MOC DATED 21.02.2007, THE ASSESSEE AGREED TO PAY A SUM OF E5,00,00,000/- TO THE ESTATE OF MEERA BAI DAWSON AND ALSO AGREED TO PAY CAPITAL GAIN ESTIMATED AT E14,00 ,00,000/- AS STATED ABOVE. ON THE ABOVE MOC ENTERED ON 22.2.200 7, THE SALE DEED EXECUTED IN FAVOUR OF M/S.VIACONS INFRASTRUCTU RE & ENVIRONMENTAL ENGG. PVT. LTD. WHEREIN ESTATE OF ME ERA BAI DAWSON WAS VENDOR AND THE ASSESSEE WAS CONFIRMING PARTY WHICH IS PLACED ON RECORD AT PAGE NO.74 OF PAPER BOOK. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE, NORMALLY TH E ASSESSEE SHOULD HAVE EXECUTED THE SALE DEED AS AN OWNER AND EXECUTOR OF I.T.A.NO.623/MDS/2015. :- 17 -: MRS. MEERA BAI DAWSON SHOULD HAVE SIGNED AS CONFIRM ING PARTY. HOWEVER, THE EXECUTORS OF MRS. MEERABAI DAWSON CITI NG ENGLISH LAW REQUESTED THAT UNLESS THEY SIGNED AS A VENDOR THE BENEFIT OF CAPITAL GAIN TAXATION WILL NOT BE AVAILABLE IN UK AND FOR REPATRIATION TO UK. THEREFORE THE ASSESSEE AGREED THAT EXECUTORS OF MRS. MEERABAI DAWSON WILL SIGN AS A VENDOR AND THE ASSES SEE WILL SIGN AS A CONFIRMING PARTY. THE ASSESSEE WILL PAY THE E XECUTORS OF MRS.MEERABAI DAWSON COMPENSATION OF E5 CRORES AND ADDITIONALLY E 15 CRORES TO MEET THE CAPITAL GAINS TAX LIABILITY BECAUSE THEY ARE SIGNING AS A VENDOR AND LIABLE TO CAPITAL GAINS TAX WILL FALL ON THEM. THE ASSESSEE ALSO AGREED TO WITHDRAW ALL LITIGATION AGAINST THE EXECUTORS OF MS. MEERABAI DAWSON. ACCORDINGLY, TH E SALE DEED WAS EXECUTED, WHEREBY EXECUTORS OF MRS.MEERABAI DAW SON HAVE SIGNED AS A VENDOR AND THE ASSESSEE HAS SIGNED AS A CONFIRMING PARTY AND IN PAGE NO. 17 OF THE SALE DEED (DOCUMENT NO.1073 OF 2007) IN CLAUSE. 10 (PAGE NO.93 OF PAPER BOOK) POIN TED OUT EXECUTORS OF MRS.MEERABAI DAWSON HAS TO PAY THE ENT IRE TAX. THE WRIT APPEAL AGAINST THE ORDER OF SINGLE JUDGE WAS D ISPOSED ON 31.03.2009 ON THE BASIS OF COMPROMISE ARRANGEMENT D ATED 22.02.2007. I.T.A.NO.623/MDS/2015. :- 18 -: 1. AS PER THIS ARRANGEMENT, THE ASSESSEE IS THE OWNER ON THE BASIS OF SALE CERTIFICATE FROM DRT. 2. THEY HAD AGREED TO PAY THE COMPENSATION OF 5 CRORES TO THE EXECUTOR OF MRS.MEERABAI DAWSON TO ENABLE THE TRANSACTION TO GO THROUGH. 3. THE ASSESSEE HAD AGREED THAT EXECUTOR OF MRS.MEERA BAI DAWSON WILL SIGN AS A VENDOR CONSEQUENTLY AS THE TAX LIABILITY WILL BE ON THE PE RSON SIGNING AS A VENDOR, THE ASSESSEE HAS GIVEN AN ADDITIONAL AMOUNT OF E15 CRORES TO MEET THE TAX LIABILITY OF THE EXECUTOR OF MRS.MEERA BAI DAWSON. THE ENTIRE SALE CONSIDERATION WAS ASSESSED IN THE HANDS OF EXECUTOR OF MRS.MEERABAI DAWSON AND TAX ON THE DEEMED CONSIDERA TION OF RS.64 CRORES AMOUNTING TO E14.61 WAS ASSESSED IN THE HAND S OF EXECUTOR OF MRS.MEERABAI DAWSON, WHICH WAS PAID OUT OF THE AMOU NT GIVEN BY THE ASSESSEE FOR THIS PURPOSE. NOW THE DEPARTMENT W OULD LIKE TO TAX E38 CRORES RETAINED BY THE ASSESSEE. AS PER THE CO MPROMISE AGREEMENT BOTH THE ASSESSEE AND EXECUTOR OF MRS. ME ERABAI DAWSON AGREED TO JOIN TOGETHER AND SELL THE PROPERTY. THE ASSESSEE HAD GIVEN E15 CRORES TO EXECUTOR OF MRS.MEERABAI DAWSON TO ME ET THEIR TAX LIABILITY. THUS, IN THE TRANSACTION THE EXECUTOR OF MRS. MEERABAI DAWSON ARE ENTITLED TO ONLY E5 CRORES AND E15 CRORE S WAS GIVEN BY THE ASSESSEE TO PAY THE TAX. THE SALE TRANSACTION I S A SINGLE TRANSACTION FOR TRANSFER OF LAND. AS PER AGREEMENT EXECUTORS OF MS. I.T.A.NO.623/MDS/2015. :- 19 -: MEERA DAWSON HAS TO MEET THE TAX LIABILITY. THE CAP ITAL GAINS ON THE ENTIRE TRANSACTION IS RS. 14.61 CRORES AND THE SAME HAS BEEN RECOVERED FROM THE EXECUTORS OF MS. MEERA DAWSON. F URTHER TAX CANNOT BE RECOVERED FROM THE SAME TRANSACTION. WITH OUT PREJUDICE, IF PART OF THE CONSIDERATION IS NOW FOISTED UPON THE A SSESSEE CREDIT SHOULD ALSO BE GIVEN FOR THE E.15 CRORES SINCE ASSESSEE HAS PASSED ON TO THE EXECUTOR OF MRS.MEERA BAI DAWSON FOR PAYMENT OF TAX. THE DEPARTMENT CANNOT ONCE AGAIN RE COVER THE TAX SEPARATELY FROM THE ASSESSEE FOR PART OF THE SALE C ONSIDERATION ON WHICH TAX HAS BEEN PAID. IN CASE MRS. MEERABAI DAWS ON IS CONSIDERED AS OWNER, THEN THE ASSESSEE HAS MERELY AGREED NOT T O PURSUE THE LITIGATION. THE AMOUNT RETAINED BY THE ASSESSEE SHO ULD BE CONSIDERED AS AMOUNT PAID FOR THE RESTRICTIVE COVENANT FOR NOT PURSUING THE LITIGATION. IN SUCH A CASE THE ENTIRE AMOUNT IS A C APITAL RECEIPT AND IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT FIRST OF ALL REOPENING OF ASSESSMENT IS BAD IN LAW. THEREAFTER, THE ISSUE CON SIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS TOTALLY DIF FERENT WITH THE ONE CONSIDERED BY THE ASSESSING OFFICER IN HIS ASSE SSMENT ORDER, WHICH THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NO JURISDICTION. FURTHER, HE SUBMITTED THAT THERE WAS SECOND REOPENI NG NOTICE ISSUED I.T.A.NO.623/MDS/2015. :- 20 -: TO THE ASSESSEE ON 31.03.2014. THE REASONS RECORDE D FOR REOPENING THE ASSESSMENT U/S.147 OF THE I.T. ACT FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION IS AS FOLLOWS:- 2. FOR THE ASSESSMENT YEAR 2007-08, YOU HAD FILED Y OUR INCOME TAX RETURN(ITR) ON 26.04.2012 ADMITTING A N IL INCOME IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE I.T. ACT ISSUED ON 28.03.2012. CONSEQUENTLY, YOUR CASE WAS TAKEN FOR SCRUTINY UNDER SECTION 143(3) R.W.S 147 OF THE I.T. ACT 1961 AND THE SCRUTINY ASSESSMENT WAS COMPLETED ON 03.03.2013 AFTER ASSESSING THE TOTAL INCOME AT 14,61,07,118/- 3. SUBSEQUENTLY, IT WAS NOTICE THAT THE INCOME TO T HE TUNE OF 37,95,95,157/- HAS ESCAPED FROM ASSESSMENT. THEREF ORE, A NOTICE UNDER SECTION 148 DATED 31.03.2014 OF THE I. T. ACT 1961 WAS ISSUED TO YOU TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-2008. IN RESPONSE, YOU FILED A LETTER DA TED 08.04.2014 BEFORE THIS OFFICE, WITH A REQUEST TO TR EAT THE ITR FILED ON 26.04.2012 VIDE E-FILED ACK 38548644126041 2 AS THE ONE FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SE CTION 148 DATED 31.03.2014 AND ALSO REQUESTED FOR THE REASON FOR ISSUE OF THE ABOVE NOTICE U/S. 148. AFTER CONSIDERING YO UR ABOVE LETTER THE REASONS TO SALE THE PROPERTY IN FAVOUR O F M/S. VIACONS INFRASTRUCTURE AND ENVIRONMENTAL ENG. PVT. LTD AND PAID CAPITAL GAINS TAX ON THE VALUE ADOPTED FOR STA MP DUTY OF 64,00,48,000/- IN THE NAME OF EXECUTOR OF MS. MEERA BAI DAWSON IN PAN NO.ALLPD 1138N. THIS IS TAX PAID ON T HE CAPITAL GAIN AS TRANSFER TO LAND BY THE LEGAL/REAL OWNER I.E THE EXECUTOR OF MS. MEERA BAI DAWSON AND TO IN THE NAME OF THE ASSESSEE. IN THIS TRANSACTION, IT IS BROUGHT TO NO TICE THAT THE ASSESSEE HAD ACQUIRED BY VIRTUE OF REGISTERED DOCUM ENT IN THE NAME OF ASSESSEE EITHER OR ILLEGALLY A RIGHT ON THE PROPERTY AND THAT IS WHY THE ASSESSEE WAS TREATED AS CONFIRMER U NDER THE STAMP DUTY ACT. FOR RELINQUISHING THE RIGHT OF THE ASSESSEE ON THE ABOVE SAID PROPERTY FOR WHICH THE ASSESSEE RECE IVED 64,00,48,000/-. THE CAPITAL GAIN ON TRANSFER OF TH E RIGHT ON THE ABOVE SAID PROPERTY WORKS OUT TO 37,95,95,157/- RESULTING IN UNDER ASSESSMENT TO AN EXTENT OF 23,34,93,039/- (379595157-146102118). IF THE GAIN ARISING OUT OF TRANSFER OF RIGHT IS BROUGHT TO TAX THERE WOULD BE A TAX DEMAND OF 19,33,61,150/- (INCLUDING INTEREST U/S.234A & B) AS AGAINST 11,49,24020/- . SINCE IT IS FAILURE ON THE PART OF THE ASSESSEE IN NOT TRULY AND FULLY DISCLOSING ALL THE MATERIAL FACTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAVE REASON TO BELIEVE I.T.A.NO.623/MDS/2015. :- 21 -: THAT THE INCOME HAS ESCAPED ASSESSMENT FOR THE ASSE SSMENT YEAR 2007-08 AND IT IS A FIT CASE WARRANTING REASSE SSMENT. 4. IN CONNECTION WITH THE REASSESSMENT PROCEEDINGS, YOUR WAS POSTED FOR HEARING ON 29.05.2014 AT 3.00PM. HOW EVER, YOU FAILED TO APPEAR IN PERSON OR THROUGH YOUR AUTH ORIZED REPRESENTATIVE ON THE SAID DATE. AND YOU ALSO FAIL ED TO FURNISH THE DETAILS AS CALLED FOR VIDE STATUTORY NOTICE(S) ISSUED U/S.143(2)/142(1) OF THE I.T. ACT 1961 DATED 21.05. 2014. THEREFORE, YOUR CASE IS AGAIN POSTED FOR HEARING ON 05.06.2014 AT 3.00PM. FURTHER, LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ABOVE REOPENING WAS STAYED BY THE HIGH COURT IN W.P .NO.28022 OF 2014 AND M.P. NO.1 OF 2014. BEING SO, THE COMMISSIO NER OF INCOME TAX (APPEALS) WANTED TO DO THINGS INDIRECTLY WHICH CANNOT BE DONE DIRECTLY. 6. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBM ITTED THAT THE TRANSACTION ALREADY SUFFERED TAX IN THE HANDS OF THE EXECUTOR OF LATE MEERA BAI DAWSON AND FOR THE SAME TRANSACTION THE ASSESSEE CANNOT BE TAXED AGAIN. FURTHER, HE SUBMITTED THAT WHEN THE MATTER OF REOPENING WHICH IS SUBJUDICE BEFORE THE MADRAS HIG H COURT, THE COMMISSIONER OF INCOME TAX (APPEALS) COULD HAVE AWA ITED FINAL OUTCOME OF THE PETITION. ACCORDING TO HIM, THE INC OME TAX DEPARTMENT ARE NOT COMPETENT TO DECIDE THE OWNERSHI P OF THE PROPERTY SO AS TO TAX IN THE HANDS OF THE ASSESSEE WHEN THE DISPUTED PARTIES AGREED THAT EXECUTOR OF MRS. MEERA BAI DAWS ON WAS THE LEGAL I.T.A.NO.623/MDS/2015. :- 22 -: OWNER OF THE PROPERTY AND OTHERS ARE CONFIRMING PA RTIES. THE INCOME TAX DEPARTMENT THRUSTED UPON THAT THE ASSESSEE IS THE ORIGINAL OWNER OF THE PROPERTY AND THE PRESENT THE ASSESSEE IS LIABLE FOR PAYMENT OF TAX. 7. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASS ESSEE ITSELF OFFERED THE INCOME FROM THIS LAND TRANSACTION AT E3 8.85 CRORES AND CLAIMED THAT IT IS EXEMPT SINCE IT WAS OFFERED AS INCOME OF AOP. BEING SO, WHEN THE AOP HAS NOT FILED THE RETURN OF INCOME SEPARATELY, AND THE SAME WAS CONSIDERED IN THE HANDS OF THE ASS ESSEE, THE ASSESSEE CANNOT HAVE GRIEVANCE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS ON RECORD. IN THIS CASE, THE ASSESSEE COMPANY ENGAGED IN REAL ESTATE BUSINESS. THE ASSESSMENT WAS REOPENED FOR THE ASSE SSMENT YEAR 2007-2008 ON THE BASIS OF THE FOLLOWING REASONS. THE ASSESSEE HAD PURCHASED TWO PROPERTIES AT ADY AR THROUGH DEBTS RECOVERY TRIBUNAL SALE ON 29.8.2001 AND REGIS TERED IT ON 16.4.2003 AND ON 25.7.2003 RESPECTIVELY. ON 19.12.2 005, M/S A.R. HOUSING PVT. LTD., HAD ENTERED INTO AN AGREEME NT WITH SRI RAMACHANDRA EDUCATIONAL & HEALTH TRUST FOR THE SAL E OF THE ADYAR PROPERTY FOR A VALUE OF 39,50,00,000/- ON WHICH SRI I.T.A.NO.623/MDS/2015. :- 23 -: RAMACHANDRA EDUCATION & HEALTH TRUST HAD PAID A SUM OF .35,42,50,000/- ON VARIOUS DATES STARTING FROM 19.1 2.2005 TO 27.02.2006. SINCE THIS TRANSACTION WAS NOT CRYSTALL IZED UPON IN FULL, A COMPROMISE WAS STRUCK BETWEEN THE FOLLOWING PARTIES BY WAY OF TRIPARTITE AGREEMENT ENTERED INTO ON 21.2.20 07:- 1 SHRI. RAMACHANDRAN EDUCATIONAL & HEALTH TRUST - PA RTY OF FIRST PART 2 M/S. VIACONS INFRASTRUCTURE & ENVIRONMENTA L - PARTY OF SECOND PART 4. M/S. A.R HOUSING PVT. LTD - CONFIRMING PAR TY AS PER THE TRIPARTITE AGREEMENT, THE ADYAR PROPERTY HAS BEEN SOLD TO M/S. VICOANS INFRASTRUCTURE AND ENVIRONMENTAL EN GG. PVT.LTD., FOR A VALUE OF 35,42,50,000/- THIS PROPERTY IN TURN WAS SOLD TO SHRI.RAMACHANDRA EDUCATIONAL & HEALTH TRUST BY M/S VIOCANS INFRASTRUCTURE & ENVIRONMENTAL ENGG. PVT. LTD. AS THIS TRANSACTION HAS NOT BEEN DISCLOSED TO THE DEPARTMEN T BY WAY OF FILING RETURN OF INCOME, THE CASE WAS REOPENED'. B ASED ON THE ABOVE REASON, NOTICE U/S 148 WAS ISSUED TO THE ASSE SSEE ON 28.3.2012. IN RESPONSE TO THAT, THE ASSESSEE HAD FI LED A RETURN OF INCOME ON 26.4.2012 AND THE ASSESSMENT WAS COMPLETE D . 9. THE ASSESSEE OBJECTED THE ABOVE REASON FOR REOP ENING AND FILED NIL RETURN OF INCOME. THE ASSESSING OFFICER WITHOU T AGREEING WITH THE CONTENTION OF THE ASSESSEE CONSIDERED THE PAYMENT O F TAX OF E14.61 CRORES PAID BY THE ESTATES OF MEERA BAI DAWSON ON B EHALF OF THE ASSESSEE AS INCOME OF THE ASSESSEE. THE ASSESSEE CH ALLENGED THIS ADDITION BEFORE THE COMMISSIONER OF INCOME TAX (APP EALS). THE COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT AGREEI NG WITH THE ASSESSING OFFICER ASSESSED ENTIRE SURPLUS INCOME AT E38,84,32,623/- WHICH IS THE INCOME GENERATED FROM SALE OF IMPUGNED PROPERTY. ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEAL S), THE AO I.T.A.NO.623/MDS/2015. :- 24 -: REQUESTED FOR ENHANCEMENT OF TAXABLE INCOME AND ON THAT BASIS HE HAS SUBSTITUTED HIS VIEW IN THE PLACE OF THE ASSESS ING OFFICER. NOW, THE FIRST ISSUE FOR OUR CONSIDERATION IS WHETHER TH E ABOVE DIRECTION OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASS ESSING OFFICER IS WITHIN HIS POWERS. IT IS NEEDLESS TO SAY THAT THE FIRST APPELLATE AUTHORITY IS VESTED WITH VERY WIDE POWERS UNDER SE C 251(1)(A) OF THE ACT AND ONCE AN ASSESSMENT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRICTED TO EXAMINING ONLY THOS E ASPECTS OF THE ASSESSMENT ABOUT WHICH THE ASSESSEE MAKES A GRIEVAN CE AND RANGES OVER THE WHOLE ASSESSMENT TO CORRECT THE ASSESSING OFFICER NOT ONLY WITH REGARD TO A MATTER RAISED BY THE ASSESSEE IN A PPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERE D BY THE ASSESSING OFFICER AND DETERMINED IN THE COURSE OF A SSESSMENT. HOWEVER, THERE IS A SOLITARY BUT SIGNIFICANT LIMITA TION TO THE POWER OF REVISION, VIZ., THAT IT IS NOT OPEN TO THE FIRST AP PELLATE AUTHORITY TO INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INC OME WHICH WERE THE SUBJECT-MATTER OF ASSESSMENT . APPLYING THE ABOVE WELL-SETTLED PRINCIPLES OF LAW TO THE FACTS OF THE INSTANT CASE, WE HAVE TO EXAMINE THE PRESENT CASE TO SEE WHETHER FIRST APPELLATE AU THORITY HAD EXCEEDED HIS JURISDICTION. IN THIS CASE, WHILE COMP UTING THE INCOME OF I.T.A.NO.623/MDS/2015. :- 25 -: THE ASSESSEE, THE ASSESSING OFFICER CONSIDERED THE PAYMENT OF E14.61 CRORES FOR INCOME TAX PAID BY ESTATES OF MRS. MEERA BAI DAWSON ON BEHALF OF THE ASSESSEE AS THE INCOME OF THE ASSESSE E. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE DERIVED THE BENEFI T TO THAT EXTENT AS THE ASSESSEE WAS THE OWNER OF THE CAPITAL ASSET WHO WAS LIABLE TO PAY TAX. THUS, ONLY THE MATTER DEALT BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR WAS TREATMENT OF PAYMENT OF INCOME TAX BY ESTATES OF MEERA BAI DAWSON IN THE HANDS OF THE ASSESSEE AS ASSESSEES INCOME. NONE OF THE ISSUE WHICH WAS DEALT BY THE CO MMISSIONER OF INCOME TAX (APPEALS) WAS CONSIDERED BY THE ASSESSIN G OFFICER AS SEEN FROM THE RECORDS. IT IS EVIDENT FROM THE ORDER OF FIRST APPELLATE AUTHORITY THAT HE BROUGHT INTO TAXATION INCOME FRO M TRANSFER OF ASSETS. IN OTHER WORDS, THIS INCOME CONSIDERED BY THE COMMI SSIONER OF INCOME TAX (APPEALS) WAS NOT AT ALL CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF FRAMING REOPENED ASSESSMENT. IN OUR OPINION, THE ADDITION ON ACCOUNT OF INCOME FROM SALE OF PROP ERTY AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE WOULD NOT CONST ITUTE THE NEW SOURCE OF INCOME, SINCE IT WAS ALREADY DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME AS EVIDENT FROM THE STATEMENT OF INCOME FILED ALONG WITH RETURN OF INCOME : I.T.A.NO.623/MDS/2015. :- 26 -: IN THE STATEMENT OF TOTAL INCOME FILED ALONGWITH TH E RETURN OF INCOME, THE DETAILS WERE GIVEN AS UNDER:- STATEMENT OF TOTAL INCOME INCOME FROM BUSINESS E NET PROFIT/(LOSS) AS PER PROFIT AND LOSS A/C 38,8 4,32,623/- LESS: AOP TAXED SEPARATELY 38,84,32,623/- GROSS TOTAL INCOME NIL LESS: DEDUCTION UNDER CHAPTER VI-A NIL -------------------------- TOTAL INCOME NIL -------------------------- AS SEEN FROM THE ABOVE, THE ASSESSEE HAD DECLARED THE NET PROFIT OUT OF THE ABOVE TRANSACTIONS AT E38,84,32,623/- IN ITS PROFIT AND LOSS ACCOUNT AND THE RETURN OF INCOME FILED FOR THE ASSE SSMENT YEAR 2007- 08. AS THE ASSESSEE ITSELF HAD ADMITTED THE NET IN COME AS E38,84,32,623/- IN ITS RETURN OF INCOME, THE COMMI SSIONER OF INCOME TAX (APPEALS) COULD EXAMINE THE SAME IN HIS ORDER. THE FIRST APPELLATE AUTHORITY HAS POWER AND HIS JURISDICTION IS WIDE AN D CANNOT BE CURTAILED. ACCORDINGLY, IN OUR CONSIDERED OPINION THE FIRST APPELLATE AUTHORITY HAS THE RIGHT TO GRANT DEDUCTION, WHICH T HE ASSESSEE IS ENTITLED TO BUT FAILS TO CLAIM BEFORE THE ASSESSING OFFICER AND AT THE SAME TIME THE FIRST APPELLATE AUTHORITY HAS THE POW ER TO ENHANCE INCOME, WHICH THE ASSESSING OFFICER HAS FAILED AND NEGLECTED TO I.T.A.NO.623/MDS/2015. :- 27 -: CONSIDER CERTAIN ASPECTS. IN OTHER WORDS, THE FIRS T APPELLATE AUTHORITY HAS THE POWER TO ADJUDICATE AND DECIDE EVERY-THING NECESSARY TO ASCERTAIN THE TRUE AND CORRECT INCOME OF THE ASSESS EE. ACCORDINGLY, THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORIT Y CANNOT BE RESTRICTED TO ONLY THOSE MATTERS CONSIDERED AND DEC IDED BY THE ASSESSING AUTHORITY. FAILURE ON THE PART OF THE ASS ESSING OFFICER TO EXAMINE CERTAIN ASPECTS CAN BE RECTIFIED AT THE APP ELLATE STAGE, AND THEREFORE, IT WOULD BE WRONG TO CIRCUMSCRIBE AND RE STRICT POWER. IN OUR OPINION, THE FIRST APPELLATE AUTHORITY CAN ENH ANCE THE ASSESSMENT BY CONSIDERING THE ISSUE WHICH WAS MENTIONED BY TH E ASSESSEE IN ITS RETURN OF INCOME THOUGH NOT CONSIDERED BY THE ASSES SING OFFICER IN ITS ORDER OF APPEAL AGAINST THE ASSESSEE AND THUS THE F IRST APPELLATE AUTHORITY HAVE JURISDICTION OF ENHANCEMENT OF INCOM E. LIMITATION ON THE POWERS OF THE COMMISSIONER OF INCOME TAX (APPE ALS), HOWEVER, IS THAT HE CANNOT TRAVEL BEYOND THE SUBJECT MATTER OF ASSESSMENT AND RETURN OF INCOME. IT IS TO BE NOTED THAT IT IS NOT SUBJECT MATTER OF APPEAL, BUT THE SUBJECT MATTER OF ASSESSMENT, WHE N IT IS SAID THAT HE CANNOT TRAVEL BEYOND THE SUBJECT MATTER OF ASSESSME NT WHAT IS MEANT IN THAT HE CANNOT INTRODUCE IN THE ASSESSMENT NEW S OURCE AS HIS POWERS OF ASSESSMENT ENHANCED IS RESTRICTED ONLY TO THE INCOME WHICH WAS SUBJECT MATTER OF CONSIDERATION FOR THE PURPOSE S OF ASSESSMENT BY I.T.A.NO.623/MDS/2015. :- 28 -: THE ASSESSING OFFICER. THEREFORE, IF AN INCOME IS SUBJECT MATTER OF CONSIDERATION BY THE ASSESSING OFFICER AND EVEN THO UGH THE ASSESSING OFFICER MAY COME TO THE CONCLUSION THAT INCOME IS N OT SUBJECT TO TAXATION, IT WOULD BE OPEN TO THE COMMISSIONER OF I NCOME TAX (APPEALS) TO TAKE DIFFERENT VIEW AND BRING THAT INC OME TO TAX. BUT, IN DOING SO HE CANNOT, INCLUDE THE INCOME DERIVED BY T HE ASSESSEE SAY, FROM ASSESSEES INCOME FROM THE TRANSFER OF CAPITAL ASSET WHICH WAS ALREADY SUBJECT TO TAX IN THE HANDS OF ESTATES OF M EERA BAI DAWSON. MOREOVER, THE POWERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ARE RESTRICTED TO THE SOURCE OF INCOME IN THE RETU RN AND IN THE ASSESSMENT ORDER. THUS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FULLEST JURISDICTION IN RESPECT OF IT; HE CAN INCLUDE IT IN THE ASSESSMENT, EVEN THOUGH IT WAS EXCLUDED BY THE ASSE SSING OFFICER, AND, NATURALLY, WHEN INCLUDED IT, HE MUST INCLUDE I T UNDER ONE OR OTHER HEAD. HOWEVER, IN THE PRESENT CASE, THE ADDITION O N ACCOUNT OF GAIN ON TRANSFER OF CAPITAL ASSET CANNOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE AS THIS IS ALREADY SUFFERED TAX IN THE HAN DS OF MRS. MEERA BAI DAWSON. IT IS THEREFORE, NOT OPEN TO THE COMMISSION ER OF INCOME TAX (APPEALS) TO DIRECT THE ASSESSING OFFICER TO ASSESS PROFIT FROM THE TRANSFER AS BUSINESS INCOME ASSET. I.T.A.NO.623/MDS/2015. :- 29 -: 10. FURTHER ALL THE PARTIES INVOLVED IN DISPUTE AGREE D THAT ESTATES OF MRS. MEERA BAI DAWSON WAS THE ABSOLUTE OWNER OF THE PROPERTY AND ENTERED INTO MOC DATED 22.02.2007, WHEREIN HELD AS UNDER:- A) A.R HOUSING (P) LTD WILL NOT PRESS ANY CLAIMS I N RESPECT OF SCHEDULE MENTIONED PROPERTIES WHETHER AS PURCHASERS OR OTHERWISE IN ANY CAPACITY INCLUDING UNDER ANY SALE CERTIFICATE ISSUED BY DRT-1, CHENNAI IN PURSUANCE O F OA 271 OF 2001 AND WILL WITHDRAW WRIT APPEALS 972, 973 AND 974 OF 2005. B) THE SECOND PARTY INDIVIDUALLY AND JOINTLY CONFIR M THAT THEY HAVE NOT RIGHT, TITLE OR INTEREST IN ANY MANNER WHA TSOEVER IN THE SCHEDULE MENTIONED PROPERTY OR IN THE ESTATE OF LATE MRS. MEERABAI DAWSON. C) A.R. HOUSING (P) LTD AGREES TO CO-OPERATE WITH F IRST PARTY OR THE SAID PURCHASER TO EFFECT MUTATION OF ALL REV ENUE RECORDS PERTAINING TO THE SCHEDULE MENTIONED PROPER TY IN FAVOUR OF THE FIRST PARTY OR THE PURCHASER AND THE SECOND PARTY AGREES TO ISSUE NECESSARY LETTERS ETC., IN T HIS REGARD FOR THE SAID PURPOSE. D) THE SECOND PARTY HAS ON THIS DATE DEPOSITED WITH THE SAID PURCHASER ALL ORIGINAL TITLE DEEDS OF THE SCHEDULE A MENTIONED PROPERTY WHICH ARE IN THEIR POSSESSION, A LIST OF WHICH IS ANNEXED HERETO AS SCHEDULE C AND CONFIRM T HAT THEY ARE NOT IN POSSESSION OF ANY OTHER TITLE DEEDS WHATSOEVER PERTAINING TO THE SCHEDULE A MENTIONED PROPERTY. E) THE FIRST PARTY AGREES THAT, IN VIEW OF THIS MEM O OF COMPROMISE THE FIRST PARTY SHALL NOT PRESS ANY CRIM INAL PROCEEDINGS, CONTEMPT APPLICATION OR OTHER ACTIONS AGAINST THE SECOND PARTY INDIVIDUALLY OR JOINTLY. THE FIRST PARTY FURTHER CONFIRMS THAT IT HAS NO CAUSE OF ACTION AGAINST THE SECOND PARTY INDIVIDUALLY OR SEVERALLY IN FUTURE IN RESPEC T OF THE SCHEDULE MENTIONED PROPERTIES. F) THE FIRST PARTY AGREES NOT TO PRESS THE SUIT CS 120 OF 2005 AND TO THEREFORE WITHDRAW THE SUIT ON THE BASIS OF THIS MEMORANDUM OF COMPRISE. G) A.R. HOUSING (P) LTD HAS DEPOSITED WITH THE PURC HASER ALL SALE CERTIFICATES PERTAINING TO THE SCHEDULE A MENT IONED PROPERTY ISSUED BY THE DRT-I, IN THE COURSE OF OA 2 71 OF 2001 AND CONFIRM THAT THERE ARE NO FURTHER SALE CER TIFICATE I.T.A.NO.623/MDS/2015. :- 30 -: ISSUED BY THE DRT-I IN OA 271 OF 2001 WITH RESPECT TO THE SCHEDULE A MENTIONED PROPERTY. H) AHNINESHA BABU HAS ALSO DEPOSITED WITH THE PURCH ASER THE DOCUMENTS LISTED IN SCHEDULE B HEREIN TO BE DEALT W ITH IN ANY MANNER DEEMED FIT BY THE PURCHASER. . 11. THE PARTIES FILED MOC BEFORE THE JURISDICTIONAL HIGH COURT IN C.S. NO.120 OF 2005 AND A.NOS.137, 138, 666, 667 & 1346 OF 2005, WHEREIN THE HIGH COURT HELD AS UNDER:- CIVIL SUIT UNDER ORDER VII RULE I OF C.P.C. 1908 (A S AMENDED) R/W ORDER IV RULE I OF THE O.S. RULES. LEARNED COUNSEL FOR THE PLAINTIFFS MAKES A STATEMEN T, MAKING AN ENDORSEMENT IN THE PLAINT ALSO THAT THE SUIT HAS BE EN SETTLED BETWEEN THE PARTIES, THEREBY PRAYING, THE SUIT MAY BE DISMISSED AS SETTLED OUT OF COURT. RECORDING THE SAME, THE SUIT IS DISMISSED AS SETTLE D OUT OF COURT, ORDERING TO REFUND HALF OF THE COURT FEE TO THE PLA INTIFFS, AS PER THE RULES. CONSEQUENTLY, CONNECTED APPLICATIONS AR E DISMISSED. 12. FURTHER, THE JURISDICTIONAL HIGH COURT IN W.A NOS. 972 TO 974 & 1012 OF 2015, VIDE ORDER DATED 31.03.2009, HELD AS UNDER:- 3. THE PARTIES CONFIRM AND AGREE THAT VICOANS INF RASTRUCTURE AND ENVIRONMENTAL ENGINEERING PRIVATE LIMITED IS IN AB SOLUTE OWNERSHIP, POSSESSION AND ENJOYMENT OF THE SAID PROPERTIES AS THE PURCHASE, HAVING PURCHASED, THE SAME FOR PROPER AND VALID CONSIDERA TION, FROM THE OWNERS AND THE CONFIRMING PARTY. THE RESPONDENT, ANDREW Y ULE & CO LTD CONFIRMS THAT IT HAS HANDED OVER VACANT AND PEACEFU L POSSESSION OF THE PROPERTY, AS DESCRIBED IN PARAS 2(I) FREE OF ITS LE ASEHOLD AND ALL OTHER CLAIMS TO THE SAID VICOANS INFRASTRUCTURE AND ENVIR ONMENTAL ENGINEERING PRIVATE LIMITED. 4 THE RESPONDENT ANDREW YULE AND CO LTD AND CRESCEN T AUTO REPAIRS AND SERVICES P. LTD CONFIRMS THAT IT HAS HANDED OVE R VACANT AND PEACEFUL POSSESSION OF THE PROPERTY AS DESCRIBED IN PARA 2(I ) FOR ANDREW YULE AND I.T.A.NO.623/MDS/2015. :- 31 -: CO. LTD FREE OF ITS LEASEHOLD AND ALL OTHER CLAIMS TO THE SAID VICOANS INFRASTRUCTURE AND ENVIRONMENTAL ENGINEERING PVT. L IT. 5.THE RESPONDENT, MEERABAI DASWON TENANTS WELFARE A SSOCIATION HEREBY CONFIRMS THAT IT HAS HANDED OVER VACANT AND PEACEFU L POSSESSION OF THE PROPERTY, FREE OF ITS LEASEHOLD AND ALL OTHER CLAIM S TO THE SAID VICOANS INFRASTRUCTURE AND ENVIRONMENTAL ENGINEERING PVT. L IMITED. 6. THE APPELLANT, RESPONDENT NO.1 AND RESPONDENT NO S. 3 TO 6 CONFIRMS THAT THEY HAVE NO CLAIM AGAINST EACH OTHER AND AGAI NST. VICOANS INFRASTRUCTURE AND ENVIRONMENTAL ENGINEERING PVT. L IMITED IN RESPECT OF THE SCHEDULE MENTIONED PROPERTIES 7. THE APPELLANT AND RESPONDENT NOS.3 TO 6 AGREE T O CO-OPERATE WITH VICOANS INFRASTRUCTURE AND ENVIRONMENTAL ENGINEERIN G PVT. LIMITED AT ALL TIMES IN FUTURE. THE APPELLANT AND VICOANS INFRASTR UCTURE AND ENVIRONMENTAL ENGINEERING PVT. LIMITED DECLARE THAT THEY HAVE NO CLAIM AGAINST THE RESPONDENT NO.1 AND RESPONDENTS 3 TO 6 UNDER ANY HEAD WHATSOEVER. 8. THE PARTIES HEREIN THEREFORE PRAY THAT THIS HON BLE COURT MAY BE PLEASED TO RECORD THIS MEMO OF COMPRISE IN W.P. NO. 972 TO 974 OF 2005 AND PASS SUCH FURTHER OR OTHER ORDERS, WHICH THIS H ONBLE COURT MAY DEEM FIT AND PROPER UNDER THE CIRCUMSTANCES OF THE CASE THUS RENDER JUSTICE. DATED AT MADRAS ON THIS THE 27THDAY OF MARCH, 2009 THE MEMO OF COMPROMISE ENTERED INTO BETWEEN THE PAR TIES IS RECORDED AND THE SAME SHALL FORM PART OF THIS PROCEEDINGS. THIS WRIT APPEAL IS DISPOSED OF IN TERMS OF THE MEMO OF COMPRISE. NO C OST. CONSEQUENTLY, WAMP NOS. 1787 TO 1789 AND 1858 OF 2005 ARE CLOSED . 13. NOW, THE DEPARTMENT CANNOT THRUST UPON THE ABSOLUTE OWNERSHIP OF THE PROPERTY ON THE ASSESSEE. BEING S O, FROM THIS ANGLE ALSO TAXING THE GAIN ON TRANSFER OF ASSET IN THE H ANDS OF THE ASSESSEE IS NOT APPROPRIATE. NEEDLESS TO SAY THAT, THE SING LE TRANSACTION CANNOT BE TAXED MORE THAN ONE PERSONS HAND ON THE SAME REA SON WHICH AMOUNT TO DOUBLE TAXATION. IN OUR OPINION, THE IS SUE TOOK UP BY THE I.T.A.NO.623/MDS/2015. :- 32 -: COMMISSIONER OF INCOME TAX (APPEALS) AFTER CANCELLI NG THE ASSESSMENT ORDER IS NOT APPROPRIATE. 14. FURTHER, IT IS ALSO BROUGHT TO OUR NOTICE T HAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR THE SECOND TIME VIDE NOTICE ISSUED U/S.148, DATED 31.03.2014 RECORDING THE REAS ONS AS UNDER:- 2. FOR THE ASSESSMENT YEAR 2007-08, YOU HAD FILED YOUR INCOME TAX RETURN(ITR) ON 26.04.2012 ADMITTING A N IL INCOME IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE I.T. ACT ISSUED ON 28.03.2012. CONSEQUENTLY, YOUR CASE WAS TAKEN FOR SCRUTINY UNDER SECTION 143(3) R.W.S 147 OF THE I.T. ACT 1961 AND THE SCRUTINY ASSESSMENT WAS COMPLETED ON 03.03.2013 AFTER ASSESSING THE TOTAL INCOME AT 14,61,07,118/- 3. SUBSEQUENTLY, IT WAS NOTICE THAT THE INCOME TO T HE TUNE OF 37,95,95,157/- HAS ESCAPED FROM ASSESSMENT. THEREF ORE, A NOTICE UNDER SECTION 148 DATED 31.03.2014 OF THE I. T. ACT 1961 WAS ISSUED TO YOU TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-2008. IN RESPONSE, YOU FILED A LETTER DA TED 08.04.2014 BEFORE THIS OFFICE, WITH A REQUEST TO TR EAT THE ITR FILED ON 26.04.2012 VIDE E-FILED ACK 38548644126041 2 AS THE ONE FILED IN RESPONSE TO THE NOTICE ISSUED UNDER SE CTION 148 DATED 31.03.2014 AND ALSO REQUESTED FOR THE REASON FOR ISSUE OF THE ABOVE NOTICE U/S. 148. AFTER CONSIDERING YO UR ABOVE LETTER THE REASONS TO SALE THE PROPERTY IN FAVOUR O F M/S. VIACONS INFRASTRUCTURE AND ENVIRONMENTAL ENG. PVT. LTD AND PAID CAPITAL GAINS TAX ON THE VALUE ADOPTED FOR STA MP DUTY OF 64,00,48,000/- IN THE NAME OF EXECUTOR OF MS. MEERA BAI DAWSON IN PAN NO.ALLPD 1138N. THIS IS TAX PAID ON T HE CAPITAL GAIN AS TRANSFER TO LAND BY THE LEGAL/REAL OWNER I.E THE EXECUTOR OF MS. MEERA BAI DAWSON AND TO IN THE NAME OF THE ASSESSEE. IN THIS TRANSACTION, IT IS BROUGHT TO NO TICE THAT THE ASSESSEE HAD ACQUIRED BY VIRTUE OF REGISTERED DOCUM ENT IN THE NAME OF ASSESSEE EITHER OR ILLEGALLY A RIGHT ON THE PROPERTY AND THAT IS WHY THE ASSESSEE WAS TREATED AS CONFIRMER U NDER THE STAMP DUTY ACT. FOR RELINQUISHING THE RIGHT OF THE ASSESSEE ON THE ABOVE SAID PROPERTY FOR WHICH THE ASSESSEE RECE IVED 64,00,48,000/-. THE CAPITAL GAIN ON TRANSFER OF TH E RIGHT ON THE ABOVE SAID PROPERTY WORKS OUT TO 37,95,95,157/- RESULTING IN UNDER ASSESSMENT TO AN EXTENT OF 23,34,93,039/- I.T.A.NO.623/MDS/2015. :- 33 -: (379595157-146102118). IF THE GAIN ARISING OUT OF TRANSFER OF RIGHT IS BROUGHT TO TAX THERE WOULD BE A TAX DEMAND OF 19,33,61,150/- (INCLUDING INTEREST U/S.234A & B) AS AGAINST 11,49,24020/- . SINCE IT IS FAILURE ON THE PART OF THE ASSESSEE IN NOT TRULY AND FULLY DISCLOSING ALL THE MATERIAL FACTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT FOR THE ASSE SSMENT YEAR 2007-08 AND IT IS A FIT CASE WARRANTING REASSE SSMENT. 4. IN CONNECTION WITH THE REASSESSMENT PROCEEDINGS, YOUR WAS POSTED FOR HEARING ON 29.05.2014 AT 3.00PM. HOW EVER, YOU FAILED TO APPEAR IN PERSON OR THROUGH YOUR AUTH ORIZED REPRESENTATIVE ON THE SAID DATE. AND YOU ALSO FAIL ED TO FURNISH THE DETAILS AS CALLED FOR VIDE STATUTORY NOTICE(S) ISSUED U/S.143(2)/142(1) OF THE I.T. ACT 1961 DATED 21.05. 2014. THEREFORE, YOUR CASE IS AGAIN POSTED FOR HEARING ON 05.06.2014 AT 3.00PM. 15. AGAINST THIS, THE ASSESSEE FILED WRIT PET ITION BEFORE THE MADRAS HIGH COURT, WHEREIN THE PROCEEDINGS WAS STAYED BY T HE HIGH COURT VIDE ITS ORDER DATED 18.11.2014 IN W.P.NO.28022 OF 2014 AND MP NO.1 OF 2014. MEANWHILE, AFTER COMING TO KNOW ABOUT THE STA Y OF SECOND REOPENING BY THE HIGH COURT, THE ASSESSING OFFICER REQUESTED THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ENHANCEMEN T OF TAXABLE INCOME. FURTHER, WE ALSO NOTE THAT U/S.251 OF THE A CT, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TO APPLY H IS MIND INDEPENDENTLY AND COME TO THE CONCLUSION ON THE ISS UE BEFORE HIM. THE ASSESSING OFFICER CANNOT INFLUENCE THE DECISION MAK ING PROCESS AND IN THIS CASE DECISION MAKING PROCESS OF THE COMMISSION ER OF INCOME TAX (APPEALS) WAS VITIATED BY THE CLEAR ATTEMPT ON THE PART OF THE ASSESSING I.T.A.NO.623/MDS/2015. :- 34 -: OFFICER. THE ASSESSING OFFICER SHOWED EXTRA INTERE ST, DEVISED HIS OWN METHODOLOGY, EVEN AFTER ISSUING SECOND REOPENING NO TICE TO THE ASSESSEE WHICH WAS STAYED BY THE HIGH COURT AS DISC USSED EARLIER. THE ASSESSING OFFICER SHOULD NOT HAVE REQUESTED THE COM MISSIONER OF INCOME TAX (APPEALS) TO ENHANCE THE ASSESSMENT AS T HE HIGH COURT HAS SEIZED OF THE MATTER. THE REQUEST MADE BY THE ASSE SSING OFFICER WAS FOR COLLATERAL PURPOSE AND WAS NOT BONAFIDE. NO REA SON IS SHOWN AS TO WHY THE ASSESSING OFFICER REQUESTED THE COMMISSIONE R OF INCOME TAX (APPEALS) TO ENHANCE THE ASSESSMENT WHEN THE SAME I SSUE WAS STAYED BY THE HIGH COURT. THERE IS NO CONVINCING REASON WH Y THE ASSESSING OFFICER COULD NOT HAVE AWAITED FOR THE FINAL OUTCO ME OF THE ISSUE PENDING BEFORE THE HIGH COURT. THUS, IT MEAN THAT THE REVENUE AUTHORITIES WANTED TO DO THINGS INDIRECTLY WHICH IS NOT POSSIBLE DIRECTLY, WHICH CANNOT BE PERMITTED. IN ALL FAIRNESS, THE REV ENUE AUTHORITIES SHOULD HAVE WAITED FOR THE OUTCOME OF WRIT PETITION FILED BY THE ASSESSEE. 16. THE COMMISSIONER OF INCOME TAX (APPEALS) MEN TIONED IN HIS ORDER THAT ASSESEES COMPANY DIRECTOR SHRI. N. NAGA RAJAN IN HIS STATEMENT ADMITTED THAT THE ASSESSEE MADE AN INCOME OF E38,89,50,349/- ON SALE OF PROPERTY AND INCURRED AN EXPENDITURE OF I.T.A.NO.623/MDS/2015. :- 35 -: E5,17,726/- AND THUS NET PROFIT OF E38,84,32,623/-. BUT THE FACT BROUGHT ON RECORD BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN PAGE NO.6 OF HIS ORDER SHOWS THAT THE ASSESSEE STAT ED IN STATEMENT OF INCOME THAT THE SAID AMOUNT WAS TO BE TAXED IN THE HANDS OF AOP SEPARATELY. FURTHER, EVEN IF IT IS ADMITTED, THE RE VENUE AUTHORITIES CANNOT TAX THE SAME. THE SAID CONSENT OF DIRECTOR SHRI. N. NAGARAJAN CANNOT GIVE JURISDICTION TO THE REVENUE AUTHORITIES TO TAX THE SAME. THE TAXING AUTHORITIES CAN ACT ONLY, IF THERE IS P OWER UNDER THE STATUTE TO DO SO. IF THERE IS A DUAL PERSONALITY IN ONE IN DIVIDUAL OR PERSON AND IF SUCH PERSON HOLDS LAND THEN A SEVERABILITY IS CO NTEMPLATED UNDER THE ACT, IF SUCH A PERSON COMES UP WITH AN APPLICATION OF COMPOSITION. THE LANDS HELD BY HIM IN HIS CAPACITY AS A NORMAL P ERSON WOULD BE SEVERED FROM THE LANDS HELD BY HIM IN HIS OTHER CAP ACITY AND WOULD BE DEALT WITH ACCORDINGLY AND THE REVENUE AUTHORITIES NORMALLY HAS NO JURISDICTION TO CLUB HOLDINGS OF PERSONS WHO HAVE A DIFFERENT STATUS IN THE EYE OF LAW AND WHO FILL IN DIFFERENT LEGAL PERS ONALITIES IN ANY ONE INDIVIDUAL AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF MARIAM AYSHA VS. COMMISSIONER OF AGRICULTURAL INCOM E TAX, 104 ITR 381 . I.T.A.NO.623/MDS/2015. :- 36 -: 17. IRRESPECTIVE OF ANY OTHER ASPECT OF THE MA TTER, THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) N EEDS TO BE SET ASIDE ON THE REASON THAT THE COMMISSIONER OF INCOM E TAX (APPEALS) CONSIDERED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS AND INVOKED THE PROVISION OF SECTION 50C TO DETERMINE T HE SALE CONSIDERATION AT E64 CRORES ON THE BASIS OF GUIDELI NE ADOPTED FOR STAMP VALUATION PURPOSES BY STATE GOVERNMENT. ON AN ALYZING THE LANGUAGE USED BY THE LEGISLATURE IN SEC. 50C, FOLLO WING PROMINENT ASPECT CAN BE SEEN THAT THE SAID SECTION SPECIFICAL LY DEALS WITH THE TRANSFER OF THE CAPITAL ASSET BEING LAND OR BUIL DING OR BOTH AND IT PROVIDES FOR REPLACING THE VALUE ADOPTED OR ASSESSE D FOR THE PURPOSE OF STAMP DUTY MORE PARTICULARLY UNDER SEC. 48 IN PL ACE OF VALUE OR SALE CONSIDERATION SHOWN BY THE ASSESSEE. IT IS TO TAKE NOTE THAT THE EXPRESSION CAPITAL ASSET HAS SPECIFIC RELEVANCE W ITH SEC. 45 WHICH PROVIDES FOR BRINING TO TAX ON TRANSFER OF CAPITAL ASSET AS CAPITAL GAIN. IT IS ABUNDANTLY CLEAR FROM THE EXPLANATION GIVEN I N CIRCULAR NO.8 OF 2002, DATED 27 TH AUG, 2002 THAT THE BASIC INTENTION TO INSERT SEC. 50C IS FOR THE PURPOSE OF DETERMINING FULL VALUE OF SAL E CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS UNDER SEC. 48. THE ISSUING OF NOTIFICATION OR CIRCULAR IS GOOD GUIDE OF CONTEMPOR ANEOUS EXPOSITION OF THE POSITION OF THE LAW AND THIS RULE IS POPULARLY KNOWN AS I.T.A.NO.623/MDS/2015. :- 37 -: CONTEMPORANEA EXPOSITIO. THERE SHOULD NOT BE A NY CLOUD OF DOUBT THAT SEC. 50C HAS APPLICATION ONLY TO THE EXTENT OF DETERMINING SALE CONSIDERATION FOR COMPUTATION OF CAPITAL GAIN UNDER CHAPTER IV-E OF THE ACT AND IT CANNOT BE APPLIED FOR DETERMINING THE IN COME UNDER OTHER HEADS. THEREFORE, WHEN ADMITTEDLY IN THE PRESENT C ASE THE SALE OF THE PROPERTY IS TREATED AS THE BUSINESS INCOME AND NOT AS A CAPITAL GAIN, THE PROVISION OF SEC.50C IS NOT APPLICABLE. BEING S O, CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUS TIFIED IN ENHANCING THE ASSESSMENT. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 623/MDS/2015 IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 11TH DAY OF SE PTEMBER, 2015, AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:11.09.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.623/MDS/2015. :- 38 -: