Shri Krishnakant Motibhai Patel(HUF), Baroda V. The ACIT., Cent.Circle-2, Baroda

ITSSA 115/AHD/2007

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9221 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-05-2010
• Assessment Year: misc
• Appeal Filed On: 10-07-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Loose papers; Cost of acquisition; Fair market value; Block assessment
• Section: 143(3); 54B; 54F; 54; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P. (AZ) & HON BLE SHRI T.K. SHARMA, J.M.) I.T.(SS)A. NO. 114/AHD./2007 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 2.7.2002 RAMANBHAI MOTIBHAI PATEL (HUF), BARODA VS.- ASSIS TANT COMMISSIONER OF INCOME TAX, (PAN : AAEHP 6533 R) CENTRAL CIRCLE-2, BAROD A (APPELLANT) (RESPONDENT) & I.T.(SS)A. NO. 115/AHD./2007 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 2.7.2002 KRISHNAKANT MOTIBHAI PATEL (HUF), BARODA VS.- ASS ISTANT COMMISSIONER OF INCOME TAX, (PAN : AAEHP 6530 P) CENTRAL CIRCLE-2, BARO DA (APPELLANT) (RESPONDENT) & I.T.(SS)A. NO. 116/AHD./2007 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 2.7.2002 DILIPBHAI MOTIBHAI PATEL (HUF), BARODA VS.- ASSISTANT COMMISSIONER OF INCOME TAX, (PAN : AAEHP 6579 H) CENTRAL CIRCLE-2, BARO DA (APPELLANT) (RESPONDENT) ASSESSEES BY : SHRI S.N. SOPARKAR DEPARTMENT BY : SHRI M.C. PANDIT, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : ALL THESE APPEALS, FILED AGAINST THREE SEPARATE OR DERS ALL DATED 22.03.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-IV, AHMEDABAD I N RESPECT OF THREE DIFFERENT ASSESSEES FOR THE BLOCK PERIOD 1.4.1996 TO 2.7.2002, WERE HEA RD ON THE SAME DATE, INVOLVED IDENTICAL ISSUES, ARGUED BY COMMON LD. REPRESENTATIVE, THEREFORE, THE SE ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. AT THE TIME OF HEARING BEFORE US, BOTH SIDES ADM ITTED THAT THE KARTA(S) OF ALL THE THREE ASSESSEE-HUF, WHO ARE APPELLANT BEFORE THE TRIBUNAL , ARE BROTHERS. THE FACTS ARE IDENTICAL IN 2 IT(SS)A NO.114, 115 & 116/AHD/2007 RESPECT OF THE THREE APPEALS. WE, THEREFORE, CONSID ER THE FACTS IN THE CASE OF RAMANBHAI MOTIBHAI PATEL (HUF), WHICH ARE AS UNDER :- SEARCH PROCEEDINGS UNDER SECTION 132 WERE CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE KARTA OF THE ASSESSEE RAMANBHAI MOTIBHAI PATEL (HUF ) ON 2.7.2002. DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS LOOSE PAPERS RELATING TO S ALE OF LAND AT GORWA WAS FOUND. NOTICE UNDER SECTION 158BD WAS ISSUED ON 14.9.2004. THE RETURN OF INCOME WAS FILED DECLARING INCORRECTLY UNDISCLOSED INCOME OF RS.3,36 ,290/- ON 21.3.2005 THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 158BD R EAD WITH SECTION 158BC OF THE ACT ON 29.09.2006, WHEREIN THE ASSESSING OFFICER TAXED 1/3 RD CAPITAL GAIN AMOUNTING TO RS.57,07,840/- IN ADDITION TO UNDISCLOSED INCOME OF RS.3,36,290/- DECLARED BY THE ASSESSEE IN THE BLOCK RETURN. THE WORKING OF 1/3 RD CAPITAL GAIN OF RS.57,07,840/- IS AS UNDER :- TOTAL CONSIDERATION AS PER ANNEXURE-1- PAGE 32 DATED 09.07.2002, INCLUDING THE CASH ON-MONEY RS.2,61,00,000/- LESS : TOTAL INDEX COST AS PER WORKING GIVEN BY THE ASSESSEE (3 HUFS.) (ACCEPTED VIDE ORDER U/S. 143(3) DATED 30.03.2005) RS. 89,76,480/- RESULTANT CAPITAL GAIN RS.1,71,23,520/- ONE THIRD CAPITAL GAIN TAXED IN THE CASE OF THE ASSESSEE RS. 57,07,840/- AGAINST THE AFORESAID ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), WHEREIN HE TOOK THE FOLLOWING GROUNDS OF APPEAL :- (1) THE LD. ASSESSING OFFICER ERRED IN ISSUING NOT ICE U/S. 158BD ON THE APPELLANT DATED 14.09.2004. (2) THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT CAPITAL GAINS EARNED BY THE APPELLANT WAS UNDISCLOSED INCOME. (3)THE LD. ASSESSING OFFICER ERRED IN ADOPTING TOTA L SALE CONSIDERATION AT RS.2,61,00,000/-. 3 IT(SS)A NO.114, 115 & 116/AHD/2007 (4) THE LD. ASSESSING OFFICER ERRED IN DENYING ANY DEDUCTION CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME FILED FOR ASSESSM ENT YEAR 2002-03 IN RESPECT OF THE CAPITAL GAINS EARNED BY THE APPELLANT. (5) THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT SINCE THE APPELLANT HAD NOT APPLIED FOR PAN, THE CAPITAL GAINS WAS REQUIRED TO BE ADDED AS UNDISCLOSED INCOME. (6)THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT SUM OF RS.50 LACS RECEIVED BY THREE CO-OWNERS OF THE LAND NAMELY THE APPELLANT, K RISHNAKANT M. PATEL HUF AND DILIPBHAI M. PATEL (HUF) WAS A PART OF TOTAL SALE C ONSIDERATION THOUGH RECEIVED PRIOR TO THE BLOCK PERIOD. (7) THE LD. ASSESSING OFFICER ERRED IN COMPUTING TH E UNDISCLOSED INCOME OF THE APPELLANT AT RS.60,44,130/-. (8) THE LD. ASSESSING OFFICER ERRED IN ISSUING NOTI CE U/S. 158BFA(2) OF THE ACT. 3. AFTER CONSIDERING THE VARIOUS SUBMISSIONS, IN TH E IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REJECTED THE GR OUND NO.1 FOR THE DETAILED REASONS GIVEN IN PARA 4 OF THE IMPUGNED ORDER DATED 22.03.2007, W HICH READS AS UNDER :- 4. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF L D. COUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER , IT HAS BEEN NOTICED THAT ONE DIARY MARKED AS PER ANNEXURE A-2 (PAGES -1-4) CONTA INING INCRIMINATING NOTING WAS SEIZED DURING THE SEARCYH CONDUCTED ON 02.07.20 02 AT RESIDENTIAL PREMISES OF SHRI RAMANBHAI M. PATEL. DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS OF SHRI RAMANBHAI M. PATEL, IT WAS CLAIMED BY HIM THAT THE CAPITAL GAIN ARISEN ON THE SALE OF GORWA LAND WAS ANCESTRAL PROPERTY WHICH BELONGS TO THE HUFS OF THREE BROTHERS. THEREFORE, THE TRANSACTION IS TAXAB LE IN CASE OF HUFS OF SHRI RAMANBHAI M. PATEL, SHRI KRISHNAKANT M. PATEL AND S HRI DILIP M. PATEL OF GORWA, BARODA. IN VIEW OF THIS FACT, NOTICE U/S. 15 8BD WAS ISSUED IN CASE OF ALL THREE HUFS. THIS WAS REASON AS WHY THE NOTICE U/S. 158BD WAS ISSUED AFTER TWO AND HALF YEARS FROM THE DATE OF SEARCH. ALSO, IF TH E UNDISCLOSED INCOME HAS BEEN DETECTED DURING SEARCH, THEN THE ASSESSMENT HAS TO BE COMPLETED UNDER CHAPTER XIV-B AS ALSO BEEN ADMITTED BY LD. COUNSEL AND NORM AL PROCEDURE OF ASSESSMENT WILL NOT BE APPLICABLE TO THE UNDISCLOSED INCOME DE TECTED. HENCE, IT IS CORRECT ON THE PART OF THE ASSESSING OFFICER THAT THE APPELLAN T WOULD NOT HAVE DISCLOSED THE CAPITAL GAINS HAD THERE NOT BEEN SEARCH U/S. 132 BE CAUSE ADVANCE MONEY ADMITTEDLY RECEIVED BY THE APPELLANT IN PURSUANCE O F AGREEMENT TO SALE DURING EARLIER YEAR WAS NOT DISCLOSED TO THE DEPARTMENT BY THE APPELLANT WHICH IS TAXABLE AS PER PROVISIONS OF INCOME TAX ACT, 1961. IT WAS I N THIS CONTEXT THAT THE ASSESSING OFFICER OBSERVED THAT EVEN ADVANCE TAX DU E AND PAYABLE BY THE APPELLANT WAS NOT PAID. ALL THREE HUFS HAVE FAILED TO FURNISH THE REGULAR RETURN OF INCOME, THEREFORE, PROVISIONS OF SECTION 158BB(C A) ARE APPLICABLE IN THE PRESENT CASE. HENCE, INCOME TAX RETURNS WERE FILED FOR THE FIRST TIME AFTER SEARCH ON 9.8.2002 WHEREAS SEARCH TOOK PLACE ON 2.7.2002. HENCE, CASES RELIED UPON BY 4 IT(SS)A NO.114, 115 & 116/AHD/2007 LD. COUNSEL IS NOT APPLICABLE TO THE FACTS OF THE P RESENT CASE SINCE FACTS OF THE PRESENT CASE ARE DIFFERENT. KEEPING IN VIEW OF ABOV E FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO INFIRMITY IN ISSUE OF NOTICE U/S. 158BD BY THE ASSESSING OFFICER. HENCE, THE FIRST GROUND OF APPEAL IS HEREB Y DISMISSED. 3.1. GROUND NO. 2 WAS ALSO REJECTED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR THE DETAILED REASONS GIVEN IN PARA 7, WHICH REA DS AS UNDER :- 7. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF LD. C OUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF CLAUSE (B) OF SE CTION 158B, IT HAS BEEN NOTICED THAT THE APPELLANT FAILED TO DISCLOSE IN THE REGULA R RETURN ONE-THIRD SHARE OF RS.50,00,000/- WHICH WAS FORFEITED EARLIER. HENCE, CLAUSE (B) OF SECTION 158B ALSO INCLUDES THAT INCOME WHICH WAS NOT DISCLOSED T ILL THE TIME OF SEARCH. FURTHER, ON THE BASIS OF THIS, IT IS EVIDENT THAT THE APPELL ANT WOULD NOT HAVE DISCLOSED CAPITAL GAIN ARISEN ON SALE OF GORWA LAND AND RETUR N OF INCOME FILED AFTER SEARCH TOOK PLACE HAS NO RELEVANCE SO FAR AS THE PROVISION S OF CLAUSE (B) OF SECTION 158B ARE CONCERNED. HENCE, THERE IS NO INFIRMITY IN THE ASSESSMENT ORDER IN WORKING OUT OF THE UNDISCLOSED INCOME. THE CONTENTIONS OF LD. C OUNSEL ARE HEREBY REJECTED, KEEPING IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE SECOND GROUND OF APPEAL IS DISMISSED. 3.2. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) ALSO REJECTED THE GROUND NO. 3 FOR THE DETAILED REASONS GIVEN IN PARA 10, WHICH READS AS UNDER :- 10. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF LD. COUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER , IT HAS BEEN NOTICED THAT THE APPELLANT HAD SOLD THE GORWA LAND MEASURING ABOUT 4 ,35,000 SQ,FTS. FOR AN EFFECTIVE RATE OF RS.60/- PER SQ.FT. THUS, AGGREGAT ING THE TOTAL SALE CONSIDERATION OF RS.261.00 LACS. HOWEVER, FOR THE PURPOSES OF THE TA XATION, THE STAMP DUTY, ETC. THE DOCUMENTED PRICE OF RS.33/- PER SQ.FT. WAS FIXED AN D THUS EFFECTIVELY FIXING THE REST OF RS.27/- PER SQ.FT. AS UNACCOUNTED AND UNDISCLOSE D PORTION OF CASH ON-MONEY SALE CONSIDERATION TOTALING TO RS.125.00 LACS AS AD MITTED BY THE ASSESSEE. (HOWEVER, THE SAME IS DERIVED AT RS.141.00 LACS AS PER ANNEXURE A-2 FOUND AND SEIZED FROM THE RESIDENCE OF SHRI RAMANBHAI M. PATE L, WHO KARTA OF HUF. DURING THE COURSE OF THE SEARCH, THE ASSESSEE HAS ADMITTED THAT THEY HAVE RECEIVED TOTAL ON MONEY IN CASH AGGREGATING RS.125.00 LACS FROM M/ S. RBG GROUP, AS NOTED IN THE SEIZED MATERIAL VIDE ANNEXURE A-2 PAGES 1-4 WHI CH IS FOUND AND SEIZED FROM HIS RESIDENCE. THESE FACTS ARE ALSO UNEQUIVOCALLY A DMITTED ON THE VERY NEXT DAY, I.E. 3.7.2002 BY TWO BROTHERS VIZ. SHRI D.M. PATEL AND K.M. PATEL IN THEIR STATEMENTS ON OATH, DATED 03.07.2002. HENCE, SALES CONSIDERATION/ CAPITAL GAINS ARISEN UNDER REFERENCE IS REQUIRED TO BE TAXED AS U NDISCLOSED INCOME OF THEIR RESPECTIVE HUFS AS TOTAL SALE PROCEEDS OF RS.261.00 LACS FOR GORWA LAND BELONGING TO THEM. KEEPING IN VIEW OF ABOVE FACTS A ND CIRCUMSTANCES OF THE CASE, THE THIRD GROUND OF APPEAL IS HEREBY DISMISSED SINC E THERE IS NO INFIRMITY IN ADOPTING TOTAL SALE CONSIDERATION AT RS.2,61,00,000 /-. 5 IT(SS)A NO.114, 115 & 116/AHD/2007 3.3. THE 4 TH GROUND OF APPEAL WAS ALSO REJECTED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR THE DETAILED REASONS GIVEN IN PARA 13, WHICH READS AS UNDER :- 13. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF LD. COUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER , IT HAS BEEN NOTICED THAT DEDUCTIONS WERE NOT CLAIMED BY THE APPELLANT IN THE BLOCK RETURN. AS ADMITTED BY LD. COUNSEL THAT BLOCK ASSESSMENT AND NORMAL ASSESS MENT ARE TWO DIFFERENT PROCEDURES OF THE ASSESSMENT WITHIN INCOME TAX ACT, 1961, THEREFORE, DEDUCTIONS NOT CLAIMED UNDER BLOCK ASSESSMENT CANNOT BE CONSID ERED BY THE A.O. UNLESS THESE ARE SPECIFICALLY CLAIMED IN THE BLOCK RETURN AND SU PPORTED WITH APPROPRIATE EVIDENCES/ PROOF TO THE SATISFACTION OF THE ASSESSI NG OFFICER. THEREFORE, THE CASE RELIED UPON BY LD. COUNSEL IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE FOURTH GROUND OF APPEAL IS NOT MAINTAINABLE AND HEN CE IS HEREBY DISMISSED AS DEDUCTIONS CANNOT BE CONSIDERED AUTOMATICALLY AS CO NTENDED BY LD. COUNSEL. 3.4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) ALSO REJECTED GROUND NO. 5 FOR THE DETAILED REASONS GIVEN IN PARA 16 OF HIS IMPUGNED O RDER, WHICH READS AS UNDER :- 16. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF LD. COUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER , IT HAS BEEN NOTICED THAT THE INTENTION OF APPELLANT WAS NOT TO FILE REGULAR RETU RN OF INCOME AND PAY TAXES SINCE PAN WAS ALSO APPLIED AFTER THE DATE OF SEARCH ON 7. 2.2002. HENCE, THE ENTIRE CAPITAL GAIN ARISEN ON THE TRANSFER OF THE GORWA LA ND IS TO BE TREATED AS UNDISCLOSED INCOME OF THE HUF U/S. 158BD. KEEPING I N VIEW OF ABOVE, THE CONTENTION OF LD. COUNSEL THAT THE MERE FACT THAT T HE APPLICATION FOR PAN WAS APPLIED AND GOT AFTER THE DATE OF SEARCH CANNOT BE MADE THE REASON OF TREATING THE REGULAR INCOME OF THE APPELLANT AS UNDISCLOSED INCO ME IS NOT BASED ON RECORDS AND FACTS OF THE PRESENT CASE AND HENCE LIABLE TO B E REJECTED BECAUSE THE REASON FOR TREATING CAPITAL GAIN AS UNDISCLOSED INCOME WAS THE SEIZURE OF DIARY IN WHICH UNDISCLOSED TRANSACTIONS WERE RECORDED AND NOT THE NON-ALLOTMENT OF PAN. SINCE THE APPELLANT WAS ADMITTEDLY AWARE OF THE CAPITAL G AIN, THEREFORE, IT WAS WILLFUL DEFAULT ON THE PART OF THE APPELLANT NOT TO FILE RE GULAR INCOME TAX RETURNS. THEREFORE, CAPITAL GAIN HAS TO BE TREATED AS UNDISC LOSED INCOME. 3.5. GROUNDS NO. 6 & 7 WERE ALSO REJECTED BY THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR THE DETAILED REASONS GIVEN IN PARA 19 OF THE IMPUGNED ORDER, WHICH READS AS UNDER :- 19. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF LD. COUNSEL AS WELL GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER , IT HAS BEEN NOTICED THAT RS.50,00,000/- WAS NEVER DECLARED IN THE REGULAR RE TURN OF INCOME DURING THE EARLIER YEAR SINCE NO RETURN WAS FILED TILL 09.08.2 002 AFTER WHEN SEARCH TOOK PLACE ON 02.07.2002. THE CONTENTION OF LD. COUNSEL THAT M ONEY OF RS.50.00 LACS RECEIVED PRIOR TO 01.04.1996 COULD NOT BE INCLUDED AS UNDISC LOSED INCOME IN THE BLOCK 6 IT(SS)A NO.114, 115 & 116/AHD/2007 PERIOD CANNOT BE ACCEDED TO KEEPING IN VIEW OF SPEC IFIC PROVISIONS CONTAINED U/S. 51 OF THE I.T. ACT, 1961. THE PROVISIONS OF SECTION 51 CONTAINS THAT WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUB JECT OF NEGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND R ETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION. KEEPING I N VIEW OF THESE PROVISIONS, MONEY OF RS.50,00,000/- RECEIVED AT EARLIER OCCASIO N HAS TO BE CONSIDERED WHILE WORKING OUT THE CAPITAL GAIN AT THE TIME OF ACTUAL TRANSFER OF LAND BY WAY OF SALE. KEEPING IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE SIXTH AND SEVENTH GROUNDS OF APPEAL ARE HERBY DISMISSED SINCE THERE IS NO INFIRMITY IN COMPUTATION OF CAPITAL GAIN. 4. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING G ROUNDS :- (1) THE LD. CIT(A.) ERRED IN CONFIRMING THAT THE IN COME DISCLOSED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 158BD WAS U NDISCLOSED INCOME U/S. 158B(B). (2) THE LD. CIT(A.) ERRED IN HOLDING THAT CAPITAL G AINS ACCRUING TO THE APPELLANT WAS UNDISCLOSED INCOME OF THE BLOCK PERIO D. (3) THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT CAPITAL GAINS INCLUDING THE AMOUNT FORFEITED ACCRUING TO THE APPELLANT WAS UNDISCLOSED INCOME. (4) THE LD. CIT(A.) ERRED IN HOLDING THAT SALE CONS IDERATION OF RS.2,61,00,000/- WAS ACTUAL SALE CONSIDERATION RECE IVED BY THE APPELLANT AND THE OTHER TWO CO-OWNERS. (5) THE LD. CIT(A.) ERRED IN HOLDING THAT SINCE THE APPELLANT HAD NOT CLAIMED DEDUCTION IN RESPECT OF INVESTMENT MADE UND ER CAPITAL GAIN IN THE BLOCK RETURN OF INCOME THE SAME WAS NOT ALLOWAB LE FROM INCOME DETERMINED AS UNDISCLOSED INCOME FOR THE BLOCK PERI OD. (6) THE LD. CIT(A.) ERRED IN CONFIRMING THE UNDISCL OSED INCOME DETERMINED BY THE ASSESSING OFFICER AT RS.60,44,130 /-. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI S.N. SOPARKAR, LD. SENIOR COUNSEL APPEARED AND CONTENDED THAT FACTS OF ALL TH E THREE CASES ARE IDENTICAL. ALL THE THREE ASSESSES WERE CO-OWNERS OF THE LAND AT GORWA. THAT THE INCOME OFFERED IN THE BLOCK RETURN WAS NOT TAXABLE IN RESPECT OF ASSESSMENT YEARS AS THE S AME WAS BELOW TAXABLE LIMIT AS LAID DOWN UNDER THE INCOME TAX ACT. THE INCOME ON ACCOUNT OF CAPITAL GAIN ON SALE OF LAND AT GORWA ACCRUED TO THE ASSESSEE ALONGWITH HIS TWO BROTHERS DURING FINANCIAL YEAR 2001-02 RELEVANT TO THE ASSESSMENT YEAR 2002-03. THE ASSESSING OFFICER AS W ELL AS LEARNED COMMISSIONER OF INCOME 7 IT(SS)A NO.114, 115 & 116/AHD/2007 TAX(APPEALS) HAS NOT DISPUTED THE YEAR OF ACCRUAL O F CAPITAL GAIN. THE REGULAR RETURN OF INCOME FOR THE FINANCIAL YEAR 2001-02 RELEVANT TO THE ASSE SSMENT YEAR 2002-03 WAS DUE ON 09.08.2002. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 09.0 8.2002 DECLARING TOTAL INCOME OF RS.34,16,842/- AFTER DEDUCTION ON ACCOUNT OF INVEST MENT, ETC. UNDER SECTION 54 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAD DISCLOSED CAPITAL GAIN IN THE SAID RETURN OF INCOME FILED UNDER SECTION 139(1) ON 09.08.2002 FOR THE ASSESSMENT YEA R 2002-03. THE ASSESSING OFFICER FRAMED THE ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 UNDER SE CTION 143(3) ON 30.03.2005 AT A TOTAL INCOME OF RS.34,16,842/- ON PROTECTIVE BASIS . THE LAND IN QUESTION WAS SOLD BY THE ASSESSEE AND TWO OTHER CO-OWNERS NAMELY RAMANBHAI MOTILAL PATEL (HUF ) AND DILIPBHAI MOTILAL PATEL (HUF). THE ASSESSEE HAD INVESTED THE SALE PROCEEDS OF CAPITAL ASSET AND IN VARIOUS TAX SAVING SCHEME UNDER SECTION 54B AND 54F AND THE EVIDENCES OF THE SAME W ERE ENCLOSED WITH ORIGINAL RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2002-03 ON 09.08.2002. SI NCE THE ENTIRE CAPITAL GAINS WERE DISCLOSED IN THE RETURN FILED, THE SAME WAS NOT UNDISCLOSED AS I NCOME AS DEFINED IN CLAUSE (B) OF SECTION 158B OF CHAPTER XIV-B OF THE INCOME TAX ACT, 1961. THE A SSESSEE AND OTHER CO-OWNERS HAD RECEIVED JOINTLY A SUM OF RS.50 LACS PRIOR TO 1.4.96 AND WAS NOT COVERED UNDER BLOCK PERIOD AND FURTHER THE AMOUNT WAS FORFEITED AS TERMS OF THE AGREEMENT TO SELL DATED 19.10.1991. SINCE THE AMOUNT WAS RECEIVED PRIOR TO BLOCK PERIOD THE SAME WAS NOT TAXABLE AS UNDISCLOSED INCOME. EVEN OTHERWISE, THE AMOUNT FORFEITED WILL REDUCE THE COS T OF ACQUISITION WHILE COMPUTING THE CAPITAL GAIN ON SALE OF LAND. TO SUM UP, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THE FOLLOWING FOUR ISSUES ARE REQUIRED TO ANSWER IN THESE APPEALS:- (I) WHETHER CAPITAL GAIN ACCRUING TO THE ASSESSEE W AS UNDISCLOSED INCOME OF THE BLOCK PERIOD? (II) WHETHER CAPITAL GAIN INCLUDING THE AMOUNT FORF EITED ACCRUING TO THE ASSESSEE WAS UNDISCLOSED INCOME? (III) WHETHER WHOLE INCOME EITHER CHEQUE OR CASH IS THE SALE CONSIDERATION? (IV) WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION FOR VARIOUS INVESTMENTS IN CAPITAL GAIN AND VARIOUS TAX SAVINGS SCHEME UNDER S ECTION 54B & 54F IN RESPECT OF UNACCOUNTED TRANSACTION? 6. WITH REGARD TO THE FIRST ISSUE I.E. WHETHER CAPI TAL GAIN IS TAXABLE AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD UNDER CHAPTER XIV-B OF THE INCOME TAX ACT, THE LD COUNSEL OF THE ASSESSEE 8 IT(SS)A NO.114, 115 & 116/AHD/2007 DREW OUR ATTENTION TO PAGE 20 (OF THE PAPER BOOK IN THE CASE OF RAMANBHAI MOTIBHAI PATEL, HUF) BEING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 FILED ON 09.08.2002. IT WAS CONTENDED THAT DUE DATE OF FILING THE RETURN OF INC OME WAS 09.08.2002 AND IT WAS FILED IN TIME. HE FURTHER DREW OUR ATTENTION TO PAGE 21 BEING COMP UTATION OF TOTAL INCOME, WHEREIN THE ASSESSEE HAS DECLARED THE LONG-TERM CAPITAL GAIN AS UNDER AN D CLAIMED THE DEDUCTION UNDER SECTION 54B & 54F :- CAPITAL GAINS : LONG TERM AMOUNT RECEIVED AS PER AGREEMENT - RS.47,00, 000/- ADD . CASH RECEIVED PRIOR TO 31.3.1995 - RS.16,66,667/- AFTER 01.04.1995 - RS.19,16,667/- RS.66,16,667/- LESS : INDEXED COST OF LAND VALUE OF LAND AS ON 1.4.1981 140475 SQ. FT. @ RS.5/- - RS. 7,02,385/- INDEXED COST 2001-02 702385 X426/100 = RS.29,92,160/- RS.36,24,507/- LESS : PURCHASE OF AGRICULTURAL LAND AT SADHI RS.31,000/- LESS : INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE RS.5,00,000/- RS.5,31,000/- RS.30,93,507/- THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON 2.7.2002. THE DUE DATE FOR FILING THE RETURN OF INCOME WAS ON 09.08.2002. THE RETURN WAS FILED IN TIME, WHEREIN THE ASSESSEE HAS DECLARED TH E CAPITAL GAIN IN RESPECT OF LAND SOLD AT GORWA, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE WOUL D NOT HAVE DISCLOSED EITHER THE ENTIRE SALE CONSIDERATION OR CAPITAL GAIN. HE FURTHER SUBMITTED THAT A SUM OF RS.50 LAKHS WAS FORFEITED PRIOR TO 1.4.1996, THEREFORE, IT WAS NOT COVERED UNDER BL OCK PERIOD. THIS AMOUNT WAS FORFEITED AS TERMS 9 IT(SS)A NO.114, 115 & 116/AHD/2007 OF THE AGREEMENT TO SELL DATED 19.10.1991. SINCE TH E AMOUNT WAS RECEIVED PRIOR TO BLOCK PERIOD, THE SAME WAS NOT TAXABLE AS UNDISCLOSED INCOME. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN ANY CASE THE AMOUNT FORFEITED WIL L REDUCE THE COST OF THE ASSET AS HELD BY ITAT, MUMBAI BENCH H IN THE CASE OF. SMT. N. SHAH VS.- JCIT [2005] 94 ITD 492 (MUM.). 7. SHRI M.C. PANDIT, LD. SR. D.R. APPEARING ON BEHA LF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APP EALS). THE LD. D.R. POINTED THAT THE AMOUNT FORFEITED RS.50 LACS IS NOT DISCLOSED BY THE ASSESSEE IN THE REGULAR RETURN OF INCOME. THEREFORE, IT APPEARS THAT THERE WAS NO INTENTION T O DISCLOSE THE SAID AMOUNT. THE LD. D.R. SUBMITTED THAT ALL THE CO-OWNERS SOLD THE GORWA LAN D MEASURING 4,35,000 SQ.FT. FOR AN EFFECTIVE RATE OF RS.60/- PER SQ.FT. THUS THE TOTAL SALE CONS IDERATION AGGREGATED TO RS.261.00 LACS. HOWEVER, FOR THE PURPOSES OF THE TAXATION, THE STAMP DUTY, E TC. THE DOCUMENTED PRICE OF RS.33/- PER SQ.FT. WAS FIXED AND THUS EFFECTIVELY FIXING THE REST OF R S.27/- PER SQ.FT. AS UNACCOUNTED AND UNDISCLOSED PORTION OF CASH ON-MONEY SALE CONSIDERATION TOTALIN G TO RS.125 LACS AS ADMITTED BY THE ASSESSEE. (HOWEVER, THE SAME IS DERIVED AT RS.141 LACS AS PER THE ANNEXURE A-2 FOUND AND SEIZED FROM THE RESIDENCE OF SHRI RAMANBHAI M. PATEL, WHO KARTA OF HUF). DURING THE COURSE OF THE SEARCH, THE ASSESSEE HAS ADMITTED THAT THEY HAVE RECEIVED TOTAL ON MONEY IN CASH AGGREGATING RS.125.00 LACS FROM M/S. RBG GROUP, AS NOTED IN THE SEIZED MATERIA L VIDE ANNEXURE A-2 PAGES 1-4 WHICH IS FOUND AND SEIZED FROM HIS RESIDENCE. THESE FACTS AR E ALSO UNEQUIVOCALLY ADMITTED ON THE VERY NEXT DAY, I.E. 3.7.2002 BY HIS TWO BROTHERS VIZ. SH RI D.M. PATEL AND K.M. PATEL IN THEIR STATEMENTS ON OATH, DATED 03.07.2002. HENCE, SALES CONSIDERATI ON/ CAPITAL GAINS ARISEN UNDER REFERENCE IS REQUIRED TO BE TAXED AS UNDISCLOSED INCOME OF THE R ESPECTIVE HUFS AS TOTAL SALE PROCEEDS OF RS.261.00 LACS FOR GORWA LAND BELONGING TO THEM. TH E SALE CONSIDERATION IS RIGHTLY ADOPTED BY THE ASSESSING OFFICER AND THE FORFEITED AMOUNT IS A LSO RIGHTLY TAXED AS UNDISCLOSED INCOME OF ALL THE THREE HUFS. THEREFORE, THE VIEW TAKEN BY THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 8. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FOUND CONSIDERABLE FORCE IN THE SUBMISSIO NS MADE BY THE LD. COUNSEL OF THE ASSESSEE THAT CAPITAL GAIN AROSE ON ACCOUNT OF SALE OF GORWA LAND IS TAXABLE AS REGULAR INCOME IN THE RELEVANT ASSESSMENT YEAR, I.E. FOR THE ASSESSMENT Y EAR 2002-03. ADMITTEDLY, ALL THE THREE ASSESSEES FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 ON DUE DATE. THIS IS NOT DISPUTED BY 10 IT(SS)A NO.114, 115 & 116/AHD/2007 BOTH THE DEPARTMENTAL AUTHORITIES BELOW. THE UNDISC LOSED INCOME IS DEFINED IN CLAUSE (B) OF SECTION 158B. THE SEARCH TOOK PLACE ON 02.07.2002. THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 WAS NOT EXPIRED WHE N THE SEARCH TOOK PLACE ON 02.07.2002. ADMITTEDLY, THE RETURN WAS FILED ON DUE DATE ON 09. 08.2002. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE COULD NOT HAVE DISCLOSED THE CORRECT AMOUNT OF CAPITAL GAIN. IN THIS CONTEXT, WE HAVE ALSO GONE THROUGH THE PROVISIONS CONTAINED IN CLAUSE (B) OF SECTION 158B OF THE INCOME TAX ACT, 1961. AFTER CAREFULLY EXAMINING THE SAID S ECTION, WE ARE CONVINCED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT T HE ASSESSEE WOULD NOT HAVE DECLARED THE CAPITAL GAIN, WHICH ACCRUED TO THEM ON SALE OF LAND AT GORW A. CLAUSE (B) OF SECTION 158B READS AS UNDER :- 158B(B) : UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION , JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS , WHERE SUCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT INSERTED BY THE FINANCE ACT,200 2, W.R.E.F. 1.7.1995[OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER T HIS ACT WHICH IS FOUND TO BE FALSE]. 9. ADMITTEDLY, THE DUE DATE FOR FILING THE RETURN O F INCOME UNDER SECTION 139(1) FOR THE ASSESSMENT YEAR 2002-03 WAS NOT EXPIRED. AS THE DUE DATE WAS NOT EXPIRED, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT DECLARED OR WOULD NOT HAVE DECLARED THE CAPITAL GAIN IN THE REGULAR RETURN OF INCOME. HENCE, WE ARE CONVINCED T HAT CAPITAL GAIN WILL NOT COME WITHIN THE PURVIEW OF COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. WHATEVER THE ACTUAL SALE CONSIDERATION AS RECEIVED IS TAXABLE IN REGULAR ASS ESSMENT YEAR FOR THE ASSESSMENT YEAR 2002-03. THE AMOUNT OF RS.50 LACS FORFEITED EVEN PRIOR TO 1. 4.1996 IS REQUIRED TO BE CONSIDERED WHILE COMPUTING THE CAPITAL GAIN IN THE REGULAR ASSESSMEN T AS IT WILL REDUCE THE COST OF ACQUISITION OF THE ASSETS. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIES BELOW CLEARLY ERRED IN HOLDING THAT CAPITAL GAIN AROSE ON ACCOUNT OF SALE OF GORWA LAND IS TAXABLE AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD 1.4.1996 TO 2.7.2002 IN RESPECT OF ALL THE THREE ASSESSEES. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO EXCL UDE THE SAME AND TAX ON SUBSTANTIVE BASIS IN REGULAR ASSESSMENT OF ALL THE THREE ASSESSEES FOR T HE ASSESSMENT YEAR 2002-03. IN THAT YEAR, THE ASSESSING OFFICER WILL CONSIDER THE AMOUNT OF RS.50 LACS FORFEITED AS THIS WILL REDUCE THE COST OF 11 IT(SS)A NO.114, 115 & 116/AHD/2007 ACQUISITION OF THE LAND SOLD. ON-MONEY/ THE SALE CO NSIDERATION RECEIVED IN CASH IS ALSO TAXABLE AS REGULAR INCOME AND NOT AS UNDISCLOSED INCOME FOR TH E BLOCK PERIOD, BECAUSE THIS WAS DULY DISCLOSED BY ALL THE THREE ASSESSEES IN THE REGULAR RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002- 03. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED T O MODIFY THE ASSESSMENT OF ALL THE THREE ASSESSEES. WHETHER THE ASSESSEE IS ENTITLED TO DEDU CTION UNDER SECTION 54B AND 54F, IS ALSO REQUIRED TO BE CONSIDERED IN REGULAR ASSESSMENT ON THE BASIS OF EVIDENCE FURNISHED ALONGWITH THE RETURN OF INCOME OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, ALL TH E THREE APPEALS FILED BY THE ASSESSEES ARE TREATED AS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 11.06.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 11 / 06 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.