Maharani Kamsundari of Darbanga Kalyani, V. ACIT, Circle-41(1),

ITSSA 175/DEL/2003

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0309 (ITAT-DELHI)
• Duration Of Justice: 11 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-01-2014
• Assessment Year: misc
• Appeal Filed On: 29-04-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN P RASAD
• Keywords: Capital asset; Search and seizure; Block assessment; Capital receipt
• Section: 131; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : FRIDAY N EW DELHI BEFORE SHRI J.S. REDDY , ACCOUNTANT MEMBER AND SHRI A.T. VARKEY , JUDICIAL MEMBER IT(SS) NO. 175 / DEL / 20 0 3 (BLOCK PERIOD 01.04.1989 TO 11.11.19 9 9) MAHARANI KAMSUNDARI OF DARBHANG A VS. ASSTT. COMMISSIONER OF INCOME TAX KALYANI HOUSE, BEHIND NO.7. CIRCLE 41(1), NEW DELHI MANSINGH ROAD, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATYEN SETHI , ADVOCATE RESPONDENT BY : S HRI GUNJAN PRASAD, SR. D.R. ORDER PER J.S. REDDY , A . M : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF THE INCOME TAX (APPEALS) - XXVI, NEW DELHI DATED 24.02.2003 WHO HAD PARTLY ALLOWED THE APPEAL OF THE A SSESSEE , AGAINST THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 158BC OF THE I.T. ACT , ON 26.11.2001 FOR THE B LOCK P ERIOD ON 01.04.1989, 11.11.1999. 2. THE APPEAL WAS EARLIER DECIDED BY THE TRIBUNAL VIDE ORDER DATED 09.09.2005. THE ASSESSEE CARRI ED THE MATTER IN APPEAL AND THE HONBLE HIGH COURT OF DELHI IN ITA NO.606/2006 , JUDGMENT DATED 12.01.2011 , HAS REMITTED THE IT(SS) NO. 175/DEL/ 2003 2 MATTER BACK TO THE TRIBUNAL FOR FRESH CONSIDERATION , IN ACCORDANCE WITH LAW. THUS, THE APPEAL IS BEFORE US. 3. FACTS IN BRIEF, THE ASSESSEE IS AN INDIVIDUAL. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 26.07.1999 UNDER SECTION 132 OF THE I.T. ACT. A WARRANT OF AUTHORIZATION WAS ISSUED IN THE NAME OF THE ASSESSEE AND THE PREMISES COVERED WERE AT 28, BARAKHAMBA ROAD, NEW DELHI. THIS PREMISES WAS OWNED BY A COMPANY BY NAME M/S. GOPAL DAS ESTATES & HOUSING PVT. LTD. THERE WAS NO SEIZURE DURING THE SEARCH. ON 24.11.1999, THERE WAS ANOTHER SEARCH UNDER SECTION 132 OF THE IT ACT IN THE NAME OF ASSESSEE AND THIS SEARCH WAS CONDUCTED THIS TIME ON THE PREMISES OF THE BANK OF TOKYO AND THE BALANCE OF AMOUNT OF RS. 58,49,595/ - , LYING IN THE ASSESSEE BANK ACCOUNT WAS SEIZED. IT IS THE CASE OF THE ASSESSING OFFICER THAT FROM THE SEARCH OPERATION AND THE STATEMENT O F THE ASSESSEE, IT HAD COME TO THEIR NOTICE , THAT THE ASSESSEE HAD SOLD HER PROPERTY NO. 25 - A, AKBAR ROAD, NEW DELHI AGAINST THE CONSIDERATION OF 3400 SQ. FT. OF SPACE IN GOPAL DA S S BHAWAN, WHICH WAS TO BE DEVELOPED BY M/S GOPAL DAS ESTATES AND HOUSING PVT . LTD. AT 28 BARAKHAMBA ROAD, NEW DELHI. BEFORE WE PROCEED FURTHER WE RECORD THE SEQUENCE OF DATE AND EVENTS. 4. THE SEQUENCE OF DATES AND EVENTS : (I) ON 30.6.1982, THE ASSESSEE ENTERED INTO A COLLABORATION AGREEMENT WITH PROMINENT CONSTRUCTION TEAM PVT. LTD. FOR IT(SS) NO. 175/DEL/ 2003 3 CONSTRUCTION OF MULTI - STOREYED APARTMENTS ON 25 - A, AKBAR ROAD, NEW DELHI, A PROPERTY BELONGING TO THE APPELLANT. (II) SINCE THE COLLABORATION AGREEMENT COULD NOT BE GIVEN EFFECT TO, ON 5.1.1986 AN AGREEMENT WAS ENTERED INTO WITH SMT. NIRMAL VERMA , PARTNER OF GOPAL DAS & SONS, WHICH OWNED 28, BARAKHAMBA ROAD, NEW DELHI AND HAD ENTERED INTO AN AGREEMENT WITH GOPAL DAS ESTATE & HOUSING PVT. LTD. TO DEVELOP 28, BARAKHAMBA ROAD, NEW DELHI. IN TERMS OF THE AGREEMENT DATED 5.1.1986, APPELLANT'S RIGHTS UN DER THE COLLABORATION AGREEMENT DATED 30.6.1982 WERE TAKEN OVER BY SMT. NIRMAL VERMA AND THE APPELLANT IN EXCHANGE OF 25 - A, AKBAR ROAD AGREED TO TAKE 3400 SQ. FT. AREA IN A BUILDING TO BE CONSTRUCTED BY GOPAL DAS ESTATE & HOUSING PVT. LTD. POSSESSION OF 34 00 SQ. FT. AREA WAS TO BE HANDED OVER TO APPELLANT ON OR BEFORE 31.3.90. (III) OUT OF 3400 SQ. FT AREA, THE APPELLANT FOR CONSIDERATION OF RS.2.80 CR. SURRENDERED 1400 SQ. FT. TO GOPAL DAS ESTATE & HOUSING PVT. LTD., IN TERMS OF MOU DATED 3.6.1996. (IV) INDEPENDENT OF THE ABOVE, GOPAL DAS ESTATE & HOUSING PVT. LTD. AGREED TO PAY RS.2.90 CR. AS COMPENSATION FOR DELAY IN HANDING OVER THE POSSESSION OF 3400 SQ. FT. AREA. 5. MR. ASHOK VERMA WAS THE MANAGING DIRECTOR OF M/S GOPAL DA S S ESTATES AND HOUSING PVT . LTD. A STATEMENT WAS RECORDED FROM MR. ASHOK VERMA DURING THE SEARCH PROCEEDING S WHEREIN HE STATED THAT AN AMOUNT OF RS.2.90 CRORE IS OUTSTANDING IN THE BOOKS OF M/S. GOPAL DAS ESTATES AND HOUSING PVT. LTD. IN THE NAME OF THE ASSESSEE. 6. ON 10.05.1999, THE DEPARTMENT HAD ISSUED SUMMON S TO BANK OF TOKYO TO PRODUCE THE ASSESSEES BANK ST ATEMENT IN WHICH CHEQUES OF RS.2.80 CRORES WERE IT(SS) NO. 175/DEL/ 2003 4 DEPOSITED. IN THE SUMMONS , THE DATE AND CHEQUE NUMBER S WERE STATED. BY NOTICE DATED 12.05.1999 , THE BANK WAS REQUIRED TO FUR NISH DETAILS OF FDS, REINVESTMENT OF FDS OR CURRENT ACCOUNT DETAILS. THE STATEMENT WAS ALSO RECORDED FROM THE ASSESSEE UNDER SECTION 131(1A) OF THE ACT . THIS WAS PRIOR TO THE SEARCH AND SEIZURE OPERATION CONDUCTED IN THE NAME OF THE ASSESSEE ON 26.07.199 9 AS WELL AS 24.11.1999. 7. THE NOTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 158BC OF THE ACT ON 04.05.2000. THE ASSESSEE FILED THE RETURN OF INCOME IN FORM NO.2B DECLARING A N UNDISCLOSED OF INCOME OF RS.1,08,53,560/ - ON 13.06.2000 FOR THE BLOCK PERIOD 01.04.1989 TO 26.07.1999. THE TAX LIABILITY WAS DECLARED AT RS.65,12,136/ - AND THE ASSESSEE CLAIMED THE ADJUSTMENT OF RS.56.00 LAKHS SEIZED ON 24.11.1999 AGAINST THE TAX LIABILITY. 8. THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 158BC ON 26.11.200 1 MAKING THE FOLLOWING ADDITIONS: - (A) RS.2.80 CR. BEING THE CONSIDERATION FOR SURRENDER OF 1400 SQ.FT. AREA WAS TREATED AS UNDISCLOSED INCOME FOR THE REASON THAT CAPITAL GAIN WAS NOT DECLARED IN THE RETURN FILED FOR ASSESSMENT YEAR 1997 - 98. (B) AMOUN T OF RS.2.90 CR. DUE FROM GOPAL DAS ESTATE & HOUSING PVT. LTD. WAS ADDED FOR THE REASON THAT IN THE BOOKS OF GOPAL DAS ESTATE & HOUSING 'PVT. LTD. THE AMOUNT IS CREDITED TO THE ACCOUNT OF THE ASSESSEE AND THAT THE ASSESSEE WAS NOT FOLLOWING CASH SYSTEM OF ACCOUNTING. THE AMOUNT WAS DUE BUT WAS NOT RECOVERED. IT(SS) NO. 175/DEL/ 2003 5 (C) ADDITION OF RS.7,84,519/ - WAS MADE AS UNDISCLOSED INCOME FOR THE PERIOD 1.04.1999 TO 24.11.1999, HOWEVER, THE SAME WAS DELETED BY CIT(A) AND THE SAME WAS ACCEPTED. (D) ADDITIONS OF RS . 43,04, 710 ON RS.2.90 CR. AND RS.4,32,000 ON ACCOUNT OF INTEREST IDBI BONDS WERE ALSO MADE. THE DELETION OF ADDITION OF RS.4,32,000/ - HAS BEEN ACCEPTED AND IS NOT IN DISPUTE. 9. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) - XXIV, 26 NEW DELHI PARTLY CONFIRME D THE ORDER OF THE ASSESSING OFFICER. AGGRIEVED THE ASSESSEE FILED THIS APPEAL ON THE FOLLOWING GROUNDS: - 1. THAT ON FACTS AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREIN REFERRED TO AS CIT(A) ERRED IN NOT ADJUDICATING UPON AND QUASHIN G SEARCH AS ILLEGAL, ON REASONING OF LACK OF JURISDICTION TO DO SO. 2. THAT ON FACTS AND IN LAW, WITHOUT PREJUDICE, THE CIT(A) ERRED IN NOT ADJUDICATING UPON, AND IN GRANTING REQUISITE RELIEF ON THE GROUNDS SUBMISSION THAT THERE WAS NO UNDISCLOSED INCOME. 3. T HE ON FACTS AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THERE IS NO ESTOPPAL AGAINST A STATUTE. 4. THAT ON FACTS AND IN LAW, THE CIT(A) ERRED IN UPHOLDING OF ADDITION IN RESPECT OF: (A) RS.4,32,000 (B)RS.2,90,00,000/ - AND (C) RS.43,04,710. 5. THAT ON FACTS AND IN LAW, THE CIT(A) ERRED IN: (1) UPHOLDING TAXATION OF CAPITAL GAINS. (11) ON GROSS RECEIPT OF 2.8 CRORES AND IN TAXATION @ 60% UNDER SECTION 158BA. (111) NOT ALLOWING LONG TERM CAPITAL LOSS SET OFF AGAINST LONG TERM CAPITAL GAIN. (IV ) N O T CONSIDERING INDEXING OF LONG TERM CAPITAL ASSETS (SHARES) 6. THAT ON FACTS AND IN LAW, THE CIT(A) ERRED IN UPHOLDING ASSESSMENT BY A NON - SPEAKING ORDER WHICH APPARENTLY LACKS REASONS AND OR LINK TO THE ULTIMATE CONCLUSION. IT(SS) NO. 175/DEL/ 2003 6 7. THAT ON FACTS AND IN LAW, THE ORDER PASSED BY AO : CIT(A) ARE BAD IN LAW AND LIABLE TO BE QUASHED AS SUCH. 8. THE PROVISIONS OF CHAPTER XIV - B OF THE INCOME TAX ACT, 1961, ARE NOT APPLICABLE. THEREFORE, THE ASSESSMENT UNDER SECTION 158BC IS INVALID. 9. THE SEARCH OPERATION U/S 132 OF THE INC OME TAX ACT, 1961, ARE NOT APPLICABLE, AND OF THE APPELLANT ARE ILLEGAL AS THE PROCEDURE LAID DOWN IN LAW FOR ISSUE OF WARRANT AND CONDUCT OF SEARCH WAS NOT FOLLOWED. 10. THAT THE APPELLANT PRAYS FOR: (A) INCIDENTAL/CONSEQUENTIAL RELIEFS AS SUCH ENTITLED TO A ND - OR AS DEEMED FIT BY THE HONBLE COURT. (B) LEAVE TO ADD, ALTER, AMEND GROUNDS AT OR BEFORE TIME OF HEARING. 10. SHRI SATYEN SETHI, ADVOCATE APPEARED ON BEHALF OF THE ASSESSEE AND SHRI GUNJAN PRASAD LD. C.I.T(D.R) REPRESENTED THE REVENUE. THE SUBMISS ION S OF THE ASSESSEE ARE AS FOLLOWS: - 1. ONLY THE UNDISCLOSED INCOME COMING TO LIGHT AS A RESULT OF SEARCH CAN BE TAXED UNDER CHAPTER XIV - B OF THE ACT. HOWEVER, IN THE PRESENT CASE, NOTHING INCRIMINATING WAS FOUND IN THE SEARCH, THEREFORE, THE ADDITIONS OF RS.2.80 CR., RS.2.90 CR AND RS.43,04,710/ - WERE BEYOND SECTION 158BC. 2. SEARCH WAS CONDUCTED AT THE PREMISES OF GOPAL DASS ESTATE & HOUSING PVT. LTD. ALLEGEDLY BELONGING TO THE APPELLANT. HOWEVER, EXCEPT FOR AGREEMENT, GOPAL DASS ESTATE & HOUSING PVT . LTD. HAD NO ALLOTMENT OF ANY PREMISES, THEREFORE, ACTUALLY NO SEARCH WAS CARRIED OUT AT THE PREMISES OF THE APPELLANT. 3. EVEN PRIOR TO SEARCH THE REVENUE WAS AWARE OF RECEIPT OF RS.2.80 CR, INASMUCH AS, NOTICE TO BANK OF TOKYO GIVING THE DETAILS OF C HEQUE NO. AGGREGATING TO RS.2.80 CR. WAS ISSUED ON 10.5.1999. THEREFORE, IT CANNOT BE SAID THAT FACT OF RECEIPT OF RS.2.80 CR. CAME TO LIGHT AS A RESULT OF SEARCH. 4. ADDITION OF RS.2.90 CR. WAS MADE ON THE PREMISE THAT THE IT(SS) NO. 175/DEL/ 2003 7 APPELLANT WAS FOLLOWING MERCAN TILE SYSTEM, HOWEVER, ACTUALLY THE APPELLANT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. THEREFORE, AMOUNT OF RS.2.90 CR. WAS TAXABLE ONLY ON ITS RECEIPT. ITAT IN PARAGRAPH 21 OF ITS ORDER OF SEPTEMBER 2005 HAS RECORDED THAT: 'THE BOOKS OF ACCOUNT WAS PRODUC ED BEFORE US AT OUR INSTANCE, FROM WHICH WERE FOUND THAT THE ASSESSEE WAS MAKING ENTRIES THEREIN ON CASH BASIS'. FROM THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEARS 1994 - 95, 1995 - 96, 1996 - 97 AND 1997 - 98, IT IS EVIDENT THAT THE APPELLANT IS FOLLOWING C ASH SYSTEM OF ACCOUNTING. 5. AMOUNT OF RS.2.90 CR. WAS NEVER PAID TO THE APPELLANT. SETTLEMENT AGREEMENT DATED 25.9.2004 RECORDS THIS FACT. 6. WITHOUT PREJUDICE, THE BASIS OF ADDITION OF RS.2.90 CR. WAS THE STATEMENT OF MR. ASHOK VERMA RECORDED U/S 1 32(4). MR. ASHOK VERMA DID NOT REPRESENT THE APPELLANT AND THE PREMISES SEARCHED ACTUALLY BELONGED TO MR. ASHOK VERMA. BOOKS OF ACCOUNT ALSO BELONGED TO GOPAL DASS ESTATE & HOUSING PVT. LTD AND NOT THE APPELLANT. 7. WITHOUT PREJUDICE, NO INSTALLMENT PLAN WAS PRESCRIBED IN THE MOU. ALL THAT WAS PROVIDED WAS THAT AMOUNT OF RS.2.90 CR. WILL BE PAID IN INSTALLMENTS, WITHIN A PERIOD OF 5 YEARS. INTEREST @ 18% WAS TO ACCRUE IF PAYMENT WAS NOT MADE IN 3 YEARS. ON ACCOUNT OF UNCERTAINTY OF PAYMENT OF RS.2.90 CR. , THE AMOUNT OF RS.2.90 CR. DID NOT ACCRUE TO THE APPELLANT ON 3.6.1996. SINCE INTEREST WAS TO ACCRUE AFTER 3 YEARS, THEREFORE, THE INTEREST CAN BE SAID TO HAVE ACCRUE ON THE LAST DATE OF THE PREVIOUS YEAR ENDED ON 31.3.2000 I.E. AFTER THE SEARCH. 11. T HE SUBMISSIONS OF THE REVENUE ARE AS FOLLOWS: - A) THE ASSESSEE HAD DISCLOSED THE AMOUNT IN THE BLOCK RETURN AND THEREFORE, CANNOT WRIGGLE OUT OF THE SAME. THE COURTS HAVE TAKEN THE VIEW THAT APPEAL IS INCOMPETENT WHERE ASSESSEE ITSELF IT(SS) NO. 175/DEL/ 2003 8 OFFERED THE INCOME OR AGREED TO ADDITION. (I) BANTA SINGH KARTAR SINGH V. CIT 125 ITR 239 (P&H), (II) STERLING MACHINE TOOLS V. CIT 123 ITR 181 (ALL), (III) SAHU & CO. V. CIT 132 ITR 122 (ORI) AND (IV) RAMAN LAL KAMDAR V. CIT 108 ITR 73 (MAD). B) THE ASSESSEE'S CONTENTION TH AT THE AMOUNT HAD BEEN DISCLOSED TO THE INCOME - TAX AUTHORITIES AND THEREFORE, SEC.158B(B) IS NOT APPLICABLE, CANNOT BE ACCEPTED. THE WORDS ' FOR THE PURPOSES OF THIS ACT', APPEARING IN THE ABOVE CLAUSE MEANS' FOR PURPOSES OF THE LEVY OF TAX'. IF THAT IS TH E TRUE MEANING OF THE WORDS, THEN THE AMOUNT CAN BE TREATED AS UNDISCLOSED INCOME IN ALL CASES WHERE THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME, PRIOR TO THE SEARCH, DECLARING THE AMOUNT AS INCOME. THE ASSESSEE CAN COME OUT OF THE CLAUSE ONLY IF SUCH A RETURN HAD BEEN FILED. C) ADMITTEDLY THE REGULAR RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997 - 98 (PAGE 76 OF THE PAPER BOOK) WAS FILED ON 12 - 01 - 1999 I.E AFTER THE DATE OF THE SEARCH. IN THIS RETURN THE ASSESSEE DID NOT DECLARE ANY CAPITAL GAINS IN RES PECT OF THE AMOUNT OF RS.2.80 CRORES. D) THE ABOVE AMOUNT WAS RECEIVED BY THE ASSESSEE ON 04 - 07 - 1996 I.E. DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR 1997 - 98. THE ASSESSEE DID NOT PAY ADVANCE TAX ON THIS AMOUNT, WHICH SHE OUGHT TO HAVE, IN THE FIRST INSTALMENT OF ADVANCE TAX PAYABLE IN THE MONTH OF SEPTEMBER, 1996. E) THE STATEMENT MADE BEFORE THE INCOME - TAX AUTHORITIES U/S 131(1A) BEFORE THE DDI, SHOWS - I) THAT THE ASSESSEE WAS OF THE VIEW THAT THE RECEIPT WAS TAXABLE TO CAPITAL GAINS AND II) THAT SHE WAS NOT AWARE THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997 - 98 HAD ALREADY BEEN FILED. SHE HAS STATED TOWARDS THE END OF THE STATEMENT THAT THE AMOUNT RECEIVED IN 1996 HAS NOT BEEN DISCLOSED YET, DUE TO DELAY IN FILING OF THE RETURN. THIS IS INCORRECT, BECAUSE THE RETURN HAD ALREADY BEEN FILED ON 12 - 01 - 1999 AND NO CAPITAL GAINS HAD BEEN DECLARED THEREIN. F) DISCLOSURE BEFORE THE ADI/DDI CANNOT AMOUNT TO DISCLOSURE 'FOR THE PURPOSES OF THIS ACT'. A DISCLOSURE FOR THE PURPOSES OF THE I NCOME - TAX ACT CAN SAID TO HAVE BEEN MADE ONLY IF THE IT(SS) NO. 175/DEL/ 2003 9 ASSESSEE HAD FILED A RETURN OF INCOME INCLUDING THEREIN THE DISPUTED AMOUNT BEFORE THE DATE OF SEARCH. THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF NOORSINGH VS UNION OF INDIA & OTHERS (249 ITR 3 78) IS AUTHORITY FOR THIS PROPOSITION. THE MADRAS BENCH OF THE TRIBUNAL WRONGLY DISTINGUISHED THIS JUDGMENT IN THE CASE OF SMT. SIVABALA DEVI (SUPRA). THE ASSESSEE DID NOT FOLLOW UP THE STATEMENT MADE U/S 131 BY WRITING ANY LETTER TO THE INCOME - TAX AUTHORI TIES INVITING THEM TO ISSUE NOTICE U/S 148 IN ORDER TO BRING TO TAX THE RECEIPT OF RS.2.80 CRORES. ON THE BASIS OF THE ABOVE ARGUMENTS, THE LEARNED CIT, DR STRONGLY CONTENDED THAT THE REQUIREMENTS OF SEC.158B(B) ARE SATISFIED AND THE AMOUNT WAS RIGHTLY B ROUGHT TO TAX IN THE BLOCK ASSESSMENT. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF SHRI SATYEN SETHI, LD. COUNSEL FOR THE ASSESSEE AND SHRI GUNJAB PRASAD LD. C.I.T(D.R) ON BEHALF OF THE REVENUE. WE HAVE PERUSED THE PAPERS ON RECORD, THE ORDERS OF THE AUTHORITIES BELOW , AS WELL AS THE CASE LAWS CITED. WE HOLD AS FOLLOWS: - (I) THE FIRST ISSUE THAT HAS TO BE ADJUDICATED IS WHETHER THE AMOUNT OF RS.2.80 CRORES BEING CONSIDERATION RECEIVED BY THE ASSESSEE ON SURRENDERED OF 1400 SQ.FT. AREA FROM OUT OF 3000 SQ.FT. AREA IN THE BUILDING PROPOSED TO BE CONSTRUCTED BY M/S GOPAL DAS S ESTATE HOUSING PVT. LTD. , AT 28 BARAKHAMBA ROAD, NEW DELHI WAS RIGHTLY TREATED AS UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT. 13. THE CASE OF THE ASSESSEE IS THAT NO INCRIMINAT ING MATERIAL WAS FOUND IN THE SEARCH A ND HENCE THE ADDITION OF RS.2,80,00,000/ - AS UNDISCLOSED INCOME WAS BEYOND THE SCOPE OF CHAPTER XIV - B. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IT(SS) NO. 175/DEL/ 2003 10 HAS DISCLOSED THE AMOUNT IN QUESTION IN ITS BLOCK RETURN AND HENCE THE RE IS NO SEPARATE ADDITION MADE BY THE ASSESSING OFFICER, WHICH CAN BE DISPUTED AND THE ASSESSEE FILED REGULAR RETURN OF INCOME FOR THE A.Y. 1997 - 98 ONLY AFTER THE DATE OF SEARCH, AND THAT IN THIS RETURN ALSO, THE ASSESSEE HAS NOT DECLARED ANY CAPITAL GAIN S IN RESPECT OF SURRENDERED OF 1400 SQ.FT. OF AREA IN QUESTION. 14. T HE ARGUMENT OF MR. GUNJAN PRASAD HAS TO BE ACCEPTED FOR THE FOLLOWING REASONS: - (A) DISCLOSURE FOR THE PURPOSE OF SECTION 158B (B) CAN ONLY BE MADE BY FILING THE RETURN OF INCOME PRIOR T O THE DATE OF SEARCH IN WHICH THE DISPUTED AMOUNT IS INCLUDED. THIS PREPOSITION SUPPORTED BY THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF NOOR S INGH VS. UNION OF INDIA AND OTHERS , 249 ITR 378 (MADRAS). (B) ANY STATEMENT MADE ORALLY OR IN WRITING BEFORE THE INCOME TAX AUTHORITIES, PRIOR TO THE DATE OF SEARCH, IN WHICH THERE IS EITHER DIRECT OR/REFERENCE TO THE NATURE AND CIRCUMSTANCES UNDER WHICH THE AMOUNT IN QUESTION WAS RECEIVED CANNOT AMOUNT DISCLOSURE FOR THE PURPOSE OF THE ACT THE DISCLOSU RE SHOULD INVITE AN ASSESSMENT AND CONSEQUENT PAYMENT OF TAX AND ONLY RETURN OF INCOME CAN SATISFY THIS REQUIREMENT. (C) THE REVENUE WAS IN POSSESSION OF MATERIAL THAT THE ASSESSEE HAS SURRENDERED RIGHTS TO 1400 SQ.FT. OF AREA FOR CONSIDERATION AN AGREEME NT WAS IT(SS) NO. 175/DEL/ 2003 11 FOUND DURING THE COURSE OF SEARCH. WHEN AN AGREEMENT IS FOUND AND THE INCOME ARISING OUT OF THAT AGREEMENT WAS NOT OFFERED TO TAX BY THE ASSESSEE BY WAY OF FILING OF A RETURN OF INCOME, THEN THE AGREEMENT BECOMES AN INCRIMINATING MATERIAL BASED ON WHICH INCOME CAN BE BROUGHT TO TAX WITH IN THE KEN OF CHAPTER - XIV - B OF THE ACT. 15. IN ANY EVENT, THE ASSESSEE HAS DISCLOSED THIS AMOUNT IN ITS BLOCK RETURN OF INCOME. THOUGH THE ASSESSEE IS NOT ESTOPP AL FROM TAKING A LEGAL STANDS, THE FACTS REMAINS THAT THE ASSESSING OFFICER CANNOT BE FOUND FAULT WITH FOR ACCEPTING THE RETURN OF INCOME OF THE ASSESSEE ON THIS ISSUE. THE PLEA OF THE ASSESSEE WAS THAT THE AUTHORITIES WERE IN KNOW OF THE TRANSACTION PRIOR TO THE SEARCH AND HENCE THE TRANSACTION IN QUESTION CANNOT BE BROUGHT TAX IN THE BLOCK ASSESSMENT, DOES NOT HAVE ANY MERIT FOR THE REASON THAT THE ASSESSEE FILED THE REGULAR RETURN OF INCOME FOR THE A.Y. 1997 - 98 ON 1 2.01.1999 , WHICH IS AFTER THE DATE OF SEARCH AND IN THIS RETURN OF INCOME, SHE DID NOT DECLA RE T HIS RECEIPT OF RS.2,80,00,000/ - , WHILE DECLARING THIS AMOUNT IN HER BLOCK RETURN OF INCOME. 16. FOR ALL THIS REASON, WE DISMISS THESE ARGUMENTS OF THE ASSESSEE AS DEVOID OF MERIT. 17. THE SECOND ISSUE THAT ARISES FOR CONSIDERATION IS THE ADDITION OF (A) RS.2,90,00,000/ - (B) RS.43,04,710/ - AND (C) RS.4,32,000/ - . T HE HONBLE HIGH COURT RECORDS PARA 7 AS FOLLOWS: - IT(SS) NO. 175/DEL/ 2003 12 7. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THIS ASPECT SHOULD BE REMITTED BACK TO THE INCOME TAX APPELLATE TRIBUNAL TO GO INTO TH E AFORESAID QUESTION. WE MAY ALSO NOTE AT THIS STAGE THAT MR. M.S. SYALI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE HAD PRODUCED THE COPY OF THE SETTLEMENT AGREEMENT DATED 25 TH SEPTEMBER, 2008 ARRIVED AT BETWEEN THE ASSESSEE AND THE COMPANY IN WHIC H SOME OTHER PERSONS ARE ALSO PARTIES AND HIS SUBMISSION IS THAT UNDER THIS AGREEMENT ENTIRE ESTATES OF THE ASSESSEE IN 25 - A, AKBAR ROAD, NEW DELHI WAS SOLD TO THE COMPANY AT A TOTAL CONSIDERATION OF RS. 10.8 CRORES (INCLUDING RS.2.80 CRORES, ALREADY RECEI VED). UNDER THIS AGREEMENT THE ASSESSEE HAD AGREED NOT TO RECEIVE RS. 2.90 CRORES AND THAT WAS INCLUDED IN THE BALANCE CONSIDERATION OF RS. 8 CRORES TO BE RECEIVED BY THE ASSESSEE. IT IS ALSO SUBMITTED THAT THE AFORESAID AMOUNT OF RS. 8 CRORES, WHICH WAS R ECEIVED BY THE ASSESSEE PURSUANT TO AGREEMENT WAS OFFERED FOR TAX. WE ARE OF OPINION THAT THIS SETTLEMENT AGREEMENT SHALL ALSO HAVE BEARING ON THE ISSUE TO BE DECIDED AND, THEREFORE, IT SHOULD BE OPE N TO THE ASSESSEE TO PRODUCE ANY RELY UPON THIS AGREEMENT AND, THEREFORE, CONSIDERING THESE SUBMISSIONS OF BOTH THE PARTIES, THE TRIBUNAL WILL DECIDE THE ISSUE AFRESH. 18. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE AMOUNT OF RS.2.90 CRORES WAS NEVER PAID TO THE ASSESSEE AND THIS FACT HAS BEEN RECORDED I N THE AGREEMENT DATED 25.09.200 8 . T HE CONTENTION OF THE ASSESSEE IS THAT SHE FOLLOWS THE CASH SYSTEM OF AMOUNT AND THEREFORE, THE AMOUNT OF RS.2.90 CRORES WAS TAXABLE ONLY ON ITS RECEIPT. WE FIND THAT THE ASSESSEES SUBMISSIONS ARE RECORDED BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER AS FOLLOWS: - VIDE LETTER DATED 16.11.2001 THE ASSESSEE HAS SUBMITTED ONCE AGAIN THAT SINCE THE ASSESSEE IS MAINTAINING HER ACCOUNTS AND FILE AN INCOME TAX RETURN ON CASH BASIS, IF THE AMOUNT COULD HAVE BEEN RECEIVED, IT WOULD HAVE BEEN IN THE NATURE OF CAPITAL RECEIPT, NOT THE INCOME. THE ASSESSEE IT(SS) NO. 175/DEL/ 2003 13 WAS ASKED TO FILE THE STATEMENT OF AFFAIRS FOR THE ENTIRE BLOCK PERIOD BUT HOWEVER THE SAME HAVE NOT BE FILED. IT IS CLEAR THAT THE ASSESSEE IS NOT MAINTAINING THE BOOK OF ACC OUNTS AS SUBMITTED BY HIM IN THE LETTER. 19. THE FIRST APPELLATE AUTHORITY AT PAGE 8 RECORDS THE TERM OF THE ARGUMENT AS FOLLOWS: - QUOTE 1. THAT IN ACCORDANCE WITH THE SAID LETTER DATED 05.01.1986 THE SECOND PARTY HAS AGREED TO PAY A SUM OF RS.2,90,00, 000/ - (RS.TWO CRORES NINETY LAKHS ONLY) AS COMPENSATION FOR THE LOSS OF INCOME THAT THE FIRST PARTY HAS SUFFERED FOR DELAY IN HANDING OVER POSSESSION FROM 31 ST OF MARCH, 1990 TILL DATE. 2. THIS COMPENSATION OF RS.2.90 CRORES WILL BE PAID IN INSTALLMENTS. H OWEVER, THE WHOLE AMOUNT IS TO BE PAID WITHIN A PERIOD OF 5 YEARS FROM NOW. INTEREST WILL ACCRUE AT SIMPLE INTEREST AT THE RATE OF 18% PER ANNUM IF PAYMENT IS NOT MADE IN THREE YEARS (3YEARS) FROM THIS DATE ON THE REDUCING BALANCE. 3. THE PARTIES HAVE FURT HER AGREED THAT THE CAUSE OF ACTION FOR PAYMENT SHALL CONTINUE DAY TO DAY TILL THE ENTIRE PAYMENT IS MADE AND THE SECOND PARTY ACKNOWLEDGES ITS LIABILITY FOR SUCH PAYMENT. 20. THE CONTENTION OF THE ASSESSEE IS THAT THE BASIS OF THE ADDITION OF RS.2.90 CRORES WAS THE STATEMENT OF MR. ASHOK VERMA RECORDED UNDER SECTION 132(4) OF THE ACT AND THAT MR. ASHOK VERMA DID NOT REPRESENT THE ASSESSEE AND THE PREMISES SEARCH ACTUALLY BELONGED TO MR. ASHOK VERMA AND THE BOOKS IN QUESTION BELONGS TO M/S. GOPAL DA S S E STATES & HOUSING PVT. LTD. IT IS FURTHER SUBMITTED THAT NO INSTALLMENT PLAN WAS PR ESCRIBED IN THE MOU AND IT WAS ONLY STATED THAT IT(SS) NO. 175/DEL/ 2003 14 THE PAYMENT SHOULD BE MADE IF THE PERIOD OF THREE YEARS AND IN DEFAULT INTEREST AT THE RATE OF 18% WAS TO ACCRUE AFTER THREE Y EARS AND HENCE THERE IS NO ACCRUE OF INCOME. IT WAS FURTHER SUBMITTED THAT THE VERY RECEIPT OF THE AMOUNT OF COMPENSATION IN QUESTION AND INTEREST THEREON WAS DOUBTFUL AND IN FACT THE ASSESSEE NEVER RECEIVED THE SAME . 21. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS NOT RECEIVED THIS AMOUNT IN QUESTION OR THE INTEREST THEREON TILL DATE. THE RECEIPT OF THIS COMPENSATION AND INTEREST THEREON WAS DOUBTFUL. T HE ASSESSEE AS ADMITTED BY THE LD. D.R. , WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND HENCE THE AMO UNT S IN QUESTION CANNOT BE TAXED AS THE SAME WAS NOT RECEIVED. T HE HONBLE HIGH COURT HAS RECORDED THE SUBMISSION THAT THE SETTLEMENT AGREEMENT WAS ENTERED INTO ON 25.09.2008 BETWEEN THE ASSESSEE AND THE COMPANY AND CERTAIN OTHER PARTIES AND UNDER THIS AGR EEMENT THE ASSESSEE SOLD PROPERTY NO. 25 - A AKBAR ROAD, NEW DELHI FOR THE 10.08 CRORES INCLUDING RS.2.80 CRORES THE RECEIVED ON CERTAIN OF 1400 SQ. FT. AREA REFERRED ABOVE AND THE ASSESSEE AGREE D NOT TO RECEIVE RS.2.90 CRORES THAT WAS TO BE PAID TO THE ASSE SSEE AS COMPENSATION FOR DELAY IN HANDING OVER CONSTRUCTED AREA AT 12, BARAKHAMBA ROAD, NEW DELHI AND THAT THE ASSESSEE HAS OFFERED THE BALANCE CONSIDERATION OF RS.8.00 CRORES TO TAX. FROM THE ABOVE AGREEMENT ALSO IT IS CLEAR THAT THE ASSESSEE HA S NEVER RE CEIVED THE SA ID AMOUNT OF IT(SS) NO. 175/DEL/ 2003 15 RS.2.90 CRORES TILL DATE. THE BALANCE SALE CONSIDERATION OF RS.8.00 CRORES, WAS OFFERED TO TAX DURING THE A.Y. 2009 - 10. THIS FACT IS NOT CONTROVERTED BY THE LD. D.R. 22. AS L D. DEPARTMENTAL REPRESENTATIVE ADMITTED THAT THE ASSESS EE HAS NEVER RECEIVED THE AMOUNT OF RS.2.90 CRORES AND AS HE ALSO COULD NOT CONTR OVERT THE CLAIM OF THE ASSESSEE, THAT SHE FOLLOW S THE CASH SYSTEM OF ACCOUNTING AND KEEPING IN VIEW THE TERMS OF THE SETTLEMENT AGREEMENT DATED 25.09.2008, AND ALSO THE FACT T HAT THE ASSESSEE HAD OFFERED TO TAX THE BALANCE CONSIDERATION OF RS.8.00 CRORES IN THE YEAR 2009 - 10 FOR THE TRANSFER OF THE PROPERTY AT 2 5 - A, AKBAR ROAD, NEW DELHI IN THE A.Y. 2009 - 10, WE UPHELD THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS.2.90 CRO RES AND INTEREST THEREON CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE DURING THE BLOCK PERIOD. NO ADDITION CAN BE MADE ON ACCOUNT OF ACCRUED INTEREST THEREON. 23. AS REGARDS, THE AMOUNT OF RS.4,32,000/ - , WHICH PERTAINS TO UNDISCLOSED INTEREST INTEREST IN COME ON IDBI BONDS FOR THE A.YS. 1997 - 1998 TO 1999 - 2000, NO ARGUMENTS WERE ADVANCED AND HENCE THE FINDINGS OF THE FIRST APPELLATE AUTHORITIES ARE CONFIRMED. IT(SS) NO. 175/DEL/ 2003 16 2 4 . IN THE RESULT, WE DELETE THE ADDITION OF RS.2.90 CRORES AND RS. 43,04,710/ - AND ALLOW THIS GROUN D NO.4 OF THE APPEAL . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 .0 8 .2014 SD/ - SD/ - ( A.T. VARKEY ) ( J.S. REDDY ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 28 .0 8 .2014 A KS* COPY OF THE ORDER FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ASSISTANT REGISTRAR