DCIT, Calicut V. Shri Sathish Chandra Dattani, Kannur

ITSSA 42/COCH/2006

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7688 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2012
• Assessment Year: misc
• Appeal Filed On: 24-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A. NOS. 216/COCH/2005 & 42/COCH/2006 BLOCK PERIOD : 01-04-1996 TO 29-01-2003 1.THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, CALICUT. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, CALICUT. VS. 1. LATE SRHI ARUN KUMAR HARIDAS DATTANI, REPRESENTED BY LEGAL HEIRS 1. SMT.RESHMI 2. MS. NIMISHA, 100, ARMAN, CANTONMENT, KANNUR. [PAN:ACKPD 9100E] 2. SHRI SATISH CHANDRA DATTANI, SERENADE, THAVAKKARA, KANNUR. [PAN: AGAPS 7489H] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) REVENUE BY SMT. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI U.MOHANAN,CA DATE OF HEARING 15/02/2012 DATE OF PRONOUNCEMENT 23 /03/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE APPEALS FILED AT THE INSTANCE OF THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A)-I, KOCHI IN THE HANDS OF RESPE CTIVE ASSESSEES AND THEY RELATE TO THE BLOCK PERIOD FROM 01-04-1996 TO 29-01-2003. SINCE THE ISSUES URGED IN BOTH THE APPEALS ARE ARISING OUT OF COMMON SET OF FACTS, THESE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON. I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 2 2. THE GROUNDS RAISED BY THE REVENUE RELATED TO A SOLITARY ISSUE, VIZ., WHETHER THERE IS TRANSFER OF ASSET WITHIN THE MEANING OF THE PROVISI ONS OF SEC.53A OF TRANSFER OF PROPERTY ACT, WHICH GIVE RISE TO CAPITAL GAIN ASSESSABLE IN THE BLOCK PERIOD IN THE HANDS OF THESE TWO ASSESSES. 3. THE FACTS RELATING TO THE SAID ISSUE IS DISC USSED IN BRIEF. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF A COM PANY NAMED M/S REAL FORT AND RESORTS PVT. LTD ON 17-01-2003. BOTH THE ASSESSEES HEREIN, HAD ENTERED INTO AN AGREEMENT WITH THE ABOVE SAID COMPANY FOR DEVELOPME NT OF LAND ADMEASURING 86 CENTS, WHICH BELONGED TO THEM AND THEIR FAMILY MEMBERS. H ENCE, THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF BOTH THE ASSESSEES HEREIN ALSO. THE DISPUTE RAISED BEFORE US RELATED TO THE CAPITAL GAIN ARISIN G ON THE TRANSFER OF 86 CENTS OF LAND REFERRED SUPRA. HENCE, IT IS CONSIDERED NECESSARY TO BRIEFLY EXPLAIN THE BACK GROUND RELATING TO THE SAME. 4. THE ABOVE SAID 86 CENTS OF LAND TO BELONGED TO LATE GORDHANDAS KHIMJI SAIT. ON HIS DEATH, THE SAID PROPERTY DEVOLVED UPON HIS WIFE , SMT. MANIBAI AND ONLY SON SHRI HARIDAS GORDHANDAS. IN THE YEAR 1951-52, SHRI HARI DAS GORDHANDAS DECLARED THE SAID PROPERTY AS BELONGING TO HIS HUF BY THROWING THE SA ME TO THE COMMON STOCK OF FAMILY AND ACCORDINGLY TREATED THE SAME AS HIS HUF PROPERT Y. AS A RESULT, SHRI HARIDAS GORDHANDAS AND TWO SONS, BEING THE ASSESSEES HEREI N BECAME ENTITLED TO 1/3 RD SHARE IN THE SAID PROPERTY. IT IS STATED THAT, ON THE DEATH OF SHRI HARIDAS GORDHANDAS, HIS 1/3 RD SHARE DEVOLVED UPON HIS WIFE AND SIX CHILDREN INCLUDING T HE 2 ASSESSEES HEREIN. CONSEQUENTLY, EACH OF THE ASSESSEES HEREIN BECAME OWNER OF 8/21 S HARE OF THE ABOVE SAID PROPERTY AND THE BALANCE 5/21 SHARE RESTED WITH THEIR MOTHER AND FOUR SISTERS. THE LD A.R SUBMITTED THAT THE JOINT FAMILY SYSTEM (HUF) WAS ABOLISHED IN THE STATE OF KERALA IN THE YEAR 1976 AND HENCE THE ASSESSEES HEREIN BECAME ABSOLUTE OWNE RS OF THEIR RESPECTIVE SHARES IN THE ABOVE SAID PROPERTY. I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 3 5. THE ASSESSEES HEREIN AND THEIR FAMILY MEMBER S ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE COMPANY CITED ABOVE VIZ., M/S RE AL FORT & RESORTS PVT. LTD FOR DEVELOPMENT OF 86 CENTS OF LAND INTO A COMMERCIAL C OMPLEX. DURING THE COURSE OF SEARCH IN THE HANDS OF THE COMPANY CITED ABOVE, THREE AGRE EMENTS DATED 08-04-1996, 02-04- 1997 AND 03-04-1997 WERE SEIZED. IT WAS ALSO NOTIC ED THAT THESE ASSESSEES HAD ALSO RECEIVED PART CONSIDERATION. HOWEVER, THESE ASSESS EES HAD OFFERED THE CAPITAL GAIN ARISING ON THE PROPERTY TRANSACTION ONLY FROM ASSESSMENT YE AR 2000-01 ONWARDS. THE AO TOOK THE VIEW THAT THE CAPITAL GAIN IS ASSESSABLE IN THE ASSESSMENT YEAR 1997-98 RELEVANT TO THE FINANCIAL YEAR 1996-97, SINCE THE TRANSFER OF THE A BOVE SAID LAND HAS TAKEN PLACE IN ACCORDANCE WITH THE PROVISIONS OF SEC. 53A OF THE T RANSFER OF PROPERTY ACT IN THE FINANCIAL YEAR 1996-97 BY VIRTUE OF A DEVELOPMENT A GREEMENT DATED 08-4-1996 ENTERED BETWEEN THE COMPANY CITED ABOVE AND SRI GORDHANDAS KHIMJI (HUF) REPRESENTED BY ITS KARTHA SHRI ARUN KUMAR H DATTANI. SINCE BOTH THE A SSESSEES HAVE NOT DECLARED ANY CAPITAL GAIN IN THE ASSESSMENT YEAR 1997-98, THE AO PROCEEDED TO COMPUTE THE CAPITAL GAIN, WHICH WAS TREATED BY HIM AS THE UNDISCLOSED I NCOME IN THE HANDS OF BOTH THE ASSESSEES FOR THE BLOCK PERIOD. WHILE COMPUTING T HE LONG TERM CAPITAL GAIN, THE MARKET VALUE OF PROPERTY AS ON 01-04-1981 WAS TO BE DEDUCT ED. THE ASSESSEE HAD ADOPTED A PARTICULAR RATE AS THE MARKET VALUE AS ON 1.4.1981, BUT THE AO DID NOT ACCEPT THE SAID VALUE DECLARED BY THE ASSESSEE. THE AO COLLECTED T HE DETAILS OF MARKET VALUE ON HIS OWN AND ADOPTED THE SAME FOR COMPUTING THE LONG TERM CA PITAL GAIN. 6. BOTH THE ASSESSEES CHALLENGED THE ORDER OF T HE AO BEFORE LD CIT(A). IT IS PERTINENT TO NOTE THAT THE AO HAS COMPLETED THE ASSESSMENT IN THE HANDS OF SHRI ARUNKUMAR H DATTANI U/S 158BC OF THE ACT. IN THE HANDS OF SATI SH CHANDRA DATTANI, THE ASSESSMENT WAS COMPLETED BY THE AO U/S 158BC R.W.S. 158BD OF T HE ACT. IT IS ALSO PERTINENT TO NOTE THAT THE DOCUMENT DATED 08-04-1996, ON WHICH THE AO HAS PLACED MUCH RELIANCE, WAS SEIZED FROM THE PREMISES OF THE COMPANY VIZ., M/S R EAL FORTS AND RESORTS PVT LTD. I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 4 7. BEFORE LD CIT(A), SHRI ARUNKUMAR H DATTANI CO NTESTED THE ASSESSMENT OF CAPITAL GAIN AS HIS UNDISCLOSED INCOME, INTER ALIA, ON T HE FOLLOWING POINTS:- (A) THE ASSESSMENT MADE U/S 158BC OF THE ACT IN RES PECT OF THE CAPITAL GAIN IS NOT IN ACCORDANCE WITH LAW, SINCE THE IMPUGNED AGREEMENT D ATED 08-04-1996 WAS NOT SEIZED FROM THE ASSESSEE, BUT FROM THE COMPANY CITED ABOVE . (B) THE TRANSACTION RELATING TO THE TRANSFER OF LAN D WAS ALREADY DISCLOSED TO THE DEPARTMENT PRIOR TO THE DATE OF SEARCH. (C) THE AGREEMENT DATE 08-04-1996 WAS ENTERED BETW EEN THE COMPANY AND GORDHANDAS KHIMJI (HUF). HENCE THE SAID AGREEMENT CAN NOT TAK EN AS THE BASIS FOR ASSESSING THE CAPITAL GAIN IN HIS HANDS. (D) THE AGREEMENT ENTERED WITH THE COMPANY IS ONLY A DEVELOPMENT AGREEMENT, WHEREIN THERE IS NO TRANSFER OF PROPERTY BY THE ASSESSEES T O THE COMPANY. UNDER THE DEVELOPMENT AGREEMENT, THE COMPANY HAS DEVELOPED THE PROPERTY I NTO A COMMERCIAL COMPLEX. THERE AFTER THE ASSESSEES HAVE TRANSFERRED PROPORTIONATE SHARE IN THE LAND TO THE PROSPECTIVE BUYERS OF SPACE IN THE COMMERCIAL COMPLEX. HENCE T HE PROVISIONS OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT DO NOT APPLY TO THE DEVELO PMENT AGREEMENT. (E) EVEN IF IT IS HELD THAT THE PROVISIONS OF SEC.5 3A OF T.P ACT IS APPLICABLE TO THE DEVELOPMENT AGREEMENT, EVEN THEN THE CAPITAL GAIN I S ASSESSABLE IN THE YEAR RELEVANT TO THE FINANCIAL YEAR 1995-96 ONLY, AS THE ASSESSEES H AVE RECEIVED DEPOSITS FROM THE COMPANY IN THE FINANCIAL YEAR 1995-96, I.E. PRIOR T O THE BLOCK PERIOD BEGINNING 1.4.1996. (F) THE AO CANNOT ASSESS THE LONG TERM CAPITAL GAI N AS THE UNDISCLOSED INCOME, SIMPLY BECAUSE HE HAS GOT DIFFERENT VIEW WITH REGARD TO TH E YEAR OF ITS TAXABILITY AND ALSO ON THE QUANTUM OF CAPITAL GAIN. 8. THE LD CIT(A) WAS CONVINCED WITH THE CONTENT IONS OF THE ASSESSEES HEREIN AND ACCORDINGLY HELD THAT THE PROVISIONS OF SEC. 53A OF THE T.P. ACT DO NOT APPLY TO THE IMPUGNED TRANSACTION. IN THE CASE OF ARUNKUMAR H D ATTANI, THE LD CIT(A) ALSO HELD THAT THE PROVISIONS OF SEC. 158BC HAVE NO APPLICATION, S INCE THE AGREEMENT WAS NOT SEIZED FROM THE PREMISES OF THE ASSESSEE. ACCORDINGLY HE CANCELLED THE ASSESSMENT OF CAPITAL GAIN AS UNDISCLOSED INCOME IN THE HANDS OF BOTH T HE ASSESSEES. AGGRIEVED BY THE ORDERS OF LD CIT(A), THE REVENUE IS APPEAL BEFORE U S IN BOTH THE CASES. I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 5 9. THE MAIN CONTENTION OF THE LD D.R WAS THAT T HE TRANSFER OF IMPUGNED LAND IN PART PERFORMANCE OF CONTRACT HAS TAKEN PLACE DURING THE FINANCIAL YEAR 1996-97, BY VIRTUE OF AGREEMENT DATED 08-04-1986 AND HENCE THE PROVISIONS OF SEC. 53A OF THE T.P. ACT SHALL APPLY TO THE SAME. HENCE THE AO WAS RIGHT IN ASSES SING THE CAPITAL GAIN THERE FROM AS THE UNDISCLOSED INCOME OF THE ASSESSEES. ON THE CONTRA RY, THE LD A.R, BY REITERATING THE SUBMISSIONS MADE BEFORE THE TAX AUTHORITIES, CONTEN DED THAT THE CAPITAL GAIN, IF ANY, IS NOT ASSESSABLE IN THE BLOCK PERIOD. 10. WE HAVE HEARD THE RIVAL CONTENTIONS. THE AS SESSMENT UNDER CONSIDERATION IS CONSEQUENT TO THE SEARCH OPERATIONS, WHICH IS POPUL ARLY CALLED BLOCK ASSESSMENT AND THE SAME IS CARRIED OUT IN ACCORDANCE WITH THE PROV ISIONS OF CHAPTER XIV-B OF THE ACT. THE BLOCK ASSESSMENT IS IN ADDITION TO AND PARALLEL TO THE REGULAR ASSESSMENT PROCEEDING. IN THE BLOCK ASSESSMENT, THE UNDISCLOSED INCOME O F THE ASSESSEE IS DETERMINED. THE TERM UNDISCLOSED INCOME IS DEFINED UNDER SEC. 158 B(B) OF THE ACT, WHICH READS AS UNDER:- UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION, J EWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON AN Y ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHER E 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 BE EN DISCLOSED FOR THE PURPOSES OF THIS ACT, OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. ON A CAREFUL READING OF THE DEFINITION OF UNDISCLO SED INCOME EXTRACTED ABOVE INDICATE THAT THE UNDISCLOSED INCOME INCLUDES ASSETS ETC. OR INCOME BASED ON TRANSACTIONS ETC., WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT . CONSEQUENTLY, IF ANY ASSET ETC. OR INCOME BASED ON TRANSACTIONS ETC. HAS ALREADY BEEN DISCLOSED UNDER THE ACT PRIOR TO THE DATE OF SEARCH , THE SAME WOULD FALL OUTSIDE THE SCOPE I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 6 OF BLOCK ASSESSMENT PROCEEDING. SUCH KIND OF DISCL OSED THINGS CAN BE CONSIDERED ONLY IN THE REGULAR ASSESSMENT PROCEEDINGS. THIS PROPOSITI ON OF LAW IS WELL SETTLED NOW. 11. NOW WE SHALL EXAMINE THE FACTS SURROUNDING THE ISSUE UNDER CONSIDERATION. IN THE INSTANT CASES, IT IS AN UNDISPUTED FACT THAT THESE ASSESSEES HAVE DECLARED THE TRANSACTIONS ENTERED BY THEM WITH THE COMPANY NAMED M/S REAL FOR TS AND RESORTS LTD IN THEIR RETURNS OF INCOME PRIOR TO THE DATE OF SEARCH. IT IS ALSO AN UNDISPUTED FACT THAT THESE ASSESSEES HAVE DECLARED THE CAPITAL GAIN ON TRANSFER OF PROPO RTIONATE PORTION OF LAND IN ASSESSMENT YEARS 2000-01 TO 2002-03 AND SUBSEQUENT YEARS. NOW THE QUESTION THAT ARISES IS WHETHER THE INCOME, WHICH HAS ALREADY BEEN DISCLOSED BY THE ASSESSEES WOULD FALL IN THE CATEGORY OF UNDISCLOSED INCOME, MERELY BECAUSE THE AO HAS DIFFERENT OPINION ABOUT ITS YEAR OF TAXABILITY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE ANSWER TO THE ABOVE QUESTION IS NO. IN THIS CONTEXT, IT IS NE CESSARY TO HIGHLIGHT FURTHER FACTS SURROUNDING THE ISSUE UNDER CONSIDERATION. THE CONT ENTION OF THE ASSESSEES IS THAT THEY HAVE NOT EFFECTED ANY TRANSFER IN FAVOUR OF THE COM PANY CITED ABOVE, SO AS TO ATTRACT THE PROVISIONS OF SECTION 53A OF THE T.P. ACT. THEY FU RTHER CONTEND THAT THE IMPUGNED AGREEMENT DATED 08-04-1996 HAS BEEN ENTERED BY A DI FFERENT ASSESSEE VIZ., SRI GORDHANDAS KHIMJI (HUF) REPRESENTED BY ITS KARTHA S HRI ARUNKUMAR H DATTANI, ONE OF THE ASSESSEES HEREIN. THEY ALSO SUBMIT THAT THE AL LEGED PART CONSIDERATION WAS RECEIVED IN THE FINANCIAL YEAR 1995-96, I.E., EARLIER TO THE BL OCK PERIOD. ALL THESE FACTS SHOW THAT THE VIEW ENTERTAINED BY THE AO THAT THERE IS PART PERFO RMANCE OF CONTRACT IN TERMS OF SEC.53A OF THE T.P. ACT IS NOT ABSOLUTE ONE. ON THE CONTRA RY THE SAID VIEW BECOMES A DEBATABLE ISSUE IN VIEW OF THE FACTS NARRATED ABOVE. UNDER T HESE CIRCUMSTANCES ALSO, IN OUR VIEW, IT IS NOT A CLEAR CASE OF INCOME, WHICH COULD BE BROUG HT AS THE UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEES HEREIN. 12. WHEN THE INCOME ARISING FROM THE TRANSACTIO N HAS ALREADY BEEN DECLARED TO THE DEPARTMENT PRIOR TO THE DATE OF SEARCH, THE SAME WO ULD FALL OUTSIDE THE DEFINITION OF UNDISCLOSED INCOME AS DEFINED IN SEC. 158B(B) OF THE ACT. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE LONG TERM CAPITAL GAINS, IN THE INSTANT CASES, FALL I.T.(SS)A NOS. 216/COCH/2005 & 42/COCH/2006 7 OUTSIDE THE SCOPE OF THE DEFINITION OF UNDISCLOSED INCOME. IN OUR VIEW, THIS DECISION COULD BE REACHED EVEN WITHOUT CONSIDERING THE SIGNI FICANCE OF THE AGREEMENT DATED 08-04- 1996 VIS--VIS SEC. 53A OF THE T.P. ACT. ACCORDING LY, WE AGREE WITH THE FINAL DECISION REACHED BY LD CIT(A) ON THIS ISSUE. SINCE WE HAVE UPHELD THE DECISION OF LD CIT(A), WE DO NOT FIND IT NECESSARY TO ADDRESS OTHER CONTEN TIONS RAISED BY THE DEPARTMENT. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 23-03-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 23 MARCH, 2012 GJ COPY TO: 1. LATE SHRI ARUN KUMAR HARIDAS DATTANI, REPRESENTE D BY LEGAL HEIRS 1. SMT. RESHMI 2. MS. NIMISHA, 100, ARMAN, BURNASSERY, CANTONMENT, KA NNUR. 2. SHRI SATISH CHANDRA DATTANI, SERENADE, THAVAKKAR A, KANNUR. 3..THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE, CALICUT.. 4. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE, CALICUT. 5. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 6. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 7. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 8. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN