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/ 2003
(Block Period 01.04.1989 to 11.11.1999)
Maharani Kamsundari of Darbhanga 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 : Shri 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 assessee, against the order of the
Assessing Officer passed under Section 158BC of the I.T. Act, on 26.11.2001 for
the Block Period on 01.04.1989, 11.11.1999.
2. The appeal was earlier decided by the Tribunal vide order dated
09.09.2005. The assessee carried the matter in appeal and the Hon'ble High
Court of Delhi in ITA No.606/2006, judgment dated 12.01.2011, has remitted the
2 IT(SS) No. 175/Del/ 2003
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 of 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 Dass 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
3 IT(SS) No. 175/Del/ 2003
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 under
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 3400 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 Dass Estates
and Housing Pvt. Ltd. A statement was recorded from Mr. Ashok Verma during
the search proceedings 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 summons to Bank of Tokyo to
produce the assessee's bank statement in which cheques of Rs.2.80 crores were
4 IT(SS) No. 175/Del/ 2003
deposited. In the summons, the date and cheque numbers were stated. By notice
dated 12.05.1999, the bank was required to furnish details of FD's, reinvestment
of FD's 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 26.07.1999 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 an
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
26.11.2001 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) Amount 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.
5 IT(SS) No. 175/Del/ 2003
(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 confirmed 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 quashing 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. The 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) not 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.
6 IT(SS) No. 175/Del/ 2003
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 Income 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 and-or as deemed fit by the Hon'ble 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 submissions 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 cheque 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
7 IT(SS) No. 175/Del/ 2003
Appellant was following mercantile 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 produced 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 cash 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 132(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. The 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
8 IT(SS) No. 175/Del/ 2003
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 that 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 the 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 respect 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 Income-tax Act can said to have been made only if the
9 IT(SS) No. 175/Del/ 2003
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 378) 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 authorities
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 brought 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 Dass 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 incriminating material was found in the
search and 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
10 IT(SS) No. 175/Del/ 2003
has disclosed the amount in question in its block return and hence there 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 gains
in respect of surrendered of 1400 sq.ft. of area in question.
14. The 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 to the date of search in which the disputed amount is
included. This preposition supported by the judgment of Hon'ble Madras High
Court in the case of Noorsingh 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 agreement was
11 IT(SS) No. 175/Del/ 2003
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 estoppal 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 12.01.1999, which is after the date of search and in this
return of income, she did not declare this 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/-. The Hon'ble High
Court records para 7 as follows:-
12 IT(SS) No. 175/Del/ 2003
"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 the 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 25th September, 2008 arrived at between the
assessee and the Company in which 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 received). 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 received 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 open 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 in the agreement
dated 25.09.2008. The 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 assessee's submissions are recorded by the
Assessing 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
13 IT(SS) No. 175/Del/ 2003
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 accounts 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.
However, 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 further 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 Dass Estates & Housing Pvt. Ltd. It is further submitted
that no installment plan was prescribed in the MOU and it was only stated that
14 IT(SS) No. 175/Del/ 2003
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 years 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. The assessee as admitted by the ld. D.R., was
following the cash system of accounting and hence the amounts in question
cannot be taxed as the same was not received. The Hon'ble 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 agreement 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 agreed not to receive Rs.2.90
crores that was to be paid to the assessee 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 has never received the said amount of
15 IT(SS) No. 175/Del/ 2003
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 ld. Departmental Representative admitted that the assessee has never
received the amount of Rs.2.90 crores and as he also could not controvert the
claim of the assessee, that she follows the cash system of accounting and keeping
in view the terms of the settlement agreement dated 25.09.2008, and also the fact
that 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 25-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 crores 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 income 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.
16 IT(SS) No. 175/Del/ 2003
24. In the result, we delete the addition of Rs.2.90 crores and Rs.43,04,710/-
and allow this ground no.4 of the appeal.
The order is pronounced in the open Court on 28.08.2014
Sd/- Sd/-
(A.T. VARKEY) (J.S. REDDY)
Judicial Member Accountant Member
Dated 28.08.2014
Aks*
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT,
ASSISTANT REGISTRAR
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