2009-VIL-335-ITAT-AHM
Equivalent Citation: TTJ 124, 508, [2009] 34 SOT 34 (AHD.) (URO)
Income Tax Appellate Tribunal AHMEDABAD
IT APPEAL NOS. 1789 (AHD.) OF 2008 AND 141 (AHD.) OF 2009 C.O. NOS. 117 (AHD.) OF 2008 AND 20 (AHD.) OF 2009
Date: 05.06.2009
VIJAY M. VIMAWAL.
Vs
ASSISTANT COMMISSIONER OF INCOME-TAX.
BENCH
Member(s) : T. K. SHARMA., D. C. AGRAWAL.
JUDGMENT
The Revenue has filed appeal in ITA No. 1789/Ahd/2008 against the order of the learned CIT(A), dt. 14th March, 2008 raising the following grounds:
"1. The CIT(A) has erred in law and on facts in directing the AO to allow cost of acquisition of land worth Rs. 17 lacs to the assessee, in spite of the fact that the same was not recorded in assessee's books thereby ignoring the decision of the Hon'ble Gujarat High Court rendered in the case of Fakir Mohmed Haji Hasan vs. CIT (2001) 165 CTR (Guj) 111 : (2001) 247 ITR 290 (Guj) to the effect that no deduction is allowable under the provisions of the IT Act for unexplained and unrecorded expenditure made for the acquisition of an asset. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the AO."
2. The assessee has filed the cross-objections against this raising the following grounds:
"1. The learned CIT(A) grossly erred in treating the income as undisclosed income instead of long-term capital gain.
2. The learned CIT(A) further erred in confirming the sale value at Rs. 1.34 crore instead of Rs. 93,72,555.
3. The learned CIT(A) further erred in confirming the disallowance of claim of deduction under s. 54F of the Act.
4. The learned CIT(A) further erred in confirming the disallowance of improvement cost of land.
5. The learned CIT(A) further erred in confirming addition of Rs. 60,000 on account of household expenses."
3. Thereafter the assessee came forward to file independent appeal in ITA No. 141/Ahd/2009 raising the following grounds:
"1. On the facts and circumstances of the case as well as law on the subject, the learned AO has erred passing order under s. 153C when no satisfaction was recorded by the AO of the person searched.
2. On the facts and circumstances of the case as well as law on the subject the learned CIT(A) has not entertained the ground regarding the validity of proceedings under s. 153C when specific ground was raised before him and when he was requested in the course of appellate proceedings to supply the copy of satisfaction note prepared by AO of the person searched.
3. On the facts and circumstances of the case as well as law on the subject the learned CIT(A) has erred in confirming the action of the AO in estimating sales value of land at Rs. 1,34,00,000 instead of Rs. 93,72,555.
4. On the facts and circumstances of the case as well as law on the subject the learned CIT(A) has erred in confirming the action of the AO in making disallowance of claim of deduction under s. 54F of the Act.
5. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the AO in making disallowance of claim of improvement of Rs. 5,95,250 on cost of land.
6. It is, therefore, prayed that the treatment/disallowance given by AO and confirmed by CIT(A) may please be reversed."
4. The appeal filed by the assessee numbering ITA No. 141/Ahd/2009 was late by 235 days. It filed an application in the form of affidavit giving following reasons for filing the appeal late:
"1, the undersigned, Shri Vijay M. Vimawala, aged about 35 years, Hindu by caste, residing at 88, Someshwara Enclave, Udhna Magdalla Road, Surat on this 9th day of February, 2009 state as under solemn affirmation:
(1) The order of CIT(A) for asst. yr. 1999-2000 was received on 14th March, 2008. The appeal was partly allowed by the order of CIT(A).
(2) The appeal was therefore required to be filed before Hon'ble Tribunal on or before 13th May, 2008.
(3) As the assessee contemplated that the Department would file an appeal before Hon'ble Tribunal. The assessee's chartered accountant advised assessee to file the cross-objection against Revenue's appeal and in this way assessee was advised that his interest for justice would be served.
(4) Revenue has filed the appeal before Hon'ble Tribunal on 21st May, 2008 which was registered as Appeal No. 1789/Ahd/2008. Assessee also filed the cross-objection before Hon'ble Tribunal against the appeal filed by the Revenue which was registered as Appeal No. 117/Ahd/2008.
(5) The assessee has also raised the grounds regarding the validity of the assessment made under s. 153C before CIT(A) which could not be properly argued as satisfaction note for issue of notice under s. 153C was not provided.
(6) Assessee being a retired person didn't have regular source of income and therefore assessee did not pay the demand. On account of continuous pressure of IT Department for the recovery of demand, assessee approached another firm of chartered accountant namely Rasesh Shah & Associates in the month of January to conduct the appellate proceedings before Hon'ble Tribunal and to file stay application before Hon'ble Tribunal.
(7) The partner of Rasesh Shah & Associates, Shri Rasesh Shah, chartered accountant advised assessee to file an appeal before Hon'ble Tribunal raising also the legal ground regarding the validity of assessment made under s. 153C on seeing that notice issued under s. 153C referred satisfaction made by AO of the assessee instead of satisfaction required to be recorded by AO of the person searched. Therefore it was advised by the new chartered accountant firm namely Rasesh Shah & Associates to file belated appeal before Hon'ble Tribunal.
(8) Assessee being a retired person and not conversant with the intricacies of the law therefore did not file an appeal initially on the advise of previous chartered accountant. However he filed the belated appeal on 13th Jan., 2009 causing delay of 235 days. The delay may please be condoned looking to facts of the case which prevented the assessee to file appeal in time.
(9) It is prayed that the above delay in filing the appeal may please be condoned as the same has occurred due to above reason. We shall always remain grateful for the act of kindness."
5. The main thrust of the reasons for not filing the appeal in time was that the assessee had filed cross-objections in time in response to appeal filed by the Revenue but fearing that Revenue might withdraw the appeal and therefore, the cross-objections so filed would come in jeopardy, it has filed an appeal independently. Further that the issue regarding initiating proceeding under s. 153C of the Act was not raised in the cross-objections. It was required to be raised as it was a legal issue and went to the root of the matter.
6. We have heard the learned Authorised Representative of the assessee and the learned Departmental Representative on the condonation of delay. After hearing the parties and in the interest of imparting substantial justice we condone the delay in filing the appeal by the assessee. Notwithstanding the issue regarding validity of assessment by invoking s. 153C of the Act is a legal issue and, therefore, the assessee is entitled to raise it as additional ground otherwise also in. the cross-objections.
7. The facts of the case are that a search and seizure operation under s. 132 of the Act was carried out at the residence of one Shri Subodhbhai M. Sanghvi on 22nd Dec., 2004. During the course of search two documents were found which related to the transactions carried out by the assessee. The details of the documents and their relevance are narrated by the learned CIT(A) as under:
"The ground Nos. 2 to 4 relate to the assessment of capital gains on sale of property amounting to Rs. 1,34,000. The AO in this connection noted that search proceedings were carried out in the case of Shri Subodh Sanghvi in December, 2004 wherein two Satakhats were found which related to the appellant and were executed by the appellant. These were relating to T.P. Scheme No. 4, final plot No. 169 admeasuring 1,800 sq. ft. and consideration was of Rs. 1,34,00,000. The area of land was mentioned to be 1,800 sq. ft. However, it was also mentioned that if the plan was passed for larger area, the consideration would be adjusted accordingly and if it was for less area the transferee will get the benefit, of consideration. As per the first Satakhat the payment was made as per the details mentioned on p. 3. The second Satakhat mentioned the consideration of Rs. 1,17,00,000 against payment were mentioned as per details of p. 3 of the order. The appellant in his statement under s. 131 recorded on 12th Jan., 2005 stated that Satakhat was for Rs. 1,34,00,000 whereas due to dispute in area the consideration agreed was of Rs. 70,27,500. This statement was recorded on 12th Jan., 2005. The appellant had explained that the property was purchased for Rs. 17 lakhs in financial year 1985-86 and accordingly the capital gain was worked out at Rs. 38 lakhs, after considering indexation cost.
It is mentioned by the AO that in the course of assessment proceedings the appellant had submitted that the consideration received was of Rs. 93,72,555 and the long-term capital gain was offered at Rs. 33,02,974, after considering the cost of indexation and also deduction under s. 54F. The AO has not accepted this and stated in para 11 of the order that this variation made in the consideration by the appellant is not acceptable. There is no basis for it. At one point of time it was claimed to be Rs. 70,27,500 whereas in assessment proceedings it is shown to be Rs. 93,72,555 and as per the details of payment received in the seized Satakhat the appellant had received Rs. 1,05,07,500. It is also mentioned that the appellant itself had mentioned that initially the consideration was agreed at Rs. 1,17,00,000 whereas it was revised to Rs. 1,34,00,000."
8. The AO treated the entire sum of Rs. 1,34,00,000 as undisclosed income for the asst. yr. 1999-2000. The learned CIT(A) on the other hand treated the same as sale consideration but has not allowed the claim of the assessee under s. 54F of the Act. The learned CIT(A) however, allowed deduction for cost of acquisition as claimed by the assessee. The Revenue is in appeal against allowing this deduction under s. 54F of the Act whereas the assessee is agitated against increasing the sale consideration to Rs. 1,34,00,000 from Rs. 93,72,555. The main ground the assessee has raised is a legal ground about validity of assessment under s. 153C of the Act, in addition to other grounds on merits of the case as taken in the cross-objections.
9. The learned Authorised Representative of the assessee submitted that there is no evidence on record that books of account and documents belonging to the assessee and found during the course of search in the case of Shri Subodhbhai M. Sanghvi were handed over to the AO of the present assessee. The AO of Shri Subodhbhai M. Sanghvi has written to the AO of the present assessee about the seizure of documents relating to the present assessee. In this regard he referred to p. 42 of his paper book wherein the AO of the present assessee has informed the assessee about the intimation received from the AO of Shri Subodhbhai M. Sanghvi. For the sake of convenience the two letters are reproduced below:
"To
The Dy. CIT,
Central Circle-3,
Surat.
Sub: Intimation for initiation of proceedings under s. 153C of the IT Act in the case of Shri Vijay M. Vimawala, S-88, Someshwar Enclave, Udhna Magdalla Road, Surat-Reg.
Please refer to above.
2. Search action under s. 132 of the IT Act was carried out at the residential premises of Shri Subodhbhai M. Sanghvi on 22nd Dec., 2004. During the course of search. certain loose papers and documents were found and seized, page Nos. 28 to 31 of Annex. A/3 contained Satakhat in respect of sale of plot No. 169 of T.P. Scheme No.4 admeasuring 1,800 sq. yds. As per the Satakhat, the land was to be sold by Shri Vijaybhai M. Vimawala to Shri Subodhbhai M. Sanghvi for a total consideration of Rs. 1,17,00,000. As per the said Satakhat, Shri Vijaybhai M. Vimawala has received, payment of Rs. 70,27,500 on various dates as against the agreed amount of Rs. 1,17,000.
3. Since the documents pertaining to your assessee has been found and seized, necessary action under s. 153C of the Act may be taken at your end.
Sd/-
Usha N. Shorte
Asstt. CIT, Central Circle-1, Surat"
"Shri Vijay M. Vimawala,
S-58, Someshwara Enclave,
Udhna Magdalla Road,
Surat.
Sub: Information regarding notice under s. 153C in your case-199-2000-Regarding
Please refer to the letter dt. 24th April, 2009 filed by your representative Rashesh Shah & Associates, chartered accountants requesting for certain details.
2. The information is as under:
In the case of Shri Subodh M. Sanghvi, search and seizure operation under s. 132 of the Act was carried out on 22nd Dec., 2004 by Investigation Wing, Surat. During the post-search operation. the Investigating Wing was covered by Shri Vijay M. Vimawala under s. 131 of the Act on 12th Jan., 2005 and a copy of the said statement was forwarded to this office. Apart from the above. the Asstt. CIT, Central Circle-3, Surat, has given intimation regarding the seizure of certain loose papers and documents related to Shri Vijay M. Vimawala vide letter dt. 3rd Nov., 2006 along with the copy of the said seized materials. A copy of the letter received from the Asstt. CIT, Central Circle-I, Surat is enclosed herewith.
3. On the basis of the above statement, letter from the Asstt. CIT, CC-1, Surat and seized documents, a notice under s. 153C of the Act was issued on 8th Nov., 2006.
Sd/-
P.V. Yadav
Asstt. CIT, Central Circle-3, Surat."
10. On the above basis the learned Authorised Representative of the assessee submitted that initiation of proceedings for the asst. yr. 1999-2000 is invalid because if reckoned from 23rd Nov., 2006 when the AO of the present assessee was intimated about seizure of documents, then the AO of the present assessee is empowered only to reopen the assessment of the asst. yr. 2001-02 and not of prior assessment years. He invited our attention to s. 153C of the Act and proviso thereof according to which assessment in the case of other person can be reopened as provided under s. 153A of the Act but the date for reckoning of six prior assessment years would be the date when books of account and document were handed over by the AO of the person searched to the AO of the other person in respect of whom books of account/documents/money/bullion/jewellery or valuable articles/things were found. As contrast, the date of reckoning for accounting six prior assessment years would be the date of search in the case of the person searched.
11. According to him the reopening of the assessment under s. 153C of the Act is, therefore, invalid.
12. On the other hand, the learned Departmental Representative submitted that the fact as to when the books of account or documents relating to the present assessee for handing over to the AO of the present assessee are not clear. However, regarding legal position the learned Departmental Representative submitted that the provisions of proviso to s. 153C were made effective from 1st June, 2003 and, therefore, they may not be applicable for asst. yr. 1999-2000.
13. We have considered the rival submissions and perused the materials available on record. The facts as available on record remain that search in the case of Shri Subodh Sanghvi was carried out on 20th Dec., 2004. The statement of the assessee under s. 132 of the Act was recorded on 12th Jan., 2005 and intimation about the recovery of the documents pertaining to the assessee were sent to the AO of the present assessee on 3rd Nov., 2006. If it is presumed that there is no other correspondence between the AO of the person searched and the AO of the present assessee then handing over of documents to the AO of the present assessee could have taken place on or after 3rd Nov., 2006. In the backdrop of above facts let us examine the provisions of s. 153C and proviso thereof which reads as under:
"153C. Assessment of income of any other person.-(1) Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, where the AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A.
Provided that in case of such other person, the reference to the date of initiation of the search under s. 132 or making of requisition under s. 132A in the second proviso to sub-s. (1) of s. 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person."
14. The main thrust of s. 153C of the Act is to empower the AO of the person searched to handover the money, gold, jewellery or other relevant articles/things or books of account or documents belonging to the other person to the AO of that other person and the AO of that other person is empowered to proceed against such other person to assess undisclosed income resulting from such money, bullion, jewellery and valuable articles or things, books of account or other documents.
15. The proviso introduced by Finance Act, 2005 w.e.f. 1st June, 2003 makes a change in the date for reckoning the initiation of assessment proceedings of earlier years in the case of other person. In the case of person searched provisions of s. 153A of the Act are applicable. Provisions of sub-s. (1)(b) empowers the AO to assess or reassess total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Accordingly, the AO can issue notice under s. 153A of the Act for six preceding assessment years following prior to the previous year in which search is conducted. In the present case search in the case of Shri Subodh Sanghvi was conducted on 20th Dec., 2004, then in his case, the AO is empowered to initiate the proceedings for assessment/reassessment for the asst. yrs. 2004-05, 2003-04, 2002-03, 2001-02, 2000-01 and 1999-2000. It is because the assessment year relevant to previous year in which search took place is asst. yr. 2005-06 (previous year 2004-05). But when we apply provisions of proviso to s. 153C of the Act then date of search is substituted by date of handing over of the documents by the AO of the person searched to the AO of the other person (present assessee). This date is 3rd Nov., 2006 which falls in the previous year 2006-07 and relevant assessment year is 2007-08. The AO now can reopen the assessment for six assessment years preceding this assessment year. They are asst. yrs. 2006-07, 2005-06, 2004-05, 2003-04, 2002-03 and 2001-02. Thus, assessment for asst. yr. 1999-2000 is barred by limitation so far as the present assessee is concerned.
16. In any case, this issue is raised for the first time before us not been examined by the learned CIT(A). We restore the matter to his file for considering the date when the relevant documents were handed over by the AO of the person searched to the AO of the present assessee.
17. In addition, the assessee has raised the issue that the AO of the person searched has not recorded satisfaction that the documents found in the search really belonged to the present assessee and that it gave rise to undisclosed income. This issue is also not examined by the learned CIT(A) as the same was not before him. Since this is also a legal issue which requires to be adjudicated, we restore the entire appeal to the file of the learned CIT(A) to decide on the legality of issues first and then consider the merit of the appeal thereafter.
18. As a result, appeals as well as the cross-objections filed by the Department and the assessee all are allowed but for statistical purposes.
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