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2016 (10) TMI 1157 - AT - Income TaxCapital gains for sale of shares - selection of assessment year - when the transfer of shares took place and what is the actual sale consideration for the purpose of reckoning Capital Gains? - Held that - The date of MOU cannot be taken as the date of contract for sale because unless and until the condition in Cl 13 is fulfilled the understanding does not assume the character of agreement for sale, and it is only on that event the amount becomes the part consideration. Till such time it is only an advance amount only, not liable for tax under the head of capital gains. We hold that when the parties adopt a mechanism in the agreement for sale itself that if a specified condition is not fulfilled, the amounts paid shall be refunded and the agreement shall be abandoned, and it is only on the accomplishment of such condition any further steps would be taken, in such situation the controlling expression of transfer is non conclusive as to the true nature of the transaction till the condition is fulfilled and then the date of fulfillment of such condition shall be taken as date of contract for sale within the meaning of Circular No. 704 dated 28.04.1995 with reference to section 2(42A) and the amounts paid by the transferee till the fulfillment of such condition would remain as advance only, but not as part for sale consideration for the purpose of reckoning the capital gains. In the search proceedings, it surfaced that the assessee was in receipt of the cash component of ₹ 740.90 lacs only towards the share sale consideration , the said receipt cannot be taxed / treated separately under any other head other than capital gains . We hold that the character of the receipt does not change pursuant to the search. Infact the search proceedings had rather sanctified the nature and character of such receipt to be part of share sale consideration. Accordingly, we hold that since it is a part of the transaction pertaining to sale of the shares, the cash component of ₹ 7,40,90,000/- cannot be treated separately and has to be treated as capital gain arising on sale of such shares and as such the contention of the revenue to treat the same as otherwise cannot be upheld in any manner even in Asst Year 2010-11. In any case, the said receipt cannot be taxed in Asst Years 2006-07 and 2007-08 separately. As discussed earlier, transfer having taken place only in Financial Year 2009-10 relevant to Asst Year 2010-11, when executed transfer deeds along with share certificates were handed over Mr. Kathotia and when transfer pursuant to order of Court was completed, the entire capital gain is taxable in Asst Year 2010-11 only and cash components in this regard received earlier cannot be taxed in the Asst Years 2006-07 and 2007-08. Undisclosed receipts and undisclosed expenditure on the basis of the seized document marked SSG/1 - Held that - AO has chosen to treat the said sums as undisclosed income merely on assumption without any evidence being in his possession nor he examined such companies. Hence the assumption has to be followed that since some of such companies are assessee s associate concern as observed by ld CITA and which has also not been disputed by revenue in its appeal at any stage. Hence the necessary corollary of these facts is that these sums referred to as Land Development Cost is nothing but expenditure incurred and hence has to be treated as Undisclosed expenditure only. In respect of the treatment of the said sum as undisclosed expenses, we find substantial merit in the fact and we uphold the order of ld CITA. Setoff of available cash - Held that - We find merit in the fact that that the ld AO himself had allowed such set off in the assessment order so revenue cannot be allowed to change its stand now. Even otherwise, the revenue is not in possession of any evidence nor it has furnished any such fact on record that the sums expended were other than out of sum earned / received as cash by the assessee. Hence, we concur with the order of ld CITA in allowing sums as part of cash flow and as such the revenue s ground fails on such account. Unexplained land purchased - corroborative material to prove the allegation by the revenue - Held that - The assessee had duly rebutted the presumption of the loose sheets as representing only land filling expenses and admittedly there is absolutely no evidence brought on record to conclude that the same represents amounts paid for purchase of land. We also agree with the argument of the ld AR that the ld AO had resorted to divergent stand on the same seized document by one treating it as purchase of land and the other treating it as land filling charges, thereby erroneously making addition on both the counts. It is pertinent from such documents that the value of 2486.20 Cottahs couldn t have become ₹ 36,09,98,700/- for 2950.56 Cottahs from March 2008 to December 2008. As far as the contention of assessee to treat the (pg 31 of SG/8) as land filling charges, it appears to be credible since revenue s action in that regard is merely on assumption. Even otherwise, the revenue failed to bring any evidence on record to prove its finding. Hence the ld AO s action in such respect is rejected and do not find any justifiable reason to interfere with the finding of the ld CITA. unexplained investment on the basis of seized document - whether the presumption u/s 292C shall be treated as mandatory under the law or whether it shall be treated as a rebuttable presumption? - Held that - Even after presumption applied to the facts u/s 292C of the Act, there is no adequate material to conclude that the transactions in the seized documents are the transactions of the assessee which remained undisclosed. The other aspects of the matter is that the presumption u/s 292C of the Act is rebuttable presumption and they don t lead to conclusive evidence. The assessee, under the principles of natural justice, has the right to rebut the presumption. Under that right also he is entitled to state that the transactions belonging to him are not recorded under any name as Kishanji . In our opinion, the information about the undisclosed expenditure, the assessee is based on inadequate or irrelevant material. Under the circumstances this ground of appeal is dismissed. Addition of Unexplained investment - Held that - As regards page 48 of the seized document, we find that factually there is no change in shareholding of the impugned companies i.e Adamaya Nirman, Shree Bishnu Nirman, Shree Bishnu Priya Plaza, Shree Gayatri Plaza and Shree Kartic Plaza and hence even if it is assumed that the contents of page 48 are true, then also the very basis being transfer of such companies having not taken place and hence entire argument of the ld AO fails. However, in the facts and circumstances, we do not find merit in the ld AO s contention since the transfer of company itself not having taken place and hence entire addition of ₹ 5,00,00,000/- fails.
Issues Involved:
1. Validity of the search and assessment orders. 2. Addition made in respect of transactions with Fort Group. 3. Addition based on seized document marked SSG/1. 4. Addition based on seized document marked SSG/3. 5. Addition based on seized document marked SSG/6. 6. Addition based on seized document marked SSG/8 read with SSG/44. 7. Addition based on seized document marked SSG/9-39. 8. Addition based on seized document marked SSG/42. 9. Addition based on seized document marked SSG/45. 10. Addition based on seized document marked SSG/48. 11. Addition towards cash, jewelry, and undisclosed bank accounts. Detailed Analysis: 1. Validity of the Search and Assessment Orders: The assessee's appeal questioned the validity of the search and assessment orders. However, these grounds were dismissed as not pressed. 2. Addition Made in Respect of Transactions with Fort Group: - A.Y 2006-07 & 2007-08: The CIT(A) held that the amounts received by Sri Bagla against the sale of shares of M/s. Graphitech India Ltd. were taxable in A.Y. 2010-11 and not in A.Y. 2006-07 or 2007-08. The Tribunal upheld this decision, dismissing the revenue's appeal. - A.Y 2010-11: The CIT(A) treated the undisclosed receipts as "Capital Gain" instead of "Income from other sources." The Tribunal upheld this decision, dismissing the revenue's appeal. 3. Addition Based on Seized Document Marked SSG/1: - A.Y 2006-07 & 2008-09: The CIT(A) confirmed the addition of undisclosed receipts and unexplained expenditure based on the seized document SSG/1. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals but allowed some grounds for statistical purposes. 4. Addition Based on Seized Document Marked SSG/3: - A.Y 2007-08, 2008-09 & 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/3. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 5. Addition Based on Seized Document Marked SSG/6: - A.Y 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/6. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 6. Addition Based on Seized Document Marked SSG/8 Read with SSG/44: - A.Y 2006-07, 2008-09 & 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/8. However, the CIT(A) deleted the addition of ?26.64 crores as undisclosed investment, which was upheld by the Tribunal. The Tribunal dismissed the assessee's and revenue's appeals. 7. Addition Based on Seized Document Marked SSG/9-39: - A.Y 2003-04 to 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/9-39. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 8. Addition Based on Seized Document Marked SSG/42: - A.Y 2007-08, 2008-09 & 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/42 but deleted the addition of ?7.19 crores as undisclosed investment. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 9. Addition Based on Seized Document Marked SSG/45: - A.Y 2007-08 & 2008-09: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/45 but deleted the addition of ?5 crores as undisclosed investment. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 10. Addition Based on Seized Document Marked SSG/48: - A.Y 2008-09 & 2009-10: The CIT(A) confirmed the addition of undisclosed expenditure based on the seized document SSG/48 but deleted the addition of ?5.91 crores as undisclosed income. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. 11. Addition Towards Cash, Jewelry, and Undisclosed Bank Accounts: - A.Y 2006-07 to 2009-10: The CIT(A) confirmed the addition of undisclosed assets and bank accounts but allowed set off against undisclosed income. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's and revenue's appeals. Conclusion: The Tribunal upheld the CIT(A)'s decisions in most cases, dismissing both the assessee's and revenue's appeals. The additions based on various seized documents were confirmed or deleted as per the CIT(A)'s findings, with some grounds allowed for statistical purposes.
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