2014 (5) TMI 199 - HC - Income Tax

Substantial question of law - Sale of Transferable Development Rights (TDRs) - Jurisdiction of the AO to issue notice u/s 153C of the Act - Quantification of profit on sale of TDR - Proper sale rate per sq.ft of TDR Held that - The Tribunal has correctly arrived at a factual conclusion that the assessee has the right of ownership on Parvati land which was taken over by the Pune Municipal Corporation namely, PMC - The PMC in turn granted the TDRs - The assessee got rights on the TDRs as per mutual understanding between the Rauts and the assessee - formal irrevocable Power of Attorney is signed only on 9th March 2001 in favour of the assessee - The transactions in relation to TDR with M/s.SAVM Associates were concluded by Shri T.S. Raut vide agreement dated 29th April 2000 - The Power of Attorney was not in force at the time when the transaction in relation to TDR with M/s.SAVM Associates was concluded by Shri Raut - Power of Attorney and which is stated to be irrevocable is signed only on 9th March 2001. The reference is made by the Tribunal to the entries in the books of account - It is on that footing that a benefit of doubt is given to the assessee - the addition is deleted, merely because the addition is to the extent of Rs.5,61,34,260/-, that by itself and without anything more, will not raise a substantial question of law the contention of Shri Gupta cannot be accepted that the addition should not have been deleted because the TDR remained in actual possession and control of the assessee - the disposed of as per the directions of the assessee is an attempt to re-appreciate and re-appraise the factual materials - Once the Tribunal has taken the date of the transaction of TDR and arrived at a factual conclusion that the Power of Attorney in favour of the assessee may be irrevocable but it is subsequent in point of time that the Appeal does not raise any substantial question of law for consideration Decided against Revenue.

Summary

Issues Involved:
1. Validity of the Tribunal's decision to apply a specific rate for unaccounted receipts from the sale of Transferable Development Rights (TDR).
2. Jurisdiction of the Assessing Officer in issuing notice under Section 153C.
3. Estimation of sale transactions based on seized documents.
4. Deletion of additions made by the Assessing Officer based on the seized documents.
5. Relevance of the irrevocable Power of Attorney in determining the tax liability.

Issue-wise Detailed Analysis:

1. Validity of the Tribunal's Decision on TDR Sale Rate:
The Revenue challenged the Tribunal's direction to apply a rate of Rs.220/- per sq.ft instead of Rs.225/- for unaccounted receipts from the sale of TDR. The Tribunal decided that the rate of Rs.220/- should only apply to the sale of 4133 sq.mt of TDR, as opposed to the entire sale of 21,650 sq.m. The Tribunal's rationale was based on the specific evidence found during the search, which only supported the lower rate for a particular portion of the TDR sales.

2. Jurisdiction of the Assessing Officer under Section 153C:
The Tribunal discussed the jurisdiction of the Assessing Officer in issuing notice under Section 153C but did not express an opinion on this matter in the current appeals. The Tribunal noted that this issue was the subject of separate appeals listed for a later date. Therefore, the present appeal did not raise any questions regarding the validity of the proceedings under Section 153C.

3. Estimation of Sale Transactions Based on Seized Documents:
The Tribunal examined the seized documents, particularly page 82, which evidenced the sale of TDRs. The Tribunal found that the Assessing Officer's global estimation of total sale proceeds based on a rate of Rs.225/- per sq.ft was improper. The Tribunal restricted the estimation to the sales reflected on page 82, considering it corroborative evidence. The Tribunal directed the Assessing Officer to apply an average rate of Rs.220/- per sq.ft for these sales and delete the rest of the additions due to the lack of corroborative evidence for other transactions.

4. Deletion of Additions Based on Seized Documents:
The Tribunal held that apart from page 82 and an unsigned agreement found on page 42, there were no other materials to estimate the sale of TDRs. The Tribunal found that these documents only enabled the estimation of TDRs mentioned on page 82 and not other transactions. The Tribunal justified the deletion of other additions made by the Assessing Officer, as there was no substantial question of law arising from the exercise undertaken by the Tribunal.

5. Relevance of the Irrevocable Power of Attorney:
The Tribunal analyzed the irrevocable Power of Attorney dated 9th March 2001, which was subsequent to the TDR transactions concluded by Shri T.S. Raut on 29th April 2000. The Tribunal concluded that the Power of Attorney could not be relied upon to fasten tax liability on transactions concluded prior to its execution. The Tribunal found contradictions in the statements of Raut and references to entries in the books of account, ultimately giving the benefit of doubt to the assessee and deleting the addition of Rs.5,61,34,260/-.

Conclusion:
The Tribunal's decision was based on a detailed analysis of the evidence and documents seized during the search. The Tribunal's findings were factual, and the High Court agreed that no substantial question of law arose from the Tribunal's exercise. Therefore, the appeals were dismissed, and the Tribunal's order was upheld.