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2014 (7) TMI 638 - AT - Income TaxValidity of proceedings u/s 153C of the Act Assessment of income of any other person - Held that - The provisions contained u/s. 153C of the Act can only be invoked where there was satisfaction by the AO having jurisdiction over the person searched or requisitioned u/s. 132A during the course of assessment proceedings - the proceedings u/s. 153A of the Act always precede the proceedings u/s. 153C of the Act and without recording satisfaction note by the AO initiating proceedings for completion of assessment u/s. 153A of the Act cannot be proceeded u/s. 153C of the Act in the case of such other person not searched - initiation of proceedings u/s. 153C of the Act in the case of the assessee for these two assessment years is not proper as there is no satisfaction recorded by the AO having jurisdiction over the person searched or requisitioned u/s. 132A of the Act during the course of assessment proceedings of searched party or later before issue of notice u/s. 153C of the Act thus, the assessment framed u/s 153C of the Act is set aside Decided in favour of Assessee.
Issues Involved:
1. Validity of proceedings initiated under Section 153C of the Income-tax Act, 1961. 2. Determination of long-term capital gains for the assessment year 2007-08. 3. Determination of short-term capital gains for the assessment year 2009-10. 4. Adoption of the cost of acquisition as on 1-4-1981. 5. Allowance of expenditure towards development costs. Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 153C: The assessee contended that the initiation of proceedings under Section 153C was not in accordance with the law, arguing that the required satisfaction note was not recorded by the Assessing Officer (AO) who passed the order under Section 153A before the seized documents were transmitted to the AO of the assessee. The Tribunal examined the procedural requirements under Sections 153A and 153C, noting that the AO must be satisfied that the seized documents belong to a person other than the searched person. The Tribunal found that the satisfaction note was not properly recorded by the AO having jurisdiction over the person searched, rendering the initiation of proceedings under Section 153C invalid. Consequently, the Tribunal quashed the assessments framed under Section 153C for both assessment years. 2. Determination of Long-Term Capital Gains for Assessment Year 2007-08: The AO had added Rs. 8,69,18,511 towards long-term capital gains based on a Development Agreement-cum-GPA executed by the assessee in favor of SSICPL on 27-10-2006. The CIT(A) upheld this addition, noting that the agreement constituted a "transfer" under Section 2(47)(v) of the Act, read with Section 53A of the Transfer of Property Act, 1882. The CIT(A) relied on judicial precedents, including the Bombay High Court's decision in Chaturbhuj Dwarakadas Kapadia vs. CIT, to conclude that the capital gains were chargeable to tax in the assessment year 2007-08. 3. Determination of Short-Term Capital Gains for Assessment Year 2009-10: For the assessment year 2009-10, the AO computed short-term capital gains of Rs. 5,88,15,978 based on the buyback of 70,947 sq. feet of built-up area by SSICPL. The CIT(A) upheld the AO's computation, noting that the consideration of Rs. 12,97,62,978 was for the built-up area bought back by the developer, and the short-term capital gains were rightly brought to tax after deducting the cost of construction. 4. Adoption of Cost of Acquisition as on 1-4-1981: The AO adopted a rate of Rs. 50 per sq. yard based on information from the SRO, while the assessee claimed a market value of Rs. 1,000 per sq. yard. The CIT(A) observed that the guideline value from the SRO was not conclusive evidence of fair market value and, based on judicial precedents, determined that a fair market value of Rs. 500 per sq. yard would be reasonable. 5. Allowance of Expenditure Towards Development Costs: The assessee claimed expenditures of Rs. 7,04,56,050 and Rs. 84,00,000 towards development costs. The CIT(A) disallowed these claims due to a lack of evidence supporting the expenditures. The CIT(A) noted that the Development Agreement only referred to land, not any construction, and no evidence of demolition or development costs was provided. Conclusion: The Tribunal quashed the assessments framed under Section 153C for both assessment years due to the improper recording of the satisfaction note. Consequently, the Tribunal did not address the merits of the additions made by the AO. The assessee's appeals were allowed, and the Revenue's appeal was dismissed as infructuous.
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