2014 (11) TMI 558 - HC - Income Tax

Interpretation of section 153C and 158BD Held that - The Tribunal was rightly of the view that the conclusions of the CIT (A) on the issue with regard to the AYs which can be subjected to proceedings u/s. 153C of the Act as well as the conclusions with regard to the validity of the additions - both in the statement of Shri Shailesh Vora as well the seized document, the reference was to the period prior to AY 98-99 - The seized document itself contains such a noting - As per the terms of the Agreement with J.P. Corporation, the Assessee had to settle all the advances received by it from the prospective purchasers of flats - Thus the receipts cannot be considered as income - the sums which as per the noting in the seized document, related to Financial Years 1998- 99 and earlier period, could not be treated as income of any of the AYs. 2001-02 to 07-08 the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Interpretation of section 153C and section 158BD of the Income Tax Act, 1961.

Analysis:
The judgment by the High Court of Bombay involved appeals challenging the order passed by the Income Tax Appellate Tribunal. The key contention raised was regarding the interpretation of sections 153C and 158BD of the Income Tax Act, 1961. The Tribunal had considered the correctness of conclusions reached by the Commissioner of Income Tax (Appeals) in a common order dated March 29, 2010. The Appeals pertained to the Revenue challenging the Commissioner's order, with the Assessee filing Cross-Objections. The Assessment Years in question were from 2001-2002 to 2007-2008, involving a partnership firm previously known as M/s. Vora Enterprises engaged in the business of building and property development.

The case stemmed from a search and seizure operation conducted under section 132 of the Income Tax Act in the premises of M/s. Athiti Group, leading to the discovery of loose papers related to a project named "Vora Village" later renamed as Leela Nagari. The project encountered various challenges, including legal issues, ultimately resulting in the termination of the Assessee's rights by the landowner. Subsequently, the Assessee decided to dispose of the project and approached Shri Athiti N. Patel, who did not express interest in taking over the project. During the assessment proceedings of M/s. Athiti Group, it was claimed that the seized papers belonged to a partner of the Assessee, Mr. Shailesh P. Vora, who acknowledged their association with the Assessee firm.

The Tribunal extensively reviewed the questions posed to the Assessee and Mr. Shailesh P. Vora's responses. It was noted that the Assessing Officer's jurisdiction assumption was not permissible under the law. The Tribunal upheld the conclusions of the Commissioner of Income Tax (Appeals) on the issue of assessment years subject to proceedings under section 153C of the Act and the validity of the additions made. The Tribunal emphasized that the seized documents referred to periods before the relevant assessment years and could not be considered as income for those years. The Tribunal also highlighted the Assessee's sale of the project to J.P. Corporation, settling advances received from prospective flat purchasers, which further supported the non-taxable nature of the receipts.

In the face of these factual findings and concurrent decisions, the Appellant contended that the Appeals raised substantial questions of law on the interpretation of legal provisions, warranting admission. However, the Court found no merit in entertaining the Appeals as the factual findings were not deemed perverse or legally flawed. The Court clarified that while the substantial legal questions could be addressed in a suitable case, there was no justification to prolong the Appeals in the present circumstances. Consequently, the Appeals were dismissed, emphasizing the importance of not wasting judicial time on futile exercises when the factual findings were sound and legally sound.