2019 (1) TMI 1553 - HC - Income Tax

Benefit of declaration made by the assessee under VDIS - credit of VDIS - unexplained investment in land - No nexus between the receipt of sale consideration from the purchase party and the payment thereof to the seller of the land - both Tribunal as well as the Commissioner (Appeals) have recorded concurrent findings of fact that the land was sold to the extent of 37,000 square yards and not 92,500 square yards as held by the Assessing Officer. - HELD THAT - Though the search came to be carried out on 30.06.1996, the notice under section 158BD read with section 158BC of the Act came to be issued subsequent to the declaration having been filed under the VDIS 1997. This court is, therefore, in the agreement with the view adopted by the Tribunal and the Commissioner (Appeals) that once the certificate under section 68(2) of the Finance Act, 1997 under the VDIS Scheme had been issued by the Commissioner of Income Tax, it was not permissible for the Assessing Officer to go behind such certificate, but is required to accept the same. Thus, the assessee having included the amount of ₹ 38,50,000/- in the disclosure made under the VDIS 1997, he was rightly given the credit thereof. 50% of unexplained investment in land taxed in the hands of the assessee substantively being 50% of alleged unexplained investment in land - Commissioner (Appeals) has found that the source of payments made by the assessee was out of moneys received from Shri Bhagwanbhai K. Patel and Shri A. B. Patel discussed in the assessment order. The Commissioner (Appeals), therefore, was of the view that the observation of the Assessing Officer that the source was not explained or the nexus was not established cannot be accepted. Thus, the conclusions arrived at by the Tribunal are based upon concurrent findings recorded by it after appreciating the material on record. Nothing has been pointed out to this court to indicate that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor has the learned senior standing counsel for the appellant been able to dislodge the findings of fact arrived by the Tribunal after appreciating the material on record. In the absence of any perversity in the findings of fact recorded by the Tribunal, it is not possible to state that the same suffers from any legal infirmity so as to warrant interference. - Decided in favour of assessee.

Summary

Issues Involved:

1. Deletion of addition of ?97,12,500/- being 50% of alleged profit on sale of land and ?1,64,18,750/- being 50% of alleged unexplained investment in land.
2. Deletion of addition on account of 50% of profit on sale of land of ?97,12,500/-.
3. Deletion of addition on account of 50% of unexplained investment in land of ?1,64,18,750/-.
4. Reduction of sales consideration of land from ?1,94,250,000/- to ?77,70,000/-.
5. Credit of income of ?38.50 lakhs disclosed under VDIS 1997.

Detailed Analysis:

1. Deletion of addition of ?97,12,500/- and ?1,64,18,750/-:

The assessment pertains to the block period from 01.04.1986 to 21.01.1997. A search conducted at Shyam Builders Group premises led to the seizure of a banakhat dated 30.06.1996, indicating a land sale agreement. The Assessing Officer (AO) computed the undisclosed income of the assessee at ?5,22,62,500/- based on this document. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions, and the Tribunal upheld this decision. The Tribunal found no material suggesting that more land was conveyed than the 37,000 square yards as per the subsequent Memorandum of Understanding.

2. Deletion of addition on account of 50% of profit on sale of land of ?97,12,500/-:

The CIT(A) and the Tribunal noted that the original agreement was for 92,500 square yards, but due to litigation, the final deal was for 37,000 square yards. The AO's inference of the sale for 92,500 square yards was not justified. The sale price was adjusted to ?77,70,000/- for 37,000 square yards instead of ?1,94,25,000/- for 92,500 square yards. The Tribunal upheld this finding, noting that the total consideration received was ?2,09,00,000/-, with ?1,31,00,000/- paid to Shri Babubhai Pothani, leaving ?77,00,000/- as the margin, split equally between the assessee and Shri Udaybhai Bhatt.

3. Deletion of addition on account of 50% of unexplained investment in land of ?1,64,18,750/-:

The CIT(A) accepted the assessee's explanation that the payments were sourced from the amounts received from the land sale. The Tribunal concurred, noting that the AO's observation of unexplained sources and lack of nexus was not substantiated. The Tribunal found that the assessee's share of ?38,50,000/- was disclosed under the VDIS 1997 and was duly credited.

4. Reduction of sales consideration of land from ?1,94,250,000/- to ?77,70,000/-:

The Tribunal agreed with the CIT(A) that the sale was finalized for 37,000 square yards due to litigation, and the sale price was correctly reduced. The Tribunal found no evidence to support the AO's higher valuation and upheld the reduced consideration.

5. Credit of income of ?38.50 lakhs disclosed under VDIS 1997:

The Tribunal upheld the CIT(A)'s decision to credit the income disclosed under the VDIS 1997. The Tribunal noted that the VDIS certificate issued under section 68(2) of the Finance Act, 1997, could not be contested by the AO. The search was conducted on 30.06.1996, and the VDIS declaration was made on 28.12.1997, before the notice under section 158BD was issued. The Tribunal found no infirmity in the CIT(A)'s action and upheld the credit of ?38,50,000/- disclosed under the VDIS 1997.

Conclusion:

The Tribunal's conclusions are based on concurrent findings of fact after appreciating the material on record. The Tribunal found no legal infirmity in the CIT(A)'s decisions and upheld the deletions and adjustments made. The appeal was dismissed, and the questions were answered in favor of the assessee and against the revenue.