2009 (1) TMI 92 - HC - Income Tax

Assessee, a developer had agreement with owner for development of land - additions of undisclosed initial investment - revenue contend that tribunal wrongly deleted the additions because addition was made on the basis of some loose papers seized during the search and these papers contained notings suggesting amount to be received and the balance - Tribunal finding that there is nothing on record to show that the assessee paid any amount in excess to owner additions rightly deleted by tribunal

Summary

Issues Involved:
1. Deletion of addition on account of capital gains not offered to tax.
2. Deletion of addition on account of undisclosed capital gains treated as unaccounted initial payment.
3. Deletion of addition on account of initial investment based on loose papers found during the search.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Capital Gains Not Offered to Tax
The Tribunal had found that the assessee was regularly filing returns of income and had disclosed the transactions related to the development of land in the returns. The Tribunal scrutinized the material on record and concluded that the transactions amounting to Rs.2,26,78,400/- were duly entered in the books of the assessee and disclosed in the returns of income for regular assessment. Consequently, the proceedings under Chapter XIV B of the Finance Act, 1995, which deals with special procedures for assessment in search cases, could not have been initiated. The Tribunal found no material from the file of the assessee showing that the Assessing Officer found any undisclosed income during the search. Therefore, the Tribunal's finding that the income disclosed in the regular returns could not be the subject matter of block assessment was upheld, and Tax Appeal No.1195 of 2008 was dismissed.

2. Deletion of Addition on Account of Undisclosed Capital Gains Treated as Unaccounted Initial Payment
The Tribunal considered the statement recorded under Section 132(4) of the Income Tax Act, wherein the assessee was questioned about loose papers indicating extra consideration received at the rate of Rs.50/- per sq.mt. The assessee clarified that he negotiated for Rs.50/- per sq.mt. over and above Rs.125/- per sq.mt., but it did not materialize. The Tribunal found no material seized during the search proving that the assessee received Rs.175/- per sq.mt. instead of Rs.125/- per sq.mt. The Tribunal held that the addition of Rs.1,07,17,950/- was rightly deleted. Consequently, Tax Appeal No.1196 of 2008 was dismissed as no substantial question of law arose for consideration.

3. Deletion of Addition on Account of Initial Investment Based on Loose Papers Found During the Search
In Tax Appeal No.690 of 2008, the Tribunal found that the proposed question of law did not arise from the order in IT(SS)A No.109/Ahd/2005, as the ground could not have been urged by the assessee. The appeal was dismissed. In Tax Appeal No.1514 of 2008, the Tribunal upheld the decision of the Commissioner (Appeals) directing the deletion of Rs.25,73,100/- as no material was found proving that the assessee paid Rs.175/- per sq.mt. instead of Rs.125/- per sq.mt. Similarly, in Tax Appeal No.706 of 2008, the Tribunal upheld the deletion of Rs.41,82,750/- based on the same reasoning. The Tribunal found no substantial question of law arising from the impugned orders, and both appeals were dismissed.

Conclusion:
The Tribunal's findings were based on the scrutiny of material evidence and the regular disclosure of transactions by the assessee in the returns of income. The appeals were dismissed as no substantial questions of law arose for consideration. The Tribunal's decisions regarding the deletion of additions on account of capital gains and initial investments were upheld.