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2021 (4) TMI 540 - AT - Income TaxAssessment u/s 153C - undisclosed LTCG - whether the document in the form of tally and Balance sheet as found during the course of search belong to the assessee? - HELD THAT - To our mind, the documents found during the search in the given facts and circumstances, were of the SJSL where the transactions for the impugned land were recorded. Thus, these were the documents which were not belonging to the assessee but to M/s SJSL. Hence, in the absence of any document found belonging to the assessee, the proceedings under section 153C of the Act cannot be initiated against the assessee. On perusal of the statement recorded under section 133(4) reproduced by the AO in his order we do not find any remarks made by such director to the effect that material/document seized during the search does not belong to the PS i.e. SJSL , or belong to the assessee company. In this regard, we also note that there were no incriminating material against OP was found in the search. Further section 153C emphasize that there should be material or document seized which belong to the OP. As such statement recorded during search is not a material or document found and seized. Therefore the statement recorded under section 132(4) cannot be construed as material/document for invoking proceeding under section 153C of the Act specially, in the circumstances where no material of incriminating in nature found belonging to OP. What could be documents having bearing on the determination of the total income of the person searched or other ? - whether the document in the form of tally and balance sheet found during the course of search is an incriminating document in nature? - In our considered view such document are not an incriminating material, as such those documents are part of the books of account maintained by the SJSL wherethe transactions for the purchase and sales of the lands were duly disclosed. Likewise, the corresponding entries in the books of accounts of the assessee and corresponding capital gain was offered to tax in the income tax returns. Thus the impounded documents were belonging to the SJSL and not the assessee company where all the material facts were disclosed. Hence the same cannot be termed as incrimination document found against the assessee company. There is no ambiguity to fact that in case of the assessee normal assessment under section 143(3) of the Act was already completed vide order dated 22-02-2012. Thus the year under consideration is unabated assessment year which can be disturbed only based on incriminating document against the assessee found during the course of search as held by the Hon ble jurisdictional High Court in the case of Pr. CIT vs. Saumya Construction 2016 (7) TMI 911 - GUJARAT HIGH COURT Thus we are of the view that the proceedings initiated under section 153C of the Act without having any incriminating materials belonging to the assessee which have bearing on its income is not sustainable. Capital gain computation - application of sec 50C - whether the stamp duty as applicable on the date of agreement (Banakhat) i.e. 12 -03-2008 should be taken as sales consideration or the actual date when the properties were actually transferred to the ultimate buyer i.e. November 2009 to March 2010? - HELD THAT - The clause (vi) of the provisions of section 2(47) provides that the word transfer in relation to capital asset includes any transaction by way of agreement which has the effect of transferring or enabling the enjoyment of any property. Indeed, the buyer of the property is enjoying the property in the given facts and circumstances. Thus in our considered view the conditions as specified under clause (vi) of the section 2(47) of the Act has been satisfied. Thus the property was transferred on 28-03-2008. Accordingly in such circumstances the value of the stamp duty as applicable on the date of agreement i.e. 12-03-2008 shall be taken as the sale consideration for working out the capital gain. We also note that the right of the assessee got extinguished by virtue of agreement to sale with respect to the property in dispute. After entering into the agreement of sale a right in personam has been created in favour of the buyer and the assessee was bound to execute the conveyance deed as per the direction of the buyer i.e. SJSL, therefore such agreement of sale should be treated as the date of transfer of the property. CIT (A) alternately also held that by virtue of first provisoinserted in the provision of section 50C (1) vide finance Act 2016, the assessee will get relief due to the fact that consideration was decided along with agreement to sale i.e. before the execution of sale deed and also received part payment - As we note that the2nd proviso clearly stipulates that the stamp duty to be taken as the sale consideration of the agreement date where the amount of consideration or a part thereof has been received by an account payee cheque or by account payee bank draft or by use of electronic clearing system through the bank account on or before the date of agreement for transfer. Admittedly in the case on hand, the assessee has received a sum of R11,000 in cash at the time of agreement. The cheque payment was received by the assessee 1st time dated 05-10-2009 for ₹ 65,00,000/-. In other words the conditions as stipulated under the 2nd proviso to section 50C of the Act in order to enjoy the benefit of 1st proviso was not complied with by the assessee. Therefore we are of the view that the finding of the learned CIT (A) to this extent is not correct.
Issues Involved:
1. Validity of proceedings initiated under section 153C of the Income Tax Act. 2. Applicability of section 50C regarding the sale consideration for capital gains. 3. Determination of the date of transfer of the property for capital gains computation. 4. Consideration of incriminating material found during the search. Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 153C: The first controversy addressed is whether the proceedings initiated under section 153C of the Income Tax Act are valid. It was noted that prior to the amendment by the Finance Act 2015, section 153C required that any valuable assets or documents found during a search must belong to a person other than the one searched. The AO must record satisfaction that such materials belong to the other person (OP). In this case, the seized documents were profit and loss accounts and tally books of SJSL, indicating transactions of sales of lands purchased earlier through Banakhat. The documents belonged to SJSL, not the assessee. Therefore, the proceedings under section 153C were deemed invalid as the materials did not belong to the assessee. The court referenced the case of Anil Kumar Gopi Kishan Agarwal vs. ACIT, where it was held that the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C did not exist if the seized material did not belong to the assessee. 2. Applicability of Section 50C Regarding Sale Consideration: The AO proposed to take the sale consideration equal to the value declared for stamp duty purposes, invoking section 50C. However, the assessee contended that the transfer of property occurred on 12-03-2008 based on Banakhat, where the stamp duty value was much lower than the actual consideration received. The CIT(A) held that the provisions of section 50C were not applicable as the transfer was effective from the date of the Banakhat. The Tribunal upheld this view, stating that the property was transferred on 12-03-2008, and the stamp duty value on that date should be considered for capital gains computation. 3. Determination of the Date of Transfer: The Tribunal examined whether the date of the Banakhat (12-03-2008) or the actual transfer date (November 2009 to March 2010) should be considered for determining the sale consideration. It was concluded that the property was transferred on 12-03-2008 as per the agreement, which created a right in favor of SJSL to enjoy the property. The Tribunal referenced the case of Sanjeev Lal vs. CIT, where it was held that an agreement to sell creates a right in personam, and the property can be deemed transferred if the right is extinguished by the agreement. 4. Consideration of Incriminating Material Found During the Search: The Tribunal noted that the AO did not identify any incriminating material found during the search that belonged to the assessee. The documents found were of SJSL, and no adverse remarks were made against the assessee in the statements recorded. The Tribunal emphasized that for proceedings under section 153C, there must be incriminating material belonging to the assessee, which was not the case here. The Tribunal referenced the case of DCIT vs. National Standard India Ltd., where it was held that statements recorded under section 132(4) cannot be construed as material for invoking section 153C. Conclusion: The Tribunal dismissed the appeal filed by the Revenue, upholding the CIT(A)'s decision that the proceedings under section 153C were invalid and that the provisions of section 50C were not applicable based on the date of the Banakhat. The cross objection filed by the assessee was dismissed as infructuous. The Tribunal concluded that the assessment could not be reopened without incriminating material belonging to the assessee.
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