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TMI Blog2011 (9) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding assessment order passed under section 144 of the Income-tax Act, 1961 dated December 28, 2006 were that one of the director Mr. Vikas A. Shah was subjected to search on February 9, 2005. The Assessing Officer has discussed a seized document marked as annexure "A-186" and the pages referred were No.95 to 104. That was a document, alleged to be an agreement dated May 27, 2004, found to be executed between the assessee-company, i.e., Mansi Builders Ltd. and one Mr. Kartik J. Patel. The said agreement was stated to be in respect of a land admeasuring 70,430 sq.yards (this area as mentioned by the Assessing Officer was later on corrected and the correct area which was the subject-matter of controversy was found to be 17,430 sq.yards). The Assessing Officer has alleged that the assessee-company has sold the said land admeasuring 17,430 sq. yards to Mr. Kartik J. Patel at Rs.5,850 per sq.yard for a total consideration of Rs. 10.79 crores. A statement of the said director was recorded under section 131(1A) on February 28, 2005. As per the said statement, he has admitted that a sum of Rs. 16 lakhs was received through cheque and a sum of Rs. 5 lakhs was received in cash, thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it received an amount of Rs. 10.79 crores. (f) The seized material cannot be considered partly correct and partly incorrect as per the provisions of section 132(4A) and they have to be taken in totality. Therefore, the assessee's contention that the seized papers are only partly correct is nothing but an attempt to escape the tax liability and mislead the Department. Finally, a sum of Rs. 10.79 crores was taxed as unaccounted income in the hands of the assessee. The matter was carried before the first appellate authority. (B) Proceedings before the first appellate authority : Before the learned Commissioner of Income-tax (Appeals), it was submitted that the Assessing Officer had made the addition only on the basis of a statement of the director Mr. Vikas A. Shah which was recorded under section 131(1A) on February 28, 2005 but while answering questions Nos. 12, 72 and 155 he had categorically stated that by that date he had only received Rs. 21 lakhs from one Shri Kartik J. Patel, alleged purchaser. The assessee has questioned that why the veracity of the said statement was not cross-checked by the Assessing Officer and specially why the Revenue Department had not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand report was called for by the learned Commissioner of Incometax (Appeals). In report, there was a reference of the "agreement dated May 27, 2004" for the reason that as per one of the terms, it was stated that the entire property was sold to the other party. In the said report the Assessing Officer has, inter alia, reiterated that firstly the assessee had followed the mercantile system of accounting, therefore, the entire amount which was agreed upon as per the said agreement had accrued to the assessee and chargeable under section 5(1) of the Income-tax Act. Alternatively, it has also been informed by the Assessing Officer in the said remand report that by virtue of the said agreement, the assessee has transferred his rights to the purchaser, therefore, rightly taxed as undisclosed receipts in the hands of the assessee. In reply to the remand report, the assessee has contested that the impugned agreement was not a registered agreement and it was simply a memorandum of understanding. Since the terms and conditions could not be followed, therefore, the deal was cancelled and the assessee remained in possession of the property without effecting any change. No ownership, title, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instalments were to be paid in the years to come. That the said sum was to be paid within three years from the date of the agreement, out of which Rs. 2 crores was to be paid within 12 months. It was also agreed upon that clearance certificate and other clearances as well as the sanctioning of the revised plan was the responsibility of the vendor. The learned authorised representative has therefore contested that it was not an outright sale because the said document was not registered but to be accomplished on completion of certain conditions. It was argued that it was merely a memorandum to be carried out to get the said deal of land finalised later on. The learned authorised representative has also drawn our attention on Form No. ITCP-6, dated March 19, 2007 issued by the Tax Recovery Officer, Central-I, Ahmedabad to Shri Vikas A. Shah in respect of 17540 sq. metres of land at Village Thaltej, Tal-Dascroi, Dist., Ahmedabad. Through this letter of recovery, it was evident that the land in question was very much under the possession and ownership of the assessee-company. The learned authorised representative has also vehemently argued that the Revenue Department had not made any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned authorised representative has also informed that in the memorandum of understanding it was stated vide clause 4(d) that a title clearance certificate in respect of the said property was to be provided by the appellant-company. Clause 5 says that only on providing the title clear ance certificate the other party would pay the remaining amount. Since there was some dispute as stated vide question No. 76, the transaction could not be completed. The learned authorised representative has also informed that in the year 2006, a change in the name of the Muktinagar Co-op. Housing Society, Vibhag-II was incorporated and vide copy of 7/12 extract dated August 18, 2006, the name of Satyasai Co-op. Housing Society was changed as issued by the District Registrar (Rural), Ahmedabad. The learned authorised representative has therefore submitted that the said evidence itself has proved that the possession of the land was not transferred in the name of Shri Kartik J. Patel. The learned authorised representative has also drawn our attention on an another point that vide an order under section 281B dated September 12, 2006 at Sl. No. 23 the name of the said property had appeared which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount, hence the agreement was in absolute terms therefore the sale consideration had accrued to assessee on the day when the agreement was signed. (E) Conclusion : We have heard both sides at length. We have carefully perused the orders of the authorities below in the light of the compilation filed and the case law cited. At the outset, we can place an observation that the provisions of section 5 of the Income-tax Act do not strictly apply on the facts and circumstances of this case. As per the language of this section, the total income of any previous year of a person who is a resident includes all income from whatever source derived, which is received or is deemed to be received in India or accrues or arises or is deemed to accrue or arise to him in India or outside India. Therefore the liability to pay income-tax on an income is when it arises or accrues to a person. While discussing the applicability of the provision sub-section (1) of section 5, the hon'ble courts have opined that the two words "accrue" and "arise" are used to contradistinguish the word "receive". An income is said to be received when it reaches the assessee but it may not accrue or arise in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here were certain riders as well, which were required to be removed for the implementation of payment terms of the memorandum of understanding. From the side of the assessee, it was pleaded that a dispute had cropped up between the parties and, therefore, the impugned amount which was received consequence upon the execution of the memorandum of understanding, was refunded immediately thereafter. A cheque (No. 252243 deposited in HDFC Bank of the company) of Rs. 16,00,000 and a cash of Rs. 5,00,000 was received on June 14, 2004, however, undisputedly the said amount of Rs. 21 lakhs (Rs. 16 lakhs vide cheques bearing Nos. 338867 and 338877 and Rs. 5 lakhs cash) was returned on June 15, 2004, i.e., very next day. It is also not the case of Revenue, even the documents have also not indicated, that the possession of the property in question was ever handed over to Shri Kartik J. Patel, party of the second part, on execution of the agreement. To streamline the legal position in this regard we have examined the connected section, i.e., section 2(47) which defines "transfer" means, in relation to a capital asset, (i) the sale, exchange or relinquishment of asset, (ii) the extinguishment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated against the assessee, the Revenue Department has attached the impugned property and vide an order of attachment of immovable property dated March 19, 2007 the Tax Recovery Officer, Central-I, Ahmedabad had addressed the attachment order to Shri Vikash A. Shah by referring the property in question. Moreover, there was an order under section 281B of the Income-tax Act dated September 12, 2006 wherein as well at Sl. No. 23 the property in question was attached in the name of Muktinagar Co-op. Housing Society, Vibhag-II in possession with Mansi Builders Ltd. and Shri Vikash A. Shah beneficial interest in the land. Those recovery notices and the attachment order of the Revenue Department have itself established that the possession had in fact vested with the assessee or with one of the director of the assessee and that no possession was handed over to Shri Kartik J. Patel. It is very peculiar that the Revenue Department had never examined Shri Kartik J. Patel though it was alleged that being purchaser of the property he had paid or yet to pay the substantial amount under dispute of Rs.10,79,00,000. If the Revenue was of the view that in fact the property had transferred i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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