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TMI Blog2014 (7) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of Assessee. - ITA No.930,931,983/Hyd/2013 - - - Dated:- 28-5-2014 - Chandra Poojari And Asha Vijayaraghavan, JJ. For the Appellant : Sri S Rama Rao For the Respondent : Sri D Sudhakar Rao ORDER:- PER : Chandra Poojari ITA No. 930/Hyd/2013 by assessee and ITA No. 983/Hyd/2013 by Revenue are cross appeals for assessment year 2007-08 and ITA No. 931/Hyd/2013 by the assessee for A.Y. 2009-10. All the appeals are directed against the common order of the CIT(A)-I, Hyderabad dated 28.3.2013 passed u/s. 143(3) r.w.s. 153C of Income-tax Act, 1961. Since the issues in these appeals are interrelated, they are clubbed together, heard together and are disposed of by this common order for the sake of convenience. 2. First, we will take up the cross appeals pertaining to assessment year 2007-08. 3. The assessee raised the following grounds: 1. The order of the learned Commissioner of Incometax (appeals) is erroneous both on facts and in law. 2. The learned Commissioner of Income-tax (appeals) erred in confirming the action of the Assessing Officer in initiating proceedings under sec. 153C of the I.T. Act. The learned Commissioner of Incometax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. The learned Commissioner of Income-tax (appeals) ought to have seen that the assessment for the said assessment year was completed under sec. 143(3) and was accepted by the Assessing Officer. The learned Commissioner of Income-tax (appeals) also ought to have seen that payments were made through cheques. 4. The Revenue raised the following grounds: 1. The order of the CIT(A) is erroneous both on facts and in law. 2. The CIT(A) is not justified in directing the AO to adopt cost of acquisition at ₹ 500 per sq. yard instead of ₹ 50 per sq. yard as adopted by the AO on the basis of information received from SRO. 5. Brief facts of the case are that the assessee had not filed its original return of income within the due date prescribed u/s. 139(1) for any of these two years. Search and seizure operations u/s. 132 of IT Act were conducted at the residential premises of Sri Maddi Narsaiah and Sri Maddi Lingaiah, Directors of M/s. Shanta Sriram Infra and Constructions Pvt. Ltd. (for short SSICPL) on 25-3-2010. A survey u/s. 133A was also conducted in the office premises of SSICPL. During the said search, incriminating material/documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,62,978/- in the year 2008-09, thus attracting Short Term Capital Gains. Accordingly, he concluded that the appellant company was liable for capital gains tax. 9. In view of the above, a statement was recorded by the DDIT (Inv) from Shri M. Lingaiah in the capacity of Managing Director of the assessee company. Shri M. Narsaiah was asked by him to show cause why the capital gains should not be calculated for the assessment years 2007-08 and 2009-10 as under: (A) Long Term Capital Gains for the assessment year 2007-08 Total area 6885 sqy Total built-up area 177040 sft Total cost (Rs. 30,53,94,000 12,97,62,978) 17,56,31,022 Cost per sft (as per builder) = 175631022/177040 = ₹ 992 Share of M/s. Shetty Pharma (88520 x ₹ 992) = 8,78,112,840 Less: Cost of land (6885/2 x 5.19 x 500) (@ ₹ 500 per sqy as on 1.4.1981 approx) = 89,33,288 LTCG 7,88,78,552 (B) Short Term Capital Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for initiation of proceedings u/s. 153C in the assessee's case, that the assessee has categorically admitted that no such objection had been raised in the course of assessment proceedings. The assessee had voluntarily and unconditionally filed returns of income in response to the notice u/s. 153C issued by the Assessing Officer. On the other hand, from the report of the Assessing Officer it is clear that during the course of search proceedings in the premises of Shri M. Narsaiah and M. Lingaiah, various details regarding Chippendale Project were found and seized. In this regard, it has been mentioned by him that there is specific seized material, being pages 29 and 30 of Annexure A/ML/RES/02 seized from the premises of Shri M. Lingaiah, which happens to be a letter addressed to Shri K. Subba Rao by Shri M. Narsaiah on behalf of the assessee company. As discussed earlier, Shri M. Narsaiah was indeed the Managing Director of the assessee company and the relevant family. Therefore, it is clear that during the course of search documents belonging to the assessee company were indeed found and seized which were sufficient to initiate the proceedings u/s. 153C of the Act. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer. Besides, it is clear that the Development Agreement cum GPA is an independent legal document, whereby the assessee had transferred its rights over the impugned land in lieu of 50% of the constructed area to be built thereon. Therefore, unless and until the said document itself had been rescinded, it could not have lost its legal value. In the instant case, admittedly, the Development Agreement was indeed acted upon. Even if any constructed area falling to the share of the land owner was later transferred to the Developer itself, it cannot be said that all the documents were only part of the ultimate step and had no legal and financial implication on their own. Finding no strength in the contention therefore, he was of the view that the long term capital gains is indeed to be considered as arising on account of transfer effected by way of the Development Agreement dated 29-10-2006, in the assessment year 2007-08. 17. The CIT(A) with regard to the claim that SSICPL bought back the built up area of 70,947 sft only in the year 2008-09, and therefore, the built up area received by the assessee has to be taken at 70,947 sft only and not at 88,520 sft, was of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial even in the year 1981 as it was in a commercially flourishing area of the twin cities. He, therefore, felt that it will meet the ends of justice if the Fair Market Value of the land as on 1-4-1981 is taken at ₹ 500/- per sq. yard. 20. As regards the contention regarding the cost of improvement being ₹ 7,04,56,050/-, though it is claimed that such expenditure was incurred in the financial year 2004-05, the CIT(A) observed that no evidence to this effect could be furnished at any stage. Mere acceptance of the income admitted for the assessment year 2005-06 would not mean that expenditure so claimed as incurred has to be accepted as actually incurred. Since such claim was made by the assessee, the onus was upon it to establish the same with necessary evidence. However, no such evidence could ever be furnished. On the other hand, the Development Agreement only speaks of land and not any construction thereon. It is claimed by the assessee that the said structure was demolished by the Developer and a new construction was made thereon. However, no evidence regarding incurrence of any expenditure for such huge demolition work, either by the assessee itself or by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only. 24. First we will take up for adjudication the first common ground in both the appeals of the assessee which is as follows: (2) The learned Commissioner of Income-tax (appeals) erred in confirming the action of the Assessing Officer in initiating proceedings under sec. 153C of the I.T. Act. The learned Commissioner of Income-tax (appeals) ought to have seen that the initiation of proceedings under sec. 153C are not valid. 25. The contention of the AR is that initiation of proceedings u/s. 153 is not in accordance with law. According to him, before issue of notice u/s. 153C satisfaction note is required to be made by the AO who has passed the order u/s. 153A before the seized document has transmitted to the AO o the assessee in whose jurisdiction the present assessee falls, as the assessee is other than the searched person. Further he submitted that such satisfaction note should be recorded before the proceedings of the searched person are completed u/s. 153A of the Act and not later. According to him, no satisfaction is recorded by the AO who has passed the order u/s. 153A of the Act in case of searched person u/s. 132 of the Act. 26. On the other hand, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee on 6.4.2011. Before issuing the notice, the AO made an order sheet entry, as reproduced in para 26 (supra), and assessment was framed u/s. 153C of the Act. 29. In order to understand the scheme of framing the assessment in the case of search conducted u/s. 132 of the Act and documents requisitioned u/s. 132A of the Act, we have to examine the provisions of section 153A to 153D of the Act brought on Statute by the Finance Act, 2003 w.e.f. 1.6.2003. These provisions have replaced the earlier provisions relating to special procedure for assessment of search cases in section 158B to 158BI of the Act. In the instant case, the action was taken in the hands of the assessee u/s. 153C r.w.s. 153A of the Act consequent to the search conducted upon M/s. SSICPL u/s. 132 of the Act. Therefore, provisions of section 153C stand applicable in the case of present assessee to frame the assessment. For the sake reference, we prefer to reproduce section 153A to 153C of the Act hereunder: 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to have effect, if such order of annulment is set aside.] Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years referred to in clause (b) of 53[sub-section (1) of] section 153A, within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of two years from the end of the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the words two years , the words thirty-three months had been substituted: [Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2009 or any subsequent financial year and during the course of the proceeding for the assessment or reassessment of total income, a reference under sub-section (1) of section 92CA is made, the provisions of clause (a) or clause (b) of this sub-section, shall, notwithstanding anything contained in clause (i) of the second proviso, have effect as if for the words two years , the words three years had been substituted:] Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing [on or after the 1st day of April, 2005 but before the 1st day of April, 2009] and during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA- (i) was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Commissioner, or] (iii) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee of being re-heard under the proviso to section 129; or (iv) in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which such application is made and ending with the date on which the order under subsection (1) of section 245D is received by the Commissioner under sub-section (2) of that section; 62[or] [(v) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Commissioner under sub-section (3) of section 245R; or (vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :] [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:] [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO is satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitions belongs or belong to a person other than the person referred to in section 153A of the Act, then the books of account or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that the AO shall proceed against each of such other person and issue such other person notice and assess or re-assess income of such other person in accordance with the provisions of section 153A of the Act. Meaning thereby that action u/s. 153C of the Act always depends upon the action u/s. 153A of the Act upon some other person. The AO of such person in whose case search was conducted is satisfied that the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belong to some other person, he after forming the belief to that extent regarding the same shall hand over the relevant material to the concerned AO having jurisdiction over such other person. In other words, we say that before initiating proceedings u/s 153C, the AO who has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment u/s. 153A of the Act and also it should be recorded. It is also to be noted that for the purpose of s. 153C a satisfaction note is sine qua non and must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) At the time of or along with initiation of proceedings against the searched person u/s. 153A of the Act; (b) Along with the assessment proceedings u/s. 153A of the Act; (c) Immediately after the assessment proceedings are completed u/s. 153A of the Act of the searched person. 32. Thus, the condition precedent for issuing notice u/s. 153C and assessing or re-assessing income of such other person is that, the money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned should belong to such other person. If the said requirement is not satisfied recourse cannot be made to the provisions of section 153C of the Act. Thus, the provisions contained u/s. 153C of the Act can only be invoked where there was satisfaction by the AO having jurisdiction over the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udited accounts for a period of ten years may have to be reopened. As the AO has not recorded his satisfaction, which is mandatory; nor has he transferred the case to the AO having jurisdiction over the matter, the impugned judgments of the High Court cannot be sustained 33. The above two judgements were delivered u/s. 158BD. We have carefully gone through the language used in section 153C and 158BD of the Act. The main difference in the language is that in section 158BD the scope of jurisdiction of AO is only with respect to the undisclosed income found during the course of search. Whereas in section 153C the scope of jurisdiction of the AO is with respect to any money, bullion, jewellery, other valuable articles or things or books of account or documents with respect to which the AO is satisfied that it belongs to such other person. But so far as the reference to word satisfaction is made it is same as available in section 158BD of the Act. Therefore, we are of the view that the ratio laid down in the above cases in respect to the point of satisfaction will apply for initiation of action u/s. 153C of the Act. In view of this, we are inclined to hold that initiation of procee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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