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TMI Blog2015 (10) TMI 1746X X X X Extracts X X X X X X X X Extracts X X X X ..... n was the director of the assessee for which there is no corobrative evidence 5 The learned CIT Appeals has also erred in enhancing the assessment while correctly coming to the conclusion that the assessee was not the owner of the property. 6 The learned CIT Appeals has also erred in enhancing the assessment on a reference from the assessing officer when there was a specific injuction granted on the similar issue by the Madras High Court in W.P.No.28022 of 2014 7 The learned CIT Appeals has also erred in enhancing the assessment with a view to override or get over the limitation on the assessing officer in taking reassessment proceedings u/s.147 of the Income Tax Act, 1961''. 3. The crux of the above grounds is that the Commissioner of Income Tax (Appeals) has no jurisdiction to enhance the assessment as he has considered new source of income which was not before the Assessing Officer. As such we are collectively adjudicating all the above grounds. 3.1 The facts of the case are that the assessee is a company dealing with the real estate business. As per the information received from the internal source of the department, the case was reopened for the assessment year 2007-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterested in executing the sale agreement. As M/s Sri Ramachandra Educational & Health Trust had already paid an advance of E35,42,50,000/- to the assessee, in order to recover the money from the assessee, M/s. Sri Ramachandra Educational & Health Trust had introduced M/s Viocans Infrastructure & Environmental Engg. Pvt. Ltd. to purchase this property and this has resulted in a tripartite agreement between M/s Ramachandra Educational & Health Trust, M/s Viacons Infrastructure & Environmental Engg. Pvt. Ltd., and the assessee on 21.2.2007. The assessee was asked by the Assessing Officer to explain during the course of recording sworn statement that why the assessee should be made as a confirming Party when the property has been clearly registered in the assessee's name by DRT. The assessee had stated that one Mrs.Meerabai Dawson was the previous owner of that land and the estates of Mrs.Meerabai Dawson filed a Writ before the High Court of Chennai regarding the ownership of the said Adyar Property. As this litigation was pending for more than four years, it had been stated by the assessee that, they have decided to close the deal by settling E20 Crores to the Estates of Mrs.Meer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual owner of the Adyar property, since the Capital Gain Tax with regard to entire value of sale consideration has been paid by the Estate of Mrs. Meerabai Dawson, no tax was pressed in the hands in the hands of M/s. A.R.Housing P.Ltd., for the reasons that as per Sec. 45(1) of the Income Tax Act, 1961 it says, "any Profits or Gains arising from the transfer of a capital asset be chargeable to Income-tax under Capital Gains, i.e., the provision says chargeability of tax is only on account of transfer of assets and not on ownership. However, since the tax ought to have been paid by M/s. A.R. Housing P. Ltd has been paid by the Estates of Mrs. Meerabai Dawson due to various reasons a specified above, the tax which had been paid by the estates of Ms. Meerabai Dawson should be treated as the deemed income of M/s. A.R. Housing P. Ltd and should be taxed under income from Other Sources and according the income of M/s. A.R. Housing P. Ltd was computed as E14,61,02,118/- as against Nil income returned by the assessee. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) observed that in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale deed was executed on 22.02.2007. The Commissioner of Income Tax (Appeals) observed that the Assessing Officer had also brought to his knowledge that after the sale certificate issued by the DRT was declared "null and void" by the High Court of Madras, the Estate of Meerabai Dawson became the rightful owner of the property and the capital gain taxes were paid by Estate of Meerabai Dawson through a separate PAN in its name. Therefore, the taxes paid by Estate of Meerabai Dawson cannot be given credit in the hands of the assessee. In view of the above submissions, the AO has requested for enhancement of the taxable income. A copy of the submissions of the Assessing Officer were also given to the assessee for its comments. The ld. Authorised Representative had submitted the reply on 28.1.2015. As per the reply given by the Id.AR, when the sale certificate issued by the DRT, Chennai was quashed by Madras High Court vide its order dated 21.3.2005, the assessee has no right in the properties and when the aasessee had paid E20 crores to estate of Meerabai Dawson out of the amount of E35.42 crores received by it from Sri Ramachandra Educational & Health Trust (later this liability wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a distinct PAN and E38,84,32,623/- disclosed by the assessee in its return of income was net profit out of the above deal as a part of its business activity on real estate, it had nothing to do with the capital gain tax paid by Estate of Meerabai Dawson, and accordingly, the Commissioner of Income Tax (Appeals) dismissed ground of the assessee. Against this, the assessee is in appeal before us. 5. The ld. Authorised Representative for assessee submitted the original property was owned by Mrs. Meerabai Dawson and she had given the property as a security to the loan taken by Trivini Garments. On account of default the property was auctioned by Debts Recovery Tribunal (DRT) vide M.A. 176/2002 in OA 271 of 2001 (DRC 45/2002) vide order dated 26.07.2002 and the same was placed at page No.1 of paper book. The assessee has obtained ownership of the property owned by Mrs. Meerabai Dawson in the auction conducted by the DRT. The DRT had given certificate of sale deed dated 16.04.2003 by which the assessee became the owner, and the same was placed at page No.5 of paper book. Thereafter, after the demise of Mrs. Meera Bai Dawson, the executors of the will of Mrs. Meera Bai Dawson who was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd part between whom the title disputes are existing.' WHEREAS, THE FIRST PART, has also entered in to negotiation with the Estate of Meerabai Dawson towards settlement who have agreed to effect the sale of the property As the vendor And Whereas the party of the first part has approached the second part for registering the property in their favour, however there were litigations including the dispute of title of the property between the party of the Second Part and the Estate of Meerabai Dawson and both the parties claiming ownership rights, and in order to avoid protracted litigation, the party of the second part has agreed to be the confirming party so that the disputes are resolved amicably thereby enabling the first party to have clear and proper title on execution of the sale deed in their favour, Whereas the party of the second part is also agreeable to the same Whereas the party of the first part agree to give compensation for non-performance in a separate agreement for the party of the second part Whereas the party of the firstpart has approached the second part to pay Rs. 5 Crores to Estate of Meerabai Dawson, along with the capital gains on the sale of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executors of Ms. Meerabai Dawson. Accordingly, the sale deed was executed, whereby Executors of Mrs.Meerabai Dawson have signed as a Vendor and the Assessee has signed as a confirming party and in Page No. 17 of the Sale deed (document No.1073 of 2007) in clause. 10 (page No.93 of paper book) pointed out Executors of Mrs.Meerabai Dawson has to pay the entire tax. The Writ Appeal against the order of Single Judge was disposed on 31.03.2009 on the basis of compromise arrangement dated 22.02.2007. 1. As per this arrangement, the Assessee is the owner on the basis of sale certificate from DRT. 2. They had agreed to pay the compensation of Rs. 5 crores to the Executor of Mrs.Meerabai Dawson to enable the transaction to go through. 3. The assessee had agreed that Executor of Mrs.Meerabai Dawson will sign as a Vendor Consequently as the tax liability will be on the person signing as a vendor, the assessee has given an additional amount of E15 crores to meet the tax liability of the Executor of Mrs.Meerabai Dawson. The entire sale consideration was assessed in the hands of Executor of Mrs.Meerabai Dawson and tax on the deemed consideration of Rs. 64 crores amounting to E14.61 was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act issued on 28.03.2012. Consequently, your case was taken for scrutiny under section 143(3) r.w.s 147 of the I.T. Act 1961 and the scrutiny assessment was completed on 03.03.2013 after assessing the total income at Rs. 14,61,07,118/- 3. Subsequently, it was notice that the income to the tune of Rs. 37,95,95,157/- has escaped from assessment. Therefore, a notice under section 148 dated 31.03.2014 of the I.T. Act 1961 was issued to you to reopen the assessment for the assessment year 2007-2008. In response, you filed a letter dated 08.04.2014 before this office, with a request to treat the ITR filed on 26.04.2012 vide e-filed ack 385486441260412 as the one filed in response to the notice issued under section 148 dated 31.03.2014 and also requested for the reason for issue of the above notice u/s. 148. After considering your above letter the reasons to sale the property in favour of M/s. Viacons Infrastructure and Environmental Eng. Pvt. Ltd and paid capital gains tax on the value adopted for stamp duty of Rs. 64,00,48,000/- in the name of executor of Ms. Meera Bai Dawson in PAN No.ALLPD 1138N. This is tax paid on the capital gain as transfer to land by the legal/real owner i.e t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies agreed that Executor of Mrs. Meera Bai Dawson was the legal owner of the property and others are confirming parties. The Income Tax Department thrusted upon that the assessee is the original owner of the property and the present the assessee is liable for payment of tax. 7. On the other hand, the Departmental Representative relied on the orders of the Commissioner of Income Tax (Appeals). The ld. Departmental Representative submitted that the assessee itself offered the income from this land transaction at E38.85 crores and claimed that it is exempt since it was offered as income of AOP. Being so, when the AOP has not filed the return of income separately, and the same was considered in the hands of the assessee, the assessee cannot have grievance. 8. We have heard both the parties and perused the materials on record. In this case, the assessee company engaged in real estate business. The assessment was reopened for the assessment year 2007-2008 on the basis of the following reasons. ''The assessee had purchased two properties at Adyar through Debts Recovery Tribunal sale on 29.8.2001 and registered it on 16.4.2003 and on 25.7.2003 respectively. On 19.12.2005, M/s A.R. Housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz., that it is not open to the First Appellate Authority to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of assessment. Applying the above well-settled principles of law to the facts of the instant case, we have to examine the present case to see whether first appellate authority had exceeded his jurisdiction. In this case, while computing the income of the assessee, the Assessing Officer considered the payment of E14.61 crores for income tax paid by estates of Mrs. Meera Bai Dawson on behalf of the assessee as the income of the assessee. According to the Assessing Officer, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee. Accordingly, the proceedings before the first appellate authority cannot be restricted to only those matters considered and decided by the assessing authority. Failure on the part of the Assessing Officer to examine certain aspects can be rectified at the appellate stage, and therefore, it would be wrong to circumscribe and restrict power. In our opinion, the first appellate authority can enhance the assessment by considering the issue which was mentioned by the assessee in its return of income though not considered by the Assessing Officer in its order of appeal against the assessee and thus the first appellate authority have jurisdiction of enhancement of income. Limitation on the powers of the Commissioner of Income Tax (Appeals), however, is that he cannot travel beyond the subject matter of assessment and return of income. It is to be noted that it is not subject matter of appeal, but the subject matter of assessment, when it is said that he cannot travel beyond the subject matter of assessment what is meant in that he cannot introduce in the assessment new source as his powers of assessment enhanced is restricted only to the income which was subject mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond Party has on this date deposited with the said purchaser all original title deeds of the schedule A mentioned property which are in their possession, a list of which is annexed hereto as Schedule C and confirm that they are not in possession of any other title deeds whatsoever pertaining to the schedule A mentioned property. e) The First party agrees that, in view of this memo of compromise the first party shall not press any criminal proceedings, contempt application or other actions against the second party individually or jointly. The first party further confirms that it has no cause of action against the second party individually or severally in future in respect of the schedule mentioned properties. f) The First party agrees not to press the suit CS 120 of 2005 and to therefore withdraw the suit on the basis of this memorandum of comprise. g) A.R. Housing (P) ltd has deposited with the purchaser all sale certificates pertaining to the Schedule A mentioned property issued by the DRT-I, in the course of OA 271 of 2001 and confirm that there are no further sale certificate issued by the DRT-I in OA 271 of 2001 with respect to the schedule A mentioned property. h) Ahn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le mentioned properties 7. The appellant and respondent Nos.3 to 6 agree to co-operate with Vicoans Infrastructure and Environmental Engineering Pvt. Limited at all times in future. The appellant and Vicoans Infrastructure and Environmental Engineering Pvt. Limited declare that they have no claim against the Respondent No.1 and Respondents 3 to 6 under any head whatsoever. 8. The parties herein therefore pray that this Hon'ble Court may be pleased to record this memo of comprise in W.P. No.972 to 974 of 2005 and pass such further or other orders, which this Hon'ble Court may deem fit and proper under the circumstances of the case thus render justice. Dated at Madras on this the 27thday of March, 2009'' The memo of compromise entered into between the parties is recorded and the same shall form part of this proceedings. This writ appeal is disposed of in terms of the memo of comprise. No cost. Consequently, WAMP Nos. 1787 to 1789 and 1858 of 2005 are closed. 13. Now, the Department cannot thrust upon the absolute ownership of the property on the assessee. Being so, from this angle also taxing the gain on transfer of asset in the hands of the assessee is not appropriate. Nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sulting in under assessment to an extent of Rs. 23,34,93,039/- (379595157-146102118). If the gain arising out of transfer of right is brought to tax there would be a tax demand of Rs. 19,33,61,150/- (including interest u/s.234A & B) as against Rs. 11,49,24020/- . Since it is failure on the part of the assessee in not truly and fully disclosing all the material facts during the course of assessment proceedings, I have reason to believe that the income has escaped assessment for the assessment year 2007-08 and it is a fit case warranting reassessment. 4. In connection with the reassessment proceedings, your was posted for hearing on 29.05.2014 at 3.00PM. However, you failed to appear in person or through your authorized representative on the said date. And you also failed to furnish the details as called for vide statutory notice(s) issued u/s.143(2)/142(1) of the I.T. Act 1961 dated 21.05.2014. Therefore, your case is again posted for hearing on 05.06.2014 at 3.00PM''. 15. Against this, the assessee filed Writ Petition before the Madras High Court, wherein the proceedings was stayed by the High Court vide its order dated 18.11.2014 in W.P.No.28022 of 2014 and MP No.1 of 2014. Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do so. If there is a dual personality in one individual or person and if such person holds land then a severability is contemplated under the Act, if such a person comes up with an application of composition. The lands held by him in his capacity as a normal person would be severed from the lands held by him in his other capacity and would be dealt with accordingly and the Revenue authorities normally has no jurisdiction to club holdings of persons who have a different status in the eye of law and who fill in different legal personalities in any one individual as held by the Jurisdictional High Court in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax, 104 ITR 381. 17. Irrespective of any other aspect of the matter, the impugned order of the Commissioner of Income Tax (Appeals) needs to be set aside on the reason that the Commissioner of Income Tax (Appeals) considered the income under the head ''income from business'' and invoked the provision of section 50C to determine the sale consideration at E64 crores on the basis of guideline adopted for stamp valuation purposes by State Government. On analyzing the language used by the legislature in Sec. 50C, followin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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