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TMI Blog1985 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's income daring the relevant year ending on October 31, 1960 ? 5. Whether there was any evidence before the Tribunal to justify the finding that the payment of Rs. 10,402 made to A. D. Gupta, Kartar Singh and S. K. Burman was the assessee's income ? 6. If answers to questions Nos. 1, 2, 3 and 5 are in the affirmative, whether the finding of the Tribunal in respect of the amounts referred to in the said questions are otherwise legally justified ?" And (b) in I.T.C. No. 30 of 1973 : " (1) Whether, on the facts and in the circumstances of the case, the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961, was justified ? (2) If the answer to the aforesaid question is in the affirmative, whether, on the facts and in the circumstances of the case while levying penalty, the tax sought to be evaded is to be calculated by including in the income returned the amounts shown in Part F of the return ? (3) Whether, on the facts and in the circumstances of the case, for calculation of the penalty, the item of Rs. 3,78,379 has to be disregarded as being income not liable to be returned? (4) Whether, on the facts and in the circumstances of the case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The transactions were elaborately discussed by the Income-tax Officer, the Appellate Assistant Commissioner as well as by the Tribunal. But, it is not necessary to go into complete details for the purposes of answering the reference which was directed to be submitted at the instance of this court. The same facts have been elaborately discussed in the judgment of this court in DLF United Ltd. v. CIT (I.T.C. No. 29 of 1973) decided on September 29, 1973. The other petition, namely, I.T.C. No. 30 of 1973, concerns some penalty orders which were passed consequential to the original assessment orders. it is sufficient at this stage to deal with the original assessment. It may be noted that the questions set out in the beginning of this judgment show that we have to deal with a sum of Rs. 2,10,000, profit made by M/s. Raisina Cold Storage and Ice Co. Ltd., which has been treated as the assessee's income in the first question. As far as the second question is concerned, we have to consider the payment of Rs. 41,039-67 made to Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh and to determine whether the same is the assessee's income. The third question is concerned with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Rs. 14,000 would go towards the advance already made to the owners of the land. These three persons, Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh entered into agreements with M/s. Delhi Land and Finance Co. Ltd. for financing the arrangement. Interest was to be paid and also part of the profit. On October 30, 1959, the original owners of the land, i.e., the owners of 441 bighas and 12 biswas of land in Majeshwar village, executed sale deeds selling the land to four parties-Raisina to the extent of one-fourth and to Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh to the extent of one-fourth each. On July 18, 1960, there were agreements between these three persons and the assessee company for developing the land and sub-dividing it into plots and selling the same. These three agreements were then substituted on May 9, 1961, by three other agreements by which they were to get lump sums in respect of the rights under the original agreement dated July 18, 1960. Consequent to these final agreements, the sums paid to these three parties were : Rs. (1) Sham Singh 2,69,249 (2) Surjit Singh 2,57,428 (3) Rajinder Singh 2,69,253 ---------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endors were Kartar Singh, A. D. Gupta K. P. Singh and S. K. Burman. These persons had entered into similar agreements for purchase of land, had taken loans from the Finance Company and then eventually entered into agreements for development of land with the assessee company which was superseded and lump sum payments were received after conveyance was made to the assessee company. In this case, the original purchase price was Rs. 14,91,858, but the assessee company paid Rs. 16,35,000. There was a difference of Rs. 1,43,142 in the price paid to the original owners by the purchasers Kartar Singh, A. D. Gupta, K. P. Singh and S. K. Burman, and the price obtained by these purchasers from the assessee company. The Income-tax Officer found that in making these transactions, these four persons had paid a sum of Rs. 1,31,740 to M/s. Delhi Land and Finance Co. Ltd. and so the addition made to the income was Rs. 1,43,142 minus Rs. 1,31,740 which amounted to Rs. 10,402. This is the subject-matter of question No. 5. The other amount with which we are concerned was the profit made by Raisina from the sale of its portion of the land. According to the Incometax Officer, this amount was Rs. 3,76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jab Security of Land Tenures Act, 1953. It was then decided by the two-man committee to effect sale in favour of Sham Singh, Surjit Singh and Rajinder Singh. These three persons entered into agreements with the Finance Company on October 28, 1959, to obtain necessary finance by pledge of the sale deeds. On October 30, 1959, the sale deeds were executed. Up to October 30, 1959, not a penny had passed from the assessee company for purchase of the land. The entire finance was obtained from the Finance Company. If it can be said that there was a benami transaction, it could only be traced to the source of the consideration which came entirely from the Finance Company. When the three persons, Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh, entered into an agreement with the assessee company for development of the plots and sale, they were already owners and had already paid the money to the original owners, without getting any help from the assessee company. Suppose, these persons had never entered into any agreement with the Finance Company, then it might be said that the consideration had been obtained from the assessee company for making the purchase from the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged by the Finance Company. So, the eventual price paid by the assessee company came to Rs. 7,95,930.18. The fact that the Finance Company provided the money for purchasing the land goes to show that the assessee company was not connected with the original purchase. If anything, it can be said that an agreement was made whereby Raisina made a profit. Much has been made by the income-tax authorities of the fact that Raisina did not have the finance to purchase the land when the original scheme was thought out. We think, this is incorrect. It is obvious that the three companies are interconnected. The financing company was M/s. Delhi Land and Finance Co. Ltd., which could as easily have lent the money to Raisina as it lent the same to Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Sigh. As we view it, the manner in which the transaction was brought about, can be properly understood only by an analysis of the Punjab Security of Land Tenures Act, 1953. That Act was passed in 1953 and was amended from time to time by many subsequent amendments. By 1959, it had totally changed. Section 19A was enacted in 1959 (which is the same year as these transactions) by means of the Punj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and Finance Co. Ltd. The eventual result was that the land came to be purchased by those three persons with a view to utilising that land eventually for development into plots. The first question is concerned with the transaction by Raisina. We have not been able to see how it is connected with the assessee. As already mentioned, the finance had come from the Finance Company. The extra amount has come by way of assignment of Raisina's Tights to the three persons who were financed by the Finance Company. It would follow that profit of Rs. 2,10,000 which came from this source had no connection with the assessee company. In fact, the assessee company was not in the picture at all at that time, i.e., October 30, 1959. Therefore, the answer to the first question has to be that there is no evidence to show that the profit of Rs. 2,10,000 earned by Raisina was the assessee's income. In other words, question No. 1 is answered in the negative, in favour of the assessee and against the Department. Turning now to question No. 3, which is the profit coming to Raisina from the land it purchased in the original transaction, i.e., one-fourth share, we fail to understand how this profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Raisina cannot be taken to be the assessee's income. When the expenditure has to be met by Raisina and no part of it has been spent by the assessee, then the profit is also to come to Raisina as the expenses of development are also to be met by Raisina. We fail to understand how an inference of benami can be raised. These three companies, i.e., the assessee company, the Finance Company and Raisina are inter-connected inasmuch as the same persons or the same group of persons control all the three companies. They are, however, not connected in such a manner that the profit made by one company can be taken to be the profit of another company. On the same line of reasoning, it is possible to hold that the entire profit belongs to the Finance Company because the money came from that Finance Company. In determining whether the income made by Raisina can be taken to be the assessee's income, we have to ask a simple question. Did the assessee spend any amount in buying or developing the plots? Did it pay in any way for Raisina's efforts in this direction. If the assessee company spent nothing, we fail to understand how Raisina's income can be the assessee company's income. So, our answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 1959, the Government took action under the Land Acquisition Act to issue notifications taking over large blocks of land around Delhi for a public purpose, namely, the development of Delhi in a planned manner. After that, private colonisation in Delhi came to an end. It is probably for this reason that in July, 1960, M/s. DLF, the assessee, entered into the transactions of July, 1960, for developing plots out of the land held by Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh. However, for the purpose of this case, we may assume that the assessee company had this object in mind from the very beginning and intended to utilise this portion of the land for developing plots. The question is : Could the company have bought the three-fourths share of the agricultural land on its own ? This does not appear possible because the land was more than 30 standard acres. In any case, as already explained, this land was purchased with money borrowed from the Finance Company. The assessee company had no hand in the purchase except to the extent that it provided reliable persons to hold the land. It is on record that there was some litigation even with these persons who claimed an ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The remaining land which was purchased by Shri A. D. Gupta, Shri Kartar Singh and S. K. Burman was financed by the Finance Company in exactly the same way as in the case of Shri Sham Singh, Shri Surjit Singh and Shri Rajinder Singh. As result of the transactions, they received Rs. 10,402 extra between them. Again, it seems to be a purchase made by the dummies of the company. However, as pointed out earlier, the effect of the Punjab Security of Land Tenures Act, 1953, was to prevent the assessee company from buying the land directly. As the object of the company appears to have been to have a large housing project, if it did not have dummies, it could not have acquired the land and there could not have been any project. So, the land was purchased in the names of different persons and those persons had to be financed. The extra amount of Rs. 10,402 is the profit Shri A. D. Gupta, Shri Kartar Singh and Shri S. K. Burman have received in the transaction. As there was no other way in which the transaction could be effected, the only question we have to ask is whether this amount of Rs. 10,402 came back to the assessee company in some way. If these persons received the money and did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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