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TMI Blog2022 (12) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in holding that land in consideration was held as fixed asset in the books of accounts although it was admitted by assessee in his statement u/s 132(4) of I T Act dated 28.08.2016 and reaffirmed in his statement u/s 131 of I T Act dated 19.10.2016 that the said land was held as stock in trade in his books. 3. The CIT(A) erred in holding that the sale of units by land owner in a project developed on JDA basis will attract taxation u/s 45(2) of I T Act only after it is sold by a registered deed. 4. The CIT(A) has erred in not considering the principles of revenue recognition as prescribed in AS9 to determine income. 5. Any other ground that may be urged at the time of appeal. CO Nos.17 to 19/Bang/2021 (AYs 2014-15 to 2016-17): Common grounds:- 1. The learned Commissioner of Income-tax (Appeals) has erred in holding that several legal issues raised by the Cross Objector in the appeal before the learned Commissioner of Income-tax (Appeals) are not to be decided upon in view of the appellant getting relief on the factual issues involved in this appeal. The learned Commissioner of Income tax (Appeals) should have decided the legal grounds also. 2. The Cross Objector had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement is available at Page no. 185 to 223 of the Paper book filed. Thereafter two Supplementary Agreements and a Deed of Rectification were also entered into which are available at page nos. 224 to242 of the Paper Book filed. At the time of entering into DA, amount of Rs. 25 Crores was given to the Respondent as refundable security deposit which was subsequently adjusted proportionally against the advances received. In terms of DA, the revenue earned from sale, lease, license of the area covered under the project was to be shared between the Respondent and developer in the ratio of 37% and 63% respectively. The developer started giving the owners share to the Respondent from FY 2012-13 onwards. These advances were shown as liabilities in the Balance sheet of the Respondent. 4.2 Respondent's share of revenue under this agreement has been offered to tax by the Respondent under the head capital gains. The revenue has been offered to tax in the year in which the flats have been registered in favour of the buyers. Such registrations began from FY 16-17 (AY 2017-18), although the Respondent had started receiving advances as early as in FY 12-13. 4.3 The details of advances received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was questioned as to why his part of the advances received shall not be considered as revenue under percentage completion method. In reply, Shri. M R Seetharam accepted this position of the department and agreed to offer the revenue in the respective Assessment Years as per the table below: Assessment Year Amount offered to Tax in (Rs.) 2014-15 27,00,00,000/- 2015-16 50,00,00,000/- 2016-17 25,00,00,000/- TOTAL 102,00,00,000/- 5.2. Again, a sworn statement of Shri. M R Seetharam was recorded u/s 131 of the Act on 19.10.2016. In the statement recorded on 19.10.2016, Shri. Seetharam once again reaffirmed the admission of unaccounted income that he admitted at the time of the search proceedings. Thus, the assessee admitted, confirmed and reaffirmed the declarations of Rs.102 crore on account of his share of income received from M/s G Corp Homes P Ltd as his business income for the respective Assessment Years. 5.3 However, in the return filed in response to notice u/s 153C of I T Act, the assessee did not declare the income as admitted during search proceedings. The assessee was asked to show-cause as to why the revenue received from M/s G Corp Homes P Ltd during the Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloper for selling the premises, including selling of the undivided interest in the land. Thus, risk of the assessee is shifted to the developer. By virtue of this, the assessee is receiving the advances from developer at end of every month. iii. The revenue-sharing model of Joint Development being followed by the assessee is a composite arrangement wherein land is contributed by one party and the development being carried out by the other party with a clear understanding on sharing of the proceeds from sale of entire developed property and also with an understanding on sharing of unsold inventory between both the parties. iv. The very terms of revenue-sharing Joint Development Agreement - 37% of the total revenue from the developed property indicates the transaction is that of business in nature similar to that of developer and not that of mere transfer of assessee's property to the customers as a capital asset as claimed by the assessee. v. The developed property is being sold in the form of apartments. Each apartment is sold to a prospective customer with an agreement to sell the undivided share of land and agreement to construct as entered between developer, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all significant risks and rewards of ownership can be considered as transferred is required to be determined on the basis of the terms and conditions of the agreement for sale. In case of real estate sales, the seller usually enters into an agreement for sale with the buyer at initial stages of construction. This agreement for sale is also considered to have the effect of transferring all significant risks and rewards of ownership to the buyer provided the agreement is legally enforceable and subject to the satisfaction of conditions which signify, transferring of significant risks and rewards even though the legal title is not transferred of the possession of the flat/apartment is not given to the buyer. * Application of AS-9 for sale of goods in real estate transactions - the completion of the revenue recognition process is usually identified the following conditions are satisfied: o The seller has transferred to the buyer all significant risks and rewards of ownership and the seller retains no effective control of the real estate to a degree usually associated with ownership. o The seller has effectively handed over possession of the real estate unit to the buyer forming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iced by the Ld. D.R. that from the returns of income filed by the assessee till AY 2015-16, the assessee had shown this land which is under JDA as stock in trade. Subsequently, from AY 2016-17 it has been shown as capital asset in the books of accounts and the income is offered by the assessee as income from capital gains. Further, the other party, i.e. G Corp Homes Pvt. Ltd. is also recognizing the revenue on the development as per percentage completion method under relevant accounting standards and once the sale agreement has been entered and the assessee has received his share of revenue, it has the effect of all significant risks and rewards even though legal title is not transferred. As per the sample sale agreements submitted by the assessee during the assessment proceedings, nowhere it is specifically mentioned that there is any risk on assessee. The JDA was executed on 2nd September 2010 and the developer has started giving the owner's share to the assessee from Financial Year 2012-13 onwards. In fact, an amount of Rs.25,00,00,000/- was given to the assessee as refundable security deposit at the time of JDA only, which is getting adjusted proportionately against, revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-14 13,87,39,209 2014-15 37,19,07,751 2015-16 59,50,41,812 2016-17 34,66,85,997 2017-18 15,61,45,940 2018-19 15,73,03,035 2019-20 22,86,64,369 2020-21 12,41,04,010 2021-22 5,11,66,373 Total 2,16,97,58,496 6.1. The reading of several clauses of Development Agreement (ref point nos. 1, 2 and 10) would show that the Respondent has nothing to do with Development of the Property. The entire construction and development costs were borne by the Developer only. The Respondent had no active role to play in the Development of the Property. This fact is not doubted by authorities below and also accepted by the DR during the course of hearing before the Tribunal. 6.2 During the years under consideration, the construction of residential apartments by the developer was under progress. No sales were registered during the years under appeal. As the flats were under construction and no registration took place and possession of the flats in respect of which advances were received was also not be handed over to the buyers. Thus, in effect no transfer took place during the years under consideration, Therefore, the question of taxation of income in the year of receipt of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these projects have been offered to tax as business income. Thus, the Respondent in the bucket of assets held two categories of immovables - one as capital asset and the other as stock in trade. Merely because, the Respondent is holding some of the lands as stock in trade, the land under consideration i.e., land at Thanisandra cannot be called as stock in trade. f. It has been judicially held in catena of case laws that an assessee may have two portfolios - investment portfolio comprising of capital assets and a trading portfolio comprising of stock in trade. The case laws in this regard are available at page nos. 1580 to 1587 of the compilation of case laws filed. Further as per circular no. 4/2007 dated 16/6/2007 (Page No.1588-1589 of compilation of case laws filed), the concept of dual portfolios has been acknowledged. Therefore, Revenue's stand that the land at Thanisandra was held as stock in trade is not correct. g. In any case and without prejudice assuming without acceding, even if the land at Thanisandra is treated as stock in trade, the advances received during the impugned assessment years would not be in the nature of income & would remain as advances (liabilities) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned order, for making additions to the Respondent's returned income, no reliance is placed on these sworn statements. The Respondent however wishes to clarify that in any case no adverse conclusions can be drawn in the Respondent's case on the basis of those sworn statements. 6.8 In the sworn statements the Respondent had agreed to offer to tax advances received in accordance with Law. 6.9 Even otherwise, the Respondent submits that there cannot be any estoppel to law. An incorrect position of law even if admitted by the assessee cannot alter the correct legal provision. Any admission which does not represent the correct legal position is not binding. 6.10. In ground no.3 raised by the Department, it was stated that the CIT(A) in the appellate order passed had held that sale of units by landowner in a project developed on DA Basis will attract taxation u/s 45(2) of the Act only after it is sold by a registered deed. In this regard, it is submitted that there is no such finding in the CIT(A)'s order with respect to applicability of section 45(2) of the Act. The provisions of section 45(2) of the Act are applicable in a case of transfer by way of conversion of capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and buyer retains no effective control of the goods transferred c. No significant uncertainty exists regarding the amount of the consideration. 6.19 In the Respondent's case, upon entering into an agreement to sale, there is no significant uncertainty that exists as regards the amount of consideration, as the consideration for future sale is fixed on the date of agreement to sale. The agreements to sale are binding legal agreements and it could be said that in most cases there is also no improbability as regards ultimate collection of revenue. Thus condition a. and c. above are met upon entering into the agreement to sale. 6.20 However, the most critical condition under point b. above is not met upon entering into agreement to sale. In the Respondent's case as has been detailed earlier, the property (title / ownership) of the flat and consequently of undivided interest on land is not transferred to the buyer upon entering of the agreement to sale. The legal title in the flats and undivided share of land is transferred only upon registration of the final sale deed. 6.21 In the Respondent's case, the alternate conditions - transfer of significant risks and rewards of ownershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements are also similarly structured and worded. Relevant clauses of the agreement are extracted below: * Clause 4 at page 10: 4) The Purchaser is aware that there may be a slight variation in the proportionate undivided interest in the land in relation to the Apartment being sold under this Agreement for Sale and the Purchaser confirms that he/ she/ they have no objection to such variation provided that the same is corresponding to the Saleable Area of the Apartment and is in line with the saleable area of other apartments in the Project. * Page 23: XII. TRANSFER/ ASSIGNMENT 1) The Purchaser shall not assign or transfer in any manner the interests, duties, rights, obligations; responsibilities etc., under this Agreement to any other person without the prior written permission of the Vendors until all the dues are paid to the Developer. 2) The written permission for any such assignment or transfer shall be considered by the Vendors, only if the Purchaser satisfies the Vendors of the credibility and financial capability of the prospective assignee or transferee and on payment of transfer charges plus service tax or any other taxes as applicable as determined by the Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement which highlight the above position are extracted below: * Clause 1 at page 12: Purchaser has no right to interfere with the progress of construction of the apartment and/or the residential buildings or the Project or any part thereof and the Purchaser is aware that he shall not be permitted to enter upon the said property at the time of construction in the interests of safety. * Clause f) at page 18: The Purchaser/s shall only be entitled to an undivided share of Land and undertake/s that the/she/they shall not seek partition and /or separate possession of the said UDI and shall not object to the construction of other apartments /residential buildings that shall be constructed on the said Property and he/she/they do/es hereby specifically confirm and agree that the Developer shall be entitled to construct composite multi-storied residential apartment buildings on the said Property without any intervention of the Purchaser/s as per the development Scheme. b. Thus, clearly, under the agreement to sale, neither risks and rewards of ownership nor control over the land have been transferred to the buyer. Therefore, no income has accrued to the Respondent during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lists a 4th condition which is not expressly present in AS 9 - i.e. transfer of possession to the buyer. c. The Respondent has through various clauses of the agreement to sale already demonstrated that the buyer under the agreement has not received possession of the share in land. In fact the buyer's share in land is not at all identifiable. The buyer is expressly prohibited from entering into any part of the overall land. There can be no interventions by the buyer whatsoever. d. Thus, even in terms of ICAI's guidance note the conditions precedent for revenue recognition are not present. Therefore, no revenue can be recognised at the time of agreement to sale. 6.27 Para 7 of AS- 9 specifies principles for recognition of revenue from services. The standard provides for two methods of revenue recognition: a) Project Completion method - Under this method revenue is recognised only upon completion of the project. b) Percentage completion method - Under this method revenue is recognised in proportion to percentage of overall work completed during the year. 6.28 As per the accounting standard, percentage completion method (also referred to as proportionate completion method) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is only at that point of time therefore that the income is to be recognized. c. Even the test of accrual would mean that there has to be a legal debt in favour of an assessee. In Respondent's case as long as the project is not completed, it does not have any debt in its favour. On the contrary there would be a debt due by the Respondent to the extent of monies paid by the prospective customers. Therefore, there would be no occasion for appropriating the money till such time that the project is completed. d. It is true that by virtue of the agreement entered into with the prospective purchasers the said purchasers agree to pay money periodically over the duration of the agreement. However, it is only a financing arrangement, which enables the Respondent and the developer to complete the project in time. When the advance amount is paid as per the agreement, it becomes a debt due by the Respondent and not debt due to the Respondent. Therefore, till project is completed there would be no legal right to appropriate the advance money paid by the prospective customers. e. The project completion method chosen by the Respondent is therefore in accordance with section 5 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acres and 9 guntas at Thanichandra, K.R. Puram, Bengaluru East. This land has been shown as fixed asset in the books of accounts of the assessee in the assessment year 2013-14 (Page No.259 of assessee's Paper book) A.Y. 2014-15 (Page No.284 of the PB) A.Y. 2015-16 (Page No.312 of PB). The assessee entered into Development Agreement (DA) with M/s. G. Corp Homes Pvt. Ltd. (Developer) on 2.9.2010 for development and construction of residential building in the land, which is placed at assessee's paper book page Nos.185 to 223. Thereafter to supplement the agreement and Deed of Rectification were also entered into which are kept on record. On entering into DA, the assessee received refundable security deposit of Rs.25 crores. Later, adjusted proportional against the advance received. As per Development agreement, revenue earned from sale, lease, license of the area covered under the project was to be shared between the assessee and developer in the ratio of 63:37. According to the assessee, the developer started giving owner share of the constructed area from financial year 2012-13 (AY 2013-14 onwards) and the developer has been receiving the advance from the prospective customers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any mortgage, charge, lease, lien or other encumbrance in respect of the Schedule Property during the currency of this Agreement. Provided however, at the request of the Developer the Owner shall sign and execute necessary mortgage/charge/lien documents for the purpose of raising finance by the Developer for the Project against Developers right/share under this Agreement. The loans/finance obtained by the Developer against the security of the Schedule Property shall be used only for the purposes of the Project in relation to the Schedule Property Provided however that the Developer shall be responsible for repayment of the loans availed of and will indemnify and keep indemnified the Owner at all times in relation to the loans / construction finance availed of. 9.3 The Owner shall handover to acquire title and khata in the Owner's name in respect of certain other lands bearing Sy. Nos. 45/3, 46/9, 49,2, 55/2, 55/3, 55/4 and 55/5 ('Additional Lands") which are contiguous to the Subject Property and if the Owner acquires title and khata in relation to the Additional Lands, the Owner shall be obliged to enter into a Supplemental Agreement to this Agreement and grant devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Residential Building(s) on the Schedule Property. 10.6 All rates, taxes, charges, assessments, duties, and outgoings in respect of the Schedule Property from the date of this Agreement shall be paid by the Developer. It is clarified that if any payments made relate to the period prior to the date of this Agreement, the same shalt be recoverable from the Owner." 7.3 Marketing and sale of premises as per clause 14 is as follows:- "14. MARKETING AND SALE OF PREMISES 14.1 The Developer shall be responsible for the marketing and sale of the Project and at the areas and premises to be constructed on the Schedule Properly and forming part of the Project in terms of this Agreement 14.2 The residential premises or any other premises constructed in relation to the Project on the Schedule Property shall be marketed as a G. Corp MSR Project and the name of the Project will be mutually decided by and between the parties 14.3 The Agreement for Sale and/or other writings to be entered into with the prospective purchasers of the premises {"Customer Agreements") shall be prepared by the Developer and for this purpose the Developer may engage legal advisors for drafting the Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E PROOJECT: 20.1 the Developer shall make best efforts to obtain the approval of the BBMP in relation to the plans within a period of 9 months from the date of execution and registration of this Agreement subject to the provisos below. Provided that the period of 9 months shall be calculated from the date of the Owner obtaining the amalgamated Khata from the BBMP in relation to Part I, Part II and Part III of the Schedule property, to the satisfaction of the Developer Provided that the period of 9 months shall be calculated from the date of the Owner obtaining the amalgamated Khata from the BEMP in relation to Part I, Part II and Part Ill of the Schedule Property, to the satisfaction of the Developer, Provided however that any time taken by the Owner to give his comments in relation to the plans and any period during which approvals a'-e not being granted by statutory / municipal authorities, which is beyond the control of the Developer, shall be excluded from the period of g months. However, in case there is a delay in receiving the approvals for reasons beyond the Developer's control, the period shall be extended mutually by the Owner and the Developer. 7.7 As se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 491), considered this issue and it is necessary to first appreciate what this judgment lays down, and perhaps even more important that, what it does not lay down. 7.10 Their Lordships of Hon'ble Bombay High Court were examining the scope and import of Section 2(47)(v) which was introduced w.e.f. 1st April, 1988. This provision, which covers one of the modes of deemed 'transfer', lays down that the scope of expression 'transfer' includes "any transaction involving the allowing of, the possession of any immovable property (as defined) to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act". Elaborating upon the scope of section 2(47)(v), their Lordships observed as follows: "Under Section2(47)(v), any transaction involving allowing of possession to be taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of Section 2(47)(v). That, in order to attract Section 53A, the following conditions need to be fulfilled. There should be contract for consideration; it should be in writing; it should be signed by the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed thereof by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the, transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than the right specifically provided by the terms of the contract; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 7.14 A plain reading of the section 53A of the Transfer of Property A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form his obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under section 2(47)(v) of the IT Act. Let us therefore consider whether the transferee, on the facts of the present case, can be said to have 'performed or is willing to perform' his obligations under the agreement. 7.16 At this point, we will go through the clause No.5 & 5.1 of the development agreement dated 2.9.2010 as enumerated therein, which itself states that no possession of property has been given through the impugned development agreement. The development agreement is only for granting license to enter property and start development activity, thus, as a result of this provision of section 2(47)(v) of the Act have no application. This falls within the purview of section 53A of the T.P. Act and such part performance has been defined as "Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h later date that depends upon the convenience of the assessee and also upon the exigencies of the situation. Amount of the income, profit or gains may then be ascertained later on the accounts being made up. But when the accounts are thus made up the income, profits & gains ascertained as a result of the accounts are referred back to the chargeable accounting period during which they have accrued or arisen and the assessee is liable to tax in respect of the same during that chargeable accounting period. It is not how an assessee treats any monies received. But what is the nature of the receipts, which is decisive of its being taxable. Income tax is a levy on income. No doubt, the IT Act takes into account two points of time on which liability to tax is attracted. Namely, the accrual of the income or its receipt "but the substance of the matter is the income". If income does not result at all, there cannot be a tax even though any book keeping an entry made about an income, which does not materialize. Where income as, in fact, been received and in subsequently given up in such situation that it remains the income of the recipient, even though given up, the tax may be payable. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Kar.) b) In our opinion, the decision of the higher authority is required to be followed and further the decision of the Hon'ble Jurisdictional High Court of Karnataka is to be followed' as a judicial proprietary demand. c) The learned Assessing Officer has come to the conclusion that the Assessee ought to have recognized income by way of percentage completion method on the basis of the revenue recognition policy adopted by the developer. In our opinion, the land owner i.e, the Assessee and the developer are two independent assesses in the scheme of the Act. Merely because the developer has followed the percentage completion method the land owner need not follow the same as each of them are independent assessable entities under the scheme of Act and are entitled to choose the method that is preferred by them. d) It has to be noted that the expert advisory committee of the Institute of Chartered Accountants of India have opined that the provisions of the Accounting Standard - 7 - Construction Contracts are not applicable developers and that the provisions of Accounting Standard - 9 - Revenue Recognition would apply to them e) In our opinion, no possession has been g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the essence of share of revenue derived for the land owner is from transfer of the undivided share of right, title and interest in the entire land and the developer share of revenue is from construction and transfer of the super built and development of common area in the project. The reliance placed by ld. D.R on the Guidance note on accounting for real estate transaction (Revised) 2012 to hold that percentage completion method has to be followed is incorrect proposition as even the Guidance note states that revenue should not be recognized till such time legal title is validly transferred to the buyer. 7.18 In our opinion, the assessee has been following project completion method of recognition of revenue and this system of accounting has been followed by from year to year which can be seen from the assessment order in assessment year from 2014-15 passed u/s 143(3) dated 19.5.2015. Thus, it was the submission ld. AR that it is not open to the department to change the method of accounting in the middle of the period of completion of the project even percentage competition method is applicable. He submitted that rule of consistency has to be followed. For this purpose, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st under the terms of the compromise decree. This was, therefore, not a case of election between two alternative units of assessment, but an attempt to bring to tax the income of an assessable entity which had escaped assessment. That apart, under section 3 of the 1922 Act, in the matter of assessment, there is no question of any election apart, under section 3 of the 1922 Act, in the matter of assessment, there is no question of any election between a HUF and a member thereof in respect of the income of the family. If a HUF exists, under section 3 of the 1922 Act, the ITO has to assess it in respect of its income. Indeed, under section 14(1) of the 1922 Act, any part of the income reeived by its members cannot be assessed over again. While section 3 of the 1922 Act confers an option on the ITO to assess either the association of persons or the members of the association individually, no such option is conferred on him thereunder in the case of a HUF, as its existence excludes the liability of its members in respect of the income of the former received by the latter. It was true that the Act does not envisage taxation of the same income twice over "one passage of money in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Excel Industries Ltd. (2013) 358 ITR 295 (SC) ii) CIT v. Bilhari Investment (P.) Ltd 299 ITR 1(SC) 8.4 It is a settled position of law that department cannot collect tax twice on the very same income and observation of the AO is absolutely contrary to the scheme of the Act that income can only' be taxed once more so when the revenue has accepted the income determined using the same method in two earlier assessment years and once subsequent assessment year. Further the information has been given to the Investigation Officer during the course of investigation. Therefore, it is more than reasonably correct to follow the same method of revenue recognition as there is an implied formidable fortified concurrence of the revenue on the method adopted by the assessee. The observation of the AO is further not under the spirit and the scheme of the Act. 8.5 It is needless to add that the department is excepted to assist the assesses in computing taxable income as per the provisions of the Act as enunciated by the CBDT in Circular No. No. 14 (XL-35) of 1955, dated 11.04.1995 and amplified by the decision of the Hon'ble Karnataka High Court in the case of Rajeshwari Cotton Ginni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fallacious. The facts in the instant case, showed that there was no construction work done by assessee itself and it was the developer i.e. M/s. G-Corp Homes Pvt. Ltd. and there was no handing over of the constructed area by present assessee to prospective purchasers. What was received from the prospective buyers was in the nature of advance, therefore, it cannot be considered as amount received towards absolute transfer of price of flats intended to be sold. The system of accounting of working out profits on completed contract basis was an accepted system of accounting and such system had been followed consistently in the past by the assessee, which had been accepted by the department in earlier years, therefore, there was no justification, whatsoever to reject this system by invoking the provisions of section 145 of the Act and making estimate of profit by AO. 8.7 At this stage, it is appropriate mention the Third member decision in the case of JCIT Vs. Magnum International Trading Company Ltd. (84 ITD 113) (Third Member) (Del.) wherein held that: "Assessee following project completion method, AO not justified in rejecting the method midway and estimated profit more so on whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld - Appeals dismissed." 8.10 In the case of DCIT Vs. Maxworth Infrastructure P. Ltd. 63 CCH 151 (Del.) that: "Accounting Standard AS-7 relied upon by the Assessing Officer is applicable strictly in the case of construction contracts only. Further, the assessee is following consistently this method of revenue recognition in prior years as well as in subsequent years and which has been accepted by the revenue and thus rule of consistency also demand that in the year under consideration the assessing officer is not justified in deviating the consistent approach of the Department. In view of above, there is no error in the order of the CIT(A) on the issue in dispute. Revenue's appeal dismissed." 8.11 In the case of DCIT Vs. Ankit Chirag Developers Pvt Ltd. 40 CCH 18 (Jodh) (Trib). held that "On perusal of clause 10 & 11 of AS-9 it is noted that in the appellant's case the retractions involving of sale of good, the performance can be regarded as achieved when conditions laid down in clause 11 are fulfilled. In this connection it may be noted that the appellant has not transferred to the buyers the property i.e. flats in as much as significant risk and rewards of ownership have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Transfer of Properties Act. (Para 6) Provisions of section 2(47) of the Act have no application to the transactions of stock-in-trade. In this case, the stock-in-trade in immovable property and the title in immovable property can be transferred or alienated in accordance with the provisions of the Transfer of Properties Act. The right, title or interest in the immovable property can be transferred only by way of registering the conveyance deed executed in this behalf. Even the accounting standard 9 dealing with the recognition of income also lays down that the income in respect of transfer of immovable property can be recognized only when the risks, rewards and ownership of the property is transferred to the buyer. Therefore, the matter requires fresh examination by the Assessing Officer in the light of the above position of law. Therefore, court remand this matter back to the file of the Assessing Officer with a direction that the income in respect of sale of plots can be recognized only in the year in which conveyance deed executed is registered in favour of the buyers and to allow the development expenditure incurred as expenditure or the expenditure likely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as the same was being followed for the last so many years. When the guidance note provided that revised AS-7 is applicable to real estate developers, the assessee has itself changed the method of accounting. Hence the AO is directed to accept the project completion method of accounting for the year under reference.-Motor Industries Company Ltd. vs. Asstt. CIT (ITA Nos. 335 & 336/Bang/2005, dt. 12th June, 2008) followed. (Para 3.25) Conclusion: Assessee developer having regularly employed project completion method which is an accepted method of accounting, and the Central Government having not notified AS-7 under s. 145(2), AO could not reject the accounts under s. 145(3) on the ground that the assessee had not followed the percentage completion method." 8.14 In the case of CIT Vs. Banjara Developers & Constructions P. Ltd. 425 ITR 673 (Karn.) wherein held that: "7. We have considered the submissions made on both the sides and have perused the record. Section 145 of the Act deals with method of accounting. Section 145(1) provides that income chargeable under the head 'profits and gains of business or profession' or 'income from other sources' shall s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al as a whole, it is evident that the tribunal has taken note of the effect of Section 145 of the Act. Therefore, the aforesaid submission made on behalf of the revenue also does not deserve acceptance. 10. In view of preceding analysis, the substantial question of law framed by this court is answered against the revenue and in favour of the assessee. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed." 8.15 In the case of CIT Vs. Prestige Estate Projects P. Ltd. 440 ITR 343 (Karn.) wherein held that "10. In the instant case, assessee entered into a Development Agreement with M/s. Karnataka Realtors Private Limited, under which agreement the assessee was to develop the property and after development of the property, the owner and the developer were entitled to a specified percentage of super built area and both were free to sell the super built area allotted to their respective shares before construction of the built up area fallen to the share of the assessee, it (assessee) entered into agreement with the proposed buyer to construct the portion as per their specification. In other words, construction is undertaken by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods has transferred to the buyer the property in the goods for a specific price or on significant risks and rewards of ownership has been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; (ii) no significant uncertainty exists regarding amount of consideration that has been derived from the sale of the goods. In the instant case, it has been noticed by the appellate Tribunal that assessee was in the activity of projects and was not a construction contractor. Thus, the revised AS-7 would be applicable to an enterprise undertaking construction activities on their own account as a venture of commercial nature. Whereas, the assessee undertakes construction activities for those persons to whom it intends to sell super built area along with undivided share of land in a project which it is developing as a developer. 11. There cannot be any dispute to the fact that every assessee being entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. Under similar circumstances as obtained from the facts on hand, Hon'ble Apex Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). 8.18 In the case of DCIT Vs. Varun Developers (440 ITR 354) (Karn.) 4. We have considered the submissions made by learned counsel for the parties and have perused the record. The first three substantial questions of law are answered in favour of the assessee for the reasons assigned by learned Senior counsel for the assessee in the judgments referred to supra. So far as fourth substantial question of law is concerned, it is pertinent to note that under section 145(1) of the Act, the income chargeable under the head Profits and Gains of Business shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The general provision is subject to accounting standards that the Central Government may notify. The assessee is a builder and developer and not a construction contractor simplicitor. Accounting Standard 7, titled construction contracts is applicable only in case of contractors and does not apply to the case of developers and builders which is evident from opinion rendered by expert advisory committee of ICAI. It is pertinent to note that the assessee had offered the income for. Assessment Year 2007-08 and no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of which are in pari-materia of section 145 of 1961 Act) have held as under: "Section 13 of 1922 Act merely prescribes that the computation of taxable profits shall be made according to the method of accounting regularly employed. Where in the opinion of the ITO the income, profits and gains cannot be properly deduced from the method of accounting, it is open to ITO to compute the income upon such basis and in such manner as he may determine". Comparing the provisions with the English provisions, it is held, "the only departure made by section 13 of 1922 Act from tax legislation in England is that whereas under English legislation the commissioner is not obliged to determine profits of a business venture according to method of accounting adopted by the assessee, under the Indian Income Tax Act, prima-facie, the ITO has for purposes of section 10 & 12 of 1922 act to compute income, profits and gains in accordance with method of accounting regularly employed. If, therefore, there is a system of accounting regularly employed and by appropriate adjustments from the accounts maintained taxable profits may be properly deduced, the ITO is bound to compute profits in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant to mention that in those years also the appellant has credited the advance received against proposed sale of flats to the Advance against sale of Flat A/c and not treated the same as income for said years on the basis that revenue in respect of sale of said flats would be recognized only on execution and registration of sale deeds of flats. The assessment of the said years have been completed by AO by the same common order, accepting the method of accounting and method of recognition of revenue. Thus the method followed by appellant is a consistent method which has been accepted by AO for two years i.e. AY 2010-11 & 2011-12 Since the said method has been consistently followed by appellant and even accepted by department, the same cannot be deviated in the present two years without there being any finding as contemplated u/s 145(3) on the basis of satisfaction required by that section viz., (1)about correctness or completeness of the accounts of the assessee or (2) about the fact that the assessee has not regularly employed the method of accounts provided in section 145(1) or (3) that the income has not been computed in accordance with the standards notified u/s 145(2). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accepted by the Revenue in the earlier years, in the present year, the Assessing Officer could not have taken a different sand and that too, without hearing the assessee". 35. Further in another judgment by CIT Vs. Umang Hiralal Thakur (2014) 42 taxmann.com 194 (Guj) is placed on the following paragraphs of its judgment. "In the present case, it is not the Assessing Officer's case that the appellant is not reporting or under reporting its income. In fact, I find in the subsequent assessment year, i.e. the assessment year 2007-08, the appellant has disclosed substantial income from the projects undertaken in the business proprietary concerns, viz, M/s. Neelkanth Enterprises, M/s. Ghanshyam Enterprises and M/s. Swaminarayan Enterprises. In the subsequent year, i.e. the assessment sear 2007-08 the profit declared from the projects run by these three proprietary concerns ranges from 43 per cent to 46 per cent. The Supreme Court in the case of Sanjeev Woolden Mills v. CIT (supra), has clearly held that to attract the proviso to section 145(1) of the Act, the Assessing Officer should be of the view that the accounts are correct and complete but the method employed is such that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come which is assessable under the Income tax Act is to be computed in accordance with the consistent system of accounting followed by the assessee unless such system, of accounting is defective and/or from such system of accounting, profit cannot be deduced. Thus, in our considered opinion, the option for choosing the system of account is with the assessee and not with the learned Assessing Officer provided the system chosen by the assessee is consistently followed by him and such system is not a defective system. In our considered view, provisions of AS7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining income is concerned. In the instant case, we find that the learned Assessing Officer has brought no material on record to show that the system of accounting adopted by the assessee for the year under appeal was not consistently followed y the assessee or the system adopted was a defective system. In our considered view, even a project completion method is also a recognized system of accounting. Simply the Institute of Chartered Accountants of India has recommended the percentage com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee holding that the results declared by the assessee on the basis of method of accounting consistently followed and the entire profit of the project has been offered in subsequent assessment year therefore there is no justification in rejecting the method of accounting followed by the assessee and substituting the same by adopting accounting AS-7 issued by ICAI and followed it for accounting. 38. Similarly Hon'ble High Court of Punjab & Haryana in the case of Commissioner of Income Tax (Central), Gurgaon V. Principal Officer, Hill View Infrastructure (P) Ltd (2017) 81 taxmann.com 58 (Punjab & Haryana) order dated 13.8.2015 confirmed the view taken by the Tribunal deciding in favour of the assessee relating to the issue of the project completion method adopted by the assessee vis-a-vis percentage completion method applied by us, the Assessing Officer observing as follows; "The assessee in reply to the query raised by the Assessing Officer had inter alia claimed that it had been consistently following method of booking of the revenue on the completion of the flat when full payment had been made to it by the person concerned and possession was delivered to him. It was pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion method which had been consistently followed by the assessee for the preceding years also. The Assessing Officer on the other hand, had applied percentage completion method to compute the income in the hands of the assessee. The Commissioner of Income Tax (Appeals) had allowed the claim of the assessee. Both the methods of accounting are i.e. project completion method and percentage completion method is accepted standards of accounting and either of the methods can be applied by the assessee. In the facts of the present case before us, the assessee had chosen to compute its income on the basis of project completion method i.e. recognizing the income on -the completion of the project and not from year to year whereas the case of the revenue was that it should account for the income as it is generated in the hands of the assessee i.e. from year to year on the basis of the work completed being relatable to the revenue generated from year to year. The Hon`ble Supreme Court in CIT Vs. Bilahari Investment (P) Ltd (supra) had held that "recognition/identification of income under the 1961 Act is attainable by several methods ,of accounting. It may be noted that the same result co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the recognized methods of accounting. It was held as under:- "It is well settled that the project completion method is one of the recognized methods of accounting. It cannot be said that the project completion method followed by the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the IT Act" The assessee respondent had been consistently following one of the recognized methods of accountancy, i.e project completion method, for computation of its income. In the absence of any prohibition or restriction under the Act for doing so, it cannot be held that the approach of the CIT (A) and the Tribunal was erroneous or illegal in any manner so as to call for interference by this Court. No substantial question of law arises. Consequently, finding no merit in these appeals, the same are dismissed." 38. It is well settled that the project completion method is one of the recognized methods of accounting. In CIT v Hyundai Heavy Industries Co. Ltd (2007) 291 ITR 482/161 Taxman 191 (SC) the Supreme Court held as follows:- "Lastly, there is a concept in accounts which is called the concept of contract accounts. Under that concept, tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method. In view of the judgments of the Supreme Court (Supra), the finding of the CIT(A), upheld by the Tribunal, does not give rise to any substantial question of law. Further, the Tribunal has also found that there was no justification on the part of the assessing officer to adopt the percentage completion method for one year(the year under appeal) on selective basis. This will distort the computation of the true profits and gains of the business. For these reasons, we axe of the view that no substantial question of law arises. We, therefore, decline to admit question Nos. 2 and 3." 41. From perusal of all the judgments it has been consistently held rather a settled law that the action of revenue authorities cannot be held justified if they substitute another method of accounting on the assessee which in the instant case was imposing of percentage completion method on the assessee even when it has been consistently maintaining the regular books of accounts on mercantile basis u/s 145 of the Act adopting project completion me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with ownership. The assessee has referred to BU permission etc. and has demonstrated on facts that the risks associated with the project continued with the developer in a significant way during the year under consideration. It is also not in dispute that the income has been ultimately offered in the later assessment year and duly assessed. Thus, the entire exercise of the AO is revenue neutral. The CIT(A) has correctly appreciated the facts and circumstances of the case and has taken note of the revenue recognition in the later year. The assessee has also demonstrated that the revenue recognized from project has been actually assessed and accepted in 143(3) r.w.s. 263 of the Act proceedings. (Para 8) Conclusion: AO cannot challenge the project completion method adopted by the assessee, a developer and constructor of the building project, to the percentage completion method unless all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership." 8.22 The following case laws also support the case of the assessee which are as follows:- * CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed by the assessee, which is the project completion method of recognizing revenue is permitted in law and could be followed by assessee. Thus, it is settled position of law that decision of the higher authority to be followed and judicial discipline requires consistency in its proceedings. 8.25 Thus, in case of JDA the assessee being landlord share the proceeds arising from the development of immovable property belonging to the land owner share at specified percentage of constructed area and retains the legal ownership, domain and control of the land with him being a land owner and no portion of it will be transferred to the developer or his nominee, as the case may be. There is no allocated area designated as owner share or developer share as the case may be. The revenue shall be recognized by land owner being present assessee only at the point of transfer of risk and rewards of ownership of divided/undivided shares of land to the purchaser of unit i.e. at the point of conveyance or possession, whichever is earlier. 8.26 Income recognition of one business cannot be applied to another: a. At para 12(viii), of the impugned order, the learned assessing officer has noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Homes Pvt. Ltd. as business income. However, while filing return of income assessee not declared this income as admitted during the course of search proceedings. 8.28 We have carefully considered the submission of the ld. DR. In our opinion, the question that needs to be addressed is whether the addition could be made merely on the basis of admission made by the assessee in the statement recorded u/s 132(4) of the Act? In our opinion, the statement recorded u/s 132(4) of the Act is not conclusive and it is rebuttable. For this proposition, we place reliance on the decision rendered by Hon'ble Supreme Courtin the case of Pullangode Rubber Product Co. Vs. State of Kerala (91 ITR 18) (SC), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admission to show that it was incorrect. We may also refer to the decision rendered by Hon'ble Supreme Court in the case of CIT vs. V. MR.P Firm (1965) 56 ITR 67, wherein it was held that the principle of estoppels will not against the Income tax Act. The relevant observations are extracted below: "The contention is that the assessees having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field." 8.30. The Hon'ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held as under: "8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready been concluded. Thus, for the assessment year 2014-15 which is a concluded assessment, to frame assessment u/s 153C of the Act the seized material is must. In the present case, the assessing officer relying only on the basis of sworn statement recorded u/s 132(4) as well as 131 of the Act without valid seized material. In our opinion, that should be a valid seized material found during the course of search and the sworn statement of the Directors cannot substitute this seized material found during the course of search, though sworn statement is a piece of evidence to frame the assessment but it is not conclusive evidence to frame the assessment or sustain the addition. 8.32 For the assessment year 2015-16 and 2016-17, these assessments were framed u/s 143(3) r.w.s. 153D of the Act and there was no valid seized material found during the course of search to frame the assessment. The ld. AO cannot rely only on the sworn statement recorded from Shri M.R. Seetharam to frame the assessment. In our opinion, as discussed in earlier para, sworn statement is not conclusive evidence to frame the assessment or to sustain the addition. The addition shall be based on the evidence found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals) ought to have decided the issue and ought to have held that the impugned order is bad in law for want of compliance of requirements of section 153C of the Act. In view of the above and other grounds to be adduced at the time of hearing, it is requested that the impugned assessment order passed by the Assessing Officer be held to be bad in law and void ab initio and be quashed. 11. Facts of the case are that a search action u/s 132 of the Act was conducted in the case of M/s. M.S. Ramaiah Developers & Builders P Ltd. on 23.08.2016. During search proceedings some documents pertaining to Shri. M R Seetharam, the assessee was found and seized. Since these documents had a bearing on total income of the Shri M R Seetharam, the same were considered for assessment of this. case u/s 153C of I T Act. Subsequently, this case is centralized to this circle by the Pr. CIT, Bangalore-6, Bangalore vide his Notification u/s 127 in F.No. Pr. CIT/B1r- 6/Centralization/20.16-17 dated 02.12.2016. 11.1 Notice u/s. 153C r.w.s. 153A of the Act was issued to the assessee on 30.08.2018 requiring 'him to file the Return of Income within 30 days from the date of receipt of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment proceedings, it was found that M/s G-Corp Homes Pvt. Ltd. is following the percentage completion method for revenue recognition being a developer of the project. Further, it was also found that the company is transferring the land owner's share of advances received regularly to Shri. M R Seetharam. This was confronted to the assessee, Shri. M R Seetharam and his sworn statement was recorded u/s 132(4) of I T Act on 28.08.2016 during the course of the search. The relevant part of the statement is reproduced as below: "Q.No.13 Please state the various stages in which the JDAs are in presently with respect to completion. Ans. The JDAs with G-Corp Homes Pvt. Ltd., M/s. Kalyam Tech Park Ltd. are under development. The JDA with M/s. Micro Construction is under preliminary clearances and construction has not started till date. With respect to M/s. Roma Builders, construction is in the final stages. Some sale deeds have been already entered into and I am yet to receive the possession of 2 to 3 apartments. Q.No.14 Please explain in detail the aspects of the JDA with G-Corp Homes Pvt. Ltd. Ans. The JDA was entered into in the FY 2010-11 between myself in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respective Assessment Years. 11.7 However, in the return filed in response to notice u/s 153C of I T Act, the assessee did not declare * the income as admitted during search proceedings. The assessee was asked to show-cause as to why the revenue received from M/s G Corp Homes P Ltd during the Asst Year 2014-15 should not be treated as his business income. 12. The Ld. A.R. submitted as follows:- ORDER IS BAD IN LAW FOR INCORRECT ASSUMPTION OF JURISDICTION: 12.1 Transfer of Respondent's case from ACIT Circle 6(3)(1) to ACIT Central Circle 1(2) in violation of Sec. 127 is bad in law. 12.2 As has been submitted earlier, the file of the Respondent was with ACIT Circle 6(3)(1) In fact for the year under appeal the Respondent was earlier assessed u/s 143(3) of the Act by ACIT Circle 6(3)(1). 12.3 However, in the Respondent's case a notice u/s 153C dated 30.08.2018 was served on the Respondent by ACIT Central Circle 1(2). On 19-09-2018 the Respondent filed a letter questioning the assumption of jurisdiction u/s 153C on the ground that the Respondent was not made aware of the reasons for transfer/assignment of his record from one officer to another officer on the ground that requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd and M/s Ramaiah Developers and Builders Pvt Ltd.". 12.9 The Respondent submits that there is however no cogent material to demonstrate as to how transfer of Respondent's case could facilitate 'effective and coordinated investigation'. The Respondent's case is not a case where large number of assessees have been subject to action of search u/s. 132. The Respondent's case has not been linked to search action in the case of any other assessee. Throughout all proceedings, there has never even been a whisper of any linkage between the Respondent's case and the search carried out in the case of other assessees. One therefore fails to decipher as to how transfer of Respondent's case to Central Circle could assist in 'effective and coordinated investigation'. 12.10 The jurisdictional high court in the case of Y. Moideen Kunhi & Co. Vs. ITO [1993] 71 Taxman 177 (Karnataka)/[1993] 204 ITR 29 (Karnataka)/[1993] 114 CTR 174 (Karnataka) has categorically/ held "mere mention of stock - phrases like 'to facilitate coordinated investigation' or variations thereof will not be in compliance with the mandatory requirement of section 127(1)" Thus the reason for transfer forthcoming from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar of registration was then accepted by the jurisdictional assessing officer. 12.16 In the present search and impugned assessment proceedings no new / hidden fact has come to light. The learned assessing officer has only changed the opinion and has now sought to tax the receipts in the year of receipt as against the year of registration. Thus, the additions in the impugned order are purely based on a change in legal opinion and not on any 'incriminating material'. 12.17 The predominant condition for satisfaction under 153C of the Act is the incriminating nature of evidence found. Though there has been change in the wordings of the section, the intention behind the section is not changed and the presence of document or evidence with incriminating nature is necessary before a notice u/s. 153C is issued. [B] Non-recording of satisfaction u/s 153C invalidates the entire proceedings 12.18 Without prejudice, from a plain reading of the provisions of law it is clear that for a valid proceeding u/s 153C following steps and procedures have to be duly followed: a. During the course of the search some incriminating material must be found. The AO of the "person searched" must be satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l/2012 AYs 2004-05 to 2009-10 * DSL Properties (P.) Ltd. v. Dy. CIT (2013) 60 SOT 88 (URO)(Delhi)(Trib.) * ACIT .v. Inlay Marketing Pvt. Ltd(2015) 167 TTJ 273 (Delhi)(Trib.) * Pepsi Foods P. Ltd. .v. ACIT (2014) 367 ITR 112 (Delhi)(HC) * CIT .v. Gopi Apartment (2014) 365 ITR 411 (All.)(HC) * DCIT.v. Akash Arogya Mindir P.Ltd. (2015) 167 TTJ 578/ 114 DTR 61 (Delhi)(Trib.) * ACIT v. Surbhi Sen Jindal (2018) 68 ITR 12(SN) (Patna) (Trib.) * Avalanche Reality P. Ltd. v. ACIT (2018) 68 ITR 79 (SN) (Indore)(Trib.) * CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84/ 278 CTR 144 (Bom.)(HC) * CIT v. Mechmen (MP)(HC) AYs 2000-01 to 2006-07 I.T.A. No.44/2011, I.T.A. No.45/2011 * DCIT .v. Aakash Arogya Mindir (P) Ltd. (2015) 167 TTJ 578 (Delhi)(Trib.) * CIT v. N. S. Software (FIRM) (2018) 403 ITR 259/ 165 DTR 201 / 302 CTR 136/ 255 Taxman 230 (Delhi) (HC) 12.22 Even the jurisdictional high court in the following cases has held that A satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the Assessing Officer who has jurisdiction over such other person. Not furnishing the reasons for satisfaction rend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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