ACIT Vs Himalaya Darshan Developers (Gujarat) Pvt. Ltd. (ITAT Ahmedabad)
The question that arises for our adjudication whether the document in the form of tally and balance sheet found during the course of search is an incriminating document in nature. In our considered view such document are not an incriminating material, as such those documents are part of the books of account maintained by the ‘SJSL’ wherethe transactions for the purchase and sales of the lands were duly disclosed. Likewise, the corresponding entries in the books of accounts of the assessee and corresponding capital gain was offered to tax in the income tax returns. Thus the impounded documents were belonging to the ‘SJSL’ and not the assessee company where all the material facts were disclosed. Hence the same cannot be termed as incrimination document found against the assessee company. Furthermore, there is no ambiguity to fact that in case of the assessee normal assessment under section 143(3) of the Act was already completed vide order dated 22-02-2012. Thus the year under consideration is unabated assessment year which can be disturbed only based on incriminating document against the assessee found during the course of search as held by the Hon’ble jurisdictional High Court in the case of Pr. CIT vs. Saumya Construction reported in 387 ITR 529. The relevant extract of the judgment is reproduced as under:
Section 153A bears the heading ‘assessment in case of search or requisition. From the heading of section 153, the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose ofthe provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income forthe sixyears preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, the earlier assessment would have to be reiterated.
In view of the above and after considering the facts in totality, we are of the view that the proceedings initiated under section 153C of the Act without having any incriminating materials belonging to the assessee which have bearing on its income is not sustainable for the reason as detailed above.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal is filed by the Revenue and the CO is filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11 Ahmedabad, [Ld. CIT (A) in short] dated 13/07/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 153C of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) dated 29/03/2016. The assessee has filed Cross Objection in the Revenue’s appeals bearing IT(SS)A no.264/AHD/2018 for the Assessment Year 20 10-2011.
2. The interconnected issue raised by the Revenue in all the grounds of appeal is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 16,67,49,036/- under the head capital gain.
3. Briefly stated facts are that the assessee in the present case is a private limited company and engaged in the finance business. The assessee was the owner of 2 plots bearing number 548 and 549 admeasuring 33,612 Sq. mtrs. which were purchased dated 24-08-2007 for a consideration of Rs. 1,45,30,560/- only.
3.1 The assessee subsequently entered into a Banakhat dated 12-03-2008 for the sale of both the plots to M/s SJ Securities Limited (in short ‘SJSL’) at a consideration of Rs. 2,02,08,750/-. Accordingly, the assessee in its income tax return declared short term capital gain of Rs. 37,18,594/- onlyin the year under consideration with respect to both the sale of plots.
3.2 However, the AO found that there was the search dated 26-10-2012 in the case of ‘SJSL’ under section 132 of the Act being the buyer of the property against the Banakaht. During the search it was found out that the buyer of the property namely SJSL has sold the aforesaid plots after converting them into small plots for the total consideration of Rs. 14,86,83,000/- during the period November 2009 to March 2010. Out of total sale value of Rs. 14,86,83,000/- an amount of Rs. 1,34,47,750/- was directly transferred to the account of the assessee company (i.e. M/s Himalaya Darshan Developer (Gujarat) Pvt. Ltd). The SJSL in their books of account has declared profit of Rs. 14,27,69,950/- which was set off against the loss generated on the sale of commodities amounting to Rs. 13,85,00,000/- only.
3.3 The AO also found that the director of ‘SJSL’ namely Shri Lalit K Rathodhas admitted in the statement, furnished dated 26-10-2012 during the search proceedings, under section 132(4) of the Act and also under section 131 of the Act dated 07-05-2012 that the company (SJSL) is engaged in providing accommodation entries. As such the company namely ‘SJSL’ was a paper company. This fact was also admitted by another director of SJSL namely Shri Partik R Shah in the statement furnished under section 131(1A) of the Act dated 01-08-2014, whowas also handling other companies which were only paper companies and engaged in providing accommodation entries.
3.4 In view of the above the AO sought clarification from the assessee proposing the entire transaction between the assessee and SJSL as a colorable device used by the assessee for transferring the capital gain on the sale of land to the SJSL which was subsequently set off against the loss on the sale of commodities.
3.5 In response to the notice, the assessee vide letter dated 19-11-2015 submitted that it has transferred both the plot of land to the ‘SJSL’ vide Banakhat dated 12-03-2008 for a consideration of Rs. 2,02,08,750/- only and against such Banakhat, has received part of the consideration detailed as under:
