NOTIFICATIONS

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I-T Rules - Form No. 3CD - Entry relating to loan/deposit in excess of limit specified in Section 269SS added

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Section 269ST - Prohibition on receipt of Rs. 2 lac or more otherwise than by a/c payee cheque/ DD/ e-banking not applicable in certain cases

CIRCULAR

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Clarifications in respect of section 269ST of the Income-tax Act, 1961

CASE LAWS

2017-TIOL-1245-HC-MAD-IT

CIT V LAVANYA LAND PVT LTD: BOMBAY HIGH COURT (Dated: June 23, 2017)

Income Tax - Sections 132 & 153C.

Keywords - purchase of land - special economic zone (SEZ) - search & seizure - unexplained expenditure.

The Jai Corp group is a partner in 'Mumbai SEZ' and 'Navi Mumbai SEZ' projects of India. This group floated various companies to purchase large chunks of land in the vicinity of SEZ. The group's real estate operations were being handled by Viredra Jain, Gaurav Jain and Dilip Dherai. Dilip Dherai was also managing land deals outside Mumbai SEZ. The assessee is one of the companies floated by this group to purchase land outside Mumbai SEZ. A search action u/s 132 was carried out in the case of this group, it's employees and close associates. They were involved in the process of acquiring land. During search of Dilip Dherai's residence, certain incriminating documents were seized and his statement was recorded as per which he made an an admission of the fact that there were amounts disbursed for purchase of lands. Dilip Dherai also stated that an amount of Rs.38.45 crores was received by him in cash to purchase lands. The statement was, however, retracted later. A notice u/s 153C was issued for those years preceding the relevant AY, requiring the assessee to file return. Prior thereto, a notice was issued u/s 143(2) for the AY 2009-10. Thereafter, a SCN was issued to the assessee informing that Rs.38.45 crores, which is a sum reflected from the documents seized from Dilip Dherai's residence, and Rs.4 crores in addition, were found during search and seizure proceedings. The assessee was called upon to explain as to why these amounts should not be treated as 'unexplained expenditure' u/s 69C, since the assessee did not provide any explanation with regard to the documents seized u/s 132 for the AYs from 2003 to 2009 and for 2009-10. The Assessment Order was passed and additions were made. The amount of unexplained expenditure was apportioned to all the land companies floated by Jai Corp Group who had purchased land in these villages in ratio of the cost of land purchased up to 28th November, 2008. This Assessment Order was passed on 29th December, 2010 and was upheld by the CIT(A). Tribunal set aside the order of the CIT(A) pertaining to the AY 2008-09 holding that the action u/s 153C was bad in law. Aggrieved Revenue preferred appeal.

Having heard the parties, the High Court held that,

Whether High Court can intervene in Tribunal's finding, that Section 153C was not attracted in case of assessee and its invocation is bad in law, if such finding is not based just on an interpretation of the said section but detailed analysis of factual finding has also been done by the Tribunal - NO: HC

++ the Tribunal arrived at the conclusion that merely on the strength of the alleged admission in the statement of Dilip Dherai, the additions could not have been made. The concurrent findings of fact would demonstrate that the essential ingredients of Section 69C enabling the additions were not satisfied. This is not a case of 'no explanation'. Rather, the Tribunal concluded that the allegations made by the authorities are not supported by actual cash passing hands. The entire decision is based on the seized documents and no material has been referred which would conclusively show that huge amounts revealed from the seized documents are transferred from one side to another. In that regard, the Tribunal found that the Revenue did not bring on record a single statement of the vendors of the land in different villages. None of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. It is in these circumstances that the Tribunal found that on both counts, namely, the legal issue, as also merits, the additions cannot be sustained. We are of the opinion that the Revenue has rightly been faulted for its approach by the Tribunal. The above are pure findings of fact and consistent with the material placed on record. Thus, the jurisdiction and vesting in the AO could have been exercised and the satisfaction in that regard was enough, are not matters which can be decided in the further appellate jurisdiction of this Court. It is not possible for us to reappraise and reappreciate the factual findings. The finding that Section 153C was not attracted and its invocation was bad in law is not based just on an interpretation of Section 153C but after holding that the ingredients of the same were not satisfied in the present case. That is an exercise carried out by the Tribunal as a last fact finding authority. Therefore, the finding is a mixed one. There is no substantial question of law arising from such an order and which alternatively considers the merits of the case as well.

Revenue's appeal dismissed

2017-TIOL-1246-HC-MAD-IT

TRO Vs SREE FOUNDATION MADRAS HIGH COURT (Dated: April 18, 2017)

Income Tax - Section 281.

Keywords - sale agreement - transfer of property - sale consideration - sale deeds.

The Company M/s. Cosmo Foundation Limited entered into an agreement of sale with M/s. Sree Foundation with respect to the vacant land. At the time of agreement, there were only two encumbrances over the aforesaid property which were cleared out of the sale consideration. As the purchaser paid the entire sale consideration, the seller handed over vacant possession and all the original documents pertaining to the subject property. Thereafter, a Power of Attorney was executed in favour of M/s Sree Foundation to enable them to execute and register sale deeds in their favour or in favour of their nominees, as and when required. A supplement agreement of sale was also executed, evidencing all the above stated facts. Therefore, according to M/s Sree Foundation, the entire sale transaction was completed on 18.02.2010 itself, as per Section 2(47). The sale deed in Document was presented before the Sub Registrar's Office, Sowcarpet, to be registered but the said document was not registered by the Sub Registrar. It was revealed that Revenue had initiated action against M/s. Cosmo Foundation Limited, u/s 147 and an order had also been passed by the ACIT, Chennai alleging that the assessee has concealed taxable income, thereby calling upon to pay a sum of Rs.1,63,08,463/- towards arrears of Income Tax for the AY 2006-2007. Revenue created a charge and attached the subject property, through intimation to the Sub Registrar, stating that M/s. Cosmo Foundations Ltd., had failed to pay tax in time and therefore the subject property was attached. M/s. Sree Foundation filed the writ petition, to issue a writ of Mandamus, directing to remove the charge and lift the attachment created in respect of the subject property. Revenue submitted that writ petition was not at all maintainable, since the proceedings dated 08.04.2011 was not challenged by M/s. Sree Foundation. Revenue further submitted that even on merits of the case, contention of M/s. Sree Foundation was that the entire sale transaction was completed on 18.02.2010 itself and that they have become the owner of the said property and only thereafter notice in Form No.57/ITCP-I dated 31.07.2010 was issued to M/s. Cosmo Foundations Limited, to pay a sum of Rs.162.86 lakhs, within 15 days from the date of receipt of the said notice. The said notice was duly served on them. But, they had failed to pay the income tax dues to the department, in time. Therefore, an order of attachment was passed on 08.04.2011. Writ Court allowed the writ petition and lifted the order of attachment. Aggrieved Revenue filed the Writ Appeal.

Having heard the parties, the High Court held that,

Whether if assessee transfers land during the pendency of any proceeding is pending then such transfer shall be void as against any claim in respect of any tax or any other sum payable as a result of completion of the said proceedings - YES: HC

Whether purchaser of property can claim to be its owner if the property has not yet been transferred in the name of the purchaser even though the entire sale consideration has been paid to the seller and necessary documents have been handed over to the purchaser - NO: HC

++ as per the proviso of Section 281, during the pendency of any proceedings under this Act or after the completion thereof, but before the service of notice any assessee who creates a charge, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceedings. Against M/s. Cosmo Foundations Limited, the department had initiated the proceedings. The sale of property as defined under the Transfer of Property Act, 1882, was not completed at the time of order of Attachment was issued by the Revenue. At that time, only a sale agreement was entered into between the parties. The contention of M/s. Sree Foundation that the entire sale consideration was paid would itself be sufficient to show that it is deemed to be the owner of the subject property. However, as per the sale agreement for any charges against the vendor, namely, M/s. Cosmo Foundations Limited, the vendor itself is liable. M/s. Sree Foundation is not the owner of the property as on the date of the order of attachment issued by the appellant department. The vendor, M/s. Cosmo Foundations Limited, is the owner of the subject property. Therefore, as per the provisions of the Act, unless the property is transferred in the name of the purchaser, M/s. Sree Foundation herein cannot claim that he is the owner of the property. Hence, it has no locus standi to question the order of attachment in the present appeal, as the it is not the owner of the property and the vendor who is the assessee cannot question the order of attachment. In an appeal preferred by Revenue, in ITA No.1469/Mds/2014 = 2016-TIOL-97-ITAT-MAD the Supreme Court held that the transfer of immovable property can only be, by way of a sale deed. In the absence of a deed of conveyance, duly stamped and registered, no right, title or interest in an immovable property can be transferred. However, the contention of M/s. Sree Foundation that he is deemed to be the owner of the property cannot be accepted in the light of the Transfer of Property Act and as per the law laid down in the aforesaid decision of Supreme Court.

Revenue's writ appeal allowed