BY TIOL News Service

AHMEDABAD, JULY 27, 2018: THE issue before the Bench is whether when the SETCOM has done due diligence to determine the quantum of capital gains and has passed its order based on proper appreciation of facts, statements of assessees and sale agreements, such order tends to go beyond the scope of judicial review. YES is the answer.

Facts of the case

THE assessees are members of the same business group. They were subjected to search & seizure operations and certain amount of cash was recovered from each of the assessees. Apart from that, goods and other valuable articles were also seized. Some quantity of gold was also seized from one of the assessees. The Revenue then recorded their statements u/s 132(4). The assessees were found to be owning some agricultural land. Such land was subsequently converted into non-agricultural land.

During the search, the Department also found copies of two MoUs which the assessees had signed with some entity for sale of the land. In this regard, the assessee claimed that as the land could not be transferred in terms of the MoU as those terms were not acted upon, beyond limitation therein had expired, the assessees sold the land at the fair market price to the willing buyer. Hence they claimed that the price quoted in the MoUs did not reflect the market price. On assessment, the AO disallowed the exemption claimed by the assessees u/s 54F and added the same to the assessee's income. Thereafter, the assessees approached the Income tax Settlement Commission and declared the value of the lands. However, the Commission determined the value at which the assessees sold the land. As such value was considerably higher than that declared by the assessees and the capital gains were calculated accordingly.

In writ, the High Court held that,

++ the findings recorded by the Settlement Commission are on appreciation of evidence and material on record, more particularly, two MoUs executed at the behest of the assessee of the same date but with different parties having different sale consideration mentioned. The Settlement Commission also considered the statements of Ms Sakariben Thakor, Ms. Gajaraben Thakor, Mr Yogesh Thakor and Mr Ashwin D Patel and even the statement of Mr Manshukhbhai Patel and valuation report of Mr Alpesh Patel. The MoUs and the valuation report of Mr Alpesh Patel. The MoUs and the statements of the various parties which are on oath and recorded during the course of search are required to be considered conjointly and as a whole and if they are considered conjointly and as a whole, it cannot be said that the Commission has committed any error in determining the sale consideration at Rs.80000 per sq yard. At this stage, it is required to be noted that in the sale deed sale consideration is mentioned at Rs. 30000 per sq yard in the two MoUs the sale consideration is mentioned at Rs. 52001/- per sq yard and Rs.77001/- per sq yard respectively;

++ it is not in dispute that there is any procedural lapse on the part of the Settlement Commission while passing the order. There is no violation of principles of natural justice while passing the order. The disclosure made by the assessee while submitting the application for settlement, the report of Commissioner, applicant's rejoinder, oral argument from both the sides and the documents submitted along with SOF and statements recorded during the search & post search proceedings have been dealt with and considered in detail and thereafter, the order has been passed;

++ on considering two MoUs it can be safely be observed that two MoU's were by and at the behest of the land owners, of which, the assessee was the head. Each and every aspect and materials relied upon have been minutely considered by the Settlement Commission. In such facts and circumstances and findings recorded by the Settlement Commission and the scope of judicial review of the order passed by the Settlement Commission recorded, we are of the opinion that no interference of this Court is called for in exercise of powers under Article 226 of the Constitution of India;

++ from the record, we found that the application submitted by the assessee has been dealt with during the schedule prescribed by the provisions of law. A detailed procedure has been observed while exercising the powers under Section 244D so much so that a report has also been examined thoroughly by the Commission. As observed, during the course of hearing proper opportunity has been given to the respective parties and therefore, amount which have been determined by the Settlement Commission (by majority) are just and proper. It is required to be noted that issue before the Commission was with respect to the determination of the capital gain on sale of the two lands;

++ hence no interference of this Court is called for under Article 226 of the Constitution of India and that too with the limited scope of judicial review of the order passed by the Settlement Commission, while exercising the powers under Article 226 of the Constitution of India.

(See 2018-TIOL-1468-HC-AHM-IT)