IN THE ITAT
Healthy Holdings (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Range II,
JOGINDER PALL, ACCOUNTANT MEMBER
AND A.D. JAIN, JUDICIAL MEMBER
IT APPEAL NOS. 180 AND 181 (ASR.) OF 2004
[Assessment year 1995-96]
January 19, 2007
Section 150 of the Income-tax Act, 1961 - Income escaping
assessment - In pursuance of an order on appeal etc. - Assessment year 1995-96 -
On search carried out at premises of one ‘M’, who was Managing Director (MD) of
assessee-companies, it was found that assessee-companies had entered into an
agreement with ‘B’ for development of B’s property as commercial property for
certain consideration and as per agreement if completion of agreement, ‘B’
would fail to pay agreed amount, assessee-companies would have right to sell 40
per cent of constructed area to realize their amount - Details regarding sale
of shops/offices, etc., showed that ‘M’ had received certain amount as sale
consideration on behalf of assessee-companies - In individual assessment of ‘M’,
said amount was added in income of ‘M’, but on appeal, Tribunal held that since
agreement was between ‘B’ and assessee-companies, said amount was assessable in
hands of assessee-companies - On basis of said order of Tribunal, Assessing
Officer reopened assessment of assessee-companies and made addition accordingly
- Assessee challenged reopening of assessment alleging that notice issued under
section 148 was illegal as reasons contained therein did not mention facts and
position in original assessment order and even otherwise terms of section
151(1), notice could have been issued by an Assessing Officer not below rank of
Asstt. CIT or Dy. CIT - Whether since it was in order to give effect to
findings of Tribunal that notice under section 148 was issued, notice was in
accordance with provisions of section 150(1), and, therefore, issuance of such
notice was valid - Held, yes - Whether up of end of financial year 1998,
sanction for issue of such notice could be given by Joint Commissioner and,
therefore, challenge to reassessment notice on that ground was also liable to
be rejected - Held, yes
Section 143 of the Income-tax Act, 1961 - Assessment -
Additions to income - Assessment year 1995-96 - Whether on facts stated under
heading “Income escaping assessment - In pursuance of an order on appeal, etc.,”
since seized material clearly gave names and addresses of parties to whom shops
were sold and from whom unaccounted money was received and out of said sale
proceeds, only a part was given to ‘B’ and remaining amount had been retained
by ‘M’, which was shown neither in hands of companies, nor in hands of ‘M’
individual, in view of directions made by Tribunal in M’s case, Assessing
Officer was justified in adding entire on money in hands of assessee-companies -
Held, yes - Whether since in cases of property transaction, unaccounted on
money received by seller over and above apparent value of transaction, entire
amount of on-money received represents unaccounted income, there was no
question of only profit element out of unaccounted on-money received being
added as undisclosed income - Held, yes
FACTS
As a result of
search and seizure action carried out in the case of ‘M’, MD of the two
assessee-companies. Certain incriminating documents were found showing that aforesaid
two companies had entered into an agreement with one ‘B’ for development of B’s
property as a commercial property for a total consideration of Rs. 80 lakhs. As
per the agreement, if on completion of contract ‘B’ failed to make the said
payment, the two companies were to get ownership of 40 per cent of the
constructed area which they would sell to realise their invested amount. As per
search details regarding sale of shops/complexes, a total amount of Rs.
54,78,165 was received by ‘M’ as sale consideration. According to ‘B’ out of
said amount, ‘M’ paid a sum of Rs. 20 lakhs to him and balance of Rs. 34,78,165
was retained by ‘M’. On behalf of those two companies as M.D. In the assessment of ‘M’ in his individual
capacity the Assessing Officer made addition of said amount in hands of ‘M’.
However, in appeal, the Tribunal held that since the agreement was between the assessee-companies,
the addition was required to be made in hands of assessee-companies. As a
consequence of the Tribunal’s order in M’s case the Assessing Officer issued
notice under section 148 to the assessees. On ground that income to the extent
of Rs. 17,39,803 each had escaped assessment in the hands of the assessee-companies.
The Assessing Officer, accordingly, made the addition, and, on appeal, the Commissioner
(Appeals) confirmed the addition.
On second
appeal, the assessee contended that the reasons recorded by the Assessing
Officer for reopening assessment contained no mention regarding facts and
position obtaining in original assessment order; and that even if it was
presumed that section 151(1) was applicable, notice under section 148 could be
issued by an Assessing Officer not below rank of Asstt. CIT or Dy. CIT.
HELD
The assessee’s grievance regarding reopening of assessment was ill-founded.
As per the provisions of section 150(1), a notice under section 148 may be
issued at any time for the purpose of making an assessment or reassessment or
recomputation in consequence of or to give effect to any finding or direction
contained any order passed, inter alia, by an
authority in an appeal, reference or revision. In the instant case, the
Tribunal, vide order dated 24-10-2001, in the case of M
for the assessment year 1995-96 observed, inter alia, that the Commissioner (Appeals) was not
justified in treating the amount of Rs. 34,78,165 received by ‘M’ in his
individual capacity and that if no receipt of that amount was shown, then,
addition was required to be made in hands of the companies and not in the hands
of the M, individual. Evidently, those observations of the Tribunal were ‘findings’
and/or ‘directions’. It was in order to give effect to those findings of
Tribunal that the notice under section 148 was issued. That notice, in
accordance with provisions of section 150(1), could be issued at any time and,
therefore, issuance of such notice was valid. As regards the objection that the
sanction for issuance of such notice was not proper, since section 150(1)
provides that such sanction has to come from an Assessing Officer not below the
rank of the Assistant Commissioner or Deputy Commissioner, whereas in the
instant case, the issuance of such notice was sanctioned by the Joint
Commissioner; section 2(16), upto the end of the financial year 1998, provided
that such a notice could be issued with the approval of the Joint Commissioner,
since “Commissioner” included “Joint Commissioner”. That objection of the
assessee by way of the additional ground of appeal was, therefore, to be
rejected. [
As regards merits of addition, it was evident that the Tribunal held
that the amount of the sale proceeds/on-money received had to be assessed in
the hands of the assessee-companies. The observations of the Tribunal in that
regard, were unequivocal. Further, it was clear from the agreement that the
assessee-companies undertook to carry out the construction on the property of
‘B’ who agreed to pay certain amounts to those two companies for the said
construction. The agreement also provided that in the event ‘B’ failed to make
payment within seven days from the raising of the bill, the contractor company
had a right to remain in occupation and in possession or to sell 40 per cent of
the constructed area or of the total maximum sale value of the constructed
building, whichever was higher, to compensate for the default in such payment.
It could not, therefore, be said at all that neither of the two companies had
any legal right to sell. No evidence whatsoever had been brought by the
assessee to prove that any payment was received by the assessee-company from
‘B’ for the construction of the said property. No on money had been shown as
income of the companies, nor ‘B’ showed it as an individual income. [
Also, the Commissioner (Appeals) had correctly held that since in cases
of property transaction, unaccounted on money received by the seller over and
above the apparent value of the transaction, the entire amount of on money
received represented unaccounted income and there was no question of only
profit element out of unaccounted on money received being added as undisclosed
income. [
The assessee had also failed to prove its contention that a major
portion of the amount of Rs. 34,78,165 was received by the assessee in the
earlier assessment year and that only a sum of Rs. 7,67,823 was received in the
year under consideration. No evidence worth its name had been produced to
substantiate its claim. Moreover, the seized material clearly gave the names
and addresses of the parties to whom shops were sold and from whom unaccounted
money was received and also, in his statement, ‘B’ had admitted that ‘M’ had
been looking after the sale of shops/offices, etc., and receiving sale
consideration from the customers. Out of the sale proceeds, only a part was
given to ‘B’, the remaining amount having been retained by ‘M’ which was shown
neither in the hands of the companies, nor in the hands of ‘M’, individual.
That clearly went to belie the claim that ‘M’ had no right, either in his
Individual capacity or as director of the two companies, to sell the properties
or to receive the sale consideration thereon. In fact ‘M’ received a sum of Rs.
34,78,165 as on money/unaccounted money in respect of the sale of shops etc.
The assessee miserably failed to prove otherwise. [
The Assessing Officer merely carried out the directions issued by the
Tribunal by apportioning the amount of Rs. 34,78,165 in the hands of the two
companies, on account of money received on sale of shops/offices etc.
Hence, finding no error in the order of Commissioner (Appeals) the same
was upheld. Both the appeal, stood dismissed.