Atul Guati,, v. DCIT, Circle-2(1),,

ITSSA 399/DEL/2004 | misc
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 39920116 RSA 2004
Bench Delhi
Appeal Number ITSSA 399/DEL/2004
Duration Of Justice 7 year(s) 4 month(s) 6 day(s)
Appellant Atul Guati,,
Respondent DCIT, Circle-2(1),,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-03-2012
Date Of Final Hearing 26-03-2012
Next Hearing Date 26-03-2012
Assessment Year misc
Appeal Filed On 23-11-2004
Judgment Text
IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.(SS)A. NO. 148/DEL/02 (BLOCK PERIOD ENDING 08.7.1999) SH. ATUL GULATI L/H LATE SH. A.C. GULATI HOUSE NO. 115 LANE NO. 5 ANUPAM GARDEN SAINIK FARMS NEW DELHI VS. DCIT CO. 26(3) NEW DELHI I.T.A.(SS) A. NO. 185/DEL/02 (1.4.89 TO 8.7.99) DCIT CIRCLE 2(1) R.NO. 398-D 3 RD FLOOR CR BUILDING NEW DELHI VS. SH. ATUL GULATI L/H LATE SH. A.C. GULATI HOUSE NO. 115 LANE NO. 5 ANUPAM GARDEN SAINIK FARMS NEW DELHI AND I.T.A.(SS) A. NO. 399/DEL/2004 (BLOCK PERIOD) SH. ATUL GULATI L/H LATE SH. A.C. GULATI HOUSE NO. 115 LANE NO. 5 ANUPAM GARDEN SAINIK FARMS NEW DELHI VS. DCIT CIRCLE 2(1) NEW DELHI (APPELLANTS) (APPELLANTS) (APPELLANTS) (APPELLANTS) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) ASSEESSEE BY : SH. SANAT KAPOOR ADV. DEPARTMENT BY : SH. D.K. MISHRA C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM THESE APPEALS BY ASSESSEE AND REVENUE EMANATE OUT OF ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE RESPECTIVE BLOCK IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 2 PERIOD. SINCE THE ISSUES ARE COMMON AND THE APPEALS WERE HEARD TOGETHER. THESE APPEALS ARE BEING CONSOLIDATED AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED IN THE IT(SS) NO. 148 READ AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -III NEW DELHI HAS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE GROSSLY ERRED IN LAW IN UPHOLDING THE ILLEGAL ASSESSMENT MADE U/S. 158BC IN PURSUANCE OF ILLEGAL SEARCH AND IN CONFIRMING THE ADDITION OF ` 30 91 272/- BEING DIFFERENCE OF ESTIMATED VALUE OF ` 44 71 272/- AND ACTUAL PURACHCSE PRICE OF ` 13.80 LAKHS. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE LOOSE UNDATED AND UNSIGNED PAPERS FOUND AT TH E RESIDENCE OF SH. VINOD JOLLY PERTAINS TO SHRI A.C. GULATI AND THAT PAPER RELATES TO THE PROPERTY PURCHASED AT SAINIK FARMS. 3. THAT THE OBSERVATIONS MADE ARE AGAINST FACTS AND ARE BASED ON SURMISES AND CONJECTURES AND DO NOT AFFOR D IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 3 ANY LEGAL JUSTIFICATION TO THE ADDITION UPHELD. IN ANY CASE THE EXPLANATION GIVEN AND THE MATERIAL AVAILAB LE ON RECORD HAVE NOT BEEN JUDICIALLY CONSIDERED AND PROPERTY INTERPRETED AND THE ADDITION HAS BEEN WRONGLY UPHELD. 4. THAT IN ANY CASE THE PAPER HAS BEEN WRONGLY LIN KED WITH THE APPELLANT. THE SEARCH WAS WRONGLY MADE AND THE ASSESSMENT MADE U/S. 158BC WAS ILLEGAL UNJUST AND UNLAWFUL AND WAS ALSO NOT APPROVED BY THE COMPETENT AUTHORITY. 5. THAT THE VALUE OF THE BUILDING HAS BEEN WRONGLY ESTIMATED AT ` 44 71 272/-. THE ESTIMATE IS UNJUS T UNLAWFUL AND HIGHLY EXCESSIVE. 6. THAT THE PURCHASE VALUE OF ` 13.80 LAKHS ACCEPTE D IN THE HANDS OF THE SELLER HAS BEEN WRONGLY IGNORED AN D REJECTED. 7. THAT THE SURCHARGE HAS BEEN WRONGLY LEVIED. 3. IN THIS CASE DURING THE SEARCH PROCEEDINGS A P IECE OF PAPER WAS FOUND IN THE HOUSE OF SH. VINOD KUMAR JOLLY WHO IS THE SON-IN-LAW OF SHRI AC GULATI. ACCORDING TO THIS PAPER CERTAIN T RANSACTIONS WERE IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 4 LISTED ON IT WHICH APPARENTLY INDICATED THAT SOME I NVESTMENT WAS MADE IN A HOUSE PROPERTY. WHEN SHRI VINOD KUMAR JOLLY WAS CONFRONTED WITH THIS PAPER HE DENIED ALL KNOWLEDGE AND OWNERSH IP OF THE SAME AND SAID THAT THIS PIECE OF PAPER DID NOT BELONG T O HIM BUT IS AN ESTIMATE OF A PROPERTY WHICH WAS TO BE PURCHASED BY HIS FATHER-IN-LAW. HE HAD IN HIS STATEMENT BEFORE THE DDI AND THE ASSESS ING OFFICER SAID THAT THE AMOUNT REFLECTED IN THIS PAPER IS AN ESTIMAT E OF INVESTMENT IN A PROPERTY AND NOT THE ACTUAL EXPENDITURE. THE PI ECE OF PAPER FOUND IN THE RESIDENCE OF SH. VINOD KUMAR JOLLY LISTED TH E FOLLOWING:- A. 66.00 40.00 2.61 8.16 11677000 34000 319000 9520000 1000000 230000 50000 70000 CASH BALANCE LOCKER DEPOSIT AND RENT BROKERAGE HOUSE PAYMENT HOUSE ADVANCE ATUL GLASS HOUSE ADVANCE B.R. DOUGALL B. 50000 1000000 9520000 HOUSE PAYMENT 10570000 C. 13.80 105.70 2.50 CHEQUES CASH BALANCE 122 IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 5 THE ASSESSING OFFICER WAS OF THE VIEW THAT A TOTAL INVESTMENT OF ` 1 19 50 000/- HAS BEEN MADE IN THIS PROPERTY ` 13.80 LACS BY CHEQUE ` 105.70 LACS BY CASH TILL TH E DATE OF SEARCH AND THE BALANCE ` 2.50 LACS WAS OUTSTANDING. SH E HAD BASED HER FINDING ON THE STATEMENT GIVEN BY SHRI VINOD KU MAR JOLLY U/S. 132(4) DURING THE COURSE OF SEARCH. SUBSEQUENTLY SH. VINOD KUMAR JOLLY RETRACTED FORM THE ABOVE STATEMENT SAYI NG THAT IT WAS GIVEN UNDER STRESS AND SINCE THIS IS A STATEMENT GIVEN UNDER DURESS AND FORCE THEREFORE THE STATEMENT THAT HE HAS GIVEN FOR A-I PAGE NO. 8 WAS NOT CORRECT AND CANNOT BE USED AS EVIDENCE TO THIS ADVANTAGE. THE ASSESSING OFFICER STATED I N HER ORDER THAT AS PER THE PANCHNAMA DRAWN DURING THE COURSE OF THE SEARCH SHRI VINOD KUMAR JOLLY HAS SAID THAT THE STATEMENT HAS BE EN GIVEN VOLUNTARILY. AS PER THE ASSESSING OFFICERS ORDER THE PROPERTY K-632 SAINIK FARMS WAS REGISTERED IN THE NAME OF SMT. SUSHI LA GULATI WIFE OF THE ASSESSEE AND MASTER ARCHIT GULATI MINO R GRANDSON (HIS SON ATUL GULATIS SONS). THE PROPERTY WAS PU RCHASE FROM NARENDER JEET SINGH FOR A TOTAL CONSIDERATION OF ` 13.80 LACS AND NO PAYMENT OTHER THAN THIS AMOUNT WAS MADE. THE ASS ESSING OFFICER WAS OF THE VIEW THAT ` 105.70 LACS PAID IN CASH IS OVER IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 6 AND ABOVE THE CHEQUE PAYMENT. HOWEVER THE ASSE SSING OFFICER PROCEEDED TO ASSESS THIS IN THE HANDS OF T HE ASSESSEE ON THE PROTECTIVE BASIS ON THE GROUND THAT MASTER AR CHIT GULATI AND SMT. SHSHILA GULATI HAVE NO FUNDS OF THEIR OWN AND T HE MONEY HAD COME FROM SHRI AC GULATI. SHE ALSO WAS OF THE VIEW THAT THE SUBSTANTIVE ADDITION REGARDING INVESTMENT IN THIS P ROPERTY SHOULD BE ASSESSED IN THE HANDS OF THE WIFE SMT. SUSHILA GU LATI AND SMT. INDU GULATI IN HER CAPACITY AS THE NATURAL GUARDIAN OF THE MINOR MASTER ARCHIT GULATI. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THE ISSUE IS WHETHER THE TRA NSACTIONS LISTED ON THE PAPER A-18 ARE AN ESTIMATE OR AN ACTUAL EXPEND ITURE IN THE PROPERTY. SECONDLY WHETHER THE DOCUMENT PERTAIN S TO PROPERTY SAINIK FARMS OR IT PERTAINS TO SOME OTHER PROPERTY. LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT FROM THE TIME THE RAID WAS CONDUCTED SHRI VINOD KUMAR JOLLY HAS DENI ED THE OWNERSHIP OF THIS PAPER. LD. COMMISSIONER OF INCOME TAX (A PPEALS) OPINED THAT THE PAPER DOES NOT PERTAIN TO SHRI VINOD KUMAR JOLL Y FROM WHOSE HOUSE IT WAS RECOVERED BUT PERTAINS TO SHRI AC GULATI. THEREAFTER LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 7 NOW I PROCEED TO ANALYSE THIS SHEET OF PAPER ON WH ICH THE DATE 18.5.99 IS WRITTEN. THE SOUTH EXTN. PROPERTY O F SHRI AC GULATI WAS SOLD IN MAY 1999 AND THE NEW PROPERTY WA S ACQUIRED ON 14.5.99. THE PAPER ITSELF AS EXPLAINE D IN THE ORDER SHOWED A CASH BALANCE OF ` 1 16 77 000/-. HO WEVER AMOUNTS WHICH SHOULD HAVE BEEN DEDUCTED HAVE BEEN ADDED BACK AND THE HOUSE PAYMENT OF ` 1 05 50 000/- IS SHOWN AT ONE PLACE WHILE ANOTHER AMOUNT OF ` 1 22 00 000/- IS SHOWN NEAR IT. THIS PAPER DOES NOT SHOW WHETHE R THE FIGURES WHICH ARE EITHER A RECEIPT OF INCOME OR EXP ENDITURE. THE CONTENTS OF THE DOCUMENTS HAVE NOT BEEN VERIFIE D OR CORROBORATED BY THE ASSESSING OFFICER WHEN CERTAIN ITEMS LIKE LOCKER DEPOSIT RENT BROKERAGE THE AMOUNTS STA NDING IN THE NAME OF SHR BR DOUGALL OR THE AMOUNT OF ` 2 35 0 00/- SHOWN AGAINST ATUL GLASS. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD WHETHER THIS AMOUNT OF ` 70 000/- HAS BEEN RECEIVED FROM SHRI BR DOUGHALL OR PAID TO HIM NOR THERE ANY STATEMENT REGARDING THE BROKERAGE PAID EVEN THOUGH AS PER RECORDS THE BROKER WHO HAS BROKERED T HIS DEAL HAS DENIED RECEIPT OF THIS AMOUNT MENTIONED IN H IS STATEMENT BEFORE THE ASSESSING OFFICER. SIMILARLY NO CLEAR IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 8 FINDING HAS BEEN RECORDED WHETHER ` 2.35 LACS HAVE BEEN RECEIVED FROM ATUL GLASS OR THEY ARE PAYABLE TO THE COMPANY. THE ASSESSING OFFICER EXAMINED ALL THE L OCKERS AND IT WAS FOUND THAT NO LOCKER WAS RECENTLY TAKEN UP BY SHRI VINOD KUMAR JOLLY OR SHRI AC GULATIS FAMILY FOR WHICH THIS DEPOSIT WAS PAID. GOING BY THE CIRCUMSTANTIAL EVIDENCE I ACCORDINGLY HOLD THAT THIS PAPER RELATES TO SHRI AC GULATI AND HE IS THE OWNER OF THE PAPER AND THE TRANSACTIO N REFLECTED IN IT RELATE TO THE PROPERTY PURCHASED I N SAINIK FARMS. SINCE THE INVESTMENT IN THIS PROPERTY HAS BE EN MADE BY SHRI AC GULATI I HOLD THAT THIS INVESTMENT IS TO BE ASSESSED IN HIS HANDS ON A SUBSTANTIVE BASIS AND NO T IN THE HANDS OF OTHERS E.G. ARCHIT GULATI THROUGH HIS MOTHER SMT. INDU GULATI AND SMT. SUSHILA GULATI W/O SH. AC GULATI OR IN THE HANDS OF VINOD JOLLY FROM WHOSE HOUSE THIS PAPER WAS FOUND. I NOW COME TO THE POINT OF UNDISCLOSED INVESTMENT IN THIS PROPERTY. THE DEPARTMENTAL VALUER HAS VALUED THIS PROPERTY AT ` 63.08 LACS. THE VALUE OF LAND HAS BE EN TAKEN AT ` 20.56 LACS AND THE COST OF BUILDING AT ` 42.52 LACS. AS PER THE APPELLANT THEY HAD PURCHASED THIS HOUSE FOR ` 13.80 IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 9 LACS AND IT WAS FOR A SEMI BUILT CONDITION. I ACCOR DINGLY HOLD THAT THE ASSESSING OFFICER SHOULD ADOPT THE VALUE OF THIS PROPERTY AS DETERMINED BY THE DVO AT ` 63.08 LACS. HOWEVER SINCE THE APPELLANT HAS STATED BEFORE ME TH AT TILL 8.7.99 NO EXTRA CONSTRUCTION WORK HAD BEEN DONE AND WHATEVER MONEY WAS SPENT ON CONSTRUCTION FELL O UTSIDE THE BLOCK PERIOD THE VALUE OF THE PROPERTY IS TAKE N AS UNDER:- VALUE OF LAND : ` 20 56 000/- COST OF SEMI BUILT STRUCTURE : ` 24 15 272/- THIS INVESTMENT IS TO BE CONSIDERED IN THE HANDS OF THE APPELLANT AND THE BALANCE AMOUNT SINCE IT FALLS OUT SIDE THE BLOCK PERIOD IS TO BE CONSIDERED DURING THE FOLLOWI NG YEAR FOLLOWING DELHI HIGH COURTS DECISION IN THE CASE O F RAVI KANT JAIN 250 ITR 141 WHERE IT HAS BEEN HELD THAT O NLY SUCH INCOME WHICH HAS NOT BEEN DISCLOSED IS TO FORM PART OF THE INCOME OF THE BLOCK ASSESSMENT AND INCOME FALLING OUT SIDE THE BLOCK PERIOD IS NOT TO BE TAKEN INTO CONSIDERAT ION. 5. AGAINST THE ABOVE ORDER THE ASSESSEE AND REVE NUE ARE IN CROSS APPEALS BEFORE US. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 10 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THA T LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT T HE CONTENTS OF THE DOCUMENT FOUND DURING THE SEARCH INDICATE THE POSS IBILITY OF ON MONEY TRANSACTION BUT NOTHING CAN BE CONCLUSIVELY D RAWN OUT FROM THE SAME. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT WHETHER THE FIGURES ARE OF RECEIPT OF INCOME OR EXPE NDITURE IS NOT CLEAR. LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S FURTHER FOUND THAT THE CONTENTS OF THE DOCUMENTS HAVE NOT BEEN VE RIFIED OR CORROBORATED BY THE ASSESSING OFFICER. LD. COMMISSIO NER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT ASSESSING OFFIC ER HAS NOT BROUGHT ON RECORD WHETHER THE AMOUNT OF ` 70 000/- HAS BEE N RECEIVED FROM SHRI BR DOUGHALL OR PAID TO HIM NOR THERE ANY STATEME NT REGARDING THE BROKERAGE PAID EVEN THOUGH AS PER RECORDS THE BROKE R WHO HAS BROKERED THIS DEAL HAS DENIED RECEIPT OF THIS AMOUN T MENTIONED IN HIS STATEMENT BEFORE THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ADDIT ION IS TO BE MADE ON THE BASIS OF VALUATION BY THE DEPARTMENTAL VA LUER. IN OUR CONSIDERED OPINION THIS ACTION OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) IS CORRECT AND DOES NOT NEED ANY INTERFER ENCE ON OUR PART. THUS WE HOLD THAT LD. COMMISSIONER OF INCOME TAX (AP PEALS) WAS IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 11 CORRECT IN HOLDING THAT THE ADDITION IN THIS REGARD SHOULD BE MADE AS PER THE VALUATION OF THE DEPARTMENTAL VALUER. THE DVO HAS VALUED THE PROPERTY AT ` 63.08 LACS. THE VALUE OF THE LAN D HAS BEEN TAKEN AT ` 20.56 LACS AND THE COST OF BUILDING AT ` 42.52 LACS . AS PER THE ASSESSEE THEY HAD PURCHASED THIS HOUSE FOR ` 13.80 LACS AND IT WAS FOR A SEMI BUILT CONDITION. IN THESE CIRCUMSTANCES LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSESSING OFFICER S HOULD ADOPT THE VALUE AS DETERMINED BY THE DVO AT ` 63.08 LACS. HO WEVER SINCE THE ASSESSEE HAS STATED BEFORE THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) THAT TILL 8.7.99 NO EXTRA CONSTRUCTION W ORK HAD BEEN DONE AND WHATEVER MONEY WAS SPENT ON CONSTRUCTION FELL O UTSIDE THE BLOCK PERIOD THE VALUE OF THE PROPERTY IS TO BE TAKEN AS UNDER:- VALUE OF LAND : ` 20 56 000/- COST OF SEMI BUILT STRUCTURE : ` 24 15 272/- LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED TH AT THIS INVESTMENT IS TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE AND THE BALANCE AMOUNT SINCE IT IS FALLS OUTSIDE THE BLOCK PERIOD IS TO BE CONSIDERED DURING THE FOLLOWING YEAR FOLLOWING DELH I HIGH COURTS DECISION IN THE CASE OF RAVI KANT JAIN 250 ITR 141 WHERE IT HAS BEEN HELD THAT ONLY SUCH INCOME WHICH HAS NOT BEEN DISCL OSED IS TO FORM IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 12 PART OF THE INCOME OF THE BLOCK ASSESSMENT AND INCO ME FALLING OUTSIDE THE BLOCK PERIOD IS NOT TO BE TAKEN INTO CONSIDERAT ION. THUS WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PA SSED A REASONABLE ORDER WHICH DOES NOT NEED ANY INTERFERE NCE ON OUR PART. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. COMMISSI ONER OF INCOME TAX (APPEALS). HENCE ON THIS ISSUE THE OBJECTION R AISED BY BOTH THE ASSESSEE AND REVENUE STAND DISMISSED. 7. THE GROUNDS RAISED IN THE IT(SS)A NO. 185 REA D AS UNDER:- 1. M/S MAHARASHTRA GLASS AND AGRO LTD. (MGAL). MGAL RECEIVED ` 4 CRORE FROM M/S SEKURIT SAINT GLOBAIN CO NDITIONS AS HIGHLIGHTED IN THE MOU DATED 29.10.06 ENTERED BET WEEN THE PARTIES THROUGH A NON-COMPLETE AGREEMENT. ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN TR EATING THE RECEIPT AS CAPITAL IN NATURE NOT CHARGEABLE TO TAX INSPITE OF THE FACT THAT THE ASSESSEE HAD NOT GIVEN AWAY INTS. INTEREST IN ITS SOURCE OF INCOME (DIVIDEND F ROM MGAK) IN EXCHANGE OF ACCEPTING ` 4 CRORE AND THE SHARE OF SHRI AC IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 13 GULATI OUT OF THIS AMOUNT AS DECLARED IN RETURN IS OF ` 87 96 000/-. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ACCEPTING THE VALUE OF PROPERTY BEARING NO. K-632 SAINIK FARMS AT ` 63.08 LACS (OUT OF WHICH A SUM OF ` 18 36 7 28/- IS TO BE CONSIDERED DURING THE FOLLOWING YEAR AS IT FA LLS OUTSIDE THE BLOCK PERIOD) AS DETERMINED BY THE DVO WITHOUT ANY JUSTIFICATION. AT THE SAME TIME THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IGNORED THE IMPORTANCE OF THE S EIZED PIECE OF PAPER WHICH DEPICTS THE VALUE OF THE SAID PROPERTY AT ` 119.50 LACS. 8. THE APROPOS THE FIRST ISSUE:- IN THIS CASE THE ASSESSEE IN HIS RETURN OF INCOM E HAD DECLARED A RECEIPT OF ` 87 96 600/- FOR THE FY 1997-98. THIS RETURN WAS DULY ACCEPTED BY THE THEN ASSESSING OFFICER. DURING TH E SEARCH PROCEEDINGS A MEMORANDUM OF UNDERSTANDING DATED 29.1 0.96 WAS FOUND AND ACCORDING TO WHICH A NON-COMPLETE AGREEMEN T WAS ENTERED INTO BY M/S SAKURIT SAINT GOBAN (SSG) AND THE INDIA N COMPANY ATUL GLASS WORKS AND MAHARASHTRA GLASS AND AGRO LTD. (MG AL). ACCORDING TO THIS AGREEMENT THEY WERE TO ALLOT 54% SHARES T O SSG OF THE ISSUED IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 14 SHARE CAPITAL OF MGAL THE PROMOTERS WERE TO RELINQUI SH THE RIGHT TO MANAGE MGAL TO SSG AND COMMIT NOT TO COMPETE WITH MGAL B USINESS OTHER THAN THEIR INVOLVEMENT WITH AGL. IN THIS CON SIDERATION FOR THIS NON-COMPETE AND CONFIDENTIALITY AGREEMENT. THE INDI AN PROMOTERS WERE PAID CERTAIN AMOUNTS IN WHICH TOTAL SHARE OF S HRI AC GULATI CAME TO ` 1 30 32 000/- OUT OF WHICH ` 87 96 600/- HAS B EEN SHOWN IN HIS RETURN OF INCOME UNDER THE HEAD CAPITAL RECEIPT EX EMPT FROM TAX. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS I S A REVENUE RECEIPT AND NOT A CAPITAL RECEIPT. SHE HAS IN HER ORDER STATED THAT THE PROMOTERS WHO WERE ONLY SHAREHOLDERS OBVIOUSLY DIFFERENT ENTITIES AS COMPARED TO THE COMPANY MGAL WHO RECEIVED ` 4 CRORES FOR NOT COMPETING AGAINST SSG. THESE TWO ISSUES WE RE HIGHLIGHTED HERE. THE PROMOTERS DO NOT HAVE ANY LOCUS STANDI TO COMPETE OR NOT TO COMPETE AGAINST MGAL. SECONDLY PROMOTERS CON TINUE TO BE SHAREHOLDERS FOR MGAL EVEN AFTER RECEIVING ` 4 CROR ES FOR NOT COMPETING AND THEREFORE THEIR SOURCE OF INCOME I.E . DIVIDEND FROM MGAL CONTINUES TO EXIST. IN OTHER WORDS THE PROMO TERS HAVE NOT GIVEN UP THEIR SOURCE OF INCOME IN EXCHANGE OF ACC EPTING ` 4 CRORES. THUS THIS RECEIPT IS A REVENUE RECEIPT AND IS REQU IRED TO BE TAXED. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 15 I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OFF ICER AND THE ARGUMENTS ADVANCED BY THE LD. AUTHORISED REPRESENTATIVE. THE APPELLANT IN HIS RETURN FOR THE ASSESSMENT YEAR 1998-99 HAS CLEARLY SHOWN IN PART 5 AS INCOME CLAIMED EXEMPT THE NON-COMPETE CAPITAL RECEIP TS OF ` 87 96 600/-. HENCE THIS FACT WAS BEFORE THE ASSESSING OFFICER WHO PASSED AN ORDER U/S. 143(1) AFTER TAKI NG INTO CONSIDERATION ALL THE FACTS THAT WERE ON THE RETURN . WHILE PROCESSING THE RETURN U/S. 143(1)(A) IF HE HAD FELT THAT THE CAPITAL GAINS SHOWN IN PART-5 WAS NOT EXEMPT HE SHOU LD HAVE ISSUED A NOTICE U/S. 143(2) AND ENQUIRED INTO THIS ISSUE AT THE TIME OF ASSESSMENT. I FIND THAT THE ASSESSIN G OFFICER IS TOTALLY CONFUSED OVER WHAT CONSTITUTES A REVENUE RECEIPT AND WHAT IS A CAPITAL RECEIPT. IN THE INSTANT C ASE THE COMPANY ATUL GLASS WORKS WAS A LEADER IN THE MANUFACT URE OF GLASS WORK AND SELLING AUTOMOTICE GLASS WHICH IS AT PRESENT CONDUCTED BY MGAL IN THE ENTIRE INDIAN SUB- CONTINENT. BY ENTERING INTO THIS AGREEMENT WITH SS G THEY HAD RELINQUISHED THEIR EXPERTISE WHICH HAD RESULTED IN THEIR GIVING UP THE RIGHT TO A PROFIT EARNING APPARATUS. HERE I WOULD LIKE TO SAY THAT THE DISTINCTION EXISTS BETWE EN AN IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 16 INCOME RECEIPT AND A CAPITAL RECEIPT. THIS DISTI NCTION HAS TO BE PROPERLY UNDERSTOOD. THE SUPREME COURT IN NATIONAL CEMENT MINES INDUSTRY HAVE HELD THAT THIS DISTINCTION THOUGH VERY FINE IS REAL THOUGH THE DIV IDING LINE MAY BE THIN AND OFTEN AT FIRST SIGHT IMPERCEPTIBLE. THE ASSESSING OFFICER SHOULD REALIZE THAT AN INCOME REC EIPT IS ALWAYS TAXABLE BUT A CAPITAL RECEIPT IN NEVER TAXAB LE UNLESS EXPRESSLY PROVIDED OTHERWISE E.G. CAPITAL GAINS GA INS ARISING FROM TRANSFER OF A CAPITAL ASSET. THE SUPRE ME COURT IN THE CASE OF M/S KEETLEWELL BULLEN 53 ITR 26 HAVE STATED THAT WHAT IS RECEIPT FOR A LOSS OF CAPITAL IS A CAP ITAL RECEIPT AND WHAT IS RECEIVED AS A PROFIT IN A TRADING TRA NSACTION IS TAXABLE INCOME. THE DETERMINATION OF A QUESTION WHE THER RECEIPT IS CAPITAL OR INCOME IS TO BE DETERMINED BY T HE FACTS OF THE PARTICULAR CASE. IF PAYMENT IS RECEIVED I N THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE FOR LO SS OF STOCK IN TRADE IT IS A REVENUE RECEIPT. HOWEVER O N THE OTHER HAND IF THE PAYMENT IS RECEIVED TOWARDS COMPENSATION FOR EXTINCTION STERLIZATION PARTLY OR FULLY OF A PROF IT EARNING SOURCE SUCH RECEIPT NOT BEING IN THE ORDINARY COURS E OF THE ASSESSEES BUSINESS IS A CAPITAL RECEIPT. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 17 THIS ACTION HAD DISRUPTED THE ENTIRE PROFIT EARNIN G STRUCTURE OF THE ASSESSEE. SO ANYTHING RECEIVED IN CONSIDERATION FOR THIS DISRUPTION WOULD PARTAKE T HE CHARACTER OF A CAPITAL RECEIPT. HENCE IN MY OPIN ION THIS RECEIPT IS CLEARLY A CAPITAL RECEIPT AND NOT A REV ENUE RECEIPT AND IS NOT TO BE TAXED AS THE INCOME OF THE APPELLANT COMPANY. THE CBDT IN THEIR INSTRUCTION N O. 1964 DATED 17.4.1999 HAVE HELD THAT ANY CONSIDERATION RE CEIVED FOR EXTINGUISHMENT OR RIGHT IS IN THE NATURE OF CAP ITAL RECEIPT. IT IS FURTHER CLARIFIED THAT EVEN WHERE SUCH TRANSFER EXTINGUISHMENT OR CURTAILMENT OF SUCH A RIGHT OR IN THE PART THE TAXABILITY OF CONSIDERATION WILL REMAIN UNAFFECT ED. SINCE THIS RECEIPTS HAS ALREADY BEEN DISCLOSED IN T HE RETURN FOR ASSESSMENT YEAR 1998-99 THIS WOULD NOT BE A P ART OF INCOME ESCAPING ASSESSMENT IN TERMS OF ASSESSMENT U/S. 158. 10. AGAINST THE ABOVE THE REVENUE IS IN APPEAL BEFO RE US. 11. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN FINDING THAT ASSE SSEE IN HIS RETURN FOR THE ASSESSMENT YEAR 1998-99 HAD CLEARLY SHOWN IN PART 5 AS IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 18 INCOME CLAIMED EXEMPT THE NON-COMPETE CAPITAL RECEIP TS OF ` 87 96 600/-. HENCE THIS FACT WAS BEFORE THE ASSES SING OFFICER WHO PASSED AN ORDER U/S. 143(1) AFTER TAKING INTO CONSI DERATION ALL THE FACTS THAT WERE ON THE RETURN. WHILE PROCESSING THE RE TURN U/S. 143(1)(A) IF HE HAD FELT THAT THE CAPITAL GAINS SHOWN IN PART-5 WAS NOT EXEMPT HE SHOULD HAVE ISSUED A NOTICE U/S. 143(2) AND ENQUIRE D INTO THIS ISSUE AT THE TIME OF ASSESSMENT. LD. COMMISSIONER OF INCOME T AX (APPEALS) OBSERVED THAT HE HAS FOUND THAT THE ASSESSING OFFIC ER IS TOTALLY CONFUSED OVER WHAT CONSTITUTES A REVENUE RECEIPT A ND WHAT IS A CAPITAL RECEIPT. IN THE INSTANT CASE THE COMPANY ATUL GLASS WORKS WAS A LEADER IN THE MANUFACTURE OF GLASS WORK AND SE LLING AUTOMOTICE GLASS WHICH IS AT PRESENT CONDUCTED BY MGAL IN THE E NTIRE INDIAN SUB- CONTINENT. BY ENTERING INTO THIS AGREEMENT WITH SS G THEY HAD RELINQUISHED THEIR EXPERTISE WHICH HAD RESULTED IN THEIR GIVING UP THE RIGHT TO A PROFIT EARNING APPARATUS. LD. COMMISSIO NER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT THIS ACTION HAS DI SRUPTED THE ENTIRE PROFIT EARNING STRUCTURE OF THE ASSESSEE. HENCE THIS RECEIPT IS CLEARLY A CAPITAL RECEIPT AND NOT A REVENUE RECEIPT AND IS NOT TO BE TAXED AS THE INCOME OF THE ASSESSEE. LD. COMMISSIONER OF IN COME TAX (APPEALS) FURTHER NOTED THAT THE CBDT IN THEIR INST RUCTION NO. 1964 DATED 17.4.1999 HAVE HELD THAT ANY CONSIDERATION RE CEIVED FOR IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 19 EXTINGUISHMENT OR RIGHT IS IN THE NATURE OF CAPITAL RECEIPT. SINCE THIS RECEIPT HAS ALREADY BEEN DISCLOSED IN THE RETURN FO R ASSESSMENT YEAR 1998-99 THIS WOULD NOT BE A PART OF INCOME ESCAPING ASSESSMENT IN TERMS OF ASSESSMENT U/S. 158. IN OUR CONSIDERED OPINION LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A R EASONABLE ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. ACCORDINGLY WE UPHOLD THE SAME. HENCE THIS GROUND RAISED BY THE R EVENUE STANDS DISMISSED. 12. THE NEXT ISSUE RAISED READ AS UNDER:- THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRE D IN ACCEPTING THE VALUE OF PROPERTY BEARING NO. K-63 2 SAINIK FARMS AT ` 63.08 LACS (OUT OF WHICH A SUM OF ` 18 36 7 28/- IS TO BE CONSIDERED DURING THE FOLLOWING YEAR AS IT FA LLS OUTSIDE THE BLOCK PERIOD) AS DETERMINED BY THE DVO WITHOUT ANY JUSTIFICATION. AT THE SAME TIME THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IGNORED THE IMPORTANCE OF THE S EIZED PIECE OF PAPER WHICH DEPICTS THE VALUE OF THE SAID PROPERTY AT ` 119.50 LACS. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 20 13. WE FIND THAT WE HAVE ALREADY ADJUDICATED THIS I SSUE RAISED IN ASSESSEES APPEAL IN IT(SS)A NO. 148 ABOVE AND UPHE LD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. HENCE THIS GROUND RAISED BY THE REVENUE ALSO STANDS DISMIS SED. 14. THE GROUNDS RAISED IN IT(SS) NO. 399 READ AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE GROSSLY ERRED IN LAW IN HOLDING THAT THE APPE LLANT / HIS LEGAL HEIRS ARE NOT INTEREST IN PURSING THE APPEAL AND IN DISMISSING THE APPEAL OF THE APPELLANT COMPANY. 2. THAT THE OBSERVATION MADE ARE AGAINST FACTS AND ARE ALSO BASED ON SURMISES AND CONJECTURES. THE DEATH CERTIFICATE AND COPY OF RATION CARD OF SHRI AC GULA TI AND AFFIDAVIT OF SH. ATUL GULATI CONFIRMING THE FACT S THAT HE IS THE ONLY SON AND LEGAL HEIR OF SH. AC GU LATI WERE DULY FILED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND THE SAME HAVE BEEN WRONGLY IGNORED. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 21 3. THAT THE MATERIAL / DOCUMENTS AVAILABLE ON RECORD HAVE BEEN WRONGLY IGNORED AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN PASSING EXPAR TE ORDER AND IN DISMISSING THE APPEAL OF THE APPELLANT SUMMARILY WITHOUT PASSING A DETAILED AND SELF SPEAKING ORDER ON MERIT AND THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS ILLEGAL AND BAD IN LAW. 4. THAT THE CORRECT INCOME AFTER GIVING APPEAL EFFE CT TO ORDER DATED 28.3.2002 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-V NEW DELHI WORKS OUT AT ` 30 91 272/- AND THE LD. DCIT HAS WRONGLY WORKED OUT THE SAME AT ` 1 05 70 000/-. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- V NEW DELHI HAS ALSO ERRED IN LAW IN DISMISSING THE APPEAL WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT. 6. THAT IN ANY CASE THE INCOME HAS BEEN WRONGLY COMPUTED THE DCIT VIDE ORDER DATED 31.7.2003 AND IS IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 22 ALSO EXORBITANTLY EXCESSIVE AND THE APPEAL EFFECT H AS BEEN WRONGLY GIVEN. 15. WE FIND THAT IN THE APPELLATE ORDER DATED 14.9. 2011 FOR THE BLOCK PERIOD 1.4.89 TO 8.7.99. THE LD. COMMISSIONER OF IN COME TAX (APPEALS) HAS HELD AS UNDER:- THIS APPEAL ARISES AGAINST THE ORDER OF THE DCIT CIRCLE4(1) NEW DELHI U/S. 158BC DATED 31.8.2001. THE ASSESSI NG OFFICER HAS FINALIZED THE ASSESSMENT ON A TOTAL IN COME OF ` 1 94 17 012/-. THE APPELLANT BEING AGGRIEVED HAS F ILED THE APPEAL UNDER CONSIDERATION. DURING THE APPELLATE PROCEEDINGS SHRI SALIL KAPOOR ADVOCATE A.R. AND SMT. SUNITA MAHESHWARI ATTENDED A ND SOME MORE TIME WAS REQUESTED WHICH WAS GRANTED. SH . SALIL KAPOOR ADVOCATE ORALLY INFORMED THAT THE APP ELLANT HAS DIED AND THE NOTICES SHOULD BE ISSUED IN THE N AMES OF THE LEGAL HEIRS. NEITHER ANY DEATH CERTIFICATE WAS FILED NOR SUCCESSION CERTIFICATE WAS FILED. THE LD. AUTHORIS ED REPRESENTATIVE REQUESTED TO FILE THESE PAPERS SO T HAT NOTICES MAY BE ISSUED IN THE NAME OF LEGAL HEIRS. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 23 THEREAFTER FOLLOWING NOTICES WERE SENT ON THE LAST KNOWN ADDRESS OF THE APPELLANT:- ON 27.2.2004 NOTICE ISSUED FOR HEARING ON 16.3.2004 ON 14.7.2004 NOTICE ISSUED FOR HEARING ON 26.7.2004 ON 2.7.2004 NOTICE ISSUED FOR HEARING ON 11.8.2004 ON 16.8.2004 NOTICE ISSUED FOR HEARING ON 23.8.200 4 & ON 27.8.2004 NOTICE ISSUE FOR HEARING ON 13.9.200 4. ALL THESE NOTICES HAVE BEEN RECEIVED BACK UNSERVED . IN VIEW OF THESE FATS IT IS PRESUMED THAT THE APPEL LANT OR IN CASE HE HAS DIED HIS LEGAL HEIRS ARE NOT INTERESTE D IN PURSUING THE APPEAL AND THEREFORE THE APPEAL IS DI SMISSED. 16. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 17. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS DISMISSED THE CASE FOR NO N PROSECUTION. IN OUR CONSIDERED OPINION LD. COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE ADJUDICATED THE MATTER ON THE MERITS OF T HE CASE. HENCE IN THE INTEREST OF JUSTICE WE REMIT THIS ISSUE TO T HE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO CONSIDER THE ISSUE AFRESH. IT (SS)A NOS. 148 & 185/DEL/02 & 399/DEL/2004 24 LD. COMMISSIONER OF INCOME TAX (APPEALS) SHALL CONS IDER THE ISSUE AFRESH AND PASS A SPEAKING ORDER ON THE GROUNDS RAI SED IN THE APPEAL OF THE ASSESSEE. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 18. IN THIS RESULT THE IT(SS) NOS. 148 & 185 FILE D BY THE ASSESSEE AND REVENUE RESPECTIVELY STAND DISMISSED AND IT(SS) NO. 399/DEL/2004 FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30/3/2012. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 30/3/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES