Vijendra Manjunath Shenai vs Commissioner Of Income-Tax And ...
2001 Latest Caselaw 957 Bom

JUDGMENT J.P. Devadhar, J.

1. Rule returnable forthwith. The respondents waive service. By consent, the petition is taken up for final hearing. Heard learned counsel on both sides.

2. By this petition, the petitioner challenges the order dated March 30, 2001, passed by the Commissioner of Income-tax under Section 264 of the Income-tax Act, 1961 (for short, "the I. T. Act"), wherein two review petitions filed by the petitioner have been dismissed.

3. The assessment year relevant herein is the assessment year 1996-97.

4. During the course of search on January 6, 1995, the petitioner (assessee) admitted and surrendered to have received on money from 17 parties (for sale of shops/flats in a project called Barkha Project) amounting to Rs. 3.56 crores in the previous year 1994-95 relevant to the assessment year 1995-96. In the

statement recorded under Section 132(4) of the Income-tax Act, the petitioner admitted to have spent the above on money received in paying extra consideration for the acquisition of various house properties and plots of land in the assessee's own name and in the names of his wife and children. During the course of assessment proceedings for the assessment year 1995-96, the assessee, by his letter dated March 26, 1998, agreed that the entire amount of Rs. 3.56 crores can be taxed solely in his hands as individual. Accordingly, the assessment order for the assessment year 1995-96 was passed on March 30, 1998, by including a sum of Rs. 3.56 crores under the head "Income from other sources." Thereafter by his order dated September 29, 1998, the Assessing Officer levied penalty under Section 271{l)(c) of the Income-tax Act for concealing particulars of income in regard to "on money" for the assessment year 1995-96.

5. For the assessment year 1996-97, the return of income was filed by the assessee on October 31, 1996, declaring total income of Rs. 5,66,56,326 inclusive of capital gains on account of sale of the project to B. P. L. Ltd. On February 26, 1999, the assessment order was passed by the Assessing Officer for the assessment year 1996-97, determining gross taxable income at Rs. 5,53,33,570.

6. On January 17, 2000, the assessee filed a revision petition under Section 264 of the Income-tax Act seeking revision of the assessment order for the assessment year 1996-97 in respect of substitution of indexed cost and also interest under Section 234B of the Income-tax Act. It was prayed that the said revision petition be heard at the earliest as the Assessing Officer is pressing for the recovery in view of the appeal against the assessment order not being admitted under Section 249(4) by the Commissioner of Income-tax (Appeals).

7. On September 28, 2000, the assessee filed another petition under Section 264 of the Income-tax Act, inter alia, seeking a direction to the Assessing Officer to recompute the capital gain of the assessment year 1996-97 after taking into consideration the amount of Rs. 3.56 crores received as "on money" from the original investors being refunded to them at the time of giving vacant possession to B. P. L. Ltd. The said revision petition dated September 28, 2000, was dismissed by the Commissioner of Income-tax on March 30, 2001. Challenging the said order, the present petition has been filed by the assessee.

8. Mr. Pandit, learned counsel for the petitioner, submitted that the order of the Commissioner of Income-tax suffers from serious infirmities and is liable to be quashed and set aside. It was submitted that the "on money" received from the original investors as advance for sale of flats/shops was liable to be refunded once the entire project was sold to third parties by cancelling the allotment made to the original investors. It was submitted that since the capital gains on account of sale of project to B. P. L. Ltd. was computed in the

assessment year 1996-97, the amount of Rs. 3.56 crores refunded to the original investors should be taken into account while computing the capital gains. It was submitted that the Commissioner of Income-tax was in error in holding that the letter of allotment made to the original investors was not of binding nature of agreement. It was submitted that having made the addition of Rs. 3.56 crores in the assessment year 1995-96 on account of advance money received in the assessment year 1995-96, the Commissioner of Income-tax could not have refused to give consequent relief in the assessment year 1996-97 when the project was sold to third parties as it would amount to double taxation. It was submitted that unless the assessee refunded the advance "on money", the assessee would not have been able to sell his project to B. P. L. Ltd. free from all charges and encumbrances. Learned counsel for the Revenue, on the other hand, supported the order of the Commissioner of Income-tax. After hearing both parties and after going through the impugned order, we are of the opinion that the order of the Commissioner of Income-tax is a well reasoned order passed on an objective consideration of the facts and circumstances of the case. It has been succinctly brought on record by the Commissioner of Income-tax as to how the on money received and spent for various specific purposes before the date of search could not be said to have been returned to the parties after the date of search. It is not the case of the assessee that some more black money was generated after the close of search and used in making such payments. If the contention of the assessee is accepted, then the said additionally generated money outside the books of account was liable to be taxed in the hands of the assessee in the assessment year in which the same was generated. The Commissioner of Income-tax in order to be fair and just gave further opportunity to the assessee in the course of revision proceedings to explain and furnish evidence in support of his claim. After analysing the explanation given by the assessee and the facts on record including the letters of the assessee and the statement recorded under Section 132(4) of the Income-tax Act, the Commissioner of Income-tax has rightly concluded that the assessment of "on money" under the head "Income from other sources" in the assessment year 1995-96 and the assessee accepting the same by making a declaration under the KVSS has no relevance to the assessment proceedings for the assessment year 1996-97 because what was assessed in the assessment year 1996-97 was capital gains arising out of sale of the project. Once it is established that the on money received in cash has been exhausted before the search in January 1995, it is not open to the assessee to contend that the same money was returned to the 17 parties subsequently. It is pertinent to note that in the agreement dated March 29, 1995, entered into by and between the assessee and B. P. L. Ltd. for sale of the property (after the date of search on January 6, 1995, wherein the receipt of on money was admitted by the assessee) nowhere is it mentioned that there is any encumbrance or liability

attached to the property to be sold. On the contrary, Clauses 12(i), (vii), (viii) and (xii) make it abundantly clear that no third party rights have been created in respect of the property agreed to be sold. Moreover, there is a categorical finding given by the Commissioner of Income-tax to the effect that in spite of the opportunity given, the assessee has not been able to adduce any evidence to prove that cash payments have been made. In the absence of proof of payment, the Commissioner of Income-tax was justified in rejecting the claim of the assessee. The undated and unsigned letters produced by the assessee have been properly analysed by the Commissioner of Income-tax as having no legal effect. Failure on the part of the assessee even to produce confirmatory letters from the persons to whom cash payments were alleged to have been refunded, clearly establishes that the entire claim of the assessee is fictitious. The Commissioner of Income-tax has rightly held that there is no question of double taxation because what was taxed in the assessment year 1995-96 was income from undisclosed sources and what was taxed in the assessment year 1996-97 was capital gains arising out of sale of the property to B. P. L. Ltd. The source of income in the two years being quite different and distinct, the petition has been rightly rejected.

9. No contentions other than those dealt with herein were raised. Under the circumstances, we see no reason to interfere with the order impugned in the petition. The petition is accordingly dismissed with no order as to costs.

10. After the petition was dismissed, learned counsel for the assessee submitted that there is another issue pertaining to substitution of indexed cost of acquisition and interest under Section 234B which was the subject matter of the revision petition dated January 18, 2000, and the same has also been dismissed by the aforesaid common order.

11. On a perusal of the impugned order of the Commissioner of Income-tax under Section 264 dated March 30, 2001, it is seen that although the revision petition dated September 28, 2000, has been filed as supplementary petition to the original revision petition dated January 18, 2000, for all practical purposes, both the revision petitions have been considered to be two separate and distinct petitions and even the prescribed fee of Rs. 25 has been paid separately. Merely because, two revision petitions have been disposed of by a common order, it is riot open to the petitioner to file a combined petition and pay court fees payable on one petition only. We have considered in this writ petition the issue pertaining to the review petition dated September 28, 2000 only.

12. In the circumstances, the issue pertaining to the revision petition dated January 18, 2000, is dismissed as not pressed with liberty to the petitioner to file an independent petition in respect thereof, if the petitioner chooses to do so.

13. The petition disposed of accordingly with no order as to costs.