Gujarat High Court
Narayan Realty Ltd vs Deputy Commissioner Of Income Tax on 29 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
C/SCA/7226/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 7226 of 2016
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NARAYAN REALTY LTD....Petitioner(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX....Respondent(s)
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Appearance:
SHRI S.N.SOPARKAR, SENIOR ADVOCATE with MRS. BHOOMI THAKORE
and MR. JAIMIN DAVE for MR B S SOPARKAR, ADVOCATE for the
Petitioner(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 29/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The petitioner has challenged orders dated 04.09.2015 and 22.02.2016, at Annexure:A colly. Brief facts are as under.
2. Petitioner is the company registered under the Companies Act and is engaged in the business of reality development. Search action took place in connection of the petitioner between 13.11.2014 to 16.11.2014 resulting into notice under section 153A of the Income Tax Act, 1961 ('the Act' for short) on 30.06.2015. During the search and the return that the Page 1 of 7 HC-NIC Page 1 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER petitioner filed in response to the notice, the petitioner had disclosed certain additional income. In this background, the respondent Deputy Commissioner of Incometax, passed an order on 04.09.2015, attaching various immovable properties of the petitioner mentioned in the said order in exercise of powers under section 281B of the Act. This order would have life of six months. He therefore, upon completion of such period, passed a fresh order on 22.02.2016, giving description of the properties and continuing the attachment upto 28.08.2016. These orders, the petitioner has challenged in the present petition on various grounds.
3. Learned counsel Shri Soparkar for the petitioner vehemently contended that the respondent has exercised powers under section 281B of the Act without the conditions precedent for exercise of such powers being satisfied. There is nothing on record to suggest that the Assessing Officer was of the opinion that for the purpose of protecting the interest of the revenue, it is necessary to attach the properties of the petitioner company. There is no such averment in the impugned order, no material to enable the Assessing Page 2 of 7 HC-NIC Page 2 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER Officer to come to such a conclusion. In any case, the total jantri value of different immovable assets of the company being attached far exceeded any tax liability which may arise at the end of the assessment proceedings. Despite such facts were brought to the notice of the authority, the respondent failed to lift the order of attachment. Many of the properties were such where either the petitioner had already executed sale deeds before the attachment was imposed or had entered into agreement to sale the same. The effect of the orders of the attachment was thus to bring the business activities of the petitioner to a standstill. Counsel submitted that the department seeks to take the entire estimated onmoney receipts of the petitioner by way of its net profit ignoring the fact that only the profit element embalmed in such receipts which can be subjected to tax.
4. On the other hand, learned counsel Shri Bhatt for the department opposed the petition contending that during search operation, several statements were recorded. Incriminating material was collected, primafacie, showing onmoney receipts by the assessee. He submitted that all issues can be gone Page 3 of 7 HC-NIC Page 3 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER into at the time of framing of the assessment for the block period. However, at this stage, it can be estimated that the additions could be in excess of Rs.60.39 crores. It would be too premature to even estimate such additions. However, it cannot be denied that the petitioner could be visited with sizable tax demand with interest and penalties. To protect the interest of the revenue, therefore, the respondent authority had passed the orders in exercise of powers under section 281B of the Act. He submitted that the petitioner had not also cooperated with the assessment proceedings.
5. Since the assessment pursuant to the search operations is pending, we would not comment on rival claims of the possible additions that may be made in the total income of the assessee. However, going by the rough formula presented by the revenue and in order to strike a balance between protecting the interest of the revenue and at the same time allowing the petitioner to carry on its normal business, we propose to provide for a formula. Even if the figure of addition of Rs.60 and odd crores is taken for the purpose of roughly estimating the possible tax Page 4 of 7 HC-NIC Page 4 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER liability, the same cannot exceed Rs.25 crores, at least of principal tax.
6. We have noted the contention of the counsel for the petitioner that number of immovable properties of the petitioner are unencumbered and free from any charge. Jantri value of such properties runs into several hundred crores of rupees. However, the petitioner company may be in the process of developing, constructing upon or selling such properties as part of its business activities.
7. In view of such facts, the orders of attachment are directed to be lifted upon fulfillment of following conditions:
I. The petitioner shall keep immovable properties unencumbered, not creating any charge whose jantri value together shall not be less than Rs.25 crores till the assessments pursuant to notice under section 153A are completed. II. The petitioner shall give a list of such properties to the department latest by 05.07.2016 alongwith which, the petitioner shall indicate the current jantry rate with supporting Page 5 of 7 HC-NIC Page 5 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER documents. The petitioner shall also file an affidavit stating that such properties are free from any encumbrance and that the petitioner shall not create any charge on such properties till the assessments are completed. III. As soon as this is done, the order of attachment qua rest of the properties shall automatically stand lifted. In other words, the petitioner would be free to deal with the rest of the properties.
IV. Jayantibhai Dalsukhbhai Panchal, the director of the petitioner company, who has sworn this petition, shall file an undertaking before this Court latest by 05.07.2016 declaring that whatever the tax with interest and penalty liabilities are ultimately crystallized, company shall pay to the department.
8. Petition disposed of accordingly.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) Page 6 of 7 HC-NIC Page 6 of 7 Created On Sat Jul 02 02:03:36 IST 2016 C/SCA/7226/2016 ORDER ANKIT Page 7 of 7 HC-NIC Page 7 of 7 Created On Sat Jul 02 02:03:36 IST 2016