Income Tax Appellate Tribunal - Ahmedabad
Pankaj Dahyabhai Patel (Huf) vs Assistant Commissioner Of Income Tax. ... on 4 August, 1998
ORDER
R.K. Bali, A.M.
1. These three appeals by the assessees relating to block period from asst. yr. 1986-87 to 1995-96 and the period 1st April, 1995, to 12th September, 1995 against the order passed by the AO under s. 158BC r/w s. 158BD of the IT Act, 1961, involve similar points and are, therefore, taken up together and disposed of by a common order for the sake of convenience.
2. The common substantive grounds taken in all these three appeals are as under :
(1) The AO has erred in assessing the appellant at an income of Rs. 21,56,514 as against returned income of Rs. 2,57,555.
(2) The AO has erred in holding that the capital gain in respect of sale of land fell in the asst. yr. 1994-95 and not in asst. yr. 1996-97 as contended by the appellant.
(3) The AO has erred in holding that the market value of the land as on 1st April, 1981, was not Rs. 7,31,200 but Rs. 3,60,950.
(4) The AO has erred in holding that the total realisation of the land was Rs. 1,38,79,800 and not Rs. 36 lakhs as contended by the appellant.
3. Briefly the facts are that the assessees in all these three appeals are three brothers who are being assessed as Karta of their HUFs in respect of income derived from rent, interest, etc. A search under s. 132(1) of the Act was carried out at their residence on 12th September, 1995. During the course of search statements of the assessees were recorded on 12th September, 1995, and again on 27th September, 1995. In these statements the assessee had admitted to have earned unaccounted capital gain on sale of a piece of land which they had made jointly along with their uncle Late Mohanlal Girdharilal. It was admitted that a piece of land admeasuring 1,800 sq. mtrs. was sold by them to Shri Harji Bechar Patel and others for a total consideration of Rs. 36 lakhs and out of that amount a part consideration of Rs. 15 lakhs was received which was evenly appropriated by the three brothers as Karta of their respective HUFs.
4. Consequent upon detection of undisclosed income on the basis of statements recorded under s. 132(4) during the course of search, notices under s. 158BC were issued to the assessees and in response to the notices the assessees filed returns of undisclosed income declaring total income of Rs. 2,57,555, in the status of HUF. It was explained in the letter accompanying the return that the assessees had sold a piece of land admeasuring about 1,800 sq. mtrs. out of land of Survey No. 361(1)(6) for a consideration of Rs. 36 lakhs. Originally, the land belonged to Shri Mohanlal Girdharlal Patel and Shri Dahyalal Girdharlal Patel (brothers). Upon death of Shri Dahyabhai Girdharlal, his three sons viz., Shri Amritlal Dahyabhai, Shri Chandrakant Dahyabhai and Shri Pankajbhai Dahyabhai become joint owners in respect of half share of this land in the capacity of Karta of their respective HUFs. Accordingly, the unaccounted long-term capital gain of Rs. 2,57,555 was worked out as under :
"Working of long-term capital gain for S. No. 361/8 land asst. yr.
1996-97
Total area of land 2,545 sq. mtrs. as per valuation report of
1-4-1981
Rs. Rs.
Valuation as at 1-4-1981 10,18,000
Land sold 1,828 sq. mtrs. 36,00,000
Land cost as per 1-4-1981 7,31,200 (Average)
Index cost (7,31,200 x 281) 20,54,470
Profit/gain 14,45,330
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1/2 share MGP 7,72,665
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1/2 share DGP
1/3 Amrutbhai D. Patel 2,57,555
1/3 Chandrakant D. Patel 2,57,555
(1/3 Pankajbhai D. Patel) 2,57,555
-----------
7,72,665
-----------
The above working was given by the assessees in the return of undisclosed income filed by them on the footing that the sale transaction of land has actually taken place in the period relevant to asst. yr. 1996-97 as they have claimed the index cost of 281 on the land cost of 7,31,200 as on 1st April, 1981, because according to the assessee the sale transaction was completed during the period relevant to asst. yr. 1996-97.
5. The AO, however, on the basis of statement of one of the three purchasers Shri Kalubhai Dulabhai Patel, which was recorded during the course of search on 11th October, 1995, held that since the possession of land for development was given by the three assessees to the purchasers some time in November, 1993 and the purchasers have also made part-payment of Rs. 15 lakhs to the sellers and after evicting the old occupants of the land, the Bhoomi Pujan ceremony was performed in May, 1994, and the entire amount of Rs. 36 lakhs was to be paid before June, 1994, in instalments although the sellers could make payment of Rs. 15 lakhs only and the balance amount was still unpaid, held that the capital gain was assessable in the asst. yr. 1994-95 because the handing over the possession of land along with the receipt of part-payment took place in November, 1993, which fell in asst. yr. 1994-95. Accordingly, the capital gain was assessable in the asst. yr. 1994-95 in terms of provisions of s. 2(47)(v). Accordingly, he worked out the unaccounted capital gain on the sale of land in the asst. yr. 1994-95 included in the block period instead of asst. yr. 1996-97 shown by the assessees and applied the cost inflation index at 244 for asst. yr. 1994-95 as against 281 for asst. yr. 1996-97 adopted by the assessee.
6. Accordingly one of the disputes in these appeals as projected in ground No. 2 is that the AO has erred in holding that the capital gain in respect of sale of land fell in the asst. yr. 1994-95 and not in the asst. yr. 1996-97 as contended by the assessees.
7. The next point of dispute as projected in ground No. 3 is with regard to taking up of the market value as on 1st April, 1981, which was taken by the AO at Rs. 3,60,950 as against the claim of the assessees at Rs. 7,31,200 on the basis of the report of an approved valuer.
8. The next point of dispute as projected in ground No. 4 is with regard to the estimation of sale consideration of the land sold at Rs. 1,38,79,800 by the AO as against Rs. 36 lakhs as admitted by the assessees during the course of statements recorded during the course of search and in the return of income subsequently filed in response to notice issued under s. 158BC.
9. The AO has discussed the question of adoption of cost of acquisition of the land as on 1st April, 1981 in paras 13 to 15 of the assessment order. The AO has observed that the assessees have adopted the cost of land at Rs. 10,18,000 for the piece of land of 2,545 sq. mtrs. as per valuation report which gives average of Rs. 400 per sq. mtr. The AO, however, after scrutiny of the valuation report found that the total area of this plot was 3,633 sq. mtrs. Out of this, an area of 1,306 sq. mtrs. was having construction of Chawl type building occupied by the old tenants and there were 63 tenants who were paying rent ranging from Rs. 6 to Rs. 70 per month. The total rent realised per annum was Rs. 13,068 and, therefore, the approved valuer has worked out the valuation of the structure standing on a piece of land of 1,306 sq. mtrs. at Rs. 1,63,350. Since the land was sold along with the structures, the AO held that the valuation of 1306 sq. mtrs. should be adopted as on 1st April, 1981, at Rs. 1,63,350 and in respect of remaining 494 sq. mtrs. only the rate of Rs. 400 per sq. mtr. would be adopted. Accordingly, the cost of land sold as on 1st April, 1981, was worked out by the AO as under :
Rs.
(i) Valuation of 1,306 sq. mtrs. as per 1,63,350
report of the approved valuer
(ii) Valuation of 494 sq. mtrs. at the rate
of Rs. 400 per sq. mtr. 1,97,600
--------
Total Value 3,60,950
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10. The AO in para 16 of the assessment order has observed that during the course of search statements of various parties involved in the transaction of sale of land including the purchasers and the sellers were recorded and all of them had stated that the price of the piece of land admeasuring 1,800 sq. mtrs. was stipulated at Rs. 2,000 per sq. mtr./yd. Accordingly, the sale price was only Rs. 36 lakhs. However, the AO in para 17 of the assessment order has referred to another aspect of this case that during the simultaneous search action at the premises of one of the three purchasers of the land viz. Shri Harji Bechar Patel, several papers indicating the transaction of sale through the brokers were found and seized. One of such paper No. 32 of loose paper file No. B-7 contained details of some land and conditions of its sale. The writing on this paper was as under :
(i) Rate per sq. yd. Rs. 77.11 (when decoded it will be read as Rs. 7,711).
(ii) First amount of Rs. 70 to be paid within one month.
(iii) Balance amount in five instalments of six months.
(iv) Scrap, etc. to be given to landlord.
(v) Name to be given of father and uncle.
(vi) Plan of the project to be put up nearby Mohannagar.
(vii) Documentation to be made on completion of the account.
The AO observed in para 17 of the assessment order that although this paper was not signed by anybody nor it was containing any specification of location, area of land, etc. it appeared that it was pertaining to the purchase of land by Shri Harji Bechar and others for M.D. Tower from the appellant assessees.
11. Accordingly, the AO issued a notice indicating his intention to adopt the sale price of the land at Rs. 7,711 per sq. yd. on the basis of the above paper as against Rs. 2,000 per sq. mtr./yd. disclosed by the three assessees in the computation of unaccounted capital gain earned by them. The assessees furnished written reply dt. 23rd September, 1996, which has been incorporated by the AO in para 19 of the impugned assessment order in the case of Shri Pankajbhai D. Patel as under :
"With reference to your above said letter, we hereby state in respect of the mere piece of paper attached with your above said letter is as under :
1. We have no relation or connection with the said letter.
2. We have not written and or signed on that paper.
3. There is no reference of specific property, survey numbers or area of property.
4. There is no reference of owner of the property.
5. We have not sold any of our property at the rate of 7.711 or as you presumed as Rs. 7,711 whatever it may be.
6. The piece of paper is not signed by anybody.
7. On the contrary we have sold out our property bearing survey No. 361/B Paiki, situated at Varachha Road, Surat, admeasuring about 1,800 sq. yd. at the rate of Rs. 2,000 per sq. yd. and out of this consideration we have received Rs. 5 lakhs as our 1/6th share of property and Rs. 1 lakh remains outstanding. Our property is situated at Varachha Road, Surat and part of the area occupied by the unauthorised persons and tenants since long and there is no constructed property at all. The purchaser i.e. Harji Becharbhai has also confirmed at the time of recording his statement under s. 132(4) of the Act in the office of the DDI and in our statement we have also confirmed and disclosed this amount and return of income filed in accordance therewith. We have also submitted the copy of agreement to sell from which you can find out terms and conditions.
8. Please submit us the copy of statement of Harji Becharbhai if any taken by you on which basis you have proposed the above said action. In such a case, we also request you to give us an opportunity to cross-examine the said Harjibhai.
9. Under the circumstances, we strongly object against your allegation that property sold by us at the rate of Rs. 7,711. In our opinion there is no value of the said mere piece of paper as it is not connected with our property and not an evidence at all and, therefore, request you to drop your idea of adopting the rate on that basis and accept your statement and return of income filed by us."
12. However, the AO after considering the submissions of assessees, rejected the same and adopted the sale price of the land which is the subject-matter of computation of unaccounted capital gain in these three appeals at Rs. 7,711 per sq. mtr./yd. for reasons given in paras 21 to 23 of the assessment order which are as under :
"21. Although the seized paper No. 32 is not signed by anybody, it does indicate that it was written in connection with negotiations for purchase and sale of some land. The fact that the purchaser Shri Harji Bechar had preserved it for pretty long time is also indicative of the fact that it pertained to some transaction entered into by him. It is also a fact that Shri Harji Bechar has not purchased any other land except the land for M.D. Tower. Hence, it he had accepted the proposal, it can be presumed that the writing in this paper is pertaining to M.D. Tower land. The other indicative factors are point Nos. 3 and 4. That is, the construction is to be started from Mohannagar side, and that the name of father and uncle is to be given to the property. The names of father and uncle of the assessee are Shri Mohanlal and Shri Dahyabhai and the name of the property constructed by Shri Harji Bechar is also M.D. Tower which corresponds with the first letters of the names of father and uncle of the assessee.
22. It may be mentioned here that the property of the assessee was in occupation of several old tenants and as per the terms of this transaction, the purchase had to manage for eviction of old tenants. In this case of transaction relating to M.D. Tower land also the purchasers have managed to evict the old tenants at a cost of Rs. 3,00,000. This fact also confirms my stand that the seized paper No. 32 of Annexure B-7 seized from the residence of Shri Harji Bechar Patel is relating to this transaction. Regarding the assessee's contention that there is no reference to the owner of property it may be mentioned here that to enter into transaction of immovable properties without getting the registration done with the proper authority. Simply on the basis of Kabja receipts immovable properties are being transferred by giving possession.
23. From all the facts of the case in their totality it is clear that the paper under reference is related to the transaction of land of M.D. Tower and the actual rate of land purchased by Shri Harji Bechar and others is Rs. 7,711 per sq. yd. and not Rs. 2,000 per sq. yd. Appropriate action in this connection is being taken in the case of purchases to tax the unaccounted investment in their hands. As the assessee is one of the sellers, his assessment would also be required to be finalised by adopting the rate of landlord by him Rs. 7,711 per sq. yd. instead of Rs. 2,000 per sq. yd. shown by him. The value of 1800 sq. yds. of land at the rate of Rs. 7,711 would come to Rs. 1,38,79,800. Therefore, the gross sale price realised by the assessee group will be adopted at Rs. 1,38,79,800 in place of Rs. 36,00,000 stated by the assessee. In view of the above discussion, long-term capital gain chargeable in the case of the assessee is worked out as here below :
13. Shri S. N. Soparkar, the learned representative of the assessee submitted that ground of appeal No. 1 is general in nature and no specific arguments were advanced in support of the same.
14. Regarding Ground of appeal No. 2 it was submitted that according to the AO the transaction was chargeable in asst. yr. 1994-95 on the ground that the possession of land was handed over in November, 1993. It was submitted that according to the AO the provisions of s. 2(47)(v) were applicable to the facts of the case. The learned representative of the assessee, however, submitted that s. 2(47)(v) have no application because that section specifically refers to the transactions involving "allowing of possession of any immovable property to be taken or retained in part-performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882". It was submitted that s. 53A of the Transfer of Property Act presupposes existence of a written agreement followed by possession. It was pleaded that in the present case undisputedly no written agreement was executed in 1993 and the same came to be executed only on 18th April, 1996, as per the copy of the agreement to sale in Gujarati, a copy of which has been furnished to us at pp. 17 to 21 of the paper-book and English translation of which was also furnished by the assessee along with covering letter dt. 30th June, 1998. The above facts were confirmed in the statement dt. 23rd October, 1996, of Shri Amrutlal Dahyabhai Fudanwala wherein in answer to question No. 3 he has confirmed that no document or writing was executed. Copy of the above statement has been furnished at p. 229 of the compilation. Accordingly, it was submitted that cl. (v) of s. 2(47) can have no application.
15. The learned Departmental Representative submitted that cl. (v) of s. 2(47) will be applicable even though written agreement was not executed because cl. (v) only requires contract of the nature referred to in s. 53A of the Transfer of Property Act. According to the Departmental Representative such contract need not be one which is necessarily contemplated under s. 53A of the Transfer of Property Act because the wording used in cl. (v) of s. 2(47) was "contract of the nature referred to in s. 53A". Reliance was placed on CIT vs. Shree Nirmal Commercial Ltd. (1995) 213 ITR 361 (Bom)(FB) and CIT vs. Ved Prakash & Sons (HUF) (1994) 207 ITR 148 P&H).
16. Alternatively it was submitted by the learned Departmental Representative that cl. (vi) of s. 2(47) would be applicable which is very wide and would relate to the transaction having the effect of transferring or enabling enjoyment of any immovable property.
17. In rebuttal, the learned representative of the assessees submitted that the arguments advanced by the Departmental Representative cannot be accepted because of specific language of sub-cl. (v) of s. 2(47). With regard to the alternative argument of the Departmental Representative, it was submitted that cl. (vi) will have no application as the same has not been invoked by the AO himself and in any case the transaction did not involve transferring or enabling enjoyment of any immovable property because a majority of the portion of land transferred was a tenanted one and no right, title or interest was created in the property in favour of the transferees at any point of time relevant to asst. yr. 1994-95. It was submitted that mere possession, without anything else cannot be covered by cl. (vi) and if such interpretation is read in cl. (vi) then cl. (v) will become redundant. Accordingly it was submitted that the AO was not justified in treating the capital gain earned by the assessee as relating to asst. yr. 1994-95 in the block period as against 1996-97 in respect of which the capital gain was declared by the assessee. Reliance was placed on CIT vs. Asha Land Corpn. (1982) 133 ITR 55 (Guj).
18. We have considered the rival submissions and have also gone through the orders passed by the AO. It is undisputed that there was no agreement in writing transferring the land in dispute in the accounting year relevant to asst. yr. 1994-95 but it is also undisputed that the possession of the land was handed over in November, 1993, and all the three assessees have admitted to have received a sum of Rs. 15 lakhs (Rs. 5 lakhs each) as a part consideration of the sale price while handing over the possession to the prospective buyers. The provisions of s. 2(47)(v) can be applied only if there is a written contract coupled with the transfer of possession in terms of s. 53A of the Transfer of Property Act. In English law, the contract to which the doctrine of part-performance applies may be oral. However, s. 53A of the Transfer of Property Act expressly requires that the contract must be in writing by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Thus, s. 53A does not recognise an oral contract. The Hon'ble Punjab & Haryana High Court in the case of New Delhi Municipal Committee vs. H. S. Rikhy AIR 1956 Pun 181 held that the doctrine of part-performance as embodied in s. 53A of the Transfer of Property Act can be invoked only when there is a writing in existence signed by the transferor or on his behalf. The writing, in other words, is an essential sine qua non for the applicability of the doctrine of part-performance. Accordingly we are of the opinion that the provisions of s. 2(47)(v) will have no application to the facts of the case because if the argument of the Departmental Representative that cl. (v) will have application because it requires-contract of the nature referred to in s. 53A" is to be accepted, then the legislature would have differently worded the cl. (v) like "any transaction involving allowing of possession of an immovable property to be taken or retained in part-performance of the contract" which is not the language used in s. 2(47)(v).
19. As regards the alternative submission of the learned Departmental Representative that cl. (vi) of s. 2(47) would be applicable we are of the opinion that if mere possession without anything else is sought to be covered by cl. (vi), then it would render cl. (v) as redundant which could not be the intention of the legislature. Accordingly we hold that sub-cls. (v) and (vi) of s. 2(47) will have no application and reliance placed by the learned Departmental Representative as well as by the learned representative of the assessee on the aforesaid decisions viz., (1995) 213 ITR 361 (supra), (1994) 207 ITR 148 (supra) and (1982) 133 ITR 55 (Guj) (supra) is not relevant because the facts are distinguishable. Accordingly the capital gain is not assessable in asst. yr. 1994-95 included in the block period. However, now we are faced with the problem as to in which year the capital gain earned by the assessees is required to be taxed which form a part of the block period before us. During the course of hearing before us the assessee have furnished a copy of the agreement of sale between the parties which was executed on 18th April, 1996, which date falls outside the block period. However, since the assessees have themselves declared the unaccounted capital gain earned by them in the asst. yr. 1996-97 included in the block period, the same should be accepted by the AO. This disposes of ground of appeal No. 2.
20. Coming to ground No. 3 with regard to the determination of market value of the land as on 1st April, 1981, the same was not seriously argued by the learned representative of the assessees at the time of hearing. Accordingly we will uphold the order of the AO in this regard which is based upon the report of the Valuation Officer and the fact that major part of the land was tenanted. Accordingly this ground is adjudicated against the assessee.
21. Coming to ground of appeal No. 4 which relates to the question as to whether the amount realised on the transfer of land was Rs. 1,38,79,800 or Rs. 36 lakhs only, the learned representative of the assessees submitted that the AO has come to the conclusion that the total price of the land stipulated was Rs. 1,38,79,800 and not Rs. 36 lakhs. It was submitted that the above finding of the AO has been reached on the basis of a piece of paper found at the residence of one Shri Harji Bechar Patel who is one of the purchasers to whom the property is agreed to be sold by the assessees. It was submitted that :
(a) At the time of search operations statements of all the parties were recorded by the authorised officer and all of them categorically stated that the total price of the land in question was Rs. 36 lakhs.
He referred to the statement of Shri Harjibhai Becharbhai Patel in particular answer to question Nos. 4 and 5 (pp. 213 and 214 of the paper book); statement of Shri Kalubhai, Dahyabhai Patel another purchaser statement dt. 11th October, 1995, answer to question Nos. 4 and 6 (pp. 223-224 of the paper-book); statement dt. 12th September, 1995, 12th October, 1995 and 13th October, 1995 of Shri Amrutbhai (pp. 224 to 232 of the paper-book).
It was submitted that ordinarily the first statement at the time of search which is given spontaneously should be preferred as compared to the statements made later on which would normally be an improved version. Reliance was placed on the decision of the Tribunal in the case of ITO vs. Nagardas Jashraj (1989) 28 ITD 368 (Ahd).
(b) It was submitted that the piece of paper on the basis of which addition is made was not found from the premises of the appellants-assessees. It is not in handwritings of the assessees and it is found from the premises of one of the purchasers of the land, who is otherwise engaged in large number of land dealings and even that person has denied that the said paper pertains to land in question as per his statement dt. 16th October, 1996-Reply to question Nos. 8 and 9 (copies of which have been supplied at pp. 214 and 216 of the paper-book).
It was submitted that even contents of the paper make it clear that the same cannot refer to the plot of land in question for the following reasons :
(i) "Rate per sq. yd. Rs. 7.11" (when decoded it will be read as Rs. 7,711).
It was submitted that this statement by itself cannot lead us anywhere. Apart from the fact that there is no basis for alleged decoding there is nothing to show that the rate pertains to the plot of land in question.
(ii) "First amount of Rs. 70 to be paid within one month."
This itself proves that this piece of paper cannot pertain to the land in question. Admittedly, the appellants have received only a sum of Rs. 15 lakhs between three brothers. The transaction took place somewhere in the month of November, 1993. If this piece of paper could pertain to the land in question, by December, 1993 or shortly thereafter Rs. 70 lakhs should have been paid. Even the AO himself accepts that amount of Rs. 15 lakhs is paid to the appellants. It was submitted that in the assessment of one of the purchasers Shri Kalubhai Becharbhai the very same AO has added only a sum of Rs. 15 lakhs as the amount paid to the appellants. Reference was made to the assessment order of Shri Kalubhai Becharbhai (copy of which has been furnished at pp. 150 to 163 of the paper-book).
(iii) "Balance amount in five instalments of six months."
Admittedly even this clause is not complied with. Therefore this can not apply to the land in question.
(iv) "Scrap, etc. to be given to landlord."
Even in the whole assessment order there is no allegation that any such scrap was given to the appellants. This clause also could not apply.
(v) "Name to be given of father and uncle."
It was submitted that the AO has assumed that just because on the plot of land agreed to be sold to Shri Harjibhai Becharbhai, etc. the scheme is to be put up with the name "M.D. Tower" this piece of paper must pertain to the land in question because "M" would stand for Mohanbhai (uncle) whereas "D" would stand for "Dahyabhai" (father of the appellants). It was submitted that this could at the most be a sheer coincidence and it would be hazardous to assume that merely because two initials correspond with two initials of uncle and father, this piece of paper covers the land in question.
(vi) "Plan of the project to be put up near Mohan Nagar."
It was submitted that this in fact shows that the deal of land in question was not finalised at all. One puts up a plan of project where the project is to be put up. If it was to be put up near the area then the exact location of the place where the plan is put up itself is identified. According to the learned authorised representative this itself would show that this could be, as stated by Shri Kalubhai, some negotiation of the proposed project with the broker and can not pertain to land in question.
(vii) "Documentation to be made on completion of the project."
This is a standard condition of all the sale transactions and, therefore, this by itself cannot lead us to any conclusion. It was submitted that, Inspite of all these factors, the AO held that the same pertains to the land in question and inter alia he gave the following reasons to justify taking up of sale consideration at Rs. 1,38,79,800 as against Rs. 36 lakhs.
(i) That this paper was preserved by Shri Harjibhai Becharbhai. According to the learned representative of the assessee as to why Shri Harjibhai Becharbhai preserved this paper cannot be a ground to hold that this relates to the land in question. The second argument of the AO was that Shri Harjibhai Becharbhai has not purchased any other land for M.D. Tower. The learned counsel for the assessee submitted that this statement is factually incorrect which is obvious from the assessment order passed in the case of Shri Harjibhai Becharbhai copies of which have been furnished to us at pp. 164 to 193 of the paper book wherein it is categorically stated that Shri Harjibhai Becharbhai was in the business of building construction and has entered into several transactions which have been referred to at p. 175 of the paper-book. Accordingly it was submitted that the basis given by the AO in the assessment order for taking sale consideration at Rs. 1,38,79,800 is not at all justified and in any case no addition can be made on the basis of a piece of paper unless it is found that it definitely pertains to the assessee. It was submitted that it is hazardous to assume that a piece of paper not in the handwriting of an assessee and found from the residence of a third party must belong to the assessee unless there are compelling reasons to hold that this is the only view possible. Reliance was placed on the following decisions :
(i) Ashwin Kumar vs. ITO (1991) 39 ITD 183 (Del);
(ii) Rajpalsingh Ramavtar vs. ITO (1991) 39 TTJ (Del) 544;
(iii) Brijlal Rupchand vs. ITO (1991) 40 TTJ (Ahd) 560; and
(iv) Amar Natwarlal Shah vs. Asstt. CIT (1997) 57 TTJ (Ahd) 454 : (1997) 60 ITD 560 (Ahd).
22. The learned Departmental Representative supported the order of the AO and submitted that the seized paper found from the residence of one of the purchasers viz., Shri Harjibhai Becharbhai apparently pertains to this very land because of clause of cl. (v) of the paper which refers to the names to be given of father and uncle and the project finally put on the land was given the name of M.D. Tower. It was further submitted that it is a known fact that the transaction in immovable property involves payment of large amount of unaccounted money which are always recorded on piece of paper in code form and as such the AO was justified in decoding 77.11 as 7,711. He accordingly supported the order of the AO.
23. We have considered the rival submissions and have also gone through the orders passed by the AO. Chapter XIV-B was introduced in the IT Act in order to make the procedure of assessment of search case more effective. Under the provisions of this Chapter the undisclosed income detected as a result of search initiated after 30th June, 1995, is required to be assessed separately as income of that block of ten previous years. From a perusal of s. 158 it is clear that within pale of Chapter XIV-B assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search. Sec. 158BA does not provide licence to the AO for making the assessment arbitrarily, capriciously or contrary to the record. In the case before us all the parties involved in the transaction whose statements were recorded by the authorised officer as well as the AO at different stages of the assessment proceedings have categorically admitted that the land in question was sold by the assessees to the purchasers at the rate of Rs. 2,000 per sq. yd./mtr. and the sale consideration was only Rs. 36 lakhs out of which only a sum of Rs. 15 lakhs was paid to the three appellants and the balance was still to be paid. As against this the AO has made a huge addition by relying on a paper which is found from the residence of one Shri Harjibhai Becharbhai which has been recorded by the AO in para 17 of the assessment order. A perusal of that paper indicates that it is a dumb document because it is not signed by any body; it does not bear any date; there is no mention of the location of the property and the explanation with regard to this paper given by Shri Harjibhai Becharbhai was that it might pertains to some land transaction which was brought to him by some real estate broker. In view of the detailed submissions made by the learned representative of the assessee in relation to various clauses mentioned on this rough paper, we are of the opinion that this cannot be held to be pertaining to the land which is the subject-matter of sale before us in the block period. The only shred of link which it could possibly have is cl. (v) which refers to the name to be given of father and uncle because the father of the appellants happens to be Dahyabhai and their uncle Mohanlal and the scheme which was subsequently put up on this land was named as M.D. Tower but merely on the basis of this such a huge addition cannot be made particularly because no other material evidence in the form of substantial jewellery, cash, etc. has been found from the residence of the assessees during the course of search which will indicate that they have received such a large amount as a sale consideration. In fact, all the concerned parties admitted that the three brothers before us have received only a sum of Rs. 15 lakhs and the balance is yet to be paid/received out of the total consideration of Rs. 36 lakhs which was the sale price agreed between the parties. It is pertinent to note that in the assessment of Shri Kalubhai the same AO has taxed only a sum of Rs. 15 lakhs paid by him to the three assessees and as such cl. (ii) of this paper on the face of it could not be applicable because according to this Rs. 70 lakhs were required to be paid to the three brothers within one month. Thus, taking into consideration the totality of the facts and circumstances of the case we are of the opinion that no addition can be made on the basis of piece of paper referred by the AO in para 17 of the assessment order because it cannot be held that the paper pertains to the transaction of land dealt with by the assessees. Accordingly, we hold that the AO was not justified in taking the sale consideration at Rs. 1,38,79,800 on the basis of a piece of paper which is not in the handwriting of any of the assessees before us and which is found from the residence of a third party and which is also not in the handwriting of that person and who has also denied that this paper pertains to the land dealt in by the assessee. Merely because the block assessment is required to be framed under Chapter XIV-B of the IT Act relating to undisclosed income, no right is given to the AO to make assessment arbitrarily or contrary to the information available on record. Accordingly, we will hold that the AO was not justified in taking the sale consideration at Rs. 1,38,79,800 as against Rs. 36 lakhs shown by the assessees in the computation of capital gains. Ground No. 4 is accordingly allowed.
24. In the result, the appeals are partly allowed.