Commissioner Of Income-Tax vs Amber Corporation on 8 October, 1993

Rajasthan High Court Rajasthan High Court Commissioner Of Income-Tax vs Amber Corporation on 8 October, 1993 Equivalent citations: 1994 207 ITR 435 Raj Bench: K Agrawal, V Singhal JUDGMENT 1. The Income-tax Appellate Tribunal has referred the following questions of law arising out of its order passed on April 9, 1981, in respect of the assessment year 1971-72 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the deed of partnership of which four of the partners contributed immovable property known as Rambagh Palace as their capital did not require registration ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to depreciation in respect of the building, Rambagh Palace ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Commissioner of Income-tax (Appeals) that the declaration was legally made under Section 3 of the Voluntary Disclosure of Income and Wealth Ordinance, 1975 ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Commissioner of Income-tax (Appeals) that in view of Section 8(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, the amount of voluntarily disclosed income of Rs. 2,32,829 shall not be included in the total income of the assessee ?" 2. The brief facts of the case are that the assessee is a partnership-firm which carried on a business in Rambagh Palace, Jaipur, and Jaipur House, Mount Abu. The firm was formed by the late His Highness Maharaja of Jaipur and his four sons. The late Maharaja and his sons had brought Rambagh Palace and Jaipur House into the firm as part of their capital contribution. The said property was brought into the stock of the firm by the partners without getting the transfer of the properties registered in accordance with the Indian Registration Act nor was the partnership deed itself got registered. The question whether the firm could claim depreciation on the aforesaid buildings even when the buildings did not stand registered in the name of the firm has been referred to this court. 3. Questions Nos. 1 and 2 were referred earlier also to this court in Reference No. 26 of 1972 (CIT v. Amber Corporation [1981] 127 ITR 29) and relying on the decision given in the case of the assessee in CIT v. Amber Corporation [1974] 95 ITR 178 (Raj), it was held that all property and rights and interests which the partners may have brought into the' common stock as their contribution to the common business are parts of the partnership property. Even if a property contributed by a partner be an immovable property, no document, registered or otherwise, is required for transferring the property to the partnership. The assessee was held entitled to the depreciation in CIT v. Amber Corporation [1981] 127 ITR 29. Since both the questions are covered by the Division Bench decision of this court and thereafter even by the apex court in the case of S.V. Chandra Pandian v. S.V. Sivalinga Nadar [1993] 1 SCC 589, which held that, even on dissolution of the partnership and distribution of the residue amongst the partners after settlement of accounts in terms of Section 48 of the Partnership Act, it is to be treated as distribution of movable property and does not result in partition, transfer or extinguishment of interest so as to attract 17 and it was not considered that the provisions of Section 17(1) of the Registration Act, 1908, are applicable thereto. In this view of the matter, it is held that the Income-tax Appellate Tribunal was justified in coming to the conclusion that the immovable property known as Rambagh Palace contributed as capital by the partners in the partnership deed did not require any registration under the Registration Act. It is also held that the Income-tax Appellate Tribunal was right in holding that the assessee is entitled to depreciation in respect of the building the Rambagh Palace.
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Commissioner Of Income-Tax vs Amber Corporation on 8 October, 1993

4. The facts relevant to questions Nos. 5 and 4 are that the assessment of the assessee was completed on March 27, 1974, which was set aside by the Appellate Assistant Commissioner on December 31, 1975. The assessment framed thereafter on July 3, 1978, was challenged before the Commissioner of Income-tax (Appeals). The dispute related to the amount of Rs. 2,32,829 which was claimed by the assessee as business expenditure and disallowed in the first assessment order. Thereafter, the assessee declared the said income as its income in the declaration made under Section 3 of the Voluntary Disclosure of Income and Wealth Ordinance, 1975. It was submitted by the assessee that since the said amount has already been declared under the Ordinance, 1975, the same cannot be included again in the second assessment order. The Income-tax Officer was of the view that no valid declaration could have been made by the assessee under Section 3 of the Ordinance, 1975, on account of search which was made in the premises of Messrs. Rambagh Palace on February 3, 1975, and, in the course of the search and seizure, certain papers relating to the assessee were found. The incriminating articles were seized in the course of the search and seizure operation. The Income-tax Officer was of the view that the declaration should be made only under Section 14(1) and not under Section 3. The contention which was raised was that the assessee-firm was dissolved on March 28, 1973, and then Messrs. Rambagh Palace (Hotel) Pvt. Ltd. came into existence. The search should have been carried out in the premises of the assessee-firm and since it was carried out in the premises of a limited company, the provisions of "ection 14(1) are not applicable. 4. The Income-tax Officer found that the authorised officers seized a number of issue slip books and loose papers detailing the quantities of wine, liquor, etc., issued by the hotel to the members of the erstwhile royal family of Jaipur from time to time. Although these papers pertain to various dates from April 1, 1964, to March 31, 1972, most of the issue slips pertain to the years 1971 and 1972, i.e., the period of disclosure. The seized material also contains a sort of consolidated chart. The quantities recorded in this chart come very near to the quantities which have been disclosed for the assessment years 1971-72 and 1972-73 and thereby lead to a strong assumption that the quantities disclosed by the firm and the quantities represented by these charts are one and the same. A letter was written by the Income-tax Officer on March 9, 1977, to Shri Bhawani Singh to explain the sources of expenditure for this supply and it was submitted that these are temporary loans to be reimbursed later on. The stock details were filed and a finding was recorded that the firm did not have sufficient stock to cover the quantities as per the chart and, therefore, the sum of Rs. 2,32,829 was added as income. 5. In the appeal before the Commissioner of Income-tax (Appeals), it was held that the search proceedings were taken in the name of Rambagh Palace Hotel Pvt. Ltd. and not in the name of the assessee-firm and the assessee-firm has already been dissolved on February 28, 1973. Therefore, the provisions of Section 14(1) of the Voluntary Disclosure of Income and Wealth Act, 1976, are not applicable. The appeal preferred before the Income-tax Appellate Tribunal by the Revenue was dismissed. 6. We have considered the argument of both learned counsel. The provisions of Section 14(1) are as under (see [1976] 102 ITR (St.) 54) : "14. (1) Subject to the provisions of this section, where any books of account, other documents, money, bullion, jewellery or other valuable articles or things belonging to a person have been seized as a result of a search, under Section 132 of the Income-tax Act or Section 37A of the Wealth-tax Act and such person (hereafter in this section referred to as 'the declarant') makes, on or after the date of commencement of this Act but before the 1st day of January, 1976, a declaration in accordance with Sub-section (2) in respect of any income relating to the previous year in which such search was made or any earlier previous year--" 7. From the provisions of the Act of 1976, it is evident that the declaration could be made under Section 3 or under Section 14. Under Section 14, the declaration could be made where any books of account or other documents belonging to a person have been seized as a result of search under Section 132 of the Income-tax Act. The provision of Section 14(1) does not contemplate that the search must be carried out on the assessee himself. If a person has kept his documents in the premises which have been searched under Section 132 and
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Commissioner Of Income-Tax vs Amber Corporation on 8 October, 1993

they have been seized, then it cannot be claimed that the said person is not covered by the provisions of Section 14(1) of the Act of 1976. The only thing which has to be seen is as to whether the documents belong to a person or not and whether they were seized as a result of search under Section 132 of the Income-tax Act or not. Search might have been carried out at any place in respect of the premises of any person or might have been in the name of a different person. In accordance with the provisions of Section 132(4A), there is a rebuttable presumption in respect of the contents of books of account and documents and if the said books of account and documents do not belong to the person from whose custody they were seized, he has the right to point out that such documents belong to some other person and the income-tax authorities have the jurisdiction to determine as to whether the submission of the person whose premises were searched is correct or not. 8. The argument of learned counsel for the assessee that the person whose premises have been searched has been excluded from the purview of Section 3 and falls under Section 14 has no substance. The provisions of Section 14(1) do not contemplate seizure as a result of a search of the premises of the person and the only requirement is that wherever the search might have been carried out and the seizure has been made of any books of account or documents, then such person to whom the books of account or documents belongs can make a declaration under Section 14. The provisions of Section 8(1) of the Ordinance of 1975 are applicable only in respect of the declaration which has been made under Section 3 and are not applicable to a declaration which has been made under Section 14. 9. In view of the above proposition of law, we are of the view that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the declaration was legally made under Section 3 of the Voluntary Disclosure of Income and Wealth Ordinance, 1975. We are also of the view that the provisions of Section 8(1) of the Ordinance of 1975 are not applicable in respect of the declaration which has been made under Section 14. 10. The reference is, accordingly, answered in favour of the Revenue and against the assessee.

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