DCIT, Circle-3(1), Hyd, Hyderabad V. Rasa Agrotech Pvt.Ltd., Hyd, Hyderabad

CO 37/HYD/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3558 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: AJAY GANDHI
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 10B; 147; 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 730/HYD/2015 ASSESSMENT YEAR: 2008-09 THE DY. CIT, CIRCLE-3(1), HYDERABAD. VS. M/S. RASA AGROTECH PVT LTD, SECUNDERABAD. PAN AABCR8624B (APPELLANT) (RESPONDENT) C.O NO. 37/HYD/2015 (ARISING OUT OF ITA NO. 730/HYD/2015) ASSESSMENT YEAR: 2008-09 M/S. RASA AGROTECH PVT LTD, SECUNDERABAD. PAN AABCR8624B VS. THE DY. CIT, CIRCLE-3(1), HYDERABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SMT. U. MINICHANDRAN ASSESSEE BY : SHRI AJAY GANDHI DATE OF HEARING : 15-02-2018 DATE OF PRONOUNCEMENT : 23-03-2018 ORDER PER P. MADHAVI DEVI, J.M.: THIS APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE AGAINST THE CIT(A)-3, HYDERABAD DATED13.03.2015 FOR THE A.Y 2008-09 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE C OMPANY, ENGAGED IN THE BUSINESS OF PROCUREMENT, PROCESSING AND 2 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. EXPORT OF SEED, FILED ITS RETURN OF INCOME FOR THE A.Y 2008- 09 ON 29.09.2008 ADMITTING A TOTAL INCOME OF RS. 1,50,16,771/- AND LONG TERM CAPITAL GAINS OF RS. 1,43,61,215/-. THE ASSESSMENT ORDER U/S 143(3) OF THE IT ACT WAS PASSED ON 28.07.2010 BY DISALLOWING THE CLA IM OF EXEMPTION U/S 10B OF THE IT ACT AND THE TOTAL INCOM E WAS DETERMINED AT RS. 3,91,35,857/-. SUBSEQUENTLY, THE A.O NOTICED THAT THE LONG TERM CAPITAL GAINS OFFERED BY THE ASSESSEE SHOULD HAVE BEEN TAXED AS SHORT TERM CAPIT AL GAINS, SINCE HE WAS OF THE OPINION THAT THE INCOME CHARGEABLE TO TAX HAS THE ESCAPED ASSESSMENT WITHIN THE MEANING OF THE SEC. 147 OF THE IT ACT, HE ISSUED A NOTICE U/S 148 OF THE IT ACT ON 21.01.203 FOR THE REASON T HAT UNDER THE PROVISIONS OF SEC. 50 OF THE IT ACT, CAPI TAL GAIN ON TRANSFER OF DEPRECIABLE ASSETS SHALL BE TREATED AS SHORT TERM CAPITAL GAINS. DURING THE REASSESSMENT PROCEE DINGS, THE ASSESSEE RAISES AN OBJECTION THAT THE REOPENING U/S 148 OF THE IT ACT IS NOT VALID. HOWEVER, THE A.O H ELD THAT THE SHORT TERM CAPITAL GAIN WAS TREATED AS LONG TER M CAPITAL GAIN BY THE ASSESSEE AND THEREFORE, THE REOPENING O F THE ASSESSMENT U/S 147 OF THE IT ACT IS VALID. 3 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. 3. THEREAFTER, HE CONSIDERED THE ASSESSEES CLAIM T HAT THE AMOUNT OF RS. 3,31,02,477/- IS TOWARDS GOODWILL AND THEREFORE IT HAS TO BE CONSIDERED AS LONG TERM CAPI TAL GAIN. AO HOWEVER, HELD THAT THE SAME IS NOT TENABLE BECAU SE IN THE STATEMENT OF ACCOUNTS FILED BY THE ASSESSEE, TH ERE IS NO MENTION OF GOODWILL BUT THE AMOUNT WAS MENTIONED ON LY AS SALE CONSIDERATION. AT THIS POINT, BEFORE THE A.O THE ASSESSEE HAD TAKEN AN ALTERNATIVE STAND THAT TRANSF ER OF SEED BUSINESS FALLS WITHIN THE AMBIT OF SEC. 50B OF THE IT ACT AS SLUMP SALE AND FILED FORM NO. 3CEA ALONG WIT H THE LETTER. OBSERVING THAT THE FORM NO. 3CEA SHOULD HA VE BEEN FILED ALONG WITH THE RETURN OF THE INCOME, A.O REJECTED THE ASSESSEES ALTERNATE CLAIM AND TREATED THE SUM OF RS. 3,31,02,477/- AS SHORT TERM CAPITAL GAIN AND BROUGH T IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE CIT(A), CHALLENGING BOTH THE VALIDITY OF THE REASSE SSMENT PROCEEDINGS AND ALSO TREATING THE LONG TERM CAPITA L GAINS OFFERED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN. THE ASSESSEE ALSO RAISED THE ALTERNATE CLAIM THAT THE TRANSACTION FALLS UNDER THE AMBIT OF SEC. 50B OF TH E IT ACT AND THEREFORE SHOULD BE CONSIDERED AS SUCH. THE CI T(A) REJECTED THE GROUNDS AGAINST THE VALIDITY OF THE 4 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. REASSESSMENT PROCEEDINGS, BUT ACCEPTED THE ALTERNAT E PLEA OF THE ASSESSEE THAT THE TRANSACTION IS A SLUMP SA LE AND SHOULD BE CONSIDERED U/S 50B OF THE IT ACT. AGAINS T THE RELIEF GRANTED BY THE CIT(A), THE REVENUE IS IN APP EAL BEFORE US AND THE ASSESSEE ALSO IS IN CROSS OBJECTION AGAI NST THE ORDER OF THE CIT(A) UPHOLDING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS. 4. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING THE GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS. 2. THE LD. CIT(A) OUGHT NOT HAVE ALLOWED THE ASSESS EES CLAIM FOR CONSIDERING ALTERNATIVE PLEA WHICH WAS RE JECTED BY THE A.O AT THE TIME OF SCRUTINY PROCEEDINGS. 3. THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF AS SESSEE FOR DETERMINING THE CAPITAL GAINS U/S 50B OF THE ACT, I N VIEW OF THE FACT THAT THE ASSESSEE FAILED TO COMPLY WITH THE PR OVISIONS OF SEC. 50B, FILING OF FORM 3CEA ALONG WITH THE RET UR N. 4. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIM E OF HEARING. 5. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) HAS ERRED IN UPHOLDING THE REOPENING THE ASSESSMENT U/S 147. 2. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 6. SINCE THE CROSS OBJECTION IS AGAINST THE VALID ITY OF THE REASSESSMENT PROCEEDINGS AND GO TO THE ROOT OF THE MATTER, IT SHALL CONSIDERED THE SAME FIRST. ADMITTEDLY, TH E REOPENING OF THE ASSESSMENT IS WITHIN THE PERIOD OF THE FOUR 5 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. YEARS. THE ASSESSEES OBJECTION IS THAT THE REOPEN ING IS DONE ON A MERE CHANGE OF OPINION. IN SUPPORT OF TH IS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS DR AWN OUR ATTENTION TO THE ASSESSEES REPLY TO THE A.O DATED 26.05.2010 IN RESPONSE TO THE NOTICE U/S 142(1) OF THE IT ACT, DATED 04.05.2010, WHEREIN THE COPY OF THE BUSI NESS PURCHASE AGREEMENT ALONG WITH THE LEDGER ACCOUNT OF UNICORN SEED RECEIVABLE WAS ENCLOSED. 7. ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE, SI NCE THE RELEVANT MATERIAL WAS BEFORE THE A.O AND THE A. O HAS NOT MADE ANY DISALLOWANCE NOR HAS DISCUSSED ANYTHIN G ABOUT THE SAME IN THE ASSESSMENT ORDER, THE A.O IS DEEMED IT TO HAVE CONSIDERED THE SAME IN THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT AND THEREFORE THE REOPENING THE ASSESSMENT FOR CONSIDERING THE SAME A S SHORT TERM CAPITAL GAINS, IS ON MERE CHANGE OF OPIN ION. HE SUBMITTED THAT ON MERE CHANGE OF OPINION THE REASSESSMENT IS NOT VALID. 8. ON THE OTHER HAND, THE LD. DR, SUPPORTED THE ORD ER OF THE CIT(A) WHO HAS HELD THAT THE CHANGE OF OPINION WOULD REQUIRE THE FORMATION OF OPINION BY THE A.O ON THE ISSUE IN THE PROCEEDINGS U/S 143(3) OF THE IT ACT, AND SINCE THE 6 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. ISSUE OF THE APPLICABILITY OF SEC. 50B WAS NEVER BE FORE THE A.O DURING THE PROCEEDINGS U/S 143(3) OF THE IT AC T, THERE CAN NEVER BE A CHANGE OF THE OPINION, AND ALSO THAT THE A.O HAS NOT CONSIDERED THE APPLICABILITY OF SEC. 50 TO THE IT ACT TO THE TRANSACTION UNDER THE BUSINESS PURCHASE AGRE EMENT. FOR COMING TO THIS CONCLUSION, THE CIT(A) HAS RELIE D UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF KELVINATOR INDIA REPORTED IN 320 ITR 561 (SC) AND A LSO IN THE CASE OF CIT VS USHA INTERNATIONAL LIMITED REPOR TED IN 348 ITR 485 (DEL) AND THE DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE CASE OF GUJARAT POWER CORPORATION LIMITED REPORTED IN 350 ITR 266 (GUJ). IN THE CASE OF KELVINAOR INDIA, THE HONBLE SUPREME COURT HELD THA T AFTER 01.04.1989, THE A.O HAS POWER TO REOPEN, PROVIDED T HERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT TH ERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN THE CASE OF USHA INTERNATIONAL (CITED SUPRA), THE HONBLE DELHI HIGH COURT HAS HELD THAT THE EXPRESSION CHANGE OF OPINI ON POSTULATES FORMATION OF OPINION AND A CHANGE THEREO F AND THAT THERE IS A DIFFERENCE BETWEEN CHANGE OF OPINI ON AND FORMATION OF OPINION. IN THE CASE OF GUJARAT POW ER CORPORATION LTD., (CITED SUPRA) IT WAS HELD THAT AF TER 7 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. 01.04.1989 POWER FOR REOPENING OF ASSESSMENT WITHIN FOUR YEARS ARE MUCH WIDER. IN THE CASE BEFORE US, THOUGH THE ASSESSEE HAS FILED THE COPY OF THE BUSINESS PURCHAS E AGREEMENT, THE A.O HAS NOT FORMED ANY OPINION ABOUT THE NATURE OF THE CAPITAL GAIN ARISING THEREFROM AND TH EREFORE, IT CANNOT BE A CASE OF CHANGE OF OPINION. THEREFORE , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE CROSS OBJECTION OF THE ASSESS EE IS REJECTED. 9. AS REGARDS THE REVENUES APPEAL IS CONCERNED, WE FIND THAT, ON REOPENING OF THE ASSESSMENT THE ENTIRE ISS UE WAS BEFORE THE A.O AND THE ASSESSEE HAD MADE THE ALTERN ATE CLAIM OF APPLICABILITY OF SEC. 50B OF THE IT ACT TO THE TRANSACTION AS A SLUMP SALE AND IN SUPPORT OF SAID CLAIM HAS FILED THE FORM NO. 3CEA. THE REQUIREMENT TO FI LE FORM NO. 3CEA ALONG WITH THE RETURN OF INCOME IS TO SUBSTANTIATE THE CLAIM U/S 50B OF THE ACT. IN THE ORIGINAL RETURN OF INCOME, SINCE THE ASSESSEE HAS NOT MADE T HE CLAIM, THE ASSESSEE COULD NOT HAVE FILED THE FORM N O. 3CEA ALONG WITH THE RETURN OF INCOME. ITS ONLY DURING T HE REASSESSMENT PROCEEDINGS, THAT THE ASSESSEE HAD MAD E AN ALTERNATE CLAIM AND THEREFORE, THE CIT(A) HAS RIGHT LY 8 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. DIRECTED THE A.O TO ASSESS THE TRANSACTION ARISING OUT OF THE BPA AS A SLUMP SALE U/S 50B OF THE IT ACT. AS REGARDS THE CONSIDERATION TOWARDS SLUM SALE, THE CIT(A) HAS NOT ONLY TAKEN THE AGREED PRICE OF RS. 4,00,00,000/- BU T ALSO THE ADDITIONAL CONSIDERATION OF RS. 24,54,056/- AS PART OF THE CONSIDERATION FOR ALL THE ASSETS LISTED IN BPA. THE ASSESSEE HAS NOT RAISED ANY GROUND OF CROSS OBJECTI ON AGAINST TREATING THE ADDITIONAL CONSIDERATION ALSO AS THE SALE CONSIDERATION FOR TRANSFER OF BUSINESS U/S 50B OF THE IT ACT. THEREFORE, THE ASSESSEE HAS ACCEPTED THE E NTIRE SALE CONSIDERATION TO BE RS. 4,24,55,056. SINCE THE CIT (A) HAS ONLY REMITTED THE ISSUE TO THE FILE OF THE A.O FOR THE CONSIDERING THE ASSESSEES ALTERNATE CLAIM U/S 50B OF THE ACT, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 10. IN THE RESULT, BOTH THE REVENUES APPEAL AS WEL L AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER 9 ITA NOS. 730/HYD/2015 & CO 37/HYD/2015 RASA AGROTECH PVT LTD, SECUNDERABAD. HYDERABAD, DATED: 23 RD MARCH, 2018. KRK 1) M/S RASA AGROTECH PVT LTD UNICORN HOUSE, PLOT NO.3 , NR GUNROCK DIAMOND POINT, TRANSPORT ROAD, SECUNDERABAD. 2) DCIT, CIRCLE -3(1), HYDERABAD 3) CIT(A) -3, HYDERABAD 4) ASST. CIT, RANGE-3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE