The Surat District Co.Op.Spinning Mills Ltd., Surat V. The Dy.CIT.,Circle-9, Surat

CO 42/AHD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9337 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: M K PATEL
• Keywords: Capital asset; Business expenditure; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEM BER THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-9, SURAT (APPELLANT) VS THE SURAT DIST. CO-OP. SPINNING MILLS LTD., RU BHAVAN, LALDARWAJA, SURAT PAN: AAAAT3001B (RESPONDENT) THE SURAT DIST. CO-OP. SPINNING MILLS LTD., RU BHAVAN, LALDARWAJA, SURAT PAN: AAAAT300B (CROSS OBJECTOR) VS THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-9, SURAT (RESPONDENT) REVENUE BY: SRI K.C. MATHEWS, SR.D.R. ASSESSEE BY: SRI M.K. PATEL, A.R. DATE OF HEARING : 18-03-2014 DATE OF PRONOUNCEMENT : 21-03-20 14 / ORDER ITA NO. 3385/AHD/2010 ASSESSMENT YEAR 2007-08 C.O. NO. 42/AHD/2011 (IN ITA NO. 3385/AHD/2010) ASSESSMENT YEAR 2007-08 I.T.A NO. 3385/AHD/2010 & CO NO. 42/AHD/2011 A .Y. 2007-08 PAGE NO DCIT VS. THE SURAT DIST. CO-OP. SPINING MILLS LTD 2 PER : D.K. TYAGI, JUDICIAL MEMBER:- APPEAL FILED BY REVENUE AND CO BY ASSESSEE ARE AG AINST THE ORDER OF LD. CIT(A)-V DATED 15-09-2010. FIRST WE WILL TAKE UP REVENUES APPEAL IN ITA NO. 3 385/AHD/2010 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. ON ACCOUNT OF LONG TERM CAPITAL GAIN AT RS. 8,72,40,555/-. BY REL YING UPON THE DECISION OF THE HONBLE ITAT IN THE ASSESSEE'S CASE WHICH IN TURN HAD ERRONEOUSLY RELIED UPON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF KP VARGHESE (1981) 131 ITR 597 (SC) WHICH IS INAPPLICA BLE TO THE UNIQUE FACTS AND CIRCUMSTANCES OF THE CASE. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8,72,40,555/-, WITHOUT APPRECIATING THE FACT THAT THE SAME WAS DONE ON THE BASIS OF THE VALUATION MADE BY SHRI JASHWANT MEHTA WHO WAS ASSESSEES OWN VALUER. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 8,7 2,40.555/-, WITHOUT APPRECIATING THE FACT THAT THE AO HAD DESCRIBED IN DETAIL HOW THE JANTRY VALUE WAS INCOMPARABLE TO THE ACTUAL DEAL VALUES AS THE ACTUAL MARKET RATES WERE VERY HIGH AS SEEN FROM THE SALES INSTANCE GIVE N BY THE A . O. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS AO FOUND THAT ASSESSEE HAS SHOWN RS. 3,98,95,198/- AS LONG TERM CAPITAL GAIN ON THE SALE OF A PIECE OF LAND @ 2242.2 PER SQUARE MET ER. AFTER CLOSURE OF THE MANUFACTURING BUSINESS THE ASSESSEE SOLD THE BUILDI NG ALONG WITH LAND AND I.T.A NO. 3385/AHD/2010 & CO NO. 42/AHD/2011 A .Y. 2007-08 PAGE NO DCIT VS. THE SURAT DIST. CO-OP. SPINING MILLS LTD 3 MACHINERY IN THE YEAR 1999. THE PROPERTY WAS VALUE D BY A REGISTERED VALUER, SRI J.H. MEHTA, WHO WAS EMPLOYED WITH THE ASSESSEE ITSELF. AS PER THE VALUATION REPORT DATED 24 TH JULY, 2000 FURNISHED BY SRI MEHTA, THE LAND WAS VALUED @ 5948 PER SQUARE METER. SUBSEQUENTLY, ANOT HER VALUATION REPORT DATED 09-10-2010 WAS SUBMITTED BY HIM IN THE NAME O F M/S MOOCCHHALA ASSOCIATES, IN WHICH THE VALUATION WAS SHOWN AT RS. 5500 PER SQUARE YARD. ON A PETITION OF LABOUR UNION BEFORE THE HONBLE HI GH COURT, HIGH COURT DIRECTED THAT LABOUR UNION LEADER WAS TO BE GIVEN A POWER OF ATTORNEY TO SELL THE LAND. THE ASSESSEE-SOCIETY GAVE THE POWER OF AT TORNEY TO THE UNION LEADER SRI NB DESAI TO SELL THE LAND ADMEASURING 71,672 SQ . MTR. SRI DESAI SOLD DIFFERENT PLOTS OF LAND IN SUCCESSIVE YEARS UPTO AS SESSMENT YEAR 2007-08 I.E. THE YEAR UNDER APPEAL. DURING THE YEAR TOTAL NUMBE R OF PLOT SOLD WAS 95 ADMEASURING 20,21.25 SQUARE METER FOR A TOTAL CONSI DERATION OF RS. 4,51,6,665/- AND ACCORDINGLY THE ASSESSEE HAS SHOWN NET LONG TERM CAPITAL GAIN AT RS. 3,98,95,198/-. THE AO CALCULATED THE L ONG TERM CAPITAL GAIN ON SALE OF LAND TAKING RATE @ 5948 PER SQUARE METER AS GIVEN BY SRI MEHTA, THE VALUER ABOVE MENTIONED. AS PER THE ASSESSMENT ORDE R THE LONG TERM CAPITAL GAIN CAME TO RS. 12,71,35,753/- INSTEAD OF 3,98,95, 198/- AS SHOWN BY THE ASSESSEE. THUS, THE ADDITION OF RS. 8,72,40,552/- WAS MADE BY AO. LD. CIT(A) DELETED THE ADDITION BY PLACING RELIANCE ON THE DECISION OF HONBLE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200 5-06 ON IDENTICAL FACTS VIDE ITS ORDER DATED 17-02-2009 IN ITA NO. 3381/AHD /2008 WHEREIN WHILE GIVING RELIEF TO THE ASSESSEE HONBLE ITAT HAS OBSE RVED AS UNDER:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND, PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F K P VARGHESE V ITO (1981) 131 ITR 597 (SC) WHEREIN IT HAS BEEN AS UNDER:- I.T.A NO. 3385/AHD/2010 & CO NO. 42/AHD/2011 A .Y. 2007-08 PAGE NO DCIT VS. THE SURAT DIST. CO-OP. SPINING MILLS LTD 4 WHAT IS IN FACT NEVER ACCRUED OR WAS NEVER RECEIVE D CANNOT BE COMPUTED AS CAPITAL GAINS UNDER S. 48. SECTION 52(1) DOES NOT DEEM INCOME TO ACCRUE OR TO BE RECEIVED WHICH IN FACT NEVER ACCRUED OR WAS NEVER RECEIVED. IT SE EKS TO BRING WITHIN THE NET OF TAXATION ONLY THAT INCOME WHICH HAS ACCR UED OR IS RECEIVED BY THE ASSESSEE AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. BUT SINCE IT WOULD NOT BE POSSIBLE FOR THE ITO TO DETER MINE PRECISELY HOW MUCH MORE CONSIDERATION IS RECEIVED BY THE ASSESSEE THAN THAT DECLARED BY HIM, SUB-S. (1) PROVIDES THAT THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF THE TRANSFER SHALL BE TA KEN TO BE THE FULL VALUE OF THE CONSIDERATION FOR THE TRANSFER WHICH H AS ACCRUED TO OR IS RECEIVED BY THE ASSESSEE. THE NET EFFECT OF THIS P ROVISION IS AS IF A STATUTORY BEST JUDGMENT ASSESSMENT OF THE ACTUAL CO NSIDERATION RECEIVED BY THE ASSESSEE IS MADE, IN THE ABSENCE OF RELIABLE MATERIALS. THE ONUS OF ESTABLISHING THAT THE CONDITIONS OF TAX ABILITY ARE FULFILLED IS ALWAYS ON THE REVENUE. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE AF ORESAID DECISION OF THE HONBLE SUPREME COURT, WE ALLOW THE CLAIM OF TH E ASSESSEE. THUS, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. SINCE LD. CIT(A) HAS GIVEN RELIEF BY FOLLOWING THE ORDER OF HONBLE ITAT IN ASSESSEES OWN CASE, WE ARE NOT INCLINED TO INTE RFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. NOW COMING TO C.O. NO. 42/AHD/2011 5. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN NOT DECIDING THE GROUND REGARDING DEDUCTIBILITY OF VARIOUS BUSINESS EXPENDITURE EVEN THOUGH ON FACTS THE BUSINESS WAS C ONTINUED ALL I.T.A NO. 3385/AHD/2010 & CO NO. 42/AHD/2011 A .Y. 2007-08 PAGE NO DCIT VS. THE SURAT DIST. CO-OP. SPINING MILLS LTD 5 THROUGH OUT THE PRECEDING AND SUBSEQUENT YEARS AND ITS A CASE OF ONLY TEMPORARY SUSPENSION OF BUSINESS. 2. THAT ON FACTS AND IN LAW AND ON EVIDENCE ON RECO RD, IT OUGHT TO HAVE BEEN HELD THAT THE ENTIRE BUSINESS EXPENDITURE IS ALLOWABLE AS CLAIMED FOR IN TOTO. 6. LEARNED COUNSEL OF THE ASSESSEE AT THE OUTSET CO NCEDED THAT IDENTICAL GROUND TAKEN BY ASSESSEE IN CO NO. 41/AHD/2011 FOR ASSESSMENT YEAR 2003- 04 WAS DISMISSED VIDE ITS ORDER DATED 10-05-2013. THEREFORE THIS YEAR ALSO THIS GROUND IS DISMISSED. 7. IN THE RESULT, BOTH THE REVENUES APPEAL AS WELL AS CO FILED BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 21/03/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,