Dulam Ravi Shankar, Hanumakonda, Hyderabad V. ITO, Ward-2, Warangal, Warangal

ITA 1041/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4412 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Assessment record; Condonation of delay
• Section: 50C; 147; 148; 263; 63

Judgement Text

ITA NOS 1041 AND 1042 OF 2015 DULAM VIJAYALAXMI W ARANGAL PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.1042/HYD/2015 (ASSESSMENT YEAR: 2011-12) SHRI DULAM RAVI SHANKAR HANMAKONDA, WARANGAL PAN: AFTPD 8073 L VS INCOME TAX OFFICER WARD 2 WARANGAL ITA NOS.1041/HYD/2015 (ASSESSMENT YEAR: 2011-12) SHRI DULAM VIJAYALAXMI HANMAKONDA, WARANGAL PAN: AKIPD 3019 J VS INCOME TAX OFFICER WARD 2 WARANGAL FOR ASSESSEES: SHRI S. RAMA RAO FOR REVENUE : SMT. G. APARNA RAO, CIT(DR) O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE APPEALS BY THE RESPECTIVE ASSESSEES AGAINS T THE ORDER OF THE CIT U/S 263 OF THE ACT. THE ASSESS EES BEFORE US ARE HUSBAND AND WIFE AND ALSO PARTNERS OF THE PARTN ERSHIP FIRM. THE FACTS ARISING OUT OF THE ASSESSEES ARE SIMILAR AND THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED AND COMMON ORDER. DATE OF HEARING : 16.11.2016 DATE OF PRONOUNCEMENT : 30.11.2016 ITA NOS 1041 AND 1042 OF 2015 DULAM VIJAYALAXMI W ARANGAL PAGE 2 OF 5 2. AT THE OUTSET, IT IS SEEN THAT THERE IS A DELAY OF 9 DAYS IN FILING OF THE ABOVE APPEALS BEFORE US. THE ASSES SEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY AND THE REASON GIVEN THEREIN IS THAT PETITIONER IN ITA NO.1042/HYD/2015, SHRI D. RAVI SHANKAR WHO IS LOOKING AFTER THE ENTIRE AFFAIRS, WA S SICK DUE TO VIRAL FEVER AND WAS UNDERGOING MEDICAL TREATMENT FO R ABOUT 10 DAYS DUE TO WHICH THE DELAY HAS OCCURRED. WE ARE CO NVINCED BY THE REASONS GIVEN BY THE ASSESSEES AND THEREFORE, T HE DELAY IS CONDONED IN THE CASE OF BOTH THE ASSESSEES. 3. AS REGARDS THE ISSUES INVOLVED IN THE APPEALS AR E CONCERNED, THE BRIEF FACTS ARE THAT THE ASSESSEES A RE INDIVIDUALS AND ARE DERIVING INCOME FROM A PARTNERSHIP FIRM M/S . NANDINI TRACTORS. DURING THE FINANCIAL YEAR 2010-11, THE AS SESSEES FILED THEIR RETURNS OF INCOME AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE AO NOTICED THAT THE ASSESS EES HAVE SOLD A PROPERTY SITUATED AT INDUSTRIAL ESTATE, WARANGAL FO R A CONSIDERATION BUT HAVE NOT FILED THE I.T. RETURNS. AS THE ASSESSEES INCOME HAD ESCAPED ASSESSMENT, A NOTICE U/S 148 OF THE ACT WAS ISSUED AND THE ASSESSMENTS WERE TAKEN UP FOR SCRUTI NY. THE ASSESSEES APPEARED AND FURNISHED THE INFORMATION CA LLED FOR THROUGH THEIR REPRESENTATIVE. THE AO OBSERVED THAT SUBSEQUENT TO THE ISSUANCE OF NOTICE U/S 148 OF THE ACT, THE ASSE SSEES FILED THEIR RETURNS ON 10.03.2014 ADMITTING INCOME WHICH INCLUD ED THE SALE CONSIDERATION ON SALE OF LAND AND ALSO PAID TAXES T HEREON. THE AO THEREFORE, EXAMINED THE RETURNED INCOME AND ACCEPTE D THE RETURNED INCOME. THEREAFTER, THE CIT, U/S 263 OF TH E ACT, VERIFIED THE ASSESSMENT RECORDS AND FOUND THAT THE VALUE OF THE PROPERTY SOLD AS PER THE SUB REGISTRAR OFFICE IS MORE THAN T HE SALE ITA NOS 1041 AND 1042 OF 2015 DULAM VIJAYALAXMI W ARANGAL PAGE 3 OF 5 CONSIDERATION ADMITTED. THEREFORE, HE WAS OF THE OP INION THAT PROVISIONS OF SECTION 50C ARE APPLICABLE. HE THEREF ORE, ISSUED NOTICE U/S 263 OF THE ACT. 4. THE ASSESSEES FILED THEIR EXPLANATIONS STATING T HAT THE ASSET SOLD IS NOT A FIXED ASSET BUT THEIR INTEREST IN THE PARTNERSHIP FIRM. IT IS SUBMITTED THAT THE ASSESSEES WERE THE P ARTNERS OF THE PARTNERSHIP FIRM ALONG WITH OTHER PARTNERS AND HAVE PURCHASED THE PROPERTY ON 9.4.2007 IN THE NAMES OF ALL THE PA RTNERS AND SINCE THE ASSESSEES RETIRED FROM THE PARTNERSHIP FI RM, THE OTHER PARTNERS HAD AGREED THAT THE ASSESSEES WOULD HAVE T O TRANSFER THEIR RIGHTS IN THE PARTNERSHIP TO THE INCOMING PAR TNERS. THEREFORE, THE SALE DEED WAS EXECUTED AND THEREFORE , IT IS ONLY A TRANSFER OF INTEREST IN THE PARTNERSHIP AND NOT THE ASSET AND THEREFORE, THE PROVISIONS OF SECTION 50C ARE NOT AP PLICABLE. THE CIT WAS, HOWEVER, NOT CONVINCED WITH THE SAID CONTE NTION AND HELD THAT THE AO HAS FAILED TO EXAMINE THE ISSUE AT THE TIME OF ASSESSMENT PROCEEDINGS AND THEREFORE, THE ASSESSMEN T ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THEREFORE, SET ASIDE THE ASSESSMENTS AND DIRECTE D THE AO TO REDO THE ASSESSMENTS AFTER PROPER EXAMINATION AS PE R LAW AND AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. AGAINST THIS ORDER OF THE CIT U/S 263, BOTH THE ASS ESSEES ARE IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW, WHILE THE LEARNED DR SUPPORTED THE ORDER OF THE CIT U/S 2 63 OF THE ACT. ITA NOS 1041 AND 1042 OF 2015 DULAM VIJAYALAXMI W ARANGAL PAGE 4 OF 5 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND FROM THE DOCUMENTS FILED IN THE PAPER BOOK THAT THE ASSESSEES ARE THE PARTNERS IN THE PARTNERS HIP FIRM AND HAVE RETIRED THEREFROM. IT IS ALSO SEEN THAT THE TW O NEW PARTNERS HAVE BEEN INDUCTED INTO THE PARTNERSHIP FIRM. COPIE S OF THE PARTNERSHIP DEED SHOW THAT THE ASSESSEES WERE THE O WNERS OF THE PROPERTY ALONG WITH OTHER PARTNERS OF THE FIRM AND THE SALE DEED HAS BEEN EXECUTED IN FAVOUR OF THE INCOMING PARTNER S FOR TRANSFERRING THEIR RIGHT IN THE PROPERTY BELONGING TO THE PARTNERSHIP FIRM. THUS, IT CAN BE SEEN THAT THE TR ANSFER IS NOT TO A PERSON IN THE OPEN MARKET BUT IS TO THE PARTNERS WH O ARE INDUCTED TO THE PARTNERSHIP FIRM. WE ALSO AGREE WITH THE CON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SALE IS S UBJECT TO THE APPROVAL OF THE OTHER PARTNERS AND THEREFORE, THE S ALE CONSIDERATION CANNOT BE EQUALIZED TO THE MARKET VAL UE OR THE REGISTERED VALUE. IT IS SUBJECT TO THE AGREEMENT B ETWEEN THE PARTNERSHIP FIRM AND ALSO THE INCOMING PARTNERS. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE , THE TRANSFER IS ONLY OF A RIGHT IN THE PARTNERSHIP FIRM AND NOT THE CAPITAL ASSET. THOUGH THE LEARNED DR SUPPORTED THE ORDER OF THE CI T AND STATED THAT THE ASSESSMENT ORDER IS BOTH ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE, WE FIND THAT THE AO DURING THE ASSESSMENT PROCEEDINGS U/S 147 HAD CONSIDERED THE I SSUE OF THE TRANSFER OF THE CAPITAL ASSET AND HAS ACCEPTED THE BUSINESS INCOME RETURNED BY THE ASSESSEE U/S 50 OF THE ACT. THE AO HAS ACCEPTED ONE OF THE POSSIBLE VIEWS AND THEREFORE, I T CANNOT BE SAID THAT THE ASSESSMENT ORDER IS ERRONEOUS. FURTHER, THE CIT ALSO SHOULD HAVE EXAMINED THE ASSESSEES CONTENTIONS THA T IT IS ONLY A BUSINESS RIGHT AND NOT A CAPITAL RIGHT WHICH HAS BE EN TRANSFERRED ITA NOS 1041 AND 1042 OF 2015 DULAM VIJAYALAXMI W ARANGAL PAGE 5 OF 5 BEFORE COMING TO THE CONCLUSION THAT THERE IS PREJU DICE CAUSED TO THE INTEREST OF THE REVENUE. THE CIT HAS NOT BROUGH T OUT THE REASONS FOR REJECTING THE ASSESSEES CONTENTIONS AN D FOR COMING TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THEREFORE, WE ARE UNABLE T O UPHOLD THE REVISION ORDER U/S 263 OF THE I.T. ACT. 7. IN THE RESULT, THE REVISION ORDER IS SET ASIDE A ND THE APPEALS OF BOTH THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2016. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 30 TH NOVEMBER, 2016. VINODAN/SPS COPY TO: 1 SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6- 643 STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 INCOME TAX OFFICER WARD 2 WARANGAL 3 PR. CIT 3 HYDERABAD 4 ADD. CIT , WARANGAL RANGE 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER