Dy. Commissioner of Income Tax, Circle -1, Allahabad V. Shri Indresh Kumar Agarwal, Allahabad

ITA 106/ALLD/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5503 (ITAT-ALLAHABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Audit objection; Cost of acquisition; Valuation report; Assessment record; Tax effect; Capital Gains
• Section: 147; 148; 54; 143(3); 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No.106/ALLD/2020 Assessment Year: 2012-13 Deputy Commissioner of Income-tax, Circle-1, 38, M.G. Road, Civil Lines Allahabad, U.P. v. Shri Indresh Kumar Agarwal, 22A, Sarojini Naidu Marg, Allahabad, U.P. PAN:ACCPA0218Q (Appellant) (Respondent) Appellant by: Shri A.K. Singh, Sr. DR Respondent by: Shri Ashish Bansal, Advocate Date of hearing: 18.07.2022 Date of pronouncement: 20.07.2022 O R D E R PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal filed by Revenue has arisen from learned Commissioner of Income-tax (Appeals) appellate order in appeal number CIT(A), Allahabad/10423/2019- 20 dated 12.08.2020 , which in turn has arisen from re-assessment order dated 11.12.2019 passed by learned Assessing Officer(AO) u/s 143(3) read with Section 147 of the Income-tax Act, 1961. This appeal filed by Revenue is disposed of because tax effect is less than Rs.50 lacs in this appeal as per CBDT Circular No.17/2019 (F.No. 279/Misc.142/2007-ITJ (Pt)) dated 08th August, 2019 issued by Central Board of Direct ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 2 Taxes, Department of Revenue, Ministry of Finance, Government of India, amending Para No.3 and 5 of the CBDT Circular No.3 of 2018 dated 11.07.2018 and its subsequent amendment dated 20.08.2018. 2. The ld. Counsel for the assessee at the outset submitted that tax-effect in this Revenue’s appeal is below Rs. 50 lacs and is thus liable to be dismissed , in view of aforesaid CBDT Circular. The ld. Counsel for the assessee submitted that total additions were made by AO to the income of the assessee , to the tune of Rs. 62,74,997/- , which effectively stood deleted by ld. CIT(A) as the reopening itself was held to be bad in law , and hence the tax effect is only Rs. 12,92,649/- which is much below the threshold limit of Rs. 50 lacs for filing an appeal with tribunal by Revenue , and that this appeal is covered by afore-stated circular issued by CBDT and hence this appeal is to be dismissed owing to low tax effect. The ld. Sr. DR on the other hand drew our attention to Ground No. 3 raised by Revenue in its appeal, wherein it is mentioned that this appeal is covered by exception in view of Circular No. 3 of 2018 dated 11.07.2018 as per para 10, and hence this appeal was filed by Revenue , which is not covered by aforesaid CBDT circular and hence this appeal is maintainable keeping in view exception at para 10(c) of the aforesaid CBDT Circular. The ld. Counsel for the assessee in reply submitted that perusal of the re-assessment order as well ld. CIT(A) orders , no-where mentions that the case was reopened by Revenue based on Revenue audit objections, rather it is clearly stated in the reassessment order that the case was reopened based on perusal of assessment records. The ld. Sr. DR produced before the Bench, the Revenue audit ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 3 objection dated 05.04.2017. Copy of the said Revenue audit objection was later filed by ld. Sr. DR vide F.No. Addl. CIT(Sr. DR)/ITAT/Alld/Indresh Agrawal/2022-23/151 dated 18.07.2022(placed on record in file), which is reproduced hereunder:- ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 4 ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 5 ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 6 3. The aforesaid Revenue audit objection raised by Revenue audit party concerns with value adopted by assessee as to its share of land @Rs. 15000 per square meters as its capital contribution by assessee to LLP M/s Raj Vilas Realtor which was accepted by AO, while as per Revenue Audit party the valuer in Part III had stated that the circle rate of the above land is around Rs.25000 to Rs.30000 per square meters. However, the prevailing market rate is 3-4 times of the sale. The Revenue Audit party noted that , thus the assessee has undervalued the book value of the capital contribution by not adopting either the prevailing circle rate or the market value resulting in short computation of long term capital gains on transfer of land amounting to Rs. 1,53,75,000/- . The said objection raised by Revenue audit party was not accepted by Department, as the note is coming on the left hand side of this objection note itself, as under: “ The objection raised is not acceptable because the provisions of section 50C are not acceptable because provisions of Section 50C are not applicable in this case. As the assessee has introduced his capital asset as capital contribution to a Limited liability partnership firm, on which provisions of section 45(3) of the I.T. Act, are applicable. Sd/- Designation-not visible” Further, on perusal of reassessment order dated 11.12.2019 , at para 2.1 & 2.2 , it is stated as under: “2.1 From perusal of the assessment records it is gathered that, “The assessee has contributed his capital asset (land situated at Sarojini Naidu Marg, Allahabad) to a Limited Liability Partnership (LLP) M/s Raj Vilas Realtors as partner’s capital contribution in the F.Y. 2011-12 and worked out capital gains on the same as Rs. 1,47,96,057/- u/s 45(3) and claimed deduction u/s 54F of Rs. 85.00 Lakh, thereby showing an income from capital gains Rs. 62,96,057/-. ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 7 It is seen that a total 4612.50 square meter of land was transferred to the LLP by three of its partners, including assessee. The share of assessee in land was worked out 1537.50 sq. mtr. Assessee has taken value Rs. 500 per square meter for computing indexed cost of acquisition of land, thereby arriving at indexed cost of acquisition of land Rs. 60,34,688(=1537.50*500*785/100). The basis of taking rate of land at Rs. 500 is only the valuation report without any other supporting document. Whereas the land rate as per the government document is Rs 165 per square meter , for location Sarojini Naidu Marg, Allahabad. Hence the correct indexed cost of acquisition will be Rs. 19,91,446 (=Rs 165*1537.50*785/100). Accordingly, after availing deduction u/s 54 the correct long term capital gains will be Rs. 1,25,71,054( i.e. Rs. 2,30,62,500 – 19,91,446 – 85,00,0000), whereas on the same transaction assessee has shown the Long term capital gains at Rs.62,96,057/- only. Therefore there is ‘escapement from assessment’ of an income of Rs. 62,74,997 (= Rs. 125,71,054 – 62,96,057) under head capital gains. 2.2 So, after recording the reason & obtaining due approval from the Pr. CIT Allahabad on 27.03.2019, the case was reopened & on-line notice under Section 148 was issued on 28.03.2019 and duly served in this case...................” The Bench duly brought the above facts to ld. SR. DR for seeking clarification as to applicability of exception as contained in para 10 of Circular No. 3 of 2018, that Revenue audit party raised objection as to the value adopted by assessee while transferring land to LLP, which objections were rejected by Department, while on the other hand the AO re- opened the assessment u/s 147/148 of the 1961 Act based upon assessment record and that too on the issue of cost of acquisition adopted by the assessee while computing capital gains on the transfer of its share of land to LLP, then how this Revenue appeal is covered by exception carved out at para 10 of Circular No. 03/2018 , which reads as under: ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 8 “10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: (a) Where the Constitutional validity of the provisions of an Act or Rule IS under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts.” The ld. Sr. DR submitted that this is the only Revenue audit objection which are placed on record in the file of the Department, and it is true that the objection raised by Revenue party was not accepted by Department, and further that the re-opening was done based on issue of cost of acquisition adopted by assessee, which too was done by AO based on perusal of assessment record and not on the basis of objection raised by Revenue audit party . Thus, it is clear that the reopening was not done based on the Revenue audit objection, as the objections raised by Revenue audit party were rejected by Department, and hence this appeal filed by Revenue is to be dismissed as tax effect in this appeal filed by Revenue is undisputedly below Rs.50 lacs in this appeal filed by Revenue (Rs. 12,92,649/- ) and thus keeping in view CBDT Circular No.17/2019 (F.No.279/Misc.142/2007-ITJ (Pt)) dated 08 th August, 2019 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, amending Para No.3 and 5 of the CBDT Circular No.3 of 2018 dated 11.07.2018 and its subsequent amendment dated 20.08.2018, we are dismissing this appeal filed by Revenue due to low tax effect involved in this appeal which is below Rs.50 lacs. While disposing of this appeal filed by Revenue due to low tax effect vide aforesaid CBDT ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 9 Circular No.17/2019 dated 08.08.2019, we clarify that we have not commented on merits of the issue(s) in this appeal. However, at the same time we are granting liberty to Revenue that if at any stage Revenue wants to agitate the matter/issue(s) in this appeal in accordance with the clauses/exceptions as are contained in the afore-stated CBDT circular number 17/2019 dated 08.08.2019 read with CBDT circular No 3/2018 dated 11.07.2018 as modified on 20.08.2018, the Revenue is hereby granted liberty to file miscellaneous application praying for recall of this order accordingly. We order accordingly. 4. In result, the appeal filed by Revenue in ITA no. 106/Alld./2020 for ay: 2012-13 stand dismissed owing to low tax effect as indicated above. Order pronounced in the open Court on 20/07/2022 at Allahabad , U.P. Sd/- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20/07/2022 Copy forwarded to: 1. Appellant –Deputy Commissioner of Income-tax , Circle-1, Aayakar Bhawan, M G Road, Allahabad, U.P. 2. Respondent – Shri Indresh Kumar Agarwal, 22-A, Sarojini Naidu Marg, Allahabad, U.P. 3. CIT(A) – Aayakar Bhawan, M G Road, Allahabad, U.P. 4. CIT- Aayakar Bhawan, M G Road, Allahabad, U.P. 5. Sr. DR – ITAT, Aayakar Bhawan, M G Road, Allahabad, U.P. By order ITA No.106/ALLD/2020 Shri Indresh Kumar Agarwal Assessment Year: 2012-13 10 Assistant Registrar