Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 66630 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-08-2012
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
DB
Assessment Year
2007-2008
Appeal Filed On
01-03-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : ABWPM2673E I.T.A.NO. 113 /IND/201 2 . A.Y. : 2007 - 08 ACIT, SHRI RAMESH MANGAL, 1(1), INDORE VS PRESS COMPLEX, A. B. ROAD, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI KESHAVE SAXENA, CIT DR RESPONDENT BY : SHRI S.N.AGARWAL & SHRI PANKAJ MOGRA, CAS DATE OF HEARING : 29 .0 8 .2012 DATE OF PRONOUNCEMENT : 30 . 0 8 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 22.12.2011 FOR THE ASSESSMENT YEAR 2007-08, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE RE VENUE :- -: 2: - 2 ON THE FACTS & IN LAW AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN: - (1) THE LD. C1T(A) HAS ERRED IN LAW AS ON FACTS IN DELETING THE ADDITION OF RS. 86,68,425/- AS SHORT TERM CAPITAL G AIN, RS. 34,21,192/- AS DISALLOWANCE OF INTEREST ON HOUSING LOAN AND RS. 11,91,058/- AS DISALLOWANCE U/S 14A. (2) THE LD. CIT(A) HAS ERRED IN LAW. AS ON FACTS IN DELETING THE ADDITION OF RS. 86,68,425/- WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE ON THE SAME DATE HAS SOLD SHARES OF THE SAME COMPANY AT TWO DIFFERENT RATES I.E. RS. 105/- AND RS. 141/- IN ORDER TO REDUCE THE CAPITAL GAINS CHARGEAB LE TO TAX. (3) THE LD. C1T(A) HAS ERRED IN LAW AS ON FACTS IN ACCEPTING THE EXPLANATION OF THE ASSESSEE REGARDING DISALLOWA NCE OF .INTEREST ON HOUSING LOAN OF RS. 34,21,192/WHICH WA S NOT PUT FORTH BEFORE ASSESSING OFFICER, BEING IN NATURE OF ADDITIONAL EVIDENCE BEFORE CONFRONTING THE SAME~ TO AO. (4) THE LD. CIT(A) HAS ERRED IN LAW AS ON FACTS IN DELETING THE ADDITION FOR DISALLOWANCE OF INTEREST ON HOUSING LO AN. THUS THE ORDER OF LD. CIT(A) IS NOT SPEAKING ONE. (5) THE LD. CIT(A) HAS ERRED IN LAW AS ON FACTS IN DELETING THE ADDITION OF RS. 11,91,058/- MADE ON ACCOUNT OF DISALLOWANCE U/S 14A WITHOUT APPRECIATING THE FACT THAT AS PER LEGAL POSITION, THE DISALLOWANCE HAS TO BE MADE WHEN INVESTMENT IS MADE FOR EARNING INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME AS PER MECHANISM GIVEN IN RULE 8D IRRESPECTIVE OF THE FACT THAT INCOME IS EARNED OR N OT DURING THE YEAR UNDER CONSIDERATION AND WHETHER THE ASSESS EE -: 3: - 3 HAS EARNED MORE INTEREST INCOME THAN INTEREST PAID. RELIANCE IS PLACED ON HARYANA LAND RECLAMATION & DEVELOPMENT CORPORATION VS. CIT (2007) 209 CTR (P&H ) 350: (2008) 302 ITR 218 (P&H). (6) THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEO US BE SET ASIDE AND THAT THE ORDER OF AO BE RESTORED. 2. WITH REGARD TO DISALLOWANCE OF INTEREST OF RS. 34,01,192/- AGAINST INCOME FROM HOUSE PROPERTY, WE OBSERVE THAT INTEREST WAS DISALLOWED BY THE ASSESSING OFFIC ER AFTER OBSERVING THAT THE LOAN WAS ACTUALLY TAKEN BY THE A SSESSEE FROM ICICI BANK ON 30.12.2006 AND UTILIZED FOR PAYM ENT OF OLD DUES TO DEEPAK COLONIZES PRIVATE LIMITED. IN AN APP EAL FILED BEFORE THE CIT(A), THE LD. CIT(A) OBSERVED THAT THE AMOUNT OF INTEREST OF RS. 34,21,192/- AS PAID BY THE ASSESSEE RELATERS TO THE FOLLOWING PARTIES :- S.NO. TO WHOM INTEREST WAS PAID AMOUNT OF INTEREST REMARKS 1. STATE BANK OF INDORE 7,02,947 FOR CONSTRUCTION OF PIPLIYA PALA GODOWN 2. ICICI BANK LIMITED 2,81,047 UTILIZED TOWARDS REPAYMENT OF OLD LIABILITIES TO DEEPAK COLONIZES PVT.LTD. 3. ICICI BANK LIMITED 1,195,966 UTILIZED TOWARDS REPAYMENT OF OLD LIABILITIES TO DEEPAK COLONIZES PVT.LTD. AND TOWARDS PURCHASE OF SHOP IN MANGAL CITY MALL. 4. DEEPAK COLONIZES P.LTD. 1,241,232 ON LATE PAYMENT OF PURCHASE CONSIDERATION -: 4: - 4 3,421,192 3. IT WAS FURTHER FOUND BY THE LD.CIT(A) THAT THE ASSE SSEE HAD PURCHASED SHOPS FROM M/S. DEEPAK COLONIZES P.LT D., IN THE YEAR UNDER CONSIDERATION AT DIFFERENT FLOORS. T HE AMOUNT OF PURCHASE CONSIDERATION DUE WAS PAID LATE BY THE ASS ESSEE TO THE SELLER. SINCE, THE ASSESSEE GOT SHOPS REGISTERE D IN HIS NAME AND LET-OUT TO DIFFERENT PERSONS, FOR THIS REASON, THE ASSESSEE HAD TO PAY INTEREST FOR DELAY IN PAYMENT OF SALE CO NSIDERATION OF THE SHOPS TO THE SELLER. THE ASSESSEE HAD TAKEN LOANS FROM ICICI BANK IN THE YEAR UNDER CONSIDERATION OF RS. 1,40,00,000/- AND UTILIZED THE ENTIRE AMOUNT TOWARD S PAYMENT OF OUTSTANDING LIABILITIES OF M/S. DEEPAK C OLONIZERS P. LIMITED. 4. AFTER CONSIDERING THE CHART FURNISHED BY THE ASSESS EE WITH RESPECT TO FLOOR-WISE BACK UP OF SHOPS PURCHAS ED BY THE ASSESSEE AND CORRESPONDING AMOUNT OF INTEREST PAID AND IN TURN RENT RECEIVED BY THE ASSESSEE, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAD PAID INTEREST TO THE SELLER M/S. D EEPAK COLONIZERS P.LIMITED TO THE TUNE OF RS. 12,41,232/- , AN -: 5: - 5 AMOUNT OF RS. 2,81,047/- AND RS. 11,95,966/- TOTALI NG TO RS. 14,77,013/- PAID TO THE ICICI BANK TOWARDS PURCHASE OF SHOP AT MANGAL CITY AND ALSO UTILIZED TOWARDS REPAYMENT OF OUTSTANDING DUES OF M/S. DEEPAK COLONIZES P. LIMITE D. THUS, TOTAL AMOUNT OF INTEREST PAID TO THE SELLER OF SHOP S AND TO THE ICICI BANK COMES TOTALING TO RS. 27,18,245/-. AS AG AINST THAT INTEREST THE ASSESSEE HAD RECEIVED RENTAL INCOME OF RS. 31,37,021/-. EVEN OTHERWISE INTEREST EXPENSES INCUR RED FOR THE PURPOSE OF BUSINESS IS REQUIRED TO BE ALLOWED U/S 3 6(1)(III) OF THE INCOME-TAX ACT, 1961. 5. THE DETAILED FINDING RECORDED BY THE LD.CIT(A) HAS NOT BEEN CONTROVERTED, ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR DELETING THE DISALLOWAN CE OF INTEREST OF RS. 34,21,192/-. 6. THE LD. CIT(A) HAS ALSO DELETED DISALLOWANCE OF RS. 11,91,058/- MADE BY THE ASSESSING OFFICER U/S 14A, BY OBSERVING THAT THE ASSESSEE HAD SHOWN INTEREST RECE IVED AMOUNTING TO RS. 40.01 LAKHS AND THE AMOUNT OF INTE REST PAID WAS ONLY RS. 20.35 LAKHS. SINCE NO BORROWED FUNDS U TILIZED FOR ANY TAX FREE INVESTMENT, THE DELETION OF DISALLOWAN CE MADE BY -: 6: - 6 THE ASSESSING OFFICER U/S 14A WAS PERFECTLY JUSTIFI ED. NO INTERFERENCE IS REQUIRED FOR THE DELETING OF RS. 11 ,91,058/- U/S 14A OF THE INCOME-TAX ACT, 1961. 7. THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS. 86,68,425/- ON ACCOUNT OF SALE OF SHARES OF M/S. DE EPAK COLONIZES P. LIMITED, BY OBSERVING THAT ON THE VERY SAME DAY I.E. ON 31.3.2007, THE ASSESSEE HAS SOLD THE SHARES OF SAME COMPANY AT RS. 141/-. THEREFORE, THE SALE OF SHARES BY ASSESSEE AT RS. 105/- WAS NOT ACCEPTED BY THE ASSES SING OFFICER, ACCORDINGLY, HE WORKED OUT THE VALUE OF SH ARES AS PER NET WORK OF THE COMPANY AND RE-WORK OUT CAPITAL GAI N BY APPLYING RATE OF RS. 141/- PER SHARE. 8. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- 4.1.5 THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME DECLARED CAPITAL GAIN ON SALE OF SHARES OF DEEPAK COLONIZERS P LIMITED AT RS. 8,55,579/-. HOWEVER, IN THE WRITTEN SUBMISSION AS FILED DURING THE -: 7: - 7 COURSE OF APPELLATE PROCEEDING, THE ASSESSEE HAD CLAIMED NET LOSS OF RS.12,37,425/-. SINCE, THE ASSESSEE HAS NOT REVISED ITS CLAIM BY WAY OF REVISED RETURN, THE CLAIM OF ADDITIONAL LOSS ON SALE OF SHARES DUE TO INTEREST CAPITALIZATION IS NOT ACCEPTABLE. THE ASSESSEE HIMSELF IN HIS REVISED STATEMENT AS FILED DURING THE COURSE OF ASSESSMENT PROCEEDING RECTIFYING THE COST OF SHARES, WRONGLY CONSIDERED AT THE TIME OF FILING OF THE ORIGINAL RETURN, DECLARED LONG TERM CAPITAL GAIN OF RS. 1,99,653/- AND SHORT TERM CAPITAL GAIN OF RS. 17,62,575/- TOTALING TO RS. 19,62,228/- AS AGAINST CAPITAL GAIN OF RS. 8,55,579/- DECLARED IN RESPECT OF THE SALE OF SHARES OF DEEPAK COLONIZERS P. LIMITED. THE ASSESSEE IN THE APPELLATE PROCEEDING POINTED OUT THAT DUE TO PROPER APPLICATION OF INDEXED COST THE AMOUNT, OF LONG TERM CAPITAL GAIN -: 8: - 8 REDUCED FROM RS. 1,99,653/- TO RS. 1,50,506/-. ACCORDINGLY, THE AO IS DIRECTED TO ADOPT THE AMOUNT OF LONG TERM CAPITAL GAIN OF RS. L,50,506/- AND SHORT TERM CAPITAL GAIN OF RS. 17,62,575/- TOTALING TO RS. 19,13,081/- IN PLACE OF CAPITAL GAIN OF RS. 8,55,579/- AS DECLARED BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME. THUS, ADDITION TO THE EXTENT OF RS. 10,57,502/- [ I.E. 19,13,081 - 8,55,579] IS CONFIRMED. THE BALANCE AMOUNT OF RS. 76,10,923/- STANDS DELETED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE WAS HOLDING SHARES OF DIFFERENT COMPANIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD SHARES OF DEEPAK COLONIZES PRIVATE LIMITED AT DIFFERENT RATES IN SHORT SPAN OF TIME, WHICH IS AS UNDER : -: 9: - 9 S.NO. DATE OF SALE NO. OF SHARES RATE OF SHARE (RS.) 1 01-01-2007 41,070 112 2 31-03-2007 158,745 105 3 31 - 032007 54000 141 253815 10. IT IS CLEAR FROM THE ABOVE THAT ON THE VERY SAME DA Y, SHARES OF DEEPAK COLONIZES PRIVATE LIMITED WERE SOL D AT PRICE, WHICH VARIED WIDELY AND NO REASON WAS ADVANCED BY T HE ASSESSEE FOR SALE OF 1,58,745 SHARES OF SAME COMPAN Y AT RS. 105/- AS AGAINST PRICE OF RS. 141/- CHARGED IN RESP ECT OF SALE OF 54,000 SHARES ON THE VERY SAME DATE. AS M/S. DEE PAK COLONIZER WAS A PRIVATE LIMITED COMPANY, ITS SHARES WERE NOT QUOTED ON THE STOCK EXCHANGE. ACCORDINGLY, ON THE BASIS OF AUDITED BALANCE SHEET OF THE ASSESSEE, THE ASSESSIN G OFFICER HAD TAKEN THE EQUITY AND RESERVES AND WORKED OUT TH E AVERAGE RATE OF SHARES AT RS. 143.50 ON THE BASIS OF NET WO RTH OF THE COMPANY AFTER HAVING THE FOLLOWING OBSERVATIONS :- 1.5 THE BALANCE SHEET OF M/S. DEEPAK COLONIZERS P.LTD. HAS BEEN PERUSED. IT REFLECTS PAID-UP CAPITA L OF -: 10: - 10 RS. 7,51,33,000/- COMPRISING OF 751330 SHARES. RESERVES & PROFIT & LOSS A/C STAND AT RS. 3,26,76,247/-. THE AGGREGATE OF ABOVE TWO FIGURES W ORK OUT TO RS. 10,78,09,247/-, WHICH IS OBVIOUSLY THE N ET WORTH OF THE COMPANY AS ON 31.03.2007, ON WHICH DAT E THE SHARES HAVE BEEN SOLD AS REFLECTED UNDER THE HE AD SHORT TERM CAPITAL GAIN. THE VALUE OF ONE SHARE OF THE COMPANY WOULD BE RS. 143.50 (10,78,09,247 / 751330) . THEREFORE, THE FAIR MARKET VALUE OF THE SHARES IS R S. 143.50 AS ON THIS DATE. ACCORDINGLY, THE RATE OF RS . 141 PER SHARE, AT WHICH THE ASSESSEE HAS SOLD HIS PART HOLDING, IS CONSIDERED REASONABLE AND ADOPTED UNANIMOUSLY FOR ALL THE SHARES SOLD ON 31.03.2007. RESULTANT CAPITAL GAIN IS WORKED OUT AS UNDER: TOTAL SHARES SOLD 253815 LESS: SHARES CONSIDERED IN LONG TERM CAPITAL GAIN 42390 NO. OF SHARES SOLD CONSIDERED IN SHORT TERM CAP.GAI N= 211425 SALE PRICE OF ABOVE SHARES @ RS. 141 PER SHARE RS. 2,98,10,925/- LESS: COST OF ACQUISITION AT BOOK VALUE : RS. 2,1 1,42,500/- SHORT TERM CAPITAL GAIN : RS. 86,68,425/- 1. -: 11: - 11 11. IT IS CLEAR FROM THE ABOVE CALCULATION OF ASSESSING OFFICER THAT HE HAS WORKED OUT VALUE OF SHARES AT R S. 143.50 AS PER THE NET WORTH OF M/S. DEEPAK COLONIZES PRIVA TE LIMITED AS ON 31.3.2007. SINCE ON THE VERY SAME DATE I.E. 3 1.3.2007, THE ASSESSEE HIMSELF HAD SOLD 54,000 SHARES AT RS. 141 PER SHARE, THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIE D IN IGNORING THE SALE PRICE OF RS. 105 SHOWN BY ASSESSEE FOR COM PUTING CAPITAL GAINS, AND TAKING THE FAIR MARKET VALUE OF 1,58,745 SHARES SOLD ON 31.3.2007 AT RS. 141. NO VALID REASO N WAS ASSIGNED BY CIT(A) FOR IGNORING THE VALUE OF SHARES WORKED OUT BY ASSESSING OFFICER ON THE BASIS OF NET WORTH OF D EEPAK COLONIZER PRIVATE LIMITED AS PER ITS AUDITED ACCOUN TS AS ON 31.3.2007. WE ARE, THEREFORE, INCLINED TO AGREE WIT H THE CONTENTION OF LD. CIT DR, SHRI SAXENA THAT CIT(A) WAS NOT JUSTIFIED IN DELETING SHORT TERM CAPITAL GAINS OF R S. 76,10,923/- EARNED ON SALE OF 1,58,745 SHARES OF M/S. DEEPAK CO LONIZERS. ACCORDINGLY, WE REVERSE THE ORDER OF CIT(A) AND UPH OLD THE ADDITION MADE BY THE ASSESSING OFFICER. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED IN PART. -: 12: - 12 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2012. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30 TH AUGUST, 2012. CPU* 2930
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