ITO, Kota V. SMT. MEENA JAIN, Kota

ITA 1144/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82808 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: S L PODDAR
• Keywords: Reopening of assessment; Opportunity of being heard; Additional evidence; Cost of acquisition; Valuation report; Assessment record; Reassessment proceedings
• Section: 147; 148; 139

Judgement Text

ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 1144/JP/2011 ASSESSMENT YEAR: 2007-08 PAN : ADFPJ 2098 H THE ITO VS. SMT. MEENA JAIN WARD- 2(1) JAIN BHAWAN, STATION ROAD KOTA KOTA (APPELLANT) (RESPONDENT) C.O. NO. 19/JP/2012 (ARISING OUT OF ITA NO. 1144/JP/2011) ASSESSMENT YEAR: 2007-08 PAN : ADFPJ 2098 H SMT. MEENA JAIN VS. THE ITO JAIN BHAWAN, STATION ROAD WARD- 2(1) KOTA KOTA (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI S.L. PODDAR DATE OF HEARING: 03-09-2014 DATE OF PRONOUNCEMENT: 31-10-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 28-10-2011, ASSESSEE HAS ALSO F ILED THE CROSS OBJECTION. ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 2 2.1 THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN:- (I) ALLOWING DEDUCTION OF RS. 17.82 LACS TO ASSESSE E FOR THE PURPOSE OF CALCULATING SHORT TERM CAPITAL G AIN ON SALE OF PLOT OF LAND EVEN THOUGH THE ASSESSEE HAS FAILED TO PROVE THAT SHE IS UNDER ANY CONTRACTUAL OBLIGATION TO INCUR TH E EXPENDITURE AND THE QUANTUM OF THE EXPENDITURE WILL BE RS. 17.8 2 LACS. (II) COMPUTING THE COST OF CONSTRUCTION PROPOSED AT RS. 17,81,721/- ONLY ON THE BASIS OF VALUATION REPORT S UBMITTED BY THE ASSESSEE AND WITHOUT GIVING ANY OPPORTUNITY TO THE DEPARTMENT FOR REBUTTING IT. 3.1 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN HE R C.O. (I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION U/S 1 38 OF THE I.T. ACT, 1961 BY THE ASSESSING OFFICER WHICH IS PRIMA F ACIE ILLEGAL AND AVOID AB-INITIO. (II) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CALCULATING THE SHORT TERM CAPITAL INCOME WITHOUT COMPLETING THE SALE TRANSACTION BY T HE ASSESSEE AS NO POSSESSION WAS GIVEN TO THE BUYER DURING THE YEAR UNDER CONSIDERATION AND THE SALE WAS ONLY CONDITIONAL SAL E WITHOUT RECEIVING THE FULL VALUE OF CONSIDERATION (III) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 21,18,279/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN WHICH HAS NOT BEEN EARNED BY THE ASSESSEE DURING THE YEAR UND ER CONSIDERATION. ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 3 4.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HER REGULAR RETURN OF INCOME U/S 139 OF THE ACT. IN ANOTHER CASE OF ONE S HRI PARAM JEET SINGH, IT WAS FOUND THAT THE ASSESSEE HAD SOLD A PLOT TO HIM FOR AN AMOUNT OF RS. 1.10 CRORES AS SOME RELEVANT ACCOUNTING ENTRIES WERE FOU ND IN HIS BOOKS. THE AO OBSERVED THAT THE ASSESSEE HAD NOT DISCLOSED ANY CA PITAL GAIN THEREON IN HER RETURN. CONSEQUENTLY A NOTICE U/S 147 OF THE ACT WA S ISSUED IN THIS BEHALF., IN RESPONSE TO NOTICE U/S 143(2) OF THE ACT, THE ASSE SSEE EXPLAINED THAT IN FACT NO CAPITAL GAINS ACCRUED IN THIS YEAR AS SALE WAS N OT COMPLETE. IT WAS FURTHER EXPLAINED THAT SHE HAD PURCHASED A PROPERTY FROM 8 CO-OWNERS IN WHICH A GOVT. SCHOOL WAS BEING RUN. THE PROPERTY WAS PURCHA SED WITH AN UNDERTAKING FROM THE SCHOOL AUTHORITIES THAT THE PR OPERTY WILL BE VACATED AFTER AV PIECE OF LAND WAS ACQUIRED BY THEM FOR THE RELOCATION OF THE SCHOOL. THE HIGHER EDUCATIONAL AUTHORITIES DID NOT AGREE WI TH THESE CONDITIONS. ON 18-09-2006, A PART OF LAND ADMEASURING 10820 SQ.FT WAS DONATED BY THE ASSESSEE TO THE SCHOOL WITH AN EXPECTATION THAT REM AINING LAND WILL BE VACATED BY THE EDUCATIONAL AUTHORITIES WHICH HAS NO T BEEN DONE. IN THE MEANWHILE, THE ASSESSEE ENTERED INTO A PURPORTED AG REEMENT TO SALE THE LAND FOR AN AMOUNT OF RS. 1.10 CRORES TO SHRI PARAM JEET SINGH, AN AMOUNT OF RS. 10.00 LACS WAS RECEIVED AS ADVANCE AND REMAINING AM OUNT OF RS. 1.00 CRORE WAS TO BE PAID LATER AT THE TIME OF DELIVERING POSS ESSION. THE SALE WAS ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 4 CONDITIONAL ON VACANT POSITION OF PROPERTY WHICH R EMAINED TO BE COMPLIED WITH DUE TO NON-VACATION OF THE LAND BY THE EDUCATI ONAL AUTHORITIES. THE ASSESSEE FURTHER SUBMITTED THAT SHE WAS READY TO PA Y THE TAX AS AND WHEN THE OUTSTANDING AMOUNT IS RECEIVED AND POSSESSION OF TH E PROPERTY IS HANDED OVER TO SHRI PARAM JEET SINGH IN PURSUANCE OF THE C ONDITIONAL SALE AGREEMENT. THUS THE ASSESSEE'S CONTENTION WAS TO TH E EFFECT THAT AS PER HER OPINION THE SALE WAS NOT COMPLETE AND THE CAPITAL G AINS WERE NOT OFFERED. HOWEVER, SHE WAS WILL TO PAY TAX ON COMPLETION OF T RANSACTION THEREOF. THE AO HOWEVER, CONFIRMED THE ADDITION BY FOLLOWING OBS ERVATIONS. IT IS CLEAR FROM THE ABOVE FACTS THAT THE ASSESSE E HAS RECEIVED THE ENTIRE VALUE OF SALES CONSIDERATION OF THE PROPERTY AND HANDED OVER THE POSSESSION OF THE PROPERTY TO T HE PURCHASER, CONSIDERING THE ABOVE FACTS THE SHORT TE RM CAPITAL GAIN IS CALCULATED AS UNDER:- 1. SALES CONSIDERATION RS. 1,10,00,000/- LESS: COST OF ACQUISITION RS. 71,00,000/- II. SHORT TERM CAPITAL GAIN RS. 39,00,000/- 4.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE THE ASSESSEE RAISED ALTERNATIVE GROUNDS AS UNDER:- 1. THAT THE LD. AO HAS GROSSLY ERRED IN MAKING THE ASSESSMENT ON TOTAL INCOME OF RS. 39,20,710/- A S AGAINST RETURNED INCOME OF RS. 20,710/- THEREBY MAKING A TO TAL ADDITION OF RS. 39,00,000/- IN THE TOTAL RETURNED INCOME. ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 5 2. THAT THE LD. AO HAS GROSSLY ERRED IN ASSESSING THE TOTAL SHORT TERM CAPITAL GAINS AT RS. 39,00,000/-IN THE CIRCUMSTANCES OF THE CASE. THE ASSESSEE FURTHER SUBMITTED AS UNDER ALONG WITH VALUATION REPORT. THE APPELLANT DESIRES TO SUBMIT COMMON SUBMISSION S FOR BOTH OF THE ABOVE GROUNDS OF APPEAL AND STATE T HAT THE LD. AO HAS TAXED THE ENTIRE AMOUNT OF RS. 39,00,000/- A S SHORT TERM GAIN FORGETTING THE FACT THAT THE SELLER IS U NDER AN OBLIGATION TO THE FOLLOWING. 1. BOUNDARY WALL MEASURING 200 FT X 8FT X 1.5 FT. 2. PRINCIPALS ROOM 3. STAFF ROOM AND OFFICE 4. TOILETS 5. PARTITION WALL 6. REGISTRATION EXPENSES. THE APPELLANT HAS BROUGHT THIS FACT TO THE NOTICE O F THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE LD. AO HAS GROSSLY FAILED TO TAKE COGNIZANCE OF THE SAME W HICH WAS A VERY VITAL ISSUE FOR MAKING THE ASSESSMENT. THE APPELLANT HAS GOT THE VALUATION DONE AND HAS OBTAINED THE VALUATION REPORT WHICH IS ENCLOSED HER EWITH. THE APPELLANT THEREFORE, BEGS TO SUBMIT THAT THE NE T CONSIDERATION SHOULD BE ASCERTAINED ONLY AFTER REDU CING THE COST OF THE WORKS WHICH HAVE BEEN AGREED TO BE DONE AND WHICH IS A PART OF THE CONTRACT. THE APPELLANT HAS BEEN TRYING HER BEST TO GET THE C ONTRACT COMPLETE BUT THE SCHOOL AUTHORITIES HAVE NEVER COOP ERATED WITH THE APPELLANT IN THE AGREED TERMS AND CONDITIONS AN D FULFILLMENT THEREOF. ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 6 4.3 THE LD. CIT(A) PARTLY ALLOWED THE APPEAL BY FOL LOWING OBSERVATIONS. ..(D) THE BALANCE PAYMENT OF RS. 1.00 CRORE IS STILL OUTSTANDING AND WILL BE RECEIVED WHEN THE VAC ANT POSSESSION OF THE PROPERTY WOULD BE HANDED OVER TO SHRI PARAMJIT SINGH. (E) THE ASSESSEE WAS REQUIRED TO TRANSFER A PIECE OF LAND TO THE SCHOOLS AND CARRY OUT SOME CONSTRUCTION WORK TO GET THE POSSESSION VACATED. TH IS CONTENTION OF ASSESSEE IS ACCEPTED ON THE BASIS OF FACTS THAT AS PER THE REPORT OF THE INSPECTOR AREA OF 172 X200 WAS TRANSFERRED TO THE GOVT. AND THE SCHOOL STOP PA YING RENT TO THE OWNERS, HOWEVER, POSSESSION IS STILL NO T VACATED IN RESPECT OF REMAINING LAND. THIS SHOWS T HAT THE SCHOOL AUTHORITIES WANT SOMETHING MORE BEFORE THE POSSESSION IS VACATED. THE ASSESSEE SUBMITTED A VALUATION REPORT W.R.T. THE WORK TO BE DONE TO GET THE POSSESSION VACATED. THE VALUE OF THIS WORK WAS SHOWN AT RS. 19,98,000/- BY TAKING BSR INDEX OF 2009. IN MY VIEW AS THE TRANSFER TOOK PLACED FINANCIAL YEAR 2006-07, THE VALUE OF THIS WO RK IS TO BE INDEXED ACCORDINGLY, THE SAME COMES TO RS. 17,81,721/- ROUNDED OFF TO RS. 17,82,000/- 4.4 AGGRIEVED, BOTH THE PARTIES ARE BEFORE US. 4.5 THE LD. COUNSEL FOR THE ASSESSEE ADVERTING TO T HE C.O. WHICH CHALLENGES THE VALIDITY OF THE REASSESSMENT PROCEED INGS CONTENDS THAT :- (I) HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VED & CO. 302 ITR 328 HAS HELD THAT NOTICE U/S 148 CANNOT BE ISSUED WHEN THE ORIGINAL RETURN OF THE ASSESSEE IS PENDING AND EVEN THE ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 7 ORDER U/S 143(1) OF THE ACT WAS NOT ISSUED. SUCH RE ASSESSMENT IS BAD IN LAW. (II) THE REASONS OF REOPENING WERE NOT SUPPLIED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S DESPITE SPECIFIC REQUEST IN THIS BEHALF. IN VIEW OF THE DEC ISION OF HON'BLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS ( INDIA) LTD. VS. ITO, 259 ITR 19, A VALID REASSESSMENT CANN OT BE MADE UNLESS THE REASONS THEREOF ARE SUPPLIED TO THE ASSE SSEE THE OBJECTIONS RAISED IN THIS BEHALF FILED BEFORE THE A O IS DECIDED . THUS THE MANDATE OF HONBLE SUPREME COURT IN THE CA SE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO (SUPRA) REMAIN S UNCOMPLIED WITH. (III) REASONS AS INDICATED BY THE AO ARE TOTALLY VA GUE AND DO NOT CONFORM TO THE COURT MANDATES IN THIS BEHALF AS THEY DO NOT MAKE OUT A SPECIFIC CASE FOR ESCAPEMENT OF ANY INCO ME. THE LD. COUNSEL FOR THE ASSESSEE THUS CONTENDS THAT THOUGH ALL THESE GROUNDS WERE TAKEN BEFORE THE LD. CIT(A) BUT THEY HAVE NOT BEEN PROPERLY DECIDED INASMUCH AS REASSESSMENT PROCEEDINGS OUGHT TO HAVE BEEN RESTORED BACK TO THE FILE OF THE AO TO COMPLY WITH THE DECISION OF H ON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO ( SUPRA). ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 8 4.6 THE LD. DR ON THE OTHER HAND CONTENDS THAT THER E IS NO NECESSITY OF AN ORDER U/S 143(1) AS IT IS MERELY PROCESSING OF RETU RN. THE PROCESSING ORDER MUST BE AVAILABLE WITH THE ASSESSMENT RECORD. 5.1 APROPOS SECOND ISSUE RAISED BY THE LD. COUNSEL FOR THE ASSESSEE, IT IS CONTENDED THAT IT IS NOT ASCERTAINABLE WHETHER THE COPY OF THE REASONS WAS APPLIED BY THE ASSESSE AND WAS SUPPLIED TO THE ASSE SSEE OR NOT AND ANY OBJECTIONS IN THIS BEHALF WAS FILED BY THE ASSESSEE . 5.2 APROPOS REVENUES APPEAL, IT IS CONTENDED THAT LD. CIT(A) ERRED IN RELYING ON VALUATION REPORT WHICH WAS SUPPLIED BY T HE ASSESSEE FOR THE FIRST TIME BEFORE HIM AND THERE WAS NO JUSTIFICATION IN G IVING RELIEF OF RS. 17.82 LACS TO THE ASSESSEE ON ITS BASIS WITHOUT CALLING F OR REMAND REPORT FROM THE AO. THUS THE VALUATION REPORT HAS BEEN ADMITTED IN VIOLATION OF RULE 46A OF INCOME TAX RULES AND THE AO HAS NOT BEEN GIVEN ADEQ UATE OPPORTUNITY OF BEING HEARD IN THIS BEHALF. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO (SUPRA) HAS SQUARE LY HELD THAT REASONS OF REOPENING OF ASSESSMENT MUST BE SUPPLIED TO THE ASS ESSEE AND OBJECTIONS, IF ANY, FILED BY IT SHOULD BE DECIDED BY THE AO BEFORE COMMENCING THE REASSESSMENT PROCEEDINGS. THUS IN THE ABSENCE OF A NY EVIDENCE ABOUT ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 9 PROVIDING OF COPY OF THE REASONS, IT WILL NOT BE PO SSIBLE FOR US TO ADJUDICATE THE FROUND OF THE ASSESSEE ABOUT THE COMPLIANCE OF HONBLE SUPREME COURT JUDGMENT IN THE CASE OF G K N DRIVESHAFT (SUPRA). 5.4 IN REVENUES APPEAL ALSO, THE ACTION OF THE LD. CIT(A) IS CHALLENGED FOR ENTERTAINING THE ADDITIONAL EVIDENCE I.E. VALUA TION REPORT WITHOUT FOLLOWING THE DUE PROCESS OF LAW U/R 46A AND GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSE. THE LD. COUNSEL FOR THE ASSES SEE PROPOSED THAT IN THESE CIRCUMSTANCES IF THE BENCH SO FINDS APPROPRIATE, TH E ASSESSEE HAS NO OBJECTION IF THE REASSESSMENT PROCEEDINGS ARE SET A SIDE AND THE MATTER IS RESTORED BACK TO THE FILE OF THE AO TO DECIDE THE S AME AFRESH BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD ON THESE ISSU ES. THUS IN VIEW OF THE FOREGOING FACTS AND CIRCUMSTANCES, IT IS TO BE ASCE RTAINED FROM THE RECORD WHETHER THE REASONS WERE PROVIDED TO THE ASSESSEE A ND ANY OBJECTION IN THIS BEHALF WAS FILED BY THE ASSESSEE HAS BEEN DECIDED O R NOT. BESIDESAS THE VALIDITY OF THE REASONS IS TO BE EXAMINED ALONG WIT H THE MERITS. BOTH THE PARTIES ARE AGGRIEVED ON MERITS OF PART RETENTION O F THE ADDITION AND PART RELIEF OF THE ADDITION. IN CONSIDERATION OF THE ENT IRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND MERIT IN THE PRO POSITION OF THE LD. COUNSEL FOR THE ASSESSEE TO SET ASIDE THE MATTER BACK TO TH E FILE OF THE AO TO DECIDE THESE ISSUES IN RESPECT OF THE VALIDITY OF 148 PRO CEEDINGS AND MERITS OF THE ITA NO. 1144/JP/2011 ITO , WARD- 2(1), KOTA VS. SMT. MEENA JA IN, KOTA 10 CASE DENVO AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS THE APPEAL OF THE REVENUE AND C.O. O F THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6.0 IN THE RESULT, THE APPEAL OF THE REVENUE AND C. O. OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 -10-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 31 ST OCT. 2014 *MISHRA COPY FORWARDED TO:- 1.THE ITO, WARD- 2(1), KOTA 2. SMT. MEENA JAIN, KOTA 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 1144/JP/2011) AR ITAT, JAIPUR