Virgo Properties P Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1208/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3946 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINIVASAN JT
• Assessee Lawyers: BALASUBRAMANIAN
• Keywords: Capital asset; Deemed to accrue or arise in india; Revised return
• Section: 143(3); 115JB; 139(5); 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI , ! ' . #$ , % &' ( BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NO.1208/MDS/2017 % ) *) / ASSESSMENT YEAR : 2011-12 VIRGO PROPERTIES PVT. LTD. NEW NO.5, OLD NO.3, PLAZA HOUSE, THIRUMURTHY STREET, T.NAGAR, CHENNAI 600 017. [PAN: AABCV 9182A] VS. ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2), CHENNAI 600 034. ( /APPELLANT ) ( / RESPONDENT ) +, . / / APPELLANT BY : SHRI BALASUBRAMANIAN, ADVOCATE 01+, . / / RESPONDENT BY : SHRI SRINIVASAN, JT. CIT . 2 / DATE OF HEARING : 13.07.2017 3* . 2 / DATE OF PRONOUNCEMENT : 31.07.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT OF T HE ORDER DATED 27.03.2017 BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHE NNAI (CIT(A) FOR SHORT), DISMISSING THE ASSESSEES APPEAL CONTESTING THE ORDER U/S. 154 DATED 06.10.2015 FOR ASSESSMENT YEAR (AY) 2011-12. 2. THE SOLE ISSUE ARISING IN THE INSTANT APPEAL IS THE MAINTAINABILITY OF THE ORDER U/S. 154 SEEKING TO ASSESS THE BOOK PROFIT OF THE ASSESSEE AT THE CORRECT 2 ITA NO. 1208/MDS/2017 (AY 2011-12) VIRGO PROPERTIES PVT. LTD. V. ASST . CIT FIGURE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR ON 30.09.2011, DISCLOSING REGULAR INCOME AT . 1,42,43,520/- AND BOOK PROFIT AT . 506,04,764/-. THE SAME WAS SUBJECT TO THE VERIFICATION PROCEDURE UNDER THE ACT, ASSESSING REGULAR INCOME AT . 158.66 LACS VIDE ORDER U/S. 143(3) DATED 19.03.20 14. THIS WAS FOLLOWED BY A NOTICE U/S. 154(3) BY THE ASSESSI NG OFFICER (AO) DATED 21.09.2015 (SERVED ON 23/9/2015), STATING THAT THE BOOK PROFIT HAD BEEN WRONGLY ASSESSED AT . 64,64,764/-, AND HAD TO BE AS PER THE PROFIT AND LOSS ACCOUNT, DULY AUDITED, I.E., AT . 506,04,764/-. THE BOOK PROFIT WAS ACCORDINGLY ASS ESSED AT . 506.05 LACS, AND CONFIRMED IN APPEAL FOR THE SAME R EASON. 3. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE (AR ) WOULD, TAKING US THROUGH THE ASSESSMENT ORDER U/S. 143(3), ATTEMPT T O EXHIBIT THAT BOOK PROFIT HAD IN FACT NOT BEEN ASSESSED AT ALL, AND THAT THE ASSE SSMENT WAS LIMITED TO REGULAR INCOME (AT . 158.66 LACS) ONLY. HOW COULD, THEN, THE SAME BE RECTIFIED ? IT IS ONLY WHERE AN ASSESSMENT IS MADE THAT A MISTAKE IN ARRIVING AT OR COMPUTING THE CORRECT FIGURE COULD AT ALL BE MADE. ON BEING ASKED OF THE BASIS OF THE FIGURE OF . 64.65 LACS, AS STATED IN THE NOTICE U/S. 154(3), HE EXPLAINED THAT THOUGH THE ASSESSEE HAD INITIALLY RETURNED THE BOOK PROFIT AT . 506.05 LACS, I.E., AS PER THE PROFIT AND LOSS ACCOUNT, IT WAS SUBSEQUENTLY REVISE D TO . 64.65 LACS PER A RETURN FILED ON 27.06.2012 BY MAKING SOME ADJUSTMENTS, AND TOWARD WHICH HE WOULD TAKE US TO PARA 1 OF THE ASSESSMENT ORDER, BEARING REFERENCE TO THE FILING OF THE REVISED RETURN. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD SUBMIT THAT THE AO HAD BROUGHT THE CORRECT AMOUNT OF BOOK PROFIT TO TAX, AND THAT A MISTAKE U/S. 154 WOULD INCLUDE AN OMISSION IN ADOPTING THE RIGHT FIGURE, EVEN AS HELD BY THE LD. CIT(A). THE AR WOULD, IN REJOINDER, PLACE RELIA NCE ON THE DECISIONS IN THE CASE OF CIT V. HERO CYCLES [1997] 94 TAXMAN 271 (SC) AND CIT V. O.RM.SM.SV.SEVUGAN [1948] 16 ITR 59 (MAD), TO PRESS HOME THE POINT THA T 3 ITA NO. 1208/MDS/2017 (AY 2011-12) VIRGO PROPERTIES PVT. LTD. V. ASST . CIT WHERE A POINT OF LAW OR OF FACT, HAS NOT BEEN EXA MINED AT ALL, THE SAME CANNOT BE REGARDED AS A MISTAKE APPARENT FROM RECORD. 4. WE HAVE HEARD THE PARTIES, PERUSED THE MATERIAL ON RECORD, AND GIVEN A CAREFUL CONSIDERATION TO THE MATTER. THE PRIMARY FACTS ARE NOT IN DISPUTE. THE ASSESSEE PER ITS ORIGINAL RETURN U/S. 139(1) RETURNED BOOK PROFIT AS PER PROFIT AND LOSS ACCOUNT, I.E., AT . 506,04,764/-. THE SAME WAS REVISED U/S. 139(4) TO . 64,64,764/- BY DELETING THE PROFIT OF . 441.40 LACS ON THE SALE OF SHARES CREDITED TO THE PROFIT AND LOSS ACCOUNT, DULY AUDITED. IT IS THIS PROFIT THAT THE R EVENUE HAS SUBJECT TO BOOK PROFIT TAX THROUGH RECOURSE TO S. 154. THIS IS BORNE OUT B Y THE NOTICE U/S. 154(3) DATED 29/1/2015, THE CONTENTS OF WHICH ARE EXTRACTED IN T HE STATEMENT OF FACTS FORMING PART OF THE APPEAL BEFORE THE FIRST APPELLA TE AUTHORITY. THE AO MADE THE ADJUSTMENT IN THE ABSENCE OF ANY OBJECTION THERETO RAISED BY THE ASSESSEE BEFORE HIM, WHILE THE LD. CIT(A) NOT ONLY FOUND THE SAME T O BE IN ORDER, I.E., IN ACCORDANCE WITH THE PROVISION OF S. 115-JB, BUT ALS O NOTED, AGAIN, AN ABSENCE OF ANY OBJECTION (I.E., ON MERITS OF THE IMPUGNED ADJU STMENT) BEFORE HIM. IN OTHER WORDS, NO CASE AGAINST THE ADJUSTMENT ON MERITS HAS BEEN MADE AT ANY STAGE. COMING TO THE ASSESSEES PLEADINGS BEFORE US, THE INCOME TAX COMPUTATION FORM DATED 19/3/2014 (COPY ON RECORD) ENCLOSED ALON G WITH THE ASSESSMENT ORDER, NOTED AS SO THEREIN, FORMS PART OF THE ASSES SMENT ORDER ITSELF, AS EXPLAINED IN KALYANKUMAR RAY V. CIT [1991] 191 ITR 634 (SC). THE SAME VIDE PARA 17 CLEARLY STATES OF THE DEEMED INCOME BY WAY OF BOOK PROFIT AT . 64,64,764/- . IT IS THEREFORE INCORRECT TO SAY, AS DOES THE ASSESSEE BEFORE US, THAT THERE HAS BEEN NO ASSESSMENT OF BOOK PROFIT IN THE FIRST INSTANCE, I.E., U/S. 143(3) DATED 19.03.2014. THE RELIANCE BY THE ASSESSEE ON THE CIT ED DECISIONS IS THUS MISPLACED. IN FACT, EVEN OTHERWISE, THE WORD MISTA KE, WHICH IS A COMPOSITE OF THE WORDS MIS AND TAKE, IS A WORD OF WIDE AND I NDEFINITE IMPORT, SO THAT A 4 ITA NO. 1208/MDS/2017 (AY 2011-12) VIRGO PROPERTIES PVT. LTD. V. ASST . CIT MISTAKE U/S. 154 WOULD INCLUDE AN OMISSION ON THE P ART OF AN AUTHORITY TO DO WHAT IT WAS BOUND TO DO, I.E., TO ASSESS THE BOOK P ROFIT IN VIEW OF THE ASSESSEE HAVING RETURNED THE SAME AND ITS PROFIT AND LOSS AC COUNT DISCLOSING A NET PROFIT. THE SAME SURELY CANNOT BE EQUATED WITH THE NON-EXAM INATION OF ANY ASPECT IN ASSESSMENT, AND WHICH IS SUBSEQUENTLY SOUGHT TO BE CARRIED UNDER SEC. 154. THE NEXT QUESTION IS IF THE AO, IN VIEW OF THE LIMI TED PURVIEW OF S. 154, EXCEEDED HIS JURISDICTION IN ALTERING THE ASSESSED FIGURE OF . 64,64,764/- TO . 506,04,764/-, I.E., BY INCLUDING THE PROFIT ON THE SALE OF SHARES. WITHOUT DOUBT, DEBATABLE ISSUES, EITHER OF FACT OR OF LAW, ARE OUT SIDE THE AMBIT OF S. 154, SO THAT ALTERATION OF THE BOOK PROFIT BY THE AO U/S. 154 CO ULD ONLY BE SUBJECT TO IT BEING NOT A DEBATABLE OR A CONTENTIOUS ISSUE. THAT IS, IS ONLY A MISTAKE, APPARENT FROM RECORD, ON THE PART OF THE AO IN ASSESSING AT THE S AID FIGURE. IN THIS REGARD, IT IS WELL SETTLED THAT S. 115-JB IS A SELF CONTAINED COD E, AND ONLY THE ADJUSTMENTS DELINEATED UNDER EXPLANATION-1 TO S. 115JB COULD BE MADE TO THE NET PROFIT AS DISCLOSED BY THE PROFIT AND LOSS ACCOUNT ADOPTED BY THE COMPANY (IN ITS ANNUAL GENERAL MEETING) TO ARRIVE AT THE BOOK PROFIT U/S. 115JB. REFERENCE FOR THIS MAY BE MADE TO THE DECISIONS IN APOLLO TYRES LTD. V. CIT [2002] 255 ITR 273 (SC) AND AJANTA PHARMA LTD. V. CIT [2010] 327 ITR 305 (SC). THE ONLY THING THEREFORE THAT NEEDS TO BE SEEN IN THIS REGARD IS I F THE COMPANY, IN REDUCING THE PROFIT ON THE SALE OF SHARES, HAS FOLLOWED ANY OF T HE SPECIFIED ADJUSTMENTS UNDER EXPLANATION 1 TO S. 115JB. WE FIND THAT NONE OF THE SPECIFIED AD JUSTMENTS CORRESPOND TO THE SAID ADJUSTMENT, MADE BY THE ASSE SSEE TO THE NET PROFIT PER THE REVISED RETURN, AND NEITHER HAS THE ASSESSEE STATED ANY AT ANY STAGE. THIS, RATHER, RAISES A QUESTION ON THE VALIDITY OF THE SAID REVIS ION, WHICH U/S. 139(5) COULD ONLY BE RECTIFY AN OMISSION OR WRONG STATEMENT IN T HE ORIGINAL RETURN, SO THAT IT IS INCUMBENT ON THE ASSESSEE TO STATE WHAT OMISSION OR WRONG STATEMENT INFORMS ITS REVISION, I.E., ITS BASIS, AND WHICH IT HAS ABYSMA LLY FAILED TO. CONTINUING FURTHER, CAPITAL GAINS ON TRANSACTIONS IN SECURITIES HAS BEE N SPECIFIED FOR REDUCTION (FROM 5 ITA NO. 1208/MDS/2017 (AY 2011-12) VIRGO PROPERTIES PVT. LTD. V. ASST . CIT NET PROFIT) ONLY IN THE CASE OF A FOREIGN COMPANY ( CL. (IID) TO EXPLANATION 1 , INSERTED W.E.F. 01/4/2016). THE SAME BY ITSELF IMPL IES, I.E., IF THERE WERE TO BE ANY DOUBT WHATSOEVER IN THE MATTER, THAT THE CAPITA L GAINS FOR AN ASSESSEE, NOT BEING A FOREIGN COMPANY, BEING NOT SPECIFICALLY PRO VIDED, IS NOT TO BE REDUCED (FROM THE NET PROFIT) IN ARRIVING AT THE BOOK PROFI T. THUS, EVEN IF THE SHARES SOLD ARE HELD AS A CAPITAL ASSET WHICH DOES NOT APPEAR TO BE THE CASE ON THE BASIS OF THE ASSESSMENT ORDER, SO THAT THE SURPLUS ON THEIR SALE IS A CAPITAL GAIN TO THE ASSESSEE, THE PROFIT ON THE SAID SALE CANNOT BE RED UCED. WE ACCORDINGLY HAVE NO HESITATION IN CONFIRMING THE IMPUGNED ORDER AND, THEREBY, THE RECTIFICATION BY THE AO. WE DECIDE ACC ORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED ON JULY 31, 2017 AT CHENNAI . SD/- SD/- ( ! ' . #$ ) (DUVVURU RL REDDY) % /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED, JULY 31, 2017. EDN 5 . 0%267 87*2 /COPY TO: 1. +, /APPELLANT 2. 01+, /RESPONDENT 3. 92 ( )/CIT(A) 4. 92 /CIT 5. 7:; 0%2% /DR 6. ;$) < /GF