Arul Industries, CHENNAI V. ACIT, CHENNAI

ITA 1408/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81173 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DURGESH SUMROTT
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Search and seizure; Reassessment proceedings
• Section: 143(3); 50C; 153A; 263; 132

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI . , . !' !' !' !' , # # # # $ $ $ $ % %% % BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1408/MDS/2014 # ' &' / ASSESSMENT YEAR :2007-08 M/S. ARUL INDUSTRIES, # 3/171, IDEAL NAGAR, VELLALANKULAM PANCHAYAT, TENKASI ROAD, TIRUNELVELI 627 012. [PAN: AACFA5573C] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, MADURAI. ( '( '( '( '( /APPELLANT ) ( )*'( )*'( )*'( )*'( / RESPONDENT ) '( + , / APPELLANT BY : SHRI PHILIP GEORGE, ADVOCATE )*'( + , / RESPONDENT BY : SHRI DURGESH SUMROTT, CIT + - / DATE OF HEARING : 12.08.2014 .& + - /DATE OF PRONOUNCEMENT : 19.09.2014 / / / / / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX II, CHENNAI, DATED 2 4.03.2014 RELEVANT TO THE ASSESSMENT YEAR 2007-08 PASSED UNDER SECTION 26 3 OF THE INCOME TAX ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF KITCHEN UTENSILS. A SEARCH AND SEIZURE OPERATION HAS BEEN CONDUCTED IN ASSESSEES GROUP I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 2 UNDER SECTION 132 OF THE INCOME TAX ACT ON1 4.10.20 09. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S . 153C OF THE ACT ON 12.12.2011. A PERUSAL OF THE ASSESSMENT RECO RDS, IT APPEARS TO THE LD. CIT THAT, THE IMPUGNED ORDER DATED 12.12.20 11 PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE FOR THE REASON THAT THE LONG TERM CAPITAL GAINS ON SALE OF AN OLD BUILD ING BY THE ASSESSEE COMPUTED AT .12,88,355/- BY CONSIDERING THE VALUE ADOPTED FOR PAYMENT OF STAMP DUTY BY THE REGISTERING AUTHORITY AS THE FULL VALUE OF CONSIDERATION ON SALE OF THE PROPERTY WAS NOT CONSI DERED AS PER SECTION 50C OF THE ACT IN THE ASSESSMENT MADE UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 12.12.2011. THEREFORE, A NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED TO THE ASSESSEE O N 11.12.2013 CALLING EXPLANATION. IN RESPONSE TO THE ABOVE NOTIC E ISSUED BY THE LD. CIT, THE ASSESSEE HAS EXPLAINED BY A LETTER DATED 2 0.12.2013, WHICH IS REPRODUCED AS UNDER: A. . B. REGARDING THE BUILDING WHICH WAS SOLD DURING TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08, IT WAS STA TED THAT IT WAS A BUSINESS ASSET AND BY INADVERTENT MISTAKE OF THE ASSESSEE, DEPRECIATION HAD NOT BEEN CLAIMED FROM THE ASSESSMENT YEAR 2005-06. INSPITE O F EXPLANATION 5 OF THE FINANCE ACT, 2001 WHICH MANDATES THE ALLOWANCE OF D EPRECIATION COMPULSORILY WITH EFFECT FROM 1.4.2002, THE ASSESSI NG OFFICER WHO DEALT WITH THE ORIGINAL ASSESSMENT ERRONEOUSLY CONSTRUED THE BUSINESS ASSET AS A CAPITAL ASSET AND CONSEQUENTLY OMITTED TO CONSIDE R EXPLANATION 5 OF THE FINANCE ACT, 2001. THE IMPUGNED ASSESSMENT ORDER PA SSED U/S 143(3) R.W.S. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 3 153C OF THE INCOME-TAX ACT CLEARLY FOLLOWED THE INC OME-TAX PROVISIONS TAKING IT AS A BUSINESS ASSET AND RE-CALCULATED THE DEPR ECIATION FROM THE ASSESSMENT YEAR 2004-05. AS THE BUILDING WAS CORREC TLY CONSIDERED AS A BUSINESS ASSET IN THE IMPUGNED ASSESSMENT ORDER, THERE IS NO NEED TO REVISE THE ORDER U/S. 263. 3. AFTER CONSIDERING THE EXPLANATION OF THE ASSESS EE, THE LD. CIT HAS OBSERVED AS UNDER: 1.6 THE CONTENTION IN RESPECT OF THE GAIN ARISING OUT OF THE SALE OF THE OLD BUILDING HAS BEEN VERIFIED FROM THE RECORDS AND THE FINDING GIVEN BY THE ASSESSING OFFICER WHILE PASSING THE OR IGINAL ASSESSMENT ORDER U/S 143(3) DATED 15.12.2009 FOR THE ASSESSMEN T YEAR 2007-08 IS VERY CLEAR THAT NO DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE IN RESPECT OF THIS BUILDING (WHICH WAS PURCHASED ON 4. 1.1996) FOR ANY ASSESSMENT YEAR. AS PER THE DEPRECIATION STATEMENTS , THERE WAS NO WRITTEN DOWN VALUE DISCLOSED IN RESPECT OF THIS BUI LDING. THIS CLEARLY PROVES THAT THIS OLD BUILDING WAS NOT USED FOR THE PURPOSES OF BUSINESS AS A FIXED ASSET. THEREFORE, IN THE ORIGINAL ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER HAS DECIDED TO TREAT THE BUILDING AS A 'CAPITAL ASSET' AND SOUGHT TO ADOPT THE SALE CONSIDERATION AS THE V ALUE ADOPTED BY THE REGISTERING AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY, AS PER THE PROVISIONS OF SECTION SAC OF THE INCOME-TAX ACT REQUIRED TO FURNISH ITS OBJECTIONS, IF ANY, NO OBJECTIONS WERE OFFERED. ACCORDINGLY, THE OLD BUILDING WHICH WAS NOT USED FOR THE PURPOSES OF ASS ESSEE'S BUSINESS WAS CONSIDERED AS A CAPITAL ASSET AND THE CAPITAL GAIN ON THE SALE OF THE BUILDING WAS COMPUTED AT RS.12,88,355/- BY ADOPTING THE REGISTRATION VALUE AS FULL VALUE OF CONSIDERATION, AS PER SECTIO N 50C OF THE ACT. AS PER RECORD, NO APPEAL HAS BEEN FILED AGAINST THIS A SSESSMENT ORDER. HOWEVER IN THE IMPUGNED ASSESSMENT ORDER DATED 12.1 2.2011 PASSED U/S 143(3) R.W.S. 153C OF THE ACT, THE ASSESSING HA S STATED THAT IT IS SEEN FROM THE RECORDS THAT NO DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE IN RESPECT OF THIS BUILDING FOR THE ASSESS MENT YEARS 2005-06 TO 2006-07. THIS ISSUE WAS DISCUSSED WITH THE REPRESEN TATIVE. THOUGH, THE ASSESSEE HAD NOT CLAIMED DEPRECIATION, IT IS DEEMED THAT DEPRECIATION FOR THE BUILDING WHICH WAS USED FOR THE PURPOSE OF BUSINESS SHOULD BE COMPUTED AND ALLOWED IN RESPECT OF THE PREVIOUS YEA R ITSELF. ACCORDINGLY, THE REPRESENTATIVE WAS ASKED TO REWORK THE CLAIM OF DEPRECIATION ALLOWABLE AND PROCEEDED TO ADD ONLY A N AMOUNT OF RS.95,196/- TOWARDS EXCESS CLAIM OF DEPRECIATION. W HILE DOING SO, THE ASSESSING OFFICER HAS NOT COME ACROSS ANY EVIDENCE TO THE EFFECT THAT THIS BUILDING WAS SHOWN IN THE BOOKS OF THE ASSESSE E AS INCLUDED IN I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 4 BLOCK OF ASSETS AND THAT IT WAS USED FOR THE PURPOS ES OF BUSINESS, THOUGH NO DEPRECIATION WAS CLAIMED ON IT. EVEN IN THE REVI SION PROCEEDINGS, NO EVIDENCE TO THIS EFFECT WAS FURNISHED. ONLY A BALD CLAIM WAS MADE THAT THE ASSESSING OFFICER HAS TAKEN A CORRECT VIEW IN T HE IMPUGNED ASSESSMENT ORDER. THERE IS NO BASIS FOR THE ASSESSI NG OFFICER TO OBSERVE THAT THOUGH THE ASSESSEE FIRM HAD NOT CLAIMED DEPR ECIATION, IT IS DEEMED THAT DEPRECIATION FOR THE BUILDING WHICH WAS USED FOR THE PURPOSE OF BUSINESS SHOULD BE COMPUTED AND ALLOWED IN RESPECT OF THE PREVIOUS YEAR ITSELF. THUS, IT IS SEEN FROM THE IMP UGNED ASSESSMENT ORDER THAT AN ISSUE WHICH HAS BECOME FINAL VIDE THE ORIGINAL ASSESSMENT ORDER, DATED 15.12.2009 WAS RE-ADJUDICATED WITHOUT ANY NEW FACTS OR EVIDENCE BROUGHT ON RECORD. 1.7 FURTHER, THE CONTENTION RAISED THAT WITH THE AS SUMPTION OF JURISDICTION U/S 153A/153C, THE EARLIER ASSESSMENT ORDERS FOR VARIOUS ASSESSMENT YEARS IN THE BLOCK PERIOD GET ABATED IS, UNTENABLE BECAUSE AS PER THE PROVISIONS OF THE ACT, ONLY THE PENDING PROCEEDINGS OF ASSESSMENT/REASSESSMENT WITHIN THE BLOCK PERIOD GET ABATED AND NOT THE COMPLETED PROCEEDINGS. THE PENDENCY OR OTHERWISE OF THE ASSESSMENT/ REASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSE E IN WHOSE CASE PROCEEDINGS ARE INITIATED U/S 153C SHOULD BE CONSTR UED FROM THE DATE OF RECEIVING THE BOOKS OF ACCOUNTS OR DOCUMENTS OR ASS ETS SEIZED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH PER SON. IN THE CASE OF THE PRESENT ASSESSEE M/S. ARUL INDUSTRIES, THE JURI SDICTION WAS TRANSFERRED TO THE ACIT, CENTRAL CIRCLE II, MADURAI VIDE NOTIFICATION DATED 13.1.2010 AND THE PROCEEDINGS U/S 153C WERE I NITIATED BY ISSUE OF NOTICE U/S 153C FOR THE ASSESSMENT YEAR 2007-08 ON 27.01.2011. AS THE ORIGINAL ASSESSMENT ORDER IN THIS CASE WAS PASS ED BY THE INCOME-TAX OFFICER, WARD I(4), TIRUNELVELI ON 15.12.2009 MUCH EARLIER TO THE TRANSFER OF JURISDICTION, THE QUESTION OF ABATEMENT OF THE ASSESSMENT PROCEEDINGS DOES NOT ARISE. 1.8 AS THE ASSESSING OFFICER WHILE PASSING THE IMPU GNED ORDER HAS ERRONEOUSLY CHANGED THE NATURE OF ASSET SOLD WITHOU T ANY EVIDENCE AND IN CONTRADICTION WITH THE SETTLED ISSUE VIDE THE OR IGINAL ASSESSMENT ORDER, THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143 (3) R.W.S 153C OF THE INCOME-TAX ACT, DATED 12.12.2011 IS CLEARLY AN ERRONEOUS ORDER WHICH IS ALSO PREJUDICIAL TO THE INTERESTS OF REVEN UE. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO REVISE IT BY BRING ING TO TAX THE AMOUNT OF RS.12,88,355/ ORIGINALLY ASSESSED TO TAX AS CAP ITAL GAINS ARISING OUT OF THE SALE OF OLD BUILDING AND TO REVERSE THE ADDI TION MADE ON ACCOUNT OF EXCESS DEPRECIATION OF RS.95,196/-. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 5 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER, AS PER LAW, ALLOWED THE DEPRECIATION EVEN IF THE SAME WAS NOT CLAIMED BY THE ASSESSEE AND THEREFORE, THE ORDER PA SSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 6. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSING OFFICER, WHILE COMPLETING THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-08, ALREADY GAVE A FINDING THAT THE ASSET WHIC H IS NOT DISPUTED, IS A CAPITAL ASSET. NOW BY ALLOWING DEPRECIATION, HE SHO ULD NOT BE PERMITTED TO SAY THAT THE ASSET IS A BUSINESS ASSET. HE ALSO SUB MITTED THAT THE SEARCH PROCEEDINGS CONDUCTED BY THE DEPARTMENT ARE NOT FOR THE BENEFIT OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (INDIA) V. ACIT [2013] 259 CT R (RAJ) 281 AND THE DECISION OF ITAT DELHI BENCH IN THE CASE OF CHARCHI T AGARWAL V. ACIT [2010] 129 TTJ (DEL) 438. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. A SEARCH O PERATION WAS CONDUCTED IN ASSESSEES GROUP UNDER SECTION 132 OF THE INCOME TAX ACT. THEREAFTER, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R .W.S. 153C OF THE ACT ON 12.12.2011. IN THE PRESENT ASSESSMENT ORDER, THE ASSESSING OFFICER HAS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 6 CONSIDERED THE ISSUE OF CAPITAL ASSET AND ALLOWED D EPRECIATION. THE VERY SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE ASSES SING OFFICER IN DETAIL IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 7-08 BY ORDER DATED 15.12.2009 AND HAS CONSIDERED THAT THE ASSET, WHICH WAS NOT DISPUTED, WAS CAPITAL ASSET AND VALUED AS PER SECTION 50C OF THE ACT FOR THE PURPOSE OF SECTION 48. THE ASSESSING OFFICER HAS CALLED OBJECT ION ALSO. THE ASSESSEE NEITHER CLAIMED DEPRECIATION BEFORE THE ASSESSING O FFICER NOR CLAIMED THE ASSET, WHICH WAS NOT DISPUTED AS BUSINESS ASSET. TH E ASSESSEE HAS ACCEPTED THE PROPOSAL MADE BY THE ASSESSING OFFICER . NOW, AFTER SEARCH, THE ASSESSING OFFICER PASSED ASSESSMENT ORDER DATED 12.12.2011, IN WHICH HE HAS ALLOWED BY CONSIDERING IT AS A BUSINESS ASSE T. IN OUR OPINION, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN THIS CONTEXT, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (INDIA) V. ACIT (SUPRA) HAS H ELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION WHILE FILING THE RE TURN UNDER SECTION 153A OF THE ACT, WHICH DEDUCTION WAS NOT CLAIMED UNDER ORIG INAL ASSESSMENT. FURTHER IN THE CASE OF CHARCHIT AGARWAL V. ACIT (S UPRA), THE DELHI BENCHES OF ITAT HAS OBSERVED THAT BY FOLLOWING THE DECISION IN THE CASE OF CIT V. SUN ENGINEERING WORKS (P) LTD. 198 ITR 297 (SC), SINCE THE SEARCH PROCEEDINGS UNDER SECTION 153A ARE FOR THE BENEFIT OF THE REVEN UE, THE ASSESSEE IS NOT PERMITTED TO VALUE THE CLOSING STOCK FOR CONCLUDED YEARS IN A DIFFERENT MANNER THAN THE ONE ADOPTED IN EARLIER YEARS AND CL AIM LOWER INCOME. IN THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1408 1408 1408 1408/M/ /M/ /M/ /M/1 11 14 44 4 7 PRESENT CASE, THE ASSESSEE HAS ALREADY ACCEPTED BEF ORE THE ASSESSING OFFICER THE ASSET IS A CAPITAL ASSET. NOW, IT CANNO T BE PERMITTED TO TAKE ADVANTAGE TO SAY THAT IT IS A BUSINESS ASSET AND EL IGIBLE FOR DEPRECIATION. THE LD. CIT CORRECTLY CAME TO A CONCLUSION THAT THE ORD ER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTA NCES OF THE CASE AND ALSO THE DECISION OF THE HONBLE RAJASTHAN HIGH COU RT IN THE CASE OF JAI STEEL (INDIA) V. ACIT (SUPRA) AND THE DECISION OF T HE DELHI BENCHES OF ITAT IN THE CASE OF CHARCHIT AGARWAL V. ACIT (SUPRA), WE HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS, THE APPEAL FILED BY THE ASSES SEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON FRIDAY, THE 19 TH OF SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 19.09.2014 VM/- / + )#-01 21&- /COPY TO: 1. '( / APPELLANT, 2. )*'( / RESPONDENT, 3. 3 ( ) /CIT(A), 4. 3 /CIT, 5. 14! )#-# /DR & 6. ! ' 5 /GF.