DCIT, Circle-6(1), Hyderabad V. M/s. Vicky Realtors, Hyderabad

ITA 146/HYD/2014

• Counselvise Citation: 14622514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Valuation report; Assessment record; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.146/HYD/14 : ASSESSMENT YEAR 2007 - 08 DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 6(1), HYDERABAD L V/S. M/S. VICKY REALTORS, HYDERABAD (PAN AAFFV 9070 N ) (APPELLANT) (RESPONDENT) CROSS OBJECTION NO.25/HYD/2014) (IN ITA NO.146/HYD/14) : ASSESSMENT YEAR 2007 - 08 M/S. VICKY REALTORS, HYDERABAD (PAN AAFFV 9070 N ) V/S. DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 6(1), HYDERABAD L (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : S HRI A.V.RAGHURAM DEPARTMENT BY : S HRI RAMAKRISHNA BANDI, DR DATE OF HEARING 2 4 .3.2015 DATE OF PRONOUNCEMENT 10.4.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : TH IS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) IV, HYDERABAD D A TED 8.11.2013 AND THE SAME IS BEING DISPOSED OF ALONGWITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEING CO NO.25/HYD/2014. 2 . THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM WHICH IS EN G AGED IN THE BU S IN E SS OF REAL ESTATE. TH E RETURN OF I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 2 IN C OM E FOR THE YEAR UN D ER CONSIDERATION W AS FIL E D BY IT ON 31.10.2007, DECLARING TOTAL INCOME OF RS .1,51,48,790 . IN THE ASSESSMENT ORIGINALLY COMPLETED UN D ER S.143(3) VIDE ORDER DATED 27.7.200 9 , THE TOTAL INCOME AS DE C L A RED B Y THE ASSESSEE IN TH E RETURN WAS AC C EPTED BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER BY ISSUING A NOTICE UN D ER S.148 ON 22.3.2012, AF T ER RECORDING THE FOLLOWIN G REASONS - 'ON VERIFICATION OF THE RECORDS, IT W A S SEEN THAT THE ASSESSEE HAD PURCHASED THE IMMOVABLE PROPERTY CONSISTING OF SEMI - FINISHED COMM E RCIAL COMPLEX NAMED AS 'OZONE'. THIS PROPERTY CONSISTS O F CELLAR + GROUND AND FOUR FLOORS WITH A BUILT UP AREA OF 58,1 7 9 SQ. FT., ALONG WITH UNDIVIDED SHARE OF LAND ADMEASURING 1858.92 SQ. YARDS SITUATED AT PUNJAGUTTA, HYDERABAD . THE TOTAL PROPERTY WAS PURCHASED FOR A TOTAL CONSIDERATION OF RS.13,13,42,530 / - - .OUT OF THE PROPERTY PURCHASE, THE ASSESSEE SOLD GROUND FLOOR ADMEASURING BUILT UP AREA OF 11,664 SQ. FT ALONG WITH UNDIVIDED SHAR E OF LAND FOR A CONSIDERATION OF RS.11,OO,OO,OOOJ - AND OFFERED THE SAME TO TAX. A S PER THE DETAILS AVAILABLE ON RECORD, THE COST OF CONSTRU C TI O N PER SQUARE FEET WORKS OUT TO R S .2257.55 (TOTAL 58,179 S Q. FT WITH UNDIVIDED LAND OF 1858.92 SQ. YARDS PURCHAS E D FOR RS.13,13,42,530). THE COST OF AREA SOLD WORKS OUT TO R S.2, 63,32,063 (11664 X RS.2257.55) AND THEREFORE, THE VALUE OF CLOSING STOCK SHOULD BE RS.L0,50,09,938 / - A S AGAINST WHICH TH E ASSESSEE SHOWN ONLY RS.5,53,42,530 / - WHICH RESULTED IN ESCAPEMENT OF INCOME. 3. IN RESPONSE TO THE NO T ICE ISSUED BY THE ASSESSING OFFICER UN D ER S.148, A LETTER WAS FILED BY TH E ASSESSEE RA ISIN G OBJECTION TO THE INI T I A T I ON OF RE - ASSESSMENT PROCE E DIN G S. IT WAS SUBMI TT ED BY THE ASSESSEE IN TH E SAID LETTER THAT THE IS S UE REL A TIN G TO TH E VALUATION O F CLO S ING STOCK WAS THO RO UGHLY EXAMINED WHILE C OMPL E TING THE ASSESSMENT ORIGINALLY UN D ER S. 143 ( 3 ) AND THE RE - OP EN ING OF THE ASSESSMENT ON THE SAME ISSUE WAS INVA L ID, AS IT WAS PROMPTED BY A MERE CHANGE OF OPINION. THE ASSESSIN G OFFICER DID NOT FIND MERIT IN THE SUBMISSION MADE BY THE ASSESSEE A N D PROCEEDED TO COMPL E TE THE RE - ASSESSMENT UN D ER S.143(3) READ I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 3 WITH S.147 VIDE HIS ORDER DATED 31.3.2013 MAKING THEREIN, AN ADDITION OF R S .4,96,74, 3 52 TO THE TOTAL INCOME O F TH E ASSES SEE ON ACCOUN T OF ALL E GED UN D ER VALUATION OF CLO S ING STOCK . 4 . AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UN D ER S.143(3) READ WITH S .147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A), CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS DISPUTING THE ADDITION MADE THEREIN ON ACCOUNT OF ALL E GED UN D ER VALUATION OF CLOSING STOCK ON M E RIT. AS REGARDS THE PRELIMINARY ISSUE REGARDING REL A TING TO THE VALIDITY OF T H E REOPENING, I T WAS SUBMI TT ED ON BEHALF OF THE ASSESSEE B EFORE THE LEARNED CIT(A) THAT TH E ASSESSING OFFICER DURING THE COU R SE OF ORIGINAL ASSESSMENT PROCE E DIN G S H A D RAISED A SPECIFIC QUERY RE GARDING THE BASIS OF THE CO S T REL A TING TO THE PORTION OF TH E PROP E RTY SOLD AND TH E ASSESSEE H A D SUBMI T TED A DETAIL E D SUBMISSION THAT AS THE VALUE OF THE G R OUND F L O OR OF ANY COMMERCIAL PROPERTY WAS SUBSTANTIALLY HIGHE R THAN THE UPPER FLOORS, A VALUATION REPORT WAS OBTAINED DETERMINING THE VALUE OF THE GROUND FLOOR AT RS.7.6 CRORES. IT WAS SUBMI T TED T H A T AFTER APPO RTIONING SUCH VALUE O F THE GROUND FLOOR, THE VALUE OF TH E REMAINING PORTION OF THE PROPERTY BEING THE CLOSING STOCK , W A S ADOPTED AT RS.5.53 CRORES, BY THE ASSESSEE AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER DURING TH E COU R SE OF ORIGINAL ASSESSMENT PROCE E DIN G S, AFTER TAKING INTO CON S I D ER A TION ALL THE FACTS OF THE CA S E AND THE RELEVANT MATERIAL IN TH E FORM OF VALU ERS REPORT. IT WAS ALSO SUBMI TT ED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT( A) THAT THE INSPECTION OF THE ASSESSMENT RECORD REVEALED T HAT THERE WAS AUDIT OBJECTION RAISED ON THIS ISSUE AND IN HIS REPLY DATED 13.7.2010 SUBMI T TED TO THE A U DIT OFFI C ER, THE ASSESSING OFFICER HIMSELF HA D ST AT ED THAT THIS ISSUE WAS DULY EXAMINED DU RING THE COU R SE OF ORIGINAL ASSESSMENT P R OC E EDIN G S. IT WAS ALSO BROUGHT TO THE NO T I C E O F THE LEARNED CIT(A) BY THE ASSESSEE THAT THE ASSESSING I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 4 OFFICER IN THI S REGARD HAD SEN T A REPO R T DATED 29.1.2011 TO THE ADDI TI ONAL CIT RANGE 6, HYDERABAD, CLEARLY STA TING THAT THE AUDIT OBJ E CTION WAS NOT ACC E P T ABLE, AS THE ISSUE IN QUESTION W AS DULY EXAMINED DURING THE COU R SE OF ORIGINAL ASSESSMENT PROC E EDINGS. IT WAS THER EF ORE , CONTENDED ON BEHALF OF TH E ASSESSEE B E FORE THE LEARNED CIT(A) THAT THE ISSUE HAVING B E EN DULY EXAMINED BY THE ASSESSING OFFICER DURING TH E COU R SE OF ORIGINAL ASSESSMENT PROCE E DIN G S, THE SUBSEQUENT ISSUE OF NO T I C E UN D ER S.148 REOPENIN G THE ASSESSMENT ON THE SAME ISSUE W A S BASED ON A MERE CHANGE OF OPINION, WHICH WAS NO T PERMISSIBLE. 5. THE LEARNED CIT(A) FOUND M E RIT IN TH E CON T ENTION S RAISED ON BEHALF OF THE ASSESSEE AND KEEPING IN VIEW THE VALUATION R EPO R T FURNISHED BY TH E ASSESSEE AS WELL AS THE LETTERS SENT BY THE ASSESSING OFFICER TO TH E AUDIT TEAM AS WELL AS TO THE ADDIT I ONAL CIT, S HE HELD T H A T T H E REOPENIN G O F ASSESSMENT ITSELF WAS NO T VALID AS THE SAME WAS BASED ON A MERE CHANGE OF OPINION. ACCOR D INGLY, THE ASSESSMENT MADE BY THE ASSESSING OFFICER UN D ER S.143(3) READ WITH S.147 WAS CANCELLED BY THE LEARNED CIT(A). KEEPING IN V IEW THE DECISION RENDERED BY HER ON THE P RELI MINARY ISSUE HOL D IN G THE ASSESSMENT MADE BY THE ASSESSING OFFICER UN D ER S.143(3) READ WITH S.147 A S INVALID, THE LEARNED CIT(A) DID NO T CON S I D ER IT NECESSARY TO DECIDE THE OTHER ISSUE RAISED BY TH E ASSESSEE IN ITS APPEAL ON M E RITS R EL A TING TO TH E ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED UN D ER - VALUATION OF CLO S IN G STOCK. 6. AGGRI E VED BY THE O R DER OF THE LEARNED CIT(A), REVENUE HAS COME IN APP EA L BEFORE US, CHALLENGING TH E AC T IO N OF THE CIT(A) IN CANCELLING TH E ASSESSMENT MADE BY THE ASSESSING OFFICER UN D ER S. 1 43(3) READ WITH S.147 HOLDIN G TH E SAME TO BE INVALID, WHILE TH E ASSESSEE HAS FILED ITS CROSS OBJ EC TION CON T ENDING THAT THE LEARNED CIT(A) OUGHT TO HAVE ALSO DECIDED THE I SSUE RELATING TO T HE A DDIT I ON I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 5 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UN D ER - VALUATION OF CLOSING STOCK ON MERITS. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE SUPPORTING THE APPEAL OF THE R E VENUE SUBMI T TED T HAT THE ISSUE RELATING TO TH E VALUATION OF CLOSING STOCK WAS NO T EX A MIN E D BY THE ASSESSING OFFICER DURING TH E COURSE OF ORIGINAL ASSESSMENT PROCEE D IN G S AS IS EVIDENT FROM TH E ORDER PASSED BY HIM UN D ER S.143(3) . HE INVITED OU R ATTENTION TO THE COPY O F TH E SAID ORDER PLACED ON RECO RD AN D SUBMI TT ED THAT THERE IS NOTHING IN TH E SAID ORDER TO SHO W THAT T H E V A LUATION O F C LOS IN G S TOCK ADOPTED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER AFTER DUE EXAMINATION AND ON APPLICATION OF MIND. HE CONTENDED THAT THERE WAS THUS NO FORMAT ION OF ANY OPINION BY THE ASSESSING OFFICER ON TH IS IS S UE AND THE QUESTION OF REOPENING OF ASSESSMENT BASED ON M E RE CHANGE OF OPINION DOES N O T ARISE. 8. THE LEARNED COUN S EL FOR THE ASSESSEE, ON THE OTHER HAND, INVITED OUR ATTENTION TO THE COPY OF THE REL E VANT OR D ER SHEET PLACED A T PAGE 11 AND 12 OF HI S PAPER - BOOK, TO POINT OUT THAT COPY O F THE REL E VANT AGREEMENT FOR SALE OF PO R TION OF THE P R OPERTY WAS SPECIFICALLY CALLED FOR BY THE ASSESSING OFFICER, AND THE SAME WAS ALSO DULY FURNISHED BY THE ASSESSEE . HE SUBMI T TED T HAT EVEN ALL OTHER DETAILS AND DOCUM E N T S REQUIRED BY TH E ASSESSING OFFICER WERE FURNISHED BY THE ASSESSING OFFICER FROM TIME TO TIME, INCLUDING THE VALUATION REPORT GIVING THE B A SIS OF VALUATION OF C LO S ING STOCK ADOPTED BY TH E ASSESSEE . HE CONTENDED THAT THE ASSESSEE H A D EN T ERED INTO ONLY ON E TRANS A C T ION OF PU R CHASE OF P R OPERTY DURING THE Y E AR UN D ER C ON S I D ERATION AND SALE OF PO R TION TH E REOF, AND THE ASSESSING OFFICER H A VING OB T AINED ALL THE REL E VANT DETAILS O F THE SAID TR A N S AC T ION, I T CANNOT B E SAID THAT THE ISSUE OF V ALU A TION OF CLO S IN G STOCK REPRESENTING THE REMAINING PORTION OF THE SAME PROPERTY WAS I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 6 NO T EXAMIN E D BY THE ASSESSING OFFICER. HE SUBMI T T E D THAT IN THE LETTER WRITTEN TO THE AUDIT PARTY AS WELL AS TO THE ADDL CIT, THE ASSES SING OFFICER HIMSELF HAD CLEARLY STATED THAT THE ISSUE RELATING TO TH E VALUATION OF C LO S IN G STOCK WAS DULY EXAMINED DURING THE COU RS E OF ORIGINAL ASSESSMENT PROCE E DIN G S. HE CONTENDED THAT THIS I S SUE THUS WAS DULY EXAMINED BY THE ASSESSING OFFICER DURIN G THE COURSE OF O RI GINAL ASSESSMENT P R OCE E DIN G S UN D ER S.143(3) AND THE REOPENIN G OF TH E ASSESSMENT ON THE SAME ISSUE BASED ON A M E RE CHANGE OF OPINION IS NO T PERMISSIBLE IN L A W, AS HELD INTER ALIA BY THE HON'BLE SUPREME COURT IN TH E C A SE OF CIT V/S. KELVINATOR INDIA LTD. ( 320 ITR 561 ) . 9. IN THE REJOINDER, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT EVEN TH E REL E VANT ORDER SHEET ENTRIES RECORDED BY THE ASSESSING OFFICER DO NO T SHOW THAT THE ISSUE RELATING TO T H E V ALUA T ION O F CLO S ING STOCK WAS SPECIFICALLY EXAMINED BY THE ASSESSING OFFICER . HE ALSO SUBMI TTE D THAT THE VALUATION OF CL O S ING STOCK ADOPTED BY THE ASSESSEE W AS NO T CORRECT AND THE VIEW TAKEN BY THE ASSESSING OFFICER IN TH E ORIGINAL ASSESSMENT WHIL E ACCEPTING THE SAID VALUATION W AS NO T A POSSIBLE VIEW. 10. WE HAVE CON S I D ERE D TH E RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE DURING THE Y E AR UN D E R CONSIDERATION PURCHASED ON E PROPERTY SITUATED AT PANJAGUTTA, HYD ERABAD FOR RS.13. 13 CORES AND SOLD A PO R TION OF THE SAID P R OP E RTY, I. E . GROUN D FLOOR FOR CON S I D ERATION OF R S .11 CRORES. TH E COST OF THE POR TION OF THE SAID PROPERTY SOLD DURIN G THE Y E AR UN D ER CONSIDERATION WAS TAKEN BY THE ASSESSEE AS RS.7.6 CRORES, ON TH E BASIS OF A VALUATION REPORT AND THE B ALANCE AMOUNT O F RS .5.53 CRO R ES B E IN G COST OF THE REMAINING PO R TION OF THE PROP E RTY CONTINUED TO BE HELD BY TH E ASSESSEE WAS SHOWN AS CLO S ING STOCK. DU R IN G TH E COURSE OF OR I GINAL ASSESSMENT I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 7 PROCE E DIN G S UN D ER S.143(3), TH E REL E VA NT DETAILS AND DOCUM E N T S RELATING TO TH E S E TR A N S AC T IONS WERE CALLED FOR BY THE ASSESSING OFFICER, AS I S EVIDENT F R OM THE RELEVANT ORDER SHEET ENTR IES , AND SIN C E TH E ISSUE RELATING TO TH E VALUATION OF CLO S ING STOCK ADOPTED BY TH E ASSESSEE W A S DIRECTLY LINKED WITH TH E S E TRA NSA CTIONS, WE FIND IT DIFFICULT TO AC C EPT THE CONTENTION OF TH E LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE S AME WAS NO T EXAMIN E D BY TH E ASSESSING OFFICER DURING THE COU R SE OF ORIGINAL PROC E EDIN G S MO R EO V ER, THE ASSESSING OFFICER HI M S EL F IN THE L E T T ERS WRITTEN TO THE AUDIT TEAM AS WELL AS TO THE CONCERNED ADDL.CIT H A D STATED IN VERY CL E AR TERMS THAT THE ISSUE RELATING TO THE VALUATION OF CLO S ING STOCK WAS DULY EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT P R OC E EDIN G S. HAVING R EGARD TO ALL TH E SE F A CTS OF THE CASE, WE FIND OURSELVES IN AGREEMENT WITH THE LEARNED CIT(A) THAT THE ISSUE R ELATING TO TH E VALUATION OF CLO S IN G STOCK HAVING B E EN EXA M IN E D BY THE ASSESSING OFFICER DURING TH E COU R SE OF ORIGINAL ASSESSMENT PROCEEDINGS UN D ER S. 1 43(3), THE REOPENIN G O F TH E ASSESSMENT ON TH E SAME ISSUE WAS BASED ON A MERE CHANGE OF OPINION, WHICH IS NO T P E RMISSIBL E IN LAW , AS HEL D INTER ALIA BY TH E HON'BLE SUPREME COURT IN TH E CASE OF KELIVINATOR IND I A LTD. (SUPRA), CITED BY THE LEARNED CO UN S EL FO R THE ASSESSEE . WE TH E R E FORE, FIND NO INFIRMITY IN TH E IMP UGNE D O R DER O F TH E LEARNED CIT(A) HOL D IN G TH E ASSESSMENT MADE BY THE ASSESSING OFFICER UN D ER S. 1 43(3) READ WITH S.147 AS INVALID AND UPHOLDING THE SAME, WE DI SMI SS THE AP P E A L FIL E D BY TH E REVE NUE . 11. AS REGARDS THE CROSS OBJECTION OF THE ASSESSEE, WE ARE OF THE VIEW THAT ONCE TH E ASSESSMENT UN D ER S .143(3) READ WITH S.147 MADE BY THE ASSESSING OFFICER IS H E LD TO BE INVALID, THE ISSUE REL A TING TO TH E ADD I TION MADE THEREIN ON ACCOUNT O F AL L EGED UN D ER VALUATION OF THE CLO S IN G STOCK BECOMES INFRUCTUOUS OR ACADEMIC AND IT IS NOT EXPEDIENT OR NECESSARY TO DECIDE THE SAME AS RIGHTLY HELD I TA NO. 146/HYD/2014 & CO 25/HYD/2014 M/S. VICKY REALTORS, HYDERABAD 8 BY THE LEARNED CIT(A). WE TH E R E FOR E , FIND NO MERIT IN TH E CROSS OBJ E CT I ON OF THE ASSESSEE , AND DISMISS THE S AME . 12. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10 TH APRIL, 2015 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER D T/ - 10 TH APRIL, 201 5 COPY FORWARDED TO: 1. M/S. VICKY REALTORS, C/O.SHRI K.VASANT KUMAR, A.V. RAGHU RAM, A DVOCATES FLAT NO.610, 6TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD - 1. 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 6(1), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) IV HYDERABAD 4. COMMISSIONER OF INCOME - TAX III, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S