Shetakari Sahakari Sangh Ltd., V. Deputy Commissioner of Income-tax,

ITA 157/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88931 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: SUS HANT PHADNIS
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 157/PN/2014 (ASSESSMENT YEAR : 2008-09) SHETKARI SAHAKARI SANGH LIMITED, 311, BHAVANI MANDAP, KOLHAPUR-416012 PAN NO.AAATS5436L .. APPELLANT VS. ITO, WARD-1(2), KOLHAPUR .. RESPONDENT ASSESSEE BY : SHRI SUSHANT PHADNIS REVENUE BY : SHRI P.S. NAIK ORDER PER R.S. PADVEKAR, JM : IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD.CIT(A), KOLHAPUR DATED 19-11-2013 F OR THE ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS TAKEN TH E MULTIPLE GROUNDS IN THE APPEAL BUT THE SOLITARY ISS UE FOR OUR CONSIDERATION IS WHETHER THE AO WAS JUSTIFIED IN LE VYING THE PENALTY OF RS.90,85,388/- U/S.271(1)(C) OF THE I.T. ACT ON THE CHARGE OF DELIBERATE CONCEALMENT OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSE SSEE IS A VERY OLD COOPERATIVE SOCIETY ENGAGED IN THE VARIOUS ACTIVITIES. IT WAS NOTICED BY THE AO THAT ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN. THE FACTS AS NOTED BY THE AO ARE AS UNDER. THE ASSESSEE SOCIETYS PROPERTY SITUATED AT C.S.NO.2104 /15 ADMEASURING ABOUT 205821 SQ.FT. E-WARD, OLE PUNE-BA NGALORE 2 HIGHWAY IN KOLHAPUR WITH THE BUILDING CONSTRUCTION WAS MORTGAGED BY THE ASSESSEE SOCIETY TO KOLHAPUR DISTR ICT COOPERATIVE BANK LTD. AGAINST THE BORROWINGS OF THE LOANS. THE LOAN BORROWED FROM THE SAID BANK WAS OUTSTANDING TO THE EXTENT OF RS.17,85,85,910/-. THE ASSESSEE SOCIETY COULD NOT REPAY THE OUTSTANDING LOAN OF THE BANK WITHIN THE T IME PERIOD. THE BANK, THEREFORE, EVOKED THE PROVISIONS OF SECTI ON 13(4) OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 (IN SHOR T SARFAESI ACT, 2002) AND TOOK THE POSSESSION OF THE ABOVE PRO PERTY ON 26-12-2007. ACCORDING TO THE PROVISIONS OF THE SAI D ACT, KDCC BANK BECOME COMPETENT TO DISPOSE OF THE SAID ASSET SEIZED BY IT FOR RECOVERY OF THE OUTSTANDING LOAN. THE BANK CARRIED OUT AUCTION OF THE SAID PROPERTY AND COULD GET THE HIGH EST BID FROM M/S.VIKRAM KAKADE CONSTRUCTION PVT. LTD. OF RS.27,8 7,00,000/-. THE SALE DEED WAS EXECUTED ON 08-12-2009 AND THE SA ME WAS REGISTERED WITH THE SUB-REGISTRAR, KOLHAPUR ON 14-1 2-2009. 3. AS NOTED BY THE AO, ON COMPLETION OF THE TRANSAC TION IN AUCTION, THE BANK ADJUSTED RS.17,85,85,910/- WHICH WAS THE OUTSTANDING DUES OF THE LOANS BORROWED BY THE ASSES SEE AND ALSO RECOVERED THE INCIDENTAL EXPENSES INCURRED BY THE BANK TO THE EXTENT OF RS.9,85,092/- AND ALSO PAID THE ULC T AXES OF RS.2,59,16,778/- ON 30-11-2010 TO THE GOVT. OF MAHA RASHTRA. THE ASSESSEE HAS DECLARED CAPITAL GAIN BY TAKING TH E VALUE OF SALE CONSIDERATION OF THE SAID PROPERTY AT RS.17,85 ,85,910/- AS ADMITTEDLY, THE BALANCE AMOUNT OF RS.10,01,14,090/- WAS NOT PAID BY THE BANK DURING THE YEAR TO THE ASSESSE NOR SAID PROPERTY WAS SOLD OR OTHERWISE DISPOSE OF DURING TH E F.Y. 2007- 3 08. THE ASSESSEE TOOK CONTENTION THAT IT WAS LIABL E TO PAY THE CAPITAL GAIN TAX ONLY ON AMOUNT OF RS.17,85,85,910/ - AND NOT ON THE FULL CONSIDERATION RECEIVED BY THE BANK TO T HE EXTENT OF RS.27,87,00,000/-. THE AO WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE DECLARED CAPITAL GAIN ON THE T OTAL SALE CONSIDERATION RECEIVED BY THE BANK TO THE EXTENT OF RS.27,87,00,000/- AS IN HIS OPINION THE DATE OF TRA NSFER OF THE SAID PROPERTY WAS 26-12-2007 WHICH FALLED DURING TH E PREVIOUS YEAR 2007-08 RELEVANT TO THE YEAR UNDER CONSIDERATI ON. HE ACCORDINGLY BROUGHT TO TAX THE CAPITAL GAIN BY TAKI NG THE FULL VALUE OF THE CONSIDERATION AT RS. 27,87,00,000/-. H E WORKED OUT THE LONG TERM CAPITAL GAIN, VIS--VIS SHORT TERM CA PITAL GAIN CONSIDERING THE BUILDING ON WHICH DEPRECIATION WAS CLAIMED BY THE ASSESSEE. IN SUM AND SUBSTANCE, AS PER THE PROV ISIONS OF SECTION 50 OF THE I.T. ACT, HE COMPUTED LONG TERM A ND SHORT TERM CAPITAL GAINS CONSIDERING THE DEPRECIATION CLA IMED BY THE ASSESSEE. 4. THE AO ALSO INITIATED THE PENALTY PROCEEDINGS BY ISSUING THE NOTICE TO THE ASSESSEE AND LEVIED THE PENALTY O F RS.90,85,388/- BY HOLDING THAT ASSESSEE HAS CONCEAL ED THE INCOME AS WELL AS FURNISHED INACCURATE PARTICULARS OF INCOME BY SHOWING THE LESSER SALE CONSIDERATION OF THE CAPITA L ASSET WHICH WAS ACQUIRED BY THE BANK UNDER THE SARFAESI ACT, 2002. 5. THE ASSESSEE CHALLENGED THE PENALTY LEVIED BY TH E AO BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) RAISED THE ISSUE OF DELAY. HE HAS OBSERVED THAT TH E ASSESSEE HAS FILED THE APPEAL WHICH IS LATE BY 5 DAYS. ACCO RDING TO THE LD.CIT(A), DEMAND NOTICE WAS SERVED ON THE ASSESSEE ON 14- 4 03-2013 AND APPEAL HAS BEEN FILED ON 18-03-2013. T HE LD.CIT(A) OBSERVED THAT ASSESSEE HAS NOT FILED THE DELAY CONDONATION PETITION AND HENCE THE APPEAL CANNOT BE ENTERTAINED. HE ACCORDINGLY REJECTED THE APPEAL. A T THE SAME TIME, IN A VERY CRYPTIC WAY, HE PROCEEDED TO DECIDE THE APPEAL ALSO ON MERIT AND THE ONLY DISCUSSION AND FINDING O F THE LD.CIT(A) IS AS UNDER : 5. INSPITE OF ABOVE DECISION I WOULD LIKE TO DEC IDE ON THE MERIT OF THE CASE ALSO. FACTS OF THE CASE AS HA S BEEN MENTIONED EARLIER, WHEREAS TOTAL SALE CONSIDERATION WAS RS.27,87,00,000/-, STILL THE APPE LLANT ADOPTED LESSER VALUE. IT DID NOT COMPUTE THE CAPITA L GAIN ON THE FULL VALUE OF CONSIDERATION. THE ADDITI ONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER HAVE BEEN CONFIRMED IN THE FIRST APPEAL. BEFORE THE ASSESSING OFFICER ALSO, THE ASSESSEE DID NOT EXPLAI N ITS CASE FOR NON-IMPOSING PENALTY. BEFORE THE UNDERSIGN ED IT WAS STATED THAT RS. 10.01 CRORES WAS NOT INCLUDE D IN THE CONSIDERATION BECAUSE THE BANK REFUSED TO PAY T HE AMOUNT. IF AFTER DISCHARGE OF BANK DUES, RS.10.01 CRORES WAS EXCESS AMOUNT WITH THE BANK, WHY THE BAN K HAS REFUSED TO PAY WHICH IT ULTIMATELY PAID, HAS NO T BEEN EXPLAINED. THE FACT IS THAT APPELLANT DID NOT INCLUDE FULL VALUE OF CAPITAL GAIN LEADING TO SHORT PAYMENT OF TAXES. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING PENALTY. GROUNDS TAKEN BY THE APPELLANT ARE REJECTED AND THE ORDER UNDER SECTION 271(1)(C) IS CONFIRMED. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. THE LD. A.R. ARGUES THAT THERE WAS NO DELAY IN FILING THE APPEAL BEFORE THE LD.CIT(A). H E SUBMITS THAT THE ORDER U/S.271(1)(C) AND THE NOTICE OF DEMAND IS DATED 21- 03-2013 THEN HOW THE LD.CIT(A) CAY SAY THAT NOTICE OF DEMAND WAS SERVED ON THE ASSESSEE ON 14-03-2013. WE FIND FORCE IN THE ARGUMENT OF THE LD. A.R. FOR THE ASSESSEE. WE HAVE VERIFIED THE PENALTY ORDER WHICH IS DATED 21-03-201 3. IT IS CERTAINLY STRANGE THAT WITHOUT VERIFYING THE ORDER ON WHICH THE 5 DATE IS APPEARING THE LD.CIT(A) ERRONEOUSLY CAME TO THE CONCLUSION THAT THERE IS A DELAY OF 5 DAYS. WE, TH EREFORE, HOLD THAT THERE WAS NO DELAY IN FILING THE APPEAL BEFORE THE LD.CIT(A). 7. THE NEXT ISSUE IS TO DECIDE THE CASE ON MERIT, W HETHER THE AO WAS JUSTIFIED IN LEVYING THE PENALTY U/S.271(1)( C) OF THE ACT UPON THE ASSESSEE. THE MAIL PLANK OF ARGUMENT OF L D. A.R. IS THAT THE ASSESSEES PROPERTY WAS MORTGAGED TO THE K DCC BANK AND AS THE LOAN WAS OUTSTANDING TO THE EXTENT OF RS.17,85,85,910/-, BANK EVOKED THE PROVISIONS UNDER SARFAESI ACT, 2002 AND TOOK THE POSSESSION OF THE SAID PROPERTY AND THERE WAS NOT TRANSFER DURING F.Y. 200 7-08. WE FIND THAT THIS PROPERTY WAS NOT AUCTIONED DURING F. Y. 2007-08 BUT THE SAID BANK SOLD THE SAID PROPERTY IN PUBLIC ACTION IN F.Y.2009-10 AND THE SALE DEED WAS EXECUTED ON 08-12 -2009. ADMITTEDLY, IN THIS YEAR, PRIMA FACIE, THERE IS NO TRANSFER OF ASSET BY THE ASSESSEE. SO FAR AS THE PROVISIONS OF SARFAESI ACT, 2002 IS CONCERNED IT IS THE PROTECTION GIVEN T O THE BANKS FOR THE RECOVERY OF THEIR OUTSTANDING LOANS AS PUBL IC MONEY IS INVOLVED. THIS ISSUE NEEDS TO BE RE-EXAMINED IN TH E LIGHT OF THE PROVISIONS OF SARFAESI ACT, 2002. ANOTHER ASPECT TO BE KEPT IN MIND IS THAT WHEN THE POSSESSION OF THE PROPERTY WAS TAKEN BY THE BANK FOR RECOVERY OF ITS OUTSTANDING LOAN BU T AT THAT TIME THE VALUE OF THE PROPERTY WAS NOT ASCERTAINED. IN THIS BACKGROUND, CAN IT BE SAID THAT THE ASSESSEE HAS CO NCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. BOTH THE AUTHORITIES BELOW HAVE TAKEN A ME CHANICAL APPROACH WITHOUT APPLICATION OF MIND FOR LEVYING AN D CONFIRMING 6 PENALTY UPON THE ASSESSEE SOCIETY WITHOUT UNDERSTAN DING HE BASIC PRINCIPLES OF LAW. WE COULD HAVE DECIDED T HE ISSUE AT OUR LEVEL BUT THE REQUIRED DOCUMENTS ARE NOT BEFORE US, I.E. THE DOCUMENT IN RESPECT OF THE AUCTION MADE BY THE BANK AND FINAL SALE DEED BETWEEN THE BANK AND THE BUYER OF THE SAI D PROPERTY. 8. WE ARE OF THE CONSIDERED OPINION FIRSTLY IT IS T O BE DECIDED WHETHER DURING F.Y. 2007-08 IS THERE TRANSFER AS CO NTEMPLATED U/S.45(1). IN OUR OPINION THIS ISSUE NEEDS FRESH A DJUDICATION. HENCE, WE CONSIDER IT FIT TO RESTORE MATTER BACK TO THE FILE OF THE LD.CIT(A) FOR FRESH ADJUDICATION. WE ACCORDINGLY D IRECT THE LD.CIT(A) TO CALL FOR THE DOCUMENTS RELATING TO AUC TION AS WELL AS THE BANK CORRESPONDENCE WITH THE ASSESSEE AND TO EXAMINE THIS ISSUE IN THE LIGHT OF SECTION 45(1) R.W.S. 247 OF THE I.T. ACT AND UNDER PROVISIONS OF SARFAESI ACT, 2002 WHETHE R THERE IS ANY TRANSFER TO SAY THAT THE CAPITAL GAIN AROSE IN A.Y. 2008-09. PRESUMING EVEN THERE IS A TRANSFER IN THIS YEAR, CA N IT BE SAID THAT THE SALE CONSIDERATION WAS KNOWN AT THE END OF THE FINANCIAL YEAR TO THE ASSESSEE, I.E., ON 31-03-2008 ? AS PER THE FACTS NOTED BY THE AO, THE SALE DEED IS EXECUTED ON LY ON 08-12- 2009 AND THAT FALLS INTO THE ASSESSMENT YEAR 2010-1 1. WE ACCORDINGLY RESTORE THE ENTIRE MATTER BACK TO THE F ILE OF THE CIT(A) WITH A DIRECTION TO DECIDE WHETHER THERE IS JUSTIFICATION TO LEVY PENALTY UPON THE ASSESSEE U/S.271(1)(C) FOR ALLEGED UNDERSTATING SALE CONSIDERATION AND ACCORDINGLY NOT DECLARING CAPITAL GAIN? THE CIT(A) IS DIRECTED TO GIVE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE AND PASS A SPEAKING ORDER IN THE LIGHT OF OUR ABOVE DISCUSSION AND OBSERVATION. 7 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13-02-2015. SD/- SD/- (G.S.PANNU) (R.S . PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMB ER PUNE DATED: 13 TH FEBRUARY, 2015 SATISH/RAVI COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE