Karad Projects And Motors Ltd., CHENNAI V. ACIT Company Circle II(4), CHENNAI

ITA 1614/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6234 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Fair market value; Set aside; Capital Gains
• Section: 271(1)(c)

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं डॉ दȣपक पी. ǐरपोटे, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND Dr. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.: 371 & 1614/CHNY/2019 िनधाᭅरण वषᭅ /Assessment Year: 2007-08 Karad Projects and Motors Ltd., (formerly known as Kirloskar Constructions & Engineers P Ltd.) Raj Parris, Trimeni Towers, 2 nd Floor, No.174, GN Chetty Road, T.Nagar, Chennai – 600 017. PAN: AADCA 9556F vs. The ACIT, Company Circle – II(4), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri S. Sridhar, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Hema Bhupal, JCIT स ु नवाई कȧ तारȣख/Date of Hearing : 16.08.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 16.08.2022 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: These two appeals by the assessee, one against assessment and one against levy of penalty are arising out of different orders of Commissioner of Income Tax (Appeals)-8, Chennai in ITA No.3/10- 11 dated 16.10.2018 & 05.04.2019. The assessment was framed by 2 ITA Nos.371 & 1614/Chny/2019 the ACIT, Company Circle II(4), Chennai for the assessment year 2007-08 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.12.2009. The penalty under dispute was levied u/s.271(1)(c) of the Act by the AO. ITA No.371/Chny/2019 2. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in assessing Long Term Capital Gain (LTCG) pertaining to sale of shares and enhancement of LTCG to the extent of Rs.6,54,01,660/- as against addition made by AO at Rs.1,13,84,480/- thereby enhancing at Rs.5,40,17,180/-. 3. Briefly stated facts are that Aban Constructions Pvt. Ltd., taken over by Kirloskar Brothers Ltd., filed its return of income on 22.10.2007 admitting income of Rs.1,52,89,609/-. During the year the assessee had transferred shares at cost price to Aban Ventures and Aban Industries and therefore no capital gains accrued to the assessee. The AO while framing assessment u/s.143(3) of the Act, rejected the assessee’s submissions and computed the total long term capital gain on sale of shares at Rs.1,13,84,480/- as against ‘nil’ capital gains computed by the assessee. The AO has computed the long term capital gains on shares in M/s. Saipem Aban Drilling 3 ITA Nos.371 & 1614/Chny/2019 Co., at Rs.85,00,000/- by adopting the EPS of Rs.134/- as the fair market value of the share as on 31.03.2007 as against the actual sale price of Rs.100, thereby estimating Rs.34/- per share as excess gain and in respect of other two companies viz., M/s. Quatar Engineering and IS Buildcon Constructions Ltd., the AO has adopted the fair market value at cost plus 10% and computed the long term capital gain at Rs.28,84,480/-. Therefore the AO made addition of LTCG on account of transfer of shares at Rs.1,13,84,480/-. Aggrieved assessee preferred appeal before CIT(A). 4. The CIT(A) noted that the assessee has held shares of the following companies in the balance sheet as on 31.03.2006 Equity shares in M/s. Saipem Aban Drilling Co. (value) Rs.2,50,00,000/- Equity shares in M/s. Qetco JV Co. (value) Rs.1,24,95,510/- Equity shares in IS Buildcon Constructions Ltd., (value) Rs.2,75,90,000/- Thereafter the assessee’s case was posted on various dates and none attended. Therefore, the CIT(A) ex-parte enhanced the assessment by an amount of Rs.5,40,17,180/- and thereby computed the LTCG on account of sale / transfer of shares of Rs.6,54,01,660/-. For this, the CIT(A) only noted the fact in para 12, which reads as under:- 4 ITA Nos.371 & 1614/Chny/2019 12. It is noted that the assessee has not responded to the proposal for enhancing the long term capital gains on sale/transfer of shares by the assessee during the year. The total value of shares transferred by the assessee was at Rs.6,54,01,660/-. Considering an expected increase in the value, the long term capital gains is taken at Rs.6,54,01,660/-, being 100% appreciation in the value of shares. This amount is replaced in lieu of an amount of Rs.1,13,84,480/- brought to tax by the Assessing Officer. As above, the enhancement works out to Rs.5,40,17,180/-. The Assessing Officer is directed to take this amount as additional long term capital gains worked out. The Assessing Officer is also directed to issue necessary demand notice u/s 156. Penalty proceedings u/s 271(1)(c) are initiated by the undersigned with respect to the enhancement of capital gains to the extent of Rs.5,40,17,180/-.” Aggrieved, assessee is in appeal before the Tribunal. 5. We have heard rival contentions and gone through the facts and circumstances of the case. Before us, the ld.counsel for the assessee took us through the ex-parte order passed by CIT(A) and stated that no doubt on many occasions, the assessee’s case was fixed for hearing but one reason or other, it could not be attended. But, assessee could not explain its non-attendance before CIT(A). We also noticed that the CIT(A)’s order has not given reason for enhancing the assessment and just on the basis of conjectures and surmises, he has enhanced the assessment and also confirmed the addition of LTCG on account of sale of shares. When this cryptic order of CIT(A) was referred to ld.Senior DR, he could not controvert the above fact situation. 5 ITA Nos.371 & 1614/Chny/2019 6. After going through the facts in entirety and the fact that the order of CIT(A) is ex-parte, although many opportunities were given to the assessee, we are inclined to set aside the order of CIT(A) and remand the matter back to his file for fresh adjudication by a speaking order. Needless to say, the CIT(A) will provide reasonable opportunity of being heard to the assessee. But in this case, the assessee is also not been vigilant and has not given any reason for non-attendance before CIT(A). Hence, we are imposing a cost of Rs.25,000/- on the assessee and direct the assessee to pay this amount to the Tamil Nadu State Legal Services Authority at High Court of Madras. The assessee will produce the payment details to CIT(A) before start of hearing. Accordingly, the matter is restored back to the file of the CIT(A) for fresh adjudication. ITA 1614/Chny/2019 7. It is noted that this is a penalty appeal arising out of assessment of LTCG and consequent enhancement by CIT(A). Since, we have adjudicated the quantum appeal and remanded the matter back to the file of the CIT(A), this penalty appeal will not survive and matter is restored back to the file of the CIT(A) for fresh adjudication. 6 ITA Nos.371 & 1614/Chny/2019 Accordingly, the order of CIT(A) is set aside and the matter is remanded back to his file for fresh adjudication. 8. In the result, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on 16 th August, 2022 at Chennai. Sd/- Sd/- (डॉ दीपक पी. ᳯरपोटे) (Dr. DIPAK P. RIPOTE) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 16 th August, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.