Deputy Commissioner of Income-tax, Circle - 6, Pune V. Abhay Sadashiv Gadgil, Pune

ITA 1652/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1116 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 29-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M R BHAGAVAT
• Keywords: Capital receipt; Revised return; Capital Gains
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1652/PUN/2017 / ASSESSMENT YEAR : 2012-13 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE. . / APPELLANT. V/S MR. ABHAY SADASHIV GADGIL, PLOT NO.77, NATRAJ SOCIETY, S.NO.34/7, HINGNE, PUNE 411005. PAN : ADQPG9351H. . / RESPONDENT ASSESSEE BY : SHRI M.R. BHAGWAT. REVENUE BY : SHRI SHASHANK DEOGADKAR. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 3, PUNE DATED 08.02.2017 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL WHO IS STATED TO BE A PARTNER IN M/S. P.N. GADGIL & CO., (SILVER) AND TWO OTHER FIRMS. ASSESSEE ELE CTRONICALLY FILED HIS RETURN OF INCOME FOR A.Y. 2012-13 ON 27.09.2014 DE CLARING / DATE OF HEARING : 05.08.2019 / DATE OF PRONOUNCEMENT: 12.09.2019 2 TOTAL INCOME AT RS.1,25,15,913/-. THE RETURN WAS REVISED O N 29.03.2014 BY REVISING THE TOTAL INCOME TO RS.9,58,983/-. T HE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S 143(3) OF THE ACT VIDE ORDER DATED 30.03.2015 AND THE TOTAL IN COME WAS DETERMINED AT RS.1,30,58,980/-. AGGRIEVED BY THE ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 08.02.2017 (IN APPEAL NO.PN/CIT(A)-3/WD 2(1), PN/122/2015-16) DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE ORD ER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLO WING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,21,00,000/ - MADE BY THE ASSESSING OFFICER UNDER THE HEAD LONG TERM CAPITAL GAIN AS PE R THE PROVISIONS OF SECTION 45(1) OF THE IT ACT, 1961, WITHOUT APPRECIA TING THE FACTS THAT AMOUNT OF RS. 1,21,00,000/- WAS RECEIVED BY THE ASSESSEE ON ACCOUNT OF RETIREMENT FROM FIRM M/S P N GADGIL & SONS IS OVER AND ABOVE H IS CAPITAL CONTRIBUTION AND TAXABLE UNDER THE HEAD LONG TERM CAPITAL GAIN. 2. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOG ETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT THERE WAS A CHANGE IN CONSTITUTION OF M/S. P.N. GADGIL & CO., (SILVER) AND ASSESSEE HAD RETIRED FROM THE FIRM ON 31.03.2012 AND HAD RECEIVED RS.1,21,00,000/- TOWARDS HIS ACCUMULATED CAPITAL PLUS HIS SHA RE ON RE- VALUATION OF ASSETS. THE ASSESSEE HAD INITIALLY OFFERED THE AMOUNT TO TAX AS LONG TERM CAPITAL GAINS IN THE ORIGINAL RETURN OF INCOME BUT IN THE REVISED RETURN, HE HAD CLAIMED IT AS CAPITAL RECEIPT BY PLAC ING RELIANCE ON CERTAIN DECISIONS WHICH ARE NOTED BY THE AO IN HIS ORD ER. AO DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE. AO WAS OF THE V IEW THAT THE 3 DECISION OF MUMBAI TRIBUNAL IN THE CASE OF SUDHAKAR M. S HETTY VS. ACIT REPORTED IN 130 ITD 197 (2011) WAS APPLICABLE TO T HE FACTS OF ASSESSEE. HE ACCORDINGLY HELD THE AMOUNT OF RS.1,21,00,000 /- RECEIVED BY THE ASSESSEE TO BE TRANSFER WITHIN THE MEANING OF SEC .2(47) OF THE ACT WHICH ATTRACTS CAPITAL GAINS AS PER SEC.45 OF THE ACT. H E ACCORDINGLY BROUGHT THE SAID AMOUNT TO TAX ON ACCOUNT OF LONG TER M CAPITAL GAINS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO ALLOWED THE APPEAL OF ASSESSEE BY OBSERVING AS UNDER : 5.3. I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISS ION MADE BY THE APPELLANT AS ABOVE CAREFULLY. IT IS SEEN FROM T HE ASSESSMENT ORDER THAT THE AO HAD TREATED THE ONE TIME RETIREMENT AMOUNT R ECEIVED BY THE APPELLANT OF RS.1,21,00,000/- FOR AY 2012-13 FROM THE FIRM M/S. PN GADGIL & CO. (SILVER) WHEREIN HE WAS A PARTNER SINCE 1998, A S INCOME FROM LONG TERM CAPITAL GAINS FOLLOWING THE DECISION S OF THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF SUDHAKAR M SHETTY VS. ACIT , 130 ITD 197 [2011], DENYING THE APPELLANT'S CLAIM THAT SUCH RETIREMENT AMOUNT WAS HIS SHARE IN THE NOTIONAL APPRECIATION IN THE VALUE OF THE IMM OVABLE PROPERTIES BELONGING TO THE SAID FIRM AS ON 31.03.2012. THE A PPELLANT HAD CLAIMED THE SAME AS EXEMPT RELYING ON THE DECISIONS OF THE MUMBAI HIGH COURT IN THE CASE OF PRASHANT S JOSHI VS. CIT (SUPRA) A ND RIYAZ A SHAIKH OF THE SAME HIGH COURT OF ORDER DATED 26.02.2013 AND T HE PUNE ITAT DECISION IN THE CASE OF RAJNATH MANILAL BHANDARI. THE AO TREATED THE SAME AMOUNT RECEIVED AS TRANSFER WITHIN THE PROVISI ONS OF SECTION 2(47) OF THE ACT AND ALSO HAD APPLIED THE CHARGING SECTION O F SECTION 45 FOR TREATING THE SAID AMOUNT AS APPELLANTS INCOME FROM CAPITAL GAINS. 5.3.1. THE APPELLANT, ON THE OTHER HAND, CONTENDED THAT THE AO HAD COMMITTED A PATENT MISTAKE IN JUDGING THE FACTS OF THE APPELLANT'S CASE AND APPLYING THE CASE OF MUMBAI TRIBUNAL VIZ. SUDHAKAR M SHETTY (SUPRA) WHICH WAS CLEARLY MIS-CEIVED. IT WAS CONTENDED BY THE APPELLANT THAT THE CRUCIAL TEST PROPOUNDED BY THE H ON'BLE BENCH IN THE SAID CASE WAS THAT THERE SHOULD BE NO BASIS OF NOTI ONAL SALE IN THE EXTRA AMOUNT AGREED TO BE PAID TO THE RETIRING PART NER OVER AND ABOVE HIS CAPITAL BUT ONLY A LUMP SUM PAYMENT IN DISCHARG E OF HIS BUNDLE OF RIGHTS IN THE FIRM. HOWEVER, IN THE CASE APPELLANT, THE APPELLANT HAD PRODUCED THE WORKING IN SUPPORT OF THE AMOUNT OF RS .1,21,00,000/- RECEIVED BY HIM AND WHICH WAS THE NOTIONAL APPRECIA TION IN THE VALUE OF THE IMMOVABLE PROPERTIES BELONGING TO THE FIRM. IT WAS NOT A N AD- HOC OR LUMP SUM PAYMENT TO THE APPELLANT BUT IT HAD A DEFINITE BASIS WHICH WAS THE ASSUMPTION OF NOTIONAL SALE ON THE DA TE OF RETIREMENT . IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAD TOTALLY MISAPPLIED THAT JUDGMENT TO THE FACTS OF THE ASSESS EE'S CASE AND HE HAD NOT MADE OUT ANY LEGAL CASE EXCEPTING HIS RELIA NCE ON THE SAID JUDGMENT IN THE CASE OF SUDHAKAR SHETTY(SUPRA). THE APPELLANT THEREAFTER, CITED A NUMBER OF DECISIONS IN THE SUBM ISSION QUOTED ABOVE INTER-ALIA CONTENDED THAT AFTER THE DECISION OF SUDHAKAR SHETTY (SUPRA), HON'BLE SUPREME COURT IN THE CASE OF CIT V S. LINGMALLU RAGHUKUMAR, 247 ITR 801 HAD RULED THAT AMOUNT RECEIVED BY A PARTNER ON RETIREMENT IS NOT TAXABLE UNDER THE HEAD OF TAXABLE. THE APPELLANT ALSO REFERRED TO THE PUNE TRIBUNAL DECISI ON IN THE CASE OF 4 RIYAZ A SHAIKH (SUPRA) WHICH WAS DECIDED IN FAVOUR OF THE S AID ASSESSEE BUT DEPARTMENT WENT IN APPEAL BEFORE THE H ON ' BLE BOMBAY HIGH COURT IN ANOTHER JUDGMENT IN THE CASE O F RAJNISH M BHANDARI VS. ITO. IT WAS ALSO CONTENDED THAT HON.BL E PUNE TRIBUNAL HAD CONSIDERED THE ISSUE IN THE CASE OF NA MODY AND CONCLUDED THAT THE AMOUNT RECEIVED ON RETIREMENT BY PARTNER IS NOT TAXABLE. DISCUSSION THE FACTS OF THE CASES AND THE FACTS IN APPELLANT'S CASE, THE APPELLANT SUBMITTED THAT THE ADDITION MADE OF RS.1, 21,00,000/- AS INCOME FROM LONG TERM CAPITAL GAINS BY THE AO BE DE LETED. 5.3.2. I AM INCLINED TO AGREE WITH THE SUBMISSION A ND CONTENTION OF THE APPELLANT. FOR THE DETAILED FACTS STATED BY THE APP ELLANT RELYING ON THE NUMBER OF DECISIONS, I HOLD THAT THE AO WAS NOT JUS TIFIED IN MAKING THE ADDITION OF RS.1,21,00,000/- HOLDING THE RETIR EMENT BENEFIT RECEIVED BY THE APPELLANT ON ACCOUNT OF NOTIONAL AP PRECIATION VALUE OF THE IMMOVABLE PROPERTIES BELONGING TO THE FIRM AS O N DATE OF RETIREMENT, IN WHICH HE WAS A PARTNER ONLY RELYING ON THE DECISION IN THE CASE OF SUDHAKAR SHETTY (SUPRA). I HOLD THE SIM ILAR VIEW AS OF THE APPELLANT THAT THE SAID CASE WAS WRONGLY APPLIED BY THE AO WITHOUT PROPER APPRECIATION OF THE FACTS IN APPELLANTS CA SE UNDER CONSIDERATION. I ON THE OTHER HAND, FOUND THAT THE CASE OF PRASHANT S JOSHI VS. CIT, 324 ITR 154 (BOM) WAS SQUARELY APPLI CABLE IN THE CASE OF THE APPELLANT. THEREFORE, THE ADDITION MADE OF RS.1,21,00,000/- ON ACCOUNT OF LONG TERM CAPITAL GAINS IS HEREBY DELETE D. GROUND NOS.1 TO 4 RAISED BY THE APPELLANT ARE ACCORDINGLY ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 5. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER RELIED ON THE DECISION OF PUNE TRIBUNAL IN THE C ASE OF ITO VS. SHRI RAJNISH M. BHANDARI (IN ITA NO.469/PN/2011 ORDER D ATED 17.07.2012). HE ALSO PLACED ON RECORD THE COPY OF THE AFOR ESAID ORDER. LD.A.R. FURTHER SUBMITTED THAT WHILE DECIDING THE ISSUE IN THE CASE OF RAJNISH M. BHANDARI (SUPRA), THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS RELIED ON THE DECISION OF PUNE TRIBUNAL IN THE CASE OF MR. RI YAZ A SHAIKH VS. ITO IN ITA NO.352/PN/2016 DATED 29.10.2010 WHEREIN IT WAS HELD THAT THE AMOUNT RECEIVED BY THE PARTNER ON HIS RETIREM ENT IS EXEMPT. HE SUBMITTED THAT AGAINST THE ORDER OF THE TRIBUNAL IN T HE CASE OF RIYAZ A SHAIKH (SUPRA), REVENUE HAD PREFERRED APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AND THE BOMBAY HIGH COURT IN ITA NO. 1969 OF 2011 5 DATED 26.02.2013 HAD DISMISSED THE APPEAL OF THE REVENUE. HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. HE THEREFO RE SUBMITTED THAT IN THE ABOVE FACTS AND CIRCUMSTANCES, NO INTERFERENC E TO THE ORDER OF LD.CIT(A), IS CALLED FOR. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO TAXABILITY OF THE AMOUNTS RECEIVED BY THE ASSESSEE ON HIS RETIREMENT FROM THE PARTNERSHIP FIRM. IT IS REVENUES CONTENTION THAT THE AM OUNT IS LIABLE TO TAX WHEREAS ON THE OTHER HAND, IT IS ASSESSEES SUBMISS ION THAT THE AMOUNT IS NOT TAXABLE. WE FIND THAT LD.CIT(A) WHILE DECIDING THE ISSUE HAD NOTED THAT THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF PRASHANT S JOSHI VS. CIT WAS APPLICABLE TO THE CASE O F THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION. WE FURTHER FIND THAT BEFORE LD.CIT(A) ASSESSEE HAD RELIED ON THE DECISION OF PUNE TRIBUN AL IN THE CASE OF RAJNISH M. BHANDARI (SUPRA) WHICH IN TURN HAD RE LIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RI YAZ A. SHAIKH VS. ITO (SUPRA). WE FIND THAT AGAINST THE ORDER IN THE CA SE OF RIYAZ A. SHAIKH (SUPRA), APPEAL WAS PREFERRED BY THE REVENUE BEFOR E THE HONBLE BOMBAY HIGH COURT AND THE SAME WAS DISMISSED BY THE H ONBLE BOMBAY HIGH COURT. BEFORE US, REVENUE HAS NOT POINTED OUT ANY FALLACY IN THE FINDINGS OF LD.CIT(A) NOR HAS PLACED ANY CONTRARY BIN DING DECISION IN ITS SUPPORT. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUNDS OF THE REVENUE ARE DISMISSED. 6 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 12 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH SEPTEMBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-3, PUNE. PR. CIT-2, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.