Servall engineering Works P Ltd., Coimbatore V. DCIT, Coimbatore

ITA 176/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9062 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: K RAGHU
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Reason to believe; Reassessment proceedings
• Section: 143(3); 50C; 133(6); 147; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO .1 76/MDS/2016 / ASSESSMENT YEAR : 20 0 9 - 1 0 M/S. SERVALL ENGINEERING WORKS P. LTD., 31, BHARATHI PARK ROAD VIII CROSS, SAIBABA COLONY, COIMBATORE 641 011. [PAN: AA ECS2949H ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , CORPORATE CIRCLE 2 , COIMBATORE. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI K. RAGHU , C.A. / RESPONDENT BY : SHRI A.V. SREEKANTH , J CIT / DATE OF HE ARING : 3 0 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 27 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C OIMBATORE , DATED 2 6 . 1 0 .20 1 5 RELEVANT TO THE ASSESSMENT YEAR 20 0 9 - 1 0 . THE ONLY GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE VALIDITY OF REASSESSMENT DONE BY THE ASSESSING OFFICER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 29.09.2009 DECLARING TOTAL INCOME OF .91,03,409/ - FOR I.T.A. NO . 1 76 /M/ 16 2 THE ASSESSMENT YEAR UNDER CONSIDERATION. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 30.08.2010 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ALL PARTICULARS INCLUDING THE DETAILS OF WORKING FOR LONG TERM CAPITAL GAINS TOGETHER WITH COPIES OF DOCUMENTS FOR SALE OF PROPERTIES. AFTER CO NSIDERING THE DETAILS FILED BY THE ASSESSEE AND AFTER MAKING VARIOUS ADDITIONS, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 20.12.2011 BY DETERMINING TOTAL INCOME OF THE ASSESSEE AT .1,84,10,473/ - . 3. THEREAFTER, T HE A SSESSING O FFICER HAS ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 12.03.2014, STATING THAT HE HAS REASON TO BELIEVE THAT INCOME OF THE A SSESSEE CHARGEABLE TO TAX FOR THE ASS ESSMENT Y EAR 2009 - 10 HAD ESCAPED ASSESSMEN T WITHIN THE MEANING OF SECTION 147 OF THE ACT . THE A SSESSEE, AFTER COMPLYING WITH THE NOTICE UNDER SECTION 148 OF THE ACT , SOUGHT FOR THE 'REASON TO B E LIEVE' AND THE A SSESSING O FFICER HAS GIVEN THE 'REASON TO BELIEVE' BY HIS LETTER DATED 01.07.2014, WHICH READS AS UNDER: IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE COMPANY HAD SOLD TWO LANDED PROPERTIES TO ITS DIRECTOR TO THE TUNE OF RS. 68, 23, 000/ - . WHILE CALCULATING LTCG, THE ASSESSEE HAD TAKEN A SUM OF .1,43,02,957/ - AS A MARKET VALUE FOR THE ABOVE TWO LANDED PROPERTIES AND ARRIVED A SUM OF .54, 65,453/ - AS LTCG FOR THE A. Y. 2009 - 10. HOWEVER, THE ASSESSEE COMPANY HAD NOT ADOPTED GUIDELINE VALUE AS PER SECTION 50 C .' I.T.A. NO . 1 76 /M/ 16 3 DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS SOLD TWO LANDED PROPERTIES TO ITS DIRECTOR AND THE DETAILS ARE AS UNDER: DETAILS OF LAND SOLD COST OF ACQUISITION ( .) SALE DEED VALUE ( .) VALUE ADOPTED BY ASSESSEE FOR THE PURPOSE OF LTCG ( .) 8 ACRES AND 29 CENTS OF LAND AT VEERAPANDI VILLAGE, COIMBATORE IN SF NO. 474/1 2.,28,478 6,23,000 46,60,084 2 ACRES 87120 SQ.FT.) LAND AT VELLAKINAR VILLAGE, COIMBATORE 24,86,398 62,00,000 96,42,873 THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT T HE A SSESSING O FFICER HAS TOTALLY EXCEEDED HIS JURISDICTION IN STATING THAT THE A SSESSEE COMPANY HAD NOT ADOPTED THE VALUE AS PER SECTION 50 C OF THE ACT. THE A SSESSEE HAS, IN FACT, APPLIED THE SAID PROVISIONS, FOR ADOPTING FULL VALUE OF CONSIDERAT ION RECEIVED OR ACCRUED AS STATED IN SECTION 50 C OF THE ACT . THE A SSESSING OFFICER HAS NOT FOUND THAT THE STAMP VALUATION AUTHORITY HAS FIXED A HIGHER VALUATION THAN DECLARED BY THE A SSESSEE IN THE RETURN. IN THE IMPUGNED ORDER, THE A SSESSING O FFICER HAS S TATED THAT IN ORDER TO ASCERTAIN THE CORRECT VALUE TO BE ADOPTED IN COMPUTATION OF LONG TERM CAPITAL GAINS, INFORMATION WERE CALLED FOR UNDER SECTION 133(6) OF THE I.T. ACT, 1961 FROM THE SUB - REGISTRAR OFFICE AT GANDHIPURAM AND PERIANAICKENPALAYAM, COIMBAT ORE, WHERE THE ABOVE LANDS WERE REGISTERED. THE RESPECTIVE SUB - REGISTRARS HAVE SUBMITTED THE GUIDELINE VALUE IN RESPECT OF THE ABOVE TWO LANDS HAVING THE SURVEY NUMBERS AS MENTIONED IN THE SALE DEEDS. THE DETAILS ARE AS UNDER: I.T.A. NO . 1 76 /M/ 16 4 COST PER CENT AS PER OFFICE R ECORD OF THE SUB - REGISTRAR PERIANAICKENPALAYAM, WHERE THE LAND AT VEERAPANDI VILLAGE MEASURING 8 ACRES AND 29 CENTS WAS REGISTERED . 13 PER SQ.FT. COST PER CENT AS PER OFFICE RECORD OF THE SUB - REGISTRAR, GANDHIPURAM, WHERE THE LAND AT VELLAKINAR VILALGE MEASURING 2 ACRES (87120 Q.FT.) WAS REGISTERED 120 PER SQ.FT. 4. THE ASSESSING OFFICER HAS OBSERVED THAT WITH REGARD TO THE LAND AT VEERAPANDI VILLAGE, THE ASSESSEE HAS ADMITTED .37,73,589/ - AS LONG TERM CAPITAL GAIN IN RESPECT OF THIS LAND. THEREFORE , THE DIFFERENCE IN THE GUIDELINE VALUE OBTAINED FROM THE SUB - REGISTRAR S OFFICE AND THE VALUE ADOPTED BY THE ASSESSEE IN ITS COMPUTATION BEING .34,377/ - ( .38,07,966 .37,73,589 ADMITTED IN THE RETURN) WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. SUBSEQUENTLY, WITH REGARD TO THE LAND AT VELLAKINAR VILLAGE, THE ASSESSEE HAS ADMITTED 16,91,864/ - AS LONG TERM CAPITAL GAIN IN RESPECT OF THIS LAND. THEREFORE, THE DIFFERENCE IN THE GUIDELINE VALUE OBTAINED FROM THE SUB - REGISTRAR S OFFICE AND THE VALUE ADOPTED BY THE ASSESSEE IN ITS COMPUTATION BEING .8,11,527/ - ( .25,03,391 .16,91,864 ADMITTED IN THE RETURN) WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 6. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER REVISED THE TOTAL INCOME ASSESSED BY INCLUDIN G THE DIFFERENCE IN THE LONG TERM CAPITAL GAIN DETERMINED BY HIM AS STATED ABOVE AND WORKED OUT THE TOTAL ASSESSED INCOME AT .1,84,21,316/ - . I.T.A. NO . 1 76 /M/ 16 5 7. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH SIDE S, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE MAIN CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE HAS CONSIDERED THE STAMP DUTY VALUATION REFERRED IN SECTION 50C OF THE ACT FOR T HE PURPOSE OF LONG TERM CAPITAL GAINS AND FURNISHED THE DETAILS AS FOLLOWS: CONSIDERATION RECEIVED AND ACCRUING AS PER SECTION 50C OF THE ACT: 1 ST PROPERTY 2 ND PROPERTY GUIDELINE VALUE FIXED BY THE STAMP DUTY AUTHORITIES .51,16,095 1,05,86,192 LESS EXPENSES IN CONNECTION WITH TRANSFER INCURRED BY THE ASSESSEE STAMP DUTY AND REGISTRATION CHARGES 4,56,011 9,43,319 46,60,084 96,43,319 LESS: INDEXED COST OF ACQUISITION 8,86,495 79,51,009 LONG TERM CAPITAL GAINS 37,7 3,589 16,91,864 AFTER GOING THROUGH THE ABOVE COMPUTATION OF LONG TERM CAPITAL GAINS, THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF REGISTRATION EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSEE WAS NOT ABLE TO PRODUCE THE DETAIL CALLED FOR LIKE BANK A CCOUNT FROM WHICH THE AMOUNTS FROM WHERE EXPENDED. SINCE THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS CLAIM OF EXPENDITURE INCURRED, IT I.T.A. NO . 1 76 /M/ 16 6 WAS NOT DESERVED BY THE ASSESSING OFFICER TO CONFRONT BY THE LD. CIT(A) UNDER SECTION 48(I) OF THE ACT. SECTION 48: AN Y EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER THAT TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. 9. IN THE PRESENT CASE, THE ASSESSEE WAS NOT ABLE TO SHOW AS TO HOW THE STAMP DUTY REGISTRATION EX PENSES WERE INCURRED BY THE ASSESSEE IN CONNECTION WITH TRANSFER OF CAPITAL ASSETS, BEING IT CANNOT BE ALLOWED. FURTHER, THE ASSESSEE MAINLY MADE A PLEA THAT THE ASSESSMENT WAS REOPENED FOR THE PURPOSE OF CONSIDERING THE COMPUTATION OF CAPITAL GAINS BY APP LYING PROVISIONS OF SECTION 50C OF THE ACT I.E., ADOPTION OF STAMP DUTY VALUATION TO FIX THE VALUE OF THE ASSETS TRANSFERRED. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, SINCE THE GROUND FOR WHICH REOPENING WAS NO T SURVIVED, THE REASSESSMENT IS BAD IN L AW. WE ARE NOT IN A POSITION TO AGREE WITH THE PREPOSITION OF THE LD. AR. T HE ASSESSMENT WAS REOPENED VALIDLY AND THE SAME WAS NOT CHALLENGED BEFORE THE ASSESSING OFFICER . THIS IS SO BECAUSE THE PRIMA FACIE, THE VALUE OF CAPITAL ASSETS DECLARED BY THE A SSESSEE IN ITS RETURN OF INCOME DOES NOT TALLY WITH THE VALUE ADOPTED FOR REGISTRATION PURPOSE IN TERMS OF SECTION 50C OF THE ACT. THERE IS NO NECESSITY OF CONCLUSI VE PROOF OF ESCAPEMENT OF INCOME AT THE TIME OF REOPENING OF ASSESSMENT. THUS, THE ASSESSING OFFICER HAS , PRIMA FACIE, REASON TO BELIEVE THAT THE INCOME IS ES CAPED FROM ASSESSMENT. HENCE, THE ASSESSING OFFICER IS EMPOWERED TO MAKE ADDITION ON THE GROUND ON WHICH REASSESSMENT I.T.A. NO . 1 76 /M/ 16 7 NOTICES MIGHT NOT HAVE BEEN ISSUED AS HELD BY THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF N. GOVINDARAJU V. ITO 377 ITR 2 4 3 , WHEREIN IT WAS HELD AS UNDER: SECTION 148 OF THE INCOME - TAX ACT, 1961, REQUIRES THE ASSESSING OFFICER TO ISSUE NOTICE TO THE ASSESSEE WHERE THE INCOME HAS ESCAPED ASSESSMENT. SUB - SECTION (2), WHICH WAS INSERTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989, WITH EFFECT FROM APRIL 1, 1989, REQUIRES THE ASSESSING OFFICER TO RECORD HIS REASONS BEFORE ISSUANCE OF ANY SUCH NOTICE UNDER SUB - SECTION (1) OF SECTION 148. THE ORTHODOX FUNCTION OF AN EXPLANATI ON IS TO EXPLAIN THE MEANING AND EFFECT OF THE MAIN PROVISION. IT IS DIFFERENT IN NATURE FROM A PROVISO, AS THE LATTER EXCEPTS, EXCLUDES OR RESTRICTS, WHILE THE FORMER EXPLAINS OR CLARIFIES AND DOES NOT RESTRICT THE OPERATION OF THE MAIN PROVISION. AN EXPL ANATION IS ALSO DIFFERENT FROM RULES FRAMED UNDER AN ACT. RULES ARE FOR EFFECTIVE IMPLEMENTATION OF THE ACT WHEREAS AN EXPLANATION ONLY EXPLAINS THE PROVISIONS OF THE SECTION. RULES CANNOT GO BEYOND OR AGAINST THE PROVISIONS OF THE ACT AS THEY ARE FRAMED U NDER THE ACT AND IF THERE IS ANY CONTRADICTION, THE ACT WILL PREVAIL OVER THE RULES. THIS IS NOT THE POSITION VIS - A - VIS THE SECTION AND ITS EXPLANATION. THE LATTER, BY ITS VERY NAME, IS INTENDED TO EXPLAIN THE PROVISIONS OF THE SECTION, HENCE, THERE CAN BE NO CONTRADICTION. A SECTION HAS TO BE UNDERSTOOD AND READ HAND IN HAND WITH THE EXPLANATION, WHICH IS ONLY TO SUPPORT THE MAIN PROVISION, LIKE AN EXAMPLE DOES NOT EXPLAIN ANY SITUATION. THE INSERTION OF EXPLANATION 3 TO SECTION 147 DOES NOT IN ANY MANNE R OVERRIDE THE MAIN SECTION AND HAS BEEN ADDED WITH NO OTHER PURPOSE THAN TO EXPLAIN OR CLARIFY THE MAIN SECTION SO AS TO ALSO BRING IN ANY OTHER INCOME (OF THE SECOND PART OF SECTION 147) WITHIN THE AMBIT OF TAX, WHICH MAY HAVE ESCAPED ASSESSMENT, AND C OMES TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENTLY, DURING THE COURSE OF THE PROCEEDINGS. CIRCULAR NO. 5 OF 2010 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ALSO MAKES THIS POSITION CLEAR. THERE IS NO CONFLICT BETWEEN THE MAIN SECTION 147 AND ITS EXP LANATION 3. THIS EXPLANATION HAS BEEN INSERTED ONLY TO CLARIFY THE MAIN SECTION AND NOT CURTAIL ITS SCOPE. THE INSERTION OF EXPLANATION 3 IS THUS CLARIFICATORY AND IS FOR THE BENEFIT OF THE REVENUE AND NOT THE ASSESSEE. AFTER THE INSERTION OF EXPLANATION 3 TO SECTION 147 IT IS CLEAR THAT THE USE OF THE PHRASE AND ALSO BETWEEN THE FIRST AND THE SECOND PARTS OF THE SECTION IS NOT I.T.A. NO . 1 76 /M/ 16 8 CONJUNCTIVE AND ASSESSMENT OF ANY OTHER INCOME' (OF THE SECOND PART) CAN BE MADE INDEPENDENT OF THE FIRST PART (RELATING TO 'SUC H INCOME' FOR WHICH REASONS ARE GIVEN IN NOTICE UNDER SECTION 148), NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE ( ANY OTHER INCOME') HAVE NOT BEEN GIVEN IN THE REASONS RECORDED UNDER SECTION 148(2). THE ISSUANCE OF NOTICE IS JUSTIFIABLE. IF THE ASSES SEE CHOOSES NOT TO CHALLENGE THE NOTICE OR IF IT IS CHALLENGED AND FOUND TO BE VALID, THEN IN EITHER CASE, SUCH NOTICE IS TO BE TREATED AS VALID AND FINAL. SINCE THE VALIDITY OF THE NOTICE ISSUED UNDER SECTION 148(2) CAN BE CHALLENGED OR IS SUBJECT TO JUDI CIAL SCRUTINY, THE ASSESSMENT OR REASSESSMENT OF 'ANY OTHER INCOME' IN THE CASE OF A VALIDLY ISSUED NOTICE CANNOT BE SAID TO BE A CASE OF FISHING AND ROVING ENQUIRY. HENCE, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 27 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.