M/s. Payal International Ltd., New Delhi V. ACIT, New Delhi

ITA 1809/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65352 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Assessee Lawyers: PREM NATH MONGA
• Keywords: Capital asset; Business expenditure; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1809/DEL/2011 ASSESSMENT YEAR : 2003-4 M/S PAYAL INTERNATIONAL LTD., ACIT, F-29, SOUTH EXTENSION, CIRCLE-14 (1), PART-II, NEW DELHI-110049. V. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PREM NATH MONGA, ADVOCATE. RESPONDENT BY : SMT. VEENA JOSHI, SR. DR. ORDER PER TS KAPOOR, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 9.2.2011. THE GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER:- 1(A) THAT THE LD CIT(A) HAS ERRED ION LAW IN CONFIRM ING IMPUGNED ORDER PASSED BY THE LD ASSESSING OFFICER AND UPHOLDING H IS ACTION TAKEN U/S 147 OF THE INCOME TAX ACT, 1961 . 1(B). THAT THERE BEING NO ESCAPEMENT OF ANY INCOME, CONDITIONS OF SECTION 147 WERE NOT FULFILLED, THE IMPUGNED ORDE R CONFIRMING THE ACTION OF THE LD ASSESSING OFFICER IN ISSUING NOTICE U/S 148 OF THE ACT AND RE-OPENING OF THE ASSESSMENT U/S 147 WAS LE GALLY UNSUSTAINABLE. ITA NO1809/DEL/2011 2 2(A). THAT THE LD CIT(A) HAS FURTHER GONE WRONG IN H OLDING THAT THE LOSS INCURRED BY THE APPELLANT IN THE SURRENDER OF PLOT WAS NOT A REVENUE LOSS BUT A CAPITAL LOSS AS RIGHTLY HELD B Y THE LD ASSESSING OFFICER. 2(B). THAT IN CONFIRMING THE DISALLOWANCE MADE BY TH E LD ASSESSING OFFICER OF ` .3,13,950/- BY AN ORDER PASSED U/S 147/143(3), LD CIT(A) HAS FAILED TO CORRECTLY APPRAI SE THE LEGAL AND FACTUAL POSITION. 3. THAT THE SUBMISSIONS MADE BY THE APPELLANT BEFORE T HE LD ASSESSING OFFICER/CIT(A) HAS NOT PROPERLY APPRECIATED LE ADING TO ERRONEOUS CONCLUSION. 4. THAT THE ORDER PASSED BY THE LD CIT(A) IS BAD IN LA W AND AGAINST THE FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY WHICH FILED RETURN ON 22.10.2003 AND THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 12.1.2004. THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 AND NOTICE 148 OF THE ACT WAS ISSUED T O THE ASSESSEE ON 10.3.2010. THE ASSESSEE REPLIED TO NOTICE THAT ITS R ETURN AS ALREADY FILED ON 22.10.2003 MAY BE TREATED AS RETURN FILED I N RESPONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSING OFFICER NOTED THAT AS SESSEE HAD CLAIMED A LOSS OF ` .3,13,950/- IN RESPECT OF SURRENDER OF INDUSTRIAL PLOT ALLOTTED TO IT BY HARYANA URBAN DEVELOPMENT AUTHORI TY (HUDA). THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE LOSS DUE TO SURRE NDER OF PLOT MAY NOT BE TREATED AS CAPITAL LOSS. IN REPLY TO THAT, THE ASSESSEE SUBMITTED THAT PLOT WAS BEING PURCHASED FOR BUSINESS PURP OSES. BEFORE IT COULD BE ACQUIRED, THE SAME WAS SURRENDERED AND 5% OF ALLOTMENT ITA NO1809/DEL/2011 3 AMOUNT AS DEDUCTED BY HUDA WAS NECESSARILY A BUSINESS EXP ENDITURE AS NO CAPITAL ASSET HAD COME INTO EXISTENCE AND CAPITAL ; LOSS OCCURS ONLY WHEN THE FIXED ASSET IS SOLD. THE ASSESSING OFFICER DI D NOT ACCEPT THE CONTENTION OF ASSESSEE AND MADE AN ADDITION OF ` .3,13,950/- ON ACCOUNT OF DISALLOWANCE BEING LOSS SUFFERED BY ASSESSEE A S OF CAPITAL NATURE. THE ASSESSEE FILED AN APPEAL BEFORE LD CIT(A) AND SUBMITTED AS UNDER:- A) THAT ASSESSING OFFICER HAD ORIGINALLY SENT NOTICES U/S 15 4/155 ON 22.7.2005 TO WHICH ASSESSEE HAD OBJECTED AND THEREAFTER NO ORDER WAS PASSED U/S 155 OF THE ACT AND THEREFORE IN VI EW OF THAT THE LD AR SUBMITTED THAT NO PROCEEDINGS U/S 147/148 OF THE ACT CAN BE MADE WHEN THE MATTER WAS ALREADY DEALT IN THE PROCEEDINGS U/S 154/155 OF THE ACT. B) THAT NO CAPITAL ASSET HAS COME INTO EXISTENCE AND HENC E THERE CANNOT BE ANY CAPITAL LOSS. C) THAT THE APPELLANT HAS ONLY RECEIVED BACK ITS OWN MON EY GIVEN AS ADVANCE AFTER DEDUCTION OF 5% WITHOUT ANY TITLE O R ANY PROPERTY OR ASSET OR CREATION OF ANY ASSET. D) THAT SINCE THERE IS NO CAPITAL LOSS, THE DEDUCTION MADE BY HUDA IS AN EXPENDITURE RELATED TO THE BUSINESS OF APPELLANT AND IS THEREFORE TO BE ALLOWED AS BUSINESS EXPENDITURE. 3. THE LD CIT(A) DID NOT AGREE WITH THE ASSESSEES APPEA L AND HELD THE DISALLOWANCE MADE WAS JUSTIFIED. THE RELEVANT PAR A OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPE LLANT AND PERUSED THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. IT IS NOT IN DISPUTE THAT THE APPELLANT COMPANY IS ENGAGE D IN THE ITA NO1809/DEL/2011 4 BUSINESS OF EXPORTS. IT APPLIED FOR ALLOTMENT OF AN IN DUSTRIAL PLOT AND SAME WAS ALLOTTED BY HARYANA URBAN DEVELOPMENT AU THORITY (HUDA) AND IT DEPOSITED ALLOTMENT MONEY ALSO. IT IS NO T THE CASE OF THE APPELLANT THAT THEY ARE DEALING IN THE REAL ESTATE BUSINESS AND PLOT WAS MEANT FOR TRADING. IT IS CLEAR THAT THE INTENTION OF THE APPELLANT WAS TO ACQUIRE A PLOT WHICH WAS A CAPIT AL ASSET. THE MOMENT THE APPELLANT WAS ALLOTTED A PLOT, IT HAS ACQUIRED A RIGHT IN THE IMMOVABLE PROPERTY. THE PROPERTY ALSO I NCLUDES A RIGHT IN THE PROPERTY. THE SURRENDER OF PLOT MEANS T HE APPELLANT HAS EXTINGUISHED ITS RIGHT IN THE PLOT, THE RIGHT WHI CH IT HAD ACQUIRED BY WAY OF ALLOTMENT. SECTION 2(47) OF THE IT ACT, 1961, DEFINES THE TRANSFER TO INCLUDE THE EXTINGUISHMENT OF ANY RIGHT IN AN ASSET. THUS, THE LOSS INCURRED ON SURRENDER OF THE PL OT CANNOT BE SAID TO BE A REVENUE LOSS. IN VIEW OF THE ABOVE DISC USSION, I HOLD THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN T REATING THE LOSS OF ` .3,13,950/- AS CAPITAL LOSS. 4. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THIS TRIB UNAL. 5. AT THE OUTSET, THE LD AR STATED THAT IT WAS A CASE O F CHANGE OF OPINION AND THEREFORE REOPENING U/S 147/148 OF THE ACT WAS NOT WARRANTED. IN THIS RESPECT HE TOOK US TO PAGES 7 & 8 O F PAPER BOOK WHERE INTIMATION U/S 143(1) DATED 12.1.2004, NOTICE U/S 154/155 DATED 22.7.2005 AND REPLY FILED BY THE ASSESSEE AGAINST NOTIC ES U/S 154/155 WERE PLACED. THE LD AR FURTHER STATED THAT NO ORDER U/S 154/155 WAS COMMUNICATED TO THE ASSESSEE AND THEREFORE ASSESSEE BELIEVE D THAT PROCEEDINGS U/S 154/155 HAD BEEN DROPPED. HE FURTHER STATED THAT THEN NOTICE U/S 147/148 DATED 10.3.2010 WAS SERVED UPO N THE ASSESSEE AND THAT TOO WITHOUT A COPY OF REASONS RECORDED. IN VIEW OF THE ABOVE FACT THE LD AR ARGUED THAT ASSESSEE HAD SUPPLI ED ALL THE ITA NO1809/DEL/2011 5 INFORMATION/DOCUMENTS IN REPLY TO PROCEEDINGS U/S 154/ 155 IN THE YEAR 2005 AND HENCE ALL MATERIAL WAS AVAILABLE BEFORE ASSESSI NG OFFICER AND ASSESSING OFFICER COULD HAVE TAKEN ACTION THEN ONLY. T HE ISSUE OF NOTICE U/S 147/148 IN THE YEAR 2010 IS THEREFORE ON A CCOUNT OF CHANGE OF OPINION ONLY AS NO NEW MATERIAL HAD COME BEFORE T HE ASSESSING OFFICER. RELIANCE WAS PLACED ON THE FOLLOWING JUDGME NTS:- 1. PURI BROS. V. CIT 205 TAXMAN 163. 2. KELVINATOR OF INDIA V. CIT 32O ITR 561 (SC). 3. KELVINATOR OF INDIA LTD. V. CIT 256 (ITR 1 (DEL.). 6. ON THE MERITS ALSO, THE LD AR ARGUED THAT LOSS SUFFER ED BY THE ASSESSEE ON ACCOUNT OF DEDUCTION MADE BY HUDA IS A NORMA L BUSINESS EXPENDITURE. RELIANCE WEAS PLACED IN THE CASE OF INDO RAMA SYNTHETICS LTD. V. CIT 228 CTR 278. 7. ON THE OTHER HAND, LD DR ARGUED THAT THERE WAS NO CHANGE OF OPINION. HE FURTHER STATED THAT CASE WAS ASSESSED U/S 143( 1) IN JANUARY, 2004. DURING 2005 AUDIT PARTY HAD RAISED CE RTAIN OBJECTIONS ON THE BASIS OF WHICH THE ASSESSING OFFICER WANTED TO REC TIFY U/S 154/155 OF THE ACT. ON FINDING THAT MISTAKE WAS NOT R ECTIFIABLE, HE DROPPED THE PROCEEDINGS AND INTIMATED THE AUDIT PART Y ACCORDINGLY. THE AUDIT PARTY DID NOT AGREE AND IN 2010 AGAIN SENT MEMO TO ASSESSING OFFICER. THE ASSESSING OFFICER THEN PROCEEDED TO REOPEN THE CASE OF THE ASSESSEE ON THE BASIS OF NEW MATERIAL IN THE F ORM OF MEMO WHICH CAME INTO NOTICE IN 2010. IN VIEW OF THE ABO VE, THE LD DR ARGUED THAT THERE WAS NO CHANGE OF OPINION. RELIANCE WAS PLA CED ON THE FOLLOWING JUDGMENTS:- 1. TEEKOY RUBBERS (INDIA) LIMITED. V. COMMISSIONER OF INCOME TAX. 181 ITR 387 2. RENUSAGAR POWER COMPANY LIMITED. V. INCOME TAX OFFICER, 'A' WARD, CIRCLE I, VARANASI, ITA NO1809/DEL/2011 6 AND ANOTHER. 117 ITR 719. 8. THE LD DR FURTHER ARGUED THAT CASE LAWS RELIED UPO N BY THE LD AR AND ALL IN RESPECT OF ASSESSMENTS U/S 143(3) WHEREAS THE PR ESENT ASSESSMENT WAS U/S 143(1) OF THE ACT. 9. IN HIS REJOINDER THE LD AR ARGUED THAT AUDIT PART Y CANNOT ADVICE ON LEGAL MATTERS. RELIANCE WAS PLACED IN THE CASE OF 2 TAXMEN 197. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND HAVE NOTED THAT ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S 143(1). THE MEMO SENT BY AUDIT PARTY WAS A FRESH MATERIAL AND ASSESSING O FFICER WAS WITHIN HIS RIGHTS TO INITIATE PROCEEDINGS U/S 147/148 E SPECIALLY KEEPING IN VIEW THE RATIO SET BY HON'BLE SUPREME COURT IN TH E CASE OF ACIT V. RAJESH JHAVERI STOCK BROKER PVT. LTD. 291 ITR 500 (S C) WHEREIN HON'BLE SUPREME COURT HAD HELD THAT IN A CASE WHERE NO SCRUTI NY ASSESSMENT WAS UNDERTAKEN, IT CANNOT BE SAID RE-ASSESSMENT PROCEEDIN GS ARE INITIATED ON CHANGE OF OPINION. THE CASE LAWS RELIED UPON BY LD AR ARE OF NO HELP TO THE ASSESSEE AS ASSESSMENTS IN THESE CASES WAS COMPLETED U/S 143(3) AND NOT U/S 143(1). IN VIEW OF T HE ABOVE, GROUND NO.1 OF THE APPEAL IS DECIDED AGAINST THE ASSESSEE. 11. AS REGARDS DISALLOWANCE ON ACCOUNT OF CAPITAL LOSS, IT IS CLEAR THAT INTENTION OF THE APPELLANT WAS TO ACQUIRE PLOT WHICH WAS A CAPITAL ASSET. THE MOMENT, THE APPELLANT WAS ALLOTTED A PLOT , IT HAS ACQUIRED RIGHT IN IMMOVABLE PROPERTY SINCE THE PROPERTY ALSO I NCLUDES RIGHT IN THE PROPERTY THEREFORE SURRENDER OF PLOT MEANS APPELL ANT HAS EXTINGUISHED ITS RIGHT IN THE PLOT AND THEREFORE THE RIGHT IN IMMOVABLE PROPERTY IN THE FORM OF ALLOTMENT LETTER WAS A CAPIT AL ASSET AND TRANSFER ITA NO1809/DEL/2011 7 THEREOF INVOLVED CAPITAL LOSS OR CAPITAL GAIN. IN T HE PRESENT CASE, THE ASSESSEE SUFFERED A CAPITAL LOSS. THE CASE LAWS RELIED UPON BY THE LD AR IN INDORAMA SYNTHETIC LTD. (SUPRA) IS OF LITTLE HE LP TO THE ASSESSEE AS IN THAT CASE THE ASSESSEE HAD INCURRED EXPENSES RELATING T O SALARY, WAGES, REPAIR AND MAINTENANCE ETC. FOR ITS ABUNDANT P ROJECT AND THESE EXPENSES WERE NECESSARILY OF REVENUE NATURE. THEREFORE , THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE NOT SIMILAR TO THE FACTS & CIRCUMSTANCES OF THE CASE RELIED UPON BY ASSESSEE. THEREFO RE, GROUND NO.2 IS ALSO DECIDED AGAINST THE ASSESSEE. IN VIEW OF TH E ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED, 13. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH DAY O F SEPTEMBER, 2012. SD/- SD/- (I.C. SUDHIR) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.07.09.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 19.7.2012 ITA NO1809/DEL/2011 8 DATE OF DICTATION 3.9.2012 DATE OF TYPING 4.9.2012 DATE OF ORDER SIGNED BY 7.9.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 7.9.2012 & SENT TO THE BENCH CONCERNED.