ACIT, CHENNAI V. Shri N.Rathna Kumar, CHENNAI

ITA 1966/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5253 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RANGARAJAN
• Assessee Lawyers: T VASUDEVAN
• Keywords: Depreciation; Retrospective amendment; Tax effect

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH, CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI.ABRAHAM P. GEORGE, A.M. I.T.A. NO.1966/MDS/2010 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IV, CHENNAI 34. VS. SHRI N. RATHNA KUMAR, NO.224, DEFENCE OFFICERS COLONY, EKKADUTHANGAL, CHENNAI 600 097. [PAN:ADGPN7953G] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.E.B. RANGARAJAN ASSESSEE BY : SHRI T. VASUDEVAN ORDER PER U.B.S. BEDI, J.M . THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) VIII, CHENNAI DATED 11.08. 2010 RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUNDS NO. 2 TO 3.3, WHICH ARE REPRODUCED AS UNDER: 2. THE LD. CIT(A) ERRED IN DE CIDING THAT THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF RUNNING THE NURSING HOME WERE NOT EXCESSIVE. 2.1 THE LD. CIT(A) ERRED IN DIRECT ING THE ASSESSING OFFICER TO ALLOW THE BUSINESS LOSS OF ` .5,11,008/- CLAIMED BY T HE ASSESSEE EXCEPT FOR RESTRICTING THE DEPRECIATION CLAIM OF THE ASSESSEE ON MOTOR CARS TO ` .56,476/- (AS AGAINST ` . 1,11,616/- CLAIMED BY THE ASSESSEE). 2.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT ON ACCOUNT OF EXCESSIVE CLAIM OF EXPENSES BY THE ASSESSEE. THE ASSE SSEE COULD NOT SUBSTANTIATE EITHER THE RECEIPTS OR EXPENSES IN THE PR OFIT AND LOSS ACCOUNT WITH BOOKS OF ACCOUNTS OR SUPPORTING DOCUMENTS EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). THUS THE ASSESSI NG OFFICER WAS LEFT WITH NO OTHER ALTERNATIVE BUT TO DISALLOW THE LOSS OF ` . 5,11,008/- CLAIMED. I.T.A. NO.1966/MDS/10 2 3. THE LD. CIT(A) ERRED IN COMING TO THE CONCLUSION THAT THE ACTIVITY OF THE ASSESSEE IN SPLITTING THE INCO ME FROM PROPERTY/ BUSINESS INHERITED FROM HIS FATHER AND ADMITTING THE SAME IN THE HANDS OF HIS NEWLY CREATED HUF(CONSISTING OF HIMSELF HIS WIFE AND HIS DAUGHTER) & HIS WIFE, SHALL AMOUNT TO LEGITIMATE TAX PLANNING. 3.1 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE FACTS OF THE APEX COURT DECISION RELIED UPON, IN THE CASE OF AZADI BACHAO ANDOLAN 263 ITR 706 ARE DISTINGUISHABLE. 3.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT IT IS SETTLED LAW THAT THE ASSESSEE AS ONLY SON OF HIS FATHER HAS TO NECESSARILY ADMIT ALL THE INCOME FROM THE PROPERTY/BUSINESS INHER ITED FROM HIS FATHER ONLY IN HIS INDIVIDUAL HANDS [CWT VS CHANDAR SE N (161 ITR 370) (SC) & CIT V RAM RAKSHPAL ASHOK KUMAR (67 ITR 164((ALL)]. 3.3 THE LD. CIT(A) FAILED TO CONSI DER THAT THE CONDUCT OF ASSESSEE IN CREATING A NEW HUF FILE & A SOLE PROPR IETARY BUSINESS IN NAME OF HIS WIFE (BOTH FILES ASSESSED IN TUTICORIN) IS SQUARELY COVERED BY THE APEX COURT DECISION IN THE CASE OF MCDOWELL AND COMPANY LIMITED (154 ITR 148). 2. THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET SUBMITTED THAT NOW FRESH CIRCULAR OF CBDT HAS COME, WHICH HAS RAISED THE FINANCIAL LIMIT FOR FILING OF APPEAL BEFORE THE TRIBUNAL TO ` .3.00 LAKHS OF TAX EFFECT AGAINST THE EARLIER LIMIT OF ` .2.00 LAKHS AND BY FILING COPY OF INSTRU CTION NO.3 OF 2011 DATED 09.02.2011, IT WAS PLEADED FOR DISMISSING THE APPEA L OF THE DEPARTMENT AS TAX ON ` . 4,48,800/- WILL COME BELOW ` .3.00 LAKHS AND THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT IN THIS FRESH CIRCUL AR DATED 09.02.2011, THERE IS SPECIFIC STIPULATION [AS PER PAR A 11 OF THE INSTRUCTION] THAT TH IS INSTRUCTION SHALL APPLY TO APPEALS FILED ON OR AFTER 09.02.2011 AND EA RLIER FILED APPEALS WILL BE GOVERNED BY EARLIER INSTRUCTIONS ON THIS SUBJECT, OPERATIVE WHEN SUCH APPEAL WAS FILED AND THE LD. DR HAS PLEADED FOR DISMISSAL OF THE PLEA OF THE ASSESSEES COUNSEL AND TO DECIDE THE APPEAL ON MERITS. I.T.A. NO.1966/MDS/10 3 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT O PERATION OF EARLIER INSTRUCTION, WHICH IS SIMILARLY WORDED, IN THIS REGARD, HAS BEEN HELD TO BE RETROSPECTIVE EFFECTIVE IN VIEW OF THE DECISIONS OF HONBLE BOMBAY AND PUNJAB & HARYANA HIGH COURTS. THEREFORE, IT WAS PLEADED THAT THE PLEA OF THE DEPARTMENT IN THIS REGARD SHOULD NOT BE ENTERTAI NED AND THE APPEAL SHOUL D BE DISMISSED AS NOT MAINTAINABLE. 4. WE HAVE CONSIDERED RIVAL SUBMISSI ONS AND MATERIAL ON RE CORD. SO FAR AS THE OBJECTION OF THE ASSESS EES COUNSEL IS CONCERNED ABOUT LESS TAX EFFECT, WE FIND THAT IN THE CBDT INSTRUCTION NO .3/2011 DATED 09.02.2011, THERE IS CLEAR STIPULATION AS PER PARA 11 OF THE SAID INSTRUCTION THAT THESE INSTRUCTIONS WILL BE APPLICABLE TO THE APPEALS FILED ON OR A FTER 09.02.2011. BUT SIMILAR TYPE OF STIPULATION WAS THERE IN IN STRUCTION NO.3 OF 2008 DA TED 15.05.2008 IN CLAUSE 11 OF SAID INSTRUCTION AND MORE THAN ONE HIGH COURTS STATED TO HAVE HELD THAT REVISED MONETARY LIMIT WOULD APPLY TO ALL PENDING APPEALS AND SUCH ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN REFUTED BY THE LD. DR AND OTHERWISE, THE DEPARTM ENT HAS NOT MADE OUT A CASE TO ESTABLISH THAT THE ISSUE FALLS WITHIN THE EXCEPTIONS PROVIDED IN THE SAID CIRCULAR/ INSTRUCTION. 4.1 FURTHER IN THE CASE OF CIT V. ASSOCIATED AGENCIES, CHENNAI-600 034 REPORTED IN 295 ITR 496, T HE HONBLE MADRAS HIGH CO URT HAS HELD THAT APPEALS CANNOT BE FILED IN VIOLATION OF THE SAID CIRCULAR. THE HONBLE MADRAS HIGH COURT HAD ALSO REFERRED TO THE J UDGMENT OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. DIGVIJAY SINGH REPORTED IN (2007) 292 ITR 314, THE JUDGMENT OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. ZOEB Y. TOPIWALS (2006) 284 I.T.A. NO.1966/MDS/10 4 ITR 379 AND ALSO ANOTHER JUDGM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CAMCO COLOUR CO., (2002) 254 ITR 565 FOR THE PROPOSITION THAT DIRECTIONS ISSUED BY THE BOARD ARE BI NDING ON THE DEPARTMENT AND APPEAL FILED WHERE THE TAX EFFECT IS LESS THAN THAT PROVIDED IN THE SAID INSTRUCTION IS NOT MAINTAINABLE. 4.2 HENCE, IN VIEW OF THE SAID CI RCULAR AND RESPECTFULLY FOLLOWING THE PRECEDENTS FROM HONBLE JURISDICTIONAL HI GH COURT AS NOTED ABOVE, THE APPEAL IS DISMISSED IN LIMINE. 5 IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED SOON AFTER THE CONCLUSION O HEARING ON 12.04.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE. 12.04.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.