B.V. JEWELS, MUMBAI V. DCIT CEN CIR 21, MUMBAI

ITA 2064/MUM/2015

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8416 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 20-02-2024
• Assessment Year: 2005-2006
• Appeal Filed On: 08-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOVIND
• Keywords: Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JM & MS PADMAVATHY S, AM I.T.A. No. 2064/Mum/2015 (Assessment Year: 2005-06) B.V. Jewels “C/o, Mr. Suken S. Mehta, Sterling Apartment, 14 th Floor, Room No. 28, Peddar Road, Mumbai- 400026 PAN : AAAFC2291C Vs. Deputy Commissioner of Income Tax, CC-21, Koimbatore. Appellant) : Respondent) Appellant/Assessee by : Shri Vijay Mehta, Shri Govind Javeri, CA Revenue/Respondent by : Shri Ashok Kumar Ambastha, Sr. DR Date of Hearing : 21.02.2024 Date of Pronouncement : 01.03.2024 O R D E R Per Padmavathy S, AM: This appeal of the Asseessee is against the order of the Commissioner of Income Tax (Appeals) – 51, Mumbai dated 23.1.2015 for AY 2005-06. 2. The assessee raised the following concise grounds of appeals. The ld AR presented arguments with regard to these concise grounds during the course 2 ITA No. 2064/Mum/2015 B.V. Jewels hearing and therefore only these grounds are considered for the purpose of adjudication – “(1) The learned CIT(A) inspite of the finding of the Hon'ble ITAT. Mumbai in its order in ITA No. 1433/Mum/2009 dated 13.05.2011 that the consent terms do not indicate the allocation of the properties to the firm at paragraph 7 of its order, has erred in confirming the addition of capital gains of Rs.5,63,07,760/ made by the AO, without disputing that the appellant did not have and could not have transferred, any occupancy right, and holding that arbitration award did not concern the appellant (Para 8.3) elsewhere, in her order, in the facts and the circumstances of the case and in law. (2) The learned CIT(A) has erred in holding that there was a waiver of loan by the ING Vysya Bank, when the loan amount was allotted only to the partners, who between them settled the loan amount, and the firm would be liable to tax u/s 45(4), and in confirming the addition of Rs.5,96,67,306/-, as extinguishment of liability taxable/s 41(1) of the I.T.Act, without due application of mind to the facts and the circumstances of the case and the law. (3) The learned CIT(A) has erred in confirming the disallowance of expenditure in respect of custom case of Rs.6,64,410/-, in the facts and the circumstances of the case and in law. (4) The learned CIT(A) has erred in confirming the disallowance of Rs.8,50,290/- on foreign travel, as personal in nature, in the facts and the circumstances of the case and in law. (5) The learned CIT(A) has erred in confirming the disallowance of Rs. 1,85,133/-, as prior period expenses, being wages paid to the employees, in the facts and the circumstances of the case and in law.” 3. The Assessee is a partnership firm carrying on business of trading in diamonds. The Assessee filed a return of income for AY 2005-06 declaring a total loss of Rs.18,19,087/- on 26.10.2005. The case was selected for scrutiny and the statutory notices were duly served on the Assessee. The AO completed the assessment by making the following additions. Sr.No. Particulars Amount/Rs. 1. Addition towards factory building as capital gains 5,63,07,760 3 ITA No. 2064/Mum/2015 B.V. Jewels 2. Waver of Vaishya Bank Loan added u/s 41(1) 5,96,67,306 3. Legal and professional expenses disallowed 10,80,349 4. Foreign travel expenses disallowed 8,50,210 5. Salaries disallowed 17,50,000 4. Aggrieved, the Assessee filed further appeal before the CIT(A) who gave partial relief to the Assessee by reducing the disallowance made towards legal and professional fees, foreign travel expenses and salaries. The Assessee and the revenue filed appeal before the Tribunal against the order of the CIT(A). The coordinate bench of the Tribunal vide order dated 13.5.2011 (ITA No.1433 and 2038/MUM/2009) restored the issues contended by the Assessee back to the AO and dismissed the appeal filed by the Department. The AO in the remand proceedings retained the additions made during the first round of assessment proceedings as listed above and the CIT(A) confirmed the said additions. The Assessee is in appeal before the Tribunal once again contending the additions made by the AO in the remand proceedings. Addition towards factory building – Ground No.1 5. Brief facts pertaining to the issue contended - The assessee and M/s B.V. Star are two partnership firms having common partners being individuals from Mehta family (Mehta Group) and Shah family (Shah Group). There were disputes and differences arose between the partners carrying on business in the said partnership firms and the same was referred to arbitration. As per the consent terms agreed before the Arbitration Tribunal the individual partners of Shah Group would retire from the assessee-firm and the individual partners from Mehta Group would retire from M/s. B.V. Star. The Mehta Group took over the firm and the business of the assessee as a going concern together with all its assets including stock, recoveries, bank balances, etc. and liabilities and obligations including