PARVINCHAND N. SEHGAL (HUF), MUMBAI V. ITO 24(3)(2), MUMBAI

ITA 2305/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0697 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Reason to believe
• Section: 54F; 142(1); 147; 148; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 2305 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 10 - 1 1 ) PARVINCHAND N. SEHGAL (HUF) PROP. SHREE MAHAVIR TEXTILES MILLS, 707, 7 TH FLOOR, AUTO COMMERCE HOUSE, H.G. ROAD, OPP: KENNEDY BRIDGE, GRANT ROAD (W), MUMBAI - 400007 / VS. ITO - 24(3)(2) C - 11, 7 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. 400051 ./ ./ PAN/GIR NO. : AAAHP 2624 R ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 11.12 .2017 / DATE OF PRONOUNCEMENT : 17. 01.2018 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 16 .0 2 .2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 42 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 1 0 - 1 1 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AO ARRIVING AT SHORT TERM CAPITAL GA IN REVENUE BY : SHRI V. VIDHYADHAR ASSESSEE BY: SHRI SHEKHAR GUPTA ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 2 OF RS.1,27,07,358/ - AS AGAINST RS.20,17,158/ - DECLARED BY THE ASSESSEE IN RESPECT OF SALE OF FACTORY PREMISES IN KAMALA BHAVAN INDUSTRIAL PREMISES CO - OP. SOCIETY LTD., GOREGAON (E), MUMBAI - 400063. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF T HE CASE IN SUSTAINING THE ORDER OF THE AO NOT ALLOWING THE BENEFIT U/S 54F IN RESPECT OF SHORT TERM CAPITAL GAIN AGAINST THE SALE OF FACTORY PREMISES IN KAMALA BHAVAN INDUSTRIAL PREMISES CO - OP. SOCIETY LTD., GOREGAON (E), MUMBAI - 400063 IN VIEW OF THE DECIS ION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS P. LTD. 281 ITR 210 AND DECISION OF GUWAHATI HIGH COURT IN THE CASE OF ASSAM PETROLEUM INDUSTRIES P. LTD. 262 ITR 587. 3. THE ASSESSEE CRAVE S LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.18,85,178/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE CASE WAS REOPENED AND NOTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 18.03.2013. THE CASE OF THE ASSESSEE WAS REOPENED ON THE FOLLOWING REASONS : - IN THE CASE OF SHRI PRAVINCHANDRA N. SEHGAL, KARTA OF THE HUF, FOR A.Y. 2010 - 11, THE ASSESSMENT HAS BEEN COMPLETED ON 8 .3.2013 WITH AN ADDITION OF SHORT TERM CAPITAL GAIN OF RS.39,44,085/ - FOR SALE OF DEPRECIABLE ASSET. DURING THE YEAR, THE ASSESSEE HAD SOLD THE ENTIRE BLOCK OF FIXED ASSET AND CLAIMED ADDITION TO THIS BLOCK OF ASSET WHICH WAS CEASED TO BE EXIT AND ENTIRE S ALE PROCEEDS LESS W.D.V IS TAXED AS SHORT TERM CAPITAL GAIN. THE BUSINESS ASSET WHICH THE ASSESSEE CLAIMED TO PUT TO USE WAS PURCHASED WITH THE HUF AND THE LATTER HAS PAID RS.1,06,90,220/ - . THE HUF FILED ITS RETURN OF INCOME ON 29.09.2010 WITH TOTAL INCOME OF RS.18,85,178/ - AND IN ITS PROPRIETARY FIRM SHREE MAHAVIR TEXTILES MILLS, CLAIMED THIS ASSET OF RS.1,06,90,220/ - AS ADDITION TO FIXED ASSET AND SOLD THE SAME BLOCK OF ASSETS AT RS.1,26,48,692/ - RESULTING SHORT TERM CAPITAL GAIN OF RS.19,43,998/ - ONLY WH ICH WAS CLAIMED EXEMPTED U/S 54. HOWEVER, THE SHORT TERM CAPITAL IS RS.1,26,34,218/ - AFTER DEDUCTION OF WDV INSTEAD OF RS.19,43,998/ - AS THERE WAS NO ADDITION TO THE BLOCK OF ASSET WHICH WAS SOLD. FURTHER, NO DEDUCTION IS ALLOWABLE U/S 54 OF THE I.T. ACT O N THE ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 3 CAPITAL GAIN OF THE SAID ASSET SINCE THE ASSET IS NOT A PROPERTY USED FOR RESIDENCE. 2. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.1,26,34,218/ - (RS.1,26,48,692/ - - RS.14,474(WDV) HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PR OVISIONS OF SECTION 147 OF THE I.T. ACT, 1961 AND ACCORDINGLY THE CASE IS REOPENED BY ISSUE OF NOTICE U/S 148 OF THE ACT, SO AS TO REASSESS THE ASSESSEES CORRECT INCOME FOR THE A.Y. 2009 - 10. 4. IN RESPONSE TO THE NOTICE THE ASSESSEE PLACED RELIANCE UPON THE WRITTEN FILED U/S 139 OF THE ACT DATED 29.09.2010. THEREAFTER, THE NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE SHORT TERM CAPITAL GAIN WAS ASSESSED TO THE TUNE OF RS.1,27,07,360/ - U/S 50 OF THE ACT. THE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT WAS ALSO DISALLOWED AND THE CAPITAL GAIN COMPUTED BY THE ASSESSEE TO THE TUNE OF RS.2,47,48,087/ - WAS ASSESSED AS LONG TERM CAPITAL GAIN ON SALE OF PROPERTY AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 3,93,58,620/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITION, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 5 . UNDER THIS ISSUE, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF SHORT TERM CAPITAL GAIN OF RS.1,27,07,358/ - AS AGAINST OF RS.20,17,158/ - DECLARED BY THE ASSESSEE IN RESPECT OF SALE OF FACTORY PREMISES IN KAMALA BHAVAN INDUSTRIAL PREMISES CO - OP. SOCIETY LTD., GOREGOAN (E), MUMBAI - 400063. AT THE VERY OUTSET, THE LD. R EPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THIS ISSUE HAS ALREADY BEEN REMANDED BY THE HONBLE ITAT MUMBAI BENCH IN ITA. NO. 2304/M/2016 AND A CCORDINGLY THE MATTER OF CONTROVERSY IS REQUIRED TO BE ADJUDICATED . COPY OR ORDER DATED 18.08.2017 ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 4 IS ON THE FI LE IN WHICH THE ASSESSMENT OF THE ASSESSEE HAS BEEN COMPLETED AS INDIVIDUAL AND IN THE SAID CASE THE MATTER OF CONTROVERSY IS ALSO THE SAME AS IN THIS CASE. T HIS ISSUE HAS ALREADY BEEN REMANDED BEFORE THE AO BY VIRTUE OF ORDER DATED 18.08.2017 PASSED BY T HE HONBLE ITAT IN THE ASSESSEES OWN CASE . THE PARA NO. 7 OF THE ORDER DATED 18.08.2017 IS HEREBY REPRODUCED AS UNDER: - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IMMOVEABLE PROPERTY IS NOT CONVEYED BY DELIVERY OF POSSESSION, BUT BY A DULY REGISTERED DEED. ONCE THE EXECUTED ITA NO. 2304/MUM/2016 DOCUMENTS ARE REGISTERED, THE TRANSFER WILL TAKE PLACE ON THE DATE OF EXECUTION OF DOCUMENTS AND NOT ON THE REGISTRATION OF DOCUMENTS. WE REFER HERE TO THE DECISION IN AL APATI VENKATARAMIAH VS. CIT (1965) 57 ITR 185(SC) AND CIT VS. PODAR CEMENTS PVT. LTD (1997) 226 ITR 625(SC). IN FIBRE BOARDS (P) LTD. (SUPRA), THE HONBLE SUPREME COURT HAS HELD: - THAT UNDER SECTION 54G THE ASSESSEE IS GIVEN WINDOW OF THREE YEARS AFTER DATE ON WHICH TRANSFER HAS TAKEN PLACE TO PURCHASE NEW MACHINERY OR PLANT OR ACQUIRE BUILDING OR LAND. THIS IS WHY THE EXPRESSION USED IN 54G(2) IS WHICH IS NOT UTILIZED BY HIM FOR ALL OR ANY OF THE PURPOSES AFORESAID. FOR THE ASSESSMENT YEAR IN QUES TION ALL THAT WAS REQUIRED FOR THE ASSESSEE SEE TO AVAIL OF THE EXEMPTION CONTAINED IN THE SECTION WAS TO UTILISE THE AMOUNT OF CAPITAL GAINS FOR PURCHASE AND ACQUISITION OF NEW MACHINERY OR PLANT AND BUILDING OR LAND. ADMITTEDLY, THE ENTIRE AMOUNT CLAIM ED IN THE ASSESSMENT YEAR IN QUESTION HAD BEEN SO UTILIZED FOR PURCHASE OR ACQUISITION OF NEW MACHINERY OR PLANT AND LAND OR BUILDING. THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SECTION 54G. WE FIND THAT THE ASSESSEE HAS FILED A LETTER DATED 28.02.201 3 IN RESPONSE TO THE LETTER DATED 20.02.2013 BEFORE THE AO STATING THAT : - WE HAVE TO STATE THAT THE ADDITION TO ASSET IS MADE IN THE CURRENT YEAR ITSELF AS THE DOCUMENT HAS BEEN REGISTERED IN THE CURRENT YEAR, ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 5 BESIDES THE POSSESSION HAS BEEN RECEIVED IN THE CURRENT YEAR. THE ONLY THING IS THE PART PAYMENT WHICH HAS BEEN MADE IN THE SUBSEQUENT YEAR. ALSO THE ASSESSEE HAS FILED A SUBMISSION BEFORE THE LD. CIT(A) ON 25.01.2016 STATING THAT: - THE ASSESSEE HAD PURCHASED ALONG WITH MR. PRAVINCHAND SEHGAL ( HUF), PREMISES IN DILKAP CENTRE AT VILLAGE MOHILI LOBO COMPOUND, ANDHERI, KURLA ROAD, SAKI NAKA, ANDHERI(E), MUMBAI FOR RS.1,31,00,000/ - (INCLUDES ASSESSEES SHARE OF RS. 31,00,000/ - VIDE AGREEMENT DATED 20.03.2010 DULY REGISTERED DURING THE YEAR. THE DOWN PAYMENT AND BALANCE PAYMENTS WERE MADE BY THE HUF AMOUNTING TO RS.1 CRORE AS ON 31.03.2010. THE ASSESSEE PAID RS.31,00,000/ - IN THE SUBSEQUENT YEAR BUT HAD TAKEN CREDIT OF THE SAME DURING THE YEAR SINCE THE PREMISES WERE PURCHASED DURING THE YEAR. WE F IND THE ABOVE SUBMISSION OF THE ASSESSEE WHICH WOULD DECIDE THE ISSUE AT HAND HAS NOT BEEN EXAMINED BY THE AO OR THE LD. CIT(A). IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH AS SESSMENT IN THE LIGHT OF OUR OBSERVATION AT PARA 7 HERE - IN - ABOVE AND AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE PERTINENT DETAILS BEFORE THE AO. 6 . IN VIEW OF THE SAID PARA THE MATTER OF CONTROVERSY HAS ALREADY BEEN RESTORED BE FORE THE AO TO DECIDE THE MATTER AFRESH . ACCORDINGLY, WE RESTORE THIS ISSUE BEFORE THE AO TO DECIDE THE MATTER AFRESH IN VIEW OF THE DIRECTION GIVEN BY HONBLE ITAT WHILE PASSING THE ORDER DATED 18.08.2017 IN THE ASSESSEES INDIVIDUAL CASE IN ITA. NO. 2304/M/2016. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.2 : - ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 6 7 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ORDER PASSED BY THE ASSESSI NG OFFIC ER IN WHICH THE ASSESSING OFFICER DID NOT ALLOW THE BENEFIT U/S 54F OF THE ACT IN CONNECTION WITH THE SHORT TERM CAPITAL GAIN AGAINST THE SALE OF FACTORY PREMISES IN KAMALA BHAVAN INDUSTRIAL PREMISES CO - OP. SOCIETY LTD., GOREGAON (E), MUMBAI - 400063. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE CASE OF ASSESSEE HAS DULY BEEN COVERED BY DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE TITLED AS CIT VS. V.S. DEMPO COMPANY LTD. (2016) 387 ITR 354 (SC) . WHEREIN IT IS H ELD THAT DEEMING FICTION CREATED IN 50(1) & (2) OF THE ACT IS RESTRICTED ONLY TO THE MODE OF COMPUTATION OF CAPITAL GAINS CONTAINED IN SEC. 48 & 49. FURTHER, IT IS WELL ESTABLISHED IN LAW THAT A FICTION CREATED BY THE LEGISLATURE HAS TO BE CONFINED FOR THE PURPOSE FOR WHICH IT IS CREATED. FURTHER SECTION 50 - E DOESNT MAKE ANY DISTINCTION BETWEEN DEPRECIABLE AND NON - DEPRECIABLE ASSET . IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE ABOVE MENTIONED CASE. WE SET ASIDE THE FINDING OF THE CIT(A) ON T HIS ISSUE AND DIRECT THE AO TO DECIDE THE MATTER AFRESH BY GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 17.01 . 201 8 . SD/ - SD/ - ( RAJENDRA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 17. 01. 201 8 ITA NO. 2305/M/2016 A.Y. 2010 - 11 . 7 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI