VANTAGE LEATHERS INDIA LIMITED , CHENNAI V. ITO,CORPORATE WARD-3(4), CHENNAI

ITA 235/CHNY/2022

AI Insights

The case revolves around the appeal by M/s. Vantage Leathers India Pvt. Ltd. against the order of the Principal Commissioner of Income Tax, Chennai-3, which invoked revisional jurisdiction under section 263 of the Income Tax Act for the Assessment Year 2012-13. The primary contention was regarding the computation of Long-Term Capital Gains (LTCG) on the sale of immovable properties. The Tribunal examined whether the assessing officer had adequately addressed the issues during the original assessment and whether the revisional authority was justified in setting aside the assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133980 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2022
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83), Pushp Steel and Mining Pvt. Ltd. vs. PCIT (ITA No.811/Del.2021 dated 29-12-2021)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Depreciation; Cost of acquisition; Capital Gains
• Section: 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण ‘बी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय +ी वी. द ु गा1 राव, ाियक सद3 एवं माननीय +ी मनोज कु मार अ8वाल ,लेखा सद3 के सम:। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.235/Chny/2022 (िनधा1रण वष1 / Assessment Year: 2012-13) M/s. Vantage Leathers India Pvt. Ltd. No.71, Gengu Reddy Road, Egmore, Chennai – 600 008. बनाम/ V s. ITO Corporate Ward-3(4), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAAC V -1 1 6 4 -H (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri D. Anand (Advocate)-Ld. A.R थ की ओरसे/Respondent by : Shri S. Senthil Kumaran (CIT)– Ld. DR सुनवाई की तारीख/Date of Hearing : 30-03-2023 घोषणा की तारीख /Date of Pronouncement : 21-04-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee challenges the validity of revisional jurisdiction u/s. 263 as exercised by Ld. Principal Commissioner of Income Tax, Chennai-3 (Pr.CIT) for Assessment Year 2012-13 vide order dated 13-03-2022. The grounds raised by the assessee read as under: - 1. The order of the learned Principal Commissioner of Income Tax-3 u/s 263 is wrong, illegal and opposed to the facts of the present case. 2. The learned PCIT erred in passing the order without due consideration of facts, submission and law. ITA No.235/Chny/2022 - 2 - 3. The learned PCIT failed to understand the fact that the original assessment was made on the basis of agreed additions as the appellant had decided to buy peace with the department and not litigate the matter. 4. The learned PCIT ought to have appreciated the submissions and explanation provided by the appellant, however baselessly chose to disregard the same while passing the erroneous order. 5. The learned PCIT erred in stating that the appellant had not satisfactory explained the deduction claim towards indexed cost of improvement claimed to be made during the year 1993-94. 6. The learned PCIT erred in stating that the appellant had not shown that a building was existed while transferring the property at halls road Egmore. 7. The learned PCIT failed to realize that the assessment order is passed only after making due inquiries and verifications in relation to the calculation of LTCG. 8. The learned PCIT was wrong in setting aside the order of the learned assessing officer and directing fresh assessment to recalculate the LTCG claimed by the appellant. 2. The Ld. AR advanced arguments and submitted that the issues as flagged in the revisionary order were duly examined by Ld. AO during the course of original assessment proceedings and a plausible view was taken in the matter which was not contrary to any law. The Ld. AO took conscious decision considering all facts / material on record and therefore, the said view could not be subjected to revision u/s 263. The Ld. CIT-DR, on the other hand, controverted the arguments of Ld. AR and submitted that the impugned issues were not examined which justify the invocation of revisionary jurisdiction u/s 263. The vital facts were not considered by Ld. AO and there was no application of mind and therefore, the revision is justified in terms of the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83). Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment and Revisionary Proceedings 3.1 From the case records, it emerges that an assessment was framed against the assessee u/s 143(3) r.w.s. 147 since the assessee ITA No.235/Chny/2022 - 3 - was found to have sold an immoveable property but the assessee did not file the return of income for the year under consideration. It transpired that the assessee sold certain property situated at Block No.32, bearing Nos. 8 & 9 (Old No.6), Halls Road. The guideline value of the property was Rs.333.25 Lacs as against Rs.300 Lacs reflected by the assessee. The Ld. AO, invoking the provisions of Sec.50C, adopted the guideline value while making computation of Long-Term Capital Gains (LTCG). The assessee had purchased land and building in the year 1991 for Rs.61.25 Lacs and the indexed value of the same was allowed while computing capital gains. The WDV of the building standing at Rs.39.86 Lacs was not allowed to the assessee. Finally, LTCG of Rs.91.63 Lacs was computed against this property. 3.2 The assessee also sold another property situated at Thiruvanmiyur and worked out LTCG of Rs.5.66 Lacs which was accepted by Ld. AO. While working out the gain, the assessee was allowed indexed cost of acquisition for Rs.60.72 Lacs and indexed cost of improvement for Rs.232.78 Lacs. 3.3 Subsequently, upon perusal of case records, Ld. Pr. CIT noted that LTCG on sale of property situated at Thiruvanmiyur was accepted by Ld. AO. The assessee claimed deduction of cost of improvement of Rs.122.41 Lacs which had taken place during the year 1993-94. The same was in the shape of development of land but no documentary proof was submitted by the assessee in support of the same. 3.4 Another observation in the impugned order was that the property situated at Halls Road was only land and the building constructed thereon was demolished long back. Therefore, the allowance of cost of acquisition of Rs.61.25 Lacs stated to be incurred during 1991-92 was ITA No.235/Chny/2022 - 4 - erroneous. The building was part of fixed asset schedule and depreciation was claimed and allowed which should not have been allowed. Accordingly, the assessee was put to show-cause notice. 3.4 The assessee defended the assessment order and submitted that it had provided all the details as called for by Ld. AO during the course of assessment proceedings. The assessee provided the copy of sale deed as well as purchase deed along with submissions dated 25-06- 2019 and 27-06-2019. The property situated at Thiruvanmiyur was a land which was close to the sea. The assessee had to incur development expenses to build the office there. Due to proximity of sea and other hindrances, the prospect of building was dropped. Since the development took place in financial year 1993-94, the relevant supporting documents pertaining to development expenses could not be retrieved. However, the assessee had submitted the financial statements pertaining to financial year 1993-94 wherein such expenditure was reflected. This fact was verified by Ld. AO with the financial statements already on record pertaining to the financial year 1993-94. Thus, it was not a case where the details were not submitted and it was also not a case where Ld. AO failed to look into the issues as flagged in the proposed revision. With respect to property situated at Halls Road, it was submitted that the property comprised-off land and building which fact could be verified from the copy of purchase deed already on record. This issue was specifically raised by Ld. AO during the course of assessment proceedings. It was explained that since the building was to be demolished immediately after the registration, only land was mentioned in the documents to avoid additional stamp duty which was at the ITA No.235/Chny/2022 - 5 - instance of the prospective buyer. The proof of existence of building after the sale of property was already furnished to Ld. AO. The same include the demolition order as obtained from the Chennai Corporation which was dated post registration of document, copies of property tax receipt etc. In the earlier years returns, the existence of building was also reflected in the fixed asset schedule. The WDV of the building, as alleged, was never claimed against the sale proceeds while computing capital gains. 3.5 However, rejecting the same, Ld. Pr.CIT held that the assessee did not finish any documentary proof for deduction claim towards indexed cost of improvement claimed to be made during the year 1993-94. The assessee also did not furnish any evidence to show that a building was existing while transferring the property at Halls Road Egmore. None of such evidence was furnished before Ld. AO during the course of assessment proceedings and Ld. AO did not consider these issues while completing the assessment. Finally, the assessment order was held to be erroneous as well as prejudicial to the interest of revenue and accordingly, set aside with the direction to Ld. AO to complete the assessment after giving reasonable opportunity of hearing to the assessee. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. Upon perusal of case records, we find that the case of the assessee was reopened, inter-alia, with a view to examine the sale of immoveable property by the assessee during the year which was reflected in the Annual Information Return (AIR). It transpired that the assessee sold property situated at Halls Road and another property ITA No.235/Chny/2022 - 6 - situated at Thiruvanmiyur. The copies of purchase deed and sale deed were duly furnished by the assessee vide its reply dated 25-06-2019 & 27-06-2019. In reply dated 27-12-2019, it was submitted that the Halls Road Property was a residential house plus two floors purchased in 25-10-1991. The assessee altered the property in the year 1992-93 to make it conducive for operations. In the year 2005-06, the property was revamped again. Since maintaining the property was becoming difficult, it was decided to sell the land. The deal was only for land. Accordingly, the assessee filed demolition application of the building with the Corporation office. The approval obtained from Corporation along with demolition fees paid by the assessee was also furnished along with the reply. With respect to property situated at Thiruvanmiyur, it was submitted that it was in close proximity to ocean. During the year 1993-94, land levelling work as well as fencing work was undertaken to safeguard the premises for which huge amount was spent and the same was claimed while computing capital gains. 5. In another reply dated 27-12-2019, the assessee demonstrated the existence of building at Halls Road and furnished necessary documentary evidences to support the same. The assessee also explained the manner in which development expenses were incurred on property situated at Thiruvanmiyur. The assessee also provided the computations of capital gains with respect to both the properties. 6. Considering assessee’s explanations and documentary evidences, Ld. AO framed an assessment on 27-12-2019 and accepted the working of the assessee except for the fact that WDV of building as claimed by assessee against Halls Property was not ITA No.235/Chny/2022 - 7 - allowed. It could thus be seen that the assessee’s case was reopened specifically to examine the issue of sale of immovable properties by the assessee during the year. During the course of assessment proceedings, Ld. AO called for requisite details from the assessee. The details were duly furnished by the assessee and the assessee made detailed submissions and provided workings of capital gains. The assessee substantiated the facts with documentary evidences. After considering all these evidences and explanations, Ld. AO framed the assessment partly accepting the claim of the assessee. In the light of all these facts it could be very well said that Ld. AO had duly applied its mind to the impugned issues as flagged in the revisionary order. The view of the Ld. AO was based on facts submitted by the assessee and it was one of the possible views which could not be said to be contrary to any law. Merely because the revisionary authority felt that certain computations were not to be accepted, the same would not be a good ground to revise the order. We find that the assessment was framed with due application of mind after considering all the aspects. In such an eventuality, the revision of the order could not be held to be justified in law. Our view is duly supported by the decision of Delhi Tribunal in Pushp Steel and Mining Pvt. Ltd. vs. PCIT (ITA No.811/Del.2021 dated 29-12-2021). The coordinate bench, in para-14, held that when AO had applied his mind to the information and details furnished by the assessee and chose not to make any additions, revision was not justified unless it was demonstrated that the view taken by Ld. AO was wholly unsustainable in law or Ld. AO had not examined the issue which he was required to examine. The assessment order could not be branded as erroneous if the revisionary authority is not satisfied with ITA No.235/Chny/2022 - 8 - the conclusion arrived by AO. The order could be brought within the preview of an erroneous order only if it involves an error by deviating from law or upon erroneous application of the legal principle. It is settled law that the power of revision can be exercised only where no inquiry as required under the law is done. Since Ld. AO has raised various queries and the same were also replied by the assessee, it could not be said that there was lack of inquiry. Accordingly, the revision was held to be unsustainable. This case law supports the case of the assessee. Therefore, on the given set of facts and circumstances, we quash the impugned order and restore the assessment framed by Ld. AO. 7. The appeal stand allowed in terms of our above order. Order pronounced on 21 st April, 2023. Sd/- (V. DURGA RAO) ाियक सद3 /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद3 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 21.04.2023 EDN/- आदेश की Uितिलिप अ 8ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF