ITO, BIKANER V. Hanuman Dass Sipani HUF P/o M/s. Suraj Takies, BIKANER

ITA 247/JODH/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9439 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 07-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U C JAIN
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Assessment record
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO.247/JU/2008 (ASSESSMENT YEAR : 1999-2000) INCOME TAX OFFICER, WARD 1(2), BIKANER. VS. SHRI HANUMAN DAS SIPANI (HUF), BADA BAZAR, BIKANER. PAN NO.AAAHH3894M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT NIGAM. RESPONDENT BY : SHRI U.C. JAIN. O R D E R PER V. DURGA RAO : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), B IKANER DT.9.1.2008. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER : DELETING THE ADDITION OF RS.8,03,400 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CREDIT ENTRY FOUND IN THE CAP ITAL ACCOUNT OF THE ASSESSEE DUE TO REVALUATION OF ASSETS, WITHOUT APPRECIATING THE FACTS OF THE CASE. DELETING THE ADDITION OF RS.8,79,120 MADE BY THE AS SESSING OFFICER ON ACCOUNT LAND RECEIVED BY THE ASSESSEE ON RETIREMENT FROM THE FIRM AFTER HAVING TAKEN MARKET VALUE OF TH E LAND THAT WAS NOT DISCLOSED IN THE COMPUTATION OF INCOME, BY HOLDING THAT THE PROVISIONS OF SECTION U/S. 45(4) OF THE IT ACT ATTRACT ONLY IN THE CASE OF FIRM, EVEN WHEN THE ASSESSING OFFICER M ADE ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES, BEING UNEXPLAINED/UNDISCLOSED INCOME, NOT UNDER THE HEAD CAPITAL GAIN AND HAS TAKEN THE VALUE OF PROPERTY ON THE BAS IS OF DLC RATE BEING PREVALENT FAIR MARKET VALUE. 2. THE ASSESSEE IS A PARTNER OF THE FIRM FILED RETU RN OF INCOME DECLARING AN INCOME OF RS.1,01,178. AS PER THE RETURN OF INC OME, THE CAPITAL ACCOUNT ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 2 OF THE ASSESSEE WAS CREDITED WITH RS.8,03,400/- AFT ER REVALUATION OF THE ASSETS OF THE FIRM. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE AS TO WHY SECTION 45(4) SHOULD NOT BE APPLIED TO THE ASSESSEES CASE. THE ASSESSEE HA S SUBMITTED THAT HE IS A RETIRED PARTNER OF THE FIRM AND RETIRED ON 31.12.19 98 AND A NOMINAL AMOUNT OF RS.8,03,400/- WAS CREDITED TO THE CAPITAL ACCOU NT OF THE ASSESSEE AFTER THE REVALUATION OF THE ASSETS OF THE FIRM. IT IS A LSO SUBMITTED THAT THERE IS NO TRANSFER OF ASSET FROM THE FIRM TO THE ASSESSEE AND IT IS THE ONLY NOMINAL AMOUNT RECEIVED ON THE RETIREMENT FROM THE FIRM. HOW EVER, THE ASSESSING OFFICER HAD NOT AGREED WITH THE SUBMISSION OF THE A SSESSEE AND AMOUNT OF RS.8,03,400/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSING OFFICER HA D WRONGLY INVOKED THE PROVISIONS OF SECTION 45(4) AND THE SAME ARE NOT AP PLICABLE TO THE ASSESSEES CASE BEING A RETIRED PARTNER. THE LD. CIT(A) AFTER EXAMINING THE SECTION 45(4) DELETED THE ADDITION MADE BY THE ASSESSING OF FICER. THE RELEVANT PORTION OF THE LD. CIT(A) IS EXTRACTED HEREUNDER : I AM IN AGREEMENT WITH THE POINT OF VIEW OF THE A PPELLANT THAT PROVISION OF SECTION 45(4) HAS APPLICATION IN THE C ASE OF PARTNERSHIP FIRM ONLY RATHER THAN IN THE CASE OF PARTNERS. HENC E, THE TAXABILITY OR OTHERWISE OF THE ISSUE PERTAINING TO REVALUATION OF ASSETS CAN BE DISCUSSED IN THE CASE OF PARTNERSHIP FIRM. THE PROV ISION OF INCOME TAX ACT IS SELF-CONTAINED SO FAR AS PARTNERSHIP FIR M IS CONCERNED AND HAS NO RELEVANCE AND APPLICATION IN THE INSTANT CAS E OF ASSESSEE. MY VIEW IS FURTHER FORTIFIED BY THE DIRECT RULING P RONOUNCED IN THE CASE OF ITD VS. RAMESH M. SHAH (2004) 2 SOT 558 (MU M) THAT AMOUNT CREDITED IN CAPITAL ACCOUNT OF RETIRED PARTN ER UPON REVALUATION OF ASSETS OF FIRM IS NOT TAXABLE AS CAP ITAL GAIN AS THERE IS NO TRANSFER. FURTHER THE CONTENTION OF APPELLAN T FINDS FORCE FROM CASE OF SUPREME COURT VS. ELLIS BRIDGE 95 TAXMAN 1 43 (SC) THAT CHARGING SECTION BE CONSTRUED STRICTLY IF A PERSON HAS NOT BEEN ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 3 BROUGHT WITHIN THE AMBIT OF CHARGING SECTION, HE CA NNOT BE TAXED AT ALL. THEREFORE, THE ADDITION OF RS.8,03,400 STANDS DELETED. THE APPELLANT SUCCEEDS ON THIS GROUND. 3. ON BEING AGGRIEVED THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPO RTED THE ORDER PASSED BY THE ASSESSING OFFICER. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEE STRONGLY RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ANOTHER PARTNER SMT. SHANTI DEVI IN ITA NO.399/MUM/07 AND SUPPORTED THE ORDER OF LEA RNED CIT(A). 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS A RETIRED PARTNER. THE REVALUATION TOOK PLACE IN THE BOOKS OF ACCOUNT OF T HE FIRM, AS A RESULT OF WHICH THE FIXED ASSETS I.E. LAND AND BUILDING VALUE BEING INFLATED AND THE PARTNERS CAPITAL ACCOUNTS WERE CREDITED IN THEIR RE SPECTIVE PROFIT SHARE RATIO. ACCORDINGLY, THE ASSESSEE BEING THE PARTNER IN THE FIRM, HIS CAPITAL ACCOUNT WAS CREDITED WORTH RS.8,03,400/-. ACCORDING TO THE LEARNED CIT(A), SECTION 45(4) HAS NO APPLICATION TO THE ASSESSEES CASE AND SAME VIEW WAS EXPRESSED BY THE TRIBUNAL, IN THE CASE OF ACIT VS. SMT. SHANTI DEVI SIPANI (ITA NO.399/JU/07 DT.19.02.2008) (SUPRA), THAT ANY THING DONE BY THE FIRM AND ANY ENTRY MADE IN THE BOOKS CANNOT BE TAXED IN THE HANDS OF THE PARTNER. SINCE PARTNERS ARE CONSISTENT ENTITIES AN D SEPARATE FROM THE FIRM, ANY INCOME OF THE FIRM CANNOT BE TAXED, PER SE, IN THE HANDS OF THE PARTNER. THE REVALUATION ENTRY IN THE BOOKS OF ACCOUNTS OF T HE FIRM IS A NOTIONAL AND ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 4 UNILATERAL ACT. AS PER THE PROVISIONS OF SECTION 1 0(2)(A), PARTNERS SHARE IN THE TOTAL INCOME OF THE FIRM IS EXEMPT. THEREFORE, THE PROVISIONS OF SECTION 45(4) RELATE TO THE CASE OF PARTNERSHIP FIRM ONLY A ND NOT THAT OF ITS PARTNERS. ANY AMOUNT CREDITED IN THE CAPITAL ACCOUNT OF A RET IRED PARTNER UPON REVALUATION OF ASSETS OF FIRM IS NOT TAXABLE AS A C APITAL GAIN AS THERE IS NO TRANSFER. IN THE CASE OF CIT VS. R. LINGMALLU RAG HUKUMAR (247 ITR 801) (SC), IT WAS HELD THAT THERE WAS NO ELEMENT OF TRAN SFER OF INTEREST IN PARTNERSHIP ASSETS BY THE RETIRED PARTNER TO THE CO NTINUING PARTNERS AND THE AMOUNT RECEIVED BY HIM WAS NOT ASSESSABLE TO CAPITA L GAINS. IN VIEW OF THE ABOVE FACTS AND THE DECISION OF THE TRIBUNAL IN THE CASE OF SMT. SHANTI DEVI SIPANI (SUPRA) AND DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF R. LINGMALLU RAGHUKUMAR (SUPRA), WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). THIS GROUND OF APPEAL RAISED B Y THE REVENUE IS DISMISSED. 7. THE SECOND GROUND OF APPEAL RELATING TO ADDITION OF RS.8,79,120. 8. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A RE TIRED PARTNER RECEIVED LAND ADMEASURING 148.02 SQ.YDS IN RANI BAZAR, BIKAN ER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HA D OBSERVED THAT THE ABOVE SAID LAND IS SITUATED IN RANI BAZAR, BIKANER, NEAR SURAJ TALKIES, BHARAT HOTEL AND OTHER SEVERAL COMMERCIAL ESTABLISHMENTS. IT WAS FURTHER OBSERVED THAT THE LAND RECEIVED BY THE ASSESSEE APPEARS TO B E COMMERCIAL AND BY NOT DISCLOSING THE MARKET VALUE AND CREDITING THE PAYME NT IN HIS CAPITAL ACCOUNT, THE ASSESSEE WAS DELIBERATELY ATTEMPTED TO AVOID TA X LIABILITY. ACCORDINGLY, ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 5 THE AO HAD VALUED THE MARKET RATE AT RS.8,79,120/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 9. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE CIT(A). IT WAS SUBMITTED BEFORE THE CIT(A) THAT TH E ASSESSEE HAS RECEIVED THE SAID LAND FROM THE PARTNERSHIP FIRM WHERE HE WA S A PARTNER. THERE IS NO TRANSFER BETWEEN THE PARTNERSHIP FIRM AND THE RETIR ED PARTNER. THIS LAND WAS NOT PURCHASED BY THE ASSESSEE, IN LIEU OF THE RETIR EMENT, THE SAME WAS RECEIVED BY THE ASSESSEE. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER. THE RELEVANT PORTION OF THE CIT(A) ORDER IS EXTRACTED HEREUNDER : I HAVE GONE THROUGH THE ASSESSMENT RECORDS AND TH E DETAILED ARGUMENTS. AFTER HAVING VETTED THE CONTENTION OF B OTH THE PARTIES I AM OF THE OPINION THAT THE SOURCE OF LAND STANDS ESTABLISHED BEYOND THE SHADOW OF DOUBT SINCE THE FI RM WHICH HAS GIVEN THE LAND TO ITS PARTNER AT THE TIME OF RE TIREMENT IN SETTLEMENT OF HIS INDIVIDUAL ACCOUNT, HAS CONFIRMED THE POSITION. AS FOR THE UNDERSTATEMENT OF THE REPORTED CONSIDERA TION THE ONUS AND ACCOUNTABILITY SOLELY AND EXCLUSIVELY VET UPON THE TRANSFEROR. THE PROVISION OF SECTION 50C OF THE I. T. ACT CONSTITUTES GOOD GUIDANCE ON THE SUBJECT. THE PROV ISION OF SECTION 45(4) OF THE I.T. ACT ALSO CASTS LIABILITY ON THE FIRM WHICH TRANSFERS THE ASSETS TO ITS PARTNERS. THEREFORE IN THE LIGHT OF AFORESAID FACTS OF THE CASE THE ADDITION OF RS.8,79 ,120 REPRESENTING THE RECEIPT OF LAND BY THE ASSESSEE FR OM THE FIRM IS HEREBY DELETED. THE APPELLANT COMES OUT SUCCESSFUL TO THAT EXTENT AND THIS GROUND OF APPEAL IS ALLOWED. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER PASSED BY THE ASSESSING OFFICER. 11. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS STRONGLY RELIED ON THE ORDER PASSED BY THE CIT(A). ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 6 12. WE HAVE HEARD BOTH THE SIDES AND PERUSED T HE RECORDS. IT IS AN ADMITTED FACT THAT THE FIRM HAS GIVEN LAND TO THE A SSESSEE AT THE TIME OF RETIREMENT IN SETTLEMENT OF HIS INDIVIDUAL ACCOUNT. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS FAILED TO SHOW THIS INCOME TO AVOID THE TAX LIABILITY. IT WAS EXPLAINED BEFORE THE ASSESSI NG OFFICER DURING THE ASSESSMENT PROCEEDINGS THAT THE SAID LAND WAS RECEI VED BY THE ASSESSEE AT THE TIME OF RETIREMENT FROM THE FIRM IN SETTLEMENT WITH THE FIRM AND IT IS NOT ACQUIRED BY WAY OF PURCHASE. HOWEVER, THE ASSESSIN G OFFICER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND THE SAME I S INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, THE CIT(A) HAS CON SIDERED THE ENTIRE ISSUE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER ON THE GROUND THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF THE LAND A ND IN SO FAR AS UNDER STATEMENT OF THE VALUE OF THE ASSET, IT HAS TO BE M ADE IN THE HANDS OF THE ASSESSEE I.E. PARTNER / TRANSFEREE. IN VIEW OF TH E ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). THIS GRO UND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 13. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED ON 22 ND MARCH, 2011. SD/- SD/- (S.V. MEHROTRA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT. 22 ND MARCH, 2011. *GPR ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 7 COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT, MUMBAI (4) CIT(A), MUMBAI (5) DR, (6) GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES ITA NO.247/JU/2008 SHRI HANUMAN DAS SIPANI (HUF) 8 DATE INIT IALS DRAFT DICTATED ON 15/03/2011 DRAFT PLACED BEFORE AUTHOR 15/03/2011 DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER DRAFT DISCUSSED & APPROVED BY SECOND MEMBER APPROVED DRAFT COMES TO SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE OF DISPATCH OF ORDER.