Shri Ramesh M. Khurana, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 2678/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9216 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-11-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 25-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Cost of acquisition; Set aside; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 48

Judgement Text

ITA NO.2 678 /AHD/201 1 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 2678 /AHD/201 1 ASSESSMENT Y EAR : 200 4 - 05 RAMESH M. KHURANA, .......... . APPELLANT 178, SUNRISE PARK, OPP. DRIVE IN CINEMA, THALTEJ ROAD, AHMEDABAD 380 054. [PAN: ABBPK 9881 F ] VS. ASSTT. COMMISSIONER OF INCOME TAX , CIRCLE - 6 , AHMEDABAD. .... ............. RESPONDENT APPEARANCES BY: SA K AR SHARMA, FOR THE APPELLANT PRADIP KUMAR MAJUMDAR FOR THE RESPONDENT D ATE OF CO NCLUDING THE HEARING : 2 4 . 1 1 .201 7 DATE OF PRONOUNCING THE ORDER : 17 . 0 2 .2017 O R D E R 1. BY WAY OF T HIS APPEAL , THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 19 TH AUGUST, 2011, PASSED BY THE LEARNED CIT(A) , IN THE M ATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 200 4 - 05, ON THE FOLLOWING GROUNDS : - 1) THE IMPUGNED ORDER DATED 19 - 08 - 2011 IS ILLEGAL AND BAD IN LAW AND REQUIRES TO BE SET ASIDE. 2) THE ASSES SING OFFICER AS ALSO THE COMMISSIONER OF INCOME TAX (APPEALS) - XI EXCEEDED IN THEIR JURISDICTION IN SPITE OF CLEAR DIRECTIONS GIVEN TO THEM BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IN THE ORDER DATED 03 - 07 - 2009 PASSED IN 1TA NO.1012/AHD/2009 FOR A.Y. 2004 - 05. 3) THE COMMISSIONER OF INCOME TAX (APPEALS) - XI ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE APPELLANT HAS MADE PAYMENT OF RS.8,2 1,154 / - TO STERLING CITY DEVELOPMENT CO. ITA NO.2 678 /AHD/201 1 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 2 OF 5 4) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XI FA ILED TO APPRECIATE THE FACT THAT THE APPELLANT IN HIS LETTER DATED 28 - 08 - 2006 SUBMITTED IN ORIGINAL ASSESSMENT PROCEEDINGS WHEREIN HE HAS STATED THAT HE HAS TO PAY TO SCDC RS. 8,84,866.84 ON ACCOUNT OF PLOT AND CONSTRUCTION. THE SAID STERLING CITY DEVELOPM ENT CO. IN ITS BOOKS OF ACCOUNTS HAS SHOWN THE APPELLANT AS DEBTOR. THIS FACT IS NOT CONTROVERTED . 5) THE APPELLANT THEREFORE HUMBL Y PRAYS THAT THE HON'BLE MEMBERS WILL BE PLEASED TO DELETE ADDITION OF RS.17,05,810 / - ON ACCOUNT OF LONG TERM CAPITAL GAINS . 2 . BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE SOLD A PROPERTY FOR RS.23,16,400/ - . THE ASSESSEE CLAIMED THE INDEXED COST OF ACQUISITION AT RS. 8,43,936/ - AND INDEXED COST OF IMPROVEMENT AT RS.15,38,087/ - . ACCORDINGLY, LONG TERM CAPITAL LOSS WAS COMPUTED AT RS.65,650/ - . THE ASSESSING OFFICER CALLED FOR VARIOUS DETAILS AND EXAMINED THE MATTER . WHILE HE HAD NO ISSUES ABOUT THE CLAIMS MADE BY THE ASSESSEE WITH RESPECT TO EXPENDITURE ETC., HE REJECTED THE CLAIM OF LONG TERM CAPITAL GAIN AND TREATED THE SALE AS G IVING RISE TO SHORT TERM CAPITAL GAIN UNDER SECTION 50A. WHILE DOING SO, HE OBSERVED AS FOLLOWS : - SUBMISSION MADE BY THE ASSESSEE HAS DULY BEEN CONSIDERED. REBUTTAL OF THE CONTENTIO N MADE BY THE ASSESSEE IS AS UNDER: - ASSESSEE HIMSELF HAS SUBMITTED VIDE HIS LETTER DATED 28.08.2006 STATING THAT I WAS CHARGING DEPRECIATION ON ALL MY ASSETS. SO ON THE SC DC COSTS I HAVE CHARGED DEPRECIATION. DUE TO DEPRECIATION FROM 1996 TO 2002 IT IS SHOWING THE PRESENT BALANCE OF RS .1,46,922/ - . ASSESSEE HAS ALSO POINTED OUT DURING THE COURSE OF ASSESSMENT THAT SAID DEPRECIATION WAS DULY ALLOWED BY THE DEPARTMENT. FURTHER, ON VERIFICATION OF THE SUBMISSION MADE BY THE ASSESSEE AND BALANCE SHEET, COPY OF BALANCE SHEET FILED FOR A.Y.1997 - 98 TO 2000 - 01 IT IS NOTICED THAT ASSESSEE HAS INCURRED VARIOUS EXPENSES TOWARDS DEVELOPMENT OF SC DC PLANT AS STERLING CITY DEVELOPMENT CORPORATION IS SHOWN AS CREDITOR IN THE LIABILITY SIDE OF BALANCE SHEET. BUT HERE IT IS PERTINENT TO NOTE THAT SINCE THE PROPERTY IN QUESTION IS DEPRECIABLE ASSET AS CLAIMED BY THE ASSESSEE AND DULY ACCEPTED BY THE DE P ARTM ENT, DIFFERENTIAL AMOUNT OF SALE CONSIDERATION (SALE CONSIDERATION - WDV OF ASSET) WILL BE LIABLE TO TAX AS SHORT TERM CAPITAL GAIN AND NOT AS LONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. ON VERIFICATION OF THE CASE RECORDS AND SUBMISSION FILED BY THE ASSESSEE FROM TIM E TO TIME IT IS GATHERED THAT WD V OF THE ASSET IS SHOWN BY THE ASSESSEE ON THE DATE OF TRANSFER I S AT RS.1,46,122/ - AGAINST WHICH ASSESSEE HAS RECEIVED TOTAL CONSIDERATION OF RS.23,16,400 / - . ACCORDINGLY, DIFFERENTIAL AMOUNT OF RS.21,70,278/ - IS LIABLE TO BE TAXED AS SHORT TERM CAPITA L GAIN. AS ASSESSEE HAS CLAIM ED LONG TERM CAPITAL LOSS OF RS. 65,650/ - DERIVED FROM SAID ITA NO.2 678 /AHD/201 1 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 3 OF 5 TRANSACTION INSTEAD OF SHOWING SHORT TERM CAPITAL GAIN OF RS.21,70,278/ - , THE CLAIM OF LONG TERM CAPITAL LOSS OF RS.65,650/ - IS ALLOWABLE TO BE DISALLOWED AND ALSO FURTHER ADDITION OF RS.21,70,278/ - IS LIABLE TO BE ADDED IN THE TOTAL INC OME OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN. IN VIEW OF THE ABOVE DISCUSSION MADE AN AMOUNT OF RS.21,70,278/ - IS ADDED T O THE TOTAL INCOME OF THE ASSESSEE AFTER DISALLOWING THE CLAIM OF LONG TERM CAPITAL LOSS OF RS.65,650/ - . THEREFORE, TOTAL ADDITION W ILL BE RS.22,35,928/ - (RS.21,70,278 + 65,650). PENALTY PROCEEDINGS U/S. 271(L)(C) IS SEPARATELY INITIATED. [ADDITION RS.22, 35,928/ - ] 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CI T(A) BUT WITHOUT ANY SUCCESS. HE THEN APPROAC HED THE TRIBUNAL WHICH REMITTED THE MATTER TO THE FILE OF THE ASSESSING O FFICER BY OBSERVING AS FOLLOWS : - WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON R ECORD ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. WE NOTED THAT T HE ASSESSEE VIDE HIS LETTER DATED 28.08.2006, A S POINTED OUT IN THE ASSESSMENT ORDER, HAS STATED THAT HE HAD CHARGED DEPRECIATION ON ALL HIS ASSETS AND ALSO CONFIRMED THAT HE HAS CHARGED DEPRECIATION ON THE PROPERTY SOLD AND DUE TO THE DEPRECIATION FROM 19 96 TO 2002, IT IS SHOWING THE PRESENT BALANCE OF RS.1,46,922/ - . THE; AO HAS GIVEN FINDING THAT THE ASSESSEE HAS ALSO POINTED OUT DURING THE COURSE OF ASSESSMENT THAT THE SAID DEPRECIATION WAS DULY ALLOWED BY THE DEPARTMENT. THE CIT(A), ON THE OTHER HAND, R EFERRING TO THE DOCUMENTS FILED BY THE ASSESSEE, GAVE A FINDING THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION IN THE INCOME - TAX RETURN ALTHOUGH HE HAS SHOWN CLAIMED DEPRECIATION ONLY FOR AYS 1999 - 2000 IN HIS BOOKS OF ACCOUNT. WE, THEREFORE, IN THE INTERES T OF JUSTICE AND FAIR - PAY TO BOTH THE PARTIES, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHOULD VERIFY THE FACTUAL POSITION AND ASCERTAIN WHETHER THE ASSESSEE HAS ACTUALLY CLAIMED THE DEPRECIATION IN ANY OF THE EARLIER YEARS O N THE ASSE TS SOLD WHILE COMPUTING THE INCOME UNDER THE INCOME - TAX ACT OR WHETHER ANY SUCH DEPRECIATION HAS BEEN DULY ALLOWED IN ANY OF THE ASSESSMENT YEARS. THE ASSESSEE IS FREE TO SUBMIT THE NECESSARY PAPERS ON WHICH HE MAY RELY. IF THE AO FINDS THAT THE ASSESSEE HAS NOT CLAIMED AND ALLOWED DEPRECIATION IN ANY OF THE PRECEDING ASSESSMENT YEARS ON THE ASSETS SOLD, THE AO IS DIRECTED TO WORK OUT THE CAPITAL GAIN AS PER THE PROVISIONS OF SECTION 48 OF THE ACT. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURP OSE. 4. THAT S HOW ASSESSING O FFICER CAME TO BE IN SEISIN OF THE MATTER ONCE AGAIN. THE ASSESSING O FFICER DID HOLD THAT DEPRECIATION WAS NOT ALLOWED ON THIS PROPERTY, AND, ACCORDINGLY, SECTION 50A HAS NO APPLICATION IN THE MATTER. ON THIS A SPECT, HIS C ONCLUSION WAS AS FOLLOWS : - ITA NO.2 678 /AHD/201 1 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 4 OF 5 IN ACCORDANCE WITH THE ABOVE FINDINGS CONSEQUENT TO DIRECTIONS OF HON BLE ITAT THE SALE OF/TRANSFER OF PLOT OF LAND AT SCDC HAS TO BE CONSIDERED AS INCOME FROM CAPITAL GAIN. 5. THE MATTER, HOWEVER, DID NOT END AT THAT. HE PR OCEEDED TO EXAMINE COST OF ACQUISITION , COST OF IMPROVEMENT ETC. AT THIS STAGE. HE HELD THAT THE COST OF ACQUISITION WAS RS.7,86,300/ - AS AGAINST RS.8,43,963/ - AS CLAIMED BY THE ASSESSEE. THE COST OF IMPROVEMENT WAS TREATED AS NIL BY HOLDING THAT IT A C LEAR PLOY AND COLOURABLE DEVICE . THE LONG TERM CAPITAL GAIN WAS THUS COMPUTED AT RS.15,30,100/ - . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A ) BUT WITHOUT ANY SUCCESS. NOT SATISFIED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE ME. 6. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. AS EVIDENT FROM THE OBSERVATIONS MADE BY THE ASSESSING O FFICER IN THE FIRST ROUND OF PROCEE DINGS, THE ASSESSING O FFICER HAD ACCEPTED THE EXPENSES SHOWN BY THE ASSESSEE AND THERE WERE NO DISPUTES IN THIS REGARD. THE SHORT POINT ON WHICH THE MATTER WAS SENT TO THE FILE OF THE ASSESSING O FFICER WAS WITH RESPECT TO VERIFICATION ABOUT DEPRECIATION A ND WHETHER SALE IN QUESTION IS TO GIVE RISE TO TAXABILITY UNDER SECTION 50A OR SECTION 48. ONCE ASSESSING O FFICER HOLDS THAT THE SALE GIVES RISE TO TAXABILITY UNDER SECTION 48 A S LONG TERM CAPITAL GAINS, THE MATTER ENDS THERE. IT WAS NO LONGER OPEN TO HI M TO EXAMINE THE DETAILS ABOUT COST OF ACQUISITION AND COST OF IMPROVEMENT WHICH WERE EXAMINED AND ACCEPTED IN THE FIRST ROUND. IN MY C ONSIDERED VIEW, THE ASSESSING O FFICER EXCEEDED HIS BRIEF IN THIS I.E. SECOND ROUND OF PROCEEDINGS. ITA NO.2 678 /AHD/201 1 A SSESSMENT Y EAR: 20 0 4 - 05 PAGE 5 OF 5 8. IN VIEW OF THE A BOVE DISCU SSIONS, I VACATE THE ASSESSING O FFICER S ORDER ON THESE POINTS AND , THEREFORE, DELETE THE IMPUGNED ADDITION. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 9. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF FEBRUA RY , 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 17 TH DAY OF FEBRUARY , 2017 . PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4 ) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD