Sri. K.P. Satish, Cochin V. The ACIT, Cochin

ITA 270/COCH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7615 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTOM BOSE
• Keywords: Capital asset; Opportunity of being heard; Assessment record
• Section: 143(3); 54F; 263; 10; 11

Judgement Text

ITA NO 270/C/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE K, JM ITA NO 270/CO C H/2015 (ASST YEAR 2010 - 11 ) SH K P SATISH 18G HEERA WATERS CHILAVANOOR COCHIN 682 020 VS THE ASST COMMR OF INCOME TAX CIRCLE 2(2) E RNAKULAM ( APPELLANT) (RESPONDENT) PAN NO. AKJPS1153M ASSESSEE BY SH ANIL D NAIR REVENUE BY SH SHA N TOM BOSE, CIT - DR DATE OF HEARING 9 TH NOV 2016 DATE OF PRONOUNCEMENT 17 TH NOV 2016 ORDER PER GEORGE GEORGE K,JM: THIS APPEAL, AT THE INSTA NCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CITS ORDER DATED 26.3.2015 PASSED U/S 263 OF THE I T ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE ASSESSEE HAS FILED CONCISE GROUNDS WHICH READ AS FOLLOWS: A. THE ORDER OF COMMISSIONER OF INCOME TAX INVOKING JURISDICTION UNDER SEC.263 OF THE ACT IS ILLEGAL, ARBITRARY AND UNAUTHORIZED. B. THE COMMISSIONER OUGHT TO HAVE APPRECIATED THE FACT THAT THE SUBJECT MATTER OF THE REVISION UNDER SEC. 263 WAS EXAMINED BY THE OFFICER DURING THE COUR SE OF ASSESSMENT UNDER SEC.143 (3) AND THAT THERE IS MENTION ABOUT IT IN THE ASSESSMENT ORDER. CORRESPONDING EXCHANGES BY THE PARTIES ARE ALSO REFERRED IN THE SAID PARAGRAPH. THEREFORE, GOING BY THE RATIO OF THE JUDGMENT, IT IS SUBMITTED THAT THE ORDER IS BAD IN LAW. ITA NO 270/C/2015 2 C. THE COMMISSIONER WHILE EXERCISING ITS JURISDICTION UNDER SEC. 263 HAS ONLY POWERS TO SET ASIDE THE ORDER AND REMAND THE MATTER BACK TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION. HOWEVER, FOR THE REASONS BEST KNOWN TO HIM, HE HAS IN T HIS ORDER CATEGORICALLY HELD THAT THE CLAIM OF EXEMPTION UNDER 54F HAS TO BE DISALLOWED BY THE ASSESSING AUTHORITY. IT IS THEREFORE SUBMITTED THAT THE FINDING TO THIS EFFECT IS BEYOND THE SCOPE OF SEC.263 AND FOR THESE REASONS THIS ORDER IS BAD IN LAW. D. THE IMPUGNED ORDER IS BAD IN LAW AS THE COMMISSIONER IN PARAGRAPH 7 OF THE ORDER PROCEEDS ON THE PREMISE THAT SALE TOOK PLACE ON 4.2.2010 AND THE ASSESSEE WAS ALLOTTED FOUR FLATS ON 16.4.2009. IT IS SUBMITTED THAT THE COMMISSIONER IS FACTUALLY ERRONEOUS IN COMING TO THIS CONCLUSION AS THE PETITIONER , IN HIS LETTER DATED 26.3.2013 HAS CATEGORICALLY STATED THAT HE HAS NOT RECEIVED ANY PROPERTY ON THAT DAY AND THEREFORE THE PREMISES UNDER WHICH THE COMMISSIONER PROCEEDS IS BAD IN LAW. E. THE IMPUGNED ORDE R IS AGAINST THE RATIO OF THE JUDGMENT REPORTED IN 295 ITR 282, 320 ITR 674, 203 ITR 108 AND 227 CTR 133. FOR THESE AND OTHER GROUNDS TO BE SUBMITTED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THE TRIBUNAL BE PLEASED TO ALLOW THE APPEAL. 2.1 THE AS SESSEE HAS ALSO FILED ADDITIONAL GROUNDS AND THE SAME IS REPRODUCED HERE FOR READY REFERENCE: A. THE ORDER OF COMMISSIONER OF INCOME TAX INVOKING JURISDICTION UNDER SEC.263 OF THE ACT IS ILLEGAL, ARBITRARY AND UNAUTHORIZED. B. THE COMMISSIONER OUGHT TO HAVE APPRECIATED THE FACT THAT THE SUBJECT MATTER OF THE REVISION UNDER SEC. 263 WAS EXAMINED BY THE OFFICER DURING THE COURSE OF ASSESSMENT UNDER SEC.143 (3) AND THAT THERE IS MENTION ABOUT IT IN THE ASSESSMENT ORDER. CORRESPONDING EXCHANGES BY THE PARTI ES ARE ALSO REFERRED IN THE SAID PARAGRAPH. THEREFORE, GOING BY THE RATIO OF THE JUDGMENT, IT IS SUBMITTED THAT THE ORDER IS BAD IN LAW. C. THE COMMISSIONER WHILE EXERCISING ITS JURISDICTION UNDER SEC. 263 HAS ONLY POWERS TO SET ASIDE THE ORDER AND REMAN D THE MATTER BACK TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION. HOWEVER, FOR THE REASONS BEST KNOWN TO HIM, HE HAS IN THIS ORDER CATEGORICALLY HELD THAT THE CLAIM OF EXEMPTION UNDER 54F HAS TO BE DISALLOWED BY THE ASSESSING AUTHORITY. IT IS THEREFORE SUBMITTED THAT THE FINDING TO THIS EFFECT IS BEYOND THE SCQPE OF SEC.263 AND FOR THESE REASONS THIS ORDER IS BAD IN LAW. D. THE IMPUGNED ORDER IS BAD IN LAW AS THE COMMISSIONER IN PARAGRAPH 7 OF THE ORDER PROCEEDS ON THE PREMISE THAT SALE TOOK PLACE ON 4.2.2010 AND THE ASSESSEE WAS ALLOTTED FOUR FLATS ON 16.4.2009. IT IS SUBMITTED THAT THE COMMISSIONER IS FACTUALLY ERRONEOUS IN COMING TO THIS CONCLUSION AS THE PETITIONER IN HIS LETTER DATED 26.3.2013 HAS CATEGORICALLY STATED THAT HE HAS NOT RECEIVED ANY PROPERTY ON THAT DAY AND THEREFORE THE PREMISES UNDER WHICH THE COMMISSIONER PROCEEDS IS BAD IN LAW. ITA NO 270/C/2015 3 E. THE IMPUGNED ORDER IS AGAINST THE RATIO OF THE JUDGMENT REPORTED IN 295 ITR 282, 320 ITR 674, 203 ITR 108 AND 227 CTR 133. FOR THESE AND OTHER GROUND S TO BE SUBMITTED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THE TRIBUNAL BE PLEASED TO ALLOW THE APPEAL. 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL, WHO IS TRADING IN SHARES THROUGH BROKERS. THE ASSESSEE IS ALSO A PARTNER IN THE PARTNERSHIP FIRM M /S STERLING CHEMICALS & PLASTICS AND STERLING ENTERPRISES, CHENNAI. FOR THE ASSESSMENT YEAR 2010 - 11, RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME OF RS. 27,37,587/ - . THE ASSESSMENT U/S 143(3) OF THE I T ACT W AS COMPLETED VIDE ORDER DATED 27.3.2013 ON A TOTAL INCOME OF RS. 31,28,246/ - . IN THE ASSESSMENT COMPLETED U/S143(3) OF THE ACT, LONG TERM CAPITAL GAINS RETURNED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER , EXCEPT FOR THE DISALLOWANCE OF T HE COS T OF IMPROVEMENT BY 20% . 3.1 SUBSEQUENTLY, NOTICE DATED 1.11.2014 U/S 263 OF THE AC T WAS ISSUED BY THE COMMISSIONER OF INCOME TAX FOR THE REASON THAT IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE AC T ON 27.3.2013, THE ASSESSING OFFICER HAD WRONGLY COM PUTED CAPITAL GAINS BY ALLOWING EXEMPTION U/S 54F OF THE ACT. THE ASSESSEE FILED WRITTEN SUBMISSION AGAINST THE PROPOSED REVISION U/S 263 OF THE ACT (WRITTEN SUBMISSION DATED 8.12.2014 ) STATING THAT THE ASSESSEE DOES NOT HAVE MORE THAN ONE RESIDENTIAL HOUS E OTHER THAN THE NEW ASSET AND THEREFORE, CANNOT BE DISENTITLED FOR EXEMPTION U/S 54F OF THE ACT. IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS CONSCIOUSLY EXAMINED ALL THE RELEVANT RECORDS AND ACCEPTED THE RETURN SUBMITTED BY THE ASSESSEE AND HE NCE, THE CIT HAD NO JURISDICTION TO REVISE THE ASSESSMENT PASSED U/S 143(3) OF THE ACT. THE ITA NO 270/C/2015 4 CIT, HOWEVER, REJECTED THE CONTENTIONS RAISED BY THE ASSESSEE AND PASSED THE ORDER U/S 263 OF THE ACT , SETTING ASIDE THE ASSESSMENT AND DIRECTING THE ASSESSING OFFI CER TO DISALLOW THE CLAIM OF EXEMPTION U/S 54F OF THE ACT. THE RELEVANT FINDINGS OF THE CIT, READ AS FOLLOWS: 6. I HAVE GONE THROUGH THE WRITTEN SUBMISSION MADE BY THE ASSESSEE AND ALSO THE FACTS POINTED OUT BY THE AR.' AS PER SEC 263(1) OF THE IT ACT, T HE COMMISSIONER OF INCOME TAX MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MA Y AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT , OR CANCELLING THE ASSESSMENT AND ,DIRECTING A FRESH ASSESSMENT'. AS SUCH THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD CARRIED OUT NECESSARY ENQUIRY DU RING THE STAGE OF ASSESSMENT U/S.143(3) AND THE COMMISSIONER OF INCOME TAX HAS NO JURIS DICTION AT THIS STAGE IS FACTUALLY INCORRECT. 7 THE FIRST ISSUE IS RELATED TO THE ALLOWABILITY OF EXEMPTION U/S.54F. THE ASSESSEE WAS HOLDING 37.5.CENTS OF LAND. THE ASSESSEE ALON G WITH 4 OTHERS HAVE ENTERED IN TO AN AGREEMENT WITH M/S.HEERA CONSTRUCTIONS FOR THE JOINT DEVELOPMENT OF THE PROPERTY AND CONSTRUCTION OF A RNULTISTORIED FLAT ON THE SAID LAND. THE ASSESSEE RECEIVED 4 FLATS AS REMUNERATION FOR THE SAME.' THE SALE WAS TAKEN PLACE ON 04/02/2010 AND AS PER RECORDS THE 'ASSESSES HAS BEEN ALLOTTED 4 F LATS ON 16/04/2009. IN THE RETURN OF INCOME FILED, THE ASSESSEE CLAIMED EXEMPTION U/S.54F FOR RS.88.43 LAKHS. 8. AS PER SECTION 54( 1) OF THE INCOME TAX ACT, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARI SES FROM TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE 'CONSTRUCTED A RESIDENTIAL HOUSE, IS EXEMPTED FROM INCOME TAX. PROVISO TO THIS 'SECTION SAYS THAT THE ASSESSEE SHOULD NOT OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET. 9. IN THIS CASE, THE ASSESSEE HAS N EITHER PURCHASED NOR CONSTRUCTED ANY HOUSE, BUT HAS RECEIVED 4 APARTMENTS AS REMUNERATION FOR THE SALE OF LAND. MOREOVER, AT THE TIME OF SALE OF L AND, THE ASSESSEE WAS ALLOTTED WITH 4 FLATS AND WAS IN POSSESSION OF MORE THAN ONE HOUSE, AS SUCH THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S.54F. THE ASSESSING OFFICER IS DIRECTED TO DISALLOW THE EXEMPTION CLAIMED U/S.54F OF THE INCOME TAX ACT AMOUNTING TO RS.88.43, LAKHS. 10 THE SECOND ISSUE REGARDING WRONG COMPUTATION OF CAPITAL GAIN. FROM THE RECORDS, IT IS SEEN THAT THE ASSESSING OFFICER IS WRONG IN THE CALCULATION OF LONG TERM CAPITAL GAIN. SIMILARLY, NECESSARY VERIFICATION HAS NOT BEEN MADE BY THE AO REGARDING THE CLAIM OF EXPENDITURE TOWARDS IMPROVEMENT OF THE FLAT. I, THEREFORE DIRECT THE ASSESSING OF FICER TO COMPUTE THE LONG TERM ITA NO 270/C/2015 5 CAPITAL GAIN CORRECTLY AFTER MAKING NECESSARY VERIFICATION ON THE CLAIM TOWARDS THE EXPENDITURE ON THE IMPROVEMENT OF FLATS 11. IN THE LIGHT OF THE ABOVE DISCUSSION, I FIND THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) DATED 27/03/2013 FOR THE ASSESSMENT YEAR 20 10 - 11 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE REVENUE. ACCORDINGLY, INVOKING THE PROVISIONS OF SECTION 263 OF T HE IT ACT, THE ASSESSMENT ORDER DATED 27/03/2013 IS SET ASIDE WITH A DIRECTION TO THE ASSESSING OFFICER TO REDO THE SAME AFRESH AFTER CONSIDERING ALL ISSUES RAISED HEREIN ABOVE AND AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4 AGGRIEVED BY THE ORDER PASSED U/S 263 OF THE ACT, THE ASSESSEE HAS FILED THE P RESENT APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT IN PARA 7 OF THE IMPUGNED ORDER HAS PROCEEDED ON THE WRONG PREMISE S THAT SALE TOOK PLACE ON 4.2.2010 AND THE ASSESSEE WAS ALLOTTED FOUR FLATS ON 16.4.2009. IT WAS SUBMITTED TH AT THE CIT W AS FACTUALLY WRONG IN COMING TO THIS CONCLUSION AS THE PETITIONER IN HIS LETTER DATED 26.3.2013 HAD CATEGORICALLY STATED BEFORE THE CIT THAT HE HAD NOT RECEIVED ANY PROPERTY ON THAT DAY AND THEREFORE, THE PREMISES UNDER WHICH THE COMMISSIONER PROCEEDED, IS BAD IN LAW. IT WAS FURTHER CONTENDED THAT THE SPECIFIC DIRECTION OF THE CIT TO DISALLOW THE EXEMPTION GRANTED U/S 54F IS NOT WARRANTED AND THE ASSESSING OFFICER MAY BE GRANTED LIBERTY TO EXAMINE THE CLAIM OF EXEMPTION U/S 54F OF THE ACT , DE - HORSE THE OBSERVATIONS MADE BY THE CIT IN THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT. 4.1 ON THE OTHER HAND, THE LD DR SUBMITTED THAT THE CIT IS JUSTIFIED IN INVOKING HIS REVISIONARY POWERS U/S 263 OF THE ACT, SINCE THE ASSESSING OFFICER HAD NOT VERIFIE D THE CLAIM OF EXEMPTION U/S 54F OF THE ACT. IT WAS SUBMITTED THAT EXEMPTION U/S 54F AMOUNTING TO RS. 88,43,200/ - WAS GRANTED TO THE ASSESSEE AS CLAIMED BY HIM WITHOUT ANY PROPER VERIFICATION. ITA NO 270/C/2015 6 5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THAT THE CLAIM OF EXEMPTION U/S 54F HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS RETURNED BY THE ASSESSEE. THE ASSESSMENT RECORDS DOES NOT SHOW THAT THERE HAS BEEN A PROPER EXAMINATION OF THE ISSU E BY THE ASSESSING OFFICER WHILE CONCLUDING THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. 5.1 THE HONBLE DELHI HIGH COURT IN THE CASE OF TOYOTA MOTOR CORPORATION , REPORTED IN 306 ITR 49(DEL) HAD HELD THAT THE ORDER OF THE ASSESSING OFFICER MUST BE S ELF CONTAINED GIVING RELEVANT FACTS AND REASONS FOR COMING TO A CONCLUSION ON THOSE FACTS AND LAW. THE RELEVANT FINDINGS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TOYOTA MOTORS CORPORATION (SUPRA) READ AS FOLLOWS: IT IS ALSO NECESSARY FOR THE PAR TIES TO KNOW THE REASONS THAT HAVE WEIGHED WITH THE ADJUDICATING AUTHORITY IN COMING TO A CONCLUSION. THE ORDER PASSED BY THE ASSESSING OFFICER SHOULD BE A SELF - CONTAINED ORDER GIVING THE RELEVANT FACTS AND REASONS FOR COMING TO THE CONCLUSION BASED ON THO SE FACTS AND LAW. WE FIND THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS CRYPTIC, TO SAY THE LEAST, AND IT CANNOT BE SUSTAINED. THE TRIBUNAL CANNOT SUBSTITUTE ITS OWN REASONING TO JUSTIFY THE ORDER PASSED BY THE ASSESSING OFFICER WHEN THE ASSESSING OFFI CER HIMSELF DID NOT GIVE ANY REASON IN THE ORDER PASSED BY HIM 5.2 ON FURTHER APPEAL, THE HONBLE SUPREME COURT WHILE DISMISSING THE APPEAL OF THE ASSESSEE ( 306 ITR 52) HELD THAT IT WAS NOT NECESSARY TO INTERFERE AT THIS STAGE. WHEN THE MATTER WOULD B E TAKEN BY THE ASSESSING OFFICER ON REMAND IT WAS HIS DUTY TO TAKE INTO ACCOUNT ALL THE RELEVANT FACTS, INCLUDING THE MATERIALS, IF ANY, PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER . ITA NO 270/C/2015 7 5.3 S INCE THERE WAS NO EXAMINATION OF ISSUE OF GRANT OF DEDUCTION U/S 54F WHILE COMPLETING THE ASSESSMENT, BY PLACING RELIANCE ON THE JUDGMENT IN THE CASE OF TOYOTA MOTOR CORPORATION (SUPRA), WE HOLD THAT THE CIT IS JUSTIFIED IN INVOKING HIS REVISIONARY POWERS U/S 263 OF THE ACT FOR SETTING ASIDE THE SAID ASSESSMENT ORD ER. 5. 4 HOWEVER , THE CIT, WHILE SETTING ASIDE THE ASSESSMENT HAD GIVEN SPECIFIC DIRECTION TO THE ASSESSING OFFICER NOT TO GRANT EXEMPTION U/S 54F OF THE ACT. THE ASSESSEE S CONTENTION IS THAT HE W AS NOT ALLOTTED FOUR APARTMENTS AND THE CIT HAS PROCEEDED ON THE WRONG FACTUAL SITUATION . W E ARE OF THE VIEW THAT THE ISSUE WHETHER THE ASSESSEE IS ENTITLED DEDUCTION U/S 54F (1) OF THE I T ACT , IS TO BE CONSIDERED AFRESH BY THE ASSESSING OFFICER BY EXAMINING THE NECESSARY EVIDENCES. THEREFORE, WE DELETE THE DIRECT ION OF THE CIT TO DENY THE BENEFIT OF DEDUCTION U/S 54F OF THE ACT. THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE OF GRANT OF DEDUCTION U/S 54F OF THE I T ACT AFRESH, DE - HOR E THE OBSERVATIONS MADE BY THE CIT. IT IS ORDERED ACCORDINGLY. 6 IN THE RESULT, T HE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF NOV 2016. SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 17 TH N OV 2016 RAJ* COPY TO: ITA NO 270/C/2015 8 1 . APPELLANT 2 . RESPONDEN T 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN