ASST CIT 15(2), MUMBAI V. ADITYA ENTERPRISES, MUMBAI

ITA 2749/MUM/2013

• Counselvise Citation: 274919914 RSA 2013
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJN EESH K ARVIND
• Keywords: Rejection of books of accounts; Sale consideration of property below Jantri Value; Capital asset; Audit objection; Period of limitation; Tangible material; Difference of opinion; Time period of passing order; Reason to believe; Change of opinion
• Section: 143(3); 50C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.2749/M/2013 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX 15(2), MATRU MANDIR, ROOM NO.113, GRANT ROAD (W) MUMBAI 400 007 VS. M/S. ADITYA ENTERPRISES, B-1/306, LARAM CENTRE, M.A. ROAD, ANDHERI (W), MUMBAI 400 058 PAN: AAJFA 5021C (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAJESH KOTHARI, A.R. REVENUE BY : SHRI RAJNEESH K. ARVIND, SR. D.R. DATE OF HEARING : 04.08.2015 DATE OF PRONOUNCEMENT : 16.09.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 0 2.01.2013. THE REGISTRY HAS NOTED THAT THE APPEAL IS TIME BARRED BY 36 DAYS . HOWEVER THE LD. DR HAS POINTED THAT THE APPEAL HAS BEEN FILED WITHIN THE P ERIOD OF LIMITATION. THE DATE OF COMMUNICATION OF ORDER APPEALED AGAINST WAS MIST AKENLY WRITTEN AS 2.1.2013 WHEREAS THE CORRECT DATE WAS 08.2.3013. HE HAS SUBMITTED THAT THE DEFECT HAS BEEN RECTIFIED. THE LD. AR HAS NOT PUT A NY OBJECTION TO THE ABOVE SUBMISSIONS. THE APPEAL IS THEREFORE TREATED AS FIL ED WITHIN THE LIMITATION PERIOD. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN HOLDING THAT THE RE-OPENING OF ASSESSMENT IN THIS C ASE WAS NOT JUSTIFIED SINCE ITA NO.2749/M/2013 M/S. ADITYA ENTERPRISES 2 THERE WAS A CHANGE OF OPINION AND NOT APPRECIATING THE FACT THAT THE CASE WAS RE-OPENED WITHIN 4 YEARS FROM THE END OF THE RE LEVANT A.Y. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.87,48,301/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF APPLICATION OF STAMP VALUATION RATE OF R S.4554 PER SQ. FT. FOR ARRIVING AT THE SALE VALUE OF THE TOTAL SALABLE ARE A TO CALCULATE THE PRESUMPTIVE SALE VALUE OF THE PROJECT. 3. THE REVENUE THROUGH GROUND NO.1 HAS CONTESTED TH E ACTION OF THE LD. CIT(A) IN SETTING ASIDE THE REASSESSMENT DONE U/S 1 47 OF THE ACT WHILE HOLDING THE SAME AS BAD IN LAW. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPER AND STARTED CONSTRUCTION OF COMMERCIAL PREMISES DURING THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE HAS BEEN FOLLOWING PERCENTAGE COMPLETION METHOD AND ACC ORDINGLY INCOME WAS OFFERED TO TAX BASED ON THE PROJECT COMPLETED DURIN G THE YEAR AND ON THE ESTIMATED VALUE OF SALES OF THE PROJECT. THE ASSES SMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ON 27.11 .09 ASSESSING THE INCOME AT RS.11,60,272/-. THEREAFTER, THE CASE WAS REOPEN ED BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 DATED 09.08 .10. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) IN THE REOPENED ASSESSMENT PROCEEDINGS MADE AN ADDITION OF RS.87,48,301/- BY W AY OF APPLYING STAMP VALUATION RATE FOR ARRIVING AT THE SALE VALUE OF TH E PROJECT. IN APPEAL, THE LD. CIT(A) SET-ASIDE THE REOPENING OF THE ASSESSMENT HOLDING THE SAME AS BAD IN LAW. BEING AGGRIEVED, THE REVENU E HAS COME IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. R EPRESENTATIVES OF THE PARTIES. WE FIND FROM THE IMPUGNED ORDER THAT BEFOR E THE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE AO HAD DULY VER IFIED THE RELEVANT FACTS AND DETAILS INCLUDING THE BOOKS OF ACCOUNT DURING THE A SSESSMENT PROCEEDINGS. THE ASSESSEE HAD FULLY COOPERATED WITH THE AO IN PROVID ING AND SUBMITTING ALL ITA NO.2749/M/2013 M/S. ADITYA ENTERPRISES 3 INFORMATION RELATING TO THE MODE OF ESTIMATING SALE VALUE OF THE PROJECT FOR ARRIVING AT PROFIT BASED ON COMPLETION OF PROJECT. NO NEW FACT OR MATERIAL HAD COME TO THE NOTICE OF THE AO, INDICATING ANY ESCAPE MENT OF INCOME. THE ASSESSEE HAD FURTHER STATED THAT THE CONCLUSION DRA WN BY THE AO WAS ERRONEOUS FOR THE REASON THAT HE CONSIDERED THE RATE OF STAMP DUTY VALUATION OF SHOPS AT RS.4,554/- PER SQ. METER AS APPLICABLE FOR THE VALU ATION OF THE OFFICE AREA. THEREFORE, REOPENING THE ASSESSMENT FOR APPLYING RA TE OF STAMP DUTY VALUATION OF RS.4,554/- APPLICABLE TO SHOPS IN RESPECT OF TH E OFFICE AREA ITSELF WAS INCORRECT. IT WAS ALSO THE CASE OF THE ASSESSEE TH AT THE REOPENING OF THE ASSESSMENT WAS DONE BY THE AO ON THE BASIS OF THE A UDIT OBJECTIONS IN A MECHANICAL MANNER. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND RELEVANT FACTS ON RECORD, THE LD. CIT(A) OBSERVED THAT THE REOPENING OF THE ASSESSMENT BY THE AO IN THIS CASE COULD NOT BE HELD TO BE JUSTIFIED. THE RELEVANT PART OF THE OBSERVATIONS OF THE CIT(A) IS REPRODUCED AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE A.O IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. AFTER CON SIDERING THE RIVAL SUBMISSIONS, IT IS NOTED THAT THE ISSUE OF VALUATION OF CLOSING STO CK/PRESUMPTIVE SALE WAS INQUIRED INTO BY THE A.O AT THE TIME OF SCRUTINY ASSESSMENT AND FROM THE CLARIFICATION/EXPLANATION OF THE ASSESSEE AT THE TI ME OF ORIGINAL ASSESSMENT, THE A.O WAS SATISFIED ON THIS ASPECT. IT IS FURTHER NOTED T HAT REOPENING HAS BEEN DONE ON THE BASIS OF AUDIT OBJECTIONS. HOWEVER, IT IS FURTHER N OTED THAT THE A.O IN THE FIRST INSTANCE DID NOT AGREE WITH THE OBSERVATIONS OF THE AUDIT TEAM THAT THE ASSESSEE HAS DISCLOSED LESSER VALUE OF THE UNSOLD FLATS/SHOP S. ON THE OTHER HAND, THE A.O HAS OBJECTED TO THE OBSERVATIONS OF THE AUDIT PARTY. UN DER THESE CIRCUMSTANCES, IT APPEARS THAT THE A.O WAS PRIMA FACIE SATISFIED THAT INCOME ASSESSED AT THE TIME OF ORIGINAL ASSESSMENT IS CORRECT, HOWEVER, IN VIEW OF THE AUDIT OBJECTIONS, HE HAS MECHANICALLY RE-OPENED THE ASSESSMENT. THEREFORE, I T IS SEEN THAT IN THIS CASE NEITHER THE A.O GOT ANY SPECIFIC INFORMATION NOR TH E ASSESSEE GAVE ANY INCORRECT INFORMATION, UNDER THESE CIRCUMSTANCES, WHEN IN SCR UTINY ASSESSMENT U/S. 143(3) EARLIER A.O HAS DULY ACCEPTED THE VALUATION OF THE ASSESSEE AS CORRECT, THEN TAKING A DIFFERENT STAND IN THE RE-ASSESSMENT PROCEEDINGS ON THE SAME FACTS CLEARLY TANTAMOUNT TO CHANGE OF OPINION. IT IS A WELL SETTL ED PRINCIPLE OF LAW THAT UNDER THESE CIRCUMSTANCES, PROCEEDINGS U/S. 148 CANNOT BE JUSTIFIED. L ITA NO.2749/M/2013 M/S. ADITYA ENTERPRISES 4 6. BEFORE US, THE LD. DR COULD NOT BRING ANY CONVIN CING ARGUMENT WHICH MAY JUSTIFY OUR INTERFERENCE IN THE ABOVE REPRODUCE D WELL-REASONED ORDER OF THE CIT(A). THE ASSESSE HAD PROVIDED ALL THE DETAILS A ND PARTICULARS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HIMSELF WAS NOT CONVINCED WITH THE WORKING OF THE VALUE OF THE PROJECT DONE BY THE AUD IT PARTY AND HAD OBJECTED TO THE SAME. HOWEVER LATTER ON HE REOPENED THE ASSESSM ENT IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND. IT HAS BEEN HE LD TIME AND AGAIN BY VARIOUS COURTS OF THE COUNTRY THAT THE REOPENING ME RELY ON THE BASIS OF AUDIT OBJECTIONS WAS NOT SUSTAINABLE IN THE EYES OF LAW. THE VIEW TAKEN BY THE AO AFTER APPRECIATION OF THE MATERIAL ON RECORD DURING THE ORIGINAL ASSESSMENT PROCEEDINGS WAS ONE OF THE POSSIBLE VIEWS AND IN HI S OPINION THE SAME WAS THE CORRECT VIEW EVEN AFTER THE OBJECTIONS OF THE AUDIT PARTY. EVEN AS OBSERVED BY THE CIT(A), THE STAMP DUTY VALUE OF THE SHOPS COULD HAVE NOT BEEN APPLIED TO THE OFFICE AREA. EVEN SECTION 50C PROVIDES FOR SUB STITUTING THE RATE ADOPTED FOR STAMP DUTY VALUE, IF THE AGREEMENT RATE IS LOWER TH AN THE RATE ADOPTED FOR THE STAMP DUTY. THIS IS APPLICABLE ONLY TO TRANSFER OF CAPITAL ASSET. SINCE SHOPS AND OFFICE HAVE BEEN THE BUSINESS ASSET OF THE ASSE SSEE, SECTION 50C PROVIDING FOR ADOPTING STAMP DUTY VALUE DOES NOT ARISE. THIS VIEW HAS BEEN CONFIRMED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KAN CONSTRUCTION AND COLONIZERS (P) LTD. (2012) 70 DTR (ALL.) 169 WHEREI N IT IS HELD THAT SECTION 50C DOES NOT APPLY TO THE CONTENTS HELD AS STOCK IN TRADE. HENCE EVEN OTHERWISE, THE REASON FOR REOPENING WAS NOT A VALID REASON. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. KELVINAT OR INDIA LTD. REPORTED AS (2010) 320 ITR 561 (SC) HAS HELD THAT THE AO HAS NO POWER TO REVIEW, HE HAS POWER TO REASSESS BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF CHANGE OF OPIN ION IS REMOVED THEN IN THE GARB OF REOPENING OF THE ASSESSMENT, REVIEW WOULD T AKE PLACE. THE AO HAS POWER TO REOPEN PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION ITA NO.2749/M/2013 M/S. ADITYA ENTERPRISES 5 THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT AND REASONS MUST HAVE A LINK WITH THE FORMATION OF THE BELIEF. IN THIS CASE THE AO HAD NO VALID REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPE ASSESSMENT . WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ) IN SETING ASIDE THE REOPENING OF THE ASSESSMENT. 7. EVEN ON MERITS THE ADDITION MADE BY THE AO ARE N OT SUSTAINABLE IN LAW AS DISCUSSED ABOVE. NEITHER THE ACTION OF THE AO IN APPLYING THE STAMP VALUE RATE OF SHOPS TO THE OFFICE AREA WAS CORRECT NOR HE WAS ENTITLED TO DO SO IN RESPECT OF STOCK IN TRADE AS DISCUSSED ABOVE. EVEN THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) ON FACTUAL MERITS ALSO. THE ORDER OF THE CIT(A) IS THEREFORE UPHELD. 8. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS HE REBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16. 09.2015 . * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.