A.T.E. ENTERPRISES P. LTD ( NOW KNOWN AS ATE P. LTD), MUMBAI V. DCIT RG 2(1), MUMBAI

ITA 2873/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8858 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 12-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Sale consideration of property below Jantri Value; Capital asset; Business expenditure; Deemed to accrue or arise in india; Fair market value; Valuation report
• Section: 68; 37; 143(3); 50C; 37(1)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . .. . . .. . , ,, , ! ! ! ! , ' ' ' ' # $% # $% # $% # $% , ,, , & ! & ! & ! & ! ' ' ' ' BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 2873 AND 2874/MUM./2011 ( &( ) '*) / ASSESSMENT YEARS : 200304 AND 200506 ) A.T.E. ENTERPRISES PVT. LTD. (NOW KNOWN AS ATE PRIVATE LIMITED) 43, DR. V.B. GANDHI MARG FORT, MUMBAI 400 021 .. +, / APPELLANT ( V/S DY. COMMISSIONER OF INCOME TAX RANGE2(1), AAYAKAR BHAVAN 101, M.K. MARG, MUMBAI 400 020 .... -.+, / RESPONDENT !+ . / PERMANENT ACCOUNT NUMBER AAACA4481G !' 0 1 / REVENUE BY : MR. NITESH JOSHI &( )2 0 1 / ASSESSEE BY : MR. MOHIT JAIN (' 0 / DATE OF HEARING 08.08.2012 $ 34* 0 / DATE OF ORDER 07.09.2012 $ $ $ $ / ORDER # $% # $% # $% # $% , ,, , & ! & ! & ! & ! 5 5 5 5 / PER AMIT SHUKLA, J.M. THE PRESENT APPEALS PREFERRED BY THE ASSESSEE, ARE DIRECTED AGAINST THE IMPUGNED SEPARATE ORDER DATED 14 TH FEBRUARY 2011, FOR ASSESSMENT YEAR 200304 AND ORDER DATED 10 TH FEBRUARY 2011, FOR ASSESSMENT YEAR 200506, PASSED BY THE LEARNED COMM ISSIONER (APPEALS) ATE ENTERPRISES P. LTD. 2 IV, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UN DER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). THESE APPEALS PERTAIN TO SAME ASSESSEE THOUGH INVOLVING DIFFERENT ISSUES, WE RE HEARD TOGETHER. THEREFORE, AS MATTER OF CONVENIENCE, BOTH THESE APP EALS ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. WE FIRST PROCEED TO ADJUDICATE THE APPEAL IN ITA NO.2873/MUM./2011, FOR ASSESSMENT YEAR 2003-04 . THE SOLE GROUND RAISED BY THE ASSESSEE, READS AS FOLLOWS: 1. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING NON RECOVERABLE BALANCE WRITTEN OFF OF ` 14,35,644 BEING EXPENSES INCURRED ON BEHALF OF THE PRINCIPAL ON THE GROUND THAT THE APPELLANT I S NOT OBLIGED TO INCUR THESE EXPENSES AND THAT IT FOLLOWS CASH SYSTEM OF A CCOUNTING. ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, N ONRECOVERABLE BALANCE WRITTEN OFF OF ` 14,35,644 OUT TO BE ALLOWED EITHER AS BAD DEBT UNDER SECTION 36(1)(VII) OR AS BUSINESS EXPENSES UN DER SECTION 37 OF THE ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS DEBITED A SUM OF ` 15,79,917, ON ACCOUNT OF NON- RECOVERABLE BALANCE WRITTEN-OFF. SINCE THE ASSESSEE WAS FOLLOWING THE METHOD OF CASH SYSTEM ACCOUNTING, WHEREIN THE INCOME IS RECOGNIZED UPON RECEIPT BASIS AND EXPENDITURE IS DEBITED AS AND WHEN PAID, THERE FORE, THERE WAS NO QUESTION OF SUNDRY DEBTORS AND SUNDRY CREDITORS WERE WRITTEN- OFF. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED AS TO WHY SUCH A CLAIM SHOULD NOT BE DISALLOWED. THE ASSESSEE SUBMITTED TH AT INSOFAR AS THE AMOUNT OF ` 1,44,273, OUT OF ` 15,79,997, WAS CONCERNED, THE SAME WAS THE INCOME OF AN EARLIER YEAR WHICH HAS BEEN ACCOUNTED FOR BY THE ASSESSEE IN THIS YEAR AND SINCE THE INCOME HAS NOT BEEN RECEIVED, THE SAM E IS CLAIMED AS BAD DEBT. FOR THE BALANCE AMOUNT, IT WAS SUBMITTED THAT THE SAME REPRESENTS THE EXPENDITURE INCURRED BY IT IN THE EARLIER YEARS ON BEHALF OF ONE OF ITS ASSOCIATED CONCERN M/S. MOTEX ENGINEERING CO. P. LT D., ON ACCOUNT OF EXHIBITION AND SINCE IT HAS NOT RECEIVED THE AMOUNT , THE SAME HAS BEEN CLAIMED AS BAD DEBT NOW. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES ATE ENTERPRISES P. LTD. 3 CONTENTION PRIMARILY ON THE GROUND THAT THE ASSESSE E HAS CHOSEN THE METHOD OF CASH SYSTEM ACCOUNTING , CONSISTENTLY FOR SEVERAL YEARS, THEREFORE, THERE WAS NO QUESTION OF ALLOWING THE BAD DEBT. HOWEVER, WITH REGARD TO PAYMENT ON BEHALF OF ITS ASSOCIATE CONCERN, THE SAME IS ALS O NOT THE EXPENDITURE OF ASSESSEES BUSINESS, THEREFORE, HE DISALLOWED THE E NTIRE CLAIM OF ` 15,79,917. REGARDING THE SUM OF ` 1,44,273, THE SAME IS NOT DISPUTED BEFORE US. WIT H REGARD TO THE CLAIM OF BAD DEBT / BUSINESS EXPENSES , INCURRED ON BEHALF OF THE PRINCIPAL, IT WAS STATED BY THE ASSESSEE THAT I T HAS ENTERED INTO A JOINT VENTURE AGREEMENT WITH A MONFORTSTEXTILEMASCHINE GM BH & CO. (MONFORTS) VIDE AGREEMENT DATED 6 TH JULY 1996. PURSUANT TO THE SAID AGREEMENT A COMPANY CALLED MOTEX ENGG. CO. PVT. LTD. (MOTEX) WA S FORMED IN WHICH ASSESSEE WAS HOLDING 49% OF THE SHARES AND BALANCE 51% WAS HELD BY MONFORTS. THE ASSESSEE IS SELLING AGENT FOR VARIOUS COMPANIES INCLUDING MOTEX. IT HAD PARTICIPATED IN EXHIBITION ORGANIZED BY ITME IN THE YEAR 2000. IT WAS NORMAL BUSINESS PRACTICE OF THE ASSESSEE TO INC UR EXPENSES AT EXHIBITIONS ON BEHALF OF PRINCIPALS AND RECOVER THE SAME FROM THOSE PRINCIPALS WHOSE MACHINERY WERE EXHIBITED AT THE EX HIBITIONS. THE ASSESSEE ALSO EXHIBITED THE MACHINES OF MOTEX AT THE EXHIBIT ION ALONG WITH MACHINES OF OTHER MANUFACTURERS FOR WHICH IT WAS ACTING AS A SELLING AGENT. IT RECOVERED THE PRO RATA EXHIBITION EXPENSES FROM ALL THE MANUF ACTURERS EXCEPT FROM MOTEX, BECAUSE OF ITS FINANCIAL CONDITIONS MOTEX. T HUS, MOTEX COULD NOT CONTRIBUTE ITS SHARE OF EXHIBITION EXPENSES INCURRE D BY THE ASSESSEE ON ITS BEHALF. MOREOVER, DUE TO HEAVY FINANCIAL LOSSES, TH E ABOVE JOINT VENTURE AGREEMENT WAS ALSO TERMINATED DURING THE YEAR UNDER CONSIDERATION, AS MOTEX DID NOT HAVE ANY COMMERCIAL FUTURE AND ITS NE T WORTH WAS VIRTUALLY ERODED. ACCORDINGLY THE ASSESSEE WROTE OFF THE AMOU NT IRRECOVERABLE AGAINST THE EXHIBITION EXPENSES. IT WAS SUBMITTED THAT THE ASSESSEE HAD INCURRED EXPENSES ON BEHALF OF MOTEX IN THE ORDINARY COURSE OF BUSINESS AND THE SAME HAD TO BE WRITTEN OFF ON ACCOUNT OF COMMERCIAL EXPE DIENCY. THEREFORE, THE WRITE OFF BY THE ASSESSEE WAS INCIDENTAL TO THE BUS INESS OF THE ASSESSEE COMPANY. IN THIS CONNECTION IT RELIED ON THE DECISI ON OF CIT V/S INDEN BISELERS (181 ITR 69)(MAD.) WHEREIN IT HAS BEEN HELD THAT NO N RECOVERY OF ADVANCES IS A TRADING LOSS IF IT AROSE DIRECTLY FROM THE CARRYI NG ON OF THE BUSINESS AND IS ALLOWABLE AS TRADING LOSS BEING INCIDENTAL TO THE B USINESS OF THE ASSESSEE. IN ATE ENTERPRISES P. LTD. 4 VIEW OF THE ABOVE, SINCE THE WRITE OFF WAS DICTATED BY COMMERCIAL CONSIDERATION, THE SAME MAY KINDLY BE ALLOWED AS EX PENSES INCIDENTAL TO THE BUSINESS U/S. 37(1) OF THE ACT. THE ASSESSING OFFIC ER, HOWEVER, REJECTED THE SAME AND DISALLOWED HE ENTIRE AMOUNT. 3. THE COMMISSIONER (APPEALS) TOO REJECTED THE CONTENT IONS OF THE ASSESSEE AND HELD THAT INSOFAR AS THE ASSESSEES CL AIM OF BAD DEBT IS CONCERNED, THE SAME IS NOT ALLOWABLE. WITH REGARD T O THE ALLOWABILITY OF BUSINESS LOSS UNDER SECTION 37(1), HE HELD THAT THE ASSESSEE WAS NOT OBLIGED TO INCUR THESE EXPENSES ON BEHALF OF THE PRINCIPAL AS THERE WAS NO WRITTEN AGREEMENT. WRITING OF SUCH EXPENSES INCURRED ON BEH ALF OF THE PRINCIPAL IS NOT ALLOWABLE AS BUSINESS LOSS AS THERE WAS NO SUCH COMPULSION. MOREOVER, THE ASSESSEE IS FOLLOWING METHOD OF CASH SYSTEM ACCOUNTING AND LOSS HAS NOT BEEN INCURRED IN THIS YEAR, THEREFORE, THE SAME CANNOT BE ALLOWED IN THIS YEAR. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE IS A SELLING AGENT TO MANY PARTIES, INCLUD ING MOTEX ENGINEERING CO. P. LTD. AS A NORMAL BUSINESS PRACTICE ADOPTED BY TH E ASSESSEE, IT HAS TO INCUR EXPENDITURE ON BEHALF OF THE PRINCIPAL WHOSE MACHINERY IT EXHIBITED IN THE EXHIBITION. THEREAFTER, THE ASSESSEE USED TO RE COVER THE EXPENDITURE FROM THE SAID PRINCIPALS. THE TOTAL EXPENDITURE INC URRED BY THE ASSESSEE DURING THE EXHIBITION OF ITME-2000, THE ASSESSEE HA S INCURRED EXPENDITURE FOR SEVERAL PARTIES / PRINCIPALS OUT OF WHICH ONE O F THEM WAS MOTEX ENGINEERING CO. P. LTD. THE ASSESSEE COULD RECOVER THE EXPENDITURE IN MOST OF THE CASES, HOWEVER, IN THE CASE OF MOTEX ENGINEE RING CO. P. LTD., THE ASSESSEE COULD NOT RECOVER THE EXHIBITION EXPENDITU RE ON ITS BEHALF DUE TO SERIOUS FINANCIAL CONDITION AND HEAVY LOSS. IN FACT , DUE TO THESE HEAVY LOSSES, JOINT VENTURE AGREEMENT WAS ALSO TERMINATED DURING THE YEAR AND THE NET WORTH OF MOTEX ENGINEERING CO. P. LTD. WAS VIRTUALL Y ERODED. IT WAS UNDER THESE CIRCUMSTANCES, THE ASSESSEE HAD NO OPTION BUT TO WRITE-OFF THE AMOUNT AS IRRECOVERABLE OR IT SHOULD BE ALLOWED AS BUSINES S LOSS. HE RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN ESSEN PRIVATE LTD. V/S CIT, [1967] 65 ITR 625 (SC). ATE ENTERPRISES P. LTD. 5 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELYING UPON THE DECISION OF THE COMMISSIONER (APPEALS), SU BMITTED THAT UNDER THE METHOD OF CASH SYSTEM ACCOUNTING , NEITHER EARLIER YEARS LOSS CAN BE ALLOWED IN THIS YEAR NOR IT CAN BE ALLOWED AS BAD D EBT. HENCE, THE FINDINGS GIVE BY THE COMMISSIONER (APPEALS) AS WELL AS BY TH E ASSESSING OFFICER SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, CAREFULLY CONS IDERED THE ORDERS OF THE COMMISSIONER (APPEALS) AS WELL AS OF THE ASSESS ING OFFICER AND THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE T HAT THE ASSESSEE HAD INCURRED THE EXPENDITURE ON ACCOUNT OF EXHIBITION O N BEHALF OF VARIOUS PRINCIPALS INCLUDING THAT OF MOTEX ENGINEERING CO. P. LTD. THE ISSUE FOR OUR ADJUDICATION IS, WHETHER SUCH NON-RECOVERY OF EXPEN DITURE FROM MOTEX ENGINEERING CO. P. LTD., CAN BE CLAIMED AS A LOSS O R EXPENDITURE IN THIS YEAR. IT IS ALSO ADMITTED FACT THAT THE ASSESSEE IS FOLLO WING THE METHOD OF CASH SYSTEM OF ACCOUNTING SINCE LAST SEVERAL YEARS. THEREFORE, IN SUCH CIRCUMSTANCES, SUCH AN EXPENDITURE CANNOT BE ALLOWE D AS BAD DEBT UNDER SECTION 36(1)(VII) R/W SECTION 36(2). NOW, COMING TO THE ISSUE AS TO WHETHER SUCH A CLAIM CAN BE ALLOWED AS A BUSINESS LOSS OR N OT. 7. FOR CLAIMING A LOSS, IT IS ESSENTIAL THAT THE SAME SHOULD BE ON REVENUE ACCOUNT AND MUST HAVE BEEN INCURRED DURING THE COUR SE OF CARRYING ON BUSINESS OR PROFESSION DURING THE YEAR. SUCH A LOSS IS ALLOWABLE WHILE COMPUTING THE INCOME UNDER SECTION 28. IN THE PRESE NT CASE, THE INCURRING OF EXPENDITURE BY THE ASSESSEE ON BEHALF OF ITS PRINCI PAL WAS PART OF ITS BUSINESS PRACTICE WHICH IT HAS BEEN FOLLOWING REGULARLY, THE REFORE, AT THE TIME OF INCURRENCE, IT WAS IN THE COURSE OF ITS BUSINESS AC TIVITIES ONLY. THIS LOSS HAS BEEN INCURRED ONLY IN A PARTICULAR CASE WHEN THE AS SESSEE COULD NOT RECOVER THE PRO-RATA EXHIBITION EXPENSES FROM ONE PARTY AND LATER ON WHEN IT WAS FOUND THAT RECOVERY OF SUCH EXPENSES WOULD BE VERY DIFFICULT, THE ASSESSEE CLAIMED IT AS A BAD DEBT WHICH IN FACT, SHOULD HAVE BEEN CLAIMED AS LOSS BECAUSE IT WAS A KIND OF A BUSINESS / TRADING LIABI LITY INCURRED BY THE ASSESSEE AS A BUSINESSMAN DURING THE COURSE OF ITS BUSINESS. ATE ENTERPRISES P. LTD. 6 8. NOW, COMING TO THE ISSUE WHETHER SUCH A LOSS CAN BE ALLOWED WHEN THE ASSESSEE IS FOLLOWING THE METHOD OF CASH SYSTEM OF ACCOUNTING , AND SUCH A LOSS HAS ARISEN ON ACCOUNT OF EXPENDITURES WHICH WE RE INCURRED IN THE EARLIER YEARS. IN OUR CONSIDERED OPINION, ONCE THE ASSESSEE HAS INCURRED EXPENDITURE ON BEHALF OF ITS PRINCIPAL AND AFTER MAKING ITS EFF ORTS COULD NOT RECOVER THE SAID EXPENDITURE, THIS WILL RESULT INTO A LOSS ONLY AND SUCH A LOSS CAN BE CLAIMED IN THE YEAR WHEN THE ASSESSEE WAS QUITE ASC ERTAINED THAT THE SAME COULD NOT BE RECOVERED. THE PARTY HEREIN THIS CASE FROM WHOM THE AMOUNT HAS TO BE RECOVERED WAS IN FINANCIAL STRINGENCY AND SO MUCH SO THAT THE JOINT VENTURE AGREEMENT THROUGH WHICH THE SAID COMPANY (M OTEX) WAS FORMED GOT TERMINATED IN THIS YEAR. IT WAS DUE TO THIS REASON THAT THE ASSESSEE CAN BE SAID TO HAVE INCURRED THE LOSS IN THIS YEAR ONLY. E VEN WHEN THE ASSESSEE IS FOLLOWING THE METHOD OF CASH SYSTEM OF ACCOUNTING , SUCH A LOSS WHICH IS ON ACCOUNT OF TRADING OR BUSINESS CANNOT BE DISALLO WED. SUCH A LOSS CANNOT BE TREATED AS A BUSINESS EXPENDITURE IN THE PRESENT YEAR FOR THE REASON THAT THE ASSESSEE IS MAINLY CARRYING OUT AGENCY BUSINESS FOR VARIOUS MACHINERY COMPONENT AND ACCESSORIES FROM WHICH IT GETS CERTAI N PERCENTAGE OF INCOME AND ANY EXPENDITURE RELATING TO AGENCY BUSINESS CAN BE CLAIMED IN RELATION TO SUCH INCOME. FOR CLAIMING SUCH EXPENSES, THE YEA R OF INCURRING OF EXPENSES IS IMPORTANT IN THE METHOD OF CASH SYSTEM ACCOUNTING . HOWEVER, THE AFORESATATED LOSS WAS DUE TO PECULIAR CIRCUMSTA NCES THAT THE ASSESSEE WHO HAD INCURRED EXPENDITURE ON BEHALF OF SOME OTHE R PERSON AS PER ITS TRADE / BUSINESS PRACTICE AND THE SAME COULD NOT BE RECOVERED EVEN AFTER A LOT OF PERSUASION AND, THEREFORE, SUCH A LOSS WHICH HAS BEEN RECOGNIZED IN THIS YEAR DUE TO ABOVE FACTS, HAS TO BE ALLOWED AS A BUSINESS LOSS. THUS, THE AMOUNT OF ` 14,35,644, THOUGH CANNOT BE ALLOWED AS BAD DEBT WR ITTEN-OFF BUT CAN DEFINITELY BE ALLOWED AS A BUSINESS LOSS. C ONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPE ALS) AND ALLOW THE GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED . 9. 2 6 &( )2 0 !' 7 0 89 : 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ATE ENTERPRISES P. LTD. 7 WE NOW PROCEED TO DISPOSES OFF THE APPEAL IN ITA NO.2874/MUM./ 2011, FOR ASSESSMENT YEAR 200506 , ON THE FOLLOWING GROUNDS:- 1. LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN COMPUTING THE CAPITAL GAINS IN RESPECT OF PROPERTY SITUATED AT MAKER CHAMBER-IV, NARIMAN POINT, MUMBAI (THE PROPERTY) BY ADOPTING SALE CONSIDERATION AT RS. 5,40,99,000/- U/S.50C BEING VALUE ADOPTED BY THE STAMP DUTY AUTHORITY (SDA) AS AGAINST ACTUAL SALE CONSIDERATION OF RS. 4,30,00,000/- ADOPTED BY THE APPELLANT.. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE CONTENTION OF THE APPE LLANT THAT THE ACTUAL SALE CONSIDERATION OF RS.4,30,00,000/- ADOPT ED BY THE APPELLANT AND DULY SUPPORTED BY THE REPORT OF A RECOGNISED VA LUER OUGHT TO BE TAKEN AS SALE CONSIDERATION FOR THE PURPOSE OF COMP UTATION OF CAPITAL GAIN. 2. LEARNED CIT (A) HAS ERRED IN DISMISSING THE GROU ND RELATING TO THE ASSESSING OFFICER ADDING AN AMOUNT OF RS.13,80, 000/- TO THE INCOME OF THE APPELLANT U/S 68, ON THE PRESUMPTION THAT THE SAME IS INFRUCTUOUS. ON FACTS AND CIRCUMSTANCES OF THE CASE , THE GROUND NOT BECOMING INFRUCTUOUS, THE LEARNED CIT(A) OUGHT HAVE DECIDED THE GROUND IN APPEAL ON THE BASIS OF FACTS AND SUBMISSI ONS MADE AND OUGHT TO HAVE DELETED THE ADDITION OF ` 13,80,000, MADE UNDER SECTION 68 OF THE ACT. 10. BRIEFLY STATED, THE FACTS RELEVANT FOR THE ISSUE IN GROUND NO.1, ARE THAT THE ASSESSEE HAS SOLD A PREMISES NUMBER 46 AND 47 O F MAKER CHAMBERS, 6, NARIMAN POINT, MUMBAI, AT 4,30,00,000, ON 8 TH MARCH 2005. THE SAID PROPERTY WAS ACQUIRED IN ASSESSMENT YEAR 1984-85 FO R A SUM OF ` 6,99,178. FOR CLAIMING INDEX COST AND OTHER EXPENSES, THE ASS ESSEE HAS OFFERED ` 1,54,35,156, FOR TAXATION AS LONG TERM CAPITAL GAIN S. THOUGH, AS PER THE AGREEMENT DATED 4 TH MARCH 2005, THE PROPERTY WAS SOLD FOR ` 4,30,00,000, HOWEVER, THE STAMP VALUATION AUTHORITY FOR THE PURP OSE OF STAMP DUTY HAS TAKEN THE VALUE OF THE PROPERTY AT ` 5,40,99,000. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT ADDUCE ANY EVI DENCE ON RECORD TO SHOW THAT THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITY OF ` 5,40,99,000, IS MORE THAN THE FAIR MARKET VALUE OF THE PROPERTY. THEREFO RE, IN VIEW OF THE PROVISIONS OF SECTION 50C, HE TOOK THE SALE CONSIDE RATION AT ` 5,40,99,000, INSTEAD OF ` 4,30,00,000. ACCORDINGLY, HE COMPUTED THE TAXABLE LONG TERM CAPITAL GAINS AS UNDER:- ATE ENTERPRISES P. LTD. 8 1) VALUE AS PER STAMP DUTY AUTHORITY ` 5,40,99,000 LESS: A) INDEX COST ` 26,84,844 B) SELLING EXP. ` 4,30,000 C) INVESTMENT ` 47,52,000 ` 78,66,844 CAPITAL GAIN ON MAKER VI PROPERTY ` 4,62,32,156 II) CAPITAL GAIN ON MAHALAXMI PREMISE ` 47,09,835 TOTAL CAPITAL GAIN ` 5,09,41,991 LESS: CAPITAL GAIN OFFERED ON ABOVE PROPERTY ` 1,76,61,161 ` 3,32,80,830 11. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAS DULY OBJECTED TO THE VALUATION MADE BY THE STAMP DUTY AUTHORITY AND HAS ALSO PRODUCED VALUATION REPORT FR OM A REGISTERED VALUER WHICH HAS NOT BEEN TAKEN INTO CONSIDERATION AND, TH EREFORE, THE ASSESSING OFFICER WAS OBLIGED UNDER THE LAW TO MAKE A REFEREN CE TO THE VALUATION OFFICER TO ASCERTAIN THE CORRECT FAIR MARKET VALUE. IN SUPPORT OF THIS CONTENTION, VARIOUS DECISIONS WERE RELIED UPON WHIC H HAS BEEN INCORPORATED IN PARA-12 OF THE APPELLATE ORDER. THE COMMISSIONER (APPEALS) DID NOT ACCEPT THE ASSESSEES CONTENTION AND DISMISS THE AS SESSEES GROUND ON THE FOLLOWING OBSERVATION AND HOLDING AS UNDER:- 13. I DO NOT AGREE WITH THE SUBMISSIONS OF THE AUT HORISED REPRESENTATIVE. I FIND THAT PROVISIONS OF SECTION 5 0C ARE MANDATORY AS THE WORD USED IN SECTION 50C IS SHALL WHICH MEAN S THE VALUATION MADE BY THE STAMP DUTY AUTHORITY IS BINDING ON THE A.O. ALTHOUGH THERE IS A PROVISION THAT THE A.O. MAY REFER THE MA TTER TO VALUATION OFFICER IF THE ASSESSEE OBJECTS TO THE VALUATION MA DE BY THE STAMP DUTY AUTHORITY STILL HE HAS TO ACCEPT THE VALUATION MADE BY THE STAMP DUTY AUTHORITY IN VIEW OF THE BINDING NATURE OF PROVISIO N OF SECTION 50C. ACCORDING, I HOLD THAT A.O. IS JUSTIFIED IN COMPUTI NG THE CAPITAL GAIN ON THE BASIS OF VALUATION MADE BY THE STAMP DUTY AUTHO RITY. THE CASE LAWS RELIED BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. THIS GROUND OF APPEAL IS DISMISSED. ATE ENTERPRISES P. LTD. 9 12. THUS, THE COMMISSIONER (APPEALS), THOUGH AGREED THA T THE ASSESSING OFFICER MAY REFER THE MATTER TO THE VALUATION OFFIC ER IF THE ASSESSEE OBJECTS TO THE VALUATION MADE BY THE STAMP DUTY AUTHORITY, STILL THE ASSESSING OFFICER HAS TO ACCEPT VALUATION MADE BY THE STAMP DUTY AUTH ORITY AS PER THE PROVISIONS OF SECTION 50C OF THE ACT, WHICH IS BIND ING. 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE OBSERVATIONS MADE BY THE COMMISSIONER (APPEALS) IS WHOLLY ERRONEOUS AS ONCE THE ASSESSEE HAS OBJECTED TO THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY, THE ASSESSING OFFICER HAS TO MAKE A REFE RENCE TO THE VALUATION OFFICER TO GET THE FAIR MARKET VALUE. 14. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELIED ON THE FINDINGS GIVEN BY THE COMMISSIONER (APPEALS). 15. AFTER HEARING THE RIVAL CONTENTIONS OF THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AV AILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS OBJECTED TO THE VALUATION ADO PTED BY THE STAMP VALUATION AUTHORITY AND HAS ALSO FILED THE VALUATIO N REPORT BY AN APPROVED VALUER IN SUPPORT OF THE ACTUAL FAIR MARKET VALUE. THE PROVISIONS OF CLAUSE (A) OF SUB-SECTION (2) OF SECTION 50C, PROVIDES THAT WH ERE THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXC EEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, T HE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUA TION OFFICER AND ONCE SUCH A REFERENCE IS MADE, THE ASSESSING OFFICER IS BOUND B Y SUCH A VALUATION IN TERMS OF PROVISIONS OF SECTION 16A(1). THE WORDS MAY REFER , APPEARING IN SUB-SECTION (2), DOES NOT ENTAIL THE DISCRETION UPO N THE ASSESSING OFFICER, BECAUSE ONCE THE ASSESSEE HAS CHALLENGED THE FAIR M ARKET VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AS PER THE CONDITIONS ENUMERATED IN CLAUSES (A) AND (B) OF SUB-SECTION (2) WHICHEVER IS APPLICA BLE, THE ASSESSING OFFICER HAS TO DETERMINE THE VALUATION OF THE CAPITAL ASSET AND THIS CAN ONLY BE DONE AFTER MAKING A REFERENCE TO THE VALUATION OFFICER. THUS, THE ASSESSING OFFICER WAS OBLIGED TO MAKE A REFERENCE IN THE MANNER PROVI DED IN SUB-SECTION (2) ATE ENTERPRISES P. LTD. 10 OF SECTION 50C. IN THE PRESENT CASE, THE ASSESSEE H AS OBJECTED TO SUCH VALUATION ADOPTED BY THE STAMP VALUATION AUTHORITY AND HAS ALSO FILED THE COPY OF VALUATION REPORT BY AN APPROVED VALUER. THE REFORE, THE ASSESSING OFFICER WAS REQUIRED TO MAKE A REFERENCE TO THE VAL UATION OFFICER IN TERMS OF SUB-SECTION (2) OF SECTION 50C. ACCORDINGLY, THE MA TTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL MAKE A REFERENCE TO THE VALUATION OFFICER AND TO GET AN ESTIMATE OF FAIR MARKET VALUE FOR DETERMINING THE VALUATION OF THE ASSET WHICH IS THE SUBJECT MATTER OF SALE. CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE COMMISSI ONER (APPEALS) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER. ACCORDINGLY, GROUND NO.1, IS HEREBY TREATED AS ALLOWED FOR STATISTICAL PURPOSES IN ACCORDANCE WITH THE AFORESTATED DIRECTIONS GIVEN BY US. 16. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADD ITION OF ` 13,18,00,000, UNDER SECTION 68 OF THE ACT. 17. THE ASSESSING OFFICER, IN THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT THE ASSESSEE HAD SOLD FLAT NO.817, IN DELHI FO R ` 13,80,000, AND AFTER CLAIMING INDEXED COST AND SELLING EXPENSES, HAS CLA IMED LONG TERM CAPITAL GAIN OF ` 21,82,830. THE ASSESSING OFFICER TREATED THE SAID AMOUNT OF ` 13,18,000, AS DEEMED INCOME UNDER SECTION 68, WHICH WAS CREDITED IN THE BOOKS OF ACCOUNT ON THE GROUND THAT THE ASSESSEE HA S FAILED TO BRING ANY EVIDENCE ON RECORD THAT IT WAS ON ACCOUNT OF SALE O F THE SAID PROPERTY. 18. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE VEH EMENTLY OBJECTED TO SUCH AN ADDITION ON THE GROUND THAT ONCE THE ASS ESSEE HAS FILED EVIDENCE IN THE FORM OF SALE AGREEMENT FOR THE SALE OF FLAT NO.817, IN DELHI, THERE WAS NO OCCASION TO TREAT SUCH AN AMOUNT AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68. THE COMMISSIONER (APPEALS) D ISMISSED THE ASSESSEES CONTENTION SOLELY ON THE GROUND THAT IN RECTIFICATION PROCEEDINGS UNDER SECTION 154, THIS MATTER HAS BEEN RESOLVED AT THE LEVEL OF THE ASSESSING OFFICER. ATE ENTERPRISES P. LTD. 11 19. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSING OFFICER, UNDER THE PROVISIONS OF SECTION 154, HAS IN FACT REJECTED THE ASSESSEES CONTENTION ON THE GROUND THAT THIS M ATTER IS SUB-JUDICE BEFORE THE COMMISSIONER (APPEALS) AND REJECTED THE ASSESSE ES PETITION FOR RECTIFICATION; VIDE ORDER DATED 31 ST MARCH 2008. 20. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELIED ON THE FINDINGS OF THE COMMISSIONER (APPEALS). 21. AFTER HEARING THE RIVAL CONTENTIONS OF THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AV AILABLE ON RECORD, WE FIND THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS WHOLLY ERRONEOUS AS THE ASSESSEE HAS FILED A COPY OF SALE AGREEMENTS IN RES PECT OF SALE OF FLATS WHEREIN IT HAS BEEN MENTIONED THAT THE SAID PROPERT Y HAS BEEN SOLD FOR A TOTAL SALE CONSIDERATION OF ` 13,80,000. ONCE THE MONEY HAS BEEN RECEIVED BY WAY OF SALE OF A PROPERTY DULY MENTIONED IN THE SALE AGREEMENT, IT CANNOT BE HELD THAT THE SAME REMAINS UNEXPLAINED. EVEN THE COMMISSIONER (APPEALS) HAS NOT CARED TO GO THROUGH THE ORDER PAS SED UNDER SECTION 154, WHEREIN THE ASSESSING OFFICER HAS REJECTED THIS CON TENTION ON THE GROUND THAT THE MATTER IS SUB-JUDICE BEFORE THE COMMISSIONER (A PPEALS). CONSEQUENTLY, WE DO NOT FIND ANY MERIT IN THE FINDINGS GIVEN BY T HE AUTHORITIES BELOW AND ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFI CER STANDS DELETED. GROUND NO.2, IS THUS ALLOWED. 22. 2 6 &( )2 / !' 0 =0 >?@ # #$ !' 7 0 89 : 21. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 23. &( )B $!'C , &( )2 0 . ITA NO. 2873 AND 2874/MUM./2011, &( ) '*) 200304 !' 7 0 89 : &( )2 0 ATE ENTERPRISES P. LTD. 12 . ITA NO. 2874/MUM./2011, &( ) '*) 200506 =0 >?@ # #$ !' 7 0 89 : 22. TO SUM UP, ASSESSEES APPEAL IN ITA NO.2873/MUM ./2011, FOR ASSESSMENT YEAR 2003-04 IS ALLOWED AND ASSESSEES A PPEAL IN ITA NO. 2874/MUM./2011, FOR ASSESSMENT YEAR 200506 IS ALLO WED FOR STATISTICAL PURPOSES. $ 0 4* D E (6 7 TH SEPTEMBER 2012 4 0 : ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER 2012 SD/- . .. . . .. . ! ! ! ! P.M. JAGTAP ACCOUNTANT MEMBER SD/- # # # # $% $% $% $% & ! & ! & ! & ! AMIT SHUKLA JUDICIAL MEMBER MUMBAI, E ( E ( E ( E ( DATED: 7 TH SEPTEMBER 2012 $ 0 -&#F GF* / COPY OF THE ORDER FORWARDED TO : (1) &( )2 / THE ASSESSEE; (2) !' / THE REVENUE; (3) H () / THE CIT(A); (4) H / THE CIT, MUMBAI CITY CONCERNED; (5) F'K -&&( , , / THE DR, ITAT, MUMBAI; (6) L) M / GUARD FILE. .F -& / TRUE COPY $( / BY ORDER - . NO / PRADEEP J. CHOWDHURY '2P &( N' / SR. PRIVATE SECRETARY > / 8 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI