G Krishna RAo Subudhi, Rayagada V. ITO, Rayagada

ITA 293/CTK/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58394 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 12-01-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 30-07-2010
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: J M PATTNAIK
• Keywords: Capital asset; Business income; Opportunity of being heard
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 293/CTK/2010 (ASSESSMENT YEAR 2001 - 02) G.KRISHNA RAO SUBUDHI, AT/P.O. GUNUPUR, DIOST.RAYGADA PAN: ACQPG 9772 K VERSUS INCOM E - TAX OFFICER, RAYGADA WARD, RAYGADA. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI J.M.PATTNAIK, FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 12.01.2012 DATE OF PRONOUNCEMENT : 13.01.2012 ORDER SHRI K.K.GUPTA, AM : THIS APP EAL BY THE ASSESSEE IS ON AN EXPARTE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ADJUDICATING ON THE ASSESSING OFFICERS BRINGING TO TAX PROTECTIVE ASSESSMENT OF THE PURPORTED CAPITAL GAINS MADE SUBSTANTIVE ON THE BASIS OF THE ASSESSING OFFIC ER HOLDING A VIEW THAT THE TRIBUNAL HAD DIRECTED THE TAXATION OF THE SAME AFTER VERIFICATION OF THE TRANSFER OF THE ASSET TO AN ERSTWHILE FIRM IN WHICH THE ASSESSE INTENDED TO BE A PARTNER. 2. THE BRIEF FACTS OF THE ISSUES ARE THAT THE ASSESSEE FILED RETUR N IN INDIVIDUAL STATUS ON DTD.31.10.200 BY DISCLOSING THE TOTAL INCOME AT 66,680 AND THE SAID RETURN WAS SCRUTINIZED BY THE ASSESSING OFFICER U/S.143(3) BY DETERMINING NET INCOME AT 8,78,170 AS PER THE ORDER DT. 31.03.2004. THE SAID ORDER WAS CHALLENGED BEFORE CIT (A) BERHEMPUR, WHERE THE LEARNED CIT(A) HAS ALLOWED THE APPEAL IN P ART VIDE ORDER DT. 18.03.2005. THE MAJOR ADDITION IN THE SAID ORDER OF ASSESSMENT U/S. 143 (3) OF THE IT ACT IN SOFAR AS TRANSFER OF CAPITAL ASSET IS CONCERN ED IS 6,61,516 . THE SAID ORDER OF ASSESSMENT SO FAR AS TRANSFER OF CAPITAL ASSET IS CONCERN W AS UP HELD BY THE APPELLATE AUTHORITY AS CLEARLY REVEALED AT PARA - 3.8 OF THE SAID ORDER DTD. 18.03.2005. AGAINST THIS, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL AND THE TRIBU NAL PARTLY ITA NO.293/CTK/2010 2 ALLOWED THE APPEAL VIDE ORDER DT. 20.01.2006 AND DIRECTED THE ASSESSING OFFICER THAT SINCE THE CAPITAL GAIN HAS BEEN ADDED IN THE HAND S OF THE FIRM, IT SHOULD NOT BE ADDED IN THE HANDS OF THE ASSESS EE AS AN INDIVIDUAL. SINCE THE ASSESSEE HAS TRA NSFE RRED ASSETS, INCOME HAS TO BE COMPUTED IN THE HANDS OF THE ASSESSEE AND IT IS THE PARTY WHO SHALL CLAIM RELIEF OR TAKE APPROPRIATE MAJORS WHETHER WRONG ADDITION HAS BEEN MADE. PURSUANT TO SUCH ORDER OF TRIBUNAL , THE ASSESSING OFFICER MADE ASSESSMENT U/ S 144/147 OF THE IT ACT. BY DETERMINING THE NET INCOME OF THE ASSESSMENT YEAR 2001 - 02 AT ( - ) RS 1,01,501 IN CASE OF M/S. JAGANNATH COLD STORAGE AND TAMARIND KERNEL PRODUCTS, AT/PO: GUNPUR, DIST: RAYAGARA . THE ASSESSING OFFICER ALSO AT THE SAME TIME MADE AS SESSMENT IN THE CASE OF G. KRISHNA RAO SUBUDHI PROP OF M/S JAGANNATH ENTERPRISES AT/PO. GUNPU R, DIST: RAYAGARA VIDE PAN NO. ACQPG9772K WHEREAS NO PAN N UMBER W AS ALLOTTED TO M /S. JAGANNATH COLD STORAGE & TAMARIND KARNEL PRODUCTS, AS BOTH ARE ASSESSED IN TH E INDIVIDUAL STATUS, AS BECAUSE THE ASSESSING OFFICER DISPUTED THE STATUS OF M/S.JAGANNATH COLD STORAGE AND TRAMARIND KERNEL PRODUCTS AS NOT FIRM. 3, THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT O N THE FACTS AND CIRCUMSTA NCE S OF THE CASE, THE ASSESSING OFFICER SHOULD NOT HAVE ASSESSED THE CAPITAL GAIN OUT OF COMPULSION IN VIEW OF THE ITAT ORDER AFTER HAVING SATISFIED HIMSELF THAT THERE WAS NO TRANSFER IN THE INSTANT CASE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L EARNED CIT (A) SHOULD NOT HAVE MISINTERPRETED THIS FI NDING OF THE ASSESSING OFFICER IN THE ORDER ITSELF, OVERLOOKING THE PROVISION OF SEC. 2 (45) DEFINING TRANSFER, THE MOST IMPORTANT INGREDIENT TO CONSIDER CAPITAL GAIN. THE LEARNED CIT(A) IS NOT CORREC T TO HOLD THAT THERE WAS CAPITAL GAIN WHEN THE ASSESSING OFFICER HIMSELF HELD THAT THERE WAS NO FIRM IN THE NAME OF M/S JAGANNATH ENTERPRISES TO BE TREATED AS A TRANSFEREE. I T WAS NOT CORRECT ON THE PART OF THE ASSESSING ITA NO.293/CTK/2010 3 OFFICER AS WELL AS THE LEARNED C IT(A) TO HOLD THAT THERE WAS CAPITAL GAIN INVOLVED WHEN THE TRANSFERROR AND THE TRANSFEREE WERE ONE AND THE SAME. THE ASSESSING OFFICER WAS PRECLUDED FROM MAKING AN EXPARTE AND PROTECTIVE ASSESSMENT OF THE FIRM AFTER HAVING HELD THAT THERE WAS NO FIRM IN EXISTENCE AND THE PROTECTIVE LOSS ASSESSED ON THE NON - EXISTING FIRM WAS A DELIBERATE ACTION TO SUBSTANTIATE A TRANSFER AND DEFEND A MISTAKE COMMITTED IN ASSESSING CAPITAL GAIN IN T HE ORIGINAL ORDER OF ASSESSMENT. I T WAS NOT CORRECT ON THE PART OF THE LEARNED CIT(A) TO CONVENIENTLY OMIT THE BASIC FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT THERE WAS NO TRANSFER AND THE HONBLE ITAT HAD PASSED AN EARLIER ORDER O N WRONG APPRECIATION OF FACTS. THE LEARNED COUNSEL FOR THE ASSESSEE CONTINUED THAT THE ASSESSING OFFICER HAS ALSO AT THE SAME TIME MADE ASSESSMENT TO G. KRISHNA RAO SUBUDHI , PROP OF M/S JAGANNATH ENTERPRISES AT/PO. GUNPUR, DIST: RAYAGARA U/S 143 / 147 OF THE I.T ACT FOR THE ASSESSMENT YEAR 200 1 - 02 BY DETERMINING THE TOTAL INCOME AT RS 5, 47,600/ - . WHILE PASSING SUCH ORDER, THE ASSESSING OFFICER HAS TAKEN THE LOSS FIGURE AT ( - ) RS 2,51,501 FROM THE FILE OF M/S JAGANNATH COLD STORAGE & TAMARIND KARNEL PRODUCTS TO THE FILE OF M / S JAGANNATH ENTERPRISES , AS CLEARLY REVEALED AT PAGE - 3 OF PARA (B) OF THE ORDER DT. 30.11.2006 PASSED BY THE ASSESSING OFFICER AND SIMILARLY THE ASSESSING OFFICER IN HIS ORDER DT. 30.11.2006 HAS ALSO OBSERVED AT PAGE 2 PARA (A) OF THE SAID ORDER - IT WAS FOUND THAT, NO SUCH FIRM WAS IN EXISTENCE EVER AND THE ASSESS E E HAD BEEN CONTINUING TO BE THE OWNER OF THOSE ASSETS AS THE PROP. O F THE BUSINESS CONCERN. THEREFORE THERE BEING NO TRANSFER OF ASSETS, NO CAPITAL GAIN COULD HAVE BEEN AROUSED TO THE ASSESS EE . HOWEVER, IN VIEW OF THE FACT THAT, HONBLE ITAT HAS CONFIRMED THE DETERMINATION OF INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN AFTER TAKING INTO CONSIDERATION OF THE ORDER DT. 31.12.2005 PASSED IN THE CASE OF M/S JAGANNATH COLD STORAGE & TAMARIND ITA NO.293/CTK/2010 4 KARNEL PRODUCTS EVEN THOUGH ON WRONG APPRECIATION OF FACTS, THE SAID INCOME IS INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT THE LD. A.O. DID IT AGAINST HIS CONSCIENCE. THE LEARNED CIT(A) HAS CONFIRMED THE ORDER OF ASSESSMENT WITHOUT APPLYING HIS MIND AND IT IS A FACT THE ASSESSEE COULD NOT APPEAR BEFORE THE SAID AUTHORITY AS HE W AS SUBJECTED TO MEDICAL TREATMENT HAVING MET WITH AN ACCIDENT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE LEARNED CIT(A) HAVING MISCONSTRUED THE FACTS AS BROUGHT O N RECORD BY THE ASSESSEE BEFORE THE TRIBUNAL , PLEAD FOR RESTORATION OF THE ISSUE FOR CONSIDERATION AFRESH BY THE LEARNED CIT(A) AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER FOLLOWING DIRECTION OF THE TRIBUNAL. ON A SPECIFIC QUERY FROM THE BENCH WHETHER THE ASSESSEE COULD BE BURDENED WITH TAX LIABILITY ON ACCOUNT OF CAPITAL GAINS WHICH NEVER TOOK PLACE AS PER THE CLEAR FINDINGS OF THE ASSESSING OFFICER THAT THE FIRM WAS NOT IN EXISTENCE, THE LEARNED DR ANSWERED IN THE NEGATIVE. 5. AFTER HEARING THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO THE MATERIAL PLACED NO RECORD, WE ARE INCLINED TO FIND THE FACTUAL MATRIX AS BROUGHT ON RECORD BY THE A SSESSING OFFICER. HE NOTED THAT BUSINESS INCOME OF SHRI JAGANNATH ENTERPRISES, TRUCK PLYING ETC., AS DETERMINED IN THE ASSESSMENT AND AS MODIFIED IN COMPLIANCE TO THE ORDER OF HONBLE I.T.A.T IN CASE OF ITA/335/CTK/2005 (INCOME CHARGEABLE UNDER THE HEAD CA PITAL GAIN WAS CALCULATED ON THE PREMISE THAT THE INDIVIDUAL ASSETS OF THE ASSESSEE WAS TRANSFERRED TO THE FIRM M/S.JAGANNATH COLD STORAGE AND TAMARIND KERNAL PRODUCTS. BUT, IT WAS FOUND THAT NO SUCH FIRM WAS IN EXISTENCE EVER AND THE ASSESSEE HAD BEEN CON TINUING TO BE THE OWNER OF THOSE ASSETS AS THE PROPRIETOR OF THE BUSINESS CONCERN. THEREFORE, THERE BEING NO TRANSFER OF ITA NO.293/CTK/2010 5 ASSETS, NO CAPITAL GAIN COULD HAVE BEEN AROSE TO THE ASSESSEE. HOWEVER, IN VIEW OF THE FACT THAT HONBLE ITAT WAS CONFIRMED THE DETERMI NATION OF INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN AFTER TAKING INTO CONSIDERATION OF THE O RDER DT.31.12.2005 PASSED IN CASE OF M/S. JAGANNATH COLD S T ORAGE AND TAMARIND KERNAL PRODUCTS, EVEN THOUGH N WRONG APPRECIATION OF FACTS, THE SAID INCOME IS INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. LOSS FROM COLD STORAGE WAS CALCULATED AT 2,51,501 VIDE THE ORDER U/S.144/147 OF THEI.T.ACT,1961 DT.31.12.2005 IN CASE OF M/S.JAGANNATH COLD STORAGE AND TAMARIND KERNAL PRODUCTS. THE ASSESSEE DID NOT DISPUTE THE ORDER IN APPEAL FOR WHICH THE INCOME SO DETERMINED IS FOUND TO BE ACCEPTABLE TO THE ASSESSEE. T HEREFORE, LOSS FROM THE COLD STORAGE IS COMPUTED AT 2,51,501. THIS CLEARLY INDICATES THAT THE ASSESSING OFFICER HAD ACTUALLY VERIFIED THAT THERE WAS NO FIRM IN EXISTENCE ON THAT DAY AND THE LOSS IF ANY, BELONGS TO THE ASSESSEE ONLY. HE HAS OBSERVED THAT THE FIRM WAS NOT REGISTERED FOR THE PURPOSE OF COMP UTING THE CAPITAL GAINS AS REGISTERED FIRM ITSELF. THE AO THEREFORE COULD NOT CONVERT THE PROTECTIVE ASSESSMENT IN THE HANDS OF THE ASSESSEE AS SUBSTANTIVE WITHOUT INDICATING THE FATE OF THE SUBSTANTIVE ASSESSMENT IN THE FIRST PLACE. WE FIND FORCE IN THE C ON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE LEARNED CIT(A) HAS BROUGHT FACTS WHICH ARE NOT GERMANE TO THE FACTS AS WERE ADJUDICATED BEFORE THE TRIBUNAL. THE ASSESSEE COULD NOT BE TAXED FOR NON - TRANSFER OF ASSETS WHICH HE CONTINUED TO HOLD AND ENJOY HIMSELF AS INDIVIDUAL. AS THE ASSESSEE HAD NOT BEEN ABLE TO APPEAR BEFORE THE LEARNED CIT(A) DUE TO AN UNFORTUNATE . INCIDENT ON THE DATE OF HEARING, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE LEARNED CIT(A) TO CONSIDER THE SAME AFRESH IN THE LIGHT OF FACTS BROUGHT ON RECORD. WE ORDER ACCORDINGLY. ITA NO.293/CTK/2010 6 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.G UPTA) ACCOUNTANT MEMBER DATE: 13.01.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: G.KRISHNA RAO SUBUDHI, AT/P.O. GUNUPUR, DIOST.RAYGADA 2. THE RESPONDENT: INCOME - TAX OFFICER, RAYGADA WARD, RAYGADA. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.