VIKAS M. TULSIAN, MUMBAI V. ITO 25(3)4, MUMBAI

ITA 3062/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92748 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BIRLA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Capital asset; Principle of natural justice
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI . . , , , # $ BEFORE SHRI R.C.SHARMA, AM AND MS.SUSHMA CHOWLA, JM ITA NO.3062/MUM/2013 : ASST.YEAR 2004-05 SHRI VIKAS M TULSIAN, 95/96, GOVT. INDL. ESTATE, HINDUSTAN NAKA, CHARKOP, KANDIVALI (W), MUMBAI- 40 067 PAN ABRPT5825A . APPELLANT VS. THE ITO 25(3)(4), MUMBAI. . RESPONDENT % /APPELLANT BY : SHRI SUNIL H TALATI % /RESPONDENT BY : SHRI PAWAN KUMAR BIRLA / DATE OF HEARING : 09.06.2015 / DATE OF PRONOUNCEMENT : 11 .06.2015. / O R D E R PER SUSHMA CHOWLA (JM) : THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), DATED 26.02.2013, RELATING TO ASSESSMENT YEAR 2004-05, AGAINST ORDER PASSED U/S 143(3) R.W.S 147 OF THE IN COME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN FACTS AND IN LAW IN CONFIRMING THE ADDITION OF R S.27,98,000/- AS SHORT ITA NO.3062/MUM/2013 VIKAS M TULSIAN 2 TERM CAPITAL GAINS ON CONVERSION OF SOLE PROPRIETAR Y CONCERN INTO COMPANY. HE OUGHT NOT TO HAVE DONE SO. 2. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ALSO DISMISSED THE APPEAL OVERLOOKING THE FACTS THAT APP ELLANT WAS ENTITLED TO EXEMPTION U/S. 47(XIV) OF THE INCOME TAX ACT, 1961 IN RESPECT OF CONVERSION OF SOLE PROPRIETARY CONCERN INTO COMPANY 3. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ALSO ERRED IN DISMISSING THE APPEAL BY FOLLOWING ORDER P ASSED IN THE CASE OF APPELLANT FOR AY 2003-04. HE OUGHT NOT TO HAVE DON E SO. 4. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ALSO NOT ADJUDICATED ON THE GROUND OF LEVY OF PENALTY U/ S. 271(1)(C) OF THE INCOME TAX ACT, 1961. 5. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS DISMISSED THE APPEAL OF THE APPELLANT WITHOUT APPLICATION OF HIS MIND TO THE FACTS OF THE CASE. 3. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, INFOR MATION WAS RECEIVED THAT THE ASSESSEE HAD CONVERTED HIS PROPRIETORSHIP FIRM VIZ. M/S. SYNDICATE OVERSEAS INTO A COMPANY M/S. SYNDICATE OVERSEAS PVT. LTD., WITHOUT PROPERLY ACCOUNTING FOR THE ASSETS AND LIABILITIES OF THE PROPRIETORSHIP CONCERN INTO COMPANYS BALANCE SHEET. AS PER THE AO IN SUCH A CASE, PROVISIONS OF SECTION 45 OF THE I.T.ACT WERE ATTRACTED. THE AO NOTED THAT INFORMATION WAS ALSO RECEIVED THAT PLANT & MACHINERY VALUED AT RS.48.96 LACS AS PER THE REPORT OF THE AUTHORIZED VALUER, WA S DECLARED AT RS.33.80 LACS BY THE ASSESSEE.AS THE ASSESSEE HAD FAILED TO DECLARE INCO ME FROM CAPITAL GAIN, THE AO WAS OF THE VIEW THAT INCOME HAD ESCAPED ASSESSMENT FOR WHICH REASONS WERE RECORDED U/S. 147 OF THE ACT AND NOTICE WAS ISSUED U/S.148 O F THE ACT. IN RESPONSE TO THE NOTICE ISSUED BY THE AO, INITIALLY THERE WAS NON-CO MPLIANCE BY THE ASSESSEE. BUT LATER THE ASSESSEE FURNISHED CERTAIN INFORMATION. THE PLE A OF THE ASSESSEE BEFORE THE AO WAS THAT THE CONVERSION OF PROPRIETARY CONCERN INTO A COMPANY WAS NOT TO BE CONSIDERED AS TRANSFER OF CAPITAL ASSET UNDER THE P ROVISIONS OF SECTION 2(47) OF THE ACT. ITA NO.3062/MUM/2013 VIKAS M TULSIAN 3 THE ASSESSEES CLAIM THAT THE SAME WAS NOT TAXABLE IN VIEW OF THE PROVISIONS OF SECTION 47(XIV) OF THE IT ACT WAS NOT ACCEPTED BY T HE AO, SINCE AS PER THE AO, THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS OR ANY EVIDE NCE TO PROVE THAT HE HAD FULFILLED THE CONDITIONS LAID DOWN IN THE SAID SECTION. THE AO ACCORDINGLY COMPUTED INCOME FROM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AND MADE AN ADDITION OF RS.27.98 LACS. 4. BEFORE THE CIT(A), THERE WAS TOTAL NON-COMPLIANC E BY THE ASSESSEE AND CONSEQUENTLY, THE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE AND UPHELD THE ORDER OF THE AO. 5. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT BEFORE THE AO, EXPLANATION WAS FURNISHED BY WAY OF SEPARATE LETTERS. THE FIST LETTER WAS DATED 12.12.2011, WHICH WAS FILED ON 14.12.2011. CONSEQUENT TO WHICH CERTA IN QUERIES WERE RAISED BY THE AO. THE ASSESSEE FURTHER CLAIMED THAT VIDE LETTER DATED 14.12.2011, WHICH WAS FILED IN THE OFFICE OF THE AO ON 23.12.2011, THE ASSESSEE EXPLAI NED AS TO HOW IT WAS FULFILLING THE CONDITIONS LAID DOWN IN SECTION 47(XIV) OF THE ACT AND THE TRANSACTION WAS NOT TO BE TREATED AS TRANSFER OF ASSETS. HOWEVER, THE AO FAI LED TO CONSIDER THE SAID EXPLANATION OF THE ASSESSEE. IT WAS FURTHER POINTED OUT BY THE LEARNED AR OF THE ASSESSEE THAT ADMITTEDLY, BEFORE THE CIT(A) THERE WAS NON-COMPLIA NCE AS THE COUNSEL FOR THE ASSESSEE HAD FAILED TO APPEAR BEFORE THE CIT(A). TH E LEARNED AR POINTED OUT THAT THE AFFIDAVIT OF THE ASSESSEE IN THIS REGARD IS PLACED ON RECORD. 6. THE LEARNED DR PLACING RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW STRESSED THAT THE ADDITION IN THE CASE OF THE ASSESSEE MERIT S TO BE UPHELD. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS THE PLEA OF THE AS SESSEE BEFORE US THAT THE EXPLANATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS H AS NOT BEEN CONSIDERED BY THE AO BEFORE FRAMING THE ASSESSMENT. THE CASE OF THE ASS ESSEE BEFORE THE AO WAS THAT ON ITA NO.3062/MUM/2013 VIKAS M TULSIAN 4 CONVERSION OF HIS BUSINESS FROM PROPRIETORSHIP TO C OMPANY, SINCE HE HAD FULFILLED THE CONDITIONS LAID DOWN IN SECTION 47(XIV) OF THE ACT, NO INCOME FROM CAPITAL GAIN WAS CHARGEABLE IN HIS CASE, AS THE SAID TRANSFER WAS OU TSIDE THE PURVIEW OF TAXABILITY U/S. 45 OF THE ACT. OUR ATTENTION WAS DRAWN TO EXPLANAT ION FILED BEFORE THE AO, WHICH IS PLACED AT PAGES 1 TO 4 OF THE PAPER-BOOK. 8. ANOTHER ASPECT OF THE ISSUE IS THE TOTAL NON-COM PLIANCE BY THE COUNSEL FOR THE ASSESSEE BEFORE THE CIT(A). THE ASSESSEE ADMITTEDL Y HAD RECEIVED NOTICE OF HEARING, WHICH IN TURN, WAS FORWARDED TO THE CHARTERED ACCOU NTANTS RAVINDRA R SUVARNA & DINESH R SUVARNA, WHO DID NOT ATTEND THE PROCEEDING S BEFORE THE CIT(A) AND, HENCE, THE ORDER WAS PASSED BY THE CIT(A). THE CLAIM OF T HE ASSESSEE BEFORE US WAS THAT HE WAS NOT AWARE ABOUT THE NON-COMPLIANCE OF HIS COUNS EL BEFORE THE CIT(A). IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND FOLLOWI NG THE PRINCIPALS OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE LOOK ED INTO BY THE AO. ACCORDINGLY, WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO, WHO S HALL LOOK INTO THE FACTS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW, AFTER AFFORDING R EASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN VIEW OF OUR SETTING ASIDE THE MATTER BACK TO THE FILE OF THE AO, WE ARE NOT ADJUDICATING THE ISSUE RAISED ON MERITS. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 10.. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 11 TH DAY OF JUNE, 2015. SD/- SD/- (R.C.SHARMA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 11 TH JUNE, 2015. SA ITA NO.3062/MUM/2013 VIKAS M TULSIAN 5 % '#()* +*( / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ( ) / THE CIT 4. ' / CIT(A) 5. #$ %& , %& , / DR, F BENCH ITAT, MUMBAI 6. $'( / GUARD FILE.