Pijush Kanti Bhunia, Midnapur V. ITO, Ward-39(1), Midnapore

ITA 327/KOL/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2493 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 18-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Cost of acquisition; Capital Gains
• Section: 271(1)(c)

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Rakesh Mishra, Accountant Member I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia...................................................................Appellant C/o Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2 nd Floor, Kolkata – 700069. [PAN: AGRPB9773C] vs. ITO, Ward-39(1), Midnapore........................................................ Respondent Appearances by: Shri Siddharth Agarwal, Advocate, appeared on behalf of the appellant. Shri P. P. Barman, Addl. CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : May 02, 2024 Date of pronouncing the order : May 08, 2024 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The captioned are the two appeals preferred by the assessee, one is pertaining to the quantum addition and the other is deleting to the levying of penalty u/s 271(1)(c) of the Income Tax Act (hereinafter referred to as the ‘Act’). First, we take assessee’s appeal relating to quantum addition and second is penalty addition. 2. ITA No.327/Kol/2024 - The assessee in this appeal has taken the following grounds of appeal: “1. For that the Ld. CIT(A) ought to have considered that the recorded reasons to believe are invalid and improper and as such, the reassessment framed vide order dated19.12.2019 is bad in law and is liable to be quashed. I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia 2 2. For that the Ld. CIT(A) ought to have considered that the re- assessment proceeding is vitiated in law in the absence of approval as envisaged u/s l151 of the Act. 3. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 1,01,26,968/- made by the A.O. being enhanced capital (difference between the closing capital of AY: 2015-16 and opening capital of AY: 2016-17) wrongly treating the same as concealed income. 4. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing.” 3. At the outset, the ld. counsel for the assessee has brought our attention that the impugned additions have been made by the Assessing Officer and further confirmed by the CIT(A) on account of difference of the amount arrived at after revaluation of the fixed assets of the assessee on 31.03.2016 as compared to be valuation on 31.03.2015. The ld. counsel in this respect has referred to the chart given in the assessment order which, for the sake of ready reference, is reproduced as under: Asset Valuation as on 31.03.2015 Valuation as on 31.03.2016 Revaluation amount Land & Building 4,65,900/- 85,00,000/- 80,34,100/- Veta & Chimney 4,60,850/- 10,75,744/- 6,14,894/- Furniture & Fixtures 4,582/- 21,426/- 16,844/- Truck 1,26,884/- 7,46,016/- 6,19,132/- Other FA - 33,481/- 33,481/- 3.1 The ld. counsel has invited our attention to the submissions made before the Assessing Officer to the effect that the difference between the value of assets on the closing day as on 31.03.2015 and the value of assets as on the opening day on 01.04.2016 was on account of I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia 3 revaluation of the assets. Neither any income was accrued nor generated to the assessee. It was also explained that the revaluation of the assets has been done to show the fair value of such assets as the assessee was planning to apply for enhancement of bank loan. The current market value of the assets was estimated by the assessee and the same was adopted as on the opening date of the assessment year in question. However, there was neither any business income nor any capital gains accrued or generated to the assessee on valuation of such asset as per market value. However, both the lower authorities made/confirmed the aforesaid additions under the misimpression that the assessee is liable to pay the tax as it had increased its capital to the tune of Rs.1,01,26,968/- on account of valuation of the asset. 3.2 The issue is squarely covered by the decision of the Hon’ble Calcutta High Court in the case of ‘PCIT vs. Salapuria Soft Zone’ reported in [2023] 150 taxmann.com 106 (Calcutta), wherein, the Hon’ble Calcutta High Court has upheld the order of the Tribunal observing that the revaluation of the fixed assets did not give rise to any profit to the firm and that the valuation of the assets at market value, which were higher than the cost, did not result any real profit or income which can be taxed. The relevant part of the order of the Hon’ble Calcutta High Court is reproduced as under: “Thus, in our view, the learned tribunal rightly rejected the contention raised by the revenue and also rightly noted the decision of the Hon’ble Supreme Court in Sanjeev Woollen Mills v. CIT [2005] 149 Taxman 431/279 ITR 434 wherein it was held that valuation of the assessee at market value, which was higher than the cost, resulted in the imaginary or notional potential profit out of itself and not any real profit or income which can be taxed.” 4. The ld. DR could not rebut the aforesaid submissions of the ld. counsel for the assessee. I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia 4 5. In view of the above discussion, the impugned additions made by the lower authorities are not sustainable as per law and the same are accordingly ordered to be deleted. However, it is made clear that the assessee will not be entitled either this year or in future to take value of the assets after revaluation/market value as cost of acquisition in case of transfer of asset for the purpose of computation of capital gains or business income as the case may be. 6. ITA No.328/Kol/2023 – In this appeal, the assessee has contested the levy of penalty u/s 271(1)(c) of the Act. 7. Since, we have deleted the quantum additions, therefore, the very basis of which the impugned penalty was levied u/s 271(1)(c) of the Act has ceased to exist. The impugned penalty order has now no legs to stand over, therefore, the same is accordingly set aside and the impugned penalty stands deleted. 8. Subject to the above observations, both the appeals of the assessee stand allowed. Kolkata, the 8 th May, 2024. Sd/- Sd/- [Rakesh Mishra] [Sanjay Garg] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated: 08.05.2024. RS Copy of the order forwarded to: 1. Pijush Kanti Bhunia 2. ITO, Ward-39(1), Midnapore 3.CIT (A)- 4. CIT- , 5. CIT(DR), I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia 5 //True copy// By order Assistant Registrar, Kolkata Benches