The DCIT, Circle-9, Surat V. The Surat District Co.Op.Spinning Mills Ltd., Surat

ITA 3384/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2076 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-04-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Business expenditure; Fair market value; Valuation report

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.3384 AND 1612/AHD/2010 [ASSTT.YEAR : 2003-2004 AND 2004-2005] WITH CO NO.41/AHD/2011 [ASSTT.YEAR : 2003-2004] IN ITA NO.3384/AHD/2010 DCIT, CIR.9 SURAT. /VS. THE SURAT DIST. CO-OP. SPINNING MILLS LTD. RU BHAVAN, LALDARWAJA, SURAT. PAN : AAAAT 3001 B ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI D.P.GUPTA, CIT-DR 4& 1 2 )/ ASSESSEE BY : SHRI M.K. PATEL 5 1 &(*/ DATE OF HEARING : 15 TH APRIL, 2013 678 1 &(*/ DATE OF PRONOUNCEMENT : 10-5-2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE TWO APPEALS BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-2004 AND 2004-2005, AN D THE CO BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-2004 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. 2. THE IDENTICAL GROUNDS IN BOTH THE APPEALS OF THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW ITA NO.3384 AND 1612/AHD/2010 WITH CO NO.41/AHD/2011 -2- THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MA DE BY THE A.O. ON ACCOUNT OF LONG TERM CAPITAL GAIN AT FOR A.Y. 2003- 2004 RS.2,44,58,768/- AND FOR A.Y.2004-05 RS.8,06,06,944 /-. BY RELYING UPON THE DECISION OF THE HONBLE ITAT IN THE ASSESS EE'S CASE WHICH IN TURN HAD ERRONEOUSLY RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.P. VARGHESE (1981) 131 ITR 5 97 (SC) WHICH IS INAPPLICABLE TO THE UNIQUE L ACTS AND CIRCUMSTAN CES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LASS THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF FOR A.Y. 2003-2004 RS.2,44,58,768/- AND FOR A.Y.2004-05 RS.8,06,06,944 /- WITHOUT APPRECIATING THE FACT THAT THE SAME WAS DONE ON THE BASIS OF THE VALUATION MADE BY SHRI JASHWANT MEHTA WHO WAS ASSES SEE'S OWN VALUER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE I.D.CIT(A) ERRED IN DELETING THE ADDITION OF FO R A.Y. 2003-2004 RS.2,44,58,768/- AND FOR A.Y.2004-05 RS.8,06,06,944 /- WITHOUT APPRECIATING THE FACT THAT THE AO HAD DESCRIBED IN DETAIL HOW THE JANTRY VALUE WAS INCOMPARABLE TO THE ACTUAL DEAL VA LUES AS THE ACTUAL MARKET RATES WERE VERY HIGH AS SEEN FROM THE SALES INSTANCES GIVEN BY THE A.O. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT (A) BE SET ASIDE AND THE ASSESSING OFFICER'S ORDER DATED 30/12 /2009 BE RESTORED. 3. THE LEARNED DR SUBMITTED THAT THE RATIO OF THE D ECISION OF K.P. VARGHESE, (1981) 131 ITR 597 (SC) HAS BEEN WRONGLY APPLIED BY THE CIT(A) FOR THE REASON THAT THE PROVISION OF SECTION 52(1) OF THE IT. ACT, 1961, WHICH WAS THE VERY BASIS FOR PRONOUNCING DECI SION IN K.P. VARGHESES CASE, HAS BEEN DELETED FROM THE STATUTE BOOK BY THE LEGISLATURE. HE SUBMITTED THAT THE MATTER OF VALUATION WAS REFER RED TO THE DEPARTMENTAL VALUATION OFFICER (DVO FOR SHORT) BY THE AO, BUT THE DVO COULD NOT FILE ITS VALUATION REPORT TILL DATE, DUE TO NON-COOPERAT ION ON THE PART OF THE ASSESSEE. HE RELIED ON THE ORDER OF THE AO. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSIONS OF THE LEARNED DR. HE SUBMITTED THAT THE ISSUE OF ADD ITION MADE BY THE DEPARTMENT BY ENHANCING THE SALE CONSIDERATION IS C OVERED IN FAVOUR OF THE ITA NO.3384 AND 1612/AHD/2010 WITH CO NO.41/AHD/2011 -3- ASSESSEE WITH THE DECISION OF THE ITAT, AHMEDABAD I N ASSESSEES OWN CASE FOR THE SUBSEQUENT ASSESSMENT YEARS 2005-2006 IN IT A NO.3381/AHD/2008 ORDER DATED 17-2-2009, AND ALSO FOR THE ASSESSMENT YEAR 2006-2007 IN ITA NO.1396/AHD/2009 IN ITA NO.1396/AHD/2009 DATED 1-7- 2009 WHEREIN IN IDENTICAL FACTS THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT EVEN AFTER DELETING THE PROVISION OF SECTION 52(1) FROM THE STATUTE, THE RATIO OF K.P.VARGHESES CASE IS STILL APPLICABLE, AND FOR MAKING A VALID ADDITION, SOME MATERIAL HAS TO BE BROUGHT ON RECORD BY THE DEPARTMENT TO PROVE THAT THE ASSESSEE HAS RECEIVED SOME MORE C ONSIDERATION, OVER AND ABOVE APPARENT CONSIDERATION, AS MENTIONED IN THE R EGISTERED SALE DEED EXECUTED BETWEEN THE PARTIES. HE SUBMITTED THAT IN FACT THE BUSINESS OF HE ASSESSEE HAS COMPLETELY CLOSED IN THE YEAR 1999, AN D HAS NOT DONE ANY OTHER BUSINESS TILL THE YEAR 2007-2008. DURING THIS PERI OD OF 1999 TO 2007, THE ASSESSEE HAS SOLD OUT ALL THE MACHINERIES AND HAS T O SELL ALL ITS LAND IN LOTS. HE SUBMITTED THAT THE MATTER TRAVELLED TILL THE HON BLE HIGH COURT AND THE HONBLE HIGH COURT HAS ENTRUSTED THE JOB OF SELLING THE LAND OF THE ASSESSEE-SOCIETY TO THE PRESIDENT OF THE LABOUR UNI ON ITSELF. HE SUBMITTED THAT THE ASSESSEE WAS INFACT UNDER HEAVY LIABILITY OF PAYMENT OF DUES TO THE EX-EMPLOYEES, AND THERE WAS NO COMPROMISE WITH THE WORKERS, AND THEREFORE THE MATTER COULD BE SETTLED ONLY AT THE L EVEL OF THE HONBLE JURISDICTIONAL HIGH COURT. HE RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND HAVE GONE THROUGH THE ORDERS OF THE AO AND THE CIT(A). WE F IND THAT EVEN AFTER THE DELETION OF PROVISION OF SECTION 52(1) FROM THE STA TUTE, THE ONUS LIES WITH THE REVENUE TO PROVE BY BRINGING SOME EVIDENCE ON RECOR D THAT THE ASSESSEE HAS TAKEN SOME AMOUNT, OVER AND ABOVE, THE STATED S ALE CONSIDERATION IN THE REGISTERED DOCUMENTS, EVIDENCING THE SALE OF IMMOVA BLE PROPERTY. NO SUCH EVIDENCE COULD BE BROUGHT ON RECORD BY THE REVENUE. THE DVO HAS NOT FILED VALUATION REPORT TILL DATE. IT IS NOT A DISP UTED FACT THAT THE ASSESSEE HAS CLOSED ITS BUSINESS IN THE YEAR 1999 AND HAS NOT DO NE ANY OTHER BUSINESS TILL ITA NO.3384 AND 1612/AHD/2010 WITH CO NO.41/AHD/2011 -4- THE YEAR 2007-2008. IT IS ALSO UNDISPUTED FACT THA T DURING THE PERIOD FROM 1999 TO 2007, THE ASSESSEE HAS SOLD OUT ITS MACHINE RY AND HAS ALSO DEMOLISHED ALL THE FACTORY BUILDING, AND CLEARED TH E LAND. THE ASSESSEE WAS UNDER HEAVY LIABILITY OF PAYMENT OF DUES TO ITS EX- EMPLOYEES. THE MATTER HAS TRAVELLED TILL THE LEVEL OF THE HONBLE HIGH CO URT, WHICH HAS DIRECTED AND EMPOWERED THE PRESIDENT OF THE EMPLOYEES UNION TO SELL THE LAND IN QUESTION. IN THE FACTS OF THE CASE, THERE SEEMS TO BE NO JUSTIFICATION FOR SUBSTITUTING THE APPARENT SALE CONSIDERATION OF THE LAND IN QUESTION WITH AN ESTIMATE OF THE FAIR MARKET VALUE OF THE LAND IN QU ESTION, AND PARTICULARLY SO, IN VIEW OF ABSENCE OF ANY MATERIAL BROUGHT ON RECOR D TO SUGGEST THE UNDERSTATEMENT OF THE SALE CONSIDERATION OR CHARGIN G OF ANY ON-MONEY BY THE ASSESSEE. POWER OF ATTORNEY, AS PER THE DIRECT ION OF THE HONBLE HIGH COURT WAS GIVEN IN FAVOUR OF THE CHAIRMAN OF LABOUR UNION, SHRI N.B. DESAI, TO SELL THE LAND AND UNDER THAT POWER OF ATT ORNEY, THE LAND WAS SOLD BY PLOTTING THE SAID LAND THE ISSUE BEFORE US IS C OVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE ITAT, AHMEDABAD I N ASSESSEES OWN CASE FOR A.Y.2005-2006 (SUPRA) AND 2006-2007 (SUPRA) WHE REIN IN IDENTICAL FACTS, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSES SEE, AND THE ADDITION MADE BY SUBSTITUTING THE SALE CONSIDERATION WAS DELETED. WE BEING IN AGREEMENT WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE T RIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2005-2006 (SUPRA) AND 2006-2007 (S UPRA), DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE GROUNDS OF THE APPEAL OF THE REVENUE IN BOTH THE YEARS ARE DISMISSED. 6. CO. NO.41/AHD/20112 (ASSTT.YEAR : 2003-2004) 7. THE GROUNDS OF THE CO OF THE ASSESSEE ARE AS UND ER: 1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O N FACTS IN NOT DECIDING THE GROUND REGARDING DEDUCTIBILITY OF VARI OUS BUSINESS EXPENDITURE EVEN THOUGH ON FACTS THE BUSINESS WAS C ONTINUED ALL THROUGH OUT IN THE PRECEDING AND SUBSEQUENT YEARS A ND IT IS A CASE OF ONLY TEMPORARY SUSPENSION OF BUSINESS. ITA NO.3384 AND 1612/AHD/2010 WITH CO NO.41/AHD/2011 -5- 2. THAT ON FACTS AND IN LAW AND ON EVIDENCE ON RECO RD, IT OUGHT TO HAVE BEEN HELD THAT THE ENTIRE BUSINESS EXPENDIT URE IS ALLOWABLE AS CLAIMED IN TOTO. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE EXPENSES INCURRED BY THE ASSESSEE SHOULD HAVE BEEN ALLOWED A S DEDUCTIBLE UNDER THE HEAD BUSINESS INCOME OF THE ASSESSEE. THE LEARN ED DR SUBMITTED THAT THE ASSESSEE HAS NOT CONDUCTED ANY BUSINESS, AND TH EREFORE NO EXPENSES COULD BE ALLOWED TO BE CLAIMED AS DEDUCTION BY THE ASSESSEE. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THERE IS NO MERIT IN THE CO OF THE ASSESSEE. THERE WAS COMPLETE STOPPAGE OF BUSINESS IN THE YEAR 1999 AND THE ASSESSEE HAS ADMITTED THAT NO BUSINESS WAS TRAN SACTED TILL THE YEAR 2007. IN THESE FACTS, WE HOLD THAT THE CIT(A) WAS JUSTIFI ED IN NOT ALLOWING THE EXPENSES AS DEDUCTIBLE IN THE HANDS OF THE ASSESSEE . ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED, AND THE G ROUNDS OF THE CO OF THE ASSESSEE ARE DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND THE CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/- SD/- ( %&' %&' %&' %&'( (( ( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD