Mr. Keshab Chandra Jain, New Delhi V. ACIT, Noida

ITA 3767/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7588 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-05-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 05-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LALITHA KRISHNAMURTHY
• Keywords: Capital asset; Depreciation; Salary income; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 2(14); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D , NEW DELHI BEFORE S HRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 37 67 /DEL/20 11 AY: 200 1 - 02 SH. KESHAB CHANDRA JAIN VS. ACIT, CIRCLE NOIDA C/O S.RAMANAND AIYAR & CO. C.AS NOIDA 708, SURYA KIRAN BLDG. 19, KASTURBA GANDHI MARG NEW DELHI 110 001 PAN: ABUPJ 6333 Q (APPELLANT) (RESPONDENT) APPELLANT BY : MS. LALITHA KRISHNAMURTHY, C.A. RESPONDENT BY : SH. T.JAMES SINGSON, SR. D.R. ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 11.5.2011 OF LD.CIT(A), GHAZIABAD PERTAINING TO THE ASSESSMENT YEAR (HEREINAFTER REFERRED TO AS THE A.Y.) 2001 - 02. 2. FACTS IN BRIEF : - THE ASSESSEE IS AN INDIVIDUAL AND HAS INCOME FROM SALARY AND OTHER SOURCES . HE FILED HIS RETURN OF INCOME ON 12.12.2001 DECLARING NET INCOME OF RS.5,24,311/ - . THE SAME WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) . THEREAFTER AN ORDER WAS PASSED U/S 143(3)(I) OF THE ACT ON 4.2.2003, WHEREIN T HE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) EXAMINED THE ISSUE AS TO WHY THE ASSESSEE HAS NOT IN CLUDED IN ITS TAXABLE INCOME, CAPITAL GAINS ON ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 2 SALE OF PLOT OF DSIDC. THEREAFTER THE A.O. REOPENED THE ASSESSMENTS BY ISSUAL OF NOTICE U/S 148 OF THE ACT ON 23.3.2006. THE CAPITAL GAINS DECLARED BY THE ASSESSEE ON THE SALE OF PLOT OF DSIDC WAS TREATED AS SHORT TERM CAPITAL GAIN, INSTEAD OF LONG TERM CAPITAL GAI N CLAIMED BY THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY , WITHOUT SUCCESS. FURTHER AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS. 1. THAT THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE INCOME TAX ACT, 1961, IS ARBITRARY, UNJUST AND BAD IN LAW. 2. THAT THERE COULD BE NO VALID ASSUMPTION OF JURISDICTION ON THE BASIS OF CHANGE IN OPINION ON AN ISSUE WHICH WAS THOROUGHLY ENQUIRED INTO BY THE ASS ESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT. CONSEQUENTLY THE REASSESSMENT SO FRAMED ON THE BASIS OF SUCH INVALID ASSUMPTION OF JURISDICTION IS BAD IN LAW. 3. THAT THERE WAS NO VALID MATERIAL WITH THE ASSESSING OFFICER AS CONTEMPLATED TO ASSUM E THE JURISDICTION UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 AND CONSEQUENTLY THE REASSESSMENT SO FRAMED ON THE BASIS OF SUCH INVALID ASSUMPTION OF JURISDICTION IS BAD IN LAW. 4. THAT THE ID COMMISSIONER OF INCOME TAX (APPEALS) GHAZIABAD HAD ERRED IN SUSTAINING THE ASSESSMENT MADE ON SALE OF PROPERTY AS A SHORT TERM CAPITAL GAIN. 5. THAT THE GAIN ON SALE OF PROPERTY AS ASSESSED BY ASSESSING OFFICER AND SUSTAINED BY ID COMMISSIONER OF INCOME TAX (APPEALS) GHAZIABAD IS ARBITRARY, UNJUST AND NOT TENABLE UNDER THE LAW ON VARIOUS FACTUAL AND LEGAL GROUNDS. 6. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 7. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTE R, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. WE HAVE HEARD MS.LALITHA KRISHNAMURTHY, THE LD.COUNSEL FOR THE ASSESSEE, AND SHRI T.JAMES SINGSON, THE LD.SR.D.R. ON BEHALF OF THE REVENUE . ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 3 3.1. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF ORDERS OF LOWER AUTHORI TIES AND CASE LAWS CITED, WE HOLD AS FOLLOWS. 4. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE A.O. HAS SPECIFICALLY ASKED INFORMATION ON THE LONG TERM CAPITAL GAINS OF RS.1,42,41 4 / - VIDE NOTICE ISSUED U/S 143(2)(I) OF THE ACT DATED 29.10.2002. THE ASSESSEE HAS GIVEN A DETAILED REPLY ON 30 TH JANUARY, 2003 WITH FIVE ENCLOSURES. THE OFFER OF PROFESSIONAL ALLOTMENT OF THE PLOT AT NARELA INDUSTRIAL COMPLEX ON 11.7.1990 WAS FURNISHED. FURTHER LETTER DT. 21.10.1991 ISSUED BY DSIDC LTD. TO THE ASSESSEE DIRECTING HIM TO PAY THE BALANCE INCOME DUE ON PROFESSIONAL ALLOTMENT OF PLOT OF LAND WAS ISSUED. THIS AMOUNT OF RS.1,25,125/ - WAS PAID ON 4.12.1991 AND COPY OF THE RECEIPT WAS FILED BEFORE THE A.O. THE ASSESSEE HAD ALSO FILED COPIES OF RE CEIPTS ISSUED BY DSIDC DT. 24.12.1993, 14.12.2000, 11.1.2001 WHICH DEMONSTRATE THAT THE PAYMENTS MADE WERE TOWARDS LEASE RENT AND MAINTENANCE CHARGES. AFTER CONSIDERING THESE DOCUMENTS THE A.O. PASSED AN ORDER U/S 143(1)(I) OF THE ACT ON 4.2.2003 ACCEPTIN G THE CLAIM OF THE ASSESSEE THAT THE INCOME ARISING ON SALE OF THE PLOT IN QUESTION IS LONG TERM CAPITAL GAIN. 4.1 . THE REASON FOR REOPENING THE ASSESSMENT IS ON THE ISSUE OF CAPITAL GAIN WHICH AROSE ON THE SALE OF DSIDC PLOT. THUS IN OUR VIEW THE REOPE NING IS MADE BASED ON CHANGE OF OPINION. THE HON BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA (320 ITR 561) RE AFFIRMED THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 256 ITR 01 . THE HON BLE DELHI HIGH COURT HAD HELD THAT THE REOPENING CANNOT BE MADE ON A MERE CHANGE OF OPINION. IT WAS HELD AS FOLLOWS. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SUB SECTION (3) OF S.143 OF THE ACT THE PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 4 THE INDIAN EVIDENCE ACT, 1872, JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE A.O. TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QU ASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE, IT IS CLEAR THAT SECTION 147 OF THE ACT DOES NOT PO S TULATE CONFERMENT OF POWER UPON THE A.O. TO INITIATE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. 4.2. SIMILARLY THE HON BLE DE LHI HIGH COURT IN CIT VS. MANAK SHOES CO. (P) LTD. (2011) REPORTED IN 200 TAXMAN 133 (DEL) HELD AS FOLLOWS. HELD: READING OF THE ORIGINAL ASSESSMENT ORDER BROUGHT OUT FOLLOWING ASPECTS : (I) THAT WAS AN ORDER PASSED UNDER SECTION 143(3) (II) THE ASSESSMENT ORDER SPECIFICALLY NOTICED THAT THE RETURN ACCOMPANIED BY STATUTORY AUDIT REPORT IN FORM NO. 3CD. (III ) THE CASE WAS TAKEN UP FOR SCRUTINY. THE REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS PURSUANT TO THE SAID NOTICE AND SUPPLIED THE DETAILS FROM TIME - TO - TIME. (IV ) THE ASSESSING OFFICER EXAMINED THE DETAILS IN RESPECT OF VARIOUS ITEMS. HE SPECIFICALLY RECORDED THAT AS IN THE PAST THE ASSESSEE CONTINUED TO CARRY ON THE BUSINESS OF CASUAL SPORTS SHOES' (V) VARIOUS ITEMS WERE SCRUTINIZ ED ON MERITS AND THE ISSUE ON DEPRECIATION WAS ALSO SPECIFICALLY COMMENTED UPON ON CERTAIN ASPECTS INASMUCH AS CERTAIN EXPENSES WERE DISALLOWED HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION THEREUPON. THE ORIGINAL ASSESSMENT ORDER UNEQUIVOCALL Y MANIFESTED THAT THE ASSESSING OFFICER SPECIFICALLY WENT INTO THE ISSUE AS TO WHETHER THERE WAS A MANUFACTURING ACTIVITY OR NOT. [PARA 8] IN THAT BACKGROUND, ONE SHOULD EXAMINE THE ASSERTION OF THE ASSESSEE THAT IT HAD SUBSEQUENTLY INFORMED THE ASSESSING OFFICER THAT IT HAD INCURRED HUGE LOSS IN ITS MANUFACTURING OPERATION AS IT RECEIVED NO ORDERS FROM ITS OVERSEAS BUYERS WHO WERE FACING COMPETITION FROM CHINESE MAKERS OF SHOES. IT WAS ALSO EXPLAINED THAT THE ASSESSEE HAD GOT ALL ITS MANUFACTURING FACILITY INTACT AT THE BEHEST OF THE BUYERS AND NO EXPENDITURE FOR MANUFACTURING THE SAME WAS INCURRED. MOST SIGNIFICANT ASPECT WAS THAT THE ASSESSEE HAD GOT A REIMBURSEMENT OF RS. 1.34 CRORES FROM ITS BUYERS AS COMPENSATION FOR MAINTAINING THE MANUFACTURING FACIL ITY WHICH AMOUNT WAS OFFERED FOR TAX AND WAS TAXED IN ENTIRETY EVEN THOUGH THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE SO CLAIMED IN ITS RETURN OF INCOME. THERE WAS NO REASON IN THE AFORESAID CIRCUMSTANCES TO DISBELIEVE THAT THE ASSESSING OFFICER HAD NOT NOTICED THAT THERE WAS NO MANUFACTURING ACTIVITY FOR WANT OF ORDERS. AT THE ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 5 SAME TIME, HE ALLOWED THE DEPRECIATION KEEPING IN VIEW THE AFORESAID FACTORS. [PARA 9] IN SUPPORT OF ITS CLAIM, THE ASSESSEE HAD FILED THE PROFIT AND LOSS ACCOUNT AND BALANCE S HEET OF VARIOUS SCHEDULES ANNEXED THERETO. SCHEDULE 17 RELATED TO 'SIGNIFICANT ACCOUNT POLICY' WHEREIN DATE OF CONSUMPTION OF RAW MATERIAL, PAYMENT TO AUDITORS, PRODUCTION DATE ON SPORT/CASUAL SHOES/SLEEPERS AND SALES HAD BEEN PROVIDED. WHEN THE ORIGINAL O RDER PASSED BY THE ASSESSING OFFICER REVEALED THAT THERE WAS AN APPLICATION OF MIND ON THE ISSUE, THERE WAS NO REASON TO PRESUME THAT THE ASSESSING OFFICER WOULD NOT HAVE NOTICED THE SAID MATERIAL PRODUCED BEFORE HIM. ON THE AFORESAID MATERIAL AND FACTS, T HE TRIBUNAL HAD RIGHTLY CONCLUDED THAT IT WAS A CASE OF MERE CHANGE OF OPINION. IN THE INSTANT CASE, THE ASSESSING OFFICER HAD SPECIFICALLY TAKEN NOTE OF THE DOCUMENTS ON RECORD. THE ASSESSMENT ORDER ITSELF MENTIONED THAT THE RETURN WAS ACCOMPANIED BY STAT UTORY AUDIT REPORT IN FORM NO. 3CD. THE ASSESSING OFFICER ALSO APPLIED HIS MIND WHILE EXAMINING THE DETAILS IN RESPECT OF VARIOUS ITEMS. THEREFORE, IT COULD NOT BE SAID THAT IT WAS A CASE OF NON - DISCLOSURE. [PARA 10] FOR THE AFORESAID REASONS, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147/148 WAS NON EST AND INVALID. [PARA 11] 5. RESPECTFULLY FOLLOWING THE PROPOSITIONS THAT ARE LAID DOWN IN THE ABOVE CITED CASE LAWS TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE REOPENING IS BAD IN LAW. 5.1. EVEN OTHERWISE WE FIND THAT THE ASSESSEE HAD MADE FULL PAYMENT TO DSIDC TOWARDS THE COST OF LAND, BY 4 TH DECEMBER, 1991. THE PAYMENTS MADE ON 29.4.2000 AND 7.12.2000 ARE ONLY TOWARDS LEASE RENT S. THUS, IN OUR VIEW, THE ASSESSEE ACQUIRED VALUABLE RIGHTS DUE TO THE ALLOTMENT MADE BY DSIDC LTD. WHEN THIS VALUABLE RIGHT IS SOLD, CAPITAL GAINS AROSE. IN THE CASE ON HAND THE VALUABLE RIGHTS IN QUESTION ACCRUED TO THE ASSESSEE ON 4 TH DECEMBER, 1991 AND THIS RIGHT WAS SOLD ON 30.01.2001. THUS CAPITAL ASSER REPRESENTING THE VALUABLE RIGHT IS A LONG TERM CAPITAL ASSET. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. K.RAMAKRISHNAN (2014) REPORTED IN 48 TAX MANN.COM 55 (DELHI). THE LD.D.R. ARGUES THAT, THE POSSESSION OF THE PLOT WAS GIVEN ONLY ON 29.1.2001 AND THE ASSESSEE SOLD THE PLOT OF LAND ON 30 TH JANUARY, 2001, WITHIN TWO ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 6 DAYS AND HENCE THE PROFIT ON SALE OF THIS PLOT OF LAND SHOULD BE ASSESSED AS SHOR T TERM CAPITAL GAIN. IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT THE ARGUMENT OF THE LD.D.R. IS TO BE DISMISSED AS DEVOID OF MERIT. 5.2. THE DELHI C BENCH OF THE ITAT IN THE CASE OF JITENDRA MOHAN VS. ITO (2007) 11 SOT 595 (DEL) HAD HELD AS FOLLOWS. SECTION 2(42A), READ WITH SECTIONS 2(14) AND 2(47), OF THE INCOME - TAX ACT, 1961 - CAPITAL GAINS - LONG TERM CAPITAL ASSETS - ASSESSMENT YEAR 2001 - 02 - ASSESSEE HAD BEEN ALLOTTED AN INDUS TRIAL SHED BY DELHI STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. (DSIDC) VIDE LETTER DATED 8 - 7 - 1994 WHICH WAS NOT OF ANY SPECIFIC SHED AS SAME WAS TO BE DECIDED LATER ON THROUGH A DRAW OF LOTS - LATER ON 27 - 8 - 1996 ASSESSEE, BY A DRAW OF LOTS, WAS ALLOTTED SHED NO. D - 13, SUBJECT TO PAYMENT OF ALL OUTSTANDING DUES AND INTEREST - ASSESSEE WAS ALLOTTED SHED ON INSTALMENT BASIS - ASSESSEE PAID FIRST INSTALMENT AND SECOND INSTALMENT ON 21 - 10 - 1993 AND 28 - 12 - 1994, RESPECTIVELY, AND DEPOSITED LAST INSTALMENT ON 19 - 12 - 1997 - POSSESSION OF SAID SHED WAS HANDED OVER TO ASSESSEE BY DSIDC ON 18 - 5 - 1998 - ASSESSEE THEREAFTER SOLD THAT SHED ON 15 - 12 - 2000 AND DECLARED LONG - TERM CAPITAL LOSS IN HIS RETURN - ASSESSING OFFICER HELD THAT INDUSTRIAL SHED HAD BEEN HELD BY ASSESSEE FOR A PERIOD MUCH LESS THAN 36 MONTHS, AS ONLY ON PAYMENT OF FINAL INSTALMENT ON 19 - 12 - 1997 ASSESSEE GOT POSSESSION OF SHED ON 18 - 5 - 1998 AND SALE OF SAME BY ASSESSEE ON 15 - 12 - 2000 HAD TO BE TREATED AS SHORT - TERM CAPITAL ASSET - WHETHER AS PER WIDER MEANIN G OF WORD PROPERTY USED IN DEFINITION OF CAPITAL ASSET IN SECTION 2(14), PROPERTY/SHED WAS HELD BY ASSESSEE ON 28 - 12 - 1994 ON PAYMENT OF SECOND INSTALMENT AFTER DATE OF ALLOTMENT - HELD, YES - WHETHER THEREFORE, SALE OF SHED BY ASSESSEE ON 15 - 12 - 2000, AFTER HOLDING SAME FOR A PERIOD OF MORE THAN 36 MONTHS WAS TO BE TREATED AS LONG - TERM CAPITAL ASSET AND SALE OF SAME RESULTING INTO LOSS/GAIN ALSO AMOUNTED TO LONG - TERM CAPITAL LOSS/GAIN - HELD, YES . 6. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE CONTENTION OF THE ASSESSEE THAT THE GAIN IN QUESTION IS TO BE ASSESSED AS LONG TERM CAPITAL GAIN . ITA NO. 3767/DEL/2011 A.Y. 2001 - 02 SH. KESHAB CHANDRA JAIN, NEW DELHI 7 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2016. SD/ - SD/ - (H.S. SIDHU) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 26 TH MAY, 2016 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR