M/s. Shanti Enterprise, Surat V. The Income tax Officer,(Tech.)Ward-I, Surat

ITA 389/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6501 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS CHHAVI ANUPAM
• Assessee Lawyers: R N VEPARI
• Keywords: Business income; Fair market value
• Section: 143(3); 234B

Judgement Text

ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH,AHM EDABAD. ( BEFORE SHRI MUKUL KUMAR SHRAWAT & SHRI D.C. AGRAWAL ) I.T .A. NO.389/AHD/2011 (ASSESSMENT YEAR : 2004 -2005) SHANTI ENTERPRISE, SHOP NO.1013-1014, MILLENNIUM TEXTILE MARKET, UMARWADA, KAMELA DARWAJA, RING ROAD, SURAT. (APPELLANT) VS. INCOME TAX OFFICER, (TECHNICAL)-1, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) I.T .A. NO.390/AHD/2011 (ASSESSMENT YEAR : 2007 -2008) SHANTI ENTERPRISE, SHOP NO.1013-1014, MILLENNIUM TEXTILE MARKET, UMARWADA, KAMELA DARWAJA, RING ROAD, SURAT. (APPELLANT) VS. INCOME TAX OFFICER, (TECHNICAL)-1, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AALFS 5217 L APPELLANT BY : SHRI R. N.VEPARI. RESPONDENT BY : MRS. CHHAVI ANUPAM. ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKUL KUMAR SHRAWAT, J.M. BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDERS OF CIT (A)-II, SURAT BOTH IDENTICALLY DATED 17-1-2011 RESPECTIVELY FOR ASSESSMENT YEAR 2004-05 AND 2007-08. ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 2 2. FOR ASSESSMENT YEAR 2004-05 THE SUBSTANTIVE GROU ND ARGUED BEFORE US IS GROUND NO.4 AND FOR ASSESSMENT YEAR 2007-08 G ROUND NO.3. FOR BOTH THE YEARS THESE GROUNDS ARE IDENTICALLY WORDED EXCE PT THE DIFFERENCE IN THE QUANTUM ADDITION. GROUND IS REPRODUCED FROM THE LEA D ASSESSMENT YEAR 2004-05 AS UNDER:- IV. ALLEGED SUPPRESSED INCOME . (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS./3,96,89,558/- (IN A.Y. 2007-08 RS. 9,90,75,624/ -) WHEN THE ESTIMATE OF SELLING RATED OF SHOPS WAS BASED ONLY O N PRESUMPTION AND COMPARING WITH A CASE OF SALE WHICH WAS NOT COMPARABLE. (2) THE APPELLANT SUBMITS THAT THERE WAS NO COR ROBORATIVE EVIDENCE TO JUSTIFY THE ESTIMATE OF SELLING PRICE RATE. (3) WITHOUT PREJUDICE TO THE ABOVE, THERE WAS NO JUSTIFICATION FOR SUSTAINING ADDITION IN RESPECT OF ALL THE SHOPS BY DETERMINING DIFFERENCE IN RATE WHICH IS NOT AT ALL APPLICABLE. (4) THE LD. CIT (A ERRED IN CONFIRMING THE ADDITIO N IGNORING (A) COMPARABLE CASES (B) AFFIDAVITS OF ALL BUYERS OF SHOPS. (C) SELLING RATE HIGHER THAN VALUE AS P ER STAMP VALUE AUTHORITY. (5) THE LD. CIT(A) ALSO DID NOT CONSIDER A LL THE RELEVANT FACTS INCLUDING THE DEPTH OF THE MARKET, BELTING SYSTEM, INABILITY TO SELL SHOPS WITH HIGH NUMBER OF VACANT SHOPS ETC. 3. FOR BOTH THE YEARS FACTS ARE IDENTICAL AS PER TH E CORRESPONDING ASSESSMENT ORDERS PASSED U/S. 143(3) IDENTICALLY DA TED 31-12-2009. THE ASSESSEE FIRM IS IN THE CONSTRUCTION BUSINESS. IT H AD CONSTRUCTED A TEXTILE ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 3 MARKET KNOWN AS MILLENNIUM TEXTILE MARKET SITUATED AT PLOT NO.147 RING ROAD, SURAT. AS PER ASSESSING OFFICER THERE WAS SUP PRESSION IN THE SELLING PRICE OF THE SHOPS. FOR ASSESSMENT YEAR 2004-05 SUP PRESSION AS COMPUTED BY THE A.O. WAS AT RS. 3,96,89,558/- AD FOR ASSESSM ENT YEAR 2007-08 THE SUPPRESSION WAS OF RS. 9,90,75,624/-. FOR BOTH THE YEARS THE A.O. HAS PREPARED A CHART TO DEMONSTRATE THAT THE SELLING RA TE AS ADOPTED BY THE ASSESSEE WAS INCORRECT AND THE SAME WAS SUBSTITUTED BY THE A.O. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY AN D LD. CIT (A) HAS PRIMARILY CONFIRMED THE ACTION OF THE A.O. BY ASSI GNING THE REASON THAT FOR A.Y. 2005-06 HIS PREDECESSOR HAS DECIDED THE APPEAL CONFIRMING THE ADDITION VIDE CIT(A) ORDER DATED 12-11-2008. THEREF ORE, FOLLOWING THE SAID ORDER FOR BOTH THE YEARS THE ASSESSEES APPEAL WAS DISMISSED. 4. WITH THIS BRIEF BACKGROUND AT THE OUTSET PARTIES APPEARING BEFORE US HAVE INFORMED THAT THE AFOREMENTIONED DECISION OF T HE LD. CIT (A) HAS ALREADY BEEN REVERSED BY THE ITAT D BENCH, AHMEDA BAD IN APPEAL NO. 469/AHD/2009 (FOR ASSESSMENT YEAR 2005-06)) VIDE OR DER DATED 22-2-2011 TITLED AS M/S. SHANTI ENTERPRISE VS. ADDL. CIT, THE RELEVANT PARAGRAPH IS REPRODUCED BELOW:- 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING THROUGH THE CASE RECORDS INCLUDING ORDER OF CIT (A), ASSESSMENT ORDE R, ARGUMENTS OF BOTH THE SIDES AND THE CASE LAWS RELIED ON. THE ABO VE FACTS ARE UNDISPUTED AND IT IS A FACT THAT THE ASSESSEE-FIRM HAS SOLD ONE HALL OF 4164 SQ. FT. TO SPCOBL @ 3242/- ON SECOND FLOOR. TH E ASSESSING OFFICER TAKING BENCH-MARK HAS POINTED OUT SUPPRESSI ON OF SELLING RATE AT 1383 SQ. FT., FROM GROUND FLOOR TO SECOND FLOOR AND THE RELEVANT CHART IS BEING AGAIN REPRODUCED AS UNDER:- ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 4 FLOOR. SOLD AREA IN SQ. FT. DURING THE YEAR. SELLING RATE AS SHOWN BY THE ASSESSEE SUPPRESSION OF SELLING RATE AS EVIDENCED BY SALE DEED OF SURAT P. COOP. BANK. SELLING RATE OUGHT TO BE TOTAL SUPPRESSION OF SALE PRICE DURING THE YEAR. LOWER GROUND FLOOR. 4956.55 3271 1383 4654 6854909 U.G.D. 3650 3741 1383 5124 5047950 F.F. 2210 2565 1383 3948 3056430 S.F. 10990 1859 1383 3242 15199170 WE FIND FROM THE ABOVE THAT THE ASSESSING OFFICER A S WELL AS CIT (A) HAS RELIED ON ONE INSTANCE, I.E., THE RATE OF SELL DEED OF SPCOBL. THE ASSESSING OFFICER HAS NOT REFERRED THE INDIVIDUAL S HOPS SOLD BY THE ASSESSEE TO THE DVO FOR ASCERTAINING THE FAIR MARKE T OF EACH SHOP SOLD. EVEN THE AO HAS NOT EXAMINED THE PARTIES TO W HOM THE ASSESSEE- FIRM HAS SOLD THE SHOPS AND EVEN THE SALE DEEDS WER E NOT CALLED FOR AND EXAMINED. THE AO HAS NEVER TRIED TO ENQUIRE INT O THE CIRCLE RATES FIXED BY THE SUB-REGISTRAR OF THE AREA FOR THE PURP OSES OF STAMP DUTY VALUATION. IN VIEW OF THESE FACTS, NOW THE QUESTION ARISES IS AS UNDER:- WHETHER, IN THE GIVEN FACTS AND CIRCUMSTANCES THE ADDITION MADE BY TAKING, THE SUPPRESSION OF SALE RECEIPTS BY THE ASS ESSING OFFICER ON THE BASIS OF SOLITARY TRANSACTIONS ENTERED BY THE ASSES SEE-FIRM WITH THE SURAT PEOPLES CO-OPERATIVE BANK LTD., CAN BE SUSTA INED OR NOT? THE ABOVE FACTS NARRATED ARE UNDISPUTED. ALL THE SH OPS SOLD BY THE ASSESSEE-FIRM ARE REGISTERED WITH THE SUB-REGISTRAR AND SALE DEEDS ARE MADE FOR THESE TRANSACTIONS. THE ASSESSING OFFICER HAS SIMPLY REJECTED THE SALE DEEDS AND ADOPTED A HIGHER SALE C ONSIDERATION FOR THE PURPOSES OF COMPUTING INCOME OF THE ASSESSEE-FIRM F ROM THE BUSINESS ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 5 OF CONSTRUCTION AND SALE OF COMMERCIAL COMPLEX. WE FURTHER FIND THAT THE ALLEGATION OF THE ASSESSING OFFICER THAT THE SH OPS ARE SOLD BELOW THE CONSTRUCTION COST IN TERMS OF SQ. FT., THIS ALL EGATION IS WITHOUT ANY BASIS AND THE LD. COUNSEL FOR THE ASSESSEE BEFORE U S HAS DEMONSTRATED THAT THE COST OF CONSTRUCTION IS LESSER THAN THE SA LE CONSIDERATION OF EACH SHOP IN TERMS OF SQ. FT. THESE PURCHASERS OF S HOPS HAVE DECLARED FULL VALUE OF CONSIDERATION IN THE SALE DEEDS REGIS TERED AND THERE IS NO UNDER STATEMENT OF THE CONSIDERATION IN RESPECT OF SALE OF THESE SHOPS. WE FID THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE-FIRM HAS NOT ENTERED INTO HONEST TRANSACTIONS AND TRANSACTIO NS ARE FOR OTHER CONCEIVABLE REASONS I.E. FOR ATTEMPTING TO AVOID OR REDUCE TAX LIABILITY AND THEY ARE NOT RECORDING ACTUAL CONSIDERATION. WE FEEL THAT IT IS QUITE POSSIBLE THAT THOUGH THE FAIR MARKET VALUE OF A PAR TICULAR SHOP IS HIGH, THE ASSESSEE MAY TRANSFER IT TO A PERSON DIRECTLY O R INDIRECTLY CONNECTED WITH HIM FOR A NOMINAL SUM FOR MORE THAN REASON AND SUCH REASONS CANNOT PER-TAKE OF THE OBJECT OF AVOIDING O R REDUCING THE TAX LIABILITY OF THE ASSESSEE-FIRM. THE HONBLE MADRAS HIGH COURT IN THE CASE OF SIVAKAMI CO. PVT. LTD. V. CIT (1973) 88 ITR 311 (MAD.) HAS HELD THAT THE BURDEN OF PROVING THAT CERTAIN SALES WERE EFFECTED WITH THE OBJECT OF AVOIDANCE OR REDUCTION OF TAX ON CAPI TAL GAINS IS ON REVENUE AND IT IS NOT ENOUGH IN THE EXPLANATION OFF ERED BY THE ASSESSEE WAS NOT ACCEPTABLE AND THERE ARE STRONG SU SPICION AS TO THE REAL MOTIVE, WHICH PROMPTED THE ASSESSEE TO SELL TH E ASSETS. THERE MUST BE SOMETHING POSITIVE TO SUGGEST THAT THE SALE S WERE EFFECTED WITH THE ORDER OF AVOIDANCE OR REDUCTION OF TAX LIA BILITY FOR CAPITAL GAINS AND THIS WAS AFFIRMED BY HONBLE APEX COURT I N (1986) 159 ITR 71 (SC). WE ARE OF THE VIEW THAT UNLESS THERE IS EV IDENCE THAT MORE THAN WHAT IS STATED IN THE DOCUMENTS OR WAS RECEIVE D, NO HIGHER PRICE CAN BE TAKEN TO BE THE BASIS FOR COMPUTATION OF TAX EITHER IN BUSINESS TRANSACTION OR CAPITAL GAIN TRANSACTIONS. THE EN TI RE ONUS IS ON REVENUE AND THE INFERENCES MIGHT BE DRAWN IN CERTAIN CASES BUT COME TO A CONCLUSION THAT A PARTICULAR HIGHER AMOUNT WAS, IN FACT RECEIVED MUST BE BASED ON SUCH MATERIAL FROM WHICH SUCH AN IRRESI STIBLE CONCLUSION FOLLOWS. IN OUR CONSIDERED VIEW, IN THE PRESENT CAS E, THE REVENUE COULD NOT LAY PRIMARY FACTS, FROM WHICH INFERENCE C AN BE DRAWN THAT THE FULL CONSIDERATION RECORDED BY ASSESSEE-FIRM IN ITS ACCOUNT AND THE SALE DEEDS IS NOT THE FULL CONSIDERATION OR THE ACT UAL PRICE RECEIVED BY THE ASSESSEE FOR THE TRANSFER OF SHOPS WERE THE UND ERSTATED PRICE. ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 6 12. FURTHER THE HONBLE APEX COURT WHILE INTERPRETI NG SEC. 52(2) OF THE ACT, IN THE CASE OF K. P. VARGHESE (SUPRA), HAS LAID DOWN THE RATIO IN REGARD TO FULL VALUE OF CONSIDERATION AS, IT C LEARLY INDICATES THAT THE FOCUS OF SECTION 52(2) OF THE ACT IS ON THE CON SIDERATION DECLARED OR DISCLOSED BY THE ASSESSEE AS DISTINGUISHED FROM THE CONSIDERATION ACTUALLY RECEIVED BY HIM. IT CONTEMPLATES WHERE THE CONSIDERATION RECEIVED BY THE ASSESSEE IN RESPECT OF THE TRANSFER IS NOT TRULY DECLARED DISCLOSED BY HIM BUT IS SHOWN AT A DIFFERENT FIGURE . THIS OF COURSE IS A VERY SMALL FACTOR AND BY ITSELF OF LITTLE CONSEQUEN CES BUT ALONG WITH THE OTHER FACTORS APPEARING IN SECTION 52(2) OF THE ACT, IT ASSUMES SAME SIGNIFICANCE AS THROWING LIGHT ON THE TRUE INT ENT OF SECTION 52(2) OF THE ACT. THE WORD DECLARED USED IN SEC. 52(2) OF THE ACT WILL NOT APPLY TO A CASE WHERE ASSESSEE HAS NOT RECEIVED ANY EXTRA AMOUNT OVER AND ABOVE WHAT IS SHOWN IN THE TRANSACTION BETWEEN THE PARTIES. IN THE PRESENT CASE BEFORE US, NO DOUBT PERTAINS TO COMPUT ATION OF BUSINESS INCOME BUT THE PRINCIPLE APPLIES IN THE SAME WAY AS SEC. 52(2) OF THE ACT INTERPRETED BY HONBLE APEX COURT IN THE CASE O F K. P. VARGHESE (SUPRA). IN THESE CIRCUMSTANCES, WE DELETE THE ADDI TION AND REVERSE THE ORDERS OF THE LOWER AUTHORITIES. THESE INTER-CONNEC TED ISSUES OF THE ASSESSEES APPEAL WITH RESPECT TO REJECTION OF BOOK RESULTS AND ON MERITS ARE ALLOWED. 5. ONCE A VIEW HAS ALREADY TAKEN BY THE RESPECTED C OORDINATE BENCH, THEREFORE, JUDICIAL PROPRIETY REQUIRES ONE BENCH OF THE TRIBUNAL TO FOLLOW ANOTHER BENCH. PARTICULARLY WHEN THE FACTS INVOLVED ARE IDENTICAL, THEREFORE, WE FIND NO REASON TO ADOPT ANY OTHER VIEW BUT TO FO LLOW THE AFORE-MENTIONED VIEW. RESULTANTLY, GROUNDS RAISED ON THIS ISSUE GO ES IN FAVOUR OF THE ASSESSEE AND ALLOWED. 6. REST OF THE GROUNDS PERTAINING TO THE REOPENING OF THE ASSESSMENT OR REJECTION OF BOOK RESULTS OR LEVY OF INTEREST U/S. 234A AND 234B ETC., ARE EITHER CONSEQUENTIAL OR DO NOT SURVIVE AFTER THE PR ONOUNCEMENT OF THE DECISION IN RESPECT OF THE QUANTUM ADDITION IN FAVO UR OF THE ASSESSEE. ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 7 7. IN THE RESULT BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 27 05 - 20 11. SD/- SD/- (D. C. AGRAWAL) (MUKUL KUMAR SHRAWAT) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD. DATED: 27- 05- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER //TRUE COPY// DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA.NO.389- 390/AHD/2011 . A.YRS. 2004-05 & 2007-08 8 1.DATE OF DICTATION 23 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 23 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..