HYDRODYNE INDUSTRIES, MUMBAI V. ITO 20(1)(3), MUMBAI

ITA 4049/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88551 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 08-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2012
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES; ON FACTS
• Assessee Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Bad and doubtful debts
• Section: 50C; 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 4049 /MUM/201 2 ASSESSMENT YEAR: - 2006 - 07 M/S HYDROD Y NE INDUSTRIES 62, MITTAL INDUSTRIAL ESTATE, UNIT 1, ANDHERI KURLA ROAD, ANDHERI (EAST), MUMBAI 400059. VS.` INCOME TAX OFFICER, 20(1)(3) MUMBAI. PAN: - AAACJ8850C APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.03.2012 OF CIT(A) FOR THE A.Y. 2006 - 07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCES OF RS. 264628/ - OUT OF BAD DEBTS AS CLAIMED BY THE A PPELLANT. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING COMPUTATION OF LONG TERM CAPITAL GAIN OF RS. 2617600/ - ON SALE OF AGRICULTURAL LAND AT PALGHAR BY INVOKING PROVIS IONS OF SECTION 50C OF THE ACT AS AGAINST THE CAPITAL GAIN OF RS. 69100/ - AS SHOWN BY THE APPELLANT. PROVISIONS OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED AND REGARD BEING HAD TO FACTS OF THE CASE PROVISIONS OF SECTION 50C SHOULD NOT HAVE BEEN ASSESSEE BY NONE REVENUE BY SHRI JEETENDRA KUMAR DATE OF HEARING 24 .02.2015 DATE OF PRONOUNCEMENT 04 .0 3 .2015 ITA NO. 4049/MUM/2012 ASSESSMENT YEAR: - 2006 - 07 2 | P A G E MADE A PPLICABLE TO THE APPELLANT'S CASE AND CAPITAL ASSETS BEING A AGRICULTURAL LAND NO CAPITAL GAIN IS CHARGEABLE ON SALE OF AGRICULTURAL LAND WHICH IS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSETS UNDER SECTION 2(14) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING COMPUTATION OF SHORT TERM CAPITAL GAIN AT RS. 4007767/ - ON SALE OF OFFICES AT MALAD, WHICH IS A DEPRECIABLE ASSETS BY INVOKING PROVISIONS OF SECTION 5 0C OF THE ACT. 2. THE APPEAL OF THE ASSESSEE WAS LISTED FOR HEARING ON 13.01.2015 AND WAS ADJOURNED TO 18.02.2015 ON THE REQUEST OF THE ASSESSEE VIDE ITS LETTER DATED 12 TH JANUARY 2015. ON 18.02.2015 WHEN THIS APPEAL OF THE ASSESSEE WAS CALLED FOR HEARING REPEATEDLY NONE HAS APPEARED ON BEHALF OF THE ASSESSEE AND, ACCORDINGLY, HEARING OF THE APPEAL WAS ADJOURNED TO 24.02.2015. ON 24.02.2015 AGAIN NONE APPEARED ON BEHALF OF THE ASSESSEE CONSEQUENTLY THE APPEAL OF THE ASSESSEE WAS HEARD EX PARTE . 3. GROUND NO. 1 IS REGARDING DISALLOWANCE OF BAD DEBTS OF RS. 2,64,628/ - . WE HAVE HEARD THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED BAD DEBTS OF RS. 20,63,020/ - IN ITS P&L ACCOUNT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF BAD DEBTS AND THE JUSTIFICATION FOR WRITING OFF THE SAME DURING THE YEAR U NDER CONSIDERATION. THE ASSESSEE FILED RELEVANT DETAILS AND EXPLANATION ALONG WITH SUPPORTING DOCUMENTARY EVIDENCES EXCEPT IN RESPECT OF ITS CLAIM OF BAD DEBT OF RS. 2,64,628/ - PERTAINING TO 23 PARTIES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S FAILED TO ESTABLISH THAT THESE DEBT WRITTEN OFF BY THE ASSESSEE IN RESPECT OF 23 PARTIES HAD BECOME BAD AND IRRECOVERABLE AND ALSO FAILED TO EXPLAIN THAT THE CORRESPONDING INCOME ITA NO. 4049/MUM/2012 ASSESSMENT YEAR: - 2006 - 07 3 | P A G E HAS BEEN OFFERED TO TAX IN THE RELEVANT PREVIOUS YEAR OR IN THE EARLIER YE AR AS REQUIRED U/S 36(2) OF THE INCOME TAX ACT. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBT TO THE EXTENT OF RS. 2,64,628/ - IN RESPECT OF 23 PARTIES. 4. ON APPEAL, THE ASSESSEE HAS CONTENDED THAT IN VIEW OF THE HON'BLE SUPREME COU RTS DECISION IN THE CASE OF T.R.F LTD. VS. CIT 323 ITR 397 , IT IS NOT REQUIRED TO ESTABLISH THAT DEBTS HAVE GONE BAD ONCE THE ASSESSEE HAS WRITTEN OFF THE DEBTS AS IRRECOVERABLE IN THE ACCOUNTS. THE CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY OBSE RVING THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY DETAIL TO SHOW THAT THESE DEBTS PERTAINING TO TH E TRADE DEBTORS ON ACCOUNT OF SALES AND OFFERED TO TAX IN THE EARLIER ASSESSMENT YEARS. FURTHER IN RESPECT OF SOME DEBTS WHICH ARE CLAIMED TO BE IRRECOVERABL E AND WRITTEN OFF, THE CIT(A) HAS NOTED THAT THE ASSESSEE HAS SUBSEQUENTLY RECOVERED THE AMOUNT, THEREFORE, IT WAS FOUND THAT THE CLAIM OF THE ASSESSEE WAS NOT A GENUINE CLAIM BY CONSIDERING THE FACT THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE AMOUN TS WERE ALREADY OFFERED TO TAX AS PER THE PROVISIONS OF SECTION 36(2). THE CIT(A)HAS CONFIRMED THE DISALLOWANCE MADE BY ASSESSING OFFICER. 5. WE FIND FROM RECORD THAT BOTH ASSESSING OFFICER AS WELL AS CIT(A) HAS CATEGORICALLY OBSERVED THAT NO DETAILS WERE MADE AVAILABLE BY THE ASSESSEE TO SHOW THAT THE BAD DEBTS CLAIMED AND WRITTEN OFF DURING THE YEAR WERE OFFERED FOR TAXATION EITHER IN THE PRECEDING ASSESSMENT YEAR OR IN THIS YEAR . FURTHER THE CIT(A) HAS POINTED THAT IN RESPECT OF ALL THESE 23 PARTIES, THE ASSESSEE HAD ALREADY RECOVERED THE AMOUNT IN RESPECT OF M/S TNT EXPRESS WORLDWISE AND M/S TILL LTD WHICH SHOWS THAT THE DECISION OF THE ASSESSEE IN WRITING OFF THE BAD ITA NO. 4049/MUM/2012 ASSESSMENT YEAR: - 2006 - 07 4 | P A G E DEBT AS IRRECOVERABLE IS NOT A HONEST DECISION. ACCORDINGLY, WE DO NOT FIND ANY ERR OR OR ILLEGALITY IN THE ORDERS OF AUTHORITIES BELOW QUA THIS ISSUE. 6. GROUND NO. 2 IS REGARDING THE LONG TERM CAPITAL GAIN OF RS. 26,17,600/ - BY INVOKING THE PROVISIONS OF SECTION 50C. THE ASSESSEE HAS SOLD THE AGRICULTURAL LAND AT PALGHAR AT A CONSIDERATION OF RS. 9 LAKH AND AFTER REDUCING THE INDEXED COST OF ACQUISITION CO MPUTED LONG TERM CAPITAL GAIN OF RS. 69,100/ - . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 50C AND ADOPTED THE FULL VALUE OF SALE CONSIDERATION AS THE VALUE TAKEN BY THE STAMP DUTY AUTHORITY. THE ASSESSEE SUBM ITTED BEFORE THE ASSESSING OFFICER THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND AND, THEREFORE, IT DOES NOT FALL UNDER THE DEFINITION OF CAPITAL ASSET U/S 2(14) OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND COMPUT ED LONG TERM CAPITAL GAIN ARISING ON SALE OF LAND IN QUESTION BY ADOPTING THE SALE CONSIDERATION AT RS. 34,48,500/ - U/S 50C OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A). THE CIT(A) CONFIRMED THE FINDING OF ASSESSING OFF ICER. 7. WE NOTE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF HYDRAULIC SYSTEM AND THE LAND IN QUESTION WAS HELD AS NON AGRICULTURAL LAND IN THE BOOKS OF ACCOUNTS. FURTHER THE ASSESSEE HAS NOT CLAIMED THAT THE LAND IN QUESTI ON WAS USED FOR AGRICULTURAL OPERATIONS BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE LAND IN QUESTION DOES NOT FALL UNDER THE CAPITAL ASSET AS PER SECTION 2(14) OF THE ACT WHEN THE PAST USE AS WELL AS FU TURE USE OF THE LAND IS NOT FOR CARRYING OUT THE AGRICULTURAL OPERATION THEN MERELY BECAUSE THE LAND IS SHOWN IN THE REVENUE ITA NO. 4049/MUM/2012 ASSESSMENT YEAR: - 2006 - 07 5 | P A G E RECORD AS AGRICULTURAL LAND ITSELF WOULD NOT EXCLUDE THE SAME FROM THE DEFINITION OF CAPITAL ASSET. WE FURTHER NOTE THAT THE ASSESS EE HAS RAISED THE OBJECTION BEFORE THE ASSESSING OFFICER REGARDING THE ADOPTION OF FULL VALUE OF SALE CONSIDERATION AS PER SECTION 50C AND DEMANDED THE VALUATION TO BE REFERRED TO THE DVO, THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING O FFICER AS WELL AS BY THE CIT(A) . WE ARE OF THE VIEW THAT WHEN THE ASSESSEE HAS RAISED THE OBJECTION U/S 50C(2) THEN THE ASSESSING OFFICER OUGHT TO HAVE REFERRED THE VALUATION OF THE LAND TO THE DVO. ACCORDINGLY, FOR THIS LIMITED PURPOSE, WE SET ASIDE THIS ISSUE TO THE RECORD OF ASSESSING OFFICER FOR REFERENCE OF THE VALUATION TO DVO AND THEN DECIDE THE ISSUE AS PER LAW. 8 . GROUND NO. 3 IS REGARDING SHORT TERM CAPITAL GAIN ON SALE OF OFFICE AT MALAD. 9 . AT THE OUTSET, WE NOTE THAT THIS ISSUE DOES NOT EMANA TE FROM THE IMPUGNED ORDER OF CIT(A). FURTHER THE ASSESSEE HAS NOT RAISED ANY SUCH GROUND BEFOR E THE CIT(A), THEREFORE, THIS GR OUND OF THE ASSESSEES APPEAL IS REJECTED. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 04 TH DAY OF MARCH 2015. SD/ - SD/ - ( N.K. BILLAIYA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER ) MUMBAI DATED 04 - 0 3 - 2015 SKS SR. P.S, ITA NO. 4049/MUM/2012 ASSESSMENT YEAR: - 2006 - 07 6 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI