M/s. SINGH & DESAI CONSTRUCTION CO., Bhopal V. The DCIT 1(1), Bhopal

ITA 421/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6287 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: N D PATWA
• Keywords: Capital asset; Depreciation; Rectification of order; Cost of acquisition
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 421/IND/2014 A.Y. : 2006-07 M/S. SINGH & DESAI DY. CIT, CONSTRUCTION CO., VS 1(1) BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. AACFS9232N A PPELLANT BY : SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADV. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 14.3.2014 FOR THE ASSESS MENT YEAR 2006-07. DATE OF HEARING : 15.03 . 20 16 DATE OF PRONOUNCEMENT : 04 . 0 4 . 201 6 M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL C ONSTRUCTION. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2006-07 DECLARING TOTAL INCOME OF RS. 9,89,270/-. THE RETURN WAS PROCESSED U/S 143(1) ON 26.3.2007 AT THE RETURN ED INCOME. HOWEVER, SUBSEQUENTLY IT WAS NOTICED FROM T HE RECORDS BY THE AO THAT THE ASSESSEE HAD DECLARED LO NG TERM CAPITAL GAINS AS WELL AS SHORT TERM CAPITAL GAINS O N THE SAME HOUSE PROPERTY WHICH WAS USED FOR THE PURPOSE OF BU SINESS AND THAT DEPRECIATION HAD ALSO BEEN CLAIMED BY THE ASSESSEE ON THE SAID PROPERTY. THE ASSESSEE HAD SHOWN LONG T ERM CAPITAL GAINS OF RS. 6,70,255/- AND SHORT TERM CAPI TAL GAINS OF RS. 44,766/- AGGREGATING TO RS. 7,15,021/- ON THE S AME PROPERTY AS UNDER :- M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 3 3 INCOME FROM LONG TERM CAPITAL GAIN HOUSE NO. 164 C-SECTOR, SHAHPURA, BHOPAL MARKET PRICE AS ON 31.3.2006 RS. 11,00,000 LESS: COST OF ACQUISITION FOR THE FINANCIAL YEAR 82-83 94259 X 497 RS. 4,29,745 6,70 ,255 109 INCOME FROM SHORT TERM CAPITAL GAIN: PURCHASE COST OF HOUSE RS. 94,250 LESS : DEPRECIATED VALUE AS ON 31.03.2006 RS. 49,484 44,766 = 7,15,021 SINCE THE CAPITAL ASSET, BUILDING, ON WHICH CAPITAL GAIN WAS OFFERED BY THE ASSESSEE, WAS A BUSINESS ASSET ON WH ICH THE DEPRECIATION HAD BEEN CLAIMED, THE AO CONSIDERED TH AT TOTAL CAPITAL GAIN WAS TO BE TREATED AS SHORT TERM CAPITA L GAINS AS PER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 50 OF THE ACT. THIS BEING A MISTAKE APPARENT FROM RECORD, THE AO I SSUED A NOTICE U/S 154 OF THE ACT TO THE ASSESSEE AS TO WHY THE M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 4 4 INTIMATION U/S 143(1) SHOULD NOT BE ACCORDINGLY REC TIFIED BY TREATING THE TOTAL GAINS AS SHORT TERM CAPITAL GAIN S U/S 50 OF THE ACT. AFTER CONSIDERING THE SUBMISSION OF THE AS SESSEE, THE AO HAD RECTIFIED THE INTIMATION U/S 143(1)AND COMPU TED THE SHORT TERM CAPITAL GAINS ON THE HOUSE PROPERTY AT R S. 10,50,152/-. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E PROPERTY WAS PURCHASED IN 1982-83 AT THE COST OF RS . 92,250/- AND THE PROPERTY WAS REVALUED AND THERE WAS NO TRAN SFER OF THE HOUSE PROPERTY U/S 2(47). THEREFORE, IT IS NOT CHARGEABLE TO TAX U/S 45(4) OF THE ACT. . THEREFORE, THERE SHOULD NOT BE ANY RECTIFICATION ON THIS AMOUNT. THE LD. AUTHORIZED RE PRESENTATIVE HAS ALSO SUBMITTED THAT THE BOARD HAS DIRECTED THE OFFICIAL OF THE DEPARTMENT AS TO HOW TO FRAME THE ASSESSMENT OR DER. THE ASSESSEE SHOULD BE GIVEN AS MUCH AS RELIEF AS HE DE SERVES. IN THIS CASE, THE ASSESSEE HAS NOT MADE ANY TRANSFER. THEREFORE, WHEN ASSESSEE HAS NOT MADE ANY TRANSFER, THERE IS N O QUESTION OF CHARGING CAPITAL GAIN ON IT. THE LD. AUTHORIZED M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 5 5 REPRESENTATIVE FURTHER SUBMITTED THAT ONE PARTNER H AS RETIRED AND ANOTHER NEW PARTNER HAS JOINED AND HOUSE WAS NE VER TRANSFERRED. THEREFORE, THERE IS NO QUESTION OF CAP ITAL GAINS ON IT. 5. THE LD. DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FACTS OF THE CASE. IT IS ADMITTED BY T HE ASSESSEE ITSELF THAT IT HAD DECLARED CAPITAL GAINS ON THE HO USE PROPERTY TRANSFERRED DURING THE YEAR UNDER CONSIDERATION. HE NCE, THERE WAS NO DISPUTE INVOLVED IN THE ORDER U/S 154 OF THE INCOME- TAX ACT, 1961. THE ISSUES REGARDING TRANSFER OF THE SAID CAPITAL ASSET U/S 2(47) AND CHARGEABILITY OF CAPITAL GAINS U/S 45 WERE NOT SUBJECT MATTERS OF THE RECTIFICATION ORDER U/S 154 DATED 10.03.2011 PASSED BY THE ASSESSING OFFICER. THE ONL Y ISSUE FOR WHICH INTIMATION U/S 143(1) WAS RECTIFIED BY THE AO WAS THAT THE CAPITAL GAINS ARISING ON THE TRANSFER OF THE SA ID PROPERTY WAS TO BE TREATED AS SHORT TERM CAPITAL GAINS U/S 5 0 OF THE ACT, WHEREAS THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GA INS U/S 50 OF THE ACT, WHEREAS ASSESSEE HAD SHOWN LONG TERM CAPITAL M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 6 6 GAINS AS WELL AS SHORT TERM CAPITAL GAINS ON THE TR ANSFER OF THE SAME PROPERTY. THUS, THE ONLY ISSUE WAS WHETHER THE RE WAS ANY MISTAKE APPARENT FROM RECORD IN COMPUTATION OF LONG TERM CAPITAL GAINS AS WELL AS SHORT TERMS CAPITAL GAINS BY THE ASSESSEE ON THE TRANSFER OF THE SAME CAPITAL ASSET. IN THIS MATTER, THE AO WAS CORRECT IN GIVING THE FINDING TH AT IT WAS A MISTAKE APPARENT FROM RECORD SINCE SECTION 50 OF TH E ACT PROVIDES IN CLEAR AND UNAMBIGUOUS TERMS THAT WHERE ANY ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH THE DEPRECIATION HAS BEEN ALLOWED UNDER THE INCOME-TAX ACT, 1961, THE GAINS SHALL BE DEEMED TO BE THE CAPITAL G AINS ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSET I.E. CHARGEABLE AS SHORT TERM CAPITAL GAINS. 7. I HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND ASSESSEES SUBMISSION THAT THE ASSESSEE FIRM IS PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL C ONSTRUCTION. THE ASSESSEE FIRM HAS PURCHASED THE PROPERTY IN THE YEAR 1982-93 AT A COST OF RS. 92,250/-. THE HOUSE WAS NO T SOLD, BUT IT WAS REVALUED AND ONE PARTNER OF THE FIRM WAS RETIRED AND NEW PARTNERS WAS ADMITTED. THE AMOUNT OF REVALU ATION M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 7 7 WAS CREDITED TO THE CAPITAL ACCOUNT OF THE PARTNER AND RETIRING PARTNER WAS PAID HIS SHARE OF CAPITAL ACCOUNT. HENC E, IT DOES NOT AMOUNT TO TRANSFER AS THERE WAS NO DISSOLUTION OF THE FIRM. THEREFORE, RELYING ON THE UPON THE DECISION OF 257 ITR 544 (S.C.) IN WHICH IT WAS HELD THAT WHEN A PARTNERSHI P IS RECONSTITUTED BY ADDING A NEW PARTNER, THERE IS NO TRANSFER OF ASSETS WITHIN THE MEANING OF SECTION 45(4) OF THE I NCOME-TAX ACT, 1961, BUT WE FIND THAT THERE ARE SOME DECISION S IN FAVOUR OF THE ASSESSEE, BUT IN THIS CASE, THE FACTS OF THE CASE ARE THAT THIS IS NOT APPEAL AGAINST THE ADDITION, BUT THIS A PPEAL IS AGAINST 154 OF THE INCOME-TAX ACT, 1961. I HAVE GON E THROUGH THE ORDER OF SECTION 154 OF THE ACT. THE AO HAS GIV EN SHOW CAUSE NOTICE AND THE ASSESSEE HAS FILED THE REPLY B UT THE ASSESSEE DID NOT REMAIN PRESENT AND THE ASSESSEE HA S NOT CLAIMED ANYTHING. THE ASSESSEES CLAIM CAN BE CONSI DERED AGAINST THE APPEAL BEFORE THE CIT(A) AGAINST THE O RDER OF THE AO, BUT NOT U/S 154 OF THE ACT. THEREFORE, WE HAVE NO ALTERNATIVE EXCEPT TO ENDORSE THE ACTION OF THE CIT (A). M/S. SINGH & DESAI CONSTRUCTION VO., BHOPAL VS. DY. CIT, 1(1), BHOPAL, I.T.A.NO. 421/IND/2014 A.Y. 2006-07 8 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 4 TH APRIL , 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 4 TH APRIL, 2016. CPU*