Amazer Investment & Finance Ltd., V. ACIT,

ITA 4242/DEL/2009

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7061 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-09-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 03-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: SAHIL SHARMA S
• Keywords: Capital asset; Question of law; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH A: NEW DELHI BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS.2478/DEL/2007 & 4242/DEL/2009 ASSESSMENT YEAR : 2003-04 AMAZER INVESTMENT & FINANCE LTD., 107, BHARAT CHAMBER, 70, SCINDIA HOUSE, NEW DELHI 110 001. PAN: AAACA 5424A VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), NEW DELHI. APPELLANT RESPONDENT APPELLANT BY : S/SHRI ANOOP SHARMA & SAHIL SHARMA, ADVOCATES RESPONDENT BY : SHRI S.K. JAIN, DR DATE OF HEARING : 20.09.2016 DATE OF PRONOUNCEMENT : 21.09.2016 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE ARE APPEALS PREFERRED BY THE ASSESSEE AGAIN ST THE RESPECTIVE ORDERS OF THE CIT(APPEALS). SINCE THE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. W E, HOWEVER, PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. ITA NO.2478/DEL/2007 2. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINS T THE ORDER DATED 25.01.2007 OF THE CIT(APPEALS)-IV, NEW DELHI INTER ALIA ON THE FOLLOWING GROUNDS:- ITA NOS.2478/DEL/2007 & 4242/DEL/2009 PAGE 2 OF 6 1. THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACT S AND LAW IN TREATING THE PROFIT ARISING FROM SALE OF SHARES OF APOLLO TYRES LTD. (OUT OF ITS INVESTMENTS) AS BUSINESS PRO FITS THEREBY REJECTING ASSESSEES TREATMENT OF SAID INCO ME AS LONG TERM CAPITAL GAINS. 1.1 THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE VIEWS OF THE ASSESSING OFFICER THA T THE CONVERSION OF STOCK IN TRADE INTO INVESTMENT BY THE ASSESSEE WAS PATENTLY WRONG AND CARRIED OUT WITH MA LAFIED INTENTION OF EVADING TAX. 1.2 THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING ASSE SSING OFFICERS DECISION THAT THE CONVERSION OF SHARES FR OM STOCK- IN-TRADE TO INVESTMENTS SHOULD HAVE BEEN MADE AT FA IR MARKET VALUE AND NOT ON BOOK VALUE AS DONE BY THE APPELLANT. 1.3 THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DECISION OF THE ASSESSING OFFICER THAT FOR THE PURP OSE OF DETERMINING WHETHER A CAPITAL ASSET IS A LONG TERM OR A SHORT TERM CAPITAL ASSET, THE PERIOD OF HOLDING OF THE CAPITAL ASSET SHOULD BE CALCULATED FROM THE DATE OF CONVERS ION OF SHARES FROM STOCK-IN-TRADE TO INVESTMENT AND NOT FR OM THE DATE OF ACQUISITION. 2. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER , ADD OR TO WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS CANDIDLY ADMITTED THAT THE IMPUGNED ISSUE IN THIS A PPEAL IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF SPLENDOR CONSTRUCTIONS PVT. LTD. V. ITO IN ITA NO.6 62/2009 DATED 16.09.2009 IN WHICH THE HONBLE HIGH COURT HAS HELD THAT THE ASSET IN ITA NOS.2478/DEL/2007 & 4242/DEL/2009 PAGE 3 OF 6 QUESTION AS CAPITAL ASSET ONLY FROM THE DATE IT IS CONVERTED INTO CAPITAL ASSET I.E., 1.4.2002 AS IT IS ONLY ON THAT THE SAID ASSET CEASED TO BE STOCK IN TRADE AND WAS TREATED AS CAPITAL ASSET. ACCORDINGLY, TH E QUESTION WAS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE A ND THE APPEAL OF THE ASSESSEE WAS DISMISSED. COPY OF JUDGMENT OF HONBLE HIGH COURT IS PLACED ON RECORD AND FOLLOWING THE SAME, WE DECIDE THE IMPUGNED ISSUE AGAINST THE ASSESSEE AND CONFIRM THE ORDER OF CIT(A PPEALS). ITA 4242/DEL/2009 4. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 17.08.2009 OF THE CIT(APPEALS)-IV, NEW DELHI INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING PENA LTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, LEVIED BY T HE ASSESSING OFFICER VIDE HIS ORDER DATED 31.3.2008, W ITHOUT CONSIDERING THE FACTS AND PROVISIONS OF SECTION 271 (1)(C) AND THE JUDICIAL PRONOUNCEMENTS THEREOF IN THEIR PROPER PERSPECTIVE. 2. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER , ADD OR TO WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 5. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ORDER OF TRIBUNAL IN T HE CASE OF SPLENDOR CONSTRUCTIONS PVT. LTD. V. ITO IN ITA NO.268/DEL/20 10 DATED 17.03.2010 , WITH THE SUBMISSION THAT IN IDENTICAL CIRCUMSTANCES , PENALTY LEVIED U/S. ITA NOS.2478/DEL/2007 & 4242/DEL/2009 PAGE 4 OF 6 271(1)(C) OF THE ACT IN THAT CASE WAS DELETED BY TH E TRIBUNAL. COPY OF ORDER OF TRIBUNAL IS PLACED ON RECORD. 6. THE LD. DR PLACED RELIANCE UPON THE ORDER OF CIT (APPEALS). 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT IN THE CASE OF SPLENDOR CONSTRUCTIONS PVT. LTD. (SUPRA) IN IDENTICAL CIRCUMSTANCES WHERE PENALTY WAS LEVIE D BY THE ASSESSING OFFICER WAS DELETED BY THE TRIBUNAL. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER FOR THE SAK E OF REFERENCE:- 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD P ERUSED. FACTS IN BRIEF ARE THAT DURING THE YEAR, THE ASSESS EE COMPANY HAD DECLARED LONG TERM CAPITAL GAIN ON SALE OF LAND OWN ED BY IT. FROM THE DETAILS FURNISHED BY THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS DISCOVERED THAT THE COMPANY PURCHASED THIS LAND IN THE FINANCIAL YEAR 1998-99 A ND SOME IMPROVEMENTS WERE MADE ON IT. IN THE BALANCE SHEETS FILED IN CONSECUTIVE YEARS THE LAND WAS SHOWN AS STOCK IN T RADE AND ITS VALUE/COST AS ON 31.3.2002 WAS REFLECTED AT RS.3,46 ,63,069/-. IN THE BALANCE SHEET AS ON 31.3.2003 FILED WITH THE RE TURN OF INCOME, NO STOCK-IN-TRADE WAS DECLARED. THE ASSESSEE COMPAN Y CLAIMED THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION IT HAD CONVERTED ITS STOCK-IN-TRADE COMPRISING OF THE IMPUGNED LAND INTO INVESTMENT AND SOLD THE SAME ON 12.12.2002 TO ANO THER COMPANY I.E. M/S PREMIER TYRES LTD. FOR RS.6,00,00, 000/-. THE DIFFERENCE IN THE SALE CONSIDERATION AND THE COST O F PURCHASE WHICH CAME TO RS.2,53,36,931/- WAS DECLARED AS LONG TERM CAPITAL GAINS. THE INCOME FROM LONG TERM CAPITAL GAIN WAS D ECLARED AT RS.1,66,09,750/- AFTER CLAIMING BENEFIT OF INDEXED COST OF ACQUISITION. IN THE ASSESSMENT ORDER, THE PERIOD OF HOLDING THE ASSET WAS RECKONED FROM THE DATE WHEN IT WAS CONVER TED AS INVESTMENT FROM STOCK IN TRADE AND SINCE IT WAS LESS THAN THREE YEARS, THE GAIN WAS TREATED AS SHORT TERM CAPITAL G AIN AND TAXED AS SUCH. IN RESPECT OF THE ADDITION MADE, THE AO LEVIE D PENALTY U/S ITA NOS.2478/DEL/2007 & 4242/DEL/2009 PAGE 5 OF 6 271(1)(C) AND THE SAME WAS CONFIRMED BY THE CIT(A). AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APP EAL BEFORE US. 3. IT WAS CONTENDED BY THE LEARNED AR THAT WHETHE R THE ASSET AS A LONG TERM CAPITAL ASSET OR SHORT TERM CAPITAL ASSET WAS A DEBATABLE ISSUE AND IN RESPECT OF THE ADDITION SO M ADE, SUBSTANTIAL QUESTION OF LAW WAS ADMITTED BY THE HONBLE HIGH CO URT. HE FURTHER CONTENDED THAT IN VIEW OF THE DECISION OF T HE ITAT AHMEDABAD BENCH IN THE CASE OF ROOPAM MERCANTILE 91 ITD 273 FOR CONCEALMENT OF INCOME, WHERE A PLEA OR CLAI M WHICH IS HELD BY THE HIGH COURT TO HAVE GIVEN RISE TO A SUBS TANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA-FIDE AS TO ATTRACT LEVY OF PENALTY U/S 271(1)(C). IN VIEW O F THE ORDER OF THE HON'BLE DELHI HIGH COURT DATED 16.9.2009, WHEREIN S UBSTANTIAL QUESTION OF LAW HAD BEEN ADMITTED BY THE HONBLE HI GH COURT. APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE IT AT AHMEDABAD BENCH, HE CONTENDED THAT PENALTY IS NOT L EVIABLE U/S 271(1)(C). 4. RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW L AID DOWN BY THE COORDINATE BENCH AS DISCUSSED HEREINABOVE, W HERE A PLEA OR CLAIM WHICH IS HELD BY THE HIGH COURT TO HAVE GI VEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO B E FRIVOLOUS OR MALA-FIDE SO AS TO ATTRACT LEVY OF PENALTY U/S 271( 1)(C). ACCORDINGLY, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY. 8. SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW O N SIMILAR SET OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO JUSTIFICA TION IN TAKING A CONTRARY VIEW IN THIS APPEAL. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(APPEALS) AND DELETE THE ADDITION. ITA NOS.2478/DEL/2007 & 4242/DEL/2009 PAGE 6 OF 6 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE VIZ., ITA NO.2478/DEL/2007 IS DISMISSED, WHEREAS ITA NO.4242/ DEL/2009 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF SEPTEMBER 2016. SD/- SD/- ( L.P. SAHU ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER NEW DELHI, DATED, THE 21 ST SEPTEMBER, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR, ITAT, NEW DELHI.