M/s International Cycle Gears, Ludhiana V. ITO, Ludhiana

ITA 433/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60869 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Principle of natural justice; Difference of opinion; Valuation report; Assessment record; Prejudicial to interest; Change of opinion
• Section: 263; 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 433/CHD/2010 ASSESSMENT YEAR: 2005-06 M/S INTERNATIONAL CYCLE GEARS, V CIT-1, B-50, PHASE VII, LUDHIANA. FOCAL POINT, LUDHIANA. PAN: AAAFI-7593J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT SHRI MANJEET SINGH DATE OF HEARING : 09.05.2012 DATE OF PRONOUNCEMENT : 24.05.2012 ORDER PER MEHAR SINGH, AM THIS IS AN APPEAL AGAINST THE ORDER DATED 29.03.201 0 PASSED BY THE CIT U/S 263 OF THE INCOME-TAX ACT,196 1 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX-1 LUDHIANA PASSED UNDER SECTION 263 OF INCOME TAX ACT IS BAD, ILLEGAL AND AGAINST THE FACTS & LAW S AND DESERVES TO BE CANCELLED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX-1 LUDHIANA HAS ERRED BY INVOKING THE PROVISION OF SEC TION 263 OF INCOME TAX ACT & ALSO ERRED IN GIVING DIRECT ION 2 TO GET THE ASSETS OF THE FIRM EVALUATED ON THE DATE OF RETIREMENT OF PARTNER & FRAME THE ASSESSMENT DENOVO WITHOUT APPRECIATING- THE FACT THAT THE ASSESSING OFFICER HAS ALREADY APPLIED HIS MIND ON THE ISSUE I N QUESTION & ACCEPTED THE CAPITAL GAIN ON RIGHTS IN LEASEHOLD PROPERTY AFTER DETAILED DISCUSSION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX -1 LUDHIANA HAS ERRED BY INVOKING THE PROVISION OF SEC TION 263 OF INCOME TAX ACT MERELY ON THE BASIS OF CHANGE D OPINION & ALSO ERRED BY NOT ACCEPTING THE FACTUAL P OSITION THAT THE CAPITAL GAIN ON LEASEHOLD PROPERTY RIGHTS HAS B EEN CORRECTLY SHOWN UNDER SECTION 45(1) OF INCOME TAX ACT & ALSO ERRED BY INVOKING THE PROVISIONS OF SECTION 45(4) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE RIGHTS IN LEASEHOLD PROPERTY IN QUESTION HAS ALREADY BEEN SOLD MUCH BEFORE THE DATE OF RETIR EMENT & HAD NOTHING TO DO WITH RETIREMENT OF PARTNER & DO NOT F ALL WITH IN THE PURVIEW OF DISTRIBUTION OF ASSETS . 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX -1 L UDHIANA HAS WRONGLY INTERPRETED THE SALE OF PROPERTY AS DISTRIB UTION OF ASSETS MERELY ON SUSPICION & SURMISES & WITHOUT ANY BASIS & CONCRETE EVIDENCE. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX -1 L UDHIANA HAS ERRED BY FORMING AN OPINION THAT THE FAIR MARKET VA LUE OF PROPERTY IN QUESTION WILL BE MORE IN VIEW OF BIFURCATION CHA RGES @ RS.200 PER SQUARE YARD INTIMATED BY PSIEC & THEREFORE HE A CTED MERELY ON SUSPICION & SURMISES & ORDER OF LEARNED CIT -1 LUDH IANA IS NOT FIRM TO PROVE THAT THE ORDER OF ASSESSING OFFICER WAS ER RONEOUS & WAS PREJUDICIAL TO INTEREST OF REVENUE & ALSO FAILED TO APPRECIATE THE FACT THAT THE PROPERTY IN QUESTION WAS RIGHT IN LEASEHOL D PROPERTY & HE ALSO COULD NOT PROVE THAT THE VALUE OF PROPERTY IN QUESTION WAS MORE THAN THE SALE CONSIDERATION SHOWN BY FIRM ON THE DA TE OF TRANSFER & 3 THEREFORE THE LEARNED CIT IS INCONCLUSIVE ABOUT THE FIRM DECISION TO PROVE THAT THE ORDER PASSED BY ASSESSING OFFICER WA S ERRONEOUS & PREJUDICIAL TO INTEREST OF REVENUE. 6. THE APPELLANT CARVES LEAVE TO ADD, OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF .. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, BEFORE US, LD. 'AR' CONTENDED THAT THE AO, HAS TAKEN A POS SIBLE VIEW AND THE VIEW TAKEN BY THE CIT, IN THE REVISION ARY PROCEEDINGS CANNOT DISPLACE THE SAME. HE NARRATED T HAT THE APPELLANT IS A PARTNERSHIP FIRM, HAVING FOUR PARTNE RS, VIZ NARESH KUMAR, BHARAT BHUSHAN, DALIP KUMAR AND RAJ R ANI. THE FIRM SOLD SOME PORTION OF THE RIGHTS, IN THE LE ASE-HOLD LAND AND BUILDING, TO ONE OF THE PARTNERS, SHRI NAR ESH KUMAR, ON 30.09.2004, VIDE UNREGISTERED SALE AGREEM ENT, FOR A CONSIDERATION OF RS.46 LACS, WHICH WAS RECEIVED B Y DEBITING THE CAPITAL ACCOUNT OF THE PARTNER. A REF ERENCE WAS INVITED TO PAGE 77-79. ON 18.12.2004, THE SAME PAR TNER, SHRI NARESH KUMAR, RETIRED FROM THE PARTNERSHIP FIR M, AS PER RETIREMENT DEED PLACED AT PAGE 22 TO 24 OF THE PAPER BOOK. THIS DEED OF RETIREMENT, WAS EXECUTED ON 18. 12.2004. THE CIT, IN ORDER U/S 263, TREATED THE SAID TRANSAC TION AS OF THE FIRM VIS-A-VIZ THE PARTNER SHRI NARESH KUMAR, O N 30.09.2004 AS DISTRIBUTION OF ASSETS, ON DISSOLUTIO N OF FIRM OR OTHERWISE, WITHIN THE MEANING OF SECTION 45(4) O F THE ACT. LD. 'AR', FURTHER MENTIONED THAT AO HAD MADE DETAIL ED ENQUIRY, BY WAY OF ISSUING QUESTIONNAIRE, ON THE SU BJECT MATTER, WHICH IS THE CORE ISSUE U/S 263 OF THE ORDE R. HE REFERRED TO PAGE 10 & 11 OF THE PAPER BOOK AND THES E PAGES 4 OF THE PAPER BOOK ARE PHOTO COPIES OF THE ORDERSHEE T ENTRIES, MAINTAINED BY THE AO. THE AO, VIDE ORDERSHEET ENTR Y DATED 25.07.2007 ASKED SPECIFIC QUESTIONS ABOUT THE DETAI LS OF PROFIT ON SALE OF PROPERTY. SIMILARLY, ON 8.8.2007 AT PAGE 11 OF THE PAPER BOOK, THE AO ASKED FOR THE PHOTO COPY AND DETAILS OF FACTORY PREMISES AND DETAILS OF CAPITAL LOSS OF LAND ETC. SIMILARLY, VIDE ORDERSHEET ENTRY DATED 20.09. 2007, AO, REQUISITIONED THE PHOTO COPY OF THE RETIREMENT DEED . IN VIEW OF THIS, THE LD. 'AR', VEHEMENTLY CONTENDED THAT TH E ISSUE RACKED UP BY THE CIT, IN THE IMPUGNED ORDER, U/S 26 3, HAS ALREADY BEEN DEALT WITH BY THE AO. THEREFORE, THE CIT IS NOT COMPETENT TO SUBSTITUTE HIS VIEW, ON THE ISSUE IN Q UESTION, WHICH HAS ALREADY BEEN CONSIDERED, BY THE AO. HE A LSO MADE A REFERENCE TO THE ASSESSMENT ORDER, AND THE O RDER PASSED BY THE CIT. 4. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER PASSED BY THE CIT AND CONTENDED THAT THE ORDE R IS CRYPTIC IN NATURE AND THE AO, HAS NOT APPLIED HIS M IND. LD. 'DR' PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD. 243 ITR 83 (S.C) AND RAMPYARI DEVI SARAOGI V CIT (1968) 67 ITR 84 (S.C). 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE DECISIONS RELIED UPON BY THE CO NTENDING PARTIES. IN THIS CASE, THE LD. CIT, HAVING REGARD TO THE FACTUAL MATRIX OF THE CASE AND THE ASSESSMENT ORDER , UNDER REFERENCE, WAS OF THE OPINION THAT THE PROVISIONS O F SECTION 5 45(4) ARE APPLICABLE TO THE PRESENT CASE. LD. CIT, IN PARA 4.1.2 OF THE IMPUGNED REVISIONARY ORDER, OBSERVED T HAT IT WAS IMPERATIVE ON THE PART OF THE AO TO GO INTO THE REAL TRANSACTIONS AND REMOVE THE VEIL TO SEE WHAT IS REA L AND WHAT IS NOT. ONCE, IT WAS FOUND THAT THE FIRM WAS A FAMILY CONCERN, THE ASSESSEE FIRM, THROUGH ITS PARTNERS, H AS OPPORTUNITY TO PRE-ARRANGE THE THING, TO AVOID THE PROVISIONS OF LAW. IN THE PRESENT CASE, PROVISIONS OF SECTION 45(4) ARE BEING AVOIDED. THE OBSERVATIONS OF CIT, CLEARLY IN DICATE THAT HE INVOKED THE DOCTRINE OF LIFTING THE VEIL. THE DO CTRINE OF SUBSTANCE OR FORM IS GENERALLY APPLICABLE TO THE AS SESSMENT PROCEEDINGS AND NOT THE REVISIONARY PROCEEDINGS. F URTHER, THE AO, HAS CONSIDERED THE ISSUE IN QUESTION, APPLI ED HIS MIND AND DID NOT INVOKE THE PROVISIONS OF SECTION 4 5(4) OF THE ACT. THE ISSUE, RAISED BY THE CIT, IS BASED ON THE FOUNDATIONAL FACT THAT AO, FAILED TO INVOKE THE PRO VISIONS OF SECTION 45(4) OF THE ACT. IN VIEW OF THIS, THE CIT IS CONSIDERING THE ISSUE ON MERIT, BY INVOKING THE PRO VISIONS OF SECTION 263, WHICH IS NOT PERMISSIBLE. THE CIT, FU RTHER, OBSERVED THAT AS FAR AS CHANGE OF OPINION IS CONCER NED, A REFERENCE IS MADE TO THE ASSESSMENT RECORDS. THE D ETAILS OF SALE OF LAND, WERE FILED DURING THE COURSE OF ASSES SMENT PROCEEDINGS. THE VALUATION REPORT WAS ALSO FILED. A S FAR AS APPLICABILITY OF SECTION 50C IS CONCERNED, THERE I S NOTHING ON RECORD TO SUGGEST THAT APPLICATION OF SECTION 45 (4) WAS EVER DISCUSSED DURING THE COURSE OF ASSESSMENT PROC EEDINGS. ULTIMATELY, CIT WAS OF THE OPINION THAT THE TWIN CO NDITIONS ENSHRINED U/S 263 OF THE ACT, STAND SATISFIED. 6 6. WE ARE OF THE CONSIDERED OPINION, HAVING REGARD TO THE SUBMISSIONS MADE BY THE ASSESSEE AND ORDERS PASSED BY THE LOWER AUTHORITIES, THAT THE ISSUE IN QUESTION, PERT AINING TO CAPITAL GAINS IN THE SAID TRANSACTION, HAS BEEN DUL Y CONSIDERED BY THE AO, AS IS EVIDENT FROM THE QUESTI ONNAIRE ISSUED AND REPLY SUBMITTED BY THE ASSESSEE. FURTHE R, THE ASSESSEE HAS FILED DOCUMENTARY EVIDENCE, INDICATING , THE DATE OF TRANSACTION, AS WELL AS THE DATE OF RETIREM ENT OF THE SAID PARTNER. IT IS WELL SETTLED PROPOSITION THAT, WHERE AO HAS TAKEN LEGALLY PERMISSIBLE VIEW, CIT CANNOT ACQU IRE REVISIONAL JURISDICTION U/S 263 OF THE ACT, MERELY BECAUSE ANOTHER VIEW IS POSSIBLE. THIS VIEW IS DULY SUPPORT ED BY THE DECISION, RELIED UPON BY THE LD. 'AR', IN THE CASE OF CIT V MUNJAL CASTINGS (2008) 303 ITR 23 (P&H). THE HON'B LE JURISDICTIONAL HIGH COURT HELD THAT AO, HAVING TAKE N A POSSIBLE VIEW, THE CIT CANNOT ACQUIRE REVISIONAL JU RISDICTION, U/S 263 OF THE ACT, MERELY BECAUSE ANOTHER VIEW IS POSSIBLE. THE HON'BLE HIGH COURT HAS REFERRED TO THE DECISION S, WHILE ADJUDICATING THE ISSUE, IN THE CASE OF MALABAR INDU STRIAL CO.LTD. V CIT (2000) 243 ITR 83 (S.C); CIT V RALSON INDUSTRIES LTD. (2007) 228 ITR 322 (S.C) AND CIT V R.M.CHIDAMBARAM PILAI (1997) 106 ITR 292 (S.C) AND DECISION OF THE CHANDIGARH TRIBUNAL, IN THE CASE OF INDIA SPINGS POSSESSING LTD. V CIT (2007) 110 TTJ 471 (CH D). LD. 'DR' PLACED RELIANCE ON THE DECISION, IN THE CASE O F MALABAR INDUSTRIAL CO. LTD. (SUPRA), TO SUPPORT HIS CONTENT IONS. THE 7 RELEVANT PART OF THE DECISION IS REPRODUCED HEREUND ER : A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T,1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CO MMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABS ENT-IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT P REJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUD ICIAL TO THE REVENUE- RECOURSE CANNOT BE HAD TO SECTION 263(1) O F THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERR ONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING T HE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UN DERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NO T CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND C OLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS OR DER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOSING TAX LAW F ULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO TH E INTERESTS OF THE REVENUE.THE PHRASE PREJUDICIAL TO THE INTEREST S OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRO NEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQ UENCE OF AN ORDER OF THE AO, CANNOT BE TREATED AS PREJUDICIAL T O THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFF ICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE 8 UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 7. A BARE PERUSAL OF THE DECISION RELIED UPON BY TH E LD. 'DR', REVEALS THAT THIS DECISION HAS BEEN DULY CONS IDERED BY THE HON'BLE HIGH COURT IN THE CASE OF CIT V MUNJAL CASTINGS (SUPRA), WHEREBY THE CIT HAS TAKEN A DIFFERENT POSS IBLE VIEW, THAN THE LEGALLY PERMISSIBLE VIEW, TAKEN BY THE AO. THE FACTS OF THE PRESENT CASE ARE DULY COVERED BY THE RATIO L AID DOWN BY THE JURISDICTIONAL HIGH COURT, AS WELL AS, BY TH E DECISION OF HON'BLE SUPREME COURT, IN THE CASE OF MALABAR I NDUSTRIAL CO.LTD. V CIT (SUPRA). THE RELIANCE, PLACED BY LD. 'DR', SUPPORTS THE CASE OF THE ASSESSEE, AND NOT THAT OF THE REVENUE. 8. THE DECISION, RELIED UPON BY THE LD. 'DR' IN THE CASE OF RAMPYARI DEVI SARAOGI (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE BEING FACTUALLY DIFFERENT AND DISTINGUISHABLE. 9. HAVING REGARD TO THE FACTUAL AND LEGAL DISCUSSIO NS, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH MAY,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH