HICKSON & DADAJEE P. LTD, MUMBAI V. ITO 5(1)(4), MUMBAI

ITA 4731/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8366 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 18-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 13-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Business income; Date of conversion; Difference of opinion; Change of opinion
• Section: 143(3); 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 4731/MUM/2011 ASSESSMENT YEAR-2004-05 M/S. HICKSON & DADAJEE PVT. LTD., SHREE PANT BHUWAN, MAMASAHEB WARERKAR BRIDGE, MUMBAI -400 007 PAN - AAACH 0986M VS. THE ITO 5(1)(4), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NARAYAN ATAL RESPONDENT BY: SHRI K.C.P. PATNAIK DATE OF HEARING :18.10.2012 DATE OF PRONOUNCEMENT: 31.10.2012 O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF LD. CIT(A)-9, MUMBAI DT. 15.3.2011 PERTAINING TO ASSESS MENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED FOLLOWING 4 GROUNDS OF A PPEAL: 1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)- 9, MUMBAI [HEREAFTER REFERRED TO AS THE CIT(A)] ERRED IN CONF IRMING THAT THE RE- OPENING OF THE ASSESSMENT MADE U/S. 143(3) OF THE A CT WAS VALID AND THEREBY UPHOLDING THE ORDER U/S. 144 R.W.S. 147 OF THE ACT AS VALIDLY PASSED. YOUR APPELLANTS SUBMIT THAT THE ORDER U/S. 144 R.W. S 147 PURSUANT TO NOTICE U/S. 148 IS MERE CHANGE OF OPINION AND IS BA D IN LAW AND LIABLE TO BE SET ASIDE AND CANCELLED. ITA NO. 4731/M/2011 2 YOUR APPELLANTS FURTHER SUBMIT THAT THE VALUATION R EPORT OF THE DISTRICT VALUATION OFFICER OBTAINED IN RESPECT OF A DIFFEREN T ASSESSMENT YEAR CANNOT BE MADE THE BASIS FOR RE-OPENING OF THE ASSE SSMENT. 2 THE LEARNED CIT(A) ERRED IN OVERLOOKING THE FACT THAT THE REASONS RECORDED BY THE L1 BEFORE ISSUE OF NOTICE U/S. 148 OF THE ACT HAVE NOT BEEN FOUND TO BE VALID BY HIMSELF AND HE HAS ALREAD Y DROPPED THE PROCEEDINGS U/S. 148 FOR ASSESSMENT YEAR 2005-06 AN D THE SAME REASONS WERE THE BASIS FOR REOPENING THE ASSESSMENT U/S. 148 FOR THE ASSESSMENT YEAR 2004-05. YOUR APPELLANTS THEREFORE SUBMIT THAT THE NOTICE IS SUED U/S. 148 AND THE CONSEQUENT ASSESSMENT MADE U/S. 144 R.W.S 147 O F THE ACT IS BAD IN LAW AND OUGHT TO BE CANCELLED. 3 THE LEARNED CIT(A) ERRED IN SUO-MOTO COMING TO TH E CONCLUSION THAT THE DATE I.E. 19.09.2002 ON WHICH BIFR HAD SANCTIONE D THE SCHEME OF REHABILITATION AND ALLOWED CERTAIN RELIEFS TO THE A PPELLANT BE DEEMED TO BE THE DATE ON WHICH THE LAND HAS BEEN DEEMED TO BE CONVERTED INTO STOCK-IN-TRADE. YOUR APPELLANTS SUBMIT THAT THE VIEW TAKEN BY THE C IT(A) IS NOT CORRECT IN LAW AND HAS BEEN ARRIVED AT WITHOUT AFFORDING AN Y OPPORTUNITY TO THE APPELLANT TO EXPLAIN THE SAME AND THEREFORE THE ORD ER OF CIT(A) TO THIS EXTENT OUGHT TO BE SET-ASIDE. 4 THE LEARNED CIT(A) ERRED IN ASSUMING THE POWERS O F THE ASSESSING OFFICER AND ACCORDINGLY ERRED IN DIRECTING THAT THE ASSESSING OFFICER SHOULD HAVE COMPUTED THE GAIN OUT OF SALE OF LAND U PTO THE DEEMED DATE OF CONVERSION OF LAND AS CAPITAL GAINS AND THE REAFTER THE EXCESS SALE PROCEEDS SHOULD BE TAXED AS BUSINESS INCOME. YOUR APPELLANTS SUBMIT THAT THE TRANSACTION OF SALE OF LAND HAS TO BE CONSIDERED UNDER THE HEAD CAPITAL GAINS WHICH IS F URTHER SUBJECT TO THE RELIEF GRANTED BY THE BIFR. 3. THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT BY ISSUE OF NOTICE U/S. 148 OF THE I.T. ACT. 4. AT THE TIME OF HEARING, THE LD. AR SUBMITTED THA T GROUND NO. 1 & 2 IS NOT PRESSED. THEREFORE, GROUND NOS.1 & 2 OF APPEAL ARE REJECTED. ITA NO. 4731/M/2011 3 5. THE ONLY GROUND REMAINS TO BE DECIDED IS WHETHER THE LOWER AUTHORITIES RIGHTFULLY TAXED THE CAPITAL GAINS ON S ALE OF PLOT OF LAND AS BUSINESS INCOME. 6. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURE OF DYES, FOOD COLOURS A ND BUILDING CONSTRUCTION. THE ASSESSEE COMPANY WENT INTO LOSSES AND APPROACHE D THE BOARD OF INDUSTRIAL FINANCE AND RECONSTRUCTION (BIFR). BIFR A LLOWED THE APPLICATION OF THE ASSESSEE AND GRANTED SCHEME OF RECONSTRUCTION. IN PURSUANCE OF THE SCHEME GRANTED BY THE BIFR, THE ASSESSEE SOLD A PLO T OF LAND PARTLY DURING THE F.Y. 2003-04 AND PARTLY DURING F.Y. 2004-05. T HE SALE CONSIDERATION OUT OF THE SALE OF THE SAID PLOT OF LAND WAS DECLARED A S LONG TERM CAPITAL LOSS BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. SIM ILAR TREATMENT WAS GIVEN FOR THE PLOT OF LAND SOLD DURING F.Y. 2004-05 PERTA INING TO A.Y. 2005-06. IT WOULD NOT BE OUT OF PLACE TO EXPLAIN IN BRIEF WHAT HAPPENED IN ASSESSMENT OF ASSESSMENT YEAR 2005-06. IN THAT YEAR, THE SALE OF PLOT OF LAND WAS TREATED AS BUSINESS ACTIVITY AND THE SALE CONSIDERATION REL ATING TO THE SALE OF PLOT OF LAND WAS CONSIDERED AS BUSINESS RECEIPT. 7. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHICH APPEAL WAS ALLOWED. 8. THE DEPARTMENT DID NOT ACCEPT THE ORDER OF THE L D. CIT(A) AND PREFERRED AN APPEAL BEFORE THE ITAT. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE TRIB UNAL IN ITA NO. 5388/MUM/2008 PERTAINING TO ASSESSMENT YEAR 2005-06 . THE TRIBUNAL AT PARA 2 & 3 OF ITS ORDER HAS DISCUSSED THE ISSUE AT LENGTH WHICH IS AS UNDER: BRIEFLY THE FACTS OF THE GROUND NO. 1 & 2 ARE THAT THE ASSESSEE IS IN THE BUSINESS OF CHEMICALS AND BUILDING CONSTR UCTION. THE AO EXAMINED THE BIFR SCHEME OF THE ASSESSEE. THE AO NOTICED THAT THE ASSESSEE DID NOT COMPLY WITH THE SCHEME, T HEREFORE, HE ITA NO. 4731/M/2011 4 WAS OF THE VIEW THAT BIFR SCHEME OF THE ASSESSEE IS NOTHING ELSE BUT A GIMMICK TO AVOID TAX. THE AO APPLIED THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF MCDOWELL AND CO. LTD. VS. COMMERCIAL TAX OFFICER, 154 ITR 148 (SC). THE C IT(A) ALLOWED THE RELEVANT GROUNDS OF APPEAL OBSERVING AS UNDER:- 2.2 I HAVE GONE THROUGH THE SUBMISSIONS AND ARGUMEN TS OF THE LD. AR AS WELL AS THE IMPUGNED ASSESSMENT ORDER. I F IND THAT THE LD. AO HAD NOT GRASPED ALL THE NUANCES OF SICA AND THE PURPOSE OF HAVING CREATED BIFR BY THE PARLIAMENT OF INDIA SIC A IS OVERRIDING ACT OVER ALL OTHER ACTS, INCLUDING I.T. A CT,1961. THE IT DEPARTMENT IS REPRESENTED BY DIRECTORATE OF RECOVER Y ON BEHALF OF CBDT BEFORE BIFR. THUS, ONCE THE SCHEME IS PASSED BY BIFR, NO OBJECTION OF CBDT CAN BE SUSTAINED EXCEPT THROUG H AAIFR AND HONBLE SUPREME COURT. IN ANY CASE IT IS NOT OPE N TO THE LD. AO TO EXAMINE AND SCRUTINIZE THE VALIDITY AND IMPLE MENTATION OF THE SCHEME GRANTED BY BIFR UNDER SICA. IN THE INSTAN T CASE, THE HONBLE BIFR HAS ALSO PASSED THE ORDER DT. 29.9. 2005 ON SUCCESSFUL REHABILITATION OF THE APPELLANT COMPANY AND DECLARED IT AS NONSTICK COMPANY WITHIN THE PROVISIONS OF SEC .3(1)(C) OF SICA. THUS, IN VIEW OF THE ABOVE DISCUSSION AND IN THE FA CTS AND CIRCUMSTANCES OF THE INSTANT CASE, THE ACTION OF LD . AO IS FOUND TOTALLY UNJUSTIFIED. ACCORDINGLY, THE APPEAL IS ALL OWED ON THESE GROUNDS. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE BENCH WAS ASKED A SPECIFIC QUERY TO THE LEARNED DR WHETHER THIS BIFR SCHEME HAS BEEN RE VERSED BY THE CONCERNED AUTHORITY. THE CONTENTION OF THE LEAR NED REPRESENTATIVES OF THE PARTIES WERE THAT THE CONCER NED AUTHORITY DID NOT REVERSE THE SAID BIFR SCHEME OF THE ASSESSEE . IN THE LIGHT OF THE FACT THAT THE AO CAN EXERCISE POWERS O NLY UNDER THE INCOME TAX TO ASSESS THE TAXABLE INCOME. WHETHER THE ASSESSEE HAS COMPLIED WITH THE BIFR SCHEME OR NOT IS NOT THE SUBJECT MATTER OF AO, THOUGH, HE HAS EMPOWERED TO EXAMINE T HE SCHEME OF BIFR, WHICH ARE RELATED TO INCOME TAX ACT . IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS CONFIRMED ON THIS ISSUE. 10. CONSIDERING THE FACTS IN THE PRESENT APPEAL, IN THE LIGHT OF THE DECISION OF THE ITAT (SUPRA), WE FIND THAT THE AO HAS DISREG ARDED THE SCHEME GRANTED BY THE BIFR ON THE GROUND THAT THE ASSESSEE HAS VIOL ATED THE PROVISIONS OF THE SCHEME AND THEREFORE IS NOT ENTITLED FOR IMMUNI TY FROM THE PROVISIONS OF ITA NO. 4731/M/2011 5 THE INCOME TAX ACT AS PROVIDED AT INTERNAL PAGE-11 P ARA 10.5 OF THE BIFR ORDER. 11. HOWEVER, IN THE LIGHT OF THE DECISION OF THE TR IBUNAL FOR THE SUBSEQUENT ASSESSMENT YEAR, WE DO NOT FIND ANY MERIT IN THE CA SE OF THE REVENUE AS THE TRIBUNAL HAS CATEGORICALLY HELD THAT THE SCHEME IS VERY MUCH APPLICABLE TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF T HE TRIBUNAL, WE DIRECT THE AO TO TREAT THE GAINS/LOSS ON SALE OF PLOT OF LAND UNDER THE HEAD CAPITAL GAINS. GROUND NO. 3 & 4 ARE ACCORDINGLY ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF OCTOBER, 2012 SD/- SD/- (I.P. BANSAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 31 ST OCTOBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI