ITO, Chttoor District V. K. Jagadeesh Reddy (HUF), Madanapalle

ITA 495/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3250 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSMENT YEAR AS PER REC
• Keywords: Sale consideration of property below Jantri Value
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.495/HYD/2010 : ASSESSMENT YEAR 2007 -08 INCOME-TAX OFFICER, WARD-1,MADANAPALLE. VS S. K. JAGADESH REDDY (HUF), MADANAPALLE. (PAN:AACHR 2071 L) (APPELLANT) (RESPONDENT) APPELLANT: SHRI K.J. RAO RESPONDENT: MOHD. AFZAL O R D E R PER AKBER BASHA,AM:- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT (A), TIRUPATI DATED 13-1-2010 AND IT PERTA INS TO THE ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS HUF. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE RETURN OF INCOME WAS FILED ON 26-7-2007 ADMITTING A TOTAL INCOME OF RS.1,22,586/- AND CLAIMED CARRY FORWARD OF LONG TERM CAPITAL LOSS OF RS.1,15,38,607/- AFTER SETTING OFF OF RS.34,81,282/- AGAINST THE CAPITAL GAINS FROM THE SALE OF HOUSE PROPERTY AT CHEN NAI. THE SAID ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 2 RETURN INCOME WAS PROCESSED UNDER THE PROVISIONS OF SEC TION 143(1) OF THE ACT ACCEPTING THE RETURNED INCOME. SU BSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING O FFICER HAD COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS.41 ,03,868/- VIDE ORDER DATED 9-10-2009 PASSED UNDER SECTION 143(3) OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER HAD NOT SET OFF THE LONG TERM CAPITAL LOSS OF RS.33,73,240/- INCURRED ON SALE OF EQUITY SHARES IN MADANAPALLY SPINNING MILLS LIMITED AND ALS O NOT SET OFF THE BROUGHT FORWARD LONG TERM CAPITAL LOSS OF RS.7,84,7 29/- OF ASSESSMENT YEAR 1999-2000 AND LONG TERM CAPITAL LOSS OF RS.2,18,048/- OF ASSESSMENT YEAR 2000-01. THE ASSES SING OFFICER HAD ALSO NOT ALLOWED THE SET OFF OF BROUGHT FORWARD LONG TERM CAPITAL LOSS OF RS.1,16,46,649/- OF ASSESSMENT YEAR 2004-05. THE ASSESSEE CONTENDS THAT THERE WAS LOSS DETERMINED AN D ALLOWED TO BE CARRIED FORWARD IN PURSUANCE OF VALID RETURN OF INCOM E FILLED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 AS PER REC ORD AND THEREFORE THE CLAIM FOR SET OFF OF SUCH LOSSES CANNOT BE DENIED IN THIS ASSESSMENT YEAR AND THE LOSSES CANNOT BE RE-DETE RMINED IN THE YEAR IN WHICH SET OFF WAS CLAIMED. THE ASSESSI NG OFFICER ALSO MADE ADDITION OF RS.5 LAKHS UNDER SECTION 50C WITHOU T AFFORDING AN OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE HAD NO T BEEN FURNISHED THE EVIDENCE TO SHOW THAT THE MARKET PRICE O F THE PROPERTY SOLD IS HIGHER THAN THE DECLARED IN THE RETURN OF INCOME. IN ANY EVENT, THE ASSESSEE HAS NOT BEEN GIVEN AN OP PORTUNITY TO MEET THE CASE AND THE PROVISIONS OF SECTION 50C OF T HE ACT DO NOT VEST UNFETTERED POWER ON THE ASSESSING OFFICER TO MA KE ADDITIONS. ON APPEAL, THE CIT (A) AFTER CONSIDERING THE GROUNDS E LABORATELY IN ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 3 HIS ORDER, ALLOWED THE SET OFF OF THE LONG TERM CAPIT AL LOSS FOR THE ASSESSMENT YEAR 1999-2000, 2000-01 AND 2007-08 AND ALSO ALLOWED THE CAPITAL GAIN LOSS ADMITTED BY THE ASSES SEE WITH REGARD TO THE SALE OF SHARES OF MADANAPALLE SPINNING MILLS LIMITED. THE CIT (A) ALSO DIRECTED THE ASSESSING OFFICER TO ADOPT THE DOCUMENTARY VALUE AS THE SALE CONSIDERATION AS AGAINS T VALUE DETERMINED BY THE SRO AND THUS PARTLY ALLOWED THE A PPEAL FILED BY THE ASSESSEE. AGGRIEVED AGAINST THE FINDINGS AND THE DECISION OF THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US. THE REVENUE RAISED THE FOLLOWING GROUNDS BEFORE US:- 1. THE ORDER OF THE CIT (A) IS ERRONEOUS ON THE FACTS OF THE CASE. 2. THE CIT (A) HAS ALLOWED THE APPEAL OF THE ASSESS EE WITHOUT VERIFICATION OF THE FACTS OF THE CASE REGARDI NG FILING OF RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 WHETHER THEY HAVE BEEN FILED WITHIN THE STIPULATED TIME AS REQUIRED UNDER SECTION 139(1). 3. THE CIT (A) ERRED IN ALLOWING THE CAPITAL GAINS L OSS ADMITTED REGARDING SHARES OF MADANAPALLE SPINNING MILLS LTD. WHEN THE COMPANY HAS GONE TO BIFR, IT IS ONLY FOR REVIVAL OF PACKAGE AND IT IS NOT FOR SALE. A S SUCH THERE IS NO ELEMENT OF PROFIT OR LOSS AND THE LO SS ALLOWED FOR APPROPRIATION IS NOT IN ORDER. ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 4 4. THE CIT (A) ERRED IN ALLOWING THE APPEAL RESTRICTIN G THE DOCUMENT VALUE AS AGAINST THE VALUE DETERMINED BY SRO. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE CIT (A) HAS ALLOWED THE APPEAL OF THE ASSE SSEE WITHOUT VERIFICATION OF THE FACTS OF THE CASE REGARDING FILIN G OF RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 WHICH WERE NOT FILED WITHIN THE STIPULATED TIME AS REQUIRE D UNDER SECTION 139(1). FURTHER, THE CIT (A) IS NOT JUSTIFIED IN ALLO WING THE CAPITAL GAINS LOSS ADMITTED REGARDING SHARES OF MADANAPALLE S PINNING MILLS LTD. WHEN THE COMPANY HAS GONE TO BIFR, IT IS ONLY FOR REVIVAL OF PACKAGE AND IT IS NOT FOR SALE. AS SUCH THERE IS NO ELEMENT OF PROFIT OR LOSS AND THE LOSS ALLOWED FOR APPROPRIATION IS NOT IN ORDER. IT IS FURTHER SUBMITTED THAT THE CIT (A) IS NOT JUST IFIED IN ALLOWING THE APPEAL RESTRICTING THE DOCUMENT VALUE AS AGAINST THE VALUE DETERMINED BY SRO. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE FAIRLY AGREED THAT THE RETURNS FOR THE ASSESSMENT YEA R 1999-2000 AND 2000-01 WERE FILED AFTER THE DUE DATE STIPULATED UNDER SECTION 139(1) OF THE ACT. WITH REGARD TO OTHER ISSUES, HE RE LIED ON THE ORDER OF THE CIT (A). ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT, AS AGREED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE RE TURNS FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 APPEARS TO H AVE FILED AFTER THE DUE DATE AS STIPULATED UNDER SECTION 139(1) OF THE ACT. HENCE, THE CIT (A) IS NOT CORRECT IN DIRECTING THE ASSE SSING OFFICER TO ALLOW SET OFF OF THE LONG TERM CAPITAL LOSS AGAI NST THE LONG TERM CAPITAL GAIN ARISING OUT OF SALE OF THE CHENNAI FLAT . THEREFORE, THE GROUND RAISED BY THE REVENUE IN GROUND NO.2 IS ACCORDING LY ALLOWED. WITH REGARD TO ALLOWING OF LONG TERM CAPI TAL LOSS ARISING OUT OF SALE OF SHARES OF MADANAPALLE SPINNING MILLS LIMITED OF RS.33,73,240/- BY THE CIT (A), WE FIND THAT THE AS SESSING OFFICER HAS NOT GIVEN ANY PROPER OR COGENT REASON FOR NOT ALLOW ING THE CAPITAL LOSS ARISING ON ACCOUNT OF SALE OF SHARES O F MADANAPALLE SPINNING MILLS LIMITED. IN VIEW OF THE ABOVE, THE C IT (A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE SE T OFF OF THE LONG TERM CAPITAL LOSS FROM THE LONG TERM CAPITAL GAI NS ARRIVED FROM THE SALE OF FLAT AT CHENNAI. HENCE, THE GROUND RAISE D BY THE REVENUE ON THIS ISSUE IS REJECTED. 6. WITH REGARD TO THE ADOPTION OF VALUE DETERMINED BY THE SRO AS SALE CONSIDERATION, WE FIND THAT THE ASSESSI NG OFFICER MECHANICALLY ADOPTED THE SROS VALUE OVER THE FAIR MA RKET VALUE DECLARED BY THE ASSESSEE WITHOUT GIVING AN OPPORTUNI TY TO THE ASSESSEE SEEKING HIS EXPLANATION OVER THE DIFFERENCE IN THE VALUATION AND ALSO THE ASSESSING OFFICER HAS NOT REF ERRED THE MATTER TO THE DVO FOR AN INDEPENDENT OPINION AS MANDATED UN DER SECTION ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 6 53C OF THE ACT. HENCE, THE CIT (A) IS RIGHT IN DELE TING THE ADDITION OF RS.5 LACS BY HOLDING THAT THE ACTION OF THE ASSE SSING OFFICER IS ARBITRARY AND NOT IN CONFORMITY WITH THE PROVISIONS OF THE SECTION 53C OF THE ACT. HENCE, HIS ORDER ON THIS ISSUE IS CON FIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER WAS PRONOUNCED IN THE COURT ON 24 06-2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER DT. 24-06-2011. COPY FORWARDED TO: 1. 2. 3. 4. 5. INCOME-TAX OFFICER, WARD-1, MADANAPALLE. SRI K.JAGADEESH REDDY, ADOPTED SON OF LATE SRI T.N. RAMALINGA REDDY, GANDHI ROAD, MADANAPALLE. CIT (A), TIRUPATI. CIT, AP, HYDERABAD. THE DR, ITAT, HYDERABAD. JMR* ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 7 ITA NO.495 OF 2010 K. JAGDESH REDDY (HUF) ====================== 8