DCIT, New Delhi V. M/s AAA Portfolio Pvt. Ltd., New Delhi

ITA 5112/DEL/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8254 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-04-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 19-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: R M MEHTA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDIP SINGH , JM ITA NO. 5112/DEL/2010 : ASSTT. YEAR : 2001 - 02 DEPUTY COMMISSION ER OF IN COME TAX, CENTRAL CIRCLE - 15 , NEW DELHI VS M/S AAA PORTFOLIO PVT. LTD., 2 - A, SHANKAR MARKET, CONNAUGHT PLACE, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA ACA1931B CO NO. 19/DEL/2011 : ASSTT. YEAR : 2001 - 02 M/S AAA PORTFOLIO PVT. LTD., 202, 1 ST FLOOR, OKHLA INDL. ESTATE, PHASE - II, NEW DELHI - 110020 VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 15, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACA1931B AS SESSEE BY : SH. R. M. MEHTA, ADV . REVENUE BY : SH. K. K. JAISWAL, DR DATE OF HEARING : 0 7 .0 4 .201 6 DATE OF PRONOUNCE MENT : 08 .04 .201 6 ORDER PER N. K. SAINI, AM : THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 03.09.2010 OF LD. CIT(A) - II I , NEW DELHI. 2. IN THE DEPARTMENTAL APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED: ITA NO . 5112 /DE L/201 0 AAA PORTFOLIO PVT. LTD. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LA W AND ON MERITS IN RELYING ON THE DECISION OF THE ITAT IN THE CASE OF M/S ESCORTS LTD. IN ITA NO. 567/DEL/2005 AND M/S BIG APPLE CLOTHINGS LTD. IN ITA NO. 762/DEL/2007. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.7.35 CRORES MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BUSINESS INCOME U/S 28(IV) OF THE ACT. 3. (A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY TH E ITAT DELHI BENCH I , NEW DELHI IN THE CASE OF M/S BIG APPLE CLOTHING PVT. LTD. VS DCIT, CC - 3, NEW DELHI IN ITA NO. 762/DEL/2009 ORDER DATED 09.10.2009, WHICH BELONGS TO THE SAME GROUP TO WHICH THE ASSESSEE BELONGS. 4. IN HIS RIVAL SUBMISSIONS THE LD. D R ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. ITA NO . 5112 /DE L/201 0 AAA PORTFOLIO PVT. LTD. 3 5. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL ON THE RECORD, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THE ITAT DELHI BENCH I , NEW DELHI IN THE CASE OF M/S BIG APPLE CLOTHING PVT. LTD. VS DCIT, CC - 3, NEW DELHI IN ITA NO. 762/DEL/2009 ORDER DATED 09.10.2009 WHEREIN VIDE PARA 7 , IT HAS BEEN HELD AS UNDER: 7. EVEN ON MERITS, IT IS NOTICED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ESCORTS LTD . WHO WAS THE 90% SHAREHOLDER IN EHIRC CHANDIGARH AND IN WHOSE CASE THE COORDINAT E BENCH OF THIS TRIBUNAL AT PARA 46 HELD AS FOLLOWS: 'I T WA S THUS A COMMON VIEW OF THE HON'BLE JUDGES THAT NORMALLY AT THE TI ME OF ACQUISITION OR PURCHASE AT A CONCESSIONAL PRICE NO PROFIT (INCOME) SECURES. THE ONLY EXCEPTION STATED BY ONE OF THE JUDGES W AS A CASE WHERE PURCHASE OF OTHER COMPANIES OR AMALGAMATIONS AND FAKING OVER OF OTHER COMPANIES IS CARRIED OUT AS A TRADING ACTIVITY. THE LD. SPECIAL COUNSEL FOR THE DEPARTMENT PROBABLY REALIZED THIS ASPECT AND HAS SOUGHT TO RAISE A NEW CONTENTION BEFORE U S, WHICH WE WILL DEAL WITH AT THE APPROPRIATE STAGE. NEVERTHELESS, THE AFORESAID PRINCIPLE CANNOT HE APPLIED IN T HE PRESENT SITUATION. THE LD. JUDGE NOTED THAT AS A RESULT OF THE AMALGAMATION PROCESS, SUBSTANTIAL SURPLUS (I.E. PRICE PAID BEING LESS THAN TH E VALUE OF T HE ASSETS AFTER DEDUCTION OF LIABILITIES) RESULTED IN FAVOUR OF THE ASSESSEE AND IT WAS SO ACCOUNTED FOR A S HAVING ACCRUED, AND, THEREFORE, OPINED IT TO BE GAINS AND PROFIT FORM A TRADING A C TI VI T Y . IN OTHER WORD S, THE ITA NO . 5112 /DE L/201 0 AAA PORTFOLIO PVT. LTD. 4 REASONING WEIGHING WITH TH E LD. JUDGE WAS T HAT SURPLUS ARISING AS A RESULT OF AMALGAMATION OF T WO COMPANIES ACCRUES WHEN THE ACCOUNTS OF THE COMPANIES ARC AMALGAMATED AND IF S UCH AMALGAMATION IS CARRIED OUT AS A PART OF WELL - PLANNED AND CONCERNED ACTIVITY, THE SURPLUS SO ACCRUING I S TO B E CONSIDERED, AS A GAIN AND PROFIT FROM A TRADING ACTIVITY . IN THE I NSTANT CASE, THE DELHI SOCIETY HAS MERGED/AMALGAMATED WITH THE CHANDIGARH SOCIETY AND THERE AFTER THE CHANDIGARH SOCIETY HAS CONVERTED ITSELF INTO A COMPANY AS PER PAR T IX OF THE COMP ANIES ACT, 1956. THE SURPLUS OR DEFICIT AS A RESULT OF THE AMA LGAMATION, IF ANY, WOULD B E IN T HE ACCOUNTS OF THE AMALGA MATED SOCIETY ONLY. THAT ISSUE I S CERTAINLY NOT BEFORE US. TO REPEAT, THE ISSUE BEFORE US IS MERELY WITH RESPECT TO THE ALLOTMENT OF SHAR ES IN THE MERGED SOCIETY AND LIMITED COMPANY TO THE ASSESSEE AS TO WHETHER SUCH, ALLOTMENT WOULD GIVE RISE TO INCOME IN THE HANDS OF THE ASSESSEE, WHICH CAN BE BROUGHT TO TAX THIS YEAR. IN ASSESSMENT YEAR CASE, THEREFORE, THE OBSERVATIONS MADE BY HIS LORDS HIP MR. JUSTICE KHANNA, J. CANNOT BE APPLIED IN T HE INSTANT FACTUAL SITUATION. F OR THE PRESENT ISSUE THAT ARISES FOR CONSIDERATION IN THE ASSES SEE'S APPEAL, IT IS ENOUGH TO CONCLUDE THAT NO INCOME CAN BE SAID TO HAVE ACCRUED OR ARISEN TO THE ASSESSEE AT TH E TIME OF PURCHASE OF THE SHARES AT A PRICE LESS THAN I T S BOOK VALUE. THUS, IT CANNOT BE SAID THAT T HE ASSESSEE EARNED AN INCOME WITHIN T HE MEANING OF SECTION 2(24) OF T HE ACT. THIS CONCLUSION IS WITH REFERENCE T O T HE CASE AS MADE OUT BY THE CIT(A). ' 6. IN THE PRESENT CASE, I T IS AN ADMITTED FACT THAT THE FACTS OF THE ASSESSEE S CASE ARE IDENTICAL TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE OF M/S BIG APPLE CLOTHING ITA NO . 5112 /DE L/201 0 AAA PORTFOLIO PVT. LTD. 5 PVT. LTD. VS DCIT, CC - 3, NEW DELHI . SO, RESPECTFULLY FOLLOWING THE AFORESAID R EFERRED TO ORDER DATED 09.10.2009 IN ITA NO. 762/DEL/2009 IN THE CASE OF M/S BIG APPLE CLOTHING PVT. LTD. VS DCIT, CC - 3, NEW DELHI. WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 7. IN THE CROSS OBJECTION ASSESSEE HAS RAISED THE FOLLOWING GROUN DS: 1. THE CIT (APPEALS) ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE REASSESSMENT U/S 147/148 OF THE I.T. ACT, 1961 ON THE PART OF THE ASSESSING OFFICER. 2. THE CIT (APPEALS) DID NOT CONSIDER THE DETAILED WRITTEN SUBMISSIONS FILED DURING THE COURSE O F HEARING BOTH ON FACTS AND IN LAW AND NEITHER DID THE CIT (APPEALS) CONSIDER THE JUDGMENTS RELIED UPON IN SUPPORT OF THE CONTENTION THAT REOPENING WAS INVALID IN CASE I. THERE WAS A COMPLETE DISCLOSURE OF MATERIAL FACTS AT THE STAGE OF THE ORIGINAL ASSES SMENT, AND II. IN THE REASONS RECORDED FOR REOPENING THERE WAS NO ALLEGATION ABOUT SUPPRESSION OF ANY MATERIAL ON THE PART OF THE ASSESSEE. 3. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS, THE CIT (APPEALS) FAILED TO CONSIDER THAT ONE OF THE GROUNDS FOR RE OPENING WAS THE VALUATION OF THE LAND BY THE DVO IN RESPECT OF THE PROPERTIES AT DELHI, CHANDIGARH, JAIPUR, ETC. BELONGING TO ITA NO . 5112 /DE L/201 0 AAA PORTFOLIO PVT. LTD. 6 EHIRC, A SEPARATE ASSESSEE ALTOGETHER, AND REOPENING ON THE - BASIS OF SUCH REPORT WAS NOT AT ALL JUSTIFIED IN LAW. 4. THE APPELL ANT RESERVES TO ITSELF, THE RIGHT TO ADD, ALTER, AMEND, SUBSTITUTE, WITHDRAW AND/OR ANY GROUND(S) OF APPEAL AT OR BEFORE THE DATE OF HEARING. 8. THE CROSS OBJECTION FILED BY THE ASSESSEE IS DELAYED BY 7 DAYS AND THE ASSESSEE FILED AN APPLICATION FOR COND ONATION OF DELAY ALONGWITH THE AFFIDAVIT OF SH. ARUN K. MATHUR, A RETAINER. SINCE WE HAVE DISMISSED THE APPEAL OF THE DEPARTMENT , ON MERIT AND THE ISSUE STANDS ALLOWED IN FAVOUR OF THE ASSESSEE, THIS CROSS OBJECTION IS ARISING OUT OF THE SAID DEPARTMENTAL APPEAL . THEREFORE, THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS INFRUCTUOUS . 9 . IN THE RESULT, APPEAL OF THE DEPARTMENT AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED . ( ORDER PRON OUNCED IN THE COURT ON 08 /04 / 2016 ) SD/ - SD/ - ( KULDIP S INGH ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /04 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR