MIRACLEE RECLAIM RUBBER COIMBATORE (P) LTD., PALAKKAD V. PCIT-1, COIMBATORE

ITA 519/CHNY/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7820 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 21-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Revenue expenditure; Capital Gains
• Section: 50C

Judgement Text

आयकरअपीलीयअिधकरण,‘ए’ यायपीठ,चे ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ीमहावीर सह, उपा य एवं ी मनोज कुमार अ वाल, लेखा सद"यके सम BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A No.:519/CHNY/2021 िनधा%रण वष%/ Assessment Year 2015 – 2016 M/s. Miracle Reclaim Rubber (Coimbatore) Private Limited, No.13 / 679, Menonpara Road, New Industrial Development Area (NIDA), Kanjikode, Palakkad – 678 621. PAN : AAECM 3230B Vs. The Principal Commissioner of Income Tax – 1, Coimbatore – Annexe Building, 63A, Race Course Road, Coimbatore – 641 018. (अपीलाथ /Appellant) ( यथ /Respondent) आयकर अपील सं./I.T.A No.:518/CHNY/2021 िनधा%रण वष%/ Assessment Year 2015 – 2016 M/s. Miracle Polymers India Limited, No.13 / 679, Menonpara Road, New Industrial Development Area (NIDA), Kanjikode, Palakkad – 678 621. PAN : AAECM 3229L Vs. The Principal Commissioner of Income Tax – 1, Coimbatore – Annexe Building, 63A, Race Course Road, Coimbatore – 641 018. (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/Appellant by : Mr. B. Mohan, Chartered Accountant यथ क ओरसे/Respondent by : Mr. ARV. Sreenivasan, Addl. CIT सुनवाई क तारीख/Date of Hearing : 07.07.2022 घोषणा क तारीख/Date of Pronouncement : 13.07.2022 आदेश आदेशआदेश आदेश /O R D E R PER MAHAVIR SINGH, VP: I.T.A No.:519/CHNY/2021: This appeal of the Assessee is arising out of the order of the PCIT/CIT-1, Coimbatore u/s.263 :: 2 :: I.T.A. Nos.519 & 518 - 2021 of the Income Tax Act, 1961 (hereinafter “the Act”) vide No.C.No.120/24/PCIT-1/2019-20; dated 31.01.2020. The assessment was framed by the Income Tax Officer, Corporate Ward – 1, Coimbatore u/s.143(3) of the Act for the Assessment Year 2015 – 2016 vide order dated 19.12.2017. 2. At the outset, it is noticed that this appeal is time bared by limitation by 597 days and the Assessee has filed a condonation petition stating the fact that the order of the PCIT dated 31.01.2020 was received by the Assessee on 04.02.2020 and the limitation for filing the appeal before the Tribunal was expiring on 04.05.2020, but actually the appeal was filed only on 22.11.2021 and thereby there is a delay in filing of the appeal by 597 days. The learned Counsel for the Assessee stated that this was due to the outbreak of ‘Covid-19’ pandemic. The Hon’ble Bench took into cognizance the Order of the Hon’ble Supreme Court the “Suo Moto WP 03/2020 dated 20.03.2020 while considering the condonation of delay. It is a fact that ‘Covid-19’ pandemic was prevalent and in term of the directions issued by the Hon’ble Supreme Court in Miscellaneous Application No.21/2022 in Suo Motu Writ Petition No.3 of 2020, :: 3 :: I.T.A. Nos.519 & 518 - 2021 we condone the delay of 597 days and admit the appeal for adjudication on merits. 3. The brief facts of the case are that the Assessee company filed its return of income relevant to the Assessment Year 2015 – 2016, dated 29.09.2015 and the Assessee’s case was selected for scrutiny assessment under the Computer Aided Scrutiny Selection [CASS], i.e. “Limited Scrutiny Category” for the reason to examine the issue (viz.) “Large other deduction claimed in Sch.BP, creating losses without any income in Profit & Loss Account ii) Sale consideration of property in ITR is less than the sale consideration reported in AIR.” The Assessing Officer after examining the details filed by the Assessee brought to tax the Long Term Capital Gains [LTCG] by invoking the provisions of Section 50C of the Act. The Assessing Officer noted the fact regarding the sale of the Assessee’s land at the rate of Rs.75/- per Sq.ft. and worked out the Long Term Capital Gains to Rs.58,27,494/- and added the same to the returned income of the Assessee and assessed as such. The Assessing Officer recorded the findings in paragraph nos. 6 to 6.2, as under: :: 4 :: I.T.A. Nos.519 & 518 - 2021 “6. It is seen from the return of income filed by the assessee company for the Assessment Year 2015-16, the assessee has admitted Long Term Capital Gains of Rs.52,864/- and Business Loss of Rs.86,76,881/-. During the Previous Year under consideration the, assessee company M/s Miracle Reclaim Rubber Coimbatore Pvt Limited along with its Sister concern M/s Miracle Polymers India Limited had jointly sold a property measuring 3.79 ½ Acres of Land with Building to M/s Multimech Engineers for a total consideration of Rs.1,84,00,000/-. The area of the property sold by the asseslee company is 1.90 ½ Acres and the rest belonged to its sister concern. 6.1 The property sold by the assessee company measuring 1.90 ½ Acres was acquired by the assessee company on 27.09.2004 for Rs.1,62,720/- and the Indexed cost of acquisition is Rs.3,47,136/-. The sale value of the land admitted in the Return is Rs.4,00,000/- only and the difference of Rs.52,864/- is admitted as Long Term Capital Gain by the assessee. 6.2 However, it is seen from the website of the Tamilnadu Registration Department, the Guideline Value of the land sold bearing Survey No.649/1 is Rs.75/- per Sq.Ft. Hence, the Sale consideration is recomputed by adopting the Guideline Value as, Rs.75/- per Sq.Ft. under section SOC of the Income Tax Act, 1961. and the guideline value of the property sold works out to Rs.61,74,630/-. The Loni Term Capital Gains is recomputed taking sale consideration as per section SOC c Rs.61,74,630/- duly reduced by the Indexed cost of Acquisition of Rs.3,47,136/- and the Long Term Capital Gains works out to Rs.58,27,494/-.” 4. Subsequently, the PCIT issued a show-cause notice dated 06.09.2019, vide No.C.No.120/24/PCIT-1/CBE/2019-20; wherein according to the PCIT, the Assessee along with its sister concern, M/s. Miracle Polymers India Limited, Palakkad sold a property, i.e., land measuring 3.79 acres including a building. According to the PCIT, as per the registration :: 5 :: I.T.A. Nos.519 & 518 - 2021 documents, the value of the land adopted was at Rs.1,51,80,000/- at the rate of Rs.40,00,000/- per acre and the building was valued at Rs.1,47,79,739/-. According to the PCIT, 50% of the Assessee’s share in land and the building comes to an amount of Rs.75,90,000/- and Rs.74,00,000/- respectively, whereas the actual share declared by the Assessee is only to the tune of Rs.61,74,630/- and Rs.74,00,000/- for the land and building and thereby there is a difference of Rs.14,15,370 in land and Rs.6,41,917/- in the building. According to the PCIT, this is a short declaration of the Long Term Capital Gains and Short Term Capital Gains. For this, the PCIT recorded the fact in paragraph Nos.2.1 & 2.2 of his show- cause notice which reads as under: “2.1 On verification of records it is noticed that during the relevant Financial Year, you and your sister concern Mis. Miracle Polymers India Ltd sold a property (land and building) and had sold 3.79 acres of land. On verification of registered document it is noticed that the value of land was adopted at Rs.1,51,60,000/- @ Rs.40,00,000/- per acre. Whereas, while completing the assessment, the Assessing Officeradopted Rs.1,23,49,260/- as me value of land as per section 50C of the Income Tax Act and 50C of which ie. Rs.61.74,630/- i.e. {50% 1,23,49,260/-} was shown as your share. However, as per Stamp Valuation Authority the value of land was assessed at Rs.1,51,80,000/- (full value) and accordingly, your company's share amounting to Rs. 75,90,000/- {50% "1,51,80,000/-}. Hence the difference of Rs. 14,15,370- { 75,90,000 minus 61,74,630} is required to be assessed under the head L TCG. :: 6 :: I.T.A. Nos.519 & 518 - 2021 2.2 On verification of records it is noticed that the total value of Building was offered at Rs.1,36,00,000/- {assessee: Rs.74,00,000/- & Miracle Polymers India Ltd: Rs.62,00,000/-}. Whereas, as per Stamp Valuation Authority the value of building was assessed at Rs.1,47,79,739-. Therefore, the difference of Rs.11,79,739{1,47,79,739/- minus 1,36,00,000/-} is required to be assessed under the head STCG in the ratio 74:62. The additional gain to be assessed in the hands of your company amounts to Rs. 6,41,917 /-. {117973974/136} .” 5. The Assessee replies to the above show-cause notice stating that the land and the building was registered as per the guideline value of the land fixed by the Tamil Nadu Registration Department at the rate of Rs.75/- per Sq.ft, i.e. for the land being sold bearing Survey No.649/1A. According to the Assessee, the sale consideration was recomputed by adopting the guideline value at the rate of Rs.75/- per Sq.ft u/s.50C of the Act. However, the guideline value of the property sold for the Assessee’s share comes to Rs.61,74,630/- and the building valuation was also assessed by the Stamp Valuation Authority at Rs.1,36,00,000/-; whereas the Assessee’s share was Rs.74,00,000/- and the Assessee’s sister concern, M/s. Miracle Polymers India Limited, Palakkad declared at Rs.62,00,000/-. The Assessee explained before the PCIT that the Stamp Valuation Authority revised the valuation subsequently, in view of the internal audit / field inspection made by the Registration Department and noticed that this under-valuation existed and a :: 7 :: I.T.A. Nos.519 & 518 - 2021 deficiency in stamp duty was paid by the Assessee to a tune of Rs.9,24,779/-. 6. The learned Counsel for the Assessee before us stated that the excess valuation was taken in view of the revised guidelines issued by the Registration Department for the property valuation and accordingly an audit objection was raised subsequent to the completion of the assessment. The learned Counsel for the Assessee stated that the assessment was made by the Assessing Officer vide order dated 19.12.2017 u/s.143(3) of the Act and the audit objection by the audit department of the Registration Department was a subsequent event. The PCIT directed the Assessing Officer to revise the assessment vide paragraph no.8, as under: “8. The Assessing Officer, is hereby directed to re-do the assessment afresh after verification of the facts discussed above. The Assessing Officer shall satisfy himself about the value adopted by the Registration Department by calling for necessary information u/s.133(6) of the Act and ascertain the actual guideline value of the property sold and then compute the LTGC and STCG in accordance with law. The Assessing Officer shall give adequate opportunity of being heard to the Assessee in this regard before passing the fresh assessment order.” Aggrieved, the Assessee came in appeal before the Tribunal. :: 8 :: I.T.A. Nos.519 & 518 - 2021 7. The learned Counsel for the Assessee stated that enhancing guideline value of the property and the subsequent internal audit objection, subsequent action will not amount to any error committed by the Assessing Officer while passing the assessment order because that is a subsequent event. On the date of passing of the assessment order, the assessment order is not erroneous and the Assessing Officer has taken a permissible view. 8. On the other hand, the learned Senior Departmental Representative relied upon the revision order. 9. We have heard the rival contentions and had gone through the facts and circumstances of the case. We noted that the revision in the stamp duty valuation by the Registration Department of the Tamil Nadu Government is in view of the subsequent event and it transpires through internal audit carried out by the Registration Department. When there exists a deficiency in the stamp duty due to the change in the property rates fixed for the stamp valuation retrospectively, we are of the view that the subsequent event will not affect the correctness of the assessment order because at the time of :: 9 :: I.T.A. Nos.519 & 518 - 2021 framing of the assessment, the assessment order is not erroneous. Once the assessment order is not erroneous, no revision is possible u/s.263 of the Act. 10. Another issue, on which the PCIT has revised the assessment is as regards to the claim of expenses relating to filing fee for enhancement of authorised share capital by the Assessee company as revenue expenditure amounting to Rs.3,25,000/-. The PCIT first of all was not sure as to whether the same is to be allowed or not but has made a simple observation, “further, there ought to have been a disallowance of Rs.3,25,000/- claimed as ROC filing fees debited in the Profit & Loss Account as this is not an allowance expenditure. Therefore, this being the factum matrix of the case, the other case laws and the objections raised thereon is not applicable to the facts of the Assessee’s case and hence not acceptable”. 11. We noted that the PCIT no doubt made these observations, but while giving directions to the Assessing Officer for reframing the assessment, he has not directed for the disallowance of this amount or for consideration while framing the assessment. In any eventuality, we noted that the plea of :: 10 :: I.T.A. Nos.519 & 518 - 2021 the Assessee before the PCIT and even now before us, is that the expenditure incurred on filing fee for enhancement of authorized share capital of the Assessee company is allowable as revenue expenditure in view of the decision of the Hon’ble Karnataka High Court in the case Hindustan Machine Tools Limited Vs Commissioner of Income Tax [1989] 175 ITR 220 (Kar). Hence, according to us, on this issue also, the revision order requires to be quashed and accordingly quashed. 12. Thus, we quash the revision order passed by the PCIT u/s.263 of the Act and allow the appeal of the Assessee. In the result, the appeal of the Assessee in I.T.A No.:519/CHNY/2021 is allowed. 13. I.T.A No.:518/CHNY/2021 : This appeal of the Assessee is arising out of the order of the PCIT/CIT-1, Coimbatore u/s.263 of the Income Tax Act, 1961 (hereinafter “the Act”) vide No.C.No.120/25/PCIT-1/2019-20; dated 03.02.2020. The assessment was framed by the Income Tax Officer, Corporate Ward – 2, Coimbatore u/s.143(3) of the Act for the Assessment Year 2015 – 2016 vide order dated 22.12.2017. :: 11 :: I.T.A. Nos.519 & 518 - 2021 14. At the outset, it is noticed that this appeal is time bared by limitation by 595 days and similar to the above facts, the order of the PCIT dated 03.02.2020 was received by the Assessee on 06.02.2020 and the limitation for filing the appeal before the Tribunal was expiring on 06.04.2020 but the appeal was actually filed only on 22.11.2021. Hence, there is a delay of 595 days. The Assessee has filed an affidavit stating that this was due to the outbreak of ‘Covid-19’ pandemic and in view of the fact to condone the delay of 595 days and admit the appeal. The Hon’ble Bench took into cognizance the Order of the Hon’ble Supreme Court the “Suo Moto WP 03/2020 dated 20.03.2020 while considering the condonation of delay. It is a fact that ‘Covid-19’ pandemic was prevalent and in term of the directions issued by the Hon’ble Supreme Court in Miscellaneous Application No.21/2022 in Suo Motu Writ Petition No.3 of 2020, we condone the delay of 595 days and admit the appeal for adjudication on merits. 15. We noted that the facts are exactly identical as in the Assessee’s sister concern M/s. Miracle Reclaim Rubber (Coimbatore) Private Limited, Palakkad in I.T.A No.:519/CHNY/2021 which is adjudicated by us above; wherein :: 12 :: I.T.A. Nos.519 & 518 - 2021 the sale of the land and the building is under dispute and 50% of the share is of the Assessee and that 50% of the share belongs to its sister concern. As the facts are identical and the issue exactly the same, as the sale of the land and building was under dispute for being assessed towards the Long Term Capital Gains and Short Term Capital Gains u/s.50C of the Act, we are taking a consistent view and quash the revision order passed by the PCIT u/s.263 of the Act in this appeal also. 16. In the result, both the appeals of the Assessee in I.T.A No.:519/CHNY/2021 and I.T.A No.:518/CHNY/2021 are allowed. Order pronounced in the court on 13 th July, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अ वाल) (MANOJ KUMAR AGGARWAL) लेखा सद य/ACCOUNTANT MEMBER (महावीर िसंह ) (MAHAVIR SINGH) उपा य /VICE PRESIDENT चे ई/Chennai, दनांक/Dated, the 13 th July, 2022 IA, Sr. PS आदेशकी ितिलिपअ ेिषत/Copy to: 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु (अपील)/CIT(A) 4. आयकरआयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड"फाईल/GF