Shri Yashwant Kalra, UDAIPUR V. ITO, UDAIPUR

ITA 534/JODH/2013

• Counselvise Citation: 53423314 RSA 2013
• Duration Of Justice: 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 25-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: G K GARGIEYA
• Keywords: Capital asset; Application of stay; Cost of acquisition; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER S.A. NO.41/JODH/2013 (IN ITA NO.534/JODH/2013) ASSESSMENT YEAR: 2007-08 SHRI YASHWANT KALRA, VS. INCOME TAX OFFICER, 1-B, SHAKTI NAGAR. WARD-1(4), UDAIPUR. UDAIPUR. (PAN: ACHPK 7781 K). ITA NO.534/JODH/2013 ASSESSMENT YEAR: 2007-08 SHRI YASHWANT KALRA, VS. INCOME TAX OFFICER, 1-B, SHAKTI NAGAR. WARD-1(4), UDAIPUR. UDAIPUR. (PAN: ACHPK 7781 K). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.K. GARGIEYA & SHRI SARVESH BALDI RESPONDENT BY : SHRI N.A. JOSHI, D.R. DATE OF HEARING : 28.11.2013 DATE OF PRONOUNCEMENT : 28.11.2013 ORDER PER HARI OM MARATHA, JUDICIAL MEMBER: BOTH THESE STAY APPLICATION AND APPEAL WERE HEARD T OGETHER AS, INSTEAD OF GRANTING STAY OUT OF TURN, HEARING WAS GRANTED. BO TH PARTIES AGREED TO ARGUE ON APPEAL. 2 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 ITA NO.534/JODH/2013 2. THIS APPEAL OF THE ASSESSEE FOR A.Y. 2007-08 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 15.10.2013. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT F OR A.Y. 2007-08 THE ASSESSEE FILED HIS RETURN OF INCOME ON 31.08.2012 IN COMPLIA NCE TO NOTICE ISSUED UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) WHICH WAS ISSUED ON 27.02.2012 AFTER RECODING REASONS. IN COMPLIANCE, THE ASSESSEE DECLARED A TOTAL INCOME OF RS.1,87,000/- WHICH INCLUDED BUSINESS INC OME OF RS.69,336/- AND INCOME FROM OTHER SOURCES OF RS.1,17,659/-. A SEAR CH AND SEIZURE OPERATION WAS CONDUCTED AT THE OFFICE OF M/S SURYA ESTATE IN WHIC H CERTAIN DOCUMENTS PERTAINING TO THE PARTNERSHIP FIRM NAMELY M/S SHRI GOVERDHAN P LAZA WERE FOUND AND SEIZED. THIS ASSESSEE IS A PARTNER IN THIS FIRM. IT WAS NO TICED THAT THE ASSESSEE HAD CONTRIBUTED A PLOT OF LAND AS HIS SHARE IN THE FIRM DURING THE F.Y. 2006-07. THE VALUE OF THIS PLOT WAS TAKEN AT RS.4,06,62,600/- AN D THE SHARE OF THE ASSESSEE COMES TO RS.1,30,12,032/-. THE ASSESSEE WAS REQUIRED TO FURNISH INFORMATION REGARDING COMPUTATION OF CAPITAL GAINS IN THIS LAND, TO SUBMI T EVIDENCE REGARDING THE COST OF ACQUISITION, TO GIVE DETAILS OF IMMOVEABLE PROPERTY AND DETAILS OF ALL BANK ACCOUNTS. ON THIS LAND THE FIRM WAS CONSTRUCTING C OMMERCIAL COMPLEX. ON 3 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 11.02.2013, AUTHORIZED REPRESENTATIVE OF THE ASSESS EE APPEARED AND THROUGH WRITTEN SUBMISSION MADE A REQUEST FOR A CERTIFIED C OPY OF THE REASONS RECORDED FOR TAKING ACTION UNDER SECTION 148 OF THE ACT. A COPY OF STATEMENT OF SHRI LALIT KUMAR SHARMA WAS ALSO DEMANDED. THE ASSESSEE OBJEC TED TO THE INITIATION OF PROCEEDINGS UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT. HOWEVER, THE A.O. REJECTED ALL THE OBJECTIONS RAISED BY THE ASSE SSEE VIDE ORDER DATED 18.02.1013. IN FACT, THE REASONS RECORDED ARE CONTAINED IN THE APPELLATE ORDER AS WELL AS IN THE LD. CIT(A)S ORDER AND ARE AS UNDER :- SHRI YASHWANT KALRA (ALONG WITH THREE OTHER PERSON S) HAS CONTRIBUTED THEIR PLOT AS THEIR SHARE IN THE PARTNERSHIP FIRM M /S SHRI GOVERDHAN PLAZA DURING F.Y. 2006-07. THE VALUE OF THE PLOT W AS TAKEN AT RS.4,06,62,600/-. THE SHARE OF SHRI YASHWANT KALRA WAS RS.1,30,12,032/-. THE CAPITAL GAIN ARISE OUT OF AB OVE TRANSFER IS LIABLE FOR TAX U/S 45(3). AS PER DATA AVAILABLE ON AST, T HE ASSESSEE HAS NOT FILED HIS RETURN FOR THE A.Y. 2007-08 4. THE A.O. SUPPLIED CERTIFIED COPY OF REASONS AND COPY OF STATEMENT OF SHRI LALIT KUMAR SHARMA. THE STATEMENT OF SHRI LALIT KU MAR SHARMA WAS RECORDED BEING BACK OF THE ASSESSEE AND NO OPPORTUNITY TO CR OSS EXAMINE HIM WAS GIVEN. THE ASSESSEE OBJECTED TO THE REASONS THAT THESE ARE NOT THE REASONS RECORDED BY THE A.O. BY APPLICATION OF HIS MIND AND HAS BEEN ISSUED IN A VERY CASUAL AND SCANTY MANNER AT THE BEHEST OF HIGHER AUTHORITIES. IT WAS OBJECTED THAT THE A.O. HAS NOT RECORDED A FINDING THAT INCOME HAS ESCAPED ASSESSME NT. HE OBJECTED THAT REASSESSMENT DONE ON THE BASIS OF INVESTIGATION WIN G CANNOT BE SUSTAINED IN THE 4 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 EYES OF LAW. THE ASSESSEE WANTED TO CROSS-EXAMINE SHRI LALIT KUMAR SHARMA AND TO THAT EXTENT A REQUEST WAS MADE TO THE A.O. BUT T HE A.O. DID NOT ALLOW. APART FROM OBJECTING ACTION TAKEN UNDER SECTION 147 OF TH E ACT, THE ASSESSEE HAS ALSO OBJECTED THAT HE IS NOT LIABLE FOR CAPITAL GAIN TAX UNDER SECTION 45(3) OF THE ACT. ACCORDING TO THE ASSESSEE, HE IS A MEMBER OF BALUCH ISTAN CO-OPERATIVE HOUSING SOCIETY LIMITED, UDAIPUR AND, THEREFORE, HE COULD N OT SELL THE LAND. ACCORDING TO THE ASSESSEE, COST OF ACQUISITION OF THIS PLOT IS N IL SO HE IS NOT LIABLE FOR ANY CAPITAL GAINS. THE ASSESSEE HAS RELIED ON THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MANOHARSINHJI P. JADEJA REPORTE D IN 281 ITR 19 (GUJ) AND THE ORDER OF ITAT, PUNE BENCH IN THE CASE OF MANOHAR PY ARELAL SADANE VS. ITO, WARD-3(1), DHULE REPORTED IN 138 ITD 250. BUT THE A.O. WAS NOT SATISFIED AND DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND H ELD THAT THE ASSESSEE IS LIABLE FOR CAPITAL GAIN UNDER SECTION 45(3) OF THE ACT. ACCOR DINGLY, THE A.O. COMPUTED THE INCOME OF THE ASSESSEE AS UNDER :- IN VIEW OF FACTUAL AND LEGAL FACTS MENTIONED ABO VE IT IS HELD THAT THE ASSESSEE HAS INCURRED CAPITAL GAIN U/S 45(3) OF THE I.T. ACT. THE CONSIDERATION IN THE HANDS OF THE ASSESSEE IS THE M ARKET RATE AGREED TO BY THE PARTNERS WHICH IN THIS CASE IS RS.1,30,12,032/- . WITHOUT PREJUDICE TO THIS AND ALTERNATIVELY, IT IS ALSO HELD THAT IF AT ANY APPELLATE STAGE IT IS HELD THAT CAPITAL GAIN LIABILITY THE ASSESSEE U/S 4 5(3) OF THE I.T. ACT IS ONLY TO THE EXTENT OF BOOKED AMOUNT I.E. RS.49,93,2 00/- THEN THE REMAINING AMOUNT I.E. RS.80,18,832/- SHOULD BE TREA TED AS UNEXPLAINED MONEY U/S 69A OF THE I.T. ACT. WITH THE ABOVE COMMENTS THE LONG TERM CAPITAL GAI NS U/S 45(3) OF THE I.T. ACT IS COMPUTED AS UNDER :- 5 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 FULL VALUE OF CONSIDERATION FOR THE LAND RS.1,30,12 ,032/- LESS: TOTAL INDEXED COST OF ACQUISITION (AS SUBMITTED BY THE ASSESSEE ON 05.03.2013 AT PAGE NO.33 RS.21,64,230/- LONG TERM CAPITAL GAIN RS.1,08,47,802 (OR SAY) RS.1,08,47,800/- AS THE ASSESSEE HAS NOT DISCLOSED THIS INCOME THE REFORE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT ARE INITI ATED SEPARATELY. THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED S UN DER :- RETURN INCOME AS DECLARED IN THE RETURN FILED IN COMPLIANCE OF 148 RS.1,87,000/- ADD: LONG TERM CAPITAL GAIN AS DISCUSSED ABOVE RS.1,08,47,800/- TOTAL RS.1,10,34,800/- 5. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT(A) WHO HAS ALSO CONFIRMED THE IMPUGNED ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE RECORDS. IT WAS ARGUED BEFORE US BY THE LD. AUTHOR IZED REPRESENTATIVE THAT NO VALID REASONS HAVE BEEN RECORDED AND THE A.O. HAS NOT GIV EN ANY SUCH FINDING THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, REASSESS MENT ORDER FRAMED UNDER SECTION 147 READ WITH SECTION 143(3) OF THE ACT BEC AME INVALID. IT WAS ALSO ARGUED ON MERIT THAT WHEN THERE IS NO COST OF ACQUISITION, NO CAPITAL GAIN CAN BE ARISEN. TO 6 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 SUPPORT HIS CONTENTION, THE LD. AUTHORIZED REPRESEN TATIVE PLACED RELIANCE ON NUMEROUS DECISIONS. ON THE OTHER HAND, LD. DEPARTM ENTAL REPRESENTATION HAS RELIED ON THE ORDER OF LD. CIT(A) AND THAT OF THE A .O. TO SUPPORT THEIR FINDINGS. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT BOTH THE A.O. AND THE LD. CIT(A) HAVE INCORPORATED THE REASONS FO R REOPENING IN THEIR RESPECTIVE ORDERS. THE A.O. HAS NOT NOT SHOW-CAUSED THE ASSES SEE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. THEREFORE, THE REO PENING ON THE BASIS OF SOME OTHER PARTYS FINDINGS CANNOT BE SAID TO BE A VALID FINDING IN THE EYES OF LAW. THE REASONS FOR REOPENING SEEM TO BE SCANTY AND CASUAL AND NOT AS PER THE PROVISIONS OF SECTION 48 OF THE ACT. THE FINDING GIVEN BY ANY OT HER AUTHORITY IN THIRD PARTYS CASE WITHOUT ESTABLISHING THE NEXUS AND REASONS TO COME A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, SUCH TYPE OF PROCEEDINGS CANNOT BE ENDORSED. WE, THEREFORE, HOLD THAT ACTION INITIATED BY THE A.O. UNDER SECTIO N 147 READ WITH SECTION 148 OF THE ACT IS NOT VALID ONE. THEREFORE, WE ALLOW LEGAL GR OUND AND QUASH THE REASSESSMENT PROCEEDINGS. 8. HOWEVER, IT WOULD BE IN THE FITNESS OF THINGS TO SETTLE THE ISSUE FOR GOOD IN CASE WE DECIDE THE ISSUE INVOLVED ON MERIT OF THE C ASE IN THIS APPEAL. IT WAS ARGUED THAT THERE IS NO COST OF ACQUISITION IN THE LAND. THEREFORE, NO CAPITAL GAIN IS 7 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 LEVIABLE. THE A.O. WHILE SUBMITTING HIS REMAND REP ORT HAS MENTIONED AT PAGE NO.4 BY RELYING ON THE DECISION OF THE HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS. MANOHARSINHJI P. JADEJA REPORTED IN 281 ITR 19 (GUJ ) AND THE DECISION OF ITAT, PUNE BENCH IN THE CASE OF MANOHAR PYARELAL SADANE V S. ITO, WARD-3(1), DHULE REPORTED IN 138 ITD 250. THE HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER :- HELD,THAT THE IMPORTANCE OF THE DATE OF ACQUISITIO N CANNOT BE LOST SIGHT TAKING INTO CONSIDERATION THE SCHEME OF THE ACT. U NDER THE ACT BOTH SHORT TERM CAPITAL GAINS AND LONG-TERM CAPITAL GAIN S ARE CHARGEABLE TO TAX BUT THE TREATMENT THEREOF IS DIFFERENT. IN THE PRESENT CASE, ADMITTEDLY, THE ASSETS HAS BEEN ACQUIRED BY A MODE OF ACQUISITI ON SPECIFIED IN SECTION 49(1)(III)(A) OF THE ACT AND THUS THE ASSET IN QUESTION WAS A LONG- TERM CAPITAL ASSET BUT NEITHER THE COST NOR THE DAT E OF ACQUISITION WERE ASCERTAINABLE. THE INCOME TAX AUTHORITIES WERE NOT RIGHT IN WORKING OUT THE CAPITAL GAINS AT RS.41,11,414/- SO AS TO BRING THE SAME TO TAX UNDER THE HEAD CAPITAL GAINS. 9. THE PIECE OF LAND WAS ALREADY IN THE NAME OF FAT HER OF THE ASSESSEE BEING MIGRATED FROM PAKISTAN AT THE RELEVANT POINT OF TIM E. THIS FACT IS NOT IN DISPUTE AT ALL. THUS, THE LAND IN QUESTION WAS ACQUIRED BY TH E FATHER AND THE ASSESSEE FREE OF COST, THEREFORE, THERE IS NO QUESTION OF CALCULATIO N OF CAPITAL GAIN ON TRANSFER OF SUCH LAND WHICH DOES NOT HAVE A COST IN THE HANDS O F THE VENDOR. THEREFORE, THE ENTIRE AMOUNT IS NOT LIABLE FOR CAPITAL GAIN TAX. THERE ARE NUMEROUS DECISIONS IN THIS DIRECTION WHICH ARE NOT REQUIRED TO BE REPEATE D. ACCORDINGLY, WE ORDER TO DELETE THE IMPUGNED ADDITION ON MERIT. 10. IN THE RESULT, APPEAL STANDS ALLOWED. 8 S.A. NO.41 & ITA NO.534/JODH/2013 A.Y. 2007-08 S.A. NO.41/JODH/2013 11. THE S.A. FILED BY THE ASSESSEE BECOMES INFRUCTU OUS IN VIEW OF THE FACT THAT WE ALREADY DECIDED THE APPEAL. THE S.A. IS, THEREF ORE, DISMISSED AS INFRUCTUOUS. 12. TO SUM UP, THE S.A. FILED BY THE ASSESSEE IS DI SMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2013) SD/- SD/- (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH NOVEMBER, 2013 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, JODHPUR