SURAKASHA DEVELOPERS LTD, MUMBAI V. CIT 7, MUMBAI

ITA 5381/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84530 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 08-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2013
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY MEHTA SHRI KISHAN VYAS
• Keywords: Capital asset; Revision of order; Earning of tax free income; Fair market value; Capital receipt
• Section: 143(3); 142(1); 14A; 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.5381/MUM/2013 ASSESSMENT YEAR: -2009-10 M/S SURAKSHA DEVELOPERS LTD. 301, MANEK BHUVAN, PLOT NO. 68, HINDU COLONY, DADAR (E), MUMBAI- 400014. VS.` THE COMMISSIONER OF INCOME TAX 7, MUMBAI. PAN:- AAICS4530L APPELLANT RESPONDENT ITA NO.5382/MUM/2013 ASSESSMENT YEAR: -2009-10 M/S NISHA CAPITAL SERVICES LTD, 3, NARAYAN BUILDING, 23, LN ROAD, HINDU COLONY, DADAR (E) MUMBAI 400014. VS.` THE COMMISSIONER OF INCOME TAX 7, MUMBAI. PAN:- AABCN8266H APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE TWO RELATED ASSESSEES ARE DIRECTED AGAINST TWO SEPARATE REVISION ORDERS OF CIT PASSED U/S 263 OF T HE INCOME TAX ACT DATED 24.5.2013 AND 14.6.2013 RESPECTIVELY FOR THE A.Y. 2 009-10. THE FACTS LEADING TO THE INVOCATION OF SECTION 263 AS WELL AS ISSUES INVOLVE D IN BOTH THE CASES ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE TWO A PPEALS WERE HEARD TOGETHER AND ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SHRI KISHAN VYAS DATE OF HEARING 09.12.2014 DATE OF PRONOUNCEMENT 18.12.2014 ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 2 | P A G E ARE BEING DISPOSED OFF BY THIS SINGLE CONSOLIDATED ORDER. THE GROUNDS RAISED IN THESE TWO APPEALS ARE IDENTICAL EXCEPT THE AMOUNTS INVOLV ED, THEREFORE, WE TAKE THE APPEAL IN CASE OF M/S NISHA CAPITAL SERVICES LTD, MUMBAI I N ITA NO. 5382/MUM/2013 AS LEAD MATTER FOR THE PURPOSE OF RECORDING THE FACTS AS WELL AS DECIDING THE GROUNDS RAISED. THE GROUNDS RAISED IN THIS APPEAL ARE AS UN DER:- BEING AGGRIEVED BY THE ORDER PASSED UNDER SECTION 263 BY THE COMMISSIONER OF INCOME- TAX - 7, THIS APPEAL PETITION IS SUBMITT ED ON THE FOLLOWING GROUNDS WHICH MAY CONSIDERED WITHOUT PREJUDICE TO ONE ANOTH ER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT - 7 ERRED IN ENHANCING THE ASSESSMENT MADE UNDER SECT ION 143(3) BY HOLDING U/S. 263 THAT AS THE ASSESSMENT ORDER CONTA INS ERROR OF LAW AND THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACTS IN CORRECT PERSPECTIVE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT - 7 ERRED IN TREATING AMOUNT OF RS. 29,21,67,6501- RE CEIVED ON RETIREMENT FROM THE PARTNERSHIP FIRMS (VIZ RS 22,90,59,118 FRO M MIS FINE DEVELOPERS AND RS 6,31,20,000 FROM M/S MAHUL CONSTRUCTION CORP ORATION) AS SHORT TERM CAPITAL GAIN BY HOLDING THE SAME AS LUMPSUM CO NSIDERATION RECEIVED BY THE ASSESSEE ON TRANSFER OF ITS RIGHTS IN CAPITA L ASSETS OF THE FIRM IN FAVOUR OF THE CONTINUING PARTNERS. 2. BOTH THE ASSESSES BEFORE US, WERE THE PARTNER AL ONG WITH THREE OTHER PERSONS IN M/S FINE DEVELOPERS WITH 12.5% CAPITAL CONTRIBU TION AND 10% OF SHARE OF PROFIT EACH. THE DETAILS OF PARTNERS AND THEIR SHARE OF PR OFIT AND LOSS ARE AS UNDER:- SR. NO. NAME OF THE PARTNER SHARE OF PROFIT/LOSS VIDE DEED OF PARTNERSHIP DATED 25.11.2005 DEED OF PARTNERSHIP DATED 6.7.2007 (I) THE APPELLANT 10% 10% (II) SAPPHIRE LAND DEVELOPERS 60% 10% (III) VISION FINSTOCK P. LTD. 20% 20% (IV) SURAKSHA DEVELOPERS P. LTD. 10% 10% (V) HOUSING DEVELOPMENT AND INFRASTRUCTURE LTD. (HDIL) - 50% TOTAL 100% 100% ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 3 | P A G E 3. M/S FINE DEVELOPERS OWN A PLOT OF LAND WHICH WAS PURCHASED FOR A CONSIDERATION OF RS. 28 CRORE. THE ASSESSEE, (M/S NISHA CAPITAL SERVICES LTD) WAS ALSO PARTNER IN M/S MAHUL CONSTRUCTION CORPORATION HAVING 10% OF SHARE OF PROFIT ALONG WITH SIX OTHER PARTNERS. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10, THE ASSESSEE RETIRED FROM THESE TWO P ARTNERSHIP FIRMS VIDE DEEDS OF RETIREMENT CUM RECONSTITUTION DATED 27.5.2008. BOTH THE DEEDS OF RETIREMENT CUM RECONSTITUTION WERE DRAFTED AND CONSTRUCTED IDENTIC ALLY. AS PER THE DEEDS OF RETIREMENT, THE ASSESSEE RECEIVED A SUM OF RS. 22,9 0,58,018/- FROM M/S FINE DEVELOPERS AND RS. 6,31,20,000/- FROM M/S MAHUL CON STRUCTION CORPORATION. THERE AMOUNTS WERE RECEIVED BY THE ASSESSEE AS LUMP SUMP ON ACCOUNT OF REVALUATION OF ASSETS OF THE FIRMS BEING PLOT OF LAND OWNED BY THE PARTNERSHIP FIRM. THE ASSESSEE HAS TREATED THESE RECEIPTS AS CAPITAL RECEIPTS AND CRED ITED IT TO ITS BALANCE SHEET UNDER CAPITAL RESERVES AND CLAIMED TO BE NOT LIABLE TO TA X. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. UNDER CONSIDERATION ON 29.09.20 09, DECLARING TOTAL LOSS OF RS. 11,468/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) O N 26.12.2011. THEREAFTER, THE CIT FOUND FROM THE RECORD THAT THE ASSESSING OFFICE R ACCEPTED THE CONTENTION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE PARTNERSHI P FIRMS ON RETIREMENT WAS NOT TAXABLE. ACCORDINGLY, THE CIT FOUND THAT THE ORDER DATED 26.12.2011 OF THE ASSESSING OFFICER PASSED U/S 143(3) OF THE INCOME TAX ACT., I S ERRONEOUS AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE. A SHOW CAUSE NOTICE U/ S 263 DATED 4.4.2013 AND 14.5.2013 WERE ISSUED TO THE ASSESSEE, WHEREBY, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER DATED 26.12.20 11, SHOULD NOT BE CANCELLED/REVISED U/S 263 OF THE INCOME TAX ACT. TH E ASSESSEE SUBMITTED ITS REPLY DATED 25.4.2013 AND 27.5.2013 ALONG WITH OTHER DETA ILS. THE ASSESSEE CONTENDED BEFORE THE CIT THAT THE ASSESSING OFFICER HAD EXAMI NED THE ISSUE OF NON TAXABILITY OF THE RECEIPT ON RETIREMENT FROM THE FIRMS AND AFTER CONSIDERING THE SUBMISSIONS THE ASSESSMENT WAS COMPLETED. SINCE THE VIEW TAKEN BY T HE ASSESSING OFFICER IS JUSTIFIED IN THE LIGHT OF VARIOUS DECISION AND FURTHER ON THI S ISSUE, THERE ARE MORE THAN ONE ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 4 | P A G E VIEW IS POSSIBLE, THEREFORE, THE CIT CANNOT SEEK RE VISION OF ORDER U/S 263 OF THE ACT. THE CIT DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE AND HELD WHILE PASSING THE IMPUGNED ORDER THAT THE AMOUNT RECEIVED BY THE ASSE SSEE FROM THE PARTNERSHIP FIRMS ON ACCOUNT OF REVALUATION OF ASSETS IS CHARGEABLE T O TAX ON THE REASONING THAT IT BEING A COMPENSATION IN LIEU OF RELINQUISHMENT OF THE ASS ESSEES RIGHT IN THE ASSET AND BUSINESS OF THE PARTNERSHIP FIRM. THE CIT SUPPORTED ITS FINDING BY CITING VARIOUS DECISIONS WHICH WE WILL DISCUSS WHILE CONSIDERING T HE CONTENTION OF THE PARTIES AT APPROPRIATE STAGE OF OUR FINDING. 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS NOT OFF ERED THIS AMOUNT TO TAX AND IT WAS TAKEN TO THE RESERVE AND SURPLUS IN THE BALANCE SHE ET. HE REFERRED THE SCHEDULE-B GIVING DETAILS OF RESERVE AND SURPLUS AND SUBMITTED THAT THIS AMOUNT WAS ADDED DURING THE YEAR. FURTHER IN THE NOTES ON ACCOUNTS, THE ASSESSEE HAS MADE CLEAR AND EXPLAINED THAT DURING THE YEAR, THE ASSESSEE HAS RE TIRED FROM THE PARTNERSHIP FIRMS IN QUESTION W.E.F 25.07.2008 AND THE ADDITION TO THE C APITAL RESERVE CONSIST OF ASSESSEES SHARE IN THE REVALUATION OF ASSET BELONGING TO FIRM S IN WHICH THE ASSESSEE WAS PARTNER. THE LD. AUTHORIZED REPRESENTATIVE THEN RE FERRED THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 142(1) ALONG WITH QUESTIONNAI RE AND SUBMITTED THAT THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF COMPENSATION RECEIVED AND THE SAME IS CREDITED TO THE CAPITAL ACCOUNT AND IN THE BALANCE SHEET UNDER SCHEDULE B-6. THE ASSESSING OFFICER ALSO ASKED THE ASSESSEE TO FILE THE COPY OF LEDGER ACCOUNT IN THE BOOKS OF M/S FINE DEVELOPERS AND MAH UL CONSTRUCTION CORPORATION AS WELL AS J.P. REALTORS APART FROM COPY OF PARTNERSHI P DEED, RETIREMENT DEED AND AMENDED DEED WITH ALL OTHER FIRMS. THUS IN ORDER TO EXAMINE THE CLAIM OF THE ASSESSEE THAT THE COMPENSATION RECEIVED FROM FIRMS ARE NOT TAXABLE. THE ASSESSING OFFICER CALLED FOR RELEVANT RECORD AND EXPLANATION. THE ASSESSEE FILED ALL THE DETAILS REQUISITIONED BY THE ASSESSING OFFICER VIDE ITS REP LY DATED 11.07.2011. THE ASSESSEE FURNISHED THE DETAILS AS WELL AS NOTE ON AMOUNTS R EGARDING CREDITED TO THE CAPITAL RESERVE, COPY OF LEDGER ACCOUNTS OF THE FIRMS ALONG WITH COPY OF PARTNERSHIP DEED, ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 5 | P A G E RETIREMENT DEED AND AMENDED PARTNERSHIP DEED. THE L D. AUTHORIZED REPRESENTATIVE HAS THEN POINTED OUT THAT VIDE LETTER DATED 23.12.2 011, THE ASSESSEE HAS AGAIN SUBMITTED A DETAILED REPLY ON THE QUERY OF TAXABILI TY /NON TAXABILITY OF THE AMOUNT RECEIVED FROM THE PARTNERSHIP FIRMS. IN THE SAID RE PLY, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ITO VS. SMT. PARU DAVE ( 110 ITD 410) (MUM), WHEREIN , IT WAS HELD THAT THE REVALUATION OF ASSET S BY PARTNERSHIP FIRM AND CREDIT OF REVALUED AMOUNT TO CAPITAL ACCOUNTS OF PA RTNERS IN THEIR RESPECTIVE SHARING RATIO DOES NOT ENTAIL TRANSFER WITHIN MEANING OF SE CTION 2(47) OF THE INCOME TAX ACT. IT WAS ALSO HELD THAT THE INTRODUCTION OF NEW PARTN ERS TO A PARTNERSHIP FIRM OWNING IMMOVABLE ASSETS AND CONSEQUENT REDUCTION IN THE SH ARING RATIO OF PRESENT PARTNERS DOES NOT ENTAIL ANY RELINQUISHMENT OF THEIR RIGHTS IN THE PARTNERSHIP PROPERTY. THE ASSESSEE ALSO CONTENDED IN THE SAID REPLY THAT EVEN IF IT IS TREATED AS TRANSFER, IT IS TAXABLE IN THE HANDS OF THE FIRMS U/S 45(4) OF THE INCOME TAX ACT AND NOT IN THE HANDS OF THE PARTNERS. IN SUPPORT OF THIS ARGUMENT, THE ASSESSEE RELIED UPON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CAS E OF CIT VS. A.N. NAIK ASSOCIATES (265 ITR 346) AS WELL AS THE DECISION OF HONBLE K ARNATAKA HIGH COURT IN THE CASE OF CIT VS. GURUNATH TALKIES26 DTR 214) . THE ASSESSING OFFICER AFTER CONSIDERING THE RELEVANT DETAILS AND DOCUMENTS/EVIDENCES FILED BY THE ASSESSEE AS WELL AS THE CONTENTIONS AND CASE LAWS RELIED UPON BY THE ASSESS EE ACCEPTED THE CLAIM THAT THE AMOUNT RECEIVED FROM THE PARTNERSHIP FIRMS IS NOT T AXABLE. THUS THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE IS SUE WAS DULY EXAMINED BY THE ASSESSING OFFICER AND THEREAFTER HE TOOK A VIEW WHI CH IS FULLY JUSTIFIED AS PER THE DECISIONS RELIED UPON BY THE ASSESSEE. WHEN THE ASS ESSING OFFICER HAS TAKEN A VIEW AFTER CONDUCTING A PROPER ENQUIRY AND THE VIEW TAKE N BY THE ASSESSING OFFICER IS A POSSIBLE VIEW, THEN THE CIT IS NOT PERMITTED TO TAK E A DIFFERENCE VIEW MERELY ON THE REASON THAT HE DID NOT AGREE WITH THE VIEW TAKE N BY THE ASSESSING OFFICER. THE LD. AUTHORIZED REPRESENTATIVE HAS FURTHER CONTENDED THAT THERE WAS NO OTHER ISSUE WHICH WAS TO BE EXAMINED BY THE ASSESSING OFFICER E XCEPT THE COMPENSATION RECEIVED BY THE ASSESSEE FROM PARTNERSHIP FIRMS. TH EREFORE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS CONDUCTED EXHAUSTIVE ENQUIRIE S AND AFTER SATISFYING HIMSELF ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 6 | P A G E ABOUT THE CLAIM OF THE ASSESSEE, ACCEPTED THE SAME. HE HAS REFERRED THE SHOW CAUSE NOTICES AS WELL AS IMPUGNED ORDER AND SUBMITTED THA T THE CIT HAS ALSO NOT RAISED THE QUESTION ABOUT THE ENQUIRY CONDUCTED BY THE ASS ESSING OFFICER. THUS THE CIT HAS NO JURISDICTION TO REVISE THE ORDER WHEN THE AS SESSING OFFICER HAS EXAMINED THE ENTIRE FACTS ON THE ISSUE INVOLVED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS;- (I) SPECTRA SHARES & SCRIPTS VS. CIT (354 ITR 35)(AP) (II) MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83) (III) C IT VS. MAX INDIA ( 295 ITR 282) (IV) CIT VS. GABRIEL INDIA LTD. (203 ITR 108) (BOM.) (V) CIT VS. VIKAS POLYMERS (236 CTR 476) (DEL.) (VI) INFOSYS TECHNOLOGIES LTD. VS. JCIT ( 287 ITR (AT) 2 11)(BANG.) (VII) MAXPAK INVESTMENTS LTD. VS. ACIT ( 13 SOT 670)(DEL. ) (VIII) INDIAN OIL CORPORATION LTD. VS. CIT IN ITA NO. 455/MUM/2012 ORDER DATED 19-02-2014. 5. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE CIT HAS RELIED UPON THE DECISION IN THE CASE OF N.A. MODI VS. CIT ( 162 ITR 420), HOWEVER, THE HON'BLE HIGH COURT HAS FOLLOWED ITS EARLIER JUD GMENT IN THE CASE OF CIT VS. TRIBHUVANDAS G. PATEL ( 115 ITR 95) AND CIT VS. H.R. ASLOT (115 ITR 255). THE JUDGMENT IN THE CASE OF CIT VS. TRIBHUVANDAS G. PATE L (SUPRA) HAS BEEN OVERRULED BY THE HON'BLE SUPREME COURT IN (236 ITR 515). THEREFORE, IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT, THE DECISIONS RELIED UPON BY THE CIT ARE NO MORE A GOOD LAW. HE HAS FURTHER SUBMITTED THAT THE DECISIONS WHICH W ERE RELIED UPON BY THE CIT HAS BEEN DULY CONSIDERED BY THE HON'BLE HIGH COURT IN A RECENT DECISION IN THE CASE OF PRASHANT S. JOSHI VS. ITO (324 ITR 154). THE HON'BLE HIGH COURT AFTER CONSIDERING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS. TRIBHUVANDAS G. PATEL (SUPRA) AS WELL AS THE DECISION IN THE CASE OF CIT VS. MOHANBHAI PAMABHAI (91 ITR 393) AND OTHER JUDGMENTS, HELD THAT THERE WAS NO BASIS F OR THE ASSESSING OFFICER TO FORM AN OPINION THAT THE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 ON ACCOUNT OF THE AMOUNT REC EIVED BY THE ASSESSEE FROM THE ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 7 | P A G E PARTNERSHIP FIRMS ON HIS RETIREMENT. THUS THE LD. A UTHORIZED REPRESENTATIVE HAS SUBMITTED THAT AFTER THE JUDGMENT IN THE CASE OF PR ASHANT S. JOSHI VS. ITO (SUPRA), THE ALLEGED DICHOTOMY NO LONGER EXISTS. 6. AS REGARDS THE DECISION OF PUNE BENCHES OF THIS TRIBUNAL IN THE CASE OF SHEVANTIBHAI C. MEHTA VS. ITO (83 TTJ 542), WHICH WAS BASED ON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF N.A. MODI VS. CIT (SUPRA). THE SAID DECISION WAS PRIOR TO THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF PRASHANT S. JOSHI (SUPRA). HE HAS FURTHER SUBMITTED THAT IN THE CASE OF RIYAZ SHAIKH VS. ITO, THE PUNE BENCHES OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE BY HOLDING THAT THE COMPENSATIONS RECEIVED BY THE ASSESSEE ON RETIREMENT FROM THE PARTNERSHIP FIRM IS NOT TAXABLE. SAID DECISION OF THE TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE HIGH COURT VIDE ORDER DATED 26.02.2013 IN ITA NO. 1969 OF 2011. THEREFORE, THE VIEW OF THE ASSESSING OFFICER IN ACCEPTING THE CLAIM OF THE ASSESSEE IS PROPER AND IN ACCORDANCE WITH LAW AS SUPPORTED BY THE VARIOUS JUD GMENTS REFERRED ABOVE. THE LD. AUTHORIZED REPRESENTATIVE HAS FURTHER CONTENDED THA T EVEN, OTHERWISE, THE VIEW TAKEN BY THE ASSESSING OFFICER IS NOT ABSOLUTELY CO NTRARY TO LAW OR INVALID, THEREFORE, EVEN ON A DEBATABLE ISSUE IF THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW THEN THE CIT HAS NO JURISDICTION TO REVISE THE ORDER MERELY ON THE GROUND THAT HE DID NOT AGREE WITH THE VIEW OF ASSESSING OFFICER. THE LD. AUTHORI ZED REPRESENTATIVE HAS POINTED OUT THAT APART FROM THE TWO ASSESSEE IN THE PRESENT APPEALS, IN THE CASE OF THIRD PARTNER M/S VISION FINSTOCK PVT. LTD., WHICH WAS AL SO RETIRED ALONG WITH THESE TWO ASSESSES, THE ASSESSING OFFICER ASSESSED THE AMOUNT RECEIVED FROM THE PARTNERSHIP FIRM TO TAX. HOWEVER, ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE BY ASSESSING OFFICER BY HOLDING THAT THE COMPENSATION RECEIVED O N RETIREMENT IS NOT TAXABLE. THE DEPARTMENT HAS FILED THE APPEAL BEFORE THE TRIBUNAL WHICH IS PENDING. THUS THERE IS NO DOUBT ABOUT THE FACT THAT THERE ARE TWO POSSIBLE VIEWS ON THE ISSUE OF TAXABILITY OF THE AMOUNT IN QUESTION AND THE ASSESSING OFFICER HA S TAKEN ONE OF THE POSSIBLE VIEWS AND CONSEQUENTLY, THE COMMISSIONER CANNOT INVOKE TH E REVISIONARY POWERS U/S 263. ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 8 | P A G E 7. THE NEXT CONTENTION OF THE LD. AUTHORIZED REPRES ENTATIVE IS THAT THERE IS NO TRANSFER OF ANY RIGHT BY WAY OF ASSIGNMENT IN FAVOU R OF THE CONTINUING PARTNERS. HE HAS SUBMITTED THAT THE ASSESSEE HAS MERELY RETIRED FROM THE PARTNERSHIP FIRM AND RECEIVED THE AMOUNT FROM THE PARTNERSHIP FIRMS AS I T WAS REFLECTED IN THE BOOKS OF ACCOUNTS PARTICULARLY IN THE CAPITAL ACCOUNT OF THE ASSESSEE, THEREFORE, THE ASSESSEE RECEIVED THE AMOUNT WHICH WAS DUE TO THE ASSESSEE A S HIS RIGHT OR INTEREST IN THE PARTNERSHIP AND ITS ASSET AND NOT IN LIEU OF ASSIG NMENT OF ANY RIGHT OR ASSET IN FAVOUR OF THE CONTINUING PARTNER. HE HAS REFERRED THE VARI OUS CLAUSES OF RETIREMENT DEED AND SUBMITTED THAT IT IS A CASE OF SIMPLE RETIREMENT FR OM PARTNERSHIP FIRM WITHOUT ASSIGNING ANY RIGHT IN FAVOUR OF THE CONTINUING PAR TNERS. THE CONTINUING PARTNERS WOULD HAVE ABSOLUTE RIGHT OVER THE BUSINESS OR ASSE T OF THE PARTNERSHIP FIRM AND NOT DEPENDENT UPON ANY ASSIGNMENT OF RIGHT BY THE RETIR ING PARTNERS IN FAVOUR OF THE INDIVIDUAL CONTINUING PARTNERS. THUS THE LD. AUTHOR IZED REPRESENTATIVE HAS SUBMITTED THAT THE RETIREMENT FROM THE PARTNERSHIP FIRM AND RECEIVING THE AMOUNT WOULD NOT AMOUNT TO ASSIGNMENT OF ANY RIGHT IN RESP ECT OF THE ASSET OF THE PARTNERSHIP FIRM IN FAVOUR OF THE CONTINUING PARTNE RS. 8. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS OVERLOOKED THE FACT AND HAS NOT CONDUCTED A PROPER ENQUIRY, THEREFORE, IT IS CASE OF NON APPLICATION OF MIND. SHE HAS RELIED UPON THE JU DGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF P.V. SREENIJIN VS. CIT [2014] 47 TAXMANN.COM 61 (KE RALA) AND SUBMITTED THAT WHEN THE ENTIRE MATERIAL AVAILABLE W ITH THE DEPARTMENT WAS NOT CONSIDERED BY THE ASSESSING OFFICER THEN IT WAS ERR ONEOUS APPROACH ON THE PART OF THE ASSESSING OFFICER RESULTING IN PREJUDICE TO THE REVENUE. CONSEQUENTLY, THE CIT HAS THE POWER TO REVISE SUCH ERRONEOUS ORDERS. SHE HAS FURTHER CONTENDED THAT RIGHT OF THE PARTNERS IN THE PARTNERSHIP FIRM IS A CAPITAL A SSET AND ON HIS RETIREMENT THE PARTNER IS TRANSFERRING THE CAPITAL ASSET IN FAVOUR OF THE CONTINUING PARTNERS. THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE MODE OF RETIREMENT IN THE CASE OF THE ASSESSEE. SHE HAS REFERRED PARA 2 OF THE DEED OF RE TIREMENT AND SUBMITTED THAT THE RETIRING PARTNER CONVEYED THAT THE CONTINUING PARTN ER SHALL FOREVER BE ENTITLED IN ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 9 | P A G E SHARE, RIGHT, TITLE AND INTEREST OF THE SAID BUSINE SS OF THE ERSTWHILE PARTNERSHIP FIRM TOGETHER WITH THE BENEFITS OF ALL CONTRACTS, LICENS ES , AGREEMENTS ETC., THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT A PPLYING HIS MIND ON THE CRUCIAL FACTS OF THE CASE, THEREFORE, THE CIT IS JUSTIFIED IN INVOKING THE REVISIONARY POWERS U/S 263. SHE HAS REFERRED PARA 15(E) OF THE IMPUGNED OR DER AND SUBMITTED THAT IN THE CASE OF FIRM M/S FINE DEVELOPERS, THE TRIBUNAL HAS HELD THAT THE RETIRING PARTNERS HAS RELINQUISHED THEIR RIGHT IN THE ASSET IN THE FIRM A ND IN LIEU OF THAT THE FIRM HAS PAID THE RETIREMENT MONEY LYING IN THEIR CAPITAL ACCOUNT . OBVIOUSLY, ASSESSEE FIRM HAD NOT TRANSFERRED ANY RIGHT IN CAPITAL ASSET TO THE RETIR ING PARTNERS RATHER IT IS THE RETIRING PARTNERS WHO HAVE TRANSFERRED THE RIGHTS IN CAPITAL ASSETS IN FAVOUR OF THE CONTINUING PARTNERS. THEREFORE, IT WAS OBSERVED THAT THAT IF T HE CAPITAL GAIN HAS TO BE TAXED, IT HAS TO BE IN THE HANDS OF THE PARTNERS AND NOT IN THE C ASE OF ASSESSEES FIRM. SHE HAS RELIED UPON THE VARIOUS DECISIONS AS RELIED UPON BY THE CI T ALONG WITH THE DECISION OF THIS TRIBUNAL IN THE CASE OF SUDHAKAR SHETTY VS. ASST. CIT (130 ITD 197) . 9. IN REBUTTAL, THE LD. AUTHORIZED REPRESENTATIVE H AS REFERRED THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF DIT VS. JYOTI FOUNDATION (357 ITR 388) AND SUBMITTED THAT IN CASE WHERE THERE IS AN INADEQ UATE ENQUIRY BUT NOT LACK OF ENQUIRY, THE COMMISSIONER MUST RECORD A FINDING IN HIS ORDER THAT THE ENQUIRY MADE BY ASSESSING OFFICER IS ERRONEOUS. THE LD. AUTHORIZ ED REPRESENTATIVE HAS SUBMITTED THAT IN VIEW OF THE SUBSEQUENT JUDICIAL PRONOUNCEME NTS AND EVEN IN THE CASE OF SUDHAKAR SHETTY VS. ASST. CIT (SUPRA), THE HON'BLE HIGH COURT HAS ALREADY ADMITTED THE APPEAL AND ALSO GRANTED INTERIM RELIEF BY STAYI NG THE DEMAND VIDE ORDER DATED 16.01.2012. THE RELIANCE BY THE DEPARTMENT ON THE S AID JUDGMENT IS MISPLACED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. THE ASSESSMENT IN THESE CASES WERE COMPLETED U/S 14 3(3). WE FIND FROM THE ASSESSMENT PROCEEDINGS THAT THE ASSESSING OFFICER I SSUE A NOTICE U/S 142(1) AND DIRECTED THE ASSESSEE TO COMPLY WITH THE NOTICE ON 12.07.2011 AT 3.30 PM BEFORE THE ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 10 | P A G E ASSESSING OFFICER. AS PER THE ANNEXURE OF NOTICE U/ S 142(1), THE ASSESSING OFFICER RAISED FOLLOWING QUERIES.:- A) PLEASE FURNISH THE DETAILS OF COMPENSATION RECEIVED AND THE SAME IS CREDITED THE CAPITAL RESERVE A/C IN THE BALANCE SHE ET UNDER THE SCHEDULE B-6 OF J. B) COPY OF YOUR LEDGER ACCOUNT IN THE BOOKS OF M/S FIN E DEVELOPERS, M/S MAHUL CONSTRUCTION CORPORATION AND M/S J.P. REALTOR S FOR F.Y. 2008- 09. C) DETAILS OF INVESTMENT MADE DURING F.Y. 2008/09 WITH SOURCE THEREOF ALONG WITH DOCUMENTARY EVIDENCE. D) DETAILS OF LOAN AND ADVANCES ALONG WITH THE NAMES & ADDRESSES OF PARTIES. E) COPY OF PARTNERSHIP DEED, RETIREMENT DEED & AMENDED PARTNERSHIP DEED WITH ALL THE FIRMS. F) LOAN CONFIRMATIONS INCLUDING SQUARED UP LOANS. G) DETAILS OF EXEMPT INCOME AND DISALLOWABLE EXPENSES U/S 14A R.W.R 8D. H) COPY OF LEDGER A/C IN THE BOOKS OF ALL SUBSIDIARY C OMPANIES FOR F.Y. 2008/09/ I) DETAILS OF MOVABLE & IMMOVABLE ASSETS, BANK A/C ETC . 11. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED I TS REPLY DATED 11.7.2011 AND FURNISHED ALL THE REQUISITE DETAILS AND RECORDS AS WELL AS THE SUBMISSIONS. THE ASSESSEE HAS SUBMITTED A DETAILED NOTE ON THE BACKG ROUND OF THE ASSESSEE AS A PARTNER OF THE PARTNERSHIP FIRM IN QUESTION AS UNDE R:- BACKGROUND [1] THE COMPANY WAS INCORPORATED IN THE YEAR 1996. THE REGISTERED OFFICE IS AT 3, NARAYAN BUILDING, 23, LN. ROAD, DADAR (E), MURNBAI -400 014. AND THE PRESENT DIRECTORS ARE SUDHIR VALIA, RAKSHA VALIA AND GAURAN G PAREKH. [2] DURING THE FINANCIAL YEAR 2005-06, THE COMPANY ENTERED INTO PARTNERSHIP IN THE FIRMS NAMELY M/S MAHUL CONSTRUCTION CORPORATION , M/S J. P. CORPORATION AND DEVELOPERS. FACTS RELATING TO RS. 29.22 CRORES ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 11 | P A G E ' DURING THE YEAR UNDER CONSIDERATION I.E. AS ON 1S T' APRIL, 2008, TWO PARTNERSHN FIRMS NAMELY M/S FINE DEVELOPERS AND M/S MAHUL CONS TRUCTION CORPORATION, VARIOUS COMMERCIAL REASONS, REVALUED THEIR BUSINESS ASSETS. ACCORDINGLY, THE FIRMS MADE NECESSARY ACCOUNTING ENTRIES IN THEIR BO OKS OF ACCOUNTS BY CREDITING RESPECTIVE PARTNERS CAPITAL ACCOUNTS. BASED ON THAT , THE ASSESSEE COMPANY ALSO MADE CORRESPONDING ACCOUNTING ENTRIES IN ITS BOOKS OF ACCOUNTS AS ON 01.04.2008 BY DEBITING THE FIRM M/S FINE DEVELOPERS AND M/S MA HUL CONSTRUCTION CORPORATION AND CREDITING CAPITAL RESERVE. 12. APART FROM ABOVE SUBMISSIONS, THE ASSESSEE AGAI N FILED A LETTER DATED 23.12.2011, WHEREIN, THE ASSESSEE MADE A DETAILED S UBMISSION ON THE ISSUE AND SUPPORTED ITS CONTENTION BY THE DECISION OF THIS TR IBUNAL AS WELL AS THE DECISION OF HON'BLE HIGH COURT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 26.12.2011 BY RECORDING THE FACT THAT IN RESPONSE T O NOTICE ISSUED U/S 142(1), SHRI NILESH MEHTA, CHARTERED ACCOUNTANT, AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE ATTENDED AND FURNISHED THE DETAILS FROM TIME TO TIM E AND ACCORDINGLY DISCUSSED THE CASE. THE ASSESSING OFFICER HAS FURTHER RECORDE D AS UNDER:- THE COMPANY IS ENGAGED IN THE BUSINESS OF REAL EST ATE AND PROPERTY DEVELOPMENT. DURING THE F.Y. 2005-06, THE COMPANY H AD ENTERED INTO PARTNERSHIP FIRM IN THE FIRMS M/S FINE DEVELOPERS & M/S MAHUL CONSTRUCTION CORPORATION. THERAFTER, THE ASSESSEE C OMPANY RETIRED FROM THE PARTNERSHIP FIRMS M/S FINE DEVELOPERS & M/S MAH UL CONSTRUCTION CORPORATION BY DEED OF RETIREMENT AND RECONSTITUTIO N DATED 27.5.2008. DURING THE YEAR, ASSESSEE HAS SHOWN INCOME FROM BUS INESS AT NIL AS ACCORDINGL TO THE ASSESSEE, NO INCOME CAN BE ASSESS ED IN THE HANDS OF THE ASSESSEE. 13. THUS IT IS CLEAR THAT THE ASSESSING OFFICER CON DUCTED AN ENQUIRY ON THE ISSUE OF TAXABILITY THE AMOUNT RECEIVED BY THE ASSESSEE ON R ETIREMENT FROM THESE TWO PARTNERSHIP FIRMS AND EXAMINED THE DEED OF RETIREME NT AND RECONSTITUTION AS WELL AS THE SUBMISSIONS OF THE ASSESSEE. IT IS MANIFEST FRO M THE NOTICE ISSUED U/S 142(1) ALONG WITH QUESTIONNAIRE, REPLY FURNISHED BY THE AS SESSEE ALONG WITH THE RELEVANT DOCUMENTS ON THE POINT THAT THE ASSESSING OFFICER H AS EXAMINED THE ISSUE AND THEN ACCEPTED THE CLAIM OF THE ASSESSEE. THEREFORE, IT I S NOT A CASE OF LACK OF ENQUIRY. EVEN ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 12 | P A G E THE CIT HAS ALSO NOT ALLEGED THAT THE ASSESSING OFF ICER HAS NOT CONDUCTED ANY ENQUIRY. ONCE THE CASE DOES NOT FALL UNDER THE CATEGORY OF L ACK OF ENQUIRY THEN THE REVISIONARY POWERS U/S 263 CAN BE INVOKED BY THE CIT ONLY WHEN THE CLAIM OF ASSESSEE ALLOWED BY THE ASSESSING OFFICER IS IMPERMISSIBLE UNDER LAW . IT IS SETTLED LEGAL PROPOSITION OF LAW THAT IF TWO VIEWS ARE POSSIBLE ON AN ISSUE AND ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS THEN THE COMMISSIONER HAS NO JUR ISDICTION TO REVISE THE ORDER OF ASSESSING OFFICER ON THE GROUND THAT HE DID NOT AGR EE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. THE COMMISSIONER HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF SUDHAKAR SHETTY VS. ASST. CIT (SUPRA) A ND HELD THAT IF THE RETIRING PARTNER HAS BEEN PAID LUMP SUMP IN CONSIDERATION, THE RETIR ING PARTNER ASSIGNED OR RELINQUISHED HIS SHARE OF RIGHT IN THE PARTNERSHIP AND ITS ASSET IN FAVOUR OF THE CONTINUING PARTNERS, THEN SUCH A TRANSACTION WOULD AMOUNT TO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF INCOME TAX ACT., GIVING RISE TO CAPITAL GAIN EXIGIBLE TO TAX. THE COMMISSIONER HAS ALSO PLACED RELIANCE ON T HE JUDGMENT OF HON'BLE HIGH COURT TRIBHUVANDAS G. PATEL ( SUPRA), CIT VS. H.R. ASLOT (SUPRA) AND IN THE CASE N.A. MODI VS. CIT ( SUPRA). IT IS PERTINENT TO NOTE THAT IN THE CASE OF N.A. MODI VS. CIT (SUPRA), THE HONBLE HIGH COURT HAS FOLLOWED THE JU DGMENT IN THE CASE OF TRIBHUVANDAS G. PATEL ( SUPRA). THE SAID JUDGMENT HA S BEEN REVERSED BY THE HON'BLE SUPREME COURT IN (236 ITR 515). IN THE SAID CASE, THE QUESTION FELL FOR CONSIDERATI ON OF HON'BLE SUPREME COURT ARE AS UNDER:- '1.WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, RS. 1,72,182 OR RS. 1,00,000 WERE LIABLE TO BE INCLUDED IN THE TOTAL IN COME OF THE ASSESSEE AS HIS SHARE OF PROFIT FROM THE FIRM OF KUMAR ENGINEERING WORKS? 2.WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SUM OF RS. 50,000 RECEIVED BY THE ASSESSEE AS HIS SHARE OF THE VALUE OF THE GOODWILL OR ANY PART THEREOF WAS LIABLE TO TAX AS CAPITAL GAIN? 3.WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SUM OF RS. 4,77,941 OR ANY PART THEREOF WAS LIABLE TO TAX AS CAPITAL GAIN BY REASON OF SECTION 47(II) OF THE ACT?' 14. THE RELEVANT QUESTION IS QUESTION NO. 3 WHICH H AS BEEN DECIDED BY THE HON'BLE SUPREME COURT AS UNDER:- ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 13 | P A G E SO FAR AS QUESTION NO. 3 IS CONCERNED THE ASSESSEE INVOKED CLAUSE (II ) OF SECTION 47 TO CONTEND THAT THE SAID SUM OF RS. 4,47,941 DOES NOT REPRESENT A CAPITAL GAIN. MR. SHARMA, LEARNED COUNSEL FOR THE APPELLANT-ASSESSEE, HAS BRO UGHT TO OUR NOTICE THE DECISION OF THIS COURT IN CIT (ADDL.) V. MOHANBAI PAMABHAI [1987] 165 ITR 166 WHERE IT HAS BEEN HELD, FOLLOWING THE DECISION IN SUNIL SIDDHARTHBHAI V. CI T [1985] 156ITR 509 (SC), THAT EVEN WHERE A PARTNER RETIRES AND SOME AMOUNT IS PAID TO HIM TOWARDS HIS SHARE IN THE ASSETS, IT SHOULD BE TREATED AS FALLING UNDER CLAUSE (II) O F SECTION 47. THEREFORE, FOLLOWING THIS DECISION, THIS QUESTION HAS TO BE AND IS ANSWERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. NOW SURVIVES THE QUESTION NO. 1. A FEW FACTS NEED TO BE STATED IN THAT BEHALF: 15. THUS THE ISSUE OF TAXABILITY OF THE AMOUNT PAID TO A RETIRING PARTNER TOWARDS THE SHARE IN THE ASSET WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. AS IT IS CLEAR FROM THE FINDING OF THE HON'BLE SUPR EME COURT THAT THIS ISSUE WAS ALREADY SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MOHAN BHAI PAMABHAI (165 ITR 166) AS WELL AS IN THE CASE OF CIT VS. SUNIL SIDDHARTHBHAI VS. CIT (156 ITR 509). IN THE CASE OF MOHANBHAI PAMABHAI (SUPRA ), THE HONBLE GUJARAT HIGH COURT I N (91 ITR 393) HELD THAT INTEREST OF A PARTNER IN A PARTNERSHIP FIRM HAS NO INTEREST IN ANY SPECIFIC ITEM OF PARTNE RSHIP FIRM. IT IS THE RIGHT TO OBTAIN HIS SHARE OR PROFIT FROM TIME TO TIME DURING THE SU BSISTENCE OF THE PARTNERSHIP AND DISSOLUTION OF THE PARTNERSHIP OR TOWARDS RETIREMEN T FROM PARTNERSHIP TO GET THE VALUE OF SHARE IN THE NET PARTNERSHIP ASSET WHICH R EMAIN AFTER SATISFYING THE DUE DEBTS AND LIABILITIES OF THE PARTNERSHIP. THE SAID AMOUNT RECEIVED BY THE RETIRING PARTNER IS HIS SHARE IN THE PARTNERSHIP AND NOT ANY CONSIDERATION FOR TRANSFERRING ALL HIS INTEREST TO THE CONTINUING PARTNERS. IN THE CAS E OF N.A. MODI VS. CIT (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS FOLLOWED THE JUDGMENT IN THE CASE OF TRIBHUVANDAS G. PATEL ( SUPRA). AS WE HAVE ALREADY MENTIONED THAT THE JUDGMENT IN THE CASE OF TRIBHUVANDAS G. PATEL (SUPRA) WAS REVERS ED BY THE HON'BLE SUPREME COURT. THEREFORE, FOLLOWING THE DECISION IN THE CAS E OF N.A. MODI VS. CIT (SUPRA) WITHOUT CONSIDERING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TRIBHUVANDAS G. PATEL ( SUPRA) MADE OUT A CASE THAT THE COMMISSIONER HAS GUIDED HIMSELF BY A PARTICULAR DECISION AND NOT BY CONSIDE RING THE OTHER RELEVANT DECISIONS ON THE POINT. FURTHER A SIMILAR ISSUE WAS CONSIDERE D BY THE HON'BLE SUPREME COURT IN ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 14 | P A G E THE CASE OF CIT VS. R. LINGMALLU RAGHUKUMAR (247 ITR 801), WHEREIN, THE HONBLE APEX COURT HAS CONSIDERED THE EARLIER JUDGMENT AND HELD AS UNDER:- 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE EXCESS AMOUNT OF RS. 46,500 RECEIVED BY THE ASSESSEE ON RETIREMENT FROM THE TWO PARTNERSHIP FIRMS IS ASSESSABLE TO CAPITAL GAINS ?' (P. 676) 2. THE HIGH COURT HAS HELD THAT THERE WAS NO TRANSFER OF ANY ASSETS AS CONTEMPLATED BY THE EXPRESSION TRANSFER AS DEFINED IN SECTION 2(47) O F THE INCOME-TAX ACT, 1961. THE HIGH COURT HAD PLACED RELIANCE ON THE JUDGMENT OF THE GU JARAT HIGH COURT IN CIT V. MOHANBHAI PAMABHAI [1973] 91 ITR 393 , WHEREIN IT HAS BEEN HELD THAT WHERE A PARTNER RET IRES FROM A PARTNERSHIP AND THE AMOUNT OF HIS SHARE IN THE NET PARTNERSHIP ASSETS AFTER DEDUCTION OF LIABILITIES AND PRIOR CHARGES IS DETERMINED ON TAKI NG ACCOUNTS IN THE MANNER PRESCRIBED BY THE RELEVANT PROVISIONS OF THE PARTNERSHIP LAW, THE RE IS NO ELEMENT OF TRANSFER OF INTEREST IN THE PARTNERSHIP ASSETS BY THE RETIRED PARTNER TO TH E CONTINUING PARTNERS. THE SAID JUDGMENT OF THE GUJARAT HIGH COURT HAS BEEN AFFIRMED BY THIS COURT IN ADDL. CIT V.MOHANBHAI PAMABHAI [1987] 165 ITR 166 . IN VIEW OF THE SAID JUDGMENT, WE FIND NO MERIT I N THIS APPEAL AND THE SAME IS, THEREFORE, DISMISSED. NO OR DER AS TO COSTS. 16. THE QUESTION BEFORE THE HON'BLE SUPREME COURT W AS THAT THE EXCESS AMOUNT RECEIVED BY THE ASSESSEE ON RETIREMENT FROM TWO PARTNERSHIP FIRMS IS ASSESSABLE AS CAPITAL GAINS. THE JUDGMENT IN THE CASE OF ACIT VS. MOHANBHANI PAMABHA I (SUPRA) WAS REITERATED BY THE HON'BLE SUPREME COURT. THE DECISIONS WHICH ARE RELI ED UPON BY THE LD. COMMISSIONER ARE ALL BASED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TRIBHUVANDAS G. PATEL ( SUPRA) WHICH WAS REVERSED BY THE HON'BLE SUPREME COURT. EVEN THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASHANT S . JOSHI VS. ITO (SUPRA) BY FOLLOWING THE JUDGMENT IN THE CASE OF TRIBHUVANDAS G. PATEL ( SUPRA) HELD IN PARA 16 AS UNDER:- 16. AT THIS STAGE, IT MAY BE NOTED THAT IN CIT V. TRI BHUVANDAS G. PATEL [1978] 115 ITR 95 (BOM.), WHICH WAS DECIDED BY A DIVISION BENCH OF T HIS COURT, UNDER A DEED OF PARTNERSHIP, THE ASSESSEE RETIRED F ROM THE PARTNERSHIP FIRM AND WAS INTER ALIA PAID AN AMOUNT OF RS. 4,77,941 AS HI S SHARE IN THE REMAINING ASSETS OF THE FIRM. THE DIVISION BENCH OF THIS COURT HAD HELD THA T THE TRANSACTION WOULD HAVE TO BE REGARDED AS AMOUNTING TO A TRANSFER WITHIN THE MEAN ING OF SECTION 2(47) INASMUCH AS THE ASSESSEE HAD ASSIGNED, RELEASED AND RELINQUISHE D HIS SHARE IN THE PARTNERSHIP AND ITS ASSETS IN FAVOUR OF THE CONTINUING PARTNERS. THIS P ART OF THE JUDGMENT WAS REVERSED IN APPEAL BY THE SUPREME COURT INTRIBHUVANDAS G. PATEL V. CIT [1999] 236 ITR 515 . FOLLOWING THE JUDGMENT OF THE SUPREME COURT IN SUNI L SIDDHARTHBHAIS CASE (SUPRA), THE SUPREME COURT HELD THAT EVEN WHEN A PARTNER RETIRES AND SOME AMOUNT IS PAID TO HIM TOWARDS HIS SHARE IN THE ASSETS, IT SHOULD BE TREAT ED AS FALLING UNDER CLAUSE (II) OF SECTION 47. THEREFORE, THE QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 15 | P A G E REVENUE. SECTION 47(II) WHICH HELD THE FIELD AT THE MATERIAL TIME PROVIDED THAT NOTHING CONTAINED IN SECTION 45 WAS APPLICABLE TO CERTAIN T RANSACTIONS SPECIFIED THEREIN AND ONE OF THE TRANSACTIONS SPECIFIED IN CLAUSE (II) WAS DI STRIBUTION OF THE CAPITAL ASSETS ON A DISSOLUTION OF A FIRM. SECTION 47(II) WAS SUBSEQUEN TLY OMITTED BY THE FINANCE ACT OF 1987 WITH EFFECT FROM 1-4-1988. SIMULTANEOUSLY, SUB -SECTION (4) OF SECTION 45 CAME TO BE INSERTED BY THE SAME FINANCE ACT. SUB-SECTION (4 ) OF SECTION 45 PROVIDES THAT PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASS ET BY WAY OF DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM OR OTHER ASSOCI ATION OF PERSONS OR BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A CO-OPERATIVE SOCIETY) OR OTHERWISE, SHALL BE CHARGEABLE TO TAX AS THE INCOME OF THE FIRM, ASSOCIATION OR BODY, OF THE PREVIOUS YEAR IN WHICH THE SAID TRANSFER TAKES PLACE. THE FAIR MARKET VALUE OF THE ASSETS ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDE RATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER FOR THE PURPOSE OF SECTION 48. EX F ACIE SUB-SECTION (4) OF SECTION 45 DEALS WITH A SITUATION WHERE THERE IS A TRANSFER OF A CAP ITAL ASSET BY WAY OF A DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM OR OTHE RWISE. EVIDENTLY, ON THE ADMITTED POSITION BEFORE THE COURT, THERE IS NO TRANSFER OF A CAPITAL ASSET BY WAY OF A DISTRIBUTION OF THE CAPITAL ASSETS, ON A DISSOLUTION OF THE FIRM OR OTHERWISE IN THE FACTS OF THIS CASE. WHAT IS TO BE NOTED IS THAT EVEN IN A SITUATION WHE RE SUB-SECTION (4) OF SECTION 45 APPLIES, PROFITS OR GAINS ARISING FROM THE TRANSFER ARE CHARGEABLE TO TAX AS INCOME OF THE FIRM. 17. THOUGH THE ISSUE BEFORE THE HON'BLE JURISDICTIO NAL HIGH COURT WAS THE VALIDITY OF REOPENING, HOWEVER, THE REOPENING WAS ON THE ISS UE OF EXCESS AMOUNT RECEIVED BY THE RETIRING PERSONS FROM THE PARTNERSHIP FIRM. THE HON'BLE HIGH COURT HAS GIVEN THE FINDING THAT IN CASE OF TRANSFER OF A CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ON DISSOLUTION OF FIRM OR OTHERWISE, DEALT WITH BY SEC TION 45(4) AND, THEREFORE, THERE IS NO TRANSFER OF CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASSET ON DISSOLUTION OF FIRM OR OTHERWISE. THE PUNE BENCHES OF THIS TRIBUNA L IN THE CASE OF REYAZ SHAIKH VS. ITO (SUPRA) HAS TAKEN A VIEW THAT THE AMOUNTS RECEI VED BY THE PARTNER ON HIS RETIREMENT ARE EXEMPT FROM CAPITAL GAIN TAX. THE TR IBUNAL IN THE SAID CASE AFTER DISCUSSING THE VARIOUS JUDGMENTS ON THE POINT HELD IN PARA 8 AS UNDER:- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS NOTED EARLIER, THE SHORT POIN T INVOLVED IN THIS APPEAL RELATES TO TAXABILITY OF AMOUNT RECELVED BY THE ASSESSEEE ON R ETIREMENT FROM PARTNERSHIP FIRM. THE HON'BLE SUPREME COURT IN THE CASE OF MOHANBHAI PAMA BHAI (SUPRA) FOLLOWING ITS JUDGMENT IN THE CASE OF SUNIL SIDDHARTHBHAI VS. CIT 156 ITR 509 (SC) HELD THAT WHEN A PARTNER RETIRED FROM THE FIRM AND RECEIVED HIS SHAR E OF AN AMOUNT CALCULATED ON THE VALUE OF THE NET PARTNERSHIP ASSETS INCLUDING GOODW ILL OF THE FIRM, THERE IS NO TRANSFER OF INTEREST OF THE PARTNER IN THE GOODWILL, AND NO PAR T OF THE AMOUNT RECEIVED IS ASSESSABLE AS CAPITAL GAIN U/S 45 OF THE ACT. THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT ITR 801(SC), THE SUPREME COURT HELD, WHILE AFFIRMING TH E PRINCIPLE LAID DOWN IN THE CASE OF ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 16 | P A G E MOHANBHAI PAMABHAI (SUPRA) THAT WHEN A PARTNER RETI RES FROM THE PARTNERSHIP FIRM AND THE AMOUNT OF HRS SHARE IN NET PARTNERSHIP ASSE TS AFTER DEDUCTION OF LIABILITIES IS DETERMINED, THERE IS NO ELEMENT OF TRANSFER OF INTE REST IN THE PARTNERSHIP ASSETS BY THE RETIRED PARTNER TO THE CONTINUING PARTNERS AND THE AMOUNT RECEIVED BY THE RETIRING PARTNER IS NOT 'CAPITAL GAIN' UNDER SECTION 4S OF T HE ACT. FURTHER, THE LEARNED COUNSEL FOR THE APPELLANT HAS CORRECTLY POINTED OUT THAT TH E DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TRIBHUVANDAS G.PATEL (SUPRA) FOLLOWED IN THE CASE OF N.A. MODY (SUPRA) HAS BEEN REVERSED BY THE HON'BLE SUPREME COURT IN T HE CASE OF TRIBHUVANDAS G.PATEL REPORTED IN 236 ITR 515 (SC) ON THIS ASPECT OF THE MATTER. IN FACT, THE HON'BLE BOMBAY HIGH COURT IN A RECENT DECISION IN THE CASE OF PRAS HANT S. JOSHI ( SUPRA) HAS NOTED THE AFORESAID LEGAL POSITION. IN THIS CIRCUMSTANCES THE RELIANCE PLACED BY THE AUTHORITIES BELOW ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF N.A.MODY (SUPRA) TO DECIDE THE CONTROVERSY AGAINST THE ASSES SEE, CANNOT BE UPHELD. INFACT, THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF PRASHANT S. JOSHI (SUPRA) HAS ALSO NOTED THE OMISSION OF SECTION 47(II) OF THE AC T AND INSERTION OF SECTION 4S( 4) OF THE ACT WITH EFFECT FROM 1.4.1988. CONSIDERING THE ENTI RETY OF THE LEGAL POSITION, IT HAS BEEN AFFIRMED BY THE HON'BLE HIGH COURT THAT AMOUNTS REC EIVED BY THE PARTNER ON HIS RETIREMENT, ARE EXEMPT FROM CAPITAL GAINS TAX. IN T HIS VIEW OF THE MATTER, WE FIND IT APPROPRIATE TO ALLOW THE CLAIM OF THE ASSESSEE AND ACCORDINGLY THE ORDER OF THE CIT(A) IS SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO DEL ETE THE IMPUGNED ADDITION. THUS, IN GROUND NOS. 2. & 3, ASSESSEE SUCCEEDS AS ABOVE. 18. THUS IT IS CLEAR THAT THE TRIBUNAL HAS TAKEN A VIEW WHICH IS BASED ON THE SUBSEQUENT DECISION OF HON'BLE SUPREME COURT AS WEL L AS HON'BLE HIGH COURT AFTER CONSIDERING THE JUDGMENT IN THE CASE OF N.A. MODI ( SUPRA). A SIMILAR VIEW HAS BEEN TAKEN BY THE HYDERABAD BENCHES OF THIS TRIBUNAL IN THE CASE OF ACIT VS. S.N. PRASAD VIDE ORDER DATED 27.01.2014 IN ITA NO, 1200/HYD/201 0. EVEN IN THE CASE OF SUDHAKAR M. SHETTY (SUPRA), THE TRIBUNAL HAS TAKEN NOTE OF THE DICHOTOMY/DIVERSE VIEW ON THE QUESTION AS TO WHETHER THERE IS ANY TRA NSFER AT ALL IN SUCH SITUATION BY THE FIRM IN FAVOUR OF THE RETIRING PARTNER OR BY THE RE TIRING PARTNER IN FAVOUR OF THE FIRM OR IN FAVOUR OF ITS CONTINUING PARTNERS. 19. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE VARIOUS DECISIONS AS DISCUSSED ABOVE IT IS CLEAR THAT THE VIEW TAKEN BY THE ASSESSING OFFICER ON THIS QUESTION OF TAXABILITY OF THE AMOUNT RECEIVED BY TH E ASSESSEE ON RETIREMENT FROM THE PARTNERSHIP FIRM IS CERTAINLY NOT AN IMPERMISSIBLE OR IMPOSSIBLE VIEW RATHER THE VIEW TAKEN BY THE ASSESSING OFFICER IS A PROPER AND MORE LOGICAL VIEW AS IT IS FORTIFIED BY THE SERIES OF DECISIONS OF HON'BLE SUPREME COURT, H ON'BLE HIGH COURT AS WELL AS OF ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 17 | P A G E THIS TRIBUNAL. THERE IS NO QUARREL ON THE POINT THA T IF THE ASSESSING OFFICER HAS FAILED TO APPLY HIS MIND AND TAKEN A VIEW WHICH IS NOT PER MISSIBLE UNDER THE LAW THEN THE ORDER WILL BE CONSIDERED AS ERRONEOUS SO FAR AS PRE JUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, WHEN THE ASSESSING OFFICER HAS CONDUCTED A N ENQUIRY AND TAKEN A POSSIBLE AND RATHER A PROPER VIEW THEN THE COMMISSIONER IS N OT PERMITTED TO EXERCISE THE REVISIONARY POWERS U/S 263 MERELY ON THE GROUND THA T HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER OR EVEN ON THE GROUND THAT THERE ARE DIVERGENT VIEW ON THE ISSUE. THEREFORE, IN THE VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MOHANBHAI PAMABHAI (SUPRA), TRIBHUVA NDAS G. PATEL (SUPRA), JUDGMENT IN THE CASE OF CIT VS. R. LINGMALLU RAGHUKUMAR (SUP RA), AS WELL AS THE JUDGMENT IN THE CASE OF PRASHANT S. JOSHI (SUPRA), THE VIEW OF THE ASSESSING OFFICER CANNOT BE SAID IMPERMISSIBLE UNDER LAW. 20. THE DECISIONS RELIED UPON BY THE LD. DR IN THE CASE OF P.V. SREENIJIN VS. CIT (SUPRA) WOULD NOT HELP THE CASE OF REVENUE BECAUSE IN THE SAID CASE THE COMMISSIONER FOUND THAT THE ASSESSING OFFICER HAD N OT APPLIED ITS MIND TO THE VARIOUS FACTUAL ASPECTS AVAILABLE ON RECORD, THEREF ORE, IT WAS THE CASE OF OVERLOOKING THE CRUCIAL FACTS AVAILABLE ON RECORD AND WAS NOT A QUESTION OF POSSIBLE VIEW TAKEN BY THE ASSESSING OFFICER. IT IS SETTLED LEGAL POSITIO N AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES LTD. VS. CI T (SUPRA) AS WELL AS THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. GABRIEL INDIA LTD (SUPRA) THAT IN CASE THE ASSESSING OFFICER HAS APPLIED HIS MIND ON AN ISSUE ON WHICH TWO POSSIBLE VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER TOOK O NE OF THE POSSIBLE VIEWS, THEN THE COMMISSIONER IS NOT PERMITTED TO REVISE THE ORDER ON THE GROUND THAT HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. ACCORDINGLY, WE HOLD THAT THE IMPUGNED ORDER IS NOT SUSTAINABLE AS THE COMMISSION ER HAS EXCEEDED THE PERMISSIBLE JURISDICTION U/S 263 AND CONSEQUENTLY T HE SAME IS QUASHED. 21. IN THE CASE OF M/S SURAKSHA DEVELOPERS LTD, THE FACTS AND ISSUES ARE IDENTICAL TO THE EXTENT OF RECEIVING THE AMOUNTS ON RETIREMEN T FROM PARTNERSHIP FIRM M/S FINE ITA NO.5381& 5382/MUM/2013 ASSESSMENT YEAR: -2009-10 18 | P A G E DEVELOPERS. IN THE SAID CASE THE ASSESSEE RETIRED A ND RECEIVED THE AMOUNT ONLY FROM ONE PARTNERSHIP FIRM AND NOT FROM TWO. IN VIEW OF O UR FINDING IN THE CASE OF NISHA CAPITAL SERVICES LTD, WHICH IS ALSO A RETIRING PART NER OF M/S FINE DEVELOPERS, THE IMPUGNED ORDER PASSED U/S 263 IS QUASHED. 22. IN THE RESULT APPEALS OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER 2014. SD/- SD/- ( D.KARUNAKARA RAO ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 18-12-2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI