SUKHARAJ B NAHAR (HUF), MUMBAI V. DCIT (OSD) 1 CEN CIR 7, MUMBAI

ITA 5706/MUM/2014

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9848 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Keywords: Capital asset
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 5706 / MUM/20 14 ( ASSESSMENT YEAR : 2006 - 07 ) SHRI SUKHARAJ B NAHAR (HUF) B - 1, MAHALAXMI CHAMBERS BHULABHAI DESAI ROAD MAHALAXMI, MUM BAI 400 026 VS. DCIT (OSD) - 1 CENTRAL CIRCLE, OSD - 7 ROOM NO.409, 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD, CHURCHGATE MUMBAI 400 020 PAN/GIR NO. AABHS7067L APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI VIMAL PUNAMIYA REVENUE BY SHR I R. MANJUNATHA SWAMY DATE OF HEARING 26 / 07 /201 8 DATE OF PRONOUNCEMENT 24 / 09 /201 8 / O R D E R PER R.C.SHARMA (A.M) : T HIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 40, MUMBAI DATED 30/06/2014 FOR A.Y.2006 - 07 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 153C OF THE IT ACT. 2. ONLY GRIEVANCE OF ASSESSEE RELATES TO CIT(A)S ACTION IN CONFIRMING THE ADDITION OF RS.19,90,675/ - MADE BY THE AO, BEING THE FINAL DEBIT AND CREDITS IN THE BOOKS OF THE FIRM M/S. NO BLE CONSTRUCTIONS WHICH HAVE BEEN TRANSFERRED TO THE CAPITAL ACCOUNT ON DISSOLUTION OF THE SAID FIRM, WITHOUT ANY PROPER AND JUSTIFIABLE BASIS. ITA NO. 5706/MUM/2014 SHRI SUKHRAJ B NAHAR 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ASSESSEE IS AN HUF AND HAS INCOME FROM BUSINESS AND INCOME FROM OTHER SOURCES. DURING THE YEAR ASSESSEE HAS CREDITED FOLLOWING AMOUNTS IN HIS CAPITAL ACCOUNT. A. S D MEHTA (DUE TO DEATH) RS.2,38,192/ - B. SURESH KUMAR VANIGOTA RS.1,97,206/ - C. BRIJESH ENTERPRISES RS.68,04,500/ - D. NOBLE CONSTRUCTION (50%) RS.2,01,580/ - E. NOBLE CONSTRUCTION RS.19,90,675/ - TOTAL RS.94,32,153/ - 4 . A SEARCH ACTION U/S. 132(1) AND SURVEY ACTION U/S. 133A WAS CONDUCTED ON NAHAR GROUP ON 02.02.2012. THE ASSESSEE BEING CONNECTED WITH THE NAHAR GROUP, AN ASSESSMENT PROCEEDING U/S. 153C WAS INITIATED ON THE ASSESSEE. ACCORDINGLY ASSESSMENT ORDER WAS PASSED ON 04.03.2014 WITH ASSESSED INCOME OF RS.1,61,75,630/ - . AGAINST THE SAID ASSESSMENT ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A). THE CIT(A) DELETED VARIOUS ADDITIONS . HOWEVER, THE CIT(A), DECIDED THE ISSUE IN RELATION TO ADDITION OF RS. 19 , 90 , 675/ - AGAINST THE ASSESSEE. THE DEPARTMENT IS NOT IN APPEAL FOR THE ADDITIONS SO DELETED. 5 . ASSESSEE IS IN FURTHER APPE AL BEFORE US. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT ASSESSEE IS 50% PARTNER IN THE PARTNERSHIP FIRM NAMELY NOBLE CONSTRUCTION. THE SAID FIRM WAS DISSOLVED ON 31.03.2006. AFTER THE FINAL SETTLEMENT OF ACCOUNTS OF THE FIRM, THE BA LANCE WAS TRANSFERRED TO CAPITAL ACCOUNT OF THE ASSESSEE. THE LD. ITA NO. 5706/MUM/2014 SHRI SUKHRAJ B NAHAR 3 ASSESSING OFFICER WRONGLY INFERRED THAT THE SAID RECEIPT IS IN NATURE OF INCOME AND ACCORDINGLY MADE ADDITION U/S 68, WITHOUT APPRECIATING THE FACTS THAT THE AMOUNT IS NOT IN NATURE OF INCOM E AND CANNOT BE TAXED U/S 68. WE FOUND THAT THE AMOUNT OF RS. 19,90,675/ - WHICH WAS CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE IS THE AMOUNT OF FINAL CAPITAL BALANCE AFTER THE SETTLEMENT OF THE ACCOUNTS OF THE FIRM NOBLE CONSTRUCTIONS, AFTER THE DISSO LUTION OF THE SAID FIRM . THE LD. CIT(A) HAS ACCEPTED THAT THE FIRM NOBLE CONSTRUCTIONS WAS DISSOLVED ON 31.03.2006 WHEREIN THE ASSESSEE WAS A PARTNER TO THE EXTENT OF 50%. ON DISSOLUTION OF THE SAID FIRM, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.19,90,675 / - . AS PER THE PROVISIONS OF S. 45(4) OF THE ACT, THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM SHALL BE CHARGEABLE TO TAX AS THE INCOME OF THE FIRM IN T HE PREVIOUS Y EAR IN WHICH THE SAID TRANSFER TAKES PLACE. THUS, IN CASE OF DISSOLUTION OF FIRM, THE TAX LIABILITY ACCRUES IN THE HANDS OF THE PARTNERSHIP FIRM AND NOT IN THE HANDS OF THE PARTNER. THEREFORE, IN CASE OF THE ASSESSEE, THE AMOUNT OF RS. 19,90,675/ - WAS WRO NGLY ADDED TO THE INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 09 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 09 /201 8 ITA NO. 5706/MUM/2014 SHRI SUKHRAJ B NAHAR 4 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//