M/s. Nexus Clothing Company, New Delhi V. ITO, New Delhi

ITA 6469/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5432 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 06-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NAVIN KUMAR JAIN
• Keywords: Capital asset; Depreciation; Cost of acquisition; Fair market value; Unabsorbed depreciation
• Section: 32

Judgement Text

ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.6469/DEL/2012 ASSESSMENT YEAR : 2009-10 NEXUS C L O T H I N G C O M P A N Y , 61/13B, 1 ST FLOOR, RAMJAS ROAD, KAROL BAGH, NEW DELHI. PAN : AAAFN3545K VS. I T O , WARD-33(1), NEW DELHI. ITA NO. 1 5 7 /DEL/201 3 ASSESSMENT YEAR : 2009-10 I T O , WARD-33(1), NEW DELHI. VS. NEXUS C L O T H I N G C O M P A N Y , 61/13B, 1 ST FLOOR, RAMJAS ROAD, KAROL BAGH, NEW DELHI. PAN : AAAFN3545K ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI N A V I N K U M A R J A I N , C A DEPARTMENT BY : S HRI KEYUR PATEL, SR. DR ORDER PER J.S. REDDY, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS AND DIRECTED AGAINST THE ORDER OF THE CIT (A)- XXVI, LAXMI NAGAR. ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 2 2. THE ASSESSEE HAS FILED THIS APPEAL ON THE FOLLOWING GR OUNDS:- 1. A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) HAS ERRED IN UPHOLDING THE ADDITION OF RS.62,91,300/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF PROFIT ON SALE OF PRO PERTY. B) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN UPHOLDING THE DENIAL OF BROUGHT FORWARD LOSS EXCLUDIN G DEPRECIATION. C) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN NOT DECIDING ON DISALLOWANCES OF DONATION OF RS.4600 MADE. 3. WE HAVE HEARD MR.NAVIN KUMAR JAIN, LD. CA, ON BE HALF OF THE ASSESSEE AND MR. KEYUR PATEL, LD. SR. DR ON BEHALF OF THE RE VENUE. 4. ON A CAREFUL CONSIDERATION OF RIVAL CONTENTIONS, W E HOLD AS FOLLOWS:- 5. ON GROUND NO.1, THE FACTS AS STATED BY THE ASSESSEE ARE AS FOLLOWS:- 1. NEXUS CLOTHING CO. IS A PARTNERSHIP FIRM. ORIGINA LLY MR. SANJIV MAKKAR AND SHARMILA MAKKAR WERE PARTNERS. 2. MR. ROHIT AND MR. MANOJ JAIN JOINED PARTNERS IN THE YEAR 2004-05 (PAPER BOOK PAGE 98-101) 3. MR. SANJIV MAKKAR AND MRS. SHARMILA MAKKAR RESIG NED AS PARTNERS AND MR. RAMESH MADAN AND MR. MANOJ BHASIN J OINED AS PARTNERS ON 15.09.2005 (PAPER BOOK PAGE 102-106). 4. THE PROPERTY IN DISPUTE BEARING NO.479 UDYOG VIHAR PHASE V GURGAON WAS ACQUIRED BY THE FIRM ON 08.11.2001 (PAPE R BOOK PAGE 24). 5. A SALE AGREEMENT WAS EXECUTED ON 7 TH SEPTEMBER 2005 FOR A SUM OF RS.30 LACS BETWEEN NEXUS CLOTHING COMPANY AND L P GARMENTS LIMITED. THE AGREEMENT WAS EXECUTED AT RS.30 LACS BEING THAN THE STAMP VALUE ON THE GIVEN DATE. (PAPER BOOK PAGE 32-34). 6. ALL OTHER AGREEMENTS, AFFIDAVITS, GPA, WILL TO SECU RE THE PROPERTY WERE EXECUTED ON 15.09.2005 (PAPER BOOK PAG E 35-53). 7. THE SALE DEED WAS NOT REGISTERED SINCE THE SAME WA S AN HSIDC PROPERTY AND WITHOUT THEIR PERMISSION REGISTRATION WAS NO T POSSIBLE. 8. REQUEST TO TRANSFER TO HSIDC WAS FILLED ON 09.11.2 005 (PAPER BOOK PAGE 25). 9. ON 14.11.2005 SANJEEV AND SHARMILA MAKKAR FILED AN APPLICATION WITH HSIDC FOR STAY OF TRANSFER OF PROPERTY WITH MALAISE INTENTIONS SINCE AS PER HSIDC WHO ARE ORIGINAL SIGNA TORIES NEED TO SIGN ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 3 THEY DID NOT RECOGNIZE CHANGE IN PARTNERSHIP FIRMS (P APER BOOK PAGE 29 TO 31A). 10. VIDE LETTER DATED 29.05.2006 HSIDC REJECTED THE TRANS FER ON ISSUE OF DISPUTE (PAPER BOOK PAGE 28) 11. ON 05.08.2006 FIR WAS FILED AGAINST SHARMILA MAK KAR AND SANJEEV MAKKAR (PAPER BOOK PAGE 55-61) 12. A LARGE NUMBER OF LEGAL CASES WERE FILLED BY BO TH THE GROUPS AND EVEN COPY OF NOTICES IN PRESS (PAPER BOOK PAGE 8 5-97) 13. ON 20.12.2007 COMPROMISE AND SETTLEMENT DEED EXECU TED AMONG THE PARTIES (PAPER BOOK PAGE 64-71). 14. ON 20.12.2007 SANJEEV AND SHARMILA MAKKAR WITHDR AWS THEIR OBJECTION WITH HSIDC AND REQUESTS TRANSFER OF PROPERTY O N THE BASIS OF APPLICATION FILLED ON 09.11.2005 (PAPER BOOK PAGE 2 6-27) 15. ON 29.04.2008 COMPROMISE AND SETTLEMENT DEED EXECU TED IN THE COURT OF CIVIL JUDGE (SENIOR DIVISION) GURGAON (P APER BOOK PAGE 62-63) 16. SALE DEED IS EXECUTED ON 11.06.2008 TO RECTIFY TH E DEFECT. (PAPER BOOK PAGE 76-84). 17. RS.30 LACS OF CONSIDERATION MENTIONED IN THE SAL E DEED DO NOT PASS BETWEEN SELLER AND BUYER. IN FACT THE SELLER MAKE S RS.30 LACS DRAFT FROM HIS ACCOUNT GIVES TO EX PARTNERS. (PAPER BOO K PAGE 72-75). 18. THESE RS.30 LACS DRAFT ARE PART OF COMPROMISE DEE D. (PAPER BOOK PAGE 67). 19. HSIDC REGISTERS THE SALE DEED AND ISSUE ALLOTMEN T LETTER IN NAME OF L P GARMENTS PVT. LTD. ON THE BASIS OF APPLICAT ION DATED 09.11.2005. (PAPER BOOK PAGE 25). 20. THE A.O. HAS RECORDED IN HIS ORDER OUR STATEMENT THAT SALE OF PROPERTY WAS DONE IN 15.09.2005 AND DUE TO DISPUTE AND CIRCUMSTANCES BEYOND OUR CONTROL THE SALE DEED COULD N OT BE REGISTERED. THE FAIR MARKET VALUE AS PER PREVAILING CIRCLE RATE AS ON 15.09.2005 IS RS.30 LACS ONLY. 21. THE VALUATION OF PROPERTY IN QUESTION WAS IN DISP UTE FROM DAY 1 BUT NO REFERENCE WAS EVER MADE TO A VALUATION OFFICER. 6. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF C IT ALLAHABAD AND ANR VS. CHANDRA NARAIN CHAUDHRI, INCOME-TAX APPEAL NO.28 7 OF 2011, JUDGEMENT DATED 29.08.2013, HAS HELD AS FOLLOWS:- ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 4 10. SECTION 50-C OF THE ACT IS A RULE OF EVIDENCE IN ASSESSING THE VALUATION OF PROPERTY FOR CALCULATING THE CAPITAL GAIN. THE DEEMING PROVISION UNDER SECTION 50 C (1) OF THE ACT IS REBUTTABL E. IT IS WELL KNOWN THAT AN IMMOVABLE PROPERTY MAY HAVE VARIOUS ATTRI BUTES, CHARGES, ENCUMBRANCES, LIMITATIONS AND CONDITIONS. IN THE PRESENT CASE, IT IS STATED THAT THE PROPERTY WAS UNDER THE TENANCY OF FATHER OF THE PURCHASER SINCE 1969 AND THUS THE ASSESSEE BEING L ANDLORD OF THE PROPERTY, OFFERED IT FOR SALE TO THE TENANT, WHICH COUL D NOT HAVE ATTRACTED FAIR MARKET VALUE, AS A WILLING PURCHASER MAY HAVE OFFERED FOR A PROPERTY IN VACANT CONDITION. THE STAMP VALUATION AUTHO RITY DOES NOT TAKE INTO CONSIDERATION THE ATTRIBUTES OF THE PROPERTY FOR DETERMINING THE FAIR MARKET VALUE IN THE CONDITION THE PROPERTY IS A OFFERED FOR SALE AND IS PURCHASED. HE IS REQUIRED TO VALUE THE PROPERTY IN ACCORDANCE WITH THE CIRCLE RATES FIXED BY THE COLLECTOR. THE OBJECT OF THE VALUATION BY THE STAMP VALUATION AUTHORITY IS TO SECURE REVENUE ON SUCH SALE AND NOT TO DETERMINE THE TRUE, CORRECT AND FAIR MARKET VAL UE ON WHICH IT MAY BE PURCHASED BY A WILLING PURCHASER SUBJECT TO AND TAKING INTO CONSIDERATION ITS SITUATION, CONDITION AND OTHER ATTRIBUTES SUCH AS IT OCCUPATION BY TENANT, ANY CHARGE OR LEGAL ENCUMBRANCES . 11. THE QUESTION AS TO WHETHER THE ASSESSEE FILED ANY OBJECTIONS BEFORE THE STAMP VALUATION AUTHORITY TO DISPUTE THE VALUATIO N, OR FILED APPEAL OR REVISION OR MADE REFERENCE BEFORE ANY AUTH ORITY, COURT OR THE HIGH COURT UNDER SUB SECTION (2) (B) OF SECTION 50 C OF THE ACT IS NOT OF ANY RELEVANCE IN THIS CASE, AS THE AO HIMSELF OBSERVE D THAT THE ASSESSEE DID NOT DISPUTE THE STAMP VALUATION BEFORE THE S TAMP VALUATION AUTHORITY. THERE MAY BE SEVERAL REASONS FOR THE PURCHASER NOT TO FILE SUCH OBJECTION. A PURCHASER MAY NOT GO INTO LITIGATION, AND PAY STAMP DUTY, AS FIXED BY THE STAMP VALUATION AUTHORITY, WHICH MAY BE OVER AND ABOVE THE FAIR MARKET VALUE OF THE PRO PERTY, AS ON THE DATE OF TRANSFER, THOUGH THE AMOUNT SO DETERMINED HAS NOT BEEN ACTUALLY RECEIVED BY OWNER OF THE PROPERTY. WHENEVER THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOP TED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY UNDER SUB SECTION (1) OF SECTION 50-C EXCEEDS THE FAIR MARKET VALUE OF THE PR OPERTY AS ON THE DATE OF TRANSFER, THE ASSESSING OFFICER MAY REFER THE V ALUATION OF THE CAPITAL ASSET TO A DEPARTMENTAL VALUATION OFFICER (DVO) A ND FOR THAT PURPOSE, THE PROCEDURE PRESCRIBED UNDER THE WEALTH TA X ACT ARE TO BE APPLIED. IN CASE OF ANY SUCH CLAIM, THE AO MAY RELY ON THE RE PORT OF REGISTERED VALUER UNDER SECTION 55-A OF THE ACT AND IN SUCH CASE IT WILL NOT BE NECESSARY FOR HIM TO REFER THE MATTER TO THE DVO. HOWEVER, IN ANY EVENT, THE AO HAS TO RECORD SUFFICIENT REASONS. HE HAS TO RECORD REASONS FOR ACCEPTING THE REPORT OF THE APPROVED VALUER SUBMITTED BY THE ASSESSEE ALONG WITH HIS CLAIM/OBJECTION UNDER SECT ION 50 -C (2) OF THE ACT. IF HE DOES NOT ACCEPT THE REPORT, HE HAS TO RECO RD THE REASON FOR REFERRING THE MATTER TO THE DVO. THE REASONS IN EITH ER CASE MUST HAVE NEXUS WITH THE OBJECTION/CLAIM MADE BY THE ASSESS EE AND THE OBJECTION, WHICH MAY BE RAISED BY THE DEPARTMENT AGAINS T THE VALUATION DETERMINED IN THE REPORT OF THE APPROVED VALUE R. ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 5 12. IN THE PRESENT CASE, WE FIND THAT CIT (A) HAS CORRE CTLY OBSERVED IN HIS ORDER THAT THE PROVISIONS OF SECTION 50 C (2) ARE E SSENTIALLY TO BE READ IN CONJUNCTION WITH THE PROVISIONS OF SECTION 50 C (1) OF THE ACT. HE ALSO FOUND THAT IN THE PRESENT CASE BOTH INGREDIENTS O F PROVISIONS OF SECTION 50 C (2) ARE PRESENT, WHICH MADE IT NECESSARY FOR THE AO TO REFER THE MATTER FOR VALUATION TO DVO IN ACCORDANCE WITH PROVISIONS OF SECTION 55-A OF THE INCOME TAX ACT. THE ITAT IN ALLOW ING THE APPEAL COMMITTED SERIOUS ERROR OF LAW IN FINDING THAT IN SUC H CIRCUMSTANCES AND FACTS OF THE CASE, THE VALUE OF THE CAPITAL ASSET AS DETERMINED BY THE APPROVED VALUER FOR THE MONTH OF OCTOBER 2004 AT RS. 33,77,186/- HAS TO BE TAKEN AS THE SALE CONSIDERATION AND SIMILARLY THE VALUE TAKEN BY THE APPROVED VALUER AS ON 1.4.1981 HAS TO BE TAKEN FOR THE PURPOSES OF ARRIVING AT INDEXED COST OF ACQUISITION. THE ITAT FAILED TO CONSIDER THAT THE AO DID NOT RECORD ANY FINDING EITHER O N THE VALIDITY OF THE CLAIM/OBJECTION FILED BY THE ASSESSEE NOR DID HE RECORD ANY FINDING ON THE SUFFICIENCY OF VALUATION OF THE APPROVED VALUER SUBMITTED BY THE ASSESSEE (EMPHASIS OURS) 7. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE CON TENTION OF THE ASSESSEE THAT REFERENCE SHOULD HAVE BEEN MADE BY THE ASSESSI NG OFFICER TO THE DEPARTMENTAL VALUATION OFFICER (DVO). HENCE, WE SET ASIDE THIS CASE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THA T HE REFER THE SAME TO THE DVO. THE DEPARTMENTAL VALUATION OFFICER SHALL CONSIDE R THE FACTS AND CIRCUMSTANCES, ESPECIALLY WITH REGARD TO THE DATES ON WHICH AGREEMENTS WERE ENTERED, CONSIDER THE VALUE OF THE PROPERTY ON THAT DATE AND ADJUDICATE THE MATTER IN ACCORDANCE WITH LAW. 8. IN THE RESULT, GROUND NO.1 IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO.2 IS ON THE ISSUE OF DENIAL OF BROUGHT F ORWARD LOSS EXCLUDING DEPRECIATION. THE ASSESSEE SUBMITS THAT DURING THE FINANC IAL YEAR 2005-06, THERE WAS ONLY RE-CONSTITUTION OF THE PARTNERSHIP FIRM BY WAY OF ADMISSION OF PARTNERS AND THAT NO PARTNER HAD RETIRED. DURING THE FINANCIAL YEAR 2006-07, TWO PARTNERS HAD RETIRED OUT OF FOUR PARTNERS. HIS CLA IM IS THAT CARRY FORWARD OF LOSSES SHOULD BE ALLOWED TO THE EXTENT THE PARTNERS W HO ARE CONTINUING. IN OUR VIEW, THE ASSESSEE IS CORRECT IN ITS CLAIM. BUT AS THE FACTUAL POSITION HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DISPOSAL IN ACCORDANCE WITH THE LAW. ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 6 10. GROUND NO.3 IS ON THE ISSUE OF DISALLOWANCE OF DONA TION OF ` 4,600/-. IN VIEW OF THE SMALLNESS OF THE AMOUNT, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT HE WOULD NOT PRESS THE GROUND. HENCE, T HE SAME IS DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ITA NO.157/DEL/2013. 12. THE REVENUES APPEAL IS ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN GIVING A RELIEF OF RS.12,86,506/- ON ACCOUNT OF UNABSORBED DEPRECIATION OUT OF TOTAL BROUGHT F ORWARD LOSSES OF RS.24,88,703/- DISALLOWED BY THE A.O. U/S 78(1) O F THE IT ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD. CIT (A) HAS ERRED IN LAW IN HOLDING THAT RESTRICTION TO CARR Y FORWARD LOSSES U/S 78(1) OF THE IT ACT 1961 DOES NOT APPLY TO UNABSORB ED DEPRECIATION. 13. UNABSORBED DEPRECIATION IS CARRIED FORWARD U/S 32 (2) AND ARE NOT BROUGHT FORWARD LOSSES WHICH ARE CARRIED FORWARD U/S 7 8. THUS, WE UPHOLD THE ORDERS OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE REVENUE. 14. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWE D AND THE REVENUES APPEAL IS DISMISSED. 15. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.02 .2014. SD/- SD/- [ A.T. VARKEY ] [ J.S. REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 21 ST FEBRUARY, 2014. DK ITA NO.6469/DEL/2012 ITA NO.157/DEL/2013 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.