The Income Tax Officer, Jalandhar V. Sh. Raj Kumar, Jalandhar

ITA 696/ASR/2013

• Counselvise Citation: 69620914 RSA 2013
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 PAN: AAUPK7944F INCOME TAX OFFICER, VS. SH. RAJ KUMAR, M/S PAINT INDIA WARD 1(3), JALANDHAR TRADING CO., NAKODAR ROAD, JALANDHAR, (APPELLANT) (RESPONDENT) APPELLANT BY: SH. MAHAVIR SINGH, SR.DR RESPONDENT BY: SH. SURINDER MAHAJAN, ADVOCATE. DATE OF HEARING: 27.02.2014 DATE OF PRONOUNCEMENT: 28.02.2014 ORDER PER BENCH 1. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 16.09.2013 PASSED BY LEARNED CIT(A), JA LANDHAR, FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS: I. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION MA DE BY THE A.O. BY DISALLOWING THE DEDUCTION AMOUNTING TO RS. 34,19 ,648/- CLAIMED BY THE ASSESSEE U/S 54EC OF THE I.T. ACT, 1961 ON T HE SALE OF DEPRECIABLE ASSETS. II. THAT, IT IS PRAYED THAT THE ORDER OF THE LEARNED CI T(A) BE SET-ASIDE AND THAT OF THE ASSESSING OFFICE RESTORED. III. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AME ND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 2 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 2. THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.10 .2010 DECLARING TOTAL INCOME OF RS. 3,09,060/- ON 01.10.2010 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT) AND INTIMATION TO THIS EFFECT WAS SENT TO THE ASSESSEE. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY UNDER CAS S AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 06.09.2011. IN RESPONSE TO THE SAME, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED. SUBSEQUENTLY, NOTICE UNDER SECTION 142(1) OF THE AC T WAS ALSO ISSUED ON 15.02.2012 REQUIRED THE ASSESSEE TO FURNISH COPY OF COMPUTATION OF INCOME AND OTHER RELATED DOCUMENTS. IN RESPONSE TO THE SAME, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED REQUISITE INFORMATION/DETAILS/DOCUMENTS. THE ASSESSEE DERIVES INCOME FROM TRADING OF ALL KINDS OF PAINTS, CHEMICALS AND BUILDING MATE RIALS ETC. AND ENJOYS INCOME FROM HOUSE PROPERTY, INCOME FROM OTHER SOURC ES AND CAPITAL GAINS. HE HAS ALSO PRODUCED BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E DISPOSED OF THE BUSINESS ASSET OUT OF FIXED ASSETS (SCF NO. 12) FOR A SUM OF RS. 49,06,000/- THE WRITTEN DOWN VALUE OF WHICH AS PER SCHEDULE OF FIXED ASSETS ATTACHED TO THE RETURN OF INCOME FOR THE ASS ESSMENT YEAR 2009-10, 3 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 STOOD AT RS. 14,86,352/-, RESULTING INTO SHORT TERM CAPITAL GAIN AT RS. 34,19,648/- AS PROVIDED UNDER SECTION 50 OF THE ACT . THE ASSESSEE HAS CLAIMED EXEMPTION UNDER 54EC OF THE ACT AND FROM TH E CAPITAL GAINS SO ARISING SINCE HE MADE INVESTMENT OF RS. 35 LACS TO ACQUIRE RURAL ELECTRIFICATION BONDS. THE ASSESSEE WAS APPRISED OF THIS FACT THAT AS PROVIDED UNDER SECTION 54EC OF THE ACT, EXEMPTION U NDER THIS SECTION IS AVAILABLE WHERE THE CAPITAL GAIN ARISES FROM THE TR ANSFER OF A LONG TERM CAPITAL ASSET AND IN THIS CASE THE ASSET TRANSFERRE D IS A SHORT TERM CAPITAL ASSET, BEING DEPRECIABLE ASSET, AS PROVIDED UNDER S ECTION 50(2) OF THE ACT. ACCORDING TO THE ASSESSEE, ENTIRE CAPITAL GAIN ARIS ING FROM THE TRANSFER OF DEPRECIABLE ASSET HAS BEEN DEPOSITED IN RURAL ELECT RIFICATION CORPORATION LTD. NON-CONVERTIBLE BONDS ON 28.02.2010 AFTER SE LLING THE ASSET. HENCE, THE ENTIRE CAPITAL GAIN COMES TO NIL. IN SUP PORT OF HIS CONTENTION, THE ASSESSEE CITED TWO JUDGMENTS ONE OF HON'BLE GAU HATI HIGH COURT IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRY PVT. L TD. REPORTED IN 262 ITR PAGE 587 AND ANOTHER JUDGMENT OF BOMBAY HIGH CO URT IN THE CASE OF CIT VS. ACE BUILDER PVT. LTD. REPORTED IN 281 IT R PAGE 210. 4. IN THE CONCLUDING PARAGRAPH, THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THE DECISION OF HON'BLE BOMBAY HIGH COURT SQUARELY APPLIES TO THE FACTS OF THE CASE BUT THE REVENUE HAVING NOT AC CEPTED THE DECISION, HE 4 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 PREFERRED TO DECIDE THE MATTER IN FAVOUR OF THE REV ENUE AND HE REJECTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 5 4EC OF THE ACT AND MADE THE ADDITION ON ACCOUNT OF SHORT TERMS CAPITAL GAIN TO THE TOTAL INCOME OF THE ASSESSEE AT RS. 34,19,648/- BY THE CO MPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 08.02 .2013. 5. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 08.02. 2013, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED FIRST A PPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 16.09.2013 ALLOWED THE AP PEAL OF THE ASSESSEE BY RESPECTFULLY FOLLOWING THE ORDER OF HON'BLE GAUH ATI HIGH COURT AND HON'BLE BOMBAY HIGH COURT (SUPRA). NOW, THE REVENUE BEING AGGRIEVED WITH THE ORDER OF LEARNED FIRST APPELLATE AUTHORITY , FILED THE PRESENT APPEAL. 6. AT THE TIME OF HEARING, LEARNED DR RELIED UPON T HE ORDER PASSED BY THE ASSESSING OFFICER AND STATED THAT THE LEARNE D CIT(A) HAS WRONGLY DELETED THE ADDITION IN DISPUTE MADE BY THE ASSESSI NG OFFICER BY DISALLOWING THE DEDUCTION AMOUNTING TO RS. 34,19,64 8/- CLAIMED BY THE ASSESSEE UNDER SECTION 54EC OF THE ACT ON THE SALE OF DEPRECIABLE ASSETS. 7. ON THE CONTRARY, LEARNED COUNSEL FOR THE ASSESSE E RELIED UPON THE ORDER PASSED BY LEARNED CIT(A) AND STATED THAT AS PER THE ASSESSMENT ORDER (PAGE NO. 2), THE ASSESSING OFFICER HAS ADMIT TED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE JUDGMENTS OF HO N'BLE BOMBAY HIGH 5 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 COURT, WHICH IS IN FAVOUR OF THE ASSESSEE, BUT THE REVENUE HAS NOT ACCEPTED THE JUDGMENT AND HE DECIDED THE MATTER IN FAVOUR OF THE REVENUE AND ONLY ON THIS GROUND THE ASSESSING OFFIC ER REJECTED THE CLAIM OF THE ASSESSEE. HE FURTHER STATED THAT THERE ARE V ARIOUS DECISIONS ON THE ISSUE IN DISPUTE WHICH HAVE BEEN DECIDED IN FAVOUR OF THE ASSESEE BY HON'BLE HIGH COURTS. TO SUPPORT HIS ARGUMENT, HE FI LED A SMALL PAPER BOOK, CONTAINING PAGES FROM 1 TO 3, IN WHICH HE HAS ATTACHED THE WRITTEN SUBMISSIONS DATED 10.06.2013; WRITTEN SUBMISSIONS D ATED 09.07.2013; LEARNED ASSESSING OFFICER COMMENTS; REPLY FILED AGA INST ASSESSING OFFICER COMMENTS DATED 29.07.2013; CASE OF DCIT VS. HIMALAYA MACHINERY (P.) LTD. (GUJARAT HIGH COURT); CASE OF C IT VS. ASSAM PETROLEUM INDUSTRIES (P) LTD. (GAUHATI HIGH COURT); CASE OF CIT VS. ACE BUILDERS (P) LTD. (BOMBAY HIGH COURT); AND POWER OF ATTORNEY. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDER PASSED BY T HE REVENUE AUTHORITY AND WE ARE OF THE VIEW THAT AS PER RECORD, THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF SALES & PURCHASE OF ALL KINDS OF PAINTS , CHEMICALS AND BUILDING MATERIAL UNDER THE NAME AND STYLE OF M/S R ANG MEHAL, NAKODER ROAD, JALANDHAR. DUE TO THE FAILURE OF BUSINESS, AS SESSEE DECIDED TO CLOSE DOWN ITS BUSINESS AND SOLD THE COMMERCIAL PROPERTY SITUATED AT NAKODER 6 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 ROAD, JALANDHAR. SALE DEED OF THE SAME WAS EXECUTED ON 13.08.2009 AT RS. 49,06,000/-. PROPERTY SOLD WAS PURCHASED BY THE ASSESSEE ON 02.09.2004 AND WRITTEN DOWN THE VALUE OF PROPERTY I N BOOKS OF ACCOUNT WAS RS. 14,86,352/-, CAPITAL GAIN WAS WORKED OUT AT RS. 34,19,648/- AN DEDUCTION OF RS. 34,19,648/- WAS CLAIMED U/S 54EC O F ACT BEING AMOUNT OF RS. 35,00,000/- INVESTED IN SPECIFIED ASSETS. CA PITAL GAIN OFFERED TO TAX WAS NIL. WHILE FRAMING ASSESSMENT U/S 143(2) OF THE ACT, THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION OF RS. 34,19,6 48/- CLAIMED UNDER SECTION 54EC OF THE ACT BY COMPLETING THE ASSESSMEN T UNDER SECTION 143(3) OF THE ACT. 9. WE HAVE THOROUGHLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER AND WE ARE OF THE VIEW THAT THE ASSESSEE HA S NARRATED THE BRIEF FACTS OF THE CASE AND DISCLOSED THE ISSUE IN DISPUT E BEFORE THE ASSESSING OFFICER AND CLAIMED THE EXEMPTION SECTION 54EC OF T HE ACT WITH THE SUPPORT OF THE CASE-LAWS RENDERED BY HON'BLE GAUHAT I HIGH COURT IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRY PVT. LTD. REPORTED IN 262 ITR PAGE 587 AND HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDER PVT. LTD. REPORTED IN 281 ITR PAGE 210. INC OME TAX OFFICER, WARD 1(3), JALANDHAR, HIMSELF ADMITTED THAT THE CAS E-LAW RELIED UPON BY THE ASSESSEE SQUARELY APPLIES TO THE FACTS OF THE A SSESSEES CASE BUT THE 7 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 REVENUE HAS NOT ACCEPTED THE DECISION AND PREFERRED TO DECIDE THE MATTER IN FAVOUR OF THE REVENUE. IN OUR CONSIDERED VIEW, T HE ASSESSING OFFICER HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE WITH OUT RESPECTING THE ORDER OF THE HON'BLE HIGH COURTS (SUPRA) OR HAS PLA CED ON RECORD ANY STAY ORDER OF HON'BLE SUPREME COURT OF INDIA ON THE JUDG MENT OF HON'BLE BOMBAY HIGH COURT. HE HAS ALSO NOT CITED ANY JUDGME NT OF THE HON'BLE HIGH COURT CONTRARY TO THE JUDGMENTS CITED BY THE A SSESSEE BEFORE HIM. SH. SHIV CHARAN SAINI, THE THEN INCOME TAX OFFICER, WARD 1(3), JALANDHAR, HAD DISRESPECTED THE JUDGMENT RENDERED B Y THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDE R PVT. LTD. REPORTED IN 281 ITR PAGE 210. THUS, WE EXPRESS OUR DISPLEASURE ON THE CONDUCT OF SH. SHIV CHARAN SAINI, THE THEN INCOME T AX OFFICER, WARD 1(3), JALANDAHR. THE RELEVANT PORTION OF THE REPLY OF THE ASSESSEE AND THE OBSERVATION OF THE ASSESSING OFFICER, WHICH ARE AT PAGE NO. 2 OF THE ASSESSMENT ORDER, ARE REPRODUCED AS UNDER: THE ENTIRE CAPITAL GAIN ARISING FROM THE TRANSFE R OF DEPRECIABLE ASSET HAS BEEN DEPOSITED IN RURAL ELECTRIFICATION CORPORA TION LTD. NON- CONVERTIBLE BONDS ON 28.02.2010 AFTER SELLING THE A SSET. HENCE, THE ENTIRE CAPITAL GAIN COMES TO NIL. FOR JUSTIFICATION , I DRAW TO YOUR KIND ATTENTION THE JUDGMENT OF HON'BLE GAUHATI HIGH COUR T IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRY PVT. LTD. CITED AT 262 ITR PAGE 587. ANOTHER JUDGMENT CITED AT 281 ITR PAGE 210 OF THE B OMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDER PVT. LIMITED. 8 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 'I HAVE CONSIDERED THE CITATIONS AS REFERRED TO BY THE ASSESSEE AND RESPECTFULLY EXPRESSED THAT THE DECISION OF THE HON 'BLE BOMBAY HIGH COURT SQUARELY APPLIES TO THE FACTS OF THE CASE BUT THE REVENUE HAVING NOT ACCEPTED THE DECISION, I PREFER TO DECIDE THE MATTE R IN FAVOUR OF THE REVENUE. AS SUCH THE CLAIM OF THE ASSESSEE CLAIMING EXEMPTION U/S 54EC IS REJECTED AND THERE WILL BE ADDITION ON ACCOUNT O F SHORT TERM CAPITAL GAIN TO THE TOTAL INCOME OF THE ASSESSEE AT RS. 341 9648/- 10. LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY APPRE CIATED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IN THE APPELL ATE PROCEEDINGS AND HAS RIGHTLY DELETED THE ADDITION IN DISPUTE. LEARNED CO UNSEL FOR THE ASSESSEE HAS ALSO FILED THE JUDGMENTS OF HON'BLE GAUHATI HIGH CO URT IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRY PVT. LTD. REPORTED IN 262 ITR PAGE 587 AND THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. ACE BUILDER PVT. LTD. REPORTED IN 281 ITR PAGE 210 ON T HE ISSUE IN DISPUTE AND HE HAS ALSO FILED A JUDGMENT RENDERED BY HON'BLE GU JARAT HIGH COURT. 11. WE HAVE THOROUGHLY GONE THROUGH THE IMPUGNED ORD ER PASSED BY LEARNED FIRST APPELLATE AUTHORITY AS WELL AS THE JUDGMENTS RENDERED BY HON'BLE HIGH COURTS (SUPRA) AND RELIED UPON BY LEAR NED COUNSEL FOR THE ASSESSEE AND WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS PASSED A WELL REASONED ORDER. THE REL EVANT PORTION OF THE IMPUGNED ORDER I.E. PARA NOS. 5.5 AND 5.6 AT PAGE N O. 15 & 16, IS REPRODUCED BELOW: 9 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 5.5 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASS ESSING OFFICER AS MADE IN THE ASSESSMENT ORDER AS WELL AS IN THE REMA ND REPORT. I HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS AND COUNTER COMMENTS FILED BY THE ASSESSEE. I HAVE ALSO CONSIDERED THE ORDER M ATERIAL BROUGHT ON RECORD INCLUDING JUDICIAL PRONOUNCEMENTS RELIED UPO N BY THE ASSESSEE. AFTER CAREFULLY CONSIDERING THE MATERIAL BROUGHT ON BROUGHT ON RECORD AS WELL AS THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE, I AM OF THE CONSIDERED OPINION THAT THE ISSUE UNDER R EFERENCE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS WHICH HAS BEEN RELIED UPON BY THE AS SESSEE. 1. CIT VS. ACE BUILDERS (P) LIMITED 281 ITR 210 (B OM.) 2. DCIT, CIRCLE-1(2), BARODA VS. HIMALAYA MACHINER Y (P) LIMITED IN APPEAL NO. 271 OF 2012 VIDE ORDER DATED 27.11.2012 3. CIT VS ASSAM PETROLEUM INDUSTRIES (P) LIMITED 2 62 ITR 587(GAUHATI) 4. CIT VS. SMT. GODAVARIDEVI SARAR 113 ITR 589 (B OM.) THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 18.07.2013 HAS ALSO ACCEPTED THAT THE ISSUE UNDER REFERENCE IS SQUARELY COVERED BY THE ORDERS OF THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRIES (P) LIMITED 262 ITR 587 (GAUHATI) AND BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDE RS (P) LIMITED 281 ITR 210 (BOM.) 5.6 IN THE ABOVE STATED FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S 54EC OF THE INCOME TAX ACT, 1961 O F AN AMOUNT OF RS. 34,19,648/-. THE ADDITION OF RS. 34,19,648/- MA DE BY THE ASSESSING OFFICER IS, THEREFORE, DELETED. IN THE RE SULT, THE GROUNDS OF APPEAL NO. 1 TO 5 TAKEN BY THE ASSESSEE ARE, THEREF ORE, ALLOWED. 12. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE REVENUE HAS FILED THE PRESENT APPEAL WITHOUT GOING THROUGH THE FACTS AS WELL AS THE JUDG MENTS RENDERED BY HON'BLE HIGH COURT AND CITED IN THE ASSESSMENT ORDE R AS WELL AS IN THE 10 I.T.A. NO. 696 (ASR)/2013 ASSESSMENT YEAR: 2010-11 IMPUGNED ORDER. THUS, LEARNED FIRST APPELLATE AUTHO RITY HAS PASSED A WELL REASONED ORDER BY RESPECTFULLY FOLLOWING THE ORDER OF HON'BLE HIGH COURTS (SUPRA) AND HAS RIGHTLY CANCELLED THE ADDITI ON MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND WE UPHOLD THE IMPUGNED ORDER DATED 16 .09.2013 PASSED BY LEARNED CIT(A), JALANDHAR. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH FEBRUARY, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. RAJ KUMAR, M/S PAINT INDIA TRADIN G CO., NAKODAR ROAD, JALANDHAR, 2. ITO, WARD 1(3), JALANDHAR 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.