ASST CIT CEN CIR 6(1), MUMBAI V. PODAR MILLS LTD, MUMBAI

ITA 6976/MUM/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1740 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PANKAJ TOPRANI
• Keywords: Capital asset converted into stock in trade; Sale consideration of property below Jantri Value; Capital asset
• Section: 45(2); 143(3); 50C; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER ITA NO. 6976/MUM/2017 (A.Y. 2008-09) DCIT- Central Circle – 6(1) Room No. 1905, 19 th Floor Air India Building Nariman Point Mumbai – 400 021 v. M/s. Podar Mills Ltd., Apar House, Hanuman Prasad Jat E-71A, AMBA Apartment Ambabari, Jaipur - 302012 PAN: AAACT4911G (Appellant) (Respondent) Assessee by : Shri Pankaj Toprani Department by : Shri R.A. Dhyani Date of Hearing : 24.02.2022 Date of Pronouncement : 20.05.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the Revenue against order of the Learned Commissioner of Income Tax (Appeals)-54, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.09.2017 for the A.Y. 2008-09. 2. Brief facts of the case are, assessee had filed return of income on 30.09.2008 admitting total income at ₹.10,40,62,071/-. The Return was 2 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., processed u/s.143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently notice u/s.148 was issued on 30.03.2015. The Assessment order u/s. 143(3) r.w.s. 147 of the Act was passed on 07.01.2016 wherein the total income was assessed at ₹.16,20,27,120/-. 3. The relevant facts relating to above addition are assessment u/s.143(3) of the Act was completed on 30.11.2010 determining total income at ₹.11,41,14,950/-. In the above assessment, the Assessing Officer made addition of ₹.3,55,172/- on account of long term capital gain on conversion of land into stock-in-trade. The above said land was sold to Swarn Bhumi Township Pvt. Ltd. and M/s. Girija Kripa Developers Pvt. Ltd. during the financial year for a total consideration of ₹.20 crores. A search and seizure action u/s.132 of the Act was carried out on 20.01.2011 on M/s. Raj Oil Mill Ltd. The assessee was also covered u/s.132 of the Act on the basis of statement recorded u/s.132(4) from Shri Mohammdi T Singaporewala. The above cases were centralized and notice u/s. 153C of the Act was issued and served on the assessee on 01.02.2013. Subsequently the order u/s.143(3) r.w.s. 153(C) of the Act was passed on 28.03.2013 accepting the returned income filed by the assessee. Subsequently notice u/s.148 was issued on 30.03.2015. The Assessment order u/s. 143(3) r.w.s. 147 of the Act was passed on 3 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., 07.01.2016 wherein the total income was assessed at ₹.16,20,27,120/-. Aggrieved assessee preferred an appeal before the Ld.CIT(A), contesting the additions proposed by the Assessing Officer u/s. 50C of the Act. 4. Subsequently, Assessing Officer received information from Income Tax Officer-Ward 3(5), Jaipur on 25.03.2015 stating that the assessee has sold land at Jaipur to Shri Mukesh Gupta and Ms. Aishwarya Mahajan. Based on the information received from Income Tax Officer, Jaipur, the Assessing Officer recorded the reasons for reopening and supplied the same to the assessee. The relevant reasons are reproduced in the order of the First Appellate Authority at Para No. 4.2 of the order. The assessee made detailed submissions before the Assessing Officer and Assessing Officer rejected the same and proceeded to complete the assessment u/s.143(3) r.w.s. 147 of the Act. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions objecting the additions made by the Assessing Officer. After considering the detailed submissions filed by the assessee Ld.CIT(A) allowed the ground raised by the assessee in this regard with the following observations: - "4.6 During the course of appellate proceedings, the Ld. Counsel for the appellant submitted that the appellant was in possession of leasehold rights of lands which were converted to stock-in-trade in 1974. They have been consistently shown in the P & L account as opening account ever since. The Ld. Counsel for the appellant 4 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., pointed out certain factual errors like the market value of the property which was sold at Rs.6 crores being shown by the Ld.A0 as Rs.10,34,74,768/- whereas factually it was only Rs.7,37,94,112/-. The said asset was subject to wealth tax as stock-in-trade. Once the asset is a stock-in- trade, the provisions of section 50C was not applicable. There were three plots of land sold, two of them sold to Swarn Bhumi Township Pvt. Ltd. for consideration of Rs.9.50 crores and Rs.4.50 crores, respectively. The third plot of land was sold to M/s. Girija Kripa Developers Pvt. Ltd. for a consideration of Rs.6 crores. The total consideration of Rs.20 crores has been shown as sale proceeds in the P & L account. Though the Ld. AD has not mentioned the section under which the disallowance is being made, the assessee has presumed it should be u/s.50C and submitted that the section 50C is not applicable to lease hold rights or stock-in- trade. The Ld. Counsel for the appellant filed copies of sale agreement for all the three transactions. It is seen from the same that there is no difference between sale consideration and the market value for the plot of lands admeasuring 35,380 sq. yd. or for the plot of land sold to Swarn Bhumi Township Pvt. Ltd. for Rs.9.50 crores. The market value for another piece of land sold to Swarn Bhumi Township Pvt. Ltd. for Rs.4.50 crores is Rs.5,94,90,276/-. The market value of land sold to M/s. Girija Kripa Developers Pvt. Ltd. for Rs.6 crores is Rs.7,37,94,112/-. Thus, there is a difference between sale consideration and the market value for the last two transactions which works out to Rs.2,82,84,388/-. As the properties in question are held as stock-in-trade, there is no question of applicability of section 50C to tax the difference. The difference in such transactions can be brought to tax u/s.56(2)(vii) but this section is only applicable to an individual or a Hindu Undivided Family (HUE) and has come into effect from 01.04.2014, therefore, the appellant is not covered under this section as it is a private limited company and the transactions pertain to FY. 2007-08. 4.7 The Ld. AO has not brought any material on record which would prove or atleast indicate that the assessee has received any sum over and above sale consideration. In the absence of any such fact finding, it is not possible to sustain the addition made by the Ld.AO. Additions cannot he made merely on the basis of suspicion, surmises and conjectures. There has to be some evidence either direct or indirect. Moreover, the Ld. AO has not referred to any section under which the disallowance is made. On the other hand, the Ld.Counsel of the appellant has shown documentary evidence that the land has been held as stock-in-trade which has been accepted by the Department on two occasions - once when the 5 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., original assessment was passed u/s.143(3) for the same year and the second time when it was taxed as stock-in-trade in the assessee’s wealth tax assessment. The Ld. AO is, therefore, directed to delete the addition. These grounds are ALLOWED.” 5. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, Ld. CIT(A), while recording a finding of fact that assesse had converted the land into stock in trade, from "capital asset", ignored the fact that on sale of such "stock in trade" after conversion, provision of section 45(2) is attracted." 2. "On the facts and in the circumstances of the case and in law, Ld. CIT(A), ignored the fact that provision of section 50C is applicable once the sale of land has to be taxed as capital gain as required under section 45(2) of the Act." 6. At the time of hearing, Ld. DR refereed to the grounds of appeal raised by the department and submitted that this issue involved land conversion into stock in trade. He brought to our notice Para No. 2 of the Assessment Order and submitted that assessee has converted the land into stock in trade and subsequently sold the same. He also brought to our notice Page No. 7 of the Appellate Order and submitted that the actual lease hold rights were converted into stock in trade in the year 1974. He objected to the deletion of the addition by the Ld.CIT(A) and prayed that additions proposed by the Assessing Officer may be sustained. 6 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., 7. On the other hand, Ld. AR brought to our notice Page No. 1 of the Paper Book which is the original Assessment Order passed u/s. 143(3) of the Act in which the same issue was considered by the then Assessing Officer and accordingly, assessee accepted and offered the long term capital gain on such conversion of stock. Further, he brought to our notice Page No. 4 of the Paper Book which is the Assessment Order passed u/s.143(3) r.w.s. 153C of the Act in which similar issue was raised by the Assessing Officer and the assessment was completed without making any addition. Further, he brought to our notice Page No. 7 of the Paper Book which is the impugned order passed by the Assessing Officer in which similar issue was once again raised by the Assessing Officer and finally he brought to our notice Para No. 4.7 of the order of the Ld.CIT(A) and supported the finding of the Ld.CIT(A). In this regard he relied on the case laws filed before the Bench which is part of the Paper Book. 8. Considered the rival submissions and material placed on record, we observe that revenue is in appeal objecting to the order passed by the Ld.CIT(A) and the department raised two grounds of appeal with the plea that Ld.CIT(A) by recording a fact that assessee had converted the land into stock in trade from “capital asset” and he ignored the fact that on 7 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., sale of such “stock in trade” after conversion, provisions of section 45(2) is attracted. 9. With regard to the above ground, it is brought to our notice by the Ld. AR that exactly similar issue was considered by the then Assessing Officer while completing original assessment u/s. 143(3) of the Act and the assessee also accepted that assessee has converted the capital assets into stock in trade and the proposed addition on such conversation was duly accepted by the assessee and paid the relevant due tax. Therefore, this issue is already considered by the then Assessing Officer and subsequently in subsequent re-assessment proceedings also similar issue was considered and accepted by the then Assessing Officers. Therefore, this issue is already settled and once again revenue has raised ground on the same issue. Therefore, we do not find any reason to adjudicate anything contrary to the settled issue. Accordingly, this ground of appeal is dismissed. 10. With regard to Ground No. 2, Revenue has raised this ground with the plea that Ld.CIT(A) ignored the fact that provisions of section 50C is applicable once the sale of land has to be taxed as capital gain, as required u/s. 45(2) of the Act. 8 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., 11. After considering the submissions of both the parties, we observe that in the first ground of appeal the Assessing Officer himself accepted that the capital assets were converted into stock in trade and Ld.CIT(A) has not considered the above fact and provisions of section 45(2) is attracted. Once Assessing Officer acknowledged the fact that the ‘capital assets” is converted into stock in trade and once again immediately in the Ground No. 2 the Assessing Officer cannot contest that sale of above said land has to be taxed as capital gain and section 50C is attracted in this case. As per the facts submitted before us clearly indicate that the capital asset is converted into stock in trade and accordingly, assessee has declared the income as stock in trade. This fact is accepted by the revenue in more than one re-assessment proceedings, therefore, we do not find any reason to allow this grounds of appeal. Accordingly, this ground of appeal is dismissed. 12. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court on 20.05.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 20.05.2022 Giridhar, Sr.PS 9 ITA NO. 6976/MUM/2017 (A.Y. 2008-09) M/s. Podar Mills Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum