M/s. Gupta Automobiles, CHENNAI V. ITO, CHENNAI

ITA 70/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73727 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Principle of natural justice; Period of limitation; Benefit of exemption; Time period of passing order
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ I.T.A. NO.70/MDS/2013 ( / ASSESSMENT YEAR : 2009-2010) M/S. GUPTA AUTOMOBILES, NO.112/8, G.P. ROAD, LAKSHMI ARCADE, ANNA SALAI, CHENNAI 600 002 . [PAN: AAAFG0557C] ( !% /APPELLANT) VS THE INCOME TAX OFFICER, BUSINESS WARD VI(2), CHENNAI . ( &'!% /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE. / RESPONDENT BY : SHRI. T.N. BETGERI, I.R.S, JCIT. /DATE OF HEARING : 04-03-2014 /DATE OF PRONOUNCEMENT : 05-03-2014 #( / O R D E R PER DR. O.K. NARAYANAN, VICE PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-2010. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IX, CHENNAI PA SSED ON 31.10.2012. -2- ITA NO.70/MDS/2013. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U NDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 02. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN AUTOMOBILES AND GENERAL SPARE PARTS. THE ASSESSEE FIRM HAD INVESTED E38 LAKHS IN REC BONDS ON 24.03.2009. THIS AMOUNT OF E3 8 LAKHS WAS RECEIVED BY THE ASSESSEE FIRM AGAINST SURRENDERING ITS TENANCY RIGHTS. THE ENTIRE AMOUNT OF E38 LAKHS RECEIVED BY THE ASSE SSEE WAS DEPOSITED IN REC BONDS, WHICH IS A SPECIFIED INVEST MENT FOR CLAIMING EXEMPTION ON CAPITAL GAINS TAX. THE ASSESSEE CLAIM ED DEDUCTION UNDER 54EC ON THE ABOVE GROUND. BUT THE ASSESSING AUTHORITY HELD THAT THE DEPOSIT WAS MADE AFTER A PERIOD OF SIX MON THS AND THEREFORE THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION QUA THE LONG TERM CAPITAL GAINS TAXATION. THE ASSESSEES CLAIM WAS T HUS REJECTED. IN FIRST APPEAL, THE ORDER OF THE ASSESSING AUTHORITY ON THIS POINT HAS BEEN CONFIRMED. THE ASSESSEE IS AGGRIEVED AND THER EFORE, THE SECOND APPEAL BEFORE THE TRIBUNAL. 03. THE ASSESSEE HAS RAISED A LONG LINE OF GROUNDS IN THE PRESENT APPEAL PLACED BEFORE US. THESE GROUNDS READ AS FOL LOWS:- -3- ITA NO.70/MDS/2013. 2. THE CIT(APPEALS) ERRED IN SUSTAINING THE REJE CTION OF THE CLAIM OF EXEMPTION U/S54EC OF THE ACT IN THE COMPUTATI ON OF LONG TERM CAPITAL GAINS WITHOUT ASSIGINING PROPER REA SONS AND JUSTIFICATION. 3. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE CONDITIONS PRESCRIBED FOR THE ELIGIBILITY TO MAKE THE SAID CLAIM OF EXEMPTION IN THE COMPUTATION OF LONG TERM CAPITAL GAINS WE RE COMPLIED WITH AND SATISFIED ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE. 4. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE R EJECTION OF THE CLAIM OF EXEMPTION WITHOUT APPRECIATING THE RELEVAN T FACTS SUPPORTED BY EVIDENCE WAS WRONG, INCORRECT, UNJUSTI FIED, ERRONEOUS AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 5. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THERE WERE NO TWO AGREEMENTS (ONE ON 13.05.2008 AND ANOTHER ON 24.10. 2008) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND OUGHT TO HAVE APPRECIATED THAT THE SO CALLED AGREEMENT DATED 13.05.2008 WAS CLARIFIED TO BE THE RECEIPT FOR ADVA NCE OF MONEY FOR VACATING THE TENANTED PREMISES. 6. THE CIT(APPEALS) FAILED TO APPRECIATE THAT HAVIN G OBTAINED NECESSARY CLARIFICATION ON THE FACTUAL ASPECTS FROM THE STAKE/PROPERTY HOLDER, THE REJECTION AS WELL AS NON CONSIDERATION OF SUCH EVIDENCE WAS WRONG, INCORRECT, UNJUSTIFIED, ERRONEOUS AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 7. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE R ESULT OF CROSS VERIFICATION ON THE CONSIDERATION OF THE CLAM OF EX EMPTION U/S. 54EC OF THE ACT WAS NOT TAKEN TO THE LOGICAL END AN D NON CONSIDERATION OF RELEVANT EVIDENCE WOULD VITIATE HI S ACTION IN THIS REGARD. 8. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE E VIDENCE IN SUPPORT OF THE FACT OF VACATING THE TENANTED PREMIS ES WERE NOT TAKEN ON RECORD BY THE ASSESSING OFFICER IN VIEW OF HER HURRIED ACTION IN COMPLETING THE ASSESSMENT GROSSLY VIOLATI NG THE PRINCIPLES OF NATURAL JUSTICE. -4- ITA NO.70/MDS/2013. 9. THE CIT(APPEALS) FAILED TO APPRECIATE THAT ANY O RDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IS N ULLITY IN LAW AND OUGHT TO HAVE APPRECIATED THAT THE EVIDENCE AVAILAB LE WOULD CLEARLY FORTIFY THE EXTINGUISHMENT OF THE RIGHT/RE LINQUISHMENT OF THE RIGHT OVER THE TENANTED PROPERTY BY THE APPELLA NT BASED ON THE AGREEMENT DATED 24.10.2008 AS WELL AS CONSEQUEN TIAL ELIGIBLE TO MAKE THE CLAIM OF EXEMPTION U/S. 54EC O F THE ACT. 10. THE CIT(APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARA 5 OF THE IMPUGNED ORDER WITHOUT ASSI GNING PROPER REASONS AND JUSTIFICATION. 11. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE EVIDENCE IN SUPPORT FOR VACATING THE PREMISES IN NOVEMBER, 2008 WERE PLACED IN THE APPELLATE PROCEEDINGS AND WENT WRONG IN RECORDING THE FINDINGS IN THIS REGARD IN PARA 5.1 O F THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION . 04. WE HEARD SHRI. S. SRIDHAR, LEARNED COUNSEL APPE ARING FOR THE ASSESSEE AND SHRI. T.N. BETGERI, LEARNED JOINT COMM ISSIONER OF INCOME TAX APPEARING FOR REVENUE. 05. THE ASSESSEE FIRM M/S. GUPTA AUTOMOBILES WAS CA RRYING ON ITS BUSINESS AT PROPERTY NO.24, WOODS ROAD, MOUNT R OAD, CHENNAI. THIS PROPERTY WAS TAKEN ON LEASE BY SHRI. BALDEV KU MAR GUPTA, WHO IS ONE OF THE PARTNERS OF THE ASSESSEE FIRM. THEREAFTER, THE PARTNER BESTOWED THE PROPERTY TO THE ASSESSEE FIRM. THE FIRM WAS PAYING RENT TO THE LANDLORD. THEREAFTER, OWNERS OF THE PROPERTY DECIDED TO SELL THE PROPERTY TO M/S. TAJ GVK HOTELS AND RESORTS LIMITED. IN ORDER TO SELL T HE PROPERTY WITHOUT ANY -5- ITA NO.70/MDS/2013. ENCUMBRANCE, IT WAS AGREED TO COMPENSATE THE ASSESS EE TO VACATE THE PREMISES. 06. IN THE ABOVE SCENARIO, A SETTLEMENT WAS ARRIVED BETWEEN THE ASSESSEE FIRM AND M/S. TAJ GVK HOTELS AND RESORTS L IMITED. AS PER THE SETTLEMENT, THE ASSESSEE FIRM WOULD BE PAID A SUM O F E38 LAKHS AND THEREAFTER, THE ASSESSEE FIRM WOULD VACATE THE PROP ERTY. THE SETTLEMENT WAS REFLECTED IN THE AGREEMENT EXECUTED ON 13.05.2008. IN THE LIGHT OF THE ABOVE AGREEMENT DATED 13.05.200 8, THE ASSESSEE FIRM WAS PAID TWO CHEQUES FOR THE SAID AMOUNT OF E3 8 LAKHS ON 27.06.2008. THOSE CHEQUES WERE ENCASHED BY ASSESSEE FIRM ON 30.06.2008. THUS IT IS TO BE SEEN THAT THE ASSESSE E FIRM HAD RECEIVED A SUM OF E38 LAKHS ON 27.06.2008 IN PURSUANCE TO TH E AGREEMENT EXECUTED ON 13.05.2008. AS PER THE AGREEMENT DATED 13.05.2008, THE ASSESSEE FIRM WAS BOUND TO HANDOVER PHYSICAL PO SSESSION OF THE PROPERTY RESULTING IN TERMINATION OF THE TENANCY RI GHTS. 07. THE BENEFIT OF EXEMPTION UNDER SECTION 54EC W OULD BE AVAILABLE ONLY IF THE TRANSFER CONSIDERATION WAS INVESTED IN THE SPECIFIED -6- ITA NO.70/MDS/2013. INSTRUMENT WITHIN A PERIOD OF SIX MONTHS FROM THE D ATE OF TRANSFER. THE AMOUNT WAS ENCASHED BY THE ASSESSEE ON 30.06.20 08. THE ASSESSEE HAD TO MAKE INVESTMENT IN REC BONDS LATEST BY 31.12.2008. BUT, ON FACT, THE ASSESSEE HAD MADE THE INVESTMENT ONLY ON 24.03.2009. THEREFORE, THE ASSESSING AUTHORITY HEL D THAT THE ASSESSEE HAD FAILED TO INVEST THE MONEY IN THE SPEC IFIED FUND WITHIN THE STIPULATED TIME. HE HELD THAT, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 54EC OF THE AC T. 08. BUT THE CASE OF THE ASSESSEE IS THAT THERE IS A MEMORANDUM OF AGREEMENT DATED 24.10.2008 BETWEEN THE PARTIES A ND THE SAME SHOULD BE CONSIDERED FOR THE PURPOSE OF COUNTING TH E LIMITATION PERIOD OF SIX MONTHS. THE SAID MEMORANDUM OF AGREEMENT DA TED 24.10.2008 WAS SIGNED BY SHRI.P. SRINIVASULU REDDY, AUTHOIRSED SIGNATORY AND SHRI. BALDEV KUMAR GUPTA, PARTNER OF THE ASSESSEE FIRM. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THERE SHOULD BE TWO AGREEMENTS FOR THE SAME TRANSACTION. THE ASSESSEE EXPLAINED THAT THE AMOUNT RECEIVED BY THE ASSESSEE IN THE LIGHT OF THE AGREEMENT -7- ITA NO.70/MDS/2013. DATED 13.05.2008 WAS ONLY AN ADVANCE AND THE FINAL AGREEMENT WAS ENTERED ONLY ON 24.10.2008 AND THEREFORE THE SURREN DER OF TENANCY RIGHTS SHOULD BE RECKONED FROM THE DATE OF THE SECO ND AGREEMENT DATED 24.10.2008. 09. WE EXAMINED THIS ISSUE IN DETAIL. AS PER THE A GREEMENT DATED 13.05.2008, THE AMOUNT PAYABLE TO THE ASSESSE E FIRM WAS E38 LAKHS. THE WHOLE AMOUNT WAS PAID TO THE ASSESSEE B Y TWO CHEQUES DATED 27.06.2008. THEREFORE, THERE IS NO FORCE I N THE ARGUMENT OF THE ASSESSEE THAT THE PAYMENT OF E38 LAKHS PAID BY M/S. TAJ GVK HOTELS AND RESORTS LIMITED WAS ONLY AN ADVANCE. AS PER THE AGREEMENT DATED 13.05.2008, THE ASSESSEE FIRM WAS T O VACATE THE PREMISES IMMEDIATELY. IF THE CONTENTION OF THE AS SESSEE IS TO BE ACCEPTED IN THE LIGHT OF THE SECOND AGREEMENT DATED 24.10.2008, THE ASSESSEE SHOULD HAVE SHOWN THAT IT HAD CONTINUED PO SSESSION OF THE PROPERTY TILL THAT DATE. NOTHING IS AVAILABLE ON R ECORD TO COME TO SUCH A CONCLUSION. -8- ITA NO.70/MDS/2013. 10. WE UNDERSTAND FROM THE FACTS OF THE PRESENT CA SE, THAT THE ASSESSEE FIRM HAD VACATED THE POSSESSION IMMEDIATEL Y AFTER EXECUTING AGREEMENT ON 13.05.2008. THE CONSIDERATI ON FOR TERMINATING TENANCY RIGHTS WAS ALSO RECEIVED BY THE ASSESSEE IMMEDIATELY. THEREAFTER, THERE WAS NOTHING TO BE PERFORMED BY ANY OF THE PARTIES. SURRENDERING TENANCY RIGHTS BY THE ASSESSEE FIRM WAS CONCLUDED BY THE AGREEMENT ON 13.05.2008 ITSELF. T HEREFORE, THE SAID SECOND MEMORANDUM DATED 24.10.2008 RELIED ON B Y THE ASSESSEE IS NOT A RELEVANT MATERIAL. IN THE COURSE OF HEARING, THE ASSESSEE HAD PRODUCED BEFORE US A COPY OF A LETTER WRITTEN BY M/S.TAJ GVK HOTELS AND RESORT LIMITED TO THE ASSESSING AUT HORITY ON 21 ST DECEMBER, 2011. IT IS STATED IN THE SAID LETTER THA T THE PAYMENT OF E38 LAKHS WAS ONLY AN ADVANCE AND FINAL CONSENSUS W AS ARRIVED ONLY IN OCTOBER, 2008 AND THE VACANT POSSESSION OF THE PROPERTY WAS ONLY RECEIVED IN NOVEMBER, 2008. WE WISH TO STATE THAT THIS IS ONLY A SELF- SERVING EVIDENCE. TO MAKE UP THE CASE, THE ASSESSEE ENTERED INTO A SECOND MEMORANDUM AGREEMENT DATED 24.10.2008 TO EXT END THE TIME TO DEPOSIT THE CONSIDERATION IN SPECIFIED BOND S. -9- ITA NO.70/MDS/2013. 11. AS RIGHTLY POINTED OUT BY THE JOINT COMMISSIONE R OF INCOME TAX, THE ASSESSEE BROUGHT UP THE ISSUE OF SECOND AG REEMENT DATED 24.10.2008 ONLY TO EXTEND THE LIMITATION PERIOD FOR INVESTING THE CONSIDERATION OF E38 LAKHS. THE SECOND AGREEMENT DATED 24.10.2008 AND THE LETTER ISSUED BY M/S. TAJ GVK H OTELS AND RESORTS LIMITED ARE ONLY SELF SERVING EVIDENCES. 12. WE AGREE WITH THE LOWER AUTHORITIES THAT THE T RANSFER WAS CONCLUDED BY THE AGREEMENT DATED 13.05.2008. AS SU CH, THE ASSESSEE HAD NOT MADE INVESTMENT OF THE CONSIDERATI ON WITHIN THE PERIOD OF SIX MONTHS. IT IS TO BE SEEN THAT THE CO NSIDERATION OF E38 LAKHS WAS ALSO RECEIVED BY THE ASSESSEE FIRM IMMED IATELY AFTER EXECUTING THE AGREEMENT DATED 13.05.2008. 13. IN THESE CIRCUMSTANCES, THE CLAIM OF THE ASSESS EE FOR EXEMPTION UNDER SECTION 54EC, IS NOT SUSTAINABLE IN LAW. 14. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. -10- ITA NO.70/MDS/2013. 15. ORDER PRONOUNCED ON WEDNESDAY, THE 5 TH OF MARCH, 2014, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (DR. O.K. NARAYANAN) VICE PRESIDENT DATED:05 TH MARCH, 2014. K.V COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR/GUARD FILE.