Jasper Auto Services Private Limited, Hyderabad V. Deputy Commissioner Of Income Tax, Circle-2(1), Hyderabad

ITA 705/Hyd/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2455 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 09-09-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 19-11-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Capital asset; Business income; Deemed to accrue or arise in india; Cost of acquisition; Agreed addition; Condonation of delay; Set aside; Capital Gains
• Section: 143(3); 192; 48; 2(A); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. 705/H/2020 ASSESSMENT YEAR: 2014 - 15 JASPER AUTO SERVICES PVT. LTD., HYDERABAD. PAN AACCB 0196P VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI P. MURALI MOHAN RAO REVENUE BY: SMT. N. SWAPNA DATE OF HEARING: 09/09/2021 DATE OF PRONOUNCEMENT: 28/1 0 /2021 O R D E R PER L.P. SAHU, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST CIT(A) - 6, HYDERABAD S ORDER DATED 01/08/2018 FOR AY 2014 - 15 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT ON THE FOLLOWING GROUNDS OF APPEAL: 1) THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL 2) (A) THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.3,68,33,000/ - _ MADE TOWARDS LONG TERM CAPITAL GAINS. 2 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 2 (B) THE LD. CIT(A) ERRED IN HOLDING THAT IN THE APPELLANT'S CASE, THERE WAS A SLUMP SALE WITHIN THE MEANING OF SECTION 2(42C) OF THE ACT ATT RACTING THE PROVISIONS OF SECTION 50B OF THE ACT. (C)THE LD. CIT(A) ERRED IN HOLDING THAT THE TRANSFER OF PART OF THE ASSESSEE'S ASSETS AS 'SLUMP SALE' AND THAT THE PROVISIONS OF SECTION 50B OF THE ACT WOULD ATTRACT. (D) THE LD. CIT(A) OUGHT TO HAVE AP PRECIATED THAT THE SALE OF ASSETS OF 'PASSENGERS CAR BUSINESS' OF THE ASSESSEE IS NOT IN THE NATURE OF 'SLUMP SALE . (E) THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE IMPUGNED SALE OF ASSETS IS AN ITEMIZED SALE AND THAT IT CANNOT BE TREATED AS A 'SL UMP SALE' WITHIN THE MEANING OF SECTION 2(42C) OF THE ACT. 3 (A) THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE 0 EXPENDITURE TO THE EXTENT OF RS.12,14,253/ - (B) THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE AGREEMENT OF THE ASSESSEE'S AR FO R THE DISALLOWANCE OF RS. 12,14,253/ - , DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAS NOT BEEN AUTHORISED BY THE APPELLANT. 4. THE APPELLANT MAY, ADD OR ALTER OR AMEND OR MODIFY OR SUBSTITUTE OR DELETE AND / OR RESCIND ALL OR ANY OF THE GROUNDS OF APPE AL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. WE NOTICE AT THE OUTSET THAT ASSESSEES INSTANT APPEALS SUFFER FROM 753 DAYS DELAY IN FILING BEFORE THE ITAT. TO THIS EFFECT, THE ASSESSEE FILED A PETITION ALONG WITH AN AFFIDAVIT FOR CONDONATION OF DELAY WHEREIN IT WAS INTER - ALIA, AFFIRMED THAT DUE TO THE PAPERS RELATING TO APPEAL MISPLACED BY ONE OF OFFICE STAFF, CAUSED THE IMPUGNED DELAY IN FILING OF THE INSTANT APPEALS. CASE LAW COLLECTOR 3 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 3 LAND ACQUISITION VS MST. KATIJI & ORS, 19 87 AIR 1353 (SC) AND UNIVERSITY OF DELHI VS. UNION OF INDIA, CIVIL APPEAL NO. 9488 & 9489/2019 DATED 17 DECEMBER, 2019, HOLD THAT SUCH A DELAY; SUPPORTED BY COGENT REASONS, DESERVES TO BE CONDONED SO AS TO MAKE WAY FOR THE CAUSE OF SUBSTANTIAL JUSTICE. W E ACCORDINGLY HOLD THAT ASSESSEES IMPUGNED DELAY IS NEITHER INTENTIONAL NOR DELIBERATE BUT DUE TO THE CIRCUMSTANCES BEYOND ITS CONTROL. THE SAME STANDS CONDONED. CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF TRADING OF AUTOMOBILES AND SERVICING OF MOTOR VEHICLES, FILED ITS RETURN OF INCOME FOR THE AY 2014 - 15 ON 30/09/2014 ADMITTING LOSS OF RS. 4,08,54,293/ - UNDER NORMAL PROVISIONS AND ADMITTED BOOK PROFIT U/S 1 15JB OF RS. 36,28,980/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICES WERE ISSUED, AGAINST WHICH, THE AR OF THE ASSESSEE FURNISHED THE INFORMATION AS CALLED FOR. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE COMPANY SOLD PASSENGERS CAR DEALERSHIP OF TATA MOTORS BUSINESS IN THREE DISTRICTS OF ANDHRA PRADESH TO M/S. JASPER AUTOMOBILES PRIVATE LIMITED (JAPL) FOR A CONSIDERATION OF RS 14,00,00,000/ - . FURTHER, THE AO EXAMINED THE AGREE MENT DATED 28.03.2014 ENTERED IN TO BETWEEN THE ASSESSEE AND JAPL AND FOUND THAT AS PER CLAUSE (3) OF THE AGREEMENT, THE ASSESSEE SOLD BUSINESS OF DEALERSHIP OF PASSENGER CARS, SUPPLY OF 4 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 4 SPARE PARTS AND SERVICE OF VEHICLES AS A GOING CONCERN TO JAPL ACCOR DINGLY, THE AO OPINED THAT THE TRANSACTION IS IN THE NATURE OF SLUMP SALE AS ENVISAGED U/S. 5OB OF THE ACT AND PROPOSED TO ADD A SUM OF RS.3,68,33,000/ - , BEING THE DIFFERENCE BETWEEN TOTAL SALE CONSIDERATION RECEIVED OF RS.L4,00,00,000/ - AND NET WORTH OF T HE COMPANY OF RS. 10. 32 CR. AS LTCG. IN THIS REGARD, THE ASSESSEE WAS OFFERED TO FILE ITS OBJECTIONS AND IN RESPONSE, VIDE ITS LETTER DATED 15.01.2016, MADE CERTAIN WRITTEN SUBMISSIONS OBJECTING TO THE PROPOSED ADDITION TREATING THE TRANSACTION AS SLU MP SALE. THE GIST OF THE ASSESSEE'S OBJECTIONS IS GIVEN BELOW. ' 1. THE DIFFERENCE BETWEEN THE SALE CONSIDERATION AND NET WORTH OF THE COMPANY OF RS.3,68,33,000/ - IS RECEIVED TOWARDS TRANSFER OF GOODWILL OF THE COMPANY AND, THEREFORE. THE SAME IS IN THE NATURE OF LOSS OF PROFIT TO THE COMPANY. THUS, THE SAME IS NOT TAXABLE. 2. THE SALE OF ASSETS OF THE COMPANY TO JAPL IS NOT IN THE NATURE OF SLUMP SALE SINCE THERE ARE STILL SOME ASSETS CONTINUING IN THE BALANCE SHEET OF THE COMPANY GENERATING INCOME. ACCORDINGLY, THE PROVISIONS OF SECTION 5OB OF THE ACT ARE NOT APPLICABLE. 3.2 AFTER HAVING CONSIDERED THE OBJECTIONS OF THE ASSESSEE, THE AO DID NO T ACCEPT THE SAME ON THE GROUND THAT THE ASSESSEE SOLD THE BUSINESS FOR A LUMP SUM CONSIDERATION WITHOUT THERE BEING ANY ITEMIZED SALE OF ASSETS AND, THEREFORE, THE PROVISIONS OF SECTION 50B OF THE ACT ARE SQUARELY APPLICABLE. ACCORDINGLY, THE AO BROUGHT T HE DIFFERENCE AMOUNT OF RS.3,68,33,000/ -- TO TAX AS LTCG. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 5 5. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, IT WAS CONTENDED BY THE ASSESSEE THAT THE SALE OF ASSE TS OF PASSENGER CAR BUSINESS OF THE ASSESSEE IS NOT IN THE NATURE OF SLUMP SALE AS ALL THE ASSETS WERE NOT TRANSFERRED AND THERE WAS AN ITEMIZED SALE OF ASSETS. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REFERRING TO THE PROVISIONS OF SECTION 50B AND CONSIDERING THE DECISIONS OF THE HONBLE SUPREME COURT, THE CIT(A), CONFIRMED THE ACTION OF THE AO, INTER - ALIA, OBSERVING AS UNDER: 7.6.14 IN THE INSTANT CASE, THERE IS NO DI SPUTE WITH REGARD TO QUANTUM OF LTCG COMPUTED. ON THE OTHER HAND, THE ONLY, CONTENTION OF THE ASSESSEE IS THAT CERTAIN ASSETS STILL EXIST IN ITS BALANCE SHEET AFTER THE SALE, I HAVE EXAMINED THE SAME AND FOUND THAT SUCH ASSETS HAVE NO NEXUS WITH THE TRANSF ER OF THE BUSINESS OF PASSENGER CAR DEALERSHIP OF TATA MOTORS OF THE ASSESSEE INASMUCH AS ALL THE ASSETS PERTAINING TO THAT BUSINESS HAVE BEEN TRANSFERRED TO JAPL AS EVIDENCED BY MOU AND THE AGREEMENT (SUPRA). AT THIS JUNCTURE, IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE IS CARRYING ON OTHER BUSINESS ACTIVITIES I.E., SUPPORTING & AUXILIARY TRANSPORT ACTIVITIES AND ACTIVITIES OF TRAVEL AGENCIES, AND BY VIRTUE OF W HI CH THE ASSESSEE IS DERIVING INCOME, EVEN AFTER TRANSFER OF BUSINESS OF PASSENGER CAR DEALER SHIP OF TATA MOTORS TO JAPL. ACCORDINGLY, THE ASSESSEE COMPANY IS HAVING CERTAIN ASSETS RELATING TO SUCH EXISTING BUSINESS. HOWEVER, THE IMPORTANT FACT TO BE NOTICED IS THAT ALL THE ASSETS PERTAINING TO BUSINESS OF PASSENGER CAR DEALERSHIP OF TATA MOTORS H AVE BEEN TRANSFERRED TO JAPL ON A GOING CONCERN BASIS. IN VIEW OF THIS, THE ASSESSEE CANNOT ARGUE THAT THE PROVISIONS OF SECTION SOB OF THE ACT ARE NOT APPLICABLE SINCE CERTAIN ASSETS EXIST IN ITS BALANCE SHEET. 7.6.15. IT IS ALSO CONTENDED BY THE ASSES SEE THAT IT WAS AN ITEMIZED SALE, BUT THE SAME IS BASELESS AND DEVOID OF MERITS 6 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 6 INASMUCH AS, AS CLEARLY MENTIONED IN THE AGREEMENT (SUPRA) THERE IS NO ITEMIZED SALE ATTRIBUTING VALUE TO EACH ASSET OF THE BUSINESS TRANSFERRED TO JAPL AND THE ASSESSEE HAS RE CEIVED A LUMP SUM AMOUNT OF RS. 14,00,00,000/ - TOWARDS THE TRANSFER OF ALL THE ASSETS OF THE BUSINESS OF PASSENGER CAR DEALERSHIP OF TATA MOTORS. 7.6.16 IN VIEW OF THE ABOVE FACTUAL MATRIX, INTERPRETATION OF THE PROVISIONS OF THE ACT AND SETTLED PROVISIO NS OF THE LAW AS PER THE JUDICIAL PRECEDENTS, IN THE INSTANT CASE, THERE WAS IN FACT A SLUMP SALE WITHIN THE MEANING OF SECTION 2(42C) OF THE ACT ATTRACTING THE PROVISIONS OF SECTION SOB OF THE ACT. THUS, 1 DO NOT FIND FAULT WITH THE ORDER OF THE AO IN INV OKING THE PROVISIONS OF SECTION 50B OF THE ACT AND TAXING LTCG OF RS 3,68,33,000/ - . ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 7.7 TAXABILITY OF CONSIDERATION RECEIVED TOWARDS SALE OF GOODWILL AS INCOME: ALTE RNATIVELY, IF THE DIFFERENCE BETWEEN SALE CONSIDERATION AND NET WORTH OF THE COMPANY IS CONSIDERED AS CONSIDERATION RECEIVED TOWARDS THE SALE OF GOODWILL, WHETHER SUCH GOODWILL IS TAXABLE AS PER THE PROVISIONS OF THE ACT? 7.7.1 COMING TO THE SECOND CONTENTION RAISED BY THE ASSESSEE BEFORE THE AO I.E., THE DIFFERENCE BETWEEN THE SALE CONSIDERATION AND NET WORTH OF THE COMPANY OF RS.3,68,33,000/ - IS RECEIVED TOWARDS TRANSFER OF GOODWILL OF THE COMPANY AND, THEREFORE, THE SAME IS IN THE NATURE OF LOSS OF PROFIT TO THE COMPANY AND NOT TAXABLE AS PER THE PROVISIONS OF THE ACT. FURTHER IN THE GROUNDS OF APPEAL AND THE STATEMENT OF FACTS, THE ASSESSEE HAS ONCE AGAIN REITERATED THE SAID ARGUMENT THAT RS.3,68,33,000/ - IS RECEIVED TO WARDS TRANSFER OF GOODWILL OF THE COMPANY AND, THEREFORE, THE SAME IS IN THE NATURE OF LOSS OF PROFIT TO THE COMPANY. IN VIEW OF THIS, I WOULD LIKE TO ADJUDICATE THE SAME AS UNDER. 7.7.2 AS CONTENDED BY THE ASSESSEE, THE ASSESSEE HAS RECEIVED RS.3,68,33, 000/ - TOWARDS TRANSFER OF GOODWILL OF THE COMPANY. 7 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 7 AS SUCH, THERE IS NO DISPUTE THAT THE DIFFERENCE AMOUNT OF RS.3,68,33, 000 / - HAS BEEN RECEIVED TOWARDS SALE/TRANSFER OF GOODWILL. BUT, THE ONLY CONTENTIOUS ISSUE IS WHETHER CONSIDERATION RECEIVED TOWARDS SA LE/TRANSFER OF GOODWILL IS TAXABLE AS PER THE PROVISIONS OF THE ACT OR NOT. IN THIS REGARD, IT IS WORTHWHILE TO EXAMINE THE LEGISLATIVE HISTORY ON TAXABILITY OF GOODWILL. 7.7.3 THE HON'BLE SUPREME COURT, IN THE CASE OF CIT VS B.C. SRINIVASA SETTY [1981J 128 ITR 294 HAS HELD THAT GOODWILL GENERATED IN A BUSINESS CANNOT BE DESCRIBED AS AN 'ASSET' WITHIN THE MEANING OF SECTION 45 OF THE ACT AND, THEREFORE, THE TRANSFER OF GOODWILL INITIALLY GENERATED IN A BUSINESS DOESN'T GIVE RISE TO A CAPITAL GAIN FOR THE PURPOSES OF INCOME TAX. WHILE DOING SO, THE HON'BLE SUPREME COURT HAS OBSERVED THAT THE COST OF ACQUISITION OF A SELF GENERATED ASSET IS INDETERMINATE AND, THEREFORE, CAPITAL GAINS CANNOT BE COMPUTED WHEN A SELF GENERATED ASSET IS TRANSFERRED. 7.7.4 HOWE VER, IT IS INTERESTING TO NOTE THAT THE RATIO LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS B.C.SRLNLVLL$A SETTY (SUPRA) HAS BEEN OVERRULED BY THE LEGISLATURE BY WAY OF AMENDING THE PROVISIONS OF SECTION 55 OF THE ACT. TO BE PRECISE, CLAUSE ( A) TO SUB - SECTION 2 OF SECTION 55 OF THE ACT WAS INSERTED IN THE STATUTE BY THE FINANCE ACT,1994, W.E.F 01.04.1995 I.E., AY 1995 - 96 ONWARDS WHEREIN COST OF ACQUISITION WITH REGARD TO SELF GENERATED GOODWILL SHALL BE TAKEN TO BE NIL. THE RELEVANT PORTION OF T HE STATUTE IN THIS REGARD IS REPRODUCED BELOW FOR READY REFERENCE: 'MEANING OF 'ADJUSTED', 'COST OF IMPROVEMENT' AND 'COST OF ACQUISITION'. 55. (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, 'COST OF ACQUISITION ', - (A) IN RELATION TO A CAPITAL ASSET, BE ING GOODWILL OF A BUSINESS OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRYON ANY BUSINESS [OR PROFESSION TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, - 8 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 8 (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE; AND (II) IN ANY OTHER CASE [NOT BEING A CASE FALLING UNDER SUB - CLAUSES (I) TO (IV) OF SUB - SECTION (1) OF SECTION 49/ , SHALL BE TAKEN TO BE NIL;' 7.7.5 AS SUCH, SUBSEQUENT TO INSERTION OF CLAUSE (A) TO SUB - SECTION 2 OF SECTION 55 OF THE ACT W.E.F AY 1995 - 96 ONWARDS THE CONSIDERATION RECEIVED ON TRANSFER OF GOODWILL IS LIABLE TO TAX UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THIS, THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE DIFFERENCE AMOUNT BETWEEN THE LUMP SUM CONSIDERATION RECEIVED OF RS.14,OO,OO,OOO/ - AND NET WORTH OF THE COMPANY QUANTIFIED AT RS.3,68,33,OOO/ - IS IN THE NATURE OF CONSIDERATION RECEIVED TOWARDS TR:MSFER OF SELF GENERATED GOODWILL AND, THEREFORE, THE SAME IS NOT TAXABLE IS UNTENABLE AND LIABLE FOR DISMISSAL. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON THE ISSUE ARE DISMISSED. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPE AL BEFORE THE ITAT. 8. BEFORE US, THE LD. AR OF THE ASSESSEE DREW OUR ATTENTION TO THE AGREEMENT FOR TRANSFER OF BUSINESS, WHICH IS PLACED AT PAGES 39 TO 48 TO SUBMIT THAT THE DETAILS OF INDIVIDUAL ASSETS HAVE BEEN DESCRIBED IN ANNEXURE - A AT PAGE 48 OF THE PAPER BOOK, THE DETAILS OF WHICH ARE AS UNDER: 9 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 9 10 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 10 ACCORDINGLY, THE NET CONSIDERATIONS HAVE BEEN WORKED OUT AS CITED SUPRA. THEREFORE IT IS OUTSIDE THE PURVIEW OF U/S 50B OF THE INCOME TAX ACT.1961. 8.1 IN SUPPORT OF ASSESSEES CASE, THE LD. AR RELIED ON THE FOLLOWING CASE LAW: 1. VATSALA SHENOY VS. JCIT, [2017] 80 TAXMANN.COM 351(SC) 2. SHIVA DISTILL ERIES LTD., [2020] 116 TAXMANN.COM 929 3. SANMAR SPECIALITY CHEMICALS LTD., TAX CASE (APPEAL) NO. 42 OF 2018. 4. DCIT VS. TONGANI TEA CO. LTD., [2015] 63 TAXMANN.COM 149 5. VEGETABLE PRODUCTS LTD., [1973] 88 ITR 192 (SC) 9. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. WE FIND THAT AS PER THE AGREEMENT, THE PRICE CONSIDERATION FOR THE UND ERTAKING AND ASSETS TO BE BOUGHT AND SOLD (BUSINESS) IS RS. 14,00,00,000/ - AS SET OUT IN THE SCHEDULE ATTACHED AS ANNEXURE A QUOTED SUPRA. THEREFORE, THE CASE IN HAND IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF VATSALA SHENOY VS. JCIT, 80 TAXMANN.COM 351 (SC) WHEREIN THE HONBLE SUPREME COURT HAS HELD AS UNDER: IT WAS NOTICED THAT THE FIRM WAS DISSOLVED ON 6 - 12 - 1987 BY EFFLUX OF TIME. THIS EVENT HAPPENED AS PER THE TERMS STIPULATED IN THE PARTNERSHIP DEED ITSELF. THE N ECESSITY FOR FILING THE PETITION UNDER THE COMPANIES ACT AROSE BECAUSE OF DIFFERENCES BETWEEN THE ERSTWHILE PARTNERS THAT HAD ERUPTED, PERTAINING TO THE AFFAIRS OF THE FIRM. NO DOUBT, IN THE SAID PETITION INTERIM ORDER WAS PASSED BY THE HIGH COURT PERMITTI NG THE GROUP OF PERSONS (SEVEN 11 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 11 IN NUMBER), HAVING CONTROLLING INTEREST IN THE FIRM, TO CONTINUE THE BUSINESS. HOWEVER, THIS WAS DONE AS AN INTERIM ARRANGEMENT TILL THE COMPLETION OF WINDING UP PROCEEDINGS. PERTINENTLY, INSOFAR AS THE FIRM IS CONCERNED, IT DID NOT CARRY ON BUSINESS THEREAFTER AS AN EXISTING FIRM. ON THE CONTRARY, FEW EX - PARTNERS WITH CONTROLLING INTEREST WERE ALLOWED TO CONTINUE THE BUSINESS ACTIVITY IN THE INTERREGNUM AS A STOPGAP ARRANGEMENT. ANOTHER IMPORTANT FACT WHICH NEEDS A MENTION IS THAT, INSOFAR AS THE FIRM IS CONCERNED, IT DID NOT FILE INCOME TAX RETURNS AFTER THE DATE OF DISSOLUTION. OBVIOUSLY SO, AS IT STOOD DISSOLVED AND WAS NO MORE IN EXISTENCE. PRECISELY FOR THIS REASON, THE INCOME THAT WAS GENERATED FROM THE BUSINESS, AFTER T HE DISSOLUTION, WAS ASSESSED BY THE INCOME TAX AUTHORITIES IN THE HANDS OF SUCH ERSTWHILE PARTNERS AS AN AOP. IT IS THIS AOP WHICH WAS FILING THE RETURNS AND GETTING THE SAME ASSESSED IN THAT CAPACITY AND PAYING THE INCOME TAX THEREUPON. FURTHER, IN THE OR DERS PASSED BY THE HIGH COURT FROM TIME TO TIME IN THE SAID PETITION, INSOFAR AS THE FIRM IS CONCERNED, IT HAS ALWAYS BEEN DESCRIBED AS 'THE DISSOLVED PARTNERSHIP FIRM'. THUS, THE ASSETS WHICH WERE SOLD ULTIMATELY WERE OF A DISSOLVED PARTNERSHIP FIRM, THOU GH AS A GOING CONCERN. [PARA 22] AT THIS STAGE, ONE MORE FACTUAL ASPECT NEEDS TO BE CLARIFIED. DURING THE PENDENCY OF THE WINDING UP PETITION BEFORE THE HIGH COURT, THE HIGH COURT HAD PASSED VARIOUS ORDERS WHICH INCLUDED AN ORDER FOR VALUATION OF THE ASSE TS OF THE FIRM. THIS VALUATION WAS DONE TO ENABLE THE COURT TO FIX THE RESERVE PRICE FOR THE PURPOSE OF INTER SE BIDDING BETWEEN THE ERSTWHILE PARTNERS AND/OR ASSOCIATION OF ERSTWHILE PARTNERS. THE CHARTERED ACCOUNTANTS HAD DONE THE VALUATION AND SUBMITTED REPORTS ON THE BASIS OF WHICH BASE PRICE WAS FIXED AT RS. 30 CRORES TAKING INTO ACCOUNT THE VALUE OF VARIOUS ASSETS. THESE ASSETS VALUED AT RS. 30 CRORES ARE SOLD FOR RS. 92 CRORES. THEREAFTER, AOP - 3, THE SUCCESSFUL BIDDER, DEPOSITED THE AMOUNT OF BID IN RESPECT OF THE SHARE OF NINE OTHER PARTNERS AND A SETTLEMENT WAS ALSO PREPARED RECORDING THE VALUE OF THE ASSETS OF THE FIRM AFTER DEDUCTING THE LIABILITY OF THE SAID NINE PARTNERS. THE NET VALUE OF THE ASSETS SO ARRIVED AT WAS DISTRIBUTED AMONG THE NINE P ARTNERS. [PARA 23] WHAT FOLLOWS FROM THE AFORESAID FACTS IS THAT THE FIRM STOOD DISSOLVED WITH EFFECT FROM 6 - 12 - 1987; THE COMPANY PETITION HAD TO BE FILED BY TWO PARTNERS IN VIEW OF ERUPTION OF DISPUTES AMONG THE PARTNERS; THE BUSINESS WAS CARRIED ON BY T HE PARTNERS WITH CONTROLLING INTEREST AS AN INTERIM ARRANGEMENT; THE INCOME WAS ASSESSED IN THEIR HANDS AS AOP AND NOT IN THE HANDS OF THE FIRM WHICH HAD ALREADY BEEN DISSOLVED; ASSETS OF THE COMPANY WERE PUT TO SALE IN ACCORDANCE WITH CLAUSE 16 OF THE PAR TNERSHIP DEED OF A DISSOLVED FIRM, THOUGH AS A GOING CONCERN; AND OUTGOING PARTNERS (ASSESSEES HEREIN) RECEIVED THEIR NET SHARE OF THE VALUE OF THE ASSETS OF THE FIRM OUT OF THE AMOUNT RECEIVED BY WAY OF SALE OF THE ASSETS OF THE FIRM AS PER CLAUSE 16 OF T HE PARTNERSHIP 12 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 12 DEED. ON THE AFORESAID FACTS, IT BECOMES CLEAR THAT ASSET OF THE FIRM THAT WAS SOLD WAS THE CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14). IT IS NOT EVEN DISPUTED. ONCE IT IS HELD TO BE THE CAPITAL ASSET, GAIN THEREFROM IS TO BE TREATED AS CAPITAL GAIN WITHIN THE MEANING OF SECTION 45. [PARA 24] THE ASSESSEES, HOWEVER, ARE ATTEMPTING THE WRIGGLE OUT FROM PAYMENT OF CAPITAL GAIN TAX ON THE GROUND THAT IT WAS A SLUMP SALE WITHIN THE MEANING OF SECTION 2(42C) AND THERE WAS NO MECHANISM AT T HAT TIME AS TO HOW THE CAPITAL GAIN IS TO BE COMPUTED IN SUCH CIRCUMSTANCES, WHICH WAS PROVIDED FOR THE FIRST TIME BY SECTION 50B WITH EFFECT FROM 1 - 4 - 2000. HOWEVER, THIS ARGUMENT FAILS IN VIEW OF THE FACT THAT THE ASSETS WERE PUT TO SALE AFTER THEIR VALUA TION. THERE WAS A SPECIFIC AND SEPARATE VALUATION FOR LAND AS WELL AS BUILDING AND ALSO MACHINERY. SUCH VALUATION HAS TO BE TREATED AS THAT OF A PARTNERSHIP FIRM WHICH HAD ALREADY STOOD DISSOLVED. [PARA 25] AS PER THE DEFINITION OF SECTION 2(42C) , SALE IN QUESTION COULD BE TREATED AS SLUMP SALE ONLY IF THERE WAS NO VALUE ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALE. THIS HAS OBVIOUSLY NOT HAPPENED. IT IS STATED AT THE COST OF REPETITION THA T NOT ONLY VALUE WAS ASSIGNED TO INDIVIDUAL ASSETS, EVEN THE LIABILITIES WERE TAKEN CARE OF WHEN THE AMOUNT OF SALE WAS APPORTIONED AMONG THE OUTGOING PARTNERS, I.E., THE ASSESSEES HEREIN. ONCE IT IS HELD THAT THE SALE IN QUESTION WAS NOT SLUMP SALE, OBVIO USLY SECTION 50B ALSO DOES NOT GET ATTRACTED AS THIS SECTION CONTAINS SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMP SALE. [PARA 26] IN THE AFORESAID SCENARIO, WHEN THE OFFICIAL LIQUIDATOR HAS DISTRIBUTED THE AMOUNT AMONG THE NINE PAR TNERS, INCLUDING THE ASSESSEES HEREINAFTER DEDUCTING THE LIABILITY OF EACH OF THE PARTNERS, THE HIGH COURT HAS RIGHTLY HELD THAT THE AMOUNT RECEIVED BY THEM IS THE VALUE OF NET ASSET OF THE FIRM WHICH WOULD ATTRACT CAPITAL GAIN. SCOPE OF SECTION 45 WAS EXP LAINED IN CIT V. GHANSHYAM (HUF) [2009] 315 ITR 1/182 TAXMAN 368 (SC) WHEREIN THE COURT STATED THAT CAPITAL GAINS UNDER SECTION 45 ARE NOT INCOME ACCRUING FROM DAY - TO - DAY. IT IS DEEMED INCOME WHICH ARISES AT A FIXED POINT OF TIME, VIZ. ON THE DATE OF TRANSFER. [PARA 27] ON APPLYING THE SAID LEGAL PRINCIPLE TO THE FACTS OF THE INSTANT CASE, IT IS FOUND THAT THE PARTNERSHIP FIRM HAD DISSOLVED AND THEREAFTER WINDING UP PROCEEDINGS WERE TAKEN UP IN THE HIGH COURT. THE RESULT OF THOSE PROCEEDINGS WAS TO SELL THE ASSETS OF THE FIRM AND DISTRIBUTE THE SHARE THEREOF TO THE ERSTWHILE PARTNERS. THUS, THE 'TRANSFER' OF THE ASSETS TRIGGERED THE PROVISIONS OF SECTION 45 AND MAKING THE CAPITAL GAIN SUBJECT TO THE PAYMENT OF TAX UNDER THE ACT. [PARA 28] INSOFAR AS ARGUMENT OF THE ASSESSEES THAT TAX, IF AT ALL, SHOULD HAVE BEEN DEMANDED FROM THE PARTNERSHIP FIRM IS CONCERNED, IT MAY BE STATED THAT ON THE FACTS OF THIS CASE THAT MAY NOT BE THE 13 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 13 SI TUATION WHERE THE FIRM HAD DISSOLVED MUCH BEFORE THE TRANSFER OF THE ASSETS OF THE FIRM AND THIS TRANSFER TOOK PLACE FEW YEARS AFTER THE DISSOLUTION, THAT TOO UNDER THE ORDERS OF THE HIGH COURT WITH CLEAR STIPULATION THAT PROCEEDS THEREOF SHALL BE DISTRIBU TED AMONG THE PARTNERS. INSOFAR AS THE FIRM IS CONCERNED, AFTER THE DISSOLUTION ON 6 - 12 - 1987, IT HAD NOT FILED ANY RETURN AS THE SAME HAD CEASED TO EXIST. EVEN IN THE INTERREGNUM, IT IS THE AOP WHICH HAD BEEN FILING THE RETURN OF INCOME EARNED DURING THE S AID PERIOD.THE HIGH COURT HAS TOUCHED UPON THIS ASPECT IN GREATER DETAIL AND HELD THAT THE ORDER PASSED BY THE ASSESSING AUTHORITY CONFIRMED IN THE FIRST APPEAL AND BY THE TRIBUNAL (SPECIAL BENCH) HOLDING THAT THE ASSESSEE'S AS ERSTWHILE PARTNERS ARE LIABL E TO PAY CAPITAL GAIN ON THE AMOUNT RECEIVED BY THEM TOWARDS THE VALUE OF THEIR SHARE IN THE NET ASSETS OF THE FIRM ARE LIABLE FOR PAYMENT OF CAPITAL GAINS UNDER SECTION 45. THE SAID FINDING IS JUSTIFIED. [PARA 29] NEXT IT IS ARGUED THAT INSOFAR AS INCOME OF THE FIRM IN THE ASSESSMENT YEAR IN QUESTION IS CONCERNED, IT COULD NOT BE TAXED AT THE HANDS OF THE ASSESSEES. THIS SUBMISSION IS AGREEABLE. [PARA 32] FIRST, AND PERTINENTLY, IT IS AN ADMITTED CASE THAT 40 PER CENT OF THE SAID INCOME WAS ALLOWED BY TH E HIGH COURT TO BE RETAINED BY THE SUCCESSFUL BIDDER (AOP - 3) PRECISELY FOR THIS VERY PURPOSE. THIS 40 PER CENT REPRESENTED THE TAX WHICH WAS TO BE PAID ON THE INCOME GENERATED BY THE ONGOING CONCERN BEING RUN BY THE ASSOCIATION OF PERSONS, AS AUTHORISED BY THE HIGH COURT. SECONDLY, IN THE PREVIOUS YEARS, THE DEPARTMENT HAD TAXED THE AOP AND THIS PROCEDURE HAD TO CONTINUE IN THE ASSESSMENT YEAR IN QUESTION AS WELL. FROM THE JUDGMENT OF THE HIGH COURT, IT IS FOUND THAT THIS ASPECT HAS BEEN DEALT WITH VERY CUR SORILY, WITHOUT TAKING INTO CONSIDERATION THE AFORESAID ASPECTS AS HIGHLIGHTED. THE ENTIRE DISCUSSION ON THIS ISSUE IS THAT THE CONCURRENT FINDING ON QUESTION OF FACT THAT VALUE OF PROFIT RECEIVED DURING INTERREGNUM PERIOD FOR A PERIOD OF 234 DAYS IS TO BE TREATED AS REVENUE INCOME HAVING REGARD TO THE REASONS ASSIGNED THAT SAID PROFIT IS CALCULATED ON THE BASIS OF NOTIONAL PROFIT CALCULATED ON TWO YEARS AVERAGE PROFIT AND FROM THIS AVERAGE 40 PER CENT WAS TO BE DEDUCTED AND THE NET AMOUNT WAS TO BE PAID, T HE FINDING IS UNASSAILABLE. THE AFORESAID DISCUSSION OF THE HIGH COURT DEALS HOW THE BUSINESS INCOME/REVENUE INCOME IS TO BE TREATED/CALCULATED, BUT THE QUESTION OF TAXABILITY AT THE HANDS OF THE ASSESSEES HAS NOT BEEN TOUCHED UPON AT ALL. [PARA 33] THE U PSHOT OF THE AFORESAID DISCUSSION IS THAT THE APPEALS ARE ALLOWED PARTLY ONLY TO THE EXTENT THAT BUSINESS INCOME/REVENUE INCOME IN THE ASSESSMENT YEAR IN QUESTION IS TO BE ASSESSED AT THE HANDS OF AOP - 3, IN TERMS OF THE ORDERS OF THE HIGH COURT, AS AOP - 3 R ETAINED THE TAX AMOUNT FROM THE CONSIDERATION WHICH WAS PAYABLE TO THE ASSESSEES HEREIN AND IT IS AOP - 3 WHICH WAS SUPPOSED TO FILE THE RETURN IN THAT BEHALF AND PAY TAX ON THE SAID 14 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 14 REVENUE INCOME. [PARA 34] 10.1 AS PER THE DEFINITION OF SECTION 2(42C), SALE IN QUESTION COULD BE TREATED AS SLUMP SALE ONLY IF THERE WAS NO VALUE ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALE. THIS HAS OBVIOUSLY NOT HAPPENED. IT IS STATED THAT AT THE COST OF REPETITION THE VALUE WAS ASSIGNED TO INDIVIDUAL ASSETS , AS PER ANNEXURE A, WHICH IS PLACED AT PAGE NO. 48 OF THE PAPER BOOK AND LIABILITIES WERE TAKEN OVER BY THE PURCHASER . IT IS IMPORTANT TO REFER TO THE AGREEMENT MADE BETWEEN THE PARTIES DATED 28 TH MARCH 2014 PLACED A T PAPER BOOK PAGE NO. 39 TO 48 OF PARA NO. 3 TRANSFER , WHICH IS AS UNDER: 3.1 THE TRANSFEREE AGREES TO BUY AND THE TRANSFEROR AGREES TO SELL TO THE TRANSFEREE AS A GOING CONCERN ALL THE UNDERTAKING AND ASSETS OWNED BY THE TRANSFEROR IN CONNECTION WITH T HE BUSINESS CARRIED ON BY THE TRANSFEROR AS ON THE TRANSFER DATE INCLUDING WITHOUT LIMITING THE GENERALITY TO THE FOREGOING: A) ALL LAND AND BUILDING INCLUDING LEASEHOLD IMPROVEMENTS {EXC EPT LAND AND BUILDINGS SITUATED AT BENZ CIRCLE R.S.NO. 122 AND R.S. NO. 120/5 SITUATED AT PATAMATA VILLAGE, VIJAYAWADA AND AT D.NO. 54 - 15 - 5, SRINIVAS NAGAR, BANK COLONY, N.H - 5, GUNDALA, VIJAYAWADA), ALL PLANT AND MACHINERY, FURNITURE & FIXTURES, OFFICE EQU IPMENT, CAPITAL WORK IN PROGRESS, OFFICE VEHICLES AND ALL OTHER FIXED ASSETS. B) ALL STOCK OF SPARE PARTS AND SUPPLIES RELATING TO THE BUSINESS OTHER THAN FIAT CAR PARTS AND SUPPLIES. C) DEBTORS AND LOANS & ADVANCES 3EXCEPT FOR INSURANCE AND FINANCE COMMISSION RECEIVABLE AND CLAIMS RECEIVABLE FROM TATA MOTORS LTD. D) INTANGIBLE ASSE TS INCLUDING SOFTWARE LICENSES ETC. 15 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 15 E) CURRENT ASSETS OTHER THAN UNSOLD VEHICLE STOCKS AS ON THE TRANSFER DATE. F) CURRENT LIABILITIES OTHER THAN LIABILITIES RELATING TO THE PURCHASE OF VEHICLES MADE UP TO THE TRANSFER DATE BY THE TRANSFEROR. THE VALUE OF THE ASSET SO TRANSFERRED TO THE TRANSFEREE ARE DETAILED IN ANNEXURE A OF THIS AGREEMENT. 3.2 THE FOLLOWING ASSETS ARE EXPRESSLY EXCLUDED FROM THE TRANSFER OF BUSINESS: - LAND AND BUILDINGS SITUATED AT BEN Z CIRCLE. R.S.NO. 122 AND R.S. NO. 120/5 SITUATED AT PATAMATA VILLAGE, VIJAYAWADA AND AT D.NO. 54 - 15 - 5, SRINIVASA NAGAR, BANK COLONY, N.H. - 5, GUNDALA, VIJAYAWADA AND - LEASEHOLD IMPROVEMENTS CARRIED OUT IN THE PREMISES AT D.NO. 54 - 15 - 5, SRINIVASA NAGAR, B ANK COLONY, N.H. - 5, GUNDALA, VIJAYAWADA - STOCK IN TRADE AS ON THE TRANSFER DATE I.E. THE CARS BOUGHT BY THE TRANSFEROR IN ITS OWN NAME FROM TATA MOTORS LTD. - CASH ON HAND AND BANK BALANCES. 3.3 THE TRANSFEREE AGREES AND UNDERTAKES TO TAKE OVER AND CONTI NUE THE EXISTING SECURED LOAN FACILITY PROVIDED TO TRAN S FEROR BY TATA CAPITAL FINANCIAL SERVICES LD. IT IS ALSO CLEARLY AGREED THAT ALL THE ASSETS HYPOTHECATED TO TFCSL AS SECURITY FOR THE LOAN FACILITY WILL ALSO GET TRANSFERRED TO THE TRANSFEREE COMPANY. 10.2 IT IS CLEAR THAT THE VALUE OF ASSETS HAS BEEN CLEARLY MENTIONED AS PER ANNEXURE A AND THE ASSETS WHICH HAVE NOT BEEN TAKEN OVER IS MENTIONED AS ABOVE AT PARA NO. 3.2 . THEREFORE, C ONSIDERING THE FACTS OF THE PRESENT CASE, IT IS HELD THAT THE SALE IN QUESTION I S NOT SLUMP SALE, OBVIOUSLY , SECTION 50B ALSO DOES NOT GET ATTRACTED AS 16 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 16 THIS SECTION CONTAINS SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMP SALE. RESPECTF ULLY FOLLOWING THE ABOVE JUDGEMENT OF THE HONBLE SUPREME COURT, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,68,33,000/ - MADE BY THE AO TREATING THE SAME AS LONG TERM CAPITAL GAINS. ACCORDINGLY, THE GROUND NOS. 2(A) TO (E) ARE ALLOWED. 11. AS REGARDS GROUND NO. 3 (A) & (B) RELATING TO THE DISALLOWANCE OF EXPENDITURE OF RS. 12,14,253/ - , DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PRODUCE BILLS AND VOUCHERS IN SUPPORT OF ADMINISTRATI VE AND SELLING EXPENSES DEBITED TO THE P&L ACCOUNT. ACCORDINGLY, THE ASSESSEE PRODUCED THE SAME FOR VERIFICATION. AFTER HAVING EXAMINED THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE, THE AO FOUND THAT THE ASSESSEE COULD NOT FURNISH BILLS AND VOUCHERS TO THE EXTENT OF . RS. 12,14,253/ - TOWARDS ADMINISTRATIVE AND SELLING EXPENSES CLAIMED IN THE RETURN OF INCOME FILED. IN VIEW OF THIS, THE AO DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME. 11.1 IN THIS REGARD, THE AO HAD RECORDED IN THE ASSESSMEN T ORDER THAT DURING THE COURSE OF HEARING CONDUCTED ON 08.11.2016, THE AR OF THE ASSESSEE AGREED FOR THE SAID DISALLOWANCE OF RS. 12,14,253/ - AND THE SAME HAD BEEN INCORPORATED IN THE ORDER SHEET NOTING DATED 08.11.2016. THE RELEVANT PORTION OF THE ASSESSM ENT ORDER THIS REGARD IS REPRODUCED BELOW FOR READY REFERENCE: 17 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 17 'DURING THE COURSE OF SCRUTINY PROCEEDINGS ASSESSEE WAS ASKED TO FURNISH BILLS AND VOUCHERS FOR ADMINISTRATIVE AND SELLING EXPENSES. CA VERIFICATION OF THE SAME IT WAS FOUND THAT BILLS . AND VOUCHER ARE NOT AVAILABLE TO THE EXTENT OF' RS.12,14,253/ - . HENCE AN AMOUNT OF RS. 12,14,253/ - OF ADMINISTRATIVE AND SELLING EXPENSES IS DISALLOWED AND ADDED BACK TO THE INCOME RETURNED. AR AGREED FOR THE SAME VIDE ORDER SHEET NOTING DATED 08.11.2016. 12. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THE AMOUNT DISALLOWED BY THE AO HAD BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS AND, THEREFORE, IT IS AN ALLOWABLE DEDUCTION U/S.37(1) OF THE ACT. 13. THE CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE, CONFIRMED THE DISALLOWANCE MADE BY THE AO BY HOLDING THAT THE AO HAD MADE THE SAID DISALLOWANCE ON AGREED BASIS AS THE AR OF THE ASSESSEE AGREED FOR THE SAME AT THE ASSESSMENT STAGE. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. THE REVENUE AUTHORITIES HAVE MADE THE DISALLOWANCE OF RS. 12,14,253/ - ON THE GROUND THAT THE A R OF THE ASSESSEE AGREED FOR THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. W HEREAS, THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT AUTHORIZED ITS A R FOR AGREED ADDITION. IN VIEW OF THE CONTRARY SUBMISSIONS, WE REMIT THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO REDECIDE THE ISSUE AFTER EXAMINING THE MATERIAL P UT - FORTH BY THE ASSESSEE BEFORE HIM IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN THE 18 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 18 MATTER. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CLAIM BY WAY OF DOCUMENTARY EVIDENCE AT HIS OWN RISK AND RESPONSIBILITI ES WITH THREE EFFECTIVE OPPORTUNITIES OF HEARING. THEREFORE, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES , IN ABOVE TERMS. PR ONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER , 2021. SD/ - SD/ - (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 28 TH OCTOBER , 2021. KV COPY TO : 1 M/S JASPER AUTO SERVICES PVT. LTD., C/O P. MURALI & CO., CAS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82 2 DCIT, CIRCLE 2(1), HYDERABAD 3 CIT(A) - 6, HYDERABAD 4 PR. CIT - 2, HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE. 19 ITA NO. 705/HYD/2020 JASPER AUTO SERVICES PVT. LTD., HYD. 19 S.NO. DETAILS DATE 1 DRAFT DICTATED ON 2 DRAFT PLACED BEFORE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER