ACIT 9(3), MUMBAI V. SHAKTI INSULATED WIRES P. LTD, MUMBAI

ITA 7130/MUM/2011

• Counselvise Citation: 713019914 RSA 2011
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T R PAITE
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147; 148; 143(3); 50C

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 7130 /MUM/2011 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2003-04) DY. COMMISSIONER OF INCOME TAX CIRCLE- (9)3), ROOM NO. 229, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ( ( ( ( / VS. M/S SHAKTI INSULATED WIRES PVT. LTD., DATTA PATTA ROAD, MAGATHANE VILLAGE, BORIVALI (E), MUMBAI 400 066. #. !./ PAN : AAACS7202B ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI T.R. PAITE 01./ 2 3 ! / RESPONDENT BY : SHRI DIVYESH I. SHAH !($ 2 / // / DATE OF HEARING : 14-08-13 45- 2 / DATE OF PRONOUNCEMENT : 27-09-13 '6 / O R D E R PER P.M. JAGTAP, A.M. : .. , !'# THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER PASSED BY THE LD. CIT(A) -20, MUMBAI DATED 29-08-2011 FOR ASSESSM ENT YEAR 2003-04. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INSULATED COPPER CONDU CTOR. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 28-3-2006, THE ITA 7130/M/11 2 TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE A. O. AT RS. 1,90,65,500/- MAINLY COMPRISING OF LONG TERM CAPITAL GAIN. THE SA ID ASSESSMENT WAS SUBSEQUENTLY REOPENED BY THE A.O. AND AFTER RECORDI NG THE REASONS, A NOTICE U/S 148 OF THE ACT WAS ISSUED BY HIM ON 22-3-2010. IN REPLY, A LETTER WAS FILED BY THE ASSESSEE ON 12-4-2010 STATING THAT THE RETURN FILED ON 1-12-2003 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO N OTICE ISSUED U/S 148 OF THE ACT. IN THE REASSESSMENT COMPLETED U/S 143(3) R.W. S. 147 OF THE ACT, TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE A.O. A T RS. 2,95,70,400/- AFTER WITHDRAWING THE DEDUCTION ALLOWED IN THE ORIGINAL A SSESSMENT OF RS. 1,27,14,993/- ON ACCOUNT OF INDEXED COST OF ACQUISI TION WHILE COMPUTING THE LONG TERM CAPITAL GAIN. AGAINST THE SAID ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CANCELLED THE ASSE SSMENT MADE BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT HOLDING THE SAME T O BE BAD IN LAW BY ACCEPTING THE ASSESSEES STAND THAT THE INITIATION OF REASSESSMENT PROCEEDING ITSELF WAS INVALID BEING BASED MERELY ON CHANGE OF OPINION. HE ALSO DELETED THE ADDITION MADE BY THE A.O. IN THE REASSESSMENT BY DI SALLOWING THE CLAIM OF THE ASSESSEE FOR INDEXED COST OF ACQUISITION RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1996-97 RENDERED VI DE ITS ORDER DATED 31-01- 2002 WHEREIN LAND DEVELOPMENT RIGHT WAS HELD TO BE A CAPITAL ASSET. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN GROUND N O. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CANCELIN G THE ASSESSMENT MADE BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT HOLDING T HAT THE INITIATION OF REASSESSMENT PROCEEDING WAS BAD IN LAW AS THE SAME WAS BASED MERELY ON CHANGE OF OPINION. IN THIS REGARD, IT IS OBSERVED T HAT THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) FOR THE YEAR UNDER CONSIDERATI ON WAS REOPENED BY THE A.O. ON THE BASIS OF FOLLOWING REASONS RECORDED BY HIM:- ITA 7130/M/11 3 IN THIS CASE THE ASSESSMENT ORDER FOR A. Y.2003-0 4 U/S. 143(3) WAS PASSED ON 28.03.2006 DETERMINING ASSESSED INCOME AT RS.1,90,65,499/-. IN THE ASSESSMENT ORDER BY INVOCA TION OF THE PROVISIONS OF SECTION 50C(1) OF THE ACT, THE LONG T ERM CAPITAL GAIN ON TRANSFER OF LAND DEVELOPMENT RIGHTS (LDRS) WAS COMP UTED AT RS.3,46,02,007/-. IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE IS CO VERED BY THE URBAN LAND CEILING ACT, IT HAS RESTRICTIONS ON TRANSFER O F LAND, AND WHAT COULD BE TRANSFERRED ARE ONLY THE DEVELOPMENT RIGHTS. FUR THER AS THE TRANSFER OF LDRS DOES NOT ENTAIL TRANSFER OF ANY ASSET THE A SSESSEE IS STILL THE OWNER OF THE LAND. AS SUCH ACCORDING TO THE AUDIT T HE DEDUCTION OF INDEXED COST OF ACQUISITION OF THE LAND AT RS.1,2 7 ,14,993/-IN THE ASSESSMENT ORDER WAS INCORRECT AND HENCE THERE IS U NDERASSESSMENT TO THE EXTENT OF RS. 1,27,14,993/-. PERUSAL OF THE CASE RECORDS REVEAL THAT THE ASSESSE E BY ITS OWN ADMISSION DURING THE ENTIRE COURSE OF APPELLATE PRO CEEDINGS IN RESPECT OF INVOCATION OF THE PROVISIONS OF SECTION 50C FOR COMPUTATION OF CAPITAL GAINS HAS CONSISTENTLY MAINTAINED THAT AS IT HAS SO LD ONLY THE LDRS. AND NOT THE LAND IT IS STILL THE OWNER OF THE LAND. THE DEDUCTION OF INDEXED COST OF ACQUISITION OF THE LAND AT RS.1,27, 14,993/-IN THE ASSESSMENT ORDER WAS THEREFORE INCORRECT. 4. A PERUSAL OF THE ABOVE REASONS RECORDED BY THE A.O. CLEARLY SHOWS THAT THE ASSESSMENT WAS REOPENED BY HIM NOT ON THE BASIS OF ANY NEW MATERIAL OR INFORMATION WHICH HAD COME TO HIS POSSESSION AFTER THE COMPLETION OF ORIGINAL ASSESSMENT IN THE CASE OF THE ASSESSEE U/S. 143(3). THE ASSESSMENT COMPLETED ORIGINALLY U/S. 143(3) THUS WAS REOPENED BY HIM ON THE BASIS OF SAME MATERIAL WHICH WAS AVAILABLE EVEN AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT AS WELL AS ON THE BASIS OF SAME SET OF F ACTS AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY THE LD. D.R. AT THE TIME OF HEARING BEFORE US. 5. IN THE CASE OF KELVINATOR INDIA LTD. (SUPRA), TH E FULL BENCH OF HONBLE DELHI HIGH COURT HAS HELD THAT SECTION 147 OF THE A CT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE A.O. TO INITIATE REASS ESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. IT HAS ALSO BEEN HELD THA T WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED U/S 143(3), A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IN TH E CASE OF ASIAN PAINTS LTD. VS. DCIT 308 ITR 195, THE HONBLE JURISDICTIONAL HI GH COURT HAD AN OCCASION ITA 7130/M/11 4 TO CONSIDER A SIMILAR ISSUE AND IT WAS HELD IN THIS CONTEXT THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SECTION 1 43(3), A PRESUMPTION CAN BE RAISED THAT SUCH ORDER HAS BEEN PASSED ON AN APP LICATION OF MIND. IT WAS ALSO HELD THAT IF NON-APPLICATION OF MIND BY A.O. I N PASSING AN ORDER WOULD ITSELF CONFER JURISDICTION UPON THE A.O. TO RE-OPEN THE PROCEEDINGS WITHOUT ANYTHING FURTHER, IT WOULD AMOUNT TO GIVING A PREMI UM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. IT WAS FURTHER HELD THAT THE LEGISLATURE HAS NOT CONFERRED THE POWER ON THE A.O. TO REVIEW HIS OWN ORDER. THE REASSESSMENT PROCEEDINGS INITIATED IN THE SAID CASE THEREFORE WAS HELD TO BE INVALID BY THE HONBLE JUR ISDICTIONAL HIGH COURT ON THE GROUND THAT THE SAME WAS BASED ON CHANGE OF OPI NION OF THE A.O. AS IT WAS MAINLY ON FRESH APPLICATION OF MIND BY THE A.O. TO THE SAME SET OF FACTS. 6. IN THE PRESENT CASE, THE INITIATION OF REASSESSM ENT PROCEEDINGS WAS NOT BASED ON ANY NEW MATERIAL OR INFORMATION WHICH HAD COME TO THE POSSESSION OF THE A.O. AFTER THE COMPLETION OF ORIGINAL ASSESS MENT U/S. 143(3) AND SINCE THE SAME WAS UNDISPUTEDLY MADE ON A FRESH APPLICATI ON OF MIND BY A.O. TO THE SAME SET OF FACTS AND TO THE SAME MATERIAL ON R ECORD AS WAS AVAILABLE AT THE TIME OF COMPLETION OF THE ASSESSMENT ORIGINALLY U/S. 143(3), WE ARE OF THE VIEW THAT THE INITIATION OF REASSESSMENT PROCEEDING S WAS BASED ON A MERE CHANGE OF OPINION OF THE A.O. WHICH IS NOT PERMISSI BLE IN LAW AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AS IAN PAINTS LTD.(SUPRA) AND BY THE FULL BENCH OF HONBLE DELHI HIGH COURT IN TH E CASE OF KELVINATOR INDIA LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAID DECIS IONS OF THE HONBLE JURISDICTIONAL HIGH COURT, AND HONBLE DELHI HIGH C OURT, WE HOLD THAT THE INITIATION OF REASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION ITSELF IN THE PRESENT CASE WAS BAD IN LAW AND THE REASSESS MENT COMPLETED BY THE A.O. U/S. 143(3)/147 IN PURSUANCE OF SUCH INITIATIO N IS LIABLE TO BE CANCELLED BEING INVALID AS RIGHTLY HELD BY THE LD. CIT(A). WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUND NO . 1 OF ASSESSEES APPEAL. ITA 7130/M/11 5 7. KEEPING IN VIEW OF OUR DECISION RENDERED ABOVE O N THE PRELIMINARY ISSUE RAISED IN GROUND NO. 1 UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT(A) CANCELING THE ASSESSMENT MADE U/S 143(3) R.W.S. 147 OF THE ACT TREATING THE SAME AS BAD IN LAW, THE ISSUE RAISED IN GROUND NO. 2 REVENUES APPEAL CHALLENGING THE DELETION OF BY THE LD. CIT(A) OF TH E ADDITION MADE BY THE A.O. BY WAY OF DISALLOWANCE OF INDEXED COST OF ACQUISITI ON HAS BECOME INFRUCTUOUS ALTHOUGH THE SAME AS NOTED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1996-97 HOLDING THAT THE LAND DEVELOP MENT RIGHT IS A CAPITAL ASSET. WE, THEREFORE, DO NOT CONSIDER IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME ON MERIT. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. #$ 2 7 2 89 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2013. . '6 2 45- :'(; 27-09-13 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; :'( DATED 27-09-13 $.)(.!./ RK , SR. PS ITA 7130/M/11 6 '6 2 0)<= >=- '6 2 0)<= >=- '6 2 0)<= >=- '6 2 0)<= >=-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ? () / THE CIT(A)- 20, MUMBAI 4. ? / CIT 9, MUMBAI 5. =$B 0))( , , / DR, ITAT, MUMBAI R BENCH 6. %, C / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1= 0) //TRUE COPY// D D D D/ // /!8 !8 !8 !8 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI