ITO, Davangere V. M/s Maganahalli Steel Corporation, Davangere

ITA 750/BANG/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89890 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-03-2015
• Assessment Year: 1989-1990
• Appeal Filed On: 24-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Sale consideration of property below Jantri Value; Business income; Depreciation; Bonafide belief; Onus to prove
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO. 750/BANG/2009 ASSESSMENT YEAR : 1989-90 THE INCOME TAX OFFICER, WARD 1, DAVANGERE. VS. M/S. MAGANAHALLI STEEL CORPORATION, B.C. ROAD, DAVANGERE. APPELLANT RESPONDENT C.O. NO.71/BANG/2009 [IN ITA NO. 750/BANG/2009] ASSESSMENT YEAR : 1989-90 M/S. MAGANAHALLI STEEL CORPORATION, B.C. ROAD, DAVANGERE. VS. THE INCOME TAX OFFICER, WARD 1, DAVANGERE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI P. DHIVAHAR, JT. CIT(DR) ASSESSEE BY : SHRI V. SRINIVASAN, C.A. DATE OF HEARING : 26.03.2015 DATE OF PRONOUNCEMENT : 10.04.2015 ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 2 OF 20 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE IS AGAINST THE ORDER DATED 8.4.2009 OF THE CIT(APPEALS ), HUBLI RELATING TO ASSESSMENT YEAR 1989-90. 2. THE ISSUES THAT ARISES FOR CONSIDERATION IN THE CO BY THE ASSESSEE ARE AS FOLLOWS:- (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE REVENUE AUTHORITIES WERE RIGHT IN COMING TO THE CONCLUSION THAT THE FIRM M/S. MAGANAHALLI STEEL CORPORATION WA S NOT DISSOLVED ON 30.09.1983 AS PER THE DEED OF DISSOLUT ION AND THAT THE NEW FIRM M/S.MAGANAHALLI ASSOCIATES DID NOT COM E INTO ACTUAL EXISTENCE WITH EFFECT FROM 02.10.1983 BY THE PARTNERSHIP DEED EXECUTED ON THE SAME DATE? (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE REVENUE AUTHORITIES WERE RIGHT IN HOLDING THAT THE FIRM M/S. MAGANAHALLI STEEL CORPORATION WAS LIABLE TO BE TAXE D ON CAPITAL GAINS ON SALE OF THE IMMOVABLE PROPERTY AT BINNY CO MPANY ROAD, DAVANGERE? (3) WHETHER THE ORDER PASSED BY THE AO IS BAD IN LA W FOR THE REASON THAT THE AO HAS PASSED THE ORDER AFTER THE E XPIRY OF PERIOD OF SIX MONTHS FROM THE DATE OF THE HONBLE HIGH COU RTS ORDER AND CONTRARY TO THE DIRECTIONS GIVEN BY THE HONBLE HIGH COURT IN THE SAID ORDER TO DISPOSE OF THE CASE WITHIN SIX MO NTHS? 3. THE ISSUE THAT ARISES FOR CONSIDERATION IN THE A PPEAL BY THE REVENUE IS AS UNDER:- ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 3 OF 20 2. THE LEARNED CIT(A) ERRED IN DIRECTING TO CALCU LATE CAPITAL GAINS ON LAND AND BUILDING SEPARATELY AS PER THE PR INCIPLE LAID DOWN IN THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. C. R. SUBRAMANIAN (242 ITR 342). 3. THE LEARNED CIT(A) ERRED IN APPRECIATING THAT T HE ASSET IN THIS CASE WAS HELD FOR BUSINESS PURPOSE AND DEPRECI ATION HAD BEEN CLAIMED AND CAPITAL GAINS IS TO BE WORKED OUT AS PE R SEC.50(2). 4. THE ABOVE ISSUES WERE ALREADY DECIDED BY THE IT AT IN ITA NO.2096/BANG/1992 BY ORDER DATED 20.7.1995. ON A R EFERENCE BY THE ITAT IN ITRC NO.479/1998 THE HONBLE HIGH COURT BY ITS O RDER DATED 27.1.2006 SET ASIDE THE ORDER OF THE TRIBUNAL AND REMANDED TH E ABOVE ISSUES FOR FRESH CONSIDERATION BY THE ASSESSING OFFICER (AO). THERE UPON THE AO PASSED HIS ORDER TAKING THE SAME STAND AS HE TOOK IN THE O RIGINAL ASSESSMENT PROCEEDINGS AND TAXED THE GAIN ON SALE OF PROPERTY AS SHORT TERM CAPITAL GAIN IN THE HANDS OF MSC. THE CIT(A) UPHELD THE OR DER OF THE CIT(A) IN BRINGING TO TAX CAPITAL GAIN IN THE HANDS OF MSC BU T DIRECTED THE AO TO CALCULATE CAPITAL GAINS ON LAND AND BUILDING SEPARA TELY AS PER THE PRINCIPLE LAID DOWN IN THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. C. R. SUBRAMANIAN (242 ITR 342). ACCORDING TO THE REVE NUE THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSET IN THIS CASE WAS HELD FOR BUSINESS PURPOSE AND DEPRECIATION HAD BEEN CLAIMED AND CAPIT AL GAINS IS TO BE WORKED OUT AS PER SEC.50(2) AND NOT IN THE MANNER A S HAD BEEN DIRECTED BY THE CIT(A) IN THE IMPUGNED ORDER. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 4 OF 20 5. FACTS UNDER WHICH THE AFORESAID ISSUES ARISE FOR CONSIDERATION ARE AS FOLLOWS. M/S. MAGANAHALLI STEEL CORPORATION (H EREINAFTER REFERRED TO AS THE ASSESSEE OR MSC) WAS FORMED AS A PARTNERSHI P FIRM ON 1.4.1976 FOR THE PURPOSE OF CARRYING ON BUSINESS OF DEALING IN I RON AND STEEL ITEMS. ON 26.08.1977, A PROPERTY AT B.C.ROAD, DAVANGERE BEARI NG D.NO.120/1 (HEREINAFTER REFERRED TO AS THE PROPERTY) WAS PUR CHASED OUT OF THE FIRMS FUNDS IN THE NAME OF THE THEN PARTNERS SHRI M.H. NI JANANDA FOR A CONSIDERATION OF RS.52,344. SUBSEQUENTLY, BY MEANS OF A REGISTERED SALE DEED DATED 27.11.1978, EXECUTED BY THE TWO PARTNERS VIZ. SHRI M.H. NIJANANDA AND SHRI M.H. RAMESHANAND (WHO THEREAFTER RETIRED FROM THE FIRM) THE PROPERTY WAS TRANSFERRED IN FAVOUR OF SHR I M. V. NARENDRANATHA, ONE OF THE CONTINUING PARTNERS OF THE ASSESSEE. A BUILDING WAS ALSO CONSTRUCTED ON THE SAID PLOT OF LAND DURING THE PER IOD FROM 1978 TO 1981 AT A COST OF RS.3,17,947, ADMITTED TO HAVE BEEN INCURR ED BY THE ASSESSEE. THE ASSESSEE ALSO CLAIMED DEPRECIATION ON THE SAID BUILDING AS A RESULT OF WHICH THE WDV OF THE BUILDING AS ON 01.07.1983 CAME DOWN TO RS.3,02,249. IT WAS CLAIMED BY THE ASSESSEE/MSC, TH AT THE FIRM AT THAT TIME CONSISTING OF THE FOUR PARTNERS VIZ., SHRI M. V. M AHENDRASWAMY, M.V. NARENDRANATH, M.V.RAJENDRANATH AND SMT.M.R. JAYASHR EE WAS DISSOLVED WITH EFFECT FROM 30.09.1983. A COPY OF THE SAID DEE D OF DISSOLUTION DATED 01.10.1983 WAS FILED ON THE RECORD OF THE AO. ACCOR DING TO THE SAID DISSOLUTION DEED, WHEREAS THE PROPERTY WAS ALLOTTED TO THE THREE RETIRING PARTNERS VIZ., SHRI M.V. MAHENDRASWAMY, M.V. NAREND RANATH AND M.V. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 5 OF 20 RAJENDRANATH. THE BUSINESS IN IRON AND STEEL ITEMS AS A GOING CONCERN, WAS HOWEVER, TAKEN OVER BY THE OTHER PARTNER SMT. M .R.JAYASHREE. IT IS CLAIMED THAT SMT. JAYASHREE RAN THE BUSINESS OF MSC AS A PROPRIETRESS TILL FINALLY IT WAS CLOSED SOME TIME IN JANUARY- FEBRUAR Y 1988. 6. IT HAS FURTHERMORE BEEN CLAIMED THAT THE THREE E RSTWHILE PARTNERS OF MSC VIZ., SHRI M.V. MAHENDRASWAMY, M.V. NARENDRANAT H AND M.V. RAJENDRANATH FORMED ANOTHER PARTNERSHIP FIRM UNDER THE NAME AND STYLE MAGANAHALLI ASSOCIATES (HEREINAFTER REFERRED AS MA) BY A PARTNERSHIP DEED EXECUTED ON 2.10.1983. A COPY OF THE SAID PART NERSHIP DEED WAS ALSO PLACED ON THE RECORDS OF THE AO. ACCORDING TO THE A BOVE PARTNERSHIP DEED, THE ABOVE MENTIONED PROPERTY BELONGING JOINTLY TO T HE THREE PARTNERS WAS MADE THE PROPERTY OF THE FIRM AND THE CAPITAL OF TH E PARTNERS WAS CONSTITUTED MOSTLY BY WAY OF IMPRESSING THE SAID PR OPERTY WITH THE PARTNERSHIP CHARACTER. THIS PARTNERSHIP FIRM ALSO C ARRIED ON BUSINESS IN THE SAME LINE VIZ., IRON AND STEEL ITEMS WITH THE ADDIT IONAL PROVISION THAT THE PARTNERSHIP UNDER ITS OBJECT CLAUSE WAS ENTITLED TO ACT AS COMMISSION AGENT, MANUFACTURERS REPRESENTATIVE AND AGENTS AND DEVELOPERS AND EXPLOITATION OF PROPERTIES. AT THE TIME OF DISSOLUT ION OF THE EARLIER FIRM MSC, THE VALUE OF THE PROPERTY FOR THE PURPOSE OF ASCERT AINMENT OF ASSETS AND LIABILITIES OF THE DIFFERENT PARTNERS, IS STATED TO HAVE BEEN REVALUED AT RS.25 LAKHS. LN THE NEW PARTNERSHIP FIRM MA ALSO, THE PRO PERTY WAS SHOWN AT THIS NEW VALUE OF RS.25 LAKHS AND THE CAPITAL SHOWN TO H AVE BEEN CONTRIBUTED BY THE THREE PARTNERS WAS ALSO FIXED ACCORDINGLY. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 6 OF 20 7. BY A REGISTERED SALE DEED EXECUTED ON 23.12.1987 , THE ABOVE MENTIONED PROPERTY WAS SOLD BY THE THREE PARTNERS V IZ. SHRI M.V. MAHENDRASWAMY, M.V. NARENDRANATH AND M.V. RAJENDRAN ATH ON BEHALF OF THE PARTNERSHIP FIRM MA TO M/S. BAPUJI CO-OPERATIVE BANK LTD., FOR RS.24,01,101. THE DISPUTE IN THE INSTANT CASE IS A T THE TIME OF SALE OF THE PROPERTY, WHO WAS ITS ACTUAL OWNER. THE DEPARTMENTA L CONTENTION IS THAT THE ABOVE MENTIONED DISSOLUTION DEED IN RESPECT OF MSC AND THE PARTNERSHIP DEED IN RESPECT OF MA WERE BOGUS ONES AND IN FACT, MSC CONTINUED ITS EXISTENCE TILL THE SALE OF THE PROPERTY WAS CONCLUD ED. THE DEPARTMENT FURTHERMORE CONTENDS THAT MA NEVER REALLY CAME INTO EXISTENCE AS A PARTNERSHIP FIRM AND THAT THE FAMILY OF THE PARTNER S OF THE ASSESSEE FIRM MANIPULATED DIFFERENT DOCUMENTS AND RECORDS TO PROJ ECT THE PICTURE OF DISSOLUTION OF THE EARLIER FIRM AND FORMATION OF A NEW FIRM VIZ., MA. ACCORDINGLY, THE AO ASSESSED THE CAPITAL GAINS ARIS ING ON THE SALE OF THE ABOVE MENTIONED PROPERTY AS SHORT TERM CAPITAL GAIN S IN THE HANDS OF THE ASSESSEE FIRM, MSC. SOME BUSINESS INCOME DISCLOSED BY MA DURING THIS YEAR WAS ALSO ASSESSED IN THE HANDS OF MSC. 8. IN THIS CONNECTION, CERTAIN OTHER FACTS ARE ALSO REQUIRED TO BE MENTIONED. RETURN OF INCOME OF MSC FOR THE ASSESSME NT YEAR 1985-86 FOR THE TRUNCATED PERIOD UP TO THE DATE OF DISSOLUTION VIZ., 30.09.1983 IS STATED TO HAVE BEEN FILED ON 29.06.1985. A COPY OF THE ACK NOWLEDGMENT ISSUED BY THE IT OFFICE IN THIS CONNECTION WAS PLACED ON THE RECORD OF THE TRIBUNAL. THERE IS SOME DISPUTE AS TO WHETHER THIS RETURN OF INCOME WAS ACTUALLY FILED ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 7 OF 20 IN DUE COURSE OR AT A MUCH LATER DATE BY MAKING SOM E MANIPULATION. THE ASSESSEE ALSO CLAIMED THAT A LETTER DATED 02.10.198 3 INDICATING THE DISSOLUTION OF MSC WAS ALSO FLIED ON THE RECORD OF THE AO ON 03.10.1983 IN RESPECT OF WHICH ALSO AN ACKNOWLEDGMENT WAS STATED TO HAVE BEEN ISSUED ON THE BODY OF THE COPY RETAINED BY THE ASSESSEE. T HE DEPARTMENT CONTESTED THE GENUINENESS OF FILING OF THIS PAPER A LSO. FORM NO.11 IN RESPECT OF THE NEW FIRM I.E., MA FOR ASSESSMENT YEA R 1985-86 IS ALSO STATED TO HAVE BEEN FILED ON THE RECORDS OF THE ASSESSEE O N 02.10.1983 ABOUT WHICH ALSO THE DEPARTMENT RAISED A CHALLENGE. IT IS , HOWEVER, A FACT THAT AN ASSESSMENT WAS MADE ON 26.10.1987 UNDER SECTION 143 (1) IN RESPECT OF THE ABOVE MENTIONED RETURN OF INCOME FOR THE PERIOD UP TO 30.09.1983. THE ASSESSMENT ORDER ACKNOWLEDGED THE RECEIPT OF THE RE TURN UNDER CONSIDERATION. THE RETURN FILED BY THE NEW FIRM MA BELATEDLY FOR ASSESSMENT YEARS 1985-86, 1986-87 AND 1987-88 WERE ALL ASSESSE D TO TAX UNDER SECTION 143(1) IN SUBSTANTIAL CAPACITY BUT BY CONSI DERING THE STATUS OF THE FIRM TO BE IN UNREGISTERED FIRM, ON DIFFERENT DATES LIKE 12.10.88, 5.3.1989 AND 30.3.1989 RESPECTIVELY. THE ITO, HOWEVER, PASS ED AN ORDER U/S. 185 FOR ASSESSMENT YEAR 1985-86 ON 12.10.1988 IN RESPEC T OF MA IN WHICH THIS PARTNERSHIP WAS CONSIDERED AS SHAM AND A DEVICE TO DEFEAT THE PROVISIONS OF THE INCOME TAX ACT. REGISTRATION WAS ACCORDINGLY REFUSED TO MA. AGAIN, WHEN THE PROPOSAL REGARDING SALE OF THE PROPERTY WA S UNDER CONSIDERATION, MA APPLIED FOR A CLEARANCE CERTIFICATE UNDER SECTIO N 230A, WHICH WAS DULY GRANTED BY THE ITO. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 8 OF 20 9. THE MAIN DISPUTE BETWEEN THE DEPARTMENT AND THE ASSESSEE WHICH IS REQUIRED TO BE RESOLVED BY THE TRIBUNAL WAS, WHE THER MSC HAD ACTUALLY BEEN DISSOLVED WITH EFFECT FROM 30.9.1983 AND THE N EW FIRM HAD COME INTO EXISTENCE FROM 1.10.1983. THE AO HAD COLLECTED EVID ENCE FROM VARIOUS AUTHORITIES AND DISCUSSED THEM IN DETAIL IN THE ASS ESSMENT ORDER TO SHOW THAT BY CIRCUMSTANTIAL EVIDENCE IT COULD BE CONSIDE RED THAT THE DISSOLUTION OF THE EARLIER FIRM AND FORMATION OF THE NEW FIRM WERE NOT GENUINE. AT THE FIRST APPELLATE STAGE ALSO, THE CIT (APPEALS) MADE DETAIL ED DISCUSSIONS OF THE SAID ARGUMENTS. THE DEPARTMENT WANTED TO ESTABLISH ITS POINT ABOUT THE RETURN IN CASE OF MA FOR ASSESSMENT YEAR 1985-86 AN D ALSO THE OTHER LETTER INTIMATING DISSOLUTION OF THE FIRM HAVING BEEN PLAN TED AT A LATER DATE BY REFERRING TO THE REGULAR RECEIPT REGISTER MAINTAINE D WITH THE DEPARTMENT IN WHICH THERE WERE NO ENTRIES RELATING TO RECEIPTS OF SUCH PAPERS. THE ASSESSEE, ON THE OTHER HAND, ARGUED THAT WHEN THE A SSESSEE WAS HAVING IN ITS POSSESSION DULY ACKNOWLEDGED RECEIPTS IN SUPPOR T OF FILING OF THE RESPECTIVE DOCUMENTS, THE DEPARTMENT CANNOT NOW DEN Y THE SAID FACTS. THE OTHER POINT RAISED BY THE ASSESSEE WAS THAT THE DEPARTMENT HAVING EVEN MADE THOROUGH INVESTIGATION INTO THE MATTER BY REFERRING IT TO THE GOVERNMENT EXAMINER OF QUESTIONED DOCUMENTS, COULD NOT COME TO ANY PROPER FINDING AND FURTHERMORE THAT THE DEPARTMENT DID NOT EVEN MAKE PROPER INQUIRY AS TO WHETHER THE ACKNOWLEDGMENTS HA D BEEN ISSUED BY THE DULY AUTHORIZED OFFICIAL REMAINING IN-CHARGE OF THE RECEIPT OF PAPERS AND DOCUMENTS OF THE RELEVANT DATES AND HENCE, COULD NO T NOW CLAIM THAT THE ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 9 OF 20 RETURN AND THE OTHER DOCUMENTS IN QUESTION HAD NOT BEEN FILED WITH THE DEPARTMENT IN A REGULAR MANNER. 10. HOWEVER, THE TRIBUNAL EXAMINED THE TOTALITY OF CIRCUMSTANCES PREVAILING AT THE RELEVANT TIME. TAKING INTO CONSID ERATION ALL THE DIFFERENT ASPECTS OF THE CASE AND CONSIDERING THE THEORY OF P REPONDERANCES OF PROBABILITY, THE TRIBUNAL ULTIMATELY CAME TO THE CO NCLUSION THAT THE DEPARTMENTAL CONTENTION ABOUT NON-DISSOLUTION OF MS C AND SUBSEQUENT NON-INCEPTION OF MA IN OCTOBER 1983 WAS REQUIRED TO BE ACCEPTED. 11. AFTER ACCEPTING THE FACT THAT MSC HAD NOT BEEN DISSOLVED AND MA HAD NOT ACTUALLY COME INTO EXISTENCE, THE TRIBUNAL HOWEVER, FINALLY FOUND THAT THE PROPERTY IN QUESTION HAD NOT ACTUALLY BEEN TRANSFERRED BY MSC, BUT BY THE THREE MALE PARTNERS OF THE SAID FIRM VIZ., S HRI MAHENDRASWAMY, NARENDRANATH AND RAJENDRANATH ACTING AS PARTNERS OF NEW FIRM, MA. THE TRIBUNAL FOUND THAT THE OTHER PARTNER OF MSC VIZ., SMT. M.R. JAYASHREE WAS IN NO WAY ASSOCIATED WITH THE SALE OF THE PROPERTY. THE TRIBUNAL ALSO FOUND THAT NOT ONLY DID THE PURCHASER ACCEPT THESE THREE MALE PERSONS TO BE THE OWNER OF THE PROPERTY AS VENDOR THEREOF, BUT EVEN T HE SALE CONSIDERATION ALSO WAS DEPOSITED IN THE BANK ACCOUNT OF MA CONSTI TUTED BY THE THREE MALE PERSONS ONLY. THE TRIBUNAL THUS CAME TO THE CO NCLUSION THAT ON THE FACE OF SUCH FACTS, IT COULD NOT BE CONCLUDED THAT THE FIRM ITSELF HAS SOLD AWAY THE PROPERTY. ON THE OTHER HAND, THE TRIBUNAL HELD THAT IT WAS THE THREE MALE PERSONS, AS STATED ABOVE, WHO HAD SOLD A WAY THE PROPERTY AND ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 10 OF 20 APPROPRIATED THE ENTIRE SALE PROCEEDS AMONGST THEMS ELVES. ACCORDINGLY, THE TRIBUNAL DELETED THE LEVY OF CAPITAL GAINS TAX IN THE HANDS OF THE ASSESSEE FIRM VIZ., MSC. 12. THE HONBLE HIGH COURT OF KARNATAKA IN ITRC NO. 479 OF 1998, BY ITS JUDGMENT DATED 27.11.2006 SET ASIDE THE ORDER OF TH E TRIBUNAL AND REMANDED THE CASE TO THE AO FOR FRESH CONSIDERATION , OBSERVING AS FOLLOWS:- THE REFERENCE IS ACCEPTED. THE ORDER OF THE ASSE SSING OFFICER AND THE APPELLATE ORDERS ARE SET ASIDE. THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR RE-DECISION. BOTH PARTIES ARE TO APPEAR BEFORE THE ASSESSING OFFICER, WITHOUT WAI TING FOR ANY NOTICE ON 27.12.2006. LIBERTY IS RESERVED TO BOTH P ARTIES TO PLACE ENTIRE MATERIAL IN TERMS OF THIS ORDER. THE ASSESSI NG OFFICER IS TO ACCEPT THE ADDITIONAL MATERIAL PLUS THE MATERIAL AL READY AVAILABLE ON RECORD AND IN THE LIGHT OF THE JUDGMENT REPORTED IN 242 ITR 342, IF AVAILABLE AND THEREAFTER PROCEED TO PASS A REASONED ORDER ON MERITS, WITHOUT IN ANY WAY BEING INFLUENCED BY H IS EARLIER ORDER OR THIS ORDER. THE ASSESSING OFFICER IS TO CO MPLETE THE PROCEEDINGS WITHIN SIX MONTHS THEREAFTER. IN THE L IGHT OF THE REMAND ORDER, WE ARE NOT INCLINED TO ANSWER QUESTIO NS OF LAW. ORDERED ACCORDINGLY. NO COSTS. 13. PURSUANT TO THE AFORESAID ORDER OF THE HONBLE HIGH COURT, THE AO TOOK UP THE CASE OF THE ASSESSEE FOR CONSIDERATION. IN THE SET ASIDE PROCEEDINGS BEFORE THE AO, THERE WAS NO ADDITIONAL MATERIAL FILED BY THE ASSESSEE. BASED ON THE EVIDENCE ALREADY AVAILABLE ON RECORD, THE AO CAME TO THE FOLLOWING CONCLUSION:- ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 11 OF 20 THE FOLLOWINGS ARE THE UNDISPUTED FACTS : (1) THE ASSESSEE FIRM WAS NOT REALLY DISSOLVED ON 30/09/1983 AND IT CONTINUED TO EXIST TILL THE DATE OF SALE WHI CH WAS EVIDENCED BY (A) THE BANK ACCOUNT AND LOAN FACILITY AVAILED WITH CORPORATION BANK WHICH WAS CLOSED ONLY ON 01/01/198 8. (B) THE SALES TAX ASSESSMENT WAS MADE FOR THE PERIO D SUBSEQUENT TO THE SAID DISSOLUTION. (C) THE INSURANCE POLICIES DATED: 03/03/1983 WERE T AKEN IN THE NAME OF THE ASSESSEE FIRM AND NOT IN THE NAME OF TH E PROPRIETARY. (D) VALUATION OF THE PROPERTIES FOR THE PURPOSE OF SALE WAS MADE IN THE NAME OF THE ASSESSEE. (E) LEASE DEED WAS ENTERED IN TO WITH UNITED INDIA INSURANCE COMPANY FOR THE PREMISES. (F) FORM NO.6, FORM NO.12 AND FORM NO.28A WERE FILE D BEFORE THE A.O. UP TO 11/05/1987. (G) THE SECOND FIRM DID NOT DEVELOP THE SAID PROPER TY FOR WHICH IT WAS CONSTITUTED. THE ABOVE FACTS CLEARLY PROVES THAT THE DISSOLUTI ON OF THE ASSESSEE FIRM AND FORMATION OF A NEW FIRM WERE CLEA RLY A DEVICE TO AVOID INCIDENCE OF CAPITAL GAIN TAX ON SALE OF T HE SAID PROPERTY. THUS, I HOLD THAT THE WHOLE TRANSACTION WAS SHUN TR ANSACTION. I, THEREFORE, HOLD THAT THE ASSESSEE FIRM IS LIABLE TO TAX ON CAPITAL GAINS ARRIVING OUT OF SALE OF IMMOVABLE PROPERTY BY REJECTING AND ASSESSEES CLAIM THAT THE FIRM WAS DISSOLVED AND DI D NOT EXIST AS ON THE DATE OF SALE AND ALSO THE CLAIM THAT PROPERT Y AND THE CAPITAL GAIN WOULD BE AT A FIGURE OF RS.24,01,101/- AS DEDU CTED BY RS.25,00,000/-. WHICH WAS THE COST TO THE NEW FIRM. AS REGARDS THE APPLICABILITY OF THE DECISION REPORTED IN 242 I TR 342. THE ASSESSEE DID NOT SUPPORT ANY EVIDENCE. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 12 OF 20 14. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) WAS OF TH E VIEW THAT THE REASONS GIVEN BY THE AO FOR HIS CONCLUSIONS ARE VAL ID AND DID NOT CALL FOR ANY INTERFERENCE. THE CIT(A) WAS, HOWEVER OF THE V IEW THAT CAPITAL GAINS, IF ANY, HAVE TO BE COMPUTED BY BIFURCATING THE SALE CO NSIDERATION RECEIVED BY ATTRIBUTING A PORTION OF IT TOWARDS THE VALUE OF LA ND AND ANOTHER PORTION TOWARDS VALUE OF THE BUILDING. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(APPEALS):- IT IS SEEN THAT AO HAS NOT BIFURCATED CAPITAL GAIN S WORKING SEPARATELY FOR LAND & BUILDING AND NOW HE IS DIRECT ED IN VIEW OF DIRECTION BY HONBLE HIGH COURT TO FOLLOW PRINCIPLE S OF HONBLE KARNATAKA HIGH COURT DECISION IN CASE OF CIT VS. C. R. SUBRAMANIYAN TO COMPUTE CAPITAL GAIN SEPARATELY FOR LAND & BUILDING. IT IS STATED IN REMAND REPORT THAT SINCE DEPRECIATION WAS ALLOWED IN BLOCK OF ASSETS FOR A.Y.1989-90 FURTHER, DEPRECIATION IS NOT ALLOWED SINCE SOLD DURING PREVIOUS YEAR. HOW EVER, AO IS DIRECTED TO COMPUTE CAPITAL GAIN ON INCOME RECEIVED ON TRANSFER OF SUCH ASSETS AS PER SECTION 52(2) OF THE ACT. 6.7 AS DISCUSSED IN ABOVE PARAS, I HAVE GONE THROU GH FACTS SUBMITTED BY APPELLANT AND AO AND IT IS SEEN THAT A S CLAIMED BY APPELLANT THERE CANNOT BE A DISSOLUTION ON 30.09.19 83 BY TAKING AWAY JOINTLY HELD PROPERTY BY FIRM BY ONLY MALE PAR TNERS AND ALLOWING LADY PARTNER TO CONTINUE FIRMS BUSINESS, SAME WILL NOT AMOUNT TO DISSOLUTION AT MOST IT CAN BE CHANGE IN C ONSTITUTION. EVEN SAME CANNOT BE CALLED AS CHANGE OF CONSTITUTIO N IN TRUE TERM BECAUSE SAID PROPERTY HAS NOT BEEN APPORTIONED IN P ROFIT/LOSS SHARING RATIO BUT WHEN PROPERTY HAS BEEN SOLD TO BA PUJI BANK ON 23.12.1987 IT CAN BE TREATED AS DISSOLUTION OF FIRM TO REDISTRIBUTE SALE PROCEEDS AS PER PROFIT SHARING RATIO WHICH WIL L AMOUNT TO CAPITAL GAIN AND RIGHTLY SO, AO HAS COMPUTED LONG T ERM CAPITAL GAIN BY APPLYING PROVISIONS OF SECTION 50C OF THE A CT. ACTION OF AO TO HOLD THAT CAPITAL GAIN ARISES IN CASE IS CONF IRMED BUT AS PER DIRECTIONS OF HONBLE KARNATAKA HIGH COURT AO HAS T O FOLLOW PRINCIPLES LAID DOWN BY HONBLE KARNATAKA HIGH COUR T IN CASE OF ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 13 OF 20 C.R. SUBRAMANIYAN REFERRED ABOVE. UNDER THE CIRCUMS TANCES, ACTION OF COMPUTING CAPITAL GAIN IS HELD AS CORRECT WITH A FURTHER DIRECTIONS TO FOLLOW IN COMPUTATION COMPUTING CAPIT AL GAIN SEPARATELY FOR LAND & BUILDING AS PER ABOVE DISCUSS ION. 7. THUS, AO HAS FOLLOWED DIRECTION OF HONBLE HIGH COURT OF KARNATAKA DIRECTIONS IN THE SPIRIT DIRECTED BY THE COURT. 8. UNDER THE CIRCUMSTANCES, PRINCIPALLY ACTION OF AO IS CONFIRMED BUT TECHNICALLY FOR COMPUTATION OF CAPITA L GAIN TAX AS PER DIRECTIONS OF HONBLE KARNATAKA HIGH COURT, APP EAL IS TREATED AS PARTIALLY ALLOWED. IN RESULT APPEAL IS ALLOWED I N PART. 15. IT CAN BE SEEN FROM THE DIRECTIONS OF THE HON BLE KARNATAKA HIGH COURT REFERRED TO EARLIER THAT THE AO WAS DIRECTED TO PASS A FRESH ASSESSMENT ORDER WITHIN A PERIOD OF 6 MONTHS. THE ASSESSEE TOOK A STAND THAT THE ORDER OF THE AO WAS INVALID FOR THE REASON IT WAS PASSED BEYOND THE PERIOD PRESCRIBED BY THE HONBLE HIGH COURT. W ITH REGARD TO THE CONTENTION OF THE ASSESSEE THAT THE ORDER PASSED BY THE AO IS BAD IN LAW AS IT WAS PASSED BEYOND A PERIOD OF SIX MONTHS, CON TRARY TO THE DIRECTIONS OF THE HONBLE HIGH COURT, THE CIT(APPEALS) HELD AS FOLLOWS:- 6. I HAVE GONE THROUGH MATERIALS ON FILE AND APPE AL IS DECIDED AS UNDER: 6.1 DATE OF PASSING ORDER: IT IS CRUCIAL TO KNOW T HAT WHEN HONORABLE HIGH COURT MENTIONS ABOUT SPECIFIC DATE O F PERFORMANCE OF PASSING AN ORDER, IF FOR LAID DOWN P ROCEDURES OF IT DEPARTMENT OF GIVING EFFECT TO SUCH ORDER ONLY A FTER RECEIPT OF SUCH ORDER BY CIT/CCIT SIX MONTH TIME AS PER IT ACT WILL COMMENCE, IS THE MAIN ISSUE OF CONTENT. (A) AS PER AO AFTER RECEIVING ORDER FROM COUNSEL O RDER IS GIVEN EFFECT TO WITHIN SIX MONTHS. THUS, IN FIRST I NSTANCE AO HAS ACTED AS PER PROVISIONS OF IT ACT. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 14 OF 20 (B) IN SECOND PLACE AO HAS NO OPTION BUT TO FOLLOW PROCEDURE LAID DOWN BY DEPARTMENT. (C) FURTHER, AO HAS ACTED IN BONAFIDE BELIEF THAT ORDER IS TO BE PASSED AFTER RECEIVING FROM PROPER CHANNEL. (D) DELAY HAS TO BE ATTACHED TO TIME ORDER TRAVELED FROM REGISTRY OF THE HONORABLE HIGH COURT TO DEPARTMENT AS MEANT BY REMAND REPORT OF AO DATED:13.10.2008. (E) IN THE ORDER OF THE HIGH COURT AT PARA 7, PAGE 12 IT IS HELD THAT IN THE ORDER OF TRIBUNAL, WE HAVE SEEN T HAT THE TRIBUNAL HAS NOT CHOSEN TO CONSIDER THE MATERIAL IN TERMS OF FINDINGS OF AO OR IN TERMS OF COMMISSIONER IN TH E LIGHT OF AVAILABLE TO EITHER PARTIES.... THEREFORE, AO HAS STATED THAT FRESH ORDER IS PASSE D ON 28.10.2007 AFTER CONSIDERING DIRECTIONS OF HONORABL E HIGH COURT OF KARNATAKA, IT IS ALSO STATED THAT CERTAIN FACTS WHICHEVER BROUGHT IN DURING THE COURSE OF ORIGINAL ASSESSMENT ARE NOT DISPUTED THAT THE FIRM WAS NOT DISSOLVED ON 30.09.1983 BUT CONTIN UE TO EXIST TILL THE DATE OF SALE OF THE SAID PROPERTY TO BAPUJI CO- OPERATIVE BANK ON 23.12.1987. THE AO HAS GIVEN SEVEN INSTANCES FOR TREATING THE DISSOLUTION DATED 30.09.83 AS A CHANGE IN THE CONST ITUTION. 16. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) BIFU RCATING THE CAPITAL GAIN BETWEEN LAND AND BUILDING, THE REVENUE IS IN A PPEAL; WHILE THE ASSESSEE HAS FILED THE CROSS OBJECTIONS AGGRIEVED B Y THE ORDER OF CIT(APPEALS) UPHOLDING CHARGING OF CAPITAL GAIN TAX ON THE ASSESSEE AND HOLDING THAT THE ORDER WAS PASSED WITHIN THE TIME L IMIT PASSED BY THE HONBLE HIGH COURT. 17. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE AND THE LD. DR. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 15 OF 20 18. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS, AS WAS MADE BEFORE THE LOWER AUTHORITIES AND IN THE PROCEE DINGS BEFORE THE TRIBUNAL IN THE FIRST ROUND OF LITIGATION. HE DREW OUR ATTENTION TO THE VARIOUS CIRCUMSTANCES WHICH ARE LISTED IN PARA 6 OF THE ORD ER OF THE TRIBUNAL DATED 20.7.1995 IN ITA NO.2096/BANG/1992. HE LAID EMPHAS IS ON THE FACT THAT THE TRIBUNAL, DESPITE FILING OF INTIMATION BY THE A SSESSEE BEFORE THE REGISTRAR OF FIRMS INTIMATING THE DISSOLUTION OF MS C, CHOSE TO IGNORE THE SAME APPARENTLY FOR NO VALID REASONS. THE TRIBUNAL HAS MERELY OBSERVED THAT THESE DOCUMENTS WERE NOT FILED BEFORE THE LOWE R AUTHORITIES AND ARE THEREFORE NOT TAKEN COGNIZANCE OF. ACCORDING TO HI M, UNDER RULE 29 OF THE I.T. RULES, THESE DOCUMENTS WERE NECESSARY FOR PROP ER ADJUDICATION OF THE DISPUTE IN APPEAL AND OUGHT TO HAVE BEEN CONSIDERED BY THE TRIBUNAL. HE SUBMITTED BEFORE US THAT THE SAME SHOULD BE TAKEN C OGNIZANCE OF. ACCORDING TO HIM, THE FACT OF INTIMATION OF MSC WAS DULY INTIMATED TO THE AO BY THE ASSESSEE AND THE FACT THAT UNDER SALES T AX ACT, RETURNS WERE FILED AFTER THE PERIOD OF DISSOLUTION AND BANK ACCO UNTS WERE OPERATED BY MSC CANNOT BE THE BASIS TO COME TO THE CONCLUSION T HAT MSC WAS NOT DISSOLVED ON 30.9.1983. 19. THE LD. DR, ON THE OTHER HAND, PLACED FIRM RELI ANCE ON THE ORDER OF TRIBUNAL IN THE FIRST ROUND OF LITIGATION AND THE O RDER OF AO WHEREIN HE HAS LISTED OUT THE CIRCUMSTANCES FOR JUSTIFYING THE CON CLUSIONS THAT THE FIRM, MSC, WAS NOT DISSOLVED AS ON 30.9.1983. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 16 OF 20 20. THE LD. DR ALSO SUBMITTED THAT THE ORDER OF THE HONBLE HIGH COURT FIXING TIME LIMIT FOR CONCLUSION OF THE ASSESSMENT BY THE AO WAS ONLY DIRECTORY AND MANDATORY. ACCORDING TO HIM, THE TIM E LIMIT AS COMPUTED BY THE AO AND APPROVED BY THE CIT(APPEALS) SHOULD BE U PHELD. 21. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. THIS TRIBUNAL, IN THE ORIGINAL ORDER PASSED IN THE APPEAL, AFTER CONSIDERING THE MATERIAL ON RECORD, CAME TO THE FOLLOWING CONCL USIONS:- 7. IT WOULD BE EVIDENT FROM THE NARRATIONS MADE AB OVE THAT THE CLAIM OF THE ASSESSEE ABOUT DISSOLUTION OF MSC AND FORMATION OF MA, ALTHOUGH EVIDENCED BY DULY EXECUTED DEEDS IN THOSE REGARDS, ARE SUBJECT TO CONSIDERABLE DOUBT AND SUSP ICION ON ACCOUNT OF OMISSIONS ON THE PART OF THE ASSESSEE AN D THE NEW FIRM TO INTIMATE THESE MATTERS TO OTHER PARTIES LIKE THE SALES TAX DEPARTMENT, BANK, INSURANCE COMPANY ETC. WE ARE NO T PAYING MUCH ATTENTION TO THE CLAIM OF THE ASSESSEE ABOUT I NTIMATION HAVING BEEN GIVEN AT THE RELEVANT TIME TO THE REGIS TRAR OF FIRMS, FOR OBVIOUS REASONS DISCUSSED ABOVE. HOWEVER, THE ASSESSEE HAS COME UP WITH SOME REASONS, WHICH HAVE BEEN DESCRIBE D BY US ABOVE. THE JUSTIFICATION OF THESE REASONINGS IS RE QUIRED TO BE WEIGHED IN THE LIGHT OF THE THEORY OF PREPONDERANCE OF PROBABILITIES. 8. FOR THE PURPOSES OF ESTABLISHING THAT MSC HAD NO T BEEN DISSOLVED AND MA HAD NOT ACTUALLY COME INTO EXISTEN CE, THE DEPARTMENT MAINLY RELIES ON THE CIRCUMSTANTIAL EVID ENCE OF NON- INTIMATION TO THE AUTHORITIES OTHER THAN THE INCOME -TAX DEPARTMENT AND ALSO CERTAIN OTHER FACTORS. SO FAR AS THE INCO ME-TAX DEPARTMENT ITSELF IS, HOWEVER, CONCERNED THE FACTS SAND THAT AS PER THE ASSESSEES OWN VERSION, THE ASSESSEE HAD INTIMA TED THE DISSOLUTION OF MSC TO THE ITO AND FURTHERMORE THAT A RETURN OF INCOME FOR MSC IN RESPECT OF ASSESSMENT YEAR 1985-8 6 (IN WHICH DISSOLUTION OF THE FIRM HAD BEEN SHOWN) WAS ALSO DU LY FILED WITH THE INCOME-TAX DEPARTMENT. THE DEPARTMENTAL CONTEN TION IN THIS REGARD IS THAT THESE PAPERS WERE NOT PROPERLY FILED IN THE REGULAR WAY BUT MUST HAVE BEEN PLANTED IN THE OFFICE OF THE ITO. THE ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 17 OF 20 DEPARTMENT WANTS TO ESTABLISH THIS FACT BY ARGUING THAT IN THE RECEIPT REGISTER OF THE DEPARTMENT THERE ARE NO ENT RIES RELATING TO FILING OF THE ABOVEMENTIONED INTIMATION LETTER AND ALSO OF THE RETURN OF INCOME PERTAINING TO MSC. THE ASSESSEE A RGUES HAT WHEN THE ASSESSEE IS HAVING DULY ACKNOWLEDGED RECEI PTS IN SUPPORT OF FILING OF THE RESPECTIVE DOCUMENTS, THE DEPARTMENT CANNOT NOW DENY THE SAID FACTS. THE OTHER POINT RA ISED BY THE ASSESSEE THAT THE DEPARTMENT, HAVING EVEN MADE THOR OUGH INVESTIGATIONS INTO THE MATTER BY REFERRING IT TO T HE GOVERNMENT EXAMINER OF QUESTIONED DOCUMENTS, COULD NOT COME TO ANY PROPER FINDING AND FURTHERMORE THAT THE DEPARTMENT DID NOT EVEN MAKE PROPER ENQUIRY AS TO WHETHER THE ACKNOWLEDGEME NT HAD BEEN ISSUED BY THE DULY AUTHORISED OFFICER REMAININ G IN-CHARGE OF THE RECEIPT OF PAPERS AND DOCUMENTS ON THE RELEVANT DATES, ALSO REQUIRES EXAMINATION. HOWEVER, AT THE SAME TIME, W E ARE REQUIRED TO LOOK INTO THE TOTALITY OF THE CIRCUMSTA NCES PREVAILING AT THE RELEVANT TIME. ALTHOUGH ACCORDING TO THE AS SESSEE, MSC HAD ALREADY BEEN DISSOLVED AND THE NEW FIRM MA HAD BEEN STARTED, YET SOME OF THE ERSTWHILE PARTNERS OF MSC LIKE S/SHRI M.V. MAHENDRASWAMY AND M.V. NARENDRANATH CONTINUED TO SIGN THE DECLARATION FORMS IN RESPECT OF TURNOVER SUBMIT TED BEFORE THE SALES-TAX AUTHORITIES, AS PARTNERS OF MSC. THE ARG UMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE COMPOSITI ON OF THE TRADING ORGANIZATION IS NOT OF MUCH IMPORTANCE BEFO RE THE SALES TAX AUTHORITIES MAY HAVE SOME FORCE. WE ARE, HOWEV ER, CONFRONTED IN THIS MATTER WITH THE CONDUCT OF S/SHR I M.V. MAHENDRASWAMY AND M.V. NARENDRANATH. HAD THE DISSO LUTION OF MSC REALLY TAKEN PLACE, THEY WOULD HAVE BEEN CONSCI OUS ENOUGH NOT TO SIGN THE SALES-TAX TURN-OVER DECLARATION FOR MS STILL AS PARTNERS OF MSC. THEY COULD HAVE, AT BEST, SIGNED THEM FOR THE PROPRIETRESS SMT. M.A. JAYASHREE. IT IS A FACT THA T BY ACTING UPON THE RETURN OF INCOME FILED BY MSC FOR ASSESSMENT YE AR 1985-86 SHOWING THE DISSOLUTION OF THE FIRM, THE IT DEPARTM ENT HAS INDIRECTLY ACCEPTED THE SAID FACT OF DISSOLUTION. THE SAME MAY BE AGAIN THE CASE ABOUT MAKING ASSESSMENTS ON THE RETU RNS FILED BY MA FOR DIFFERENT YEARS. HOWEVER, IT IS REQUIRED TO BE NOTED THAT ALL THESE ASSESSMENTS WERE MADE U/S. 143(1) WITHOUT THE CONSCIOUS APPLICATION OF MIND ON THE PART OF THE AS SESSING AUTHORITY. ON THE OTHER HAND, SIMILAR STRANGE CIRC UMSTANCES LIKE NON-RECORDING OF THE RECEIPT OF PAPERS FILED BY THE ASSESSEE WITH THE INCOME-TAX DEPARTMENT ARE CLAIMED TO HAVE HAPPE NED IN RESPECT OF MORE THAN ONE SUCH PAPERS VIZ., THE RETU RN OF INCOME OF ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 18 OF 20 MSC FOR ASSESSMENT YEAR 1985-86 AND ALSO THE LETTER OF THE ASSESSEE DATED 3-10-1983 INTIMATING THE DISSOLUTION OF MSC. THE CO-INCIDENCE OF SUCH STRANGE CIRCUMSTANCES ON MORE THAN ONE OCCASIONS HAS GOT TO BE CONSIDERED AS REALLY IMPROB ABLE. HENCE, TAKING INTO CONSIDERATION ALL THE DIFFERENT ASPECTS OF THE CASE AND CONSIDERING THE THEORY OF PREPONDERANCE OF PROBABIL ITY, WE ARE LED TO HOLD THAT THE DEPARTMENTAL CONTENTION ABOUT NON-DISSOLUTION OF MSC AND SUBSEQUENT NON-INCEPTION OF MA IN OCTOBE R 1983 ITSELF HAS GOT TO BE ACCEPTED. 22. IT IS NO DOUBT TRUE THAT IF THE CIRCUMSTANCES O F THE ASSESSEE HAVING INTIMATED THE INCOME-TAX DEPARTMENT OF ITS DISSOLUT ION IS GIVEN DUE CREDENCE AND THE FACTUM OF MA HAVING FILED THE RETU RN OF INCOME EVEN PRIOR TO THE SALE OF THE PROPERTY IS GIVEN DUE CREDENCE, IT IS POSSIBLE TO COME TO A CONCLUSION THAT THERE WAS A DISSOLUTION OF MSC ON 3 0.9.1983. WE DO NOT WISH TO TAKE A CONTRARY VIEW THAT WAS ALREADY TAKEN BY THE TRIBUNAL ON IDENTICAL SET OF FACTS. IN OTHER WORDS, WE GIVE TH E BENEFIT OF DOUBT TO THE REVENUE, AS WAS DONE BY THE TRIBUNAL IN ITS ORDER I N THE FIRST ROUND OF LITIGATION. THE EVIDENCE ON RECORD SHOWS THAT THE F ACTUM OF DISSOLUTION OF THE FIRM WAS NEITHER PROVED NOR DISPROVED. IT IS H ELD TO BE NOT PROVED. SINCE THE BURDEN OF PROOF WAS ON THE ASSESSEE, THE CONCLUSIONS DRAWN BY THE REVENUE AUTHORITIES HAVE TO BE UPHELD. WITH R EGARD TO THE QUESTION AS TO WHETHER THE ASSESSEE OWNED THE PROPERTY OR WAS I T THE PROPERTY OF THE THREE INDIVIDUALS AS WAS HELD BY THE TRIBUNAL IN TH E FIND ROUND OF LITIGATION, WE ARE OF THE VIEW THAT ONCE THE DISSOLUTION OF THE FIRM IS HELD TO BE NOT PROVED, THE NECESSARY COROLLARY IS THAT THE PROPERT Y CONTINUES TO BE THAT OF THE ASSESSEE FIRM. ADMITTEDLY THE PROPERTY WAS ALW AYS CONSIDERED AS THE ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 19 OF 20 PROPERTY OF THE ASSESSEE FIRM, THOUGH IT STOOD IN T HE NAME OF PARTNERS. THEREFORE THE CONCLUSION THAT THE PROPERTY BELONGS TO THE ASSESSEE HAS TO BE UPHELD. THE GRIEVANCES PROJECTED BY THE ASSESSE E IN ITS CO ARE THEREFORE REJECTED. 23. WE ARE ALSO OF THE VIEW THAT TIME LIMIT LAID DO WN BY THE HONBLE HIGH COURT IS ONLY DIRECTORY AND NOT MANDATORY. WE ARE ALSO OF THE VIEW THAT THE COMPUTATION OF TIME LIMIT AS DONE BY THE REVENUE IS PROPER AND CALLS FOR NO INTERFERENCE. 24. THE CO OF THE ASSESSEE IS ACCORDINGLY REJECTED. 25. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D, WE ARE OF THE VIEW THAT THE BIFURCATION OF LAND AND BUILDING WAS RIGHTLY DONE BY THE CIT(APPEALS), KEEPING IN MIND THE DIRECTIONS OF THE HONBLE HIGH COURT AND ALSO FOLLOWING THE DECISION RENDERED BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF C.R. SUBRAMANIYAN (SUPRA) . WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE ALSO. LAND IS NOT A DEPRECIABLE ASSET AND THEREFORE TO THE EXTENT CONSIDERATION RECEIVED ON SALE OF THE PROPERTY IS ATTRIBUTABLE TO LAND, PR OVISIONS OF SECTION 50(2) ARE NOT ATTRACTED. THE GRIEVANCE PROJECTED BY THE REVE NUE IN THIS REGARD IS THEREFORE REJECTED. THE APPEAL OF THE REVENUE IS T HEREFORE DISMISSED. ITA NO.750/BANG/2009 & CO NO.7/BANG/2009 PAGE 20 OF 20 26. IN THE RESULT, THE APPEAL BY THE REVENUE AND CO BY THE ASSESSEE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF APRIL, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 10 TH APRIL, 2015. /D S/ COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.