Navabharat Enterprises Ltd., Hyd, Hyderabad V. DCIT, Circle 16(1), Hyderabad, Hyderabad

ITA 874/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2710 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DIVYA K J
• Assessee Lawyers: N VENKATARAM
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA. NO.874/HYD/2016 ASSESSMENT YEAR: 2005 - 2006 NAVABHARAT ENTERPRISES LIMITED, HYDERABAD. PAN: AAACN 6936 D VS. DCIT, CIRCLE - 16(1), IT TOWERS, HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI N. VENKATARAM FOR REVENUE : SMT. DR. DIVYA K.J - DR DATE OF HEARING : 10.01.2018 DATE OF PRONOUNCEMENT : 10.01.2018 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 4, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2005 - 06. 2. FACTS IN BRIEF ARE THAT ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF EXPORT OF TOBACCO AND DECLARED LOSS OF RS. 9 . 78 CRS FOR THE YEAR UNDER CONSIDERATION WHEREAS ASSESSMENT WAS COMPLETED BY DETERMINING THE LOSS AT RS. 3,43,62,633/ - . 3. A.O. NOTICED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH INSTRING TECHNOLOGY PRIVATE LIMITED FOR TRANSFER OF RCC HOUSE TOGETHER WITH 1.95 ACRES OF LAND FOR A CONSIDERATION OF RS. 14,51,780/ - . ASSESSEE RECEIVED PART CONSIDERATION AND HAS ALSO GIVEN POSSESSION OF THE 2 PROPERTY. SINCE THE A SSESSEE HAS NOT DECLARED SHORT TERM CAPITAL GAINS ON THAT, IN THE PROCEEDINGS U/S 147 OF THE ACT, THE A.O. ISSUED A SHOW CAUSE NOTICE AS TO WHY THE SAME SHOULD NOT BE BROUGHT TO TAX. 4. SIMILARLY THE A.O. WAS OF THE OPINION THAT THE ASSESSEE GAINED AN AMO UNT OF RS. 1.75 CRS TOWARDS ONE TIME SETTLEMENT OF LOAN WITH UNION BANK OF INDIA AND VIJAYA BANK WHICH IS IN THE FORM OF REMISSION OF INTEREST LIABILITY, ALLOWABLE FOR DEDUCTION , AND THE ASSESSEE HAVING NOT DECLARED THE SAME IN ITS RETURN OF INCOME , THE SA ME AMOUNTS TO ESCAPEMENT OF INCOME. 5. ASSESSEE IN ITS REPLY SUBMITTED THAT THE INTEREST WAS NOT CLAIMED AS DEDUCTION IN THE EARLIER YEARS AND HENCE THE QUESTION OF APPLICATION OF SECTION 41(1) DOES NOT ARISE. A.O. REJECTED THE CONTENTION ON THE GROUND THAT THE ASSESSEE IS DUTY BOUND TO FURNISH DETAILS OF THE FACT THAT INTEREST WAS NOT CLAIMED AS DEDUCTION IN THE EARLIER YEARS. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. NOTICED THAT THE ASSESSEE SOLD CERTAIN DEPRECIABLE ASSETS AND ADMITTED LO NG TERM CAPITAL LOSS WHEREAS IT IS A TRANSACTION COMING WITHIN THE PROVISIONS OF SECTION 50(1) OF THE INCOME TAX ACT, 1961. HE WAS ALSO OF THE OPINION THAT THE ASSESSEE STILL CONTINUE S TO BE IN THE BUSINESS AND WHAT HAS BEEN TRANSFERRED IS ONLY A PART OF THE ASSETS AND THUS IT CANNOT BE TREATED AS SLUMP SALE U/S 51B OF THE ACT. 7. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAD SOLD AN ENTIRE TOBACCO UNIT WHICH IS AN UNDERTAKING BY ITSELF AND HENCE, THE PROVISIONS OF SECTION 50B COMES INTO PLA Y . ELABOR ATING FURTHER , IT WAS SUBMITTED THAT IN ORDER TO SEEK THE BENEFIT OF SECTION 50B, IT IS NOT NECESSARY TO TRANSFER THE ENTIRE UNDERTAKING SO LONG AS AN UNIT AS SUCH IS TRANSFERRED. 3 8. A.O. OBSERVED THAT IN THE ASSETS SCHEDULE, FEW ASSETS STILL REMAIN WITH THE ASSESSEE AND HENCE IT CANNOT BE TREATED AS A TRANSFER OF THE ENTIRE BUSINESS. ASSESSEE HAS NEVER ADMITTED ANY INCOME FROM THE TOBACCO UNIT SEPARATELY AND HAS BEEN SHOWING CONSOLIDATED REVENUES. FURTHER, THE ASSESSEE HAS NOT DEMONSTRATED AS TO HOW THE ASSETS TRANSFERRED RELATE TO THE TOBACCO UNIT , S INCE IT HAS NOT MAINTAINED ANY SEPARATE BOOKS WITH REGARD TO THE UNDERTAKING WHICH GOES TO SHOW THAT ONLY A PART OF THE ASSESSEES BUSINESS WAS SOLD, THUS HE INVOKED THE PROVISIONS OF SECTION 50B OF THE ACT T O COMPUTE THE CAPITAL GAINS. 9. ON AN APPEAL FILED BY THE ASSESSEE ON BOTH THE ISSUES, LD. CIT(A) AFFIRMED THE ACTION OF THE A.O. IT MAY BE NOTED THAT THE CASE OF THE ASSESSEE WAS THAT IT HAS NOT PROVIDED ANY INTEREST IN THE BOOKS AND IT HAS NEVER CLAIME D ANY EXPENDITURE IN THE PREVIOUS YEAR S IN WHICH EVENT AT THE TIME OF ONE - TIME SETTLEMENT WITH THE BANKS , THE SAME CANNOT BE BROUGHT TO TAX U/S 41(1) OF THE ACT. IT WAS ALSO STATED THAT THE FACTUAL MATRIX , EXPLAINED TO THE ASSESSING OFFICER, WAS NOT PROPE RLY TAKEN COGNISANCE OF. DESPITE THAT, LD. CIT(A) CONFIRMED THE ACTION OF THE AO WITHOUT GIVING ANY REASONS. IN FACT THERE IS NO DISCUSSION BY THE LD. CIT(A) ON BOTH THE ISSUES. IT WAS A NON - SPEAKING ORDER PASSED BY THE LD. CIT(A). SIMILARLY WITH REGAR D TO THE CLAIM OF SLUMP SALE THERE WAS NO DISCUSSION IN THE ORDER OF THE LD. CIT(A) WHILE CONFIRMING THE ACTION OF THE A.O. THUS THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON TWO GROUNDS I.E., INVOKING THE PROVISIONS OF SECTION 4 1 (1) OF THE ACT IS BAD IN LAW AND THE A.O. ERRED IN NOT TAKING INTO CONSIDERATION THE PLEA OF APPLICABILITY OF SECTION 50B INSTEAD OF SECTION 50(1) OF THE ACT. 10. LD COUNSEL FOR THE ASSESSEE FILED A DETAILED PAPER BOOK TO SUBMIT THAT THE ENTIRE RECORD OF THE EARLIER YEARS ALON G WITH ANNUAL REPORTS ETC., WERE PLACED BEFORE THE A.O. AS WELL AS THE LD. CIT(A) IN SUPPORT OF THE CONTENTION OF THE ASSESSEE - COMPANY THAT THE INTEREST WAS NOT CLAIMED 4 AS DEDUCTION / DEDUCTED TO PROFIT & LOSS ACCOUNT IN THE EARLIER FINANCIAL YEARS BUT THE SAME WAS OVERLOOKED BY THE A.O. AS WELL AS THE LD. CIT(A). 11. WE HAVE ALSO HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND CAREFULLY PERUSED THE RECORD. SINCE THE FACTS WERE PLACED BEFORE THE ASSESSING OFFICER, THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE SAME, IF NOT THE A.O. SINCE THE ORDER PASSED BY LD. CIT(A) IS NOT A SPEAKING ORDER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) WITH A DIRECTION TO RECONSIDER THE MATTER AFRESH. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE - COMPANY IS TREATED AS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JANUARY, 2018. SD/ - SD/ - (S. RIFAUR RAHMAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED: 10 TH JANUARY, 2018. OKK, SR.PS COPY TO 1. NAVABHARAT ENTERPRISES LIMITED, 8 - 2 - 325, ROAD NO.3, BANJARA HILLS, HYDERABAD. 2. DCIT 16(1), IT TOWERS, HYDERABAD. 3. CIT (A) - 4 , HYDERABAD. 4. PR. CIT - 4 , HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE