M/s. Mali Florex Ltd., Hyd, Hyderabad V. DCIT, Central Circle-6, Hyderabad

ITA 892/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59185 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: K C DEVADAS
• Keywords: Search and seizure; Cost of acquisition; Assessment record; Capital receipt
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 892/HYD/2011 ASSESSMENT YEAR 2006-07 M/S MALI FLOREX LIMITED GACHIBOWLI, HYDERABAD (PAN AACCM 8025A) VS THE DCIT, CENTRAL CIRCLE 6, HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI K.C. DEVADAS RESPONDENT BY : SHRI T. DIWAKAR PRASAD DATE OF HEARING : 12.1.2012 DATE OF PRONOUNCEMENT : 3.2.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THIS APPEAL PREFERRED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER PASSED BY THE CIT(A) I, HYDERABAD DATED 21.3 .2011 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE I.T. ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE APPELLANT ON 17.10.2007. CONSEQUEN TLY NOTICE U/S 153A OF THE ACT WAS ISSUED BY THE ASSESSING OFF ICER (AO) IN RESPONSE TO WHICH THE APPELLANT FILED ITS RETURN OF INCOME ADMITTING A LOSS OF RS 18,09,489/- UNDER THE HEAD CAPITAL GAINS. DURING THE COURSE OF THE ASSESSMENT PROCE EDING, THE AO FOUND THAT THE APPELLANT HAD SOLD 6 ACRES OF LAN D FOR AN AMOUNT OF RS. 18,00,000/- IN THE COMPUTATION OF LON G TERM CAPITAL GAIN, THE APPELLANT HAD CLAIMED INDEXED COS T OF ACQUISITION AND IMPROVEMENT AMOUNTING TO RS. 36,09, 489/- ITA NO.892 OF 2011 M/S MALI FLOREX LIMITED, HYDERABAD 2 WHICH INCLUDED INDEXED COST OF ACQUISITION OF RS. 1 3,56,312/- AND THE BALANCE AMOUNT OF RS. 22,53,177/- RELATED T O COST OF IMPROVEMENT AND INDEXATION THEREON. THE APPELLANT COMPANY WAS REQUESTED TO FURNISH NECESSARY EVIDENCE RELATIN G TO THE CLAIM OF COST OF IMPROVEMENT. THE APPELLANT FAILED TO FILE THE SAME. SINCE THE IMPROVEMENT COST WAS NOT VERIFIABL E, THE AO DISALLOWED THE CLAIM OF INDEXATION RELATING TO COST OF IMPROVEMENT AMOUNTING TO RS. 22,53,177/-. THE LONG TERM CAPITAL GAIN WAS RECOMPUTED AT RS. 4,43,688/- AND A TAX DEMAND OF RS. 1,47,371/- WAS RAISED. 3. DURING THE COURSE OF APPELLATE PROCEEDING, THE APPELLANT RAISED AN ADDITIONAL GROUND SUBMITTING THAT THE LAN D IN QUESTION BEING AGRICULTURAL LAND, THE AO OUGHT NOT TO HAVE S UBJECTED THE TRANSACTION TO CAPITAL GAINS AT ALL. 4. THE CIT(A) HAS HELD AS FOLLOWS: I HAVE GONE THROUGH THE ADDITIONAL GROUND RAISED B Y THE APPELLANT WHEREIN THE APPELLANT CHALLENGES THE COMPUTATION OF CAPITAL GAIN MADE BY THE AO STATING THAT THE SAID LAND WAS AGRICULTURAL IN NATURE. I DO NOT ACCEPT THE CONTENTION RAISED BY THE APPELLANT IN THE ADDIT IONAL GROUND. I FIND FROM THE ASSESSMENT RECORD THAT THE APPELLANT ITSELF HAD COMPUTED THE INCOME FROM LONG TERM CAPITAL GAIN FROM SALE OF LAND OF 6 ACRES AND HAD D ECLARED A LOSS OF RS. 18,09,489/- THEREON. THUS IT IS NOT F AIR ON THE PART OF THE APPELLANT TO STATE THAT THE AO HAS COMP UTED THE LONG TERM CAPITAL GAIN ON THE SALE TRANSACTION. SIN CE THE APPELLANT ITSELF HAD ADMITTED THE TRANSACTION TO BE LIABLE FOR CAPITAL GAIN, I DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE AO COMPUTING THE LONG TERM CAPITAL GAIN ON THE SALE ITA NO.892 OF 2011 M/S MALI FLOREX LIMITED, HYDERABAD 3 TRANSACTION OF THE APPELLANT. THE ADDITIONAL GROUN D IS THEREFORE DISMISSED. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI K.C. DEVADA S SUBMITTED THAT POWERS OF THE CIT(A) IS CO-TERMINUS WITH THE POWERS OF THE ASSESSING OFFICER AND FOR THIS PROPOS ITION HE RELIED ON THE FOLLOWING JUDGEMENTS: A. CIT VS KANPUR COAL SYNDICATE (1964) REPO RTED IN 53 ITR 225 (SC) B. JUTE CORPORATION OF INDIA LTD REPORTED A S 187 ITR 688. 6. THE LEARNED COUNSEL ALSO RELIED ON THE ORDER OF THE ITAT, CALCUTTA A BENCH IN THE CASE OF SHRI SHUSHIL KR. DAS VS. ITO IN ITA NO.193/CAL/2011 WHEREIN IT HAS BEEN HELD AS FOL LOWS: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE MOOT QUESTION ARISING OUT OF THIS APPEAL IS WHETHER THE INCOME DETERMINED BY THE ASSESSING OFFICER ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE CAN BE A FIGURE LOWER THAN THE INCOME RETU RNED BY THE ASSESSEE. IT IS A WELL SETTLED THAT THE PRINCIP LE FOR DETERMINING THE TAXABLE INCOME OF THE ASSESSEE UNDE R THE INCOME TAX ACT SHOULD BE WITHIN THE PURVIEW OF THE LAW IN FORCE. IF THE TAXABLE INCOME DETERMINED BY THE ASS ESSING OFFICER IS NOT IN ACCORDANCE WITH SUCH PRINCIPLE IT IS OPEN TO THE ASSESSEE TO CONTEND THE SAME BEFORE THE HIGHER AUTHORITIES TO FOLLOW THE CORRECT APPLICATION OF LA W TO DETERMINE THE ACTUAL TAXABLE INCOME OF THE ASSESSEE . IN OUR CONSIDERED VIEW, THE LOWER AUTHORITIES NOT EXPECTED , TO SAY THAT MERELY BECAUSE THE ASSESSEE HAS RETURNED INCOM E WHICH IS HIGHER THAN THE INCOME DETERMINED IN ACCOR DANCE WITH THE PROVISIONS OF LAW, SUCH RETURNED INCOME SH OULD BE ITA NO.892 OF 2011 M/S MALI FLOREX LIMITED, HYDERABAD 4 TREATED AS LAWFULLY ASSESSED. AN ASSESSEE IS LIABL E TO PAY TAX ONLY UPON THE TAXABLE INCOME. THE LAW IMPOSED B Y THE ASSESSING OFFICER TO ASSESS THE INCOME ACCORDING TO LAW AND DETERMINED THE TAX PAYABLE THEREON. IN DOING SO, TH E ASSESSING OFFICER CANNOT ASSESS THE INCOME OF THE A SSESSEE AN AMOUNT WHICH IS NOT TAXABLE AS PER LAW THOUGH SH OWN BY THE ASSESSEE IN THE RETURN. IT IS ALWAYS OPEN T O THE ASSESSEE TO TAKE A PLEA THAT THE TAXABLE INCOME THO UGH SHOWN AS INCOME IS NOT TAXABLE UNDER LAW BEFORE THE HIGHER AUTHORITIES,. THE CIT (A) WITHOUT GOING INTO THE M ERIT OF THE CASE HELD THAT THE CIT(A) IS NOT HAVING ANY POWER T O REDUCE THE TAXABLE INCOME OF THE ASSESSEE AT THE APPELLATE STAGE, WHICH IS NOT CORRECT. IN THE CASE OF CIT VS CHARANJ IT JAWA (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTS THE VIEWS THAT THE INTEREST RECEIVED AS A RESULT OF THE ORDER OF THE HONBLE HIGH COURT WAS NOT A STAT UTORY INTEREST AND WAS IN THE FORM OF DAMAGE/ COMPENSATIO N AND THE SAME WAS NOT LIABLE TO TAX. IN VIEW OF THE ABO VE, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE AND ALSO ON PERUSAL OF THE CASE LAWS RELIED UP ON BY BOTH THE PARTIES WE HOLD THAT THE INTEREST OF RS 2, 53,730/- RECEIVED BY THE ASSESSEE AS PER THE ORDER OF THE HO NBLE HIGH COURT WAS NOT TAXABLE AND THE SAME IS A CAPITA L RECEIPT. WE ALSO TAKE SUPPORT FROM THE CIRCULAR IS SUED BY THE CBDT VIDE CIRCULAR NO. 14(XL-35) DATED 11.4.195 5 WHICH HAS DIRECTED THE OFFICERS NOT TO TAKE ADVANTA GE OF THE IGNORANCE OF THE ASSESSEE. THE APPELLATE AUTHORITI ES HAS POWERS TO ADMIT POINTS OF LAW AND ADMIT CLAIM FOR EXEMPTION BASED ON MATERIALS ON RECORD AS PER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER CO. LTD VS CIT (1998) REPORT ED IN 229 ITR 383 (SC). IN VIEW OF THE ABOVE, WE DIRECT THE ITA NO.892 OF 2011 M/S MALI FLOREX LIMITED, HYDERABAD 5 ASSESSING OFFICER TREAT THE AFORESAID RECEIPT OF RS 2,53,730/- AS CAPITAL RECEIPT WHICH WAS RECEIVED BY HIM AS PER THE ORDER OF THE HONBLE HIGH COURT.. 7. WE HEARD BOTH THE PARTIES AND PERUSED THE MATER IALS AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) HAS D ISMISSED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE THAT THE L AND IN QUESTION BEING AGRICULTURAL LAND, THE ASSESSING OFF ICER OUGHT NOT TO HAVE SUBJECTED THE TRANSACTION TO CAPITAL GAINS AT ALL AND THE ASSESSEE HAS AGITATED AGAINST THE ORDER OF THE CIT( A) AT GROUND NO.5 IN THE GROUNDS OF APPEAL RAISED BEFORE US. 8. WE ARE OF THE OPINION THAT THE CIT(A) OUGHT TO HAVE ADJUDICATED ON THE ADDITIONAL GROUND RAISED BY THE ASSESSEE NOT WITHSTANDING THE DISCLOSURE BY THE ASSESSEE TO THE CONTRARY. THE ASSESSEE HAS ALSO FILED THE ASSESSMENT ORDER FOR TH E ASSESSMENT YEAR 2006-07 UNDER THE WEALTH TAX ACT WHERE IT IS S TATED THAT THE ASSESSEE COMPANY HAS PURCHASED LAND MEASURING O F AROUND 20 ACRES IN MARCH 1986 OF BOOK VALUE OF RS.26,80,77 5/- . THE ASSESSEE FILED ITS RETURN OF HIS RETURN OF WEALTH F OR THE ASSESSMENT YEAR 2006-07 ON 5.10.2011 ADMITTING A NE T WEALTH AT RS. NIL AND THE ASSESSMENT WAS COMPLETED BY ASSE SSING THE WEALTH AT NIL. THE RATIO OF THE DECISION IN THE CA SE OF CIT(CENTRAL) MADRAS VS. INDIAN EXPRESS (MADURAI) PV T. LTD. ( 140 ITR 705) (MAD.) SUPPORTS OUR STAND. WE THEREFORE, S ET ASIDE THE ISSUE TO THE FILE OF THE CIT(A) TO ADJUDICATE UPON THE SAME. ITA NO.892 OF 2011 M/S MALI FLOREX LIMITED, HYDERABAD 6 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON: 3.2.2012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 3RD FEBRUARY , 2012 COPY FORWARDED TO: 1. M/S MALI FLOREX LIMITED, NO.4/51/L/88, LUMBINI SLN SPRINGS, GACHIBOWLI , HYDERABAD-32 2. THE DCIT, CENTRAL CIRCLE 6, HYDERABAD 3. THE CIT(A)-I, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/