Sh. Jawahar Lal Choudhaary, JODHPUR V. ITO, JODHPUR

ITA 94/JODH/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8027 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Cost of acquisition; Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NOS. 94 & 95/JU/2010 ASSESSMENT YEARS: 2003-04 & 2005-06 SHRI JAWAHAR LAL CHOUDHARY VS. THE A.C.I.T C-13/16, NEAR AGENCY POST OFFICE WARD 1(4) RESIDENCY ROAD, JODHPUR JODHPUR PAN NO. ACSPC 4682 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI DEPARTMENT BY : SHRI G.R. KOKANI DATE OF HEARING : 26.11.2012 DATE OF PRONOUNCEMENT : 30.11.2012 ORDER PER HARI OM MARATHA, J.M. THESE ARE TWO APPEALS FILED BY THE SAME ASSESSEE FO R A.YS. 2002-03 AND 2005-06 DIRECTED AGAINST THE ORDE R OF THE LD. CIT(A), JODHPUR, DATED 1.2.2011 . 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS ALLOTTED AN INDUSTRIAL PIECE OF LAND M EASURING 4855.50 SQ YARDS, BY THE GOVERNMENT OF RAJASTHAN FO R SETTING UP OF A AGRO SERVICE CENTRE-CUM-MANUFACTURI NG OF AGRICULTURAL IMPLEMENTS AND OTHER ENGINEERING WORKS . THE ASSESSEE STARTED TRACTOR REPAIRING WORK ON THIS PLO T BUT DUE TO HEAVY LOSSES, SUFFERED BY HIM, CLOSING THIS BUSINESS. THEREAFTER, THE ASSESSEE JOINED SERVICE IN THE YEAR 1983. THE ASSESSEE HAD SUFFERED HEAVY LOANS AND LITIGATIO NS RELATING TO REPAYMENTS ENSUED. CONSEQUENTLY, THE ASSESSEE HAD DISPOSED OF THE FACTORY LAND AND OTHER ASSETS. THE FACTOR LAND WAS SOLD TO SHRI JAINA RAM & PARTY IN THE YEAR 1987. THE LAND WAS SITUATED IN NAGAUR IN KHASR A NO. 572/825, FALLING IN TEHSIL NAGAUR. AFTER GETTING T HE LAND USE FROM INDUSTRIAL TO COMMERCIAL AS PER THE PERMIS SION OF THE DISTRICT COLLECTOR, NAGAUR ON 12.3.1999, REGIST ERED WITH SUB-REGISTRAR ON 29.3.1999. A POWER OF ATTORN EY [POA] WAS EXECUTED IN FAVOUR OF ONE SHRI JAINA RAM S/O SHRI JAI RAM ON 19.2.2002, TO TAKE CARE AND MAINTAI N THIS LAND. THEREAFTER, THE ENTIRE LAND WAS DIVIDED INTO PLOTS 3 AND SHOPS OF DIFFERENT SIZES AND WERE SOLD THROUGH THE POA HOLDER SHRI JAINA RAM ON BEHALF OF THE ASSESSEE THR OUGH SALE-DEEDS WHICH WERE REGISTERED BY POA ON BEHALF O F THE ASSESSEE IN FAVOUR OF THE PURCHASERS OF SHOPS AND P LOTS. FOR A.Y. 2005-06, THE ASSESSEE FILED HIS RETURN OF INCOME IN FORM NO. 2D ON 31.3.2006 WITH ITO, WARD 1 AT R S. 1,98,760/- AND ALSO DISCLOSED CAPITAL LOSS OF RS. 1 ,06,620/. SUBSEQUENTLY, THE A.O. INITIATED PROCEEDINGS U/S 14 7 AFTER RECORDING REASONS AND ISSUED NOTICE U/S 148 ON 13.8 .2008. THE ASSESSEE COMPLIED WITH THE NOTICE WITH A REQUES T TO TREAT THE RETURN OF INCOME FILED ON 31.3.2006 IN RE SPONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSEE DEMANDE D COPY OF REASONS AND OBJECTED TO THE INITIATION OF ACTI ON U/S 147 AND ALSO OBJECTED TO THE JURISDICTION OF THE A. O. THE REASONS RECORDED FOR TAKING ACTION U/S 147 ARE AS U NDER: PLEASE REFER TO YOUR WRITTEN REPLY SUBMITTED ON 01 .10.2008 VIDE WHICH YOU HAVE STATED THAT YOUR I.T. RETURN FO R THE AY 2003-04 FILED ON 31.3.2005 AT WARD-1, VIDE ACKNOWLE DGEMENT NO. 18242, THE SAME MAY BE TREATED IN RESPONSE TO N OTICE ISSUED U/S.148 DATED 13.08.2008. YOU WERE ALSO REQU ESTED 4 FOR OBTAINING COPY OF REASONS RECORDED U/S.147/148, THEREFORE, A COPY OF REASON RECORDED U/S. 148 IS EN CLOSED HEREWITH. THE JOINT COMMISSIONER OF INCOME TAX, NAG AUR RANGE, NAGAUR WAS ALSO GIVEN APPROVAL U/S.!51(L) OF THE I.T. ACT ON 11.08.2008. RETURN DECLARING TOTAL INCOME AT RS.1,56,566/- FILE D ON 31.03.2005 FOR THE AY 2003-04. THE RETURN WAS PROCE SSED ON 28.06.2005 AT THE SAME INCOME. ON PERUSAL OF STATEM ENT OF TOTAL INCOME FURNISHED ALONG WITH THE RETURN OF INC OME FILED FOR THE AY 2003-04, IT IS NOTICED THAT ASSESSEE SHO WN LOSS FROM LONG TERM CAPITAL GAIN AT (-) RS.33,74,200/-. THE TOTAL LAND SOLD BY THE ASSESSEE MEASURING 4300 SQ FT. IN THE URBAN AREAS. THE ACIT, CIRCLE, NAGAUR HAS PASSED INFORMATION VID E LETTER NO ACIT/CIR/NGR/ 07-08/582 DATED 15.01.2008 THAT WH ILE COMPLETING ASSESSMENT PROCEEDINGS FOR THE AY 2005- 06 IN THE CASE OF M/S. SRI ADITYA HOTELS & RESTAURANT, NAGAUR , IT WAS NOTICED THAT THE SELLER I.E. SHRI JAWAHAR LA! WAS S HOWING HIGHER COST OF BUILDING AS ON 01.04.1981 HAS DRASTI CALLY REDUCED ITS ACTUAL CAPITAL GAIN. THE CAPITAL GAIN S HOULD BE CALCULATED AS PER THE COST OF BUILDING AS ON 17.02. 2005 ( AT THE VALUE ASCERTAIN BY THE DVO) LESS INDEXED COST OF BU ILDING AS ON 01.04.1981 ( AT THE VALUE ASCERTAINED BY THE DVO) A ND ANY- OTHER EXPENSES USED FOR THIS PURPOSE. THE CALCULATION OF ESCAPED INCOME IS AS UNDER: - 5 A. COST OF ACQUISITION SHOWN BY THE ASSESSEE AS ON 1.04. 1981 4300 SQ.FT. X RS.200/- PER SQFT = RS.8,60,000/- RS. 8,60,000X 447/100 = RS.38,44,200/- B. COST OF ACQUISITION DETERMINED AS ON 01.04.1981 BY THE DEPARTMENTAL VALUATION OFFICER (REPORT DATED 12.12.2007) :- 4300 SQFT. X RS.4.30 PER SQ.FT = RS. 18.490/-RS. 18,490X44 7/100 = DIFFERENCE IN COST OF ACQUISITION AS ON 01.04.1981 C. SALE CONSIDERATION OF LAND D. LONG TERM CAPITAL GAIN ON SALE OF LAND (C-B) (RS.38,44,200-RS.82,650) I HAVE REASON TO BELIEVE THAT INCOME OF RS.37,61.55 0/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE AY 2003-04 ON ACCOUNT OF LONG TERM CAPITAL GAIN, AS THE PERIOD OF FOUR YEARS HAS ELAPSED AND (HE INC OME ESCAPED IS ABOVE RS. 1.00 LAC, THE APPROVAL OF WORTHY JOINT COMMISSIONER OF INCOME TAX, NAGAUR RANGE, NAGAUR IS SOLICITED TO ISSUE NOTICE U/S. 1 48 TO THE ASSESSEE . 3. SIMILAR REASONS ARE RECORDED FOR THE OTHER A.Y. I.E., 2005-06. RS. 82,650/- RS.7,61,530/- .38,44,200/- RS.37,61,550 6 4. THE A.O. HAS REJECTED ALL THE OBJECTIONS RAISED BY THE ASSESSEE AND PROCEEDED TO DECIDE CAPITAL GAINS ON T HE BASIS OF DVOS REPORT WHICH WAS OBTAINED IN THE CAS E OF THIRD PARTY I.E. ADITYA HOTEL & RESTAURANT, NAGAUR. THE ASSESSEE HAS TAKEN THE COST OF THE ASSET AS ON 1.4. 1981 AT RS. 210/- PER SQ. FT. AS AGAINST WHICH THE DVO HAS ADOPTED THE RATE OF RS. 4.30 PER SQ. FT. ADOPTED BY THE DVO . THE ASSESSEE HAS OBJECTED TO SUCH A RATE ADOPTED BY THE DVO WHICH IS STATED TO BE BASED ON ENTIRELY DIFFERENTLY SITUATED PROPERTIES. THE ASSESSEE HAD CITED EXAMPLE OF CONTEMPORARY SALE DEED OF THE PROPERTY IN NAGAUR WE RE ALMOST NEAR TO THE COST ADOPTED BY THE ASSESSEE IN THE COMMERCIAL AREA. BUT THE A.O. REJECTED THE ENTIRE OBJECTIONS AND PROCEEDED TO DETERMINE CAPITAL GAIN ON THE BASIS OF DVOS REPORT ALONE, THAT TOO, OBTAINED IN THE THIRD PARTYS CASE. THIS ACTION WAS APPROVED BY THE LD. CIT(A) AS WELL. THE ASSESSEE IS IN SECOND APPEAL BEFORE U S. 7 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. W HILE HEARING OF THIS APPEAL ON THE LEGALITY OF INITIATIO N OF ACTION U/S 147 R.W.S. 148 OF THE ACT, IT WAS ASCERT AINED FOR A FACT THAT THIS ACTION HAS BEEN TAKEN SOLELY ON TH E BASIS OF DVOS REPORT WHICH WAS OBTAINED IN THIRD PARTYS CASE. 6. WE HAVE INCORPORATED REASONS FOR TAKING ACTION U /S 147 BY THE A.O. IN THE FORMER PART OF THIS ORDER. THE PERUSAL OF REASONS CLEARLY SPELL OUT THAT THIS ACTI ON RESTS ON DVOS REPORT ALONE. 7. THERE IS ALSO A JURISDICTION DEFECT IN ISSUANCE OF NOTICE U/S 148 OF THE ACT. THE A.O. NOT HAVING JUR ISDICTION OVER THE ASSESSEE HAS ISSUED NOTICE U/S 148. THE A SSESSEE IS REGULARLY ASSESSED TO TAX AT NAGAUR. HE FILED H IS RETURN OF INCOME [ROI] AT NAGAUR BUT THE JURISDICTION OVER THE ASSESSEE LIED WITH THE ITO, JODHPUR. IN ANY CASE, THE RETURN OF INCOME [ROI] WAS FILED AT NAGAUR AND NOTI CE U/S 148 WAS ISSUED BY THE ITO, JODHPUR. THERE SEEMS TO BE 8 NOT VALID TRANSFER OF JURISDICTION U/S 127 OF THE A CT. BUT WE ARE ON THE VALIDITY OF INITIATION OF ACTION U/S 147 R.W.S. 148 OF THE ACT. SIMPLY ON THE BASIS OF A DVOS REP ORT ACTION U/S 147 R.W.S 148 CANNOT BE INITIATED. IN T HIS REGARD THE FOLLOWING DECISIONS ARE RELEVANT: A. ITO VS. SHIV SHAKTI BUILD HOME P LTD [2011] 61 DTR (JD) (TRIB) 37 B. PRAKASH CHAND VS. DCIT & ORS. [2004] 269 ITR 260 [MP] C . ITO VS. SANTOSH KUMAR DALMIA [1994] 208 ITR 337 [ CAL] D. TITANOR COMPONENS LTD. VS. ACIT [2011] 60 DTR 273 [BOM] E. BHAGWATI SHANKARI KARKHANA [2004] 269 ITR 186 [BOM] F. WESTERN OUTDOOR INTERACTIVE [2006] 286 ITR 620 [BO M] G. CIT VS. SFIL STOCK BROKING LTD [2010] ITR 285 [DEL ] 8. THEREFORE, BY RESPECTFULLY FOLLOWING THE DICTUM LAID DOWN IN THE ABOVE DECISIONS, WE ALLOW THE GROUNDS T AKEN BY THE ASSESSEE IN ITS APPEALS. 9 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 30 TH NOVEMBER, 2012. SD/-/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH NOVEMBER, 2012 VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) BY ORDER 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR