DY.COMMISSIONER OF INCOME TAX CIRCLE-2(1), BILASPUR(CG) V. M/s Shakti Construction, BILASPUR(CG)

ITSSA 8/BIL/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2284 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: R B DOSHI
• Keywords: Capital asset; Document seized; Fair market value; Corroborative evidences
• Section: 2(14); 6; 132; 28; 2

Judgement Text

ITA NO . 08 / BLPR /201 3 ASSESSMEN T Y EAR: 20 0 7 - 08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, SMC , RAIPUR [CORAM : PRAMOD KUMAR AM ] ITA NO . 08 / BLPR /201 3 AS SESSMENT Y EAR : 20 0 7 - 08 DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1), BILASPUR. .APPELLANT VS. SHAKTI CONSTRU CTION ... . RESPONDENT TIKRAPARA, BILASPUR (C.G.). [P AN: A BCFS 1011 Q ] APPEARANCES BY: R.K. SINGH , FOR THE APPELLANT R.B. DOSHI , F OR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 2 1 ST , 201 6 DATE OF PRONOUNCING THE ORDER : JUNE 22 ND , 201 6 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS C HALLENGED CORRECTNESS OF THE ORDER DATED 0 3 . 10 .201 2 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 1 4 3 (3) R.W.S. 1 53B OF THE INCOME T AX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 20 07 - 08, ON THE FOLLOWING GROUNDS : - (I) T HE LEARNED CIT(A) ERRED IN LAW AND ON FACTS BY HOLDING THAT LAND TRANSFERRED ON DISSOLUTION OF FIRM TO ITS PARTNERS WAS STOCK IN TRADE BECAUSE NO BUSIN ESS WAS DONE BY THE FIRM SINCE INCEPTION AND EVEN NO EXPENSES WERE INCURRED ON DEVELOPMENT AND SO THERE IS NO BASIS OF HOLDING THE ASSET TO BE STOCK IN TRADE. (II) THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS BY CALLING REMAND REPORT TO EXAMINE THE NATUR E OF ASSET WHEN EARLIER ASSESSING OFFICER HAS HELD THAT ITA NO . 08 / BLPR /201 3 ASSESSMEN T Y EAR: 20 0 7 - 08 PAGE 2 OF 5 THE ASSET WAS CAPITAL IN NATURE AS THE LATER ASSESSING OFFICER S REMAND REPORT CAN BE TREATED AS MERE CHANGE IN OPINION . (III) THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS BY RELYING THE DECISION OF HON'BLE ITAT, BILASPUR S DECISION IN ITA NO.73 TO 79/BLPR/2010 , 80 TO 82/BLPR/2010, 221 TO 226/BLPR/2010 DATED 21.10.2011 AS THE RATIO OF THE CASES ARE DIFFERENT FROM THE PRESENT CASE AS IN THE PRESENT CASE SALE CONSIDERATION IS N OT DISBELIEVED BUT DUE TO HOLDING THE ASSET AS CAPITAL IN NATURE PROVISIONS OF SECTION 45(4) OF THE INCOME TA X ACT, 1961 WERE APPLIED. 2. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE AN A D DITION OF RS.42,13,198/ - ON THE GROUND THAT THE FIRM DISSOLVED AND THAT THE DIFFERENCE BETWEEN T HE FAIR MARKET VALUE DETERMINED BY THE APPROVED VALUER AND BOOK VALUE OF THE LAND, WHICH WAS HELD BY THE FIRM IS TO BE TAXED IN TH E HANDS OF THE FIRM. THE AS SESSEE S PLEA THAT THE LAND WAS HELD AS STOCK IN TRADE WAS BRUSHED ASIDE. AGGRIEVED , ASSESSEE CARRIED THE MAT T ER IN APPEAL BEFORE THE L EARNED CIT(A). L EARNED CIT(A) DELETED THE SAID ADJUSTMENT BY, INT E R ALIA, HOLDING, IN HIS DETAILED ORDER AS FOLLOWS : - DECISION : I CONSIDERED THE SUBMISSION MADE BY THE LD. AR CAREFULLY. UP TO AND INCLUDING THE ASSTT. YR. 1987 - 88, ANY DISTRIBUTION OF CAPITAL ASSETS ON DISSOLUTION OF A FINN, ASSOCIATION, ETC. WAS EXEMPT FROM APPLICABILITY OF SECTION 45, THE CHARGING S ECTION FOR CAPITAL GAIN. THIS WAS BY VIRTUE OF SECTION 47(II). SECTION 47(II) VIRTUALLY EMBODIED THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN CIT VS. BANKEY LAI VAIDYA (1971) 79 ITR 594 (SC), ACCORDING TO WHICH THE AMOUNT RECEIVED BY A PARTNER ON DISSOL UTION OF THE FIRM WAS NOTHING BUT HIS SHARE IN THE DISTRIBUTED ASSETS OF THE FIRM. THIS POSITION HAS UNDERGONE A MATERIAL CHANGE FROM ASSTT. YR. 1988 - 89. SUB SECTION (4) HAS BEEN INSERTED IN SECTION 45 WHEREAS SECTION 47(II) HAS BEEN OMITTED W.E.F. 1 APRIL , 1988. ACCORDING TO SUB - SECTION (4), PROFITS OR GAINS RAISING FROM TRANSFER OF CAPITAL ASSETS BY WAY OF DISTRIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM, ASSOCIATION, ETC OR OTHERWISE SHALL BE CHARGEABLE TO TAX AS INCOME OF THE FIRM ASSOCIATI ON ETC. OF THE PREVIOUS YEAR IN WHICH THE SAID TRANS FER TAKES PLACE AND FOR THE PURPOSES OF SECTION 48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED BY ACCRUING AS A RESU LT OF THE TRANSFER. CAPITAL ASSET IS DEFINED IN SECTION 2(14) OF THE I.T. ACT. LONG TERM CAPITAL ASSET AND GAINS ARE DEALT WITH U/S 2(29A) AND SECTION 2(29B). SHORT TERM CAPITAL ASSETS AND GAINS ARE DEALT WITH ITA NO . 08 / BLPR /201 3 ASSESSMEN T Y EAR: 20 0 7 - 08 PAGE 3 OF 5 U/S 2(42A) AND SECTION 2(42B) OF THE ACT. TRAD ING ASSET IS DEALT WITH U/S 28 OF THE ACT. IN THE PRESENT CASE IN HAND, THE PARTNERSHIP FIRM CONSISTING OF PARTNERS SHRI ANIL MUNDRA, SMT. MANJU MUNDRA, SHRI JITENDRA SALUJA AND SMT. NEETU SALUJA CAME INTO EXISTENCE THROUGH THE PARTNERSHIP DEED DATED 11 - 08 - 2004 SUBSEQUENTLY AMENDED ON 19 - 01 - 2005 FOR THE PURPOSE OF EARNING BUSINESS ON CIVIL CONSTRUCTION WORKS, COLONIZERSHIP, BROKERSHIP IN THE NAME AND STYLE OF M/S. SHAKTI CONSTRUCTION' . THE REGISTERED DEED REGARDING PURCHASE OF LAND ADMEASURING RS. 18785 S Q.FT. LOCATED AT KH. NO. 120/4. TATYA TOPE NAGAR, BILASPUR FOR A CONSIDERATION OF RS. 22.00,000/ - FROM SMT. SHEELA BEN ON 01 - 09 - 2004 WAS FOUND IN THE RESIDENTIAL PREMISE OF SHRI MAHENDRA SALUJA IN COURSE OF ACTION U/S 132 OF THE ACT AND SEIZED AS PER PANCH NAMA DATED 01 - 02 - 2007. IN VIEW OF THIS SEIZURE, THE AO ISSUED NOTICE U/S 143(2) R.W.S. 153C IN THE CASE OF THE APPELLANT FIRM FOR THE ASSESSMENT YEAR 2005 - 06 AND NOTICE U/S 143(2) R.W.S. 153B OF THE ACT FOR THE ASSTT. YR. 2007 - 08. THERE WAS NO INCRIMINATIN G DOCUMENT SEIZED TO CALL FOR ACTION U/S 153C AND RELYING ON THE JUDGMENT OF THE JURISDICTIONAL ITAT, BILASPUR BENCH. BILASPUR IN THE CASE OF SALUJA GROUP IN ITA NO. ITA NO. 73 TO 79 /BLPR/2010, 80 TO 82 /BLPR/2010, 221 TO 226/ BLPR /2010 DATED 21 - 10 - 2011 WHEREIN, THE HON BLE TRIBUNAL HAS AFFIRMED THE ORDER OF CIT(APPEAL), BILASPUR DELETING THE ADDITIONS BY HOLDING THAT SALE CONSIDERATION MENTIONED IN THE SALE DEED FOUND DURING THE COURSE OF SEARCH CANNOT BE DISBELIEVED FOR INVOKING THE PROVISIONS OF SECTIO N 69B MERELY ON THE BASIS OF THE REPORT OF THE APPROVED VALUER UNLESS THE UNDERSTATEMENT OF INVESTMENT IS ESTABLISHED BY DIRECT OR CORROBORATIVE EVIDENCES, WHICH HAS NOT BEEN DONE IN THIS CASE. RELYING ON THE AFORESAID JUDGMENT OF THE HON BLE TRIBUNAL, ADD ITION MADE TO THE RETURN INCOME OF THE FIRM FOR THE ASSTT. YR. 2005 - 06 SOLELY ON THE BASIS OF THE ESTIMATED VALUATION MADE BY THE REGISTERED VALUER WAS DELETED VIDE ORDER OF CIT (APPEAL). BILASPUR IN ITA NO.179/2009 - 10 DATED 28 - 01 - 2012. DURING THE YEAR UND ER CONSIDERATION, THE APPELLANT FIRM WAS DISSOLVED W.E.F. 31 - 03 - 2007. THERE IS NO DISPUTE TO THE FACT THAT THE FIRM CONSTITUTED ON 11 - 08 - 2004 FOR THE PURPOSE OF DOING THE REAL ESTATE BUSINESS HAS NOT CARRIED OUT ANY BUSINESS TILL THE DATE OF DISSOLUTION ON 31 - 03 - 2007. THE ASSETS INCLUDING THE LAND HELD AS STOCK - IN - TRADE IN THE ACCOUNT BOOKS OF THE FIRM WERE TRANSFERRED TO THE PARTNERS ON BOOK VALUE. THE AMOUNT RECEIVED BY A PARTNERS ON DISSOLUTION OF FIRM CANNOT BE BROUGHT TO TAXED AS CAPITAL GAINS BY VIRTU E OF SECTION 45(4) SINCE THE SUB - SECTION OF THE AFORESAID SECTION IS INTENDED TO LEVY CAPITAL GAIN ARISING FROM TRANSFER OF A CAPITAL ASSET . THE AO EXAMINED THE ISSUE ONCE AGAIN AND SUBMITTED THE REPORT VIDE LETTER NO. ACIT/CIR - 2(L)/BSP/REMAND REPORT/2011 - 12/837 DATED 13 - 02 - 2012 WHEREIN, HE INFORMED THAT THE LAND WAS HELD AS STOCK - IN - TRADE IN THE ACCOUNT BOOKS OF THE APPELLANT FIRM. THE AO, IN COURSE OF ASSESSMENT PROCEEDINGS FOR THE IMPUGNED YEAR OF ASSESSMENT, PROCEEDED WITH THE REPORT OF THE SAME REGIST ERED VALUER IN ESTIMATING THE FAIR MARKET VALUE OF THE LAND AT RS 53,44,332/ - AND ENHANCED THE PRICE BY 20% TO ARRIVE AT THE FAIR MARKET VALUE OF THE LAND ON THE DATE OF TRANSFER AND ADDED THE DIF FERENTIAL AMOUNT OF RS. 42,31,198/ - AS UNEXPLAINED MONEY U/S ITA NO . 08 / BLPR /201 3 ASSESSMEN T Y EAR: 20 0 7 - 08 PAGE 4 OF 5 69A OF THE I.T. ACT ON ACCOUNT OF THE ALLEGED TRANSFER OF LAND BY THE APPELLANT FIRM TO THE PARTNERS IN COURSE OF ITS DISSOLUTION. HE HAS NOT SPECIFIED THE SPECIFIC PROVISIONS ' AND THE SPECIFIC POWERS OF THE STATUTE BOOK BEFORE SOLELY RELYING ON THE OLD REPORT OF THE REGISTERED VALUER WHICH IS NOT VALID FOR REFERENCE AND BASIS FOR ENHANCEMENT OF INCOME AS HAS BEEN DECIDED BY THE HON BLE TRIBUNAL IN RELATED GROUP OF CASES OF EARLIER YEAR(S). HE HAS NOT SPECIFIED THE PROVISIONS OF THE ACT WHICH HAS AUTHORI ZED HIM TO MAKE SUCH REFERENCE TO THE OLD REPORT OF THE REGISTERED VALUER. OBVIOUSLY, HE INTENDED TO BRING THE APPELLANT FIRM TO THE NET OF MISCHIEF OF PROVISIONS RELATING TO THE LONG TERM CAPITAL GAIN OUGHT TO HAVE ARISEN IN THE HANDS OF THE APPELLANT FIR M IN COURSE OF TRANSFER OF LAND TO THE PARTNERS. HE COULD HAVE MADE A VALID REFERENCE TO THE STAMP VALUATION AUTHORITY OR DVO TO ARRIVE AT FAIR MARKET VALUE ON THE DATE OF TRANSFER BY RESORTING TO SPECIFIC PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE FACTS AND IN THE GIVEN CIRCUMSTANCES OF THE EASE AND ALSO IN VIEW OF THE APPLICABILITY OF THE AFORESAID DECISION OF THE HON'BLE TRIBUNAL IN ITS LETTER AND IN ITS SPRITES TO THE FACT OF THE CASE OF THE YEAR UNDER CONSIDERATION, I FIND THAT THE ADDITION MADE TO T HE RETURNED INCOME BY INVOKING PROVISIONS OF SECTION 69A IS UNSUSTAINABLE AND HENCE, IT IS DELETED. 4. IN THE RESULT, THE APPEAL IS ALLOWED. 3. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE ME. 4 . I HAVE HEARD THE RIVAL CONTENTIONS , PERU SED THE MA T ERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CA S E IN THE LI GHT OF APPLICABLE LEGAL POSITION . I FIND IT IS NOT IN DISPUTE THAT SECTION 4 5 (4) APPLIES ON THE FACTS OF THIS CASE AND THAT THE LAND IN QUESTION WAS ALL ALONG HELD AS STOCK IN TRADE . THIS FACT STANDS ACCEPTED BY THE ASSESSING OFFICER IN HIS REMAND REPORT AS WELL. IN THIS VIEW OF THE MATTER, IN MY CONSIDERED VIEW, THE VERY BASIS OF IMPUGNED ADDITION IS NOT SUSTAINABLE IN LAW. IN ANY CASE, AS LEARNED CIT(A) RIGHTLY POINTS OUT, THERE WAS NO OCCASION FOR OR PROVISIONS ENABLING THE REFERENCE TO THE DVO FOR ASCERTAINMENT OF FAIR MARKET VALUE AND THEN PROCEEDING TO TA X THE INCOME ON THE BASIS OF THIS EXERCISE IN THE HANDS OF THE ASSESSEE. I, THEREFORE, APPROVE AND CONFIRM THE CONCLUSION ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. ITA NO . 08 / BLPR /201 3 ASSESSMEN T Y EAR: 20 0 7 - 08 PAGE 5 OF 5 5. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JUNE , 2016. SD/ - PRAMOD KUMAR (ACCOUNT ANT MEMBER) DATED: THE 22 ND DAY OF JUNE, 2016 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR