RAHAS INVESTMENT P.TLD, MUMBAI V. DCIT 10(1), MUMBAI

MA 507/MUM/2018

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1555 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 27-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Rectification of order; Capital receipt; Set aside
• Section: 115JB; 254(2); 6; 12; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM M A NO S . 507 & 508 /MUM/ 2018 (ARISING OUT OF ITA NO S . 3366 & 2752 /MUM/2014) (ASSESSMENT YEAR: 2010 - 11 ) L UPIN INVESTMENT PRIVATE LIMITED 159, CST ROAD, KALINA, SANTACRUZ (E), MUMBAI - 400 098 VS. DY. CIT - 10(1), AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 PAN/GIR NO. AAACR 3202 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAJAN VORA RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 29.10.2018 DATE OF PRONOUNCEMENT : 06.12 .2018 ORDER U/S. 254(2) OF THE INCOME TAX ACT, 1961 PER SHAMIM YAHYA, A. M.: BY WAY OF THESE MISCELLANEOUS APPLICATIONS THE ASSESSEE SEEKS ORDER U/S. 254(2) OF THE INCOME TAX ACT, 1961 (THE ACT' FOR SHORT) AGAINST THE TRIBUNALS ORDER IN ITA NOS. 3366 & 2752/MUM/2 014 VIDE ORDER DATED 01.06.2018 FOR ASSESSMENT YEAR 2010 - 11. 2. I N THE I NCOME TAX APPEALS THE RE WERE CROSS APPEALS BY THE R EVENUE AND THE ASSESSEE AND THE TRIBUNAL HAD MADE FOLLOWING CONCLUDING ADJUDICATION : 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE ASSESSEE IS A COMPANY. EA RLIER IT WAS PARTNER IN THE FIRM PRANIK LANDMARK ASSOCIATES . I T HAD RETIRED FROM THE FIRM WITH EFFECT FROM 01.04.2009 B Y WAY OF A RETIREMENT DEED. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY RECEIVED A SUM OF RS.10,48,51,708/ - OVER AND ABOVE W HAT WAS DUE TO IT FROM THE PARTNERSHIP FIRM UPON RETIREMENT AS REFLECTED BY THE ASSESSEE COMPANYS ACCOUNTS . THE ASSESSEE DURING THIS YEAR ON 06.11.2009 HAS PASSED AN ENTRY CLAIMING THAT IT WAS DUE TO THE EARSTWHILE PARTNERSHIP FIRM UPON THE FIRMS 2 MA NO S . 507 & 508 /MUM/2018 RE VALUA TION OF ASSETS IN THE PAST WHICH THE ASSESSEE COMPANY HAD NOT TAKEN CREDIT IN ITS CAPITAL ACCOUNT WITH THE FIRM. THE ASSESSEE COMPANY HAD CREDITED THIS TO REVALUATION RESERVE DURING THE YEAR . WE FIND THAT THE R EVALUATION RESERVE IS CREATED WHEN THE ASSET O F THE COMPANY/FIRM ARE VALUED DURING THE YEAR. IT IS CLEAR THAT THERE WAS NO REVALUATION OF ANY ASSET OF THE COMPANY. HENCE BY NO STRETCH OF IMAGINATION , ASSESSEE CAN MAKE ANY CREDIT E NTRY TO THE REVALUATION RESERVE, DURING THE YEAR, AND THAT ALSO FOR OTHE R ASSESSEES ASSETS. 10. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE SUM RECEIVED WAS EXEMPT U /S.10(2A), A READING OF THE SAID SECTION MAKES IT CLEAR THAT THE SAID SECTION MAKES THE PROFIT OF A FIRM ASSESSED AS SUCH EXEMPT IN THE HANDS OF ITS PARTNERS. I N THE PRESENT CASE , THE ASSESSEE COMPANY WAS NOT AT ALL PARTNER IN THE SAID FIRM. IT HAD RETIRED FROM THE FIRM WITH EFFECT FROM 01.04.2009 . HENCE , THE AMOUNT RECEIVED BY A RETIRED PARTNER FROM ITS EARSTWHILE PARTNERSHIP FIRM CANNOT AT ALL BE CLAIMED TO BE EXEMPT U /S.10(2A). H ENCE , WE ARE OF THE CONSIDERED OPINION THAT THE ACTION OF THE ASSESSING OFFICER IS QUITE CORRECT IN HOLDING THAT ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U /S.10(2A). 11. N OW WE COME TO THE CLAIM THAT THE SUM RECEIVED WAS EXEMPT AS CAPITAL RECEIPT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THE SUM TO BE CAPITAL RECEIPT BY HOLDING THAT IT WAS RECEIVED ON ACCOUNT OF ERSTWHILE PARTNERSHIP FIRM FROM W H ICH THE ASSESSE E HAD RETIRED. THE FACTS OF THE CASE CLEARLY INDICATE THAT THE ASSESSEE HAD RETIRE D FROM THE PARTNERSHIP FIRM AND THE RETIREMENT DEED WAS DULY EXECUTED. THERE WAS NO MENTION OF ANY REMAINING CLAIM OF THE ASSESSEE IN THE ASSETS OF THE FIRM OR REVALUATION RE SERVE. HENCE , THE ASSESSEE HAD RELINQUISHED ITS RIGHT INTO THE PROPERTIES OF THE PARTNERSHIP FIRM IN LIEU OF OUTSTANDING AS ON THAT DATE OF RETIREMENT. AS IT IS EVIDENT , THE SAID REVALUATION IS CLAIMED TO HAVE TAKEN PLACE IN THE YEAR PRIOR TO THE YEAR UNDE R CONSIDERATION IN 2007 - 08. THE ASSESSEE COMPANY HAD NOT TAKEN CREDIT OF THAT REVALUATION RESERVE IN I TS ACCOUNTS OF THAT PERIOD. ON QUERY FROM THE BENCH IN THIS REGARD , THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE COMPANY HAD TAKEN A CONSCI OUS DECISION NOT TO ACCOUNT FOR THE REVALUATION RESERVE CREDIT. CONSIDERED IN THIS PERSPECTIVE WHEN THE ASSESSEE COMPANY HAD NOT ACCOUNTED FOR THE REVALUATION RESERVE IN THE PAST WHEN IT HAD ACCRUED AND CONSCIOUSLY LEFT IT IN THE HANDS OF THE FIRM, IT CANN OT CLAIM THAT THE RECEIPT IN THE PRESENT YEAR RELATES TO THE ABOVE SAID REVALUATION DESPITE THE FACT THAT ASSESSEE HAD RETIRED DULY RELINQUISHING ITS RIGHTS AND PROPERTIES IN THE SAID FIRM. HENCE , IN OUR CONSIDERED OPINION , THE LD. COMMISSIONER OF INCOME T AX (APPEALS) HAS CLEARLY ERRED IN HOLDING THAT THIS SUM HAS BEEN RECEIVED UPON RETIREMENT FROM THE FIRM AND IT IS A CAPITAL RECEIPT. 12. ACCORDINGLY, WE UPHOLD THE ORDER OF THE ASSESSING OFFICER AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DENYING THE ASSESSEES CLAIM OF DEDUCTION U/S. 10(2A). WE ALSO SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE AMOUNT RECEIVED IS A CAPITAL GAIN. HENCE, THIS ISSUE IS DECIDED IN FAVOUR OF THE REVENUE. THE OTHER GROUNDS RAISED ARE CONSEQUEN TIAL. HENCE, WE ALSO SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHICH GRANTED DEDUCTION OF THE AMOUNT IN COMPUTATION OF BOOK PROFIT. AS WE HAVE 3 MA NO S . 507 & 508 /MUM/2018 ALREADY HELD IT IS NEITHER A CAPITAL RECEIPT NOR IT HAS ANYTHING TO DO WITH REVALUATION OF ASSETS OF THE ASSESSEE COMPANY. 3. N OW BY WAY OF THESE MISCELLANEOUS APPLICATION S IT IS THE SUBMISSION OF THE ASSESSEE THAT THERE ARE MISTAKE S APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL, WHICH NEED CORRECTION U /S. 254(2) OF THE INCOME TAX ACT, 1961 . 4. T HE LD. COUNSEL OF THE ASSESSEE HAS STATED THAT IN THE ITAT S ORDER THERE IS NON - CONSIDERATION OF CHANGE OF NAME (POST AMALGAMATION OF THE ASSESSEE) WHICH WAS INTIMATED BY THE LETTER FILED BY THE ASSESSEE. IN THIS REGARD, WE NOTE THAT THE ABOV E MATTER ONLY REQUIRES CORRIGENDUM WHICH WE ARE PASSING HERE , BRIN G ING ON RECORD A CHANG E OF NAME OF THE ASSESSEE POST AMALGAMATION BY WAY OF A CORRIGENDUM OF EVEN DATE . 5. THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT IT IS AN INCORRECT FACTUAL FINDING BY THE TRIBUNAL THAT THE ASSESSEE HAS RECEIVED OVER AND ABOVE THE AMOUNTS DUE TO HIM FROM THE PARTNERSHIP DEED. IN THIS REGARD, HE HAS SUBMITTED THAT THE TRIBUNAL HAS BEEN ER RONEOUS IN APPRECIATING THE PAPER BOOK SUBMITTED IN THIS REGARD AND, HENCE, IT HAS BEEN REQUESTED THAT THE FACTS OF THE ASSESSEE REQUIRE DUE RECONSIDERATION. 6. FURTHERMORE, IT HAS BEEN PLEADED THAT THE ITAT HAS WRONGLY MADE A N INFERENCE IN STATING THAT THE RETIREMENT DEED SHOULD STATE IF ANY BALANCE IS PENDING PAYMENT TO THE RETIRING PARTNER. IT HAS BEEN SUBMITTED THAT THERE IS NO STATUTORY REQUIREMENTS IN THIS REGARD. HENCE , IT HAS BEEN SUBMITTED THAT THIS ASPECT MAY BE RECONSIDERED. IT HAS FURTHER BEEN SUBMITTED THAT THE ITAT HAS ERRONEOUSLY CONCLUDED THAT THE ASSESSEE HAS RELINQUISHED RIGHTS IN THE ASSETS OF PLA IN LIEU OF AMOUNTS DUE TO IT ON THE DATE OF RETIREMENT. THAT THE LD. CIT(A) HAS DEALT WITH THE ISSUE AND RELIED UPON THE HONB LE 4 MA NO S . 507 & 508 /MUM/2018 SUPREME COURT DECISION IN THE CASE OF MOHANBHAI PAMABHAI (SUPRA) . THAT THE ITAT HAS DR AWN AN INCORRECT CONCLUSION THAT THE ASSESSEE HAD RELINQUISHED ITS RIGHTS IN THE PROPERTIES OF THE FIRM IN LIEU OF OUTSTANDING AS ON THE DATE OF RETIREMENT. HENCE, IT HAS BEEN SUBMITTED THAT THE CORREC T FACTS AS SUBMITTED S HOULD BE CONSIDERED. 7. IT HAS FURTHER BEEN SUBMITTED THAT THE ITAT HAS WRONGLY MENTIONED THAT THE ASSESSEE HAS TAKE N A CONSCIOUS DECISION NOT TO ACCOUNT FOR THE REVALUATION RESERVE CREDIT. IT IS SUBMITTED THAT THE FACTS AS SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE WERE MISCONSTRUED. THAT THE ITAT HAS INCORRECTLY CONCLUDED THAT THE AMOUNT RECEIVED ON RETIREMENT CANNOT BE CONNECTED WITH THE REVALUATION DONE IN THE PAST YEARS. THAT THE ITAT HAS NOT ADJUDICATED GROUND NO. 2 RAISED BY THE ASSESSEE AND THERE IS NO CLEAR CONCLUSION ON TAXABILITY OF RECEIPTS. THAT GROUND NO. 2 RAISED BY THE DEPARTMENT ON SECTION 115JB WAS WRONGLY DECIDED BY NOT REFERRING TO THE DETAILS REFERRED IN THE LD. CIT(A) S ORDER. THAT THERE WAS COMPLETE DISREGARD OF THE JUDICIAL PRECEDENCE CITED BY THE ASSESSEE. THAT THE DETAILED REASONING OF THE LD. CIT(A) WAS NOT CONSIDERED. THAT THE ITAT HAS NOT CONSIDERED THE LETTER FILED FOR WITHDRAWAL OF GROUND NOS. 1 & 3 BY THE ASSE SSEE DURING THE APPELLATE PROCEEDINGS. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) SUBMITTED THAT THE ASSESSEE IS SEEKING A REVIEW OF THE ORDER OF THE TRIBUNAL WHICH IS NOT PERMISSIBLE UNDER THE ACT. 9. UPON CAREFULLY CONSIDERA TION, WE NOTE THAT THE ITAT HAS CLEARLY RECORDED THAT THE ORDER IS BEING PASSED AFTER CAREFULLY HEARING THE PARTIES AND PERUSING THE RECORDS. IN THE ORDER PASSED, THE ITAT HAS UPHELD THE DENIAL OF CLAIM OF DEDUCTION U/S. 10 (2A) . THE ITAT 5 MA NO S . 507 & 508 /MUM/2018 HAS ALSO SET ASIDE THE ORDER OF THE LD. CIT(A) WHICH HELD THAT THE RECEIPT SHOULD BE TREATED AS CAPITAL RECEIPT. THE ITAT HAS ALSO SET ASIDE THE ORDER OF THE LD. CIT(A) REGARDING THE ADJUSTMENT OF THE SAID AMOUNT FROM COMPUTATION OF BOOK PROFIT U/S. 115JB. ALL THE ISSUES RAISED IN THE APPEALS WERE DULY ADJUDICATED. NOW THE LD. COUNSEL OF THE ASSESSEE IS POINTING OUT THE VARIOUS SUBMISSIONS AND THE PAPER BOOK SUBMITTED AND WANTS A RECONSIDERATIO N OF THE ISSUE S DEC IDED BY THE ITAT. WE FIND THAT SECTION 254(2) OF THE ACT MANDATE S RECTIFICATION OF THE MISTAKE APPARENT FROM THE RECORD. THE REQUEST OF RECONSIDERATION AS MADE BY THE LD. COUNSEL OF THE ASSESSEE THROUGHOUT HIS SUBMISSIONS DOES NOT COME U NDER THE PURVIEW OF RECTIFICATION OF MISTAKE APPARENT FROM THE RECORD. WHAT THE LD. COUNSEL OF THE ASSESSEE IS SEEKING IS THE REVIEW OF THE ORDER OF THE TRIBUNAL WHICH IS NOT PERMISSIBLE UNDER THE ACT. 10. IN THIS REGARD, WE PLACE RELIANCE UPON THE DECISI ON OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAMESH ELECTRIC AND TRADING CO. [1993] 203 ITR 497 (BOM). IN THE SAID ORDER, THE HON'BLE JURISDICTIONAL HIGH COURT HAS REFERRED TO AND DRAWN STRENGTH FROM THE HONBLE APEX COURT DECISION IN THE CASE OF T.S. BALARAM, ITO V. VOLKART BROS. [1971 ] 82 ITR 50 ( SC). THE HON'BLE JURISDICTIONAL HIGH COURT HAS REFERRED TO THE FOLLOWING FROM THE HONBLE APEX COURT DECISIO N: 'A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD.' 11. THEREAFTER AFTER CONSIDERING THE VARIOUS FACTS AND DECISIONS, THE HON'BLE JURISDICTIONAL HIGH COURT HAS EXPOUNDED AS UNDER: IN OUR VIEW, THE POWER OF RECTIFICATION UNDER SECTION 254(2) OF THE INCOME - TAX ACT CA N BE EXERCISED ONLY WHEN THE MISTAKE WHICH IS SOUGHT TO BE RECTIFIED IS AN 6 MA NO S . 507 & 508 /MUM/2018 OBVIOUS AND PATENT MISTAKE WHICH IS APPARENT FROM THE RECORD, AND NOT A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY ARGUMENTS AND A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHIC H THERE MAY CONCEIVABLY BE TWO OPINIONS, AS HAS BEEN SHOWN IN THE PRESENT CASE. FAILURE BY THE TRIBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION IS NOT AN ERROR APPARENT ON THE RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUD GMENT. 12. FROM THE ABOVE IT IS CLEAR THAT WRONG APPRECIATION OF FACTS OR WRONG APPRECIATION OF CASE LAWS MAY BE AN ERROR IN JUDGEMENT BUT THEY DO NOT CONSTITUTE MISTAKE APPARENT FROM RECORD. 13. THUS FROM THE ABOVE DISCUSSION AND PRECEDENT, WE FIND TH AT THE ISSUE POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE DO NOT FALL UNDER THE REALM OF MISTAKE APPARENT FROM THE RECORD LIABLE TO BE RECTIFIED U/S. 254(2) OF THE ACT. IT IS SETTLED LAW THAT RE - APPRECIATION/RE - ADJUDICATION IS NOT PERMISSIBLE IN THE GARB OF THE RECTIFICATION OF MISTAKE IN THE ORDER OF THE TRIBUNAL. 1 4 . IN THE RESULT, THE SE MISCELLANEOUS APPLICATION S BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 . 1 2 . 2 0 1 8 S D / - S D / - ( RAM LAL NEGI ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 6 . 1 2 . 2 0 1 8 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI