ACIT, Nashik v. Shri Chandrakant Kashinath Kele (HUF), Dhule

ITA 1493/PUN/2002 | misc
Pronouncement Date: 07-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 149324514 RSA 2002
Bench Pune
Appeal Number ITA 1493/PUN/2002
Duration Of Justice 8 year(s) 18 day(s)
Appellant ACIT, Nashik
Respondent Shri Chandrakant Kashinath Kele (HUF), Dhule
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 07-01-2011
Assessment Year misc
Appeal Filed On 19-12-2002
Judgment Text
IN THE INCOME TAX APPLLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 1493/PN/02 (BLOCK PERIOD 1990-91 TO 2000-01 ) (BROKEN PERIOD FROM 01-04-1999 TO 02-02-2000) ACIT CENTRAL CIRCLE-1 NASHIK .... APPELLANT VS. SHRI CHANDRAKANT KASHINATH KELE (HUF) CHANDRAVEL MADHUBAN COLONY WADI BHOKER ROAD DHULE . RESPONDENT APPELLANT BY : SHRI A.S. SINGH RESPONDENT BY : SHRI NIKHIL PATHAK ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-II NASHIK DATED 23-10-2002. ASSESSEE IS A KARTA HUF AN D HE WAS AN ERSTWHILE PARTNER IN THE FIRM NAMED M/S. VISHAL BUILDERS AND PROMOTERS P UNE. 2. DURING THE PROCEEDINGS AT THE VERY OUTSET LD. COU NSEL MENTIONED THAT THERE ARE THREE GROUNDS IN THE APPEAL AND GROUND 3 RELATES TO THE ISSUE OF CHARGING OF SURCHARGE WHICH IS A SETTLED ONE IN THE LIGHT OF THE SUPREME COURT JUDGEMENT IN THE CASE OF S.N. GUPTA 297 ITR 322. IN THIS CASE T HE SUPREME COURT HELD THE PROVISO TO SEC. 113 OF THE ACT INSERTED BY THE FINANC E ACT 2002 W.E.F. 01-06-2002 IS CLARIFICATORY AND CURATIVE IN NATURE. THIS VIEW OF THE SUPREME COURT WAS SUBSEQUENTLY CONFIRMED BY THE SAME COURT IN THE CASE OF RAJIV BHATARA 310 ITR 105 (SC) TOO. LD. DR HAS NO ISSUE IN THIS REGARD AND HE M ENTIONED THAT THE SUPREME COURT DECISION HAS TO BE FOLLOWED. ON CONSIDERING THE ISSUE RAISED BY THE REVENUE VIDE GROUND NO. 3 AND THE REPORTED DECISION IN THE CAS E OF S.N. GUPTA (SUPRA) WE ITA NOS. 1493/PN/02 BLOCK PERIOD: 90-91 TO 00-01 PAGE 2 OF 5 ARE OF THE OPINION THAT REVENUE SHOULD SUCCEED IN TH IS MATTER. ACCORDINGLY GROUND NO. 3 OF THE REVENUE IS ALLOWED. 3. REGARDING GROUND NO. 2 THE REVENUE IS OF THE OPINION THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF 7 LAKHS IN RESPECT OF TH E PROPERTY RECEIVED FROM THE FIRM I.E. VBP PUNE. IN THIS REGARD LD. DR RELIED ON ORDER OF THE A.O. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE TOOK US THROUGH PAGE 17 18 AND 19 OF IMPUGNED ORDER AND STATED THAT THE COMMISSIONER MADE A SPEAKING ORDE R AND FINALLY GRANTED RELIEF TO THE ASSESSEE. LD. COUNSEL HIGHLIGHTED THE FACT O F DISCLOSING RELEVANT DETAILS IN THE RETURN ABOUT THE IMPUGNED SALE PROCEEDS INCIDENTAL TO THE IMPUGNED PROPERTY NO. CTS 241 IN THE ASSESSMENT OF THE FIRM BEFORE THE DATE OF SEARCH ON THE ASSESSEE AND THE FIRM. 4. WE HAVE GONE THROUGH THE SAID PARAS AND FIND IT REL EVANT TO REPRODUCE THE SAME FOR ONE OF FACTS THE REASONING GIVEN BY THE A.O FOR MAKING ADDITIONS AND THE REASONING GIVEN BY THE CIT(A) FOR DELETION OF THE SAI D DECISION. RELEVANT PARAS ARE AS FOLLOWS:- GROUND NO. 3 AND 3A : ADDITION OF RS. 7 LAKHS : M/S. VISHAL BUILDERS AND PROMOTERS A PARTNERSHIP FIRM WHERE ASSESSEE GROUP WERE A P ARTNER HAS ENTERED IN TO THE AGREEMENT OF ASSIGNMENT ON 2/08/96 WITH M/S. PRASHANT SHAH AND ASSOCIATES PUNE IN RESPECT OF PROPERTY NO. C TS 241 PUNE SIGNING FOR RS. 9 25 000/- ON THE CONDITION THAT IF ANY CHEQ UE ISSUED BY PRASHANT SHAH IS DISHONORED AGREEMENT CAN BE AUTOMATICALLY CA NCELLED. NOW ON DISSOLUTION OF THE FIRM ON 15/11/96 THIS PROPERTY HAS COME TO THE SHARE OF THE ASSESSEE HUF. IT IS RELEVANT TO MENTION THAT AGA INST THIS AGREEMENT THE THEN FIRM HAS ALREADY RECEIVED RS. 225000/- BEFORE DISS OLUTION AND RS. 700000/- WAS YET TO BE RECEIVED BY THE ASSESSEE GROUP ON BEHALF OF THE FIRM. THIS AGREEMENT FOR ASSIGNMENT HAS BEEN SUBSEQUENTLY C ANCELLED. IT HAS BEEN PROVIDED IN THE DISSOLUTION DEED THAT IF THIS AGREEME NT IS CANCELLED KELE GROUP SHALL BE ENTITLED TO DEVELOP THE SAID PROPERTY O R TO SALE TO ANY OTHER PERSON. THE ASSESSEE HUF HAS SHOWN RS. 7 LAKHS RECEIV ABLE IN THE BOOKS ON 1/4/98. SUBSEQUENTLY THE ASSESSEE HAS PAID BACK RS . 225000/- TO SHRI PRASHANT SHAH PUNE AND HAS TAKEN BACK THIS PROPERTY W HICH WAS ORIGINALLY AGREED TO BE SOLD FOR RS. 925000/-. THE A.O IN THE P RESENT ASSESSMENT ORDER HAS HELD THAT AFTER DEDUCTING RS. 225000/- BALANCE RS. 7 LAKHS CONSTITUTED UN-DISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSME NT YEAR 99-2000. AT THE APPELLATE STAGE FACTS SUBMITTED BEFORE THE A.O HAVE BEEN REITERATED. IT HAS BEEN EXPLAINED THAT ON DISSOLUTION OF THE FIRM AS PART OF ITS SHARE IN ASSETS OF THE DISSOLVED FIRM THE APPELLATE GROUP WAS TO RECEIVE RS. 7 LAKHS FROM SHRI PRASHANT SHAH AND ASSOCIATES PUNE IN PURSUANCE TO THE OLD AGREEMENT OF ASSIGNMENT SIGNED NOT BY THE APPELLANT BUT BY THE THEN FIRM WHICH HAS FILED ITS RETURN WITH ITO WARD 2(5) PUNE FO R THE ASSESSMENT YEAR 97-98 BEFORE THE SEARCH AND SEIZURE ON 30/08/97 AND HA S ALREADY CREDITED RS. 9.25 LAKHS AS ITS SALES IN S.B. (PROJECT ACCOUNT ) AND HAS ALSO SHOWN RS. 7 LAKHS AS RECEIVABLE FROM SHRI PRASHANT SHAH IN THE BAL ANCE SHEET FOR THE PERIOD ENDING ON 31/07/97. ITA NOS. 1493/PN/02 BLOCK PERIOD: 90-91 TO 00-01 PAGE 3 OF 5 IN VIEW OF THE ABOVE FACTS IT HAS BEEN ARGUED THAT THE APPELLANT HUF HAS RECEIVED ONLY PROPERTY WORTH RS. 7 LAKHS AND NOT AN Y AMOUNT BY CASH OR CHEQUE FOR RS. 7 LAKHS. HOW THE SAME SHOULD CONSTITU TE THE INCOME. FURTHER THAT THE FIRM HAS BEEN DISSOLVED AND THIS TRANSACTION OF RS. 9.25 LAKHS HAS ALREADY BEEN RECORDED ON INCOME TAX RETURN OF THE FIRM BEFORE THE DATE OF SEARCH HOW THE SAME SHOULD BE TREATED AS UN-DISCLOSED . NO EVIDENCE HAS BEEN FOUND IN THE COURSE OF SEARCH. IN THE COPY OF AC COUNT OF THE HUF IN THE BOOKS OF THE FIRM ON 15/11/96 RS. 7 LAKHS HAS BEEN DEBITED BEING DEBTORS BEING TAKEN BY KELE (HUF). THE LEARNED COUNSEL HAS ALSO TAKEN ME THROUGH THE AG REEMENT FOR ASSIGNMENT DATED 2/8/96. IST PARTY M/S. VISHAL BUILD ERS AND PROMOTERS THROUGH KISHORE PATE PARTNER IN FAVOUR OF PRASHANT SHAH & ASSOCIATES PUNE FOR RS. 9 25 000/- WITH SCHEDULE OF PAYMENTS TO BE M ADE BY PRASHANT SHAH AND ASSOCIATES. THE DEED OF CANCELLATION DATED 23/9 /98 BETWEEN SHRI C.K. KELE (INDIVIDUAL) AND POWER OF ATTORNEY HOLDER OF MISS . SHILPA ALSO ON BEHALF OF HUF AND M/S. PRASHANT SHAH AND ASSOCIATES PUNE LEDGER ACCOUNT OF M/S. PRASHANT SHAH ASSOCIATES IN THE BOOKS OF THE APPELLA NT HUF ETC. IN ORDER TO SUPPORT HIS CONTENTION T HAT THE ADDITION MADE BY TH E A.O AT RS. 7 LAKHS WAS NOT JUSTIFIED EITHER ON FACTS OR ON LAW. I HAVE ALSO DISCUSSED THE FACTS WITH THE A.O. TO W HOM IT HAS BEEN EXPLAINED THAT THE AMOUNT OF RS. 7 LAKHS REPRESENTS O NLY THE VALUE OF THE PROPERTY. NO SUCH AMOUNT OF RS. 7 LAKHS HAS BEEN RECEI VED BY CASH/ CHEQUE BY THE APPELLANT. THIS PROPERTY HAS BEEN SOLD EITHER H ENCE THIS AMOUNT OF RS. 7 LAKHS DOES NOT AMOUNT TO SALE PROCEEDS EITHER. THE A.O. HAS HOWEVER RELIED ON PARA 7.4 OF THE ASSESSMENT ORDER. IN VIEW OF THIS SINCE AMOUNT OF RS. 7 LAKHS DOES NOT PARTAKE CHARACTER OF INCOME AND T HE FACT HAS ALREADY BEEN DISCLOSED BY THE FIRM BEFORE SEARCH AND SEIZURE A DDITION OF RS. 7 LAKHS CAN NOT BE MADE AND THE SAME CAN NOT BE TREATED AS U N-DISCLOSED EITHER HENCE ADDITION MADE BY THE A.O AT RS. 7 LAKHS IS D ELETED. 5. FROM THE ABOVE EXTRACT IMPORTED FROM THE IMPUGNED O RDER WE FIND THE ABOVE PARAGRAPHS ARE SELF EXPLANATORY AND WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A). ACCORDINGLY GROUND NO. 2 OF THE R EVENUE IS DISMISSED. 6. REGARDING GROUND NO. 1 OF THE APPEAL BY THE REVENUE DR STATED THAT THE CIT(A) ERRED IN DELETING THE ADDITION F RS. 2 50 446/ - AND RS. 8 86 450/- BY APPLYING THE PROVISIONS OF SEC. 176(3A) OF THE INCOM E TAX ACT. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE PROVIDED THE BACKGROUND O F THE ISSUE AND STATED THAT THE ASSESSEE WAS SEARCHED ON 02/02/2000 U/S. 132 OF THE ACT. BLOCK ASSESSMENT WAS COMPLETED DETERMINING THE UNDISCLOSED INCOME OF RS. 18 71 896/- VIDE ORDER DATED 27-02-2002 FOR THE A.Y 1998-99 AND 1999-00 OF THE BLOCK PERIOD. A.O HAS ALL THE INFORMATION THAT THE PROVISIONS OF SEC. 176(3A) P ROVIDED FOR TAXING OF ENTIRE SALE PROCEEDS IN HANDS OF THE ASSESSEE WITHOUT ALLOWING T HE DEDUCTION OF THE COAST OF THE PROPERTIES WHICH THE ASSESSEE GOT FROM THE DESOLATION OF THE FIRM. AS PER THE LD. ITA NOS. 1493/PN/02 BLOCK PERIOD: 90-91 TO 00-01 PAGE 4 OF 5 COUNSEL A.O TAXED ALL THE THREE SHARES IN THE IMPUGN ED PROPERTIES IN THE HANDS OF THE ASSESSEE WHO ONLY HAS PART STAKE IN THE PROPERTY. IN THE PROCESS A.O REJECTED THE CONTENTIONS OF THE ASSESSEE THAT THE PROVISIONS OF SEC. 176(3A) DID NOT APPLY TO THE FACTS OF THE CASE. ON FACTS IT IS MENTIONED TH AT SHRI KELE GROUP CONSTITUTE 50% OF THE CAPITAL SHARE IN THE FIRM VBP PUNE AND OUT OF THIS 50% SHARE ASSESSEE OWNS ONLY 5%. TOWARDS 50% OF THE KELE GROUP FIRM A DESOLA TION PASSED ON AN ASSET AT OFFICE NO. 1 PUNE AND 2 FLATS AT PUNE TAXABILITY OF THESE SALE PROCEEDS OF THESE PROPERTIES. ALL THESE PROPERTIES WERE SOLD ON 13/09/19 97 AND 13/12/1998. WHILE A SHOP OFFICE NO. WAS SOLD FOR RS. 5 31 000/- FLATS 1 AND 2 WERE SOLD FOR 15 66 000. ASSESSEE FILED THE RETURN OF INCOME DISCLOSING THE P ROFITS OUT OF THE ABOVE SALE PROCEEDS AFTER CLAIMING COST OF FLATS AMOUNTING TO RS . 8 86 450/-. TO SUM UP ASSESSEE HUF RECEIVED RS. 5 51 000/- FOR OFFICE AND RS. 15 66 000/- TOWARDS SALE OF TWO FLATS. BUT IN THE UNDISCLOSED INCOME ASSESSEE O FFERED RS. 300554/- TOWARDS SPACE NO. 1 AND RS. 679550/- TOWARDS FLATS. A.O TOOK OBJECTION FOR OFFERING THE REDUCED AMOUNTS BY RS. 250446/- TOWARDS OFFICE AND R S. 886450/- TOWARDS THE FLATS ON ACCOUNT OF COST OF THE ASSETS SOLD. DURING THE PROCEEDINGS BEFORE US LD. COUNSEL NARRATED THAT THE ISSUE BEFORE US IS WHETHER T HE IMPUGNED INCOME WHEN THE RELEVANT ENTRIES ARE ALREADY REFLECTED IN THE BOOKS OF ACCOUNTS AND WHEN THE DISSOLUTION WAS FILED ALONG WITH THE RETURN CONSTITU TES THE UNDISCLOSED INCOME AND AS PER THE ASSESSEE THE IMPUGNED ISSUES SHOULD BE EX AMINED BY THE AO DURING THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSMENT PRO CEEDINGS. 7. IN THIS REGARD LD. COUNSEL TOOK US THROUGH THE FIN DINGS OF THE CIT(A) WHEREIN IT IS HELD THAT THE ASSESSEE DUTY INFORMED TH E DEPARTMENT ABOUT THE DISSOLUTION AND ENCLOSED THE COPY OF THE DISSOLUTI ON DEED TO THE RETURN OF INCOME FOR THE RELEVANT PERIOD. FURTHER LD. COUNSEL MENTIONE D THAT THE ASSESSEE IS ENTITLED TO DEDUCTION TOWARDS THE COST OF OFFICE 2 FLATS ALO NGWITH LEGAL AND OTHER TRANSFER FEES. CIT(A) MENTIONED FURTHER THAT THE A.O HIMSELF IS ADMITTED TO SUCH DEDUCTIONS THOUGH THE SAME WAS SEEN FROM PAGE 11 OF THE IMPUGNE D ORDER. LD. COUNSEL MADE ELABORATE DISCUSSION OF APPLICABILITY OF PROVISIONS O F SEC. 176(3A) OF THE ACT. CIT(A) DISMISSED THIS FINDING AND HELD THAT THE SAME ARE AP PLICABLE TO THE FACTS OF THE CASE AS THE FIRM VBP WERE ADMITTEDLY DISSOLVED ON 31-07-19 97 W.E.F. 16-07-1996. THUS THE CIT(A) HELD THAT THE PROVISIONS OF SEC. 176(3A) IS APPLICABLE TO THE FACTS OF THIS CASE AND FURTHER HELD THAT A.O IS ENTITLED TO DEDUCTI ON TOWARDS THE COST AND THERE INSTANTLY EXPLAINED TO THE SAME TRANSACTION. ACCORDIN GLY CIT(A) GAVE A RELIEF WITH WHICH THE REVENUE IS AGGRIEVED. ITA NOS. 1493/PN/02 BLOCK PERIOD: 90-91 TO 00-01 PAGE 5 OF 5 8. WE HAVE UNDERSTOOD THE FACTS OF THE CASE AND PE RUSED THE ORDERS OF THE REVENUE THE PAPER BOOK FILED BEFORE US CONTAINING TH E COPY OF THE DISSOLUTION DEED OF THE FIRM AND THE OTHER RELEVANT MATERIAL. THE ESSEN TIAL REASONING OF THE CIT(A) IN GRANTING RELIEF INCLUDE (I) THE IMPUGNED ADDITIONS S HOULD HAVE BEEN MADE IN THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSMENT AN D WE HAVE NO PROBLEM IN AFFIRMING THE SAME; (II) AO IN EFFECT STATED THAT TH E COST OF THE ASSETS IE OFFICE AN THE FLATS AND OTHER INCIDENTAL EXPENDITURE ARE REQUIRED TO BE SET OFF AGAINST THE SALE CONSIDERATIONS OF THE IMPUGNED ASSETS. IN THIS REGARD ALSO CONSIDERING THE PRINCIPLES OF NATURAL JUSTICE AND THE PRINCIPLES OF LIBERAL OF S TATUTES IE THE PROVISIONS OF SECTION 176(3A) OF THE ACT WE AFFIRM THE VIEW OF THE CIT(A) . IT IS NATURAL THAT ONLY THE NET ASSET VALUE HAS TO BE BROUGHT TO TAX AND NOT THE GRO SS VALUE OF THE ASSET. IT IS EVIDENT THAT THE SAID SUB SECTION REFERS TO THE EXPRES SION ANY SUM RECEIVED IN THE PROVISIONS OF SEC. 176(3A) OF THE ACT AND NOT TH E GROSS SUM RECEIVED. IT IS PLAUSIBLE INTERPRETATION THAT THE EXPRESSION ANY SUM RECEIVED DOES IMPLY THE EVERY SUM GIVEN OR PAID BY THE FIRM. FURTHER EXPRESSION RECEIVED IMPLIES THE NET INFLOW ONLY. THEREFORE IN THESE CIRCUMSTANCES W E ARE OF THE OPINION ORDER OF THE CIT(A) DOSE NOT CALL FOR ANY INTERFERENCE. GROUND N O. 1 OF THE REVENUE IS DISMISSED. 9. IN THE RESULT APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDERS PRONOUNCED IN THE OPEN COURT ON 07 TH JANUARY 2011. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 07 TH JANUARY 2011 R COPY OF THE ORDER IS FORWARDED TO : 1. ACIT CENTRAL CIRCLE-1 NASHIK 2. ASSESSEE 3. CIT(A)-II NASHIK 4. CIT(CENTRAL) NAGPUR 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE