The DCIT, Circle-4,, Baroda v. M/s. Maksteel Wire Healds Ltd.,, Baroda

ITA 2562/AHD/2008 | 2005-2006
Pronouncement Date: 31-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 256220514 RSA 2008
Assessee PAN AABCM2840E
Bench Ahmedabad
Appeal Number ITA 2562/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 20 day(s)
Appellant The DCIT, Circle-4,, Baroda
Respondent M/s. Maksteel Wire Healds Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 31-08-2010
Date Of Final Hearing 19-08-2010
Next Hearing Date 19-08-2010
Assessment Year 2005-2006
Appeal Filed On 10-07-2008
Judgment Text
FIT FOR PUBLICATION -(GR.3 - PARA 8 TO 10) SD/- SD/- (A.N.PAHUJA) (MUKUL KR.SHRAWAT) AM JM IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER DATE OF HEARING : 19/08/2010 DRAFTED ON: 20/08/2 010 ITA NO.2562/AHD/2008 ASSESSMENT YEAR : 2005-06 DEPUTY CIT CIRCLE-4 BARODA VS. M/S.MAKSTEEL WIRE HEALDS LTD. 880/3 GIDC ESTATE MAKARPURA BARODA PAN/GIR NO. : AABCM 2840 E (APPELLANT) .. (RESPONDENT) AND CROSS OBJECTION NO.211/AHD/2008 A.Y. 2005-06 (ARISING OUT OF ITA NO.2562/AHD/2008- A.Y.2005-06) M/S.MAKSTEEL WIRE HEALDS THE DY.CIT BARODA VS. C IR-4 BARODA (CROSS OBJECTOR) .. (RESPO NDENT) ASSESSEE BY : SHRI MEHUL THAKKER REVENUE BY : SHRI K.M. MAHESH SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C ROSS OBJECTION ARISING OUT OF THE ORDER OF THE LEARNED CIT(APPEALS )-III BARODA DATED 03/04/2008 PASSED FOR ASSESSMENT YEAR 2005-06. ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 2 - 2. FIRST WE SHALL TAKE UP THE REVENUES APPEAL. GROUND NO.1: 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW I N DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S.4 0(IA) AMOUNTING TO RS.46 040/- OVERLOOKING THE FACT THAT THE ASSESSEE HAD NOT DEDUCTED THE TAX AT SOURCE ON SUCH COMMISSION PAYMENT TO NON -RESIDENT BESIDES ERRED IN ADMITTING FRESH EVIDENCE IN CONTR AVENTION OF RULE 46A OF THE IT RULES 1962 WHICH WAS NEVER SUBJECTE D TO THE VERIFICATION DURING THE ASSESSMENT PROCEEDINGS. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 DATED 15.11 .2007 WERE THAT THE ASSESSEE-COMPANY HAS DEBITED A SUM OF RS.4 19 260/- TOWARDS SALES COMMISSION. IT WAS NOTICED BY THE ASSESSING OFFIC ER THAT ON THE SAID SALES COMMISSION NO TAX WAS DEDUCTED AT SOURCE. AS PER THE PROVISIONS OF SECTION 40(IA) OF THE I.T. ACT 1961 ON PAYMENT OF COMMISSION BROKERAGE ETC. TAX IS TO BE DEDUCTED A ND IN CASE OF DEFAULT NO DEDUCTION IS TO BE ALLOWED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. THE ASSE SSING OFFICER HAS FURTHER RECORDED THAT SINCE THE ASSESSEE HAD NOT DE DUCTED THE TAX AS REQUIRED UNDER THE PROVISIONS OF THE ACT HENCE TH E SAID EXPENDITURE WAS NOT ALLOWABLE. IT HAS ALSO BEEN NOTED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS S UCH AS THE NAME AND ADDRESS OF THE PARTY HENCE THE COMMISSION AMOUNT OF RS.46 040/- OUT OF THE TOTAL CLAIM WAS DISALLOWED. THE MATTER WAS CA RRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. BEFORE THE FIRST APPELLATE AUTHORITY IT WAS CON TENDED THAT THE ASSESSING OFFICER HAS WRONGLY INVOKED THE SECTION WHICH WAS NOT FOUND ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 3 - IN THE STATUTE. HOWEVER IT WAS CLARIFIED THAT THE SECTION 40(A)(IA) REFERS TO THE EXPENDITURE ON INTEREST PAYABLE TO A RESIDEN T ON WHICH TAX IS DEDUCTIBLE AT SOURCE. IT WAS ALSO CLARIFIED THAT S ECTION 40(A)(I) REFERS TO THE EXPENDITURE OF INTEREST ROYALTY OR FEES ETC. PAYABLE OUTSIDE INDIA TO A NON-RESIDENT ON WHICH ALSO TAX IS DEDUCTIBLE AT SOU RCE. BEFORE THE LEARNED CIT(APPEALS) A CBDT CIRCULAR NO.786 DATED 0 7/02/2000 HAS ALSO BEEN CITED. THE LEARNED CIT(APPEALS) HAS NOT ED THAT THE IMPUGNED PAYMENT WAS MADE TO A NON-RESIDENT AGENT OPERATING OUTSIDE THE COUNTRY. IT HAS ALSO BEEN NOTED BY THE LEARNED CIT(APPEALS) THAT NO PART OF INCOME HAD ARISEN IN INDIA. FURTHER SECTION 9(1)( I) HAS ALSO BEEN MENTIONED. CERTAIN OTHER FACTS HAVE ALSO BEEN NOT ED SUCH AS THAT M/S.BILLION FULL INTERNATIONAL CO.LTD. HAD NO BRANC H IN INDIA AND OPERATES FROM TAIWAN. AFTER NARRATING THOSE FACTS IT WAS HELD THAT SINCE THE SAID COMPANY HAD NO PERMANENT ESTABLISHMENT IN INDIA HENCE THE PAYMENT WAS COVERED BY CBDT CIRCULAR NO.786 DATED 0 7/02/2000 THEREFORE THERE WAS NO NECESSITY FOR DEDUCTING THE TAX AT SOURCE WITH THE RESULT DIRECTED TO DELETE THE ADDITION. 4. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. AT THE OUTSET WE HAVE QUESTIONED WHETHER ALL THOSE FACTS AS ENTERTAI NED BY THE LEARNED CIT(APPEALS) WERE BEFORE THE ASSESSING OFFICER. HO WEVER PARTIES APPEARING BEFORE US WERE NOT IN A POSITION TO CATEG ORICALLY AFFIRM THAT ALL THOSE FACTS HAVE ACTUALLY BEEN PLACED BEFORE THE AS SESSING OFFICER. IN THIS CONTEXT WE WANTED TO ENSURE WHETHER THE LEARN ED CIT(APPEALS) HAS GRANTED AN OPPORTUNITY TO THE REVENUE FOR VERIFICAT ION OF THOSE FACTS BEFORE ADMITTING THOSE FRESH EVIDENCES HOWEVER IT WAS REPLIED IN ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 4 - NEGATIVE. RATHER IN THE GROUNDS OF APPEAL THE R EVENUE HAS EMPHATICALLY RAISED THE OBJECTION THAT THE FIRST AP PELLATE AUTHORITY HAS INFRINGED THE PROVISIONS OF RULE 46A OF THE I.T. RU LES 1962 AND ADMITTED CERTAIN NEW EVIDENCES WHICH WERE NOT BEFOR E THE ASSESSING OFFICER. BECAUSE OF THIS PRELIMINARY OBJECTION WE ARE OF THE VIEW THAT SINCE THE FIRST APPELLATE AUTHORITY HAS NEITHER GRA NTED AN OPPORTUNITY TO THE REVENUE DEPARTMENT NOR HAVE BEEN CALLED FOR A R EMAND REPORT THEREFORE IT WAS UNFAIR ON HIS PART TO ACCEPT FRES H EVIDENCE WHICH WERE STATED TO BE NOT BEFORE THE ASSESSING OFFICER. TH OUGH AS PER THE FACTS NARRATED BEFORE US IT APPEARS THAT THE ASSESSEE HA S SOME FORCE IN HIS EXPLANATION THAT ONCE THE PAYMENT HAS BEEN MADE TO A NON-RESIDENT OUTSIDE INDIA AND THE SAID NON-RESIDENT HAS NO PERM ANENT ESTABLISHMENT IN INDIA OR ANY ESTABLISHMENT IN INDIA THEREFORE THE ASSESSEE WAS NOT UNDER OBLIGATION TO DEDUCT THE TAX AT SOURCE IN VIE W OF THE CBDT CIRCULAR NO.786(SUPRA) BUT CERTAIN FACTS SUCH AS QUESTION OF PERMANENT ESTABLISHMENT THE STATUS OF THE NON-RESIDENT AND T HE MODE AND PLACE OF PAYMENT HAVE NOT BEEN INVESTIGATED OR EXAMINED BY T HE ASSESSING OFFICER THEREFORE THE NATURAL JUSTICE DEMANDS TO REFER THIS GROUND BACK TO THE STAGE OF ASSESSING OFFICER TO APPRECIATE THE FA CTS OF THE CASE AND THEN ONLY APPLY THE CORRECT LEGAL POSITION AS PRESCRIBED ON THE STATUTE. SINCE WE ARE RESTORING THIS GROUND BACK TO THE STAGE OF A SSESSING OFFICER THEREFORE THIS GROUND MAY BE TREATED AS ALLOWED ON LY FOR STATISTICAL PURPOSES. 5. GROUND NO.2:- 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W IN DIRECTING TO DELETE THE DISALLOWANCE OF RS.1 39 754/- WHICH WAS HELD AS EXPENDITURE ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 5 - ALREADY CLAIMED IN EARLIER YEARS OVERLOOKING THE F ACT THAT THE ASSESSEE HAD NOT ESTABLISHED THAT IT WAS A DEBT AND THE SAI D DEBT HAD BECOME BAD AND ALSO OVERLOOKED THE RATIOS LAID DOWN BY THE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS (P) LTD 259 ITR 481 (GUJ.). 5.1. THE OBSERVATION OF THE ASSESSING OFFICER WAS T HAT A CLAIM WAS MADE IN RESPECT OF COMMISSION ON SALES IN RESPECT O F THE FOLLOWING TWO ENTRIES; REPRODUCED BELOW:- 30/04/2004 JV 042004 21 AMOUNT DEBITED OF NIMIT IND USTRIAL COMM. IN LAST YEAR NOW ENTRY REVERSE TO SUBHASH KHANS COMM.A/C. RS.1 05 899 30/04/2004 JV 042004 22 CREDIT NOTE ENTRY DELETED IN YEAR 2001-02 NOW COMMENTRY REVERSED IN SUBHASH KHABARIS COMM..A/C. RS.33 855 5.2. AS PER ASSESSING OFFICER THE SAID EXPENDITURE WAS RELATED TO THE EARLIER ASSESSMENT YEAR. IT WAS ALSO NOTED THAT T HE ASSESSEE HAD CLAIMED THOSE VERY EXPENSES IN THE RESPECTIVE YEARS THEREF ORE THAT VERY CLAIM COULD NOT BE ALLOWED TWICE. WITH THE RESULT THE IMPUGNED AMOUNT OF RS.1 39 754/- WAS TAXED IN THE HANDS OF THE ASSESSE E. 6. WHEN THE MATTER HAD REACHED BEFORE THE FIRST APP ELLATE AUTHORITY ALTOGETHER A NEW TURN WAS TAKEN THAT THE AMOUNT IN QUESTION WAS NOTHING BUT WRITE OFF BAD DEBT . SINCE AN ALTOGETHER NEW CLAIM WAS MADE THEREFORE THE LEARNED CIT(APPEALS) HAS SAID THAT T HE SAID OUTSTANDING AMOUNT COULD NOT BE REVEALED DESPITE EFFORTS WERE M ADE. AS PER ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 6 - LEARNED CIT(APPEALS) IN THE PAST YEARS SALES HAVE DULY BEEN OFFERED FOR TAXATION THEREFORE WRITE OFF AS BAD DEBT WAS ALLOWABLE IN THE HANDS OF THE ASSESSEE. 7. WHILE PERUSING THE ORDERS OF THE AUTHORITIES BEL OW AGAIN WE HAVE NOTICED AS WE HAVE NOTICED SUPRA WHILE ADJUDICATI NG UPON GROUND NO.1 THAT CERTAIN NEW EVIDENCES HAVE BEEN ENTERTAINED BY THE LEARNED CIT(APPEALS). NOT ONLY THE NEW EVIDENCES BUT THE LEARNED CIT(APPEALS) HAS ALTOGETHER CHANGED THE NATURE OF T HE CLAIM. AS PER LEARNED CIT(APPEALS) IT WAS A CLAIM OF BAD DEBT WHICH WAS WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION HOWEVER T HE SAID CLAIM WAS NOT BEFORE THE ASSESSING OFFICER. AN ALTOGETHER DIFFE RENT COLOUR WAS GIVEN IN RESPECT OF THE IMPUGNED CLAIM OF EXPENDITURE. WH ILE DECIDING THIS GROUND THE LEARNED CIT(APPEALS) HAS AGAIN INFRINGE D THE PROVISIONS OF RULE 46A OF THE I.T.RULES 1962 BY NOT PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE RESPONDENT-ASSESSEE. TO ASCERTA IN WHETHER IT WAS A BAD DEBT OR MERELY A REVERSAL OF AN ENTRY OF COMMISSION PA YMENT WE ARE OF THE VIEW THAT THE MATTER REQUIRES REINVESTIG ATION AT THE STAGE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER CAN VERI FY WHETHER IT WAS A CLAIM OF BAD DEBT OR MERELY AN ENTRY WAS REVERSED IN RESPECT OF THE CLAIM OF COMMISSION. WE ORDER ACCORDINGLY. SINC E THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF ASSESSING OFFICER TH EREFORE THIS GROUND MAY BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES . 8. GROUND NO.3:- 3. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W IN SCALING DOWN THE SALE CONSIDERATION OF PROFITS FOR CAPITAL GAIN FROM RS.52 40 121/- TO ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 7 - RS.31 74 000/- IGNORING THE SOUND BASIS OF VALUATIO N OF PLOTS I.E. FILED INQUIRIES ADOPTED BY THE ASSESSING OFFICER. 8.1. THE ASSESSING OFFICER HAS NOTED THAT THE ASSES SEE HAS OFFERED 'LONG-TERM CAPITAL GAIN' ON SALE OF LAND. FACTS HA VE REVEALED THAT THERE WAS A SALE OF PLOT OF LAND IN MARCH-2005 FOR A SALE CONSIDERATION OF RS.26 52 000/-. AGAINST THAT THE ASSESSEE HAS CLA IMED INDEXED COST OF ACQUISITION AMOUNTING TO RS.23 87 459/- AS WELL AS INDEXED COST OF IMPROVEMENT AMOUNTING TO RS.2 11 826/-. WITH THE R ESULT 'LONG-TERM CAPITAL GAIN' WAS DISCLOSED AT RS.52 715/-. IT W AS EXPLAINED BY THE ASSESSEE THAT THERE WAS A PLOT OF LAND IDENTIFIED A S 984/A IN GIDC INDUSTRIAL ESTATE MAKARPURA BARODA. THE SAID PLO T OF LAND WAS PURCHASED IN 1994. IT WAS A GIDC PLOT. THE PLOT WAS DIVIDED INTO SEVEN PARTS AND SOLD EACH PART TO DIFFERENT INDUSTRIES/JO B-WORKERS. THE ASSESSING OFFICER HAS MENTIONED THE DETAILS OF THE SALE OF PLOT TO SEVEN PARTIES HOWEVER THERE IS NO NECESSITY TO REPRODUC E THE SAID DETAILS BUT THE ONLY OBSERVATION ON SCRUTINY OF THE SAID DETAIL S OF THE SALE COULD BE MADE THAT THERE WAS A WIDE VARIATION IN THE SALE PR ICE OF THOSE SEVEN PLOTS. THEREFORE A QUERY WAS RAISED THAT WHY THER E WAS A DIFFERENCE IN SALE PRICE. THE EXPLANATION OF THE ASSESSEE WAS TH AT THE SAID PRICE VARIATION WAS DUE TO THE LOCATION OF ROAD PARKING ETC. TO ASCERTAIN THE CORRECTNESS OF THE TRANSACTION A QUERY WAS RAI SED FROM THE REGIONAL MANAGER GIDC BARODA BY INVOKING THE PROVISIONS OF SECTION 133(6) OF THE I.T. ACT 1961. IT WAS INFORMED THAT THROUGH A N ORDER THE ASSESSEE HAS ALLOWED TO TRANSFER THOSE PLOTS TO VARIOUS PAR TIES HOWEVER SUBJECT TO PAYMENT OF 10% AS TRANSFER FEES. THE DETAIL OF THE TRANSFER FEE HAS ALSO BEEN FURNISHED. AS PER GIDC INFORMATION THE SAID PLOT WAS VALUED AT ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 8 - UNIFORM RATE AND OVER WHICH TRANSFER FEES WAS CHARG ED. BECAUSE OF THE SAID INFORMATION THE ASSESSING OFFICER HAS AGAIN RAISED A QUERY THAT ONCE THE GIDC HAS VALUED THE ENTIRE PLOT AS A WHOLE APPLYING THE UNIFORM RATE THEN WHY THE ASSESSEE HAS SOLD THE SAME AFTE R PLOTTING INTO SEVEN PLOTS AT DIFFERENT RATES. AS PER ASSESSING OFFICE R THE PRICE OF THE PLOTS IN QUESTION HAD VARIED FROM RS.439/- TO RS.1 677/- PER SQ.MTR. THE EXPLANATION OF THE ASSESSEE WAS THAT THE VARIATION IN PRICE IN THE PLOTS WAS ON ACCOUNT OF LOCATION OF EACH PLOT SUCH AS DIRE CT ENTRANCE CORNER PLOT OR ROAD-SIDE PLOT ETC. AN INSPECTOR OF THE REVEN UE DEPARTMENT WAS DEPUTED TO INSPECT THE PROPERTY AND VERIFY THOSE F ACTS. THE SAID REPORT OF THE INSPECTOR IS NEED NOT TO BE REPRODUCED KEEPI NG BREVITY IN MIND. HOWEVER THE ASSESSING OFFICER HAS HELD THAT VARIAT ION IN THE PRICE OF EACH PLOT WAS NOT JUSTIFIABLE. IN HIS OPINION TH E ASSESSEE WAS UNABLE TO FURNISH ANY JUSTIFICATION FOR CHARGING DIFFERENT RA TES OF THOSE PLOTS THOUGH A UNIFORM RATE WAS ADOPTED FOR THE PURPOSE OF PAYM ENT OF TRANSFER FEES TO GIDC. ACCORDING TO ASSESSING OFFICER THE AVERAGE SALE PRICE PER SQUARE METER WAS RS.1 677/- PER SQ.MTR. APPLYING THE SAID RATE OF RS.1 677/- PER SQ.MTR. TO THE TOTAL AREA OF 3124.7 SQ.MTR. THE SALE CONSIDERATION WAS DETERMINED BY THE ASSESSING OFFIC ER AT RS.50 40 121/- AND APPLYING THE INDEXED COST OF ACQUISITION ON THE SAID AMOUNT BALANCE WAS TAXED IN THE HANDS OF THE ASSESSEE AS 'LONG-TER M CAPITAL GAIN'. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY. 9. IT WAS ARGUED BEFORE THE LEARNED CIT(APPEALS) TH AT THERE IS NO LAW PROVIDED IN THE STATUTE FOR SUBSTITUTING FOR THE DI SCLOSED VALUE OF CONSIDERATION. IT HAS ALSO BEEN CLARIFIED THAT E VEN THE PROVISIONS OF ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 9 - SECTION 50C OF THE I.T. ACT 1961 WOULD NOT HAVE AP PLIED BECAUSE ON THE SALE OF THE IMPUGNED PROPERTY NO STAMP DUTY WAS PAY ABLE. IT WAS CLARIFIED THAT NO FREE HOLD RIGHTS WERE GRANTED BY THE STATE GOVERNMENT THEREFORE THE PROVISIONS OF SECTION 50C OF THE I.T . ACT 1961 WERE NOT APPLICABLE ON SUCH TRANSFER FEES. THE LEARNED CIT( APPEALS) HAS TAKEN A DIFFERENT VIEW ON THE GROUND OF THE SITUATION OF TH E PLOTS. IN HIS OPINION THE PLOTS SITUATED ON THE FRONT-SIDE WOULD HAVE FET CHED THE HIGHER RATE. AFTER ASSIGNING A FEW OTHER REASON IT WAS HELD THA T AN AVERAGE RATE WAS TO BE APPLIED TO DETERMINE THE PRICE CONSIDERATION OF ALL THE PLOTS. THE LEARNED CIT(APPEALS) HAS THEREFORE ADOPTED AN AVE RAGE RATE OF RS.849/- PER SQ.MTR. AND ACCORDINGLY CALCULATED THE FULL V ALUE OF CONSIDERATION AND DIRECT THE ASSESSING OFFICER TO RECOMPUTED THE CAPITAL GAIN ACCORDINGLY. SINCE PART RELIEF HAS BEEN GRANTED B Y THE LEARNED CIT(APPEALS) THEREFORE BOTH THE SIDES ARE AGGRIEV ED AND IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE SIDES AS WELL AS CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE ACT. ONCE THE ADMITTED POSITION IS THAT THE P LOT IN QUESTION WHICH WAS DIVIDED INTO SEVEN PLOTS WAS A LEASED PROPERTY OF GIDC THEREFORE ONLY LEASE HOLD RIGHTS WERE TRANSFERRED. ALTHOUGH UNDISPUTEDLY THE GIDC HAS CHARGED 10% TRANSFER FEES BY ADOPTING A UNIFORM RATE OF TRANSFER FOR THE ENTIRE PLOT THAT WAS STATED TO BE RS.1 500/- P ER SQ.MTR. WHATEVER WAS THE RATE APPLIED BY THE GIDC HAS NO RELEVANCE A S FAR AS THE ISSUE IN HAND IS CONCERNED. THE FUNDAMENTAL ISSUE IS THAT W HETHER THE ASSESSING OFFICER HAD JURISDICTION TO SUBSTITUTE THE CONSIDER ATION AS PASSED ON ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 10 - BETWEEN THE PARTIES. DURING THE COURSE OF HEARING IT WAS ASKED THAT AFTER THE REMOVAL OF SECTION 52 OF THE I.T. ACT 1961 FRO M THE STATUTE WITH EFFECT FROM 01/04/1988; WHICH WAS MEANT FOR DETERM INATION THE CONSIDERATION IN THE CASE OF UNDER STATEMENT THE A SSESSING OFFICER HAS ANY RIGHT TO OBJECT THE CONSIDERATION DISCLOSED BY THE ASSESSEE. FROM THE SIDE OF THE REVENUE LEARNED DEPARTMENTAL REPRESEN TATIVE SHRI K.M.MAHESH HAS EXPLAINED THAT NOW SECTION 50C PRESC RIBES THE METHOD TO DETERMINE THE FULL VALUE OF CONSIDERATION IN CER TAIN CASES. HOWEVER LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE S HRI MEHUL THAKKAR HAS OBJECTED THAT THE PROVISIONS OF SECTION 50C CAN ONLY BE APPLIED FIRSTLY IF THERE IS QUESTION OF STAMP VALUATION FO R THE PURPOSE OF REGISTRATION OF A DOCUMENT AND SECONDLY THE PROCED URE TO BE FOLLOWED IS THAT THE ASSESSING OFFICER HAS TO REFER THE MATTER TO THE VALUATION OFFICER TO ASCERTAIN THE VALUE OF A CAPITAL ASSET. IN THE LIGHT OF HIS ARGUMENT IT IS AN UNDISPUTED POSITION THAT THE PLOT IN QUESTION WA S NOT SUBJECT TO STAMP DUTY BEING THE PLOTS WERE HAVING ONLY LEASE HOLD R IGHTS. IN THE ABSENCE OF TRANSFER OF FREE-HOLD RIGHTS OR THE RIGHTS OF OW NERSHIP THERE WAS NO QUESTION OF LEVY OF STAMP DUTY ON SUCH A TRANSFER. THIS LEGAL CONTENTION OF THE ASSESSEE HAS CONVINCING FORCE THAT THE STAMP DUTY IS CHARGED ONLY IN A TRANSACTION IN WHICH THE TRANSFER OF PROPERTY IS WITH THE OWNERSHIP RIGHTS. FURTHER THE SECOND CONTENTION ALSO HAS FORCE THAT IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE CORRECTNE SS OF THE CONSIDERATION THEN HE COULD HAVE REFERRED THE MATT ER TO THE VALUATION OFFICER AS PRESCRIBED U/S.50C(2) OF THE I.T. ACT 1 961. NO SUCH ACTION WAS TAKEN BY HIM THEREFORE IT WAS NOT JUSTIFIED O N HIS PART TO SUBSTITUTE THE SALE CONSIDERATION ON HIS OWN WITHOUT ANY BASIS OR COGENT MATERIAL. ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 11 - MERELY ON ASSUMPTION THE ASSESSING OFFICER HAS APP LIED A UNIFORM RATE IN RESPECT OF ALL THE SEVEN PLOTS WHICH WAS NOT A PRACTICAL APPROACH FOR DETERMINING THE CONSIDERATION OF THE PLOTS ADMITTE DLY HAVING DIFFERENT LOCATIONS. EVEN THE LEARNED CIT(APPEALS) HAS GONE WRONG IN ESTIMATING AN ANOTHER AVERAGE RATE FOR THE PURPOSE OF SUBSTIT UTION OF THE SALE CONSIDERATION. HE HAS GATHERED SOME INFORMATION O F ADJOINING PLOTS BUT THE PROVISIONS OF THE ACT HAS GIVEN LIMITED POWER F OR SUCH AN ACTION. RATHER IN THE CASE OF K.P.VARGHESE VS. ITO & ANR. R EPORTED AS (1981)131 ITR 597(SC) THE HON'BLE SUPREME COURT HAS SAID IN RESPECT OF THE PROVISIONS APPLICABLE AT THAT TIME THAT THERE MUST BE TWO CONDITIONS PRECEDENT TO APPLY THOSE PROVISIONS AND THOSE HAVE TO BE SATISFIED CUMULATIVELY VIZ. FAIR MARKET VALUE OF CAPITAL ASS ET ON THE DATE OF TRANSFER EXCEEDS FULL VALUE OF CONSIDERATION BY NOT LESS THA N 15% AND THE SECOND CONDITION THAT THE FULL VALUE OF CONSIDERATION IS F OUND TO BE AT A LESSER FIGURE THAN THE ACTUALLY RECEIVED BY THE ASSESSEE. HOWEVER IT HAS ALSO BEEN HELD BY THE HON'BLE APEX COURT THAT THE THEN A PPLICABLE SECTION 52(2) WAS NOT TO BE APPLIED IN BONA FIDE TRANSACTIO NS. IN CASE OF UNDERSTATEMENT OF CONSIDERATION IF ALLEGED BY THE REVENUE DEPARTMENT THEN THE BURDEN OF PROVING UNDERSTATEMENT OF CONSID ERATION LIES ON THE REVENUE. THOUGH THIS LANDMARK DECISION OF THE HON' BLE APEX COURT WAS IN THE CONTEXT OF A SCRAPPED SECTION OF IT ACT BUT THE LEGAL PROPOSITION AS LAID DOWN THEREIN GIVES US A DIRECTION TO RESOLVE S UCH A CONTROVERSY IF RAKED UP BY THE REVENUE DEPARTMENT AS IN THE PRESE NT APPEAL. IN THE LIGHT OF THE ABOVE DISCUSSION ON FACTS AS ALSO THE DECISION OF THE HON'BLE COURT CITED-SUPRA WE HEREBY DRAW TWO LEGAL PROPOSI TIONS. FIRST ONE IS THAT THE STATUTE HAD PRESCRIBED SECTION 52 TITLED A S CONSIDERATION FOR ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 12 - TRANSFER IN CASES OF UNDERSTATEMENT . THE PURPOSE OF THE SAID SECTION WAS THAT WHERE AN ASSESSEE ACQUIRED A CAPITAL ASSET AND THE ITO HAD A REASON TO BELIEF THAT THE TRANSFER WAS WITH THE OBJ ECT OF AVOIDANCE OR REDUCTION OF THE LIABILITY OF CAPITAL GAIN THEN TH E AO WAS EMPOWERED TO ADOPT THE VALUE OF THE CONSIDERATION TAKEN INTO ACC OUNT THE FAIR MARKET VALUE OF THE SAID CAPITAL ASSET. SINCE WE HAVE SP ECIFICALLY ASKED THAT IN PLACE OF THE SAID DELETED SECTION 52 OF THE I.T. AC T 1961 IS THERE ANY NEW PROVISION HAS BEEN INSERTED OR SUBSTITUTED IN THE I T ACT BUT THE REVENUE HAS NOT CITED ANY SUCH IDENTICAL PROVISION BUT ONL Y MENTIONED THE PROVISIONS OF SECTION 50C OF THE I.T. ACT 1961. T HIS SECTION HAS AN ALTOGETHER DIFFERENT AREA OF OPERATION. THIS SECTI ON IS LIMITED IN ITS SCOPE. THE SCOPE IS THAT WHERE THE CONSIDERATION DECLARED IS LESS THAN THE VALUE ADOPTED FOR THE PAYMENT OF STAMP DUTY THEN FOR THE PURPOSE OF SECTION 48 THE VALUE SO ADOPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY SHOULD BE DEEMED TO BE FULL VALUE OF THE CONSIDERATION. T HEREFORE THE SCOPE OF SECTION 50C CANNOT BE SAID TO BE PARI MRTERIA WITH THE SCOPE AND AMBITS OF THE ERSTWHILE SECTION 52 OF THE I.T. ACT 1961. DUE TO THIS REASON WE CAN HOLD THAT AFTER THE DELETION OF SECTION 52 FROM THE STATUTE THE ASSESSING OFFICER IS DENUDED WITH THE POWERS OF SUB STITUTION OF CONSIDERATION UNLESS AND UNTIL THE TRANSFER OF AN A SSET HAD FALLEN WITHIN THE AMBITS OF SECTION 50C OF THE I.T. ACT 1961. NEXT IS THE QUESTION WHICH WE HAVE DECIDED IS WHETHER AT ALL THE ASSESSI NG OFFICER COULD NOW BE DIRECTED TO APPLY THE PROVISIONS OF SECTION 50C OF THE I.T. ACT 1961 TO DETERMINE THE CORRECT VALUE OF THE CONSIDERATION. ACCORDING TO US SEEING THE FACTS OF THE CASE THAT TOO IS NOT POSSIBLE. THE REASON IS THAT THIS IS NOT THE CASE OF TRANSFER OF OWNERSHIP THEREFORE T HE CLAUSE OF PAYMENT OF ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 13 - STAMP DUTY DID NOT ARISE. THE ASSET IN QUESTION W AS ADMITTEDLY A LEASED PROPERTY THEREFORE AFTER MAKING THE PAYMENT OF TR ANSFER FEES TO GIDC FOR TRANSFER OF LEASE-HOLD RIGHTS THE IMPUGNED PRO PERTY HAD EXCHANGED HANDS. THERE WAS NO NECESSITY OF PAYMENT OF STAMP DUTY AS INFORMED BY THE ASSESSEE. ONCE IT WAS AN ADMITTED FACTUAL POS ITION THAT THE TRANSFER IN QUESTION WAS NOT SUBJECT TO PAYMENT OF STAMP DUTY THEN THE NATURAL CONSEQUENCE IS THAT THE PROVISIONS OF SECTION 50C S HOULD NOT COME INTO PLAY. WE HOLD ACCORDINGLY. THUS THE TOTALITY OF THE CIRCUMSTANCES DEMANDS TO REVERSE THE FINDINGS OF ASSESSING OFFICE R AND LEARNED CIT(APPEALS) BOTH AND THE VALUE OF CONSIDERATION AS DISCLOSED BY THE ASSESSEE HAS TO BE CONSIDERED FOR TAX PURPOSE. THE REFORE THIS GROUND OF REVENUE IS DISMISSED. 11. IN THE RESULT THE APPEAL OF THE REVENUE MAY B E TREATED AS PARTLY ALLOWED. 12. ASSESSEES CO NO.211/AHD/2008 (ARISING OUT OF I TA NO.2562/AHD/2008 FOR ASSESSMENT YEAR 2005-06) 12.1. THE FOLLOWING GROUNDS WERE RAISED BY THE AS SESSEE IN ITS CROSS OBJECTION:- THE LEARNED COMMISSIONER (APPEALS) ERRED IN PARTLY CONFIRMING ADDITION IN RESPECT OF CAPITAL GAINS BY HYPOTHETICA LLY ASSUMING THE FULL VALUE OF CONSIDERATION FOR SALE OF THE PROPERTIES A T RS.31.74 LACS COMPARED TO ACTUAL AMOUNT OF RS.26.52 ALCS. APPELLANT SUBMITS THAT THE ACTUAL VALUE OF SALE CON SIDERATION WAS RS.26.52 LACS AND THE ADDITION OF RS.5.22 LACS IS N OT JUSTIFIED. ITA NO.2562/AHD/2008(BY REVENUE) AN D CO NO.211/AHD/2008 (BY ASSESSEE) DY.CIT VS. M/S.MAKSTEEL WIRE HEALDS LTD. ASST.YEAR - 2005-06 - 14 - APPELLANT PRAYS THAT THE ADDITION OF RS.5.22 LACS O N THIS GROUND BE DELETED. 12.2. WE HAVE ALREADY DECIDED HEREINABOVE THAT THE RE WAS NO JUSTIFICATION ON THE PART OF THE REVENUE AUTHORIT IES TO DISTURB THE CONSIDERATION AMOUNT AS DISCLOSED BY THE ASSESSEE. ONCE A VIEW HAS ALREADY BEEN TAKEN THEREFORE THE CONSEQUENCE IS T HAT THE ISSUE RAISED THROUGH THIS CROSS-OBJECTION BY THE CROSS OBJECTOR STANDS ALLOWED. 13. IN THE RESULT REVENUES APPEAL IS TREATED AS PART LY ALLOWED THAT TOO ONLY FOR STATISTICAL PURPOSES WHEREAS TH E CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 31/ 08 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED / /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPA RTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-III BARODA 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD