Shri Bhupatlal Chhaganlal Jariwala,HUF, Surat v. The ACIT.,Circle-3,, Surat

ITA 3154/AHD/2008 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 315420514 RSA 2008
Assessee PAN AABHB5950M
Bench Ahmedabad
Appeal Number ITA 3154/AHD/2008
Duration Of Justice 2 year(s) 10 month(s) 23 day(s)
Appellant Shri Bhupatlal Chhaganlal Jariwala,HUF, Surat
Respondent The ACIT.,Circle-3,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2005-2006
Appeal Filed On 05-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER DATE OF HEARING : 21/07/2011 DRAFTED ON: 25/07/2011 ITA NO.3154/AHD/2008 ASSESSMENT YEAR : 2005-06 BHUPATLAL CHHAGANLAL JARIWALA HUF 121 NEHRUNAGAR SOCIETY OPP.SVR ENGG.COLLEGE ICCHANATH SURAT VS. THE ACIT CIRCLE-3 SURAT PAN/GIR NO. : AABHB 5950 M ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M.K. PATEL A.R. RESPONDENT BY: SHRI S.K. MEENA SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LD.CIT(A)-II SURAT DATED 17/07/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT THE LEARNED ACIT CIRCLE-3 SUR AT ERRED IN MAKING ADDITION OF RS.53 70 000/- [RS.88 70 000/- - RS.35 00 000/-] BY APPLYING PROVISIONS OF SECTION 50C OF THE I.T. ACT WITHOUT APPRECIATING THE FACTS AND FIGURES OF THE CASE. ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 2 - 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) OF THE IT ACT 1961 DATED 3 1.12.2007 WERE THAT THE ASSESSEE HAS SOLD A LAND AND BUILDING FOR A CONSIDERATION OF RS.35 LACS. THE AO HAS ASKED THE ASSESSEE TO FUR NISH THE COPY OF CHALLAN OF STAMP DUTY PAID IN RESPECT OF THE TRANSFER OF LAND AND BUILDING. IT WAS ALSO NOTICED THAT ADDITIONAL STAMP DUTY WAS LEVIED. ON ENQUIRY SUB-REGISTRAR SURAT HAS INFORMED THAT AN ADDITIONAL STAMP DUTY OF RS.8 34 825/- WAS LEVIED. ON THAT BASIS THE AO HAS NOTED THAT IN RESPECT OF THE LAND MEASUR ING 1774 SQ.METERS AS PER THE JANTRI RATE TOTAL CONSIDERATIO N SHOULD BE RS.88 70 000/- AS AGAINST THE SALE CONSIDERATION SH OWN BY THE ASSESSEE OF RS.35 LACS. THE ASSESSEE IN DEFENSE H AS FURNISHED TWO VALUATION REPORTS. IT WAS ALSO CLAIMED BY THE ASSE SSEE THAT A FACTORY WAS CONSTRUCTED ON THE LAND. IN SUPPORT OF THE CL AIM OF CONSTRUCTION OF FACTORY A RAJA CHITI ISSUED BY SMC DATED 16/05 /1995 WAS PRODUCED. THE AO WAS OF THE VIEW THAT THE PROPERT Y IN QUESTION CONSISTED ONLY LAND. AS PER AO THE CLAIM OF CONS TRUCTION OF FACTORY WAS MERELY TO MITIGATE TAX LIABILITY. FAC TS OF THE CASE HAVE ALSO REVEALED THAT IN SUPPORT OF THE CONTENTION ASS ESSEE HAS FURNISHED TWO VALUATION REPORTS ONE WAS DATED 06/09/1990 OF SHRI ARUN K.PRADHAN AND AN ANOTHER VALUATION REPORT DATED 24/ 07/2003 OF SHRI JASHWAT H.MEHTA. BEFORE AO ASSESSEE HAS ALSO M ADE A PLEA THAT FOR THE PURPOSE OF VALUATION THE MATTER COULD BE R EFERRED TO THE VALUATION OFFICER. THE A.O. HAD IN FACT REFERRED THE ISSUE TO ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 3 - VALUATION OFFICER BARODA VIDE A LETTER DATED 30 TH NOVEMBER 2007. THE AO HAS ALSO NOTED IN PARAGRAPH NO.4.4 THAT NO VALUATION REPORT WAS RECEIVED BY HIS OFFICE TILL THAT DATE THEREFORE HE HAD NO OPTION BUT TO DETERMINE THE VALUE AS PER THE INFORM ATION RECEIVED FROM OF STAMP DUTY AUTHORITIES RECEIVED. THE AO HAS COMPUTED THE LONG TERM CAPITAL GAIN AS FOLLOWS:- FULL VALUE OF CONSIDERATION : RS.88 70 000 LESS : INDEXED COST : RS.19 16 458 ---------------- DIFFERENCE : RS.69 53 542 ======== THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE CIT(A) HAS HELD THAT THE TRANSACTION IN QUES TION WAS SQUARELY COVERED BY THE PROVISIONS OF SECTION 50C O F THE ACT. HENCE THE ACTION OF THE AO WAS AFFIRMED AS PER THE FOLLOWING CONCLUDING PARAGRAPH:- 6.5. TAKING INTO ACCOUNT SUCH FACTS AND CIRCUMSTAN CES OF THE CASE AND ALSO THE PROVISIONS OF SEC-50C OF THE IT ACT WHICH HAVE BEEN DISCUSSED IN PRECEDING PARAS IN CONSIDERA BLE DETAIL IT IS HELD THAT THE ASSESSEES CASE WAS SQUARELY CO VERED BY THE PROVISIONS OF SEC 50C OF THE IT ACT AND THEREFORE THE AO WAS FULLY JUSTIFIED IN ADOPTING THE VALUE OF THE PROPER TY AS ASSESSED ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 4 - BY THE SVA AT RS.88 77 000 AS THE FULL VALUE OF THE SALE CONSIDERATION FOR THE PURPOSE OF CALCULATING THE L TCG EARNED BY THE ASSESSEE. THE ADDITION OF THE SUM OF RS.69 53 542 AS LTCG IS THEREFORE CONFIRMED. 4. BEFORE US LD.AR MR.M.K. PATEL HAS MADE TWO FOLD ARGUMENTS. HIS FIRST PLANK OF ARGUMENT IS THAT IF THE ASSESSEE HAS CONTESTED THE VALUATION THEN IN TERMS OF THE PROVISIONS OF SECTI ON 50C OF THE ACT THE AO SHOULD HAVE WAITED FOR THE DVOS REPORT BEFO RE FINALISATION OF THE ASSESSMENT. THE AO HAD REFERRED THE VALUATI ON TO THE VALUATION OFFICER BUT THAT WAS OF NO CONSEQUENCE BE CAUSE THE ASSESSMENT WAS MADE MERELY ON THE BASIS OF AN ENQUI RY CONDUCTED WITH THE SUB-REGISTRAR SURAT. ALTERNATIVELY HE H AS PLEADED THAT THE VALUATION REPORTS SUBMITTED BY THE ASSESSEE SHO ULD HAVE BEEN CONSIDERED BY THE AO. THE SECOND PLANK OF HIS ARGUMENT WAS THAT THE ASSESSEE HAS FURNISHED THE CALCULATION OF LONG TERM CAPITAL GAIN ON THE BASIS OF THE VALUATION OF THE LAND PLUS THE VALUATION OF THE FACTORY AND THAT COMPUTATION OF LONG TERM CAPITAL G AIN WAS ALTOGETHER IGNORED BY THE AO. HE HAS THEREFORE PLEA DED THAT THE APPELLANT IS CHALLENGING THE ENTIRE LONG TERM CAPIT AL GAIN AS ASSESSED BY THE AO AT RS.69 53 542/-. 5. FROM THE SIDE OF THE REVENUE LD.DR MR.S.K. MEEN A HAS DEFENDED THE ORDERS OF THE AUTHORITIES BELOW. HIS MAIN EMPHASIS ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 5 - WAS ON THE PROVISIONS OF SECTION 50C OF THE ACT AND ARGUED THAT ONCE THE ADMITTED FACTUAL POSITION WAS THAT THE JA NTRI RATE WAS HIGHER; THEN THE AO HAD NO OPTION BUT TO ASSESS THE CAPITAL GAIN AS PRESCRIBED UNDER THE STATUTE. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. ADMITTED FACTUAL POSITION IS TH AT THE AO HAD REFERRED THE MATTER TO VALUATION OFFICER BARODA V IDE HIS OFFICE LETTER DATED 30 TH OF NOVEMBER 2007 AS IS EVIDENT FROM PARAGRAPH NO.4.4 OF THE IMPUGNED ASSESSMENT ORDER. IT IS ALS O EVIDENT FROM THAT PARA THAT THE DEPARTMENTAL VALUATION REPORT WA S WANTING AT THE TIME WHEN THE ASSESSMENT WAS FINALISED. IN VIEW OF THIS ADMITTED FACT WE ARE OF THE VIEW THAT ONCE AS PER THE PROVI SIONS OF SECTION 50C(2) OF THE ACT THE AO IS REQUIRED AS PER THE S TATUTE TO REFER THE MATTER TO VALUATION OFFICER WHERE THE ASSESSEE CLAI MS THAT THE STAMP VALUATION AUTHORITY HAS NOT CORRECTLY ADOPTED THE V ALUE AND THAT HAD EXCEEDED THE FAIR MARKET VALUE THEN THE RIGHT RECO URSE FOR THE AO IS TO REFER THE MATTER TO DVO. HENCE IT WAS EXPECTED F ROM THE A.O. TO WAIT FOR THE REQUISITE REPORT BEFORE FINALIZATION O F THE IMPUGNED ASSESSMENT ORDER. UNDER THE CIRCUMSTANCES TO ARRIVE AT THE CORRECT FIGURE OF VALUATION WE HEREBY RESTORE THIS ISSUE B ACK TO THE AO TO TAKE THE ASSISTANCE OF THE DVO AND CALL FOR THE VAL UATION REPORT WHICH HAD ALREADY BEEN REFERRED BY HIM. AS FAR AS THE SECOND PLANK ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 6 - OF THE ARGUMENT OF THE LD.AR IS CONCERNED SINCE TH E MATTER HAS ALREADY BEEN REFERRED BACK TO AO THEREFORE LEGALLY HE IS ENTITLED TO CLAIM BEFORE THE AO THE CORRECT METHOD OF COMPUTATI ON OF LONG TERM CAPITAL GAIN. IN THIS REGARD ON PAGE NO.45 OF THE COMPILATION THERE WAS AN ACCOUNT OF FACTORY BUILDING PURCHASED WHER EIN AS ON 01/04/2004 BALANCE BROUGHT FORWARD WAS RS.4 53 717 /-. THE LD.AR HAS ASSERTED THAT IT WAS RELATED TO THE FACTORY BUI LDING. LD. A.R. HAS ALSO TRIED TO DEMONSTRATE THAT IN ADDITION TO THE FACTORY BUILDING THE ASSESSEE HAS ALSO SOLD THE APPURTENANT LAND. FOR T HIS FACTUAL PROPOSITION LD.AR HAS MENTIONED FEW CLAUSES OF THE IMPUGNED SALE DEED TO DEMONSTRATE THAT THE PROPERTY IN QUESTION WAS NOT ONLY THE LAND BUT LAND ALONG WITH FACTORY BUILDING WHICH WAS SOLD BY THE ASSESSEE. ONCE WE HAVE ALREADY DECIDED TO RESTORE THIS ISSUE BACK TO AO WITH THE DIRECTION TO FOLLOW THE PROVISIONS OF S ECTION 50C OF THE ACT THEREFORE ALL THESE FACTUAL ASPECTS CAN ALSO BE ASCERTAINED BY THE AO AFTER DUE INVESTIGATION. IN THE RESULT T HE ENTIRE ISSUE IS RESTORED BACK TO AO FOR DE NOVO CONSIDERATION HENC E THIS GROUND MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPO SES. 7. GROUND NO.2 READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AS WELL AS LAW ON THE SUBJECT THE LEARNED ACIT CIRCLE-3 SURAT ERRED IN MAKING ADDITION OF RS.54 563/- ON ACCOUNT OF LO W GP WITHOUT POINTING OUT ANY DEFECTS. ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 7 - 7.1. THE OBSERVATION OF THE AO WAS THAT THE ASSESSE E IS IN THE BUSINESS OF TEXTILE I.E. TRADING OF SAREES ON RETA IL BASIS. FOR THE YEAR UNDER CONSIDERATION GP WAS DECLARED @ 19.92% AS AGA INST THE GP RATE AT 29.67%. DUE TO THE SAID VARIATION CERT AIN ENQUIRIES WERE RAISED AND THEREAFTER THE GP WAS ADOPTED APPLYING T HE RATE OF THE PREVIOUS YEAR AND THE DIFFERENCE WAS TAXED AS FOLLO WS:- GROSS PROFIT ADOPTED ABOVE @ 29.67% RS.1 66 1 58 GROSS PROFIT SHOWN BY THE ASSESSEE RS.1 11 595 -------------- DIFFERENCE RS. 54 563 ======= 8. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY THOUGH LD.CIT(A) HAS MENTIONED AN ARGUME NT OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 44AF SUPPOR TS THE PROFIT DECLARED BY THE ASSESSEE BUT WITHOUT ADJUDICATING ON THAT POINT LD.CIT(A) HAS AFFIRMED THE ACTION OF THE AO. 9. IN RESPECT OF THIS GROUND ON HEARING THE SUBMIS SIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT ONCE IT IS AN AD MITTED FACT THAT THE ASSESSEE IS IN RETAIL BUSINESS THEN IN CASE THE A O IS NOT SATISFIED WITH THE RATE OF PROFIT DECLARED BY THE ASSESSEE T HEN HE COULD HAVE TAKEN THE GUIDANCE FROM ONE OF AN ANOTHER PROVISION OF IT ACT WHICH IS INTRODUCED WITH THE VERY PURPOSE TO ASSESS A TRADER WHO IS ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE . THE RELEVANT SECTION IS SEC. 44AF OF THE ACT. WHEN WE HAVE RAIS ED A QUERY ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 8 - LD.AR HAS DECLARED THAT THE TURNOVER OF THE ASSESSE E HAD NOT EXCEEDED THE PRESCRIBED LIMIT. HOWEVER IT WOULD BE JUST AND PROPER FOR US TO RESTORE THIS GROUND AS WELL BACK TO THE STAGE OF AO TO RECONSIDER THE BASIS OF ADDITION IN THE LIGHT OF THE PROVISIONS OF SECTION 44AF OF THE ACT. WE HOLD ACCORDINGLY AND T HIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE ONLY. 10. GROUND NO.3 READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT THE LEARNED ACIT CIRCLE-3 SUR AT ERRED IN MAKING ADDITION OF RS.7 148/- PAID TOWARDS LIC LOAN INTEREST TREATING IT AS UTILIZED FOR NON BUSINESS PURPOSE. 10.1 AS PER AO THE ASSESSEE HAS CLAIMED INTEREST EXPENSE OF RS.7 148/- ON LIC LOAN. THE SAME WAS DISALLOWED WH ICH WAS CHALLENGED. LD.CIT(A) HAS APPRECIATED THE FACTS OF THE CASE AND HELD AS UNDER: 14. THE SUBMISSIONS OF THE ARS DO NOT MAKE ANY S ENSE TO ME. IT IS ABSOLUTELY CLEAR THAT IT DID NOT MAKE AN Y SENSE TO THE AO EITHER. FOR THE INTEREST TO BE ALLOWABLE AS RE VENUE EXPENDITURE IT NECESSARILY HAD TO BE SHOWN THAT TH E LOAN HAD BEEN TAKEN AND UTILIZED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. SINCE THIS HAS NOT BE EN DONE EVEN IN THE APPELLATE PROCEEDINGS THE DISALLOWANCE OF T HE SUM OF ITA NO.3154/AHD /2008 BHUPATLAL C.JARIWALA HUF VS. ACIT ASST.YEAR - 2005-06 - 9 - RS.7 148 BEING THE INTEREST PAID ON LIC LOAN WILL STAND CONFIRMED. 11. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES W E FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). RATHER CONS IDERING ADDITION BEING TRIFLE IN NATURE THE SAME WAS NOT SERIOUSLY CONTESTED. IN VIEW OF THIS THIS GROUND OF THE ASSESSEE IS DISMIS SED. 12. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED BUT FOR STATISTICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 29 TH JULY 2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 29/ 07 /2011 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II SURAT 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD 1. DATE OF DICTATION.. 22.7.11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER