The ACIT,3(1), v. M/s SM & SM Hotles,

ITA 453/IND/2007 | 1999-2000
Pronouncement Date: 20-01-2010 | Result: Dismissed

Appeal Details

RSA Number 45322714 RSA 2007
Bench Indore
Appeal Number ITA 453/IND/2007
Duration Of Justice 2 year(s) 5 month(s) 3 day(s)
Appellant The ACIT,3(1),
Respondent M/s SM & SM Hotles,
Appeal Type Income Tax Appeal
Pronouncement Date 20-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 20-01-2010
Date Of Final Hearing 13-01-2010
Next Hearing Date 13-01-2010
Assessment Year 1999-2000
Appeal Filed On 17-08-2007
Judgment Text
PAGE 1 OF 5 - I.T.A.NO. 453/IND/2007 M/S. SM AND SM HOTELS IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO. 453/IND/2007 A.Y. : 1999-2000 ACIT M/S. SM AND SM HOTELS 3(1) VS 22/2 MANORAMAGANJ INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.K.SINGH CIT JDR RESPONDENT BY : SHRI P.N.DIXIT ADV. DATE OF HEARING : 13.01.2010 O R D E R PER V.K. GUPTA A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I INDORE DATED 22.05.2007 FOR THE ASSESSM ENT YEAR 1999-2000. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUNDS RAISED BY THE REVENUE IN THIS APPEAL READ AS UNDER :- 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO PROPE R SERVICE OF NOTICE U/S 143(2). PAGE 2 OF 5 - I.T.A.NO. 453/IND/2007 M/S. SM AND SM HOTELS 2. LD. CIT(A)-I ERRED IN DELETING THE ADDITION OF RS. 2 89 40 721/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF SHORT TERM CAPITAL GAIN. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000. THE A.O. ISSU ED NOTICE U/S 148 ON 28.3.2004 IN RESPONSE TO WHICH THE ASSESSEE FILE D RETURN OF INCOME DECLARING NIL INCOME. THE A.O. NOTED THAT THE ASSES SEE FIRM WAS CONSTITUTED ON 1.4.1997 HAVING SEVEN PARTNERS. ONE OF SUCH PARTNERS WAS SHRI MOHANLAL KEDIA (HUF) WHO CONTRIBUTED CAPITAL IN THE FORM PROPERTY SITUATED AT 22/2 MANORAMAGANJ INDORE. SUBSEQUENTL Y PARTNERSHIP FIRM WAS RECONSTITUTED. HOWEVER ON 16.9.1998 PARTNERSH IP FIRM WAS CONVERTED INTO A COMPANY. THE A.O. ANALYZED THE PRO VISIONS OF MEMORANDUM OF ASSOCIATION WHICH CONTAINS A CLAUSE TO CARRY ON THE BUSINESS OF HOTEL. THE A.O. HOWEVER HELD THAT NO BUSINESS WAS ACTUALLY CARRIED OUT BY THE ERSTWHILE FIRM OR BY THIS COMPAN Y. HENCE THE TRANSFER OF THE ASSETS OF THE FIRM WAS NOT COVERED AS PER SE CTION 47(XIII). HENCE THE ASSESSEE WAS LIABLE TO PAY THE SHORT TERM CAPIT AL GAIN ON THE TRANSFER OF CAPITAL ASSETS AND WORKED OUT THE SAME AT RS.2 89 4 0 721/-. IN DOING SO THE A.O. REJECTED ALL THE CONTENTIONS OF THE ASSESS EE WHICH WERE IN THE CONTEXT OF THE APPLICABILITY OF THE PROVISIONS OF S ECTION 47(XIII) AND NON- SATISFACTION OF CONDITIONS OF SECTION 148 OF THE AC T. AGGRIEVED BY THIS PAGE 3 OF 5 - I.T.A.NO. 453/IND/2007 M/S. SM AND SM HOTELS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS SUBMITTED THAT NOTICE U/S 143(2) WAS NOT SER VED IN THE MANNER PRESCRIBED U/S 283(2) OF THE ACT AS SUCH NOTICE HA S BEEN SERVED ON THE PRINCIPAL OFFICER OF THE COMPANY AND NOT ON THE ERS TWHILE PARTNERS OF THE ASSESSEE FIRM. THE ASSESSEE ALSO RAISED CONTENTIONS REGARDING NON- COMPLIANCE OF CONDITIONS OF SECTION 148 AND THE GUI DELINES OF THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFT AS REP ORTED IN 259 ITR 19. THE ASSESSEE ALSO SUBMITTED THAT THE PROVISIONS OF SECTION 47(XIII) WAS SQUARELY APPLICABLE AS THE ASSESSEE FIRM HAD ST ARTED CONSTRUCTION OF HOTEL AND IT WAS NOT REQUIRED THAT IT MUST HAVE RUN A HOTEL TO CONSTRUE THE FACTS OF THE BUSINESS BEING CARRIED ON BY THE ASSES SEE FIRM. HENCE THE ASSESSEE PLACED RELIANCE ON VARIOUS JUDICIAL DECISI ONS IN SUPPORT OF ITS VARIOUS CONTENTIONS OF ALL THESE ASPECTS. THE LD. C IT(A) UPHELD THE ACTION OF THE A.O. IN REGARD TO ISSUE OF NOTICE U/S 148 AS THE A.O. HAD NECESSARY INFORMATION TO FORM A PRIMA FACIE BELIEF THAT THE CONDITIONS EXISTED FOR EXERCISE OF JURISDICTION UNDER THAT SEC TION. AS REGARDS IMPROPER SERVICE OF THE NOTICE U/S 143(2) THE LD. CIT(A) HELD THAT THERE WAS NO VALID SERVICE OF NOTICE U/S 143(2) ON THE AS SESSEE HENCE ASSESSMENT ORDER FRAMED IN CONSEQUENCE THEREOF WAS NOT PROPER. THE LD. CIT(A) AFTER ANALYZING THE PROVISIONS RELATING TO THE MEANING OF BUSINESS AND SECTION 47(XIII) HELD THAT ACTIVITIES OF THE CONSTRUCTION OF PAGE 4 OF 5 - I.T.A.NO. 453/IND/2007 M/S. SM AND SM HOTELS HOTEL BUILDING BY THE ASSESSEE FIRM IN THE FACTS AN D CIRCUMSTANCES OF THE CASE AMOUNTED TO CARRYING ON OF THE BUSINESS ACTIVI TIES. HENCE THE A.OS ACTION OF DENYING BENEFIT CONTEMPLATED U/S 47(XIII) OF THE ACT. THUS THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE ON MERITS AS WELL. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT NOTICE OF REOPENING WAS SERVED ON TH E ASSESSEE FIRM. HOWEVER NOTICE U/S 143(2) OF THE ACT WAS NOT SERVE D ON THE ASSESSEE FIRM. HENCE THE DECISION OF THE LD. CIT(A) WAS COR RECT IN LAW. THE LEARNED COUNSEL ON MERITS AS WELL AS ON LEGAL ISSUE S FURTHER PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) AND FINDINGS OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE ASSESSEE FIRM WAS FORMED WITH THE OBJECT TO CARRY ON THE BUSINESS OF HOTEL AND IN PURSUANCE OF THIS OBJECT STARTED CONSTRUCTION OF HOTEL BUILDING. IN THE MEANWHILE T HE ASSESSEE FIRM CONVERTED IT-SELF INTO A COMPANY. THE ASSESSMENT FO R THIS YEAR WAS REOPENED U/S 148 AND THE ASSESSEE OBJECTED FOR NON- COMPLIANCE OF PAGE 5 OF 5 - I.T.A.NO. 453/IND/2007 M/S. SM AND SM HOTELS PROVISIONS OF SECTION 148 BEFORE THE LD. CIT(A). HO WEVER SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF LD. CIT(A) IN THIS REGARD BY NOT FILING THE APPEAL. HENCE NO DECISION IS CALLED FOR THEREON. AS REGARDS TO SERVICE OF NOTICE U/S 143(2) IT IS AN UNDISPUTED F ACT THAT SUCH NOTICE HAS NOT BEEN SERVED ON THE ASSESSEE FIRM IN THE MANNER AS PRESCRIBED U/S 283(2) OF THE ACT HENCE THE DECISION OF THE LD. C IT(A) IN THIS REGARD IS UPHELD. WE FURTHER FIND THAT THE CARRYING ON OF THE BUSINESS ACTIVITIES IN THE PRESENT CASE WOULD START FROM THE CONSTRUCTION OF BUILDING ITSELF. HENCE IN OUR OPINION THE PROVISIONS OF SECTION 47 (XIII) ARE ALSO APPLICABLE. ACCORD9INGLY THE DECISION OF THE LD. C IT(A) IS ALSO UPHELD IN THIS REGARD. THUS BOTH THE GROUNDS OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :20 TH JANUARY 2010. CPU* 14141