Income Tax Appellate Tribunal - Mumbai
Asian Marble Industries , Mumbai vs Assessee on 31 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.4022/M/2009
Assessment Year: 2005-06
ACIT 12(1), M/s. Asian Marble Industries,
Room No.117, 59, Apollo Street,
Vs.
Aayakar Bhavan, Sonawala Bldg., 2nd Floor,
M.K. Marg, Mumbai - 400 001
Mumbai - 400020 PAN: AAEFA8754F
(Appellant) (Respondent)
CO No.23/M/2010
Assessment Year: 2005-06
M/s. Asian Marble Industries, ACIT 12(1),
59, Apollo Street, Room No.117,
Vs.
Sonawala Bldg., 2nd Floor, Aayakar Bhavan,
Mumbai - 400 001 M.K. Marg,
PAN: AAEFA8754F Mumbai - 400020
(Appellant) (Respondent)
Assessee by : Shri Pradip N. Kapasi, A.R.
Revenue by : Shri Asghar Zain V.P., D.R.
Date of Hearing : 28.10.2014
Date of Pronouncement : 31.12.2014
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal by the Revenue and the cross objection by the assessee are directed against the order dated 06.04.2009 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2005-06.
First we take up the appeal of the Revenue i.e. ITA No.4022/M/2009.
ITA No.4022/M/2009 & CO No.23/M/20102 M/s. Asian Marble Industries ITA No.4022/M/2009 (Revenue's Appeal):
2. The Revenue has taken the following grounds of appeal:
"1(a) "On the basis of facts and circumstances of the case and in law, the ld.CIT(A) has erred in admitting additional evidences submitted by the assessee during the appellate proceedings".
1(b) "The ld.CIT(A), based on the entries made in the books of accounts, which were for the first time produced only before the CIT(A), erre d in arriving at the conclusion that conve rsion of capital asset to stock in trade was made on 01.04.2001, ignoring the fa ct that the ret urn of income for A.Y. 02-03 filed by the assessee on 12.06.2002 showed the property as capital asset and not as stock in trade."
1(c) "The CIT(A) erred in ignoring the fact that the filing of revised return of income for A.Y.02-03 and return of income for A.Y. 0304 on 30.09.2003, showing the property as stock in trade was only an after- thought, to escape from the rigours of provisions of section 50C".
1(d) "T he C I T( A ) e r re d i n ig n o r i ng t ha t , obt a in i ng o f BM C approval, appointment of architects etc. can at best be treated as accretion to the value of capital asset but do not indicate any venture in the nature of business".
2(a) "The ld.CIT(A) erred in not appreciating that conversion of capital asset to stock in trade took place on 30.09.2003 and that the provisions of section 50C. are attracted."
2(b) "The ld.CIT(A) erred in not appreciating that the vacant lands are not valued by the Valuation Cell and that the value as per Stamp Duty Ready Reckoner is a self contained testament as the A.O. has rig htly adopted the market value for the purpose of calculation of capital gains by invoking the provisions of section 50C.
3 "The ld.CIT(A) erred in upholding the value of the property as on 01.04.1981 at Rs.23,83,825/- ignoring that the title of the property was under litigation / dispute at that point of time and t h e s a m e w a s s e t t l e d b y t h e H o n ' b l e H i g h C o u r t o r d e r d t. 27.07.2000."
4. "The appellant prays that the order of the CIT(A) on the above g round(s ) be s et as ide and t hat of t he Ass ess ing O ff ic er be restored.
5" The Appellant craves leave to amend or alter any ground or add a new ITA No.4022/M/2009 & CO No.23/M/2010 3 M/s. Asian Marble Industries ground which may be necessary."
3. The brief facts of the case are that the assessee was holding a factory building as its capital asset and was claiming depreciation upon it. The assessee converted the said capital asset to stock in trade on 01.04.01 and offered capital gain of Rs.2,14,36,356/-. The assessee gave the said property for development to the developer on 18.06.04. The Assessing Officer (hereinafter referred to as the AO), however, observed that the assessee had filed the original return of income for the assessment year 2002-03 on 12.06.02 and had not shown the capital asset as stock in trade. Subsequently, the assessee filed revised return for assessment year 2002-03 dated 30.09.03. The AO observed that the due date for filing of revised return was before 31.03.04 or before the return is processed under section 143(1) whichever is earlier. Since the date of processing the return was 13.05.03, hence the revised return dated 30.09.03 was invalid. The AO further held that the motive behind filing the revised return was to avoid application of section 50C of the Act inserted in the Income Tax Act w.e.f. 01.04.03. The AO further observed that the dates of filing of revised return for assessment year 2002-03 and return for assessment year 2003-04 were the same. He further observed that the assessee had not produced any evidence to the effect that the transfer of land from capital asset to stock in trade took place on 01.04.01. The AO therefore held that the actual conversion took place on 30.09.03 i.e. on the date of filing of revised return of assessment year 2002-03. The AO further observed that the assessee had claimed the cost of acquisition of land as on 01.09.81 at Rs.23,83,825/- based on the valuation report dated 22.09.03, hence there was no conversion of land before 22.09.03. The AO further was of the view that for arriving at capital gains, the stamp duty applicable for the calendar year 2002-03 should be adopted. Accordingly, he took the value at Rs.8,21,78,000/- for the purpose of determining the capital gains. The AO further observed that the land was ITA No.4022/M/2009 & CO No.23/M/2010 4 M/s. Asian Marble Industries under dispute and the Hon'ble High Court had adjudicated the matter vide order dated 27.07.2000 determining the value at Rs.94,850/-. He held that the date of acquisition of land was 27.07.2000. He therefore determined the fair market value of the land as on 27.07.2000 and gave the indexation benefit from the said date. Aggrieved by the order of the AO, the assessee filed appeal before the Ld. CIT(A).
4. Before the Ld. CIT(A), the assessee furnished certain additional evidences. The said evidences were forwarded by the Ld. CIT(A) to AO for his comments. The AO vide his report objected to the admission of additional evidences. However, he reiterated his views as were given in the assessment order. The Ld. CIT(A), after taking into consideration the comments of the AO as well as the submission of the assessee, observed that the AO had not specifically asked the assessee to furnish the proof of conversion of the property from capital asset to stock in trade on 01.04.01. The assessee realised that the AO had rejected his claim of conversion of the property on 01.04.01 only after receipt of the assessment order. From the evidence on the file, the Ld. CIT(A) further observed that the AO for the first time on 27.12.12 only, put a query to the assessee as to why the revised return filed on 30.09.03 should not be treated as an afterthought. The said query of the AO was replied by the assessee vide letter dated 28.12.07. The assessee had immediately replied the letter. Since the assessment was getting time barred, the AO completed the assessment on 31.12.07 i.e. within the short span of three days after getting reply. The Ld. CIT(A) therefore agreed with the submissions of the assessee that no sufficient opportunity was granted by the AO to produce the voluminous evidences regarding the date of conversion etc. to the assessee. After considering the comments of the AO and submissions of the assessee and in view of the evidences brought before him, the Ld. CIT(A) allowed the ITA No.4022/M/2009 & CO No.23/M/2010 5 M/s. Asian Marble Industries application of the assessee for additional evidences and took into consideration the said evidences while disposing off the appeal of the assessee.
5. On merits, the Ld. CIT(A) noticed from the evidence on the file that the accounting entries as appearing in the books of accounts of the assessee showed that the conversion of the capital asset into stock in trade occurred on 01.04.01 itself. He also observed that the AO had not doubted the genuineness of these entries nor he had disputed the books of accounts produced before him during the course of assessment proceedings. He observed from the evidences that the assessee had not only passed book entries but had actually worked on the land with an intent to make profit by way of development of the land. The assessee had received the BMC approval for demarking the plot on 06.04.2000, engagement of architect was made on 23.08.2000, approval of the chief engineer for developing the land and subsequent other formalities showed that the land was converted into stock in trade on 01.04.01 for which the assessee had paid the taxes as per provisions of section 45(2) of the Act while making the redevelopment agreement on 18.06.04. The Ld. CIT(A) also held that the revised return filed by the assessee could not be held as invalid. In view of the amendment to section 143(3) w.e.f. 01.06.99, the order of intimation under section 143(1) is not to be treated as assessment. Hence, the revised return was a valid return. He also observed that the valuation report made on 22.09.03 was for the purpose of determining the cost of acquisition of land as on 01.04.81 and this report could not be related to determine the date of conversion. Hence, after taking into consideration the voluminous evidence on the file the Ld. CIT(A) held that the capital asset was converted into stock in trade on 01.04.01 and not on 30.09.03 as was treated by the AO. The Ld. CIT(A) thereafter held that the provisions of section 50C were not applicable to the case in hand as the assessee had not sold the land and the matter never ITA No.4022/M/2009 & CO No.23/M/2010 6 M/s. Asian Marble Industries went to Stamp Duty Authorities. He held that the conversion of capital asset to stock in trade is deemed as a transfer in view of section 2(47)(iv) of the Act. Since the value of the land was never assessed by the Stamp Duty Authorities, hence the provisions of section 50C were not applicable and the AO had not got jurisdiction to suo-moto apply the provisions of section 50C on deemed transfer. Since no stamp duty was ever imposed by the Stamp Duty Authorities, hence the provisions of section 50C were not applicable. The Ld. CIT(A) further observed that the Hon'ble High Court had passed decree on 27.07.2000 on the basis of agreement of sale made in the year 1973, hence the assessee could be held to be owner of the property since 01.04.81. He therefore held that the assessee was entitled to opt for the fair market value of the property as on 01.04.81. He therefore held that the date of conversion from capital asset to stock in trade be taken as 01.04.01 and further that the provisions of section 50C were not applicable and further that the assessee is entitled to adopt the fair market value as on 01.04.81 as cost of acquisition for the purpose of computing the capital gains. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us.
6. A perusal of the above reproduced grounds of appeal reveals that the Revenue has agitated firstly the admission of additional evidence and thereby finding of the Ld. CIT(A) that the capital asset was converted into stock in trade on 01.04.01 and further the finding of the Ld. CIT(A) that the provisions of section 50C were not applicable to the case in hand. After perusal of the detailed order of the Ld. CIT(A), we find that the Ld. CIT(A) had forwarded the documents/evidences sought to be produced by the assessee during appellate proceedings to the Ld. AO and called for his comments. The Ld. CIT(A) has given a categorical finding that the AO neither had put a specific query regarding the date of conversion and even had not given proper ITA No.4022/M/2009 & CO No.23/M/2010 7 M/s. Asian Marble Industries opportunity to the assessee to produce the necessary evidences on the file. Even the AO had been given opportunity to rebut the evidences but the AO could not point out any defects in the evidences/accounts of the assessee. Hence, we do not find any infirmity in the order of the Ld. CIT(A) so far the question as to admission of additional evidence is concerned. The Ld. CIT(A), after detailed discussion and appreciation of evidence on file, has held that the date of conversion of capital asset into stock in trade was 01.04.2001.
6.1 The land in question was not actually transferred and hence no value was adopted by the Stamp Duty Authorities as the matter never went to Stamp Duty Authorities. Under such circumstances, in our view, the provisions of section 50C were not applicable. The Ld. CIT(A) has given a well reasoned finding regarding the non application of section 50C of the Act to the assessee's case. The Ld. CIT(A) has also discussed that the Hon'ble High Court has decreed the plaint holding the assessee to be owner on the basis of agreement of the year 1973. We do not find any infirmity in the order of the Ld. CIT(A) on the above issues and the same is accordingly upheld.
CO No.23/M/2010:
7. So far the cross objections of the assessee are concerned, the assessee has agitated that it had wrongly offered tax on capital gains on the conversion of capital asset to stock in trade in the year under consideration by wrongly applying the provisions of section 45(2) of the Act pleading that the stock in trade was not transferred during the year under consideration and as such no tax was payable for the year under consideration. The Ld. CIT(A), after going through the evidences, has held that the assessee had entered into a development agreement on 28.06.04 with Shree Balaji Developers and thereby had conveyed the land for the purpose of development to the developer. He has held that such conveyance of land very much falls within the meaning of ITA No.4022/M/2009 & CO No.23/M/2010 8 M/s. Asian Marble Industries transfer under section 2(47) of the Act and the capital gains arising as per the provisions of section 45(2) were taxable in the instant year. Without further going into this controversy, we find that the assessee itself had offered the tax on capital gains under section 45(2) treating the conveyance of the land to the developer vide development agreement dated 28.06.04. Now, the assessee, in our view, is estoped from his own act and conduct to dispute the date of transfer. We, accordingly, do not find any merit in the cross objections and the same are accordingly dismissed.
8. In the result, the appeal of the Revenue as well as the cross objections of the assessee are hereby dismissed.
Order pronounced in the open court on 31.12.2014.
Sd/- Sd/-
(D. Karunakara Rao) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 31.12.2014.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.