Income Tax Appellate Tribunal - Ahmedabad
Abhishek J. Shah,, Ahmedabad vs Assessee on 21 October, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH AHMEDABAD
BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER,
AND SHRI S. S. GODARA, JUDICIAL MEMBER.
ITA Nos. 1789 to 1793/Ahd/2016
(Assessment Years:2006-07, 2008-09, 2009-10, 2007-08 & 2010-11)
Shri Abhishek J Shah
45, Abhisaaj, Sardar Patel Nagar,
Behind Telephone Exchange,
Off. C.G. Road, Navrangpura,
Ahmedabad - 380006 Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle-1(2), Ahmedabad Respondent
PAN: AFUPS6499E
&
ITA Nos. 1794 & 1795/Ahd/2016
(Assessment Years: 2010-11 & 2011-12)
Shri Jayendra N Shah
45, Abhisaaj, Sardar Patel Nagar,
Behind Telephone Exchange,
Off. C.G. Road, Navrangpura,
Ahmedabad - 380006 Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle-1(2), Ahmedabad Respondent
PAN: ADIPS2509M
ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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&
ITA Nos. 1796 & 1797/Ahd/2016
(Assessment Years: 2009-10 & 2011-12)
Smt. Ashaben J Shah
45, Abhisaaj, Sardar Patel Nagar,
Behind Telephone Exchange,
Off. C.G. Road, Navrangpura,
Ahmedabad - 380006 Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle-1(2), Ahmedabad Respondent
PAN: AFUPS6498F
&
ITA No. 1798/Ahd/2016
(Assessment Year: 2011-12)
Smt. Sajani J Shah
45, Abhisaaj, Sardar Patel Nagar,
Behind Telephone Exchange,
Off. C.G. Road, Navrangpura,
Ahmedabad - 380006 Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle-1(2), Ahmedabad Respondent
PAN: AEOPS0915G
आवेदक क ओर से / By Assessee : Shri M. G. Patel & Arti N. Shah,
A.R.
ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
-3-
राज
व क ओर से / By Revenue : Shri Pradip Kumar Majumdar,
Sr. D.R.
सनु वाई क तार ख/Date of Hearing : 17.10.2016
घोषणा क तार ख/Date of
Pronouncement : 21.10.2016
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This batch of 10 appeals pertains to four different assessees. First assessee Shri Abhishek J. Shah has instituted his five appeals ITA Nos.1789 to 1793/Ahd/2003 for A.Ys. 2006-07 to 2010-11 against separate orders of the CIT(A)-11, Ahmedabad ; all dated 26.04.2016 except the first assessment year containing order dated 27.04.2016, passed in case nos. CIT(A)- 11/093/CC-1(2)/2014-15, CIT(A)-11/094/CC-1(2)/2014-15, CIT(A)- 11/044/CC-1(2)/2014-15, CIT(A)-11/043/CC-1(2)/2014-15 & CIT(A)- 11/058/CC-1(2)/2014-15; respectively.
2. Second assessee is Shri Jayendra J. Shah. He has filed two appeals ITA Nos. 1794 & 1795/Ahd/2016 against the very CIT(A)'s orders; both dated 18.04.2016 in case nos. CIT(A)-11/045/CC-1(2)/2014-15 & CIT(A)- 11/046/CC-1(2)/2014-15 for A.Ys. 2010-11 & 2011-12; respectively.
3. Third assessee Smt. Ashaben J. Shah. She has preferred ITA Nos.1796 & 1797/Ahd/2016 for A.Ys. 2009-10 & 2011-12 against very CIT(A)'s orders dated 12.04.2016 & 11.04.2016 passed in case nos. CIT(A)- 11/041/CC-1(2)/2014-15 & CIT(A)-11/042/CC-1(2)/2014-15 ; respectively. ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -4-
4. Fourth assessee is Smt. Sajni J. Shah. Her sole appeal ITA No.1798/Ahd/2016 for A.Y.2011-12 preferred against the very CIT(A)'s order dated 11.04.2016 in case no. CIT(A)-11/040/CC-1(2)/2014-15.
Relevant proceedings in all cases are u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961; in short 'the Act'.
5. Both parties at the outset point out that first assessee's Shri Abhishek J. Shah three appeals ITA Nos. 1789, 1792 & 1790/Ahd/2016 for A.Ys. 2006- 07 to 2008-09; respectively challenge validity of Section 153A proceedings on the ground that neither there was any incriminating material found in the course of impugned search conducted in case of M/s. Maruti group of companies on 27.04.2011 nor any assessment had been pending on the date of search since the same already stood framed on 07.05.2007, 30.10.2007 & 10.08.2009; respectively in furtherance to corresponding returns being filed on 30.10.2006, 30.10.2007 & 17.10.2008. Relevant assessments processed/framed u/s.143(1) stand placed on record in the respective paper books. We notice that this assessee further assails correctness of interest disallowance/addition of Rs.1,13,533/-, Rs.2,10,641/- & Rs.77,883/- in these three appeals.
6. Learned representatives further point out that third assessee's appeal ITA No.1796/Ahd/2016 filed by Smt. Ashaben J. Shah also raised identical legal ground challenging validity of Section 153A proceedings on the very two counts stated hereinabove by pleading that she had filed return on 29.07.2009 which stood processed/assessed u/s.143(1) of the Act on 31.12.2009 (copy of the order available on record at page 27 of the paper book). This assessee's latter substantive ground challenges correctness of addition of Rs.5,61,162/- made by both the lower authorities after estimating value of the property as per stamp valuation u/s.50C of the Act. ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -5-
7. We have heard rival submissions on the legal issue of validity of Section 153A proceedings. There is no dispute that these two assessees have filed their respective returns in the corresponding assessment years in question and the same stood processed/assessed u/s.143(1) of the Act as per dates given in preceding paragraphs. We afforded sufficient opportunity to the Revenue for placing on record any incriminating material found in the course of search pertaining to these two assessees within the meaning of Section 153A of the Act. No such material is quoted in orders of the lower authorities nor any such evidence has been placed on record before us. Coupled with this, learned CIT(A) also does not specifically reject these assessees' contentions raised in the lower appellate proceedings that assessment proceedings in their respective cases could not have been held to be pending so as to invoke Section 153A proceedings. We find in these backdrop that both the lower authorities have erred in initiating the impugned proceedings u/s.153A of the Act in violation of second proviso thereto. A coordinate bench of this tribunal in INTAS Pharmaceuticals Ltd. vs. DCIT IT(SS)A Nos. 807 to 809/Ahd/2010 along with a group of cases has quashed similar assessments framed u/s.153 A of the Act as under:
"3. The assessee refers to its identical grounds raised in its first three appeals and in C.O. No.4/Ahd/2011. It argues that assessments in all four assessments years stood completed on 27.12.2002, 02.01.2006, 29.12.2006 and 29.03.2006 i.e. much prior to the search in question conducted on 23.10.2007. The only exception is that the first assessment year involves a summary assessment u/s.143(1) of the Act. Rest all are 'regular' assessments. The latter three assessments were agitated before the CIT(A). And upto the tribunal on various issues on merits. The assessee submits that no incriminating documents, papers, books of accounts or any money or other valuable assets was found in the course of search. Nor is any such material stated in these impugned assessments framed u/s. 153A of the Act. It contends that the Assessing Officer framed the impugned assessments without highlighting any incriminating material by merely reviewing merits of the disallowances earlier made and the same is not valid as per law. Case law of (2015) 58 taxmann.com 78 (Bombay) CIT vs. Continental Warehousing Corporation (Nhava Sheva ) Ltd. affirming Special Bench decision of the tribunal in All India Cargo Logistic vs. DCIT 137 ITD 287 is quoted in support.
Thereafter, submits is that its assessment had already finalized before search ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -6- which could not have been treated as abated alike pending assessments for initiating Section 153A proceeding in question. The assessee's last plea is that for the purpose of adjudicating validity of proceedings u/s. 153A of the Act, assessments framed u/s. 143(1) and 143(3) are to be treated at par in case time limit of issuing scrutiny notices u/s.143(2) lapses in the former case. It quotes case law of Delhi Bench of the tribunal in ITA No. 2637/Del/2010 ACIT vs. PACL India Ltd. decided on 28th June, 2013 and prays for quashing of all these four assessments.
4. The Revenue strongly opposes the assessee's above stated arguments and submits that an assessing authority can initiate Section 153A proceedings by reopening all assessments pertaining to the preceding six assessment years after search and assess income afresh as per law. It quotes case law of (2014) 49 taxmann.com 98 (Karnataka) Canara Housing Development Co. vs. DCIT, [2014] 52 taxmann.com 172 (Allahabad) CIT vs. Raj Kumar Arora, [2014] 49 taxmann.com 465 (Delhi) Filatex India Ltd. vs. CIT, [2014] 24 taxmann.com 98 (Delhi) CIT vs. Anil Kumar Bhatia, [2015] 53 taxmann.com 391(Bangalore - Trib.) Rupesh Anand vs. ACIT, [2010] 130 TTJ 700 (Chennai) Harvey Heart Hospitals Ltd. vs. ACIT and prays for upholding the CIT(A)'s common order under challenge on this legal plea in question.
5. We granted the assessee an opportunity to rebut the Revenue's arguments. It submits that the hon'ble Bombay high court (supra) has already distinguished the case laws of Anil Kumar Bhatia and Canara Housing Development Co. (supra) and holds that the same do not deal with the issue in question. Other case laws cited at the Revenue's behest are stated to be in relation to scope of a Section 153A assessment as against that of the very assumption of jurisdiction. The order of Chennai bench of the tribunal is stated to be against the Special bench decision in All India Cargo Logistics (supra) case.
We have heard both the parties and gone through the case file as well as judicial precedents quoted hereinabove.
6. The assessee company manufactures and trades in pharmaceutical products. It filed its returns on 31.10.2002, 29.11.2003, 30.10.2004 and 30.10.2005 admitting incomes of Rs.5,05,14,253/-, Rs.6,52,14,632/- , Rs.13,00,77,099/- and 8,62,02,182/- relating to the impugned four assessment years from 2002-03 to 2005-06; respectively. The Assessing Officer processed the first return on 27.12.2002 resulting in refund of Rs.10,43,020/-. He framed 'regular' assessments on 02.01.2006, 29.12.2006 and 29.03.2007 making some additions; most common being those of staff welfare expenses and deductions u/s. 80G/80HHC and interest etc. The assessee filed separate appeals for these three latter assessment years before the CIT(A). The same were partly allowed on 25.01.2007 and 19.10.2007. This latter date relates to the CIT(A)'s orders in A.Y. 2004-05 and 05-06. Thereafter, the parties came to the tribunal.
7. It transpires from the case file that in the mean time, the department conducted the impugned search in case of M/s. "INTAS" group of companies. This culminated in issuance of Section 153A notices dated 06.05.2008. The assessee filed separate returns on 18.11.2008. The Assessing Officer framed ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -7- consequential search assessments on 30.12.2009 inter alia making the above stated disallowances/additions. The assessee preferred separate appeal. It would raise a legal plea that once no incriminating material or any undisclosed assets had been discovered during the search, the impugned Section 153A jurisdiction could not have been assumed. It submitted that the Assessing Officer nowhere mentioned all or any such material in his assessment orders. And also that Section 153A proceedings are not in the nature of a de novo assessment. It pleaded that none of the above stated assessments were pending as on the date of search so as to abate u/s.153A 2nd proviso thereto. The CIT(A) has rejected this said legal plea as under:
"4. The first ground is regarding validity of the assessment order passed under section 153A of the Income-tax Act. It was argued that no incriminating documents, books of accounts, money or other valuables relating to unaccounted transactions is found in the course of search. Therefore, the assessing officer was not justified in initiating proceedings under section 153 A of the Income-tax Act. For this proposition, the appellant has relied upon the various decisions. This issue has been dealt by me in the ease of Rohan Dyes and Intermediates and Intermediates and in the case of Tex excellence Pvt. Ltd. as under:
"According to the AR, the AO was not justified in passing order u/s. 153A in view of the decisions of Meghmani Organics Pvt. Ltd. of IT AT 129 TTJ 255 (Ahd); Shri Anil K. Bhatia vs. ACIT C.C.-17, New Delhi and other decisions of ITAT, particularly when no incriminating "documents were found and seized from the premises of the appellant. In other words, the contention of the AR is that the various tribunals have held that
(i) if no incriminating documents/assets are found during the course of search then the earlier orders passed u/s. 143(1) or 143(3) become final and cannot be reagitated in the 153A proceedings
(ii) only those assessments or re-assessments will abate which were pending as on the date of search.
5.1 None of these decisions have considered the applicability of different laws at the time of original assessment and assessment order u/s. 153A. If the law is different at different points of time then the AO is duty bound to apply such law. In this case also the law at the time of passing original assessment was different than the law prevailing at the time of search as the provisions of section 80HHC and section 28(iiia), 28(iiib) etc. were amended with retrospective effect. The ratio of the above mentioned decisions of ITAT would not be applicable in such cases of retrospective amendment.
5.2. Further in all the decisions relied upon by the appellant i.e. decision of ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -8-
a) Anil P. Khimani vs. DCIT, 14 (Mum)
b) Helios Food Additiva P. Ltd. vs. DCIT CC 40(Mumbai)
c)) Meghmani Organics Ltd (Ahd)
d) Anilkumar Bhatia vs. ACIT C.C.I7, Delhi.
It has been held that the initiation of 153A/153Cproceedings are invalid in respect of those years for which no incriminating documents is found d search. That means 153A proceedings can be initiated only in those yea) which incriminating documents is seized. In other words, the assessment u/s. 153A/153C can be made only in respect of seized material. Only in respect of pending assessments other issues can be considered besides the seized documents. In other words, there needs to be two assessments order for completed assessments - one regular and other based on seized documents. With due respect, this interpretation is not correct as the basic scheme of search assessments u/s. 153A/153C was introduced w.e.f. 2003 to overcome the two assessments theory i.e. block assessments u/s. 158BC/158BD based on seized material and regular assessment u/s. 143(3). Section 153A presupposes making of the assessment of 6years irrespective of whether any incriminating document is seized or not.
5.3 Further, if the decisions are considered as good law then no remedial action is possible in respect of completed assessments u/s. 143(3) or returns accepted u/s, 143(1) by resorting to the provisions of section 154 or 147 or l53A of the Act. For example, if in a case the completed assessment years are 2003-04 and 2004-05 and regular assessment for A.Y. 2005-06 is pending as on the date of search and the assessment for A.Y. 2002-03 was re-opened and pending for assessment as on the date of search, then as per these decisions, the AO can pass order u/s. 153A only in respect of A.Y. 2002-03 and A.Y. 2005-06 whereas in respect of A.Y. 2003-04 and 2005-06 on the same issue he cannot pass the assessment order. This interpretation is definitely not in accordance with law. This issue has been decided by me in the case of Texcellence Overseas by holding as under :
"6. I have considered the submission of the appellant. It was admitted by the AR of the appellant that in original Return of Income for A. Y. 2002-03 to A. Y. 2004-05 the appellant has made claim of deduction u/s. 80HHC and u/s. 80IA. The return for A.Y. 2002-03 was accepted u/s. 143(1). In A.Y. 2003-04 and 2004-05 the assessment order was passed u/s. 143(3). In these two years, the claim of deduction u/s. 80HHC on DEPB was disallowed by the AO in the original assessment. Further, after the return for A.Y. 2002-03 was accepted u/s. 143(1), there has been an amendment in the year 2005 wherein certain conditions were stipulated in respect of deduction u/s. 80HHC on DEPB. This amendment was made retrospective w.e.f.
ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.) -9- 1/4/1998. This amendment was not there when the return for A.Y. 2002-03 was accepted u/s.143(1). In A.Y. 2003-04 and 2004-05 the AO has already made a disallowance of deduction u/s.80HHC on DEPB licence in 143(3) order.
The cases relied upon by the appellant of different ITATs are distinguishable on the facts that in neither of such cases the AO has made the addition of the same amount in original assessment nor there was any retrospective amendment. In fact, in the case of Shri Anil K. Bhatia & Others, the ITAT Delhi at para 9.2 of the order while referring to the decision of ITAT, Ahmedabad in the case of Meghmani Organics Ltd. has mentioned as under:
"10. The decisions relied on by the learned DR are distinguishable on facts. In the said cases the Tribunal have given a finding that "it is not the complaint of the assessee that any income, which is already subjected to assessment under s. 143(3) or under s. 148 of the Act completed prior to the search in respect of six assessment years referred to in s. 153A, has also been included in the assessment framed under s. 153A of the Act." However, in the present case the Assessing Officer has recomputed deduction u/s. 80HHC and 80IA of the Act by reducing the claim thereof. The Assessing Officer was not competent to do so in assessment u/s. 153A of the Act. We, therefore, cancel the assessment framed u/s. 153A of the Act for all the years,"
Therefore, the ratio of the decisions of the ITAT will not be applicable in this case. The assessment order passed u/s. 153A is therefore upheld. The first ground of appeal of the appellant is dismissed. "
4.1 As the facts of the present case are similar to the facts of the case of Rohan Dyes and Intermediates Ltd, that is, in the original assessment order is also the deduction under section 80 HHC has been disallowed along with other expenses as mentioned in the ground number 4 unlike in the case of Meghmani industries Ltd, the AO was fully justified in initiating proceedings under section 153 A of the Income-tax Act. In short, this ground of the appellant is dismissed."
This leaves the assessee aggrieved.
8. We have already narrated arguments advanced of both the parties hereinabove. The question that arises for our consideration is as to whether the Assessing Officer has rightly assumed Section 153A jurisdiction or not in these four assessment years. We deem it appropriate to reproduce the statutory provision itself reading as under:
"153A.[(1)] Notwithstanding anything contained in section 139, section 147, person where a search is initiated under section 132 or books of ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall -
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment yhears referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search in conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:
[Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.] [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.-- For the removal of doubts, it is hereby declared that,-- ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."
A perusal of above stated statutory provision reveals that pending assessments on the date of search in respect of preceding six assessment years abate as per the 2nd provision. However, the same does not include those assessments which have already attained finality or wherein , assessment orders have already been passed. We reiterate that assessment orders in all these four assessment years stood passed on 27.12.2002, 02.01.2006, 29.12.2006 and 29.03.2007 i.e. much before the date of search falling on 23.10.2007. The assessee's case has through out been that there is no incriminating material; whatsoever as prescribed u/s.153A so as to give rise to the proceedings in question. In these facts, we notice that the Special bench of the tribunal in All India Cargo Logistics (supra) answered the very reference and held in para 58 that only pending assessments abate in case of a search being conducted and an Assessing Officer retains the original jurisdiction as well as the one conferred on him u/s.153A for which assessments shall be made for each of the six assessment years separately. The Special Bench thereafter comes to non abated i.e. assessments which are not pending as per above said 2nd provision and holds that the assessment therein u/s.153A will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or property discovered in the course of search. This is not the Revenue's case; or for that no such material is placed on record that the search in question unearthed any such undisclosed material in assessee's case. We are inferring in these facts that there does not exist any such material not produced in the course of regular assessment but found in search. Parties inform us very fairly that hon'ble jurisdictional high court has not adjudicated this question. In these facts, we observe that the Special bench's decision squarely covers the assessee's case. The hon'ble Bombay high court (supra) affirms the said decision by holding that the same does not suffer from any infirmity. Their lordships also specifically advert with the decisions of hon'ble Delhi and Karnataka high court (supra) and observe that the same do not deal with an issue wherein Section 153A proceedings are initiated without any incriminating material discovered in search of the corresponding regular assessments stood finalized. Their lordships' discussion about the hon'ble Karnataka high court is that the same pertains to an instance of exercise of Section 263 jurisdiction vis-à-vis 153A proceedings. We take into account all these circumstances and hold that initiation of impugned Section 153A proceedings in this set of four assessment years in absence of any incriminating material found in search conducted after finalization of regular assessments is not sustainable. We quote Delhi tribunal's decision (supra) and hold that assessments framed u/s.143(1) and 143(3) of the Act have to be treated at par in such cases.
This leaves us with the other judgments quoted at the Revenue's behest. The case law of Raj Kumar Arora (supra) deals with scope of a Section 153A ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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assessment and not that of assumption of jurisdiction which stands on a different footing. The same is the case in other decision of Filatex India Ltd. (supra). The case law of Bangalore and Chennai benches of the Tribunal holding that an Assessing Officer gets jurisdiction for passing orders u/s.153A after search even in absence of any incriminating material in case of assessments already finalized; go against the special bench decision hereinabove. The same are no longer valid precedents. The Revenue's arguments relying on the above stated decision are accordingly rejected. We accept the assessee's arguments challenging validity of initiation of Section 153A proceedings in all these four assessment years. The impugned assessments are accordingly quashed."
The Revenue fails to point out any distinction on facts or law involved therein vis-à-vis the issue before us. We draw support from learned coordinate bench decision and accept assessees' legal challenge made to validity of Section 153A proceedings in these four appeals ITA Nos. 1789, 1790, 1792 & 1796/Ahd/2016. The same are accordingly quashed. Assessees' pleadings on merits therein challenging various additions (supra) are accordingly rendered infructuous. These four appeals are allowed.
8. We now come to Shri Abhishek J. Shah's appeal ITA No.1791/Ahd/2016 raising two substantive grounds inter alia pleading that the CIT(A) has erred in confirming adoption of valuation on the basis of stamp duty at Rs.13,35,510/- instead of sale consideration of Rs.11,09,200/- as per sub registrar certificate thereby confirming addition of Rs.8,85,510/- and interest disallowance of Rs.21,686/- ; respectively.
9. We first proceed to deal with the former issue of valuation of assessee's property sold to the extent of ½ share at survey no.458, Jethlaj, Kalol on 31.03.2009. The assessee declared cost of acquisition and improvement as Rs.2.25lacs. He stated sale consideration of Rs.4.5lacs. The assessee further disclosed stamp duty of Rs.1,30,880/-. The stamp authorities valued this property at Rs.13,35,510/-. The assessee would submit capital gains for assessment to the tune of Rs.2.25 lacs. The Assessing Officer in these facts observed that the actual sale consideration of the property sold ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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was much higher. He sought to invoke Section 50C on the basis of above assessed value. The assessee's reply came on 11.03.2013 stating actual sale price of Rs.4.5lacs to be just and proper in view of various depreciating factors. The Assessing Officer rejected the same on the ground that provisions of Section 50C applied in this case. He inferred that the assessee had also not challenged stamp valuation in any proceedings which formed an independent valuation criteria. All this made the Assessing Officer to adopt stamp value resulting in the impugned short term capital gain of Rs.8,85,510/- in question. The CIT(A) confirms Assessing Officer's action.
10. Learned counsel for the assessee submits that both the lower authorities have erred in adopting stamp price of assessee's capital assets sold as fair market value without even making Section 50C(2) reference despite the fact that the appellant has throughout been claiming the actual sale price of Rs.4.5 lacs to be just and proper in view of various depreciating factor. Ld. Departmental Representative strongly supports CIT(A)'s order. We notice from the paper book that hon'ble Calcutta high court in Sunil Kumar Agrawal vs. CIT (2015) 372 ITR 83 (Cal.) deals with the very statutory provision i.e. 50C(2) of the Act to hold that when an assessee supports the sale price to be fair market value of the assets sold, an Assessing Officer has to make reference to the DVO for ascertaining the appropriate value. The Revenue fails to point out any exception to the set law. We accordingly set aside this issue to the file of Assessing Officer for making necessary reference to the DVO and proceed further as per law after affording adequate opportunity of hearing to the assessee. This first substantive ground succeeds for statistical purposes.
11. The assessee's latter substantive ground challenges interest disallowance of Rs.21,686/-. He had declared interest income under the head ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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'income from other sources' of Rs.1,24,914/- and claimed expenditure of Rs.1,46,900/-. The Assessing Officer sought to know nexus between the two figures of income and expenditure. The assessee appears to have failed in proving the same. This made the Assessing Officer to invoke Section 57(iii). He observed that assessee's income was mostly from bank deposits and other advances whereas he has himself charged interest on higher rates than that paid. He further quoted assessee's failure in proving that he had incurred the impugned expenditure fully and exclusively for the purpose of business. All this resulted in impugned interest disallowance of Rs.21,686/-. The CIT(A) confirms the same.
12. We have heard both the parties. Relevant findings perused. Learned counsel representing assessee is unable to prove the very nexus between the impugned disallowance figure and the above stated interest income in the instant proceedings as well. We thus find no reason to interfere in the above disallowance of interest of Rs.21,686/-. The same is accordingly confirmed. This latter substantive ground fails. ITA No.1791/Ahd/2016 is partly allowed for statistical purposes.
13. This very assessee's next appeal ITA No.1792/Ahd/2016 also raised two substantive grounds inter alia pleading that the CIT(A) has erred in law and facts in confirming value of property as per Section 50C though he had no title over it and only the possession thereof was transferred. This is followed by the latter substantive ground challenging interest disallowance of Rs.17,572/-.
14. Both parties are ad idem that the assessee in the instant appeal had transferred the impugned capital asset namely Devpath Office no. 309 to 310. He purchased the same on 08.10.1997 followed by it sale on 08.10.2009. The assessee took cost of acquisition and improvement as Rs.1,76,824/- ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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followed by its sale price of Rs.4,80,318/-, stamp duty of Rs.35,200/- and assessed value of Rs.7,11,111/-. He claimed lack of title and only transfer of possession to form few amongst many depreciating factors. Both the lower authorities have gone by the above stamp valuation resulting in the impugned addition computed as per stamp price. There is further no quarrel that neither the Assessing Officer nor CIT(A) have made Section 50C(2) reference to the DVO despite assessee's vehement contention supporting the actual sale price to be the fair market value. We follow our discussion in preceding paragraphs in view of Calcutta high court decision and issue the same direction to the Assessing Officer to proceed afresh for making Section 50C(2) reference to the DVO as per law. This first substantive ground as stated allowed for statistical purpose.
15. Coming to latter issue of interest disallowance, both parties are unanimous that same is covered by our findings on the very issue in preceding assessment year decided hereinabove against the assessee. We appreciate this fair stand and dismiss this latter substantive ground. This appeal ITA No.1793/Ahd/2016 is partly allowed for statistical purposes.
16. We now come to second assessee Jayendra N. Shah's appeal ITA No.1794/Ahd/2016 for A.Y. 2010-11 raising sole substantive ground in challenging the CIT(A)'s order estimating value of property as per stamp value u/s.50C of the Act resulting in addition of Rs.3,64,629/- despite the fact that the appellant had pointed out various depreciating factors including lack of title over the property and only transfer of possession being involved in the sale instance in question. Both parties point out before us that this capita asset is also Devpath Office no. 311 to 313 acquired on 08.10.1997 and sold on 08.10.2009 i.e. the very office/property as involved in ITA No.1793/Ahd/2016 in case of first assessee Shri Abhishek J. Shah wherein ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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we have already remitted matter back to the Assessing Officer for making reference to the DVO u/s.50C(2) of the Act to ascertain the fair market value. We deem it appropriate in this factual backdrop that both the lower authorities have erred in adopting stamp price of Rs.11,23,232/- instead of the actual sale price of Rs.7,58,703/- without making the statutory reference as per hon'ble Calcutta high court's decision (supra). We thus remit this issue as well to the Assessing Officer by adopting the very reasoning. This sole substantive ground as well as main case appeal ITA No.1794/Ahd/2016 are allowed for statistical purposes.
17. Shri Jayendra N. Shah's next appeal ITA No.1795/Ahd/2015 for A.Y. 2011-12. He raises three substantive grounds inter alia pleading that the CIT(A) has erred in law and on facts of the case in not accepting net capital gain shown of Rs.44,64,578/- thereby adopting the same as Rs.1,09,51,564/-, in not giving indexation benefit w.e.f. 01.04.1981 despite the fact that the asset in question was purchased well before the said date for valid consideration and also in confirming non acceptance of value of land at Rs.1500 per sq.mtr. as on 01.04.1981 despite supported by a Government approved valuer's report; respectively. Learned counsel appearing for the assessee does not press for the above second substantive ground. He further clarifies that above third substantive ground is supplemental to assessee's first substantive ground. The Revenue is fair enough in not disputing the same. We accordingly proceed to adequate assessee's first substantive ground.
18. We come to relevant facts of the case. This assessee through his eponymous HUF and three other co-purchasers acquired impugned capital assets i.e. plot nos. 50 & 51 at Village Sola, Ahmedabad on 29.08.1975 for Rs.48,884/-. His share was 1/4th therein to the tune of Rs.12,221/-. The ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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assessee and other three members of the HUF thereafter executed a partition deed to the extent of 1/4th share each out of the 1/4th share hereinabove on 24.09.2010. They sold these assets for Rs.29,11,89,494/- on 01.11.2010. This assessee's share therein came to be Rs.7,27,97,356/-. He adopted value of his share of land as on 01.04.1981 to be Rs.9,85,875/-, arrived at indexed cost of Rs.65,82,971/- resulting in long term capital gains of Rs. 1,14,64,578/-. The assessee thereafter claimed to have invested a sum of Rs.70lacs for the purpose of claiming Section 54EC deduction. He would offer net long term capital gains of Rs.44,64,578/-. The Assessing Officer took note of the above HUFs wealth tax returns for A.Ys. 1988-89 and 2010- 11 stating fair market value of the assets as Rs.54000/-. He thus sought to adopt fair market value thereof as on 01.04.1981 to be Rs.13,500/-.
19. The assessee's reply filed on 14.03.2014 inter alia pleaded to have purchased the land in question in 1975 i.e. well before 01.04.1981 for the purpose of cost indexation. He further highlighted the fact that a Government approved valuer has adopted value of the asset in question as Rs.1500/- per sq. mtr. forming basis of his long term capital gain computation. The Assessing Officer heavily relied on the above two wealth tax returns. He invoked estoppel principle against the assessee. The assessing authority further observe that the assessee's definite share in the assets sold came to be devolved upon him only after HUF partition on 24.09.2010 (supra) and therefore, cost indexation would start from this crucial date. He further observed that the valuation officer u/s.55A had determined value as on 01.04.1981 of the assets in question to be much lower than assessee's valuation. The Assessing Officer accordingly re-computed assessee's long term capital gain of Rs.1,09,51,564/- in question. The CIT(A) affirms the same.
ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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20. We have heard both the parties reiterating their respective stands. There is no issue that both the lower authorities have proceeded to reject assessee's long term capital gains computation mainly on the basis of the above state HUF's wealth tax returns filed for A.Ys. 1988-89 and 2010-11 (supra). We find that hon'ble Karnatka high court in (2014) 267 CTR (Kar) 172 Late Smt. Krishna Bajaj vs. ACIT reject this parameter of valuation to hold that there is adequate mechanism provided in the Act u/s.2(22B) for determining fair market value of capital asset. Their lordships further conclude that wealth tax valuations are not even admissible in the income tax law. Ld. Departmental Representative fails to rebut correctness thereof. We further notice from pages 31 to 40 of the paper book as pointed out at assessee's behest that both the lower authorities have accepted similar valuation declared by one of the co-owner namely Abhishek J. Shah (HUF). We hold in view of all these facts that the very foundation available with the lower authorities for proceedings against the assessee is no more sustainable. We thus accept this first substantive ground. ITA No.1795/Ahd/2016 is partly allowed.
21. We now come to ITA No.1797/Ahd/2016 filed by assessee Smt. Ashaben J. Shah for A.Y. 2011-12. This appellant raises three substantive grounds in assailing correctness of the lower appellate order confirming assessment findings in rejecting her capital gains declared of Rs.42,14,578/- thereby enhancing the same to the tune of Rs.1,07,01,564/-, not giving indexation benefit from 01.04.1981 depsite the fact that the previous owner had acquired the property before the said date and further in not agreeing with the value of the land at Rs,1500/- per sq.mter. as on 01.04.1981 in spite of the fact that the same was supported by a Government approved valuer's report.
ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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22. Both parties inform us at the outset that all three substantive grounds raised in the instant appeal are identical being very much connected the corresponding grounds raised in ITA No.1795/Ahd/2016 decided hereinabove in case of Jayendra N. Shah since involving the very capital asset. We refer to our discussion hereinabove and accept assessee's first substantive ground. Ld. counsel representing assessee points out that he is not pressing for second substantive ground and third substantive ground is very much connected to the first substantive ground already accepted. We appreciate this fair stand. This appeal ITA No.1797/Ahd/2016 partly succeeds.
23. This leaves us with the last assessee Smt. Sajani J. Shah's appeal ITA No.1798/Ahd/2016 for A.Y.2011-12. She raises three substantive grounds in challenging the CIT(A)'s order affirming assessment findings computing long term capital gains of Rs.1,09,51,564/- instead of Rs.44,64,578/-, not granting cost indexation benefit from 01.04.1981 despite the fact that the impugned capital assets had been acquired well before the said date and further in not accepting value of the land sold at Rs.1500/- per sq. mtr. In spite a Government approved valuer's report; respectively.
24. Both the learned representatives invite our attention to ITA No.1795/Ahd/2016 in case of Jayendra J. Shah decided hereinabove adjudicating identical grounds qua the very capital assets in assessee's favour so far as first issue of long term capital gains being computed as per wealth tax returns (supra) are concerned. We refer to our discussion in preceding paragraphs and accept the first substantive ground in assessee's favour. She does not press for second substantive ground. She further states that her third substantive ground only supplements the first substantive ground already accepted. The Revenue does not contest the same. We thus dismiss second ITA Nos.1789 to 1798/Ahd/2016 (Shri Abhishek J Shah & 3 Ors.)
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substantive ground as not pressed and third one is held to have been rendered academic in view of our findings qua first substantive ground. This appeal ITA No.1798/Ahd/2016 is partly allowed.
25. We rely on our discussion hereinabove to allow ITA Nos. 1789, 1792, 1790 and 1796/Ahd/2016. ITA Nos1795, 1797 & 1798 /Ahd/2016 are partly allowed. ITA No.1794/Ahd/2016 is allowed for statistical purposes. ITA Nos. 1791 & 1793/Ahd/2016 are partly allowed for statistical purposes.
[Pronounced in the open Court on this the 21st day of October, 2016.] Sd/- Sd/-
(N. K. BILLAIYA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 21/10/2016
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज
व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आय!
ु त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।