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JUSTICE DONE ON CAREFUL PERUSAL OF APPEAL DOCUMENT EVEN IN ABSENCE APPELLANT- KAPIL SHROFF- cases before tribunal and Courts can be decided based on written submissions and documents.

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JUSTICE DONE ON CAREFUL PERUSAL OF APPEAL DOCUMENT EVEN IN ABSENCE APPELLANT- KAPIL SHROFF- cases before tribunal and Courts can be decided based on written submissions and documents.
By: CA†DEV KUMAR KOTHARI
May 6, 2020
All Articles by: CA†DEV KUMAR KOTHARI       View Profile
  • Contents

Case discussed:

2019 (11) TMI 925 - ITAT KOLKATA  -SHRI KAPIL SHROFF VERSUS INCOME TAX OFFICER WARD-5 (1) , KOLKATA.

Brief facts:

In this case The Ld. AO denied exemption and made addition as LTCG arising on sale of rural agricultural land. Though in the Return of Income the gain was described as agricultural income however, during assessment and in appeal proceedings it was clarified to be capital receipt being  exempted LTCG on transfer of rural agricultural land. The ld. AO also invoked S.50C and made further addition for excess of valuation made by stamp authority over actual consideration.

Another issue was treating a financial accommodation in nature of commercial transaction, received from a company by assesse as a  working director and a shareholder having substantial interest in the said  company. The assesse had provided securities and personal guarantees to banks for securing loans in favour of said company and as per MOU, company undertook to provide short-term mutual accommodation to assesse as a director of company.

The Ld. AO  did not accept claims of assesse and made additions which were confirmed by the ld. CIT(A).

Therefore, assesse had preferred appeal before the Tribunal. Assessee had filed a paper book, and sought adjournment as some more documents were required for presentation of the case. Case was adjourned few times. At the last occasion, due to communication barriers, somehow assesse was not aware of date of final hearing fixed and accordingly on that day no one was present in the Court Room and case was called twice, and then heard ex parte the appellant.

Careful consideration of the paper book by Tribunal:

On reading of the order of Tribunal we find that honorable JM has very carefully considered the lengthy and voluminous paper book running into 216 pages, and discussed relevant pages of paper book and information provided therein for ascertaining facts. Besides Ld. JM has also considered some other judgments relevant to issues, though the same was not placed in paper book.  After ascertaining facts and applying law, honorable Tribunal has deleted additions made by Ld. AO and confirmed by Ld. CIT(A).

Justice done:

This shows that honorable tribunal has done justice expeditiously. Instead of adjourning hearing, finding relevant material on record, Tribunal heard the respondent (AO)  through the D.R. and considered paper book filed by assesse and decided the appeal and allowed relief admissible in view of facts and legal position.

We find that in many cases appellate authorities and Tribunal also  dismiss appeal if appellant is not present. In some cases, even paper books filed by appellant assesse were not considered and appeal was dismissed merely because appellant was not present at the time of hearing. This is contrary to law including ITAT Rules. As per law Tribunal is required to decide the appeal based on records. Dismissal of appeal for reason of absence of appellant is not as per law and result into injustice. In such cases many times, on application of appellant, and on showing sufficient cause for   absence at the time of hearing, order dismissing the appeal may be recalled and then appeal is heard again. This results into delayed justice. For example, readers can refer to some decisions of ITAT  in case of Quadra Medical Services P. Ltd. reported on this website. In those cases appeals of assesse were dismissed ignoring the paper book filed for the reason that appellant was not present hence it was assumed that appellant is into interested in prosecuting the appeal. However, on  Miscellaneous Applications  those orders of Tribunal on ITA  were recalled, appeal was heard afresh and then the Ld. CIT(A) was directed to hear appeal on merits after allowing reasonable opportunity to appellant. By this way justice was delayed.

Learning from the case of Kapil Shroff (supra):

From this case we find that cases before tribunal and Courts can be decided based on written submissions and documents.

Written submissions and documents are important because we find considerable time gap between date of hearing and writing and pronouncement of judgments. Furthermore, it is experienced that many of verbal arguments are not considered because at the time of hearing all points are not noted by Tribunal and Courts. Therefore, it is advisable to file either detailed written submissions or at least brief notes and page reference of paper book. 

Rules also need to be made specific , that appellant / respondent be required  to file written submission and / or paper book for consideration of Tribunal / Courts and in that case personal appearance may not be required. In such cases, appeals can be decided based on written submissions and paper book. However, in view of ever changing legal position, the parties should also be permitted to file further submissions or updates on the issues in the case.

The appellant and respondents can be given an option to rely on written submissions and waive requirement of personal representations.

This will expedite delivery of justice. Furthermore, it will also increase scope of  working from home by parties, their representatives, authorities and judges.

Thus e-proceedings can be extended to Tribunals and Courts. In those cases, if required hearing can be conducted through tele-conference or video-conference etc.

Paper book- index in case discussed above:

As per draft prepared by author- some page numbers were filled later on):

In this case the compilation of paper book was guided the author and assesse had finalized with page numbers filled in and filed paper book before Tribunal and forwarded copy of the same to the D.R. The index to paper book shows documents placed in it. Some important documents were highlighted by underlining or bold print etc. The same is as follows:

 ITA No. 743/ Kol. / 2017 fixed for hearing on 07.03.2019 Before Hon’ble “C” Bench

           Kapil Shroff                               Income Tax Officer, Ward 5(1), Kolkata                                                                                

              (Appellant)                                                  (Respondent)          

Index to Paper Book

Indicating lower authorities before whom documents were filed as required U/R. 18(3) of ITAT Rules :-                                                    

Serial No.

         Description with relevant information and remarks

Page No.

Lower authority before whom filed **

      1

Written submission before CIT(A) filed on 05/01/2017

1-2

CIT(A)-2, Kolkata

      2

Written submission before the Assessing Officer filed on 23/02/2015

3-4

I.T.O. Ward 5(1), Kolkata

3

Written submission before the Assessing Officer filed on 26/02/2015

5

I.T.O. Ward 5(1), Kolkata

4

Written submission explaining reason for treatment of Sale Proceeds of Agricultural Land as exempt income referring the following case laws;

(i) CIT vs. Siddharth J Desai - 1981 (9) TMI 48 - GUJARAT HIGH COURT;

(ii) ASSISTANT COMMISSIONER OF INCOME-TAX. VERSUS RAMJIBHAI P. CHAUDHRY. 2008 (7) TMI 483 - ITAT AHMEDABAD;

(iii) CIT vs. P. J. Thomas 1992 (8) TMI 5 - MADRAS HIGH COURT;

(iv) Rajendra Pershad Tejprakash vs. ITO Ward 9(2), Hyderabad in 2013 (8) TMI 1119 - ITAT HYDERABAD

6

I.T.O. Ward 5(1), Kolkata

 

Supporting document filed before lower authorities:

(A) About Capital Gains Exemption for Agricultural Land / Reduction:

 

 

5

Copy of the Deeds of Purchase No. O-5559 for 219.25 Decimals purchased in F.Y.2005-06 for ₹ 4178149/-. 

7-22

I.T.O. Ward 5(1), Kolkata

6

Copy of the Deeds of Purchase No. I-2158 for 100.00 Decimals purchased in F.Y.2005-06 for ₹ 897260/-.   

23-34

NEW

7

Copy of the Deeds of Sale No. I-3288 sold in F.Y.2011-12 for ₹ 7500000/-.    SAV 12650550/-

35-47

I.T.O. Ward 5(1), Kolkata

8

Copy of the Deeds of Sale No. I-1575 sold in F.Y.2011-12 for ₹ 1983439/-  SAV 1983439/-

 

48-59

I.T.O. Ward 5(1), Kolkata

9

Copy of the Deeds of Sale No. I-1641 sold in F.Y.2011-12 for ₹ 2040493/-  SAV  2040496/-.

 

60-71

I.T.O. Ward 5(1), Kolkata

10

Copy of the Deeds of Sale No. I-1607 sold in F.Y.2011-12 for ₹ 1983439/-,    SAV 1984439/-.

72-84

I.T.O. Ward 5(1), Kolkata

11

Copy of Certificate dated 12/03/2012 from Mahespur Gram Panchayat on Nature of Land (Shali land means agricultural land)

85

I.T.O. Ward 5(1), Kolkata

12

Present status of land being agricultural land as on 260219 vide -copies of Five Khatian & Plot Information from website of Directorate of Land Records and Surveys, Govt. of West Bengal. LIVE DATA AS ON 26.02.2019- the land is still agricultural land   website address: htttp://banglabhumi.gov.in/LRWEB

86-90

I.T.O. Ward 5(1), Kolkata

13

Copy of (reminder) letter dated 02/01/2015 from the ld. Assessing Officer to The A.D.S.R., Uluberia requesting to confirm category of the land.  

91

Asst. records

14

Copy of reply from the A.D.S.R., Uluberia received on 06/01/2015 by the ld. Assessing Officer.Pl see page 92 in which it is clearly mentioned that for valuation purpose lands were considered for industrial purposes by stamp authority. Therefore such valuation is not real market value of land.

92-95

Asst. records

15

Unreported judgments Filed / Referred before the Assessing Officer and CIT(A) – 2, Kolkata with regard to Agricultural Land matter:

(i) Rajendra Pershad Tejprakash vs. ITO Ward 9(2), Hyderabad in 2013 (8) TMI 1119 - ITAT HYDERABAD.

96-

 

 

 

 

 

I.T.O. Ward 5(1), Kolkata /    CIT(A)-2, Kolkata

16

(i) Computation of Long Term capital gains after applying cost inflation index based on actual consideration– Alternative contention without prejudice. Valuation by stamp authority is based on wrong assumption of industrial use whereas land was agricultural land at the time of sale and is still agricultural land as per land records.

(ii) Copy of  Computation of Income of the Appellant in which capital gains on sale of agricultural land was considered exempt.

 

NEW 

 

ITO Ward 5(1), Kolkata

17

Copy of Statement of Income and Balance sheet of the Appellant Sri Kapil Shroff as at 31/03/2012

 

 

 

About issue of Deemed Dividend :

 About maintaining current account and also  Providing Collateral Security and Personal Guarantee by Shri Kapil Shroff as Director to Bank of Space Matrix P. Ltd., hence non-applicability of  Deemed Dividend u/s. 2(22)(e) :

 

 

18

Copy of current account for F.Y. 2011-12 and 2012-13 of Kapil Shroff in books of Space Matrix P. Ltd showing entries for salary, TDS, payments, loan given and refund received.

This is in nature of current mutual accommodation account.

 

 

 

NEW

19

(i) Assignment of insurance policies and acceptance of assignment dated 05/03/2010 of personal guarantee of the Appellant in his capacity of director of Space Matrix (P) Limited from IDBI Bank;

(ii) Letter of Sanction dated 05/01/2010 of Financial Assistance from IDBI Bank;

(iii) Letter of Renewal of Credit Facilities dated 16/04/2011 from Union Bank;

 

 

 

 

I.T.O. Ward 5(1), Kolkata

 

 

MOU for guarantee, security and  mutual accommodation etc.

 

 

20

 Unreported Judgment Filed / Referred before the Assessing Officer / CIT(A) – 2, Kolkata:

(i) ACIT Comp. Cir. V(3) vs. Smt. G. Sreevidya in ITA No.1270 (MDS) of 2011 [2012 (8) TMI 484 - ITAT, CHENNAI]

 

 

 

I.T.O. Ward 5(1), Kolkata

 

About No Accumulated Surplus:

 

 

21

Statement showing deficit as on 27/03/2012 and 31/03/2012 after making necessary adjustments. This shows that there was no Accumulated Surplus IN CASE OF SPACE MATRIX P. LTD

 

 

NEW

22

Copy of Audited Balance Sheet, Profit & Loss  Account and Schedules  of Space Matrix (P) Ltd. as at 31/03/2012;

 

 

I.T.O. Ward 5(1), Kolkata

23

Copy of Unaudited Balance sheet and Profit & Loss Account and schedules of Space Matrix (P) Ltd. as at 27/03/2012

 

 

NEW

24

Circular No. 19/2017 dated 12/06/2017 about Commercial Loan, Deposit and Advances not to be considered as deemed dividend following judgments accepted by revenue. This is also applicable in case of the  Appellant.

 

 

NEW- Circular

25

Judgment in case of Pradip Kumar Malhotra vs. CIT; 2011 (8) TMI 16 / Other Citation: [2011] 338 ITR 538 (Cal)

195-201

NEW judgment.

26

Judgment dated 16/01/2019 of ITAT Kolkata in case of DCIT, CIRCLE-8 (2) , KOLKATA VERSUS SHRI SANJAY BUDHIA AND (VICE OF VERSA) [2019 (1) TMI 1765 - ITAT KOLKATA] in ITA No. 1451/Kol/2015. In this case S. 2.22.e was held not applicable in respect of sum advanced by company (Patton International Ltd. - PIL) to director who had extended personal guarantee to banker of company (PIL). This ruling is applicable in case of Appellant.

 

NEW judgment.

27

Excerpts/ Head Notes/ Relevant Portion of some recent judgments on s.2.22.e, holding not deemed dividend in the case of commercial contract etc.

 

NEW

Copy of paper book is being filed before the learned Departmental Representative.

As per my understanding any new evidence was not filed before CIT (A) and / is not enclosed in paper book before Tribunal.

New documents are further analysis of documents considered by lower authorities and new circular and judgments.

** Assessment records were referred before the Ld. CIT (A).

   _______________

SHRI KAPIL SHROFF VERSUS INCOME TAX OFFICER WARD-5 (1) , KOLKATA.

 

By: CA†DEV KUMAR KOTHARI - May 6, 2020

 

 

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