TMI Blog2015 (6) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2014 - SHRI MUKUL Kr. SHRAWAT, SHRI T.R. MEENA, JJ For The Respondent : Shri K. C. Mathews, Sr.D.R. For The Appellant : Shri Rasesh Shah, A.R. ORDER PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER This is an appeal filed by the assessee arising from the order of learned CIT(A)-I, Surat, dated 25.06.2013. The appellant has raised the following grounds: 1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals)has erred in confirming the action of assessing officer in reopening assessment by issuing notice u/s 148 of I. T. Act, 1961. 2. On she facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in taxing the sum of ₹ 1,46,00,000/- received on transfer of rights in the plot as income from other sources without allowing any cost of acquisition as against amount of ₹ 86,79,812/- shown by the assessee under the head Long Term Capital Gain after claiming indexed cost of acquisition of ₹ 59,20,188/-. 3. On the facts and in circumstances of the case as well as law on the subject, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the actual asset that has been given on lease or rent in the case of assessee company. On perusal of the statement of computation of income, it is observed that the total .income as per the normal provisions of the Act was arrived at (-) ₹ 2079792 which included Long Term Capital Gain treated separately as under: Consideration on sale of land ₹ 14600000 Less: Indexed cost of acquisition ₹ 5920188 LT.C.G Rs.8679812 Less : deduction u/s. 54 EC (REC bonds) Rs.8700000 Taxable LTCG Nil 3. The possession of the land wax handed over to the transferee on 31.12.04. Further, on perusal of the records, it is observed that the land sold was GIDC' land held on lease which was allowed to be transferred lo the transferee by GIDC Office Order dated 16,6.2005, Thus, assessee had tenancy rights vested in it which was transferred. 4. In the instant case, asses-see had acquired the land on lease directly from GIDC i.e. the owner of the asset (land). Since, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reopening of the assessment by mentioning that the land in question was taken on lease by the assessee from GIDC for 99 years. GIDC has allowed to transfer the land vide an order dated 16.06.2005. It was contested that the provisions of Section 55(2)(a) did not apply on the facts of the case for the reason that the assessee had made payment to GIDC for acquisition of lease hold rights and therefore the said payment was in the nature of cost of acquisition . Challenging the validity of the reopening, it was argued that earlier as assessment was made u/s. 143(3) of IT Act and therefore after the lapse of four years, in the absence of any concealment of facts on the part of the assessee, the proceedings u/s. 148 were wrongly initiated. It was submitted by the-assessee that the payment made to GIDC in different years totaling ₹ 43,27,224/- were informed while placing on record the working of the Long Term Capital Gain as under: Assessment Year (Amount in Rs.) 1992-93 6,96,611 1993-94 2,16,872 1994-95 4,12,218 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the above facts, M/s. Devrekha Engineering Ltd/Pvt does not exist on GIDC' '.v record. Thus, the said plot stands in the name of M/s. RD Dyg Ptg Mills P. Ltd. Copies allotment letter to M/s. D.S. Synthetics and Transfer in favour of M/s. R.D. Dyg Ptg Mills P. Ltd. are enclosed herewith. 4.2 On the basis of the above information, learned CIT(A) was of the view that the appellant was never a lessee and certain material facts were not disclosed before the AO; hence, he has upheld the reopening of assessment as well as issued a notice of enhancement, Learned CIT(A) has mentioned that those facts were not in the possession of the AO who had passed the original assessment order on 31.12.2007. An another fact has also been noted by learned CIT(A) in paragraph 8.6 that the matter was earlier referred to DVO vide a letter dated 20' of November, 2007, in respect of sale of GIDC plot no.365 at the time of original assessment proceedings. That reference was made for the reason that in view of the then AO the sale consideration had appeared towards lower side. However, the assessment was completed without report as the matter was getting time barred. Learned CIT(A) has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in balance sheet with value of ₹ 43,27,224/- the assessing officer inferred 'cost of acquisition' as Nil. Since in the computation of LTCG. the property was referred to as GIDC land, (open plot No.365) it was inferred that it is tenanted properly with Nil cost of acquisition u/s. 55(2)(a). Since, the appellant had maintained that it has taken the property directly from GIDC on lease and no cost of acquisition of equivalent amount was reflected in annual accounts, assessing officer was left with no opinion but to believe that cost of acquisition was Nil and lease rentals/charges were either not paid or were claimed as 'revenue expenditure '. 8.16 This reason to believe was formed on the basis of information available in return and provided by the appellant. Therefore, it cannot be held that the assessing officer did not have material before him/her to for 'reason to believe'. Even now, when all the facts have been ascertained, the cost of acquisition is Nil as no property, license or lease rights have been acquired in the name of appellant - company. Therefore, the fact that cost in the hands of appellant is Nil is still correct. Only the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice u/s.147/148 after lapse of four years was bad in law. Learned AR has placed reliance on CIT Vs. Kelvinator of India Ltd., 320 ITR 561 (SC), and CIT Vs. Foramer France, 264 ITR 566 (SC), H.K. Buildcon Ltd. Vs. ITO, 339 ITR 535 (Gujarat). He has also argued that the learned CIT(A) has wrongly changed the head of income which is not permissible as held in the case of Gujarat Flurochemical, 319 ITR 289 (Guj.). 6. From the side of the Revenue, learned Sr.D.R., Mr. K.C. Mathews appeared. He has placed strong reliance on the factual as well as legal findings of learned CIT(A). He has contested that when the original return was filed the true and correct facts were not discernible from the return filed. Rather before learned CIT(A) it was asked to produce the original lease deed but that was not furnished. The assessee was never holding rights in the said property. The admitted factual position was that the land in question was allotted by GIDC to a firm M/s. D.S. Synthetics. Only that firm was granted permission to transfer the land to M/s. R.D. Dyeing and Printing Mills vide a letter of GIDC, dated 16th of June, 2005. The assessee has stated wrong facts at the time of orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently in the course of the proceedings under this section, or recomputed the loss or the depreciation proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be. for the assessment year concerned (hereinafter in this section and in sections 148 lo 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section(3) of section 143 or this section has been made for the relevant assessment year no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response lo a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 7.1 This proviso prescribes that where an assessment u/s. 143(3) is made then no action shall be taken under this Section, i.e. 147, after the expiry of four years from the end of the relevant assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The assessee had computed the indexed cost of acquisition at ₹ 59,20,l88/- which was objected by the AO on the ground that the assessee had not acquired land on lease directly from GIDC, owner of the land. The lease rights, i.e., tenancy rights were not purchased from a previous owner (tenant), according to AO, as per the provisions of Section 55(2)(a) of IT Act, the AO has thus fixed the cost of acquisition at Rs. Nil. We are not convinced with the interpretation assigned by the AO in respect of provision of Section 55(2)(a). For the purpose of computation of Section 48 and Section 49 the cost of acquisition in relation to a capital asset means the amount of the purchase price. The capital asset as defined in this Section are goodwill of a business, trade mark, brand name associated with a business, right to manufacture or produce or process any article or thing, right to carry on business, tenancy rights, loom hours, stage carriage permits. In the case of acquisition of such assets by the assessee by purchase from previous owner the amount of purchase price is to be considered as cost of acquisition . Prima facie, while issuing the notice u/s. 148, the obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) went wrong in upholding the action of the AO; hence, his findings is hereby reversed. 7.4 We have examined a decision cited by learned CIT-D.R. pronounced in the case of CIT Vs. Kiranbhai Jamunadas Seth, 39 taxmann.com 116 (Guj). In the said case, a return was processed u/s. 143(1) of IT Act, admittedly it was a not scrutiny assessment. On that ground, the Hon'ble Court has opined that the original assessment being made without any scrutiny, therefore, the Revenue could have re-opened the assessment beyond four years. Further, a decision of Sun Pharmaceuticals Industries Ltd., 29 taxmann.com 262 (Guj) has been cited, wherein the admitted fact was that there was non disclosure of primary facts. The return of income was filed u/s. 1 15 JA. The assessment was made u/s. 143(3) determining higher taxable income. Subsequently, it was noted that there was double claim of deduction in respect R D expenditure. There was an excess deduction u/s.80IA as well. The Court has therefore held that there was no true and full disclosure as also the primary facts were not disclosed; hence, the reopening of the assessment was justified. Contrary to this, in the present case, on examinat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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