TMI Blog2018 (7) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, unsustainable. Since the facts of the instant case demonstrate beyond doubt that the price of ₹ 27,50,00,000/- received by the assessee was in respect of plant & machinery as well as Capital WIP, the Ld. Pr. CIT’s finding that such price was paid only in respect of plant & machinery was based on no material and, therefore, the finding recorded by the Ld. Pr. CIT on incorrect understanding of the facts is unsustainable in law. Similarly, the Ld. Pr. CIT’s finding in show cause notice as well as impugned order that the loss on sale of fixed assets was determined by AO without conducting any enquiry is also even factually wrong. Therefore, Ld. Pr. CIT’s order which is based on incorrect understanding of the material facts as discussed above is unsustainable and needs to be set aside on this score alone. Notice u/s. 142(1) of the Act dated 03.11.2014, the AO had raised specific question requiring the assessee to furnish details of machinery and capital WIP sold and the reasons for low sale consideration. From the material placed before him and only after examination of the document furnished the AO passed the assessment on 16.01.2015. On these facts, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For The The Respondent : Shri G. Hangshing, CIT ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee against the revision order of the Ld. Pr. CIT-2, Kolkata dated 14.03.2017 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. In this appeal the appellant has assailed the decision of invoking jurisdiction by the Pr. CIT u/s 263 of the Act and thereafter directing the AO to disallow the short term capital loss of ₹ 9,65,11,775/- and instead assess short term capital gain of ₹ 27,41,15,579/-. In the course of hearing the assessee also filed additional grounds objecting to the validity of the impugned order on the ground that the notice was issued in the name of M/s. Bhatapara Paper Mills Ltd, a non-existing entity. 3. Briefly stated the facts of the case are that for the AY 2012-13, return u/s 139 was filed declaring loss of ₹ 10,33,31,991/- inter alia including short term capital loss of ₹ 9,65,11,775/-. During the relevant year the assessee had sold its scrap paper manufacturing plant including Capital Work-in-Progress ( Capital WIP ) at Kakinara, West Bengal for considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected AO to compute the short term capital gain of ₹ 27,41,15,579/-. Being aggrieved by this order, the appellant is in appeal before us. 6. At the time of hearing the Ld. AR of the appellant assailed the Ld. Pr. CIT s order on various grounds. He submitted that while passing the impugned order, the Ld. Pr. CIT completely brushed aside the contentions put forth before him by the assessee and also ignored the material facts which were available on the records and thereby came to incorrect conclusion that the assessee did not incur any loss but rather made gain of ₹ 27,41,15,579/- . The Ld. AR first drew our attention to the annual financial statements for the year ended 31st March 2013. It was pointed out that sale consideration of ₹ 27,50,00,000/- received from M/s Ajmera Steels Pvt. Ltd. (M/s. ASPL) was adjusted both from the block of Plant Machinery and Capital WIP in the Fixed Asset Schedule at Note No. 7 of the accounts and that the net loss of ₹ 12,65,47,945/- after adjusting the book WDV of Plant Machinery (P M) and Capital WIP of ₹ 3,04,49,393/- ₹ 37,06,27,354/- respectively was debited under the head Other Expenses Note No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cost of the Fixed Assets Capital Work-in-Progress was ₹ 4,12,55,831/- ₹ 37,06,27,354/- respectively. The book value of the Fixed Assets, after deducting Depreciation as on 01.04.2011 was ₹ 3,04,49,393/-. For income-tax purposes, since the Fixed Assets were eligible for accelerated rate of depreciation by way of a statutory allowance, its WDV as on 01.04.2011 was ₹ 5,38,761/- and the Capital WIP stood at its original cost of ₹ 37,06,27,354/-. Referring to these figures the Ld. AR submitted that no prudent person would pay a sum of ₹ 27,50,00,000/- for plant machinery whose original cost at the time of acquisition was ₹ 4,12,55,831/- which after depreciation, use, wear tear etc. was reflected at a useful value of ₹ 3,04,49,393/- in the books of accounts and its written down value for tax purposes stood eroded to ₹ 5,38,761/- . These facts further supported the appellant s case that the Capital WIP indeed formed part of the aggregate Fixed Assets sold to M/s. Ajmera Steels Pvt Ltd. The Ld. AR thus submitted that the factual premise on which the Ld. Pr. CIT proceeded with the SCN and passed the revisionary order was erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65,11,775/- was made by the AO by adopting a possible legal view and the view so adopted was not an impossible view and hence even in such a scenario, the Ld. Pr. CIT s exercise of jurisdiction u/s 263 and the consequent order was bad in law, liable to be set aside. 13. On the other hand, the Ld. DR appearing on behalf of the Revenue submitted that the AO in this case had given only a standard questionnaire which is normally given as a preliminary exercise for collecting information from the assessee during the course of assessment proceedings. The replies and information given by the assessee to this questionnaire was simply collected by the AO and placed on record without making any further enquiry or application of mind. Hence, it cannot be said that the AO had examined the issue. The Ld. DR reiterated the Ld. Pr. CIT s contention and finding and he vehemently relied on the order passed by the Ld. Pr. CIT passed u/s. 263 of the Act and did not want us to interfere with the impugned order. 14. After having heard the rival submissions and having gone through the records, first of all let us take the guidance of judicial precedents which illuminates the invocation of revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . Taking note of the aforesaid dictum of law laid down by the Hon ble Apex Court, let us examine whether the Assessing Officer passed order u/s 143(3) dated 16.02.2015 is erroneous as well as prejudicial to the interest of the revenue. We find in the first place that the impugned proceedings u/s. 263 of the Act were initiated by the ld. Pr. CIT on the following two assumption of facts namely, (a) that the sale price of ₹ 27,50,00,000/- realized by the assessee only pertained to sale of scrap plant and machinery and (b) before conclusion of the assessment, no enquiry whatsoever in respect of loss assessed under the head Capital Gain was conducted by the AO. On perusal of the material on record and the Ld. AR s submission, we however, find that both these assumptions were factually unfounded and contrary to the material facts gathered by the AO in the course of assessment. As taken note earlier under the provision of sec. 263 of the Act, the Ld. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the impugned order u/s. 263 of the Act while recording his final conclusion that the entire sale consideration was required to be netted off only against the WDV of the plant and machinery, the Ld. Pr. CIT proceeded on the footing that entire such sale consideration was paid by the purchaser only for purchase of plant and machinery. In recording such a finding there was an implied assertion that either the appellant/assessee did not sell the Capital WIP to M/s. ASPL or alternatively the capital WIP was sold or transferred to the successful bidder without allocating any consideration. We, however, find that both these assumption and inferences on which the Ld. Pr. CIT proceeded were factually without any basis and therefore, has no legs to stand and so wrong. In this context, we say that no prudent person properly instructed in law or facts would have drawn such inference which makes the impugned order perverse. We note that both in the course of original assessment by AO and in the course of 263 proceeding before Ld. Pr. CIT the appellant/assessee had furnished copy of the agreement for sale dated 16.09.2011 between the appellant/assessee and M/s ASPL. The subject clause of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act dated 03.11.2014 had required the appellant/assessee to provide the particulars of sale of fixed assets and capital WIP and the details of the loss incurred there from. In response to such a questionnaire, the appellant/assessee had furnished the relevant particulars vide its letter dated 07.11.2014. The assessee had submitted documents supporting the sale of plant machinery and capital WIP and also furnished the reasons for the loss incurred. In the explanation, the appellant/assessee had also provided the working of the loss computed under the head Short Term Capital Gain . After examination of the assessee s explanation and documents furnished, the order u/s. 143(3) of the Act was passed by the AO on 16.01.2015 in which the loss reported by the assessee under the head Capital Gains was assessed and this carry forward was also permitted by the AO u/s. 74 of the Act. The foregoing facts, therefore, put beyond any doubt that prior to completion of assessment, the AO had indeed conducted examination of the relevant facts culminating in assessment of short term capital loss incurred on sale of plant machinery and Capital WIP. We, therefore, find that both the premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the foregoing thereof, let us discuss a case law. We find that the assessee s case is supported by the decision of the Hon ble jurisdictional High Court in the case of CIT Vs. J. L. Morrison Pvt. Ltd. 366 ITR 593. In this case also the assessment was framed u/s. 143(3) of the Act, which was held by the Ld. CIT to be erroneous and prejudicial to the interest of the Revenue. In the show cause notice, the CIT had set out five specific heads of expenses in respect of which the CIT considered the AO s order was erroneous because deduction allowed by the AO without calling for requisite information, without adequate enquiry. On appeal, the coordinate bench of this Tribunal, however, found that in the notice issued u/s. 142(1) of the Act the AO had required the assessee to furnish the details of various expenses, inter alia, including the items specified in the show cause notice. The Tribunal, therefore, held that in respect of the issue set out in the show cause notice the AO had indeed conducted enquiry and by requiring the assessee to furnish the details and after examining the relevant details and explanation the AO had taken one of the plausible view and, therefore, the Ld. CIT was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an inclusive definition which means it is not exhaustive and, therefore, it includes within this ambit Property of every kind . Section 2(14) brings within its sweep, assets and properties of every kind be it moveable or immovable, real or corporeal, personal or institutionalized. Section 2(14) of the Act only carves out four exceptions viz., (i) agricultural land in India, (ii) personal effects, (iii) stock in trade and (iv) gold bonds. Save except these specific exemptions granted by the Legislature every other asset owned and or held by the assessee falls within the scope of capital asset and it is wholly immaterial, whether or not such asset is used for assessee s business purposes or not. It is undoubted fact that in the assessee s financial statements the asset in the form of Capital WIP was appearing and undoubtedly the appellant had incurred cost of ₹ 37,06,27,354/- for acquiring the same. Undoubtedly, WIP for the appellant had incurred cost of ₹ 37,06,27,354/- was a valuable property and hence, in the nature of a capital asset . Our view also find support from the decision of this Tribunal in the case of JCIT Vs. Graphite India Ltd. 89 ITD 415 wherein cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the assessee that conceptually there is no cost of acquisition which could be attributable to the various rights/licences, etc. acquired by the assessee. It is equally difficult to accept that the date of acquisition of various rights/privileges/licences/tangible or intangible assets is not known. The dates and cost components constituting various rights, privileges proposed to be transferred to GKW vide agreement dated 30.8.1995, are definitely known and all these costs have been properly recorded in the books of accounts and capitalised as capital work-in-progress. The question of determination of cost of acquisition is primarily a question of fact which has been determined by the A.O. in the course of assessment under Section 143(3). After verifying the details of various expenses incurred by the assessee, he has reached to the conclusion that the cost of acquisition as recorded in the books of accounts for various rights, privileges, etc. was ₹ 44.88 lakhs. In our considered view, therefore, and on the facts of the case, since the assessee had sold the plant and machinery along with the capital WIP, the cost incurred on capital WIP was required to be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of almost seven times of the actual cost at which the machinery was originally acquired but at the relevant time of sale have been used, old, depreciated and worn out scrap item. Indeed therefore, we concur with the assertion of assessee that the capital WIP was sold along with the plant and machinery which were lying idle in the appellant/assessee s factory whose business was under suspension. Accordingly, both the appellant/assessee as well as the AO was right on the facts and in law in taking into account the cost of acquisition of capital WIP for computing the overall loss accruing on sale of fixed assets including capital WIP. For the reasons set out in the foregoing we are therefore, unable to agree with the Ld. Pr. CIT s finding in the impugned order that no evidence was furnished before him satisfying the claim raised by the assessee is not tenable and, therefore, we find that the jurisdiction invoked for exercising his revision jurisdiction is not tenable in the eyes of law and, therefore, we have no hesitation in quashing the impugned order passed by the Ld. Pr. CIT. Therefore, the ground of appeal of assessee is allowed. 21. In the result, appeal of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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