Case Law Details

Case Name : Laxmi Ice & Cold Storage Vs Income Tax Officer (ITAT Lucknow)
Appeal Number : ITA No. 260/LKW/2016
Date of Judgement/Order : 21/02/2018
Related Assessment Year : 2009-10
Courts : All ITAT (5374) ITAT Lucknow (79)

Laxmi Ice & Cold Storage Vs ITO (ITAT Lucknow)

Section 50C speaks about transfer of land or building or both and the adoption of deemed valuation being valuation of stamp purposes as the full value of consideration. It does not speak of plant and this contention was put on record vide reply of the assessee dated 23/11/2015, which is placed at pages 120 to 122 of the paper book as well as by reply dated 23/12/2015, which is placed at pages 123 to 125 of the paper book whereby it has been put on record that it was a depreciable business assets duly disclosed in the return of income. The cold storage was sold as a whole and constituted plant under section 43(3) of the Act. The term “plant” has been interpreted as including cold storage building also and this line of reasoning is established by the Hon’ble jurisdictional High Court in the case of CIT vs. Kanodia Cold Storage (supra). We are, therefore, of the considered view that provisions of section 50C of the Act is not applicable to the cold storage building so to substitute actual sale consideration by deemed sale consideration and the order of the Assessing Officer passed under section 147/143(3) of the Act cannot be a subject matter of section 263.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal is preferred by the assessee against the order passed under section 263 of the Act by the Principal Commissioner of Income-tax-1, Kanpur dated 29/1/2016.

2. The assessee has challenged the assumption of jurisdiction by the Principal Commissioner of Income-tax-1, Kanpur under section 263 of the Act.

3. The facts in this case as appearing on record are that the return of income was filed by the assessee-firm on 24/9/2009 declaring Nil income. Subsequently assessment was completed on 13/2/2015 under section 147/143(3) of the Act on the returned income. An information was gathered from AIR that the assessee has sold assets worth Rs.3,41,23,200/- as per stamp valuation and registration deed was executed on 8/6/2009. However, assessee has not reflected this amount in its return of income, therefore, the Assessing Officer issued notice under section 147 of the Act for assessment year 2009-10 to the assessee on account of escapement of income after duly recording the reasons. During the assessment proceedings, assessee claimed that it had already shown income from sale of assets in the return of income and has treated the surplus of sale of fixed assets as business profit and has credited the profit of Rs.55,85,092/- in the profit & loss account of the firm in assessment year 2009-10. The Assessing Officer has accepted this claim of the assessee and completed the assessment on the returned income. The Principal Commissioner of Income-tax-1, Kanpur observed that as per sale deed executed on 8/6/2009, the assets sold by the assessee included land and building and machinery. The sale value of these assets, for stamp duty purposes, is as under:-

Sale of land Rs.91,84,000/-
Sale consideration Rs.2,35,91,700/-
Sale of Machinery Rs.11,65,000/-
Sale of trees Rs.1,82,000/-
Total Rs.3,41,23,200/-

4. But the assessee has credited only Rs.1.50 crores as the sale value of assets in its accounts and not Rs.3,41,23,200/- which is the full value of consideration as per stamp valuation authorities. Thus, the income of Rs.1,91,23,200/- not credited by the assessee in its books of account has escaped taxation and therefore the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Accordingly notice under section 263 of the Act was issued to the assessee. The main contention in the notice was that the Assessing Officer has not given any reason as to why provisions of section 50C of the Act are not attracted in this case when for the purpose of stamp, the value of the property was shown at Rs.3,41,23,200/- whereas the assessee has shown only Rs.1.50 crores for the purpose of taxation. Thereafter the Pr. CIT elaborates on the facts that how the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and accordingly he set aside the order of the Assessing Officer and revised the order passed by the Assessing Officer under section 263 of the Act.

5. Being aggrieved with the order of the Pr. CIT, the assessee preferred an appeal before us. At the time of hearing, the ld. A.R. of the assessee invited our attention to page 3 of the paper book which is the notice sent to the assessee by the Assessing Officer under section 142(1) of the Act regarding escapement of assessment and page 4 of the paper book which is the detailed reply filed by the assessee. The ld. A.R. of the assessee vehemently argued that the assessment order was passed after taking into consideration and conducting relevant enquiries as is evident in the notice issued under section 142(1) of the Act on 24/12/2013 wherein the Assessing Officer had asked for various details relevant to bring out whether the income chargeable to tax has escaped assessment. The ld. A.R. of the assessee submitted that the observation of the Pr. CIT that the order passed by the Assessing Officer was without conducting any enquiry is not at all correct and there is also no application of provisions of section 50C in this case. The ld. A.R. of the assessee placing reliance upon the judgment of the Hon’ble jurisdictional High Court in the case of CIT vs. Kanodia Cold Storage, 100 ITR 155, submitted that the order passed by the Pr. CIT under section 263 of the Act deserves to be set aside.

6. The ld. D.R., on the other hand, placed reliance upon the order of the Pr. CIT passed under section 263 of the Act.

7. We have perused the case records, analysed the facts and circumstances and we find that so far as section 263 is concerned, it contemplates action if twin conditions are fulfilled that order must not only be erroneous but also it should be prejudicial to the interest of the Revenue. In the instant case, the Pr. CIT has stated the order passed by the Assessing Officer is prejudicial and erroneous but the basic question whether provisions of section 50C are applicable to the depreciable assets or not is very much a debatable issue. This view finds support from the following judicial pronouncements:-

1. CIT vs. Max India Ltd., [2007] 295 ITR 282 (SC)

2. Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC)

3. CIT vs. Hari Singh & Associates [2014] 102 DTR (Raj( 306.

4. CIT vs. Hewlett-Packard India Sales P. Ltd. [2016] 382 ITR 496 (Karn.)

8. We also find that necessary enquiry was conducted by the Assessing Officer as is evident from the documents filed before us in the paper book that the assessment order under section 147/143(3) of the Act was passed after conducting necessary enquiry. We have also perused the reasons recorded for issuance of notice under section 148 of the Act, which is placed at page 2 of the paper book and reply furnished by the assessee to notice under section 142(1) of the Act, which is placed at page 4 of the paper book and also assessment order passed by the Assessing Officer. We also find place therein the copy of sale deed, which is placed in the paper book from pages 7 to 97 and copy of financial statement of account along with Schedule “4” to the balance sheet, which is placed at page 110 of the paper book. The factors narrated above would conclusively establish that the assessment was framed after due enquiry / investigation by the Assessing Officer. We further find that section 50C speaks about transfer of land or building or both and the adoption of deemed valuation being valuation of stamp purposes as the full value of consideration. It does not speak of plant and this contention was put on record vide reply of the assessee dated 23/11/2015, which is placed at pages 120 to 122 of the paper book as well as by reply dated 23/12/2015, which is placed at pages 123 to 125 of the paper book whereby it has been put on record that it was a depreciable business assets duly disclosed in the return of income. The cold storage was sold as a whole and constituted plant under section 43(3) of the Act. The term “plant” has been interpreted as including cold storage building also and this line of reasoning is established by the Hon’ble jurisdictional High Court in the case of CIT vs. Kanodia Cold Storage (supra). We are, therefore, of the considered view that provisions of section 50C of the Act is not applicable to the cold storage building so to substitute actual sale consideration by deemed sale consideration and the order of the Assessing Officer passed under section 147/143(3) of the Act cannot be a subject matter of section 263. We, therefore, find no merit in the order of the ld. Commissioner of Income-tax and accordingly we set aside the same.

9. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 21/02/2018.

Download Judgment/Order

More Under Income Tax

Posted Under

Category : Income Tax (28055)
Type : Judiciary (12274)
Tags : ITAT Judgments (5554) section 50C (117)

Leave a Reply

Your email address will not be published. Required fields are marked *