The Commissioner of Income-tax, Chennai v. A. R. Builders & Developers P. Ltd
[Citation -2020-LL-0225-9]

Citation 2020-LL-0225-9
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name A. R. Builders & Developers P. Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 25/02/2020
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags indexed cost of acquisition • lack of application of mind • erroneous and prejudicial • revisional jurisdiction • acquisition of property • transfer of property • cost inflation index • capital gain tax • double taxation • revised return • sale of shares • capital asset • sale of land • prejudicial to the interest of revenue
Bot Summary: 2.2 The Principal Commissioner of Income Tax, Chennai-1, considering that the order passed by the Assessing Officer is prejudicial to the interests of the revenue, issued notice dated 17.10.2018 to the assessee to show cause as to why the giving effect order passed by the Assessing Officer on 30.12.2016 should not be set aside invoking provisions of Section 263 of the Act. 07/2020 assessment order passed was erroneous and prejudicial to the interest of the revenue, set aside the assessment order dated 30.12.2016 and directed the assessing officer to examine the aspects stated in Section 263 of the order in respect of indexing cost and pass fresh order, after affording opportunity to the assessee. The order of the Assessing Officer is a non-speaking order. The learned Assessing Officer had simply accepted the claim of the assessee without verifying it and the order of the assessing officer is erroneous and prejudicial to the interest of the revenue. In such view of the matter, the contention of the learned counsel for the appellant/Revenue that there is no speaking order and that order of the assessing officer was cryptic is not acceptable one. Though the Principal Commissioner of Income Tax has got power under Section 263 of the Act, to revise the order, if he considers that the Assessing Officer has not properly examined the materials or not properly calculated the income of the assessee, when the plausible two views are possible and the assessing officer adopted one of the views, the Principal Commissioner of Income Tax should not interfere with the order passed by the Assessing Officer. 07/2020 of the Assessing Officer unless it found that the order of the Assessing Officer is perverse.


T.C.A.No.07/2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 25.02.2020 CORAM: HON'BLE MR. JUSTICE N. KIRUBAKARAN and HON'BLE MR.JUSTICE P. VELMURUGAN T.C.A.No.7 of 2020 Commissioner of Income Tax Chennai Appellant/Respondent. -Vs- M/s.A.R.Builders & Developers P Ltd., No.148, Acropolis Building Dr. Radhakrishnan Salai Mylapore, Chennai-600 004 PAN: AABCE3953A Respondent /assessee/appellant Prayer:Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, against order made in ITA.No.3298/Chny/2018 relating to Assessment Year 2014-15. For Appellant : Ms. Hemalatha For Respondent : Mr. A. S. Sriiraman JUDGMENT P. VELMURUGAN,J. Tax Case Appeal is filed by Revenue as against order of Income Tax Appellate Tribunal, Madras 'A' Bench dated 20.03.2019 passed in ITA.No.3298/Chny/2018 for assessment year 2014-2015. http://www.judis.nic.in 1/14 T.C.A.No.07/2020 2.1 facts of this case is that assessee/company filed its original return for assessment year 2014-15 on 22.11.2014 disclosing income of Rs.79,29,320/-. Thereafter, assessee filed revised return on 23.11.2014 admitting total income of Rs.4,34,23,280/-. case was selected for scrutiny and notice under Section 143(2) dated 03.09.2015 was served and notice under Section 142(1) was also issued calling for details. assessment was completed on 30.12.2016 under Section 143(3) of Act accepting returns filed. 2.2 Principal Commissioner of Income Tax, Chennai-1, considering that order passed by Assessing Officer is prejudicial to interests of revenue, issued notice dated 17.10.2018 to assessee to show cause as to why giving effect order passed by Assessing Officer on 30.12.2016 should not be set aside invoking provisions of Section 263 of Act. 2.3 assessee filed reply dated 07.11.2018. Taking into account reply of assessee and also considering scope of Section 263 of Act, Principal Commissioner of Income Tax-1, Chennai, passed order under Section 263 of Act on 13.11.2018, holding that there was lack of application of mind on part of Assessing Officer while passing assessment order and in view of fact that http://www.judis.nic.in 2/14 T.C.A.No.07/2020 assessment order passed was erroneous and prejudicial to interest of revenue, set aside assessment order dated 30.12.2016 and directed assessing officer to examine aspects stated in Section 263 of order in respect of indexing cost and pass fresh order, after affording opportunity to assessee. 2.4 Aggrieved by said order of Principal Commissioner of Income Tax-1, Chennai, assessee had preferred appeal before Income Tax Appellate Tribunal and Tribunal allowed appeal filed by assessee on ground that when two views were possible and Assessing Officer had taken one such view and Commissioner of Income Tax did not agree but same would not be reason for treating order of Assessing Officer as erroneous and prejudicial to interest of revenue. Holding so, Tribunal set aside order of Principal Commissioner of Income Tax-I, under Section 263 of Act. 2.5 Aggrieved by said order of Income Tax Appellate Tribunal, revenue has filed present Tax case Appeal before this court. 3.1. learned Standing counsel appearing for appellant/Revenue would submit that Assessing Officer has passed http://www.judis.nic.in 3/14 T.C.A.No.07/2020 one page order and there is no reason given for accepting income tax returns filed by assessee. order of Assessing Officer is non-speaking order. Further, she would submit that order of Assessing Officer was cryptic. assessing officer had not examined how original cost was computed. learned Assessing Officer had simply accepted claim of assessee without verifying it and order of assessing officer is erroneous and prejudicial to interest of revenue. Further, she would submit that indexed cost claimed by assessee should be from date of original sale from year 2004- 2005, but not from year 2011-2012 since actual sale has not been taken place in 2011-12, but only share alone has been transferred. Property has not been transferred during assessment year 2011-12. Transfer of property was effected only in year 2004-05 as per Transfer of Property Act. property was actually transferred in Financial Year 2004-05 and not in Financial Year 2010-11. Therefore, calculating indexed cost of acquisition for purpose of capital gain tax adopted by assessing officer is erroneous. Even Assessing Officer has not given any reason as to why they have not taken original sale of year 2004 but adopted for year 2010-11. 3.2. learned Standing counsel further submits that learned Commissioner of Income Tax passed order under Section 263 of http://www.judis.nic.in 4/14 T.C.A.No.07/2020 Act and has rightly held that for purpose of computing indexed cost of acquisition of land, it should be with reference to year of acquiring land i.e., 2004-05 and not 2010-11, however, learned Income Tax Appellate Tribunal (ITAT) misapplied decision of Honourable Supreme Court and also decisions of High Courts and set aside order of learned Principal Commissioner of Income Tax passed under Section 263 of Act and therefore, appellant/Revenue has filed this appeal by raising following substantial question of law: Whether on facts and in circumstances of case, Tribunal was right in setting aside order passed by Commissioner of Income tax under Section 263? 3.3 In support of her contention, learned counsel for appellant/Revenue placed reliance on following judgments:- (1) [2000] 109 Taxman 66 (SC) Malabar Industrial Co. Ltd., Vs. Commissioner of Income Tax ; (2) [2019] 102 taxmann.com 55 (Karnataka) V.K.Bharathi Vs. Commissioner of Income Tax, Bengaluru. 4.1. learned counsel for respondent/assessee would submit that order of learned Principal Commissioner of Income Tax is erroneous. Assessing Officer had taken one of plausible two views http://www.judis.nic.in 5/14 T.C.A.No.07/2020 after verifying long term capital gain returned by assessee. assessee company shares had changed hands in year 2010-11 and new share holders paid prices for acquiring shares considering revaluation done on land. sellers of shares have paid appropriate capital gains tax that corresponds to revaluation reserve and if corresponding cost is not allowed to present owner, it would result in double taxation of sale amount. only income returned by assessee for assessment year was towards capital gains arising out of sale of land. Further he would submit that land under consideration was originally owned by M/s.Ecci Koya Ltd., in year 2005-06. Since there were no other assets in above mentioned company, land was revalued to market price and sold to respondent company during assessment year 2011-12. During Assessment Year 2011-12 relevant to Financial year 2010-11, by way of shares purchase agreement, said transaction was duly reported by company as well as outgoing share holders who have paid capital gains tax on same for consideration paid by respondent. said transaction was also accepted by department during said assessment year. 4.2. During assessment year under consideration 2014-15, respondent had sold property and offered capital gains tax on sale http://www.judis.nic.in 6/14 T.C.A.No.07/2020 proceeds while calculating cost on acquisition of property for purpose of computing capital gains under Section 48 of Act. respondent/assessee had taken into consideration revalued sum through which said land was purchased and reported for taxation during assessment year 2011-12. Under section 48 of Income Tax Act, cost of acquisition will be increased by applying cost inflation index [CII]. Once cost inflation index is applied to cost of acquisition, it becomes indexed cost of acquisition, since said sale of land construed only income of respondent/assessee during assessment year under consideration. said aspects were examined and accepted by Assessing Officer during course of original assessment proceedings dated 30.12.2016. said order was sought to be revised by invoking provisions under Section 263 of Act so as to take value of purchase of previous owner made during assessment year 2005-2006, for purpose of computing indexed cost of acquisition. He would further submit that scope of revision under Section 263 of Income Tax Act, 1961, is narrow and using power of revision, there cannot be substitution of view taken by Assessing Officer on issue on hand. power of revision cannot be assumed for reviewing order of Assessing Officer in as much as power of revision cannot be stretched so as to include power of review. http://www.judis.nic.in 7/14 T.C.A.No.07/2020 4.3. Further learned counsel would submit that purchase cost in hands of share holders is fully disclosed and it is reflected in balance sheet of respondent. sellers of shares having paid appropriate capital gains tax fortifying adoption of cost at increased value, which is not notional but actual. Further it is attempt to restrict cost of land to extent of value of land in hands of previous owner. 100% share holding of company viz., M/s.Ecci Koya Ltd., was acquired and therefore, there is complete change in ownership of company. It is not case of succession. Cost to previous owner would be cost to successor only when transactions are covered by modes specified under Section 49(1) of Act. transfer in case under consideration is not governed by any of modes specified under Section 49(1)(i) to 49(1)(iv). Therefore, when capital asset has become property of assessee in modes other than ones mentioned under Section 49(1), adopting cost of previous owner to be that of present owner is incorrect. He would further submit that seller of shares had paid tax on capital gains that corresponds to revaluation reserve and if corresponding cost is not allowed to present owner, it would tantamount to taxation of same income twice, firstly, in hands of sellers of shares and once again in hands of successor. intention of statute is not to impose tax on same income twice. Income Tax Appellate Tribunal has http://www.judis.nic.in 8/14 T.C.A.No.07/2020 gone through above mentioned factual position in impugned order and held that said transaction has been scrutinised originally by Assessing Officer and that capital gains has been duly collected by Department from shareholders during assessment year 2011-12 itself. Therefore, action of appellant in invoking revisional jurisdiction under Section 263 of Act is wrong on account of absence of cumulative satisfaction of error and prejudice in original assessment order since assessing officer adopted one possible view in law factually. 5. Heard learned counsel on either side and perused records. 6. On perusal of entire records, it is not in dispute that assessee had revalued land during Financial Year 2010-11 and computation of indexed cost of acquisition for purpose of working of capital gains, started with revalued amount. It is also not disputed that only income of assessee for impugned assessment year was capital gains arising on sale of land. Further, it is also not in dispute that erstwhile share holders of M/s.Ecci Koya Ltd., as it was known earlier had paid capital gains tax on consideration received by them from sale of shares, after reckoning revised value of land in hands of assessee company. http://www.judis.nic.in 9/14 T.C.A.No.07/2020 7. Though assessing officer has not passed any detailed order, authority had accepted returns filed by assessee. present share holders of assessee company paid capital gains tax considering market value of aforesaid landed property. assessing officer has accepted claim of assessee that calculation from revised value is correct. In such view of matter, contention of learned counsel for appellant/Revenue that there is no speaking order and that order of assessing officer was cryptic is not acceptable one. Though Principal Commissioner of Income Tax has got power under Section 263 of Act, to revise order, if he considers that Assessing Officer has not properly examined materials or not properly calculated income of assessee, when plausible two views are possible and assessing officer adopted one of views, Principal Commissioner of Income Tax should not interfere with order passed by Assessing Officer. 8. In this case, even though there is no transfer of property by excluding sale deed, but at same time, property has been revalued in accordance with law and capital gains tax also paid on revised value. It is not case of department that for purpose of evading income tax, assessee company has wrongly calculated value of lands which is less than market value. Therefore, as http://www.judis.nic.in 10/14 T.C.A.No.07/2020 pointed out by Income tax Appellate Tribunal and reliance placed in case of CIT Vs. Max Inda Ltd., 295 ITR 282, referred to by learned counsel, it is very clear that time and again, as held by Honourable Supreme Court as well as this court, when two views are possible, if Assessing Officer had taken one of plausible views, CIT has no authority to set aside order of Assessing Officer and adopt its one of other views. Therefore, citation above referred to reported in 295 ITR 282 is squarely applicable to facts of present case and Principal Commissioner of Income Tax could not substitute lawful view taken by Assessing Officer. 9. Though learned counsel for appellant/Revenue referred to decision of Karnataka High Court in case of V.K.Bharathi Vs. Commissioner of Income Tax, Bengaluru and stated that in similar situation, Karnataka High Court, set aside order of Assessing Officer and sent for re-determination by Assessing Officer stating that issues to be reconsidered and in other decision rendered by Honourable Supreme Court reported in [2000] 109 Taxman 66 (SC) [Malabar Industrial Co.Ltd., Vs. Commissioner of Income-tax], justifying order of CIT, both decisions would go to show that when two views are possible, if assessing officer taken one of plausible views, CIT has no authority to take other view and set aside order http://www.judis.nic.in 11/14 T.C.A.No.07/2020 of Assessing Officer unless it found that order of Assessing Officer is perverse. facts of abovesaid referred cases would make it clear that in absence of any supporting material and without making any inquiry and on such facts, conclusion of CIT that order of ITO was held to be erroneous, was held to be justified by High Court as well as Honourable Supreme Court. 10. Admittedly in this case, assessing officer has accepted returns filed by respondent/assessee company and respondent/assessee company has also given reason for adopting revised value and also pointed out that except said property, company has no other property for income and also entire shares has been transferred and also value of land were revised and revalued and capital gains tax also paid. Therefore, under these circumstances, this court do not find any valid reason to interfere with order passed by Income Tax Appellate Tribunal. substantial question of law raised by appellant/revenue is answered accordingly. Thus, we find no good reason to admit Tax Case (Appeal) filed by Revenue. Consequently, Tax Case (Appeal) stands dismissed. No costs. INDEX:Yes/No [N.K.K.,J] [P.V.,J] Internet:Yes/No 25.02.2020 nvsri http://www.judis.nic.in 12/14 T.C.A.No.07/2020 To 1.The Commissioner of Income Tax, Chennai. 2.The Principal Commissioner of Income Tax, Chennai-1 Chennai-34. 3.The Income Tax Appellate Tribunal, Bench, Chennai. http://www.judis.nic.in 13/14 T.C.A.No.07/2020 N. KIRUBAKARAN, J. and P. VELMURUGAN, J. nvsri T.C.A.No.7 of 2020 25.02.2020 http://www.judis.nic.in 14/14 Commissioner of Income-tax, Chennai v. A. R. Builders & Developers P. Ltd
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