DCIT, CIRCLE-3(1), HYD, HYDERABAD vs. RASA AGROTECH PVT.LTD., SEC'BAD, SECUNDERABAD

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 730/Hyd/2015 Assessment Year: 2008-09 The Dy. CIT, Circle-3(1), vs. M/s. Rasa Agrotech Pvt Hyderabad. Ltd, Secunderabad.

PAN – AABCR8624B (Appellant) (Respondent)

C.O No. 37/Hyd/2015 (Arising out of ITA No. 730/Hyd/2015) Assessment Year: 2008-09

M/s. Rasa Agrotech Pvt Ltd, vs. The Dy. CIT, Circle-3(1), Secunderabad. Hyderabad.

PAN – AABCR8624B (Appellant) (Respondent)

Revenue by : Smt. U. Minichandran Assessee by : Shri Ajay Gandhi

Date of hearing : 15-02-2018 Date of pronouncement : 23-03-2018 ORDER PER P. MADHAVI DEVI, J.M.: This appeal filed by the Revenue as well as cross

objection of the assessee are against the CIT(A)-3,

Hyderabad dated13.03.2015 for the A.Y 2008-09

engaged in the business of procurement, processing and

2 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

export of seed, filed its return of income for the A.Y 2008-

09 on 29.09.2008 admitting a total income of Rs.

1,50,16,771/- and long term capital gains of Rs.

1,43,61,215/-. The assessment order u/s 143(3) of the IT

Act was passed on 28.07.2010 by disallowing the claim of

exemption u/s 10B of the IT Act and the total income was

determined at Rs. 3,91,35,857/-. Subsequently, the A.O

noticed that the long term capital gains offered by the

assessee should have been taxed as short term capital

gains, since he was of the opinion that the income

chargeable to tax has the escaped assessment within the

meaning of the Sec. 147 of the IT Act, he issued a notice

u/s 148 of the IT Act on 21.01.203 for the reason that

under the provisions of Sec. 50 of the IT Act, capital gain

on transfer of depreciable assets shall be treated as short

term capital gains. During the reassessment proceedings,

the assessee raises an objection that the reopening u/s

148 of the IT Act is not valid. However, the A.O held that

the short term capital gain was treated as long term capital

gain by the assessee and therefore, the reopening of the

assessment u/s 147 of the IT Act is valid.

3 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

the amount of Rs. 3,31,02,477/- is towards goodwill and

therefore it has to be considered as long term capital gain.

AO however, held that the same is not tenable because in

the statement of accounts filed by the assessee, there is no

mention of goodwill but the amount was mentioned only as

sale consideration. At this point, before the A.O the

assessee had taken an alternative stand that transfer of

seed business falls within the ambit of Sec. 50B of the IT

Act as slump sale and filed Form No. 3CEA along with the

letter. Observing that the Form No. 3CEA should have

been filed along with the return of the income, A.O rejected

the assessee’s alternate claim and treated the sum of Rs.

3,31,02,477/- as short term capital gain and brought it to

tax. Aggrieved, the assessee preferred an appeal before the

CIT(A), challenging both the validity of the reassessment

proceedings and also treating the long term capital gains

offered by the assessee as short term capital gain. The

assessee also raised the alternate claim that the

transaction falls under the ambit of Sec. 50B of the IT Act

and therefore should be considered as such. The CIT(A)

rejected the grounds against the validity of the

4 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

reassessment proceedings, but accepted the alternate plea

of the assessee that the transaction is a slump sale and

should be considered u/s 50B of the IT Act. Against the

relief granted by the CIT(A), the revenue is in appeal before

us and the assessee also is in cross objection against the

order of the CIT(A) upholding the validity of the

reassessment proceedings.

grounds of appeal:

“1. The Ld. CIT(A) erred both in law and on facts. 2. The Ld. CIT(A) ought not have allowed the assessee’s claim for considering alternative plea which was rejected by the A.O at the time of scrutiny proceedings. 3. The Ld. CIT(A) erred in allowing the claim of assessee for determining the capital gains u/s 50B of the Act, in view of the fact that the assessee failed to comply with the provisions of Sec. 50B, filing of form 3CEA along with the ret urn. 4. Any other ground(s) that may be urged at the time of hearing.” 5. In the cross objection the assessee has raised the

following grounds of appeal:

“1. The CIT(A) has erred in upholding the reopening the assessment u/s 147. 2. Any other grounds that may be urged at the time of hearing.” 6. Since the cross objection is against the validity of the

reassessment proceedings and go to the root of the matter,

it shall considered the same first. Admittedly, the

reopening of the assessment is within the period of the four

5 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

years. The assessee’s objection is that the reopening is

done on a mere change of opinion. In support of this

contention, the Ld. Counsel for the assessee has drawn our

attention to the assessee’s reply to the A.O dated

26.05.2010 in response to the notice u/s 142(1) of the IT

Act, dated 04.05.2010, wherein the copy of the business

purchase agreement along with the ledger account of

Unicorn Seed receivable was enclosed.

the relevant material was before the A.O and the A.O has

not made any disallowance nor has discussed anything

about the same in the assessment order, the A.O is deemed

it to have considered the same in the assessment

proceedings u/s 143(3) of the IT Act and therefore the

reopening the assessment for considering the same as

short term capital gains, is on mere change of opinion. He

submitted that on mere change of opinion the

reassessment is not valid.

the CIT(A) who has held that the change of opinion would

require the formation of opinion by the A.O on the issue in

the proceedings u/s 143(3) of the IT Act, and since the

6 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

issue of the applicability of Sec. 50B was never before the

A.O during the proceedings u/s 143(3) of the IT Act, there

can never be a change of the opinion, and also that the A.O

has not considered the applicability of Sec. 50 to the IT Act

to the transaction under the business purchase agreement.

For coming to this conclusion, the CIT(A) has relied upon

the decision of the Hon’ble Supreme Court in the case of

Kelvinator India reported in 320 ITR 561 (SC) and also in

the case of CIT Vs Usha International Limited reported in

348 ITR 485 (Del) and the decision of the Hon’ble Gujarat

High Court in the case of Gujarat Power Corporation

Limited reported in 350 ITR 266 (Guj). In the case of

Kelvinaor India, the Hon’ble Supreme Court held that after

01.04.1989, the A.O has power to reopen, provided there is

tangible material to come to the conclusion that there is

escapement of income from assessment. In the case of

Usha International (cited supra), the Hon’ble Delhi High

Court has held that the expression “change of opinion”

postulates formation of opinion and a change thereof and

that there is a difference between “change of opinion” and

“formation of opinion”. In the case of Gujarat Power

Corporation Ltd., (Cited supra) it was held that after

7 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

01.04.1989 power for reopening of assessment within four

years are much wider. In the case before us, though the

assessee has filed the copy of the business purchase

agreement, the A.O has not formed any opinion about the

nature of the capital gain arising therefrom and therefore,

it cannot be a case of change of opinion. Therefore, we do

not find any reason to interfere with the order of the CIT(A)

on this issue and the cross objection of the assessee is

rejected.

that, on reopening of the assessment the entire issue was

before the A.O and the assessee had made the alternate

claim of applicability of Sec. 50B of the IT Act to the

transaction as a slump sale and in support of said claim

has filed the Form No. 3CEA. The requirement to file Form

No. 3CEA along with the return of income is to

substantiate the claim u/s 50B of the Act. In the original

return of income, since the assessee has not made the

claim, the assessee could not have filed the Form No. 3CEA

along with the return of income. Its only during the

reassessment proceedings, that the assessee had made an

alternate claim and therefore, the CIT(A) has rightly

8 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

directed the A.O to assess the transaction arising out of

the BPA as a slump sale u/s 50B of the IT Act. As regards

the consideration towards slum sale, the CIT(A) has not

only taken the agreed price of Rs. 4,00,00,000/- but also

the additional consideration of Rs. 24,54,056/- as part of

the consideration for all the assets listed in BPA. The

assessee has not raised any ground of cross objection

against treating the additional consideration also as the

sale consideration for transfer of business u/s 50B of the

IT Act. Therefore, the assessee has accepted the entire sale

consideration to be Rs. 4,24,55,056. Since the CIT(A) has

only remitted the issue to the file of the A.O for the

considering the assessee’s alternate claim u/s 50B of the

Act, we do not see any reason to interfere with the order of

the CIT(A).

cross objection of the assessee are dismissed.

Pronounced in the open court on 23rd March, 2018.

Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER

9 ITA Nos. 730/Hyd/2015 & CO 37/Hyd/2015 Rasa Agrotech Pvt Ltd, Secunderabad.

Hyderabad, Dated: 23rd March, 2018.

KRK 1) M/s Rasa Agrotech Pvt Ltd Unicorn House, Plot No.3, Nr Gunrock Diamond Point, Transport Road, Secunderabad. 2) DCIT, Circle -3(1), Hyderabad 3) CIT(A) -3, Hyderabad 4) Asst. CIT, Range-3, Hyderabad 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File