ACIT, CIR-1, , DURGAPUR vs. M/S THE DURGAPUR PROJECTS LTD., DURGAPUR

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA (BEFORE SRI SANJAY GARG, JUDICIAL MEMBER & SRI RAJESH KUMAR, ACCOUNTANT MEMBER) I.T.A. No. 87/Kol/2019 Assessment Year: 2015-16 Asst. Commissioner of Income Tax, Circle-1, Durgapur………...............................Appellant Vs. M/s. The Durgapur Projects Ltd................................................................................Respondent [PAN: AABCT 0595 M] Appearances by: Sh. Biswanath Ghosh, Addl. CIT, appeared on behalf of the Revenue. None appeared on behalf of the Assessee. Date of concluding the hearing : January 5th, 2022 Date of pronouncing the order : February 9th, 2022 ORDER Per Sanjay Garg, Judicial Member: The present appeal was instituted by the Revenue against the order of the Commissioner of Income Tax (Appeals), Durgapur [hereinafter referred to as ld. ‘CIT(A)’] dated 30.10.2018 bearing Appeal No. 92/CIT(A)/DGP/2017-18 passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’) for AY 2015-16. 2. Different dates were fixed for hearing, but none appeared on behalf of the assessee, hence we proceed to decide the appeal after hearing the ld. D/R. 3. The Revenue has taken the following grounds of appeal: “1. That the Ld. CIT(A), Durgapur erred in deleting the addition of Rs. 5,48,43,584./- made by the AO on accounts of transfer of land (market value is Rs.9,95,60,980/-) to NHAI. 2. In regard to ground No.1, Sec 50C is deeming provision and there is no reference for unaccounted receipts as stated by CIT(A)-Durgapur. There is no exception u/s 50C of the IT Act 1961, in regard to compulsory acquisition, the only exception is reference to the DVO by the Assessing Officer. 3. That the Ld. CIT(A), Durgapur erred in deleting the addition made by the AO amounting to Rs.7,41,00,000/- and Rs. 16,36,000/- on account of shortage of coal and shortage of imported coal respectively. 4. That the appellant craves leave to add, alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing.”

2 I.T.A. No. 87/Kol/2019 Assessment Year: 2015-16 M/s. The Durgapur Projects Ltd. 4. The first issue is related to Section 50C of the Act. The assessee received Rs. 4,47,17,396/- against the transfer of land at Dag no. 17733, Khatian no. 321 of Radhamadhavpur. The property was acquired by National Highway Authority of India. The point of the grievance is whether Section 50C is applicable or not in the case of compulsory acquisition. The assessing authority has drawn the following observations in his order which are as follows:

“3. Application of section 50C of the I.T. Act. 1961: It is seen from the details filed that the assessee during the year has received Rs.4,47,17,396/- from M/s. National Highway Authority of India(NHAI) on transfer of land DAG No. 17733, Khatian No. 321 of Radhamadhavpur. It is observed from the details filed by the assessee during the course of assessment proceedings that market value by the stamp valuation authority has been determined at Rs.9,95,60,980/-. In this respect, the assessee vide letter dated 29.08.2017 was asked to explain as to why provision of section 50C is not invoked in respect of the above transaction. 4. The assessee vide letter dated 06.12.2017 submitted that the amount of Rs.4,47,1,7,396/-. was received as compensation provided by NHAI on compulsory acquisition of land. The NHAI also deducted TDS u/s. 194 LA of the IT Act on the said payment to the assessee. 5. On-going through the submission, I found that the contention of the assessee is not acceptable.” 4.1. After the order of the ld. assessing authority, the ld. CIT(A) has made the following observations against the order of the AO which are as follows:

“4.2. A similar question was addressed by the Hon’ble ITAT Hyderabad in Income-tax Officer Vs. Southern Steel Ltd. (ITAT Hyderabad) ITA No. mo/Hyd/2016 for the AY 2012-13 wherein while addressing the moot question whether Sec. 5OC can be invoked when the purchaser is a government undertaking i.e, Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC), the Hon’ble Bench has held against the applicability of Section 50C in a case of land transferred to Government. 4.3. In view of the above discussions I hold that the Ld. AO was not justified in invoking the provisions of section 50C of the Act on the land compulsorily acquired by the NHAI. As such, the Ld. AO is directed to recompute the Capital Gains without applying sec 50C to this case. As a result, this ground of appeal is allowed.” 4.2. The land of the assessee was acquired by the NHAI and the transfer is by compulsory acquisition. The judicial inference was drawn by the Hon’ble Hyderabad ‘SMC’ Bench of the Tribunal in ITA Nos. 1680/Hyd/2018 & 1681/Hyd/2018 order dated 22.07.2020 wherein the Hon’ble Bench held as follows:

“8. At the outset, I do not find any merit in the orders of both the Ld. Revenue Authorities. It is pertinent to mention that the provisions of section 50C was introduced to curb the menace of unaccounted cash being infused in the real estate transactions. Quite often the actual sale consideration paid for acquiring immovable property is more than the sale consideration disclosed in the sale deed executed. In order to overcome the escapement of Capital Gain Tax on such transactions, Section 50C was introduced in the Statute, so as to at least adopt the market value of the State Revenue Authority as the sale consideration for the purpose of computing

3 I.T.A. No. 87/Kol/2019 Assessment Year: 2015-16 M/s. The Durgapur Projects Ltd. Capital Gain under the provisions of the Act. Further, to avoid genuine hardships to the assessee, the provisions of Section 50C(2) of the Act provided for referring the matter to the Valuation officer of the Revenue to determine the actual market value of the immovable property sold by considering all the relevant factors which may not have been considered by the State Valuatio Authority. In the case of the assessee, the value of the property is already determined by the State Government which is nothing but the amount of Rs. 46,22,878/- coupled with certain TDS rights. It is pertinent to mention that no compensation is paid by way of cash for acquisition of the land in the case of both the assessees. Moreover considering the facts and circumstances of the case, it is apparent that the assessees have not actually transferred their immovable property consisting of land and building but have only transferred their right to receive the amount of the compensation of Rs. 46,22,878/- and the TDR rights and both these asset do not fall under the category of immovable property. Further there is no finding by the Ld. Revenue Authorities that the market value of the TDR rights received by the assessees coupled with the amount of Rs. 46,22,878/- is at par with the SRO value of the property. It is also evident that the transaction is a distress transaction causing mental agony due to loss arising out of land acquisition and wastage of land. Keeping in view of all these facts and circumstances of the case, I am of the considered view that the provisions of section 50C of the Act cannot be invoked in the hands of both these assessees. Hence, I hereby set aside the order of the Ld. CIT (A) and direct the Ld. AO to delete the addition made invoking the provisions of section 50C of the Act in the case of both the assessees.” 4.3. The issue is squarely covered by the above decision of the co-ordinate Bench of the Tribunal. We do not find any infirmity in the order of the ld. CIT(A) on this issue. Hence, ground nos. 1 & 2 of the appeal are dismissed.

“6. Shortage of coal: On perusal of annual report, it is found that under the head quantity/value of raw materials consumed under worksheet to note 13, shortage of coal of 27,426.39 MT having value Rs.7.41 Crores has been shown which is abnormally high whereas in A.Y. 2014-15, there has been surplus of coal to the extent of 18,450.24 MT. The shortage of coal claimed under the A.Y. in question as compare to excess on in the immediately preceding A.Y. is not justifiable. Further, for Coke Oven Plant shortage of | imported coal was shown at 170.91 MT valuing at Rs.16.36 Lakhs, however, there was no shortage in the immediately preceding A.Y. In this respect, this office vide letter dated 29.08.2017 requested the assessee to explain the same. 6.1. The assessee vide letter dated 16.12.2017 submitted that shortage to the tune of 27,426.39 MT of coal as raised in query is actually surplus as shown in the annual account for the F.Y. 2014-15. Accordingly, relevant decision of the 597th meeting BOD of DPL, held on 18.08.2015, copy of which has been furnished. 6.2. I have considered the submission of the assessee and gone through the notes of the board meeting 18.08.2015. It is pertinent to note that Annual a/c of the assessee is dated 14.10.2015 which is later than Board meeting dated 18.08.2015. In the 54th Annual Report, shortage of coal is clearly mentioned in worksheet to note 13. Hence, explanation of the assessee is not found to be convincing. Since, there was no shortage in the immediately preceding A.Y., shortage of coal claimed by the assessee of 27,426.39 MT valuing Rs.7.41 Crores is disallowed and added to the total income. (Addition of Rs.7.41 Cores)

4 I.T.A. No. 87/Kol/2019 Assessment Year: 2015-16 M/s. The Durgapur Projects Ltd. 6.3. Penalty proceeding u/s. 271(1)(c) of the I.T. Act are initiated for furnishing inaccurate particulars of income. 7. Regarding shortage of imported coal of 170.91 MT valuing at Rs. 16.36 Lakhs, the assessee has not furnished any explanation. Hence, the same is disallowed and added to the total income. (Addition of Rs. 16.36 Lakhs)” 5.1. Against the assessment order, the ld. CIT(A) has made the following observations:

“5.3. On a consideration of facts as are apparent from the assessment order I find that the only reason why the AO has disallowed the claim made by the appellant is that there was no shortage of coal during the immediately preceding AY. This certainly cannot be a ground for making such disallowance. There could be ‘n’ - number of reasons for a shortage to occur. The AO ought to examined the circumstance in which such shortage was claimed to have occurred and on basis of such facts, he should have decimated the claims made by the appellant. If the logic given by the AO can be extrapolated to life, the AO would refuse to accept that a person is dead simply because he was alive the last year! There are important aspects of production in a business and all these are interconnected. The AO should have first of all examined the reason why the loss happened. Was there a shortage of funds that the coal could not be purchase? Was there any mishap due to which the coal could not reach the factory premises? What was the position of expenses on account of purchase and transportation related to coal as compared to the AY 2014-15? Was there any malfunctioning in the factory unit which led to more consumption of coal and what were the actions taken by the appellant company to tide over the crisis? Since there was a shortage of coal did it impact the production? In the case of imported coal, the AO could have, similarly examined the import bills, dates of payments, dates of shipment to find out the exact quantity of coal imported by the applicant along with the opening stock, etc. These and similar facts could have led to a correct fact finding related to the purchase, consumption and stock of coal. Deprived of any fact, it is difficult to accept the AO’s action which appear to be based on his own whims. Whims cannot be a ground for making addition to the income of the appellant. 5.4. With these observations, the additions made by the AO to the tune of Rs. 7.41 crores and Rs. 16.36 lakh on account of disallowance of shortage of coal at 27,426.39 MT of coal and 170.91 MT of imported coal is directed to be deleted. Appeal on this ground is allowed.” 5.2. It is very clear that the assessing authority added back the shortage of coal on the basis of the financial statement of the earlier years. So we uphold the order of the ld. CIT(A) and ground no. 3 of the Revenue is dismissed.

Order is pronounced in the open court on 09.02.2022. Sd/- Sd/- [Rajesh Kumar] [Sanjay Garg] Accountant Member Judicial Member Dated: 09.02.2022 Bidhan (P.S.)

5 I.T.A. No. 87/Kol/2019 Assessment Year: 2015-16 M/s. The Durgapur Projects Ltd. Copy of the order forwarded to: 1. Asst. Commissioner of Income Tax, Circle-1, Durgapur. 2. M/s. The Durgapur Projects Ltd., New Administration Building, Dr. B.C. Roy Avenue, Durgapur-713 201. 3. CIT(A), Durgapur. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.