PIJUSH KANTI BHUNIA,KOLKATA vs. ITO, WARD-39(1), MIDNAPORE

3. At the outset, the ld. counsel for the assessee has brought our attention that the impugned additions have been made by the Assessing Officer and further confirmed by the CIT(A) on account of difference of the amount arrived at after revaluation of the fixed assets of the assessee on 31.03.2016 as compared to be valuation on 31.03.2015. The ld. counsel in this respect has referred to the chart given in the assessment order which, for the sake of ready reference, is reproduced as under:

Asset Valuation as on Valuation as Revaluation 31.03.2015 on 31.03.2016 amount Land & Building 4,65,900/- 85,00,000/- 80,34,100/- Veta & Chimney 4,60,850/- 10,75,744/- 6,14,894/- Furniture & Fixtures 4,582/- 21,426/- 16,844/- Truck 1,26,884/- 7,46,016/- 6,19,132/- Other FA - 33,481/- 33,481/- 3.1 The ld. counsel has invited our attention to the submissions made before the Assessing Officer to the effect that the difference between the value of assets on the closing day as on 31.03.2015 and the value of assets as on the opening day on 01.04.2016 was on account of &328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia revaluation of the assets. Neither any income was accrued nor generated to the assessee. It was also explained that the revaluation of the assets has been done to show the fair value of such assets as the assessee was planning to apply for enhancement of bank loan. The current market value of the assets was estimated by the assessee and the same was adopted as on the opening date of the assessment year in question. However, there was neither any business income nor any capital gains accrued or generated to the assessee on valuation of such asset as per market value. However, both the lower authorities made/confirmed the aforesaid additions under the misimpression that the assessee is liable to pay the tax as it had increased its capital to the tune of Rs.1,01,26,968/- on account of valuation of the asset.

3.2 The issue is squarely covered by the decision of the Hon’ble Calcutta High Court in the case of ‘PCIT vs. Salapuria Soft Zone’ reported in [2023] 150 taxmann.com 106 (Calcutta), wherein, the Hon’ble Calcutta High Court has upheld the order of the Tribunal observing that the revaluation of the fixed assets did not give rise to any profit to the firm and that the valuation of the assets at market value, which were higher than the cost, did not result any real profit or income which can be taxed. The relevant part of the order of the Hon’ble Calcutta High Court is reproduced as under:

Thus, in our view, the learned tribunal rightly rejected the contention raised by the revenue and also rightly noted the decision of the Hon’ble Supreme Court in Sanjeev Woollen Mills v. CIT [2005] 149 Taxman 431/279 ITR 434 wherein it was held that valuation of the assessee at market value, which was higher than the cost, resulted in the imaginary or notional potential profit out of itself and not any real profit or income which can be taxed.

I.T.A. Nos.327&328/Kol/2024 Assessment Years: 2016-17 Pijush Kanti Bhunia 5. In view of the above discussion, the impugned additions made by the lower authorities are not sustainable as per law and the same are accordingly ordered to be deleted. However, it is made clear that the assessee will not be entitled either this year or in future to take value of the assets after revaluation/market value as cost of acquisition in case of transfer of asset for the purpose of computation of capital gains or business income as the case may be. 6. – In this appeal, the assessee has contested the levy of penalty u/s 271(1)(c) of the Act.