ACIT, CHENNAI vs. M/S. COROMANDEL OILS PRIVATE LTD., CHENNAI

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ITA 1941/CHNY/2013Status: DisposedITAT Chennai26 June 2015AY 2011-1217 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that reassessment proceedings initiated under Section 148 were not valid for certain assessment years due to expired time limits. It also noted that additions cannot be made solely on presumption and assumption without supporting material specific to the assessee.

What were the facts?

The assessee's appeals concern the determination of sale consideration for land to compute capital gains and the validity of reassessment proceedings. The Revenue's appeals relate to penalties levied under Section 271(1)(c). The Assessing Officer made additions based on materials found during a survey of a related company, suggesting suppressed sale consideration.

What were the issues?

Whether reassessment proceedings were validly initiated and if additions to income can be made based on material from a related entity without direct evidence.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

Hearing: 07.05.2015Pronounced: 26.06.2015

PER N.R.S. GANESAN, JUDICIAL MEMBER:

Both, the assessee and the Revenue filed the appeals against the respective orders of the Commissioner of Income Tax (Appeals)-I, Chennai, for the assessment years 2009-10, 2010-11 and 2011-12. The Revenue also filed appeals against the order of the CIT(Appeals) on penalty levied under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). Since common issue arises in all the appeals, we heard the appeals together and disposing of the same by this common order.

2.

First, let’s take the assessee’s appeals for assessment years 2009-10, 2010-11 and 2011-12 in I.T.A. Nos.1880, 1881 & 1882/Mds/2013. 3. Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that the only issue arises for consideration is with regard to determination of sale consideration of the land for the purpose of computation of capital gains. The Ld. representative submitted that the assessee has also raised an issue of reopening I.T.A. Nos.1937 to 1942/Mds/13 of the assessment under Section 147 of the Act. Referring to the reopening of the assessment, the Ld. representative submitted that the Assessing Officer based upon an errorneous information in respect of period of holding of the property, determined the short

term capital loss instead of long term capital loss on mutual funds.

In fact, according to the Ld. representative, the assessment was reopened only for the purpose of assessing the capital loss on mutual funds by issuing notice under Section 148 of the Act. During

(2011) 331 ITR 236, the Ld. representative submitted that an Assessing Officer has not made any addition on the reasons for which the assessment was reopened under Section 148 of the Act,

therefore, he cannot make any other addition in the reassessment

proceedings under Section 147 of the Act. The Ld. representative

also submitted that the time limit for issuing notice under Section 148 has expired for assessment years 2009-10 and 2010-11. Therefore, the reassessment proceeding initiated under Section 148

of the Act for assessment years 2009-10 and 2010-11 is not valid. I.T.A. Nos.1937 to 1942/Mds/13

4.

Coming to the merit of the appeal, the Ld. representative for the assessee submitted that there was a survey in the business

premises of the assessee on 24.1.2012 and no material was found

during the course of survey operation. The entire assessment was made on the basis of material found in the course of Coromandel

Cables Pvt. Ltd. According to the Ld. representative, in the course

of survey in the case of M/s Coromandel Cables Pvt. Ltd., it appears

that the revenue authorities found certain development agreement

and other material to indicate that M/s Coromandel Cables Pvt. Ltd.

sold land to M/s Doshi Housing and received sale consideration

over and above it was disclosed in the sale deed. On the basis of the material found in the case of Coromandel Cables Pvt. Ltd., the Assessing Officer came to a conclusion that the assessee also might have received the same amount for transfer of its land.

According to the Ld. representative, no material is available on record to suggest that the assessee has received any money over

and above the amount shown in sale deed. Merely because the assessee’s land happened to be adjacent to the land of Coromandel

Cables Pvt. Ltd., it does not mean that the assessee has received

the same money on sale of the said land. In the absence of any material, according to the Ld. representative, there cannot be any I.T.A. Nos.1937 to 1942/Mds/13 addition in the hands of the present assessee. According to the Ld.

representative, the entire assessment proceeding is based on the presumption and assumption that the assessee might have received

the sale consideration as it was in the case of Coromandel Cables

Pvt. Ltd. According to the Ld. representative, this being a judicial

proceeding, there cannot be any addition on the basis of assumption and presumption. According to the Ld. representative,

the addition made by the Assessing Officer, which was confirmed by the CIT(Appeals), is not justified.

5.

On the contrary, Sh. Pathlavath Peerya, the Ld.

Departmental Representative, submitted that the assessee owns a factory and land at Perungudi. The assessee-company entered into an agreement with M/s Doshi Housing to develop a residential

project, namely, “Etopia-II”. In fact, the land belonging to the assessee is situated adjacent to the land owned by M/s Coromandel

Cables Pvt. Ltd. According to the Ld. representative, the transaction between the assessee and the developers are so arranged that the higher sale consideration for the purpose of computing the capital gain in the hands of the assessee was suppressed by diverting the majority portion of the profits to the developer of the property so as to claim benefit under Section 80- I.T.A. Nos.1937 to 1942/Mds/13 IB(10) of the Act. The Ld. D.R. further submitted that the partnership firm was reconstituted on 1.4.2007 in which one Shri

M.G. Surendranath was introduced as partner with a share profit at 35%. However, he was not given any share of loss. According to the Ld. D.R., all the three entities, namely, M/s Coromandel Cables

Pvt. Ltd., M/s Coromandel Oils Pvt. Ltd. (the present assessee) and M/s Doshi Housing Pvt. Ltd. are all belonging to one group, namely,

Doshi Group in which Shri Harshad V. Doshi was at the helm of affairs having absolute control in all the spheres of activities. During

the course of survey operation, the revenue authorities found that M/s Coromandel Cables Pvt. Ltd. entered into a joint development

agreement with M/s Doshi Housing, a partnership firm, for developing a land belonging to M/s Coromandel Cables Pvt. Ltd. A copy of joint development agreement entered between M/s

Coromandel Cables Pvt. Ltd. and M/s Doshi Housing was found

during the course of survey operation.

6.

The material found during survey operation shows that the value of the land belonging to M/s Coromandel Cables Pvt. Ltd. was found to be `35 Crores approx. as against the value of `10 Crores

disclosed in the sale deed. In fact, according to the Ld. D.R., M/s

Coromandel Cables Pvt. Ltd. disclosed the value as per guideline I.T.A. Nos.1937 to 1942/Mds/13 value determined by the Sub-

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