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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member):
These appeals have been filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-16,
2 CLR Properties Limited Mumbai {(in short Ld. CIT(A)} dated 03.06.2013 both for the assessment year 2006-07, decided against the quantum order u/s 143(3) and penalty order u/s 271(1)(c) of the Act passed by the Assessing Officer (in short ‘AO’).
The assessee has raised following grounds of appeal:
1. Denial of set-off of the loss of Rs. 42.90884 on transfer of building a. The Ld. CIT(A) erred in law and on facts in confirming the action of the Ld.AO in denying the set-off of loss of Rs. 42,90,884/- relating to transfer of building against the deemed business income and also against the long term capital gains charged to tax for the year under consideration. b. Your appellant submits that a loss of Rs. 42,90,884/- had arisen on a transfer of the said building that was a depreciable asset a fact which was confirmed by the Ld.AO. c. Your appellant pleads that the loss suffered of Rs.42 90 884/- be allowed to be set-off against the assessed long term capital gains or the business income for the year under consideration.
2. Transfer of Building a. The Ld. CIT(A) erred in law in holding that the said building was not 'transferred' ignoring the fact that the fact of transfer was confirmed by the Ld.AO. b. Your appellant submits that the building was transferred and the fact of transfer was confirmed by the Ld.AO.
3 CLR Properties Limited c. Your appellant pleads that the said building be held as 'transferred' during the year.
During the course of hearing, it has been brought to our notice at the very outset that there is a delay in filing of appeal by the assessee. Ld Counsel drew our attention upon the affidavits from the assessee filed along with petition seeking contention of delay in filing of appeal. First affidavit has been filed by the director of the assessee company dated 31st January 2014. We find it appropriate to reproduce the contents of this affidavit:
“I Percy Lakadia Director of CLR Properties Limited having registered office at Plot No. 112, Road No13, MIDC, Andheri(E), Mumbai - 400093 solemnly affirm and state as under: - That the company CLR Properties Limited has wound up its operation since 2007. The Company has been left with no staff to look after its administration and tax affairs since 2007. I am attaching herewith Copies of Profit & Loss Account for Asst Year 2011-2012, 2012- 2013 & 2013-2014 confirming that there is no staff. Also Attached herewith Copies of That I along with the Other Director of the Company Chandrashekhar Sitaram Tamanekar have taken up alternative occupation with Brightland Resorts Private Limited as directors on 07/04/2008. I am attaching herewith details of Directors of Brightland Resorts Private Limited from MCA Website confirming our appointment as Directors of the said company w.e.f. 07/04/2008. That the order of CIT(A) was received by us on 4 CLR Properties Limited 15/03/2011. That I failed to appreciate and understand the need to take remedial action as I was swayed by the fact that the taxes on the disputed amount were paid before the receipt of appellate order. Moreover the counsel of the company CA Taral V.Dedhia was not in a position to advise the company on the matter & overlooked the consequences of not filing the appeal. The gravity of the matter requiring remedial action was realized only on receipt of Ex- Parte Penalty Order received on 13/04/2012. Immediately on receipt of the said order on 13/04/2012 the appeal to ITAT was filed on 18/05/2012 i.e. within 60 days of such receipt for contesting the assessment order U/s 143(3) read with Section 250 of the act. That due to the above circumstances the appeal with the Hon ITAT was filed late by 370 days. The delay of 370 days was on account of a reasonable cause as the company was prevented in filing of appeal in time due the facts stated above. That the company has always complied with the provisions of law. I request your honour to condone the delay and admit the appeal. Solemnly declared on this 31st day of January 2014.”
In support of the averments made in the aforesaid affidavit, the then Counsel of the assessee has also filed affidavit, confirming on oath, deposition made by the director in his affidavit. The contents of this affidavit are also reproduced herein below: “I Taral V. Dedhia C.A. residing at 153/7 Sunray Sion (E), Mumbai - 400022 solemnly affirm and state
5 CLR Properties Limited as under:- That I was approached by Shri Percy Lakadia Director of CLR Properties Limited to represent on behalf of the Company before the CIT(A) against the order passed U/s.143(3) by the Assessing Officer on 24/12/2008 for Asst Year 2006-2007. That on behalf of the company I made submissions against the said order U/s. 143(3) passed by the Assessing Officer before Hon CIT(A). That the company again approached me in 3rd week of March 2011 for opinion on order passed by CIT(A) for Asst Year 2006-2007. That I was unable for give the opinion on the next remedial step to be taken on the CIT(A) order & also failed to advise the Company on the consequence of not filing an appeal against the said CIT(A) Order before the Hon ITAT. Solemnly declared on this 31st day of January 2014. Sd/- (Taral V. DEdhia)”
Ld. Counsel of the assessee requested that the delay occurred unintentionally and due to ignorance of the assessee, and that there was no conscious or deliberate delay on the part of the assessee, and in support of his request he relied upon the judgment of Supreme Court in the case of Mst. Katiji & Ors [1987] [167 ITR 471] (SC) and of Hon’ble Bombay High Court report at 344 ITR 166.
6 CLR Properties Limited 6. On the other hand, Ld. DR opposed assessee’s request for condonation of delay. It was submitted by him that appeal was filed after the penalty order.
In response, Ld. Counsel submitted that no delay was made by the assessee after the receipt of the penalty order and appeal against quantum order was filed promptly.
We have gone through the facts and circumstances of the case and compared it with the affidavits filed before us. Nothing was brought before us to contradict the averments made therein. We find claim of the assessee as bonafide. In our considered view, there was sufficient cause for delay in filing this appeal, and therefore, in the interest of justice and fair play, delay in filing this appeal condoned and admit it for hearing and proceed to decide the same on merits.
The solitary issue raised in this appeal is that the Ld. CIT(A) has confirmed the action of Ld. AO in denying the benefit of set off of loss of Rs.42,90,884/- relating to transfer of building against business income, and also long term capital gain shown by the assessee. The assessee is also aggrieved with the action of Ld. CIT(A) in holding that the said building was not transferred.
The brief facts of the case are that the assessee company had acquired land for its factory in the year 1960 and thereafter it had constructed a factory building for its scales
7 CLR Properties Limited manufacturing business. In order to reflect the change in business the assessee had converted its land into stock-in- trade which resulted into long term capital gains of Rs.69,00,053/- that was offered to tax in A.Y. 2006-07 in accordance with the provisions of section 45(2) of the Income Tax Act, 1961. The assessee company also suffered a loss of Rs. 42,90,884/- in A.Y. 2006-07 on building standing on the said land which was duly accepted by the A.O. While filing the return of income the short term capital loss of Rs. 42,90,884/- was set-off against the business income and the resultant income of Rs. 24,28,095/- and Rs.69,00,053 was offered for taxation. The A.O. assessed the Total Income at Rs.1,36,19,030/- by denying the set-off of the said loss suffered in A.Y. 2006-07 of Rs.42,90,884/- on account of building which was on the said land against the business income of Rs. 67.18,983/- and also against the capital gains of Rs. 69,00,053/-.
Being aggrieved by the order of Assessing Officer u/s 143(3), the assessee company had filed an appeal before the CIT(A). The Ld. CIT(A) dismissed the appeal without appreciating the facts, submissions and explanations by stating that no 'transfer' of the said building took place because there was no sale and also denied the assessee company's claim of set-off loss of Rs. 42,90,884/- on building against the LTCG.
8 CLR Properties Limited 12. During the course of hearing before us, it has been submitted at the very out set by the Ld. Counsel that the limited issue before the Ld. CIT(A) was that the loss on transfer of building would pertain to which year i.e. the year under concern i.e. A.Y. 2006-07 or year in which building was converted into stock in trade i.e. A.Y.2005-06. But Ld. CIT(A) crossed his boundaries and took up another issue. It was held by him that building was not even transferred by the assessee. It was submitted that the issue of transfer was not there before the AO because it was accepted by the AO that building has been transferred. It has been further submitted by him that Ld. CIT(A) had taken up this issue without giving any show cause notice to the assessee. Detailed submissions have been made by him in support of his claim that building was transferred as per law and facts and various cases have been cited by him in support of his claim. He has also taken us through various pages of the paper book to show that building was in fact transferred. He made submissions on the other issue also which was raised by the AO that the loss pertained to the A.Y. 2006-07 and not A.Y. 2005-06, and therefore, the benefit of set off should be provided in the year before us.
On the other hand Ld. DR has supported the orders of the lower authorities. We have gone through the submission made before us, order of lower authorities and material placed before us for our consideration. It is noted by us that Ld. Counsel has rightly contended that the issue of ‘transfer’ of building was raised by the Ld. CIT(A) for the first time and that too,
9 CLR Properties Limited without confronting the assessee in this regard. The perusal of the order reveals that Ld. CIT(A) did not put his doubts before the assessee. Detailed arguments have been made by Ld. Counsel before us, showing that there is no application of mind by the Ld. CIT(A). Therefore, in the interest of justice we send this issue back to the file of the AO wherein this issue shall be decided afresh after taking into consideration all the submissions and evidences of the assessee, which the assessee shall place before the Ld. CIT(A). Ld. CIT(A) shall decide all the issues again including the issue of year of taxability of gain/loss. The Ld. CIT(A) shall also take into account various judgments which the assessee may like to place before him and after considering correct position of law only, appellate order should be passed by him. Thus, these grounds are treated as allowed for statistical purposes.
Now we shall take up penalty appeal being :
In this appeal, the assessee has challenged the action of Ld. CIT(A) in confirming the penalty on the amount of addition made by the AO in the assessment order.
14.1. Since we have sent this issue back to the file of the Ld. CIT(A), we deem it appropriate to send the issue of penalty also back to the file of the Ld. CIT(A). The penalty appeal shall be decided by Ld. CIT(A) after deciding the quantum appeal.