Section 50C not applicable to cold storage building so to substitute actual sale consideration by deemed sale consideration and order of AO cannot be revised u/s 263 – ITAT
ABCAUS Case Law Citation:
ABCAUS 2232 (2018) (03) ITAT
The assessee was aggrieved by the order passed under section 263 of the Income Tax Act, 1961 (the Act) and had challenged the assumption of revisional jurisdiction by the Commissioner of Income Tax (CIT)
The appellant assessee was a firm running a cold storage. The return of its income was filed declaring Nil income and the assessment was also completed u/s 147/143(3) of the Act on the returned income.
Later, based on AIR information that the assessee had sold assets which was not reflected in the return of income, the Assessing Officer issued notice under section 147 of the Act on account of escapement of income after duly recording the reasons.
During the course of re-assessment proceedings, assessee claimed that it had already shown income from sale of assets in the return of income and has treated the surplus of sale of fixed assets as business profit and has credited the same in the profit & loss account of the firm. The Assessing Officer accepted the claim of the assessee and completed the assessment on the returned income.
Subsequently, The Principal Commissioner of Income-tax observed that as per sale deed, the assets sold by the assessee included land and building and machinery. The sale value of all these assets put together, for stamp duty purposes was more than double the amount which the assessee had credited as the sale value of assets in its accounts.
Thus the CIT was of the view that full amount of sale consideration not credited by the assessee in its books of account has escaped taxation and therefore the order of the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. Accordingly notice under section 263 of the Act was issued to the assessee.
The main ground as per the notice was that the AO had not given any reason as to why the provisions of section 50C of the Act were not attracted in this case when for the purpose of stamp, the value of the property was higher than the amount shown by the assessee for the purpose of taxation.
Accordingly he set aside the order of the Assessing Officer and revised the order passed by the Assessing Officer under section 263 of the Act.
Before the Tribunal, it was contended that the assessment order was passed after taking into consideration and conducting relevant enquiries which was evident from the notice issued under section 142(1).It was submitted that the observation of the CIT that the order passed by the Assessing Officer was without conducting any enquiry was not at all correct and there was also no application of provisions of section 50C in this case. Placing reliance on the judgment of the jurisdictional High Court it was submitted that the revisional order passed by the CIT under section 263 of the Act be set aside.
The Tribunal observed that the basic question as to whether the provisions of section 50C are applicable to the depreciable assets or not is very much a debatable issue.
The ITAT also observed that the assessment order under section 147/143(3) of the Act was passed by the AO after conducting necessary enquiry/investigation.
The Tribunal observed that section 50C speaks about transfer of land or building or both and the adoption of deemed valuation being valuation of stamp purposes as the full value of consideration. It does not speak of plant and this contention was raised by the assessee stating that it was a depreciable business assets duly disclosed in the return of income.
The Tribunal noted that the cold storage was sold as a whole and constituted plant under section 43(3) of the Act. The term “plant” has been interpreted as including cold storage building also and this line of reasoning is established by the Hon’ble jurisdictional High Court.
Thus, the Tribunal opined that the provisions of section 50C of the Act is not applicable to the cold storage building so to substitute actual sale consideration by deemed sale consideration and the order of the Assessing Officer passed under section 147/143(3) of the Act cannot be a subject matter of section 263.
Accordingly the Tribunal set aside the order of the Commissioner of Income-tax.