2019 (5) TMI 1381 - AT - Income Tax

Rectification u/s 154 - time barring order - passing the order in 6 months - HELD THAT - The provision (s. 154(8)) is not cast in negative terms, which is indicative, and also one of the tests as pointed out by the Hon ble Court 2011 (4) TMI 511 - PATNA HIGH COURT , of the provision being directory. Contrast this with s.154(7), cast in negative terms, which is mandatory. Rather, a reading of section 154(8) makes it abundantly clear that an order u/s. 154(1) r/w s. 154(4) is to be a result, as afore-stated, of a conscious decision. This is even otherwise apparent as the order is appellable and, in fact, being an order covered u/s. 154(1)(a), itself subject to rectification, as where it bears a mistake apparent from record. The said Grounds would not hold. Rectification u/s 154 - the circle rate (of land) could not be applied as it is a case of a composite sale - HELD THAT - The only course therefore available, where the said adjudication is considered erroneous, is for the effected party to take the matter in further appeal. True, the ld. CIT(A) has, in arriving at his decision, regarded the land sold as not appurtenant to the Feed Mill, while the assessee states of the same being a part and parcel of the factory building sold . Further, it may also be that the ld. CIT(A) considers so as land, if regarded as part of the units sold, would be subject to provision of section 50B, in which case no indexation benefit would be available to the assessee and, two, only the net worth, as certified by an Accountant, of the relevant undertaking (i.e., excluding the plant and machinery of the other unit), allowed as a deduction. It is for these reasons that the ld. CIT(A) states it to raise a contentious issue and, in any case, covered u/s. 154(1A). Rectification u/s 154 - the correct commercial rate to be applied is ₹ 15,000 per marla, as the Collector had himself applied the said rate - HELD THAT - The assessee s letter dated 09.01.2018 is, to that extent, a separate application, since undisposed. It is open for the assessee to, where so advised, seek disposal of the said application dated 09.01.2018. I say so, i.e., where so advised as, as it appears, it may be of no consequence. The value (out of the total consideration of ₹ 280 lacs) imputed to the other assets is the balance after deducting that ascribed to land. As such, a change in the said rate, impacting land value (cost), would imply a corresponding increase in STCG; in fact, to exactly the same extent. How, one wonders, would it assist the assessee in any manner? Penalty u/s 271(1)(c) - tax sought to be evaded - HELD THAT - It is precisely this that would cause the assessee s appeal agitating the levy of penalty as being liable to be accepted at the threshold. The primary (and the sole) reason for the assessment of the capital gain in a sum higher than that returned by the assessee (by ₹ 25.90 lacs), on which the impugned penalty is levied, is, as a narration of the fore-going facts makes it clear, on account of non-allowance of the WDV of the entire block of asset, i.e., of both the units, i.e., as against only of the Feed Mill Unit. The difference between the two sets of the WDV allowed by the ld. CIT(A), is ₹ 26.06 lacs (₹ 71 lacs ₹ 44.94 lacs), i.e., more than the difference for which the penalty is being levied and which is due to the allowance of (indexed) cost of land (at ₹ 0.16 lacs). Therefore, even as the asessee has not furnished any explanation during the penalty proceedings, nor indeed in the appellate proceedings, there is no tax sought to be evaded , in terms of Explanation 4 to section 271(1)(c), on which penalty could be levied. The assessee, accordingly, succeeds.

Issues:
1. Quantum and penalty proceedings appeal by the Assessee.
2. Dispute over computation of short-term and long-term capital gains.
3. Application under section 154 for amendment of appellate order.
4. Barred by time and non-est appeal order.
5. Application of circle rate for land in composite sale.
6. Correct commercial rate for land valuation.

Analysis:

1. The Assessee filed two appeals challenging the dismissal of application under section 154 for amendment of the appellate order and the confirmation of penalty under section 271(1)(c) for assessment year 2006-07. The dispute arose from the computation of short-term and long-term capital gains related to the sale of assets.

2. The Assessee sold its feed mill unit and land, resulting in short-term capital gain and long-term capital gain. The Assessing Officer computed the gains based on the Written Down Value (WDV) of the assets. The first appellate authority upheld the separate computation of gains on land and assets, allowing relief to the Assessee.

3. The Assessee filed an application under section 154, challenging the computation of gains and the application of circle rate for land valuation. The first appellate authority rejected the application, stating the issues were debatable and covered under section 154(1A), leading to the Assessee's appeal on various grounds.

4. The appeal raised concerns about the order being time-barred and non-est, but the tribunal dismissed these grounds, emphasizing the mandatory nature of the amendment process under section 154. The tribunal cited legal precedents to support the directory nature of the time frame for such orders.

5. The dispute over the application of the circle rate for land in a composite sale was considered contentious. The tribunal upheld the separate computation of gains on the land, emphasizing the distinction between land and other assets, as established in legal precedents.

6. The issue of the correct commercial rate for land valuation was raised, but the tribunal noted that this aspect was not part of the original application under section 154. The tribunal highlighted the need for separate applications for new issues and emphasized the lack of impact on the overall capital gains computation.

In conclusion, the tribunal dismissed the Assessee's appeal in one case and allowed it in the penalty proceedings, ruling in favor of the Assessee due to the absence of tax evasion and discrepancies in the capital gains computation.

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