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TMI Blog2017 (11) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153C/143(3)/144 for making de-novo assessment is not illegal and bad in law 3. Counsel for the appellant contended that after loosing before the tribunal, notice were issued u/s 263 and order came to be passed Annexure-11 which was subject matter of challenge before the tribunal. 4. The tribunal after considering the case of the appellant has observed as under:- 2.11 Ld. CIT in para 12 of his order by reviewing AOs order held the arrangement to be a colorable and therefore, direct to explore the possibility of taxing the revaluation profits. He has failed to appreciate AO has adopted a view to protect the interest of the revenue in case of the firm by reducing the value of closing stock holding the same to taxable in the hands of the partners. Thus ld.CIT in the guise of 263 powers has reviewed a justifiable view taken by AO which is without jurisdiction and beyond the scope of reversionary powers. 2.12 Reliance is placed on following case laws:- Sudhakar M. Shetty Vs. ACIT 130 ITD 197 (Mum) Supreme Court in case of CIT Vs MaxIndia Ltd. 295 ITR 292. CIT Vs. Chambal Fertilizers and Chemicals Ltd. (2014) 360 ITR 225 (Raj.) CIT Vs. New Delhi Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is decided ex parte against him. In contradistinction assessee is challenging an order which apparently goes in his favor. Its challenge rather indicates that ex parte assessmentis on facts which do not meet the eyes. Reliance in support of ld. CIT order is placed on:- i.Smt. Tara Devi Agrawal v CIT 88 ITR 323 (SC) ii.Smt Renu Gupta v CIT 301 ITR 45 (Raj) 2.14 We have heard the rival contentions and perused the material available on record. The assessment in question was consequent to a search; assesses non cooperation has been adversely viewed by AO and at the end of the day search assessment was framed without co operation of the assessee. Assessment order refers to various frequent reconstitution of the firm and transfer of land rights therein; instances of revaluation of land; claim of their exemption from the taxation are not addressed in the ex parte search assessment order. The issues raised by ld. CIT for non inquiry are found to validly raised and ought to have been inquired by AO more particularly when assessee was non cooperative. For this purpose necessary field inquiries were necessary besides cross verification of record of other search entitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government :] Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section :] Provided also that no deduction shall be allowed in computing the income chargeable under the head Capital gains in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.] Explanation For the purposes of this section,- (I) foreign currency and Indian currency shall have the meanings respectively assigned to them in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999)]; (ii) the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at the rate of exchange prescribed in this behalf; (iii) indexed cost of acquisition means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the remaining five partners. There was no dissolution of the firm or at any rate there was no distribution of capital asset on 01.04.1994 when three partners retired from the partnership firm. What was given to the retiring partners is cash representing the value of their share in the partnership. No capital asset was transferred on the date of retirement under the deed of retirement deed dated 01.04.1994. In the absence of distribution of capital asset and in the absence of transfer of capital asset in favour of the retiring partners, no profit or gain arose in the hands of the partnership firm. Therefore, the question of the firm being assessed under Section 45(4) and charging them tax for the profits or gains which did not accrue to them would not arise. 25. It was contended on behalf of the revenue that five incoming partners brought money into the firm. Three erstwhile partners who retired from the partners on 01.04.1994 took money and left the property to the incoming partners. It is a device adopted by these partners in order to evade payment of profits or gains. As rightly held by this Court in Gurunath's case (supra) it is taxable. This argument proceeds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevailed with the High Court. The decision in Muhammad Hussain Sahib v. Abdul Gaffoor Sahib MANU/TN/0316/1950 : [1950] 1 M.L.J. 81 correctly sets out the mode of taking accounts regarding the assets of a firm. While the valuation of assets during the subsistence of the partnership would be immaterial and could even be notional, the position at the point of dissolution is totally different: But the situation is totally different when the firm is dissolved or when a partner retires. The settlement of his account must be not on a notional basis but on a real basis, that is every asset of the partnership should be converted into money and the account of each partner settled on that basis.... The assets have to be valued, of course, on the basis of the market value on the date of the dissolution... 36. This applies equally well to assets which constitute stock-in-trade. There can be no manner of doubt that, in taking accounts for purposes of dissolution, the firm and the partners, being commercial man, would value the assets only on a real basis and not at cost or at their other value appearing in the books. A short passage from Pickles on Accountancy (Third Edn), p. 650 will mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee filed a profit and loss account and certain other statements. In the profit and loss account, a sum of $ 1,01,248 was shown as difference on revaluation of estates, gardens and house properties on the dissolution of the firm on 13.3.61, such difference being $ 70,500 in respect of house properties and $ 30,748 in respect of estates and gardens. In the memo of adjustment for income-tax purposes, however, the above sum was deducted on the ground that it was not assessable either as revenue or capital. A statement was also made before the officer that partner Ramanathan Chettiar, forming one group and the other partners forming another group, were carrying on business separately with the assets and liabilities that fell to their shares on the dissolution of the firm. 6.2 He contended that assets were transferred in that case but in the present case assets were not transferred. 7. In view of the above, the appeal stands allowed and the issue is answered in favour of the assessee. However, it is made clear that as and when valuation of the land will be considered, the acquisition of price of ₹ 2 crores will not be considered, only the difference of ₹ 9 cro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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