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TMI Blog2017 (3) TMI 1881X X X X Extracts X X X X X X X X Extracts X X X X ..... HON BLE SRI ABY. T. VARKEY, JM AND DR. ARJUN LAL SAINI, AM For the Appellant : Shri G.Mallikarjuna CIT-DR For the Respondent : Shri J.P.Khaitan, Sr.Advocate ORDER Per Dr. A.L. Saini, AM This is an appeal by the Revenue against the order dated 23.05.2013 of CIT(A)-I, Kolkata relating to AY 2008-09. 2. The Assessee is a company. For AY 2008-09, the Assessee filed a return of income declaring total loss at ₹ 51,360/-. The Assessee along with M/S.Wellgrowth Griha Nirman Pvt.Ltd., M/S. Blue Heaven Griha Nirman Pvt.Ltd., and M/s.Orchid Griha Nirman Pvt.Ltd., were partners in a partnership firm by name M/S.Salarpuria Soft Zone. The loss declared by the Assessee was on account of share of exempt profit from the partnership firm M/S.Salarpuria Soft Zone. The return so filed was processed u/s.143(1) of the Income Tax Act, 1961 (Act) on 13.10.2009. The assesse has shown, mainly, income from share of profit transferred from partnership firm Viz,M/s Salarpuria Soft Zone. 3. Subsequently proceedings u/s.147 of the Act were initiated by issue of a notice u/s.148 of the Act dated 3.11.2011 which was served on the Assessee on 4.11.2011. The reasons recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Assets in the balance sheet. 6. On January 9, 2006, the said three companies and another company called Wellgrowth Griha Nirman Pvt. Ltd. executed a deed of partnership in terms of which the said three companies transferred the said land to the partnership firm M/s. Salarpuria Soft Zone as their capital contribution. The fourth assessee company was to arrange the entire finance required for the development of the said land. Each of the said three companies had a 10% share in the profit/loss and the assessee company's share was 70%. The partnership business was deemed to have commenced on and from April 1, 2005. A supplemental deed of partnership was executed on March 13, 2006 between the four partners which inter alia, provided that the said firm can avail loan/credit facilities from commercial banks/financial institutions by mortgaging/charging its movable and immovable properties. The said firm subsequently obtained such loan/credit facilities to the extent of ₹ 250 crores. 7. The said three companies transferred the said land to the said firm on January 9, 2006 at cost and such cost was the amount recorded in the books of account of the said firm for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital contribution by the partners during the financial year ended March 31, 2006. The land was contributed by the said three companies during the previous year ended March 31, 2008 relevant to the assessment year 2008-09 for a sum of ₹ 314,29,74,600/- (value of the land on revaluation as on 31.3.2008) by way of capital contribution when it was converted into fixed assets from inventory by the said firm. (b) Section 45(3) of the Act was applicable in respect of such transfer made during the previous year relevant to the assessment year 2008-09. The revalued figure of ₹ 314,29,74,600/- recorded in the books of account of the said firm as on March 31, 2008 was to be deemed as the full value of consideration received or accruing as a result of transfer of the capital asset by way of capital contribution. The revaluation amount of ₹ 289,13,56,904/- was the profit which accrued to the said three companies and each of them was liable to be taxed on one-third of such profit i.e. ₹ 96,37,85,635/- as short term capital gains. (c) The land was grossly undervalued till it was part of inventory in the books of the said firm to avoid the market value of the land of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 40(b) of the Act. If the revaluation by the firm resulted in any taxable income, such income had to be considered in the hands of the firm alone and the partner's share in such income would be exempt in his hands. Even if the case made out in the recorded reasons is taken as correct, the AO could not have formed the belief that any income in respect of which the partner was chargeable to tax had escaped assessment in his hands. The AO himself was quite aware of this position as is apparent from the observation made by him in his order. Even if one proceeds on the basis that the revaluation of assets by the firm gave rise to taxable income, such income can only be considered in the firm's assessment. That the firm did not disclose any income on account of revaluation and did not pay any tax on such income does not confer jurisdiction upon the partner's Assessing Officer to reopen the partner's assessment on the allegation of escapement of income. In my view, even if the case made out in the reasons recorded is accepted on its face value, no belief could have been entertained by the AO that any , income in respect of which the partner was chargeable to tax h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2269 /Kol/ 2013 ( Orchid Griha Nirman Pvt. Ltd) involving the same assessment year viz. 2008-09. The relevant paras of the judgment is reproduced below: 25. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. DR relied on the order of AO. The ld. Counsel for the assessee relied on the submissions as were made before CIT(A) and relied on the order of CIT(A). He further placed reliance on the decision of the Hon ble Supreme Court in the case of Sanjeev Wollen Mills Vs. CIT 279 ITR 434 (SC) wherein the Hon ble Supreme Court held that by showing Market value of closing stock, assessee cannot be said to have made profit which was necessary for taxing income under the Act. 26. We have given a very careful consideration to the rival submissions. As far as the validity of initiation of reassessment proceedings u/s.147 of the Act is concerned, we are of the view that the conclusions of the CIT(A) are just and proper and calls for no interference. The reasons recorded by the AO before issuing notice u/s.148 of the Act for making reassessment u/s.147 of the Act, shows that the AO had information that the Partnership Firm had revalued its assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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