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TMI Blog2023 (5) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... 2023 to 16.05.2023 as part heard . Despite providing sufficient opportunity, the assessee could not support with documentary evidence that such Audit Report was filed by the assessee before the AO in original assessment proceedings. In these circumstances, we are of the opinion that disclosure of this material fact/requirement of law was not fulfilled by the assessee in the original assessment proceedings. Since in the case, it is evident that the facts of Audit Report required u/s 50B(3) of the Act being material to the assessment and which was not filed before the AO , therefore, the assessee is responsible for not disclosing the material facts fully and truly. Hence, we set aside the findings of Ld.CIT(A) on the issue in dispute and hold that re-assessment has been validly reopened by the AO. LTCG computation of the assessee arising from slump sale of the food service division - HELD THAT:- We find that computation of LTCG on the transfer of undertaking as the slump sale consists of two components. First component is sale consideration and the second component is the net worth or cost of acquisition. When the net worth of division is subtracted from the sale consideration, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort the ld. CIT(A) ]for Assessment Year ( AY ) 2012-13, raised following grounds: - 1. Whether on the facts and circumstances of the case, the ld. CIT(A) erred in treating reopening invalid without appreciating that as per section 151(1) (prior to 01.04.2021), notice u/s. 148 can be issued after expiry of 4 years from the end of the relevant A.Y., if Principal Commissioner of Income Tax (PCIT) is satisfied on the basis of reasons recorded by AO that it is a fit case for issue of notice and in the instant case of the assessee, approval of PCIT was taken before issue of Notice u/s 148 of the I.T. Act. 2. Whether on the facts and circumstances of the case, the ld. CIT(A) erred in holding the treating reopening invalid without appreciating that for the relevant assessment year AO had examined with reference to the ROI filed and it was found that the assessee had not filed necessary report as required u/s 50B(3) of the Act and it was seen that the assessee had incorrectly adopted the amount of networth of asset while computing Long Term Capital Gain of slump sale made during the year under consideration and this had resulted incorrect computation of LTCG and hence under assessment of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 1,50,04,578 Sale consideration 4,50,00,000 Long Term Capital Gains 2,99,95,422 The AO in the assessment proceedings, substituted the sale consideration received by the Fair Market Value ( FMV ) of the transaction of the slump sale of the transfer of food division at Rs. 7,20,32,509/- [i.e. which was estimated by the valuer under the Profit Earning Capacity Value (PACV) method]. Thereafter, the AO reduced the net worth of the food division amounting to Rs. 94,11,315/-, worked out by the valuer as against the net worth of Rs. 1,50,04,578/- computed by the assessee. 4. The fair market value (FMV) of the sale consideration computed by the AO is reproduced as under: - Sl. No. Particulars Profit Before Tax Tax 1. PERFORMANCE Rs. Rs. 2006-07 1,89,36,647 2007-08 2,15,21,971 2008-09 1,79,20,548 2009-10 4,71,60,172 2010-11 2,68,60,953 Total 13,24,00,291 2. FUTURE MAINTENANABLE PROFITS Average profit before tax 2,64,80,058 Less: TA/TM( 2% of Estimated Turnover) 65,75,78,245 1,31,51,565 Less Income Tax Payable @ 30% 30,98,548 Surcharge Payable @2% 1,99,927 41,98,475 Education Cess Payable 2% 83,970 Higher Education Cess 25 41,985 43,24,230 3. Net Maintainable Profit after tax 90,04,064 Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 11. Before us, Ld.Sr.DR submitted that there was failure on the part of the assessee in submitting the Audit Report required u/s 50B(3) of the Act, which was mandatorily to be filed by the assessee and therefore, there was a failure on the part of the assessee in disclosing full and true facts which are material for completing the assessment. Thus, under the second proviso (2) of section 147of the Act, the AO has validly reopened the assessment. He accordingly submitted that Ld.CIT(A) without appreciating the facts of the case, invalidated section 147 of the Act on the ground of change of opinion on the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account : Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth. Explanation 2. For computing the net worth, the aggregate value of total assets shall be, (a ) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (i) of sub-clause (c) of clause (6) of section 43 ; 51 [***] 52[(b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction under section 35AD , nil; and (c) in the case of other assets, the book value of such assets.]]] 15. During the course of hearing before us, Ld. Counsel for the assessee was given opportunity to produce copy of any such Audit Report required u/s 50B(3) of the Act, which was filed before the AO in original assessment proceedings and the case was adjourned from 04.05.2023 to 16.05.2023 as part heard . Despite providing sufficient opportunity, the assessee could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned addition of Rs. 3,26,25,672 are duly considered. The Net Worth of the business was worked out for the purposes of Section 50B(3) of the Act at Rs. 1.50,04,578by replacing book value of the Fixed Assets by the written down value of the block of assets under the Income-tax Act in terms of the above referred provisions of Section 50-B (3) of the Act. assessee was in the service sector, the valuation should have been adopted at the value of the business arrived at on PECV method instead of the average of NAV PECV. this Method has been prescribed and followed by the erstwhile Controller of Capital Issues (CCI). Further, the said valuer has considered various methods and after careful consideration has adopted this method. Hence, it is submitted that the no fault can be found with such method. In fact the Assessment Order also does not contain any specific reasons for not accepting this method of valuation nor does it contain any specific reasons for adopting PECV method. Such consideration had been agreed upon, as reflected in. the Business Transfer Agreement, by and between the two parties, after deliberations and negotiations and there was no room what so ever for estimating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oundsviz. 2.1 to 2.5 are allowed. 17. Before us, Ld.Sr. DR referred to section 50B(2) of the Act and submitted that for the purpose of LTCG on transfer of a capital asset by way of slump sale, FMV of the capital asset as on the date of transfer is deemed to the full value of the consideration received or accruing as a result of the transfer of such capital asset , therefore the AO has correctly substituted the sale consideration exchange between the parties with FMV worked out by the valuer on PECV method. He further submitted that net worth of the food division has already been adopted on the basis of the books of the accounts of the assessee. 18. On the other hand, Ld. Counsel for the assessee submitted that the AO has not accepted the method of valuation which was furnished by the assessee. The valuer computed the FMV by averaging the valuation as per PECV method as well as net asset value method. He submitted that when the legislation has conferred an option on the assessee to choose a particular method of the valuation, the AO cannot find fault in the said recognized method and adopting the method of his own choice. In support of this, he relied on the decision of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,50,04,578/-. The Ground No.3 raised by the Revenue is accordingly allowed for statistical purposes. 22. Ground No.4 raised by the Revenue relates to the disallowance of employee s contribution to PF/ESI paid after due date prescribed under the relevant Act. The finding of Ld.CIT(A) on the issue in dispute is reproduced as under: - 5.5.1. For ready reference, this Explanation 5 is reproduced, as below:- Explanation 5: For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies. 5.5.2 It is, thus, clear that the Legislature has expressed its intent clearly that provision of Section 43B of the Act neither applied (words used are shall not apply and shall be deemed never to have been applied ) nor shall apply to any sum received by an assessee from any of his employees to which the provisions of Section 2(24)(x) applies i.e. the controversial contribution of the employees' to PF/ESIC like welfare funds and to which the provision in Income Tax Law is un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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