TaxTMI 
TaxTMI 
2018 (2) TMI 59
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....(hereinafter referred to as "Assessee") and one by Commissioner of Income Tax (hereinafter referred to as "Revenue"). The details of judgments of Tribunal, relevant Assessment Years (hereinafter referred to as "A.Y.") etc. are given in the following chart: Sl. No. I.T.A. No. Date of Impugned judgment I.T.A. No. Before Tribunal Assessment Year 1 24 of 2012 07/08/12 154/LKW/2012 2007-08 2 25 of 2014 15.07.2014 52/LKW/2014 2007-08 3 121 of 2015 23.06.2015 62/LKW/2012 2008-09 4 120 of 2015 23.06.2015 301/LKW/2013 2009-10 3. There is a Writ Petition also, filed by Assessee, i.e., Misc. Bench No. 1812 of 2014 wherein petitioner has challenged Reference dated 10.10.2013 made by Joint Commissioner of Income Tax, Range-VI, Lucknow, i.e. Assessing Officer (hereinafter referred to as "A.O.") to District Valuation Officer (hereinafter referred to as "D.V.O.") and provisional valuation report dated 28.02.2014/03.03.2014 and 10.03.2014 submitted by DVO i.e. respondent-3. 4. ITA No. 24 of 2012 filed by Revenue was admitted on 08.10.2013 on following two substantial questions of law: (A) Whether und....
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....s, is justified and tenable in the eye of law? (C) Whether an order of Assessing Officer merges with the order of Appellate Authority even through the order of Appellate Authority is only to the effect of permitting appeal to be withdrawn and does not delve upon the merits of the case? (D) Whether right of appeal which is a statutory right guaranteed to every Assessee can be taken away by applying doctrine of merger in the circumstances that earlier appeal stood withdrawn in order to pursue application under Section 154 of Act, 1961? (E) Whether appellant can be left without a remedy against an assessment order inflicting a heavy tax liability against him only because in proceedings under Section 154 he had filed an appeal which has been decided against him? (F) Whether an order of assessment in respect of which an appeal was preferred before CIT (Appeals), but was subsequently withdrawn can subsequently be rectified by Assessing Officer under Section 154 of Act, 1961? (G) Whether error pointed out by appellant in its application under Section 154 to the effect that Assessing Officer had made a mistake apparent on record by not subtracti....
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....declared net loss of Rs. 171240/- and claimed refund of Rs. 39686/-. Subsequently a revised return was filed on 24.03.2005 increasing amount of refund to Rs. 5,39,686/-. It also disclosed that Assessee has entered into an agreement with M/s Arif Builders on 20.06.2003 for development of land. The case was selected for scrutiny on the ground that the factum of Builder's agreement etc., which was element of capital gain, was not disclosed. Assessment was finalized by Assistant Commissioner of Income Tax, Range-IV, Lucknow (hereinafter referred to as "ACIT-IV, Lko") vide order dated 28.12.2006 and it computed long term capital gain as under: Valuation of 1733.40 sq. mtr land (18651 sq. ft) as per valuation Report dated 19.03.2001 as on 1.4.1981 37,30,277 Valuation of 1901 sq. mtr land (20455 sq. ft) as per valuation Report dated 13.6.2002 as on 1.4.1981 19,43,225 Total 56,73,502 Indexed cost as on 31.3.2004 is multiplied by 463/100 2,62,68,314 Less:- Total contemplated value as per Agreement 3,00,00,000 Long Term Capital Gain Rs. 37,31,686 Subject to the above, total income was computed as under:- Not los....
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.....08.2012. Setting aside CIT-II's order dated 30.03.2012 passed under Section 263, Tribunal confirmed assessment order dated 23.12.2009. Thereafter A.O. passed order dated 13.02.2013 on Assessee's application under Section 154 and rejected the same in view of judgment of Tribunal dated 07.08.2012. This order of A.O. dated 13.02.2013 was challenged in appeal by Assessee before CIT(A)-II, Lko which has been dismissed vide order dated 23.10.2013. Assessee then further preferred appeal before Tribunal which has also been dismissed vide judgment dated 15.07.2014. ITA 25 of 2014 has been filed by Assessee challenging Tribunal's order dated 15.07.2014 while Tribunal's judgment dated 07.08.2012 whereby CIT-II's order passed order under Section 263 was set aside by Tribunal has been challenged by Revenue in ITA No. 24 of 2012. 14. For Assessment Year 2008-09 return of income was filed on 08.10.2008 declaring total income of Rs. 57285150/-. The case was selected in scrutiny. Notice under Section 143(2) was issued by A.O. to Assessee on 27.08.2009. Assessee's representative appeared and explained that Assessee converted land in Stock in trade in 2003. It also entered....
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....f revised return of income filed on 13.10.2010 and alongwith above submitted revised computation of income and capital gain calculation. The capital gain calculation shown by the assessee is as under:- Areas Sq. Ft. Value Residential Area as per valuer's report as on 01.04.2003 643580.57 183420462.4 Total flat 200 taken on above land area on which capital gain taken 64358057/200=3217.90 183420462/200=917102 Value of land taken in sold flat during the F.Y. 07-08 A.Y. 08-09 3218X9=28962 917102X9=8253920 Cost of land area taken in sold flat as on 01.04.1981 as per valuer's report 9528962+2751390 Index Cost 2751390X463/100 12738935.7 Capital gain/loss on land area taken in 9 sold flat during the F.Y. 2007-08 (A.Y. 2008-09) as under: Sale Consideration of land 82,53,920/- Index Cost 1,27,38,936/- Net Loss (-) 44,85,016/- It is notice in the above calculation of capital gain, the assessee has taken demand cost of land as on 01.04.1981 as Rs. 95/- on the basis of registered valuer's report. The circle rats as on 01.04.1981 of Nishatganj (Paper Mill) where....
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.... = Rs. 2,08,13,932/- 3. Profit on Mutual Funds = Rs. 3,08,204/- 4. Company land sold = Rs. 28,54,601/- 5. Business loss 01-02 = Rs. 4,42,619/- 6. Business loss 04-05 = Rs. 1,34,724/- 7. Business loss 06-07 = Rs. 11,87,030/- 8. Business loss 07-08 = Rs. 2,19,93,446/- 9. Unabsorbed Depreciation 2001-02 = Rs. 20,726/- 10.Unabsorbed Depreciation 2004-05 = Rs. 36,511/- 11. Unabsorbed Depreciation 2006-07 = Rs. 61,741/- Rs. 4,96,81,806/- Rs. 5,63,94,107/- 2.(a)Capital Gain as calculated in para 2 above Rs. 84,27,065/- (b)Profit on Mutual Fund Rs. 3,08,204/- (c) As discussed in para (3) above Rs. 13,99,150/-" 17. Assessee preferred appeal before CIT(A)-II against assessment order dated 30.12.2010 in relation to A.Y. 2008-09 and appellate authority vide order dated 05.12.2011 partly allowed appeal. The first ground considered by CIT(A)-II was value of land as on 01.04.1981 and as adopted on 01.04.2003. CIT(A)-II held that since valuation report of Registered Valuer relied on by Assessee was accepted by A.O. in earlier year, A.O. was not justified in taking market value....
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....market value of the land sold through public auction in the year 1985. Therefore, we are of the view that the fair market value determined by the registered valuer is not correct. On the other hand, the Assessing Officer has adopted the circle rate as on 1.4.1981 without looking to the fact that the assessee has filed the registered valuer's report to determine the fair market value of the land on 1.4.1981. We find force in the contention of the assessee that the Assessing Officer is not expert in the field of determining the value of land therefore, he should have made reference to the DVO to determine the value of land as on 1.4.1981, but he did not do so. He adopted the circle rate as fair market value of land as on 1.4.1981 ignoring the registered valuer's report submitted by the assessee and computed the long term capital gain. The approach adopted by the Assessing Officer does not appear to be correct. Since the market value of the land as on 1.4.1981 was not determined correctly either by the assessee or the Assessing Officer, this issue requires a fresh adjudication by the Assessing Officer. Accordingly, we set aside the order of the ld. CIT(A) in this regard and re....
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.... Total Income Rs. 6,31,07,164/-" 21. Assessee preferred appeal before CIT(A)-II and vide order dated 15.02.2013, it followed earlier appellate order dated 05.12.2011 passed by CIT(A)-II in relation to A.Y. 2008-09 and deleted addition of Rs. 85,72,936/- made by A.O. by working out capital gain on the basis of circle rate for cost of acquisition and partly allowed appeal accordingly. Thereagainst Revenue preferred ITA No. 301/LKW/2013 which has been decided by Tribunal vide judgment dated 23.06.2015 and setting aside order of CIT(A)-II, it has remanded the matter to A.O., to redetermine fair market value as on 01.04.1981. 22. The above facts disclose an important aspect that land in question was owned by State Government and is 'Nazul Land'. This fact was also not disputed by learned counsels for parties during the course of arguments that land in question was/is 'Nazul'. Lease to Assessee was granted vide lease deed executed in 1942. It forms a 'Capital Assets' to Assessee in the light of definition of 'Capital Asset' under Section 2(14) which reads as under: "(14) "capital asset" means property of any kind held by an ass....
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....wner of a land. Here, admittedly owner of land is State Government. It is in this backdrop, certain basic issues, we find have not been addressed by any Revenue Authority, though integrally connected and relevant to be looked into to understand the nature of further transactions. These are: (I) Whether Assessee could have converted 'capital asset' in the form of lease rights over land in dispute in 'stock in trade' which may have effect of converting land itself from 'capital asset' to 'stock in trade'. In other words, whether conversion of 'capital asset' into 'stock in trade' in respect of land in dispute was confined only to the extent of lease rights which Assessee held over property in dispute or it can be said that land itself became a 'stock in trade'. (II) On 01.04.2003 when Assessee claimed that 'capital asset' in respect of land was converted into 'stock in trade', whether Assessee held land in question as a 'Lessee'. (III) Whether, on 01.04.2003 Assessee was in possession of land in dispute validly having lease renewed/ or unauthorizedly or otherwise, since lease wa....
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.... 4431. For dealing with such property under the authority of the Lt. Governor of North Western provinces, two orders were issued in October, 1846 and October, 1848 wherein after the words "Nazul property" its english meaning was given as "Escheats to the Government". Sadar Board of Revenue on 20th May, 1845 issued a circular order in reference to Nazul land and in para 2 thereof it mentioned "The Government is the proprietor of those land and no valid title to them can be derived but from the Government." The Nazul land was also termed as confiscated estate. Under circular dated 13th July, 1859, issued by the Government of North Western Provinces, every Commissioner was obliged to keep a final confiscation statement of each district and lay it before the Government for orders. The kingdom of Oudh was annexed by East India Company in 1856. It declared the entire land as vested in the Government and thereafter settled the land to various individuals Zamindars, Nawabs etc. 4432. At Lucknow revolt against the British Company broke up in May, 1857 which is known as the first war of independence which very quickly angle a substantial part of north western provinces. After failur....
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....se any personal right of ownership upon immoveable property. The entire property within the suzerainty of the king belong to him, who had right to tax its subject in the form of tax or otherwise by realising share in the agricultural or other income in the immoveable property. The percentage of share may differ and that may not be relevant for our purpose. 4438. The second aspect of the matter is that since ancient time the right of ownership proceeded with possession and is recognized by the well known principle "possession follows title". The individual right of ownership therefore was well recognized in the various personal laws and the only right the king had to acquire the land in known valid means, namely by purchase or gift etc. The obligation upon the king is to protect the subject and his property from enemies and for that purpose he used to raise revenue from the subject in the form of tax and/ or share from the income of the property etc. It is said that the King, by virtue of its authority, was not the sole owner of the entire immoveable property within his suzerainty but though the immoveable property was subject to his suzerainty, the individual right of the ....
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.... 1935. After the enactment of the Constitution of independent India, Article 296 now provides : "Subject as hereinafter provided, any property in the territory of India which, if this Constitution had not come into operation, would have accrued to His Majesty or, as the case may be, to the Ruler of an Indian State by escheat or lapse, or as bona vacantia for want of a rightful owner, shall if it is property situate in a State, vest in such State, and shall, in any other case, vest in the Union." 4441. The Apex Court in Pierce Leslie and Co. Ltd. (supra) has considered the above principles in the context of sovereign India as it stands under its constitution after independence and has observed that "in this country the Government takes by escheat immoveable as well as moveable property for want of an heir or successor. In this country escheat is not based on artificial rules of common law and is not an incident of feudal tenure. It is an incident of sovereignty and rests on the principle of ultimate ownership by the State of all property within its jurisdiction." 4442. The Apex Court placed reliance on Collector of Masulipatam Vs. C. Vencata Narainapah 8 M....
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.... establishing its sovereignty." 4449. In Thakur Amar Singhji Vs. State of Rajasthan AIR 1955 SC 504, in para 40, the Court said : "The status of a person must be either that of a sovereign or a subject. There is no tertium quid. The law does not recognise an intermediate status of a person being partly a sovereign and partly a subject and when once it is admitted that the Bhomicharas had acknowledged the sovereignty of Jodhpur their status can only be that of a subject. A subject might occupy an exalted position and enjoy special privileges, but he is none the less a subject ..." 4450. In State of Rajasthan and Others Vs. Sajjanlal Panjawat and Others AIR 1975 SC 706 it was held that the Rules of the erstwhile Indian States exercised sovereign powers, legislative, executive and judicial. Their firmans were laws which could not be challenged prior to the Constitution. The Court relied on its earlier two decisions in Director of Endowments, Govt. of Hyderabad Vs. Akram Ali AIR 1956 SC 60, and Sarwarlal Vs. State of Hyderabad AIR 1960 SC 862. 4451. In Promod Chandra Deb Vs. State of Orissa A.I.R. 1962 S.C. 1288 "act of the State" was explained in th....
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....Act, 1882') do not apply to Government land. Section 3 says that all provisions, restrictions, conditions and limitations ever contained in any such grant or transfer, as aforesaid, shall be valid and take effect according to their tenor, any rule of law statute or enactment of the Legislature to the contrary notwithstanding. ...." 25. The above discussion makes it clear that title of land was with Government. Mere grant of lease to any person cannot have the consequence of divesting title from State to such person. The land in question was leased out to Assessee in 1942. Lease rights became effective from 01.04.1942. Initial tenure of lease was 30 years. Thereafter it was renewable for two terms, each of 30 years, total of 90 years. The first tenure of 30 years ended on 31.03.1972. Second term would have ended on 31.03.2002. It has not been brought on record, whether the term of lease was extended in 1972 and thereafter in 2002. Only when term of lease would have been renewed by State Government, Assessee could have continued with lease rights, validly upto 31.03.2032, otherwise in absence of renewal of lease, after expiry of initial period, lease rights of Assessee came to....
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....visions of the DD Act and terms and conditions of the lease deed and the case law referred supra that there is no automatic renewal of lease of the property in question in favour of the original lessee" 36. Having said so, Court held that in absence of renewal of lease, status of original lessee in relation to disputed property was an "unauthorized occupant" in terms of Section 2(g) of Act, 1972." 28. We may also notice at this stage that judgment in Commissioner of Income Tax Vs. Carlton Hotel Pvt. Ltd. (Supra) has attained finality since appeal before Supreme Court in Special Leave to Appeal (C) No. 28637 of 2017 has been dismissed by Supreme Court on 06.11.2017. 29. If Assessee continued to have possession over land in dispute without renewal of lease as an unauthorized occupant, this has again to be examined whether Assessee could have claimed any right over property in dispute either as 'capital asset' or as 'stock in trade' at all. 30. What has been done in the case in hand is that ignoring the fact that Assessee did not have any title over land but possessed only lease rights, and land was owned by State Government, Revenue Authorities have ....
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....ibunal got finalized on 23.06.2015 when Tribunal dismissed Revenue's Appeal and upheld order of CIT(A)-II. This matter is not before us. However, since the questions and issues, as we have already discussed above, forming root of the matter, were not examined at all, it cannot be said that earlier assessment of A.Y. 2004-05 will have any affect and legal consequence like res-judicata or estoppel against Revenue in examining those matters and proceeding accordingly. An issue not considered would not attract the principle of res-judicata. 33. Moreover, so far as A.Y.2004-05 is concerned, we find that CIT(A)-II while allowing Assessee's appeal against assessment order dated 28.12.2006 held that loss or gain, whatever, should be computed during A.Y. in which land was converted from 'capital asset' to 'stock in trade' and not during the period of conversion and this fact has been confirmed by Tribunal by dismissing Revenue's appeal and confirming order of CIT(A). The question is, when it can be said that land itself was converted into 'stock in trade' from 'capital asset'. Since, this aspect having not been taken further in appeal and in re....
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....of 2012 in favour of Revenue. The view taken by Tribunal cannot be sustained inasmuch A.O. having not examined the matter in correct perspective, as discussed above, it is a clear case where his order is erroneous and prejudicial to the interest of Revenue and, therefore, CIT has rightly exercised jurisdiction under Section 263 of Act, 1961. 35. The orders in respect of A.Y. 2008-09 and 2009-10 have followed the orders in A.Y. 2007-08 and, therefore, have to be re-examined in the light of the findings of A.O. on issues, we have discussed above and now require A.O. to examine in the present case. So far as Question-(B) in ITA 24 of 2012 and Questions-(A), (B) and (C) in ITAs 120 of 2015, 121 of 2015 and 25 of 2014 are concerned, we hold that these questions need not be answered at this stage for the reason that we are remanding the matter to A.O. to re-examine the entire matter in the light of discussions made above and, thus, set aside/modify order of Tribunal in respect of all three Assessment Years, i.e., 2007-08, 2008-09 and 2009-10. Now A.O. will examine the entire aspect afresh and pass fresh orders in respect of aforesaid Assessment Years. 36. All the appeals stand disp....