TaxTMI 
TaxTMI 
2026 (6) TMI 230
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.... challenged the consequential levy of interest under sections 234A and 234B. 3. Briefly stated, the assessee is a partnership firm consisting of two partners, namely Shri Yatin Vora and Shri Vipul Vora. The assessee was engaged in the business of labour job work and manufacture of Gum Rosin from its industrial undertaking situated at MIDC, Pawane, Navi Mumbai. One industrial unit bearing No. C-166/2 was acquired on 09.12.1986 and subsequently the adjoining industrial unit bearing No. C-166/1 was acquired on 03.11.2000 from the Court Receiver, High Court, Bombay, pursuant to a distress auction sale conducted by Bank of India for recovery of dues from the defaulting concern M/s. Atul Traders. The assessee purchased the said property for Rs. 25 lakhs and, according to it, was also required to bear various liabilities attached to the property. 4. It is the case of the assessee that from Financial Year 2008-09 onwards the business suffered severe setbacks on account of labour unrest, industrial disputes and regulatory changes affecting its business operations. These circumstances ultimately resulted in closure of the business from Financial Year 2009-10 onwards. The assessee has f....
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.... CIT(A), however, was not persuaded to accept the aforesaid contentions. According to him, the valuation reports were obtained only after completion of assessment; the burden to establish fair market value was entirely upon the assessee; the valuation adopted by the approved valuer appeared excessive, particularly because Unit No. C-166/1 had been purchased only a few months earlier for Rs. 25 lakhs; and the assessee had failed to file returns for several preceding years. He further held that adequate opportunities had been granted during assessment proceedings and therefore the valuation reports subsequently filed could not be relied upon. The claim relating to MIDC transfer premium was also rejected and the assessment order was confirmed. 9. Before us, the learned counsel for the assessee reiterated the submissions advanced before the authorities below and strongly contended that the entire approach adopted by the Assessing Officer is contrary to the statutory scheme governing computation of capital gains. He submitted that both assets having been acquired prior to 01.04.2001, the assessee had an absolute statutory right to substitute fair market value as on that date. He furt....
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....s, it would be necessary to first notice the approach adopted by the Assessing Officer. A perusal of the assessment order reveals that despite the assessee having furnished copies of the purchase agreements and sale agreements relating to both the industrial units, the Assessing Officer proceeded on the footing that the assessee had neither satisfactorily explained the source of acquisition of the properties nor furnished a proper computation of capital gains. Proceeding on that premise, he brought to tax the entire sale consideration of Rs. 4.42 crores received on transfer of the two industrial units as long-term capital gain. Significantly, no deduction whatsoever was granted either towards the actual cost of acquisition, indexed cost of acquisition, fair market value as on 01.04.2001, expenditure incurred in connection with transfer or any other deduction contemplated under section 48. Thus, what has ultimately been subjected to tax is not the profit arising from transfer of the capital asset but the entire gross consideration received on sale. In our considered opinion, such an approach strikes at the very foundation of the statutory scheme governing capital gains. The charging....
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....d. The valuation report admittedly became available on 28.03.2022. Thus, this is not a case where an assessee, after suffering an adverse assessment, sought to create evidence at a much later stage. The valuation exercise was already in progress and culminated almost contemporaneously with the passing of the assessment order. Once such evidence became available and was duly placed before the first appellate authority, it was incumbent upon the appellate authority to examine the same on merits. Appellate proceedings under the Income Tax Act are a continuation of assessment proceedings and their primary object is to determine the correct tax liability in accordance with law. They are not intended to perpetuate an incorrect assessment merely because a relevant document became available shortly after completion of the assessment proceedings. 15. Equally untenable, in our opinion, is the observation that the valuation adopted by the approved valuer appears excessive because Unit No. C-166/1 had been purchased only a few months earlier for Rs. 25 lakhs. The record unmistakably reveals that the said property was not acquired through a normal commercial transaction. It was purchased fro....
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....s and not on the basis of perceived conduct of the taxpayer. 17. We further find considerable force in the assessee's reliance upon CBDT Circular No.14 (XL-35) dated 11.04.1955. The circular embodies a salutary principle that tax authorities should assist taxpayers in securing lawful reliefs and should not take advantage of ignorance, inadvertent omissions or procedural lapses where substantive entitlement otherwise exists. The circular certainly does not mandate acceptance of unsupported claims; however, where a claim is otherwise legally tenable and supporting evidence becomes available during appellate proceedings, the authorities are expected to determine the correct tax liability rather than deny relief on hyper-technical considerations. Similar is the position regarding the claim of transfer premium paid to MIDC amounting to Rs. 22.20 lakhs. The material available on record prima facie indicates that the payment was intrinsically linked with transfer of leasehold rights. Whether the expenditure was directly borne by the assessee or adjusted through the overall transfer arrangement is a matter requiring factual verification. However, the claim could not have been rejected w....