CIT Vs. SHASTHA PHARMA LABORATORIES

JUDGEMENT

(1.) THE Revenue has preferred this appeal against the order passed by the Tribunal holding that the transaction in question would not fall within section 45(4) of the IT Act, 1961, as such no capital gains is payable.

(2.) ASSESSEE filed its return of loss of Rs. 6,83,400 on 28 -12 -1992. After considering assessment under section 143(3) of the IT Act, 1961 (hereinafter referred to as the Act), an order came to be passed on 11 -11 -1994 treating the assessee as the unregistered firm and accepting the return filed. The assessment was reopened by issuing notice under section 148 of the Act on 19 -12 -2000, after taking due approval from the CIT. The assessee in reply to the notice, filed a letter dt. 6 -1 -2001 without enclosing the enclosures, contending that in the return filed earlier, it is clearly indicated that on 30 -3 -1992, the assets and liabilities have been taken over by the assessee after other partners retired and the firm has been advised that as there is no transaction of transfer under section 2(47) of the Act, there is no capital gains. They also contended that they have disclosed fully and truly all the material facts necessary for the purpose of the assessment for the relevant previous year. The assessment was duly completed under section 143(3) of the Act and the order dt. 11 -11 -1994, accepting the same should not have issued notice under section 148 of the Act, which is barred by the first proviso to section 147 and the proceedings now initiated is void oh initio. They also pointed out that the stand of the assessing authority that there has been a dissolution of the firm and there is a capital gain chargeable to tax under section 45(4) of the Act could have been taken, based on the information available in the statement of income. It is open to the Department to claim that the said information has been withheld. The stand now taken by the Department is only a change of opinion and cannot be the basis for issue of notice under section 148 r/w section 147 of the Act. After considering the aforesaid objections, the assessing authority after setting out the particulars furnished along with the return, held that the assessee has not furnished fully and truly all material facts necessary for working out capital gains even without considering the copies, statement and schedule furnished subsequently. The assessee has taken a stand that it is a transaction of taking over a firm by the company as a going concern and therefore, it does not amount to transfer. The details of revaluation was never furnished. In the Sch. 4, there is no mention of revaluation.

(3.) ON merits it was held that inclusive definition of transfer includes any transaction in any manner whatsoever, which has the effect of transferring or enabling the enjoyment of any immovable property. The assessing officer further held that by revaluation of the assets, the value of the assets was increased before the transfer, because of which there is definitely a capital gain liability in the hands of the assessee. Though the firm was taken over as a going concern and as there was no dissolution of the firm it has no bearing under section 45(4) of the Act, which clearly says dissolution of a firm or otherwise and therefore, it was held that section 45(4) of the Act is attracted and assessee is liable to pay capital gains.