COMMISSIONER OF INCOME TAX CHENNIAI Vs. R SRINIVASAN

JUDGEMENT

(1.) THE appellant/revenue has filed the above Tax Case Appeal against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench dated 22.05.2009 in ITA.No.1951/Mds/2008 by raising the following substantial question of law.

(2.) THE assessee/respondent is a Chartered Accountant by profession. He is also practising as a surveyor and loss assessor since 1982 and he is also Director in M/s Srivatsan Surveyors Private Limited. THE assessment year is 2000-2001 and the corresponding accounting year ended on 31.03.2000. During the year the assessee/respondent sold his insurance survey loss business to the said company for a price of Rs.56 lakhs. THE respondent also filed a return of income on 31.10.2000 admitting the income of Rs.47,39,790/-. THE said return was processed under Section 143(1) of the Act. Later the assesee/ respondent filed revised return on 26.03.2002 admitting long term capital gain of Rs.56 lakhs and also claimed exemption under Section 54F of the Income Tax Act. In the assessment proceedings relating to the assessment year 2000-2001 in the case of M/s Srivatsan Surveyors Private Limited, the concerned assessing officer verified that the company had purchased goodwill for a price of Rs.56 lakhs from the assessee, who was the one of the Directors of the said company. On verification, it was found that the cost of the goodwill works out to only Rs.12,06,350/- as against Rs.56 lakhs shown in the records of the company. THE assessing officer was of the view that there was an escaped income and has issued a notice under Section 148 of the Income Tax Act on the assessee. THE assessment was completed under Section 143(3) read with Section 147 of the Act and determined the total income at Rs.59,39,790/-. While completing the assessment, the assessing officer worked out the value of the goodwill only at Rs.12,00,000/- as against Rs.56 lakhs and assessed Rs.12,00,000/- under the head "long term capital gains". THE balance sum of Rs.44 lakhs was treated as business income under Section 28(iv) of the Act. Further, the assessing officer also rejected the deduction claimed by the assessee under Section 54F of the Act, since the house property has been purchased for a sum of Rs.56,23,760/- by the assessee not out of the consideration received on account of transfer of the capital asset. Aggrieved by that order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). THE said Commissioner held that option is given to the assessee by Section 54F to invest even within a period of one year before the date on which the transfer takes place and therefore, allowed the appeal and set aside the order of the assessing officer. Aggrieved by that order, the Revenue has filed the appeal before the Income Tax Appellate Tribunal. THE Tribunal remanded the matter in respect of the valuation of the goodwill and in respect of the claim of exemption under Section 54F of the Act, the Tribunal allowed the claim and dismissed the appeal filed by the revenue. Aggrieved by that order, the Revenue has filed the present appeal.

(3.) THE assessee purchased a property for a sum of Rs.56,23,740/- and the registration was made on 18.08.2000. THE assessee had not received any sale consideration of Rs.56 lakhs from M/s Srivatsan Surveyors Private Limited till the date of registration of the property.