2012 (1) TMI 216 - ITAT JAIPUR

Capital account balance received by the appellant on account of his retirement from the firm M/s. Krishna Villa Apartments - taxability - Held that:- The Finance Minister in the budget speech for the year 2003 stated that no confession shall be obtained during search and seizure operation. The instructions were followed by CBDT by issue of a circular on the lines desired by the Finance Minister. There can be an estoppel on the issue of the facts but there cannot be estoppel on the principle of law. It is not the case of the revenue that the assessee was not disclosing the amount received as a result of retirement from the firm. The assessee obtained the legal advice and was of the opinion that such revaluation is capital receipt which is not liable to tax. Hence, we feel that income cannot be added simply on the basis of surrender. The statement recorded u/s 132(4) can be rebutted by the assessee and the case of the assessee is that the amount is not liable to tax.

After considering various case laws relied upon by both the parties, we feel that the issue is to be decided in favour of the assessee because if two constructions are to possible then one has to adopt the construction which is favourable to the assessee. We had also noticed the distinguishing features in this case and it is not a simple case in which other partners joined the firm. This is a case where another firm has been taken over by the firm in which the assessee was a partner. Both the firms were having intangible rights arising from development agreement and right of constructing a housing / commercial complex and none of the firm valued such rights in the form of monetary consideration. Such rights remained with the firm even after retirement of the assessee. We therefore, hold that the ld. CIT(A) was not justified in confirming the addition of ₹ 5,24,47,943/-.