DILIP C. KARNIK, MUMBAI V. ITO WD 11(2)(2),

CO 145/MUM/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8775 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 26-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KESHAV B BHUJLE
• Keywords: Period of limitation; Additional evidence; Revised return
• Section: 54F; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BIL LAIYA, AM ./I.T.A. NO. 6298/MUM/2011 ( / ASSESSMENT YEAR : 2008-09 THE ITO, WARD 11(2)(2), AAYAKAR BHAVAN, MUMBAI-400 020 SHRI DILIP C. KARNIK, 41, KALPAK APARTMENT, MADHUSUDAN MARG, BANDRA (E), MUMBAI-400 051 C.O. NO. 145/MUM/2012 (ARISING OUT OF I.T.A. NO. 6298/MUM/2011 ( / ASSESSMENT YEAR : 2008-09 SHRI DILIP C. KARNIK, 41, KALPAK APARTMENT, MADHUSUDAN MARG, BANDRA (E), MUMBAI-400 051 THE ITO, WARD 11(2)(2), AAYAKAR BHAVAN, MUMBAI-400 020 ./ !' ./PAN/GIR NO. : AACPK 0941Q ( # /APPELLANT ) .. ( $%# / RESPONDENT ) # & / DEPARTMENT BY: ` SHRI JAVED AKHTAR $%# ' & / ASSESSEE BY : SHRI KESHAV B. BHUJLE ' ( / DATE OF HEARING : 04.06.2013 )* ' ( / DATE OF PRONOUNCEMENT : 07.06.2013 +, / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-3, MUMBAI DT. 24.6.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. ITA NO.6298/M/2011 C.O. NO. 145/M/2012 2 ITA NO. 6298/M/2011 2008-09 2. THE REVENUE HAS RAISED FOLLOWING SUBSTANTIVE GRO UNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A), MUMBAI, HAS ERRED IN DECID ING THAT THE TENANCY RIGHTS IN THE PROPERTY AT ROOM NO.2197, BUILDING NO.44 OF GANDHI NAGAR PRANAV CO-OPERATIVE SOCIETY LTD., BANDRA(E), MUMBAI- 400 051 WERE OWNED JOINTLY BY THE ASSESSEE AND HIS PARTNER IN THE FIRM M/S.FURNIN FURNIN SERVICES 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-3, MUMBAI, HAS ERRED IN BASING HIS DECISION MERELY UPON AN AFFIDAVIT FILED BY THE ASSE SSEE, WHICH WAS NEVER FILED BEFORE THE A.O. AND THE CONTE NTS OF WHICH WERE NOT BORNE OUT BY THE FACTS ON RECORD. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-3, MUMBAI, HAS ERRED IN BASIN G HIS DECISION ON ADDITIONAL EVIDENCE FILED IN THE FORM O F AN AFFIDAVIT, WITHOUT COMPLYING WITH RULE 46A OF THE I T RULES AND WITHOUT ALLOWING AN OPPORTUNITY TO THE A.O TO R EBUT SUCH EVIDENCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-3, MUMBAI HAS ERRED IN DIRECTIN G THE AO TO CONSIDER CAPITAL GAINS ON TRANSFER OF THE ABOVE SAID PROPERTY AT RS.17,10,939/- INSTEAD OF RS.33,34,060/ - AS ASSESSED BY AO BEFORE ALLOWING DEDUCTION U/S.54EC. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-3, MUMBAI HAS ERRED IN ALLOWING DEDUCTION U/S.54F IN RESPECT OF THE AMOUNT OF DEP OSIT OF RS.25,14,208/- UNDER CAPITAL GAINS ACCOUNTS SCHEME, WHEN SUCH CLAIM WAS NOT MADE IN THE RETURN OF INCOME OR IN ANY REVISED RETURN AND THEREFORE COULD NOT HAVE BEEN CO NSIDERED IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (284 ITR 323). ITA NO.6298/M/2011 C.O. NO. 145/M/2012 3 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT T HAT THE EARNING OF CAPITAL GAINS ON SALE OF SHARES AND THE DEPOSIT UNDER THE SAID SCHEME WERE NOT AT ALL DECLARED IN T HE RETURN OF INCOME FILED. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DIS CLOSED CAPITAL GAIN ON SALE OF THE TENANCY RIGHT AT RS. NIL AFTER CLAIMING EXEMPTION U/S. 54EC OF THE ACT AT RS. 15,57,053/- IN RESPECT OF THE INVEST MENT IN THE BONDS OF NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI). THE A O SOUGHT DETAILS FROM THE ASSESSEE. THE ASSESSEE FILED A DETAILED R EPLY DT. 23.11.2010 AND EXPLAINED THAT THE IMPUGNED PROPERTY WAS PURCHASED ON 29.8.1995 FROM MS. JESSY JOHNSON MANATH FOR RS. 11 LAKHS. THEREAF TER THE SAID PROPERTY WAS INTRODUCED BY THE ASSESSEE AS CAPITAL IN THE FI RM M/S. FURNIN FURNIN SERVICE CENTRE WHERE ASSESSEE WAS HAVING 50% OF S HARE IN PROFIT. THE FIRM WAS DISSOLVED ON 31.3.2008. HOWEVER, PRIOR TO THE DISSOLUTION OF THE SAID PROPERTY WAS SOLD AND THE CONSIDERATION WAS DI VIDED EQUALLY BETWEEN BOTH THE PARTNERS. BOTH THE PARTNERS DECLARED 50% OF THE CAPITAL GAIN ON SALE OF TENANCY PROPERTY IN RESPECT OF THEIR SHARES . 3.1. THE AO WAS OF THE OPINION THAT THE SAID PROPER TY WAS APPEARING IN THE BALANCE SHEET OF THE PARTNERSHIP FIRM M/S. FUR NIN FURNIN SERVICE CENTRE AS AN ASSET. THEREFORE, ANY CAPITAL GAIN IN RESPECT OF THE SALE OF SAID PROPERTY SHOULD BE TAXED IN THE HANDS OF THE F IRM. THE AO SOUGHT CLARIFICATION FROM THE ASSESSEE ON THIS ISSUE. THE ASSESSEE REPLIED VIDE LETTER DT. 11.12.2010. THE ASSESSEE EXPLAINED THAT THE SAID PROPERTY WAS PURCHASED BY HIM IN 1995 AND THEREAFTER IT WAS INTR ODUCED IN THE PARTNERSHIP FIRM WHEREIN THE ASSESSEE HAD 50% SHAR E IN PROFIT. IT WAS FURTHER EXPLAINED THAT THE PROPERTY WAS SOLD ON 7.1 2.2007, THE TIME ITA NO.6298/M/2011 C.O. NO. 145/M/2012 4 AVAILABLE FOR INVESTMENT IN BONDS U/S. 54EC WAS UPT O 6.6.2008. HOWEVER, IN THE MEANTIME, THE FIRM WAS DISSOLVED ON 31.3.2008 WHICH CREATED A PECULIAR SITUATION THEREFORE EACH OF THE PARTNER ACCOUNTED FOR THE RESPECTIVE SHARE IN CAPITAL GAINS AND CLAIMED E XEMPTION U/S. 54EC FOR THE AMOUNT INVESTED BY BOTH THE PARTNERS IN THEIR INDIVIDUAL CAPACITY. 3.2. THE ASSESSEE FURTHER CLAIMED THAT BY DOING SO THERE IS NO LOSS TO THE REVENUE. THE SUBMISSIONS OF THE ASSESSEE DID NOT F IND ANY FAVOUR FROM THE AO. THE AO WAS OF THE FIRM BELIEF THAT THE SAL E CONSIDERATION OF RS. 55 LAKHS WAS PAID FROM THE TRANSFEREE IN FAVOUR OF THE ASSESSEE EVEN THOUGH THE SAID FIRM WAS IN EXISTENCE AS ON THE DAT E OF THE SALE. IT WAS ONLY LATER ON 50% OF THE SALE CONSIDERATION WAS TRA NSFERRED TO THE OTHER PARTNER WHOSE NAME IS NOWHERE APPEARING EITHER IN T HE PURCHASE DEED OR SALE DEED OF THE PROPERTY. THE AO CONCLUDED THAT T HE ASSESSEE WAS THE SOLE OWNER OF THE PROPERTY THEREFORE THE ENTIRE SAL E CONSIDERATION IS TO BE ASSESSED IN THE HANDS OF THE ASSESSEE AND WENT ON TO TAX THE ENTIRE CAPITAL GAIN FROM THE SALE OF THE IMPUGNED P ROPERTY IN THE HANDS OF THE ASSESSEE. 4. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE C ASE HELD AS UNDER: I HAVE CONSIDERED THE FACTS AND PERUSED THE MATERI AL ON RECORD. I FIND THAT THE INITIAL INVESTMENT IN THE P ROPERTY WAS MADE BY BOTH THE PARTNERS EQUALLY. THOUGH THE PURCHASE D EED WAS MADE IN NAME OF THE APPELLANT DUE TO SOCIETY BY LAWS BU T IT WAS AGREED THAT THE PROPERTY WILL BELONG TO FIRM. THEY HAVE AL SO EXECUTED AN AFFIDAVIT TO EFFECT THAT BOTH THE PARTNER WILL HAVE EQUAL SHARES IN THE PROPERTY. THE ASSET WAS BROUGHT IN THE BOOKS OF THE FIRM AND IT WAS BEING SHOWN IN THE BALANCE SHEET FROM 1996 SINCE TH E PURCHASE OF PROPERTY. THE SALE PROCEEDED RECEIVED IN THE NAME O F THE APPELLANT WERE DIVIDED ENQUIRY BY THE BOTH PARTNERS. THE PART NERS HAVE EQUAL SHARES IN THE PARTNERSHIP FIRM. SINCE, IT WAS KNOWN THAT FIRM WAS TO ITA NO.6298/M/2011 C.O. NO. 145/M/2012 5 BE DISSOLVED BY 31-3-08; HENCE, THEY HAVE INVESTED SALE CONSIDERATION IN NHAI BONDS AS REQUIRED U/S 54E OF THE ACT. THEREFORE, I FIND FORCE THAT THE SALE PROCEEDS BELO NGED TO APPELLANT AND OTHER PARTNERS, HENCE, THE APPELLANT IS ENTITLE D TO EXEMPTION U/S 54E OF THE ACT. THE SAC CONSIDERATION OF THE APPELL ANT IS TO BE CONSIDERED AT 50% OUT OF TOTAL SO E CONSIDERATION O F RS.55 LAKHS. THE CAPITAL GAINS BEFORE EXEMPTION COME TO RS.33,34 ,060/- OF WHICH 50% WOULD BE AT RS. 17,10,939. ACCORDINGLY, T HE CAPITAL GAINS IN THE CASE OF THE APPELLANT IS TO BE CONSIDE RED AT RS.17,10,939 AGAINST WHICH THE APPELLANT HAS INVES TED RS.16 LAKHS IN NHAI BONDS. HENCE, THE CHARGEABLE LONG TERM CAPI TAL GAINS IN THE CASE OF THE APPELLANT WOULD BE AT RS.1,10,939 [ 17,10,939- 16,00,000]. ACCORDINGLY THE AO IS DIRECTED TO CONSI DER LONG TERM CAPITAL GAINS AT RS.1,10,939 IN THE CASE OF THE AP PELLANT AS AGAINST RS.17, 43,060 ASSESSED BY HIM. THIS GROUND OF APPEA L IS THEREFORE PARTLY ALLOWED. 5. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE AO. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES. IN OUR CONSIDERATE VIEW, THE LD . CIT(A) HAS GIVEN A CATEGORICAL FINDING ON THE ISSUE OF TAXABILITY OF CAPITAL GAIN. WE DO NOT FIND ANY REASON TO TAMPER WITH SUCH CATEGORICAL FIN DINGS OF THE LD. CIT(A). GROUND NO. 1,2 & 3 ARE ACCORDINGLY DISMISS ED. 8. THE SECOND GRIEVANCE OF THE REVENUE RELATES TO A LLOWANCE OF DEDUCTION U/S. 54F OF THE ACT IN RESPECT OF THE AMO UNT OF THE DEPOSIT OF RS. 25,14,208/- UNDER CAPITAL GAINS ACCOUNTS SCHEME . 9. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT HE HAS SOLD 300 SHARES OF SHYAMKARN A ENTERPRISES TO ITA NO.6298/M/2011 C.O. NO. 145/M/2012 6 HDIL FOR SALE CONSIDERATION OF RS. 50 LAKHS. THE A SSESSEE FURNISHED COMPUTATION OF CAPITAL GAINS IN THIS RESPECT. THE ASSESSEE HAS COMPUTED CAPITAL GAIN AT RS. 49,97,000/- FROM WHICH HE CLAIM ED EXEMPTION U/S. 54F FOR PURCHASE OF LAND AND CONSTRUCTION AT RS. 27,87, 792/-AND FURTHER FOR DEPOSIT UNDER CAPITAL GAIN SCHEME WITH BANK FOR RS. 25,14,208/-. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSE D THIS FACT IN THE RETURN FILED ON 13.1.2009 NOR HAS CLAIMED EXEMPTION U/S. 5 4F. THE AO WAS OF THE FIRM BELIEF THAT AS PER THE PROVISIONS OF SEC. 54F (4), THE AMOUNT OF NET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN ONE YEAR BEFO RE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE OR WH ICH IS NOT UTILIZED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET B EFORE THE DATE OF FURNISHING THE RETURN OF INCOME U/S 139 BE DEPOSITE D BY THE ASSESSEE IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE S PECIFIED IN AND UTILIZED IN ACCORDANCE WITH THE ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAMED IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSI TS. ON FURTHER SCRUTINIZING THE DETAILS, THE AO NOTICED THAT THE A SSESSEE HAS CLAIMED TO HAVE DEPOSITED AN AMOUNT OF RS. 24,14,208/- MADE WI TH BANK OF MAHARASHTRA UNDER CAPITAL GAIN SCHEME. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS NOT DISCLOSED THE DETAILS OF DEPOSIT NOR ENCLOSED THE PROOF OF MAKING THE DEPOSIT. THE ASSESSEE HAS FAIL ED TO FULFILL THE CONDITIONS PROVIDED IN SEC. 54F(4) AND ACCORDINGLY DENIED THE DEDUCTION OF DEPOSIT OF RS. 24,14,208/-. 10. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED A LL THE NECESSARY DETAILS RELATING TO DEPOSIT IN CAPITAL GAINS ACCOUN T SCHEME. THE LD. CIT(A) WAS CONVINCED THAT THE ASSESSEE HAS INVESTED UNDER CAPITAL GAINS SCHEME WITHIN THE TIME LIMIT PRESCRIBED I.E. BEFORE FILING OF THE RETURN. AS ITA NO.6298/M/2011 C.O. NO. 145/M/2012 7 THE RETURN WAS FILED IN ELECTRONIC FORM, THERE IS N O REQUIREMENT OF LAW TO SUBMIT DOCUMENTS ALONGWITH RETURN OF INCOME, THEREF ORE, THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT DENIAL OF DEDUCTION U /S. 54F IS WITHOUT ANY BASIS AND ACCORDINGLY DIRECTED THE AO TO ALLOW THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE IN CAPITAL GAINS ACCOUNT SCHEM E. 11. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE AO. 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN STATED BEFORE THE LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS. WE FIND THAT THE AO HAS ALLOWED PART OF THE CLAIM O F DEDUCTION U/S. 54F IN RESPECT OF THE PURCHASE OF LAND AND PART OF THE COST OF CONSTRUCTION. THEREFORE, THE AO CANNOT SAY THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN THE RETURN OF INCOME. IT IS AN UNDISPU TED FACT THAT THE RETURN OF INCOME WAS FILED ELECTRONICALLY AND AS PER THE NEW PROVISION RELATING TO THE FILING OF RETURN, THE ASSESSEE IS NOT REQUIR ED TO FILE ANY DOCUMENT ALONGWITH RETURN OF INCOME. HOWEVER, AT THE SAME T IME, WE FIND THAT ALL THE NECESSARY DETAILS WERE FILED DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS AND LD. CIT(A) HAS CATEGORIC ALLY HELD THAT THE DEPOSIT IN CAPITAL GAINS ACCOUNT SCHEME WAS WELL W ITHIN THE PERIOD OF LIMITATION PROVIDED U/S. 54F(4) OF THE ACT. THAT BE ING THE FACT OF THE MATTER, WE DO NOT FIND ANY REASON TO TAMPER WITH TH E FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. C.O. NO. 145/M/2012 ITA NO.6298/M/2011 C.O. NO. 145/M/2012 8 15. A PERUSAL OF THE GROUNDS OF CROSS OBJECTION SHO WS THAT THE ASSESSEE HAS FILED CROSS OBJECTION ONLY IN SUPPORT OF THE OR DER OF THE LD. CIT(A). SINCE WE HAVE CONFIRMED THE ORDER OF THE LD. CIT(A) , THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2013 . +, ' * - .+/ 07.06.2013 * ' 0 SD/- SD/- (VIJAY PAL RAO ) ( N.K. BILLAIYA ) + /JUDICIAL MEMBER + / ACCOUNTANT MEMBER MUMBAI; .+ DATED 07/06 /2013 . . ./ RJ , SR. PS +, +, +, +, ' '' ' $(1 $(1 $(1 $(1 21( 21( 21( 21( / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 140 $( , , / DR, ITAT, MUMBAI 6. 0 5 / GUARD FILE. +, +, +, +, / BY ORDER, %1( $( //TRUE COPY// 6 66 6 / 7 7 7 7 ! ! ! ! (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI