ITO,Ward 2(1), Nashik V. Shri Bharat V. Shah, Nashik

ITA 1022/PUN/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59992 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 25-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V L JAIN
• Assessee Lawyers: S K AMBASTHA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Salary income
• Section: 143(3); 50C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 1022/PN/2009 (ASSESSMENT YEAR: 2004-05) INCOME-TAX OFFICER. .. APPELLANT WARD 2(1) NASHIK VS. SHRI BHARAT V SHAH, .. RESPONDE NT B-17, MANGAL PARK APARTMENT, GOVIND NAGAR, NASHIK APPELLANT BY : SHRI V L JAIN RESPONDENT BY : SHRI S K AMBASTHA DATE OF HEARING : 05.01.2012 DATE OF PRONOUNCEMENT : 30.01.2012 ORDER PER G.S. PANNU, A.M .: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, NASHIK DATED 08. 06.2009 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 30.12.2008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME -TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2004- 05. 2. IN THIS CASE, THE BRIEF FACTS ARE THAT THE ASSESSEE FILE D A RETURN OF INCOME ON 21.7.2006 DECLARING TOTAL INCOME OF RS 77,180 /- FROM INSURANCE COMMISSION AND SALARY INCOME. THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AT THE RETURNED INCOME. SUBSEQUENTLY , THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 27.3.2008 O N THE GROUND THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT INA SMUCH AS THE ASSESSEE DID NOT DISCLOSE INCOME ON THE SALE OF LAND AT SUR VEY NO. 21/1B AND 23/1B SITUATED IN VILLAGE DEOLALI, DIST. NASHIK. IN RE SPONSE TO THIS NOTICE, ASSESSEE FILED A REPLY DATED 8.4.2008 SUBMITTING THAT TH E RETURN ORIGINALLY FILED ON 2.7.2006 BE TREATED AS A RETURN FILED IN RESPONSE T O NOTICE UNDER SECTION 148 OF THE ACT. 3. IN THE ENSUING ASSESSMENT PROCEEDINGS, THE CASE SET UP BY THE ASSESSING OFFICER WAS BASED ON A DEVELOPMENT AGREEMENT DAT ED 31.12.2003 BETWEEN ONE SHRI RAJESH ARUN PATHARKAR (REFERRED TO A S DEVELOPER ON ONE HAND) AND BETWEEN ASSESSEE AND TWO OTHERS, NAMELY, S/SHR I SAMPURNANAD KESHAV GAVANDE AND MANOHAR SRIDHAR PATIL (REFERRED T O AS VENDORS) REGARDING PROPERTIES SITUATED AND DESCRIBED AS 21/1B AND 23/1B IN VILLAGE DEOLALI, DIST. NASIK. IN TERMS OF THE SAID AGREEMENT, THE VENDORS COMPRI SING OF THE ASSESSEE AND TWO OTHERS WERE TO RECEIVE CONSIDERATION OF RS 38,00,000/- WITH THE SHARE OF THE ASSESSEE BEING 13,00,000/-, I.E. 34.21 %. THE ASSESSING OFFICER HELD THAT THE SAID TRANSACTION IS TAXABLE IN T HE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE VALUE ADOPTED FO R STAMP DUTY PURPOSES WAS RS 99,66,000/- AND THEREFORE, INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT THE TOTAL CONSIDERATION WAS ADOPTED AT R S 9966,000/- INSTEAD OF RS 38,00,000/-, FOR THE PURPOSES OF COMPUTING CAPITAL G AIN ON ACCOUNT OF THE TRANSFER ENVISAGED IN THE DEVELOPMENT AGREEMENT DATE D 31.12.2003. IN THIS MANNER, AS PER THE ASSESSING OFFICER, THE LONG TERM CAPI TAL GAIN ASSESSABLE IN THE HANDS OF THE ASSESSEE WAS RS 27,07,137/-. 4. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSE SSEE CONTENDED THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN TREATING THE CAPITAL GAINS AS INCOME OF THE ASSESSEE AND IN INVOKING TH E PROVISIONS OF SECTION 50C OF THE ACT. THE COMMISSIONER OF INCOME-TAX (A PPEALS) HAS DELETED THE ADDITION AS ACCORDING TO HIM THE PROPERTY CANNOT BE HELD TO BE A CAPITAL ASSET AND THUS IT IS NOT A TRANSACTION GIVING R ISE TO CAPITAL GAINS AND THEREFORE, THE QUESTION OF INVOKING THE PROVISIONS OF SECT ION 50C OF THE ACT DOES NOT ARISE. ACCORDINGLY HE DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER. IN THIS REGARD PARA 4 OF THE ORDER OF THE C OMMISSIONER OF INCOME-TAX (APPEALS) IS RELEVANT, WHICH READS AS FOLLOWS: 4. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLAN T AND ALSO THE REASONS GIVEN BY THE AO IN THIS REGARD. A STUDY OF THE SEQUENCE OF E VENTS LEADING TO THE SALE OF PROPERTY AS MENTIONED ABOVE INDICATES THAT THE APPE LLANT WAS INTERESTED IN THE DEVELOPMENT OF THE PROPERTY AND NOT TO HOLD IT AS A N INVESTMENT. FURTHER, THE ORIGINAL PAYMENTS WERE NOT PAID BY THE APPELLANT BUT AID BY M/S VIRAJ ESTATE P. LTD. AS APPEARING IN THEIR BOOKS OF ACCOUNTS. THUS, THE APP ELLANT WAS NOT HAVING SUFFICIENT RESOURCES FOR HOLDING IT AS INVESTMENT. IT IS FURTH ER SEEN THAT THE SALE DEED WAS MADE FOR AND ON BEHALF OF M/S VIRAJ ESTATES P. LTD AS PE R THE STIPULATIONS IN THE MOU DATED 21.8.2000. THEREFORE, THE SAID PROPERTY CANNOT BE H ELD AS A CAPITAL ASSET, HENCE THE SALE DOES NOT ATTRACT CAPITAL GAINS.SINCE IT IS NOT A TRANSACTION UNDER THE CAPITAL GAINS, THE QUESTION OF INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT DOES NOT ARISE. THEREFORE, THE ADDITION MADE BY THE AO IN THIS REGA RD IS DELETED. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE SAID PROPERTY WAS CO-OWNED BY THE ASSESSEE AND TWO OTHERS I NASMUCH AS BY WAY OF TWO SALE DEEDS DATED 16.9.2000 AND 16.12.2000 THE OWNERSHIP WAS BEING ENJOYED BY THE ASSESSEE. ON ACCOUNT OF THE SALE CONS EQUENT TO THE DEVELOPMENT AGREEMENT DATED 31.12.2003 IN QUESTION, THE GAIN ARISING TO THE ASSESSEE WAS LIABLE TO BE ASSESSED AS LONG TERM CAPITAL GAINS AND ACCORDINGLY, SECTION 50C OF THE ACT HAS BEEN RIGHTLY INVO KED BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSE E HAS DEFENDED THE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS), BUT HAS REFERRED TO PAGE 7 TO 9 OF THE PAPER BOOK WHICH CONTAI NS CHRONOLOGY OF EVENTS LEADING UPTO THE IMPUGNED DEVELOPMENT AGREEMENT DAT ED 31.12.2003 TO POINT OUT THAT THE ASSESSEE WAS DEPICTED AS A PURCHASER IN THE SA LE DEED DATED 16.12.2000 ONLY AS A NOMINEE OF VIRAJ ESTATES P. LTD. (IN SHORT VEPL) AND THAT THE PAYMENTS WERE MADE BY VEPL. THAT THE SALE DEEDS WE RE MADE FOR AND ON BEHALF OF THE VEPL IN TERMS OF A MOU DT. 21.8.2000 W HEREBY THE ASSESSEE ALONGWITH TWO OTHERS ENTERED INTO AN AGREEMENT TO DE VELOP THE PROPERTY. IT WAS POINTED OUT THAT ON 2.2.2002 THE SAID MOU DATED 21. 8.2000 WAS CANCELLED WHILE THE SALE DEEDS EXECUTED BY THE ASSESSEE ON 16.12.2 000 AS A NOMINEE OF VEPL REMAINED AND THEREFORE, WHEN THE IMPUGNED D EVELOPMENT AGREEMENT DATED 31.12.2003 WAS EXECUTED AND THE SAME W AS SIGNED BY THE ASSESSEE WITH NO BENEFICIAL INTEREST, WHICH WAS ENTIRELY W ITH VEPL. IN FACT, IT IS STATED THAT ON CANCELLATION OF THE MOU DATED 21.8.2 000, IT WAS AGREED THAT THE AMOUNT RECEIVED UNDER ANY SUBSEQUENT TRANSFER OF T HE PROPERTY SHALL BE HANDED OVER BY THE ASSESSEE TO VEPL. IT IS ALSO POINTED O UT THAT THE TRANSACTION DOES NOT BELONG TO THE ASSESSEE, BUT TO VEPL WHICH HAS REFLECTED THE ENTIRE TRANSACTION IN ITS BOOKS OF ACCOUNT AND THEREF ORE THE TAXABILITY OF THE CAPITAL GAIN DOES NOT ARISE IN THE ASSESSEES CASE AT ALL. A PART THEREFROM, IT IS POINTED OUT THAT ONE OF THE ALTERNATIVE PLEA BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS THAT THE PROPERTY WAS ALWAYS IN TENDED TO BE ACQUIRED FOR DEVELOPMENT AND HENCE IT WAS TO BE TREATE D AS STOCK-IN-TRADE AND NOT A CAPITAL ASSET AND THEREFORE PROVISIONS OF SEC. 50 C DO NOT APPLY AT ALL. EXPLAINING THAT THE COMMISSIONER OF INCOME-TAX (APPEA LS) ACCEPTED THE ALTERNATIVE PLEA OF THE ASSESSEE AND DELETED THE ADDITI ON, THE LEARNED COUNSEL SUBMITTED THAT THE PRIMARY PLEA OF THE ASSESSEE WAS THAT NO INCOME ARISES IN THE HANDS OF THE ASSESSEE IN RELATION TO THE SAID TRANSA CTION HAVING REGARD TO THE CHRONOLOGY OF EVENTS LEADING TO THE AGREEMENT DA TED 31.12.2003. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE RELEVANT MATERI AL TO WHICH OUR ATTENTION HAS BEEN DRAWN DURING THE COURSE OF HEARING. IN OUR CON SIDERED OPINION, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS PROCEEDED TO A DJUDICATE ON AN ALTERNATIVE PLEA SET UP BY THE ASSESSEE REGARDING THE NATURE OF INCOME, WITHOUT ADJUDICATING ON THE PRIMARY PLEA RAISED BY TH E ASSESSEE THAT THE INCOME FROM THE STATED TRANSACTION WAS NOT ARISING IN TH E HANDS OF THE ASSESSEE. IN OUR VIEW, THE SAID PRIMARY ISSUE WAS LIABLE TO BE DETERMINED AT THE THRESHOLD, AS OUR SUBSEQUENT DISCUSSION WOULD SHOW. 8. ON 5.1.1993, BY WAY OF TWO SEPARATE AGREEMENTS OF SALE VEPL ACQUIRED THE PROPERTY AT S. NO. 21/1/B AND 23/1/B, D EOLALI, NASHIK FROM DHIRAJLAL CHIMANLAL SHAH & OTHERS AND SHISHIR GOVARD HANDAS SHAH & OTHERS FOR A TOTAL CONSIDERATION OF RS 1,80,00,000/-. ON 21. 8.2000, VEPL ENTERED INTO A MOU WITH ASSESSEE AND TWO OTHERS, NAMELY, S/SHRI SAMPU RNANAD KESHAV GAVANDE AND MANOHAR SRIDHAR PATIL WHEREBY ASSESSEE ALON GWITH THE TWO OTHER PERSONS WAS TO DEVELOP THE PROPERTY FOR CONSIDERA TION PAYABLE TO VEPL AND IN TERMS OF THE SAID MOU THE FINAL CONVEYANCE OF TH E SAID PROPERTY WAS TO BE DIRECTLY MADE IN THE NAMES OF ASSESSEE AND TWO OTHER S, I.E S/SHRI SAMPURNANAD KESHAV GAVANDE AND MANOHAR SRIDHAR PATI L. ON 16.9.2000 BY WAY OF A SALE DEED ONE GROUP OF THE ORIGINAL OWNERS, I.E. SHISHIR SHAH & OTHERS EXECUTED THE SALE DEED OF PART OF THE PROPERTY IN THE NAMES OF S/SHRI SAMPURNANAD KESHAV GAVANDE AND MANOHAR SRIDHAR PATIL . ON 16.12.2000 SIMILARLY THE SECOND SET OF ORIGINAL OWNERS, I.E. DHIRA JLAL CHIMANLAL SHAH & OTHERS EXECUTED THE REMAINING PORTION OF THE PROPERTY IN THE NAME OF THE ASSESSEE AND TWO OTHERS, NAMELY S/SHRI SAMPURNANAD KESHA V GAVANDE AND MANOHAR SRIDHAR PATIL. SUBSEQUENTLY ON 2.2.2002 THE EARLIER MOU DATED 21.8.2000 ENTERED BY VEPL WITH ASSESSEE AND TWO OTHERS F OR DEVELOPMENT WAS CANCELLED ON ACCOUNT OF CERTAIN DISPUTES AND NON- PASSIN G OF VACANT POSSESSION BY VEPL TO THE ASSESSEE AND TWO OTHERS AS REQUIRED BY THE MOU DATED 21.8.2000. SUBSEQUENTLY, A DEVELOPMENT AGREEM ENT DATED 30.12.2003 WAS EXECUTED BY ASSESSEE AND TWO OTHERS, NAMELY, SAMPURN ANAD KESHAV GAVANDE AND MANOHAR SRIDHAR PATIL WITH SHRI RAJESH PATHARKAR FOR A CONSIDERATION OF RS 38,00,000/-. THIS AGREEMENT IS THE B ASIS FOR THE ASSESSING OFFICER TO INFER THAT THE ASSESSEE HAS EARNED A LONG TER M CAPITAL GAIN ON SALE OF PROPERTY AND ACCORDINGLY, ASSESSEES SHARE OF LONG TERM CAPITAL GAIN AMOUNTING TO RS 27,07,137/- HAS BEEN ASSESSED IN HIS HA NDS. THE SAID AMOUNT HAS BEEN CALCULATED BY THE ASSESSING OFFICER AFTER INVOKING PROVISIONS OF SECTION 50C OF THE ACT. PERTINENTLY, THE ASSESSING OFF ICER WAS OF THE OPINION THAT THE OWNERSHIP OF THE PROPERTY DID NOT BELONG TO VEPL, AS CANVASSED BY THE ASSESSEE, THOUGH THE PAYMENTS WERE MADE BY VEPL. AS PER THE ASSESSING OFFICER IN TERMS OF THE REGISTERED SALE DEEDS DATE D 16.12.2000 ASSESSEE AND TWO OTHER PERSONS, NAMELY, S/SHRI SAMPURNAN AD KESHAV GAVANDE AND MANOHAR SRIDHAR PATIL WERE THE OWNERS OF THE PROPERTY AND HENCE THE INCOME AS A RESULT OF THE TRANSFER IN TERM S OF THE DEVELOPMENT AGREEMENT DATED 30.12.2003 IS ASSESSABLE IN THE HANDS OF THE ASSESSEE. 9. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSESS EE RAISED VARIOUS PLEAS. HOWEVER, ONE OF THE PERTINENT POINTS RA ISED WAS THAT THE TRANSACTION BELONGS TO VEPL AND THE TAXABILITY OF INCOM E ARISING FROM THE SAID TRANSACTION IS ASSESSABLE IN THE HANDS OF VEPL AND NOT IN THE HANDS OF THE ASSESSEE. IT WAS ALSO ASSERTED BEFORE THE COMMISSIONER OF I NCOME-TAX (APPEALS) THAT VEPL HAS REFLECTED THE ENTIRE TRANSACTION S IN ITS BOOKS OF ACCOUNT AND RETURNS OF INCOME WHICH CONFIRMED THE POSITION CANVASSED BY THE ASSESSEE. THIS ARGUMENT OF THE ASSESSEE IS CONTAINED IN ITS SUBM ISSIONS DATED 21.5.2009, THE RELEVANT PORTION OF WHICH HAS AL SO BEEN EXTRACTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN HIS ORDER. CONSPI CUOUSLY, ON THIS ASPECT THERE IS NO DETERMINATION BY THE COMMISSIONER OF INCOME-TAX (APPEALS). IT GOES WITHOUT GAINSAYING THAT BEFORE ASSESSI NG THE IMPUGNED INCOME, IT IS IMPERATIVE TO DETERMINE AS TO WHETHER O R NOT THE INCOME IS ASSESSABLE IN THE HANDS OF THE ASSESSEE, AS THE SAID ISSUE IS FU NDAMENTAL AND GOES TO THE ROOT OF THE MATTER. WITHOUT ADJUDICATING ON THIS ASPECT, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS PROCEEDED TO DEL ETE THE ADDITION ON AN ALTERNATE PLEA DEALING WITH THE NATURE OF THE INCOME. WITHOUT GOING INTO THE MERITS OF THE DECISION OF THE COMMISSIONER OF INCOME- TAX (APPEALS) ON THE NATURE OF THE INCOME IN QUESTION, WE DEEM IT FIT AND PROPER TO SET ASIDE THE IMPUGNED ORDER AND RESTORE FOR ADJUDICATION AFRESH. TH E COMMISSIONER OF INCOME-TAX (APPEALS) SHALL ADJUDICATE THE PRIMARY PLEA OF THE ASSESSEE AS TO WHETHER OR NOT HAVING REGARD TO THE FACTS OF THE CASE , INCOME IF ANY, ARISING AS A RESULT OF THE IMPUGNED TRANSACTION IS ASSESSABLE IN THE HANDS OF THE ASSESSEE OR NOT. IT IS ONLY AFTER ADJUDICATING THE AFORESA ID PRIMARY CONTROVERSY THE COMMISSIONER OF INCOME-TAX (APPEALS) SHALL PROCEED TO DEAL WITH OTHER ISSUES IN ACCORDANCE WITH LAW. 10. IN THIS MANNER, WE CONCLUDE BY SETTING ASIDE THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO BE ADJUDICATED DE NOVO KEEPING IN MIND THE AFORESAID DISCUSSION. THE COMMISSIONER OF INCOME-T AX (APPEALS) SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND THEREAFTER PASS AN ORDER AFRESH IN ACCORDANCE WITH LAW. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF JANUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED 30 TH JANUARY, 2012 B COPY TO:- 1) SHRI BHARAT V SHAH, NASHIK 2) ITO WD 2(1) NASHIK 3) THE CIT (A)-II NASHIK 4 THE CIT-I NASHIK 5) DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE