M/s. RAMA RECYCLING PVT. TLD., MUMBAI V. DCIT CENT. CIR.- 2, MUMBAI

ITA 1102/MUM/2006

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4066 (ITAT-MUMBAI)
• Duration Of Justice: 16 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 14-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Block assessment; Set aside; Capital Gains
• Section: 271(1)(c); 154; 143(1); 143(2); 158BD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER AND ITA NO. 1102/MUM/2006 (A.Y: 2001-02) M/s. Rama Recycling Pvt. Ltd., 1711, World Trade Centre – 1 Cufe Parade, Mumbai – 400005 PAN: AAACR1794F v. DCIT – Central Circle – 2 CGO Building Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) ITA NO. 4950/MUM/2007 (A.Y: 2001-02) M/s. Rama Scrap Recycling Pvt. Ltd., 181, Maker Tower “E" Cuffe Parade, Mumbai - 400005 PAN: AAACR1794F v. ACIT – Central Circle – 2 CGO Building, 9 th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) ITA NO. 7307/MUM/2008 (A.Y: 2001-02) DCIT – Central Circle – 3(3) Room No. 609, 6th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 v. M/s. Rama Recycling (P) Ltd., {formerly Rama Scrap Recycling Pvt. Ltd.,} 181, Maker Tower “E" Cuffe Parade, Mumbai - 400005 PAN: AAACR1794F (Appellant) (Respondent) 2 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., Assessee by : Shri Rajiv Khandelwal Department by : Shri C.T. Mathews Date of Hearing : 27.01.2022 Date of Pronouncement : 22.04.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by assessee against the different orders of Learned Commissioner of Income Tax (Appeals) Central -1, [hereinafter in short “Ld.CIT(A)”] dated 27.01.2005. Assessee and Revenue filed appeals challenging the order of the Learned Commissioner of Income Tax (Appeals) –III for the A.Y. 2001-02 dated 15.10.2008 in partly sustaining the penalty order passed by the Assessing Officer dated 27.03.2007. 2. First we take up the appeal of the assessee in ITA.No. 1102/MUM/2006 for Assessment Year 2001-02. 3. Brief facts of the case are, assessee has filed return of income on 30.10.2001 declaring income of ₹.16,03,415/- under normal provisions and ₹.43,03,130/- under section 115JA of Income-tax Act, 1961 (in short 3 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., “Act”) along with financial statement and tax audit report in the form No. 3CA and 3CD. It is processed u/s. 143(1) of the Act and subsequently selected for scrutiny and statutory notice u/s. 143(2) and 143(1) of the Act were issued and served on the assessee. The assessee is in appeal before us raising following grounds in its appeal: - “GROUNDS OF APPEAL 1. The ground or grounds of appeal are without prejudice to one another. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the view taken by the AO in assessing surplus of Rs.43,44,700/- realised on surrender of rights to acquire the flats as “Short term capital gains" as against "Long term capital gains" shown by the Appellant. 2. The Ld. CIT(A) failed to appreciate that the flats were surrendered after a period of 36 months and as such surplus realised on such surrender ought to be taxed as "Long term capital gains" allowing the benefits of indexation and rate of income tax. 3. In reaching to the conclusion and confirming such view of the AO, the Ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. The Appellant craves leave to add, alter, amend or delete any or all of the above grounds of appeal.” 4. With regard to additional ground of appeal, this deals with the legal issue and does not require any verification of the fact. Therefore, additional ground of appeal are accepted for adjudication and the additional ground is reproduced below: - “1. The CIT(A) ought to have deleted the addition of Rs.43,44,700 made on account of alleged Short Term Capital Gains made by the AO on protective basis 4 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 2. The CIT(A) erred in confirming the above addition of Rs. 43,44,700 3. The CIT(A) erred in and acted illegally and without jurisdiction in converting the protective addition of Rs. 43,44,700 made by AO into a substantive addition.” 5. The relevant facts of the above grounds of appeal are, the assessee acquired two flats namely, Flat Nos 601 .and 602 in Ronak Residency, Khar by the agreements dated 10 th July, 1997 for a total consideration of ₹.1,40,00,000 (₹.70,00,000 for each flat). Since the construction of the flats could not be completed due to the financial difficulties faced by the developers, the bookings for the said flats were cancelled by the agreements dated 30 th August, 2000, under which the right to purchase the said two flats were surrendered to the new developers, Mr Kanti Govani and Mr.Ramesh Govani (hereinafter called as "Govanis"). On cancellation of the above two flats, the assessee received a total consideration of ₹.1,63,94,700 (including compensation received on sale of these flats ₹.43,44,700). As the booking for the said two flats was cancelled/ surrendered after period of 36 months, the. said resulting gain was offered to tax as long term capital gain for the year. 6. The Assessing. Officer considered the gains arising on surrender of rights in the said flats as short-term capital gains as against as long term 5 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., capital gains on the ground that the said flats were originally allotted to Mrs. Manju Ramsinghani and Mrs. Sonia Chhabria was held in their name until 6 th January, 1998. Aggreived assessee preferred appeal before the Ld.CIT(A) and Ld.CIT(A) concluded that the Assessing Officer was justified in treating the capital gains as short-term capital gains and dismissed the appeal of the assessee. Against this order of the Ld.CIT(A) the assessee is in appeal before us. 7. At the time of hearing, Ld. AR of the assessee submitted as below:- “4. The Assessing Officer erred in holding that the Flat Nos 601 and 602 were booked in the name of Mrs Manju Ramsinghani and Mrs Sonia S Chhabria by relying upon part of the seized material Contained in the file marked as Annexure A-1 seized on 13.07.2001 (hereinafter referred to as "file"). The appellants submit that – 4.1. Flat Nos. 601 & 602 in Ronak Residency, Khar were booked in the name of the appellants by the agreement dated 10th July, 1997. The payments for the said flats were made by the appellants and, by LKP Merchant Financing Limited and Mrs Sonia Chhabria on behalf of the appellants. The payments for the said flats to the tune of Rs.1,10,00 000 were made prior to the execution of the agreement. The payment schedule is given below – Date of payment Cheque no Amount (Rs) Total amount (Rs) 19.07.1997 057992 10,00,000 19.04.1997 057993 10,00,000 19.04.1997 057990 5,00,000 19.04.1997 057991 5,00,000 22.04.1997_ 057994 10,00,000 23.04.1997 057995 10,00,000 07.05.1997 057998 10,00,000 06.06.1997 057996 10,00,000 10.06.1997 057997 10,00,000 80,00,000 6 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., Date of payment Cheque no Amount (Rs) Total amount (Rs) Paid by LKP Merchant Financier on behalf of the appellants – 26.05.1997 573375 1000000 05.06.1997 573376 1000000 05.07.1997 278975 1000000 30,00,000 Paid by Sonia Chhabria behalf of the appellants – 10.10.1997 391171 10,00,000 10,00,000 Total 1,20,00,000 4.2. The appellant made a decision to purchase the Flat Nos. 601 and 602 in Ronak Residency, Khar by agreements dated 10 th July, 1997 for a total consideration of Rs.70,00,000 per flat. In fact, ₹.1.20,00,000 (Rs.60,00,000 per flat) was paid and the same is confirmed in the agreements. It can also be seen from the above table that the appellants made payments to the tune of Rs 80.00,000 from its own funds. Rs 30,00,000 was paid by LKP Merchant Financing Limited and Rs 10,00,000 was paid by Mrs Sonia Chhabria on behalf of the appellants. The said payments are recorded by the company in its books of accounts for year ended 31st March 2000, much prior to 13th July, 2001; being the date on which the search, and seizure was carried out in the premises of Rama Newsprint And Papers Ltd. 4.3. The appellants further submit that the Assessing Officer has placed reliance on Page nos 77 to 79 of file, and assumed that the booking of the Flat Nos 601 and 602 were done in the name of Mrs Manju and Mrs Sonia. Their names appears on the since the developers personally knew the family of the directors of the appellant-company, the developers put their personal names in place of the name of the appellants. Accordingly, in all the notings, drafts, documents etc, the developers have mentioned their names inspite of the fact that the purchase agreements were executed between the appellants and the developers, This mistake of the developers cannot be held against the appellants to conclude that bookings of the said flats were not in their name. 4.4 The appellants further, submit that the other papers cannot be considered "more reliable" than the signed agreement executed on the stamp papers. Considering the fact that the payments for these agreements were made by the appellants and by other parties on their behalf, the contention booking of the flats in the name of Mrs. Manju and Mrs. Sonia cannot be held to be correct. Only an amount of Rs 10,00,000 was paid by Mrs Sonia that too on behalf of the appellants whereas amount ₹.80,00,000 was directly paid by the appellants.to the developers as evidenced form their books of account. 7 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 4.5. The appellants further, submit that the Assessing Officer has made unsustainable presumption on the basis of conjectures and surmises that the agreements for purchase of flats in the name of the appellants were executed after December, 1997 by executing a post dated agreement on Rs 20 stamp paper. This is far from the truth as the stamp papers used for executing the agreements were issued by the Stamp Office on 15th May, 1997 and were actually executed on 10th July, 1997. Further, the payments for the same were made in the year 1997 as evidenced from the above table, Therefore; the observation of the Assessing Officer is invented and de hors the records. 5. The Assessing Officer erred in interpreting the contents of page nos 54 and 169 of the file to the effect that the said flats were originally booked in the names of Mrs Manju Ramsinghani and Mrs Sonia Chhahria. The appellants submit that — 5.1. The developers of Ronak Residency, Prem Santosh Properties Pvt Ltd started facing severe financial crisis and due to such and other reasons, the project of Ronak Residency could not be carried out and be completed in time. As such, the project started facing an escalation in the cost of construction coupled with a change in the scenario of the property market. The purchasers of the flats were suffering huge interest loss on the amounts invested in the project and started demanding damages due to delay in the implementation of the project. 5.2. In order to complete the project faster and at a minimum cost, various meetings and negotiations were being held among the developers, owners of land and other purchasers. In such meetings, the developers used to bring various proposals for reallocation of the flats, etc. Page no 54 is one of such several drafts for the alternate allotments of the flats with different permutations and combinations. Even the drafts of the proposed agreements were discussed to come to a viable settlement amongst all the parties. In this page, Flat Nos 701 and 702 are shown as the flats proposed to be allotted to Mrs. Manju. However, the appellants would like to emphasise that the purchase agreement was executed by the appellants for purchase of Flat Nos 601 and 602 and not 701 and 702 as mentioned on that page, where name of Mrs Manju is shown in a presentative capacity for the appellants. 5.3. Page no 169 (dated 07.01.98) shows the details of the proposed flat positions presented by the developers, Prem Santosh Properties Pvt. Ltd. to all the purchasers and the owners in the meeting to be held on 11.01.1998. The appellants submit that what is stated on page nos 54 and 169 are only the draft proposals for the approval in the meeting to be held on 11.01.1998. 8 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 5.4. The aforesaid contentions of the appellants is supported from the fact that since the proposed position was not accepted, the developers made various changes on page no 169 and the amended writing clearly indicates that Flat Nos 601 and 602 were to be allotted to the appellants, referred to by the name of Mrs. Manju, whose name is written in the representative capacity for the appellants. 5.5. The Assessing Officer held that the name of the appellant,'- 'company is not appearing on the said page no 169. The appellants submit that the name of Mrs Manju is stated against Flat No 601 and 602 on the said page. The appearance of name of Mrs. Manju is in lieu of the name of the appellants was very common and, as explained above her name and the name of Mrs Sonia appear in all the correspondences papers written by the developers during the course of meeting for negotiations in the representative capacity of the appellant-company. 5.6. The appellants further, submit page no 165 of the file (dated 12.0 1.98) contains the minutes of the meetings held on 11.0 1.98 between the owners of the land (Mr. Pasari's), developers (Mr. Chawla's) and the purchasers (other parties). As per this page, the anomaly in the distribution of the flats is corrected and the final proposal was approved in the meeting. The appellants would like to draw the attention to the fact that as per this page (minutes of the meetings), Flat Nos 601 and 602 are stated to have been allotted to Mr Vashu Ramsinghani, whose name is again written as a representative of the appellants. If the Assessing Officer's contention that the flats were originally booked in the name of Mrs Manju Ramsinghani and Mrs Sonia Chhabria were held to be correct, the names to be mentioned would have either been Mrs Manju or Mrs Sonia or both but not Mr Vashu Ramsinghani. 5.7. The very fact that the name of Mr Vashu is noted against the allotment of the Flat Nos 601 and 602, clearly establishes the fact that, though the flats were originally booked by the appellants by the purchase agreements, all the negotiations on behalf of the appellant-company were being made by him and his family members. The individual names of the directors of the appellant-company were being mentioned by the developers in the place of the name of the appellant-company, possibly because they hold very good market reputation and were the key persons in the negotiations and revival of the project. Further, it is worthwhile to note that in the entire list of the name of the allottees, not a single name of any company is appearing. This also means that the developers were in the regular habit of stating the representatives' names while putting up the proposals for the revival of the project. 9 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 5.8. From the above, it is clearly established that the contention of the Assessing Officer that the said flats were booked in the name of Mrs Manju Ramsinghani and Mrs Sonia Chhabria is incorrect and not sustainable. 6. The Assessing Officer further, observed the amount paid by Mrs Manju Rs 20,000,00 was returned and concluded that the bookings were made in the name of Mrs Manju and Mrs Sonia. The appellants submit that- 6.1. Payments for the purchase of the said flats were made by the appellants, and by LKP Merchant Financing Limited and Mrs. Sonia Chhabria on behalf of the appellants. The said payments have already been acknowledged in the purchase agreements for the said flats. 6.2. The Assessing Officer relied upon the receipts dated 05.07.97 and 10.07.97 issued by the developer, Prem Santosh Properties Pvt Ltd (on pages 89 and 93 of the file). The document on page no 89 is the receipt acknowledging the receipt of the three cheques aggregating Rs 30,00,000 paid by LKP Merchant Financing Ltd on behalf of the appellants. The document on page no 93 is the receipt acknowledging the receipt of Rs 10,00,000 paid by Mrs Sonia on behalf of the appellants. 6.3. The appellants submit that these receipts were issued in the month of December, 1997 whereas the agreements for purchase of the flats were executed on 10th July, 1997. This clearly shows that the developers had issued the receipts acknowledging that the said payments have been received from the appellant-company. However, as per their practice, the developers have written the names of Mrs Manju and Mrs Sonia as representatives of the company. In this context, the appellants submit that neither Mrs Manju nor Mrs Sonia have recorded these payments as payment for purchase of the flats in their books of account. 6.4. The appellants further submit that since they are a closely held company and the the directors are family members, there were no disputes that could have arisen in the future. The directors remained under a bona fide belief that the names of Mrs Manju and Mrs Sonia were used in the representative capacity of the appellants and hence, they did not pay much attention to the names appearing in the receipts issued by the developers. 6.5. The Assessing Officer, by relying on page nos 43, 44 and 55 of the file, erred in considering that the payments for the said flats were made by Mrs Manju, which was subsequently returned. The cheque no 376931 dated 16.05.1997 of Rs 10,00,000 and cheque no 376933 dated 23.05.1997 of Rs 10,00,000 are issued from the accounts of Mrs. Sonia Chhabria. Mrs Manju is the authorised signatory to that account. As such, the reliance placed by the Assessing Officer that payments were made by 10 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., Mrs Manju is factually incorrect. The payments made to the developers were subsequently received back in the ensuing month, which were deposited in the same account of Mrs Sonia. These payments were advanced to them as friendly loans and were received back in a month's time The Assessing Officer's contention, relying on page 55 of the file, that the said cheques were paid towards the purchase of flats is incorrect, since the appellant-company had executed the agreements for purchase of the flats and the payment were made by the company directly, and by LKP Merchant Financing Ltd and Mrs Sonia on their behalf. 6.6. As per page no 55 of the file, the cheque of Mrs Sonia Chabbria of Rs. 10,00,000 dated 10.10.1997 was given to the developers as the appellants were falling short of funds to make the payment towards the purchase of the said flats. Accordingly, the said payment of Rs 10,00,000, made by Mrs Sonia to the developers (Prem Santosh Properties Pvt. Ltd.) was adjusted towards the payments to be made by the appellants 6.7. The appellants further states that the said noting on page no 55 of the file, which states 'Attention - Mr. Vashu Ramsinghani', one of the director of the appellant-company, contains the following statement – "The payment position of your fiats in Khar Project is as follows — Flat No. 601 Flat No. 602 Rs. 60.00 L Rs. 60.00 Recd." 6.8. As the appellants were purchasing the flats from the developers, this statement depicted the position of the payments made for the Flat nos. 601 and 602. This page gives a summary of the transactions that took place between Mrs Sonia & the developers in connection with the payments made by her to the developers. In the latter part of the page, the developers have confirmed having received Rs 10,00,000/- from Mrs Sonia for the flats and have further confirmed having received Rs.60,00.000, each for the Flat Nos. 601 and 602, which were purchased by the appellants from the developers. 6.9. The Assessing Officer contended that the said page depicts that for the purchase of those flats, monies were advanced by Mrs Manju. which were subsequently recovered. The appellants submit that the monies were advanced by Mrs Sonia to the tune of Rs20,00,000 as a temporary friendly loans to the developers, which were received back during the year. As such, the appellants submit that the reliance placed upon this page be regarded as untenable inasmuch as it only recorded the transactions of the friendly loan advanced and at the bottom of the page, a summary of the payments made for the flats purchased by the appellants. 11 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 7. The Assessing Officer further, observed that the payments for the said flats were never made by the appellants and that the balance in the account of Premraj Developers Pvt. Ltd., sister concern of Prem Santosh Properties Pvt. Ltd., was adjusted towards the payment to be made. The appellants submit that - 7.1. The appellants had booked some offices and car parkings at the Chawla Complex, Belapur which was to be constructed and developed by Premraj Developers Pvt. Ltd. For the bookings of these offices, the appellants advanced a sum of Rs 80,00,000 to the developers. However the project was getting delayed due to some reasons. Hence, the appellants requested the developers to return the money advanced and cancel the booking made at Belapur. Accordingly, the developer cancelled all the bookings and the aforesaid sum of Rs.80,00,000 was returned to the appellants and was credited to their bank accounts. 7.2. The appellants later considered to purchase the property in Ronak Residency, Khar. Therefore, it entered into negotiations with the developers, Prem Santosh Properties Pvt. Ltd. to purchase Flat nos. 601 and 602. The appellants started to make advance payments to the developers and then executed the agreements for purchase of the said flats on 10 th July, 1997 as mentioned in para 4.1 above. 7.3. The appellants submit that there was an error in stating the name of the ledger account in their books of accounts. The payments that were being made to Prem Santosh Properties Pvt. Ltd. were being erroneously debited in the name of Premraj Developers Pvt Ltd with the narration that the cheques were issued to Prem Santosh Properties Pvt. Ltd. It is only a human error of the accountant and should be ignored. 7.4. The Assessing Officer contended that the payment of Rs 80,00,000 was never made by the appellants to the developers for the purchase of the said flats and that the appellants tried to take an advantage of transferring the loan outstanding with Prernraj Developers Pvt. Ltd. to Prem. Santosh Properties Pvt. Ltd. This is nothing but imagination of the Assessing Officer. In fact, the entire amount advanced for the Belapur contract, was received back and was deposited in the bank account of the appellant. Fresh payments were made for the Khar project, which have been regularly cleared from the bank account of the appellants. There was no transfer of balance as alleged by the Assessing Officer. As such, the said contention of the Assessing Officer is factually incorrect and should be disregarded. 8. The appellants further, submit that amount aggregating Rs.30,00,000 was paid by LKP Merchant Financing Limited and Rs 12 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 10,00,000 was paid by Mrs Sonia Chhabria to the developers on behalf of the appellants for purchase of the said flats in Ronak Residency. The said payments have been made as part payments towards the consideration payable by the appellants to the developer and are duly reflected in the agreements. These payments have been recorded in the books of account of the appellants for the year ended March, 2000. As the payments were directly made by the third parties to the developers (M/s. LKP Merchant Financing Limited and Mrs. Sonia) to the developers - Prem Santosh Properties Pvt. Ltd., inadvertently, the said sums were not accounted in the books or accounts in the year of payment. However, LKP Merchant Financing Limited properly accounted for the said payments in the books of account for the year ended 31 March, 1998 as having being made on behalf of the appellants. During the financial year ended 31 st March, 2000, the appellants noticed this error and rectified it by passing the entries for the sum of Rs 30,00,000 paid by LKP Merchant Financing Limited and Rs 10,00,000 paid by Mrs Sonia Chhabria on their behalf. It was just an inadvertent error and the appellants rectified the same voluntarily by passing the necessary journal entries in the books of account for the year ended 3 l March, 2000, much prior to the date of search. 9. The appellants further submit that the Flat Nos. 601 and 602 at Ronak Residency, Khar were purchased by the agreements dated 10th July, 1997. The payments for the said flats were made. Even though some of the correspondences were made by the developer in the individual name of the directors of the companies, it cannot lead to a conclusive proof that the flats were booked in the name of Mrs Manju and or Mrs Sonia particularly in view of the fact that their names are stated by the developers in the representative capacity of the appellants. It is very well settled position in law that the document on the stamp paper has more reliability than writing on blank paper. Merely because certain papers were found during the course of search, the same cannot be held to be ultimate and final evidence. In view of the above, it is evident that the appellants acquired the rights in the said flats on 10th July, 1997 by an agreement on even date. The said rights were subsequently transferred by the agreements dated 30th August, 2000. As such, the period of holding of the capital assets, being rights in the said flats, is more than 36 month and hence, the said rights ought to be considered as long-term capital assets and the gains arising on transfer of the same ought to be taxed as long-term capital gains and not short-term capital gains.” 13 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 8. On the other hand, Ld.DR submitted that purchase of the property were recorded in the year 1998 and all the payments were adjusted against the parties Mrs. Manju Ramsinghani and Mrs. Sonia Chhabria whereas the Flat Nos. 601 and 602 are registered in the name of Mr.Tulasi das and Mr. Mulani. He submitted that the assessee subsequently acquired the same and he supported the findings of the AO that the compensation money received is only short term gains. 9. Considered the rival submissions and material placed on record. We observe that the assessee booked the flat nos 601 & 602 in Ronak Residency, Khar by an agreement dated 10.07.1997 and the payments were made by the assessee, by LKP Merchant Financing Ltd and one payment of ₹.10 lakhs by Ms Sonia Chhabria on 10.10.1997. Consequent to cancellation of agreement by the developer, the assessee has got additional compensation, this gain, which assessee has offered as long term capital gain, whereas the Assessing Officer, by relying on the certain documents, as per which was found during the search in which the builder recorded the receipt of money are recorded in the name of Mrs Sonia and Mrs Manju and similar recordings were made by the builder in the subsequent meeting documents. The question is whether the documents, 14 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., which denote that the names used by the builder as a representation for the assessee or it may be booked by these people on behalf of the assessee since all these individuals are related parties. Merely because the builder recognize this transaction on the representation basis, the ownership will not devolve on the individuals who are not party to the agreement. We observe that the agreement entered by the assessee even before the search took place. What is relevant is the existence of agreement and relevant payments made by the assessee, we observe that the substantial payments were made by assessee. It clearly indicate that the actual beneficiary is the assessee and the persons have acted in a representative capacity. We observe that atleast Mrs Sonia made certain payment, whereas Mrs Manju has not contributed in this transaction except her name was recorded by the builder, this does not give ownership right to Mrs Manju. 10. In our considered view, the same Assessing Officer would not have accepted the genuineness of the ownership in case Mrs Manju claim without making any payment or contributing to anything in this transaction. There is ample evidence to show that the assessee has entered into agreement for the purchase of flats and made the substantial 15 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., payment, therefore, we are in agreement with the claim made by the assessee that the compensation received by the assessee is long term considering the fact that the agreement was entered by the assessee in the year 1997. Accordingly, the ground raised by the assessee is allowed. ITA.No. 4950/MUM/2007 (A.Y. 2001-02) 11. Assessee has raised following grounds in its appeal: - “1.a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the rejection made by the AO in respect of application for rectification u/s.154 presented by the Appellant and thereby further erred in approving the assessed Short term capital gains on surrender of right to purchase flat Nos. 601 and 602 at Ronak Residency at Rs.43,44,700/ as against correct Short term capital losses of Rs.12,77,300/ after considering the unaccounted investment of Rs.56,22,000/ in the said flats as assessed in the block assessment order u/s.158BD for the block period from 1-4-1995 to 23-7-2001. b). The Ld. CIT(A) failed to appreciate that the mistake pointed out by the Appellant in the Application for amendment is apparent from the record and the same ought have been rectified u/s.154. c) In reaching to the conclusion and upholding the refusal to carry out rectification u/s. 154 by the AO, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 2. In order to compute the capital gains accruing on the sale of a capital asset, the cost of acquisition of the asset is to be deducted from the value of consideration and the cost of acquisition of the capital asset means total expenditure incurred in acquiring the asset whether accounted or unaccounted.” 16 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., 12. At the time of hearing, it was submitted that the issue involved in this appeal is relating to section 154 of the Act. Ld. AR submitted that the issue relating to block assessment and the assessee filed appeal against the assessment made u/s. 158BD and he submitted that the addition made in the above block assessments were quashed by the ITAT and this appeal is relating to rectification application made by the assessee before Assessing Officer and the same was rejected by the Assessing Officer. Since the block assessments itself is quashed by the ITAT, the appeal against the rectification becomes infructuous. 13. On the other hand, Ld. DR did not made any counter arguments. Therefore, we are inclined to treat the appeal filed by the assessee is infructuous. Accordingly, this appeal is dismissed as such. ITA.No. 7307/MUM/2008 (A.Y. 2001-02) - Revenue Appeal 14. Penalty order consequential to the assessee appeal in ITA.No. 1102/Mum/2006 (A.Y. 2001-02) above order. 15. Revenue has raised following grounds in its appeal: - 1. “On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the penalty levied u/s.271(1)(c) 17 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., amounting to Rs.13,49,320/- without appreciating the facts that quantum addition to total income after the evidence relating to the non-allotment of flats was unearthed during a search & seizure.” 2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 16. Considered the rival submissions and material placed on record. In this appeal, revenue is in appeal as the Ld CIT(A) deleted the penalty levied u/s 271(1)(c) without considering the fact that Assessing Officer made the quantum addition after unearthing the evidence relating to non- allotment of flats. The same quantum appeal was filed by the assessee and we considered the facts on record and decided the issue in favour of the assessee in the Para Nos 9 and 10 above. Therefore, the appeal filed by the revenue is accordingly deleted. 17. In the result, appeals filed by the assessee are allowed and appeal filed by the Revenue is dismissed. Order pronounced in the open court on 22.04.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 22.04.2022 Giridhar, Sr.PS 18 ITA NO. 1102/MUM/2006 (A.Y: 2001-02) and other M/s. Rama Recycling Pvt. Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum