ITO Ward-10(2), New Delhi V. Meera Goyal, New Delhi

ITA 1198/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1552 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 14-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Keywords: Capital asset; Rectification of order; Cost of acquisition; Fair market value; Difference of opinion; Change of opinion; Capital Gains
• Section: 56(2); 56; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. KULDIP SINGH, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 8239/DEL/2019 : ASSTT. YEAR : 2013-14 MEERA GOYAL, B-45, MAHARANI BAGH, NEW DELHI-110065 VS INCOME TAX OFFICER, WARD-10(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AGQPG7373J ITA NO. 1198/DEL/2019 : ASSTT. YEAR : 2013-14 INCOME TAX OFFICER, WARD-10(2), NEW DELHI VS MEERA GOYAL, B-45, MAHARANI BAGH, NEW DELHI - 110065 (APPELLANT) (RESPONDENT) PAN NO. AGQPG7373J ASSESSEE BY : SH. R. S. SINGHVI, CA REVENUE BY : MS. PRAMITA M. BISWAS, CIT DR DATE OF HEARING: 23.11.2020 DATE OF PRONOUNCEMENT: 14.12.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AND REVENUE AGAINST THE ORDERS OF THE LD. CIT(A)-22, NE W DELHI, DATED 29.11.2018. 2. IN ITA NO. 8239/DEL/2019, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS NOT JUSTIFIED IN PASSING THE ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 2 RECTIFICATION ORDER U/S 154 R.W.S. 250(6) OF THE INCOME TAX ACT, 1961 AFTER MAKING ADDITION TO THE EXTENT OF RS.12,19,83,470/- MERELY BASED ON CHANGE OF OPINION AND REAPPRAISAL OF FACTS ALREADY ON RECO RD. (II) THAT THERE IS NO CASE OF ANY APPARENT MISTAKE ON RECORD AND PROVISIONS OF SECTION 154 HAVE BEEN APPLIED ON ILLEGAL AND ARBITRARY BASIS. (III) THAT THE ISSUE OF TAXABILITY OF FORFEITURE AM OUNT BEING A SUBJECT MATTER OF APPEAL BEFORE THE HONBLE ITAT, THE RECTIFICATION ORDER PASSED BY THE CIT(A) IS WITHOUT VALID JURISDICTION AND AGAINST THE PRINCIPL ES OF DOCTRINE OF MERGER. (IV) THAT IN ANY CASE, COMPLETE FACTS REGARDING FORFEITURE BEING ALREADY ON RECORD AND DULY DISCUSS ED BY THE ASSESSING OFFICER AND THERE BEING NO MISTAKE APPARENT FROM RECORD, THE RECTIFICATION ORDER FALLS OUTSIDE THE SCOPE OF SECTION 154 OF THE ACT. 2. THAT ADDITION TO THE EXTENT OF RS.12,19,83,470/- IS EVEN NOT IN CONFORMITY WITH PROVISIONS OF SECTION 5 1 OF THE INCOME TAX ACT, 1961 AND IS BAD IN LAW. 3. THAT THERE IS NO CASE OF ANY SURPLUS AS ALLEGED BY CIT(A) AS WHOLE ISSUE IS UNDER DISPUTE AND EVEN OTHERWISE, SURPLUS IF ANY IS OF CAPITAL NATURE AND NO LIABLE TO TAX, THE IMPUGNED ADDITION IS MISCONCEIVE D AND NOT SUSTAINABLE. 4. THAT FURTHER TILL THE PROPERTY IS SOLD, THE ISSU ES OF ANY SUCH GAIN OR INCOME IS NOT RELEVANT. 5. THAT ORDERS PASSED BY LOWER AUTHORITIES ARE NOT JUSTIFIED ON FACTS AND SAME ARE BAD IN LAW. 3. IN ITA 1198/DEL/2019, FOLLOWING GROUNDS HAVE BEE N RAISED BY THE REVENUE: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETI NG THE ADDITION OF RS.12,50,00,000/- MADE BY THE AO ON ACCOUNT OF TREATMENT OF THE EARNEST MONEY ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 3 FORFEITED IN RESPECT AN AGREEMENT FOR SALE OF PROPERTY AS ASSESSEES INCOME UNDER THE HEAD INCOME FROM OTHER SOURCE, 1.A) WHETHER THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT FORFEITED IS IN THE NATURE OF CAPIT AL RECEIPT IN TERMS OF SECTION 51 WHICH IS REQUIRED TO BE ADJUSTED AGAINST THE COST OF THE PROPERTY WHILE COMPUTING CAPITAL GAINS ON SALE OF THE SUCH PROPERT Y IN FUTURE, NOT APPRECIATING THE FACT THAT THE SAID SECTION IS MEANT TO APPLY TO GENUINE TRANSACTIONS AND THEREFORE, WHERE THE ACT OF FORFEITURE IS BEING USED AS A DEVICE IN VIEW OF SIMILAR FORFEITURE IN RESPECT OF THE SAME PROPERTY IN THE PAST, THE AO WAS JUSTIFIED IN TREATING THE AMOUNT FORFEITED AS INCOME OF THE ASSESS U/S 56 OF THE ACT. 1.B) WHETHER THE LD. CIT(A) HAS ERRED IN RELYING UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR A.Y. 2007-08, NOT APPRECIATING THE FACT THAT THE DECISION OF HONBLE HIGH COURT IN THE SAID ASSESSMENT YEAR PROCEEDED ON ENTIRELY DIFFERENT PREMISES, NAMELY I) THAT THE AO HAD FAILED TO COMPLY WITH THE DIRECTION GIVEN BY THE ADDL. COMMISSIONER OF INCOME TAX U/S. 144A OF THE ACT, WHICH WERE BINDING ON HIM. II) THAT THE PLEA OF APPLICABILITY OF THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT WAS NOT RAISED BEFORE THE TRIBUNAL. 1.C) WITHOUT PREJUDICE TO THE FOREGOING, WHETHER TH E LD. CIT(A) HAS, IN DELETING THE ADDITION MADE BY TH E AO IN THE YEAR UNDER CONSIDERATION, HAS IGNORED THE FACT THAT THE PROPERTY WAS PURCHASED BY THE ASSESSEE FOR A CONSIDERATION OF RS.18,30,16,530/- AND THE COST OF ACQUISITION OF THE ASSET ALREADY STOOD REDUCED TO RS. 30,16,530/- ONLY IN TERMS OF SECTION 51 OF THE ACT ON ACCOUNT OF DEDUCTION OF AN AMOUNT OF RS. 18,00,00,000/- (BEING THE AMOUNT OF ADVANCE FORFEITED IN A Y 2007-08 IN RESPECT OF THE SAME PROPERTY) FROM THE SAID ORIGINAL COST, AND, THEREFORE, THE AFORESAID FURTHER FORFEITURE OF ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 4 RS.12,50,00,000/- HAD RESULTED IN THE ASSESSEE HAVING RECEIVED A BENEFIT OF RS. 12,19,83,470/- (I. E. RS.12,50,00,000/- MINUS RS.30,16,530/-) WITHOUT CONSIDERATION WHICH WAS LIABLE TO BE TREATED AS INCOME OF THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT. 4. THE RELEVANT FACTS EXAMINED FOR THE ADJUDICATION ARE THAT, THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL THE PROPERTY NO. 37, FRIENDS COLONY, NEW DELHI ON 24.12.2011 WITH MS . PRITI SARAF FOR A CONSIDERATION OF RS.63.28 CRORES. THE B UYER NAMELY MS. PRITI SARAF HAS PAID AN AMOUNT OF RS.12.50 CROR ES TO THE ASSESSEE AS ADVANCE. SINCE, THE REMAINING PAYMENTS COULD NOT BE COMPLETED ON THE PART OF THE BUYER, THE AGREEMEN T HAS BEEN TERMINATED AND AN AMOUNT OF RS.12.50 CRORES HAS BEE N FORFEITED. THE AO HELD THAT THE ASSESSEE HAS FORFEI TED AN AMOUNT OF RS.12.50 CR., BUT HAS NOT PAID ANY TAX O N THE FORFEITED AMOUNT AND BROUGHT THE AMOUNT OF RS.12.50 CRORES TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO HAS ALSO OBSERVED THAT THE ASSESSEE HAS RECEIVED AN AMO UNT OF RS.18 CRORES DURING THE FINANCIAL YEAR 2006-07 FOR THE SAME PROPERTY AND HAS NOT PAID ANY AMOUNT TOWARDS THE TA X FOR THE FORFEITURE. 5. THE LD. CIT (A) INITIALLY DELETED THE ADDITION O N THE GROUNDS THAT THERE IS NO PROVISION TO TAX THE AMOUNT FORFEI TED IN THE INCOME TAX ACT. THE LD. CIT(A) HELD THAT THE PROVIS IONS OF SECTION 51 AND THE PROVISIONS OF SECTION 56(2)(IX) ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE IN THE CURR ENT YEAR. THE RELEVANT PORTION OF THE LD. CIT(A) IS AS UNDER: 6.7 EVEN THOUGH THERE MAY BE MERIT IN THE OBSERVATION OF THE AO THAT IN RESPECT OF THE VERY SAME PROPERTY, EARLIER ALSO THERE WAS A CLAIM OF ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 5 FORFEITURE AND AS SUCH THE CLAIM OF FORFEITURE IN RESPECT OF THE VERY SAME PROPERTY IN THE YEAR UNDER CONSIDERATION IS A WILLFUL ATTEMPT TO AVOID PAYMENT OF TAX ON FORFEITED AMOUNT. HOWEVER, IN THE ABSENCE OF ANY ADVERSE OBSERVATION REGARDING GENUINENESS OF AGREEMENT TO SALE, THE MATTER IS REQUIRED TO BE CONSIDERED ON LEGAL PRINCIPLES. 6.8 THE AO HAS NOT DISPUTED THE SOURCE AND GENUINENESS OF RECEIPT OF EARNEST MONEY AS SAME WAS ON THE BASIS OF EXECUTION OF AGREEMENT TO SELL AND ONCE THERE IS A LEGAL TRANSACTION BETWEEN THE PARTIES, THERE CANNOT BE ANY GROUND OR BASIS TO PRESUME THAT RECEIPT OF RS. 12,50,00,000/- AS IN TH E NATURE OF INCOME FROM OTHER SOURCES. THERE IS THUS NO PRIMARY BASIS FOR HOLDING THE RECEIPT OF RS. 12,50,00,000/- AS INCOME FROM OTHER SOURCES. 6.9 HOWEVER, REGARDING THE FACT, WHETHER RECEIPT O F AMOUNT RS. 12,50,00,000/- FORFEITED BY THE APPELLAN T COULD BE CONSIDERED AS INCOME AND CHARGEABLE TO TAX IN TERMS OF PROVISIONS OF SEC. 51 OF I.T. ACT, 1961 WHICH DEAL WITH THE ISSUE OF RECEIPT OF ANY ADVANCE IN RESPECT OF ANY CAPITAL ASSET. THE SCOPE OF SEC. 51 HAS BEEN DEALT WITH IN APPELLANTS OWN CASE FOR A.Y . 2007-08 BY ITAT & DELHI HIGH COURT AND AS THE VERY SAME PROVISIONS ARE RELEVANT IN THE YEAR UNDER REFERENCE ALSO, THE LEGAL PRINCIPLES STAND WELL SET TLED. HOWEVER, THE AO HAS MADE AN ATTEMPT TO GO INTO INTENTION OF LEGISLATURE BY MAKING REFERENCE TO NEW LY INSERTED PROVISO TO SECTION 51 APPLICABLE W.E.F. 01.04.2015 AS PER WHICH SUCH FORFEITED ADVANCE IS T O BE TREATED AS INCOME IN TERMS OF PROVISIONS OF SEC. 56(2)(IX). 6.10 IT IS FURTHER NOTICED THAT THERE IS A DISPUTE BETWEEN BUYERS (APPELLANT) AND SELLER AND MATTER IS PENDING BEFORE JUDICIAL AUTHORITIES AS PER SEQUENCE OF EVENTS SUBMITTED IN THE WRITTEN SUBMISSION OF TH E APPELLANT. AS PER THE RELEVANT DETAILS, MATTER IS S TILL PENDING FOR FINAL SETTLEMENT. THE HONBLE DELHI HIG H COURT APPOINTED SOLE ARBITRATOR TO ADJUDICATE THE DISPUTES BETWEEN THE PARTIES. THUS THERE IS NO MATERIAL TO HOLD THAT IMPUGNED TRANSACTIONS IS NON ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 6 GENUINE AND MERELY AN ATTEMPT TO AVOID PAYMENT OF TAX. HOWEVER, CONSIDERING THE VARIOUS JUDICIAL ORDE RS PASSED IN THE APPELLANTS OWN CASE BY CIT(A), ITAT AND HONBLE DELHI HIGH COURT, THERE IS NO CASE FOR INVOKING AMENDED PROVISIONS IN THE YEAR UNDER REFERENCE. 6.11 TAKING INTO CONSIDERATION ALL THE FACTUAL AND LEGAL POSITION AND RESPECTFULLY FOLLOWING THE DECIS ION OF HONBLE DELHI HIGH COURT AND ITAT IN APPELLANTS OWN CASE, I AM OF THE VIEW THAT ADDITION MADE BY TH E AO OF FORFEITURE OF ADVANCE AS INCOME FROM OTHER SOURCES, IS NOT SUSTAINABLE. THE ADDITION MADE BY T HE AO IS DELETED, AS A RESULT THESE GROUNDS OF APPEAL IS ALLOWED. 6. LATER, THE LD. CIT(A) PASSED AN ORDER U/S 154 MO DIFIED THE ORDER ON THE GROUNDS THAT THE ASSESSEE HAS FURNISHE D INCOMPLETE FACTS AND THE ORDER PASSED U/S 154, THE LD. CIT(A) HELD THAT THE FORFEITURE OF ADVANCE OF RS.18 CRORES RECEIVED DURING THE ASSESSMENT YEAR 2007-08 IS MORE THAN THE COST OF ACQUISITION AND HENCE THE AMOUNT RECEIVED BY THE AS SESSEE DURING THE YEAR OF RS.12.50 CRORES IS TREATED AS RE CEIVED WITHOUT CONSIDERATION. THE LD. CIT(A) HELD THAT SIN CE THE AMOUNT HAS BEEN RECEIVED WITHOUT CONSIDERATION, THE ENTIRE RECEIPT MINUS THE COST OF ACQUISITION IS TAXABLE. 7. BEFORE US DURING THE ARGUMENTS, THE LD. AR ARGUE D THAT THE ORDER U/S 154 IS BEYOND THE PROVISIONS AND SCOPE OF INCOME TAX ACT AND THE MERITS OF THE ISSUE. THE LD. AR ARGUED THAT THE PROVISIONS OF SECTION 51 AND PROVISIONS OF SECTION 56(2)(IX) ARE NOT APPLICABLE FOR THE ASSESSED FOR THE INSTANT YEA R. 8. THE LD. DR ON THE OTHER HAND, ARGUED THAT THE AS SESSEE HAS BEEN HABITUALLY RECEIVING MONEY AND FORFEITING IT. HE ARGUED THAT ON THE EARLIER OCCASION, THE ASSESSEE RECEIVED RS.18 CRORES ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 7 AND SUBSEQUENT HE RECEIVED RS.12.50 CRORES AGAINST THE PROPERTY OF VALUE OF RS.30.16 LACS. HENCE, THE AMOU NT HAS BEEN RIGHTLY HELD TO BE TAXABLE BY THE LD. CIT(A). 9. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 10. WE HAVE GONE THROUGH THE PROVISIONS OF THE ACT. THE PROVISIONS OF SECTION 51 ARE AS UNDER: 51. WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUBJECT OF NEGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION: [PROVIDED THAT WHERE ANY SUM OF MONEY, RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATIO NS FOR TRANSFER OF A CAPITAL ASSET, HAS BEEN INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE FOR ANY PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE (I X) OF SUB-SECTION (2) OF SECTION 56, THEN, SUCH SUM SH ALL NOT BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION.] 11. FURTHER, WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 56 OF THE ACT. THE PROVISIONS OF SECTION 56(2)(IX) ARE AS UNDER: 56(2) .. [(IX) ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATIONS FOR TRANSFE R OF A CAPITAL ASSET, IF, (A) SUCH SUM IS FORFEITED; AND ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 8 (B) THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF S UCH CAPITAL ASSET;] 12. WE FIND THAT BOTH THE PROVISION TO SECTION 51 H AS BEEN INSERTED BY THE FINANCE (NO.2) ACT 204 WITH EFFECT FROM 1.4.2015 AND SO AS THE PROVISIONS OF CLAUSE (IX) OF SUB-SECTION (2) OF SECTION 56. HOWEVER, THE ASSESSING OFFICER C HOSE TO APPLY THE PROVISIONS INSERTED FROM 01.04.2015 TO THE ASSESSME NT YEAR 2013-14 WHICH CANNOT BE HELD TO BE LEGALLY VALID. THE PRE-A MENDED PROVISIONS APPLICABLE TO THE CASE OF THE ASSESSEE FOR THE INST ANT ASSESSMENT YEAR DIRECTS AS TO HOW THE ADVANCE OR OTHER MONEY RECEIV ED IS TO BE TREATED. AS PER THE PROVISIONS IN EXISTENCE, ANY MONEY OR OTHER MONEY RECEIVED IN CONNECTION WITH NEGOTIATIONS OF ANY CAPITAL ASSET A ND RETAINED BY THE ASSESSED SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED IN COMPUTING THE COST OF ACQUISITIONS WHILE DETERMI NING THE CAPITAL GAINS. 13. THUS, GOING THROUGH THE PROVISIONS OF SECTIONS AMENDED AND PRE-AMENDED, WE FIND THAT TILL THE ASSESSMENT Y EAR 2015- 16, THE AMOUNT OF FORFEITURE IS NOT LIABLE TO BE TA XED BUT WILL GO ONLY IN REDUCING THE VALUE OF THE ASSET WHILE COMPU TING THE TAXABILITY OF THE ASSESSEE UNDER THE HEAD CAPITAL GAINS. THERE IS NO TAXABILITY OF THE FORFEITED AMOUNT IN THE CUR RENT YEAR. THE REVENUE MAY MONITOR OR KEEP TRACK OF DETERMINATION OF CAPITAL GAINS AS AND WHEN THE ASSET IS FINALLY SOLD. 14. NOT TO LEAVE THE ISSUE RAISED BY THE REVENUE OF RECEIPT OF ADVANCE MONEY FROM M/S SHINE STAR BUILT CO. PVT. LT D. OF RS.18 CRORES DURING THE ASSESSMENT YEAR 2007-08, WE FIND THAT THE HONBLE HIGH COURT VIDE ORDER DATED 17.01.2013 DELE TED THE ADDITION MADE BY THE AO ON SIMILAR GROUNDS AND HELD THAT THE AMOUNT RECEIVED SHOULD BE TREATED IN ACCORDANCE WIT H SECTION ITA NOS. 8239 & 1198/DEL/2019 MEERA GOYAL 9 51 OF THE INCOME TAX ACT, THUS, RESTING THE ARGUMEN TS OF THE REVENUE. ITA NO. 8239/DEL/2019 (ASSESSEES APPEAL) 15. SINCE, THE MATTER HAS BEEN ADJUDICATED ON MERIT S OF THE ISSUE IN THE APPEAL OF THE REVENUE, THE APPEAL OF T HE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) PASSED U/S 154 BECOMES INFRUCTUOUS AND HENCE DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THAT OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2020. SD/- SD/- (KULDIP SINGH) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 14/12/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR