Shri Satish Keshrichand Shah, Nani Daman V. The Income Tax Officer, Vapi Ward-4, Daman

ITA 1262/AHD/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9849 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: RASESH SHAH
• Keywords: Capital asset; Cost of acquisition; Fair market value
• Section: 271(1)(c); 2(14); 143(1)

Judgement Text

SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER . . ./ I.T.A. NO.1262/AHD/2014 [ [ / ASSESSMENT YEAR : 2009-10 SHRI SATISH KESHRICHAND SHAH, JAIN STREET, NANI DAMAN. [PAN: AEQPS 7180 F] VS. THE INCOME TAX OFFICER, VAPI WARD-4, DAMAN. APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI RASESH SHAH CA /REVENUE BY SHRI B.P.K.PANDA LD.SR.DR / DATE OF HEARING: 06.05.2019 /PRONOUNCEMENT ON: 09.05.2019 /O R D E R PER SUDHANSHU SRIVASTAVA, JM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VALSAD, (IN SHORT THE CIT (A)) DATED 10.01.2014 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED DECLARING A TOTAL INCOME OF RS.7,72,471/-. THE CASE WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) AND WAS SUBSEQUENTLY SELECTED FOR SCRUTINY. SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 2 OF 8 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FURNISH COMPLETE DETAILS OF PURCHASE/SALE OF MOVABLE AND IMMOVABLE PROPERTIES MADE BY THE ASSESSEE AND HIS FAMILY MEMBERS. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THERE WAS NO SALE OR PURCHASE OF MOVABLE OR IMMOVABLE PROPERTY EITHER BY HIM OR HIS FAMILY MEMBERS DURING THE YEAR UNDER CONSIDERATION. 2.2 THE ASSESSING OFFICER (AO) ALSO REQUESTED THE SUB-REGISTRAR OF DAMAN TO PROVIDE DETAILS REGARDING SALE AND PURCHASE OF IMMOVABLE PROPERTIES BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN RESPONSE, THE SUB-REGISTRAR OF DAMAN SUBMITTED A COPY OF SALE DEED FOR SALE OF IMMOVABLE PROPERTY FOR A SALE CONSIDERATION OF RS.40 LAKHS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD LAND BEARING SURVEY NO.167/5 ADMEASURING 1400 SQ. MTRS AND ANOTHER LAND BEARING SURVEY NO.166/6 ADMEASURING 2800 SQ. MTRS, BOTH SITUATED AT DUNATHA, NANI DAMAN WHICH WERE INHERITED FROM THE ASSESSEES FATHER LATE SHRI KESHARICHAND MOTICHAND SHAH. IT WAS ALSO NOTICED THAT AS PER THE DEED REGISTERED IN THE OFFICE OF THE SUB-REGISTRAR UNDER SERIAL NO.1039/2008 DATED 23.04.2008 THE ASSESSEE ALONG WITH HIS TWO BROTHERS WERE THE JOINT VENDORS OF THESE LANDS. THE ASSESSING OFFICER PROPOSED TO IMPOSE LONG TERM CAPITAL GAIN TAX ON RS.13,33,333/- BEING 1/3 RD OF THE TOTAL SALE CONSIDERATION. SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 3 OF 8 2.3 THE ASSESSEE WAS ISSUED SHOW-CAUSE NOTICE AND THE ASSESSEE DENIED ANY LIABILITY TO BE ASSESSED TO TAX IN VIEW OF THE JUDGMENT OF THE HON'BLE APEX COURT IN CIT VS. SRINIVASA SHETTY REPORTED IN 128 ITR 294 (SC) WHEREIN IT WAS HELD THAT WHERE THE COST OF ASSET TO THE ASSESSEE WAS NIL, NO GAINS COULD BE CHARGED TO TAX. HOWEVER, THE ASSESSING OFFICER, FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (ITAT AHMEDABAD) IN THE CASE OF VIJAY SINH R.RATHOD VS. ITO REPORTED IN 106 ITD 153 (SPECIAL BENCH) MADE AN ADDITION WITH RESPECT TO LONG TERM CAPITAL GAINS AMOUNTING TO RS.13,33,333/-. 2.4 THE ASSESSEES APPEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY WAS ALSO DISMISSED. 2.5 NOW, THE ASSESSEE HAS APPROACHED THIS TRIBUNAL (ITAT) AND HAS CHALLENGED THE UPHOLDING OF ADDITION PERTAINING TO LONG TERM CAPITAL GAIN BY RAISING THE FOLLOWING GROUNDS OF APPEAL: (1) A.O. HAS ERRED IN LAW AND ON FACTS TO COMPUTED CAPITAL GAIN IN THE HANDS OF COOWNERS AND 1/3 SHARES THEREOF OF RS.13,33,333/- IN THE HANDS OF THE APPELLANT. (2) LAND SOLD WAS LEASED TO DECEASED KESHRICHAND MOTICHAND SHAH FATHER OF THE APPELLANT AND LEASEHOLD RIGHT BEING TREATED AS CAPITAL OR PROPERTY AND THEREFORE DATE OF REGISTRATION OF LEASE DEED DT.22-8-1995 EXECUTED IN FAVOUR OF SHRI ISMAIL IBRAHIM DHJARIWAL, AND ANOTHER LEASE DEED EXECUTED ON DT.22-8-1995 WHICH IS REGISTERED UNDER NO.834/95 IN THE NAME OF SATYANARAYAN GOPILAL KABRA IS THE DATE OF TRANSFER OF LAND I.E. ON DT.22-8- 1995, CAPITAL GAIN ARISEN HAVE TO BE COMPUTED AND CAPITAL GAIN WAS REGISTERED TO BE LEVIED ON ANNUAL GROUND RENT OF RS..621/- PER YEAR PAYABLE FOR ONE YEAR AND RS.965/- ANNUAL GROUND RENT PAYABLE FOR 99 YEARS FOR ANOTHER LEASE DEED IS CAPITAL GAIN TO BE LEVIED IN THE CASE OF ORIGINAL OWNER AND NOT RS.40,00,000/- IN THE HANDS OF DECEASED SONS WHO ARE COOWNERS. (3) AMOUNT OF RS.40,00,000/- IS PAID BY THE PURCHASER TO THE LEASES AND SUBLEASES BY THE PURCHASER BECAUSE LESSOR HAS NOT RESERVED ANY RIGHT OF SELL OF SUCH LAND DURING THE PERIOD OF 99 YEARS PERIOD OF LEASE. SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 4 OF 8 (4) ARREARS OF TAX IS REQUESTED TO BE STAYED TILL THE DISPOSAL OF THIS APPEAL. (5) PENALTY TO BE LEVIED U/S 271(1)(C) IS PRAYED TO BE STAYED TILL THE DECISION OF APPEAL. 3. THE LEARNED AUTHORISED REPRESENTATIVE (AR) APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE COULD NOT BE BROUGHT WITHIN THE PURVIEW OF LONG TERM CAPITAL GAINS BECAUSE THE COST OF ACQUISITION FOR THE ASSESSEE IN RESPECT OF IMPUGNED PROPERTY WAS NIL. HOWEVER, THE LEARNED AUTHORISED REPRESENTATIVE FAIRLY AGREED THAT BE AS IT MAY, THE ASSESSEES CASE WAS COVERED AGAINST HIM AND IN FAVOUR OF THE REVENUE BY THE ORDER OF THE SPECIAL BENCH IN THE CASE OF VIJAY SINH R.RATHOD VS. ITO (SUPRA). 4. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND ALSO PLACED RELIANCE ON THE ORDER OF THE SPECIAL BENCH AS AFORE MENTIONED. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, IT IS ABUNDANTLY CLEAR THAT THE CASE OF THE ASSESSEE IS COVERED AGAINST HIM AND IN FAVOUR OF THE REVENUE BY THE ORDER OF THE AHMEDABAD SPECIAL BENCH IN THE CASE OF VIJAY SINH R.RATHOD VS. ITO (SUPRA). IN THE CASE DECIDED BY THE SPECIAL BENCH BRIEF FACTS WERE THAT THE ANCESTORS OF THE ASSESSEE WERE ALLOTTED LANDS FOR CULTIVATION BY PORTUGUESE ADMINISTRATION UNDER ORGANIZACAO AGRAIA (OA). HOLDING OF SAID ALWARA RIGHTS UNDER OA ENTITLED THE HOLDERS TO LANDS IN TERMS OF DADRA AND NAGAR HAWELI LAND REFORMS REGULATION, 1971. ALL THE SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 5 OF 8 ASSESSEES HAD BEEN GRANTED LAND UNDER THE NEW LAND REFORMS REGULATION, 1971, AFTER DUE VERIFICATION OF NATURE OF THEIR RIGHTS, HOLDING IN OA AND SUBSEQUENT PERIOD. DURING THE RELEVANT ASSESSMENT YEARS, THE ASSESSEES SOLD THE SAID LAND AND FILED THEIR RETURNS CLAIMING NIL INCOME FROM CAPITAL GAINS. THEY CONTENDED THAT THE SAID OCCUPANCY RIGHTS COULD NOT BE CONSIDERED AS OWNERSHIP RIGHTS BECAUSE THE RIGHT TO TRANSFER RESTED WITH THE GOVERNMENT. IT WAS FURTHER CLAIMED THAT SINCE THE COST OF ACQUISITION OF THE OCCUPANCY RIGHT/S WAS NOT CAPABLE OF BEING ASCERTAINABLE, THERE WAS NO LIABILITY FOR CAPITAL GAIN. THE ASSESSING OFFICER, HOWEVER, REJECTED THE ASSESSEES CONTENTION AND TAXED THE ENTIRE GAIN AS CAPITAL GAIN. ON APPEAL, THE ASSESSEE CONTENDED THAT IN ANY CASE, THE ASSESSING OFFICER SHOULD HAVE COMPUTED THE COST OF ACQUISITION ON THE BASIS OF FAIR MARKET VALUE AS ON 1-4-1981 ON THE LAND ACQUIRED BY THE ASSESSEE BEFORE 1-4-1981. THE LD. COMMISSIONER (APPEALS), HOWEVER, UPHELD THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEES WERE IN SECOND APPEAL BEFORE THE TRIBUNAL. AS THE ISSUE WAS OF A PUBLIC IMPORTANCE AND ARISING IN MANY APPEALS PENDING IN THE TRIBUNAL, A SPECIAL BENCH WAS CONSTITUTED FOR ADJUDICATION OF THE QUESTION AS TO WHETHER THE POSSESSION OF LAND AS ALWARA IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT, THE SALE WHEREOF IS LIABLE TO CAPITAL GAIN UNDER SECTION 45. SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 6 OF 8 5.1 THE SPECIAL BENCH AFTER DULY CONSIDERING THE FACTUAL MATRIX OF THE CASE AND THE SETTLED LEGAL POSITION REACHED THE CONCLUSION THAT THE POSSESSION OF LAND HELD BY THE ASSESSEES IS NOT AS ALWARA RIGHT HOLDER BUT OCCUPANCY RIGHT AS PER DADRA & NAGAR HAVELI LAND REFORMS REGULATION, 1971. IT WAS HELD THAT THE OCCUPANCY RIGHTS IN THESE LANDS, THEREFORE, AMOUNTED TO CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT, THE SALE WHEREOF IS LIABLE TO BE TAXED AS CAPITAL GAIN UNDER SECTION 45 OF THE ACT. IT WAS HELD THAT THE ASSESSEES HAD SOLD CAPITAL ASSET AS OWNERS OF LAND IN QUESTION, AND THE COST OF ACQUISITION, WHICH THOUGH WAS CLEARLY ASCERTAINABLE, WAS TO BE SUBSTITUTED BY THE FAIR MARKET VALUE AS ON 1-4-1981 AS PRAYED BY THE ASSESSEES. 5.2 IT WAS FURTHER HELD BY THE SPECIAL BENCH THAT EVEN IF THE BENCH WAS TO ACCEPT THE VIEW THAT ALWARA RIGHTS AND OCCUPANCY RIGHTS WERE THE SAME IN SUBSTANCE AND CONTENTS AS INTERPRETED BY THE HON'BLE BOMBAY HIGH COURT IN THE TWO DECISIONS ARISING UNDER OA, 1963, THERE WOULD BE NO CHANGE INSOFAR AS THE TAXABILITY OF CAPITAL GAIN WAS CONCERNED. THESE RIGHTS WOULD BE THEN HELD BY THE ASSESSEES, AS INHERITED FROM THE FOREFATHERS, AND THE COST OF ACQUISITION IN THE HANDS OF THE ASSESSEES WOULD BE THAT OF THE FOREFATHERS BY VIRTUE OF SECTION 49(1)(II)(A) OF THE ACT PROVIDING THAT WHERE THE CAPITAL ASSETS BECOME THE PROPERTY OF THE ASSESSEE BY SUCCESSION, INHERITANCE OR DEVOLUTION, THE COST OF ACQUISITION OF THE ASSETS WOULD BE DEEMED TO SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 7 OF 8 BE THE COST AT WHICH THE PREVIOUS OWNER OF THE PROPERTY HAD ACQUIRED THE PROPERTY. IN VIEW OF THE OBSERVATIONS OF THE BOMBAY HIGH COURT IN THE TWO OTHER CASES CITED ABOVE, THE COST WOULD BE NIL IN THE HANDS OF THE PREVIOUS OWNER SO ALSO IN THE HANDS OF THE PRESENT OWNER. IT WAS FURTHER HELD THAT THE ASSESSEES WOULD, HOWEVER, HAVE THE OPTION TO SUBSTITUTE THE FAIR MARKET VALUE AS ON 1-4-1981 AS GIVEN UNDER SECTION 55(2) OF THE ACT, AND THEREFORE, THE MARKET VALUE AS ON THAT DATE WOULD BE THE COST OF ACQUISITION WHICH HAS TO BE ALLOWED AS DEDUCTION WITH THE BENEFITS OF INDEXATION COST TO THE ASSESSEES. 5.3 IT WAS FURTHER HELD BY THE HON'BLE SPECIAL BENCH THAT IF THE CONTENTION OF THE ASSESSEE THAT THE COST IN THE HANDS OF THE PREVIOUS OWNER WAS NOT ASCERTAINABLE WAS TO BE ACCEPTED, THE PROVISIONS OF SECTION 55(2) OF THE ACT WOULD THEN COME INTO FORCE AND THE FAIR MARKET VALUE WOULD BE THE FAIR MARKET VALUE ON THE DATE ON WHICH CAPITAL ASSETS BECAME THE PROPERTY OF THE PREVIOUS OWNER AND IN THAT CASE ALSO THE ASSESSEES WOULD BE ENTITLED TO SUBSTITUTE THE FAIR MARKET VALUE AS ON 1-4-1981 UNDER SECTION 55(2) OF THE ACT AND THAT HAS TO BE ALLOWED AS A DEDUCTION WITH BENEFIT OF INDEXATION COST AS AFORESAID. 5.4 IN THE PRESENT APPEAL BEFORE US, THERE IS NO DISPUTE AS TO THE FACTS AND BOTH THE PARTIES HAVE FAIRLY ACCEPTED THAT THE FACTS ARE IDENTICAL TO THE FACTS AS RECORDED BY THE SPECIAL BENCH IN ITS ORDER. BOTH THE LOWER AUTHORITIES HAVE ALSO PLACED RELIANCE ON THIS ORDER OF SATISH KESHRICHAND SHAH VS. ITO, VAPI WARD-4, DAMAN /ITA NO.1262/AHD/2014/A.Y. 2009-10 PAGE 8 OF 8 THE SPECIAL BENCH WHILE DISMISSING ASSESSEES CONTENTION THAT THE IMPUGNED TRANSACTION DID NOT FALL WITHIN THE MISCHIEF OF SECTION 45 OF THE ACT. THE LD. AR ALSO HAS FAIRLY ACCEPTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE. ACCORDINGLY, RESPECTFULLY FOLLOWING THE ORDER OF THE SPECIAL BENCH OF ITAT AHMEDABAD IN THE CASE OF VIJAY SINH R. RATHOD VS. ITO (SUPRA), WE DISMISS THE APPEAL OF THE ASSESSEE. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09.05.2019. SD/- SD/- (VIKRAM SINGH YADAV) (SUDHANSHU SRIVASTAVA) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 9 TH MAY , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT