ISABELLE TRADERS LTD, MUMBAI V. ITO 2(2)(1), MUMBAI

ITA 1263/MUM/2013

• Counselvise Citation: 126319914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 22-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Cost of acquisition; Valuation report
• Section: 50C

Judgement Text

1 , I INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. , !' , ! BEFORE S/SH. JOGINDER SINGH, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1263/MUM/2013 , # # # # $ $ $ $ ASSESSMENT YEAR 2006-07 ISSEBELLA TRADERS LIMITED, C-1/10/20,CAWASJI PATEL STREET, JEEVAN JYOT BUILDING,FORT MUMBAI-1 PAN:AAACI6822M VS. ITO 2(2)(1), AAYKAR BHAVAN,M K ROAD MUMBAI-20 ( %& / APPELLANT) ( '(%& / RESPONDENT) ) * ! / REVENUE BY : SHRI VIJAY KUMAR BORA #+, #+, #+, #+, * * * * ! !! ! / ASSESSEE BY : SHRI SANJAY R PARIKH # # # # ) )) ) ,- ,- ,- ,- / DATE OF HEARING : 20-10-2014 .$ ) ,- / DATE OF PRONOUNCEMENT : 20-10-2014 # # # # , 1961 ) )) ) 254(1) ! !! ! ,, ,, ,, ,, !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! !' !' !' !' ! !! ! # # # # : CHALLENGING THE ORDER DT.30.11.2012 OF THE CIT(A)-5 ,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: BEING AGGRIEVED BY THE ORDER DATED 30.11.2012 PASS ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V, MUMBAI, YOUR APPELLANT THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WINCH IS INDEPENDENT OF, AND WITHOUT PREJUDICE TO, THE OTHERS: I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED INCOME TAX OFFICER ERRED IN LAW IN NOT ACCEPTING YOUR APPELLANT CLAIM OF LONG TERM CAPITAL GAIN ON SALE CONSIDERATION OF RS. 56,00,000/- AND ADDED BACK INC OME OFRS.4,22,371/ TREATING THE SAME AS SHORT TERM CAPITAL GAIN ON SALE OF PROPERTY UNDER S ECTION 50-C OF THE ACT . YOUR APPELLANT REQUEST YOUR HONOR TO DIRECT LEARNED A.O. TO DELETI NG THE SAID ADDITION IN TOTO AMOUNTING TO RS.4,22,871/-. II)WITHOUT PREJUDICE TO ABOVE, THE LEARNED OFFICER ERRED IN LAW IN NOT CONSIDERING SALE OF PROPERTY AS LONG TERM CAPITAL ASSET AND ACCORDINGLY GAIN / LOSS TO BE ASSESSED AS LONG TERM CAPITAL GAIN / LOSS.YOUR APPELLANT REQUEST YOU R HONOR TO CONSIDERED THE SALE OF PROPERTY AS LONG TERM CAPITAL ASSET AND DUE CONSIDE RATION FOR INDEX PURCHASE COST OF PROPERTY TO BE ALLOWED. III)YOUR APPELLANT CRAVES LEAVE TO ALTER, MODIFY, A MEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL, OR TO ADD ONE OR MORE ADDITIONAL GROUND(S), AT OR BEFORE THE HEARING OF THE APPEAL, AS MAY BE NECESSARY. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND INVESTMENT,FILED ITS RETURN OF INCOME ON 27.11.2006 DECLARING INCOME AT RS. 3,07,090/-.ASSESSING OFFICER(AO) FINALISED THE ASSESSMENT ON15.12.2011 U/S.143(3)R.W .S.147 OF THE ACT,DETERMINING THE INCOME AT RS7,31, 940/-. 2.1. FIRST GROUND OF APPEAL IS ABOUT ADDITION MADE BY TH E AO OF RS. 4,22,871/-.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SOLD THE OFFICE PREMISES,ADMEASURING 600 SQ. FT . AREA,FOR RS. 56 LAKHS,THAT AS PER THE REGISTRATION DOCUMENTS THE MARKET VALUE OF THE PROP ERTY WAS RS.65,65,87L/-.THE AO RE- 2 OPENED THE ASSESSMENT INVOKING THE PROVISIONS OF S ECTION 50C OF THE ACT.IN RESPONSE TO THE NOTICE ISSUED U/S.148 OF THE ACT,THE ASSESSEE STATE D THAT IT HAD SOLD THE OFFICE PREMISES OCTOBER,2005 FOR AN AGREED SUM OF RS.56 LACS ,THAT SAME WAS ALSO REFLECTED IN THE AUDITED ACCOUNTS,THAT THE ABOVE PROPERTY WAS NOT REGISTERED IN THE NAME OF ISABELLE TRADERS,THAT NECESSARY STAMP DUTY WAS NOT PAID BY THE COMPANY ON THE PROPERTY,THAT AN AMOUNT OF RS.6 LACS WAS RETAINED BY THE PURCHASER VIZ M/S SHREELEK HA ENTEORISES OF THE PROPERTY TOWARDS STAMP DUTY AND REGISTRATION FEE,THAT THE ASSESSEE W AS PAID ONLY 50 LAKHS,THAT SAID FACT WAS CLEAR FROM THE COPY OF THE DEED OF TRANSFER,THAT TH E BUYER HAD PAID THE STAMP DUTY ON THE PROPERTY IN RESPECT OF THE ORIGINAL PURCHASE OF THE PROPERTY.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE AO HELD THAT THE MARKET VALUE O F THE PROPERTY WAS SHOWN AT 65,63,871/- IN THE REGISTRATION DOCUMENTS,THAT THE ASSESSEE COM PANY HAD ENTERED INTO AGREEMENT FOR PURCHASE OF THE PROPERTY IN APRIL 1995, BUT THE STA MP DUTY PAYMENT WAS NOT MADE AS THE REGISTRATION OF THE PROPERTY WAS NOT DONE,THAT AT T HE TIME OF ACTUAL REGISTRATION OF THE PROPERTY THE ASSESSEE HAD TO ADJUST THE AMOUNT OF 6 LACS IN CLUDING THE STAMP DUTY AND REGISTRATION FEE TO THE BUYER,THAT THE ASSESSEE HAD SHOWN THE PROPER TY IN THE BALANCE SHEET AT RS.55,41,000/-. ACCORDINGLY,THE AO TOOK THE COST PRICE OF THE PROPE RTY AT RS.61,41,000/-INCLUSIVE OF STAMP DUTY AND REGISTRATION FEE.HE FURTHER HELD THAT THE PROVISIONS OF SECTION 50C WERE ATTRACTED IN THE TRANSACTION,THAT THE ASSESSEE WAS LIABLE TO PAY SHORT TERM CAPITAL GAIN ON TRANSFER OF PROPERTY ON THE DEEMED VALUE AS PER PROVISIONS OF S ECTION 50C.FINALLY,HE MADE AN ADDITION OF RS.4,22,871/- TO THE INCOME OF THE ASSESSEE. 2.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,THE ASSESSEE A RGUED THAT THAT THE DOCUMENT WAS NOT REGISTERED, THAT THE PROVISIONS OF SECTION 50C WERE NOT APPLICABLE, THAT THE AMENDMENT TO SECTION 50C WAS PROSPECTIVE AND NOT RETROSPECTIVE,T HAT IT HAD FURNISHED THE REASONS WHY MARKET VALUE OF PROPERTY COULD NOT BE ADOPTED,THAT THE AO SHOULD HAVE REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER TO DETERMINE THE MARKET VALUE OF THE PROPERTY CONSIDERING THE DEFECTS IN THE TITLE OF THE PROPERTY.THE ASSESS EE PLACED RELIANCE IN ON THE DECISIONS OF MEGHRAJ BAID(114TTJ 841),SMT. MANJU RANI JAM (24SOT 24),AJMAL FRAGRANCES & FASHIONS (P.) LTD.(34SOT57),B.N. PROPERTIES HOLDINGS (P.) LT D.(6 ITR-(TRIB.)1).IT WAS FURTHER ARGUED THAT THE AO HAD NOT REFERRED THE MATTER TO THE VALU ATION OFFICER,THAT THE ORDER WAS PASSED WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE ,THAT THE MATTER MIGHT BE REMANDED TO THE AO,THAT HE SHOULD BE BE DIRECTED TO CALL FOR A VALU ATION REPORT.IT WAS STATED THAT IF THE FAA LIKED TO PROCEED WITH THE MATTER WITHOUT CALLING FO R A VALUATION REPORT,HE SHOULD AFFORD AN OPPORTUNITY TO THE ASSESSEE TO ENABLE IT TO FILE SU BMISSIONS ON MERITS. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE AO HAD CHARGED CAPITAL GAINS AS PER PROVISIONS U/S 50C,THAT THE ASSESSEE HAD CONTENDED THAT THERE WERE CERTAIN DEFECTS IN THE DEED,THAT IT WAS NOT PROPERLY STAMPED AND REGISTERED,THAT DUE TO THAT DEFECT AND THE BUYER TAKING OVER THE RE SPONSIBILITY OF GETTING THE PURCHASE DOCUMENT STAMPED AND REGISTERED WOULD DEFINITELY NO T PAY THE MARKET VALUE TO IT,THAT THE ASSESSEE FURTHER POINTED OUT THAT THE DOCUMENT WAS NOT REGISTERED AND THE PROVISIONS OF SECTION 50C WERE NOT APPLICABLE,THAT DURING THE COU RSE OF APPELLATE PROCEEDINGS IT WAS ASKED AS TO WHEN THE DOCUMENT WAS REGISTERED,THAT NO DOCU MENTARY EVIDENCE IN THAT REGARD HAD BEEN PRODUCED,THAT IT HAD NOT BEEN ABLE TO DISCHARG E ONUS CAST UPON IT.FINALLY,HE REJECTED THE APPEAL FILED BY THE ASSESSEE. 2.3. BEFORE USAUTHORIESD REPRESENTATIVE(AR)STATED THAT T HE FAA HAD DECIDED THE ISSUE WITHOUT EFFECTIVE HEARING,THAT FOR INVOKING THE PRO VISIONS OF SECTION 50C OF THE ACT REFERENCE TO THE VALUATION OFFICER WAS A PRE-CONDITION,THAT T HE FAA HAD NOT DECIDED THE ISSUE OF 3 REFERENCE TO THE VALUATION OFFICER,THAT THE ASSESSE E WAS OWNING THE PROPERTY FOR LAST TEN YEARS, THAT THE AO WAS WRONG IN CHARGING SHORT TERM CAPITA L GAINS(STCG).HE REFERRED TO THE ORDER OF THE HONBLE CALCUTTA HIGH COURT DELIVERED IN THE CASE OF SUNIL KUMAR AGARWAL (GA.NO. 3686 OF 2013-ITAT NO.221OF 2013,DATED 13.03.2014).D EPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD SPECIFICALLY REQUESTED THE FAA TO ALLO W IT TO FILE WRITTEN SUBMISSION ON MERITS OF THE CASE,IF HE WAS OF THE OPINION THAT THE DECISION OF THE AO IN NOT REFERRING THE MATTER TO THE VALUATION OFFICER WAS AS PER LAW.WE FIND THAT THE F AA HAS NOT DECIDED THE SAID ISSUE.IT IS A FACT THAT THE ASSESSEE HAD NOT RAISED THE ISSUE OF REFERENCE TO THE DVO BEFORE THE AO,BUT IT HAD RAISED AN OBJECTION BEFORE THE FAA AND HAD REQU ESTED HIM TO REMAND BACK THE MATTER TO THE AO.IN OUR OPINION PROVISIONS OF SECTION 50C CAN BE INVOKED ONLY IF CERTAIN CONDITIONS ARE FULFILLED AND THE AO HAS TO FOLLOW A PARTICULAR PRO CEDURE.IN THE CASE UNDER CONSIDERATION,THE FAA SHOULD HAVE RESTORED BACK THE MATTER TO THE AO OR SHOULD HAVE ALLOWED THE ASSESSEE TO MAKE SUBMISSION ON MERITS.BUT,HE DID NOT FOLLOW ANY OF THE TWO OPTIONS.THEREFORE,IN OUR OPINION,IN THE INTEREST OF JUSTICE,THE MATTER SHOUL D BE REMANDED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. 0,1 0,1 0,1 0,1 #+, #+, #+, #+, 2 2 2 2 3 3 3 3 ) )) ) /,1 /,1 /,1 /,1 4, 4, 4, 4, ) )) ) , , , , 5 55 5 . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH ,OCTOBER,2014 . !/ !/ !/ !/ ) )) ) .$ .$ .$ .$ ! ! ! ! 6 66 6 7# 7# 7# 7# 20 OCTOBER , 201 4 ) )) ) 8 88 8 SD/- SD/- ( # / JOGINDER SINGH) ( !' !' !' !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! /ACCOUNTANT MEMBER / MUMBAI, 7# /DATE: 20.10.2014. SK !/ !/ !/ !/ ) )) ) ',9 ',9 ',9 ',9 :!9$, :!9$, :!9$, :!9$, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR I BENCH, ITAT, MUMBAI / 9= ',# , . . . 6. GUARD FILE/ 0 (9, (9, (9, (9, ', ',', ', //TRUE COPY// !/# / BY ORDER, > / DY./ASST. REGISTRAR , /ITAT, MUMBAI