ACIT 16(3), MUMBAI V. DARSHANSINGH CHADHA, MUMBAI

ITA 1286/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92270 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: ABHISHEK TILAK
• Keywords: Capital asset; Cost of acquisition; Date of conversion; Fair market value; Valuation report; Revised return
• Section: 45(2); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 ACIT - 16(3) MATRU MANDIR, 2 ND FLOOR, R. NO. 206, TARDEO ROAD, MUMBAI 400 007 VS. SHRI DARSHANSINGH CHADHA C/O. M/S. B. ASASINGH & SONS, 409, V.P. ROAD MUMBAI 400 004 PAN:-AABPC 6695 C (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI ABHISHEK TILAK REVENUE BY : SHRI LOV E KUMAR DATE OF HEARING : 19.03.2015 DATE OF PRONOUNCEMENT : 10.04.2015 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST ORDER DATED 29.11.2012, PASSED BY THE LD.CIT(A)-27, MUMBA I IN RELATION TO PENALTY PROCEEDING U/S 271(1)(C) FOR THE A.Y. 2004- 05. IN GROUNDS OF APPEAL THE REVENUE HAS RAISED FOLLOWING GROUND:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LE VIED U/S 271(1)(C) OF THE ACT CONSIDERING INITIATION OF PROC EEDINGS AS IN- VALID WITHOUT APPRECIATION THAT SUCH IMPOSING OF PE NALTY AFTER RECEIPT OF ORDER ITAT WAS VALID AS PER SECTION 275( 1A) OF THE I.T. ACT. ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 2 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF CONSTRUCTION. THE ORIGINAL RETUR N OF INCOME WAS FILED ON 29.08.2004 DECLARING TOTAL INCOME OF RS.9,20,940 /- UNDER THE HEAD BUSINESS. LATER ON ASSESSEE FILED A REVISED RETURN OF INCOME ON 27.10.2005 DECLARING CAPITAL GAIN OF RS.28,39,703/- IN ADDITION TO THE INCOME RETURNED ORIGINALLY. THE AFORESAID CAPITAL GAIN WAS OFFERED ON THE GROUND THAT ON 01.05.2003 THE ASSESSEE HAS CONV ERTED HIS CAPITAL ASSETS, NAMELY, LAND WITH STRUCTURES OF AN OLD BUN GALOW INTO STOCK IN TRADE, THEREFORE, HE WAS LIABLE FOR THE CAPITAL GAI NS WHICH IS TO BE TAXED AT THE TIME OF SALE OF STOCK IN TRADE. DURING THE C OURSE OF SCRUTINY PROCEEDINGS THE ASSESSEE FILED REVISED COMPUTATION OF INCOME ON 15.12.2006, WHEREIN THE LONG TERM CAPITAL GAIN WAS SHOWN AT RS.20,61,218/- IN THE ASSESSMENT ORDER PASSED U/S 1 43(3) ON 28.12.2006, THE ASSESSING OFFICER ADOPTED SALE VALU E OF THE NEWLY BUILT FLAT SOLD AS STOCK IN TRADE, ON THE STAMP DUTY RATE AS FAIR MARKET VALUE ON THE DATE OF CONVERSION OF CAPITAL ASSET INTO STO CK IN TRADE AND AFTER ALLOWING INDEXED COST OF ACQUISITION, HE COMPUTED T HE CAPITAL GAINS AT RS.79.08 LAKHS. HE FURTHER DISALLOWED THE ASSESSEE S CLAIM U/S 54 F. IN THE FIRST APPEAL, THE LD. CIT(A), VIDE ORDER DATED 26.02.2009 ALLOWED THE ASSESSEES CLAIM FOR DEDUCTION U/S 54F HOWEVER WITH REGARD TO THE ASSESSEES CLAIM THAT FMV OF THE PROPERTY ON THE DA TE OF CONVERSION OF CAPITAL ASSETS INTO STOCK IN TRADE ON 01.05.2003, S HOULD BE CONSIDERED AS PER THE VALUATION REPORT FURNISHED BY THE ASSESSEE BEFORE THE AO, THE LD. CIT(A) HELD THAT SUCH A CLAIM IS NOT TENABLE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA. A FTER GIVING EFFECT TO THE FIRST APPELLATE ORDER, THE INCOME WAS DETERMINE D AT RS.29,87,660/-, WHICH INCLUDED LONG TERM CAPITAL GAINS OF RS.20,61, 218/-. IN THE SECOND ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 3 APPEAL FILED BY THE REVENUE AS WELL AS THE ASSESSEE , THE ASSESSEES CLAIM OF EXEMPTION U/S 54F WAS DENIED ON THE GROUND THAT THE INVESTMENT WAS MADE BY THE ASSESSEE IN FOUR FLATS IN A RESIDEN TIAL UNIT. AS REGARDS THE CONSIDERATION OF VALUATION REPORT FILED BY THE ASSESSEE BEFORE THE AO FOR ARRIVING AT THE FMV OF THE PROPERTY ON THE DATE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE, THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AND HELD THAT DE CISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. IS NO T APPLICABLE. IN THE ORDER GIVING EFFECT, TO THE TRIBUNAL ORDER THE AO A CCORDINGLY DISALLOWED THE CLAIM U/S 54F. 3. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITT ED THAT THE CAPITAL GAIN WAS OFFERED IN THE REVISED RETURN WHIC H WAS FILED BEFORE THE DATE OF SURVEY WAS CARRIED OUT ON 12.12.2005, AS TH E REVISED RETURN WAS FILED ON 27.10.2005. THUS, DISCLOSURE OF CAPITAL GA IN WAS VOLUNTARILY. THE CLAIM U/S 54F MADE IN THE REVISED RETURN WAS BONA F IDE AND APPEAL U/S 260 A HAS ALREADY BEEN FILED BEFORE THE HONBLE HIG H COURT, AGAINST THE ORDER OF THE TRIBUNAL WHICH HAS BEEN ADMITTED BY TH E HONBLE HIGH COURT. HOWEVER, THE ASSESSING OFFICER HAD LEVIED TH E PENALTY, ON THE GROUND THAT ASSESSEES CLAIM OF EXEMPTION U/S 54F W AS WRONG AND THEREFORE, THE ITAT HAD DENIED THE CLAIM. 4. THE LD. CIT(A) HAS DELETED PENALTY AFTER OBSERVI NG AND HOLDING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE CONTENTS OF THE PE NALTY ORDER AND THE APPELLANT'S SUBMISSIONS. AT THE OUTSE T, THE ONLY ISSUE FOR CONSIDERATION IN LEVYING THE PENALTY WAS THE IMPUGNED CAPITAL GAINS ON CONVERSION OF CAPITAL ASSETS INTO STOCK-IN- TRADE U/S. 45(2) OF THE ACT. HAVING CONSIDERED THE APPELL ANT'S SUBMISSIONS DATED 26.02.2010, THE AO. HAS DROPPED T HE PENALTY PROCEEDINGS, WHICH FACT IS ALSO ACKNOWLEDGED BY THE PRESENT AO ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 4 WHO LEVIED THE PENALTY. IN OTHER WORDS, THE PRESENT AO. SOUGHT TO REINITIATE THE PENALTY PROCEEDINGS WHICH WERE ALREA DY DROPPED ON CONSIDERATION OF THE FACTS. I AM OF THE CONSIDERED OPINION THAT SUCH REINITIATING IS NOT ALLOWED IN LAW, THERE BEIN G NO PROVISION TO DO SO. IN OTHER WORDS, THE AO IS CLEARLY WRONG IN L EVYING PENALTY IN A MATTER IN WHICH HIS PREDECESSOR HAS ALREADY RE ACHED A SATISFACTION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY. SECONDLY, THE A. O. AT PRESENT HAS NOT FULLY GIVEN EFFECT TO THE ORDER OF THE HON'BLE IT AT THAT HE HAS NOT TAKEN A DECISION AS T O THE FAIR MARKET VALUE OF THE PROPERTY ON THE DATE 0 CONVERSI ON, AND WITHOUT ARRIVING AT SUCH FAIR MARKET VALUE IT IS NO T POSSIBLE TO COMPUTE THE CORRECT QUANTUM OF CAPITAL GAINS. THERE FORE, WITHOUT ARRIVING AT THE CORRECT QUANTUM OF CAPITAL GAINS, T HE A.O. CANNOT ALLEGE THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF THE SAME. FURTHER, APPELLANT OFFERED CAPITAL GAINS TO TAX U/S. 45(2) OF THE ACT IN THE REVISED RETURN FILED ON 27- 10-2005 WHICH WAS PRIOR TO THE DATE OF SURVEY. SIMILARLY, THE NOT ICE U/S. 143(2) OF THE ACT ISSUED ON 12-07-2005 WAS ALSO A STATUTOR Y NOTICE AND AS ON THE DATE OF ISSUING THE SAID NOTICE NO ENQUIR Y WAS DONE BY THE A.O. AS TO THE IMPUGNED CAPITAL GAINS. IN CIRCU MSTANCES, IT CANNOT BE STATED THAT THE APPELLANT WAS COMPELLED T O DISCLOSE THE IMPUGNED CAPITAL GAINS ON ACCOUNT OF THE ACTION TAK EN BY THE AO A VOLUNTARILY. FURTHER, THE REQUIRED DETAILS INCLUD ING THAT OF THE VALUATION RE ARRIVING AT THE FAIR MARKET VALUE OF T HE PROPERTY, WERE PLACED BEFORE THE AO AT THE TIME OF THE ASSESS MENT PROCEEDINGS AND THUS ALL THE MATERIAL FACTS WERE BY THE APPELLANT. IN SUCH CIRCUMSTANCES, APPELLANT CANNOT BE ALLEGED TO BE GUILTY FURNISHING INACCURATE PARTICULARS. 5. BEFORE US, LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT FIRSTLY, THE INCOME UNDER THE HEAD C APITAL GAIN WAS DECLARED ONLY WHEN THE SCRUTINY PROCEEDINGS HAD COM MENCED AND SECONDLY, THE ASSESSEES CLAIM FOR BENEFIT UNDER SE CTION 54F HAS BEEN DECIDED AGAINST THE TRIBUNAL. THEREFORE, PENALTY HA S RIGHTLY BEEN LEVIED. 6. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED THA T AGAINST THE ORDER OF THE TRIBUNAL DENYING THE EXEMPTION U/S 54F , THE APPEAL HAS BEEN ADMITTED BY THE HIGH COURT ON THIS ISSUE THERE FORE, NO PENALTY SHOULD BE LEVIED AS IT IS A DEBATABLE ISSUE. FURTHE R, THE ASSESSEES CLAIM ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 5 WAS BONA FIDE AND SUCH A BONA FIDE CLAIM IS STRONGL Y SUPPORTED BY CATENA OF DECISION OF HIGH COURTS WHEREIN IT HAS BE EN HELD THAT IF THE TWO RESIDENTIAL HOUSES HAVE BEEN PURCHASED ADJACENT TO EACH OTHER EVEN WITH TWO DIFFERENT SALE AGREEMENT, THE ASSESSE E IS ENTITLED FOR EXEMPTION U/S 54/54F. IN SUPPORT OF HIS CONTENTION HE RELIED UPON FOLLOWING CASES:- I) CIT VS. D. ANANDA BASAPPA [(2009) 309 ITR 329 (K ARN)] II) CIT VS. SMT. V.R. KARPAGAM [(2014) 272 CTR 184 (MAD)] III) CIT VS. SMT. K.G. RUKMINIAMMA [(2011) 331 ITR 211 (KARN)] IV) CIT VS. SMT. JYOTHI K. MEHTA [(2011) 201 TAXMAN 79 (KARN) (MAG)] V) CIT VS. SYED ALI ADIL [(2013) 352 ITR 418 (AP)] VI) CIT VS. GITA DUGGAL [[(2013) 357 ITR 153 (DEL)] VII) CIT VS. KHOOBCHAND M. MAKHIJA [(2014) 43 TAXMA NN.COM 143 (KARN)] 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF THE IMPUGNED ORDER, IT IS SEEN THAT LD. CIT(A) HAS NOTE D A VERY IMPORTANT FACT THAT, EARLIER THE ASSESSING OFFICER HAS DROPPE D THE PENALTY PROCEEDINGS AFTER CONSIDERING THE ASSESSEES EXPLAN ATION. LATER ON THE SAID PENALTY HAS BEEN REINITIATED WITHOUT GIVING CO MPLETE AFFECT TO THE ORDER OF THE TRIBUNAL AND HENCE LD. CIT(A) HAS RIGH TLY CONCLUDED THAT THE AO CANNOT BE SATISFIED THAT THE ASSESSEE HAS FU RNISHED THE INACCURATE PARTICULARS OF THE INCOME, WHEN HE HAS N OT ARRIVED AT THE CORRECT QUANTUM OF CAPITAL GAINS. TILL THE TIME OF ISSUANCE OF NOTICE U/S 143(2) AND FILING OF REVISED RETURN, THERE WAS NO Q UERY OR INQUIRY BY THE AO WITH REGARD TO THE CAPITAL GAINS OFFERED BY THE ASSESSEE THEREFORE, IT CANNOT BE HELD THAT REVISED RETURN WAS NOT VOLUNTAR Y. FINALLY THE PENALTY HAS BEEN LEVIED ON THE GROUND THAT EXEMPTION U/S 54 F IS NOT AVAILABLE TO THE ASSESSEE AS THE CAPITAL GAIN WAS INVESTED IN FO UR FLATS. ASSESSEES ITA NO. 1286/MUM/2013 ASSESSMENT YEAR: 2004-05 6 CLAIM FOR EXEMPTION U/S 54F CAN BE HELD TO BE BONA FIDE IN VIEW OF IN VARIOUS DECISIONS OF THE HONBLE HIGH COURT AS WELL AS THE TRIBUNAL, WHEREIN IT HAS BEEN HELD THAT, EVEN IF THE ASSESSEE HAS BOUGHT/CONSTRUCTED TWO OR MORE FLATS WHICH ARE ADJA CENT TO EACH OTHER, THEN SAME CAN BE CONSIDERED AS RESIDENTIAL HOUSE, EVEN IF THERE ARE DIFFERENT AGREEMENTS FOR EACH UNITS. IN ALL THE DEC ISIONS RELIED UPON BY THE LEARNED COUNSEL THESE PROPOSITION HAS BEEN UPHE LD CONSISTENTLY. ACCORDINGLY, WE HOLD THAT NO PENALTY IS LEVIABLE ON SUCH A CLAIM MADE BY THE ASSESSEE U/S 54F AS IT WAS A BONA FIDE CLAIM. A CCORDINGLY, THE ORDER OF THE LD. CIT(A) DELEING THE PENALTY IS UPHELD. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF APRIL, 2015. SD/- SD/- (B.R. BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.04.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH // TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.