DR. JAYANT KASHINATH BAPAT, MUMBAI V. CIT 11, MUMBAI

ITA 1416/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100606 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Keywords: Depreciation; Cost of acquisition; Capital expenditure
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN , VP AND SHRI SANJAY ARORA, AM ./ I.T.A. N O. 1416/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) DR. JAYANT KASHINATH BAPAT 91, RANADE ROAD, 6 DWARKANATH MANSION, SHIVAJI PARK, MUMBAI - 400 028 / VS. CIT - 11, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. RAOD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABPB 0599 G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MANDAR VAIDYA / RESPONDENT BY : SHRI S. D. SRIVASTAVA / DATE OF HEARING : 05.05.201 5 / DATE OF PRONOUNCEMENT : 05 .08.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 30.12.2013 BY THE COMMISSI ONER OF INCOME TAX - 11, MUMBAI (CIT FOR SHORT) QUA THE ASSESSEES ASSESSMENT FOR ASSESSMENT YEAR (A.Y.) 2009 - 10 FRAMED U/S.143(3) OF THE ACT ON 24.08.2011. 2 ITA NO. 1416/MUM/2014 (A.Y. 2009 - 10) DR. JAYANT KASHINATH BAPAT VS. CIT 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A DENTIST, IN PRACTICE THROUGH A TENANTED PRE MISES SINCE 1975, TRANSFERRED THE TENANCY RIGHTS FOR A CONSIDERATION OF ` .50 LACS, CLAIMING ` .22,71,430/ - AS THE INDEX ED COST OF THE ACQUISITION /IMPROVEMENT THEREOF O N A COST OF ` .3,90,280/ - , INCLUDING COST OF ACQUISITION AT ` . 12,500/ - , RETURNING NET LONG TERM CAPITAL GAIN (LTCG) ON THE SAID TRANSFER AT ` .2,28,570/ - , I.E., AFTER CLAIMING THE EXEMPTION U/S.54EC AT ` .25 LACS FOR THE INVESTMENT IN BONDS OF NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) UNDER THE C APITAL G AINS BOND SCHEME. THE LD. CIT CALLED FOR A ND EXAMINED THE ASSESSEES ASSESSMENT RECO RD UNDER HIS REVISIONARY POWERS . THE ASSESSING OFFICER (A.O.) HAD NOT EXAMINED THE ISSUE OF COST OF ACQUISITION OF THE TENANCY RIGHTS , WHICH IS GENERALLY NIL, PROPERLY. THE TENANCY A GREEMENT DATED 18.06.1975 WITH D R. (MRS) RADHA CHANDRAN, ADDUCED DURING THE ASSESSMENT PROCEEDINGS TOWARD THE SAME (PB PGS. 19 - 25), WAS FOR THE PURCHASE OF EQUIPMENT, INSTRUMENTS, FURNITURE AND FIXTURE , ETC., DETAILED THEREIN. SIMILARLY, THE SUM OF ` .12,500/ - PAID PURPORTEDLY FOR ACQUIRI NG THE SAID TENANCY WAS, AS EVIDENCED BY THE RECEIPT DATED 18.06.1975 (PB PG.26) , FOR A REFUNDABLE DEPOSIT, WHICH COULD THEREFORE NOT BE CONSIDERED AS TOWA RD COST OF ACQUISITION. THE INVESTMENT IN NHA BONDS TOWARD EXEMPTION U/S.54EC WAS ALSO NOT MADE WITHI N THE PRESCRIBED PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER. THE ASSESSEE WAS, ACCORDINGLY, SHOW CAUSED U/S.263 OF THE ACT TOWARD THE SAME. BEING, HOWEVER, NOT SATISFIED WITH THE ASSESSEES EXPLANATION OF THE SAID ISSUES HAVING BEEN EXAMINED BY THE A.O . DURING THE ASSESSMENT PROCEEDINGS, THE LD. CIT WAS OF THE VIEW THAT THE ASSESSES CLAIM OF THE COST OF ACQUISITION (OF THE TENANCY RIGHTS) ; THE COST OF IMPROVEMENT THEREOF ; AND THE DEDUCTION U/S.54EC, IN COMPUTING THE CAPITAL GAIN ON ITS TRANSFER, WERE A LLOWED BY THE A.O. WITHOUT MAKING ADEQUATE INVESTIGATION AND WITHOUT APPLICATION OF MIND, SO THAT HIS ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, I.E., QUA THESE ISSUES. HE, ACCORDINGLY, SET ASIDE THE ASSESSMENT FOR BEING PASSED AFR ESH AS PER LAW AFTER MAKING PROPER ENQUIRIES O N THESE ISSUES. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3 ITA NO. 1416/MUM/2014 (A.Y. 2009 - 10) DR. JAYANT KASHINATH BAPAT VS. CIT 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. CLEARLY, THE ONLY ISSUE BEFORE US IS WHETHER THE FINDING BY THE LD. CIT, THE REVISIONA RY AUTHORITY UNDER THE ACT, OF THE IMPUGNED ASSESSMENT A S HAVING BEEN MADE WITHOUT DUE APPLICATION OF MIND, I.E., THE LACK OF PROPER ENQUIRY QUA THE ISSUES UNDER REFERENCE, IS VALID IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OR NOT. IT IS NOT DENIED, BEIN G WELL SETTLED , THAT LACK OF PROPER ENQUIRY RENDERS AN ORDER AS PER S E ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE , LEADING TO A VALID ASSUMPTION OF JURISDICTION U/S.263 OF THE ACT , WHICH , IN E F FE CT , IS THE ONLY ISSUE BEFORE US; THE LD. CIT HA VING RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING AUTHORITY FOR THE PURPOSE, SO THAT HIS PURVIEW WOULD BE TO DECIDE THE ISSUES UNDER REFERENCE AFRESH UPON PROPER EXAMINATION AND IN ACCORDANCE WITH THE LAW. WE SH AL L TAKE UP EACH OF THE THREE ISSUES , TO EXAMINE AND DECIDE UPON WHICH THE ASSESSMENT HAS BEEN SET ASIDE BY THE LD. CIT , T O SEE IF THE ASSESSEES CLAIM IN ITS RESPECT COULD BE REASONABLY ACCEPTED, AS DONE BY THE A.O. PER THE IMPUGNED ASSESSMENT, I.E., CONSIDERING THE MATERIAL ON RECORD COUP LED WITH THE ASSESSEES EXPLANATION /S, IF ANY : A) COST OF A CQUISITION: CLEARLY , THE SAME ( ` .12,500/ - ) PAID BY THE ASSESSEE ON ACQUISITION, AS EVIDENCED FROM THE RECEIPT DATED 18.06.1975, IS TOWARD A REFUNDABLE DEPOSIT. THAT THE SAME CANNOT BE RECOVERED AS TH E OWNER (DR. RADHA CHANDRAN) HA S, AS CLAIMED, MIGRATED ABROAD, IS ANOTHER MATTER ALTOGETHER . T HE FACT OF THE MATTER NEVERTHELESS REMAINS THAT THE ASSESSEE IS ENTITLED TO THE SAID REFUND , AND COULD , ON ACCOUNT OF NON RECEIPT , BE SAID TO HAVE INCURRED A LOSS TO THAT EXTENT. WHY, IN VIEW OF THE ASSESSEE HAVING TRANSFERRED THE TENANCY RIGHTS TO ANOTHER, HE COULD EVEN TRANSFER /ASSIGN THE SAID DEPOSIT, SECURING HIMSELF, SO THAT THE TRANSFEREE TENANT SHALL BE ENTITLED TO THE SAID AMOUNT FROM THE OWNER ON ITS SURRE NDER. IN ANY CASE, THE SAME BY ITSELF WILL NOT RESULT IN IT BEING CONSIDERED AS A COST OF ACQUISI TI ON. THERE IS, IN FACT, EVEN NO DISCUSSION IN THE MATTER IN THE ASSESSMENT ORDER NOR ANY EXPLANATION BY THE ASSESSEE AS TO WHY AND HOW THE SAME, I.E., A REFUN DABLE DEPOSIT , QUALIF IES AS A COST OF ACQUISITION. B) COST OF I MPROVEMENT: THIS IS THE SECOND ASPECT ON WHICH THE ASSESSMENT HAS BEEN SET ASIDE U/S.263. TOWARD THIS, THE ASSESSEE ADMITS TO NON - AVAILABILITY OF THE BILLS/VOUCHERS, 4 ITA NO. 1416/MUM/2014 (A.Y. 2009 - 10) DR. JAYANT KASHINATH BAPAT VS. CIT THOUGH YET CLAIMS TO HAVE GE NUINELY INCURRED THE E XPENDITURE. FURTHER, THE DETAIL OF THE EXPENDITURE, STATED TO BE INCURRED ON THE RENOVATION OF THE CLINIC, IS IN THE YEARS 1978 AND 1979 (VIDE LETTER DATED 11.07.2011 BEFORE THE A.O.) , IS FOR ` .1,00,600/ - , AS AGAINST THE ASSESSEES CL AIM OF EXPENDITURE AT ` .3,7 7 ,780/ - , WHICH HAS BEEN SUBJECT TO INDEXATION. IN FACT, THE DETAILS OF THE EXPENDITURE FURNISHED DURING THE REVISION PROCEEDINGS (PB PG. 27) REVEAL THE SAID EXPENDITURE TO BE INCURRED DURING FINANCIAL YEAR (FY) 19 7 6 - 7 7, WHILE THE BALANCE EXPENDITURE OF ` .2,77,180/ - (3,7 7 ,780 1,00,600) STANDS INCURRED FROM F . YS . 1975 - 76 TO 1981 - 82. HOW COULD THE SAME INDEX BE THEREFORE APPLIED FOR THE EXPENDITURE INCURRED DURING F.Y. 1981 - 82 ? FURTHER, WHAT IS THE BASIS OF THE SAID DETAIL, I.E., I F THE ASSESSEE IS NOT MAINTAINING ANY RECORD IN ITS RESPECT? THEN, AGAIN, THE QUESTION THAT OUGHT TO ARISE IS IF THE SAME COULD AT ALL BE CONSIDERED AS THE COST OF IMPROVEMENT IN - AS - MUCH AS ALL THAT THE ASSESSEE HAS IS THE TENANCY RIGHTS IN THE PREMISES , S O THAT ANY CAPITAL EXPENDITURE, I.E., ASSUMING IT BEING INCURRED, IS ENTITLED TO DEPRECIATION UNDER EXPLANATION 1 TO SECTION 32(1) OF THE ACT. THE ASSESSMENT ORDER IS B E R E FT OF ANY FINDING IN THE MATTER , WITH THERE BEING NOTHING TO INDICATE AN APPLICATION OF MIND THEREON, EVEN AS THE ASSESSEES EXPLANATION, I.E., INADEQUACY OF THE RELEVANT VOUCHERS, ITSELF SUGGEST OR CLEARLY WARRANTS A PROPER ENQUIRY AND DETERMINATION. C) EXEMPTION U/S. 54EC: THE ASSESSEE STATES OF THE RELEVANT BONDS AS BEING NOT AVAILABLE A T THE RELEVANT TIME, I.E., WITHIN THE SIX MONTHS OF THE TRANSFER DATE, SO THAT THE SAME CAME TO BE PURCHASED AS SOON AS THE SAME WERE AVAILABLE. THE INVESTMENT, AS EVIDENCED FROM THE COPY OF THE BANK STATEMENT FURNISHED (PB PGS. 28 - 30), STANDS MADE ON 13.0 3.2009, I.E., ABOUT 11 MONTHS AFTER THE TRANSFER DATE. ON AN ENQUIRY WITH REFERENCE THERETO, OBSERVING A CREDIT THEREIN ON 06.03.2009, IT WAS EXPLAINED BY THE LD. AUTHORIZED REPRESENTATIVE (AR) THAT THE ASSESSEE HAD MADE AN INVESTMENT IN BANK FDR, AND WHIC H MATURE D ONLY ON THAT DATE, SO THAT THE BONDS WERE PURCHASED SOON THEREAFTER (ON 13.03.2009). NOW, THIS IS ENTIRELY DIFFERENT FROM STATING THAT THE BONDS WERE NOT AVAILABLE FOR A PERIOD OF SIX MONTHS AFTER THE TRANSFER DATE ; THE SAME BEING AVAILABLE, AS C LARIFIED, ON 29.05.2008 . T HE VALIDITY OF THE ASSESSEES EXPLANATION IN LAW, TOWARD WHICH HE CITE D SOME DECISIONS, SHALL STAND TO BE EXAMINED DURING ASSESSMENT PROCEEDINGS, WHICH WAS ALSO NEED TO BE FACTUALLY ESTABLISHED. ALSO RELEVANT IN THE MATTER IS IF T HE BONDS OF ANY OTHER ENTITY, I.E., RURAL ELECTRIFICATION CORPORATION LTD., OR ANY OTHER, QUALIFYING U/S. 54EC , WERE AVAILABLE AT THE RELEVANT TIME. THERE IS NOTHING ON RECORD TO SUGGEST ANY QUERY OR ENQUIRY IN THE MATTER BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS. THERE IS, ACCORDINGLY, NO QUESTION OF THE ASSESSEES EXPLAINING THE SAME OR ITS EXPLANATION BEING 5 ITA NO. 1416/MUM/2014 (A.Y. 2009 - 10) DR. JAYANT KASHINATH BAPAT VS. CIT SUBJECT TO VERIFICATION OR VALIDATION. THE INVOCATION OF SECTION 263 ON THIS ISSUE IS , THUS , PERFECTLY JUSTIFIED. 4. WE, ACCORDINGLY, FIND LITTL E MERIT IN THE ASSESSEES CLAIMS, I.E., IN RESPECT OF THE ISSUES QUA WHICH THE ASSESSMENT STANDS SET ASIDE. WE, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 05 , 201 5 SD/ - SD/ - (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 05 . 0 8 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI