Satyabrata Mukherjee, Kolkata V. ITO, Ward-30(4), Kolkata, Kolkata

ITA 1428/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87613 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Deduction for capital gain; Deemed dividend; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER ITA NO. 1428 /KOL/ 2012 ASSESSMENT YEAR: 2007 - 08 SATYABRATA MUKJERJEE P - 74, LAKE ROAD, KOLKATA 700 029 [ PAN NO.AEAPM 5746 H ] / V/S . INCOME TAX OFFICER WARD - 30(4), 2N GARIAHAT ROAD, 5 TH FLOOR, KOLKATA 700 068 / APPELLANT .. / RESPONDENT / BY APPELLANT SHRI MIR AJ D SHAH, AR / BY RESPONDENT SHRI SANJAY, JCIT - SR - DR / DATE OF HEARING 09 - 01 - 2015 / DATE OF PRONOUNCEMENT 13 - 01 - 2015 / O R D E R PER SHAMIM YAHYA , ACCOUNTANT MEMBER: - THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - XIV, KOLKATA DATED 05 - 09 - 2012 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. 2. GROUNDS OF APPEAL IS AS UNDER: - 1. FOR THAT THE LD. C.I.T.(A) ERRED IN LAW IN HOLDING TH AT THE ASSESSING OFFICER WAS RIGHT IN LAW IN THE FACTS OF THE CASE THAT THE PART OF SALE CONSIDERATION FROM TRANSFER OF PROPERTY OF THE COMPANY NAMELY M/S A.R. LTD. AMOUNTING TO RS.11,00,000/ - I TAXABLE IN THE HANDS OF THE APPELLANT. 2. FOR THAT THE LD. C .I.T.(A) ADMITTED IN PARA 3 OF THE APPELLATE ORDER THAT THE ASSESSEE RECEIVED A SUM OF RS.11,00,000/ - WHICH REPRESENTS A PORTION OF SALE ITA NO. 1428/KOL/2012 A.Y. 2007 - 08 SATYABRATA MUKHERJEE V. ITO WD - 30(4), KOL. PAGE 2 PROCEEDS OF RS.35,00,000/ - IN RESPECT OF SALE OF PROPERTY BELONGING TO M/S A.R. PVT. LTD. . 3. FOR THAT WHEN THE PROP ERTY IS ADMITTEDLY BELONGED TO THE A PERSON OTHER THAN THE ASSESSEE CAPITAL GAINS , IF ANY, ARISING OUT OF SALE/TRANSFER OF THE SAME IS ASSESSABLE IN THE HANDS OF THE OWNER OF THE PROPERTY AND NOT IN THE HANDS OF THE ASSESSEE. 4. FOR THAT OFFICERS OF THE DEPARTMENT SHOULD NOT TAKE ADVANTAGE OF ASSESSEE S BONAFIDE IGNORANCE OF LAW. 5. FOR THAT MERELY BECAUSE THE APPELLANT WRONGLY OFFERED CAPITAL GAINS IN HIS RETURN WHICH IS NOT AT ALL TAXABLE IN HIS HANDS, THE AUTHORITIES CANNOT TAKE ADVANTAGE OF THE IG NORANCE OF THE APPELLANT. 3. IN THIS CASE THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD INVESTED A SUM OF 11 LAKH IN BONDS ISSUED BY RURAL ELECTRIFICATION CORPORATION LTD. THE AO ASKED THE ASSESSEE TO EXPLAIN SOURCE OF INVESTMENT IN THE AFORESAID B ONDS. THE ASSESSEE EXPLAINED THAT HE HAD RECEIVED A SUM OF 11 LAKH WHICH REPRESENTS A PORTION OF SALE PROCEED OF 35 LAKHS IN RESPECT OF SALE OF PROPERTY BELONGING TO AR PVT. LTD. TH AT TH E ASSESSEE IS A DIRECTOR AND SHARE HOLDER IN THE AFORESAID COMPANY AN D HE RECEIVED THE AMOUNT FROM A.R. PVT. LTD. OF WHICH HE WAS A DIRECTOR AS A CUSTODIAN BY VIRTUE OF RESOLUTION. THE AO DID NOT ACCEPT THIS, HE O BSERV ED THAT IT IS CONSIDERED THAT SINCE THE PROPERTY BELONGED TO A.R. PVT. LTD. COMPANY, THERE IS NO CAPITAL GAIN IN THE PERSONAL HANDS OF THE ASSESSEE AND CLAIM OF DEDUCTION U/S 54EC OF THE I.T. ACT, IS THEREFORE, IRRELEVANT. AS WELL AS, SINCE THE ASSESSEE HAD RECEIVED THE MONEY WHICH IS CREDITED IN HIS PERSONAL BANK ACCOUNT AND THE SOURCE OF INCOME IS NOT PROPE RLY EXPLAINED, IT IS CONSIDERED THE SAID AMOUNT AS UNEXPLAINED INCOME AND TREATED AS INCOME FROM OTHER SOURCES IN THE HAND OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) CONFIRMED THE ADDITION BY OBSERVI NG AS UNDER: - 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IN THE FIRST GROUND OF APPEAL THE APPELLANT HAS CONTESTED THE ACTION OF THE ASSESSING OFFICER OF TAXING THE INCOME OF THE APPELLANT UNDER THE HEAD INCO ME FROM OTHER SOURCES AND DENYING EXEMPTION U/S. 54EC. IT IS SEEN FROM THE RECORD OF THE CASE THAT THE APPELLANT HAS HIMSELF FILED RETURN OF INCOME ITA NO. 1428/KOL/2012 A.Y. 2007 - 08 SATYABRATA MUKHERJEE V. ITO WD - 30(4), KOL. PAGE 3 SHOWING CAPITAL GAIN OF RS.11,00,000/ - . HE HAD CLAIMED EXEMPTION U/S54EC ON THE AFORESAID GAIN. ON THE ONE H AND THE APPELLANT HAS CLAIMED EXEMPTION U/S. 54EC AND ON THE OTHER HAND THE LD. AUTHORISED REPRESENTATIVE HAS ARGUED THAT NO CAPITAL GAIN HAS ACCRUED IN THE HANDS OF THE APPELLANT. THEREFORE, THERE IS CONTRADICTION IN THE ARGUMENT OF THE LD. AUTHORISED REP RESENTATIVE. IN THE PRESENT CASE, THE RELEVANT PREVIOUS YEAR IS FINANCIAL YEAR 2006 - 07. THE APPELLANT HAS RETAINED WITH HIM THE SALE PROCEED OF THE PROPERTY AMOUNTING TO RS.11,00,000/ - TILL DATE WHICH IS EVIDENT FROM THE LETTER DATED 28.08.2012 FILED BY TH E LD. AUTHORISED REPRESENTATIVE. THUS THE APE HAS CONTINUO U SLY ENJOYED THE INCOME FROM FINANCIAL YEAR 2006 - 07 TO DATE, I.E. FOR NEARLY SIX YEARS. F U RTHER, THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THE COMPANY HAS OFFERED ANY CAPITAL GAIN FOR TAX BEFORE THE REV E NUE AUTHORITIES. THE LD. AUTHORISED REPRESENTATIVE HAS ALSO ADMITTED THAT THE COMPANY DID NOT FILE ANY RETURN OF INCOME FOR THE AM YEAR 2007 - 08. SINCE THE ASSESSEE HAS RECEIVED THE MONEY WHICH IS CREDITED IN HIS PERSONAL BANK ACCOUNT, I HOLD THAT THE ASSESSING OFFICER WAS RIGHT IN LAW ON THE FACTS OF THE CASE IN TAXING THE INCOME OF RS.11,00,000/ - IN THE HANDS OF THE APPELLANT UNDER THE HEAD INCOME FROM OTHER SOURCES . SINCE THE INCOME IS ASSESSABLE IN THE HANDS OF THE APPELLANT UNDER TH E HEAD INCOME FROM OTHER SOURCE S , THE APPELLANT IS NOT ENTITLED TO EXEMPTION U/S 54EC OF THE INCOME TAX ACT, 1961. ACCORDINGLY, IT IS HELD THAT THE ASSESSING OFFICER IS RIGHT IN LAW IN THE FACTS OF THE CASE IN DENYING EXEMPTION CLAIMED BY THE APPELLANT U /S54EC OF THE INCOME - TAX ACT, 1961. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. HENCE, THE GROUND NO. 1 OF THE APPEAL IS DISMISSED. 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL A ND PERUSED THE RECORD. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS UNDISPUTED FACT OF THE CASE THAT SALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE IN CONSIDERATION OF PROPERTY SOLD WH I CH BELONGED TO THE COMPANY IN WHICH THE ASSESSEE IS A SHAREHOLDER AND DIRECTOR. IN THIS CONNECTION, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPONSE TO NOTICE ISSUED BY THE ASSESSING OFFICER THE PURCHASER HAD CONFIRMED THAT S HE HAD PURCHASED THE PROPERTY FROM THE COMPANY, I.E. AR PVT. LTD. LD. COUNSEL FOR THE ASS ESSEE FURTHER CONTENDED THAT THERE IS NO DISPUTE THAT THE SAID PROPERTY SOLD BELONGED TO THE COMPANY IN WHICH THE ASSESSEE IS DIRECTOR AND SHAREHOLDER. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE BANK ACCOUNT OF THE COMPANY WAS DEFUNCT, THE SALE P ROCEED WERE DEPOSITED IN ASSESSEE S BANK ACCOUNT. LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SINCE THE SALE CONSIDERATION BELONG ED TO THE ASSESSEE - COMPANY, IT WAS NOT AT ALL TAXABLE IN THE HANDS OF THE ITA NO. 1428/KOL/2012 A.Y. 2007 - 08 SATYABRATA MUKHERJEE V. ITO WD - 30(4), KOL. PAGE 4 ASSESSEE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT BEST IT COULD HAVE BEEN TREATED AS DEEMED DIVIDEND U/S 2( 22)(E) OF THE INCOME TAX ACT, 1961. HOWEVER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION IS NOT APPLICABLE AS THE ASSESSEE IS HOLDING 9% SHARE IN THE SAID COMPANY. HENCE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FROM ANY POINT OF VIEW THE SUM INVOLVED WAS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. 7. LD. DR ON THE OTHER HAND SUBMITTED THAT ASSESSEE HAD RECEIVED THE MONEY IN ITS BANK ACCOUNT AND HAS CONTINUED TO ENJOY THE SUM. HENCE, LD. DR PLEADED THAT AUTHORITIES BELOW HAS RIGHTLY TAXED THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES . 8. UPON CAREFUL CONSIDERATION, WE NOTE THAT IT IS UNDISPUTED THAT THE SOURCE OF MONEY RECEIPT IS DULY EXPLAIN ED AND AMOUNT RE CEIVED BY THE ASSESSEE IS IN RESPECT OF PROPERTY SOLD WHICH BELONGED TO THE COMPANY IN WHICH ASSESSEE IS A DIRECTOR AND SHAREHOLDER. THIS ASPECT THE AO HAS HIMSELF CONFIRMED WHEN HE HELD THAT HE IS DENYING THE CAPITAL GAIN EXEMPTION CLAIM OF THE ASSESSEE, AS THE MONEY RECEIVED BELONGED TO THE COMPANY, A.R. PVT. LTD. THE COMMON LAW MAXIM OF APROBATE AND REPR OBATE MANDATES THAT A PERSON CANNOT ACCEPT AND REJECT THE SAME INFORMATION. WHEN AO ACCEPTS THAT THE MONEY RECEIVED DID NOT BELONG TO THE ASSESSEE, HE CA NNOT AT THE SAME TIME TAX THE SAME IN THE HANDS OF THE ASSESSEE AS HIS INCOME FROM UNEXPLAINED SOURCES. MOREOVER, THE PURCHASER ON ENQUIRY FROM AO HAS CONFIRMED THAT PROPERTY PURCHASED BY HERE BELONGED TO THE COMPANY M/S A.R. LTD. 9. IT IS SETTLED LAW TH AT COMPANY IS AN ARTIFICIAL JURIDICAL PERSON WHICH HAS ITS OWN IDENTITY AND IT I S TAXABLE AS SUCH. HENCE, FOR I T S PROPERTY SOLD IT IS THE COMPANY WHICH IS TAXABLE AND NOT THE ASSESSEE WHO RECEIVED THE MONEY ON BEHALF OF THE COMPANY. NOW THE LD. COUNSEL FOR THE ASSESSEE S PLEA IS ALSO COGENT THAT THE RECEIPT OF SUM OF MONEY FROM THE COMPANY COULD BE TAXABLE IN THE HANDS OF THE ASSESSEE WHO IS SHAREHOLDER AND DIRECTOR ONLY UNDER U/S 2(22)(E) OF THE ACT. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT ASSESSEE IS NOT HOLDING MORE 9% SHARE IN THE SAID COMPANY. HENCE, PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT ALSO APPLICABLE. IN ITA NO. 1428/KOL/2012 A.Y. 2007 - 08 SATYABRATA MUKHERJEE V. ITO WD - 30(4), KOL. PAGE 5 ANY CASE, IT IS NOT AT ALL THE CASE OF REVENUE THAT SUM INVOLVED I S TAXABLE IN THE HANDS OF THE ASSESSEE AS D EEMED DIVIDEND. ACCORDINGLY, WE FIND THAT JUST BECAUSE OUT OF IGNORANCE THE ASSESSEE HAS INVESTED SALE PROCEED IN REGARD ON BEHALF OF COMPANY CAPITAL GAIN BOND TO SAVE ITS PERCEIVED CAPITAL GAIN LIABILITY , T HE SUM INVOLVED CANNOT BECOME TAXABLE INCOME OF T HE ASSESSEE. THE CENTRAL BOARD OF DIRECT TAX IN ITS CIRCULAR HAS ALSO REITERATED THAT OFFICERS OF THE REVENUE SHOULD NOT TRY TO LATER ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE. I T IS ALSO SETTLED LAW THAT AN INCOME SHOULD BE TAXED IN THE HANDS OF THE APPR OPRIATE ASSESSEE TO WHOM THE INCOME BELONGS. SINCE THE INCOME BY WAY OF SALE PROCEED OF THE PROPERTY DID NOT BELONG TO THE ASSESSEE , T HE ASSESSEE IS NOT TAXABLE FOR THE SAID AMOUNT. AS HELD BY HON BLE APEX COURT IN THE CASE OF INCOME TAX OFFICER V. CH. ATCHAIAH (1996) 218 ITR 239 (SC), IT IS THE DUTY OF THE ASSESSING OFFICER TO ASSESS THE RIGHT PERSON ONLY . FURTHERMORE, AS HELD BY THE HON BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, WEST BENGAL I V. INDIA DISCOUNT CO. LTD. (1970) 75 ITR 191 (SC) A RE CEIP T WHICH IN LAW CANNOT BE REGARDED AS INCOME CANNOT BECOME SO MERELY BECAUSE OF ASSESSEE S BOOK ENTRY. ACCORDINGLY, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10 . IN THE RESULT, THIS APPEAL FIL ED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 /0 1 /201 5 SD/ - SD/ - ( MAHAVIR SINGH ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, *DKP - 13 /0 1 /201 5 ITA NO. 1428/KOL/2012 A.Y. 2007 - 08 SATYABRATA MUKHERJEE V. ITO WD - 30(4), KOL. PAGE 6 / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - SATYABRATA MUKHJERJEE, P - 74, LAKE RD. KOOL - 29 2 . / RESPONDENT - ITO, WARD - 30(4), 2 GARIAHAT RD., 5 TH FL. KOL - 68 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , / DR, ITAT, KOLKATA 6 . / GUARD FILE. BY ORDER/ , /TRUE COPY/ / ,