D. Bowrimal Chordia, CHENNAI V. ITO, CHENNAI

ITA 1448/CHNY/2012

• Counselvise Citation: 144821714 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: MAHAVEER CHAND JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1448/MDS/2012 (ASSESSMENT YEAR : 2007-08) SHRI D. BOWRIMAL CHORDIA, NO.191, VELLALA STREET, PURASAWALKAM, CHENNAI - 600 084. PAN : AACPC 2545 C (APPELLANT) V. THE INCOME TAX OFFICER, BUSINESS WARD XIII (2), CHENNAI - 600 034. (RESPONDENT) APPELLANT BY : SH. MAHAVEER CHAND JAIN, CA RESPONDENT BY : SHRI S. DAS GUPTA, JCIT DATE OF HEARING : 24.09.2013 DATE OF PRONOUNCEMENT : 24.09.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGRI EVED ON AN ADDITION OF ` 8,50,000/- MADE BY THE ASSESSING OFFICER, WHICH WA S CONFIRMED BY THE CIT(APPEALS). 2. FACTS RELATING TO THE CASE ARE THAT ASSESSEE HAD FILED A RETURN DECLARING INCOME OF ` 7,59,560/- FOR THE IMPUGNED ASSESSMENT YEAR, I.T.A. NO. 1448/MDS/12 2 ON 9.11.2007. ASSESSEE WAS ENGAGED IN PAWN BROKER BUSINESS AND ALSO PROMOTING FLATS. ASSESSEE HAD ACQUIRED 6000 S Q.FT. OF LAND ON 19.6.2004 FROM ONE SHRI RIPO DAMAN MALHOTRA FOR A P RICE OF ` 77,50,000/-. ASSESSEE CONSTRUCTED THEREIN AN APART MENT COMPLEX IN THE NAME OF NIRMAL BUILDERS. ASSESSEE HAD CONSTR UCTED THEREIN TEN FLATS IN TOTAL OF WHICH, INCOME FROM FIVE FLATS WER E OFFERED FOR THE ASSESSMENT YEAR RELATING TO 2006-07 AND OF THE BALA NCE FIVE FLATS IN THE IMPUGNED ASSESSMENT YEAR. ASSESSING OFFICER, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT ASSESSEE HAD NOT ADMITTED ANY INCOME FROM THE SALE OF UNDIVIDED SHARE OF LAND BUT HAD ADMITTED ONLY INCOME FROM SALE OF FLATS. AS PER THE ASSESSI NG OFFICER, WHEN ASSESSEE SOLD FIVE FLATS, UNDIVIDED SHARE OF LAND M EASURING 2389 SQ.FT. ALSO STOOD TRANSFERRED TO THE FLAT OWNERS. THE COST PER SQ.FT. OF LAND, BASED ON THE PURCHASE VALUE OF ` 77,50,000/- FOR 6000 SQ.FT., CAME TO ` 1291/- PER SQ.FT. THEREFORE, AS PER THE A.O., THE COST OF 2389 SQ.FT. SOLD BY THE ASSESSEE TO FLAT BUYERS WOU LD BE ` 30,84,200/- AGAINST WHICH, ASSESSEE HAD RECEIVED ` 39,40,000/- FROM THE FLAT BUYERS. HENCE, A.O. WAS OF THE OPINION THAT ASSESS EE FAILED TO SHOW THE PROFIT OF ` 8,55,800/- IN HIS HAND. THOUGH THE ASSESSEE HAD F ILED A LETTER GIVING A WORKING OF THE MANNER IN WHICH HE HAD ACCOUNTED THE INCOME FROM SALE, THIS WAS NOT ACCEPTED BY THE A.O. AS PER THE A.O., I.T.A. NO. 1448/MDS/12 3 ASSESSEE WAS LEFT WITH 1238 SQ.FT. OF LAND IN POSSE SSION WITH HIM. IF THE VALUE OF THE SAID 1238 SQ.FT. LEFT WITH WAS CON SIDERED, THE PROPOSED ADDITION OF ` 8,50,000/- WAS NOT NOTIONAL BUT REAL. IN THIS VIEW OF THE MATTER, SHE MADE AN ADDITION OF ` 8,50,000/-. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT HE ORIGINAL INTENDED TO CONSTRUCT GROUND + FIVE FLOORS. HOWEVER, MUNICIPAL AUTHORITIES GAVE APPROVAL ONLY F OR GROUND + FOUR FLOORS. WHEN FLATS WERE SOLD, THE PROPORTIONATE UN DIVIDED SHARE (UDS) IN THE LAND WAS ALWAYS INCLUDED THEREIN. THE UDS WAS DIVIDED CONSIDERING TOTAL GROUND + FIVE FLOORS AND NOT FOUR FLOORS. IT WAS ON ACCOUNT OF THIS REASON, THAT A NOTIONAL UDS OF 1238 SQ.FT. WAS LEFT WITH HIM. NEVERTHELESS, ACCORDING TO ASSESSEE, SINCE FI FTH FLOOR COULD NOT BE CONSTRUCTED, THERE COULD BE NO VALUE ATTACHED TO THIS NOTIONAL UDS OF 1238 SQ.FT. 4. HOWEVER, LD. CIT(APPEALS) WAS NOT APPRECIATIVE O F THE CONTENTION OF ASSESSEE. ACCORDING TO HIM, ASSESSEE WAS LEFT WITH 1238 SQ.FT. OF WHICH, HE WAS AN ABSOLUTE OWNER. SU CH UDS WAS NOT SURRENDERED TO THE OWNERS OF THE TEN FLATS. ASSESS EE HAD ABSOLUTE RIGHT IN UNSOLD UDS OF 1238 SQ.FT. HE HELD THAT AS SESSEE COULD NOT I.T.A. NO. 1448/MDS/12 4 CONSIDER THE VALUE OF UNSOLD UDS AS NOTIONAL. HE, THEREFORE, UPHELD THE ADDITION OF ` 8,50,000/- MADE BY THE A.O. 5. NOW BEFORE US, CA M. MAHAVEER CHAND JAIN, APPEAR ING FOR ASSESSEE, STRONGLY ASSAILING THE ORDERS OF AUTHORIT IES BELOW, SUBMITTED THAT ASSESSEE HAD SUBMITTED A WORKING BEF ORE A.O. , WHICH READ AS UNDER:- A.Y. O/B UDS SOLD VALUE OF UDS BALANCE 2006 - 07 77,55,000 2043 2043 X 1650 = 33,70,400 = 43,79,600/ - 2007 - 08 43,79,600 2389 2389 X 1650 = 39,39,000 = 4,40,600/ - 2008 - 09 4,40,600 330 330 X 1650 = 4,40,600 = NIL BALANCE UDS 1238 SQ.FT. VALUE NIL AS PER LEARNED A.R., THE PRO RATA UDS SOLD TO EACH OF THE FLAT OWNERS IN AGGREGATE WOULD SHOW THAT ASSESSEE WAS LEFT WITH 1238 SQ.FT. OF THE UDS, BUT NO VALUE COULD BE ATTACHED THEREON. AC CORDING TO HIM, THE FLATS WERE CONSTRUCTED IN TOTAL 6000 SQ.FT. OF LAND. PRESUMPTION TAKEN BY THE LOWER AUTHORITIES THAT FIFTH FLOOR COU LD BE CONSTRUCTED AND HENCE THE BALANCE UDS HAD A VALUE IN ASSESSEES HAN DS WAS BASELESS. ACCORDING TO HIM, THE ADDITION MADE WAS ARBITRARY AND NOT OF ANY REAL INCOME. 6. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ADDITION WAS MADE BECA USE THE I.T.A. NO. 1448/MDS/12 5 ASSESSEE HAD NOT ADMITTED INCOME FROM SALE OF UDS. IT WAS NOT MERELY A QUESTION OF ANY UNSOLD UDS BEING LEFT WITH ASSESSEE. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. ASSESSEE HAD, DURING THE COURSE OF ASSESSMENT PROCE EDINGS BEFORE THE ASSESSING OFFICER, GIVEN DETAILS REGARDING THE MANNER IN WHICH HE HAD ACCOUNTED FOR THE LAND VALUE. ASSESSING OFFICE R WAS OF THE OPINION THAT ASSESSEE WAS LEFT WITH 1238 SQ.FT. OF LAND IN HIS POSSESSION. HOWEVER, WE FIND THAT ASSESSEE HAD INI TIALLY PLANNED FOR CONSTRUCTION OF GROUND + FIVE FLOORS. NEVERTHELESS , PERMISSION WAS RECEIVED BY HIM FROM THE AUTHORITIES ONLY FOR GROUN D + FOUR FLOORS. THIS HAS NOT BEEN DISPUTED BY THE REVENUE. WHEN AS SESSEE SOLD TEN FLATS COMPRISED GROUND + FOUR FLOORS, HE GAVE P ROPORTIONATE SHARE OF LAND TO THE BUYERS TAKING THE TOTAL NUMBER OF FL OORS AS GROUND + FIVE. BALANCE OF 1238 SQ.FT. OF UDS CONSIDERED IN THE HANDS OF THE ASSESSEE EMANATED ONLY BECAUSE OF THIS. IF THE ASS ESSEE HAD SOLD THE UNDIVIDED SHARE TO THE TEN FLAT OWNERS PRO RATA , NOTHING WOULD HAVE BEEN LEFT TO HIM. ON THE OTHER HAND, HE SOLD THE UDS TO THE FLAT OWNERS CONSIDERING A TOTAL FLOOR AREA OF GROUND + F OUR FLOORS. HOWEVER, FIFTH FLOOR COULD NEVER BE CONSTRUCTED SIN CE PERMISSION WAS NOT GIVEN FOR THIS BY THE MUNICIPALITY. THUS, 1238 SQ.FT. OF LAND I.T.A. NO. 1448/MDS/12 6 CONSIDERED BY THE A.O. AS LEFT WITH ASSESSEE WAS NO TIONAL AND NOT REAL. THERE WAS NO LAND IN POSSESSION OF THE ASSES SEE. CONSTRUCTION WAS DONE IN WHOLE OF 6000 SQ.FT. PURCHASED BY THE A SSESSEE. LD. CIT(APPEALS) HAS GIVEN A CLEAR FINDING THAT 1238 SQ .FT. COULD NOT BE UTILIZED IN ANY MANNER AND COULD NOT BE EXPLOITED I N ANY MANNER AND HAD BECOME USELESS. IF THAT BE SO, WE ARE OF THE O PINION THAT ATTACHING ANY VALUE TO SUCH BALANCE OF 1238 SQ.FT. OF UDS, OUGHT NOT HAVE BEEN DONE. THE ADDITION, IN OUR OPINION, WAS NOT JUSTIFIED. SAME STANDS DELETED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, THE 2 4 TH OF SEPTEMBER, 2013, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH SEPTEMBER, 2013. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-XII, CHENNAI- 34/ CIT-X, CHENNAI/D.R./GUARD FILE