Shri Bipinbhai P.Patel, Baroda V. The Dy.CIT.Circle-1(1), Baroda

ITA 1481/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6059 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: T P HEMANI
• Keywords: Capital asset; Business income; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NOS. 2487/AH D/2011 & 1481/AHD/2014 (ASSESSMENT YEAR:2008-09) BIPINBHAI P. PATEL, C/O. APEX EXTRUSIONS PVT. LTD., 220/221, GIDC, MAKARPURA, BARODA - 390010 APP ELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, BARODA RESPONDENT PAN: ACQPP7757H /BY ASSESSEE : SHRI T. P. HEMANI, A.R. /BY REVENUE : SHRI OM PRAKASH MEENA, SR. D.R. /DATE OF HEARING : 27.04.2017 /DATE OF PRONOUNCEMENT : 28.04.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEAR 20 08-09 AGAINST THE CIT(A)-I, BARODAS SEPARATE ORDERS DATED 08.07.2011 & 17.02.2014, PASSED ITA NOS. 2487/AHD/11 & 1481/AHD/14 [BIPINBHAI P. PA TEL VS. DCIT] A.Y. 2008-09 - 2 - IN CASE NO. CAB-I/114/10-11 & CAB-I/343/2012-13, IN PROCEEDINGS U/S.143(3) AND SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT; RESPECTIVELY. 2. A PERUSAL OF THE INSTANT CASE FILES REVEALS THAT THE ABOVE FORMER APPEAL ITA NO.2487/AHD/2011 PERTAINS TO QUANTUM CASE WHERE IN THE CIT(A) HAS RESTRICTED CAPITAL GAINS ADDITION OF RS.30LACS AS M ADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 29.11.2010 TO RS. 2LACS ONLY AFTER CONCLUDING THAT THE ASSESSEE WAS ONLY ONE OF THE FI FTEEN MEMBERS OF SHANTIVAN MEMBERS ASSOCIATION. LATTER APPEAL ITA NO.1481/AHD/2014 RELATES TO CONSEQUENTIAL PENALTY PROCEEDINGS WHEREI N BOTH THE LOWER AUTHORITIES PENALIZED THE ASSESSEE TO THE TUNE OF R S.62000/- U/S.271(1)(C) OF THE ACT WITH REGARD TO THE ABOVE ADDITION OF RS.2LA CS. 3. WE ADVERT TO ASSESSEES ABOVE QUANTUM APPEAL FIR ST. THE WHOLE ISSUE APPEARS TO BE ARISING FROM A SALE TRANSACTION OF AN IMMOVABLE PROPERTY SOLD FOR RS.30LACS. THE ASSESSING OFFICER RECEIVED AIR INFORMATION ABOUT THE ASSESSEE HAVING ENTERED INTO THE ABOVE IMMOVABLE PR OPERTY TRANSACTION. HE THUS PUT UP THE ASSESSEE ON NOTICE REGARDING THE SA ME WHO IN TURN DENIED TO HAVE EXECUTED ANY SUCH TRANSFER. THE ASSESSING OFF ICER THEREAFTER GOT RECEIVED THE NECESSARY SALE DOCUMENT CONTAINING ASS ESSEES SIGNATURES TO ADD THE ABOVESTATED SUM OF RS.30LACS AS HIS INCOME IN A SSESSMENT ORDER DATED 29.11.2010. HE FURTHER INITIATED THE IMPUGNED PENA LTY PROCEEDINGS. 4. WE NOW ADVERT TO THE CIT(A)S ORDER RESTRICTING THE ABOVE ADDITION TO RS.2LACS ONLY AFTER CONCLUDING THAT THE ASSESSEE IS ONE OF THE FIFTEEN CO- OWNERS IMMOVABLE PROPERTY SOLD IN QUESTION AS FOLLO WS: 3.1 IN APPEAL, IT WAS SUBMITTED THAT SINCE APPELLA NT WAS NOT THE OWNER OF THE SAID PROPERTY, HE COULD NOT BE IN A POSITION TO FURNISH DETAILS REQUIRED BY ITA NOS. 2487/AHD/11 & 1481/AHD/14 [BIPINBHAI P. PA TEL VS. DCIT] A.Y. 2008-09 - 3 - THE AO. STILL, APPELLANT COOPERATED WITH THE AO AND SUBMITTED VARIOUS DETAILS SUCH AS COPY OF COMPUTATION OF TOTAL INCOME SHOWING SALE CONSIDERATION, DATE OF SALE, COST OF ACQUISITION AN D CAPITAL GAINS. APPELLANT FURTHER SUBMITTED THAT THE PROPERTY UNDER CONSIDERA TION WAS A NON- AGRICULTURAL LAND JOINTLY HELD BY 15 MEMBERS (INCLU DING THE APPELLANT) OF SHANTIVAN MEMBERS ASSOCIATION, A REGISTERED NON-PRO FIT ORGANIZATION IN EQUAL PROPORTIONS. APPELLANT FILED 7/12 ABSTRACT IN THIS REGARD. FURTHER, APPELLANT SUBMITTED THAT SIGNATURES WERE PUT BY HIM ALONGWITH OTHER MEMBER ON THE SALE DEED AS POWER OF ATTORNEY HOLDER S OF REMAINING MEMBERS AS EVIDENT FROM PAGE NOS 8 &. 9 OF THE SALE -DEED TO SELL THE LAND ON 31.3.2008 TO MR. NEHUL PATEL. APPELLANT REITERATED CONDITIONS IMPOSED BY NEHUL PATEL REGARDING RELEASE OF PAYMENT ON GETTING CLEAR TITLE FOR CONSTRUCTION OF LAND AND THAT THE SAME WAS SELLER'S RESPONSIBILITY. CONFIRMATION FROM NEHUL PATEL IN THIS REGARD WAS FI LED BEFORE THE AO. APPELLANT ALSO FILED COPY OF STAY ORDER FROM VMC RE STRAINING CONSTRUCTION BY NEHUL PATEL ON THE SAID LAND, DUE TO WHICH ANY O UT DATED CHEQUES ISSUED BY NEHUL PATEL COULD NOT BE DEPOSITED BY SHANTIVAN MEMBERS ASSOCIATION EXCEPT FOR ONE CHEQUE OF RS. 1 LAKH. AS PER APPELLA NT, THERE WAS NO SALE OF PROPERTY, SINCE PURCHASER WAS NOT ABLE TO MAKE USE OF SAID PROPERTY AS PER CONDITIONS ATTACHED TO SALE. AMOUNT OF RS.L LAKH DE POSITED IN THE BANK ACCOUNT OF SHANTIVAN MEMBERS ASSOCIATION COULD ALSO NOT BE DISTRIBUTED TO MEMBERS BUT WAS UTILIZED FOR COMMON EXPENSES OF THE SOCIETY. APPELLANT SUBMITTED THAT IN ANY CASE, ENTIRE SALE PROCEEDS WO ULD GO TO SHANTIVAN MEMBERS ASSOCIATION, A REGISTERED SEPARATE ENTITY A ND NO PART OF PROCEEDS COULD GO TO ANY MEMBER DIRECTLY AND THUS THERE WAS NO QUESTION OF TAXING INDIVIDUAL MEMBER WITHOUT RECEIPT OF MONEY FROM SHA NTIVAN MEMBERS ASSOCIATION. APPELLANT SUBMITTED THAT ON ONE HAND, THE ID. AO ACCEPTED THAT PROPERTY WAS JOINTLY HELD IN THE NAME OF 15 MEMBERS AND APPELLANT GOT RIGHT TO SELL THE PROPERTY THROUGH POWER OF ATTORNEY ONLY AND ON OTHER HAND, AO STATES THAT THROUGH POWER OF ATTORNEY, APPELLANT GO T RIGHT ON THE WHOLE IMMOVABLE PROPERTY. APPELLANT SUBMITTED THAT A PERS ON CANNOT LAWFULLY BECOME OWNER OF PROPERTY BY VIRTUE OF HOLDING POWER OF ATTORNEY ALONE, A FACT WELL-KNOWN TO THE AO WHO WAS TOO KEEN TO TAX T HE ENTIRE SALES CONSIDERATION IN THE HANDS OF APPELLANT, SOMEHOW OR OTHER WITHOUT LOOKING INTO THE SUBSTANCE AND NATURE OF TRANSACTION. REGAR DING AO'S OBSERVATION THAT THERE WAS NO SIGNATURE OF APPELLANT ON POWER O F ATTORNEY, APPELLANT SUBMITTED THAT FOR EXECUTING POWER OF ATTORNEY, SIG NATURE OF PERSON WHO APPOINTS POWER OF ATTORNEY AND SIGNATURE OF TWO WIT NESSES ONLY IS REQUIRED. APPELLANT FILED COPIES OF POWER OF ATTORNEY IN FAVO UR OF APPELLANT BY OTHER MEMBERS OF SHANTIVAN MEMBERS ASSOCIATION AND COPY O F SALE-DEED ALONG WITH ITS ENGLISH TRANSLATION. 3.2 I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE A ND APPELLANT'S SUBMISSIONS. SALE DEED OF THE PROPERTY IN QUESTION WAS EXECUTED BETWEEN 15 CO-OWNERS INCLUDING THE APPELLANT AND SHRI NEHULBHAI PATEL. 7 /12 ABSTRACT OF THE LAND IN QUESTION ALSO SHOWS THE PROPERTY TO BE POSSESSED /OWNED BY THE SAME 15 ITA NOS. 2487/AHD/11 & 1481/AHD/14 [BIPINBHAI P. PA TEL VS. DCIT] A.Y. 2008-09 - 4 - PERSONS INCLUDING THE APPELLANT. IN THE SALE-DEED, AGAINST VENDORS, NAMES OF 15 PERSONS ARE RECORDED. APPELLANT AND SHRI RAMESHB HAI H PATEL EXECUTED THE SALE-DEED ON BEHALF OF 15 CO-OWNERS ON THE STRE NGTH OF POWER OF ATTORNEY GIVEN IN THEIR NAMES BY 15 CO-OWNERS. THE SALE CONS IDERATION WAS DEPOSITED IN THE BANK ACCOUNT OF SHANTIVAN MEMBERS ASSOCIATIO N AND NOT IN THE INDIVIDUAL BANK ACCOUNT OF APPELLANT. IT IS THEREFO RE CLEAR THAT THE LAND IN QUESTION WAS OWNED JOINTLY BY 15 PERSONS, WHO SOLD IT TO NEHUL PATEL. ENTIRE CAPITAL GAINS ARISING ON SALE OF LAND CANNOT BE TAX ED IN THE HANDS OF APPELLANT ALONE. APPELLANT'S CONTENTIONS ABOUT CAPI TAL GAINS NOT ARISING DUE TO SALE TRANSACTION BEING NOT COMPLETE DUE TO NON F ULFILLMENT OF CONDITION REGARDING CONSTRUCTION ETC. ARE HOWEVER, NOT TENABL E. IN THE SALE DEED, THERE ARE NO SUCH CONDITIONS AS STATED BY THE APPELLANT R EGARDING USE OF LAND FOR CONSTRUCTION BY THE PURCHASER. TRANSFER OF LAND IS COMPLETED ON EXECUTION OF SALE DEED AND HANDING OVER OF ITS POSSESSION. AS CL EARLY MENTIONED ON PAGE 6 OF THE SALE DEED, POSSESSION OF LAND WAS HANDED O VER TO PURCHASER BEFORE EXECUTION OF SALE DEED. IN FACT, ON PAGE 8 OF SALE DEED, IT IS CLEARLY RECORDED THAT 'PURCHASER HAS BECOME COMPLETE AND FULL OWNER OF SAID PROPERTY'. CAPITAL GAINS ON SALE OF THE PROPERTY HAVE THEREFOR E INDEED ARISEN DURING THE YEAR. AS PER THE SALE-DEED AS WELL AS FORM 7/12 , OWNERSHIP OF LAND IS OF 15 PERSONS INCLUDING THE APPELLANT AND NOT OF SHANT IVAN MEMBERS ASSOCIATION. THE CAPITAL GAINS ARE, THEREFORE TO BE TAXED IN THE HANDS OF INDIVIDUAL MEMBERS AND NOT SHANTIVAN MEMBERS ASSOCI ATION. SUCH TAXABLE CAPITAL GAINS ARE TO BE COMPUTED AS DIFFERENCE BETW EEN SALE CONSIDERATION OF RS.30 LAKH AND THE COST OF ACQUISITION OF THE PROPE RTY. ON ENQUIRING ABOUT COST OF ACQUISITION AND SHARES OF INDIVIDUAL MEMBER S, AR HAS SUBMITTED LETTER INFORMING THAT NO COST WAS INCURRED BY THE A PPELLANT AND OTHER MEMBERS OF SOCIETY TO BECOME EQUAL OWNERS OF LAND A ND COST MAY BE TAKEN AT NIL. TAXABLE CAPITAL GAINS ON SALE OF PROPERTY, THEREFORE WORK OUT TO BE RS.30 LAKH, OUT OF WHICH APPELLANT'S SHARE IS RS.2 LAKH. ADDITION IN THE HANDS OF THE APPELLANT IS, THEREFORE DIRECTED TO BE RESTR ICTED TO RS.2 LAKH AND BALANCE ADDITION, I.E. RS.28 LAKH IS DIRECTED TO BE DELETED IN HIS HANDS. CAPITAL GAINS OF RS.28 LAKH ARE TO BE TAXED IN THE HANDS OF REMAINING 14 CO- OWNERS IN EQUAL PROPORTION. THE ASSESSEES FORMER APPEAL ARISES IN CONTEXT OF ABOVE QUANTUM FINDINGS. 5. LEARNED COUNSEL REPRESENTING ASSESSEE VEHEMENTL Y ARGUED THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN MAKING THE IMPU GNED ADDITION OF RS.2LACS IN QUESTION. HE HOWEVER FAILED TO DISPUTE THE FACT THAT THE ASSESSEE WAS ONE OF THE 15 CO-OWNERS OF THE IMMOVABLE PROPERTY IN QU ESTION FETCHING TOTAL CONSIDERATION PRICE OF RS.30LACS WHEREIN HIS SHARE WAS THAT OF RS.2LACS ONLY. ITA NOS. 2487/AHD/11 & 1481/AHD/14 [BIPINBHAI P. PA TEL VS. DCIT] A.Y. 2008-09 - 5 - WE THEREFORE CONCLUDE THAT BOTH THE LOWER AUTHORITI ES HAVE RIGHTLY MADE THE IMPUGNED ADDITION IN ASSESSEES HANDS. HIS SOLE SU BSTANTIVE GROUND AS WELL AS QUANTUM APPEAL ITA NO.2487/AHD/2011 FAIL ACCORDI NGLY. 6. WE NOW PROCEED TO DEAL WITH ASSESSEES PENALTY A PPEAL ITA NO.1481/AHD/2014 CHALLENGING CORRECTNESS OF SECTION 271(1)(C) PENALTY OF RS.62000/- PERTAINING TO ABOVE QUANTUM ADDITION OF RS.2LACS. THE ASSESSING OFFICER STRONGLY REITERATED THE ABOVE QUANTUM DEVEL OPMENTS TO TREAT THE SAID ADDITION AS A CASE OF CONCEALMENT OF INCOME. LEARN ED CIT(A) CONFIRMS THE SAME. 7. HEARD BOTH SIDES STRONGLY REITERATING THEIR RESP ECTIVE STANDS AGAINST AND IN SUPPORT OF THE IMPUGNED PENALTY. LEARNED ASSESSI NG OFFICER QUOTES ASSESSEES ACT AND CONDUCT IN SCRUTINY PROCEEDINGS QUA THE ABOVE LAND TRANSACTION OF RS.30LACS TO ORIGINALLY IMPOSE THE P ENALTY IN QUESTION AFTER CONCLUDING THAT HE HAD CONCEALED HIS TAXABLE INCOME . THIS PENALTY ORDER IS DATED 25.02.2013. THE CIT(A) AFFIRMS THE SAME. IT IS EVIDENT IN THIS FACTUAL BACKDROP THAT THE ASSESSING OFFICERS SCRUTINY REVO LVED AROUND AIR INFORMATION (SUPRA) DISCLOSING THE ASSESSEE TO HAVE ACTED AS POWER OF ATTORNEY OF THE OTHER FOURTEEN CO-OWNERS IN ACTING AS THE SO LE VENDOR RECEIVING ENTIRE SALE CONSIDERATION OF RS.30LACS. THE FACT HOWEVER REMAINS THAT HIS SHARE THEREIN WAS OF RS.2LACS ONLY. WE THEREFORE CONCLUD E THAT THE LOWER AUTHORITIES HAVE ERRED IN PROCEEDING TO IMPOSE THE IMPUGNED PENALTY BY TREATING THE SAID AIR INFORMATION AND SUBSEQUENT DE VELOPMENTS AS THE FOUNDATION FOR HOLDING THE ASSESSEE TO HAVE CONCEAL ED HIS INCOME. IT IS FURTHER NOT CLEAR AS TO HOW THE ENTIRE SALE CONSIDE RATION OF RS.2LACS WOULD BE TREATED AS ASSESSEES INCOME SINCE THE SAME IS EITH ER CAPITAL GAINS OR BUSINESS INCOME TO BE SUBJECTED TO THE APPROPRIATE COMPUTATI ON UNDER RESPECTIVE HEADS. BE THAT IS IT MAY, WE GRANT THE ASSESSEE BE NEFIT OF DOUBT AS HE WAS NOT ITA NOS. 2487/AHD/11 & 1481/AHD/14 [BIPINBHAI P. PA TEL VS. DCIT] A.Y. 2008-09 - 6 - THERE SOLE OWNER OF THE PROPERTY IN QUESTION. WE T HEREFORE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY OF RS.62000/- IN QUESTION. LATTER APPEAL ITA NO.1481/AHD/2014 IS ACCEPTED. 6. THE ASSESSEES FORMER APPEAL ITA NO.2487/AHD/201 1IS DISMISSED AND LATTER APPEAL ITA NO.1481/AHD/2014 IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF APRIL, 2017.] SD/- SD /- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD: DATED 28/04/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0