SUDEEP N. KOTHARE, MUMBAI V. A.C.I.T. - 25(3), MUMBAI

ITA 1481/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9548 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 26-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Business income; Surrender of tenancy right
• Section: 143(3); 54F; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . , / BEFORE SHRI D. MANMOHAN, VICE PRESIDENT /AND !'# , ! . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 1481/MUM/2012 $ $ $ $ / ASSESSMENT YEAR 2008-09 SHRI SUDEEP N. KOTHARE, 9/B, WHISPERING PALMS XX_CLUSIVES, FLAT NO. 603/604, 6 TH FLOOR, LOKHANDWALA TOWNSHIP, AKURLI ROAD, KANDIVALI (EAST), MUMBAI 400 101. PAN: AAHPK 0975 D VS. ASST. COMMISSIONER OF INCOME TAX 25(3), MUMBAI. ( %& / APPELLANT ) ( '(%& / RESPONDENT ) %& ) ! / APPELLANT BY : SHRI HIRO RAI '(%& * ) ! /RESPONDENT BY : SHRI C.G.K. NAIR * +, / DATE OF HEARING : 26-11-2012 -$ * +, / DATE OF PRONOUNCEMENT : 30-11-2012 .!/ / O R D E R PER RAJENDRA, A.M. THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT .19.01.2012 PASSED BY THE CIT(A)-35, MUMBAI. FOLLOWING GROUNDS OF APPEAL HA VE BEEN RAISED BY THE ASSESSEE: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DENIAL OF EXEMPTION OF RS.59,00,000/- UNDER SECTION 54F OF TH E INCOME TAX ACT, 1961 FOR HIS SHARE OF INVESTMENT IN A NEW RESIDENTIAL PROPERTY, FROM T HE CAPITAL GAINS ARISING FROM SURRENDER OF TENANCY RIGHTS. ITA NO. 1481/MUM/2012 SHRI SUDEEP N. KOTHARE 2 2.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE TWO NEW ADJACENT FLATS ON SAME FLOOR WERE PURCHASED AND UTILISED BY YOUR APPELLANT AS ONE RESIDENTIAL HOUSE WITH ONLY ONE COMMON ENTRANCE, KI TCHEN, HALL, RATION CARD, ELECTRICITY METER AND TELEPHONE CONNECTION, THOUGH PURCHASED VI DE TWO SEPARATE AGREEMENTS FOR UNIT NO. 603 AND UNIT NO. 604. 3.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT FOLLOWING THE RATIO OF DIRECT DECISIONS OF THE JURISDICTIONAL HIGH COURT A S WELL AS THE JURISDICTIONAL SPECIAL BENCH OF MUMBAI BENCH OF THE TRIBUNAL ON THE ISSUE INVOLV ED IN THE APPEAL. AS REGARDS DISALLOWANCE OF EXPENSES OF RS.22,459/- 4.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING AD HOC DISALLOWANCE OF RS. 22,459/-, BEING 20% OF TOTAL EX PENSES OF RS.1,12,294/-, CLAIMED BY THE APPELLANT AGAINST PROFESSIONAL FEES RECEIVED FROM M /S. ARC MARINE PVT. LTD. AS REGARDS DISALLOWANCE UNDER SECTION 8OGG OF RS.1 6,000/- 5.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUCTION UNDER SECTION 8OGG OF RS.16,000/- IN RESPECT OF REN T PAID TO NAVEED SHAIKH OF RS.1,30,500/- FOR THE USE OF PREMISES 5A, SPRING LE AF TOWER, FLAT 1002/03, LOKHANDWALA TOWNSHIP, AKRULI ROAD, KANDIVALI (EAST), MUMBAI 400 101. 6.THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT FORM 10BA HAD BEEN DULY SUBMITTED TO THE LEARNED ASSESSING OF FICER ON 07.06.2011 DURING REMAND REPORT PROCEEDING AS WELL AS FILED WITH THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON 23.03.2011 DURING APPEAL PROCEEDINGS. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY O F THE ABOVE GROUNDS OR ADD A NEW GROUND, IF AND WHEN NECESSARY. 2. ASSESSEE AN INDIVIDUAL, SHOWING HIS INCOME UNDER TH E HEADS SALARY, BUSINESS, CAPITAL GAINS AND OTHER SOURCES, FIL ED HIS RETURN OF INCOME ON 05.01.2009 DECLARING TOTAL INCOME OF RS.35. 79 LAK HS. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ORDER U/S. 143(3) OF THE I NCOME-TAX ACT, 1961(ACT), ON 01.12.2010, DETERMINING THE TOTAL INCOME AT RS. 95. 17 LAKHS. 2.1. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT T HE ASSESSEE HAD SURRENDERED HIS TENANCY RIGHTS IN PREMISES NO.2 ON GROUND FLOOR OF BUILDING KNOWN AS AJINKYA MANSION FOR A TOTAL SUM CONSIDERATION OF RS.85,00,000/-. ASSESSEE CLAIMED THAT HE HAS INVESTED RS.59,00,000/- IN NEW RESIDEN TIAL PREMISES AT KANDIVALI WHICH WAS JOINTLY PURCHASED ALONG WITH HIS SON MR. AKSHAY S. KOTHARE AND HIS WIFE DEEPASHRY KOTHARE. WITH REGARD TO HIS INVESTMENT A SSESSEE CLAIMED EXEMPTION U/S 54F OF THE ACT. AO HELD THAT THE ASSESSEE HAD PURC HASED TWO SEPARATE FLATS NAMELY FLAT NO. 603B AND FLAT NO. 604B IN THE BUILDING KNO WN AS WHISPERING PALMS THROUGH TWO SEPARATE AGREEMENTS, THAT THERE WAS NO DIRECT COROLLARY BETWEEN SECTION 54 AND SECTION 54F OF THE ACT. HE FURTHER HELD THA T THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S. 54F ONLY ON ONE OF TWO FLATS PURCHASED ,THAT THE AS SESSEE HAD PURCHASED ANOTHER FLAT IN CONTRAVENTION WITH THE PR OVISO TO SECTION 54F,THAT THE TOTAL CONSIDERATION OF RS. 85,00000/- WAS THE TOTAL LONG TERM CAPITAL GAIN OF THE ASSESSEE DURING THE YEAR. FINALLY, HE HELD THAT THE ASSESSE E WAS ENTITLED TO EXEMPTION U/S.54F ITA NO. 1481/MUM/2012 SHRI SUDEEP N. KOTHARE 3 OF THE ACT AND AN AMOUNT OF RS. 59,00,000/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 2.2. AGAINST THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE AND OBTAINING A REMAND REPORT HE HELD THAT THE APPELLAN T HAD RELIED MAINLY ON JUDICIAL PRONOUNCEMENTS IN HIS FAVOUR, THAT WHEN THE HONBLE COURTS DECIDED ANY ISSUE, A GENERAL GUIDELINE WAS GIVEN THEREIN BUT THE SAME HA D TO BE APPLIED IN DIFFERENT CASES DEPENDING UPON THE RATIO OF FACTS OF THE CASE I.E. RATIO DECIDENDI, THAT SUBMISSIONS MADE BY THE ASSESSEE WERE PRACTICALLY NOT POSSIBLE TO BE APPLIED IN THE CASE OF THE APPELLANT, THAT THE AO HAD ENOUGH MATERIAL IN HIS A SSESSMENT ORDER AS WELL AS THE REMAND REPORT ON THIS ISSUE. HE CONFIRMED THE ADDI TION MADE BY THE AO. 3. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT PROVISIONS OF SECTION 54 AND 54 F WERE NOT EXCLUSIVE, THAT AO AND THE FAA HAD IGNORED THE CERTIFICATE ISSUED BY THE HOUSING SOCIETY, RATION C ARD, TELEPHONE BILL AND ELECTRICITY BILL SUBMITTED BY THE ASSESSEE TO PROVE THAT ASSESSEE WA S RESIDING IN ONE UNIT, THAT BOTH THE FLATS WERE COMBINED, THAT THE UNIT HAD A COMMON ENT RANCE, THAT FAA HAD NOT GIVEN ANY INDEPENDENT FINDING ABOUT THE SUBMISSIONS MADE BEFORE HIM. HE RELIED UPON THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT DELI VERED IN THE CASE OF JOE B FARNANDES (ITA NO.1467/2007 DTD. 10.12.2008). HE A LSO RELIED UPON THE CASES OF D. ANNADA BASSAPA (309ITR 329); SMT. SUNITA AGGARWAL ( 284 ITR 0020) DELIVERED BY HIGH COURTS OF KARNATAKA AND DELHI RESPECTIVELY. HE FURTHER RELIED UPON THE ORDER OF THE SPECIAL BENCH, MUMBAI IN THE CASE OF SUSHILA M. ZAVERI [(107 ITD 327 (MUM) (SB)]. DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 3.1. WE FIND THAT THE FAA HAS NOT DEALT WITH ANY OF THE SUBMISSIONS MADE BY THE ASSESSEE. ALTHOUGH HE HAS HELD THAT LEGAL SUBMISSIO NS MADE BY THE AR WERE NOT APPLICABLE IN THE CASE UNDER CONSIDERATION, YET HE HAS NOT GIVEN ANY REASON, WHY THE CASES RELIED UPON BY THE ASSESSEE WERE NOT APPLICAB LE AND HOW THE FACTS OF THOSE CASES WERE DIFFERENT FROM THE CASE OF THE APPELLANT-ASSES SEE. WE FIND THAT FAA HAS SOLELY RELIED ON THE ORDER OF THE AO AND THE REMAND REPORT SUBMITTED TO HIM BY THE AO. WE HAVE PERUSED THE REMAND REPORT AND THE ORDER OF THE AO. WE FIND THAT THERE IS NO MATERIAL TO DENY THE ASSESSEE EXEMPTION AVAILABL E U/S. 54F OF THE ACT. WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE ORDER OF THE SPECIAL BENCH OF THE ITAT, MUMBAI AND THE ORDER OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF JOE B FERNANDES (SUPRA). WHILE DECIDING THE ISSUE O F EXEMPTION AVAILABLE U/S. 54 AND 54F, SPECIAL BENCH HAS HELD AS UNDER: THEREFORE, THE EXEMPTION UNDER SECTIONS 54 AND 54F WOULD BE ALLOWABLE IN RESPECT OF ONE RESIDENTIAL HOUSE ONLY. IF THE ASSESSEE HAS PURCHA SED MORE THAN ONE RESIDENTIAL HOUSE, THEN THE CHOICE WOULD BE WITH ASSESSEE TO AVAIL THE EXEM PTION IN RESPECT OF EITHER OF THE HOUSES, PROVIDED THE OTHER CONDITIONS ARE FULFILLED. HOWEVE R, WHERE MORE THAN ONE UNIT ARE PURCHASED WHICH ARE ADJACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, COMMON KITCHEN, ETC., THEN IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTL Y, THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION. 3.2. TELEPHONE BILL, ELECTRICITY BILL AND THE CERTIFICAT E ISSUED BY THE HOUSING SOCIETY CLEARLY PROVE THAT RESIDENTIAL UNITS PURCHA SED BY THE ASSESSEE AND MEMBERS OF ITA NO. 1481/MUM/2012 SHRI SUDEEP N. KOTHARE 4 HIS FAMILY WAS CONVERTED IN A SINGLE UNIT AND WAS B EING USED AS ONE UNIT ONLY. AO IN HIS REMAND REPORT HAS NOT CONTRAVENED THIS FACT. I N OTHER WORDS THE ASSESSEE HAS PROVED, WITH DOCUMENTARY EVIDENCES, THAT THE RESIDE NTIAL UNIT WAS ONLY ONE, SO IN OUR OPINION, HE IS ENTITLED FOR EXEMPTION AVAILABLE AS PER THE PROVISIONS OF SECTION 54F OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF SUSHI LA M. ZAVERI (SUPRA), WE DECIDE GROUND NOS. 1 TO 3 IN FAVOUR OF THE ASSESSEE. 4. NEXT GROUND OF APPEAL (GROUND NO.4) IS ABOUT CONF IRMING ADHOC DISALLOWANCE OF RS. 22,459/-.DURING THE YEAR ASSES SEE HAD RECEIVED BUSINESS INCOME FOR PROFESSIONAL SERVICES GIVEN TO M/S. ARC MARINE . LTD. AMOUNTING TO RS. 2,83,760/-. ON THIS INCOME ASSESSEE HAD CLAIMED EXPENSES TO THE EXTENT OF RS. 1,12,294/ -. AO DISALLOWED AND ADDED BACK A SUM OF RS. 22, 459/-(20 % OF THE TOTAL EXPENSES)TO THE TOTAL INCOME OF THE ASSESSEE FOR WANT OF PROPER CHE CK AND VERIFICATION. 4.1. IN THE APPELLATE PROCEEDINGS, FAA HELD THAT DISALLO WANCE MADE BY THE AO WERE NOT ADHOC DIS-ALLOWANCE, THAT ASSESSMENT ORDER WAS PASSED U/S. 143(3) OF THE ACT, THAT ONUS WAS SQUARELY UPON THE APPELLANT TO P RODUCE ALL THE NECESSARY DOCUMENTS AND EVIDENCES BEFORE AO TO SUPPORT ITS CLAIM OF VAR IOUS EXPENSES, THAT DISALLOWANCE WAS MADE FOR THE REASON FOR WANT OF PROPER CHECK AN D VERIFICATION. 4.2. BEFORE US, AR SUBMITTED THAT ISSUE MAY BE DECIDED O N MERITS. DR SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. WE HAVE HEA RD THE RIVAL SUBMISSIONS, WE FIND THAT THE DISALLOWANCE WAS MADE BY THE AO FOR WANT O F PROPER CHECK AND VERIFICATION. THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE FAA IS SILENT ABOUT THE DETAILS WHICH WERE CALLED FOR BY THE AO/NOT FIL ED BY THE ASSESSEE. BOTH THE AUTHORITIES HAVE NOT HIGHLIGHTED THE DETAILS OF THE EXPENSES THAT WERE UNVERIFIABLE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ADD ITION MADE BY THE AO AND CONFIRMED BY THE FAA CANNOT BE UPHELD. GROUND NO.4 IS DECIDED IN FAVOUR OF THE ASSESSEE. 5. GROUND NOS. 5 AND 6 ARE ABOUT DIS-ALLOWANCE MADE BY THE AO U/S. 80GG OF THE ACT. DURING THE COURSE OF HEARING BEFORE US, A R SUBMITTED THAT BOTH THE GROUNDS SHOULD BE TREATED AS NOT PRESSED. GROUND NOS. 5 AND 6 STAND DISMISSED. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2012 .!/ * -$ , ! ' 1 2.3 30 TH NOVEMBER, 2012 * 4 5 SD/- SD/- ( . / D. MANMOHAN) ( !'# / RAJENDRA) / VICE PRESIDENT !, .6 / ACCOUNTANT MEMBER MUMBAI, 2. DATE: 30 TH NOVEMBER, 2012 TNMM ITA NO. 1481/MUM/2012 SHRI SUDEEP N. KOTHARE 5 .!/ .!/ .!/ .!/ * ** * '+7 '+7 '+7 '+7 8!7$+ 8!7$+ 8!7$+ 8!7$+ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE (7+ '+ //TRUE COPY// .!/ .!/ .!/ .!/ / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI