SMT. ROOPREKHA, CHENNAI V. ITO, NCW - 2 (3), CHENNAI

ITA 149/CHNY/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8520 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 23-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Sale consideration of property below Jantri Value; Capital asset; Set aside; Capital Gains
• Section: 68; 54; 263; 271(1)(c); 143(3); 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI , . , % BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.149/CHNY/2020 ( / ASSESSMENT YEAR: 2015-16) MRS. ROOPREKHA 4/25, R.K.MUTT ROAD, MANDAVELI, CHENNAI-600 028. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD-2(3) CHENNAI. PAN: ADOPR 8893F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. J.PRABHAKAR, C.A /RESPONDENT BY : MR. G.JOHNSON, ADDL.CIT /DATE OF HEARING : 07.07.2021 /DATE OF PRONOUNCEMENT : 09.08.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE LEARNED PRINCIPAL CIT-1, CHENNAI DATED 22.11.2019 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVES INCOME FROM HOUSE PROPERTY, INC OME FROM BUSINESS OR PROFESSION AND INCOME FROM OTHER SOURCE S FILED HER RETURN OF INCOME FOR ASSESSMENT YEAR 2015-16 ON 07. 07.2016 ADMITTING TOTAL INCOME OF RS.7,37,390/- . THE ASSES SMENT HAS BEEN COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1 961 ON 2 ITA NO.149/CHNY/2020 15.12.2017 AND ACCEPTED INCOME DECLARED IN THE RE TURN OF INCOME FILED FOR THE YEAR. 3. THE CASE HAS BEEN SUBSEQUENTLY TAKEN UP FOR REVI SION U/S.263 OF THE INCOME TAX ACT, 1961, ON THE GROUND THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE, INSOFAR AS ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAIN FRO M SALE OF PROPERTY AND HENCE, ISSUED SHOW-CAUSE NOTICE AND CA LLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SHALL NOT BE REVISED FOR THE REASONS STATED IN SHOW-CAUSE NOTICE. IN RESPONSE, THE ASSES SEE SUBMITTED THAT IT HAD SOLD A PROPERTY FOR CONSIDERA TION OF RS.70 LAKHS ALONG WITH ADDITIONAL CONSIDERATION OF RS.22 LAKHS FOR SALE OF MOVABLE ASSETS OF FIXTURES WITH ITS PROPER TY, WHICH IS PART AND PARCEL OF PROPERTY SOLD BY THE ASSESSEE. FURTHER, THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAIN BY CO NSIDERING MARKET VALUE OF THE PROPERTY AS DETERMINED FOR PAYM ENT OF STAMP DUTY BY THE STATE GOVT. AND HAS ADOPTED SUM O F RS.91,70,000/- U/S. 50C OF THE ACT . THEREAFTER, T HE ASSESSEE HAS CLAIMED EXEMPTION U/S.54 OF THE ACT, FOR PURCH ASE OF 3 ITA NO.149/CHNY/2020 ANOTHER RESIDENTIAL HOUSE PROPERTY AND THUS, COMP UTED NIL CAPITAL GAIN FROM SALE OF HOUSE PROPERTY. AS REGAR DS SALE OF MOVABLE ASSETS LIKE AIR-CONDITIONER, FURNITURE AND FIXTURES ETC., THE ASSESSEE HAS NOT COMPUTED ANY CAPITAL GAIN, BE CAUSE THEY ARE IN THE NATURE OF PERSONAL EFFECTS AND AS SUCH THEY ARE EXEMPT FROM TAX. THE ASSESSING OFFICER, AFTER VER IFYING RELEVANT FACTS HAS ACCEPTED CLAIM OF THE ASSESSEE A ND HENCE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFI CER CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTER ESTS OF REVENUE. 4. THE PRINCIPAL CIT, AFTER CONSIDERING RELEVANT SU BMISSIONS OF THE ASSESSEE AND ALSO RELIED UPON PLETHORA OF J UDICIAL PRECEDENTS HELD THAT THE ASSESSEE HAS FAILED TO PRO VE CONSIDERATION RECEIVED FOR SALE OF MOVABLE ASSETS OF RS.22 LAKHS AND HENCE, OPINED THAT SAME NEEDS TO BE BROU GHT TO TAX U/S.68 OF THE ACT AS UNEXPLAINED CASH CREDITS. THE RELEVANT FINDINGS OF THE LEARNED PRINCIPAL CIT ARE AS UNDER :- 7. I HAVE PERUSED THE CONTENTS OF THE WRITTEN S UBMISSION OF THE AUTHORIZED REPRESENTATIVE AND IN MY CONSIDERED VIEW, THERE IS A TOTAL LACK OF APPLICATION OF MIND ON THE PART OF THE AO AND THIS IS A FIT CASE TO INVOKE THE PROVISIONS OF SEC. 263 OF THE 4 ITA NO.149/CHNY/2020 ACT. THEREFORE, IN CONCLUSION THE ASSESSING OFFICER HAS FAILED TO MAKE A COMPLETE VERIFICATION WITH RESPECT TO THE ASPECTS AS DISCUSSED SUPRA AND HAD PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, WITHOUT PROPER DILIGENT APPLICAT ION OF MIND AND ENQUIRY, AND HENCE IN MY CONSIDERED OPINION THE ASSESSMENT ORDER SO PASSED IS BOTH ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 8. THUS IN VIEW OF THE NARRATED FACTS OF THE CA SE, IT IS AMPLY CLEAR THAT THE TOTAL CONSIDERATION RECEIVED FOR THE PROPERTY HAS BEEN SPLIT TO AVOID PAYMENT OF STAMP DUTY. TAX PLAN NING IS ONE OF THE RECOGNIZED WAYS OF SAVING INCOME-TAX. HOWEVE R, IN THE GUISE OF TAX PLANNING NO ATTEMPT SHOULD BE MADE TO SAVE INCOME-TAX BY TRYING TO RESORT TO IMPROPER PLANNING . INCOME- TAX ACT (THE ACT) IS A WONDERFUL PIECE OF LEGISLATI ON AND THERE ARE NUMBER OF AVENUES LISTED OUT IN THE ACT FOR TAX PLANNING AND THE COURTS HAVE ALSO BEEN LIBERAL IN INTERPRETI NG BENEFICIAL PROVISIONS IN FAVOUR OF TAXPAYERS. OF LATE IT HAS B EEN NOTICED THAT SELLERS OF CAPITAL ASSET - BE IT A PLOT OR RES IDENTIAL PROPERTY - IN ORDER TO OBLIGE THE PURCHASERS OF SUCH CAPITAL ASSET FOR THE PURPOSE OF SAVING STATE STAMP DUTY, AGREE TO SPLIT UP THE TOTAL CONSIDERATION INTO TWO COMPONENTS-ONE TOWARDS SALE OF THAT IMMOVABLE PROPERTY AND THE OTHER TOWARDS SALE OF MO VABLES SUCH AS FURNITURE, FITTINGS ETC. IN THE CASE WHICH AROSE BEFORE THE ITAT DELHI BENCH IN DEVINDER KUMAR(SUPRA) THE A SSESSEE SOLD A HOUSE PROPERTY INCLUDING FURNITURE IN THE HO USE DURING THE ASSESSMENT YEAR 2013-14 AND PURCHASED ANOTHER RESIDENTIAL HOUSE AND CLAIMED DEDUCTION UNDER SECTI ON 54 OF THE ACT. THE ASSESSEE ALSO DID NOT LET IN ANY EVID ENCE TO EXPLAIN THAT VALUE OF ITEMS UNDER SALE WAS MORE THA N WHAT WAS DETERMINED BY THE ASSESSING OFFICER. THE ASSES SING OFFICER, THEREFORE, HELD THAT THE TRANSACTION OF SA LE FURNITURE 5 ITA NO.149/CHNY/2020 WAS SHAM AND WAS TO INFLATE VALUE OF FURNITURE SO A S TO EVADE STAMP DUTY INVOLVED IN THE SALE TRANSACTION AND ALS O TO EVADE PROPER PAYMENT OF LONG- TERM CAPITAL GAINS AND, THU S, TREATED SUCH EXCESS AMOUNT SHOWN ON SALE OF FURNITURE AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 IN THE HAN DS OF THE ASSESSEE.LT WAS SOUGHT TO BE ARGUED ON BEHALF OF TH E ASSESSEE BEFORE THE TRIBUNAL THAT WHAT WAS SOLD WAS SALE OF PERSONAL EFFECTS AND, THEREFORE, NO ADDITION WAS WA RRANTED. THE TRIBUNAL REPELLED SUCH CONTENTION RAISED ON BEH ALF OF THE ASSESSEE BECAUSE THE PERSONAL EFFECTS WOULD NOT BE INCLUDED IN THE CAPITAL ASSET UNDER SECTION 2(14)(II). THE T RIBUNAL, THUS, HELD THAT THE EXCESS RECEIPT HAD TO-BE CONSIDERED U NDER THE RESIDUARY CLAUSE INCOME FROM OTHER SOURCES AND IT WAS RIGHTLY TAXED SO BY THE ASSESSING OFFICER. 9. IN THE INSTANT CASE THE ASSESSE HAS NOT BEEN ABL E TO ESTABLISH THE GENUINENESS OF THE TRANSACTION WITH R EGARD TO SALE OF USED MOVABLES IN THE REVISION PROCEEDINGS A ND THUS APPLYING THE DECISION RENDERED IN DEVINDER KUMAR CA SE (SUPRA) THE SALE CONSIDERATION OF THE PROPERTY IN Q UESTION IS HELD TO BE RS.70 LAKHS AND THE SUM OF RS.22 LAKHS REPRESENTING SALE OF USED MOVABLES WILL BE BROUGHT TO TAX ULS.68 AS UNEXPLAINED CASH CREDITS AND TO BE CONSID ERED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSES SEE.THE ASSESSMENT ORDER STANDS MODIFIED AND THE ASSESSING OFFICER SHALL GIVE EFFECT TO THIS ORDER AND INITIATE AND FI NALIZE PENALTY PROCEEDINGS ULS 271(1)(C) WITHIN TIME. IT IS ORDERED ACCORDINGLY. 6 ITA NO.149/CHNY/2020 5. THE LEARNED A.R FOR THE ASSESSEE SUBMITTED THAT THE PRINCIPAL CIT HAS ERRED IN SET ASIDE ASSESSMENT ORD ER PASSED BY THE ASSESSING OFFICER BY HOLDING THAT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, WITHOU T APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAS THOROUGHLY EXAMINED THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAIN AND FURTHER SALE OF MOVABLE ASSETS LIKE PERSONAL EFFECTS AND A FTER CONSIDERING RELEVANT FACTS ACCEPTED CLAIM OF THE AS SESSEE. THEREFORE, THE PRINCIPAL CIT HAS COMPLETELY ERRED I N REVISION OF ASSESSMENT ORDER U/S.263 OF THE ACT. 6. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTING THE ORDER OF THE PRINCIPAL CIT SUBMITTED THAT THERE IS AN ERROR IN THE ORDER PASSED BY THE ASSESSING OFFICER, IN NO T CONSIDERING SALE OF MOVABLE ASSETS AND HENCE, THE PRINCIPAL CIT HAS RIGHTLY REVISED ASSESSMENT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE PROVISIONS OF SECTION 263 OF THE ACT EMP OWERS THE PRINCIPAL CIT TO REVISE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, IF HE FEELS THAT ASSESSMENT ORD ER PASSED BY 7 ITA NO.149/CHNY/2020 THE ASSESSING OFFICER IS ERRONEOUS, INSOFAR AS IT I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FROM A PLAIN READING OF SECTION 263 OF THE ACT, IT IS VERY CLEAR THAT BEFORE EXERCI SING HIS JURISDICTION U/S.263 OF THE ACT, THE PRINCIPAL CIT SHOULD SATISFY HIMSELF THAT THE ASSESSING OFFICER HAS PASSED OR DER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVE NUE. UNLESS THE PRINCIPAL CIT PROVES THAT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS OR WHICH IS NOT PASSED IN ACC ORDANCE WITH LAW IN RIGHT PERSPECTIVE OF FACTS, THE PRINCIPAL CI T CANNOT REVISE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. FURTHER, TO INVOKE JURISDICTION U/S.263 OF THE ACT, TWIN CO NDITIONS EMBEDDED U/S.263 OF THE ACT MUST CO-EXIST. IN OTH ER WORDS, IF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFIC ER IS ERRONEOUS, BUT IT IS NOT PREJUDICIAL TO THE INTERE STS OF REVENUE, OR VICE-VERSA, THEN THE PRINCIPAL CIT DOES NOT HAVE A NY POWER TO REVISE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THIS LEGAL PROPOSITION IS SUPPORTED BY PLETHORA OF JUDICIAL DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S.MALABAR INDUSTRIES CO.LTD. VS. CIT (2000) 243 ITR 83(SC). 8 ITA NO.149/CHNY/2020 8. IN LIGHT OF ABOVE LEGAL POSITION, IF YOU EXAMIN E FACTS OF THE PRESENT CASE, WE FIND THAT ASSESSING OFFICER HAS EXAMINED THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAIN FRO M SALE OF PROPERTY AND FURTHER, SALE OF MOVABLE ASSETS LIKE AIR- CONDITIONER, FURNITURE AND FIXTURES ETC. AND ACCEPT ED CLAIM OF THE ASSESSEE THAT THEY ARE IN THE NATURE OF PERSON AL EFFECTS NOT LIABLE FOR TAX. THE ASSESSING OFFICER, AFTER ACCEP TING EXPLANATION FURNISHED BY THE ASSESSEE, HAS TAKEN A POSSIBLE VIEW AND HAS COMPLETED THE ASSESSMENT, THEREFORE, THE PRINCIPAL CIT CANNOT ASSUME JURISDICTION U/S.263 OF THE INCOME TAX ACT, 1961, TO TREAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE QUESTION WHETHER MOVABLE ASSETS LIK E AIR- CONDITIONER, USED TVS, FRIDGE, DINING TABLE ETC. AR E PERSONAL EFFECTS OR CAPITAL ASSETS IS DEBATABLE ISSUE. SINCE THE ISSUE IS DEBATABLE, THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEW AND ACCEPTED CLAIM OF THE ASSESSEE THAT THE Y ARE IN THE NATURE OF PERSONAL EFFECTS AND NOT LIABLE FOR TAX. THE VIEW TAKEN BY THE ASSESSING OFFICER MAY NOT BE CORRECT, BUT T HE PRINCIPAL CIT CANNOT ASSUME JURISDICTION TO REVIEW THE ASSESS MENT ORDER 9 ITA NO.149/CHNY/2020 U/S.263 OF THE ACT, UNLESS THE VIEW TAKEN BY THE AS SESSING OFFICER IS UNSUSTAINABLE IN LAW, BECAUSE THE PRINCI PAL CIT CANNOT IMPOSE HIS VIEW ON THE ASSESSING OFFICER . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT ONCE AN ISSUE WA S SUBJECT MATTER OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER IN ORIGINAL ASSESSMENT PROCEEDINGS, THEN THERE IS NO S COPE FOR THE PRINCIPAL CIT TO REVISE ASSESSMENT ORDER BY HOLDIN G THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER I S ERRONEOUS, INSOFAR AS IT IS PREJUDICIAL TO THE INTE RESTS OF REVENUE. THIS VIEW IS SUPPORTED BY THE DECISION OF HON'BLE M ADRAS HIGH COURT, AS RELIED UPON BY THE ASSESSEE, IN THE CASE OF VENKATAKRISHNA RICE COMPANY VS. CIT (163 ITR 129), WHERE THE HONBLE HIGH COURT, WHILE DEALING WITH THE ISSU E OF REVISION OF ASSESSMENT ORDER U/S.263 HAS HELD AS UNDER:- THE LANGUAGE USED BY THE LEGISLATURE IN SECTION 26 3 IS TO THE EFFECT THAT THE COMMISSIONER MAY INTERFER E IN REVISION F HE CONSIDERS THAT THE ORDER PASSED BY TH E INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR, AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS QUITE CLEAR FROM THE ABOVE PHRASING THAT TWO THINGS MUST CO- EXIST IN ORDER TO GIVE JURISDICTION TO THE COMMISSI ONER TO INTERFERE IN REVISION. THE ORDER OF THE INCOME-T AX OFFICER IN QUESTION MUST NOT ONLY BE ERRONEOUS BUT ALSO THE ERROR IN THE INCOME-TAX OFFICER ORDER MUST BE O F SUCH A KIND THAT IT CAN BE SAID OF IT THAT IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. IN OTHER WORDS, ME RELY 10 ITA NO.149/CHNY/2020 BECAUSE THE OFFICER ORDER IS ERRONEOUS, THE COMMISSIONER CANNOT INTERFERE. AGAIN, MERELY BECAUSE THE ORDER OF THE OFFICER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN AGAIN, THAT IS NOT ENOUGH TO CONFER JURISDICTION ON THE COMMISSIONER T O INTERFERE IN REVISION. THESE TWO ELEMENTS MUST CO- EXIST. 9. IN THIS VIEW OF THE MATTER AND BY CONSIDERING F ACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER I S NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVEN UE. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE PRINCIPAL CIT H AS ERRED IN REVISION OF ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER U/S.143(3) OF THE ACT. HENCE, WE QUASH REVISION OR DER PASSED BY THE PRINCIPAL CIT U/S.263 OF THE ACT. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH AUGUST, 2021 SD/- SD/- ( ) ( . ) (MAHAVIR SINGH) (G. MANJUNATHA ) / VICE-PRESIDENT % / ACCOUNTANT MEMBER ' /CHENNAI, ( / DATED 9 TH AUGUST, 2021 DS *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .