ASST CIT 14(3), MUMBAI V. PRAFUL B SHAH, MUMBAI

ITA 151/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0170 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 143(3); 50C; 45(5); 142(1); 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 151 / MUM/ 20 1 4 ( / ASSESSMENT YEAR: 20 09 - 10 ) ASSTT. COMMISSIONER OF INCOM E TAX - 14(3), 6 TH FLOOR, EARNES T HOUSE, NARIMAN POINT, MUMBAI - 400021 / VS. SHRI PRAFUL B SHAH, C/O P R FABRICS, 355, GOVARDHA N GALLY, M J MARKET, MUMBAI - 400002. ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AACPS76 96G ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAJAT MITTAL /R E SPONDENT BY : SHRI VIPUL JOSHI / DATE OF HEARING : 21.6 .2017 / DATE OF PRONOUNCEMENT : 5.7 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 25, MUMBAI , DATED 1 1 . 10 .201 3 , PERTAINING TO THE ASSESSMENT YEAR S 20 09 - 10 WHICH IN TURN HA VE ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 29.12.2011 UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2 ITA NO. 151 /MUM/201 4 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THE VARIOUS G ROUNDS OF APPEAL IS AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF LONG TE RM CAPITAL GAINS BY THE AO BY APPLYING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 31.8.2009 DECLARING TOTAL INCOME OF RS.24,27,550/ - WHICH WAS PROCESSED UNDE R SECTION 143(1) OF THE ACT. THEREAFTER THE CASE OF THE ASSESSEE PROCESSED UNDER CASS AND STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. THE ASSESSEE SOLD A FLAT WHICH WAS IN JOINT OWNERSHIP AND ASSESSEES SHARE WAS 1/3 RD IN THE PROPERTY BEARING NO.320, 320/1 TO 16 AT DUFTARY ROAD, MALAD (EAST) , TALUKA BORIVALI, MUMBAI. THE SAID FLAT WAS SOLD AT A CONSIDERATION OF RS.2,43,50,000/ - VIDE AGREEMENT DATED 7.9.1995 OUT OF WHICH ONLY RS.10 LAKHS WERE RECEIVED. THE SA ID AGREEMENT COULD NOT BE EXECUTED DUE TO FAMILY DISPUTE AND THEREAFTER SECOND AGREEMENT DATED 24.03.1999 WAS ENTERED INTO IN CONTINUATION OF THE FIRST AGREEMENT AND RS.1,95,50,000/ - WAS RECEIVED AND THE POSSESSION OF THE FLAT WAS ALSO HANDED OVER IN TH AT YEAR TO THE BUYER AND T HE BUYER ALSO STARTED RECEIVING THE RENT FROM THE SAID PROPERTY WHICH HAS BEEN CONFIRMED BY THE REPLY OF THE PURCHASER WHICH WAS FILED BEFORE THE AO IN RESPONSE TO THE NOTICE U/S 133 (6) OF THE ACT. THE ASSESSEE OFFERED THE LONG TERM CAPITAL GAIN TO TAX IN ASSESSMENT YEAR 2000 - 01 AND ASSESSED BY THE DEPARTMENT ACCORDINGLY ACCEPTING THE LONG TERM CAPITAL GAIN AS OFFERED BY THE ASSESSEE. HOWEVER, 3 ITA NO. 151 /MUM/201 4 T HE SAID PROPERTY WAS FINALLY REGISTERED IN THE NAME OF THE BUYER VIDE CONVENIENCE DEE D DATED 26.9.2008 AND THE ASSESSEE WAS PAID RS.20 LAKHS COMPRISING OF RS.16 LAKHS AS ADDITIONAL COMPENSATION AND RS.4 LAKHS OUTSTANDING AND PAYABLE OUT OF THE ORIGINAL CONSIDERATION. THE ASSESSEE BOUGHT THE TAX FREE BONDS AND CLAIMED THE LONG TERM CAPITA L GAIN AS EXEMPT U/S 54EC OF THE ACT. ACCORDING TO THE AO, THE CONV EYANCE DEED WAS EXECUTED ON 26.9.2008 AND THEREFORE THE PROPERTY HAS TO BE TAXED ON THE VALU E AS PER THE STAMP VALUATION AUTHORITY WHICH WAS RS.5,78,16,500/ - AND ACCORDINGLY ISSUED NO TICE TO THE ASSESSEE AS TO WHY THE PROVISIONS OF SECTION 50C OF THE ACT SHOULD NOT BE APPLIED FOR DETERMINING THE CAPITAL GAINS. THE NOTICE OF THE ASSESSING OFFICER WAS REPLIED BY THE ASSESSEE BY SUBMITTING THAT THE ORIGINAL AGREEMENT DATED 7.9.1995 COULD NOT BE EXECUTED IN TERMS OF GIVING POSSESSION AND RECEIVING THE CONSIDERATION UNTIL 11.5.1999 ON WHICH DATE THE PURCHASER MADE SUBSTANTIAL PART OF THE CONSIDERATION AND THE CAPITAL GAINS WAS DULY SHOWN IN THE YEAR 2000 - 01. THE LD. AR SUBMITTED THAT THE A SSESSEE PAID THE TAX ON THE SAID CAPITAL GAIN IN THE ASSESSMENT YEAR 2000 - 01 WHICH WAS ACCEPTED BY THE DEPARTMENT. THE LD. AR ALSO SUBMITTED BEFORE THE AO THAT UPON THE FINAL SETTLEMENT OF THE DISPUTE ON 26.09.2008 THE PROPERTY WAS FINALLY CONVEYED VIDE CONVEYANCE AGREEMENT DATED 26.09.2008 AND THE ASSESSEE RECEIVED THE ADDITIONAL COMPENSATION OF RS.16 LAKHS PLUS RS.4 LAKHS REMAINING DUE IN TERMS OF THE EARLIER AGREEMENT DATED 24.03.1999. THE ASSESSEE ALSO SUBMITTED THAT THE SAID ADDITIONAL CONSIDERAT ION RECEIVED WAS INVESTED IN 4 ITA NO. 151 /MUM/201 4 TAX FREE BONDS UNDER SECTION 50EC OF THE ACT. HOWEVER, THE AO NOT FINDING THE REPLY OF THE ASSESSEE AS CONVINCI NG REWORKED THE LONG TERM CAPITAL GAINS AS GIVEN IN PARA 4 OF ASSESSMENT ORDER AND ADDED A SUM OF RS.1,21,62,5 86/ - UNDER THE HEAD LTCG BY ALLOWING DEDUCTION TOWARD THE SALE CONSIDERATION ALREADY OFFERED TO TAX IN THE ASSESSMENT YEAR 2000 - 01 BY ASSESS ING THE INCOME OF ASSESSEE AT RS.1,30,55 , 500/ - VIDE ORDER DATED 29.12.2011 PASSED UNDER SECTION 143(3) OF THE ACT . 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 5.5 I HAVE CAREFULLY PERUSED T HE ASSESSMENT ORDER , WRITTEN SUBMISSIONS OF THE APPELLANT REMAND REPORT , REJOINDER OF THE APPELLANT AND THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDING TO THE AO, THE TOTAL SALE CONSIDERATION OF PROPERTY WAS AT RS.2 , 43 , 50 , 000/ - AS PER AGREEMENT DATED 07 .09 .1995, OF WHICH PART CONSIDERATION OR RS. 1,95,50,000/ - (APPELLANT'S SHARE L/3RD APPROX. AT RS.64, 50,000/ - ) WAS OFFERED TO TAX IN A.Y. 2000 - 01 . HOWEVER. I FIND THAT THE TOTAL CONSIDERATION MENTIONED IN THE AGREEMENT DATED 07.09.1 9 95 EXECUTED BY THE APPELLA NT IS AT RS.64,50, 000 / - ONLY AND THE APPELLANT HAS OFFERED THE SAID AMOUNT TO TAX IN THE YEAR OF HANDING OVER POSSESSION OF THE PROPERTY I.E. A. Y. 2 000 - 01 . THE FACT THAT FULL AMOUNT OF RS.64 ,50,000 / - WAS OFFERED TO TA X IN A.Y. 2000 - 01 IS ALSO VERIFIED FRO M THE COMPUTATION OF INCOME FOR THAT YEAR SUBMITTED BY THE APPELLANT. THE AMOUNT OF RS.2 , 43 , 50 , 000 CONSIDERED BY THE AO TO BE PART OF TOTAL SALE CONSIDERATION AS PER AGREEMENT DATED 07.09.1 9 95 IS IN FACT THE TOTAL CONSIDERATION AS PER INDENTURE OF CONVE Y ANCE DATED 26.09.2008. WHI CH INCLUDES RS.16,00 , 000/ - AS ADDITIONAL CONSIDERATION TO EACH OF THE THREE VENDORS GRANTED IN FULL AND FINAL SETTLEMENT. IN MY OPINION. THE SAID ADDITIONAL COMPENSATION OF RS.16 , 00 , 000/ - ACCRUED TO TH E APPELLANT COULD NOT HAVE BEEN FORESEEN WHILE EXECUTING THE ORIGINAL AGREEMENT AND ALSO WHILE HANDING OVER THE POSSESSION BY THE 5 ITA NO. 151 /MUM/201 4 APPELLANT. THE APPELLANT , IN BONA TIDE BELIEF OFFERED TO TAX THE ENTIRE ORIGINAL SALE CONSIDERATION OF RS.64 , 50 , 000/ - IN THE YEAR OF HANDING OVER THE P OSSESSION I.E. A .Y. 2000 - 01 EVEN THOUGH A PART OF THE CONSIDERATION WAS NOT RECEIVED BY HIM IN THAT YEAR. I FIND THAT THE SAID TREATMENT GIVEN BY THE APPELLANT IN A. Y. 2000 - 0 1 W AS IN ACCORDANCE WITH SECTION 2(47)(V) OF THE ACT WHICH CLEARLY STATES THAT T RANSFER IN RELATION TO A CAPITAL ASSETS, ASSET. INCLUDES ANY TRANSACTION INVOLVING. T HE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE RE FERRED IN SEC T ION 53A OF THE TRA NSFER O F P ROPER TY ACT, 1882 I ALSO NOTE THAT THE AO IN HIS REMAND REPORT HAS ADMITTED THE POSSESSION OF PROPERTY HAVING TAKEN P LACE IN FY 1999 - 2000 (RELEVANT TO AY 2000 - 01), AND THE ENQUIRY U/S 133 (6) ALSO CONFIRM ED THE CONTENTION OF THE APPELLANT THAT THE PURC HASER WAS COLLECTING RENT AFTER GETTING POSSESSION IN THAT YEAR. HENCE, IT IS ESTABLISHED BEYOND DOUBT THAT THE BENEFICI AL OWNERSHIP OF PROPERTY WAS TRANSFERRED IN THE F Y 1999 - 2000 ITSELF AND THEREFORE, THE APPELLANT HAD CORRECTLY OFFERED THE ORIGINAL SALE CONSIDERATION OF RS.64,50 ,000/ - TO TAX A . Y.2000 - 01. NOW THE QUESTION REMAINS OF THE TAXABILITY OF THE ADDITIONAL CONSIDERATION RS.16 , 00 , 000 / - RECEIVED AS PER AGREEMENT DATED 26.09.2008. SECTION 45(5) DEALS WITH SIMILAR SITUATION IN CASE OF COMPULSORY ACQUISITION, WHEREBY ANY ENHANCED COMPENSATION IS TO BE TAXED IN THE YEAR OF RECEIPT. THERE MAY ARISE AN ARGUMENT THAT SECTION 45 ( 5) IS APPLICABLE ONLY TO' COMPULSORY ACQUISITION, HENCE, NOT APPLICABLE TO, PRESENT CAS E, HOWEVER, IN THE PRESENT CASE IT WOU LD ALSO NOT BE, POSSIBLE, TO REVISE THE ASSESSMENT A.Y 2000 - 01 , SINCE THE REOPENING OF THAT ASSESSMENT IS ALREADY TIME BARRED . HENCE, THE GIVEN SITUATION THERE WOULD BE NO OTHER ALTERNATE BUT TO TAX THE AMOUNT OF RS.16 , 00,000 / - IN THE YEAR OF RECEIPT I.E. A. Y. 2009 - 10. THE APPELLANT H AS MISTAKEN LY OFFERED TO TAX RS.20 , 0,0001 - (INCLUDING THE BALANCE AMOUNT OF RS.4 , 00 , 000/ - OUT OF RS.64 , 50,000 / - ALREADY OFFERED TO TAX IN A. Y . 2000 - 0 1 ). AFTER CLAIMING THE DEDUCTION UNDER SECTION 54EC THE APPELLANT ARRIVED AT TAXABLE LTCG OF RS. NIL. THEREFORE , EVEN THOUGH THE GROSS AMOUNT OF LTCG IS REVISED TO RS.16 , 00 , 000/ - AS ABOVE. THE NET AMOUNT WOULD BE 'NIL' ONLY AFTER ALLOWING DEDUCTION U/S 54EC TO THAT EXTENT. AS REGARDS TO THE APPLICABILITY OF SECTION 50C, SINCE TH E PROPERTY IS CONSIDERED AS TRANSFERRED IN PREVIOUS YEAR RELEVANT TO A.Y.2000 - 01 , THE QUESTION OF APPLYING THE PROVISIONS O THE SAID SECTION IN THE CURRENT ASSESSMENT YEAR UNDER CONSIDERATION DOES NOT ARISE. IN VIEW 6 ITA NO. 151 /MUM/201 4 OF THE ABOVE , THE ADDITION MADE IN T HE ASSESSMENT ORDER OF RS.1,06,27,945/ - AS LTCG ON TRANSFER OF PROPERTY IS DELETED 6 . WE HAVE HEARD THE RIVAL PARTIES AND CONSIDERED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS AND CITATION AS RELIED BY THE PARTIES. THE UNDISPUTED FA CTS ARE THAT A PROPERTY WAS SOLD BY THE ASSESSEE OF WHICH HE WAS THE CO - OWNER TO THE EXTENT OF 1/3 RD VIDE AGREEMENT DATED 7.9.1995 FOR A TOTAL CONSIDERATION OF RS . RS.2,43,50,000/ - AND ONLY RS.10 LAKHS WAS RECEIVED AT THE TIME OF SINGING OF THE AGREEMEN T . THE SAID AGREEMENT COULD NOT BE EXECUTED DUE TO FAMILY FEUD . LATER ON, SUPPLEMENTARY AGREEMENT WAS EXECUTED ON 24.3.1999 AND SUBSTANTIAL PART OF THE CONSIDERATION TO THE TUNE OF RS.1,95,00,000/ - WAS PAID TO THE CO - OWNER S INCLUDING THE ASSESSEE AND THE P OSSESSION OF THE PROPERTY WAS ALSO GIVEN TO THE PURCHASER OF THE PROPERTY. T HE CAPITAL GAIN ON THE SAID PROPERTY WAS CALCULATED ,OFFERED AND TAXED IN THE ASSESSMENT YEAR 2000 - 01 THE FINDING S WHEREOF HAS BEEN GIVEN BY THE LD.CIT(A) AND CORROBORATED BY THE INCOME TAX RETURN AND COMPUTATION OF CAPITAL GAINS FILED BY THE ASSESSEE. T HE DISPUTE WAS FINALLY SETTLED ON 26.9.2008 WHEN THE FINAL INDENTURE OF CONVEYANCE DEED WAS EXECUTED BETWEEN THE ASSESSEE AND THE OTHER CO - OWNER S AND THE BUYER AND THE ASSESSEE RECEIVED RS.16 LAKHS AS ADDITIONAL CO MPENSATION ALONG WITH RS.4 LAKHS REMAINING OUTSTANDING UNDER AGREEMENT DATED 24.3.199 9 AND THUS , IN ALL RS.20 LAKHS WAS RECEIVED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2009 - 10 WITH SIMILAR PAYMENTS TO OTHER CO - O WNERS . THE AO FORMED A CONCLUSION THAT 7 ITA NO. 151 /MUM/201 4 THE PROVISIONS OF SECTION 50C OF THE ACT WERE TO BE APPLIED AND VALUE AS PER THE STAMP VALUATION AUTHORITY OF RS.5,78,16,500/ - WAS TO BE SUBSTITUTED AS DEEMED CONSIDERATION IN PLACE OF CONSIDERATION IN THE CONV EYANCE AGREEMENT DATED 26.9.2008. WHEREAS THE LD.CIT(A) HAS TAKEN A VIEW THAT THE ASSESSEE HAS ALREADY MADE PART PERFORMANCE WHEN THE SUBSTANTIAL CONSIDERATION WAS RECEIVED AND POSSESSION WAS HANDED OVER TO BUYER IN AY 2000 - 01 AND DELETED THE ADDITION AS MADE BY THE AO. IN OUR CONSIDERED OPINION THE LD CIT(A) HAS TAKEN A CORRECT VIEW OF THE MATTER AS PER LAW , AS THE POSSESSION OF THE PROPERTY WAS GIVEN IN THE ASSESSMENT YEAR 2000 - 01 AND THE BUYER OF THE PROPERTY ALSO WAS STARTED RECEIVING RENT FROM TH E PROPERTY FROM THAT YEAR WHICH WAS ALSO CONFIRMED BY THE REPLY OF THE BUYER FILED WITH THE AO IN RE SPONSE TO THE NOTICE SECTION 133(6) OF THE ACT. WE ARE IN AGREEMENT WITH THE FINDING OF THE LD.CIT(A) THAT THE ADDITION OF RS.1,06,27,945/ AS MADE B Y T HE AO INVOKING THE PROVISIONS OF SECTION 50C IS WRONG AND WAS RIGHTLY DELETED BY THE LD.CIT(A). ACCORDINGLY , THE ORDER OF THE LD.CIT(A) IS UPHELD. 7 . IN THE RESULT, THE APPEAL OR THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH JUL , 2017. SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 5. 7. 2017 SRL,SR.PS 8 ITA NO. 151 /MUM/201 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPE LLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI