NITA DONALD SEQUEIRA, MUMBAI V. ITO 12(2)(4) NOW ITO 17(2)(4), MUMBAI

ITA 1518/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1216 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 28-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Assessee Lawyers: ASHOK J PATILAR
• Keywords: Period of limitation

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./1518/MUM/2015, /ASSESSMENT YEAR: 2010-11 NITA DONALD SEQUEIRA F-1, CORINTHIAN , JUSTICE VYAS ROAD COLABA, MUMBAI-400 005. PAN:ADUPS 8076 P VS. INCOME TAX OFFICER-17(2)(4) (FORMERLY ITO-12(2)(4)) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN-DR ASSESSEE BY: SHRI ASHOK J. PATIL-AR / DATE OF HEARING: 23.02.2017 / DATE OF PRONOUNCEMENT:12.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 17/12/2014 OF CIT(A)-2 8,MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-AN INDIVIDUAL,DERIVES INCOM E FROM OTHER SOURCES COMPRISING INTEREST FROM BANKS AND DIVIDEND INCOME, FILED HER RETURN OF INCOME ON 31.07.2010,DECLARING TOTAL INCOME AT RS.38,180/-.THE AO COMPLETED THE ASSESSME NT U/S.143(3) OF THE ACT ON 28.3. 2013,DETERMINING HER INCOME AT RS.2.05 CRORES. 2. FIRST TWO GROUND OF APPEAL ARE ABOUT VALIDITY OF PR OTECTIVE ASSESSMENT PASSED BY THE AO WITH REGARD TO IMMOVABLE PROPERTY SOLD.DURING THE A SSESSMENT PROCEEDINGS THE AO RECEIVED SPECIFIC INFORMATION UNDER CASS THAT THE ASSESSEE HAD SOLD PROPERTY, ON 22.2.2010, FOR RS.4.05 CRORES, THAT IN THE YEAR 2001 THE ASSESSEE ALONGWITH HER HUSBAND DONALD SEQUEIRA (DS) HAD BECOME THE TENANTS OF FLAT NO.F-1 IN A BUILDIN G AT COLABA BY PAYING A PREMIUM OF RS.30 LAKHS VIDE TENANCY AGREEMENT,DATED 24.12.2001 ,THAT VIDE AGREEMENT,DATED 15.3.2007, THE FLAT WAS PURCHASED BY THE ASSESSEE AND HER HUSB AND FOR A CONSIDERATION OF RS.50 LAKHS, THAT THE ASSESSEE CLAIMED THAT DUE TO FAMILY DISPU TE THE SAID FLAT WAS DIVIDED INTO TWO AREAS BY MUTUAL CONSENT CONSISTING OF 1497 SQ.FT. (BELONG ING TO THE ASSESSEE) AND 978 SQ.FT. (BELONGING TO DS),THAT THE ASSESSEE CONTINUED TO ST AY IN THE PORTION CONSISTING OF 1497 SQ.FT., THAT THE FLAT NO.GF-2 WAS PURCHASED BY DS VIDE SALE AGREEMENT,DATED 05.07.2007,FOR A CONSIDERATION OF RS.1.40 CRORES, THAT THE ASSESSEE HAD NO RIGHT,TITLE OR INTEREST IN THE FLAT NO.F- 2,THAT LATER ON PROPERTY CONSISTING OF F-2 AND A PA RT OF FLAT F-1(COMPRISING AREA OF 978 SQ.FT. 1518/M/15(10-11) NITA DONALD SEQUEIRA 2 WAS SOLD FOR RS.4.05 CRORES),VIDE AGREEMENT,DATED 2 2.2.2010. THE AO FURTHER OBSERVED THAT THE ASSESSEE AND HER HUSBAND WERE JOINT TRANSFEROR S IN THE SAID SALE DEED, THAT THE RECEIPT OF RS.4.05 CRORES ISSUED TO THE BUYERS WAS ALSO JOINTL Y SIGNED BY THE ASSESSEE AND HER HUSBAND, THAT FLAT NO.F-1WAS JOINTLY PURCHASED BY BOTH THE P ERSONS,THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED AN AFFIDAVIT FR OM DS CONFIRMING THAT OUT OF THE TOTAL AREA OF 2475 SQ.FT. OF FLAT NO.F-1 AN AREA OF 978 SQ.FT. BELONGED TO HIM AND THAT ENTIRE SALE CONSIDERATION FOR THAT PORTION WAS RECEIVED BY HIM ONLY, THAT THE ASSESSEE HAD ARGUED THAT IN THE WORST CASE SCENARIO SHE WOULD BE LIABLE TO CAPI TAL GAINS IN RESPECT OF SALE OF 50% OF AREA OF 978 SQ.FT. THE AO FOUND THAT DS HAS NOT FILED RETURN OF INCOME FOR AY. 2010-11.HE HELD THAT PART OF FLAT F-1 AND F-2 HAD BEEN SOLD BY ONE COMMON SALE D EED, THAT THE ASSESSEE AND HER HUSBAND WERE JOINT TRANSFERORS THAT THE RECEIPT OF SALE CON SIDERATION OF RS.4.05 CRORES HAD BEEN SIGNED BY BOTH THE PERSONS,THAT ON THE SALE OF FLATS SHORT TERM CAPITAL GAIN WOULD ARISE, AS THE PROPERTIES HAD BEEN PURCHASED IN THE YEAR 2007 AND SOLD IN FEBRUARY,2010.FINALLY,HE HELD THAT ENTIRE SHORT TERM CAPITAL GAIN(STCG)ARISING ON SALE OF THE SAID TWO FLATS WOULD BE TAXED IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS.ACCORDIN GLY HE COMPUTED STCG OF RS.2.04 CRORES IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. 3. AGGRIEVED BY ORDER OF AO,THE ASSESSEE FILED AN APPE AL BEFORE FIRST APPELLATE AUTHORITY (FAA). BESIDES ARGUING THE CASE ON MERITS THE ASSES SEE ALSO FILED ADDITIONAL GROUND CHALLENGING THE ASSESSMENT MADE ON PROTECTIVE BASIS .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THA T FROM THE PURCHASE AGREEMENT IT WAS CLEAR THAT FLAT NO.F-2 WAS PURCHASED BY DS, THAT FL AT NO.2 AND 978 SQ.FT. AREA OF FLAT-F-1 HAD BEEN SOLD BY THE HUSBAND OF THE ASSESSEE, THAT AO H AD WRONGLY TAXED THE CAPITAL GAIN ARISING OUT OF SALE OF FLATE F-2 IN THE HANDS OF THE ASSESS EE, EVEN ON PROTECTIVE BASIS, THAT SAME WOULD RIGHTLY BE TAXABLE IN THE HANDS OF DS.WITH REGARD T O 978 SQ.FT. AREA OF FLAT F-1, HE HELD THAT THE ASSESSEE AND HER HUSBAND WERE JOINT OWNERS OF T HE FLAT, THAT NOWHERE IN THE SALE DEED IT WAS MENTIONED THAT DS WAS THE OWNER OF THE 978 SQFT . AREA IN ABSOLUTE TERMS, THAT NO DOCUMENTARY EVIDENCE WAS PRODUCED EVIDENCING THAT D S WAS EXCLUSIVE OWNER OF THE PROPERTY IN DISPUTE. HE FURTHER HELD THAT THE ASSESSEE HAD N OT RELINQUISHED HER OWNERSHIP OVER THE PROPERTY, THAT EVEN FOR ARGUMENT SAKE IF IT WAS ACC EPTED THAT THERE WAS RELINQUISHMENT , SAME WOULD ATTRACT LIABILITY TO CAPITAL GAINS.FINALLY, H E HELD THAT STCG OF RS.53.96 LAKHS ON THE SALE OF 978 SQFT. OF FLAT F-1 WOULD BE ASSESSABLE I N THE HANDS OF THE ASSESSEE. 1518/M/15(10-11) NITA DONALD SEQUEIRA 3 4. BEFORS US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED T HAT THE ASSESSEE WAS NOT OWNER OF THE PART OF THE FLAT F.1,THAT SHE HAD NOT RECEIVED ANY SALE PROCEEDS,THAT DS HAD IN HIS AFFIDAVIT STATED THAT SALE PROCEEDS WERE RECEIVED BY HIM ONLY ,THAT PROTECTIVE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS INVALID,THAT THE FAA HAD NOT ADJUD ICATED THE ISSUE.HE REFERRED PAGES 136,137OF THE PB AND RELIED UPON THE CASE OF SURESH K.JAJOO, (39SOT514).THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE ORDERS OF THE AO AND THE FAA AND CONTENDED THAT THE ASSESSEE HAD SIGNED THE SALE AGREEMENT AS JOINT OWNER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE DS AND ASSESSEE HAD JOINTLY PURCHASED FLAT F.1 IN T HE YEAR 2007,THAT LATER ON DS PURCHASED FLAT F.2 ALSO,THAT FAMILY PROBLEMS LED TO DIVORCE O F THE ASSESSEE AND DS,THAT THE ASSESSEE GOT POSSESSION OF 1478 SQ.FT.OF FLATS AND DS BECAME OWN ER OF THE REST OF THE FLATS,THAT HE SOLD F.2 AND PART OF FLAT F.1 FOR A SALE CONSIDERATION OF RS .4.05 CRORES,THAT HE DID NOT FILE RETURN OF INCOME FOR THE TRANSACTION IN QUESTION,THAT THE ASS ESSEE AND DS HAD SIGNED THE SALE DEED FOR SELLING PART OF F.1,THAT DS IN HIS AFFIDAVIT STATED THAT THE ASSESSEE HAD NOT RECEIVED ANY THING ON ACCOUNT OF SALE OF FLAT F.1,THAT THE AO MADE PRO TECTIVE ASSESSMENT IN CASE OF THE ASSESSEE,THAT NO SUBSTANTIVE ASSESSMENT WAS MADE IN CASE OF DS,THAT DURING THE APPELLATE PROCEEDINGS THE FAA PARTLY ALLOWED THE APPEAL OF TH E ASSESSEE,THAT HE DID NOT DEAL WITH THE JURISDICTIONAL ISSUE I.E.NULLITY OF PROTECTIVE ASSE SSMENT IN ABSENCE OF SUBSTANTIVE ASSESSMENT. HE HELD THAT MATTER WAS DECIDED ON MERITS AND THE A DDITIONAL GROUND RAISED BY THE ASSESSEE ABOUT PROTECTIVE /SUBSTANTIVE ASSESSMENT WAS INFRUC TUOUS. IN OUR OPINION,JURISDICTIONAL ISSUES HAVE TO BE ADJ UDICATED FIRST.AN ORDER WITHOUT JURISDICTION IN NO ORDER.THEREFORE,WHENEVER A QUESTION OF LEGALI TY OF AN ASSESSMENT IS CHALLENGED WITH REGARD TO JURISDICTION IT HAS TO ADDRESSED BEFORE D ECIDING THE MERITS OF THE CASE.AS PER THE SETTLED PRINCIPLES OF TAXATION,GOVERNING THE PROTEC TIVE ASSESSMENT(ALSO TERMED AS PAPER ASSESSMENT/ALTERNATE ASSESSMENT/PARALLEL ASSESSMENT /COLD STORAGE ASSESSMENT),A PROTECTIVE ASSESSMENT WILL NOT SURVIVE WITHOUT A SUBSTANTIVE A SSESSMENT.THE EXISTENCE OF FIRST IS A PRE- CONDITION FOR SURVIVAL OF THE SECOND.IN THE CASE OF JAGGANATH BAWRI AND OTHERS(234 ITR 464)THE HONBLE GAUHATI HIGH COURT HAS HELD AS UNDE R: UNDER THE LAW IT IS OPEN TO THE DEPARTMENT TO MAKE ASSESSMENTS ON TWO PERSONS IN RESPECT OF THE SAME INCOME, WHERE THERE IS SOME AMBIGUITY AS T O THE LIABILITY TO CHARGE. SUCH ASSESSMENTS ARE MADE TO PROTECT THE INTEREST OF THE REVENUE SO MUCH SO, UNLESS SUCH PROTECTIVE OR ALTERNATE ASSESSMENT IS MADE, ASSESSM ENT PROCEEDINGS AGAINST THE PARTY FINALLY FOUND TO BE LIABLE MAY BECOME BARRED BY TIME. IT HA S NOW BECOME AN ESTABLISHED PRACTICE THAT IN THE CASE OF DOUBT AS TO THE PERSON WHO WILL BE A ND DEEMED TO BE IN RECEIPT OF THE INCOME, IT 1518/M/15(10-11) NITA DONALD SEQUEIRA 4 IS OPEN TO THE DEPARTMENT TO MAKE PROTECTIVE OR ALT ERNATIVE ASSESSMENT. IN LALJI HARIDAS V. ITO [1961] 43 ITR 387, THE SUPREME COURT OBSERVED A T PAGE 392 AS FOLLOWS : IN CASES WHERE IT APPEARS TO THE INCOME-TAX AUTHO RITIES THAT CERTAIN INCOME HAS BEEN RECEIVED DURING THE RELEVANT ASSESSMENT YEAR BUT IT IS NOT CLEAR WHO HAS RECEIVED THAT INCOME AND PRIMA FACIE IT APPEARS THAT THE INCOME M AY HAVE BEEN RECEIVED EITHER BY A OR BY B OR BY BOTH TOGETHER, IT WOULD BE OPEN TO THE RELEVANT INCOME-TAX AUTHORITIES TO DETERMINE THE SAID QUESTION BY TAKING APPROPRIAT E PROCEEDINGS BOTH AGAINST A AND B. IN THE MATTER OF SUNIL KUMAR(139ITR880)THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: THE I.T. ACT, 1961, HAS NOT MADE ANY SPECIFIC PROV ISION ABOUT PROTECTIVE ASSESSMENT OR PRECAUTIONARY ASSESSMENTS. IN A TAXATION PROCEEDING , A QUESTION MIGHT ARISE AS TO WHETHER AN INCOME SAID TO HAVE BEEN EARNED BY B IS REALLY EARN ED BY HIM OR IT IS AN INCOME OF A. THE I.T. DEPT. HAS TO MAKE AN ASSESSMENT WITHIN THE PRESCRIB ED PERIOD OF LIMITATION AND, HENCE, IT WOULD NOT DELAY LONG THE MAKING OF AN ASSESSMENT ON B, SIMPLY BECAUSE THE ENQUIRY AS TO WHETHER THE INCOME OF B SHOULD BE TREATED TO BE THA T OF A IS PENDING. THERE COULD NOT BE AN ASSESSMENT OF THE SAID INCOME AS OF BOTH A AND B. T HE VERY PURPOSE OF SUCH AN ENQUIRY WOULD BE TO ASSESS THE INCOME OF B SEPARATELY, OR TO INCL UDE IT IN THE INCOME OF A. BUT, IF THE PROCEEDING IS HELD ONLY AGAINST A, IT MAY STILL BE POSSIBLE THAT AFTER NECESSARY ENQUIRY THE CONCERNED AUTHORITY MAY COME TO A CONCLUSION THAT T HE INCOME OF B SHOULD NOT BE CLUBBED WITH THE INCOME OF A, AND, BY THE TIME THIS FINDING IS GIVEN, THE LIMITATION FOR MAKING THE ASSESSMENT AGAINST B WOULD ALREADY BE OVER. IN SUCH A CONTINGENCY, THE INCOME SHOWN TO HAVE BEEN EARNED BY B WILL GO UNTAXED. TO AVOID SUC H A CONTINGENCY, THE PROTECTIVE ASSESSMENT IS TO BE MADE EVEN AGAINST B. BUT THE RE COVERY ON THE BASIS OF SUCH PROTECTIVE ASSESSMENT WOULD DEPEND UPON THE ULTIMATE DECISION AS TO WHETHER THE INCOME SHOWN TO HAVE BEEN EARNED BY B BELONGED TO A. IF THE FINDING IS I N THE AFFIRMATIVE, THE PROTECTIVE ASSESSMENT WILL CEASE TO BE OPERATIVE AS THE INCOME COVERED BY THAT ASSESSMENT WOULD BE INCLUDED IN THE INCOME OF A. IN THE MATTER OF SURESH K.JAJOO, (SUPRA),THE TRIB UNAL HAD HELD THAT AN ASSESSMENT CAN BE CONSIDERED AS PROTECTIVE ONLY WHEN THERE IS SUBSTAN TIVE ASSESSMENT AND THAT SUBSTANTIVE ASSESSMENT HAS TO PRECEED PROTECTIVE ASSESSMENT. IN THE CASE UNDER CONSIDERATION THE AO HAD TAXED TH E CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AS IT WAS FOUND THAT HER HUSBAND HAD NOT F ILED RETURN OF INCOME.IN ABSENCE OF A SUBSTANTIVE ORDER THE AO WAS NOT JUSTIFIED IN PASSI NG A PROTECTIVE ORDER.CONSIDERING THE ABOVE,WE HOLD THAT THE PROTECTIVE ASSESSMENT PASSED BY THE AO WAS INVALID AND WITHOUT THE SANCTION OF THE LAW.SO,REVERSING THE ORDER OF THE F AA,WE DECIDE FIRST TWO GROUNDS IN FAVOUR OF THE ASSESSEE. 6. EVEN ON MERITS,THE MATTER HAD TO BE ADJUDICATED IN FAVOUR OF THE ASSESSEE.THE AO HAS GONE ONLY BY THE SALE DEED AND HAS CONVENIENTLY FORGOT T HE AFFIDAVIT OF THE EX-HUSBAND OF THE ASSESSEE AS WELL AS THE DIVORCE DECREE.TAX LIABILIT Y HAS TO DETERMINED BY SUBSTANCE OF A TRANSACTION AND NOT BY FORUM.DS HAD ADMITTED THAT H E WAS THE SOLE OWNER OF THE PART OF FLAT F.1 AND SALE PROCEEDS WERE RECEIVED BY HIM FOR SELL ING THE SAME.THE AO/FAA HAD MADE NO INQUIRY WITH DS.THE ASSESSEE HAS DISCHARGED THE BUR DEN CAST UPON HER.IT WAS THE TURN OF THE REVENUE AUTHORITIES TO MAKE FURTHER INQUIRIES IN TH AT REGARD.WE FIND THAT THEY DECIDED THE 1518/M/15(10-11) NITA DONALD SEQUEIRA 5 ISSUE WITHOUT GOING TO THE SUBSTANCE AND THE SURROU NDING CIRCUMSTANCES.WE ARE OPINION THAT ORDER OF THE FAA CANNOT BE ENDORSED EVEN ON MERITS. GROUNDS NO.3-5 ARE DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. 12 , 2017 SD/- SD/ - ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 12.04 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR H BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.