BHIKHUBAHI D TOPIWALA HUf, MUMBAI V. ACIT WD 21(1), MUMBAI

ITA 1537/MUM/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9883 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTANU KUMAR SAIKIA
• Keywords: Capital asset; Reasonable cause
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 1537 / MUM/20 12 & ITA NO.4042/MUM/2013 ( ASSESSMENT YEAR : 2006 - 07 ) M/S. BHIKHUBHAI D TOPIWALA HUF 301, PAMPESS HIGHT, B/8 MODEL TOWN SOC., GULMOHAR ROAD NO.7 VILE PARLE (W) MUMBAI 400 049 VS. COMMISSIONER OF INCOME TAX WARD - 21 MUMBAI PAN/GIR NO. AAAFT5107P APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI VIPUL JOSHI REVENUE BY SHRI SANTANU KUMAR SAIKIA DATE OF HEARING 12 / 03 /201 8 DATE OF PRONOUNCEME NT 14 / 03 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY ASSESSEE AGAINST THE ORDER OF CIT - 21, MUMBAI DATED 16/03/2011 FOR A.Y.2006 - 07 AND ALSO AN APPEAL AGAINST THE ORDER OF CIT - 32, MUMBAI DATED 26/02/2013 U/S.263 OF THE IT ACT. 2. IN ITA NO.1537/MUM/2012 ASSESSEE HAS CHALLENGED INVOCATION OF POWER OF CIT U/S.263 AND ALSO THE DIRECTION GIVEN BY CIT FOR TREATING THE LONG TERM CAPITAL GAIN OFFERED BY ASSESSEE AS SHORT TERM. 3. IN ITA NO.4042/MUM/2013, ASSESSEE HAS CHALLENGED THE ORDER OF CIT (A) IN THE MATTER OF ORDER PASSED BY AO GIVING EFFECT TO THE OR DER PASSED BY CIT U/S.26 3 OF THE IT ACT. ITA NOS. 1537/MUM/2012 & 4042/MUM/2013 BHIKHUBHAI D TOPIWALA HUF 2 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS OF T HE CASE ARE THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 27.10.2006 DECLARING TOTAL INCOME OF RS. 34,81,776/ - INCLUSIVE OF LONG TERM CAPITAL GAIN OF RS. 32,90,458/ - ON SALE OF FLAT AS PER AGREEMENT DATED 23/8/2005. THE ASSESSEE HAD EXECUTED TRIPARTI TE UNREGISTERED AGREEMENT WITH LAND OWNERS AND BUILDER ON 16/7/2002 TO ACQUIRE UNDIVIDED INTEREST IN LAND AT BANGALORE FOR RS.22,90,000/ - & ON THE SAME DAY ALSO EXECUTED ANOTHER UNREGISTERED AGREEMENT WITH BUILDER FOR CONSTRUCTION OF FLAT NO. 502 ADMEASURI NG 3025SQ. FEET BY THE BUILDER ON THE SAID LAND. IN TERMS OF THE AGREEMENTS DATED 16/7/2002, THE POSSESSION OF THE FLAT NO 502 WAS GIVEN BY BUILDER TO ASSESSEE ON 31 - 12 - 2003. THE FLAT ALONG WITH UNDIVIDED INTEREST IN LAND WAS THEREAFTER SOLD FOR PRICE OF R S. 1,70,97,497/ - ON 23 - 08 - 2005. THE ASSESSMENT WAS MADE 143(3) ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE COMM ISSIONER OF INCOME TAX, MUMBAI CITY - 21 ISSUED SHOW CAUSE NOTICE DT. 21/02/2011 PROPOSING TO PASS ORDER U/S. 263 WHEREBY HE PROPOSED TO BIF URCATE THE SALE CONSIDERATION OF FLAT IN TWO PARTS VIZ (I) LAND AND (II) FLAT ON GROUNDS THAT THE FLAT WAS SOLD ON 23/8/2005 I.E. WITHIN 36 MONTHS FROM THE DATE OF POSSESSION I.E 31/12/2003. ACCORDING TO THE NOTICE ISSUED BY CIT - 21, THE SALE CONSIDERATION IN RESPECT OF LAND RESULTED IN LONG TERM CAPITAL GAIN AND THE CONSIDERATION RELATING TO FLAT RESULTED IN SHORT TERM CAPITAL GAIN. THE ASSESSEE FILED OBJECTION TO PROPOSED REVISION BY LETTER DT.01/03/2011.AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE COMMISSIONER OF INCOME TAX - 21 PASSED ORDER U/S. 263 AND DIRECTED THE : A.O. TO TAX THE ITA NOS. 1537/MUM/2012 & 4042/MUM/2013 BHIKHUBHAI D TOPIWALA HUF 3 ENTIRE CONSIDERATION AS SHORT TERM CAPITAL GAIN ONLY. THE A.O. THEREAFTER ISSUED SHOW - CAUSE NOTICE TO TREAT THE PROFIT ON SALE OF LAND AS LTCG AND THE PROFIT ON SALE OF FLAT AS STCG BUT LATER SHE ISSUED FRESH SHOW CAUSE NOTICE TO ASSESSEE ASKING ASSESSEE TO EXPLAIN WHY THE ENTIRE CONSIDERATION MAY NOT BE TREATED AS SHORT TERM CAPITAL GAINS ONLY. THE ASSESSEE VIDE HIS LETTER DT. 28/11/2011 OBJECTED TO SUCH TREATMENT AND REQUESTED THE A.O. TO TAKE INDEPENDENT AND JUDICIAL DECISION OF THE MATTER. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AO FINALLY ASSESSED THE ENTIRE CAPITAL GAINS ARISING FROM SALE OF FLAT AT BANGALORE AS STCG ONLY. 6. BY T HE IMPUGNED ORDER, CIT (A) CONFIRMED THE ACTION OF THE AO AFTER OBSERVING AS UNDER, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. THUS THE APPELLANT AS PER UNREGISTERED AGREEMENT ON 16/7/2002 HAD OBTAINED ONLY THE 'RIGHT TO SPECIFIC PERFORMANCE U NDER A CONTRACT FOR SALE OF INTEREST IN LAND AND SUPERSTRUCTURE TO BE CONSTRUCTED BY DEVELOPER, WHICH NO LONGER SUBSISTED AFTER FLATS WERE CONSTRUCTED AND ACTUALLY DELIVERED TO THE ASSESSEE BY TAKING POSSESSION ON 31/12/2003. HENCE THERE WAS NO CONTINUATIO N OF RIGHTS OBTAINED UNDER UNREGISTERED AGREEMENT DATED 16/7/2002 ON COMPLETION OF CONSTRUCTION & POSSESSION OF THE FLAT. THEREAFTER, THE ASSESSEE HAD SOLD/TRANSFERRED THE CAPITAL ASSET BEING THE FLATS ON 23/8/2005 AND NOT THE 'RIGHTS TO SPECIFIC PERFORMA NCE' AND THEREFORE, THE CAPITAL GAIN IN THE PRESENT CASE HAS TO BE COMPUTED BY TAKING PERIOD OF HOLDING OF THE ASSETS, BOTH LAND AND SUPERSTRUCTURE FROM DATE WHEN THE POSSESSION OF FLATS WAS RECEIVED ON 31/12/2003 AND NOT FROM THE DATE OF AGREEMENT ON 16/7 /2002. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS. 1537/MUM/2012 & 4042/MUM/2013 BHIKHUBHAI D TOPIWALA HUF 4 8. THERE WAS A DELAY OF 292 DAYS IN FILING THE APPEAL AGAINST THE ORDER PASSED U/S.263. HOWEVER, THERE IS NO REASONABLE CAUSE FOR DELAY. ACCORD INGLY, WE DIS MIS S THE APPEAL ON THE GROUND OF DELAY ITSELF . 9. WITH REGARD TO MERIT OF THE ADDITION AS PER ORDER OF AO U/S.143(3) R.W.S. 263 , WE FOUND THAT ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR PURCHASE OF FLAT. FOR THIS PURPOSE, ASSESSEE ENTE RED IN TO AN AGREEMENT FOR UNDIVIDED INTEREST IN LAND UNDER THE SCHEME OF BUILDER (KARNATAKA APARTMENT OWNERSHIP ACT) WHEREIN FLAT PURCHASER REQUIRED TO PURCHASE UNDIVIDED INTEREST IN LAND FROM OWNER AND REQUIRED TO GET CONSTRUCTED FLAT THROUGH THE BUILDER. WE FO UND THAT THE BUILDER ALREADY ENTERED INTO AGREEMENT FOR SALE WITH LAND OWNER DATED 29.04.2001, WHERE THE LAND OWNER AGREED TO TRANSFER THE PROPERTY. PLAN WAS ALSO SANCTIONED ON 06/02/2002, ACCORDING TO WHICH BUILDER HAS TO COMPLETE WITHIN 24 MONTHS. HOWEVE R, BOTH THE AGREEMENTS FOR ACQUIRING UNDIVIDED SHARE IN THE LAND AND AS WELL AS ACQUIRING FLAT FOR EXECUTING ON 16/07/2002. THE POSSESSION OF THE FLAT WAS GIVEN BY BUILDER TO THE ASSESSEE ON 31/12/2003. THE ASSESSEE HAS THEREAFTER SOLD THE FLAT FOR CONSIDE RATION OF RS.1,70,97,945/ - ON 23/08/2005. THUS, ASSESSEE HAVING RIGHT IN PART OF LAND AS WELL AS FLAT FOR A PERIOD OF 37 PLUS MONTHS AND SINCE ASSESSEE WAS HOLDING THE RIGHT FOR MORE THAN 36 MONTHS, HE IS ELIGIBLE FOR LONG TERM CAPITAL GAIN. MERELY BECAUS E POSSESSION OF FLAT WAS GIVEN ON 31/12/2013, WILL NOT HA M MER ITS DATE OF BOOKING OF FLAT WHICH WAS ENTERED BY ASSESSEE WITH OWNER OF LAND AND BUILDER. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE LONG TERM CAPITAL GAIN BY GIVING BENEFIT OF INDEXATION AS PER THE ACTUAL DATE OF ITA NOS. 1537/MUM/2012 & 4042/MUM/2013 BHIKHUBHAI D TOPIWALA HUF 5 PAYMENT SO MADE FOR ACQUIRING FLAT. IF ANY INVESTMENT HAS BEEN MADE BY ASSESSEE OUT OF THIS LONG TERM CAPITAL GAIN, THE AO SHOULD COMPUTE THE TAXABLE CAPITAL GAIN S AFTER CONSIDERING THE SAME AS PER LAW. WE DIRECT ACCORDINGLY. 10. I N THE RESULT ITA NO.1537/MUM/2012 IS DISMISSED WHEREAS ITA NO.4042/MUM/2013 IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 03 /201 8 S D/ - ( RAM LAL NEGI ) SD/ - ( R.C.SHARM A ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 03 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMB AI 6. GUARD FILE. //TRUE COPY//