LATE RITA ANDRADE THROUGH LEGAL HEIR MARIO ANDRADE, MUMBAI V. ITO-25(3)(3), MUMBAI

ITA 1639/MUM/2023

AI Insights

The case involves an appeal by Mario Andrade, the legal heir of the late Rita Andrade, against the order of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The dispute centered on the taxation of temporary accommodation charges amounting to Rs. 6,72,750 received by the late Rita Andrade as part of a redevelopment agreement. The ITO treated this amount as taxable under 'income from other sources' and passed the assessment order in the name of the deceased. The CIT(A) upheld this decision without merit consideration, leading to the appeal before the Tribunal. The Tribunal found procedural improprieties in the assessment and appellate processes and ruled that the receipts were capital in nature, thus not taxable as income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302540 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-07-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 10-05-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAKOLI GHOSH
• Keywords: Capital receipt
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.1639/Mum/2023 (Assessment Year :2011-12) Late Rita Andrade Through Legal Heir Mario Andrade Tave Maria, R/162, Juhu Church Road, Juhu, Mumbai-400 057 Vs. Income Tax Officer- 25(3)(3) Mumbai PAN/GIR No.AEPPA5691A (Appellant) .. (Respondent) Assessee by Shri Jayesh Dadia Revenue by Ms. Kakoli Ghosh Date of Hearing 31/07/2023 Date of Pronouncement 31/07/2023 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against impugned order dated 27/12/2021 passed by NFAC, Delhi for the quantum of assessment passed u/s.147 r.w.s. 144 for the A.Y.2011-12. 2. In the grounds of appeal assessee has raised three issues:  Firstly, ld. CIT(A) was erred in law and on facts confirming the order of the ld. AO passed in the name of deceased person; ITA No. 1639/Mum/2023 Late Rita Andrade Through Legal Heir Mario Andrade 2  secondly the ld. CIT(A) has erred in law and on facts in passing exparte order; and  lastly, the ld. CIT(A) has erred in law and on facts in confirming the action of the ld.AO in taxing amount of Rs.6,72,750/- which was in the nature of capital receipts. 3. The brief facts are that assessee is an individual and when she was alive, stayed in a small tenement (chawl). In April 2010, an agreement was entered between developer, M/s. Heena Builders and Developers and 19 Co-owners wherein builder had undertaken redevelopment programme and also promised to give small constructed flats to tenants as sale consideration. Apart from that he also agreed to provide temporary accommodation charges to the tenants / persons occupying in chawl. As per the agreement there were 23 existing structures, out of which 20 premises were occupied by the tenants and remaining three premises were occupied by the owners. The assessee as part of the agreement also received a small flat admeasuring 550 sq. ft in the proposed new building as a permanent alternate accommodation on the said property in lieu of constructing the tenanted premises. Apart from that, assessee also offered temporary accommodation charges for 18 months so that assessee can take temporary accommodation for which amount of Rs.6,22,750/- was paid to the assessee. 4. Since assessee did not have any taxable income, she had not filed the return of income for A.Y.2011-12. Based on information received from ITO (I&CI) Unit 2(3), Mumbai that assessee ITA No. 1639/Mum/2023 Late Rita Andrade Through Legal Heir Mario Andrade 3 received ‘temporary accommodation charges’ which is the receipt in the hands of the members which should be brought to tax u/s. 56. Since assessee had not filed the return of income therefore, notice u/s.148 was issued on 29/03/2018 and was sent through registered post which according to the ld. AO was served on 02/04/2018. In the meantime before the issuance of notice u/s.148, assessee had died on 10/11/2017, however, legal heirs could not intimate to the ld. AO nor could they participate in the assessment proceedings. Accordingly, the ld. AO passed order u/s.144 in the name of the deceased person. The ld. AO has treated the receipt of temporary accommodation charges of Rs.6,22,750/- taxable in the hands of the assessee under the head ‘income from other sources’. 5. Before the ld. CIT (A) also assessee could not participate before the appellate proceedings despite service of notices through e-mails. The ld. CIT (A) without deciding the issue on merits has dismissed the appeal on the ground that assessee is not vigilant or interested in pursuing the appeal. 6. Before us, ld. Counsel submitted that, firstly, the entire assessment order passed u/s.147 / 144 is bad in law as it has been passed in the case of the deceased person. Secondly, he submitted that even the ld. CIT (A) has passed the order in the name of the deceased person and without deciding the issue on merits. Lastly, on merits he submitted that here the assessee has received compensation for getting displaced for a temporary period to find temporary accommodation till she would have got ITA No. 1639/Mum/2023 Late Rita Andrade Through Legal Heir Mario Andrade 4 accommodation in new building and this cannot be treated as taxable receipts in the hands of the assessee. 7. On the other hand, ld. DR submitted that at no point of time legal heirs of the assessee intimated the ld.AO about the death of the assessee and therefore, assessee now cannot take the plea that assessment order has been passed in the name of the deceased person and therefore, it is invalid. In so far as order of the ld. CIT (A), she submitted that as is evident from page 2 of the appellate order, four opportunities were given and no response was filed by the assessee and therefore, ld. CIT(A) was justified in passing an exparte order. On merits, she submitted that matter can be restored back to the file of the ld. CIT(A) for deciding it afresh. 8. It is not in dispute that before the issuance of notice u/s.148 on 29/03/2018, assessee had died and at no point of time assessee had intimated to the AO or to the department through legal heirs about her death. Thus, ld. AO was constrained to pass an order on the basis of the information/ material available on record wherein the name of the assessee was mentioned alongwith address. 9. Without going into the legality of the order, on merits, we find that assessee was a tenant in a small tenement (chawl) on a plot of land situated at Periera Wadi, Juhu, Mumbai. There were 23 such premises out of which 20 premises were occupied by tenants and assessee was one of the tenants. The re- development agreement was entered by M/s. Heena Builders and ITA No. 1639/Mum/2023 Late Rita Andrade Through Legal Heir Mario Andrade 5 Developers wherein it was agreed that the builder will offer tenants a small permanent alternate accommodation on ownership basis free of cost equivalent to the existing carpet area in the occupation and also they were offered temporary accommodation charges to find alternate accommodation for 18 months so as to compensate for their displacement. Accordingly, the assessee was also paid temporary accommodation charges of Rs. 6,72,750/- which has been sought to be taxed as ‘income from other sources’ by the ld. AO. First of all these receipts is purely in the nature of compensation for finding alternate accommodation on rent till the assessee gets constructed house in the re-developed plot. It is not in the nature of any income or receipts which can be taxed u/s. 56. It is purely a capital receipt in the form of compensation where assessee was required to find an alternate accommodation for temporary period on rent which is kind of damage for displacement. Accordingly, the amount received on account of temporary accommodation charges cannot be purely capital receipt and cannot be taxed u/s.56 and in merits, the appeal of the assessee is allowed. 10. In the result, appeal of the assessee is allowed. Order pronounced on 31 st July, 2023. Sd/- (GAGAN GOYAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 31/07/2023 KARUNA, sr.ps ITA No. 1639/Mum/2023 Late Rita Andrade Through Legal Heir Mario Andrade 6 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//