THE ITO 12(3)(1), MUMBAI V. M/S. BHAGWANDAS A. NICHLANI, MUMBAI

ITA 1706/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7409 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S M KESHKAMAT S S RAN D
• Keywords: Capital asset; Additional evidence
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B: MUMBAI BEFORE SHRI N V VASUDEVAN, JUDICIAL MEMBER AND SHRI RAJENRA SINGH, ACCOUNTANT MEMBER ITA NO.889/MUM/2008 ASSESSMENT YEAR 2004-05 INCOME TAX OFFICER -12(3)(2), WD 12(3)(2), R NO.102, AAYAKAR BHAVAN, M K MARG, MUMBAI 400 021 VS MS SHEELA BHAGWANDAS NICHLANI, 1302, DALAMAL TOWERS, 211-NARIMAN POINT, MUMBAI 400 021 PAN AAEPN 2258 Q (APPELLANT) (RESPONDENT) ITA NO.1706/MUM/2008 ASSESSMENT YEAR 2004-05 INCOME TAX OFFICER -12(3)(1), WD 12(3)(2), R NO.102, AAYAKAR BHAVAN, M K MARG, MUMBAI 400 020 VS MR BHAGWANDAS A NICHLANI, 1302, DALAMAL TOWER, 211-NARIMAN POINT, MUMBAI 400 021 PAN AAEPN 2256 R (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI S M KESHKAMAT / S.S. RAN D FOR RESPONDENT : SHRI LAXMI NARAYAN ORDER PER RAJENRA SINGH, AM 1. THESE APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST DIFFERENT ORDERS DATED 29.11.2007 AND 28.12.2008 OF CIT (A) FOR ASSESSMENT YEAR 2004-05 IN CASES OF THE ASSESSEES U NDER REFERENCE. AS THE ISSUES RAISED IN THESE APPEALS ARE CONNECTED , THESE ARE BEING DISPOSED OF BY SINGLE CONSOLIDATED ORDER FOR THE SA KE OF CONVENIENCE. MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 2 2. WE FIRST TAKE-UP THE APPEAL OF THE REVENUE IN C ASE OF MS SHEELA BHAGWANDAS NICHLANI IN ITA NO 889/MUM/2008 . THE REVENUE IN THIS APPEAL HAS RAISED DISPUTES ON TWO D IFFERENT GROUNDS. 2.1 THE FIRST DISPUTE IS REGARDING DEDUCTION CLAIM ED ON ACCOUNT OF COMPENSATION PAID TO RAMESH NICHLANI WHILE COMPU TING THE CAPITAL GAIN FROM SALE OF PROPERTY. THE ASSESSEE WHO WAS IN THE BUSINESS OF FINANCING HAD ALSO DECLARED CAPITAL GAIN ON ACCOUNT OF SALE OF PROPERTY. THE ASSESSEE HAD RECEIVED RS 2,77,50,000 FROM SALE OF 50% SHARE OF PROPERTY AT KHAR. WHILE COMPUTING THE CAPITAL, THE ASSESSEE HAD ALSO CLAIMED DEDUCTION OF RS 25 LAKHS ON ACCOUNT OF PAYM ENT TO THE TENANT SHRI RAMESH NICHLANI AND RS 24,95,000/- TO THE TENA NT SMT PRABHAVATI SHETTY IN ADDITION TO OTHER EXPENSES LIKE BROKERAGE ETC. THE ASSESSING OFFICER ALLOWED THE DEDUCTION ON ACCOUNT OF PAYMENT TO SMT PRABHAVATI SHETTY AS THE LATTER HAD PRODUCED COPY O F RATION CARD AND ELECTRICITY BILL TO PROVE THE TENANCY. RAMESH NICH LANI, HOWEVER, COULD NOT PRODUCE TENANCY AGREEMENT ON THE GROUND THAT TH E SAME HAD BEEN SUBMITTED TO THE SMALL CAUSES COURT AT BANDRA. HE ALSO COULD NOT PRODUCE ANY RENT RECEIPT ETC. ASSESSING OFFICER, T HEREFORE, DISALLOWED THE CLAIM OF DEDUCTION OF RS 25 LAKHS ON THIS ACCOU NT. 2.1.1 IN APPEAL, THE ASSESSEE SUBMITTED A VERY OLD AGREEMENT DATED 16.9.1969 BETWEEN THE LANDLORD OF KHAR PROPER TY AND SHRI RAMESH B NICHLANI WHICH SHOWED THAT SHRI RAMESH NIC HLANI WAS A TENANT. AS PER THE SAID AGREEMENT, THE LICENSEE HA D ALLOWED MR NICHLANI WHO USED AND OCCUPIED THE SAID FLAT ON LEA VE AND LICENSE BASIS FOR A PERIOD OF 11 MONTHS COMMENCING FROM 15.9.1959 @ RS 400 PER MONTH. THE ASSESSEE ALSO SUBMITTED THAT MR NICHLAN I HAD SUBLET THE PREMISES TO M/S RALHAN PRODUCTION AND SUBLETTING WA S CLEAR FROM THE FACT THAT MR NICHLANI HAD FILED CASE IN THE SMALL C AUSES COURT AT BANDRA WHICH PASSED AN EVICTION ORDER ON 10.1.2003. THE ASSESSEE MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 3 ALSO FILED A COPY OF REGISTERED DEED OF THE PARTNER SHIP FIRM M/S PREM RAJ & CO DATED 28.02.1973 IN WHICH KHAR PROPERTY WA S MENTIONED AS ADDRESS. THE ASSESSEE ARGUED THAT ONLY BECAUSE REN TAL INCOME HAD NOT BEEN DECLARED IN THE INCOME-TAX RETURN COULD NO T BE THE GROUND TO REJECT THE TENANCY. CIT (A) WAS SATISFIED BY THE E XPLANATION GIVEN AND ALLOWED THE CLAIM OF THE ASSESSEE, AGGRIEVED BY WHI CH THE REVENUE IS IN APPEAL. 2.1.2 WE HAVE HEARD BOTH THE PARTIES PERUSED THE R ECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS RE GARDING ALLOWABILITY OF DEDUCTION OF RS 25 LAKHS ON ACCOUNT OF PAYMENT T O THE TENANT SHRI RAMESH B NICHLANI. THE ASSESSING OFFICER HAD DISAL LOWED THE CLAIM ON THE GROUND THAT THERE WAS NO EVIDENCE PRODUCED TO S HOW THAT SHRI RAMESH NICHLANI WAS A TENANT. HOWEVER, IT APPEARS THAT THE ASSESSEE FILED EVIDENCE IN THE FORM OF LEAVE AND LICENSE AGR EEMENT DATED 16.9.1969 BEFORE CIT (A) TO PROVE THE TENANCY BASED ON WHICH THE CLAIM WAS ALLOWED. THIS WAS A FRESH EVIDENCE AND, THEREFORE, OPPORTUNITY WAS REQUIRED TO BE GIVEN TO THE ASSESSI NG OFFICER BY CIT (A) WHICH HAD BEEN NOT DONE. BOTH THE PARTIES AGRE ED THAT THE MATTER MAY BE RESTORED TO THE ASSESSING OFFICER FOR NECESS ARY EXAMINATION OF THE ADDITIONAL EVIDENCE. WE, THEREFORE, RESTORE TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH ORDER AFT ER NECESSARY EXAMINATION OF EVIDENCES PRODUCED BEFORE THE CIT (A ) AND AFTER ALLOWING THE OPPORTUNITY TO THE ASSESSEE. 2.2 THE SECOND DISPUTE IS REGARDING ALLOWABILITY O F DEDUCTION U/S 54 OF THE INCOME-TAX ACT. AS PER SECTION 54 OF THE INCOME-TAX ACT, CAPITAL GAIN ARISING FROM THE TRANSFER OF LONG -TERM-CAPITAL ASSET, BEING THE BUILDING OR LAND APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE, INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS EXEMPT FROM TAX, IN CASE THE ASS ESSEE HAS WITHIN A MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 4 PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED OR WITHIN A PERIOD O F THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE. IN THIS CASE, THE ASSESSEE HAD PURCHASED A RESIDENTIAL HOUSE IN WHICH THE CAPI TAL GAIN HAD BEEN INVESTED. THE ASSESSING OFFICER, HOWEVER, DISALLOW ED THE CLAIM OF EXEMPTION ON THE GROUND THAT THE ASSESSEE WAS NOT T HE OWNER OF THE RESIDENTIAL PROPERTY SOLD. THE ASSESSING OFFICER O BSERVED THAT THE ASSESSEE WAS ONLY THE OWNER OF THE LAND ON WHICH TH E PROPERTY HAD BEEN CONSTRUCTED BY HER HUSBAND. AS THE ASSESSEE W AS NOT THE OWNER OF THE RESIDENTIAL PROPERTY SOLD, THE ASSESSING OFF ICER DISALLOWED THE CLAIM OF DEDUCTION U/S 54 OF THE INCOME-TAX ACT. I N APPEAL, THE ASSESSEE FILED A COPY OF AGREEMENT DATED 3.12.1973 ENTERED INTO BETWEEN MS SHEELA BHAGWANDAS NICHLANI, THE ASSESSEE AND MR BHAGWANDAS A NICHLANI, AS PER WHICH, A RESIDENTIAL HOUSE CONSISTING OF GROUND FLOOR AND TWO UPPER FLOORS WAS REQUIRED TO B E CONSTRUCTED FOR WHICH FUNDS WAS TO BE CONTRIBUTED BY HER HUSBAND. THE AGREEMENT FURTHER PROVIDED THAT THE LAND TOGETHER WITH THE ST RUCTURE WAS INTENDED TO BE HELD JOINTLY BY BOTH AND IN CASE THE PROPERTY WAS SOLD, THE NET SALE PROCEEDS WERE TO BE SHARED BY TWO OWNERS IN TH E EQUAL PROPORTION. THE ASSESSEE SUBMITTED THAT THE AGREEM ENT WAS A DIRECT EVIDENCE OF THE ASSESSEE BEING 50% OWNER OF THE RES IDENTIAL HOUSE. THE ASSESSEE ALSO FILED PROPERTY TAX RECEIPT, WHICH HAD BEEN ISSUED IN THE JOINT NAME OF THE ASSESSEE AND HER HUSBAND. A COPY OF THE REGISTERED DEED OF THE FIRM M/S PREM RAJ & CO WAS A LSO FILED IN WHICH THE ADDRESS OF THE ASSESSEE, WHO WAS A PARTNER OF T HE FIRM, WAS MENTIONED AS KHAR PROPERTY, IT WAS ALSO SUBMITTED B UT IN CASE THE ASSESSEE WAS NOT 50% OWNER OF THE PROPERTY, THE ASS ESSING OFFICER WOULD NOT HAVE ASSESSED ONLY 50% OF THE INCOME FROM PROPERTY IN THE NAME OF HER HUSBAND. CIT (A) WAS SATISFIED BY THE EVIDENCE PRODUCED AND ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED B Y THE RELIEF GIVEN TO THE ASSESSEE, THE REVENUE IS IN APPEAL BEFORE TH E TRIBUNAL. MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 5 2.2.1 WE HAVE HEARD BOTH THE PARTIES PERUSED THE R ECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS RE GARDING ALLOWABILITY OF DEDUCTION U/S 54 IN RESPECT OF CAPITAL GAIN ARIS ING FROM SALE OF RESIDENTIAL HOUSE. THE ASSESSING OFFICER DISALLOWE D THE CLAIM ON THE GROUND THAT THE ASSESSEE WAS ONLY THE OWNER OF THE LAND AND NOT THE OWNER OF THE RESIDENTIAL HOUSE. THE CASE OF THE AS SESSEE IS THAT IN TERMS OF THE AGREEMENT DATED 3.12.1973 THE ASSESSEE WAS 50% OWNER OF THE PROPERTY, WHICH HAD BEEN CONSTRUCTED ON THE LAND BELONGING TO HER, WITH FUNDS CONTRIBUTED BY HER HUSBAND. HOWEVE R, THE PERUSAL OF THE ASSESSMENT ORDER DOES NOT SHOW THAT THE SAID AG REEMENT HAD BEEN FILED BEFORE THE ASSESSING OFFICER. THE ASSES SEE ALSO PRODUCED NO EVIDENCE TO SHOW THAT THE SAID AGREEMENT HAD BEE N FILED BEFORE ASSESSING OFFICER. IN FACT, BOTH THE PARTIES AGREE D THAT THE MATTER MAY BE RESTORED TO THE ASSESSING OFFICER FOR EXAMIN ATION OF THE VARIOUS ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE THE CIT (A). WE AGREE THAT FRESH EXAMINATION IS NECESSARY AS THE ASSESSING OFFICER HAD NOT BEEN GIVEN OPPORTUNITY IN RESPECT OF THE AD DITIONAL EVIDENCES FILED BEFORE THE CIT (A). WE, THEREFORE, RESTORE T HIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH ORDER AFT ER NECESSARY EXAMINATION OF THE EVIDENCES FILED BEFORE THE CIT ( A) AND AFTER ALLOWING OF OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. THE APPEAL OF THE REVENUE IN CASE OF SHRI BHAGWANDAS A NICHLANI IN ITA 1706/MUM/2008 . IN THIS APPEAL ONLY DISPUTE RAISED BY THE REVENUE IS REGARDING CLA IM OF DEDUCTION ON ACCOUNT OF COMPENSATION PAID TO THE TENANT SHRI RAM ESH NICHLANI WHILE COMPUTING THE CAPITAL GAIN FROM SALE OF THE PROPERT Y. THE ISSUES IS IDENTICAL TO THE GROUND NO.1 RAISED IN CASE OF THE WIFE OF THE ASSESSEE I.E. MRS SHEELA B NICHLANI, IN WHICH CASE ALSO SIMI LAR CLAIM OF THE MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 6 DEDUCTION HAD BEEN MADE AS 50% OF THE CAPITAL GAIN FROM THE SALE OF THE SAID PROPERTY HAD BEEN DECLARED IN HER CASE. I N VIEW OF OUR DECISION VIDE PARA 2.1.2 OF THIS ORDER, WE RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH O RDER AFTER NECESSARY EXAMINATION OF THE ADDITIONAL EVIDENCES AND AFTER A LLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 12TH DAY OF MARCH 2010. SD/- SD/- (N V VASUDEVAN) (RAJENRA SINGH) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATE: 12TH MARCH, 2010 . COPY TO 1. THE APPELLANT. 2. THE RESPONDENT 4. CIT(A)-XII, MUMBAI. 5. CIT -XII, MUMBAI. 6. D R B BENCH, MUMBAI. 7. GUARD FILE. BY ORDER / / TRUE COPY / / ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI *CHAVAN/- MS SHEELA BHAGWANDAS NICHLANI MR BHAGWANDAS A NICHLANI ITAS 889 & 1706/M/2008 7 SNO DATE INITIALS 1 DRAFT DICTATED ON 10-03-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 12-03-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER