Navin Purshottam Bhagwani, Pune V. ITO [INT-1], Pune

ITA 1865/PUN/2012

• Counselvise Citation: 186524514 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P I PATWA
• Keywords: Residential status; Share purchase agreement; Cost of acquisition; Wrong claim
• Section: 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1865/PN/2012 (ASSESSMENT YEAR 2009-10) NAVIN PURSHOTTAM BHAGWANI, FLAT NO.202, WING 6, WELLINGTON MEWS, OPP : GREAT PUNJAB HOTEL, KOREGAON PARK, PUNE-411001 .. APPELLANT PAN NO. ALWPB666IP VS. ITO (INTERNATIONAL TAXATION)-I, PUNE .. RESPONDEN T ASSESSEE BY : SHRI P.I. PATWA REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 22-07-2014 DATE OF PRONOUNCEMENT : 24-07-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 30- 07-2012 OF THE CIT(A)-IT/TP, PUNE RELATING TO ASSES SMENT YEAR 2009-10. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE THEY ALL RELATE TO THE ORDER OF THE CIT(A) IN CONFIRMING THE DETERMINATION OF LONG TERM CAPITAL GAIN OF RS.1,29,76,391/- IN THE HANDS OF THE ASSESSEE. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A NON-RESIDENT INDIVIDUAL AND FILED HIS RETURN OF INCOME DECLARING NIL INCOME ON 22-12- 2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AND IN CAPACITY AS POWER OF ATTORNEY HOLDER OWNS 4 FLATS EACH REGISTERED UNDER SEPARATE AGREEMENTS ON 05-05-1993 (REGISTERED ON 20-07-1998). HE NOTED TH AT THE FLATS BEARING NOS. 2 602 AND 603 WERE PURCHASED IN THE NAME OF HIS FATHE R SHRI PURUSHOTTAM T. BHAGWANI (SECOND NAME SMT.MAYA P.BHAGWANI) AND THE FLATS BEARING NOS. 601 AND 604 WERE PURCHASED IN THE NAME OF HIS MOTHE R (SMT.MAYA PURUSHOTTAM (SECOND NAME SHRI PURUSHOTTAM T. BHAGWA NI). EACH FLAT WAS REGISTERED SEPARATELY UNDER THE STAMP DUTY ACT. TH E COST OF EACH FLAT WAS SHOWN AS UNDER : FLAT NO. ADDRESS COST OF ACQUISITION DATE OF REGISTRATION 601 CASCA BLANCA, YAMUNANAGAR, OSHIWARA, VARSOVA, ANDHERI(W), MUMBAI-400053 552500 20-07-1998 602 -- 420750 -DO- 603 -- 488750 -DO- 604 -- 484500 -DO- 2.2 HE NOTED THAT DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE SOLD ALL THESE 4 FLATS FOR RS.51 LAKHS, 36 LAKHS, 45 LAKHS A ND 42 LAKHS RESPECTIVELY ON 06-05-2008. THUS THE TOTAL CONSIDERATION RECEIVED WAS SHOWN AT RS.1,74,00,000/-. AFTER INDEXATION, THE ASSESSEE H AS CLAIMED LONG TERM CAPITAL GAIN FROM PURCHASE OF 4 FLATS AT RS.1,40,96 ,583/- AND CLAIMED THE SAME AS EXEMPT ON THE GROUND THAT THE ENTIRE CONSID ERATION IS INVESTED IN PURCHASE OF FLATS, ONE FOR RS.1,10,00,000/- ON 17-0 7-2008 AT MUMBAI AND ANOTHER FLAT FOR RS.50,28,600/- ON 26-05-2008 AT PU NE. THE ASSESSING OFFICER NOTED FROM THE AFFIDAVIT FILED BY THE ASSES SEE THAT HE IS RESIDING IN SPAIN SINCE LAST 27 YEARS. THE ASSESSEE HAS OBTAIN ED PAN AND APART FROM CAPITAL GAIN THE ASSESSEE HAS INCOME FROM OTHER SOU RCES ALSO. 2.3 FROM THE DETAILS FURNISHED BY THE ASSESSEE FROM TIME TO TIME, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT SINCE THE ASSESSEE HAS FAILED TO OFFER HOUSE PROPERTY INCOME FROM THE ABOVE 4 FLATS PREVIOUSLY, THEREFORE, EXEMPTION U/S.54 OF THE I.T. ACT IS NOT APPLICABLE TO HIM. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM O F EXEMPTION U/S.54 OF THE 3 ACT SHOULD NOT BE DISALLOWED. IN ABSENCE OF ANY SA TISFACTORY EXPLANATION, THE ASSESSING OFFICER HELD THAT THE BASIC CONDITION FOR CLAIM OF EXEMPTION U/S.54 OF THE ACT IS DEFEATED SINCE SALE OF PROPERTY IN QU ESTION IS NOT CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. H E ACCORDINGLY REJECTED THE CLAIM OF EXEMPTION U/S.54 OF THE I.T. ACT. 3. BEFORE THE CIT(A) THE ASSESSEE VEHEMENTLY OBJECT ED TO THE DENIAL OF EXEMPTION U/S.54. HOWEVER, THE CIT(A) WAS ALSO NOT CONVINCED AND REJECTED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDE R : 3.1 APPARENTLY, ASSESSING OFFICERS DECISION OF DENYING EXEMPTION U/S.54 SEEM TO BE INCORRECT AS EXEMPTION PROVISIONS ARE NOT D EPENDENT ON THE FACT AS TO WHETHER THE ASSESSEE FILED HIS RETURNS FOR THE EARLI ER YEARS OR NOT. HOWEVER, I AGREED WITH THE ASSESSING OFFICERS DECISION T O DENY EXEMPTION TO THE APPELLANT ALBEIT ON DIFFERENT GROUND AFTER EXAM INATION OF THE RECORDS. THE REASONS FOR THE DECISION ARE MENTIONED IN THE SUCCE EDING PARAGRAPHS : 3.2. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT WAS ASKED TO FURNISH COPIES OF THE SALE AND AGREEMENTS OF THE RESIDEN TIAL PROPERTIES PURCHASED BY THE APPELLANT. THE APPELLANT FURNISHED THE SAME. ON PERUSAL OF SALE AGREEMENTS, IT IS SEEN THAT THE APPELLANT'S PARENTS - SMT. MAYA BHAGWANI AND SHRI PURUSHOTTAM BHAGWANI HAD JOINTLY PURCHASED THESE PR OPERTIES IN 1993. SMT MAYA BHAGWANI DIED INTE-STATE IN THE YEAR 2000 AND SUBSEQUENTLY, APPELLANT'S FATHER- SHRI PURUSHOTTAM BHAGWANI BECAME THE SOLE O WNER OF THE PROPERTIES. 3.3. IN THE CASE OF THE PURCHASE AGREEMENTS OF THE PROPERTIES IN WHICH CAPITAL GAIN WAS REINVESTED, IT IS SEEN THAT THE PURCHASES WERE IN THE JOINT NAME OF SHRI PURUSHOTAM BHAGWANI AND THE APPELLANT SHRI NAVIN BHA GWANI. APPELLANT- SHRI NAVIN BHAGWANI CLAIMED THE EXEMPTION U/S 54 IN THE RETURN OF INCOME FOR A Y 2009-10 IN THE STATUS OF INDIVIDUAL (NOT ON THE STATUS OF 'NON RESIDENT' AS HE HAS CLAIMED FOR THE YEAR IN APPEAL) 3.4. WHEN ENQUIRED, THE LEARNED REPRESENTATIVE SUBM ITTED THAT SHRI PURUSHOTTAM BHAGWANI IS AN NRI WHO LIVES IN SPAIN. HE HAD GIVEN POWER OF ATTORNEY TO SHRI NAVIN BHAGWANI (SON AND THE APPELLANT) FOR DOING PA PER WORK FOR THE SALE AND PURCHASE OF THE PROPERTIES. SHRI PURUSHOTTAM BHAGWANI COULD NOT FILE RETURN OF INCOME AS HE WAS NOT IN INDIA AND TIME EXPIRED FOR THE FILING THE RETURN OF INCOME. THEREFORE, EXEMPTION WAS CLAIMED BY THE APPELLANT I N HIS RETURN, WHO IS POWER OF ATTORNEY HOLDER OF SHRI PURUSHOTTAM BHAGWANI. 3.5. WHEN ASKED TO EXPLAIN AS TO HOW THE APPELLANT COULD GET AN EXEMPTION WHEN HE DID NOT INVEST THE PROPERTY SOLD BY HIM. THE LEARNED REPRESENTATIVE REPLIED THAT APPELLANT HAS ERRONEOUSLY CLAIMED EXEM PTION IN HIS RETURN ON RECEIPT OF WRONG ADVICE FROM THE TAX CONSULTANT IN MUMBAI. LEA RNED REPRESENTATIVE SUBMITTED THAT, APPELLANT'S FATHER, WHO IS A NRI, HAD PURCHAS ED RESIDENTIAL PROPERTIES. HE COULD NOT FILE RETURN AS HE WAS NOT IN INDIA THEREFORE; S HRI NAVIN BHAGWANI CLAIMED EXEMPTION ON WRONG ADVICE FROM THE CONSULTANT. 4 3.6. IT IS VERY CLEAR THAT APPELLANT HAS NOT INVEST ED IN THE PROPERTIES NOR LEGALLY HE IS AN OWNER NOR A JOINT-OWNER OF THE PROPERTIES SOL D. THE SHARE CERTIFICATES OF THE PROPERTIES ISSUED BY THE CO-OPERATIVE HOUSING SOCIE TY, WHERE THESE FLATS WERE LOCATED ALSO SHOW THAT OWNER OF THE PROPERTIES WAS SHRI PUR USHOTTAM BHAGWANI. THEREFORE, ONLY SHRI PURUSHOTTAM BHAGWANI CAN CLAIM EXEMPTION U/S 54. THE APPELLANT IS NOT ENTITLED FOR THE CLAIM OF EXEMPTION U/S 54. 3.7. THE APPELLANT HAS GIVEN FARFETCHED EXPLANATION TO JUSTIFY HIS BLATANT FALSE CLAIM OF EXEMPTION. ALL ALONG, HE LED THE AUTHORITI ES TO BELIEVE THAT IT WAS THE APPELLANT, WHO WAS OWNER OF THE PROPERTIES. 3.8. THE A.O. IS CORRECT IN HIS OBSERVATION THAT TH E RETURNS OF INCOME DECLARING THESE PROPERTIES WERE NOT FILED BEFORE TH E DEPARTMENT. IN MY VIEW, NOTICE U/S 148 COULD HAVE BEEN ISSUED TO EXAMINE SOURCE S OF INVESTMENT AND POSSIBILITY OF RECEIPT OF RENTAL INCOME ON THESE PROPE RTIES LOCATED IN MUMBAI AND RESIDENTIAL STATUS OF THE APPELLANT SHRI NAVIN BHAGWANI DURING THE RELEVANT YEARS. IN ANY CASE AS MENTIONED, THE APPELLANT CANNOT CLAIM THIS EXEMPTION. 3.9. IN VIEW OF THE ABOVE DISCUSSION, I CONFIRM THE AO'S DECISION NOT TO ALLOW EXEMPTION UNDER SECTION 54 TO THE APPELLANT. 3.10 WITH THE RESULT, THE APPEAL IS DISMISSED. 3.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT WHEN THE ASSESSEE IS NOT THE OWNER OF THE PROPERTY, WHIC H ADMITTEDLY BELONG TO HIS FATHER SHRI PURUSHOTTAM T. BHAGWANI, THEREFORE, BRI NGING THE LONG TERM CAPITAL GAINS TO TAX IN THE HANDS OF THE ASSESSEE I S NOT AT ALL JUSTIFIED. HE SUBMITTED THAT DUE TO WRONG ADVICE BY THE CHARTERED ACCOUNTANT, THE ASSESSEE HAS MADE THE MISTAKE IN DECLARING LONG TER M CAPITAL GAIN IN HIS HANDS AND CLAIMED EXEMPTION U/S.54. HOWEVER, THE FA CT REMAINS THAT THE PROPERTIES IN QUESTION DO NOT BELONG TO THE ASSESSE E AND BELONG TO HIS FATHER. THEREFORE, THERE IS NO QUESTION OF BRINGING INTO TA X THE LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. RELYING ON THE FOLLO WING DECISION THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSI NG OFFICER IS DUTY BOUND TO DETERMINE TAXABILITY OF A PARTICULAR INCOME IN T HE HANDS OF THE ASSESSEE AS PER RELEVANT TAX PROVISION IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS OFFERED THE SAME IN THE RETURN OF INCOME : 5 I. CIT VS. BHARAT GENERAL RE-INSURANCE COMPANY LTD. , (1971) 81 ITR 303 (DELHI). II. IMPSAT PRIVATE LTD. VS. ITO (2005 92 TTJ 552 (D ELHI). 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN HIS RETURN OF INCOME HAD DECLARED LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF 4 FLATS AS POWER OF ATTORNEY HOL DER AND CLAIMED EXEMPTION U/S.54 OF THE ACT ON ACCOUNT OF PURCHASE OF ONE FLA T AT MUMBAI AND ANOTHER AT PUNE. WE FIND THE ASSESSING OFFICER DENIED THE CLAIM OF EXEMPTION U/S.54 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS NOT DECLARED THE INCOME FROM HOUSE PROPERTY ON ACCOUNT OF THOSE 4 FLATS AND THER EFORE THE PROVISIONS OF SECTION 54 ARE DEFEATED. WE FIND THE LD.CIT(A) UPH ELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AS NOT INVESTED IN THE PROPERTIES NOR LEGALLY HE IS AN OWNER NOT A JOINT O WNER OF THE PROPERTIES SOLD. IT IS ONLY SHRI PURUSHOTTAM BHAGWANI WHO CAN CLAIM EXEMPTION U/S.54 OF THE ACT AND THE ASSESSEE IS NOT ENTITLED FOR THE CLAIM OF EXEMPTION U/S.54. 6.1 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FLATS SOLD IN QUESTION DO NOT BELONG TO THE ASSESSEE AND THEY BELONG TO HIS FATHER SHRI PURUSHOTTAM BHAGWANI AND THE ASSESSEE HAS ERRO NEOUSLY AND ON WRONG ADVICE BY THE CHARTERED ACCOUNTANT, DECLARED THE LO NG TERM CAPITAL GAIN IN HIS HANDS AND CLAIMED EXEMPTION U/S.54. WE FIND ME RIT IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. BE FORE THE ASSESSING OFFICER AS WELL AS THE CIT(A), IT WAS CLEARLY BROUG HT ON RECORD THAT THE FLATS 6 IN QUESTION DO NOT BELONG TO THE ASSESSEE AND THESE FLATS BELONG TO THE FATHER OF THE ASSESSEE. IT HAS BEEN HELD IN VARIOUS DECIS IONS THAT THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE TAXABILITY OF A PARTICULAR INCOME IN THE HANDS OF THE ASSESSEE AS PER RELEVANT TAX PROVI SION IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS OFFERED THE SAME IN THE RETUR N OF INCOME. MERELY BECAUSE THE ASSESSEE HAS WRONGLY DECLARED THE LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF THESE 4 FLATS THE AUTHORITIES BE LOW, IN OUR OPINION, ARE NOT JUSTIFIED IN TAXING THE LONG TERM CAPITAL GAIN IN T HE HANDS OF THE ASSESSEE WHEN HE IS NOT THE OWNER OF THESE FLATS. IN THIS V IEW OF THE MATTER, WE SET- ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESS ING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ARE A CCORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 24-07-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 24 TH JULY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-IT/TP, PUNE 4. THE CIT-I/TP, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE