INCOME TAX OFFICER 23(1)(5), MUMBAI V. HARJINDER KAUR P. BHASIN, MUMBAI

ITA 1995/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9748 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DEEPIKA CHHAJED
• Keywords: Unexplained cash credit; Business income; Cost of acquisition; Tax effect; Capital Gains
• Section: 143(3); 54F; 133(6); 201; 113; 68; 54

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 1995 /MUM/ 201 8 (ASSESSMENT YEAR 20 14 - 1 5 ) ITO - 23(1)(5) ROOM NO. 113 1 ST FLOOR MATRU MANDIR TARDEO MUMBAI - 400 007. V S . HARJINDER KAUR P. BHASIN 2, SILVER CRAFT BUILDING 16 TH ROAD, BANDRA - WEST MUMBAI - 400 050. PAN : AAEPB8089N ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI SUBHASH CHHAJED & MS. DEEPIKA CHHAJED DEPARTMENT BY SHRI MANOJ KUMAR SINGH DATE OF HEARING 01 . 0 8 . 201 9 DA TE OF PRONOUNCEMENT 24 . 10 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 27.12.2017 AND PERTAINS TO A.Y. 2014 - 15. 2. GROUNDS OF APPEAL READ AS UNDER : - 1. 'WHETHER ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CTT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 54F OF RS. 16,84,080/ - AND U/S 54 OFRS.76,25,040/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO COMPLY THE CONDITIONS AS STIPULATED IN SECTION 54F AND IN SECTION 54 OF THE IT ACT?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S 54F OF RS. 16,84,080/ - AND U/S 54 OF RS. 76 ,25,040/ - WITHOUT APPRECIATING THE FACT THAT THE RATIO OF DECISIONS RELIED UPON BY HIM ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. U/S. 68 OF THE I.T. ACT OF RS.5,00,000/ - IN RESPECT OF UNEXPLAINED AND UNPROVED UNSECURED LOAN TAKEN BY THE ASSESSEE?' HARJINDER KAUR P. BHASIN 2 3. BRIEF FACTS OF THE CASE ARE AS UNDER : - IN THIS CASE, THE ASSESSEE HAD FILED THE RETURN OF INC OME ON 23.08.2014 DECLARING TOTAL INCOME OF RS.4,75 , 130. THE ASSESSMENT WAS COMPLETED U/S. 143(3) AND INCOME WAS ASSESSED AT RS.1,05,59,840 VIDE ORDER DATED 22 .12.2016 AFTER MAKING THE DISALLO WANCE OF RS.5,00,000 ON ACCOUNT OF LOAN CONFIRMA TION NOT PROVIDED AND HENCE, UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT AND RS.95,84,710 BEING THE CAPITAL GAINS DEDUCTION CLAIMED BY THE ASSESSEE. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY, BUSINESS INCOME, CAPITAL GAINS AND OTH ER SOURCES. THE ASSESSEE HAD BORROWED MONIES OF RS.5,00,000 FROM SHRI P.S. BAJAJ AND FILED THE LOAN CONFIRMATION. THE SAID LOAN CONFIRMATION DID NOT BEAR ANY SIGNATURE OR PAN OF MR. BAJAJ. NO RESPONSE WAS RECEIVED TO THE NOTICE ISSUED U/S. 133(6) OF THE AC T. ACCORDINGLY, THE AO TREATED THE SAME AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE ALONGWITH 3 OTHER CO - OWNERS HAD SOLD A SHOP ON 26.12.2013 FOR A CONSIDERATION OF RS.3,96,00,000. THE ASSESSEE'S S HARE IN THE SHOP IS 25% AND SHE RECEIVED SALES CONSIDERATION OF RS.99,00,000 ON SALE OF SHOP AND COMPUTED CAPITAL GAINS AT RS.16,84,080. TO ARRIVE AT THE CAPITAL GAINS, THE ASSESSEE DEDUCTED THE FOLLOWING : - INDEXED COST OF ACQUISITION RS.54,27,745 INDEXED COST OF IMPROVEMENT RS.25,12,585 OTHER COSTS RS.2,75,590 WHILST THE ASSESSEE SUBMITTED THE DETAILS OF COST OF ACQUISITION AND COST OF IMPROVEMENT, NO DETAILS IN RESPECT OF OTHER COSTS OF RS.2,75,590 WAS SUBMITTED. ACCORDINGLY, THE AO COMPUTED THE CAPITAL GAINS ON SALE OF SHOP AT RS.19,59,670. THE ASSESSES HAD SOLD HER FLAT ON 14.11.2013 AND EARNED LONG TERM CAPITAL GAINS ON SALE OF FLAT AMOUNTING TO RS. 76,25,040. THE ASSESSEE CLAIMED THE DEDUCTION OF RS.76,26,040 U/S. 54 AND RS.16,84,080 U/. 54F ON SALE OF FLAT AND SHOP. HARJINDER KAUR P. BHASIN 3 5. TO CLAIM THE SAID DEDUCTIONS, THE ASSESSEE WAS REQUIRED TO PURCHASE A PROPERTY WITHIN ONE YEAR BEFORE OR TWO YEARS AFTER OR CONSTRUCT A PROPERTY WITHIN THREE YEARS FROM THE DATE OF SALE. THE ASSESSEE CONTENDED THAT SHE HAD INVESTED THE GAINS INTO A NEW FLAT AND SUBMITTED A COPY OF ALLOTMENT LETTER. THE ASSESSEE DID NOT FURNISH THE PURCHASE AGREEMENT OF THE FLAT AND ACCORDINGLY, THE AO DISALLOWED THE DEDUCTIONS CLAIMED U/S. 54 OF RS.76,25,040 AND 54F OF RS. 1 9,59,670 AND ADDED RS.95,84,7 10 TO THE TOTAL INCOME . 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE LEARNED CIT(A) LEARNED CIT(A) AS REGARDS THE ISSUE OF DEDUCTION U/S. 54 AND 54F NOTED THE FACTS AS UNDER : I HAVE PERUSED THE ALLOTMENT LETTER ISSUED BY THE BUILDER, K M ORDAN REALTY DATED 04.02.2014. AS PER THE SAID LETTER, FIAT NO. 1102 ON THE 11 TH FLOOR OF THE PROPOSED NEW BUILDING TO BE CONSTRUCTED ON THE LAND WOULD BE ALLOTTED TO THE ASSESSEE. THE BUILDING NAMED SOORAJ PRAKASH WAS DEMOLISHED AND VIDE THE DEVELOPMENT A GREEMENT DATED 18.10.2010 THE SOCIETY AND DEVELOPERS NAMELY HICON DEVELOPERS PVT LTD, THE DEVELOPMENT RIGHTS WERE GRANTED TO HICON. HOWEVER, HICON COULD NOT CARRY OUT THE DEVELOPMENT ACTIVITIES AND ACCORDINGLY, WITH THE CONFIRMATION OF THE SOCIETY, THE DEV ELOPMENT RIGHTS ACQUIRED BY HICON VIDE THE DEVELOPMENT AGREEMENT WERE ASSIGNED TO K MORDAN REALTY. PURSUANT TO THIS, THE ASSESSEE WAS ALLOTTED FLAT NO. 1102 IN THE PROPOSED BUILDING TO BE DEVELOPED FOR WHICH A TOTAL CONSIDERATION OF RS.2,67,00,000 WAS PAID AND THE ASSESSEE'S SHARE IN THE SAME WAS RS.1,77,00,000. THE BUILDERS, K MORAN REALTY HAS CONFIRMED THE RECEIPT OF THIS PAYMENT. IN PURSUANCE OF THE DEED OF ASSIGNMENT, K MORDAN HAS APPLIED TO THE STATUTORY AUTHORITIES FOR SANCTIONING OF THE BUILDING PLA NS FOR THE PROPOSED BUILDING TO BE CONSTRUCTED. CLAUSE 16 OF THE ALLOTMENT LETTER CLEARLY STATES THAT 'PENDING THE EXECUTION OF THE AGREEMENT FOR SALE, WE HAVE ISSUED THIS ALLOTMENT LETTER IN RESPECT OF THE SAID FLAT/S AND YOU SHALL BE REQUIRED TO EXECUTE SUCH AGREEMENT WHICH THE SAME SHALL BE BINDING ON BOTH THE PARTIES.....ON THE EXECUTION AND REGISTRATION OF THE AGREEMENT FOR SALE, THIS ALLOTMENT LETTER SHALL BE IPSO FACTO CANCELLED AND SHALL BE TREATED AS NULL AND VOID. THIS ORIGINAL LETTER OF ALLOTMEN T SHALL BE SURRENDERED TO US AT THE TIME OF EXECUTION OF THE AGREEMENT FOR SALE. CLAUSE 22 FURTHER STATES THAT 'THIS LETTER OF ALLOTMENT SHALL BE FINAL AND BINDING ON YOU AND SHALL NOT BE ALTERED OR MODIFIED IN ANY MANNER WHATSOEVER.' THE INTENT OF BOTH THE PARTIES IS CLEARLY REFLECTED IN THE ALLOTMENT LETTER THAT THE AGREEMENT FOR SALE WOULD BE ENTERED ONCE THE NECESSARY APPROVALS ARE OBTAINED AND THE ALLOTMENT LETTER IS BINDING ON BOTH THE PARTIES. HARJINDER KAUR P. BHASIN 4 7. THEREAFTER LEARNED CIT(A) REFERRED TO HON'BLE BOMB AY HIGH COURT DECISION IN THE CASE OF HILL JB WADIA (69 TAXMAN 114), ITAT DECISION IN THE CASE OF SUDESHKUMAR G. NAGDEV AND SEVERAL OTHER HIGH COURT DECISIONS. THEREAFTER LEARNED CIT(A) CONCLUDED AS UNDER : THE AO HAS ALSO OBSERVED IN THE ASSESSMENT ORDE R THAT THE AMOUNTS PAID UNDER THE LETTER OF ALLOTMENT CAN BE RETURNED AS THE SAME ARE IN THE NATURE OF ADVANCES AND HENCE, THE ASSESSEE MAY LOSE THE EXEMPTION U/S. 54 OF THE ACT. IN MY OPINION, THIS DOES NOT MILITATE ASSESSEE'S CLAIM FOR EXEMPTION IN THE I NSTANT ASSESSMENT YEAR, AS THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE AO THAT THE ADVANCE HAS BEEN RETURNED. IN CASE IF IT IS FOUND THAT THE ADVANCE HAS BEEN RETURNED, IT WOULD CERTAINLY CALL FOR FORFEITURE OF THE ASSESSEE'S CLAIM U/S. 54 OF THE ACT. IN SUCH A SITUATION, THE PROVISO BELOW SECTION 54(2) OF THE ACT WOULD APPLY WHEREBY IT IS PRESCRIBED THAT SUCH AMOUNT SHALL BE CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR, IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE OR IGINAL ASSET EXPIRES. THE AFORESAID PROVISION ALSO DOES NOT JUSTIFY THE ACTION OF THE AO IN DENYING THE CLAIM OF EXEMPTION UNDER SECTION 54 IN THE INSTANT ASSESSMENT YEAR. THEREFORE, IN VIEW OF THE BINDING DECISIONS OF THE JURISDICTIONAL HIGH COURT AND IT AT AS WELL OTHER CO - ORDINATE BENCHES OF ITAT IN SIMILAR FACTS, I HEREBY HOLD THAT THE ASSESSEE IS ALLOWED THE BENEFIT OF DEDUCTION CLAIMED U/S. 54 AND 54F OF THE ACT ON THE BASIS OF THE LETTER OF ALLOTMENT AS THE ASSESSEE HAS PAID SUBSTANTIAL AMOUNT OF CON SIDERATION TO THE BUILDER AND HENCE, THE ADDITION MADE BY THE AO IS HEREBY DELETED . 8. AS REGARDS THE ADDITION OF RS. 5,00,000/ - AS UNEXPLAINED CASH CREDIT LEARNED CIT(A) REFERRED TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAIC HAND H. GANDHI (141 ITR 67) FOR THE PROPOSITION THAT INTEREST IN BANK STATEMENT AND PASS BOOK CANNOT QUALIFY THAT ADDITION U/S. 68 OF THE ACT. LEARNED CIT(A) ALSO NOTED THAT THE ASSESSEE HAS FILED UNSIGNED CONFIRMATION AND ALSO NO COMPLIANCE WAS MADE REGAR DING NOTICE U/S. 133(6) OF THE ACT THEREAFTER FINALLY LEARNED CIT(A) HELD THAT : THE AO IN THIS CASE HAS NOT OBSERVED OR PLACE ON RECORD AS REGARDS WHETHER THE ASSESSEE WAS MANDATORILY REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS OR NOT. HAVING SAID THAT AND R ELYING ON THE JURISDICTIONAL DECISION OF THE HIGH COURT, I AM OF THE VIEW THAT THE ADDITION MADE BY THE AO IN THE ABSENCE OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE BE DELETED . 9. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. HARJINDER KAUR P. BHASIN 5 10. WE HAVE HEA RD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LEARNED CIT(A) HAS DECIDED BOTH THE ISSUE IN FAVOUR OF THE ASSESSEE BY PLACING RELIANCE UPON HON'BLE JURISDICTIONAL HIGH COURT DECISION. MOREOVER IT IS ALSO NOTED THAT TAX EFFECT IN THIS CASE IS BE LOW THE LIMIT FIXED BY CBDT FOR FILING APPEAL BEFORE THE ITAT AS PER CBDT CIRCULAR NO. 17/2019 DATED 8.8.2019. ACCORDINGLY THIS APPEAL BY THE REVENUE STANDS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 24 . 10 . 201 9 . SD/ - SD/ - ( PAWAN SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 24 / 10 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI HARJINDER KAUR P. BHASIN 6 T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 1995 /MUM/ 201 8 (ASSESSMENT YEAR 20 14 - 1 5 ) ITO - 23(1)(5) ROOM NO. 113 1 ST FLOOR MATRU MANDIR TARDEO MUMBAI - 400 007. V S . HARJINDER KAUR P. BHASIN 2, SILVER CRAFT BUILDING 16 TH ROAD, BANDRA - WEST MUMBAI - 400 050. PAN : AAEPB8089N ( APPELLANT ) ( RESPONDENT ) CORRIGENDUM THIS CORRIGENDUM IS BEING ISSUED TO CORRECT THE MISTAKE IN THE ORDER PASSED BY THE TRIBUNAL IN ITA NO. 1995/MUM/2018 DA TED 24.10.2019 IS CORRECTED AS UNDER : - IN THE AFORESAID ORDER ON PAGE NO. 5 PARA 10 LAST LINE THE WORD ALLOWED SHOULD BE READ AS DISMISSED . SD/ - SD/ - ( PAWAN SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI ; DATED : 7 / 1 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI