THE ACIT,CIRCLE - 1(1), Vijayawada V. Smt. Morampudi Manichandana, Vijayawada

ITA 202/VIZ/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5308 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PM B
• Keywords: Capital asset; Gift; Cost of acquisition
• Section: 143(3); 154; 15

Judgement Text

ITA NO.202/VIZAG/2013 SMT. M. MANICHANDANA, VIJAYAWADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 202 /VIZAG/ 20 13 ASSESSMENT YEAR : 2007 - 08 ACIT CIRCLE - 1(1) VIJAYAWADA VS. SMT. M. MANICHANDANA VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.ABYPM 1125B APPELLANT BY: SMT. KOMALI KRISHNA, DR RESPONDENT BY: SHRI G.V.N. HARI, ADVOCATE DATE OF HEARING : 03.12.2013 DATE OF PRONOUNCEMENT : 06.12.2013 ORDER PER SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER:- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), VIJAYAWADA DATED 18.01.2013. THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) ERRED IN GRANTING THE RELIEF WITHOUT CONSIDERING THE FACT THAT THE AO HAS DENIED THE ACQUISITION OF ASSE T VIZ., GOLD AND JEWELLERY, A MOVABLE ASSET BY WAY OF GIFT AS THE EX PLANATION OF THE ASSESSEE IS LACK OF EVIDENCE WHICH IS NOT APPROPRIA TE AND NOT ACCEPTABLE SINCE THE CONFIRMATION LETTER IS A SELF SERVING DOCUMENT. 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE DECISI ON OF AO BY FOLLOWING THE PROVISIONS OF FIFTH PROVISO TO EXPLAN ATION III TO SECTION 48 OF THE ACT IN ADOPTING THE COST OF INFLATION IND EX FOR THE FINANCIAL YEAR 2005-06 IN WHICH THE ASSET IS HELD BY THE ASSE SSEE FOR THE FIRST YEAR AS AGAINST THE COST OF INFLATION INDEX TAKEN B Y THE ASSESSEE FOR THE F.Y. 1981-82. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITION BY ST ATING THAT THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET AS THE DECISION IS AGAINST THE PROVISIONS OF SECTION 4 8 OF THE ACT . ITA NO.202/VIZAG/2013 SMT. M. MANICHANDANA, VIJAYAWADA 2 2. THE ISSUE IN THIS APPEAL IS ABOUT THE RECTIFICAT ION CARRIED OUT U/S 154 OF THE I.T. ACT BY THE ASSESSING OFFICER WHILE COMPUTI NG THE CAPITAL GAINS. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRI ETRIX OF ANIL PRINTERS. THE ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLETED DETERM INING THE TOTAL INCOME AT RS.95,01,880/-. SUBSEQUENTLY, AFTER ISSUING A N OTICE, THE A.O. HAS PASSED ORDER U/S 154 OF THE ACT STATING THAT DURING THE FI NANCIAL YEAR 2005-06 THE ASSESSEE HAS RECEIVED GOLD AND JEWELLERY AS GIFT FR OM HER GRANDMOTHER, A TOTAL WEIGHT OF THE GOLD AND JEWELLERY OF 2043.600 GRAMS. AS THE ASSESSEES GRANDMOTHER STATED TO HAVE RECEIVED OR ACQUIRED THE ABOVE GOLD PRIOR TO 1981, ASSESSING OFFICER HAS COMPUTED THE CAPITAL GAINS ON SALE OF SUCH JEWELLERY BY ADOPTING THE COST INFLATION INDEX FOR THE FINANCIAL YEAR 2005-06 AND REWORKED THE CAPITAL GAINS. 3. AGGRIEVED BY THE ORDER PASSED BY THE A.O. U/S 15 4 OF THE I.T. ACT, THE ASSESSEE CONTESTED BEFORE THE CIT(A) THAT THE ASSES SING OFFICER EXAMINED THE ISSUE AND ALLOWED THE CAPITAL GAINS IN THE ORDER U/ S 143(3) OF THE ACT AND ASSESSING OFFICER CANNOT MODIFY THE SAME U/S 154 OF THE ACT BY TAKING A DIFFERENT VIEW. IT WAS FURTHER SUBMITTED THAT THE BENEFIT OF COST OF ACQUISITION TO THE PERSON WHO RECEIVED IT AS A GIFT IS ALLOWABL E FROM THE DATE IT WAS ACQUIRED BY THE ORIGINAL OWNER BASED ON THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH 3 54 ITR 474 (BOM.). THE LD. CIT(A) ALLOWED THE ASSESSEES CONTENTIONS BY ST ATING AS UNDER: 5. I HAVE GONE THROUGH THE IMPUGNED MODIFICATION OR DER PASSED FOR THE ASSESSMENT YEAR UNDER REVIEW TOGETHER WITH THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT. 5.1 SINCE THE APPELLANT IN THE PRESENT CASE IS HEL D LIABLE FOR LONG TERM CAPITAL GAINS TAX BY TREATING THE PERIOD FOR W HICH THE CAPITAL ASSET IN QUESTION WAS HELD BY THE PREVIOUS OWNER AS THE PERI OD FOR WHICH THE SAID ASSET WAS HELD BY THE APPELLANT, THE INDEXED COST O F ACQUISITION HAS ALSO TO BE DETERMINED ON THE VERY SAME BASIS. 5.2 AS THE GIFT TRANSACTION BETWEEN THE APPELLANT AND HER GRANDMOTHER IS NOT TREATED AS TRANSFER FOR THE PURP OSE OF SECTION 45 OF THE INCOME TAX ACT, IN THE RESULT WHILE COMPUTING THE C APITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY THE APPELLA NT UNDER A GIFT, THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFEREN CE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ITA NO.202/VIZAG/2013 SMT. M. MANICHANDANA, VIJAYAWADA 3 APPELLANT BECAME THE OWNER OF THE ASSET. ACCORDING LY THE APPEAL IS ALLOWED AND THE ADDITION OF RS.13,47,974 IS DELETED. 4. THE REVENUE IS AGGRIEVED AND IS IN APPEAL. 5. AFTER CONSIDERING THE RIVAL ARGUMENTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). EVEN THOUG H THE LD. D.R TOOK PAINS TO EXPLAIN THE CASE AND WHY COST OF ACQUISITION IS TO BE ADOPTED FROM THE YEAR ASSESSEE TOOK POSSESSION OF THE GOLDEN JEWELLERY, T HE SAME CANNOT BE ACCEPTED AS PROVISIONS OF SECTION 49 OF THE ACT CLE ARLY ENVISAGES THAT COST OF THE PROPERTY TRANSFERRED TO THE ASSESSEE BY A GIFT HAS TO BE DETERMINED WITH RELATION TO COST OF ACQUISITION BY THE PREVIOUS OW NER AND INDEXATION BENEFIT IS TO BE ALLOWED FROM THE DATE OF ACQUISITION BY THE P REVIOUS OWNER. IN THIS CASE IT SEEMS THE ASSESSEES GRAND MOTHER ACQUIRED THE GOLDEN JEWELLERY PRIOR TO 1981. THEREFORE, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH (SUPRA), WHICH UPHELD THE SPECIAL BENCH DECISION OF THE ITAT IN TH E SAME NAME, WE HAVE TO UPHOLD THE ORDER OF THE CIT(A). IT WAS HELD IN THE ABOVE CASE AS UNDER:- IN CONSTRUING THE WORDS ASSET WAS HELD BY THE ASSE SSEE IN CLAUSE (III) OF THE EXPLANATION TO SECTION 48 OF THE INCOME-TAX ACT, 1961, THE OBJECT WITH WHICH THE WORDS ARE USED IN THE STATUTE HAVE TO BE SEEN. IT IS CLEAR FROM EXPLANATION 1(I)(B) TO SECTION 2(42A) TOGETHER WITH SECTIONS 48 AND 49 THAT THE OBJECT OF THE STATUTE IS NOT MERELY TO TAX THE CAPITAL GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED BY AN ASSESSEE BY INCURRING THE COST OF ACQUISITION, BUT ALSO TO TAX THE GAINS ARISING ON T RANSFER OF A CAPITAL ASSET, INTER ALIA, ACQUIRED BY AN ASSESSEE UNDER A GIFT OR WILL AS PROVIDED UNDER SECTION 49 WHERE THE ASSESSEE IS DEEMED TO HAVE INC URRED THE COST OF ACQUISITION. THEREFORE, IF THE OBJECT OF THE LEGIS LATURE IS TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UND ER A GIFT OR WILL BY INCLUDING THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREV IOUS OWNER IN DETERMINING THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE ASSE SSEE, THEN THAT OBJECT CANNOT BE DEFEATED BY EXCLUDING THE PERIOD FOR WHIC H THE ASSET WAS HELD BY THE PREVIOUS OWNER WHILE DETERMINING THE INDEXED CO ST OF ACQUISITION OF THAT ASSET TO THE ASSESSEE. IN OTHER WORDS, IN THE ABSE NCE OF ANY INDICATION IN CLAUSE (III) OF THE EXPLANATION TO SECTION 48 THAT THE WORDS ASSET WAS HELD BY THE ASSESSEE HAVE TO BE CONSTRUED DIFFERENTLY, TH E WORDS SHOULD BE CONSTRUED IN ACCORDANCE WITH THE OBJECT OF THE STAT UTE, THAT IS, IN THE MANNER SET OUT IN EXPLANATION 1(I)(B) TO SECTION 2(42A). ITA NO.202/VIZAG/2013 SMT. M. MANICHANDANA, VIJAYAWADA 4 THE ASSESSEE DERIVED INCOME FROM BUSINESS, HOUSE P ROPERTY, CAPITAL GAINS AND OTHER SOURCES. THE ASSESSEES DAUGHTER, THE PREVIOUS OWNER, ORIGINALLY ACQUIRED THE CAPITAL ASSET (FLAT) ON JAN UARY 29,1993, AND THE ASSESSEE ACQUIRED THE FLAT UNDER A GIFT DEED DATED JANUARY 2, 2003, WITHOUT INCURRING ANY COST. THE ASSESSEE SOLD THE CAPITAL ASSET ON JUNE 30, 2003, FOR RS.1.10 CRORES. ACCORDING TO THE ASSESSING OFFICER , THE ASSET WAS HELD BY THE ASSESSEE FROM FEBRUARY 1, 2003, AND, THEREFORE, THE COST INFLATION INDEX FOR 2002-03 WOULD BE APPLICABLE IN DETERMINING THE INDE XED COST OF ACQUISITION FOR THE ASSESSMENT YEAR 2004-05. THE COMMISSIONER (APPEALS) HELD THAT THE LONG TERM CAPITAL GAINS HAD TO BE DETERMINED BY COM PUTING THE INDEXED COST OF ACQUISITION WITH REFERENCE TO THE COST INFLATION INDEX FOR 1993-94 INSTEAD OF THE COST INFLATION INDEX FOR THE ASSESSMENT YEAR 20 02-03 AS HELD BY THE ASSESSING OFFICER. THIS WAS CONFIRMED BY THE TRIB UNAL. ON APPEAL: HELD, DISMISSING THE APPEAL, (I) THAT WHEN THE LEG ISLATURE BY INTRODUCING THE DEEMING FICTION SEEKS TO TAX THE GA INS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL THE CAP ITAL GAINS UNDER SECTION 48 HAVE TO BE COMPUTED APPLYING THE DEEMED FICTION. T HEREFORE, THE FICTION CONTAINED IN EXPLANATION 1(I)(B) TO SECTION 2(42A) HAS TO BE APPLIED IN DETERMINING THE INDEXED COST OF ACQUISITION UNDER S ECTION 48. (II) THAT BY APPLYING THE DEEMING PROVISION CONTAI NED IN EXPLANATION 1(I)(B) TO SECTION 2(42A) THE ASSESSEE WAS DEEMED T O HAVE HELD THE ASSET FROM JANUARY 29, 1993, TO JUNE 30, 2003, BY INCLUDI NG THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER AND, ACCOR DINGLY, HELD LIABLE FOR LONG TERM CAPITAL GAINS TAX. WHILE COMPUTING THE C APITAL GAINS, THE INDEXED COST OF ACQUISITION HAD TO BE COMPUTED WITH REFEREN CE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHICH THE ASSESSEE BECAME THE OWNER OF THE ASSET. 6. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT SEE A NY REASON TO RECTIFY THE ORDER PASSED U/S 143(3) OF THE ORDER. EVEN IN T HE ORDER U/S 154, THE ASSESSING OFFICER CONTINUED TO TREAT THE CAPITAL GA IN AS LONG TERM CAPITAL GAIN ONLY, EVEN THOUGH THE COST OF ACQUISITION WAS ARRIV ED W.E.F. A.Y. 2005-06 AND HAS NOT TREATED THE SAME AS SHORT TERM CAPITAL GAIN . 7. APART FROM THAT, THE ASSESSING OFFICER HAS NO JU RISDICTION TO MODIFY AN ORDER U/S 154 OF THE ACT, WHEREIN AN OPINION HAS BE EN TAKEN BY THE A.O. IN ALLOWING THE INDEXATION WHICH CANNOT BE MODIFIED BY TAKING A DIFFERENT OPINION. PROVISIONS OF SECTION 154 OF THE ACT DOES NOT APPLY TO REVISE/REVIEW THE ORDER BY TAKING A DIFFERENT OPINION, MORE SO U/ S 154 OF THE ACT WHICH IS APPLICABLE ONLY FOR MODIFYING THE MISTAKES COMMITTE D IN THE ORDER. IN VIEW OF ITA NO.202/VIZAG/2013 SMT. M. MANICHANDANA, VIJAYAWADA 5 THIS, THERE IS NO MERIT IN THE GROUNDS RAISED BY TH E REVENUE. ACCORDINGLY, THE SAME ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 06.12.2013 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 6 TH DECEMBER, 2013 COPY TO 1 ACIT, CI RCLE - 1(1), VIJAYAWADA 2 SMT. MORAMPUDI MANICHANDANA, PROPX. ANIL PRINTERS, ANIL BUILDINGS, SURYARAOPET, VIJAYAWADA-2 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM