Shri.K.G.Shivarudraiah, Bangalore V. Income-Tax Officer, Bangalore

ITA 2045/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5344 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU JT BENGALURU
• Keywords: Opportunity of being heard; Tangible material; Fair market value; Revised return
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.2045/BANG/2016 ASSESSMENT YEAR : 2006-07 SHRI K.G. SHIVARUDRAIAH, SHIVAKRUPA NILAYA, KAGADASAPUR, C.V. RAMAN NAGAR POST, BANGALORE 560 093. PAN: ADGPS 5896F VS. THE INCOME TAX OFFICER, WARD 7(2)(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI M.K. BIJU, JT. CIT(DR)(ITAT)-3, BENGALURU DATE OF HEARING : 15.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(APPEALS) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED ASSESSING OFFICER UN DER SECTION 143(3) R.W.S 147 OF THE ACT IS OPPOSED TO LAW, FACT S AND CIRCUMSTANCES OF THE CASE, AND THEREFORE LIABLE TO BE CANCELLED. NOTICE U/S.148. 2. THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE JOINT DEVELOPMENT AGREEMENT(JDA) DATED:23/05/2006 WITH M/ S. KEERTHI ESTATES DID NOT PRIMA FACIE INDICATE ANY ES CAPEMENT OF INCOME AND THEREFORE, NO NOTICE U/S.148 COULD BE IS SUED ON THAT BASIS . ITA NO. 2045/BANG/2016 PAGE 2 OF 7 3. THE LEARNED AO FAILED TO APPRECIATE THAT CAPIT AL GAIN INCOME ACCRUING AS PER THE JOA WAS ALREADY ADMITTED IN THE RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR AND THEREFORE, IT WAS NOT A CASE OF ESCAPEMENT OF INCOM E AT ALL WARRANTING ISSUE OF NOTICE U/S.148. 4. THE LEARNED AO FAILED TO APPRECIATE THAT THERE WAS NO TANGIBLE MATERIAL ON THE BASIS OF WHICH SATISFACTIO N COULD BE REACHED REGARDING ESCAPEMENT OF INCOME TO ISSUE THE NOTICE U/S.148. 5. THE REASONS RECORDED BY THE LEARNED AD, IF ANY, IN THE ABSENCE OF ANY TANGIBLE MATERIAL INDICATING ESCAPEM ENT OF INCOME, COULD HAVE NO NEXUS WITH THE PURPORTED INCO ME ESCAPING ASSESSMENT AND THEREFORE, THE NOTICE U/S.148 IS LIA BLE TO BE SET- ASIDE AS BAD IN LAW. JOINT DEVELOPMENT AGREEMENT (JDA) 6. THE LEARNED A.O AS WELL AS THE LEARNED APPELLAT E COMMISSIONER FAILED TO APPRECIATE THAT THERE WAS NO HANDING OVER OF POSSESSION TO M/S. KEERTHI ASSOCIATES ON EXECUTI ON OF THE JOA AND THERE WAS NO CONSIDERATION RECEIVED IN CONTRADI STINCTION TO THE CASE BEFORE THE HON'BLE JURISDICTIONAL HIGH COU RT IN T.K.DAYALU, AND CONSEQUENTLY THERE WAS NO LIABILITY TO TAX THE CAPITAL GAIN IN THE PRESENT ASSESSMENT YEAR. DEDUCTION U/S. 54F . 7. THE LEARNED A.O AS WELL AS THE LEARNED APPELLAT E COMMISSIONER FAILED TO APPRECIATE THAT THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. K.G.RUKMINIAMMA IS APPLICABLE TO THE FACTS OF THE C ASE AND THE STATUTORY AMENDMENT TO SECTIONS 54 AND 54F BY THE F INANCE ACT, 2014 FURTHER CLARIFIES THE LEGAL POSITION AND ACCOR DINGLY, THE DEDUCTION U/S.54F COULD NOT BE DENIED. 8. THE LEARNED A.O. AS WELL AS THE LEARNED APPELLA TE COMMISSIONER FAILED TO 'APPRECIATE THAT THE DECISIO N OF THE HON'BLE SUPREME COURT IN GOETZE (INDIA) LTD., IS NO T APPLICABLE TO THE FACTS OF THE CASE SINCE INCOME UNDER THE HEA D CAPITAL GAIN ITSELF IS NOT RECOGNIZED IN THE RETURN FILED AND TH E APPELLANT COULD NOT HAVE CLAIMED THE DEDUCTION ON THE CAPITAL GAINS INCOME NOT ITA NO. 2045/BANG/2016 PAGE 3 OF 7 ADMITTED, AND ONCE IT IS FOUND THAT THE APPELLANT W AS ELIGIBLE FOR THE DEDUCTION U/S.54F, IT SHOULD NOT HAVE BEEN DENI ED. 9. THE LEARNED APPELLATE COMMISSIONER OUGHT TO HAV E APPRECIATED THAT THE DECISION OF THE HON'BLE SUPREM E COURT IN GOETZE (INDIA) LTD., RESTRICT THE POWER OF THE ASSE SSING OFFICER TO ALLOW THE DEDUCTION WHICH IS NOT CLAIMED IN THE RET URN / REVISED RETURN, AND SUCH RESTRICTION CANNOT BE EXTENDED TO THE APPELLATE AUTHORITY AS CLARIFIED BY THE HON'BLE SUP REME COURT ITSELF IN THIS VERY DECISION. THE APPELLANT SEEKS LEAVE TO ADD, ALTER, AMEND OR D ELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF ACTUAL HEARING, THE HON'BLE ITAT MAY BE PLEASED TO CANCEL THE IMPUGNED ASSESSMENT ORDER AND ALLOW THE APPEAL IN T HE INTEREST OF EQUITY AND JUSTICE. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS MOVED AN APPLICATION FOR ADMISSION OF FOLLOWING ADD ITIONAL GROUNDS:- 1. WITHOUT PREJUDICE TO THE CONTENTION THAT THER E IS NO TRANSFER BY VIRTUE OF THE JOINT DEVELOPMENT AGREEME NT DATED 23/0312006, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ADOPTING THE PROPORTIONATE COST OF CONSTRUCTION INCURRED BY THE DEVELOPER FOR THE BUILT UP AREA FALLING TO THE SHARE OF THE A PPELLANT BY VIRTUE OF JOINT DEVELOPMENT OF THE APPELLANT'S PROPERTY AS THE FULL VALUE OF THE CONSIDERATION ACCRUING AS A RESULT OF TRANSF ER UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED AND DETERMINED THE FULL VALUE OF CONSIDERATION ACCRUING AS A RESULT OF TRANSFER UNDER THE JOINT DEVELOPMENT AGREEMENT ON T HE BASIS OF THE GUIDELINE VALUE OF THE UNDIVIDED INTEREST IN TH E LAND AGREED TO BE TRANSFERRED BY THE APPELLANT AS THE EXTENT OF BU ILT UP AREA AND THE COST OF CONSTRUCTION THEREOF WAS NOT CAPABLE OF BEING ASCERTAINED ON THE DATE OF EXECUTION OF THE JOINT D EVELOPMENT AGREEMENT AND CONSEQUENTLY, THE SALE CONSIDERATION ADOPTED IS HIGHLY EXCESSIVE AND LIABLE TO BE REDUCED SUBSTANTI ALLY. ITA NO. 2045/BANG/2016 PAGE 4 OF 7 3. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUNDS SHOULD BE ADMITTED FOR THE ADVANCEMENT OF S UBSTANTIAL CAUSE OF JUSTICE. HE INVITED OUR ATTENTION THAT THE IMPUGNE D ISSUE IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN THE CASE OF SHRI K.G. ADAVEESHAIAH IN ITA NO.2043/BANG/2016 IN WHICH THE TRIBUNAL HAS RESTORED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO READJUDIC ATE THE ISSUE AFRESH IN THE LIGHT OF GUIDELINES LAID DOWN IN THAT ORDER. IT WA S FURTHER CONTENDED THAT SHRI K.G. ADAVEESHAIAH IS ONE OF THE CO-OWNER OF THE IMP UGNED PROPERTY FOR WHICH THE AGREEMENT WAS EXECUTED WITH THE BUILDER F OR CONSTRUCTION OF THE PROPERTY. SINCE THE TRIBUNAL HAS TAKEN A PARTICULA R VIEW IN A SIMILAR SET OF FACTS, THE ORDER OF CIT(APPEALS) MAY BE SET ASIDE A ND THE MATTER BE RESTORED BACK TO THE FILE OF AO TO READJUDICATE THE ISSUE IN THE TERMS INDICATED IN THE ORDER OF TRIBUNAL IN THE CASE OF SHRI K.G. ADAVEESHAIAH IN ITA NO.2043/BANG/2016 , COPY OF WHICH IS PLACED ON RECORD. 4. THE LD. DR PLACED RELIANCE UPON THE ORDER OF CIT (APPEALS). 5. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE PROPERTY WAS OWNED BY K.G. BASAVARAJ, K.G. ADAVEESHAIAH, MR. K.G. NAGARAJ AND THE ASSESSEE AND ALL THE OWNERS OF THE PROPERTY THROUGH THEIR LE GAL HEIRS HAVE ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH THE BUILDER , M/S. KEERTHI ESTATES ITA NO. 2045/BANG/2016 PAGE 5 OF 7 AND THESE FACTS ARE EVIDENT FROM THE JOINT DEVELOPM ENT AGREEMENT PLACED ON RECORD AT PAGES 1 TO 15 OF THE COMPILATION. IN THE CASE OF SHRI K.G. ADAVEESHAIAH IN ITA NO.2043/BANG/2016 , THE TRIBUNAL HAS EXAMINED THE ASPECT AS TO IN WHICH ASSESSMENT YEAR THE CAPITAL G AIN ACCRUED FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF T.K. DAYALU (331 ITR 211) . THE TRIBUNAL HAS HELD THAT FAIR MARKET VALUE OF THE SHARE OF THE ASSESSEE IN THE CONSTRUCTED AREA HAS TO BE CONS IDERED AS ON THE DATE OF JOINT DEVELOPMENT AGREEMENT AND FOR DOING THAT E XERCISE, THE TRIBUNAL HAS RESTORED THE MATTER TO THE AO. THE TRIBUNAL HA S ALSO HELD THAT CAPITAL GAIN HAS TO BE ACCRUED IN THE YEAR IN WHICH THE PRO PERTY WAS TRANSFERRED. IT HAS ALSO DIRECTED THE AO TO EXAMINE THE CLAIM OF DE DUCTION U/S. 54/54F OF THE I.T. ACT. THE FINDINGS OF THE TRIBUNAL IN PARA S 5 TO 8 ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 5. REGARDING GROUND NO. 6 AND ADDITIONAL GROUNDS , IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT IN THE CASE OF SHRI C. JAGANNATH - HUF VS. ITO IN ITA 1231, 1233 A ND 1234/BANG/2016 DATED 20.01.2017 , THE FACTS WERE SIMILAR AND THE TRIBUNAL DULY CONSIDERED THE JUDGMENT OF HON'BLE KA RNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. DR. T. K. DAY ALU (SUPRA) AND HELD THAT THE FAIR MARKET VALUE OF THE SHARE OF THE ASSESSEE IN THE CONSTRUCTED AREA HAS TO BE CONSIDER ED AS ON THE DATE OF THE IDA AND FOR DOING THAT E X ERCISE , THE MATTER WAS RESTORED TO A.O. HE SUBMITTED A COPY OF THIS TRIBUN AL ORDER AND DRAWN OUR ATTENTION TO PARA 9 THEREOF. LEARNED OR O F THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. A SP ECIFIC QUERY WAS RAISED BY THE BENCH THAT WHETHER THERE IS DIFFE RENCE IN FACTS IN THE PRESENT CASE AND IN THE CASE CITED BY THE LE ARNED AR OF THE ASSESSEE. IN REPLY , LEARNED DR OF THE RE V ENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS. 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND F ORCE IN THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSE E THAT IN VIEW ITA NO. 2045/BANG/2016 PAGE 6 OF 7 OF THE JUDGMENT CITED BY HIM , IN THE PRESENT CASE ALSO, THE MATTER SHOULD BE RESTORED TO THE A.O. FOR DETERMINING THE AMOUNT OF CAPITAL GAIN BY CONSIDERING THE FAIR MARKET VALUE O F THE SHARE OF THE ASSESSEE IN THE CONSTRUCTED AREA AS ON THE DATE OF THE IDA AS THE CONSIDERATION RECEI V ED BY THE ASSESSEE. ACCORDINGLY , BY RESPECTFULLY FOLLOW I NG THIS TRIBUNAL ORDER RENDERED IN THE CASE OF SHRI C. JAGANNATH - HUF V S . ITO (SUPRA ), WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE A. O. IN BOTH THE CASES TO WORK OUT THE CAPITAL GAIN AFRESH BY CONSIDERING THE FAIR MARKET VALUE OF THE SHARE OF THE ASSESSEE IN THE CONSTRUCTED AREA AS ON THE-DATE OF THE IDA AS THE C ONSIDERATION RECEIVED BY THE ASSESSEE. NEEDLESS TO SAY , THE A.O. SHOULD PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 6 AND ADDITIONAL GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 7. REGARDING THE REMAINING GROUNDS I.E. GROUNDS 7 TO 9, IN RESPECT OF DENIAL OF DEDUCTION U/S 54 & 54F, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT BY FOLLOWING TH E JUDGMENT OF HON ' BLE APEX COURT RENDERED IN THE CASE OF GOETZ (INDIA ) LTD., 157 TAXMAN 1 , THIS ISSUE WAS DECIDED BY CIT (A) AGAINST THE ASSES SEE AS PER PARA 6.2 OF HIS ORDER BY SAYING THAT SINCE I T WAS NOT CLAIMED IN THE RETURN OF INCOME OR BY FILING A REVI SED RETURN , THIS CLAIM IS NOT ALLOWABLE. HE SUBMITTED THAT THIS JUDG MENT OF HON'BLE APEX COURT DOES NOT IMPINGE THE POWERS OF C IT(A) AND THEREFORE, HE SHOULD HAVE DECIDED THIS ISSUE ON MER IT. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND FORCE IN THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSE E ON THIS ISSUE ALSO BECAUSE THE JUDGMENT OF HON'BLE APEX COURT REN DERED IN THE CASE OF GOETZ (INDIA) LTD. (SUPRA) DOES NOT IMPINGE THE POWERS OF CIT (A) AND THEREFORE , HE SHOULD HAVE DECIDED THIS ISSUE ON MERIT. THEREFORE, ON THIS ISSUE ALSO, WE RESTORE TH E MATTER BACK TO THE A.O. FOR A DECISION ON THE MERIT OF THE CLAIM O F THE ASSESSEE. GENERALLY, UNDER THESE FACTS, WE RESTORE THE MATTER TO CIT(A) BUT SINCE, IN THE PRESENT CASE, THE MAIN ISSUE ABOUT QU ANTUM OF CAPITAL GAIN IS RESTORED TO A.O., WE FEEL IT PROPER TO REST ORE THIS MATTER ALSO TO THE FILE OF THE A.O. THE A.O. SHOULD PROVID E ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THEN PASS NECESSARY ORDER AS PER LAW ON THIS ISSUE ALSO. ' ITA NO. 2045/BANG/2016 PAGE 7 OF 7 6. SINCE THE TRIBUNAL HAS ALREADY TAKEN A PARTICULA R VIEW IN ONE OF THE CO-OWNERS CASE, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEAL. THEREFORE, FOLLOWING THE SAME, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECOMPUTE THE CAPITAL GAIN IN THE TERMS INDICATED IN THE ORDER OF TRIBUNAL IN THE CAS E OF SHRI K.G. ADAVEESHAIAH IN ITA NO.2043/BANG/2016 . ACCORDINGLY, THE ORDER OF CIT(APPEALS) IS SET ASIDE AND THE MATTER IS RESTORE D BACK TO THE FILE OF AO TO RE-EXAMINE THE ISSUE AFRESH, AFTER AFFORDING OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MAY, 2017. SD/- SD/- (JASON P. BOAZ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDI CIAL MEMBER BANGALORE, DATED, THE 26 TH MAY, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.