UMANG MADAN, MUMBAI V. PR CIT 16, MUMBAI

ITA 2202/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2480 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANGRAM GAIKW
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Salary income; Valuation report
• Section: 143(3); 50C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A NO.2202/MUM/2015 (AY 2010-11) UMANG MADAN, 7 PAPA INDUSTRIAL ESTATE, SUREN ROAD, ANDHERI-E, MUMBAI-400069 PAN: AANPM7593H VS. PR. CIT-16, R. NO. 442, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK J. PAT IL REVENUE BY : SHRI SANGRAM GAIKW AD (DR) DATE OF HEARING : 16.11.2015 DATE OF PRONOUNCEMENT : 18.11.2015 O R D E R PER PAWAN SINGH, JM: THE PRESENT APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 19.03.2015 PASSED BY THE PR. COMMISSIONER OF INCOME TAX-16, MU MBAI (CIT) FOR SHORT) IN RESPECT OF ASSESSMENT YEARS 2010-11 ON THE FOLLOWIN G GROUNDS OF APPEAL: THE GROUNDS MENTIONED HEREUNDER ARE WITHOUT PREJUDI CE TO ONE ANOTHER. 1. THE LEARNED PR.COMMISSIONER OF INCOME TAX ERRED IN INITIATING ACTION UNDER SECTION 263 INSPIRE ALL THE RELEVANT DETAILS REQUIR ED FOR COMPLETING THE ASSESSMENT UNDER SECTION 143(3) WERE FURNISHED TO T HE ASSISTANT COMMISSIONER OF INCOME TAX 11(3) FOR COMPLETING THE ASSESSMENT F OR THE ASSESSMENT YEAR 2010-11. 2. THE LEARNED PR. COMMISSIONER OF INCOME TAX -16 E RRED IN APPRECIATION OF VALUATION REPORT OF A APPROVED VALUER FOR RS.15,19, 10,000. THE APPROVED VALUER HAS VERY CATEGORICALLY MENTIONED IN THE REPORT THAT ANTICIPATED VALUE AFTER COMPLETION INCLUDING INTERIORS. 3. THE LEARNED PR. COMMISSIONER FAILED IN APPRECIAT ION OF THE FACT THAT APPROVED VALUER HAS GIVEN THREE REPORTS, THE MAIN V ALUATION REPORT IS REPORT DATED 07/09/2008 OTHER TWO REPORTS ARE STAGE WISE R EPORTS. 4. THE LEARNED PR. COMMISSIONER FAILED TO APPRECIAT E THE CLARIFICATORY REPORT DT. 11/03/2015 GIVEN BY THE SAME VALUER. 5. THE LEARNED PR. COMMISSIONER OF INCOME TAX FAILE D IN APPRECIATING FRESH VALUATION REPORT REGARDING THE BEAR SHELL OF THE BU ILDING BY SRUJAN CONSTRUCTION MANAGEMENT SOLUTION. 2 ITA NO.2202/MUM/2015- UMANG MADAN. 2. THE ASSESSEE, WHO IS AN ARCHITECT DERIVING HIS I NCOME FROM SALARY, BUSINESS & PROFESSION, INCOME FROM HOUSE PROPERTY, CAPITAL GAI N AND INCOME FROM OTHER SOURCES, FILED RETURN OF INCOME ON 30.08.2010 IN RESPECT OF AY-201 0-11, DECLARING TOTAL INCOME AT RS. 50,80,529/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND GIVING THE OPPORTUNITY OF HEARING, THE ASSESSIN G OFFICER (AO) MADE THE DISALLOWANCE @ 16% FROM THE INCOME ARISING OUT OF SALARY AND BUSIN ESS & PROFESSION. THE ASSESSEE DECLARED HIS INCOME FROM SALARY AT RS. 48,00,000/- AND INCOM E FROM PROFESSION AT RS. 9,00,000/-, THUS, A TOTAL INCOME FROM SALARY AND PROFESSION OF RS. 57, 00,000/- OUT OF WHICH 16% WAS DISALLOWED BEING PERCENTAGE OF EXPENSES ATTRIBUTABLE TO PROFES SIONAL INCOME AND ASSESSED THE INCOME VIDE ORDER DATED 18.01.2013. 3. THE LD. CIT(A) WHILE EXERCISING THE POWER U/S 26 3 OF THE I.T.ACT ISSUED A SHOW CAUSE NOTICE DATED 24.02.2015 GIVING THE DETAILS REASON I N THE NOTICE THAT THE ORDER OF AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE SHOW CAUSE NOTICE FURTHER CONTAINED A REFERENCE THAT ASSESSEE SOLD TWO PLOT A ND COMMERCIAL BUILDING AT HINGEWADI , DISTRICT PUNE TO M/S EMERALD ELECTRIC PVT. LTD . ON 09.02.2010 FOR A CONSIDERATION OF RS. 20,00,00,000/-. HOWEVER, IN THE COMPUTATION OF CAPI TAL GAIN, THE ASSESSEE HAS TAKEN THE CONSIDERATION OF THE SAID PROPERTY AT RS. 7,25,00,0 00/- AND AFTER DEDUCTING THE COST OF LAND AND COST OF CONSTRUCTION, THE ASSESSEE CLAIMED SHORT TE RM CAPITAL GAIN (STCG) OF RS. 33,45,848/-. THE SHOW CAUSE NOTICE FURTHER CONTAINED THE REFEREN CE THAT THE ASSESSEE LEASED THE ENTIRE PROPERTY TO M/S ASTRIX PROPERTY PVT. LTD. VIDE LEAS E DATED 24.12.2008, WHEREIN THE LESSEE WAS ENTITLED TO UNDERTAKE THE INTERNAL AND OTHER DEVELO PMENT WORK AS PER THE REQUIREMENT OF THE SAID COMMERCIAL PROPERTY AT HIS OWN COST AND NOTICE D THAT ASSESSEE MADE INTER SE AGREEMENT DATED 26.03.2010 WITH M/S ASTRIX PROPERTY PVT. LTD. IN WHICH IT IS MENTIONED THAT OUT OF SALE CONSIDERATION OF RS. 20,0000000/-, THE ASSESSEE WOU LD GIVE RS. 12,75,00,000/- TO M/S ASTRIX PROPERTIES PVT. LTD. AGAINST THE EXPENDITURE INCURR ED BY THAT PARTY IN RESPECT OF INTERNAL WORK, MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES ETC. A ND THE REMAINING AMOUNT OF RS. 7,25,00,000/- WOULD ONLY BE RETAINED BY ASSESSEE AG AINST THE SALE OF BOTH THE PLOT OF LAND. THE NOTICE FURTHER DISCLOSED THAT NO BASIS OF SUCH BIFU RCATION IS MENTIONED IN THE INTER SE AGREEMENT. THE SHOW CAUSE NOTICE SPECIFICALLY CONTAINED THE RE FERENCE THAT AO HAD NOT MADE ANY INVESTIGATION TO FIND OUT WHETHER A SUM OF RS. 7.25 CRORE WAS A REASONABLE AMOUNT FOR TWO PLOT OF LAND, WHOSE COST OF PURCHASE WERE RS. 3,12,35,08 0/- AND RS. 1,71,60,000/- RESPECTIVELY AND THE COMMERCIAL BUILDING HAVING BUILT UP AREA OF 333 69 SQ.FT. AND NOT MADE ANY VERIFICATION REGARDING DETAILED OF INTERNAL WORK, PLANT AND MACH INERY, EQUIPMENT OF FURNITURE AND FIXTURE FOR WHICH RS. 12.75 CRORE WAS GIVEN TO M/S ASTRIX PROPE RTY PVT. LTD. 3 ITA NO.2202/MUM/2015- UMANG MADAN. 4. THE SHOW CAUSE NOTICE WAS REPLIED BY ASSESSEE VI DE ITS REPLY DATED 11.03.2015 WHEREIN ASSESSEE HAS REPLIED THAT AS PER THE LEASE AGREEMEN T, THE ASSESSEE HAS TO COMPLETE RCC STRUCTURE ALONG WITH BRICK WORK AND EXTERNAL PLASTER ETC., T HE ALLOCATION OF RS. 20,0000000/- IS MADE ON THE BASIS OF EXPENDITURE, LEASE INCURRED BY EACH PA RTIES APPL HAS INCURRED EXPENDITURE ON THE PROJECT TO THE EXTENT OF ABOVE RS. 15 CRORE MERELY INTERNAL FURNITURE, EQUIPMENT ETC. AND THEREAFTER WAS NOT ABLE TO PAY RENT TO THE ASSESSEE W.E.F. 01.04.2009, HENCE THE ASSESSEE HAS NO OPTION BUT TO SALE THE BUILDING ON THE BASIS OF AS IS WHERE IS AND WAS SOLD TO M/S EMERALD ELECTRIC PVT. LTD. OF RS. 20,0000000/-. AFTER CONSI DERING THE REPLY OF ASSESSEE, THE CIT(A) MADE THE FOLLOWING OBSERVATION IN HIS ORDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMIS SIONS OF THE ASSESSEE CAREFULLY. I AGREE WITH HIM ON THE GENERAL LEGAL POSITION REGARD ING THE APPLICABILITY OF SEC. 263 AS SUBMITTED BY SHRI OSANI. BUT THE FACTS IN THIS CASE ARE DIFFERENT. THIS IS NOT A CASE WHERE THE AO HAD ADOPTED ONE OF THE COURSES PERMISS IBLE IN LAW OR WHERE THE ORDER WAS PASSED BY THE AO AFTER DUE APPLICATION OF MIND. THE PRESENT CASE IS ON DIFFERENT FOOTING. AS MENTIONED ABOVE, THIS IS A CASE WHERE T HE AO DID NOT MAKE PROPER INVESTIGATION IN RESPECT OF FOLLOWING VERY IMPORTAN T AND OBVIOUS FACTS: (I) THE A.O. DID NOT INVESTIGATE WHETHER THE SUM OF RS.7.25 CRORE RETAINED BY THE ASSESSEE OUT OF THE SALE CONSIDERATION OF THE PROPE RTY AT RS. 20 CRORE WAS A REASONABLE AMOUNT FOR 2 PLOTS OF COMMERCIAL LAND WH OSE COSTS OF PURCHASE- WERE RS. 3.12 CRORE AND RS. 1.71 CRORE AND THE COMM ERCIAL STAR HOTEL BUILDING HAVING BUILT-UP-AREA OF 33,368 SQ.FT. (II)THE A.O. DID NOT EXAMINE/INVESTIGATE THE DETAIL S OF THE INTERIOR WORK, PLANT & MACHINERY, EQUIPMENTS, FURNITURE AND FIXTURE, ETC F OR WHICH .RS. 12.75 CRORE WAS GIVEN BY THE ASSESSEE TO M/S. ASTRIX PROPERTIES (P) LTD OUT OF THE TOTAL SALE PROCEEDINGS OF RS. 20 CRORES. (III) DESPITE THERE BEING SUCH A BIG DIFFERENCE BET WEEN THE COST OF CONSTRUCTION OF THE BUILDING AS VALUED BY THE GOVT. APPROVED VAL UER AT RS. 15,19,10,000/- AND RS. 2,74,50,768/- ONLY ACCOUNTED BY THE ASSESSEE, T HE AO DID NOT MAKE ANY ENQUIRY OR INVESTIGATION OF FACTS IN THIS REGARD. H E DID NOT APPLY 'HIS MIND TO SEE WHETHER ANY UNEXPLAINED INVESTMENT - WAS MADE IN TH E CONSTRUCTION OF THE PROPERTY FOR THE PURPOSE OF APPLICATION OF SEC. 69B . HE DID NOT EVEN REFER THE MATTER TO THE DISTRICT VALUATION OFFICER- FOR VALUA TION OF THE COST OF CONSTRUCTION OF THE SAID PROPERTY WHEN THE GAP BETWEEN THE VALUE ESTIMATED BY THE GOVT. APPROVED VALUER AND THAT OF THE ASSESSEE WAS SO LAR GE. (IV) THE AO DID NOT MAKE ANY INVESTIGATION OR CONDU CT ANY ENQUIRY REGARDING THE GENUINENESS OF THE SALE CONSIDERATION OF THE PR OPERTY COMPRISING OF SAID 2 PLOTS OF COMMERCIAL LAND AND HOTEL BUILDING WITH IN TERIORS AND OTHER 4 ITA NO.2202/MUM/2015- UMANG MADAN. DEVELOPMENTAL WORKS AT RS. 20 CRORES ONLY,WHEN IT W AS VALUED BY THE GOVT. APPROVED VALUER AT RS 30,19,10,000/-. (V) THE AO DID NOT MAKE ANY VERIFICATION FROM THE S TAMP DUTY AUTHORITY ALSO TO FIND OUT WHETHER THE PROVISION OF SEC. 50C WAS APPL ICABLE. SHRI OSANI, LD. A.R. OF THE ASSESSEE HAS NOT PRODUC ED ANY EVIDENCE TO SHOW THAT THE AO HAD RAISED ANY QUERY OR MADE ANY INVESTIGATION I N RESPECT OF ANY OF THE ABOVE ISSUES DURING THE ASSESSMENT PROCEEDING. SHRI OSANI , LD A.R. HAS ALSO NOT SUBMITTED ANY EVIDENCE TO SHOW THAT ANY SUBMISSIONS WERE MADE OR ANY DOCUMENTS WERE FILED WITH RESPECT TO THE ABOVE ISSUES BY THE ASSESSEE DU RING THE COURSE OF THE ASSESSMENT PROCEEDING. AS SUCH, THIS IS A CLEAR CASE OF INADEQ UATE INVESTIGATION ON THE GLARING VITAL ISSUES ON THE PART OF THE AO. IT IS A SETTLED POSITION OF LAW THAT THE ASSESSMENT MADE WITHOUT INQUIRY IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE AND PROCEEDING U/S. 263 LIES IN SUCH CASE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD, THE LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE HAS ARGUED THAT ASSESSEE HAS PROVIDED ALL DOCUMENT RELATING TO THE TRANSACTION OF THE PROPERT Y WHICH INCLUDES THE VALUATION REPORT, LEASE DEED DATED 24.12.2008, DEED OF SURRENDER OF LEASE, VALUATION REPORT DATED 07.09.2008 AND 05.03.2009 BOTH PREPARED GOVT. APPROVED VALUER, COP Y OF CONVEYANCE DEED DATED 19.02.2010 AND ARGUED THAT THE PAPER BOOK WHICH IS FILED BEFOR E US WERE FILED BEFORE THE AO. 5. WE HAVE SEEN THAT THE VALUATION REPORT WHICH WER E PREPARED AT THE INSTANCE OF ASSESSEE BY SHRI AVINASH KULKARNI, COPY OF WHICH AVAILABLE A T PAGE 50 OF PAPER BOOK CONTAINED THE REFERENCE THAT ESTIMATED COST OF CONSTRUCTION RS. 1 5,19,10,000/- WITH STATUS OF COMPLETION OF 100% AND COST OF FURNITURE AND FIXTURE, EQUIPMENT R S. 15,00,000,00/-. 6. THE AR OF ASSESSEE FURTHER ARGUED THAT AFTER SUB MISSION OF ALL THE DOCUMENT WHICH WAS THE AO TO CONSIDER THE SAME WHILE MAKING THE ASSESS MENT AND THAT THE SAME IS NOT FIND REFERENCE IN THE ASSESSMENT ORDER, THE ORDER IS NOT ERRONEOUS NOR CAN BE SAID PREJUDICIAL TO THE INTEREST OF REVENUE. 7. THE DEPARTMENTAL REPRESENTATIVE (DR) OF REVENUE HAD CATEGORICALLY ARGUED THAT AS PER GOVT. APPROVED VALUER, THE REPORT OF WHICH WAS PREP ARED AT THE INSTANCE OF ASSESSEE VALUED THE PROPERTY ALONG WITH THE INTERNAL WORK AT RS. 30,19, 10,000/- AND THE ASSESSEE HAS SHOWN THE SALE CONSIDERATION ONLY AT RS. 20 CRORE AND SUCH A HUGE DIFFERENCE IN THE SAID TWO FIGURES REQUIRED INVESTIGATION BY THE AO. 8. WE HAVE SEEN THAT THE ORDER OF AO IS SILENT ABOU T THE SALE CONSIDERATION AND THE TOTAL COST OF PROPERTY EVEN DOES NOT REFER WHETHER THE AO MADE ANY INVESTIGATION REGARDING THE GENUINENESS OF THE SALE CONSIDERATION. SIMILARLY, T HE ORDER OF AO IS SILENT, WHETHER THE AO 5 ITA NO.2202/MUM/2015- UMANG MADAN. MADE ANY VERIFICATION FROM STAMP AUTHORITY TO FIND OUT IF THE PROVISION OF SECTION 50C WAS APPLICABLE IN THE CASE OF ASSESSEE OR THE FAIR VALU E OF THE PROPERTY AT THE TIME OF SALE. 9. THE LD. AR OF THE ASSESSEE RELIED UPON THE JUDGM ENT FILED BEFORE US, PARTICULARLY, IN CASE TITLED AS CIT VS. J.P.GOEL 247 ITR 555(KOL) AND CIT VS. AMALGAMATION LTD. 238 ITR 963 (MADRAS). NONE OF THE AUTHORITY CITED BY THE LD. AR IS HELPFUL TO THE ASSESSEE AS FACTS OF BOTH THE CASES ARE AT THE VARIANCE AND ALTOGETHER DIFFER ENT. IN THE ASSESSMENT ORDER DATED 18.01.2013, THE AO HAS NOT REFERRED ANY OTHER SOURC E OF INCOME OR TRANSACTION DURING THE RELEVANT FINANCIAL YEAR (FY) ALTHOUGH ALL THE DETAI LS OF TRANSACTION MADE DURING THE FY WERE FILED, HOWEVER, THE AO HAS ONLY COMPUTED THE INCOME IN RESPECT OF INCOME FROM SALARY AND PROFESSION AND THE ORDER IS SILENT ABOUT THE INCOME FROM HOUSE PROPERTY, HENCE WE FIND NO ILLEGALITY IN THE ORDER PASSED BY CIT(A) BY INVOKIN G THE PROVISION OF SECTION 263 OF THE ACT. THE ORDER OF THE CIT(A) QUALIFY BOTH THE CONDITIONS CONTAINED IN THE SECTION 263 OF THE ACT. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/ 2015 SD/- SD/- (B. R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 18.11.2015 SK PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT- CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE //TRUE COPY// BY ORDER , (DY./ASSTT. REGISTRAR) ITAT, MUMBAI