PARVINCHAND N. SEHGAL, MUMBAI V. ITO 24(3)(2), MUMBAI

ITA 2304/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0232 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2304/MUM/2016 ASSESSMENT YEAR: 2010 - 11 M/S. PRAVINCHAND N. SEHGAL VS. ITO - 24(3)(2), PROP. N.P. TEXTILE 707, 7 TH FLOOR MUMBAI - 400051 AUTO COMMENCE HOUSE, H.G. ROAD. OPP. KENNEDY BRIDGE, GRANT ROAD (W) MUMBAI 400007 PAN NO. AAPPS5941M (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. DEEPAK TRALSHAWALA, AR REVENUE BY: MR. SAURABH KUMAR R AI, DR DATE OF HEARING : 22 /0 5 /2017 DATE OF PRONOUNCEMENT: 18/08/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 42, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READ S AS UNDER: - THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE A.O. ARRIVING AT SHORT TERM CAPITAL GAIN OF RS.39,44,085/ - AS AGAINST RS.8,44,085/ - DECLARED BY THE ASSESSEE IN RESPECT OF SALE OF FACTORY ITA NO. 2304/MUM/2016 2 PREMISES IN KAMALA BHAVAN INDUSTRIAL PREMISES CO - OP. SOCIETY LTD., GOREGAON (E), MUMBAI - 400063. 3. BRIEFLY STATE D , THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO), ON VERIFICATION OF THE COMPUTATION OF INCOME, NOTICED THAT THE ASSESSEE HAD OFFERED CAPITAL GAINS OF RS.1, 91,937/ - IN RESPECT OF SALE OF IMMOVABLE PROPERTY BEING SHOP AT KAMALA BHAVAN INDUSTRIAL P REMISES CO - OP. SOCIETY LTD., GOREGAON (E), MUMBAI - 63. HOWEVER, THE ASSESSEE HAD NOT COMPUTED THE CAPITAL GAINS. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE FILED A LETTER DATED 17.12.2012 ALONG WITH A COPY OF SALE AND PURCHASE AGREEMENT OF TH E SHOP. THE AO AFTER VERIFICATION OF THE SALE AGREEMENT FOUND THAT THE AGREEMENT VALUE OF SHOP WAS RS.33,00,000/ - WHEREAS THE MARKET VALUE ADOPTED BY THE STAMP DUTY AUTHO RITY HA D BEEN SHOWN AT RS.39,72,587/ - . ACCORDINGLY, THE ASSESSEE REVISED HIS SHORT TERM CAPITAL GAINS ( STCG ) FROM RS.1,91,937/ - TO RS.8,44,085/ - CONSIDERING THE SALE VALUE AS PER SECTION 50C OF THE ACT . ON VERIFICATION OF THE REVISED COMPUTATION OF CAPITA L GAINS, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN THE SHOP AS BUSINESS ASSETS AND CALCULATED THE CAPITAL GAINS AS PER SECTION 50 OF THE ACT . THE ASSESSEE HAD ALSO CLAIMED DEDUCTION ON ADDITION TO FIXED ASSET PURCHASED VIDE AGREEMENT DATED 20.03.2010 WITH HIS HUF. FURTHER THE AO AFTER VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE FOUND THAT HE HAD ENTERED INTO AN AGREEMENT OF PURCHASE OF SHOP ALONG WITH HIS HUF FOR A TOTAL CONSIDERATION OF RS.1,31,00,000/ - OUT OF WHICH HE HAD MADE PAYMENT OF RS.31,00,0 00/ - ONLY IN THE SUBSEQUENT YEAR I.E. FY 2010 - 11. SINCE THE ADDITION TO THE FIXED ASSETS WAS NOT PURCHASED DURING THE IMPUGNED ASSESSMENT YEAR, THE AO ASKED THE ASSESSEE TO EXPLAIN WHY RS.39,44,085/ - SHOULD NOT BE TAXED ITA NO. 2304/MUM/2016 3 AS STCG IN PLACE OF RS.8,44,085/ - . I N RESPONSE TO IT, THE ASSESSEE FILED A REPLY DATED 2 8 .02.2013 BEFORE THE AO STATING THAT (I) THE ADDITION TO ASSET HAS BEEN MADE IN THE CURRENT YEAR ITSELF AS DOCUMENT HAS BEEN REGISTERED IN THE CURRENT YEAR, (II) THE POSSESSION HAS BEEN RECEIVED IN THE CU RRENT YEAR, (III) SECTION 50(1)(III) DOES NOT SAY THAT FULL PAYMENT HAS TO BE MADE TO CLAIM DEDUCTION. HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND CALCULATED THE STCG U/S 50 AS UNDER: SALE VALUE OF SHOP (MARKET VALUE) RS.39,72,587 LESS: WDV RS.28,502 SHORT TERM CAPITAL GAIN U/S 50 RS.39,44,085 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT (I) THE ASSESSEE HA D ENTERED INTO A SALE AGREEMENT DATED 20.03.2010 WITH GORKAP PROPERTIES AND INVESTMENT PVT. LTD., (II) THE ASSESSEE HAD AGREED TO PURCHASE AN UNDER - CONSTRUCTION SHOP FROM THE BUILDER, (III) AS ON THE DATE OF THE SAID AGREEMENT, THE ONLY ASSET WITH THE ASSES SEE WAS A RIGHT TO HAVE THE PROPERTY HANDED OVER TO IT AFTER IT WAS CONSTRUCTED I.E. RIGHT OF SPECIFIC PERFORMANCE, (IV) THE ASSET DID NOT EXIST AND IT WAS ALSO NOT IN THE POSSESSION OF THE ASSESSEE, (V) AN EXAMINATION OF THE SALE AGREEMENT ALSO PROVED NON - EXISTENCE OF THE NEW ASSET, (VI) THERE WAS NO BUILDING WITH THE ASSESSEE AND THE SHOP WAS ULTIMATELY CONSTRUCTED AND HANDED OVER TO THE ASSESSEE ONLY ON 01.06.2013 I.E. AFTER MORE THAN THREE YEARS , (VII) THE ASSESSEES BLOCK OF ASSET OF BUILDING HAD CEASE D TO EXIST AS ON 31.03.2010 BY VIRTUE OF THE SALE OF HIS GALA, (VIII) THE ASSESSEE HAD ACQUIRED ONLY A RIGHT TO GET A PROPERTY, IT WAS NOT THE SAME AS GETTING THE PROPERTY ITSELF AND (IX) THE AGREEMENT WITH THE ITA NO. 2304/MUM/2016 4 PROMOTERS DID NOT SPECIFY THE SHARE OF THE AS SESSEE AND THE HUF IN THE PROPOSED PROPERTY. IN VIEW OF THE ABOVE, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO IN TAXING RS.39,44,085/ - AS STCG . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES (I) A COPY OF AGREEMENT BETWEEN THE ASSESSEE AND GORKAP PR OPERTIES & INVESTMENT PVT. LTD. , (II) COMMENCEMENT CERTIFICATE. RELIANCE IS ALSO PLACED BY HIM ON THE DECISION IN FIBRE BOARDS (P) LTD. VS. CIT (2015) 376 ITR 596 (SC) AND INDOGEM VS. ITO (2016) 7 2 TAXMANN.COM 315 (MUMBAI - TRIB). 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). HE SUBMITS THAT IN THE INSTANT APPEAL WHEN ASSESSEE SOLD HIS GALA, HE HAD NO ASSETS LEFT. THE ASSESSEE THEN ENTERED INTO A SALE AGREEMENT TO PURCHASE AN UNDER - CONSTRUCTION PREMISE A ND SINCE THE OFFICE PREMISES WERE NOT PUT TO READY USE AT ALL DURING THE YEAR, THERE WAS NO ADDITION TO THE FIXED ASSETS AND HENCE, THE BENEFIT OF SUB - CLAUSE (III) OF SUB - SECTION (1) OF SECTION 50 COULD NOT BE GIVEN. THE LD. DR ALSO PLEADS THAT AS ON THE DATE OF AGREEMENT DATED 20.03.2010 WITH M/S GORKA PROPERTIES & INVESTMENT PVT. LTD., THE ONLY ASSET WITH THE ASSESSEE WAS A RIGHT TO HAVE THE PROPERTY HANDED OVER TO HIM AFTER IT WAS CONSTRUCTED I.E. RIGHT OF SPECIFIC PERFORMANCE. THE ASSET DID NOT EXIST A ND IT WAS ALSO NOT IN THE POSSESSION OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IMMOVEABLE PROPERTY IS NOT CONVEYED BY DELIVERY OF POSSESSION, BUT BY A DULY REGISTERED DEED. ONCE THE EXECUTED ITA NO. 2304/MUM/2016 5 DOCU MENTS ARE REGISTERED, THE TRANSFER WILL TAKE PLACE ON THE DATE OF EXECUTION OF DOCUMENTS AND NOT ON THE REGISTRATION OF DOCUMENTS. WE REFER HERE TO THE DECISION IN ALAPATI VENKATARAMIAH VS. CIT (1965) 57 ITR 185(SC) AND CIT VS. PODAR CEMENTS PVT. LTD (1997 ) 226 ITR 625(SC). IN FIBRE BOARDS (P) LTD. (SUPRA) , THE HONBLE SUPREME COURT HAS HELD: - THAT UNDER SECTION 54G THE ASSESSEE IS GIVEN WINDOW OF THREE YEARS AFTER DATE ON WHICH TRANSFER HAS TAKEN PLACE TO PURCHASE NEW MACHINERY OR PLANT OR ACQUIRE BUILDING OR LAND. THIS IS WHY THE EXPRESSION USED IN 54G(2) IS WHICH IS NOT UTILIZED BY HIM FOR ALL OR ANY OF THE PURPOSES AFORESAID. FOR THE ASSESSMENT YEAR IN QUESTION ALL THAT WAS REQUIRED FOR THE ASSESSEE SEE TO AVAIL OF THE EXEMPTION CONTAINED IN TH E SECTION WAS TO UTILISE THE AMOUNT OF CAPITAL GAINS FOR PURCHASE AND ACQUISITION OF NEW MACHINERY OR PLANT AND BUILDING OR LAND. ADMITTEDLY, THE ENTIRE AMOUNT CLAIMED IN THE ASSESSMENT YEAR IN QUESTION HAD BEEN SO UTILIZED FOR PURCHASE OR ACQUISITION OF NEW MACHINERY OR PLANT AND LAND OR BUILDING. THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SECTION 54G. WE FIND THAT THE ASSESSEE HAS FILED A LETTER DATED 28.02.2013 IN RESPONSE TO THE LETTER DATED 20.02.2013 BEFORE THE AO STATING THAT : - WE HAVE TO STA TE THAT THE ADDITION TO ASSET IS MADE IN THE CURRENT YEAR ITSELF AS THE DOCUMENT HAS BEEN REGISTERED IN THE CURRENT YEAR , BESIDES THE POSSESSION HAS BEEN RECEIVED IN THE CURRENT YEAR. THE ONLY THING IS THE PART PAYMENT WHICH HAS BEEN MADE IN THE SUBSEQUENT YEAR. ALSO THE ASSESSEE HAS FILED A SUBMISSION BEFORE THE LD. CIT(A) ON 25.01.2016 STATING THAT: - THE ASSESSEE HAD PURCHASED ALONG WITH MR. PRAVINCHAND SEHGAL (HUF) , PREMISES IN DILKAP CENTRE AT VILLAGE MOHILI LOBO COMPOUND, ANDHERI , KURLA ROAD , SAKI NA KA, ANDHERI(E), MUMBAI FOR RS.1,31,00,000/ - (INCLUDES ASSESSEES SHARE OF RS. ITA NO. 2304/MUM/2016 6 31,00,000/ - ) VIDE AGREEMENT DATED 20.03.2010 DULY REGISTERED DURING THE YEAR. THE DOWN PAYMENT AND BALANCE PAYMENTS WERE MADE BY THE HUF AMOUNTING TO RS.1 CRORE AS ON 31.03.2010. THE ASSESSEE PAID RS.31,00,000/ - IN THE SUBSEQUENT YEAR BUT HAD TAKEN CREDIT OF THE SAME DURING THE YEAR SINCE THE PREMISES WERE PURCHASED DURING THE YEAR. WE FIND THE ABOVE SUBMISSION OF THE ASSESSEE WHICH WOULD DECIDE THE ISSUE AT HAND HAS NOT BEEN EX AMINED BY THE AO OR THE LD. CIT(A). IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT IN THE LIGHT OF OUR OBSERVATION AT PARA 7 HERE - IN - ABOVE AND AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE PERTINENT DETAILS BEFORE THE AO. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 18/08/2017 . SD/ - SD/ - (MAHAVIR SI NGH) (N.K. PRADHAN) J UDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 18/08/2017 RAHUL SHARMA, SR. P.S. 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI