Shri Mukeshkumar K. Patel, Ahmedabad V. The Income Tax Officer, Ward-14(2), Ahmedabad

ITA 246/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8503 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Bonafide belief
• Section: 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO. 246/AHD/2015 ( / ASSESSMENT YEAR : 2007-08) SHRI MUKESHKUMAR K. PATEL B-13, SARASWATI NAGAR SOC., OPP. ONGC AVNIBHAVAN, SABARMATI, AHMEDABAD - 380061 # VS. THE ITO, WARD 14(2), AHMEDABAD $ # % & # PAN/GIR NO. : AEEPP 9698 H ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI TUSHAR P. HEMANI, A.R. ($'*) / RESPONDENT BY : SHRI JAMES KURIAN, SR. D.R. + ,*-. / DATE OF HEARING 31/08/2017 /012*-. / DATE OF PRONOUNCEMENT 26/09/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-5, AHMEDABAD, D ATED 30/12/2014 FOR THE ASSESSMENT YEAR (AY) 2007-08, ON THE FOLLOWING GROUNDS: I. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN REOPENING TH E ASSESSMENT U/S.147 OF THE ACT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ITA NO. 246/AHD /2015 MUKESH KUMAR K. PATEL VS. ITO ASST.YEAR 2007-08 - 2 - LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE ACTION O F REOPENING IS WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACTS. II. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.4,53,570/- MA DE IN RESPECT OF INTEREST INCOME ON RECEIPT BASIS INSTEAD OF ACCR UAL BASIS IN SPITE OF THE FACT THAT THE SAID INTEREST PERTAINED TO EARLIER ASSESSMENT YEARS. LD; CIT(A) HAS FURTHER ERRED IN N OT APPRECIATING THAT OUT OF THE TOTAL SUM OF RS.4,53,5 70/-, THE APPELLANT HIMSELF HAS SHOWN A SUM OF RS.63,498/- IN THE RETURN OF INCOME FILED BY HIM. III. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THA T IT IS A SETTLED LEGAL POSITION OF LAW THAT INTEREST ON ENHANCED COM PENSATION FOR LAND COMPULSORILY ACQUIRED UNDER THE LAND ACQUISITI ON ACT, 1894 CANNOT BE TAKEN TO HAVE ACCRUED ON THE DATE OF THE ORDER OF THE COURT GRANTING ENHANCED COMPENSATION BUT HAS TO BE TAKEN AS HAVING ACCRUED YEAR AFTER YEAR FROM THE DATE OF DELIVERY OF POSSESSION OF LANDS TILL THE DATE OF SUCH ORDER. IV. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS W ITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHE R ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IM PUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN C LEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. V. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INTEREST U/S.234A/B/C OF THE ACT. VI. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN INITIATING PENAL TY U/S 271(1)(C) OF THE ACT. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO. 246/AHD /2015 MUKESH KUMAR K. PATEL VS. ITO ASST.YEAR 2007-08 - 3 - IN THIS CASE, THE APPELLANT HAS RECEIVED TOTAL INTE REST OF RS.4,53,570/- IN THE FINANCIAL YEAR 2006-07. THE AP PELLANT HAS COMPUTED INTEREST FROM F.Y. 2001-02 TO 2006-07 AS UNDER:- SR. NO. F.Y. A.Y. INT. AMOUNT RECEIVED (RS.) 1/4 TH SHARE 1. 2001-02 2002-03 1,14,185 28,546 2. 2002-03 2003-04 3,04,495 76,123 3. 2003-04 2004-05 3,80,168 95,155 4. 2004-05 2005-06 3,80,168 95,155 5. 2005-06 2006-07 3,80,168 95,155 6. 2006-07 2007-08 2,53,747 63,436 TOTAL 18,14,281 4,53,570 2.2 THE APPELLANT HAS NOT SHOWN INTEREST INCOME ON THE ACCRUAL BASIS IN THE RELEVANT ASST. YEAR 2002-03 TO 2006-07. THE APPELLANT HAS NOT GIVEN ANY DETAILS TO SHOW THAT IT WAS FOLLOWING THE ACCRUING SYSTEM OF ACCOUNTING AND ACCORDINGLY THE INTEREST TO THE EXTE NT OF RS.63,436/- AND NOT THE FULL INTEREST AMOUNT OF RS.4,53,570/- WAS T AXABLE IN THE HANDS IN THE YEAR UNDER CONSIDERATION. SINCE BEING THE INDIV IDUAL THE APPELLANT MUST BE FOLLOWING THE RECEIPT METHOD OF ACCOUNTING AND IN THE YEAR UNDER CONSIDERATION THE ENTIRE INTEREST HAVE BEEN RECEIVE D BY THE APPELLANT THEREFORE THE SAME IS LIABLE TO BE TAXED IN THE YEA R UNDER CONSIDERATION ITSELF AND AO MADE THE ADDITION OF RS.4,53,570/-. 3. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO. 246/AHD /2015 MUKESH KUMAR K. PATEL VS. ITO ASST.YEAR 2007-08 - 4 - 4. NOW APPELLANTS APPEAL IS BEFORE US. 5. WE HAVE GONE THROUGH THE IMPUGNED ORDER AND HEAR D THE SUBMISSIONS OF BOTH THE PARTIES. 5.2 GROUND NO.1 IS NOT PRESSED. 5.3 LEARNED AR STATED THAT DURING THE F.Y. ASSESSEE AND HIS MOTHER SAKARBEN K. PATEL, BROTHER SHAILESHKUMAR K. PATEL A ND SISTER ILABEN K PATEL HAVE RECEIVED INTEREST AMOUNT TO RS.18,14,281 /- AS HEIRS OF DECEASED KESHAVLAL MARGHABHAI PATEL. THEY HAVE NOT SHOWN SHARE OF SAID INTEREST INCOME IN THE HEIRS INDIVIDUAL RETURN AS THEY WERE UNDER BONAFIDE BELIEF THAT THE TOTAL COMPENSATION RECEIVE D IS FOR COMPULSORY ACQUISITION OF AGRICULTURAL LAND. HENCE, IT IS EXEM PT FROM INCOME TAX. THERE BELIEF FOR EXEMPT FROM INCOME TAX WAS SUPPOR TED BY READING OF AWARD IN WHICH HONOURABLE JUDGE HAVE MENTIONED T HAT ALL THE OPPONENT DIRECTED TO PREVENT THE DEDUCTION OF INCOM E TAX THUS THEY BELIEVED THAT THE SAID COMPENSATION IS TOTALLY EXEM PT FROM TAX. THUS AS FACT MENTIONED ABOVE ON BONAFIDE BELIEF AND THERE W AS NO INTENTION TO NOT TO PAY TAX ON INTEREST INCOME, THEY HAVE NOT SHOWN THE SHARE OF THE SAID INTEREST INCOME OF RS.18,14,281/- IN RESPECTIVE HEI RS INDIVIDUAL RETURN OF INCOME. ON KNOWING THE FACTS THAT SHARE OF INTERES T RECEIVED UNDER AWARD IS TO BE SHOWN IN THE INDIVIDUAL RETURN OF IN COME OF THE HEIRS. ITA NO. 246/AHD /2015 MUKESH KUMAR K. PATEL VS. ITO ASST.YEAR 2007-08 - 5 - THUS, ASSESSEE OFFERED HIS SHARE OF INTEREST INCOME AMOUNT TO RS.4,53,570/- (1/4 TH OF RS.18,14,281/-). 5.4 LEARNED AR ALSO CITED AN ORDER OF COORDINATE BE NCHS DECISION IN THE CASE OF SAKARBEN K. PATEL VS. ITO, WHO IS ALSO BENEFICIARY OF THE AWARD IN ITA NO.2989/AHD/2013 FOR A.Y.2007-08, IN W HICH HONBLE BENCH HELD THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF MOVALIYA BHIKUBHAI BALABHAI VS. ITO [(2016) 388 ITR 343 (GUJ )] INTEREST AWARDED UNDER SECTION 28 OF THE LAND ACQUISITION AC T, AS ADMITTEDLY THE INTEREST IN THIS CASE IS, IS AN ACCRETION TO ENHANC ED COMPENSATION AND IS REQUIRED TO BE TREATED AS CONSIDERATION ON TRANSFER WHICH CAN BE BROUGHT TO TAX AS CAPITAL GAINS. IN THE PRESENT CASE, THE L AND TRANSFERRED IS AN AGRICULTURAL LAND AND, THEREFORE, IT CANNOT BE TAXE D AS CAPITAL GAINS SINCE THE AGRICULTURAL LAND WILL FALL OUTSIDE THE AMBIT O F 'ASSET'. IN THIS VIEW OF THE MATTER, THE PLEA RAISED BY THE ASSESSING OFFICE R FOR TAXATION OF INTEREST, ON RECEIPTS BASIS, IS DEVOID OF LEGALLY S USTAINABLE BASIS. WHILE I DECLINE TO DEAL WITH THE INCOME ALREADY OFFERED TO TAX BY THE ASSESSES, ON HER OWN, I HOLD THAT THE ADDITION OF RS 3,90,034 WA S VITIATED IN LAW. I DIRECT THAT THIS ADDITION OF RS 3,90,034 BE DELETED AND APPEAL ALLOWED IN THE TERMS INDICATED ABOVE. 6. RESPECTFULLY, FOLLOWING THE ABOVE SAID JUDGMENT, SAME IS PERTAINED TO THE MATTER OF THE ASSESSEE. THEREFORE, WE ALLOW THIS APPEAL OF THE ASSESSEE. ITA NO. 246/AHD /2015 MUKESH KUMAR K. PATEL VS. ITO ASST.YEAR 2007-08 - 6 - 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 26 / 09 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/09/2017 PRITI YADAV, SR.PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4 ! 5 / THE CIT(A)-5, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 20/09/2017 (DICTATION-PAD 5 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21/09/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER