DILIP G. KIRKIRE, MUMBAI V. A.C.I.T. CENTRAL CIRCLE 15 & 16, MUMBAI

ITA 2577/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75426 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 17-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 2577/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) LATE SHRI DILIP GOPAL KIRKIRE (THROUGH LEGAL HEIR SHRI SHAUNAK DILIP KIRKIRE) PLOT NO.104, FLAT NO.101, RAJ NIKETAN, HINDU COLONY, LANE-4, DADAR, MUMBAI-400 014 / VS. ASST. CIT, CENTRAL CIRCLE-15 & 16, MUMBAI ! ./' ./PAN/GIR NO. AEFPK 2576 Q ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# % / APPELLANT BY : SHRI ANIL SATHE $!# & % / RESPONDENT BY : SHRI R. K. SAHU ' ()* & + / DATE OF HEARING : 03.12.2013 ,-. & + / DATE OF PRONOUNCEMENT : 14.02.2014 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-39, MUMBAI (CIT(A) FOR SH ORT) DATED 23.01.2012, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2007-08 VIDE ORDER DATED 31.12.2009. 2 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT 2. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND F ACTS OF THE CASE. THE ASSESSEE, A THANE BASED DEVELOPER, ENTERED INTO A DEVELOPMENT A GREEMENT WITH THE OWNERS (CHAUDHARYS AND PATILS) ON 17.02.2006 TO DEVELOP A PLOT OF LAND ADMEASURING 1650 SQ. MTRS. AT GHODBUNDER ROAD, THANE. 45% OF THE CONSTRU CTION, AS PERMITTED BY THE BRIHANMUMBAI MUNICIPAL CORPORATION (BMC) SUBJECT TO A MINIMUM OF 5100 SQ. FT., AND ANOTHER 1000 SQ. FT. (AS WORKSHOP), WAS TO BE G IVEN BY THE ASSESSEE TO THE OWNERS FREE OF COST, I.E., BY WAY OF COST OF THE DEVELOPMENT RI GHTS, RETAINING THE BALANCE BUILT-UP AREA, BEING FLATS, FOR HIMSELF. FURTHER, VIDE CLAUSE 4 OF THE AGREEMENT, THE ASSESSEE WAS TO GIVE AN INTEREST-FREE DEPOSIT OF RS.15 LACS TO THE OWNER S, AS PER THE SCHEDULE SPECIFIED, WHO WOULD REFUND THE SAME ON DELIVERY OF THE FLATS TO T HEM. THE ASSESSEE SUBSEQUENTLY, I.E., VIDE A TRIPARTITE AGREEMENT DATED 08.08.2006 , ASSIGNED THE DEVELOPMENT RIGHTS UNDER THE PRINCIPAL AGREEMENT/S OF 17.02.2006 TO A PARTNERSHI P FIRM BY NAME M/S.SHRI SACHIDHANAND DEVELOPERS (SD), ALSO IN THE BUSINESS OF DEVELOPMENT OF PROPERTY, FOR A CONSIDERATION OF RS.18 LACS. HIS RETURN OF INCOME F OR THE YEAR, FILED ON 31.03.2009, HOWEVER, DISCLOSED A GAIN OF ONLY RS.2,80,130/-, AS UNDER, ON THE SAID TRANSACTION: PLOT DEVELOPMENT RIGHT TRANSFERRED TO SHRI SACHIDANAND DEVELOPERS (AMT. IN RS.) GROSS AMOUNT INCLUDING STAMP DUTY & REGISTRATION 19,34,800 LESS I) DEPOSIT GIVEN TO PLOT OWNER 15,00,000 II) STAMP DUTY PAID 1,24,670 III) REGISTRATION CHARGES 30,000 16,54,670 NET INCOME 2,80,130 IT WAS EXPLAINED THAT THE CONSIDERATION SPECIFIED I N THE AGREEMENT DATED 08.08.2006, I.E., RS.18 LACS, HAD BEEN WRONGLY SO STATED, AND IS IN F ACT TO BE RECKONED AT RS.3 LACS, BEING INCLUSIVE OF THE INTEREST-FREE DEPOSIT OF RS.15 LAC S, WHICH WAS IN FACT FINANCED BY THE ASSIGNEE, SD, ITSELF. THE PARTIES REALIZING THEIR M ISTAKE HAD ENTERED INTO A RECTIFICATION DEED, DULY REGISTERED, ON 03.11.2009 (PB PGS.130-138), CLARIFYING THAT THE REFUNDABLE DEPOSIT OF RS.15 LACS, AS WELL AS THE EXPENSES INCU RRED TOWARD STAMP AND REGISTRATION, FORM PART OF THE CONSIDERATION OF RS.18 LACS. THE S AME WAS FOUND NOT ACCEPTABLE. THE BASIS OF THE REVENUES CASE, SINCE CONFIRMED BY THE FIRST APPELLATE AUTHORITY, AND AFTER 3 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT CONSIDERING THE REMAND REPORT CALLED FOR BY HIM UPO N ADMITTING ADDITIONAL EVIDENCES U/R. 46A, IS THAT NO CASE FOR A MISTAKE IN THE ORIGINAL AGREEMENT DATED 17.02.2006 IS MADE OUT. BOTH THE ASSESSEE AND SD ARE DEVELOPERS, WELL CONVE RSANT IN LAND DETAILS, SO THAT A MISTAKE, WHICH CANNOT EVEN OTHERWISE BE LIGHTLY I NFERRED, BE SO IN THE INSTANT CASE. FURTHER, THE ASSIGNMENT WAS PER A REGISTERED DOCUME NT, THE VALUE OF WHICH FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION, WAS AGAIN T AKEN AT RS.18 LACS. THE PLEA OF THE CONSIDERATION HAVING BEEN WRONGLY MENTIONED THEREIN WAS THUS NOT ACCEPTABLE. THE ASSESSEES EXPLANATION WAS ACCORDINGLY REJECTED AS AN AFTERTHOUGHT. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3.1 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE (A R) WOULD EMPHASIZE ON THE LEGAL VALIDITY OF THE REGISTERED AGREEMENT DATED 03.11.20 09, WHICH COULD NOT BE DISMISSED AS AN AFTERTHOUGHT, AND IS TO BE READ ALONG WITH THE ASSI GNMENT DEED ITSELF, I.E., IN MODIFICATION/RECTIFICATION THEREOF. THE ASSIGNEE HA D ITSELF FINANCED THE INTEREST-FREE REFUNDABLE DEPOSIT, AND STANDS DULY REFLECTED IN IT S BOOKS FROM 17.02.2006 ONWARDS (PB PG.139). HOW COULD THE SAME BE THUS CONSIDERED AS AN AFTERTH OUGHT ? 3.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, IMPRESS UPON US THAT THE SO CALLED RECTIFICATION HAD BEEN CARR IED OUT ONLY IN NOVEMBER, 2009, I.E., OVER THREE YEARS AFTER THE ASSIGNMENT AND, FURTHER, MORE IMPORTANTLY, MUCH AFTER THE AGREEMENT HAD BEEN GIVEN EFFECT TO. IT WAS IN FACT EXECUTED ONLY AFTER THE MATTER WAS TAKEN UP BY THE ASSESSING OFFICER (A.O.), I.E., BY THE ISSUE OF NOTICES ON 10.07.2009, SO THAT THE MISTAKE BEING DETERMINED AND RECTIFIED IN NOVEMBER, 2009 IS NOT AN ACCIDENT. THE ASSESSEE IS NOT ONLY A DEVELOPER, BUT ALSO A QU ALIFIED ENGINEER, WITH THE ORIGINAL AGREEMENT (PB PGS.34-100) IN FACT DESCRIBING HIM AS A WELL-KNOWN DEVELOPER OF THANE (PARA 5). FURTHER, THE TWO, I.E., CONSIDERATION A ND REFUNDABLE DEPOSIT, ARE ENTIRELY DIFFERENT IN NATURE, SO THAT THERE IS NO QUESTION O F THE TWO BEING EVEN OTHERWISE MIXED-UP OR CONFUSED WITH EACH OTHER. IN FACT, THE ASSESSEE HAS ALSO NOT RETURNED THE INCOME AS PER THE RECTIFICATION DEED ITSELF INASMUCH AS THE EXPEN SES ON REGISTRATION, ETC. ARE NOT 4 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT DEDUCTED FROM THE GROSS CONSIDERATION OF RS.18 LACS ; THE DIFFERENCE BETWEEN THE TWO INCOMES, I.E., AS RETURNED AND ASSESSED, BEING EXAC TLY RS.15 LACS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, GIVING OUR CAREFUL CONSIDERATION TO THE MATTER. 4.1 IN OUR VIEW, INASMUCH AS THE QUESTION OF WHETHE R THE CONSIDERATION OF RS.18 LACS SPECIFIED IN THE AGREEMENT DATED 08.08.2006 (PB PGS .101-129), DULY REGISTERED, IS WRONGLY SO SPECIFIED, AND IS THUS INCLUSIVE OF THE REFUNDABLE DEPOSIT OF RS.15 LACS, OR NOT SO, WHICH ARISES FOR ADJUDICATION, IS TO BE DETERMI NED ON A CONJOINT READING OF THE DIFFERENT AGREEMENTS AND A CONSIDERATION OF THE SUR ROUNDING CIRCUMSTANCES, NOTHING MUCH TURNS ON THE PARTIES BEING EXPERTS OR QUALIFIED PER SONS OR, FOR THAT MATTER, THE REGISTRATION OF THE RECTIFICATION AGREEMENT DATED 03.11.2009, WH ICH STANDS ADMITTEDLY ENTERED INTO MUCH AFTER THE TRANSACTION HAD BEEN CLOSED, AND ONL Y WHEN THE ASSESSEES RETURN FOR THE RELEVANT YEAR STOOD SELECTED FOR BEING SUBJECT TO T HE VERIFICATION PROCEDURE UNDER THE ACT AND WAS UNDER CONSIDERATION BY THE ASSESSING AUTHOR ITY. THAT APART, THE ASSIGNMENT DEED DATED 08.08.2006 IS A REGISTERED DOCUMENT AND, THUS , BOTH ADMISSIBLE IN EVIDENCE IN A COURT OF LAW AND A LEGALLY ENFORCEABLE (BINDING) CO NTRACT. ITS EFFECT CANNOT BE WHITTLED BY ENTERING INTO A RECTIFICATION DEED, MORE SO AS THE SAID DEED DOES NOT EXPLAIN THE BASIS OR THE REASON FOR THE MISTAKE, WHICH EXTENDS TO A PRIN CIPAL INGREDIENT OF THE CONTRACT, I.E., CONSIDERATION. THE SAME COULD AT BEST BE CONSIDER ED AS A MODIFICATION TO THE TERMS OF THE EARLIER AGREEMENT, SO THAT THE IMPUGNED INCOME OF RS.15 LACS STOOD ACCRUED TO THE ASSESSEE DURING THE RELEVANT YEAR, WHICH COULD THOU GH BE CLAIMED BY WAY OF LOSS/BAD DEBT ON THE BASIS OF THE SUBSEQUENT AGREEMENT OF 2009. T HE SAME WOULD HOWEVER RAISE THE ISSUE OF GENUINENESS OF THE SUBSEQUENT WAIVER/AGREE MENT. IN FACT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE SAME BEING ENTERED I NTO MUCH AFTER THE CLOSE OF THE TRANSACTION, I.E., AFTER BOTH THE PARTIES HAD PERFO RMED THEIR PART OF THE CONTRACT, OR SUBSTANTIALLY SO - INASMUCH AS THE DATE/S OF THE PA YMENT OF THE ADMITTED CONSIDERATION OF RS.3 LACS IS NOT SPECIFIED OR BORNE OUT BY THE RECO RD, IS TO NO CONSEQUENCE, AND HAS BEEN, AS APPARENT, ENTERED INTO ONLY WITH A VIEW TO SATIS FY THE REVENUE AUTHORITIES. 5 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT 4.2 SO HOWEVER, ON A CONSIDERATION OF THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE ASSESSEE WAS ENTITLED TO A CONSIDERATION OF RS. 3 LACS ONLY ON ASSIGNMENT AND, ACCORDINGLY, HAS RIGHTLY RETURNED H IS NET INCOME THEREFROM, I.E., SUBJECT TO THE ADJUSTMENT OF INCIDENTAL EXPENSES. WE SAY SO FOR MORE THAN ONE REASON. THE INTEREST-FREE DEPOSIT, EVEN AS ADMITTED BY THE LD. CIT(A), AS PAID UP TO THE DATE OF THE ASSIGNMENT (RS.6 LACS), WAS PAID FOR OR FINANCED ON LY BY THE ASSIGNEE, SD. IN FACT, EVEN THE SUBSEQUENT PAYMENTS TO THE OWNERS, I.E., FOR TH E BALANCE RS.9 LACS (ALL OF WHICH STAND LISTED AT PAR 5, PG. 5 OF THE IMPUGNED ORDER), BY T HE ASSESSEE TO THE OWNERS, ARE ONLY OUT OF THE MONEYS ADVANCED TO HIM BY SD, DULY REFLECTING T HE SAME AS A RECEIVABLE (BY WAY OF REFUNDABLE DEPOSIT) IN ITS ACCOUNTS (PB PG. 139), W HICH WOULD ONLY HAVE BEEN DISCLOSED TO THE REVENUE PER ITS ANNUAL ACCOUNTS, AND FOR EAC H OF THE INTERVENING YEARS. THE FINANCING BY THE ASSIGNEE STANDS IN FACT CONFIRMED BY THE LD. CIT(A) VIDE PARA 5.9.3 OF HIS ORDER. WHY WOULD, ONE MAY ASK, THE ASSESSEE CONTINUE TO MA KE PAYMENTS TO THE OWNERS AFTER HAVING ASSIGNED HIS INTEREST IN THE DEVELOPME NT AGREEMENT/S ON 08.08.2006, OF WHICH THE OWNERS ARE IN FACT A PART AS A THIRD, CON FIRMING PARTY, OR THE ASSIGNEE CONTINUE TO FINANCE THE SAME ? BOTH THE ASSIGNOR AND THE ASSIGNEE CONSIDERED IT AS A PART OF THE FORMERS UNPERFORMED OBLIGATION TO THE OWNERS UNDER THE PRINCIPAL AGREEMENT/S. THIS IS WHAT THE ASSESSEE DRAWS ATTENTION TO WHEN HE STATES THAT IT IS NOT A COINCIDENCE THAT THE PAYMENT SCHEDULE OF (DEPOSIT OF) RS.15 LACS AND THA T OF (CONSIDERATION OF) RS.18 LACS, BOTH SPECIFIED UNDER THE RESPECTIVE AGREEMENTS, AGR EE. THERE IS, IT IS TO BE NOTED, NO MENTION OF THE REFUNDABLE DEPOSIT (OF RS.18 LACS) I N THE SUBSEQUENT (ASSIGNMENT) AGREEMENT, AND WHICH CANNOT BE INASMUCH AS THE OWNE RS HAD ALREADY RECEIVED RS.6 LACS BY THAT DATE. THE SAID AMOUNT, ACCORDINGLY, FINDS M ENTION AS A RECEIPT BY THE ASSESSEE ASSIGNOR AT PG.19 OF THE AGREEMENT DATED 08.08.2006 (PB PG.119). FURTHER, WHY WOULD THE OWNERS ALSO NOT INSIST FOR THE BALANCE RS.9 LACS; T HE ASSIGNMENT CARRYING ALL THE TERMS AND CONDITIONS OF THE PRINCIPAL AGREEMENT/S ? THE LD. CIT(A), WHILE ACCEPTING THAT THE ASSESSEE DID NOT MAKE ANY INVESTMENT IN THE PROJECT , WHICH HAD NOT EVEN COMMENCED AS ON THE DATE OF THE ASSIGNMENT, AND WAS ONLY A MIDDL E MAN, YET CONTINUES TO BE GUIDED BY THE LACK OF CREDIBILITY OF THE RECTIFICATION DEED ( WHICH WE ENDORSE, STATING OUR REASONS FOR 6 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT THE SAME), DESPITE CLEAR FINDINGS CORROBORATING THE ASSESSEES STAND. ALL THAT THE REVENUE WAS, IN OUR VIEW, REQUIRED TO DO TO SATISFY ITSELF IN THE MATTER WAS TO EXAMINE THE VERACITY OF THE ACCOUNTING ENTRIES MADE BY SD IN ITS REGULAR BOOKS (PB PG.139). THIS IS AS WHY WOULD IT NOT OTHERWISE CLAIM RS.18 LACS THE AGREE D CONSIDERATION IN ITS BOOKS, BEING ADMISSIBLE AS EXPENDITURE TOWARD WORK-IN-PROGRESS ( WIP). THIS WOULD AT ONCE SATISFY OR QUELL ITS DOUBTS WITH REFERENCE TO AN EXTERNAL EVID ENCE. A DIFFERENT TREATMENT, AS BY WAY OF REFLECTING RS.15 LACS AS A DEPOSIT ACCOUNT, ONLY SHOWS OF ITS BEING A PART OF THE SALE CONSIDERATION OF RS.18 LACS. THE INFERENCE OF AN AFTER-THOUGHT IS INCONSISTENT W ITH AND NOT BORNE OUT OF THE MATERIAL ON RECORD, AS WELL AS THE CONDUCT OF THE P ARTIES EVEN PRIOR TO THE EXECUTION OF THE RECTIFICATION DEED, INCLUDING THE RETURNING OF THE INCOME ITSELF ON THE TRANSACTION BY THE ASSESSEE IN MARCH, 2009 . THE SAME, IT WOULD BE NOTED, MATCHES WITH THE NET O F THE OTHER SUMS RECEIVED AND PAID, AT RS. 1,34,800/- AND RS. 1 ,54,670/- RESPECTIVELY (REFER PARA 2 ABOVE), UP TO THE LAST RUPEE, AND AT VARIANCE WITH THE RECTIFICATION DEED ITSELF . THE INFERENCE OF AN AFTER-THOUGHT COULD THOUGH EXTEND T O THE SAID DEED, HAVING BEEN ENTERED INTO MUCH LATER EVIDENTLY WITH A VIEW TO SATISFY TH E REVENUES DOUBTS IN THE MATTER. THE SAME IS IRRELEVANT UNDER THE CIRCUMSTANCES, AND STA NDS IGNORED BY US (ALSO REFER PARA 4.1). 4.3 IN VIEW OF THE FOREGOING, WE ARE OF THE CLEAR V IEW THAT THE ASSESSEES CLAIM OF THE STATED CONSIDERATION OF RS.18 LACS UNDER THE ASSIGN MENT DEED IS INCLUSIVE OF RS.15 LACS TO BE PAID TO THE OWNERS BY WAY OF A REFUNDABLE DEPOSI T, IS CORRECT AND, ACCORDINGLY, THE SAME STOOD RIGHTLY DEDUCTED IN COMPUTING THE CAPITA L GAIN ARISING THERETO ON ASSIGNMENT. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 0. 1 (230 & ) 4 & 56 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 14, 2014 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 7( DATED : 14.02.2014 7 ITA NO.2577/MUM/2012 (A.Y. 2007-08) LATE SHRI DILIP G. KIRKIRE VS. ASST. CIT ).(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $ !# / THE RESPONDENT 3. ' 8 ( ) / THE CIT(A) 4. ' 8 / CIT - CONCERNED 5. ;)<= $ (>2 , + >2. , ' * / DR, ITAT, MUMBAI 6. =?3 @* / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI