ITO ACIT 31(2), Mumbai V. SMT. JAYANTI S CHAKRABORTY , Mumbai

ITA 2651/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2594 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 271(1)(c); 143(3); 54F; 13; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI M. BALAGANESH , HON'BLE ACCOUNTANT MEMBER ITA NO . 2651 /MUM/201 9 (A.Y : 2012 - 13 ) ACIT 31(2 ) ROOM NO. 107, C - 13, 1 ST FLOOR PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E), MUMBAI - 400 051 V . SMT JAYATI S. CHAKRABORTY 1803/1804, OBERAI WOODS MOHAN GOKHALE ROAD GOREGAON (E), MUMBAI 400 063 PAN: AAOPC5980B (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : MS. USHA GAIKWAD DATE OF HEARING : 11.11.2020 DATE OF PRONOUNCEMENT : 17 .11.2020 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 42 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 31.01.2019 FOR THE ASSESSMENT YEAR 2012 - 13 . 2. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT THE LD.CIT(A) DELETED THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT ON TH E GROUND THAT 2 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY QUANTUM ADDITIONS/ DISALLOWAN CE WERE DELETED BY THE HON'BLE ITAT VIDE ORDER DATED 18.10.2018 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . 3. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE OFF THIS A PPEAL ON HEARING THE LD. DR ON MERITS. 4. LD. DR FAIRLY SUBMITTED THAT IN THIS CASE THE HON'BLE BENCH HAD DELETED THE ADDITIONS/DISALLOWANCES MADE IN T HE ASSESSMENT ORDER PASSED U/S. 143(3) OF T HE ACT . LD. DR FURTHER SUBMITTED THAT REVENUE FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT CHALLENGING THE ORDER OF THE TRIBUNAL . THEREFORE, LD. DR REQUESTED TO SET - ASIDE THE ORDER OF THE LD.CIT(A). 5. HEARD LD. DR , PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS THE FINDING OF THE LD.CIT(A) THAT THE TRIBUNAL HAD DELETED THE ADDITIONS/DISALLOWANCES MADE IN THE QUANTUM PROCEEDINGS VIDE ORDER DATED 18/10/2018 AND S INCE THE ADDITION S MADE IN THE QUANTUM PROCEEDINGS WAS DELETED BY THE TRIBUNAL THE LD.CIT(A) DELETED T HE PENALTY OBSERVING AS UNDER: - 5.1 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, AND CAREFULLY GONE THROUGH THE ORDER OF THE AO AS WELL AS THE DECISION OF THE HON'BLE TRIBUNAL. 3 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY 5.2 IT IS OBSERVED THAT THE HON'BLE ITAT HAS ADJUDICATED ON THE QUANT UM ADDITION VIDE PARA - 16 OF THE ORDER DATED 18/10/2018, AND DELETED THE ADDITIONS MADE BY THE AO U/S. 143(3) R.W.S. 147 OF THE ACT. THUS, THE VERY BASIS FOR LEVYING PENALTY U/S. 271(1)(C) HAS NOT SURVIVED. THEREFORE, THE PENALTY OF RS.53,19,263/ - FOR A.Y . 2012 - 13 LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT ARE DELETED. 6. W E HAVE PERUSED THE ORDER OF THE TRIBUNAL IN QUANTUM PROCEEDINGS IN ITA.NO. 7122/ MUM / 2016 DATED 18.10.2018 AND FIND THAT T HE ONLY ISSUE IN THE QUANTUM PROCEEDINGS WAS THAT THE ASSESSING OFFICER TREATED THE GAINS ON SALE OF RESIDENTIAL FLAT OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN AS AGAINST THE CLAIM OF T HE ASSESSEE THAT IT SHOULD BE ASSESSED AS LONG TERM CAPITAL GAIN . T HE TRIBUNAL ALLOWED CLAIM OF THE ASSESSEE OBSERVING AS UNDER : - 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE NARROW DISPUTE BEFORE US IS WHETHER THE CAPITAL GAIN EARN BY ASSESSEE IS SHORT TERM OR THE LONG TERM CAPITAL GAIN AND / OR THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54 OF THE ACT. THE LOWER AUTHORITIES HAVE NOT DISPUTED THE CERTAIN DATES. IT IS NOT IN DISPUTE THAT THE ASSE SSEE PURCHASED THE RIGHT IN THE ASSET/ FLAT FROM THE PERSON WHO WAS INITIALLY ALLOTTED THE FLAT VIDE ALLOTMENT LETTER. THE ASSESSEE PURCHASED THE SAID FLAT VIDE AGREEMENT DATED 25.04.2008, WHICH WAS DULY CONFIRMED BY THE BUILDER (OBEROI CONSTRUCTIONS). IN PURSUANCE OF THE PURCHASE AGREEMENT FROM THE ORIGINAL ALLOTEES THE AGREEMENT TO SALE WAS EXECUTED ON 19TH JULY 2009 AND WAS REGISTERED ON 3RD AUGUST 2009. THIS AGREEMENT WAS EXECUTED IN LIEU OF ALLOTMENT LETTER DATED 17/05/2006 & 25 /04/2008, WHICH IS DULY ENDORSED ON THE AGREEMENT. WE HAVE ALSO PERUSED THE CONTENTS OF THE ALLOTMENT LETTER ISSUED BY THE BUILDER. THE PERUSAL OF ALLOTMENT REVEALS THAT RS. 8,78,405/ - WAS PAID ON ACCOUNT OF EARNEST MONEY, RS. 13,17,608/ - WAS PAID AT THE TIME OF ISSUING OF ALL OTMENT LETTER. RS. 4,39,203/ - WAS PAYABLE ON COMPLETION OF PLINTH OF THE BUILDING, RS. 47,43,387/ - WAS PAYABLE IN FORTY EQUAL INSTALMENT ON COMPLETION 4 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY OF 40TH SLABS OF THE BUILDING WHERE THE SAID FLAT IS SITUATED. RS. 3,51,362/ - WAS PAYABLE ON COMPLETION O F BRICK WORK OF THE BUILDING, RS. 3,51,362/ - WAS PAYABLE AT THE TIME OF PLASTERING OF BUILDING. RS. 3,51,362/ - ON COMPLETION OF FLOORING AND TILING AND REMAINING SIMILAR BALANCE OF RS. 3,51,362/ - WAS PAYABLE AT THE TIME OF READY TO USE OF THE FLAT. THUS, E NTIRE AMOUNT WAS PAYABLE IN A TIME FRAME MANNER, WHICH IS LINKED TO THE PROGRESS OF THE CONSTRUCTION. 12. THE CBDT VIDE CIRCULAR NO. 471 [F. NO. 207/27/85 - IT(A - II)], DATED 15 - 10 - 1986 ISSUED FOLLOWING INSTRUCTION: 1. SECTIONS 54 AND 54F PROVIDE THAT CAP ITAL GAINS ARISING ON TRANSFER OF A LONGTERM CAPITAL ASSET SHALL NOT BE CHARGED TO TAX TO THE EXTENT SPECIFIED THEREIN, WHERE THE AMOUNT OF CAPITAL GAIN IS INVESTED IN A RESIDENTIAL HOUSE. IN THE CASE OF PURCHASE OF A HOUSE, THE BENEFIT IS AVAILABLE IF THE INVESTMENT IS MADE WITHIN A PERIOD OF ONE YEAR BEFORE OR AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE AND IN CASE OF CONSTRUCTION OF A HOUSE, THE BENEFIT IS AVAILABLE IF THE INVESTMENT IS MADE WITHIN THREE YEARS FROM THE DATE OF THE TRANSFER. 2. THE BO ARD HAD OCCASION TO EXAMINE AS TO WHETHER THE ACQUISITION OF A FLAT BY AN ALLOTTEE UNDER THE SELF - FINANCING SCHEME (SFS) OF THE D.D.A. AMOUNTS TO PURCHASE OR IS CONSTRUCTION BY THE D.D.A. ON BEHALF OF THE ALLOTTEE. UNDER THE SFS OF THE D.D.A., THE ALLOTMEN T LETTER IS ISSUED ON PAYMENT OF THE FIRST INSTALMENT OF THE COST OF CONSTRUCTION. THE ALLOTMENT IS FINAL UNLESS IT IS CANCELLED OR THE ALLOTTEE WITHDRAWS FROM THE SCHEME. THE ALLOTMENT IS CANCELLED ONLY UNDER EXCEPTIONAL CIRCUMSTANCES. THE ALLOTTEE GETS T ITLE TO THE PROPERTY ON THE ISSUANCE OF THE ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A FOLLOW - UP ACTION AND TAKING THE DELIVERY OF POSSESSION IS ONLY A FORMALITY. IF THERE IS A FAILURE ON THE PART OF THE D.D.A. TO DELIVER THE POSSESSION OF T HE FLAT AFTER COMPLETING THE CONSTRUCTION, THE REMEDY FOR THE ALLOTTEE IS TO FILE A SUIT FOR RECOVERY OF POSSESSION. 3. THE BOARD HAVE BEEN ADVISED THAT UNDER THE ABOVE CIRCUMSTANCES, THE INFERENCE THAT CAN BE DRAWN IS THAT THE, D.D.A. TAKES UP THE CONSTRU CTION WORK ON BEHALF OF THE ALLOTTEE AND THAT THE TRANSACTION INVOLVED IS NOT A SALE. UNDER THE SCHEME THE TENTATIVE COST OF CONSTRUCTION IS ALREADY DETERMINED AND THE D.D.A. 5 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY FACILITATES THE PAYMENT OF THE COST OF CONSTRUCTION IN INSTALMENTS SUBJECT TO T HE CONDITION THAT THE ALLOTTEE HAS TO BEAR THE INCREASE, IF ANY, IN THE COST OF CONSTRUCTION. THEREFORE,FOR THE PURPOSE OF CAPITAL GAINS TAX THE COST OF THE NEW ASSET IS THE TENTATIVE COST OF CONSTRUCTION AND THE FACT THAT THE AMOUNT WAS ALLOWED TO BE PAID IN INSTALMENTS DOES NOT AFFECT THE LEGAL POSITION STATED ABOVE. IN VIEW OF THESE FACTS, IT HAS BEEN DECIDED THAT CASES OF ALLOTMENT OF FLATS UNDER THE SELF - FINANCING SCHEME OF THE D.D.A. SHALL BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS. 13. THE CBDT IN CIRCULAR NO. 672 DATED 16 - 12 - 1993 ISSUED FOLLOWING INSTRUCTIONS: 1. ATTENTION IS INVITED TO BOARD'S CIRCULAR NO. 471, DATED 15 - 10 - 1986. IT WAS CLARIFIED THEREIN THAT CASES OF ALLOTMENT OF FLATS UNDER THE SELF - FINANCING SCHEME OF THE DELHI DEVELOPMENT AUTHORITY (DDA) SHOULD BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCOME - TAX ACT. THE BOARD HAS SINCE RECEIVED REPRESENTATIONS THAT EVEN IN RESPECT OF ALLOTMENT OF FLATS/HOUSES BY CO - OPERATIVE S OCIETIES AND OTHER INSTITUTIONS, WHOSE SCHEMES OF ALLOTMENT AND CONSTRUCTION ARE SIMILAR TO THOSE OF DELHI DEVELOPMENT AUTHORITY, A SIMILAR VIEW SHOULD BE TAKEN. 2. THE BOARD HAS CONSIDERED THE MATTER AND HAS DECIDED THAT IF THE TERMS OF THE SCHEMES OF ALL OTMENT AND CONSTRUCTION OF FLATS/HOUSES BY THE CO - OPERATIVE SOCIETIES OR OTHER INSTITUTIONS ARE SIMILAR TO THOSE MENTIONED IN PARA 2 OF BOARD'S CIRCULAR NO. 471, DATED 15 - 10 - 1986, SUCH CASES MAY ALSO BE TREATED AS CASES OF CONSTRUCTION FOR THE PURPOSES OF SECTIONS 54 AND 54F OF THE INCOME - TAX ACT. 14. THE HONBLE DELHI HIGH COURT IN CIT VS. RAMAKRISHNAN [2014] 363 ITR 59 (DEL.) HELD THAT IN ORDER TO DETERMINE TAXABILITY OF CAPITAL GAIN ARISING FROM SALE OF PROPERTY, IT IS DATE OF ALLOTMENT OF PROPERTY WHIC H IS RELEVANT FOR PURPOSE OF COMPUTING HOLDING PERIOD AND NOT DATE OF REGISTRATION OF CONVEYANCE DEED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN MADHU KAUL VS. CIT(SUPRA) HELD THAT WHERE A FLAT WAS ALLOTTED TO ASSESSEE ON 7 - 6 - 1986 AND SHE PAID FIRST INST ALMENT ON 4 - 7 - 1986 AND POSSESSION OF FLAT WAS DELIVERED ON A 6 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY LATER DATE AND THEREAFTER SHE SOLD FLAT ON 5 - 7 - 1989, CAPITAL GAIN ARISING FROM SALE OF FLAT WAS A LONG - TERM CAPITAL GAIN. 15. FURTHER, THE HONBLE PUNJAB & HARYANA HIGH COURT IN VINOD KUMAR JAIN VS. CIT (SUPRA) ON THE FACTS THAT ASSESSEE WAS ALLOTTED A FLAT BY DELHI DEVELOPMENT AUTHORITY (DDA) ON 27.02.1982 ON INSTALMENTS UNDER RESIDENTIAL SCHEME. HOWEVER, THE POSSESSION OF FLAT WAS GIVEN TO THE ASSESSEE ON 15.05.1986. THE ALLOTMENT LETTER ISSUED INDICATES THE FLAT NUMBER AND THE BALANCE AMOUNT PAYABLE. THE ASSESSEE SOLD THE FLAT ON 06.01.1989 AND CLAIMED LONG TERM CAPITAL GAIN AND FURTHER CLAIMED THE SET OFF OF CAPITAL ON PURCHASE OF ANOTHER FLAT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ASS ESSEE THAT POSSESSION OF FLAT WAS GIVEN ONLY ON 15.05.1986 AND, THEREFORE, THE CAPITAL GAIN ON SALE OF FLAT WERE SHORT TERM CAPITAL GAIN. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSESSING OFFICER WAS UPHELD. TRIBUNAL ALSO DISMISSED THE APPEAL OF THE ASSESSEE. ON FURTHER APPEAL BEFORE THE HONBLE DELHI HIGH COURT, THE A LONG TERM CAPITAL GAIN AND WAS ALSO ENTITLED FOR SET OFF UNDER SECTION 54 OF THE ACT. 16. CONSIDERING THE DECISION OF VARIOUS HIGH COURTS AS REFERRED ABOVE AND THE CBDT CIRCULARS NO. 471 & 672, WE FIND THAT THE HOLDING PERIO D SHOULD BE COMPUTED FROM THE DATE OF ISSUE OF ALLOTMENT LETTER. IN CASE, THE HOLDING PERIOD IS MORE THAN 36 MONTH FROM THE DATE OF ALLOTMENT TILL THE DATE OF TRANSFER, THE ASSET IS TO BE TREATED AS LONG TERM CAPITAL ASSET IN THE HAND OF ASSESSEE AND ON TR ANSFER OF SUCH ASSET; THE ASSESSEE WOULD BE ENTITLED FOR LONG TERM CAPITAL GAIN. NOW COMING THE FACTS OF THE PRESENT CASE, THE ASSESSEE ACQUIRED THE RIGHT IN FLAT NO. 302, 3RD FLOOR, TOWER - C WITH CAR PARKING IN OBEROI SPRING, OSHIWARA, ANDHERI VIDE ALLOTME NT LETTER DATED 25.04.2008, WHICH IS DULY CONFIRMED AND ACKNOWLEDGE BY M/S OBEROI CONSTRUCTION. THE ASSESSEE SOLD THE SAID FLAT ON 05.10.2011. THEREFORE, THE GAIN EARNED BY ASSESSEE IS TAXABLE AS LONG TERM CAPITAL GAIN. HENCE, THE GROUND NO.1 OF THE APPEAL RAISED BY ASSESSEE IS ALLOWED. ASSESSEE WAS ALLOWED LONG TERM CAPITAL GAIN. WHILE ALLOWING APPEAL OF THE ASSESSEE, THE HONBLE COURT REFERRED THE CBDT CIRCULAR NO. 471 DATED 15.10.1996 WHICH DESCRIBED NATURE OF RIGHT THAT AN ALLOTTEE ACQUIRES ON ALLOTMENT OF A FLAT UNDER SELF - FINANCING SCHEME. IT WAS HELD THAT ASSESSEE WAS A FLAT ON 27.02.1982 ON PAYMENT OF INSTALMENT BY ISSUING OF AN ALLOTMENT LETTER AND HE HAD BEEN MAKING PAYMENT IN TERM THEREOF, SPECIFIC NUMBER OF F LAT 7 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY WAS ALLOTTED TO THE ASSESSEE AND POSSESSION WAS DELIVERED ON 15.05.1986. THE RIGHT OF ASSESSEE PRIOR TO 15.05.1986 WAS THE RIGHT IN THE PROPERTY. IN SUCH SITUATION, IT CANNOT BE HELD THAT PRIOR TO THAT SAID DATE, THE ASSESSEE WAS NOT HOLDING THE FLAT A ND THE ASSESSEE WAS ALLOWED . 7. S INCE THE TRIBUNAL ACCEPTED THE CLAIM OF THE ASSESSEE AND DELETED ADDITION THE CONSEQUENTIAL PENALTY U/S. 271(1)(C) OF THE ACT HAS NO LEGS TO STAND. IN THE CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED IN DELETING THE PENALTY SINCE THE VERY BASIS FOR LEVY OF PENALTY I.E. ADDITION MADE IN THE ASSESS MENT PROCEEDINGS WAS DELETED BY THE TRIBUNAL AND IN WHICH CASE PENALTY WILL NOT SURVIVE. THUS , WE CONFIRM THE ORDER OF THE LD.CIT(A) IN DELETING THE PENALTY. GROUND RAISED BY THE REVENUE IS REJECTED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 17 . 11 .2020 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. SD/ - SD/ - ( M. BA LAGANESH ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 17 / 11 / 2020 GIRIDHAR, SR.PS 8 ITA NO.2651/MUM/2019 (A.Y: 2012 - 13) SMT JAYATI S. CHAKRABORTY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM