JOGINDERPAL SINGH ARORA, MUMBAI V. ITO 2(2)2, MUMBAI

ITA 268/MUM/2010

• Counselvise Citation: 26819914 RSA 2010
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 24-12-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 11-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: D C JAIN
• Keywords: Gift; Cost of acquisition; Valuation report; Revised return
• Section: 54; 139(5)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI . . , / ! ! ! ! , BEFORE S/SH.B.R.MITTAL,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 268/MUM/2010, ' ' ' ' # # # # / ASSESSMENT YEAR 2003-04 JOGINDERPAL SINGH ARORA C/O D.C. JAIN & CO. 75 BOMBAY MUTUAL BUILDING, DR. D.N.ROAD, FORT,MUMBAI-1 VS. ITO 2(2)-2 AAYAKAR BHAVAN, ROOM NO. 549, 5 TH FLOOR, M.K.ROAD, MUMBAI-400020 PAN:ABDPA7550R ( $% / ASSESSEE ) ( &'$% / RESPONDENT) $% $% $% $% ( (( ( ) ) ) ) / ASSESSEE BY : SHRI D.C.JAIN &'$% ( ) / RESPONDENT BY : SHRI M.L.PERUMAL ' ' ' ' ( (( ( *+ *+ *+ *+ DATE OF HEARING : 24 . 12 .2013 ,-# ( *+ /DATE OF PRONOUNCEMENT : 29 . 01 .201 4 ' ' ' '1961 1961 1961 1961 ( (( ( 254 254 254 254( (( (1 11 1) )) ) *6* *6* *6* *6* 7 7 7 7 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M: CHALLENGING THE ORDER DATED 18.11.2009 OF THE CIT(A )-5,MUMBAI,ASSESSEE HAD RAISED FOLLOWING GROUNDS OF APPEAL. 1.UNDER THE FACTS AND CIRCUMSTANCES AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING THE INDEXED COST IN TERMS OF SECTION 55(2)(B) BASED ON THE VALUATION REPORT WHICH IS AT RS.92,14,380/ AS THE F IAT IN CUFFE PARADE HAVING BEEN UNDER OCCUPATION AND USE FOR THE PURPOSE OF RESIDENCE OF THE APPELLANT FROM 1976. 1(A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FAILED TO APPRECIATE THAT: (I) THOUGH THE FLAT WAS PURCHASED BY THE FIRM, BUT IT WAS IN USE FOR THE PURPOSE OF RESIDENCE OF THE PARTNER I.E. APPELLANT FROM THE DATE IT WAS PUR CHASED IN THE YEAR 1976. (II)THE DECLARATION MADE BY THE PARTNERS ON 23/04/1982 WAS ONLY FOR THE PURPOSE OF MUTUAL CONVENIENCE TO AVOID FUTURE MISUNDERSTANDINGS IN TH E NEW GENERATION OF THE FAMILY. (III)THE PARTNERSHIP FIRM HAS NEITHER CLAIMED ANY D EPRECIATION AND / OR MAINTENANCE, THE APPELLANT HAS PAID ALL THE MAINTENANCE CHARGES TO T HE SOCIETY SINCE BEGINNING. (IV) THE MADRAS HIGH COUP IN THE CASE OF CIT. VS. M . K. CHANDRAKANT-258 I.T.R 14(MADRAS) HAS HELD THAT IT IS THE PARTNERS WHO OWN THE PROPER TY AND THE FIRM IS NOT A LEGAL ENTITY UNDER THE GENERAL LAW OF PARTNERSHIP. EACH OF THE ASSESSEE WA S USING THE BUILDING FOR THE PURPOSE OF RESIDENCE IN HIS OWN RIGHT FOR MORE THAN TWO YEARS, THEREFORE, THE CONDITION OF USE OF THE HOUSE PROPERTY IN THEIR OWN RIGHT AS OWNERS OF THE PROPER TY IS SATISFIED. THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDER SECTION 54 OF I. T. ACT. 2.THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE THE GROUND/S OF APPEAL AT OR BEFORE THE HEAR ING OF APPEAL. ASSESSEE ALSO RAISED FOLLOWING ADDITIONAL GROUND OF APPEAL : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE APPELLANT HAS NOT ENT ITLED TO REVISE THE WORKING OF LONG TERM CAPITAL GAINS BY RELYING UPON THE JUDGMENT IN THE CASE OF O OETZE (INDIA) LTD., VS. CIT (284 ITR 323 (SC) . 2 ITA NO. 268/MUM/2010 JOGINDERPAL SINGH ARORA THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE CONSIDERED THE REVISED COMPUTATION OF LONG TERM CAPITAL GAINS AS HIS POWER S ARE CO-TERMINUS WITH THOSE OF THE ASSESSING OFFICER AND DECIDED THE MATTER IN ACCORDANCE WITH L AW. 2. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 30.09.2003 DECLARING TOTAL INCOME OF RS.5. 05 LACS.ASSESSING OFFICER (AO) FINALISED THE ASSESS MENT ON 27.03.2006 DETERMINING THE TOTAL INCOME OF THE RS.1.29 CRORES.EFFECTIVE GROUND OF AP PEAL FILED BY THE ASSESSEE PERTAINS TO DISALLOW -ANCE OF INDEXED COST IN TERMS OF SECTION 55(2)(B) BASED ON THE VALUATION REPORT.AO FOUND,DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THAT THE ASSES SEE HAD SOLD A FLAT AND SALE CONSIDERATION WAS INVESTED IN TWO DIFFERENT FLATS IN DIFFERENT BUILDI NGS THAT ASSESSEE HAD CONSIDERED THE INDEXED COST FOR THE FY 2001-02.HE DIRECTED THE ASSESSEE TO PROD UCE THE COPY OF AGREEMENT FOR PURCHASE OF FLAT, AO FOUND THAT ASSESSEE HAD PURCHASED FOUR FLA TS, FLAT NO.1, 1802A,FLAT NO.2,AND 1802B INSTEAD OF TWO FLATS AS DECLARED IN THE COMPUTATION OF INCO ME.WHILE THE ASSESSMENT PROCEEDINGS WERE GOING ON ASSESSED CHANGED HIS AR AND THE NEW REPRES ENTATIVE,VIDE HIS LETTER DATED 14.03.2006, SUBMITTED A REVISED CALCULATION OF LONG TERM CAPITA L GAIN(LTCG).THE REVISED CALCULATION OF LTCG READ AS UNDER: LONG TERM CAPITAL GAIN: SALE VALUE OF HOUSE PROPERTY AT FLAT NO.82, IN JOLLY MA KER APARTMENT II, CUFFE PARADE, COLABA, MUMBAI 400 005 1,92,62,000 LESS EXPENSES ON STAMP DUTY, BROKERAGE, COMP. FEE ETC. 5,61,000 1,87,01,000 LESS INDEX COST OF ACQUISITION OF PROPERTY VALUE AS ON 01.04.1981 2163000 INDEXED COST 21,63,000 X 426/100 92,14,380 94,86,620 LESS INVESTMENT IN PURCHASE OF RESIDENTIAL FLATS: 1. COST OF FLAT NO.1802 IN SOLITAIRE BUILDING, IN HIRANA NDANI GARDEN, POWAI, MUMBAI 400076 ADMEASU -RING 1790 SQ.FT.(OCCUPIED) 94,61,749 2. COST OF FLAT NO.2603 IN GLEN CROFT BLDG. IN HIRANAN DANI GARDEN, POWAI, MUMBAI-400076, ADMEAS -URING 1490 SQ.FT. 77,17,801 NET LONG TERM CAPITAL LOSS 76,92,930 AFTER PERUSING THE DOCUMENTS SUBMITTED BY THE ASSES SEE,AO HELD THAT THE ORIGINAL FLAT NO. 82, JOLLY MAKER APARTMENT, COLABA WAS PURCHASED BY PARTNERSHI P FIRM M/S MACHINERY MANUFACTURING CORPORATION (MMC) ON 24.08.1976 AT RS. 92,950/- LAC S, THAT THE ASSESSEE WAS A PARTNER OF THE SAID FIRM,THAT ON 22.04.1982 HE HAD PURCHASED THE FLAT F ROM THE FIRM FOR THE CONSIDERATION OF RS. 1.72 LACS,THAT THE ASSESSEE HAS PURCHASED THE FLAT IN TH E FY 1982-83,THAT HE WAS NOT ENTITLED TO CLAIM THAT ASSET IN QUESTION WAS PURCHASED BEFORE 01.04.1 981. THEREFORE, HE REJECTED THE REQUEST MADE BY THE ASSESSEE FOR REPLACEMENT OF THE COST OF PRIC E BY THE VALUATION AS ON 01.04.1981 FOR THE PURPOSE OF INDEXATION. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE SAID PROPERTY WAS OWNED BY THE FIRM IN WHICH THE AS SESSEE WAS ONE OF THE PARTNERS AND NOTWITHSTANDING THE FACT THAT HE RESIDED THEREIN SI NCE 1976, THAT HE WAS NOT REAL OWNER OF THE FLAT, THAT THE VERY FACT THAT THE SAID FLAT WAS ASSIGNED TO THE ASSESSEE ON 23.04.1982 MADE IT ALL THE MORE CLEAR THAT THE ASSESSEE WAS NOT LEGAL OWNER OF THE SAME TILL THAT DATE,THAT THERE WAS ABSOLUTELY NO REQUIREMENT FOR OTHER PARTNERS TO RELINQUISH THEIR RIGHTS IN FAVOUR OF THE ASSESSEE, THAT OCCUPATION OF THE FLAT BY THE ASSESSEE DID NOT GIVE THE ASSESS EE ANY LEGAL AND ENFORCEABLE RIGHTS OF POSSESSION OR ALIENATION OF THE SAME WHICH WAS APPARENT FROM T HE FACT THAT ONLY VIDE AN AGREEMENT WITH OTHER PARTNERS SUCH RIGHTS WERE VESTED IN HIM AS LATE AS 23.04.1982,THAT THE FLAT WAS NOT OWNED BY THE ASSESSEE TILL SUCH DATE,THAT EVEN IN THE VALUATION REPORT OF APPROVED VALUER DATED 06.03.2006,AS PER POINT NO.4,THE SAID FLAT HAD BEEN CATEGORICALLY STA TED TO BE OWNED BY MMC IN THE MONTH OF APRIL 1981 AND THE ASSESSEE WAS MERELY OCCUPYING THE SAID FLAT FOR RESIDENTIAL PURPOSES,THAT THE ASSESSEE BY HIS OWN ADMISSION WAS NOT THE LEGAL OWNER OF THE SAID FLAT,THAT WEALTH TAX RETURN MENTIONING 3 ITA NO. 268/MUM/2010 JOGINDERPAL SINGH ARORA THE ASSESSEE AS THE OWNER OF THE FLAT COULD NOT BE THE BASIS FOR HOLDING HIM THE OWNER,THAT THE RETURN OF WEALTH WAS FILED ON 28.06.1983 I.E. MUCH AFTER 22.04.1982,THAT TILL THE AGREEMENT WITH OTHER PARTNERS THE ASSESSEE DID NOT HAVE ANY POWER OF ALIENATION OF THE SAID FLAT AND ONLY FOR SUCH PURPOSES ENTIRE ARRANGEMENTS WERE MADE.FINALLY,HE H ELD THAT IN VIEW OF THE AGREEMENT DATED 23. 04.1982 THE ASSESSEE WAS NOT THE OWNER OF THE SAID PROPERTY AND WAS MERELY OCCUPYING THE SAID FLAT,THAT THERE WAS ABSOLUTELY NO BASIS FOR CLAIMIN G THE BENEFIT OF SECTION 55(2)(B) OF THE ACT ON THE PREMISE THAT HE OWNED THE FLAT FRORN 1976 AND AS SU CH THE VALUE AS ON 01.04.1981 COULD BE TAKEN FOR THE PURPOSES OF ARRIVING AT THE COST OF ACQUISI TION. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT THE FIRM HAD NOT CLAIMED DEPRECIA - TION FOR THE FLAT,THAT THE ASSESSEE WAS PAYING SOCI ETY CHARGES,THAT FLAT WAS PURCHASED BY THE FIRM, THAT AMOUNT WAS DEBITED TO THE PARTNERS ACCOUNT.DE PARTMENTAL REPRESENTATIVE(DR) SUBMITTED THAT RETURN OF WEALTH TAX WAS FILED BY THE ASSESSEE AFTE R THE DEED,THAT THE ASSESSEE WANTED TO SUBSTITUTE THE VALUE OF THE FLAT,THAT THE SECOND CALCULATION O F THE FLAT WAS AN AFTERTHOUGHT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.FROM THE AGREEMENT ENTERED IN TO BETWEEN AESTHETIC BUILDERS ON ONE SID E AND SH.ONKAR SINGH GOURI,SH.JOGINDERPAL SINGH,SMT.DEVENDAR KAUR AND SMT.MOHINDER KAUR ON TH E OTHER HAND(PAGE NO.150-153 OF THE PAPER BOOK PB)IT IS CLEAR THAT PARTNERSHIP FIRM WA S THE OWNER OF THE FLAT TILL THE AGREEMENT WAS SIGNED,THAT ASSESSEE BECAME THE OWNER OF THE FLAT F ROM 23.04. 1982.IN OUR OPINION OWNERSHIP AND POSSESSION ARE TOTALLY TWO ENTIRELY DIFFERENT CONCE PTS-POSSESSION OF A PROPERTY GIVES CERTAIN RIGHTS TO THE OCCUPIER OF THE PROPERTY BUT THAT DOES NOT M EAN THAT HE IS THE OWNER OF THAT PROPERTY.RIGHT OF ALIENATION OF THE PROPERTY IS ONE OF THE BASIC F ACT TO BE DECIDE THE ISSUE OF OWNERSHIP OF THE PROPERTY.ONLY THE OWNER OR AN AUTHORISED REPRESENTA TIVE OF THE OWNER HAS THE LEGAL RIGHT TO SELL/GIFT/EXCHANGE/DONATE THE PROPERTY.HIS RIGHT TO DISPOSE THE PROPERTY IS ABSOLUTE-NO ONE CAN PREVENT HIM FROM DEALING WITH THE PROPERTY IN THE MANNER HE THINKS FIT.THE DEED OF ASSIGNMENT IS THE MOST IMPORTANT EVIDENCE THAT PROVES THAT THE AS SESSEE WAS NOT OWNER OF THE FLAT TILL THE DEED WAS INKED.LEGAL RIGHTS ARE CREATION OF THE STATUTES -IN OTHER WORDS THEY ARE NOT AUTOMATIC AND UNTIL AND UNLESS PROVISIONS OF CERTAIN ACTS DO NOT CONFER CERTAIN RIGHTS EXISTENCE OF SUCH RIGHTS CANNOT BE PRESUMED.IT IS ALSO A FACT THAT THE FIRM HAD PURCHA SED THE FLAT AND RETURN OF WEALTH WAS FILED BY THE ASSESSEE AFTER DEED OF ASSIGNMENT WAS SIGNED AND TH E ASSESSEE HAD BECOME THE OWNER OF THE FLAT.WE FIND THAT THE REGISTERED VALUER IN HIS VALU ATION REPORT HAD SPECIFICALLY MENTIONED THAT THE FIRM WAS THE OWNER OF THE FLAT.CONSIDERING THE PECU LIAR FACTS OF THE CASE AND THE SURROUNDING CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ASSESS EE WAS NOT THE OWNER OF THE FLAT AS ON 01.04. 1981.THEREFORE,CONFIRMING THE ORDER OF THE FAA,WE D ECIDE GROUND NO.1 AGAINST THE ASSESSEE. 3. IN THE ADDITIONAL GROUND OF APPEAL ASSESSEE HAS STA TED THAT WHILE DECIDING THE APPEAL,FAA HAD NOT CONSIDERED THE SUBMISSIONS MADE BY IT WITH REGA RD TO THE REVISED CLAIM OF LONG TERM CAPITAL GAINS(LTCG).WE FIND THAT WHILE REJECTING THE CLAIM MADE BY THE ASSESSEE FOR WORKING OF LTCG, AO HAD RELIED ON THE DECISION IN THE CASE OF GOETZ (LNDIA) LTD (284 ITR 323)DELIVERED BY THE HONBLE APEX COURT.IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE ASSESSEE HAD NOT FILED REVISED RETURN U/S 139(5) OF THE ACT WITHIN THE STIPULATED TIME LIMIT,THAT THE AO HAD NO POWER TO ENTERTAIN NEW CLAIM IN ABSENCE OF A NEW RETURN FILED BY AN AS SESSEE. 3.1. BEFORE US,AR SUBMITTED THAT THE ASSESSEE HAD TAKEN ADDITIONAL GROUND BEFORE THE FAA AND SUBSTANTIATED HIS SUBMISSION.IN THIS REGARD,HE REFE RRED TO PARA-9.1(IV) AND 9.2 OF THE ORDER PASSED BY THE FAA.HE SUBMITTED THAT THE FAA HAD NOT GIVEN HIS FINDING ABOUT THE ADDITIONAL GROUND.DR ALSO DID NOT CONTROVERT THE SUBMISSIONS MADE BY THE AR. 3.2. AFTER HEARING THE RIVAL SUBMISSIONS WE ARE OF THE O PINION THAT THE CONTENTION OF THE AR HAS MERITS AND THEREFORE IN THE INTEREST OF JUSTICE THE MATTER IS SENT BACK TO THE FAA TO DECIDE THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE AND PASS A REASONED AND SPEAKING ORDER.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE.WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT,IN THE CASE OF PRITHVI BROKERS(349ITR336 )HAS HELD THAT FAA AND THE TRIBUNAL CAN 4 ITA NO. 268/MUM/2010 JOGINDERPAL SINGH ARORA ADMIT NEW CLAIM DURING APPELLATE PROCEEDINGS,THOUGH THE AO CANNOT ADMIT A FRESH CLAIM,IF THE ASSESSEE DOES NOT FILE A REVISED RETURN.ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 9 : '9* ; < 7*= >* ( * ?@ . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2014. 7 ( ,-# A 29 '+, 2014 - ( 6 . SD/- SD/- ( . . . B.R.MITTAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, C' /DATE: 29.01.2014 SK 7 7 7 7 ( (( ( &*D &*D &*D &*D E D#* E D#* E D#* E D#* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ F G , 4. THE CONCERNED CIT/ F G 5. DR I BENCH, ITAT, MUMBAI / DH6 &*' , . . . 6. GUARD FILE/ 6 I . 'D* &* //TRUE COPY// 7' / BY ORDER, J / ? DY./ASST. REGISTRAR , /ITAT, MUMBAI.