Kanchan Bai, CHENNAI V. ITO NCW 5(1), CHENNAI

ITA 2680/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3799 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: N DEVANATHAN
• Keywords: Capital asset; Gift; Principle of natural justice; Cost of acquisition; Wrong claim; Onus to prove; Condonation of delay
• Section: 143(3); 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , , % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.2680 & 2681/CHNY/2018 & & /ASSESSMENT YEARS: 2010-11 & 2010-11 SMT.KANCHAN BAI CHORDIA , 18,RAMANUJA STREET, SOWCARPET,CHENNAI 600 079. VS. INCOME TAX OFFICER, NON CORPORATE WARD 5(1), CHENNAI. [ PAN: AAEPC 5069 M ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.N.DEVANATHAN,ADVOCATE *+) , /RESPONDENT BY : MR.R.CLEMENT RAMESH KUMAR, ADDL. C.I.T, D.R , /DATE OF HEARING : 13.06.2019 , /DATE OF PRONOUNCEMENT : 14.08.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHENNAI DAT ED 29.06.2018 FOR ASSESSMENT YEAR 2010-11. SINCE, THE ISSUES ARE CO MMON, THE APPEALS ARE HEARD TOGETHER AND DISPOSED OFF BY THE COMMON ORDER . FOR THE SAKE OF ITA NOS.2680 & 2681/CHNY/2018 :- 2 -: CONVENIENCE, WE TAKE UP THE ASSESSEES QUANTUM APPE AL IN ITA NO. 2680/MDS/2018. ITA NO. 2680/MDS/2018: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELL ANT IS AN INDIVIDUAL, ENGAGED IN THE TWO WHEELER FINANCING. THE RETURN OF INCOME FOR THE AY 2010- 11 WAS FILED ON 31.03.2011 DISCLOSING TOTAL INCOME OF RS. 1,99,990/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPL ETED BY INCOME TAX OFFICER, NON-CORPORATE WARD 5(1), CHENNAI VIDE ORDE R DATED 26.03.2013 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AT TOTAL INCOME OF RS. 44,10,950/-. SUBSEQUENTLY, WHEN THE ASSESSING OFFICER NOTICED THAT WHILE COMPUTING THE CAPITAL GAINS, THE ASSESSE E HAD CLAIMED A SUM OF RS.5,50,381/- TOWARDS ADDITION TO THE COST OF IMPRO VEMENT TO THE ASSET, WHICH WAS INCURRED BY THE PREVIOUS OWNER IN THE YEAR 2001 -02 WHEREAS THE PROPERTY WAS SETTLED IN FAVOUR OF ASSESSEE ON 13.09.2012 BY REGISTERED DOCUMENT, THE VALUE OF PROPERTY WAS DECLARED AT RS.1,90,000/-. B ASED ON THIS INFORMATION, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE I NCOME OF RS.4,49,990/- HAD ESCAPED FROM ASSESSMENT AND ACCORDINGLY, ISSUED NO TICE U/S.148 OF THE ACT ON 17.03.2017. THE ASSESSEE FILED RETURN OF INCOME ON 24.06.2017 IN RESPONSE TO SAID NOTICE U/S.148 OF THE ACT, DISCLOSING INCOME O F RS.44,10,950/-, WHICH IS THE SAME AS THE ORIGINAL ASSESSED INCOME AND THIS W AS REVISED ON 11.08.2017 AT TOTAL INCOME OF RS.40,40,990/-. AGAINST THE SAID RETURN OF INCOME, ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT WAS COM PLETED VIDE ORDER DATED ITA NOS.2680 & 2681/CHNY/2018 :- 3 -: 19.12.2017 AT A TOTAL INCOME OF RS.51,89,118/-. WH ILE DOING SO, THE ASSESSING OFFICER HAD ONLY TAKEN COST OF PURCHASE IN THE HAND S OF ORIGINAL OWNER OF RS.90,224/- WITHOUT CONSIDERING THE COST OF IMPROVE MENT BORNE BY THE PREVIOUS OWNER WHILE COMPUTING THE CAPITAL GAINS. 3. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 4. IT IS SUBMITTED BY LD.AR THAT THE LOWER AUTHOR ITIES HAVE TOTALLY IGNORED THE COST OF IMPROVEMENT BORNE BY THE PREVIOUS OWNER AND THE VALUE ADOPTED FOR THE PURPOSE OF REGISTRATION OF SETTLEMENT DEED HAS NO RELEVANCE. 5. ON THE OTHER HAND, SENIOR LD.DR PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT A PPEAL RELATES TO WHETHER THE COST OF IMPROVEMENT BORNE BY THE PREVIOUS OWNER IN THE CASE OF ACQUISITION OF THE PROPERTY BY ONE OF THE MODES SPECIFIED U/S.49 O F THE ACT IS ALLOWABLE DEDUCTION FOR THE PURPOSE OF CALCULATING GAINS. THE ISSUE WAS CONSIDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C.I.T VS. MANJULA J. SHAH REPORTED IN [2012] 204 TAXMAN 691 (BOM) WHEREIN IT HAS BEEN HELD AS FOLLOWS:- 22. THE OBJECT OF GIVING RELIEF TO AN ASSESSEE BY ALLOWING INDEXATION IS WITH A VIEW TO OFFSET THE EFFECT OF INFLATION. AS P ER THE CBDT CIRCULAR NO. 636 DATED 31/8/1992 [SEE 198 ITR 1(ST)] A FAIR METHOD OF ALLOWING ITA NOS.2680 & 2681/CHNY/2018 :- 4 -: RELIEF BY WAY OF INDEXATION IS TO LINK IT TO THE PE RIOD OF HOLDING THE ASSET. THE SAID CIRCULAR FURTHER PROVIDES THAT THE COST OF ACQUISITION AND THE COST OF IMPROVEMENT HAVE TO BE INFLATED TO ARRIVE A T THE INDEXED COST OF ACQUISITION AND THE INDEXED COST OF IMPROVEMENT AND THEN DEDUCT THE SAME FROM THE SALE CONSIDERATION TO ARRIVE AT THE L ONG TERM CAPITAL GAINS. IF INDEXATION IS LINKED TO THE PERIOD OF HOL DING THE ASSET AND IN THE CASE OF AN ASSESSEE COVERED UNDER SECTION 49(1) OF THE ACT, THE PERIOD OF HOLDING THE ASSET HAS TO BE DETERMINED BY INCLUDING THE PERIOD FOR WHICH THE SAID ASSET WAS HELD BY THE PRE VIOUS OWNER, THEN OBVIOUSLY IN ARRIVING AT THE INDEXATION, THE FIRST YEAR IN WHICH THE SAID ASSET WAS HELD BY THE PREVIOUS OWNER WOULD BE THE F IRST YEAR FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE. 23. SINCE THE ASSESSEE IN THE PRESENT CASE IS HELD LIABLE FOR LONG TERM CAPITAL GAINS TAX BY TREATING THE PERIOD FOR WHICH THE CAPITAL ASSET IN QUESTION WAS HELD BY THE PREVIOUS OWNER AS THE PERI OD FOR WHICH THE SAID ASSET WAS HELD BY THE ASSESSEE, THE INDEXED CO ST OF ACQUISITION HAS ALSO TO BE DETERMINED ON THE VERY SAME BASIS. 24. IN THE RESULT, WE HOLD THAT THE ITAT WAS JUSTIF IED IN HOLDING THAT WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSF ER OF A CAPITAL ASSET ACQUIRED BY THE ASSESSEE UNDER A GIFT, THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO THE YEAR IN WH ICH THE PREVIOUS OWNER FIRST HELD THE ASSET AND NOT THE YEAR IN WHIC H THE ASSESSEE BECAME THE OWNER OF THE ASSET.. THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIG H COURT IS CLEARLY APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, W E DIRECT THE ASSESSING OFFICER TO ALLOW THE COST OF IMPROVEMENT BORNE BY THE PREVI OUS OWNER AS INFLATED BY INDEXATION. ITA NOS.2680 & 2681/CHNY/2018 :- 5 -: 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ITA NO. 2681/MDS/2018: 8. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAI NST THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHENNAI DATED 02.02.2016 FOR ASSESSMENT YEAR 2010-11 CONFIRMING THE PENALTY LEVIED U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) BY THE ASSESSING OFFICER . 9. AT THE OUTSET, IT IS NOTICED THAT THE APPEAL H AS BEEN FILED WITH A DELAY OF 897 DAYS. THE ASSESSEE FILED CONDONATION PET ITION, PRAYING FOR CONDONING THE DELAY BY STATING THAT THE DELAY HAD OCCURRED ON ACCOUNT OF FACT THAT THE APPELLANT IS AN AGED PERSON AND SUFFE RING CHRONIC RENAL FAILURE, HYPERTENSION, HYPOTHYROIDISM, DEPRESSION, ETC. AND THEREFORE, THEY COULD NOT FOLLOW UP THE AUDITOR, WHO WAS ENTRUSTED WITH THE J OB OF FILING THE APPEAL AND THE DELAY HAD OCCURRED ON ACCOUNT OF LAPSE OF THE C HARTERED ACCOUNTANT. THE LEARNED SR.D.R OPPOSED THE CONDOANTION OF DELAY. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. CONSIDERIN G THE FACT THAT THE APPELLANT IS AGED AND SUFFERING FROM COMPLEXITY OF DISEASES, IT IS A FIT CASE FOR CONDONATION OF DELAY AND ACCORDINGLY WE CONDONE THE DELAY OF 897 DAYS IN FILING THE APPEAL AND ADMIT THE APPEAL ACCORDINGLY. 11. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF A PPEAL. 1. THE ORDER OF THE LD. ASSESSING OFFICER IS CONTR ARY TO LAW FACTS AND CIRCUMSTANCE, AGAINST THE PRINCIPLES OF NATURAL JUSTICE, LEGITIMA TE EXPECTATION, AGAINST EVIDENCE & ITA NOS.2680 & 2681/CHNY/2018 :- 6 -: FAIR PROCEDURE AND THERE IS NEITHER CONCEALMENT OR FURNISHING OF INACCURATE PARTAKERS TO INITIATE PROCEEDINGS U/S 271 (1) (C). 2. THE LEARNED CIT (A) FUNDAMENTALLY FAILED TO APPR ECIATE THAT THE IMPUGNED ORDER IS ILLEGAL DUE TO NON SATISFACTION IN THE LIGHT OF THE FACT THERE EXISTS NEITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS THE BURDEN OF PROOF PLACED ON THE ASSESSEE UNDER THE EXPLANATION IS SUB JECT TO CONDITIONS THEREIN. IT IS NECESSARY THAT THERE SHOULD BE AN INFERENCE OF CONC EALMENT AT THE TIME OF INITIATION OF THE PROCEEDINGS IN THE NO ICE ISSUED U/S 274 REA D WITH 271 (1)(C) OF THE ACT. VS. L&T FINANCE LTD.(BOMBAY HIGH COURT) 3. WITHOUT PREJUDICE, THE PENALTY IS NOT IMPOSABLE SINCE THE AO /CIT (A) BASED HIS REASONS ON THE STRENGTH OF THE ORDERS OF THE APPELL ATE ORDER OF THE DIFFERENCE ASSESSE WITHOUT APPLICATION OF MIND IN REGARD TO PE NALTY PROCEEDINGS IN THE CASE OF THE APPELLANT (A) IT IS WELL SETTLED THAT THE ASSESSMENT AND PENA LTY PROCEEDINGS ARE SEPARATE DISTINCT AND HENCE THE FINDINGS GIVEN IN THE ASSESS MENT ARE NOT RELEVANT AND PENALTY CANNOT BE BASED ON SUCH FINDINGS AND HENCE THE ORDE R IS VOID AND NULLITY. IN THE PENALTY PROCEEDINGS, THE AUTHORITIES MUST CONSIDER THE MATTER A FRESH AS THE QUESTION HAS TO BE CONSIDERED FROM DIFFERENT ANGLE. (SEE (ASHOK PAI (SC) (B) THE EXPLANATION IS BONA FIDE AND HENCE PENALTY IS NOT LEVIABLE. (C) THE SUPREME COURT IN THE CASE OF T. ASHOK PAI VS. CIT (2007) 292 ITR 11 (SC) POINTED THAT THE PENALTY ISSUE SHOULD BE DECIDED ON A DIFFERENT ANGLE. 4. CAPITAL GAINS: THE LEARNED CIT (A) FUNDAMENTALLY FAILED TO APPRECI ATE (A) HENCE THE IMPUGNED ORDER IS VOID. SINCE IT WAS CUT AND PASTED OF OTHER ASSESSE WITHOUT APPLICATION OF MIND (B) RELIEF U/S 54 THE AC WAS NEGATIVED BY THE AO WI THOUT ANY ENQUIRY AND IT IS DUTY OF THE AO IS TO INFORM RELIEF AVAILABLE TO THE ASSE SSEE (SEE ABHINITHA FOU\JDATION PVT. LTD.396 ITR 251 (MA D) (C) THE ADDITIONS MADE IN THE ASSESSMENT HAD NOT BE COME FINAL AND THE MATTER HAS BEEN TAKEN BEFORE THE APPELLATE AUTHORITIES. 5. THAT THE APPELLANT IS ENTITLED TO RELIEF U/S.35 (1)(II) OF THE ACT (SEE RELIANCE PETRO (322 ITR 158 SC) 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL G ROUNDS. ITA NOS.2680 & 2681/CHNY/2018 :- 7 -: 12. THE BRIEF FACTS OF THE CASE ARE THAT THE RETUR N OF INCOME FOR ASSESSMENT YEAR 2010-11 WAS FILED BY THE ASSESSEE D ECLARING TOTAL INCOME OF RS.1,99,990/-. AGAINST THE SAID RETURN OF INCOME , THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 26.03.2013 PASSED U/S.14 3(3) OF THE ACT AT ASSESSED INCOME OF RS.39,60,961/- AFTER MAKING ADDI TION ON ACCOUNT OF LONG TERM CAPITAL GAINS ON SALE OF PROPERTY AND MAK ING DISALLOWANCE OF RS.2,50,000/- U/S.35(1)(III) OF THE ACT. THE ASSES SING OFFICER HAD INITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ON THE GROUND THAT ASSESSEE HAD FAILED TO DISCLOSE THE CAPITAL GAINS O N SALE OF IMMOVABLE PROPERTY AND ALSO MADE A WRONG CLAIM OF RS.2,50,000 /- U/S.35(1)(III) OF THE ACT. IN RESPECT OF SHOW CAUSE NOTICE, IT IS SU BMITTED THAT THE ADDITION WAS MADE ONLY FOR ASSESSEES INABILITY TO PRODUCE E VIDENCE IN RESPECT OF CONSTRUCTION OF A NEW HOUSE, WHICH IS ELIGIBLE FOR DEDUCTION U/S.54 OF THE ACT AND THEREFORE, IT IS SUBMITTED THAT IT IS NOT A FIT CASE WARRANTING LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. HOWEVER, THE ASS ESSING OFFICER REJECTED THE SAID EXPLANATION VIDE ORDER DATED 24.09.2013 AN D IMPOSED PENALTY OF RS.8,15,958/- U/S.271(1)(C) OF THE ACT. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDE R CONFIRMED LEVY OF PENALTY. BEING AGGRIEVED, THE APPELLANT IS IN APPE AL BEFORE US IN THE PRESENT APPEAL. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE PENALTY WAS LE VIED IN RESPECT OF ADDITION MADE ON ACCOUNT LONG TERM CAPITAL GAINS ON SALE OF IMMOVABLE PROPERTY AND ITA NOS.2680 & 2681/CHNY/2018 :- 8 -: THE ADDITION ON ACCOUNT OF ALLEGED BOGUS CLAIM U/S. 35(1)(III) OF THE ACT. IN RESPECT OF ASSESSMENT OF CAPITAL GAINS, THE ASSESSE E HAS CLAIMED EXEMPTION OF CAPITAL GAINS U/S.54 OF THE ACT, BUT THE ASSESSEE H AD FAILED TO PRODUCE EVIDENCES IN RESPECT OF CONSTRUCTION OF A NEW HOUSE . IN THE CIRCUMSTANCES, THE ASSESSING OFFICER HAD MADE AN ADDITION OF CAPITAL G AINS. THUS, THE ADDITION WAS MADE BY THE ASSESSING OFFICER FOR FAILURE TO PR OVE THE CLAIM. 14. SIMILARLY THE ADDITION U/S.35(1)(III) OF THE A CT WAS MADE BY THE ASSESSING OFFICER ONLY FOR ASSESSEES INABILITY TO PRODUCE NECESSARY APPROVAL FROM CBDT. THEREFORE, IT IS SETTLED PROPOSITION OF LAW THAT MERE INABILITY TO SUBSTANTIAL CLAIM DOES NOT ENTAIL LEVY OF PENALTY U/S.271(1)(C) OF THE ACT, RELIANCE IN THIS REGARD CAN BE PLACED ON THE DECISI ON OF SUPREME COURT IN THE CASE OF C.I.T VS. RELIANCE PETROPRODUCTS PVT LT D.,REPORTED IN 322 ITR 158(SC), ACCORDINGLY, WE ARE OF THE CONSIDERED OPIN ION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. 16. TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE IN ITA NO. 2680/MDS/2018 AND ITA NO. 2681/MDS/ 2018 ARE ALLOWED. ORDER PRONOUNCED ON THE 14 TH AUGUST, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ITA NOS.2680 & 2681/CHNY/2018 :- 9 -: /CHENNAI, 2 /DATED: 14 TH AUGUST, 2019. K S SUNDARAM , *34 54 /COPY TO: 1. ) /APPELLANT 4. 6 /CIT 2. *+) /RESPONDENT 5. 4 * /DR 3. 6 ( ) /CIT(A) 6. & /GF