NATHURAM RAMNARAYAN P.LTD, MUMBAI V. ADDL CIT RG 2(2), MUMBAI

ITA 2715/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3299 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIMATI BHARTI SINGH
• Assessee Lawyers: HARISH RAHEJA
• Keywords: Surrender of tenancy right

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 2 715 /MUM/201 4 ( / ASSESSMENT YEAR : 20 0 7 - 08 ) M/S NA THURAM RAMNARAYAN PVT.LTD., RUSTOM BLDG, 2 ND FLOOR, 29, VEER NARIMAN ROAD, MUMBAI - 400023 / VS. ASSTT. COMMISSIONER OF INCOME TAX 2 ( 2 ) , 545, AYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ./ PAN : AAACN1289P / ASSESSEE BY SHRI HARISH RAHEJA / REVENUE BY SHRIMATI BHARTI SINGH / DATE OF HEARING : 2 5 . 5.2016 / DATE OF PRONOUNCEMENT : 6.6. 2016 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF LD.CIT(A) DATED 12.3.2014 FOR THE ASSESSMENT YEAR 2007 - 08 BY WHICH THE LD.CIT(A) HAS CONFIRMED THE PENALTY OF RS.60,00,000/ - LEVIED BY THE AO. 2. AT THE OUTSET, THE LD.AR SU BMITTED BEFORE US THAT THE QUANTUM APPEAL OF THE ASSESSEE HAS BEEN ALLOWED BY THE TRIBUNAL IN ITA NO.2583/MUM/2011 (AY - 2007 - 08) DATED 30.10.2015 AGAINST WHICH THE PENALTY OF RS.60,00,000/ - WAS IMPOSED BY THE AO VIDE ORDER PASSED U/S 271(1)( C) DATED 29 TH MARCH, 2012 2 NO.2715/MUM/2014 AND CONFIRMED BY THE LD.CIT(A). THE LD.AR SUBMITTED THAT SINCE THE QUANTUM HAS BEEN DELETED BY THE TRIBUNAL, THE PENALTY IMPOSED ON THE QUANTUM DOES NOT SURVIVE. THEREFORE, THE LD.AR PRAYED THAT THE PENALTY LEVIED BY THE AO AND CONFIRME D BY THE LD.CIT(A) BE DELETED . 3 . THE LD. DR DID NOT RAISE ANY OBJECTION TO THE SUBMISSION PUT FORTH BY THE LD.AR. 4 . AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES AND ON PERUSAL OF THE TRIBUNAL ORDER PASSED IN ASSESSEES OWN CASE IN ITA NO.2583/MUM /2011(SUPRA), VIDE PARA 15 OF THE SAID ORDER THE TRIBUNAL DELETED THE IMPUGNED ADDITION OF RS.3 .00 CRORES ON ACCOUNT OF CAPITAL GAIN. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE FINDING OF THE TRIBUNAL AS UNDER : 15. HAVING CONSIDERED THE SUBMISSION S OF THE PARTIES AND PERUSED THE ORDERS OF THE DEPARTMENTAL AUTHORITIES AND OTHER MATERIAL PLACED BEFORE US, WE FIND THE FOLLOWING FACTS EMERGING THEREFROM. THE ASSESSEE WAS THE OWNER OF A BUILDING AT WALKESHWAR ROAD, WHICH IS UNDER OCCUPANCY OF SEVERAL TE NANTS ONE OF THEM BEING SMT. RANI K. PODDAR, WHO OCCUPIED THE PREMISE FROM THE YEAR 2004, AFTER IT WAS VACATED BY A POST OFFICE WHICH WAS TO OCCUPYING THE PREMISE FOR MORE THAN 40 YEARS. AS IS EVIDENT FROM THE MATERIAL ON RECORD, THE ASSESSEE COMPANY ENTER ED INTO A REGISTERED TENANCY AGREEMENT WITH SMT. RANI K. PODDAR, ON 16 TH JULY 2004, BY VIRTUE OF WHICH SMT. RANI K. PODDAR, OCCUPIED SUBJECT PREMISE AS A TENANT ON MONTHLY RENT OF RS.1,000. IT IS ALSO NOTICED THE ASSESSEE COMPANY SOLD THE PROPERTY TO LODHA PROPERTY DEVELOPMENT PVT. LTD. THROUGH REGISTERED CONVEYANCE DEED ON 15 TH DECEMBER 2006. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE COMPANY DECLARED CAPITAL GAIN ON TRANSFER OF THE PROPERTY. THUS, AS CAN BE SEEN, AFTER SALE OF THE BUILDING ON 15 TH DECE MBER 2006, FOR ALL PRACTICAL PURPOSES, THE ASSESSEE COMPANY LOST ITS RIGHT, TITLE, INTEREST OVER THE PROPERTY. IT IS ALSO NOT IN DISPUTE THAT AT THE TIME OF SALE OF THE BUILDING, SEVERAL TENANTS WERE OCCUPYING THE PROPERTY ONE AMONGST THEM BEING SMT. RANI K. PODDAR. IT IS ALSO EVIDENT ON RECORD THAT LODHA PROPERTY 3 NO.2715/MUM/2014 DEVELOPMENT PVT. LTD. PAID COMPENSATION TO ALL THE TENANTS WHO WERE OCCUPYING THE PROPERTY FOR SURRENDERING THEIR TENANCY RIGHTS. SIMILARLY, AMOUNT OF ` 3 CRORE WAS PAID TO SMT. RANI K. PODDAR, FO R SURRENDERING HER TENANCY RIGHTS. IT IS ALSO EVIDENT THAT THE AMOUNT PAID AS COMPENSATION TO SMT. RANI K. PODDAR, BY LODHA PROPERTY DEVELOPMENT PVT. LTD. IS NOT MORE THAN SIMILAR COMPENSATION PAID TO OTHER TENANTS. IN THE AFORESAID FACTS AND CIRCUMSTANCES , WHEN THE ASSESSEE HAS SOLD THE PROPERTY TO A THIRD PARTY AND THE TRANSACTION RELATING TO SURRENDER OF TENANCY RIGHTS IS BETWEEN THE TENANT AND THE PURCHASER OF THE PROPERTY, HOW SUCH A TRANSACTION CAN BE CONSIDERED TO BE A SHAM TRANSACTION OR COLOURABLE DEVICE IS NOT UNDERSTOOD. AS ALREADY STATED, THE ASSESSEE HAS ENTERED THE TENANCY AGREEMENT WITH SMT. RANI K. PODDAR, IN JULY 2004. THEREFORE, PRIOR TO MORE THAN TWO YEARS BEFORE THE SALE, THE ASSESSEE COULD NOT HAVE CONCEIVED THAT THE PURCHASER WOULD BE P AYING AN AMOUNT OF RS.3 CRORE TOWARDS SURRENDER OF TENANCY RIGHTS BY THE TENANT. THEREFORE, IT IS TOTALLY UNBELIEVABLE THAT FOR DIVERTING A PART OF PROFIT, THE ASSESSEE COMPANY WOULD HAVE ADMITTED SMT. RANI K. PODDAR AS TENANT. MOREOVER, WHEN THE PURCHASER HAS PAID COMPENSATION TO ALL THE TENANTS FOR SURRENDERING THEIR TENANCY RIGHTS, IT CANNOT BE SAID THAT THE ASSESSEE HAS DIVERTED A PART OF ITS PROFIT BY ADOPTING A COLOURABLE DEVICE. AS FAR AS THE ALLEGATION OF THE DEPARTMENT THAT BY PAYING RENT OF RS. 30, 000 FOR 30 MONTHS, SMT. RANI K. PODDAR, HAS GOT AN AMOUNT OF RS. 3 CRORE, IT IS TO BE OBSERVED THAT AFTER VACATION OF THE PREMISE BY THE POST OFFICE, WHICH WAS OCCUPYING IT FOR A MONTHLY RENT OF RS. 1,000, THE ASSESSEE THOUGHT IT PRUDENT TO RENT OUT THE PREM ISE WITH SIMILAR RENT OF RS. 1,000, TO SMT. RANI K. PODDAR, INSTEAD OF KEEPING IT VACANT. THEREFORE, THE DECISION TAKEN BY THE ASSESSEE COMPANY BEING A BUSINESS DECISION, THE SAME CANNOT BE CHALLENGED BY THE DEPARTMENTAL AUTHORITIES. MOREOVER, IT IS SEEN FR OM THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS ON 21 ST DECEMBER 2009, THE ASSESSEE HAS DEMONSTRATED THAT DURING THE RELEVANT PERIOD OTHER TENANTS WERE ALSO PAYING SIMILAR RENT. THAT BEING THE CASE, IT CANNOT BE SAID THAT THE TRANSACTIONS RELATING TO RENTING OF PREMISES BY THE ASSESSEE COMPANY TO SMT. RANI K. PODDAR, OR THE SUBSEQUENT TRANSACTION BETWEEN SMT. RANI K. PODDAR AND LODHA PROPERTY DEVELOPERS PVT. LTD. FOR SURRENDERING TENANCY RIGHTS ARE SHAM TRANSACTI ON, MORE SO, WHEN THE TRANSACTIONS ARE THROUGH VALID DOCUMENT. IT WILL BE PERTINENT TO MENTION HERE THAT IN THE COURSE OF HEARING, IT HAS BEEN DEMONSTRATED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DEPARTMENTAL AUTHORITIES HAVE GAINED IN TERMS OF RE VENUE AS SMT. RANI K. PODDAR, HAS PAID SHORT TERM CAPITAL GAIN TAX @ 33.66% WHEREAS IF THE ASSESSEE WOULD HAVE SHOWN THE AMOUNT OF RS. 3 CRORE AS CAPITAL GAIN, IT WOULD HAVE PAID TAX @ 4 NO.2715/MUM/2014 22.44%. FINALLY, IT IS NOT DISPUTED THAT SMT. RANI K. PODDAR, HAS DECLA RED SHORT TERM CAPITAL GAIN ON THE AMOUNT OF RS. 3 CRORE RECEIVED BY HER ON SURRENDERING TENANCY RIGHT AND PAID TAXES. THE DEPARTMENT HAS ALSO ACCEPTED IT. THAT BEING THE CASE, WE FAIL TO UNDERSTAND HOW THE SAME INCOME CAN AGAIN BE ASSESSED AT ASSESSEES HA ND. THUS, CONSIDERING THE AFORESAID FACTS, WE ARE OF THE FIRM VIEW THAT ADDITION OF RS. 3 CRORE AS CAPITAL GAIN AT THE HANDS OF THE ASSESSEE IS ON MERE PRESUMPTION AND SURMISES AND NOT ON REASONABLE GROUNDS. THEREFORE, WE HAVE NO HESITATION IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). THEREFORE, THIS APPEAL DO ES NOT HAVE LEGS TO STAND AND HENCE, WE DIRECT THE AO TO DELETE THE PENALTY OF RS.60 LAKHS. 5 . IN THE RESULT, THE APPEAL OF THE ASSESS EE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JUNE , 201 6 SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 6.6 .2016 SR.PS:SRL: / C OPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUAR D F ILE / BY ORDER, TRUE COPY [ / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI