DR. GIRISH VASUDEO GADKARI, MUMBAI V. THE ITO 11(2)(3), MUMBAI

ITA 2789/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7916 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 29-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 23-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S S PHADKAR
• Keywords: Capital asset; Cost of acquisition; Fair market value; Benefit of exemption; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. K. AGARWAL, JM & SHRI R.K. PANDA, AM I.T.A. NO. 2789/MUM/2008 (ASSESSMENT YEAR 2003-04) DR. GIRISH VASUDEO GADKARI 1 ST FLOOR, BANG BHAVAN, 122, HINDU COLONY, DADAR, MUMBAI-400 014 PAN: AACPG4000A VS. I.T.O.-11(2)(3) AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI-400 020 APPELLANT RESPONDENT APPELLANT BY: MR. S.S. PHADKAR RESPONDENT BY: MR. SUNIL KUMAR O R D E R DATE OF HEARING: 29.01.2010 DATE OF ORDER: 04.02.2010 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 25 TH FEBRUARY, 2008 OF THE CIT(A)-XI, MUMBAI RELATING T O ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IN HIS VARIOUS GROUNDS OF APPEAL HAS C HALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWA NCE OF CLAIM FOR EXEMPTION U/S. 54EC OF THE INCOME-TAX ACT, 1961 (TH E ACT) MADE BY THE ASSESSING OFFICER. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRACTISING GENERAL PHYSICIAN. THE ASSESSING OFFICER DURING TH E COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AD SHOWN NIL INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN. FROM THE STATEMENT OF COMPUTATION FILED BY THE ASSESSEE, HE OBSERVED T HAT THE ASSESSEE HAS SOLD THE GARAGE ON 25 TH APRIL, 2002 FOR A CONSIDERATION OF RS. 15 LAKHS. AFTER ADOPTING THE FMV AS ON 1.4.1981 AT RS .1,18,036 AND AFTER REDUCING THE INDEXED COST OF ACQUISITION AT R S.5,27,621, THE I.T.A. NO. 2789/MUM/2008 DR. GIRISH VASUDEO GADKARI =================== 2 ASSESSEE HAS WORKED OUT THE CAPITAL GAIN OF RS.9,72 ,379. IN VIEW OF INVESTMENT OF RS.12 LAKHS IN SPECIFIED BONDS THE AS SESSEE HAS DECLARED NIL CAPITAL GAIN. 4. THE ASSESSING OFFICER OBSERVED THAT DURING THE A.Y. 2002-03, THE ASSESSEE HAS SOLD HIS FLAT AT HINDU COLONY, DAD AR FOR A CONSIDERATION OF RS. 74 LAKHS. AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS.18,46,310 CAPITAL GAIN DECLARED W AS RS.55,53,690. THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 54 TOWARDS PURCHASE OF NEW RESIDENTIAL HOUSE ON 21 ST FEBRUARY, 2002 FOR RS.35 LAKHS AND INVESTMENT U/S. 54EC IN ELIGIBLE BONDS ON 8 TH MAY, 2002 WAS SHOWN AT RS.25 LAKHS. AFTER DEDUCTING THE ABOVE TWO AMOU NTS, AMOUNTING TO RS.60 LAKHS THE ASSESSEE HAD DECLARED LONG TERM CAPITAL LOSS AT RS.4,46,310. THE ASSESSING OFFICER OBSERVED THAT T HE EXEMPTION RELATING TO RS. 25 LAKHS INVESTED IN THE RURAL ELEC TRIFICATION BONDS U/S. 54EC HAS ALREADY BEEN CONSIDERED BY THE ASSESS EE AGAINST THE SALE OF THE FLAT. HOWEVER, THE ASSESSEE VIDE ITS L ETTER DATED 17.11.2003 ACCOMPANYING THE RETURN OF INCOME HAD ST ATED THAT OUT OF INVESTMENT IN BONDS AT RS.25 LAKHS MADE ON 14 TH JUNE, 2002 EXEMPTION TO THE TUNE OF RS.17,42,798 I.E., EQUIVAL ENT TO THE CAPITAL GAIN ON SALE OF FLAT IS TO BE CONSIDERED AND THE BA LANCE UNADJUSTED AMOUNT OF RS.8,57,002 AND FURTHER INVESTMENT IN RUR AL ELECTRIFICATION BONDS AT RS. 5 LAKHS ON 14 TH OCTOBER, 2002 WILL BE CONSIDERED AS AVAILABLE FOR EXEMPTION U/S. 54EC AGA INST SALE OF GARAGE DURING THE YEAR. ACCORDING TO THE ASSESSING OFFICER SINCE THE ASSESSEE HAS MADE TOTAL INVESTMENT IN BONDS AT RS. 30 LAKHS OUT OF WHICH RS.25 LAKHS EXEMPTION IS INCORPORATED IN THE RETURN FOR THE A.Y. 2002-03 AND ONLY RS. 5 LAKHS IS INVESTED IN RU RAL ELECTRIFICATION BONDS DURING THE A.Y. 2003-04, THEREFORE, ONLY AN A MOUNT OF RS.5 LAKHS BE ALLOWED TO THE ASSESSEE U/S. 54EC FOR THE A.Y. 2003-04. 5. THE ASSESSING OFFICER ACCORDINGLY CONFRONTED THE AB OVE FACTS TO THE ASSESSEE. IT WAS EXPLAINED THAT THE ASSESSE E HAD OVERLOOKED I.T.A. NO. 2789/MUM/2008 DR. GIRISH VASUDEO GADKARI =================== 3 CERTAIN BASIC FACTS IN MAKING THE SAID INVESTMENT. IT WAS SUBMITTED THAT SINCE INVESTMENT IN THE RURAL ELECTRIFICATION BONDS FALL WITHIN THE PRESCRIBED PERIOD OF 6 MONTHS, BENEFIT OF EXEMP TION HAS TO BE GIVEN CONSIDERING THE OVERALL INVESTMENT SHOWN TO H AVE BEEN MADE IN A.Y. 2002-03 AND 2003-04. 6. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THA T THE FLAT HAS BEEN SOLD ON 3 RD MARCH, 2002 AND THE GARAGE HAS BEEN SOLD ON 25 TH APRIL, 2002. THE RETURN OF INCOME FOR THE A.Y. 200 2-03 WAS FILED ON 9 TH AUGUST, 2003. THE ASSESSEE HAD INVESTED RS.25 LAK HS ON 8 TH MAY, 2002 AND ANOTHER RS. 5 LAKHS ON 5 TH OCTOBER, 2002. THUS AT THE TIME OF FILING OF THE RETURN FOR A.Y. 2002-03 THE SALE O F FLAT AND GARAGE HAD TAKEN PLACE AND INVESTMENT OF RS.25 LAKHS IN RURAL ELECTRIFICATION BONDS WAS ALSO MADE BEFORE THE DATE OF FILING OF RE TURN FOR A.Y. 2002-03. HAD THE SALE OF GARAGE TAKEN PLACE BEFORE THE ABOVE DATE THE ASSESSEE SHOULD HAVE COME OUT CLEAR ABOUT BIFUR CATION OF INVESTMENT/EXEMPTION AGAINST THE CAPITAL ASSETS TRA NSFERRED. NOWHERE IN THE RETURN FOR A.Y. 2002-03 THE ASSESSEE HAD INDICATED THAT PART OF SUCH INVESTMENT OF RS.25 LAKHS NEEDS T O BE GIVEN BENEFIT OF EXEMPTION AGAINST CAPITAL GAIN LIABLE FOR TAXATI ON IN THE SUBSEQUENT YEAR. HE OBSERVED THAT THE ASSESSEE VID E HIS LETTER DATED 24.11.2005 HAS STATED THAT THE PROPOSED INVESTMENT IN NEW RESIDENTIAL FLAT WAS RS. 40 LAKHS BUT THE FLAT WAS ULTIMATELY BOUGHT FOR RS.35 LAKHS ON 21 ST FEBRUARY, 2002. ACCORDING TO THE ASSESSING OFFICER ALL THESE CHRONOLOGICAL EVENTS SHOW THAT TH E ASSESSEE WAS FULLY AWARE OF ALL INVESTMENT/CAPITAL GAIN EXEMPTIO N PATTERN AVAILABLE WITH HIM WHILE FILING THE RETURN FOR A.Y. 2002-03. ACCORDING TO HIM EACH ASSESSMENT YEAR IS INDEPENDEN T. SINCE THE ASSESSEE WHILE FILING THE RETURN OF INCOME FOR A.Y. 2002-03 HAS NOT MENTIONED THAT A PART OF THE EXEMPTION WILL BE AVAI LABLE FOR A.Y. 2003-04, THEREFORE, HE HELD THAT THE ENTIRE INVESTM ENT OF RS. 25 LAKHS WOULD PERTAIN TO A.Y. 2002-03 AND THE ASSESSE E IS ENTITLED TO I.T.A. NO. 2789/MUM/2008 DR. GIRISH VASUDEO GADKARI =================== 4 EXEMPTION U/S. 54EC OF THE ACT ONLY FOR THE AMOUNT OF RS.5 LAKHS. HE ACCORDINGLY ALLOWED RS.5 LAKHS FROM CAPITAL GAIN ON ACCOUNT OF SALE OF GARAGE AT RS.9,72,379 U/S. 54EC AND BROUGHT TO TAX THE BALANCE LONG TERM CAPITAL GAIN OF RS.4,72,379. 7. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF TH E CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SOLD THE FLAT DURING THE A.Y. 2002-03 AND THE GARAGE DURING THE A.Y. 2003-04 AND THE ASSESSEE HAS INVEST ED IN RURAL ELECTRIFICATION BONDS AS PER THE PROVISIONS OF SECT ION 54EC. REFERRING TO PROVISIONS OF SECTION 54EC, HE SUBMITT ED THAT THE ACT SAYS THAT THE CAPITAL GAIN HAS TO BE INVESTED IN TH E PRESCRIBED BONDS WITHIN THE STIPULATED TIME AND IT DOES NOT SPEAK OF ANY ASSESSMENT YEAR. REFERRING TO PAGES 33 TO 48 OF THE PAPER BOO K, WHICH IS THE COPY OF THE SALE DEED OF THE GARAGE, HE REFERRED TO PAGE 39 (INTERNAL PAGE 6 OF THE SALE DEED) AND SUBMITTED THAT THE SAL E CONSIDERATION IS CLEARLY MENTIONED AS RS.10 LAKHS WHEREAS THE ASSESS ING OFFICER HAS PROCEEDS ON THE ASSUMPTION THAT THE SALE PROCEEDS I S RS.15 LAKHS. HE SUBMITTED THAT THE ASSESSEE BY MISTAKE HAS STATE D THE SALE PROCEEDS AT RS.15 LAKHS. SINCE THE ACTUAL SALE PRO CEEDS OF THE GARAGE IS RS.10 LAKHS, THEREFORE, THE MATTER MAY BE RESTOR ED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND RE COMPUTATI ON OF THE CAPITAL GAIN. 9. THE LEARNED DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) SUBMI TTED THAT ON THE BASIS OF THE FIGURES GIVEN BY THE ASSESSEE THE ASSE SSING OFFICER HAS ADOPTED THE SALE CONSIDERATION OF THE GARAGE AT RS. 15 LAKHS. HE HAD NO OCCASION TO GO THROUGH THE SALE DEED AS ACCORDIN G TO THE ASSESSEE THE SALE PROCEEDS OF THE GARAGE IS ONLY RS.15 LAKHS . HE SUBMITTED I.T.A. NO. 2789/MUM/2008 DR. GIRISH VASUDEO GADKARI =================== 5 THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE SALE PRIC E OF RS.10.00 LAKHS AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSE E. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSING OFFICER HAD TAKEN THE SALE PROCEEDS OF THE GARAGE AT RS.15 LAKHS ON THE BASIS OF THE CALCULATION GIVEN BY THE ASSESSEE. HOWEVER, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE SALE CONSIDERA TION IS ONLY RS. 10 LAKHS AND THE COPY OF THE SALE DEED WAS FILED BEFOR E THE ASSESSING OFFICER WHICH HAS NOT BEEN VERIFIED BY THE ASSESSIN G OFFICER. IT HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT IN THE C ASE OF BALMUKUND ACHARYA VS. DCIT THAT THE ASSESSING OFFICER SHOULD NOT TAKE ADVANTAGE OF THE ASSESSEES IGNORANCE OF LAW. SINC E THE SALE CONSIDERATION IS NOW CONTENTED TO BE RS.10,00,000 O NLY AS AGAINST RS.15,00,000 ADOPTED BY MISTAKE BY THE ASSESSEE AND ADOPTED BY THE ASSESSING OFFICER, THEREFORE, WE, IN THE INTERE ST OF JUSTICE, DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE COPY OF THE SALE DEE D FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S AND FIND OUT THE SALE PROCEEDS AND DETERMINE THE CAPITAL GAIN AS PER LAW. THE ASSESSING OFFICER SHALL GIVE REASONABLE OPP0ORTUNIT Y OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATIST ICAL PURPOSES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 4 TH FEBRUARY, 2010 SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 4 TH FEBRUARY, 2010 I.T.A. NO. 2789/MUM/2008 DR. GIRISH VASUDEO GADKARI =================== 6 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A)-XI, MUMBAI, (4) THE CIT-XI, MUMBAI, (5) THE DR, G BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO