Income-tax Officer, V. Shri Prashant Prahlad Ashtekar,

ITA 28/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9177 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Capital asset; Reasonable cause; Tax effect

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 28/PUN/2015 / ASSESSMENT YEAR : 2007-08 ITO, WARD - 12(1), PUNE . /APPELLANT V/S SHRI PRASHANT PRAHLAD ASHTEKAR, 603, SADASHIV PETH, PUNE 411 030 PAN : AAPPA3064K . /RESPONDENT C.O. NO. 46/PUN/2016 (ARISING OUT OF ITA NO.28/PUN/2015) / ASSESSMENT YEAR : 2007-08 SHRI PRASHANT PRAHLAD ASHTEKAR, 603, SADASHIV PETH, PUNE 411 030 PAN : AAPPA3064K . / CROSS OBJECTOR V/S ITO, WARD - 12(1), PUNE . / APPELLANT IN THE APPEAL ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI ACHAL SHARMA, ADDL.CIT / ORDER PER D. KARUNAKARA RAO, AM : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE. THEY ARE AGAINST THE ORDER OF CIT(A) CENTRAL, PUNE DATED 13- 10-2014 FOR THE ASSESSMENT YEAR 2007-08. / DATE OF HEARING :13.07.2017 / DATE OF PRONOUNCEMENT: 26.07.2017 2 ITA NO.28/PUN/2015 AND CO NO. 46/PUN/2016 ITA NO.28/PUN/2015 (BY REVENUE) : 2. TO START WITH WE SHALL TAKE UP THE REVENUES APP EAL. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION THAT THE TAX EFFECT INVOLVED IN THE APPEAL OF THE REVENUE IS BELOW RS.10 LAKHS. BR INGING OUR ATTENTION TO THE FACT THAT THE AO MADE DISALLOWANCE OF RS.1.36 CRORE S ON ACCOUNT OF CERTAIN EXPENSES. APPEAL OF THE ASSESSEE WAS PARTLY ALLOWE D BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. THE RELIEF GRANTED TO THE ASSESSEE BY THE CIT(A) WORKS OUT TO TAX EFFECT OF BELOW RS.10 LAKHS.LD. DE PARTMENTAL REPRESENTATIVE DID NOT HAVE ANY DATA TO REBUT THE SAME. 3. ON HEARING BOTH THE SIDES, WE FIND THE TAX EFFEC T IS CERTAINLY LESS THAN RS.10 LAKHS. THEREFORE, IN VIEW OF CIRCULAR NO.21/2 015 DATED 10-12-2015 OF CBDT RAISING THE MONETARY LIMIT FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL, WHICH ALSO APPLIES TO PENDING APPEALS FILED BY THE REVENUE, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AND HAS TO BE DISMISSED. IN VIEW OF THE ABOVE, THE APPEAL FI LED BY THE REVENUE IS DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. C.O. NO.46/PUN/2016 ( BY ASSESSEE) : 5. NOW WE SHALL TAKE UP THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 6. IN CONNECTION WITH THE CROSS OBJECTIONS FILED BY THE ASSESSEE, LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE SOLITARY CROSS OBJECTION WHICH IS EXTRACTED AS UNDE R : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN NOT ALLOWING THE ENTIRE E XPENDITURE OF RS.55,53,785/- AND IN RESTRICTING THE ALLOWANCE ONL Y TO RS.12,70,000/- IN RESPECT OF EXPENDITURE INCURRED BY ASSESSEE AS COST OF IMPROVEMENT, ADVOCATES FEES, EXPENDITURE ON REMOVAL OF THE DEFE CTS IN THE TITLE OF THE 3 ITA NO.28/PUN/2015 AND CO NO. 46/PUN/2016 PROPERTY AND COMMISSION IN RESPECT OF THE CAPITAL A SSETS/IN CONNECTION WITH THE TRANSFER OF THE CAPITAL ASSET, THAT HAS GIVEN R ISE TO CAPITAL GAINS CHARGED TO TAX. 7. NARRATING THE BACKGROUND OF THE FACTS OF THE CAS E, LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED INTO THE DEVELOPMENT AGREEMENT WITH THE LAND OWNER FROM DAGA DE FAMILY VIDE REGISTERED DOCUMENT DATED 23-05-2005. THE SAID RIG HTS WERE SOLD FOR A SUM OF RS.2.75 CRORES TO MR. DAVID KOIL PILLAY. AS PER THE STATUTE, ASSESSEE COMPUTED SHORT TERM CAPITAL GAINS AND FILED THE RET URN OF INCOME. CONSIDERING THE FACT THAT THE ASSESSEE INCURRED EXPENDITURE OF RS.55 LAKHS TOWARDS EXPENSES IN CONNECTION WITH THE SAID TRANSFER/SALE OF THE RIGHTS, ASSESSEE CLAIMED THE SAME AS DEDUCTION WHILE COMPUTING THE S HORT TERM CAPITAL GAINS. DURING THE ASSESSMENT PROCEEDINGS, SAID DEDUCTION W AS NOT ALLOWED BY THE AO FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER. CIT (A) CONFIRMED THE SAME ALLOWING ONLY A SUM OF RS.12 LAKHS (ROUNDED OFF) OU T OF THE TOTAL CLAIM OF RS.55 LAKHS. MEANWHILE, AGGRIEVED WITH THE ASSESSE ES SALE/TRANSFER OF THE SAID RIGHTS TO MR. DAVID KOIL PILLAY WHO INTURN TRA NSFERRED THE RIGHTS TO ANOTHER CONCERN NAMED M/S. SUYOG CITY (AOP), THE ORIGINAL L AND OWNER FROM DAGADE FAMILY FILED A CASE AGAINST THE ASSESSEE AND OTHERS AGAINST TRANSACTION OF SALE BY THE ASSESSEE TO MR. DAVID KOIL PILLAY AND FURTHE R SALE TO M/S. SUYOG CITY. ASSESSEE, MR. DAVID KOIL PILLAY AND M/S. SUYOG CITY WERE THE RESPONDENTS. EVENTUALLY, THE ADDITIONAL JUDGE, SMALL CAUSES COUR T AND JOINT CIVIL JUDGE, SENIOR DIVISION, PUNE PASSED THE DECREE AGAINST THE ASSESSEE. MR. DAVID KOIL PILLAY AND M/S. SUYOG CITY VIDE THE SPECIAL CIVIL S UIT NO.454/2009 EXTN.111 DATED 14-02-2017. AS THE FACT STAND TODAY, THE ABO VE REFERRED SALE TRANSACTION OF THE RIGHTS TO MR. DAVID KOIL PILLAY, WHICH GAVE RAISE TO THE CAPITAL GAINS, IS CONSIDERED AS NULL AND VOID BY THE COURT. OF COURSE, THE ASSESSEE IS CONTEMPLATING TO GO TO THE HIGHER COURT AGAINST THE SAID DECREE. 4 ITA NO.28/PUN/2015 AND CO NO. 46/PUN/2016 8. FURTHER, OTHER FACT IS THAT ASSESSEE OFFERED SHO RT TERM CAPITAL GAINS AND PAID THE RELEVANT TAXES AS PER THE STATUTE. THE DI SALLOWANCE OF LEGAL EXPENSES MADE BY THE AO IN THE ASSESSMENT HAS ONLY INFLATED THE ABOVE REFERRED TAXES OF SHORT TERM CAPITAL GAINS. IF IN CASE, THE SAID DECREE IS AFFIRMED BY THE HIGHER JUDICIARY IN DUE COURSE OF TIME, IT IS LIKEL Y THAT THE ENTIRE TAX PAID BY THE ASSESSEE ON THE SHORT TERM CAPITAL GAINS IS REQUIRE D TO BE REFUNDED BY THE DEPARTMENT IN DUE COURSE. IT IS IN THIS CONTEXT TH IS ISSUE OF DISALLOWANCE OF RS. 55 LAKHS MADE BY THE AO HAS NEXUS TO THE TRANS ACTION OF SALE OF THE DEVELOPMENT RIGHTS WHICH IS UNDER LITIGATION AS DES CRIBED ABOVE. 9. WITH THE ABOVE BACKGROUND FACTS, LD. COUNSEL FOR THE ASSESSEE RAISED AN ORAL ADDITIONAL GROUND STATING THAT THE CHARGEAB ILITY OF CAPITAL GAINS IS INCIDENTAL TO THE SAID SALE OF DEVELOPMENT RIGHTS T O MR. DAVID KOIL PILLAY CONSTITUTES THE LEGAL ISSUE, AND IN ALL PROBABILITY , THE TRANSACTION MAY NOT RESULT IN GENERATING ANY CAPITAL GAINS IN VIEW OF T HE SAID DECREE (SUPRA) WHICH TREATED THE SAID TRANSACTION AS NULL AND VOID. FAI RLY SUBMITTING, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ORAL ADDITIONA L GROUND MAY KINDLY BE REMANDED TO THE FILE OF THE AO FOR CONSIDERING ITS LEGAL NATURE AS WELL AS LIKELY REFUND INVOLVED IN THE MATTER. 10. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE REFER RING TO THE DELAY OF 29 DAYS IN FILING OF THE CROSS OBJECTION APPEAL BROUGH T OUR ATTENTION TO THE AFFIDAVIT DATED 05-07-2017 AND MENTIONED THAT THERE WAS A REASONABLE CAUSE FOR NOT FILING THE C.O. IN 30 DAYS TIME PROVIDED UN DER THE RULES. REFERRING TO THE SAID AFFIDAVIT, LD. COUNSEL BROUGHT OUR ATTENTI ON TO PAGE 2 OF THE AFFIDAVIT AND READ OUT THE RELEVANT PARAGRAPHS WHICH ARE EXTR ACTED AS UNDER: I RESPECTFULLY SUBMIT THAT AS PROVIDED BY SECTION 254(4) OF THE INCOME TAX ACT, THE CROSS OBJECTIONS WERE REQUIRED TO BE FILED WITHIN 30 DAYS OF THE RECEIPT OF THE NOTICE OF APPEAL, I.E. ON OR BEFORE 27-10-2016. THE CROSS 5 ITA NO.28/PUN/2015 AND CO NO. 46/PUN/2016 OBJECTIONS HOWEVER HAVE BEEN FILED ON 28-11-2016. THUS, THERE IS A DELAY OF 31 DAYS IN FILING ON THE CROSS OBJECTIONS. THE ACT UAL DELAY IS OF 29 DAYS, AS 26-11-2016 AND 27-11-2016 WERE HOLIDAYS BEING SATUR DAY AND SUNDAY. I RESPECTFULLY SUBMIT THAT, I AM AN ORDINARY BUSINE SS-MAN. I AM NOT AWARE OF THE INCOME TAX LAWS AND PROCEDURES. ON RECEIVING T HE NOTICE OF HEARING OF APPEAL OF THE REVENUE, I CONTACTED MY CHARTERED ACC OUNTANT, WHO ADVISED ME TO APPOINT A COUNSEL FOR THE APPEAL BEFORE THE H ONBLE TRIBUNAL. THEREAFTER IT TOOK ME SOME TIME TO APPOINT THE COUN SEL FOR THE APPEAL. ON APPRAISAL OF THE RELATED DOCUMENTS MY COUNSEL ADVIS ED ME TO FILE CROSS OBJECTIONS WITH RESPECT TO THE REVENUES APPEAL. A CCORDINGLY THE PAPER WORK WAS PREPARED FOR FILING THE CROSS OBJECTIONS. THE CROSS OBJECTIONS WERE FILED ON 28-11-2016. BY THAT TIME HOWEVER THE NORMAL TIM E OF 30 DAYS AVAILABLE U/S.253(4) OF THE ACT, FOR FILING THE CROSS OBJECTI ONS HAS ALREADY EXPIRED. THUS A DELAY OF 29 DAYS HAS OCCURRED IN FILING THE CROSS OBJECTIONS. 11. FROM THE ABOVE, IT IS EVIDENCE, IGNORANCE OF TH E TIME LIMITATIONS, ASSESSEES FAILURE TO APPOINT A CHARTERED ACCOUNTAN T TO ADVICE HIM, SMALLNESS OF 29 DAYS OF DELAY ETC. ARE THE REASONS GIVEN BY T HE ASSESSEE IN THE AFFIDAVIT. 12. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE SMALLNESS OF THE DELAY, WE ARE OF THE OPINION THAT THE DELAY SHOULD BE CONDONED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE SHOULD BE HEARD ON MERITS. 13. COMING BACK TO THE ORAL ADDITIONAL GROUND RAISE D BEFORE US, AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THA T THE ADDITIONAL GROUND RAISED BY THE ASSESSEE HAS NEXUS TO THE CROSS OBJEC TIONS RAISED BY THE ASSESSEE IN THE PRESENT C.O. THEREFORE, WE ARE OF THE VIEW THAT INSTEAD OF DECIDING THE ALLOWABILITY OF EXPENDITURE DIRECTLY O N ACCOUNT OF LEGAL EXPENSES, WE ARE OF THE VIEW THAT MATTER SHOULD BE REMANDED T O THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH TAKING INTO ACCOUNT THE ADD ITIONAL EVIDENCES BY WAY OF DECREE AND OTHERS FILED BEFORE US FOR CONSIDERATION . AO IS DIRECTED TO ADMIT THE SAME AND ADJUDICATE THE CROSS OBJECTIONS RAISED IN THE APPEAL BY PASSING A SPEAKING ORDER IN THE MATTER. ACCORDINGLY, THE CRO SS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6 ITA NO.28/PUN/2015 AND CO NO. 46/PUN/2016 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE CROSS OBJECTION APPEAL FILED BY THE ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JULY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 26 TH JULY, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) CENTRAL , PUNE 4. CIT CENTRAL, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE.