GAJANAN KRISHNARAO RAAKSHAK, Nagpur V. CIT-III, Nagpur

ITA 291/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3147 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Revision of order; Cost of acquisition; Assessment record
• Section: 143(3); 50C; 54F; 2(14); 131; 263

Judgement Text

1 ITA NO. 291/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER (S.M.C) I.T.A. NO. 291/NAG/2014 ASSESSMENT YEAR : 2009 - 10. GAJANAN KRISHNARAO RAAKSHAK, COMMISSIONER OF INCOME - TAX - III, NAGPUR. VS. NAGPUR. PAN ANXPR1119F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.J. THAKAR AND SHRI S.C. THAKAR. RESPONDENT : S MT. SUMAN MALIK. DATE OF HEARING : 19 - 11 - 2015. DATE O F PRONOUNCEMENT : 15 TH JANUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX - III, NAGPUR PASSED U/S 263 OF I.T. ACT DATED 20 TH MARCH, 2014. BY GROUNDS OF APPEAL THE APPELLANT HAS CHALLENGED THE SETTING ASIDE OF THE ORDER PASSED BY THE AO U/S 143(3) BY INVOKING THE PROVISIONS OF SECTION 263 OF I.T. ACT. 2. AS PER THE IMPUGNED ORDER PASSED U/S 263 OF I.T. ACT THE OBSERVATION WAS THAT AS PER THE ASSESSMENT RECORD THE ASSESSEE HAD NOT DECLARED CAPITAL GAIN FROM THE SALE OF LAND HAVING 1/3 RD SHARE. AS PER THE SALE DEED THE LAND WAS SOLD FOR A SUM OF RS. 32 LAKHS WHICH HAD THE COST OF ACQUISITION OF RS.11,21,000/ - . ACCORDING TO THE LE ARNED CIT, SHORT TERM CAPITAL GAIN WAS ASSESSED IN THE HANDS OF THE ASSESSEE WAS INCORRECT. THE SHORT TERM CAPITAL GAIN WAS WORKED OUT AT 2 ITA NO. 291/NAG/2014 RS.20,79,000/ - AND THE ASSESSEES SHARE WAS WORKED OUT AT RS.6,93,000/ - . HOWEVER, AS PER LEARNED COMMISSIONER, ON PERU SAL OF THE SALE DEED, THE MARKET VALUE OF THE PROPERTY FOR STAMP DUTY PURPOSE WAS RS.90,65,000/ - . HENCE IN HIS OPINION THE AO SHOULD HAVE INVOKED THE PROVISIONS OF SECTION 50C OF I.T. ACT. IN HIS OPINION AFTER INVOKING THE PROVISIONS OF SECTION 50C THE AO HAS UNDER ASSESSED THE SHORT TERM CAPITAL GAIN BY A SUM OF RS.19,55,000/ - BY INVOKING SECTION 50C OF I.T. ACT. FINALLY LEARNED COMMISSIONER HAS HELD THAT THE AO HAD NOT TAKEN THE CORRECT VIEW IN THE IMPUGNED ASSESSMENT ORDER, HENCE DIRECTED TO DETERMINE TH E CAPITAL GAIN AS PER THE OBSERVATIONS MADE IN THE ORDER. BEING AGGRIEVED, THE ASSESEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 3. FROM THE SIDE OF THE APPELLANT, LEARNED A.R. MR. C.J. THAKAR APPEARED AND PLEADED THAT WHILE PASSING THE ORDER U/S 143(3) DATED 15 - 12 - 2011` THE AO HAD MADE A THOROUGH INVESTIGATION. THE AO HAS DISCUSSED THE ISSUE OF SALE OF PROPERTY AT GREAT LENGTH AND FINALLY ASSESSED THE SHORT TERM CAPITAL GAIN AT RS.6,93,000/ - . THE AO HAS MADE THE COMPUTATION AS UNDER : IT IS CLEAR THAT THE L AND OF 0.81 HECTARES PURCHASED BY ASSESSEE ON 04.02.2006 JOINTLY ALONGWITH TWO OTHER PERSONS FOR A TOTAL CONSIDERATION OF RS.11,21,000/ - WAS NON AGRICULTURE LAND AND IT WAS PURCHASED WITH AN INVESTMENT PURPOSE AND THE SAME WAS HELD FOR A PERIOD OF LESS THA N 36 MONTHS AND THEREFORE THE GAIN FROM THE SALE OF THIS LAND IS LIABLE TO TAX AS SHORT TERM CAPITAL GAIN. THEREFORE, THE SHORT TERM CAPITAL GAIN CHARGEABLE TO TAX FROM THE SALE OF THIS LAND IS WORKED OUT AS UNDER : SALE CONSIDERATION RS. 32,00,000 / - LESS COST OF ACQUISITION RS. 11,21,000/ - TOTAL TAXABLE SHORT TERM CAPITAL GAIN RS. 20,79,000/ - ASSESSEES SHARE IN THE ABOVE CAPITAL GAIN (1/3 RD ) RS. 6,93,000/ - ____________ SHORT TERM CAPITAL GAIN CHARGEABLE TO TAX RS. 6,93,000/ - ___________ 3 ITA NO. 291/NAG/2014 THEREFORE, A SUM OF RS.6,93,000/ - IS BEING ADDED TO THE TOTAL INCOME OF THE ASSESSEE TOWARDS UNDISCLOSED SHORT - TERM CAPITAL GAIN. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED FOR FURNISHING INACCURATE PARTICULAR S OF INCOME. THERE FORE THE CONTENTION OF THE ASSESSEE WAS THAT IN A SITUATION WHEN AN ASSESSMENT WAS MADE AFTER DUE APPLICATION OF MIND AS WELL AS AFTER THOROUGH INVESTIGATION, THEN SUCH A VIEW OF THE AO SHOULD NOT BE HELD AS AN ERR ONEOUS VIEW. PLACING R ELIANCE O N THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT 243 ITR 83 (SC) AND CIT VS. GABRIAL INDIA LTD. 203 ITR 108 (BOM.), IT IS PLEADED BEFORE US THAT THE ORDER OF LEARNED COMMISSIONER DESERVES TO BE QUASHED. 4. FROM THE SIDE OF THE REVENUE, LEARNED D.R. SMT. SUMAN MALIK APPEARED AND PLEADED THAT THE VIEW TAKEN BY THE AO WAS INCORRECT VIEW WHEN HE WAS AWARE THAT THIS IS A CASE OF A SALE WHERE THE VALUE WAS UNDERSTATED, HENCE FULLY COVERED BY THE PROVISIONS OF SECTION 50C OF THE I.T. ACT. SINCE THE AO HAS F AILED TO INVOKE THE SAID PROVISIONS, HENCE THE IMPUGNED ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. LEARNED D.R. HAS PLACED RELIANCE ON THE DECISION OF RAMPYARI DEVI SARAOGI 67 ITR 84 (SC) AND SWARUP VEGETABLE PRODUCTS 187 ITR 412 (ALL .). 5. I HAVE HEARD BOTH THE SIDES AT SOME LENGTH. I HAVE CAREFULLY PERUSED THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) AFTER THE ISSUANCE OF ENQUIRY NOTICES. THIS FACT IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF WHEREIN THE AO HAS DISCUSSED THE FACTS OF THE CASE AND THERE AFTER ISSUED A SHOW CAUSE NOTICE. FOR READY REFERENCE, RELEVANT PORTION IS REPRODUCED : 2 . DU R ING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS OBSERVED THAT THE ASSESSEE HAD SOLD A JOINT PROPERTY OF ABOUT 0 . 81 HECTARES OF LAND SITUATED AT MOUZA : ISSASANI , TAH HINGNA , DIST . NAGPUR WHICH WAS HELD BY HIM JOINTLY WITH TWO OTHERS FOR A TOTAL CONSIDERATION OF RS. 32,00,000/ - . THE SALE DEED IN R ESPECT OF THIS PROPERTY WAS EXECUTED ON 26 . 11 . 2008. THE ASSESSEE ACQUIRED OWNERSHIP RIGHT S IN THIS PROPERTY ALONG WITH TWO OTHER CO - OWNERS BY PAYING THE ENTIRE SALE CONSIDERATION AND BY OBTAINING A 4 ITA NO. 291/NAG/2014 KABJA PATRA VA VIKRICHA KARAR NAMA (POSSESSION - CUM - SALE AGREEMENT) ON 04 - 02 - 2006 AND POWER OF ATTORNEY SPECIFICALLY FOR THIS PROPERTY . THIS POW ER OF ATTORNEY WAS REGISTERED ON 04 - 02 - 2006. THUS , THE ASSESSEE ACQUIRED 1. FU LL O WN E RSRUP N QNTS AS WE L L A S ME PNYS I CA I PO S SES S ION OT ME PROPERLY ON 04 - 02 - 2006 . THESE OWNERSHIP RIGHTS WERE TRANSFERRED BY THE ASSESSEE ALONG OTHER TWO CO - OWNERS , VIDE SALE DEED DATED 26 . 11.2008 , WHICH WAS SIGNED BY H I M WITH OTHER CO - OWNERS , AS CONSENTOR TRANSFERRING HIS OWNERSHIP RIGHTS . THE ASSESSEE ' S SHARE FROM THIS SALE TRANSACTION OF PROPERTY WORKS OUT TO ABOUT RS . 10 , 66,667/ - AND WHEREAS ASSESSEE'S SHARE IN THE I NVE STMENT OF THIS PROPERTY WORKS OUT TO ABOUT RS . 3 , 73,666/ - HOWEVER , THE ASSESSEE DID NOT DISCLOSE ANY CAPITAL GAIN FROM THE SALE OF THIS ASSET! TRANSFER OF OWNERSHIP RIGHTS IN THIS PROPERTY . THEREFORE, A SHOWCAUSE NOTICE WAS ISSUED TO THE ASSESSEE , VIDE T HIS OFFICE LETTER NO . ITO WD 5(3 )/SHOW CAUSE NOTICE/2011 - 12 DATED 1 ST DECEMBER, 2011. THE CONTENTS OF THE SHOWCAUSE NOTICE ARE AS UNDER : ' DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A . Y. 2009 - 10 , IT IS FOUND THAT YOU HAVE PURCHASED A PIECE OF LAND ADMEASURING 0 . 81 HECTARES SITUATED AT PH NO. 46 , MOUZA ISASANI , TAH HINGNA D I ST . NAGPUR ALONGWITH TWO OTHER CO - OWNERS FOR A TOTAL CONSIDERATION OF RS . 32 , 00 , 0001 - . THE SALE DEED IN RESPECT OF THIS PR OPERTY WAS EXECUTED ON 26.11 . 2008 AND ACCORDING TO YOUR STATEMENT DELIVERED ON 01 . 11 . 2011 THE PHYSICAL POSSESSION OF THE PROPERTY WAS ALSO DELIVERED ON 26 . 11 . 2008 ITSELF. YOUR SHARE IN THE SALE CONSIDERATION HAS BEEN WORKED OUT AT RS. 10 , 66 , 667/ - . ON VERIFICATION OF THE DETAILS FILED BY YOU DURING ASSESSMENT PROCEEDINGS , IT IS FOUND THAT THE ABOVE STATED LAND WAS PURCHASED BY YOU JOINTLY ALONGWITH (I) SHRI PRASHANT RAMESH BHUTE AND (II) SHRI MOHAN MAHADEVRAO BAWANKAR FOR A TOTAL CONSIDERATION OF RS. 11 , 21 , 000/ - . THIS PROPERTY WAS REGISTERED ON 04 . 02 . 2006 AND THE POSSESSION OF THIS PROPERTY WAS ALSO DELIVERED TO YOU ALONGWITH OTHER CO - OWNERS ON 04 . 02 . 2006 . THIS IS EVIDENT FROM THE KABJA PATRA VA VIKRICHA KARAR NAMA FILED BY YOU AS WELL AS YOUR OWN STATEMENT DELIVERED U/S . 131 (3) ON 01 . 12.2011. YOUR SHARE OF INVESTMENT IN THIS PROPERTY WAS RS . 3 , 73,666/ - . FROM THE ABOVE, IT IS CLEAR THAT THE ABOVE STATED PROPERTY WAS SOLD WITHIN THREE YEARS FROM THE DATE OF ITS PURCHASE . THEREFORE , AS PER THE PROVISIONS OF SECTION 45 R . W . S . 2(42A) THE GAIN ARISING FROM THE SALE OF THIS CAPITAL ASSET I . E . LAND ADMEASUR I NG 081 HECTARES IS A SHORT TERM CAPITAL GAIN AND IS C HA R GEABLE TO AS SUCH THE EXEMPTION U/S . 54/54F IS NOT A V A I LABLE AG AINST CAPITAL GAIN ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSET . IN VIEW OF THE ABOVE , THE GAIN OF RS . 6 , 5 3 , 000/ - ARISING FROM THE SALE OF THE ABOVE STATED SHORT TERM C AP I TAL ASSET IS CHARGEABLE TO TAX AS SHORT TERM CAPITAL GAIN 5 ITA NO. 291/NAG/2014 ( STCG) BUT THE SAME WAS NOT OFFERED BY YOU FOR TAXATION . THEREFORE , I WOULD LIKE TO TAX THE ABOVE AMOUNT OF RS. 6 , 5 3 , 000/ - AS STCG . YOUR OBJECTION , IF ANY , SHOULD REACH TH E UNDERSIGNED ON OR BEFORE OR ' DECEMBER , 2011 , IN WRITING, ' ' .,_. . . . ' FAILING WHICH I T WILL BE CONSTRUED THAT YOU HAVE NO EXPLANATION -- . - , - _... . - . - ' - . - .. TO OFFER IN THIS MATTER AND THE ABOVE STATED AMOUNT WILL BE . .., . --- ADDED TO YOUR RETURNED INCOME AND THE ASSESSMENT PRO C EEDINGS WILL BE FINALIZED ACCORDINGLY. ' -- - _ - ' - ' '. ', 5.1 THEREFORE , ONE OF THE PRELIMINARY OBJECTION OF LEARNED COMMISSIONER FOR INVOKING JURISDICTION U/S 263 OF TH E I.T. ACT THAT THE AO HAD FAILED TO MAKE THE PROPER ENQUIRY WAS, IN MY OPINION, INCORRECT. I HAVE FOUND THAT THE AO HAD CONSIDERED THE FACTS OF THE CASE AS WELL AS THE APPLICABLE PROVISIONS OF THE ACT. THE AO HAD ISSUED A SHOW CAUSE NOTICE AS WELL WHICH WAS FOUND TO BE DULY COMPLIED BY THE ASSESSEE. THIS REASON FOR THE INVOCATION OF JURISDICTION U/S 263 IS HEREBY REVOKED. 5.2 THE NEXT REASON FOR THE INVOCATION OF THE REVISIONAL JURISDICTION WAS THAT THE VIEW TAKEN BY THE AO WAS NOT SUSTAINABLE IN THE EYES OF LAW. ACCORDING TO THE LEARNED COMMISSIONER, ONLY ONE VIEW WAS POSSIBLE THAT THE ASSESSMEN T SHOULD HAVE BEEN MADE BY APPLYING THE PROVISIONS OF SECTION 50C OF I.T. ACT. IN THIS REGARD, THE FACTS OF THE CASE AS STATED BEFORE THE AO WERE AS UNDER : I) THAT HE HAS PURCHASED AGRICULTURAL LAND 0.81 HECTARES OUT OF AGRICULTURAL LAND OF 1 . 62 HECTARES SI TUATED AT SHEET NO . 113/2, K - H NO 69 , PH NO 46 , MOUZA VILLAGE ISSASANI , TAH . HINGNA , ~ DIST : NAGPUR ALONGWITH TWO OTHER CO - PARTNERS NAMELY (I) SHRI PRASHANT RAMESH BHUTE (II) SHRI MOHAN MAHADEVRAO BAWANKAR OF NAGPUR . II ) THE ABOVE PROPERTY WAS PURCHASED FROM SHRI NARAYAN TUKARAM UPASE , PROP . KRISHNA HOUSING AGENCY, NAGPUR FOR RS . 11 , 21 , 000/ - ON 20 . 06 . 2005. III ) THAT THE ABOVE DEALING WAS MADE IN KUTCHA KARARNAMA WITH KABJA PATRA AND PAID RS . 1000/ - ON 20.06 . 2005 IN CASH . ON 21 . 06 . 2005 RS . 3 , 00 , 000/ - WAS PAID AND LATER ON TWO CHEQUES OF 6 ITA NO. 291/NAG/2014 RS.1,00,000/ - EACH WERE ISSUED VIDE CHEQUE NOS. 560123 AND 375787 RESPECTIVELY. THE REMAINING PAYMENT WAS MADE IN CASH FROM TIME TO TIME. THEA SSESSEE STATED THUS HE BECAME JOINT OWNER OF THE AGRICULTURAL LAND OF 0.81 HECTARES W.E.F. 20.06.2005 POSITIVELY. IV) THUS THE ABOVE STATED PROPERTY WAS SOLD AFTER 42 MONTHS ON 26.11.2008 AND THE SALE DEED WAS ALSO REGISTERED ON 26.11.2008 ITSELF. V) THUS THE CAPITAL ASSET I.E. AGRICULTURAL LAND WAS HELD BY HIM FOR 42 MONTHS AND RELIED UPON SEC. 2(14) OF I.T. ACT, 1961 FOR PROVING HIS OWNERSHIP OF THE PROPERTY. VI) THAT IN VIEW OF SECTION 2(42A) OF I.T. ACT, AS THIS ASSET IS HELD FOR MORE THAN 36 MONTHS THE CAPITAL GAIN ARISING OUT OF TRANSFER OF THIS LAND SHOULD BE TREATED AS LONG TERM CAPITAL GAIN AND EXEMPTION U/S 54F IS TO BE ALLO WED. VII) THAT THE SALE PROCEEDS OF THE ABOVE STATED AGRICULTURAL LAND WERE USED BY HIM FOR PURCHASE OF RESIDENTIAL PLOT WHICH WAS PURCHASED ON 02.06.2008 AND FOR REPAYMENT OF HAND LOANS TAKEN FROM RELATIVES FOR CONSTRUCTION WORK ON THE PLOT AND THEREFORE HE IS ELIGIBLE FOR DEDUCTION U/S 54/54F. VIII) THAT THE LAND SOLD BY HIM IS AN AGRICULTURAL LAND AND FALLS BEYOND 8 KMS FROM NMC LIMITS AND THEREFORE THE GAIN ARISING ON SALE OF THIS AGRICULTURAL LAND IS NOT TAXABLE. 5.3 MOREOVER A STATEMENT OF THE ASSESSEE U/S 131 WAS ALSO RECORDED. HOWEVER, T HE AO HAS FORMED A VIEW THAT THE LAND WAS PURCHASED ON 04 - 02 - 2006 AND SOLD ON 26 TH NOVEMBER, 2008 . ACCORDING TO THE AO THE PHYSICAL POSSESSION OF THE PROPERTY WAS ALSO HANDED OVER ON 04 - 02 - 2006. THEREFORE, HOLDING OF THE PROPERTY WAS LESS THAN 36 MONTHS. HENCE THE CAPITAL GAIN ON TRANSFER OF THE SAID ASSETS WAS SHORT TERM CAPITAL GAIN. THE AO HAD ALSO DISALLOWED THE CLAIM OF 54F DEDUCTION ON THE GROUND THAT IT WAS AN AFTER THOUGHT OF THE ASSESS EE AND AS PER LAW ONLY AVAILABLE AGAINST SALE OF LONG TERM CAPITAL ASSET. I HAVE ALREADY DISCUSSED IN ABOVE PARAS THE MANNER IN WHICH THE AO HAS COMPUTED THE SHORT TERM CAPITAL GAIN. IN MY CONSIDERED OPINION, WHEN THE AO HAS EXAMINED THE NATURE OF THE ASSE T AS WELL AS THE PROVISIONS OF THE I.T. ACT AND THEREUPON ARRIVED AT A CONCLUSION TO ASSESS THE GAIN AS SHORT TERM CAPITAL GAIN, THEREFORE, THERE WAS NO OCCASION ON THE PART OF THE LEARNED COMMISSIONER TO HOLD THAT AN ERRONEOUS VIEW WAS TAKEN BY THE AO. IN THE CASE OF GABRIAL INDIA LTDE. (SUPRA) IT WAS EXPRESSED THAT THE PROVISIONS OF SECTION 263 DOES NOT VISUALISE 7 ITA NO. 291/NAG/2014 SUBSTITUTION OF THE JUDGMENT OF COMMISSIONER FOR THAT OF THE JUDGMENT OF THE ITO, UNLESS THE DECISION OF THE ITO IS ERRONEOUS. IT HAS ALSO BEE N CLARIFIED BY THE HONBLE COURT THAT AN ORDER IS ERRONEOUS WHEN IT IS NOT IN ACCORDANCE WITH LAW. THE VIEW EXPRESSED BY THE HONBLE COURT WAS THAT THE POWER U/S 263 SHOULD NOT BE EXERCISED AT THE WHIMS AND CAPRICE OF COMMISSIONER. AS FAR AS THE DECISIONS CITED FROM THE SIDE OF THE R EVENUE ARE CONCERNED, I HAVE EXAMINED THE FACTS AND THE NATURE OF THE DISPUTE AND HEREBY HOLD THAT THOSE DECISIONS ARE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. ACCORDINGLY I HEREBY QUASH THE ORDER PASSED U/S 263 OF I.T. ACT BY ALLOWING THE GROUNDS OF APPEAL. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRODUCED IN THE OPEN COURT ON THIS 15 TH DAY OF JANUARY, 2016. SD/ - (MUKUL K. SHRAWAT) JUDICIAL MEMBER NAGPUR, DATED: 15 TH JANUARY, 2016. COPY FORWARDED TO : 1. GAJANAN KRISHNA RAAKSHAK, PLOT NO. 11/8, ASHIRWAD NAGAR, BEHIND BADA TAJBAG, NAGPUR. 2. I.T.I., WARD - 5(3), NAGPUR. 3. COMMISSIONER OF INCOME - TAX - III, NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR