Chandra Mohan Pattanayak, Bhubaneswar V. ACIT, Bhubaneswar

ITA 3/CTK/2010

• Counselvise Citation: 322114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-01-2010
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Capital asset; Gift; Salary income; TDS
• Section: 143(3)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 03/CTK/2011 (ASSESSMENT YEAR 2006 - 07) CHANDRAMOHAN PATTANAYAK, PLOT NO.136,SA GHID NAGAR,BHUBANESWAR 751 007 PAN: ABMPP 5291 K VERSUS ACIT, OSD RANGE 2, BHUBANESWAR AT PRESENT ACIT, CIRCLE 2(1),BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.K.MOHAPATRA, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K .GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON THE FOLLOWING TWO GROUNDS. 1. FOR THAT THE SUSTAINING OF THE ADDITION OF 2,10,000 UNDER INCOME FROM HOUSE PROPERTY IN RES PECT OF PROPERTY AT FLAT NO.705B IN PRESTIGE ST. JOHNS WOODS, BANGALORE BY THE LEARNED CIT(APPEALS) IS ERRONEOUS AND BAD BOTH ON FACTS AND IN LAW. 2. FOR THAT THE ASSESSEE HAVING EXERCISED ITS OPTION U/S. 23(4) OF THE ACT IN RESPECT OF THE SAID HOUSE PROP ERTY AT FLAT NO.705B & PARKING LOT IN PRESTIGE ST. JOHNS WOODS, BANGALORE, THE LEARNED CIT(APPEALS) OUGHT TO HAVE HELD THAT THE INCOME OF THE SAID PROPERTY AS NIL INSTEAD OF CONCURRING WITH THE ASSESSING OFFICER IN ASSESSING THE INCOME OF PROPERTY AT FL AT NO.123 AND GARAGE NO.3. RANKA PARK APARTMENTS, BANGALORE AS NIL . 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THE BRIEF FACTS THAT THE ASSESSEE FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF 6,04, 700. THE ASSESSE HAD SALARY INCOME AND HAD DECLARED INCOME FROM CAPITAL GAINS IN THE IMPUGNED ASSESSMENT YEAR WHICH WAS SUBJECTED TO SCRUTINY U/S.143(3). HE HAD PROPERTY HAVING THREE HOUSES AS FOLLOWS: ITA NO.03/CTK/2011 2 1 . FLAT NO.123 & GARAGE NO.3, RANKA PARK APARTMENTS, .4,5&6, LALBAGH ROAD, BANGALORE : ( A ) THE ASSESSEE UNDER AN AGREEMENT REGISTERED IN THE SUB REGISTRARS OFFICE, BASAVANAGUDI, BANGALORE DATED 30/10/1985 (FOR SHORT THE AGREEMENT HAS PERFORMED THE CONDITIONS UNDER THE AGREEMENT, PAID 275,000 AND TAKEN POSSESSION OF THE HOUSE (FLAT NO.123 AND GARAGE NO.3, RANKA PARK APARTMENTS, PLOT NO.4, 5 & 6, LALBAGH ROAD, BANGALORE) DURING THE FINANCIAL YEAR 1985 - 86 AND AS THE OWNER IS IN PEACEFUL PROCESSION OF THE SAID HOUSE PROPERTY SINCE THEN, IRRESPECTIVE OF THE REGISTRATION OF THE SAID HOUSE PROPERTY ON 16.12.2003 VIDE DOCUMENT NO.5478 IN OFFICE OF THE SUB REGISTRARS, BASAVANAGUDI, BANGALORE. ( B ) IT IS PERTINENT TO NOTE THAT THE SAID HOUSE PROPERTY IS SELF OCCUPIED BY THE ASSESSEE FOR H IS OWN RESIDENCE ALL ALONG SINCE 1986 AND ACCORDINGLY BEEN ASSESSED TO INCOME TAX IN THE PAST YEARS (C) THE ASSESSEE, IN MARCH 2006, RELEVANT TO ASSESSMENT YEAR 2006 - 07 HAS SOLD THE SAID HOUSE PROPERTY FOR 28 IAKHS AND THE SAID HOUSE PROPERTY BEING A LONG TERM CAPITAL ASSET (AS HAS BEEN HELD FROM 1986 I.E. FOR A PERIOD OF 36 MONTHS OR MORE, THE LONG TERM CAPITAL GAINS OF 5,57,895 COMPUTED UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 (FAR SHORT LT AC T OR ACT) AND TAKING INTO ACCOUNT THE ELIGIBLE DEDUCTION U/S.54 OF THE ACT ON ACCOUNT OF AN AMOUNT OF 22,27,650 PAID FOR CONSTRUCTION OF NEW RESIDENTIAL HOUSE (FLAT NO.2, TARINI PALACE, SAHID NAGAR, BHUBANESWAR) AS UNDER: THE TAXABLE LONG TERM CAPITAL GAINS UNDER THE PROVISIONS OF THE ACT IS NIL. 2 . PROPERTY AT FLAT NO.705B & PARKING LOT OF PRESTIGE ST. JOHNS WOODS, BANGALORE : (A) THE ASSESSEE, VIDE A GIFT DEED DATED 15.08.2005 (ASSESSMENT YEAR 2006 - 07), HAS GIFTED THE PROPERTY AT FLAT NO.705B A ND PARKING LOT OF PRESTIGE ST. JOHNS WOODS, BANGALORE ((JAR SHORT THE PROPERTY) TO HIS DAUGHTER TANUJA PATTANAYAK AND POSSESSION TAKEN ON 15.08.2005 BY HER FOR SELF OCCUPATION AS HER ONLY HOUSE PROPERTY. ITA NO.03/CTK/2011 3 (B) THE ASSESSEE, BEING NO LONGER THE OWNER O F THE PROPERTY AFTER THE SAME WAS GIFTED HAS NOT TAKEN INTO ACCOUNT ANY INCOME THERE FROM IN HIS RETURN SINCE AS STATED ABOVE THE DONEE IS DEEMED OWNER AFTER THE VALID GIFT AND THE HOUSE IS SELF OCCUPIED BY HER AS THE ONLY PROPERTY. 3 . HOUSE AT FLAT NO. 101. ABHISEK APARTMENTS. 729, SAHID NAGAR. BHUBANESWAR - 751007 . THE ASSESSEE, DURING THE PREVIOUS YEAR 2005 - 06 (ASSESSMENT YEAR 2006 - 07) WAS ALSO OWNER OF HOUSE AT FLAT NO.101, ABHISEK APARTMENTS, 729, SAHID NAGAR, BHUBANESWAR - 751007 AND THE SAME WAS LET OUT THROUGH OUT THE YEAR AND ACCORDINGLY, THE INCOME OF 46,430 THERE FROM HAS BEEN INCLUDED IN THE INCOME OF THE ASSESSEE UNDER THE HEAD HOUSE PROPERTY FOR THE ASSESSMENT YEAR 2006 - 07. TAKING INTO ACCOUNT THE AFORESAID PROPERTY AT SL.1 AND 3 ABOVE ALONG WITH THE SALARY INCOME OF 3,73,380 AND INCOME OF 3,03,368 UNDER THE HEAD OTHER SOURCES, THE INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2006 - 07 (PREVIOUS YEAR 2005 - 06) WAS FILED ON 17.7.2006 U/S. 139(1) OF THE IT ACT ON A TOTAL INCOME OF 6,04,700 AND WHEREIN INCOME TAX OF 1,24,207 INCLUDING TDS OF 19,207 HAS BEEN PAID. THE ASSESSING OFFICER, VIDE ASSESSMENT ORDER U/S. 143(3) OF THE ACT DATED 30.12.2008 MADE THE FOLLOWING ADDITIONS/ DISALLOWANCES: ( A ) IN RESPECT OF THE SALE OF THE SAID HOUSE PR OPERTY AT FLAT NO.123 AND GARAGE NO.3, RANKA PARK APARTMENTS, BANGALORE HAS TREATED 22 LAKHS AS SHORT TERM CAPITAL GAIN AND HAS ADDED THE SAME IN THE TOTAL INCOME; AND HAS DENIED THE DEDUCTION ULS.54 ARISING OUT FOR CONSTRUCTION OF NEW RESIDENTIAL HOUSE (FLAT NO.2, TARINI PALACE, SAHID NAGAR, BHUBANESWAR AND IN RESPECT OF WHICH 22,27,650 HAS ALREADY BEEN PAID; AND (B) IN RESPECT OF THE SAID GIFTED PROPERTY AT FLAT NO.705B AND PARKING LOT OF PRESTIGE ST. JOHNS WOODS, BANGALORE, HAS TAKEN THE ANNUAL VAL UE @ 25,000 P.M ( 3 LAKHS PER ANNUM ) U/S.23(4) OF THE ACT AND ACCORDINGLY MADE AN ADDITION OF 2, 10,000 UNDER THE HEAD HOUSE PROPERTY AND ASSESSED ON A TOTAL INCOME OF 30,14,700 AND RAISED A DEMAND OF 1 0,94,330 INCLUDING INTEREST OF 271,241 AND 1, 146 U/S.234B & 234C OF THE ACT ITA NO.03/CTK/2011 4 RESPECTIVELY FURTHER, IN THE SAID ORDER DT.30.12.20008 THE LEARNED ASSESSING OFFI CER HAS NOT GIVEN CREDIT FOR TDS OF 966. 3. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS ) AND THE LEARNED C IT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER WITHOUT DELIBERATING ON THE ISSUE THAT IT WAS THE PREROGATIVE OF THE ASSESSEE TO CHOOSE PROPERTY FOR CONSIDERATION OF NOTIONAL INCOME FOR THE SELF OCCUPIED PORTION ONCE THE ASSESSE DECIDED TO DISPOSE OF A PROPERTY IN THE IMPUGNED ASSESSMENT YEAR RENDERING INCOME FROM CAPITAL GAINS . THE LEARNED CIT(A) THEREFORE HELD THAT THE ASSESSEE HAD RENDERED LONG TERM CAPITAL GAIN WHICH THE ASSESSEE DOES NOT HAVE OBJECTION TO INSOFAR AS SUB - SECTION (4) OF SECTION 23 OF THE ACT CLEARLY INDICATES THAT THE DETERMINATION OF ANNUAL VALUE OF A HOUSE OR HOUSES OTHER THAN THE HOUSE IN RESPECT OF THE ASSESSEE EXERCISES AN OPTION UNDER CLAUSE (A) SHALL BE DETERMINED UNDER SUB - SECTION (1) AS IF SUCH HOUSE OR HOUSES HAD BEEN LET . 4. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER COULD NOT IMPOSE HIS CHOICE WHEN THE ASSESSEE HAS RENDERED HIS CHOICE OF HOLDING A PARTICULAR HOUSE AS SELF OCCUPIED WHEN THE ASSESSING OFFICER HAVING OBSERVED TAXATION FOR CAPITAL GAINS SEPARATELY AND THE PROPERTY FOR GIFT NOT HAVING CRYSTALLIZED IN THE ASSESSMENT YEAR LEFT THE DISCRETION TO THE ASSESSEE AND NOT TO BE FORCED UPON BY THE ASSESSING OFFICER. HE PRAYED THAT PLOT NO.705B MAY PLEASE BE TREATED AS SELF OCCUPIE D PORTION PENDING REGISTRATION OF THE GIFT DEED TO THE ASSESSEES DAUGHTER INSOFAR AS THE ANNUAL LETTING OUT VALUE OF THAT PROPERTY MAY BE BROUGHT TO TAX BY DETERMINING THE ANNUAL LETTING OUT VALUE . THE SECOND PROPERTY BE DEEMED TO BE LET OUT UNDER CONSIDERATION FOR IT HAVING BEEN SOLD WITH PROFIT IN MARCH, 2006 THEREFORE WAS THE PROPERTY CONSIDERED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. ITA NO.03/CTK/2011 5 5. THE LEANED DR OPPOSED TO THE CONTENTION OF TH E LEARNED COUNSEL FOR THE ASSESSEE BY INDICATING THAT MERE FIVE DAYS CANNOT LEAD TO A FINDING THAT ONCE THE PROPERTY HAS BEEN SOLD WAS TO REMAIN SELF OCCUPIED ONLY FOR THE PART OF THE YEAR. THE LEARNED CIT(A) THEREFORE UPHELD THE GIFT TO THE DAUGHTER AS NO T BE CONSIDERED FOR SELF OCCUPATION OF THE ASSESSEE WAS THE INTENTION OF THE ASSESSEE CANNOT NOW BE RETRACTED BY THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE HAD BEEN RENDERING THE PROPERTY AT RANKA PARK APARTMENTS TO BE SOLD IN THE FAG END OF THE F INANCIAL YEAR. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO ACCEDE TO THE PRAYER OF THE LEARNED COUNSEL FOR THE ASSESSEE NSOFAR AS ACCORDING TO THE PROVIS IONS OF SECTION 23(4), THE ASSESSEE HAVING BEEN MORE THAN ONE PROPERTY COULD OPT FOR HOLDING A PARTICULAR PROPERTY FOR THE PURPOSE OF TAXATION ON THE NOTIONAL ANNUAL LETTING OUT VALUE BEING THE PROPERTY AS SELF OCCUPIED. THE ASSESSING AUTHORITIES MISDIRECT ED THEMSELVES TO HOLD THAT THE GIFTED PROPERTY COULD NOT BE HELD AS SELF OCCUPIED WHEN THE VERY GIFT HAD NOT CRYSTALLIZED BY THEIR OWN FINDINGS. IT IS NOT THE CASE OF THE ASSESSEE TO TAKE ADVANTAGE OF THE SITUATION WHEN THE ERSTWHILE SELF OCCUPIED PROPERTY HAS BEEN RENDERED TO TAX IN THE IMPUGNED ASSESSMENT YEAR ON ACCOUNT OF CONSIDERATION RECEIVED FOR CAPITAL GAINS. THE SAME PROPERTY, THEREFORE, CANNOT BE TAXED ON THE BASIS OF NOTIONAL ANNUAL LETTING OUT VALUE. THIS WILL RENDER TAXATION AGAINST THE SPIRIT OF LAW INSOFAR AS THE ACTUAL INCOME CANNOT BE PITTED AGAINST NOTIONAL INCOME. THE LAW REQUIRES THE ASSESSEE TO CHOOSE A PROPERTY HAVING MORE THAN ONE PROPERTY TO BE CONSIDERED AS SELF OCCUPIED AS HAS BEEN BROUGHT FOR CONSIDERATION BY THE LEARNED COUNSEL FO R THE ASSESSEE. FOR THIS, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR APPLYING THE ANNUAL LETTING OUT VALUE ON THE PROPERTY NAMELY, FLAT NO.705B & PARKING ITA NO.03/CTK/2011 6 LOT OF PRESTIGE ST.JOHNS WOODS, BANGALORE FOR TAXATION IN THE IMPUGNED ASSESSMENT YEAR, ALL OTHER FACTS AND CIRCUMSTANCES REMAINING THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 5 TH AUGUST, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCO UNTANT MEMBER DATE: 5 TH AUGUST, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: CHANDRAMOHAN PATTANAYAK, PLOT NO.136,SAGHID NAGAR,BHUBANESWAR 751 007. 2. THE RESPONDENT: ACIT, OSD RANGE 2, BHUBANESWAR A T PRESENT ACIT, CIRCLE 2(1),BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.