RASHMI M DHANANI, MUMBAI V. ITO WD 26(2)(5), MUMBAI

ITA 3166/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2727 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Opportunity of being heard; Principle of natural justice; Cost of acquisition; Corroborative evidences; Set aside
• Section: 143(3); 142(1); 250; 201

Judgement Text

SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE SRI SHAMIM YAHYA, A M AND SRI RAM LAL NEGI , J M . / ITA NO . 3166 / MUM/ 201 9 ( / ASSESSMENT YEAR 2010 - 11 ) MRS. RASHMI MAHENDRA DHANANI C - 10, 506, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPEX, BANDRA EAST] MUMBAI / VS. INCOME TAX OFFICER WARD - 26(2)(5), MUM B AI ( / APPELLANT) ( / RES PONDENT) . / PAN NO. AADPD 3333 T / APPELLANT BY : SHRI SATYA PRAKASH SINGH, AR / RESPONDENT BY : SHRI JEETENDRA KUMAR, DR / DATE OF HEARING: 19.10.2020 / DATE OF PRON OUNCEMENT : 26.11.2020 / O R D E R , / PER SHAMIM YAHYA , AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) - 38, MUMBAI DATED 20.03.2019 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11 . 2. THE GROUNDS OF APPEAL READ AS UNDER : - 1. THE ORDER DATED 20/ - 3/2 - 10 BEARING NO.CITA - 38/ITO - 26(2)(5)/IT - 10182/2017 - 18 BY THE CIT(A) - 38, MUMBAI IS ARBITRARY, 2 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI AGAINST NATURAL JUSTICE, UNLAWFUL, AGAINST THE PROVISIONS OF INCOME TAX ACT, 1961, INVALID AND T HEREFORE LIABLE TO BE QUASHED. 2. THE LEARNED COMMISSIONER OF INCOME TAX, APPEAL WAS NOT JUSTIFIED IN NOT CONSIDERING THE FOLLOWING PAYMENTS AMOUNTING TO 10,22,492/ - MADE BY THE ASSESSEE FOR ACQUISITION OF THE PROPERTY BEFORE ARRIVING LONG TERM CAPITAL GAIN. PARTICULARS AMOUNT () AMENITIES 9,38,250 FURNITURE & FIXTURE 84,242 TOTAL 10,22,492 3. BRIEF FACTS OF THE CASE ARE AS UNDER THAT DU RING THE COURSE O F ASSESSMENT PROCEEDING UNDER SECTION 143(3) OF THE ACT, 1961, THE AO OBSERVED THAT THE ASSESSEE HAD SOLD FLAT BEING FLAT NO.604/B, ETERNIA HIRANANDANI GARDENS, POWAI FOR SALE CONSIDERATION OF RS.46,60,000/ - AND CLAIMED LONG TERM CAPITAL LOSS. FROM THE WOR KING OF LONG TERM CAPITAL LOSS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD SHOWN PURCHASE PRICE OF THE FLAT AT 18,39,397/ - IN 1994 THE YEAR 2002 - 03 WITH TRANSFER CHARGES OF 75,000/ - . AFTER INDEXING THE PURCHASE PRICE FROM 1994 - 95 ONWARDS, THE ASSESSEE ARRIVED AT INDEXED PURCHASE PRICE OF 44,88,413/ - AND AFTER INDEXING GARAGE COST FROM 2002 - 03 ONWARDS, THE INDEX ED COST OF ACQUISITION OF GARAGE WAS SHOWN AT 2,26,219/ - WHICH ALSO INCLUDED TRANSFER CHARGES OF 75,000/ - . THUS, THE TOTAL INDEXED COST OF THE PROPERTY WAS TAKEN BY THE ASSESSEE AT 47,89,632/ - AS AGAINST WHICH THE 3 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI SALE CONSIDERATION OF THE PROPERTY WAS SHOWN AT 46,00,000/ - , THEREBY ARRIVING AT LONG TERM CAPITAL LOSS OF 1,29,632/ - . ON FURTHER VERIFICATION OF THE PURCHASE DEED, IT WAS NOTICED THAT THE ASSESSEE ALONG WITH HER HUSBAND PURCHASED THE PROPERTY AT 7,29,750/ - AND PAID STAMP DUTY OF 26,300/ - T OTALING TO 7,56,050/ - WHEREAS THE ASSESSEE HAD SHOWN PURCHASE COST OF 18,39,397/ - BEFORE INDEXATION AND DEDUCTION OF 44,88,413/ - WAS CLAIMED AFTER INDEXATION. IN VIEW OF THE SAME, AT THE TIME OF ASSESSMENT, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PURCHASE COST OF 18,39,397/ - . IN REPLY, ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF 9,38,250/ - WAS PAID TO THE BUILDER TOWARDS AMENITIES CHARGES ON THE FLAT AND THIS AMOUNT WAS REGULARLY SHOWN IN THE BALANCE SHEET SINCE THE YEAR 1995. FURTHER, THE ASSES SEE ALS O CONTENDED THAT THE AMOUNT OF R S.9,38,250/ - SHOULD BE CONSIDERED AS COST OF ACQUISITION/ IMPROVEMENT TO THE SAID PROPERTY. HOWEVER, THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AS IT WAS OBSERVED THAT CONSTRUC TION OF FIAT WHICH IN FACT ARE FULLY COVERED BY THE PURCHASE DEED OF THE SAID FLAT. IT WAS FURTHER OBSERVED THAT AS PER THE AMENITIES AGREEMENT THE AMOUNT OF 9,38,250/ - WAS REQUIRED TO BE PAID ON OR BEFORE 30.04.1994, HOWEVER, ASSESSEE DID NOT DISCLOSE THE DETAILS OF PAYMENT, MODE OF PAYMENT WITH DATE AND SUPPORTING EVIDENCES. IT WAS STATED BY THE ASSESSING OFFICER THAT AS PER THE PURCHASE DEED THE ASSESSEE HA S PURCHASED A COMPLETELY CONSTRUCTED FLAT FOR 7,29,750/ WITH ALL AMENITIES WHICH INDICATES THAT A COMPLETELY CONSTRUCTED FLAT WAS PURCHASED BY THE ASSESSEE HENCE, ANY FURTHER CLAIM TOWARDS AMENITIES WAS NOT ACCEPTABLE. ACCORDINGLY, THE AO REDUCED THE INDE XED 4 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI PURCHASE PRICE OF 18,44,879/ - AND GARAGE COST OF RS. 226,219/ - FROM THE SALE CONSIDERATION OF RS. 46.60 LAKHS AND DETERMINED LONG TERM CAPITAL GAIN OF 25,88,902/ - , A GAINST THIS ADDITION, ASSESSES FLIED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) UPH ELD THE DECISION OF THE AO IN DISALLOWING ASSESSEE'S CLAIM OF INDEXED COST OF A CQUISITION IN RESPECT OF AMENITY CHARGES. HOWEVER, THE LEARNED CI T(A) DIRECTED THE AO TO CONSIDER ASSESSEES CLAIM IN RESPECT OF STAMP DUTY PAID TOWARDS COST OF ACQUISITION AND ALSO THE TRANSFER CHARGES PAID TO THE SOCIETY WHILE COMPUTING CAPITAL GAIN. ON ASSESSEES APPEAL AGAINST THE LEARNED CIT(A)'S ORDER AS AFORESAID, THE ITAT HELD AS UNDER: 'IN OUR VIEW, THESE WORKS IF ACTUALLY HAD BEEN UNDERTAKEN BY THE BUILDER AS PER AMENI TIES AGREEMENT, WOULD CERTAINLY NEED TO BE INCLUDED IN THE COST OF ACQUISITION. ONLY BECAUSE THE AGREEMENT IS IN PLAIN PAPER OR NOT REGISTERED WOULD NOT DEPRIVE THE ASSESSEE FROM GETTING THE BENEFIT OF AMOUNT PAID TOWARDS AMENITIES IN CASE THE ASSESSEE HAS ACTUALLY PAID IT. MOREOVER, IF ALL OTHER FLAT OWNERS HAVE ENTERED INTO SIMILAR AGREEMENT FOR AMENITIES AND HAVE MADE PAYMENT FOR SUCH AMENITIES, IT WILL DEFINITELY PROVE THAT THERE WAS AN ARRANGEMENT BETWEEN THE BUILDER TO SPLIT THE WORK INTO TWO DIFFEREN T AGREEMENT, FOR WHICH THE PURCHASERS OF FLAT CANNOT BE HELD RESPONSIBLE. THEREFORE, WHEN SUCH FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER, IT WAS INCUMBENT ON HIS PART TO MAKE ENQUIRY AND FIND OUT WHETHER SIMILAR AGREEMENT WAS ENTERED INTO BY OTHER FLAT OWNERS. IN THAT 5 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI EVENT, IT WOULD HAVE BEEN PROVED THAT THE FLAT PURCHASED BY THE ASSESSEE WAS IN A SEMI - FINISHED CONDITION AND WAS NOT COMPLETE IN ALL RESPECT AS CERTAIN WORK WAS TO BE DONE AS PER THE AMENITIES AGREEMENT. THEREFORE, IN OUR VIEW, IF IT IS FOUND THAT ALL OTHER FLAT OWNERS HAVE ENTERED INTO SIMILAR AMENITIES AGREEMENT WITH THE BUILDERS/ DEVELOPERS, NO ADVERSE VIEW CAN BE TAKEN IN RESPECT OF THE ASSESSEE AND THE AMENITIES CHARGES PAID BY THE ASSESSEE HAS TO BE TREATED AS PART OF THE C OST OF ACQUISITION FOR THE PURPOSE OF INDEXATION. HENCE, FOR THE LIMITED PURPOSE OF ASCERTAINING WHETHER OTHER FLAT OWNERS HAVE ENTERED INTO SIMILAR AMENITIES AGREEMENT, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THIS ASP ECT AND DECIDE THE ISSUE AFRESH IN TERMS OF OUR OBSERVATIONS HEREIN ABOVE AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSING OFFICER ISSUE D NOTICE UNDER SECTION 142(1) OF THE I.T . ACT, 1961 DATED 01.09.2017 TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE VIDE LETTER DATED 04.09.2017 REITERATED THE SUBMISSION MADE BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS. (I) THE ASSESSEE HAS ALREADY FILED THE COPY OF PURCHASE AGREEMENT AS WELL AS AMENITIES AGREEMENT AT THE TIME OF ASSESS MENT PROCEEDINGS. (II) THE ASSESSEE HAS ALSO FILED ALL HER EARLIER YEAR BALANCE SHEETS UP TO ASSESSMENT YEAR 2010 - 11 SHOWING THE PAYMENTS MADE BY HER FOR PURCHASING THE PROPERTY AND THE AMENITIES 6 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI PROVIDED IN THE ABOVE FLOAT. (III) IT WAS CONFIRMED THAT WHI LE PURCHASING THE ABOVE FLAT IT WAS REGULAR PRACTICE OF THE BUILDER TO DIVIDE PURCHASE AGREEMENT INTO 2 PARTS I.E. PURCHASE AGREEMENT AS WELL AS AMENITIES AGREEMENT. (IV) THE SIMILAR AGREEMENT IN ALL OTHER PROPERTIES SOLD BY THE BUILDER DURING THE TIME OF PURCHASE OF PROPERTY. IN VIEW OF ITATS DIRECTION TO ASCERTAIN WHETHER ALL OTHER FLAT OWNERS OF ETERNIA CHS HAVE ENTERED INTO SIMILAR AMENITIES AGREEMENT LETTERS DATED 15.11.2017 WERE ISSUED TO THE BUILDER, M/S. HIRANANDANI LAKE GARDENS AND TO THE SECRETAR Y, ETERNIA CO - OPERATIVE HOUSING SOCIETY LTD. CALLING FOR DETAILS OF SALE AGREEMENTS ENTERED BY THE BUILDER WITH OTHER FLAT OWNERS IN THE SOCIETY ETERNIA CHS LTD., HIRANANDANI GARDENS, POWAI. HOWEVER, ONLY ONE COPY OF AGREEMENT ENTERED INTO BY THE BUILDER W ITH ONE BUYER WAS PROVIDED. AS REGARDS DETAILS CALLED FROM THE SOCIETY, THERE WAS NO COMPLIANCE FROM THE SOCIETY. THEREFORE, REMINDER LETTERS DATED 12.12.2017 WERE ISSUED TO THE BUILDER AND THE SECRETARY, ETERNIA CHS CALLING FOR FURTHER DETAILS OF FLAT OW NERS WHO HAVE ENTERED INTO AMENITIES AGREEMENT. A LET T ER WAS ALSO ISSUED TO M/S LAKE VIEW DEVELOPERS, A GROUP CONCERN OF HIRANANDANI LAKE GARDENS. IN REPLY, THE BUILDER HIRANANDANI LAKE GARDENS AND ITS GROUP CONCERN M/S. LAKE VIEW DEVELOPERS, VIDE LETTER D ATED 19.12.2017 SUBMITTED AS UNDER: - 1. THERE ARE 128 FLATS IN ETERNIA CO - OPERATIVE HOSING SOCIETY LTD. 7 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI NO COMPLIANCE HAS BEEN RECEIVED FROM THE SOCIETY EVEN AFTER REPEATED REMINDERS. ON PERUSAL OF THE SUBMISSION RECEIVED FROM THE BUILDER, HIRANANDANI LAK E GARDENS AND THE GROUP CONCERN M/S. LAKE VIEW DEVELOPER, AO OBSERVED THAT OUT OF 128 FLATS IN ETERNIA CHS AMENITIES AGREEMENT HAVE BEEN MADE ONLY IN RESPECT OF 33 FLATS. THIS IMPLIES THAT THERE WAS NO MANDATORY ARRANGEMENT ON THE PART OF THE BUILDER TO SP LIT THE WORK INTO TWO DIFFERENT AGREEMENTS, WHICH IS CONTRARY TO THE FACTS SUBMITTED BY THE ASSESSEE VIDE LETTER DATED 04.09.2017. IT ES TA BLISHES THE FACT THAT THE FLAT WAS HANDED OVER BY THE BUILDER IN COMPLETE CONSTRUCTED FORM AND WAS FIT FOR HABITATION IN ALL RESPECTS AS, PART FROM VERY FEW FLAT OWNERS, MAJORITY OF OTHER FLAT OWNERS IN ETEMIA CHS HAVE NOT ENTERED INTO SUCH AMENITIES AGREEMENT WITH THE BUILDER. IT IS FURTHER OBSERVED FROM THE AMENITIES AGREEMENT THAT THE AMENITIES CHARGES CLAIMED INCLUDES SPECIAL WATER PROOFING IN TOILETS/KITCHEN, SPECIAL WOOD FOR DOORS/WINDOWS ETC. WHICH ARE NOT IN THE NATURE OF IMPROVEMENT COST. THE AMENITIES AGREEMENT - CLAIMED BY THE ASSESSEE IS ALSO NOT WITH THE BUILDER BUT A GROUP CONCERN., M/S. LAKE VIEW DEVELOPER. TH E ASSESSEE HAS NOT BEEN ABLE TO CO - RELATE THE TWO AGREEMENTS ENTERED WITH TWO DIFFERENT BUSINESS ENTITIES ONE WITH M/S. HIRANANDANI LAKE GARDEN AND OTHER WITH M/S. LAKE VIEW DEVELOPERS. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO DISCLOSE THE. DETAILS OF PAYMEN T, MODE OF PAYMENT WITH DATE, SUPPORTING EVIDENCES IN RESPECT OF SUCH PAYMENTS. IN VIEW OF THE ABOVE, LONG TERM CAPITAL GAIN DETERMINED AS PER ORDER UNDER SECTION 250 OF THE I.T. ACT OF 25,13,902/ - IS CHARGED TO TAX. 4. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE 8 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI ASSESSING OFFICERS ACTION BY INTERALIA OBSERVING AS UNDER: - 7.3.1 TAKING INTO CONSIDERATION THE INFORMATION WITH A PINCH OF SALT, THAT ONLY 33 FLAT OWNERS HAVE ENTERED INTO AMENITIES AGREEMENT SINCE COPY OF THE SAID DOCUMENTS HAVE NOT BEE N MADE AVAILABLE EITHER BY THE BUILDER, SOCIETY OR THE APPELLANT, OUT OF 128 FLATS IN THE SAID SOCIETY BUILDING STRONGLY INDICATES THAT THERE WAS NO MANDATORY SPLITTING OF THE PURCHASE/ SALE AGREEMENTS INTO TWO PARTS AS WRONGLY CONTENDED BY THE APPELLANT V IDE LETTER DATED 14.09.2017. THIS ALSO PROVES THE FACT THAT THE BUILDER HAD HANDED OVER FULLY COMPLETED AND CONSTRUCTED FLAT TO THE FLAT BUYERS BECAUSE MAJORITY OF OTHER FLAT OWNERS HAVE NOT ENTERED INTO ANY SUCH AMENITIES AGREEMENT WITH BUILDER. I ALSO FI ND THAT THE SAID AMENITIES AGREEMENT IS ALSO NOT WITH THE BUILDER BUT THE GROUP CONCERN, M/S. LAKEVIEW DEVELOPERS. THEREFORE, THE APPELLANT FAILED TO ESTABLISH CORRELATION BETWEEN THE TWO AGREEMENTS ENTERED WITH TWO DIFFERENT ENTITIES. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS 9 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS THE AMENITIES CHARGES CLAIMED BY THE ASSESSEE AS PART OF COST OF ACQUISITION OF THE FLAT. THIS ISSUE HAD ALREADY TRAVELLED TO THE ITAT BEFORE. THE ITAT HAD PRINCIPALLY AGREED WITH THE ASSESSEES CLAIM BUT HAD DIRECTED THE AUTHORITIES BELOW TO EXAMINE WHETHER THE SIMILAR AGREEMENT HAD BEEN ENTERED FOR AMENITIES BY OTHER FLAT OWNERS. THE OB JECTION OF THE AUTHORITIES BELOW TOWARDS THE VERACITY OF AGREEMENT FOR THE AMENITIES HAD ALREADY BEEN REJECTED BY THE ITAT. 6. WE FIND THAT THEREAFTER UPON SUBSEQUENT ENQUIRY THE ASSESSING OFFICER GOT INFORMATION THAT 33 OF THE FLAT OWNERS HAVE ALSO ENTERED I NTO SUCH AMENITIES AGREEMENTS. DESPITE THIS INFORMATION THE AUTHORITIES BELOW DISALLOWED THE ASSESSEES CLAIM BY HOLDING THAT THE VERACITY OF THE SAME WAS NOT ESTABLISHED. WE NOTE THAT THE VERACITY OF THE CLAIM WAS ALREADY ESTABLISHED BY THE AGREEMENT ALRE ADY SUBMITTED BY THE ASSESSEE EARLIER WHICH THE ITAT HAS ACCEPTED. THE MATTER WAS ONLY REMANDED TO FIND OUT THE POSITION OF OTHER FLAT OWNERS. FROM THE ENQUIRY OF THE AUTHORITIES BELOW IT CAME TO LIGHT THAT 33 OTHER FLATTERS HAD ENTERED INTO SIMILAR AMENIT Y AGREEMENT. IN SUCH CIRCUMSTANCES IN OUR CONSIDERED OPINION THE AUTHORITIES BELOW SHOULD HAVE FOLLOWED THE ITAT ORDER AND ALLOWED THE ASSESSEES CLAIM OF AMENITIES CHARGES AS PART OF COST OF THE POSITION. THIS POSITION IS FURTHER FORTIFIED THAT THE AMENIT Y CHARGES HAD ALREADY BEEN PAID AND THE SAME WAS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE. ACCORDINGLY, IN OUR CONSIDERED OPINION THE DENIAL OF THE ASSESSEES CLAIM TOWARDS AMENITIES CHARGES PAID AS PART OF COST OF ACQUISITION IS NOT 10 | P A G E ITA NO. 3166/MUM/2019 MRS. RASHMI MAHENDRA DHANANI SUSTAINABLE. ACC ORDINGLY SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE AND DECIDE THE ISSUE IN FAVOUR OF ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED AS ABOVE. ORDER PRONOUNCED UNDER RULE 34(4) OF ITAT RULES ON 26. 11. 2020 . SD / - SD/ - ( / RAM LAL NEGI ) ( / SHAMIM YAHYA ) ( / JUDICIAL MEMBER ) ( / ACCOUNTANT MEMBER ) , / MUMBAI, DATED: 26 .11 . 2020 , . / SUDIP SARKAR, SR.PS / COP Y OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI