HIMANSHU G MEHTA, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX - 24, MUMBAI

ITA 3612/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9047 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL RAMAN CIR
• Assessee Lawyers: KSHIPRA SINGHVI
• Keywords: Capital asset; Revision of order; Opportunity of being heard; Cost of acquisition; Benefit of exemption
• Section: 143(3); 54F; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3612/MUM/2018 ASSESSMENT YEAR: 2013 - 14 HIMANSHU G. MEHTA, A/501, NAV KALPITA, LALLUBHAI PARK, ANDHERI (WEST), MUMBAI - 400058. VS. PR. COMMISSIONER OF INCOME TAX - 24, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. PAN NO. AAAPM9658C APPELLANT RESPONDENT ASSESSEE BY : MS. KSHIPRA SINGHVI, AR REVENUE BY : MR. RAHUL RAMAN, CIR DR DATE OF HEARING : 04/09/2018 DATE OF PRONOUNCEMENT : 03/12/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2013 - 14. THE APPEAL IS DIRECTED AGAIN ST THE ORDER PASSED BY THE PR. COMMISSIONER OF INCOME TAX - 24 [IN SHORT PCIT], MUMBAI U/S 263 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED PCIT WAS NOT JUSTIFIED IN HOLDING THAT THE AS SESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY THE ASSESSING OFFICER FOR A. Y. 2013 - 14 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE CLAIM FOR DEDUCTION U/S HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 2 54 OF THE INCOME TAX ACT WAS ALLOWED BY THE AO AFTER DUE ENQUIRY AND VERIFICATION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEA RNED PCIT WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY THE ASSESSING OFFICER FOR A.Y. 2013 - 14 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE CLAIM FOR DEDUCTION U/S 54 OF THE INCOME TAX ACT IS A LEGALLY VALID CLAIM IN VIEW OF T HE DECISION OF THE HONORABLE ITAT, MUMB AI IN RAMITA MAHENDRA MEHTA ITA N O. 453 5 /MUM/2014. 3. WI THOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LEARNED PCIT WAS NOT JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER ON THE ALLOWABLY OF THE DEDUCTION U/S 54 OF THE ACT, AS IT IS WELL SETTLED THAT WHEN THE TWO VIEWS ARE POSSIBLE ON AN ISSUE, EXERCISE OF REVISIONARY POWER U/S 263 WOULD NOT BE JUSTIFIED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013 - 14 ON 15.10.2013 DECLARING TOTAL INCOME OF RS.13,52,240/ - . THE ASSESSING OFFICER (AO) OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HA S SHOWN TOTAL RECEIPTS OF RS.2,25,29,858/ - , WHEREAS AS PER 26AS IT WAS RS.2,25,42,925/ - . THE AO MADE AN ADDITION OF THE ABOVE DIFFERENCE OF RS.13,068/ - AND ARRIVED AT TOTAL INCOME OF RS.13,65,310/ - . THE PCIT HAS RECORDED THAT SUBSEQUENTLY IT WAS NOTICED THAT THE ASSESSEE HAD SOLD TWO IMMOVABLE PROPERTIES, INVESTED THE SALE PROCEEDS THEREOF IN PURCHASE OF ANOTHER RESIDENTIAL PROPERTY AND CLAIME D EXEMPTION U/S 54 OF THE ACT. IN RESPONSE TO A QUERY RAISED BY THE PCIT TO EXPLAIN WHY THE CLAIM U/S 54 SHOULD NOT BE DISALLOWED , THE ASSESSEE FILED A REPLY DATED 27.03.2018, WHICH HAS BEEN EXTRACTED AT PARA 3 OF THE IMPUGNED ORDER HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 3 DATED 28.03.2018. THE P CIT WAS NOT CONVINCED WITH THE SAID REPLY OF THE ASSESSEE ON THE GROUND THAT THE DATES OF SALE OF THE TWO PROPERTIES ARE 24.08.2012 AND 26.12.2012, WHEREAS THE AGREEMENT FOR PURCHASE OF THE NEW PROPERTY WAS EXECUTED ON 22.07.2009. PAYMENT FOR THE SAME WAS MADE ON VARIOUS DATES IN 2009, 2011 AND 2012 AND, AS STATED BY THE ASSESSEE, POSSESSION OF THE NEW FLAT WAS TAKEN ONLY ON 24.08.2012. AS PER THE PCIT, WHENEVER AN AGREEMENT FOR PURCHASE IS SIGNED AND REGISTERED AND SUBSTANTIAL AMOUNT IS ALSO PAID FOR THE P URCHASE, IT CAN BE SAID THAT PURCHASE HAS BEEN EFFECTED. IN THE PRESENT CASE, THE AGREEMENT FOR PURCHASE WAS SIGNED IN JULY 2009, AFTER PAYMENT OF RS.1,00,000/ - BY THE ASSESSEE. THEREAFTER, A FURTHER SUM OF RS.30,00,000/ - WAS PAID BY 10.08.2011 VIZ. BEFORE ONE YEAR FROM THE DATE OF SALE OF THE ORIGINAL ASSET. THE PCIT OBSERVED THAT WHEN, OUT OF A TOTAL AMOUNT OF RS.90,00,000/ - AN AMOUNT OF RS.40,00,000/ - WAS INVESTED IN THE NEW PROPERTY BEFORE ONE YEAR FROM THE DATE OF SALE OF THE ORIGINAL ASSETS, THERE IS NO REASON TO ASSUME THAT THE PURCHASE WAS NOT CONCLUSIVE TILL THE POSSESSION OF THE FLAT WAS PHYSICALLY HANDED OVER. THE PCIT REFERRED TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RASIKLAL M. PARIKH (ITA NO. 314 OF 2013) STATING THAT MER E ISSUE OF ALLOTMENT LETTER BY THE BUILDER/DEVELOPER DOES NOT CONFER TITLE, UNTIL AND UNLESS THE AGREEMENT FOR SALE UNDER THE PROVISIONS OF THE MOFA ACT IS REGISTERED. APPLYING THE ABOVE RATIO, THE PCIT HELD THAT SINCE THE AGREEMENT FOR PURCHASE/SALE WAS R EGISTERED ON 22.07.2009, THAT WOULD BE THE DATE WHEN THE ASSESSEE CAN BE SAID TO HAVE PURCHASED THE PROPERTY AS PER THE PROVISIONS OF MOFA ACT. HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 4 THE PCIT ALSO OBSERVED THAT THE ABOVE ASPECTS HAVE NOT AT ALL BEEN EXAMINED BY THE AO, WHILE ALLOWING DEDUCTIO N U/S 54 OF THE ACT, IN THE ASSESSMENT MADE U/S 143(3) DATED 19.02.2016. THEREFORE, THE PCIT SET ASIDE THE ORDER OF THE AO ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 54 OF THE ACT AND DIRECTED HIM TO REASSESS THE INCOME AFTER ALLOWING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 4. BEFORE US, THE LD. COUNSEL OF THE A SSESSEE SUBMITS THAT DURING THE PREVIOUS YEAR 2012 - 13, THE ASSESSEE HAD MADE LONG TERM CAPITAL GAINS (LTCG) ON SALE OF TWO RESIDENTIAL PROPERTIES. FURTHER DEDUCTION U/S 54 WAS CLAIMED RESULTING IN LTCG AT RS. NIL . AS PER HIM , THE RESIDENTIAL HOUSE AT KANDIVALI (EAST) WAS SOLD FOR RS.55,00,000/ - VIDE AGREEMENT DATED 24.08.2012. THE SALE OF THE PROPERTY RESULTED IN CAPITAL GAINS OF RS.45,42,485/ - , AFTER CLAIMING THE INDEXED COST OF ACQUISITION OF THE PROPERTY. THE RESIDENTIAL HO USE AT VIRAR WAS SOLD FOR RS.14,00,000/ - VIDE AGREEMENT DATED 26.12.2012. THE SALE OF THE PROPERTY RESULTED IN CAPITAL GAINS OF RS.5,68,875/ - , AFTER CLAIMING THE INDEXED COST OF ACQUISITION OF THE PROPERTY. THUS THE TOTAL CAPITAL GAINS ON THE SALE OF THE A FORESAID TWO PROPERTIES CAME TO RS.51,11,360/ - . THE LD. COUNSEL SUBMITS THAT THE ASSESSEE PURCHASED THE UNDER - CONSTRUCTION RESIDENTIAL FLAT AT KAMLA PARK VIEW, FLAT NO. 501, 5 TH FLOOR, LALLUBHAI PARK, ANDHERI WEST, MUMBAI - 400058 FROM THE BUILDER KAMLA LAN DMARC PROPERTIES PVT. LTD. THE AGREEMENT FOR THE FLAT WAS EXECUTED HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 5 ON 22.07.2009, INVOLVING PURCHASE CONSIDERATION OF RS.90,00,000/ - . THE PAYMENTS MADE TOWARDS THE SAID FLAT ARE AS UNDER: SR. NO. DATE CHEQUE/DD NO. AMOUNT (RS.) 1 21/07/2009 785395 1,00,000/ - 2 19/02/2011 762707 20,00,000/ - 3 10/08/2011 990051 10,00,000/ - 4 15/09/2011 990052 20,00,000/ - 5 29/09/2011 375229 10,00,000/ - 6 06/01/2012 885525 10,00,000/ - 7 05/03/2012 885562 10,00,000/ - 8 29/03/2012 885542 9,00,000/ - 90,00,000/ - THE LD. COUNSEL SUBMITS IT IS APPARENT THAT THE PAYMENTS APPEARING AT SERIAL NO. 4 TO 8, AMOUNTING TO RS.59,00,000/ - HAVE BEEN MADE BEFORE ONE YEAR OF THE TRANSFER OF RESIDENTIAL PROPERTY SOLD ON 24.08.2012. ALTHOUGH THE AGREEMENT FOR THE RESIDENTIAL HOUSE AT ANDHERI WAS ENTERED ON 22.07.2009, POSSESSION OF THE SAID HOUSE WA S GIVEN TO THE ASSESSEE ON 27.08.2012 BY THE BUILDER KAMLA LANDMARC PROPERTIES PVT. LTD. THUS LTCG ON SALE OF THE SAID PROPERTIES AMOUNTED TO RS.51,11,360/ - . IT IS STATED THAT THE ASSESSEE HAD MADE INVESTMENT IN THE NEW RESIDENTIAL HOUSE AT ANDHERI AMOUNT ING TO RS.59,00,000/ - BEFORE ONE YEAR OF SALE OF THE RESIDENTIAL HOUSE I.E. 24.08.2012. HENCE THE ENTIRE CAPITAL GAINS WERE EXEMPT U/S 54. HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 6 THE LD. COUNSEL SUBMITS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD SUBMITTED COPIES OF THE AGREEMENTS FOR PURCHASE AND SALE OF PROPERTIES, ALONG WITH DETAILS OF INVESTMENT AND WORKING OF LTCG. IT IS FURTHER SUBMITTED THAT VIDE LETTER DATED 03.01.2016, IT WAS FILED BEFORE THE AO THAT SINCE THE ASSESSEE HAD MADE INVESTMENT IN RESIDENTIAL FLAT OF RS.60,00,000/ - , THE LTCG OF RS.51,11,360/ - IS EXEMPT U/S 54. ALSO IT IS STATED THAT VIDE LETTER DATED 08.02.2016 IT IS FILED BEFORE THE AO THAT IN CASE OF PURCHASE OF HOUSE, THE BENEFIT IS AVAILABLE IN THE INVESTMENT IN NEW HOUSE MADE BY THE ASSESSEE WITHIN THE STIPULATED PERIOD U/S 54. IT IS THUS SUBMITTED THAT THE AO HAS ALLOWED THE CLAIM OF DEDUCTION U/S 54 AFTER DUE VERIFICATION AND EXAMINATI ON. RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. SMT. BEENA K. JAIN (1996) 217 ITR 363 (BOM), SMT. RAMITA MAHENDRA MEHTA V. ITO (ITA NO. 4535/MUM/2014 FOR AY 2010 - 11) OF ITAT D BENCH, MUMBAI, BASTIMAL K. JAIN V. ITO (ITA NO. 2896/MUM/2014 FOR AY 2 010 - 11) OF ITAT B BENCH, MUMBAI, NISHI CHOUBEY V. CIT (ITA NO. 3353/MUM/2014 FOR AY 2009 - 10) OF ITAT B BENCH MUMBAI, ITO V. SHRI NARSHIVHA AMRUTRAO DHERE (ITA NO.1944/PN/2013 FOR AY 2008 - 09) OF ITAT A BENCH PUNE, SHRI HARESH D. TRIVEDI (HUF) V. PCIT (ITA NO. 674/PUN/2016 FOR AY 2012 - 13) OF ITAT B BENCH PUNE, CIT V. GABRIEL INDIA LTD . (1993) 203 ITR 108 (BOM), CIT V. M/S FINE JEWELLERY (INDIA) LTD. (ITA NO. 296 OF 2013) BY BOMBAY HIGH COURT AND CIT V. GERA DEVELOPMENTS PVT. LTD. (ITA NO. 2171 OF 2013 ) BY BOMBAY HIGH COURT. 5. ON THE OTHER HAND, THE LD. DR RELIES ON THE DECISION IN RASIKLAL M. PARIKH (SUPRA) AND SUBMITS THAT MERE ISSUE OF ALLOTMENT LETTER BY THE HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 7 BUILDER/DEVELOPER DOES NOT CONFER TITLE, UNTIL AND UNLESS THE AGREEMENT FOR SALE UNDER THE PROVISIONS OF THE MOFA ACT IS REGISTER ED . THUS IT IS STATED BY HIM THAT SINCE THE AGREEMENT FOR PURCHASE/SALE WAS REGISTERED ON 22.07.2009, THAT WOULD BE THE DATE WHEN THE ASSESSEE CAN BE SAID TO HAVE PURCHASED THE PROPERTY AS PER THE PROVISIONS OF MOFA AC T. THEREFORE, THE LD. DR SUPPORTS THE ORDER PASSED BY THE PCIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. A SIMILAR ISSUE AROSE BEFORE THE HONBLE BOMBAY HIGH COURT IN SMT. BEENA K. JAIN (SUPRA). IN THAT CASE THE ASSESSEE HAD SOLD OFFICE PREMISES ON 23RD JULY, 1987, WHICH RESULTED IN LONG TERM CAPITAL GAINS OF RS.24,05,050/ - . PRIOR TO THE SALE SHE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF A RESIDENTIAL FLAT WHICH AGREEMENT WAS DATED 4TH SEPTEMBER 1985. THE AGREEMENT WAS FOR PURCHASE OF A FLAT FOR A TOTAL CONSIDERATION OF RS.12,26,751/ - . ON THE DATE OF THE AGREEMENT OF SALE, THE ASSESSEE PAID A SUM OF RS.1,35,000/ - AS EARNEST MONEY. THIS AGREEMENT WAS REGISTERED ON 27TH OCTOBER 1985. THE CONSTRUCTION OF THE FLAT WAS FINALLY COMPLETED IN JULY, 1988. THE ASSESSEE PAID THE CONSIDERATION AMOUNT OF RS.10,44,375/ - PLUS RS.47,376/ - ON 29TH JULY, 1988, AND SHE WAS PUT IN POSSESSION OF THE SAID FLAT ON 30TH JULY, 1988. THE A SSESSEE CLAIMED THE BENEFIT OF EXEMPTION UNDER SECTION 54F OF THE ACT. THE TRIBUNAL ALLOWED HER EXEMPTION ON RS.11,04,423/ - U/S 54F OF THE ACT. THE HONBLE HIGH COURT AGREED WITH THE ORDER OF THE ITAT AND HELD : HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 8 UNDER SECTION 54F OF THE INCOME - TAX ACT, IN THE CASE OF AN ASSESSEE IF ANY CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE, AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH AS PROVIDED IN THAT SECTION. AS PER THE SECTION CERTAIN EXEMPTION HAS TO BE ALLOWED IN RESPECT OF THE CAPITAL GAINS TO BE CALCULATED AS SE T OUT THEREIN. THE DEPARTMENT CONTENDS THAT THE ASSESSEE DID NOT PURCHASE THE RESIDENTIAL HOUSE EITHER ONE YEAR PRIOR TO OR TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN THE LONG - TERM CAPITAL GAINS. ACCORDING TO THE DEPARTMENT, THE AGREEM ENT FOR PURCHASE OF THE NEW FLAT WAS ENTERED INTO MORE THAN ONE YEAR PRIOR TO THE SALE. HENCE, THE PETITIONER IS NOT ENTITLED TO THE BENEFIT UNDER SECTION 54F . IN OUR VIEW, THE TRIBUNAL HAS RIGHTLY NEGAT IVED THIS CONTENTION AND HAS HELD THAT THE NEW RESIDENTIAL HOUSE HAD BEEN PURCHASED BY THE ASSESSEE WITHIN TWO YEARS AFTER THE SALE OF THE CAPITAL ASSET WHICH RESULTED IN LONG - TERM CAPITAL GAINS. THE TRIBUNAL HAS HELD THAT THE RELEVANT DATE IN THIS CONNECT ION IS JULY 29, 1988, WHEN THE PETITIONER PAID THE FULL CONSIDERATION AMOUNT ON THE FLAT BECOMING READY FOR OCCUPATION AND OBTAINED POSSESSION OF THE FLAT. THIS HAS BEEN TAKEN BY THE TRIBUNAL AS THE DATE OF PURCHASE. THE TRIBUNAL HAS LOOKED AT THE SUBSTANC E OF THE TRANSACTION AND COME TO THE CONCLUSION THAT THE PURCHASE WAS SUBSTANTIALLY EFFECTED WHEN THE AGREEMENT OF PURCHASE WAS CARRIED OUT OR COMPLETED BY PAYMENT OF FULL CONSIDERATION ON JULY 29, 1988, AND HANDING OVER OF POSSESSION OF THE FLAT ON THE NE XT DAY. 6.1 IN THE INSTANT CASE, AS MENTIONED EARLIER, THE PAYMENTS AMOUNTING TO RS.59,00,000/ - HAVE BEEN MADE BEFORE ONE YEAR OF THE TRANSFER OF RESIDENTIAL PROPERTY SOLD ON 24.08.2012. THE POSSESSION OF THE SAID HOUSE WAS GIVEN TO THE ASSESSEE ON 27.08. 2012 BY THE BUILDER KAMLA LAN D MARC PROPERTIES PVT. LTD. HIMANSHU G. MEHTA ITA NO. 3612/MUM/2018 9 WE FIND THAT THE RATIO LAID DOWN IN SMT. BEENA K. JAIN (SUPRA) BY THE HONBLE BOMBAY HIGH COURT SQUARELY APPLIES TO THE INSTANT CASE. FOLLOWING THE SAME, WE SET ASIDE THE ORDER U/S 263 DATED 28.03.2 018 PASSED BY THE PCIT. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/12/2018. SD/ - SD/ - ( SANDEEP GOSAIN) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 03/12/2018 RAHUL SHARMA, SR. P.S. COPY 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// (SR. PRIVATE SECRETARY) ITAT, MUMBAI