GEETADEVI UMA SHANKAR MODI, MUMBAI V. ITO 12(3)(1), MUMBAI

ITA 3636/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8186 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Reason to believe
• Section: 143(3); 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI . . , !! !! !! !! , ' ' ' ' BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER /. ITA NO. 3636/MUM/2012 # # # # $ $ $ $ / ASSESSMENT YEAR :2005-06. GEETA DEVI UMASHANKAR MODI, 49 BAJAJ BHAVAN, NARIMAN POINT, MUMBAI 400 021 # # # # / VS. ITO 12(3)(1) MUMBAI % % % % ./ PAN : AAGPM9755N (APPLICANT) .. RESPONDENT) APPELLANT BY: SHRI BHUPENDRA SHAH RESPONDENT BY : ` SHRI B. YADAGIRI (DR) # # # # & && & '( '( '( '( / DATE OF HEARING : 21-07-2014 )*$ )*$ )*$ )*$ & && & '( '( '( '( /DATE OF PRONOUNCEMENT :19-09-2014 ITA NO.363 6 /MUM/2012 . 2 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDERS OF THE CIT(A) DATED 30.04.2012 PERTAINING TO ASSESSMENT YE AR 2005-06. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE VALIDITY OF REOPENING TH E ASSESSMENT BY ISSUANCE OF NOTICE U/S. 148 OF THE I T ACT. APPELLANT CONTENDS THAT THE NOTICE SO ISSUED IS TOTALLY ILLEGAL AND UNJUSTIFIED AND CONSEQUENTLY THE REASSE SSMENT ORDER PASSED U/S.L43(3) R.W.S 147 OF THE I T ACT IS LIABLE TO BE QUASHED. 2. (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A S WELL AS IN LAW THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE ACTION OF THE AO TO ADOPT THE MARKET VALUE OF THE PROPERTY AS PER STAMP DUTY VALUATION AT RS.1,25 ,35,250/- (1/2 SHARE) BY APPLYING THE PROVISIONS OF SECTION 50C AS AGAINST THE ACTUAL SALE CONSIDERATION AS PER AGREEMENT AT RS.50,00,000/- (1/2 SHARE). (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW THE LEARNED CIT (A) HAS ERRED IN APPRECIATING THE FACT THAT APPELLANT H AD SOLD THE LEASE HOLD RIGHTS IN THE PROPERTY AND NOT THE OWNERSHIP PROPERTY AND THEREFO RE PROVISIONS OF SECTION 50C SHOULD NOT BE MADE APPLICABLE. (C) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW THE LEARNED CIT(A) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.7 5,35,250/- IN THE LONG TERM CAPITAL LOSS DECLARED BY THE APPELLANT IN THE RETURN OF INC OME AT RS.47,14,412/-. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN NOT DIRECTING THE AO TO REFER THE MATT ER TO THE VALUATION OFFICER FOR DETERMINING THE CORRECT VALUE OF THE PROPERTY SOLD BY THE APPELLANT. 4) THAT THE ORDER OF THE LD. CIT.(APPEALS) BEING AR BITRARY AND BAD IN LAW, THE SAME SHOULD BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF OR RELIEFS AS PRAYED FOR. 5) THAT THE APPELLANT CRAVES THE LEAVE TO ADD, AMEN D AND MODIFY THE ABOVE GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE A.Y.2005-06 WAS FILED BY ASSESSEE ON 31.08.2005 DECLARING TOTAL INCOME AT RS.4,03,206/-. ASSESSEE DECLARED RENT INCOME, LONG TERM CAPITAL LOSS ON SALE OF SHARES AND IMMOVABLE PROPERTIES AND INCOME FROM OTH ER SOURCES. WHILE COMPUTING THE LONG TERM CAPITAL LOSS, THE SALE PRICE OF LAND WAS SHOWN AT RS.50 LACS AND THE ITA NO.363 6 /MUM/2012 . 3 INDEXED COST OF ACQUISITION WAS DETERMINED AT RS.93 ,12,568/- AFTER CONSIDERING REPAIR BROKERAGE AND LEGAL EXPENSES OF RS.3,50,000/-, LONG TERM LOSS WAS COMPUTED AT RS.46,62,568/- . THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT (IN SHORT THE ACT). IT WAS EXPLAIN ED BY THE ASSESSEE THAT VIDE AGREEMENT DTD.24.09.2004 SHRI PRAKASH CHANDRAKANT K ANTAWALA (THE ASSIGNOR) SOLD TO S/SHRI SUNIL CHANDULAL SHAH AND SHYAM SUNDER MOD I (ASSIGNEES) HIS PROPERTY IN WHICH SHRI UMA SHANKAR MODI AND SMT.GEETADEVI UMASH ANKAR MODI (ASSESSEE) WERE CONFIRMING PARTIES. THE CONFIRMING PARTIES WER E PAID RS.1 CRORE UNDER THIS AGREEMENT. THE ASSESSEE OFFERED HER SHARE IN THE PROPERTY UNDER THE HEAD LONG TERM CAPITAL GAIN. THE COMPUTATION OF THE ASSESSEE WAS A CCEPTED BY THE ASSESSING OFFICER (IN SHORT AO), WHILE COMPLETING ASSESSMENT U/S.14 3(3) VIDE ORDER DATED 10.12.2007. 3. THEREAFTER LETTER DATED 25.11.2008 WAS RECEIVED BY THE AO FROM ADDL. C.I.T. RANGE 19(1), MUMBAI WITH WHOM SHRI PRAKASH C. KANTA WALA WAS ASSESSED TO TAX. HE FORWARDED A COPY OF AGREEMENT DATED 24.09.2004. THI S AGREEMENT WAS ENTERED INTO BY HIS ASSESSEE SHRI PRAKASH CHANDRAKANT NAKTAWALA, (ADDRESSED AS ASSIGNOR), SHRI UMA SHANKAR MODI AND SMT. GEETADEVI UMASHANKAR MODI (ADDRESSED AS CONFIRMING PARTIES) AND S/SHRI SUNIL CHANDULAL SHAH AND SHRI S HYAM SUNDER MODI (ADDRESSED AS ASSIGNEES). AS PER RECITALS IN THE AGREEMENT SHRI P RAKASH C. KANTAWALA ASSIGNOR HAD AGREED TO SELL LAND ALONG WITH BUNGLOW TO SHRI UMA SHANKAR MODI AND SMT, GEETADEVI UMASHANKAR MODI (ASSESSEE) VIDE AGREEMENT DATED 31.07.1987 FOR A SUM OF RS.37,50,000/- HOWEVER, DUE TO LITIGATIONS THIS TRANSACTION COULD NOT BE COMPLETED. SUBSEQUENTLY SHRI PRAKASH C. KANTAWALA ( ASSIGNOR) ENTERED INTO AGREEMENT WITH SHRI SUNIL CHANDULAL SHAH AND SHRI S HYAM SUNDER MODI (ASSIGNEES) TO SELL THE ABOVE PROPERTY FOR A SUM OF RS.30 LACS, AS PER AGREEMENT DATED 24.09.2004. AS PER THIS AGREEMENT THE ASSIGNEES SHR I SUNIL CHANDULAL SHAH AND SHRI SHYAM SUNDER MODI ALSO AGREED TO PAY SUM OF RS. 1 C RORE TO SHRI UMASHANKAR MODI ITA NO.363 6 /MUM/2012 . 4 AND ASSESSEE TO RELINQUISH THEIR INTEREST IN THE PR OPERTY. THUS THE AO NOTED THAT THE TOTAL SALE CONSIDERATION UNDER THIS AGREEMENT WAS R S.1.30 CRORES. THE STAMP DUTY AUTHORITIES DETERMINED THE MARKET VALUE OF THE PROP ERTY AT RS.2,50,70,500/-. THE AO FURTHER NOTED FROM ASSESSEES COMPUTATION OF CAPITA L GAINS THAT SHE HAD TAKEN SALE CONSIDERATION AT RS.50 LACS (ASSESSEES SHARE). H E OBSERVED THAT SECTION 50C OF THE I.T.ACT.1961, PROVIDED THAT WHERE THE CONSIDERATIO N RECEIVED OR ACCRUING AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEIN G LAND OR BUILDING OR BOTH, WAS LESS THAN THE VALUE ACCEPTED OR ASSESSED OR ASSESSABLE B Y ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE WOULD FO R THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. HE THEREFORE HELD THAT THE SALE CON SIDERATION OF THE ASSESSEE SHOULD BE ADOPTED AT RS.2,50,70,500/- (MARKET VALUE AS PER ST AMP DUTY AUTHORITIES) AND NOT RS.1,00,00,000/- AS ADOPTED BY THE ASSESSEE. HE TH US BELIEVED THAT CAPITAL GAINS OF RS.75,35,250/- HAD ESCAPED ASSESSMENT. HE THEREFORE ISSUED NOTICE TO THE ASSESSEE U/S.148 OF THE ACT, AFTER RECORDING REASONS FOR REO PENING THE ASSESSMENT U/S.147 OF THE ACT. 4. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE EXP LAINED THAT SHE ALONG WITH HER HUSBAND SHRI UMASHANKAR MODI JOINTLY PURCHASED THE PROPERTY FOR A CONSIDERATION OF RS.37,50,000/- FROM SHRI PRAKASH CHANDRAKANT KANTAW ALA AS PER AGREEMENT DATED 31/07/1987. THE SAID PROPERTY WAS NOT FULLY VACANT AND THE SELLERS BROTHER MR. DEEPAK KANTAWALA WAS ALSO OCCUPYING SOME PORTION OF THE SAME. SINCE THERE WERE VARIOUS LITIGATIONS IN THE AFORESAID PROPERTY WITH REGARD TO THE OCCUPATION OF DEEPAK KANTAWALA, THE PROPERTY COULD NOT BE TRANSFERRED IN THE NAME OF THE ASSESEE. UNDER SUCH CIRCUMSTANCES, THE ASSESSEE AND HER HUSBAND D ECIDED TO TAKE OUT THEMSELVES BY DISPOSING THE SAID RIGHTS IN THE PROPERTY AND THERE FORE DEED OF ASSIGNMENT WAS ITA NO.363 6 /MUM/2012 . 5 EXECUTED ON 24/09/2004 BETWEEN MR. PRAKASH CHANDRAK ANT KANTAWALA THE ASSIGNER AND MRS. GEETA DEVI MODI AND HER HUSBAND MR. UMASHANKAR MODI AS CONFIRMING PARTY AND MR. SUNIL CHANDULAL SHAH AND SHAMSUNDEAR MODI AS THE ASSIGNEES BY VIRTUE OF THE SAID DEED OF ASSIGNMEN T THE TOTAL CONSIDERATION WAS DECIDED AT RS.1,30,00,000/-, OUT OF WHICH A SUM OF RS.30,00,000/- WAS PAID TO ASSIGNER SHRI CHANDRAKANT KANTAWALA AND RS.1,00,00, 000/- WAS PAID TO CONFIRMING PARTIES 1) SHRI UMASHANKAR MODI & (2) SMT. GEETA DE VI MODI. THE CONSENT TERMS WERE FILED IN THE BOMBAY HIGH COURT IN SUIT NO.1002 OF 1998 AND SETTLEMENT WAS DONE BETWEEN PRAKASH CHANDRAKANT KANTAWALA, DEEPAK CHANDRAKANT KANTAWALA, UMASHANKAR MODI, GEETA DEVI MODI, SHYAMSUNDAR MODI AND SUNIL CHANDULAL SHAH. ON THE BASIS OF SAID CONSENT TERMS, DEFENDANT NO.5& 6 (SHYAMSUNDAR MODI AND SUNIL SHANDULAL SHAH) PAID A SUM OF RS.2,11,00,000/- TO D EEPAK CHANDRAKANT KANTAWALA AND HIS WIFE SARLA CHANDRAKANT KANTAWALA ( PLAINTIF F NO.1 & 2) AND IN ADDITION A FLAT OF 2000SQ. FT( CARPET AREA) AND ALSO RENT . THE SAI D PAYMENT TO THE PLAINTIFF NO.1 & 2 WAS IN ADDITION TO PAYMENT OF RS.1,30,00,000/- ALRE ADY MADE TO THE ASSIGNOR AND CONFIRMING PARTIES PER DEED OF ASSIGNMENT EXPLAINED EARLIER.. THE STAMP DUTY VALUATION WAS IN RESPECT OF THE ENTIRE PROPERTY WIT HOUT TAKING INTO CONSIDERATION THE ABOVE SAID TRANSACTIONS. THE ULTIMATE BUYER HAD TO PAY THE CONSIDERATION OF THE PROPERTY TO THE VARIOUS PARTIES INVOLVED IN IT I.E. THE ORIGINAL OWNER, ASSESSEE AND HER HUSBAND AND LITIGANT. THUS THE TOTAL COST OF THE PR OPERTY TO THE BUYER WAS MUCH MORE THAN THE MARKET VALUE OF RS.2,50,70,500/-. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE AND HER HUSBAND HAD NO CLEAR TITLE OF THE SAID PROPERTY. THEY JUST GOT THE LEASE HOLD RIG HTS IN THE PROPERTY, WHICH WAS ALSO CONTINUOUSLY UNDER LITIGATION AND ULTIMATELY THE SA ID RIGHT WERE SURRENDERED BY THEM BY BECOMING CONFIRMING PARTY IN THE DEED OF ASSIGNM ENT DATED 24/09/2004. UNDER SUCH CIRCUMSTANCES, THERE WOULD BE NO JUSTIFICATION FOR THE AO TO APPLY THE ITA NO.363 6 /MUM/2012 . 6 PROVISIONS OF SECTION 50C TO RECALCULATE THE CAPITA L GAIN THE HANDS OF ASSESSEE BY ADOPTING THE MARKET VALUE OF THE PROPERTY. 5. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONT ENTIONS OF THE ASSESSEE AND HELD THAT AS PER THE PROVISIONS OF SECTION 50C OF T HE INCOME TAX ACT, 1961, IN CASE OF TRANSFER OF THE PROPERTY, THE VALUATION ADOPTED BY THE STAMP DUTY AUTHORITIES WAS TO BE ADOPTED. HE THEREFORE, ADOPTED THE VALUE OF CONS IDERATION AS PER THE STAMP DUTY AUTHORITIES AT RS.2,50,70,500/- AND THEREBY CALCULA TED THE CAPITAL GAINS ACCRUED TO THE ASSESSEE IN RELATION TO HER SHARE. AGGRIEVED AGAI NST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) . 6. THE LD. CIT(A), HOWEVER, ALSO REJECTED THE CONTE NTIONS OF THE ASSESSEE OBSERVING THAT PROVISIONS OF SECTION 50C WERE MANDA TORY. HE FURTHER OBSERVED THAT HE [THE CIT(A)] HAD NO JURISDICTION TO REFER THE MA TTER TO THE VALUATION OFFICER FOR DETERMINING THE ACTUAL MARKET VALUE OF THE PROPERT Y AS THE SAID POWER WAS VESTED WITH THE AO ONLY. HE, THEREFORE, DISMISSED THE APPE AL OF THE ASSESSEE. THE ASSESSEE HAS THUS COME INTO APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND ALSO GONE THROUGH THE RECORD. SO FOR AS THE GROUND NO.1 OF THE ASSESSEE, AGITATING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT, IS CONCERNED, IN OUR VIEW, IT WAS THE DUTY OF THE ASSESSEE TO DISCLOSE TRUE AND ENTIRE FACTS RELATING TO THE INCOME EARNED FROM THE SALE OF THE PROPERTY IN QUESTION. THE ASSESSEE HAD SHOWN THE SALE PRICE OF IMMOVABLE PROPERTY AT RS.50 LAKHS AND THE RETURN WAS PROCESSE D BY THE AO, ACCORDINGLY. HOWEVER, THE ASSESSING OFFICE RECEIVED INFORMATION FROM LETTER DATED 25.11.2008 FROM ADDL. C.I.T. RANGE-19(1) MUMBAI, DISCLOSING TH AT THE TOTAL SALE CONSIDERATION UNDER THE AGREEMENT WAS RS.1.30 CRORES. THE STAMP D UTY AUTHORITIES DETERMINED THE ITA NO.363 6 /MUM/2012 . 7 MARKET VALUE OF THE PROPERTY AT RS.2,50,70,500/-. U NDER SUCH CIRCUMSTANCES THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. IT WAS A CASE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HER ASSE SSMENT IN HER CASE. HENCE, WE DO NOT FIND ANY FAULT WITH THE ACTION OF THE AO IN REOPENI NG ASSESSMENT AFTER RECEIVING THE LETTER DATED 25.11.2008 FROM ADDL. C.I.T. RANGE-19( 1) MUMBAI. GROUND NO.1 IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. 8. SO FOR AS THE GROUND NO.2 TO 4 ARE CONCERNED, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE LOWER AUTHORITIES FAILED T O TAKE INTO CONSIDERATION NECESSARY FACTS AS WERE NARRATED BY THE ASSESSEE DURING THE A SSESSMENT PROCEEDINGS AS WELL DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A). UNDER SUCH CIRCUMSTANCES, THE ACTION OF THE LOWER AUTHORITIES IN STRAIGHT AWAY AP PLYING THE PROVISION OF SECTION 50C IN A MECHANICAL MANNER AND THEREBY CHARGING THE ASSESSEE FOR CAPITAL GAINS TAX AS PER THE VALUE ADOPTED BY THE STAMP DUTY AUTHORIT IES CANNOT BE HELD TO BE JUSTIFIED. THE LOWER AUTHORITIES HAVE FAILED TO CONSIDER THE V ERY RELEVANT FACT THAT ASSESSEE HAD RECEIVED ONLY A PART OF THE SALE CONSIDERATION, WHE REAS, THERE WERE SOME OTHER PERSONS, AS NARRATED ABOVE, WHO HAD ALSO RECEIVED C ONSIDERATION OUT OF THE SALE PROCEEDS. HENCE THE ORDER UNDER APPEAL IS HERBY SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE MATTER AFRESH AFTER TAKING INTO CONSIDERATIONS THE SUBMISSION OF THE ASSESSEE AND I F THE CONTENTION OF THE ASSESSEE IS FOUND CORRECT, THEN TO DETERMINE THE ACTUAL SALE CO NSIDERATION OF THE PROPERTY AND CHARGE THE ASSESSEE ON THE AMOUNT RECEIVED BY HER. THE AO WILL BE AT LIBERTY TO CHARGE THE RESPECTIVE OTHER RECEIVERS OF THE SALE CONSIDERATION AS PER THE AMOUNT/SHARE RECEIVED BY THEM IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISIONS OF THE LAW. NEEDLESS TO SAY THAT THE AO WILL GIVE PROP ER OPPORTUNITY TO THE ASSESSEE TO PRESENT HER CASE. ITA NO.363 6 /MUM/2012 . 8 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19-09-2014 . & )*$ ,#- 19-09-2014 * & ! SD/- SD/- ( R.C.SHARMA) (SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; ,# DATED 19 .09.2014 . # . ./ A.K.PATEL , PS & .'/ 0/$' / COPY OF THE ORDER FORWARDED TO : 1. %1 / THE APPELLANT 2. .2%1 / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- MUMBAI CONCERNED 4. 3 / CIT MUMBAI CONCERNED 5. / 4! .'# , , / DR, ITAT, MUMBAI F BENCH 6. !5 6 / GUARD FILE. # / BY ORDER, 2/' .' //TRUE COPY// 7 / 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI