ITO 20(3)(1), MUMBAI V. THE L/Hs OF RAJ VITHALDAS THAKKAR, MUMBAI

ITA 4090/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0094 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Reopening of assessment; Capital asset; Cost of acquisition; Fair market value; Corroborative evidences; Valuation report; Benefit of exemption; Reassessment proceedings
• Section: 143(3); 54F; 142(1); 147; 148

Judgement Text

1 ITA 4090/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MNJUNATHA (ACCOUNTANT MEMBER) ITA NO.4090/MUM /2015 (ASSESSMENT YEAR 2008-09 ) ITO 20(3)(1), MUMBAI VS THE LEGAL HEIRS OF LATE RAJ VITHALDAS THAKKAR, DHARMAKSHETRA, 7, VATCHRAJ LANE, MATUNGA (CR), MUMBAI-19 PAN : AFPPT2640K APPELLANT RESPONDENT APPELLANT BY MS POOJA SWAROOP RESPONDENT BY NONE DATE OF HEARING 14-06-2017 DATE OF PRONOUNCEMENT 21- 06-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE CIT(A)-32, MUMBAI DATED 30/04/2015 AND IT PERTAINS TO THE ASST. YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LEGAL HEIR OF LATE. RAJ.V. THAKKAR. THE RETURN OF INCOME FOR THE A.Y. 2008-09 WAS FILED ON 25.03.2009, DECLARING TOTAL INCOME OF RS. 50,630 /-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, ON 24/12/2010, ACCEPTING TOTAL I NCOME DECLARED BY THE ASSESSEE. SUBSEQUENTLY, THE CASE HAS BEEN REOPENED AFTER DUE PROCESS OF 2 ITA 4090/MUM/2015 LAW, FOR THE REASON THAT INCOME CHARGEABLE TO TAX H AD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAD CLAIMED EXCESS INDEXED COST O F ACQUISITION OF PROPERTY WHILE COMPUTING LONG TERM CAPITAL GAIN, WH ICH CAUSED ESCAPEMENT OF INCOME CHARGEABLE TO TAX. ACCORDINGLY , NOTICE U/S 148 WAS ISSUED CALLING FOR RETURN OF INCOME. IN RESPONSE TO NOTICE, THE ASSESSEE HAS FILED A LETTER AND STATED THAT ORIGINAL RETURN OF INCOME FILED ON 25/03/2009 MAY BE TREATED AS RETURN FILED IN RESPON SE TO NOTICE U/S 148 OF THE ACT. THEREAFTER, THE CASE WAS SELECTED FOR S CRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) OF THE ACT, WERE ISSU ED. THE ASSESSEE NEITHER APPEARED NOR FURNISHED ANY DETAILS TO JUSTI FY COMPUTATION OF CAPITAL GAIN AND ALSO ADOPTION OF COST OF ACQUISITI ON. THE A.O. COMPLETED ASSESSMENT U/S 144, R.W.S. 147 OF THE ACT, AND DETE RMINED TOTAL INCOME OF RS. 80,48,220/-, INTER ALIA BY RE-COMPUTING LONG TERM CAPITAL GAIN AND ALSO DISALLOWED EXEMPTION CLAIMED U/S 54F FOR REINV ESTMENT IN PURCHASE OF ANOTHER RESIDENTIAL HOUSE PROPERTY AND 54EC FOR INVESTMENT IN NHAI BONDS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE HAS CHALLENGED REOPENING AND ALSO FILED ELABORATE WRITTEN SUBMISSI ONS TO CHALLENGE RE- COMPUTATION OF CAPITAL GAIN BY REWORKING INDEXED CO ST OF ACQUISITION AND DENIAL OF EXEMPTION CLAIMED U/S 54EC AND 54F OF THE ACT. THE CIT(A), AFTER CONSIDERING EXPLANATIONS OF THE ASSESSEE UPHE LD REOPENING OF ASSESSMENT AND DISMISSED GROUND OF THE ASSESSEE. IN SO FAR AS ISSUES 3 ITA 4090/MUM/2015 AGITATED ON MERITS, THE CIT(A) AFTER CONSIDERING AS SESSEES SUBMISSIONS AND ALSO CONSIDERING CERTAIN JUDICIAL DECISIONS INC LUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MA NJULA.J SHAH (2012) 204 TAXMANN 691(BOM), HELD THAT THE ASSESSEE GOT RI GHT OVER THE PROPERTY BY WAY OF ONE OF THE MODE SPECIFIED IN SEC TION 49(1) AND HENCE, RIGHTLY ADOPTED COST OF ACQUISITION OF PROPERTY AS ON 1-4-1981 OR COST TO THE PREVIOUS OWNER WHICHEVER IS HIGHER AND ALSO RIG HTLY COMPUTED INDEXED COST OF ACQUISITION FROM THE DATE OF ASSET FIRST HE LD BY THE PREVIOUS OWNER OR 1-4-1981. AS REGARDS EXEMPTION U/S 54F, THE CIT( A) OBSERVED THAT THE ASSESSEE HAD CLAIMED EXEMPTION FOR FLAT ALLOTTED BY THE BUILDER IN VIEW OF TRANSFER OF LAND AS PER THE AGREEMENT DATED 14-09-2 009. HOWEVER, SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR VERIFIC ATION OF CONDITIONS PRESCRIBED UNDER SECTION 54F. SIMILARLY, IN SO FAR AS EXEMPTION U/S 54EC, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOL LOWING THE DECISION OF ITAT, AHMADABAD SPECIAL BENCH, IN THE CASE OF ALKAB EN B. PATEL VS. ITO, (2014)148 ITD 31(AHD)(SB), WHEREIN IT WAS HELD THAT THE TERM MONTH IN SECTION 54EC MEANS THE CALENDAR MONTH, BUT DOES NOT MEAN 30 DAYS. IN THIS CASE, THE ASSESSEE HAS INVESTED SALE CONSIDERA TION WITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF ASSET AND HENCE, HE IS ELIGIBLE FOR EXEMPTION U/S 54EC OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US AND FILED FOLLOWING GROUNDS OF APP EAL. 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. PR. CIT(A) HAS ERRED IN COMPUTING THE CAPITAL G AINS ARISING ON TRANSFER OF CAPITAL ASSETS ACQUIRED BY THE ASSESSEE UNDER 4 ITA 4090/MUM/2015 INHERITANCE, BY TAKING INDEXED COST OF ACQUISITION WITH REFERENCE TO THE YEAR IN WHICH THE DONOR FIRST HELD THE ASSETS A S AGAINST THE YEAR IN WHICH THE ASSESSEE FIRST HELD THE ASSET.' 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. PR. CIT(A) ERRED IN DIRECTING THE AO TO VERIFY AND ALLO W DEDUCTION U/S. 54F AS THERE IS NO EVIDENCE ON RECORD DURING THE REASSESSMENT PROCEEDINGS TO VERIFY CLAIM U/S. 54F AND IF THE ASSESSEE HAS PRODU CED ANY NEW EVIDENCE DURING THE APPELLATE PROCEEDINGS I T SHOULD HAVE BEEN REMANDED TO A.O. FOR VERIFICATION. ' 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS COMPUTATION OF INDEXED COST OF ACQUISITION. THE FACTS WHICH LEADS TO THE IMPUGNED ADDITION ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR, THE ASSESSEE ALONG WITH OTHER CO-OWNERS HAD TRANSFE RRED THEIR RESPECTIVE SHARES IN INHERITED PROPERTY VIDE AGREEMENT DATED 6 -7-2007 FOR A CONSIDERATION OF RS. 2,37,50,000/- AND THE ASSESSEE GOT HIS SHARE OF RS. 47,50,000/-. THE ASSESSEE ALSO GOT ONE RESIDENTIAL FLAT IN THE NEW BUILDING TO BE CONSTRUCTED IN LIEU OF SURRENDER OF HIS TENAN CY RIGHTS IN THE PROPERTY WHICH WAS VALUED AT RS. 32,50,000/-. THE SAID PROPE RTY WAS ACQUIRED BEFORE 1981. SINCE, THE PROPERTY WAS ACQUIRED BY WA Y OF ONE OF THE MODES SPECIFIED U/S 49(1), AS PER THE PROVISIONS OF SECTION 55(2)(B), THE ASSESSEE HAS ADOPTED FMV AS ON 1-4-1981 AND ALSO CO MPUTED INDEXED COST OF ACQUISITION BY ADOPTING INDEXATION FROM 1-4 -1981 FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN. THE FMV A S ON 1-4-1981 ADOPTED BY THE ASSESSEE WAS SUPPORTED BY VALUATION REPORT OF REGISTERED VALUER. THE A.O. HAS ADOPTED COST TO THE PREVIOUS O WNER FOR THE PURPOSE OF COMPUTATION OF COST OF ACQUISITION AND ADOPTED I NDEXATION FROM 1-4- 1981. 5 ITA 4090/MUM/2015 5. NONE APPEARED FOR THE ASSESSEE. HAVING HEARD LD. D.R. AND CONSIDERED MATERIALS ON RECORD, WE FIND THAT THE AS SESSEE HAS COMPUTED COST OF ACQUISITION OF PROPERTY AS PER THE PROVISIO NS OF SECTION 55(2)(B)(II), BECAUSE THE IMPUGNED PROPERTY WAS ACQ UIRED BY THE ASESSEE BY WAY OF ONE OF THE MODES SPECIFIED UNDER SECTION 49(1). AS PER THE PROVISIONS OF SECTION 55(2)(B), IN CASE THE PROPERT Y IS ACQUIRED BY WAY OF INHERITANCE, THEN THE ASSESSEE SHALL ADOPT COST TO THE PREVIOUS OWNER OR FMV OF THE PROPERTY AS ON 1-4-1981 WHICHEVER IS HIG HER. IN THIS CASE, THERE IS NO DISPUTE WITH REGARD TO DATE OF ACQUISIT ION AND MODE OF ACQUISITION OF PROPERTY. THE A.O. DID NOT DISPUTE T HE DATE OF ACQUISITION OF THE PROPERTY AND MODE OF ACQUISITION. BEFORE THE CI T(A), THE ASSESSEE HAS FILED NECESSARY DETAILS OF ACQUISITION OF PROPERTY AND ALSO FILED SUPPORTING DOCUMENTS IN THE FORM OF VALUATION REPORT TO JUSTIF Y THE FMV AS ON 1-4- 1981. THE CIT(A), BY FOLLOWING THE DECISION OF HON BLE BOMBAY HC, IN THE CASE OF CIT VS. MANJULA.J SHAH (2012) 204 TAXMANN 6 91(BOM) AND ALSO CIT VS. NITA TANNA (2014) 220 TAXMANN 165 (MAG), AL LOWED COST OF ACQUISITION OF PROPERTY AS PER THE PROVISIONS OF SE CTION 55(2)(B) AND FURTHER ALLOWED THE BENEFIT OF INDEXATION FROM THE DATE FROM WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER. FACTS REMAIN UNCHANGED. THE REVENUE FAILS TO BRING ON RECORD ANY CONTRARY JUDGM ENT TO COUNTER THE FINDINGS OF THE CIT(A). HENCE, WE ARE INCLINED TO U PHOLD THE CIT(A) ORDER AND DISMISS GROUND RAISED BY THE REVENUE. 6. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS DENIAL OF BENEFIT OF EXEMPTION U/S 54EC AND 54F OF THE ACT, FOR REINVEST MENT OF SALE 6 ITA 4090/MUM/2015 CONSIDERATION FOR PURCHASE OF RESIDENTIAL HOUSE PRO PERTY AND NHAI BONDS. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F TOWARDS ONE FLAT TO BE CONSTRUCTED IN NEW BUILDING IN LIEU OF SURRENDER OF HIS TENANCY RIGHTS IN THE ASSET TRANSFERRED BY VIRTUE OF AGREEMENT DATED 14/9/2009. THE SAID FLAT HAS BEEN VALUED AT RS. 32,50,000/-. THE ASSESS EE HAS INCLUDED SAID AMOUNT IN THE GROSS CONSIDERATION RECEIVED AS RESUL T OF TRANSFER FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AND CLAIMED EXEMPTION U/S 54F TOWARDS REINVESTMENT. THESE FACTS WERE NOT DISPUTED BY THE LD. CIT(A). THE CIT(A), DID NOT ALLOW THE CLAIM OF THE ASSESSEE , BECAUSE THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCE FOR THE VAL UE OF FLAT, HOWEVER, SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR VER IFICATION OF FACTS BEFORE ALLOWING EXEMPTION CLAIMED. SINCE, THE MATTER IS SE T ASIDE TO THE FILE OF THE A.O. FOR VERIFICATION OF FACTS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE FI NDINGS OF THE CIT(A). HOWEVER, THE CIT(A) ORDER DID NOT THROW ANY LIGHT O N THE ISSUE AS TO WHETHER THE ASSESSEE HAS FULFILLED CONDITIONS PRESC RIBED UNDER SECTION 54F FOR CLAIMING SUCH EXEMPTION. THEREFORE, WE DIRECT T HE A.O. TO VERIFY THE CLAIM OF THE ASSESSEE IN THE LIGHT OF PROVISIONS OF SECTION 54F AND ALLOW EXEMPTION ACCORDINGLY. 7. IN SO FAR EXEMPTION CLAIMED U/S 54EC FOR INVESTM ENT OF SALE CONSIDERATION IN NHAI BONDS, THE CIT(A) RECORDED CL EAR FACTS THAT THE ASSESSEE HAS INVESTED SUM OF RS. 40,00,000/- IN NHA I BONDS BY ISSUING CHEQUE ON 5-1-2008, WHEREAS ALLOTMENT HAS BEEN DONE ON 31-01-2008. AS PER THE PROVISIONS OF SECTION 54EC, TO GET THE B ENEFIT OF EXEMPTION, THE 7 ITA 4090/MUM/2015 ASSESSEE NEEDS TO INVEST LONG TERM CAPITAL GAIN ARI SING FROM TRANSFER OF ASSET WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE SUCH TRANSFER. IN THIS CASE, THE ASSESSEE HAS TRANSFERRED CAPITAL ASSET ON 6-7-2007. IF YOU CONSIDER DATE OF CHEQUE, I.E. ON 5-1-2008, THEN THE DATE OF INVESTMENT IS WITHIN A PERIOD OF SIX MONTHS. THIS PROPOSITION WAS SUPPORTED BY THE DECISION OF MUMBAI ITAT, IN THE CASE OF KUMARPAL AM RUTLAL DOSHI VS. DCIT (ITA. 1523/M/10), WHEREIN IT WAS OBSERVED THAT DATE OF PAYMENT FOR THE PURPOSE OF SECTION 54EC IS THE DATE OF ISSUE OF CHE QUE, BUT NOT DATE OF ENCASHMENT OR DATE OF ALLOTMENT OF BONDS. ASSUMING FOR A MOMENT, IF THE DATE OF INVESTMENT IS CONSIDERED AS DATE OF ALLOTME NT OF NHAI BONDS, I.E. ON 31-01-2008. THE COORDINATE BENCH OF AHMADABAD SP ECIAL BENCH IN THE CASE OF ALKABEN B PATEL VS. ITO (2014) 148 ITD 31 ( AHD) HAS EXAMINED THE TERM MONTH PROVIDED IN SECTION 54EC TO MEAN A CALENDAR MONTH, BUT NOT 30 DAYS. THE EXPRESSION WITHIN A MONTH MEANS BEFORE THE END OF THE CALENDAR MONTH. THEREFORE, FOR THE PURPOSE OF SECTI ON 54EC, THE PERIOD OF INVESTMENT SHOULD BE RECKONED FROM THE END OF THE M ONTH IN WHICH TRANSFER OF CAPITAL ASSET TOOK PLACE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54EC FOR INV ESTMENT IN NHAI BONDS. THE CIT(A), AFTER CONSIDERING RELEVANT FACTS AND AL SO PROVISIONS OF ACT, HAS RIGHTLY ALLOWED EXEMPTION CLAIMED U/S 54EC OF T HE ACT. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE CIT(A)S ORDER AND DISMISS GROUND RAISED BY THE REV ENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 8 ITA 4090/MUM/2015 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2017. SD/- SD/- (D.T. GARASIA) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 21 ST JUNE, 2017 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI