GEETA RASIK SHAH, MUMBAI V. ACIT CEN CIR 2, THANE

ITA 4202/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9935 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 19-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: SUBODH RATNAPARKHIAR
• Keywords: Capital asset; Search and seizure; Document seized; Principle of natural justice; Cost of acquisition; Difference of opinion; Documents seized; Change of opinion
• Section: 2(14); 153A; 132; 15

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./4202/MUM/2015, / ASSESSMENT YEAR: 2006-07 GEETA RASIK SHAH 901/902, RAHEJA GRANDE, TURNER ROAD BANDRA (W), MUMBAI-400 050. PAN:ABDPS 7777 A VS. ACIT, CENTRAL CIRCLE-2 6TH FLOOR, ASHAR I.T. PARK, ROAD NO.16Z, WAGLE IND. ESTATE, THANE (W) MUMBAI-400 604. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: MS. VIDISHA KALRA-CIT-DR /ASSESSEE BY: SHRI SUBODH RATNAPARKHI-AR / DATE OF HEARING: 16/06/2017 / DATE OF PRONOUNCEMENT:01/09/2016 PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 25/03/2013,OF THE CIT(A )-2,THANE,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,DERIVING INCO ME FROM SHARE OF PROFIT FROM PARTNERSHIP - FIRMS, INTEREST FROM FDRS AND SHORT-TERM CAPITAL GA INS,FILED HER RETURN OF INCOME ON 23/05/ 2007,DECLARING TOTAL INCOME OF RS.18.02 LAKHS.THE A SSESSING OFFICER(AO)COMPLETED THE ASSESS -MENT U/S.143(3)OF THE ACT,ON 31/10/2008,DET ERMINING THE INCOME OF THE ASSESSEE AT RS.18, 02,940/-. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE WAS NOT INTERESTED IN PURSUING GOA-3.HENCE ,SAME STANDS DISMISSED AS NOT PRESSED. BRIEF FACTS: 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION OF RS.1.77 CRORES ON ACCOUNT OF COMPENSA-TION ARISING FROM SURRENDER OF ALLOTMENT O F FLATS.A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CARRIED OUT BETWEEN 24/03/20 11 AND 26/03/2011 IN THE CASE OF RAVI GROUP OF CASES INCLUDING M/S.RAVI DEVELOPMENTS.THE ASSESSEE IS ONE OF THE PARTNERS OF THE SAID FIRM.DURING THE SEARCH PROCEEDINGS VARIOUS NEW SPAPERS,COMPUTER BACKUPS AND OTHER DOCUMENTS WERE SEIZED. LATER ON, A NOTICE U/S.153A OF THE ACT IN RESPONSE TO WHICH THE ASSESSEE FILED HER RETURN OF INCOME FOR THE YEAR UN DER APPEAL ON 13/12/2011,DECLARING THE SAME TOTAL INCOME THAT WAS SHOWN IN THE ORIGINAL RE TURN. DURING THE ASSESSMENT PROCEEDINGS,THE AO NOTICED TH AT THE ASSESSEE HAD SHOWN A FLAT AT ANDHERI APPEARING ON THE ASSET SIDE OF THE BALANCE SHEET AS ON 31/03/2005, VALUED AT RS. 1.15 CRORES OTHER THAN HER RESIDENTIAL HOUSE,THAT THE SA ME WAS CARRIED FORWARD FROM AY. 2004- 05.VERIFICATION OF THE BALANCE SHEET FOR THE YEAR U NDER CONSIDERATION REVEALED THAT THE SAID 4202/M/15 GEETA RASIK SHAH 2 PROPERTY WAS NOT APPEARING ON THE ASSET SIDE OF BAL ANCE SHEET AS ON 31/03/2006 AND THAT NO INCOME FROM THE SAID TRANSACTION WAS OFFERED TO TAX .HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE,IN RESPONSE TO WHICH SHE FILED HER EXPLANA TION,VIDE LETTER DATED 20/03/2013.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO OBSERVED THAT THE ASSESSEE HAD NOT TAKEN OVER THE POSSESSION OF THE FLAT,THAT CAPITAL GAIN W AS NOT ARISING OUT OF THE TRANSACTION IN QUESTION AS THE TRANSFER OF FLAT HAD NOT TAKEN PLAC E.HE ISSUED A LETTER TO RAJESH CONSTRUCTION CO.(RCC)AND CALLED FOR CERTAIN DETAILS WITH REGARD TO ALLOTMENT OF FLAT. 2.1. AFTER CONSIDERING THE AVAILABLE MATERIAL AND THE BA NK STATEMENT MAINTAINED BY THE ASSESSEE WITH SHAMRAO VITHAL CO-OPERATIVE BANK BAND RA,HE HELD THAT THE ASSESSEE HAD RECEIVED RS.4.04 CRORES FROM RCC IN THE MONTH OF NO VEMBER,2005,THAT SHE HAD ONLY PAID A TOKEN AMOUNT TOWARDS THE ADVANCE OF FLAT,THAT NO AC TUAL PURCHASE DEED WAS EXECUTED,THAT SHE CANCELLED THE TRANSACTION LATER ON AND IN TURN RECE IVED AN AMOUNT OF RS.4,04,80,000/-AGAINST CANCELLATION OF THE FLAT.HE FURTHER OBSERVED THAT S HE HAD RECEIVED AN AMOUNT OF RS.2,89, 80,000/-AS A COMPENSATION AGAINST THE CANCELLATION OF THE SAID TRANSACTION, THAT SHE HAD NOT OFFERED THE AMOUNT FOR TAXATION FOR THE YEAR UNDER APPEAL.THE AO COMPLETED THE ASSESSMENT U/S.143(3)R.W.S.153A,ON 25/03/2013,DETERMINING THE INCOME OF THE ASSESSEE AT RS.3.07 CRORES,AFTER MAKING AN ADDITION OF RS.2.89 CRORES O N ACCOUNT OF COMPENSATION RECEIVED FROM THE BUILDER ON TERMINATION OF ALLOTMENT OF FLATS BO OKED WITH RCC. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND RAISED VARIOUS GROUNDS OF APPEAL INCLUDING NOT COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE IN MAKING THE ADD ITION ON ACCOUNT OF COMPENSATION RECEIVED AND NOT SHARING THE INFORMATION COLLECTED FROM RCC. IT WAS ARGUED THAT NO INCRIMINATING MATERIAL WAS FOUND AND SEIZED RELATING TO THE ISSUE OF INVESTMENT IN FLATS WITH RCC EITHER BY THE ASSESSEE OR ANY OTHER MEMBER OF HER FAMILY OR T HEIR SUBSEQUENT CANCELLATION,THAT THE ORIGINAL ASSESSMENT FOR THE YEAR UNDER CONSIDERATIO N WAS COMPLETED ON 31/10/2008 I.E. BEFORE THE SEARCH WAS CARRIED OUT IN THE MONTH OF MARCH,20 11,THAT NOTHING WAS SPENDING ON THE DATE OF SUCH AS FAR AS THE YEAR UNDER APPEAL WAS CONCERN ED, THAT THE ASSESSMENT ORIGINALLY COMPLETED DID NOT ABATE,THAT IN THE ASSESSMENT PROC EEDINGS THE AO FOUND THAT INVESTMENT IN FLAT AT ANDHERI APPEARING AS ON 31/03/ 2006 DID NOT APPEAR IN THE SUBSEQUENT YEAR,THAT THE AO CALLED FOR INFORMATION FROM RCC, THAT THE ADDITION MADE BY THE ASSESSEE WAS A RESULT OF THE ENQUIRIES CARRIED OUT BY THE AO DURING THE ASSESSME NT PROCEEDINGS AND NOT A RESULT OF ANY INCRIMINATING EVIDENCE FOUND IN THE COURSE OF SEARC H ACTION.HE RELIED UPON CERTAIN CASE LAWS 4202/M/15 GEETA RASIK SHAH 3 AND STATED THAT THE ADDITION MADE BY THE AO WAS NOT BASED ON SEIZED INCRIMINATING RECORDS, THAT HE WAS NOT JUSTIFIED IN MAKING THE ADDITION. ON MERITS OF THE ADDITION,IT WAS ARGUED THAT ASSESS EE AND HER DAUGHTERS HAD INDEPENDENTLY INVESTED CERTAIN AMOUNTS WITH RCC FOR BOOKING OF FL ATS IN BUILDINGS UNDER DEVELOPMENT,THAT EACH FAMILY MEMBER HAD INVESTED THE CONSIDERATION O UT OF THEIR OWN SOURCES OF FUNDS, THAT INVESTMENTS WERE DULY REFLECTED ON THE ASSET SIDES OF THE BALANCE SHEETS OF THE RESPECTIVE PERSONS FOR THE RELEVANT AY.S, THAT THE MONEY HAD F LOWN TO RCC FROM THE BANK ACCOUNTS OF EACH PERSON INDEPENDENTLY, THAT THE ASSESSEE IN THE YEAR 2001 HAD INVESTED IN HER OWN NAME AND IN THE NAMES OF THEN MINOR DAUGHTERS CERTAIN AM OUNTS FOR BOOKING OF FLATS WITH RCC, THAT IN THE YEAR 2005 THE SAID ALLOTMENTS WERE CANCELLED AND THE AMOUNTS WERE REFUNDED TO HER WITH COMPENSATION,THAT HER DAUGHTERS DID NOT GET AN Y COMPENSATION, THAT THE DAUGHTERS OF THE ASSESSEE WERE MINOR IN THE YEAR 2001,THAT THE AGREE MENTS WERE SIGNED BY HER ON THEIR BEHALF,THAT THE DAUGHTERS AT THE TIME OF CANCELLATI ON OF ALLOTMENT HAD ATTAINED MAJORITY,THAT AO HAD MADE THE ADDITION OF RS.2.89 CRORES UNDER TH E MISUNDERSTANDING OF FACTS,THAT THE SURPLUS EARNED BY THE ASSESSEE IN THE TRANSACTION O F INVESTMENT AND CANCELLATION OF FLAT IN HER OWN NAME WAS OF RS.1.77 CRORES ONLY. 3.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT THE FIRST ARGUMENT RAISED BY HER WAS ABOUT JUR ISDICTION,THAT SHE HAD ARGUED THAT NO INCRIMINATING MATERIAL RELATING TO INVESTMENT IN FL AT OR THE SUBSEQUENT CANCELLATION WAS FOUND IN THE COURSE OF SEARCH ACTION AND THAT THE ORDER P ASSED BY THE AO WAS BAD IN LAW,THAT THE REQUIREMENT OF INITIATING THE PROCESS OF ASSESSMENT U/S.153A WAS CARRYING OUT OF THE SEARCH U/S.132,THAT SECTION 153A/153C DID NOT CONTAIN THE WORDS OR PHRASES INCRIMINATING MATERIAL OR UNDISCLOSED INCOME, THAT HAD THE LEGISLATURE INT ENDED TO RESTRICT THE SCOPE OF ASSESSMENT U/S.153A ONLY TO MATERIAL FOUND DURING THE SEARCH I T WOULD HAVE BEEN INDICATED SO AS WAS DONE UNDER THE ERSTWHILE PROVISIONS OF SECTION 158 BC OR SECTION 158 BD OF THE ACT,THAT THE WITHDRAWAL OF RESTRICTION AS CONTAINED UNDER THOSE SECTION CLEARLY SUGGESTED THAT LEGISLATURE INTENTIONALLY DID NOT RESTRICT THE SCOPE OF ADDITIO N U/S.153A TO THE FINDING OF SOME INCRIMINATING MATERIAL DURING THE SEARCH, THAT THE MANDATE OF SECTION 153A WAS ASSESSMENT OF TOTAL INCOME, THAT COMPUTATION OF INCOME COULD NOT BE RESTRICTED TO DETECTION OF INCRIMINATING EVIDENCES ALONE.HE REFERRED TO THE CASE OF CHETANDA SS LACHMAN DASS (211 TAXMAN 61) AND HELD THAT ADDITION TO BE MADE IN ASSESSMENT U/S. 15 3A OR 153C OF THE ACT WERE NOT REQUIRED TO BE RESTRICTED TO INCRIMINATING MATERIAL FOUND DURIN G THE SEARCH,THAT AS PER THE LETTER OF THE ASSESSEE DATED 20/03/2013 INCOME ARISING OUT OF COM PENSATION RECEIVED OVER AND ABOVE THE ADVANCE ON CANCELLATION OF THE TRANSACTION WITH RCC WAS NOT ADMITTED IN THE ORIGINAL RETURN 4202/M/15 GEETA RASIK SHAH 4 OF INCOME,THAT THE UNDISCLOSED INCOME WAS DISCOVERE D CONSEQUENT TO SEARCH OPERATION IN THE CASE OF THE ASSESSEE,THAT THE ISSUE ON HAND WAS NOT SUBJECT MATTER OF THE ORIGINAL ASSESSMENT,THAT IT WAS NOT A CASE THAT IN THE REASS ESSMENT A DIFFERENT VIEW WAS TAKEN ON MERE CHANGE OF OPINION,THAT THE UNDISCLOSED INCOME WAS D ETECTED ON VERIFICATION OF VARIOUS DETAILS GATHERED IN THE COURSE OF SEARCH OPERATION IN THE G ROUP CASES.FINALLY,HE REJECTED THE CONTENTION OF THE ASSESSEE ABOUT ADDITION BEING MAD E WITHOUT ANY MATERIAL. 3.2. WITH REGARD TO THE ARGUMENT OF THE ASSESSEE THAT AM OUNT RECEIVED ON CANCELLATION WAS LIABLE TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS WITH RESULTANT BENEFIT OF INDEXED COST OF ACQUISITION,THE FAA HELD THAT THE CONTENTION OF THE ASSESSEE WAS NOT SUSTAINABLE IN LAW,THAT SHE HAD ONLY BOOKED FLATS IN HER NAME IS AND IN THE NAMES OF MINOR DAUGHTERS IN THE YEAR 2001 BY PAYING TOKEN ADVANCES FOR SEVERAL FLATS IN DIFFERENT BUILDINGS,THAT SHE HAD NOT PLACED ON RECORD AGREEMENT OF SALE,IF ANY,ENTERED INTO WIT H THE RESPECTIVE BUILDERS,THAT BY PAYING TOKEN ADVANCE MONEY SHE DID NOT GET ANY RIGHT WHICH COULD BE TERMED AS CAPITAL ASSETS WITHIN THE DEFINITION OF SECTION 2(14) AND WHICH COULD BE TRANSFERRED WITHIN THE MEANING OF SECTION 2(47),THAT RCC,IN ITS LETTER DATED 22/11/2005,HAD S TATED THAT POSITION OF THE FLATS COULD NOT BE GIVEN TO HER BEFORE 25/03/2005 AND ACCORDINGLY COMP ENSATION WAS AGREED TO BE PAID TO HER IN VIEW OF SURRENDERING THE FLATS,THAT SHE HAD CLAIMED THAT AT THE TIME OF ORIGINAL PROCEEDINGS THE POSSESSION OF THE FLAT WAS NOT TAKEN AND THAT NO DE EMED INCOME FROM HOUSE PROPERTY WAS CONSIDERED, THAT THE BOOKING OF FLATS DID NOT BASED ANY RIGHT IN THE CAPITAL ASSET,THAT RCC HAD PAID THE COMPENSATION AND THAT SAME WAS IN THE NATU RE OF INTEREST ON ADVANCE PAID BY THE ASSESSEE IN THE YEAR 2001, THAT THERE WAS ONLY ALLO TMENT LETTER ISSUED TO THE ASSESSEE,THAT SHE HAD A MERE RIGHT TO SUE FOR DAMAGES ON THE BASIS OF ALLOTMENT LETTER,THAT NO TRANSFER, AS CONTEMPLATED IN SECTION 2(47)OF THE ACT HAD TAKEN P LACE IN THE CASE UNDER CONSIDERATION,THAT THE AMOUNT RECEIVED BY HER WAS NOT ASSESSABLE AS CA PITAL GAIN,THAT SAME WAS TO BE ASSESSED UNDER THE RESIDUARY HEAD I.E.INCOME FROM OTHER SOUR CES. HE FURTHER OBSERVED THAT THE ORDER OF THE TRIBUNAL IN THE CASE OF K R SRINATH (80 ITD 193 )WAS RENDERED IN A DIFFERENT CONTEXT, THAT SHE HAD NOT PLACED ON RECORD ANY AGREEMENT ENTERED INTO BY HER WITH THE BUILDER,THAT SHE HAD RECEIVED ONLY REFUND OF ADVANCE PAID WITH INTEREST, THAT THE ASSESSEE AND BUILDER HAD NOT COME TO AN AGREEMENT OR UNDERSTANDING UNDER WHICH ASSESS EE ASSIGNED RIGHTS, TITLE AND INTEREST TO THIRD PARTY AND RECEIVED CONSIDERATION,THAT BY PAYI NG ADVANCE MONEY SHE DID NOT GET ANY RIGHT WHICH COULD BE TERMED AS CAPITAL ASSET,THAT THE AMO UNT IN QUESTION WAS PAID BY WAY OF COMPENSATION ON ACCOUNT OF FAILURE OF THE BUILDER T O FULFILL THE TERMS OF AGREEMENT AND NOT FOR RELINQUISHMENT/EXTINGUISHMENT OF ANY RIGHT OF THE A SSESSEE, THAT THE AO WAS JUSTIFIED IN ASSESSING THE SUM RECEIVED FROM THE BUILDER UNDER T HE HEAD INCOME FROM OTHER SOURCES. 4202/M/15 GEETA RASIK SHAH 5 3.3. WITH REGARD TO THE QUANTUM ADDITION,THE FAA HELD TH AT THE ASSESSEE HAD RECEIVED RS. 1.77 CRORES FROM RCC AS COMPENSATION, THAT RS.1.12 CRORE S (55.40 LAKHS +54 LAKHS) WERE RECEIVED BY HER ON BEHALF OF HER DAUGHTERS,THAT RCC HAD NOT PAID ANY COMPENSATION TO HER DAUGHTERS, THAT SHE HAD INVESTED IN THE NAMES OF HER MINOR DAU GHTERS IN THE YEAR 2001,THAT SHE RECEIVED BACK THE AMOUNT INVESTED IN THE YEAR 2005,THAT THE CLAIM MADE BY HER WAS CORRECT. HE DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT COMPENSATION OF RS. 1.12 CRORES WAS RECEIVED IN RESPECT OF THE SAME FLATS BOOKED IN THE NAMES OF THE MINORS AND ON DUE VERIFICATION ALLOW THE CLAIM MADE BY THE ASSESSEE.F INALLY,HE HELD THAT ADDITION TO THE EXTENT OF RS.1.77CRORES UNDER THE HEAD INCOME FROM OTHER SOU RCES HAD TO BE CONFIRMED. 4. BEFORE US,THE AR STATED THAT IN ABSENCE OF SEIZURE OF INCRIMINATING DOCUMENTS NO ADDITION COULD BE MADE TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL.HE RELIED UPON THE CASES OF CONTINENTAL WAREHOUSING CORPORATION (374 ITR 645), GURINDER SINGH BABA (386 ITR 483),KABUL CHAWALA (380 ITR 573) AND RRJ SECURI TIES LTD. (62 TAXMANN.COM 391).THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA AND CONTENDED THAT AS PER PANCHNANA,DATED 26/03/201,CERTAIN DOCUMENTS WERE SE IZED, THAT THE DOCUMENTS CONSISTED BANK ACCOUNT STATEMENT OF SHAMRAO VITTHAL CO-OPERAT IVE BANK, THAT THE AMOUNT RECEIVED BY THE ASSESSEE WERE TRANSACTED THROUGH THE SAID BANK ACCOUNT, THAT THE AMOUNT IN DISPUTE RELATED TO SEIZED DOCUMENTS, THAT THE ASSESSEE HAD ADMITTED THAT BOOKS OF ACCOUNTS WERE NOT AVAILABLE, THAT THERE WAS SPECIFIC REFERENCE TO BAN K PASSBOOKS IN THE QUESTION AND ALSO RECORDED DURING THE COURSE OF SEARCH PROCEEDINGS, T HAT THE ASSESSEE HAD ADMITTED THAT BANK PASSED OF SHAMRAO VITTHAL CO-OPERATIVE BANK WOULD B E PRODUCED LATER ON, THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT PROPERLY DRAWN PRIOR TO SE ARCH AND WERE REDRAWN SUBSEQUENT TO SEARCH AS FAR AS PER FLAT AT ANDHERI WAS CONCERNED. SHE REFERRED TO THE CASE OF CONTINENTAL WAREHOUSING CORPORATION(SUPRA) AND STATED THAT THE HONORABLE BOMBAY HIGH COURT HAD MADE A REFERENCE TO THE INCOME IS DISCLOSED IN THE RETUR NS OF INCOME AND SCOPE OF ENQUIRY REVOLVING AROUND THE SEARCH/REQUISITION. SHE FURTHER ARGUED T HAT THE PHRASE MATERIALS UNCOVERED IN THE SEARCH WAS NOT DEFINED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO OR BY THE HONORABLE JURISDICTIONAL HIGH COURT. SHE RELIED UPON THE CASE S OF E N GOPAKUMAR (75 TAXMAN.COM 215), ST. FRANCIS CLAY DECOR TILES (385 ITR 624)AND CHETAN DAS LACHMAN DAS (SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT AN ACTION U/S.132 OF THE ACT WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 24/03/2011,THAT THE AO HAD COMPLETED THE ASSESSMENT U/S. 153A OF THE ACT ADDING RS.2.89 CRORES TO HER INCOME ON ACCOUNT OF CANCELLATION OF BOOKING 4202/M/15 GEETA RASIK SHAH 6 OF FLAT,THAT THE ASSESSEE HAD NOT SHOWN THE SAID IN COME IN HER ORIGINAL RETURN THAT WAS FILED IN THE REGULAR COURSE,THAT IN THE APPELLATE PROCEEDING S,THE FAA REDUCED THE ADDITION AND GRANTED PART RELIEF,THAT HE REJECTED THE JURISDICTIONAL ISS UE RAISED BY THE ASSESSEE. 5.1. SEARCHES AND SEIZURES ARE,IN ANY JURISPRUDENCE,AN A SPECT OF THE OVERRIDING POWER OF THE STATE EXERCISED IN PUBLIC INTERESTS EITHER FOR ENSU RING SOCIAL SECURITY OR FOR PROTECTING SOME PUBLIC INTERESTS.IT IS SAID THAT SEARCHES,UNDER THE ACT,ARE NECESSITATED FOR AVOIDING TAX EVASION AS WELL AS FACILITATING THE ASSESSMENT PROCEEDINGS. THEREFORE,A NARROW CONSTRUCTION SECTION 132 OF THE ACT IN NEVER ADVISED BY THE HONBLE COUR TS.SEARCH AND SEIZURE,IS ONE OF THE TOOLS,THOUGH THE HARSHEST ONE,TO COLLECT DUE TAXES FROM THE ASSESSEES.SUCH ACTIONS MAY LEAD TO UNEARTH UNDISCLOSED INCOMES.ASSESSMENT OF SEARCHED PERSONS IS PART OF THE OVERALL EXERCISE TO DETERMINE THEIR TAX LIABILITIES. A NOTICE U/S.153A OF THE ACT CAN BE ISSUED IN THE C ASES WHERE ACTION U/S.132 IS CARRIED OUT.AS FAR AS ADDITIONS ARE CONCERNED SAME CAN BE MADE ON THE BASIS OF SOME SEIZED MATERIAL.BUT,THE CASE BEFORE US,IS UNIQUE,AS THE ASSESSEE HERSELF HA S ADMITTED THAT BY MISTAKE SHE HAD NOT DISCLOSED A PORTION OF HER TAXABLE INCOME.IT WAS NE VER ARGUED BY THE ASSESSEE THAT SHE HAD NOT EARNED INCOME FROM CANCELLATION OF BOOKING OF A FLA T.SO,IN OUR OPINION, SHE CANNOT RAISE ANY OBJECTION ABOUT THE TAXABILITY OF TRANSACTIONS IN Q UESTION.IF WE CONSIDER THE PECULIAR FACTS OF THE CASE,IT BECOMES CLEAR THAT AFTER THE ASSESSEE A DMITTED THE INADVERTENT MISTAKE,THE AO ACCEPTED HER CLAIM IN PRINCIPLE. IN LIGHT OF THE PE CULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE DECIDE THE JURISDICTIONAL ISSUE AGAINST THE ASSESSE E. 6. SECOND EFFECTIVE GROUND OF APPEAL IS ABOUT HEAD OF INCOME UNDER WHICH THE COMPENSATION RECEIVED ON CANCELLATION OF THE FLATS SHOULD BE ASS ESSED I.E.WHETHER IT SHOULD BE TAXED UNDER THE HEAD INCOME FROM CAPITAL GAINS OR INCOME FROM O THER SOURCES.RELATED TO IT IS THE ISSUE OF INDEXATION,IF THE DISPUTED AMOUNT IS TO BE TAXED AS CAPITAL GAINS.WE HAVE ALREADY MENTIONED THE FACTS REGARDING CANCELLATION OF FLAT-BOOKING BY THE ASSESSEE,IN THE EARLIER PART OF THE ORDER AND THE PART RELIEF GIVEN TO HER BY THE FAA. 6.1. BEFORE US,THE AR ARGUED THAT THE ASSESSEE HAD INVES TED CERTAIN AMOUNTS WITH RCC FOR ACQUISITION OF FLATS IN A BUILDING UNDER DEVELOPMEN T, THAT IN THE YEAR 2005 THE ALLOTMENT WAS CANCELLED, THAT THE INVESTMENT WAS MADE IN THE YEAR 2001, THAT THE FAA WAS NOT JUSTIFIED IN DENYING THE INDEXATION FOR THE ASSET SOLD, THAT HE DID NOT GRANT BENEFICIAL RATE OF TAXES TO THE ASSESSEE, AS PROVIDED UNDER SECTION 112 OF THE ACT. HE REFERRED TO THE PROVISIONS OF SECTION 2 (14) OF THE ACT AND STATED THAT CAPITAL ASSET MEANT PROPERTY OF ANY KIND HELD BY AN ASSESSEE, THAT UNDER THE ALLOTMENT LETTER THE ASSESSEE WAS GR ANTED RIGHT TO ACQUIRE THE IDENTIFIED FLATS FOR 4202/M/15 GEETA RASIK SHAH 7 A PARTICULAR CONSIDERATION, THAT SHE HAD ALSO MADE PAYMENT OF A MAJOR PORTION OF THE FLAT COST TO THE BUILDER, THAT THE ALLOTMENT OF FLATS HELD BY HER ON PAYMENT OF SUBSTANTIAL CONSIDERATION WAS A VALUABLE RIGHT IN PROPERTY, THAT IT WAS A CA PITAL ASSET,THAT THE BUILDER COULD NOT COMPLETE THE CONSTRUCTION OF BUILDING IN TIME, THAT THE AGRE EMENT TO ACQUIRE THE FLATS WAS CANCELLED, THAT THE ASSESSEE RECEIVED CERTAIN AMOUNTS AS COMPENSATI ON IN VIEW OF THE TERMINATION OF RIGHTS OF THE SAID FLATS, THAT THE COMPENSATION RECEIVED ON T ERMINATION OF ALLOTMENT WAS IN THE NATURE OF CAPITAL GAIN,THAT SHE WAS ENTITLED FOR DEDUCTION O F INDEXED COST OF ACQUISITION. HE RELIED UPON THE CASES OF MADHU KAUL(363 ITR 54),VIJAY FLEXIBLE CONTAINERS (186 ITR 693), HILLA J B WADIA(216 ITR 376),PRAVEEN GUPTA(137TTJ 307)AND CBD T CIRCULAR NO.471,DATED 15/ 10/ 1986.THE DR SUPPORTED THE ORDER OF THE FAA. 6.2 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE AO AND FAA HAD REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT BY PAYING TOKEN ADVANCE SHE DID NOT GET ANY RIGHT WHICH COULD BE TE RMED AS CAPITAL ASSETS WITHIN THE DEFINITION OF SECTION 2(14) AND WHICH COULD BE TRANSFERRED AS PER THE PROVISIONS OF SECTION 2(47) OF THE ACT.IT IS A FACT THAT THE ASSESSEE HAD NOT SIGNED A NY FORMAL AGREEMENT WITH RCC.BUT,RCC HAD ADMITTED TO HAVE RECEIVED MONEY FROM HER AND RETURN ING THE SAME ON CANCELLATION OF BOOKING OF THE FLAT,THAT THE ASSESSEE HAS ARGUED THAT THE D ISPUTED TRANSACTION RESULTED IN CAPITAL GAINS. HERE,WE WOULD LIKE TO REFER TO CASE OF MADHU KAUL ( SUPRA). IN THAT MATTER THE FLAT WAS ALLOTTED TO THE ASSESSEE IN THE MONTH OF JUNE, 1986. PAYMENT OF FIRST INSTALMENTS BY THE ASSESSEE ON 04/07/1986, CONFERRED A RIGHT UPON THE ASSESSEE TO HOLD A FLAT. THE AO HELD THAT AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF FLAT WAS NOT LO NG-TERM CAPITAL GAIN. MATTER TRAVELLED UP TO THE HONBLE PUNJAB AND HARYANA HIGH COURT. DECIDING THE CASE IN FAVOUR OF THE ASSESSEE, THE HONBLE COURT HELD THAT MERE FACT THAT POSSESSION W AS DELIVERED LATER WOULD NOT DETRACT FROM THE FACT THAT ALLOTTEE WAS CONFERRED A RIGHT TO HOL D PROPERTY ON ISSUANCE OF AN ALLOTMENT LETTER, THAT PAYMENT OF BALANCE INSTALMENTS,IDENTIFICATION OF A PARTICULAR FLAT AND DELIVERY OF POSSESSION WERE CONSEQUENTIAL ACTS, HAT THE TRIBUNA L ERRED IN HOLDING THAT TRANSACTION DID NOT ENVISAGE A LONG-TERM CAPITAL GAIN.IN THE CASE OF VI JAY FLEXIBLE CONTAINERS (SUPRA),THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY FELL WITHIN THE EXPRESSION PROPERTY OF ANY KIND,USED IN SECTION 2 (14) AND WAS A CAPITAL ASSET.IN THAT MATTER THE ASSESSEE FIRM HAD ENTERED INTO AN A GREEMENT FOR PURCHASE OF AN IMMOVABLE PROPERTY.IT PAID RS. 17,500 AS EARNEST MONEY.SUBSEQ UENTLY, IT HAD TO FILE A SUIT FOR SPECIFIC PERFORMANCE OF THE AGREEMENT FOR SALE OR,IN THE ALT ERNATIVE,FOR DAMAGES FOR ITS BREACH. CONSENT TERMS WERE ARRIVED AT IN THE SUIT AND A DEC REE WAS PASSED IN FAVOUR OF THE ASSESSEE FOR 4202/M/15 GEETA RASIK SHAH 8 THE SUM OF RS. 1,17,500/-AND INTEREST. THE SAID SUM WAS RECEIVED BY THE ASSESSEE DURING THE COURSE OF THE PREVIOUS YEAR RELEVANT TO THE AY.1972 -73. THE AO HELD THAT THE RIGHT THAT THE ASSESSEE HAD ACQUIRED UNDER THE AGREEMENT FOR SALE WAS A CAPITAL ASSET. UPON THE EXTINGUISH - MENT OF THAT RIGHT,THE ASSESSEE HAD RECEIVED THE SU M OF RS. 1,17,500/-.DEDUCTING THE COST OF ACQUISITION OF THE CAPITAL ASSET IN THE AMOUNT OF R S.17,500/-AND EXPENSES AND LEGAL CHARGES IN THE SUM OF RS.17,904/-,THE AO FOUND THE CAPITAL GAI N TO BE RS.82,086/-.THE TRIBUNAL, HOWEVER, HELD THAT THE AMOUNT WAS NOT ASSESSABLE AS CAPITAL GAINS.ON A REFERENCE HONBLE COURT HELD AS UNDER: .UNDER THE AGREEMENT TO PURCHASE THE PROPERTY, THE ASSESSEE HAD ACQUIRED THE RIGHT TO HAVE THE IMMOVABLE PROPERTY CONVEYED TO HIM. HE WAS, UND ER THE LAW, ENTITLED TO EXERCISE THAT RIGHT NOT ONLY AGAINST HIS VENDORS BUT ALSO AGAINST A TRANSFEREE WITH NOTICE OR A GRATUITOUS TRANSFEREE. HE COULD ASSIGN THAT RIGHT. WHAT HE ACQ UIRED UNDER THE SAID AGREEMENT FOR SALE WAS, THEREFORE, PROPERTY WITHIN THE MEANING OF THE INCOME-TAX ACT, 1961, AND, CONSEQUENTLY, A CAPITAL ASSET. WHEN HE FILED THE SUIT IN THE COURT AGAINST THE VENDORS, HE CLAIMED SPECIFIC PERFORMANCE OF THE SAID AGREEMENT FOR SALE BY CONVE YANCE TO HIM OF THE IMMOVABLE PROPERTY AND, ONLY IN THE ALTERNATIVE, DAMAGES FOR BREACH OF THE AGREEMENT. A SETTLEMENT WAS ARRIVED AT WHEN THE SUIT REACHED HEARING AT WHICH POINT OF TIM E THE ASSESSEE GAVE UP HIS RIGHT TO CLAIM SPECIFIC PERFORMANCE AND TOOK ONLY DAMAGES. HIS GIV ING UP OF THE RIGHT TO CLAIM SPECIFIC PERFORMANCE BY CONVEYANCE TO HIM OF IMMOVABLE PROPE RTY WAS A RELINQUISHMENT OF THE CAPITAL ASSET. THERE WAS, THEREFORE, A TRANSFER OF A CAPITA L ASSET WITHIN THE MEANING OF THE INCOME-TAX ACT. THE CAPITAL ASSET HAD BEEN ACQUIRED FOR THE CO ST OF RS. 17,500 PAID AS AND BY WAY OF EARNEST MONEY. THE INCOME-TAX OFFICER HAD DEDUCTED FROM OUT OF THE TOTAL SUM OF RS. 1,17,500 RECEIVED BY THE ASSESSEE UNDER THE CONSENT TERMS TH E AMOUNT OF RS. 17,500 AS BEING THE COST OF ACQUISITION OF THE ASSET AND THE SUM OF RS. 17,904 ON ACCOUNT OF EXPENSES AND LEGAL CHARGES. THE ASSESSMENT WAS MADE BY HIM RIGHTLY ON THE BASIS THAT THE CAPITAL GAINS AMOUNTED TO RS. 82,086. CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E JUDGMENT OF VIJAY FLEXIBLE CONTAINERS (SUPRA),WE HOLD THAT THE INCOME ARISING OUT OF SURR ENDERING THE FLAT TO THE BUILDER HAD TO BE TAXED UNDER THE HEAD CAPITAL GAINS AND NOT UNDER TH E HEAD INCOME FROM OTHER SOURCES. CONSIDERING THE PERIOD OF HOLDING OF THE ASSET,THE ASSESSEE IS ENTITLED TO BENEFIT OF INDEXATION AND THE DISPUTED AMOUNT IS TO BE TAXED AS LONG-TERM CAPITAL GAIN.SECOND EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS P ARTLY ALLOWED. ! ' #$% &'() . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER, 2017. &* + ' 01 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 01.09.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 4202/M/15 GEETA RASIK SHAH 9 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / ; 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.