MAHIPATRAI PRABHUDAS SHAH FAMILY TRUST, MUMBAI V. ACIT (CPC)), MUMBAI

ITA 4215/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1979 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2016
• Assessment Year: misc
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Capital asset
• Section: 2(14); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI A.K. GARODIA ,AM ./ I.T.A. NO.4214 & 4215/MUM/2014 ( / ASSESSMENT YEAR: 2009-10 &2010-11 ) SHRI MAHIPATRAI PRABHUDAS SHAH FAMILY TRUST 404, COMMERCE HOUSE, 140 NAGINDAS MASTER ROAD, FORT, MUMBAI 400 023. / VS. INCOME TAX OFFICER 12(3)(4), AAYKAR BHAVAN, MUMBAI 400023. ./ ./ PAN/GIR NO. AADPK 8375K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY R. PARIKH / RESPONDENT BY : SHRI B.S.BIST / DATE OF HEARING : 03/12/2015 !'# / DATE OF PRONOUNCEMENT : 23 .12.2015 / O R D E R PER A. K. GARODIA, A. M: BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST TWO SEPARATE ORDERS BOTH DATED 12/03/2014 OF COMMISSION ER OF INCOME TAX (APPEALS)-23, MUMBAI (HEREINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEARS 200910 & 201011. AS A COMMON ISS UE IS INVOLVED, BOTH APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THE COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE GROUN DS RAISED BY THE ASSESSEE ARE IDENTICAL IN BOTH YEARS. THESE ARE AS UNDER: 2 I.T.A. NO.4214 & 4215/MUM/2014 (ASSESSMENT YEAR: 2009 -10 &2010-11 ) 1. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE COPY OF RETURN OF INCOME FILED BY THE ASSESSEE BY WAY OF E. FILING IS AVAILABLE ON PAGES 24 TO 62 AND RELEVANT PAGE IS 38 REGARDING DETAILS OF INCOME FROM HOUSE PROPERTY. HE FURTHER SUBMITTED THAT THESE DETAILS ARE COMPULSORI LY TO BE FILLED UP AND ONCE THESE ARE FILLED UP, THE FIGURE OF INCOME AS PER TH ESE DETAILS IS AUTOMATICALLY TRANSFERRED IN THE COMPUTATION OF INCOME PART OF IN COME AND THE ASSESSEE CANNOT CHANGE THE SAME AND THERE IS NO ROW OR COLUM N ISSUE REGARDING CHARGEABILITY OF TAX ON SHORT TERM CAPITAL GAIN ARI SING ON SALE OF PAINTING IS COVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF HO NBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. KURUVILLA ABRAHAM A S REPORTED IN 88 DTR 291 (MADRAS). HE ALSO PLACED RELIANCE ON FOLLOWING JUDG MENTS OF HONBLE BOMBAY HIGH COURT:- A) INDIAN DEL. P. LTD. VS. CIT, 349 ITR 330 (BOM) B) SANCHIT SOFTWARE AND SOLUTIONS P. LTD. VS. CIT, 349 ITR 404 (BOM). 2. AS AGAINST THIS, THE LD. DR OF THE REVENUE SUPPO RTED THE ORDER OF CIT(A). 3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT IN THE PRESENT CASE, THE ASSESSEE OFFERED SHORT TERM CAPITAL GAIN TO TAX TOTALING OF RS.5,59,611/- INCLUDING AN AMOUNT OF RS.2.75 LAKHS BEING SHORT TE RM CAPITAL GAIN ON ACCOUNT OF SALE OF PAINTING AT TAX RATE OF 10%. ADMITTEDLY, THE SHORT TERM CAPITAL GAIN BEING PROFIT ON SALE OF SHARES AMOUNTING TO RS.1,90 ,167/- AND PROFIT ON SALE OF MUTUAL FUND RS.94,444/- ARE LIABLE TO TAX AT THE RA TE OF 10% ONLY. BUT IN RESPECT OF GAIN ON SALE OF PAINTING OF RS. 2.75 LAK HS, THE AO INITIATED THE PRESENT PROCEEDINGS U/S 154 AND IN THE SAME, IT WAS HELD BY THE AO AS PER HIS ORDER DATED 03.01.2012 THAT THE GAIN OF RS.2.75 LAK HS ON SALE OF PAINTING IS CHARGEABLE TO TAX AT NORMAL RATE AND NOT AT 10%. DU RING THESE PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO ALSO TH AT AS PER SECTION 2 (14), PERSONAL EFFECTS IS NOT A CAPITAL ASSET AND THIS SE CTION WAS AMENDED BY FINANCE 3 I.T.A. NO.4214 & 4215/MUM/2014 (ASSESSMENT YEAR: 2009 -10 &2010-11 ) ACT 2007 W.E.F. 1.04.2008 AS PER WHICH, PAINTINGS W ERE SPECIFICALLY EXCLUDED FROM THE DEFINITION OF PERSONAL EFFECTS WHICH IS NO T A CAPITAL ASSET AS PER SECTION 2(14) BUT IN THE PRESENT CASE, THE ASSESSME NT YEAR INVOLVED IS AY 2007- 08 I.E. BEFORE THIS AMENDMENT AND THEREFORE, GAIN ARISING TO THE ASSESSEE ON SALE OF PAINTING IS NOT LIABLE TO TAX AT ALL. BUT T HE AO REJECTED THIS CONTENTION OF THE ASSESSEE BY STATING IN HIS ORDER PASSED BY HIM U/S 154 THAT THE ASSESSEE HAS BROUGHT THE MISTAKE TO NOTICE ONLY WHEN THE NOT ICE TO RECTIFY TO TAX SHORT TERM CAPITAL GAIN TAX ON SALE OF PAINTING WAS SOUGH T. HENCE, IT IS SEEN THAT THIS IS NOT THE CASE OF AO THAT AS PER THE PROVISIONS OF SECTION 2 (14) AS WERE ON THE STATUTE BOOK DURING THE RELEVANT PERIOD I.E. BEFORE THE AMENDMENT BY THE FINANCE ACT 2007 WITH EFFECT FROM A. Y. 2008 09, PAINTING IS A CAPITAL ASSET AND IT IS NOT PERSONAL EFFECTS. THE ORDER OF LEARNE D CIT(A) IS THIS THAT THE ASSESSEE DID NOT RAISE ANY CLAIM IN THE COURSE OF A SSESSMENT PROCEEDING THAT THE PAINTING IN QUESTION IS REPRESENTING HIS PERSON AL EFFECTS HELD BY HIM FOR PERSONAL USE AND IT IS NOT CAPITAL ASSET. THEREFORE , IT IS SEEN THAT AS PER IMPUGNED ORDER OF CIT(A) ALSO, IT IS NOT A CASE MAD E OUT THAT PAINTING IN QUESTION IS NOT PERSONAL EFFECT AND THEREFORE, IT H AD TO BE ACCEPTED THAT PAINTING IN PRESENT CASE IS PERSONAL EFFECT. IN THA T SITUATION, THE ORDER OF THE AO U/S 154 TO INCREASE THE RATE OF TAX CHARGEABLE ON S UCH GAIN ARISING ON SALE OF PAINTING CANNOT BE APPROVED AT NORMAL RATE. SINCE T HE ASSESSEE HAS HIMSELF OFFERED THE PROFIT ON SALE OF PAINTING AS LIABLE TO TAX AT THE RATE OF 10% AND NO APPEAL WAS FILED IN ORIGINAL ASSESSMENT PROCEEDINGS AND THIS CLAIM IS MADE IN SECTION 154 PROCEEDINGS INITIATED BY THE A.O. TO CH ARGE TAX AT NORMAL RATE AS AGAINST 10% RATE OFFERED BY THE ASSESSEE, IT CANNOT BE HELD IN THE PRESENT PROCEEDINGS THAT NO TAX IS CHARGEABLE ON THIS PROFI T ON SALE OF PAINTING BUT ACTION OF AO OF INCREASING THE TAX RATE FROM 10% TO NORMAL RATE ALSO CANNOT BE APPROVED. IN THE FACTS OF THE PRESENT CASE WHEN IT IS SEEN THAT THE PROFIT ON SALE OF PAINTING IS ACTUALLY NOT LIABLE TO CAPITAL GAIN TAX BECAUSE THIS IS NOT A CAPITAL OF ASSET, IT CANNOT BE SUBJECTED TO TAX AT NORMAL R ATE OF TAX ONLY BECAUSE THE ASSESSEE HAS WRONGFULLY OFFERED THE SAME TO TAX AT THE RATE OF 10%. HENCE, ON 4 I.T.A. NO.4214 & 4215/MUM/2014 (ASSESSMENT YEAR: 2009 -10 &2010-11 ) THIS ASPECT, WE HOLD THAT THE RECTIFICATION MADE BY THE AO U/S 154 TO THE EFFECT THAT NORMAL RATE OF TAX SHOULD BE APPLIED IN RESPEC T OF SHORT TERM CAPITAL GAIN ON SALE OF PAINTING IS UNJUSTIFIED AND THEREFORE, I REVERSE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND IT IS HELD THAT WHATEVER TAX IS PAID BY THE ASSESSEE ON THE PROFIT ON SALE OF PAINTING BE ACCEPTED WITHOUT MAKI NG ANY FURTHER ADDITION IN THE TAX LIABLILITY OF THE ASSESSEE ON THIS ACCOUNT. I WANT TO MAKE IN CLEAR THAT THE RETURNED INCOME CANNOT BE REDUCED IN 154 PROCEE DINGS INITIATED BY THE A.O. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWED I N THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2015 SD/- (A.K. GARODIA) / ACCOUNTANT MEMBER MUMBAI; ( DATED : 23.12.2015 PRAMILA / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT - CONCERNED 5. ,-. //01 , 01# , / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) $%, / ITAT, MUMBAI