ESTATE OF KRISHNAKUMAR J KHATAU, MUMBAI V. ITO 16(3)(4), MUMBAI

ITA 4223/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84299 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 12-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: N H GAJRIA
• Keywords: Invalid notice; Business income; Cost of acquisition; Fair market value; Difference of opinion; Change of opinion
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI . . , BEFORE SHRI I.P. BANSAL, JM ./ I.T.A. NO.4223/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 ESTATE OF KRISHNAKUMAR J KHATAU, 114/B, R.K.WADI, V.P.ROAD, MUMBAI 400 004 / VS. THE ITO 16(3)(4), MUMBAI. ! ./ '# ./ PAN/GIR NO. : ACGPK 8931N ( $ / APPELLANT ) .. ( %& $ / RESPONDENT ) ./ I.T.A. NO.4224/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 ESTATE OF DHARAMSHI KHATAU, 114/B, R.K.WADI, V.P.ROAD, MUMBAI 400 004 / VS. THE ITO 16(3)(4), MUMBAI. ! ./ '# ./ PAN/GIR NO. : AAAHD 3955P ( $ / APPELLANT ) .. ( %& $ / RESPONDENT ) APPELLANT BY SHRI N.H. GAJRIA RESPONDENT BY SHRI NEIL PHILIP ' ()! / DATE OF HEARING : 01/12/2014 *+ ' ()! / DATE OF PRONOUNCEMENT : 01/12/2014 , / O R D E R THESE ARE APPEALS FILED BY THE ASSESSEES AND THE Y ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A)-27, MUMBAI DAT ED 4/3/2014 IN THE CASES OF RESPECTIVE ASSESSEES. GROUNDS OF APPEAL IN BOT H THE APPEALS ARE IDENTICAL EXCEPT DIFFERENCE IN FIGURES OF GROUND NO.2. GROUN DS OF APPEAL NO.4223/MUM/2014 READ AS UNDER: ./ I.T.A. NO.4223&4224/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 2 THE LEARNED CIT(A)-27 MUMBAI 1. ERRED IN CONFIRMING THE REOPENING OF THE ASSESSM ENT WITH CHANGE OF OPINION AS ALSO THE REASSESSING U/S.143(3) R.W.S. 147 OF THE I .T. ACT 1961 ON THE BASIS OF DEFECTIVE AND TIME BARRED NOTICE U/S 148. 2. ERRED IN CONFIRMING TREATING OF THE INCOME FROM LONG TERM CAPITAL GAIN OF RS. 1,36,688/- (LTCG) FROM KASHIMIRA LAND AS INCOME FRO M BUSINESS REASSESSING THE SAID LTCG AS BUSINESS INCOME AT RS.2,49,180/- BASED ON REDUCED COST OF ACQUISITION OF RS. 85/- AND NOT AT RS.110/- AND TRE ATING RS. 2,49,180/- AS INCOME ESCAPING ASSESSMENT AND RESULTING IN REASSESSMENT O F TOTAL INCOME AT RS. 3,41,718/- AGAINST RETURNED INCOME OF RS. 92,538/- WHERE DEDUCTION U/S. 54EC OF RS.1,30,000/- WAS CLAIMED FOR INVESTING IN RECL BON DS AGAINST LTCG OF RS.1,30,688/- WHICH OUGHT TO HAVE BEEN ALLOWED. 3. ERRED IN NOT ANALYZING THE FACTS ON RECORDS AND NOT ESTABLISHING FACTS/CONTENTION BUT BLINDLY FOLLOWING ADVERSE INFERENCES/REASONING HELD BY DCCC 20 ON THE FACTS IN THE CASE OF MAHENDRA DEVIDAS & JAIRAJ DEVIDAS (MD&J D) FOR LTCG AS BUSINESS INCOME BUT OUGHT TO HAVE HELD THE APPELLANT IS NOT REGULARLY, FOR LAST TEN YEARS, SELLING OF KASHIMIRA LANDS.. 4. OUGHT TO HAVE DEALT FAIRLY AND JUSTLY WITH SUBMI SSIONS AND OBJECTION, FACTS AND RECORDS OF THE APPELLANT. 5. APPELLANT CRAVE LEAVE TO ADD TO, ALTER, MODIFY, DELETE, OMIT ANY ONE OR MORE OF THE ABOVE GROUNDS EITHER IN FULL OR PAR OR PARTS TILL T HE COMPLETION OF HEARING THEREOF. GROUND NO.2 IN ITA NO.4224/MUM/2014 IS REPRODUCED B ELOW TO BRING OUT DIFFERENCE IN FIGURES. ERRED IN CONFIRMING TREATING OF THE INCOME FROM L ONG TERM CAPITAL GAIN OF RS.1,30,688/- (LTCG) FROM KASHIMIRA LAND AS INCOME FROM BUSINESS REASSESSING THE SAID LTCG AS BUSINESS INCOME AT RS.2,49,180/- B ASED ON REDUCED COST OF ACQUISITION OF RS.85/- AND NOT AT RS.110/- AND TREA TING RS.1,18,492/- AS INCOME ESCAPING ASSESSMENT AND RESULTING IN REASSESSMENT O F TOTAL INCOME AT RS.2,93,746/- AGAINST RETURNED INCOME OF RS.1,75,25 4/-. 2. AT THE TIME OF HEARING IT WAS POINTED OUT BY LD. AR THAT BOTH THE APPEALS MAY BE DISPOSED OF SIMULTANEOUSLY AS THE FACTS ARE IDENTICAL AND RELATES TO ASSESSABILITY OF CAPITAL GAIN FROM THE SAME PROPER TY. IN THIS VIEW OF THE SITUATION I WILL REFER TO THE FACTS AS EXISTING IN ITA NO.4223/MUM/2014 AND THE DECISION TAKEN THERE WILL BE APPLICABLE TO THE OT HER APPEAL. 3. THE ASSESSEE IS A CO-OWNER OF PROPERTY SITUATED AT VILLAGE MIRA, TALUKA AND DISTRICT THANE. THE PROPERTY IS BEING SOLD IN PART S DURING THE LAST 10 YEARS AND FOR THE YEAR UNDER CONSIDERATION THE DETAILS OF SAL E ARE AS UNDER: ./ I.T.A. NO.4223&4224/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 3 DATE OF AGREEMENT SURVEY NO. AREA SOLD TO AGREEMENT VALUE. 27.11.2004 17 10699 SQ.MTRS. SHRI NARESH SHAH 1,08,76,6000 3.1 THE ASSESSEE ADOPTED FAIR MARKET VALUE AS ON 01 /04/1981 AT RS.110/- PER SQ.MTR. AGAINST THE DVOS REPORT IN CO-OWNERS CAS E ACCORDING TO WHICH FAIR MARKET VALUE AS ON 01/04/1981 WAS ADOPTED AT RS.85/ - PER SQ.MTR. THE AO ALSO DID NOT ACCEPT THE CASE OF THE ASSESSEE REGARDING T AXABILITY OF THE TRANSACTION AS RESULTING INTO CAPITAL GAIN AND HE TREATED THE INCO ME ARISING OUT OF THE SALE OF LAND AS BUSINESS INCOME. IN THIS MANNER THE AO HA S COMPUTED THE SHARE OF SALE CONSIDERATION FALLING TO THE HANDS OF THE ASSESSEE IN THE FOLLOWING MANNER. SALE CONSIDERATION 1,08,76,600 LESS COST OF ACQUISITION AS DISCUSSED ABOVE (10,699 X85) 9,09,415 99,67,185 ASSESSEE SHARE 2.5% 2,49,180 INCOME ESCAPED 2,49,180 THE AFORESAID AMOUNT OF RS.2,49,180/- HAS BEEN ADDE D BY THE AO TO THE INCOME OF THE ASSESSEE WITHOUT GIVING THE BENEFIT OF COST OF INDEXATION AND CONSEQUENTLY CAPITAL GAIN BENEFIT. LD. CIT(A) HAS UPHELD THE A CTION OF AO. THE ASSESSEE IS AGGRIEVED HENCE HAS FILED AFOREMENTIONED GROUNDS O F APPEAL. 3.2 IN THE PRESENT APPEAL THE GRIEVANCE OF THE ASSE SSEE IS TWO FOLD. FIRSTLY; THAT COST OF ACQUISITION IS TO BE TAKEN AS PER VALUE TAK EN BY THE ASSESSEE AT RS.110/- PER SQ. MTR. AS AGAINST RS.85/- ADOPTED BY AO ON TH E BASIS OF DVOS REPORT IN THE CASE OF ANOTHER CO-OWNER. SECONDLY; THE AO COMMITT ED AN ERROR IN TREATING THE INCOME ARISING TO THE ASSESSEE AS BUSINESS INCOME A ND LD. CIT(A) HAS WRONGLY UPHELD THE ACTION OF AO. 3.3 CONTESTING ON THE FIRST POINT, IT IS THE SUBM ISSION OF LD. AR THAT REFERENCE TO DVOS REPORT CANNOT BE MADE WHILE ASCERTAINING T HE COST OF ACQUISITION AS ON 01/04/1981 ACCORDING TO THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. PUJA PRINTS, 360 ITR 697, WHEREIN THEIR LORDSHIPS HAVE HELD THAT REFERENCE TO DVO UNDER SECTION 55A CAN BE MADE ONLY IF THE VALUE ADOPTED BY THE ./ I.T.A. NO.4223&4224/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 4 ASSESSEE IS LESS THAN THE FAIR MARKET VALUE AND THI S POSITION OF LAW WOULD BE APPLICABLE BEFORE THE AMENDMENT BROUGHT BY THE FIN ANCE ACT, 2012 W.E.F. 01/07/2012. ON THE SECOND ISSUE IT IS CASE OF LD. AR THAT THE SAME AO IN RESPECT OF ANOTHER CO-OWNER NAMELY MR. VINAY DHARMS HI KHATAU HAS ASSESSED THE SAME CAPITAL GAIN EVEN IN RESPECT OF A.Y 2010-1 1 UNDER THE HEAD CAPITAL GAIN. REFERENCE IN THIS REGARD WAS MADE TO THE ORDER PASS ED BY THE SAME ASSESSING OFFICER WHICH IS DATED 25/10/2012 AND COPY OF WHIC H IS PLACED AT PAGES 18 AND 19 OF THE PAPER BOOK. REFERENCE IS ALSO MADE TO TH E COMPUTATION OF INCOME, COPY OF WHICH IS FILED AT PAGE 20 OF THE PAPER BOOK , WHEREIN IT WAS MADE CLEAR THAT GAIN IS RECEIVED BY THE SAID ASSESSEE IN RESP ECT OF VERY SIMILAR PROPERTY WHICH IS BEING SOLD FROM YEAR TO YEAR BY THE CO-OWN ERS OF THE SAID PROPERTY. 3.4 ON THE ABOVE FACTS, I HAVE HEARD BOTH THE PART IES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. LD. DR RELIED UPON THE ASSESSMENT ORDER AND ORDER PASSED BY LD. CIT(A). THE IMPUGNED PROPERTY IS BEING SOLD BY THE CO- OWNERS FROM TIME TO TIME AND GAIN ARISING THERE FRO M HAS BEEN SHOWN AS GIVING RISE TO CAPITAL GAIN. THE ASSESSEE IS ONLY A CO-O WNER OF 2.5% AND THE PROPERTY IS OWNED BY THESE ASSESSEES BY WAY OF INHERITANCE AND THESE PROPERTIES ARE NOT PURCHASED BY THE CO-OWNERS. THE SAME AO HAS ASSESS ED THE SALE OF THE SAID PROPERTY IN THE HANDS OF OTHER CO-OWNERS AS INCO ME GIVING RISE TO CAPITAL GAIN BY WAY OF AN ORDER PASSED UNDER SECTION 143(3) ON 2 5/10/2012. WHEREAS IN THE CASE OF THE ASSESSEE HE HAS TREATED THE SAID GAIN AS BUSINESS INCOME. THUS, THE STAND OF AO IS CONTRADICTORY TO EACH OTHER. THOUG H AO HAS OBSERVED THAT ASSESSEE IS DOING BUSINESS OF SALE OF LAND FROM LA ST 10 YEARS BUT ASSESSEE IS SIMPLY A CO-OWNER OF THE PROPERTY WHICH IS BEING SO LD SIMULTANEOUSLY BY THE CO- OWNERS AND NO MATERIAL HAS BEEN BROUGHT ON RECORD T O SHOW THAT THE SAID ACTIVITY WAS IN THE NATURE OF BUSINESS. NO PURCHAS E OF LAND HAS BEEN SHOWN IN THE HANDS OF THE ASSESSEE IN ANY OF THE YEARS TO SH OW THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE WAS BEING CARRIED ON IN THE NATUR E OF BUSINESS. THEREFORE, I AM OF THE OPINION THAT IN ABSENCE OF SUCH MATERIAL THE INCOME ARISING FROM SALE OF LAND CANNOT BE TREATED AS INCOME FROM BUSINESS. TH E INCOME ARISING OUT OF SALE OF LAND IS ASSESSABLE AS CAPITAL GAIN. ./ I.T.A. NO.4223&4224/MUM/2014 ( / ASSESSMENT YEAR : 2005-06 5 3.5 THE SECOND ISSUE IS COVERED BY THE AFOREMENTION ED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUJA PRINT S (SUPRA). THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE AS ON 1/4/1981 CANNOT B E REDUCED ON THE BASIS OF DVOS REPORT AS REFERENCE TO DVO IN THE PRESENT CAS E WOULD BE AGAINST THE POWERS GIVEN TO AO U/S. 55A OF THE ACT. ACCORDING LY, THE FAIR MARKET VALUE AS ON 1/4/1981 SHOWN BY THE ASSESSEE CANNOT BE REDUCE D. THE AO IS DIRECTED TO GIVE BENEFIT OF FAIR MARKET VALUE @ 110/- PER SQ.MT R. 4. LD. A.R DID NOT PRESS GROUND RELATING TO RE-OPEN ING, HENCE, GROUND NO.1 IS DISMISSED BEING NOT PRESSED. 5. THE DECISION TAKEN AS ABOVE WOULD BE APPLICABLE TO BOTH THE APPEALS. 6. IN VIEW OF ABOVE DISCUSSION BOTH THE APPEALS ARE TREATED TO BE PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 01/12/2014 . , ' *+ ! - ./ 01/12/2014 + ' 0 SD/- . . (I.P.BANSAL) /JUDICIAL MEMBER MUMBAI; . DATED 01/12/2014 , , , , ' '' ' %(1 %(1 %(1 %(1 21( 21( 21( 21( / COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT 2. %& $ / THE RESPONDENT. 3. 3 ( ) / THE CIT(A)- 4. 3 / CIT 5. 140 %( , , / DR, ITAT, MUMBAI 6. 05 6 / GUARD FILE. , , , , / BY ORDER, &1( %( //TRUE COPY// 7 77 7 / 8 8 8 8 ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS