MANHAR P KHADAWALA, MUMBAI V. ACIT CIR 12(1), MUMBAI

ITA 4234/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4955 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 27-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRITAM SINGH
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Principle of natural justice; Valuation report
• Section: 143(3); 50C; 2(14)

Judgement Text

` , IN THE INCOME TAX APPELLATE TRIBUNAL B B ENCH, MUMBAI . . , !'# , $ %& BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 4234/MUM/2013 ( ' ' ' ' / ASSESSMENT YEAR : 2009-10 MR. MANHAR P. KHADAWALA, 13/15, A.K. MARG, FORT, MUMBAI-400 001 THE ACIT, CIRCLE-12(1), AAYAKAR BHAVAN, MUMBAI 400 020 &( $ ./ )* ./ PAN/GIR NO. :AAGPK-6317E ( (+ / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ / / APPELLANT BY : ` DR. K. SHIVARAM ,-(+ 0 / /RESPONDENT BY : SHRI PRITAM SINGH 0 12$ / DATE OF HEARING :16.09.2013 34' 0 12$ / DATE OF PRONOUNCEMENT :16.9.2013 %5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-23, MUMBAI DT. 01.03.2013 PERTAINING TO A.Y . 2009-10. 2. THE ASSESSEE HAS RAISED 6 SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1,2 & 3 ARE INTERLINKED AND ARE TAKEN UP TOGETH ER FOR THE SAKE OF CONVENIENCE. 3. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CI T(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS. 12,79,22,068/- ON ACCOUNT OF ALLEGED LONG TERM CAPITAL GAINS. IT IS THE SAY OF THE ITA NO.7904/M/2010 2 ASSESSEE THAT LAND WAS NOT EXIGIBLE TO CAPITAL GAIN AS IT WAS NOT CAPITAL ASSET WITHIN THE MEANING OF SEC 2(14)(III) , BEING AN AGRICULTURE LAND. 4. THIS ISSUE HAS BEEN DISCUSSED AT LENGTH BY THE A O AT PARA-6 ON PAGE-3 OF HIS ORDER. DURING THE COURSE OF THE SCRU TINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE WAS A LLOTTED 51 PLOTS OF DIFFERENT SIZE BY ONE M/S. MAHAL MIRA HOLIDAY RESOR TS. THESE WERE FARM HOUSE PLOT AND ARE PART OF THE PROPERTY AT VILLAGE VIRANI TALUKA PEN , DIST. RAIGAD . THE ASSESSEE PAID RS. 10,29,754/- TOWARDS THE COST OF THE SAID PLOTS. THE AO FURTHER OBSERVED THAT THE ASSES SEE SURRENDERED BACK THESE PLOTS TO THE ORIGINAL OWNER, I.E. MAHALMIRA RESORTS FOR A PRICE OF RS. 2,04,09,000/-. THE ISSUE BEFORE THE AO WAS WHET HER ON THESE PLOTS CAPITAL GAIN AROSE AS PER THE PROVISIONS OF THE ACT OR THE PLOTS WERE AGRICULTURAL LAND WITHIN THE MEANING OF SEC. 2(14) OF THE ACT. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE SALE OF THES E FARM PLOTS SHOULD NOT BE TREATED AS TAXABLE. THE ASSESSEE FILED A DE TAILED REPLY CLAIMING THAT ANY GAIN ARISING FROM THE TRANSFER/SURRENDER OF THE SAID 51 FARM PLOTS WAS NOT LIABLE FOR TAX AS THE IMPUGNED LAND WERE AGRI CULTURAL LAND. TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE PRODUCED COPIE S OF 7/12 EXTRACTS WHICH CLEARLY INDICATES THAT THESE FARM PLOTS WERE FOR AG RICULTURAL PURPOSES. 4.1. THE AO DID NOT ACCEPT THE CONTENTION OF THE AS SESSEE AND WAS OF THE FIRM BELIEF THAT PLOTS SOLD BY THE ASSESSEE WER E NON AGRICULTURAL LAND AND TREATING THEM AS NON AGRICULTURAL LAND, THE A O WENT ON TO COMPUTE LTCG FOR 51 NOS OF PLOT. THE AO ALSO APPLIED PROVI SIONS OF SEC. 50C OF THE ACT AND DETERMINED THE LTCG AT RS. 12,79,22,068 /-. 5. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THE GRIEVANCE OF THE ASSESSEE AT PARA-4 ON PAGE-4 OF HIS ORDER. DURING THE COURSE OF THE APPE LLATE PROCEEDINGS, THE ITA NO.7904/M/2010 3 LD. CIT(A) CALLED FOR REMAND REPORT FROM THE AO. T HE RELEVANT PORTION OF THE REMAND REPORT IS EXHIBITED AT PAGE 467 OF TH E PAPER BOOK WHICH IS EXTRACTED AS UNDER: GROUND NO. 3 : 51 AGRICULTURAL FARM PLOTS IT HAS BEEN CONTENDED BY THE ASSESSEE THAT 51 PLOTS ALLOTTED BY M/S. MAHAL MIRA HOLIDAY RESORTS ARE AGRICULTURAL FARM PL OTS AGAINST WHICH NECESSARY EVIDENCE HAS BEEN SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDING. THE EVIDENCES SUBMITTED HAVE BEEN PERUSED. ON SCRUTINY OF THE CERTIFICATE FROM THE TEHSILDAR IT IS FOUND THAT THE IMPUGNED LAND IS 9 K MS FROM THE MUNICIPAL LIMIT WHILE SCRUTINY OF CERTIFICATE F ROM GRAM PANCHAYAT IT IS FOUND THAT THE POPULATION OF THE AR EA IS 765. THE SCRUTINY OF TOWN PLANNING CERTIFICATE REVEALED THAT THE IMPUGNED LAND IS AN AGRICULTURE LAND. FURTHER, THE ASSESSEE HAS SUBMITTED THE 7/12 EXTRACT WHICH PROVE THAT THE LAND IS AN AGRICULTURAL LAND IN THE LAND REVENUE RECORD. I T IS SEEN THAT THE ASSESSEE HAS FULFILLED THE NECESSARY CONDI TIONS AS LAID DOWN IN SEC. 2(14)(III) OF THE I.T. ACT. MORE OVER, THE CONTENTION OF THE ASSESSEE THAT HE HAS BEEN SHOWING AGRICULTURAL INCOME CONSISTENTLY FOR PAST FEW YEARS HAD BEEN ACCEPTED BY THE DEPARTMENT, IS FOUND TO BE CORRECT. IN VIEW OF THE ABOVE, THERE IS NO REASON TO DOUBT THE ASSESSEES CONTENTION THAT SALE FROM 51 AGRICULTURA L FARM PLOTS IS NOTHING BUT SALE OF AGRICULTURAL LAND. 5.1. THE LD. CIT(A) DID NOT ACCEPT THE REMAND REPOR T OF THE AO ON THE RELEVANT ISSUE. THE LD. CIT(A) OBSERVED THAT THE AO ERRED IN COMMENTING IN HIS REPORT THAT SALE OF 51 FARM PLOT S IS NOTHING BUT SALE OF AGRICULTURAL LAND. ACCORDING TO THE LD. CIT(A), TH E AO SHOULD HAVE GONE DEEP INTO THE FACTS OF THE CASE AND SHOULD HAV E BROUGHT CORRECT FACTS ON RECORD ON HIS OWN WHILE SENDING REMAND REPORT AN D ACCORDINGLY REJECTED THE REMAND REPORT DT. 20.11.2012. THE LD. CIT(A) ALSO REJECTED THE SUBMISSIONS OF THE ASSESSEE AND DISMISSED THE G RIEVANCE OF THE ASSESSEE AND CONFIRMED THE FINDINGS OF THE AO. ITA NO.7904/M/2010 4 6. AGGRIEVED BY THIS FINDINGS OF THE LD. CIT(A), AS SESSEE IS BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE REVENUE AUTHORITIES DID NOT PROVIDE THE C OPY OF THE REPORT OF THE INSPECTOR THOUGH IT WAS USED AGAINST THE ASSESSEE T HEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS APPLIED PROVISIONS OF SE C. 50C OF THE ACT WHEN THE SAME HAS BEEN BROUGHT ON STATUTE FROM 1.10 .2009 AND THEREFORE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. T HE LD. COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT THE LOWER AUTHORITIES HAVE COMPLETELY IGNORED THE FACT THAT THE ASSESSEE HAS BEEN SHOWING AGRICUL TURAL INCOME FROM THE IMPUGNED LAND WHICH HAS BEEN ACCEPTED IN A.Y. 2008- 09 U/S. 143(3) OF THE ACT. THE LD. COUNSEL FURTHER BROUGHT TO OUR NO TICE THAT THE DOCUMENT RELIED UPON BY THE LD. CIT(A) DO NOT PERTAIN TO THE ASSESSEE AND THE LD. CIT(A) HAS GROSSLY ERRED IN REJECTING THE REMAND RE PORT OF THE AO ON THE GROUND THAT MORE ENQUIRY OUGHT TO HAVE BEEN MADE. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIA L EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. IT IS NOT IN DIS PUTE THAT THE ASSESSEE WAS THE OWNER OF 51 NOS OF FARM PLOTS. IT IS ALSO NOT IN DISPUTE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SURRENDE RED ALL THOSE 51 NOS. OF FARM PLOT FOR A CONSIDERATION OF RS. 2.04 CRORE S. THE ONLY POINT OF DISPUTE IS THAT ACCORDING TO THE ASSESSEE, THE IMPU GNED FARM PLOT WERE AGRICULTURAL LAND AND ACCORDING TO THE REVENUE AUTH ORITIES, THE SAME WERE NON AGRICULTURAL LAND, THUS, THE ISSUE RELATES TO T HE CHARGEABILITY OF CAPITAL ITA NO.7904/M/2010 5 GAIN TAX. IT IS A FACT THAT IN THE REMAND PROCEEDIN GS, THE AO HAS ACCEPTED THE IMPUGNED FARM LAND AS AGRICULTURAL LAND. HOWEV ER, WE FIND THAT THE LD. CIT(A) HAS SIMPLY RUBBISHED THE REMAND REPORT W ITHOUT ASSIGNING ANY REASON. WE ALSO FIND FORCE IN THE CONTENTION O F THE ASSESSEE THAT THE LD. CIT(A) HAS RELIED UPON CERTAIN DOCUMENTS WHICH DO NOT PERTAIN TO THE ASSESSEE FOR EXAMPLE 7/12 EXTRACTS. WE ALSO FI ND THAT THE REPORT OF THE INSPECTOR WAS NOT PROVIDED TO THE ASSESSEE THOUGH U SED AGAINST HIM THEREBY VIOLATING THE BASIC PRINCIPLES OF NATURAL J USTICE. THE AO HAS INVOKED THE PROVISIONS OF SEC. 50C OF THE ACT THOUG H THE FACTS ON RECORD SHOW THAT THERE WAS NO REGISTERED TRANSFER DEED EXE CUTED FOR THE SURRENDER OF SAID FARM PLOTS WHICH MEANS THAT NO ST AMP DUTY VALUE WAS ASSESSED .THE WORD ASSESSABLE HAS BEEN BROUGHT U NDER THE PROVISIONS OF SEC. 50C FROM 1.10.2009 THEREFORE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. WE ALSO FIND THAT THE ASSESSEE HAS SUBSTANTIATED HIS CLAIM BY VALUATION REPORT WHICH WAS FILED BEFORE THE AO A ND IF THE AO WAS NOT SATISFIED, THE MATTER SHOULD HAVE BEEN REFERRED TO THE DVO. CONSIDERING ALL THESE FACTS IN TOTALITY AND THE FACTS THAT THER E WAS A DENIAL OF NATURAL JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER COLLECTIN G NECESSARY INFORMATION FROM THE THEHSIL RECORDS RELATING TO THE NATURE OF THE FARM PLOTS. THE AO IS ALSO DIRECTED TO REFER THE MATTER RELATING TO TH E VALUATION TO THE DISTRICT VALUATION OFFICER AND AFTER RECEIVING THE REPORT, T HE AO IS DIRECTED TO PROVIDE THAT REPORT TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH ALL THE NECESSARY DOCUMENTS BEFORE THE AO TO SUBSTANTIA TE HIS CLAIM THAT THE IMPUGNED FARM PLOTS ARE AGRICULTURAL LAND. THE AO IS ALSO DIRECTED TO VERIFY THE APPLICABILITY OF THE PROVISIONS OF SEC. 50C OF THE ACT ON THE FACTS OF THE CASE AFTER GIVING REASONABLE AND SUFFI CIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1,2 & 3 AR E ALLOWED FOR STATISTICAL PURPOSE. ITA NO.7904/M/2010 6 10. GROUND NO. 4 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) ERRED IN PARTLY CONFIRMING THE ACTION OF THE AO IN DISALLOWI NG INTEREST ON BANK OVERDRAFT. 11. THE AO HAS DISCUSSED THIS ISSUE AT PARA-5 ON PA GE-2 OF HIS ORDER. THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN INTERES T INCOME OF RS. 62,10,229 AS INCOME FROM OTHER SOURCES AND AT THE S AME TIME THE ASSESSEE HAS CLAIMED INTEREST PAID AT RS. 39,89,607/-. THE AO SOUGHT CLARIFICATION FROM THE ASSESSEE IN RESPECT OF THIS CLAIM. THE AS SESSEE EXPLAINED THAT THE INTEREST PAID IS ON THE OVERDRAFT LOAN TAKEN AGAINS T HIS OWN FIXED DEPOSITS. THE AO REJECTED THIS SUBMISSION OF THE ASSESSEE. T HE AO WAS OF THE OPINION THAT THE ASSESSEE HAS PURCHASED FIXED DEPOS ITS FROM HIS OWN FUNDS AND THEREFORE THERE IS NO QUESTION OF ANY EXPENDITU RE AND WENT ON TO DISALLOW THE ENTIRE INTEREST CLAIMED AT RS. 39,89, 607/-. 12. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PARA-5 ON P AGE-12 OF HIS ORDER. THE ASSESSEE EXPLAINED TO THE LD. CIT(A) THE UTILIZ ATION OF OVERDRAFT FUND WHICH IS EXHIBITED AT PAGE-13 OF THE ORDER OF THE L D. CIT(A). AFTER CONSIDERING THE FACTS AND SUBMISSIONS MADE BY THE A SSESSEE, THE LD. CIT(A) WAS PARTLY CONVINCED WITH THE UTILIZATION OF THE OVERDRAFT FACILITY. HOWEVER, THE LD. CIT(A) OBSERVED THAT THE OTHER UT ILIZATION WAS MEANT FOR PERSONAL USE OF THE APPELLANT AND THEREFORE INT EREST TO THIS EXTENT CANNOT BE SAID TO HAVE BEEN INCURRED TO EARN INTERE ST. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.24,24,752/-. 13. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), TH E ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH AT INTEREST CLAIMED AS EXPENDITURE HAS DIRECT NEXUS WITH THE INTEREST EARN ED ON FIXED DEPOSITS. ITA NO.7904/M/2010 7 THE LD. COUNSEL FURTHER SUBMITTED THAT THE LOWER AU THORITIES HAVE COMPLETELY DISREGARDED THE EXPLANATION OF THE ASSES SEE. 14. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LD. CIT(A). 15. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND THE RELEVANT MATERIAL BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. WE HAVE ALSO PERUSED THE REMAND REPORT FILED BY THE AO DURING THE COURSE OF THE APPELLATE PROCEEDINGS. WE FIND THAT A DETAILED EXPLANATION WAS GIVEN BY THE ASSESSEE IN THE FORM OF TABULATION CHART WHI CH IS EXHIBITED AT PAGE- 478 AND 479 OF THE PAPER BOOK. IT APPEARS THAT THE AO HAS NOT CONSIDERED THESE DETAILS . THEREFORE IN THE INTEREST OF JUSTIC E AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AS EXPLAINED IN THE FORM OF A TABULAR CHART. THE ASSESSEE IS DIRECTED TO ONCE AGAIN FURNISH THIS TAB ULAR CHART BEFORE THE AO. THE AO IS DIRECTED TO VERIFY THE SAME AND DECIDE TH E ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. GROUND NO. 4 IS ALLOWED FOR STATISTICAL PURPOSE. 16. GROUND NO. 5 RELATES TO THE ADDITION MADE ON TH E BASIS OF AIR INFORMATION. A PERUSAL OF THE ORDER SHOW THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF UN-RECONCILED INTEREST INCOM E OF RS. 42,278/-. IN OUR HUMBLE OPINION, THIS ISSUE DESERVES TO BE DECID ED AFRESH BECAUSE THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF THIRD PART Y INFORMATION. THERE MAY BE EVERY POSSIBILITY THAT THE THIRD PARTY MAY H AVE UPLOADED INCORRECT FIGURES. THEREFORE, THIS ISSUE IS RESTORED BACK T O THE FILES OF THE AO. THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE UN-RECONCILED AMOUNT PERTAINS TO THE ERROR ON THE PART OF THE THI RD PARTY AFTER GIVING A ITA NO.7904/M/2010 8 REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17. GROUND NO. 6 HAS NOT BEEN PRESSED BEFORE US AND ACCORDINGLY IT IS DISMISSED AS NOT PRESSED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16.9.2013 . %5 0 4' $ 6 7%8 16.9.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K. BILLAIYA) /PRESIDENT $ %& / ACCOUNTANT MEMBER MUMBAI; 7% DATED 16.9.2013 . . ./ RJ , SR. PS %5 0 ,1 : '1 %5 0 ,1 : '1 %5 0 ,1 : '1 %5 0 ,1 : '1 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. <9 ,1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. %5 %5 %5 %5 / BY ORDER, - 1 ,1 //TRUE COPY// ? ?? ? / @ ) @ ) @ ) @ ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI