ITO 26(2)(1), MUMBAI V. JAYASHREE DUSHYANT PATEL, MUMBAI

ITA 4274/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83908 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 21-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-05-2013
• Court: TRIBUNAL
• Department Lawyers: VIVEK A PERAMPURNA
• Assessee Lawyers: MAYUR R MAKODIA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Salary income; Tax effect
• Section: 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE S/ SHRI D.MANMOHAN ( VP ) & SANJAY ARORA (AM) I.T.A. NO. 4274 /MUM/ 20 13 (ASSESSMENT YEAR : 200 7 - 0 8 ) ITO 26(2)(1) ROOM NO. 608, 6 TH FLOOR SMT. KAMLADEVI MITTAL AYURVEDIC HOSPITAL BUILDING CHAR NI ROAD MUMBAI - 400002. VS. MS. JAYASHREE DUSHYANT PATEL B - 16, ROOP KAMAL S.V. ROAD KANDIVALI (WEST) MUMBAI - 400 067. PAN/GIR NO . AAAPP9873E ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI MAYUR R.MAKODIA DEPARTMENT BY : SHRI VIVEK A PERAMPURNA DAT E OF HEARING : 21 . 10 .2014 DATE OF PRONOUNCEMENT : 21 . 10 .2014 O R D E R PER D. MANMOHAN (VP) : - THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - 28, MUMBAI AND IT PERTAINS TO A.Y. 2007 - 08. FOLLOWING GROUNDS WER E URGED BEFORE US : - (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE DEVELOPMENT RIGHTS OF THE ASSESSEE ACQUIRED VIDE AGREEMENTS DATED 06/06/1992 AND 10/04/1993 WERE HELD AS STOCK - IN - TRADE AND NOT AS CA PITAL ASSETS FOR WHICH PROVISIONS OF SECTION 50C ARE NOT APPLICABLE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE, HOLDING 1/7 TH SHARE, WAS IN POSSESSION OF THE PROPERTY AS IS OWNER' (2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT( A) ERRED IN HOLDING THAT THE ASSESSEE SOLD THE RIGHTS AT COST AND NO INCOME HAS ARISEN FROM SUCH SALE WITHOUT APPRECIATING THAT THE AO WAS JUSTIFIED IN ASSIGNING NIL COST FOR THE ACQUISITION OF ASSET AS NO MS. JAYASHREE DUSHYANT PATEL 2 ASSET WAS SHOWN IN THE TRIAL BALANCE OF THE PRECED ING YEAR ENDING ON 31/03/2006, FILED BY THE ASSESSEE' (3) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE FACTS THAT THIS CASE IS A GROUP OF CASES HAVING IDENTICAL FACTS BEING PART OF THE SAME TRANSACTION AND THE FACT THAT APPEALS HAVE BE EN FILED BEFORE THE ITAT IN THOSE CASES I.E. (A) SHRI CHANDULAL PATEL AND (B) V CHAMPABEN C. PATEL VIDE APPEAL NO. 2892/MUM/2012 AND 5686/MUM/2012 RESPECTIVELY. THE APPEAL IN THIS CASE IS ALSO BEING PREFERRED IN THE INTEREST OF JUSTICE DESPITE THE FACT THA T TAX EFFECT IN THIS CASE, WHEN TAKEN INDIVIDUALLY IS LESS THAN RS. 3.00 LAKHS I.E. THE LIMIT PRESCRIBED BY THE INSTRUCTION NO. 3 OF 2011'. (4) THE APPELLANT PRAYS THAT THE ORDER OF THE ID. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORE D'. 2. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. A SSESSEE OFFERED SALARY INCOME , EARNED FROM M/S. SAGAR PREMISES PVT. LTD. AND ALSO INCOME FROM OTHER SOURCES . IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2007 - 08, ASSESSEE DECLA RED TOTAL INCOME OF RS. 1,11,960/ - . BASED ON THE AIR INFORMATION THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENT AND ACCORDINGLY ISSUED A NOTICE U/S. 148 OF THE ACT CALLING FOR EXPLANATION AS TO WHY THE ASSESSEE HAS NOT OFFERED ANY LONG TERM CAPITAL GAIN. 3. IT MAY BE NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE TRANSFERRED HER 1/7 TH SHARE IN DEVELOPMENT RIGHTS IN THE PROPERTY BEARING SURVEY NO. 68 AT TALUKA BORIVALI. THE SAID PROPERTY IS AN AGRICULTURAL LAND HAVING AGGREGATE AREA 4, 428.60 SQ. MTRS. O F WHICH ASSESSEES SHARE IS 632.65 SQ. METERS. THERE ARE THREE CO - OWNERS OF THE PROPERTY EACH HAVING 2/7 TH SHA R E I.E. MRS. CHAMPABEN C.PATEL, SHRI CHANDULAL P. PATEL AND SHRI ANIL PATEL. 4. IN SO FAR AS THE ASSESSEE IS CONCERNED, RIGHTS IN AGRICULTURAL PROPERTY WERE ACQUIRED FROM SHRI CHANDRAKANT GOVIND B H AGWE VIDE AGREEMENT DATED 12.4.1993 FOR A CONSIDERATION OF RS. 3,14,000/ - . EVEN AT THE TIME OF ACQUIRING SUCH RIGHTS PROPERTY WAS SUBJECT MATTER OF PROT RA CTED LITIGATION; PROPERTY WAS A LSO PLAGUED BY VARIOUS NEGATIVE FACTORS SUCH AS LACK OF APPROACH ROAD, MS. JAYASHREE DUSHYANT PATEL 3 OCCUPATION OF SLUM DWELLERS AND A TEMPLE, HIGH TENSION LINES OF ELECTRICITY DEPARTMENT PASSING THROUGH THE PROPERTY ETC . ON ACCOUNT OF PROTRACT ED LITIGATIONS THE T ITLE OF THE PROPERTY W AS NEVER PASSED TO THE ASSESSEE. THEREFORE THE PROPERTY COULD NOT BE DEVELOPED AS EXPECTED AND HENCE RIGHTS OVER THE PROPERTY WERE TRANSFERRED TO M/S. JAJODIA AND PATEL PROPERTIES WITH AN INTENTION TO COME OUT OF THE LITIGATI ON. ALL THE CO - OWNERS HAVE ENT ERED INTO AN AGREEMENT DATED 16.6.2006 WITH M/S. JAJODIA AND PATEL PROPERTIES. 5. ACCORDING TO THE ASSESSING OFFICER MARKET VALUE OF THE PROPERTY AS PE R STAMP VALUATION AUTHORITY WAS SHOWN AT RS. 4.99 CRORES WHEREAS, THE ASSESSEE CLAIMED TO HAVE RECEIVED CONSIDERATION OF ONLY RS. 3,14,000/ - . THE ASSESSEE EXPLAINED THAT SHE HAD ENTERED INTO ONLY A DEVELOPMENT AGREEMENT AND SINCE ASSESSEE IS NOT AN OWNER OF THE PROPERTY , SECTION 50C IS NOT APPLICABLE. IT WAS ALSO CONTENDED THAT SECTION 50C IS APPLICABLE ONL Y IN RESPECT OF TRANSFER OF CAPITAL ASSET WHEREAS , IN THE INSTANT CASE , PROPERTY WAS ACQUIRED BY THE ASSESSEE FOR DEVELOPMENT AND HAD ALL ALONG BEEN TREATED AS STOCK - IN - TRADE AND HENCE PROVISIONS OF SECTION 50C CANNOT BE PRESSED INTO SERVICE. 6. DESPI TE DETAIL ED SUBMISSIONS , THE ASSESSING OFFICER HAD TAKEN INTO CONSIDERATION THE VALUE OF THE PROPERTY AS PER STAMP VALUATION AUTHORITY , TO COMPUTE LONG TERM CAPITAL GAIN AND ACCORDINGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.13,14,210/ - . 7. IT M AY BE NOTICED THAT IN THE CASE OF SMT. CHAMPABEN C. PATEL AND SHRI CHANDULAL P. PATEL ALSO THE ASSESSING OFFICER PROCEEDED TO MAKE ADDITION ON SIMILAR LINES. IN THE CASE OF ANIL PATEL THE MATTER WAS NOT PICKED UP FOR SCRUTINY, AS PER ASSESSEES COUNSEL , AN D HENCE NO ADDITION WAS MADE IN HIS CASE. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT CONTRADICTED THE CLAIM OF THE ASSESSEES REPRESENTATIVE. 8. AGGRIEVED BY THE ADDITION MADE IN THE CASE OF THE ASSESSEE HEREIN , THE ASSESSEE CONTENDED THAT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE IN THE MS. JAYASHREE DUSHYANT PATEL 4 INSTANT CASE AND ALSO RELIED UPON THE ORDER S PASSED BY LEARNED CIT(A) IN THE CASE OF OTHER TWO CO - OWNERS. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE LEARNED CIT(A) SET ASIDE THE ADDITION MADE BY THE ASSESSING OFFI CER BY OBSERVING AS UNDER : - 8) FROM THE ABOVE DISCUSSION IT IS CLEAR THAT TITLE OF THIS PROPERTY IS NOT CLEAR AND REMAINS UNDER SERIOUS DISPUTE. FURTHER, THE PROPERTY REMAINS UNAUTHORIZED OCCUPATION OF SLUM DWELLERS. THE DEVELOPMENT P LAN OF THIS PROPERTY IS STILL NOT APPROVED. FURTHER IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AMOUNT GIVEN IN RESPECT OF ACQUISITION OF D EVELOPMENT RIGHTS IS B EING SHOWN ONLY AS ADVANCE. UNDER THESE CIRCUMSTANCES, THE CIT(A) - 18, MUMBAI HAD HELD THAT PROVIS IONS OF SECTION 50C OF THE ACT WERE NOT APPLICABLE AND THE TRANSACTION CANNOT BE TREATED AS CAPITAL GAINS. 9) IN VIEW OF THE ABOVE FACTS AND ORDER OF LD. CIT(A) - 18, IN THE CASE OF OTHER CO - OWNER NAMELY SHRI. CHANDULAL PATEL, DATED 06.02.2012, AND CIT (A) - 35, MUMBAI IN THE CASE OF CHAMPABEN C. PATEL, I HOLD THAT CAPITAL GAINS OF RS.12,02,250/ - ARE NOT LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. 1 FURTHER HOLD THAT PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT C ASE. ACCORDINGLY, THE ADDITION MADE BY THE A.O. IS DIRECTED TO BE DELETED AND THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 9. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE PLACED COPIES OF THE ORDERS PASSED BY ITAT C BENCH, MUMBAI IN THE CASE OF SMT. CHAM PABEN C. PATEL (ITA NO. 5686/MUM/2012 DATED 14.2.2014) AND SHRI CHANDULAL P. PATEL (ITA NO. 2892/MUM/2012 DATED 23.8.2013) TO SUBMIT THAT UNDER IDENTICAL CIRCUMS TANCES THE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO THE PROPERTY UNDER CONSIDERATION AND ACCORDINGLY AFFIRMED THE ORDERS PASSED BY THE LEARNED CIT(A) IN THOSE CASES. ASSESSEE BEING 1/7 TH OWNER OF THE SAID PROPERTY, CONSISTENT WITH THE VIEW TAKEN BY THE ITAT IN THE CASE OF OTHER CO - OWNERS, LEARNED COUNSEL PLEADED THAT IN THE INSTANT CASE ALSO SECTION 50C CANNOT BE MADE APPLICABLE; IN WHICH EVENT, ADDITION MADE BY MS. JAYASHREE DUSHYANT PATEL 5 THE ASSESSING OFFICER HAS NO LEGS TO STAND. HE THUS STRONGLY SUPPO RTED THE ORDER PASSED BY LEARNED CIT(A). 10. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENTATIVE MERELY RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER. IT IS NOT DISPUTED BY THE REVENUE THAT THE FACTS IN THE INSTANT CASE ARE IDENTICAL IN THE CA SE OF SMT. CHAMPABEN C. PATEL AND SHRI CHANDULAL P. PATEL (SUPRA). 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT IN CASE OF OTHER CO - OWNERS, WE ARE OF THE VIEW THAT THE ORDER PAS SED BY LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT. ORDER PRONOUNC ED ON 21 ST D AY OF OCTOBER , 2014 . SD/ - ( SANJAY ARORA ) ACCOUNTANT MEMBER SD/ - (D. MANMOHAN ) VICE PRESIDENT MUMBAI ; DATED : 21 / 10 /20 14 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS