SHWETA SUNIL KOCHHAR, MUMBAI V. ITO CIR 20(3)(3), MUMBAI

ITA 4482/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1591 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Gift; Cost of acquisition; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, MUMBAI. BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER I.T.A NO. 4482/MUM/2009 ASSESSMENT YEAR: 2005-06 SHWETA SUNIL KOCHHAR, V. THE ITO, CIRCLE 20(3)(3) , NEPTUENI BLDG., C-408, 4 TH CROSS LANE, MUMBAI. LOKHANDWALA COMPLEX, ANDHERI (W), MUMBAI PA NO.AHTPK 8545 J (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY : SHRI D.SONGATE O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 9.6.2009 OF LD CIT (A)-XXXII, MUMBAI FOR THE ASSESSMENT YEAR 2 005-06. 2. AT THE TIME OF HEARING, NONE APPEARED TO REPRESE NT THE CASE ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION HAS BEEN F ILED. I FIND THAT EARLIER THE CASE WAS FIXED FOR HEARING ON 5.5.2010 FOR WHICH, NOTICE SENT TO THE ASSESSEE BY REGD. POST HAD DULY BEEN RECEIVED AS PER ACKNOWLEDGEMENT PLACE D ON RECORD. SINCE ON THAT DATE, THE BENCH DID NOT FUNCTION, THE HEARING WAS ADJOURN ED TO 7.6.2010 AND THE PARTIES WERE INFORMED THROUGH NOTICE BOARD. THIS SHOWS THAT ON EARLIER DATE OF HEARING ALSO, NO ONE APPEARED FROM THE SIDE OF THE ASSESSEE BECAUSE OTHE RWISE THE ASSESSEE WOULD HAVE TAKEN NOTE OF THE NEXT DATE OF HEARING AND APPLIED FOR ADJOURNMENT. I, THEREFORE, PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERI AL AVAILABLE ON RECORD AND AFTER HEARING THE LD D.R. WHO PLACED RELIANCE ON THE ORDE RS OF THE AUTHORITIES BELOW. 3. THE FIRST DISPUTE IS REGARDING COMPUTATION OF LO NG TERM CAPITAL GAIN FROM SALE OF JEWELLERY. ITA NO.4482/M/2009 M/S. SHWETA SUNIL KOCHHAR 2 3.1 BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE HAD INHERITED THE JEWELLERY ON DEATH OF HER MOTHER-IN-LAW IN 2001. THE MOTHER-IN-LAW OF THE ASSESSEE, LATE SMT. SUSHILA KOCHHAR, HAD PURCHASED THE SAID JEWELLERY IN THE YE AR 1973 FOR A SUM OF RS.55,000/-. THE ASSESSEE AFTER INHERITING THE JEWELLERY IN 2001 , SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION FOR A SUM OF RS.4,10,080/-. SINCE TH E JEWELLERY HAD BEEN ACQUIRED BY THE PREVIOUS OWNER PRIOR TO 1.4.1981, THE ASSESSEE TOOK THE COST OF ACQUISITION AS MARKET VALUE AS ON 1.4.1981 WHICH WAS DETERMINED BY THE AP PROVED VALUER AT RS.70,146/-. THE ASSESSEE, THUS, COMPUTED THE INDEXED COST OF ACQUIS ITION AT RS.3,36,700/- AND LONG TERM CAPITAL GAIN FROM THE SALE OF JEWELLERY WAS DE CLARED AT RS.73,300/-. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE COMPUTATION AN D HELD THAT SINCE THE JEWELLERY HAD BEEN RECEIVED BY THE ASSESSEE AFTER THE DEATH OF HE R MOTHER-IN-LAW IN 2001, THE HOLDING PERIOD WAS COMPUTED FROM 1.4.2001 AND THE INDEXED C OST WAS THUS, DETERMINED AT RS.79,037/- ON THE BASIS OF COST OF ACQUISITION OF RS.70,146/-. THE AO, THUS, COMPUTED THE LONG TERM CAPITAL GAIN AT RS.3,30,962/-. THIS WAS DISPUTED BY THE ASSESSEE, WHO SUBMITTED BEFORE CTI (A) THAT THE HOLDING PERIOD H AD TO BE COMPUTED FROM 1.4.1981 AS THE PREVIOUS OWNER HAD ACQUIRED THE JEWELLERY PRIOR TO THAT DATE. RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF JANNAHAVI INVESTMENTS PVT LTD.[304 ITR 276 (BOM)] AND ON THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF MRS PUSHPA SOFAT, [89 TTJ 499] . THE CIT (A), HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED BY THE ASSESSEE AND O BSERVED THAT THE ASSESSEE HELD THE PROPERTY W.E.F. 2001 ON INHERITANCE BECAUSE OF THE DEATH OF HER MOTHER-IN-LAW, THE PREVIOUS OWNER AND, THEREFORE, THE ASSESSEE HELD TH E SAID PROPERTY FOR THE FIRST TIME IN 2001. HE, THEREFORE, AGREED WITH THE AO THAT FOR T HE PURPOSE OF INDEXATION, THE HOLDING PERIOD HAS TO BE RECKONED FROM 2001 AND NOT FROM 1. 4.1981. ACCORDINGLY, HE UPHELD THE DECISION OF THE AO. AGGRIEVED WITH SUCH DECISI ON, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.2. I HAVE HEARD THE LD D.R,. PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING COMPUTATION OF LONG TERM CAPITAL GAIN FROM SALE OF JEWELLERY. THERE IS NO DISPUTE THAT THE JEWELLERY HAD BEEN INHERITED BY THE ASSESSEE AFTER THE DEATH OF HER MOTHER-IN-LAW IN 2001. THER E IS ALSO NO DISPUTE THAT THE MOTHER- IN-LAW HAD ACQUIRED THE JEWELLERY IN THE YEAR 1973 I.E. PRIOR TO 1.4.1981. AS PER EXPLANATION 1(B) TO SECTION 2(42A), IN CASE THE AS SET HAS BEEN ACQUIRED BY WAY OF GIFT, ITA NO.4482/M/2009 M/S. SHWETA SUNIL KOCHHAR 3 WILL, INHERITANCE, ETC, THE PERIOD OF HOLDING OF TH E ASSET WILL ALSO INCLUDE THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER. SI NCE IN THIS CASE, THE PREVIOUS OWNER WAS HOLDING THE ASSET SINCE 1973, THE ASSESSEE IS D EEMED TO HAVE HELD THE ASSET FROM THE SAID DATE AND THE COST OF ACQUISITION HAS TO BE TAKEN AS MARKET VALUE OF THE ASSET AS ON 1.4.1981. IN FACT THE AO HAS ALSO TAKEN THE COST OF ACQUISITION AS MARKET VALUE AS ON 1.4.1981 BUT HE DENIED THE BENEFIT OF HOLDING PERIO D. IN MY VIEW, THE PERIOD OF HOLDING HAS BEEN RIGHTLY RECKONED BY THE ASSESSEE FROM THE DATE THE ASSET WAS HELD BY THE PREVIOUS OWNER AND THE INDEXED COST HAS BEEN RIGHTL Y COMPUTED BY THE ASSESSEE WITH RESPECT TO COST INDEX AS ON 1.4.1981 AND NOT FROM 2001 AS DONE BY THE AO. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE ITAT (SB) IN THE CASE OF CIT V. MANJULA J. SHAH (ITA NO.7315/M/2007). I, THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) AND ALLOW THE CLAIM OF THE ASSESSEE. 4. THE SECOND DISPUTE IS REGARDING ESTIMATED DISALL OWANCE OF EXPENSES OUT OF CONVEYANCE/SALES PROMOTION/STAFF CHARGES/TRAVELING EXPENSES. THE ASSESSEE HAD CLAIMED EXPENSES UNDER THESE HEADS AGGREGATING TO R S.82,074/-. THE AO NOTED THAT CERTAIN VOUCHERS PRODUCED BY THE ASSESSEE WERE NOT DULY SUPPORTED BY INDEPENDENT THIRD PARTY BILLS. THE AO, THEREFORE, MADE THE EST IMATED DISALLOWANCE @ 20% OF THE EXPENSES AMOUNTING TO RS.16,415/-. IN APPEAL, THE CIT (A) OBSERVED THAT THE ASSESSEE HAD NOT DENIED THE FACT THAT THE VOUCHERS WERE NOT FULLY SUPPORTED BY INDEPENDENT THIRD PARTY BILLS. HENCE, THE EXPENSES WERE NOT SUPPORTE D BY PROPER EVIDENCE. HOWEVER, THE CIT (A) RESTRICTED THE DISALLOWANCE TO RS.10,000/- AND THUS, GAVE A RELIED OF RS.6,415/-. AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.1 I HAVE HEARD THE LD D.R., PERUSED THE RECORDS A ND CONSIDERED THE MATERIALS CAREFULLY. THE DISPUTE IS REGARDING ESTIMATED DISA LLOWANCE OUT OF CONVEYANCE/SALES PROMOTION/STAFF CHARGES AND TRAVELING EXPENSES. TH E AO, ON EXAMINATION OF RECORDS HAS GIVEN A FINDING THAT CERTAIN VOUCHERS PRODUCED BY T HE ASSESSEE WERE NOT SUPPORTED BY INDEPENDENT THIRD PARTY BILLS AND THIS FINDING OF T HE AO WAS NOT CONTROVERTED BY THE ASSESSEE BEFORE THE CIT (A). IT IS A SETTLED LEGAL POSITION THAT THE BURDEN IS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENSES CLAIMED HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN THE A BSENCE OF PROPER EVIDENCE, IT CANNOT BE ASCERTAINED THAT THE EXPENSES WERE INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE ESTIMATED DISALLOWANCE OF EXPENSES IS, THEREFORE, JUSTIFIED. HOWEVER, IN ITA NO.4482/M/2009 M/S. SHWETA SUNIL KOCHHAR 4 MY VIEW, ON THE FACTS OF THE CASE, IT WOULD BE APPR OPRIATE IF THE DISALLOWANCE IS RESTRICTED TO 10% OF SUCH EXPENSES. THEREFORE, I C ONFIRM THE DISALLOWANCE TO THE TUNE OF RS.8,207/-. THIS GROUND IS THUS, PARTLY ALLOWED . 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2010 SD/- (RAJENDRA SINGH (ACCOUNTANT MEMBER) MUMBAI, DATED 7 TH JUNE, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, MUM BAI 4. COMMISSIONER OF INCOME TAX-20, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH SMC, MUMBA I //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.4482/M/2009 M/S. SHWETA SUNIL KOCHHAR 5 DATE INITIALS 1. DRAFT DICTATED ON 7.6.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 7.6.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.4482/M/2009 M/S. SHWETA SUNIL KOCHHAR 6