M/s. Satnam Overseas Exports, New Delhi V. DCIT, New Delhi

ITA 4486/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3475 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Keywords: Capital asset; Additional evidence; Speculation loss; Revised return
• Section: 2(14); 139(5); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4486/DEL/2016 ASSESSMENT YEARS 2010-11 SATNAM OVERSEAS EXPORTS, 201, VIPPS CENTRE, 2- COMMUNITY COMPLEX, MASJID MOTH, GK-II, NEW DELHI. PAN: AACFS 5863 P VS. DCIT, CENTRAL CIRCLE- 28, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE(S) BY : MS. ANANYA KAPOOR & SHRI SANAT KAPOOR, ADV. REVENUE BY : MS. BEDOBANI CHAUDHURI, SR.D.R. / DATE OF HEARING : 18/04/2017 / DATE OF PRONOUNCEMENT: 19/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LEARNED CIT(A)- XIX, NEW DELHI, VIDE ORDER DATED 21.06.2016 FOR THE ASSESSMENT YEAR 2010- 11. 2. THE ASSESSEE HAS RAISED AS MANY AS ELEVEN GROUND S OF APPEAL. AS A MATTER OF FACT THE LEARNED COUNSEL FOR THE ASSESSEE , MS. ANANYA KAPOOR, ADV. PRESSED ONLY GROUND NOS. 3, 4 AND 5 WHICH PERT AINED TO ONE ISSUE ONLY AND THE SAID GROUNDS ARE REPRODUCED HEREINBELOW. 3. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS I N HOLDING THAT NO COGNIZANCE CAN BE TAKEN OF THE CLAIM MADE BY THE ASSESSEE THAT SALE OF PROPERTY BE TREATED AS CAPITAL GAIN AND INDEXATION BENEFIT SHOULD BE ALLOW ED TO THE ASSESSEE. THE ACTION OF THE CIT(A) IN REJECTING THE CLAIM IS ILLEGAL AND BAD IN LAW. 4. THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET AND HENCE DID NOT ACQ UIRE ANY RIGHTS OVER THE PROPERTY. 5. THE INTERPRETATION GIVEN BY THE CIT(A) IS ILLEGA L, BAD IN LAW, CONTRARY TO THE JUDGMENTS AND WELL SETTLED PRINCIPLES OF LAW. MOREO VER THE CIT(A) HAS FAILED TO EXAMINE THE MATERIAL ON RECORD IN A JUDICIOUS MANNE R. ITA NO.850/DEL/2015 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD TRANSFERRED THE ALLOTMENT RIGHT IN RESPECT OF FLAT ALLOTTED TO HIM. THE POSSESSION OF THE FLAT WAS NEVER TAKEN BY THE ASSESSEE. THE FLAT DID NOT C OME INTO EXISTENCE AND THE FULL COST OF THE FLAT WAS ALSO NOT PAID BY THE ASSE SSEE. IN VIEW OF THE ABOVE FACTS, THE BENEFIT OF INDEXATION WAS NOT GIVEN. MOR EOVER ALLOTMENT OF FLAT IS NOT COVERED IN THE DEFINITION OF CAPITAL ASSET. 4. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D ADDITIONAL EVIDENCES AND THE REMAND REPORT WAS CALLED FROM THE AO. LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO AFTER CONSIDERING TH E SUBMISSION OF THE ASSESSEE AND THE REMAND REPORT. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. AS A MATTER OF FACT THE ASSESSEE CLAIMED THE PROFIT AN D SALE OF ALLOTMENT RIGHT UNDER THE HEAD OTHER SOURCES AND DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS SAME HAS CLAIMED BY WAY OF COMPUTATION AS INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WHICH WAS REJECTED B Y BOTH THE AUTHORITIES BELOW. LEARNED COUNSEL, MISS ANANYA KAPOOR ARGUED T HAT THE CLAIM MADE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCE EDINGS IS WELL WITHIN THE LAW AND HELD BY HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. SAM GLOBAL SECURITIES LTD. IN ITA NO.214/2013 DATED 2.9.2013. THE SAID DECISION DATED 2 ND SEPTEMBER, 2013 OF HONBLE JURISDICTIONAL HIGH COU RT IS REPRODUCED HEREINBELOW: REVENUE IN THIS APPEAL, WHICH PERTAINS TO ASSESSME NT YEAR 2001- 02, RELY UPON JUDGMENT OF THE SUPREME COURT IN GOETZE (INDIA) LTD . VS. CIT, (2006) 284 ITR 323 (SC). THE CONTENTION IS THAT THE RESPONDENT-ASSESSE E SHOULD BE DENIED DEDUCTION UNDER SECTION 10 (35)(A) OF THE INCOME TAX ACT, 196 1(ACT) AND CLAIM OF BUSINESS LOSS OF RS.85,18,854/- SHOULD BE REJECTED AS NO REV ISED RETURN WAS FILED UNDER SECTION 139(5) OF THE ACT. ITA NO.850/DEL/2015 3 2. IT IS AN ACCEPTED POSITION THAT THE ASSESSEE HAD NOT CLAIMED THE SAID DEDUCTION OR BUSINESS LOSS IN THE RETURN OF INCOME FILED ON 31ST OCTOBER, 2001, DECLARING TAXABLE INCOME OF RS.1,72,910/-. SUBSEQUENTLY, NOTICE FOR S CRUTINY ASSESSMENT UNDER SECTION 143(2)(II) WAS ISSUED. DURING THE COURSE OF THE ASS ESSMENT PROCEEDINGS, THE RESPONDENT-ASSESSEE HAD FILED REVISED COMPUTATION O F INCOME VIDE LETTER DATED 12TH JANUARY, 2004, CLAIMING THAT DIVIDEND OF RS. 80,48, 977/- FROM THE UNITS OF MUTUAL FUND WAS EXEMPT UNDER SECTION 10(33) OF THE ACT AND LOSS ON SALE OF UNITS AMOUNTING TO RS.85,18,583/- WAS A BUSINESS LOSS AND NOT SPECULATIVE LOSS. 3. THE CLAIMS WERE REJECTED BY THE ASSESSING OFFICE R ON THREE GROUNDS THAT THE RESPONDENT-ASSESSEE HAD NOT FILED A REVISED RETURN WITHIN THE TIME ALLOWED UNDER SECTION 139(5) OF THE ACT; DIVIDEND WAS RECEIVED FR OM SUN F&C MUTUAL FUND, WHICH WAS NOT INCLUDED IN THE SPECIFIED LIST OF MUT UAL FUNDS APPROVED BY SEBI; AND AS THE ASSESSEE WAS DEALING WITH SHARES, INCOME/LOS S FROM SHARES/UNITS WAS SPECULATIVE LOSS AND NOT BUSINESS LOSS. 4. CIT (APPEALS) DISMISSED THE APPEAL OF THE ASSESS EE, BUT ON REMAND THE MATTER WAS RESTORED TO THE FIRST APPELLATE AUTHORITY. THER EUPON, VIDE ORDER DATED 16TH FEBRUARY, 2009, CIT (APPEALS) HELD THAT SUN F&C MUT UAL FUND WAS DULY APPROVED MUTUAL FUND UNDER SECTION 10(23D). HE OBSERVED THAT DIVIDEND FROM THE UNITS OF MUTUAL FUND WAS EXEMPT UNDER SECTION 10 (35)(A). SI MILARLY WITH REGARD TO THE LOSS, HE OBSERVED THAT UNITS OF MUTUAL FUNDS WERE SOLD AN D NOT SHARES, AND THEREFORE, THE ADVERSE EFFECT OF EXPLANATION TO SECTION 73 WAS NOT APPLICABLE. RELIANCE WAS PLACED UPON DECISION OF THE SUPREME COURT IN APOLLO TYRES LTD. VS. CIT, (2002) 255 ITR 283 (SC). INSPITE OF THE SAID OBSERVATIONS, THE CIT (APPEALS) DID NOT ALLOW THE APPEAL ON THE GROUND THAT THE ASSESSEE HAD NOT FILED A REVISED RETURN WITHIN THE TIME ALLOWED UNDER SECTION 139(5) OF THE ACT, BUT H AD ONLY FILED A REVISED COMPUTATION. 5. THE TRIBUNAL HAS REVERSED THE SAID FINDINGS AFTE R REFERRING TO THE FACTUAL MATRIX. REFERENCE WAS MADE TO THE DECISION OF THE SUPREME C OURT IN CIT VS. MR. P. FIRM, (1965) 56 ITR 67 (SC) AND CIRCULAR NO. 114 XL-35 OF 1955 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ON 11TH APRIL, 1955, THAT AN OFFICER MUST NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS. JUDG MENT OF THE SUPREME COURT IN GOETZE INDIA LTD. (SUPRA) WAS DISTINGUISHED ON THE GROUND THAT THE SAID CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DID NOT IMPINGE UPON THE POWER OF THE TRIBUNAL. THE MATTER WAS REMANDED TO THE ASS ESSING OFFICER TO CONSIDER THE CASE ON MERITS AND DECIDE ACCORDINGLY. 6. IN COMMISSIONER OF INCOME TAX VS. JAI PARABOLIC SPRINGS LTD., [2008] 306 ITR 42 (DELHI), A DIVISION BENCH OF THIS COURT MADE REF ERENCE TO THE FOLLOWING PASSAGE FROM NATIONAL THERMAL POWER CO. LTD. VS. CIT, [1998 ] 229 ITR 383(SC):- THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMEN T PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX L IABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. WE DO NOT SEE ANY REASON TO RE STRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUN DS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). BOTH THE ASSESSES AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPE AL/CROSSOBJECTIONS BEFORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOUL D BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. ITA NO.850/DEL/2015 4 7. REFERENCE WAS ALSO MADE TO AN EARLIER DECISION O F THE SUPREME COURT IN JUTE CORPORATION OF INDIA LTD. VS. CIT, [1991] 187 ITR 6 88 (SC), WHEREIN IT HAS BEEN HELD AS UNDER:- AN APPELLATE AUTHORITY HAS ALL THE POWERS WHICH TH E ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PR OVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON TO JUSTIFY CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND R AISED BY THE ASSESSED IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PAS SED BY THE INCOME TAX OFFICER. THIS COURT FURTHER OBSERVED THAT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL A ND EACH CASE HAS TO BE CONSIDERED ON ITS OWN FACTS. THE APPELLATE ASSISTAN T COMMISSIONER MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAISED EARLIER FOR GOOD REASONS. THE APPE LLATE ASSISTANT COMMISSIONER SHOULD EXERCISE HIS DISCRETION IN PERM ITTING OR NOT PERMITTING THE ASSESSED TO RAISE AN ADDITIONAL GROUND IN ACCOR DANCE WITH LAW AND REASON. THE SAME OBSERVATIONS WOULD APPLY TO APPEAL S BEFORE THE TRIBUNAL ALSO. 8. DECISION IN THE CASE OF GOETZE (INDIA) LTD. (SUP RA) WAS DISTINGUISHED IN JAI PARABOLIC SPRINGS LTD. (SUPRA) IN THE FOLLOWING WOR DS:- IN GOETZE (INDIA) LTD. VS. CIT [2006] 284 ITR 323 (SC) WHEREIN DEDUCTION CLAIMED BY WAY OF A LETTER BEFORE THE ASS ESSING OFFICER, WAS DISALLOWED ON THE GROUND THAT THERE WAS NO PROVISIO N UNDER THE ACT TO MAKE AMENDMENT IN THE RETURN WITHOUT FILING A REVIS ED RETURN. APPEAL TO THE SUPREME COURT, AS THE DECISION WAS UPHELD BY TH E TRIBUNAL AND THE HIGH COURT, WAS DISMISSED MAKING CLEAR THAT THE DEC ISION WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY TO ENTERTAIN C LAIM FOR DEDUCTION OTHERWISE THAN BY A REVISED RETURN, AND DID NOT IMP INGE ON THE POWER OF THE TRIBUNAL. 9. IN CIT VS. NATRAJ STATIONERY PRODUCTS (P) LTD., (2009) 312 ITR 222 RELIANCE PLACED ON GOETZE (INDIA) LTD. (SUPRA) BY THE REVENU E WAS REJECTED, AS THE ASSESSEE HAD NOT MADE ANY NEW CLAIM BUT HAD ASKED FOR RE-COMPUTATION OF DEDUCTION UNDER SECTION 80-IB. THE SAID DECISION MA Y NOT BE SQUARELY APPLICABLE BUT THE COURTS HAVE TAKEN A PRAGMATIC VIEW AND NOT THE TECHNICAL VIEW AS WHAT IS REQUIRED TO BE DETERMINED IS THE TAXABLE INCOME OF THE ASSESSEE IN ACCORDANCE WITH THE LAW. IN THIS SENSE, ASSESSMENT PROCEEDINGS ARE NOT ADVERSARIAL IN NATURE. 10. IN COMMISSIONER OF INCOME TAX VS. ROSE SERVICES APARTMENT INDIA P. LTD., [2010] 326 ITR 100 (DELHI) RELYING UPON THE DECISIO N OF THE SUPREME COURT IN NATIONAL THERMAL POWER CO. LTD.(SUPRA ), A DIVISION BENCH OF THIS COURT REJECTED THE PLEA OF THE REVENUE THAT THE TRIBUNAL COULD NOT HAVE ENTERTAINED THE PLEA, HOLDING THAT THE TRIBUNAL WAS EMPOWERED TO DEAL WIT H THE ISSUE AND WAS ENTITLED TO DETERMINE THE CLAIM OF LOSS, IF AT ALL, UNDER ONE S ECTION/PROVISION OR THE OTHER. 11. DECISION IN GOETZE (INDIA) LTD. (SUPRA) WAS AGA IN RELIED UPON BY THE REVENUE IN CIT VS. JINDAL SAW PIPES LTD., [2010] 328 ITR 33 8 (DELHI) BUT THE CONTENTION ITA NO.850/DEL/2015 5 WAS NOT ACCEPTED, OBSERVING THAT THE TRIBUNAL S JURISDICTION IS COMPREHENSIVE AND ASSIMILATES ISSUES IN THE APPEAL FROM THE ORDER OF THE CIT (APPEALS) AND THE TRIBUNAL HAS THE DISCRETION TO ALLOW A NEW GROUND T O BE RAISED. 12. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE NOT INCLINED TO INTERFERE WITH ORDER PASSED BY THE TRIBUNAL. THE APPEAL IS DISMISSED. 5.1 IN VIEW OF THE FACTS AND DECISION OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF SAM GLOBAL SECURITIES LTD. (SUPRA), THE CLAIM MADE DURING THE ASSESSMENT PROCEEDINGS IS HELD TO BE VALID AND I FI ND NO DEFECT IN THE SAME. 6. AS REGARDS THE CLAIM MADE FOR SELLING OF THE RIG HT, THE QUESTION ARISES WHETHER THE RIGHT TO RECEIVE IN THE FLAT IS A PROPE RTY WHICH COMES IN THE AMBIT OF CAPITAL ASSET OR NOT HAS BEEN SCRUTINIZED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DATA SERVICES LTD. REP ORTED IN 122 ITR 594 (BOM.). THE COPY OF THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE SAID CASE IS PLACED AT PAPER BOOK PAGES 8 TO 13 AND THE RELEVANT PARAGRAPH READ BY THE LEARNED COUNSEL IS REPRODUCED HEREINBEL OW: WHAT IS CAPITAL ASSET IS DEFINED IN SECTION 2(14) OF THE INCOME TAX ACT, 1961. UNDER THAT PROVISION, A CAPITAL ASSET MEANS PROPERT Y OF ANY KIND HELD BY ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION. THE SUB-CLAUSES WHICH DEAL WITH WHAT PROPERTY IS NOT INCLUDED IN THE DEFI NITION OF CAPITAL ASSET ARE NOT RELEVANT. UNDER SECTION 2(47), A TRANSFER IN RELATI ON TO A CAPITAL ASSET IS DEFINED AS INCLUDING THE SALE, EXCHANGE OR RELINQUISHMENT OF T HE ASSET OR THE EXTINGUISHMENT OF ANY RIGHT THEREIN OR THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW. THE WORD PROPERTY USED IN SECTION 2(14) OF THE INCOME TAX ACT, IS A WORD OF THE WIDEST AMPLITUDE AND THE DEFINITION HAS RE-EMPHASIS ED THIS BY USE OF THE WORDS OF ANY KIND. THUS, ANY RIGHT WHICH CAN BE CALLED PROPERTY WILL BE INCLUDED IN THE DEFINITION OF CAPITAL ASSET. A CONTRACT FOR S ALE OF LAND IS CAPABLE OF SPECIFIC PERFORMANCE WILL BE INCLUDED IN THE DEFINITION OF CAPITAL ASSET. A CONTRACT FOR SALE OF LAND IS CAPABLE OF SPECIFIC PERFORMANCE. IT IS ALSO ASSIGNABLE (SEE HOCHAT KIZHAKKE MADATHIL VENKATESWARA AIYAR VS . KALLOR ILLATH RAHMAN NAMBUDHRI. AIR 1917 MAD 358). THEREFORE, IN OUR VIE W, A RIGHT TO OBTAIN CONVEYANCE OF IMMOVABLE PROPERTY, WAS CLEARLY PROP ERTY AS CONTEMPLATED BY SECTION 2(14) OF THE INCOME TAX ACT, 1961 7. THE SAID DECISION HAS BEEN FOLLOWED BY HONBLE M UMBAI BENCH OF TRIBUNAL IN THE CASE OF ACIT VS. HANSABEN M. MEHTA REPORTED IN (2004) 90 ITD 44 (MUM). IN VIEW OF THE FACTS IN THE PRESENT C ASE AND THE DECISION ITA NO.850/DEL/2015 6 RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE MORE THAN 90% OF THE PAYMENTS MADE FOR THE SAID PROPERTY WILL TANTAMOUNT TO A RIGHT WHICH IS TRANSFERRABLE AND WILL BE TERMED AS A CAPITAL ASSET . THE TOTAL PAYMENT HAVING BEEN MADE FOR RS.89,50,000/- WHEREAS ON TRANSFER TH E ASSESSEE RECEIVED RS.1,19,32,000/- FETCHING ABOUT 30 LAKHS PROFIT WHI CH HAS BEEN OFFERED UNDER THE HEAD CAPITAL GAINS. THE FINDINGS OF THE LEARN ED CIT(A) CANNOT BE APPROVED IN VIEW OF MY FINDINGS HEREINABOVE, AND TH EREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, GROUND NO.3, 4 AND 5 OF THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 19 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 19/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSTT. REGISTRAR, ITAT, NEW DELHI