ITO 24(3)(4), MUMBAI V. ROOCHA V BIWALKAR, MUMBAI

ITA 4602/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJENDRA KUMAR
• Assessee Lawyers: VIPUL K MODY
• Keywords: Unexplained cash credit; Capital asset; Cost of acquisition
• Section: 54B; 2(14); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4602/MUM/2011 ASSESSMENT YEAR: 2007-08 ITO-24(3)(4), R. NO. 706 C-11, 7 TH FLOOR, B.K.C. BANDRA(E), MUMBAI-400051 VS. SMT. ROOCHA V. BIVALKAR, 2202-B WING, LAKSHECHANDI HEIGHTS, GOKULDHAM, GOREGAON(E), MUMBAI- 400063 PAN: AAIPB 3805 E (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAJENDRA KUMAR RESPONDENT BY : SHRI NITESH JOSHI & SHRI VIPUL K. MODY DATE OF HEARING : 29.04.2013 DATE OF PRONOUNCEMENT : 17.05.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A) -34, MUMBAI DATED 16.03.2011 FOR THE ASSE SSMENT YEAR 2007-08. 2. GROUND NO. 1 RELATES TO THE ADDITION OF RS.9,90, 675/- U/S 68 OF THE I.T. ACT BY THE AO AND THE SAME DELETED BY THE LD.CIT(A). 2.1. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL EN GAGED IN THE BUSINESS OF SHARE TRADING, WHILE SHOWING A CAPITAL BALANCE AS ON 31.0 3.2006 AT RS.27,42,066/- HAD FURTHER SHOWN AN OPENING BALANCE AT RS.28,17,141/- AS ON 01.04.2006. AS THE AO FOUND THERE WAS A DIFFERENCE IN THE OPENING BALANCE OF RS.75,075/- (28,17,141- 27,42,066) REQUESTED THE ASSESSEE TO FURNISH THE EX PLANATION IN RESPECT OF INCREASE IN THE OPENING CAPITAL ALONG WITH ITS SOURCE FOR WH ICH THE ASSESSEE SUBMITTED THE RECONCILED CAPITAL ACCOUNT AS FOLLOWS: I.T.A. NO. 4602/MUM/2011 SMT. ROOCHA V. BIVALKAR A.Y. 2007-08 2 OP. BAL AS ON 1.4.2006 CLOSING BAL. AS ON 31.3.2006 1.4.2006 TO PORTFOLIO INVESTMENT IN SHARES RS.13, 24,575/- OPENING AS ON 31.3.2007 12,18,532/- DIFFERENCE RS. 1,06,043 28,17,141 1,06,043 27,42,066 1.4.2006 TO BASIS COMMODITIES CL. BALANCE 31.3.2007 W/OFF 4,73,925 1.4.2006 TO BANK BALANCE DIFFERENCE 31.3.2006 RS.163,822 (OPENING) RS.1,18,668 (ATUAL) RS.45,154 1.4.2006 CREDIT DIFFERENCE RS.197 1.4.2006 INVESTMENT CAPITAL HDFC CORE SATELITE 2,0 0,000 1.4.2006 HDFC PREMIER MULTICAP 5,00,000 TOTAL 34,42,263 34,42,263 FROM THE ABOVE, THE AO FOUND THAT THE ASSESSEE HAS INCREASED HER OPENING CAPITAL FROM RS.27,42,066 TO 34,42,263/- THE DIFFERENCE AMO UNT BEING RS.7,00,197/. FURTHER, THE AO FOUND THAT THE ASSESSEE HAD INCREAS ED THE CAPITAL BY INCLUDING THE FOLLOWING AMOUNTS: A. BMC CO-OP. BANK DEPOSIT RECEIVED RS. 55,896/- B. POST OFFICE RD RS. 63,250/- C. POST MIS RECEIVED RS. 47,532/- D. KRISHNA VALLEY BOND REDEMPTION RS. 5,000/- E. POST MIS PRE-MATURED AMOUNT RS .1,18,800/- TOTAL RS.2,90,478/- AS THE ASSESSEE HAD NOT SUBMITTED ANY DOCUMENTARY E VIDENCE FOR BOTH THE SUMS RS.7,00,197/- AND RS.2,90478/- TOTALLY AMOUNTING TO RS.9,90,675/-, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS/INVESTMENTS U/S 68 OF THE ACT. 2.2 ON APPEAL, THE LD.CIT(A) DELETED THE IMPUGNED A DDITION AND THE RELEVANT FINDING IS EXTRACTED HEREUNDER: I HAVE GONE THROUGH THE CONTENTS OF IMPUGNED ASSES SMENT ORDER, GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS OF THE APPELLANT S AUTHORISED REPRESENTATIVE ALONG WITH THE CSE LAWS RELIED UPON BY HIM ON THIS ISSUE. I FIND FORCE IN THE ARGUMENTS AND SUBMISSIONS OF THE LD. AUTHORISED REPRESENTATIVE THAT NO ADDITION IS WARRANTED FOR OP ENING CAPITAL AS WELL AS PAST SAVINGS. IT IS NOT THE CASE OF THE ASSESSING O FFICER THAT THE AMOUNT OF RS.9,90,675/- HAS BEEN CREDITED IN THE BANK ACCOUNT DURING THE CURRENT YEAR. THE ASSESSING OFFICER HAS SIMPLY REJECTED THE EXPLA NATION THAT THE APPELLANT DOES NOT MAINTAIN THE BOOKS OF ACCOUNT FOR THE PAST FINANCIAL YEARS AFFAIRS. EVEN IF THIS EXPLANATION IS REJECTED, THERE IS NO A DVERSE MATERIAL ON RECORD TO SUGGEST THAT THE IMPUGNED INVESTMENTS ARE MADE AFRE SH DURING THE CURRENT YEAR. THEREFORE, IN MY CONSIDERED OPINION, NO ADDIT ION CAN BE MADE FOR THE DIFFERENCE IN THE CAPITAL ACCOUNT AS THE APPELLANT IS HAVING SUFFICIENT I.T.A. NO. 4602/MUM/2011 SMT. ROOCHA V. BIVALKAR A.Y. 2007-08 3 RESOURCES AS MENTIONED BY THE ASSESSING OFFICER IN PARA 5.2, 5.5 AND 5.6 OF THE IMPUGNED ASSESSMENT ORDER. ACCORDINGLY, THE IMP UGNED ADDITION IS DELETED IN THE FACTS AND CIRCUMSTANCES OF THE INSTA NT CASE. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE HAS RA ISED THIS GROUND IN THE APPEAL BEFORE US. 2.3 BEFORE US, THE LD. DR HAS STATED THAT THE ASSES SEE HAS FAILED TO PRODUCE ANY EVIDENCE BEFORE THE AO AS TO WHY SUCH DIFFERENCE IN CAPITAL SHOULD NOT BE CONSIDERED AS UNEXPLAINED CREDITS U/S 68 OF THE ACT AND FURTHER CONTENDED THAT THE LD.CIT(A) OUGHT NOT TO HAVE DELETED THE ADDITION MA DE BY THE AO IN SUCH A SITUATION. 2.4 ON THE OTHER HAND THE LD. AR HAS STATED THAT TH E ASSESSEE WAS NOT REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT IN THE EARLIER YEA RS. HOWEVER, THE BALANCE SHEET AND CAPITAL ACCOUNT BY HER TAX CONSULTANT IS BASED ON THE TRANSACTIONS ENTERED INTO HER CURRENT BANK ACCOUNT. HER INVESTMENTS MADE IN T HE PAST HAVE NOT PROPERLY BEING REFLECTED IN THE BALANCE SHEET. ALL THE PAST INVEST MENTS MADE BY HER WERE DULY INCORPORATED DURING THE F.Y. 31/3/2007. IT IS FURTH ER SUBMITTED THAT THE ASSESSEE HAS BEEN THE EMPLOYEE WITH BOMBAY MUNICIPAL CORPORATION IN THE PAST, OUT OF HER SALARIES, SHE HAS MADE INVESTMENTS IN RECURRING DEP OSIT, MONTHLY INCOME SCHEME AND HAD ALSO ACCOUNT WITH BMC CO-OP. BANK, WHICH HA S NOT BEEN OPERATED AS SUCH CURRENTLY. ALL THESE PAST INVESTMENTS HAVE BEEN OUT OF HER SALARIES EARNED FROM BMC. THE FACTS HAVE BEEN BROUGHT BEFORE THE AO VIDE LETT ER DATED 1/12/2009 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. FURTHER, FRO M THE SAID LETTER IT HAS ALSO BEEN SUBMITTED THAT HDFC CORE & SATELLITE FUND HAS BEEN PURCHASED ON 17/09/2004 AND HDFC MULTI CAP FUND INVESTMENT MADE ON 06/04/2005. HENCE, THE SAID INVESTMENTS ARE DULY EXPLAINED AND ARE OUT OF VALID SOURCE. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS GRO UND AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET, IT IS NOT DISPUTED THAT T HE IMPUGNED INVESTMENTS ARE NOT RELATED TO THE PREVIOUS YEAR TO THE ASSESSMENT YEAR UNDER CONSIDERATION. WHEN THE FACT BEING SO, WE ARE OF THE CONSIDERED OPINION THA T THE PROVISIONS OF SECTION 68 OF THE ACT IS NOT APPLICABLE TO THE SAID INVESTMENTS F OR THE YEAR UNDER CONSIDERATION AS THE PROVISION IS APPLICABLE ONLY WHEN THE SUM IS FO UND CREDITED IN THE BOOKS OF THE I.T.A. NO. 4602/MUM/2011 SMT. ROOCHA V. BIVALKAR A.Y. 2007-08 4 ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR. WE ALSO FIND MERIT IN THE CONTENTION OF THE LD.AR THAT THE ASSESSEE HAS N OT BEEN REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT IN THE EARLIER YEARS AS THE ONLY S OURCE OF INCOME IS OUT OF HER SALARY. IT IS ALSO FOUND THAT THE PAST INVESTMENTS MADE BY HER ARE DULY INCORPORATED DURING THE F.Y. 31/3/2007. IN VIEW OF THE MATTER, W E ARE OF THE OPINION THAT THE IMPUGNED ADDITION U/S 68 OF THE ACT IS NOT SUSTAINA BLE IN LAW AND IN FACTS. HENCE THIS GROUND OF APPEAL IS DISMISSED. 3. GROUND NO. 2 PERTAINS TO THE DISALLOWANCE OF RS. 5,00,000/- ARISING OUT OF AGRICULTURAL LAND AS SHORT TERM CAPITAL GAIN CHAR GEABLE TO TAX AS MADE BY THE AO AND THE SAME DELETED BY THE LD.CIT(A). 3.1 BRIEFLY STATED, THE ASSESSEE, DURING THE YEAR U NDER CONSIDERATION, HAD SOLD A LAND SITUATED AT VADAVALI VILLAGE, DIST RAIGAD FOR A SALE CONSIDERATION OF RS.6,50,000/- AND HAD NOT OFFERED THE SAME TO TAX SINCE THE SALE OF AGRICULTURAL LAND CANNOT BE BROUGHT TO TAX. HOWEVER, IN THE ASSESSMENT FRAMED U /S 143(3), THE AO AFTER DEDUCTING THE PURCHASE COST OF RS.1,50,000/- FROM T HE SALE CONSIDERATION OF RS.6,50,000/- TREATED THE IMPUGNED RECEIPT OF RS.5, 00,000/- AS SHORT TERM CAPITAL GAIN AND TAXED ACCORDINGLY FOR THE REASON THAT THE HOLDING PERIOD OF THE LAND BY THE ASSESSEE IS LESS THAN 2 YEARS AND HENCE THE PROVISI ONS OF SECTION 54B FOR CLAIMING THE EXEMPTION IS NOT FULFILLED. 3.2 ON APPEAL, THE LD.CIT(A) DELETED THE IMPUGNED A DDITION MADE BY THE AO AND THE RELEVANT FINDINGS ARE EXTRACTED HEREUNDER: I HAVE GONE THROUGH THE CONTENTS OF IMPUGNED ASSES SMENT ORDER GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS OF THE APPELLANTS A UTHORISED REPRESENTATIVE ALONG WITH THE CASE LAWS RELIED UPON BY HIM ON THIS ISSUE. I FIND FORCE IN THE ARGUMENTS AND SUBMISSIONS OF THE LD. AUTHORISED REP RESENTATIVE THAT THE IMPUGNED AGRICULTURAL LAND IS NOT COVERED BY THE DE FINITION OF CAPITAL ASSET U/S 2(14) OF THE I.T. ACT 1961 AS THE IMPUGNED LAND IS SITUATED WITHIN THE BOUNDARY OF SAJA KADVA GRAM PANCHAYAT HAVING A POPU LATION OF LESS THAN 1000. THE DETAILS OF IMPUGNED LAND ARE AS UNDER:- SURVEY/HISSA NO. AREA SIZE NAME OF VILLAGE 53/5 0-62-0 0.74 WADAVALI 53/10B 0-32-0 0.30 WADAVALI I.T.A. NO. 4602/MUM/2011 SMT. ROOCHA V. BIVALKAR A.Y. 2007-08 5 THE ASSESSING OFFICER HAS NOT BROUGHT ANY ADVERSE M ATERIAL ON RECORD TO SUGGEST THAT THE CONTENTION OF THE APPELLANT IS WRO NG AND THE IMPUGNED LAND IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2( 14) OF THE I.T. ACT, 1961. THEREFORE, I DO NOT FIND ANY JUSTIFICATION IN COMPU TING CAPITAL GAINS. ACCORDINGLY THE IMPUGNED ADDITION IS DELETED IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. AGGRIEVED BY THE IMPUGNED DECISION, REVENUE HAS RAI SED THIS GROUND IN THE APPEAL BEFORE US. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS GR OUND AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE SUBJECT MATTER OF TRANSFER IS AN AGRICULTURAL LAND. THE ONLY ISSUE RAISED BY THE REVENUE IS AS R EGARDS THE HOLDING PERIOD OF THE SAID LAND WHICH IS LESS THAN TWO YEARS PROHIBITS TH E ASSESSEE FROM CLAIMING THE EXEMPTION U/S 54B OF THE ACT. THE PERUSAL OF THE SA LE DEED AND THE EXTRACT 7 AND EXTRACT 12 TOGETHER WITH LAND CERTIFICATE ANNEXED T O THE SAID AGREEMENT REVEALS THAT THE SAID LAND IS IN RURAL AREA OF KARJAT AT VILLAGE VADAVALI, DIST. RAIGAD WITHIN THE JURISDICTION OF GRAM PANCHAYAT-KADIV, REGISTRATION DIVISION OF KARJAT. IT IS PERTINENT TO NOTE THAT THE INCOME CAN BE TAXED ON SALE OF AGRICU LTURAL LAND ONLY WHEN THE SAID LAND IS COVERED BY THE MEANING OF CAPITAL ASSETS UNDER SECTION 2(14) OF THE ACT. THE AGRICULTURAL LAND IN INDIA IS A CAPITAL ASSET PROVI DED IT IS NOT SITUATED IN ANY AREA WITH THE TERRITORIAL JURISDICTION OF A MUNICIPALITY OR A CANTONMENT BOARD HAVING A POPULATION OF 10,000 OR MORE; OR IN ANY NOTIFIED AR EA AS PER THE PROVISIONS OF SECTION 2(14)(III). HENCE, THE AGRICULTURAL LAND SOLD BY TH E ASSESSEE IS NOT A CAPITAL ASSET SINCE IT IS IN RURAL AREA WITHIN THE MEANING OF SEC TION 2(14)(III), THE IMPUGNED RECEIPT CANNOT BE BROUGHT TO TAX AS CAPITAL GAIN BY INVOKIN G SECTION 54B OF THE ACT. AS THE PROVISIONS OF SECTION 54B OF THE ACT ARE NOT APPLIC ABLE TO THE FACTS OF THE CASE, THE ISSUE OF HOLDING PERIOD OF THE LAND FOR LESS THAN 2 YEARS DOES NOT ARISE AT ALL IN THE INSTANT CASE. IN VIEW OF THAT MATTER WE DO NOT FIND ANY JUSTIFIABLE REASON TO SUSTAIN THE ADDITION MADE BY THE AO. ACCORDINGLY, THIS GROU ND IS DISMISSED. 4. AS MENTIONED EARLIER, IT IS NOT DISPUTED BY THE REVENUE AT ANY STAGE OF THE ASSESSMENT PROCEEDINGS THAT THE SUBJECT MATTER OF T RANSFER IS AGRICULTURAL LAND AND ALSO THE SALE DEED CLEARLY INDICATES THAT THE SALE PERTAINS TO AGRICULTURAL LAND. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN HOLDING I.T.A. NO. 4602/MUM/2011 SMT. ROOCHA V. BIVALKAR A.Y. 2007-08 6 THE IMMOVABLE PROPERTY AS AGRICULTURAL LAND. THUS W E DO NOT FIND ANY MERIT ON IN THE CONTENTION OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCHARGED HER ONUS OF PROVING THE SUBJECT MATTER OF SALE AS AGRICULTURAL LAND. TH US GROUND NO. 3 IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MAY, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.05.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.