ITO WD 21(3)(1), MUMBAI V. AJIT L VERMA, MUMBAI

ITA 4670/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4388 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , ! ## , $ ! , % BEFORE HO NBLE S/SHRI G.S.PANNU, AM AND SANJAY GAR G, JM ./I.T.A. NO.4670/MUM/2011 ( $ & / ASSESSMENT YEAR :2007-08) INCOME TAX OFFICER - 21(3)(1), ROOM NO.503, 5 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. / VS. SHRI AJIT L VERMA, 1204, ODYSSEY II, HIRANANDANI GARDEN, POWAI, MUMBAI-400076. ( '( / APPELLANT) .. ( )*'( / RESPONDENT) !' ./ + ./PAN/GIR NO. :AACPV8221C '( , / APPELLANT BY SHRI RAKESH RANJAN )*'( - , /RSPONDENT BY SHRI K SHIVRAM - . / DATE OF HEARING : 08.01.2016 /0& - . /DATE OF PRONOUNCEMENT : 08.01.2016 1 1 1 1 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 24.3.2011 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-32 [(HEREINAFTER REFERRED TO AS THE CIT(A )], MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR : 2007-08. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE SUM OF RS. 2.16 CRORES RECEIVED BY THE ASSESSEE WITHOUT CONSIDERATION, IS LIABLE TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT UN DER THE HEAD INCOME FROM OTHERS SOURCES; ITA NO.4670/MUM/2011 2 (I) THE LD. CIT(A) IGNORED THE FACT THAT IN THE REMAND REPORT, THE AO HAD CLEARLY DISPUTED THE DOCUMENTS SUBMITTED BEF ORE THE APPELLATE AUTHORITY CLEARLY ASSERTING THAT THE DOCU MENTS ARE NOTHING BUT AN AFTER THOUGHT; (II) THE LD. CIT(A) IGNORED THE FACT THAT DURING THE AS SESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED COPY OF HE WILL EXECUTED BY HIS FATHER WHERE THERE WERE NO NOTINGS OF TWO SISTERS A ND MOTHER OF THE ASSESSEE ENDORSING THE PROPERTY IN FAVOUR OF TH E ASSESSEE. HOWEVER, THE COPY OF THE SAME WILL SUBMITTED BEFO RE THE LD. CIT(A) CONTAINED THE NOTHINGS OF THE TWO SISTERS AN D THE MOTHER WHICH CLEARLY SHOWS THAT THERE WAS AN INTENTION OF THE ASSESSEE TO DEFRAUD THE REVENUE; (III) THE LD. CIT(A) IGNORED THE FACT THAT IN THE PROPERT Y ORDINARILY SHOULD HAVE DEVOLVED UPON THE TWO SISTERS OF THE AS SESSEE WHICH WAS CLEAR FROM THE DOCUMENTS WHICH WERE AVAILABLE O N THE RECORD. (IV) THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD IN ANY CASE AN ENFORCEABLE RIGHT IN SPITE OF THE FACT THAT AT THE TIME OF ASSESSMENT PROCEEDINGS THERE WAS NOTHING ON RECORD TO SHOW THAT THE PROPERTY BELONGED TO THE ASSESSEE OR HE HAD ANY ENFORCEABLE RIGHT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U /S 54F IN RESPECT OF THE INVESTMENT OF RS.1,48,02,000/- THOUGHT THE ASSESSEE IS NOT THE RIGHTFUL OWNER OF THE PROPERTY HE HAS SOLD AND THE SALE PROCEEDS HAVE BEEN INVESTED IN THREE RESIDENTIAL UN ITS. 3. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTOR ED. 3. A PERUSAL OF THE ABOVE SAID GROUNDS REVEAL THAT THE REVENUE HAS TAKEN TWO EFFECTIVE ISSUES. THE ISSUE TAKEN VIDE G ROUND NO.1 IS AS TO WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE ON TRAN SFER OF BUNGALOW IS TO BE ASSESSED AS CAPITAL GAINS OR AS INCOME UNDER THE HEAD INCOME FROM OTHERS SOURCES. ITA NO.4670/MUM/2011 3 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E RECEIVED SALE CONSIDERATION OF RS.2.16 CRORES FROM M/S LAKE VI EW DEVELOPERS IN EXCHANGE OF THE BUNGALOW AS PER THE AGREEMENT DATE D 29.8.2005. AS PER THE SAID AGREEMENT, THE PLOT WITH BUNGALOW NAMED AS VERMA NIWAS WAS TRANSFERRED BY THE ASSESSEE TO THE DEVELOPER AN D IN EXCHANGE OF THE SAME, THE ASSESSEE RECEIVED A SUM OF RS.67,98,000/ - + THREE RESIDENTIAL FLATS VALUED AT RS.1,48,02,000/-. THE TOTAL CONSID ERATION THUS WAS RECEIVED OF RS.2.16 CRORES, WHICH WAS TREATED BY THE ASSESSE E AS LONG TERM CAPITAL GAINS (LTCG). THE ASSESSEES CLAIM WAS T HAT HE HAD BECOME THE OWNER OF THE SAID PROPERTY IN VIEW OF THE WILL OF HIS FATHER LATE SHRI L H VERMA AND LATE TARABEN L VERMA (MOTHER OF THE ASSE SSEE). THE FATHER OF THE ASSESSEE AS PER HIS WILL BEQUEATHED THE PR OPERTY IN FAVOUR OF HIS WIFE WITH THE STIPULATION THAT IF SHE (MOTHER OF T HE ASSESSEE) PRE-DECEASED SHRI L.H.VERMA (FATHER), BUNGALOW WOULD DEVOLVE UP ON THE ASSESSEE. HOWEVER, SHRI L H VERMA, PRE-DECEASED MOTHER OF THE ASSESSEE HENCE BUNGALOW DEVOLVED UPON THE MOTHER OF THE ASSESSEE. A WILL WAS ALSO MADE BY THE MOTHER OF THE ASSESSEE WHEREIN SHE HAD INTENDED THAT HER PROPERTIES WILL DEVOLVE UPON HER SON AND DAUGHTERS I.E. ASSESSEE AND HIS TWO SISTERS. HOWEVER, DURING HER LIFE TIME, SHE AND TWO SISTERS OF THE ASSESSEE IN VIEW OF THE LAST WISHES OF SHRI L.H. VE RMA, MADE NOTING ON THE COPY OF THE WILL OF THE FATHER RELINQUISHING THE IR ALL RIGHTS IN THE BUNGALOW IN FAVOUR OF THE ASSESSEE AND HENCE THE A SSESSEE BECAME ABSOLUTE OWNER OF THE PROPERTY. THEREAFTER, THE ASS ESSEE EXCHANGED THE ABOVE PROPERTY WITH THE DEVELOPER AS MENTIONED ABOV E. NOW, THE CONTENTION OF THE ASSESSING OFFICER (HEREINAFTER RE FERRED TO AS THE AO) WAS THAT THE ASSESSEE WAS ONLY OWNER TO THE EXTENT OF 4 7 PERCENT SHARE IN THE BUNGALOW. HOWEVER, THE ASSESSEE RECEIVED CONSIDERA TION FOR ENTIRE BUNGALOW, HENCE, THE CONSIDERATION, RECEIVED MORE T HAN HIS SHARE IN THE PROPERTY BY THE ASSESSEE, WAS NOT CAPITAL GAIN IN T HE HANDS OF THE ITA NO.4670/MUM/2011 4 ASSESSEE. HE ACCORDINGLY, ASSESSED THE REMAINING 5 3% OF THE CONSIDERATION RECEIVED BY THE ASSESSEE IN EXCHANGE OF BUNGALOW AS INCOME FROM OTHER SOURCES. 5. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE F URNISHED THE RELEVANT DOCUMENT AND EVIDENCES ALONG WITH THE COPY OF WIL L AND ORDER OF PROBATE OF THE HONBLE HIGH COURT AND OTHER EVIDENC ES. THE REMAND REPORT WAS CALLED UPON BY THE LD. CIT(A) IN THIS RESPECT. THE ASSESSEE ALSO MADE REQUEST TO THE AO THAT IF HE HAS ANY DOU BT ABOUT THE SIGNATURE OF THE SISTERS ON THE COPY OF THE WILL RELINQ UISHING THEIR RIGHT IN FAVOUR OF THE ASSESSEE, HE COULD GET THE SAME EXAMINED THR OUGH FORENSIC LABORATORY. THE ASSESSEE ALSO OFFERED THAT TO VE RIFY THE FACTS, THE AO SHOULD EXAMINE SISTERS OF THE ASSESSEE. HOWEVER, T HE AO WITHOUT MAKING VERIFICATION ETC. SIMPLY OPINED THAT THE SISTERS OF THE ASSESSEE HAD RELINQUISHED THE RIGHT ON LATTER DATE TO THE DATE O F EXCHANGE AGREEMENT. HE OBSERVED THAT IN THE DATE OF TRANSFER, THE ASSES SEE WAS NOT THE OWNER OF THE ENTIRE PROPERTY. HE, THEREFORE, TREATED THE INCOME EARNED BY THE ASSESSEE IN EXCHANGE OF BUNGALOW IN EXCESS OF HIS 4 7% SHARE, AS INCOME WITHOUT CONSIDERATION AND ASSESSED THE SAME AS INCO ME FROM OTHER SOURCES. 6. IN APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE EVIDENCES PRODUCED AND FILED BY THE ASSESSEE AND THE NATURE OF TRANSAC TIONS ENTERED INTO BY THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAD RECEIV ED INCOME IN LIEU OF TRANSFER OF BUNGALOW WHICH WAS A CAPITAL ASSET. HE OBSERVED THAT THE AO HAD NOT MADE PROPER APPRECIATION OF EVIDENCE FILED BY THE ASSESSEE. HE OBSERVED THAT CONJOINT READING OF THE WILL OF L H VERMA AND TARABEN L VERMA CLEARLY PROVES THAT THE ASSESSEE WAS ALWAYS H AVING INTEREST IN VARMA NIWAS. TWO SISTERS OF THE ASSESSEE AND THE MOTHER OF THE ITA NO.4670/MUM/2011 5 ASSESSEE HAD RELINQUISHED THEIR SHARE IN FAVOUR OF THE ASSESSEE AND THE ASSESSEE HAD RECEIVED CONSIDERATION IN LIEU OF EXCH ANGE OF HIS RIGHTS IN THE BUNGALOW AS PER EXCHANGE AGREEMENT DATED 29.8.2005. THEREFORE, HE HELD THAT THE INCOME EARNED BY THE ASSESSEE WAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RECORD AVAILABLE BEFORE US. THE UNDISPUTED FACT IS THAT TH E INCOME WAS RECEIVED BY THE ASSESSEE FOR TRANSFER OF BUNGALOW UNDER EXCH ANGE DEED DATED 29.8.2005. THE ASSESSEE WAS HAVING RIGHT AND INTER EST IN THE BUNGALOW, WHICH WAS TRANSFERRED. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAD RECEIVED THE INCOME WITHOUT CONSID ERATION. THERE IS AMPLE EVIDENCE ON THE FILE THAT ULTIMATELY THE PRO PERTY I.E. BUNGALOW IN QUESTION DEVOLVED UPON THE ASSESSEE WHICH WAS TRAN SFERRED BY THE ASSESSEE AND THE INCOME EARNED BY THE ASSESSEE THER E FROM IS TO BE ASSESSED AS CAPITAL GAINS. EVEN FOR THE SAKE OF AR GUMENTS IF WE PRESUME THAT THE ASSESSEE HAD SOLD THE PROPERTY IN WHICH H E HAD NO TITLE OR INTEREST BUT AFTER HAVING SOLD THE PROPERTY HE GOT RIGHT OR TITLE IN THE PROPERTY THEN ALSO HE IS ESTOPPED UNDER THE LAW FR OM SAYING THAT THE SALE AGREEMENT EARLIER ENTERED BY HIM CANNOT BE ACTED U PON OR THAT THE SALE DEED WAS INVALID. UNDER SUCH CIRCUMSTANCES, THE PR ESUMPTION UNDER THE LAW IS THAT THE ASSESSEE HAD SOLD HIS INTEREST IN T HE ENTIRE PROPERTY EVEN IF HE HAS ACQUIRED SUCH OWNERSHIP RIGHTS AFTER THE SAL E. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS ISSUE AND THE SAME IS UPHELD. 8. SO FAR AS THE SECOND ISSUE IS CONCERNED I.E. RE GARDING THE CLAIM OF DEDUCTION U/S 54F OF THE ACT, THE AO OBSERVED THA T THE ASSESSEE HAD PURCHASED THREE FLATS AND HENCE, AS PER THE PROVISI ONS OF SECTION 54F, THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION IN RESPECT OF ONE RESIDENTIAL UNIT ITA NO.4670/MUM/2011 6 ONLY. HOWEVER,THE LD. CIT(A) AFTER CONSIDERING TH E FACTS AND EVIDENCES ON THE FILED OBSERVED THAT ALL THE THREE FLATS WERE I NTERCONNECTED AND HAD ONLY ONE ENTRY, ONE KITCHEN THEY WERE USED BY THE A SSESSEE AS ONE UNIT. THE ELECTRICITY BILL WAS ALSO ONLY ONE, THOUGH THER E WERE THREE AGREEMENTS FOR PURCHASE OF THREE FLATS, HOWEVER, THE SAME WERE USED AS ONE UNIT. THE LD. CIT(A) AFTER PERUSING THE FLOOR PLAN AND OTHER RECORD HELD THAT IN FACT, THE ASSESSEE HAD PURCHASED ONLY ONE FLAT WHICH WAS CONVEYED TO THE ASSESSEE VIDE THREE SEPARATE AGREEMENTS FOR THE PU RPOSE OF CONVENIENCE OF THE BUILDER OR FOR ANY OTHER PURPOSES AS THE CAS E MAY BE . HE HELD THAT IT WAS A SINGLE DWELLING UNIT AND THE ASSESSEE THUS WAS ENTITLED TO CLAIM ALL THE BENEFITS ARISING OUT OF SECTION 54F OF THE ACT. IN VIEW OF THE DETAILED DISCUSSION MADE BY THE LD. CIT(A) AFTER PROPER APPR ECIATION OF THE EVIDENCE ON THE FILE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THERE IS NO MERIT IN THE APPEAL OF THE REVENUE HENCE THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 08 TH JAN, 2016 . /0& 2 3 4 08 TH JAN, 2016 0 - # 9 SD/- SD/- ( . . /G S PANNU) ( ## /SANJAY GARG) ! ! ! ! /ACCOUNTANT MEMBER $ $ $ $ ! ! ! ! /JUDICIAL MEMBER MUMBAI: JAN, 2016. . $ . ./ SRL , SR. PS 1 1 1 1 - -- - )$.:; )$.:; )$.:; )$.:; <;&. <;&. <;&. <;&. / COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. )*'( / THE RESPONDENT. ITA NO.4670/MUM/2011 7 3. =. ( ) / THE CIT(A)- CONCERNED 4. =. / CIT CONCERNED 5. ;># )$.$ , , / DR, ITAT, MUMBAI CONCERNED 6. #? @ / GUARD FILE. 1 / BY ORDER, A (ASSTT. REGISTRAR) , /ITAT, MUMBAI