VIRMATI H. DALAL ( DECEASED) BY L/H GITA, MUMBAI V. ITO WD 24(2)(4)), MUMBAI

ITA 4863/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84632 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FROZE ANDHYARUJINA; AKH
• Keywords: Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 4863/MUM/2011 ( / ASSESSMENT YEAR: 2006-07 ) MS. VIRMATI H DALAL (DECEASED) BY LH GITA CHOKSI, DEVE RATAN, 1 ST FLOOR, AMERSI ROAD, MALAD (WEST), MUMBAI -400 064 PAN: AIWPD 3023 G VS INCOME TAX OFFICER-WARD 24(2)(4), BANDRA KURLA COMPLEX, C-13, 8 TH FLOOR, BANDRA (EAST), MUMBAI -400 051 (APPELLANT) (RESPONDENT) APPELLANT BY : !' # SHRI FROZE ANDHYARUJINA RESPONDENT BY : $% & ' () SHRI AKHILENDRA YADAV /DATE OF HEARING : 23-12-2014 /DATE OF PRONOUNCEMENT : 23-12-2014 ORDER , , , , PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 34, MUMBAI, DATED 29.03.2011, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT APPEAL ERRED IN CONFIRMING THE ORDER OF THE LEA RNED ITO ON THE GROUND THAT BY EXECUTING POWER OF ATTORNEY I N FAVOUR OF MR. LAXMAN PAGARE TO RETAIN 40% OF SALE PROCEEDS CANNOT BE SAID TO AN EXPENDITURE INCURRED WHOLLY AN D EXCLUSIVELY IN CONNECTION WITH THE IMPUGNED TRANSF ER. IN SPITE OF THE FACT THAT IT IS A CHARGE ON PROPERTY F OR OBTAINING THE MARKETABLE TITLE TO SALE OF PROPERTY. 2. THE APPELLANT SUBMITS THAT THE PAYMENT TO SHRI L AXMAN PAGARE BE TREATED AS EXPENDITURE INCURRED WHOLLY AN D EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND OT HERWISE AS THE COST OF ACQUISITION OF THE ASSET TO CLAIM I. E. MARKETABLE TITLE FOR THE SALE OF LAND AS THE PAYMEN T IS FOR SERVICES RENDERED BY HIM ARE TO OBTAIN THE MARKETAB LE TITLE FOR TRANSFER OF PROPERTY. 3. THE APPELLANT ALSO SUBMITS THAT IT IS A CASE WHE RE THE PROPERTY WAS UNSALEABLE DUE TO ENCROACHMENT OF OTHE R PERSONS AND THERE WAS NO MARKETABLE TITLE TO THE PR OPERTY. LH GITA CHOKSI LATE MS. VIRMATI H DALAL (DECEASED) ITA 4863/M/2011 2 4. THE APPELLANT ALSO SUBMITS THAT CONSIDERATION RE CEIVED BY THE APPELLANT BE TREATED AS CAPITAL GAIN AND THE RE IS CHARGE ON THE PROPERTY BY MR. LAXMAN PAGARE BEFORE THE CONSIDERATION IS RECEIVED FROM THE SALE OF PROPERTY AND ONLY ACTUAL INCOME RECEIVED BE TAXED AS CAPITAL GAIN. 5. THE APPELLANT THEREFORE SUBMITS THAT ONLY30% SAL E CONSIDERATION BE TREATED AS INCOME AND NOT 50% AS W ORKED OUT BY THE LEARNED ITO. 2. THE AR, AT THE TIME OF HEARING SUBMITTED THAT GROUNDS NO. 4 & 5 ARE ONLY EFFECTIVE GROUNDS AND, HE, THEREFORE, DELVED O N THE TWO GROUNDS ONLY AS GROUNDS NO. 1, 2 & 3 WERE GENERAL AND ARGUMENTATIVE. 3. THE FACTS ARE THAT THE ASSESSEE IS A WIDOW OF MR. HARKISHANDAS DALAL, WHO ACQUIRED LARGE PARCELS OF LAND IN KAL YAN IN 1940/1950S, WHICH WERE PUT ON SMALL RENTALS. IN THE PA SSING YEARS, BESIDES AUTHORIZED TENANTS, THE LANDS WERE ENCRO ACHED BY NEARBY RESIDENTS. MR. HARKISHANDAS DALAL ASSISTED BY MR. L AXMAN A PAGARE (LP) INSTITUTED LEGAL PROCEEDINGS ON ENCROACHER S AND SOME OF THE TENANTS WHO WERE NOT PAYING RENT ON REGULA R BASIS, FOR THEIR EVICTION AND / OR COMPROMISE. 4. IN 1992, MR. HARKISHANDAS DALAL EXPIRED LEAVING BEHIND HIS NATURAL LEGAL HEIRS, I.E. HIS WIFE MRS. VIRMATI H DALAL AND HIS DAUGHTER MS. GEETA CHOKSI. BEING THE TWO LADIES, LIVING IN MUMBAI, COULD NOT ATTEND TO OR GIVE TIME TO THE ISSUES A ND LEGAL PROCEEDINGS INITIATED BY THE LATE MR. HARKISHANDAS DALAL, D ECIDED TO GIVE IRRECOVERABLE POWER OF ATTORNEY (POA) IN FAVOUR OF M R. LP TO LOOK AFTER THE INTERESTS OF THE TWO LADIES IN THE SUITS AN D OTHER NEGOTIATIONS WITH TENANTS AND ENCROACHERS. AS AN INCENT IVE IT WAS AGREED BETWEEN THE TWO LADIES AND MR. LP THAT IN CASE O F SALE OF LAND FROM PARCELS HELD BY THE FAMILY 60% OF THE PROCEEDS S HALL BE PAID TO THE TWO LADIES AND 40% SHALL BE RETAINED BY MR. LA XMAN A PAGARE. 5. CONSEQUENT TO THIS AGREEMENT OF POA TWO PLOTS WERE SOLD, ONE FOR RS. 28,22,000/- OF WHICH RS. 16,93,200/- CAME TO THE LH GITA CHOKSI LATE MS. VIRMATI H DALAL (DECEASED) ITA 4863/M/2011 3 LADIES AND RS. 11,28,800/- WAS RETAINED BY MR. LP. THE OTHE R PLOT WAS SOLD FOR RS. 2,46,900/-, OF WHICH RS. 1,48,140/- CAME TO T HE TWO LADIES AND RS. 98,760/- WAS RETAINED BY MR. LP. 6. THE ASSESSEE FILED HER RETURN DECLARING CAPITAL GAINS OF 50% OF THE PROCEEDS THAT CAME TO HER I.E. 60% OF TOTAL VALUE A ND THE OTHER 50% WAS SHOWN BY THE DAUGHTER. THE ASSESSEE, TH EREFORE, DECLARED CAPITAL GAINS OF RS. 9,20,670/- AND INVESTED THE S AME IN BONDS AS PER SECTION 54EC (AS PER THE AR, THE ASSESSEE INVESTED A HIGHER AMOUNT IN BONDS). 7. IN THE ASSESSMENT PROCEEDINGS, THE AO CALLED FOR ALL T HE DETAILS, WHICH WERE PROVIDED FOR BY THE ASSESSEE AND CLAIME D THAT THE CAPITAL GAINS WERE RIGHTLY COMPUTED BY THE ASSESSEE. 8. THE AO, AFTER CONSIDERING THE EXPLANATION OF THE ASSES SEE CAME TO THE VIEW THAT THE CAPITAL GAIN HAD TO BE COMPUT ED ON THE GROSS FIGURES OF RS. 28,22,000/- AND RS. 2,46,900/- OF WHICH T HE TWO LEGAL HEIRS SHARES WOULD BE COMPUTED AT 50% EACH. 9. AGAINST THIS ORDER OF THE AO, THE ASSESSEE APPROACHED THE CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS AND INCORPORA TING THE FACTS AND DETAILS IN HIS ORDERS, SUSTAINED THE VIEW O F THE AO, THAT THE CAPITAL GAINS HAD TO BE COMPUTED ON GROSS FIGUR ES AND NOT ON THE FIGURES/SALE PROCEEDS ACTUALLY RECEIVED BY THE AS SESSEE. 10. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS NOW BEFORE THE ITAT. 11. IN THE INTEGRAM, THE ASSESSEE MRS. VIRMATI H DALAL ALSO EXPIRED, LEAVING THE ONLY LEGAL HEIR, MS GEETA CHOKSI, WHO IS NOW PURSUING THE APPEAL. 12. AT THE TIME OF HEARING BEFORE US, THE AR REITERATED TH E ENTIRE SEQUENCE OF EVENTS AND SUBMITTED THAT THE COURSE ADOP TED BY THE LH GITA CHOKSI LATE MS. VIRMATI H DALAL (DECEASED) ITA 4863/M/2011 4 REVENUE AUTHORITIES WAS AGAINST TENETS OF LAW AND THAT T HE ASSESSEE COULD ONLY BE CHARGED TO TAX, ON THE INCOME THAT HAS ACCRUED TO HER. 13. THE AR SUBMITTED THAT BY VIRTUE OF THE POA, LP RECEIV ED 40% OF THE SALE PROCEEDS AND THE REMAINING 60% WAS DIVIDE D AT 30% EACH BY THE TWO LADIES. THIS FACT REMAINS UNCONTROVERTED. 14. THE AR, THEREFORE, SUBMITTED THAT UNDER NO CIRCUMSTA NCES THE ASSESSEE COULD HAVE BEEN SADDLED WITH THE INCOME, W HICH NEVER ACCRUED OR RECEIVED BY HER. THE AR, THEREFORE, PLEA DED THAT THE ADDITION, THUS MADE BE DELETED. 15. ON THE OTHER HAND THE DR VEHEMENTLY SUPPORTED TH E ORDERS OF THE REVENUE AUTHORITIES AND PLEADED THAT THERE IS NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES. 16. WE HAVE HEARD THE ARGUMENTS AND HAVE PURSUED TH E ORDERS OF THE REVENUE AUTHORITIES AND THE PAPERS AND CASE LAWS RELIED UPON BY THE AR. ONE BASIC FACT THAT HAS BEEN COMPLETELY IGNORED BY THE REVENUE AUTHORITIES, WHILE FRAMING THE ASSESSMENT O F THE ASSESSEE WAS TO ASCERTAIN THE STATUS OF THE RETURN AN D ASSESSMENTS IN THE CASE OF MR. GEETA CHOKSI AND MR. LP. 17. WE FIND THAT THE ADDRESS OF LP HAS BEEN MENTIONED B Y THE CIT(A) IN HIS ORDER AND WHICH WAS ALSO SUPPLIED TO THE AO, B UT THE REVENUE AUTHORITIES IGNORED TO ASCERTAIN HIS ASSESSMENT STATUS. WE CANNOT ACCEPT THE SUBMISSIONS OF THE DR THAT THE CA SE BE RESTORED TO THE AO TO FIND OUT THE DETAILS OF ASSESSMENT IN THE CASE OF MR. LP AND/OR MS. GEETA CHOKSI. ACCORDING TO US, THE RE VENUE AUTHORITIES MISSED THE BUS LONG BACK. 18. WE ALSO FIND FROM THE APB, THE ASSESSMENT STATUS OF M S. GEETA CHOKSI, RECIPIENT OF THE OTHER 50% OF 60%, WHOSE RE TURN OF INCOME WAS ACCEPTED BY THE AO AND IN THE SUBSEQUENT Y EAR, ON LH GITA CHOKSI LATE MS. VIRMATI H DALAL (DECEASED) ITA 4863/M/2011 5 THE SAME FACTS, ASSESSMENT WAS FRAMED U/S 143(3) ACCEPTIN G THE RETURNED INCOME. 19. UNDER THESE FACTUAL CIRCUMSTANCES, WE ARE OF THE OPIN ION THAT THE REVENUE AUTHORITIES ERRED IN ADDING BACK REMAIN ING 20% TO EQUATE THE FIGURE OF 50% OF GROSS SALE PROCEEDS. NOT ONLY, THIS WAS FACTUALLY INCORRECT, BECAUSE, THE QUANTUM HAD BEEN T HE RESULT OF A LEGAL DOCUMENT EXECUTED BETWEEN THE LADIES AND LP A ND MORE THEN THAT THE OTHER PARTIES DECLARED THEIR SHARE, WHICH WAS ACCEPTED BY THE DEPARTMENT. 20. WE CANNOT ACCEPT THE ARGUMENT OF THE DR FOR RESTO RATION OF THE CASE TO THE FILE OF THE AO, BECAUSE, THE REVENUE AUTH ORITIES HAVE ACCEPTED THE RETURN OF OTHER CO-OWNER, DESPITE TH E FACT THAT THEY WERE UNDER FULL AND COMPLETE KNOWLEDGE OF THE SEQUE NCE OF EVENTS. 21. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE AO TO DELETE THE ADDITION, AS MADE BY HIM AND COMPUTE T HE LTCG AS DECLARED BY THE ASSESSEE. 22. SINCE GROUNDS NO. 4 AND 5 ARE LINKED TO EACH OTHER, BOTH THE GROUNDS ARE TREATED AS ALLOWED. 23. IN THE RESULT, THE APPEAL AS FIELD BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2014. SD/- SD/- ( ) ( ) (N.K. BILLAIYA) ( VIVEK VARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 23 RD DECEMBER, 2014 ,/ COPY TO:- LH GITA CHOKSI LATE MS. VIRMATI H DALAL (DECEASED) ITA 4863/M/2011 6 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A)-34, MUMBAI. 4) THE CIT- 24, MUMBAI. 5) .)/0 ,# , , / THE D.R. F BENCH, MUMBAI. 6) 012 COPY TO GUARD FILE. (&3#4 / BY ORDER / / TRUE COPY / / 5 / 46 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS