LATE BHAGWANDAS A NICHLANI, MUMBAI V. INCOME TAX OFFICER-17(1)(2), MUMBAI

ITA 4933/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6244 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Keywords: Opportunity of being heard; Cost of acquisition; Set aside; Capital Gains
• Section: 207; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE S HRI S. RIFAUR RAHMAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 4933/MUM/2017 ASSESSMENT Y EAR: 2012 - 2013 PREM NICHLANI ON BEHALF OF LATE BHAGWANDAS A. NICHLANI, 1302/1303, DALAMAL TOW ER, 211, NARIMAN POINT, MUMBAI - 400021 PAN: AAEPN2256R VS. THE ITO 17 (1) (2), FIRST FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VINAY SINHA ( AR ) REVENUE BY : MS. KAVITA P. KAUSHIK ( D R ) DATE OF HEARING: 11 /11 /201 9 DATE OF PRONOUNCEMENT: 17 / 01 /20 20 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 02.05.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT(A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX A CT, 1961 (FOR SHORT THE ACT). 2. BR IEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF ADVANCING LOAN TO PRIVATE PARTIES AND HAVING INCOME FROM CAPITAL GAIN AND OTHER SOURCES, FILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME AT RS. 16,84,030/ - . THE CASE WAS SELECTED FOR SCRUTINY. IN RESPONSE TO THE NOTICE U/S 143 (2) AND 142 (1) OF THE ACT, THE AUTHORIZED REPRESENTATIVE (AR) APPEARED BEFORE THE AO AND FILED THE DETAILS AND DISCUSS THE CASE . IT WAS NOTICED THAT ASSESSEE HAD SHOWN LONG TERM CAPITAL LOSS OF RS. 75,904/ - ON SALE OF FLAT AT BORIVALI AFTER CLAIMING INDEXATION OF COST OF ACQUISITION AND CARRIED FORWARD THE 2 ITA NO. 4933 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 LOSS TO THE SUBSEQUENT YEAR. THE ASSESSEE HAD PURCHASE THE FLAT FOR RS. 63,12,600/ - . THE ASSESSEE HAD BOOKED THE FLAT VIDE LETTER DATED 17.11.2006 AND SOLD THE SAME DURING THE FY 2011 - 12 FOR A TOTAL CONSIDERATION OF RS. 99,00,000/ - . THE AO DENIED THE INDEXATION CLAIMED BY THE ASSESSEE. IN THE FIRST APPEAL, THE LD. CIT (A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2 . T HE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW. 2. THE LEARNED CIT (A) ERRED IN NO T ALLOWING BENEFIT OF INDEXATION TO THE ALLOTMENT LETTER DATED 17/11/2006 EVEN WHILE ACCEPTING THAT IT IS A LONG TERM ASSET. 3. THE LEARNED CIT (A) ERRED IN HOLDING THAT CIT VS. TATA SERVICE (1980) 122 ITR 594 BOMBAY ALLOWS RIGHT TO ACQUIRE A PROPERTY AS CAP ITAL ASSET AND DOES NOT ALLOW INDEXATION WITHOUT APPRECIATING THE FACT THAT THE JUDGMENT WAS RENDERED IN 1980 WHEREAS INDEXATION WAS INTRODUCED FROM 1992. 4. IT IS PRAYED THAT THE BENEFIT OF INDEXATION MAY BE ALLOWED IN RESPECT OF ALLOTMENT LETTER. 3. AT T HE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ITAT HAS DEALT WITH THE IDENTICAL ISSUE IN ASSESSEES OWN CASE ITA NO. 1475/MUM/2015 PERTAINING TO THE AY 2010 - 11 AND THE ITAT VIDE ORDER DATED 16.08.2016 SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD . CIT (A) AND DIRECTED THE AO TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER OBSERVING THAT SINCE THE ASSESSEE WAS HOLDING THE RIGHTS IN THE PROPERTY, THE ASSESSEE IS ENTITLED FOR INDEXATION. THE LD. COUNSEL FURTHER RELIED ON THE DECISION O F THE ITAT, MUMBAI IN THE CASE OF MS. NITA A. PATEL VS. ITO, ITA NO. 4313/MUM OF 2008 AND ANITA D KANJANI VS. ACIT, ITA NO. 2291/MUM/2015 AND THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. 3 ITA NO. 4933 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 MANJULA J SHAH 16 TAXMANN.COM 42 (BOM) TO SUB STANTIATE THE CLAIM OF THE ASSESSEE. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ORDER PASSED BY THE LD.CIT (A) SUBMITTED THAT SINCE THE LD. CIT (A) HAS PASSED THE ORDER IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 11, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). MOREOVER, THE LD. CIT (A) HAS DISTINGUISHED THE FACTS OF THE PRESENT CASE WITH THE FACTS OF THE ASSESSEES CASE FOR THE AY 2010 - 11. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENTIONS OF THE PARTIES. THE ONLY GRIEVANCE OF THE ASSESSE IS THAT THE LD. CIT (A) HAS ERRED IN NOT ALLOWING BENEFIT OF INDEXATION EVEN WHILE ACCEPTING THE SAME AS LONG TERM ASSET. AS PER THE LD. COUNSEL, THE ASSESSEE ACQUIRED RIGHTS IN THE PROPERTY VIDE LETTER OF ALLOTMENT DATED 17.11.2006 AND SOLD THE RIGHTS IN THE SAID PROPERTY THROUGH A REGISTERED SALE DEED VIDE AGREEMENT DATED 30.03.2012 WITHOUT TAKING POSSESSION OF THE PROPERTY. THE AUTHORITIES BELOW REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT SINCE THE ASSESSEE HAD NOT TAKEN POSSESSION OF THE SAID PROPERTY, BENEFIT OF INDEXATION OF COST OF ACQUISITION CANNOT BE GIVEN. AS POINTED OUT BY THE LD. COUNSEL , DURING THE ASSESSMENT YEAR 2010 - 11 SIMILAR ISSUE CAME BEFORE THE COORDINATE BENCH . IN THE SAID CASE, THE ASSESSEE BOOKED A FLAT IN 2005 AND MADE PAYMENTS ON VARIOUS DATES UP TO 2008 AMOUNTING TO RS. 43,67,370/ - . LATER ON THE ASSESSEE SOLD THE FLAT ALLOTT ED TO IT AND RECEIVED THE CONSIDERATION ALONG WITH THE COMPENSATION OF RS. 37,17,670/ - AS FULL AND FINAL CONSIDERATION. THE ASSESSEE CLAIMED BENEFIT INDEXATION ON THE AMOUNT AS COST OF ACQUISITION. THE CLAIM OF THE ASSESSEE WAS DENIED BY THE AUTHORITIES B ELOW. THE MATTER TRAVELLED TO THE ITAT AND THE ITAT SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) AND DIRECTED THE AO TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW HOLDING THAT THE ASSESSEE IS ENTITLED FOR INDEXATION BENEFIT . THE OPERATIVE PART OF THE ORDER OF THE COORDINATE BENCH READS AS UNDER: - 4 ITA NO. 4933 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 2.4 IF SUB - CLAUSE (III) TO EXPLANATION TO SECTION 48 OF THE ACT, WHICH DEALS WITH MODE OF COMPUTATION, IS ANALYZED, THE INDEXED COST OF ACQUISITION MEANS THE AMOUNT WHICH BEARS TO THE COST OF ACQUISI TION, THE SAME PROPORTION AS COST INFLATION INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 1981, WHICHEVER I S LATER. IN THE PRESENT SET OF FACTS, THE FIRST AMOUNT WAS MADE BY THE ASSESSEE ON 29.10.2005 AND THEREAFTER ON VARIOUS DATES UP TO 09/08/2008. THE ASSESSEE WAS HOLDING THE RIGHTS IN THE PROPERTY FROM THE DATE OF AGREEMENT OR AT LEAST W.E.F. 29/10/2005 WHE N THE FIRST PAYMENT WAS MADE BY THE ASSESSEE. NEITHER THE AGREEMENT WAS NOT MADE AVA ILABLE BEFORE ME NOR THIS MATTER WAS ANALYZED FROM THIS ANGLE. THE LD. COUNSEL CONTENDED THAT HE IS READY TO PRODUCE THE AGREEMENT BEFORE THE ASSESSING OFFICER, THUS, CONSI DERING THE TOTALITY OF FACTS AND THE DECISION OF THE TRIBUNAL IN THE CASE OF MS. NITA A. PATEL VS INCOME TAX OFFICER (2011) 128 ITD 24 (SUPRA), THIS APPEAL IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND IF TH E ASSESSEE PRODUCES THE AGREEMENT THEN THE INDEXATION MAY BE GRANTED FROM THE DATE OF AGREEMENT AND IF NOT, THEN FROM 29/10/2005, THE DATE WHEN THE FIRST PAYMENT OF RS.5 LAKH WAS MADE BY THE ASSESSEE TOWARDS THE PURCHASE OF THE FLAT. THE RATIO LAID DOWN IN CIT VS VED PRAKASH & SONS (HUF) 207 ITR 148 (P & H) (PARA - 3), CIT VS R.R. SOOD (1986) 161 ITR 92; 24 TAXMAN 498 (BOM.)(PARA - 3), CIT VS PODDAR CEMENT PVT. LTD. (1997) (226 ITR 625 (SC)(PARA - 9) AND CIT VS MS. PIROJA C. PATEL (2000) 242 ITR 582(BOM.)(PARA - 3) SUPPORTS THE CASE OF THE ASSESSEE. IN THE CASE OF MS. NITA A. PATEL, IT WAS HELD THAT THE ASSETS WHICH ARE REFERRED UNDER THE CAPITAL GAINS INCLUDE NOT ONLY THE PROPERTY WHICH ARE TANGIBLE BUT ALSO INTANGIBLE RIGHTS, WHOSE PHYSICAL POSSESSION CANNOT BE TA KEN. THE WORD HELD USED IN EXPLANATION (III) TO SECTION 48 DOES NOT MEAN PHYSICAL OWNERSHIP OR PHYSICAL POSSESSION OF THE PROPERTY. THE ASSESSEE WAS HOLDING THE RIGHTS IN THE PROPERTY FROM 27/12/1990, THEREFORE, IT WAS HELD THAT INDEXATION HAS TO BE ALLO WED FROM THAT DATE. THUS, IN THE LIGHT OF THE FOREGOING DISCUSSION/JUDICIAL PRONOUNCEMENTS, THE LD. ASSESSING OFFICER IS DIRECTED ACCORDINGLY AND DECIDE AFRESH IN ACCORDANCE WITH LAW. 5 ITA NO. 4933 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 NEEDLESS TO MENTION HERE THAT THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 6. T HE COORDINATE BENCH HAS HELD IN ASSESSEES CASE AFORESAID THAT INDEXATION COST OF ACQUISITION OF A PROPERTY HAS TO BE CALCULATED WITH REFERENCE TO THE DATE WHEN ASSESS EE ACQUIRE D OWNERSHIP RIGHTS OF PROPERTY AND FOR SAID PURPOSE PHYSICAL POSSESSION OF THE PROPERTY IS NOT NECESSARY IN TERMS OF EXPLANATIO N (II) TO SECTION 48 OF THE ACT. 7. I N THE CASE OF NIRMAL KUMAR SETH VS. CIT 17 TAXMANN.COM 127 (ALL) , THE QUESTION BE FORE THE HONBLE ALLAHABAD HIGH COURT WAS THAT WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDING THAT IT IS THE ACTUAL AMOUNT OF PAID FROM TIME TO TIME AFTER THE DATE OF ISSUANCE OF ALLOTMENT LETT ER WHICH IS TO BE CONSIDERED FOR THE PURPOSE OF INDEXATION WITH RESPECT TO THE DATE OF PAYMENT WITHIN THE MEANING OF SECOND PROVISO OF SECTION 48 OF THE INCOME TAX ACT, 1961 READ WITH CLAUSE II AND IV OF EXPLANATION THEREOF. THE HONBLE COURT DECLINED TO I NTERFERE WITH THE FINDINGS OF THE TRIBUNAL HOLDING THAT AFTER ISSUANCE OF ALLOTMENT LETTER ASSESSEE MADE PAYMENTS FROM TIME TO TIME IN INSTALLMENTS . SINCE TH E ASSESSEE SOLD THE SAID PLOT AFTER HOLDING IT FOR MORE THAN 3 YEARS , THE ASSESSEE ENTITLED TO CLA IM LONG TERM CAPITAL GAIN TAKING INTO ACCOUNT INDEXED COST OF ACQUISITION AS PER THE PAYMENT SCHEDULED. 8. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT IN THE AFORESAID CASE, WE SET ASIDE THE IMPUGNED ORDER PASSED B Y THE LD. CIT (A) AND HOLD THAT THE ASSESSEE IS ENTITLED FOR BENEFIT OF INDEXATION FROM THE DATE OF INITIAL INVESTMENT. AS PER THE DETAILS FURNISHED BY THE ASSESSEE , THE ASSESSEE MADE PAYMENT OF RS. 25,00,000/ - IN THE FY 2006 - 07, RS. 15,60,000/ - IN THE FY 2007 - 08, RS. 15,60,000 IN THE FY 2008 - 09, RS. 6,92,000/ - IN THE FY 2009 - 10 AND RS. 65,356/ - IN THE FY 2011 - 12. WE THEREFORE, DIRECT THE AO TO GIVE BENEFIT OF INDEXATION TO THE ASSESSEE AS PER THE PAYMENT SCHEDULE. 6 ITA NO. 4933 / MUM/2017 ASSESSMENT YEAR: 2012 - 1 3 IN THE RESULT, APPEAL FILED BY THE ASSES SEE FOR ASSESSMENT YEAR 2012 - 2013 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY , 2020 . SD/ - SD/ - ( S. RIFAUR RAHMA N ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 17 / 01 / 20 20 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A ) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI