SHREEJIDHAM DEVELOPERS P.LTD, MUMBAI V. ITO 5(3)(2), MUMBAI

ITA 5208/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100810 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN ,AM AND LALIT KUMAR, JM ./ I.T.A. NO . 5208 / MUM/20 14 ( / ASSESSMENT YEAR : 20 07 - 08 ) M/S SHREEJIDHAM DEVELOPMERS PVT LTD., 302, AMAR TIRUPATI, BHULABHAI DESAI ROAD, MUMBAI - 400026. / VS. INCOME TAX OFFICER, 5 ( 3 )( 2 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAECS5082P / APPELLANT BY SHRI RAJIV KHANDELWAL / RSPONDENT BY SHRI AIRIJU JAIK A RAN / DATE OF HEARING : 17 .8 . 201 5 / DATE OF PRONOUN CEMENT: 1 7 . 8. 201 5 / O R D E R PER B.R.BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 28.7.2014 PASSED BY LD CIT(A) - 9, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. THE ASSESSEE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF SHORT TERM CAPITAL GAIN OF RS.6,75,447/ - . 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS RELATING TO THE ISSUE UNDER CONSIDERATION ARE STATED IN BRIEF. THE ASSESSING OFFICER RE - OPENED THE ASS ESSMENT UPON RECEIPT OF INFORMATION THAT THE ASSESSEE HAS TRANSFERRED A HOUSE PROPERTY AND ALSO PAID CASH TOWARDS DISCHARGE OF A CREDITOR, NAMED SHRI NEMISH BHARAT KOTHARI, I.E., DURING THE COURSE OF ITA NO. 5 2 0 8 / MUM/20 14 2 ASSESSMENT PROCEEDING PERTAINING TO SHRI NEMISH BHARAT K OTHARI, HE HAD FILED A CONFIRMATION LETTER TO HIS AO WITH REGARD TO THE LOAN GIVEN TO THE ASSESSEE HEREIN. THE SAID CONFIRMATION LETTER, WHICH WAS IN THE FORM OF LEDGER ACCOUNT COPY, SHOWED THAT HE HAD RECEIVED A PROPERTY WORTH RS.5,25,000/ - AND CASH OF R S.1,50,447/ - TOWARDS THE DISCHARGE OF THE SETTLEMENT OF AMOUNT DUE FROM THE ASSESSEE. BASED ON THIS INFORMATION, THE AO HAS REOPENED THE ASSESSMENT. IN THE REOPENED PROCEEDINGS, THE ASSESSING OFFICER ASSESSED THE AGGREGATE AMOUNT OF RS.6,75,447/ - (RS.5,2 5,000/ - + RS.1,50,447/ - ) AS SHORT TERM CAPITAL GAINS. THE LD CIT(A) ALSO CONFIRMED THE SAME. 3. THE LD COUNSEL SUBMITTED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE REAL ESTATE BUSINESS. DUE TO BAD BUSINESS CONDITIONS, THE DIRECTORS OF THE COMPANY EN TERED INTO A CONSENT TERMS AND THE SAME WAS REDUCED IN WRITING ON 30 - 05 - 2003. AS PER THE TERMS AND CONDITIONS AGREED BETWEEN THE DIRECTORS OF THE COMPANY, THE AVAILABLE HOUSES WERE ALLOTTED TO THE THREE DIRECTORS IN THE RATIO OF THEIR CONTRIBUTION. THE DI RECTORS ALSO TOOK OVER THE LOAN LIABILITIES, I.E., THE LOANS ARRANGED BY EACH OF THEM. ACCORDINGLY, THE DIRECTORS HAVE TAKEN OVER THE AVAILABLE HOUSES AS WELL AS THE LIABILITIES. THE LD A.R SUBMITTED THAT SHRI NEMISH BHARAT KOTHARI IS THE SON OF ONE OF T HE DIRECTORS NAMED SHRI BHARAT RATILAL KOTHARI. HE SUBMITTED THAT THE SAID DIRECTOR TOOK OVER THE LOAN LIABILITY PERTAINING TO SHRI NEMISH BHARAT KOTHARI IN TERMS OF THE CONSENT AGREEMENT. HE FURTHER SUBMITTED THAT THE TERMS OF THE CONSENT AGREEMENT WAS G IVEN EFFECT TO IN THE BOOKS OF THE ASSESSEE COMPANY AND IN SUPPORT OF THE SAME, THE LD A.R INVITED OUR ATTENTION TO THE BALANCE SHEET OF THE ASSESSEE COMPANY AS AT 31.3.2005 & 31.3.2005. HE SUBMITTED THAT THE ASSESSEE COMPANY DOES NOT POSSESS ANY INVENTOR IES AS ON 31.3.2004 AND THE LOAN LIABILITIES HAVE ALSO COME DOWN FROM 198.66 LAKHS AS ON 31.3.2003 TO RS.17.41 LAKHS AS ITA NO. 5 2 0 8 / MUM/20 14 3 ON 31.3.2004. ACCORDINGLY THE LD A.R SUBMITTED THAT THE ASSESSEE HAS TRANSFERRED THE LOAN LIABILITY OF SHRI NEMISH BHARAT KOTHARI BEFOR E 31.3.2004 ITSELF AND THE SAID LIABILITY WAS DISCHARGED BY THE DIRECTOR SHRI BHARAT RATILAL KOTHARI. HE FURTHER SUBMITTED THAT ALL THESE FACTS HAVE BEEN BROUGHT TO THE NOTICE OF THE TAX AUTHORITIES THROUGH THE AFFIDAVITS FILED BY SHRI VASANT K SAVLA, THE DIRECTOR OF THE ASSESSEE COMPANY, SHRI BHARAT RATILAL KOTHARI (THE DIRECTOR WHO TOOK OVER THE LOAN LIABILITY) AND SHRI NEMISH BHARAT KOTHARI ( THE CREDITOR). ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ASSESSING THE AMOUNT OF RS.6,75,447/ - IN THE HANDS OF THE ASSESSEE HEREIN, SINCE THE ASSESSEE HEREIN IS NOT CONNECTED WITH THOSE PAYMENTS. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE IMPUGNED ADDITION HAS BEEN MADE ON THE BASIS OF ACCOUNT STATEMENT FURNISHED BY SHRI NE MISH BHARAT KOTHARI, THE CREDITOR AND THE ASSESSEE DID NOT SEEK TO CROSS EXAMINE HIM. ACCORDINGLY HE SUBMITTED THAT THE AO HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF THE DOCUMENTARY EVIDENCE CITED ABOVE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FUR NISHED AFFIDAVITS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS AND HENCE THE AO DID NOT CONSIDER THE SAME. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN ASSESSING THE IMPUGNED AMOUNT OF RS.6,75,447/ - AS CAPITAL GAINS IN THE HANDS OF THE ASS ESSEE. 5. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FILED AFFIDAVIT OBTAINED FROM THE CREDITOR AND HENCE THERE WAS NOT REQUIREMENT OF ANY CROSS EXAMINATION. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD FILED RELEVANT DETAILS BEFORE THE END OF THE ASSESSMENT PROCEEDINGS, BUT THE AO CHOSE TO PASS THE ASSESSMENT ORDER WITHOUT CARRYING OUT FURTHER EXAMINATION, EVEN THOUGH THERE WAS SUFFICIENT TIME AVAILABLE WITH THE AO. ITA NO. 5 2 0 8 / MUM/20 14 4 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS N O DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE IS A BUILDER AND DEVELOPER. HENCE THE ALLOTMENT OF HOUSE, IF ANY, TO THE CREDITOR WOULD HAVE TO BE CONSIDERED UNDER THE HEAD BUSINESS AND NOT UNDER THE HEAD CAPITAL GAINS. FURTHER, WE NOTICE THAT TH E ASSESSING OFFICER HAS ALSO ASSESSED THE ALLEGED CASH PAYMENT OF RS.1,50,447/ - AS SHORT TERM CAPITAL GAIN, WHICH IS BLATANTLY INCORRECT. THE CAPITAL GAINS TAX CAN BE LEVIED ONLY IN RESPECT OF AMOUNT RECEIVED ON SALE OF A CAPITAL ASSET AND THE PAYMENT, IF ANY, MADE CANNOT FALL UNDER THE CATEGORY OF CAPITAL GAIN. THESE FALLACIES WOULD SHOW INCORRECT APPRECIATION OF FACTS ON THE PART OF THE TAX AUTHORITIES. 7. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE DID NOT HOLD ANY PROPERTIES IN ITS BALANCE SHEET S INCE 31.3.2004. THE FACTS RELATING TO THE SAME HAS BEEN DULY EXPLAINED BY THE LD A.R, I.E., AS PER THE CONSENT TERMS REACHED BETWEEN THE DIRECTORS OF THE ASSESSEE COMPANY, EACH OF THE DIRECTOR HAS TAKEN OVER THE AVAILABLE HOUSES AND ALSO LIABILITIES BROUG HT THROUGH THEM. THESE FACTS HAVE BEEN CONFIRMED BY TWO OF THE DIRECTORS BY FILING AFFIDAVITS. THE LIABILITY PERTAINING TO SHRI NEMISH BHARAT KOTHARI HAS BEEN TAKEN OVER BY THE DIRECTOR NAMED SHRI BHARAT RATILAL KOTHARI. ALL THESE TRANSACTIONS HAVE TAKE N PLACE BEFORE 31.3.2004. HENCE THE LIABILITY OF THE ASSESSEE COMPANY HAS CEASED TO EXIST SINCE THAT DATE. SUBSEQUENTLY, SHRI BHARAT RATILAL KOTHARI HAS SETTLED THE AMOUNT DUE TO SHRI NEMISH BHARAT KOTHARI BY GIVING ONE HOUSE AND ALSO BY MAKING FURTHER P AYMENT OF RS.1,50,447/ - . 8. IN VIEW OF THE FOREGOING DISCUSSIONS, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT IT IS NOT CONNECTED WITH THE TRANSACTIONS RELATING TO SETTLEMENT OF THE LOAN LIABILITY OF SHRI NEMISH BHARAT KOTHARI. FURTHER, ALL ITA NO. 5 2 0 8 / MUM/20 14 5 THESE FACTS HAVE BEEN MADE CLEAR BY THE CREDITOR HIMSELF BY FILING AFFIDAVIT AND THE SAME HAS ALSO BEEN CONFIRMED BY THE DIRECTOR SHRI BHARAT RATILAL KOTHARI. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN ASSESSING THE AMOUNT OF RS.6, 75,447/ - AS SHORT TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE FOR THE REASONS DISCUSSED ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 1 7 TH AUGUST 2015. 1 7 TH AUGUST, 2015 SD SD ( LALIT KUMAR) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 1 7 TH AUG , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI