ITO 16(2)(1), MUMBAI V. MANOJ K. SANGHANI, MUMBAI

ITA 5263/MUM/2009

• Counselvise Citation: 526319914 RSA 2009
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 14-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: SUNIL NAHTA
• Keywords: Rectification of order; Assessment record
• Section: 143(3); 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGH AVAN (JM) ITA NO. 5263/MUM/2009 ASSESSMENT YEAR- 2003-04 THE I.T.O. 16(2)(1), MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 VS. SHRI MANOJ K. SANGHANI, 131, MONALISA, 13 TH FLOOR, BOMANJI PETIT ROAD, OFF WARDEN ROAD, MUMBAI-400 036 PAN-AAEPS 7108K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.P. TRIVEDI RESPONDENT BY: SHRI SUNIL NAHTA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 15.6.2009 PASSED BY THE LD. CIT(A)-XVI FOR TH E ASSESSMENT YEAR 2003-04. 2. THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT WAS C OMPLETED ON 26.2.2006. IN COMPLETING THE ASSESSMENT, THE ASSES SING OFFICER RECOMPUTED THE DEDUCTION AVAILABLE U/S. 54EC AND 54 F OF THE I.T. ACT. THE AO IN COMPLETING THE ASSESSMENT WORKED OUT THE ASSESSEES INVESTMENT IN THE FLAT AT RS. 2,28,17,400/-. THE A SSESSEE FILED AN APPLICATION FOR RECTIFICATION OF MISTAKE U/S. 154 O F THE I.T. ACT ON 27.11.2006 BEFORE THE AO. 3. THE APPLICATION OF THE ASSESSEE RELATED TO THE W ORKING OF THE CONSIDERATION/PROCEEDS WHICH GAVE RISE TO THE LONG TERM CAPITAL GAIN ITA NO.5263/M/09 2 INVESTED IN DESIGNATED BONDS (54EC) AND WHICH HAD T O BE DEDUCTED FROM THE TOTAL NET CONSIDERATION TO WORK OUT THE NET CONSIDERATION FOR WORKING OUT THE LONG TERM CAPITAL GAINS REQUIRED TO BE INVESTED FOR EXEMPTION U/S.54F. ACCORDING TO THE ASSESSEE, THE C ONSIDERATION UTILIZED FOR EXEMPTION U/S.54EC IS TO BE WORKED OUT AS UNDER : SCRIPT QTY DATE PURCHASE VALUE COST INDEXED VALUE SALE LTCG GERMAN REMEDIES LTD. SHARES 3458 01/02/91 1 1 10,37,400 10,37,400 9850 1/12/93 541750 992468 29,55,000 19,62,532 29,99,932 LESS DEDUCTION ON INVESTMENT IN REC BONDS U/S. 54 EC 30,00,000 CONSIDERATION UTILISED FOR U/S. 54 EC 39,92,400 4. THE A.O. BY HIS ORDER DATED 26.3.2007 REJECTED T HE APPLICATION OF THE ASSESSEE FOR THE FOLLOWING REASONS:- (A) AS MENTIONED ABOVE THE ASSESSEE HAS CLAIMED EXEMPTI ON U/S.54EC AMOUNTING TO RS.30,00,000/- AGAINST THE SA LE OF 9850 SHARES GERMAN REMEDIES. (B) THE ASSESSEE HAS SOLD 30259 SHARES OF GERMAN REMEDI ES AND HAS SHOWN CAPITAL OF RS.90,77,698/- ON THE SAME DAT E ON WHICH 9850 SHARES OF GERMAN REMEDIES HAVE BEEN SOLD. IT I S THEREFORE, CLEAR THAT THE ASSESSEE HAS SOLD TWO LOT S AND THE ASSESSEE HAS NOT CLAIMED EXEMPTION U/S.54EC AGAINST THE LOT OF 30259 SHARES OF GERMAN REMEDIES IN THE RETURN OF IN COME. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 54F AGAINST THE SAME. ITA NO.5263/M/09 3 5. IN APPEAL BEFORE THE LD. CIT(A), THE APPLICANT R EITERATED THE SUBMISSIONS MADE BEFORE THE A.O. AND REQUESTED FOR RECONSIDERATION OF THE DECISION. 6. THE LD. CIT(A) HELD AS FOLLOWS: IN VIEW OF THIS, I DIRECT THAT THE NET CONSIDERATIO N RELATING TO INVESTMENT IN SEC.54EC BE WORKED OUT, BY TAKING INT O CONSIDERATION THE SALE PROCEEDS RELATABLE TO THE ADDITIONAL CAPIT AL GAIN OF RS.10,37,400/- WHICH HAS BEEN ADDED TO THE CAPITAL GAIN OF RS.19,62,532/-, REALIZED ON THE SALE OF SECOND LOT OF SHARES OF GERMAN REMEDIES LTD. AS A RESULT, THE CONSIDERATION PERTAINING TO THE INVESTMENT IN BONDS U/S. 54EC WOULD BE AS FOLLO WS:- SALE CONSIDERATION LTCG GERMAN REMEDIES LTD. 10,37,400 10,37,400 29,55,000 19,62,532 39,92,400 29,99,932 THEREFORE, THE NET CONSIDERATION RELATABLE TO THE I NVESTMENT IN SEC.54F IS RS.2,52,58,021/- (RS.2,92,50,421 RS.39,92,400). T HE COST OF THE FLAT AS ASSET AS DETERMINED BY THE AO IN GIVING EFFECT TO T HE ORDER OF THE CIT(A)S IS RS.2,30,29,204/-. THEREFORE, THE DEDUCTION U/S.54F = CAPITAL GAIN X INVESTMENT IN PROPERTY / 2,52,58,021 = RS.2,33,77,7 68/-. EXEMPTION U/S. 54F RS.2,33,77,768/- LESS : EXEMPTION ALLOWED IN A.Y. 2002-03 RS.1,79,48 ,846/- ALLOWABLE U/S.54F RS. 54,28,922/- EXEMPTION U/S.54EC AS PER ORIGINAL ORDER RS. 30,0 0,000/- RS. 84,28,922/- LONG TERM CAPITAL GAIN TAXABLE (10691474 8428922) RS.22,62,552/- THE AO IS DIRECTED TO REVISE HIS ORDER DT. 26.03.20 07, BY ADOPTING THE AMOUNT OF RS.22,62,552/- AS THE TAXABLE LONG TERM C APITAL GAIN. 7. AGGRIEVED REVENUE IS IN APPEAL BEFORE US AND RAI SED THE FOLLOWING GROUND: ITA NO.5263/M/09 4 THE LD. CIT(A) ERRED IN ACCEPTING THE PLEA OF THE ASSESSEE FOR RECTIFICATION U/S. 154 OF THE ACT, AS THERE IS NO MISTAKE WHICH C OULD BE TERMED AS A MISTAKE APPARENT FROM THE RECORD. MORE, SO AS WHAT THE ASSESSEE HAS STATED IS AN AFTERTHOUGHT AND DOES NOT FORM PART OF THE ASSESSMENT RECORD? FURTHER, THE ORDER OF THE CIT(A) IS AGAINST THE FACTS OF THE CASE. 8. WE FIND THAT THE ASSESSEE SOLD 40,109 SHARES OF GERMAN REMEDIES LTD. ON 31.7.2002. THESE SHARES WERE SOLD IN TWO LOTS CONSISTING OF 30259 SHARES WHICH WERE ACQUIRED ON 1.2.1991 AND TH E SECOND LOT OF 9,850 SHARES WHICH WERE ACQUIRED ON 1.12.1993. THE CAPITAL GAINS WHICH HAS BEEN EARNED BY THE ASSESSEE ON THE SALE OF FIRS T LOT OF THE SHARES WAS RS.90,77,698/- AND ON THE SALE OF SECOND LOT WAS RS .19,62,532/-. THE ASSESSEE HAD SHOWN THE CAPITAL GAIN OF RS.90,77,69 8/- TO HAVE BEEN INVESTED IN PURCHASING THE RESIDENTIAL HOUSE TO CLA IM DEDUCTION U/S.54F AND THE CAPITAL GAIN OF RS.19,62,532/- ON THE SALE OF THE SECOND LOT HAVE NOT BEEN INVESTED IN ACQUIRING DESIGNATED BONDS TO CLAIM DEDUCTION U/S.54 EC. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD DISCLOSED THE CAPITAL GAINS TO HAVE BEEN INVESTED IN THE RETURN OF INCOME FILED BY HIM AND WORKED OUT THE CAPITAL GAIN/LOSS ON THAT BASIS. THE ASSESSEE HAD INVESTED AMOUNT OF RS.30,00,000/- IN THE DESIGNATED BONDS DURING THE YEAR AND THE A.O. HAS ALSO ACCEPTED THE CLAIM OF TH E ASSESSEE FOR DEDUCTION U/S.54EC. THEREFORE, THE NET CONSIDERATIO N RELATING TO THE AMOUNT INVESTED IN BONDS U/S.54EC SHOULD BE WORKED OUT ON THE BASIS OF THE INVESTMENT AT RS.30,00,000/- AND NOT AT RS.1 9,62,532/-. FURTHER, THE SALE PROCEEDS RELATEABLE TO THE ADDITIONAL CAPI TAL GAIN OF RS. 10,37,400/- REALIZED ON THE SALE OF SECOND LOT OF S HARES OF GERMAN REMEDIES IS TO BE ADDED TO THE CAPITAL GAIN OF RS. 19,62,532/-. THEREFORE THE LONG TERM CAPITAL GAIN WORKS OUT TO RS. 10,37,4 00 + RS.19,62,532/- = 29,99,932/- SALE CONSIDERATION OF GERMAN REMEDIES W ORKS OUT TO RS.10,37,400/- + RS. 29,55,000 = RS. 39,92,400/-. THE COST OF THE FLAT AS DETERMINED BY THE AO IN GIVING EFFECT TO THE OR DER OF THE LD. CIT(A) ON 28.12.2006 IS RS. 2,30,29,204/- HENCE DEDUCTION U/ S. 54F = CAPITAL ITA NO.5263/M/09 5 GAIN X INVESTMENT IN PROPERTY MINUS NET CONSIDERATI ON WHICH IS RS. 2,56,40,320 X 2,30,29,204 -2,52,58,021 = RS. 2,33,7 7,768/-. EXEMPTION U/S. 54F RS.2,33,77,768/- LESS : EXEMPTION ALLOWED IN A.Y. 2002-03 RS.1,79,48 ,846/- ALLOWABLE U/S.54F RS. 54,28,922/- EXEMPTION U/S.54EC AS PER ORIGINAL ORDER RS. 30,0 0,000/- RS. 84,28,922/- LONG TERM CAPITAL GAIN TAXABLE (10691474 8428922) RS.22,62,552/- HENCE THE LONG TERM CAPITAL GAIN TAXABLE IS RS. 22, 62,552/-. WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS CORRECTL Y CALCULATED THE TAXABLE LONG TERM CAPITAL GAIN TAKING INTO CONSIDERATION TH E RECTIFICATION U/S. 154. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CI T(A) AND DISMISS THE DEPARTMENTAL APPEAL. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF JUNE, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 24 TH JUNE, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO.5263/M/09 6 DATE INITIALS 1 DRAFT DICTATED ON: 14. 0 6 . 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 15 .0 6 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______