RAHUL MANGILAL PORWAL, MUMBAI V. DCIT CC 5(1), MUMBAI

ITA 5280/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1269 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: PRAMOD K PARIDA; SANJUKTA CHOUDHARY
• Keywords: Sale consideration of property below Jantri Value; Fair market value
• Section: 56(2)(vii)(b); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO.5279/MUM/2018 ( ASSESSMENT YEAR:2012-13) DR. SHELLEY JAIN 603, BHAIRAV DARSHAN CHS C.S.NO.802, J.B. MARG ELPHINSTONE (W) MUMBAI 400 013 VS. DY. CIT CC-5(1) AIR INDIA BUILDING 19 TH FLOOR, NARIMAN POINT MUMBAI 400 013 PAN/GIR NO. AESPJ7894K (APPELLANT ) .. (RESPONDENT ) ITA NO.5280/MUM/2018 ( ASSESSMENT YEAR:2012-13) SHRI RAHUL MANGILAL PORWAL 603, BHAIRAV DARSHAN CHS C.S.NO.802, J.B. MARG ELPHINSTONE (W) MUMBAI 400 013 VS. DY. CIT CC-5(1) AIR INDIA BUILDING 19 TH FLOOR, NARIMAN POINT MUMBAI 400 013 PAN/GIR NO. AGVPP8319C (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI PRAMOD K PARIDA & MS. SANJUKTA CHOUDHARY REVENUE BY SHRI AKHTAR H ANSARI DATE OF HEARING 11/11/2019 DATE OF PRONOUNCEMENT 16/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THESE APPEALS ARE FILED BY ASSESSEE AGAINST THE ORD ER OF CIT(A) FOR A.Y.2012-13 IN THE MATTER OF ORDER PASSED U/S.143(3 ) /153 A OF THE INCOME TAX ACT. 2 ITA NO.5279/MUM/2018 DR. SHELLEY JAIN 2. BOTH THE ASSESSES SHRI RAHUL MANGILAL PORWAL AND DR. SHELLEY JAIN ARE HUSBAND AND WIFE, AND ARE HAVING COMMON GRIEVAN CE FOR THE ADDITION MADE BY THE AO U/S.56(2)(VIIB) OF THE INCO ME TAX ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT A SEARCH & SEIZURE ACTION U/S. 132(1 ) OF THE ACT WAS CONDUCTED IN THE CASE OF ANAND RATHI GROUP AND RELA TED PERSONS ON 24-09-2013. NOTICE U/S.153A WAS ISSUED AND SERVED O N THE ASSESSEE ON 02-02-2015. IN RESPONSE TO NOTICE U/S.153A, THE ASS ESSEE SMT. SHELLEY JAIN FILED HER RETURN OF INCOME DECLARING TOTAL INC OME OF RS.1,87,312/- ON 21/04/2015. SMT. SHELLEY JAIN IS THE WIFE OF SHRI R AHUL PORWAL, AN EMPLOYEE OF ANAND RATHI GROUP. VIDE ASSESSMENT ORDE R DATED 10-03- 2016, THE INCOME WAS ASSESSED U/S. 153A R.W.S.143(3 ) AT RS.48,83,060/- . IN THE COURSE OF ASSESSMENT, AO OBSERVED THAT SHR I RAHUL PORWAL JOINTLY WITH HIS WIFE HELD TENANCY RIGHTS OF SHOP N O.7, SITA SADAN, S.B. MARG, ELPHINSTONE (W), MUMBAI. THE TENANCY AGREEMEN T WAS ENTERED INTO ON 25-01-2012 BETWEEN MR. VIJAY KUNVERJI SHAH AND OTHERS AS LANDLORDS AND SHRI RAHUL PORWAL AND SMT. SHELLY JAI N AS TENANTS. THE MARKET VALUE FOR THE PURPOSE OF STAMP DUTY PAYMENT WAS RS.93,91,500/- AND STAMP DUTY WAS PAID AMOUNTING TO RS.4,69,600/- BASED ON THE MARKET VALUE. QUESTIONS WERE ASKED REGARDING THIS T RANSACTION IN THE COURSE OF SEARCH TO SHRI RAHUL PORWAL WHICH WAS REC ORDED IN THE STATEMENT U/S 132(4) DATED 24/09/2013. IN REPLY, SH RI RAHUL PORWAL STATED THAT THE TENANCY RIGHT WAS ACQUIRED FROM THE LANDLORD WITHOUT ANY CONSIDERATION AS PER THE TENANCY AGREEMENT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THIS ASPECT WAS AGAIN EXAMI NED AND THE ASSESSEE SUBMITTED THAT THE RENT OF THE SHOP WAS FI XED IN ACCORDANCE WITH THE PROVISION OF THE MAHARASHTRA RENT CONTROL ACT, 1999. IT WAS 3 ITA NO.5279/MUM/2018 DR. SHELLEY JAIN FURTHER STATED THAT THERE WAS NO QUESTION OF PURCHA SE OF ANY TENANCY RIGHT WITHOUT CONSIDERATION. THE ASSESSING OFFICER DID NOT FIND THE EXPLANATION OF THE ASSESSEE TO BE CONVINCING. THE A O OBSERVED THAT THE FAIR MARKET VALUE OF THE TENANCY RIGHT AS PER THE S TAMP DUTY VALUE WAS RS.93,91,500/- WHEREAS AS PER THE ASSESSEE, THE SIX -LANDLORDS HAD ENTERED INTO THIS AGREEMENT FOR RECEIVING AN AMOUNT OF RS.225/- PER MONTH. THE AO INVOKED THE PROVISION OF SECTION 56(2 )(VII) AND BROUGHT TO TAX THE VALUE OF THE PROPERTY IN EXCESS OF THE S TATED CONSIDERATION. SINCE THE PROPERTY WAS CO-OWNED BETWEEN SHRI RAHUL PORWAL AND HIS WIFE SMT. SHELLEY JAIN, 50% OF THE VALUE WAS ASSESS ED IN THE HANDS OF BOTH THE ASSESSEE AMOUNTING TO RS. 46,95, 750/-. 4. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTIO N OF THE AO AGAINST WHICH BOTH THE ASSESSEES ARE IN FURTHER APP EAL BEFORE THE TRIBUNAL. 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I HAD ALSO CAREFUL LY GONE THROUGH THE TERMS AND CONDITIONS OF THE TENANCY AGREEMENT ENTER ED INTO BETWEEN ASSESSEE AND THE LANDLORD WHICH HAVE THE FOLLOWING CLAUSES:- (I) VACATING THE PREMISES IN ONE MONTH NOTICE , (II) PERIODIC PAYMENT OF RENT PAID MONTH WISE . (III) NO POWER TO SUBLET (IV) PERMISSION REQUIRED TO MAKE ALTERATION OR REPAIR OF RENTED PREMISE. 6. HOWEVER, NO CONSIDERATION OF WHATSOEVER NATURE P ASSED EXCEPT PAYMENT OF MONTHLY RENT TO USE THE TENANTED PREMISE S AS MEDICAL CLINIC. RENT RECEIPTS WERE ISSUED TO THE ASSESSEE. THE STAM P DUTY IS PAID BASED 4 ITA NO.5279/MUM/2018 DR. SHELLEY JAIN ON THE LEASE RENT AS DEFINED UNDER THE TENANCY AGRE EMENT AS PER MAHARASHTRA RENT CONTROL ACT. SINCE, THE LANDLORDS DENIED TO BEAR THEIR PART OF OFFICIAL COST, THE ASSESSEE BEING THE TENAN T WHO WAS IN NEED OF PREMISES HAD NO OPTION BUT TO PAY FROM HIS OWN POCK ET SO THAT HIS WIFE (THE 2 ND ASSESSEE) COULD START HER PRACTICE. THE SAID PAGDI BUILDING HAD 8 SHOPS. SIMILAR PAYMENTS HAD BEEN MADE BY OTHER TENA NTS AS WELL. THEREFORE, IT IS NOT A CASE OF RECEIPT OF IMMOVABLE PROPERTY FREE OF COST AS OCCUPIED BY THE TENANT. IN FACT, PERIODIC MONTHL Y RENT HAD BEEN PAID BY THE TENANT TO THE LANDLORDS. HENCE, SECTION 56(2 )(VII)(B) IS NOT APPLICABLE UNDER THE PRESENT FACTS AND CIRCUMSTANCE S OF THE CASE. MOREOVER, THE RENT PAYABLE IN FACT INCREASED YEAR AFTER YEAR. 7. SINCE THE PROVISIONS OF SECTION 56(2)(VIIB) ARE OF DEEMING NATURE, THE SAME SHOULD BE CONSTRUED STRICTLY. SINCE, THERE WAS NO TRANSFER OR ANY IMMOVABLE PROPERTY OR RIGHTS THEREIN, MERE TENA NCY AGREEMENT WILL NOT GIVE RISE ANY RIGHT TO THE ASSESSEE SO AS TO RE CEIVE THE SAID IMMOVABLE PROPERTY FREE OF COST. 8. FROM THE RECORD I FIND THAT THE RENT OF THE SHOP WAS FIXED IN ACCORDANCE WITH THE PROVISIONS OF THE MAHARASHTRA R ENT CONTROL ACT, 1999 AND THERE WAS NO QUESTION OF PURCHASE OF ANY T ENANCY RIGHTS WITHOUT CONSIDERATION. THE RENT PER MONTH UPTO MAY, 2013 WAS RS.225/- PER MONTH AND FROM JUNE, 2013, IT WAS INCREASED TO RS.500/- PER MONTH. SECTION 56(2)(VII)(B) HAS NO APPLICATION AS THIS IS NOT A CASE OF OWNERSHIP TRANSFER. THIS SECTION SEEKS TO RESTRICT PARTICULAR TRANSACTIONS WHICH ARE GIVEN FREE OF COST BY RELATED/KNOWN PERSONS O R WITH LESS CONSIDERATION OR WITHOUT CONSIDERATION WHICH IS BELOW THE MARKET PRICE. THIS IS NOT A CASE OF TRANSFER OF IMMOVABLE PROPERTY. THERE IS NO 5 ITA NO.5279/MUM/2018 DR. SHELLEY JAIN TRANSFER OF ANY OWNERSHIP. IT WAS SIMPLICITER A TEN ANCY AGREEMENT WHEREIN ASSESSEE WAS PAYING MONTHLY RENT FOR THE PR EMISES AS PER TERMS OF TENANCY AGREEMENT. THE ADDITION WAS MADE BY AO O N THE PRESUMPTION THAT CASH MUST HAVE BEEN PAID FOR TENAN CY RIGHTS WHEREAS NO INCRIMINATING MATERIAL TO SUPPORT THIS WAS FOUND IN THE COURSE OF SEARCH NOR AO HAS REFERRED ANY EVIDENCE IN SUPPORT OF HIS ASSUMING THAT ASSESSEE HAD PAID ANYTHING. IT IS NOT A CASE OF SIM PLE ASSESSMENT U/S.143(3) BUT IT IS A CASE OF SEARCH AND SEIZER WH EREIN ASSESSMENT WAS FRAMED U/S.153A R.W.S. 143(3). HOWEVER, NO INCRIMIN ATING DOCUMENT WAS FOUND EVEN DURING SEARCH TO SUGGEST THAT ASSESSEE H AD PAID ANY CASH FOR OBTAINING OWNERSHIP RIGHTS OVER THE PREMISES. AS PE R RECORDS THE ASSESSEE HAD ENTERED INTO A TENANCY AGREEMENT TO ST ART MEDICAL PRACTICE FOR DR. SHELLY JAIN AND TO START A DENTAL CLINIC. THE AO HAS ADOPTED CIRCLE RATE FOR DETERMINING DEEMED VALUE OF CONSIDE RATION WITHIN THE MEANING OF SECTION 50C. THE AO HAS INVOKED SECTI ON 56(2)(VII)(B} ON DEEMED BASIS. THE OWNERSHIP REMAINS WITH THE LANDL ORD, THEREFORE, PROVISIONS OF SEC.56(2)(VII)(B) IS NOT APPLICABLE. THE DECISION OF THE ASSESSING OFFICER/ IS NOT CORRECT SINCE (I) THE ASSESSEE IS NOT THE OWNER OF THE ASSETS NOR HE HAS RECEIVED, ANY INCOME EVEN ON DEEMED BASIS EITHER U/S,45 OR U/ S.56. (II) THE TENANCY AGREEMENT IS NOT A DOUBTFUL AGREEMENT, THE ONUS SHIFTS ON THE REVENUE TO PROVE THE SAME. (III) THE ASSESSEE IS A SALARIED INDIVIDUAL AND HIS WIFE IS A DOCTOR. (IV) MONTHLY RENT REGULARLY PAID HAS BEEN TRE ATED AS REVENUE PAYMENT. (V) AFTER CERTAIN PERIOD, THE PREMISE WILL HAVE TO BE V ACATED FOR HANDING OVER TO LAND LORD. 9. MOREOVER NOTHING INCRIMINATING MATERIAL WAS FOUN D DURING THE COURSE OF SEARCH TO INDICATE THAT ASSESSEE HAD PAID ANY AMOUNT TO THE LANDLORD FOR OBTAINING THE OWNERSHIP RIGHT OVER THE BUILDING. ACCORDINGLY, 6 ITA NO.5279/MUM/2018 DR. SHELLEY JAIN I DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR INVOKING PROVISIONS OF SECTION 56(2)(VIIB). 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2019. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 16/12/2019 KARUNA, SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//