FORTUNE HOTELS & ESTATE P. LTD, MUMBAI V. ACIT CEN CIR 29, MUMBAI

ITA 5403/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55358 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 01-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHSHASTRI NAIK
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Sale consideration of property below Jantri Value; Fair market value
• Section: 271(1)(c); 50C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI P.M.JAGTAP (A.M) & SHRI N.V.VASUDEVAN (J.M) ITA NO.5403/MUM/2010(A.Y. 2004-05) FORTUNE HOTELS & ESTATES PVT. LTD. PLOT NO.25, GIRNARA, B- WING, PALIMALA ROAD, BANDRA (WEST), MUMBAI 400 050. PAN:AAACF 0694G (APPELLANT) VS. THE ACIT, CEN.CIR.29, MUMBAI. (RESPONDENT) APPELLANT BY : SHRI K.R.LAKSHMINARAYANAN RESPONDENT BY : SHRI PARTHSHASTRI NAIK DATE OF HEARING : 28/09/2011 DATE OF PRONOUNCEMENT : ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 8/6/2010 OF CIT(A)-14, MUMBAI RELATING TO A.Y 2004-05. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A), WHEREBY THE CIT (A) CONFIRMED THE ORDER OF THE AO IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 2 71(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED BY THE AO ON THE ASSESSEE ARE A S FOLLOWS: THE ASSESSEE IS A COMPANY. DURING THE PREVIOUS YE AR THE ASSESSEE SOLD ITS OFFICE PREMISES AT 1401, RAHEJA CENTRE , NARIMAN P OINT, MUMBAI 21 FOR A SALE CONSIDERATION OF RS. 2 CRORES. THE AO NOTICED THAT THE MARKET VALUE ADOPTED BY THE REGISTRAR OF ASSURANCES FOR THE PURPOSE OF LEVY OF STAMP DUTY WAS RS. 3,72,42,000/-. IN VIEW OF THE PROVISIONS OF SECTIO N 50C(2) OF THE ACT THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE FULL VALUE OF CONSIDERATION ITA NO.5403/MUM/2010(A.Y. 2004-05) 2 RECEIVED ON TRANSFER SHOULD NOT BE ADOPTED AS PER T HE VALUE ADOPTED FOR THE PURPOSE OF STAMP DUTY AND CAPITAL GAIN ON SALE OF T HE PROPERTY BE COMPUTED ACCORDINGLY. THERE UPON THE ASSESSEE INSISTED THAT THE QUESTION OF VALUATION OF THE PROPERTY BE REFERRED TO THE DEPARTMENTAL VALUA TION OFFICER(DVO). ON REFERENCE BY THE AO THE DVO VIDE REPORT DATED 27/12 /2006 DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY AT RS.2,70,03,920/-. THE ASSESSEE MAINTAINED THAT THE VALUE OF RS. 2.00 CRORES IS THE ACTUAL SALE CON SIDERATION RECEIVED BY IT AND THEREFORE, THE SAME SHOULD BE ACCEPTED AS THE FULL VALUE OF CONSIDERATION RECEIVED ON TRANSFER. THE AO HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE AND DETERMINED THE CAPITAL GAIN BY SUBSTITUTING THE VALUE AS ADOPT ED BY THE DVO AS THE FULL VALUE OF CONSIDERATION RECEIVED ON TRANSFER FOR THE PURPO SE OF COMPUTING CAPITAL GAIN. CONSEQUENTLY, THE CAPITAL GAIN DECLARED BY THE ASSE SSEE AT RS. NIL IN THE COMPUTATION OF INCOME WAS DETERMINED BY THE AO AT R S. 70,01,045/-. IN RESPECT OF THE ADDITION SO MADE THE AO IMPOSED PENALTY UNDE R SECTION 271(1)(C) OF THE ACT HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) CONCURRED THE VIE W OF THE AO. 3. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L D. COUNSEL FOR THE ASSESSEE THAT THE QUESTION WHETHER PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME CAN BE IMPOSED CONSEQUENT TO AN ADDITION MAD E TO A COMPUTATION OF CAPITAL GAIN BY APPLYING PROVISIONS OF SECTION 50C OF THE ACT HAS ALREADY CONSIDERED BY THIS TRIBUNAL IN THE CASE OF RENU HIN GORANI VS. ACIT IN ITA NO.2210/M/10 AND THIS TRIBUNAL HELD AS FOLLOWS: 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD . WE FIND THAT THE AO HAD MADE ADDITION OF RS.9,00,824/- BEIN G DIFFERENCE BETWEEN THE SALE CONSIDERATION AS PER SALE AGREEMENT AND TH E VALUATION MADE BY THE STAMP VALUATION AUTHORITY. THUS, THE ADDITION H AS BEEN MADE BY THE AO BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT QUESTIONED THE ACTUAL ITA NO.5403/MUM/2010(A.Y. 2004-05) 3 CONSIDERATION RECEIVED BY THE ASSSSEE BUT THE ADDI TION IS MADE PURELY ON THE BASIS OF DEEMING PROVISIONS OF THE INCOME TAX A CT, 1961. THE. AO HAS NOT GIVEN ANY FINDING THAT THE ACTUAL SALE CONSIDER ATION IS MORE THAN THE SALE CONSIDERATION ADMITTED AND MENTIONED IN THE SA LE AGREEMENT. THUS IT DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISH ING INACCURATE PARTICULARS OF INCOME IT IS ALSO NOT THE CASE OF TH E REVENUE THAT THE ASSESSEE HAS FAILED TO FURNISH THE RELEVANT RECORD AS CALLED BY THE AO TO DISCLOSE THE PRIMARY FACTS. THE ASSESSEE HAS FURNISHED ALL THE R ELEVANT FACTS, DOCUMENTS/MATERIAL INCLUDING THE SALE AGREEMENT AND THE AO HAS NOT DOUBTED THE GENUINENESS AND VALIDITY OF THE DOCUMEN TS PRODUCED BEFORE HIM AND THE SALE CONSIDERATION RECEIVED BY THE ASSE SSEE. UNDER THESE FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSES SEE HAS NOT FURNISHED CORRECT PARTICULARS OF INCOME. MERELY BECAUSE THE A SSESSEE AGREED FOR ADDITION ON THE BASIS OF VALUATION MADE BY THE STAM P VALUATION AUTHORITY WOULD NOT BE A CONCLUSIVE PROOF THAT THE SALE CONSI DERATION AS PER THIS AGREEMENT WAS INCORRECT AND WRONG. ACCORDINGLY THE ADDITION BECAUSE OF THE DEEMING PROVISIONS DOES NOT IPSO FACTO ATTRACT THE PENALTY U/S 271(1)(C ). HENCE IN VIEW OF THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT.LTD (SUPRA), THE PENALTY LEVIED U/S 271(1)( C ) IS NOT SUSTAINABLE. THE SAME IS DELETED . 5. THE LD. D.R HOWEVER, RELIED ON THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. , ITA 07/2010 ORDER DATED 24/5/2010, WHEREIN THE HONBLE DELHI HIGH COURT IN AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL CANCELLING PENALTY OBSERVED THAT IF THE CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION, THE ASSESSEE WOULD BE LIABLE FOR IMPOSING PENALTY, IF HE WAS NOT ACTING BONA FI DE, WHILE MAKING SUCH CLAIM. ACCORDING TO THE LD. D.R THE ASSESSEE OUGHT TO HAVE SUBSTANTIATED ITS CLAIM BY FILING A REPORT OF REGISTERED VALUER ALONGWITH RETU RN. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A COP Y OF THE RETURN OF INCOME FILED BY THE ASSESSEE IS AVAILABLE AT PAGE-1 OF THE ASSESSEES PAPER BOOK. THE ASSESSEE HAS GIVEN THE COMPUTATION OF CAPITAL GAIN AT RS. NIL AND HAS FURTHER ATTACHED THE FOLLOWING NOTE: NOTE: DURING THE PREVIRN.S YEAR RELEVANT TO THE AS SESSMENT YEAR THE. ASSESSEE COMPANY HAS SOLD PREMISES 1401, AT LAHEJA CENTRE, NARIMAN ITA NO.5403/MUM/2010(A.Y. 2004-05) 4 POINT ,MUMBAI -21, AS PER DEED OF SALE & TRANSFER D ATED 21-08-2003. THE TOTAL SALE VALUE AS PER THE AGREEMENT IS RS 2. 00,0 0,000/-. HOWEVER, AS PER STAMP DUTY CT THE MARKET VALUE OF PREMISES IS D ETERMINED AT RS, 3,72.42,000/-. A COPY OF THE DEED OF SALE AND TRANS FER & REGISTRATION RECEIPT ARE ENCLOSED WITH THE RETURN OF INCOME FOR YOUR REFERENCE AND RECORD. THE ASSESSEE COMPANY HAS SOLD THE PREMISES FOR RS.2,00,00,000/- AND THE CAPITAL GAIN IS CALCULATED ON THE BASIS OF SALE VALUE AS PER AGREEMENT DATED 2 1-08-2003 AT THE PREVAILING MARKE T RATE. HOWEVER, STAMP DUTY AUTHORITIES HAS VALUED AT RS. 3,72,42,00 0/- THIS IS TO PLACE ON RECORD. IT IS THUS CLEAR THAT THE ASSESSEE HAS PLACED ALL T HE FACTS BEFORE THE AO. IN THE ASSESSMENT PROCEEDINGS THERE HAS BEEN NO FINDING NO R IS THERE ANY MATERIAL TO SHOW THAT THE ASSESSEE RECEIVED SOMETHING MORE THAN A SUM OF RS. 2.00 CRORES WHICH IS THE FULL VALUE OF CONSIDERATION RECEIVED A S PER INSTRUMENT OF TRANSFER. THUS IT IS CLEAR THAT BUT FOR THE PROVISIONS OF SEC TION 50C OF THE ACT, THE IMPUGNED ADDITION FOR WHICH PENALTY WAS IMPOSED WOULD NOT HA VE BEEN MADE. WE ARE OF THE VIEW THAT THE CLAIM MADE BY THE ASSESSEE IN THE PRE SENT CASE CANNOT BE SAID TO BE TOTALLY BASELESS OR UNTENABLE IN LAW. WE ARE OF T HE VIEW THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF RENU HINGORANI (SUPRA) S QUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. WE, THEREFORE, DIRECT THAT THE P ENALTY IMPOSED ON THE ASSESSEE BE CANCELLED. THE APPEAL BY THE ASSESSEE IS ALLOWE D. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF SEPT. 2011. SD/- SD/- (P.M.JAGTAP ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 30 TH SEPT.2011 ITA NO.5403/MUM/2010(A.Y. 2004-05) 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.5403/MUM/2010(A.Y. 2004-05) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 28/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28/9/11 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 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER