INCOME TAX OFFICER (IT)-2(1)(1), MUMBAI V. PRABHU MURLIDHAR CHULANI, MUMBAI

ITA 5485/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0987 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-08-2017
• Court: TRIBUNAL

Judgement Text

P A G E | 1 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI IN THE INCOME TAX APPELLATE TRIBUNAL ' C ' BENCH, MUMBAI BEFORE SHRI PRADI P KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 5485/MUM/2017 (ASSESSMENT YEAR: 2013 - 14 ) ITO - (IT) - 2(1)(1) R. NO. 1724 , 17 TH FLOOR , AIR INDIA BUILDING , NARIMAN POINT, MUMBAI - 400 02 1 VS. SHRI PRABHU MURLIDHAR CHULANI, B - 502, BLUE HILL SOCIETY, C - 10A, DHANRAJ MAHAL, CSM MARG, APOLLO BUNDER, MUMBAI - 400001 PAN ACXPC6391H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI V. VIDHYADHAR , D.R RESPONDENT BY : NONE DATE OF HEARING : 26 .11.2018 DATE OF PRONOUNCEMENT : 2 8 . 11.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 55, MUMBAI, DATED 22.05.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 10.03.2016 FOR A.Y. 2013 - 14. THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF AP PEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY A . O BY RELYING ON THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF MANJULA SHAH VS. DCIT REPORTED IN 355 ITR 474 (BOM ) (2013) WHEN THE SLP FILED IN THE SAID CASE IS PENDING BEFORE SC. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN TAKING YEAR OF ACQUISITION AS 1984 FOR THE PURPOSE OF COMPUTATION OF LT CG EVEN THOUGH THE ASSET WAS ACQUIRED BY THE ASSESSEE IN THE YEAR 1992 BY WAY OF TRANSFER ON THE DEATH OF HIS MOTHER. P A G E | 2 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT( A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2013 - 14 ON 31.07.2013 DECLARING INCOME OF RS.2,49,60,210/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. DURING THE COURSE OF THE ASSE SSMENT PROCEEDINGS IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAD SOLD A RESIDENTIAL PROPERTY I.E FLAT NO. B - 51 (ALONGWITH GARAGE), 5 TH FLOOR AT MEHERINA CHS LTD., 51 - C NEPEANSEA ROAD, MUMBAI, VIDE AGREEMENT TO SELL DATED 28.12.2012 FOR A CONSIDERATION OF RS. 9,36,00,000/ - ( V ALUE AS PER SEC. 50C WAS RS. 8,07,67,000/ - ). ON A PERUSAL OF THE RECORDS PLACED ON RECORD BY THE ASSESSEE, IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAD WORKED OUT THE INDEXED COST OF ACQUISITION OF THE AFORESAID PROPERTY AT RS.1,61,42,844/ - AND HAD SHOWN THE L O NG TERM CAPITAL GAIN (FOR SHORT LT CG) AT RS.7,52,42,586/ - . FURTHER, ON A PERUSAL OF THE AGREEMENT TO S ELL DATED 28.12.2012 THE A.O OBSERVED THAT THE AFORESAID PROPERTY WAS PURCHASED BY THE MOTHER OF THE ASSESSEE VIZ. SMT. BHAGWATI MURLIDHAR CHULANI ON 12.02.1966. ON THE DEATH OF SMT. BH AGWATI MURLIDHAR CHULANI ON 17.02.1988 THE AFORESAID PROPERTY WAS D E V O L V E D TO THE ASSESSEE AS PER THE L ETTER OF A DMINISTRATION , DATED 09.03.1998 ISSUED BY THE HONBLE COURT OF JUDICATURE AT BOMBAY. APART THEREFROM, IT WAS GATHERED BY THE A.O THAT M/S ME HERINA CHS LTD. HAD ALSO CERTIFIED THAT THE AFORESAID PROPERTY I.E FLAT NO. B - 51 (ALONGWITH GARAGE), 5 TH FLOOR AT MEHERINA CHS LTD., 51 - C NEPEANSEA ROAD, MUMBAI WAS TRANSFERRED IN THE NAME OF THE ASSESSEE ON 02.08.1992. P A G E | 3 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI 4. THE A.O OBSERVED THAT THE ASSESSE E HAD ADOPTED THE FAIR MARKET VALUE (FOR SHORT F.M.V) OF THE AFORESAID PROPERTY AS ON 01.04.1981, AS WELL AS HAD TAKEN THE DATE OF ACQUISITION BY THE PREVIOUS OWNER FOR COMPUTING THE INDEXED C OST OF ACQUISITION OF THE SAID PROPERTY. THE A.O DID NOT FIND FAVOUR WITH THE CLAIM OF THE ASSESSEE TO THE EXTENT HE HAD TAKEN THE DATE OF ACQUISITION BY THE PREVIOUS OWNER FOR WORKING OUT THE INDEXED COST OF ACQUISITION OF THE PROPERTY UNDER CONSIDERATION . THE A.O HELD A STRONG CONVICTION THAT AS PER EXPLANATION (III) TO SEC. 48 THE INDEXED COST OF ACQUISITION WAS TO BE WORKED OUT ON THE BASIS OF THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE . THE A.O WAS OF THE VIEW THAT THE STATUTE NOWHERE PROVIDED T HAT IN CASE OF ACQUISITION OF AN ASSET AS PER THE MODE CONTEMPLATED UNDER SEC.49(1), THE COST INFLATION INDEX WAS TO BE TAKEN AS THAT OF THE YEAR IN WHICH THE ASSET WAS FIRST HELD BY THE PREVIOUS OWNER. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THOUGH TH E A.O ACCEPTED THE COST OF ACQUISITION AS ON 01.04.1981 AS CLAIMED BY THE ASSESSEE AT RS.18,94,700/ - , BUT ALLOWED THE BENEFIT OF THE INDEX ATION OF THE COST OF ACQUISITION TO THE ASSESSEE ONLY FROM THE YEAR IN WHICH THE AFORESAID PROPERTY WAS ACQUIRED BY HIM. ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR INDEXATION OF THE COST OF ACQUISITION FROM THE YEAR 1981 WAS DISLODGED AND WAS SUBSTITUTED BY THE A.O BY THE YEAR IN WHICH THE PROPERTY WAS FIRST ACQUIRED BY HIM I.E F INANCIAL YEAR 1992 - 93. THE A.O IN THE BA CKDROP OF HIS AFORESAID OBSERVATIONS WORKED OUT THE LTCG IN THE HANDS OF THE ASSESSEE AT RS. 8,41,46,487/ - . 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTION S ADVANCED BY THE ASSESSEE WAS PERSUADED TO SUBSCRIBE TO THE SAME. IT WAS NOTICED BY THE CIT(A) THAT THE ISSUE UNDER CONSIDERATION WAS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF P A G E | 4 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI BOMBAY IN THE CASE OF CIT VS. MANJULA J. SHAH (2013) 355 ITR 474 (BOM ). ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE CIT(A) DIRECTED THE A.O TO ALLOW THE INDEXATION OF THE COST OF ACQUISITION TO THE ASSESSEE FROM 01.04.1981 WHILE WORKING OUT THE LTCG IN HIS CASE. 6. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT( A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE ASSESSEE RESPONDENT DESPITE HAVING BEEN PUT TO NOTICE AS REGARDS THE DATE OF HEARING OF THE APPEAL HA S HOWEVER NEITHER PUT UP AN APPEARANCE , NOR ANY APPLICATION SEEKING AN ADJOURNMENT HAS BEEN FILED BEFORE US. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS ARE LEFT WITH NO OTHER ALTERNATIVE BUT TO PROCEED WITH AS PER RULE 25 OF THE A PPELLATE TRIBUNAL RULES, 1963 AND DISPOSE OFF THE APPEAL AFTER HEARING THE REVENUE APPELLANT. THE LD. DEPARTMENTA L REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER PASSED BY THE A.O. 7. WE HAVE HEARD THE LD. D.R AND HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT BY THE REVENUE TO ADJUDICATE AS TO WHETHER THE CIT(A) IS CORRECT IN LAW AND THE FACTS OF THE CASE IN DIRECTING THE A.O TO WORK OUT THE INDEXED COST OF ACQUISITION BY TAKING THE YEAR OF ACQUISITION AS THAT OF THE PREVIOUS OWNER. ADMITTEDLY, THE PROPERTY UNDER CONSIDERATION I.E FLAT NO. B - 51 (ALONGWITH GARAGE), 5 TH FLOOR AT MEHERINA CHS LTD., 51 - C NEPEANSEA ROAD, MUMBAI, WAS PURCHASED BY THE MOTHER OF THE ASSESSEE VIZ. SMT. BHAGWATI MURLIDHAR CHULANI, ON 12.02.1966. SUBSEQUENTLY, AFTER THE DEATH OF SMT. BHAGWATI MURLIDHAR CHULANI ON 17.02 .1988 THE PROPERTY WAS TRANSFERRED IN THE NAME OF THE ASSESSEE AS PER THE L ETTER OF A DMINISTRATION DATED 09.03.2018 ISSUED BY THE HONBLE COURT OF JUDICATURE AT BOMBAY. THE ASSESSEE HAD THEREAFTER SOLD THE AFORESAID PROPERTY VIDE AGREEMENT TO S ELL DATED 28.12.2012 FOR A CONSIDERATION OF RS.9,36,00,000/ - . THE P A G E | 5 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI ASSESSEE FOR COMPUTING THE INDEXED COST OF ACQUISITION HAD AS PER SEC. 55(2)(B)(II) ADOPTED THE F . M . V AS ON 01.04.1981 AT RS.18,94,700/ - . FURTHER, FOR THE PURPOSE OF COMPUTING THE INDEXED COST OF ACQUISITION THE ASSESSEE ON THE BASIS OF THE DATE OF ACQUISITION OF THE PROPERTY BY HIS DECEASED MOTHER, HAD TAKEN THE COST INFLATION INDEX FOR THE F INANCIAL YEAR 1981 - 82 AND HAD WORKED OUT THE INDEXED COST OF ACQUISITION AT RS.1,61,42,844/ - . 8 . WE HA VE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF THE CONSIDERED VIEW THAT NO INFIRMITY EMERGES FROM THE WORKING OF THE INDEXED COST OF ACQUISITION BY THE ASSESSEE WHO HAD ACQUIRED THE AFORESAID PROPERTY AS PER THE MODE CONTEMPLATED I N SEC.49(1)(II) OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT FROM A PERUSAL OF SEC. 49(1) , IT CAN SAFELY BE GATHERED THAT THE CAPITAL GAINS LIABILITY HAS TO BE COMPUTED BY CONSIDERING THAT THE ASSESSEE HAD HELD THE ASSET FROM THE DATE IT WAS HELD BY THE PREVIOUS OWNER , AND THE SAME ANALOGY HAS ALSO TO BE APPLIED FOR THE PURPOSE OF DETERMINING THE INDEXED COST OF ACQUISITION . WE FIND THAT THE ISSUE INVOLVED IN THE CASE BEFORE US IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF CIT VS. MANJULA J. SHAH (2013) 355 ITR 474 (BOM). IN THE SAID JUDGMENT , THE HONBLE HIGH COURT HA D OBSERVED THAT WHEN THE LEGISLATURE BY INTRODUCING THE DEEMING FICTION HAS SOUGHT TO TAX THE GAINS ARISING ON TRANSFER OF A CAPITAL ASSET ACQUIRED UNDER A GIFT OR WILL AND THE CAPITAL GAINS UNDER SEC.48 OF THE ACT HAS TO BE COMPUTED BY APPLYING THE SAID DEEMED FICTION, THEREFORE, IT WOULD NOT BE POSSIBLE TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE FICTION CONTAINED IN EXPLANATION 1(I)(B) TO SEC. 2(42A) OF THE ACT CANNOT BE APPLIED FOR DETERMINING THE INDEXED COST OF ACQUISITION UNDER SEC.48 OF THE ACT. IN TERMS OF OUR AFORESAID OBSERVATIONS , WE ARE OF THE CONSIDERED VIEW THAT NO INFIRMITY DOES EMERG E FROM THE ORDER OF THE CIT(A) WHO RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE HIGH P A G E | 6 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI COURT OF BOMBAY IN THE CASE OF CIT VS. MANJULA J. SHAH (2013) 355 ITR 474 (BOM) , HA S DIRECTED THE A.O TO ALLOW THE INDEXATION OF THE COST OF ACQUISITION TO THE ASSESSEE FROM 01.04.1981 WHILE WORKING OUT THE CAPITAL GAINS IN HIS HANDS. 9 . WE THUS FINDING OURSELVES AS BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A), UPHOLD HIS ORDER. 10 . THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 2 8 .11.2018 S D / - S D / - (PRADEEP K. KEDIA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 28 . 11.2018 * PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 7 ITA NO. 5485/MUM/2017 A.Y. 2013 - 14 ITO (IT) VS. SHRI PRABHU MURLIDHAR CHULANI