ITO 25(3)(2), MUMBAI V. PALLAVI V. GORADIA, MUMBAI

ITA 604/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9036 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Valuation report
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C ,MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.604/MUM/2015 FOR (ASSESSMENT YEAR : 2011-12) ITO-25(3)(2), ROOM NO. 604, C-10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. VS. SMT. PALLAVI V. GORADIA, 501, GOVIND VIHAR, 7 TH ROAD, JVPD SCHEME, VILE PARLE (WEST), MUMBAI-400056. PAN: ADSPG2462M (APPELLANT) (RESPONDENT) REVENUE BY : SHRI C.W. ANGOLKAR (DR) ASSESSEE BY : SHRI VIMAL PUNMIY A (AR) DATE OF HEARING : 10.11.2016 DATE OF PRONOUNCEMENT : 13.01.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL FILED BY REVENUE U/S 253 OF THE INCOME-TAX ACT AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT THE CIT(A)] 32, MUMBAI DATED 12.11.2014 FOR ASSESSMENT YEAR (AY) 20 11-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THAT THE INCOME OF RS.2,00, 000/- IS INCOME FROM HOUSE PROPERTY AND NOT AS INCOME FROM OTHER SOURCES IGNORING THAT THE ASSESSEE WAS NOT THE OWNER OF THE PROPERTY AND WAS JUST CARRYING THE TENANT RIGHTS ONLY. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 54F OF T HE IT. ACT WITHOUT PROPERLY APPRECIATING THE FACT THAT THE DEDUCTION U /S 54F WAS CLAIMED DURING ASSESSMENT PROCEEDINGS AND WITHOUT REVISING THE RET URN OF INCOME AND ALSO THE FACT THAT THE CONSIDERATION RECEIVED BY THE ASS ESSEE WAS NOT APPROPRIATED TOWARDS THE PURCHASE OF RESIDENTIAL HOUSE AND ALSO BEYOND THE TIME LIMIT PRESCRIBED'. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS. 10,37, 725/- AS UNEXPLAINED INCOME ON ACCOUNT OF CAPITALIZATION OF JEWELLERY' 2 ITA NO. 604/M/2015 SMT. PALLAVI V. GORADIA 4. 'THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 29.07.2011 DECLARING TOTAL INCOME OF RS. 10,75,633/ -. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 17.01.2014. THE ASSESSING O FFICER (AO) WHILE MAKING THE ASSESSMENT BESIDES THE OTHER ADDITION/DISALLOWANCE TREATED THE INCOME OF RS. 2,00,000/- FROM SUB-LETTING OF HOUSE PROPERTY AS I NCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY, DISALLOWED THE EXEMPTION U/S 54F AND FURTHER MADE THE ADDITION OF RS. 10,37,725/- AS UNE XPLAINED INCOME OF CAPITALIZATION OF JEWELLERY. ON APPEAL BEFORE THE LD. CIT(A), THE INCOME FROM SUB-LETTING OF HOUSE PROPERTY WAS TREATED AS INCOME HOUSE PROPERTY ALL OWED THE DEDUCTION U/S 54F AND FURTHER DELETED THE ADDITION OF RS. 10,37,725/- ON ACCOUNT OF CAPITALIZATION OF JEWELLERY. THEREFORE, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. LD DEPARTMENTAL REPRESENTATIV E (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) FOR ASSESSEE AND PER USED THE MATERIAL AVAILABLE ON RECORD. FIRST GROUND OF APPEAL RELATES TO THE TREAT MENT OF INCOME FROM HOUSE PROPERTY. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO. THE LD. DR ARGUED THAT ASSESSEE IS NOT THE OWNER OF THE PROPERTY WHIC H WAS LET OUT ON RENT. HENCE, THE AO RIGHTLY TREATED THE INCOME FROM HOUSE PROPERTY A S INCOME FROM OTHER SOURCES. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUE D THAT THE TENANCY AGREEMENT DATED 11.07.1991 CONTAINED THE CLAUSE THAT THE ASSE SSEE HAS A RIGHT TO SUB-LET THE PREMISES. THE ASSESSEE EXERCISED HER RIGHT AND LET OUT THE PROPERTY TO EARN INCOME FROM THE HOUSE PROPERTY. THE LD AR OF THE ASSESSEE RELIED ON THE DECISION OF DELHI HIGH COURT IN SMARTS (P) LTD. VS. CIT (2008) 166 TA XMAN.53 (DEL.) AND FURTHER ON THE DECISION OF THE TRIBUNAL IN MACHINERY & SPARES VS JCIT IN ITA NO. 5965/M/2013 DATED 21.01.2016. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND SEEN THE ORDER OF AUTHORITIES BELOW. THE AO WHILE FRAMING THE ASSESSM ENT ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE RENTAL INCOME ON TENA NTED PROPERTY SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASS ESSEE FILED HIS REPLY DATED 30.12.2013 AND CONTENDED THEREIN THAT ASSESSEE HAS ACQUIRED THE TENANTED PROPERTY 3 ITA NO. 604/M/2015 SMT. PALLAVI V. GORADIA WITH THE RIGHT TO EXERCISE AND TO SUBLET THE TENANT ED PROPERTY AND TO EARN RENTAL INCOME. THE CONTENTION OF THE ASSESSEE WAS NOT ACCE PTED BY THE AO HOLDING THAT THE INCOME DERIVED BY SUBLETTING IS LIABLE TO BE TREATE D AS INCOME FROM OTHER SOURCES AS THE ASSESSEE IS NOT THE OWNER OF THE PROPERTY. THE LD. CIT(A) WHILE CONSIDERING THIS GROUND OF APPEAL CONSIDERED THE DEFINITION OF DEEME D OWNERSHIP U/S 27(IIIB) WHICH IS ONLY FOR THE PURPOSE OF CHARGING OF SECTION 22 T O 26 OF THE ACT FOR THE PURPOSE OF COMPUTATION OF INCOME FROM HOUSE PROPERTY. THE LD . CIT(A) CONCLUDED THAT THE ASSESSEE WAS HAVING FULL CONTROL OVER THE PROPERTY WHICH WAS SUBLET FOR EARNING THE RENTAL INCOME. THE LD. CIT(A) RELIED UPON THE DECIS ION OF HONBLE DELHI HIGH IN SMARTS (P) LTD. VS. CIT (SUPRA) AND DIRECTED THE AO TO TREAT THE RENTAL INCOME OF ASSESSEE AS INCOME FROM HOUSE PROPERTY INSTEAD OF I NCOME FROM OTHER SOURCES. WE HAVE SEEN THE CONTENTS OF THE RENT AGREEMENT AND BY VIRTUE OF CLAUSE NO. 26 THE ASSESSEE HAS RIGHT TO SUBLET THE PROPERTY. THE ASSE SSEE IS HOLDING THE TENANCY RIGHT IN THE PROPERTY FROM LAST MORE THAN 24 YEARS. THE ASSE SSEE HAS FULL CONTROL OVER THE PROPERTY FROM MORE THAN TWO DECADES AND BY EXERCISI NG THE RIGHT TO SUBLET THE PROPERTY WAS SUBLET TO THE TENANT FOR EARNING THE R ENTAL INCOME. THUS, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A)WHILE GRANTING RELIEF TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 5. GROUND NO.2 RELATES TO THE DEDUCTION U/S 54F. THE L D. DR FOR THE REVENUE ARGUED THAT ASSESSEE DURING THE ASSESSMENT PROCEEDING CLAI MED THE BENEFIT U/S 54F WITHOUT CLAIMING ANY EXEMPTION AT THE TIME OF FURNISHING TH E RETURN OF INCOME AND THE AO RIGHTLY DENIED THE EXEMPTION U/S 54F OF THE ACT. ON THE OTHER HAND, LD. AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE IS ELIGIBLE TO RA ISE THE CLAIM BEFORE THE APPELLATE AUTHORITY IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS( 349 ITR 336). IT WAS FURT HER ARGUED THAT THE SECOND GROUND FOR REJECTING THE EXEMPTION WAS THAT ASSESSE E NOT INVESTED THE SALE PROCEED IN PURCHASE OF NEW HOUSE AND PURCHASE THE NEW HOUSE FR OM OTHER SOURCES. IT WAS FURTHER ARGUED THAT ONE TO ONE NEXUS IS NOT REQUIRE D WHILE INVESTING THE SALE PROCEED TO PURCHASE A NEW HOUSE AS PER THE DECISION OF MUMB AI TRIBUNAL IN ACIT VS. DR. P.S. PASRICHA (2008) 20 SOT 468 AND THE DECISION OF HYDERABAD TRIBUNAL IN MUNNER KHAN VS. ITO (2010(14 SOT 504 (HYD.) 4 ITA NO. 604/M/2015 SMT. PALLAVI V. GORADIA 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO DENIED THE CLAIM OF EXEMPTION U/S 54F HOLDING THAT NO SUCH CLAIM WAS MADE WHILE FILING RETURN OF INCOME BUT THE SAME WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDING. THE LD. CIT(A) WHILE CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. PR UTHVI BROKERS AND SHAREHOLDERS (SUPRA) ADMITTED THE GROUNDS OF APPEAL. THE LD CIT( A) WHILE CONSIDERING THE CLAIM ON OF ASSESSEE ON MERIT FOLLOWED THE DECISION OF MUNNER KHAN VS. ITO (SUPRA) AND THE DECISION OF MUMBAI TRIBUNAL IN ACIT VS. DR. P.S . PASRICHA ALLOWED THE CLAIM OF ASSESSEE U/S 54F OF THE ACT. WE HAVE GONE THROUGH T HE DECISION OF CO-ORDINATE BENCH IN MUNNER KHAN VS. ITO (SUPRA) AND DR. P.S. PASRICH A WHEREIN IT WAS CATEGORICALLY HELD THAT IT IS QUITE IRRELEVANT THAT THE SAME FUND MUST BE UTILIZED FOR PURCHASE OF THE NEW HOUSE. WE HAVE NOTICED THAT THE LD CIT(A) CONS IDERED ALL THE FACTS BEFORE GRANTING EXEMPTION U/ S 54 OF THE ACT. THUS, IS NO INFIRMITY OR ILLEGALITY IN THE ORDER PASSED BY LD. CIT(A). THUS, GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 7. GROUND NO.3 RELATES TO THE DELETION OF ADDITION OF RS. 10,37,725/- AS UNEXPLAINED INCOME ON ACCOUNT OF CAPITALIZATION OF JEWELLERY. T HE LD. DR FOR THE REVENUE SUPPORTED THE ORDER AND ARGUED THAT ASSESSEE WAS UN ABLE TO EXPLAIN THE SOURCE OF JEWELLERY AS SHOWN IN THE BALANCE-SHEET OF THE ORDE R UNDER CONSIDERATION. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUPPORTED THE O RDER OF LD. CIT(A) AND WOULD ARGUE THAT THE AO MADE THE ADDITION WITHOUT ANY IND EPENDENT ENQUIRY AND ANY COGENT MATERIAL ON RECORD AGAINST THE ASSESSEE. THE LD. CIT(A) APPRECIATED THE FACT OF THE CASE AND GRANTED THE RELIEF. THE ASSESSEE WA S IN POSSESSION OF THE GOLD JEWELLERY SINCE 1982 WORTH RS. 86,761/- WHICH IS VA LUED BY THE VALUER AT RS. 10,37,725/-. THE LD. AR OF THE ASSESSEE FURTHER FIL ED THE COPY OF VALUER AND THE ORDER OF WEALTH TAX FOR AY 1982-83. 8. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE AO DURING THE ASSESSMENT, AS KED THE ASSESSEE TO EXPLAIN THE SOURCE OF GOLD AND DIAMOND JEWELLERY WITH SUPPORTIN G EVIDENCE. THE ASSESSEE FILED HIS REPLY DATED 27.08.2013. ALONG WITH REPLY THE AS SESSEE FURNISHED THE VALUATION REPORT DATED 15.04.2011 SHOWING THE VALUE OF JEWELL ERY AT RS. 10,37,725/- AND THE ORDER OF WEALTH TAX OFFICER. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO 5 ITA NO. 604/M/2015 SMT. PALLAVI V. GORADIA HOLDING THAT THE ASSESSEE FAILED TO PRODUCE THE ORI GINAL VALUATION REPORT AND WEALTH TAX ORDER AND THERE IS NO VARIATION, ONLY ITEM WHIC H WAS POSSESSED BY THE ASSESSEE ON 31.03.1982 TILL DATE. THE AO CONCLUDED THAT THE ASSESSEE DID NOT DISCLOSED SIMILAR ITEM OF GOLD AND DIAMOND IN ANY OF HER INCO ME TAX RETURNS. THE LD CIT(A) CONSIDERED THE CONTENTIONS OF THE ASSESSEE AND CONC LUDED THAT AO HAS NOT MADE ANY INDEPENDENT INVESTIGATION BEFORE MAKING ADDITION. T HE REASONING OF THE AO IS MERLY BASED ON SUSPICION. THE ASSESSEE WAS NOT REQUIRED T O FILE WEALTH TAX RETURN AS HER NET WEALTH WAS BELOW THE TAXABLE LIMIT. THE AO HAS NO V ALID REASONS TO DOUBT THE JEWELRY WHICH HAS BEEN ASSESSED UNDER THE WEALTH TA X. THE FINDING OF THE LD CIT(A) IS WELL REASONED AND DOES NOT REQUIRE ANY FURTHER I NTERFERENCE WHICH WE AFFIRM. THUS, THIS GROUND OF APPEAL IS ALSO FAILED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JANUARY, 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 13/01/2017 S.K.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/