GAURAV HITENDRA SHAH, MUMBAI V. ITO 24(1)(4), MUMBAI

ITA 6377/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0131 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D PRAKASH JHUNJHUNWALA

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 6377 /MUM/ 2 016 (ASSESSMENT YEAR 20 11 - 12 ) MR. GAURAV HITENDRA SHAH BALI HOUSE, GROUND FLOOR LIBERTY GARDEN ROAD NO.2 MAMLATDAR WADI MALAD WEST MUMBAI - 400 064 . VS. ITO 24(1)(3) BANDRA KURLA COMPLEX BANDRA MUMBAI. ( APPELLANT ) ( RESPONDENT ) PAN NO . AQRPS0266M ASSESSEE BY S/ SHRI D. PRAKASH JHUNJHUNWALA & SANJAY JAIN DEPARTMENT BY SHRI RAKESH RANJAN DATE OF HEARING 8 .6 . 201 7 DATE OF PRONOUNCEMENT 5 .7 . 201 7 O R D E R THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 2011 - 12 AND IT RELATES TO THE ASSESSMENT YEAR 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ASSESSMENT OF RS.19.00 LAKHS IN T HE HANDS OF THE ASSESSEE. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. A PROPERTY NAMED MATRU JYOTI LOCATED IN KANDIVALI (WEST) WAS OWNED BY SHRI BHERULAL ROOPCHAND JAIN AND SMT. JYOTSHNA BHERULAL JAIN (HEREINAFTER REFERRED TO AS OWNER S. THEY EXECUTED A SPECIFIC POWER OF ATTORNEY ON 05 - 10 - 2001 IN FAVOUR OF THE ASSESSEE AND SMT. RAJSHREE RAMESH SHAH (HEREINAFTER REFERRED TO AS POA HOLDERS), AS THE OWNERS DECIDED TO SELL THE PROPERTY FOR A SUM OF RS.36.00 LAKHS TO THE POA HOLDERS. THE POA HOLDER PAID AN ADVANCE OF RS.3.00 LAKHS UPON EXECUTION OF SPECIFIC POWER OF ATTORNEY IN FAVOUR OF THEM AND THE POWER OF ATTORNEY GAVE MR. GAURAV HITENDRA SHAH 2 POWER TO POA HOLDERS TO SELL THE PROPERTY. THE BALANCE AMOUNT OF RS.33.00 LAKHS WAS NOT PAID BY THE POA HOLDERS. ON 30 - 10 - 2010, THE POA HOLDER SOLD THE PROPERTY FOR A SUM OF RS.38.00 LAKHS. ON THE BASIS OF THIS SALE TRANSACTION, BOTH THE POA HOLDERS OFFERED RS.19.00 LAKHS EACH AS THEIR RESPECTIVE INCOME IN THEIR RESPECTIVE INCOME TAX RETURN. 3. SINCE THE POA HOLDERS DID NOT PAY THE BALANCE AMOUNT OF RS.33.00 LAKHS TO THE OWNERS OF THE PROPERTY, THEY FILED SUIT IN THE COURT OF LAW AGAINST THE POA HOLDERS. FINALLY A CONSENT TERM DATED 25 - 02 - 2013 WAS FILED BEFORE HONBLE BOMBAY HIGH COURT, WHEREIN THE POA HOLDER S AGREED TO PAY A SUM OF RS.41.00 LAKHS (AS AGAINST RS.33.00 LAKHS) TO THE OWNERS. THE AMOUNT OF RS.41.00 LAKHS WAS PAID BY WAY OF PAY ORDERS ON 24 - 07 - 2013. 4. BEFORE THE AO, THE ASSESSEE FILED A REVISED COMPUTATION, WHEREIN THE ASSESSEE EXCLUDED THE INCOME OF RS.19.00 LAKHS OFFERED BY HIM EARLIER AND IN THAT PLACE, HE COMPUTED LONG TERM CAPITAL GAIN. IT IS PERTINENT TO NOTE THAT THE ASSESSMENT PROCEEDING FOR THE YEAR UNDER CONSIDERATION WAS IN PROGRESS WHEN THE CONSENT TERMS WERE EXECUTED. HOWEVER, THE AO DID NOT RECOGNISE THE REVISED COMPUTATION OF INCOME. BEFORE LD CIT(A), THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS P LTD (349 ITR 336) AND CONTENDED THAT T HE REVISED COMPUTATION SHOULD BE ACCEPTED. ACCORDINGLY THE LD CIT(A) ADMITTED THE SAME. HOWEVER, THE LD CIT(A) DID NOT ACCEPT THE LONG TERM CAPITAL GAIN COMPUTED BY THE ASSESSEE ON THE REASONING THAT THE ASSESSEE ACQUIRED ONLY POWER OF ATTORNEY AND DID N OT BECOME OWNER OF THE PROPERTY, SINCE THE POA HOLDERS DID NOT PAY THE BALANCE AMOUNT OF RS.33.00 LAKHS. SINCE THE POA HOLDERS HAS PAID ONLY RS.3.00 LAKHS AND THEREAFTER SOLD THE PROPERTY FOR RS.38.00 LAKHS, THE LD CIT(A) TOOK THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY ASSESSED MR. GAURAV HITENDRA SHAH 3 50% OF SALE CONSIDERATION OF RS.38.00 LAKHS AS INCOME OF THE ASSESSEE. ACCORDINGLY HE DISMISSED THE GROUND OF THE ASSESSEE. 5. I HEARD THE PARTIES ON THIS ISSUE. IN MY VIEW, THE LD CIT(A) WAS CORRECT IN LAW IN REJECTING T HE COMPUTATION OF LONG TERM CAPITAL GAINS, SINCE THE POA HOLDER DID NOT BECOME OWNER OF THE PROPERTY. IN MY VIEW, THESE TRANSACTIONS SHOULD BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. I NOTICE THAT THE POA HOLDERS HAVE PAID AN ADVANCE OF RS.3.0 0 LAKHS AND ACQUIRED SPECIFIC POWER OF ATTORNEY TO SELL THE PROPERTY. IT IS THE UNDERSTANDING BETWEEN THE OWNERS AND POA HOLDERS THAT THE VALUE OF PROPERTY WAS RS.36.00 LAKHS AT THE TIME OF ENTERING SPECIFIC POA. THE POA HOLDERS, ULTIMATELY, SOLD THE PRO PERTY FOR RS.38.00 LAKHS ON 30.10.2010. HENCE THE POA HOLDERS SHOULD HAVE RETURNED BACK RS.33.00 LAKHS OUT OF THE SALE CONSIDERATION TO THE OWNERS AS PER THE TERMS OF SPECIFIC POA. FOR THE REASONS BEST KNOWN TO THEM, THE POA HOLDERS DID NOT RETURN THE MO NEY AS AGREED AND HENCE THE OWNERS STARTED LITIGATION IN THE COURT OF LAW. ULTIMATELY THE POA HOLDERS PAID A SUM OF RS.41.00 LAKHS TO THE OWNERS. THUS, THE TOTAL COST TO THE POA HOLDERS WAS RS.3.00 LAKHS PLUS RS.41.00 LAKHS, AGGREGATING TO RS.44.00 LAKHS . WHEREAS, THE POA HOLDER HAS SOLD THE PROPERTY FOR A SUM OF RS.38.00 LAKHS, MEANING THEREBY, THEY HAVE INCURRED A LOSS OF RS.6.00 LAKHS IN THESE TRANSACTIONS, OUT OF WHICH THE SHARE OF ASSESSEE IS RS.3.00 LAKHS. ACCORDINGLY I AM OF THE VIEW THAT NOTHING IS TAXABLE OUT OF THESE TRANSACTIONS. IT IS A WELL SETTLED PROPOSITION OF LAW THAT THERE IS NO ESTOPPELS AGAINST THE LAW AND THE AO IS NOT ENTITLED TO TAX ANY RECEIPT, WHICH IS OTHERWISE NOT TAXABLE. ACCORDINGLY I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.19.00 LAKHS ASSESSED IN THE HANDS OF THE ASSESSEE. MR. GAURAV HITENDRA SHAH 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 5.7 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 5 / 7 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CI T(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI