Hemanth Kumar Bothra, CHENNAI V. ITO, CHENNAI

ITA 647/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77321 (ITAT-CHENNAI)
• Duration Of Justice: 44 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI IRS
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Capital asset; Gift; Prejudicial to interest
• Section: 54F; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . . ! , ' !# $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NO.647/MDS/2014 ( / ASSESSMENT YEAR : 2009-2010) SHRI. HEMANTH KUMAR BOTHRA. NO.2, VENKATRAYAN LANE, CHENNAI 600 003. [PAN: AAAPH9863N] ( %& /APPELLANT) VS THE INCOME TAX OFFICER, WARD X(4), CHENNAI ( '(%& /RESPONDENT) / APPELLANT BY : SHRI. B. RAMAKRISHNAN, FCA / RESPONDENT BY : SHRI. ANIRUDH RAI, IRS, CIT-DR /DATE OF HEARING : 03.06.2014. ! /DATE OF PRONOUNCEMENT : 11.06.2014. !) / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2009-10; EMANATES FROM ORDER DATED 10.02.2014 PASSED BY THE COMMISSIONER OF INCOME TAX-IX, CHENNAI IN C.NO.12/263/CIT-IX/13- 14 IN I.T.A.NO.647/MDS/2014. :- 2 -: PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. IN THE COURSING OF HEARING, THE ASSESSEE VEHEMENTLY PLEADS THAT THE CIT HAS WRONGLY ASSUMED JURISDICTION U/S. 263 O F THE ACT IN DIRECTING THE ASSESSING OFFICER TO TREAT THE CAPITA L GAINS ARISING FROM SALE OF HIS PROPERTY AT BANGALORE AS SHORT TERM I NSTEAD OF LONG TERM IN NATURE. HE SUBMITS THAT HIS FATHER HAD ACQUIRED THE AFORESAID PROPERTY IN THE YEAR 1991 WHICH WAS SOLD ON 01.08.2 008 AND THE HOLDING PERIOD IS MUCH MORE THAN THREE YEARS. THE ASSESSEE ARGUES THAT ONCE THAT IS SO, CAPITAL GAINS HAVE TO BE TREA TED AS LONG TERM ONLY. TO BUTTRESS THE CONTENTIONS, CASE LAW CIT V/ S. SHRI. A. SURESH RAO (2014) 41 TAXMAN.COM 475 (KARNTAKA) HAS BEEN QU OTED. ACCORDINGLY, THE ASSESSEE PRAYS FOR ACCEPTANCE OF T HIS APPEAL. 3. IN REPLY, THE REVENUE STRONG SUPPORTS THE CITS ORD ER PASSED IN SECTION 263 PROCEEDINGS DIRECTING THE ASSESSING OF FICER TO TREAT THE CAPITAL GAINS AS SHORT TERM IN PLACE OF LONG TER M AS DONE DURING REGULAR ASSESSMENT AND PRAYS FOR REJECTION OF THE APPEAL. 4. THE ASSESSEE; AN INDIVIDUAL, IS HAVING INTEREST I NCOME IN RELEVANT PREVIOUS YEAR. ON 31.07.2009, HE HAD FILE D HIS RETURN DECLARING INCOME OF L.10,44,570/-. THE SAME WAS S UMMARILY I.T.A.NO.647/MDS/2014. :- 3 -: PROCESSED. THEREAFTER, THE ASSESSING OFFICER FRAME D REGULAR ASSESSMENT ADMITTING INCOME ALREADY DISCLOSED. IN THIS MANNER, THE ASSESSMENT ATTAINED FINALITY ON 19.12.2011. 5. IT IS TO BE SEEN FROM THE CASE FILE THAT ON 18.2.2 013, THE CIT ISSUED SECTION 263 NOTICE PROPOSING TO REVISE THE A FORESAID ASSESSMENT BY TERMING IT AS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. THIS OPINION WAS FORMED ON TWO REA SONS. FIRST ONE WAS THAT THE BANGALORE PROPERTY HAD BEEN ACQUIRED ON 11.08.2006 AND SOLD WITHIN A PERIOD OF 36 MONTHS ON 01.08.2008 WHICH WOULD RESULT IN SHORT TERM CAPITAL GAINS INSTEAD OF LO NG TERM. AND THEREFORE, THE CIT TERMED THE ASSESSEE AS NOT ENTIT LED FOR EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. 6. IN RESPONSE THE ASSESSEE CHOSE TO FILE A WRIT PETI TION NO.5663 OF 2013 BEFORE HONBLE JURISDICTIONAL HIGH COURT. ON 2 8.11.2013, THEIR LORDSHIP DISMISSED IT AS PRE-MATURE. THEREAFTER, T HE CIT RESUMED SEC.263 PROCEEDINGS. THEREIN, THE ASSESSEE PLEADED THAT THE PROPERTY HAD BEEN ACQUIRED IN THE YEAR 1991-92 AND SOLD ON 0 1.08.2008 I.E. AFTER 17 YEARS. THEREFORE, HE EMPHASIZED IN FAVOUR OF LONG TERM CAPITAL GAINS. HE CONTESTED THAT SEC 263 NOTICE BY STATING THAT THE ASSESSMENT ORDER WAS NOT ERRONEOUS AND PREJUDICIAL TO INTEREST OF THE I.T.A.NO.647/MDS/2014. :- 4 -: REVENUE. BASED ON THE CASE LAW OF M/S. MALABAR IND USTRIAL CO. LTD V/S. CIT 243 ITR 83, THE ASSESSEE EXPLAINED THAT TH E ASSESSING OFFICER CONDUCTED DUE ENQUIRY, APPLIED HIS MIND AND HAD TAK EN ONE OF THE POSSIBLE VIEW. THE ASSESSEE HAD ALSO PLACED RELIAN CE ON CASE LAW A. SURESH RAO (SUPRA) AND PRAYED FOR DROPPING SEC.263 PROCEEDINGS. 7. WE FIND FROM THE ORDER UNDER CHALLENGE THAT THE ASSESSEES EXPLANATIONS COULD NOT CONVINCE THE CIT. HE OBSERV ED THAT THE ASSESSING OFFICER HAD NOT AT ALL EXAMINED THIS ISSU E OF CAPITAL GAINS VIS- -VIS HOLDING PERIOD OF THE ASSET AND WRONGLY TREA TED SHORT TERM CAPITAL GAINS AS LONG TERM. IN CITS OPINION, SI NCE THERE IS DIFFERENCE IN THE RATE OF TAX BETWEEN THE TWO CAPITAL GAINS I. E. 30% AND 20% RESPECTIVELY; ASSESSMENT FRAMED WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. THEN HE HAS HELD THAT THE ASSESSING OFFICER HAD NOWHERE STATED REASONS FOR ACCEPTING THE ASSESS EES CLAIM. QUA HOLDING PERIOD OF THE CAPITAL ASSET, THE CIT FOUND THAT SINCE ALLOTMENT ITSELF HAD BEEN CANCELLED BY THE BANGALORE DEVELOPM ENT AUTHORITY(BDA), ASSESSEES FATHER ACQUIRED THE ASSE T ONLY ON 11.08.2006 WHICH HAS BEEN SOLD ON 01.08.2008 I.E. WITHIN A PERIOD OF 36 MONTHS MAKING IT A SHORT TERM CAPITAL ASSET. THEN, HE REFERS TO CONTENTS OF THE SALE DEED AND TRANSFER AGREEMENT TO TREAT IT AS A CASE I.T.A.NO.647/MDS/2014. :- 5 -: OF OWNERSHIP BEING ACQUIRED IN THE YEAR 2006. COMI NG TO THE LAW CASE OF MALABAR INDUSTRIAL COMPANY (SUPRA), THE CITS OR DER READS THAT THERE IS NO VIEW AT ALL MUCH LESS A POSSIBLE ONE T AKEN BY THE ASSESSING OFFICER. ON CASE LAW OF A. SURESH RAO (SUPRA) HE DI STINGUISHES ITS APPLICATION AFTER CONCLUDING THAT THEREIN ASSETS A LLOTMENT HAD REMAINED WITH THE ASSESSEE/ALLOTTEE AS AGAINST THE ASSESSEE CASE WHEREIN HE IS A THIRD PERSON WHO HAS PURCHASED THE PROPERTY AFTER CANCELLATION OF ALLOTMENT. ACCORDINGLY, THE CIT HA S DIRECTED THE ASSESSING OFFICER TO TREAT THE SALE PROFITS AS SHO RT TERM CAPITAL GAINS INSTEAD OF LONG TERM CAPITAL GAINS AND TAX THE SA ME AS PER LAW. THIS LEAVES THE ASSESSEE AGGRIEVED. 8. WE HAVE HEARD BOTH PARTIES AND PERUSED THE CASE FILE. IN ABSENCE OF ANY DOCUMENTS PLACED ON RECORD, WE TREAT THE FACTS RECORDED IN CITS ORDER AS CORRECT. THE CAPITAL AS SET IN QUESTION IS SITUATED AT 7 TH , A MAIN ROAD, HENNUR ROAD, BANASWADI ROAD EXTENSION, 1 ST BLOCK, BANGALORE. THE ASSESSEE SHRI.HEMANTH KUMAR BOTHRA IS SON OF SHRI.C.P. BOTHRA HERAFTER CP. ON 1.3.1985, THE BANGALORE DEVELOPMENT AUTHORITY HEREAFTER BDA HAD ALLOTTED THIS PROPERTY TO SH. MURALI MANOHAR HEREAFTER MM; FOL LOWED BY A LEASE CUM AGREEMENT DATED 17.02.1986. IN THE YEAR 1991, THERE HAPPENED I.T.A.NO.647/MDS/2014. :- 6 -: AN AGREEMENT BETWEEN MM AND CP QUA THIS ASSET. BECAUSE OF THIS, MM REQUESTED BDA TO TRANSFER THE PROPERTY IN CP S NAME. ACCORDINGLY, THE BDA EXECUTED A CONDITIONAL SALE DEED IN CP FAVOUR ON 11.02.1992. THERE IS NO RECORD BEFORE US TO PROV E CP POSSESSION OVER THE ASSET. ON 05.07.2006, THE COMMISSIONER, B DA CANCELLED THE AFORESAID CONDITIONAL SALE DEED FOR NON-FULFILLMENT OF CERTAIN TERMS, CONDITIONS AND RULES. ON 22.07.2006, THE REGISTRAR , BANGALORE REGISTERED THIS CANCELLATION IN HIS RECORD, THEREA FTER ON 7-8.8.2006, CP PAID MM L.50,000/- IN CASH AND L.1,00,000/- THROUGH A CHEQUE RESPECTIVELY. ON 10.08.2006, THE BDA EXECUTED A SALE DEED IN FAVOUR OF MM. ON THE VERY NEXT DAY FALLING ON 11.08.200 6, MM EXECUTED A SALE DEED IN CPS FAVOUR FOR A CONSIDERATION OF L .2,25,038/- COMPRISING OF L.75,038/- ALREADY PAID IN CASH ALONG WITH L.1,50,000/- STATED HEREIN ABOVE. IN THIS MANNER, CP ACQUIRED TITLE AND POSSESSION OF THE PROPERTY ONLY ON 11.08.2006. ON 9.1.2008, HE HAD GIFTED THIS PROPERTY TO THE ASSESSEE. ON 01.08.2008, THE ASSES SEE SOLD THIS CAPITAL ASSET FOR L.2.30 CRORES. ON 6.8.2008, HE H AD PURCHASED ANOTHER PROPERTY FOR L.1.16 CRORES AND INVESTED BAL ANCE CONSIDERATION IN A CAPITAL GAINS ACCOUNT SCHEME ON 31.7.2009. I.T.A.NO.647/MDS/2014. :- 7 -: 9. COMING TO REGULAR ASSESSMENT, THE ASSES SEE HAD DECLARED LONG TERM CAPITAL GAINS AND THEIR REINVESTMENT AS PER SEC.54F. IN ASSESSMENT ORDER, WE FIND NO DISCUSSION AT ALL ABOU T THIS FACTUAL POSITION. NOR THE ASSESSEE HAS PLACED BEFORE US PR OOF OF ANY ENQUIRY CONDUCTED BY THE ASSESSING OFFICER. IN OUR VIEW, LACK OF ENQUIRY IN A REGULAR ASSESSMENT ITSELF IS ERRONEO US AND PREJUDICIAL TO INTEREST OF THE REVENUE. SO, WE HOLD THAT NEITH ER THERE WAS ANY ENQUIRY NOR A VIEW MUCH LESS A POSSIBLE ONE TAKEN B Y THE ASSESSING OFFICER. MOREOVER, THE ASSESSEE HAS FAILED TO PLACE ON RECORD COPIES OF THE ABOVE STATED TRANSACTIONS AND AGREEMENTS TO PROVE THAT SH. CP HAD ACQUIRED OWNERSHIP AND POSSESSION IN THE Y EAR 1991 OR IN ANY CASE BEFORE 11.08.2006 U/S.247(V) OF THE ACT. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY FAULT WITH OBSERV ATIONS OF THE CIT THAT HOLDING PERIOD OF THE CAPITAL ASSET IS ONL Y FROM 11.08.2006 TO 01.08.2008 IE LESS THAN 36 MONTHS WHICH GIVES RI SE TO SHORT TERM CAPITAL GAINS. NOW WE COME TO THE CASE LAW OF A. SURESH RAO(SUPRA). THEREIN THE BDA HAD ALLOTTED ORIGINAL SITE TO THE CONCERNED ALLOTTEE; PUT HIM IN POSSESSION, EXEC UTED A REGISTERED SALE DEED. THEREAFTER, IT HAD CANCELLED THE SALE I.T.A.NO.647/MDS/2014. :- 8 -: DEED AND ALLOTTED YET ANOTHER SITE. ONLY IN THOSE CIRCUMSTANCES, THE HONBLE KARNATAKA HIGH COURT HAS COUNTED PREVIOUS HOLDING PERIOD BEFORE CANCELLATION AND HELD THE ASSET SOLD AS LONG TERM. THESE FACTS AR E NOT AKIN TO THOSE INVOLVED IN THE PRESENT CASE. WE HAV E ALREADY MADE IT CLEAR THAT THE ASSESSEE HAS NOT PL ACED ON RECORD ANY EVIDENCE TO PROVE HIS FATHERS OWNERSHIP AND POSSESSION BEFORE 11.08.2006 (SUPRA). ON 11.8.2006 , CP HAD PAID FRESH CONSIDERATION AND GOT EXECUTED FULL FLEDGED SALE DEED. THEREFORE, WE OBSERVE THAT CP HAD ACQ UIRED TITLE AND POSSESSION OF THE ASSET ONLY ON 11.08.200 6. THEREFORE, THE CONSEQUENTIAL CAPITAL GAINS ARE SHO RT TERM ONLY. 10. IN VIEW OF OUR ABOVE DISCUSSION, WE HOLD TH AT ON ALL COUNTS IE TREATMENT OF CAPITAL GAINS AS WELL AS NON CONDUCTIN G OF ENQUIRY AND NO VIEW FORMED BY THE ASSESSING OFFICER IN FRAMING REGULAR ASSESSMENT, THE CIT HAS RIGHTLY ASSUMED /EXERCISED HIS JURISDICTION U/S. 263 OF THE ACT. THE ASSESSEES CONTENTIONS AR E REJECTED. I.T.A.NO.647/MDS/2014. :- 9 -: 11. ACCORDINGLY, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 11TH OF JUNE, 2 014, AT CHENNAI. SD/- SD/- ( . . . ) ( . . ! ) ' !# (DR. O.K. NARAYANAN) VICE PRESIDENT (S.S. GODARA) JUDICIAL MEMBER DATED:11TH JUNE, 2014. K.V '# $% &% /COPY TO: 1. ' APPELLANT 2. / RESPONDENT, 3. ( ( )/CIT, 4. ( /CIT, 5. %)* + /DR 6. *, - /GF.