Smt. Nidhi Agarwal, Bareilly V. Income Tax Officer, Ward-2(1), Bareilly

ITA 656/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1197 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K VISHWAKARMA
• Keywords: Application of stay; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER S.A. NO.15/LKW/2017 [ARISING OUT OF ITA NO. 656/LKW/2017 ASSESSMENT YEAR: 2014 - 15 SMT. NIDH I AGARWAL 35 - B/4, RAMPUR GARDEN CIVIL LINES, BAREILLY V. INCOME TAX OFFICER WARD 2(1) BAREILLY T AN /PAN : ADVPA6252C (APP LIC ANT) (RESPONDENT) ITA NO. 656/LKW/2017 ASSESSMENT YEAR: 2014 - 15 SMT. NIDHI AGARWAL 35 - B/4, RAMPUR GARDEN CIVIL LINES, BAREIL LY V. INCOME TAX OFFICER WARD 2(1) BAREILLY T AN /PAN : ADVPA6252C (APP ELL ANT) (RESPONDENT) ASSESSEE BY: SHRI ABHINAV MEHROTRA, ADVOCATE DEPARTMENT BY: SHRI R. K. VISHWAKARMA, D.R. DATE OF HEARING: 15 12 201 7 DATE OF PRONOUNCEMENT: 08 01 2018 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS STAY APPLICATION ARISING OUT OF ITA NO.656/LKW/2017 IS PREFERRED BY THE ASSESSEE WITH A REQUEST TO STAY THE RECOVERY OF DEMAND TILL DISPOSAL OF THE APPEAL. ONE OF THE PRAYERS IN THE STAY PETITION WAS THAT THE APPEAL MAY BE HEARD AT AN EARLY DATE. [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 2 2 . AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT IF THE APPEAL OF THE ASSESSEE IS HEARD ON PRIORITY , ASSESSEE WILL NOT PRESS FOR THE STAY APPLICATION . 3 . AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE HAVE DECIDED TO TAKE UP THE APPEAL OF THE ASSESSEE FOR HEARING. ACCORDINGLY, THE STAY APPLICATION OF THE ASSESSEE IS DISMISSED AS NOT PRESSED AND WE PROCEED TO DISPOSE OF THE APPEAL OF THE ASSESSEE ON MERIT. 4 . THE BRIEF FACTS OF THE CASE AS APPEARING IN TH E ORDER OF THE LD. CIT(A) ARE AS UNDER: - 'THAT THE APPELLANT ACQUIRED A PROPERTY IN F.Y. 2012 - 13 JOINTLY WITH FOUR OTHER FAMILY MEMBERS. THE AMOUNT INVESTED BY EACH ONE OF THEM INDIVIDUALLY WAS AS INFRA: NIDHI AGARWAL RS. 74,31,000/ - VISHNU AGARWAL RS. 36, 69,500/ - SANDEEP AGARWAL RS. 36,70,500/ - SANJAY AGARWAL RS. 13,00,000/ - VINEETA AGARWAL RS. 13,00,000/ - TOTAL RS. 1,73,71,000/ - THAT THE AFORESAID PROPERTY WAS SOLD IN F.Y. 2013 - 14 FOR AN AMOUNT OF RS.2,96,36,000/ - . SINCE BANK LOAN WAS OBTAINED BY THE APPELLANT ALONGWITH THE OTHER CO - SHARES THE BANK WITHOUT ASKING THE SELLERS DEDUCTED TDS U/S 194 - 1 A @ 1% EQUAL PROPOSITION AND PAID THE BALANCE AMOUNT DIRECTLY TO EACH OF THE SELLERS ACCOUNT. SINCE TDS RETURN U/S 194 - IA COULD NOT BE REVISED THE CO - OWNERS DECIDED TO FILE THEIR RETURN AS UNDER: - [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 3 SI. NO. NAME OF THE CO - OWNER SALE PRICE PURCHASE PRICE TRANSFER CHARGES CAPITAL GAIN /LOSS 1. NIDHI AGARWAL 59.27.200/ - 74,31,000/ - 4,17,000/ - ( - ) 19,20,800/ - 2. VISHNU AGARWAL 59,27,200/ - 36, 69,500/ - 4,17,000/ - (+) 18,40,700/ - 3, SANDEEP AGAWAL 59,27,200/ - 36,70,500/ - 4,17,000/ - (+) 18,39,700/ - 4. SANJAY AGAWAL 59,27,200/ - 73,00,000/ - 4,17,000/ - (+) 42,10,200/ - 5. VINEETA AGARWAL 59,27,2007 - 13.00.000/ - 4,17,000/ - (+) 42 ,10,200/ - THIS WAS DONE ONLY ON ACCOUNT OF THE FACTS THAT THE RETURN IS FILED IN UNEQUAL PROPORTIONS THERE WILL BE MISMATCH OF FORM 26AS IN ALL THE 5 RETURNS AND IN ORDER TO AVOID LITIGATION RETURN OF EACH CO - OWNER WAS FILED IN BY TAKING EQUAL SALE CONS IDERATION. THAT THE LD. AO MADE THE ADDITION BY TAKING THE RESPECTIVE SALE CONSIDERATION IN A PERCENTAGE MANNER OF ORIGINAL INVESTMENT MADE. THIS HAS BEEN DONE ONLY ON ACCOUNT OF THE FACT SOME CO - OWNERS HAD CLAIMED SET OFF LOSS AGAINST THE CAPITAL GAINS SO SHOWN. THE LD. AO HAS BASED HIS JUDGMENT PURELY BASED ON AN ASSUMPTION THAT SOME TYPE OF TAX PLANNING HAS BEEN DONE, AND COMPLETELY IGNORED THAT FACT THAT THE ENTIRE SALES CONSIDERATION HAS DULY BEEN DULY REFLECTED BY EACH OF THE CO - OWNERS AND HAVE SHOWN ONLY ACTUAL EXPENDITURE INCURRED BY THEM AS ALLOWABLE EXPENDITURE. IT IS IMPORTANT TO NOTE THAT IN THE AFORESAID CASE THE A. 0. HA CHANGED THE SALE CONSIDERATION ON HIS OWN WITHOUT ANY DOCUMENT TO CONTRARY JUST ON THE BASIS OF A PRESUMPTION. IT IS A SETTLE D LAW SALES CONSIDERATION CANNOT BE CHANGED BY THE AO. IS HAS TO BE ACCEPTED A OFFERED BY THE ASSESSEE. IT HAS BEEN VINDICATED THROUGH VARIOUS JUDGMENTS OF HON'BLE SUPREME COURT AND HIGH COURTS AS REFERRED BELOW THAT INCOME CANNOT BE ADDED ON NOTIONAL BASI S AND THAT SALE CONSIDERATION CANNOT BE ENHANCED NOTIONALLY : - ( 1 ) CIT V. V. A. RAMAN & CO. (67 ITR 11) (SC) ( 2 ) K.P. VERGHESE V. ITO (131 ITR 597) (SC) ( 3 ) POONA ELECTRICITY SUPPLY CO. LTD. V. CIT (57 ITR 521) (SC) [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 4 ( 4 ) CIT V. SHOORJI VALLABHDAS & CO. (46 ITR 144) (SC) ( 5 ) K EDARNATH JUTE MFG. CO. LTD. (82 ITR 363) (CAL) ( 6 ) CIT VS CITIBANK N. A. (201 ITR 930) (BOM) ( 7 ) CIT VS. EASTERN INVESTMENTS LIMITED (213 ITR 334) (CAL) ( 8 ) CIT VS. A. RAMAN & CO. (67 ITR 11) (SC) ( 9 ) CIT VS. MAHAVIR CO. (P) LTD., (206 ITR 68) (RAJ) THE AO CANNOT ASSU ME THE SAME AND BY DOING SO HE IS DISREGARDING THE APPARENT. FOR THIS PROPOSITION RELIANCE IS PLACED ON FOLLOWING: - THE SUPREME COURT HAS HELD, IN THE CASE OF CIT V. B. M. KHARWAR 72 ITR 603, 607 (SC) THAT: 'IT IS NOW WELL - SETTLED THAT THE T AXING AUTHORITIES ARE NOT ENTITLED IN DETERMINING WHETHER A RECEIPT IS LIABLE TO BE TAXED TO IGNORE THE LEGAL CHARACTER OF THE TRANSACTION WHICH IS THE SOURCE OF THE RECEIPT AND TO PROCEED ON WHAT THEY REGARD AS 'TH&~ SUBSTANCE OF THE MATTER.' THE SUPREME COURT, IN THAT CASE, PROCEEDED TO HOLD THAT: 'THE LEGAL EFFECT OF A TRANSACTION CANNOT BE DISPLACED BY PROBING INTO THE 'SUBSTANCE OF THE TRANSACTION'. THIS PRINCIPLE APPLIES A LIKE TO CASE IN WHICH THE LEGAL RELATION IS RECORDED IN A FORMAL DOCUMENT, AND TO CASE WHERE IT HAS TO BE GATHERED FROM EVIDENCE ORAL AND DOCUMENTARY AND CONDUCT OF THE PARTIES TO THE TRANSACTION.' ALL THE PARTIES TO THE TRANSACTION HAVE THROUGH THEIR CONDUCT AND ACTION HAVE CLEARLY TREATED THE INTEREST IN THE PROPERTY AS EQUAL, AN D ACCORDINGLY HAVE SHOWN THE SAME IN THEIR RETURN OF INCOME. IT IS IMPORTANT TO NOTE THAT WHEN TWO OR MORE PEOPLE BUY A PROPERTY BUT DO NOT SPECIFICALLY MENTION THE SHARE THAT EACH HAS IN PROPERTY; A TENANCY - IN - COMMON' IS CREATED. ALL THE CO - OWNERS CAN USE THE ENTIRE PROPERTY AND EVERY CO - OWNER IS DEEMED TO BE HAVING AN EQUAL SHARE IN IT. IT IS TO BE NOTED THAT MERE CO - [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 5 OWNERSHIP OF PROPERTY WITHOUT REFERENCE TO ANY SPECIFIED EXTENT WOULD IMPLY THAT THE CO - OWNERS HAVE EQUAL INTERESTS IN THE PROPERTY. FOR ANY SPECIFIC, PRE - AGREED SHARE, THE DETAILS HAVE TO SPECIFICALLY BE MENTIONED IN THE PROPERTY DOCUMENTS. THE SALE DEED CAN SPECIFY THE SHARES OF THE CO - OWNERS - THE PROPORTION OF OWNERSHIP AMONG THE INDIVIDUALS. IN THE INSTANT CASE ALSO ALL THE FAMILY MEMBERS HAD DECIDED TO TREAT THEIR SHARES EQUAL AS PART OF THE FAMILY ARRANGEMENT WHICH IS PERMISSIBLE UNDER THE LAW. FURTHER SECTION 48 OF THE INCOME TAX ACT, 1961 SPEAKS THE MANNER OF COMPUTATION OF CAPITAL GAIN: [MODE OF COMPUTATION. 48. THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITA/ ASSET THE FOLLOWING AMOUNTS, NAMELY: - (I) EXPENDITURE INCURRED WHOLLY AND EXCESSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THRETO: IT IS VERY CLEAR FROM ABOVE THAT THE ACT CLEARLY SPEAKS ABOUT DIFFERENCE BETWEEN SALE CONSIDERATION AND COST OF ACQUISITION AS CAPITAL GAIN. IN THIS CASE ALSO THE SALE CONSIDERATION OF THE ASSESSEE IS 59,27,200/ - WHICH IS EVIDENCE BOTH BY THE BANK STATEMENT & TDS DEDUCTED AND THE COST OF ACQUISITION IS 74,37,000/ - FURTHER AN AMOUNT OF 417000 BEING TRANSFER EXPENSES THE BALANCE RESULT IN CAPITA L GAIN/LOSS. IT IS ALSO TO BE UNDERSTOOD THAT THE LEARNED AO HAS ERRED ON FACTS AND IN LAW WHEREIN THE AMOUNTS WHICH WERE ALREADY OFFERED IN HANDS OF RELEVANT PERSONS HAS AGAIN BEEN TAXED IN ASSESSEE'S HANDS WHICH IS RESULTING IN DOUBLE TAXATION. AGAIN CON SIDERING IT IS WOULD RESULTING IN DOUBLE TAXATION OF SAME INCOME WHICH IS PROHIBITED UNDER INCOME TAX ACT. IT IS A SETTLED LAW THAT SAME INCOME CANNOT BE TAXED TWICE AND COURTS HAVE RECOGNIZED AND FIRMLY SETTLED [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 6 THE PRINCIPLE THE ESCHEWS DOUBLE TAXATION IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS: NAGAPPA VS. CIT[1969](73 ITR 626,633)(SC); - CIT VS. MURLIDHAR [1966](60 ITR 95)(SC); JOTIPRASAD PRASAD VS. ITO [1959] (37 ITR 107) (ALL); GIRDHARIAFA VS. CIT (1968) 70 ITR 853 (ALL); CIT VS. JOHNY (1969) 73 ITR 459 (KER); ESCORTS LTD. VS. UOI (1993) 199 ITR 43 (SC) THE LD. AO HAS ALSO MADE AN ADDITION OF RS. 52,056/ - BY DISALLOWING THE SET OFF OF LOSS UNDER THE HEAD HOUSE PROPERTY AGAINST INCOME UNDER HEAD BUSINESS OR PROFESSION BY HOLDING THAT THIS LOSS HAS BEEN RECOMPUTED AS SHORT TERM CAPITAL GAINS DESPITE THE FACTS THAT THIS LOSS HAS NOTHING TO DO WITH INCOME FROM CAPITAL GAINS. THE LD. AO HAS TOTALLY CONFUSED HIMSELF WHILE GIVING THIS FINDING AND THUS THE DISALLOWANCE OF THE SAME IS VOID - AB - INITIO. IN VIEW OF ABOVE IT IS HEREBY PRAYED THAT DUE RELIEF BE GRANTED TO THE ASSESSEE AND THE ORDER BE QUASHED.' 5 . THE LD. CIT(A) AFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE ASSESSEE HELD AS FOLLOWS: - THE ORDER OF THE A.O. AND THE ABOVE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED. THE APPELLANT IS THE CO OWNER OF A PROPERTY. THE APPELLANT INVESTED 42% OF THE TOTAL CONSIDERATION AT THE TIME OF PURCHASE OF THE PROPERTY. THEREFORE, IT IS CLEAR THAT TH E APPELLANT WAS HAVING A SHARE OF 42% IN THE PROPERTY. HOWEVER, AT THE TIME OF SALE OF THE PROPERTY THE APPELLANT IS CLAIMING THAT SHE IS ONLY 20% OWNER. THIS CLAIM IS BASELESS INTERESTINGLY THE APPELLANT IS CLAIMING COST OF ACQUISITION AT 42% AND SALE CON SIDERATION FOR 20%. THIS IS ABSURD AND ILLEGAL. IT IS CLEAR THAT APPELLANT IS CLAIMING HIGHER DEDUCTION IN TERMS OF COST OF ACQUISITION AND SHOWING SALE CONSIDERATION FOR LESSER PORTION. IN VIEW OF THIS THE AO WAS FUL LY JUSTIFIED IN TAKING THE SALE CONSID ERATION IN THE SAME PROPORTION AS COST OF ACQUISITION SHOWN BY THE APPELLANT. THIS BEING SO THERE IS NO ERROR IN THE ORDER OF THE AO. THE SAME IS CONFIRMED. [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 7 IN THE RESULT, THE APPEAL IS DISMISSED. 6 . WE HAVE PERUSED THE CASE RECORD AND WE FIND THAT IN THIS C ASE THE ASSESSEE HAS CLAIMED COST OF ACQUISITION AT 42% AND SALE CONSIDERATION @ 20%. THE LD. CIT(A) WAS OF THE VIEW THAT WHEN THE ASSESSEE WAS HAVING SHARE OF 42%, IT IS ABSURD AND S INCE ASSESSEE IS CLAIMING HIGHER DEDUCTION, THEREFORE, THE ASSESSING OFF ICER WAS JUSTIFIED IN TAKING THE SALE CONSIDERATION IN THE SAME PROPORTION AS COST OF ACQUISITION. AT THE TIME OF HEARING BEFORE US, THE LD. A.R. OF THE ASSESSEE CONTENDED THAT AT THE TIME OF SALE OF PROPERTY, ASSESSEE WAS THE OWNER OF ONLY 20% OF THE PRO PERTY AND AT THE SAME TIME IT WAS ALSO CONTENDED THAT THE ASSESSING OFFICER HAS NOT PROVIDED PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE FOR PRESENT ING HER CASE. WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT SCENARIO AND IN THE INTEREST OF JUSTI CE , THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE WHETHER THE ASSESSEE WAS HAVING SHARE OF 42% OR AT THE TIME OF SALE, SHE WAS OWNER OF ONLY 20% OF THE PROPERTY. ACCORDINGLY , WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AFTER PROVIDING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 7 . IN THE RESULT, STAY APPLICATION OF THE ASSESSEE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 / 01/2018 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH JANUARY, 2018 JJ: 1812 [ S.A. NO.15/LKW/2017 AND ITA NO.656/LKW/2017 ] 8 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR