Gambhir Chorida, CHENNAI V. ITO Non Corporate Ward 4(4), CHENNAI

ITA 669/CHNY/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8873 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Capital receipt; Revised return; Reason to believe; Reassessment proceedings
• Section: 148

Judgement Text

आयकर अपीलीय अिधकरण ‘बी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय -ी वी. द ु गा3 राव, ाियक सद5 एवं माननीय -ी मनोज कु मार अ:वाल ,लेखा सद5 के सम<। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.669/Chny/2019 (िनधा3रण वष3 / Assessment Year: 2013-14) Shri. Gambhir Chordia 342, Mint Street, Sowcarpet, Chennai – 600 079. बनाम/ V s . ITO Non-Corporate Ward -4(4) Chennai. थायी लेखा सं. /जीआइ आर सं. /P AN / G I R No . AAL P G - 8 8 6 7 - E (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri D. Anand (Advocate) – Ld. AR थ की ओरसे/Respondent by : Shri P. Sajit Kumar (JCIT) – Ld. DR सुनवाई की तारीख/ Date of Hearing : 09-02-2022 घोषणा की तारीख / Date of Pronouncement : 15-02-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2013- 14 arises out of the order of learned Commissioner of Income Tax (Appeals)-5, Chennai [CIT(A)] dated 12-07-2018 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. ITA No. 669/Chny/2019 - 2 - 147 of the Act on 22-12-2017. The grounds raised by the assessee read as under: - i) The order of the Learned CIT(A) -5 is against the provisions of law and contrary to the facts of the case and is therefore unsustainable. (ii) The Learned CIT(A) -5 erred in dismissing the appeal and upholding the addition of Rs.10,00,000 by following decisions whose facts and circumstances are completely different from the facts and circumstances of the appellant's case. (iii) The Learned CIT(A) -5 erred in not following the binding decision of Hon'ble ITAT Madras Bench `D' in the case of R T Balasubramaniam Vs ITO [1994] 50 ITD 513 (MAD) wherein, on facts identical to the facts of the case of the appellant, the Hon'ble ITAT held that appeal u/s 246(1) is a valid one. (iv) The Learned CIT(A) - 5 ought not to have upheld the addition of Rs 10,00,000 as the same constituted a capital receipt not liable for tax as per 51 of the IT Act, 1961. (v) The order of the learned CIT(A) -5 is incomplete in so far as it has not rendered any decision on the Grounds of Appeal against addition of interest income of Rs.4,26,044 which has been subjected to tax twice. (vi) The reopening of the assessment u/s 148 by the assessing officer is invalid as there can be no valid reason to believe that income chargeable to tax has escaped with reference to a capital receipt dealt with by a specific provision of the I T Act,1961. (vii) For the grounds stated above and for the grounds which may be permitted to be adduced at the time of hearing of the appeal it is prayed that the additions made in the assessment be deleted and justice rendered. The Ld. AR submitted that the only grounds urged in the appeal are ground nos.2 to 4 and the other grounds are not being pressed. In ground nos. 2 to 4, the sole grievance of the assessee is addition of Rs.10 Lacs which have been claimed by the assessee to be capital receipt not liable to Tax u/s. 51 of the Act. However, the revenue authorities have added the same to the income of the assessee since the assessee offered the same in the revised return of income. 2. The Registry has noted a delay of 186 days in the appeal, the condonation of which has been sought by the assessee on the strength of an affidavit. It has been submitted that after receipt of the appellate order, the same was handed over along with other papers to the concerned Chartered Accountant. However, the appeal papers got mixed-up with other papers of the assessee which resulted into ITA No. 669/Chny/2019 - 3 - late filing of appeal. It has also been submitted that the delay was neither willful nor intentional. Though, Ld. DR opposed the condonation of delay, however, finding that the delay was not intentional, we admit the appeal for adjudication on merits. 3. Having heard rival submissions and after going through the orders of lower authorities, our adjudication would be as under. 4. During the course of reassessment proceedings, it transpired that the assessee, along with his brother Shri Pannalal Chordia, entered into agreement to sell a property admeasuring 7200 square feets situated at Madley South Colony, T. Nagar, Chennai for consideration of Rs. 27 Crores and received advance of Rs.2 Crores. However, the negotiations failed and the assessee as well as seller mutually decided to cancel the agreement as per contractual terms. As per the terms, the vendors were entitled to deduct Rs.20 Lacs towards liquidated damages. Accordingly, the assessee, to the extent of his share, refunded the amount of Rs.90 Lacs after deducting Rs.10 Lacs towards liquidated damages. Though the assessee did not offer this income in the original return of income, however, the said amount of Rs.10 Lacs was offered to tax in revised return of income filed by the assessee during the course of reassessment proceedings. 5. However, subsequently the assessee preferred further appeal before Ld. CIT(A) and submitted that the receipt of Rs.10 Lacs were nothing but capital receipts not chargeable to tax. It was submitted that the amendment to Section 56(2)(ix) was applicable only from Assessment Year 2015-16 which provide that any sum of money received as on advance or otherwise in the course of negotiations for transfer of capital assets and if such sum is forfeited and the ITA No. 669/Chny/2019 - 4 - negotiations do not result in transfer of capital asset then the amount so forfeited shall be chargeable to tax under the head “Income from other sources”. However, before the amendment, the advance money so forfeited would be governed by the provisions of Sec.51 which provide that where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations, shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition. However, Ld. CIT(A) rejected the plea on the ground that these were agreed additions. Aggrieved, the assessee is in further appeal before us. 6. Upon careful consideration of factual matrix, the undisputed position that emerges is that the assessee has retained liquidated damages of Rs.10 Lacs out of advance give by the purchaser as part of sale consideration of a capital asset. The advance so retained by the assessee was governed by the provisions of Sec.51 which provide that such retention was to be deducted from cost of acquisition of the asset. The amendment brought in to Sec. 56(2)(ix) was effective only from AY 2015-16 and therefore, the retention amount could not be brought to tax in this year. The CBDT Circular 14 (XL-35) of 1955 dated 11-04-1955 provides that the department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due from him. Further, Article 265 of the Constitution of India provides that no tax shall be levied or collected except by the authority of law. Therefore, no tax can be levied or collected in India, unless it is explicitly and clearly authorised by way of legislation. ITA No. 669/Chny/2019 - 5 - Hence, on the given facts and circumstances, the amount forfeited by the assessee could not be brought to tax simply because the same was, under mistake, admitted by the assessee in the return of income. We direct Ld. AO to re-compute the income of the assessee by reducing the income by sum of Rs.10 Lacs. This amount shall go on to reduce the cost of the capital asset. 7. The appeal stand partly allowed in terms of our above order. Order pronounced on 15 th February, 2022 Sd/- (V. DURGA RAO) ाियक सद5 /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद5 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 15-02-2022 JPV JPVJPV JPV आदेश की Wितिलिप अ :ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF