ITO 25(3)(1), MUMBAI V. NEELA H IYER, MUMBAI

ITA 6691/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83674 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DURYA DUTT
• Assessee Lawyers: KAMLESH IYER
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Additional evidence; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 6691/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER 25(3)(1), ROOM NO. 307, 3 RD FLOOR, BLDG. C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 # VS. NEELA H. IYER PROP. M/S. APEX FREIGHT SYSTEM, 6, SWARUP NAGAR, NEXT TO JEENA HOUSE, OM NAGAR, ANDHERI (E), MUMBAI-99 . 303,5/C, ALICA NAGAR, AKURLI ROAD, KANDIVALI (E), MUMBAI-400 101 $ #'%' ./PAN/GIR NO. AAFPI 4386 L ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI DURYA DUTT '($&)* / RESPONDENT BY : SHRI KAMLESH IYER + ,)- / DATE OF HEARING : 11.06.2014 ./0 )- / DATE OF PRONOUNCEMENT : 05.09.2014 '1# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (CIT(A) FOR SH ORT) DATED 03.08.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2008-09 VIDE ORDER DATED 30.11.2010. 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE VALIDITY IN LAW, AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE DIRECTION BY THE LD. CIT(A) TO THE ASSESSING OFFICER 2 ITA NO. 6691/MUM/2012 (A.Y. 2008-09) ITO VS. NEELA H. IYER (A.O.) TO COMPUTE THE CAPITAL GAIN ARISING TO THE A SSESSEE ON THE SALE OF OFFICE PREMISES AT SAHAR CARGO ESTATE IN TERMS OF SECTION 50 OF THE AC T, FURTHER ALSO DIRECTING THE MANNER IN WHICH THE SAME OUGHT TO BE SO, I.E., THE COST TO BE ADOPTED AND THE DEDUCTION TO BE ALLOWED IN COMPUTING THE SAME. 3. THE FACTS OF THE CASE ARE SIMPLE AND LARGELY UND ISPUTED. THE ASSESSEE, A CLEARING AND FORWARDING AGENT, OPERATING UNDER THE TRADE NAM E M/S. APEX FREIGHT SYSTEM, ACQUIRED A COMMERCIAL UNIT # 113, ADMEASURING 705 S Q. FT. (BUILT UP AREA) AT SAHAR CARGO ESTATE, ANDHERI (E), FALLING UNDER GREATER MUMBAI R EGION, VIDE AN AGREEMENT DATED 07.10.2005 (PB PGS. 47-66) AT A COST OF RS.21.15 LA CS. THE SAME STOOD SOLD BY THE ASSESSEE VIDE AGREEMENT FOR SALE DATED 26.06.2007 ( PB PGS. 67-94) FOR RS.39 LACS. THE ASSESSEE HAVING NOT RETURNED THE SHORT TERM CAPITAL GAIN (STCG) ARISING TO IT THUS (PB PGS. 35-37), WHICH IN THE OPINION OF THE A.O. WORKS TO R S.17.85 LACS, I.E., THE DIFFERENCE BETWEEN THE SALE AND PURCHASE COST, THE SAME WAS BR OUGHT TO TAX U/S.45(1) AS STCG AFTER SHOW CAUSING THE ASSESSEE IN ITS RESPECT, PROVIDING HER AN OPPORTUNITY TO EXPLAIN THE SAID OMISSION/NON-DISCLOSURE OF INCOME PER HER RETURN (R EFER PARAS 3, 9 OF THE ASSESSMENT ORDER). IN APPEAL, THE ASSESSEE EXPLAINED THAT THE RELEVANT CAPITAL ASSET WAS, UPON PURCHASE, INCLUDED AS A PART OF THE RELEVANT BLOCK OF ASSETS, OFFICE PREMISES WHICH HAD A BROUGHT FORWARD OPENING WRITTEN DOWN VALUE (WDV) OF RS.6,81,716/- AS ON 01.04.2005, AND DEPRECIATION ACCORDINGLY CLAIMED ON THE SAID BL OCK AT THE EXIGIBLE RATE OF 10%, RESULTING IN THE CLOSING WDV (OF THE SAID BLOCK) AT RS.26,32,524/- AS ON 31.03.2006, AS UNDER, WHICH IS IN AGREEMENT WITH THE BOOKS OF ACCO UNT AND THE RETURN FOR A.Y. 2006-07 (PB PGS. 42-46): A.Y. 2006-07 BLOCK OF ASSETS RATE OPENING WDV DATE OF ADDITION ADDITION TOTAL DEPRECIATION CLOSING WDV OFFICE PREMISES 10% 6,81,716 07.10.2005 22,43,310 29,25,027 2,92,503 26,32,524 3 ITA NO. 6691/MUM/2012 (A.Y. 2008-09) ITO VS. NEELA H. IYER THE SAID CLOSING WDV, BEING ALSO THE OPENING WDV FO R THE CURRENT YEAR, IS TO BE DEDUCTED AS A DEEMED COST OF ACQUISITION U/S.50. FU RTHER, THE ACQUISITION COST OF THE ASSET HAD BEEN TAKEN AT RS.22,43,310/-, I.E., AS AGAINST RS.21.15 LACS, IN VIEW OF INCURRING INCIDENTAL COST. TWO, AS THE STAMP DUTY AND OTHER R EGISTRATION EXPENSES, I.E., UPON SALE, WERE TO BE SHARED EQUALLY BETWEEN THE VENDOR AND TH E VENDEE, ANOTHER RS.1,12,730/- WOULD REQUIRE BEING DEDUCTED FROM THE SALE CONSIDER ATION OF RS.39 LACS IN COMPUTING STCG U/S.45 R/W S. 50. THE LD. CIT(A) DIRECTED ACCO RDINGLY, SO THAT THE REVENUE IS IN APPEAL, ALSO CLAIMING THAT THE FIRST APPELLATE AUTH ORITY HAD IN SO DIRECTING, ADMITTED ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES, 1962 (REFER GROUND 1(IV)). 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 OUR FIRST OBSERVATION IN THE MATTER IS THAT THE ASSESSEES PAPER-BOOK (ALSO REFERRED TO IN THE FOREGOING NARRATION FACTS AT PARA 3 ABOVE ), IS NOT CERTIFIED BY OR ON THE ASSESSEES BEHALF IN TERMS OF RULE 18 OF THE INCOME TAX (APPEL LATE TRIBUNAL) RULES, 1963, SPECIFYING AS TO WHICH DOCUMENT WAS PRODUCED BEFORE WHICH AUTHORITY, AND ITS PURPORT. THERE IS IN FACT NO CERTIFICATION WHATSOEVER, INCLU DING AS TO THEIR BEING TRUE COPIES. THE SAME, EVEN OTHERWISE MATERIAL, IN-AS-MUCH AS NO DOC UMENT THAT HAS NOT BEEN PRODUCED BEFORE THE AUTHORITIES BELOW COULD BE CONSIDERED BY US AS A PART OF THE RECORD (R. 18(6)), ASSUMES PARTICULAR SIGNIFICANCE IN VIEW OF THE REVE NUES GROUND NO. 1(IV), CLAIMING ADMISSION OF ADDITIONAL EVIDENCE/S BY THE LD. CIT(A ) IN VIOLATION OF RULE 46A. THE DOCUMENTS FORMING PART OF THE ASSESSEES PAPER-BOOK , I.E., APART FROM THE ASSESSEES RETURN AND COMPUTATION FOR A.YS. 2006-07 AND 2008-0 9, EVEN AS THERE IS NO REFERENCE TO THEIR ADMISSION IN THE IMPUGNED ORDER, WE CONSIDER AS RELEVANT AND MATERIAL FOR THE PROPER DISPOSAL OF THE MATTER, WHICH IS AS TO, IN E FFECT, THE CORRECT AMOUNT OF INCOME BY WAY OF STCG AT WHICH THE ASSESSEE IS LIABLE TO BE A SSESSED IN VIEW OF TRANSFER OF THE COMMERCIAL UNIT # 113 AT SAHAR CARGO ESTATE. THIS I S AS ADMITTEDLY THE ASSESSEE HAS NOT DISCLOSED ANY SUM TOWARD THE SAME PER HER RETURN OF INCOME. WHY, IN FACT, EVEN HER ACCOUNTS FOR THE CURRENT YEAR (PB PGS. 38-41) DO NO T REFLECT THE SALE NOR IN FACT THE 4 ITA NO. 6691/MUM/2012 (A.Y. 2008-09) ITO VS. NEELA H. IYER INCURRING OF EXPENDITURE ON TRANSFER, CLAIMED AT RS .1.12 LACS, EVEN AS CLAUSE 7 OF THE AGREEMENT FOR SALE DATED 26.06.2007 WE OBSERVE PROV IDES FOR SHARING OF THE EXPENSES ON REGISTRATION AND STAMP DUTY. HOW HAS THE SAID EXPEN DITURE BEEN INCURRED/MET, AND HOW HAVE THE SALE PROCEEDS BEEN ACCOUNTED FOR, WOULD AL SO TO HAVE BEEN SEEN. THE MATTER SHALL NECESSARILY HAVE TO TRAVEL TO THE FILE OF THE A.O. FOR RE-ADJUDICATING THE MATTER BY ISSUING DEFINITE FINDINGS OF FACT, DECIDING THE REL EVANT ISSUES. 4.2 WE MAY, BEFORE PARTING WITH THE MATTER, CONVEY THE POSITION OF LAW QUA THE SUBJECT MATTER OF DISPUTE; THE RESTORATION BY US BEING ONLY IN VIEW OF THE NON-PRODUCTION OF THE RELEVANT EVIDENCES, WHICH WE CONSIDER AS MATERIAL I N DECIDING THE ISSUE AT HAND. THE ASSESSEES ASSESSMENT FOR A.Y. 2006-07, AS IT APPEA RS TO US, IS U/S.143(1). THE INCLUSION OF THE ASSET TRANSFERRED IN THE RELEVANT BLOCK OF A SSETS OFFICE PREMISES WOULD DEPEND ESSENTIALLY ON ITS USER AS AN OFFICE PREMISES BY TH E ASSESSEE, QUA WHICH WE FIND THE LD. CIT(A) TO HAVE ISSUED NO FINDING. MERELY BECAUSE TH E ASSESSEE HAS RETURNED AND DISCLOSED IT AS SUCH PER ITS RETURN OF INCOME, WHICH HAS BEEN ACCEPTED BY THE REVENUE AS SUCH; IT BEING PRECLUDED TO EXAMINE THE SAME U/S.143(1), WOU LD NOT BY ITSELF IMPLY ITS USER AND, THUS, INCLUSION OF THE SAME IN THE RELEVANT BLOCK O F ASSETS. WHERE, OF-COURSE, THE SAME HAS BEEN, SO THAT IT FORMS A PART OF THE RELEVANT BLOCK OF ASSETS, SEC.50 WOULD APPLY, TO WHICH EXTENT WE ARE IN AGREEMENT WITH THE LD. CIT(A). FURTHER ON, WE OBSERVE THAT WHAT THE ASSESSEE HAD A GREED TO VIDE AGREEMENT DATED 07.10.2005, BY PAYING AN UPFRONT AMOUNT OF RS.5 LAC S, IS TO PURCHASE THE SAID UNIT. THE BALANCE IS TO BE PAID UPON POSSESSION. CLAUSE 7(A) OF THE AGREEMENT STIPULATES THE DATE BY WHICH THE POSSESSION IS TO BE DELIVERED BY THE BUIL DER, AND WHICH IS NOT SPECIFIED. THE DATE OF POSSESSION IS MATERIAL IN-AS-MUCH AS IT IS AN ESSENTIAL INGREDIENT OF TRANSFER U/S. 2(47) OF THE ACT. AS SUCH, WHEN THE POSSESSION WAS ACTUALLY DELIVERED, A MATTER OF FACT, WOULD NEED TO BE ASCERTAINED BY THE A.O. THEN, AGAI N, THE SAME, WHERE SO, WOULD ONLY BE AFTER 07.10.2005, WHILE THE ASSESSEES RETURN/RECOR DS SHOW THE ACQUISITION DATE AS DURING THE PERIOD UP TO 30.09.2005, WHICH IS CLEARLY INCOR RECT. THE SAME WOULD, AT THE VERY MINIMUM, LEAD TO THE DEPRECIATION EXIGIBLE FOR A.Y. 2006-07 BEING LOWER BY HALF. NO 5 ITA NO. 6691/MUM/2012 (A.Y. 2008-09) ITO VS. NEELA H. IYER DEPRECIATION FOR THE INTERVENING YEAR, I.E., A.Y. 2 007-08, HAS IT APPEARS BEEN CLAIMED, AND THE REASON/S FOR THE SAME WOULD ALSO NEED TO BE ASC ERTAINED. SO, HOWEVER, AS IT WOULD APPEAR TO US, IT IS THE DEPRECIATION ACTUALLY ALLOW ED THAT HAS TO BE RECKONED FOR COMPUTING THE WDV OF THE BLOCK OF ASSETS U/S.43(6), AND WHICH IS TO BE IN TURN ALLOWED IN COMPUTING THE CAPITAL GAIN U/S.50C. THOUGH, THEREFO RE, THE REVENUE MAY NOT TO BE CORRECT IN NOT ALLOWING DEPRECIATION FOR THE INTERVENING YE AR (A.Y. 2007-08), I.E., IN VIEW OF EXPLANATION 5 TO SECTION 32(1), IT CANNOT BE DENIED THAT THE LA W WOULD HAVE TO FOLLOW COURSE. THE A.O. SHALL EXAMINE THESE ASPECTS, INCLU DING THE REASON/S FOR NON-CLAIM OF DEPRECIATION FOR A.Y. 2007-08, AND DECIDE THE ASSES SEES CLAIM, WHICH WE AGREE TO IN PRINCIPLE, AS PER LAW. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISPOSED OF ON THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 05, 2014 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + 2, MUMBAI; 3 DATED : 05.09.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + 4- 5 6 / THE CIT(A) 4. '' + 4- / CIT - CONCERNED 5. 78 9'-:; ' :;0 + 2, / DR, ITAT, MUMBAI 6. 9 <= , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + 2, / ITAT, MUMBAI