Smt. Kamala Ebenezer, Bangalore V. ITO, Bangalore

ITA 671/BANG/2009

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0006 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZINIK VASHAI
• Assessee Lawyers: GANESH RAO
• Section: 54

Judgement Text

ITA.671/BANG/2009 PA GE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A' BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A.NO.671/BANG/2009 (ASSESSMENT YEAR : 2006-07 ) SMT. KAMALA EBENEZER, FLAT NO.001, MARIA RESIDENCY, NO.101, WHEELER ROAD EXTENSION, COOKIE TOWN, BANGALORE .. APPELLANT V. INCOME TAX OFFICER, WARD -1(7), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. GANESH RAO RESPONDENT BY : SMT. JACINTA ZINIK VASHAI O R D E R PER K. P. T. THANGAL, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX(A) FOR THE ASSESSMENT YE AR 2006-07. THOUGH THE ASSESSEE HAS URGED AS MANY AS SIX EFFECT IVE GROUNDS, IN FACT, IT IS CONFINED TO ONE ISSUE AND IS AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IN CONFIRMING THE ASS ESSMENT ORDER THAT IS WITH REGARD TO REIMBURSEMENT OF FIXED DEPOS IT OF RS.20 LAKHS RECEIVED BY THE ASSESSEE IN THE YEAR 1997 AND RS.15 LAKHS TOWARDS ITA.671/BANG/2009 PA GE - 2 INTEREST ON THE ABOVE FIXED DEPOSIT RECEIVED BY THE ASSESSEE ON 29.4.2005, WHICH WAS INVESTED IN NABARD BONDS ON 10 .10.2005 AND CLAIMING EXEMPTION U/S.54EC OF THE ACT WAS NOT ALLOWED. THE ASSESSEE IS OBJECTING TO THE ASSESSMENT OF THE ABOV E ASSESSMENTS AS SUCH. 2. THE FACTS LEADING TO THE DISPUTE BRIEFLY IS AS U NDER. THE ASSESSEE FILED THE RETURN OF INCOME ON 22.6.2006 DE CLARING INCOME OF RS.3,00,110/- WHICH WAS PROCESSED U/S.143(1). SUBS EQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. AS PER THE AIR INFORMAT ION IT WAS NOTICED THE ASSESSEE DEPOSITED AN AMOUNT OF RS.45 LAKHS IN NABARD BONDS DURING THE YEAR UNDER CONSIDERATION. ON QUESTIONIN G, THE ASSESSEE STATED THAT ALONG WITH HER LATE HUSBAND SHE HAD ENT ERED INTO AN AGREEMENT FOR SALE OF LAND IN THE YEAR 1997 WITH M/ S. KMF BUILDERS AND DEVELOPERS LTD., THIS WAS DONE BY ISSUING POWE R OF ATTORNEY TO SHRI. PRADEEP KUMAR MALIK ONE OF THE DIRECTORS. ON THE ADVISE OF THE PURCHASER, THE ASSESSEE HAD DEPOSITED AN AMOUNT OF RS.20 LAKHS IN FIXED DEPOSIT WITH M/S. KMF LTD., IN WHICH THE PURC HASER HAD SUBSTANTIAL INTEREST. THE COMPANY, KMF LTD., WENT INTO LIQUIDATION AND DID NOT PAY THE ASSESSEE ON MATURITY OF DEPOSIT IN SPITE OF ASSESSEE'S ALL OUT EFFORTS. SUBSEQUENTLY ASSESSEE FURTHER LEARNT THAT THE PURCHASER OF THE LAND WAS NEGOTIATING TO SELL THE P ROPERTY ON THE BASIS ITA.671/BANG/2009 PA GE - 3 OF POWER OF ATTORNEY ISSUED BY THE ASSESSEE. IMMED IATELY THE ASSESSEE CANCELLED THE POWER OF ATTORNEY. HOWEVER, THE PURC HASER HAD SOLD THE PROPERTY ON 18.12.2004. THE SALE TOOK PLACE BEFORE THE CANCELLATION OF THE POWER OF ATTORNEY. THUS, THE SALE BECAME VO ID. THE PURCHASER AGREED TO PAY RS.35 LAKHS TO THE ASSESSEE. THIS TH E ASSESSEE CLAIMED AS ADDITIONAL CONSIDERATION OR THE ASSESSEE WANTS I T TO BE CONSIDERED AS WING FALL GAIN/CAPITAL APPRECIATION. THE ASSESSEE SUBMITTED A SATISFACTION AGREEMENT IN SUPPORT OF THE ABOVE CLAI M. FROM THE AGREEMENT, IT WAS NOTED THE ASSESSEE DEMANDED PAYME NT TOWARDS FIXED DEPOSITS KEPT IN KMF LTD., AND INTEREST THERE ON. THE ASSESSING OFFICER HELD THE RECEIPT IN FACT TAKES TH E CHARACTER OF FIXED DEPOSIT AMOUNT RECEIVED WHICH WAS DEPOSITED BY THE ASSESSEE AND INTEREST PAID ON THIS DEPOSIT DOES NOT TAKE THE CHA RACTER OF WIND FALL GAIN OR CAPITAL APPRECIATION, AS CLAIMED BY THE ASS ESSEE. ALTERNATIVELY THE ASSESSEE CONTENDED IF RS.15 LAKHS IS TREATED AS INTEREST THEN IT SHOULD BE SPREAD OVER A PERIOD OF 9 YEARS AND IT CA NNOT BE TAXED IN ONE YEAR. THE ASSESSING OFFICER HELD TO ACCEPT THE CLAIM OF THE ASSESSEE, THE ASSESSEE SHOULD HAVE REQUIRED TO WORK OUT THE TAX LIABILITY INCLUDING INTEREST AND PAID THE SAME WHER EAS THIS HAS NOT BEEN DONE BY THE ASSESSEE. HENCE HE REJECTED THIS CLAIM OF THE ASSESSEE AND TREATED THE ENTIRE AMOUNT OF RS.15 LAK HS AS ASSESSEE'S TAXABLE INCOME IN THE YEAR UNDER CONSIDERATION. ITA.671/BANG/2009 PA GE - 4 3. THE ASSESSEE FURTHER SUBMITTED RS.20 LAKHS WAS D ECLARED IN THE RETURN OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998 -99 AS SALE RECEIPT FOR CALCULATING THE CAPITAL GAINS AND THE AMOUNT WA S INVESTED IN NABARD BONDS, ON ACCOUNT OF WHICH ASSESSEE WAS ENTI TLED TO DEDUCTION U/S.54EC OF THE ACT. AS PER THE SECTION THE ASSESSEE WAS ELIGIBLE TO CLAIM EXEMPTION IF THE CAPITAL GAIN IS INVESTED AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF TRA NSFER. IN THE INSTANT CASE, EVEN ACCORDING TO THE ASSESSEE SHE RECEIVED T HE AMOUNT IN ASSESSMENT YEAR 1997-98, WHEREAS THE INVESTMENT WAS MADE IN THE YEAR 2005. HENCE, THE ASSESSING OFFICER HELD THE A SSESSEE'S REQUEST IS UNACCEPTABLE. AGGRIEVED BY THE ABOVE ORDER ASSESSE E APPROACHED THE FIRST APPELLATE AUTHORITY. 4. THE COMMISSIONER OF INCOME-TAX(A) RECORDS THAT T HE ASSESSEE VIDE SALE AGREEMENT DT.16.9.95 SOLD IMMOVABLE PROPE RTY MEASURING 9 ACRES 10 GUNTAS IN SY NO.131,132, 133, 118/2 AND 11 8/5 OF SEEGEHALLI VILLAGE, BIDARAHALLI HOBLI, HOSKOTE TALUK, BANGALOR E TO M/S. KMF BUILDERS AND DEVELOPERS LTD., FOR A TOTAL CONSIDERA TION OF RS.3,70,00,000/- AT THE RATE OF RS.40,00,000/- PER ACRE. A PAYMENT OF RS.1,10,00,000/- WAS MADE OUT OF TOTAL SALE CONSIDE RATION OF RS.3,70,00,000/- SUBJECT TO THE BALANCE AMOUNT OF R S.2,59,00,000/- TO BE PAID PARTIALLY UPON RECEIPT OF NOC FROM THE APPR OPRIATE AUTHORITY ITA.671/BANG/2009 PA GE - 5 UNDER CHAPTER XXC OF THE INCOME TAX ACT, 1961 AND T HE REMAINDER TO BE PAID ON OR BEFORE THE EXECUTION AND REGISTRATION OF SALE DEED. ASSESSEE'S TOTAL RECEIPT OF THE SALE CONSIDERATION WAS RS.1,60,00,000/- , THE DETAILS OF WHICH ARE GIVEN AT PAGE 3 OF THE C OMMISSIONER OF INCOME-TAX(A)'S ORDER. ASSESSEE OUT OF THIS RECEIP T MADE THE ABOVE MENTIONED FD OF RS.20,00,000/- ON 11.4.1997 IN KMF LTD., A COMPANY IN WHICH THE PURCHASER HAD SUBSTANTIAL INTE REST AND EXECUTED A POWER OF ATTORNEY IN FAVOUR OF PRADEEP KUMAR MALI K AS MENTIONED ABOVE. THE COMPANY WENT INTO LIQUIDATION WITHOUT M AKING ANY PAYMENT. SUBSEQUENTLY KNOWING THAT THE PARTY WAS T RYING TO SELL THE PROPERTY TO A THIRD PARTY, THE ASSESSEE CANCELLED T HE POWER OF ATTORNEY. THE ASSESSEE FILED A CRIMINAL COMPLAINT AGAINST THE COMPANY WHICH IS PENDING BEFORE THE COMPANY LAW BOARD AND RBI. IN O RDER TO ESCAPE THE LEGAL CONSEQUENCES THE COMPANY ENTERED INTO A S ETTLEMENT AGREEMENT WITH THE ASSESSEE AND HER HUSBAND. THUS PAYMENT OF RS.35 LAKHS WAS MADE BY THE TWO DEMAND DRAFTS OF RS.14 LA KHS AND RS.21 LAKHS. 5. BEFORE THE COMMISSIONER OF INCOME-TAX(A) ASSESSE E SUBMITTED THE RECEIPT OF RS.35 LAKHS IS A WIND FALL GAIN/CAPI TAL APPRECIATION SINCE THE ASSESSEE HAD GIVEN UP ALL HOPES OF GETTING BACK THE DEPOSITS AND ON RECEIPT OF THE AMOUNT ASSESSEE INVESTED IT IN NA BARD BONDS AND, ITA.671/BANG/2009 PA GE - 6 THEREFORE, THE ASSESSEE IS QUALIFIED FOR SECTION 54 E DEDUCTION. ALTERNATIVELY, IT WAS CONTENDED RS.15 LAKHS, IF TRE ATED AS INTEREST ON FD SHOULD BE TAXED BY SPREADING IT OVER A PERIOD OF NINE YEARS. 6. IN THE PREMISES OF THE ABOVE FACTS, THE COMMISSI ONER OF INCOME-TAX(A) HELD AGREEING WITH THE ASSESSING OFFI CER THAT THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S.54EC AN D BRINGING THE ENTIRE INTEREST OF RS.15 LAKHS FOR THE ASSESSMENT Y EAR 2005-06. HE HELD THAT SECTION 54EC IS CLEAR TO THE EFFECT THAT THE ASSESSEE SHOULD HAVE MADE THE INVESTMENT WITHIN SIX MONTHS OF THE R ECEIPT OF CONSIDERATION SO AS TO GET THE BENEFIT OF THE SECTI ON. ASSESSEE NEITHER INVESTED THE WHOLE NOR ANY PART OF THE CAPITAL GAIN WITHIN THE TIME STIPULATED OF SIX MONTHS. INVESTMENT WAS MADE AFTE R LAPSE OF EIGHT YEARS. COMING TO THE INTEREST OF RS.15 LAKHS THE A SSESSEE NEVER MADE AN ATTEMPT TO DISCLOSE THE INCOME EARNED OVER A PER IOD OF NINE YEARS AND VOLUNTARILY NEVER OFFERED IT TO TAX. HENCE, HE HELD THERE IS NO REASON FOR THE ASSESSEE TO ARGUE THAT IT SHOULD BE SPREAD OVER NINE YEARS. AGGRIEVED BY THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. CONTENDING PARTIES REITERATED THE SUBMISSIONS MA DE BEFORE THE REVENUE AUTHORITIES. ITA.671/BANG/2009 PA GE - 7 8. CONSIDERING THE RIVAL SUBMISSIONS AND GOING THRO UGH THE ORDER OF THE REVENUE AUTHORITIES WE ARE OF THE VIEW THAT THE ISSUE IS TO BE DECIDED IN ASSESSEE'S FAVOUR. THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGES 23 TO 26 AND ALSO 27 TO 30 OF THE PAPER BOOK, WHICH ARE THE ASSESSMENT ORDERS FOR THE ASSE SSMENT YEAR 1997-98 -REGULAR AS WELL AS REOPENED. IN THE REOPE NED ASSESSMENT ORDER UNDER COMPUTATION OF CAPITAL GAINS, NET SALE FIGURE OF RS.3,64,00,000/- IS MENTIONED WHICH INDICATES THAT THIS AMOUNT WAS CONSIDERED BY THE REVENUE AUTHORITIES WHILE MAKING THE ASSESSMENT FOR ASSESSMENT YEAR 1997-98. AT PAGE 26, IN THE RE GULAR ASSESSMENT, ASSESSEE'S SHARE IS TAKEN AS RS.1,57,40,540/- WHICH INDICATES THAT THE AMOUNT WAS KNOWN AND TAXED EARLIER AND, THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION IN TAXING IT AG AIN. 9. COMING TO THE ASSESSEE'S CLAIM IF THE BENEFIT OF SECTION 54EC IS NOT TO BE GIVEN TO THE ASSESSEE, THEN THE ADDITIONA L RECEIPT OF RS.15 LAKHS SHOULD BE TREATED AS INTEREST ACCRUED ON THE DEPOSIT, WE ARE OF THE VIEW IT IS A REASONABLE CLAIM. MERELY BECAUSE THE AMOUNT WAS NOT DISCLOSED TO THE REVENUE IT DOES NOT MAKE THE ENTIR E RECEIPT IS TO BE TREATED AS INCOME FOR THE YEAR UNDER CONSIDERATION. WE HOLD SO. ITA.671/BANG/2009 PA GE - 8 10. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 15TH DAY OF JANUARY, 20 10. SD/- SD/- (A. MOHAN ALANKAMONY) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 15TH JANUARY, 2010 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE