KIRIT R. PATEL, MUMBAI V. ITO WD 21(1)(2), MUMBAI

ITA 6717/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4223 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: RASHMIKANT CH OKSEY
• Keywords: Capital asset; Rectification of order; Cost of acquisition; Capital receipt
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBA I BENCH B, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6717/MUM/2010 ASSESSMENT YEAR: 2007-08 SHRI KIRIT R. PATEL, 5 TH FLOOR, RAM NIWAS, 34 VALLABHNAGAR, N.S. ROAD, JVPD, VILE PARLE (W), MUMBAI-400057 PAN: AABPP3139J VS. ITO WARD 21(1)(2) C-10 BUILDING, PRATYAKSHKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RASHMIKANT CH OKSEY REVENUE BY : SHRI SACHCHIDANAND DUBE (DR) DATE OF HEARING : 02.02.2016 DATE OF PRONOUNCEMENT : 10.02.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE CHALLEN GING THE VALIDITY OF ORDER PASSED U/S. 154 DATED 20.07.2007 PASSED BY CIT(A)-32, MUMBAI W HEREIN THE ORDER PASSED BY CIT(A) DATED 31.03.2010 WAS RECTIFIED ON THE APPLIC ATION OF ASSESSING OFFICER (AO). IN THE APPLICATION, THE AO CONTENDED THAT ASSESSMENT A GAINST THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1,87,87,420/- . THE ASSESSEE ALONG WITH HIS BROTHER SHRI BHARAT R. PATE L RECEIVED AMOUNT FROM BUILDER WHICH WAS CONSIDERED AS INCOME FROM OTHER SOURCES BY THE AO AFTER LOOKING INTO NATURE OF THE RECEIPT TREATED THE SAME AS INCOME FROM OTHER SOURC ES. AGAINST THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL AND THE CIT(A) IN ITS ORDER DATED 31.03.2010 ON THE APPEAL BY ASSESSEE, THE CIT(A) GRANTED RELIED TO THE ASSES SEE HOLDING THAT THE AMOUNT RECEIVED BY ASSESSEE AGAINST SALE OF TDR ARE NOT CHARGEABLE TO CAPITAL GAIN TAX. 2 ITA NO. 6717/M/2010 SHRI KIRIT R. PATEL 2. ON THE APPLICATION OF AO FOR RECTIFICATION OF ORDER , THE CIT(A) ISSUED A NOTICE U/S. 154 DATED 09.07.2010 ALONG WITH THE CIT(A) LETTER DATED 14.07.2010 REQUIRING THE ASSESSEE TO MAKE HIS SUBMISSION. IN THE APPLICATION THE AO MADE THE SUBMISSION THAT IN THE CASE OF ASSESSEE, IT WAS HELD THAT RECEIPTS ARE NOT TO BE C HARGED AS INCOME FROM OTHER SOURCES, AS THE SAME IS CAPITAL RECEIPT AND THE AMOUNT RECEIVED BY THE ASSESSEE AGAINST TDR/FSI RIGHT ARE NOT CHARGEABLE TO TAX. HOWEVER, IN THE CA SE OF BROTHER OF ASSESSEE THE SAME WAS TREATED AS CAPITAL GAIN RECEIPT. 3. THE ASSESSEE OBJECTED ABOUT THE RECTIFICATION OF OR DER DATED 31.03.2010 AND ARGUED THAT THERE WAS NO ERROR APPARENT FROM THE RECORD AND ARG UED THAT ASSESSEE OBJECTED TO THE INITIATION OF RECTIFICATION PROCEEDING AND SUBMITTE D THAT THERE WAS NO MISTAKE IN THE ORDER PASSED BY THE CIT(A) IN THE CASE OF ASSESSEE AND TH E MISTAKE, IF ANY, WAS IN THE ORDER PASSED IN THE CASE OF MR. BHARAT R. PATEL (BROTHER OF ASSESSEE), THE ASSESSEES REPRESENTATIVE FURTHER ARGUED THAT RELIEF CLAIMED I N THE GROUND OF APPEAL IN CASE OF BOTH THE BROTHERS WERE DIFFERENT. THE RELIEF CLAIMED BY ASSESSEE WAS THAT AMOUNT RECEIPT CANNOT BE TAXED AS INCOME FROM OTHER SOURCES AND FU RTHER THE SAME IS A CAPITAL ASSET NOT CHARGEABLE TO TAX IN VIEW OF THE FACT THAT THERE WA S NO COST OF ACQUISITION OF TDR ENTITLEMENTS WHEREAS IN CASE OF BHARAT R. PATEL IN HIS GROUNDS OF APPEAL CLAIMED THE RELIEF TO THE EXTENT THAT AMOUNT RECEIVED CANNOT BE TAXED AS INCOME FROM OTHER SOURCES BUT SHOULD BE CHARGED TO TAX AS CAPITAL GAIN, IN TH E ORDER PASSED BY THE CIT(A) AS CATEGORICALLY AGREED TO THE RELIEF CLAIMED BY THE A SSESSEE AND PASSED THE ORDER ON MERIT OF THE CASE AND IT CANNOT BE SAID THAT THERE IS ANY MISTAKE APPARENT IN THE CASE OF ASSESSEE. 4. THE LD. DR FOR REVENUE SUPPORTED THE ORDER PASSED B Y CIT(A). 5. BEFORE ANALYSING THE IMPUGNED ORDER, LET US EXAMINE THE SCOPE OF SECTION 154 OF THE ACT WHICH EMPOWER THE REVENUE AUTHORITY TO MAKE RECTIFI CATION IN ITS ORDER, THE HONBLE APEX COURT IN LAND MARK CASE OF ITO VS. VOLKART BRO THERS [(1971) 82 ITR 50 (SC)] EXPLAINED THE SCOPE OF SECTION. 154. ....A MISTAKE APPARENT ON THE RECORD MUST BE AN OB VIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DR AWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIO NS. AS SEEN EARLIER, THE HIGH COURT OF BOMBAY OPINED THAT THE ORIGINAL ASSESSMENT S WERE IN ACCORDANCE WITH LAW THOUGH IN OUR OPINION THE HIGH COURT WAS NOT JUSTIF IED IN GOING INTO THAT QUESTION.......AN ERROR WHICH HAS TO BE ESTABLISHED BY A LONG-DRAWN PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS CANNOT BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD. A DECISION ON DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD...... . 6. FURTHER, THE HONBLE APEX COURT IN MASTER CONSTRUCT ION CO. (P.) LTD. V. STATE OF ORISSA [(1966) 17 STC 360, 363], EXPRESSED THE VIEW THAT A N ERROR WHICH IS APPARENT ON THE FACT 3 ITA NO. 6717/M/2010 SHRI KIRIT R. PATEL OF THE RECORD SHOULD BE ONE WHICH IS NOT AN ERROR W HICH DEPENDS FOR ITS DISCOVERY ON ELABORATE ARGUMENTS ON QUESTIONS OF FACT OR LAW. 7. FURTHER, THE HONBLE APEX COURT IN SATYNARAYAN LAXM INARAYAN HEDGE VS. MALLIKARJUN BHAVANAPPA THIRUMALA, AIR 1960 SC 137, HELD THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMET HING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. 8. LET US, EXAMINE THE MISTAKE WHAT IT COMPRISES? M ISTAKE IS AN ORDINARY WORD, BUT IN TAXATION LAW, IT HAS A SPECIAL SIGNIFICATION. IT IS NOT AN ARITHMETICAL OR CLERICAL ERROR ALONE THAT COMES WITHIN ITS PURVIEW. IT COMPREHENDS ERROR S WHICH, AFTER A JUDICIOUS PROBE INTO THE RECORD FROM WHICH IT IS SUPPOSED TO EMANATE, AR E DISCERNED. THE WORD MISTAKE IS INHERENTLY INDEFINITE IN SCOPE, AS WHAT MAY BE A MI STAKE FOR ONE MAY NOT BE ONE FOR ANOTHER. IT IS MOSTLY SUBJECTIVE AND THE DIVIDING L INE IN BORDER AREAS IS THIN AND INDISCERNIBLE. 9. THE PLAIN READING OF WORD (APPARENT) IS THAT IT MUS T BE SOMETHING WHICH APPEARS TO BE SO EX-FACIE AND IS INCAPABLE OF ARGUMENT OR DEBATE. 10. THE LD. CIT(A) WHILE MAKING RECTIFICATION IN ITS OR DER DATED 31.03.2010 ON THE PETITION FILED BY THE AO DATED 01.07.2010 HAS OBSERVED THAT IN THE CASE OF BHARAT R. PATEL WHICH WAS ALSO DECIDED ON THE SAME DAY HAVE TREATED THE A MOUNT RECEIVED AS CAPITAL GAIN. THE CIT(A) AFTER COMPARING AND DISCUSSING BOTH THE ORDE RS PASSED BY HIM ON THE SAME DAY RECTIFIED THE ORDER PASSED IN THE CASE OF ASSESSEE AND TREATED THE AMOUNT RECEIVED BY ASSESSEE AS A CAPITAL RECEIPT AND HELD TO BE CHARGE ABLE UNDER THE CAPITAL GAIN TAX. 11. WE HAVE PERUSED THE ORDER OF CIT(A) IN CASE OF BHAR AT R. PATEL AND OF ASSESSEE. SHRI BHARAT R. PATEL WHO HAD CLAIMED THE SALE OF DEVELOP MENT RIGHT AS A LTCG WHICH WAS DENIED TO HIM BY THE AO AND TREATED THE SAME AS INC OME FROM OTHER SOURCES, HOWEVER, THE SAME WAS ALLOWED BY CIT(A) IN ITS ORDER DATED 3 0.03.2010. THE ASSESSEE CLAIMED THE AMOUNT RECEIVED AGAINST TDR/FSI AS A CAPITAL RECEIP T WHICH IS NOT CHARGEABLE TO CAPITAL TAX. HOWEVER, THE AO TREATED THE SAME AS INCOME FRO M OTHER SOURCES BY CONCLUDING THAT IT IS NOT A TRANSFER FALLING WITHIN THE PROVISION O F SECTION 45 OF I.T. ACT. 12. THOUGH THE ASSESSEE AND HIS BROTHER RECEIVED THE AM OUNT FROM BUILDER BUT SINCE BEGINNING BOTH THE BROTHER SET UP THEIR DIFFERENT C LAIM IN RESPECT OF AMOUNT RECEIVED UNDER TDR AGREEMENT FOR THE PURPOSE OF ASSESSMENT. THE CASE OF ASSESSEE WAS CONSIDERED BY CIT(A) ON WHICH CONCEIVABLY TWO OPINI ON ARE AVAILABLE. SINCE LD. 4 ITA NO. 6717/M/2010 SHRI KIRIT R. PATEL CIT(A) HAS TAKEN ONE OF THE POSSIBLE VIEWS, HIS ORD ER CANNOT SAID TO SUFFER FROM MISTAKE APPARENT FROM RECORD. 13. THE CIT(A) WHILE EXERCISING THE POWER U/S. 154 OF T HE ACT ARE IGNORED THE PRINCIPLE AND BASIC SCOPE OF RECTIFICATION OF ORDER AS DISCUSSED IN PARAS 5 TO 8 SUPRA. HENCE, THE ORDER DATED 20.07.2010 PASSED BY CIT(A) IS NOT SUSTAINABL E UNDER THE SCRUTINY OF LAW AND THE SAME IS SET-ASIDE. IN THE RESULT, APPEAL FILED BY THE ASS ESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH FEBRUARY, 2016. SD/- SD/- ( B.R.BASKARAN ) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 10/02/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/