ITO 19(1)(3), MUMBAI V. JAGDAMBE CO-OPERATIVE HSG. SOCIETY LTD, MUUMBAI

ITA 7028/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6399 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 20-12-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 11-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: K R LAXMINARAYAN
• Keywords: Bonafide belief; Cost of acquisition; Difference of opinion
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI PRAMOD KU MAR,(AM) ITA NO.7028/MUM/2008 ASSESSMENT YEAR : 2001-02 THE INCOME TAX OFFICER-19(1)(3) ROOM NO.314, 3 RD FLOOR PIRAMAL CHAMBERS, PAREL, LALBAUG MUMBAI-12. ..( APPELLANT ) VS. M/S. JAGDAMBE CO-OPERATIVE HOUSING SOCIETY LTD. PLOT NO.427, 15HT ROAD, KHAR (WEST) MUMBAI. ..( RESPONDENT ) P.A. NO. (AAAAJ 2933 J) APPELLANT BY : SHR I SURENDRA KUMAR RESPONDENT BY : SHRI K.R. LAXMINARAYAN O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 30.9.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CO- OPERATIVE HOUSING SOCIETY. IT WAS NOTICED BY THE ASSESSIN G OFFICER THAT THE MEMBERS OF THE CO-OPERATIVE HOUSING SOCIETY BEING O WNERS OF THE FLAT IN THE SAID HOUSING SOCIETY HAVE ENTERED INTO A DE VELOPMENT AGREEMENT WITH M/S. J.B. ASSOCIATES, 3, DWARAKA BUILDING , SARASWATI ROAD, SANTACRUZ, MUMBAI DATED 20.3.2000 FOR TRANSFER OF DEVELOPMENT RIGHTS FOR CONSTRUCTION OF ADDITIONAL FLOORS FOR A CONSID ERATION OF RS.1,01,00,000/-. HOWEVER, THE ACTUAL TRANSFER OF TDR TOOK PLACE ON ITA NO.7028/M/08 A.Y:01-02 2 EXECUTION OF DEVELOPMENT AGREEMENT DATED 23.12.2000. SINCE THE ASSESSEE DID NOT DISCLOSE THE RECEIPT OF CONSIDERATION IN ITS RETURN OF INCOME, NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1 961 (THE ACT) WAS ISSUED AND SERVED UPON THE ASSESSEE ON 22.9.2005. IN RESPONSE THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.15,40,000/-. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT AS PER THE DEVELOPMENT AGREEMENT , M/S. J.B. ASSOCIATES AGREED TO MAKE PAYMENT OF RS .16.00 LACS TO THE ASSESSEE SOCIETY AND FURTHER RS.85.00 LACS TO ITS MEMBERS BEING OWN ERS OF THE FLAT IN CONSIDERATION FOR THE TRANSFER OF DEVELOPMENT RIGHTS. THE ISSUE IN WHOSE HANDS THE CONSIDERATION RECEIVED ON TRANSFER OF DEVELOPMENT RIGHT WAS A SUBJECT MATTER OF ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER ON 16.1.2006. THE ASSESSING OFFICER HAS ASSESS ED THE ENTIRE CONSIDERATION RECEIVED ON ACCOUNT OF TDR IN T HE HANDS OF THE ASSESSEE'S SOCIETY HOLDING THAT THE LAND BASED ON WHICH DEVELOPMENT RIGHTS ARE ACQUIRED WAS BELONGING TO THE ASSESSEE'S SOCIETY. ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER PASSED BY THE ASSESSING OFFICER VIDE ORDER DATED 22.9.2006. NO APPEAL AGAINST THE SAID APPELLATE ORDER OF THE LD. CIT(A) WAS FILED. 3. IN RESPONSE TO NOTICE TO SHOW CAUSE AS TO WHY PENALTY U/S.271(1)(C) SHOULD NOT BE IMPOSED, IT WAS STATED BY THE ASSESSEE THAT THE AMOUNTS HAVE BEEN DIRECTLY RECEIVED BY THE ME MBERS FROM THE DEVELOPER AND NOT THROUGH THE SOCIETY, AND THE ME MBERS ARE ASSESSED TO TAX AND HAVE ACCOUNTED FOR THE SAME IN THEIR H ANDS. THE ASSESSEE WHILE RELYING ON CERTAIN JUDICIAL DECISIONS SUBMITT ED THAT THERE IS NO CONSCIOUS BREACH OF LAW. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S SUBMISSION. ACCORDING TO THE A SSESSING OFFICER THE ADDITION HAS BEEN UPHELD BY THE LD. CIT(A ), THEREFORE, IT IS A FIT CASE FALLS UNDER EXPLANATION 1 TO SEC 271(1)(C) OF TH E ACT AND ITA NO.7028/M/08 A.Y:01-02 3 ACCORDINGLY HE IMPOSED PENALTY OF RS.7,27,933/- VIDE OR DER DATED 12.4.2007 PASSED U/S.271(1)(C) OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE RELYING CERTAIN DECISIONS INCLUDING THE APPELLATE ORDER ON THE SAME ISSUE IN THE CASE OF AMBER CROFT CO-OP. HSG. SOCIETY F OR ASSESSMENT YEAR 2002-03 HELD THAT THE ISSUE OF TAXABILIT Y OF COMPENSATION RECEIVED ON SURRENDER OF DEVELOPMENT RIGHT S IS A COMPLEX ISSUE AND THERE CAN BE A GENUINE DIFFERENCE OF O PINION IN THE MATTER BETWEEN THE ASSESSING OFFICER AND THE ASSESSEE AND KE EPING IN VIEW THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS BONA FIDE, DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER . 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE P ENALTY OF RS.7,27,933/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT IGNORING THE FACT THAT THE ASSESSEE IS THE OWNER OF THE LAND AND DEVELOPMENT RIGHT IS ATTACHED TO THE LAND OWNED BY THE ASSESSEE AND HENCE THE COMPENSATION RECEIVED IS TAXABLE IN THE HANDS OF THE ASSESSEE AND NOT IN THE HANDS OF THE MEMBERS OF THE SOCIETY. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND IN THE PENALTY OR DER, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY T HE ASSESSING OFFICER. HE THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER BE RESTORED. ITA NO.7028/M/08 A.Y:01-02 4 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE ORDER OF THE LD. CIT(A) FURTHER SUBMITS THAT THE TRIBUNAL IN THE FOLLOWING CASES HAS HELD THAT NO CAPITAL GAIN BE CHARGED ON THE TRANSFER OF ADDITIONAL FSI FOR THE REASON IT HAS NO COS T OF ACQUISITION :- 1. MAHESHWAR PRAKASH-2 CO-OP HSG. SOCIETY LTD. VS. ITO (2009 ) 118 ITD 223(MUM), 2. ITO VS. SHRI RAM KUMAR MALHOTRA (2010) TIOL 512 ITAT - MUM, 3. M/S. NEW SHAILAJA CHS LIMITED VS. ITO IN ITA NO.512/MUM/2007 ORDER DATED 2.12.2008 FOR THE ASSESSMEN T YEAR 2003-04, 4. ITO VS. M/S. LOTIA COURT CO-OP. HOUSING SOCIETY LTD. IN ITA NO.5096/M/05 ORDER DATED 6.6.2008 FOR ASSESSMENT YEAR 2003-04 AND 5. M/S. AMBER CROFT CO-OPERATIVE HOUSING SOCIETY LIMITED VS. ITO IN ITA NO.5697/MUM/2006 ORDER DATED 1.6.2009 FO R THE ASSESSMENT YEAR 2002-03. HE FURTHER SUBMITS THAT THE TRIBUNAL IN THE CASE OF ITO VS. M/S. AMBER CROFT CO-OP HSG. SOCIETY IN ITA NO.6776/MUM/07 ORDER DATED 20.4.2009 FOR THE ASSESSMENT YEAR 2002-03 HAS UPHELD THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY TH E ASSESSING OFFICER. HE ALSO PLACED ON RECORD THE COPIES OF THE ORDERS OF THE T RIBUNAL. HE THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT (A) IN DELETING THE PENALTY BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT IT HAS BEEN CONSISTENTLY HELD BY THE TRIBUNAL IN THE ABOVE CASES THAT NO CAPITAL GAIN CAN BE CHARGED ON TRANSFER OF ADDITIONAL FSI BY THE ASSESSEE FOR THE R EASON THAT IT HAS NO COST OF ACQUISITION. ITA NO.7028/M/08 A.Y:01-02 5 8. IN M/S. AMBER CROFT CO-OP. HSG. SOCIETY SUPRA, THE TR IBUNAL WHILE DEALING WITH THE ISSUE OF PENALTY U/S.271(1)(C) H AS OBSERVED AND HELD AS UNDER :- 5. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. THE FACTS STATED BEFORE US HAVE NOT B EEN CONTROVERTED MUCH LESS REBUTTED BEFORE US BY THE LE ARNED D.R. THE ASSESSEE HAD NOT DISCLOSED THE DEVELOPMENT CHARGES RECEIVED FROM THE DEVELOPERS BY THE MEMBERS OF THE SOCIETY. HOWEVER, THE MEMBERS OF THE SOCIETY HAD DISCLOSED THE RECEIPT IN THEIR INDIVIDUAL HANDS. NO TICE UNDER SECTION 148 HAD BEEN ISSUED TO THE ASSESSEE, AS THE ASSESSING OFFICER WAS OF THE VIEW THAT DEVELOPM ENT CHARGES WAS ASSESSABLE IN THE HANDS OF THE SOCIETY. THE ASSESSEE HAS CLAIMED BEFORE THE REVENUE AUTHORITIES THAT IT WAS UNDER THE BONAFIDE BELIEF THAT THE DEVELOPME NT CHARGES ARE ASSESSABLE IN THE HANDS OF THE INDIVIDU AL MEMBERS OF THE SOCIETY AND NOT IN THE HANDS OF THE SOCIETY AND THEREFORE, NO RETURN OF INCOME WAS FILE D BY THE SOCIETY. THE VIEW PERCEIVED BY THE ASSESSEE HA S BEEN ACCEPTED BY THE TRIBUNAL IN ANOTHER CASE NAMEL Y M/S. NEW SHAILAJA CHS LIMITED (SUPRA). THE MERE FACT THAT THE REVENUE AUTHORITIES HAVE TAKEN A DIFFERENT VIEW IN THE CASE OF THE ASSESSEE WHICH IS SUBJECT MATTE R OF LITIGATION BEFORE THE HIGHER AUTHORITIES DOES NOT W ARRANT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C). IT IS WELL SETTLED PRINCIPLE OF LAW THAT ASSESSMENT PROCEEDING S AND PENALTY PROCEEDINGS ARE TWO DISTINCT PROCEEDINGS. THERE MAY BE A DIFFERENCE OF OPINION IN REGARD TO ASSESSM ENT OF RECEIPT BETWEEN THE TAX PAYER AND TAX COLLECTOR. SO HOWEVER, THE MERE FACT THAT THE CLAIM OF THE ASSESS EE IS NOT ACCEPTED WOULD NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF PENALTY, IF SUCH A CLAIM IS A BONAFID E CLAIM. IN THE PRESENT CASE, THE CLAIM MADE BY THE ASSESSEE IS SUPPORTED BY THE DECISION OF THE TRIBUNAL IN THE CA SE OF M/S. NEW SHAILAJA CHS LIMITED (SUPRA). THEREFORE, TH E BELIEF OF THE ASSESSEE THAT DEVELOPMENT CHARGES REC EIVED FROM THE DEVELOPERS WAS NOT ASSESSABLE IN THE HANDS OF THE SOCIETY CANNOT BE SAID TO BE UNFOUNDED. TAKING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE INTO CONSIDERATION, WE ARE OF THE VIEW THAT THE PENALTY UNDER SECTION 271(1)(C) IS NOT JUSTIFIED IN THIS CASE. TH EREFORE, THE DECISION OF THE CIT(A) IN DELETING THE PENALTY IS JUSTIFIED AND IS ACCORDINGLY UPHELD. AS THERE IS NO MERIT IN ITA NO.7028/M/08 A.Y:01-02 6 THE APPEAL OF THE REVENUE, THE SAME IS ACCORDINGLY DISMISSED. RESPECTFULLY FOLLOWING THE AFORESAID CONSISTENT VIEW OF T HE TRIBUNAL AND KEEPING IN VIEW THE RATIO OF DECISION OF HON'BLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD.(2010) 322 ITR 158 (SC ) WHEREIN THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUD ING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 519 (SC) AND UNION O F INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277 (SC) HAVE OBSERVED AND HELD THAT : . . A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE . SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS, WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE AND ACCORDINGLY WE ARE INCLINED TO UP HOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE PENALTY I MPOSED BY THE ASSESSING OFFICER . THE GROUNDS TAKEN BY THE REVENUE ARE , THEREFORE, REJECTED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2010. SD/- SD/- (PRAMOD KUMAR) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.12.2010. JV. ITA NO.7028/M/08 A.Y:01-02 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.