THE ITO WARD - 1(1), Visakhapatnam V. Potluri Phanendra Babu, Visakhapatnam

ITA 719/VIZ/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6541 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAN
• Keywords: Capital asset
• Section: 142(1)

Judgement Text

ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.719/VIZAG/2013 ( / ASSESSMENT YEAR: 2010-11) ITO, WARD - 1(1), VISAKHAPATNAM VS. POTLURI PHANENDRA BABU VISAKHAPATNAM [PA N: AGSPP7638K ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI R.S. ARAVINDAN, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 24.01.2017 / DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (A), VISAKHAPATNAM DATED 17.10.2013 AND IT PERTAINS TO THE ASSESSMENT YEAR 2010-11. ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM BUSINESS HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 20.10.2011 DECLARING TOT AL INCOME OF ` 8,37,530/-. THE CASE HAS BEEN SELECTED FOR SCRUTIN Y AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WERE ISSUED. IN RESPONSE TO N OTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED THE INFORMATION CALLED FOR INCLUDING BANK STATEMENTS, SALE DEED DOCUMENTS FOR VERIFICATION. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT DURING THE PREVI OUS YEAR RELEVANT TO ASSESSMENT YEAR 2010-11, M/S. A.T.R. WEARHOUSING PRI VATE LIMITED HAS AUTHORIZED THE ASSESSEE TO ACT AS GENERAL POWER OF ATTORNEY HOLDER ON ITS BEHALF IN RESPECT OF THE LAND MEASURING 1611 SQ .YDS. BEARING SURVEY NO.19/2C SITUATED AT CHINAWALTAIR, VISAKHAPATNAM. IN ORDER TO GIVE EFFECT TO THE ARRANGEMENT BETWEEN M/S. ATR WEARHOUSI NG PVT. LTD. AND THE ASSESSEE, A POSSESSORY SALE AGREEMENT COUPLED W ITH GENERAL POWER OF ATTORNEY DATED 29.4.2009 HAS BEEN EXECUTED. IN EXERCISE OF THE POSSESSORY SALE AGREEMENT-CUM-GENERAL POWER OF ATTO RNEY, THE ASSESSEE FACILITATED SALE OF LAND BETWEEN M/S. ATR WEARHOUSING PVT. LTD. AND THE PURCHASERS, SMT. P. LAKSHMI AND MISS A . MALAVIKA VIDE DOCUMENT DATED 17.7.2009. SINCE THERE ARE TWO SEPA RATE TRANSACTIONS, ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 3 I.E. ONE BETWEEN M/S. ATR WEARHOUSING PVT. LTD. AND THE ASSESSEE, OTHER 3 PARTIES BY WAY OF POSSESSORY SALE AGREEMENT -CUM-GENERAL POWER OF ATTORNEY AND SUBSEQUENT TWO SEPARATE SALE DEEDS BETWEEN THE ASSESSEE AND PURCHASER SMT. P. LAKSHMI AND A. MALAV IKA, THE A.O. OBSERVED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE PURCHASER IS COMING WITHIN THE DEFINITION OF TRANSFER AS DEFI NED U/S 2(47)(V) OF THE ACT AND ACCORDINGLY, ASKED ASSESSEE TO EXPLAIN AS T O WHY THE SAID TRANSACTION CANNOT BE HELD AS TRANSFER AND RELATED CAPITAL GAIN SHALL NOT BE LEVIED. 3. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE S UBMITTED THAT HE HAD EXECUTED SALE DEED IN FAVOUR OF THE PURCHASER I N THE CAPACITY OF GPA HOLDER ON BEHALF OF M/S. ATR WEARHOUSING PVT. L TD. AND THE CONSIDERATION FOR TRANSFER OF THE PROPERTY HAS BEEN PAID BY THE PURCHASERS TO THE COMPANY DIRECTLY, THEREFORE SUBSE QUENT SALE DEEDS CANNOT BE CONSIDERED AS TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT. THE A.O. AFTER CONSIDERING THE EXPLANA TIONS OF THE ASSESSEE, HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE PURCHASERS IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT AND ACCORDINGLY, LEVIED SHORT TERM CAPITAL GAIN ON SUBS EQUENT SALE DEEDS EXECUTED BY THE ASSESSEE IN FAVOUR OF THE PURCHASER S. THE A.O. FURTHER ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 4 HELD THAT SINCE, THE SALE CONSIDERATION SHOWN IN TH E SALE DEEDS IS LESS THAN THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITY, HE HAS ADOPTED VALUE AS PER STAMP AUTHORITY AND COMPUTED SHORT TER M CAPITAL GAIN OF ` 2,74,38,000/-. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE CIT(A) AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE CONVEYAN CE UNDER THE SALE AGREEMENT DATED 29.4.2009 HAS TO BE CONSIDERED AS A N INTERMEDIATE TRANSACTION IN RELATION TO THE SALE AND CANNOT BE C ONCEIVED AS AN INDEPENDENT TRANSACTION CONSTITUTING TRANSFER FOR T HE PURPOSE OF SECTION 2(47)(V) OF THE ACT IN REGARD TO THE CONVEYANCE OF 636 SQ.YD. AND 700 SQ.YD. OF LAND. HOWEVER, IT IS CLARIFIED THAT THE CONVEYANCE UNDER THE SALE AGREEMENT COULD BE CONCEIVED OF TRANSFER FOR T HE PURPOSE OF SECTION 2(47)(VI) OF THE ACT, IN REGARD TO THE BALANCE PROP ERTY OF AN EXTENT OF 275 SQ.YD. OF LAND. THE CIT(A) FURTHER HELD THAT T HE IMPUGNED SALE DEEDS BETWEEN THE ASSESSEE AND THE PURCHASERS CANNO T BE CONSIDERED AS A SEPARATE TRANSFER OF CAPITAL ASSET AND HENCE, THE A.O. WAS INCORRECT IN CHARGING CAPITAL GAINS IN THE HANDS OF THE ASSES SEE. WITH THESE OBSERVATIONS, DIRECTED THE A.O. TO DELETE ADDITIONS TOWARDS SHORT TERM ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 5 CAPITAL GAINS. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN DELETING ADDITIONS MADE BY THE A.O. TOWARDS SHORT TERM CAPIT AL GAIN BY IGNORING THE FACTS THAT THE ASSESSEE HAS EXECUTED SALE DEEDS IN FAVOUR OF THE PURCHASERS. THE LD. CIT(A) HAS CLEARLY ERRED IN HO LDING THAT THE CONVEYANCE UNDER THE POSSESSORY SALE AGREEMENT DATE D 29.4.2009 SHOULD BE CONSIDERED AS THE INTERMEDIATE TRANSACTIO N AND HENCE NOT TO BE TREATED AS SEPARATE TRANSFER AS DISTINCT FROM TH AT VIDE THE EXECUTION OF SALE DEEDS BY THE ASSESSEE IN RESPECT OF SMT. P. LAKSHMI AND SMT. A. MALAVIKA WHILE AT THE SAME TIME HOLDING THAT THE RE MAINING LAND TO THE EXTENT OF 275 SQ.YD COULD BE TREATED AS TRANSFER TO THE ASSESSEE FOR THE PURPOSE OF SECTION 2(47)(V) OF THE ACT, THEREBY CON TRADICTING HIS OWN FINDINGS. THE D.R. FURTHER SUBMITTED THAT THE TRAN SACTION BETWEEN THE ASSESSEE AND THE PURCHASER IS A SEPARATE AND DISTIN CT TRANSACTION COMING WITHIN THE DEFINITION OF TRANSFER AS DEFINED U/S 2(47)(V) OF THE ACT AND HENCE, THE A.O. HAS RIGHTLY CHARGED CAPITAL GAIN IN THE HANDS OF THE ASSESSEE AND HIS ORDER SHOULD BE UPHELD. 6. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORT ING THE ORDER OF THE CIT(A), SUBMITTED THAT THE ASSESSEE IN THE CAPA CITY OF GENERAL POWER ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 6 OF ATTORNEY HOLDER COMPLETED SALE TRANSACTION BETWE EN M/S. ATR WEARHOUSING PVT. LTD. AND THE PURCHASERS. THE ASSES SEE NEITHER PAID ANY CONSIDERATION FOR PURCHASE OF PROPERTY NOR RECE IVED ANY CONSIDERATION FROM THE PURCHASERS, THEREFORE, CHARG ING CAPITAL GAINS FOR EXECUTION OF SALE DEEDS IN FAVOUR OF THE PURCHASERS IN THE CAPACITY OF GPA HOLDER IS NOT SUSTAINABLE IN THE EYES OF LAW. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX WHICH LEADS TO THE ADDITION ARE THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2010-11, THE ASSES SEE ALONG WITH 3 OTHER PERSONS ENTERED INTO A POSSESSORY SALE AGREEM ENT CUM GENERAL POWER OF ATTORNEY ON 29.4.2009 FOR PURCHASE OF PROP ERTY FROM M/S. ATR WEARHOUSING PVT. LTD. AS PER THE SAID SALE AGREEMENT , SMT. P. LAKSHMI AND SMT. A. MALAVIKA HAS PAID TOTAL CONSIDERATION A GREED TO BE PAID FOR THE VENDORS. FURTHER, AS PER THE SAME SALE AGREEME NT, THE ASSESSEE HAS BEEN NOMINATED AS GENERAL POWER OF ATTORNEY HOL DER AND AUTHORIZED TO EXECUTE AND REGISTER SALE DEEDS IN RESPECT OF TH E SCHEDULED PROPERTY OR ANY PART THEREOF AND TO RECEIVE CONSIDERATION AN D TO PRESENT THE SAME FOR REGISTRATION BEFORE THE REGISTERING AUTHOR ITIES. THE ASSESSEE IN THE CAPACITY OF GPA HOLDER HAS EXECUTED TWO SEPARAT E SALE DEEDS IN ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 7 FAVOUR OF P. LAKSHMI AND A. MALAVIKA. ON VERIFICAT ION OF THE SALE DEED COPIES FILED BY THE ASSESSEE, WE FIND THAT THE SALE DEED HAS BEEN EXECUTED BY THE VENDORS M/S. ATR WEARHOUSING PVT. L TD. THROUGH ITS GPA HOLDER SRI P. PANENDRA BABU. ON FURTHER VERIFI CATION OF THE SALE DEEDS, WE FIND THAT THE CONSIDERATION FOR TRANSFER OF PROPERTY HAS BEEN PAID BY THE PURCHASERS DIRECTLY TO THE VENDORS M/S. ATR WEARHOUSING PVT. LTD. THE ASSESSEE NEITHER RECEIVED ANY CONSID ERATION FROM THE PURCHASERS NOR PAID ANY CONSIDERATION TO THE VENDOR S FOR PURCHASE OF THE PROPERTY. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW, THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE PURCHASERS IS IN CONTINUATION WITH THE EARLIER POSSESSORY SALE AGREE MENT CUM GPA DATED 29.4.2009 ENTERED BETWEEN THE VENDOR M/S. ATR WEARHO USING PVT. LTD. AND THE PURCHASERS OF THE PROPERTY. 8. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE ARE OF THE VIEW THAT THE CONVEYANCE UNDER THE SALE AGREEMENT DATED 29.4.2009 CANNOT BE CONSIDERED AS AN INDEPENDENT TR ANSACTION, DIFFERENT FROM THE SALE DEEDS DATED 17.7.2009. HENCE, THE CO NVEYANCE UNDER THE TWO IMPUGNED SALE DEEDS CANNOT BE CONCEIVED TO BE A SEPARATE TRANSFER BY THE ASSESSEE TO THE VENDEES DE-HORS THE SALE AGR EEMENT. THE IMPUGNED SALE DEEDS CANNOT BE CONSIDERED AS A SEPAR ATE TRANSFER OF A ITA NO.719/VIZAG/2013 POTLURI PHANENDRA BABU, VSKP 8 CAPITAL ASSET BETWEEN THE ASSESSEE AND THE PURCHASE RS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUS TIFIED IN CHARGING CAPITAL GAINS IN THE HANDS OF THE ASSESSEE, AS THE CONDITIONS PRECEDENT FOR LEVY OF CAPITAL GAINS IN THE HANDS OF THE ASSES SEE ARE NOT SATISFIED. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS HAS RIGHTLY DIRECTED THE A.O. TO DELETE ADDITIONS MADE TOWARDS SHORT TERM CA PITAL GAINS. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, WE INCLINED TO UPHOLD CIT(A) ORDER AND DISMISS THE APP EAL FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 ST JAN17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 31.01.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1(1), VISAKHAPATNA M 2. / THE RESPONDENT SHRI POTLURI PHANENDRA BABU, D. NO.47-14-9, DWARAKANAGAR, VISAKHAPATNAM 3. + / THE CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //