ARUNA D SAWANT, MUMBAI V. ITO 16(2)(4), MUMBAI

ITA 7191/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1641 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 03-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Sale consideration of property below Jantri Value
• Section: 143(3); 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.7191/MUM/2012 (ASSESSMENT YEAR 2005-06) SMT.ARUNA D SAWANT, 2, BHASKAR BHAU LANE, MANTRI BUILDING, GAMDEVI, GRANT ROAD, MUMBAI 400007 PAN:AAOPS6604 ...... APPE LLANT VS. THE ITO 16(2)(4), MATRU MANDIR, MUMBAI .... RESPONDENT APPELLANT BY : SHRI BHUPENDRA SHAH RESPONDENT BY : SHRI A. RAMACHANDR AN DATE OF HEARING : 29/09/2016 DATE OF PRONOUNCEMENT : 30/11/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAI NING TO ASSESSMENT YEAR 2005-06 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-27, MUMBAI DATED 25/09/2012, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT) DATED 24/12/2007. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS FOLLOWS:- 2 ITA NO.7191/MUM/2012 (ASSESSMENT YEAR 2005-06) 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. ERRED IN EXPANDING THE SCRUTINY WITHOUT PRIOR APPRO VAL AND MONITORING BY THE JCIT ADDITIONAL COMMISSIONER OF INCOME TAX, EVEN T HOUGH THE PRESENT CASE WAS SELECTED SPECIFICALLY ON THE BASIS OF INFORMATI ON RECEIVED THROUGH AIR RETURNS & SHOULD BE LIMITED TO ONLY THAT ASPECT AS PER BOARD'S F.NO. 225/26/2006- ITA-IJ [PT] DATED 23-5-2007. 2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED A.O. ERRED IN TREATING STAMP DUTY VALUATION OF RS. 10041 394/- 1- IN RESPECT OF SALE OF FLAT AT BANDRA , WITHOUT REFERRING THE SAME U/S 50C TO THE DVO THEREBY MAKING ADDITION OF RS. 5652245/-. 3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING EXEMPTION UNDER SECTION 54 IN RESPECT OF THE COST OF DEVELOPMENT EXPENSES ON PLOT OF LAND AT KARJAT AMOU NTING TO RS 14,57,025/- BY HOLDING THAT THE SAME ARE INCURRED IN A.Y. 2006- 07 EVEN THOUGH ALLOWED U/S 54. 4) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN DISALL OWING EXEMPTION U/S 54 IN RESPECT OF THE COST OF FLAT AT DAHISAR AMOUNTING TO RS 470575/-. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN HOLDIN G THAT REINVESTMENT U/S 54 HAS TO BE AS PER THE VALUE DETERMINED U/S 50C 6) INTEREST U/S 234. IS WRONGLY LEVIED & PENALTY U/ S 271 [I] [C] IS ERRONEOUSLY INITIATED. 3. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL BUT THE ONLY POINT AGITATED BY THE ASSESSEE BEFORE US AGAINST THE ACTION OF THE CIT(A) IS IN NOT ALLOWING EXEMPTION OF CAPITAL GAI NS UNDER SECTION 54 OF THE ACT IN FULL AND BRINGING TO TAX A SUM OF RS.19,27,600/- . 3. IN THIS CONTEXT, FACTS RELEVANT TO APPRECIATE TH E CONTROVERSY ARE AS FOLLOWS. DURING THE YEAR UNDER CONSIDERATION, ASSE SSEE SOLD A FLAT AT BANDRA FOR A CONSIDERATION OF RS.55,00,000/-, WHEREAS IN T ERMS OF SECTION 50C OF THE ACT, THE FULL VALUE OF CONSIDERATION WAS ADOPTED AT RS.1,41,00,394/- BEING THE MARKET VALUE OF THE PROPERTY DETERMINED BY STAMP VALUATION AUTHORITIES. ON THE BASIS OF ADOPTING THE STAMP DUTY VALUATION AS THE CONSIDERATION IN TERMS 3 ITA NO.7191/MUM/2012 (ASSESSMENT YEAR 2005-06) OF SECTION 50C OF THE ACT, THE CAPITAL GAIN WAS WO RKED BY THE ASSESSING OFFICER AS WELL AS CIT(A) AT RS.56,52,245/-. IN PARA 5 OF T HE ORDER, THE CIT(A) NOTES THAT ASSESSEE HAS CLAIMED INVESTMENT IN HOUSE IN KARJAT AS UNDER: - LAND AT KARJAT RS. 2,62,500/- CONSTRUCTION EXPENSES (RS.4919170 RS. 827025/- - RS.63,00,000) RS. 34, 62,145/- FLAT AT DAHISAR RS. 4,50,000/- RS. 41,74,645/- THE CIT(A) NOTES THAT THE FLAT AT DAHISAR WAS A SE PARATE PROPERTY PURCHASED ON 13/12/2005 AND WOULD CONSTITUTE A SECOND PROPERTY AND, THEREFORE, HE CONSIDERED THE ELIGIBLE AMOUNT OF INVESTMENT FOR TH E PURPOSE OF EXEMPTION UNDER SECTION 54 OF THE ACT AT RS.37,24,645/- ONLY. AS A CONSEQUENCE, THE RESULTANT CAPITAL GAIN OF RS.19,27,600/- (I.E. RS.5 6,52,245 (-) RS.37,24,645/-) WAS DETERMINED AS TAXABLE CAPITAL GAINS IN THE HAND S OF THE ASSESSEE. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT ASSESSEE HAS INVESTED THE ACTUAL SALE CONSIDERATION RECEIVED ON SALE OF PROPERTY IN ACQUI RING THE NEW ASSET AND, THEREFORE, THE ENTIRE AMOUNT ON CAPITAL GAINS WOULD BE EXEMPT UNDER SECTION 54 OF THE ACT. THE LD. REPRESENTATIVE FOR THE ASSE SSEE POINTED OUT THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS REQUI RED TO INVEST THE ENTIRE AMOUNT OF CAPITAL GAIN WORKED OUT BY APPLYING THE D EEMING PROVISIONS OF SECTION 50C OF THE ACT IN THE PURCHASE OF NEW ASSET . 5. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REP RESENTATIVE POINTED OUT THAT CIT(A) IN PARA -7 OF THE ORDER HAS RELIED UPON THE DECISION OF THE 4 ITA NO.7191/MUM/2012 (ASSESSMENT YEAR 2005-06) BANGALORE TRIBUNAL IN THE CASE OF GOULI MAHADEVAPPA VS. ITO,128 ITD 503(BANG) TO HOLD THAT THE REMAINING PORTION OF LON G TERM CAPITAL GAIN COMPUTED BY APPLYING THE PROVISIONS OF SECTION 50C AS REDUCED BY THE EXEMPTION WORKED OUT UNDER SECTION54F OF THE ACT BY CONSIDERING ACTUAL AMOUNT RECEIVED AS FULL VALUE OF CONSIDERATION WOU LD BE TAXABLE. IN THIS MANNER, THE LD. DEPARTMENTAL REPRESENTATIVE HAD SOU GHT TO DEFEND THE ORDER OF THE CIT(A). 5. HAVING CONSIDERED THE RIVAL STANDS, IN OUR VIEW , THE ASSESSEE HAS TO SUCCEED ON THE SHORT POINT RAISED BEFORE US. AT TH E TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DEC ISION OF THE MUMBAI TRIBUNAL IN THE CASE OF RAJ BABBAR VS. ITO, 56 SOT 1(MUM), WHEREIN IT HAS BEEN HELD THAT WHILE COMPUTING EXEMPTION UNDER SECTION 5 4 OF THE ACT ACTUAL SALE CONSIDERATION IS TO BE TAKEN INTO CONSIDERATION AND NOT THE STAMP DUTY VALUATION OF CONSIDERATION IN TERMS OF SECTION 50C OF THE ACT. TO THE SIMILAR EFFECT IS ALSO THE DECISION OF THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF NAND LAL SHARMA V. ITO, 61 TAXMANN.COM 271(JAIPUR-T IB). A PERUSAL OF THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF RA J BABBAR(SUPRA) REVEALS THAT THE DECISION OF THE BANGALORE TRIBUNAL IN THE CASE GOULI MAHADEVAPPA (SUPRA), WHICH HAS BEEN RELIED UPON BY THE CIT(A) H AS ALSO BEEN CONSIDERED AND DISTINGUISHED. ACCORDING TO THE MUMBAI BENCH OF THE TRIBUNAL, THE DEEMING FICTIONAL IMPORT OF SECTION 50C OF THE ACT CANNOT BE IMPORTED FOR THE PURPOSES OF WORKING OUT THE EXEMPTION OUTLINED IN S ECTION 54F OF THE ACT. IN OUR CONSIDERED OPINION, THOUGH THE TRIBUNAL IN THE CASE OF RAJBABBAR (SUPRA), WAS DEALING WITH AN EXEMPTION UNDER SECTION 54F OF THE ACT IN A CASE WHERE SECTION 50C OF THE ACT WAS APPLIED FOR COMPUTING TH E CAPITAL GAINS, BUT THE 5 ITA NO.7191/MUM/2012 (ASSESSMENT YEAR 2005-06) RATIO THEREIN IS FULLY APPLICABLE IN THE PRESENT CA SE ALSO, WHICH IS IN RELATION TO ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 54 OF THE ACT. INASMUCH AS, IN THE PRESENT CASE, ALSO THE CAPITAL GAINS HAVE BEEN DETERMINED IN TERMS OF SECTION 50C OF THE ACT. FURTHERMORE, IT IS ALSO NO T IN DISPUTE THAT IF CAPITAL GAINS IS COMPUTED BY ADOPTING THE ACTUAL SALE CONS IDERATION RECEIVED BY THE ASSESSEE, THE COST OF THE NEW ASSET AS DETERMINED B Y CIT(A) IS IN EXCESS OF THE CAPITAL GAIN SO DETERMINED AND, THUS CAPITAL GAIN B ECOMES EXEMPT UNDER SECTION 54 OF THE ACT. UNDER THESE CIRCUMSTANCES, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM FOR EXEMPTION UNDER SECTION 54 OF THE ACT AS CLAIMED BY THE ASSES SEE. THUS, THE ASSESSEE SUCCEEDS IN THIS APPEAL. 6. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2016 SD/- SD/- ( RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 30/11/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI