MOHD SALIM AHMADBHAI MITHA, Nagpur V. INCOME TAX OFFICER-WARD-4(2), Nagpur

ITA 72/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1637 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Additional evidence; Corroborative evidences
• Section: 50C; 54

Judgement Text

1 ITA NO. 72/NAG/2014. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T. A. NO.72/NAG/2014 ASSESSMENT YEAR : 2008 - 09. MOHD. SALIM AHMADBHAI MITHA, THE INCOME - TAX OFFICER, C/O ADVOCATE AVINASH M. JOHARAPURKAR, VS. WARD - 4(2), NEAR ITWARI HIGH SCHOOL, ITWARI, NAGPUR. NAGPUR. PAN ACAPM4947J. (APPELLANT) RESPONDENT. APPELLANT BY : SHRI ABHAY AGRAWAL. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 10 - 08 - 2015. DATE OF PRONOUNCEMENT : 11 TH SEPT. 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 08 - 11 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2008 - 09. THE GROUNDS OF APPEAL READ AS UNDER : 1. CIT(APPEALS) ERRED IN CONFIRMING THE ORDER OF ASSESSING O FFICER. 2. CIT(APPEALS) ERRED IN HOLDING THE CAPITAL GAIN IS SHORT TERM CAPITAL GAIN AND NOT LONG TERM CAPITAL GAIN EVEN THOUGH ASSESSEE HELD THE ASSETS FROM 22 - 09 - 2004 UNDER HIS POSSESSION. 2 ITA NO. 72/NAG/2014. 3. CIT(APPEALS) ERRED IN NOT ALLOWING THE DEDUCTION IN SECTION 54/54F AS THE CASE MAY BE. 3. IN THIS CASE THE AO NOTED THAT THE ASSESSEE PURCHASED AN IMMOVABLE PROPERTY BEING A RESIDENTIAL HOUSE JOINTLY WITH HIS WIFE VIDE AGREEMENT REGISTERED ON 26 - 11 - 2007 FOR ` 12,25,000/ - . THE SAME PROPERTY WAS SOLD VIDE AGREEMENT REGISTERED ON 20 - 12 - 2007. THE AO WAS OF THE OPINION THAT THE ISSUE IS OF SHORT TERM CAPITAL GAIN. THE ASSESSEE STATED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR SALE OF THE SAID PROPERTY MUCH EARLIER. THE ASSESSEE STATED THAT THE ASSESSEE HAS TAKEN THE POSSESSION ON 22 - 09 - 2004. HOWEVER, THE AO WAS NOT CONVINCED. HE OBSERVED THAT AS PER THE REGISTERED AGREEMENT IT WAS REGISTERED ON 26 - 11 - 2007. AS PER THE AGREEMENT AT POINT NO. 8 IT WAS MENTION ED THAT THE OWNER SHALL GIVE POSSESSION OF THE FLAT TO THE FLAT PURCHASER ON EXECUTION OF HIS AGREEMENT. HENCE THE AO TOOK INFERENCE THAT THE ASSESSEE HAS TAKEN THE POSSESSION AFTER 26 - 11 - 2007. THE AO FURTHER HELD THAT THE OWNER BEING GIVEN THE POSSESSION BEFORE THE EXECUTION OF AGREEMENT WHICH WAS EXECUTED ON 22 - 11 - 2007 AND BEFORE THE PAYMENT WHICH WAS MADE FROM 15 - 09 - 2005 TO 26 - 11 - 2007 IS ALSO NOT ACCEPTABLE. ACCORDINGLY THE AO TREATED THE SAME AS SHORT TERM CAPITAL GAIN SINCE THE HOLDING WAS LESS THAN 36 MONTHS. THE AO ALSO SUBSTITUTED THE SALE PROCEEDS BY APPLYING THE PROVISIONS OF SECTION 50C . THE AO ALSO HELD THAT SINCE THE GAIN ARISING OUT OF THIS TRANSACTION IS SHORT TERM CAPITAL GAIN AND NOT LONG TERM CAPITAL GAIN, QUESTION OF EXAMINATION U/S 5 4F OF THE ACT DOES NOT ARISE. ACCORDINGLY HE ADDED A SUM OF ` .99,55,025/ - . AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS). 4. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) CONFIRMED THE ACTION OF THE AO. 3 ITA NO. 72/NAG/2014. 5. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 6. IN THE APPEAL BEFORE US THE ASSESSEE HAS NOT RAISED THE ISSUE OF SUBSTITUTION OF SALE PROCEEDS BY INVOKING THE PROVISIONS OF SECTION 50C. THE ASSESSEE HAS ONLY APPEALED THAT THE GAIN SHOULD BE TREATED AS LONG TE RM CAPITAL GAIN AND THAT THE LEARNED CIT(APPEALS) ERRED IN NOT ALLOWING THE DEDUCTION U/S 50C/54F. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE HAS ALSO SUBMITTED ADDITIONAL EVIDENCES BEING COPIES OF RELEVANT SUPPORTING DOCUMENTS IN SUPPORT OF THE CLAIM THAT INSTALMENTS WERE PAID BY THE ASSESSEE TO THE SELLER AGAINST THE PROPERTY IN THE FINANCIAL YEAR 2002 - 03 AND 2003 - 04. LEARNED COUNSEL ALSO PRODUCED ADDITIONAL EVIDENCES DATED 23 - 02 - 2005 THAT PATEL BROTHERS CONSTRUCTION CORPORATION RETURNED THE ADVANCE OF ` .4,50,000/ - AND HENCE FRESH PAYMENTS WERE MADE. . AS ADDITIONAL EVIDENCES, ASSESSEES COUNSEL HAS ALSO PRODUCED COPIES OF BILLS TOWARDS MAINTENANCE CHARGES TOWARDS FLAT BETWEEN S EPT., 2004 TO JULY, 2006 ON SAMPLE BASIS. LEARNED COUNSEL OF THE ASSESSEE HAS SUMMARIZED HIS ARGUMENTS AS UNDER : 1. GROUND 2: THE LEARNED CIRCA) ERRED IN HOLDING THE CAPITAL GAIN IS SHORT TERM CAPITAL GAIN AND NOT LONG TERM CAPITAL GAIN EVEN THOUGH ASSESSEE HELD THE ASSETS FROM 22/09/2004 UNDER HIS POSSESSION. THE ASSESSEE SUBMITS THAT , IT HAS ACQUIRED THE POSSESSION OF FLAT NO . 502 , 5TH FLOOR , '0' WING PATEL APARTMENTS , MUMBAI ON 22/09/2004 . THE POSSESSION LETTER PROVIDED BY THE BUILDER TO THE ASSESSEE IS ENCLOSED AT PAGE 19 OF PAPER BOOK - 1 (TITLED AS 'INDEX OF SUBMISSION - I ' ) . THIS FACT WAS INFORMED AND COPY OF POSSESSION LETTER WAS FILED BEFORE THE LEARNED AO AND THE LEARNED CIT(A) RESPECTIVELY (REFER PAGE 56, 53 AND 21 OF PAPER BOOK - I) . THE LEARNED AO AND LEARNED CIT(A) ERRED IN NOT CONSIDERING THE POSSESSION LETTER FILED WHICH DEMONSTRATED THAT THE AFORESA I D FLAT WAS UNDER THE ASSESSEE'S POSSESSION SINCE 22/09/2004 . THE FLAT WAS SOLD ON 20/12/2007 I . E AFTER 38 MONTHS 28 DAYS. THEREFORE , THE ASSET CONST I TUTED A LONG TERM CAP I TA L ASSET AS PER DEFINIT I ON REPRODUCED BELOW : 4 ITA NO. 72/NAG/2014. '2(29A} 'IONG - TERM CAP I TAL ASSET ' MEANS A CAPITAL ASSET WHICH IS NOT A SHORT - TERM CAPITAL ASSET ; 2(42A} 'SHORT - TERM CAPITAL ASSET' MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY - SIX MONTHS IMMEDIATELY PRECED I NG THE DATE OF ITS TRANSFER' THE LEARNED AO AND CIT(A ) ERRED IN OBSERVING THAT THE SINCE , THE AGREEMENT FOR PURCHASE OF FL AT WAS REG I STERED ON 26/11/2007 , THE ASSESSEE COULD NOT HAVE ACQUIRED POSSESSION OF FLAT BEFORE 26/11/2007 . THE LEARNED AO ERRED IN RELYING ON CLAUSE 8 OF THE AGREEMENT WHICH STATES AS UNDER : '8 . THE OWNERS SHALL GIVE POSSESSION OF THE FLAT TO THE FLAT PURCHASER ON EXECUTION OF THESE AGREEMENT' HOWEVER , THE LEARNED AO ERRED IN NOT CONSIDERING THE SUBSEQUENT CLAUSE 9 WHICH CONTRADICTS CLAUSE 8 , AS UNDER : 'THE FLAT PURCHASER SHALL TAKE POSSESSION OF THE FLAT WITHIN 7 DAYS OF THE OWNERS GIVING WRITTEN NOTICE TO THE FLAT PURCHASER INTIMATING THAT THE SAID FLAT ARE READY FOR USE AND OCCUPATION' ACCORDINGLY , THE NOTICE WAS GIVEN BY THE BUILDER ON 22/09/2004 AND THE POSSESSION WAS DULY ACQUIRED BY THE ASSESSEE . THE ASSESSEE HAS ALSO ENCLOSED COPY OF BILLS TOWARDS MAINTENANCE CHARGES PAID BY THE ASSESSEE FOR THE FLAT DURING THE PERIOD SEPTEMBER 2004 TO JULY 2006 (ON SAMPLE BASIS) . (REFER PAGE 89 TO 94 OF PAPER BOOK - IV). IN VIEW OF ABOVE, THE ASS ESSEE SUBMITS THAT, THE AGREEMENT HAS TO BE READ IN TOTALITY, CONSIDERING CORROBORATIVE EVIDENCES ON RECORD, TO ARRIVE AT A 'HARMONIOUS INTERPRETATION' . THE LEARNED AO HAS OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS TO THE BUILDER BETWEEN 15/09/2005 TO 26/11/2007 AND HENCE , THERE IS NO QUESTION OF GIVING POSSESSION BEFORE MAKING FULL AND FINAL PAYMENT . IN THIS REGARD , IT IS SUBMITTED THAT THE ASSESSEE (ALONGWITH HIS WIFE HOLDING 50% SHARE IN PROPERTY) HAD MADE INSTALLMENT PAYMENTS OF RS . 2 , OO , OOO IN FY 2002 - 03 AND RS . 2 , 50 , OOO IN FY 2003 - 04 TO THE BUI L DER (COPY OF EVIDENCES FOR PAYMENT HAVE BEEN ENCLOSED AT PAGES 35 TO 41 AND SUMMARY CHART IS ENCLOSED AT PAGE 88 OF PAPER BOOK - IV) . THE PAYMENT MADE TO THE BUILDER OF RSA , 50 , OOO (AS ABOVE) WAS RETURNE D BY THE BUILDER TO THE ASSESSEE AND FRESH CHEQUES WERE ISSUED BY THE ASSESSEE AT THE INSTANCE OF THE BUILDER , BETWEEN 15/09/2005 TO 26/11/2007. 2. GROUND 3: THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION UNDER SECTION 54/54F AS THE CASE MAY BE. 5 ITA NO. 72/NAG/2014. THE LEARNED AO & CIT(A) DID NOT ALLOW EXEMPTION UNDER SECTION 54 SINCE , THEY HELD THE CAPITAL ASSET AS 'SHORT TERM CAPITAL ASSET' . HOWEVER , THE ASSESSEE HAS DEMONSTRATED IN PARA 2 ABOVE THAT THE ASSET IS A 'LONG TERM CAPITAL ASSET' . THE ASSESSEE SUBMITS THAT I T HAS I NVESTED ENTIRE NET SALE CONS I DERATION IN PURCHASE OF ANOTHER RESIDENTIAL PROPERTY AND HENCE , IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54 OF THE ACT . IN THIS REGARD, THE ASSESSEE HAD SUBMITTED BEFORE THE LEARNED AO & CIT( A) THAT EXEMPTION UNDER SECTION 54 HAS TO BE PROVIDED HAVING REGARD TO THE 'ACTUAL SALE CONSIDERATION' AND NOT 'DEEMED SALE CONSIDERATION' AS PER SECTION 50C. IN THIS REGARD , THE ASSESSEE RELIES ON DECISIONS ENCLOSED AT PAGE 95 TO PAGE 112 OF PAPER BOOK - IV . IN VIEW OF ABOVE, THE ASSESSEE SUBMITS THAT IT IS NOT LIABLE FOR TAX SINCE, THE ENTIRE CAPITAL GAINS ARE EXEMPTED UNDER SECTION 54 OF THE ACT . LEARNED A.R. HAS ALSO RELIED UPON THE FOLLOWING CASE LAWS : 1. CHATURBHUJ DWARKADAS KAPADIA VS. CIT 260 ITR 491 (BOM.HC) 2. CIT VS. MRS. HILLA J.B. WADIA 216 ITR 376 (BOM HC). 8. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE ASSESSEE HAS GOT PROPERTY REGISTERED IN 2006 AND DATE OF REGISTRATION SHOULD BE THE DATE OF ACQUISITION OF THE PROPERTY. HE ALSO RELIED UPON THE CASE LAW FROM BAGRI IMPEX (P) LTD. VS. ACIT 214 TAXMAN 305 OF HONBLE KOLKATA HIGH COURT IN SUPPORT OF THE APPLICATION OF SECTION 50C BY THE AO. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE SOLE DISPUTE IN THIS CASE IS AS TO WHAT IS THE DATE OF ACQUISITION OF THE PROPERTY BY THE ASSESSEE. IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAD ACQUIRED THE PROPERTY MUCH EARLIER. IT HAD ACQUIRED THE POSSES SION OF THE FLAT ON 22 - 09 - 2004. FOR THIS PURPOSE, POSSESSION LETTER PROVIDED BY THE BUILDER HAS ALSO BEEN SUBMITTED. ASSESSEES COUNSEL HAS ALSO REFERRED TO THE PROVISIONS IN THE AGREEMENT FOR SALE THAT FLAT PURCHASER SHALL TAKE POSSESSION OF THE FLAT WITH IN SEVEN DAYS OF THE OWNERS GIVING WRITTEN NOTICE TO THE FLAT PURCHASER INTIMATING THAT THE SAID FLATS ARE READY FOR USE AND OCCUPATION. ACCORDINGLY IT HAS BEEN SUBMITTED THAT 6 ITA NO. 72/NAG/2014. NOTICE WAS GIVEN BY THE BUILDER ON 22 - 09 - 2004 AND THE POSSESSION WAS DULY ACQUI RED BY THE ASSESSEE. NOW THE ASSESSEE HAS ALSO ENCLOSED COPIES OF BILLS TOWARDS MAINTENANCE CHARGES BY THE ASSESSEE FOR FLAT DURING THE PERIOD S EPT., 2004 TO JULY, 2006. THE REVENUES PLEA THAT THE PAYMENTS WERE MADE BY THE ASSESSEE FOR PURCHASE IN 2005 HAS BEEN COUNTERED BY THE SUBMISSION THAT ACTUALLY THE PAYMENTS WERE MADE IN 2002 AND 2003 BUT THE AMOUNTS WERE RETURNED BY THE BUILDER IN 2005 A ND FRESH CHEQUES WERE ISSUED. 10. WE FIND THAT SOME OF THE DOCUMENTS MENTIONED ABOVE HAVE BEEN SUBMITTED BY WAY OF ADDITIONAL EVIDENCE AS THEY WERE NOT PRODUCED BEFORE THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION THE ADDITIONAL EVIDENCES ARE USEFUL AN D GO TO THE ROOT OF THE MATTER. HENCE WE HAVE ADMITTED THE SAME. NOW WE FIND THAT AS ONE OF THE PLEAS TAKEN BY THE REVENUE AUTHORITIES IS THAT ACQUISITION OF THE PROPERTY CANNOT TAKE PLACE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN UNLESS THERE IS TRAN SFER OF PROPERTY BY A REGISTERED DEED. THIS HAS BEEN VEHEMENTLY ARGUED AGAIN ST BY THE LEARNED COUNSEL OF THE ASSESSEE. IN THIS REGARD ASSESSEES COUNSELS RELIANCE UPON THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CHATURBHUJ DWARKADAS KAP ADIA VS. CIT 260 ITR 491 IS RELEVANT. IN THIS CASE HONBLE HIGH COURT HAS EXPOUNDED THAT EVEN ARRANGEMENTS CONFERRING PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE COULD FALL U/S 2(47)(V). SIMILARLY LEARNED COUNSEL OF THE ASSESSEES RELIANCE UPON HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. MRS. HILLA J.B. WADIA 216 ITR 376 IS ALSO RELEVANT. IN THIS CASE ALSO IT WAS HELD THAT REGISTRATION OF THE DEAL IS NOT ESSENTIAL AND THE MATERIAL PLACED WAS DOMAIN OVER THE FLAT AND INVESTMENT IN IT. WE FIND THAT THE ABOVE CASE LAWS AND THE ADDITIONAL EVIDENCES PRODUCED HEREIN ABOVE ARE ESSENTIAL FOR PROPER ADJUDICATION OF THIS CASE. WE FIND THAT SINCE THE ADDITIONAL DOCUMENTS WERE NOT BEFORE THE AUTHORITIES BELOW, IN OUR CONSIDERED OPINION, INTEREST O F JUSTICE WILL BE SERVED IF THE 7 ITA NO. 72/NAG/2014. ISSUES IN THE APPEAL IS REMITTED BACK TO THE FILE OF THE AO. THE AO SHALL TAKE INTO ACCOUNT THE ADDITIONAL EVIDENCES BEING SUBMITTED BY THE ASSESSEE. THE AO SHOULD ALSO TAKE INTO CONSIDERATION THE JURISDICTIONAL HIGH COURT DECISIONS CITED BY THE LEARNED COUNSEL OF THE ASSESSEE AS ABOVE. ACCORDINGLY WE REMIT THE SUBMISSIONS OF THE ASSESSEES COUNSEL AND THE ADDITIONAL EVIDENCES TO THE FILE OF THE AO. THE AO SHALL CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE PROPER OP PORTUNITY OF BEING HEARD . 1 1 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT. 2015. SD/ SD/ (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 11 TH SEPT.T, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER 8 ITA NO. 72/NAG/2014. WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR