MANEET J SHAH L/H JAIMAL K. SHAH, MUMBAI V. ADDL CIT RG 19(2), MUMBAI

ITA 7324/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3945 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 26-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Capital asset; Gift; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI .. , !,#$ # % BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7324/MUM/2010 ( ' ( )( ' ( )( ' ( )( ' ( )( / / / / ASSESSMENT YEAR: 2006-07) MANEET J. SHAH L/H-JAIMAL K. SHAH PREETIKA APTS., 9 TH FLOOR, FLAT NO.901, SARASWATI COLONY, SARASWATI ROAD, SANTACRUZ (W), MUMBAI-400 054 ' ' ' ' / VS. ASST. CIT-19(2), INCOME TAX OFFICE, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI-400 012 * #$ ./ + ./ PAN/GIR NO. AIFPS 4804 F ( *, / APPELLANT ) : ( -.*, / RESPONDENT ) *, / # / APPELLANT BY : SHRI VIJAY C. KOTHARI -.*, 0 / # / RESPONDENT BY : SHRI PREETAM SINGH ' 0 12$ / // / DATE OF HEARING : 25.07.2013 3 ) 0 12$ / DATE OF PRONOUNCEMENT : 25.07.2013 #4 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE CONTESTING THE OR DER U/S.263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 VIDE ORDER DATED 25.08.2010. 2 ITA NO.7324/MUM/2010 (A.Y. 2006-07) MANEET J. SHAH VS. ASST. CIT 2.1 EXPLAINING THE BACKGROUND FACTS OF THE CASE, IT WAS SUBMITTED BY THE LD. AR, HIS COUNSEL, THAT THE ISSUE THAT ARISES IN THE INSTANT CASE IS IF AND TO THE EXTENT THE GAIN ARISING TO THE ASSESSEE ON THE SALE OF TWO FLATS DURING THE YEAR IS ASSESSABLE AS SHORT TERM CAPITAL GAIN (STCG) OR AS LONG TERM CAPITAL GAIN (LTCG). T HE LAND, ON WHICH THE SAID FLATS, ALONG WITH THE TWO OTHERS (WHICH STAND SOLD BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08), BELONGS TO THE ASSESSEE SINCE THE YEAR 1962, HAVING BEEN RECEIVED BY WAY OF GIFT ON 23.03.1962. ON 21.02.200 1, THE ASSESSEE ENTERED INTO A DEVELOPMENT-CUM-SALE AGREEMENT WITH A BUILDER, WHER EBY IN EXCHANGE OF THE LAND, THE DEVELOPER WOULD HAND OVER THE 55% OF THE DEVELOPED PROPERTY, WHICH TRANSLATES INTO THE FOUR FLATS AFORESAID, FREE OF COST TO THE ASSESSEE. THE ASSESSEE HAS TREATED THE ENTIRE GAIN ON THE SALE OF TWO FLATS OUT OF THE SAME DURING THE RELEVANT PREVIOUS YEAR AS LTCG, AT RS.406.59 LACS, ALSO CLAIMING THE BENEFIT OF DEDUCT ION U/S.54EC THEREAGAINST (AT RS.306 LACS). THE SAME STOOD ACCEPTED IN ASSESSMENT U/S.14 3(3) DATED 18.12.2008. 2.2 IN VIEW OF THE REVISIONARY AUTHORITY, HOWEVER, WHAT THE ASSESSEE HAD SOLD WAS RESIDENTIAL FLATS, WHICH HAD COME INTO EXISTENCE ON LY DURING THE FINANCIAL YEAR (F.Y.) 2004- 05, WHILE THE ASSESSEE HAD CLAIMED THE INDEXATION B ENEFIT W.E.F. F.Y. 2000-01. WHAT HAD COME INTO EXISTENCE ON ENTERING INTO THE DEVELOPMEN T AGREEMENT ON 21.02.2001 WAS A RIGHT TO A RESIDENTIAL FLAT/S, WHICH WITHOUT DOUBT IS A CAPITAL ASSET. HOWEVER, THE SAME COULD NOT BE EQUATED WITH A RESIDENTIAL FLAT ITSELF , WHICH IS WHAT HAS BEEN SOLD/TRANSFERRED BY THE ASSESSEE, AFTER COMING INTO EXISTENCE DURING THE F.Y.2004-05. AS SUCH, THE GAIN ARISING ON THE SALE OF THE TWO FLATS WOULD BE A SHO RT TERM CAPITAL GAIN (STCG). ACCORDINGLY, THE ASSESSEE WOULD NEITHER BE ELIGIBLE FOR INDEXATION BENEFIT, WHICH IS ONLY AVAILABLE IN COMPUTING THE LTCG, AS WELL AS THE EXE MPTION U/S.54EC. THE ASSESSEES CLAIM HAVING BEEN ACCEPTED IN ASSESSMENT U/S.143(3) , THE SAID OPINION BY THE LD. CIT WOULD ONLY AMOUNT TO A CHANGE OF THE SAID OPINION, WHICH IS NOT PERMISSIBLE U/S.263. FURTHER, EVEN SO, IT NEEDS TO BE APPRECIATED THAT T HE FLAT INVOLVES TWO COMPONENTS, I.E., THE LAND AS WELL AS THE SUPER STRUCTURE. WHILE IT COULD BE SAID THAT THE SUPER STRUCTURE CAME INTO EXISTENCE DURING THE F.Y. 2004-05, THE PROPORT IONATE LAND, I.E., AS RELATABLE TO THE AREA 3 ITA NO.7324/MUM/2010 (A.Y. 2006-07) MANEET J. SHAH VS. ASST. CIT OF THE FLATS SOLD, HAS BEEN THE ASSESSEES PROPERTY SINCE THE YEAR 1962. ACCORDINGLY, WITHOUT DOUBT, THE CAPITAL GAINS ON THE LAND PART O F THE SALE OF FLAT, WOULD HAVE TO BE CONSIDERED AS AN LTCG. 2.3 ON AN ENQUIRY BY THE BENCH AS TO IF AN ASSESSME NT IN PURSUANCE TO THE IMPUGNED ORDER HAS BEEN MADE, HE REPLIED IN THE AFFIRMATIVE, ALSO CLARIFYING THAT THE ASSESSING OFFICER (A.O.) HAS ALSO HELD THE ENTIRE GAINS ARISI NG FOR THE A.Y. 2007-08 AS STCG. ON A FURTHER QUERY AS TO WHETHER THE ASSESSEE HAS ACCEPT ED THE ASSESSMENT FOR THE CURRENT YEAR, HE CLARIFIED IT AS NOT SO, WITH THE MATTER BEING IN APPEAL BEFORE THE TRIBUNAL IN ITA NO.2485/MUM/2013. 3. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT THE ENTIRE FOCUS OF THE ARGUMENTS BY THE LD. AR IS ON THE MERITS OF THE CASE, AND WHI CH IS NOT A SUBJECT MATTER OR THE ISSUE ARISING IN THE INSTANT APPEAL. THE LD. CIT HAS, FIN DING THAT THE RELEVANT ASPECT HAD NOT BEEN ENQUIRED INTO OR CONSIDERED BY THE A.O. IN FRAMING THE ASSESSMENT, SET ASIDE THE SAME TO THAT EXTENT, TO BE ADJUDICATED AFTER HEARING THE AS SESSEE. HOW COULD THE SAID DIRECTION, FOR WHICH HE WOULD REFER TO THE LAST PARA OF HIS ORDER, READING AS UNDER, COULD BE POSSIBLY IMPUGNED : IN VIEW OF ABOVE DISCUSSION, I FIND THAT THE ASSES SMENT MADE IS ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENU E. THE SAID ORDER IS THEREFORE SET-ASIDE ON THE ISSUE OF COMPUTATION OF CAPITAL GAINS AND CORRESPONDING CLAIM OF DEDUCTION U/S.54EC OF THE I. T. ACT. THE A.O. IS DIRECTED TO COMPLETE THE ASSESSMENT ORDER EXPEDITIO USLY AFTER GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND IN T HE LIGHT OF ABOVE OBSERVATION. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. CLEARLY, THE A.O. WHILE FRAMING THE ASSESSMENT ACCEPTED THE ASSESSEE S CLAIM OF THE CAPITAL GAINS UNDER REFERENCE BEING LTCG, AND HAS NOT MADE ANY ENQUIRY INTO THE APPLICATION OF LAW AFTER BRINGING THE ENTIRE FACTS ON RECORD. IN FACT, AN IS SUE RAISED BY THE ASSESSEE WITH REGARD TO A PART OF THE SAID CAPITAL GAIN, I.E., AS ATTRIBUTABL E TO THE LAND COMPONENT OF THE FLAT, WHICH THOUGH IS A COMPOSITE ASSET/PRODUCT, WHICH THE LD. AR CLAIMED BEFORE US AS ALSO ARISING, 4 ITA NO.7324/MUM/2010 (A.Y. 2006-07) MANEET J. SHAH VS. ASST. CIT HAS NOT BEEN CONSIDERED EVEN BY THE LD. CIT, SO THA T THE MATTER REQUIRES TO BE DELIBERATED, WHICH HAS NOT BEEN. THIS IN FACT FURTHER FORTIFIES HIS ORDER INASMUCH AS HE HAS NOT PASSED AN ORDER ON MERITS BUT ONLY SET ASIDE THE ASSESSMEN T QUA THIS ISSUE FOR PROPER CONSIDERATION IN ACCORDANCE WITH THE LAW. QUA MERITS, AND ONLY TOWARD HIGHLIGHTING THE NEED FOR PROPER INQUIRY, HE HAS CORRECTLY POINTED O UT THAT WHAT HAD ACCRUED TO THE ASSESSEE ON THE EXECUTION OF THE DEVELOPMENT AGREEMENT IS A RIGHT TO THE RESIDENTIAL FLAT, I.E., A SUPER STRUCTURE IN EXCHANGE OF THE RELINQUISHMENT O F RIGHT TO THE EXTENT OF 45% OF HIS INTEREST IN THE LAND. THE MATTER HAVING BEEN SET AS IDE BY THE LD. CIT FOR CONSIDERATION ON MERITS, AND TOWARD WHICH WE FIND HIM TO HAVE RELIED UPON THE DECISION BY THE TRIBUNAL IN THE CASE OF LATA VASUDEVA VS. ADDL. CIT (IN ITA NO.2864/MUM/2009 DATED 07.05.2010), AND WHICH IS STATED TO HAVE CONSIDERED THE PROVISIO NS OF TRANSFER OF PROPERTY ACT AS WELL AS THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. VIJAY FLEXIBLE CONTAINERS [1990] 186 ITR 693 (BOM), THE SAME WOULD NOT ARISE FOR CONSIDERATION AT THIS STAGE; IT BEING APPARENT THAT THERE HAS BEEN NO PRO PER APPLICATION OF MIND IN THE MATTER, SO THAT THE ASSESSMENT IS PER SE ERRONEOUS IN-SO-FAR AS IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE. NO INFIRMITY IN THE IMPUGNED ORDER IS, THE REFORE, OBSERVED BY US. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. 5 16 ' (51 0 $5 0 1 78 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 25, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER MUMBAI; 9' DATED : 25.07.2013 .'../ ROSHANI , SR. PS 5 ITA NO.7324/MUM/2010 (A.Y. 2006-07) MANEET J. SHAH VS. ASST. CIT #4 0 -1: ;#:)1 #4 0 -1: ;#:)1 #4 0 -1: ;#:)1 #4 0 -1: ;#:)1/ COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT 3. < ( ) / THE CIT(A) 4. < / CIT - CONCERNED 5. :?@ -1' , , / DR, ITAT, MUMBAI 6. @A( B / GUARD FILE #4' #4' #4' #4' / BY ORDER, C CC C/ // /7 7 7 7 (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI