SUNIL MANGHARAM MOTWANI, MUMBAI V. ITO 18(2)(1), MUMBAI

ITA 7431/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2772 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Valuation report
• Section: 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.7431/MUM/2013 ( %' ( / ASSESSMENT YEAR: 2009-10) SHRI SUNIL MANGHARAM MOTWANI C/O. NAIK WATCH CO.,7-C, CHHAPRA BUILDING, N.C.KELKAR ROAD, DADAR, MUMBAI - 400028 ' / VS. ITO 18(2)(1) PIRAMAL CHAMBERS, MUMBAI - 400012 ./ ./ PAN/GIR NO. : AJUPM8862F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 14.09.2016 !' /DATE OF PRONOUNCEMENT: 23.09.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 17.10.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 19, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2009-10. ASSESSEE BY: SHRI BHUPENDRA SHAH DEPARTMENT BY: SHRI VIKRAM BATRA ITA NO.7431/M/2013 A.Y. 2009-10 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- GROUNDS OF APPEAL BEFORE THE HONOURABLE ITAT MUMBAI 1. IN THE FACTS AND THE CIRCUMSTANCES OF LAW, THE ASSESSING OFFICER ERRED IN DENYING EXEMPTION U/S.54 IN RESPEC T OF LTCG ARISING ON SALE OF ANCESTRAL PROPERTY EVEN THO UGHT THE RE-INVESTMENT IS MADE WITHIN STIPULATED PERIOD OF TWO YEARS BY PURCHASING A NEW FLAT, ONLY BECAUSE THE SA LE PROCEEDS WERE DEPOSITED IN BANK FD INSTEAD OF CAPIT AL GAIN ACCOUNT DURING THE INVENTING PERIOD. 2. IN THE FACTS AND THE CIRCUMSTANCES OF LAW, LEARN ED CIT(A)- 19, MUMBAI ALSO ERRED IN CONFIRMING THE ABOVE SAID DENIAL OF EXEMPTION U/S.54. 3. IN THE FACTS AND THE CIRCUMSTANCES OF LAW, THE A SSESSING OFFICER ERRED IN WRONGLY CHARGING INTEREST U/S.234B , C AND D AND HAS WRONGLY INITIATED PENALTY U/S.274 R.W.S. 271(1)(C). RELIEF PRAYED 1. TO ALLOW THE EXEMPTION U/S.54 TO THE EXTENT OF RE-I NVESTMENT MADE OUT OF SALE PROCEED OF LTCG ON SALE OF ANCESTR AL PROPERTY. 2. TO DELETE THE ABOVE SAID INTEREST U/S.234B, C AND D AND INITIATION OF PENALTY U/S.274 R.W.S. 271(1)(C). 3. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 26.02.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.1,56,350/-. THE RETURN HAS ALREADY BEEN PROCES SED U/S.143(2) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) RESU LTING IN A NIL DEMAND. THE CASE WAS SELECTED FOR SCRUTINY AND NOT ICE U/S.143(2) OF THE ACT WAS ISSUED ON 19.08.2010 AND DULY SERVED UP ON THE ASSESSEE ON 25.08.2010. NOTICE U/S.142(1) OF THE ACT ALONG WITH THE ITA NO.7431/M/2013 A.Y. 2009-10 3 QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE ON 06.01.2 011 AND 09.06.2011, WHICH WERE DULY SERVED UPON THE ASSESSE E. THE ASSESSEE WAS AN INDIVIDUAL DERIVING INCOME FROM BUSINESS, IN COME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. DURING THE YEA R UNDER ASSESSMENT, THE ASSESSEE SOLD A FLAT AT B-35, BROTH ER CHS, MAHIM, MUMBAI FOR A SUM OF RS.13,75,000/- ON 28.07.2008. THE ASSESSEE COMPUTED THE LONG TERM CAPITAL GAIN OF RS.7,93,000/ - AFTER DEDUCTING INDEXED COST OF ACQUISITION OF RS.5,82,00 0/-. HE INVESTED AN AMOUNT OF RS.12,00,000/- IN NEW RESIDENTIAL PROP ERTY VIDE AGREEMENT FOR SALE DATED 31.08.2009 AND CLAIMED EXE MPTION OF LONG TERM CAPITAL GAIN U/S.54 OF THE ACT. THE SAID FLAT WAS INHERITED BY THE ASSESSEE. THE FLAT WAS EARLIER OWNED BY SHRI W ADHUMAL MOTWANI I.E. ASSESSEES GRANDFATHER WHO EXPIRED IN 1983 LEA VING BEHIND HIM HIS LEGAL HEIR SHRI MANGARAM MOTWANI I.E. ASSESSEES FA THER. SHRI MANGARAM MOTWANI EXPIRED ON 04.06.2007 LEAVING BEHI ND HIM FOUR SONS INCLUDING THE ASSESSEE. THE ASSESSEE HELD THE 1/4 TH SHARE OF FLAT ON 04.06.2007. THE ASSESSING OFFICER COMPUTED THE INDEXED COST OF ACQUISITION I.E 551 PERTAINING TO F.Y.2007-08 WHERE AS THE ASSESSEE HAD TAKEN INDEX 133 OF F.Y.1985-86 AND COMPUTED REV ISED LONG TERM CAPITAL GAIN VIDE HIS LETTER DATED 12.09.2011. THE ASSESSEE TAKEN THE COST OF ACQUISITION TO THE TUNE OF RS.4,5 3,150/- BEING VALUE AS ON 01.04.1981 AS PER VALUATION REPORT DATED 09.0 9.2011 OF SHRI K. S. SHIKARI AND ASSOCIATES FURNISHED BY THE ASSESSEE . THE ASSESSEES 1/4 TH SHARE WAS TO THE EXTENT OF RS.1,13,287/-. THE CON TENTION OF THE ITA NO.7431/M/2013 A.Y. 2009-10 4 ASSESSEE WAS NOT ACCEPTED. THE PROPERTY WAS SOLD O N 28.07.2008 FOR RS.13,75,000/- AND TAKING THE COST OF ACQUISITION TO THE TUNE OF RS.1,19,660/-. THE LONG TERM CAPITAL GAIN WAS ASSE SSED TO THE TUNE OF RS.12,55,340/- AND THE SAID LONG TERM CAPITAL GA IN WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CLAIMED T HE EXEMPTION TO THE TUNE OF RS.12,00,000/- U/S.54F(4) OF THE ACT BU T THE SAME WAS DECLINED AND THEREFORE THE TOTAL INCOME OF THE ASSE SSEE WAS ASSESSED TO THE TUNE OF RS.14,11,690/- AND ACCORDINGLY TAXED. FEELING AGGRIEVED THE APPEAL WAS FILED BEFORE THE CIT(A) WHO CONFIRME D THE ORDER, THEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1-3:- 4. ISSUE NO.1 TO 3 ARE INTER CONNECTED, THEREFORE A RE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER THESE ISSUES THE ASSESSEE HAS RAISED THE POINT WITH REGARD TO DENYING THE EXEMPTION U/S. 54F OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN ARISING OUT ON TH E SALE OF ANCESTRAL PROPERTY. THE ASSESSING OFFICER DENIED THE EXEMPT ION ON THE GROUND THAT THE ASSESSEE WAS REQUIRED TO DEPOSIT AN AMOUNT OF CAPITAL GAIN IN A SPECIFIED ACCOUNT BEFORE THE DUE DATE OF FURNISHING OF THE RETURN OF INCOME U/S.139 OF THE ACT WHEREAS THE ASSESSEE KEPT THE SALE CONSIDERATION IN A FIXED DEPOSIT ACCOUNT IN BANK OF INDIA IN THE NAME OF SMT. KAJAL MOTWANI WHO WAS THE WIFE OF THE ASSES SEE. SINCE THE ASSESSEE FAILED TO ABIDE THE PROVISION U/S.54 OF TH E ACT, THEREFORE THE EXEMPTION U/S.54F OF THE ACT WAS DECLINED AND THE T OTAL INCOME OF THE ITA NO.7431/M/2013 A.Y. 2009-10 5 LONG TERM CAPITAL GAIN WAS ASSESSED TOWARDS THE INC OME OF THE ASSESSEE. THE CIT(A) HAS CONFIRMED THE SAME. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THIS ISSUE HAS DULY BEEN COVERED BY THE HONBLE HIGH COURT OF KARNATAKA TIT LED AS COMMISSIONER OF INCOME TAX, BANGALORE VS. K. RAMCHA NDRA RAO [2015] 56 TAXMANN.COM 163. ON THE OTHER HAND THE L EARNED REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIE D UPON THE ORDER OF CIT(A) IN QUESTION. NO DOUBT THE MATTER OF CONTROV ERSY HAS NOW BEEN SETTLED BY THE HONBLE HIGH COURT OF KARNATAKA IN C ASE TITLED AS COMMISSIONER OF INCOME TAX, BANGALORE VS. K. RAMCHA NDRA RAO (SUPRA) IN WHICH IT HAS BEEN SPECIFICALLY HELD THAT THE ASSESSEE WAS NOT REQUIRED TO BE DENY THE EXEMPTION U/S.54F OF THE AC T ON THE GROUND THAT ASSESSEE DID NOT DEPOSIT SAID AMOUNT IN CAPITA L GAINS ACCOUNT SCHEME BEFORE DUE DATE PRESCRIBED U/S.139(1) OF THE ACT. THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR OF THE CASE OF C OMMISSIONER OF INCOME TAX, BANGALORE VS. K. RAMCHANDRA RAO (SUPRA) . IN VIEW OF THE SAID CIRCUMSTANCES THE BENEFIT OF SECTION 54F(4 ) OF THE ACT IS NOT REQUIRED TO BE DENIED TO THE ASSESSEE. HENCE THE SA ME IS HEREBY ALLOWED AND ACCORDINGLY THE ASSESSMENT IS REQUIRED TO BE COMPLETED. THE INTEREST ISSUE IS CONSEQUENTIAL AND NEED NOT RE QUIRED TO BE ADJUDICATED SEPARATELY. IN VIEW OF THE SAID CIRCUM STANCES IT IS QUITE CLEAR THAT THE LEARNED CIT(A) HAS DECIDE THE MATTER WRONGLY AND ILLEGALLY WHICH IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW HENCE ITA NO.7431/M/2013 A.Y. 2009-10 6 THE FINDING OF THIS ISSUE IS ORDERED TO BE SET ASID E. ACCORDINGLY THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINS T THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 23 RD SEPTEMBER, 2016 MP MP MP MP * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI