CHANDLER INVESTMENT AND TRADING P. LTD, MUMBAI V. ITO 5(1)(3), MUMBAI

ITA 7651/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9550 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 04-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: BIRAN GABHAWALA
• Keywords: Sale consideration of property below Jantri Value; Valuation report
• Section: 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 7651/MUM/2010 (ASSESSMENT YEAR: 2004-05) M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. 135, DOCTOR CENTRE, KEMPS CORNER, AUGUST KRANTI MARG, MUMBAI -400 036 PAN AAACC 1588 J VS INCOME-TAX OFFICER 5(1)(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BIRAN GABHAWALA RESPONDENT BY : SHRI A.B. KOLI DATE OF HEARING : 01.11.2012 DATE OF PRONOUNCEMENT : 30.11.2012 O R D E R PER VIVEK VARMA, JM: THE ASSESSEE IS AN APPEAL BEFORE THE ITAT AGAINST THE O RDER OF CIT(A) 9, MUMBAI DATED 19.08.2010, WHEREIN, THE CIT(A) HAS S USTAINED THE LEVY OF PENALTY OF RS. 5,15,300/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS, AS NARRATED IN THE SOF ARE, THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS O F DEVELOPMENT OF THE PROPERTY. RETURN OF INCOME FOR A.Y. 2004-05 DECLARI NG LOSS OF RS. 1,08,762/- WAS FILED ON 01/11/2004 WHICH WAS PROCESSED U/S OF I.T. ACT. THE APPELLANT COMPANY WAS A PARTY OF BID FOR PROPER TY BELONGING TO M/S FIT TIGHT NUT AND BOLTS LIMITED BEFORE DEBT RECOVERY TR IBUNAL ADMEASURING ABOUT 22,741.30 SQ. METERS. THE DEBT RECOVERY TRIBUNAL CONFIRMED THE BID IN FAV OR OF APPELLANT AND ITS NOMINEES ON 19/03/2001 FOR A TOTAL CONSIDERATION O F RS. 26.67 CRORES WHICH WAS LATER ON REVISED TO RS. 37.35 CRORES. THE DEBT RECOVERY TRIBUNAL APPOINTED THE RECEIVER A ND DIRECTED THEM TO EXECUTIVE CONVEYANCE DEED IN FAVOR OF APPELLANT AND ITS NOMINEES M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. ITA NO. 7651/MUM/2010 2 THE APPELLANT COMPANY HAS PROPOSED TO EXECUTE THE C ONVEYANCE DEED FOR ONE PLOT MEASURING 17,441.30 SQ. METERS IN FAVOR OF APP ELLANT AND 5,300 SQ. METER IN FAVOR OF ITS NOMINEES I.E. M/S BELLAMY INVESTME NT & TRADING CO. P. LTD. M/S FIT TIGHT NUT AND BOLTS LTD. HAD EXECUTED TWO S EPARATE AGREEMENT ON 09/01/2004 I.E. ONE PLOT MEASURING 17,441.30 SQ. ME TERS IN FAVOR OF THE APPELLANT COMPANY AND THE OTHER PLOT MEASURING 5,30 0 SQ. METERS IN FAVOR OF M/S BELLAMY INVESTMENTS AND TRADING CO. PVT. LTD. F OR RS. 6,35,67,500/- AND RS. 6,21,63,700/- RESPECTIVELY. THE APPELLANT HAS B EEN CONFIRMING PARTY OF THE AGREEMENT BETWEEN M/S FIT TIGHT NUT AND BOLTS LIMIT ED AND M/S BELLAMY INVESTMENT AND TRADING COMPANY PVT. LTD. THE A.O. ISSUED NOTICE U/S 148 STATING THE REASON T HAT APPELLANT HAS SOLD PLOT TO M/S BELLAMY INVESTMENTS AND TRADING CO. P. LTD. FOR A TOTAL CONSIDERATION OF RS. 62,21,63,700/- WHEREAS THE STAMP DUTY VALUATION WAS AT RS. 6,35,67,500/-. THUS THERE IS APPLICATION OF DEEMING APPLICATION PR OVISION OF SECTION 50C IN HANDS OF APPELLANT FOR RS. 14,36,500/-. TO BUY PEACE THE APPELLANT COMPANY FILED RETURN OF INCOME U/S 148 OFFERING RS. 14,36,500/- AS ITS INCOME WITH THE CONDITION THAT N O PENALTY SHOULD BE IMPOSED. HOWEVER, THE A.O. INITIATED PENALTY PROCEEDINGS U/S . 271(1)(C) OF I.T. ACT. DURING THE PENALTY PROCEEDINGS IT WAS SUBMITTED THA T THE SELLER IS M/S FIT TIGHT NUT & BOLTS (P) LTD. AND NOT THE APPELLANT AND IT W AS JUST A CONFIRMING PARTY OF THE DEAL. THE TOTAL CONSIDERATION OF THE APPELLANT AND IT WAS APPORTIONED AS PER AREA OF LAND IN TWO AGREEMENTS. THUS, SECTION 50C I F AT ALL APPLICABLE, THEN IT SHOULD BE APPLIED IN THE HANDS OF SELLER I.E. M/S. FIT TIGHT NUT BOLTS (P) LTD AND NOT ON THE APPELLANT COMPANY. IT WAS FURTHER SUBMITTED THAT THERE IS A TIME GAP OF ALMOST THREE YEARS WHEN THE DRT DECIDED THE SALES CONSIDERATION AND WHEN THE AC TUAL JURISDICTION TOOK PLACE. THE APPELLANT HAS NO CONTROL EITHER OVER THE CONSID ERATION DECIDED BY THE DRT OR OVER THE STAMP DUTY VALUATION. THUS THIS IS NOT CORRECT TO APPLY THE PROVISIONS OF 50C ON THE APPELLANT COMPANY. HOWEVER, THE LD. A.O. AS WELL AS CIT(A) FAILED TO A PPRECIATE THE SUBMISSION AGGRIEVING WITH THE SAME THIS APPEAL IS MADE ON THE FOLLOWING GROUNDS OF APPEAL. 3. TAKING THESE FACTS INTO CONSIDERATION, THE REVENUE AU THORITY TREATED THE ASSESSEE TO BE THE DEEMED OWNER OF PLOT A DMEASURING 5,300 SQ. METER WHICH WAS TRANSFERRED TO M/S BELLAMY IN VESTMENT & TRADING CO. PVT. LTD. BY DEBT RECOVERY TRIBUNAL ON BEHALF OF M/S FIT TIGHT NUT AND BOLTS PVT. LTD. THE ASSESSING OFFICER, NOT ONLY HELD THE ASSESSEE TO BE THE DEEMED OWNER, BUT ALSO INVOKED THE PROVISIONS OF SECTION 50C. IT WAS ARGUED BEFORE THE REVENUE AUTHORITY THAT SECTION 50C CANNOT BE INVOKED SINCE THE ASSESSEE WAS NOT THE SELLER BECAUSE THE SELLER WAS M/S FIT TIGHT NUT AND BOLTS PVT. LTD. THE A O, ALSO M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. ITA NO. 7651/MUM/2010 3 INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE, HOLDING THAT THE ASSESSEE HAD FAILED TO DISCLOSE THE CAPITAL GAINS EARNED BY THE ASSESSEE AMOUNTING TO RS. 14,36,500/-. 4. IT WAS CONTENDED BEFORE THE REVENUE AUTHORITY IN TH E REGULAR ASSET PROCEEDING AS WELL AS IN THE IMPUGNED PENALTY PROCEEDINGS THAT THE ASSESSEE WAS NOT THE OWNER OF THE PLOT TRANSFERRED TO BELLAMY, THOUGH IT HAD WON THE BID AND SINCE THE TOTAL PROPERTY WAS NOT TRANSFERRED AT THE TIME OF AUCTION, THE ASSESSEE REQUEST ED DEBT RECOVERY TRIBUNAL IN THE YEAR UNDER CONSIDERATION TO T RANSFER THE PART ADMEASURING 5300 SQ. MTS. TO BELLAMY, WHEREIN THE ASSESSEE WAS THE CONFIRMING PARTY. 5. THE REVENUE AUTHORITY DID NOT ACCEPT THIS ARGUMENT IN EITHER OF THE PROCEEDINGS AND INITIATED PENALTY PROCEEDINGS AND ALSO LEVIED A PENALTY. THE CIT(A) ALSO SUSTAINED THE PENALTY, AS LEVIED BY THE AO. 6. THE ASSESSEE IS IN APPEAL BEFORE THE ITAT AGAINST THE O RDER OF THE CIT(A), SUSTAINING THE LEVY OF PENALTY. 7. BEFORE US, THE AR REITERATED THE FACTS THAT (A) THE ASSESSEE WAS ONLY THE CONFIRMING PARTY AND THE AR PLACED BEFORE US TH E DEED OF CONVEYANCE WHEREIN IT MENTION THAT M/S FIT TIGHT NUT AND BOLTS PVT. LTD. IS THE SELLER, BELLAMY IS THE BUYER AND THE ASSESSEE IS THE CONFIRMING PARTY, (B) PROVISION OF SECTION 50C CANNOT BE INVOKED AGAINST THE ASSESSEE, (C) PENALTY CANNOT BE IMPOSED WHERE THE ADDITION IN SOUGHT TO BE MADE ON ACCOUNT OF A DEEMING PROVISION, (D) THAT THE MONEY WAS PAID DIRECTLY TO DEBT RECOVERY TRIBUNAL AND T HAT NO MONEY WAS ROUTED THROUGH THE ASSESSEE. 8. THE AR, THEREFORE, PLEADED THAT UNDER THESE FACTUAL PO SITIONS PENALTY IS NOT EXIGIBLE AND PLACED RELIANCE ON THE DECISION O F THE CO- M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. ITA NO. 7651/MUM/2010 4 ORDINATE BENCH OF ITAT, MUMBAI IN THE CASE OF RENU HINGORA NI IN ITA NO. 2210/MUM/2010, WHEREIN THE ITAT DELETED THE PENALTY LEVIED ON THE BASIS OF THE VALUATION IN ACCORDANCE WITH SECTION 50C. THE COORDINATE BENCH IN THE CASE OBSERVED : WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELEV ANT RECORD. WE FIND THAT THE AO HAD MADE ADDITION OF RS. 9,00,824/- BEING DI FFERENCE BETWEEN THE SALE CONSIDERATION AS PER SALE AGREEMENT AND THE VALUATI ON MADE BY THE STAMP VALUATION AUTHORITY. THUS, THE ADDITION HAS BEEN MA DE BY THE AO BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. IT IS EVI DENT FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT QUESTIONED THE ACTUAL CONSIDERA TION RECEIVED BY THE ASSESSEE BUT THE ADDITION IS MADE PURELY ON THE BAS IS OF DEEMING PROVISIONS OF THE INCOME TAX ACT. 1961. THE AO HAS NOT GIVEN ANY FINDING THAT THE ACTUAL SALE CONSIDERATION IS MORE THAN THE SALE CONSIDERAT ION ADMITTED AND MENTIONED IN THE SALE AGREEMENT. THUS IT DOES NOT AMOUNT TO C ONCEALMENT OF INCOME OF FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO FURNISH THE RELEVANT RECORD AS CALLED BY THE AO TO DISCLOSE THE PRIMARY FACTS. THE ASSESSEE HAS FURNISHED ALL THE RELEVANT FACTS, DOCUMENTS/ MATERIAL INCLUDING THE S ALE AGREEMENT AND THE AO HAS NOT DOUBTED THE GENUINENESS AND VALIDITY OF THE DOCUMENTS PRODUCED BEFORE HIM AND THE ALE CONSIDERATION RECEIVED BY THE ASSES SEE. UNDER THESE FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT FURNISHED CORRECT PARTICULARS OF INCOME. MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION ON THE BASIS OF VALUATION MADE BY THE STAMP VALUATION AUTH ORITY WOULD NOT BE A CONCLUSIVE PROOF THAT THE SALE CONSIDERATION AS PER THIS AGREEMENT WAS INCORRECT AND WRONG. ACCORDINGLY THE ADDITION, BECA USE OF THE DEEMING PROVISIONS, DOES NOT IPSO FACTO ATTRACT THE PENALTY U/S 271(1)(C). HENCE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF CIT V/S RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), THE PENAL TY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE. THE SAME IS DELETED. 9. WE FIND THAT THE FACTS IN THE INSTANT APPEAL, WHEREIN THE ASSESSEE FILED RETURN IN RESPONSE TO NOTICE UNDER SECTIO N 148, OFFERING RS. 14,36,500/- AS ITS INCOME, IN SUM AND SUBSTANCE, ARE ID ENTICAL TO THE FACTS IN THE CASE BEFORE THE COORDINATE BENCH, AS C ITED AND REFERRED TO ABOVE, WHERE, THE PENALTY WAS DELETED. 10. IN THE INSTANT CASE, AO LEVIED PENALTY OF RS. 5,15,300/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, IN RESPECT OF THE OFFER OF INCOME OF RS. 14,36,500/- BY THE ASSESSEE IN THE RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THE BAS IS OF THIS SUM M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. ITA NO. 7651/MUM/2010 5 IS THE VALUATION REPORT OBTAINED UNDER SECTION 50C OF THE INCOME TAX ACT. THEREFORE THE ISSUE TO BE ADDRESSED IN THE INSTANT APPEAL RELATES TO THE FACT, WHETHER PENALTY UNDER SECTION 271(1)(C) IS EXIGB LE IN RESPECT TO THE INCOME BROUGHT TO TAX BY VIRTUE OF THE VALUATION REPORT RECEIVED FROM THE DVO, INVOKING THE PROVISIONS OF SECTION 50 C OF THE ACT. THIS QUESTION, ALREADY STANDS ANSWERED BY THE COORD INATE BENCH IN THE CASE OF RENU HINGORANI (SUPRA) . IN THAT CASE, THE COORDINATE BENCH OF THE MUMBAI ITAT HELD THAT WHEN THE ACTUAL CONS IDERATION RECEIVED BY THE ASSESSEE IS UNQUESTIONED BY THE AO AND THE ADDITION IS MADE, RELYING ON THE VALUATION REPORT OBTAINED UNDER SEC TION 50C OF THE INCOME TAX ACT, THERE IS NO CASE FOR INVOKING THE PE NALTY PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT. IN THE INSTANT CASE, THERE IS NO INCRIMINATING DOCUMENT/MATERIAL TO DEMON STRATE THAT (A) THE ASSESSEE WAS THE TRANSFEROR OF THE DEMISED PROPER TY OR (B) IN CASE THE ASSESSEE WAS TO BE HELD TO BE THE DEEMED OW NER, AS THE REVENUE AUTHORITIES HAVE HELD, THAT THE ASSESSEE, RECEIVE D ANY EXCESS CONSIDERATION OVER AND ABOVE THE CONSIDERATION, AS DECLAR ED. THE OFFER OF ADDITIONAL INCOME OF RS. 14,36,500/- IS MERELY BASED ON T HE VALUATION REPORT RECEIVED FROM THE DVO, WHICH NORMALLY ARE BASED ON ESTIMATES. 11. IT IS NOT THE CASE OF THE DEPARTMENT THAT, THE DVO HAD ANY INCRIMINATING DATA, TO SUGGEST THE CONCEALMENT OF RS. 14,36,500/-. 12. TAKING INTO ACCOUNT THE ENTIRE FACTS OF THE CASE AND, RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF RENU HINGORANI (SUPRA), BASED ON SIMILAR FACTS, IN OUR OPINION, THE REVENUE AUTHORITIES ERRED IN LEVYING THE PENALTY. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) SUSTAINING THE PENALTY AND DIRECT THE ASSESSING OFFICER TO DELETE TH E PENALTY OF RS. 14,36,500/-. M/S CHANDLER INVESTMENT AND TRADING CO. PVT. LTD. ITA NO. 7651/MUM/2010 6 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 30/11/2012. SD/- (D. KARUNAKARA RAO) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE : 30/11/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- 22 , MUMBAI. 4) THE CIT 10, MUMBAI, 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI RASIKA