MANOJ VITHALDAS MESWANI SON & LEGAL HEIR OF LATE SMT. MADHUMATI V. MESWANI, MUMBAI V. ACIT CIR 19(2), MUMBAI

ITA 7967/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3654 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-06-2015
• Assessment Year: 1995-1996
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVIN GUPTRA
• Assessee Lawyers: KANTILAL B PAREKH
• Keywords: Cost of acquisition
• Section: 143(3); 147; 148; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI AMIT SHUKLA , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO. 7967 /MUM / 201 0 ( / ASSESSMENT YEAR : 1995 - 96 ) SHRI MANOJ VITHALDAS M ESWANI SON AND LEGAL HEIR OF LATE SMT.MADHUMATI V MESWANI, FLAT NO.101, NATHDWARA C H SOC LTD, PODDAR ST., SANTACRUZ(W), MUMBAI - 400054 . / VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE - 19(2), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. ./ PAN : AADPM5905D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI KANTILAL B PAREKH / RESPONDENT BY : SHRI NAVIN GUPTRA / DATE OF HEARING : 14 .1.2016 / DATE OF PRONOUNCEMENT : 09. 3. 2016 / O R D E R PER RAJESH KUMAR , AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 28.06. 201 0 PASSED BY THE LD.CIT(A) - 30 , MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 1995 - 96 . 2. SOLE GROUND RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF PENALTY LEVIED U/S 271(1)(C ) OF THE INCOME TAX ACT, 1961 (T HE ACT) AMOUNTING TO RS.25,41,970/ - . 3. THE FACT IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.6.1995 DECLARING THE INCOME OF RS.12,93,320/ - UNDER THE HEAD INCOME ITA NO. 7967 / MUM/20 1 0 2 FROM OTHER SOURCES AND RS.24,59,371/ - UNDER THE HEAD LONG TERM CAPITAL GAINS (LTCG) FROM SALE OF MOVABLE PROPERTIES KNOWN AS MADHU SADAN SITUATED AT PODAR STREET, SANTA CRUZ (W), MUMBAI. THE ASSESSEE GOT THE SAID PROPERTY BY WAY OF WILL FROM HER LATE HUSBAND IN 1970. THE PROPERTY CONSISTED OF LAND OF ABOUT 1003 SQ.YA RDS AND BUILDING COMPRISING GROUND, FIRST AND 2 ND FLOOR. DURING THE FINANCIAL YEAR THE ASSESSEE ENTERED INTO AN AGREEMENT DATED 11.9.1993 WITH M/S LAKE END CONSTRUCTIONS PVT LTD FOR TRANSFER OF THE SAID BUILDING FOR A CONSIDERATION OF RS.1,30,00,000/ - FOR DEVELOPMENT, HOWEVER RETAINED THE FIRST FLOOR OF THE SAID BUILDING ADMEASURING ABOUT 1800 SQ. FT. SUBSEQUENTLY , THE ASSESSEE MADE ANOTHER AGREEMENT WITH THE SAID COMPANY DATED 20.7.1994 AND AS PER THE SAID AGREEMENT THE ENTIRE BUILDING W A S TO BE DE MOLISHED AND REBUILT BY THE SAID CONSTRUCTION COMPAN Y AND ONE OF THE CONDITIONS GIVEN IN THE SAID AGREEMENT THAT THE BUILDER WOULD GIVE TO THE ASSESSEE AN AREA OF 1800 SQ. FT ON THE FIRST FLOOR AND ACCORDINGLY THE ENTIRE BUILDING WAS HANDED OVER TO THE SAID CONSTRUCTION COMPANY. UNDER THE SAID AGREEMENT, THE ASSESSEE WAS PAID RS.95 LAKHS AS AN INTEREST FREE SECURITY DEPOSITS BY THE CONSTRUCTION COMPANY TILL THE BUILDING IS CONSTRUCTED AND IT HANDED OVER 1800 SQ.FT AREA ON THE FIRST FLOOR TO THE AS SESSEE. THE ASSESSEE DECLARED THE SALE OF PROPERTY IN THE RETURN OF INCOME BY SHOWING SALE CONSIDERATION OF RS.1,30,00,000 AND COST OF ACQUISITION AFTER INDEXATION AT RS.64,86,946/ - WHICH WAS CALCULATED ON THE BASIS OF REGISTER VALUARS REPORT , V ALUING THE PROPERTY AT RS.21,05,573/ - AND FROM THE CAPITAL GAIN SO CALCULATED THE ASSESSEE CLAIMED DEDUCTION OF RS.40,27,575/ - U/S 54 IN RESPECT OF THE PROPERTY PURCHASED ON 18.4.1994 AT RAMESHWAR CO - OP.HSG SOC, SANTA CRUZ (W), MUMBAI BESIDE CLAIMING AN EXPENSE OF RS.10,59,620/ - INCURRED IN CONNECTION WITH THE TRANSFER OF THE SAID PROPERTY INCLUDING THE AMOUNT OF RS.4,50,000/ - PAID AS BROKERAGE . SUBSEQUENTLY, THE CASE WAS REOPENED UNDER SECTION 147 R.W. SECTION 148 OF THE ACT ON ITA NO. 7967 / MUM/20 1 0 3 THE GROUND THAT RS.95 LA KHS TAKEN IN LI EU OF 1800 SQ.FT. AREA ON THE FIRST FLOOR OF THE OLD BUILDING WAS NOT TAK EN INTO ACCOUNT WHILE CALCULAT ING CAPITAL GAIN ON T HE SALE OF THE PROPERTY AND ALSO THAT THE EXPENSES ON BROKERAGE CHARGES WAS CLAIMED AT RS.4,50,000/ - AS AGAINST RS. 2.6 LAKHS BEING 2 PER CENT ON THE SALE CONSIDERATION OF RS.1,30,00,000/ - . THE ASSESSMENT U/S 147 R.W. SECTION 143(3) OF THE ACT WAS COMPLETED ON 27.3.2002 BY TAKING SALE CONSIDERATION FOR SALE OF PROPERTY KNOWN AS MADHU SADAN TO BE RS.2,25 ,00,000/ - INSTEAD OF RS.1,30,00,000/ - SHOWN BY THE ASSESSEE. THE AO DETERMINED THE SALE CONSIDERATION OF THE PROPERTY ON THE GROUND THAT 1800 SQ.FT AREA WAS NOT IN EXISTENCE WHICH WAS GIVEN TO THE ASSESSEE BY THE BUILDER AFTER DEMOLISHING THE OLD BUILDING COMPLET ELY AND THE VALUE OF THE NEW FLAT AS PER AGREEMENT DATED 20.9.1994 WAS RS.95 LAKHS AND THE AO FURTHER HELD THAT THE FACT WAS SUBSTANTIATED BY THE ASSESSEE ITSELF AS IT HAD PAID BROKERAGE OF RS.4,50,000/ - FOR THE ENTIRE CONSIDERATION. THUS, THE LON G TERM CAPITAL GAINS WAS ASSESSED UNDER SECTION 143(3) READ WITH SECTION 147 AT RS.1,30, 50 ,0 59 / - AFTER ALLOWING DEDUCTION OF RS.40,27,575/ - U/S 54 OF THE ACT QUA NEW FLAT PURCHASED . 4. THE MATTER TRAVELLED UP TO THE TRIBUNAL , HOWEVER THE ASSESSEE DESPIT E TAKING THE GROUND AGAINST TAKING OF SALE CONSIDERATIONS AT RS.2,25,00,000/ - DID NOT PRESS THE SAME AND PRESSED ONLY FOR ALLOWING RELIEF UNDER SECTION 54 IN RESPECT OF RS.95,00,000/ - . THE TRIBUNAL ALLOWED THE SECOND GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AS THE ASSESSEE DID NOT PRESS THE FIRST GROUND OF THE APPEAL. THUS, THE TRIBUNAL DID NOT GIVE ANY FINDING ON THE FIRST GROUND. IT IS NOTEWORTHY THAT THE ASSESSEE RETURNED AND REFUNDED THE SAID INTEREST FREE SECURITY DEPOSIT TO THE BUILDER CO MPANY IN THREE INSTALLMENTS I.E. RS.40 LAKHS ON 31.3.1995, RS.45 LAKHS ON 31.3.1996 AND RS.10 LAKHS ON 31.3.1997 UPON RECEIVING THE POSSESSION ITA NO. 7967 / MUM/20 1 0 4 OF THE 1800 SQ.FT AREA ON THE FIRST FLOOR AND THEREFORE THERE WAS NO SALE NOR WAS THERE ANY DISPOSAL OF TH E SAID AREA. THE AO LEVIED THE PENALTY OF RS.25,41,970/ - ON THE GROUND THAT THE ASSESSEE FURNISHED IN ACCURATE PARTICULARS OF INCOME AND SUPPRESSED HER INCOME. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO C ONFIRMED THE ACTION OF THE AO BY HOLDING AS UNDER : FOR THE ABOVE REASONS, I AM INCLINED TO HOLD THAT THE VALUE OF THE FLAT WILL CONSTITUTE PART OF THE CONSIDERATION FOR SALE OF THE PROPERTY BY THE ASSESSEE. THE VALUE OF THE FLAT HAS BEEN TAKEN BY THE AO AT RS.95 LACS ON THE BASIS OF THE VALUE WHICH APPEARS TO HAVE BEEN PUT UPON THE FLAT BY THE PARTIES TO THE TRANSACTION. ACCORDINGLY, THE ACTION OF THE AO IN TAKING THE SALE CONSIDERATION AT RS. 2.25 CRORE IS CONFIRMED. I HAVE ALSO CONSIDERED THE FACT S OF THE CASE IN ENTIRETY AND THE FINDINGS GIVEN BY MY PREDECESSOR IN THE QUANTUM APPEAL. AFTER ANALYSING ALL THE FACT, IT BECOMES EVIDENT THAT EVEN THOUGH APPARENTLY T H ERE WERE TWO AGREEMENTS ENTERED INTO BY APPELLANT, THEY HAVE BEEN PROVED BEYOND DOUBT A S PART OF AN OVERALL SCHEME WHERE ONLY TRANSACTION WAS SOUGHT TO B E E X E CU T ED. I T IS ONLY TO SEEK THE DEDUCTION TWICE THAT TWO AGREEMENTS WERE ENTERED INTO. WHEN APPEAL WAS FILED BY THE APPELLANT AGAINST THIS ORDER OF CIT(A) SUPRA BEFORE ITAT, THE APPELLA NT DID NOT DISPUTE THE DETERMINATION OF THE SALE CONSIDERATION OF R S .2.25 CRORE EVEN THOUGH IN THE GROUNDS OF APPEAL FILED, IT HAS DULY RAISED THIS ISSUE. IT IS EVIDENT FROM THE PERUSAL OF DETAILS ESPECIALLY THE ORDER OF THE ITAT IN THE APPELLANT'S OWN CASE SUPRA THAT THE APPELLANT HAS CONCEDED THE SUBMISSION BEFORE ITAT. IN OTHER WORDS, THE VERY REASON FOR WHICH IT SOUGHT AN APPEAL BEFORE ITAT INTER - ALIA CHALLENGING THE ADDITION ON ACCOUNT OF SECURITY DEPOSIT OF R S .95 LACS WAS UNHINDERDLY CONCEDED BY THE APPELLANT, AFTER THE TRANSACTIONS WERE HELD AS 'SHAM' AND AN ARRANGEMENT BETWEEN PARTIES TO EVADE TAXES LEGITIMATELY DUE TO THE REVENUE . WITH THESE FACTS OF THE APPELLANT'S CASE, PROTRUDING FROM ALL THE SIDES AND WHEN THESE FACTS ARE JUXTAPOSED WIT H THE PROVISION OF SEC.271 (1)(C) OF INCOME TAX ACT, 1961 IT IS EVIDENT THAT THE APPELLANT IS CAUGHT BY THE MISCHIEF OF EXPLANATION 1 TO SEC.271 (1 )(C). THE EXPLANATION OFFERED BY THE APPELLANT IS FOUND TO BE FALSE AND THE ITA NO. 7967 / MUM/20 1 0 5 FALSITY OF THE CLAIM OF THE APPE LLANT HAS TO BE APPRECIATED IN THE BACKGROUND OF INCORRECT CLAIM MADE BY THE APPELLANT. IT'S CLAIM THAT THERE WERE TWO AGREEMENTS AND TWO DIFFERENT TRANSACTIONS - ONE BY AGREEMENT DT.11.09.1993 AND ANOTHER BY AGREEMENT DT. 20.07.1994 HAS BEEN FINALLY FOUND AS ONE TRANSACTION ONLY AND THAT IS HOW THE TAX LIABILITY HAS ARISED . FROM ANALYSIS OF THE FACTS, IT CANNOT BE BELIEVED THAT TWO OPINIONS ARE POSSIBLE BECAUSE THIS CASE HAS GONE THROUGH HUGE GYRATIONS AND WHAT HAS EMERGED IS THE REAL INTENTION. THE 'GUILTY MIND' OF THE APPELLANT IS PROVED BEYOND ANY DOUBTS. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED UPON BY THE AR, HOWEVER, THEY ARE DISTINGUISHABLE ON FACTS. BUT IN MY VIEW, THE NATURE OF TRANSACTIONS ENTERED INTO BY THE APPELLANT BY EXECUTING TWO D EEDS WHICH HAS BEEN HELD AS 'SHAM' CLEARLY ATTRACTS PENALTY, AS HELD BY MUMBAI IT AT IN THE CASE OF M /S ULTRAMARINE & PIGMENTS LTD V. ACIT REPORTED IN (2010), 38 DTR 42. THE CRUX OF THE OBSERVATION OF THE MUMBAI ITAT IN THE CASE OF ULTRAMARINE (SUPRA) IS T HAT WHERE THE ASSESSEE HAS ENTERED INTO AN ARTIFICIAL ARRANGEMENT OF PURCHASE AND LEASE BACK TRANSACTIONS TO EVADE TAX LIABILITY AN D T HE TRANSACTIONS HAVING FOUND TO BE BOGUS, PENALTY U/S 271(1)(C ) IS LE VIABLE 5. THE LD. AR SUBMITTED BEFORE US THAT THE PENALTY LEVIED BY THE AO WAS INCONSISTENT WITH THE FACT THAT THERE WAS NEITHER ANY SALE NOR ANY TRANSFER OF 1800 SQ.FT AREA ON THE FIRST FLOOR OF THE PROPERTY KNOWN AS MADHU SADAN. THE LD. COUNSEL SUBMITTED THAT VIDE AGREEMENT DATED 20.7.1995 THE PROPE RTY SOLD TO THE BUILDER WAS TO BE DEMOLISHED AND AS PER THE CONDITION IN THE AGREEMENT THE BUILDER WAS TO HANDOVER AN AREA OF 1800 SQ. FT ON THE FIRST FLOOR OF THE NEW PROPERTY AFTER DEVELOPMENT TO THE ASSESSEE WHICH WAS ALSO CONDITION IN THE OLD AGREEME NT DATED 11.9.1993. THE LD. COUNSEL SUBMITTED THAT THE CONTENTION OF ASSESSEE THAT INTEREST FREE SECURITY DEPOSIT OF RS.95 LAKHS WAS TO BE REFUNDED WHEN THE BUILDER HANDED OVER THE POSSESSION OF THE AREA OF 1800 SQ. FT ON THE FIRST FLOOR OF THE PROPERTY AND IN THE EVENT THE BUILDER BACK ING OUT ITS COMMITMENTS UNDER THE SAID AGREEMENT AT - LEAST THE ASSESSEE WOULD FORFEIT THE SECURITY AND THUS THE ASSESSEE WAS PLACED IN A BETTER POSITION THAN WITHOUT HAVING ANY SUCH SECURITY. THE SAID INTEREST FREE SECUR ITY DEPOSIT WAS REPAID BACK IN THREE INSTALMENTS TO THE BUILDER UPON HANDING ITA NO. 7967 / MUM/20 1 0 6 OVER OF THE POSSESSION OF 1800 SQ. FT AREA ON THE FIRST FLOOR OF THE NEW PROPERTY BY THE DEVELOPER AS UNDER : A) RS.40 LAKHS ON 31.3.1995, B) RS.45 LAKHS ON 31.3.1996 C) R S.10 LAKHS ON 31.3.1997. THE TRIBUNAL DIRECTED THE AUTHORITIES BELOW TO ALLOW THE BENEFIT OF RS.95 LAKHS AS INVESTMENT IN THE NEW PROPERTY AS THE ASSESSEE DID NOT P RESS GROUND BEFORE THE TRIBUNAL RELATING TO SALES CONSIDERATION OF RS.2,25,00,000/ - WHICH DO NOT MEAN THAT THE ASSESSEE CONCEALED ANY INCOME OR FURNISHED IN ACCURATE PARTICULARS OF HER INCOME. THE CO - ORDINATE BENCH D IRECTED THAT THE BENEFIT U/S 54 OF THE ACT BE ALLOWED IN RESPECT OF R S.95 LAKHS . THE LD. COUNSEL, PRAYED THAT IN VIEW O F THE ABOVE FACTS, WHICH PROVE D UNEQUIVOCALLY THAT NO TRANSFER OF 1800 SQ FTS ON THE FIRST FLOOR OF THE NEW PROPERTY HAD BEEN TAKEN PLACE AND THE SECURITY DEPOSIT OF RS.95 LAKHS RECEIVED FROM THE BUILDER WAS DULY REFUNDED IN THREE INSTALLMENTS AS DETAI LED ABOVE. THE PENALTY IMPOSED U/S 271(1)(C) WAS WRONG AND UNCALLED FOR AND THEREFORE, THE ORDER OF THE LD.CIT(A) BE SET ASIDE. 6 . ON THE CONTRARY, THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSEE TRANSFERRED THE PROPERTY TO THE BUILDER VIDE AGREEMENT DATED 11.9.1997 TO M/S LAKE END CONSTRUCTIONS PVT LTD FOR DEVELOPMENT OF THE PROPERTY WHILE RETAINING 1800 SQ. FT AREA ON THE FIRST FLO OR OF THE BUILDING. WE ALSO NOTE THAT THE ASSESSEE VIDE AGREEMENT DATED 20.7.1994 ENTERED WITH THE SAID DEVELOPER AGREED TO HANDOVER THE POSSESSION OF THE ENTIRE PROPERTY INCLUDING 1800 SQ. FT. AREA ON THE FIRST FLOOR OF THE PROPERTY ON THE CONDITION THA T THE ITA NO. 7967 / MUM/20 1 0 7 BUILDER WOULD PAY INTEREST FREE SECURITY DEPOSIT OF RS.95 LAKHS TO THE ASSESSEE AND IT WOULD BE REFUNDED AFTER THE BUILD ER HANDED OVER 1800 SQ. FT AREA ON THE FIRST FLOOR OF THE RE - CONSTRUCTED PROPERTY. THE CO - ORDINATE BENCH OF THE TRIBUNAL DI RECTED THE AO TO ALLOW THE BENEFIT U/S 54 OF THE ACT IN RESPECT OF RS.95 LAKHS . T HE PENALTY PROCEEDINGS ARE INDEPENDENT OF THE ASSESSMENT PROCEEDINGS AND THEREFORE HAVE TO BE EXAMINED ACCORDINGLY. IN THE PRESENT CASE, IN OUR OPINION THE ASSESSEE HA S NEIT HER CONCEALED HIS INCOME NO R HAS FURNISHED INACCURATE PARTICULARS OF INCOME . THE ASSESSEE HAD DISCLOSED ALL AND FURNISHED THE PARTICULARS WITH REGARD TO THE SAID SALE OF PROPERTY IN THE RETURN OF INCOME AND ALSO DECLARED CAPITAL GAIN AFTER CLAIMING BENEF IT U/S 54 OF THE ACT IN RESPECT OF FLAT AT RAMESHWAR CO - OP.HSG SOC, SANTA CRUZ (W), MUMBAI BESIDE S CLAIMING THE EXPENDITURES ON TRANSFER OF PROPERTY AND DECLARED LONG TERM CAPITAL GAINS FOR TAXATION. BESIDES, THE SECURITY DEPOSIT WHICH WAS TREATED AS PART OF SALES CONSIDERATION WAS REFUNDED TO THE BUILDER UPON HANDING OVER OF THE 18 00 SQ.FT. FLATS ON FIRST FLOOR OF THE NEW PROPERTY IN THREE INSTALLMENTS AS AGREED. THUS UNDER THESE FACTS WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS NOT F URNISHED ANY INACCURATE PARTICULARS OF INCOME AND O RDER OF LD.CIT(A) UPHOLDING THE PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE SUSTAINED. WE, THEREFORE, DELETE THE PENALTY BY ALLOWING THE APPEAL OF THE ASSESSEE. THE AO IS DIRECTED ACCORDINGLY. 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH MAR CH , 2016 . 9 TH MARCH, 2016 SD SD ( AMIT SHUKLA ) ( RAJESH KUMAR ) / JU DICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09 /3 /2016 . . ./ SRL , SR. PS ITA NO. 7967 / MUM/20 1 0 8 / 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