Smt. Pratibha Sehgal, Kanpur V. Income Tax Officer-1(3), Kanpur

ITA 828/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100454 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Reasonable cause; Fair market value; Condonation of delay
• Section: 50C; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.828/LKW/2014 ASSESSMENT YEAR:2007-08 SMT. PRATIBHA SEHGAL 55/7, KAHU KOTHI KANPUR V. INCOME TAX OFFICER 1(3) KANPUR TAN/PAN:ACNPS6701P (APPELLANT) (RESPONDENT) ITA NO.694/LKW/2014 ASSESSMENT YEAR:2007-08 SMT. PRATIBHA SEHGAL 55/7, KAHU KOTHI KANPUR V. INCOME TAX OFFICER 1(3) KANPUR TAN/PAN:ACNPS6701P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. AMIT NIGAM, D.R. DATE OF HEARING: 29 10 2015 DATE OF PRONOUNCEMENT: 09 11 2015 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE LD. CIT(A). 2. APPEAL IN I.T.A. NO. 694/LKW/2014 IS FILED LATE BY 832 DAYS, FOR WHICH THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT OF THE ASSESSEE STATING THEREIN THAT WHILE DECIDING THE APPEAL, THE LD. CIT(A) HAS HELD THAT THERE IS NO APPLICATION OF PROVISIONS OF SECTION 50C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED :- 2 -: IN SHORT THE ACT') TO THE ADVANCE AMOUNT RECEIVED BY THE ASSESSEE. HE, HOWEVER, DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE EXCLUDING LONG TERM CAPITAL GAIN ASSESSED BY HIM. BUT IN THE CONCLUDING PARAGRAPH, THE LD. CIT(A) HAS OBSERVED THAT CONSIDERATION RECEIVED AMOUNTING TO RS.45 LAKHS FROM THE BUYER NEEDS TO BE RETURNED BACK. ACCORDINGLY IN FAILURE OF THE SAME, THE WHOLE PROCEEDS RETAINED BY THE ASSESSEE NEEDS TO BE TAXED IN HER HANDS. SINCE THE ASSESSEE GOT RELIEF FROM THE LD. CIT(A), SHE DID NOT CHALLENGE THE ORDER OF THE LD. CIT(A) BEFORE THE TRIBUNAL. 3. THOUGH THE LD. CIT(A) HAS NOT GIVEN ANY DIRECTION TO THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER HAS PASSED AN ORDER UNDER SECTION 154 READ WITH 251 OF THE ACT AND ASSESSED THE CONSIDERATION RECEIVED AMOUNTING TO RS.45 LAKHS IN THE HANDS OF THE ASSESSEE BY MAKING AN ADDITION HAVING IGNORED THE FACT THAT THE ORDER ANNULLING THE AGREEMENT OF PURCHASE WAS CHALLENGED BY THE BUYER BEFORE THE HIGHER FORUM. THE ORDER PASSED UNDER SECTION 154 READ WITH 251 OF THE ACT WAS CHALLENGED BEFORE THE LD. CIT(A), BUT THE ASSESSEE DID NOT FIND FAVOUR WITH HIM AND THE LD. CIT(A) HAS CONFIRMED THE ADDITION. AGAINST THAT ORDER OF THE LD. CIT(A), THE ASSESSEE ALSO PREFERRED AN APPEAL BEFORE THE TRIBUNAL IN I.T.A. NO. 828/LKW/2014, THE OTHER APPEAL. AFTER THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT, THE ASSESSEE HAS REALIZED THAT THE ORDER OF THE LD. CIT(A), IN WHICH OBSERVATION WAS MADE, NEEDS TO BE CHALLENGED AND ACCORDINGLY THE PRESENT APPEAL WAS FILED LATE BY 832 DAYS. SINCE THERE IS A VALID REASONABLE CAUSE FOR DELAY IN FILING OF THE APPEAL, THE DELAY MAY BE CONDONED AND THE APPEAL MAY BE ADMITTED FOR HEARING. 4. HAVING CAREFULLY EXAMINED THE AFFIDAVIT IN SUPPORT OF THE APPLICATION FOR CONDONATION OF DELAY, WE FIND THAT THERE IS A JUSTIFIABLE CAUSE FOR DELAY IN FILING OF THE APPEAL. WE ACCORDINGLY CONDONE THE :- 3 -: DELAY AND ADMIT THE APPEAL FOR HEARING AND PREFER TO ADJUDICATE BOTH THESE APPEALS SIMULTANEOUSLY, AS COMMONS ISSUE IS INVOLVED THEREIN. 5. THROUGH I.T.A. NO. 694/LKW/2014, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) THAT THE LD. CIT(A) CANNOT MAKE ANY OBSERVATION THAT CONSIDERATION RECEIVED AMOUNTING TO RS.45 LAKHS FROM THE BUYER NEEDS TO BE RETURNED BACK AND ACCORDINGLY IN FAILURE OF THE SAME, THE WHOLE PROCEEDS RETAINED BY THE ASSESSEE NEEDS TO BE TAXED IN HER HAND, AS NO ISSUE IN THIS REGARD WAS PENDING BEFORE THE LD. CIT(A). THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ISSUE BEFORE THE LD. CIT(A) WAS WITH REGARD TO THE APPLICABILITY OF PROVISIONS OF SECTION 50C OF THE ACT TO THE ADVANCE MONEY RECEIVED BY THE ASSESSEE FOR SALE OF CAPITAL ASSET. THEREFORE, THIS OBSERVATION OF THE LD. CIT(A) DESERVES TO BE EXPUNGED FROM THE ORDER OF THE LD. CIT(A). 6. THE LD. D.R., ON THE OTHER HAND, HAS CONTENDED THAT THE ENTIRE ISSUE WAS OPEN BEFORE THE LD. CIT(A) AND THE LD. CIT(A) IS ALSO ARMED WITH CO-TERMINUS POWER OF THAT OF THE ASSESSING OFFICER AND IS COMPETENT ENOUGH TO PASS ANY ORDER WHICH HE DEEMS FIT AND PROPER IN VIEW OF THE CIRCUMSTANCES OF THE CASE. THE LD. D.R. HAS FURTHER CONTENDED THAT THERE IS NO DISPUTE THAT PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE INVOKED WITH RESPECT TO THE ADVANCE MONEY RECEIVED WHILE EXECUTING THE SALE AGREEMENT, BUT IF THE ADVANCE MONEY RECEIVED IS NOT REFUNDED TO THE BUYER, THE SAME SHOULD BE ASSESSED IN THE HANDS OF THE ASSESSEE IN ACCORDANCE WITH LAW. THEREFORE, THE OBSERVATIONS OF THE LD. CIT(A) ARE NOT CONTRARY TO THE ISSUE IN DISPUTE BEFORE HIM AND, THEREFORE, HE HAS RIGHTLY MADE THE OBSERVATION. 7. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ENTIRE ISSUE WAS OPEN BEFORE THE LD. CIT(A) IN THE APPEAL FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) WITH RESPECT TO THE APPLICABILITY OF PROVISIONS OF SECTION 50C OF THE ACT TO THE ADVANCE MONEY RECEIVED BY THE ASSESSEE WHILE EXECUTING :- 4 -: THE SALE AGREEMENT. WHILE DEALING WITH THE ISSUE, THE LD. CIT(A) HAS RIGHTLY HELD THAT THE PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE APPLIED TO THE ADVANCE MONEY RECEIVED BY THE ASSESSEE WHILE EXECUTING THE SALE AGREEMENT WITH THE BUYER. BUT IN CASE ADVANCE MONEY IS NOT REFUNDED TO THE BUYER DESPITE CANCELLATION OF SALE AGREEMENT, WHAT TREATMENT SHOULD BE GIVEN TO THE RECEIPTS AND IN THIS REGARD THE OBSERVATION OF THE LD. CIT(A) IS NOT INCORRECT. BUT SO FAR AS THE ISSUE OF TAXABILITY OF THE RECEIPTS IS CONCERNED, IT IS TO BE EXAMINED IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE ACT. THEREFORE, THE OBSERVATION OF THE LD. CIT(A) IN THIS REGARD THAT THE SAME BE TAXED IN THE HANDS OF THE ASSESSEE, DOES NOT APPEARS TO BE PROPER. BUT HE CANNOT BE DEBARRED FROM MAKING ANY OBSERVATION WITH RESPECT TO THE TREATMENT OF RECEIPTS IN THE HANDS OF THE ASSESSEE. THEREFORE, IN THIS APPEAL, WE ARE OF THE VIEW THAT THE OBSERVATION OF THE LD. CIT(A) IS NOT DEVOID OF MERIT AND DESERVES TO BE SUSTAINED. SO FAR AS TAXABILITY OF RECEIVED AMOUNT IN THE HANDS OF THE ASSESSEE IS CONCERNED, THAT IS NOT PROPER. 8. CONSEQUENT TO THIS ORDER OF THE LD. CIT(A), THE ASSESSING OFFICER HAS PASSED AN ORDER UNDER SECTION 154 READ WITH SECTION 251 OF THE ACT AND ASSESSED THE RECEIPT OF RS.45 LAKHS AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. ON THIS ISSUE OUR ATTENTION WAS INVITED TO THE PROVISIONS OF SECTION 51 OF THE ACT, IN WHICH IT HAS BEEN STATED THAT WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUBJECT OF NEGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION. IN THE LIGHT OF THIS PROVISION, THE ADVANCE MONEY RECEIVED ON ACCOUNT OF NEGOTIATION FOR TRANSFER OF CAPITAL ASSET, WOULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. MOREOVER, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED AN :- 5 -: EVIDENCE ON RECORD THAT THE JUDGMENT FOR CANCELLATION OF THE SAID AGREEMENT WAS ALSO CHALLENGED BEFORE THE HIGHER FORUM BY THE BUYER, THEREFORE, SO LONG AS THE CONTROVERSY WITH RESPECT TO THE VALIDITY OF THE SALE AGREEMENT IS RESOLVED, THE ADVANCE MONEY RECEIVED BY THE ASSESSEE CANNOT BE TREATED TO BE THE INCOME OF THE ASSESSEE. MOREOVER, AS PER PROVISIONS OF SECTION 51 OF THE ACT, THE ADVANCE MONEY RECEIVED ON ACCOUNT OF NEGOTIATION FOR TRANSFER OF CAPITAL ASSET WILL SIMPLY REDUCE THE COST OF ACQUISITION OF ASSET. THEREFORE, IN ANY MANNER THE SAID AMOUNT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE. 9. WE HAVE ALSO EXAMINED THE OTHER ASPECT OF THE FACT THAT THE LD. CIT(A) HAS SIMPLY MADE AN OBSERVATION IN HIS ORDER AND HE HAS NOT GIVEN ANY SPECIFIC DIRECTION TO THE ASSESSING OFFICER. THEREFORE, THE ISSUE OF TAXABILITY OF RECEIPTS CANNOT BE EXAMINED UNDER SECTION 154 OF THE ACT. IN ANY CASE, THE RECEIPT OF RS.45 LAKHS ON ACCOUNT OF EXECUTION OF SALE AGREEMENT FOR TRANSFER OF CAPITAL ASSET CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. AT THE MOST, IT WOULD REDUCE THE COST OF ACQUISITION AT THE TIME OF COMPUTATION OF LONG TERM CAPITAL GAIN ON ITS TRANSFER. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE SUCCEEDS IN BOTH THE APPEALS. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN I.T.A. NO. 828/LKW/2014. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 TH NOVEMBER, 2015 JJ:0311 :- 6 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR