Nirmal Chand Soni, Kolkata V. ACIT, Circle - 44, KOLKATA, Kolkata

ITA 832/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5872 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M SURANA SH
• Keywords: Cost of acquisition; Valuation report
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI ABY T. VARKEY, JUDICIAL MEMBER) ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI..............................APPELLANT 28, BARRACKPORE TRUNK ROAD KOLKATA 700 072 [PAN : ARLPS 4328 R] ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-44, KOLKATA.................RESPONDENT ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI................................APPELLANT 28, BARRACKPORE TRUNK ROAD KOLKATA 700 072 [PAN : ASMPS 0452 Q] ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-44, KOLKATA.............RESPONDENT APPEARANCES BY: SHRI S.M. SURANA, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SAURABH KUMAR, ADDL. CIT, SR. D/R. APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 26 TH , 2018 DATE OF PRONOUNCING THE ORDER : JULY 20 TH , 2018 ORDER PER J. SUDHAKAR REDDY, AM :- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA, (HEREINAFTER THE LD. CIT(A)), , PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), BOTH RELATING TO ASSESSMENT YEAR 2007-08. 2. WE HAVE SHRI S.M. SURANA, ADVOCATE, THE LD. COUNSEL ON BEHALF OF THE ASSESSEE AND SHRI SAURABH KUMAR, ADDL. CIT, SR. D/R ON BEHALF OF THE REVENUE. THE CRUX OF THE ISSUE THAT ARISES IN THIS APPEAL BOILS DOWN TO THE OBSERVATIONS OF THE LD. CIT(A) AT PAGE 30 & 31 OF ITS ORDER, WHICH IS EXTRACTED FOR READY REFERENCE:- THE APPELLANT HAS TAKEN ARGUMENT THAT THE APPELLANT WAS NOT OWNER OF THE PROPERTY IN VIEW OF THE OF THE WEALTH TAX DECISION GIVEN IN APPELLANT OWN CASE FOR THE SAME PROPERTY 2 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI BY HON'BLE ITAT. HENCE NO ASSESSABLE INCOME ARISES IN HIS HANDS. IT WAS NOT WEALTH IN THE HANDS OF APPELLANT HENCE IT WAS NOT ASSESSABLE IN THEIR HAND AND NO CAPITAL GAIN IS TO BE CHARGED ON SUCH LAND. THE APPELLANT SUBMITTED AS UNDER: 'SETH BHAGCHAND SONI (FATHER OF THE ASSESSEE) WAS THE OWNER OF VARIOUS PROPERTIES INCLUDING THE INCLUDING PROPERTIES ON SALE OF WHICH CAPITAL GAIN AROSE AND WHICH IS DISPUTED. SRI BHAGCHAND SONI WAS DECLARED AN INSOLVENT VIDE ORDER DATED 21.12.1962 PASSED BY SENIOR CIVIL JUDGE NO. 1, JAIPUR CITY IN INSOLVENCY PETITION NO. 6 OF 1962 AND IN PURSUANCE THEREOF RECIEVER WAS APPOINTED BY THE COURT FOR ALL THE PROPERTIES OF SAID BHAGCHAND SONI. THE SAID RECEIVER ALSO TOOK OVER THE ACTUAL PHYSICAL AND VACANT POSITION OF ALL THE PROPERTIES. SRI BHAGCHAND SONI HAD 3 LEGAL HEIRS VIZ. SRI PROMOD CHAND SONI, SRI NIRMAL CHAND SONI AND SRI SUSHI! CHAND SONI. M/S. MADANGANJ IDEAL CORPORATION LTD WAS THE LAST RECEIVER IN WHOM THE PROPERTIES WERE VESTED. M/ S. MADANGANJ IDEAL CORPN. SOLD THE PROPERTIES AS RECEIVER AND THE GAIN ON SALE OF THOSE PROPERTIE IS IN DISPUTE. THE HON'BLE ITATHELD THAT IT IS THE RECEIVER WHO SHALL BE ASSESSABLE AND THE NET WEALTH CANNOT BE INCLUDED IN THE HANDS OF THE ASSESSEE WHO ARE ALSO THE PRESENT APPELLANT IN THE APPEAL BEFORE YOUR HONOUR. THIS SHOWS THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE PROPERTIES SOLD WERE NEITHER WEALTH NOR CAPITAL. IN FACT THE ARGUMENT OF THE ASSESSEE IS THAT THE SAME WERE NOT ASSESSABLE IN THEIR HANDS. ELABORATE DISCUSSIONS HAVE BEEN MADE IN THE ORDER OF THE ITAT REFERRED TO ABOVE. THE ASSESSEE AS LEGAL HEIR INHERITS TO THE REMAINDER OF THE AMOUNT AS MAY BE LEFT WITH THE RECEIVER ON SALE OF PROPERTIES. THE ASSESSEE WAS NOT THE OWNER OF THE PROPERTIES NOR COULD HAVE CLAIMED THE; OWNERSHIP IN VIEW OF THE APPOINTMENT OF RECEIVER BY THE HIGH COURT WITH SPECIFIC DIRECTION TO DISBURSE TO THE CREDITORS OF THE ESTATE. ANY ESTATE INHERITED BY ANY PERSON IN INDIA FROM THEIR FORE FATHER CANNOT BE TREATED AS INCOME. IN THIS CASE SINCE THE APPELLANT WAS NOT OWNER TILL THE DISPOSAL OF LIABILITY AND IT RECEIVED MONEY ONLY FOR DISPOSAL OF HIS LIABILITY AGAINST THE PROPERTY DUE TO THE REASON OF BEING ARRIVED FROM THE ANCESTOR PROPERTY HENCE IT WAS TREATED AS GAIN. CONSIDERING THE DECISION OF HON'BLE ITAT IN CASE OF THE APPELLANT AS ARGUED BY THE AIR THAT APPELLANT WAS NOT OWNER TILL THE LIABILITY GOT DISCHARGE AND IT WAS NOT WEALTH IN HIS HAND, BUT ITS RIGHT GOT CREATED ONLY AFTER SALE AND ADJUSTMENT OF LIABILITY BY THE THEIR MORTGAGER BECAUSE THE APPELLANTS WERE HAVING INHERENT SUCCESSION RIGHT WHICH GOT MONETIZED IN FORM OF SURPLUS MONEY RECEIVED BY THE SUCCESSORS, ONLY AFTER THE ADJUSTMENT OF LIABILITY, HENCE THE NATURE OF RECEIPTS CHANGE ITS COLOUR. AS THERE WAS NO TRANSFER OF PROPERTY BY THE RECIPIENTS, AND THERE WAS NO COST OF ACQUISITION IN THEIR HAND, HENCE IT IS NOTHING BUT INCOME FROM OTHER SOURCES. 3. THE ASSESSEE SUBMITS THAT THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF SRI NIRMAL CHAND SONI VS. A.C.W.T, CIR-44, KOLKATA, W.T.A. NO. 12/KOL/2016 & SRI SUSHIL CHAND SONI VS. A.C.W.T, CIR-44, KOLKATA, W.T.A. NO. 13/KOL/2016; ASSESSMENT YEAR 2005-06, ORDER DT. 07/06/2017, HAS CATEGORICALLY HELD THAT WEALTH TAX CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE ON THE SUBJECT MENTIONED THREE PROPERTIES AND HENCE THE ORDER OF THE LD. CIT(A) IS ERRONEOUS. HE FURTHER ARGUED THAT AS IT IS A CASE OF INHERITANCE, THE AMOUNT CANNOT BE TAXED IN VIEW OF PROVISO (C) TO SECTION 56(2)(V) OF THE ACT. HE SUBMITTED THAT THERE IS NO ESTOPPEL AGAINST LAW AND THAT THE ASSESSEE CANNOT BE TAXED AGAINST THE PROVISIONS OF LAW. 3 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI THE LD. D/R, RELIES ON THE ORDER OF THE ASSESSING OFFICER. 4. THE KOLKATA C BENCH OF THE TRIBUNAL IN THE ABOVE MENTIONED ORDER IN THE ASSESSEES OWN CASE, AT PARA 3.1. HAS BROUGHT OUT THE BRIEF FACTS OF THE CASE, WHICH IS EXTRACTED FOR READY REFERENCE:- 3.1. THE BRIE FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS AN INDIVIDUAL AND HAD DECLARED LONG TERM CAPITAL GAINS (LTCG) AT RS 3,54,13,145/- IN THE INCOME TAX RETURN FILED ON 29.7.2010 FOR THE ASST YEAR 2007-08 BEING HIS 1/3RDSHARE IN THE FOLLOWING L PROPERTIES :- A) PLOT NO. 20 TO 24 & 24A MEASURING 4621.31 SQUARE YARDS AT ASC ROAD, SONI COLONY, ANAND NAGAR, VAISHALI NAGAR MAIN ROAD, NEAR ANA SAGAR, AJMER; B) PROPERTY NO. AMC NO.8/278, 6/283 AT KADAKKA CHOWK, AJMER, WHICH IS A TENANTED PROPERTY AND C) PROPERTY AMC NO. 2/500 AT THOK TELIAN, FOY SAGAR ROAD CHOWK, AJMER THE LD. A.O. ISSUED NOTICE U/S 17 OF THE ACT BY RE-OPENING THE ASSESSMENT FOR THE ASST. YEAR 2005-06 ON THE ONLY GROUND THAT THE ASSESSEE HIMSELF HAD OFFERED LTCG IN ASST YEAR 2007-08 IN RESPECT OF THE ABOVEMENTIONED PROPERTIES AND HENCE IT GOES TO PROVE THAT THE ASSESSEE HAD ACCEPTED THE CO-OWNERSHIP OF THESE PROPERTIES AND ACCORDINGLY LIABLE FOR WEALTH TAX ON THE SAID PROPERTIES FOR THE EARLIER YEARS. IN RESPONSE TO NOTICE U/S 17 OF THE ACT, THE ASSESSEE FILED RETURN OF NET WEALTH AT RS.10,17,200/- ON 15.5.2012 WHICH INCLUDED JEWELLERY / ORNAMENTS ONLY IN THE LIST OF ASSETS U/S 2( EA) OF THE ACT. 3.2. THE ASSESSEE EXPLAINED THE ENTIRE BACKGROUND OF THE CASE BY WAY OF WRITTEN SUBMISSIONS STATING THAT ALL THE PROPERTIES BELONGED TO ASSESSEE'S FATHER LATE SETH BHAGCHAND SONI. THE ORDER OF HON 'BLE HIGH COURT DIVISION BENCH, JAIPUR DATED 22.1.2001 WAS BROUGHT ON RECORD WHEREIN IT WAS ORDERED THE FOLLOWING :- SHRI SETH BHAGCHAND SONI (FATHER OF THE ASSESSEE) WAS DECLARED INSOLVENT ON 21.12.1962 AND PROCEEDINGS WERE IN PROGRESS UNDER PROVINCIAL INSOLVENCY ACT IN THE HANDS OF HIS FATHER. IN THE MEAN TIME, HIS FATHER EXPIRED ON 3.8.1983 DURING PENDENCY OF INSOLVENCY PROCEEDINGS. PURSUANT TO INSOLVENCY PROCEEDINGS, A RECEIVER WAS APPOINTED TO THE ESTATE OF SETH BHAGCHAND SONI. MR CHUTTANLAL SHRIMAL, ADVOCATE WAS APPOINTED AS RECEIVER FOR HIS PROPERTIES. THE LEGAL HEIRS OF LATE SETH BHAGCHAND SONI ARE NIMAL CHAND SONI (ASSESSEE HEREIN); SUSHIL CHAND SONI (ANOTHER ASSESSEE HEREIN) AND PRAMOND CHAND SONI. THE LEGAL HEIRS MOVED AN APPLICATION ON 01.10.1983 FOR SUBSTITUTING THEM AS DEFENDANT IN THE PLACE OF SHRI BHAGCHAND SONI (PURSUANT TO HIS DEATH ON 3.8.1983) , SO THAT THEY CAN TAKE PART AND MONITOR THE PROCEEDING OF THE CASE AND-MAY RENDER ASSISTANCE TO THE RECEIVER IN REALIZING THE PROPERTY OF LATE BHAGCHAND SONI, FOR PAYING THE DUES OF THE CREDITORS AND MAY BE ENTITLED TO THE RESIDUE OF THE PROPERTY, IF ANY. THE APPLICATION MOVED BY THE LEGAL HEIRS WAS ACCEPTED BY ORDER DATED 29.9.1989 AND ACCORDINGLY ALL THE THREE SONS WERE RECORDED AS HEIRS. AGAINST THE ORDER DATED 29.9.1989, ERSTWHILE RECEIVER SHRI CHUTTANLAL SHRIMAL MOVED AN APPLICATION BEFORE THE HONBLE HIGH COURT DIVISION BENCH, JAIPUR UNDER A.B. CIVIL REVISION NUMBER 974 OF 1989 TITLED 'CHUTANLAL SHRIMAL VERSUS SHRI NIRMAL CHAND SONI ETC' AND VIDE ORDER DATED 23.3.1990 , SHRI RAMRAJLAL GUPTA , ADVOCATE WAS APPOINTED AS RECEIVER FOR THE PROPERTIES OF SETH BHAGCHAND SONI. SHRI RARNRAJLAL GUPTA , RECEIVER, ALSO TENDERED HIS RESIGNATION ONE 17.9.1991 AND PURSUANT TO ANOTHER APPLICATION MOVED BY THE LEGAL HEIRS , VIDE ORDER DATED 14.5.1992, SHRI .DHARMCHAND SHARMA WAS APPOINTED AS RECEIVER. AGAINST THE ORDER DELIVERED ON 4 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI 14.5.1992, THE HEIRS OF SETH BHAGCHAND SONI MOVED AN APPLICATION BEFORE THE .HON'BLE HIGH COURT DIVISION BENCH, JAIPUR UNDER A.B.CIVIL APPEAL NO. 299/92 TITLED NIRMALCHAND VERSUS DHARMCHAND WHICH WAS ACCEPTED VIDE ORDER DATED 19.8.1992. THE RECEIVER FURNISHED THE TOTAL LIST OF CREDITORS TO WHOM THE ESTATE OF SETH BHAGCHAND SONI OWES MONEY AFTER REVISING IT SEVERAL TIMES PURSUANT TO DEBTS GETTING ASSIGNED IN FAVOUR OF SOMEONE AND SOME CREDITORS NOT TURNING UP FOR RECEIVING THE NOTICE AND REGISTER THEMSELVES WITH THE RECEIVER AS RECOGNIZED CREDITORS. ACCORDINGLY THE RECEIVER WAS ALLOTTED THE TASK OF SETTLING THE CREDITORS AS PER FINAL LIST AVAILABLE WITH HIM BY LIQUIDATING THE ASSETS OF THE ESTATE OF SETH BHAGCHAND SONI. ON 31.10.2000, THE RECEIVERS ALONG WITH THE LEGAL HEIRS OF SETH BHAGCHAND SONI MOVED AN APPLICATION FOR COMPOSITION AND SCHEME OF ARRANGEMENT IN RESPECT OF THE CREDITORS MADANGANJ IDEAL CORPORATION PVT LTD AND THOSE CREDITORS WHO HAVE NOT RECEIVED THE AMOUNT OF INTEREST. FINALLY IT WAS AGREED THAT M/S MADANGANJ IDEAL CORPORATION PVT LTD WILL ITSELF PAY THE DUE AMOUNT OF ITS OWN AND OF CREDITORS AND FOR PAYMENT TO THE CREDITORS MENTIONED, THE PROPERTIES HEREUNDER SHALL BE GIVEN UNDER THE ADMINISTRATION OF M/S MADANGANJ IDEAL CORPORATION PVT LTD WITH THE CONDITION THAT IT SHALL SELL THE SAID PROPERTIES, RECEIVE THE PAYMENT, PAY THE DUES OF THE CREDITORS AND IF THEREAFTER THERE REMAINS ANY AMOUNT, THE SAID REMAINING AMOUNT SHALL BE GIVEN TO THE HERIS OF SETH BHAGCHAND SONI :- A) VACANT LAND, CHRISTIAN GANJ B) PROPERTY NO. A.M.C. 10/11 PILI KOTHI SITUATED BEHIND CITY IMPROVEMENT TRUST , AJMER C) PART OF PROPERTY NO. 1/477 AT LOHAGAL ROAD AJMER WHICH IS NOT YET SOLD. IT WAS ALSO AGREED THAT M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL BE ENTITLED TO RECOVER THE EXPENSE FOR ADMINISTRATION OF THE PROPERTIES FROM THE ESTATE OR SHALL HAVE THE RIGHT TO RECOVER THE SAME FROM THE LEGAL HEIRS. M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL NOT HAVE THE OWNERSHIP RIGHTS OVER THE SAID PROPERTIES. M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL HAVE THE RIGHT TO SELL THE SAID PROPERTIES, RECEIVE THE AMOUNT RECEIVABLE AND SHALL BE LIABLE TO PAY THE OUTSTANDING AMOUNT OF THE CREDITORS FROM THE AMOUNT RECEIVED ON SALE OF THE PROPERTIES OR PART THEREOF. THE HEIRS OF SETH BHAGCHAND SONI AND RECEIVERS ALSO CONSENTED TO THE PROPOSAL. ACCORDINGLY IT WAS HELD THAT THERE REMAINS NO LIABILITY OF THE CREDITORS ON ESTATE OF SETH BHAGCHAND SONI. THE CREDITORS SHALL NOW HAVE THE RIGHT TO RECOVER THEIR DUES FROM M/S MADANGANJ IDEAL CORPORATION PVT LTD AND M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL BE LIABLE FOR PAYMENT OF THEIR DUES. IN THE CIRCUMSTANCES AND AS PER THE SCHEME OF ARRANGEMENT THE NAMES OF THE CREDITORS SHALL BE DELETED FROM THE LIST OF DEBTS OF THE ESTATE. ON THE BASIS OF THE SAID SCHEME OF ARRANGEMENT AND ON THE BASIS OF ACCEPTANCE OF THE SAME BY THE HONBLE COURT , M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL GET THE RIGHT TO SELL THE PROPERTIES OR ANY PART THEREOF. PURSUANT TO THE SAID SCHEME OF ARRANGEMENT IT WAS ORDERED BY THE HONBLE COURT AS UNDER:- 18. AS FAR AS THE QUESTION OF APPROVAL OF THE COMPOSITION AND SCHEME OF ARRANGEMENT IS CONCERNED, IT IS IN ACCORDANCE WITH LAW AND ALL THE EXISTING CREDITORS HAVE PUT THEIR SIGNATURE ON IT. IN THIS SITUATION, THE APPROVAL TO THE COMPOSITION AND SCHEME OF 5 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI ARRANGEMENT IS JUSTIFIED AND IS IN ACCORDANCE WITH LAW. THEREFORE, THE COMPOSITION AND SCHEME OF ARRANGEMENT SUBMITTED BY SAID PARTIES IS ACCEPTABLE. 19. THEREFORE ACCEPTING THE COMPOSITE SCHEME OF ARRANGEMENT IT IS ORDERED THAT M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL PAY THE AMOUNT PAYABLE TO THE CREDITORS WHICH IS STATED AS AFORESAID AND AS PER THE RESOLUTION OF THE SCHEME, IT IS ORDERED TO THE RECEIVER TO DELIVER THE PROPERTIES UNDER THE ADMINISTRATION OF M/S MADANGANJ IDEAL CORPORATION PVT LTD. M/S MADANGANJ IDEAL CORPORATION PVT LTD SHALL SELL THE PROPERTIES OR PART THEREOF AND PAY THE DUES OF THE CREDITOS FROM THE SAME AMOUNT WHICH IS RECEIVED ON SALE OF THE PROPERTIES AND IF ANY RESIDUE REMAINS AFTER PAYMENT TO ALL THE CREDITORS, SHALL PAY THE REMAINING AMOUNT TO THE HEIRS OF SETH BHAGCHAND SONI. THE DETAILS OF PROPERTIES ARE AS UNDER: 1. VACANT LAND, CHRISTIAN GANJ 2. PROPERTY NO. A.M.C. 10/11 PILI KOTHI SITUATED BEHIND NAGAR SUDHAR NYAS AJMER, AJMER 3. PART OF PROPERTY NO. 1/477 AT LOHAGAL ROAD AJMER WHICH IS NOT YET SOLD. ACCORDINGLY NO AMOUNT REMAINS PAYABLE AGAINST THE INSOLVENT. ORDER 20. IN THE RESULT, AS PER SECTION 39 OF PROVINCIAL INSOLVENCY ACT, ON APPROVAL HAVING BEEN ACCORDED TO THE COMPOSITE SCHEME OF ARRANGEMENT THE ORDER DECLARING SRI BHAGCHAND SONI AS INSOLVENT IS ANNULLED AND THE PAYMENT MADE BY THE RECEIVER TO THE CREDITORS OR ANY PROPERTY SOLD BY THE RECEIVER FOR PAYMENT TO THE CREDITORS BEFORE THE DATE OF ANNULMENT SHALL BE TREATED AS VALID. ALL THE PROPERTIES OF SETH BHAGCHAND SONI SHALL VEST IN HIS LEGAL HEIRS EXCEPT THE PROPERTIES GIVEN UNDER THE ADMINISTRATION OF M/S MADANGANJ IDEAL CORPORATION P LTD . WHATEVER AMOUNT IS LYING WITH THE RECEIVER, THE SAME SHALL BE DEPOSITED WITH THE COURT. THIS ORDER SHALL BE PUBLISHED IN GOVERNMENT GAZETTE AND NOTICE SHALL ALSO BE PUBLISHED IN THIS RESPECT IN DAINIK NAVJYOTI, RAJASTHAN PATRIKA, DAINIK BHASKAR AND TIMES OF INDIA. 21. THE JUDGEMENT WAS DICTATED ON 22.1.2001 AND SIGNED AND PRONOUNCED IN THE OPEN COURT. 3.3. THE ASSESSEE ALSO PLACED THE COPY OF THE ORDERS OF AJMER DEVELOPMENT AUTHORITY IN FAVOUR OF M/S MADANGANJ IDEAL CORPORATION PVT LTD BEING RECEIVER ALLOWING CONVERSION OF LAND FROM AGRICULTURE TO RESIDENTIAL ON 8.11.2001 BEING PLOT NO. 23,24A,22,21,20 AND 24 AND ON SUCH CONVERSION, THE CONVERTED LAND WAS 788.33+937.77+755+804.16+768.05+568=4621.31 SQUARE YARDS AND SAME AREA CONTINUED WHEN THE PROPERTY WAS CONVERTED FROM RESIDENTIAL TO COMMERCIAL ON 6 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI 21.6.2006. THE ASSESSEE ALSO PLACED THE EVIDENCE FOR PAYMENT OF CONVERSION CHARGES BY M/S MADANGANJ IDEAL CORPORATION PVT LTD BY CHEQUE. THE ASSESSEE PLACED THE FOLLOWING DOCUMENTS BEFORE THE LD AO :- A) COPY OF AGREEMENT DATED 7.9.2006 FOR THE SALE OF PLOT NO. 20 TO 24A MEASURING 4621.31 SQUARE YARDS BETWEEN THE RECEIVER AS VENDOR AND THE PURCHASER ; B) COPY OF THE MARKET RATE CHART OF ALL PROPERTIES AS PER REGISTRATION AUTHORITY PUBLISHED ON 24.5.2005 :- (I) ASC ROAD, SONI COLONY, ANAND NAGAR, VAISALI NAGAR MAIN ROAD BEING PLOT NO. 20 TO 24 AND 24A- RS 3510/- (II) PROPERTY AT A.M.C. NO. 8/278 = 6/283 , KARAKKA CHOWK RS 2970/- (III) PLOT PART OF PROPERTY AT A.M.C. NO. 2/500, FOY SAGAR ROAD RS 900/- C) COPY OF DEED OF SALE OF THE SAID PROPERTY REGISTERED ON 8.1.2007 BETWEEN M/S MADANGANJ IDEAL CORPORATION PVT LTD WHO EXECUTED THE SALE DEED AS VENDOR / RECEIVER ; D) COPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF NIRMAL CHAND AND SUSHIL CHAND SONI FOR 31.3.2005 WHEREIN THE PROPERTY IN QUESTION IS NOT APPEARING ; E) COPY OF LEDGER ACCOUNT OF ESTATE OF BHAGCHAND SONI IN THE BOOKS OF M/S MADANGANJ IDEAL CORPORATION PVT LTD FOR THE YEAR ENDING 31.3.2005, 31.3.2006 AND 31.3.2007 ; F) COPY OF THE DEED OF SALE OF PROPERTY AT A.M.C. NO. 8/278=6/283, KARAKKA CHOWK, AJMER ; G) COPY OF DEED OF SALE OF PLOT PART OF PROPERTY AT A.M.C. NO. 2/500, FOY SAGAR ROAD, AJMER ; H) VALUATION REPORT OF PROPERTY AT A.M.C. NO. 8/278=6/283, KARAKKA CHOWK, AJMER I) VALUATION REPORT OF PLOT PART OF PROPERTY AT A.M.C. NO. 2/500, FOY SAGAR ROAD, AJMER 3.4. BASED ON THE AFORESAID FACTS AND DOCUMENTS SUBMITTED, IT WAS PLEADED THAT THE ASSESSEE CANNOT BE INVITED WITH LEVY OF WEALTH TAX ON THE SUBJECT MENTIONED THREE PROPERTIES AS IT WAS NOT HAVING POSSESSION OF THE SAME NOR HAVING ANY CONTROL OVER THE SAME AS IT HAD ALREADY GOT VESTED WITH M/S MADANGANJ IDEAL CORPORATION PVT LTD PURSUANT TO THE COURT ORDER DATED 22.1.2001 AS DETAILED SUPRA. HENCE THE PROVISIONS OF SECTION 21(4) OF THE WEALTH TAX ACT, 1957, WHEREIN WEALTH TAX SHALL BE LEVIED ONLY ON M/S MADANGANJ IDEAL CORPORATION PVT LTD AND NOT ON THE ASSESSEES HEREIN. THE ASSESSEE STATED THAT THOSE 3 PROPERTIES DOES NOT BELONG TO THE ASSESSEE AS PER THE DEFINITION OF ASSETS U/S 2(EA) OF THE ACT. 3.5. THE LD AO HOWEVER CONCLUDED THAT SINCE ASSESSEE HAD OFFERED LTCG IN HIS INCOME TAX RETURNS FOR THE ASST YEAR 2007-08 ON THE SALE OF THE SUBJECT MENTIONED PROPERTIES, THAT AMOUNTS TO ACCEPTANCE OF OWNERSHIP OF THE ASSESSEE AND THAT THOSE PROPERTIES BELONGED TO THE ASSESSEE AS ON THE VALUATION DATE I.E 31.3.2005 AND ACCORDINGLY SUBJECTED THE 3 PROPERTIES TO WEALTH TAX IN THE HANDS OF THE ASSESSEE. HE HELD THAT THE THREE PROPERTIES WERE LYING WITH M/S MADANGANJ IDEAL CORPORATION PVT LTD TO DO THE WORK I.E PAYING OFF THE CREDITORS AS PER DIRECTIONS OF THE COURT ORDER. THE LD AO FURTHER OBSERVED THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM THAT THE PROPERTIES SOLD AS MENTIONED ABOVE WERE NOT OWNED BY HIM ALONG WITH TWO OTHER CO-OWNERS. THE LD AO FURTHER OBSERVED THAT ASSESSEE WAS DEFINITELY UNDER LEGAL OBLIGATION FOR WEALTH TAX LIABILITY AS HE WAS 7 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI ALWAYS HAVING INTEREST IN THE PROPERTIES AND THAT IS WHY CAPITAL GAINS HAS BEEN DECLARED BY HIM ON THE SALE OF THE SAME PROPERTIES. THE LD AO OBSERVED THAT A VERY MOOT QUESTION ARISES AS TO WHO HAD THE INTEREST THEN IN THE SAID PROPERTIES IF NOT THE ASSESSEE AND WHY IT HAS BEEN MAKING EFFORTS TO DEPOSIT DIFFERENT KINDS OF TAXES AND OTHER CHARGES WITH THE MUNICIPAL COUNCIL AS WELL AS IMPROVEMENT TRUST, AJMER TO CONVERT LAND INTO COMMERCIAL LAND, GETTING LEASE DEEDS FROM THE AUTHORITIES AND GETTING APPROVAL FOR CONSTRUCTION OF A SHOPPING MALL ON THE SAID LAND AND SO MANY OTHER ACTIVITIES. 4.1. AFTER HEARING RIVAL SUBMISSIONS AT PARA 5 PAGE 10, THE TRIBUNAL HELD AS FOLLOWS:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK OF THE LD AR . WE FIND THAT THERE IS NO DISPUTE ON THE FACT THAT THE AFORESAID THREE PROPERTIES WERE VESTED WITH M/S MADANGANJ IDEAL CORPORATION PVT LTD PURSUANT TO THE ORDER OF THE COURT DATED 22.1.2001. IT IS NOT IN DISPUTE THAT THE ASSESSEE ALONG WITH TWO OTHER HEIRS, WOULD BE ENTITLED ONLY FOR THE RESIDUE REMAINING, IF ANY, ON SALE OF PROPERTIES AND SUCH SALE CONSIDERATION BEING UTILIZED FOR PAYING OFF THE CREDITORS OF ESTATE OF SETH BHAGCHAND SONI. IN OTHER WORDS, THE ASSESSEE WOULD BE ENTITLED ONLY FOR SOME CASH LEFT OVER, AFTER DISTRIBUTION OF SALE CONSIDERATION TO THE CREDITORS OF ESTATE OF SETH BHAGCHAND SONI. IT IS NOT IN DISPUTE THAT M/S MADANGANJ IDEAL CORPORATION PVT LTD HAD TAKEN RESPONSIBILITY TO DISCHARGE ALL THE CREDITORS OF ESTATE OF SETH BHAGCHAND SONI AND FOR THAT PURPOSE ONLY, IT HAS BEEN VESTED WITH THE PROPERTIES OF THE SAID ESTATE AS PER THE DIRECTIONS OF THE COURT VIDE ORDER DATED 22.1.2001. SINCE THE PROPERTIES ARE VESTED UNDER THE CONTROL OF M/S MADANGANJ IDEAL CORPORATION PVT LTD AND IN VIEW OF THE FACT THAT THE ASSESSEE ALONG WITH OTHER CO- OWNERS DOES NOT HAVE ANY HOLD/ CONTROL / DOMINION OVER THE SUBJECT MENTIONED THREE PROPERTIES OR CANNOT DICTATE TERMS ON THE NEGOTIATION OF THE SALE CONSIDERATIONS FOR THREE PROPERTIES, IT CANNOT BE SAID THAT THE SAID PROPERTIES BELONGED TO THE ASSESSEE AS ON THE VALUATION DATE SO AS TO FALL WITHIN THE DEFINITION OF NET WEALTH U/S 2(M) OF THE ACT. IN THIS REGARD, THE PROVISIONS OF SECTION 28 OF THE PROVINCIAL INSOLVENCY ACT, 1920 WOULD BE RELEVANT FOR OUR DISCUSSION AND THE SAME IS REPRODUCED BELOW:- 28. EFFECT OF AN ORDER OF ADJUDICATION. (1) ON THE MAKING OF AN ORDER OF ADJUDICATION, THE INSOLVENT SHALL AID TO THE UTMOST OF HIS POWER IN THE REALISATION OF HIS PROPERTY AND THE DISTRIBUTION OF THE PROCEEDS AMONG HIS CREDITORS. (2) ON THE MAKING OF AN ORDER OF ADJUDICATION, THE WHOLE OF THE PROPERTY OF THE INSOLVENT SHALL VEST IN THE COURT OR IN A RECEIVER AS HEREINAFTER PROVIDED, AND SHALL BECOME DIVISIBLE AMONG THE CREDITORS, AND THEREAFTER, EXCEPT AS PROVIDED BY THIS ACT, NO CREDITOR TO WHOM THE INSOLVENT IS INDEBTED IN RESPECT OF ANY DEBT PROVABLE UNDER THIS ACT SHALL DURING THE PENDENCY OF THE INSOLVENCY PROCEEDINGS HAVE ANY REMEDY AGAINST THE PROPERTY OF THE INSOLVENT IN RESPECT OF THE DEBT, OR COMMENCE ANY SUIT OR OTHER LEGAL PROCEEDING, EXCEPT WITH THE LEAVE OF THE COURT AND ON SUCH TERMS AS THE COURT MAY IMPOSE. 8 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI (3) FOR THE PURPOSES OF SUB-SECTION (2), ALL GOODS BEING AT THE DATE OF THE PRESENTATION OF THE PETITION ON WHICH THE ORDER IS MADE, IN THE POSSESSION, ORDER OR DISPOSITION OF THE INSOLVENT IN HIS TRADE OR BUSINESS, BY THE CONSENT AND PERMISSION OF THE TRUE OWNER, UNDER SUCH CIRCUMSTANCES THAT HE IS THE REPUTED OWNER THEREOF, SHALL BE DEEMED TO BE THE PROPERTY OF THE INSOLVENT. (4) ALL PROPERTY WHICH IS ACQUIRED BY OR DEVOLVES ON THE INSOLVENT AFTER THE DATE OF AN ORDER OF ADJUDICATION AND BEFORE HIS DISCHARGE SHALL FORTHWITH VEST IN THE COURT OR RECEIVER, AND THE PROVISIONS OF SUB-SECTION (2) SHALL APPLY IN RESPECT THEREOF. (5) THE PROPERTY OF THE INSOLVENT FOR THE PURPOSES OF THIS SECTION SHALL NOT INCLUDE ANY PROPERTY (NOT BEING BOOKS OF ACCOUNT) WHICH IS EXEMPTED BY THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908), OR BY ANY OTHER ENACTMENT FOR THE TIME BEING IN FORCE FROM LIABILITY TO ATTACHMENT AND SALE IN EXECUTION OF A DECREE. (6) NOTHING IN THIS SECTION SHALL AFFECT THE POWER OF ANY SECURED CREDITOR TO REALISE OR OTHERWISE DEAL WITH HIS SECURITY, IN THE SAME MANNER AS HE WOULD HAVE BEEN ENTITLED TO REALISE OR DEAL WITH IT IF THIS SECTION HAD NOT BEEN PASSED. (7) AN ORDER OF ADJUDICATION SHALL RELATE BACK TO, AND TAKE EFFECT FROM THE DATE OF THE PRESENTATION OF THE PETITION ON WHICH IT IS MADE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE MAY END UP HAVING AN ASSET U/S 2(EA) OF THE ACT ON THE RESIDUE LEFT OVER, IF ANY, WHICH WOULD BE IN THE FORM OF CASH AND MOREOVER, THERE WAS NO GUARANTEE AS TO WHETHER THE SAME WOULD REMAIN AS SUCH ON THE VALUATION DATE. THE LD AO HAD TREATED THE ABOVEMENTIONED THREE PROPERTIES AS AN IMMOVABLE PROPERTY AND HELD THAT THE SAME CONSTITUTES ASSETS U/S 2(EA) OF THE ACT. BUT WE FIND THAT THE CHARACTER OF THE ASSET (IF AT ALL ANY RESIDUE IS RECEIVED) , IF ANY, COMPLETELY CHANGES FROM IMMOVABLE PROPERTY INTO CASH AND HENCE IT COULD BE SAFELY CONCLUDED THAT THE ASSET DOES NOT REMAIN AS IMMOVABLE PROPERTY AS ON THE VALUATION DATE AND HENCE ON THAT COUNT ALSO , THE SAME CANNOT BE BROUGHT WITHIN THE AMBIT OF WEALTH TAX. 4.2. IN REGARD TO PROVISIONS TO SECTION 21 OF THE WEALTH TAX ACT, 1957, THE TRIBUNAL HELD AS FOLLOWS:- HENCE THE ABOVE PROVISIONS OF THE ACT ARE VERY CLEAR THAT THE WEALTH TAX SHALL BE LEVIED ONLY ON THE ADMINISTRATORS, TRUSTEES , MANAGERS, ETC WHEN THEY ARE HOLDING THE ASSETS ON BEHALF OF ANY OTHER PERSON. IN THE INSTANT CASE, M/S MADANGANJ IDEAL CORPORATION PVT LTD IS THE ADMINISTRATOR AND MANAGER OF THE THREE PROPERTIES. HENCE THE WEALTH TAX , IF ANY, ON THE SUBJECT MENTIONED THREE PROPERTIES, COULD BE LEVIED ONLY IN THE HANDS OF M/S MADANGANJ IDEAL CORPORATION PVT LTD AND NOT ON THE ASSESSEES 9 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI HEREIN. IN OUR CONSIDERED OPINION, THE PROVISIONS OF SECTION 21 OF THE ACT HAVE BEEN INTRODUCED IN THE STATUTE ONLY TO TAKE CARE OF THESE TYPE OF SITUATIONS. 4.3. THE TRIBUNAL CONCLUDED AS FOLLOWS:- HENCE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF HONBLE AP HIGH COURT, WE HOLD THAT THE WEALTH TAX COULD BE ASSESSED ONLY IN THE HANDS OF M/S MADANGANJ IDEAL CORPORATION PVT LTD AND NOT IN THE HANDS OF THE ASSESSEES HEREIN. HENCE WE DIRECT THE LD AO TO REMOVE THE VALUE OF SUBJECT MENTIONED THREE PROPERTIES FROM THE WEALTH TAX ASSESSMENT OF ASSESSEES HEREIN. ACCORDINGLY THE GROUND NO.2 RAISED BY THE ASSESSEES HEREIN IS ALLOWED. 5. THE CONCLUSION OF THE LD. CIT(A), AS EXTRACTED ABOVE, IN OUR VIEW, IS NOT CORRECT. THE ASSESSEES ARE INHERITING THE PROPERTY. IT CANNOT BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES IN VIEW OF PROVISO (C) TO SECTION 56(2)(V) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE DELETE THE ADDITION AND ALLOW BOTH THE APPEALS OF THE ASSESSEE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. KOLKATA, THE 20 TH DAY OF JULY, 2018. SD/- SD/- [ ABY T. VARKEY ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.07.2018 {SC SPS} 10 ITA NO. 832/KOL/2018 ASSESSMENT YEAR: 2007-08 NIRMAL CHAND SONI ITA NO. 833/KOL/2018 ASSESSMENT YEAR: 2007-08 SUSHIL CHAND SONI COPY OF THE ORDER FORWARDED TO: 1. NIRMAL CHAND SONI 28, BARRACKPORE TRUNK ROAD KOLKATA 700 072 2.SUSHIL CHAND SONI 28, BARRACKPORE TRUNK ROAD KOLKATA 700 072 3. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-44, KOLKATA 4. CIT(A)- 5. CIT- , 6. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES