ITO, Ghaziabad V. Shri Vishal Goyal, Ghaziabad

ITA 835/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91432 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 14-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Keywords: Capital asset; Charitable institution; Cost of acquisition; Capital receipt
• Section: 143(3); 142(1)

Judgement Text

ITA NO. 835/ DEL/ 2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H , NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 835 / DEL/201 1 A.Y. : 200 6 - 0 7 INCOME TAX OFFICER, WARD - 2(1), GHAZIABAD VS. SHRI VISHAL GOYAL, KM - 78, KAVI NAGAR, GHAZIABAD (PAN: ACWPG3686Q) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. J.P. CHANDREKAR, SR. DR ASSESSEE BY : SH. R.K. GAUR, FCA DATE OF HEARING : 1 4 - 0 7 - 201 5 DATE OF ORDER : 20 - 0 7 - 201 5 ORDER PER H.S. SIDHU, JM REVENUE HAS FILED THIS APPEAL AGAINST THE O RDER DATED 26 . 11 .201 0 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS ), GHAZIABAD P ERTAINING TO ASSESSMENT YEAR 200 6 - 0 7 ON THE FOLLOWING GROUNDS: - 1. THAT THE LD. C I T(A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT THE ENTIRE TRANSACTION IS COLORABLE WHERE INSTEAD OF THREE PARTIES MENTIONED IN THE SALE AGREEMENT ONLY ONE PARTY RECEIVED THE ENTIRE ADVANCE PROCEEDS WHEREAS AS PER THE SALE AGREEMENT, IT SHOULD HAVE BEEN DIVIDED ON PRO - RATA BASIS. ITA NO. 835/ DEL/ 2011 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY FALLING TO APPRECIATE THE FACT THAT AS PER THE SALE AGREEMENT THE SALE CONSIDERATION SO RECEIVED WAS TO BE UTILIZED FOR PROMOTING THE OBJECTIVE OF THE TRUST. AS S UCH THE ADVANCE RECEIVED SHOULD HAVE ALSO GONE TO THE TRUST ONLY BUT THIS WAS NOT DONE. THIS AGAIN SHOWS THE COLORABLE TRANSACTION BY THE ASSESSEE TO TAKE THE BENEFIT OF THE ADVANCE PROCEEDS. 3. THAT THE LD. CIT CA) HAS ERRED IN LAW ON FACTS BY NOT A PPRECIATING THAT THE ENTIRE TRANSACTION IS COLORABLE IN NATURE WHERE THE ASSESSEE HAS CONVENIENTLY TRIED TO COLOUR THE TRANSA C TION AS THAT OF CAPITAL RECEIPT TAKING THE SHADOW OF SECTION 51 OF THE I.T. ACT, WHEREAS THE TRANSACTION IS AN ATTEMPT TO EVAD E TA XATION BY THE ASSESSE IN THE FO R M OF INCOME FROM OTHER SOURCES AND SIPHONING OF FUNDS BY THE PAYING CONCERN. 4. THAT THE LD. CIT CA) HAS ERRED IN LAW AND ON FACTS IN FAILING TO PIERCE THE CORPORATE VEIL IN THIS CASE TO EXPOSE THE TRUE NATURE OF TRA N SACTION WHICH IS ATTEMPT BY THE ASSESSEE TO EVADE TAXATION TILL THE FINAL TRANSFER OF CAPITAL ASSET AND PREVENT THE ADVANCE FORFEITED TO BE CONSIDERED AS INCOME FROM OTHER SOURCES EVEN IF THE CAPITAL ASSET IS NEVER TRANSFERRED IN THE THUS PREVENTING ANY TA XATION ON THE ADVANCE FORFEITED TILL THEN. 5 . T HAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FAC T S BY NOT CONSIDE RING THE CASE LAW CIT VS STER LING ITA NO. 835/ DEL/ 2011 3 INVESTMENT CORPORATION LTD.( 1979 ) I TAXMA N 396: (1979) 12 CTR 263: (1980) 123 ITR 441 (BOM) WHEREBY HELD BY HON BLE BOMBAY HIGH COURT TO CONSIDER THE FORFEITURE OF ADVANCE MONEY AS REVENUE RECEIPT AND NOT CAPITAL RECEIPT AS CONSIDERED BY THE LD. CIT(A). 6. THAT THE ORDER OF THE LD. CIT(A) DESERVES TO BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN WAS FILED ON 19.1.2007 BY THE ASSESSEE DECLARING AN INCOME OF RS. 84,152/ - . THE CASE WAS PROCESSED U/S. 143(1) OF I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR COMPULSORY SCRUTINY AND NOTICES U/S. 142(1) AN D 143(2) WERE ISSUED AND PROPERLY SERVED UPON THE ASSESSEE. NOTICE U/S. 142(1) AND 143(2) WAS ISSUED ON 1.12.2008. IN COMPLIANCE TO WHICH NEITHER ANYBODY ATTENDED NOR ANY REPLY WAS FILED. ON GOING THROUGH THE DOCUMENTS FILED BY THE ASSESSEE S COUNSEL , A O COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT, 1961 AT A TOTAL INCOME OF RS. 75,84,150/ - + RS. 57,500/ - AGRICULTURAL INCOME VIDE ORDER DATED 26.12.2008. 3. AGAINST THE AFORESAID ASSESSMENT ORDER OF THE ASSESSING OFFICER, ASSESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER 26 . 1 1 .201 0 HAS ALLOWED THE APPEAL OF THE ASSESEE AND DELETED THE ADDITION IN DISPUTE. ITA NO. 835/ DEL/ 2011 4 4 . AGGRIEVED BY THE AFORESAID IMPUGNED ORDER DATED 26 . 11 .201 0 , REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5 . AT THE TIME OF HEARING LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL FILED BY THE R EVENUE. 6 . ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE UPHELD. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND THAT THE ASSESSEE IS AN INDIVIDUAL. AO OBSERVED THAT AN AGREEMENT DATED 25.4.2005 WAS MADE TO SELL CERTAIN PROPERTIES BELONGING TO THE TRUST TO M/S RAJ HANS TOWER PVT. LTD. CERTAIN AMOUNTS IN THE FORM OF PART P AYMENT WERE RECEIVED BY THE TRUST AS WELL AS ASSESSEE AND ASSESSEE S BROTHER, SHRI VINEET GOYAL TOTAL AMOUNT RECEIVED BY THE ASSESSEE WAS RS. 75,00,000/ - . LATER ON, LITIGATION OCCURRED DUE TO NON APPROVAL OF MAP BY THE GDA AND ASSESSEE HAS NOT RETURNED BA CK THE AMOUNT. THE AO HELD THAT THE TRUST WAS CREATED TO AVOID PROPER TAXATION IN DISGUISE OF TRUST. THE AO ADDED RECEIPTS OF RS. 75,00,000/ - AS INCOME OF THE ASSESEE FROM OTHER SOURCES. WE FURTHER FIND THAT AO NEITHER OBTAINED FULL DETAILS NOR COULD UN DERSTAND THE ENTIRE SEQUENCE OF TRANSACTIONS AND HAS REACHED THE ITA NO. 835/ DEL/ 2011 5 CONCLUSIONS IN A HAPHAZARD AND CONFUSED MANNER ; T HE BASIC AGREEMENT, WHICH HAS BEEN REFERRED TO BY THE AO, ITSELF, WHEN READ CAREFULLY, MAKES IT AMPLY CLEAR THAT CERTAIN PROPERTIES CLUBBED TO GETHER WERE SUBJECT MATTER OF SALE; THE OWNERS OF THESE PROPERTIES WERE THE ASSESSEE, HIS BROTHER SHRI VINEET GOEL AND DEVI DAYAL CHARITABLE TRUST, WHICH IS A FAMILY TRUST OF ASSESSEE'S FAMILY. IN OTHER WORDS, THE MOST IMPORTANT ISSUE IS AS TO WHETHER THE AO HAS ERRED IN CONCLUDING THAT THE ASSESSEE IS NOT A LEGAL OWNER, WHILE THE FACTS ON RECORD POINT OUT THAT ASSESSEE IS ONE OF THE 3 LEGAL OWNERS OF THE LAND UNDER SALE; THE OTHER TWO BEING SHRI VINEET GOEL AND DEVI DAYAL CHARITABLE TRUST . THE AO IS TOTAL LY WRONG IN ASSUMING AND, SOMEHOW INSISTING IN THE REMAND REPORT THAT THE ASSESSEE IS NOT A LEGAL OWNER AND, THEREFORE, THE AMOUNT FORFEITED, IF ANY, WOUL D BE TAXED IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. THE A SSESSEE HAS FURNISHED PROOF OF OWNERSHIP OF THIS LAND PIECE. THESE DOCUMENTS FURNISHED CLEARLY SHOW THAT THE ASSESSEE SHRI VISHAL GOYAL, HIS BROTHER SHRI VINEET GOEL AND THE FAMILY TRUST, NAMELY, DEVI DAYAL CHARITABLE TRUST ARE ALL LEGAL OWNERS OF RESPECTIVE PORTIONS OF LAND WHICH I S THE SUBJECT MATTER OF SALE ADVANCES. WE NOTE FROM THE RECORDS THAT T HESE LAND OWNERS HAVE RECEIVED ADVANCES FROM M / S J MD BUILDTECH PRIVATE LIMITED AND MLS RAJHANS TOWERS PRIVATE LIMITED, THE SHARE OF THE ASSESSEE, IN TOTAL OF SUCH ADVANCES, BEING RS.75,O O,QOO / - . HOWEVER, MLS RAJHANS TOWERS ITA NO. 835/ DEL/ 2011 6 PRIVATE LIMITED HAS GONE IN LITIGATION: CURRENTLY IN THE FORM OF ARBITRATION PROCEEDINGS PENDING BEFORE RETIRED JUSTICE J .P. SINGH. ACCORDING TO THE A SSESSEE , HE AND OTHER TWO LEGAL OWNERS HAVE NO INTENTION TO WITHHOLD THE ADVANCES, BUT HAVE COUNTERED THE CLAIM OF MLS RAJ HANS TOWERS PRIVATE LIMITED BY SAYING THAT AS MLS RAJ HANS TOWERS PRIVATE LIMITED HAS NOT FULFILLED THEIR PART OF COMMITMENTS; SO THE AMOUNT RECEIVED AS ADVANCE PART PAYMENT WAS ALSO LIABLE TO BE FORFEI TED. AS THE MATTER IS UNDER ARBITRATION; SO THE DISPUTE IS STILL UNDECIDED. IN VIEW OF THE ABOVE FACT; EVEN IF AO'S PRESUMPTION THAT THE AMOUNT HAS BEEN IS LIKELY TO BE FORFEITED; SECTION 51 WILL IMMEDIATELY COME INTO OPERATION. SECTION 51 OF I. T. ACT, 196 1 CLEARLY SAYS 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 AY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHI CH THE ASSET WAS ACQUIRED IN C OMPUTING THE COST OF ACQUISITION.' THEREFORE, WHATEVER AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE AS ADVANCE IN AFOREMENTIONED NEGOTIATIONS FOR SALE AND IF THOSE AMOUNTS ARE NOT RETURNED BACK; THE COST OF PROPERTY WOULD STAND RE DUCED BY SUCH AMOUNT. IN OTHER WORDS, WHEN THIS SALE DOES NOT MATERIALIZE AND THE AMOUNT STANDS FORFEITED/NOT RETURNED; AND ASSESSEE MAKES ANOTHER SALE IN FUTURE; THEN FOR PURPOSES OF COMPUTING THE GAIN, COST OF ACQUISITION WOULD BE REDUCED BY RESPECTIVE A MOUNT OF ADVANCES ITA NO. 835/ DEL/ 2011 7 RECEIVED AND NOT RETURNED. WE FURTHER FIND THAT LD. CIT(A) HAS NOTED THAT V ARIOUS COURT CASES CLARIF IED THIS OPERATION OF SECTION 51; THE MOST RECENT AND RELEVANT BEING THE CASE OF MLS TRAVANCORE RUBBER & TEA LTD REPORTED IN 243 ITR 158 ( S C ). THIS IS FURTHER ON RECORD THAT THE M/S DEVI DAYAL TRUST HAS NOT MADE ANY SUCH CONCLUSION (AS MADE BY THE AO OF THE ASSESSEE IN THIS CASE ) IN SCRUTINY ORDER PASSED FOR THE SAME ASSESSMENT YEAR. IT IS MORE INTERESTING TO NOTE THAT THE SAME AO, WHO IS A LSO ASSESSING SHRI VINEET GOEL, ANOTHER RECIPIENT AND LEGAL OWNER, DOES NOT TAKE ANY REMEDIAL ACTION IN CASE OF SHRI VINEET GOEL. THE ABOVE FACTS SHOWS THE I NCONSISTENT ATTITUDE OF THE AO. 7.1 WE FIND FROM THE ABOVE, THAT I N NUTSHELL, AS ASSESSEE IS ON E OF THE LEGAL OWNERS OF THE IMPUGNED LAND FOR SALE; SO THE ENTIRE THEORY OF THE A O (THAT THE TRUST HAS BEEN DESIGNED FOR TAX EVASION AND ASSESSEE HAS EARNED INCOME FROM OTHER SOURCES), CRUMBLES DOWN. SECTION 51 IS FOUND TO BE APPLICABLE IN SUCH CASES; THE ASSESSEE IS ASKED TO REDUCE THE AMOUNT OF ADVANCE IF FORFEITED AFTER ARBITRATION, FROM COST OF PROPERTY WHILE WORKING OUT GAIN ON ANY SUBSEQUENT SALE. THE A O IS ALSO DIRECTED TO TAKE NOTE OF THIS, FOR FUTURE ASSESSMENT PURPOSES. WE FIND LD. CIT(A) HAS R IGHTLY HELD THAT F OR THE - TIME BEING, THERE IS NO BASIS FOR ANY ADDITION OF,RS.75,OO,OOO / - AND ACCORDINGLY HE DELETED THE ADDITION IN DISPUTE. ITA NO. 835/ DEL/ 2011 8 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE WELL REASONED ORDER OF THE LD. CIT(A), ACCORDINGLY, WE UPHOLD THE SAME AND DECIDE THE ISSUE AGAINST THE REVENUE BY DISMISSING THIS GROUND OF APPEAL . 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OU RT ON 20 / 0 7 /20 1 5 . SD/ - SD/ - [ N.K. SAINI ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE : - 20 / 7 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES