INDIRA VASANJI SHAH( SINCE DECEASED THROUGH LEGAL REPRESENTATIVE SHAHANK LILADHAR), MUMBAI V. DCIT CIR 18(2), MUMBAI

ITA 8805/MUM/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8829 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N M PORWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Onus to prove
• Section: 50C; 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.8805 /MUM/2011 (ASSESSMENT YEAR: 2006-07) MISS INDIRA VASANJI SHAH VS. DCIT, CIRCLE 18(2) C/O. MR. H.S. NANDU, ADVOCATE 228-A/3, LEELA BHAVAN, NEAR KOLIWADA RLY. STN., SIOIN (E) MUMBAI 400022 PIRAMAL CHAMBERS, LALBAUG PAREL, MUMBAI 400012 PAN ARSPS0012K APPELLANT RESPONDENT APPELLANT BY: SHRI N.M. PORWAL RESPONDENT BY: SHRI PURUSHOTTAM KUMAR DATE OF HEARING: 05.09.2017 DATE OF PRONOUNCEMENT: 24.10.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-29, MUMBAI DATED 19.10.2011 FOR A.Y. 2006-07 . 2. THE ASSESSEE HAS TAKEN AS MANY AS 17 GROUNDS OF APP EAL ON THE DIRECTION OF THE TRIBUNAL, SUBSEQUENTLY THE ASSESSE E HAS FILED, VIDE LETTER DATED 13 TH MAY, 2016 THE FOLLOWING TWO CONCISE GROUNDS OF APP EAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN NOTE APPRECIATING THAT THE RIGHT TO PROPER TY IS A CAPITAL ASSET U/S. 2(14) OF THE INCOME TAX ACT, 1961. HE FA ILED TO APPRECIATE THAT THE ASSESSEE WAS HOLDING THE RIGHT TO PROPERTY I.E. FLAT NO. 502 DURING THE PERIOD 1 ST APRIL, 2002 TO 10 TH FEBRUARY, 2006 I.E. FOR A PERIOD OF 4 YEARS AND 9 D AYS (EXCEEDING 36 MONTHS). 2. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TH E PERMISSION TO REDEVELOP THE PROPERTY WAS GIVEN ON 1 ST APRIL, 2002 AND THE ALLOTMENT LETTER WAS ALSO ISSUED ON THE EVEN DATE, AS MENTIONED BY THE A.O. IN HIS ASSTT. ORDER DATE4D 21 ST OCTOBER, 2008. ITA NO. 8805/MUM/2011 MISS INDIRA VASANJI SHAH 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTE4D DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS SOL D AN IMMOVABLE PROPERTY FOR ` 74 LAKHS AND AFTER REDUCING THE COST OF ACQUISITION OF ` 57 LAKHS THE ASSESSEE HAS SHOWN A SUM OF ` 17 LAKHS AS LONG TERM CAPITAL GAINS. IT WAS FURTHER NOTED THAT THE ASSESSEE RECEI VED AN ALLOTMENT LETTER FOR FLAT NO. 502 DATED 1 ST APRIL, 2001 OF PAYMENT OF ` 1,00,000/-. HE TOOK THE VIEW THAT THE ALLOTMENT LETTER WAS A FABRICATED ONE. TILL THE ASSESSEE SOLD THE FLAT ON 20.02.2006, NO AGREEMENT WAS EXECU TED BETWEEN THE ASSESSEE AND THE BUILDER M/S. AMRUT DHARA ENTERPRIS ES. ALTHOUGH THE AGREEMENT HAS BEEN EXECUTED WITHIN SIX MONTHS FROM THE DATE OF THE ALLOTMENT LETTER. THE AO ALSO FOUND FROM THE SALE A GREEMENT DATED 10.02.2006 THAT THE OWNER OF THE PLOT GRANTED PERMI SSION TO THE DEVELOPER TO DEVELOP THE PROPERTY ONLY ON 22.04.2002. THEREFO RE HE TOOK THE VIEW THAT THE ALLOTMENT LETTER CANNOT BE PRIOR TO THIS P ERMISSION TO DEVELOP THE PLOT. THEREFORE THE AO TOOK THE PROFIT EARNED BY TH E ASSESSEE TO BE ADVENTURE IN THE NATURE OF TRADE AND ALSO MADE AN A DDITION UNDER SECTION 50C AMOUNTING TO ` 51,955/- BY TAKING STAMP VALUE OF THE PROPERTY AT ` 87,61,124/- INSTEAD OF ` 87 LAKHS AS THE SALE CONSIDERATION SHOWN BY THE ASSESSEE. THE ASSESSEES SHARE BEING 85% OF ` 61,124/-, ` 51,955/- WAS ADDED UNDER SECTION 50C. WHEN THE MATTER WENT BEFOR E THE CIT(A), THE CIT(A) CONFIRMED THE SAME. 4. WE HAVE HEARD THE LEARNED D.R. AND GONE THROUGH THE SUBMISSION MADE BY THE ASSESSEE DATED 7 TH JULY AS WELL AS 19 TH OCTOBER, 2016. WE NOTED THAT IN THIS CASE THE ASSESSEE WAS ALLOTTED T HE PLOT BY DEPOSITING A SUM OF RS.1,00,000/- THROUGH CHEQUE NO. 732661 DATE D 5 TH APRIL, 2002 IN FAVOUR OF AMRUT DHARA ENTERPRISES. THIS VERY CHEQUE WAS CLEARED AND DEBITED IN THE BANK STATEMENT OF THE ASSESSEE ON 5 TH APRIL, 2002. THE AO WITHOUT VERIFYING THE FACT FROM THE DEVELOPER JUST OBSERVED THAT THE SAID ALLOTMENT LETTER IS A FABRICATED ONE. IN OUR OPINIO N WHILE MAKING THIS ALLEGATION THE ONUS IS ON THE REVENUE TO BRING EVID ENCE ON RECORD. IN THIS CASE THE AO JUST MADE SUCH OBSERVATION AND REJECTED THE CLAIM OF THE ASSESSEE WITHOUT BRINGING ANY EVIDENCE TO THE CONTR ARY ON RECORD. EVEN NO ITA NO. 8805/MUM/2011 MISS INDIRA VASANJI SHAH 3 NOTICE UNDER SECTION 133(6), ETC. WAS MADE ON THE B UILDER. IN OUR OPINION THE ONUS IS ON THE REVENUE TO PROVE THAT THE DOCUME NT FURNISHED BY THE ASSESSEE IS A FABRICATED ONE. WE REVERSE THE SAID F INDING IN THE ABSENCE OF ANY EVIDENCE. IT IS THE SETTLED VIEW AS PER THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DAULATRAM RAWA TMALL 87 ITR 349 THAT THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO ALLEGES THAT THE APPARENT IS NOT REAL. MERELY AN AG REEMENT HAS NOT BEEN ENTERED INTO BY THE ASSESSEE WITH THE DEVELOPER WIT HIN A PERIOD OF SIX MONTHS FROM THE DATE OF ALLOTMENT DID NOT MEAN THAT A RIGHT OF THE ASSESSEE HAS NOT BEEN CREATED IN THE FLAT TO BE CON STRUCTED BY THE BUILDER. WE HAVE ALSO GONE THROUGH THE TRIPARTITE AGREEMENT DATED 10 TH FEBRUARY 2006 BY WHICH THE ASSESSEE HAS TRANSFERRED HIS RIGH TS IN THE AFORESAID FLAT. CLAUSE J OF THIS AGREEMENT STATES AS UNDER: - J THE PROMOTERS ALONE HAVE THE SOLE AND EXCLUSI VE RIGHTS TO SELL THE FLATS/TENEMENTS/PREMISES/BASEMENT , OPEN SLIT PARKING, SPACES AND OTHER RIGHTS AND PRIVILEGES INCLUDING THE RIGHTS TO PUT UP NEON SIGNS AND HOARDINGS OR TO AFFIX ANTENNA, DEVELOP TERRACE GARDENS RIGHTS TO CABLE NETWORK STATION MOBILE PHONES, STATION OR SUB -STATIONS IN THE SAID BUILDING OR ANY PART THEREOF AND TO ENTER INTO AGREEMENT WITH THE PURCHASERS OF THE FLATS TENEMENT AND PREMISES AND O THER RIGHTS AND PRIVILEGES AND TO RECEIVE THE CONSIDERATION IN RESP ECT THEREOF. IT IS NOTED THAT WHEN THE ASSESSEE BECAME THE OWNER OF THE FLAT HE HAS ACQUIRED HIS RIGHTS IN A CAPITAL ASSET. SECTION 2 S UB-SECTION (14) DEFINES A CAPITAL ASSET TO MEAN A PROPERTY OF ANY KIND HELD B Y THE ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OF PROFESSION. T HE RIGHT BY VIEW OF AN ALLOTMENT LETTER IS A VALUABLE RIGHT AND THAT RIGHT S HAS BEEN CREATED IN FAVOUR OF THE ASSESSEE WHEN THE BUILDER HAS ISSUED AN ALLOTMENT LETTER AND RECEIVED THE CONSIDERATION TOWARDS BOOKING OF THE F LAT, I.E. 1 ST APRIL, 2002. THE ASSESSEES RIGHT GOT EXTINGUISHED WHEN HE TRANS FERRED THE SAID RIGHT VIDE AGREEMENT DATED 10 TH FEBRUARY, 2006. IT IS A FACT THAT M/S. AMRUT DHARA ENTERPRISES BEFORE ALLOTTING THE FLAT TO THE ASSESSEE HAS ALREADY APPLIED TO MUMBAI BUILDING REPAIR AND RECONSTRUCTIO N BOARD FOR COMMENCEMENT CERTIFICATE ON 18 TH MARCH, 2002. THE CHIEF OFFICER OF THE MUMBAI BUILDING REPAIR AND RECONSTRUCTION BOARD GRA NTED THEIR ITA NO. 8805/MUM/2011 MISS INDIRA VASANJI SHAH 4 PERMISSION FOR DEVELOPMENT OF THE PROPERTY VIDE THE IR LETTER DATED 5 TH FEBRUARY, 2002. THE ADDITIONAL COLLECTOR AND COMPET ENT AUTHORITY CERTIFIED ON 1 ST APRIL, 2002 THAT THE SAID PLOT IS NOT A VACANT LAN D UNDER THE PROVISIONS OF URBAN LAND CEILING ACT, 1976 AND GAVE PERMISSION TO THE PROMOTERS TO REDEVELOP THE SAID PROPERTY. ALL THESE TOOK PLACE BEFORE THE DEVELOPMENT AGREEMENT WAS SIGNED ON 22 ND APRIL, 2002 BETWEEN M/S. AMRIT DHARA ENTERPRISES AND THE OWNERS BUT PRIOR TO SIGNING OF THE SAID AGREEMENT THE BUILDER APPLIED TO THE MUMBAI BUILDIN G REPAIRS AND RECONSTRUCTION BOARD FOR COMMENCEMENT CERTIFICATE A ND PRIOR TO THE SIGNING OF THE DEVELOPMENT AGREEMENT ON 22 ND APRIL, 2002 THE OWNERS HAVE AUTHORISED THE DEVELOPER TO MAKE NECESSARY APPLICAT ION TO VARIOUS GOVERNMENT AUTHORITIES. IN THE TRIPARTITE AGREEMENT DATED 10 TH FEBRUARY, 2006 IT IS CLEARLY BEEN MENTIONED UNDER CLAUSE J THAT THE PROMOTERS/ DEVELOPER HAS SOLE AND EXCLUSIVE RIGHT TO SELL THE FLATS/TENEMENTS/ PREMISES/BASEMENT, ETC. THE ALLOTMENT LETTER WAS SI GNED ON 1 ST APRIL, 2002 WHICH WAS PRIOR TO THE SIGNING OF THE DEVELOPMENT A GREEMENT DATED 22 ND APRIL, 2002. BY VIRTUE OF THIS TRIPARTITE AGREEMENT DATED 10 TH FEBRUARY, 2006 IT IS APPARENT THAT THE ALLOTMENT LETTER SIGNE D BY THE DEVELOPER ON 1 ST APRIL, 2002 WAS RATIFIED AND HE HAS EXCLUSIVE RIGHT TO SELL THE FLAT. IT IS NOT DISPUTED THAT THE ALLOTMENT LETTER DATED 1 ST APRIL, 2002 IS DULY REGISTERED WITH THE SUB-REGISTRAR AND WAS SIGNED BY THE ASSESS EE AS WELL AS M/S. AMRUT DHARA ENTERPRISES. THE AO, IT APPEARS WAS WAN TED TO JUST DISALLOW THE CLAIM OF THE ASSESSEE. THEREFORE, WITHOUT ASCER TAINING AND BRINING ANY EVIDENCE JUST ASSUMED AS IF THE ALLOTMENT LETTER IS A FABRICATED ONE. IN OUR OPINION THE AO CANNOT GIVE SUCH A FINDING IN THE AB SENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD. PARAS 3 & 4 OF THE ALLOTME NT LETTER DATED 1 ST APRIL, 2002 SIGNED BY THE DEVELOPMENT STATES AS UNDER: - (3) YOU HAVE SATISFIED YOURSELVES AS REGARDS OUR T ITLE TO THE PLOT AND SHALL NOT RAISE ANY REGULATION OR OBJECTION THERETO . (4) YOU HAVE EXAMINED THE SANCTIONED BUILDING PLANS AND OTHER PAPERS IN RESPECT OF THE ABOVE FLAT AND APPROVED TH E SAME. YOU CONSENT TO THE AMENDMENTS TO THE BUILDING PLANS THA T MAY BE MADE IN THE FUTURE TO UTILISE ADDITIONAL OR FURTHER FSI AND /OR TDR AS ALSO THE CONSTRUCTION OF ADDITIONAL BUILDINGS IN RESPECT OF THE LARGE LAYOUT OF ITA NO. 8805/MUM/2011 MISS INDIRA VASANJI SHAH 5 THE ABOVE PLOT PROVIDED THE SHAPE, SIZE AND LOCATIO N OF THE ABOVE PLOT IS NOT ALTERED.' SIMILARLY, CLAUSE D OF THE TRIPARTITE AGREEMENT D ATED 10 TH FEBRUARY, 2006 READS AS UNDER:- '(D} BY VARIOUS AGREEMENTS EACH MADE BETWEEN THE PR OMOTERS OF THE ONE PART, THE OWNERS OF THE SECOND PART AND THE TENANTS/OCCUPANTS OF THE SAID OLD BUILDING OF THE T HIRD PART, THE PROMOTERS AGREED TO ALLOT TO EACH OF THE TENANTS/OC CUPANTS THE PREMISES IN THE NEW BUILDING TO BE CONSTRUCTED ON T HE SAID PLOT, AS ALTERNATIVE ACCOMMODATION IN LIEU OF THE TENANTS/OC CUPANTS AGREEING TO SURRENDER THEIR RIGHTS IN THE PREMISES IN THEIR RESPECTIVE OCCUPATION IN THE SAID OLD BUILDING AND AGREED TO GIVE FACILIT IES TO DEMOLISH THE SAME AS THEREIN MENTIONED.' FROM THIS IT IS APPARENT THAT THE OWNERS OF THE PLO T HAVE AUTHORISED THE DEVELOPER TO TAKE THE PLOT AND THE MOMENT THE ASSES SEE HAS BOOKED THE FLAT AND FLAT HAS BEEN ALLOTTED TO THE ASSESSEE, A VALUA BLE RIGHT HAS CREATED. IT IS A CAPITAL ASSET AND THAT RIGHT CONTINUED TILL TH E ASSESSEE ENTERED INTO TRIPARTITE AGREEMENT DATED 10 TH FEBRUARY, 2006. UNDER SECTION 45 OF THE INCOME TAX ACT TRANSFER OF A CAPITAL ASSET IS CHARG EABLE TO TAX UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD INCOME FROM BUSINESS. IT IS NOT A CASE OF THE REVENUE THAT THE ASSESSEE WAS REG ULARLY BOOKING FLATS AND SELLING THE SAME SO THAT IT CAN BE SAID THAT TH E ASSESSEE HAS ENTERED INTO A BUSINESS TRANSACTION. THE INCOME SHOWN BY TH E ASSESSEE HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS . THE CAPITAL DERIVED BY THE ASSESSEE IS LONG TERM CAPITAL GAIN AS THE AS SESSEE HELD THE RIGHT ON THE ASSET FOR MORE THAN 36 MONTHS. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO TREAT THE SAID PROFIT A S LONG TERM CAPITAL GAINS A RETURNED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 24 TH OCTOBER, 2017 ITA NO. 8805/MUM/2011 MISS INDIRA VASANJI SHAH 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -29, MUMBAI 4. THE CIT - 18, MUMBAI 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.