ITO, Bangalore V. K.S. Keshavaraju, Bangalore

ITA 953/BANG/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5547 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CIT IDR
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Opportunity of being heard; Set aside
• Section: 143(3); 54F; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.953/BANG/2009 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, WARD 4(3), BANGALORE. : APPELLANT VS. SHRI K.S. KESHAVARAJU, NO.98, 2 ND CROSS, 4 TH PHASE, J.P. NAGAR, SARAKKI EXTENSION LAYOUT ( DOLLARS LAYOUT), BANGALORE 560 078. : RESPONDENT ITA NO.1063/BANG/2010 ASSESSMENT YEAR : 2005-06 SHRI K.S. KESHAVARAJU, NO.98, 2 ND CROSS, 4 TH PHASE, J.P. NAGAR, SARAKKI EXTENSION LAYOUT ( DOLLARS LAYOUT), BANGALORE 560 078. : APPELLANT VS. THE INCOME TAX OFFICER, WARD 4(3), BANGALORE. : RESPONDENT ITA NOS.953/B/09 & 1063/B/10 PAGE 2 OF 5 REVENUE BY : SHRI G.V. GOPALA RAO, CIT-I(DR) RESPONDENT BY : SHRI V. SRINIVASAN, C.A. O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE ARE TWO APPEALS, ITA NO.953/B/10 IS FILED BY THE REVENUE FOR THE A.Y. 2006-07 AGAINST THE ORDER OF THE CIT(APPEA LS)-II, BANGALORE U/S. 143(3) DATED 24.7.2009 AND ITA NO.1063/B/10 IS FILE D BY THE ASSESSEE FOR THE A.Y. 2005-06 AGAINST THE ORDER OF THE CIT(A)-II , BANGALORE U/S. 144 DATED 15.3.2010. 2. IN THE APPEAL FOR THE A.Y. 2006-07, THOUGH THE R EVENUE HAS RAISED 7 GROUNDS OF APPEAL, THE CRUX OF THE ISSUES ARE THAT THE CIT(A) ERRED IN DIRECTING THE AO TO ASSESS THE INCOME ON THE ELEMEN T OF LONG TERM CAPITAL GAINS FOR THE A.Y. 2005-06 INSTEAD OF A.Y. 2006-07 AND WITH RESPECT TO THE SALE OF 12 FLATS, THE CIT(A) OUGHT NOT TO HAVE TAKE N FRESH EVIDENCE FILED BY THE ASSESSEE WITHOUT GIVING AN OPPORTUNITY TO THE A SSESSING OFFICER AS PER THE PROVISIONS OF RULE 46A OF THE I.T. RULES. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDI VIDUAL AND OWNED PROPERTY ALONG WITH OTHER CO-OWNERS. THE SAID PROP ERTY WAS SUBJECT MATTER OF A JOINT DEVELOPMENT AGREEMENT WITH M/S. REDDY ST RUCTURES PVT. LTD. (HEREINAFTER REFERRED TO AS THE DEVELOPER). THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT O N THE BASIS OF THE AFORESAID JOINT DEVELOPMENT AGREEMENT WITH THE DEVE LOPER ON 27.9.2004, THE ASSESSEE WAS ENTITLED TO CERTAIN BUILT AREA IN THE FORM OF RESIDENTIAL APARTMENTS AFTER DEVELOPMENT AND CALLED UPON THE AS SESSEE AS TO WHY ITA NOS.953/B/09 & 1063/B/10 PAGE 3 OF 5 CAPITAL GAINS WAS NOT OFFERED. THE ASSESSEE CONTEN DED THAT THE ENTIRE CAPITAL GAINS WAS EXEMPT UNDER THE PROVISIONS OF SE CTION 54F OF THE ACT AND WAS NOT LIABLE TO CAPITAL GAINS TAX. THE ASSES SING OFFICER, HOWEVER, HELD THAT THERE WAS A TRANSFER OF INTEREST IN THE L AND TO THE DEVELOPER ON JOINT DEVELOPMENT AND COMPUTED LONG TERM CAPITAL GA IN AT RS.1,39,42,929 DENYING THE CLAIM OF EXEMPTION U/S. 54F. HE ALSO M ADE AN ADDITION OF RS.24,13,000 AS UNEXPLAINED CASH CREDIT. 4. ON APPEAL, THE CIT(A) NOTED THAT THE TRANSFER TO OK PLACE ON 27.9.2004 IN THE FINANCIAL YEAR 2004-05 RELEVANT TO A.Y. 2005-06 WHEN THE JOINT DEVELOPMENT AGREEMENT WAS ENTERED INTO AND PO SSESSION OF THE PROPERTY WAS DELIVERED IN THE SAID FINANCIAL YEAR. HE ALSO NOTICED THAT THE ASSESSEE HAD SOLD/TRANSFERRED 12 FLATS PURSUANT TO THE DEVELOPMENT OF PROPERTY DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2006-07 ON A CONSIDERATION OF RS.2,93,33,500 AND CONSIDERED IT T O BE LIABLE FOR CAPITAL GAINS. THE LD. CIT(A) HELD THAT THE PROFIT FROM SA LE OF LAND IS TO BE TREATED AS LONG TERM CAPITAL GAINS AND THE PROFIT ON SALE O F BUILT UP AREA TO BE TREATED AS SHORT TERM CAPITAL GAINS. THE CLAIM OF EXEMPTION U/S. 54F WAS DENIED AS THERE WAS NO CAPITAL GAINS ON DEVELOPMENT BEING ASSESSED FOR A.Y. 2005-07. HOWEVER, THE ADDITION OF RS.24,13,00 0 AS UNEXPLAINED CASH CREDIT WAS DELETED BY THE LD. CIT(A). 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL FOR THE A.Y. 2006-07 IN ITA NO. 953/B/2009 ON THE GROUNDS THAT CAPITAL GAINS SHOULD BE ASSESSED IN A. Y. 2006-07 ONLY AND WITH REGARD TO ASSESSMENT OF CAPITAL GAINS ON SALE OF 12 APARTMENTS, THE ASSESSING OFFICER WAS NOT AFFORDED THE OPPORTUNITY. ITA NOS.953/B/09 & 1063/B/10 PAGE 4 OF 5 6. IN THE MEANWHILE, BASED ON THE DIRECTIONS OF TH E LD. CIT(A), THE ASSESSING OFFICER PASSED AN ORDER OF ASSESSMENT U/S . 144 DATED 23.12.09 FOR THE A.Y. 2005-06 DETERMINING CAPITAL GAINS AT R S.1,72,42,801 (AS AGAINST RS.1,39,42,929 DETERMINED FOR THE A.Y. 2006 -07) WITHOUT ALLOWING DEDUCTION U/S. 54F. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) VIDE ORDER DATED 15.3.2010 CONFIRMED THE ORDER OF THE AO, EXCEPT ON THE QUANTUM OF LONG TERM CAPITAL GAINS. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFO RE US FOR THE A.Y. 2005- 06. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF HEARING BEFORE US, T HE LD. AR SUBMITTED THAT THE MAIN PLANK OF THE REVENUES APPEAL FOR A.Y. 200 6-07 IS THAT AS FAR AS THE SALE OF FLATS IS CONCERNED, THE CIT(A) DIRECTED THE AO TO COMPUTE CAPITAL GAINS FOR THE A.Y. 2005-06 INSTEAD OF A.Y. 2006-07 WITHOUT PROVIDING OPPORTUNITY TO THE AO AND THEREFORE IT IS PLEADED B Y THE REVENUE THAT THE MATTER IS TO BE RESTORED BACK TO THE AO FOR HIS CON SIDERATION. IN LIGHT OF THIS CONTENTION OF THE REVENUE, THE LD. AR FURTHER SUBMI TTED THAT THE APPEAL OF THE ASSESSEE FOR A.Y. 2005-06 MUST ALSO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER SINCE THE ASSESSMENT ORDER PASSED BY THE AO FOR THE A.Y. 2005-06 IS IN CONSEQUENCE OF THE APPELLATE ORD ER OF THE CIT(A) FOR THE A.Y. 2006-07. IT WAS ALSO SUBMITTED THAT THE ASSES SMENT ORDER FOR A.Y. 2005-06 CANNOT BE SUSTAINED WITHOUT CONSIDERING THE YEAR OF TAXABILITY OF THE CAPITAL GAINS AFRESH BY THE AO. THE LD. DR THO UGH OPPOSED TO THE SUBMISSIONS OF THE LD. AR, RELUCTANTLY AGREED FOR B OTH THE APPEALS TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR HIS FRESH CONSIDERATION. ITA NOS.953/B/09 & 1063/B/10 PAGE 5 OF 5 IN THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF T HE CIT(APPEALS) FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL BEFORE US TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE MATTER AFRE SH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE ASSESSEE IS AL SO DIRECTED TO COOPERATE WITH THE PROCEEDINGS BEFORE THE ASSESSING OFFICER. 8. IN THE RESULT, BOTH APPEALS OF THE REVENUE AND T HE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2011. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH JUNE, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.