Deputy Commissioner of Income-tax, Pune V. Baban Genuji Kumbharkar, Pune

MA 40/PUN/2023

AI Insights

The case involves Baban Genuji Kumbharkar, the appellant, who contested the Income Tax Officer's decision regarding the assessment year 2007-2008. The primary issue was the determination of the cost of acquisition of a land asset, which the appellant claimed was 'NIL'. The Tribunal had previously accepted this claim, leading to the Revenue's application for rectification, arguing that there was a mistake apparent on record. The Tribunal, however, found no merit in the Revenue's application, citing the lack of any concrete evidence or findings from the lower authorities about the actual cost of acquisition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 138001 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-10-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 02-03-2023
• Other Referred Cases: CIT Vs. Sambhaji Nagar Co-op. Hsg. Society Ltd., CIT Vs. Markapakula Agamma, ACIT vs. Saurashtra Kutch Stock Exchange Ltd., CIT vs. Reliance Telecom Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR ARVIND BHARDWAJ
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “A” BENCH : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK RIPOTE, ACCOUNTANT MEMBER M.A.No.40/PUN./2023 Arising out of I.T.A.No.2315/PUN./2016 - Assessment Year 2007-2008 Baban Genuji Kumbharkar, Rukmini Niwas, Vadgaon Khurd, Pune – 411 041 Maharashtra. PAN AULPK3261G vs. The Income Tax Officer, Ward – 6(1), Pune. (Appellant/Assessee) (Respondent/Applicant) For Assessee : Shri Deepak Sasar For Revenue : Shri Kumar Arvind Bhardwaj Date of Hearing : 06.10.2023 Date of Pronouncement : 26.10.2023 ORDER PER SATBEER SINGH GODARA, J.M. : This Revenue’s miscellaneous applications filed u/s.254(2) of the Income Tax Act, 1961 [in short “the Act”] seeks to recall the tribunal’s order dated 08.06.2022 allowing assessee’s corresponding main appeal ITA.Nos.2315/PUN./ 2016 as under : “3. Learned counsel stated at the Bar that once the assessee succeeds in his first and foremost substantive ground regarding the cost of acquisition claimed as “NIL” his substantive grounds No. 2 to 7 would be rendered 2 M.A.No.40/PUN./2023 academic. We proceed in this factual background and find that the CIT(A) has rejected the claim of valuation made by the assessee as on 1-4-1981 of the property transferred by him, by observing as under: “10.3 I have considered the submissions filed by the appellant. In the return filed by the appellant for the first time in response to notice u/s 148, it was accepted that land was acquired by the original owner prior to 1-4-1981 and therefore, exercising the option, the FMV of land as on 01/04/1981 was considered as cost of acquisition for purpose of computing long term capital gain. No such plea that land came into the possession of the appellant in the circumstances that cost of land was not conceivable was taken before the AO. During the course of appellate proceedings, it was claimed that appellant was in possession of land for a long period and therefore, owner of the land had requested the revenue authorities to delete their name and put the name of the appellant as owner in the land records. One report of advocate Mr. P. M. Khire dated 27.05.2009 regarding the investigation of the title of the property along with certified copy of 3 M.A.No.40/PUN./2023 mutation entry dated 12.09.1973 was furnished. The appellant had also relied on the decision of the courts where in case of adverse possession for a long period, cost to the encroacher was not found determinable, hence, on sale of property by such owners (encroachers) was not held liable to the capital gain tax. From the investigation of the title report, it is noted that original owner of the land was his Highness Shri Govind Balwant Patwardhan as per Mutation Entry dated 19.04.1935. On 25.04.1957, name of Shri Bhiwa Deoji Kumbharkar as tenant of Shri G. B. Patwardhan was mutated. In 1960, Shri Bhiwa Deoji Kumbharkar expired leaving the appellant as only heir and thereafter, name of the appellant was mutated as tenant on 13.03.1962. Later on 12.09.1973, heirs of Late Shri G. B. Patwardhan namely Shri Krishnaji Govind Patwardhan along with his brothers filed the application that the appellant was tilling the land for long period hence their name should be deleted from revenue record and name of the appellant be mutated from tenant to owner of the land. From the mutation 4 M.A.No.40/PUN./2023 entry dated 12.09.1973, it was seen that for the reason that appellant was tilling the land for a long period, the legal heirs of Late Shri G.B.Patwardhan through his legal representative Shri M.A. Patwardhan, Advocate requested the authorities to mutate name of the appellant from tenant to owner and name of Shri G. B. Patwardhan be deleted. In view of these facts, appellant was requested to bring copy of application filed by the legal representative of Shri Patwardhan before the revenue authorities to ascertain the nature of mutation entry. However, it was stated that revenue authorities are not able to lay hand on the same. Now the basic issue is whether the land was grabbed by the appellant or his grandfather Late Bhimji Deoji Kumbharkar from Late G. B. Patwardhan and the appellant continued his adverse possession on the land or due to long period of services in preservation and tilling of land by the appellant and his-grandfather, the Patwardhan family gifted the land to the appellant. No material whatsoever has been brought on record to show that appellant was 5 M.A.No.40/PUN./2023 in forcible possession of the land and there was any litigation Civil or Criminal between the heirs of G. B. Patwardhan and the appellant. It was a simple case where his highness Sardar G. B. Patwardhan out of his sweet will made Late grandfather of the appellant as tenant of the land in 1957 and thereafter in same capacity name of the appellant was mutated as tenant in 1962. It was the benevolence of the family of his highness that they had requested the revenue authorities to delete their name as owner and mutate the name of appellant from tenant to owner of the land in view of long period of services by the appellant. There is no evidence to hold that it was forcible and adverse possession in the hands of the appellant. Therefore, it is held that land was gifted to the appellant on 12.09.1973 and accordingly, cost of acquisition in the hands of appellant can be taken at the option of the appellant either the cost in hands of late G. B. Patwardhan or the FMV as on 01.04.1981. The appellant had exercised the option of considering FMV as on 01.04.1981 being the cost of acquisition. 6 M.A.No.40/PUN./2023 Therefore, acceptance by the appellant in his return of income and the acceptance by the AO that long term capital gain are chargeable by considering FMV of 01.04.1981 as cost of acquisition to the appellant is valid and as per law. No interference is called for on this issue and the ground raised by the appellant is hereby dismissed.” 5. The sole dispute between the parties is admittedly regarding the cost of acquisition of the land/capital asset. The assessee has claimed the same at Rs. “nil” all along which stands rejected in lower proceedings. We find in this factual backdrop that section 49(1)(i) to (iv) prescribing cost; with reference to certain modes of acquisition wherein if it is found that the capital asset in issue has been acquired under the specified mode; gift herein is to be taken for which the previous owner had acquired the same for valuation consideration followed by Explanation thereto inserted by Finance Act, 1965 w.e.f. 1-4-1965. Mr. Walimbe fails to rebut the clinching fact that the learned lower authorities could not find the actual cost of acquisition paid by way of valuable consideration. We therefore, find merit in the assessee's case in the light of CIT Vs. Sambhaji Nagar Co-op. Hsg. Society Ltd. (2015) 370 ITR 325 as well as CIT Vs. Markapakula Agamma 7 M.A.No.40/PUN./2023 (1987) 165 ITR 386 (AP) and direct the Assessing Officer to frame his consequential computation after adopting the cost of the asset’s acquisition in issue as “NIL”. Once the assessee succeeds in his first and foremost substantive ground, all other grounds have become infructuous in light of his statement in para-3 hereinabove. Ordered accordingly.” 2. The applicant/Revenue has filed its instant miscellaneous application pleading the following substantive grounds : 8 M.A.No.40/PUN./2023 9 M.A.No.40/PUN./2023 10 M.A.No.40/PUN./2023 3. Suffice to say, the Revenue’s sole substantive arguments before us is that we have committed a mistake apparent on record whilst accepting the assessee’s cost of acquisition of the capital asset as “NIL”, thereby deleting the corresponding long term capital gains addition in issue. We find no merit in the Revenue’s instant miscellaneous application once it has come on record that there was no finding in the learned lower authorities respective orders about the actual cost of acquisition. We further reiterate in light of hon’ble apex court’s landmark decison in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd., [2008] 305 ITR 227 (SC); CIT vs. Reliance Telecom Ltd., [2021] 133 taxmann.com 41 (SC); that the purpose of sec.254(2) rectification proceedings is only to correct an apparent mistake than taking recourse to roving enquiries. Rejected accordingly. 11 M.A.No.40/PUN./2023 4. This Revenue’s miscellaneous application is dismissed in above terms. Order pronounced in the open Court on 26.10.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 26 th October, 2023 VBP/- Copy to 1. The applicant 2. The respondent 3. The CIT(A)-12, Pune. 4. The Pr. CIT-III, Pune. 5. D.R. ITAT – ‘A’ Bench, Pune. 6. Guard File. //By Order// //True Copy // Assistant Registrar, ITAT, Pune Benches, Pune.