Income Tax Appellate Tribunal - Mumbai
Bina Indrakumar , Mumbai vs Assessee on 6 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'B', MUMBAI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER &
SHRI VIVEK VARMA, JUDICIAL MEMBER
I.T.A. NO. 4106/Mum/2011
Assessment Year : 2006-07
Ms. Bina Indrakumar, Vs. Income Tax Officer,
B 402, Samudra Darshan, Ward 11 (1)(1),
159, Four Bunglows, N. Dutta Marg, Mumbai.
Andheri (West),
Mumbai 400 052.
PAN: AAAPI 3074 N
(Appellant) (Respondent)
Appellant by : Mr. K. Shivram.
Respondent by : Mr. Pravin Varma.
Date of Hearing:.- 06-06-2012.
Date of Pronouncement: 15-06-2012.
ORDER
Per VIVEK VARMA, JM:
The appeal is filed by the assessee, against the order passed under section 263 by CIT 11, Mumbai, dated 29-03-2011, wherein the CIT has set aside the order of the AO passed u/s 143(3) dated 15-12- 2008.
2. The facts of the case are that assessment u/s 143(3) was framed in the instant case on a total income of Rs. 19,79,080/-. This included income from LTCG at Rs. 10,25,078/-. On the intimation received from the succeeding AO, on the issue of LTCG and excess allowance of deduction under section 80C, proceedings u/s 263 were Page 1 of 8 initiated and the CIT set aside the order holding that the sale of flats during the year was in fact short term capital gains and not long term as the sale was effected within 36 months of their acquisition. He, therefore, held that the order passed by the AO dated 15-12-2008, wherein the AO had accepted the sale of flats by the assessee to be LTCG, was erroneous and prejudicial to the interests of the revenue.
3. The Authorised Representative appearing on behalf of the assessee explained the facts of the case, and pointed out that the revision proceedings are on two issues, i.e. (a) understatement to the extent of Rs. 11,89,558 on account of capital gains and (b) excess deduction under section 80C of the Act.
4. The AR, then perused the issue of capital gains, wherein, he submitted that the assessee purchased three flats vide agreement dated 14-03-2001 from R. S. Estate Developers Pvt. Ltd. in the building called Oberoi Sky Gardens at Andheri (W), Mumbai. As the building was under construction, the assessee paid Rs. 10,00,000/- and Rs. 7,20,000/- on 28-07-2000 and 20-10-2000 and made the full and final payment on 13-02-2001, against which, the developer and the assessee signed the agreement of sale. On 09-10-2002 the assessee asked the rectification to be made in the agreement dated 14-03-2001, which was duly entered into vide deed of rectification dated 09-10- 2002 as the flats numbers were wrongly mentioned in the original agreement.
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5. The A.R. pointed out that on March 13, 2001, the developer issued the receipt saying the receipt of full payment against the sale of flats. He therefore emphasise that along with the date of agreement, the receipt saying that the developer has received full payment is most important. The A.R. also pointed out that the deed of rectification dated 09-10-2002 mentions in clause (ii) that the area of the flat remain unchanged but it shall accompany terrace rights on certain additional payment.
6. The A.R. submitted that the entire facts had been placed before the AO vide submissions dated 18-08-2006. The A.R. also submitted that the AO had issued a notice u/s 154 seeking to rectify (i) that the gain on the sale of flat is a short term capital gain and (ii) deduction u/s 80-C has been allowed at Rs. 1,00,000/- which is not allowable against income under the head capital gain. The A.R. pointed out that detailed reply was filed vide letter dated 10-01-2011 in response to the rectification notice, the A.R. submitted that this rectification is still to be disposed off. The A.R. further submitted that the assessee had acquired valuable rights, vide agreement dated 14-03-2001, which he submitted, is fortified by Circular No. 471 dated 15-10-1986, given in 162 ITR 41 (St) and Circular No. 672 dated 16-12-1993, given in 115 CTR 73 (St) in the context of flat by DDA and other similar schemes, wherein it was held, "The Board have been advised that under the above circumstances, that can be drawn is that the D.D.A. takes up the construction on behalf of the allottee and that the transaction involved is not Under the Page 3 of 8 scheme, the tentative cost of construction is already determined and the D.D.A. facilitates the payment of the cost of construction in instalments subject to the condition that the allottee has to bear the increase, if any, in the cost of construction. Therefore, for the purpose pose of capital gains tax, the cost of the new asset is the tentative co construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of flats under the financing Scheme of the Delhi Development Authority shall be cases of construction for the purpose of capital gains", pleaded that assessee acquired valuable right in the flats. The A.R. relied on the following decisions:
1) CIT v/s Vimal Lalchand Mutha 187 ITR 613 (Bom)
2) CIT v/s Mrs. Hilla J. B. Wadia 216 ITR 376 (Bom)
3) CIT v/s Amilaben Upendra Shah 262 ITR 657 (Guj)
4) Vinod Kumar Jain v/s CIT 195 Taxman 174 (P&H)
5) Charanbai Singh Jolly v/s 8th ITO 5 SOT 89 (Mum)
6) Smt. Lata G. Rohra v/s DCIT 21 SOT 541.
7. The A.R. concluded that when the entire facts had been examined by the AO, subsequently, the CIT cannot take different view on the same facts and hence action u/s 263 is bad in law.
8. The DR basically relied on the order passed u/s 263 by the CIT and submitted that there was no evidence of the possessing having been taken by the assessee and that through the rectification, the assessee had actually taken different flats, which according to him was within the three years period and hence was short term and that the action of CIT in initiating proceedings under section 263 was correct. Page 4 of 8
9. We have heard the arguments of both the sides and have perused the material brought on record in the appellant's paper book (APB), we find that the AO, in the regular assessment proceedings had called for all the details with regard to the twin transactions and had incorporated his decision in the assessment order. Therefore, the issue before us is, whether still, the assessment order is erroneous and prejudicial to the revenue. From the facts as narrated by the AR, we are of the considered opinion that the issue has been dealt with and an opinion had been formed over that by the AO. It is therefore, a clear case of change of opinion, because even the DR could not get out of the fact that the entire material and evidence was not before the AO and we also cannot come to a diverse view regarding the disclosure of evidence. Therefore, we have to hold that this was a clear case of change of opinion. We also get support from the various decisions of the Hon'ble jurisdictional High Court of Bombay in the case of Grasim Ind. Ltd. v/s CIT, reported in 321 ITR 92, wherein the Hon'ble Bombay High Court has held, "AO taking possible view, order not erroneous or prejudicial". The Hon'ble Supreme Court in the case of Malabar Ind. Co. Ltd. v/s CIT, reported in 243 ITR 83 has held, "Where two views are possible and the AO adopts one of the views permissible in law, the order cannot be treated as erroneous, unless the view taken by the AO is sustainable.". The Hon'ble jurisdictional High Court of Bombay in CIT v/s Development Credit Bank Ltd, reported in 323 ITR 206, has held, "dismissing the appeal, that there was no basis or justification for the Page 5 of 8 Commissioner to invoke the provisions of section 263. The AO after making an enquiry and eliciting a response from the assessee came to the conclusion that the assessee was entitled to depreciation on the value of securities held on the trading account. The Commissioner could not have treated this finding to be erroneous or to be prejudicial to the interests of the Revenue. The observation of the Commissioner that the AO had arrived at a finding without conducting an enquiry was erroneous, since an enquiry was specifically held with reference to which a disclosure of details was called for by the AO and furnished by the assessee. The Tribunal was justified in holding that recourse to the powers under section 263 was not warranted in the facts and circumstances of the case".
10. In the instant case we have already seen that, during the regular assessment proceedings the AO had already made the enquiry, as he thought fit. In these circumstances, it can never be held that there was a lack of enquiry by the authority under the Act. It can also not be held that the enquiry was inadequate because complete details were provided to the AO, therefore, we have to hold that this was a clear case of change of opinion, that too, on a proposal sent by the AO, meaning whereby it was not the case of suo moto action of the CIT. This is important to note because the words used in section 263 are, "he may". In the instant case, the impugned order itself specifies that the proposal was received from the AO, which means, that the CIT himself did not apply his mind. Both these propositions were dealt with by the Hon'ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. Vs CIT, reported in 243 ITR 83, wherein (in the Page 6 of 8 head notes), the Apex Court held, "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely,
(i) the order of the Assessing Officer sought to be revised is erroneous; and
(ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act". In these circumstances, taking into account all the facts emerging from the orders of the revenue authorities, the action to invoke revision proceedings under section 263 is bad in law and cannot be sustained.
11. We, therefore, cancel the proceedings under section 263 on the issue of LTCG as bad in law and as a consequence, we sustain and uphold the order passed under section 143(3) by the AO on the issue of capital gains.
12. The AR had also mentioned the second part of revision proceedings with regard to excess allowance of deduction under section 80C, the AR submitted that vide submissions dated 28/03/2011, it was informed to the CIT that the AO had already initiated rectification proceedings on the issue. Vide letter to the AO, dated 10/01/2011, the assessee has conveyed her no objection to Page 7 of 8 rectify the order to that extent. In that circumstance, recourse to revision proceedings is unwarranted.
13. We have heard the submission of the AR and have also perused the record. We are unable to subscribe to this argument because this was an erroneous view taken by the AO, which, in any case is unsustainable in law. We, therefore, uphold the revision proceedings initiated by the CIT on the issue of excess allowance of deduction under section 80C.
In the result :
We hold that initiation of proceedings under section 263 on the issue of LTCG is bad and uncalled for, and We uphold the revision proceedings on excess allowance of deduction under section 80C.
14. The AR has not pressed ground no. 1, which is dismissed as not pressed.
15. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on this day of 15/06/2012.
Sd/- Sd/-
(R.S.SYAL) (VIVEK VARMA )
ACCOUNTNAT MEMBER JUDICIAL MEMBER
Mumbai: 15/06/2012.
P/-*
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