Income Tax Appellate Tribunal - Chandigarh
Smt. Radha Devi, Mandi vs Ito, Mandi on 13 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.1095/Chd/2014
(Assessment Year : 2008-09)
Smt.Radha Devi Vs. The Income Tax Officer,
W/o Sh.Kesar Singh, Sunder Nagar, Distt. Mandi,
VPO Tattapani, Tehsil Karsog, Himachal Pradesh.
Distt. Mandi, Himachal Pradesh.
PAN: ANXPD9019J
(Appellant) (Respondent)
Appellant by : Shri Tej Mohan Singh,
Respondent by : Smt. Meenakshi Vohra, DR
Date of hearing : 04.09.2017
Date of Pronouncement : 13.10.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Thi s ap peal h a s b e e n f i l e d b y t h e a s s e s s e e a g a i n st t h e o r d e r o f L d . CI T( A p p e a l s ) , Sh i m l a d a t e d 2 9 . 9 . 2 014 , r e l a t i n g t o a s s e s sm e n t yea r 2 0 0 8 - 09 .
2. B r i e f b a ck g r o u nd o f t h e ca s e i s t h a t t h e as s e s s ee h ad f i l e d r et u r n o f i nc o m e f o r a s s es sm e n t y e ar 2 0 0 9-1 0 c l a i mi n g r e f u n d o f R s. 6 , 80 , 2 3 3 / - o n a cc ou n t o f TD S o n c o m p e n s a t i on r e c e i v e d f r o m L AO o f R s .6 6 , 0 4 ,2 02 / - . Th e c a s e w as s e l e c te d for s c r u t i ny d ur i n g the c o u rs e of which the assessee c o n t e n d e d t ha t th e c o m p e n s a ti o n w a s r e c e i v e d o n 2 9 . 3 . 2 0 0 8 a n d w a s l i ab l e t o b e t a x e d i n a s s e s s m e nt y e a r 2 0 0 8 - 0 9 instead of a s s es s m e n t year 2 00 9 - 1 0 . Armed with this i n f o r m a ti o n , n ot i c e u / s 1 48 o f the I n c o m e Ta x A ct, 1 9 6 1 ( i n 2 s h o r t ' t h e A c t ' ) w a s i s s u e d t o th e a s s e s s ee f o r a s s e s s m e nt y e a r 2 0 0 8 - 0 9 an d a s s e s s m e nt u / s 1 4 3 ( 3 ) / 14 8 o f t h e A c t w a s c o mp l e t e d a t a t o t a l i n c om e o f R s . 6 7 ,4 9 ,2 9 0 w h ic h i n c l u d e d t h e com p e n s a t i on r e cei v e d b y t h e as s es s e e t a xe d a s S h o r t Te r m C a p i t a l Ga i n a mo u n t i n g t o R s . 56 , 5 4 , 2 9 0 /- a f t e r n e tt i n g o ff t h e c o s t of a c qu i s i t i o n o f t h e a s s e t f r om c o m p e n s a ti o n re c e i v e d , and Rs . 1 1 , 2 5 , 00 0 / - re c e i v e d as c o m p e n s a ti o n for l o s s o f i nc o me a s s e s se d a s th e n o r m al b u s i n e s s i n c o m e o f t h e a ss e s s e e.
3. Th e matter was carried in appeal b e f o re the L d . CI T( A p p e a l s ) where the a s s es s e e c h a l l e ng e d b o t h the a s s u m p t i on o f j ur i s d i c t i o n u / s 1 47 o f t he A c t a s we l l a s t h e additions made on merits. Th e L d . CI T( A p p e a l s ) v i d e h e r o r d e r d a t e d 29 . 9. 2 0 1 4 d i s m i s s e d a l l t h e g r o u nd s r a i s e d b y t h e a s s e ss e e .
4. A g g r i e v e d b y t he s a m e , t he a s se s s e e h a s co m e u p i n a p p e a l b ef o r e us .
5. G r o u n d No . 1 ra i s e d b y t h e as s e ss e e i s a l e ga l g ro u n d c h a l l e n g i n g t h e v a l i d i t y of t h e as s e s s m e n t fr a m ed u / s 1 4 7 o f t h e A ct a n d r ea d s a s u nd e r :
"1. That in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) is not justified in upholding the reopening the case of the appellant under section 147 read with section 148 of the Income Tax Act 1961.
6. B r i e f f a c t s re l a t i n g t o t h e i s s u e ar e t h a t t h e a s s ess e e ' s p r o p e r t y h a d b e en a c q u i r ed f o r co n s t r u c t i o n o f Co a l D a m in 3 Ta t t a p a n i a n d a w a r d w a s p a s s ed b y t h e L A O , S un d e r N a g ar a l l o w i n g t h e fo l l o w i n g a m o un t s a s c o m p e n s at i o n :
a) Structure Value = R s . 3 0 , 51 , 3 8 6 /-
b) Solatium = R s . 9 , 15 , 4 1 5 /-
c) A d d i t i o n al A m o un t = R s . 2 6 , 37 , 4 0 0 .70
To t a l = R s . 6 6 , 04 , 2 0 2 /-
7. Th e TD S C e r t i f i c a t e w as i ss u e d b y th e L AO f or t he a s s e s s m e nt y e a r 2 0 0 9 - 1 0 . Th e a ss e s s e e f i l e d h e r r e t u r n f o r t h e s a i d y e a r c l a i m i n g e n t i r e r ec e i p t a s t a x f r ee a n d t h e refund of the tax d e d u c te d at source am o u n t i n g to R s . 6 , 8 0 , 22 3 / - . Th e c a s e w a s s el e c t e d f o r sc r u t i n y f o r A . Y 2 0 0 9 - 1 0 d u r i n g th e c o u r se o f w h i c h t h e a s s e s se e c o n t e n d e d t h a t t h e sa i d co m p e n s a t i o n h av i n g b e e n r e c e i v e d i n t h e f i n a n c i a l ye a r en d i n g o n 3 1 . 3. 20 0 8 i . e . o n 2 9 .3 . 2 0 0 8 , a nd t h u s w a s t a x a b l e i n a s s e s s me n t ye a r 2 0 0 8 - 09 . A cc o r d i n g l y, t h e A s s es s i n g O ff i c e r , a c c e p ti n g t h e a s s es s e e ' s co n t e n t i o n, h e l d t h at t h e s ai d s u m wa s a s ses s a b l e i n a s s es sm e n t y e ar 2008-09 and not in ass e s s m e n t year 2 0 0 9 - 10 . C o n s e q u e nt l y , th e c a s e w a s r e op e n e d f o r a s se ss m e n t y e ar 2 0 0 8 - 0 9 , i n w h i c h , a s p e r t he A s s e s s i n g O f f i c er h e h a d reason to b el i e v e t h at the income to t he tune of R s . 6 6 , 0 4 ,2 0 2 / - h a d e s c a pe d a s se s s m e n t . Th e a s s e s s e e on r e c e i p t o f t he c op y o f re a s o n s f or r e o p e ni n g f i l e d o b j e c t i o n i n r e s p e c t t o th e s a m e w h i c h w as c o n s i d e r ed a nd d i s p o s e d o f f b y th e A s s es si n g O f f i c e r .
8. B e f o r e th e L d .CI T( A p p e a l s ) th e a s s e s s ee c h a l l en g e d t h e v a l i d i t y o f th e r e - a s s e s sm e nt p r o c e e d i n gs s ta t i n g t h a t t h e r e w a s no r e as o n w h i c h co u l d h a v e l e d t o t h e b e l i e f t h at 4 t h e i n c o m e h a d e s c a p e d a s s es s me n t . Th e a s s e s s e e p l e a d ed t h a t t h e A s s es s i n g O f f i c e r h ad co m p l e t e i n fo r m at i o n a b o u t t h e c o s t o f co ns t r u c t i o n o f t h e p r o p e r t y w hi c h h a d b e e n a c q u i r e d a n d a f te r a p p l y i n g i n d e x e d c o s t m e t h o d t o i t t he c a p i t a l g a i n i n an y c a s e c o u l d not h a v e w o r k e d out a t R s . 6 6 l a c s a n d, t h er e fo r e , t he r e as o n r e c o r d e d b y th e A s s e s s i n g Officer th a t t he income to th i s e x t e nt had e s c a p ed a s s e s s m e nt w a s w r o n g . Th e a s se s s e e al s o co n t en d e d t h at t h e A s s e s s i ng O f f i c e r w a s a war e t h a t t h e a s se s s e e h a d i n v e s t e d i n ne w p r o p e r t y a n d w as e n t i tl e d t o d e du c t i o n on t h e s a m e , th e r e fo r e , a s p e r th e i n f o r m a t i o n a v ai l a b l e w i t h t h e A s s e s si n g O ff i c e r i t c ou l d n ot h a v e l e d to t he b e l i e f o f e s c a p e m e nt o f i nc o m e a n d a s s u ch t h e c as e h a d be e n i l l eg a l reopened by t he A s s e s s i ng O f fi c e r . Th e L d . CI T( A p p e a l s ) r e j e c t e d t h e c o nt e n t i o n o f t h e a s s e s s e e h o l di ng t h a t t h e Assessing O f f i ce r having cl e ar i n f o r m at i o n regarding c o m p e n s a ti o n r ec e i v e d b y t h e a ss e s s e e d u r i ng t he y e a r , t h e r e o p e n i n g w a s val i d .
9. B e f o r e u s , t he L d . c o u n s e l f or a s s e s s e e r e i t e r a t ed t he c o n t e n t i on s r ai s e d b e f o re th e L d . CI T( A p pe a l s ) and vehemently a r gu e d that the Assessing O ff i ce r had no i n f o r m a ti o n i n h i s p o s s e s s i o n o f es c a p e m e n t o f i n co m e a n d, t h e r e f o r e, t h e r eo p e n i n g wa s i n val i d .
10. Th e L d . D R , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d . CI T( A pp e a l s ) a n d s t a t ed t h a t t h e r e o pe n i n g was valid since the Assessing O f fi c e r had i n f o rm a t i o n of 5 c o m p e n s a ti o n rec e i v e d by t h e as s e s s e e p e r t a i n i n g t o th e i m p u g n e d y e a r ha v i n g n o t b e e n br o u g h t t o t a x .
11. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s, p e r u s e d t h e o rde r s o f t h e a u t ho r i t i e s b e l o w a nd a l s o t h e d o c u m e n t s p r o du c e d b ef o r e u s . W e f i n d n o me r i t i n t h e c o n t e n t i on of th e Ld. counsel for assessee. It is not d i s p u t e d t h a t the A s s e s s i n g O f fi ce r h a d i nf o r m a ti o n t h a t th e c o m p e n s a ti o n r ec e i v e d b y t h e a s se s s e e o f R s . 6 6 , 04 , 2 0 2 / - o n a c c o u n t o f a c qu i s i t i o n o f h e r p r o p e r t y p e rt a i ne d t o t h e i m p u g n e d a s s es sm e n t y e a r a n d h a d n o t b e e n r et u r n e d f o r i n c o m e t a x by t he a s s e ss e e fo r t he i m p u gn e d ye a r. Th e s a i d i n f o r m a ti o n had been p r o vi d e d by the a s se s se e herself d u r i n g t h e c o u r se o f p r o c e ed i n g s f o r a s se s s m e nt ye a r 2 0 09 - 1 0 . Th i s i n f o r ma ti o n w a s s u f f i c i e nt f o r th e A s se s s i n g O f f i ce r t o f o r m b e l i e f o f e s c a p e m en t o f i n c o m e . Th e c o nt e n t i o n of t h e L d . c o u n s el f o r a s s es s e e t h a t t h e A ss e s s i n g Of f i c e r w a s a w a r e of t he c ost o f t h e c o n s t ru ct i o n o f t h e h o use p r o p er t y a n d , t h e r ef o r e , a f t e r i n d e x i n g th e s a m e h e c o ul d n o t h a v e f o r m e d a b e l i e f o f e s c a p e m en t of i n c o m e t o t h e e x t e n t o f c o m p e n s a ti o n rec e i v e d o f R s. 6 6 l a c s , w e f i n d h a s n o m er i t . F i r s t l y i t h a s no t b e e n s h o w n a s t o h o w t he A s s e s s i n g O f f i c e r w a s a w a re o f a l l t h e s e f ac t s , a n d e v e n o th e r w i s e , i t i s s e t t l e d l a w th a t a t t he s t a ge o f i s s ua n c e o f n o t i c e t he o n l y q u es t i o n i s w h e t h er t h er e w a s r e l e v a n t ma t e r i a l o n w h i c h a r e a so n ab l e p e r s o n co u l d h a v e f o r m ed a r e q u i s i te b e l i e f of e s c a pem e n t o f i n c o m e . Th i s b e l i e f b e i n g w i t h i n th e r e a l m o f s u b je c ti v e s a t i s f ac t i o n , e s c a p e m e n t of i n c o m e i s 6 n o t t o b e c on c l us i v e l y pr o v e d . Th e H o n ' bl e Apex Court in t h e c a s e o f Ra ym o n d W o o l l e n Mi l l s v s I TO ( 1 9 99 ) 2 3 6 I TR 3 4 ( S C ) h as h e l d a s u n d e r :
"We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the Court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the ITO after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority."
12. Th e fact that the c o m p en s at i o n r e c ei v e d by the a s s e s s e e h a s n ot b e e n r e t ur n e d f o r t a x a t i o n n p u r p o s e i s e n o u g h t o a r ri v e a t t h e b e l i e f t ha t t h e i n c o m e ha d e s c a p ed a s s e s s m e nt . Th a t l a t e r o n , d u ri n g t h e c o u r s e o f a s s e s s m e nt p r o c e e d i ng s i t ma y t u r n o u t t ha t t h e a s se s s e e ha d i n f a ct , i n c u r r e d l o s s o r t h e q u an t u m o f th e c a p i t a l g a i n ea r n e d ma y b e l e s s t h a n t h e a m o u n t o f c om p en s a t i o n r e c e i v e d m a k e s no d i f f e r e n ce t o t he s i t u a ti o n . The A s s e s s i n g O ff i c e r i s no t r e q u i r e d to q u an t i f y e x a ct l y t h e a m o u n t o f i n com e w h i c h h a s e s c a p e d a s se s s m e n t . Th i s e x e r c i s e c a n a n d s h o u l d be d o n e d u r i n g th e a s s e s s m e nt p r o ce e d i n g s w h i l e a t t h e s t a g e o f r e c o r d i n g r e as o n s t o a s s u m e j u r i s d i c t i on t o r e o p e n t he c a s e , t h e A s se s si n g O f f i c er i s o n l y r e q u i r e d t o fo rm a b e l i e f that i n c o m e ha d e s c a pe d a sse s s m e n t f o r th e i m p u g n ed year.
7
13. I n v i e w o f t h e a b o v e , w e h o l d th a t t h e r e - a s s e ss m e n t p r o c e e d i ng s w e r e v a l i d l y i n i t i a te d and dismiss ground No.1 r a i s e d b y t h e as se s s e e .
14. G r o u n d N o. 2 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"2. That in the fact and circumstances of the case Ld. Commissioner of Income Tax (Appeals) is not justified in upholding the taxing of a sum of Rs11,25,000/- on account of loss of earning received on account of acquisition of the property of the matter.
15. Th e f a c t s r e l a t i ng t o t h e i s s u e a r e t h a t d u r i n g t he r e - a s s e s s m e nt p r o ce e d i n g s t h e a s s es s e e s u b m i t te d th a t a p a r t f r o m t h e c o m p e ns a t i o n a m o u nt i ng t o R s . 6 6 , 0 4 , 202 / - i t h a d also r e ce i v e d a sum of R s . 1 1, 2 5 , 0 0 0 / - from the L A O, B i l a s p u r o n a c co u n t o f l o s s o f g o o d w i l l . Th e a s s e s s e e submitted that the said a m ou n t received c ou l d not be s u b j e c t e d t o t a x s i n c e i t c o u l d a t b e s t be s a i d t o h a v e b e en r e c e i v e d on a c c ou n t o f a p e r so na l e f f e c t no t f a l l i n g w i t h i n t h e d e f i n i ti o n of c a p i t a l a s se t u / s 2 ( 1 4 ) o f t he A c t a n d f u r t h e r s i n ce i t w a s a s e l f a c q u i r e d g o o d w i l l w hi c h w a s n o t t a x a b l e a s p e r l a w l a i d d o w n b y th e H o n ' b l e S u p re m e C o u rt i n t h e c as e o f CI T V s . B . C . S r i v a sa S e t t y , 1 2 8 I TR 2 9 4 . Th e A s s e s s i n g O f f i c er o n p e ru s i n g t he d o c u m en t s s ub m i t t e d b y t h e a s s e ss e e fo un d t h a t t h e a ss es s e e h a d r e c e i ved a s u m o f R s . 1 1 , 2 5 ,0 0 0 / - fr o m t h e L AO , B i l a s p u r o n ac c o u nt o f l o s s of i n c o m e w h i ch w a s e a r n i n g f rom r u n n i n g a gu e s t h o u s e named R a i n bo w Guest House which was si t u a t e d at D h a r m i k S t h al . Th e r e a f t e r t h e A s s e s s i n g O ff i c er c o l l e c t ed i n f o r m a ti o n f r om t h e L A O to k n o w e x a c tl y wh a t k i n d of a p p l i c a t i o n w a s m o v e d b y t h e a ss e s s e e t o g e t t h e a m o u n t of 8 R s . 1 1 , 2 5 ,0 0 0 / - . F r o m t h e d oc u m e n t s se n t by t h e L A O , B i l a s p u r, t h e A s s e s s i n g O f f i c e r no t e d t h a t t h e a ss e s s e e h a d s u b m i t t e d a n app l i c a t i o n b e f or e t h e L A O s t a t i ng t h a t s he was the p r o p r i et o r of Rainbow guest house which was s i t u a t e d i n Ta t t ap a n i a n d t h e s am e w a s t a k e n o n l e a s e f o r a p e r i o d of 2 0 y ea r s f r o m S h r i Ke s a r Si n g h , w ho w a s t h e o w n e r o f t h e g u es t h o u s e, f r o m th e y e a r 1 9 9 8 . Sh e h a d al s o filed B al a n c e Sheet f or the year e nd i n g 3 1 . 3 . 2 00 4 , 3 1 . 3 . 2 0 0 5 a n d 31 . 3 . 2 0 0 6 s h o wi ng t h e s a i d b u i l d i n g a s f i x e d asset and claiming d e p r e c i at i o n on the same. Th e Assessing O ff i c er based on this i n f o r m a t i on asked the a s s e s s e e a s t o wh y t h e c o m p e n s at i o n r e c e i v ed f o r t h e l o s s o f i n c o m e f o r t h e co m i n g 1 5 y e a r s c o m p u t e d o n t he b a s i s o f e a r n i n g v a l ue o f R s . 7 5 , 0 0 0/ - p e r a n n u m f o r 1 5 y ea r s b e n o t treated as i n c om e received in advance and not c a p i tal receipt. Th e a s s e s s e e i n r e s p o ns e s t a t e d t h a t th e a m o u nt h a d b e e n r e c e i ve d o n a c c o u n t of g o o d w i l l w h i c h c o u l d n o t b e s u b je c t e d t o ta x a s p e r t h e d ec i s i o n o f th e Hon ' b l e Ap e x C o u r t i n t h e c as e o f B . C . S r i va s a S e t t y ( s u pra ) a n d t h e m o n e y h a v i n g b ee n c o m p u t e d f o r t h e l o s s o f e a r n i n g f o r 1 5 y e a r s th e s am e c o u l d no t b e s ub j e c t e d t o t a x a t i o n i n o ne p a r t i c u l ar y e a r. Th e Assessing Officer re je c t e d the c o n t e n t i on o f the a s s e s s ee s t a ti n g t h a t th e A c t h a s b e e n a m e n d e d an d c ap i t a l g ai n i s c h a rg e a b l e e ve n o n th e t r a n s fe r o f g o o d w i l l o r bu s i n e s s o r t e n an c y r i g h t i f t h e y a r e s e l f g e n e r a t e d. Th e A s s e s s i n g O f f i c er f u r t h er h e l d th a t i t i s a c a s e o f c o m p e n sa t i o n a g a i n st l o ss o f e a r n i n g a n d n o t o f s a l e o r t r a n sf e r of g oo d w i l l . H e , t h e r ef o r e , tr e a t e d t h e r e c e i p t of 9 R s . 1 1 , 2 5 ,0 0 0 / - a s h e r n o r m a l bu s i n e s s i n c om e a n d a d d e d t h e s a m e t o t h e i n c o m e o f t h e a sse s s e e .
16. B e f o r e t he L d . CI T( A p p e a l s ) , t h e as s e s s e e re i t e r at ed t h e c o n t e n t i on m a de before t he Assessing O ff i c e r . Th e L d . CI T( A p p e a l s ) i n t u r n h e l d t h a t t h e c o m pe n s a t i on r e c e i ve d w a s o n a c c o u nt o f t r a n s f e r of a ss e t a n d t h u s mo d i f i e d he order of the Assessing Of f i ce r to tax the additional c o m p e n s a ti o n a s p a r t o f c a p i t a l g a i n i ns t e a d o f b u s i n e ss income.
17. B e f o r e u s , t he L d . c o u n s e l f or a s s e s s e e r e i t e r a t ed t he c o n t e n t i on m a d e b e f o r e t h e l o we r a u t h o r i t i es , w h i l e t h e L d . D R r e l i e d u p o n th e o r d e r o f t h e Ld . CI T( A p p e a l s ) .
18. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s. Th e i s s u e b e f or e u s p e r ta i n s to d e t e r m i n i n g t h e n a t u r e of t h e c o m pe n s a t i on r e c e i ve d o f R s .1 1 , 2 5 , 0 0 0/ - w het h e r i t w a s i n t h e n a tu r e o f c o m p e n s at i o n re c e i v e d fo r a c q ui s i t i o n of t h e a s s e s s e es p r o p e r t y a s h e l d by t h e C I T( A ) c a p i t a l o r was otherwise capital in n a tu r e no t liable to be taxed as p l e a d e d by t h e Ld . C o u n s e l f o r the a s s e s s ee .
19. Th e f a c t s w h i c h a r e n o t d i s p u t e d a r e t h a t t h e a s s e s s e e was the owner of a property built on land taken on lease by h e r f r o m h e r h u s b a n d f o r a p e r i o d o f 2 0 y e ar s a n d w a s r u n n i n g a g u e s t h o u s e o n t h e sa m e . Th e p e r i o d o f l e a s e remaining wh e n t h e s a i d p r o pe r t y w a s a c q ui re d b y t h e G o v e r n m e nt w as 15 years. Th e assessee had been c o m p e n s a te d f or t h e a cq u i s i ti o n o f p r op e r t y t o th e t u n e o f 10 R s . 6 6 , 0 4 ,2 0 2 / - a n d t h e re a f t e r th e a s s e ss e e h ad r e q u e s te d t h e L A O to c o m pe n s a t e h er f u r t he r f o r g oo d w i l l on a c c o u n t o f d i s co n t i n u at i on o f he r b us i n e ss , i n r e s p o ns e t o w h i c h t he a s s e s s e e h ad f i l ed c o p i e s o f h er Ba l a n c e S h e et t o th e L A O t o p r o v e t ha t s he ha d b e e n r u n n i ng a g u e st h o us e on t h e sa i d p r o p e r t y an d e ar n i n g i n c om e o f a p p r o x i m at e l y Rs . 7 5 , 0 0 0 /- p e r y e a r . Th e L A O h a d a c c e p t ed t h e c o n t e n t i on s o f t h e a s s e s s e e a n d d i re c t e d t h at t h e a ss e s s e e b e c o m p en s a t e d f or her loss of y ea r l y i n c om e wh i c h a m o un t e d in all to R s . 1 1 , 2 5 ,0 0 0 / - . Th e r e l e v a n t a p p l i c a t i on o f t he a s s e s s e e a n d t h e o r de r of t h e L A O f or m ed p a r t o f t he Pa p e r B o o k placed at pages 36 to 38.
20. W h a t e m e r g es f ro m t h e s e f a c ts i s t h a t t h e L A O h a d a w a r d e d t h e s um o f R s . 1 1 , 2 5 ,0 0 0 / - t o t h e as s e s s e e a s c o m p e n s a ti o n for t h e l o s s o f t he i n c o m e e a r n i n g a p p a r a tu s of the a s s e ss e e . Th e G ov e r n m e n t having taken o v e r / a c q ui r e d th e p r e m i s e s and t h e l a n d o n w h i c h t h e a s s e s s e e w a s r un n i n g h er g u e st h o u s e , t h e a s se s s e e h ad b e e n d e pr i v e d o f h e r i n c o m e e a rn i n g s o ur c e an d s i n c e t h e r e m a i n i n g l e a se f o r t h e g u e s t h ou s e w a s 1 5 ye a rs , s h e h a d b e e n d e p r i ve d o f h e r i n c o m e e ar ni n g a p p a r a tu s f or t h e n e x t 1 5 y e a r s. C o ns i de r i n g t he s e f a c t s t h e LA O h a d c om p e n s a t e d h e r f o r th e l o ss o f h e r i n c o m e e a r n i n g a p p a r at u s . S u c h c o m p e n s a ti o n s re c e i v e d fo r l o ss o f b u s i n es s o n a c c o u n t of c o m p u l s o r y r eq ui s i t i o n o f b u s i n es s a s s et s ha s b ee n h e l d to b e c a p i t a l r e c e i pt s b y t h e H o n ' b l e A p e x c o u r t i n t h e c a s e o f S e n a i r a m vs CI T ( 1 9 6 1 ) 4 2 I TR 3 9 2 . Th e s a i d r e c e i p t, 11 t h e r e f o r e, i s ca p i t a l i n n at u r e and c a n n o t b e b r ou g h t t o ta x i n t h e h an d s o f th e a s s e s se e .
21. Th e c o n t e n t i o n o f t h e R ev e n u e t h a t t h e s a m e fo r m ed p a r t o f t h e c o ns i d e r a t i on f o r th e a s s e t i s t o t al l y o f f t h e mark. Th e c o m p e n s a t i on r e c ei v e d by the a ss e s s e e on a c c o u n t o f t h e ac q u i s i t i on o f t h e b u i l d i n g f o r med p a r t a n d w a s i n cl u d e d i n t h e a w a r d g r an t e d t o t h e a s se s s e e , t h e amount of w h i c h w a s R s . 6 6 , 0 4 ,2 0 2 / - o n l y , a s pe r t h e s a i d sheet p l ac e d at Paper Bo o k pa g e N o . 2 6. Th e figure of R s . 1 1 , 2 5 ,0 0 0 / - d o e s n o t fo r m pa r t o f t h e s a i d s h e e t . In f a c t , a s p oi n t e d o u t a b o v e , th e LA O h a d a w a r de d t h e s u m a s c o m p e n s a ti o n f or loss of i n c om e and, t h e r e fo r e , by no s t r e t c h o f i m a gi n a t i o n t h e s a i d a m o u n t c a n b e s a i d t o b e p a r t o f t h e c o mpe n s a t i o n o f a c qu i s i t i o n of a s s et .
22. I n v i e w o f t h e ab o v e w e h o l d t ha t t h e a m o u n t re c e i v ed a m o u n t i n g t o Rs . 1 1 , 2 5 , 00 0 / - a s c o m p e n s a t i on f o r l o s s of business was a c a pi t a l re c e i p t d i s t i nc t from the c o m p e n s a ti o n r ec e i v e d f o r a c q u i si t i o n of l an d a nd t h u s n ot t a x a b l e i n t h e h an d s o f t he a s s es se e .
G r o u n d No . 2 r ai s e d b y th e a s ses s e e t h er e f o r e st a n d s allowed.
23. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"3. That in the facts and circumstances of the case the Ld Assessing Officer is not justified in upholding the taxing of a sum of Rs 56,54,290/- as shot term capital gains . The same should have been held to be assessable as a long term capital gain."12
24. I n t h e a f or e s a i d g r o u n d , th e a ss e s s e e h a s c h a l le n g ed t h e t r e a t me n t o f t h e a m o u n t r ece i v e d a s c o mp e ns a t i o n o n a c c o u n t o f a c qu i s i t i o n of i t s p r o pe r t y a s S h o r t Te r m C a p i t al G a i n b y t r e at i n g t h e a s s et a c qu i re d a s t h e bu s i n es s a s s e t of t h e a s s es s e e as a g a i n s t L o n g Te rm C a p i t al G a i n s r e t u r n ed b y t h e a s s e ss e e t r e a t i n g th e s a me a s t r a n s f er o f a p e r s o n a l c a p i t a l as s e t .
25. B r i e f l y s t at e d , th e a s s e s s e e h ad c o m p u t e d t h e ca p i t a l g a i n e ar n e d o n tr a n s f e r o f t h e as s e t c om p u l s or i l y a c q u i r ed by setting o ff from the co n s i d e r a ti o n r ec e i v e d of R s . 6 6 , 0 4 ,2 0 2 / - , t h e i n d e xe d c os t o f a c q u i s i t i o n o f t h e a s s et w h i c h w as c o mp u t e d a t R s . 5 0,5 6 , 9 9 8 / - a n d ag a i n s t th e r e s u l t a n t ca p i t a l g a i n o f R s . 1 5 ,47 , 2 0 3 / - t h e as se s s e e h a d c l a i m e d d ed u c t i o n u / s 5 4 F o f th e A c t . Th e c om p u t a t i o n f i l e d b y t h e a s se s s e e r e p r o d uc ed a t p a g e s 3 a n d 4 o f t h e a s s e s s m e nt o r d er a s u n d er :
Computation of capital gain Consideration 6604202 (Taken the entire compensation as deduction as per mandate of the Supreme Court in 315 ITR 1 page) Less cost of construction 1989-90 77728 x 551 249000.74 172 + 1990-91 5830 x 551 17650.16 182 --------------
266650.90 H.No.53 Kothi No.321/322 1998-99 2527595x551 3967820.07 351 + 1998-99 319749x551 501942.16 351 + 1999-00 189600x551 268559.38 389 ------------------
4738321.61
+
H.NO. 52 Kothi No. 322
1992-93 21056x551 52026.00
13
223 ---------------
5056998.51
Capital Gain 1547203.49
Less; deduction under section 54F 1547203.49
Tax Payable NIL
TDS 680233.00
Refundable 680233.00
Regarding the amount received in respect of loss of goodwill can at best be termed as a personal effect not falling with in the definition of capital asset u/s 2(14) of the I.T. Act, 1961. Further even in the case of sale/transfer of self acquired goodwill the same is not taxable as per the law laid down by the Hon'ble SC of India in the case of CIT Banglore Vs. B.C.Srivasa Setty reported as 128 ITR 294.Further the assessee had spent in huge chunk of money in the construction of new house in which a business venture stands commenced w.e.f. 2013 and the same is allowable as deduction as per the mandate of section 54F/54D of the I.T.Act, 1961 and it is prayed the same may kindly be allowed to the assessee.''
26. Th e A s s e s s i n g O f f i c e r c o n d uc t ed e n q u i r i e s f r om t h e L A O a n d f o u n d th a t t h e a s s es s e e w h i l e s t a k i n g i ts c l a i m f o r c o m p e n s a ti o n on a c c o u n t of l os s o f i n c om e / g oo d w i l l h ad s t a t e d t h at s h e w a s t h e p r o pr i e to r o f M / s R a i n bo w g u e s t h o u s e wh i c h w a s a c q u i re d by t he G o v e r nm e n t a nd h a d a l s o filed Ba l a n c e Sh e e t s f or the period en d i n g 3 1 . 3 . 2 0 1 4, 3 1 . 3 . 2 0 1 5 a n d 3 1 . 3 . 2 0 1 6 s h o wi n g t h e b u i l di n g t h e r e i n a s h e r f i x e d as s e t a n d c l a i m i n g d ep r e c i a t i on t h e r eo n . O n t he b a s i s o f t h i s i n for m a t i o n t h e A s ses s i n g O f f i ce r h e ld t h a t t h e a s s e t w a s th e b us i n e s s a s se t o f th e a s s e s s ee a n d t h e c a p i t al g a i n e a rn e d t he re o n w a s t a x a bl e u / s 5 0 o f t h e A ct a s S ho r t Te r m C a p i t a l G a i n o n w h i c h n o i n d e x a t i on w a s a l l o w a b l e. Th e a s s e s s e e c o nt e n d e d d u r i n g a ss e s s m e n t p ro c e ed i n g s t h a t n o b u s i n e ss w a s c a r r i e d ou t o n t h e s a i d pr o p e r t y a n d t he Balance Sheet had n e v er b e en filed to th e Income-tax A u t h o r i t i e s a n d n o d e p r e c i a ti o n c l a i m e d t h e re o n , w h i c h w a s b r u s h e d a si d e by t h e A s s es s i n g O f f i c e r fo r t h e re a s o n t h at e v e n i f t he I TR s w e r e n o t f i l e d , i t w o u l d no t t a ke a w a y t h e f a c t t h a t t h e ass e s s e e w as r u n ni n g a g u es t h o us e o n t h e 14 s a m e a n d t h e de p r e c i a t i o n a n d o t h e r e x p e n s e s w o u l d b e d e e m e d t o h a v e b e e n a l l o w e d t o th e a s s e s se e . Th e A s s e s s i ng O f f i c e r t h er e a f t er c a l c u l a t ed t h e w r i t t e n d o w n va l u e o f t he g u e s t h ou s e b u i l d i n g as o n 1 . 4 .2 0 0 7 w h en t he a s s e t wa s c o m p u l s o ri l y a cq u i r e d a nd r e du c e d the sa m e from the c o m p e n s a ti o n r ec e i v e d , thus w or k i n g ou t th e net S h or t Te r m C a p i t a l G a i n a t R s . 5 6, 5 4 , 2 90 / - , t h e ca l c u l ati o n o f t h e written d o wn value and Short Te r m Capital Gain is r e p r o d u c ed a t pa g e s 9 a n d 1 0 of t h e a s s e s s m ent o r d e r a s under:
Financial Opening balance/ Rate Depreciation Written of down Amount Year Written down depreciation value at the value end of year 1998-99 3037344 + 21056 + No depreciation as the guest house was not 83558 complete and could not have been put to use 1999-00 3141958 20% 628392 2513566 2000-01 2513566 20% 502713 2010853 2001-02 2010853 20% 402170 1608683 2002-03 1608683 10% 160868 1447815 2003-04 1447815 10% 144781 1303034 2004-05 1303034 10% 130303 1172731 2005-06 1172731 10% 117273 1055458 2006-07 1055458 10% 105546 949912 F r o m t h e a b o v e c h a r t i t i s c l e a r t h a t t he w r i t t e n d o w n v a l u e o f t h e p r o p e r t y a s o n 0 1/ 0 4 / 2 0 0 7 w as r . 9 4 9 9 12 / - . S i n c e, t h e a s s e s s e e h a s r e c e i ve d t o t a l c o m p e n s at i o n a t R s .6 6 0 4 2 02 / - o n 2 9 . 0 2 . 2 0 08 t h e s h o rt t e r m c a p i t a l ga i n i s c o m p u t e d a s u n d er :
G r o s s a m o u nt o f c om p e n s a t i on r e c e i v e d R s . 6 6 04 2 0 2 / -
Le s s W . D . V . o f t h e b u i l di n g
A s o n 0 1/ 0 4 / 2 0 0 7 R s . 9 4 99 1 2 / -
N e t S h o r t T e r m C a pi t a l G a i n R s . 5 6 54 2 9 0 / -
27. B e f o r e th e L d. CI T( A p p e a l s ) t h e Ld . c o u n se l f o r a ss e s s e e r e i t e r a t ed her c o n t e n t i on s w hi c h was r e j e c ted by t he 15 L d . CI T( A p p e a l s ) w h o u p h e l d t he f i n d i n g s o f t he A s s e s s i n g O f f i c e r o n t h i s i ss u e .
28. B e f o r e u s , t he L d . c o u n s e l f or a s s e s s e e r e i t e r a t ed t he c o n t e n t i on s m a de b e f o r e t h e l o we r a u t h o r i t i e s i .e . t h e s a i d c a p i t a l g ai n w a s n o t o n a c c o u nt o f s a l e o f b u si n e s s a s s e t s i n c e n o b us i n es s w a s c a rr i e d ou t b y t h e as s e s se e a n d no d e p r e c i a ti o n e v e r c l a i m e d o n t he s a m e a s e v i de n ce . Th e L d .
c o u n s e l f o r a ss es s e e s u pp o r t e d h i s c o n te n t i o n b y s t a t i n g t h a t t h e a ss e s s ee h a d n e v e r f i l ed r e t u r n s i n e a rl i e r y e a r s a n d t h u s h a d nev e r c l a i m e d th e i n c o m e ea r n e d th e r e o n as b u s i n e s s i n c o m e, n o r h ad n e v er c l a i m e d d e p r e c i at i o n o n t h e said asset. Th e L d . c o u n s e l f o r a s s e s s e e a l s o st a t e d t h a t m e r e l y o n th e b as i s o f d o c um e n t s s u b m i t t e d t o t he L A O t he A s s e s s i n g O ff i c er a r r i v e d a t t h e s a i d c o n c l u s i on w h i l e t h e f a c t w a s th a t t he a s s e s s e e h a d n e v e r f i l e d r e t urn s c l a i m i n g t h e i n co m e ea r ne d f r o m t h e a s se t a s b u s i n es s i n c o m e o r treating the as s e t as its business asset c l a i m i ng d e p r e c i a ti o n t he re o n .
29. Th e L d . D R , o n t h e o t h e r ha n d , c o u n t e r e d b y st a t i n g t h a t t h e a ss e s s ee h a d s t a k e d i t s c l a i m f o r co m p en s a t i o n f or l o s s o f i n c o m e be f o r e t h e L A O b y f i l i n g h e r B a l a nc e S h e e t s r e f l e c t i n g t h e f ac t t h a t sh e h a d e a r n e d bu s i n e ss i n c o me f r o m t h e s a i d a ss e t a n d al s o c l ear l y r e f l ec t i n g t h e s a i d a s se t a s b u s i ne s s as se t c l a i m i n g d e p re c i a t i o n t h e r eo n. Th e L d . DR stated that the assessee was now estopped from claiming o th e r wi s e before a no th e r g o v e r n me n t revenue a u t h o r i t y. Th e Ld . D R st a t e d t h at h a v i n g a c c ep t ed a s s e s se e s 16 c l a i m f or c o m pen s a t i o n o n a c cou n t o f l o s s of i n c o m e a n d t h e a s se s s e e h a vi n g a p pl i e d a n d a c c e p t e d t h e s am e a l s o f o r t h e s a m e r e a so n t h e as s e s s e e c an n o t n o w m a k e a ' U ' t u r n a n d s t a t e th a t w h a t w a s c l a i me d b e f o r e th e LA O b y t h e a s s e s s e e w a s i nc o r r e c t . Th e L d . D R f u r t h e r st a t e d t h at n o n - f i l i ng o f r e tu r n c a nn o t he l p t h e a s s e s se e ' s c a s e s i n ce t h e s a i d ac t h as n o b e a r i n g o n t h e a c t i vi t y c ar r i e d o u t by t h e a s s e s se e . Th e L d . D R f u rt h e r p o i nt e d o ut t h a t t h e d e p r e c i a ti o n c a l c u l a t e d a nd r e du c e d f o r m th e co s t o f t he a s s e t w a s p i c k ed f r o m t h e f i g u re s u p p l i e d b y t h e a s s e s s e e i n t h e B a l a n ce S h e et a n d P r o f i t & L os s A c c o u n t f i l e d b e f o r e t h e LAO. Th e L d. D R , t h e re f o r e , st a t e d t ha t i t w as b a s e d o n i n f o r m a ti o n p r o vi d e d b y t h e a s s es s e e t o t h e L A O w h i c h h as n o t b e e n d e n i e d b y t h e a s s e s se e , t h a t t h e A s s e ss i n g O f f i c e r a r r i v e d a t t h e c or r e c t c o n c l us i o n t h a t t h e s a i d a s se t w a s t h e b u s i n e s s a ss e t of t h e a s s e s se e an d t h e c a p i ta l ga i n e a r n e d t h e r e o n , t h e r ef or e , w a s S h o rt Te r m C a pi t a l G a i n a n d t h e a s s e s s e e w a s n ot e n t i tl e d to a n y i n d e x at i o n o f th e c o s t of t h e a c q u i s i t i o n of t h e s a me .
30. We have heard both t he p a r ti e s and p e r u s ed t he documents filed before us. We find no mer i t in the c o n t e n t i on of the Ld. Counsel for assessee. It is an a d m i t t e d f a ct t ha t b e f o r e t h e L AO t h e a s s e s s e e h a d s t a k e d c l a i m t o b e c o m pe n s a t e d f o r l o ss o f i t s b u s i n e s s i n c o m e a nd a s e v i d e n c e of t h e s a m e h a d f i l ed B a l a n c e S h e et b e f o r e t he L A O s h o w i n g t ha t t h e i m p u g n ed a s s e t w a s i t s b u s i n e s s a s s e t an d wa s be i n g d ep r e c i at e d a c c o r di n g l y . Th e a s s es s e e 17 i n h e r a p p l i c a t i o n b e f o r e t he LA O h a d s u b m i t te d t h a t s h e w a s r u nn i n g a g u e s t ho u s e i n t h e s a i d p ro p e r t y a n d w as earning i n c o me t h e r e on . Ev e n the LAO awarded c o m p e n s a ti o n t o t h e a s s e s se e o f R s . 1 1 ,2 5 , 0 0 0 /- f o r l o ss o f Business i n c o me . All t h es e f ac t s , w h i c h have not b e en c o n t r o v e rt e d by the a s s e s s ee lead o nl y to on e logical c o n c l u s i on , t h a t t h e a s s e t w as t h e b u s i n e ss a ss e t o f t he assessee. Th e Revenue, t h e r e fo r e , has rightly held the c a p i t a l g a i n e a rn e d t h e r e o n a s S h o r t Te r m C a p i t a l G a i n e a r n e d on s a l e o f b u s i ne s s as s et a s p er t h e p r ov i s i o n s o f s e c t i o n 5 0 o f t h e A c t a n d d e n i e d t h e a s s e s s e e i nde x a t i o n o n t h e c o s t o f a c qu i s i t i o n of t h e a s s et t h e r e o n.
31. Th e c l a i m o f t h e L d . c o u n s e l f or a s s e s s e e t h at t h e s a i d a s s e t w a s n o t i ts b u s i n e s s a s se t i s b a s e d s o l e l y o n t h e f a c t that it had n ev e r f i l ed r e t ur ns before the Income-tax Authorities c l ai m i n g so. We find no s u bs t a n ce in this a r g u m e n t o f th e L d . c o u n s e l f or a s s e s s e e . N on f i l i n g of i n c o m e t a x r e t u rn d o e s n o t pr o v e t h a t t h e a ss e t wa s n o t t he b u s i n e s s a s s et o f t h e a s s e ss e e . Th e n o n -f i l i n g o f i n c o me t a x r e t u r n i s i n f a c t a d e f a u l t o n t h e p a r t o f t h e a s s e s s ee w h i c h h a s i t s o w n c o n s e q ue n c es b u t m e r e l y b ec a u s e t h e a s s e s s e e d o e s n ot f i l e h e r i n c o m e t a x r e t u r n d o e s n o t m e a n t h a t s h e h a s ea rn e d n o t a x a bl e i n c o m e a t a l l . Th e n o n f i l i n g o f I n c o m e Ta x R et u r n d o e s n o t pro v e a n y t hi n g a t a l l .
32. Th e L d . c o u n s e l f o r t h e a s se s s ee h a s a l s o co n te n d e d t h a t a s p e r s e c t i o n 5 0 of t h e A c t , w h i c h tr e a t s c ap i t a l g ai n s e a r n e d i n c a se o f d e p r ec i a b l e as s e t s a s s h o rt te r m c a p i t a l 18 g a i n s , t h e ca p i t al a s s e t s h o ul d f or m b l o c k o f ca p i t a l a s s e t s o n w h i c h d e p r ec i a t i o n ha s b e en " a l l o w ed " u n de r t h e A ct. Th e c o n t e n t i o n o f t h e L d . C o un se l i s t h a t s i n c e n o r et u r n has been filed by the a s s e s se e , the a s s e s see has n ot claimed d e pr e ci a t i o n also an d having n ot c l a i m ed d e p r e c i a ti o n , t h e s a m e c a n n o t be s a i d t o h a v e b ee n a l l o w e d to it also.
33. W e d o n o t f i n d a n y m e r i t i n th i s c o n t en t i o n o f t he a s s e s s e e a l so . F i r s t l y a s p e r t h e a s s e s s e e s o wn c l a i m b e f o r e the LAO, the impugned a s s et i.e. the building ,is its b u s i n e s s a s s et w h i c h i s b ei n g d e p r e c i a te d ye a r t o ye a r as r e f l e c t e d i n t h e b a l a n c e s he e t f i l e d b e f o r e t h e L AO . M e r e l y b e c a u s e n o r e t ur n h a s b e e n f i l ed b y t h e a s s e s s e e w i l l n o t t a k e a w a y t h e ad m i t t e d f a ct t h at t h e a s s e t i s a b u s i n e ss a s s e t o f t h e a ss e s s e e f or m i n g p a r t o f bl o c k o f a s s e t i .e. B u i l d i n g. M o r e ov e r d e p r e c i at i o n " a l l o w e d " t o t he a s s e s s ee c a n n o t b e re a d so a s t o m e a n t h at a l l o w e d a f t e r ha v i n g b e e n c l a i m e d by t h e a s s e s s e e . E x p l an a t i o n 5 t o s e ct i o n 3 2 ( 1) ,which de a l s with allowability of d ep r e c i at i o n , s t a te s d e p r e c i a ti o n wi l l b e a l l o w e d a s pe r t h e p r o v i s i o n o f s e c ti on 3 2 w h e t he r o r no t t h e a s s e s se e h a s c l a i m e d t h e d e d u c t i o n w h i l e co m p u t i n g i t s i n c o m e . The r e f o r e a c t u al c l a i m b y t h e a s s e s s e e i s n o t re q u i r e d ev e n b y s t a t u t e fo r a l l o w in g i t .
34. W e , t h e r e fo r e , ho l d t h a t t he c ap i t a l g a i n e a r n ed o n c o m p u l s o r y a c qu i s i t i o n o f t h e p r o p e r t y h a s b ee n r i g h t l y h e l d t o b e S h or t Te r m C a p i t a l Ga i n a n d h a s b een c o r r e c t l y 19 c o m p u t e d a t R s.5 6 , 5 0 , 2 9 0/ - a f ter d e n y i n g t h e i nd e x a t i o n o n t h e c o s t o f t h e ac q u i s i t i on .
Ground N o. 3 ra i s e d by the as s e s s e e is, t h ere f o r e , d i s m i s s e d.
3 5 . G r o u n d N o. 4 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"4. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) in not allowing deduction under section 54F/54D of the Income Tax Act, 1961. The same is very much allowable in the eyes of law."
36. Th e a b o v e g r o u nd w a s n o t p r es se d b e f o r e u s and i s , t h e r e f o r e, d i s mi ss e d a s n ot p r e s se d . I n ef f e c t , t he a p p e a l o f t h e a s s e ss e e s tan d s p a r t l y a l l o w ed .
37. I n t h e r e s u l t , th e a p p ea l o f t he a s s e ss e e i s pa r t l y allowed.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 13 t h October, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh