Shri Shailesh Jayantilal Jogani Surat v. The Acit Circle 6 Surat

1 In The Income Tax Appellate Tribunal C Bench Ahmedabad Before Honble Shri T K Sharma Judicia L Member And Honble Shri D C Agrawal Accountant Member Ita No 967 Ahd 2007 Assessment Year 2004 2005 Assistant Commissioner Of Income Tax Circle 8 Surat Versus Shri Shailesh Jayantilal Jogani Surat Pan Abnpj 1522 E Appellant Respondent A N D C O No 100 Ahd 2007 Arising Out Of I T A No 967 Ahd 2007 Assessment Year 2004 2005 Shri Shailesh Jayantilal Jogani Surat Versus Assistant Commissioner Of Income Tax Circle 8 Surat Cross Objector Respondent For The Assessee N O N E For The Department Shri M C Pandit Sr D R Order Per T K Sharma Judicial Member This Appeal By The Revenue And Cross Objection By The Assessee Are Against The Order Dat Ed 22 12 2006 Of Ld Commissioner Of Income Tax Appeals Iv Surat For The Assessment Year 2004 05 2 The Only Ground Raised By The Revenue In Its App Eal Is As Under On The Facts And In The Circumstances Of The Case And In Law The Ld C I T A Has Erred In Directing The Assess Ing Officer To Tax The Amount Of Compensation Of Rs 11 64 675 Re Ceived On Account Of Sale Of Flat Under The Head Capital Gai Ns 3 In This Case Notice Of Hearing Was Sent Through Registered Post This Was Returned By The Postal Authorities With The Remarks Left In These Circumstances We Proceed To Decide The Appeal Of The Revenue And Cro Ss Objection Filed By The Assessee On Merit After Hearing The Ld Departmental Represe Ntative And Material Available On Record 4 The Brief Facts Relating To Controversy Involved In This Ground Of Appeal Are That The Assessee Is An Individual During The Cour Se Of Assessment Proceedings The A O Found That The Assessee Had Shown Sale Proceed S Of Rs 23 90 300 On Sale Of Flat 2 Ita No 967 Ahd 2007 Co No 100 Ahd 2007 Situated At Mumbai And Worked Out Long Term Capital Gain Of Rs 1 29 766 After Considering Cost Inflation Index The A O Asked Th E Assessee To Show Cause As To Why The Compensation Received From Kanakia Constructi On Pvt Ltd Should Not Be Treated As Income From Other Sources In Reply Befo Re The A O The Assessee Submitted That The Conditions For Chargeability Under The Hea D Of Capital Gains Under Section 45 1 Of The Income Tax Act 1961 Are Satisfied Th E A O Rejected The Explanation Of The Assessee Holding That Although There Was The Tr Ansfer Of The Capital Asset But The Transfer Was Limited Only To Rs 12 25 625 While Other Part Was Received From Compensation And Was In The Nature Of Income From O Ther Sources And Made An Addition Of Rs 11 64 675 5 On Appeal Before The Learned Commissioner Of Inc Ome Tax Appeals The Assessee Submitted That Transfer In Relation To A C Apital Asset As Defined In Section 2 47 Includes The Sale Exchange Or Relinquishment Of Th E Asset Or Extinguishment Of Any Right Thereof The Observation Of A O That The Amo Unt Received Over And Above The Refund Of Paid Amount Was Income From Other Sources Was Without Any Basis And The A O Contradicted His Own Statement That The Assess Ee Had Never Occupied The Flat Nor Had Ever Held The Ownership Or Possession Of The Fl At By Observing In The Order That There Was Transfer Of Asset Before The Learned Com Missioner Of Income Tax Appeals It Was Submitted That Notional Rent Fo R The Said Flat Was Added To The Income Of The Assessee In Earlier Two Assessment Ye Ars The Assessee Had Made Full Payment For The Flat And It Was Not An Advance Whic H Was Given To The Builder For Allotment Of The Flat On Refund Of Which The Build Er Would Give Interest Also After Considering The Various Submissions In The Impugne D Order The Learned Commissioner Of Income Tax Appeals Directed The A O To Tax The Entire Amount Under The Head Capital Gains The Detailed Reason Ing Of The Learned Commissioner Of Income Tax Appeals Is Contained In Page 2 Of Th E Impugned Order Which Reads As Under I Have Considered The Submissions And Gone Through The Various Documents Filed Before Me The A O Is Prob Ably Influenced By The Wordings Of The Agreement Between The Buil D Er And The Appellant Wherein The Appellant Requeste D The Builder To Cancel The Said Allotment And A Refund O F The Amount Paid For Purchase Of Such Flat Along With The Appre Ciation In The Price Of The Flat In The Form Of Compensation T He Aos Observations That The Appellant Was Not The Owner O F The Flat Nor Was He In Possession Thereof Is Not Borne By Th E 3 Ita No 967 Ahd 2007 Co No 100 Ahd 2007 Documentary Evidence It Is Seen That Addition On Ac Count Of Income From The Said Flat Was Made At Rs 82 500 I N A Y 2002 03 And 2003 04 Which Was Also Confirmed By The C I T A In A Y 2002 03 Thereby Strengthening App Ellants Arguments That He Was In Possession Of The Said Pro Perty I Agree With The Id Ar That The Entire Confusion Has Arisen Because The Property Was Sold Back To The Builder F Rom Whom It Was Purchased Had It Been Sold To A Third Party O Bviously The Flat Would Not Have Been Sold At The Price At Which It Was Purchased In View Of Huge Increase In The Real Esta Te Prices Therefore The So Called Compensation Is Nothing Bu T Profit Arising Out Of Such Sale Consideration As Per Sec 2 47 Of The I T Act The Transfer Of Properly Also Includes Exti Nguishment Of Any Right Therein And In The Instant Case The Appe Llant Has Extinguished His Rights In Favour Of The Builder An D Received Profits In The Form Of Compensation It Is Also See N That The Appellant Has To Pay Society Which Supports The Cla Im Of The Appellant That The Flat Was In His Possession And T Hat He Had Paid The Total Price For Allotment Of Such Flat I Do Not Agree With The A O S Views That The Compensation Receive D By The Appellant Is In The Nature Of Notional Interest Sin Ce Interest Would Be Paid In Respect Of An Advance Or A Loan Wh Ich Is Not The Fact In The Instant Case In View Thereof I Am Of The Considered View That The A O S Action In Treating The Said Compensation As Income From Other Sources Is Not In Order And The Entire Amount Is To Be Taxed Under The Head Ca Pital Gains 6 At The Time Of Hearing On Behalf Of Revenue Shr I M C Pandit Sr D R Appeared And Contended That The Learned Commissione R Of Income Tax Appeals Has Not Appreciated The Fact That The Entire Transactio N On Sale Of Flat Has Been Done Without Any Registration With Local Authority And P Ayment Of Stamp Duty To The Government The Ld D R Further Submitted That As Per Conveyance Deed The Amount Of Rs 11 64 675 On Account Of Compensation Receiv Ed By The Assessee Is Over And Above The Purchase Amount Of Rs 12 25 625 In Resp Ect Of Full Value Of Consideration The Compensation Amount Did Not Form Part Of Full V Alue Of Consideration Because Sale Of Flat Has Been Done Without Any Registration With Local Authority And Payment Of Stamp Duty To The Government 7 Having Heard The Ld Departmental Representative We Have Carefully Gone Through The Orders Of Authorities Below Transfer I N Relation To A Capital Asset As Defined In Section 2 47 Included The Sale Exchang E Or Relinquishment Of The Asset Or Extinguishment Of Any Right Thereof The Observation Of The A O That The Appe Llant Was Not Owner Of The Flat Nor He Was In Possession Thereof Is Not Borne By The 4 Ita No 967 Ahd 2007 Co No 100 Ahd 2007 Documentary Evidence Because Income From The Said Flat The A O Taxed The Income Under The Head Income From House Property At Rs 8 2 500 In The Assessment Years 2002 03 And 2003 04 This Addition Was Confirmed By The Learned Commissioner Of Income Tax Appeals Thereby Strengthening The Asses Sees Argument That Said Property Was In His Possession He Can Let Out Use D Or Sale The Said Property In These Circumstances In Our Opinion The Learned Commissi Oner Of Income Tax Appeals Has Given Cogent Reason For Holding That Extra Amou Nt Received By The Assessee Is Taxable Under The Head Capital Gains We Therefo Re Decline To Interfere 8 The Only Ground Raised In The Cross Objection Fi Led By The Assessee Is That The Learned Commissioner Of Income Tax Appeals Has Rig Htly Deleted The Addition Of Rs 11 64 675 On The Point Of Income From Other So Urces 9 In View Of Our Decision In Revenues Appeal The Cross Objection Filed By The Assessee Is Rendered Infructuous Therefore The Sa Me Is Dismissed 10 In The Result The Appeal Filed By The Revenue As Well As The Cross Objection Filed By The Assessee Are Dismissed This Order Is Pronounced In Open Court On 22 Nd January 2010 Sd Sd D C Agrawal T K Sharma Accountant Member Jud Icial Member Dated 22 01 2010 Copy Of The Order Is Forwarded To 1 The Appellant 2 The Respondent 3 The Cit A Concerned 4 The Cit 5 The Dr Ahmedabad Bench 6 The Guard File By Order True Copy Asstt Registrar Deputy Registrar Itat Ahmedabad Benches Ahmedabad Laha Sr P S