Mr Nasim Akhtar Ansari, v. The I T O 3 (1),

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.406/IND/2008 A.Y.2005-06 INCOME TAX OFFICER 3(1) BHOPAL APPELLANT VS NASEEM AKHTAR ANSARI BHOPAL PAN AARPA 4565G RESPONDENT ITA NO.435/IND/2008 A.Y.2005-06 NASEEM AKHTAR ANSARI BHOPAL APPELLANT VS INCOME TAX OFFICER 3(1) BHOPAL RESPONDENT DEPARTMENT BY : SHRI P.K. MITRA ASSESSEE BY : SHRI SHABBIR BAKSHI AND SHRI RAJU SONPAR O R D E R PER JOGINDER SINGH JUDICIAL MEMBER 2 THESE ARE CROSS APPEALS BY THE REVENUE AS WELL AS B Y THE ASSESSEE AGAINST THE DECISION OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) DATED 30.6.2008. THE REVENUE (ITA NO . 406/IND/2008) HAS CHALLENGED THE DELETION OF ADDITION OF RS.50 00 628/- MADE WITH REGARD TO CAPITAL GAINS ON SALE OF AGRICULTURAL LAN D SITUATED WITHIN 8 KMS FROM THE MUNICIPAL LIMITS. DURING HEARING OF THIS APPEAL THE LEARNED SHRI P.K. MITRA INVITED OUR ATTENTION TO PAGE 4 OF THE ASSESSMENT ORDER EVIDENCING THAT NOTICE U/S 142(1) OF THE ACT DATED 10.9.2007 WAS ISSUED TO THE ASSESSEE TO CLARIFY THE POSITION OF MUNICIPA L LIMIT FOR CAPITAL GAIN APPLICABILITY. OUR ATTENTION WAS ALSO INVITED TO L AST PARA OF PAGE 3 OF THE IMPUGNED ORDER WHEREIN THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE IMPUGNED ADDITION. IT WAS ST RONGLY ASSERTED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE THAT THE MUNICIPAL LIMIT IS 8 KMS FROM BHOPAL MUNICIPALITY AND NOT THREE KMS AS CLAIMED BY THE ASSESSEE. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSEE DECLARED NET INCOME OF RS.40 365 /- ALONG WITH AGRICULTURAL INCOME OF RS. 34 000/-. DURING THE RE LEVANT PERIOD THE ASSESSEE SOLD HIS AGRICULTURAL LAND AND CLAIMED THA T THE ASSESSEE IS NOT LIABLE TO CAPITAL GAINS TAX SINCE THE LAND IS SITUA TED BEYOND THE LIMIT PRESCRIBED U/S 2(14) OF THE ACT. DURING THE ASSESS MENT PROCEEDINGS THE 3 LEARNED ASSESSING OFFICER ISSUED NOTICE U/S 142(1) POINTING OUT TO THE ASSESSEE THAT THE LAND IN QUESTION IS SITUATED WITH IN 8 KMS FROM THE MUNICIPAL LIMIT THEREFORE IT HAS TO BE TAXED FOR THE PURPOSES OF CAPITAL GAINS. HOWEVER THE ASSESSEE ON THE BASIS OF NOTIF ICATION PUBLISHED IN ITR (EDN. 205 OF 1994) AND DIRECT TAX CIRCULAR PUBL ISHED BY TAXMAN (2003) WHEREIN THE PRESCRIBED LIMIT WAS 3 KMS AND N OT 8 KMS AS CLAIMED BY THE ASSESSING OFFICER PLEADED THAT THE PRESCRIB ED LIMIT IS 3 KMS FOR BHOPAL CITY. WHILE FRAMING THE ASSESSMENT U/S 143(3 ) OF THE ACT THE CLAIM OF THE ASSESSEE WAS REJECTED AND THE IMPUGNED ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DECIDED IN FAV OUR OF THE ASSESSEE BY HOLDING THAT VIDE CIRCULAR NO. 9447 ISS UED BY CBDT DATED 6.1.1994 (ITR 205) OF 1994 AND THE CIRCULAR PUBLISH ED BY TAXMAN IN 2003 THE PRESCRIBED LIMIT IS 3 KMS ON THE PLEA THA T THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE LIMIT PRESCRIBED U /S 2(14) IS 3 KM. THE AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 3. UNDER THE AFOREMENTIONED FACTS NOW THE QUESTION ARISES AS TO WHETHER THE LIMIT IS 3 KMS OR 8 KMS ? BEFORE COMING TO ANY CONCLUSION IT IS PERTINENT TO MENTION HERE THAT BEFORE THE ASSESS MENT IS FRAMED U/S 143(3) NOTICE U/S 142(1) WAS ISSUED TO THE ASSESSEE WHEREIN IT WAS SPECIFICALLY POINTED OUT THAT THE PRESCRIBED LIMIT IS 8 KM AND NOT 3 KM. 4 STILL THE ASSESSEE CLAIMED THAT THE LIMIT IS 3 KM. THE RELEVANT SECTION 2(14)(III) OF THE ACT IS REPRODUCED HEREUNDER :- IN THIS ACT UNLESS THE CONTEXT OTHERWISE REQUIRES ( 14 ) CAPITAL ASSET MEANS PROPERTY 42 OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION BUT DOES NOT INCLUDE III ) AGRICULTURAL LAND 46 IN INDIA NOT BEING LAND SITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICT ION OF A MUNICIPALITY 46 (WHETHER KNOWN AS A MUNICIPALITY MUNICIPAL CORPORATION NOTIFIED AREA COMMITTEE TOWN AREA COM MITTEE TOWN COMMITTEE OR BY ANY OTHER NAME) OR A CANTONME NT BOARD AND WHICH HAS A POPULATION 46 OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ; OR ( B )IN ANY AREA WITHIN SUCH DISTANCE NOT BEING MORE T HAN EIGHT KILOMETRES FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM ( A ) AS THE CENTRAL GOVERNMENT MAY HAVING REGARD TO THE EXTENT OF AND SCOPE FOR URBA NISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE 47 ;] IF THE LANGUAGE USED IN THE AFORESAID RELEVANT SECT ION IS ANALYSED IT SPECIALLY CLARIFIES THE DISTANCE OF 8 KM FROM THE M UNICIPAL LIMIT/CANTONMENT BOARD OR AS THE CASE MAY BE. IT I S NOT THE CASE THAT THE ASSESSEE IS A LAYMAN AND HE IS WELL ADVISED BY THE LEGAL EXPERTS AND ESPECIALLY WHEN NOTICE U/S 142(1) WAS ISSUED TO THE ASSESSEE MENTIONING THAT THE PRESCRIBED LIMIT IS 8 KM AND NO T 3 KM AS HAS BEEN CLAIMED STILL THE ASSESSEE INSISTED THAT THE PRESC RIBED LIMIT IS 3 KMS FROM THE MUNICIPALITY. IF NO NOTICE (AS DISCUSSED ABOVE) WOULD HAVE BEEN 5 GIVEN TO THE ASSESSEE THEN REASONABLY THE CLAIM OF THE ASSESSEE WOULD HAVE BEEN JUSTIFIED AS DUE TO PRINTING ERROR THE DI STANCE WAS WRONGLY PRINTED AS 3 KMS FOR THE CITY OF BHOPAL. WE HAVE AL SO PERUSED NOTIFICATION NO. 9447 DATED 6 TH JANUARY 1994 WHEREIN FOR THE PURPOSES OF AGRICULTURAL INCOME AND CAPITAL GAINS THE COPIES O F THE GAZETTE NOTIFICATIONS WERE MADE AVAILABLE TO THE PUBLIC ON 13 TH FEBRUARY 1991 WHEREIN AT PAGE 16 FOR THE CITIES OF MADHYA PRADESH THE DISTANCE HAS BEEN MENTIONED AS 8 KMS FROM MUNICIPAL LIMITS IN AL L DIRECTIONS FOR THE CITY OF BHOPAL. WHEN THIS NOTIFICATION WAS BROUGHT TO THE NOTICE OF THE LD. COUNSEL FOR THE ASSESSEE HE MERELY STATED THAT ON THE BASIS OF NOTIFICATION HE REASONABLY PRESUMED THAT THE LIMIT WAS 3 KMS. WHAT IT MAY BE IN VIEW OF THE CLEAR LANGUAGE USED IN SECTI ON (REPRODUCED ABOVE) THIS GROUND OF THE REVENUE IS ALLOWED THERE FORE ON THIS ISSUE THE STAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS REVERSED. 4. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE (ITA NO. 435/IND/2008). GROUND NOS.1 & 3 ARE GENERAL IN NATU RE WHEREIN ONLY PARTLY CONFIRMATION OF THE RELIEF HAS BEEN CHALLENG ED. THE ONLY GROUND ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE PERTAINS TO UPHOLDING THE ASSESSMENT ORDER TO THE EXTENT OF GIFT RECEIVED BY THE ASSESSEE IGNORING THE RELATIONS WITHOUT CONSIDERATION OF SEC. 56(2)(V ) OF THE ACT. DURING HEARING OF THIS APPEAL THE LD. COUNSEL FOR THE ASS ESSEE INVITED OUR 6 ATTENTION TO PROVISO TO SEC. 56(2)(V) AND PLACED RE LIANCE UPON THE DECISION IN CHANDRAKANT H. SHAH VS. ITO (2009) 28 SOT 315 (MUM) BY FURTHER SUBMITTING THAT THE ASSESSEE RECEIVED THE G IFT FROM SON OF HIS SISTER. PLEA WAS ALSO RAISED THAT ADEQUATE CONSIDER ATION HAS BEEN DELIBERATED UPON IN THE CASE OF CHANDRAKANT H. SHAH VS. ITO (SUPRA). ON THE OTHER HAND THE LD. SR. DR INVITED OUR ATTEN TION TO PARA 8 OF THE ASSESSMENT ORDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED TO HAVE RECEIVED GIFT OF RS.6 50 000/- FROM HIS SISTERS SON AND CLAIMED THE SAME EXEMPT U/S 56(2)( V) OF THE ACT. THE LD. ASSESSING OFFICER VIDE NOTICE U/S 142(1) DATED 10.9 .2007 ASKED THE ASSESSEE AS TO WHY THE AMOUNT OF GIFT BE NOT ADDED TO THE TOTAL INCOME AS THE SISTERS SON IS NOT INCLUDED IN THE DEFINITI ON OF THE RELATIVE TO WHICH THE ASSESSEE VIDE LETTER 15.11.2007 CLAIMED AS UNDE R: AS PER CLAUSE (IN VIEW OF THESE FACTS ) OF THE EXPLANATION OF THE SAID PROVISO BROTHER OR SISTER O F EITHER OF THE PARENTS OF THE INDIVIDUAL HAS BEEN INCLUDED AS RELATIVE WHICH MEANS THAT NEPHEW/NIECE CAN RECEIVE GIFT FROM HIS/HER UNCLE OR AUNT AND IS NOT TAXABLE IN THEIR HANDS. IN OTHER WORDS THE RELATION SHIP AS ABOVE IS TERMED AS RELATIVE. HOWEVER TO EXCLUDE THE NEPHEW/NIECE GIVING GIFT TO THE SAME UNCLE OR A UNT WHICH IS ALSO A RELATIVE IN ACTUAL SENSE JUST BECA USE IT IS NOT SPECIFICALLY DEFINED UNDER THE SAID PROVISO. 7 THE LD. ASSESSING OFFICER VIDE PARA 8 OF THE ASSESS MENT ORDER HELD AS UNDER: 8. THE REPLY OF THE ASSESSEE HAS NO FORCE AND IS N OT TENABLE IN VIEW OF THE PROVISO OF SECTION 56(2). TH E DEFINITION OF RELATIVE IS EXHAUSTIVE AND THE SON OR DAUGHTER OF BROTHERS OR SISTERS OF THE ASSESSEE HAS NOT BEEN INCLUDED IN THE DEFINITION OF RELATIVE. THEREF ORE THE GIFT FROM NEPHEW (BHANJA) IS TAXABLE U/S 56(2) AS INCOME FROM OTHER SOURCES. AS REGARDS THE CLAIM ON ACCOUNT OF CONSIDERATION OF CARING THE RELATIVES OF THE DONOR THE SAME CANNOT BE ACCEPTED AS CONSIDERATION . THE WORD CONSIDERATION IN THE ACT CONNOTS MONETARY CONSIDERATION OR CONSIDERATION WHICH CAN BE QUANTIF IED IN TERMS OF MONEY. IN THE CASE OF CIT VS. P.M. PAIL Y PILLAI (86 ITR 516) THE HONBLE KERALA HIGH COURT HELD THAT THE CONSIDERATION MEANS IN THE SENSE IN WHICH IT IS UNDERSTOOD IN AGREEMENT ENFORCEABLE AT LAW. IN THIS CASE THE ASSESSEE HAS USED A VAGUE DEFINITION OF CONSIDERATION WHICH IS NOT APPLICABLE FOR THE PURPO SE OF SECTION 56(2). I THEREFORE ADD THE AMOUNT OF RS.6 .50 LACS RECEIVED FROM SHRI MOHD. ASNEN U/S 56(2) OF TH E INCOMETAX ACT AS INCOME FROM OTHER SOURCES. PENALTY PROCEEDINGS U/S 271(1) OF THE INCOMETAX ACT 1961 ARE INITIATED. 6. ON APPEAL THE LD. CIT(A) HELD THAT THE DONOR IS NOT RELATIVE AS SUCH THERE IS NO INFIRMITY IN THE ASSESSMENT ORDER AND DISMISSED THE APPEAL OF THE ASSESSEE WHICH IS UNDER CHALLENGE BEF ORE US. 7. BEFORE COMING TO ANY CONCLUSION WE ARE REPRODUC ING HEREUNDER THE RELEVANT PROVISION OF THE ACT AS PROVIDED U/S 5 6: INCOME FROM OTHER SOURCES. 91 56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLU DED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES IF IT I S NOT CHARGEABLE TO 8 INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITEMS A TO E. (2) IN PARTICULAR AND WITHOUT PREJUDICE TO THE GEN ERALITY OF THE PROVISIONS OF SUB-SECTION (1) THE FOLLOWING INCOME S SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FRO M OTHER SOURCES NAMELY : .. 97 [( V ) WHERE ANY SUM OF MONEY EXCEEDING TWENTY-FIVE THOUSAND RUPEES IS RECEIVED WITHOUT CONSIDERATION B Y AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY FROM ANY PER SON ON OR AFTER THE 1ST DAY OF SEPTEMBER 2004 98 [BUT BEFORE THE 1ST DAY OF APRIL 2006] THE WHOLE OF SUCH SUM : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SU M OF MONEY RECEIVED ( A ) FROM ANY RELATIVE; OR ( B ) ON THE OCCASION OF THE MARRIAGE OF THE INDIVIDUAL ; OR ( C ) UNDER A WILL OR BY WAY OF INHERITANCE; OR ( D ) IN CONTEMPLATION OF DEATH OF THE PAYER; OR 99 [( E ) FROM ANY LOCAL AUTHORITY AS DEFINED IN THE EXPLANATION TO CLAUSE ( 20 ) OF SECTION 10 ; OR ( F )FROM ANY FUND OR FOUNDATION OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTIO N OR ANY TRUST OR INSTITUTION REFERRED TO IN CLAUSE ( 23C ) OF SECTION 10 ; OR ( G ) FROM ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA .] EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE RELATIVE MEANS ( I ) SPOUSE OF THE INDIVIDUAL; ( II ) BROTHER OR SISTER OF THE INDIVIDUAL; ( III )BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUAL; ( IV ) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; ( V ) ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVID UAL; ( VI ) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOUSE OF THE INDIVIDUAL; ( VII ) SPOUSE OF THE PERSON REFERRED TO IN CLAUSES ( II ) TO ( VI );] IT IS CLEAR FROM CLAUSE (V) OF SUB-SECTION 2 OF SEC . 56 THAT ANY MONEY RECEIVED EXCEEDING RS.25 000/- WITHOUT CONSIDERATIO N FROM ANY PERSON 9 OTHER THAN RELATIVE AS DEFINED IN THE EXPLANATION W ILL NOT BE INCLUDIBLE IN INCOME FROM OTHER SOURCES. IN THE AFORESAID SECTION THE MEANING OF THE WORD RELATIVE HAS BEEN EXPLAINED THROUGH EXPLANAT ION AND IF THE SAME IS ANALYSED THE SISTERS SON HAS NOT BEEN INCLUDED FOR THE PURPOSES OF EXEMPTION. ON A QUERY FROM THE BENCH REGARDING NON- INCLUSION OF THE DONOR (SISTERS SON) IT WAS PLEADED BY THE LD. COU NSEL FOR THE ASSESSEE THAT THE GIFT WAS MADE BY THE DONOR DUE TO CONSIDER ATION AS THE FAMILY WAS OBLIGED TOWARDS THE ASSISTANCE PROVIDED BY THE ASSESSEE DURING THEIR LIFETIME THEREFORE THE GIFT SHOULD BE ALLOW ED. THE LD. COUNSEL FOR THE ASSESSEE WITH THE HELP OF THE CASE OF CHANDRAKA NT H. SHAH VS. ITO (SUPRA) EXPLAINED THE TERM ADEQUATE CONSIDERATION . WE ARE NOT IN AGREEMENT WITH THIS ASSERTION OF THE ASSESSEE BECAU SE THE WORD ADEQUATE CONSIDERATION IN THAT PARTICULAR CASE HA S BEEN USED IN DIFFERENT CONTEXT/PURSUANT TO APPLICABILITY OF SEC. 16(3)(B). DURING HEARING THE LD. COUNSEL FOR THE ASSESSEE PLEADED T HAT SINCE THE FATHER OF THE DONOR EXPIRED EARLY AND THE ASSESSEE HELPED HIS SISTER AND OTHER FAMILY MEMBERS THEREFORE THE DONOR WANTED TO GIVE GIFT TO THE DONEE. WHAT MAY BE THE REASONS WE ARE OF THE VIEW THAT NA TURAL LOVE & AFFECTION OR ANY HELP DURING WORST DAYS CANNOT BE M EASURED IN TERMS OF MONEY. AT THE SAME TIME SINCE THE PARLIAMENT IN IT S WISDOM HAS NOT INCLUDED SISTERS SON SPECIFICALLY IN THE LIST OF R ELATIVES FOR THIS PURPOSES THEREFORE THE APPEAL CANNOT BE DECIDED ON EMOTIONA L/PASSIONATE 10 ASSERTION ESPECIALLY WHEN THE LANGUAGE USED IN THE RELEVANT SECTION IS VERY PLAIN AND CLEAR THEREFORE WE HAVE NOT NOTICE D ANY INFIRMITY IN THE STAND TAKEN BY THE LD. CIT(A). CONSEQUENTLY IT WA S RIGHTLY ADDED AS INCOME FROM OTHER SOURCES THEREFORE THIS GROUND O F THE APPEAL OF THE ASSESSEE IS HAVING NO MERIT CONSEQUENTLY DISMISSE D. FINALLY THE APPEAL OF THE REVENUE IS ALLOWED AND THAT OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 7.2.2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH FEBRUARY 2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE DN/-