Sri Banda Reddy Pingali, Hyderabad v. ITO, Hyderabad

ITA 587/HYD/2009 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 58722514 RSA 2009
Assessee PAN ALIPP7187J
Bench Hyderabad
Appeal Number ITA 587/HYD/2009
Duration Of Justice 1 year(s) 8 month(s) 22 day(s)
Appellant Sri Banda Reddy Pingali, Hyderabad
Respondent ITO, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 22-12-2010
Next Hearing Date 22-12-2010
Assessment Year 2004-2005
Appeal Filed On 29-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMB ER ITA NO.587/HYD/09 : ASST. YEAR: 2004-05 SRI BANDA REDDY PINGALI HYDERABAD. (PAN: ALIPP 7187 J) VS INCOME-TAX OFFICER WARD-7(1) HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.P. RAMASWAMY RESPONDENT BY : SMT. VASUNDHARA SINHA O R D E R PER AKBER BASHA ACCOUNTANT MEM BER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME-TAX DATED 24-3-2009 AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS BEFORE US: 1. THE ORDER U/S 263 PASSED BY THE CIT-6 HYDERABAD ON 14-3-09 IS ERRONEOUS BOTH IN LAW AND IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 2 2. THE CIT OUGHT NOT TO HAVE DOUBTED THE EXPLANATION OFFERED BY THE APPELLANT CONCERNING THE INVESTMENT IN BONDS OUT O F THE SALE CONSIDERATION RECEIVED BY HIM FROM THE VENDEES. 3. THE CIT WAS VERY MUCH INCORRECT IN HOLDING THAT THE CAPI TAL GAIN ARISING OUT OF THE TRANSACTION OF SALE OF PROPERTY UNDER CONSIDERATION IS LIABLE TO BE ASSESSED FOR THE ASSESSMENT YEAR 2005-06 INSTEAD OF FOR THE ASSESSMENT YEAR 2004-05 WHICH IS UNDER CONSIDERATION. 4. THE CIT IS NOT CORRECT IN COMING TO THE CONCLUSION THAT T HE PHYSICAL POSSESSION OF THE PROPERTY WAS ACTUALLY DELIVERED TO THE VENDEES ON 30-11-2004 SIMPLY BECAUSE OF CALUSE-3 OF T HE SALE DEED. 5. THE CIT FAILED TO APPRECIATE THE CONTENTS OF THE LETTE R DT. 12-9- 2003 WRITTEN BY THE APPELLANT TO THE VENDEES WHEREIN IT WAS SPECIFICALLY STATED THAT IMMEDIATELY ON PAYMENT OF THE ENTIRE SALE CONSIDERATION OF RS.84 20 000 BY 31-10-2003 HIS BRO THER P. TIRUPATHI REDDY WHO IS THE APPELLANTS GPA HOLDER WOULD RELINQUISH MY RIGHTS IN THE PROPERTY IN FAVOUR OF TH E VENDEES. 6. THE CIT WAS INCORRECT IN COMING TO THE CONCLUSION THAT TH E BONDS ACQUIRED BY HIM WERE NOT OUT OF THE SALE CONSIDERA TION. 7. THERE WAS NO JUSTIFICATION OR REASON FOR THE CIT TO DRA W AN INFERENCE THAT THE PHYSICAL POSSESSION OF THE PROPERTY WA S NOT DELIVERED TO THE VENDEES IMMEDIATELY ON RECEIPT OF FU LL PAYMENT OF SALE CONSIDERATION. 8. THE ORDER U/S 263 IS BASED COMPLETELY ON PRESUMPTIONS AN D PROBABILITIES BUT NOT ON THE BASIS OF ANY FACTS AND A S SUCH THE CIT WAS NOT JUSTIFIED IN BASING HIS CONCLUSION ON THE PR OBABLE ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 3 EVENTS STATED BY HIM IN PARA 3.7 OF HIS ORDER UNDER SE CTION 263 OF THE ACT. 9. THE CIT WAS NOT JUSTIFIED IN HOLDING THAT THERE WAS NO N APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT IS NOT CORRECT INASMUCH AS THIS ISSUE HAS CROPPED UP EVEN DURING THE ASSESSMENT PROCEEDINGS AND COPY OF SALE DEEDS EXECUTED ON 30-8-2004 WERE FURNISHED TO THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THEY WERE COMPLETELY EXAMINED BY THE ASSESSING OFFICER BE FORE COMPLETION OF THE ASSESSMENT. 10. THE CIT FAILED TO CONSIDER THE FACT THAT THE APPELLANT APPLIED FOR BONDS ON 31-10-2003 ITSELF ENCLOSING THE CHEQUES IN F AVOR OF RURAL ELECTRIFICATION CORPORATION LIMITED AND THE BONDS WERE ISSUED ON 3-11-2003 ON WHICH DATE THE CHEQUES WERE CLEARE D ON APPELLANTS BANK ACCOUNT. 11. ANY OTHER GROUND OR GROUNDS THAT SHALL BE URGED A T THE TIME OF APPEAL HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIV IDUAL FILED HIS RETURN OF INCOME ON 15-10-2004 ADMITTING TO TAL INCOME OF RS.1 75 830/-. THE CASE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT UNDER SECTION 143(3) O N 20-9- 2006 BY ACCEPTING THE INCOME RETURNED AND ALLOWING THE CLAIM OF EXEMPTION UNDER SECTION 545EC OF THE ACT IN RESPECT OF D ISCLOSED CAPITAL GAINS OF RS.84 20 000/-. THE CIT EXAMINED THE RECORDS F OR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE CASE OF THE ASSESSEE AND FOUND THAT THE ASSESSMENT ORDER UNDER SECTION 143(3) DATE D 20-9-2006 TO BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE INVOKING ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 4 THE PROVISIONS OF SECTION 263 OF THE ACT AND CIT ACCORDING LY ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE SETTING OUT THE GROUND OF PROP OSED REVISION. THE CIT AFTER DISCUSSING THE ISSUE ELABORATELY IN HIS ORDER DIRECTED THE ASSESSING OFFICER TO ASCERTAIN THE CORRECT MARK ET VALUE OF THE PROPERTY ON THE DATE OF TRANSFER WITHIN THE MEAN ING OF SECTION 50C OF THE ACT THAT IS FROM THE OFFICE OF THE SUB-REGISTRAR AND HE FURTHER DIRECTED TO EXAMINE THE CITY BANK ACCOUNTS OF THE VENDE ES OF THE PROPERTY IN QUESTION TO ASCERTAIN AS TO WHETHER THE AMO UNTS IN THE ASSESSEES ACCOUNT RS.84 20 000 DID COME FROM THE SAID ACCOUNT. IN THE LIGHT OF THE ABOVE HE SET ASIDE THE SAID ASSESSMENT WITH A DIRECTION TO THE ASSESSING OFFICER TO REDO THE SAME IN THE LIGHT O F THE FINDINGS OBSERVATIONS AND DIRECTIONS GIVEN IN HIS ORDER. AGGRIEVE D AGAINST THE DECISION OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ORDER UNDER SECTION 263 PASSED BY THE CIT IS ERRONEOUS B OTH IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CIT OUG HT NOT TO HAVE DOUBTED THE EXPLANATION OFFERED BY THE ASSESSEE CONCERNI NG THE INVESTMENT IN BONDS OUT OF THE SALE CONSIDERATION RECEIVE D BY HIM FROM THE VENDEES. IT IS FURTHER CONTENDED THAT THE CIT WAS I NCORRECT IN HOLDING THAT THE CAPITAL GAIN ARISING OUT OF THE TRA NSACTION OF SALE OF PROPERTY UNDER CONSIDERATION IS LIABLE TO BE ASSESSED FOR THE ASSESSMENT YEAR 2005-06 INSTEAD OF FOR THE ASSESSMENT YEAR 2004-05 WHICH IS UNDER CONSIDERATION AND THE CIT IS NOT JUSTIFIED IN CO MING TO THE CONCLUSION THAT THE PHYSICAL POSSESSION OF THE PROPERTY WAS A CTUALLY DELIVERED TO THE VENDEES ON 30-11-2004 ONLY BASED ON THE CALUSE-3 OF THE SALE DEED. IT IS FURTHER CONTENDED THAT THE CIT F AILED TO APPRECIATE THE CONTENTS OF THE LETTER DATED 12-9-2003 WRITTEN BY THE ASSESSEE TO ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 5 THE VENDEES WHEREIN IT WAS SPECIFICALLY STATED THAT IM MEDIATELY ON PAYMENT OF THE ENTIRE SALE CONSIDERATION OF RS.84 20 00 0/- BY 31-10- 2003 HIS BROTHER P. TIRUPATHI REDDY WHO IS THE ASSESSEE S GPA HOLDER WOULD RELINQUISH THE ASSESSEES RIGHTS IN THE PROPERTY IN FAVOUR OF THE VENDEES. IT IS FURTHER CONTENDED THAT THE CIT WAS INCO RRECT IN COMING TO THE CONCLUSION THAT THE BONDS ACQUIRED WERE NOT OUT OF T HE SALE CONSIDERATION AND THERE WAS NO JUSTIFICATION OR REASON FO R THE CIT TO DRAW AN INFERENCE THAT THE PHYSICAL POSSESSION OF THE PRO PERTY WAS NOT DELIVERED TO THE VENDEES IMMEDIATELY ON RECEIPT OF FU LL PAYMENT OF SALE CONSIDERATION AND THE ORDER OF THE CIT UNDER SECTION 26 3 IS BASED COMPLETELY ON PRESUMPTIONS AND PROBABILITIES BUT NOT ON THE BASIS OF ANY FACTS. THE CIT WAS NOT JUSTIFIED IN BASING HIS CONCLUSION ON THE PROBABLE EVENTS STATED BY HIM IN PARA 3.7 OF HIS ORDER UNDER SECT ION 263 OF THE ACT. IT IS SUBMITTED THAT THE CIT WAS NOT JUSTIFIED IN H OLDING THAT THERE WAS NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT IS NOT CORRECT INASMUCH AS THIS ISSUE HA S CROPPED UP EVEN DURING THE ASSESSMENT PROCEEDINGS AND COPY OF SALE DEEDS EXECUTED ON 30-8-2004 WERE FURNISHED TO THE ASSESSI NG OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THEY WERE COMPLETEL Y EXAMINED BY THE ASSESSING OFFICER BEFORE COMPLETION OF THE ASSESSMEN T AND THE CIT FAILED TO CONSIDER THE FACT THAT THE ASSESSEE APPLIED FOR BONDS ON 31-10-2003 ITSELF ENCLOSING THE CHEQUES IN FAVOR OF RURA L ELECTRIFICATION CORPORATION LIMITED AND THE BONDS WERE ISSUED ON 3-11- 2003 ON WHICH DATE THE CHEQUES WERE CLEARED ON ASSESSEES BANK ACCOUNT. HE RELIED ON THE CIRCULAR NO. 359 DATED 10-5-1983 FOR THE PROPO SITION THAT IF THE ASSESSEE INVESTS THE EARNEST MONEY OR THE ADVANCE RECEIVED I N SPECIFIED ASSETS BEFORE THE DATE OF TRANSFER OF ASSET THE AMOUNT S O INVESTED WILL ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 6 QUALIFY FOR EXEMPTION UNDER SECTION 54E OF THE ACT. HE RELIED VARIOUS DECISIONS OF THE TRIBUNAL IN SUPPORT OF HIS CONTENTIONS. 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE WHILE RELYING ON THE ORDER OF THE CIT SUBMITTED THAT THE LETTER RELIED UPON BY THE ASSESSEE DATED 12.09.2003 IS ONLY A COLORABL E DEVICE IN WHICH IT IS STATED THAT IMMEDIATELY ON PAYMENT THE ASSE SSEES BROTHER WAS TO EXTINGUISH THE ASSESSEES RIGHTS IN THE PROPERTY ON HIS BEHALF AND THE TRANSFER HAD ACTUALLY TAKEN PLACE IN AUGUST 2004 A ND HENCE THE CAPITAL GAIN WOULD FALL FOR CONSIDERATION FOR TAXATION ONLY FOR THE ASSESSMENT YEAR 2005-06 AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE THE CIT HAS RIGHTLY INVOKED JURISD ICTION UNDER SECTION 263 OF THE ACT IN THE CASE OF ASSESSEE. HE RELIED ON THE DECISION OF ADVANCE RULING AUTHORITY IN THE CASE OF AN URAG JAIN REPORTED IN 277 ITR 01 FOR THE PROPOSITION THAT THE CAPITAL GA INS IS TO BE TREATED AS THE INCOME OF THE PREVIOUS YEAR IN WHICH TRANSFER TO OK PLACE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ORIGINAL ASSESSMENT WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 143( 3) OF THE ACT. WHILE MAKING THE SAID ASSESSMENT IT APPEARS TH AT THE ASSESSING OFFICER CALLED FOR SOME DETAILS AND THE ASSESSEE IN TURN SUBMITTED THE SAID DETAILS ALONG WITH THE COPY OF SALE D EED EXECUTED ON 30-8-2004 TO THE ASSESSING OFFICER. IT APPEARS THAT THE A SSESSING OFFICER EXAMINED THE SAID DOCUMENT BEFORE COMPLETING THE ASSESSMEN T IN QUESTION. IN OUR OPINION WHEN THE ASSESSING OFFICER HAS PASSED AN ORDER AFTER CONDUCTING NECESSARY ENQUIRIES AND DUE APPLIC ATION OF MIND THE CIT CANNOT ASSUME HIS JURISDICTION TO REVISE SUCH AN OR DER SIMPLY ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 7 BECAUSE THE CIT WANTED ENQUIRIES TO BE CONDUCTED IN A PA RTICULAR MANNER OR THE CIT WAS OF THE OPINION THAT SOME OR MOR E ENQUIRIES NEEDED TO BE CONDUCTED. WE FIND THAT AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THE ASSESSING OFFICER APPLIED HIS MI ND AND WAS SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE AN D THE ASSESSING OFFICER HAS TAKEN A VIEW THAT THE CAPITAL GAIN UNDER D ISCUSSION ARISING ON THE TRANSFER OF THE PROPERTY IS IN FACT ASSESSABLE TO T AX ONLY IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE ASSESSING OFFICER AL LOWED THE EXEMPTIONS IN THAT REGARD. IT IS TRUE THAT THE ASSESSING OFFICER HAS NOT INCORPORATED THE FACTS IN DETAIL IN HIS ORDER BUT THAT WOULD NOT MEAN THAT THERE HAD BEEN NO APPLICATION OF MIND BY HIM. WE FIND THAT THE CIT FORMED THE VIEW THAT THE CAPITAL GAINS UNDER DISCUSS ION IS ASSESSABLE ONLY FOR THE ASSESSMENT YEAR 2005-06 ONLY ON THE BASIS OF THE COLUMN 3 OF THE SALE DEED EXECUTED BETWEEN THE A SSESSEE AND THE VENDEE. IN OUR OPINION THE SALE DEEDS ARE DRAFTED ON ROUTINE MANNER BY DOCUMENT WRITERS INCORPORATING GENERAL CLAUSES LIKE DELI VERY OF PROPERTY ETC. WITHOUT EVEN GOING TO THE ACTUAL ASPECT OF THE DA TE OF DELIVERY OF THE PROPERTY. IN THE CASE UNDER CONSIDERATION THE LEAR NED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED THROUGH A LETTER ISSUED B Y THE VENDEE THAT ON RECEIPT OF ENTIRE AMOUNT OF SALE CONSIDERATION THE VENDOR DISTINGUISHED HIS RIGHTS IN THE PROPERTY TO THE BUYER A ND ONLY THE REGULAR CONVEYANCE DEED HAS BEEN EXECUTED IN FAVOR OF THE BUYER AS PER THE BUYERS CONVENIENCE IN THE LATER DATE. THE LEARNED COUN SEL FOR THE ASSESSEE ALSO FILED AN AFFIDAVIT FROM THE PRESENT GPA HOL DER OF THE PROPERTY I.E. THE PURCHASER OF THE SAID PROPERTY STATI NG THAT THE SELLER HANDED OVER THE PHYSICAL POSSESSION OF THE PROPERTY TO TH E BUYER IMMEDIATELY ON PAYMENT OF SALE CONSIDERATION I.E. IN THE MONTH OF OCTOBER 2003 AND ALSO HE AFFIRMED THAT SINCE THE ASPECT OF TAKING THE ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 8 POSSESSION OF THE PROPERTY IN OCTOBER 2003 WAS NOT BROU GHT TO THE NOTICE OF THE DOCUMENT WRITER SPECIFICALLY THE DOCUMENT WRITER MENTIONED IN COLUMN-3 OF THE SALE DEED THAT THE POSSESSIO N OF THE PROPERTY WAS DELIVERED ON THE DATE OF EXECUTION OF TH E DEED IN A ROUTINE MANNER. WE ARE CONVINCED WITH THE EXPLANATION OFFER ED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DELIVERY OF PHYSICAL POSSE SSION OF THE PROPERTY TO THE VENDEE WAS DONE ONLY IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY THE CAPITAL GAIN IN QUESTION SHALL BE TAXABLE ONLY FOR THE ASSESSMENT YEAR 2004-05 AND HENCE EXEMPTION AVAILABLE UNDER SECTION 54EC OF THE A CT IN RESPECT OF CAPITAL GAINS ALSO FALLS IN THE ASSESSMENT YEAR 2004-05 ONL Y. THERE IS NO JUSTIFICATION ON THE PART OF THE CIT TO DRAW AN INFER ENCE THAT PHYSICAL POSSESSION OF THE PROPERTY WAS NOT DELIVERED TO THE VEND EES IMMEDIATELY ON RECEIPT OF PAYMENT. THE ENTIRE ORDER PASSED BY THE CIT UNDER SECTION 263 IS BASED ON PURELY PRESUMPTIONS AND CONJ ECTURES AND NOT BASED ON ANY MATERIAL FACTS EXCEPT RELYING ON THE SA LE DEED WHICH WAS PREPARED BY THE DOCUMENT WRITER IN A ROUTINE MANN ER. EVEN THE CIT FAILED TO CONSIDER THE FACT THAT THE ASSESSEE APPLIED REC BONDS ON 31-10-2003 ITSELF WHICH WAS EVIDENCED BY PRODUCING A COPY OF CHEQUE ISSUED BY THE ASSESSEE TO THE REC LIMITED AND THE BONDS A RE ISSUED TO THE ASSESSEE ON 3-11-2003 ON WHICH DATE THE CHEQUES WERE CL EARED FROM THE ASSESSEES BANK ACCOUNT. IN OUR CONSIDERED VIEW T HE DEPARTMENT CANNOT BE PERMITTED TO BEGIN A FRESH LITIG ATION BECAUSE OF NEW VIEWS AND IT IS QUITE CLEAR IN THE CASE UNDER CONSIDE RATION THAT THE CIT HAS REALLY MADE AN EFFORT TO CAUSE A ROUTINE ENQUI RY WITH REGARD TO THE MATTER THAT HAD BEEN ALREADY CONCLUDED ON THE TH INKING THAT AS IT APPEARS HE HAS AUTHORITY TO BEGIN A FRESH LITIGATION BECAUSE OF THE NEW VIEW ENTERTAINED BY HIM. THE AFORESAID APPROACH IS N OT PERMISSIBLE ITA NO. 587/HYD/20 09 BANDA REDDY PINGAL HYD. ================== = 9 UNDER SECTION 263 OF THE ACT. IN VIEW OF THE ABOVE W E CANCEL THE ORDER OF COMMISSIONER OF INCOME TAX AND RESTORE THAT OF THE A SSESSING OFFICER. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 21-01-2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 21-01-2011. COPY FORWARDED TO: 1. BANDA REDDY PINGALI 10-2-289/73 SHANTI NAGAR HYDERABAD. 2. 3. 4.. 5. JMR* INCOME-TAX OFFICAER WARD-7(1) 2 ND FLOOR VB- BLOCK IT TOWERS AC GUARDS HYDERABAD. CIT-VI AP HYDERABAD. THE DR ITAT HYDERABAD.