ITO 22(2)-1, NAVI MUMBAI v. DEVANAND CHATURVEDI, MUMBAI

ITA 6343/MUM/2009 | 2006-2007
Pronouncement Date: 28-09-2011 | Result: Dismissed

Appeal Details

RSA Number 634319914 RSA 2009
Assessee PAN ABPCT8871A
Bench Mumbai
Appeal Number ITA 6343/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 19 day(s)
Appellant ITO 22(2)-1, NAVI MUMBAI
Respondent DEVANAND CHATURVEDI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 28-09-2011
Date Of Final Hearing 21-09-2011
Next Hearing Date 21-09-2011
Assessment Year 2006-2007
Appeal Filed On 09-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOOD (A. M) ITA NO.6343/MUM/2009 (A.Y. 2006-07) THE ITO 22(2)1 MUMBAI ROOM NO.419 4 TH FLOOR TOWER NO.6 VASHI RLY. STATION COMPLEX VASHI NAVI MUMBAI 400 705 (APPELLANT) VS. SHRI DEVANAND CHATURVEDI 61 GREEN GARDEN APARTMENT ACHARYA NAGAR DEONAR MUMBAI 400 088 PAN: AABPCT 8871A (RESPONENT) APPELLANT BY : SHRI G.P.TRIVEDI RESPONDENT BY : SHRI PIYUSH CHATURVEDI DATE OF HEARING : 21/09/2011 DATE OF PRONOUNCEMENT : 28/09 /2011 ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORD ER DATED 23/9/2009 OF CIT(A)-33 MUMBAI RELATING TO ASSESSMENT YEAR 2006- 07. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 15 .57 LAKHS MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN FROM SALE OF PROPERTY WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS HOLDING 50% SHARE IN THE PROPERTY ALONG WITH HIS BROTHER AS PER SALE AGREEMENT AND BOTH THE OWNERS HAVE ENTERED IN TO SALE AGREEMENT WITH T HE PURCHASER AND HENCE THE RESULTANT LONG TERM CAPITAL GAIN WAS TAXA BLE IN HIS HANDS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) FAILED TO APPRECIATE THE FACTS THAT THE ASSE SSING OFFICER HAS RIGHTLY TREATED THE GIFT AS AN INVALID GIFT SINCE G IFT DECLARATION WAS NOT REGISTERED WITH THE SUB-REGISTRAR AND AS PER TRANSF ER OF PROPERTY ACT THE GIFT WAS INCOMPLETE UNLESS THE OWNERSHIP / RI GHT OF THE PROPERTY IS TRANSFERRED FROM ONE PERSON TO ANOTHER. ITA NO.6343/MUM/2009 (A.Y. 2006-07) 2 2. THE FACTS AND CIRCUMSTANCES GIVING RISE TO THE P RESENT APPEAL BY THE REVENUE ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. HE IS A CHARTERED ACCOUNTANT BY PROFESSION. FOR ASSESSMENT YEAR 2006-07 HE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 3 87 969/-. IN THE C OURSE OF ASSESSMENT PROCEEDINGS THE AO ON THE BASIS OF ANNUAL INFORMATI ON REPORT CAME TO KNOW THAT THE ASSESSEE AND HIS BROTHER MR. N.K.CHATURVED I WERE THE JOINT OWNERS OF A PROPERTY AT KURLA MUMBAI AND HAD SOLD PART OF THE PROPERTY DURING THE PREVIOUS YEAR FOR A SALE CONSIDERATION OF RS.55.00 LACS. THE AO FURTHER NOTICED THAT THE ASSESSEE HAD NOT DECLARED LONG TER M CAPITAL GAINS ON SALE OF THE PROPERTY REPRESENTING HIS HALF SHARE. WHEN THE ASSESSEE WAS CONFRONTED WITH THE ABOVE FACTS THE ASSESSEE EXPLAINED THAT IT WAS TRUE THAT THE ASSESSEE HAD SOLD ALONGWITH HIS BROTHER MR. N.K.CHATURVEDI THE PROPERTY AT KURLA FOR A CONSIDERATION OF RS. 55 08 000/-. THE ASSESSE AL SO SUBMITTED THAT THE PROPERTY WAS JOINTLY PURCHASED IN THE NAME OF HIS B ROTHER MR. N.K.CHATURVEDI AND THE ASSESSEE. AT THE TIME OF PU RCHASE THE ASSESSEE HAD MADE A PAYMENT OF RS. 4 77 625/-. IT WAS FURTHER S UBMITTED THAT THE ASSESSEE WAS CONTENT WITH RECEIVING A SUM OF RS. 5. 00 LACS. THE ASSESSEE SUBMITTED THAT THERE WAS A FAMILY ARRANGEMENT WHERE BY IT WAS AGREED THAT THE ASSESSEE WILL GIVE UP HIS RIGHTS TO HIS SHARE O F THE PROPERTY THAT WAS SOLD AFTER RECEIVING THE AMOUNT WHICH WAS ACTUALLY GIVEN BY THE ASSESSEE AT THE TIME OF PURCHASE OF THE PROPERTY. IT WAS ALSO SUBM ITTED THAT THE FAMILY SETTLEMENT WAS ARRIVED AT SOMEWHERE IN APRIL 2005 A ND PURSUANT TO THE SAID FAMILY ARRANGEMENT ASSESSEE HAD GIVEN UP HIS SHARE OF RIGHT TITLE AND INTEREST OVER THE PROPERTY IN FAVOUR OF HIS BROTHER MR. N.K.CHATURVEDI. THE ASSESSEE ALSO SUBMITTED THAT MR. N.K.CHATURVEDI HA D DECLARED CAPITAL GAIN ON SALE OF THE PROPERPTY AFTER EXCLUDING THE SUM OF RS. 5.00 LACS RECEIVED BY THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE. IT WAS THUS ARGUED THAT THE CAPITAL GAIN IN QUESTION HAS ALREAD Y BEEN TAXED IN THE HANDS ITA NO.6343/MUM/2009 (A.Y. 2006-07) 3 OF MR. N.K.CHATURVEDI AND CANNOT BE AGAIN BROUGHT T O TAX IN THE HANDS OF THE ASSESSEE IN RESPECT OF THE HALF SHARE OF THE SA LE CONSIDERATION. 3. THE AO DID NOT ACCEPT THE PLEA OF THE ASSESSEE. ACCORDING TO HIM THE FAMILY ARRANGEMENT PLEADED BY THE ASSESSEE COULD NO T BE ACCEPTED BECAUSE THE ASSESSEES BROTHER N.K. CHATURVEDI HAS INCUR RED HEAVY LONG TERM CAPITAL LOSS IN THE SHARES AND THE LONG TERM CAPITA L GAIN ON SALE OF PROPERTY WAS SET OFF AGAINST CAPITAL LOSS ON SALE OF SHARES. ACCORDING TO THE AO IF THE ASSESSEE DID NOT HAVE ANY RIGHTS OVER THE PROPERTY BECAUSE OF THE FAMILY ARRANGEMENT THEN THERE WAS NO NEED TO SIGN THE INST RUMENT OF TRANSFER BY WHICH THE PROPERTY WAS SOLD. ACCORDING TO THE AO P URSUANT TO THE FAMILY ARRANGEMENT THERE WAS NO MUTUATION OF N.K.CHATURVED IS NAME AS OWNER OF THE PROPERTY IN PUBLIC DOCUMENTS MUNICIPAL OR OTHE R GOVERNMENT AUTHORITIES. ACCORDING TO THE AO THERE WAS NO VALI D TRANSFER OF ASSESSEES INTEREST OVER THE PROPERTY IN FAVOUR OF N.KCHATURVE DI. FOR THE ABOVE REASONS THE AO THAT THE ASSESSEE HAS DELIBERATELY AND WITH MALAFIDE INTENTION PREPARED A STORY AND EVADED THE TAX ON SALE OF PROP ERTY. THE AO HELD THAT THE ASSESSEE USED COLOURFUL DEVICE TO DEFRAUD THE R EVENUE. THE AO REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD. VS. CTO 1985 (154 ITR 148) AND HELD THAT TAX P LANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF L AW. ACCORDING TO HIM COLOURFUL DEVICES CANNOT BE PART OF TAX PLANNING AN D IT WAS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT WAS HONOU RABLE TO AVOID PAYMENT OF TAX BY RESORTING TO DUBIOUS METHOD. THE AO THEREFO RE BROUGHT CAPITAL GAIN PERTAINING THE ASSESSEES SHARE TO TAX AS FOLLOWS: ITA NO.6343/MUM/2009 (A.Y. 2006-07) 4 THE LTCG FROM SALE OF PROPERTY IS COMPUTED @ 50% SHARE OF PROPERTY SOLD I.E. .. RS.27 50 000/- LESS: INDEXED COST = 477625 X 497 .. RS. 11 92.8 62/- 199 LONG TERM CAPITAL GAIN .. RS.15 57 1381- =========== == ACCORDINGLY LTCG OF RS.15 57 1381- WAS ADDED TO TH E INCOME. 4. ON APPEAL BY THE ASSESSEE THE CIT(A) HELD THAT T HE ENTIRE CAPITAL GAIN HAD ALREADY BEEN TAXED IN THE HANDS OF THE ASSESSEE S BROTHER AND THEREFORE THERE WAS NO QUESTION OF TAX AVOIDANCE. THE CIT(A) ALSO HELD THAT THE FAMILY ARRANGEMENT PLEADED BY THE ASSESSEE WAS BONA FIDE AND THAT IT DOES NOT REQUIRE ANY REGISTRATION OR CONVEYANCE. THE CIT(A) ALSO HELD THAT THE AO HAS NOT HELD THAT THE DOCUMENTS SUBMITTED BY THE ASSESS EE WAS NOT GENUINE BUT PROCEEDED ONLY ON THE BASIS THAT SAME WAS NOT LEGAL . THE CIT(A) ALSO HELD THAT THE ASSESSEE SIGNED THE CONVEYANCE DEED TO GIV E A CLEAR TITLE TO THE PURCHASER AND THAT WILL NOT BE A GROUND TO HOLD THA T THE ASSESSEE HAD RIGHT TITLE OR CLAIM OVER THE PROPERTY. THE CIT(A) HELD ALSO THAT AS LAID DOWN IN SEVERAL JUDICIAL PRONOUNCEMENTS FAMILY ARRANGEMENTS ENTERED INTO FOR THE PURPOSE OF RESOLVING FAMILY DISPUTES WHICH IS VOLUN TARILY AND NOT INDUCED BY FRAUD COERCIVE OR UNDUE INFLUENCE DOES NOT REQUIR E REGISTRATION. IN THIS REGARD THE CIT(A) RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF KALE & OTHERS VS. DY.DIRECTOR OF CONSOLIDAT ION AIR 1976 SC 807. THE CIT(A) THEREFORE HELD THAT THE ACTION OF THE AO IN BRINING LONG TERM CAPITAL GAINS TO TAX IN RESPECT OF HALF SHARE IN TH E HANDS OF THE ASSESSEE WAS NOT PROPER AND THE SAME WAS DIRECTED TO BE DELETED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.6343/MUM/2009 (A.Y. 2006-07) 5 5. WE HAVE HEARD THE SUBMISSIONS OF THE LD. D.R WH O RELIED ON THE ORDER OF THE AO. WE ARE OF THE VIEW THAT THE ORDER OF TH E CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE TRANSFER GIVING RISE TO THE CAPITAL GAIN IN QUESTION HAD TAKEN PLACE ON 31/3/2006. THE INSTRUMENT OF TRANSF ER BY WHICH THE PROPERTY WAS SOLD IS NO DOUBT EXECUTED BY BOTH THE ASSESSEE AND HIS BROTHER N.K.CHATURVEDI. EVEN PRIOR TO THE SALE OF THE PROP ERTY AS EARLY IN APRIL 2005 THERE WAS A FAMILY ARRANGEMENT BETWEEN THE AS SESSEE AND HIS BROTHER N.K.CHATURVEDI. THE ASSESSEE AND N.K.CHATURVEDI W ERE SONS OF LATE SHRI B. N. CHATURVEDI. N.K.CHATURVEDI AND THE ASSESSEE WE RE OWNERS OF ONE HALF SHARE EACH OF THE RESIDENTIAL PROPERTY SITUATED AT 64 GREEN GARDEN APARTMENTS ACHARYA NAGAR DEONAR MUMBAI 400 088 (HEREINAFTER REFERRED AS SAID BUNGALOW NO 64). THIS IS PROPERTY WHICH WA S SOLD GIVING RAISE TO CAPITAL GAIN THE CHARGEABILITY OF WHICH IS IN DISPU TE IN THIS APPEAL. WHILE ACQUIRING THE SAID BUNGALOW N.K.CHATURVEDI HAD CONT RIBUTED RS. 5 67 625/- AND THE ASSESSEE HAD CONTRIBUTED RS 4 77 625/-. TH ERE WAS ANOTHER HOUSE IN THE SAME SOCIETY I.E. BUNGALOW NO.61 GREEN GARD EN APARTMENTS ACHARYA NAGAR DEONAR MUMBAI 400 088 WHICH IS OWNED BY MR . B.N. CHATURVEDI AND MRS. RAMAVATI CHATURVEDI JOINTLY WHO WERE THE PARENTS OF THE ASSESSEE AND MR.N.K.CHATURVEDI. MR.N.K.CHATURVEDI AS LEGAL HEIR HAD A SHARE IN BUNGALOW NO.61. PRIOR TO ACQUIRING BUNGALOW NO. 64 THE FAMILY CONSISTING OF THE ASSESSEE N.K.CHATURVEDI AND ANOTHER BROTHER AND THEIR FAMILY TOGETHER WITH THE PARENTS LIVED IN BUNGALOW NO. 61. HOWEVER AFTER ACQUISITION OF BUNGALOW NO. 64 N.K.CHATURVEDI WITH HIS FAMILY S HIFTED TO BUNGALOW NO. 64 WHEREAS THE ASSESSEE AND THE OTHER BROTHER MR. V IVEKANAND ALONG WITH THEIR FAMILY AND THE PARENTS CONTINUED TO RESIDE IN BUNGALOW NO. 6. SINCE N.K.CHATURVEDI WAS RESIDING AT 64 GREEN GARDEN APA RTMENTS ACHARYA NAGAR DEONAR MUMBAI 400 088 WHICH IS JOINTLY OWN ED BY HIM AND THE ASSESSEE AND SINCE THE ASSESSEE AND THE OTHER BROTH ER VIVEKANAND CHATURVEDI WERE RESIDING IN 61 GREEN GARDEN APARTM ENTS ACHARYA NAGAR ITA NO.6343/MUM/2009 (A.Y. 2006-07) 6 DEONAR MUMBAI 400 088 THE OTHER PROPERTY OWNED BY THE PARENTS IT WAS DECIDED AFTER DEATH OF THE PARENTS IT WAS DECIDED THAT THE ASSESSEE AND MR.N.K.CHATURVEDI WOULD REALIGN THEIR INTEREST IN THE TWO BUNGALOWS. IT WAS AGREED THAT THE ASSESSEE WILL GIVEN UP HIS RIGHTS O VER BUNGLOW NO.64 IN FAVOUR OF N.K.CHATURVEDI AND IN RETURN N.K.CHATURVE DI WOULD RETURN TO THE ASSESSEE THE PRINCIPAL AMOUNT CONTRIBUTED BY HIM OF RS. 4 77 625/-AT THE TIME OF PURCHASE OF THE PROPERTY. IN TURN N.K.CHAT URVEDI GAVE UP HIS RIGHTS OVER BUNGLOW NO.61 IN FAVOUR OF THE ASSESSEE SO THA T HE CAN CONTINUE TO RESIDE THERE WITHOUT ANY HASSLE WHATSOEVER. 6. THE ABOVE FAMILY ARRANGEMENT WAS ENTERED SOMETI ME PRIOR TO 11/4/2005 AND THESE FACTS HAVE BEEN AFFIRMED IN AN AFFIDAVIT DATED 11/4/2005 BY MR. N.K.CHATURVEDI. THE LAW IS WELL SETTLED THAT FAMIL Y ARRANGEMENT ENTERED INTO WITH A VIEW TO RESOLVE FAMILY DISPUTES WHICH IS BO NAFIDE VOLUNTARY AND NOT INDUCED BY FRAUD COERCION OR UNDUE INFLUENCE DOES NOT REQUIRE REGISTRATION. SUCH FAMILY ARRANGEMENTS BY ITSELF WOULD CONVEY RIG HT TITLE AND INTEREST IN IMMOVABLE PROPERTY WITHOUT ANY FURTHER REQUIREMENTS . THUS WHEN THE PROPERTY WAS SOLD ON 31/3/2006 THE ASSESSEE HAD NO RIGHT WHATSOEVER IN THE PROPERTY BUT WAS ENTITLED TO RECEIVE ONLY THE C ONTRIBUTION MADE BY HIM AT THE TIME OF PURCHASE OF THE PROPERTY. IN THE SALE D EED DATED 31/3/206 BY WHICH THE PROPERTY WAS SOLD THE FACT THAT THE ASSES SEE WAS PAID RS. 5.00 LACS (WHICH IS IN ACCORDANCE WITH THE FAMILY ARRANGEMENT ) IS DULY RECORDED. THOUGH THE SALE DEED DOES NOT REFER TO THE FAMILY A RRANGEMENT IT IS CLEAR FROM THE CIRCUMSTANCES THAT THE ASSESSEE RECEIVED O NLY RS. 5.00 LACS WHICH IS DULY RECORDED IN THE SALE DEED THAT THE FAMILY ARRANGEMENT HAD BEEN ACTED UPON. IT IS ALSO SEEN THAT MR. N.K.CHATURVED I HAD OFFERED THE ENTIRE CAPITAL GAIN ON SALE OF THE PROPERTY TO TAX AND HAS BEEN TAXED ON SUCH CAPITAL ITA NO.6343/MUM/2009 (A.Y. 2006-07) 7 GAIN. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW TH AT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THIS APPEAL BY THE REVENUE. 6. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 28 TH DAY OF SEPT. 2011. SD/- SD/- (T.R.SOOD ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 29TH SEPT.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RD BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.6343/MUM/2009 (A.Y. 2006-07) 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 21/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 22/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER