Shri Vedprakash Devikinandan Chiripal, Ahmedabad v. The Addl.CIT.,Range-11,, Ahmedabad

ITA 838/AHD/2013 | 2008-2009
Pronouncement Date: 21-10-2016 | Result: Allowed

Appeal Details

RSA Number 83820514 RSA 2013
Assessee PAN AAHPC2102Q
Bench Ahmedabad
Appeal Number ITA 838/AHD/2013
Duration Of Justice 3 year(s) 6 month(s) 30 day(s)
Appellant Shri Vedprakash Devikinandan Chiripal, Ahmedabad
Respondent The Addl.CIT.,Range-11,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 21-10-2016
Date Of Final Hearing 19-10-2016
Next Hearing Date 19-10-2016
Assessment Year 2008-2009
Appeal Filed On 22-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER ./ ITA.NO.838/AHD/2013 / ASSTT. YEAR: 2008-2009 VEDPRAKASH DEVIKINANDAN CHIRIPAL 283 CHIRIPAL NEW CLOTH MARKET OPP: RAPUR GATE AHMEDABAD. PAN : AAHPC 2102 Q VS ADCIT RANGE-11 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI P.M.MEHTA REVENUE BY : MS.ANITA HARDASANI SR.DR / DATE OF HEARING : 19/10/2016 / DATE OF PRONOUNCEMENT: 21/10/2016 $%/ O R D E R PER RAJPAL YADAV JUDICIAL MEMBER PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE A SSESSEE AGAINST THE ORDER OF THE LD.CIT(A)-XVI AHMEDABAD DATED 16.1.20 13 PASSED FOR THE ASSTT.YEAR 2008-09. 2. SOLITARY SUBSTANTIAL GRIEVANCE OF THE ASSESSEE I S THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING ADDITION OF RS.54 75 000/- WHILE COMPUTING SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. ITA NO.838/AHD/2013 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 27.9.2008 DECLARING TOTAL INCOME AT RS.37 65 870/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT A ND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE OF HEARING THE ASSESSEE APPEARED AND SUBMITTED REQUIS ITE DETAILS AS CALLED FOR. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE WAS OWNER AND IN POSSESSION OF AGRICULTURE LAND BEARING SURVE Y NOS.278 TO 280 ON 1.9.2006. THE ASSESSEE HAD ENTERED INTO AN AGREEME NT WITH SHRI PRAMUKHBHAI AND OTHERS TO SELL THIS LAND ON 4.6.2007. THEREAFT ER PROSPECTIVE VENDEE I.E. PRAMUKHBHAI AND OTHERS HAD IDENTIFIED ANOTHER BUYER NAMELY SHRI AMALBHAI AND OTHERS AND AN AGREEMENT TO SELL WAS ENTERED IN TO WITH THEM BY PRAMUKHBHAI. THE LAND WAS ULTIMATELY SOLD ON 16.6.2 007 AND THE SALE CONSIDERATION STATED IN THE SALE DEED WAS OF RS.63 LAKHS. WHILE COMPUTING THE CAPITAL GAIN THE ASSESSEE HAS TAKEN SALE CONSI DERATION AT RS.8 25 000/- WHICH WAS MENTIONED IN THE AGREEMENT DATED 4.6.2007 . THE AO HARBOURED A BELIEF THAT HOW A PERSON CAN SELL HIS VALUABLE RIGH TS WITHIN A PERIOD OF 12 DAYS WITHOUT REALIZING FULL CONSIDERATION. ACCORDINGLY AFTER ELABORATE DISCUSSION THE LD.AO ASSUMED THAT THE SALE CONSIDERATION WHICH OUGHT TO HAVE BEEN RECEIVED BY THE ASSESSEE SHOULD BE AT RS.63 LAKHS AND HE ACCORDINGLY COMPUTED CAPITAL GAIN. 4. DISSATISFIED WITH THIS ASSESSMENT ORDER THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A). BUT THE LD.CIT(A) CONCURRED WITH THE AO AND UPHELD THE COMPUTATION OF CAPITAL GAIN MADE BY THE AO. 5. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDERS OF THE REVENUE AUTHORITIES RAISED THREE FOLD SUBMISSIONS. HE POINTED OUT THAT THE AO HAS NOT DOUBTED GENUINENESS OF THE TRANSACTION. ULTIMATE BUYER OF THE LAND IS NOT RELATED TO THE ASSESSEE IN ANY MANNER. SIMILARLY PROSPECTIVE ITA NO.838/AHD/2013 3 VENDEES BY VIRTUE OF AGREEMENT DATED 4.6.2007 HAVE FILED THEIR RETURN AND PAID TAXES ON THE DIFFERENTIAL AMOUNT OF I.E. RS.54 75 0 00/-. THE VALUE OF THE LAND FOR THE PURPOSE OF STAMP DUTY VALUATION WAS NOT MOR E THAN RS.8.25 LAKHS. HE POINTED OUT THAT EXPRESSION FULL CONSIDERATION EM PLOYED IN SECTION 48 OF THE INCOME TAX ACT FOR THE PURPOSE OF COMPUTATION OF CA PITAL GAIN CAN ONLY BE REPLACED WITH THE HELP OF DEEMING PROVISION PROVIDE D IN SECTION 50C. EXCEPT THESE TWO PROVISIONS THERE IS NO OTHER PROVISION I N THE INCOME TAX ACT WHICH AUTHORIZE THE AO TO REPLACE FULL VALUE OF CON SIDERATION APART FROM THE ABOVE HE POINTED OUT THAT SECOND SITUATION WHEN T HE AO CAN REPLACE THIS CONSIDERATION DISCLOSED BY THE ASSESSEE IS THAT THE AO IS ABLE TO LAY HIS HAND ON ANY MATERIAL DEMONSTRATING THE FACT THAT THE ASS ESSEE HAD ACTUALLY RECEIVED SOMETHING MORE THAN THE ONE STATED IN THE ALLEGED D OCUMENT FOR RELINQUISHMENT OF RIGHTS OR IN THE COMPUTATION MADE FOR THE CAPITAL GAIN. THE AO NOWHERE ALLEGED THAT THE ASSESSEE HAS RECEIVED S OMETHING MORE THAN RS.8.25 LAKHS. THE CASE OF THE REVENUE IS THAT IF THE ULTIMATE BUYER HAS PURCHASED THE LAND FOR A SUM OF RS.63 LAKHS THEN THE ASSESSEE SHOULD HAVE RECEIVED THIS AMOUNT. EXCEPT THIS ASSUMPTION OR IN FERENCE THERE IS NO CONCRETE MATERIAL ON THE RECORD POSSESSED BY THE RE VENUE AUTHORITIES. ON THE STRENGTH OF HONBLE SUPREME COURT DECISION IN THE C ASE OF CIT VS. GEORGE HENDERSON & CO. LTD. 66 ITR 622 HE CONTENDED THA T EXPRESSION FULL VALUE OF CONSIDERATION EMPLOYED IN SECTION 48 OF THE INC OME TAX ACT DOES NOT MEAN THE MARKET VALUE OF THE ASSET TRANSFERRED BUT THE PRICE BARGAINED FOR BY THE PARTIES TO THE SALE. THUS FULL VALUE FOR CONS IDERATION MEANS ACTUAL RECEIPT OF CONSIDERATION RECEIVED BY THE ASSESSEE. HE ALSO RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. GILLANDERS ARBUTHNOT & CO. 87 ITR 407. HE POINTED OUT THAT THESE JUDGMENT S HAVE BEEN FOLLOWED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. GAURANGINIBEN S. SHODHAN REPORTED IN 367 ITR 238. THE LD.COUNSEL F OR THE ASSESSEE TOOK US THROUGH THE ORDER OF THE LD.CIT(A) AND POINTED OUT HOW THE LD.CIT(A) HAS ITA NO.838/AHD/2013 4 FAILED TO APPRECIATE THE PROVISION OF CONTRACT ACT AS WELL AS SPECIFIC RELIEF ACT. ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE ONE OF THE REASONS ASSIGNED BY THE LD.FIRST APPELLATE AUTHORITY IN PARA 4.4 ON PAGE NO.11 OF THE ORDER IS THAT IN AGREEMENT TO SELL DATED 4.62007 IT HAS NOT BEEN PROVIDED THAT PROSPECTIVE VENDEE WOULD FURTHER ASSIGN RIGHTS ACCR UED BY VIRTUE OF THIS AGREEMENT TO HIS NOMINEES OR ANY OTHER PERSONS. A CCORDING TO THE LD.COUNSEL FOR THE ASSESSEE WHEN AN AGREEMENT TO SELL IN RESP ECT OF IMMOVABLE PROPERTY IS EXECUTED A RIGHT IN PERSONAM IS CREATED IN FAVOUR OF THE VENDEE AND SUCH RIGHT WOULD RESTRICT THE VENDOR FROM RESELLING THE SAID PROPERTY SOMEONE ELSE BECAUSE THE VENDEE GETS A LEGITIMATE RIGHT TO ENFOR CE A SPECIFIC PERFORMANCE OF THE AGREEMENT. THUS THERE CANNOT BE ANY REQUIREME NT BY LAW OR EVEN IMPLIEDLY TO TAKE PERMISSION FOR ASSIGNMENT OF THOS E RIGHTS AND IF ANY ONE HAS ANY GRIEVANCE THEN IT IS THE ULTIMATE BUYER QUA PROSPECTIVE VENDEE BY VIRTUE OF AGREEMENT DATED 16.6.2007. THERE CANNOT BE ANY GRIEVANCE TO THE ASSESSEE BECAUSE THE ASSESSEE HAS ALREADY EXECUTED AGREEMENT AND RELINQUISHED HIS RIGHT BY WAY OF AGREEMENT DATED 4. 6.2007 WHICH CAN BE ENFORCED BY WAY OF A SUIT FOR SPECIFIC RELIEF. IN ANY CASE INCOME TAX DEPARTMENT CAN HAVE NO OBJECTION ON THE TRANSACTION S WHICH ARE PERFORMED IN ACCORDANCE WITH THE PROVISION OF LAW. SIMILARLY H E POINTED OUT OTHER ERRORS COMMITTED BY THE LD.CIT(A) WHILE APPRECIATING THE F ACTS. 6. THE LD.DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE REVENUE AUTHORITIES. SHE TOOK US THROUGH THE FINDING OF TH E LD.CIT(A) RECORDED IN PARA 4.5 OF PAGE NO.17. ON THE STRENGTH OF HONBLE SUPR EME COURT DECISION IN THE CASE OF JAIN BROS. VS. UNION OF INDIA REPORTED IN 77 ITR 107 HER CONTENTION IS THAT EVEN IF A THIRD PARTY HAS PAID TAX THEN TH AT DOES NOT ABSOLVE THE ASSESSEE FOR REQUIRING TO PAY LEGITIMATE DUE OF TAX ES. ASSESSEE HAS TO PAY HIS TAX ACCORDING TO HIS OBLIGATIONS WHICH CANNOT BE D ISCHARGED BY A THIRD PERSON. ACCORDING TO HER EVEN IF THE VENDEE BY V IRTUE OF AGREEMENT DATED ITA NO.838/AHD/2013 5 16.6.2007 HAS PAID TAXES ON THE DIFFERENTIAL AMOUNT OF RS.54 75 000/- THE ASSESSEE CANNOT BE ABSOLVED FROM THE PAYMENT OF TAX . 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 48 PROVIDES MODE OF COMPUTATION OF CAPITAL GAIN. THIS SECTION CONTEMPLATES THAT INCOME CHARGEABLE UNDER T HE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF CO NSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER THE AMOUNTS VIZ. (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER AND (II) THE COST OF ACQUISITION ASSET AND THE COST OF ANY IMPROVEMENT T HERETO. SUB-SECTION (1) OF SECTION 50C CONTEMPLATES THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED BY AN AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY VALUATION IN RESPECT OF SUCH TRANSFER THEN VALUE SO ADOPTED WOU LD BE DEEMED TO BE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRU ING TO THE ASSESSEE. IN OTHER WORDS THE AO WILL BE AUTHORIZED TO REPLACE T HE ALLEGED SALE CONSIDERATION BY THE VALUE ON WHICH STAMP DUTY WAS PAID WHILE COMPUTING THE CAPITAL GAIN. APART FROM THIS SECTION THERE IS NO THING PROVIDED IN THE ACT WHICH CAN AUTHORIZE THE AO TO REPLACE THE ACTUAL SA LE CONSIDERATION DISCLOSED BY THE ASSESSEE. OTHER PERIPHERAL CONSIDERATIONS V IZ. IF THE AO WAS POSSESSING CONCRETE MATERIAL EXHIBITING RECEIPT OF MORE AMOUNT THAN THE ACTUAL SALE CONSIDERATION WITH THE HELP OF THAT MA TERIAL AN INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAS RECEIVED ACTUALLY MORE CONSIDERATION THAN THE ONE STATED IN THE SALE DEED OR TAKEN IN THE COMPUTATION FOR THE PURPOSE OF PAYMENT OF CAPITAL GAIN TAX. IT HAS NOT BEEN DISPUTED BEF ORE US THAT SALE CONSIDERATION MENTIONED IN THE AGREEMENT AT RS.8.25 LAKHS IS MORE THAN THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY FOR THE PURP OSE OF PAYMENT OF STAMP DUTY. THEREFORE SECTION 50C CANNOT BE INVOKED. I F THE SECTION 50C CANNOT BE ITA NO.838/AHD/2013 6 INVOKED THEN OTHER MODE IS THAT THE MATERIAL COLL ECTED BY THE AO TO DEMONSTRATE THAT THE ASSESSEE HAS RECEIVED MORE THA N THE ONE STATED IN THE COMPUTATION. ON PERUSAL OF THE RECORD WE FIND THA T THE AO WAS UNABLE TO LAY HIS HAND ON ANY OTHER MATERIAL. HE HAS DRAWN HIS I NFERENCE ON THE BASIS OF HUMAN PROBABILITIES THAT HOW SOMEBODY WOULD NOT TRY TO RECEIVE CONSIDERATION OF HIS VALUABLE LAND EQUIVALENT TO TH E MARKET RATE. WHY THE ASSESSEE WOULD AGREE TO SELL THE LAND IN A TIME GAP OF 12 DAYS ONLY WHEREBY HE HAS TO SACRIFICE A SUM OF RS.54 70 000/-. WE MA Y NOT BE IN A POSITION TO DISPEL THIS INFERENCE ON THE BASIS OF HUMAN PROBABI LITIES BUT THE SUSPICION CANNOT TAKE PLACE THE POSITION OF EVIDENCE. THE AO HAS TO COLLECT THE EVIDENCE IN SUPPORT OF HIS SUSPICION. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF GEORGE HENDERSON (SUPRA) THAT EXPRES SION FULL VALUE OF THE CONSIDERATION DOES NOT MEAN THE MARKET VALUE OF TH E ASSET. IT IS THE PRICE BARGAINED FOR BY THE PARTIES. THERE WAS ALWAYS LIT IGATION AND DEPARTMENT HAD SUSPICION LIKE THE ONE IN THE PRESENT CASE THAT IS THE REASON SECTION 50C WAS BROUGHT IN THE INCOME TAX ACT. WITH THE HELP OF TH IS SECTION THIS FULL VALUE OF CONSIDERATION CAN BE REPLACED. BUT THIS PROVISI ON IS ALSO NOT APPLICABLE IN THE PRESENT CASE. ON WHAT BASIS THE LD.AO CAN DRA W AN INFERENCE THAT THE SUM OF RS.63 LAKHS WAS THE FULL VALUE OF CONSIDERATION IN THE HANDS OF THE ASSESSEE. APART FROM THE ABOVE INTERMEDIARIES HAVE ALREADY MADE PAYMENT OF TAX FOR THE DIFFERENTIAL AMOUNT AND THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF PWS ENGINEERS LTD VS. CIT TAX APPEAL NO.209 OF 2015 HAS OBSERVED THAT THERE SHOULD NOT BE ANY DOUBLE TAXATION ON THE SAME AMOUNT. THE OBSERVATION MADE BY THE HONBLE HIGH COURT IN 6 REA DS AS UNDER: 6. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. THE QUESTION OF APPLICABILITY OF SECTION 40A(2) OF THE ACT TO THE R ESTRICTED DISALLOWANCE OF RS. 47 90 178/- IS ALREADY CONCLUDED BY THIS COU RT BY THE SAID ORDER DATED 31.3.2015. WE MAY THEREFORE PROCEED ON THAT BASIS. DESPITE THIS THE QUESTION THAT STILL SURVIVES IS WHETHER THE REV ENUE CAN TAX THE SAME INCOME IN THE HANDS OF THE COMPANY ON WHICH THE DIR ECTORS HAD ITA NO.838/AHD/2013 7 ALREADY PAID THE TAX AT THE SAME RATE AT WHICH THE COMPANY WOULD HAVE BEEN LIABLE TO BE ASSESSED. IN THIS CONTEXT WE MAY RECALL THAT CONSISTENTLY BEFORE ASSESSING OFFICER CIT(APPEALS) AND TRIBUNAL THE ASSESSEE HAD CANVASSED THAT ALL THE FOUR DIRECTORS WHO HAD RECEIVED SUCH REMUNERATION WERE TAXED IN THE HIGHEST BRACKE T OF 30%; AT THE SAME RATE AT WHICH THE ASSESSEE COMPANY AT THE RELE VANT TIME WAS ASSESSED. IN FACT THE ASSESSEE HAD DEMONSTRATED BE FORE CIT(APPEALS) THAT THE TAX LIABILITY OF THE COMPANY ON SUCH DISPU TED REMUNERATION AMOUNT WAS EXACTLY THE SAME AS THE TAX THE FOUR DIR ECTORS HAD PAID TO THE REVENUE. TO THESE FACTUAL ASPECTS EVEN THE REV ENUE HAS AT NO STAGE RAISED ANY DISPUTE. WE MAY THEREFORE PROCEED ON THE BASIS THAT THE ELEMENT OF EXCESSIVE REMUNERATION REPRESENTS TH AT INCOME OF THE COMPANY WHICH WAS EVENTUALLY TAXED IN THE HANDS OF THE DIRECTORS AT THE SAME RATE AT WHICH; HAD IT NOT BEEN SO DISTRIBU TED; WOULD HAVE BEEN TAXED IN THE HANDS OF THE COMPANY. IN THAT VIEW OF THE MATTER THE QUESTION OF REVENUE NEUTRALITY WOULD IMMEDIATELY AR ISE. A CERTAIN INCOME HAS ALREADY BEEN TAXED IN THE HANDS OF THE D IRECTORS. PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RATE IN THE HANDS OF THE PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION. ONLY ON THIS COUNT WE ANSWER QUESTION IN FAVOUR OF THE APPELLANT- ASSESSEE AND AGAINST REVENUE ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE TRIBUNAL. THE TAX APPEAL IS DISPOSED OF ACCO RDINGLY. 8. TAKING INTO CONSIDERATION ALL THESE FACTS AND CI RCUMSTANCES WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED WHILE CONFIRMING THE ADDITION OF RS.54 75 000/-. WE ALLOW THIS GROUND OF APPEAL AND DELETE ADDITION. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER 2016 AT AHMEDABAD. SD/- SD/- ( PRADIP KUMAR KEDIA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 21/10/2016