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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI M. BALAGANESH & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 27/10/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2011–12.
In its appeal, the assessee has raised the following grounds:–
“1. On the facts and in the circumstances of the case and as per the law, the addition of Rs. 10,98,500/- is unsustainable as the brother of the Appellant (Mr. Ashutosh Jhaveri) is treated as a full owner of the capital asset under Shri Sanjay Y. Jhaveri ITA no.3263/Mum./2022 consideration and the entire capital gains were brought to tax in his hands by the Revenue/Department which has been upheld by the Hon'ble ITAT vide order dated 24.06.2019 (ITA 5122/Mum/2016). Thus, the addition of Rs. 10,98,500/- as made in the hands of the Appellant may be deleted.
2. On the facts and in the circumstances of the case and as per the law, the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals) ["the learned Commissioner (Appeals)] erred in confirming the order of the learned assessing officer and consequently upholding the addition of Rs. 10,98,500/- for the year under consideration. Thus, the addition of Rs. 10,98,500/- may be deleted.
On the facts and in the circumstances of the case and as per the law, the learned Commissioner (Appeals) erred in deciding the appeal ex parte in violation of the principle of natural justice. Thus, the order dated 27.10.2022 may be set aside and the matter may be restored back to the file of the learned Commissioner (Appeals).
On the facts and in the circumstances of the case and s per the law, the order dated 27.10.2022 as passed by the learned Commissioner (Appeals) is bad in law since it dismisses the appeal on the reason of non-prosecution and does not adjudicate on the grounds/additional grounds of appeal
and the issues under consideration. The said order being in violation of the provisions of Section 250 and 251 of the Act and the decision of the Hon'ble jurisdictional Bombay High Court in "CIT vs. Premkumar Arjundas Luthra (HUF) [2016] 69 taxmann.com 407 (Bombay)" may be quashed.
5. The appellant craves leave to add, alter, rescind or amend any of the above grounds of appeal.”
3. The only grievance of the assessee is against the addition of Rs.10,98,500, as short-term capital gains in the hands of the assessee despite the fact that the entire capital gains have already been taxed in the hands of his brother.
4. The brief facts of the case are that the assessee is an individual and is working in the family-run business viz. M/s Sanjay Steel Company. For the year under consideration, the assessee did not file any return of income. The AIR information revealed property transactions of Rs. 1,25,00,000 and Rs. 1,23,05,500, and Rs. 85,76,500, for the year under consideration. Since in the absence of return of income, the source of property transactions was not Shri Sanjay Y. Jhaveri ITA no.3263/Mum./2022 evident, accordingly proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on 22/03/2018. During the proceedings under section 47 of the Act, the assessee was asked to furnish the deed of property transactions along with capital gain computations thereon. It was submitted by the assessee that the assessee along with Mr. Ashutosh Jhaveri and Mr. Virajlal Jhaveri, entered into an agreement with Ekta Supreme Housing on 24/02/2011, of purchase of Flat No.1405 in Lake Primerose for Rs. 85,76,500. Further, vide agreement dated 11/03/2011, assessee along with Mr. Virajlal Jhaveri and Mr. Ashutosh Jhaveri, sold the said property for Rs. 1,25,00,000. Since the property was not held by the assessee for more than 36 months, therefore, the assessee was asked to show cause as to why the said asset should not be treated as a short-term asset and taxed accordingly. In reply thereto, the assessee, inter-alia, submitted that since 100% addition was made in the case of Mr. Ashutosh Jhaveri, who is the brother of the assessee, hence addition should not be made in its case. The Assessing Officer vide order dated 28/12/2018, passed under section 143(3) r/w section 147 of the Act, made an addition of one-third of short-term capital gains in the hands of the assessee on the basis that Mr. Ashutosh Jhaveri has not accepted the assessment order and has filed appeal which is pending before the Tribunal.
5. In the appeal before the learned CIT(A), despite various notices being issued, there was neither any compliance on behalf of the assessee nor any reply/submission filed on behalf of the assessee. Accordingly, vide impugned ex–parte order dated 27/10/2022, the learned CIT(A) dismissed the appeal
Shri Sanjay Y. Jhaveri ITA no.3263/Mum./2022 filed by the assessee on the basis of material available on record. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative (“learned AR”) submitted that 100% addition made in the hands of the brother was upheld by the coordinate bench of the Tribunal. The learned AR further submitted that in appeal before the Hon’ble High Court, the brother of the assessee has only challenged the Tribunal’s order on the characterisation of the capital gains as short-term capital gains instead of long-term capital gains, and no dispute has been raised, before the Hon’ble High Court, against 100% addition of capital gains in his hands.
On the other hand, learned Departmental Representative vehemently relied upon the orders passed by the lower authorities.
We have considered the submissions of both sides and perused the material available on record. From the perusal of the order dated 24/06/2019, passed by the coordinate bench of Tribunal in Mr. Ashutosh V. Jhaveri vs ITO, in for assessment year 2011-12, forming part of the paper book from pages 41-58, we find that the 100% addition of short term capital gains in the hands of the assessee’s brother was upheld by the Tribunal in respect of the same transaction. We find that in the memorandum of appeal filed under section 260A of the Act against the aforesaid order passed by the coordinate bench, which forms part of the paper book from pages 59-105, the assessee’s brother has raised the following questions of law before the Hon’ble jurisdictional High Court:
Shri Sanjay Y. Jhaveri ITA no.3263/Mum./2022
“The Appellant states that the following substantial questions of law, each of which are in the alternative and without prejudice to any other arising out of the impugned order of the Tribunal dated 24.06.2019:- A. Whether on the facts and in the circumstances of the case and as per law, the ITAT is justified in upholding that the capital asset transferred by the Appellant in the year under consideration was short term in nature instead of long term? B. Whether on the facts and in the circumstances of the case and as per law, the ITAT is justified in concluding that a period of holding was to be reckoned from date of the purchase the date agreement entered into by the Appellant and his other two co-owners with the builder on 24.02.2011 and thereby treating the capital asset as short term in nature without considering the provisions of Section 2(42A) and Section 2(29A) of the Act? Whether on the facts and in the circumstances of the case and as per law, the ITAT is justified in deciding the issue of the nature/classification of the capital asset against the Appellant by relying on the decisions which were not cited by any of the parties to the dispute and further, without granting any opportunity to the Appellant to offer his comments on the applicability of the said decisions? D. Whether on the facts and in the circumstances of the case and as per the law, the ITAT is justified in upholding the disallowance of Rs. 7,35,642/- on the observation that the said payments were in the nature of commission and hit by the provisions of Section 40a(ia) of the Act?”
Thus, from the above, it is evident that the 100% addition of capital gains was made in the hands of assessee’s brother and the said addition was upheld by the Co–ordinate Bench of the Tribunal. As per the assessee, the brother of the assessee has accepted the 100% addition of capital gains in his hands and has only challenged the Tribunal’s order on the characterisation of the capital gains as short-term capital gains instead of long-term capital gains before the Hon’ble jurisdictional High Court. The Revenue has not brought any material contrary to the aforesaid submission. Since the entire capital gains have already been admitted to be taxable in the hands of assessee’s brother, therefore, we are of the considered view that the addition of one-third of the capital gains from the very same transaction in the hands of the assessee is Shri Sanjay Y. Jhaveri ITA no.3263/Mum./2022 unwarranted and therefore, is directed to be deleted. As a result, grounds raised by the assessee are allowed.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 23/02/2023