INCOME TAX OFFICER , PIRAMAL CHAMBERS - INCOME TAX OFFICE, MUMBAI, MAHARASHTRA vs. GO GO GARMENTS , MUMBAI

1. This appeal by the revenue is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 03.07.2024 for Assessment Years (AY) 2013-14. The grounds raised by the revenue are as under:

Whether on the facts and in the circumstances of the case and in law, the action of Ld. CIT(A) to delete the addition of Rs. 6,80,11,020/- made u/s. 50C holding that assessee was not beneficial owner without considering the fact that the assessee firm had sold three commercial galas as per the Registered Deed dated 21.05.2012 giving its name and PAN number being the Statutory Legal Owner of the said galas?" 3. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the appeal of the assessee and deleted the addition of Rs. 6,80,11,020/- made u/s. 50C on account of sale of three commercial galas without appreciating the merits of the addition and without considering the facts that it is clearly mentioned in the Registered Sale Deed dated 21.05.2012 at page numbered that- The Memorandum Records Family Settlement dated 01.07.2003 is not registered at the O/o. the Sub-Registrar of Assurance hence the said property is still on the name of M/s. Go Go Garments in the records of The New Standard Engineering Company Ltd and other statutory records?" 4. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the appeal of the assessee and deleted the addition of Rs. 6,80,11,020/- made u/s. 50C on account of sale of three commercial galas holding that Mr. Vinodkumar Goenka is the owner has sold the three commercial galas without appreciating the merits of the addition and without verifying the facts that assessee firm is the legal owner as per law and has applied for NOC for sale of the said galas in the year 2012 and obtained the NOC from J.V. Patel Compound User's Association and also from M/s. NESCO Ltd, which are part of Registered Sale Deed 21.05.2012 at page numbered 21 & 23 respectively ?" 5. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has right in allowing the appeal of the assessee and deleted the addition of Rs. 6,80,11,020/- made u/s. 50C on account of sale of three commercial galas holding that assessee firm is not owner of the said galas relying merely its adjustment entries and notarized papers, without considering the facts that assessee firm was the legal owner and sold the three commercial galas as per statutory provisions of law being the Legal Owner?”

The Memoranda Recording Family Settlement dated 01.07.2003 has been perused. The contention of appellant that the properties in question has been transferred to Sh. Vinod Goenka has been found on page 4 of the settlement deed which is scanned below:

The appellant has produced Retirement cum Reconciliation Deed dated 04.04.2003 wherein Retirement of following partners was recorded (highlighted deed reproduced hereunder:

The sale consideration of three units 8A, 8B and 8C is of Rs. 3,07,44,252/-; Rs. 1,90,89,378/- and Rs. 1,81,77,390/- respectively. The appellant has submitted that the whole proceeds have gone to Sh. Vinod Kumar Goenka and the statement in this regard has been furnished by Sh. Vinod Goenka before the AO. The details given before AO reflect the bank account and instrument that is DD/RTGS No.s alongwith amounts received by Sh. Vinod Goenka. The statement In view of above discussion and evidences, this is clearly inferred that properties namely 8A, 8B and 8C situated at Ground Floor, Building No. 3, Carel Road, Parel, Mumbai have been sold by Sh. Vinod Kumar Goenka and he is in receipt of sale proceeds arising out of these. The capital gain arising on sale of these properties ought to be assessed in the hands of Sh. Vinod Kumar Goenka. Similarly, the value of sale of these properties ought to be as per section 50C of the I.T. Act. The grounds of appeal in case of appellant firm are allowed and the addition made of Rs. 6,80,11,020/- is deleted in hands of appellant.”

The ld. AR on the other hand submitted that the CIT(A) has considered the various documentary evidences submitted by the assessee and has given a detailed factual finding based on the same while giving relief to the assessee. The ld. AR further submitted that the family settlement were the impugned properties were settled in favour of Shri Vinod Kumar B Goenka at the time of retirement was executed on 01.07.2003 and that the assessment for AY 2004-05 was carried out under section 143(3) of the Act. The ld. AR drew our attention to the order under section 143(3) dated 28.12.2006 for AY 2004-05 where the AO did not make any addition after considering the details furnished with regard to the settlement of the properties on retirement of the partner. The ld. AR accordingly argued that in the year of settlement the revenue has accepted the submission of the assessee that the Go Go Garments property has indeed been transferred to Shri Vinod Kumar B Goenka and therefore the revenue cannot take a different stand on the sale of the said property. The ld. AR submitted that the entire sale consideration has been received by Shri Vinod Kumar B Goenka and this fact is substantiated by the bank statements submitted before the lower authorities. The ld. AR submitted that the provisions of section 2(47)(vi) is applicable to assessee's case according to which any transaction which has the impact of transferring /enabling the enjoyment of any immovable properties will amount to transfer. The ld. AR further submitted that the impugned property have been used by Shri Vinod Kumar B Goenka for running his own business which fact has been considered by the CIT(A) while giving relief to the assessee. Accordingly, the ld. AR submitted that there is no infirmity in the order of the CIT(A).

We heard the parties and perused the material on record. The AO during the assessment proceedings noticed that the assessee has executed a sale deed for sale of 3 immovable properties but has not offered any capital gains in the return of income. The assessee submitted that the properties have been transferred to the retired partner Shri Vinod Kumar B Goenka who has been using the same for his own business purpose. The assessee further submitted that Shri Vinod Kumar B Goenka is the owner who has sold these properties and he is the one who has received the entire consideration. The AO did not accept the submissions and made additions towards the difference between the stamp duty value and the actual consideration under section 50C of the Act. On further appeal the CIT(A) gave relief to the assessee after considering the various documentary evidences submitted by the assessee. It is the contention of the revenue that the document transferring the property to the retiring partner is not registered and the book entry transferring the impugned properties to the capital account of the retiring partner Go Go Garments does not legally transfer the ownership of the properties. In this regard we notice that Shri Vinod Kumar B Goenka retired during the financial year relevant to AY 2004-05 and the document settling the properties in his favour was executed (though not registered) during the said AY and the entries in the books were also passed. We further notice that during assessment for AY 2004-05 the AO has examined the relevant details in this regard and has completed the assessment without recording any adverse findings with regard to the impugned transaction. Accordingly there is merit in the submission of the ld AR that the department has not disputed the fact that the transfer has taken place in AY 2004-05. Sub-clause (vi) of section 2(47) of the Act defines the term "transfer" to include any transaction by way of any agreement or any arrangement or in any other manner whatsoever which has the effect of transferring, or enabling the enjoyment of, any immovable property. Sub-clause (vi) was introduced vide Finance Act 1987 and in the Memorandum explaining the clauses it is mentioned that the said sub-clause is introduced to expand the scope of ownership so that the taxability of income arising from the property does not go out of the tax net merely for the reason that the person receiving the income is not the registered owner of the property. In other words, sub-clause (vi) was inserted to over ride the recognition of ownership only through registration which is a requirement under section 54 of the Transfer of Property Act. On perusal of the CIT(A)'s order we notice that the CIT(A) has recorded a finding that the impugned properties have been used by Shri Vinod Kumar B Goenka for his business purposes after receiving them post retirement. Therefore it is an undisputed fact that the impugned properties have been enjoyed by Shri Vinod Kumar B Goenka by using the same for his business purposes. Accordingly, there is merit in the submission of the ld AR that the property has been transferred within the meaning of provisions of section 2(47)(vi) of the Act to Shri Vinod Kumar B Goenka. The fact that the entire sale consideration has Go Go Garments been received by Shri Vinod Kumar B Goenka also supports the contention that Shri Vinod Kumar B Goenka is the owner of the property and the sale deed is executed by the firm only for the reason that on records the assessee continued to be the owner. It is also relevant to mention here that Shri Vinod Kumar B Goenka has not declared the capital gain by filing the return of income cannot be a reason for taxing the gain on the transfer of properties in the hands of the assessee since it is the fundamental principle under the Act that the income must be assessed in the hands of the correct person who has earned it. In view of these discussions and considering the facts and circumstances of the case, we see no reason to interfere with the decision of the CIT(A) who has considered the issue on merits before giving relief to the assessee.

In result, the appeal of the revenue is dismissed.