RANJAN TALAKSHI VORA ,MUMBAI vs. INCOME-TAX OFFICER 20 (3) -1, MUMBAI

आदेश / ORDER PER BEENA PILLAI, JUDICIAL MEMBER:

Present appeal filed by assessee arises out of the order dated 28/03/2025 passed by the Learned Commissioner of Income Tax (Appeals), Addl./JCIT(A)-1, Bengaluru [hereinafter referred to as “Ld.CIT(A)”] for A.Y. 2014-15, on the following grounds of appeal:-

“Being aggrieved by the order of the Assessing Officer, 20(3) (1), Mumbai and learned Commissioner of Income-tax (Appeal), NFAC, Delhi, this 1

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA appeal petition is filed on the following amongst other grounds of appeal, which it is prayed may be considered without prejudice to one another. 1. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in treating long term capital asset as short term in nature and making addition of RS.1,704,705 without appreciating that the underlying asset was booked way back in the year 2006-07, and Your Appellant gave all the necessary documents to establish claim of the asset being long term in nature eligible for indexation benefit in terms of section 48 of the Income-tax Act 1961. 2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in coming to conclusion that underlying asset was short term in nature by treating ledger account of the flat in books of your Appellant as in the books of builder, and thereby coming to conclusion that, although the investment was made in financial year 2006-07, since the builder allotted flat on March 31, 2011, and the said flat was sold within a period of 36 months from that date, the underlying asset was short term in nature. 3. Your Appellant craves leave to add to, amend, alter, modify, and / or delete any of the above grounds of appeal at or before final disposal of appeal.” 2. Brief facts of the case are as under:- The assessee filed her return of income for A.Y. 2014-15 on 30.07.2014 declaring total income of ₹18,650/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 and subsequently selected for scrutiny. Notices u/s 143(2) and 142(1) were issued and duly complied with by the assessee.

2.1. During the year under consideration, the assessee had declared Long Term Capital Gain arising from surrender of rights in Flat No. B/1201, Palm Paradise, Navi Mumbai, developed by M/s Moraj Finanz Corporation. The said flat was booked by the assessee vide letter of reservation dated 25.01.2007 for a total consideration of ₹20,12,670/-. It was submitted that the assessee subsequently surrendered her rights in the said flat during F.Y.

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA 2013-14 for a consideration of ₹74,25,000/-. The assessee submitted that as per the arrangement with the developer, the consideration was received upon sale of the flat to the identified purchaser and the amount was paid to the assessee on 15.03.2014. The assessee thus computed Long Term Capital Gain after claiming indexed cost of acquisition and brokerage expenses of ₹1,48,500/-.

2.2. During the course of assessment proceedings, the Ld.AO questioned the date of acquisition and period of holding of the property. In response, the assessee furnished the reservation letter, ledger accounts and other supporting documents evidencing acquisition of rights in the flat in F.Y. 2006-07. In response to notice u/s 133(6), M/s Moraj Finanz Corporation confirmed that the flat was originally allotted to Mrs. Kalavati R. Trivedi and was subsequently transferred to the assessee during F.Y. 2006-07 with consent of all parties. The developer also confirmed the subsequent surrender/cancellation of the flat and payment of ₹74,25,000/- to the assessee. 2.3. The assessee explained that out of the total cost of ₹20,12,670/-, ₹2,62,000/- was paid directly to the developer and the balance ₹17,50,670/- was paid to Mrs. Kalavati R. Trivedi on behalf of the developer. The assessee submitted that the payments were duly recorded in the books under the head “Advance Against Flat” and separate workings were maintained for individual properties. 2.4. However, the Ld.AO observed that the journal entry recording the booking/allotment of Flat No. B/1201 appeared in the assessee’s books only on 31.03.2011. Considering the said date as the date of acquisition, the Ld.AO held that the period of holding

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA was less than 36 months as the surrender took place on 15.03.2014. Accordingly, the Ld.AO treated the gain arising from surrender of rights in the flat as Short Term Capital Gain instead of Long Term Capital Gain and rejected the assessee’s claim.

Aggrieved by the order of Ld.AO the assessee preferred appeal before the Ld.CIT(A).

3.1. The Ld.CIT(A) further observed that although the Ld.AO allowed set-off of current year short-term capital loss of ₹35,59,125/-, the claim of brought forward short-term capital loss was not allowed. It was noted that the assessee had duly declared short-term capital losses of ₹11,15,396/- for A.Y. 2009-10 and ₹1,96,273/- for A.Y. 2010-11 and had claimed set-off of brought forward loss of ₹2,87,435/- in the computation of capital gains. The Ld.CIT(A) observed that since short-term capital loss is eligible for carry forward and set-off u/s 74 of the Act, and the returns were filed within the prescribed time u/s 139(1), the Ld.CIT(A)

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA directed the Ld.AO to allow the set-off of brought forward short- term capital loss and recompute the capital gains.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

4.1. The Ld.AR submitted that the issue under consideration is regarding treatment of the Long Term Capital Asset as Short Term Capital Asset, resulting in addition of ₹17,04,705/-. It was contended that the assessee had booked Flat No. B/1201, Palm Paradise, Navi Mumbai, developed by M/s Moraj Finanz Corporation, vide letter of reservation dated 25.01.2007 for a consideration of ₹20,12,670/-. He submitted that the assessee had also invested in other properties with the same developer and maintained a common ledger account for advances paid towards such properties.

4.2. The Ld.AR submitted that the assessee subsequently surrendered her rights in the said flat vide cancellation letter dated 16.12.2013 for a consideration of ₹74,25,000/-. As per the arrangement with the developer, the surrender consideration was payable after receipt of sale proceeds from the identified purchaser, and accordingly the amount was paid to the assessee on 15.03.2014. The assessee had claimed brokerage expenditure of ₹1,48,500/- while computing Long Term Capital Gain.

4.3. The Ld.AR submitted that during the assessment proceedings, the Ld.AO questioned the date of acquisition and the payments made towards booking of the flat. In response, M/s Moraj Finanz Corporation, in reply to notice u/s 133(6), confirmed that Flat No. B/1201 was originally allotted to Mrs. Kalavati R. Trivedi and, with

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA the consent of all parties, the rights therein were transferred to the assessee during F.Y. 2006-07. The developer also confirmed the allotment, transfer and subsequent surrender of the flat.

4.4. It was explained that the assessee had paid a total consideration of ₹20,12,670/- towards acquisition of rights in the said flat. Out of this, ₹2,62,000/- was paid directly to the developer through cheque dated 11.01.2007 and the balance amount was paid to Mrs. Kalavati R. Trivedi on behalf of the developer. The said payments were duly reflected in the assessee’s books of account.

4.5. The Ld.AR further submitted that during the course of hearing, the assessee was directed to reconcile the payments reflected in the bank statement with the confirmation issued by the developer. In this regard, it was submitted that the payment of ₹2,62,000/- was duly reflected in the assessee’s bank statement and matched with the developer’s confirmation. Further, an amount of ₹16,28,470/- was paid to Mrs. Kalavati R. Trivedi on 20.01.2007, which was also confirmed by the developer.

4.5. It was submitted that the developer had credited ₹17,50,670/- in the assessee’s account towards the payment made to Mrs. Kalavati R. Trivedi. The difference amount of ₹1,22,200/- was adjusted by the developer against advances relating to other flats booked by the assessee. Therefore, the difference in amounts was only due to internal adjustment of ledger balances maintained by the developer and could not alter the fact that the assessee had acquired the rights in the flat in F.Y. 2006-07.

4.6. The Ld.AR contended that since the assessee had booked multiple flats with the same developer, a consolidated ledger under

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA the head “Advance Against Flat” was maintained. However, separate workings were maintained to identify the cost attributable to each individual flat. The assessee also furnished ledger accounts evidencing that the investment in the impugned flat was reflected from F.Y. 2006-07 onwards.

4.7. It was submitted that the right in the flat had vested in the assessee in F.Y. 2006-07 itself and, therefore, the asset transferred during the year under consideration constituted a Long Term Capital Asset. The Ld.AO erred in considering the journal entry dated 31.03.2011 as the date of acquisition and consequently treating the gain as Short Term Capital Gain.

4.8. The Ld.AR relied upon CBDT Circular No. 471 dated 15.10.1986 and Circular No. 672 dated 16.12.1993, wherein it has been clarified that in cases of allotment of flats, the date of allotment is relevant for determining the date of acquisition, as the allottee obtains a right in the property on issuance of the allotment letter and subsequent payments are only consequential.

4.9. The Ld.AR also referred to the provisions of section 50C/section 56(2)(x) of the Act to submit that the statute recognizes the date of agreement/allotment as distinct from the date of registration, thereby supporting the assessee’s contention that the holding period should be reckoned from the date of booking/allotment.

4.10. Accordingly, the Ld.AR submitted that the assessee had duly established the acquisition of rights in Flat No. B/1201 in F.Y. 2006-07 through contemporaneous documentary evidence, including allotment letter, developer’s confirmation, bank

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA statements and ledger accounts. Mere difference in accounting entries or adjustment of advances could not change the nature of the asset. Hence, the resultant gain was rightly offered as Long Term Capital Gain and the addition made by the Ld.AO treating the same as Short Term Capital Gain deserves to be deleted.

4.11. Per Contra, the Ld.DR submitted that the assessee had claimed Long Term Capital Gain on surrender of rights in Flat No. B/1201, Palm Paradise, Navi Mumbai. He submitted that, the Ld.AO rightly treated the gain as Short Term Capital Gain. It was submitted that, as per the books of account and ledger entries, the journal entry recording acquisition/allotment of the flat was passed only on 31.03.2011. Since the surrender consideration of ₹74,25,000/- was received on 15.03.2014, the period of holding was less than 36 months and the asset did not qualify as a Long Term Capital Asset.

4.12. The Ld.DR contended that the assessee failed to conclusively establish that the amount of ₹20,12,670/- was actually paid towards acquisition of the flat in F.Y. 2006-07. The payment details furnished by the assessee were not fully reconciled with the developer’s confirmation and ledger accounts, and therefore the claim of acquisition from F.Y. 2006-07 was not substantiated.

4.13. It was further submitted that the assessee had only surrendered rights in the flat and had not acquired ownership of the property. Hence, the date reflected in the books was rightly considered for determining the period of holding. The reliance placed on CBDT Circulars regarding allotment of flats was stated to be not applicable to the facts of the present case.

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA Accordingly, the Ld.DR supported the orders of the lower authorities and submitted that the gain arising from surrender of rights in the flat was rightly assessed as Short Term Capital Gain.

We have perused the submissions advanced by both sides in light of records placed before us.

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA 5.2. On the other hand, the Ld. DR supported the findings of the lower authorities and submitted that the assessee failed to conclusively prove payment of the entire consideration of ₹20,12,670/- in F.Y. 2006-07. It was argued that the books of account reflected the relevant entry only on 31.03.2011 and, therefore, the AO was justified in considering the said date as the date of acquisition. It was also contended that the asset was held for less than 36 months and hence the gain was rightly assessed as Short Term Capital Gain. 5.3. We have carefully considered the rival submissions. From the documents placed on record, particularly the letter of reservation dated 25.01.2007 issued by the developer and the confirmation furnished by M/s Moraj Finanz Corporation, it is evident that the assessee had acquired rights in Flat No. B/1201 during F.Y. 2006- 07. The developer has also confirmed the transfer of allotment from Mrs. Kalavati R. Trivedi to the assessee and the subsequent surrender of such rights. 5.4. The fact that the payment entries were subsequently reflected in the books or that certain adjustments were made in the consolidated ledger maintained by the developer cannot, by itself, override the contemporaneous evidence establishing the acquisition of rights. The explanation furnished by the assessee regarding maintenance of a common ledger for various flats and adjustment of advances has not been controverted by bringing any adverse material on record. 5.5. It is also pertinent to note that the right acquired by an allottee in a property is a valuable capital asset and the date of allotment/reservation is relevant for determining the period of holding. The CBDT Circulars relied upon by the assessee also

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA recognize that allotment confers a right in the property and subsequent payments are merely consequential. 5.6. Accordingly, considering the documentary evidence placed on record, we hold that the assessee acquired the rights in the impugned flat in F.Y. 2006-07 and the period of holding has to be reckoned from such date. Therefore, the rights surrendered by the assessee during F.Y. 2013-14 constituted a Long Term Capital Asset and the resultant gain is liable to be assessed as Long Term Capital Gain after allowing the benefit of indexation. 5.7. Hence, the action of the Ld.AO/CIT(A) in treating the gain as Short Term Capital Gain is set aside. The Ld.AO is directed to recompute the capital gains accordingly. Accordingly, Ground Nos. 1 & 2 raised by the assessee are allowed. In the result appeal filed by the assessee stands allowed

Order pronounced in the open court on 29/06/2026. Sd/- Sd/-

JAGADISH BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 29/06/2026 SC, Sr. P.S.

ITA 3730/MUM/2025 RANJAN TALAKSHI VORA Copy to: RANJAN TALAKSHI VORA , 9/37, MEGH CHHAYA, MEGH WADI, SAIBABA ROAD, PAREL, MUMBAI- 1 400 012, MUMBAI-400012, MAHARASHTRA

INCOME-TAX OFFICER 20 (3) -1, PIRAMAL CHAMBERS, LALBAUG, 2 PAREL, MUMBAI-400012, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE