AKBARALI A. PROBUNDERWALLA,MUMBAI vs. ITO, WD. 1(1)(1), MUMBAI

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ITA 5721/MUM/2010Status: DisposedITAT Mumbai25 August 2016AY 2006-075 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the income from the land was taxed twice, once for the partnership firm (M/s. Sharp Construction Co.) and again for the individual assessee. This double taxation was deemed unjustifiable.

What were the facts?

The assessee, an individual and partner in a construction firm, registered a development deed for land for Rs. 15,00,000. The Assessing Officer added this amount as capital gain under Section 50C, viewing it as an attempt to evade tax by transferring the land to the firm. The CIT(A) confirmed this.

What were the issues?

Whether the same income from the sale of development rights of a land can be taxed twice, once in the hands of the partnership firm and again in the hands of the individual partner. Whether Section 50C is applicable when the assessee claims not to have received consideration and the development rights were not sold by him.

Which sections of the Income-tax Act were involved?

Section 45,Section 50C,Section 143(1),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM

For Appellant: Dr. K. Shivaram and Ms. Sheetal Jadhav
Hearing: 12.05.2016Pronounced: 25.08.2016

Assessee by: Dr. K. Shivaram and Ms. Sheetal Jadhav Department by: Shri R. P. Rastogi सुनवाई क� तार�ख / Date of Hearing: 12.05.2016 घोषणा क� तार�ख /Date of Pronouncement: 25.08.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:

The assessee has filed the present appeal against the order dated 12.03.2010 passed by the Commissioner of Income Tax (Appeals) 1, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2006-07.

ITA No.5721/M/2010 A.Y. 2006-07

2.

The assessee has raised the following grounds:-

“1.a. The learned CIT(A) erred on facts and in law in confirming the taxing of the Appellant on the sale of development rights to M/s.Landline Builders by M/s. Sharp Construction Co. which amounts to double taxation. b. The learned CIT(A) erred on facts and in law in confirming the application of section 50C of the Income Tax Act, when the Appellant had not received any consideration nor were the development rights sold by him. c. The learned CIT(A) erred on facts and in law in stating that the development rights of the land in question were transferred by the appellant. d. The learned CIT(A) erred on facts and in law in not accepting the fact that M/s. Sharp Construction Co. has paid tax on the sale of development rights of the same plot in question.”

3.

The brief facts of the case are that the assessee filed his return of income on 23.03.2007 declaring total income to the tune of Rs.84,090/- The return was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”) on 22.08.2007. Subsequently, the case was selected for scrutiny and notice u/s.143(2) dated 29.10.2007 was issued and served upon the assessee. Notice u/s. 142(1) of the Act was also issued on 23.06.2008 and served upon the assessee on 24.06.2008. The assessee was an individual having salary income, income from house property and capital gain and partner in the M/s. Sharp Construction Co. The assessee was also a director with M/s. A.K.Porbunderwala Builders Pvt. Ltd. During the previous year

ITA No.5721/M/2010 A.Y. 2006-07 relevant to the A.Y.2006-07, development deed was registered with M/s.Landline Developers on 23rd day of August, 2005 for a consideration of Rs.15,00,000/-, in which the assessee was stated to be the owner. On seeing the return of income of the assessee, it was observed that there was no income and gain on this transactions. Therefore the notice was issued and after receipt of the reply value of the sale of land to the tune of Rs.54,37,010/- was added to the income of the assessee as capital gain u/s.45 r.w.s 50C of the Act. The Assessing Officer was of the view that the assessee introduced the land in the name of M/s.Sharp Constructions Co. in 1986-87 or 1994-95 for only Rs.73,800/- just to evade the tax. The said land was not reflected in the closing stock. The profit was not offered to tax of Rs.15,00,000/-. The land was with the name of Shri Akbarali A. Porbandwala. The Assessing Officer was of the view that the intention of the assessee was to evade the tax by transferring the land to partnership firm, therefore the Assessing Officer invoked the provision u/s.50C of the Act and accordingly assessed the income of the assessee and taxed. The CIT(A) was also of the same view.

4.

We have heard the argument advanced by the learned representative of the parties and perused the record. The bone contention of the assessee is that the income from the land is not liable to be taxed twice. The assessee has shown the land with M/s.Sharp Constructions Co. wherein the income from the land was assessed by ITA No.5721/M/2010 A.Y. 2006-07 the Assessing Officer by virtue of order dated 26.12.2008 for the A.Y.2006-07. The said order was also challenged before the CIT(A) who confirmed the order of Assessing Officer by virtue of order dated 05.01.2010. Subsequently, the matter went up before the Income Tax Appellate Tribunal, Mumbai who also decided the case in for A.Y.2006-07. The said order perused which clearly speaks about the assessment of the income with regard to the land belonging to the M/s. Sharp Constructions Co. in question. The Assessing Officer has also assessed the income upon the said land on account of alienation by the Akbarali A. Probunderwalla to M/s. Landline Builders Pvt. Ltd. by virtue of development deed registered on 23.08.2005 for a consideration of Rs.15,00,000/- again by treating the land belonging to Akbarali A. Probunderwalla individually. Now it is not in dispute that the land has been assessed twice one on the part of M/s. Sharp Construction Co. which is the partnership firm and the other on behalf of the individual Akbarali A. Probunderwalla. The land was used for the purpose of the firm. The said consideration to the tune of Rs.15,00,000/- was assessed twice one on the part of the M/s. Sharp Construction Co. and Akbarali A. Probunderwalla individually. It is the case of double taxation because the alienation of the land has been assessed two times which does not seem justifiable. Accordingly, these issues are decided in favour of the assessee against the revenue and set aside the finding of the CIT(A) on the above said issues.

ITA No.5721/M/2010 A.Y. 2006-07

5.

In the result, the appeal filed by the assessee is hereby allowed.

Order pronounced in the open court on 25th August, 2016.

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