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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI B.R.BASKARAN, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri S.L.Jain Department by: Shri A. Ramachandran CIT-DR सुनवाई क" तार"ख / Date of Hearing: 10.06.2016 घोषणा क" तार"ख /Date of Pronouncement: 19.08.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
This is an appeal filed against the order dated 09.11.2012 passed by the Commissioner of Income Tax (Appeal) 26, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10. A.Y.2009-10
2. The assessee has raised the following grounds:-
“1. On the facts and in the circumstances of the case and in the law the learned Commissioner of Income Tax Appeal – 26 error treating the business profit of Rs.70,00,000/- on the sale of TDR, which was generated after purchase of land by the Appellant, as a business income . While there was no cost for TDR. Secondly, it is also completely wrong to say on the part of the learned Commissioner of Income Tax Appeal – 26 that there was no right remaining because the land purchased by the Appellant was said is fully encroached by slum developers the Deputy Collector (ENC) and Competent Authority. Thirdly, it is also completely wrong to say on the part of the learned Commissioner of Income Tax Appeals – 26 that the reserved area there was some surplus land left in the hands of the appellant. Your honor is requested to delete unnecessary addition of Rs.70,00,000/- made by the learned Commissioner of Income Tax Appeal.
2. On the facts and in the circumstances of the case and in the law the learned Asst. Commissioner of Income Tax erred making disallowance @ 10% of the various expenses ad- hocly without specifying any voucher without any bases. Your honor is requested to delete unnecessary ad hoc & arbitrary disallowance 10% of the various expenses while all the expenses has been used exclusively for business purposes and there was no personal element.
3. Penalty proceedings u/s. 271(1)(c)of the Income Tax Act, 1961. The learned Commissioner of Income Tax Appeal – 26 has wrongly initiated penalty proceedings u/s.271(1)(c) of the Income Tax Act 1961, since the Appellant has not concealed the particulars of income or furnished inaccurate particulars at the time of the assessment. Hence there was not fault on the part of the appellant for submitting inaccurate particulars of income. A.Y.2009-10 In view of the above, the Penalty proceeding u/s.271(1)(c) of the Income Tax Act 1961 initiated the learned Commissioner of Income Tax Appeal – 26 should be dropped.
3. The brief facts of the case are that the assessee has filed his return of income on 29.09.2009 declaring total income to the tune of Rs.58,26,316/-. The return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). The case was selected for scrutiny under CASS. Notice u/s.143(2) of the Act was issued on 19.08.2010 and served upon the assessee. Thereafter notice u/s.142(1) of the Act dated 25.05.2011 was issued and served upon the assessee. On perusal of the books of accounts, it came into notice that the assessee has given the advance for Transferable Development Right (TDR) for Rs.50,00,000/- and assessee has also received advance against TDR to the tune of Rs.1,20,00,000/-. The notice was given to the assessee and the Assessing Officer had arrived at this conclusion that the assessee has purchase the TDR for sum of Rs.50,00,000/- and sold the same in sum of Rs.1,20,00,000/-. Therefore, the difference to the tune of Rs.70,00,000/- was added to the income of the assessee. The assessee has also claimed the expenses to the tune of Rs.42,06,947/- and the Assessing Officer disallowed the 10%. On appeal the CIT(A) disallowed the 5% but he assessee was not satisfied hence the assessee has filed the present appeal basically on the above said two grounds. A.Y.2009-10 ISSUE NO.1:-
Under this issue the assessee has challenged the addition to the tune of Rs.70,00,000/- on sale of TDR. The contention of the assessee is that the assessee purchased the land when no TDR was accrued however the TDR was accrued lateron, therefore the income to the tune of Rs.70,00,000/- is not liable to be added towards the income of the assessee. In support of this contention the learned representative of the assessee has placed reliance on the following decisions:
Commissioner of Income Tax Vs. Sambhaji Nagar Co- op HSG Society Ltd. (High court of Bombay)
Jethalal D. Mehta Vs. Deputy Commissioner of Income Tax (ITAT, Mumbai ‘D’ Bench)
Commissioner of Income Tax Vs. B.C.Srinivasa Setty (Supreme Court of India)
4. New Shailaja Co-operative Housing Society Ltd. Vs. Income Tax Officer (ITAT, Mumbai ‘B’ Bench)
Commissioner of Income Tax Vs. H.H. Sri Raja Rajagopala Thondaiman by Lr. (High Court of Madras) A.Y.2009-10
6. Commissioner of Income Tax Vs. Hindustan Housing & Land Development Trust Ltd. (Supreme Court of India)
5. On the other hand the learned representative of the department has argued that in view of the MOU for sale of TDR dated 30.04.2007, it is quite clear that the assessee has purchased the TDR, therefore, in view of the said circumstances the income from the sale of TDR is liable to be taxable hence the learned CIT(A) has rightly passed the order which is not require to be interfered with at this appellate stage. By giving the careful thoughts to the contention raised by the learned representative of the parties and perused the record, we found that the assessee purchased certain property / land situated at village Pahadi Village, Goregaon (East), Mumbai bearing CTS No.255 admeasuring approx. 4085.50 sq. mts. or thereabouts more particularly described in the First schedule as large property. The property was acquired by the vendor under Sanad dated 18th August 1962. The property was reserved for following purpose:-
(a) an area admeasuring approx. 1173 square metres out of the said property is reserved by the MMRDA for a Rail Over Bridge (ROB);
(b) an area admeasuring approx. 771 square metres out of the said Property is reserved for D.P.Road; and A.Y.2009-10
(c) an area admeasuring approx. 2141 square metres out of the said property is reserved for a Parking Lot.
At the time of the sale of the property, the purchaser / assessee came to know each and every aspect of the assessee. He knew that he would only entitled for the TDR which could be subsequently sold. Now, he purchased the said property in sum consideration of Rs.50,00,000/-. Subsequently, the purchaser / assessee sold the TDR in sum of Rs.1,20,00,000/-, therefore, an amount of Rs.70,00,000/- was added to the income of the assessee on the ground of that the assessee purchased the TDR. The assessee moved an application for TDR on 09.07.2007 as per EXIT “B”. The assessee received the TDR on 13.05.2008 by virtue of letter dated 13.05.2008 as per EXIT “C”. In view of the said circumstances apparently on 30.04.2007 the date of the execution of the MOU no TDR was in existence. The TDR cost was Nil, therefore right to eliminate is not taxable. The MOU speaks about the purchase of land however, the word purchase of TDR right has also been mentioned but at the time of execution of MOU dated 30.04.2007 no TDR right was in existence in favour of the seller as well as purchaser. Moreover, it come into notice that the seller was owner of the said land by virtue of Sanad dated 18th August 1962. The TDR right if any was going to be accrued then the same is going to accrued in favour of the owner. The assessee purchased this said land when no TDR was accrued in favour of earlier owner. A.Y.2009-10 Assessee did not purchase TDR right from owner. No doubt factual position of the land was well within the knowledge of the party but this fact cannot be denied that the TDR right on the land first time was accrued in favour of assesse which was sold by the assessee for sum of Rs.1,20,00,000/-. In view of this peculiar facts and circumstances and in view of the law relied by the learned representative of the assessee mentioned above, we are of the view that he said amount in question is not taxable in accordance with law, therefore, we delete the said addition and allowed the appeal of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue.
ISSUE. NO. 2:-
Under this issue the assessee has challenged the disallowance to the extent of 5% on the expenses to the tune of Rs.42,06,947/-. At the time of examination of the documents / accounts, the Assessing Officer found that all the expenses were made in cash and were not supported with third parties evidence and many vouchers were self made. In some expenses personal element could not be ruled out therefore the Assessing Officer disallowed to the 10% of the total expenditure, however in appeal before the CIT(A), CIT(A) restricted the disallowance to the extent of 5%. No justifiable materials have been placed on record. However, assessee took the plea of pre- audited accounts but this factual situation was also there at the time of filing an appeal before the CIT(A). When we consider the reasons of A.Y.2009-10 disallowance to the extent of 5% of the expenditure then we found that the documents of the accounts were not supported by third party evidence and the vouchers were self made which can be considered as cogent and convincing evidence in support of the claim of the assessee. Therefore we found that the CIT(A) has restricted the disallowance to the extent of 5% of the expenses claimed by the assessee which is quite reasonable, therefore, the observation of the CIT(A) is not required to be interfere with at this appellate stage. Accordingly this issue is decided in favour of the revenue and against the assessee.
ISSUE NO.3
Since the penalty has not been levied, therefore, challenging the same is not justifiable therefore this issue is not required to be adjudication on this stage.
9.. In result the appeal filed by the assessee is hereby partly allowed.
Order pronounced in the open court on 19th August, 2016. (B.R.BASKARAN) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 19th August, 2016 MP MP MP MP A.Y.2009-10