IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
Sl. I.T.A. No./
1. ITA No. 944/Hyd/2011 Mr. Mirza Jaleel Ahmed The DCIT A.Y. 2008-09 Hyderabad Central Circle-6 PAN: AHBPA5946P Hyderabad
2. ITA No. 945/Hyd/2011 Mr. Mirza Iqbal Ahmed -do- A.Y. 2008-09 Hyderabad
3. ITA No. 946/Hyd/2011 Smt. Mehmooda Begum -do- A.Y. 2008-09 Hyderabad
4. ITA No. 947/Hyd/2011 Mr. Mirza Jameel Ahmed -do- A.Y. 2008-09 Hyderabad
5. ITA No. 948/Hyd/2011 Smt. Rahmatunnisa -do- A.Y. 2008-09 Begum
6. ITA No. 949/Hyd/2011 Smt. Kouser Begum -do- A.Y. 2008-09 Hyderabad
7. ITA No. 902/Hyd/2011 The DCIT Mr. Mirza Iqbal Ahmed A.Y. 2008-09 Central Circle-6 Hyderabad Hyderabad PAN:AJTPM5187A
8. ITA No. 903/Hyd/2011 -do- Mr. Mirza Jameel Ahmed A.Y. 2008-09 Hyderabad PAN: AJUPM8296K
9. ITA No. 904/Hyd/2011 -do- Mr. Mirza Jaleel Ahmed A.Y. 2008-09 Hyderabad PAN: AHBPA5946P
Assessee by: Shri K.A. Sai Prasad
Revenue by: Shri M.S. Rao
Date of hearing: 19.04.2012
Date of pronouncement: 31.05.2012
PER CHANDRA POOJARI, AM:
I.T.A. No. 944 to 949/Hyd/2011 are appeals by different assessees and I.T.A. Nos. 902 to 904/Hyd/2011 are appeals by the Revenue directed against different orders of the CIT(A)-I, 2 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
Hyderabad. Since certain issues in all these appeals are inter- related, all these appeals are clubbed together, heard together and are being disposed of by this common order.
2. Brief facts of the case are that the above assessees are co- owners of a piece of land admeasuring 5 acres 6 guntas in Survey Nos. 218 and 219 at Narsing Village Panchayat, Rajendra Nagar Mandal. The said land was sold on 24.8.2007 by all the co-owners to M/s. Demi Realtors Ltd., vide sale deed No. 8314/2007 dated 24.8.2007. There was a search action u/s. 132 of the Income-tax Act, 1961 on 17.10.2007 in the case of all the assessees and purchasers of the said land. In response to the notice u/s. 153A, the assessees herein filed their respective return of income declaring income from capital gains and also claiming exemption u/s. 54B and 54F of the Act. Later, the assessments were completed as follows:
Name of the assessee income income No.
1. Mr. Mirza Iqbal Ahmed 45,47,916 5,26,65,940
2. Mr. Mirza Jameel Ahmed 82,43,000 5,63,00,264
3. Mr. Mirza Jaleel Ahmed 85,38,602 5,64,59,563
4. Smt. Mehmooda Begum 25,41,590 93,01,090
5. Smt. Rahmatunnisa Begum 36,43,344 96,46,970
6. Smt. Rahmatunnisa Begum 25,22,190 96,46,970
3. In the course of the assessment proceedings the Assessing Officer made various additions towards suppression of receipts on relinquishment of rights, additions towards receipt from (1) Radha Realtors, (2) Mr. Karunakar Reddy, (3) Demi Realtors and (4) Amogh Realtors. Further he disallowed deduction u/s. 54B and 54F of the Income-tax Act, 1961. Against this the assessees went in appeal before the CIT(A). The CIT(A) given certain relief. Still aggrieved the assessees are in appeal before us and for granting certain deduction in the case Mr. Mirza Iqbal Ahmed, Mr. Mirza 3 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
Jameel Ahmed and Mr. Mirza Jaleel Ahmed, the Revenue is also in appeal before us against the same assessees.
4. The grounds are mostly common in all assessees' appeals. For convenience, we reproduce herein the grounds raised by Sri Mirza Iqbal Ahmed:
2. The learned First Appellate Authority is not justified in determining the total sale consideration in the hands of the appellants group at Rs. 16.25 crores as against 9.95 crores actually received and offered to tax by the appellant and his family members.
3(a) The First Appellate Authority is not justified in confirming the addition of Rs. 2,37,09,111 being the alleged suppression of receipts, ignoring the averments made by the vendees in the registered document of sale and the actual payments acknowledged by the vendees in letter filed before the Assessing Officer.
3(b) The learned First Appellate Authority failed to appreciate the fact that the Assessing Officer himself has treated the amount of Rs. 4.80 crores paid by the vendee to the mediators as brokerage.
3(c) The learned First Appellate Authority is not justified in treating the sum of Rs. 2 crores as sale consideration which even according to the vendees becomes payable on settlement of certain disputes.
3(d) Without prejudice to the ground No. 2(a) above the learned First Appellate Authority should have appreciated the alternate claim that the payments to the mediators be treated as outflow in the hands of the appellant group and the net consideration received be taxed in the hands of the appellants groups.
3(e) Without prejudice to the ground Nos. 2(a), (b) and (c0 above the learned First Appellate Authority is not justified in apportioning the alleged additional consideration among the appellant and his two brothers ignoring the shares and ownerships of their three sisters.
4. The learned First Appellate Authority is not justified in rejecting the claim of exemption u/s. 54B to the extent of Rs. 53,57,386 ignoring the receipts issued 4 ITA No. 944/Hyd/2011 & Ors.
Mr. Mirza Jaleel Ahmed & Ors.
by the vendors of the land.
6. The learned First Appellate Authority is not justified in confirming that the appellant and his family have only certain disputed rights over the land and therefore, are not eligible for exemption u/s. 54B of the Income-tax Act, ignoring the evidences indicating ownership and active possession of the appellants group for the last several years.
7(a) The learned First Appellate Authority is not justified in restricting the claim of exemption u/s. 54F to the extent of Rs. 35,97,815 as against Rs. 59,89,760 claimed, ignoring the receipts issued by the vendors.
7(b) The learned First Appellate Authority is not justified in confirming the denial of exemption u/s. 54F for the sum of Rs. 50,00,000 being the cost of improvements incurred by the appellant.
8. The learned First Appellate Authority is not justified in ignoring the additional ground that the asset in question does not come within the purview of the capital asset as defined in sec. 2(14) based on the ratio laid down by the Hon'ble Income-tax Appellate Tribunal, Hyderabad in the case of Srinivas Pandit vs. ITO-7(2), Hyderabad.
5. The assessees also raised the additional ground in all the appeals as follows:
"Without prejudice to the other grounds, the learned First Appellate Authority having confirmed the Assessing Officer's finding that the amount received by the appellant is for relinquishing the disputed rights over the land, should have held such receipts as not taxable under any of the provisions of Income-tax Act, since the cost of acquisition of the disputed rights in hands of the appellant is nil."
6. The assessees also filed petition for admitting the additional ground stating that the additional ground which is purely legal in nature requiring no further verification of facts and arising from the order of the CIT(A), Hyderabad, be admitted in the above appeals in the interest of justice.
5 ITA No. 944/Hyd/2011 & Ors.
Mr. Mirza Jaleel Ahmed & Ors.
7. The Revenue raised the following grounds of appeal:
1. The learned CIT(A) erred on facts and in law in directing to delete the advance amounts received from M/s. Radha Realty Corporation at Rs. 33,73,333 and Rs. 3,33,333/- received from Sri D.S. Karunakar Reddy.
2. The learned CIT(A) ought to have appreciate the fact that the assessee has treated the payments received as advances, but not admitted as revenue during the year of receipt.
3. The learned CIT(A) erred on facts in distinguishing the advances received in previous years and sale consideration received during the year by sale of the property.
4. The learned CIT(A) failed to appreciate that the assessee forfeited the advances during the previous year relevant for assessment year 2008-09 and sold the property to somebody else. The learned CIT(A) also failed to appreciate the cessation of liability occurred during the year under question.
8. The AR advanced strong argument regarding admission of the above additional ground. The AR submitted that since it is now a settled fact that the consideration received is only a for relinquishment of disputed rights over the land in question, the said consideration received cannot be taxed under any head of income for the following reasons:
a) Admittedly the assessee is not a dealer in lands/real estate hence the question of taxing the same as business income does not arise and was at least not the case of the department also.
b) The consideration received has no cost of acquisition and hence there is no gain on transfer, which is chargeable to tax under the head capital gain u/s 45 of the Income Tax Act.
6 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
c) Reliance is placed on the ratio laid in the following cases.
CIT vs. B.C. Srinivasa Setty (128 ITR 294) (SC) CIT vs.vSmt. M. Agama (165 ITR 386) (AP) B. Ramakrishnaiah vs. ITO (39 SOT 379) (ITAT Hyderabad)
d) In all the above cases, the judicial authorities have held that the amounts received in respect of transfer of capital assets, cannot be taxed under the head capital gains if there is no cost of acquisition. In all the decisions, the relevance of charging section u/s 45 and the provisions of computation under sec. 48 were discussed.
e) The relevant observations and findings of the Hon'ble Apex Court in the case of Srinivasa Setty (Supra) (at page 300) are as under:
"The mode of computation and deductions set forth in section 48 provide the principal basis for quantifying the income chargeable under the head 'Capital gains'. The section provides that the income chargeable under that head shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset:
'(ii) the cost of acquisition of the capital asset. .. '
What is contemplated is an asset in the acquisition of which it is possible to envisage a cost. The intent goes to the nature and character of the asset, that it is an asset which possesses the inherent quality of being available on the expenditure of money to a person seeking to acquire it. It is immaterial that although the asset belongs to such a class, it may, on the facts of a certain case, be acquired without the payment of money. That kind of case is covered by section 49 and its cost, for the purpose of section 48, is determined in accordance with those provisions. There are other provisions which indicate that section 48 is concerned with an asset capable of acquisition at a cost. Section 50 is one such provision. So also is sub-section (2) of section 55. None of the provisions pertaining to the head 'Capital gains' suggests that they include an asset in the acquisition of which no cost at all can be conceived.
7 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
f) The ITAT Hyderabad Bench in the case of B. Ramakrishnaiah vs. ITO (supra) (at page 401) observed as under:
"7.8 As seen from above, a particular thing, right or interest may be a capital asset within the meaning section 2( 14), at transaction in relation may not give rise to taxable capital gain, this should because of the fact that no transfer as envisaged by the act was involved. Similarly, certain capital asset which could not give rise to capital gain because of the fact that cost of acquisition can be envisaged in the acquisition of the asset. Any right which can be called property will be included in the definition of "capital asset". A contract for sale of land is capable for specific performance. It is also assignable. Therefore, a right to obtain conveyance of immovable property is clearly property contemplated by section 2(14) of the Income-tax Act. With this background, we required to consider the facts of the present case. In the present case what was said to be relinquished or surrender was a right in the asset. The giving up of the right to claim specific performance by conveyance of immovable property held to be relinquishment of capital asset and it was transfer of capital asset within the meaning of the Income-tax Act. The assessee gave up his right to claim specific performance. By the termination of his oral agreement and allowing the vendor to sell the property to any person at any price, the assessee had given up or relinquished his right of specific performance and what he has received is the consideration for relinquishing that right that assessee was paid sum of Rs. 1.5 crores. This transfer attracts the tax on capital gain if there is a cost involve to acquire that right. In the present case, it was not possible to envisage its cost. In any case, such cost has not been specifically determined or brought on record by Assessing Officer. Though, the parties involved stated that there was an advance payment of Rs. 1 lakh by the assessee to the vendor, there was no iota of documentary evidence supporting this other than statement from the parties. Therefore, the amount of Rs. 1.5 crores, though it is a capital receipt, which did not give rise any capital gain because it was received in respect of relinquishment of right of purchase of property, the cost of which was not determined. It was held in the case of B. C. Srinivasa Setty (supra) that in computing the capital gain it is a condition that to determine the cost of acquisition of the asset transfer, where such determination fails there can be no capital gain. In view of this, though there was a relinquishment of right over an asset, there was no 8 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
transfer of capital asset in accordance with the provisions of section 45 of the Income-tax Act. The assessee not liable for the capital gain.
g) The Hon'ble ITAT also referred to the decision of the Andhra Pradesh High Court in the case of CIT Vs.M.Agamma,(supra) in coming to the above conclusion.
h) The applicability of the amended provisions of Sec. 55 dealing with the issue of deemed cost of acquisition was discussed by the Gujarat High Court in the case of of Commissioner of Income Tax Vs Manoher Sinhji P. Jadeja (281 ITR 19), wherein the High Court held that the Amended provisions of sec 55 can be invoked only in respect of specified assets mentioned in that section only and not all asset. The relevant extract (at pages 30 & 36) having a bearing on the issue on hand is extracted as under.
"However, it requires to be noted that by the Finance Act, 1987 with effect from April 1, 1988, the amendment to section 55 of the Act only ropes in taxability of goodwill on transfer of the same even if there is no cost of acquisition. Similarly, section 55 has been amended from time to time to enable the taxation of other assets wherein no cost of acquisition is envisaged ; tenancy rights, stage carriage permits and, loom hours by the Finance act, 1994 with effect from April 1, 1995; right to manufacture, produce or process any article or thing by the Finance act, 1997 with effect from April 1, 1988 ; trademark or brand name associated with business by the Finance Act, 2001 with effect from April 1, 2002; and right to carry on any business by the Finance Act, 2002 with effect from April 1,2003.
Therefore, even if the amendment is taken into consideration section 55 can be invoked in cases on nil cost of acquisition for the purpose of bringing to tax entire sale consideration only in relation to the specified assets. The Legislature having amended the said section from time to time has roped in only specified assets as noted herein before. In the circumstances, the amendment instead of working to the advantage of the Revenue goes to indicate that the Legislature does not want to bring within the purview of the tax net all assets (except the 9 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
specified assets) which do not have cost of acquisition and the entire sale consideration cannot be treated as profits and gains chargeable under the head "Capital gains" by adopting the cost of acquisition as nil".
i) Hence, viewed from any angle it is humbly submitted that the amounts received by assessee for relinquishment of disputed right cannot taxed since the said rights have no cost of acquisition.
j) Even though the assessee group had in its returns admitted capital gains, they are not precluded from raising this legal issue which goes to the roots of the case. It is pertinent to submit here that operations u/s 132 of the !.T. Act were conducted on 17-10-2007, i.e., less than two months from the date of registration of the Agreement of Sale-cum-GPA. And all the bank accounts of the assessee-group were placed under prohibitory orders. The Investigating Officials worked out the probable capital gains and the tax thereon and got the pay orders issued in favour of the Commissioner of Income tax, Central Hyderabad. The assessee-group, in all fairness filed the Returns, accordingly admitting the capital gains subject to the eligible deductions as per claims in the Returns of Income.
k) The findings of the Assessing Officer and First Appellate Authority and the decision of the Hon'ble Income Tax Appellate Tribunal in the case of Mustafa group, necessitates the consideration of the issue of taxing or otherwise, of the amount received on relinquishment of disputed rights.
l) In this regard, on the question of making fresh legal claims at this juncture, the assessee group places reliance on the decision of the Gujarat High Court in the case of S.R. Koshti 10 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
vs CIT (276 ITR 165). The facts of the case are: the assessee did not claim relief u/s 10(10C) in its returns. Subsequently the claim was made u/s 154 and upon rejection of the same a petition u/s 264 was filed before Commissioner of Income Tax. The Commissioner of Income Tax refused to entertain the petition. On these facts, the Hon'ble High court (at page 165) observed as under:
"The authorities under the Income tax Act, 1961 are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected.
Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. When an Assessing Officer has adopted one of the courses permissible in law, which has resulted in loss of Revenue, or where two views are possible and the Assessing Officer has taken one view, with which the Commissioner does not agree, the order cannot be treated to be erroneous and prejudicial to the interests of the Revenue.
Once an assessee is in a position to show that he has been over assessed under the provisions of the Act, regardless of whether the over-assessment is as a result of the assessee's own mistake or otherwise, the Commissioner has the power to correct such an assessment under section 246(1) of the Income Tax Act, 1961. If the Commissioner refuses to give relief to the assessee, he would be acting de hors the powers under the Act". (Emphasis supplied).
m) The assessees' rights/entitlements to raise new grounds which are legal in nature are up held by the Apex Court in the following cases.
1. Jute Corporation of India (187 ITR 688)(SC)
2. National Thermal Power Corporation Ltd (229 ITR 383)(SC)
11 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
n) In the light of the above submissions, it is prayed that the Hon'ble Income tax Appellate Tribunal be pleased to hold that the amounts received on relinquishment of disputed rights over the assets is not liable for capital gains tax, since there is no cost of acquisition.
o) If the Hon'ble Income Tax Appellate Tribunal is pleased to consider this legal issue in favour of the assessee group, the other issues raised by the assessee group need not be adjudicated. In case the additional Ground is not acceptable to the Hon'ble Income Tax Appellate Tribunal, the submissions on the other grounds issue wise are as under.
9. The DR strongly opposed admission of the additional ground.
10. We have heard both the parties on this issue. In our opinion, there is a reasonable cause for raising additional ground by the assessee before us for the first time. Considering the arguments of the AR, it is appropriate to admit the additional ground. However, the lower authorities have no occasion to go into the merit of the additional ground raised by the assessee before us. In all fairness it is appropriate to set aside this issue to the file of the Assessing Officer to examine the additional ground in the light of the arguments placed by the assessee's counsel before us. Accordingly, we remit back the additional ground raised before us to the file of the Assessing Officer for due consideration. He will examine the same in the light of the arguments made by the assessee's counsel before us and in the light of the judgement of Supreme Court in the case of B.C. Srinivasa Setty (cited supra) and also the other judgements cited by the AR. Since the additional ground raised by the assessees goes to the root of the matter, at this stage, we refrain ourselves 12 ITA No. 944/Hyd/2011 & Ors. Mr. Mirza Jaleel Ahmed & Ors.
from adjudicating any other grounds raised by the assessee or by the Revenue.
11. In the result, all the assessees' appeals as well as Revenue appeals are allowed for statistical purposes.
Order pronounced in the open court on 31st May, 2012.
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated the 31st May, 2012
Copy forwarded to:
1. Mr. Mirza Jaleel Ahmed, c/o. M/s. Ch. Parthasarathy & Co., 1-1-298/ 2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
2. Mr. Mirza Iqbal Ahmed, c/o. M/s. Ch. Parthasarathy & Co., 1-1-298/ 2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
3. Smt. Mehmooda Begum, c/o. M/s. Ch. Parthasarathy & Co., 1-1-298/ 2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
4. Mr. Mirza Jameel Ahmed, c/o. M/s. Ch. Parthasarathy & Co., 1-1-298/ 2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
5. Smt. Rahmatunnisa Begum, c/o. M/s. Ch. Parthasarathy & Co., 1-1- 298/2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
6. Smt. Kouser Begum, c/o. M/s. Ch. Parthasarathy & Co., 1-1-298/ 2/B/3, 1st Floor, Sowbhagya Avenu3e, St. No. 1, Ashoknagar, Hyderabad-500 020.
7. The Deputy Commissioner of Income-tax, Central Circle-6, Hyderabad.
8. The Commissioner of Income-tax (Appeals)-I, Hyderabad.
9. The Commissioner of Income-tax (Central), Hyderabad.
10. The DR - B Bench, ITAT, Hyderabad.