The Commissioner Of Income Tax-I, Chandigarh v. Yoginder Mohan Sehgal

I.T.A. No.82 of 2012 (O&M) -l- IN THE HIGH COURT OF PUNJAB AND HARYANA.AT CHANDIGARH I.T.A. No.82 of 2012 (O&M) Date of Decision: April 22, 2014 The Commissioner of Income Tax-I, Chandigarh ... Appellant Versus Yoginder Mohan Sehgal .... Respondent CORAM: HON'BLE MR.JIUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE KULDIP SING Present:Ms. Urvashi Dhugga, Advocate,for the appellant. Mr. Akshay Bhan, Senior Advocate,with Mr. Alok Mittal, Advocate,for the respondent. ++ SATISH KUMAR MITTAL, J, The revenue has filed the instant appeal under Section 260A ofthe Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) against theorder dated 03.11.2011 (Annexure A-6) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafterreferred to as ‘the Tribunal’) in ITA No.550/Chd/2010, pertaining to theAssessment Year 2005-06, raising the following substantial questions oflaw:- ;(1) Whether on the facts and circumstances of thecase, the Hon'ble ITAT has erred in law incase, the Hon'ble ITAT has erred in law in I.T.A. No.82 of 2012 (O&M) -2- deleting the addition ofRs. 1,33,54,388/- made bythe Assessing Officer after including theconsideration received in kind 1.e. the value ofground floor/flat in the total considerationreceived on account of sale of only 60% share inland. The Hon'ble ITAT has failed to appreciatethe provisions ofsection 48 ofthe Income Tax Actwhich clearly states that ‘full’ value ofconsideration has to be taken into account whilecomputing capital gains. (11) Whether on the facts and circumstances of thcase, the Ld. ITAT has erred in law in inferringthat the ground floor flat was received by theassessee in lieu of the transfer of40% land rightslosing sight of the fact that the addition of Rs.1,33,54,388/- made by the AO in substancerelates to transfer of 60% land rights only & thatdoesnotchangetheoveralladditions/computation of capital gains made bythe AO.”case, the Ld. ITAT has erred in law in inferringthat the ground floor flat was received by theassessee in lieu of the transfer of40% land rightslosing sight of the fact that the addition of Rs.1,33,54,388/- made by the AO in substancerelates to transfer of 60% land rights only & thatdoesnotchangetheoveralladditions/computation of capital gains made bythe AO.” The brief facts of the case are that originally the assessment ofthe assessee (who derives income from salary, house property, capital gainsand other sources) was framed by the Assessing Officer vide order dated9.4.2007 (Annexure A-1) under Section 143(3) of the Act at an income ofRs.61,38,784/-. Subsequently the Commissioner of Income Tax initiated theproceedings under Section 263 of the Act against the assessee on the groundthat the capital gains declared by the assessee with reference tocollaboration agreement dated 04.06.2004 had been accepted by theAssessing Officer without application of mind. After hearing the assessee, I.T.A. No.82 of 2012 (O&M) -3- the assessment order was set aside by the Commissioner of Income Tax videorder dated 22.07.2008 (Annexure A-2) and the matter was remanded to theAssessing Officer for fresh adjudication in accordance with law. The assessee challenged the said order by filing an appealbefore the Tribunal which was dismissed vide order dated 27.01.2009(Annexure A-3). Thereafter, the Assessing Officer re-framed the assessmentunder Section 143(3) of the Act vide order dated 30.11.2009 (AnnexureA-4). By the said order, the Assessing Officer assessed the value ofconsideration received by the assessee in kind from the collaborator asRs.1,63,33,333/- and allowed exemption under Section 54 of the Act to thetune of Rs.29,78.965/- and thereafter determined the capital gains earned bythe assessee as Rs.1,33,54,368/- on account of his share of 40% over andabove what he has declared for 60% share of the property. The assessee challenged the said order by filing an appealbefore the Tribunal which was dismissed vide order dated 27.01.2009(Annexure A-3). Thereafter, the Assessing Officer re-framed the assessmentunder Section 143(3) of the Act vide order dated 30.11.2009 (AnnexureA-4). By the said order, the Assessing Officer assessed the value ofconsideration received by the assessee in kind from the collaborator asRs.1,63,33,333/- and allowed exemption under Section 54 of the Act to thetune of Rs.29,78.965/- and thereafter determined the capital gains earned bythe assessee as Rs.1,33,54,368/- on account of his share of 40% over andabove what he has declared for 60% share of the property. Aggrieved against the said order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals) which was partlyallowed by the Commissioner of Income Tax vide order dated 22.02.2010(Annexure A-5) while holding that under the collaboration agreement theassessee had transferred 60% of the ownership in the plot for aconsideration of Rs.1,90,00,000/- on which the capital gains was paid andthe addition made by the Assessing Officer of Rs.1,33,54,388/- on accountof remaining 40% of the plot could not have been made as the assessee didnot transfer that share to the collaborator and retained the same for himself.With regard to penalty proceedings, it was held by the Commissioner ofIncome Tax that the penalty proceedings are independent proceedings and I.T.A. No.82 of 2012 (O&M) -4- the issue could not be adjudicated in quantum proceedings. The said order was challenged by the revenue by filing anappeal before the Tribunal which has been dismissed by the impugned orderdated 03.11.2011 (Annexure A-6), We have heard the learned counsel for the parties and do notfind any illegality in the order passed by the Tribunal as in our opinion thesubstantial questions of law framed by the revenue in this appeal do notarise in the facts and circumstances of the case. Undisputedly, the assessee entered into a _ collaborationagreement with the builder M/s Saluja Construction Company Limited on4.6.2004, according to which, he had transferred 60% share of the land onwhich the construction was to be raised after demolition of the existingconstruction. The builder was given right to sell first and second floor, twoservant quarters and two car parking spaces and right to use common spaceand terrace on 2[nd]floor, and in lieu of all, the builder was to pay a sum ofRs.1,90,00,000/- to the assessee besides construction of the basement,ground floor and servant quarter etc. The assessee received Rs.1,90,00,000/-as consideration for sale of 60% of the plot along with right of the builder toraise the construction and to sell the same to any one. In addition to that, hehad received the consideration in kind, i.e., cost of construction of thebasement, ground floor, servant quarter etc., which was to be given to himas per the agreement. Undisputedly, the value of construction on basement andground floor, which was to be given to the assessee, was Rs.29,78,965/-.That was the cost of construction which the assessee received in kind and I.T.A. No.82 of 2012 (O&M) -5- Undisputedly, the value of construction on basement andground floor, which was to be given to the assessee, was Rs.29,78,965/-.That was the cost of construction which the assessee received in kind and I.T.A. No.82 of 2012 (O&M) -5- qua that cost of construction, the assessee is entitled to get exemption undersection 54 of the Act. But the Assessing Officer had adopted a novelmethod in calculating the capital gains. He had obtained the report withregard to total sale consideration of the two floors by the builder which wasRs.2,45,00,000/-; and by taking the said figure, the Assessing Officercalculated the total value of the plot with construction as Rs.4,08,33,333/-and thereafter assessed the cost of 40% of the value of the plot andconstruction as Rs.1,63,33,333/- and then held that the said amount is theconsideration which the assessee has received in kind, and after deductingan amount of Rs.29,78,965/-, i.e. cost of construction which the assessee isentitled for exemption under Section 54 of the Act, the Assessing Officerassessed the capital gains as Rs.1,33,54,368/-. In our opinion, the learnedCommissioner of Income Tax (Appeals) has rightly held that there was nojustification by the Assessing Officer in computing the capital gains inrespect of 40% share in the property in the above manner as the assesseenever transferred 40% share to the builder. What he has gained in kind wasthe constructed portion on the ground floor, the value of which wasundisputedly Rs.29,78,965/-. The learned Tribunal while upholding thedecision of the Commissioner of Income Tax (Appeals) has rightly observedthat the Assessing Officer has completely overlooked the fact that theassessee had transferred only 60% ownership in the property for which hewas paid an amount of Rs.1,90,00,000/. The assessee never transferred 40%Share in the property to the builder. The said share was kept by him onwhich the builder constructed the ground floor and has given the same tothe assessee after construction. The value of that construction which the I.T.A. No.82 of 2012 (O&M) -6- assessee had received was Rs.29,78,965/- which the assessee was entitled tofor exemption under Section 54 of the Act. Thus, there was no justificationfor adding an amount of Rs.1,33,54,388/- and the said addition has beenrightly deleted by the Commissioner of Income Tax (Appeals), and the saidorder has been rightly upheld by the learned Tribunal. In view of the above, we do not find any illegality in theimpugned order and in our opinion, no substantial question of law is arisingfrom the impugned order of the Tribunal. Dismissed. (SATISH KUMAR MITTAL)JUDGE April 22, 201401* ( KULDIP SINGH )JUDGE