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2016 (10) TMI 524 - ITAT PUNE

2016 (10) TMI 524 - ITAT PUNE - TM - Computation of Long term capital gains (LTCG) - Disallowance of payment made to hutment dwellers for vacating the land - Held that:- These unauthorized occupants do not have permanent place of stay and they move from one place to another till the time they get place to settle down. Moreover, the dwellers were not personally known to the assessee. In such circumstances it is not prudent to expect from the assessee to produce the illegal occupants of land to wh .....

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f assessee in toto. The third objection is that there is no formal agreement with the slum dwellers. The Assessing Officer has observed that the receipts produced by the assessee are cyclostyled bearing only name and amount. We are of the considered view that when payments are made to encroachers/illegal occupants for vacating the land no formal agreement is required to be executed. The prime object of the owner of land is to seek the possession of land and ensure that land is free from encumbra .....

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ntire payment made to encroachers for vacating the land are not justified. - The assessee had jointly purchased the land with Shri Narayan S. Khadake, though the assessee had major share in the land. As per assessee own admission, the assessee has paid ₹ 7.80 lakhs out of ₹ 10.00 lakhs paid to encroachers. The remaining sum of ₹ 2.20 lakhs was contributed by Shri Narayan S. Khadake. Taking into consideration the entirety of facts we are of considered opinion that no disallo .....

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property or was dealing in land/property. The ld. DR has not been able to controvert the findings of the first appellate authority. In our opinion the findings of Commissioner of Income Tax (Appeals) are well reasoned and justified. We concur with the same. No other issue has been raised by the Department in appeal. Accordingly, the appeal of the Revenue is dismissed. - ITA No. 632/PN/2007, ITA No. 821/PN/2007 - Dated:- 19-8-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee .....

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ssing the additional ground of appeal i.e. in not declaring the assessment order passed u/s. 143(3) r.w.s. 147 as bad in law and void ab initio. 2. In the facts and circumstances of the case Learned Commissioner of Income Tax, Appeals-II, Nashik erred in not allowing the payment of ₹ 10,00,000/- made to Hutment Dwellers for vacating the premises and thereby rejecting the claim for reduction of index cost for improvement. 3. The Department on the other hand has impugned the findings of Comm .....

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the learned CIT(A) erred in treating the addition made on account of adventure in nature of trade as presumption. In para 10 of the AO's order it is very clear that assessee before entering into this transaction and after that also was having series of transactions which proves that assessee was indulging in such adventure in nature of trade since long. 3. On the facts and in the circumstances of the case, the decision of the ITAT, Bombay G Bench in the case of ITO Vs. Sitaram Chamaria (6 SO .....

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eti on 08-11-2004 which was served on Smt. Ujjawala S. Baheti, wife of Mr. Sitaram Anandram Baheti. The appellant in response to the notice u/s. 148 intimated the Assessing Officer vide letter dated 14-01-2005 regarding the death of her husband Mr. Sitaram Anandram Baheti and also requested the Assessing Officer to give reasons for issuing notice u/s. 148 of the Act. The appellant further requested the Assessing Officer to treat the return already filed as return of income in response to notice .....

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of notice u/s. 148 of the Act, despite that the Assessing Officer chose to continue with the assessment proceedings without issuing fresh notice on the LR u/s. 148 of the Act. The Assessing Officer had sufficient time available with him for issuing notice u/s. 148 on the LR even when appeal was pending before the Commissioner of Income Tax (Appeals). Since, the reassessment proceedings were completed on the basis of notice issued in the name of a dead person, the same are null and void. The fir .....

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at the very authority of the court to pass any decree and such defect cannot be cured even by the consent of the parties. The ld. AR contended that where the order has been passed by the court without jurisdiction it is obligation of the appellate court to set aside the order under appeal. The ld. AR in support of his submissions placed reliance on the following decisions : i. Harshad Chiman Lal Modi Vs. DLF Universal Ltd. & Another, AIR 2005 SC 4449; ii. State of Gujarat Vs. Rajesh Kumar Ch .....

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cided on 20-07-2011. 4.1 The ld. AR further submitted that a perusal of reasons for reopening which are available at page 85 of the paper book would show that reassessment proceedings have been initiated without their being any fresh material available for reopening. The Assessing Officer has invoked the provisions of section 147 merely to verify the transactions. There is no allegation against the assessee that the assessee has not truly and fairly given the details or the assessee has suppress .....

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ssessee along with one Shri Narayan S. Khadake purchased plot of land which was encroached by unauthorized occupants. The land was purchased by the assessee and Shri Narayan S. Khadake in the year 1995 for a consideration of ₹ 3,60,395/-. The vendor of the land had already filed suit against illegal occupants of the land in Civil Court at Jalgaon. A sum of ₹ 10 lakhs was paid to various unauthorized occupants of the land in out of Court settlement to get the land vacated. Thereafter, .....

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not ready to vacate the land till the payment is received by them in cash. The assessee was constrained to make payment in cash to the encroachers of the land. The ld. AR further submitted that the fact that land was encroached by slum dwellers is clearly evident from the perusal of purchase deed. It is also an undisputed fact that civil suit was pending before Civil Court, Jalgaon for evicting of illegal occupants of land. The suit was withdrawn on 01-03-2001 after the assessee had entered int .....

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owing the expenditure claimed by the assessee towards payment of compensation to the alleged encroachers of land and further disallowed by the Commissioner of Income Tax (Appeals). The ld. DR submitted that the assessee in his return of income had declared total income of ₹ 22,30,284/- including agriculture income of ₹ 42,000/-. The original assessment was made in the case of the assessee on 29-12-2003 u/s. 143(1) of the Act. Thereafter, notice u/s. 148 was issued on 08-11-2004. The .....

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ice u/s. 148 and even sought reasons for reopening. Thereafter, the Assessing Officer issued notices u/s. 143(2)/142(1) in the name of LR of Mr. Sitaram Anandram Baheti i.e. the present assessee. The present assessee after the demise of her husband stepped into the shoes of her husband and being his legal representative participated in the assessment proceedings. The present assessee even filed revised return of income on 14-02-2005 declaring income of ₹ 23,81,102/- and also paid self asse .....

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ficer came to know about the death of Mr. Sitaram Anandram Baheti all notices were issued in the name of LR. Sufficient opportunity of hearing was given to the assessee. The assessee participated in the assessment proceedings throughout. Therefore, no prejudice is caused to the assessee. 5.1 The ld. DR submitted that the decision rendered by the Mumbai Bench of the Tribunal in the case of Shri Avinash V Vyas Vs. Income Tax Officer (supra) is distinguishable as in the said case Assessing Officer .....

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Court in the case of Kaushalaya Bai Vs. ACIT reported as 238 ITR 1008. The ld. DR contended that in the said case the Hon'ble Madhya Pradesh High Court has held that since the widow of the deceased had already participated in the proceedings, notwithstanding the fact that notice was issued in the name of dead person, the defect in the notice stood automatically cured. The ld. DR further in support of his submissions placed reliance on the following decisions : i. Commissioner of Income Tax V .....

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moved in 1999. Thereafter, the plot was sold in 2002 after it was free from unauthorized occupants. This clearly shows that the plot was purchased with the intention of earning huge profit after removing encroachers. The land transaction is clearly adventure in the nature of trade. Apart from the land in question, the assessee had made investment in other immovable assets as well. 6. Controverting the submissions of the ld. DR, the ld. AR submitted that in the case of Kaushlya Bai Vs. ACIT (supr .....

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ocate by profession and was not dealing in property. The assessee made investment in properties including the land in question. The assessee did not sell any of the properties between 1985 to 2002. Merely for the reason that the assessee had made investment in immovable assets, it would be wrong to hold that the assessee was dealing in property. The ld. AR prayed for dismissing the appeal instituted by the Department. 7. We have heard the submissions made by the representatives of rival sides an .....

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of notice issued u/s. 148 of the Act. The Assessing Officer proceeded with the assessment without issuing fresh notice in the name of LR of the deceased. We observe that at the time of issuance of notice u/s. 148 it was not in the knowledge of Assessing Officer that Mr. Sitaram Anandram Baheti had died. After this fact came to the knowledge of Assessing Officer, the subsequent notices issued by the Assessing Officer u/s. 143(2)/142(1) of the Act were in the name of present assessee/appellant, t .....

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ome Tax Officer (supra) to say that assessment made on the dead person is null and void. There is absolutely no doubt about this proposition. However, we find that facts in the cases on which the ld. AR of the assessee has placed reliance are at variance from the facts of the case in hand. In the case of Avinash V. Vyas (supra) notice u/s. 148 was issued on a dead person, the LR of the deceased informed the Assessing Officer regarding the demise of assessee, despite that the Assessing Officer is .....

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ok Kumar Vij. In reply to notice Shri S.C. Jain, CA again informed Assessing Officer on 14-05-2009 regarding death of Ashok Kumar Vij. The Assessing Officer was aware of the fact that Ashok Kumar Vij had died yet the Assessing Officer erred in issuing notice u/s. 148 in the name of dead person. 8.2 In the case of Vipin Walia Vs. Income Tax Officer (supra), a notice u/s. 148 was issued in the name of Shri Inder Pal Singh Walia. The notice was returned un-served with endorsement Addressee expired .....

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er approached the Hon'ble Delhi High Court in Writ Petition. The Hon'ble High Court in the facts of the case quashed the notice dated 27-03-2015 and the proceeding arising therefrom. It is a trite law that no assessment can be made on the dead person and the notice of assessment/reassessment also suffers from defect if issued in the name of dead person. As per the provisions of section 159 of the Act, the Assessing Officer has to bring on record LRs of the deceased before proceeding with .....

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ad brought on record LR of the deceased Mr. Sitaram Anandram Baheti. Thus, the case laws on which the ld. AR have placed reliance are distinguishable on facts. In all the aforesaid cases, the Assessing Officer erred in proceeding with assessment / issuing notices in the name of dead person even after having knowledge of the death of the assessee. Thus, the assessments made were rightly held to be null and void. In our opinion, the case laws from which the assessee is trying to draw strength does .....

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espect of information furnished by the assessee in the return of income. We find merit in the submissions of the ld. DR. The Assessing Officer can apply his mind and form an opinion in respect of return of income in proceedings u/s. 143(3) of the Act. In the facts of the case we find no merit in the objection raised by the assessee against reassessment proceedings. Accordingly, ground No. 1 raised in the appeal by the assessee is dismissed. 10. In ground No. 2 of the appeal, the assessee has ass .....

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e civil suit against the illegal occupants of the land was subsequently withdrawn as the assessee had entered into out of court settlement with the encroachers of the land. Ostensibly, ₹ 10,00,000/- was paid in cash to the illegal occupants of the land for vacating the land. The fact that the land was illegally encroached by the hutment dwellers at the time of purchase and the same was subsequently vacated has not been disputed by the Department. It is a well known fact that the illegal oc .....

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land only if cash payment is made to them. The illegal occupants of land may not even have bank accounts. Even if they have, they may not even trust or wait for encashment of cheques after vacating the land. The owners of the land have to take immediate possession of the land after making cash payments to illegal occupants. 11. The authorities below have disallowed the cash payments made to unauthorized occupants of the land primarily for the reasons : (i) the assessee has not produced the perso .....

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ace to settle down. Moreover, the dwellers were not personally known to the assessee. In such circumstances it is not prudent to expect from the assessee to produce the illegal occupants of land to whom payments were made. In so far as second objection is concerned the assessee has furnished a copy of title of civil suit filed in the Civil Court, Jalgaon. A perusal of same shows that the suit was filed against 19 defendants, if the assessee has included the name of some more persons in the list .....

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legal occupants for vacating the land no formal agreement is required to be executed. The prime object of the owner of land is to seek the possession of land and ensure that land is free from encumbrances and encroachments. The assessee has produced receipts signed by some of the persons to whom payments have been made. The objection of the Department that receipts are on cyclostyled paper and lacks information is unwarranted. When the possession of land is retrieved from unauthorized occupants .....

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paid to encroachers. The remaining sum of ₹ 2.20 lakhs was contributed by Shri Narayan S. Khadake. Taking into consideration the entirety of facts we are of considered opinion that no disallowance on account of payment of compensation is called for. Accordingly, ground No. 2 in the appeal by assessee is allowed. 13. In the result, the appeal of the assessee is partly accepted in the aforesaid terms. 14. The Department in appeal has assailed the findings of Commissioner of Income Tax (Appe .....

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uch conclusion in the assessment order. The A.O. relied on the decision of CIT vs. Prabhu Dayal-82 ITR 804 and also the decision of CIT vs. Minal Ramesh Chandra- 167 ITR 507. The assessee purchased the property in the year 1995 and sold the same in the year 2002, i.e. after a gap of more than 6 years. The assessee was an Advocate and the real estate was not his business and therefore, the conclusion drawn by the A.O. that the assessee had purchased the plot for making a profit is baseless. Adven .....

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the assessee purchased property with an intention of making profit. Thus the conduct of the assessee also does not show that the transaction is in the nature of adventure in trade. The assessee is able to argue that the property was sold for repaying the bank loan and the co-owner was wanting to build a house. Hence, the sale is making profit. As already discussed above, the assessee was an Advocate and sale and purchase of lands is not incidental to his profession. Even the character of the tra .....

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