ITAT: Bulder’s rent payments in redevelopment situations are not taxed

Fact and issue of the case

This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals)-41, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 23.05.2018 for the A.Y.2013-14.

At the outset, we observe that the present appeal is filed by the assessee with a delay of 1566 days and assessee also filed an affidavit in this regard and prayed for condonation of delay. In the affidavit assessee has submitted as under: –

“(1) It is evident from the order of assessment completed u/s 143(3) of the Income Tax Act, 1961 that there were two addition made in the course of assessment u/s.143(3) on account of drawings Rs 1,90,000 and on account of rent received Rs.3,73,191/ from the builders on the property under redevelopment.

(ii) That the aggrieved by the aforesaid both the additions appeal was contested before CIT(A)- 41, Mumbai u/s.250 Of the Act wherein the 1st addition of Rs 1,90,000 was deleted whereas the 2nd addition was confirmed, vide order CIT(A)-41/IT/152/16-17 dated 23.05.2018, distinguishing the order of Coordinate Bench of this Tribunal, relied upon by me, in the case of Kishore B Bangia vide ITA 2349/M/2011 vide dated 31.01.2012.

(iii) That both the proceedings, proceeding u/s 143(3) aswell as proceeding u/s.250 of the Income Tax Act, were represented by the Bharat B Shah and CO., Chartered Accountants which advised me that addition confirmed is based on the order of the Co-ordinate Bench of the ITAT, Mumbai and hence, there is little merit in the case to take it before the 2nd appellate authority and this advice was followed in view of fiduciary relation have had with the CA Shri Bharat B Shah.

(iv) That following the aforesaid order of the CIT(A)-41, Mumbai, penalty proceeding was initiated u/s.271(1)(c) and eventually levied, vide Order DIN ITBA/PNL/F/271(1)(c)/2021- 22/1038515609(1) dated 07.01.2022 and the same is contested before the NFAC, Delhi.

Observation of the court

After considering the submissions of the assessee Ld.CIT(A) rejected and distinguished the case laws relied on by the assessee in the case of Kushal K. Bangia v. ITO in ITA.No. 2349/Mum/2011 and sustained the addition made by the Assessing Officer.

Aggrieved assessee is in appeal before us raising following grounds in its appeal: –

“Ground No.1 Ld. CIT(A) is erred to confirm the addition made, despite this being a covered issue by the decision of the Co- Ordinate Bench of this H’ble ITAT whereby it is made clear that impugned addition made is capital receipt and hence, not chargeable to tax.

Ground No.2 Appellant craves to add, amend alter to the grounds raised above ”

Respectfully following the above said decision, we also hold that the above receipt of compensation for hardship is in the nature of capital receipt. Accordingly, the addition made by the Assessing Officer is deleted. Ground raised by the assessee is allowed.

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

Order pronounced in the open court on 03rd April, 2023