Shri Lawrence Rebello v. ITO

Case snapshot

Sections / provisions: 4

Questions before the Court / Tribunal

• S. 4 : Charge of income-tax – Hardship allowance received from the Developer – Capital receipt-Not chargeable to tax. [S. 2(24)(vi)] The Hon’ble Income-tax Appellate Tribunal – Indore Bench in the case of Shri Lawrence Rebello v. ITO ITA No.132/Ind/2020 dated September 29, 2021 inter alia, relying on the decisions of the Hon’ble ITAT- Mumbai Bench in the case of Smt. Delilah Raj Mansukhani Vs. ITO, ITA No.3526/Mum/2017, order dated 29.01.2021, Kaushal K. Bangia v. ITO ITA No.2349/Mum/2011 dated January 31, 2012 and Shri Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 held that the benefit received by the assessee in the form of bigger size of flat and amount received as hardship allowance from the developer is a capital receipt, which cannot be treated as revenue receipt for taxing as income. (ITA No.132/Ind/2020 dated September 29, 2021, A.Y. 2011-12) Coram Hon’ble Shri C.M.…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

ITA No.132/Ind/2020 (/glyph470/uni0928/uni0927/uni093E/glyph110/uni0930/uni0923 /uni0935/uni0937/glyph110 / Assessment Year : 2011-2012) Shri Lawrence Rebello, 3, Nath Mandir Colony, South Tukoganj, Indore Vs ITO-1(3), Indore PAN No. : ABEPR 2143 L

/glyph470/uni0928/uni0927/uni093E/glyph110/glyph465/uni0930/uni0924/uni0940 /uni0915/glyph566 /uni0913/uni0930 /uni0938े /Assessee by : Shri Pankaj Shah, CA /uni0930/uni093E/uni091C/glyph233/uni0935 /uni0915/glyph566 /uni0913/uni0930 /uni0938े /Revenue by : Shri P.K.Singh, Sr.DR

This is an appeal filed by the assessee against the order dated 08.01.2020, passed by the CIT(A)-I, Indore for the assessment year 20112012 on the following grounds :- 1. On the facts and circumstances of the case and in law the learned Commissioner of Income tax (Appeals)-I ("CI T(A)") erred in confirming the action of Assessing Officer in reopening the case and making reassessment under Section 147 of the Act which is prayed to be quashed and held as unwar ranted, illegal and bad-in law.

2. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the action of As sessing Officer determining total income at Rs.34,01,150/- as against declared income of Rs.6,28,040/- which is bad in la w and excessive.

3. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the action of As sessing Officer in making addition of RS.27,73,108/- on acc ount of Hardship Compensation received by treating it reven ue receipt instead of capital receipt. The appellant prays tha t the addition be deleted.

Appellant / petitioner / assessee submissions

2. Brief facts of the case are that the assessee is an individual and filed his return of income manually on 28.07.2011, declaring income of Rs.6,28,040/-. On the basis of information received from ITO-23(2)(3), Mumbai, regarding receipt of Rs.27,73,108/-, the AO recorded the satisfaction for reopening the case of the assessee for A.Y.2011-2012 u/s.148 of the Act. In pursuance to notice u/s.148 of the Act, the assessee filed his return of income declaring the income as declared in the original return. The AO asked the assessee regarding receipt of Hardship compensation of Rs.27,73,108/- from M/s DB MIG Real tors and Builders Pvt. Ltd. In this regard, the assessee submitted th at he has not offered money receipt as Hardship Compensation for taxation for the relevant assessment year as Hardship Compensation for taxati on is not a revenue receipt but a capital receipt. However, the AO did not accept the above contention of the assessee and treated that the com pensation received by the assessee during the period under consideration as income of the assessee from other sources and charged to tax acco rdingly. 3. Against the order of AO, the assessee preferred appeal before the CIT(A) and the CIT(A) dismissed the appeal of the assessee. 4. Further aggrieved by the order of CIT(A), the as sessee is in appeal before the Tribunal on the grounds as mentioned above. Ground No.1 5. Learned Assessee’s Representative (AR) submitted that the ld. CIT(A) has erred in confirming the action of AO in reopening the case and

making reassessment u/s.147 of the Act, which deser ves to be quashed being unwarranted, illegal and bad-in-law. Ld. AR a lso submitted that the ld. First Appellate Authority (FAA) has also erred in confirming the action of the AO in initiating reassessment proceedings u/ s.147 of the Act and issuing notice u/s.147 of the Act beyond six years without any legal and justified basis. Therefore, the entire reopening pr oceedings, notice and all consequent proceedings and orders deserve to be qua shed being unsustainable and bad in law. 6. Replying to the above, Shri P.K.Singh, ld. Sr. D epartmental Representative(DR) drew our attention towards page No.6 of assessee’s paper book and vehemently contended that the AO has initiated reassessment proceedings u/s.147 of the Act and has issued notice u/s.148 of the Act by following all legal procedure , required approval and by pressing into service the provision of clause(b) of Explanation 2 to Section 147 of the Act and in para 4 of the reasons recorded, the AO has expressly mentioned that the assessee has not decla red fully and truly income chargeable to tax for the F.Y.2010-2011 rela ting to the assessment year 2011-2012, therefore, no allegation can be levelled against the AO regarding initiation of reassessment proceedings and issuance of notice.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

Thus, the ld. Sr.DR submitted t hat the initiation of reassessment proceedings, issuance of notice and co nsequent proceedings and orders may kindly be upheld. 7. On careful consideration of above rival submissi ons, we are of the considered view that from the copy of reasons recor ded by the AO vide

It has not been controverted th at the said agreement was undertaken between the said two parties and ass essee was also one of the beneficiary/flat owner in the said society. The ld. AR of the assessee has not pointed out any fact that the asse ssee has declared the said transaction before the department, therefore, the allegation levelled by the AO that the assessee has not declared fully and truly the income chargeable to tax for A.Y. 2010-2011 relevant to A. Y.2011-2012. We may also point out that at the time of initiation of pr oceedings, the assessee has to draw a prima facie inference and satisfactio n that the income has escaped assessment but the AO has not debarred or s topped from granting relief to the assessee by dropping the rea ssessment proceedings if during the course of reassessment proceedings th e assessee exclusively established and substantiate that there was no income chargeable to tax has escaped.

Without commenting o n merits of the case, we are of view that the initiation of reasses sment proceedings and

proceedings u/s.147 of the Act by pressing into ser vice clause (b) of Explanation 2 to Section 147 of the Act and issuanc e of notice u/s.148 of the Act is valid and has been based on sound legal principle and provisions of the Act. Therefore, we decline to gra nt any relief to the assessee on ground No.1 raised by the assessee. Con sequently, ground No.1, being legal, is hereby dismissed. Ground Nos.2 & 3: 8. Ld. AR submitted that on the facts and circumsta nces of the case and in law the learned CIT(A) erred in confirming t he action of Assessing Officer determining total income at Rs.34,01,150/- as against declared income of Rs.6,28,040/- which is bad in law and exc essive.

coordinate bench of the Tribunal in the case of Shr i Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 concluded t hat the amount received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax and, therefore, the Bench directed to delete the addition. 9. Replying to the above, ld. Sr. DR supported the reassessment as well as first appellate order and submitted that th e assessee has not come with clean hands and has not declared the impu gned amount received by it before the taxation authorities. Ld. Sr.DR also submitted that in absence of required details it cannot be co nsidered as capital receipt, therefore, the orders of authorities below may kindly be upheld.

10. Placing rejoinder to the above, ld. AR drew ou r attention to the page No.6 of the assessee’s paper book and submitte d that in para 3 of the reasons, the AO himself noted that the assessee was to receive a flat of 1536 sq.ft. in lieu of old flat of 615 sq.ft., i n addition to that he was also to receive total hardship allowance due to members as per DA in the period between 01.04.2010 to 31.03.2011 of Rs.9,243 ,693/-, therefore, it cannot be alleged against the assessee that the ass essee could not establish the fact that it was capital receipt. 11. On careful consideration of above rival submiss ions, we are of the considered view that in the reasons recorded the AO himself noted that the benefits received by the assessee from a bigger size of flat and impugned amount has been given in pursuance to agre ement between the society and the developer and it was hardship c ompensation,

Operative decision and relief

The impugned receip t ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same will be taken into account as such, as and when occasion arises for computing capital gains in respect of th e said asset. Subject to these observations, the appeal of assessee is allowed.”

Accordingly, ground Nos.2 & 3 are allowed and the A O is directed to delete the addition. 12. Ground No.4 is general in nature, which require s no separate adjudication. 13. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 29 /09/202 1. Sd/ - (/uni092E/glyph470/uni0928/uni0937 /uni092C/uni094B/uni0930/uni093E/uni0921) (MANISH BORAD ) Sd/ - (/uni0938/uni0940./uni090F/uni092E. /uni0917/uni0917/glyph110) (C.M.GARG) /uni0932े/uni0916/uni093E /uni0938/uni0926/glyph233/uni092F / ACCOUNTANT MEMBER /glyph220/uni092F/uni093E/glyph470/uni092F/uni0915 /uni0938/uni0926/glyph233/uni092F / JUDICIAL MEMBER /glyph466/uni0926/uni0928/uni093E/uni0902/uni0915 Dated 29 / 09 /2021 Prakash Kumar Mishra, Sr.P.S. /uni0906/uni0926े/uni0936 /uni0915/glyph566 /glyph293/glyph470/uni0924/glyph871/uni0932/glyph874/uni092A /uni0905/glyph275े/glyph874/uni0937/uni0924 /Copy of the Order forwarded to :

Ratio and legal principle

The narrow proposition associated with Shri Lawrence Rebello v. ITO concerns s. 4 : charge of income-tax – hardship allowance received from the developer – capital receipt-not chargeable to tax. [s. 2(24)(vi)] the hon’ble income-tax appellate tribunal – indore bench in the case of shri lawrence rebello v. ito ita no.132/ind/2020 dated september 29, 2021 inter alia, relying on the decisions of the hon’ble itat- mumbai bench in the case of smt. delilah raj mansukhani vs. ito, ita no.3526/mum/2017, order dated 29.01.2021, kaushal k. bangia v. ito ita no.2349/mum/2011 dated january 31, 2012 and shri devshi lakhamshi dedhia vs. acit in ita no.5350/mum/2012 held that the benefit received by the assessee in the form of bigger size of flat and amount received as hardship allowance from the developer is a capital receipt, which cannot be treated as revenue receipt for taxing as income. (ita no.132/ind/2020 dated september 29, 2021, a.y. 2011-12) coram hon’ble shri c.m.… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA No.132/Ind/2020.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Disposed / relief as recorded” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 4 : Charge of income-tax – Hardship allowance received from the Developer – Capital receipt-Not chargeable to tax. [S. 2(24)(vi)] The Hon’ble Income-tax Appellate Tribunal – Indore Bench in the case of Shri Lawrence Rebello v. ITO ITA No.132/Ind/2020 dated September 29, 2021 inter alia, relying on the decisions of the Hon’ble ITAT- Mumbai Bench in the case of Smt. Delilah Raj Mansukhani Vs. ITO, ITA No.3526/Mum/2017, order dated 29.01.2021, Kaushal K. Bangia v. ITO ITA No.2349/Mum/2011 dated January 31, 2012 and Shri Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 held that the benefit received by the assessee in the form of bigger size of flat and amount received as hardship allowance from the developer is a capital receipt, which cannot be treated as revenue receipt for taxing as income. (ITA No.132/Ind/2020 dated September 29, 2021, A.Y. 2011-12) Coram Hon’ble Shri C.M.… Its practical value lies in the way the Indore connected the governing provisions—4—to the procedural posture and evidence before it.

The authority level is ITAT / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 4 and the decision date 2021-09-29; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Shri Lawrence Rebello v. ITO, the proceeding is ITA No.132/Ind/2020, and the decision is dated 2021-09-29. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SHRI C.M.GARG, JM & SHRI MANISH BORAD, AM. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 4. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Disposed / relief as recorded. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 4 — apply the exact version considered in the judgment.

Case network

• Gopalakrishnan Rajkumar & Anr v. The Principal Commissioner of Income-tax, Chennai-8 & others — Madras High Court · Disposed / relief as recorded
• NOIDA v. Anand Sonbhadra — Supreme Court of India · Dismissed
• DCIT, Central Circle 2 v. Bhagyalaxmi Rolling Mills Pvt. Ltd. — ITAT Pune · Dismissed
• Jay Chemical Industries Ltd. v. DCIT — ITAT Ahmedabad · Dismissed

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