INCOME TAX OFFICER, CIVIC CENTRE MINTO ROAD DELHI V. USHA ARORA, HARYANA

ITA 3165/DEL/2024

AI Insights

The case involves an appeal by the Income Tax Officer against Usha Arora concerning the assessment of long-term capital gains and the disallowance of construction costs claimed by the assessee for the financial years 2012-13, 2019-20, and 2020-21. The Assessing Officer (AO) had initially disallowed these claims due to lack of documentary evidence proving the construction was carried out during the claimed financial years. However, the Ld. CIT(A) reversed this decision, accepting the assessee's additional evidence and valuation report, which led to the Revenue's appeal to the Income Tax Appellate Tribunal. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126762 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2021-2022
• Other Referred Cases: Govind Gangadhar Sabane [2019] 174 ITD 577 (Pune.Trib), CIT Vs. Brijpal Sharma [2009] 178 Taxman 467 (P & H .HC), G.L. Sultania and Anr. V. SEBI (AIR 2007 SC 2172) (SC), Sanjeevi and Co. vs CIT [1966]62 ITR 156(Mad.HC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: M.R. SAHU
• Keywords: Additional evidence; Cost of acquisition; Valuation report; Competent authority; Government Approved Valuer; Grounds of appeal; Residential Building; Dismissed; National Faceless Appeal; Commencement certificate; Disallowing; Indexed Cost of Construction; Voucher; Transfer; Transactions; Deleted; Department
• Section: 143(3); 143(1); 54; 133(6); 13; 2; 467

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SH. SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. SUDHIR KUMAR, JUDICIAL MEMBER ITA No.3165/Del/2024 Assessment Year: 2021-22 Income Tax Officer Civic Centre Minto Road, Delhi Vs. Usha Arora Villa No.39, Palm Springs Golf Course Road, Gurgaon Haryana -122002 PAN No.AAEPA0287F (APPELLANT) (RESPONDENT) Appellant by Ms. Harpreet Kaur Hansra, Sr. DR Respondent by Sh. M. R. Sahu, CA Date of hearing: 22/04/2025 Date of Pronouncement: 25/04/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal is preferred by the revenue is against the order 05.03.2024 of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “NFAC”] arising out of the order 08.08.2024 passed Assessing Officer dated 22.12.2022 under 2 section 143(3) read with section 144B of the Income Tax Act, 1961 [herein after, the Act] for the assessment year 2021-22. 2. The revenue has raised following grounds of appeal :- 1. That on facts and circumstances of the case and law, the CIT(A) has erred in deleting cost of construction for the A.Y. 2012-13 without verifying identify, creditworthiness and genuineness of the parties. 2. That on facts and circumstances of the case and in law, the CIT(A) has erred in deleting cost of construction for the A.Y. 2019-20 without verifying identity, creditworthiness and genuineness of the parties. 3. The appellant reserves right to add, alter or amend the grounds of appeal on or before the date of disposal of appeal. 3. The brief facts of the case are that the assessee is a home maker and she filed her return of income declaring an income of Rs. 56,67,920/-under the head capital gain and other sources. The return was processed u/s 143(1) of the Act and the case of 3 the assessee was picked up for scrutiny. The AO observed that the assessee had a capital gain amounting to Rs. 8,21,621 wherein the property in question was sold for a consideration of Rs.16,50,00,000/- against which she has claimed cost(s) of construction at Rs.1,18,59,481/-, Rs.4,00,00,000/- and Rs.10,00,000/- as deduction for the FY 2012-13, 2019-20 & 2020-21 respectively. Further, AO observed that a deduction u/s 54 to the extent of Rs.6,00,00,000 was also claimed which has been accepted by the AO. However, the AO rejected the reasoning/documentary evidences furnished by the assessee in support of her claim of cost of construction and held that in the absence of any documentary evidences proving that the construction was actually carried out during the FY 2012-13, the indexed cost of construction amounting to Rs.1,78,48,519 for the FY 2012-13 was disallowed and added back to the income. The AO further observed that cost of construction claimed at Rs. 2,54,50,000/- for the FY 2019-20 by the appellant has also been disallowed by the AO. The Assessment 4 in this case was completed by the AO at Rs.4,51,76,888/- making addition of Rs. 4,43,55,267/- on account of Long- Term Capital Gain. 4. Aggrieved by the aforesaid Assessment Order, the assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. The assessee filed additional evidences before the Ld. CIT(A) and accordingly the Ld. CIT(A) asked the submissions of the AO but AO did not furnish the requisite remand report, however, AO was given several opportunities. The assessee filed written submissions before the Ld. CIT(A) which are reproduced at pages 14 to 18 of the appellate order. Accordingly, the Ld. CIT(A) after going through the written submissions of the assessee as well as assessment order along with the appeal of the assessee by observing as under: “6.3 The appellant has claimed that she had got residential house under reference constructed partly during the financial year 2012-13 and spent Rs. 1,18,59,481/-Accordingly, she 5 claimed indexed cost of acquisition at Rs. 1,78,48,519/- against the sale consideration of the said property. Ld. AO has disallowed the claim of the appellant for the reason that she could not substantiate her claim by furnishing reliable documentary evidences such as bills and vouchers for the payments made by her in the construction of the building and she could not produce any contract agreement for construction works. Ld. AO also pointed out that the appellant could not furnish the commencement certificate for the construction of the building and without such certificate construction of the building cannot be started. Further, Id. AO also pointed out that the appellant did not furnish any bank statement demonstrating that payments for construction works were done through banking channel. However, Id. AO has accepted that the appellant had furnished approved building plan dated 03.09.2012 but he was of the opinion that the approved building plan does not conclusively prove that the construction activity has taken place during the financial year 2012-13. On the other hand, the appellant had furnished a valuation report issued by a government approved valuer who estimated the cost of construction in 2012-13 at Rs. 1.28.01.250/-, Ld. AO 6 has denied accepting the valuation report as it was merely based on the estimation of the cost only if the building was actually constructed in the F.Y. 2012-13. 6.4. During the appellate proceedings the appellant has furnished copies of purchase and sale deed of the property sold during the assessment year under reference. A perusal of purchase deed shows that the appellant had purchased a bare residential plot whereas she sold a residential house comprising her share in entire basement, ground floor, first floor and approximately 3/4th portion of entire stilt floor of the property under reference along with 77.5% of undivided, indivisible impartible ownership right in the said plot of land measuring 514 sq. yds. Ld. has not controverted the fact that the building was constructed; only debatable issue is the timing of construction, It is evident from the record that the appellant had got the building plan approved by the competent authority in the financial year 2012-13, it means that she was intended to get the building constructed then only. During the assessment proceedings, the appellant had furnished a copy of bills issued to her by M/s Ease Consultants Engineers (P) Ltd. 7 dt. 07.12.2012. The Id. AO rejected the same for the reason that it was not bearing PAN and Service Tax No. of the issuing party, but he did not bother to conduct an independent enquiry by issuing notice u/s 133(6) of the Act to the above party. Similarly, Id. AO just rejected the valuation of the government approved valuer without asking him the basis of valuation by issuing notice u/s 133(6) to him. He had also option to refer the case for valuation to the respective Departmental Valuation Officer (DVO) but he did not do so. Ld. AO has not denied the construction of the building, his only objection about timing of the construction but he has failed to establish conclusively that the building was not constructed partly in the F.Y. 2012-13. On the other hand the appellant had submitted approved building plan, valuation report form approved valuer and a copy of bill issued by M/s Consultants Engineers (P) Ltd. Only for the reason that the assessee could not produce supporting bills and voucher and commencement certificate for construction, indexed cost of construction as claimed by the appellant cannot be disallowed. It appears that the appellant started construction works after getting the building plan approved. If she did not obtain commencement certificate for construction, it 8 may be violation local construction bye laws, but on the basis of the same credit for cost of construction cannot be denied. Therefore, in the light of the facts of the case, I am of the considered opinion that the appellant's claim of indexed cost of construction in the F.Y. 2012-13 is justified. Hence, Id. AO is directed to delete the addition of Rs. 1,78,48,519/- made by him to the Long Term Capital Gain of the appellant. Accordingly, ground no. 2 of the appeal is allowed. 7.5 As discussed in para no. 4 above this written submission along with other documents furnished by the appellant during the appellate proceedings were forwarded to the Ld. AO asking a remand report and his comments on the acceptability of the additional evidences filed by the appellant. Despite various reminders no remand report has been furnished by the Id. AO. However, this office issued a query letters u/s 250(4) of the Act to the appellant. A perusal of assessment order shows that the Id. AO neither issued show cause notice nor draft assessment order to the assessee before passing the impugned assessment order. Therefore, in view of the case laws referred by the appellant and on the basis of the facts of the case, I am of the considered opinion that the appellant was not provided 9 sufficient opportunity to substantiate her claim during the assessment proceedings. Hence, additional evidences filed during the appellate proceedings are accepted. 7.6. During the appellate proceedings the appellant has furnished bank statements of the bank accounts maintained by her highlighting the relevant transactions. She also furnished copies of bills raised by Mis Shiv Krishna Construction along with confirmed copy of ledger account of Mis Barni Industries and Ashish Agrawal to whom she made payments for construction works. The appellant has also furnished Valuation Report issued by Er. V. P. Singh, a government approved valuer. The Id. AO denied to accept the said valuation report without providing any cogent reason. Entire payments were made through banking channel to the abovementioned three parties which is evident from the bank account statement of the appellant. Ld. AO has also accepted this fact and mentioned the same in the impugned assessment order. 7.7. This is an uncontroverted fact that the sale consideration realized by the appellant was against the sale of complete 10 residential building not against the bare residential plot as purchased by her. The cost of construction cannot be nil as it has been held by the Id. AO by disallowing entire amount of cost of construction claimed by the appellant. Therefore, I am of the considered opinion that disallowance of Rs. 1.04.50.000/- being costs of construction of the building incurred by the appellant in F.Y. 2019-20 is not justified. Accordingly Id. AO is directed to delete the above addition. 8. Ld. AO has disallowed Rs. 1,50,00,000/- claimed by the appellant as cost of acquisition of the property sold. Brief facts of the case are that the appellant had entered 8. into an agreement dated 03.12.2018 with Ishika Batra to sell the property under reference for Rs. 1.40.00.000/-, Ishika Batra paid Rs. 75,00,000/- as advance to the appellant through banking channel, but the property was not transferred to Ishika Batra. Later, this agreement was cancelled vide Deed of Cancellation of Agreement to Sell dated 25.09.2020. According to this cancellation deed the appellant had to pay Rs. 1.50.00.000/- to Ishika Batra who had advanced had advanced Rs. 75.00.000/- to the appellant against the sale of 11 property under reference. Both the deeds/agreements were not registered however; payments were made through bank by both parties. 5. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 6. The Ld. DR relied upon the order of the Assessing Officer. 7. On the other hand, Ld. AR for the assessee reiterated the submissions made before the Ld. CIT(A) and submitted that the Ld. CIT(A) has rightly deleted the additions and the order of the Ld. CIT(A) may be upheld. He further submitted that due to non- filing the remand report by the AO, the LD.CIT(A) has applied the Rule 46A read with section250(4) of and the relief granted to the assessee. Reliance has placed on the following decisions (i) Govind Gangadhar Sabane [2019] 174 ITD 577 (Pune.Trib) In the case the Hon’ble Co-ordinate bench held that the relief u/s 54 of the Act cannot be denied due to non -production of 12 bills & vouchers. Approved valuer’s certificate is sufficient proof to allow relief where, construction of house is accepted. 2. CIT Vs. Brijpal Sharma [2009] 178 Taxman 467 ( P & H .HC) 3. G.L. Sultania and Anr. V. SEBI (AIR 2007 SC 2172) (SC) 3. Sanjeevi and Co. vs CIT [1966]62 ITR 156(Mad.HC) 8. We have heard the rival submissions and perused the material available record. 8. We have heard the rival submissions and perused the material available record. 9. Perusal of the order of the Ld. CIT(A) reveals that the remand report was called out by the appellate authority but the AO was failed to submit the report. The Ld. CIT(A) has examined the issue that the assessee has furnished the valuation report issued by a government approved valuer who estimated the cost of construction in 2012-13 at Rs. 1,28,01,250/-. The assessee also filed the additional evidence before the appellate authority on which remand report was called out from the AO. The Ld. CIT(A) has examined the issues in the correct prospective and 13 rightly allowed the appeal of the assessee. The reasoning and findings of the Ld. CIT(A), while granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reason to interfere with the findings of the Ld. CIT(A). The appeal of the revenue is liable to be dismissed. 10. In the result the appeal of the Revenue is dismissed. Order pronounced in the open court on 25.04.2025. Sd/- Sd/- (SHAMIM YAHYA) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:25.04.2025 Neha, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "