John Baptist Lasrado, CHENNAI V. JCIT, CHENNAI

ITA 1045/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8678 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 09-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: K HEMALATHA
• Keywords: Reopening of assessment; Unexplained investment; Capital asset; Depreciation; Salary income; Deemed to accrue or arise in india; Cost of acquisition; Tangible material; Difference of opinion; Notional interest; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 54F; 234B; 147; 69; 148; 54

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A. NO S . 104 5 AND 1046 /MDS/201 6 ASSESSMENT YEAR S :20 08 - 09 AND 2011 - 12 S HRI JOHN BAPTIST LASRADO, 26/23, 3 RD SEAWARD ROAD, VALMIKI NAGAR, THIRUVANMIYUR, CHENNAI 600 0 4 1 . [PAN: A A D P J7078G ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , BU SINESS CIRCLE III , CHENNAI 34 . ( / APPELLANT ) ( / RESPONDENT ) I.T.A. NO. 1047/MDS/2016 ASSESSMENT YEAR :2011 - 12 SMT. FLAVY DAISY LASRADO, 26/23, 3 RD SEAWARD ROAD, VALMIKI NAGAR, THIRUVANMIYUR, CHENNAI 600 041. [PAN:AAAPF2804K] VS. THE DEPUTY COMMISSIONER OF INCO ME TAX, BUSINESS CIRCLE III, CHENNAI 34. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MS. K. HEMALATHA,, FCA / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEAR ING : 09 . 05 .201 6 / DATE OF P RONOUNCEMENT : 29 .07 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THESE APPEALS FILED BY TWO DIFFERENT ASSESSEES ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS), 15, I.T.A. NO S . 1045 TO 1047 /M/ 16 2 CHENNAI ALL DATED 23.02.2016 RELEVANT TO THE ASSESSMENT YEARS STATED HEREINABOVE. I.T.A. NO. 1045/MDS/2016 2. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE REOPENING OF ASSESS MENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] IS BAD IN LAW. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAVING INCOME FROM SALARY, HOUSE PROPERTY INCOME AND INTEREST INCOME. THE ASSESSEE HAS FILED HIS INC OME DECLARING TOTAL INCOME OF .10,44,920/ - AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED FROM THE RECORDS THAT IN THE VERIFICATION REPORT OF ITO IV(I&CI), CHENNAI DATED 05.06.2013, IT WAS MENTIONED THAT DUR ING THE YEAR, THE ASSESSEE HAS SOLD AN IMMOVABLE PROPERTY ON 12.10.2007 BY WAY OF POWER OF ATTORNEY. FURTHER, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 54 OF THE ACT BY INVESTING IN A NEW RESIDENTIAL PROPERTY AND HE IS NOT ELIGIBLE FOR THE CLAIM AS THE CONSTRUCTION OF NEW PROPERTY WAS COMPLETED ON 29.03.2011 ONLY, BEYOND 3 YEARS FROM THE DATE OF SALE AND THAT TOO THE CAPITAL GAINS WERE NOT INVESTED IN CAPITAL GAIN ACCOUNT SCHEME. IT WAS ALSO NOTICED THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 008 - 09 WAS FILED BY THE ASSESSEE IN BUSINESS WARD III(3) AND LATER ON IT WAS FORWARDED TO I.T.A. NO S . 1045 TO 1047 /M/ 16 3 BUSINESS CIRCLE III AND THE SAME WAS PROCESSED. IT WAS VERIFIED FROM THE RETURN OF INCOME THAT THE FULL VALUE OF CONSIDERATION RECEIVED BY THE ASSESSEE WAS .2.00 CRO RES MORE THAN ADMITTED BEFORE THE ITO (I&CI), CHENNAI. FURTHER, THE PROPERTY SOLD WAS VACANT LAND AND THE ASSESSEE IS ELIGIBLE ONLY FOR DEDUCTION UNDER SECTION 54F. THE ASSESSEE ALREADY OWNS 3 PROPERTIES, ON WHICH 2 MAY BE RESIDENTIAL AND HENCE THE ASSESSE E MAY NOT BE ELIGIBLE FOR ANY DEDUCTION AT ALL. 2.2 UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT BY ASSESSING T OTAL INCOME OF THE ASSESSEE AT .1,37,17,722/ - . 2.3 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 2.4 ON BEING AGGRIEVED, TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.5 THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY CONTENDED THAT THE SCRUTINY ASSESSMENT WAS REOPENED WITHOUT ANY FRESH TANGIBLE MATERIAL AND AS SUCH, REOPENING IS BAD IN LAW. SHE HAS SUBMITTED THAT DURING TH E COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE HAS FILED ALL THE MATERIALS NECESSARY I.T.A. NO S . 1045 TO 1047 /M/ 16 4 FOR THE PURPOSE OF ASSESSMENT AND THE REOPENING IS NOT BASED ON ANY TANGIBLE MATERIAL. THEREFORE, THE REASSESSMENT FRAMED IS BAD IN LAW. 2.6 WE HAVE HEARD BOTH SIDES, PER USED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE SCRUTINY ASSESSMENT UNDER SECTION 143(1) OF THE ACT WAS COMPLETED ON 25.11.2009 AND THE ASSESSMENT WAS REOPENED SINCE THERE WAS DIFFERENCE IN THE VALUE OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE AND ADMITTED IN THE RETURN OF INCOME. T HE ASSESSING OFFICER NOTICED THAT THE CAPITAL GAINS ARISING TO THE ASSESSEE AS CLAIMED IN THE RETURN OF INCOME WAS DUE TO TRANSFER OF AN IMMOVABLE PROPERTY IN THE FORM OF VACANT LAND IN TWO ITEMS ADMEASURING 5940 SQ.FT. AND 5742 SQ.FT. BEING PLOT NO. 18 SITUATED AT M.G.R. ROAD, NO. 132, PALAVAKKAM VILLAGE, TAMBARAM TALUK, KANCHIPURAM DISTRICT, TAMILNADU. THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR SALE ON 12.10.2007 WITH THE B UYERS MR. K.V. PRASAD AND MR. K. RAJASEKAR FOR THE SALE OF THE ABOVE MENTIONED PROPERTY FOR A TOTAL SALE CONSIDERATION OF .1,54,00,000/ - AND THE CONSIDERATION WAS RECEIVED IN TWO INSTALMENTS (A) .85,50,000/ - PAID BY MR. K. RAJASEKAR ON 05.04.2007 AND (B) .68,50,000/ - ON 07.04.2007 PAID BY MR. K.V. PRASAD. FROM THE ABOVE IT IS CLEAR THAT THE FULL VALUE OF CONSIDERATION OF T HE SAID PROPERTY WAS ONLY .1,54,00,000/ - BUT THE ASSESSEE HAS CLAIMED THE FULL VALUE OF CONSIDERATION RECEIVED WAS .2.00 CRORES. I.T.A. NO S . 1045 TO 1047 /M/ 16 5 2.7 NOW, THE CONTENTION OF THE AR IS THAT THE REASSESSMENT WAS DONE ONLY ON THE BASIS OF SAME SET OF FACTS, WHICH WERE ALR EADY AVAILABLE ON RECORD AND IT CANNOT BE A GROUND FOR REOPENING OF THE ASSESSMENT. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE F ORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, ACTION U NDER SECTION 148 OF THE ACT CAN BE TAKEN . BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED I S THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CAS E, THE SCRUTINY ASSESSMENT WAS COMPLETED ON 2 5 . 1 1 .20 09 UNDER SECTION 143(1 ) OF THE ACT. THE REASON FOR REOPENING WAS DISCUSSED ABOVE. THE ARGUMENT OF THE LD. AR IS THAT UNDER SECTION 147 OF THE ACT IN CASE THE ASSESSMENT ORDER IS COMPLETED U NDER SECTION 143(1 ) OF THE ACT , AS HAS BEEN DONE IN THIS CASE, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEA R UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. I.T.A. NO S . 1045 TO 1047 /M/ 16 6 2 . 8 THE LD. AR CONTENDED THAT IN THIS CASE, THE ASSESSING OFFICER HAVE NO TANGIBLE FRESH MATERIAL FOR THE REASSESSMENT FOR THAT ASSESSMENT YEAR. AS SEEN FROM THE REASONS RECORDED WHICH GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION THAT INCOME HAS ESCAPED ASSESSMENT THAT IS WHY HE REOPENED THE ASSESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THAT POINT OF TIME OF REOPENING WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THE PLEA OF THE LD. AR IS NOT TENABLE IN THE EYES OF LAW. UNDER SECTION 147, THE ASSESSING OFF ICER CAN EITHER ASSESS OR RE - ASSESS BUT FOR TAKING ACTION THERE UNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT PROCEEDINGS UNDER SE CTION 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153 OF THE ACT . IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. THE ASS ESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE SCRUTINY ASSESSMENT WAS COMPLETED UNDER SECTION 143( 1 ) ARE SATISFIED OR NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH I NCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF I.T.A. NO S . 1045 TO 1047 /M/ 16 7 UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER W OULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE POWER UNDER SECTION 147 OF THE ACT TO RE - ASSESS THE INCOME POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. ON THE BASIS OF CHANGE OF OPINION , WHICH CANNOT BE PER SE A REASON TO REOPEN THE ASSESSMENT. IN OUR OPINION, AS SEEN FROM THE ABOVE REASONS RECORDED, THE ASSESSING OFFICER WOULD HAVE ASCERT AINED THE ESCAPEMENT OF INCOME AT THE TIME OF SCRUTINY ASSESSMENT ALSO ONLY WITH DUE DILIGENT. HENCE, THE REOPENING IS HELD TO BE VALID. EVEN OTHERWISE, IT IS THE DUTY OF THE ASSESSEE TO BRING ALL THE FACTS TO THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT AND ONLY JUST FILING OF DOCUMENTS AT THE TIME OF ASSESSMENT IS NOT ENOUGH AND HE SHOULD BE DREW THE ATTENTION OF THE ASSESSING OFFICER TO ALL NECESSARY MATERIAL. CONSEQUENTLY, WE HOLD THAT THE ENTIRE ASSESSMENT IN THIS CASE IS VALID AND THEREFORE, THE REOPENING OF ASSESSMENT IS UPHELD. I.T.A. NO S . 1045 TO 1047 /M/ 16 8 3. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DENIAL OF THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54F OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS INVESTED THE CAPITAL GAINS IN CONSTRUCTION OF A NEW ASSET. T HE SECTION 54F OF THE ACT MANDATES THAT THE ASSESSEE HAS TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE ON WHICH THE TRANSFER OF ORIGINAL ASSET TOOK PLACE . IN THIS CASE, THE ASSESSING OFFICER NOTICED THAT TRANSFER ON SALE OF PROPERTY WAS TAKEN PLACE ON 12.10.2007 AND IN VIEW OF THE PROVISIONS OF SECTION 54F OF THE ACT, THE ASSESSEE SHOULD HAVE CONSTRUCTED THE RESIDENTIAL HOUSE WITH IN 11.10.2010 [3 YEARS FROM THE DATE OF TRANSFER] , WHEREAS, THE CONSTRUCTION OF THE PROPERTY HAS BEEN COMPLETED ON 29.03.2011. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. 3.1 ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 3.2 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE SOLD THE PR OPERTY AND THE TRANSFER ON SALE OF PROPERTY TOOK PLACE ON 12.10.2007. THE ASSESSEE SHOULD HAVE CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER I.E., ON 11.10.2010. HOWEVER, IN THIS CASE, THE CONSTRUCTION OF THE RESIDENTIAL HO USE HAS BEEN COMPLETED ON 29.03.2011. I.T.A. NO S . 1045 TO 1047 /M/ 16 9 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THAT THE ASSESSEE HAS UTILIZED THE SALE CONSIDERATION AND ISSUED PAYMENTS TO HIS BUILDER WITHIN THE TIME ALLOWED FOR CONSTRUCTION OF HOUSE PROPERTY AND THE REFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 54F OF THE ACT. BY RELYING ON THE DECISION IN THE CASE OF CIT V. SMT. B.S. SHANTHAKUMARI [2015] 60 TAXMANN.COM 74 (KAR), THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT SHOULD BE ALLOWED TO THE ASSESSEE. WE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS NOT DISPUTED THAT THE CONSIDERATION SO RECEIVED ON TRANSFER OF HIS LONG TERM CAPIT AL ASSET HAS NOT BEEN INVESTED IN CONSTRUCTING A RESIDENTIAL HOUSE TO SATISFY THE INGREDIENTS OF SECTION 54F OF THE ACT. THE ONLY DISPUTE IS THAT THE CONSTRUCTION OF RESIDENTIAL HOUSE WAS NOT COMPLETED BEFORE THE END OF THREE YEARS IN VIEW OF THE PROVISION S OF SECTION 54F OF THE ACT. ON SIMILAR FACTS AND CIRCUMSTANCES, IN A RECENT JUDGEMENT, THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SMT. B.S. SHANTHAKUMARI (SUPRA) HAS OBSERVED AS UNDER: 8. SECTION 54F OF THE ACT IS A BENEFICIAL PROVISION WHI CH PROMOTES FOR CONSTRUCTION OF RESIDENTIAL HOUSE. SUCH PROVISION HAS TO BE CONSTRUED LIBERALLY FOR ACHIEVING THE PURPOSE FOR WHICH IT IS INCORPORATED IN THE STATUTE. THE INTENTION OF THE LEGISLATURE, AS COULD BE DISCERNED FROM THE READING OF THE PROVISION , WOULD CLEARLY INDICATE THAT IT WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF A RESIDENTIAL PLOT AND COMPLETION OF CONSTRUCTION OF A RESIDENTIAL HOUSE IN THE PLOT SO ACQUIRED. A BARE PERUSAL OF SAID PROVISION DOES NOT EVEN REMOTELY SUGGEST THAT IT IN TENDS TO CONVEY THAT SUCH CONSTRUCTION SHOULD BE COMPLETED IN ALL RESPECTS IN THREE (3) YEARS AND/OR MAKE IT HABITABLE. I.T.A. NO S . 1045 TO 1047 /M/ 16 10 THE ESSENCE OF SAID PROVISION IS TO ENSURE THAT ASSESSEE WHO RECEIVED CAPITAL GAINS WOULD INVEST SAME BY CONSTRUCTING A RESIDENTIAL HOUS E AND ONCE IT IS ESTABLISHED THAT CONSIDERATION SO RECEIVED ON TRANSFER OF HIS LONG TERM CAPITAL ASSET HAS INVESTED IN CONSTRUCTING A RESIDENTIAL HOUSE, IT WOULD SATISFY THE INGREDIENTS OF SECTION 54F. IF THE ASSESSEE IS ABLE TO ESTABLISH THAT HE HAD INVES TED THE ENTIRE NET CONSIDERATION WITHIN THE STIPULATED PERIOD, IT WOULD MEET THE REQUIREMENT OF SECTION 54F AND AS SUCH, ASSESSEE WOULD BE ENTITLED TO GET THE BENEFIT OF SECTION 54F OF THE ACT. THOUGH SUCH CONSTRUCTION OF BUILDING MAY NOT BE COMPLETE IN AL L RESPECT 'THAT BY ITSELF WOULD NOT DISENTITLE THE ASSESSEE TO THE BENEFIT FLOWING FROM SECTION 54F'. IN FACT, APPELLATE COMMISSIONER HAS NOT ONLY TAKEN NOTE OF THE JUDGMENT OF THE CO - ORDINATE BENCH OF THIS COURT IN SAMBANDAM'S UDAYKUMAR CASE (SUPRA), BUT HAD ALSO TAKEN NOTE OF THE JUDGMENT OF HIGH COURT OF MADRAS IN THE CASE OF CIT V. SARDARMAL KOTHARI [2008] 302 ITR 286 , WHICH WAS ON SIMILAR FACTS AS OBTAIN ED IN SAMBANDAM UDAYKUMAR'S CASE (SUPRA) AND AS SUCH IN THE INSTANT CASE, APPELLATE COMMISSIONER ALLOWED ASSESSEE'S APPEAL NOTING THAT THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF HIGH COURT OF MADRAS BEFORE APEX COURT IN CC NOS.3953 - 3954/2009 HAD BEEN DISMISSED ON 06.04.2009. 9. THAT APART, CO - ORDINATE BENCH OF THIS COURT IN SAMBANDAM UDAYKUMAR'S CASE (SUPRA) REFERRED TO SUPRA HAS EXAMINED SIMILAR ISSUE AND HAS HELD THAT THE WORDS USED IN SECTION 54F ARE 'PURCHASED' OR 'CONSTRUCTED' AND HELD THAT THE CONDITION PRECEDENT FOR CLAIMING BENEFIT UNDER SUCH PROVISION IS THE CAPITAL GAIN REALIZED FROM SALE OF A LONG - TERM CAPITAL ASSET SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTED EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDE NTIAL HOUSE. IT HAS ALSO BEEN HELD THAT IF THE ASSESSEE HAS INVESTED MONEY IN CONSTRUCTING THE RESIDENTIAL HOUSE, MERELY BECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL RESPECTS OR SUCH BUILDING IS YET TO BE COMPLETED FULLY OR THE BUILDING NOT BEING IN A FIT CONDITION FOR BEING OCCUPIED, WOULD BY ITSELF NOT BE A GROUND FOR THE ASSESSEE TO BE DENIED THE BENEFIT UNDER SECTION 54F OF THE ACT. IT HAS BEEN HELD BY THE CO - ORDINATE BENCH AS UNDER: THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF A RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION OR OCCUPATION IS NOT THE REQUIREMENT OF LAW. THE WORDS USED IN THE SECTION ARE 'PURCHASED' OR 'CONSTRUCTED'. FOR SUCH PURPOSE, THE CAPITAL GAIN REALIZED SHOULD HAVE BEEN INVESTED IN A R ESIDENTIAL HOUSE. THE CONDITION PRECEDENT FOR CLAIMING BENEFIT UNDER THE SAID PROVISION IS THE CAPITAL GAIN I.T.A. NO S . 1045 TO 1047 /M/ 16 11 REALIZED FROM SALE OF CAPITAL ASSET SHOULD HAVE BEEN PARTED BY THE ASSESSEE AND INVESTED EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE. IF AFTER MAKING THE ENTIRE PAYMENT, MERELY BECAUSE A REGISTERED SALE DEED HAD NOT BEEN EXECUTED AND REGISTERED IN FAVOUR OF THE ASSESSEE BEFORE THE PERIOD STIPULATED, HE CANNOT BE DENIED THE BENEFIT OF SECTION 54F OF THE ACT. SIMILARL Y, IF HE HAS INVESTED THE MONEY IN CONSTRUCTION OF A RESIDENTIAL HOUSE, MERELY BECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL RESPECTS AND IT WAS NOT IN A FIT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULATED, THAT WOULD NOT DISENTITLE THE ASSESSEE F ROM CLAIMING THE BENEFIT UNDER SECTION 54F OF THE ACT . 10. WE ARE IN COMPLETE AGREEMENT WITH THE RATIO LAID DOWN BY THE CO - ORDINATE BENCH OF THIS COURT. IT HAS ALSO BEEN NOTICED BY THIS COURT THAT ON THE FACTS OF THE PRESENT CASE, ASSESSEE HAD PRODUCED MATERIAL EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY TO DEMONSTRATE THAT THE CONSTRUCTION WAS ON THE VERGE OF COMPLETION BY PRODUCING PHOTOGRAPHS AND THIS ASPECT, THOUGH NOT NOTICED IN DETAIL, SAME CAME TO BE NOTICED BY THE TRIBUNAL TO REJECT THE APPEAL OF REVENUE. IT WAS ALSO NOTICED BY THE TRIBUNAL THAT CONSTRUCTION OF THE BUILDING HAVING BEEN COMPLETED AND SAME HAVING BEEN OCCUPIED BY THE ASSESSEE, IS ALSO A FACTOR TO DISMISS THE APPEAL OF THE REVENUE . 3.3 IN OUR OPINION, IN PRINCIPLE, THE ABOVE JUDG EMENT OF THE HON BLE KARNATAKA HIGH COURT IS APPLICABLE TO ASSESSEE S CASE IF THE ASSESSEE HAS INVESTED THE SALES CONSIDERATION IN THE CONSTRUCTION OF NEW HOUSE. THE PLEA OF THE ASSESSEE IS THAT THE ASSESSEE HAS ALREADY PAID MONEY TO THE BUILDER FOR THE PU RPOSE OF THE CONSTRUCTION OF NEW HOUSE. HOWEVER, THE EVIDENCE BROUGHT ON RECORD IS NOT ENOUGH TO HOLD W HAT EXACT AMOUNT FOR INVESTMENT IN THE NEW RESIDENTIAL HOUSE WAS MADE BY THE ASSESSEE . ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFI CER TO DECIDE THE ISSUE AFRESH IN LINE OF THE ABOVE JUDGEMENT OF THE HON BLE KARNATAKA HIGH COURT. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . I.T.A. NO S . 1045 TO 1047 /M/ 16 12 4. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CON FIRMING THE ASSESSMENT OF NOTIONAL INTEREST @ 4.5% ON THE RENTAL DEPOSIT AND TAXING IT UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT SANCTION OF LAW. THE ASSESSEE HAS RECEIVED .1,85,00,000/ - FROM M/S. IGATE GLOBAL SOLUTIONS LTD. TOWARDS RENTAL DEPOSIT WHICH WAS USED TO ACQUIRE A NEW PROPERTY. THEREFORE, THE ASSESSING OFFICER OPINED THAT DEEMED INTEREST INCOME ACCRUED TO THE ASSESSEE OUT OF RENTAL DEPOSIT RECEIVED SHOULD BE TREATED AS DEEMED INCOME AND WORKED OUT THE APPROXIMATE RATE OF INTEREST AT 4.5% OF THE TOTAL AMOUNT, WHICH COMES TO .8,32,500/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER INCOME FROM OTHER SOURCES . 4.1 ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4.2 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.3 WE HA VE HEARD RIVAL CONTENTIONS. ADMITTEDLY, THERE IS NO DISPUTE ABOUT RECEIPT OF .1,85,00,000/ - AS RENTAL DEPOSIT FROM M/S. IGATE GLOBAL SOLUTIONS LTD. AND IT IS ALSO NOT DISPUTED THAT THE RENTAL DEPOSITS RECEIVED BY THE ASSESSEE HAS BEEN USED FOR ACQUIRING I MMOVABLE PROPERTY. BUT, THE ASSESSING OFFICER HAS DISPUTED THAT THE RENTAL DEPOSITS WOULD EARN SOME INTEREST INCOME AND THEREFORE LEVIED DEEMED INTEREST @ 4.5% ON THE DEEMED INCOME ACCRUED TO THE ASSESSEE OUT OF RENTAL DEPOSIT RECEIVED. THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. WE I.T.A. NO S . 1045 TO 1047 /M/ 16 13 FIND THAT THE AUTHORITIES BELOW HAVE NOT STIPULATED AS TO UNDER WHICH PROVISIONS OF ACT/RULE, THE DEEMED INTEREST WAS LEVIABLE ON THE DEEMED INCOME ON SUCH RENTAL DEPOSIT. FURTHER, WE FIND THAT IN TH E CASE OF HIGHWAYS CONSTRUCTION CO. PVT. LTD. V. CIT 199 ITR 702, THE HON BLE GAUHATI HIGH COURT HAS HELD THAT T HERE WAS NO PROVISION IN THE INCOME - TAX ACT EMPOWERING THE INCOME - TAX AUTHORITIES TO INCLUDE IN THE INCOME AN INTEREST , WHICH WAS NOT DUE OR NOT COLLECTED. THE REFORE, THE ADDITION OF AMOUNTS AS NOTIONAL INTEREST WAS NOT JUSTIFIED . UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD. C I T(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON THIS ACCOUNT. 4.4 TH E APPEAL FILED BY THE ASSESSEE IN I.T.A. NO. 1045/MDS/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 1046/MDS/2016 [A.Y. 2011 - 12] 5. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE RECO MPUTATION OF THE LONG TERM CAPITAL GAIN BY THE ASSESSING OFFICER AT .1,71,37,668/ - INSTEAD OF .1,67,02,096/ - AS ADMITTED BY THE ASSESSEE. 5.1 THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IN H IS RETURN OF INCOME HA S CLAIMED .1,67,02,096/ - AS LONG TERM CAPITAL GAINS ARISING DUE TO SALE OF IMMOVABLE PROPERTY FOR THE ASSE SSMENT YEAR 2011 - 2012. FROM THE MATERIALS I.T.A. NO S . 1045 TO 1047 /M/ 16 14 AVAILABLE ON RECORD AND SUBMISSIONS MADE BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THAT THE ASSESSEE ALONG WITH HIS WIFE HAS SOLD AN IMMOVABLE PROPERTY , WHICH IS NOT A RESIDENTIAL HOUSE, FOR A TOTAL CONSIDERATION OF .34 , 92 ,1 6, 000 / - FOR WHICH THE ASSESSEE CLAIMED .45,00,000/ - AS EXPENDITURE ON TRANSFER AND .31,13,11,808/ - AS INDEXED COST OF ACQUISITION AND ARRIVED CAPITAL GAINS AT . 3,34,04,192/ - OUT OF WHICH T H E ASSESSEE HAS CLAIMED 50% OF HIS SHARE AMOUNTING TO . 1,67,02,096/ - AS H IS SHARE OF CAPITAL GAINS . THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE AIR CONDITIONER PLANT [PART OF THE PROPERTY SOLD] SOLD DURING THE YEAR WAS ACQUIRED ON 17.05.2010 FOR .30,00,000/ - AND HENCE THE INDEXATION CLAIMED ON THE C OST OF AIR CONDITIONER PLANT HAS TO BE DISALLOWED. ACCORDINGLY, THE ASSESSING OFFICER CALCULATED THE TOTAL COST OF ACQUISITION TO BE DEDUCTED AT .31,04,40,665/ - . 5.2 ON APPEAL, THE LD. CIT(A) HAS OBSERVED AS UNDER: 5.2.1 I HAVE CONSIDERED THE FINDI NGS GIVEN BY THE AO AND WRITTEN SUBMISSION FILED BY THE AR OF THE APPELLANT. THE APPELLANT HAD CLAIMED INDEXED COST OF ACQUISITION OF THE PROPERTY AT RS.31,13,11,808/ - , HOWEVER, THE AO RESTRICTED THE SAME TO RS.31,04,40,665/ - . WHILE ARRIVING AT THE AFORESA ID INDEXED COST THE ASSESSING OFFICER DID NOT ALLOW THE INDEXATION ON THE AIR CONDITIONER PLANT AMOUNTING TO RS.30 LAKHS WHICH WAS ACQUIRED ON 17.5.2010. THE ASSESSING OFFICER WORKED OUT THE LONG TERM CAPITAL GAINS OF THE APPELLANT AS UNDER: - TOTAL CONSI DERATION RECEIVED RS. 3,49,21,600 LESS: BROKERAGE RS. 45,00,000 LESS: COST OF ACQUISITION AFTER NECESSARY INDEXATION RS. 31,04,40,665 I.T.A. NO S . 1045 TO 1047 /M/ 16 15 TOTAL CAPITAL GAINS RS. 3,42,75,335 ASSESSEE S SHARE OF RS.1,71,37,668/ - THE CONTENTION OF THE AO IN THIS REGARD IS THAT THE AIR CONDITIONER PLANT WAS BOUGHT IN THE SAME YEAR IN WHICH THE PROPERTY WAS SAID. THE ISSUE OF INDEXATION ON AIR CONDITIONER PLAN HAS NOT BEEN PRESSED BY THE APPELLANT AND THEREFORE THIS GROUND OF APPEAL OF DETERMINATION OF LONG TERM CAPITAL G AINS AT RS. 1 ,71,37,668/ - INSTEAD OF RS.1,67,02,096/ - IS DISMISSED. 5.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS CLAIMED INDEXATION INCLUDING THE COST OF AIR CONDITIONER PLANT, WHICH IS THE PART OF THE PROPERTY SOLD BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE SAME SINCE THE AIR CONDITIONER PLANT WAS ACQUIRED ON 17.05.2010 FOR .30,00,000/ - , HE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN THE COURSE OF APPELLATE PROCEEDINGS, IN HIS ORDER, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS NOT PRESSED THE GROUND AND THEREFORE, HE SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. ONE THE GROUND RAISED BEFORE THE LD. CIT(A) WAS NOT PRESSED AND SUBSEQUENTLY RAISING THE SAME GROUND BEFORE THE TRIBUNAL IS NOT TENABLE UNDER THE ACT/LAW. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 6. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION CLAIMED UNDER SECTION 54F OF THE ACT. I.T.A. NO S . 1045 TO 1047 /M/ 16 16 6.1 THE ASSES SEE HAS CLAIMED DEDUCTION UNDER SECTION 54F OF THE ACT TO THE EXTENT OF .85,00,000/ - STATING THAT THE SAID AMOUNT WAS DEPOSITED IN CAPITAL GAINS ACCOUNT SCHEME . THE ASSESSING OFFICER HAS OBSERVED THAT THOUGH THE ASSESSEE HAS DEPOSITED .85,00,000/ - IN T HE ABOVE SCHEME ON 30.07.2011, BUT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENTIAL PROOF FOR INITIATING CONSTRUCTION OF ANY RESIDENTIAL HOUSE AND MOREOVER, THE COPY OF THE CERTIFICATE OF SUCH DEPOSIT INDICATES THAT THE DEPOSITS WERE WITHDRAWN BEFORE THE DAT E OF MATURITY. SINCE THE AMOUNT SO DEPOSITED WAS NOT UTILIZED FOR CONSTRUCTION OF RESIDENTIAL HOUSE BEFORE 30.09.2013, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 6.2 ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER SINCE THE ASSESSEE HAS NOT FILED ANY DOCUMENT FOR AGREEMENT OF CONSTRUCTION OR ANY OTHER DETAILS REGARDING THE CONSTRUCTION OF HOUSE. 6.3 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6.4 WE HAVE HEARD BOTH SIDES, PERUSED THE MATER IALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SECTION 54F OF THE ACT MANDATES THAT THE SALES CONSIDERATION RECEIVED SHOULD BE UTILIZED FOR PURCHASE OF A NEW RESIDENTIAL HOUSE WITHIN ONE YEAR FROM THE DATE OF TRANSFER OR CONSTRUCTS A RESI DENTIAL HOUSE WITHIN 3 YEARS OF TIME. IF ANY AMOUNT NOT UTILIZED EITHER PURCHASE OR FOR CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN THE DATE OF FILING OF I.T.A. NO S . 1045 TO 1047 /M/ 16 17 RETURN OF INCOME, THEN THE AMOUNT SO REMAINING SHOULD BE DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME AND MAY BE UTILIZED FOR CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN 3 YEARS OTHERWISE, THE SAME SHALL BE BROUGHT TO TAX. IN THE PRESENT CASE, THE ASSESSEE CLAIMS THAT THE ABOVE AMOUNT WITHDRAWN FROM THE ABOVE SCHEME HAS BEEN PAID TO THE BUILDER M/S. ALLIANCE PROJECT PRIVATE LIMITED THROUGH BANKING CHANNEL. SINCE THE ASSESSEE HAS NOT FILED ANY EVIDENCE OR COPY OF AGREEMENT FOR CONSTRUCTION OF RESIDENTIAL HOUSE, THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT WAS DISALLOWED. EVEN BEFORE US ALSO, THE ASSESSE E HAS NOT FILED ANY COPY OF THE AGREEMENT FOR CONSTRUCTION OF HOUSE. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED PAPER BOOK, WHEREIN THE LEDGER EXTRACT OF THE BUILDER M/S. ALLIANCE RETREAT PVT. LTD. HAS BEEN FILED AND CLAIMED THAT THE AMOUNT WITHDR AWN FROM THE SCHEME HAS BEEN PAID TO THE BUILDER FOR CONSTRUCTION OF HOUSE . ACCORDINGLY, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE OF CLAIM OF 54F OF THE ACT IN ACCORDANCE WITH LA W. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT GROUND (4 & 5) RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF 50% OF THE INTEREST ON BORROWED CAPITAL CLAIMED BY THE ASSESSEE AGAINST INCOME FROM HOUSE PROPERTY ON THE MISTAKEN ERRONEOUS PRESUMPTION THAT THE ASSESSEE BEING I.T.A. NO S . 1045 TO 1047 /M/ 16 18 CO - OWNER ALREADY WITH HIS SPOUSE AND ENTITLED TO CLAIM 50% OF THE INTEREST WHEREIN REALITY THAT THE TOTAL INCOME IS .1,27,37,090/ - . THE ASSESS EE HAD CLAIMED ONLY 50% INTEREST OF .63,68,545/ - . HOWEVER, THE ASSESSING OFFICER TAKEN 50% INTEREST ONLY AND HENCE, THE LOSS ON HOUSE PROPERTY REDUCED FROM .48,28,865/ - TO .14,45,570/ - . THE LD. CIT(A) ALSO ERRED IN CONFIRMING THE ADDITION OF .1,03,487/ - TO THE RENTAL INCOME FROM M/S. RBS BUSINESS SERVICES PVT. LTD. BASED ON MISTAKEN ENTRY IN FORM 26AS WITHOUT VERIFYING THE FACTS. 7.1 THE ASSESSEE HA S ADMITTED RENTAL INCOME FROM FOUR HOUSE PROPERTIES TOTALLING T O A LOSS OF . 48,28,865/ - . OUT OF THE FO UR PROPERTIES, FOR THE PROPERTY LISTED AS PROPERTY - 2, SITUATED AT GUINDY; THE ASSESSEE HAD CLAIMED INTEREST ON BORROWED CAPITAL AMOUNTING TO . 63,68,545/ - . ON EXAMINATION OF RECORDS, THE ASSESSING OFFICER FOUND THAT THE PROPERTY WAS JOINTLY OWNED BY THE ASSESSEE AND HIS WIFE AND THE INTEREST PAYABLE ON BORROWED CAPITAL, WHICH SHOULD BE BORNE BY THE ASSESSEE AND HIS WIFE EQUALLY WAS .63,68,545/ - WHEREAS THE ASSESSEE HA S CLAIMED WHOLE PORTION OF INTEREST AS DEDUCTION IN HIS INCOME. FURTHER, THE ASSESSING O FFICER H AS FOUND FROM THE R ETURN OF I NCOME FILED BY HIS WIFE THAT SHE HAS ALSO CLAIMED THE WHOLE AMOUNT AS DEDUCTION TOWARDS INTEREST ON BORROWED CAPITAL. HENCE ONLY 50% OF THE INTEREST HAS TO BE ALLOWED AS DEDUCTION UNDER SECTION 24 OF THE ACT AND THE LOS S FROM THE SAID PROPERTY HAS BEEN DETERMINED A T . 24,21,400/ - . I.T.A. NO S . 1045 TO 1047 /M/ 16 19 7.2 FOR THE PROPERTY LISTED AS PROPERTY - B IN THE STATEMENT OF INCOME, SITUATED AT RAHEJA TOWERS, CHENNA I , THE ASSESSEE HAS DECLARED THE RENTAL INCOME AS . 1 2,41,844/ - WHEREAS THE ASSESSING OFFICER FOUND THAT THE ACTUAL RECEIPT OF RENT WA S . 13,45,362/ - . HENCE THE INCOME FROM THE SAID HOUS E PROPERTY AFTER NECESSARY DEDUCTIONS UNDER SECTION 24 OF THE ACT WAS CALCULATED AS .3,55,832/ - . B ASED ON THE ABOVE OBSERVATION THE LOSS FROM HOUSE PROPERTY FOR THE ASSESSEE WA S DE TERMINED AS . 14,45,5 70/ - . 7.3 ON APPEAL, THE LD. CIT(A) ALLOWED BOTH THE GROUNDS FOR STATISTICAL PURPOSES. 7.4 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7.5 WE HAVE HEARD RIVAL CONTENTIONS. WITH REGARD TO THE ABOVE REDUCTION OF LOSS IN HOUSE PRO PERTY FROM .48,28,865/ - TO . 14,45,570/ - AND ADDITION TOWARDS RENTAL INCOME OF .1,03,487/ - , THE LD. CIT(A) HAS OBSERVED AS UNDER: 5.4.2 I HAVE CONSIDERED THE FINDINGS GIVEN BY THE AO AND WRITTEN SUBMISSION FILED BY THE AR OF THE APPELLANT. THE ABOVE CONTENTIONS O F THE AR OF THE APPELLANT NEEDS TO BE VERIFIED WITH REFERENCE TO RECORDS AND IF HER CONTENTION IS FOUND TO BE CORRECT THEN THE WHOLE OF RS.63,68,545/ - SHOULD BE ALLOWED. THIS PART OF GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. AS REGARDS TO THE R ENTAL INCOME, THE AR OF THE APPELLANT HAS STATED THAT THE AO HAS TAKEN THE RENTAL VALUE FOR 13 MONTHS INSTEAD OF 12 MONTHS. HOWEVER, HE HAS NOT SUBMITTED ANY PROOF IN THIS REGARD AND THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED AND TH IS GROUND OF APPEAL IS PARTLY ALLOWED. I.T.A. NO S . 1045 TO 1047 /M/ 16 20 7.6 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PAID .1,27,37,090/ - TOWARDS INTEREST ON BORROWED CAPITAL FOR PROPERTY SITUATED AT GUINDY WHICH BELONGED TO THE ASSESSEE AND HIS SPOUSE JOINTLY. OUT OF . 1,27,37,090/ - , THE ASSESSEE HAS CLAIMED 50% OF THE INTEREST UNDER SECTION 24 OF THE ACT AMOUNTING TO .63,68,545/ - AND THE ASSESSING OFFICER HAS MISTAKENLY TAKEN THE INTEREST ON BORROWED CAPITAL AT .63,68,545/ - . IN SUPPORT OF HI S CLAIM, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED INTEREST CERTIFICATE AND CONFIRMATION FROM THE HDFC BANK. WE FIND FORCE IN THE ARGUMENT ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFIC ER TO VERIFY THE DETAILS AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7.7 WITH REGARD TO RENTAL INCOME, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT BECAUSE OF WRONG ENTRY IN FORM 26AS F ILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS TAKEN 13 MONTH S RENT AMOUNTING TO .13,45,362/ - , THEREFORE, THE DIFFERENCE OF .1,03,518/ - WAS BROUGHT TO TAX. SINCE THE ASSESSEE HAS NOT FILED ANY PROOF IN THIS REGARD, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. IN THE INTEREST OF JUSTICE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE TOTAL RENTAL INCOME AND DECIDE THE ISSUE AFRESH AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. I.T.A. NO S . 1045 TO 1047 /M/ 16 21 8. THE NEXT GROUND RAISED IN THE APPEAL OF T HE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE OF .1,17,30,111/ - AS UNEXPLAINED INVESTMENT. FROM THE MATERIALS AVAILABLE ON RECORD AND SUBMISSIONS MADE BY THE ASSESSEE, THE ASSESSING OFFICER H AS OBSERVED THAT THE ASSESSEE AND HIS SPOUSE HAD A TOTAL I NCOME OF .35,89,06,838/ - DURING THE FINANCIAL YEAR 20 10 - 11. THE EXPENDITURE INCURRED AS PER THE SUBMISSIONS MADE BY THE ASSESSEE JOINTLY BY HER AND HER HUSBAND INCLUDES EXPENDITURE TOTA L LING TO .38,23,67,059/ - THUS THE ASSESSEE AND H IS SPOUSE HAS INCURRED EXCESS EXPENDITURE OF .2,34,60,221/ - FOR WHICH THE SOURCE OF INCOME WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER . HENCE THE WHOLE AMOUNT OF .2,34,60,221/ - WAS DETERMINED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT, AND THE ASSESSEE'S SHARE OF . 1 ,17,30,111/ - WAS ADDED AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER SINCE THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE. 8.1 WE HAVE HEARD RIVAL CONTENTIONS. THE LD. COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT T HE TOTAL INCOME OF THE ASSESSEE AND HIS SPOUSE FOR THE ASSESSMENT YEAR 2011 - 12 WAS WRONGLY TAKEN AT .35,89,06,868/ - . DURING THE ASSESSMENT YEAR, THE ASSESSEE ALONG WITH HIS SPOUSE HAD INVESTED IN MUTUAL FUNDS, FIXED DEPOSITS AND PROPERTY. THE INVESTMENTS WERE MADE OUT I.T.A. NO S . 1045 TO 1047 /M/ 16 22 OF THE INCOME OF THE ASSESSEE AND HIS SPOUSE FROM PREVIOUS YEAR SAVINGS, CURRENT YEAR RECEIPTS, RENTAL DEPOSITS FROM TENANTS' AND BORROWINGS FROM THE BANK AGAINST FIXED DEPOSITS . FURTHER, IT WAS SUBMIT TED THAT THE SAID EXPENDITURES OF .38,23,67,059/ - WAS INCURRED BY WAY OF BANKING CHANNEL WHICH REFLECTS THE INCOME DECLARED BY THE ASSESSEE FOR THE EARLIER YEARS. SINCE ALL THE CREDITS OF THE BANK STATEMENTS WERE EXPLAINABLE, THE SAME CANNOT BE TREATED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT AND PLEADED THAT THE ADDITION SHOULD BE DELETED. 8.2 FROM THE ABOVE, IT IS CLEAR THAT T HE TOTAL INCOME OF THE ASSESSEE AND HIS SPOUSE DURING THE FINANCIAL YEAR 2010 - 11 RELEVANT TO ASSESSMENT YEAR 2011 - 12 WAS .35,89,06,838/ - , WHEREAS , THE TOTAL EXPENDITURE OF THE ASSESSEE AND HIS SPOUSE WAS TO THE TUNE OF .38,23,67,059/ - AND THUS THE ASSESSEE AND HIS SPOUSE HAD INCURRED EXCESS EXPENDITURE OF .2,34,60,221/ - , THE SOURCE OF WHICH HAS NOT BEEN EXPLAINED EITHER B EFORE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(A) . THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE PAST SAV ING S , CURRENT YEAR RECEIPTS, RENTAL DEPOSITS , BORROWIN G S FROM BANK FIXED DEPOSIT ETC. WHIC H ARE OVER AND ABOVE THE SUM OF .35,89,06,038/ - . ACCORDINGLY, THE LD. AR PRAYED THAT THE ISSUE MAY BE REMITTED TO THE ASSESSING OFFICER AND THE ASSESSEE SHALL BE DIRECTED TO PLACE NECESSARY DOCUMENTARY EVIDENCE TO SHOW THAT ENOUGH FUNDS IS AVAILABLE I.T.A. NO S . 1045 TO 1047 /M/ 16 23 WITH THE ASSESSEE TOWARDS THE IMPUGNED INVESTMENT FOR WHICH THE LD. DR HAS NOT PUT ANY SERIOUS OBJECTION. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION WITH A DIRECTION TO THE ASSESSEE TO PLACE NECESSARY EVIDENCE T O SUPPORT THE SAID INVESTMENTS BEFORE THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. WITH REGARD TO NEXT GROUND RAISED BY THE ASSESSEE, CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE, WHICH HAS TO BE COMPUTED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. IN I.T.A. NO. 1047/MDS/2016, FOR THE ASSESSMENT YEAR 2011 - 12 , THE ASSESSEE, WHO IS THE SPOUSE IN APPEAL FOR THE SAME ASSESSMENT YEAR HAS RAISED IDENTICAL ISSUES AS RAISED IN THE APPEAL OF HER SPOUSE IN I.T.A. NO. 1046/MDS/2016. IN VIEW OF OUR DECISION IN ALL THE ISSUES RAISED BY THE ASSESSEE I.T.A. NO. 1046/MDS/2016, THE SAME DECISION SHOULD BE FOLLOWED IN I.T.A. NO. 1047/MDS/2016 SINCE ISSUES ARE IDENTICAL ON SIMILAR FACTS AND CIRCUMSTANCES. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IN I.T.A. NO. 1047/MDS/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO S . 1045 TO 1047 /M/ 16 24 12. IN THE RESULT, THE APPEAL IN I.T.A. NO. 1045/MDS/2016 IS PARTLY ALLOWED AND APPEALS IN I.T.A. NO. 1046/MDS/2016 AND I.T.A. NO. 1047/MDS/2016 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 29 TH JULY , 2016 AT CHENNAI. SD/ - SD/ - ( CHANDRA PO OJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.