Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 6261 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 1 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-09-2016
Appeal Filed By
Department
Bench Allotted
B
Next Hearing Date
23-08-2016
Assessment Year
2009-2010
Appeal Filed On
06-08-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1180/HYD/2012 ASSESSMENT YEAR: 2009-10 THE INCOME TAX OFFICER, WARD-I, NELLORE VS SRI INDURU MAHIDHAR KUMAR REDDY, NELLORE [PAN: AACPI8349C] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT U. MINICHANDRAN, DR FOR ASSESSEE : NONE DATE OF HEARING : 23-08-2016 DATE OF PRONOUNCEMENT : 07-09-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), GUNTUR, DA TED 27-04-2012 ON THE ISSUE OF ALLOWING THE CLAIM OF IMPR OVEMENT WITHOUT ANY EVIDENCE AND ALLOWING DEDUCTION U/S. 54F OF THE INCOME TAX ACT [ACT] ON PRESUMPTION AND SURMISES AND FURTHER ALLOWING ADDITIONAL EVIDENCE VIOLATING RULE 46A. THE DETAILED GROUNDS RAISED BY REVENUE AS UNDER: 2. THE LD. CIT (A) ERRED IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEDUCTION FOR AN AMOUNT OF RS. 7 LAKHS TOWARDS BROK ERAGE AND COST OF IMPROVEMENT IN THE COMPUTATION OF LONG TERM CAPI TAL GAINS THOUGH THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCES BY WAY OF BILLS AND VOUCHERS IN SUPPORT OF THE EXPENDITURE OF RS.10,45, 690/- CLAIMED TO I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 2 -: HAVE BEEN INCURRED UNDER THESE HEADS, EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROC EEDINGS. 3. THE FINDING OF THE LD. CIT (A) THAT INCURRING OF EXPENSES TOWARDS BROKERAGE AND IMPROVEMENT OF THE SITE IS NECESSARY IS PERVERSE ON FACTS AS SUCH FINDING IS WITHOUT ANY BASIS IN THE L IGHT OF FAILURE OF THE ASSEESSEE TO SUBSTANTIATE THE SAME WITH EVIDENC E. 4. THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 54F BF ACCEPTING THE ASSESSEE'S CLAIM OF CONSTRUCTION OF A NEW RESIDENTIAL HOUSE. 5. THE LD. CIT (A) OUGHT TO HAVE RECORDED THE REASO NS FOR ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE D URING THE APPELLATE PROCEEDINGS REGARDING THE INVESTMENT TOWA RDS CONSTRUCTION OF RESIDENTIAL HOUSE IN ACCORDANCE WIT H RULE 46A(2) OF THE INCOME TAX RULES, 1962 AND OUGHT TO HAVE ALLOWE D AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE ADDITIONAL EVIDENCE AND FURNISH HIS REPORT WHICH IS MANDATORY AS PER RULE 46A(3) OF THE INCOME TAX RULES, 1962. 6. THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING TO ALLOW DEDUCTION U/S 54F WHEN ADMITTEDLY THE CONSTRUCTION OF THE NEW RES IDENTIAL HOUSE HAS NOT BEEN COMPLETED WITHIN THE SPECIFIED PERIOD OF THREE YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET, AS REQ UIRED UNDER SEC. 54F(1). 7. THE LD. CIT (A) OUGHT NOT TO HAVE DIRECTED THE A SSESSING OFFICER TO ALLOW DEDUCTION U/S 54F BY IGNORING TO CONSIDER THE FACT THAT THE ESSENTIAL CONDITION SPECIFIED IN SEC. 54F(4) REGARD ING DEPOSITING THE UNUTILIZED NET SALE CONSIDERATION INTO THE CAPITAL GAINS ACCOUNT IN A BANK BEFORE THE DUE DATE FOR FILING THE RETURN OF I NCOME HAS NOT BEEN FULFILLED. 2. EVEN THOUGH NOTICES WERE SENT PERIODICALLY TO ASSES SEE, NONE APPEARED ON BEHALF OF ASSESSEE. THERE ARE POSTINGS REGULARLY FROM 14-11-2012 ONWARDS AND SOMETIMES NOTICES WERE ISSUED THROUGH THE DR ALSO. AS NONE APPEARED FOR ASSESSEE, THE APPE AL IS DECIDED EX-PARTE -THE RESPONDENT-ASSESSEE ON MERITS. I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 3 -: 3. BRIEFLY STATED, ASSESSEE DERIVING INCOME FROM CONTR ACTS AND CAPITAL GAINS FILED HIS E-RETURN OF INCOME FOR THE AY. 2009-10 ON 14-03-2010, ADMITTING INCOME OF RS. 2,36,510/-, APART FROM AGRICULTURAL INCOME OF RS. 4,50,000/-. IT IS SEEN FR OM THE ASSESSMENT ORDER THAT ASSESSEE HAS PURCHASED PROPERTY ON 05-07-1999 FOR A TOTAL CONSIDERATION OF RS. 3,22,566/- AND THE SAME WAS SOLD ON 25-04-2008 FOR RS. 40,10,000/- AND ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAINS EXEMPTION U/S. 54 F BY INVESTING TO THE TUNE OF RS. 28,59,200/-. ASSESSEE WH ILE COMPUTING THE CAPITAL GAINS, HAS CLAIMED BROKERAGE OF RS. 80,200/- AND AMOUNT SPENT TOWARDS IMPROVEMENT LIKE GRAV EL, WELL AND COMPOUND WALL AT RS. 9,65,490/-. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED BY THE ASS ESSING OFFICER (AO) TO PRODUCE THE BILLS AND VOUCHERS FOR TH E EXPENDITURE CLAIMED. SINCE ASSESSEES AR HAS EXPRESSED HIS INA BILITY TO PRODUCE THE BILLS AND VOUCHERS FOR THE EXPENDITURE, THE SAME WAS NOT CONSIDERED. IT IS ALSO SEEN FROM THE ASSESSMENT ORD ER THAT ASSESSEE HAS INVESTED OUT OF THE SALE PROCEEDS TOWARDS PURCHASE OF SEVEN SITES AT MUTHUKURU VILLAGE, NELLORE DISTRICT FOR A TOTAL CONSIDERATION OF RS. 28,59,200/- AND CLAIMED EXEMPTIO N U/S. 54F ON TRANSFER OF PROPERTY OTHER THAN THE HOUSE. THE AO H AS OPINED THAT SINCE ASSESSEE HAS INVESTED THE AMOUNT IN PURCHASE OF THE CAPITAL ASSETS OTHER THAN THE RESIDENTIAL HOUSE, THE EXEMP TION CLAIMED U/S. 54F IS NOT ALLOWABLE AND THE AO HAS RECA LCULATED THE LONG TERM CAPITAL GAINS AT RS. 35,27,395/- AND THE SA ME WAS BROUGHT TO TAX. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE LD. CIT(A), ASSESSEE FILED CERTAIN ADDITIONAL INFORMATION. WHILE ADMITTING THAT I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 4 -: THERE IS CONFUSION IN TAKING THE VALUE OF PROPERTY, L D. CIT(A) HAS HOWEVER, ALLOWED THE CLAIMS STATING AS UNDER: 4.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE AO AND ALS O SEEN EVERY OTHER MATERIAL PLACED BEFORE ME. THIS IS A CASE WHE RE THE CLAIM OF THE APPELLANT UNDER SECTION 54F WAS COMPLETELY DENI ED ON THE GROUND THAT THE SALE PROCEEDS OF A PLOT OF LAND WAS INVESTED IN ACQUIRING PLOTS ONLY, BUT NOT INVESTED IN CONSTRUCT ION OF RESIDENTIAL PROPERTY WITHIN THREE YEARS FROM THE DATE ON WHICH THE ORIGINAL ASSET HAS BEEN TRANSFERRED, WHICH IS UNDER CHALLENG E, THE FACTS OF THE CASE AND THE ISSUES RELATED TO CLAIM OF DEDUCTI ON UNDER SECTION54F ARE AS UNDER. 4.2. THERE IS NO DISPUTE IN BASIC FACTS OF THE CASE , THAT IS; THE APPELLANT HAS PURCHASED A SITE ON 05.07.1999 FOR A CONSIDERATION OF RS. 3,22,566/-, WHICH WAS SOLD ON 25.04.2008 FOR A CONSIDERATION OF RS. 40,10,000/-, IMMEDIATELY ON SALE, HE HAS PUR CHASED 6 PLOTS FOR A CONSIDERATION OF RS.5,62,455/- ON 25.04.2008 ITSELF. AMONG THESE 6 PLOTS, ONE PLOT IS AT MUTHUKURU, ON WHICH I N THE NEXT THREE YEARS CONSTRUCTION OF RESIDENTIAL HOUSE TOOK PLACE, BUT NOT COMPLETED. IN CLAIMING DEDUCTION UNDER SECTION 54F, THE APPELLANT CLAIMED IMPROVEMENT EXPENSES OF RS.9,65,490/- AND B ROKERAGE OF RS.80,200/- WHICH WERE NOT ALLOWED BY THE AO ON THE GROUND EVIDENCES WERE NOT PRODUCED. IN COURSE OF THE APPEL LATE PROCEEDINGS, THE AR HAS PRODUCED RECORDS REFLECTING BROKERAGE CHARGES AND IMPROVEMENT CHARGES AS CLAIMED AND SOUG HT TO GET THE RELIEF. IT IS FURTHER EXPLAINED BY THE AR THAT AFTE R PURCHASE OF THE SITE, LAND FILLING. LEVELING, SOIL TREATMENT GARDEN ING AND CONSTRUCTION OF BOUNDARY WALL TOOK PLACE FOR WHICH MAXIMUM OVERH EAD WAS LABOUR AND LOCAL PURCHASE OF MATERIAL AND MISPLACED THE RECEIPTS AND THE FACT BEING THAT THE SAME WERE RECORDED IN B OOKS, THE SAME MAY BE ALLOWED IN THIS CONTEXT, ONCE THE AO WANTED THE PROOF TO BE PRODUCED, THE APPELLANT IS DUTY BOUND TO PRODUCE TH E SAME AND ANSWER THE QUERIES TO HIS SATISFACTION. IN CASE OF ANY DIFFICULTY, THE SAME COULD HAVE BEEN EXPLAINED TO HIM ONLY, BUT THA T IS NOT THE CASE HERE. BUT, HOWEVER, GIVEN THE NATURE AND PURCHASE P RICE INCURRED ON IT AND ALSO 'IN LIGHT OF THE GOOD SALE PROCEEDS, I AM OF THE OPINION THAT THE IMPUGNED EXPENSES WERE NECESSARY. BUT, IN THE ABSENCE OF THE EVIDENCES, THE AUTHENTICITY AND CORRECTNESS OF EXPENDITURE IS SUSCEPTIBLE. BUT, AS OBSERVED ALREADY, THERE IS A T RUTH IN INCURRING OF EXPENDITURE, BUT WHAT WAS THE EXACT QUANTUM SUPPORT ED BY PROOF IS NOT ASCERTAINABLE. IN SUCH A SITUATION, A DEGREE OF GUESS WORK IS EMPLOYED TO ARRIVE AT AN APPROXIMATE FIGURE. THE TO TAL CLAIM OF THE APPELLANT IN THIS REGARD IS RS.10,45,690/-. IN LIGH T OF THE ABOVE DISCUSSION, HAVING REGARD TO THE FACTS, CIRCUMSTANC ES, RECORDS I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 5 -: PRODUCED BY THE APPELLANT DURING THE COURSE OF APPE LLATE PROCEEDINGS AND VARIOUS EXPLANATIONS OFFERED BY THE AR, I AM OF THE CONSIDERED OPINION THAT ENDS OF JUSTICE ARE MET IF THE ABOVE EXPENDITURE IS RESTRICTED TO RS. 7,00,000/- WHEN TH E SAME IS ADOPTED THEN THE LONG TERM CAPITAL GAINS COMES TO R S. 24,80,090/- AND THE AO IS DIRECTED ACCORDINGLY. NOW HAVING RE-D ETERMINED THE LONG TERM CAPITAL GAINS, IT IS IMPORTANT TO EXAMINE THE INVESTMENT PATTERN FOR CLAIMING DEDUCTION UNDER SECTION 54F, W HICH IS AS UNDER:- 4.3. HERE SOME DEGREE OF CONFUSION IS THERE, AS THE AO HAS MENTIONED IN THE BODY OF THE ASSESSMENT ORDER SEVEN PLOTS WERE PURCHASED, BUT WHEREAS ON EXAMINATION OF RECORDS IN VESTMENT OUT OF SALE PROCEEDS WERE INVESTED IN SIX PLOTS ONLY, W HEREAS, THE SEVENTH PLOT WAS PURCHASED BY APPELLANT'S WIFE IN T HE NAME OF THE APPELLANT. AS PER THE RECORDS THE APPELLANT HAS INV ESTED AN AMOUNT OF RS. 5,62,455/- OUT OF THE SALE PROCEEDS ON THE D ATE OF SALE OF HIS ORIGINAL PLOT, I.E., ON 25.04.2008 FOR PURCHASE OF THESE SIX PLOTS. IT IS IMPORTANT TO NOTE HERE THAT PLOT NUMBER 5 WAS AT MU THUKURU, ON WHICH RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED AND TH E VALUE OF THIS PLOT WAS RS.1,06,000/ SINCE, THE DEDUCTION UNDER SE CTION 54F IS AVAILABLE ON CONSTRUCTION; THE VALUE OF CONSTRUCTIO N INCLUDING THE VALUE OF THE PLOT HAS TO BE TAKEN FROM 25.04.2008 T O 24.04.2012. FROM THE RECORDS, IT IS ASCERTAINED THAT AFTER PURC HASE OF PLOT FOR RS.1,06,000/- ON 25.04.2008, TILL 31.03.2009, NO CO NSTRUCTION WAS MADE BUT DOCUMENTATION WORK FOR PERMISSIONS FOR CON STRUCTION WAS COMPLETED. DURING THE PERIOD FROM 01.04.2009 TILL 3 1.03.2010 AN AMOUNT OF RS. 3,00,000/- WAS SPENT FOR CONSTRUCTION . DURING 01.04.2010 TILL 31.03.2011, AN AMOUNT OF RS. 7,92,0 00/WAS SPENT. NEXT, AS PER THE AR AND AS PER UNAUDITED ACCOUNTS, FROM 01.04.2011 TILL 31.03.2012 AN AMOUNT OF RS.32,50,00 0/- WAS SPENT. BUT, HOWEVER, AS THE REMAINING PERIOD IN THREE YEAR S IS FROM 01.04.2012 TO 24.04.2012, I.E., FOR 24 DAYS, THE EX PENDITURE IS TAKEN ON PRORATE BASIS, WHICH COMES TO RS.3,14,000/ -. THUS IN THE 3 YEARS FROM THE DATE OF TRANSFER FROM THE ORIGINAL A SSET, THE APPELLANT HAS SPENT AN AMOUNT OF RS.14,06,000/-, WHICH IN PRI NCIPLE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54F. HAVING CO ME SO FAR, THE ACTUAL DEDUCTION UNDER SECTION 54F IS DETERMINED AS UNDER:- 4.4. IT IS A FACT THAT AS ALREADY DISCUSSED SUPRA, THE LONG TERM CAPITAL GAINS ACCRUED TO THE APPELLANT IS RS.24,80, 090/-. TOTAL SALE PROCEEDS INVOLVED ARE RS. 40,10,000/- OUT OF THESE SALE PROCEEDS, SECTION 54F INVESTMENTS AMOUNTED TO RS.15,12,000/- (RS.1,06,000/- BEING THE AMOUNT INVESTED IN PURCHAS E OF PLOT NO.5 + RS.14,06,000/- BEING THE AMOUNT INVESTED IN CONSTRU CTION OF HOUSE WITHIN THREE YEARS) AND THE NON-54F SECTION INVESTM ENTS ARE RS.24,98,000/-. NOW, THE LOGICAL CONCLUSION IS THAT THE SECTION 54F DEDUCTION AVAILABLE ON LONG TERM CAPITAL GAINS OF R S.24,80,090/- IS I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 6 -: IN THE RATIO OF RS.15,12,000 TO 40,10,000, I.E., 37 .71%. THUS, OUT OF THE LONG TERM CAPITAL GAIN OF RS.24,80,090/- DEDUCT ION AVAILABLE IS TO THE EXTENT RS.9,35,241/- AND THE REMAINING AMOUN T OF RS.15,49,849/- IS THE TAXABLE LONG TERM CAPITAL GAI N AND THE AO IS DIRECTED ACCORDINGLY. THE AO IS DIRECTED TO VERIFY THE CORRECTNESS OF THE CALCULATIONS SPELT OUT HEREIN ABOVE AND IN CASE OF VARIATION, PUT THE SAME TO THE APPELLANT AND RECOMPUTE THE TAXABLE LONG TERM CAPITAL GAINS THEREAFTER AND RE-COMPUTE THE LIABILI TY ACCORDINGLY. 5. AFTER PERUSING THE ORDER OF AO AND ORDER OF CIT(A) , WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE AND DECIDED THE ISSUE WITHOUT GIVING AN OPPORTUNITY TO TH E AO. MOREOVER, WHILE GIVING A FINDING THAT THE HOUSE WAS NOT COMPLETE, HE HAS ALLOWED PROPORTIONATE DEDUCTION U/S. 54F AND AL SO ALLOWED OTHER CLAIMS. WE ARE OF THE OPINION THAT THE ISSUES SH OULD HAVE BEEN REFERRED TO AO FOR VERIFICATION. SINCE ASSESSEE HAS NOT APPEARED OR REPRESENTED BEFORE US, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF AO AND CIT(A) AND RESTORE THE ASSES SMENT OF CAPITAL GAINS TO THE FILE OF AO FOR FRESH EXAMINATION A ND ADJUDICATION. ASSESSEE IS FREE TO MAKE SUBMISSIONS AND FURNISH NECESSARY EVIDENCE WITH REFERENCE TO VARIOUS CLAIMS. AO IS ALSO DIRECTED TO GIVE DUE OPPORTUNITY TO ASSESSEE IN THE PRO CEEDINGS. WITH THESE DIRECTIONS, WE RESTORE THE ISSUE/ASSESSMENT TO THE FILE OF AO, TO BE RE-DONE ACCORDING TO LAW AND FACTS. 6. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH SEPTEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 07 TH SEPTEMBER, 2016 TNMM I.T.A. NO. 1180/HYD/2012 SRI INDURU MAHIDHAR KUMAR REDDY :- 7 -: COPY TO : 1. THE INCOME TAX OFFICER, WARD-I, 24-2-438, GNT RO AD, DARGAMITTA, NELLORE. 2. SRI INDURU MAHIDHAR KUMAR REDDY, 16-3-100, RAMALINGAPURAM, NELLORE. 3. CIT(APPEALS)-GUNTUR. 4. CIT-GUNTUR. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.
Mehul