Girish Kumar Malpani, Hyd, Hyderabad V. ACIT, Circle-6(1), Hyderabad, Hyderabad

ITA 1206/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6023 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Keywords: Additional evidence

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1206/HYD/2016 ASSESSMENT YEAR: 2006-07 SHRI GIRISH KUMAR MALPANI, HYDERABAD. PAN AEAPM0871K VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-6(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C DEVDAS REVENUE BY : SHRI K.J RAO DATE OF HEARING : 22-03-2017 DATE OF PRONOUNCEMENT : 31-03-2017 ORDER THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A)-9, HYDERABAD DATED 22-02-2016, ON THE ISSUE O F DENIAL OF COST OF CONSTRUCTION / IMPROVEMENT WHILE CALCULATING T HE CAPITAL GAINS. 2. BRIEFLY STATED, ASSESSEE ALONG WITH FIVE OTHERS SOL D A PROPERTY TO M/S SREYA CONSTRUCTIONS FOR A CONSIDERATI ON OF RS. 2,35,85,500/-. ASSESSEES SHARE BEING RS. 39,30,91 6/- HAS BEEN OFFERED AS SALE CONSIDERATION ON WHICH THERE IS NO DI SPUTE. WHILE COMPUTING THE CAPITAL GAINS, ASSESSEE HAD CLAIMED COS T OF ACQUISITION OF THE PROPERTY AT RS. 22,78,461/- ON WHI CH ALSO THERE IS NO DISPUTE. ASSESSEE ALSO CLAIMED COST OF CONSTRUC TION AT RS. 9,46,513/-. OUT OF THIS AMOUNT, THE DISPUTE WAS ON PRO PORTIONATE SHARE IN CLAIM OF CONSTRUCTION COST TO AN EXTENT OF RS. 7 ,42,499/-. ASSESSEE CLAIMED ALONG WITH FIVE CO-OWNERS, SPENT AN AMOUNT OF RS. 45,00,000/- AND THE SAME WAS CLAIMED TO HAVE BEEN PAID TO 2 ITA NO. 1206/HYD/2016 SHRI GIRISH KUMAR MALPANI, HYDERABAD. M/S MAHESHWARI MEGAVENTURES LTD., WHICH WAS ENTRUSTED TH E WORK OF CONSTRUCTION OF PROPERTY. A.O NOTICED THAT THE SALE DOCUMENT MENTIONS THAT PROPERTY BEING OPEN PLOT OF LAN D WITH SMALL ROOM OF 2,00 SQ. FT. WHEN IT WAS PUT FORTH TO ASS ESSEE AS TO HOW SUCH HUGE COST WAS SHOWN FOR ONLY SMALL ROOM, A SSESSEE SUBMITTED THE AGREEMENT OF CONSTRUCTION ENTERED WITH M/S MAHESHWARI MEGAVENTURES LTD., AND ALSO PHOTOGRAPHS OF THE LAND SHOWING THE EXISTENCE OF THE BUILDING. A.O HOWEVER, DISBELIEVED THE SAME AND AN AMOUNT OF RS. 7,42,499/- WAS DISALLO WED. THERE ARE OTHER DISALLOWANCES, WHICH WERE ACCEPTED B UT THE DISPUTE IS ONLY WITH REFERENCE TO THE ADDITION OF COST C LAIMED, WHILE WORKING OUT THE SHORT TERM CAPITAL GAINS. 3. BEFORE THE LD. CIT(A), ASSESSEE FURNISHED ADDITION AL EVIDENCE IN THE FORM OF STATEMENTS OF ACCOUNTS OF M/S M AHESHWARI MEGAVENTURES LTD., AND THE ADDITIONAL EVIDENCES WERE AD MITTED AS PER RULE 46A AND FORWARDED TO A.O FOR HIS VERIFICATIO N. THE A.O REPORTED ON 16-12-2016 AND THE REMAND REPORT WAS EXTRA CTED BY THE CIT(A) IN THE ORDER IN PARA 6.4. AFTER OBTAINING THE REMARKS OF THE ASSESSEE, LD. CIT(A) REJECTED THE CONTENTIONS. THE ORDER IN PARA 7.4 & 7.5 IS AS UNDER: 7.4. THUS, THE A.O GAVE A DETAILED REMAND REPORT S TATING THAT NO BUILDING OF THE VALUE OF RS. 45 LAKHS EXISTED ON TH E SAID PROPERTY AND THE COST OF CONSTRUCTION CLAIMED BY THE ASSESSEE WAS NO T CORRECT. FURTHER, THE A.O WAS OF THE OPINION THAT BEFORE THE COMMENCE MENT OF CONSTRUCTION OF ANY BUILDING, NECESSARY STATUTORY APPROVALS WERE REQUIRED TO BE TAKEN FROM MUNICIPAL AUTHORITIES, WHICH THE ASSESSEE COUL D NOT PRODUCE AT THE TIME OF ASSESSMENT PROCEEDINGS OR THE REMAND PROCEE DINGS. THEREFORE, THE CLAIM OF THE ASSESSEE REMAINS UNSUBSTANTIATED. THUS THE ASSESSEES CONTENTIONS THAT THE CONTRACTEE COMMENCED THE WORK ON AN ORAL AGREEMENT CANNOT BE GIVEN ANY CREDENCE WITHOUT ANY SUPPORTING DOCUMENTARY EVIDENCE. FURTHER, THE A.O, IN THE REM AND REPORT HAS CATEGORICALLY STATED THAT THE LEDGER COPIES REVEAL THAT MAJOR EXPENDITURE WAS INCURRED BEFORE DATE OF EXECUTION OF CONSTRUCTI ON AGREEMENT AND THAT 3 ITA NO. 1206/HYD/2016 SHRI GIRISH KUMAR MALPANI, HYDERABAD. THE BILLS/VOUCHERS FOR INTERIORS REVEALED THAT THE SAID PURCHASE WAS INTENDED FOR HOTELS/RESTAURANTS, AND NOT CONSTRUCTI ON OF HOUSE. 7.5 IN VIEW OF ALL ABOVE MENTIONED FACTS AND CIRCUM STANCES OF THE CASE AND THE DETAILED REASONING GIVEN BY THE A.O IN THE ASSESSMENT ORDER AND THE REMAND REPORT, THE ADDITION MADE BY THE A.O IS HEREBY UPHELD 4. LD. COUNSEL REFERRING TO THE PURCHASE DEEDS PLA CED ON RECORD SUBMITTED THAT THE PURCHASE DEEDS INDICATED THAT TH ERE WAS SEMI-FINISHED BUILDING WHICH WAS PURCHASED ALON G WITH OPEN LAND IN THREE SEPARATE AGREEMENTS AND THERE IS PROOF TH AT SEMI- CONSTRUCTED BUILDING WAS PURCHASED. IT WAS FURTHER SU BMITTED THAT IMMEDIATELY AFTER ACQUIRING THE PROPERTY, THE PARTI ES HAVE ENTERED INTO THE MEMORANDUM OF UNDERSTANDING AND THEN G AVE THE CONSTRUCTION CONTRACT TO M/S MAHESHWARI MEGA VENTURES LTD., WHICH HAD SHOWN THE RECEIPT OF RS. 45,00,000/- IN THE IR BOOKS OF ACCOUNT AND ALSO OFFERED PROFIT TO A LARGE EXTENT IN TH E HANDS OF COMPANY. SINCE, ASSESSEE HAS PAID THE AMOUNT MUCH BE FORE THE PROPERTY WAS SOLD, THIS EXPENDITURE HAS TO BE CONSIDE RED AS GENUINE. WITH REFERENCE TO THE CONTENTION THAT SALE DEED DOES NOT CONTAIN ANY SUCH BIG PROPERTY, IT WAS FAIRLY ADMITTED THAT THERE SEEMS TO BE A MISTAKE AND BASICALLY ASSESSEE SOLD HIS LAND FOR VALUE, THEREFORE, THE SELLER WOULD NOT HAVE BOTHERED A BOUT THE PRESENCE OF A BUILDING AT THE TIME OF REGISTRATION. IT WAS SUBMITTED THAT THE ABSENCE OF THE BUILDING IN THE SALE DEE D DOES NOT VITIATE THE CLAIM OF ASSESSEE, AS ASSESSEE ALONG W ITH OTHERS HAVE PAID THE AMOUNT FOR WHICH PROOF WAS PRODUCED BEF ORE A.O. IT WAS FURTHER SUBMITTED THAT A.O HIMSELF HAS ALLOWED THE C OST OF LICENSE FEE PAID TO MUNICIPALITY AND ALSO TO BROKERAG E, BUT ONLY DISALLOWED THE VALUE OF THE BUILDING CONSTRUCTED. 5. LD. DR HOWEVER RELIED ON THE FINDINGS OF THE A.O A ND THE REMAND REPORT AND ALSO THE ORDER OF THE CIT(A). 4 ITA NO. 1206/HYD/2016 SHRI GIRISH KUMAR MALPANI, HYDERABAD. 6. I HAVE CONSIDERED THE RIVAL ARGUMENTS AND THE DOCUM ENTS PLACED ON RECORD. IT IS OBSERVED THAT TOTAL PROPERTY WA S PURCHASED BY WAY OF THREE SEPARATE PURCHASE BILLS AND THE SCHED ULES TO THE DEEDS MENTIONED THAT THERE WAS A BUILDING. FOR THE SAK E OF RECORD THE SCHEDULE OF AGREEMENT DATED 06-12-2003 PLACED IN THE PAPER BOOK FROM PAGES 1989-1995 SHOWS THE PROPERTY OF PLO T ADMEASURING 600 SQ. YARDS (ALONG WITH PORTION OF OLD HOUSE ADMEASURING 1000 SQ. FEET) OUT OF 1828 SQ. YARDS EQUA L TO 1529 SQ. METERS BEARING PREMISES NO. 8-2-293/82/8/1323/A , ROAD NO. 67, JUBILEE HILLS LAYOUT. SIMILAR DESCRIPTION WAS MENTIONED IN THE OTHER TWO DOCUMENTS ALSO, WHICH INDICATE THAT OUT OF THE 1828 SQ. YARDS OF THE LAND, THERE WAS A PORTION OF OLD HOUSE AD MEASURING 1000 SQ. FEET. IMMEDIATELY THEREAFTER THE ASSESSEES H AVE ENTERED A MEMORANDUM OF CONSTRUCTION AGREEMENT DATED 29-03-20 05 FOR CONSTRUCTION THE RESIDENTIAL PROPERTY WITH SPECIFICATIONS OF COLUMNS, BEAMS ETC., AS STATED IN SECOND PAGE OF THE C ONSTRUCTION AGREEMENT, FOR A CONSIDERATION OF RS. 45,00,000/-. M /S MAHESHWARI MEGAVENTURES LTD., HAD SHOWN THIS RECEIPT OF RS. 45,00,000/- WHICH WAS ACCEPTED BY THE A.O. IT WAS AL SO ON RECORD THAT THE SAID COMPANY HAS SPENT ONLY AN AMOUNT OF RS. 27,77,538/- AND BALANCE WAS OFFERED AS PROFIT. AS S EEN FROM THE NOTES ON ACCOUNTS ALSO, THE SAID COMPANY HAS TAKEN OVE R AN ENTERTAINMENT CENTER IN THE MONTH OF FEB 2006 AND A RES TAURANT WHICH WERE NOT CAPITALIZED. HOWEVER, A.O FINDS THAT TH E BILLS PRODUCED PERTAIN TO ITEMS FOR HOTEL AND OTHER ITEMS WHI CH ARE USED IN HOTEL / RESTAURANT, BUT NOT COST OF CONSTRUCTION ON THE PROJECT. SINCE, THIS FORUM IS NOT IN A POSITION TO EXA MINE WHETHER THE ASSESSEES CONTENTIONS ARE CORRECT OR NOT, I AM O F THE OPINION THAT THE CLAIM IS TO BE REEXAMINED. ASSESSEE IS DIRECT ED TO PRODUCE THE NECESSARY DETAILS OF EXPENDITURE SPENT BY TH E SAID 5 ITA NO. 1206/HYD/2016 SHRI GIRISH KUMAR MALPANI, HYDERABAD. COMPANY ON CONSTRUCTION AND ALSO HOW THE PAYMENTS ARE MADE, AS THE A.O IS DOUBTING THE PAYMENTS ALSO. A.O IS DIREC TED TO EXAMINE THE ISSUE AFRESH, IN THE LIGHT OF THE EVIDENCE THAT MAY BE PRODUCED AND ALLOW THE EXPENDITURE ACCORDINGLY, IF THE SAME IS SPENT ON THE BUILDING ON THE PROPERTY. PRIMA-FACIE ASSESSEES CONTENTIONS SEEMS TO BE VALID AS THE A.O HIMSELF HAS A LLOWED COST PERTAINING TO LICENSE FEES PAID TO MUNICIPALITY. IF LI CENSE FEE WAS PAID, THERE MUST BE SOME LICENSE OBTAINED FOR THE CONSTR UCTION PROJECT. THESE REQUIRE A DETAILED VERIFICATION/ANALYS IS. THEREFORE, THE ORDER OF THE A.O AND CIT(A) TO THE EXTENT OF CLAIM OF COST OF IMPROVEMENT ON THIS RS. 45,00,000/- STATED TO HAVE BEEN SPENT THROUGH M/S MAHESHWARI MEGA VENTURES LTD., IS RESTORED TO A.O FOR FRESH VERIFICATION AND PROPORTIONATE ALLOWANCE THE REON. ASSESSEE IS DIRECTED TO FURNISH THE NECESSARY EVIDEN CE TO A.O, SO AS TO SUBSTANTIATE THE CLAIM. WITH THESE OBSERVATIONS, THE ISSUE IS RESTORED TO THE FILE OF A.O FOR FRESH VERIFICATION, IF REQUIRED FROM THE BUYER ALSO. ACCORDINGLY, ASSESSEE GROUNDS ARE ALLO WED FOR STATISTICAL PURPOSES. 7. IN THE RESULT ASSESSEE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2017. SD/- ( B. RAMAKOTAIAH) ACCOU NTANT MEMBER HYDERABAD, DATED: 31 ST MARCH, 2017 KRK 6 ITA NO. 1206/HYD/2016 SHRI GIRISH KUMAR MALPANI, HYDERABAD. 1) SHRI GIRISH KUMAR MALPANI C/O B. NARSING RAO & CO C A PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS, HYD. 96 2) ACIT, CIRCLE-6(1), HYDERABAD 3) CIT(A) -9, HYDERABAD 4) PR.CIT -6, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE