SHRI NARESH AGARWAL, Jaipur V. ACIT, Jaipur

ITA 1214/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48000 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: G G MUNDRA
• Keywords: Sale consideration of property below Jantri Value
• Section: 50C; 131; 54

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH, A, JAIPUR (BEFOERE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.1214/JP/10 ASSESSMENT YEAR : 2007-08 NARESH AGARWAL, JAIPUR VS. ASSISTANT COMMISSIONER OF INCOME TAX, PROP. M/S RAHUL EXPORTS, CIRCLE-5 21, BURMESE COLONY, JAIPUR AGRA ROAD, JAIPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH.G.G. MUNDRA RESPONDENT BY: MS. ROSHANTA MEENA O R D E R SHRI.N.L.KALRA, A.M. THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER OF LD CIT(A)-II, JAIPUR DATED 09/08/2011. 1. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS A S UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING DI SALLOWANCE MADE BY THE ASSESSING OFFICER OF CLAIM OF EXPENSES OF RS.2102048/- MADE B Y THE APPELLANT WHILE WORKING OUT CAPITAL GAIN ON SALE OF 3 PLOT(S) OF LAND RESULTING IN ADDITION OF SAID AMOUNT TO THE DECLARED INCOME FROM CAPITAL GAIN. 2. THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN O F RS.11,73,144/- ON SALE OF PLOTS. PLOTS WERE SOLD FOR RS.88,95,000/- TO SH. G.D. SONK HIA AND SH. S.S. KHANDELWAL THROUGH SALE DEEDS DATED 27.02.2007. ASSESSEE CLAIMED BROKE RAGE EXPENSES OF RS.6 LAKHS. MARKET RATE OF BROKERAGE IS GENERALLY 1% AND THEREF ORE A.O. WAS OF THE OPINION THAT 2 BROKERAGE EXPENSES CLAIMED ARE EXCESSIVE. THE ASSES SEE WAS ASKED TO JUSTIFY THE BROKERAGE PAYMENT OF RS.6 LAKHS. PAYMENTS HAVE BEEN MADE TO THE FOLLOWING PERSONS. MANOJ GOYAL RS.1 LAKH VINEET GOYAL RS.1.5 LAKH VIPIN GOYAL RS.2.5 LAKH AMIT GOYAL RS.1 LAKH 2.1 MANOJ GOYAL HAS SHOWN BROKERAGE OF RS.1 LAKH I N HIS RETURN AND OTHER INCOME WAS RS.1,76,949. AFTER CLAIMING DEDUCTION OF INTEREST PAID ON HOME LOAN, SH. MANOJ GOYAL HAS NOT PAID TAX. THE ASSESSEE WAS ASKE D TO PRODUCE MANOJ GOYAL BUT HE WAS NOT PRODUCED AND HENCE SUMMON U/S 131 WAS ISSUE D ON 21.12.2009 TO APPEAR ON 23.12.2009. BUT HE DID NOT COMPLY WITH THE SUMMON. 2.2 VINEET GOYAL HAS SHOWN COMMISSION INCOME OF RS .1.5 LAKH AND OTHER INCOME OF RS. 1,29,327/-. NO TAX PAID AFTER CLAIMI NG DEDUCTION ON A/C OF INTEREST PAID ON HOME LOAN. VINEET GOYAL WAS ALSO REQUIRED TO BE PRO DUCED BUT HE WAS NOT PRODUCED. HE ALSO DID NOT ATTEND THE OFFICE OF THE A.O. IN SPITE OF SUMMON ISSUED FOR 23.12.2009 ON 21.12.2009. 2.3 AMIT GOYAL HAS SHOWN COMMISSION OF RS.1.66 LAK H AND OTHER INCOME WAS RS.87,006/- AND HE PAID RS.2,137/- AS INCOME TAX LI KE MANOJ GOYAL AND VINEET GOYAL, HE ALSO DID NOT ATTEND THE PROCEEDINGS BEFORE A.O. IN SPITE OF SUMMON ISSUED FOR 23.12.2009 ON 21.12.2009. 3 2.4 VIPIN GOYAL SHOWED COMMISSION OF RS.2,94,056/- AS COMMISSION IN HIS PROFIT AND LOSS ACCOUNT. THE COMMISSION RECEIVED FR OM OTHER PARTY IS ONLY RS.44,506/-. SH. VIPIN GOYAL WAS NOT PRODUCED AND HE DID NOT ATT END THE PROCEEDINGS IN RESPONSE TO SUMMON ISSUED U/S 131. 2.5 AFTER POINTING OUT THE ABOVE FACTS, THE A.O. D ISALLOWED BROKERAGE TO THE EXTENT OF RS.5,11,000/- AFTER OBSERVING AS UNDER FROM THE ABOVE DISCUSSION, IT IS SENT HAT NONE OF T HE ABOVE PARTIES TO WHOM THE ASSESSEE HAS CLAIMED TO HAVE MADE PAYMENT ON ACCOUNT OF BROKERAGE DID NOT APPEAR FOR EXAMINATION DESPITE BEING ASKED SPEC IFICALLY THAT THE PERSONAL PRESENCE WAS REQUIRED. THE GENUINENESS OF THE PAYME NTS CLAIMED TO HAVE BEEN MADE BY THE WERE MADE. ONE MORE POINT EMERGES FROM THE A BOVE DISCUSSION THAT WHY THE ASSESSEE MADE THE BROKERAGE PAYMENT TO 4 DIFFERENT PARTIES OF DIFFERENT AMOUNTS OF SUCH A HUGE VOLUME WHILE GENERALLY BROKERAGE IS PAI D TO ONLY A PERSON OR TWO. MOREOVER, THE SO CALLED BROKERS WHO WERE CLAIMED TO HAVE BEEN ENGAGED IN THE DEALING OF SUCH A HIGH VALUE TRANSACTION HAVE SHOWN HARDLY ANY INCOME FROM ANY OTHER DEALING. THE ASSESSEE WAS IN TOUCH WITH THE A BOVE BROKERS BUT STILL FAILED TO PRODUCE THEM. THE ASSESSEE ALSO DID NOT EXPLAIN AS TO WHY SUCH HUGE AMOUNT WAS PAID AS BROKERAGE WHICH WAS TOO HIGH IN COMPARISON GENERAL PREVAILING RATE OF BROKERAGE IN THE MARKET AND IS TOTALLY UNJUSTIFIABL E. THE ENTIRE SCENARIO WAS PRE PLANNED BY THE ASSESSEE IN ORDER TO MINIMIZE THE TA X INCIDENCE AS IT WAS A SHORT TERM CAPITAL GAIN ON WHICH NO DEDUCTIONS/EXEMPTION OF SE CTION 54 ARE AVAILABLE. IN VIEW OF ABOVE DISCUSSION, IT IS CONCLUDED THAT THE ASSESSEE HAD MADE EXCESSIVE PAYMENT ON ACCOUNT OF BROKERAGE IN ORDER TO REDUCE THE TAX LIABILITY. THEREFORE, IT WILL BE JUSTIFIABLE TO MAKE A DISALLOWANCE OF RS.5,11,00 0/- BEING OVER AND ABOVE THE 1% GENERAL MARKET RATE OF BROKERAGE. 2.6 THE ASSESSEE CLAIMED A SUM OF RS.9,50,918/- AS COST OF IMPROVEMENT. IT IS STATED THAT EXPENDITURE WAS INCURRED ON BOUNDARY WA LL AND LEVELING. THE A.O. NOTICED THAT THE SALE DEED DOES NOT SHOW ANY CONSTRUCTION D ONE AS BOUNDARY WALL. THE ASSESSEE WAS ASKED TO PRODUCE BILLS OR OTHER EVIDENCE IN RES PECT OF EXPENSES CLAIMED TO HAVE BEEN INCURRED BY HIM BUT NO PROOF WAS FILED. THE A.O., A FTER CONSIDERING THE AREA OF THE PLOTS, 4 WAS OF THE OPINION THAT COST OF BOUNDARY WALL SHOUL D NOT HAVE BEEN MORE THAN RS.10,000/-. THE A.O. DISALLOWED THE CLAIM OF EXPEN SES OF RS.9,50,918/-. 2.7 THE ASSESSEE CLAIMED TO HAVE INCURRED EXPENSES ON REGISTRY CHARGES. THERE IS COMMON PRACTICE THAT REGISTRY CHARGES ARE BORNE BY THE PURCHASER. THE A.O. ASKED THE LD. A/R TO PRODUCE THE ASSESSEE AND THE P URCHASER BUT NONE OF THE PARTIES APPEARED BEFORE A.O. 2.8 THE A.O. ALSO NOTICED THAT IN SALE DEEDS, THE WORD KRETA HAS BEEN CHANGED TO VIKRETA. THE A.O. ALSO REFERRED TO SECTION 50C A ND HELD THAT FULL VALUE OF CONSIDERATION IS THE AMOUNT AT WHICH THE REGISTRAR HAS ADOPTED FO R STAMP DUTY. HENCE THE SUM OF RS.6,40,130/- WAS DISALLOWED. 3. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ACTION OF A.O. AFTER OBSERVING AS UNDER: I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENTS T AKEN BY SH. MUNDRA QUITE CAREFULLY. IT IS A FACT THAT THERE ARE NO SPECIFIC EVIDENCE REGARDING SERVICES PROVIDED BY SH. MANOJ GOYAL, SH. VINIT GOY AL, SH. VIPIN GOYAL AND SH. AMIT GOYAL AS BROKER IN ARRANGING THE AFORESAID SALE OF LAND PLOT OF THE APPELLANT. I AGREED WITH THE ASSESSING OFFICER THAT MAXIMUM IN SUCH HIG H VALUE TRANSACTIONS THE BROKERAGE CAN BE 1% OF THE SALE CONSIDERATION AND IF THERE IS A CLAIM MORE THAN THIS LIMIT THEN THERE HAS TO BE EXCEPTIONAL CIRCUMSTANCE S, AND NEITHER IN ASSESSMENT PROCEEDINGS OR IN APPELLATE PROCEEDINGS ANY EVIDENC E COULD BE FURNISHED FOR EXISTENCE OF EXCEPTIONAL CIRCUMSTANCES. CONSIDERING THE FACT THAT EVEN AFTER SHOWING THE SAID RECEIPT AND BROKERAGE/COMMISSION BY THESE PERSONS WHEN IN NONE OF THE CASE A SINGLE RUPEE OF TAX HAS BEEN PAID THEN ASSESSING OFFICER INSTEAD THE SUMMON SEC. 131 OF I.T. ACT TO ALL THESE 4 PERSONS ON THE GIVEN ADDRESSES TO VERIFY THE SERVICES PROVIDED BY THESE PERSONS BUT NONE OF THE PERSON CO ULD APPEAR BEFORE ASSESSING OFFICER. EVEN SH. MUNDRA IN THE APPELLATE PROCEEDIN GS COULD NOT SHOW HIS READINESS TO PRODUCE THESE PERSONS BEFORE THE APPELLATE AUTHO RITY. UNDER THESE CIRCUMSTANCES IN MY CONSIDERED VIEW THE ASSESSING OFFICER WAS JUSTIF IED IN ALLOWING RS.89,000/- AS 5 BROKERAGE WHICH WAS A LITTER MORE THAN 1% OF SALE C ONSIDERATION AT RS88,95,000/-- FOR THE SAID 3 PLOTS AND THE RESULTANT DISALLOWANCE OF RS5,11,000/- ON ACCOUNT OF BROKERAGE CLAIM IS HEREBY CONFIRMED. AS FAR AS CLAI M FOR A SUBSTANTIAL AMOUNT OR RS.9,50,916/-. EVEN WHEN SUCH HIGH AMOUNT IS CLAIME D TO HAVE BEEN INCURRED ON LEVELING OF THE LAND PLOTS AND CONSTRUCTION OF THE BOUNDARY WALL BUT NOT A SINGLE BILL/ VOUCHER/ DETAILS OF THE CONTRACTOR COULD BE PRODUCE D BEFORE ASSESSING OFFICER INSPITE OF OPPORTUNITY GIVEN. NO SUCH DETAILS COULD BE GIVE N EVEN IN THE APPELLATE PROCEEDINGS. FURTHER, EVEN IN THE SALE DEED THERE I S NO MENT ON EVEN IN A SINGLE WORD REGARDING CONSTRUCTION OF BOUNDARY WALL ON THE SAID LAND PLOT. UNDER THESE CIRCUMSTANCES IN MY CONSIDERED VIEW THE ASSESSING O FFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM REGARDING COST OF IMPROVEMENT OF RS.9,50, 918/- WHICH IS HEREBY CONFIRMED BY REJECTING RELEVANT GROUND OF APPEAL. AS FAR AS T HE DISALLOWANCE OF REGISTRY/ STAMP DUTY EXPENSES CLAIMED TO HAVE BEEN BORNE BY THE APP ELLANT IS CONCERNED, IT IS SEEN THAT THERE IS ALTERATION IN THE SALE DEED IN THE HA NDWRITING ACCORDING TO WHICH ORIGINALLY THE WORD KRETA WAS MENTIONED WHICH WAS MODIFIED BY PREFIXING VI BY MAKING IT AS VIKRETA. CUSTOMARILY THE BUYER HAS T O BEAR THE REGISTRATION AND STAMP DUTY CHARGES AND THEREFORE, IN ORDER TO VERIFY THE FACTS THE ASSESSING OFFICER REQUIRED THE APPELLANT AND THE PURCHASER TO BE PRODUCED IN A SSESSMENT PROCEEDINGS BUT THE APPELLANT DID NOT APPEAR AND HE DID NOT PRODUCE EVE N THE BUYER. FURTHER, EVEN IN THE APPELLATE PROCEEDINGS NO READINESS HAS BEEN SHOWN B Y SH. MUNDRA TO PRODUCE THE APPELLANT AND PURCHASER FOR NECESSARY VERIFICATION. FURTHER, THERE IS NO EVIDENCE FOR THE USE OF SAID MONEY FOR THE AFORESAID PURPOSE BY THE APPELLANT. UNDER THE CIRCUMSTANCES IN MY CONSIDERED VIEW THE ASSESSING O FFICER WAS JUSTIFIED IN DISALLOWING THE REGISTRY/ STAMP DUTY EXPENSES CLAIM ON THE SALE OF PLOTS AT RS.6,40,130/- WHICH IS HEREBY CONFIRMED BY REJECTING RELEVANT GROUND OF AP PEAL 4.. BEFORE US THE LD. A/R STATED THAT GENUINENESS O F PAYMENT OF BROKERAGE IS ESTABLISHED AND THE SAME HAS NOT BEEN DOUBTED. PERU SAL OF SALE DEED SHOW THAT ONE PLOT OF LAND WAS CARVED OUT OF AGRICULTURAL LAND AND TWO PL OTS WERE ALLOTTED BY A HOUSING CO- OPERATIVE SOCIETY AS RESIDENTIAL PLOTS. SUCH PLOTS WERE NOT APPROVED AND REGULARIZED BY JDA AND THE APPREHENSION OF THE ASSESSEE WAS THAT S UCH PLOTS MAY NOT BE REGULARIZED AND HENCE ASSESSEE WAS INTERESTED TO REALIZE THE INVEST MENT. THE BROKERS SEARCHED SOME VENTURE INVESTORS WHO WERE WILLING TO BUY PLOTS AND THEREFORE DEMANDED HIGHER BROKERAGE. THE A.O. DID NOT GIVE A REASONABLE OPPOR TUNITY TO THE BROKERS AND PASSED THE ORDER ON 24.12.2009. 6 4.1 IN RESPECT OF COST OF IMPROVEMENT, IT IS SUBMI TTED THAT ASSESSEE FILED AFFIDAVIT OF THE PURCHASER. THE A.O. HAS DISBELIEVE D THE EXPENSES. 4.2. THE SALE OF PLOTS MADE BY ASSESSEE IS A COMPE LLING SELLER AND HENCE AGREED TO BEAR THE REGISTRATION CHARGES. THE MISTAKE IN TH E SALE DEED WAS NOTICED AND IT WAS RECTIFIED. 5. ON THE OTHER HAND THE LD.D/R SUPPORTED THE ORDER S OF LOWER AUTHORITIES. 6.. WE HAVE HEARD BOTH THE PARTIES. THE ONUS IS AN THE ASSESSEE TO ESTABLISH THE EXPENSES FOR WHICH HE IS MAKING CLAIM. WHEN THERE I S AN ABNORMALITY IN RESPECT OF EXPENSES THEN THE ONUS IS HEAVILY ON THE ASSESSEE. THERE IS A DIFFERENCE BETWEEN ARGUMENT AND EVIDENCE. THERE IS AN ARGUMENT THAT THE ASSESSE E WAS COMPELLED TO SELL THE PLOT AS THESE WERE NOT APPROVED AND HENCE HIGHER BROKERAGE WAS GIVEN. THE SALE DEED SHOWS THAT SUCH PLOTS HAVE BEEN EARLIER APPROVED FOR TRANSFER BY JDA. THE A.O. REQUIRED THE ASSESSEE TO PRODUCE BROKERS AND IN THE ASSESSMENT O RDER, THE A.O. HAS CLEARLY MENTIONED THAT BROKERAGE IS NOT ALLOWED TO THE EXTENT OF RS.6 LAKH AS THE PERSONS WHO HAVE RECEIVED BROKERAGE WERE NOT PRODUCED. THE PERSONS RECEIVING BROKERAGE HAVE SHOWN THE RECEIPT IN THEIR I.T. RETURN AND THEREFORE THE ISSUE OF BROKER AGE IS RESTORED BACK ON THE FILE OF THE A.O. TO PROVIDE OPPORTUNITY TO THE ASSESSEE TO PROD UCE BROKERS. 7. IN RESPECT OF EXPENSES ON STAMP DUTY AND BOUNDAR Y WALL, THE LD. A/R HAS DRAWN OUR ATTENTION TO THE AFFIDAVITS OF THE PURCHASES. T HERE AFFIDAVITS ARE AVAILABLE AT PAGES 16 TO 19 OF THE PAPER BOOK AND IT IS MENTIONED THAT TH ESE WERE FILED BEFORE THE A.O. THE LD. 7 CIT(A) HAS MENTIONED THAT THE A/R HAS NOT SHOWN ANY READINESS TO PRODUCE THE ASSESSEE AND PURCHASER. IF A PERSON WHOSE AFFIDAVIT IS FILED IS NOT PRODUCED THEN SUCH AFFIDAVIT CANNOT BE ACCEPTED AS EVIDENCE. NO EVIDENCE IN RESP ECT OF EXPENSES INCURRED ON BOUNDARY WALL FILED. WE, THEREFORE, FEEL THAT ISSUE OF COST OF IMPROVEMENT AND EXPENSES ON STAMP DUTY IS RESTORED ON THE FILE OF THE A.O. TO GIVE OP PORTUNITY TO THE ASSESSEE TO PRODUCE THE PURCHASER. IN CASE THE PURCHASERS ARE NOT PRODUCED THEN THE A.O. WILL BE AT LIBERTY TO MAKE ADDITION ON BOTH THE ISSUES. THE A.O. WILL ALS O BE AT LIBERTY TO EXAMINE THE ASSESSEE. 8.. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. THE ORDER IS PRONOUNCED IN OPEN COURT ON 22-07-2011 . SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 22-07-2011 *MUKESH 1. SHRI NARESH AGARWAL, JAIPUR. 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-5, JAI PUR. 3. THE CIT, 4. THE CIT (A) 5. THE D.R., ITAT, JAIPUR 6. GUARDE FILE ITA NO.1214/JP/2010 BY ORDER A.R. I.T.A.T., 8