HARI SHANKAR KANCHAL, Jaipur V. ITO, TONK

ITA 126/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2020 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S MEHRA CIT DHK
• Assessee Lawyers: RAKESH JAIN; GURJIT SINGH
• Keywords: Capital asset
• Section: 54F; 234B; 54

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 126/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 HARI SHANKAR KANCHAL, PROP.- SAND STONE IMPEX, RIICO INDUSTRIAL AREA, DEOLI, TONK. CUKE VS. INCOME TAX OFFICER, WARD- TONK. PAN/TAN NO.: ACRPK 8761 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI GURJIT SINGH (CA) & SHRI RAKESH JAIN (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.S. MEHRA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28/06/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/06/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS THE APPEAL FILED BY THE ASSESSEE EMANATES F ROM THE ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 24/11/2015 FOR THE A. Y. 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVED INCOME FROM MANUFACTURING, PROCESSING AND TRADING OF SAND/ SLATE STONE TILES. RETURN OF INCOME WAS FILED ON 29/09/2011 DECLARING T OTAL INCOME OF RS. 5,81,250/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SOLD A ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 2 PLOT BEARING NO. G-1/656, SITAPURA INDUSTRIAL AREA, JAIPUR FOR A SUM OF RS. 53,00,000/- ON 26/03/2011. THIS PLOT WAS PURCHASE D BY THE ASSESSEE ON 31/01/2007 FOR A SUM OF RS. 3,37,000/-. THE ASSE SSING OFFICER FOUND THAT THE ASSESSEE HAS NOT DISCLOSED ANY LONG TERM C APITAL GAIN IN THE RETURN OF INCOME AND ALSO HAD NOT MADE ANY CLAIM U/ S 54 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) OR OTHER RELEVANT P ROVISIONS OF THE ACT IN THE RETURN OF INCOME. THE ASSESSING OFFICER CALCULAT ED LONG TERM CAPITAL GAIN AT RS. 48,38,330/-. THE A.O. ALSO NOT ALLOWED RS . 12,76,527/- PAID TO RIICO AS DEVELOPMENT CHARGES. THE ASSESSING OFFIC ER HAS ALSO MADE DISALLOWANCES @ 10% OUT OF PROCESSING EXPENSES, TELEP HONE EXPENSES AND VEHICLE EXPENSES DEBITED IN P&L ACCOUNT. 3. THE LD CIT(A) HAS CONFIRMED THE ACTION OF THE ASSE SSING OFFICER WITH REGARD TO LONG TERM CAPITAL GAIN, DISALLOWANCE O F RS. 12,76,572/- CLAIMED TOWARDS COST OF IMPROVEMENT PAID TO RIICO AN D DISALLOWANCES OUT OF PROCESSING CHARGES, TELEPHONE AND VEHICLE EX PENSES. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US BY TAKING FOLLOWING GROUNDS OF APPEAL: 1.1 RS.48,38,330/-: THE LD. CIT(A) ERRED IN LAW AS WE LL AS ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.48,38,330/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. THE ADDITION SO MADE AND CONFIRMED BEI NG CONTRARY TO THE PROVISIONS OF LAW AND FACTS, THE LON G TERM CAPITAL GAIN AS CLAIMED NIL DURING THE COURSE OF ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 3 ASSESSMENT PROCEEDINGS, KINDLY BE ACCEPTED AND THE IMPUGNED ADDITION SO MADE, KINDLY BE DELETED IN FUL L. 1.2 RS.12,76,572/-: THE LD. CIT(A) ALSO ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DENIA L OF THE COST OF IMPROVEMENT CLAIMED BY THE APPELLANT BE ING THE PAYMENT MADE TO RIICO ALLEGING THAT NO EVIDENCE WAS FILED. THE DENIAL TO THE CLAIMED COST OF IMPROVEMENT BY THE AO AND CONFIRMATION THEREOF BY T HE CIT(A) BEING CONTRARY TO THE PROVISIONS OF LAW AND FA CTS ON RECORD, THE ASSESSEE KINDLY BE HELD ENTITLED TO THE CLAIM OF COST OF IMPROVEMENT OF RS.12,76,572/- AS A LSO THE INDEXATION THEREOF ACCORDINGLY. 1.3. RS.2,28,898/-: THE LD. CIT(A) FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE D ENIAL OF THE CLAIM MADE BY THE ASSESSEE U/S 54 ON ACCOUNT OF THE CONSTRUCTION OF A NEW RESIDENTIAL HOUSE. THE DENI AL TO THE DEDUCTION BY THE AO AND CONFIRMATION THEREOF BY THE CIT(A), BEING CONTRARY TO THE PROVISIONS OF LAW A ND FACTS, THE ASSESSEE KINDLY BE ALLOWED THE DEDUCTION U/S 54 AS CLAIMED. 2. RS.2,85,683/-: THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF THE FOLLOWING EXPENSES: S. NO. HEAD OF EXPENSES EXP. CLAIMED DISALLOWED BY AO @ 10% EXP. SUSTAINED BY CIT(A) @ 10% 2.1 PROCESSING CHARGES RS. 22,88,976/ - RS.2,28,898/ - RS.2,28,898/ - 2.2 TELEPHONE EXP. RS. 1,46,190/ - RS.14,619/ - RS.14,619/ - 2.3 VEHICLE EXP. RS.4,21,657/ - RS.42,166/ - R S.42,166/ - THE DISALLOWANCE SO MADE AND CONFIRMED BY THE CIT(A) BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE, KINDLY BE DELETED IN FULL. ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 4 3. THE AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING THE INTEREST U/S 234B & 234C OF THE ACT . THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARGI NG OF ANY SUCH INTEREST. THE INTEREST SO CHARGED, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. 4. THE APPELLANT PRAYS YOUR HONOUR INDULGENCES TO AD D, AMEND OR ALTER OF OR ANY OF THE GROUNDS OF THE APPE AL ON OR BEFORE THE DATE OF HEARING. 5. GROUND NO. 1.1, ON THIS ISSUE THE LD AR OF THE A SSESSEE HAS SUBMITTED THAT THE FINDINGS RECORDED BY THE LOWER AU THORITIES ARE INCORRECT. THE ASSESSEE HAS PURCHASED A RESIDENTIAL PLOT AND THERE WAS CONSTRUCTION OF A HABITABLE UNIT. HE SUBMITTED THAT THE INSPECTORS REPORT ITSELF SHOWS THAT IT WAS NOT A VACANT PLOT BUT THERE WAS A CONSTRUCTION. IT WAS A DWELLING UNIT CONSISTING TWO ROOMS, VARANDA AND TOILET, WHICH WAS HABITABLE IN NATURE. THEREFORE, THE FINDINGS OF THE LOWER AUTHORITIES THAT THERE WAS NO CONSTRUCTION ON THE PLOT IS FACTUALLY I NCORRECT. HE HAS DRAWN OUR ATTENTION TOWARDS THE INSPECTORS REPORT, WHICH I TSELF MENTIONS THAT THERE WAS CONSTRUCTION. HE CLAIMS IT A CHOWKIDAR HUT BUT IT WAS A HABITUAL PLACE. HE HAS ALSO SUBMITTED THAT THE LOWER AUTHORI TIES ALSO DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE A SSESSEE HAS NOT CLAIMED IT IN THE RETURN OF INCOME. FOR THIS, THE L D. AR SUBMITTED THAT THE LD. CIT(A) HAS PLENARY POWER IN DISPOSING OF AN APPEA L. THE SCOPE OF THE POWER OF THE LD. CIT(A) ARE COTERMINOUS WITH THE A.O. HE ALSO SUBMITTED ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 5 THAT THE LD. CIT(A) CAN DO WHATEVER THE A.O. CAN DO AND HE CAN ALSO DIRECT THE A.O. TO DO WHAT HE HAS FAILED TO DO. THERE FORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT ADMITTING THE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT. HE ALSO PLEADED THAT THE ASSESSEE DESERVES A F AIR TREATMENT WITH REGARD TO CLAIM OF DEDUCTION U/S 54 OF THE ACT ON T HE CAPITAL GAIN EARNED IN THE SALE OF THE PLOT LOCATED AT SITAPURA INDUSTR IAL AREA, JAIPUR. 6. ON THE OTHER HAND, THE LD. SR.DR HAS RELIED ON T HE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND THE CASE L AWS RELIED UPON. THE ASSESSEE HAD SOLD A PLOT OF LAND LOCATED AT SITAPUR A INDUSTRIAL AREA, JAIPUR FOR A SUM OF RS. 53,00,000/- ON 26/03/2011, WHICH WAS PURCHASED BY HIM ON 31/1/2007 FOR A SUM OF RS. 3,37,000/-, TH US THE ASSESSEE EARNED LONG TERM CAPITAL GAIN ON THE SALE OF THE LA ND. THE ASSESSEE HAS NOT DISCLOSED THIS CAPITAL GAIN IN THE RETURN OF IN COME. FOR THE SAME, THE ASSESSEE SUBMITTED AN EXPLANATION THAT SINCE THE AS SESSEE HAS REINVESTED THE CAPITAL GAIN SO EARNED IN THE PURCHA SE OF A RESIDENTIAL PLOT WITHIN TWO YEARS FROM THE DATE OF SALE, THEREFORE, TH E ASSESSEE WAS NOT LIABLE FOR CAPITAL GAIN. IN THESE CIRCUMSTANCES, TH E LONG TERM CAPITAL GAIN WAS TREATED AS EXEMPTED AND NOT DISCLOSED IN THE RET URN OF INCOME. THE ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 6 ASSESSEE CLAIMED THAT THE PLOT WAS ALSO HAVING CONST RUCTION OF A DWELLING UNIT OF TWO ROOMS, VARANDA AND TOILET FOR THE SAME, HE FILED A COLOURED PHOTOGRAPH WHICH ALSO WAS SUBMITTED BEFORE THE LD. CI T(A). IT WAS ALSO CLAIMED THAT THERE WAS AN ELECTRICAL CONNECTION IN THE NAME OF THE EARLIER PLOT OWNER. NO ELECTRIC CONNECTION CAN BE OBTAINED WI THOUT CONSTRUCTION OF HABITABLE ROOMS. THEREFORE, THE ASSESSEE IS ENTIT LED FOR EXEMPTION U/S 54F OF THE ACT. THE LD. CIT(A) HAS NOT GIVEN ANY SPEC IFIC FINDING ON THE ISSUE THAT HOW ASSESSEE GOT ELECTRIC CONNECTION WITHO UT CONSTRUCTION ON THE PLOT. IT IS POLICY OF THE GOVERNMENT THAT NO EL ECTRIC CONNECTION CAN BE OBTAINED WITHOUT CONSTRUCTION. THE ACQUISITION OF TH E PLOT IS NOT IN DISPUTE. ONLY DISPUTE IS WHETHER THERE WAS CONSTRUC TION OF HABITUAL UNIT. INSPECTORS REPORT MENTIONS THAT THERE WAS CONSTRUCT ION OF CHOWKIDAR ROOM. THE ASSESSEE CLAIMS THAT IT WAS A HABITUAL UNIT HAVING ELECTRIC CONNECTION, HENCE THE ASSESSEE DESERVE FOR BENEFIT U/S 54F OF THE ACT. THE ASSESSEE SUBMITS PHOTOGRAPH OF CONSTRUCTED PORTI ON, ON THAT ISSUE, THE REVENUE IS NOT ABLE TO CONTROVERT THE FACT OF C ONSTRUCTION. CONSIDERING ALL THESE RELEVANT FACTS AND CIRCUMSTANCES, WE ALLOW THIS GROUND OF ASSESSEES APPEAL. WE ALSO HOLD THAT WHEREVER A LEG AL CLAIM IS AVAILABLE TO THE ASSESSEE THEN THE LD. CIT(A) IS EMPOWERED TO E NTERTAIN SUCH CLAIM OF THE ASSESSEE IN VIEW OF THE DECISIONS OF THE HON' BLE SUPREME COURT AS ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 7 WELL AS THE HON'BLE HIGH COURTS. ACCORDINGLY, THIS G ROUND OF THE ASSESSEES APPEAL IS ALLOWED. 8. THE GROUND NO. 1.2 OF THE APPEALS IS REGARDING TH E CLAIM OF RS. 12,76,572/- AS THE COST OF IMPROVEMENT PAID TO THE RIICO. ON THIS ISSUE, WE HAVE HEARD BOTH THE SIDES. THE ASSESSING OFFICER H ELD THAT THE AMOUNT PAID OF RS. 12,76,577/- WAS TOWARDS THE PENAL TY FOR WITHDRAWAL OF THE CASE AGAINST THE RIICO. THE ASSESSEE SUBMITT ED A COPY OF RECEIPT FROM THE RIICO AND IT WAS CLAIMED THAT NOWHERE IN THE RECEIPT, SUCH FACTS HAVE BEEN MENTIONED, THEREFORE, ASSESSING OFF ICERS FINDINGS WAS INCORRECT. THE A.OS FINDINGS ARE ABNORMAL IN THE S ENSE THAT THE ASSESSEE SHOULD PAY THE AMOUNT TO THE RIICO FOR THE WITHDRAWAL OF THE CASES FILED BY THE ASSESSEE AGAINST THE RIICO. THUS, THE A.OS CLAIM IN THIS REGARD IS NOT JUSTIFIED. THEREFORE, IN OUR CONS IDERED VIEW, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT THE A MOUNT WAS PAID FOR WITHDRAWAL OF THE CASES FILED AGAINST THE RIICO. CONS IDERING ALL THESE ASPECTS, WE HOLD THAT THE AMOUNT PAID TO THE RIICO WA S TOWARDS THE DEVELOPMENT CHARGES AND THE SAME WERE FOR THE IMPROV EMENT OF THE CAPITAL ASSET, WHICH HAS BEEN SOLD OUT BY THE ASSESS EE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT THE ASSESSEE I S ENTITLED TO CLAIM ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 8 THESE DEVELOPMENT EXPENSES FOR WORKING OUT THE CAPI TAL GAIN. ACCORDINGLY, THIS GROUND OF THE ASSESSEES APPEAL I S ALSO ALLOWED. 9. IN THE GROUNDS NO. 1.3 AND 2 OF THE APPEAL ISSUE S ARE RELATED WITH SUSTAINING THE DISALLOWANCES OF EXPENSES DEBITED UND ER THE HEADS PROCESSING CHARGES, TELEPHONE CHARGES AND VEHICLE C HARGES @ 10%. 10. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE HAVE ALSO CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIE S. THE 10% OF THE DEVELOPMENT EXPENSES WAS DISALLOWED FOR THE REASON TH AT THE ASSESSEE HAS AGREED FOR THE DISALLOWANCES. THE 10% OF THE TELE PHONE EXPENSES AND VEHICLE EXPENSES WERE DISALLOWED ON ACCOUNT OF PE RSONAL USE BY THE ASSESSEE AND THEIR FAMILY MEMBERS. SINCE THE ASSESS EE HIMSELF AGREED FOR DISALLOWANCE OF 10% EXPENSES DEBITED UNDER THE H EAD PROCESSING CHARGES, THEREFORE, THERE IS NO SCOPE FOR ANY RELIE F ON THIS COUNT. FURTHER THE DISALLOWANCES OUT OF TELEPHONE EXPENSES AND VEHI CLE EXPENSES ARE ALSO JUSTIFIED AS THERE IS NO DENIAL OF PERSONAL US E BY THE ASSESSEE AND HIS FAMILY MEMBERS. IN VIEW OF THESE FACTS, WE SUSTAI N THE DISALLOWANCES UNDER THESE HEADS. 11. THE GROUND NO. 3 IS REGARDING THE CHARGING OF IN TEREST U/S 234B AND 234C OF THE ACT. THE SAME ARE CONSEQUENTIAL AND MANDATORY, THEREFORE, THE SAME ARE DECIDED ACCORDINGLY. ITA 126/JP/2016 HARI SHANKAR KANCHAL VS ITO 9 12. THE GROUND NO. 4 IS OF GENERAL IN NATURE AND DOE S NOT REQUIRE ANY ADJUDICATION, THEREFORE, THE SAME IS HEREBY DISMISS ED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/06/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH JUNE, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI HARI SHANKAR KANCHAL, TONK. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD- TONK. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 126/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR