Smt. Geeta Narang, Delhi V. ACIT, New Delhi

ITA 1309/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3373 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Keywords: Principle of natural justice; Cost of acquisition; Valuation report; Benefit of exemption; Set aside; Capital Gains
• Section: 54F; 143(2); 54

Judgement Text

1 ITA NO. 1309/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. NO. 1309/DEL/20 17 (A.Y. 2012-13) GEETA NARANG, 2768, GALI ARYA SAMAJ, BAZAR SITA RAM DELHI 110 006. (PAN : AAGPN 2450 D) (APPELLANT) VS ACIT CIRCLE 46(1), NEW DELHI ( RESPONDENT) APPELLANT BY SH. VED JAIN, ADV. RESPONDENT BY SH. S. N. MEENA, SR. D.R. ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX [APPEALS]-16, NEW DELHI DATED 20.12.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A )] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN ACCEPTING THE COST OF C ONSTRUCTION TO THE EXTENT OF 75% OF THE VALUE OF PROPERTY ESTIMATED BY THE RE GISTERED VALUER. (II) THAT ONCE ACCEPTING IN PRINCIPLE THAT THE COST OF C ONSTRUCTION HAS IN FACT BEEN INCURRED, THE LEARNED CIT(A) HAS ERRED IN ESTI MATING THE SAME TO THE EXTENT OF 75% OF VALUE ESTIMATED BY THE REGISTERED VALUER. DATE OF HEARING 26.11.2019 DATE OF PRONOUNCEMENT 03.12.2019 2 ITA NO. 1309/DEL/2017 (III) THAT THE LEARNED CIT(A) HAS ERRED IN ESTIMATING THE 75% OF THE VALUE ESTIMATED BY THE REGISTERED VALUER WITHOUT THERE BE ING ANY BASIS FOR THE SAME. (IV) THAT THE LEARNED CIT(A) HAS ERRED IN TAKING 75% OF THE VALUE ESTIMATED BY THE REGISTERED VALUER, WITHOUT POINTING OUT ANY SPE CIFIC DISCREPANCY IN THE SAID REPORT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F THE AO IN DISALLOWING AN AMOUNT OF RS.5,00,000/- ON ACCOUNT OF COMMISSION ON SALE OF PROPERTY PAID BY THE ASSESSEE, WHILE COMPUTING INCOME UNDER THE HEAD CAPITAL GAINS. 4. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATI VE, THE LEARNED CIT(A) HAS ERRED IN NOT GIVING ASSESSEE THE BENEFIT OF EXE MPTION UNDER SECTION 54 OF THE ACT TO THE EXTENT OF RS.2,13,23,510/- BEING THE INVESTMENT MADE IN THE RESIDENTIAL PROPERTY. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE GROUNDS OF APPEAL. 3. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME UN DER THE HEAD INCOME FROM BUSINESS, INCOME FROM CAPITAL GAINS AND IN COME FROM OTHER SOURCES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2012-1 3 ON 31.03.2014 DECLARING AN INCOME OF RS.42,31,790/-. THEREAFTER, THE CASE O F THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME TA X ACT WAS ISSUED TO THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD A PROPERTY SITUATED AT OKHLA INDUSTRIAL AREA FOR A CONSIDERATI ON OF RS.2.7 CRORE AND EARNED CAPITAL GAINS OF RS.1,29,95,449/-. OUT OF THE SALE PROCEEDS, THE ASSESSEE BROUGHT A FLAT IN NOIDA ON 16.07.2012 FOR A TOTAL C ONSIDERATION OF RS.50,00,000/- AND A FLAT IN GURGAON OR 12.11.2012 FOR A TOTAL CONSIDERATION OF RS.2,13,23,510/-. THE ASSESSEE CLAIMED DEDUCTION U/ S 54F OF THE ACT FOR BOTH THE PROPERTIES AND TAX WAS PAID ON THE REMAINING AM OUNT OF RS. 35,54,080/-. FURTHER, WITH THE COST OF ACQUISITION OF THE PROPER TY SITUATED IN OKHLA INDUSTRIAL AREA, THE ASSESSEE CLAIMED CONSTRUCTION EXPENSES OF RS.63,76,658/-. 3 ITA NO. 1309/DEL/2017 DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASS ESSING OFFICER ASKED THE ASSESSEE TO PRODUCE EVIDENCE TO SUPPORT THE CONSTRU CTION EXPENSES AS CLAIMED BY THE ASSESSEE. IN RESPONSE TO WHICH, THE ASSESSEE FILED A REPLY DATED 05.02.2015, STATING THEREIN THAT THE RECORDS PREVAI LING TO THE A.YS. 2002 TO 2006 WERE NOT AVAILABLE WITH THE ASSESSEE. THE ASSE SSEE SUBMITTED THE COPIES OF PURCHASE DEED OF THE SAID PROPERTY I.E. OKHLA IN DUSTRIAL AREA PROPERTY. THE ASSESSEE BEFORE THE ASSESSING OFFICER SUBMITTED THA T AS PER THE SALE DEED OF THE SAID PROPERTY, IT IS CLEARLY EVIDENT THAT THE ASSES SEE SOLD A CONSTRUCTED PROPERTY TO M/S MIR HANDICRAFTS PVT. LTD. IN FEB. 2012 AFTER COMPLETING THE CONSTRUCTION. THEREFORE, THE ASSESSEE GOT CONSTRUCT ION DONE ON THE SAID PLOT AFTER ACQUIRING IT. THE ASSESSING OFFICER HELD THAT SINCE THERE IS NO DOCUMENTARY EVIDENCE FOR CLAIMING AFORESAID CONSTRU CTION EXPENSES AND MADE ADDITION TO THAT EXTENT. THE ASSESSING OFFICER FURT HER MADE ADDITION OF RS.5,00,000/- ON ACCOUNT OF COMMISSION PAID ON SALE OF PROPERTY. THE SAID DISALLOWANCE WAS MADE IN RESPECT OF PURCHASE AND SA LE TRANSACTION OF THE FLAT AT GURGAON AND INDUSTRIAL PROPERTY SITUATED AT OKHL A INDUSTRIAL AREA WHICH WERE DONE THROUGH THE SAME PROPERTY DEALER. THE ASS ESSING OFFICER HAS NOT GIVEN EXEMPTION U/S 54 TO THE EXTENT OF RS.2,13,23, 510/- AS EXEMPTION U/S 54F IS NOT AVAILABLE FOR THE INVESTMENTS IN PROPERT Y MADE THROUGH BORROWED FUNDS. THE SAID INVESTMENT WAS MADE PARTLY THROUGH OWN FUNDS TO THE EXTENT OF RS.44,41,369/- AND PARTLY THROUGH BORROWED FUND TO THE EXTENT OF RS.1,68,82,141/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT AS REGARDS GROUND NO.2 , THE ASSESSEE HAD PURCHASED A PLOT MEASURING 200 SQ. MTRS. AND SOLD A BUILT-UP PROPERTY COMPRISING THE TOTAL PLINTH AREA OF 525 SQ. MTRS. T HE ASSESSING OFFICER, IF HAD ANY DOUBT IN THE VALUE OF CONSTRUCTION AS ADOPTED B Y THE ASSESSEE THEN THE ASSESSING OFFICER COULD HAVE REFERRED THE MATTER TO A VALUATION OFFICER UNDER 4 ITA NO. 1309/DEL/2017 SECTION 142A OF THE ACT FOR DETERMINING THE COST OF CONSTRUCTION. ALTERNATIVELY, LD. AR SUBMITTED THAT THE ASSESSING OFFICER COULD H AVE GIVEN OPPORTUNITY TO THE ASSESSEE TO ARRANGE A VALUATION REPORT FROM A R EGISTERED VALUER SO AS TO JUSTIFY THE CONSTRUCTION COST AS CLAIMED BY THE ASS ESSEE. THE LD. AR SUBMITTED THAT A COPY OF VALUATION REPORT AS AN ADDITIONAL EV IDENCE PREPARED BY THE ACCRUED VALUERS CLEARLY STATES THAT THE TOTAL VALUE WAS COMPUTED TO RS. 62,05,000/-. AFTER CONSIDERING THE VALUATION REPORT , THE CIT(A) ASKED FOR THE COMMENTS FROM THE ASSESSING OFFICER ON THE REPORT. HOWEVER, THE ASSESSING OFFICER CHOSE NOT TO SAY ANYTHING ON THE MERIT OF T HE VALUATION REPORT. HOWEVER, THE CIT(A) ALSO DISREGARDED THE SUBMISSIONS OF THE ASSESSEE AND ACCEPTED 75% OF THE VALUE AS DETERMINED BY THE REGISTERED VALUER , I.E., RS. 46,53,750/- AND REJECTED THE COST OF CONSTRUCTION AS CLAIMED BY THE ASSESSEE. THERE IS NO DISPUTE IN THE FACT THAT THE ASSESSEE GOT CONSTRUCT ION DONE ON THE PLOT SITUATED IN OKHLA INDUSTRIAL AREA. THE SAME IS EVIDENT FROM THE SALE DEED. THEREFORE, THE LD. AR SUBMITTED THAT FOR COMPLETING THE ABOVE CONS TRUCTION CERTAIN COST WAS INCURRED WHICH RIGHTLY CLAIMED BY THE ASSESSEE WHIL E CALCULATING CAPITAL GAIN. THE LD. AR FURTHER SUBMITTED THAT THE REGISTERED VA LUER WORKED OUT THE CONSTRUCTION COST OF RS.62,05,000/- FOR THE APPROVE D/PERMISSIBLE AREA WITHIN MCD BY-LAWS I.E. 3,873.6 SQ.FT. WHEREAS THE ACTUAL CONSTRUCTION BY THE ASSESSEE IS MUCH MORE THAN THAT. THE LD. AR SUBMITT ED THE DETAILS OF THE VALUATION REPORT. THE LD. AR FURTHER SUBMITTED THAT THE ACTUAL COST INCURRED BY THE ASSESSEE IS MUCH MORE THAN SPECIFIED IN THE VAL UATION REPORT AS THE VALUER HIMSELF HAS ACCEPTED THE FACT THAT THE ACTUAL AREA OF CONSTRUCTION BY THE ASSESSEE IS MUCH MORE THAN THE PERMISSIBLE LIMITS O F MCD WHICH JUSTIFIES THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE WAS ISSUED A COMPLETION CERTIFICA TE BY DELHI NAGAR NIGAM ON 10.12.2003 STATING THEREIN THAT THE CONSTRUCTION WO RK DONE BY THE ASSESSEE ON THE INDUSTRIAL PLOT IS COMPLETED AND DECLARED IT TO BE READY TO USE. THE LD. AR SUBMITTED THAT ONCE THE CIT(A) ACCEPTED THE VALUE O F THE CONSTRUCTION COST TO THE EXTENT OF 75% OF THE ESTIMATED VALUE CALCULATED BY THE REGISTERED VALUER WITHOUT ANY BASIS IS BAD IN LAW AND LIABLE TO BE DE LETED. 5 ITA NO. 1309/DEL/2017 6. THE LD. DR SUBMITTED THAT THE CIT(A) HAS RIGHTLY HELD THAT SOME AMOUNT OF INVESTMENT HAS TAKEN PLACE IN THE CONSTRUCTION O F THE PROPERTY AND THEREFORE, RIGHTLY DIRECTED THE ASSESSING OFFICER TO RE-COMPUT E THE CAPITAL GAIN BY ACCEPTING 75% OF THE VALUE ESTIMATED BY THE REGISTE RED VALUE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORD. SINCE THE CIT(A) HAS ALREADY A CCEPTED THE FACT THAT THERE WAS A CONSTRUCTION AND HAS NOT DOUBTED THE VALUATIO N REPORT OF THE REGISTERED VALUER. THUS, THE ASSESSEE BEFORE THE ASSESSING OFF ICER HAS GIVEN THE CONSTRUCTION COST AND THE DETAILS WHILE INCURRING T HE SAME. THEREFORE, THE SAME COST CANNOT BE ESTIMATED AND CANNOT BE DISALLOWED. THE EVIDENCES SHOW THAT THERE IS A CONSTRUCTION COST INCURRED BY THE ASSESS EE AND THROUGH THE RECORDS THE SAME WAS PROPERLY VALUED BY THE REGISTERED VALU ER. THEREFORE, THE ESTIMATION DONE BY THE CIT(A) IS NOT JUSTIFIED IN A BSENCE OF ANY CONTRARY MATERIAL BEFORE THE ASSESSING OFFICER AS WELL AS BE FORE THE CIT(A). THEREFORE, WE SET ASIDE THE DIRECTIONS GIVEN BY THE CIT(A). GROUN D NO.2 IS ALLOWED. 8. AS REGARDS TO GROUND NO. 3 RELATING TO DISALLOWA NCE OF RS.5,00,000/- ON ACCOUNT OF COMMISSION PAID ON SALE OF PROPERTY, THE LD. AR SUBMITTED THAT USUALLY FOR CARRYING OUT ANY PURCHASE AND SALE TRAN SACTIONS IN THE CASE OF PROPERTY, AN AGENT IS HIRED AND THE SAME IS A COMMO N PRACTICE. THE LD. AR SUBMITTED THAT THE RANGE OF COMMISSION IN SUCH TYPE OF BUSINESS VARIES FROM 1% TO 2%, THEREFORE, THE PAYMENT OF COMMISSION IN T HE CASE IN HAND IS VERY REASONABLE COMMISSION AMOUNTING ONLY TO 0.1590% AND THEREFORE CLAIM OF THE ASSESSEE CANNOT BE DENIED. 9. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AS W ELL AS THE ORDER OF THE CIT(A). 6 ITA NO. 1309/DEL/2017 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIALS AVAILABLE ON RECORD. AS REGARDS COMMISSION PAID, TH E ASSESSEE HAS NOT GIVEN ANY DOCUMENTARY EVIDENCE AS REGARDS TO THE PAYMENT MADE TO THE SO-CALLED AGENT. THE EVIDENCE WAS NOT BEFORE THE ASSESSING OF FICER AS WELL AS BEFORE THE CIT(A). THEREFORE, IN ABSENCE OF ANY EVIDENCE, THE CIT(A) HAS RIGHTLY CONFIRMED THIS ADDITION ON ACCOUNT OF COMMISSION EXPENSES. GR OUND NO.3 IS DISMISSED. 11. AS REGARDS GROUND NO.4, IN RESPECT OF DISALLOWA NCE OF EXEMPTION U/S 54 OF THE ACT TO THE EXTENT OF RS.2,13,23,510/-. THE L D. AR SUBMITTED THAT THE ASSESSEE SOLD INDUSTRIAL PROPERTY SITUATED AT OKHLA FOR RS.2.7 CRORES. HOWEVER, TO CLAIM THE BENEFIT OF EXEMPTION U/S 54F OF THE AC T THE ASSESSEE PURCHASED A FLAT AT GURGAON FOR RS.2,13,23,510/- WITHIN THE STI PULATED TIME AS MENTIONED IN SECTION 54F OF THE ACT. HOWEVER, THE SAID INVEST MENT WAS MADE PARTLY THROUGH OWN FUNDS AND PARTLY THROUGH BORROWED FUNDS . THUS, THE TOTAL ELIGIBLE DEDUCTION U/S 54F IS RS.2,13,23,510/- INSTEAD OF RS .44,41,369/- AS ACQUIRED BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESS EE SUBMITTED CERTAIN DOCUMENTS FOR CLAIMING THE ADDITIONAL DEDUCTION AMO UNTING TO RS.1,68,82,141/- WHICH WAS NOT AT ALL CONSIDERED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT(A). 12. THE LD DR SUBMITTED THAT EXEMPTION U/S 54F IS N OT AVAILABLE FOR THE INVESTMENTS IN PROPERTY MADE THROUGH BORROWED FUNDS . THE LD. DR FURTHER SUBMITTED THAT THE SOLD PROPERTY IS HAVING MORE VAL UE EARNED BY THE ASSESSEE THAN THE PURCHASE PROPERTY. THEREFORE, MAKING A SUB MISSION THAT THE INVESTMENT IN PROPERTY IS MADE THROUGH BORROWED FUN D DOES NOT SUSTAIN AND THE CIT(A) RIGHTLY REJECTED THIS PLEA. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE MATERIALS AVAILABLE ON RECORDS. FROM THE PERUSAL OF RECORDS, IT CAN BE SEEN THAT THE ASSESSEE SUBMITTED CERTAIN DOCUMENTS BEFORE THE ASSESSING OF FICER AND THE CIT(A) IN RESPECT OF CLAIMING BENEFIT OF EXEMPTION U/S 54F OF THE ACT. THE FACT REMAINS 7 ITA NO. 1309/DEL/2017 THAT THE ASSESSEE SOLD PROPERTY SITUATED AT OKHLA A ND PURCHASED A FLAT AT GURUGAON. WHETHER THE TRANSACTION OF PURCHASE IS FR OM BORROWED FUND OR THROUGH OWN FUNDS HAS NOT BEEN PROPERLY VERIFIED BY THE ASSESSING OFFICER OR THE CIT(A) BEFORE REJECTING THE ASSESSEES SAID CLA IM U/S 54F OF THE ACT. THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THIS ISSUE A FRESH AFTE R TAKING INTO CONSIDERATION ALL THE DOCUMENTS PERTAINING TO SALE AND PURCHASE OF TH E PROPERTIES AND DETERMINE WHETHER THE INVESTMENT IS MADE EITHER THROUGH BORRO WED FUND OR OWN FUND. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 4 IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DAY OF DECEMBER, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 03/12/2019 PRITI YADAV, SR. PS * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI