Shri Amit Jain, Kota V. Assistant Commissioner Of Income Tax, Circle-2, Kota

ITA 132/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3781 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Assessee Lawyers: B V MAHESHWARI
• Keywords: Capital asset; Audit objection; Cost of acquisition; Valuation report; Capital Gains
• Section: 143(3); 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 132/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 SHRI AMIT JAIN, C/O B VISHAL & CO. RAGHUKUL, 15, UIT PLOTS B/H, GUMANPURA POLICE STATION, JHALAWAR ROAD, KOTA CUKE VS. ACIT, CIRCLE-02, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AFRPJ5514L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. B. V. MAHESHWARI (CA) JKTLO DH VKSJ LS @ REVENUE BY : SH. K. C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 02/03/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 03/03/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 19.11.2018 WHEREIN THE ASSESSEE HAS TAKE N THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. AO GROSSLY ERRED ON LAW IN REOPENI NG THE ASSESSMENT U/S 147/148 TO THE COMPLETED ASSESSMENT U/S 143(3) ON THE ISSUES WHICH WERE BEFORE THE LD. AO AT THE TIME OF REGULAR ASSES SMENT. 2. THAT THE LD. AO GROSSLY ERRED ON LAW IN MAKING T HE ADDITION IN SHORT TERM CAPITAL GAIN OF RS. 3,45,926/- BY REDUCI NG THE COST OF CONSTRUCTION BY THE SAID AMOUNT AND THE LD. CIT(A), KOTA ALSO ERRED IN SUSTAINING THE SAID ADDITION. ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS ORIGINALLY FILED HIS RETURN OF INCOME ON 31.07.2011 WHICH WAS ASSESSED U/S 143(3) DATED 10.03.2014. THEREAFTER, THE NOTICE U/S 148 WAS ISSU ED ON 03.02.2016 AND ASSESSMENT WAS COMPLETED U/S 143(3) READ WITH 147 W HEREIN THE ADDITION OF RS. 3,45,926/- WAS MADE U/S THE HEAD SHORT TERM CA PITAL GAIN BY REDUCING THE COST OF CONSTRUCTION CLAIMED BY THE ASSESSEE. BEIN G AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SUSTAINED THE SAID ADDITION. AGAINST THE SAID FINDINGS, THE ASSESSEE I S IN APPEAL BEFORE US. 3. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE REOPENING THE ASSESSMENT U/S 147 OF THE ACT. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) WHEREIN THE ASS ESSEE HAS SHOWN SHORT TERM CAPITAL GAINS OF RS. 22,000/- AND WHICH WAS AC CEPTED BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT ALL THE FIGURES FOR SALE AND PURCHASE OF PROPERTY AND DOCUMENTS WERE FILED BEFORE THE LD. AO AT THE T IME OF ORIGINAL ASSESSMENT AND THE AO WAS SATISFIED THAT THE SHORT TERM CAPITA L GAIN DECLARED BY THE ASSESSEE WAS CORRECT AND ACCORDINGLY, THE ASSESSMEN T WAS COMPLETED U/S 143(3). IT WAS SUBMITTED THAT SUBSEQUENTLY ON THE B ASIS OF AUDITOR OBJECTION, THE CASE OF THE ASSESSEE WAS REOPENED AND THE NOTIC E U/S 148 WAS ISSUED. IT WAS SUBMITTED THAT ONCE A VIEW HAS BEEN TAKEN BY TH E ASSESSING OFFICER, ANOTHER VIEW BASIS THE AUDIT BASIS OBJECTIONS RAISE D BY THE AUDIT PARTY CANNOT BE TAKEN AS THE SAME WILL AMOUNT TO CHANGE IN OPINI ON WHICH CANNOT CONFER JURISDICTION TO THE ASSESSING OFFICER U/S 147 OF TH E ACT. IN SUPPORT, THE RELIANCE WAS PLACED ON THE HONBLE RAJASTHAN HIGH COURT DECI SION IN CASE OF CIT VS. SAMBHAR SALT 262 ITR 675 (RAJ.). 4. PER CONTRA, THE LD. DR SUBMITTED THAT ON PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT, THERE IS NO MENTION THAT THE MATTER WAS REOPENED BASIS ANY A UDIT OBJECTIONS. IT WAS ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 3 FURTHER SUBMITTED THAT EVEN WHERE IT IS HELD THAT T HE MATTER WAS REOPENED BASIS AN AUDIT OBJECTION, SUCH AUDIT OBJECTION CAN CONSTI TUTE INFORMATION AND BASIS SUCH INFORMATION WHERE THE ASSESSING OFFICER FORMS A PRIMA FACIE VIEW THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT, THE MATTER CAN BE REOPENED U/S 147 OF THE ACT. 5. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 3,45,926/- UNDER THE HEAD SHORT TERM CAPITAL GAINS. IN THIS REGARD, THE LD. AR SUBMITTED THAT ASSESSEE HAD FILED HIS RETURN OF INC OME FOR THE ASSESSMENT YEAR 2011-12 ON 31.07.2011 DECLARING AN INCOME OF R S. 22,27,674. AFTERWARDS, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE SAME WAS FINALIZED U/S 143(3) OF THE INCOME TAX ACT 1961 WHE REIN TOTAL INCOME WAS DETERMINED AT RS. 52,13,590/-. FURTHER, NOTICE UNDE R SECTION 148 WAS ISSUED FOR A.Y. 2011-12 WHEREIN THE ASSESSING OFFIC ER HAS MADE ADDITION OF RS. 3,45,926/- ALLEGING THAT ASSESSEE HAD DOUBLY CLAIMED THE COST OF CONSTRUCTION OF HOUSE OF RS. 57,71,000/- THAT IS IN CLUSIVE OF RS. 6,61,815/- WHICH WAS PAID BY THE ASSESSEE TO RHB AT THE TIME OF ACQUISITION OF HOUSE. 6. IT WAS SUBMITTED BY THE LD AR THAT THE ASSESSEE HAD PURCHASED THE HOUSE IN SKELETON CONDITION AND PAID RS. 21,98,463/ - TOWARDS ACQUISITION TO RHB. FURTHER, THE SAID SKELETON STRUCTURE WAS DE MOLISHED AND THE ASSESSEE HAD RECONSTRUCTED THE HOUSE FROM THE BASEM ENT TO THIRD FLOOR, THEREFORE THE COST OF RS. 57,71,000/- AS DEPICTED B Y THE VALUATION REPORT WERE ONLY THE COST OF RECONSTRUCTION OF HOUSE FROM BASEMENT TO THIRD FLOOR. IT IS THEREFORE QUITE IMPERATIVE TO NOTE THA T FIRSTLY THE GROUND FLOOR THAT WAS ACQUIRED BY PAYING RS. 21,98,463/-TO RHB W AS DEMOLISHED AND THEN THE HOUSE WAS AGAIN RECONSTRUCTED RIGHT FROM T HE BASEMENT TO THIRD FLOOR FOR A TOTAL COST OF RS 57,71,000. ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 4 7. IT WAS ACCORDINGLY SUBMITTED THAT IN THIS CASE T HERE ARE CLEAR FACTS THAT THE ASSESSEE PURCHASED LAND & BUILDING FROM RA JASTHAN HOUSING BOARD & AS PER THE DEMAND NOTICE, HE PAID RS. 21,98 ,463/- THEN THE ASSESSEE DEMOLISHED THE EXISTING STRUCTURE AND CONS TRUCTED NEW BUILDING CONSISTING OF BASEMENT, GROUND AND FIRST FLOOR. TH E VALUE OF RECONSTRUCTION WAS DECLARED RS. 57,71,000/- WHICH HAS BEEN ACCEPTE D BY THE A.O. THE OBJECTION OF THE AUDITOR WAS IN RELATION TO THE COS T ALREADY INCURRED IN SKELETON HOUSE BY THE ASSESSEE AND THE SAID AMOUNT WAS RS. 6 61,815/- OUT OF RS. 2198465/-. IN THIS REGARD, IT WAS SUBMITTED THAT: 1. THE HOUSING BOARD IS ALLOTTING ONLY SKELETON HOUSE, WHICH REQUIRES FINISHING ETC. 2. THAT RHB IS ALLOTTING THE HOUSE CONSTRUCTED ON GROU ND FLOOR, IT IS NOT HAVING ANY HOUSE WHICH HAS BASEMENT. 3. THE CONSTRUCTION OF NEEV & WALLS IS NOT HAVING STRE NGTH, WHICH CAN TAKE LOAD OF ANOTHER TWO (2) STORIES. 4. THUS WHEN THE VALUATION REPORT HAVE BEEN ACCEPTED, THEN IT IS BEYOND DOUBT THAT THERE IS CONSTRUCTION, OF BASEMEN T, GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR, THUS WHEN THER E IS BASEMENT THAT ITSELF IS A PROOF THAT THE ORIGINAL CONSTRUCTI ON WAS DEMOLISHED & THE ENTIRE CONSTRUCTION WAS DONE AFRESH, APART FR OM BASEMENT, THERE ARE TWO OTHER STORIES, WHICH IS ONLY POSSIBLE IT THE NEW BASE PILLAR & WALLS WERE CONSTRUCTED TO THE DIMENSION WH ICH CAN TAKE THE LOAD OF UPPER STORIES. THUS FROM THE FACTS OF THE CASE, IT IS CLEAR THAT T HE ENTIRE CONSTRUCTION IS NEW, HENCE NOTHING OUT OF AMOUNT PAID TO HOUSING BO ARD WILL BE REDUCED FROM THE CONSTRUCTION . ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 5 8. IT WAS FINALLY SUBMITTED THAT THE COST OF RS. 6, 61,815/- WAS INCLUDED IN COST OF ACQUISITION OF LAND & BUILDING OF RS. 21,98,463/- BUT NOT THE RECONSTRUCTION COST OF RS. 57,71,000/-, SO THERE WERE NO DOUBLE DEDUCTION OF COST OF ACQUISITION. THEREFORE TOTAL O UTLAY FOR THE HOUSE WAS RS. 79,69,463/- (RS. 21,98,463/- + RS. 57,71,000/-) THAT SHOULD BE REDUCED FROM THE SALES CONSIDERATION BECAUSE FOR TH E PURPOSE OF CAPITAL GAINS, COST OF ACQUISITION IS REDUCED FROM THE SALE S CONSIDERATION. FOR THE PURPOSE OF CALCULATION OF CAPITAL GAIN, COST OF ACQ UISITION MEANS THE VALUE FOR WHICH IT WAS ACQUIRED BY THE ASSESSEE AND THE G ENERAL MEANING OF COST OF IMPROVEMENT OF AN ASSET IS CAPITAL EXPENDIT URE INCURRED BY AN ASSESSEE IN MAKING ADDITION/IMPROVEMENT TO THE CAPI TAL ASSETS INCLUDING AND EXPENDITURE INCURRED TO PROTECT OR COMPLETE THE TITLE TO THE CAPITAL ASSETS OR TO CURE SUCH TILE. TO PUT IT DIFFERENTLY ANY EXPENDITURE INCURRED TO INCREASE THE VALUE OF THE CAPITAL ASSET IS TREATED AS COST OF IMPROVEMENT. HENCE THE COST OF IMPROVEMENT OR CONSTRUCTION AS TA KEN BY THE ASSESSING OFFICER AT RS. 51,09,185 AFTER EXCLUDING RS. 661,81 5/- IS COMPLETELY IN DEFIANCE OF THE SPRITE OF THE TRUE FACTS OF THIS CA SE AS WELL AS AGAINST THE PROVISIONS CONTAINED IN INCOME TAX ACT 1961 WITH RE SPECT TO COMPUTATION OF INCOME UNDER THE HEAD OF CAPITAL GAIN. 9. PER CONTRA, THE LD. DR SUBMITTED THAT AO HAS RI GHTLY DENIED THE DEDUCTION CLAIMED BY THE APPELLANT ON THE CONSTRUCT ION COST RELATED TO THE SOLD HOUSE AS COST OF IMPROVEMENT. THERE IS NO REFERENCE IN THE VALUATION REPORT REGARDING ANY DEMOLITION EXPENSES WHICH WOULD LEAD TO CONSTRUCTION OF A FRESH BUILDING OR NEW HOUSE IN PL ACE OF THE 'SKELETON' STRUCTURE RECEIVED FROM THE HOUSING BOARD AS CLAIME D BY THE APPELLANT. SECONDLY, THE VALUATION REPORT IS PRIMARILY FOR BAN K LOAN PURPOSES AND FURTHER IMPROVEMENTS, MATERIALS ETC HAVE BEEN INCLU DED TO RAISE ITS VALUE FOR MAXIMIZING THE LOAN. THERE IS NOT MUCH WO RK COST WISE SHOWN IN THE ANNEXURE RELATED TO FLOOR PLANS FOR THE BASE MENT WHICH IS THE MAIN ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 6 BASIS OF THE ARGUMENT OF THE ASSESSEE FOR A NEW CON STRUCTION. IT IS NOT UNDERSTOOD AS TO WHY THE ASSESSEE WOULD FIRST PAY R S 21 LAKHS TO THE HOUSING BOARD AND THEN DEMOLISH THE STRUCTURE FOR A NEW CONSTRUCTION AND THEN AGAIN CLAIM THE COST OF THAT CONSTRUCTION IN R EDUCTION OF THE GAINS ON SALE. THE ARGUMENTS ARE BASICALLY NOT MATCHING TO T HE FACTS AND ARE THEREFORE NOT ACCEPTABLE. THE DEDUCTION MADE BY THE A.O LEADING TO AN ADDITION OF RS. 3,45,926/- IS THEREFORE RIGHTLY UPH ELD BY THE LD CIT(A). HE ACCORDINGLY SUPPORTED THE FINDINGS OF THE LOWER AUT HORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF CONVEYANCE DEED FOR PURCHASE OF PROPERTY, WE FIND THAT AT THE TIME OF PURCHASE, THE PROPERTY CON SISTED OF TWO ROOMS, KITCHEN AND ATTACHED TOILETS AND WHEN THE PROPERTY WAS SOLD , IT CONSIST OF BASEMENT, GROUND, FIRST, SECOND AND THIRD FLOOR AS PER THE VA LUATION REPORT. BOTH THE CONVEYANCE DEED AND VALUATION REPORTS ARE AVAILABLE ON RECORD AND HAS BEEN CONSIDERED BY THE LOWER AUTHORITIES. FURTHER, DURI NG THE COURSE OF HEARING, THE LD AR HAS SUBMITTED THE PHOTOGRAPHS OF THE PROPERTY AT THE TIME OF PURCHASE AND SUBSEQUENT SALE. BASIS THE MATERIAL AVAILABLE O N RECORD, WE THEREFORE FIND THAT IT IS A CASE WHERE THE PROPERTY SO PURCHASED I NITIALLY FROM RHB WAS DEMOLISHED AND FRESH CONSTRUCTION WAS CARRIED OUT B Y THE ASSESSEE. IT IS THEREFORE A CASE OF DEMOLITION AND RECONSTRUCTION O F PROPERTY. THE ASSESSEE ALONG WITH HIS BROTHER HAS PAID RS 21,98,463 TO RHB AND WHICH HAS BEEN ALLOWED BY THE AO TO THE EXTENT OF 50% OF ASSESSEE S SHARE. FURTHER, AS PER VALUATION REPORT, THE TOTAL COST OF RECONSTRUCTION COMES TO RS 57,71,000 WHICH HAS NOT BEEN DISPUTED BY THE AO. THEREFORE, HAVING NOT DISPUTED THE RECONSTRUCTION COST OF RS 57,71,000, THERE IS NO BA SIS TO REDUCE THEREFROM ASSESSEES SHARE OF RS 6,61,815 PAID INITIALLY TO R HB TOWARDS COST OF CONSTRUCTION AS THERE IS NO DISPUTE THAT THE SAID A MOUNT WAS PAID AND THUS INCURRED BY THE ASSESSEE IN ACQUISITION OF SUBJECT PROPERTY. IN THE RESULT, THE ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 7 ADDITION MADE BY THE ASSESSING OFFICER IS DELETED A ND GROUND NO. 2 OF ASSESSEES APPEAL IS ALLOWED. GROUND NO. 1 THUS BE COMES ACADEMIC AND IS THUS DISMISSED AS INFRUCTIOUS. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/03/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/03/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI AMIT JAIN, KOTA 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-2, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 132/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 8 ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 9 ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 10 ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 11 ITA NO. 132/JP/2019 SHRI AMIT JAIN, KOTA VS. ACIT, KOTA 12