ITO, Hyderabad V. S. Ramani, Hyderabad

ITA 1328/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59210 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: A V RAGHURAM
• Keywords: Question of law; Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER. ITA NO.1328/HYD/2010 : ASSESSMENT YEAR 2006-07 INCOME - TAX OFFICER, WARD - 6(3), HYDERABAD V/S. S MT. S.RAMANI, HYDERABAD ( PAN- AFVPS 5714 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI A.V.RAGHURAM DATE OF HEARING 18. 1.2012 DATE OF PRONOUNCEMENT 25.1.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, HYDERABAD D ATED 13.8.2010, FOR THE ASSESSMENT YEAR 2006-07. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL ARE AS FOLLOWS- 1. THE CIT(A) IS ERRED IN BOTH FACTS OF THE CASE AND QUESTION OF LAW INVOLVED. 2. THE CIT(A) ERRED IN CONSIDERING THE FACT THAT THE A SSESSEE HAS FAILED TO SUBSTANTIATE THE CLAIM OF INVESTMENT IN CONSTRUCTIO N. 3. THE CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE OF DIFFERENCE IN COST OF IMPROVEMENT OF RS.46,41,351/-. 4. THE CIT(A) OUGHT HAVE CONSIDERED THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH EVIDENCE TO SHOW DRAWINGS FROM HER BANK ACC OUNT FOR INVESTMENT, WHEREAS, SHE HAS INCLUDED DRAWINGS FROM HER HUSBAND S BANK ACCOUNT IN SUPPORT OF HER CLAIM OF INVESTMENT. ITA NO.1328/HYD/2010 SMT. S.RAMANI, HYDERABAD 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E, DURING THE ASSESSMENT YEAR UNDER CONSIDERATION HAD DISPOSED OF A RESIDENTIAL HOUSE PROPERTY. WHILE ARRIVING AT THE CAPITAL GAINS, THE ASSESSEE DEDUCTED THE COST OF ACQUISITION OF THE PLOT AND COST OF CONSTRU CTION, AS HAD BEEN INCURRED BY THE ASSESSEE DURING THE FINANCIAL YEARS 1999-200 0 TO 2001-02, AMOUNTING TO RS.74,61,L192. AS A PROOF OF CONSTRUCT ION, THE ASSESSEE FURNISHED A VALUATION REPORT. HE NOTED THAT IN THE REGISTERED VALUERS REPORT, THE COST OF THE OF THE PROPERTY WAS SHOWN A T RS.73,86,949, AS AGAINST RS.74,61,192 CLAIMED AS COST OF CONSTRUCTIO N BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE D IFFERENCE OF RS.74,243 FOR THE ASSESSMENT YEAR 1999-2000, WHICH ACCORDING TO I NDEXATION HAD BEEN ADOPTED AS RS.94,856 FOR ARRIVING AT THE CAPITAL GA INS. THE ASSESSING OFFICER THUS DISALLOWED AN AMOUNT OF RS.94,856. THE ASSESS ING OFFICER FURTHER NOTED THAT IN THE VALUATION REPORT DATED 15.12.2008 , IT WAS MENTIONED THAT DURING THE INSPECTION BY THE REGISTERED VALUER, THE PROPERTY IN QUESTION WAS UNDER RENOVATION. THE ASSESSING OFFICER THEREFORE O PINED THAT THE BUILDING AS ON THE DATE OF INSPECTION, I.E. 15.12.2008 HAD BEEN CONSIDERED BY THE REGISTERED VALUER FOR ARRIVING AT THE VALUE OF THE PROPERTY. HOWEVER, THE ASSESSEE HAD SOLD THE PROPERTY DURING THE FINANCIAL YEAR 2005[06. THE ASSESSING OFFICER THEREFORE, FELT THAT IT WAS NOT K NOWN WHETHER ANY ALTERATIONS WERE MADE BY THE PURCHASER OF THE PROPE RTY FROM THE SAID DATE TILL THE DATE OF VALUATION BY THE REGISTERED VALUER ON 15.12.2008. HE FELT THAT SINCE THE PROPERTY WAS UNDER RENOVATION, MODI FICATIONS MIGHT HAVE BEEN MADE BY THE PRESENT OWNER SUBSEQUENT TO THE SA LE OF THE PROPERTY. THE ASSESSING OFFICER THEREFORE, DEPUTED THE INSPEC TOR TO VISIT THE PREMISES AND SUBMIT A REPORT REGARDING THE MODIFICATIONS CAR RIED OUT BY THE PRESENT OWNER. IN THE REPORT DATED 25.12.2008 SUBMITTED BY THE INSPECTOR, IT WAS MENTIONED THAT SOME OF THE MODIFICATIONS WERE CARRI ED OUT BY THE PRESENT OWNERS AND THAT HIS LOCAL ENQUIRIES REVEALED THAT T HE VALUE OF THE PROPERTY WAS INFLATED BY 50%. THE ASSESSING OFFICER ALSO NO TED THAT THE ASSESSEE COULD NOT PRODUCE FULL PROOF REGARDING THE COST OF CONSTRUCTION OF THE HOUSE. THE ASSESSEE MERELY SUBMITTED COPIES OF BANK ACCOUN TS OF HERSELF AND HER ITA NO.1328/HYD/2010 SMT. S.RAMANI, HYDERABAD 3 HUSBAND, WHERE FROM WITHDRAWALS TO THAT EXTENT HAD BEEN MADE. THE ASSESSING OFFICER NOTED THAT EVEN THE BANK ACCOUNTS PRODUCED TO EXPLAIN THE INVESTMENTS WERE NOT IN THE NAME OF THE ASSESSEE ON LY. HE NOTED THAT THE ASSESSEE COULD NOT EVEN SUBSTANTIATE THE EXPENDITUR E INCURRED FROM THE WITHDRAWALS MADE FROM HER OWN ACCOUNT AND THEREFORE , HAD TO TAKE THE HELP OF THE WITHDRAWALS FROM THE BANK ACCOUNT OF HER HUS BAND. HE ALSO NOTED THAT THERE WAS NOT EVEN AN IOTA OF EVIDENCE STATING THAT THE MONIES WITHDRAWN FROM THE BANK ACCOUNTS WERE UTILISED FOR THE PURPOSE OF CONSTRUCTION OF HOUSE. THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE COULD NEITHER PRODUCE THE BILLS SUPPORTING THE VARI OUS EXPENDITURE INCURRED FOR CONSTRUCTION OF HOUSE NOR COULD PRODUCE ANY EVI DENCE THAT THE WITHDRAWN MONEY WAS PAID TO THE PERSONS FROM WHOM THE GOODS REQUIRED FOR CONSTRUCTION OF THE HOUSE WERE PURCHASED. UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER DISALLOWED 50% OF THE VALUE GIVEN BY THE VALUER, BEING OF TEHE OPINION THAT THE REMAINING VALUE HAD BEEN ADDE D BY THE PRESENT OWNER. ACCORDINGLY, HE CONSIDERED THE COST OF IMPRO VEMENT AT 50% OF RS.73,86,949 ONLY AND THE SAID 50% BEING RS.36,93,4 75 WAS INDEXED TO RS.46,41,280 FOR ARRIVING AT THE CAPITAL GAINS. 4. ON APPEAL, THE CIT(A) OBSERVING THAT THE ASSESS ING OFFICER HAS NOT ESTABLISHED THAT THE WITHDRAWALS MADE FORM THE BANK ACCOUNTS OF THE ASSESSEE AND HER HUSBAND WERE UTILIZED BY THEM FOR ANY OTHER PURPOSE/INVESTMENT, AND THE ASSESSING OFFICER MEREL Y DISBELIEVED THE VERSION OF THE ASSESSEE AND CONCLUDED THAT THE WITH DRAWALS MIGHT HAVE BEEN USED FOR SOME OTHER PURPOSE AND SUCH CONCLUSI ON IS BASED ON MERE CONJECTURES AND SURMISES, FOUND NO REASON FOR THE D ISALLOWANCE OF 50% OF CONSTRUCTION EXPENSES AMOUNTING TO RS.46,41,351 AFT ER INDEXATION. HE ACCORDINGLY DELETED THE SAID DISALLOWANCE MADE BY T HE ASSESSING OFFICER. FURTHER, CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED ANY SPECIFIC ACCOUNT OF CONSTRUCTION EXPENSES AND THERE IS ALSO NO EVIDENCE TO THE EFFECT THAT ANY SUPERVISION CHARGES WERE ACTUAL LY INCURRED BY THE ASSESSEE, THE CIT(A) OPINED THAT IT WOULD BE PROPER TO ADOPT THE VALUE AS ITA NO.1328/HYD/2010 SMT. S.RAMANI, HYDERABAD 4 ARRIVED AT BY THE REGISTERED VALUER IN THE VALUATIO N REPORT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. HE ACCORDINGLY DIREC TED THE ASSESSING OFFICER TO RECOMPUTE THE CAPITAL GAINS, AFTER CONSIDERING T HE COST OF CONSTRUCTION SHOWN IN THE REGISTERED VALUERS REPORT. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. WE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS FURNISHED A VALUATION REPORT FROM THE REGISTERED VALUER, AT THE SPECIFIC INSTANCE OF THE ASSESSING OFFICER. HOWEVE R, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID VALUATION REPORT WAS NOT GIVING TRUE PICTURE OF THE STATE OF AFFAIRS, AND ACCORDINGLY DEPUTED HIS I NSPECTOR TO VERIFY THE FACTS AND SUBMIT THE REPORT. AS OBSERVED BY THE CIT(A), T HE INSPECTOR IS NOT A TECHNICAL EXPERT, AND WHEN THE ASSESSING OFFICER WA S OF THE VIEW THAT THE REPORT OF THE REGISTERED VALUER, WHO IS A TECHNICAL EXPERT, IS NOT REFLECTING TRUE PICTURE, HE OUGHT TO HAVE REFERRED THE MATTER TO THE PRESCRIBED AUTHORITY FOR PROPER VALUATION. HOWEVER, THE ASSES SING OFFICER DID NOT DO SO AND DID NOT BRING ANY MATERIAL ON RECORD, TO SUGGES T THAT THE COST OF CONSTRUCTION WAS IN FACT INFLATED, AND THE COST OF CONSTRUCTION DETERMINED NEEDS TO BE SUBSTITUTED WITH ANOTHER VALUATION FROM AN EXPERT. HOWEVER, IT IS ALSO TRUE THAT THE ASSESSEE HAS NOT MAINTAINED A NY SPECIFIC ACCOUNT FOR THE CONSTRUCTION EXPENSES INCURRED. NO BILLS OR VO UCHERS IN RESPECT OF THE SAME COULD BE PRODUCED BY THE ASSESSEE TO SUBSTANTI ATE HER CLAIM BEFORE THE LOWER AUTHORITIES. EXCEPT FOR THE BALD STATEMEN T THAT THE INVESTMENT IN THE CONSTRUCTION WAS MADE BY MAKING WITHDRAWALS FRO M HER OWN AND HER HUSBANDS BANK ACCOUNTS, NO EVIDENCE IN SUPPORT OF THE SAME COULD BE FURNISHED. IN THE CIRCUMSTANCES, THERE IS SOME JUST IFICATION FOR THE DISALLOWANCE OUT OF THE COST OF CONSTRUCTION CLAIME D BY THE ASSESSEE, AND THE CIT(A) AS SUCH WAS NOT JUSTIFIED IN DELETING TH E ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HOWEVER, THE DISALL OWANCE WORKED OUT AT ITA NO.1328/HYD/2010 SMT. S.RAMANI, HYDERABAD 5 50% MADE BY THE ASSESSING OFFICER IS ON HIGHER SIDE . CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF T HE VIEW THAT DISALLOWANCE WORKED OUT AT 25% OF THE COST OF CONSTRUCTION CLAIM ED, BEFORE INDEXATION, WOULD MEET THE ENDS OF JUSTICE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A), AND DIRECT THE ASSESSING OFFICER TO RECOMPU TE THE CAPITAL GAINS, BY RESTRICTING THE COST OF CONSTRUCTION CLAIMED BY THE ASSESSEE BY DISALLOWING 25% OF THE COST OF CONSTRUCTION CLAIMED PRIOR TO IN DEXATION. TO THIS EXTENT, GROUNDS OF APPEAL OF THE REVENUE ARE ALLOWED. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 25.1.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DATED 25TH JANUARY, 2012 COPY FORWARDED TO: 1. SMT. S.RAMANI, PLOT NO.58, PRASHSAN NAGAR, ROAD NO. 72, JUBILEE HILLS, HYDERABAD 2. INCOME-TAX OFFICER, WARD 6(3), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) - IV , HYDERABAD 4. COMMISSIONER OF INCOME - TAX III , HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S