KRISHNAMURTHY KANCHANA, CHENNAI V. ITO NON CORPORATE WARD-1(4), CHENNAI

ITA 1466/CHNY/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2366 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 09-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS R ANITA
• Assessee Lawyers: T BANUSEKAR
• Keywords: Sale consideration of property below Jantri Value; Commercial expediency
• Section: 40A(3); 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , , BEFORE SHRI V DURGA RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1466/CHNY/2019 /ASSESSMENT YEAR: 2013-14 SMT. KRISHNAMURTHY KANCHANA, 49/1, SATHYA SAI DECORS, APPU STREET, MYLAPORE, CHENNAI-600 004. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD-1(4), CHENNAI. [PAN: AJAPK 3867C] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, C.A /RESPONDENT BY : MRS. R. ANITA, JCIT /DATE OF HEARING : 10.03.2021 / DATE OF PRONOUNCEMENT : 21.04.2021 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI, IN ITA NO.93/2016- 17 DATED 05.02.2019 FOR THE ASSESSMENT YEAR 2013-14 . 2. SMT. KRISHNAMURTHY KANCHANA, THE ASSESSEE, IS AN INTERIOR DECORATOR HAVING BRANCH OFFICES AT MADURAI AND COIM BATORE BESIDES CHENNAI. WHILE MAKING THE ASSESSMENT FOR THE A.Y 20 13-14, BASED ON THE ANNUAL INFORMATION RETURN PARTICULARS, THE A.O FOUND THAT THE ASSESSEE HAS SOLD A PROPERTY FOR RS. 70,00,000/- AN D HAS NOT OFFERED ANY ITA NO.1466/CHNY/2019 :- 2 -: CAPITAL GAIN. THE ASSESSEE EXPLAINED THAT THE PROFI T ON SALE OF PROPERTY WAS CREDITED TO CONTRACT RECEIPTS, WHICH IS INCLUDE D IN THE TOTAL CONTRACT RECEIPTS SHOWN IN THE P & L ACCOUNT. THE A.O DID NO T ACCEPT THE EXPLANATION AND COMPUTED THE SHORT TERM CAPITAL GAI N. WHILE DOING SO, THE DEVELOPMENTAL COST CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE A.O FOR WANT OF EVIDENCE. FURTHER, THE A.O FOUND T HAT THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF CASH ON VARIOUS OCCA SIONS AND ACCORDINGLY MADE A DISALLOWANCE U/S. 40A(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE HA S SUBMITTED COPIES OF BILLS AND VOUCHERS IN SUPPORT OF DEVELOPMENTAL COST CLAIMED BY HER. THE LD. CIT(A) HELD THAT THE ASSESSEE DID NOT ADMIT SHO RT TERM CAPITAL GAIN. SINCE, THE DESCRIPTION OF THE PROPERTY IN THE PURCH ASE DEED DATED 03.08.2011 AND THE SALE DEED DATED 01.02.2013 REMAI NED THE SAME, HE AGREED WITH THE A.O THAT THERE IS NO DEVELOPMENTAL WORK WHATSOEVER WAS UNDERTAKEN BY THE ASSESSEE. HOWEVER, HE FOUND THAT THE A.O ERRED IN NOT INVOKING THE PROVISIONS OF S. 50C OF THE ACT AND HE NCE, ISSUED A NOTICE TO THE ASSESSEE AS TO WHY THE ASSESSMENT SHOULD NOT BE ENHANCED AND AFTER CONSIDERING THE ASSESSEES EXPLANATION, DIREC TED THE AO TO RE- COMPUTE SHORT TERM CAPITAL GAIN ADOPTING THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY AS THE FULL VALUE OF CONS IDERATION. WITH REGARD TO THE DISALLOWANCE U/S. 40A(3) OF THE ACT, SINCE T HE ASSESSEE HAS FAILED ITA NO.1466/CHNY/2019 :- 3 -: TO FURNISH THE EVIDENCE TOWARDS BUSINESS EXPEDIENCY ETC. THE LD. CIT(A) SUSTAINED THE DISALLOWANCES MADE BY THE A.O. AGGRIE VED, THE ASSESSEE FILED THIS APPEAL. 3. THE CASE WAS HEARD THROUGH VIDEO CONFERENCING. THE LD. A.R INVITED OUR ATTENTION AT PG. 7 OF HIS PAPER BOOK AN D SUBMITTED THAT ON 02.02.2013, RS. 10,54,660/- HAS BEEN INCLUDED IN TH E LEDGER ACCOUNT OF THE CONTRACT WORK. THUS, IT WAS SUBMITTED THAT THE SHORT TERM CAPITAL GAIN FROM THE SALE OF PROPERTY SITUATED IN MADURAI WAS I NADVERTENTLY INCLUDED TO THE CONTRACT RECEIPTS SHOWN IN THE P & L ACCOUNT . THE LD. CIT(A) WITHOUT APPRECIATING THE FACT UPHELD THE ADDITION W HICH AMOUNTS TO DOUBLE ADDITION OF THE SAME SUM. WITH REGARD TO THE DISALLOWANCE TOWARDS DEVELOPMENT COST INCURRED BY THE ASSESSEE, INVITING OUR ATTENTION TO THE COPIES OF PAYMENTS AND VOUCHERS IN PAPER BOOK PG. 89 TO 164, THE LD. A.R SUBMITTED THAT THESE DETAILS WERE FURNISHED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) FAILED TO APPRECIATE THE EVIDENCES PRODUCED TOWARDS DEVELOPMENT EXPENDITURE AND DISMIS SED THE APPEAL WITHOUT APPRECIATION. THE LD. AR FURTHER SUBMITTED THAT THE PROPERTY SOLD WAS A BUSINESS ASSET AND THE LD. CIT(A) ERRED IN EN HANCING THE ASSESSMENT BY INVOKING PROVISIONS OF S. 50C OF THE ACT. INVITING OUR ATTENTION TO PAGES 3 & 4 OF THE ASSESSMENT ORDER, T HE LD. AR SUBMITTED THAT THE A.O HAD ADOPTED TWO DIFFERENT FIGURES AT R S. 42,60,000/- & RS. ITA NO.1466/CHNY/2019 :- 4 -: 40,08,100/- TOWARDS COST OF LAND WITHOUT GIVING ANY REASON. ON THE DISALLOWANCES MADE U/S. 40A(3) OF THE ACT, THE LD. A.R SUBMITTED THAT SUCH DISALLOWANCES CAN BE MADE WHEN AN EXPENDITURE IS MADE BY WAY OF CASH ON EACH OCCASION EXCEEDS RS. 20,000/-. THE LD. A.R INVITING OUR ATTENTION TO THE PG. 5 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE A.O MADE DISALLOWANCES OF RS. 20,000/- ON VARIOUS OCCAS IONS WHICH IS NOT CORRECT AS IT HAS NOT EXCEEDED RS. 20,000/- ON EACH OCCASION. FURTHER, THE LD. CIT(A) FAILED IN APPRECIATING THE FACT THAT THE ASSESSEE HAD TO INCUR CASH EXPENDITURE DUE TO COMMERCIAL EXPEDIENCY AND DUE TO STRINGENT DEADLINE AND HENCE, PROVISIONS OF S. 40A( 3) OF THE ACT R/W. RULE 6DD OF THE INCOME TAX RULES, 1962 ARE NOT INVOKABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, THE LD. AR S UBMITTED THAT THE ASSESSEES APPEAL MAY BE ALLOWED. 4. PER CONTRA, THE LD. DR SUBMITTED THAT ADMITTEDLY THE ASSESSEE IS AN INTERIOR DECORATOR. THE ASSESSEE HAS NOT ESTABL ISHED THAT SHE IS BUYING AND SELLING OF LAND THEREFORE, LEVY OF SHORT TERM CAPITAL GAIN IS IN ORDER. SINCE, THE ASSESSEE HAS NOT ESTABLISHED THE OTHER CLAIMS, SHE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HEARD THE RIVAL CONTENTIONS, AND GONE THROUGH RELEVANT MATERIAL. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSE SSEE EXPLAINED THAT THE GAIN ON SALE OF PROPERTY WAS INADVERTENTLY INCL UDED IN THE TOTAL ITA NO.1466/CHNY/2019 :- 5 -: CONTRACT RECEIPTS. HOWEVER, THE A.O WITHOUT EXAMINI NG THE ASSESSEES CONTENTIONS WITH REFERENCE TO THE ACCOUNTS AND OTHE R FACTS AND CIRCUMSTANCES, MERELY PROCEEDED TO DETERMINE SHORT TERM CAPITAL GAIN. AS POINTED OUT BY THE LD. A.R, THE A.O HAS ADOPTED TWO DIFFERENT FIGURES TOWARDS COST OF THE LAND WITHOUT GIVING ANY REASON. THOUGH THE ASSESSEE HAS NOT SUBSTANTIATED THE COST OF DEVELOPMENT BEFOR E THE A.O, BUT, HAS FILED CERTAIN MATERIAL BEFORE THE LD. CIT(A) WHICH WAS NOT EXAMINED BY THE LD. CIT(A). AS POINTED OUT BY THE LD. D.R, THE NATURE, FACTS AND CIRCUMSTANCES ASSOCIATED WITH THE IMPUGNED ASSET HA S ALSO NOT BEEN EXAMINED. CONSIDERING THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THE ISSUES RELATED TO THE SHORT TERM CAPITAL GAIN BACK TO THE A.O FOR FRESH EXAMINATION AND DUE DECISION. THE ASSESSEE S HALL LAY RELEVANT MATERIAL IN SUPPORT OF HER CONTENTIONS BEFORE THE A .O AND COMPLY WITH THE REQUIREMENTS OF THE A.O IN ACCORDANCE WITH LAW. TH E A.O SHALL DUE EXAMINATION AND AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE SHALL DECIDE THESE ISSUES IN ACCORDANCE WITH LAW. ON THE ISSUE OF DISALLOWANCES U/S. 40A(3) OF THE ACT, THOUGH THE AS SESSEE PLEADED THAT THERE WAS BUSINESS EXPEDIENCY ETC., THE ASSESSEE H AS NOT TAKEN ANY SUCH STAND BEFORE THE A.O NOR FILED ANY PARTICULARS IN SUPPORT OF ITS CONTENTION BEFORE THE LD. CIT(A) THEREFORE, WE DO N OT FIND ANY MERIT ON SUCH STAND. HOWEVER, THE LD. A.RS SUBMISSION THAT DISALLOWANCES U/S. 40A(3) OF THE ACT CAN BE MADE WHEN AN EXPENDITURE I S MADE BY WAY OF ITA NO.1466/CHNY/2019 :- 6 -: CASH ON EACH OCCASION EXCEEDS RS. 20,000/- FIND MER ITS. THEREFORE, WE DIRECT THE A.O TO DELETE THOSE DISALLOWANCES WHICH DO NOT EXCEED RS. 20,000/- ON EACH OCCASION UNDER EACH HEAD. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED ON THE DAY OF 21 ST APRIL, 2021 IN CHENNAI. SD/ - S D/ - ( ) (V DURGA RAO) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, /DATED: 21 ST APRIL, 2021 . EDN, SR. P.S /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF