R. Satish Kumar Reddy,Hy, Secunderabad V. ACIT, Circle-6(1), Hyderabad

ITA 1681/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53698 (ITAT-HYDERABAD)
• Duration Of Justice: 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard; Cost of acquisition; Fair market value; Corroborative evidences
• Section: 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1681/HYD/2011 ASSESSMENT YEAR 2008-2009 SHRI R.SATISH KUMAR REDDY HYDERABAD. PAN ADQPR5849D VS. ACIT, CIRCLE 6 (1) HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMA RAO (AR) RESPONDENT BY : SHRI B.V. PRASAD REDDY (DR) DATE OF HEARING : 23.07.2013 DATE OF PRONOUNCEMENT : 18.10.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30.08.2011 FOR THE A SSESSMENT YEAR 2008-2009. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED HIS RETURN OF INCOME ELECTRONICALLY FOR THE AY 2008-09 ON 31/03/2 010 DECLARING TOTAL INCOME AT RS. 16,89,960/-, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED T HE INFORMATION CALLED FOR. AFTER EXAMINING THE INFORMATION CALLED FOR AND AFTER DISCUSSING WITH THE AR, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING CERTAIN ADDITIONS, WHICH WILL BE DEALT WITH IN THE FORE-GOI NG PARAS. 3. AS REGARDS THE ADDITION PERTAINING TO THE BUSINESS INCOME, IT IS OBSERVED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS UNDERTAKEN A BUSINESS ACT IVITY JOINTLY WITH AN 2 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY ASSOCIATE SMT. S. SUNITHA FOR DEVELOPMENT OF A PLOT AT PROPERTY BEARING D.NO 8-2-293/82/NL/287, MLA COLONY, BANJARA HILLS, HYDERABAD ADMEASURING 600 SQUARE YARDS. THE SAID PROPERTY IS LOCATED AT THE NORTH AND EASTERN BOUNDARIES AND WAS FILLED WITH MUD, ROC KS UP-TO FORTY FEET, AND WAS UNEVEN. THE PLOT WAS ALSO NOT AS PER 'VAAST HU SHASTRA'. HENCE, THE ASSESSEE ALONG WITH HIS ASSOCIATE SMT.S.SUNITHA CONCEIVED THIS AS A BUSINESS OPPORTUNITY TO BUY THE PLOT AND RE-SELL IT AT A PROFIT, AFTER CARRYING OUT DEVELOPMENT ACTIVITY LIKE LEVELLING, BLASTING O F ROCKS, CONSTRUCTION OF BOUNDARY WALLS ETC. THE ASSESSEE HAD BOUGHT THE PLO T FOR RS.72,00,000/- AND HAD INCURRED AN EXPENDITURE OF RS.61,68,370/- T OWARDS DEVELOPMENT AND OTHER EXPENSES. THE PLOT WAS SOLD FOR RS L,50,0 0,000/-.THE NET PROFIT WORKS OUT TO RS 16,31,630/-. THE ASSESSEE'S SHARE B EING 50% VIZ., RS 8,15,815/-, WAS SHOWN IN THE RETURN OF INCOME AS BU SINESS INCOME. THE ASSESSING OFFICER HAS TAXED THE ABOVE TRANSACTION U NDER THE HEAD 'CAPITAL GAINS' BY ADOPTING SALE CONSIDERATION AT SRO VALUE OF RS.2,10,00,000/- BY INVOKING SECTION 50C AND AFTER DISALLOWING THE E NTIRE EXPENDITURE CLAIMED, BY RECORDING FOLLOWING REASONS IN THE ASSE SSMENT ORDER AS UNDER: 1. THE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASSES SEE IS NOT SUPPORTED BY ANY EVIDENCE. 2. THE SOURCES FOR INVESTMENT IN PROPERTY AT THE TI ME OF PURCHASE NOT CLEAR. 3. THE ASSET WAS NOT DECLARED AS STOCK IN TRADE IN THE BALANCE SHEET FOR EARLIER YEARS. 4. THE ASSESSEE HAS NOT ENGAGED HIMSELF IN SUCH BUS INESS ON EARLIER OCCASIONS. 5. NO BOOKS OF ACCOUNT ARE MAINTAINED FOR BUSINESS ACTIVITY. 6. NO STATUTORY AUDIT WAS MADE. 7. NO TDS WAS MADE AGAINST THE PAYMENTS FOR DEVELOP MENT EXPENDITURE. 4. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD AS FOLLOWS: (1) AGREEMENT BETWEEN THE ASSESSEE AND SMT. SUNITH A 3 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY DATED 19.02.2006 IS AN UNREGISTERED DOCUMENT AND THEREFORE, CANNOT BE TAKEN AS RELIABLE AS CONTEMPORANEOUS EVIDENCE. HE FURTHER HELD THAT IT I S AN AFTER-THOUGHT AND HAS BEEN PREPARED TO CLAIM THAT T HERE WAS BUSINESS ARRANGEMENT. (2) AS REGARDS THE DECISION OF THE HONBLE APEX COU RT IN THE CASE OF G.VENKATASWAMY NAIDU THAT THE CIT(A) RELIED ON BY THE ASSESSEE ON THE PROPOSITION THAT A SINGLE TRANSACTION OR A SINGLE ACTIVITY OF PURCHASE AND SALE MAY ALSO BE TREATED AS BUSINESS. THE CIT(A) HELD THAT IT HAS NOT BEEN ESTABLISHED IN THE PRESENT CAS E THAT THE PURCHASE WAS INTENDED FOR RE-SALE AND NOT FOR INVESTMENT. (3) THE CIT(A) RELIED ON THE DECISION OF ANIL JAIN VS. CIT 294 ITR 435. (4) WITH RESPECT TO THE OPPORTUNITY NOT BEING HEARD GIVEN TO THE ASSESSEE BEFORE INVOKING THE PROVISIONS OF SECT ION 50C, IT WAS HELD BY THE CIT(A) THAT AN OPPORTUNITY IS REQUIRED TO BE GIVEN AS STIPULATED IN SECTION 50(2) (A). ONLY WHEN THE ASSESSEES CLAIM BEFORE THE ASSESSING OFFICER THAT VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE A S ON THE DATE OF TRANSFER. SINCE NOTHING HAS BEEN BROUGH T ON RECORD IN THIS CASE, THAT SUCH CLAIM WAS RAISED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, THE CIT(A) DISMISSED THE GROUND TAKEN BY THE ASSESSEE. (5) THE CIT(A) HELD THAT THE PAYMENTS MADE FOR THE DEVELOPMENT WERE NOT SUBJECTED TO TDS AND THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE WITH RESPEC T TO THE INCURRENCE OF DEVELOPMENT EXPENDITURE AND HENCE , UPHELD THE ORDER OF THE ASSESSING OFFICER ON THE IS SUE. 4 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 5. AS REGARDS THE ADDITION OF LONG TERM CAPITAL GA INS, THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR SOLD A RESIDENTIAL PROPERTY BEARING D.NO 8-2-293/82/L/78C, ROAD NO 12, JUBLIEE HILLS, HYDERABAD ADMEASURING 450 SQUARE YARDS WITH A BUILT UP AREA O F 64 SQUARE FEET FOR A GROSS CONSIDERATION OF RS.2,41,00,000/- .AFTER CON SIDERING THE EXPENSES ON TRANSFER OF RS.4,82,000/- THE NET SALE CONSIDERA TION IS RS.2,36,18,000/-. THE SAID PROPERTY WAS PURCHASED BY THE ASSESSEE ON2 6/08/1989 FOR A CONSIDERATION OF RS.1,04,661/- BREAK UP OF WHICH IS AS FOLLOWS : LAND COST 80,000 COMMISSION 20,000 STAMP DUTY 4,661 TOTAL 1,04,661 THE ASSESSEE INCURRED AN EXPENDITURE OF RS.14,00,00 0/-TOWARDS COST OF IMPROVEMENT IN THE YEAR 1989, BY WAY OF CONSTRUCTION OF THE RESIDENTIAL UNIT, ITS BOUNDARIES, ETC. THE COST OF IMPROVEMENT IS SUPPORTED BY CERTIFICATE FROM GOVERNMENT CERTIFIED ENGINEER. THE LONG TERM CAPITAL GAINS ON SALE OF THE ABOVE RE SIDENTIAL HOUSE, WORKS OUT TO RS.L,87,97,836/- AND WAS RE-INVESTED I N ANOTHER RESIDENTIAL HOUSE PROPERTY. ACCORDINGLY, EXEMPTION UNDER SECTIO N 54, WAS CLAIMED IN THE RETURN OF INCOME. THE DETAILS OF THE REINVESTME NT ARE AS FOLLOWS: PURCHASE OF A SEMI-FINISHED HOUSE WITH A BUILT UP AREA OF 4000 SQUARE FEET AND LAND ADMEASURING 400 SQUARE YA RD ON 31.07.2008 FOR AN AMOUNT OF RS.64,81,000/-. STAMP DUTY STAMP DUTY PAID FOR RS. 5,83,193/-. CONSTRUCTION AGREEMENT WITH SRI RANJITH REDDY AND LUMBINI CONSTRUCTIONS LIMITED FOR RS 66,00,000/- VIDE DATED 23.01.2009. AND THE BALANCE AMOUNT OF RS.51,43,643/-WAS REINVE STED IN A NEW PROPERTY WITHIN 3 YEARS FROM THE SALE OF T HE SAID PROPERTY. THE ADDITION OF BALANCE AMOUNT OF.S1,43,6 43/- IS SUPPORTED BY A CERTIFICATE FROM GOVERNMENT APPROVED ENGINEER/VALUER. 6. THE ASSESSING OFFICER HAS DISALLOWED COMMISSION OF RS.20,000/- PAID FOR PURCHASING THE ABOVE HOUSE. FURTHER, THE E XPENSES ON TRANSFER OF 5 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY RS.4,82,000/- WAS ALSO DISALLOWED IN SPITE OF PRODU CING RECEIPTS FOR THE SAME. 7. THE INDEXED COST OF IMPROVEMENT OF RS.44,84,884/ - WAS DISALLOWED AFTER EXAMINING THE ENGINEER AND RECORDI NG HIS STATEMENT ON OATH, STATING THAT THERE IS NO BASIS FOR ESTIMATING THE COST OF IMPROVEMENT. 8. FURTHER, THE EXEMPTION U/S 54 WAS NOT ALLOWED AS WHAT WAS TRANSFERRED IS A RESIDENTIAL UNIT WITH 8FT X 8 FT D IMENSIONS AND HOLDING THAT SUCH STRUCTURE CANNOT BE TREATED AS BUILDING. HOWEVER, EXEMPTION U/S 54F WAS ALLOWED TO THE EXTENT OF AMOUNT SPENT W ITHIN SIX MONTHS FROM THE DATE OF TRANSFER OF THE ASSET. 9. WITH RESPECT TO THE ISSUE OF TREATMENT OF BUSINE SS INCOME AS SHORT TERM CAPITAL GAINS THE ASSESSEE EXPLAINED THAT BES IDES COST OF ACQUISITION OF RS. 72 LAKHS, A SUM OF RS.5,43,920/- HAD BEEN SP ENT TOWARDS STAMP DUTY. THE ASSESSEE HAD ALSO INCURRED FURTHER EXPEND ITURE TOWARDS GROUND LEVELLING DEVELOPMENT EXPENDITURE ETC., AND AFTER I NCURRING SUCH EXPENDITURE THE PLOT WAS SOLD FOR RS. 1.5 CRORES. T HE NET INCOME ON THE TRANSACTION WAS ESTIMATED AT 10.875% ON THE GROSS R ECEIPTS OF RS. 1.5 CRORES AND 50% SHARE OF THE ASSESSEE CAME TO RS.8,1 5,825/-. THE ASSESSEE IN REPLY TO THE QUERIES RAISED BY THE ASSE SSING OFFICER HAS STATED THAT HE HAS NOT BEEN REGULARLY IN THE BUSINE SS OF DEVELOPMENT ON SALE OF PROPERTY AND THIS WAS ONE BUSINESS ACTIVITY JOINTLY UNDERTAKEN WITH AN ASSOCIATE FOR THE DEVELOPMENT PURPOSE AS THE ASS ESSEE WAS AN ARCHITECT AND HAS BEEN INTERACTING WITH DEVELOPERS. THE ASSESSEE ALSO CLAIMED THAT THE LAND WAS FILLED WITH ROCKS AT THE TIME OF PURCHASE AND WAS NOT EVEN A PLOT AND THE PLOT WAS ALSO NOT AS PER VA STU. THEREFORE, SMT. SUNITHA AND THE ASSESSEE THOUGHT IT WOULD BE A GOOD BUSINESS, OPPORTUNITY TO BUY THE PLOT, DEVELOP THE SAME, AND LATER ON SELL THE PLOT FOR A PROFIT. THE ASSESSEE HAD NOT UNDERTAKEN ANY OTHER DEVELOPMENT ACTIVITY DURING THE PREVIOUS YEAR AND NO REGULAR BOOKS OF AC COUNTS HAD BEEN MAINTAINED AND THEREFORE, NO AUDIT WAS CONDUCTED. T HE ASSESSEE 6 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY FURNISHED DETAILS OF DESCRIPTION OF THE WORK DONE O N THE PLOT. 10. IN REPLY TO THE ASSESSING OFFICERS QUERIES THE ASSESSEE FURNISHED A BRIEF DESCRIPTION OF THE DEVELOPMENT ACTIVITIES AND AN ESTIMATE FROM ARCHITECT, HOWEVER, DETAILS OF MACHINERY HIRED AND PERSONS FROM WHOM IT WAS HIRED, WAS NOT FURNISHED. THE ASSESSEE NEITHER FURNISHED BOOKS OF ACCOUNTS AS THE SAME WAS EXPLAINED AS NOT MAINTAINE D. FEW RECEIPTS WITH THUMB IMPRESSION OF SOME RECIPIENTS NOT HAVING A PR OPER ADDRESS WERE PRODUCED BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF EXPENDITURE OF RS. 72 LAKHS IN THE ABSENCE OF AN Y SUPPORTING EVIDENCE. THE ASSESSEES A.R. SUBMITTED BEFORE THE CIT(A) THA T THE ASSESSEE HAD EMPLOYED DAILY LABOURERS FOR REMOVING THE ROCKS AND LEVELLING THE GROUND AND IT WAS NOT POSSIBLE TO GIVE PROPER RESIDENTIAL ADDRESSES FOR THEM AS THEY WERE MORE OR LESS NOMADS CAMPING ON THE PLACES WHERE THEY UNDERTAKE WORK. HOWEVER, SOME VOUCHERS HAD BEEN PR ODUCED BEFORE THE ASSESSING OFFICER AND THE CIT(A). 11. AS REGARDS LONG TERM CAPITAL GAINS, BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE HAD SOLD ANOTHER PROPER TY AT D. NO. 8-2- 293/82/L/78C, ROAD NO. 12, JUBILEE HILLS, HYDERABAD FOR A CONSIDERATION OF RS. 2,41,00,000/-. THE SRO ALSO HAD ADOPTED THE SAID AMOUNT AS THE FAIR MARKET VALUE. THE SAID PROPERTY HAD BEEN PURCH ASED FOR RS. 80,000/- ON 26/08/1989. BESIDES, THE ASSESSEE HAD CLAIMED RS . 4,82,000/- AS EXPENSES ON TRANSFER AND COMMISSION AT RS. 20,000/- AT THE TIME OF ACQUISITION. ACCORDINGLY, THE INDEXED COST OF ACQUI SITION OF RS. 3,35,280/- HAD BEEN DEDUCTED FROM THE SALE VALUE. IN ADDITION TO THE ABOVE, THE ASSESSEE HAD ALSO CLAIMED INDEXED COST OF IMPROVEME NT AMOUNTING TO RS. 44,84,884/-. FINALLY, THE LTCG HAD BEEN DETERMINED AT RS. 1,87,97,836/-, THE ENTIRETY OF WHICH WAS CLAIMED EXEMPT U/S 54 ON ACCOUNT OF REINVESTMENT IN RESIDENTIAL HOUSE. T HE ASSESSEE HAD FURNISHED THE RECEIPTS IN RESPECT OF EXPENSES ON TRANSFER OF RS.4 ,82,000/-, AS ALSO THE COMMISSION EXPENSES OF RS.20,000/-, VIDE L ETTER DATED 11.3.2010, THE A.R. SUBMITTED THAT A DETAILED ESTIM ATION HAD ALSO 7 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY BEEN GIVEN BY THE APPROVED VALUER REGARDING THE COS T OF IMPROVEMENT AT RS.44,84,884/- AND THE VALUER HAD AL SO BEEN EXAMINED ON OATH. 12. WITH REGARD TO THE OBSERVATION OF THE ASSESSING OFFICER THAT THE 8 FT X 8 FT STRUCTURE COULD NOT BE CONSIDERED A S A BUILDING / RESIDENTIAL HOUSE, THE REPRESENTATIVE CITED THE DEC ISION OF THE HON'BLE ITAT, HYDERABAD IN THE CASE OF DR. UMA CHALLA HOLDI NG THAT A RESIDENTIAL HOUSE MEANS A HOUSE OR HUT OR S UPER-STRUCTURE, WHICH IS FIT FOR HUMAN HABITATION AND THE LEARNED AR CLAIMED EXEMPTION U/S 54. 13. ON BEING REQUIRED TO EXPLAIN HOW THE SAID STRUC TURE SHOULD BE TREATED AS A RESIDENTIAL HOUSE, THE ASSESSEES REPR ESENTATIVE VIDE LETTER DATED 28/12/2010 CONTENDING THAT THE LAND SO LD BY THE ASSESSEE CONSISTED OF A SMALL RESIDENTIAL HOUSE ON WHICH RENT OF RS. 60,000/- HAD ALSO BEEN RECEIVED DURING THE YEAR . IT WAS SUBMITTED THAT THE GAIN HAD BEEN INVESTED IN ANOTHE R RESIDENTIAL HOUSE PROPERTY AND EXEMPTION WAS CLAIMED U/S 54. TH E ASSESSEES REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD PAID RS. 1,30,81,000/- TOWARDS THE PURCHASE OF NEW RESIDENTI AL PROPERTY (SEMI CONSTRUCTED) WITHIN 6 MONTHS FROM THE DATE OF SALE OF THE FIRST MENTIONED PROPERTY AND RS. 5,83,190/- WERE PA ID TOWARDS STAMP DUTY FOR THE NEW PROPERTY BEFORE THE DUE DATE OF FILING OF RETURN, THE BALANCE CAPITAL GAIN OF RS. 57,15,836/- WAS INVESTED IN THE NEW PROPERTY WITHIN 3 YEARS FROM THE DATE OF SA LE OF THE FIRST MENTIONED PROPERTY. ACCORDINGLY, THE ASSESSEE REQUE STED TO CONSIDER THE EXEMPTION U/S 54F FOR THE ABOVE INVEST MENT MADE IN THE NEW RESIDENTIAL HOUSE PROPERTY. 14. THE ASSESSEES A.R. FURTHER SUBMITTED THAT BEFO RE INVOKING THE SECTION 50C, NO OPPORTUNITY OF BEING HEARD WAS BEING GIVEN TO THE ASSESSEE. 8 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 15. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) HELD HAS FOLLOWS: 11. THE CIT(A) HELD THAT THE EXPENSES ON TRANSFER OF RS.4,83,000/- AND COMMISSION OF RS.20,000/- DOES NO T CONTAIN ADDRESSES OF THE RECIPIENTS OR THEIR PAN SO AS TO SUBSTANTIATE THE EVIDENCE OF PAYMENTS. BESIDES, NO EVIDENCE REGARDING TDS THAT SUCH PAYMENTS HAS ALSO BEEN FURN ISHED. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE ASSESSIN G OFFICER. WITH RESPECT TO THE CLAIM OF INDEX COST OF IMPROVEM ENT OF RS.44,84,884/-, THE CIT(A) OBSERVED THAT EVEN THE GOVERNMENT APPROVED VALUER WAS NOT IN A POSITION TO SAY THAT THE COMPOUND WALL AC SHEET ROOF TOILET AND UNDERGRO UND SUMP WAS CONSTRUCTED IN THE YEAR 1989 AND THE ESTIM ATED COST ON IMPROVEMENT MADE BY THE VALUER WAS REJECTED BY THE CIT(A) UPHOLDING THE ORDER OF THE ASSESSING OFFICER . 12. WITH RESPECT TO THE CLAIM OF EXEMPTION UNDER SE CTION 54/54F, THE CIT(A) WAS OF THE VIEW THAT THE TERM R ESIDENTIAL HOUSE MEANS HOUSE OR A SUPERSTRUCTURE WHICH IS FIT FOR HUMAN HABITATION AND THE BUILT-UP AREA OF 64 SQ. FE ET ON THE LAND IS NOT FIT FOR HUMAN HABITATION AND HENCE, NOT ENTITLED TO EXEMPTION UNDER SECTION 64 AS A RESIDENTIAL HOUSE. THE ASSESSEES ALTERNATIVE CLAIM UNDER SECTION 54F WAS ALREADY CONSIDERED BY THE ASSESSING OFFICER WHO HAD GIVEN A RELIEF OF A SUM OF RS.1,36,64,190/- AND THE SAME WAS CONFIRME D BY THE CIT(A). AS REGARDS THE BALANCE CAPITAL GAINS OF RS.57,16,836/- THE CIT(A) HELD THAT THE SAME WAS NO T APPROPRIATED FOR PURCHASE OF THE NEW ASSET WITHIN O NE YEAR BEFORE 29.11.2007 NOR WAS IT DEDUCTED INTO THE CAPI TAL GAINS AMOUNT CLAIMED/SCHEME BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME AND HENCE, THE ASSESSEE CANNOT GET THE BENEFIT UNDER SECTION 54F. HENCE, THE CIT(A) DISMIS SED THE ASSESSEES APPEAL. 16. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. ORIGINALLY, THE ASSESSEE HAS RAISED THREE GROUNDS, AS PER THE G ROUNDS OF APPEAL MEMO ATTACHED TO FORM NO. 35. LATER ON THE A SSESSEE HAS FILED REVISED GROUNDS OF APPEAL, WHICH ARE AS FOLLO WS: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FA CTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE TRANSACTION RELATING TO THE PURCHASE AND SALE OF LA ND AT DOOR NO.8-2-293/82/NL/287, MLA COLONY, BANJARA HILL S, 9 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY HYDERABAD REPRESENT THE INCOME FROM CAPITAL GAIN WHEREAS THE APPELLANT CARRIED IT AS A BUSINESS TRANSACTION. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANT IS AN ARCHITECT AND IS INTE RESTED IN THE BUSINESS OF REAL ESTATE AND, THEREFORE, OUGH T TO HAVE HELD THAT THE INCOME DERIVED FROM SALE OF THE PROPERTY IS THE INCOME FROM BUSINESS BEING A PART O F THE SAME ACTIVITY. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN HOLDING THAT THE INCOME FROM S ALE OF THE SAID PROPERTY IS INCOME FROM CAPITAL GAINS AND ALSO FURTHER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN APPLYING THE PROVISIONS OF SEC. 50C OF THE I.T. ACT . 5. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE PROCEDURE LAID DOWN IN SEC. 50C(2) WAS FOLLOWED BY THE ASSESSING OFFICER BEFORE ADOPTING THE VALUE FIXED B Y THE SUB- REGISTRAR FOR THE PURPOSE OF DETERMINING THE CAPITA L GAIN. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT WHEN THERE I S A DISPUTE ABOUT THE VALUE ADOPTED BY THE SUB-REGISTRA R, THE QUESTION OF DETERMINING THE MARKET VALUE COULD HAVE BEEN REFERRED TO THE VALUATION CELL WHICH WAS NOT DONE B Y THE ASSESSING OFFICER. 6. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE EXP ENDITURE OF RS.72,00,000/- INCURRED ON DEVELOPMENT OF THE PLOT IS NOT ALLOWABLE AS A DEDUCTION, EITHER FOR DETERMINING TH E INCOME FROM BUSINESS OR FOR DETERMINING INCOME FROM CAPITA L GAIN. 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PRO PERTY SITUATED AT HOUSE NO.8-2-293/82/L/78C, ROAD NO.12, JUBILEE HILLS, HYDERABAD IS NOT A RESIDENTIAL HOUSE INSPITE OF THE FACT THAT THERE WAS A RESIDENTIAL HOUSE IN THE LAND AT T HE TIME OF SALE AND INSPITE OF THE FACT THAT A RENT OF RS.60,0 00/- PER ANNUM WAS RECEIVED FROM THE SAID HOUSE. THE CIT(A) OUGHT TO HAVE VERIFIED THE RETURNS OF INCOME FILED BY THE AP PELLANT WHEREIN THE INCOME FROM THE SAID PREMISES WAS ADMIT TED UNDER THE HEAD PROPERTY AND IS ACCEPTED BY THE AS SESSING OFFICER. 8. THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE IND EXED COST OF IMPROVEMENTS TO THE PROPERTY CLAIMED BY THE APPELLANT OF RS.44,84,884/-. 10 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 9. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APP ELLANT IS ELIGIBLE FOR DEDUCTION U/S. 54F OF THE I.T. ACT WHE REAS THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 54 OF THE I.T. ACT. 10. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE EXPENDITURE INCURRED ON THE ACQUISITION OF THE NEW ASSET TILL THE DUE DATE FOR FILING THE RETURN OF INCOME U/S. 1 39(4) OF THE I.T. ACT IS ALLOWABLE TO THE APPELLANT HEREIN AND S HOULD NOT HAVE LIMITED THE AMOUNT ALLOWABLE TO THE EXTENT OF THE EXPENDITURE INCURRED UPTO THE DUE DATE FOR FILING T HE RETURN OF INCOME U/S. 139(1) OF THE I.T. ACT. 11. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE ENTIRE AMOUNT REALISED WAS SPENT IN ACQUISITION OF NEW ASS ET BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME UNDER SECTION 132(4) I.E., BEFORE 31.03.2010 AND, THEREFORE, OUGH T TO HAVE DIRECTED TO ALLOW EXEMPTION FOR THE ENTIRE AMOUNT. 17. THE ASSESSEE ALSO FILED A PETITION FOR ADMI SSION OF ADDITIONAL GROUNDS OF APPEAL, WHICH ARE AS FOLLOWS : 1. THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE DEVELOPMENT EXPENDITURE INCURRED BY THE APPELLANT A ND DEBITED TO THE PROFIT AND LOSS ACCOUNT. 2. THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE INDEXED COST OF IMPROVEMENT INCURRED BY THE APPELLA NT. 18. AFTER HEARING THE PARTIES, WE ADMIT THE SAID AD DITIONAL GROUNDS, WHICH GO TO THE ROOT OF THE MATTER AND DOES NOT INV OLVE ANY FURTHER/ADDITIONAL INVESTIGATION INTO FACTS OTH ER THAN WHICH ARE ALREADY ON RECORD, RELYING ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE NATIONAL THERMAL POWER CORPORATIO N LTD. VS. CIT, 229 ITR 383 (SC). 19. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI S. RAMA RAO, ARGUED BEFORE US THAT THE ASSESSEE IS AN ARCHITECT WHO HAS BEEN ASSOCIATED WITH THE BUSINESS OF CONSTRUCTION AND WA S PROMPTED TO INVEST IN A SINGLE BUSINESS VENTURE ALONG WITH THE OTHER P ERSON SMT. SUNITHA. AS THE ASSESSEE HAD NOT UNDERTAKEN ANY OTHER DEVELOPME NT ACTIVITY OTHER THAN THIS SOLE BUSINESS VENTURE, THE LEARNED COUNSE L, FOR THE ASSESSEE STRONGLY RELIED ON THE DECISION OF SHRI G. VENKATAS WAMY NAIDU VS. CIT 11 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 352 ITR 594 AND RELIED ON THE PROPOSITION THAT EVEN A SINGLE VENTURE AMOUNTS TO BUSINESS. THE LEARNED COUNSEL PRODUCED T HE RELEVANT DOCUMENTS OF THE PURCHASE OF THE PROPERTY AT PAGE 4 3 OF THE PAPER BOOK BEING AGREEMENT OF SALE CUM- GPA WITH POSSESSION A LSO. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE INTENTION TO SELL WAS VERY MUCH THERE AT THE TIME OF PURCHASE ITSELF AND IT WAS NEV ER INTENDED TO BE TREATED AS CAPITAL ASSET. THE LEARNED COUNSEL FOR THE ASSES SEE POINTED OUT TO PAPER BOOK AT PAGE 13 CONTAINING PROFIT AND LOSS AC COUNT WHERE THE PROFIT HAD BEEN DECLARED AT 10.5% BEING RS.16,31,630/-. TH E LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT SINCE IT WAS A JOINT VENTURE, BOOKS OF ACCOUNTS WERE NOT MAINTAINED AND THE SAME WILL NOT BE REFLECTED IN THE INDIVIDUAL BALANCE SHEETS AND NO STATUTORY AUDIT HA S BEEN DONE. 20. WITH RESPECT TO APPLICATION OF SEC. 50C, THE L EARNED COUNSEL, FOR THE ASSESSEE CONTENDED THAT THE SAME DOES NOT A PPLY FOR BUSINESS ACTIVITY. ALTERNATIVELY, HE STATED THAT ASSESSING O FFICER DID NOT FOLLOW THE PROCEDURE FOR 50C BY NOT REFERRING TO THE VALUATION CELL. 21. WITH RESPECT TO THE PAYMENTS TOWARDS DEVELOPME NT EXPENDITURE, THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT ROCKS WERE REMOVED AND LEVELLING WORK WAS DONE AND ONLY V ERY UNSKILLED LABOURER WERE EMPLOYED, WHO WERE PAID DAILY WAGES A ND HENCE, THERE WAS NO NECESSITY TO DEDUCT TDS. THE LEARNED COUNSEL FUR THER SUBMITTED THAT THE NATURE OF WORK WAS SUCH THAT THE EXPENDITURE CA NNOT BE SUBSTANTIATED BY PROPER VOUCHERS. THE LEARNED COUNSEL ALSO STATED THAT THE LOWER AUTHORITIES WERE AWARE AND IT WAS NOT PROVED FALSE THAT THERE WERE BOULDERS ON THE PROPERTY WHICH HAD TO BE REMOVED. 22. WITH RESPECT TO LONG TERM CAPITAL GAINS, LEARNE D COUNSEL, FOR THE ASSESSEE, STATED THAT THE PROPERTY WAS PURCHASED IN THE YEAR 1989. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE PHOT OGRAPH OF THE PROPERTY WHICH HAS BEEN FILED AT PAGE 38. AT PAGE 3 6 OF THE PAPER BOOK UNDER ANNEXURE-1A TO THE SCHEDULE PROPERTY, THE ANN UAL RENTAL VALUE OF THE BUILDING HAS BEEN STATED AS RS.8000/-. THE RECE IPT OF MUNICIPAL 12 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY CORPORATION OF HYDERABAD TOWARDS PAYMENT OF HOUSE T AX AT RS.3499/- HAS BEEN ENCLOSED. IN THE STATEMENT OF INCOME AT PAGE-2 OF THE PAPER BOOK, THE ASSESSEE STATED THAT RENT FROM THE BANJARAHILLS PROPERTY IS AT RS.60,000/-. THE LEARNED COUNSEL FOR THE ASSESSEE A LSO RELIED ON THE DECISION IN THE CASE OF DR. SMT. UMA CHALLA IN ITA. NO.747/HYD/2007 AND CLAIMED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT. THE LEARNED COUNSEL FURTHER STATED THAT TH E ESTIMATE MADE BY THE REGISTERED VALUER SHRI PRADEEP KUMAR REDDY SUPPORTS THE IMPROVEMENTS TO THE PROPERTY AND THE SAME HAVE TO BE TAKEN INTO ACCOUNT FOR CALCULATION UNDER SECTION 48 OF THE ACT. 23. WITH RESPECT TO GROUND NOS. 10 & 11, THE LEARNED COUNSEL SUBMITTED THAT THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE EXPENDITURE INCURRED ON THE ACQUISITION OF THE NEW ASSET TILL THE DUE DA TE FOR FILING THE RETURN OF INCOME U/S. 139(4) OF THE I.T. ACT IS ALLOWABLE TO THE APPELLANT HEREIN AND SHOULD NOT HAVE LIMITED THE AMOUNT ALLOWABLE TO THE EXTENT OF THE EXPENDITURE INCURRED UPTO THE DUE DATE FOR FILING T HE RETURN OF INCOME U/S. 139(1) OF THE I.T. ACT. FURTHER, HE SUBMITTED THAT THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE ENTIRE AMOUNT REALISED WAS SP ENT IN ACQUISITION OF NEW ASSET BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME UNDER SECTION 132(4) I.E., BEFORE 31.03.2010 AND, THEREFORE, OUGH T TO HAVE DIRECTED TO ALLOW EXEMPTION FOR THE ENTIRE AMOUNT. 24. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI S. RAMA RAO, STATED THAT THE KARNATAKA HIGH COURT IN THE CASE OF FATHIMA BAI VS. I.T.O. (2009) 32 DTR (KAR.) 243 HAS HELD AS FOLLOWS : SEC. 54(2) DECLARES THAT WITHIN ONE YEAR FROM THE DATE OF TRANSFER IF THE CAPITAL GAIN IS NOT INVESTED IN PURCHASE OF BUI LDING, THE ASSESSEE SHOULD DEPOSIT THE AMOUNT IN THE CAPITAL GAIN ACCO UNT SCHEME OR ELSE THE ASSESSEE SHOULD INVEST THE CAPITAL GAINS B EFORE FILING OF RETURN WITHIN THE PERMITTED PERIOD UNDER S. 139, IN WHICH EVENT, THE ASSESSEE WILL NOT BE LIABLE TO PAY CAPITAL GAIN TAX . IN THE INSTANT CASE, THE DUE DATE FOR FILING OF RETURN IS 30TH JUL Y, 1988. UNDER S. 139(4) THE ASSESSEE WAS ENTITLED TO FILE RETURN IN THE EXTENDED TIME, WHICH IS WITHIN 31ST MARCH, 1990. THE ASSESSEE DID NOT FILE THE RETURN WITHIN THE EXTENDED DUE DATE, BUT FILED THE RETURN ON 27TH 13 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY FEB., 2000. HOWEVER, THE ASSESSEE HAD UTILISED THE ENTIRE CAPITAL GAINS BY PURCHASE OF A HOUSE PROPERTY WITHIN THE ST IPULATED PERIOD OF S. 54(2) I.E., BEFORE THE EXTENDED DUE DATE FOR RET URN UNDER S. 139. THE ASSESSEE TECHNICALLY MAY HAVE DEFAULTED IN NOT FILING THE RETURN UNDER S. 139(4). BUT, HOWEVER, UTILISED THE CAPITAL GAINS FOR PURCHASE OF PROPERTY BEFORE THE EXTENDED DUE DATE UNDER S. 1 39(4). THE CONTENTION OF THE REVENUE THAT THE DEPOSIT IN THE S CHEME SHOULD HAVE BEEN MADE BEFORE THE INITIAL DUE DATE AND NOT THE EXTENDED DUE DATE IS AN UNTENABLE CONTENTION.CIT VS. RAJESH KUMAR JALAN (2006) 206 CTR (GAU) 361 :(2006) 286 ITR 274 (GAU) CONCURRED WITH. 25. THE LEARNED D.R. FILED WRITTEN SUBMISSIONS SUM MARISING EACH ASPECT OF THE ISSUE IN DISPUTE. 26. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. 27. GROUND NO. 1 IS GENERAL IN NATURE, 28. IN GROUND NOS. 2 AND 3, A CLAIM WAS RAISED THAT AS THE ASSESSEE WAS AN ARCHITECT, THE SALE SHOULD BE SEEN AS A BUSINESS TRANSACTION AND NOT AS CAPITAL GAINS TRANSACTION. B UT THE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM BY PRODUCING REGUL AR BOOKS OF ACCOUNTS OR AUDIT REPORT, DETAILS OF BUSINESS RELAT IONSHIP WITH SMT SUNITHA. THE ASSESSEE'S CLAIM THAT HE UNDERTOOK ONLY ONE BUSINESS ACTIVITY AND RELIED ON THE APEX COURT JUDGMENT IN T HE CASE OF G. VENKAT SWAMY NAIDU (35 ITR 594) DOESN'T STAND AS TH E APEX COURT HAD LAID ADDITIONAL TEST IN THE CASE OF ANIL JAIN VS. C IT (294 ITR 435). THE CIT(A) HAS POINTED OUT THAT IT HAS NOT BEEN SUBSTAN TIATED BY THE ASSESSEE THAT THE PURCHASE WAS INTENDED FOR RESALE AND NOT FOR INVESTMENT. I T IS OBSERVED THAT THE ASSESSEE SOLD A PLOT OF LAND FOR A CONSIDERATION RS. 1.5 CRORES AGAINST SRO VALUE OF R S.2.10 CRORES. THIS IS A JOINT PROPERTY (HELD ALONG WITH ONE M. SU NITHA ) AND THE ASSESSEE DECLARED BUSINESS PROFIT @ RS.8.15 LACS (50% SHARE) . THE ASSESSEE CLAIMED THE SAME AS BUSINESS INCOME, HOWEVER, THE A SSESSEES CLAIM THAT IT WAS BUSINESS INCOME CANNOT BE SUBSTANTIATED FOR TH E FOLLOWING REASONS, AS POINTED OUT BY THE LEARNED DR: 14 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 1. THE ASSESSEE WAS NOT IN THE REGULAR BUSINESS OF DEVELOPMENT AND SALE OF PROPERTY. 2. THE ASSESSEE COULD NOT PRODUCE ANY PARTNERSHIP D EED WITH THE JOINT OWNER SMT. SUNITHA EVIDENCING ANY BUSINESS. 3. THE DEVELOPMENT EXPENDITURE CLAIMED BY THE ASSES SEE (RS. 72 LACS) IS NOT SUPPORTED BY ANY EVIDENCE. 4. THE ASSESSEE HAS NOT DECLARED THE ASSET AS STOCK-IN-TRADE IN THE BALANCE SHEET FOR THE EARLIER YEARS. 5. THE ASSESSEE HAS NOT ENGAGED HIMSELF IN SUCH BUSINE SS ON EARLIER OCCASIONS. 6. NO BOOKS OF ACCOUNTS ARE MAINTAINED FOR THE ALLE GED BUSINESS ACTIVITY. 7. IF IT IS ASSUMED TO BE A BUSINESS ACTIVITY, THE TO EXCEEDS THE LIMIT PRESCRIBED U/S. 44AB AND THE ASSESSEE WAS LIABLE TO CONDUCT AUDIT WHICH HE HAS NOT DONE. 8. NO TDS HAS BEEN MADE AGAINST THE PAYMENTS MADE FOR THE ALLEGED DEVELOPMENT EXPENDITURE. 9. FROM THE RETURN OF A.Y. 2007-2008, IT IS SEEN THAT NO STOCK- IN-TRADE HAS BEEN DECLARED BY THE ASSESSEE. HENCE, THE CLAIM OF THE ASSESSEE THAT THE PROPERTY PURCHASED W AS A BUSINESS STOCK-IN-TRADE IS NOT ACCEPTABLE. 10. AS THE PERIOD OF HOLDING IS LESS THAN THREE YEARS, THE A.O . HAD RIGHTLY BROUGHT A SUM OF RS.66,51,275/- BEING THE S HARE OF THE ASSESSEE IN THE TRANSACTION. IN VIEW OF THE ABOVE, WE DISMISS GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE. 29. AS REGARDS GROUND NO. 4 & 5, IN OUR OPINION HAVING DECIDED THAT THE INCOME FROM TRANSACTION OF SALE OF LAND IS TO B E TREATED AS CAPITAL GAINS AND NOT AS BUSINESS PROFIT, THE CIT(A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO REFER THE QUESTION OF DETERMIN ING THE MARKET VALUE TO THE VALUATION CELL, AS THERE IS A DISPUTE ABOUT THE VALUE ADOPTED BY THE SUB-REGISTRAR. HENCE, WE DIRECT THE ASSESSING OFFIC ER TO REFER THE MATTER OF VALUATION TO THE VALUATION CELL AND THEREAFTER D ETERMINE THE SHORT-TERM CAPITAL GAIN IN ACCORDANCE WITH LAW. 30. AS REGARDS THE ISSUE OF LONG TERM CAPITAL GAINS , IT IS OBSERVED THAT THE THE ASSESSEE SOLD ANOTHER PROPERTY AT JUB ILEE HILLS FOR A CONSIDERATION OF RS.2.41 CRORES. THE PROPERTY WAS P URCHASED IN THE YEAR 1989 FOR RS.80,000. THE ASSESSEE C LAIMED EXPENSES ON TRANSFER OF RS.4,82,000. THE ASSESSEE CLAIMED EXPENSES OF RS.44 ,84,884 AS 15 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY INDEXED COST OF IMPROVEMENT. WE FIND THAT THE FOLLO WINGS POINTED OUT BY THE DR ARE RELEVANT TO THE ISSUE UNDER CONSIDERATIO N: 1. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE OR, COMMISSION PAYMENT AND EXPENSES ON TRANSFER. HENCE, THE SAME WAS DISALLOWED. 2. REGARDING THE EXPENSES ON IMPROVEMENT, THE ASSE SSEE RELIED ON A CERTIFICATE ISSUED BY A VALUER. ON EXAM INATION OF THE VALUE R BY THE ASSESSING OFFICER, IT WAS FOUND THAT THERE WAS NO BASIS FOR ESTIMATION OF DEVELOPMENT WORKS DONE IN THE YEAR 1989. HENCE, THE A.O. DISALLOWED THE ENTIR E AMOUNT OF RS.44,84,884 BEING THE INDEXED COST OF IMPROVEMENT. VALUE WAS REGISTERED IN 1996-97 AND IT IS SEEN THAT HE HAS GIVEN CERTIFICATE FOR THE YEAR 198 9. 3. THE A.O. ALSO DISCOVERED THAT THE HOUSE SOLD WA S TO AN EXTENT OF 64 SFT (8 X 8 FT) ONLY AND 450 SQ.YDS IN EXTENT. IT THEREFORE DID NOT FULFILL THE CONDITION THAT IT WAS A RESIDENTIAL PROPERTY. THE ASSESSEE ALSO CLAIMED EXEMPTION U/S. 54/54F ON REINVESTMENT IN HOUSE THE ASSESSEE WAS THEREFORE HELD TO BE ELIGIBLE FOR EXEMPTION U/S 54F AND NOT 54 THO UGH HE CLAIMED EXEMPTION UNDER THE LATTER SECTION VIDE LET TER DATED : L0.12.2010. 4. THE ASSESSEE CLAIMED EXEMPTION FOR AN AMOUNT OF RS.64,81,000 TOWARDS PURCHASE OF PROPERTY AND RS.66,00,000 TOWARDS IMPROVEMENT OF 1 HE SAID PROPERTY. THOUGH THE A.O. CONSIDERED THE SAME AS ELIGIBLE FOR EXEMPTION U/S.54F, HE DIDN'T ALLOW THE BALANCE RS.57,16,836 AS EXEMPTION BECAUSE THIS UNUTILIZED P ORTION OF CAPITAL GAINS WAS NOT INVESTED IN CAPITAL GAINS BONDS BEFORE FURNISHING SUCH RETURN. 31. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND THERE IS NO REASON TO INTERFERE WITH THE SAME AND, ACCORDINGLY, THE ORDER OF THE CIT(A) IS HEREBY CONFIRMED ON THIS ISS UE. 32. AS REGARDS GROUND 6, WE FIND THAT D URING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE THE DETAILS IN RESPECT OF DEVELOPME NT EXPENDITURE SUCH AS : 1. DESCRIPTION OF DEVELOPMENT WORKS DONE IN THE PLO T OF LAND. 16 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 2. DETAILED ESTIMATION OF THE DEVELOPMENT WORKS UND ERTAKEN 3. DETAILS OF MACHINERY HIRED AND THE NAME ADDRESS, PAN OF THE PERSON FROM WHOM MACHINERY WAS HIRED. 4. FULL NAMES AND ADDRESSES OF THE RECIPIENTS. 5. BASIS ON WHICH THE AMOUNT PAID TO THE PERSONS WE RE DETERMINED AND SPECIFIC VOLUME OF WORK DONE BY SUCH PERSONS. 6. DETAILED SOURCE OF CASH PAID TO THE RECIPIENTS A ND 7. BOOKS OF ACCOUNTS MAINTAINED FOR THIS VENTURE 33. THE LEARNED COUNSEL REITERATED THE ARGUMENTS MA DE BEFORE THE CIT(A). 34. APPRECIATING THE CIRCUMSTANCES OF THE CASE, ONE MORE OPPORTUNITY IS GIVEN TO THE ASSESSEE TO SUPPORT HIS CLAIM OF EX PENSES BEFORE THE ASSESSING OFFICER AND HENCE, WE SET ASIDE THIS ISSU E TO THE FILE OF THE ASSESSING OFFICER. 35. WITH REGARD TO GROUND NOS. 7 & 9, THE STRUCTURE THAT EXISTED AT THE TIME OF SALE WAS A ROOM 64 SFT IN EXTENT WHICH BY N O STRETCH OF IMAGINATION CAN BE TERMED TO BE A RESIDENTIAL UNIT. IT IS OBSER VED THAT THE ASSESSEE HAS PRODUCED THE ANNUAL RENTAL RECEIPT, PHOTOGRAPH AND THE COMPUTATION OF INCOME WHERE HE HAS DECLARED THE PROPERTY TO FET CH RS. 60,000/- PER ANNUM. RELYING FROM THE ANNEXURE ATTACHED TO THE SA LE DEED DATED 29 TH NOVEMBER, 2007 BETWEEN SHRI R. SATISHKUMAR REDDY AN D SHRI PRANAV REDDY. RELYING ON THE DECISION OF DR. SMT. UMA CHA LLA IN ITA.NO.747/HYD/2007 FOR THE ASSESSMENT YEAR 2003-20 04 DATED 24 TH OCTOBER, 2008, WE ARE OF THE OPINION THAT THE ASSES SEE SHALL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 54F EVEN THOUGH PROPERTY IS ONLY 8 X 8 I.E., 64 SQ. FEET AS LONG AS IT IS USED FOR HUMAN HABITATION. WE DIRECT THE ASSESSING OFFICER TO WORK-OUT THE RELIEF UNDER SECTION 54F. T HEREFORE, GROUND NOS. 7 & 9 RAISED BY THE ASSESSEE ARE DISMISSED. 36. WITH RESPECT TO GROUND NO.8, THE CIT(A) COMMENTED AT PARA 9.1 OF HIS ORDER THAT THE VALUER HIMSELF COULD NOT JUSTIFY THE ESTIMATED COST OF IMPROVEMENT. GOING THROUGH THE STATEMENT RECORDE D BY THE DEPARTMENT FROM MR. D.PRATAP KUMAR REDDY ON OATH WHEN HE APPEA RED ON 15.12.2010 WE OBSERVE THAT THE QUESTIONS AND ANSWERS HEREIN BE LOW ARE RELEVANT : 17 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY QUESTION NO.7 : PLEASE STATE HOW YOU JUSTIFY THE A MOUNT CERTIFIED BY YOU ? ANSWER : I CANNOT JUSTIFY THE EXACT AMOUNT. HOWEVER , MY ESTIMATION IS ON THE BASIS OF GENERAL TOPOGRAPHY OF THE AREA. QUESTION NO.8 : YOU HAVE ALSO CERTIFIED CONSTRUCTIO N COST OF COMPOUND WALL AT A COST OF RS.39,150/-, CONSTRUCTIO N OF A.C. SHEET ROOM AT RS.10,000/-, A.C. SHEET ROOFED TOILET OF RS .2,500/- AND CONSTRUCTION OF UNDERGROUND SUMP AT RS.11,250/-. HO W DID YOU ASCERTAIN THE COST OF THESE CONSTRUCTION IN THE YEA R 1989. ANSWER : WE HAVE MADE THE ESTIMATION ON THE BASIS O F PRESENT COST ON A REVERSE CALCULATION METHOD. HOWEVER, I CANNOT SAY THAT THE CONSTRUCTIONS WERE MADE IN 1989. 37. FROM THE ABOVE STATEMENT MADE BY MR. D.PRADEEP KUMAR WE ESTIMATE THE IMPROVEMENTS AT 50% AS PRADEEP KUMAR H IMSELF HAS ONLY GONE BY SOME GENERAL ESTIMATION. HENCE, WE REMIT TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER TO RE-WORK THE INDEX COST OF IMPROVEMENTS BY RESTRICTING IT TO RS.22,42,442/- FOR THE PURPOSE OF MAKING CALCULATION UNDER SECTION 48. 38. WITH RESPECT TO AN AMOUNT OF RS.20,000/- PAID BY THE ASSESSEE FOR PURCHASING THE NEW PROPERTY AND THE EX PENSES ON TRANSFER FOR AN AMOUNT OF RS.4,82,000/- THE MATTER IS REMITT ED TO THE FILE OF ASSESSING OFFICER WHO SHALL GATHER EVIDENCE AND VER IFY THE RECEIPTS. IT IS NEEDLESS TO SAY THAT AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE SHOULD BE GIVEN TO THE ASSESSEE TO REPRESENT HIS CASE. 39. AS REGARDS GROUND NOS. 10 & 11, AS PER THE PROVISIONS OF SECTION 54/54F, THE INVESTMENT HAS TO BE MADE AS PER THE PR OVISIONS OF SECTION 139(1) ONLY. THEREFORE, THESE GROUNDS OF THE ASSESS EE ARE DISMISSED. 40. AS REGARDS THE ADDITIONAL GROUNDS RAISED, WHICH HAVE ALREADY BEEN RAISED AS GROUND NO. 6 AND 8 OF THE REVISED GR OUNDS OF APPEAL AND THE SAME HAVE BEEN DECIDED (SUPRA). THEREFORE, THE ADDITIONAL GROUNDS 1& 2 RAISED BY THE ASSESSEE BECOME INFRUCTUOUS AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 18 ITA NO. 1681/HYD/2011 R. SATISH KUMAR REDDY 41. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 .09.2013 SD/- SD/- (CHANDRA POOJARI) ( ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD DTD. 18 TH OCTOBER, 2013. VBP/KV COPY TO 1. SHRI RASURI SATISH KUMAR REDDY, 8-2-293/82/L/78C , MLA COLONY, ROAD NO.12, BANJARA HILLS, HYDERABAD PAN ADQPR5849D C/O. K .K. GUPTA, F.C.A. 3464, DUNDOO VIHAR, R.P. ROAD, SECUNDERABAD. 2. ITO, WARD 8 (2), HYDERABAD 3. CIT(A)-III, HYDERABAD. 4. CIT-II, HYDERABAD 5. DR, ITAT, HYDERABAD B BENCH, HYDERABAD.