Sunil Kumar Jain, Delhi V. ACIT, New Delhi

ITA 194/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4802 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: SANJEEV KAWTRA
• Keywords: Capital asset; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SH.L.P.SAHU, ACCOUNTANT MEMBER ITA NO. 194/DEL/2014 (ASSESSMENT YEAR: 2009 -10) APPELLANT BY SH.SANJEEV KAWTRA, CA RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR.DR DATE OF HEARING 06.07.2017 DATE OF PRONOUNCEMENT 22.08.2017 ORDER PER L.P.SAHU, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 01.10.2013 OF THE CIT(A)-XXVIII, NEW DELHI RELATING TO ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED BY LD. CIT (A) IS BAD IN LAW . 2. THAT THE LD. CIT (A) WAS NOT JUSTIFIED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE PARTIAL ADDITION OF RS. 3,92,103/- (TOTAL ADDITION RS 7,84,206/-) MADE BY THE ASSESSING OFFIC ER OF ENTIRE INTEREST PAID ON BORROWED FUND FROM BANKS UTILIZED FOR MAKIN G PAYMENT FOR PROPERTY WHICH WAS SOLD DURING THE YEAR UNDER APPEAL. 3. THAT THE LD. CIT (A) WAS NOT JUSTIFIED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN ENHANCING THE LONG TERM CAPI TAL GAIN ON SALE OF PLOT BY GIVING INDEXATION BENEFIT ON COST OF ACQUISITION FROM FINANCIAL YEAR 2003- SUNIL KUMAR JAIN, 94, NEW RAJDHANI ENCLAVE, VIKAS MARG, DELHI-110092. PAN-AAHPJ8930H VS ACIT, CIRCLE-37(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO. 194/DEL/2014 2 | P A G E 04 INSTEAD OF FINANCIAL YEAR 1999-2000 WITHOUT AFFO RDING PROPER OPPORTUNITY TO THE APPELLATE . 4. THAT THE LD. CIT (A) WAS NOT JUSTIFIED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE PARTIAL ADDIT ION OF RS. 12,400/- (TOTAL ADDITION RS 24,800) MADE BY THE ASSESSING OFFICER O N ADHOC BASIS ON THE PLEA THAT PERSONAL ELEMENT IN CAR RUNNING AND ENTER TAINMENT EXPENSES CANNOT BE RULED OUT. 5. THAT APPELLANT CRAVES LEAVE TO ADD, ALTER AND MO DIFY ANY OF THE GROUNDS DURING THE COURSE OF APPELLATE PROCEEDINGS. 2. IN THIS APPEAL FILED BY THE ASSESSEE, GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION; IN GROUND NOS. 2 , 3 & 4, THE AO MADE ADHOC ADDITION ON THE CAR RUNNING EXPENSES WHICH HAS BEEN RESTRICTED TO 10%. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME OF RS.23,97,871/- ON 30.09.2009. THE CASE WAS SELECTE D FOR SCRUTINY UNDER CASS AND NOTICES WERE ISSUED TO THE ASSESSEE U/S 143(2) OF THE I.T.ACT, 1961 (IN SHORT ACT). DURING THE SCRUTINY PROCEEDINGS, THE AO NO TED THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.10,45,637/- IN H IS RETURN OF INCOME FOR SALE OF PLOT B-149, SUN CITY, GURGAON. ON BEING ASKED B Y THE AO, THE ASSESSEE SUBMITTED DETAILS OF LONG TERM CAPITAL GAIN COMPUTE D IS AS UNDER:- S.NO. PARTICULARS AMOUNT COST YEAR INDEX SALE YEAR INDEX AMOUNT AMOUNT SALE CONSIDERATION 1,70,00,000 LESS 1. INDEXED COST OF ACQUISITION (1999- 2000) 22,30,000 289 582 3336401 2. INDEXED COST OF ACQUISITION 33750 389 582 50494 3. INDEXED COST OF ACQUISITION 197340 406 582 282886 4. INDEXED COST OF ACQUISITION 165708 426 582 226389 5. INDEXED COST OF 92765 447 582 103892 ITA NO. 194/DEL/2014 3 | P A G E ACQUISITION 6. CHARGES ICICI 3283 447 582 4274 7. INDEXED COST OF ACQUISITION 48500 463 582 60965 8. INDEXED COST OF ACQUISITION 34617 463 582 43514 9 INDEXED COST OF ACQUISITION (2003- 04) (STAMP DUTY) 6266975 463 582 788119 10. INDEXED COST OF ACQUISITION (2004- 05) 9722 480 582 11787 4908726 TOTAL LTCG 1,20,91,273 SHARE OF THE ASSESSEE 60,45,637 LESS NHB BOND INVESTMENT 50,00,000 LONG TERM CAPITAL GAIN 10,45,637 4. IN RESPONSE TO THE QUERY RAISED BY THE AO, THE A SSESSEE SUBMITTED DOCUMENTS AND PERUSAL OF THE DOCUMENTS, THE AO OBSE RVED THAT THE ASSESSEE HAS TAKEN LOAN OF RS.15,00,000/- FROM ICICI BANK FO R THE PURCHASE/CONSTRUCTION OF THE ABOVE SAID PROPERTY. THE PROPERTY WAS BOOKED UPON M/S SUNCITY PROJECT LTD. AND THE LOAN WAS RAIS ED FROM ICICI BANK IN NOV. 1999 AND JOINTLY WITH WIFE OF RS.15 LACS AND RS.6,2 5,000/- TAKEN FROM BANK OF BARODA ON 20.05.2003 FOR MAKING OF FINANCIAL PAYMEN T OF THE PROPERTY AND THE PROPERTY WAS REGISTERED ALSO IN F.Y. 2003-04 IN THE NAME OF THE ASSESSEE AND HIS WIFE. THE INTEREST WAS ALSO COMPUTED TO THE BA NK ON THE LOAN TAKEN FROM BOTH THE BANKS. THE PROPERTY WAS SOLD FOR RS.1,70, 000/-. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE CLAIMED COST OF ACQUISITION ON THE COS T OF THE PROPERTY PURCHASED AND INTEREST PAID UPTO 2004-05 O N LOANS. THE AO DID NOT ALLOW THE INDEXED VALUE OF INTEREST PAID OF RS.7,84 ,206/- AND ADDED TO THE INCOME OF THE ASSESSEE AS A LONG TERM CAPITAL GAIN. 5. FURTHER THE AO OBSERVED THAT THE ASSESSEE HAS CL AIMED UNDER CAR RUNNING EXPENSES OF RS.1,12,000/- IN HIS P&L A/C. THE AO A SKED FOR THE LOG BOOK BUT ITA NO. 194/DEL/2014 4 | P A G E THE ASSESSEE WAS UNABLE TO SUBMIT, THEREFORE, THE A O DISALLOWED 1/5 OF THE CAR RUNNING EXPENSES OF RS.22,400/- AND ADDED BACK TO T HE INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ADDITION OF THE AO, THE ASSESSE E FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE SUBMITTED DETAILED WRITTEN SUBMISSIONS BEFORE THE LD.CIT(A) AND AFTER CONSIDERING THE WRIT TEN SUBMISSIONS AND AOS ORDER, THE FINDINGS OF THE LD.CIT(A) IS AS UNDER:- 5.3 TO VERIFY THE FACT THE APPELLANT WAS ASKED TO CONFIRM THE DATE OF PURCHASE OF A PLOT, AND PRODUCE THE DOCUMENTS EVIDE NCING REGISTRY OF THE PLOT AND ALSO TO PRODUCE THE FINANCIAL STATEMENT FO R THE YEAR 1999-2000 AND 2000-01. IN RESPONSE THE APPELLANT PRODUCED CO NVEYANCE DEED SHOWING THAT THE PROPERTY HAD BEEN REGISTERED ON 02 .07.2003, AT RS.24,61,564/- FOR WHICH RS.3,07,750/- HAD BEEN PAI D AS STAMP DUTY. FURTHER, AS PER THE FINANCIAL STATEMENT FOR THE YEA R ENDING 31.03.2000 AND 31.03.2001, THE VALUE OF THE SUNCITY PLOT HAD BEEN SHOWN AT RS.11,15,000/- IN THE BALANCE SHEET OF THE APPELLAN T I.E. DR.SUNIL KUMAR JAIN. THE INTEREST PAYMENT TO ICICI BANK WAS NOT CA PITALIZED TO THE LOAN ACCOUNT. IN THE BALANCE SHEET FOR THE PERIOD ENDING 31.03.2009 THE OPENING BALANCE OF THE PROPERTY HAS BEEN SHOWN TO BE RS.13, 68,239/- . IT IS APPARENT THAT HERETO THE VALUE OF THE PROPERTY INCL UDES ONLY THE AMOUNT PAID TOWARDS STAMP DUTY AND EXTERNAL DEVELOPMENT CH ARGES, AND THE INTEREST PAYMENT, IF ANY, HAS NOT BEEN CAPITALIZED. SINCE THE BALANCE SHEET DOES NOT REFLECT ANY CAPITALIZATION OF INTEREST PAY MENT, THE COST OF ACQUISITION CAN NOT INCLUDE THE EXPENDITURE, IF ANY TOWARDS INTEREST. THE APPELLANT CAN THEREFORE NOT BE ALLOWED BENEFIT OF I NDEXATION ON INTEREST. FURTHER AS THE REGISTERED SALE DEED THE PROPERTY HA S BEEN REGISTERED IN THE NAME OF THE APPELLANT ON 02.07.2003. BEFORE THIS DA TE THE PAYMENT MADE TO SUNCITY WAS AN ADVANCE. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE CAPITAL GAINS AFTER ALLOWING INDEXATION ON COST OF ACQUISITION AS PER THE REGISTERED AGREEMENT AT THE REGISTERED PRICE W.E.F. THIS DATE THAT IS 02.07.2003 AND NOT FROM 1999-2000 AS CLAIMED BY THE ASSESSEE. THE ITA NO. 194/DEL/2014 5 | P A G E APPELLANT HAD CLAIMED THAT 100% DISALLOWANCE OF INT EREST HAS BEEN MADE IN HIS CASE, INSPITE OF THE FACT THAT HE HAS OWNERS HIP OF ONLY 50% OF THE PROPERTY. THE CLAIM OF THE APPELLANT IN THIS REGARD IS ACCEPTED, THE ASSESSING OFFICER IS DIRECTED TO INITIATE ACTION IN THE CASE MRS.BELIA JAIN OR INTIMATE THE ASSESSING OFFICER OF MRS.BELIA JAIN IN RESPECT OF THE REST OF THE DISALLOWANCE IN RESPECT OF' INCLUDING INTEREST PAYM ENT AS PART OF COST OF ACQUISITION. THE APPELLANT THUS GETS PART RELIEF, HOWEVER, THE I NDEXED COST OF ACQUISITION IS AMENDED AS DISCUSSED ABOVE. 7. LD.CIT(A) IN RESPECT OF ADHOC ADDITION I.E. 1/5 OF CAR RUNNING EXPENSES REDUCED TO THE 10% AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASS ESSEE FILED APPEAL BEFORE THE ITAT. 9. LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) AND HE ALSO PRODUCED THE PAPER BOOK WHICH CONTAINS TO 1 TO 206 PAGES AND HE REFERRED SECTION 48 OF THE ACT FOR TRUE DETERMINATION OF THE COST OF ACQUISITION OF ASSETS. LD.AR SUBMITTED THAT THE PLOT WAS BOOKED AND TAKEN LOAN FROM THE ICICI BANK. THE ICICI BANK PAID DIRECTLY TO THE VENDORS AND TRI -PARTY AGREEMENT WAS MADE AND FURTHER THE ASSESSEE TOOK LOAN FROM BANK OF BAR ODA FOR THE FINAL PAYMENT AND THE PROPERTY WAS GOT REGISTERED IN THE NAME OF THE ASSESSEE AND HIS WIFE JOINTLY. THE LOAN WAS RE-PAID WITH THE INTEREST. THE PAYMENT IS ALSO PART OF THE COST OF ACQUISITION. THE INTEREST HAS NOT BEEN DEBI TED IN THE VALUE OF ASSETS IS NOT RELEVANT. IN THIS REGARD, HE ALSO RELIED ON TH E JUDGEMENT OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS CIT 82 ITR 363 {1971} [SC ]. HE ALSO SUBMITTED THAT THE LOAN WAS TAKEN AND UTILIZED FOR THE OBJECTIVE F OR WHICH IT WAS TAKEN. UTILIZATION OF LOAN FOR THE PURPOSE, IT WAS TAKEN T HE MOST IMPORTANT THING WHILE ITA NO. 194/DEL/2014 6 | P A G E GIVING LOAN CLAIM FOR THE INTEREST. THE HOUSING LO AN WAS UTILIZED FOR CONSTRUCTION/PURCHASE OF HOUSE. THE LOAN WAS NOT O NLY USED FOR THE PURCHASE OF PLOT. THE VERY PURPOSE OF THE LOAN WAS TAKEN FO R THE PURCHASE/CONSTRUCTION OF THE HOUSE. HE RELIED ON THE FOLLOWING JUDGEMENT S:- (I) CIT V MITHLESH KUMARI [1973] 92 ITR 9 (DELHI); (II) CIT V TRAVANCORE-COCHIN CHEMICALS LTD. [1975] 99 IT R 24 (KER.) (FB); (III) ADDL. CIT V K.S.GUPTA [1979] 119 ITR 372 (AP); AND (IV) CIT V MAITHERYI PAI [1985] 152 ITR 247 (KER.) 10. HE FURTHER SUBMITTED THAT THE CASE LAWS RELIED BY THE AO ARE IN DIFFERENT FOOTINGS, THEREFORE, IN THIS CASE, IT IS NOT APPLIC ABLE. 11. LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORI TIES AND HE SUBMITTED THAT THE AO HAS CONSIDERED RIGHTLY THE COST OF ACQUISITI ON OF THE ASSETS AND HE REFEREED SECTION 48 OF THE ACT REGARDING COST F ACQ UISITION. HE FURTHER SUBMITTED THAT AFTER THE ACQUISITION OF ASSETS REGISTERED IN THE NAME OF THE ASSESSEE, NO OTHER EXPENDITURE CAN BE ALLOWED. HE FURTHER SUBMI TTED THAT IN THE COMPUTATION OF CAPITAL GAIN, THERE ARE THREE TYPES OF EXPENDITURE WHICH CAN BE DEDUCTED FROM THE NET CONSIDERATION WHICH IS AS UND ER:- (I) COST OF ACQUISITION OF ASSETS; (II) COST OF ANY IMPROVEMENT THEREIN & EXPENDITURE INCUR RED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF ASSETS. 12. THEREFORE, THE AO AND THE LD.CIT(A) HAS PASSED A GOOD REASONED ORDER IN RESPECT OF GROUND NO.4. HE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 13. AFTER HEARING BOTH THE SIDES AND PERUSING THE M ATERIAL ON RECORD, WE OBSERVED THAT THE PROPERTY WAS BOOKED IN THE NAME O F THE ASSESSEE JOINTLY WITH HER WIFE IN THE FY 2008-09 AND THE SUBSTANTIVELY AM OUNT OF THE COST OF PROPERTY WERE ALSO PAID TO VENDORS. ANNUAL PROPERTY HAS GOT REGISTERED IN THE FY 2003- ITA NO. 194/DEL/2014 7 | P A G E 04 EFFECT TO THE ISSUE FOR GIVING INDEXATION BENEFI T TO THE ASSESSEE BECAUSE THE SUBSTANTIAL VALUE OF THE PROPERTY HAD ALREADY BEEN PAID AT THE TIME OF BOOKING OF THE CAPITAL ASSETS. THE TRI-PARTY AGREEMENT WAS AL SO MADE WITH THE ICICI BANK AT THE TIME OF SANCTIONING OF THE LOANS FOR THE PUR CHASE/CONSTRUCTION OF THE PLOT AND THE LOAN AMOUNT WAS DIRECTLY PAID TO THE VENDOR S. IN TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERING THE O RDER OF THE LOWER AUTHORITIES AND SUBMISSIONS OF THE ASSESSEE, THE AS SESSEE IS ENTITLED FOR THE INDEXATION BENEFIT FROM THE FY 1999-2000 AND ONWARD S IN RESPECT OF INTEREST PAID TO THE BANKS IN RESPECT OF HIS SHARE IN THE PR OPERTY. THEREFORE, THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. 14. DURING THE SCRUTINY PROCEEDINGS, THE AO ASKED F OR THE LOG BOOK BUT THE ASSESSEE SUBMITTED THAT NO LOG BOOK HAS BEEN MAINTA INED. THEREFORE, THE ESTIMATION MADE BY THE AO AND RESTRICTION MADE UPTO 10% BY THE LD.CIT(A) IS JUSTIFIABLE. ONCE THE AO OR APPELLATE AUTHORITY RA ISED CERTAIN QUERIES AND THE ASSESSEE FAILED TO PROPERLY RESPOND THE SAME, THE A UTHORITIES BELOW WERE QUITE JUSTIFIED TO DISALLOW THE EXPENDITURE, KEEPING IN V IEW THE NATURE & SIZE OF ASSESSEES BUSINESS AND OTHER ATTENDING FACTS & CIR CUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE DISCUSSION, GROUND NO.4 OF THE AP PEAL IS REJECTED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST, 2017. SD/- SD/- (BHAVNESH SAINI) (L.P.SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER *AMIT KUMAR* DATE:- 22.08.2017 ITA NO. 194/DEL/2014 8 | P A G E COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI