Shri Mukeshbhai Kalidas Patel, Ahmedabad V. The Asst.DIT.,(Intl.Taxn.), Ahmedabad

ITA 2356/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0504 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 19-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADIP KR MAJUMDAR
• Keywords: Search and seizure; Cost of acquisition; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH BEFORE: SHRI D.K. TYAGI JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCO UNTANT MEMBER SHRI MUKESHBHAI KALIDAS PATEL, 2A, TIRTHNAGAR SOCIETY III, SOLA RAOD, GHATLODIA, AHMEDABAD (APPELLANT) PAN NO. AAVPP9801P VS. THE ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AHMEDABAD (RESPONDENT) REVENUE BY : SRI PRADIP KR. MAJUMDAR, SR. D.R. ASSESSEE BY : SRI URVASHI SHODHAN, A.R. DATE OF HEARING : 14-02-2013 DATE OF PRONOUNCEMENT : 22- 02-2013 / ORDER PER : D.K TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR DATED 21.05.2010. 2. THE ASSESSEE HAS TAKEN FOLLOWING TWO EFFECTIVE G ROUNDS OF APPEAL:- ITA NO. 2356/AHD/2010 A.Y.:-2007-08 ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 2 1 THE LEARNED CIT(A) GANDHINAGAR, AHMEDABAD HAS ER RED IN CONFIRMING THE ADDITION OF RS. 5,70,000/- TO THE AM OUNT OF LONG TERM CAPITAL GAINS DECLARED. 2. THE LEARNED CIT(A) GANDHINAGAR, AHMEDABAD HAS ER RED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS. 67,9 19/-. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS DECLAR ED LONG TERM CAPITAL GAIN ON THE SALE OF A PLOT OF LAND BY TAKING THE SALE CO NSIDERATION AT RS. 61,80,000/- AS PER CONVEYANCE DEED DATED 10.11.2006 . THE ASSESSING OFFICER FURTHER FOUND THAT ON 13.11.2006, THE ASSESSEE HAS RECEIVED ANOTHER SUM OF RS. 5,70,000/- FROM THE PURCHASER, WHICH HAS ALSO B EEN ATTRIBUTED IN ASSESSEES RECORD TO THE SALE OF PLOT AT KALUPUR. WHEN ASSESSEE WAS ASKED, THE ASSESSEES EXPLANATION WAS THAT THIS IS AN REIM BURSEMENT OF THE EXPENSES INCURRED BY THE ASSESSEE IN LEVELING OF LAND, CONST RUCTING COMPOUND WALL AND DOES NOT FORM PART OF THE SALE CONSIDERATIONS. HOW EVER, THE ASSESSEE DID NOT HAVE SUPPORTING EVIDENCE OF SUCH EXPENSES BEING INC URRED LONG BACK. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTABLE TO T HE ASSESSING OFFICER ON THE GROUND THAT AS PER CONVEYANCE DEED THE PLOT OF LAND HAS BEEN SOLD IN THE PRESENT SHAPE ALONG WITH BOUNDARY WALL AT RS. 61,80 ,000/- AND THERE IS NO PROVISION OF REIMBURSEMENT OF EXPENSES IN THE SAID CONVEYANCE DEED. ACCORDINGLY, HE TOOK THE SALE VALUE OF PLOT AT RS. 67,50,000/- I.E. AT RS. 61,80,000/-+5,70,0000/-=67,50,000/- WHICH AMOUNTED TO AN ADDITION OF RS. 5,70,000/- TO THE CAPITALS GAIN SHOWN BY THE ASSESS EE. 4. BEFORE LD.CIT(A), THE ASSESSEE MADE FOLLOWING SUBMISSIONS/CONTENTIONS:- ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 3 IN PARA THREE OF THE ASSESSMENT ORDER, THE LEARNED ASSESSING OFFICER HAS CONCLUDED THAT THE SALE CONSIDERATION TOWARDS P LOT OF LAND SOLD DURING THE PREVIOUS YEAR IS NOT RS. 61,80,000/- AS RETURNED BY THE ASSESSEE BUT RS. 67,50000/- I.E. MORE BY RS. 5,70,0 00/- FOR WHICH SEPARATE AGREEMENT WAS EXECUTED AND THEREBY MAKE AD DITION OF RS. 5,70,000/- TO THE INCOME. IT IS RESPECTFULLY CLARIFIED THAT ONE PLOT OF LAND WAS ACQUIRED IN 1992. THEREAFTER, YOUR ASSESSEE HAD INCURRED EXPENSES TOW ARDS CONSTRUCTING OF COMPOUND WALL, LEVELING OF PLOT, FILLING OF LAND ETC. ALL THIS ADDITIONAL WORK WAS CARRIED OUT OVER A PASSAGE OF T IME FROM SAY 1992.93 TO 2000.01. COMPOUND WALL WAS MADE SOMEWHE RE IN YEAR 2000 ETC. THUS ALL EXPENSES WERE INCURRED AT DIFFE RENT POINT OF TIME AND IN INSTALLMENTS. SINCE THE MATER IS VERY OLD Y OUR ASSESSEE IS NOT IN POSSESSION OF SUPPORTING EVIDENCES RELATING TO EXPE NSES INCURRED. HOWEVER THE FACT THAT AT THE TIME OF SALE OF PROPER TY, LEVALISED PLOT OF LAND AND COMPOUND WALL WAS IN EXISTENCE AND THE SAI D FACT HAS BEEN ACKNOWLEDGED BY THE PURCHASER AND EVEN NOT DENIED B Y THE LD. A.O. HOWEVER, AS IT RELATES TO REIMBURSEMENT OF EXPENSES AND NOT TOWARDS RECOVERY OF COST OF ORIGINAL ASSETS, A SEPARATE AGR EEMENT WAS EXECUTED AND IN THE MAIN DEED OF SALE, ONLY THE CONSIDERATIO N TOWARDS THE SALE OF PLOT OF LAND WAS STATED. IN VIEW OF THIS, YOUR ASSESSEE TOO UNDER BONAFIDE U NDERSTANDING WHILE COMPUTING LONG TERM CAPITAL GAIN, SALE CONSIDERATIO N AS PER THE SALE DEED OF RS. 61,80,000/- WAS CONSIDERED WHEREAS THE AMOUNT OF RS. 5,70,000/- WAS RECEIVED THROUGH SEPARATE AGREEMENTS PERTAINS TO RECEIPTS TOWARDS REIMBURSEMENT OF EXPENSES INCURRED , SAME WAS IGNORED. THE ISSUE WOULD NOT HAVE ARISED, HAS THE COMPUTATIO N OF INCOME WAS MADE AS UNDER:- I COST OF PLOT OF LAND RS. 6,50,072 ADD: COST OF IMPROVEMENT (UPTO RS. 5,7000 TOTAL COST RS. 12,20,072 II. INDEXED COST OF ACQUISITION (INDEXATION OF COST OF LAND ONLY AND NOT THAT OF EXPENSES OF IMPROVEMENT AS PRECISE PERIOD NOT AVAILABLE) RS. 16,95414 TOTAL INDEXED COST OF ACQUISITION RS. 22,65,414 ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 4 SALE CONSIDERATION (61,80,000+5,70,000) RS. 67,50,0 00 LONG TERM CAPITAL GAIN (WHICH IS EXACTLY THE SAME AMOUNT AS COMPUTED BY ASSESSEE) RS. 44,84,586 COPIES OF BOTH THE DEEDS I.E. DEED OF SALE FOR 61,8 0,000/- AND AGREEMENT FOR RS. 5,70,000/- SEPARATELY EXECUTED AR E APPENDED SEPARATELY FOR YOUR HONOURS READY REFERENCE. CONSIDERING THE FACTS OF THE CASE AND EVIDENCES ON RECORD, ADDITION MADE MAY KINGLY BE DELETED. 5. LD. CIT(A) HOWEVER DISMISSED THIS GROUND OF THE ASSESSEE BY OBSERVING AS UNDER:- 3.3 THE MATTER HAS BEEN CONSIDERED BUT I AM AFRAID I CANNOT AGREE WITH THE AUTHORIZED REPRESENTATIVE. A PLOT OF LAND ALONG WITH BOUNDARY WALL AND ITS VARIOUS CHARACTERISTICS IS AL WAYS SOLD IN TOTALITY AND NOT IN TERMS OF VARIOUS ACTIVITIES WHICH GO TO FORM THE PRESENT STATE IT IS IN. IN FACT, ANY ASSET WOULD BE SOLD I N ITS ENTIRETY AND THE IMPROVEMENTS CARRIED THEREON WOULD GET REFLECTED IN ITS VALUE. THE IMPROVEMENTS LIKE LEVELING OF LAND ARE NOT INDEPEND ENT RIGHTS OR ASSETS WHICH CAN BE TRANSACTED. ALTHOUGH THE AUTHO RIZED REPRESENTATIVE HAS FILED A SEPARATE CONVEYANCE DEED DATED 10/11/2006 REGARDING THE SO CALLED REIMBURSEMENT, I T IS CLEAR THAT THE SAID CONVEYANCE DEED DOES NOT MADE MUCH OF A SENSE. FURTHERMORE, IN ANY CASE, IT SEEMS FROM THE ASSESSMENT ORDER THA T NO SUCH DEED WAS FILED BEFORE THE ASSESSING OFFICER. THEREFORE, IT IS CLEAR THAT THE ENTIRE SUM OF RS. 67,50,000/- IS TO BE TREATED AS CONSIDER ATION RECEIVED FOR SALE OF LAND. 6. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A). ON THE OTHER HAND, LD. D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THERE ARE TWO CONVEYANCE DEEDS SINGED BETWEEN THE A SSESSEE AND THE PURCHASER IN RESPECT OF SALE OF PLOT AT KALUPUR BOT H DATED 10.11.2006. ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 5 ACCORDING TO ASSESSEE THE SALE CONSIDERATION OF THE PLOT WAS ONLY AT RS. 61,80,000/- AS PER THE FIRST CONVEYANCE DEED AND TH E SUM OF RS. 5,70,000/- RECEIVED BY ANOTHER CONVEYANCE DEED WAS NOT IN RESP ECT OF SALE CONSIDERATIONS BUT WHICH RELATED TO REIMBURSEMENT O F EXPENSES ONLY. THE ASSESSING OFFICER HAS HOWEVER TAKEN BOTH THE AMOUNT S AS SALE VALUE OF THE PLOT AT KALUPUR AND HAS CALCULATED CAPITAL GAINS AC CORDINGLY. THIS ACTION OF THE A.O. HAS BEEN CONFIRMED BY LD. CIT(A) AFTER TAK ING INTO CONSIDERATION THE CONTENTION OF THE ASSESSEE WHICH WE HAVE ALREAD Y REPRODUCED IN PARA NO. 4 OF OUR ORDER. WHILE GOING THROUGH THE SECOND CON VEYANCE DEED, WE FIND THAT IN THAT DEED THERE IS MENTION OF VERY VITAL FA CTS THAT WHEN PURCHASER TOOK THE POSSESSION OF THE PLOT FROM THE ASSESSEE IT WAS FOUND THAT AREA OF THE PLOT WAS 38 SQAURE YARD MORE THAN IN THE RECORD OF THE S OCIETY. THE POSSIBILITY OF REGULARIZING THIS DISCREPANCY OF AREA OF THE PLOT I N THE EARLIER CONVEYANCE DEED AND TO OBTAIN THE CONSENT OF THE ASSESSEE IN R ESPECT OF ADDITIONAL AREA OF THE LAND, PAYMENT OF RS. 5,70,000/- WAS MADE TO THE ASSESSEE CANNOT BE RULED OUT SINCE ASSESSEE HAS FAILED TO GIVE ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THIS PAYMENT WAS REIMBURSEMENT OF EXPENSES INCURRED BY ASSESSEE FOR THE DEVELOPMENT OF THIS PLOT. THEREFORE, THE LOWER AUT HORITIES HAVE RIGHTLY TREATED THE PAYMENT RECEIVED BY THE ASSESSEE IN TER MS OF BOTH THE CONVEYANCE DEEDS AS SALE CONSIDERATION/VALUE OF THE PLOT FOR CALCULATING CAPITAL GAIN. THIS GROUND OF THE ASSESSEE IS THERE FORE DISMISSED. 8. GROUND NO. 2 RELATES TO DISALLOWANCE OF INTEREST OF RS. 67,919/-. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFF ICER DISALLOWED THE INTEREST PAID BY THE ASSESSEE FOR OVERDRAFT FACILIT IES ON THE GROUND THAT THE SAME HAS BEEN UTILIZED FOR ADVANCE FREE LOAN AND AD VANCE TO RELATIVES AND ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 6 FRIENDS. BEFORE CIT(A), THE ASSESSEE PLACED RELIAN CE ON THE FOLLOWING SUBMISSIONS:- THE LEARNED ASSESSING OFFICER, VIDE PARA FIVE OF T HE ASSESSMENT ORDER HAS DISALLOWED INTEREST OF RS. 67,919/- PAID TO BAN K TOWARDS INTERIM OVERDRAFTS FACULTIES ON THE FINDING THAT SAID HAS N OT BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR EARNING INCOME FROM OTHE R SOURCES. IT IS RESPECTFULLY CLARIFIED THAT ASSESSEE HAS OFFE RED NET INCOME OF RS. 36,156, AS UNDER:- INCOME FROM OTHER SOURCES SR. NO. PARTICULARS AMOUNT AMOUNT (I) INTEREST FROM SHAH CORPORATION 55,500 (II) BANK F.D.R. INTEREST 48,355 (III) S.B. A/C INTEREST 220 1,04,075 LESS: INTEREST PAID TO BANK ON OVERDRAFT FACILITIES 67,919 NET INCOME 36,156 IT IS QUESTION OF TEMPORARY MISMATCH. OWN CAPITAL DEPLOYED IN INCOME EARNING ASSET AND ON PURELY TEMPORARY BASIS. ASSESSEE HAS UTILIZED FACILITIES FOR GIVING TEMPORARY ADVANCES T O KNOWN RELATIVES AND CONCERNS, IT IS NOT OBLIGATORY TO CHARGE INTERE ST FOR EACH AND EVERY ADVANCES, ULTIMATELY MADE OUT OF OWN FUND. F OR FEW ADVANCES TO CLOSE RELATIVE FOR SMALL PERIOD INTEREST WAS NOT CHARGED WHEREAS INTEREST WAS CHARGED FOR ADVANCES TO SHAH CORPORATI ON. HOWEVER OVERALL INTEREST RECEIPT IS MORE BY RS. 36,156/- AN D INTEREST PAID ON OVERDRAFT FACILITY WHICH IS NOT UTILIZED TOWARDS CA PITAL EXPENDITURE OR PERSONAL EXPENDITURE DISALLOWANCE MADE THAT OF OVER DRAFT INTEREST OF RS. 67,919/- DESERVES TO BE DELETED. 9. THE ACTION OF THE ASSESSING OFFICER WAS CONFIRME D BY LD. CIT(A) BY OBSERVING AS UNDER:- THE MATTER HAS BEEN CONSIDERED AND I AM AFRAID I D O NOT AGREE WITH THE AUTHORIZED REPRESENTATIVE. IT HAS BEEN ACCEPTE D THAT THE MONIES IN QUESTION HAVE BEEN ADVANCED TO FRIENDS AND RELAT IVES FOR WHICH NO ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 7 INTEREST IS CHARGEABLE. THEREFORE, IT IS INAPPROPR IATE TO SET OFF THIS INTEREST AGAINST INTEREST FROM BANK FDR OR INTEREST FROM SHAH CORPORATION. IF THE VERSION OF THE AUTHORIZED REPR ESENTATIVE, I.E. THIS IS A TEMPORARY ARRANGEMENT, IS CORRECT, THE SAME CO ULD HAVE BEEN PROVED BY THE SHOWING THE MOVEMENT OF FUNDS, WHICH WAS NOT DONE. THEREFORE, IN MY VIEW, THE ADDITION MADE BY THE ASS ESSING OFFICER BY TREATING IT AS HAVING NOT BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME IS CORRECT A ND IS, THEREFORE, CONFIRMED. 10. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LD. CIT(A) WHILE LD. D.R. RELIED ON THE ORDER OF LOWER AUTHORITIES. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ASSESSEE HAS OFFERED NET INCOME OF RS. 36,156/- AS UNDER:- INCOME FROM OTHER SOURCES SR. NO. PARTICULARS AMOUNT AMOUNT (I) INTEREST FROM SHAH CORPORATION 55,500 (II) BANK F.D.R. INTEREST 48,355 (III) S.B. A/C INTEREST 220 1,04,075 LESS: INTEREST PAID TO BANK ON OVERDRAFT FACILITIES 67,919 NET INCOME 36,156 IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE EXP ENSES OF INTEREST PAID TO BANK ON OVERDRAFT FACILITIES OF RS. 67,919/- WAS IN CURRED TO EARN INTEREST FROM SHAH CORPORATION OR INTEREST FROM BANK THE NETTING OF INCOME UNDER THE HEAD INCOME FROM ANOTHER SOURCE CANNOT BE DONE. SINCE IN THIS CASE NO SUCH EVIDENCE HAD BEEN PLACED ON RECORD BY THE ASSESSEE AT ANY STAGE, THIS NETTING HAS RIGHTLY BEEN DENIED BY THE LOWER AUTHORITIES AN D THEREFORE, DISALLOWANCE ITA NO. 2356/AHD/2010 A.Y. 2007-08 PAGE NO MUKESH KALIDAS PATEL VS. ASST. DIRECTOR OF INCOME T AX 8 OF RS. 67,919/- MADE BY THE ASSESSING OFFICER AND S USTAINED BY THE LD. CIT(A) IS HEREBY CONFIRMED. THIS GROUND IS ALSO DI SMISSED. 12. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 22 /02/2013 A.K. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#