ITO, Nashik V. Shri Dhanraj Jodharam Sangtani, Nashik

ITA 2421/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1185 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C D UPASANI
• Keywords: Cost of acquisition; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA , JM AND SHRI R.K. PANDA , AM ITA NO. 2421 /PN/201 2 ASSESSMENT YEAR : 20 0 8 - 09 THE INCOME TAX OFFICER, WARD 2(1), NASHIK. . APPELLANT VS. SHRI DHANRAJ JODHARAM SANGTANI, HARSH PLYWOOD, SHOP NO.4, NAVRANG COMPLEX, NASHIK PUNE ROAD, DWARKA, NASHIK 422 011. PAN : ACYPS1687D . RESPONDENT / APPELLANT BY : SHRI RAJESH DAMOR / RESPONDENT BY : SHRI C. D. UPASANI / DATE OF HEARING : 1 3 .0 8 .2015 / DATE OF PRONOUNCEMENT: 26 .0 8 .2015 DATE OF HEARING : 1 3 .0 8 .2015 DATE OF PRONOUNCEMENT: 26 .0 8 .2015 / ORDER PER SUSHMA CHOWLA, J M : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - I , NASHIK DATED 27.09.2012 RELATING TO ASSESSMENT YEAR 20 0 8 - 09 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) - I, NASHIK HAS NOT APPRECIATED THE FACT THAT THE PLOT SITUATED AT S.N.551A/220/32 WAS PURCHASED BY THE ASSESSEE FROM HIS BROTHER ON 05.10.1992 I.E. IN F.Y. 1992 - 93 WHEREAS CLAIMED TO HAVE INCURRED IMPROVEMENT EXPENSES OF RS.1,80,000/ - FOR THE SAID PLOT IN THE YEAR 1991 - 92 WHICH IS QUITE IMPOSSIBLE. 2 ITA NO. 2421 /PN/201 2 2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) FAILED TO APPRECIATE THE FA CT THAT, IN THE SALE DEED AGREEMENT IT IS CLEARLY MENTIONED THAT ASSESSEE HAD OBTAINED COMMENCEMENT CERTIFICATES FROM THE DHULE NAGAR PALIKA FOR CONSTRUCTION VIDE CERTIFICATE NO.2671 DATED 10.01.1996. IN THESE CIRCUMSTANCES, THERE IS NO FORCE IN THE ASSES SEES SUBMISSION THAT HE HAD INCURRED EXPENSES ON CONSTRUCTION OF RS.4,75,000/ - AND RS.85,000/ - IN THE YEAR 1994 - 95 AND 1995 - 96 RESPECTIVELY. THE CIT(A) IGNORED THIS FACT WHILE DELETING THE ADDITION. 3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE CIT(APPEALS) IGNORED THE VERY FACT WHICH IS CLEAR FROM THE RECORD THAT THE ASSESSEE HAD OBTAINED PERMISSION FOR ADDITIONAL CONSTRUCTION OF 186.84 SQ.MTR. ON 29.10.2007 AND SOLD OUT THE PROPERTY AFTER COMPLETING THE CONSTRUCTION ON 24.12.2007 I.E. WITHIN TWO MONTHS, WHICH IS QUITE IMPOSSIBLE. 4] THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, AND TO ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 5] ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAI NST THE ORDER OF CIT(A) IN ALLOWING THE COST OF IMPROVEMENT OF RS.11,43,500/ - INCURRED ON THE PROPERTY SITUATED AT DHULE, MAHARASHTRA. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE DECLARED INCOME FROM SALE OF PROPERTY AS LONG TERM CAPITAL GAIN. THE ASSE SSEE HAD PURCHASED A PLOT AT DHULE ON 17.10.1992 FOR A CONSIDERATION OF RS.85,000/ - . THE ASSESSEE THEREAFTER CLAIMED TO HAVE INCURRED EXPENSES OF RS.19,58,500/ - IN AGGREGATE OVER THE YEARS TOWARDS IMPROVEMENT/CONSTRUCTION ON THE SAME PLOT. THE YEAR - WISE DETAILS OF EXPENSES INCURRED TOWARDS IMPROVEMENT WERE CLAIMED AS UNDER : - COST OF IMPROVEMENT CLAIMED BY THE ASSESSEE FINANCIAL YEAR RS.1,80,000/ - 1991 - 92 RS.4,75,000/ - 1994 - 95 RS. 85,000/ - 1995 - 96 RS.1,00,000/ - 1996 - 97 RS.3,03,500/ - 1999 - 00 RS. 8,15,000/ - 2004 - 05 TOTAL RS.19,58,500/ - 5. THE ASSESSING OFFICER ALLOWED THE COST OF IMPROVEMENT OF RS.8,15,000/ - RE LATING TO FINANCIAL YEAR 2004 - 05 AND DISALLOWED THE COST OF IMPROVEMENT RELATING TO EARLIER YEARS AGGREGATING TO RS.11,43,500/ - , ON THE GROUND THAT SUPPORTING EVIDENCE 3 ITA NO. 2421 /PN/201 2 TOWARDS COST OF IMPROVEMENT WA S NOT FILED. THE ASSESSING OFFICER ADOPTED THE AGGREGATE OF COST OF PROPERTY AT RS.85,000/ - AND COST OF IMPROVEMENT AT RS.8,15,000/ - AND AFTER APPLYING INDEXATION , THE INDEXED COST OF ACQUISITI ON WAS WORKED BY THE ASSESSING OFFICER AT RS.10,20,552/ - . THE NET TAXABLE LONG TERM CAPITAL GAIN WAS ACCORDINGLY WORKED AT RS.9,90,448/ - . 6. IN APPEAL, THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT SUPPORTING DOCUMENTARY EVIDENCES WITH REGARD TO THE COST OF IMPROVEMENT OF THE PROPERTY I.E. COPY OF THE IT RETURNS, CAPITAL ACCOUNT AND BALANCE SHEET SHOWING THE COST OF IMPROVEMENT WERE PLACED BEFORE HIM. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD CONSIDERED AND ACCEPTED THE COST OF IMPR OVEMENT OF RS.8,15,000/ - RELATABLE TO FINANCIAL YEAR 2004 - 05 ONLY ON THE BASIS OF IT RETURNS AND BALANCE SHEET. THEREFORE, THERE WAS NO JUSTIFICATION TO DISALLOW THE CLAIMS OF IMPROVEMENT IN RELATION TO OTHER FINANCIAL YEARS ON THE GROUND THAT NO EVIDENCE WA S PLACED ON RECORD. THEREFORE, BY APPLYING THE SAME YARDSTICK ON THE EVIDENCES THAT WERE ACCEPTABLE TO THE ASSESSING OFFICER IN RESPECT OF THE COST OF IMPROVEMENT FOR THE FINANCIAL YEAR 2004 - 05 (ASSESSMENT YEAR 2005 - 06), WHEREBY HE HA D ALLOWED SUCH IM P ROVEMENT COST OF RS.8,15,000/ - , CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE BALANCE COST OF IMPROVEMENT OF RS.11,43,500/ - AND RE - WORK THE INCOME FROM CAPITAL GAINS. 7 . AGGRIEVED BY THE IMPUGNED ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE U S. 8 . THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO TABULATED STATEMENT IN PARA 3 OF THE ASSESSMENT ORDER AND POINTED OUT THAT THE ASSESSEE CLAIMS TO HAVE INCURRED 1,80,000/ - TOWARDS IMPROVEMENT IN FINANCIAL YEAR 1991 - 92, WHEREAS THE ASS ESSEE HA D PURCHASED THE PLOT ITSELF FROM HIS BROTHER ON 05.10.1992 I.E. IN THE SUBSE QUENT FINANCIAL YEAR 1992 - 93. THEREFORE, HE COULD NOT HAVE INCURRED THE IMPUGNED COST OF IMPROVEMENT OF RS.1,80,000/ - . HE FURTHER CONTENDED 4 ITA NO. 2421 /PN/201 2 THAT IN THE SALE AGREEMENT ITS ELF , IT IS CLEARLY MENTIONED THAT ASSESSEE HA D OBTAINED COMMENCEMENT CERTIFICATE FOR CONSTRUCTION OF THE PROPERTY FROM DHULE NAGAR PALIKA VIDE CERTIFICATE NO.2671 DATED 10.01.1996. IN THE CIRCUMSTANCES, T HE ASSESSEE COULD NOT HAVE CARRIED OUT THE ALLEGE D CONSTRUCTION AND INCURRED THE COST OF RS.4,75,000/ - AND RS.85,000/ - IN THE FINANCIAL YEARS 1994 - 95 AND 1995 - 96 RESPECTIVELY. THE CIT(A) IGNORED THIS FACT WHILE DELETING THE ADDITION. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER POINT ED OUT THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE INCURRING OF TH E COST OF IMPROVEMENT BY DOCUMENTARY EVIDENCES . THE ONUS PLACED ON THE ASSESSEE WA S NOT DISCHARGED BY HIM. ADDITIONALLY, HE OBSERVED THAT AS PER THE ASSESSEE , THE COST OF THE PROPERTY TO GETHER WITH THE ALLEGED COST OF IMPROVEMENT AS CLAIMED BY HIM STAND S AT RS.20,55,081/ - WHEREAS IT HAS BEEN SOLD FOR TOTAL CONSIDERATION OF RS.20,11,000/ - RESULTING IN A LOSS OF RS.44,081/ - AFTER A GAP OF NEARLY 17 YEARS. 9 . THE LD. AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE, ON THE OTHER HAND, REFERRED TO THE COP IES OF THE RETURN S OF INCOME, COP IES OF BALANCE SHEET OF THE RELEVANT ASSESSMENT YEARS , DECLARING COST OF IMPROVEMENT. HE EMPHASIZED THAT WHEN THE COST OF IMPROVEMENT OF RS.8,15,000/ - RE LATING TO FINANCIAL YEAR 2004 - 05 HA D BEEN ACCEPTED ON THE BASIS OF THESE DOCUMENTS, THERE WA S NO REASON TO DEPART FROM THE SAME IN THE OTHER FINANCIAL YEARS AND REJECT THE IMPROVEMENT COST INCURRED BY HIM. HE, HOWEVER, ADMITTED THAT DUE TO PROLONG GAP BETWEEN THE C OST OF IMPROVEMENT AND THE YEAR OF SALE, HE HA D NOT PRESERVED THE BILLS, BANK STATEMENT AND OTHER DOCUMENTARY EVIDENCES TO SUPPORT THE BONA - FIDES OF HIS CLAIM. HE, HOWEVER, RELIED UPON R ULE 6 F (5) OF THE INCOME TAX RULES, 1962 TO SAY THAT THE ASSESSEE IS M ANDATORILY REQUIRED TO MAINTAIN ALL THE RELEVANT RECORDS, BOOKS OF ACCOUNT, ETC. TO BE PRESERVED FOR A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY. IN THE INSTANT CASE, THE ASSESSMENT RELATES TO ASSESSMENT YEAR 2008 - 09 AND THUS T HE PAST RECORDS TILL ASSESSMENT YEAR 2002 - 03 WERE ONLY REQUIRED TO BE PRESERVED BY THE ASSESSEE. 5 ITA NO. 2421 /PN/201 2 1 0 . WE HAVE HEARD THE R IVAL SUBMISSIONS AND PERUSED THE RECORDS . THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SOLD ITS PROPERTY AT DHULE FOR TOTAL C ONSIDERATION OF RS. 20,11,000/ - . THE ASSESSEE HAD PURCHASED N.A. PLOT NO.32, ADMEASURING 304 SQ. MTRS. FROM HIS BROTHER SHRI SHANKARLAL JODHARAM SANGTANI ON 17.10.1992 FOR TOTAL CONSIDERATION OF RS.85,000/ - . THE STAMP DUTY ON THE SAID TRANSACTION OF RS.9, 900/ - WAS PAID BY THE BROTHER OF ASSESSEE AND NOT BY THE ASSESSEE, AS VERIFIED BY THE ASSESSING OFFICER. HENCE, THE COST OF ACQUISITION OF THE PLOT WAS ADOPTED BY THE ASSESSING OFFICER AT RS.85,000/ - AND NOT RS.96,581/ - AS CLAIMED BY THE ASSESSEE. IN ADD ITION, THE ASSESSEE HAD CLAIMED YEAR - WISE COST OF IMPROVEMENT, TOTALING RS.19,58,500/ - , AS PER BIFURCATION PROVIDED UNDER PARA 4 ABOVE. THE ASSESSING OFFICER HA D REJECTED THE CLAIM OF COST OF IMPROVEMENT/CONSTRUCTION OF PLOT PURCHASED BY THE ASSESSEE IN OCTOBER, 1992 EXCEPT A SUM OF RS.8,15,000/ - CLAIMED TO HAVE BEEN INCURRED IN FINANCIAL YEAR 2004 - 05 , ON THE GROUND THAT NO DOCUMENTARY EVIDENCES WERE PLACED ON RECORD TO SUPPORT THE EXPENDITURE INCURRED. THE FIRST OBJECTION OF THE ASSESSING OFFICER WAS SUPPORT THE EXPENDITURE INCURRED. THE FIRST OBJECTION OF THE ASSESSING OFFICER WAS TO THE COST OF IMPROVEMENT OF RS. 1,80,000/ - IN FINANCIAL YEAR 1991 - 92. THE ASSESSEE HAD PURCHASED THE PLOT OF LAND FROM HIS BROTHER ON 17.10.1992 I.E. IN FINANCIAL YEAR 1992 - 93, HENCE, THERE IS NO MERIT IN THE AFORESAID COST OF IMPROVEMENT DECLARED BY THE A SSESSEE IN FINANCIAL YEAR 1991 - 92 I.E. IN THE YEAR PRIOR TO THE YEAR OF PURCHASE. THE ASSESSEE FURTHER CLAIMED TO HAVE MADE ADDITIONS BY WAY OF COST OF IMPROVEMENT OF RS. 4,75,000/ - IN FINANCIAL YEAR 1994 - 95 AND RS.85,000/ - IN FINANCIAL YEAR 1995 - 96. THE ASSESSEE HAD RECEIVED THE COMMENCEMENT CERTIFICATE FOR CONSTRUCTION OF THE AFORESAID PROPERTY FROM DHULE NAGAR PALIKA VIDE CERTIFICATE NO. 267 1 , DATED 10.01.1996 I.E. IN FINANCIAL YEAR 1995 - 96 . IN THE ABSENCE OF ANY PERMISSION FROM THE STATUTORY AUTHORITIE S, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE THAT IT HAD INCURRED THE EXPENDITURE OF RS.4,75,000/ - IN FINANCIAL YEAR 1994 - 95 AND RS.85,000/ - IN FINANCIAL YEAR 1995 - 96. THE NEXT CLAIM OF THE EXPENDITURE IS IN FINANCIAL YEAR 1996 - 97 OF RS.1 LAKH AND IN 6 ITA NO. 2421 /PN/201 2 FINANCIAL YEAR 1999 - 2000 OF RS.3,03,500/ - . THOUGH THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE IN RESPECT OF THE SAID EXPENDITURE INCURRED BY THE ASSESSEE, HOWEVER, IN VIEW OF THE PERMISSION HAVING BEEN RECEIVED BY THE ASSESSEE FOR THE CONSTRUCTION OF SAID PROPERTY, WE FIND MERIT IN THE AFORESAID CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF COST OF IMPROVEMENT IN FINANCIAL YEAR 1996 - 97 AND 1999 - 2000 . ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE - WORK THE INCOME FROM LONG TERM CAPITAL GAINS AFTER ALLOW ING THE DEDUCTION ON ACCOUNT OF INDEXED COST OF IMPROVEMENT OF RS.1 LAKH IN FINANCIAL YEAR 1996 - 97 AND RS.3,03,500/ - IN FINANCIAL YEAR 1999 - 2000. THE COST OF IMPROVEMENT DECLARED BY THE ASSESSEE IN FINANCIAL YEAR 2004 - 05 AT RS.8,15,000/ - HAS ALREADY BEEN ACCEPTED BY THE ASSESSING OFFICER AND THE SAME WOULD BE CONSIDERED WHILE WORKING OUT THE INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 11. THE ASSESSEE BEFORE US HAS TIME AND AGAIN RAISED THE PLEA THAT IT HAD DECLARED SAID COST OF IMPROVEMENT IN THE RESPECTIVE ASSESSMENT YEARS IN ITS HANDS BY WAY OF INVESTMENT DECLARED IN ITS BALANCE SHEET FILED FOR THE RESPECTIVE ASSESSMENT YEARS. THE ASSESSEE IN ASSESSMENT YEAR 1995 - 96 CLAIMS TO HAVE EXPENDED RS. 4,75,000/ - ON COST OF IMPR OVEMENT. HOWEVER, THE INCOME TAX RETURN FILED FOR THE YEAR REFLECTS THE ASSESSEE TO HAVE DECLARED ONLY AN INCOME OF RS. 2,84,310/ - . SIMILARLY, IN ASSESSMENT YEAR 1996 - 97 , THE INCOME DECLARED TO THE TUNE OF RS.3,27,180/ - , IN WHICH YEAR THE ASSESSEE CLAIMS TO HAVE INCURRED EXPENDITURE OF RS. 85,000/ - . HOWEVER, IN THE LATER ASSESSMENT YEARS, THE ASSESSEE HAS CONSISTENTLY DECLARED INCOME VARYING BETWEEN RS. 3,50,000/ - TO RS. 4,50,000/ - AND AS HELD BY US IN THE PARA HEREINABOVE, THE ASSESSEE IS ENTITLED TO THE CL AIM OF COST OF IMPROVEMENT OF RS.1 LAKH IN ASSESSMENT YEAR 1997 - 98 AND RS.3,03,500/ - IN ASSESSMENT YEAR 2000 - 01 . THE ASSESSING OFFICER HAS ALREADY ALLOWED THE CLAIM OF ASSESSEE IN ASSESSMENT YEAR 2005 - 06 . ANOTHER ASPECT TO BE NOTED IS THAT THOUGH THE ASS ESSEE CLAIMS TO HAVE SPENT SUBSTANTIAL AMOUNT O N COST OF IMPROVEMENT OF THE SAID PLOT, BUT THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN 7 ITA NO. 2421 /PN/201 2 SUPPORT OF ITS CLAIM. IN THE ABSENCE OF ANY EVIDENCE FILED TO ESTABLISH ITS CLAIM, WE FIND NO MERIT I N THE CLAIM OF THE ASSESSEE VIS - - VIS COST OF IMPROVEMENTS CLAIMED TO HAVE BE EN INCURRED IN FINANCIAL YEARS 1991 - 92, 1994 - 95 AND 1995 - 96. IN THE ABSENCE OF ANY EVIDENCE FILED CORROBORATING THE CONSTRUCTION CARRIED OUT ON THE PREMISES, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE THAT THE COST OF IMPROVEMENT AS DECLARED IN THE BALANCE SHEET SHOULD BE ACCEPTED. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD. HOWEVER, IN VIEW OF THE EVIDENCE OF PERM ISSION RECEIVED FROM THE STATUTORY AUTHORITIES FOR CONSTRUCTION , WE ALLOW THE CLAIM WITH REGARD TO THE COST OF IMPROVEMENT IN FINANCIAL YEARS 1996 - 97 AND 1999 - 2000. THE ASSESSING OFFICER IS DIRECTED TO RE - COMPUTE THE INCOME FROM CAPITAL GAINS IN LINE WITH OUR DIRECTIONS. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 1 2 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF AUGUST , 2015. ORDER PRONOUNCED ON THIS 26 TH DAY OF AUGUST , 2015. SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER PUNE ; DATED : 26 TH AUGUST , 2015. / GCVSR / COPY OF THE O RDER IS FORWARDED TO : 1 ) THE ASSESSEE; 2 ) THE DEPARTMENT; 3 ) THE CIT(A) - I , NASHIK ; 4 ) THE CIT - I , NASHIK ; 5 ) THE DR A BENCH, I.T.A.T., PUNE; 6 ) GUARD FILE. / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE