Shri. Verghese Stephen, Bengaluru V. The Assistant Commissioner Of Income Tax, Circle- 1(2)(2), Bangalore

ITA 2492/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3751 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 04-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NITISH RANJAN; WAY OF FURNISHING OF ADDITIONAL
• Keywords: Additional evidence; Cost of acquisition; Reasonable cause; Valuation report; Set aside; Capital Gains
• Section: 54

Judgement Text

ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER ITA NOS.2492/BANG/2019 ASSESSMENT YEAR: 2015-16 VERGHESE STEPHEN NO.C-003, ADARSH PALM RETREAT TOWER 4 BOUGENVILLA, DEVARABISENAHALLI VARTHUR POST, OUTER RING ROAD BENGALURU EAST, BENGALURU-560103 PAN NO :ACUPS1635D VS. ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1(2)(2) BENGALURU APPELLANT RESPONDENT A PPELLANT BY : SHRI NITISH RANJAN, A.R. RESPONDENT BY : MS. NEERA MALHOTRA, D.R. DATE OF HEARING : 02.07.2020 DATE OF PRONOUNCEMENT : 10.07.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 18-10-2019 PASSED BY LD CIT(A)-1, BENGALURU A ND IT RELATES TO THE ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION RE NDERED BY LD CIT(A) IN RESPECT OF COST OF CONSTRUCTION CLAIMED B Y THE ASSESSEE WHILE COMPUTING LONG TERM CAPITAL GAINS ARISING ON SALE OF A HOUSE PROPERTY. THE ASSESSEE HAS ALSO RAISED GROUNDS SEE KING FURTHER ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 2 OF 9 DEDUCTION U/S 54 OF THE ACT IN RESPECT OF ADDITIONA L EXPENSES INCURRED BY THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUES ARE DISCUSS ED IN BRIEF. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD A RESIDENTIAL HOUSE PROPERTY LOCATED AT NO.9, BLOCK NO.C, SECTOR NO.XIV, NOIDA, GHAZIABAD, U.P (NEAR DELHI) FOR A SUM OF RS.10.00 C RORES. THE RESIDENTIAL PROPERTY WAS CONSTRUCTED ON A PLOT ALLO TTED TO THE ASSESSEES FATHER IN THE YEAR 1981 BY NOIDA AUTHORI TY. AFTER THE DEMISE OF ASSESSEES FATHER, THE PROPERTY WAS TRANS FERRED TO THE ASSESSEES MOTHER, WHO WROTE WILL IN FAVOUR OF THE ASSESSEE. AFTER HER DEMISE ON 22.11.2002, THE ASSESSEE BECAME EXCLU SIVE OWNER OF THE PROPERTY. THE ASSESSEE CLAIMED COST OF PROPERTY AS ON 1.4.1984 AS RS.44.92 LAKHS AND CLAIMED DEDUCTION OF INDEXED COST OF ACQUISITION AT RS.3.76 CRORES. ACCORDINGLY THE LON G TERM CAPITAL GAINS WAS DETERMINED BY THE ASSESSEE AT RS.6.24 CRO RES. THE ASSESSEE CLAIMED DEDUCTION U/S 54 OF THE ACT TO THE TUNE OF RS.5.77 CRORES IN RESPECT OF NEW RESIDENTIAL PROPERTY PURCH ASED BY HIM. ACCORDINGLY, THE TAXABLE AMOUNT OF LONGTERM CAPITAL GAINS WAS WORKED OUT AT RS.47.40 LAKHS IN THE RETURN OF INCOM E. 4. THE AO, DURING THE COURSE OF SCRUTINY PROCEED INGS, NOTICED THAT THE ASSESSEE HAS PAID THE AMOUNT OF RS.5.77 CRORES TOWARDS PURCHASE OF NEW HOUSE PROPERTY ON THE STRENGTH OF AGREEMENT TO SELL AND FURTHER NO SALE DEED WAS REGISTERED TILL THE DATE OF PASSING OF ASSESSMENT ORDER, MEANING THEREBY, THE ASSESSEE HAS NOT ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 3 OF 9 OBTAINED POSSESSION OF THE NEW HOUSE PROPERTY. THE AO TOOK THE VIEW THAT OBTAINING THE POSSESSION OF HOUSE PROPERT Y IS IMPORTANT FOR CLAIMING DEDUCTION U/S 54 OF THE ACT. SINCE TH E ASSESSEE DID NOT OBTAIN POSSESSION, HE DISALLOWED THE CLAIM FOR DEDUCTION U/S 54 OF THE ACT. 5. WITH REGARD TO THE CLAIM FOR DEDUCTION OF IN DEXED COST OF ACQUISITION, THE ASSESSEE PRODUCED BEFORE THE AO CE RTAIN DOCUMENTS RELATING TO PERMISSION OBTAINED FOR CONST RUCTION AND DID NOT PRODUCE ANY DOCUMENT TO SHOW THAT THE BUILDING WAS ACTUALLY CONSTRUCTED IN 1984. ACCORDINGLY, THE AO TOOK THE VIEW THAT, IN THE ABSENCE OF PROOF FOR PERIOD AND DETAILS OF CONSTRUC TION, THE WHOLE CLAIM OF INDEXATION IS TO BE DISALLOWED. ACCORDING LY HE DISALLOWED A SUM OF RS.3.63 CRORES. 6. IN THE APPEAL FILED BEFORE LD CIT(A), THE FI RST APPELLATE AUTHORITY ALLOWED THE CLAIM FOR DEDUCTION U/S 54 OF THE ACT. 7. WITH REGARD TO THE COST OF CONSTRUCTION, THE ASSESSEE SUBMITTED BEFORE LD CIT(A) THAT HE HAS SUBMITTED A VALUATION REPORT OBTAINED FROM A GOVERNMENT APPROVED VALUER NAMED SHRI B P SI NGH, WHO HAD VALUED THE COST OF CONSTRUCTION. THE COST OF C ONSTRUCTION WAS ARRIVED AT UNDER THE FOLLOWING HEADS:- 1. COST OF CONSTRUCTION OF SUPER STRUCTURE - 17, 67,180 2. COST OF FINAL FINISHING - 17,20,000 3. COST OF CONSTN OF COMPOUND WALL - 6,30,000 ------------------ 41,17,180 =========== ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 4 OF 9 IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS FURNISHED THE VALUATION REPORT BEFORE THE AO. HENCE THE LD C IT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT, THE AO SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHE D BREAK-UP DETAILS OF EXPENSES INCURRED ON COST OF FINAL FINI SHING AND COST OF CONSTRUCTION OF COMPOUND WALL. ACCORDINGLY, THE LD CIT(A) RESTRICTED THE CLAIM OF COST OF FINAL FINISHING TO 30% OF RS.17,20,000/- AND CONFIRMED THE DISALLOWANCE OF BA LANCE AMOUNT. HE ALSO CONFIRMED DISALLOWANCE OF COST OF CONSTRUCT ION OF COMPOUND WALL. 8. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 9. THE LD. A.R. SUBMITTED THAT HE IS NOT PRESSING G ROUND NO.2. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. HE SUBMITTED THAT GROUND NO.1 IS GENERAL IN NATURE. 10. THE LD. A.R. SUBMITTED THAT GROUND NOS.3 TO 7 RELATE TO DISALLOWANCE IN COST OF CONSTRUCTION CONFIRMED BY L D. CIT(A). THE LD. A.R. SUBMITTED THAT THE A.O., IN HIS REMAND REP ORT, HAS OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED BREAKU P DETAILS OF EXPENSES INCURRED ON COST OF FINAL FINISHING AND CONSTRUCTION OF THE COMPOUND WALL. HE SUBMITTED THAT THE ASSESSEE HAS SINCE OBTAINED BREAKUP DETAILS FROM THE GOVERNMENT APPROV ED VALUER (GAV) AND FURNISHING THE SAME AS ADDITIONAL EVIDENC E. THE L. A.R. SUBMITTED THAT THE ASSESSEE WAS IN THE PROCESS OF S HIFTING HIS RESIDENCE FROM DELHI TO BANGALORE WHEN THE REMAND P ROCEEDINGS ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 5 OF 9 WERE GOING ON AND HENCE, HE COULD NOT CONTACT THE G AV FOR GETTING THE DETAILS SOUGHT BY THE A.O. ACCORDINGLY, HE SUB MITTED THAT THERE WAS REASONABLE CAUSE FOR THE ASSESSEE FOR NOT SUBMI TTING THE DETAILS BEFORE A.O. ACCORDINGLY, HE PRAYED THAT THE ADDITI ONAL EVIDENCES FURNISHED BY THE ASSESSEE MAY KINDLY BE ADMITTED AN D THE ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. FOR EXAMINI NG THE SAME AFRESH. 11. ON THE CONTRARY, THE LD. D.R. OBJECTED TO THE A DMISSION OF ADDITIONAL EVIDENCE BY STATING THAT THE ASSESSEE DI D NOT FURNISH THE RELEVANT DETAILS BEFORE THE AO IN ASSESSMENT PROCEE DINGS AS WELL AS IN REMAND PROCEEDINGS. ACCORDINGLY SHE SUBMITTED TH AT THE ADDITIONAL EVIDENCE SHOULD NOT BE ACCEPTED. IN THI S REGARD, THE LD. D.R. PLACED HER RELIANCE ON THE DECISION RENDERED B Y HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAWAHAR LAL JAI N (HUF) VS. CIT (2015) 59 TAXMANN.COM 374 AND ALSO DECISION REN DERED BY CHANDIGARH BENCH OF ITAT IN THE CASE OF RISHI SAGAR VS. ITO (2013) 36 TAXMANN.COM 508. 12. WE HEARD THE PARTIES AND PERUSED THE RECORD. A DMITTEDLY, THE BREAKUP DETAILS OF EXPENSES INCURRED UNDER THE HEAD S COST OF FINAL FINISHING AND COST OF CONSTRUCTION OF COMPOUND WA LL WERE NOT FURNISHED BEFORE THE A.O. ALONG WITH VALUATION REPO RT SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDING. IT IS ALSO A FACT THAT THE ASSESSEE COULD NOT SUBMIT THE BREAKUP DETAILS E VEN DURING REMAND PROCEEDINGS. IN THIS REGARD, IT HAS BEEN SU BMITTED BY THE ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 6 OF 9 ASSESSEE THAT HE WAS IN THE PROCESS OF SHIFTING HIS RESIDENCE FROM DELHI TO BANGALORE AND HENCE HE COULD NOT CONTACT T HE GAV WHO WAS HAVING THE RELEVANT DETAILS. IT HAS BEEN SUBMI TTED THAT THE BREAKUP DETAILS HAVE SINCE BEEN OBTAINED AND ACCORD INGLY THEY ARE PLACED AS ADDITIONAL EVIDENCE. CONSIDERING THE EXP LANATIONS FURNISHED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN NOT FURNISHING THE RELEVANT DETAILS BEFORE THE A.O. DURING THE COURSE OF REMAND PROCEED INGS. WE ALSO NOTICE THAT THE A.O. DID NOT EXAMINE THE VALUATION REPORT FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. UNDER THESE SET OF FACTS, IN THE INTEREST OF NATURA L JUSTICE, WE ARE OF THE VIEW THAT THE ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE DESERVES TO BE ADMITTED. ACCORDINGLY, WE ADMIT THE ADDITIONAL EVIDENCES. WE NOTICE FROM THE BREAK-UP DETAILS THAT THERE IS VARIATION BETWEEN THE AMOUNT CLAIMED BY THE ASSESSE E TOWARDS COST OF FINAL FINISHING AND COST OF CONSTRUCTION OF COMP OUND WALL. WE NOTICE THAT THE GAV HAS VALUED THE COST OF COMPOUND WALL AT RS.2,86,500/- AS AGAINST THE CLAIM OF RS.6,30,000/- . THE COST OF FINAL FINISH HAS BEEN ESTIMATED BY GAV AT RS.17,30, 000/- AS AGAINST RS.17,20,000/- INITIALLY DECLARED BY THE AS SESSEE. HENCE THE CLAIM OF THE ASSESSEE BY WAY OF FURNISHING OF A DDITIONAL EVIDENCES REQUIRES EXAMINATION AT THE END OF THE A. O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 7 OF 9 RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMIN ING THE ISSUE AFRESH. 13. GROUND NO.8 RELATES TO CLAIM FOR DEDUCTION U/S 54 OF THE ACT IN RESPECT OF ADDITIONAL EXPENSES INCURRED ON NEW P ROPERTY. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD NOT REGISTERED THE NEW RESIDENTIAL HOUSE PROPERTY IN HIS NAME, AT THE TIME WHEN THE RETURN OF INCOME WAS FILED FOR THE YEAR UNDER CONSIDERATIO N. HENCE THE ASSESSEE CLAIMED ACTUAL AMOUNT THAT HAD BEEN SPENT AT THAT POINT OF TIME AS DEDUCTION U/S 54 OF THE ACT. HE SUBMIT TED THAT THE ASSESSEE HAS INCURRED THE EXPENSES BY WAY OF VAT, S ERVICE TAX, REGISTRATION CHARGES AND STAMP DUTY, AGGREGATING TO ABOUT RS.56 LAKHS, SUBSEQUENT TO THE FILING OF RETURN OF INCOME . HE SUBMITTED THAT THESE EXPENSES HAVE BEEN INCURRED WITHIN 3 YEA RS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. ACCORDINGLY, H E SUBMITTED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF THE ADDIT IONAL EXPENSES U/S 54 OF THE ACT. ACCORDINGLY, HE PRAYED THAT THE A. O. MAY BE DIRECTED TO ALLOW THE ADDITIONAL EXPENSES AS DEDUCTION U/S 5 4 OF THE ACT. 14. THE LD. D.R. ON THE CONTRARY, SUBMITTED THAT TH E ASSESSEE IS MAKING A NEW CLAIM BEFORE THE ITAT AND THE SAID CLA IM HAS NOT BEEN MADE EITHER BEFORE THE A.O. OR LD. CIT(A). TH E LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE CAN VERY WELL MOVE APPR OPRIATE PETITION BEFORE THE A.O. SEEKING HIS CLAIM AS PER LAW. ACCO RDINGLY SHE SUBMITTED THAT THE ITAT SHOULD NOT ADMIT THIS GROUN D OF THE ASSESSEE. ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 8 OF 9 15. HAVING HEARD THE RIVAL SUBMISSIONS, WE FIND MER IT IN THE CONTENTIONS OF LD. D.R. WE NOTICE THAT THE ASSESSE E IS MAKING CLAIM FOR ADDITIONAL DEDUCTION FOR THE FIRST TIME B EFORE TRIBUNAL. WE NOTICE THAT THIS CLAIM IS FACTUAL IN NATURE AND FUR THER RELEVANT DETAILS ARE NOT AVAILABLE ON RECORD. HENCE, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD FIRST SEEK APPROPRIATE REMEDY B EFORE THE A.O IN ACCORDANCE WITH LAW. ACCORDINGLY, WE REJECT THE GR OUND NO.8 OF THE ASSESSEE. 16. GROUND NO.9 RELATES TO COST OF LAND ADOPTED BY THE A.O. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE A.O. HAS AD OPTED THE COST OF LAND AT RS.91,743/- AS AGAINST RS.1 LAKH. SINCE THIS IS A FACTUAL MATTER REQUIRING VERIFICATION AT THE END OF THE A.O ., WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. 17. GROUND NO.10 RELATES TO INTEREST CHARGED U/S 23 4B & 234D OF THE ACT. THIS IS CONSEQUENTIAL IN NATURE. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.07.2020. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 10 TH JULY, 2020. VG/SPS ITA NO.2492/BANG/2019 MR. VARGHESE STEPHEN, BANGALORE PAGE 9 OF 9 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.