Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 6249 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 9 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2022
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
A
Assessment Year
2014-2015
Appeal Filed On
12-11-2018
Judgement Text
आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.3093/Chny/2018 (िनधाBरण वषB / Assessment Year: 2014-15) Shri Gopalakrishnan Paramasivam Gopalakrishnan C/o. Inbaraj M, F1, LV Prasad Road, Dhanalakshmi Colony, Vadapalani, Chennai – 600 026. बनाम/ V s. ITO, Non Corporate Ward-16(3), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AU BP P -9 3 0 6 - R (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri M. Inbaraj (C.A) – Ld. AR थ की ओरसे/Respondent by : Shri ARV. Sreenivasan (Addl. CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 12-07-2022 घोषणा की तारीख /Date of Pronouncement : 17-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-4, Chennai [CIT(A)] dated 23-08-2018 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 15-12-2016. The grounds of appeal taken by the assessee read as under: 1.a) The learned CIT(Appeals) has erred by not fully considering the evidence towards the cost of construction of new house property. He has not considered the Confirmation by the builder for the amount received by him from appellant for construction. ITA No.3093/Chny/2018 - 2 - b) The learned CIT(Appeals) vide para 28 of his order u/s. 250(6) has held that “Regarding the cost of construction of new residential house property, the assessee claimed to have paid a sum of Rs.74,09,924/- to the contractor Sh.J.Baskaran prop. Of Mis. A.B.Constructions. It is pertinent to mention here that the entire amount was expended in cash only, thereby erring with respect to the material part of the assessment, since out of the total amount of Rs.74,09,924/- only Rs.9,14,000/- (12%) is in cash and the balance Rs.64,95,924/- (87%) is by cheques/bank transfers issued on various dates. c) The learned CIT(Appeals) has erred in leaning heavily against the fact that the Contractor has not maintained books of accounts or filed income tax returns, in disallowing construction expenditure of the appellant though the Contractor has informed during assessment proceedings that he is not required to maintain books of accounts u/s 44AD and has not filed income tax returns due to his income being below taxable limits and has also submitted copies of his bank statements for the relevant period for perusal and scrutiny by AO and CIT(Appeals) d) The learned CIT(Appeals) has erred by not considering the submissions of the appellant in the interpretation of section 54F viz that only the sale consideration on sale of capital assets which result in gains need to be invested to claim deduction u/s 54F and not that of sale consideration on sale of capital assets which result in capital loss because the formula prescribed in section 54F will become defunct when applied in case of capital loss. 2) The learned CIT(Appeals) has erred in not upholding the lack of jurisdiction of Assessing Officer (AO) in the case of limited scrutiny cases to scrutinize areas not specified in the scrutiny notice without following the requirements/procedures as specified in Board Instruction no. 5/2016 dated 14.07.2016. The AO’s action in disallowing House Rent Allowance Exemption when the limited scrutiny notice is for i) Cash Deposit and ii) Deduction claimed under the Head Capital Gains is ultra vires of section 133(3) in view of above Board Instruction. 3) The appellant craves leave to add, amend, modify, rescind or alter any ground of appeal. As evident, the assessee is primarily aggrieved by computation of capital gains and denial of full deduction u/s 54/54F. 2. The Ld. AR advanced arguments assailing the additions sustained in the impugned order which has been controverted by Ld. Sr. DR. Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment Proceedings 3. The facts qua the issue are that the assessee sold certain land admeasuring 17640 square feets at Thiruvallur and 1430 square feets of land with building in Kolathur. The assessee computed capital gains ITA No.3093/Chny/2018 - 3 - for Rs.122.06 Lacs against which it claimed deduction u/s 54F/54 for the same amount and arrived at ‘nil’ gains. The same was on account of investment in purchase of land at Madipakkam and construction of house thereon. The investment so made aggregated to Rs.127.48 Lacs. However, in the absence of any sufficient documentary evidence forthcoming from the assessee, Ld. AO brought to tax entire sale consideration of Rs.184.02 Lacs Appellate proceedings 4. During appellate proceedings, the submissions made by the assessee were subjected to remand proceedings. The assessee revised the investment in new properties to Rs.186.96 Lacs. After considering the submissions as well as remand report, Ld. CIT(A) held that brokerage charges of Rs.1.26 Lacs were not to be considered as cost of Land since the assessee could not file the name and address of the person to whom the brokerage was paid. The assessee paid construction cost in cash for Rs.74.09 Lacs to contractor Shri J. Bhaskaran prop. of M/s AB Constructions. The enquiries made from the contractor revealed that he had no documentary evidence to establish that he carried out construction of the house. He was not filing return of income and not maintaining books of accounts since his income was claimed to be below taxable limit. Therefore, the construction cost was restricted to Rs.49.95 Lacs. In other words, the deduction was restricted to Rs.117.99 Lacs and taxable capital gains were worked out as Rs.43.79 Lacs. 5. The revised computation of capital gains as submitted by assessee before Ld. AO during remand proceedings was as under: - ITA No.3093/Chny/2018 - 4 - INCOME FROM CAPITAL GAINS PROPERTY 1 PROPERTY 2 PARTICULARS THIRUVALLUR KOLATHUR Sale Consideration 14,112,000 4,290,000 (coies of sale deeds have already been submitted during Appellate/Remand Proceedings and upheld) (Date:02.09.2013) (Date:05.09.2013) Net Consideration 14,112,000 4,290,000 Sale Consideration u/s 50C (It is Confirmed as stamp duty @ 7% is calculated on this value by the Registering Authority) 14,112,000 4,290,000 Indexed Cost Of Acquisition 1,456,322 4,739,573 (copies purchases deeds have already been submitted during I Appellate/Remand Proceedings and upheld) (718080*939/463) (3190000*939/632) Long Term Capital Gain (Confirmed during Appellate /Remand Proceedings 12,655,678 (-) 449,573 Exemption u/s 54F (Applicable only for Property 1) Purchase of Land at Madipakkam copies purchases deeds have already been submitted during I Appellate/Remand Proceedings and upheld) 6,300,000 (A) Ignored for further calculation as it is capital loss Stamp Duty-11-09-2013 (Evidenced in copy of purchase deed already submitted during I appellate/Remand Proceedings and upheld) 441,000 (B) Registration fee (Evidenced in copy of purchase deed already submitted during I Appellate/Remand Proceedings and upheld) 63,120 (C) Brokerage @ 2% of Purchase value 126,000 (D) House Construction Cost 1,17,66,132 (E)* Total Investment u/s 54F (A)+(B)+(C)+(D+(E))=(F) (Page Nos. 89-95) 1,86,96,252 (F) Deduction u/s 54F (Restricted to) 14,112,000 income Chargeable Under Capital Gains NIL *House Construction Cost: Construction Cost through Contractor Rs. 74,09,924 Construction Cost Directly incurred by Appellant Rs. 40,85,506 Pre-Construction Housing Loan Interest Rs. 2,20,702 Total Rs. 1,17,16,132* ITA No.3093/Chny/2018 - 5 - 6. During remand proceedings, notice u/s 133(6) was issued to the contractor Shri J. Bhaskaran prop. of M/s AB Constructions who filed reply dated 21.12.2017 along with copy of construction agreement, full details of extra work done and copies of bank statements. However, it was submitted by him that income was below taxable limit and therefore, no books were maintained and no tax returns were filed. Considering the same, it was noted by Ld. AO that the construction agreement stipulated payment of Rs.49.95 Lacs @ Rs.1350/- per square feets. An additional amount of Rs.24.14 Lacs was stated to be paid by the assessee to him for additional work done. Rejecting the additional cost paid by the assessee, Ld. AO restricted the claim to the extent of Rs.49.95 Lacs. The direct construction cost of Rs.40.85 Lacs as stated to be paid by the assessee was held to be not admissible for want of documentary evidence. Similarly, the pre-construction housing loan of Rs.2.70 Lacs was held to be not admissible. Finally, the capital gains were computed by Ld. AO as under: - Working of Deduction u/s. 54F: Total Net sale consideration on sale of Lands at Thiurvallur = Rs. 1,41,12,000/- Less: The indexation cost of acquisition of Lands at Thiurvallur = Rs. 14,56,322/- The LTCG on sale of Lands at Thiurvallur = Rs. 1,26,55,678/- Total net sale consideration of property (vacant land) at Kolathur = Rs. 42,90,000/- Less: The index cost of acquisition = Rs. 47,39,573/- The Long-term Capital Loss = Rs. 4,49,573/- The LTCG on sale of Lands at Thiurvallur = Rs. 1,26,55,678/- Less: The Long-term Capital Loss on sale of property at Kolathur = Rs. 4,49,573/- Total LTCG for the A.Y. 2014-15 = Rs. 1,22,06,105/- ITA No.3093/Chny/2018 - 6 - Net Sale consideration on sale of Lands at Thiurvallur = Rs. 1,41,12,000/- (a) Net sale consideration on sale of Land at Kolathur = Rs. 42,90,000/- (b) Net sale consideration received on sale of Lands(a+b) = Rs. 1,84,02,000/- A Total LTCG for the A.Y.2014-15 = Rs. 1,22,06,105/- B Total cost of investment on New House Property = Rs. 1,17,99,180/- C Deduction u/s. 54F = LTCG X Investment in new property = B X C Total net sale sale consideration on sale of Land A B X C = 12206105 x 11799180 = Rs.78,26,434 A 18402000 From the above Taxable LTCG for the A.Y. 2014-15 is worked as under: Total LTCG for the A.Y 2014-15 : Rs. 1,22,06,105/- Less: Deduction u/s. 54F : Rs. 78,26,434/- Net Taxable LTCG for the A.Y. 2014-15 : Rs. 43,79,671/- Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 7. Upon careful consideration, we find that the assessee has paid construction cost of Rs.74.09 Lacs to Shri J. Bhaskaran prop. of M/s AB Constructions under a construction agreement. The perusal of ledger account of the said party as placed on record would reveal that majority of these payments are through banking channels which are evidenced by assessee’s bank statements. Shri J. Bhaskaran responded to the notice issue by Ld. AO u/s 133(6) and file the requisite details. The Ld. AO found that the said party was not maintaining books of accounts and no tax return was filed since the income was stated to be below taxable limit. However, the aforesaid fact, in our opinion, could not jeopardize assessee’s claim since the assessee had paid the amount through banking channels under a ITA No.3093/Chny/2018 - 7 - construction agreement, a fact which stood confirmed by the contractor. In such a case, restricting the construction cost to the extent of Rs.49.95 Lacs could not be held to be justified. Accordingly, we direct Ld. AO to allow full construction cost of Rs.74.09 Lacs as paid to the contractor. 8. So far as cost of Rs.40.88 Lacs stated to be incurred by the assessee is concerned, upon perusal of ledger as placed on record, it could be seen that the assessee has paid the construction cost of Rs.5.18 Lacs through banking channel whereas the remaining amount of Rs.35.67 Lacs has been paid in small trenches for various construction work which is evident from the narrations appended with each of the entry. In such a case, the denial of deduction of the same is not justified. The Ld. AO is directed to allow this cost. 9. Upon perusal of tabulation as given in para-5, it could be seen that the assessee has not claimed any deduction on sale of property which is situated at Kolathur and in fact, the computations have resulted into capital loss for assessee on sale of this property. Therefore, the sale consideration of this property was not to be considered while computing proportionate deduction u/s 54 / 54F. We order so. The Ld. AO is directed to re-compute assessee’s income. No other grounds have been urged before us. 10. The appeal stands partly allowed in terms of our above order. Order pronounced on 17 th August, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 17-08-2022 JPV JPVJPV JPV ITA No.3093/Chny/2018 - 8 - आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF
