ITO, New Delhi V. Sh Umesh Chandra Rustagi, New Delhi

ITA 3179/DEL/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1820 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 01-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ K CHOPRA
• Keywords: Business income; Source of fund; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI L.P. SAHU ITA NO. 3179/DEL/2010 ASSESSMENT YEAR: 2009-10 ITO, VS. UMESH CHANDRA RUSTAGI, WARD 47(2), F-57, PREET VIHAR, NEW DELHI. NEW DELHI. (PAN: AAGPR4178N) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI VED JAIN , CA DEPARTMENT BY: SHRI MANOJ K. CH OPRA, SR. DR DATE OF HEARING : 01 .10.2015 DATE OF PRONOUNCEMENT: 21 :12.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN I) DELETING THE ADDITION OF RS.2,67,01,204 MADE BY THE A.O. ON ACCOUNT OF INCOME FROM LONG TERM CAPITAL GAIN, ACCE PTING THE ASSESSEES VERSION AND WITHOUT APPRECIATING THE REA SONS FOR THE ADDITION MENTIONED BY THE A.O. IN THE ASSESSMENT OR DER; II) HOLDING THAT THE CLAIM OF THE ASSESSEE THAT HE RECE IVED ONLY 15% SHARE OF THE SAID CAPITAL GAIN IS BACKED BY DOC UMENTARY EVIDENCE WITHOUT MENTIONING THE SAID EVIDENCE AND M ORE SO THE 2 REGISTERED SALE DEED OF THE PROPERTY UNDER CONSIDER ATION AND DDAS DOCUMENT (CONVEYANCE DEED DATED 30.10.2006) VEHEMENTLY SUPPORTS THE FACT THAT THE ASSESSEES SH ARE IN THE SAID CAPITAL GAIN IS 50% AND NOT 15% AND THE BASIS OF ASSESSEES CLAIM, THE DEED OF SETTLEMENT DATED 09.02.2007 IS A SELF SERVING DOCUMENT ONLY; III) DIRECTING THE A.O. TO ALLOW THE COST OF IMPROVEMENT /ADDITIONS FOR WORKING OUT THE VALUE OF CAPITAL GAIN IGNORING THE FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY SUPPORTING DOCUM ENTARY EVIDENCE IN THIS REGARD. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE RELEVANT FACTS ASSESSEE THAT ORIGINALLY THE PROPERTY WAS PURCHASED AND CONSTRUCTED BY LATE SHRI NIHAL CHAND RUSTAGI (F ATHER OF ASSESSEE) AND LATE SMT. MEVA DEVI RUSTAGI (MOTHER OF ASSESSEE) HA VING 3/5 TH AND 2/5 TH SHARES IN THE PROPERTY RESPECTIVELY. THE LAND INVOL VED IN THE PROPERTY WAS PURCHASED JOINTLY BY LATE SHRI NIHAL CHAND RUSGATI AND LATE SMT. MEVA DEVI RUSTAGI JOINTLY IN THE YEAR 1965 FOR RS.10,748. THE HOUSE WAS CONSTRUCTED ON THE SAID LAND BY THEM IN THE FINANCIAL YEAR 1976 -77. THEY HAD FILED THEIR RESPECTIVE INCOME-TAX RETURNS FOR WHICH ASSESSMENTS WERE MADE UNDER SEC. 3 143(3) OF THE ACT IN BOTH THE CASES. COST OF LAND A ND BUILDING AS WELL AS SOURCE OF FUNDS WITH VALUATION REPORTS WERE FILED A ND ACCEPTED BY THE DEPARTMENT. ON THE DEMISE OF SMT. MEVA DEVI RUSTAGI , HER 2/5 TH SHARE IN THE PROPERTY WENT TO THE FATHER OF THE ASSESSEE I.E. SH RI NIHAL CHAND RUSTAGI AND SHRI SUBHASH CHAND RUSTAGI . CONSEQUENTLY, SHRI NIHAL CHAND RUSTAGI BECAME THE OWNER OF 4/5 TH SHARES OF THE PROPERTY AND BALANCE 1/5 TH SHARE WENT TO SHRI SUBHASH CHAND RUSTAGI. SHRI NIHAL CHAN D RUSTAGI AND SHRI SUBHASH CHAND RUSTAGI CONSTRUCTED FIRST AND SECOND FLOORS IN THE FINANCIAL YEARS 1992 AND 1993 AND LET OUT THE NEWLY CONSTRUCT ED PROPERTY TO RUSSIAN EMBASSY. THE RENTAL INCOME OF THE PROPERTY WAS SHA RED 4/5 TH AND 1/5 TH RESPECTIVELY BETWEEN BOTH THE CO-OWNERS TILL THE DE ATH OF SHRI NEHAL CHAND RUSTAGI ON 20.1.1995. SHRI NIHAL CHAND RUSTAGI HAD EXECUTED A WILL ON 03.03.1993 ACCORDING TO WHICH LAND AND BUILDING (4/ 5 TH ). ACCORDING TO THE WILL, THE LAND AND BUILDING (4/5 TH SHARES) AT B-3/26, VASANT VIHAR, NEW DELHI WAS ALLOCATED TO THE FOLLOWING MEMBERS OF THE FAMIL Y IN THE PROPORTION/SHARE SPECIFIED IN THE WILL: 1) SH. SUBHASH CHANDRA RUSTAGI & HIS WIFE SAROJ RUS TAGI : THE ENTIRE IST FLOOR OF THE MAIN BUILDING AND QUARTER O N THE IST FLOOR IN THE ANNEX EQUALLY. 4 2) SH. UMESH CHANDRA RUSTAGI & HIS WIFE ASHA RUSTAG I : THE ENTIRE GROUND FLOOR OF THE MAIN BUILDING AND THE GA RAGE IN THE ANNEXE EQUALITY. 3) ELDERS DAUGHTER SMT. PUSHPA RANI AND HER UNMARR IED DAUGHTER : TWO BEDROOMS AND THE REAR KITCHEN ON THE IIND FLOOR OF THE MAIN BUILDING. 4) THE REMAINING DRAWING CUM DINING ROOM AND THE FR ONT KITCHEN ON THE IIND FLOOR OF THE MAIN BUILDING SHALL BE OWN ED JOINTLY BY TWO SONS SUBHASH CHANDRA RUSTAGI & UMESH CHANDRA RU STAGI EQUALLY. 4. ALL THE NAMED PARTIES IN THE WILL (FAMILY MEMBER S) DECIDED MUTUALLY TO HONOUR THE LAST WILL OF THEIR FATHER WITHOUT DIS PUTE AND ALL THE CO-OWNERS DECIDED TO SHARE THE RENTAL INCOME FROM THE PROPERT Y IN THE PROPORTION AGREED AMOUNTS TO THEM MUTUALLY AND THE SAME UNDERS TANDING CONTINUED FROM 1995-96 TO 2006-07. THE WHOLE OF THE PROPERTY AT B-3/26, VASANT VIHAR, NEW DELHI WAS LET OUT ON RENT VIDE LEASE AGR EEMENT DATED 10.3.1995. THE SAID LEASE AGREEMENT WAS MADE BETWEEN SHRI SUBH ASH CHAND RUSTAGI, MRS. SAROJ RUSTAGI. MR. UMESH CHAND RUSTAGI, MRS. A SHA RUSTAGI AND PUSPA RANI RUSTAGI AS CO-OWNERS OF THE PROPERTY REP RESENTED THROUGH DULY AUTHORIZED REPRESENTATIVES SHRI SUBHASH CHANDRA RUS TAGI AND UMESH CHAND RUSTAGI OF THE FIRST PART AND THE GOVERNMENT OF THE REPUBLIC OF UGANDA OF THE OTHER PART. BESIDES, ALL THE CO-OWNERS HAVE SH ARED AND DISTRIBUTED RENTAL 5 INCOME SINCE FINANCIAL YEAR 1995-96 TILL THE DISPOS AL OF THE PROPERTY IN F.Y. 2006-07. THE SHARE OF THE ASSESSEE IN THE RENTAL IN COME HAS DULY BEEN ACCEPTED BY THE ASSESSING OFFICER AS DECLARED IN TH E RETURN OF INCOME. THE ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES SHARE IN THE PROPERTY LESS THAN HALF PERCENTAGE AS ESTIMATED BY HIM WHILE PASSING T HE ASSESSMENT ORDER. IN SUPPORT, THE ASSESSEE SUBMITTED PHOTO COPIES OF INC OME-TAX RETURNS OF ALL THE CO-OWNERS FOR THE FINANCIAL YEAR 1995-96, 2000-01 A ND 2006-07, WHEREIN RENTAL INCOME OF THE SAID PROPERTY HAS BEEN DECLARE D AND ACCEPTED BY THE DEPARTMENT. THE ASSESSEE ACCORDINGLY CONTENDED THA T ALL THE PERSONS NAMED ABOVE IN THE WILL OF LATE SHRI NIHAL CHAND RUSTAGI HAVE BEEN ESTABLISHED CO- OWNERS OF THE PROPERTY SINCE FINANCIAL YEAR 1995-96 TILL 2006-07. THE FAMILY ACCORDINGLY MADE A DEED OF FAMILY SETTLEMENT WHEREI N SPECIFIC SHARES OF ALL THE CO-OWNERS WAS PREDETERMINED SO THAT NO DISPUTE AS REGARDS TO AMOUNT/SHARE IN THE SALE CONSIDERATION COULD CROP U P AMONG THE FAMILY MEMBERS. THE HOUSE PROPERTY SITUATED AT B-3/26, VAS ANT VIHAR, NEW DELHI WAS SOLD FOR A TOTAL CONSIDERATION OF RS. 8 CRORES ON 9.2.2007. THE SALE DEED OF THE SAID PROPERTY WAS EXECUTED ON 9.2.2007 BY SH RI SUBHASH CHANDRA RUSTAGI AND SHRI UMESH CHANDRA RUSTAGI ON BEHALF OF ALL THE CO-OWNERS OF THE PROPERTY AND THE ASSESSEE HAS RECEIVED A SUM O F RS. 4CRORES OF TOTAL SALES 6 CONSIDERATION OF RS.8 CRORES AND DISTRIBUTED THE SA ID AMOUNTS AMONGST CO- OWNERS INCLUSIVE HIMSELF AS UNDER: UMESH CHANDRA RUSTAGI (ASSESSEE) 1.2 CRORE - MRS. SAROJ RUSTAGI (W/O SUBHASH CHANDRA 1.0 CRORE RUSTAGI, CO-OWNER); - MRS. ASHA RUSTAGI (W/O ASSESSEE CO-OWNER) 1.2 CROR E - MRS. PUSHPA RUSTAGI (SISTER OF ASSESSEE, CO-OWNER) 0.6 CRORE FINALLY, THE TOTAL CONSIDERATION OF RS. 8 CRORES WA S DISTRIBUTED AMONG THE CO-OWENRS AS UNDER: SUBHASH CHANDRA RUSTAGI - 2.5 CRORE (PART OF RS. 4 CRORE) SAROJ RUSTAGI RS.2.5 CRORES ( 1.5CRORE FROM SUBHASH CHANDRA RUSTAGI & RS. 1 CRORE FROM UMESH CH ANDRA RUSTAGI). UMESH CHANDRA RUSTAGI RS.1.2 CRORE (RETAIN BY HIMS ELF) ASHA RUSTAGI - RS.1.2 CRORE (PAID BY UMESH CHANDRA RUSTAGI) PUSHPA RANI RUSTAGI - RS.0.6 CRORE (PAID BY UMESH CHANDRAS RUSTAGI). 5. ALL THE ABOVE CO-OWNERS HAVE CONSIDERED THEIR RE SPECTIVE SHARES OF SALE PROCEEDS IN THEIR PERSONAL INCOME-TAX RETURNS FOR THE ASSESSMENT YEAR 2007-08. THE INCOME-TAX RETURNS OF ONE OF THE CO-OW NERS, NAMELY, SMT. SAROJ RUSTAGI HAS BEEN ASSESSED UNDER SEC. 143(3) O F THE ACT, WHEREIN HER SHARE IN THE PROPERTY INCLUSIVE OF ABOVE RS.1 CRORE PAID BY THE ASSESSEE WAS ASSESSED AS LONG TERM CAPITAL GAIN. SIMILARLY, THE INCOME-TAX RETURNS OF SHRI 7 SUBHASH CHANDRA RUSTAGI, SMT. ASHA RUSTAGI AND SMT. PUSPA RANI RUSTAGI, THE OTHER CO-OWNERS WERE ACCEPTED BY THE DEPARTMENT UNDER SEC. 143(1)(A) OF THE ACT. CONSEQUENTLY, THE ASSESSEE COULD NOT BE AS SESSED FOR THE INCOME OF THE OTHER CO-OWNERS WHICH THEY HAVE ALREADY OFFERED FOR TAX IN THEIR PERSONAL I.T. RETURNS. THUS, IT WAS CONTENDED BY THE ASSESSE E THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING RS. 4 CROR ES FOR COMPUTATION OF CAPITAL GAIN TAX AS AGAINST RS.1.2 CRORES OFFERED B Y THE ASSESSEE IN HIS RETURN OF INCOME. THE ASSESSING OFFICER DID NOT ADMIT THE DEED OF FAMILY SETTLEMENT WHICH WAS MADE WITH A SOLE INTENTION OF MUTUAL AGREEMENT AMONGST THE CO-OWNERS OF THE PROPERTY SO THAT RIGHT AND PRIVILEGES OF THE OTHER CO-OWNERS IN SALES PROCEEDS COULD BE PROTECTE D WITHOUT ANY HINDRANCE OR DISPUTES. THE ASSESSEE CONTENDED THAT FINDING OF THE ASSESSING OFFICER WAS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. HE IGNORED THAT ALL THE CO- OWNERS HAD BEEN SHARING FRUITS OF THE PROPERTY SINC E FINANCIAL YEAR 1995-96 TILL FINANCIAL YEAR 2006-07 AND DEED OF FAMILY SETT LEMENT WAS AN EXPRESSION OF MUTUAL UNDERSTANDING ON DISTRIBUTION/ SHARE PROP ERTY EXISTS AMONG THE CO- OWNERS AFTER IMPLEMENTATION OF THE WILL. THE LEARNE D CIT(APPEALS) HAS, HOWEVER, ACCEPTED THE CLAIM OF THE ASSESSEE AFTER D ISCUSSING THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM, WHIC H HAS BEEN QUESTIONED BY THE REVENUE BEFORE THE ITAT. 8 6. IN SUPPORT OF THE GROUNDS, THE LEARNED SR. DR HA S BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE SUBMITTED THAT THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITION OF RS.2,67,01 ,204 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INCOME FROM LONG TE RM CAPITAL GAIN WITHOUT APPRECIATING THE REASONS FOR THE ADDITION MENTIONED BY THE ASSESSING OFFICER. HE SUBMITTED FURTHER THAT THE LEARNED CIT( APPEALS) HAS ALSO ERRED IN HIS FINDING THAT THE ASSESSEE HAS RECEIVED ONLY 15% SHARES OF THE SAID CAPITAL GAIN WITHOUT MENTIONING THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT AND IGNORING THE REGISTERED SALE DEED OF THE PROPER TY AND ACCEPTING THE DEED OF SETTLEMENT DATED 9.2.2007 WHICH IS A SELF-SERVIN G DOCUMENT ONLY. THE LEARNED CIT(APPEALS) HAS FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE COST OF IMPROVEMENT/ADDITION FOR WORKING OUT THE VALUE OF CAPITAL GAIN IGNORING THE FACT THAT ASSESSEE COULD NOT PROD UCE ANY SUPPORTING DOCUMENTARY EVIDENCE. 7. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER. HE REITERATED THE SUBMISSIONS MADE THEREIN A ND PLACED RELIANCE ON THE FOLLOWING DECISION: 1. CIT VS. SANTOKH SINGH (2001) 252 ITR 707 (DEL .); 9 8. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW, WE FIND THAT THE LEARNED CIT(APPEALS) HAS DECIDED THE ISSUES RAI SED IN THE ABOVE GROUNDS AFTER DISCUSSING THE MATTER IN DETAIL AND SUBMISSIO NS OF THE ASSESSEE MEETING OUT THE OBJECTION OF THE ASSESSING OFFICER. FOR A R EADY REFERENCE, THE RELEVANT PARA NO. 1 OF THE FIRST APPELLATE ORDER IS BEING REPRODUCED HEREUNDER: I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE APPELLANT, THE EVIDENCE FILED AS WELL AS THE ORDER OF THE AO. THE ONLY ISSU E IN THIS APPEAL IS THAT A PROPERTY HAD BEEN SOLD IN WHICH THE APPELLANT WAS A EO-OWNER AND THE AO HAS TAKEN THE SHARE OF THE APPELLANT IN THE CAPITAL GAIN AT 50% W HEREAS ACCORDING TO THE APPELLANT HIS SHARE WAS ONLY 15%. THE APPELLANT HAS GIVEN DETAILED ARGUMENTS SUPPORTED BY DOCUMENTARY EVIDENCE THAT ORIGINALLY T HE PROPERTY WAS OWNED BY SH.N IHAL CHAND RUSTOGI AND HIS WIFE SMT. MEWA RUST OGI IN THE RATIO OF 3/5111 AND 2/5IH AFTER THE DEATH OF SMT. MEWA RUSTOGI HER 2/51H SHARE WAS DIVIDED EQUALLY BETWEEN HER HUSBAND, IHAL CHAND RUSTOGI AND HER SON SH. SUBHASH CHAND RUSTOGI. AS A RESULT OF WHICH THE OWNERSHIP OF SH. NIHAL CHAND RUSTOGI BECAME 4/5111 (3/5IH + V2) AND THAT OF SUBHASH CHAND RUSTO GI 1/5IH. ALTHOUGH THE ORIGINAL PROPERTY CONSISTED OF A SINGL E STOREY HOUSE, LATER, IN THE YEAR 1992-93, BOTH IHAL CHAND AND SUBHASH CHAND RUSTOGI TOGETHER MADE CERTAIN IMPROVEMENTS/ADDITIONS BY CONSTRUCTING I ST FLOOR A ND 2ND FLOOR TO THIS HOUSE. THE NEW HOUSE WAS ASSESSED BY ASSESSOR AND COLLECTOR OF MCD AND AS PER VALUATION REPORT OF THE REGISTERED VALUER AS WELL AS THE ASSE SSMENT OF ASSESSOR AND COLLECTOR OF MCD, THE VALUE OF SUCH IMPROVEMENT/ADD ITION WAS RS. 10,47 ,852/- (CONSIDERED FOR INDEXED COST PURPOSE ). WHEN NIIHAL CHAND RUSTOGI (HAVING 4/5TH SHARE IN TH E PROPERTY) DIED, THE PROPERTY WAS DIVIDED AS PER HIS WILL BETWEEN THE FO LLOWING PERSONS: L. SH.SUBHASG CHANDRA RUSTAGI & HIS WIFE SAROJ RUST AGI:- THE ENTIRE IST FLOOR OF THE MAIN BUILDING AND QUARTER ON THE IST F LOOR IN THE ANNEXE EQUALLY. II. SH.UMESH CHANDRA RUSTAGI & HIS WIFE ASHA RUSTAG I:-THE ENTIRE GROUND FLOOR OF THE MAIN BUILDING AND THE GARAGE IN THE AN NEXE EQUALLY. III. ELDER'S DAUGHTER SMT.PUSHPA RANI AND HER UNMAR RIED DAUGHTER:- TWO BEDROOMS AND THE REAR KITCHEN ON THE 2ND FLOOR OF T HE MAIN BUILDING. 10 IV. THE REMAINING DRAWING CUM DINING ROOM AND THE FRONT KITCHEN ON THE IIND FLOOR OF THE MAIN BUILDING SHALL BE~NED JOINTLY BY T WO SONS SUBASH CHANDRA RUSTAGI & UMESH CHANDRA RUSTAGI EQUALLY. AII THE CO-OWNERS TOGETHER GAVE THE HOUSE ON RENT. THE HOUSE WAS LET OUT TO UGANDA EMBASSY. THE RENT RECEIVED WAS DIVIDED BE TWEEN THE ABOVE CO-OWNERS IN THEIR RESPECTIVE SHARES AND THEY WERE DECLARING THE INCOME SEPARATELY IN THEIR INDIVIDUAL TAX RETURNS. THE PROPERTY WAS SOLD BY ALL THE CO-SHARERS ON 9-02 -07 BUT SH.SUBHASH CHND RUSTOGAI AND UMESH CHAND RUSTAGI WERE AUTHORIZ ED BY THE OTHER CO- OWNERS TO COMPLETE ALL THE FORMALITIES RELATING TO THE SALE AS PER FAMILY SETTLEMENT DATED 9-02-2007. IT IS BECAUSE OF THIS FACT THAT ON LY SUBASH CHAND RUSTAGI AND UMESH CHANDRA RUSTAGI HAVE SIGNED AN 'AGREEMENT TO SELL, THE AO HAS INFERRED THAT THESE TWO WERE THE CO-OWNERS OF THE PROPERTY A ND THEREFORE HAS ASSESSED 50% OF THE SHARE OF CAPITAL GAINS IN THE HANDS OF UMESH CHANDRA RUSTAGI. HOWEVER, IN MY MIND THERE IS NO DOUBT THAT THE SHARE OF UMESH C HANDRA RUSTOGI WAS NOT 50% BUT ONLY 15%. THEREFORE, I AM OF THE VIEW THAT THE AO WAS NOT CORRECT IN ASSESSING THE 50% SHARE OF SALE CONSIDERATION IN TH E HAND OF UMESH CHANDRA RUSTOGI. THE CLAIM OF THE ASSESSEE THAT HE RECEIVED ONLY 15% SHARE OF CAPITAL GAIN IS BACKED BY DOCUMENTARY EVIDENCE. AS THE SECOND GROUND OF APPEAL IS THAT THE AO WAS N OT CORRECT IN DISALLOWING THE BENEFIT OF INDEXED COST OF IMPROVEM ENT/ADDITION TO THE PROPERTY WHILE WORKING OUT THE CAPITAL GAIN BECAUSE THE FACT THAT IMPROVEMENTS/ADDITIONS HAVE BEEN MADE IS CLEAR FROM THE DOCUMENTS FILED BE FORE THE AO LIKE SALE DEED, RENT AGREEMENT ETC. WHICH GIVES A DESCRIPTION OF PR OPERTY. IT HAS BEEN ARGUED THAT - IT IS ESTABLISHED THAT, ADDITIONS /IMPROVEMENTS HAV E BEEN MADE ,AND - THE VALUE OF ADDITIONS IS RS.L 0,47,852 AS PER THE SAME VALUATION REPORT ON WHICH THE AO HAS HIMSELF RELIED FOR TAKING INDEXED COST OF AC QUISITION AS ON 01-04-1981. IT IS THEREFORE NOT JUSTIFIED THAT COST OF IMPROVEMENT HA S NOT BEEN ACCEPTED BY THE AO. I AM CONVINCED THAT THE CLAIM OF THE APPELLANT FOR ALLOWING COST OF IMPROVEMENT/ADDITIONS FOR WORKING OUT THE CAPITAL G AIN IS GENUINE AND IT SHOULD BE ALLOWED. THE APPELLANT HAS GIVEN BEFORE ME THE FOLLOWING WOR KING OF CAPITAL GAIN- SALE CONSIDERATION 80,000,000.00 LESS: COST OF ACQUISITION FAIR MARKET VALUE OF LAND & BUILDING AS ON 1-4-1981 (AS PER VALUATION REPORT) 950,018.00 INDEXED VALUE AS ON 2006-07 4,930,593.00 ADDITIONAL CONSTRUCTION IN 1992-93 (AS PER VALUATION REPORT) 1,047,852.00 11 INDEXED VALUE OF ADDITION AS ON 2006-07 2,438,723. 00 FREEHOLD EXPENSES IN 2006-07 407,353.00 TOTAL DEDUCTION 7,776,669.00 ACCOUNT OF TOTAL CAPITAL GAIN 72, 223,331.00 SHARE OF ALL THE COOWNERS AS PER FAMI LY SETTLEMENT MR.S.C.RUSTAGI 31.25% MRS.SAROJ RUSTOGI 31.25% ASSESSEE SHARE 15% 10,833,500.00 MRS.ASHA RUSTAGI 15% MRS.PUSHPA RUSTAGI 7.5% I FIND THAT THE ABOVE WORKING IS CORRECT AND THE AO IS DIRECTED TO ADOPT THE SAME AND MODIFY HIS ORDER. THE CAPITAL GAIN TO BE A SSESSED IN THE HANDS OF THE ASSESSEE IS RS.L 0,833,500.00 AND NOT RS.375,34,704 /- AS DONE BY THE AO. THE APPELLANT THEREFORE GETS A RELIEF OF RS.2,67 ,01,20 4/-. THE THIRD GROUND AGAINST CHARGING OF INTEREST IS CO NSEQUENTIAL IN NATURE AND THE AO IS DIRECTED TO GIVE EFFECT ARISING OUT O F THIS ORDER. THE LAST GROUND OF APPEAL AGAINST INITIATION OF PEN ALTY PROCEEDINGS U/S.271 (1)( C) IS PREMATURE AND NEEDS NO ADJUDICATION. 6. IN THE RESULT THE APPEAL IS ALLOWED. 9. THE SOLE ISSUE TO BE DECIDED IN THE APPEAL IS AS TO WHETHER THE SHARE OF THE ASSESSEE IN THE CAPITAL GAIN ARISING OUT OF THE SALE OF THE PROPERTY WAS 15% ONLY AS PER THE ASSESSEE OR WAS IT 50% AS PER T HE ASSESSING OFFICER. THE LEARNED CIT(APPEALS) HAS CONCURRED WITH THE CLAIM O F THE ASSESSEE THAT HE WAS HAVING SHARE OF 15% ONLY AGAINST 50% AS HELD BY THE ASSESSING OFFICER. THE CLAIM OF THE ASSESSEE AS DISCUSSED HEREINABOVE BY THE LEARNED CIT(APPEALS) IN HIS FINDING WAS FULLY SUPPORTED WIT H SUFFICIENT DOCUMENTS. THE PROPERTY WAS ORIGINALLY OWNED BY SHRI NIHAL CHA ND RUSTAGI AND HIS WIFE SMT. MEWA RUSTAGI IN THE RATIO OF 3/5 TH AND 2/5 TH . AFTER THE DEMISE OF SMT. MEWA RUSTAGI, HER 2/5 TH SHARE WAS DIVIDED EQUALLY BETWEEN HER 12 HUSBAND SHRI NIHAL CHAND RUSTAGI AND HER SON SHRI S UBHASH CHAND RUSTAGI. AS A RESULT, THE OWNERSHIP OF SHRI NIHAL CHAND RUST AGI BECAME 4/5 TH (3/5 TH + 1/2TH ) AND THAT OF SUBHASH CHAND RUSTAGI AT 1/5 TH . IN THE YEAR, 1992-93, BOTH SHRI NIHAL CHAND AND SUBHASH CHAND RUSTAGI TOGETHER MADE CERTAIN IMPROVEMENTS/ADDITIONS BY CONSTRUCTING FIRST FLOOR AND SECOND FLOOR TO THE HOUSE AND THE NEW HOUSE WAS ASSESSED AS PER VALUATI ON REPORT OF THE REGISTERED VALUER AS WELL AS THE ASSESSMENT OF ASSE SSOR AND COLLECTOR OF MCD HOLDING THE VALUATION OF SUCH IMPROVEMENT/ADDITIONS AT RS.10,47,852 (CONSIDERED FOR INDEXED COST PURPOSE). WHEN NIHAL C HAND RUSTAGI (4/5 TH SHARE IN THE PROPERTY) DIED THE PROPERTY WAS DIVIDE D AS PER HIS WILL BETWEEN SHRI SUBHASH CHAND RUSTAGI AND HIS WIFE SMT. SAROJ RUSTAGI; SHRI UMESH CHANDRA RUSTAGI AND HIS WIFE ASHA RUSTAGI; ELDER DA UGHTER SMT. PUSHPA RANI AND HER UNMARRIED DAUGHTER AND REMAINING PORTI ON OF THE PROPERTY WAS JOINTLY OWNED BY TWO SONS SHRI SUBHASH CHANDRA RUST AGI AND UMESH CHANDRA RUSTAGI. ALL THE CO-OWNERS TOGETHER GAVE TH E HOUSE ON RENT TO UGANDA EMBASSY. THE RENT RECEIVED WAS DIVIDED AMONG ST THE CO-OWNERS IN THEIR RESPECTIVE SHARES AND THEY WERE DECLARING THE INCOME SEPARATELY IN THEIR INDIVIDUAL TAX RETURN. THE PROPERTY WAS LATER ON S OLD BY ALL THE CO-OWNERS AND ALL THE FORMALITIES RELATING TO THE SALES WERE COMPLETED AS PER THE FAMILY SETTLEMENT DATED 09.02.2007. SHRI SUBHASH CHANDRA RUSTAGI AND UMESH 13 CHANDRA RUSTAGI WERE AUTHORIZED BY THE OTHER CO-OWN ERS TO COMPLETE ALL THE FORMALITIES RELATING TO SALE AS PER THE FAMILY SETT LEMENT. IT IS BECAUSE OF THIS FACT THAT ONLY SHRI SUBHASH CHANDRA RUSTAGI AND UME SH CHAND RUSTAGI HAD SIGNED AGREEMENT TO SELL WHICH IN OUR VIEW HAS BEEN INFERRED BY THE ASSESSING OFFICER THAT THESE TWO WERE THE CO-OWNERS OF THE PROPERTY AND, THEREFORE, HE HAS ASSESSED 50% OF THE SHARES OF CAP ITAL GAINS IN THE HANDS OF THE ASSESSEE. NOTING THESE FACTS IN DETAILS, WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS RIGHTLY COME TO THE CONCLU SION THAT THE ASSESSEE WAS HOLDING 15% SHARES ONLY IN THE PROPERTY SOLD. F OR THE PURPOSE, THE LEARNED CIT(APPEALS) HAS RIGHTLY TAKEN COGNIZANCE O F THE FAMILY SETTLEMENT, WHICH AS PER THE ABOVE CITED DECISION IN THE CASE O F CIT VS. SANTOKH SINGH (SUPRA) HAS TO BE CONSIDERED TO BRING ABOUT HARMONY IN A FAMILY AND TO DO JUSTICE TO THOSE VARIOUS MEMBERS AND AVOID ANTICIPA TION FEW DISPUTES WHICH MIGHT RUIN THEM ALL. THE HON'BLE DELHI HIGH COURT I N THE SAID DECISION HAS REFERRED THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF SS PILLAI VS. C.S. PILLAI, AIR 1972 S.C. 2069 OBSERVING THAT IF I N THE INTEREST OF THE FAMILY, PROPERTIES AND FAMILY PEACE, CLOSE RELATION S SETTLED THEIR DISPUTES AMICABLY, THE HON'BLE SUPREME COURT WILL BE RELUCTA NT TO DISTURB THE SAME. THE COURTS GENERALLY LEAN IN FAVOUR OF THE FAMILY A RRANGEMENT. WE THUS DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER WHI CH IS STRENGTHENED BY THE 14 DOCUMENTS FILED IN SUPPORT OF THE CLAIM 15% SHARES OF THE ASSESSEE AND SUPPORTED BY THE ABOVE CITED DECISION GIVING IMPORT ANCE TO THE FAMILY SETTLEMENT. THE SAME IS UPHELD. THE GROUND NOS. 1 A ND 2 ARE ACCORDINGLY REJECTED. 10. GROUND NO.3 : IN THIS GROUND, THE REVENUE HAS QUESTIONED THE ACCEPTANCE OF COST OF IMPROVEMENT CLAIMED AT RS.10, 47,852 BY THE ASSESSEE, BY THE LEARNED CIT(APPEALS). 11. THE LEARNED SENIOR DR PLACED RELIANCE ON THE AS SESSMENT ORDER WHEREAS FIRST APPELLATE ORDER WAS REFERRED BY THE L EARNED AR. THE ASSESSING OFFICER HAD DISALLOWED THE BENEFIT OF IND EXED COST OF IMPROVEMENT/ADDITION TO THE PROPERTY WHILE WORKING OUT THE CAPITAL GAIN. THE LEARNED CIT(APPEALS) HAS ACCEPTED THE COST OF I MPROVEMENT ON THE BASIS OF SALE DEED, RENT AGREEMENT ETC. GIVING THE DESCRIPTION OF THE PROPERTY. WHILE DOING SO, THE LEARNED CIT(APPEALS) HAS NOTED THAT THE VALUE OF ADDITION WAS RS.10,47,852 AS PER THE SAME VALUATIO N REPORT ON WHICH THE ASSESSING OFFICER HIMSELF HAS RELIED UPON FOR TAKIN G INDEXED COST OF ACQUISITION AS ON 01.04.1981. IN ABSENCE OF REBUTTA L OF THIS SPECIFIC FINDING OF THE LEARNED CIT(APPEALS), WE ARE OF THE VIEW THA T THE LEARNED 15 CIT(APPEALS) WAS RIGHT IN HOLDING THAT THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN DENYING THE COST OF IMPROVEMENT. THE F IRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUND NO. 3 IS AC CORDINGLY REJECTED. 12. IN RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2015 ( L.P. SAHU ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 /12/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 16 DATE DRAFT DICTATED ON COMPUTER 21.12.2015 DRAFT PLACED BEFORE AUTHOR 21.12.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 21.12.20 15 APPROVED DRAFT COMES TO THE SR.PS/PS 21.12.2015 KEPT FOR PRONOUNCEMENT ON 21.12.2015 FILE SENT TO THE BENCH CLERK 21.12.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.