Nitin P. Wagaskar, Nashik V. Assistant Commissioner of Income tax, Nashik

ITA 369/PUN/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6860 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-02-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P U N A Y; ABHIJIT HALDER ITA NOS
• Keywords: Salary income; Cost of acquisition; Corroborative evidences; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO. 369/PUN/2017 / ASSESSMENT YEAR : 2013-14 MR. NITIN P. WAGASKAR, FLAT NO. 4 & 5, ANAND KUNJ APARTMENT, OLD GANGAPUR NAKA, GANGAPUR ROAD, NASHIK- 422 005 PAN : AAPPW0728C ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. / RESPONDENT / ITA NO. 400/PUN/2017 / ASSESSMENT YEAR : 2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. ....... / APPELLANT / V/S. MR. NITIN P. WAGASKAR, FLAT NO. 4 & 5, ANAND KUNJ APARTMENT, OLD GANGAPUR NAKA, GANGAPUR ROAD, NASHIK- 422 005 PAN : AAPPW0728C / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI ABHIJIT HALDER 2 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 / DATE OF HEARING : 27.02.2019 / DATE OF PRONOUNCEMENT : 28.02.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THESE CROSS APPEALS PREFERRED BY THE ASSESSEE AND RE VENUE EMANATES FROM THE COMMON ORDER OF LD. CIT(APPEAL)-1, NASHIK DATED 0 1.12.2016 FOR THE ASSESSMENT YEAR 2013-14 AS PER RESPECTIVE GROUNDS OF APPEAL O N RECORD. SINCE THE FACTS ARE COMMON, ISSUES SIMILAR, THESE CROSS A PPEALS ARE DISPOSED OF VIDE THIS CONSOLIDATED ORDER. 2. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAS DERIVED INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY , INCOME FROM BUSINESS OR PROFESSION, INCOME FROM CAPITAL GAIN AND INCOME FR OM OTHER SOURCES. THE ASSESSEE HAS FILED RETURN OF INCOME FOR ASSES SMENT YEAR 2013-14 ON 01/11/2013 DECLARING TOTAL INCOME AT RS.18,14,280/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. SUBSEQUENTLY, ORDER U/ S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T) WAS PASSED ON 03/02/2016, ASSESSING TOTAL INCOME AT RS.2,96,36,034/- BY MAKING THE ADDITION OF RS.2,78,21,754/- ON ACCOUNT OF INTEREST, CONST RUCTION COST AND COST OF IMPROVEMENT CLAIMED BY THE ASSESSEE. 3. BEING AGGRIEVED WITH THE ASSESSMENT ORDER PASSED, TH E ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A) AND THE ASSESSEE G OT PART RELIEF FROM THE FIRST APPELLATE AUTHORITY. WITH REGARD TO THE ALLOWABILITY OF E XPENSES INCURRED ON CONSTRUCTION OF HOUSE, IT WAS OBSERVED BY THE LD. CIT (A) THAT THE ASSESSEE 3 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 HAS CLAIMED CONSTRUCTION COST OF RS.1,39,12,951/- . THE ASSESSING OFFICER HAS DENIED THE CLAIM FOR WANT OF PROOF . THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A) HAS PRODUCED BILLS, KACCHA RECEIPTS CASH VOUCHERS IN SUPPORT OF HIS CLAIM . THE LD. AR HAS STATED THAT SINCE THE FATHER OF THE ASSESSEE HAS PASSED AWAY THEY ARE NOT IN POSITIO N TO PRODUCE OTHER CORROBORATIVE EVIDENCES NOR CAN LINK UP THE CASH PAYMEN TS WITH WITHDRAWAL FROM THE BANK. THE MATTER BEING OLD IT IS NOT POSSIBLE TO TRACE THE PARTY WHO HAS UNDERTAKEN THE WORK. THE AR HAS FURTHER SUBMITTED THAT IT IS A FACT THAT THE BUNGALOW WAS CONSTRUCTED AND SOLD. THEREFORE, DISALLOW ANCE OF CONSTRUCTION EXPENSES IS NOT WARRANTED. IT IS AN UNDISPU TED FACT THAT THE SALE OF BUNGALOW HAS TAKEN PLACE. THUS IN ALL FAIRNESS COST OF CON STRUCTION HAS TO BE ALLOWED. BUT IT IS ALSO A FACT THAT DUE TO UNIQUE CIRCUM STANCES THE GENUINENESS OF THE ENTIRE EXPENDITURE CANNOT BE VERIFIED. T HE LD. CIT(A) THEREFORE, ALLOWED 75% OF THE COST OF CONSTRUCTION/IMPROVEM ENT OF THE RESIDENTIAL HOUSE AND DISALLOWED REMAINING 25%. THE ASSESS EE IS IN APPEAL WITH REGARD TO THIS SAID DISALLOWANCE OF THE 25% OF THE COS T OF IMPROVEMENT/CONSTRUCTION AS HELD BY THE LD. CIT(A). 4. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND STATED THAT ALL THE BILLS, VOUCHERS, KACCHA RECEIPTS AVAILABLE WITH THE ASSESSEE WER E SUBMITTED BEFORE THE REVENUE AUTHORITY AND THAT IS NOT DISPUTED. HOWEVE R, OTHER CORROBORATIVE EVIDENCES COULD NOT BE PROCURED AS HAS BEEN ACCEPTED EVEN BY THE LD. CIT(A), SINCE THE CONSTRUCTION IS OLD ONE AND AFTER DEMISE OF THE FATHER OF THE ASSESSEE, INFORMATION COULD NOT BE GATHERED TO IDENTIFY OT HER CORROBORATIVE EVIDENCES TO JUSTIFY THE ENTIRE COST OF IMPROVEMENT OF THE RESIDENT IAL HOUSE. 4 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 5. THE LD. DR ON THE OTHER HAND APPRAISED THE BENCH THAT IN THE REVENUES APPEAL GROUND NO.1 PERTAINS TO THE GRIEVANCE OF THE REVENUE TO THE FACT THAT LD.CIT(A) HAS ALLOWED 75% OF COST OF IMPROVEMENT/ CONSTRUCTION OF THE HOUSE AND THE LD. DR VEHEMENTLY OPPOSED THE ORD ER OF LD. CIT(A) BY PLACING STRONG RELIANCE IN THE FINDINGS OF THE LD. ASSESSING OFFICER. 6. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE R IVAL CONTENTIONS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS CASE. THE FACTS ON RECORDS ARE THAT THE ASSESSEE INCURRED CAPITAL GAIN ON SALE OF BUILDING AND THE ASSESSEE HAS CLAIMED CONSTRUCTION COST, INTEREST ON HOUSING LOAN. IT IS AN UNDISPUTED FACT THAT THE LAND ON WHICH THE BUILDING WAS CONSTRUCTED , WAS BOUGHT BY FATHER OF THE ASSESSEE, GRANDMOTHER AND FATHER OF THE A SSESSEE AND CONSTRUCTION OF RESIDENTIAL HOUSE WAS UNDERTAKEN AND COM PLETED IN 2006. THEREAFTER, DURING THE ASSESSMENT PROCEEDING, REGARDING C OST OF CONSTRUCTION, THE ASSESSEE HAS PRODUCED BEFORE THE ASSESSING OFFICER A S WELL AS LD. CIT(A) THE BILLS, VOUCHERS, KACCHA RECEIPTS IN SUPPORT OF HIS CLAIM. T HE LD. AR OF THE ASSESSEE SUBMITTED THAT SINCE FATHER OF THE ASSESSEE HA S PASSED AWAY, THEY ARE NOT IN A POSITION TO GATHER OTHER CORROBORATIVE EVID ENCES NOR CAN LINK UP THE CASH PAYMENTS WITH WITHDRAWAL FROM THE BANK. THE MAT TER BEING OLD IT IS NOT POSSIBLE TO TRACE THE PARTY WHO HAS UNDERTAKEN TH E WORK. IT IS A FACT THAT THE SALE OF BUNGALOW HAS TAKEN PLACE. WE ALSO OBSERVE TH AT MOST OF THE DETAILS, DOCUMENTARY EVIDENCES WERE FURNISHED BY THE ASSE SSEE. HOWEVER, VALIDITY AND CORRECTNESS OF THOSE DOCUMENTARY EVIDENCES COULD NOT BE FURTHER VERIFIED. THUS, IN ALL FAIRNESS, WE ARE OF CONSIDERED VIEW THAT THE PURPOSE OF JUSTICE WOULD BE SERVED IF 10% OF THE CONSTRUCTION COST/IM PROVEMENT COST IS DISALLOWED. 5 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ISSUE AND DIRECT THE ASSESSING OFFICER TO PROVIDE RELIEF TO THE ASSESS EE UP TO 90% OF ENTIRE COST OF CONSTRUCTION/ IMPROVEMENT WHILE REMAINING 10 % IS DISALLOWED. ACCORDINGLY, THE ASSESSING OFFICER SHOULD PROVIDE APPEAL EFFEC T. THEREFORE, THIS GROUND IN BOTH REVENUE AND ASSESSEES APPEAL IS PARTLY ALLOWED . 7. THE REVENUE IS ALSO IN APPEAL WITH REGARD TO DELETION O F ADDITION OF RS.22,19,520/- ON ACCOUNT OF CLAIM OF INTEREST. 8. THE LD. CIT(A) IN HIS ORDER ON THE ISSUE OF INTEREST ON HOUSING LOAN OBSERVED THAT THE ASSESSEES FATHER CONSTRUCTED A HO USE WHO IS NO MORE. THEREFORE, NO VERIFICATION FROM HIM IS POSSIBLE. THE DOCUMENTS PLACED ON RECORDS SHOWS THAT THE LOAN FROM LIC HOUSING FINANCE WA S TAKEN BY THE ASSESSEE, HIS FATHER AND MOTHER JOINTLY AND THE SAME WA S TRANSFERRED TO HIS FATHERS HUF. FROM THE HUF, THE LOAN WAS TAKEN BY THE FATHER AND HOUSE WAS CONSTRUCTED. THE LD. CIT(A) SCANNED THESE DOCUMENTS FILED IN SUPPORT OF THE LOAN FROM LIC HOUSING FINANCE WHICH ARE THERE ON REC ORD AS APPEARING IN THE ORDER OF LD. CIT(A). THEREAFTER, THE LD. CIT(A) RELIED ON THE CASE LAWS IN THE CASE OF CIT VS. RAJA GOPALA RAO (2001) 252 ITR 459 ( MAD.) AND CIT & ITO VS. HARIRAM HOTELS (P.) LTD. (2010) 229 CTR 455 AND ALSO IN THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. RA MABRAHMAM IN 2012 27 TAXMANN.COM 104 (CHENNI-TRIB.) AND THEREAFTER, APP LIED IT TO THE FACTS OF THE ASSESSEES CASE AND OPINED AND HELD THAT T HE ASSESSEE HAS CONSTRUCTED THE HOUSE AND NOT BOUGHT READYMADE HOUS E. THEREFORE, COST OF ACQUISITION IS NOT ON A FIXED DATE BUT AN ONGOING ONE. THE LOAN WAS OBTAINED FOR IMPROVEMENT ALSO DEPICTS THAT CONSTRUCTION ACTIVITY HA D NOT STOPPED BUT WAS IN PROGRESS. THE FACTS ON RECORD SHOW THAT ASSESSE E HAS OBTAINED LOAN TOWARDS CONSTRUCTION AND IMPROVEMENT OF THE HOUSE. IN V IEW OF THE AFORESAID 6 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT THE INTEREST PAID IS TO BE ALLOWED TOWARDS COST OF ACQUISITION AND IMPROVEMENT WHILE COMPUTING CAPITAL GAIN AT THE TIME OF SALE OF PROPERTY. THE LD.CIT(A) ALLOWED INTEREST TAKEN FOR CONSTRUCTION/IMPROVEMENT OF THE HOUSE. 9. WE HAVE PERUSED THE CASE RECORDS AND HAVE GIVEN T HOUGHTFUL CONSIDERATION TO THE FINDINGS OF THE LD.CIT(A). IT IS EVIDENT FROM THE RECORD THAT LOAN WAS TAKEN FROM LIC HOUSING FINANCE FOR CONSTRU CTION/ IMPROVEMENT OF THE HOUSE BY THE ASSESSEE. THEREFORE, IT I S LEGALLY JUSTIFIED THAT WHATEVER INTEREST IS PAID TOWARDS COST OF ACQUISITION AND IMPROVEMENT SHOULD HAVE BEEN ALLOWED WHILE COMPUTING CAPITAL GAIN AT THE TIME OF SALE OF PROPERTY. THIS HAS BEEN VERY TRULY OBSERVED BY THE V ARIOUS JUDICIAL BINDING DECISIONS AS REFERRED IN THE ORDER OF THE LD. CIT(A). WE, THE REFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND RELIEF PROVIDED TO THE ASSESSEE IS THEREBY SUSTAINED. 10. IN THE RESULT, THIS GROUND OF APPEAL BY THE REVENUE IS DISMISSED. 11. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE AND GROUND NO.1.1 IN THE REVENUES APPEAL ARE PARTLY ALLOWED. GROUND NO.1.2 OF THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED ON 28TH DAY OF FEBRUARY, 2019. SD/- SD/- ANIL CHATURVEDI PA RTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 28 TH FEBRUARY, 2019. SB 7 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEAL)-1, NASHIK. 4. THE PR. CIT-1, NASHIK. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 8 ITA NOS. 369 & 400/PUN/2017 A.Y.2013-14 DATE 1 DRAFT DICTATED ON 27 .0 2 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28 .0 2 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER