Kushiram Kanhayalal Ahuja, Ahmednagar V. Income-tax Officer,

ITA 402/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1471 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI; ANIL CHAWARE
• Keywords: Opportunity of being heard; Additional evidence; Cost of acquisition; Valuation report
• Section: 10

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.402/PN/2014 % % / ASSESSMENT YEAR : 2007-08 KHUSHIRAM KANHAYALAL AHUJA, AHUJA NIWAS, MAHAVEER NAGAR, SAVEDI ROAD, NEAR HOTEL OBEROI, AHMEDNAGAR 414 003 PAN NO.AAWPA8221B . / APPELLANT V/S ITO, WARD-1, AHMEDNAGAR . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI S.K. RASTOGI, CIT & SHRI ANIL CHAWARE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30-12-2013 OF THE CIT(A)-IT/TP, PUNE RELATIN G TO ASSESSMENT YEAR 2007-08. 2. THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSESSEE AR E AS UNDER : 1. COMMISSIONER (APPEALS) HAS ERRED BOTH ON FACTS AND L AW IN CONFIRMING DISALLOWANCE OF DEDUCTION FOR COST OF CONSTRUCTION/ACQUISITION OF FACTORY BUILDING CLAIMED RS.10,50,216/- AND BROKERAGE PAID FOR TRANSFER RS.15,000/- / DATE OF HEARING :21.07.2016 / DATE OF PRONOUNCEMENT:29.07.2016 2 ITA NO.402/PN/2014 APPELLANT PRAYS TO ALLOW THE COST WHILE COMPUTING CAP ITAL GAIN. 2. APPELLANT PRAYS FOR JUST & EQUITABLE RELIEF. 3. APPELLANT PRAYS TO ADD, ALTER, AMEND AND/OR WITHD RAW THE GROUND, SUBMIT EVIDENCE/ADDITIONAL EVIDENCE DURING A PPEAL PROCEEDINGS. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND PARTNER IN AHUJA WATCH. HE IS ALSO ENGAGED IN THE BUSINESS OF SHARE BROKER AND DERIVES RENTAL INCOME FROM F ACTORY SHED. HE FILED HIS RETURN OF INCOME ON 13-07-2007 DECLARING TOTAL INCOME OF RS.1,21,233/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SOLD O NE SHED IN THE MIDC AREA FOR RS.12 LAKHS. WHILE PAYING TAX ON SUCH S ALES, THE ASSESSEE CLAIMED COST OF PURCHASES AND COST OF IMPRO VEMENT, I.E. CONSTRUCTION MADE IN A.Y. 2001-02 AND 2002-03 THE AS SESSEE HAS CLAIMED THE COST OF CONSTRUCTION AT RS.8,80,120/-. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO SUBSTANTIATE THE SOURCE OF CONSTRUCTION AND EXPLAIN T HE NATURE OF CONSTRUCTION ETC TO JUSTIFY THE SAME. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO COMPUTED THE CAPITAL GAIN AT RS.10,90,768/- THE DETAILS OF WHICH ARE AS UNDER : SALE PROCEEDS OF PLOT & SHED RS.12,00,000 I. LESS : COST OF PLOT INCLUDING BROKERAGE RS.1,00,450 LESS : BROKERAGE DISALLOWED AS RS.15,000 DISCUSSED ABOVE ---------------- RS.85,450 INDEXATION OF ABOVE RS.1,09,232 II. COST OF DEVELOPMENT (A) CLAIMED FOR A.Y. 2001-02 RS.6,03,063 (B) CLAIMED FOR A.Y. 2002-03 RS.4,47,153/- ----------------- RS.10,50,216 ------------------ NOT ALLOWED AS DISCUSSED IN PARA SIX ABOVE NIL NIL RS.1,09,232 ----- ---- ---------------- - LONG TERM CAPITAL GAIN RS.10,90,768 ---------------- - 3 ITA NO.402/PN/2014 4. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO IN DETERMINING THE LONG TERM CAPITAL GAIN AT RS.10,90,768/- BY OBSERVING AS UNDER: FINDINGS : 2.9 I HAVE CAREFULLY CONSIDERED THE FACTS AND ARGUMEN TS OF THE APPELLANT. AFTER GOING THROUGH THE FACTS, I AM CONVI NCED THAT THE APPELLANT'S CLAIM IS AN AFTERTHOUGHT AND NOT SUPPORTED BY ANY EVIDENCE WHATSOEVER. THE SO CALLED EVIDENCE FURNISHED BEFORE THE LEARNED AO AND BEFORE ME IN MY VIEW, IS NOTHING BUT AN AFTERTHOUGHT TO REDUCE TAX LIABILITY, WHICH DOES NOT HAVE ANY CRE DIBILITY. THE REASONS FOR MY CONCLUSION ARE AS UNDER: 1. THE BREAK-UP OF EXPENDITURE SHOW THAT, ALL THE PA YMENTS ARE CLAIMED TO HAVE BEEN MADE ARE IN ROUND FIGURES. IT I S WELL-KNOWN FACT THAT ALL GENUINE PAYMENTS CAN NEVER BE IN THE ROUND FIGURES. 2. THE APPELLANT DID NOT PRODUCE BOOKS OF ACCOUNTS BE FORE THE LEARNED AO IN WHICH, SUCH EXPENDITURE WAS RECORDED. THERE IS NO CASH BOOK FOR THE CASH EXPENDITURE. 3. THE APPELLANT HAS NOT BEEN ABLE TO FURNISH A SINGLE BILL OR INVOICE ISSUED BY THIRD-PARTY SUPPLIER. ITS ENTIRE CLAI M OF EXPENDITURE IS BASED ON SELF-MADE VOUCHERS. IN REAL LIFE SITUATION, IT IS DIFFICULT TO BELIEVE THAT THE APPELLANT WOULD NOT GET PROPER BIL LS OR SALE INVOICES FOR HIS MAJOR ITEMS OF EXPENDITURE INCURRED BY HIM FO R THE CONSTRUCTION OF SHED. 4. THE APPELLANTS ENTIRE EXPENDITURE OF RS.11,00,000 /- IS STATED TO HAVE BEEN MADE IN CASH. AGAIN THIS IS IMPROBABLE SIT UATION, IN WHICH THE ENTIRE EXPENDITURE IS INCURRED IN CASH. IN REAL LIFE, SITUATION, THERE WOULD ALSO BE FEW CHEQUE PAYMENTS. 5. DURING THE ASSESSMENT PROCEEDINGS, THE LEARNED AO HAD ISSUED SUMMONS TO SUPPLIERS WHICH WERE RETURNED UNSERVED. IT IS HIGHLY IMPROBABLE THAT ALL HIS SUPPLIERS WOULD HAVE EI THER LEFT THEIR PREMISES OR WOULD HAVE GIVEN INCOMPLETE ADDRESSED TO TH E APPELLANT. 6. AS FAR AS THE APPELLANT'S SOURCE OF INCOME IS CONCERN ED, IT IS SEEN THAT SUBSTANTIAL INCOME IS SHOWN TO HAVE BEEN MET W ITH MATURITY OF FIXED DEPOSITS. HOWEVER, APPELLANT'S BANK STATEMENT DOES NOT SHOW ANY CREDITS OF MATURITY OF FIXED DEPOSITS. BAN K ACCOUNT ALSO DOES NOT SHOW ANY CREDIT ENTRIES OF THE AMOUNTS RETURNE D BY SHRI MUNOT, WIFE AND SON. IT IS DIFFICULT TO BELIEVE THAT ALL THESE PEOPLE HAVE PAID EXACTLY THE SAME AMOUNT DIRECTLY TO THE LEVELS O F MATERIAL SUPPLIERS. IN ORDINARY COURSE, THE MONEY SHOULD HAVE BE EN CREDITED INTO THE BANK ACCOUNT AND THEN IT SHOULD HAVE BEEN D ISBURSED DEPENDING ON THE AMOUNT OF EXPENDITURE. IT IS A MATT ER OF COMMON SENSE THAT AMOUNT OF RECEIVABLE WOULD NEVER MATCH WIT H EXACT AMOUNT OF PAYABLES FOR THE DIRECT PAYMENT TO SUPPLIE RS OR TO LABORERS. 4 ITA NO.402/PN/2014 7. THE APPELLANT HAS SHOWN CASH WITHDRAWAL OF RS 55,000 /-, WHICH IS STATED TO HAVE BEEN SPENT TOWARDS COST OF CONST RUCTION. I DO NOT AGREE WITH THIS EXPLANATION BECAUSE IN SUCH A CASE, THE APPELLANT HAS NOT WITHDRAWN ANY AMOUNT FOR HIS HOUSEHOLD EXPENDI TURE AND PERSONAL EXPENDITURE. 8. THE APPELLANT HAS EXPLAINED SOURCES OF RS 8,80,000/- OUT OF TOTAL EXPENDITURE OF RS 10,65,000. THUS, AFTER SO MUCH OF EFFORTS, THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE SOURCES OF EXPENSES OF RS. 2,15,000/-. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US : 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED THE ORDER OF THE CIT(A). HE FILED AN APPLICATION FOR ADMISSION OF ADDITIONA L EVIDENCE IN THE SHAPE OF A VALUATION REPORT FROM A REGISTE RED VALUER ACCORDING TO WHICH THE COST OF SUCH CONSTRUCTION WAS RS.8,80,000/-. REFERRING TO PAGES 36 AND 37 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF T HE BENCH TO THE DETAILS OF EXPENDITURE INCURRED DURING F.Y. 2000-01 , 2001- 02 AND 2002-03. REFERRING TO PAGES 38 AND 39 OF THE PA PER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF T HE BENCH TO THE SOURCE OF INCOME FOR IMPROVEMENT OF THE SHED. REFE RRING TO THE COPY OF COMPUTATION OF INCOME FOR A.Y. 2005-06, A COPY OF WHICH IS PLACED AT PAGE 64 OF THE PAPER BOOK, THE LD. COU NSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE SAID COMPUTATION ACCORDING TO WHICH THE ASSESSEE HAS SHOWN RENT OF RS.44,000/- FROM THE SHED. REFERRING TO THE COPY OF COMPU TATION OF INCOME FOR A.Y. 2006-07, A COPY OF WHICH IS PLACED AT PAG E 66 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW T HE ATTENTION OF THE BENCH TO THE SAID COMPUTATION AND SUBM ITTED THAT ASSESSEE HAS SHOWN RS.70,400/- AS INCOME FROM THE SAID SHED. HE SUBMITTED THAT UNLESS THERE IS SHED THE ASSES SEE COULD NOT HAVE DERIVED RENTAL INCOME FROM THE SAID PREMISES. HE ACCORDINGLY SUBMITTED THAT DEDUCTION FOR COST OF CONSTRUCTION/IMPROVEMENT OF THE SHED SHOULD BE ALLOWED TO THE ASSESSEE. 5 ITA NO.402/PN/2014 7. IN HIS ALTERNATE SUBMISSION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE CONTENTION OF THE REVENUE THAT THE ASSESSEE HAS NOT MAINTAINED PROPER ACCOUNTS AND HAS N OT EXPLAINED THE SOURCE OF SUCH INVESTMENT IS ACCEPTED, THEN AT LEAST SOME AMOUNT SHOULD BE ALLOWED TO THE ASSESSEE TOWARDS THE COST OF CONSTRUCTION/IMPROVEMENT OF THE SHED WHICH WAS THERE SINCE THE ASSESSEE WAS SHOWING RENTAL INCOME FROM THEN SAID PROPERTY. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS CLAIMED INDEXED COST OF CONSTRUCTION OF RS.10,50,216/- AND BROKERAGE OF RS.15,000/- FROM THE SALE CONSIDERATION OF RS.12 LAKHS FOR COMPUTING THE CAPITAL GAIN. ACCORDING TO THE ASSESSEE, HE HAS SPENT AN AMOUNT OF RS.4,95,000/- DURING A.Y. 2001-02, RS.15,000/- DURING A.Y. 2000-01 AND RS.3,85,120/- DURING A.Y. 2002-03 TOWARDS CO ST OF CONSTRUCTION AND BROKERAGE ETC. WHICH HAS BEEN SUMMAR IZED BY THE LD.CIT(A) AT PARA 2.1 OF THE APPEAL ORDER. THE COST O F CONSTRUCTION/IMPROVEMENT AND BROKERAGE WAS DISALLOWED BY THE AO BASICALLY ON THE GROUND THAT ASSESSEE WAS UNABLE TO PRODUCE THE PARTIES TO WHOM PAYMENTS HAVE BEEN MADE TOWARDS THE CONSTRUCTION AND THE ASSESSEE ALSO COULD NOT SATISFACTO RILY EXPLAIN THE SOURCE TOWARDS SUCH CONSTRUCTION. IT IS AN ADMITTED FACT THAT THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS OF A CCOUNT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE TH AT HE HAS EXPLAINED THE SOURCE OF SUCH EXPENDITURE AND THE VALUATIO N REPORT SHOWS THAT THE ASSESSEE HAS SPENT THAT MUCH AMOUNT TOWARDS CONSTRUCTION/IMPROVEMENT. IT IS ALSO THE ALTERNA TE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ATHOU GH ASSESSEE WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE MANNE R OF CONSTRUCTION AND THE SOURCE THEREOF, HOWEVER, SOME PROP ORTIONATE COST SHOULD BE ALLOCATED TOWARDS CONSTRUCTION OF THE SHE D BECAUSE WHAT THE ASSESSEE HAS OBTAINED FROM MIDC WAS A VACANT 6 ITA NO.402/PN/2014 LAND AND AT THE TIME OF SALE, THERE WAS A SHED AND THE A SSESSEE WAS SHOWING RENTAL INCOME FROM THE SAID SHED DURING A.YRS. 2005-06 AND 2006-07. 10. THE COPY OF THE VALUATION REPORT PRODUCED AS ADD ITIONAL EVIDENCE IN OUR OPINION HAS NO SANCTITY. IT IS NOT KNOWN HOW THE VALUER HAS ENTERED THE PREMISES WHEN THE SAME WAS SOLD BY THE ASSESSEE LONG BACK AND THERE IS NOTHING ON RECORD TO S HOW THAT THE OWNER OF THE SHED HAS PERMITTED HIM TO ENTER THE PREMISES. NO SATISFACTORY EVIDENCE WAS PRODUCED TO JUSTIFY THE CO ST OF CONSTRUCTION/IMPROVEMENT CLAIMED BY THE ASSESSEE. HOWE VER, WE FIND SOME FORCE IN THE ALTERNATE SUBMISSION OF THE LD. C OUNSEL FOR THE ASSESSEE THAT SOME COST SHOULD BE ALLOCATED TOW ARDS THE CONSTRUCTION OF THE SHED. ADMITTEDLY, THE ASSESSEE WAS SHOWING INCOME FROM PROPERTY IN A.YRS. 2005-06 AND 2006-07 AND T HE COMPUTATION COPIES OF WHICH ARE PLACED AT PAGES 64 TO 66 OF THE PAPER BOOK. FROM THE COPY OF THE ALLOTMENT LETTER ISSUE D BY MIDC, A COPY OF WHICH IS PLACED AT PAGES 8 AND 9 OF THE P APER BOOK, WE FIND THE ASSESSEE HAS BEEN ALLOTTED LAND ADMEAS URING 1000 SQ.MTRS COMPRISING OF PLOT NO.G-39, FROM AHMEDNAGAR INDUSTRIAL AREA. FURTHER, THE AGREEMENT BETWEEN MIDC A ND ASSESSEE, A COPY OF WHICH IS PLACED AT PAGES 10 TO 25 SH OWS THAT THE ASSESSEE WAS ALLOTTED ONLY LAND. RELEVANT CLAUSE 1 READS AS UNDER : DURING THE PERIOD OF THREE YEARS FROM THE DATE HER EOF THE LICENSEE SHALL HAVE LICENSE AND AUTHORITY ONLY TO E NTER UPON THE PIECE OF LAND DESCRIBED IN THE FIRST SCHEDULE HEREU NDERWRITTEN AND DELINEATED ON THE PLAN ANNEXED HERETO AND THERE ON SURROUNDED BY A RED-COLOURED BOUNDARY LINE FOR THE PURPOSE OF BUILDING AND EXECUTING WORKS THEREON AS HEREINAFTER PROVIDED AND FOR NO OTHER PURPOSE WHATSOEVER AND UNTIL THE G RANT OF SUCH LEASE AS IS HEREINAFTER REFERRED TO, THE LICENSEE S HALL BE DEEMED TO BE A BARE LICENSEE ONLY OF THE PREMISES AT THE S AME RENT AND SUBJECT TO THE SAME TERMS AS IF THE LEASE HAD BEEN ACTUALLY EXECUTED. 11. SIMILARLY, THE LETTER ISSUED BY MIDC TO THE ASSESSEE AS PER THE COMPLETE PLAN FOR THE PROPOSED FACTORY BUILDING ALSO S HOWS THAT IT WAS ONLY A VACANT LAND ALLOTTED BY MIDC AND THE ASSESSEE HAS CONSTRUCTED THE BUILDING ON THE SAID LAND. THEREFORE, W HILE WE 7 ITA NO.402/PN/2014 AGREE WITH THE FINDINGS OF THE REVENUE AUTHORITIES THAT TH E ASSESSEE HAS NOT SATISFACTORILY EXPLAINED THE CONSTRUCTIO N OF THE SHED ON THE SAID PLOT BUT THE FACT REMAINS THAT THERE WAS A SHED ON THE LAND FROM WHICH THE ASSESSEE WAS DERIVING RENTAL IN COME AND WHICH HAS BEEN OFFERED TO TAX BY THE ASSESSEE AND NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE THAT THE RENTAL INC OME WAS DISBELIEVED BY THE REVENUE AUTHORITIES. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT SOME COST OF CONSTRUCTION OF THE SHED ON THE SAID LAND HAS TO BE ALLOW ED FROM A.Y. 2004-05 ONWARDS. SINCE THE ASSESSEE STARTED GETTIN G RENTAL INCOME FROM THE SHED FROM A.Y. 2005-06 ONWARDS, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT INVESTMENT OF RS.3 LAKHS ON ESTIMATE FOR COST OF CONSTRUCTION IN A.Y. 2004-05 WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE AO SHALL COMPUTE THE CAPITAL GAIN BY CONSIDERING THE COST OF CONST RUCTION AT RS.3 LAKHS IN A.Y. 2004-05. HE WILL COMPUTE THE CAPITAL GA IN AFTER DEDUCTING THE INDEXED COST OF ACQUISITION TO THE ASS ESSEE AS PER LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 12. SO FAR AS THE BROKERAGE OF RS.15,000/- IS CONCERNED NOTHING WAS BROUGHT TO OUR NOTICE AS TO WHOM THE BROK ERAGE HAS BEEN PAID AND THE DETAILS THEREOF. IN ABSENCE OF ANY EV IDENCE BEFORE US THE CLAIM OF BROKERAGE IS DISALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-07-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 29 TH JULY , 2016. LRH'K 8 ITA NO.402/PN/2014 ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A)-IT/TP, PUNE 4. % S / THE CIT-I, PUNE 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , ( + //TRUE COPY// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE