Sh. Baljeet Singh Yadav, Ghaziabad V. ITO, New Delhi

ITA 4209/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4225 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RC DANDEY
• Keywords: Cost of acquisition
• Section: 139

Judgement Text

ITA NO.4209/DEL/2013 AY: 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A: NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4209/DEL/2013 ASSTT. YEAR: 2009-10 SHRI BALJEET SINGH YADAV, SB-133, SHASTRI NAGAR, GHAZIABAD. VS INCOME TAX OFFICER, WARD NO. 1(2), GHAZIABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAPIL GOEL, CA RESPONDENT BY : SHRI R.C. DANDEY, SR.DR DATE OF HEARING : 28.08.2017 DATE OF PRONOUNCEMENT: 29.09.2017 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (APPEALS), GHAZIABAD WHO V IDE ORDER DATED 18.02.2013 HAS DISMISSED ASSESSEES APPEAL FO R AY 2009- 10. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SS TUBES. THE RETURN OF INCOME WAS FILLED ON 30.09.2009 DISCLOSING INCOM E OF ITA NO.4209/DEL/2013 AY: 2009-10 2 RS.41,260/- AND AGRICULTURE INCOME OF RS.95,750/- W HICH WAS PROCESSED AND SUBSEQUENTLY SELECTED FOR SCRUTINY. D URING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THA T THE ASSESSEE HAD SOLD A PROPERTY FOR A CONSIDERATION OF RS. 1,92,16,000/-. THE RETURN REFLECTED THE CALCULATION OF THE CAPITAL GAIN AS UNDER: SALES CONSIDERATION RS.1,92,16,000/- INDEXED COST OF ACQUISITION RS. 10,06,301/- COST OF IMPROVEMENT AFTER INDEXATION RS.1,82,72,582 /- EXPENDITURE ON TRANSFER 0 BALANCE (-)RS. 62,883/- 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS ASKED TO FURNISH COPY OF PURCHASE DEED, COPY OF SALE DEED AND DOCUMENTARY EVIDENCE/S IN SUPPORT OF COST OF IM PROVEMENT SHOWN. THE ASSESSEE SUBMITTED THE BIFURCATION OF TH E COST OF IMPROVEMENT AS UNDER:- INDEXED COST OF LAND FILING, SITE DEVELOPMENT, GROU ND LEVELLING AND BOUNDARY WALLS IN THE YEAR 2001 RS. 26,35,200/ - COMPENSATION PAID TO M/S U.P. BONE MILLS (P) LTD. RS. 1,56,37,380/- ITA NO.4209/DEL/2013 AY: 2009-10 3 2.2 THE ASSESSEE WAS FURTHER ASKED BY THE AO TO SH OW CAUSE AS TO WHY THE AMOUNT SHOWN AS PAID AS COMPENSATION TO M/S U.P. BONE MILLS (P) LTD. AMOUNTING TO RS.1,56,37,380/- B E NOT DISALLOWED. THE ASSESSEE IN HIS REPLY BEFORE THE AO SUBMITTED THAT HE HAD PAID THE AMOUNT ON ACCOUNT OF BREACH OF PURCHASE AGREEMENT DATED 01.07.2008 WHICH HE HAD EXECUTED WI TH THE SAID COMPANY AND THAT HE WAS FORCED TO PAY SAID COM PENSATION TO SAFE GUARD HIS RIGHTS ON THE SAID PROPERTY. IT W AS THE ASSESSEES SUBMISSION THAT THE SAME SHOULD BE CONSI DERED AS COST INCURRED BY THE ASSESSEE FOR PROTECTING HIS RI GHTS IN THE SAID LAND. HOWEVER, THE AO WAS OF THE OPINION THAT THE C LAIM OF THE ASSESSEE COULD BE ACCEPTED IN THE LIGHT OF THE LEGA L PROVISIONS. ACCORDING TO THE AO, WHAT THE LAW PERMITTED TO BE D EDUCTED FROM THE SALE CONSIDERATION, WHILE COMPUTING LONG TERM C APITAL GAIN, WAS THE COST OF IMPROVEMENT WHEREAS THE ASSESSEE HA D DEDUCTED THE COMPENSATION PAID FOR THE CANCELLATION OF AGREE MENT FOR SALE OF PROPERTY. AS PER THE AO, THE ASSESSEE HAD NEITHE R MADE ANY ALTERATION NOR ANY ADDITIONS TO THE ASSET. THE SUM PAID BY THE ASSESSEE WAS ON ACCOUNT OF COMPENSATION DUE TO CANC ELLATION OF AGREEMENT BY THE ASSESSEE HIMSELF WHICH WAS NOT AT ALL DEDUCTIBLE FROM THE CAPITAL GAIN. THE AO RELIED ON THE CASE OF ITA NO.4209/DEL/2013 AY: 2009-10 4 AMBAT ECHKUTTY MENON VS CIT (1978) 111 ITR 880 (KER ) WHEREIN THE HONBLE KERALA HIGH COURT HAS HELD THAT SUM SPE NT TO CLEAR ENCUMBRANCE IS NOT COST OF IMPROVEMENT. THE AO ALSO RELIED ON THE CASE OF CIT VS ROSHANBABU MOHAMMAD HUSSEIN MERC HANT (2005) 275 ITR 231 (BOM) WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT EXPENDITURE INCURRED BY AN ASSE SSEE TO REMOVE AN ENCUMBRANCE CREATED BY THE ASSESSEE HIMSE LF (ON A PROPERTY WHICH WAS ACQUIRED BY HIM WITHOUT ANY ENCU MBRANCE) SHALL NOT BE ALLOWED AS A DEDUCTION UNDER SECTION 4 8. THE AO OBSERVED THAT IN THIS CASE THE PROPERTY WAS WITHOUT ANY LITIGATION. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD ENTER ED INTO AN AGREEMENT TO SELL THE PROPERTY WITH M/S U.P. BONE M ILLS (P) LTD AND LATER ON THE AGREEMENT WAS CANCELLED BY THE ASS ESSEE HIMSELF. THE AO CONCLUDED THAT THE ASSESSEE HAD TO PAY COMPENSATION AS PER THE TERMS OF THE AGREEMENT, WHI CH IN NO CIRCUMSTANCES COULD BE TREATED EITHER AS COST OF AC QUISITION OR AS COST OF IMPROVEMENT AND HENCE COULD NOT BE ALLOWED AS A DEDUCTION UNDER SECTION 48 OF THE INCOME TAX ACT, 1 961 (HEREINAFTER CALLED THE ACT). ACCORDINGLY, CONSID ERING THE ABOVE FACTS, THE AMOUNT OF RS. 1,56,37,380/- PAID BY THE ASSESSEE TO ITA NO.4209/DEL/2013 AY: 2009-10 5 M/S U.P. BONE MILLS PVT. LTD. AND SHOWN AS COST OF IMPROVEMENT WAS DISALLOWED AND ADDED BACK TO ASSESSEES TOTAL I NCOME. 2.3 FURTHER, DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS ALSO ASKED TO FURNISH DOCUMENTARY EVID ENCE/S IN RESPECT OF BOUNDARY WALL AND LEVELLING OF THE LAND SHOWN AT RS.19,28,859/- THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS INCURRED BY THE ASSESSEE FOR SITE DEVELOPMENT O F THE LAND PURCHASED BY HIM IN THE YEAR 2001 AND INCLUDED COST OF LAND LEVELLING, EARTH FILLING, BOUNDARY WALL AND OTHER R ELATED SITE DEVELOPMENT ACTIVITIES TO PROTECT THE UNDUE TRESPAS SING BY THE ANTI SOCIAL ELEMENTS. THE ASSESSEE ALSO SUBMITTED T HAT AS THE SAID AMOUNT WAS INCURRED BY THE ASSESSEE IN THE F.Y. 200 1-02, THE EVIDENCE FOR THE SAME CANNOT BE PRODUCED IMMEDIATEL Y. THE AO WAS OF THE OPINION THAT AS NO SUPPORTIVE DOCUMENT/S IN RESPECT OF SITE DEVELOPMENT, BOUNDARY WALL ETC. WERE FURNIS HED, ASSESSEES CLAIM COULD NOT BE ACCEPTED AND, ACCORDI NGLY, COST OF IMPROVEMENT SHOWN AT RS.19,28,859/- WAS ALSO DISALL OWED. 2.4 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A) AND REITERATED BEFORE THE LD. FIRST APPELLATE A UTHORITY THAT HE HAD PAID THE AMOUNT OF RS. 1,56,37,380/- TO M/S U.P . BONE MILLS (P) LTD ON ACCOUNT OF BREACH OF PURCHASE AGREEMENT DATED ITA NO.4209/DEL/2013 AY: 2009-10 6 1.07.2008, WHICH THE ASSESSEE HAD EXECUTED WITH THE SAID COMPANY FOR SALE OF PART OF LAND. IT WAS REITERATED THAT THE ASSESSEE APPREHENDED THAT THE PROPOSED BUYER WAS PL ANNING TO TAKE FORCEFUL POSSESSION OF THE ENTIRE PIECE OF LAN D I.E. EVEN THE PIECE OF LAND WHICH WAS NOT A PART OF SAID AGREEMEN T AND HE WAS, THUS, WAS FORCED TO PAY THE SAID COMPENSATION. HOWEVER, THE LD. CIT (A) WAS OF THE OPINION THAT THE EXPLANATION OFF ERED BY THE ASSESSEE AS VERY CURSORY, DEVOID OF MUCH LOGIC AND ALSO DEVOID OF THE REQUISITE DOCUMENTARY EVIDENCE. THE LD. CIT (A) OPINED THAT THE ENTIRE EXPLANATION REGARDING PURCHASE AGREEMENT WITH M/S U.P. BONE MILLS (P) LTD., SUBSEQUENT TERMINATION OF ANY SUCH AGREEMENT, THE PAYMENT OF SUCH A HUGE COMPENSATION ETC. WERE ALL WITHOUT ANY PIECE OF REQUISITE DOCUMENT, SO AS TO LEND EVEN REASONABLE CREDENCE TO SUCH EXPLANATION. THE LD. CI T (A) OBSERVED THAT THE ENTIRE STORY OF ANY SUCH APPREHENSION OF FORCEFUL POSSESSION AND PAYMENT OF COMPENSATION, WE RE ALL COOKED UP STORY FOR THE PURPOSE OF CAMOUFLAGING PAY MENTS MADE ON SOME OTHER PROJECTS OR FOR SOME OTHER PURPOSE BU SINESS-OR NON BUSINESS, LEGAL OR ILLEGAL AND THAT THE ENTIRE EXPLANATION WAS WORTH REJECTING AT THE FIRST INSTANCE ITSELF. THE L D. CIT (A) FURTHER OBSERVED THAT IN THE PRESENT CASE, NEITHER THE FACT OF ANY REAL ITA NO.4209/DEL/2013 AY: 2009-10 7 THREAT OR TITLE HAS BEEN EVIDENCED, NOR ANY SUCH COMPENSATION/CLAIMED IN RESPECT OF M/S U.P. BONE MI LLS (P) LTD. WHICH COULD REQUIRE SUCH HUGE COMPENSATION, BEEN AD DUCED. THE LD. CIT (A) UPHELD THE ACTION OF THE A.O. IN DISALL OWING THE CLAIM OF RS. 1,56,37,380/-. SIMILARLY, IN RESPECT OF THE COST IMPROVEMENT OF RS. 19,28,859/- ALSO, THE LD. CIT (A ) REJECTED THE ASSESSEES CLAIM ON THE GROUND THAT NO DETAILS OR D OCUMENTARY EVIDENCE/S HAVE BEEN FURNISHED EITHER BEFORE THE A. O. OR EVEN BEFORE HIM. 2.5 NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HA S RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. THAT THE LEARNED THE FOLLOWING GROUNDS CIT (APPEAL) HAS ERRED IN UPHOLDING THE ORDER PASSED BY THE ASSESSIN G OFFICER IN THE INSTANT CASE EVEN THROUGH THE ASSESSING OFFICER DID NOT HAVE ANY VALID JURISDICTION TO PASS THE IMPUGNED ASSESSM ENT ORDER. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN UPH OLDING THE DISALLOWED OF RS.1,56,37,380/- MADE BY THE ASSESSIN G OFFICER WHILE COMPUTING INCOME FROM LONG TERM CAPITAL GAINS . 3. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN UPH OLDING THE DISALLOWANCE OF RS.26,35,200/- BEING THE INDEXED C OST OF LAND FILING, SITE DEVELOPMENT, GROUND LEVEL LING AND EXP ENDITURE ON BOUNDARY WALL AMOUNTING TO RS.19,28,859/- MADE BY T HE ASSESSING OFFICER WHILE COMPUTING INCOME FROM CAPIT AL GAINS. 4. THAT THE APPELLANT CRAVES THE RIGHT TO AMEND, A PPEND, DELETE ANY OR ALL GROUNDS OF APPEAL. ITA NO.4209/DEL/2013 AY: 2009-10 8 3. THE LD. AR ASSAILED THE ACTION OF BOTH THE LO WER AUTHORITIES IN REJECTING THE ASSESSEES CLAIM OF DEDUCTION OF R S.1,56,37,380/- AS ALLOWABLE DEDUCTION U/S 48 OF THE ACT AS GENUINE COST OF IMPROVEMENT. THE LD AR VEHEMENTLY SUBMITTED THAT TH E ONLY POINT WHICH WAS RAISED BY THE AO IN THE ASSESSMENT PROCEEDINGS WAS THE ALLOWABILITY OF THE IMPUGNED PAYMENT AS COS T OF IMPROVEMENT WITHIN THE MEANING OF SECTION 48 OF THE ACT. THE LD AR REFERRED TO THE ASSESSMENT ORDER AND SUBMITTED T HAT THE FOLLOWING ASPECTS WERE NOT CALLED IN QUESTION BY TH E AO I) THAT THERE WAS A WRITTEN AGREEMENT DATED 1/07/2008 (PAPE R BOOK PAGES 39 TO 41) FOR SALE OF GIVEN LAND ON A RS 100 STAMP PAPER; II) THAT SAID AGREEMENT CONTAINED A COVENANT THAT I N EVENT OF LAND BEING NOT SOLD TO THE BUYER, THE SELLER WILL COMPEN SATE THE BUYER AT THE AGREED SUM; III) THAT ULTIMATELY THE ASSESSE E SOLD THE LAND TO SOME OTHER BUYER AND COULD NOT SELL THE LAND TO THE PROPOSED BUYER AS THE LAND WAS MORTGAGED WITH STATE BANK OF INDIA AND NO OBJECTION CERTIFICATE (NOC) COULD NOT BE OBTAINE D AS AGREED; IV) THAT THE AFORESAID AMOUNT IS DULY DISCLOSED AS INCOME IN THE HANDS OF THE RECIPIENT BUYER IN ITS AUDITED PROFIT/ LOSS ACCOUNT (PAPER BOOK PAGES 22). ITA NO.4209/DEL/2013 AY: 2009-10 9 3.1 THE LD AR FURTHER SUBMITTED THAT ONCE NO DOUBT WAS CAST ON THE SAID AGREEMENT BY THE AO DURING ASSESSMENT, THE ONLY QUESTION REQUIRING CONSIDERATION AT THIS STAGE WAS THE ALLOWABILITY OF THE PAYMENT UNDER SECTION 48 OF THE ACT MADE TO THE PROPOSED BUYER AS PER THE AGREEMENT. IT WAS THE SUBMISSION OF THE LD. AR THAT THE BURDEN TO ESTABLISH THAT THE SAID AGREEMENT WAS SHAM OR BOGUS WAS ON THE REVENUE AND THE SAME HAS NOT BEEN DISCHARGED. IT WAS FURTHER SUBMITTED T HAT THE LOWER AUTHORITIES HAVE NOT BEEN ABLE TO CONTROVERT, BY AN Y POSITIVE MATERIAL, THE AGREEMENT ON RECORD. LD AR FURTHER SU BMITTED THAT NO ENQUIRY U/S 131/133(6) OF THE ACT WAS CONDUCTED BY ANY OF THE LOWER AUTHORITIES BEFORE REJECTING THE CLAIM OF THE ASSESSEE. 3.2 THE LD AR FURTHER SUBMITTED THAT THE HONBLE KE RALA HIGH COURTS DECISION IN THE CASE OF AMBAT ENCHKUTY MENO N REPORTED IN 111 ITR 880 AND RELIED UPON BY THE AO WHILE MAKI NG THE DISALLOWANCE, WAS NO LONGER A GOOD LAW AS THE SAME HAD BEEN OVERRULED BY THE HONBLE APEX COURT IN THE CASE OF RM ARUNACHALAM REPORTED IN 227 ITR 229 WHEREIN THE AFO RESAID JUDGMENT OF THE HONBLE KERALA HIGH COURT HAS BEEN EXPRESSLY DISAPPROVED. THE LD. AR ALSO REFERRED TO AN ORDER O F THE KOLKATA ITAT IN THE CASE OF SATYABRATA DEY VS DCIT (AT PAPE R BOOK PAGES ITA NO.4209/DEL/2013 AY: 2009-10 10 69 TO 78) AND RELIED ON THE SAID ORDER AND SUBMITTE D THAT WHEN TITLE IS ANY WHERE DEFECTIVE, INCOMPLETE OR IMPERFE CT, ANY PAYMENT TO MAKE THE TITLE COMPLETE IS ALLOWABLE U/S 48 OF T HE ACT. THE LD. AR ALSO STRONGLY RELIED ON HONBLE APEX COURTS DECISION IN CASE OF SANJEEV LAL REPORTED IN 365 ITR 389 (SC) TO HIGHLIGHT THE IMPORTANCE OF AGREEMENT. THE LD AR ALSO READ OUT TH E PROVISIONS OF SECTION 48 OF THE ACT TO HIGHLIGHT THAT SECTION 48(II) USES THE PHRASE ANY BEFORE IMPROVEMENT, WHICH MUST BE GIVE N DUE WEIGHTAGE. LD AR PLEADED THAT THE LD. CIT (A) HAS FAILED TO CONSIDER THE ISSUE FROM AN OBJECTIVE CRITERIA AND H AS MIXED HIS PERSONAL VIEWS INTO THE LEGAL ASPECTS TO DECIDE AGA INST THE ASSESSEE. LD AR STATED THAT LD. CIT (A)S PERSONAL AND ORAL PERCEPTION ABOUT NO THREAT EXISTING CANNOT DEMOLISH THE ASSESSEES AVERMENT WHICH IS SUPPORTED BY UN-ASSAIL ED DOCUMENTARY EVIDENCE/S. 3.3 THE LD. AR FURTHER SUBMITTED THAT MERELY ON ORD ER SHEET, A VAGUE AND ARBITRARY REASON WAS PUT FORTH TO THE ASS ESSEE, AS EVIDENT FROM PAGE 2 OF THE IMPUGNED ORDER, WHICH WA S COMPLETELY INADEQUATE TO FOIST ANY TAX LIABILITY ON ASSESSEE. LD AR SUBMITTED THAT THE IMPORTANCE OF SPECIFIC AND VALID SHOW CAUS E NOTICE COULD NOT BE SUBSTITUTED BY A RITUALISTIC ORDER SHEET E NTRY. HE PLACED ITA NO.4209/DEL/2013 AY: 2009-10 11 RELIANCE ON THE CBDT INSTRUCTION NO. 20 OF 2015 DAT ED 29/12/2015 WHICH CLARIFIED THE EXISTING AND PREVALE NT LEGAL POSITION ON SHOW CAUSE NOTICE THAT A VALID SHOW CAU SE NOTICE IS A MUST BEFORE MAKING ANY ADDITION. LD AR STATED THAT SINCE NO SHOW CAUSE NOTICE WAS ISSUED BEFORE MAKING SUBJECT ADDITIONS, THE SAME MAY BE DELETED ON THIS SHORT COUNT ITSELF. LD AR RELIED ON FOLLOWING CASE LAWS TO SUPPORT HIS PLEA: I) DELHI HIGH COURT IN KULDEEP SINGH (12/08/2014) II) KOLKATA ITAT IN SATYABRATA DEY (14/05/2013) III) DELHI HIGH COURT IN EAGLE THEATRES 205 TAXMAN 449 IV) BOMBAY HIGH COURT IN 190 ITR 56 V) MADRAS HIGH COURT IN 261 ITR 222 3.4 APROPOS THE SECOND ISSUE OF RS 19,28,859/-, T HE LD AR SUBMITTED THAT SINCE THE MATTER WAS OLD AND THE COS T OF IMPROVEMENT WAS GENUINELY INCURRED, JUST FOR WANT O F SPECIFIC DOCUMENTARY EVIDENCE/S, THE AO CANNOT REJECT IT WHE RE IT HAS BEEN EXPRESSLY SUBMITTED THAT SAID COST WAS INCURRE D IN YEAR OF ACQUISITION OF LAND I.E. IN FINANCIAL YEAR 2001-200 2 TOWARDS LAND LEVELLING, EARTH FILLING, BOUNDARY WALL ETC. IT WAS ALSO SUBMITTED THAT AS PER THE STATUTORY PRESCRIPTION OF RULE 6F ( 5) OF THE INCOME TAX RULES, 1962, THE LIMITATION TO KEEP THE BOOKS A ND RECORDS ITA NO.4209/DEL/2013 AY: 2009-10 12 EXPIRED FOR THE PREVIOUS YEAR 2001-2002(AY 2002-200 3) ON 31.3.2009 I.E. BEFORE THE RETURN FILING DATE U/S 13 9 OF THE ACT ON 30.09.2009 AND ALSO BEFORE THE ISSUANCE OF STATUTOR Y NOTICE U/S 143(2) WHICH WAS DATED 22.09.2010. IN THE ALTERNATE , THE LD AR PLEADED THAT A SUITABLE VIEW MAY BE TAKEN IN THE OV ERALL FACTUAL SITUATION. 4. THE LD. DR OPPOSED THE ARGUMENTS OF LD AR. LD DR ARGUED THAT THE ASSESSEE DID NOT ESTABLISH HIS CLAIM FOR C OST OF IMPROVEMENT OF RS 156,37,380/- ON TENABLE LEGAL GR OUNDS. LD DR ARGUED THAT MERE AGREEMENT WAS NOT GOOD ENOUGH T O ESTABLISH ASSESSEES CASE QUA THE CLAIM OF RS 156,3 7,380/-. LD DR COUNTERED THE ARGUMENT OF THE LD AR THAT THE AO WAS INCORRECT IN DISALLOWING THE ASSESSEES CLAIM. IT W AS SUBMITTED THAT THE CLAIM WAS NOT MAINTAINABLE U/S 48 AT ALL. LD DR RELIED ON ORDERS PASSED BY THE AO AND THE LD. CIT (A). ON THE SECOND ISSUE OF RS 19,28,859/-, LD DR REITERATED THAT NOTH ING CONCRETE WAS FILED BY THE ASSESSEE IN THIS REGARD. SUMMING U P HIS ARGUMENTS, LD DR PRAYED FOR THE DISMISSAL OF THE AS SESSEES APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. AS FAR AS THE FIRST ISSUE B EFORE US IS ITA NO.4209/DEL/2013 AY: 2009-10 13 CONCERNED, IT IS SEEN THAT THE AO REJECTED THE CLAI M OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD NEITHE R MADE ANY ALTERATION NOR ANY ADDITIONS TO THE ASSET. THE AO W AS OF THE OPINION THAT THE AMOUNT PAID BY THE ASSESSEE WAS ON ACCOUNT OF COMPENSATION DUE TO CANCELLATION OF AGREEMENT BY TH E ASSESSEE HIMSELF WHICH WAS NOT DEDUCTIBLE FROM THE CAPITAL G AINS UNDER THE PROVISIONS OF SECTION 48 OF THE ACT. HOWEVER, T HE LD. CIT (A), WHILE DISMISSING THE ASSESSEES APPEAL, DID NOT ACT IVELY CONSIDER THE PLEADINGS OF THE ASSESSEE VIS-A-VIS THE DEDUCTIBILITY OF THE AMOUNT PAID AS COMPENSATION U/S 48 OF THE ACT BUT H ELD AGAINST THE ASSESSEE BY QUESTIONING THE VERY GENUINENESS AN D THE NECESSITY OF THE IMPUGNED PAYMENT. THUS, THE LD. CI T (A) FAILED TO EXAMINE THE CLAIM OF THE ASSESSEE IN LIGHT OF TH E PROVISIONS OF SECTION 48 OF THE ACT. 5.1 AS FAR AS THE EVIDENTIARY VALUE OF SUCH TYPE OF AGREEMENTS IS CONCERNED, THE HONBLE APEX COURT HAD AN OCCASION T O DEAL WITH THE EVIDENTIARY VALUE OF AN AGREEMENT TO SELL AND P URCHASE AND THE RIGHTS CREATED THERE-FROM IN THE CASE OF SANJEE V LAL REPORTED IN 369 ITR 389 (SC). THE HONBLE APEX COURT OBSERVE D AS UNDER: ...23. CONSEQUENCES OF EXECUTION OF THE AGREEMENT TO SELL ARE ALSO VERY CLEAR AND THEY ARE TO THE EFFECT THAT THE APPELLANTS COULD NOT HAVE SOLD THE PROPERTY TO SOMEONE ELSE. I N PRACTICAL ITA NO.4209/DEL/2013 AY: 2009-10 14 LIFE, THERE ARE EVENTS WHEN A PERSON, EVEN AFTER EX ECUTING AN AGREEMENT TO SELL AN IMMOVEABLE PROPERTY IN FAVOUR OF ONE PERSON, TRIES TO SELL THE PROPERTY TO ANOTHER. IN O UR OPINION, SUCH AN ACT WOULD NOT BE IN ACCORDANCE WITH LAW BEC AUSE ONCE AN AGREEMENT TO SELL IS EXECUTED IN FAVOUR OF ONE PERSON, THE SAID PERSON GETS A RIGHT TO GET THE PROPERTY TR ANSFERRED IN HIS FAVOUR BY FILING A SUIT FOR SPECIFIC PERFORMANC E AND THEREFORE, WITHOUT HESITATION WE CAN SAY THAT SOME RIGHT, IN RESPECT OF THE SAID PROPERTY, BELONGING TO THE APPE LLANTS HAD BEEN EXTINGUISHED AND SOME RIGHT HAD BEEN CREATED I N FAVOUR OF THE VENDEE/TRANSFEREE, WHEN THE AGREEMENT TO SEL L HAD BEEN EXECUTED.... 5.2 COMING TO THE FACTS OF THE PRESENT CASE, THE L D. CIT (A) HAS DOUBTED THE GENUINENESS OF THE AGREEMENT AND HAS EV EN HINTED AT THE POSSIBILITY OF THE ASSESSEE HAVING FABRICATE D THE STORY TO SUIT HIS ENDS. HOWEVER, THESE OBSERVATIONS OF THE L D. CIT (A) ARE NOT BACKED BY ANY COGENT EVIDENCE BUT ARE MORE IN T HE REALM OF SURMISES AND CONJECTURES. EVEN THE LD DR, DURING TH E COURSE OF ARGUMENTS BEFORE US, DID NOT PUT ANY SORT OF ARGUME NT TO REMOTELY DOUBT THE GENUINENESS OF THE AGREEMENT. TH E LD. DR COULD NOT REFUTE THE ASSERTION OF THE LD. AR THAT T HE PAYEE HAD DULY ACCOUNTED/DISCLOSED THE SAID AMOUNT AS INCOME IN ITS HANDS. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER S HOWS THAT THIS ASPECT HAS NOT BEEN LOOKED INTO AT ALL BY THE AO. THUS, THE FINDINGS BY THE AO AND THE LD. CIT (A) ARE BASED ON TWO DIFFERENT FOOTINGS. FURTHER, THE AO, WHILE DISALLOWING THE AS SESSEES CLAIM HAS RELIED UPON THE HONBLE KERALA HIGH COURTS DEC ISION IN THE ITA NO.4209/DEL/2013 AY: 2009-10 15 CASE OF AMBAT ENCHKUTY MENON REPORTED IN 111 ITR 88 0. HOWEVER, THIS JUDGMENT OF THE HONBLE KERELA HIGH C OURT IS NO LONGER A GOOD LAW AS THE SAME HAS BEEN OVERRULED BY THE HONBLE APEX COURT IN THE CASE OF RM ARUNACHALAM REPORTED I N 227 ITR 229 WHEREIN THE AFORESAID JUDGMENT OF THE HONBLE K ERELA HIGH COURT HAS BEEN EXPRESSLY DISAPPROVED. IT REMAINS UN DISPUTED THAT THE ASSESSEE WAS NOT SPECIFICALLY CONFRONTED O N THIS ISSUE AND A SIMPLE ORDER SHEET ENTRY WAS MADE BEFORE MAKI NG THE DISALLOWANCE. THEREFORE, ON AN OVERALL APPRECIATION OF THE CIRCUMSTANCES, WHICH INCLUDE THE AOS RELIANCE ON A JUDGMENT OF THE HONBLE KERELA HIGH COURT WHICH HAD BEEN OVER-R ULED, THE FAILURE OF THE AO TO ISSUE A SHOW-CAUSE NOTICE BEFO RE MAKING THE PROPOSED DISALLOWANCE, THE FAILURE OF THE LD. CIT ( A) TO SPECIFICALLY ADJUDICATE ON THE ISSUE OF ADMISSIBILITY OF ASSESSE ES CLAIM U/S 48 OF THE ACT COUPLED WITH THE AO NOT EXAMINING THE SALE AGREEMENT TO TEST ITS VERACITY, WE ARE OF THE CONSI DERED OPINION THAT THE ENTIRE ISSUE NEEDS TO BE RESTORED TO THE F ILE OF THE AO FOR RE-EXAMINING THE ISSUE IN LIGHT OF THE EVIDENCES FI LED BY THE ASSESSEE AS WELL AS THE SETTLED JUDICIAL PRECEDENTS . ACCORDINGLY, WE RESTORE THE ISSUE OF DETERMINATION OF THE DEDUCT IBILITY OF RS. 1,56,37,380/- AS AN ADMISSIBLE DEDUCTION TO THE FIL E OF THE AO TO ITA NO.4209/DEL/2013 AY: 2009-10 16 BE DECIDED IN TERMS OF OUR OBSERVATIONS ABOVE AFTER GIVING A PROPER OPPORTUNITY TO THE ASSESSEE. 5.3 AS FAR AS THE SECOND ISSUE OF RS 19,28,859/- EXPENDED TOWARDS THE COST OF IMPROVEMENT IS CONCERNED, WE AR E OF THE VIEW THAT TO MEET ENDS TO JUSTICE, TAKING INTO ACCOUNT H OLISTIC CONSIDERATION OF ALL THE FACTS, WE ARE OF THE OPINI ON THAT HALF OF THE AMOUNT CLAIMED MAY BE TREATED AS ALLOWED AS THE FACTUM OF IMPROVEMENT BY INCURRING EXPENSES IS NOT DOUBTED AN D WE ACCORDINGLY SUSTAIN 50% OF THE SAME. ACCORDINGLY GR OUND NO. 3 IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAN DS PARTLY ALLOWED IN TERMS OF OUR DIRECTIONS. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.09.2017 . SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH SEPTEMBER, 2017 GS ITA NO.4209/DEL/2013 AY: 2009-10 17 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSISTANT REGISTRAR ITAT NEW DELHI