ADDL. CIT - 18(1), MUMBAI V. MRS. INDRANI CHANDRAKANT CHOKSI, MUMBAI

ITA 4481/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87957 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 30-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2013
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Earning of tax free income; Cost of acquisition; Capital expenditure
• Section: 54F; 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.3541/MUM/2013 ASSESSMENT YEAR: -2009-10 INDRANI CHANDRAKANT CHOKSI H-1, EDEN HALL, 8 TH FLOOR, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400018. VS.` ADDL. COMMISSIONER OF INCOME TAX, RANGE 18(1), ROOM NO. 118, PIRAMAL CHAMBERS, LALBAUG MUMBAI 400012. APPELLANT RESPONDENT ITA NO.4481/MUM/2013 ASSESSMENT YEAR: -2009-10 ADDL. COMMISSIONER OF INCOME TAX, RANGE 18(1), ROOM NO. 118, PIRAMAL CHAMBERS, LALBAUG MUMBAI 400012. VS.` INDRANI CHANDRAKANT CHOKSI H-1, EDEN HALL, 8 TH FLOOR, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400018. APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DAT ED 04.03.2014 OF CIT(A) FOR A.Y. 2009-10. FIRST WE TAK E UP THE APPEAL OF THE ASSESSEE, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED: - ASSESSEE BY SHRI NARESH JAIN REVENUE BY SHRI VIJAY KUMAR BORA DATE OF HEARING 30.12.2014 DATE OF PRONOUNCEMENT 16.01.2015 INDRANI CHANDRAKANT CHOKSI 2 | P A G E GROUND OF APPEAL GROUND NO 1 DISALLOWANCE OF RS.24,766/- U/S 14A OF THE ACT 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C . LT . (A) ERRED IN UPHOLDING DISALLOWANCE OF RS.24 , 766/- U/S 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES IN RESPECT O F THE FOLLOWING EXPENSES: NATURE OF EXPENSE INCURRED AMOUNT (IN RS.) AUDIT FEES 7,304 BANK CHARGES 17 , 462 TOTAL EXPENSES CLAIMED 24,766 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.LT . (A) ERRED IN IGNORING THE FACT THAT THE PROVISIONS OF SECTION 14A OF THE ACT ENABLING DISALLOWANCE OF EXPENSES INCURRED TO E ARN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ARE NOT APPLICABL E TO THE NATURE OF EXPENSES INCURRED BY THE APPELLANT WHICH HAVE BEEN ENUMERATE D ABOVE IN PARA 1. GROUND NO 2 REDUCTION OF RS. 23,62,840/- FOR DEDUC TION CLAIMED U/S 54F OF THE ACT 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T . (A) ERRED IN RESTRICTING THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 54F OF THE ACT TO RS.5,20,65,966/- AND THEREBY DISALLOWING THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 54F OF THE ACT TO THE EXTENT OF RS.23,62,8401- (RS.9,90,0001- PLUS RS.13, 72 , 8401-). 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.IT . (A) ERRED IN IGNORING THE FACT THAT THE APPELLANT H AD RIGHTFULLY CLAIMED THE CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES O F PURCHASE OF A RESIDENTIAL FLAT, OVER AND ABOVE THE PURCHASE CONSIDERATION WHI CH ENTITLED HER FOR CLAIM OF DEDUCTION U/S 54F OF THE ACT . 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW , THE LEARNED C.IT . (A) ERRED IN IGNORING THE FACT THAT THE APPELLANT H AD PAID CONTRIBUTION OF RS.9,90,0001- TOWARDS BUILDING REPAIRS & DEVELOPMENT FUND, WHICH IS A PRECONDITION TO OBTAIN THE MEMBERSHIP TO THE LOYAL COOP. HSG. SOC . LTD . , IN WHICH THE RESIDENTIAL FLAT IS SITUATED AND CLAIMED AS DEDUCTION U/S 54F OF THE ACT . 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.IT . (A) ERRED IN IGNORING THE FACT THAT THE APPELLANT H AD PAID A SUM OF RS.13,72,8401- TO VARIOUS PARTIES TOWARDS THE RENOV ATION IN THE NATURE OF CAPITAL EXPENDITURE IN ORDER TO MAKE THE SAID RESID ENTIAL FLAT HABITABLE AND CLAIMED AS DEDUCTION U/S 54F OF THE ACT . INDRANI CHANDRAKANT CHOKSI 3 | P A G E GROUND NO 3 ALLOWANCE OF INDEXED COST OF ACQUISITION OF RS.88,25,241/- AGAINST SALE OF SHARE IN IMMOVABLE PROPERTY FOR A CONSIDERATION OF RS.60,95,OOO/- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.IT . (A) ERRED IN NOT DIRECTING THE AO TO COMPUTE THE CA PITAL GAINS AFTER REDUCING THE INDEXED COST OF ACQUISITION OF RS.88,2 5,241/- AND THERE BY IGNORING THE LONG TERM CAPITAL LOSS OF RS.27,30,241 /- ARISING ON SALE OF % SHARE IN PAWANA HOUSE PROPERTY BY THE APPELLANT . 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.IT . (A) ERRED IN IGNORING THE FACT THAT THE APPELLANT W AS ENTITLED TO REDUCE THE INDEXED COST OF ACQUISITION OF RS.88,25,241/- A GAINST THE SALES CONSIDERATION OF RS . 60 , 95,OOOI-. IN VIEW OF THE ABOVE, THE APPELLANT INDIVIDUAL PRAY S THAT: A. THE DISALLOWANCE OF RS.24,655/- U/S 14A OF THE ACT BE DELETED AND RELIEF BE GIVEN TO THE APPELLANT . B. THE REDUCTION OF THE CLAIM OF THE APPELLANT FOR DE DUCTION U/S 54F OF THE ACT TO THE EXTENT OF RS.23,62,8401- BE IGNORED AND RELI EF BE GIVEN TO THE APPELLANT . C. THE BENEFIT OF INDEXED COST OF ACQUISITION OF RS.8 8 , 25 , 241/- AGAINST THE SALES CONSIDERATION OF RS.60 , 95 , OOOI- BE ALLOWED AND LONG TERM CAPITAL LOSS OF RS.27,30,241/- ARISING ON SALE OF % SHARE IN PAWANA HOUSE PROPERTY BY THE APPELLANT HUF BE COMPUTED. 2. GROUND NO. 1 IS REGARDING DISALLOWANCE U/S 1 4A. THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 14,71,443/- WHICH IS CLAIMED E XEMPT U/S 10(34). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIM ED RS. 8,15,135/- AS EXPENSES EXCLUDING PURCHASES IN THE P&L ACCOUNT. TH E ASSESSING OFFICER MADE A DISALLOWANCE OF RS. 1,43,647/- U/S 14A AS WOR KED OUT UNDER RULE 8D OF THE INCOME TAX RULES. 3. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOW ANCE OF INTEREST COMPUTED UNDER RULE 8D(2) AND RESTRICTED THE ADMINISTRA TIVE EXPENSES TO INDRANI CHANDRAKANT CHOKSI 4 | P A G E THE EXTENT OF RS. 24.766/- BEING TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), BOTH ASSESSEE AND R EVENUE FILED CROSS APPEALS ON THIS ISSUE. 4 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT NO EXPENSES WERE INCURRED BY THE ASSE SSEE FOR EARNING THE DIVIDEND INCOME, THEREFORE, NO DISALLOWANCE CAN BE MAD E U/S 14A. HE HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER WORKED OU T THE ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) WHICH IS MANY TIMES MORE THAN THE ACTUAL EXPENDITURE CLAIMED BY THE ASSESSEE IN THE P&L ACCOUN T. HE HAS FURTHER CONTENDED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT CANNOT BE ATTRIBUTED TO THE EARNING OF DIVIDEND INCOME . 5 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT THE DISALLOWANCE HAS TO BE WORKED OUT AS PER RULE 8D AND, THEREFORE, THE ASSESSING OFFICER IS JUS TIFIED IN DISALLOWING THE AMOUNT OF EDXPENSES UNDER RULE 8D. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THE EXPENSES WHI LE COMPUTING THE INCOME FROM PROFITS & GAINS OF BUSINESS AS UNDER:- NATURE OF EXPENSES INCURRED AMOUNT IN RS. AUDIT FEES 7,304 INDRANI CHANDRAKANT CHOKSI 5 | P A G E BANK CHARGES 17,462 INTEREST PAID 68,187 TOTAL EXPENSES CLAIMED 92,953 7 THE ASSESSING OFFICER MADE DISALLOWANCE U/S 14A R .W.R 8D AS UNDER:- HEAD OF DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULS AMOUNT IN RS. EXPENDITURE DIRECTLY RELTING TO EXEMPT INCOME U/R 8D2(I) NIL INTEREST PAID U/R 8D(2)(II) 16,293 AVERAGE VALUE INVESTMENTS U/R 8D2(III) 1,27,354 TOTAL DISALLOWANCE U/S 14A OF THE ACT 1,43,647 8 THUS IT IS CLEAR THAT THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES UNDER SECTION 14A HAS BEEN MADE BY THE ASS ESSING OFFICER AT RS. 1,27,354/- WHICH IS EVEN MORE THAN THE TOTAL EXPENS ES CLAIMED BY THE ASSESSEE. THE CIT(A)HAS RESTRICTED THE DISALLOWANCE TO THE ACT UAL CLAIM OF EXPENSES WITHOUT GOING INTO THE ASPECT OF ATTRIBUTABILITY OF THE SAID EXPENSES FOR EARNING THE DIVIDEND INCOME. THUS IT IS CLEAR THAT THE WORKI NG UNDER THE PROVISIONS OF RULE 8D MILITATES WITH THE UNDISPUTED FACT AND THUS BECOME UNWORKABLE AS IT GIVES THE RESULTS THAT IS INCONSISTENT WITH THE UND ISPUTED FACT. IT SHOWS THAT THERE IS AN INHERENT FALLACY UNDER THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES SO FAR AS IT RESULTS THE QUANTUM OF DISALLOWA NCE MORE THAN THE ACTUAL EXPENDITURE CLAIMED AND OTHERWISE ABSOLUTE CONTRADICTO RY TO THE FACT. HENCE INDRANI CHANDRAKANT CHOKSI 6 | P A G E THERE AS SITUATIONS WHEN THE WORKING OF RULE 8D GIV ES ABSURD RESULTS IN COMPLETE DISREGARD TO THE FACT OF THE ISSUE. THEREFO RE, THE PROVISIONS OF RULE 8D SUFFERS SERIOUS FUNDAMENTAL DEFECT OF NON ENVISAGE OF THE GROUND REALITY OF ACTUAL EXPENDITURE. IT IS A CASE WHERE A PROVISION I S INTRODUCED TO REMOVE THE MISCHIEF BUT TURN OUT ITSELF TOBE MORE MISCHIEVOUS THAN THE MISCHIEF TO BE REMEDIED. THEREFORE, WHEN A PROVISION BECOME UNWORKA BLE AND UNREALISTIC THEN IT CANNOT BE APPLIED IN SUCH A CASE. IN THE CAS E IN HAND THE ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF AUDIT FEE AND BANK CHARGES TOTAL AMOUNTING TO RS. 24,766/- AND ALSO SHOWN THE INCOME FROM THE BUSINESS AND PROFESSION AT RS. 1,08,35,372/- APART FROM THE DIVIDEND INCOME OF RS. 14,71,443/-. IF THE PROVISIONS OF RULE 8D(2)(III) ARE APPLIED FOR WORKI NG OUT THE DISALLOWANCE U/S 14A WITHOUT CONSIDERING THE ACTUAL EXPENDITURE IT COM ES TO RS. 1,27,354/- WHICH IS MORE THAN FIVE TIMES HIGHER THAN THE ACTUA L EXPENSES CLAIMED BY THE ASSESSEE. THEREFORE, THE PROVISIONS OF RULE 8D(2)(I II) CANNOT BE INVOKED IN THIS CASE. 9. EVEN, OTHERWISE, THESE TWO ITEM OF EXPENDITURE I .E. AUDIT FEE AND BANK CHARGES DO NOT FALL UNDER THE CATEGORY OF THE EXPENDI TURE INCURRED FOR A COMPOSITE ACTIVITY RESULTING TAXABLE AND NON TAXABL E INCOME, THEREFORE, THERE IS NO DIRECT OR PROXIMATE NEXUS OF THESE TWO EXPENDITURE S WITH THE EARNING OF DIVIDEND INCOME. UNDER THE PROVISIONS OF SECTION 14A, T HE APPORTIONMENT OF AN EXPENDITURE IS REQUIRED TO BE MADE ONLY WHEN THE EXPEN DITURE IS INCURRED FOR A COMPOSITE ACTIVITY OR INDIVISIBLE ACTIVITY WHICH RES ULTS TAXABLE AND NON TAXABLE INCOME. IN THE ABSENCE OF ANY NEXUS OF THE EXPENDITU RE IN QUESTION WITH EARNING OF THE DIVIDEND INCOME, NO DISALLOWANCE IS CA LLED FOR U/S 14A OF THE INDRANI CHANDRAKANT CHOKSI 7 | P A G E ACT. ACCORDINGLY WE DELETE THE DISALLOWANCE MADE U/S 1 4A ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE. 10. GROUND NO. 2 IS REGARDING REDUCTION OF CLAIM U/S 54F. THE ASSESSEE HAS EARNED THE LONG TERM CAPITAL GAIN OF RS. 7,53,44,067 /- FROM THE SALE OF SHARES OF M/S HINDUSTAN PLATINUM LTD., THE ASSESSEE CLAIMED DEDUCTION U/S 54EC TO THE EXTENT OF RS. 50 LAKH FOR INVESTMENT IN REB (RU RAL ELECTRIFICATION BONDS) AND ALSO CLAIMED DEDUCTION U/S 54F OF RS. 5,44,28,806/- F OR INVESTMENT IN NEW RESIDENTIAL HOUSE. THE ASSESSING OFFICER NOTED THAT T HE AMOUNT OF RS. 5,44,28,806/- INCLUDES A SUM OF RS. 9,90,000/- PAID TO THE SOCIETY TOWARDS REPAIR AND DEVELOPMENT FUND. THE ASSESSING OFFICER AC CORDINGLY, DISALLOWED THE CLAIM OF DEDUCTION U/S 54F IN RESPECT OF THE SA ID AMOUNT OF RS. 9,90,000/-. 11. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A) BUT COULD NOT SUCCEED. 12. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT AS PER DEED OF TRANSFER EXECUTED BY THE ASSESSEE FOR THE PURPOSE OF ACQUIRING RESIDENTIAL FLAT, THE ASSESSEE IS REQUIRED TO PAY THE SOCIETY THE TRANSFER CHARGES/DONATION/ CONTRIBUTION PAYABLE FOR THE SAID SOCIETY. ACCORDINGLY, THE ASSESSEE MADE THE PAYMENT OF RS. 9, 90,000/- TOWARDS CONTRIBUTION OF BUILDING REPAIR AND DEVELOPMENT FUND O F THE SOCIETY. HE HAS FURTHER SUBMITTED THAT WITHOUT THE PAYMENT OF THE SA ID AMOUNT, THE ASSESSEE COULD NOT GET THE ADMISSION TO THE SAID SOCIETY AND A S SUCH SHE WOULD NOT BE IN POSITION TO ENJOY THE FRUITS OF THE PURCHASE OF SAI D RESIDENTIAL FLAT. THE LD. INDRANI CHANDRAKANT CHOKSI 8 | P A G E AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT IN T HE ASSESSMENT OF THE SOCIETY, THE ASSESSING OFFICER HAS DISALLOWED THIS AM OUNT AND HAS TAXED THE SAME AND, THEREFORE, THE SAID AMOUNT SHOULD BE ALLOWED AS PART OF INVESTMENT IN THE NEW ASSET. 13. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT T HE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS GIVEN A FINDING THAT THE PAY MENT TO THE SOCIETY IS VOLUNTARY CONTRIBUTION AFTER THE PROPERTY WAS TRANS FERRED IN THE NAME OF THE ASSESSEE. THUS THE PAYMENT IS NOTHING TO DO WITH THE PURCHASE CONSIDERATION OF THE FLAT IN QUESTION BUT FOR THE MAINTENANCE AND DEV ELOPMENT CHARGES PAID TO THE SOCIETY. HE HAS RELIED UPON THE ORDER OF THE AUTH ORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. IT IS PERTINENT TO NOTE THAT APART FROM RS. 9.90 LAKH AS SUM OF RS. 25,600/- WAS ALSO PAID BY THE ASSESSEE TO THE SOCIET Y AS ENTRY FEE WHICH WAS ALLOWED BY THE ASSESSING OFFICER AS PART OF THE COST OF THE ACQUISITION OF FLAT. THUS IT IS CLEAR THAT FOR ENTRANCE IN THE SOCIETY, THE CHARGES WERE ONLY RS. 25,600/- WHICH HAS BEEN ALLOWED. THERE IS NO MANDATE OF PAYMENT OF RS. 9.90 LAKH TO THE SOCIETY AS A PRE CONDITION FOR TRANSFER OF FLAT IN QUESTION WHEN THE ENTRANCE FEE IS SEPARATELY PAID BY THE ASSESSEE. FU RTHER IT WAS PAID FOR MAINTENANCE AND DEVELOPMENT FUND OF THE SOCIETY AND HA S NO CONNECTION WITH ACQUISITION OF OR TRANSFER OF FLAT IN QUESTION. T HE STAND OF THE SOCIETY IN THE ASSESSMENT PROCEEDINGS OF THE SOCIETY IS THAT THE A MOUNT IS COLLECTED FROM THE MEMBERS FOR CARRYING OUT REPAIR OF THE BUILDING OF T HE SOCIETY AND NOT OF ANY PARTICULAR FLAT. SUCH REPAIR IS CARRIED OUT ONCE IN EVERY 10 TO 12 YEARS, THEREFORE, WHEN THE PAYMENT IS NOT FOR ACQUISITION OR TRANSFER OF FLAT THEN IT INDRANI CHANDRAKANT CHOKSI 9 | P A G E CANNOT BE PART OF THE COST OF THE NEW FLAT FOR THE PURPOSE OF EXEMPTION U/S 54F OF THE INCOME TAX ACT. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 15. GROUND NO. 2 IS REGARDING REDUCTION OF DEDUCTION U /S 54F ON ACCOUNT OF EXPENDITURE ON RENOVATION. IN THE CLAIM OF DEDUCTION U/S 54F, THE ASSESSEE ALSO INCLUDED THE RENOVATION EXPENDITURE OF RS. 13,72,814/- . THE ASSESSING OFFICER NOTED THAT AT THE TIME OF DEED OF TRANSFER ON 30.12.20 08, THE VENDOR WAS RESIDING IN THE FLAT. THE ASSESSING OFFICER ACCORDING LY DISALLOWED THE DEDUCTION U/S 54F ON THIS AMOUNT OF RS. 13,72,814/- CLAIMED BY THE ASSESSEE AS INCURRED FOR MAKING THE PROPERTY IN A HABITABLE CONDITION. 16. ON APPEAL, THE ASSESSEE PLACED RELIANCE ON VARIO US DECISIONS OF THIS TRIBUNAL, HOWEVER, COULD NOT SUCCEED. 17. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS CONTENDED THAT THE EXPENDITURE HAS BEEN INCURRED FOR M AKING THE FLAT IN A HABITABALE CONDITION. HE HAS REFERRED THE DETAILS O F THE EXPENDITURE AND SUBMITTED THAT THE EXPENDITURE WERE NECESSARY FOR MA KING THE FLAT FIT FOR HABITATION. HE HAS RELIED UPON THE VARIOUS DECISIONS AS RELIED BEFORE THE CIT(A) AS WELL AS THE DECISION OF THIS TRIBUNAL DATED 04.0 9.2013 IN THE CASE OF MEHER R. SURTY, MUMBAI VS. ITO IN ITA NO. 531/MUM/2013. INDRANI CHANDRAKANT CHOKSI 10 | P A G E 18. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER AS WE LL AS THE CIT(A) HAS GIVEN THE FINDING THAT THE EXPENDITURE WAS NOT REQUIRED FOR MAKING THE FLAT FIT FOR HABITATION AS THE VENDOR WAS RESIDING IN THE FLAT AT THE TIME OF TRANSFER. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. FROM THE DETAILS OF THE EXPENDITURE IT IS MA NIFEST THAT THE EXPENDITURE HAS BEEN INCURRED FOR REPLACING THE FLOOR WITH MARBL E AS WELL AS WALL TILES AND GRANITES. THERE IS NO REPORT OR ANY ASSESSMENT FROM THE ARCHITECT THAT THE WORK WAS REQUIRED FOR MAKING THE FLAT HABITABLE. THE ASSE SSEE HAS RELIED UPON THE VARIOUS DECISIONS OF THIS TRIBUNAL ON THIS POINT. HO WEVER IN ALL THE DECISIONS IT WAS NOTED THAT THE EXPENDITURE WAS INCURRED FOR MAK ING THE RESIDENTIAL FLAT HABITABLE. THIS FACT WAS DULY BROUGHT ON RECORD IN T HOSE CASES BY WAY OF REPORT OF ARCHITECT. IN THE CASE IN HAND, NO SUCH EVIDENCE WAS PRODUCED BY THE ASSESSEE TO SHOW THAT THE HOUSE WAS NOT IN A HABITA BLE CONDITION AND THE EXPENDITURE WAS INCURRED FOR MAKING IT HABITABLE. ACC ORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA T HIS ISSUE. 20. GROUND NO. 3 IS REGARDING DISALLOWANCE OF INDEXED C OST OF ACQUISITION OF IMMOVABLE PROPERTY, SHARE IN WHICH WAS SOLD BY THE ASSESSEE. 21. WE HAVE GONE THROUGH THE IMPUGNED ORDERS OF AUTH ORITIES BELOW AND FIND THAT NO SUCH GROUND WAS EITHER RAISED BEFORE THE AUTHORITIES BELOW OR ADJUDICATED BY THE AUTHORITIES BELOW. EVEN NO ARGUMEN T WAS ADDRESSED BY THE ASSESSEE BEFORE US ON THIS ISSUE EXCEPT THE GROUND. THEREFORE, THIS GROUND OF INDRANI CHANDRAKANT CHOKSI 11 | P A G E THE ASSESSEES APPEAL DOES NOT EMANATE FROM THE IMPU GNED ORDERS OF THE AUTHORITIES BELOW AND ACCORDINGLY THE SAME IS DISMISSE D. 22. THE REVENUE IN ITS APPEAL HAS RAISED FOLLOWING G ROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,02,5881- MADE U/S14A OF THE INCOME TAX ACT WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE ULS 14A HAS BEEN MADE AS PRESCRIBED UNDER RULE 8D OF THE INCOME TAX RULES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 60,95,0001 - BEING INC OME FROM OTHER SOURCES WITHOUT APPRECIATING THE FACT THAT NO REMAND REPORT WAS CALLED FOR FROM THE AO TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE. 23. GROUND NO. 1 IS REGARDING DISALLOWANCE U/S 14A RE STRICTED BY THE CIT(A). 24. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS GROUND IS COMMO N TO THE GROUND NO. 1 OF THE ASSESSEES APPEAL AND IN VIEW OF OUR FINDING IN GROUND NO. 1 OF THE ASSESSEES APPEAL, THIS GROUND OF THE REVENUES APPE AL IS DISMISSED. 25. GROUND NO. 2 IS REGARDING DELETION OF ADDITION OF R S. 60,95,000/- U/S 68. 26. THE ASSESSEE HAS SHOWN A RECEIPT OF RS. 60,95,0 00/- AGAINST THE TRANSFER OF HALF SHARE IN THE IMMOVABLE PROPERTY AT PAWANA. THE ASSESSING OFFICER INDRANI CHANDRAKANT CHOKSI 12 | P A G E REJECTED THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION U/S 68 AS UNEXPLAINED CASH CREDIT. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY CONSIDERING THE MOU AS WELL AS THE PAYMENTS MADE BY THE ASSESSEE TOW ARDS THE CONSTRUCTION OF THE PROPERTY IN QUESTION. 27. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE ASSE SSEE HAS FAILED TO PROVE THAT THE PROPERTY WAS SHOWN IN THE CAPITAL ACCOUNT OF THE ASSESSEE FOR THE EARLIER YEARS AND, THEREFORE, IT WAS AN AFTERTHOUGHT FOR SHOWING THE SALE OF PROPERTY IN QUESTION AGAINST THE SAID PAYMENT OF RS. 60,95,000/-. 28. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTAT IVE HAS SUBMITTED THAT THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS AND EVI DENCE TO SHOW THE PAYMENTS MADE BY THE ASSESSEE FROM YEAR 2000 TO 2007 FOR CONSTRUCTION OF PROPERTY. ALL THE PAYMENTS WERE MADE THROUGH CHEQUES AND, THEREFORE, VIDE MOU DATED 08.01.2009, THE ASSESSEE TRANSFERRED HER H ALF SHARE IN THE PROPERTY IN FAVOUR OF THE HUF AGAINST THE REFUND OF THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE HAS FURTHER SUBMITTED THAT IN THE CASE OF THE HUF, THE TRIBUNAL VIDE ORDER DATED 16.11.2014 HAS ACCEPTED THE SAID TRANSACTION FOR THE PURPOSE OF ALLOWING THE CLAIM OF DEDUCTION U/S 54. INDRANI CHANDRAKANT CHOKSI 13 | P A G E 29. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER DOUBTED THE SOURCE OF T HE AMOUNT RECEIVED BY THE ASSESSEE IN THE BANK ACCOUNT FROM CHANDRAKANT S. CHO KSI HUF AND ACCORDINGLY, MADE THE ADDITION U/S 68. ON APPEAL, THE CIT(A) HAS CONSIDERED THE RELEVANT FACT AND DECIDED THE ISSUE IN PARA 12 AS UNDER:- 12. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E ARGUMENTS OF THE APPELLANT AND THE FINDINGS GIVEN BY THE ASSESSING OFFICER. TH E CONTENTION OF THE APPELLANT IS ACCEPTABLE BECAUSE OF THE FOLLOWING REASONS:- (I) THERE IS A CREDIT ENTRY OF RS.60,95,000/- IN TH E BANK ACCOUNT OF THE APPELLANT WHICH WAS RECEIVED FROM CHANDRAKANT S.CHOKSI HUF. T HE AO. HAS NOT DOUBTED THE GENUINENESS OF THIS CREDIT. (II) DURING ASSESSMENT PROCEEDINGS, THE APPELLANT F ILED COPIES OF BALANCE SHEET FOR THE YEARS ENDING ON 31-03-2006, 31-03-2007, 31- 03-2008 AND 31-03-2009. HOWEVER THESE BALANCE SHEETS WERE NOT ACCEPTED BY T HE AO. ON THE GROUND THAT THEY WERE UNSIGNED. ONCE THESE DOCUMENTS WERE SUBMI TTED BY THE APPELLANT HERSELF, THERE IS NO NEED FOR HER TO SIGN THE DOCUM ENT PERSONALLY. FURTHER, THE EARLIER RETURNS OF THE APPELLANT WERE AVAILABLE WIT H THE AO. AND HE HAS GIVEN NO FINDING THAT THESE BALANCE SHEETS WERE DIFFERENT FR OM THE BALANCE SHEET SUBMITTED ALONG WITH THE RETURN OF INCOME FIELD BY THE APPELLANT. (III) IT IS SEEN THAT APPELLANT HAS BEEN SHOWING TH IS PROPERTY UNDER THE HEAD 'INVESTMENT' WITH A NARRATION 'PAWANA PROPERTY'. TH E COPIES OF BALANCE SHEETS HAVE BEEN FILED RIGHT FROM THE YEAR 2000-01 ONWARDS . THE LAND OF THIS PROPERTY HAS BEEN SEPARATELY SHOWN IN THE BALANCE SHEET THRO UGH THESE YEARS ON A VALUE OF RS.25,000/-. THE YEAR-WISE CONSTRUCTION AND CORR ESPONDING INCREASE IN THE VALUE OF PROPERTY HAS BEEN SHOWN AS BELOW:- 1) 31-03-2000 RS.33,85,000/- 2) 31-03-2001 RS.54,75,000/- INDRANI CHANDRAKANT CHOKSI 14 | P A G E 3) 31-03-2002 RS.56,25,000/- 4) 31-03-2003 RS.56,25,000/- 5) 31-03-2004 RS.57,35,000/- 6) 31-03-2005 RS.58,25,000/- 7) 31-03-2006 RS.60,20,000/- 8) 31-03-2007 RS.60,95,000/- (IV) THE APPELLANT HAS GIVEN THE DETAILS OF CHEQUE NUMBERS AND BANK ACCOUNT DETAILS FOR THIS PAYMENT OF RS.60,95,0001-. ALL THE SE PAYMENTS HAVE BEEN MADE FROM HER BANK ACCOUNT NO.125296 IN BANK OF BARODA A ND THESE PAYMENTS HAVE BEEN MADE FROM 06-04-1999 ONWARDS. THEREFORE, THE F ACT THAT APPELLANT HAS INVESTED RS.60,95,0001- IN THE 'PAWANA PROOPERTY' F ROM HER OWN FUNDS HAVE BEEN PROVED BEYOND DOUBT. (V) AS PER THE MOU, THE APPELLANT DECIDED TO WITHDR AW HER RIGHTS FROM THE CONSTRUCTED PROPERTY AT PAWANA LAND IN FAVOUR OF CH ANDRAKANT S.CHOKSI HUF. ACCORDINGLY, CHANDRAKANT S.CHOKSI HUF PAID RS.60,95 ,0001- TO THE APPELLANT AS THE REIMBURSEMENT OF CONSTRUCTION COST INCURRED BY HER. (VI) IN THE CASE OF APPELLANT THE IDENTITY AND CAPA CITY OF THE SOURCE I.E. CHANDRAKANT S.CHOKSI HUF HAS NOT BEEN DOUBTED BY TH E A.O. AND EVEN THE GENUINENESS OF TRANSACTION HAS ALSO BEEN ACCEPTED B Y THE A.O. THIS TRANSACTION IS ALSO REFLECTED IN THE RETURN FILED FOR A Y. 2009-1 0 BY CHANDRAKANT S.CHOKSI HUF, IN THAT CASE, THE ASSESSMENT HAS BEEN FRAMED U/S.14 3(3) OF I.T.ACT AND THIS TRANSACTION HAS NOT BEEN CHALLENGED BY THE AO. THER EIN. IN THAT CASE, CHANDRAKANT S.CHOKSI HUF HAS CLAIMED DEDUCTION U/S. 54F ON ACCOUNT OF INVESTMENT IN A NEW PROPERTY FOR THE ABOVE STATED A MOUNT OF RS.60,95,OOO/-. HOWEVER, THE AO. HAS NOT ALLOWED DEDUCTION U/S.54F ON THE GROUND THAT IT ONLY AMOUNTED TO EXTENSION OF EXITING HOUSE. THE A.A., I N THAT CASE, DID NOT DOUBT THE GENUINENESS OF TRANSACTION I.E. PURCHASE OF 50% OF SHARE IN THE PAWANA PROPERTY FROM THE APPELLANT BY CHANDRAKANT S.CHOKSI HUF FOR A CONSIDERATION OF RS.60,95,0001-. (VII) AS PER SECTION 68 OF I.T.ACT THE CONDITIONS F OR ITS APPLICABILITY ARE:- I. THE EXISTENCE OF BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESEE HIMSELF. II. A CREDIT ENTRY IN THE BOOKS OF ACCOUNT, AND INDRANI CHANDRAKANT CHOKSI 15 | P A G E III. THE ABSENCE OF A SATISFACTORY EXPLANATION BY T HE ASSESSEE ABOUT THE FOLLOWING: (I) IDENTITY OF CREDITOR (II) CAPACITY OF CREDITOR, AND (III) GENUINENESS OF TRANSACTION FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT IN THE CASE OF APPELLANT THE IDENTITY AND CAPACITY OF THE CREDITOR AND GENUINENESS OF TRA NSACTION HAVE BEEN SUFFICIENTLY PROVED BY THE APPELLANT. THE A.O. HAS NOT GIVEN ANY FINDING THAT THIS AMOUNT WAS FUNDED FROM THE INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES AND THEREFORE THIS AMOUNT CANNOT BE ADDED TO THE IN COME OF THE APPELLANT U/S.68 OF ITACT. ACCORDINGLY, THE ADDITION MADE BY THE A.O . OF RS.60,95,OOOI- U/S.68 OF ITACT IS DELETED. THIS GROUND IS ALLOWED. 30. THUS IT IS CLEAR THAT THE ASSESSEE PRODUCED THE R ECORD TO SHOW THE PAYMENT TOWARDS CONSTRUCTION OF THE PROPERTY IN QUES TION FROM THE YEAR 2000 TILL 31.03.2007 TOTAL AMOUNTING TO RS. 60,95,000/-. AS PER MOU THE ASSESSEE HAS RECEIVED BACK ONLY THE INVESTED AMOUNT OF RS. 60, 95,000/- WITHOUT ANY SURPLUS OR GAIN ON THE SAME. FURTHER WE NOTE IN THE CASE OF SHRI CHANDRAKANT S. CHOKSI HUF VS. ACIT IN ITA NO. 3540/MUM/2013, THE T RIBUNAL VIDE ORDER DATED 18.11.2014 HAS ACCEPTED THE FACT OF TRANSFER OF THE SHARE IN THE PROPERTY IN QUESTION BY THE ASSESSEE IN FAVOUR OF THE HUF. T HE RELEVANT PART OF THE TRIBUNALS ORDER IN PARA 4.3 IS AS UNDER:- 4 .3 LASTLY, REGARDING WHETHER REGISTRATION OF MOU IS COMPULSORY OR NOT, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. LAXMICHAND NARPAL NAGDA (SUPRA) AND DELHI HIGH COURT IN THE CASE OF BALRAJ V. CIT (SUPRA). IN THE LATTER DECISION, THE HONBLE DELHI HIGH COURT HELD THAT FOR THE PURPOSE OF ATTRACTING THE PROVISIONS OF SECTION 54, IT WAS NOT NECESSARY THAT THE ASSESSEE SHOULD BECOME O WNER OF THE PROPERTY ON ONLY THROUGH REGISTRATION, AS THE SECTION SPEAKS OF PUR CHASE AND REGISTRATION OF DOCUMENT WAS NOT IMPERATIVE. THUS, ON ALL COUNTS, T HE REASONING GIVEN BY THE A.O. AS WELL AS CIT(A) CANNOT BE SUSTAINED IN VIEW OF THE AFORESAID LEGAL PROPOSITION DISCUSSED ABOVE. ACCORDINGLY, WE HOLD T HAT THE ASSESSEE IS ELIGIBLE FOR INDRANI CHANDRAKANT CHOKSI 16 | P A G E CLAIM OF DEDUCTION OF RS.60,95,000 U/S 54F IN PURCH ASE OF ACQUIRING ONE HALF SHARE OF THE RESIDENTIAL HOUSE OWNED BY SMT.INDRANI CHANDRAKANT CHOKSI, ONE OF THE MEMBERS OF THE ASSESSEE-HUF. THEREFORE, THE GRO UND RAISED BY THE ASSESSEE STANDS ALLOWED. ACCORDINGLY IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES OF THE CASE AS WELL AS THE ORDER OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI CHANDRAKANT S. CHOKSI HUF VS. ACIT (SUPRA), WE DO NOT FIND ANY ER ROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 31. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED WHEREAS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 16 TH DAY OF JANUARY 2015. SD/- SD/- (R.C. SHARMA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 16-01-2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI