Smt. S.Sudha, CHENNAI V. ACIT, CHENNAI

ITA 464/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4995 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 08-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Cost of acquisition; Capital Gains
• Section: 271(1)(c); 143(3); 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A. NO.464(MDS)/2011 ASSESSMENT YEAR: 2008-09 SMT. S.SUDHA, THE ASSISTANT COMMISSIONER 26, VIVEK FLATS, 8-VIVEKANANDA- OF INCO ME-TAX, PURAM I STREET, WEST MAMBALAM, VS. SALARY CIRCLE I, CHENNAI-600033. CHENNAI. PAN AZTPS7926D. (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI T.BANUSEKAR RESPONDENT BY: DR. I .VIJAYAKUMAR O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST THE REVISION ORDER PASSED BY THE COMMISSIONER OF INCOME -TAX, CHENNAI-II ITA O.464(MDS)/2011 2 AT CHENNAI UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 THROUGH HIS PROCEEDINGS DATED 7-1-2011. 2. IN THE CASE OF THE ASSESSEE THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 14 7. IN THE RETURN OF INCOME THE ASSESSEE HAS ADMITTED AN AMOUNT OF ` 3,89,670/- AS LONG TERM CAPITAL GAINS, WHICH IS THE UNUTILIZED AM OUNT OUT OF ` 12,10,000/- REPRESENTING THE LONG TERM CAPITAL GAIN S FOR THE ASSESSMENT YEAR 2005-06 ARISING OUT OF THE SALE OF RESIDENTIAL PROPERTY, WHICH PROCEEDS WERE INVESTED IN CAPITAL G AINS ACCOUNT SCHEME. THE ASSESSEE THEREAFTER PURCHASED ONE RESI DENTIAL APARTMENT ON 28-6-2006 FOR ` 8,20,330/-. THE ABOVE STATED COST OF ACQUISITION OF ` 8,20,330/- INCLUDED PRICE AS PER SALE DEED, STAMP CHARGES, REGISTRATION CHARGES, ADVOCATE FEES, BROKE RAGE, TILES LAYING, WHITE WASH ASIAN PAINTS, ELECTRICAL REWIRING AND WO OD WORK. 3. ON EXAMINING THE RECORDS OF THE CASE, THE COMMI SSIONER OF INCOME-TAX FOUND THAT THE ASSESSEE HAD NOT PRODU CED ANY EVIDENCE TO SUPPORT THE CLAIM OF EXPENSES IN THE CA SES OF ADVOCATE FEES AND BROKERAGE. HE ALSO FOUND THAT EXPENSES RE LATING TO LAYING OF ITA O.464(MDS)/2011 3 TILES, WHITE WASH, ELECTRICAL REWIRING AND WOOD WOR K CANNOT FORM PART OF ACQUISITION COST. HE, THEREFORE, HELD THAT THE CORRECT AMOUNT OF COMPUTATION TO BE MADE UNDER SECTION 54 SHOULD BE M ADE AFTER DEDUCTING THE ABOVE STATED ITEMS. 4. REJECTING THE OBJECTIONS RAISED BY THE ASSESSEE , THE COMMISSIONER OF INCOME-TAX MODIFIED THE COMPUTATION UNDER SECTION 54 AFTER REDUCING THE ITEMS OF ADVOCATE FEES, BROKE RAGE, TILES LAYING, WHITEWASH, ELECTRICAL REWIRING AND WOOD WORK. HE A LSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C), READ W ITH SECTION 274. 5. THE ASSESSEE IS HIGHLY AGGRIEVED BY THE ABOVE O RDER OF THE COMMISSIONER OF INCOME-TAX AND THEREFORE THIS A PPEAL IS FILED BEFORE US. 6. WE HEARD SHRI T.BANUSEKAR, LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND DR. I.VIJ AYAKUMAR, LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR TH E REVENUE. THE EXPENSES RELATING TO LAYING OF TILES, WHITE-WAS HING, ELECTRICAL REWIRING AND WOOD WORK WERE INCURRED BY THE ASSESSE E AFTER ITA O.464(MDS)/2011 4 PURCHASING THE PROPERTY. THESE ITEMS OF EXPENDITUR E INCURRED BY THE ASSESSEE AFTER ACQUISITION OF THE PROPERTY CANNOT B E TREATED AS PART OF ACQUISITION COST. ON ACQUIRING THE PROPERTY, THE O WNERSHIP OF THE PROPERTY HAS BEEN TRANSFERRED TO THE ASSESSEE INSTA NTLY. THEREFORE, THE POST ACQUISITION EXPENSES CANNOT GO BACK TO FOR M PART OF THE ACQUISITION COST AS SUCH. THE LEARNED CHARTERED AC COUNTANT HAS PLACED BEFORE US A JUDGMENT OF THE INCOME-TAX APPEL LATE TRIBUNAL, MUMBAI BENCH-G IN THE CASE OF SALEM FAZELBHOY VS. D EPUTY COMMISSIONER OF INCOME-TAX, 106 ITD 167, WHERE THE TRIBUNAL HAS ALLOWED TO ENHANCE THE COST OF ACQUISITION BY CERTA IN REPAIR AND REMODELLING EXPENSES CARRIED OUT BY THE ASSESSEE. BUT IN THAT CASE INCURRING OF THAT EXPENDITURE WAS PART OF THE SALE CONTRACT OF THE PROPERTY AND THOSE ACTIVITIES WERE CARRIED OUT BY T HE ASSESSEE FOR AND ON BEHALF OF THE SELLER OF THE PROPERTY AND IT WAS IN SUCH CIRCUMSTANCES THAT THE TRIBUNAL HAS HELD THAT THOSE AMOUNTS ALSO WOULD FORM PART OF ACQUISITION COST. BUT IN THE PR ESENT CASE THERE IS NO SUCH CONTRACTUAL OBLIGATION. THE PROPERTY WAS S OLD TO THE ASSESSEE AS IS WHERE IS CONDITION. THEREAFTER THE ASSESSEE SPENT MONEY TO IMPROVE THE INHABITABILITY IN THE PROPERTY . THAT MAY BE AN ESSENTIAL EXPENDITURE. BUT IT DOES NOT FORM PART O F ACQUISITION COST. ITA O.464(MDS)/2011 5 7. THE COMMISSIONER OF INCOME-TAX IS JUSTIFIED IN REVISING THE ASSESSMENT ORDER TO EXCLUDE THE EXPENSES RELATI NG TO TILES LAYING, WHITE WASHING, ELECTRICAL REWIRING AND WOOD WORK FR OM THE ACQUISITION COST OF THE PROPERTY. THOSE ADJUSTMENTS MADE BY TH E COMMISSIONER OF INCOME-TAX ARE UPHELD. 8. BUT REGARDING THE EXPENSES RELATING TO ADVOCATE FEES AND BROKERAGE, WE FIND THAT THE COMMISSIONER OF INCOME- TAX HAS ACTED TOO TECHNICAL. IT IS COMMON KNOWLEDGE THAT IN MAJO RITY OF TRANSACTIONS IN HOUSE PROPERTIES BROKERS ARE INVOLVED. THEREFOR E, PAYMENT OF ` 12,500/- AS BROKERAGE CANNOT BE CONSIDERED AS UNWAR RANTED. THE ONLY THING IS THAT THE ASSESSEE COULD NOT PRODUCE A FORMAL PIECE OF EVIDENCE. GENERALLY SUCH TYPE OF EVIDENCES MAY NOT BE AVAILABLE AS THE BROKERS ARE NOT A DISCIPLINED LOT AND NOT IN TH E HABIT OF DEDUCING EVERY ACTION IN DOCUMENT. WE HAVE TO DECIDE THESE MATTERS TAKING A CUE FROM THE REALITIES OF WORLDLY LIFE. THIS IS TH E CASE OF ADVOCATE FEES ALSO. LEGAL SCRUTINY OF TITLE DEEDS AND DOCUMENTS ARE VERY ESSENTIAL IN PURCHASING IMMOVABLE PROPERTIES. THEREFORE WE F IND THAT THE EXCLUSION OF BROKERAGE AND ADVOCATE FEES FROM THE C OST OF ACQUISITION ITA O.464(MDS)/2011 6 OF THE NEW PROPERTY IS NOT JUSTIFIED. THAT PART OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX IS VACATED. 9. THE COMMISSIONER OF INCOME-TAX HAS ALSO INITIAT ED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) READ WI TH SECTION 274. FIRST OF ALL WE FIND THAT SINCE THERE IS NO PENALTY ORDER SUBSISTING AT THE TIME OF PASSING OF THE REVISION ORDER, IT IS NO T PROPER ON THE PART OF THE COMMISSIONER OF INCOME-TAX TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) THROUGH A REVISION ORDER. ONCE A REVISED ORDER IS PASSED IT IS FOR THE ASSESSING AUTHORITY TO CONSIDE R WHETHER PENALTY IS TO BE LEVIED OR NOT. IF THE ASSESSING AUTHORITY HA S NOT LEVIED PENALTY WHERE IT IS IMPERATIVE, THEN ONLY THE COMMISSIONER OF INCOME-TAX CAN IN HIS WISDOM INTERFERE IN THAT MATTER. 10. SECONDLY, ON MERITS THE ASSESSEE HAS CLAIMED T HOSE EXPENSES AS PART OF ACQUISITION COST ON A BONA FIDE BELIEF THAT LAW PERMITS SUCH A TREATMENT. THEREFORE, THERE IS NO Q UESTION OF FURNISHING ANY INACCURATE PARTICULARS OR ANY CASE O F CONCEALMENT OF INCOME. THEREFORE, INITIATION OF PENALTY PROCEEDIN GS UNDER SECTION ITA O.464(MDS)/2011 7 271(1)(C) IS NOT JUSTIFIED. SUCH DIRECTION OF THE COMMISSIONER OF INCOME-TAX IS VACATED. 11. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 7 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 7 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.