E.Vittal Rao, Hyderabad V. ITO, Hyderabad

ITA 490/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3371 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: K E SUNIL BABU
• Keywords: Cost of acquisition; Corroborative evidences
• Section: 142(1); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.490/H/2009 ASSESSMENT YEAR 2005-06 SHRI C. VITTAL RAO, HYDERABAD. (PAN AIJPC 2024 M) VS THE INCOME TAX OFFICER, WARD 5(2), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI K.E. SUNIL BABU RESPONDENT BY : SHRI S. RAMA RAO ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) V, HYDERABAD DATED 10.2.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL : 1. THE CIT(A) ERRED IN CONFIRMING THE DETERMINATION O F LONG TERM CAPITAL GAIN AT RS. 38,18,307/-. 2. THE CIT(A) ERRED IN NOT DIRECTING THE ASSESSING OFF ICER TO ALLOW RELIEF ELIGIBLE U/S 54 OF THE IT ACT 3. THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE MADE BY THE ASSESSING OFFICER OF THE BROKERAGE ON THE SALE OF HOUSE OF RS .1 LAKH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS NO T FILED RETURN OF INCOME WITHIN THE DUE DATE AS REQUIRED U/S 139(1) OF THE A CT. ON THE BASIS OF INFORMATION RECEIVED FROM THE CIT (CIB), HYDERABAD REGARDING SALE OF A PROPERTY BY THE ASSESSEE FOR AN AMOUNT OF RS.44,00, 000 THE ASSESSING OFFICER HAS ISSUED A NOTICE U/S 142(1) OF THE ACT O N 20.8.2007. IN RESPONSE ITA NO.490/H/2009 SHRI C. VITTAL RAO, HYDERABAD 2 TO THE NOTICE REQUIRING THE ASSESSEE TO FURNISH DET AILS IN RESPECT OF THAT PROPERTY, HE HAS FILED A LETTER DATED 1.11.2007 STA TING THAT HE HAS SOLD A RESIDENTIAL PROPERTY AT HOUSE NO.5-1-119 ADMEASURIN G 260 SQ. YARDS AT GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD FO R A CONSIDERATION OF RS.44,00,000 AND SUBMITTED THAT THE SALE PROCEEDS W ERE UTILISED FOR PURCHASE OF A NEW HOUSE PROPERTY AND HENCE HE IS EL IGIBLE FOR EXEMPTION U/S 54 OF THE ACT. LATER THE ASSESSEE HAS FILED A RETU RN OF INCOME FOR THIS ASSESSMENT YEAR ON 23.11.2007 SHOWING INCOME AT RS. 47,600/-. IN THE STATEMENT OF TOTAL INCOME, WHILE COMPUTING THE INCO ME FROM HOUSE PROPERTY AT RS.47,600 AND THE ASSESSEE FURNISHED THE COMPUT ATION OF LONG TERM CAPITAL GAINS AS UNDER: LONG TERM CAPITAL GAINS SALE OF RESIDENTIAL PLOT SALE PROCEEDS OF HOUSE PROPERTY RS.4,400,000.00 LESS: SELLING EXPENSES 100,000.00 --------------------- NET SALE CONSIDERATION 4,300,000.00 LESS: COST OF ACQUISITION AND FURTHER CONSTRUCTION ETC. SINCE IT IS AN ANCESTRAL PROPERTY VALUE ON 1.4.1994 RS.3.80 LAKH PURCHASED IN 1961 3.80 X 4.80 = 25,900 LONG TERM CAPITAL GAINS 704,247.10 ---------------- 3,595,752.90 LESS: EXEMPTION U/S 54 3,595,752.90 ------------------ 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I N RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER FOR FURNI SHING THE DETAILS IN RESPECT OF LONG TERM CAPITAL GAINS, THE ASSESSEE HAS SUBMIT TED THAT PROPERTY BEARING NO.5-1-119 COMPRISING GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR, SITUATED AT GOWLIGUDA, WAS SOLD BY DOCUMENT BEARING NO.3911 DAT ED 13.12.2004. HE HAS AVAILED MORTGAGE LOAN FROM PRUDENTIAL BANK AGAI NST ANOTHER HOUSE PROPERTY BEARING NO.5-2-469 TO 474 SITUATED AT OSMA N GUNJ, HYDERABAD IN ITA NO.490/H/2009 SHRI C. VITTAL RAO, HYDERABAD 3 THE YEAR 1997. THE LOAN AVAILED BY HIM WAS REPAID ON 31.1.2005 WITH THE SALE PROCEEDS OF THE ABOVE HOUSE PROPERTY BEARING NO.5-1-119, GOWLIGUDA, HYDERABAD. THE ASSESSEE SUBMITTED THAT THE CAPITAL GAIN WAS INVESTED IN RELEASING THE PROPERTY WHICH WAS UNDER MORTGAGE TO THE PRUDENTIAL BANK AND THE SAME AMOUNTS TO REINVESTMENT MADE U/S 54 OF THE ACT. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT, AP VS. T.N. ARAV INDA REDDY. HOWEVER, AFTER REFERRING TO THE PROVISIONS OF SECTION 54 OF THE ACT, AND STATING THAT THE FACTS IN THE SAID DECISION ARE DIFFERENT FROM THAT OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NO T UTILISED THE SALE PROCEEDS OF THE ORIGINAL ASSET FOR SUCH PURPOSES SO AS TO ALLOW EXEMPTION U/S 54 OF THE ACT. HE, THUS, HELD THAT THE ASSESSE E IS NOT ELIGIBLE FOR ANY EXEMPTION U/S 54 OF THE ACT FROM THE LONG TERM CAP ITAL GAINS DERIVED BY HIM FROM SALE OF THE SAID PROPERTY AT 5-1-119, AND AS S UCH REJECTED SUCH CLAIM OF THE ASSESSEE. FURTHER, WHILE COMPUTING LONG TERM C APITAL GAINS, THE ASSESSEE HAS CLAIMED DEDUCTION FOR AN AMOUNT OF RS. 1 LAKH TOWARDS BROKERAGE. IN SUPPORT OF THIS CLAIM, THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS FROM FOUR PERSONS VIZ., SRI C. AJAY KUMAR, SRI T. NAVEEN KUMAR, SRI K.SRINU AND SRI K. KALYAN FOR SUMS OF RS .20,000, RS.30,000, RS.20,000 AND RS.30,000 RESPECTIVELY. HOWEVER, STA TING THAT THE FOUR HANDWRITTEN LETTERS FILED FROM THOSE PERSONS ARE AN AFTER THOUGHT AND MOREOVER THERE IS NO MENTION OF THE DATES OF PAYMEN T IN THOSE LETTERS, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E FOR DEDUCTION OF RS.1 LAKH TOWARDS BROKERAGE, AND COMPUTED THE TAXABLE I NCOME UNDER THE HEAD LONG TERM CAPITAL GAINS AT RS.38,18,307. TAKING INTO ACCOUNT THIS AMOUNT UNDER THE HEAD LONG TERM CAPITAL GAINS AND THE INTE REST INCOME FOR AN AMOUNT OF RS.19,793 THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS.38,73,700 U/S 14 3(3) OF THE ACT VIDE ORDER DATED 31.12.2007. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF T HE ASSESSING OFFICER. AGAINST THIS THE ASSESSEE IS IN APPEAL BE FORE US. ITA NO.490/H/2009 SHRI C. VITTAL RAO, HYDERABAD 4 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE T HROUGH THE CASE LAW CITED BY THE LEARNED AUTHORISED REPRESENTATIVE FOR THE AS SESSEE. IN THE PRESENT CASE, THE ASSESSEE CLAIMED DEDUCTION U/S 54 ON THE REASON THAT THE ASSESSEE HAS USED THE SALE CONSIDERATION RECEIVED ON SALE OF PROPERTY BEARING HOUSE NO.5-1-119 ADMEASURING 260 SQ. YARDS AT GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD FOR REPAYMENT OF LOAN AT RS.3 5,95,752/- WITH PRUDENTIAL URBAN COOPERATIVE BANK LTD. AS SEEN FRO M THE COPY OF LETTER DATED 5/8/1997 OF THE SAID BANK WHICH HAS BEEN WRIT TEN TO THE ASSESSEE WHILE SANCTIONING A LOAN OF RS.25.73 LAKHS, THE SAI D BANK HAS ASKED SECURITY OF PROPERTY HAVING VALUE NOT LESS THAN 47.71 LAKHS. ACCORDINGLY, THE ASSESSEE HAS MORTGAGED THE PROPERTY BEARING NO.5-2- 469 TO 473 SITUATED AT GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD ST ANDING IN THE NAME OF SMT. CHANDI LACHAMMA, RESIDING AT 5-2-474, FIRST FLOOR, GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD FOR AVAILING THE SAID AMOUNT FROM PRUDENTIAL URBAN COOPERATIVE BANK LTD. LATER, THE ASSESSEE DEFAULTED THE REPAYMENT OF SAID LOAN. TO RECOVER THE LOAN, THE S AID BANK PUT UP A NOTICE FOR AUCTION FOR SALE ON 17.2.2005. THE ASSESSEE HA S PAID THE SAID LOAN OUT OF THE SALE CONSIDERATION OF PROPERTY BEARING NO. 5 -1-119 GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD. THIS PAYMENT OF LO AN OUT OF SALE CONSIDERATION OF PROPERTY AT 5-1-119 GOWLIGUDA, RIS ALA ABDULLAH, OSMANGUNJ, HYDERABAD AND IT CANNOT BE CONSTRUED AS ACQUISITION OF NEW PROPERTY IN TERMS OF S.54 OF THE IT ACT. THE REPAY MENT OF LOAN OUT OF SALE CONSIDERATION OF A PROPERTY IS NOTHING BUT APPLICA TION OF SALE CONSIDERATION. IN OTHER WORDS, IT IS APPLICATION OF SALE CONSIDERA TION FOR THE PURPOSE REPAYMENT OF EARLIER LOAN. THE REPAYMENT OF LOAN C ANNOT BE CONSTRUED AS ACQUISITION OR PURCHASE OF ANY NEW PROPERTY. THE ASSESSEE HAS ALREADY EMBEDDED WITH RIGHT OVER THE PROPERTY BEARING NO.5- 2-469 TO 473, SITUATED AT GOWLIGUDA, RISALA ABDULLAH, OSMANGUNJ, HYDERABAD AS WELL AS HE HAS ENCUMBERED WITH LIABILITY ATTACHED WITH THE PROPERT Y. IN OTHER WORDS, THE RIGHT AS WELL AS THE LIABILITY IN RELATION TO THE S AID PROPERTY IS ALWAYS ITA NO.490/H/2009 SHRI C. VITTAL RAO, HYDERABAD 5 ATTACHED TO THE ASSESSEE. AFTER REPAYMENT OF THE L OAN, THE BANK RELEASED THE ORIGINAL DOCUMENTS OF THE PROPERTY WHICH IS STANDIN G IN THE NAME ASSESSEES MOTHER TO THE ASSESSEE. THE BANK HAS ONLY RETURNED THE ORIGINAL DOCUMENTS OF THE PROPERTY AND THE BANK HAS NOT TRANSFERRED AN Y PROPERTY. UNDER THIS SITUATION, WE CANNOT SAY THAT THERE IS ANY ACQUISIT ION OR PURCHASE OF PROPERTY BY THE ASSESSEE. FURTHER, THE ASSESSEES MOTHER WAS EXPIRED IN THE YEAR 2002 I.E. MUCH BEFORE THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR. FOLLOWING THE DEATH OF THE ASSESSEES MOTH ER, THE SAID PROPERTY BEARING NO.5-2-469 TO 473 GOWLIGUDA, RISALA ABDULL AH, OSMANGUNJ, HYDERABAD DEVOLVED UPON THE ASSESSEE IN THE YEAR 20 02. THE OWNERSHIP OF THE ASSESSEE ON THE PROPERTY IMMEDIATELY FALLS ON T HE DEATH OF HIS MOTHER AND DISCHARGING THE LIABILITY ATTACHED TO THE PROPE RTY TOWARDS THE BANK LOAN CANNOT BE CONSTRUED AS AN ACQUISITION OF PROPERTY B Y THE ASSESSEE. BEING SO, THE ASSESSEES CLAIM IS DEVOID OF MERITS. THE RELIANCE PLACED BY THE ASSESSEE ON THE JUDGEMENT IN THE CASE OF CIT VS. T. N. ARVINDA REDDY (120 ITR 46) AND IN THE CASE OF CIT VS. T.N. ARVINDA RED DY (116 ITR 551 (AP) IS MISPLACED AND CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. FURTHER, THE CLAIM OF THE ASSESSEE REGARDING PAYMENT OF RS.1 LAKHS PAID TOWARDS BROKERAGE FOR WHICH THE ASSESSEE HAS NOT PRODUCED A NY EVIDENCE. THIS CLAIM OF THE CASE CANNOT BE ENTERTAINED AT THIS STA GE WITHOUT ANY SUPPORTING EVIDENCE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STA NDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N: 21.4. 2011 SD/- SD/- G.C. GUPTA CHANDRA POOJA RI VICE PRESIDENT ACCOUNTANT MEMBE R DATED THE 21 ST APRIL, 2011 ITA NO.490/H/2009 SHRI C. VITTAL RAO, HYDERABAD 6 COPY FORWARDED TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.103,H.NO.3-6-5 42/4, INDIRADEVI NILAYAM, ST. NO.7, HIMAYAT NAGAR, HYDERABAD-29 2. THE ITO, WARD NO.5(2), HYDERABAD 3. THE CIT(A) V, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, HYDERABAD NP