SHARDA JHABARMAL JANGIR, MUMBAI V. ITO 24(3)(3), MUMBAI

ITA 5348/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1724 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 31-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: VIJAY SINGH
• Keywords: Cost of acquisition; Benefit of exemption; Set aside
• Section: 133(6); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5348/M/2016 ASSESSMENT YEAR: 2010-11 MRS. SHARDA JHABARMAL JANGIR, 1303-A, LAKSHACHANDI HEIGHT, GOKULDHAM, GOREGAON (EAST), MUMBAI - 400063 PAN: ABSPJ 2647M VS. THE INCOME TAX OFFICER, WARD 24(3)(3), MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIJAY SINGH, A.R. REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH, D.R . DATE OF HEARING : 30.04.2019 DATE OF PRONOUNCEMENT : 31.05.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 18.05.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION O F A.O. AND HAS ERRED IN ALLOWING ONLY A PART RELIEF. 2. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.33,12,991/- ON ACCOUNT OF UNEXPLAINED PURCHASES. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF 20% OF LABOUR CHARGES AMOUNTING TO RS.8,09,212/-. 4. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION OF RS.19,39,836/- ON ACCOUNT OF LONG TERM CAPITAL GAIN AND HAS FURTHER E RRED IN DENYING THE FULL BENEFIT OF EXEMPTION U/S 54 FOR PURCHASE OF NEW RES IDENTIAL HOUSE. ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 2 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND W HICH WAS NOT PRESSED BY THE COUNSEL OF THE ASSESSEE AT THE T IME OF HEARING AND IS DISMISSED ACCORDINGLY. 4. THE FIRST GROUND IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 5. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DECISION OF LD. CIT(A) CONFIRMING ADDITION OF RS.33 ,12,991/- ON ACCOUNT OF UNEXPLAINED PURCHASES. 6. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS CARR YING ON THE BUSINESS OF CIVIL CONTRACTORS UNDER THE NAME AND ST YLE OF AJ CONSTRUCTION. DURING THE YEAR, THE GROSS RECEIPT O F THE ASSESSEE WAS RS.1,33,84,389/- AND MATERIAL AND LABOUR CHARGE S WERE RS.69,49,340/- AND RS.40,46,056/- RESPECTIVELY. TH E AO IN ORDER TO VERIFY THE GENUINENESS OF THESE EXPENSES C ALLED UPON THE ASSESSEE TO FURNISH THE BOOKS OF ACCOUNTS, AUDI T REPORT, BILLS, VOUCHERS ETC. THE ASSESSEE ON 11.01.2013 SUBMITTED DETAILS OF LABOUR CHARGES AND PURCHASES. THEREAFTER, AO ISSUE D NOTICE UNDER SECTION 133(6) OF THE ACT TO MAJOR PARTIES. AFTER EXAMINING THE RESPONSES FROM VARIOUS SUPPLIERS, THE AO FOUND THAT THERE WERE DISCREPANCIES IN THE ACCOUNTS OF TW O MAJOR SUPPLIERS NAMELY M/S. GENERAL PLUMBLINES AND M/S. G ENERAL TUBES PVT. LTD. BOTH THE PROPRIETARY CONCERNS WERE HAVING COMMON PROPRIETOR. THE PURCHASES SHOWN BY THE ASSES SEE FROM M/S. GENERAL PLUMBLINES AND M/S. THE GENERAL TUBES PVT. LTD. WERE RS.35,75,843/- AND RS.15,37,536/- RESPECTIVELY . HOWEVER, AS PER THE DETAILS SUBMITTED BY THESE PARTIES, THE PURCHASES WERE SHOWN AT RS.17,95,387.73 AND RS.NIL RESPECTIVE LY. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED AS TO W HY THE ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 3 DIFFERENCE OF RS.17,75,455/- AND RS.15,37,536/- SHO ULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE WHICH WAS REPLI ED BY THE ASSESSEE BY SUBMITTING THAT THERE IS AN EXACT PURCH ASE BILL OF RS.17,75,455/- OF M/S. GENERAL PLUMBLINES WHICH HAS BEEN THE REASON OF THIS VARIATION IN THESE PURCHASES. THE A SSESSEE ALSO FILED A COPY OF BILL OF RS.15,37,536/- OF M/S. THE GENERAL TUBES PVT. LTD. THE AO FOUND THAT BOTH THESE INVOICES WE RE PROFORMA INVOICES AND THE WORD PROFORMA WAS DELETED AND THER EFORE THESE INVOICES WERE NOT SHOWN BY BOTH THESE SUPPLIERS. T HE AO FINALLY TREATED THE PURCHASES OF RS.33,12,991/- AS UNEXPLAI NED PURCHASES AND ADDED THE SAME TO THE INCOME OF THE A SSESSEE. SIMILARLY, AS REGARDS LABOUR CHARGES THE AO ASKED T HE ASSESSEE TO FILE THE PAGE WISE ANALYSIS OF OUTSTANDING EXPEN SES OF RS.36,94,933/- WHICH WAS REPLIED BY THE ASSESSEE VI DE LETTER DATED 19.03.2013. THE AO FOUND ON THE BASIS OF SUB MISSIONS OF THE ASSESSEE THAT ALL THESE PAYMENTS WERE MADE IN C ASH AND SIGNATURES WERE OBTAINED ON THE VOUCHERS ONLY. THU S AO CAME TO THE CONCLUSION THAT SINCE THE ASSESSEE HAS FAILE D TO SUBMIT THE COMPLETE DETAILS LIKE PERSON-WISE PAYMENT, THEI R OUTSTANDINGS AND CONFIRMATIONS ETC. AND ALSO FOUND THAT THERE WERE NO SUFFICIENT CASH WITHDRAWAL TO PAY THESE LAB OUR CHARGES AND THUS DISBELIEVED THE THEORY OF THE ASSESSEE THA T 90% OF THE TOTAL LABOUR CHARGES WERE REMAINED UNPAID. FINALL Y AO CAME TO THE CONCLUSION THAT SAID PAYMENTS AND LABOUR EXPEN SES WERE NOT PROPERLY VERIFIED AND THUS DISALLOWED AND ADDED A SUM OF RS.8,09,212/- BY APPLYING 20% OF LABOUR CHARGES TO THE TOTAL INCOME OF THE ASSESSEE ON ADHOC BASIS. 7. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE SO FAR AS THE PURCHASE OF MA TERIAL OF ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 4 RS.33,12,991/- IS CONCERNED BY OBSERVING THAT ASSE SSEE HAS NO EXPLANATION FOR THE PURCHASES MADE TO THIS EXTENT A ND ALSO OBSERVED THAT IT IS NOT A CASE OF BOGUS BILLS THAT WERE ACQUIRED THROUGH FROM OTHER SOURCES BY THE ASSESSEE. THE L D. CIT(A) NOTED THAT THERE WAS NO EVIDENCE OF CONSUMPTION OF MATERIAL ALSO AND MOREOVER THE SUPPLIERS HAD DENIED TO HAVE SUPPLIED ANY MATERIALS. THE LD. CIT(A) ALSO DISMISSED THE A PPEAL OF THE ASSESSEE ON LABOUR CHARGES ON THE GROUND THAT ASSES SEE DID NOT EXPLAIN THE LABOUR CHARGES AND NO LABOUR REGISTERS WERE PRODUCED. THE LD. CIT(A) NOTED THAT THE ASSESSEE C OULD NOT EXPLAIN AS TO WHY THE LABOUR REGISTERS WERE NOT AVA ILABLE FOR VERIFICATION AND FINALLY DISMISSED THE APPEAL ON TH IS GROUND ALSO. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE PURCHASES TO THE TUNE OF RS.33,12,991/- WHICH WERE STATED TO BE MADE FROM TW O PARTIES NAMELY M/S. GENERAL PLUMBLINES OF RS.17,95,387/- AN D M/S. GENERAL TUBES PVT. LTD. OF RS.15,37,536/- WERE ADDE D TO THE INCOME OF THE ASSESSEE FOR THE REASON THAT THE SAID PAYMENTS WERE NOT CONFIRMED BY THE SUPPLIERS WHO SPECIFICALL Y STATED IN REPLY TO NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT THAT THEY HAVE NOT SUPPLIED ANY SUCH GOODS TO THE ASSESSEE. WE ALSO NOTE THAT THE ASSESSEE HAS FILED THE BILLS AND VOUCHERS BEFORE THE AUTHORITIES BELOW. AS REGARDS THE PURCHASES, THE A LLEGATIONS OF THE AO ARE THAT THE PURCHASES WERE BOOKED ON THE BA SIS OF PERFORMA INVOICES BY CUTTING AND STRIKING OFF THE WORD PERFORMA BY THE SUPPLIERS AND THEREFORE THE SAID BILLS CAN N OT BE ACCEPTED. HOWEVER, WE NOTE THAT IN THE SAID BILL THERE WAS AD JUSTMENT OF RS.1,00,000/- ADVANCE ON BEHALF OF M/S. THE GENERAL TUBES PVT. LTD. WHICH WAS DULY ACCEPTED BY THE AO. WE ALSO FI ND THAT NO ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 5 CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE BY TH E AO. MOREOVER, THE INVOICE SUBMITTED BY THE ASSESSEE OF RS.33,12,991/- APPEARS TO BE GENUINE AS COMPARED TO THE BILLS SUBMITTED BY THE SUPPLIERS AS THE BILLS SUBMITTED B Y THE ASSESSEE BEAR THE SIGNATURE OF THE SUPPLIERS AND TH E RECEIPT OF RS.1,00,000/- ON BEHALF OF THE M/S. THE GENERAL TUB ES PVT. LTD. DULY SIGNED BY THE SUPPLIER. HOWEVER, THE SAID SUP PLIER DENIED HAVING SUPPLIED ANY MATERIAL AS PER THE BILLS WHICH IS IN CONSISTENT AND CONTRARY WITH THE STATEMENT OF THE S UPPLIER AS THERE IS A RECEIPT OF RS.1,00,000/- ON BEHALF OF M/ S. THE GENERAL TUBES PVT. LTD. WHICH WAS ACCOUNTED FOR BY THE ASSE SSEE AND ACCEPTED BY THE AO AND EVEN THE SUPPLIER HAS ADMITT ED THE SAME. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN AGR EEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT PURCHAS E BILLS SUBMITTED BY THE ASSESSEE ARE NOT GENUINE AS ANY TR ANSACTION CAN NOT BE ACCEPTED IN PART. MOREOVER, THE ASSESSE E IS A CIVIL CONTRACTOR AND IN CASE OF NON MAINTENANCE OF BOOKS BY THE ASSESSEE IF THE PROVISIONS OF 448D OF THE ACT ARE A PPLIED, THE INCOME IS ESTIMATED @ 8% OF THE GROSS RECEIPT WHERE AS THE AO ESTIMATED AT 39% OF THE GROSS RECEIPT, WE ALSO NOTE THAT IN THE PRECEDING THREE YEARS NAMELY A.Y. 2007-08, 2008-09 & 2009-10 THE NET PROFIT RATES OF THE ASSESSEE WERE RS.7.9%, 8% AND 8.3% AND IN THE CURRENT YEAR THE GP RATE IS 9.22% AS AGA INST 39% ESTIMATED BY THE AO. THEREFORE, EVEN IF WE GO BY T HE THEORY OF NET PROFIT AND CONSISTENCY OVER THE YEARS THE CASE OF THE ASSESSEE APPEARS TO BE REASONABLE. ACCORDINGLY, WE ARE SETTING ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND ADD ITION IS ORDERED TO BE DELETED. ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 6 9. SIMILARLY, THE AO HAS DISALLOWED THE LABOUR CHAR GES OF RS.8,09,212/- ON ESTIMATED BASIS ON THE GROUND THAT ASSESSEE HAS FAILED TO SUBMIT COMPLETE DETAILS LIKE PERSON-W ISE PAYMENT AND OUTSTANDING AMOUNT, CONFIRMATION FOR THE OUTSTA NDING BALANCE ETC. AND THERE WAS NO SUFFICIENT CASH WITHD RAWAL TO MAKE THE PAYMENT TO THE WORKER AND THUS MADE AN ADH OC DISALLOWANCE OF 20%. THE LD. CIT(A) AFFIRMED THE S AME ON THE GROUND THAT LABOUR CHARGES WERE NOT SUPPORTED BY TH E EVIDENCES. 10. AFTER ANALYZING THE FACTS ON RECORD AND PERUSIN G THE MATERIAL AVAILABLE, WE OBSERVE THAT AN ADHOC DISALL OWANCE WAS MADE BY THE AO BY IGNORING THE FACT THAT ASSESSEE I S A PETTY CONTRACTOR HAVING TURNOVER OF RS.1,33,84,389/-. WE OBSERVE FROM THE RECORDS PLACED BEFORE US THAT THE RECIPIEN TS HAVE PUT THEIR SIGNATURES ON THE VOUCHERS AND ASSESSEE IS MA INTAINING LOOSE SHEETS TO KEEP THE LABOUR RECORDS. WE FURTHE R FIND THAT THE NP RATE OVER THE YEARS HAVE SHOWN CONSISTENT GROWTH AND DURING THE YEAR THE NET PROFIT RATE IS 9.22% WHICH IS SHOW ING UPWARD TREND. THEREFORE, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION OF THE LD. CIT(A) ON THE POINT OF MAKING ADHOC DISALLO WANCE. ACCORDINGLY, THE ORDER OF LD. CIT(A) IS SET ASIDE A ND THE AO IS DIRECTED TO DELETE THE ADDITION. 11. THE ISSUE IN 4 TH GROUND OF APPEAL RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.19,39,83 6/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF LONG TERM CA PITAL GAIN BY DENYING THE EXEMPTION UNDER SECTION 54 OF THE A CT FOR PURCHASE OF NEW RESIDENTIAL HOUSE. ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 7 12. THE FACTS IN BRIEF ARE THAT ASSESSEE HAS SOLD R ESIDENTIAL FLAT FOR A CONSIDERATION OF RS.70.00 CRORES ON 27.11.200 9 AND HAS PURCHASED ANOTHER FLAT AT RS. 87,45,200/- ON 14.07. 2009. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKE D THE ASSESSEE TO FURNISH THE COMPUTATION OF TOTAL INCOME . THE AO OBSERVED FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT THE PURCHASE PRICE OF THE OLD FLAT WAS RS.13,93,000/- P LUS BROKERAGE OF RS.40,000/-. THE AO OBSERVED FROM THE AUDITED B ALANCE SHEET THAT ASSESSEE HAS CREDITED RS.62,10,000/- TO THE CAPITAL ACCOUNT TOWARDS SALE OF FLAT AND INFERRED THAT THE COST OF ACQUISITION OF THE ASSESSEE WAS ONLY RS.7,90,000/- WHICH WAS CALCULATED BY REDUCING RS.62,10,000/- FROM TOTAL SA LE CONSIDERATION OF RS.70,00,000/- AND AFTER INDEXING THE RESULTANT AMOUNT OF RS.7,90,000/-, THE INDEXED COST OF ACQUIS ITION WAS CALCULATED ON RS.14,22,450/-. THE AO, ACCORDINGLY, CALCULATED THE LONG TERM CAPITAL GAIN AT RS.55,75,550/-. THE AO WHILE CALCULATING THE EXEMPTION UNDER SECTION 54 CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT USED THE LONG TERM CAPITAL GAIN ENTIRELY TOWARDS ACQUISITION OF NEW FLAT AS TH E ASSESSEE HAS UTILISED BANK LOAN TO THE TUNE OF RS.50,00,486/- TO PURCHASE THE FLAT AND THUS CALCULATED THE INVESTMENT IN NEW HOUS E AND TAXABLE CAPITAL GAIN AS UNDER: INVESTMENT IN NEW HOUSE AS PER ASSESSEES WORKING 87,45,200 LESS : DISALLOWABLE MISC. EXPENSES 19,500 TRANSFER FEES 87,500 1,07,000 86,38,200 LESS: BANK LOAN 50,00,486 NET INVESTMENT ELIGIBLE FOR SEC.54 36,37,714 LONG TERM GAIN AS CALCULATED ABOVE 55,77,550 TAXABLE LONG TERM CAPITA GAINS 19,39,836 ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 8 13. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DI SMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF AO BY HOLDING THAT THE BENEFIT OF DEDUCTION UNDER SECTION 54 OF T HE ACT IS AVAILABLE ONLY TO THE EXTENT OF LONG TERM CAPITAL G AIN INVESTED AND NOT QUA THE BORROWED FUNDS USED FOR THE PURCHAS E OF FLAT BY RELYING ON THE DECISION IN THE CASE OF MILAN SHARAD REPERAL VS. ACIT (2009) 27 SOT 61 (MUM.), CIT VS. VR DESAI (2011 ) 197 TAXMANN.COM 52 (KER.) AND SMT. V. KUMUDA VS. DCIT (2 012) 135 ITD 116 HYD. 14. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ONLY ISSUE ON THE BASIS OF WHICH THE AO RESTRICTED THE BENEFIT UNDER SECTION 54 OF THE ACT IN THE PURCHASE OF NEW HOUSE PROPERTY IS THAT THE LOAN FUN DS WERE USED IN THE PURCHASE OF PROPERTY TO THE TUNE OF RS. 50,00,486/- AND THUS THE LONG TERM CAPITAL GAIN REMAINED UNUTIL IZED TO THE TUNE OF RS.19,39,836/- WHICH WAS ASSESSED AS LONG TERM CAPITAL GAIN. THE AO AND LD. CIT(A) HAVE RELIED ON THE THR EE DECISIONS AS REFERRED TO HEREINABOVE. HOWEVER, NOW THE ASSES SEES CASE STOOD SQUARELY COVERED BY THE DECISION OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P.S. PASRICHA ITA NO.1825 OF 2009 WHEREIN IT HAS BEEN HELD THAT EVEN IF NEW HOU SE IS PURCHASED OUT OF BORROWED FUNDS EVEN THEN THE DEDUC TION UNDER SECTION 54 OF THE ACT IS ALLOWABLE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT (SUPRA) SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE BENEFIT OF SECTION 54 TO THE ASSESSEE IN RESPECT OF THE ENTIRE CAPITAL GAIN. ITA NO.5348/M/2016 MRS. SHARDA JHABARMAL JANGIR 9 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.05.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.