MR.VISHAL BATRA, `LUDHIANA V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, LUDHIANA

ITA 54/ASR/2021

AI Insights

The case involves Sh. Vishal Batra, the appellant, who contested the addition of Rs. 18,82,729/- to his income under the head 'Short Term Capital Gains' for the Assessment Year 2015-16. The addition was initially made by the Assessing Officer following a search operation under section 132 of the Income Tax Act, 1961, and was sustained by the Commissioner of Income Tax (Appeals). The appellant argued that certain amounts should be considered as 'Cost of Improvement' and 'Expenditure wholly & exclusively in connection with transfer of asset', which were not accepted by the lower authorities. The Tribunal, after hearing the Departmental Representative and reviewing the materials on record, upheld the additions, agreeing with the lower authorities' interpretations and applications of the relevant sections of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114641 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 06-07-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HITENDRA BHAURAOJI NINAWE
• Keywords: Cost of acquisition; Capital Gains
• Section: 132; 2; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 54/Asr/2021 Assessment Year: 2015-16 Sh. Vishal Batra, 37-GF, Nirmal Chhaya Apartments, C-Block, Rishi Nagar, Ludhiana [PAN: ABJPB9927H] Vs. Dy. Commissioner of Income Tax, Central Circle-1, Jalandhar (Appellant) (Respondent) Appellant by : None Respondent by: Sh. Hitendra Bhauraoji Ninawe, CIT-DR Date of Hearing: 08.08.2023 Date of Pronouncement: 31.08.2023 ORDER Per Dr. M. L. Meena, AM: The captioned appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 28.04.2021 in respect of Assessment Year: 2015-16. ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 2 2. The assessee has raised the following grounds of appeal: “1. That the Learned Commissioner of Income Tax (Appeals) has erred in law and facts of the Case by sustaining an addition amounting to Rs. 18,82,729/- under the head “Income from Short Term Capital Gains”. 2. That, out of the above amount of Rs. 18,82,729/-, the Learned Commissioner of Income Tax (Appeals) has erred in not considering an amount of Rs. 4,00,000/- as “Cost of Improvement” in calculating the above said “Short Term Capital Gain”. 3. That, out of the above amount of Rs. 18,82,729/-, the Learned Commissioner of Income Tax (Appeals) has erred in not considering an amount of Rs. 14,82,729/- either as “Cost of Acquisition/Improvement” or as “Expenditure wholly & exclusively in connection with transfer of asset” in calculating the above said “Short Term Capital Gain”. 4. That the above disallowance made in the case of the Appellant is against the facts and circumstances of the Case. 5. That the Appellant craves leave to add or amend any grounds of appeal later during the course of Appellate Proceedings.” 3. None attended for the assessee. The adjournment application filed by the assessee is rejected being devoid of merits. The appellant assessee has been granted as many as seven opportunities of being heard to make submission in support of the ground of appeal filed before the Tribunal. Considering the small addition of Rs.18,82,729/- made under the head income from short term capital gain as “Cost of improvement and transfer expenses being not considered as “Expenditure wholly & exclusively in ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 3 connection with transfer of asset.” Therefore, it was decided to hear the ld. DR, perused the material facts and adjudicates the appeal on merits of the case. 4. Briefly facts are that the assessment u/s153A r.w.s. 144 was passed consequent to a search u/s 132 was conducted in this case on 27.12.2017.In response to the notice u/s 153A, no return has been filed. Subsequently, notice u/s 142 along with questionnaire to appear on04.10.2019, however on the said date neither the assessee attended nor filed any reply. Thereafter, on 26.11.2019, a show-cause notice was issued to the assessee for filing the reply, but on the said date, since no reply was filed by the assessee. Consequently, the assessment was passed u/s 144 after taking into account all the material on record by the AO to the best of his judgment and knowledgewith an addition of Rs. 18,82,729/- on account of disallowance of expenses claimed as cost of improvement and expenditure on transfer relating to Short Term Capital Gain. 5. In appeal, the learned CIT (A) has confirmed the addition by observing as under: ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 4 Th e fa cts o f th e c a se , b a sis o f a d d it io n /d isa llo w a nce m a d e b y A O a n d th e a rg u me n t s o f th e A R d u r i n g th e co u rse o f a pp e lla te p ro ce e d in g s h a ve b e e n co n sid e re d . Th e A R h a s su b mi tte d th a t th e a p p e lla n t p u r ch a se d a re sid e n tia l h o u se in th e p re vio u s ye a r a n d so ld th e sa me d u rin g th e ye a r u n d e r co n sid e ra t io n . It is fu rth e r su b mi tte d th a t th e in te re st p a id o n t h e re s id e n tia l h o u se so ld h a s b e e n ca p ita l i ze d a n d in clu d e d in th e co st o f a sse t an d a cco rd in g l y, ca lcu la te d th e S h o r t Te r mCa p ita lG a in o n w h ich ta x ha s b e e n p a id . I t is h o w e ve r re le va n t to me n t io n , h e re th a t n o d o cu men ts h a ve b e e n file d d u rin g th e a p p e lla te p ro ce e d in g s in su p p o rt of cla i m re g a rd in g th e d e d u ctio n o f R s. 1 8 ,8 2 ,7 2 9 /-. In t h e re ma n d re po rt, th e A O h a s me n tio n e d th a t th e a sse sse e su b mitte d th e d e ta il o f in te r e st p a id o n h o me lo a n c la i me d a s e xp e n d itu re in c u rre d o n t ra n sfe r b u t fa ile d to fu rn i sh a n y d o cu me n t re la t in g to th e co st o f i mp ro ve me n t o f Rs. 4 ,0 0 ,0 0 0 /-. It is re le va n t to me n tio n h e re th a t th e in te r e st p a id o n h o u sin g lo a n ca n n o t b e sa id to b e e xp e n d itu re in cu rr e d w h o lly & e xclu s ive ly in co n n e ctio n w ith tra n sfe r . Th e h o u sing lo a n w a s ta ke n fo r a cq u i sit io n o f th e p ro p e rty a n d in t e re st o n th e sa me is a l lo w a b le a s a d e d u ctio n u nd e r S e ctio n 2 4 o f th e In co me Ta x Ac t o u t o f th e re n ta l in co me , if a n y, e a rn e d b y th e a sse sse e b u t it ca n n o t b e sa id to b e e xp e n d itu re in co n n e ctio n w ith tra n sfe r . Th e e xp e n d itu re i n co n n e ctio n w i th tra n sfe r w i ll in clu d e th e e xp e n se ma d e a t th e ti me o f sa le o f th e p ro p e rt y b y th e a sse sse e . It is a rg u e d b y th e A R d u rin g th e a p p e lla te p ro c e e d in g s th a t th e l o a n w a s ta ke n fo r p u rch a se o f p ro p e rt y a n d co n te n d e d th a t h e n ce the in te re st o n lo a n f o r m p a rt o f e lig ib le d e d u c tio n u /s 4 8 o f th e In co me Ta x A ct, 1 96 1 o u t o f sa le co n sid e ra tio n fo r th e p u rp o se o f c o mp u ta tio n o f ca pita l g a in s. Ho w e ve r, th e a rg u me n ts o f th e A R a re n o t fo u n d a ccep ta b le s in ce a s p e r S e ct io n 4 8 o n ly th e a mo u n t s o f 'e xp e n d itu re s in c u rre d w h o l ly a n d e xclu si ve ly in co n n e ctio n w ith th e tra n sfe r' a nd 'th e co st o f th e a cq u is itio n o f th e a sse ts a n d co st o f a n y i mp ro ve men t th e re to ' a re a llo w a b le a s d e d u ctio n o u t o f 'sa le c o n sid e ra t io n '. Un d o u b te d ly th e 'in te re st o n lo a n ' c a n n o t b e sa id to t h e e xp e n d itu re in c u rre d w h o l ly a n d e xclu si ve ly in co n n e ct io n w ith su ch t ra n sfe r. Fu r th e r, th e se ca n n o t b e sa id to th e co st o f a cq u isit io n b e ca u se th e co st o f a cq u is itio n me a n s th e a mo u n t p a id t o th e se l le r b y th e b u ye r (i.e . th e a sse sse e ) a t th e ti me o f p u r ch a se o f th e p ro p e rty b y th e a sse sse e . A lso t h e in te re st p a id is n o t 'co s t o f i mp ro ve me n t ' b e ca u se th e va lu e o f th e p ro p e rty h a s n o t in cre a se d o n a cco u n t o f th e in te re st p a id b y th e a sse sse e . Th e in te re st o n lo a n a mo u n t re la te s to mo d e o f a rra n g e me n t o f fin a n ce fo r a cq u isit io n o f p ro p e rty a n d is a n e l ig ib le d e d u ctio n a s p e r S e ctio n 2 4 o f th e IT A ct, 1 9 6 1 u n d e r th e h e a d 'in co me fro m h o u se p ro p e rt y'. Ho w e ver , th is is n o t a n a llo w a b le d e d u c tio n u n d e r th e h e a d 'ca p ita l g a ins ’ a s cla i me d b y th e a sse sse e u n d e r th e g a rb o f E xp e n d itu re o n Tra n sfe r '. Th e re fo re , ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 5 in vie w o f th e cl e a r cu t p ro v isio n p ro vid in g fo r d ed u ctio n o f the In te re st a mo u n t o u t o f re n ta l in co me , a n d th e re b e in g n o p ro v is io n fo r d e d u ctio n o f th is a mo u n t o u t o f c a p ita l g a in s, th e cl a i m o f th e a sse sse e re g a rd in g deduction o f Rs. 1 4 ,8 2 ,7 2 9 /- is re j e cte d . A l so , re g a rd in g th e d e d u ctio n o f Rs4 ,0 0 ,0 0 0 /-a s 'co st o f i mp ro v e me n t', th e A O in re ma n d re p o rt h a s cle a rl y me n t io n e d th a t th e a sse sse e fa ile d to fu rn ish a n y d o cu me n t re la tin g to th i s a mo u n t. Hen ce , t h is cla i m i s a lso lia b le to b e re je c te d . In vie w o f th e a b o ve d isc u ssio n , th e a d d itio n o f R s.1 8 ,8 2 ,7 2 9 /- ma d e b y th e A O is fo u n d su st a in a b le a s p e r la w a n d h e n ce co n fi r me d . 6. The assessee has contended in ground of appeal that the Learned Commissioner of Income Tax (Appeals) has erred in law and facts of the Case by sustaining an addition amounting to Rs. 18,82,729/- under the head “Income from Short Term Capital Gains”; that he has not considered an amount of Rs. 4,00,000/- as “Cost of Improvement” and amount of Rs. 14,82,729/- either as “Cost of Acquisition/Improvement” or as “Expenditure wholly & exclusively in connection with transfer of asset” in calculating the above said “Short Term Capital Gain”. Thus, he argued that disallowance made and confirmed in the case of the Appellant is against the facts and circumstances of the Case. 7. After hearing the learned DR, perusal of the impugned order and considering the return submissions filed by the appellant, we find that the Ld. CIT (A) has facts confirmed the action of Ld. AO in making an addition of Rs. 18,82,729/- under the head “Income from Short Term Capital ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 6 Gains”.The appellant submitted before the CIT(A) that the interest paid on the residential house sold has been capitalized and included in the cost of asset and accordingly, calculated the Short Term Capital Gain on which tax has been paid. It is however noted by the CIT(A) that no documents have been filed during the appellate proceedings in support of claim regarding the deduction of Rs. 18,82,729/-. Even in the remand report, the AO has mentioned that the assessee submitted the detail of interest paid on home loan claimed as expenditure incurred on transfer but failed to furnish any document relating to the cost of improvement of Rs. 4,00,000/-. In our view, the CIT(A) has been justified in observing that It is relevant to mention here that the interest paid on housing loan cannot be said to be expenditure incurred wholly & exclusively in connection with transfer. As per the provisions of the Income Tax Act, interest on the housing loan taken for acquisition of the property is allowable as a deduction under Section 24 of the Income Tax Act out of the rental income, if any, earned by the assessee but it cannot be said to be expenditure in connection with transfer of an asset. In our view, the expenditure in connection with transfer will include the expense made at the time of sale of the property by the assessee. ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 7 8. It was argued by the AR during the appellate proceedings before the CIT(A) that the loan was taken for purchase of property and contended that hence the interest on loan form part of eligible deduction u/s 48 of the Income Tax Act, 1961 out of sale consideration for the purpose of computation of capital gains. However, the arguments of the AR are was not found acceptable since as per Section 48 only the amounts of 'expenditures incurred wholly and exclusively in connection with the transfer' and 'the cost of the acquisition of the assets and cost of any improvement thereto' are allowable as deduction out of 'sale consideration'. Undoubtedly the 'interest on loan' cannot be said to the expenditure incurred wholly and exclusively in connection with such transfer. Further, it cannot be said to be the cost of acquisition because the cost of acquisition means the amount paid to the seller by the buyer (i.e. the assessee) at the time of purchase of the property by the assessee. Also the interest paid is not 'cost of improvement' because the value of the property has not increased on account of the interest paid by the assessee. The interest on loan amount relates to mode of arrangement of finance for acquisition of property and is an eligible deduction as per Section 24 of the IT Act, 1961 under the head 'income from house property'. In view of that matter, there ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 8 being a clear provision providing for deduction of the interest amount out of rental income, and there being no provision for deduction of this amount out of capital gains, the claim of the assessee regarding deduction of Rs. 14,82,729/- is rightly rejected by the CIT(A). As regards to the claim of the deduction of Rs. 4,00,000/- as 'cost of improvement', it was categorically mentioned by the AO in remand report that the assessee failed to furnish any documentary evidence relating to this amount. Therefore, this claim was liable to be rejected. 9. In view of the above discussion, we find no infirmity or perversity in the order of the Ld. CIT(A) to the facts on record and therefore, the impugned order confirming the addition of Rs.18,82,729/- made by the AO is upheld. 10. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 31.08.2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT(Appeals) ITA No.54/Asr/2021 Vishal Batrav. Dy. CIT 9 (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order