OM PRAKASH THAKUR, New Delhi V. ITO Ward 29(3), New Delhi

ITA 542/DEL/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5810 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TAJENDER KHANNA
• Keywords: Fair market value; Capital expenditure
• Section: 54; 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’ : NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA No.542/DEL/2023 (Assessment Year: 2013-14) Om Prakash Thakur, vs. ITO, Ward 29 (3), 118/01, Govind Puri, Galli No.2, New Delhi. Opp. to Kalkaji Bust Depot, New Delhi – 110 019. (PAN : ABGPT9067R) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Tajender Khanna, CA REVENUE BY : Shri Om Prakash, Sr. DR Date of Hearing : 08.07.2024 Date of Order : 12.07.2024 ORDER This appeal by the assessee is directed against the order of the ld. CIT (Appeals)/National Faceless Appeal Centre (NFAC) dated 17.01.2023 for the assessment year 2013-14. 2. Grounds of appeal taken by the assessee read as under :- “1. The Assessing Officer has erred in and (NFAC) has compounded the error by confirming the action of the Assessing Officer limiting the value of the deduction to Rs. 65.45 Lakh only i.e. by not allowing Rs. 23.50 Lakh which was paid by Assessee for putting the house in habitable condition under section 54 of the Income Tax Act. 2. The Assessing Officer has erred in and (NF AC) has compounded the error by not recognizing the fact that the assessee had entered into two separate contracts with the same builder one for the purchase of raw house property and second 2 ITA No.542/DEL/2023 for wooden work, glass work, POP work, Painting works, bathroom fittings & fixing works, furniture fitting and in same property as per assessee specifications and lifestyle. It is quite clear both agreements were an integral part of the deal of buying the house property. The payment of Rs.60 Lacs was under one contract for the purchase of the house property and the remaining payment of Rs 23.50 Lacs was made under contract for the wooden work, glass work, POP work, Painting works, bathroom fittings & fixing works, furniture fitting and improvement of same property as per assessee specifications requirements and lifestyle from the same builder. The consideration for both contracts was made through banking channels before the registration of property. 3. The Assessing officer has erred in and National Faceless Appeal has compounded this by not considering, assets for Section 54 should be an asset purchased by the Assessee and if an Assessee incurs a cost for making it habitable, useful, and convenient it should be considered as an investment made by the Assessee for the purchase of property and deduction under section 54. 4. The Assessing Officer has erred and (NFAC) has compounded that error by confirming the action of the Assessing Officer not making the reference to the Valuation Officer to ascertain the fair market value of captioned property. 5. The Assessing Officer has erred and (NFAC) has compounded that error by confirming the action of the Assessing Officer by not allowing the assessee to rebuttal/refute the inspection report. 6. The Assessing Officer has erred and (N F AC) has compounded that error by confirming the action of the Assessing Officer of not sharing the Inspection Report with the assessee before issuing the Assessment order. 7. The Assessing Officer has erred and (NFAC) has compounded that error by confirming the action of the Assessing Officer of physical verification of Inspecting officer visit at the property at H.No. B-304, Green Fields Colony Faridabad Haryana on 20.03.2016 without any intimation to 3 ITA No.542/DEL/2023 assessee, was near and close to time barring date of assessment and further inspection report was based on the statement of third parties and not shared with assessee before completion of Assessment; the Assessing Officer has also given notice under section 133(6) to the seller, by calling for information U/S 133(6) dated 15/03/2016 at the last fag end of time barring case, sufficient and reasonable notice period was not allowed to Builder for verifying and certify the claim of the assessee, The Builder had replied that as his accountant is on festival leave for one week and he needs time up to 4th April 2016. The assessment was completed in hurry within the next 11 Days on 31.03.2016 as it was getting time barring. 8. The NFAC has erred by not relying upon a judgment of ITAT Ahmedabad D Bench in the case of Rajat B Mehta vs. ITO (ITA No.19/2011-12). In that case, two separate agreements have been entered one agreement for the purchase of the property and the second for furniture fitting. ITAT Ahmedabad D Bench upholds the grievance of the assessee, and, accordingly, directs the Assessing Officer to delete the disallowance of deduction under section 54. The assessee got the relief accordingly the copy thereof is attached herewith.” 3. Brief facts of the case are that the assessee is an individual. The sources of income of the assessee for the year under consideration are income from business, income from capital gain and income from other sources. The return of income declaring total income of Rs.3,09,510/- for the concerned year was e-filed on 30.09.2013 and the same was processed u/s 143(1) of the Income-tax Act, 1961 (for short ‘the Act’). This case was selected for scrutiny under CASS and a notice u/s 143(2) of the Act was issued vide letter dated 16.09.2014. During the year under consideration, the assessee has claimed deduction for investment made in house property in accordance with section 54 of the Act amounting Rs.89,68,127/-. During the 4 ITA No.542/DEL/2023 year under consideration, the assessee has sold his residential property situated at L-8, Kalkaji, New Delhi-110019 jointly with other co-owners and his share in sale proceeds was Rs.98,00,000/-. The assessee has purchased house property at plot no. B-303, Sector-B in residential colony known as Greenfields situated at Faridabad, Haryana on 11.12.2012 at a sale considerations of Rs.60,00,000/- paid stamp duty of Rs.4,80,000/- , commission of Rs.65,000/- in respect of purchase of property and Rs.24,24,127/- for capital expenditure to bring the new house in the habitable condition. The assessee has purchased the aforesaid flat in unfinished condition from the builder. The assessee has incurred the necessitate capital expenditures which amount to Rs.24,24,127/- in the form of electrification of house and water facilities, wooden works, glass works, works to carry out cooking activities, bath room fittings and fixings and painting of wall, doors and windows, in support of which necessary evidences has been provided to the AO vide letter dated 05.02.2016 to make the new property in the habitable condition since the flat so purchased was in unfinished/in a state of general disrepair and was inhabitable. The AO denied the claims made by assessee u/s 54 of the Act stating that the capital expenditure so made by the assessee to bring the new property in the habitable condition stating that it will not be includible in the cost of new property and hence consequently disallowed the amount of Rs.24,24,127/-. 5 ITA No.542/DEL/2023 4. Upon assessee’s appeal, ld. CIT (A) elaborately considered the issue and concluded as under :- “ The short issue for consideration is whether the renovation expenses claimed by the appellant which were incurred much after the purchase of the property do form part of purchase consideration of the property eligible to claim the benefits of section 54 of the income tax Act. The appellant all along pleaded before the department that he had incurred the renovation expenses of a sizable amount which according to him forms part of capital cost and thus eligible to claim deduction permissible under section 54 of the Act. The appellant had not provided the payment details for incurring that much volume of capital expenditure when he stated that all renovation expenses were incurred before the registration date. When the renovation expenses were incurred much before the registration date, then, naturally, it would be obvious that the registration valuation for which the said property would be registered would be for the same value and not for a lesser value. The appellant claims that the total cost inclusive of his renovation expenses was of the order of Rs.89.50 lakhs whereas the appellant purchased the property at a registered value of Rs.65.45 lakhs. No prudent person would agree to get It registered for a lesser value when he really paid a higher amount than the registration value for acquisition of the property. On the other hand, even if the renovation expenditure is Incurred much before the registration, no prudent person will enter into an agreement for renovation much after the renovation work is completed. It is also to be stated here that the AO also did not bring on record the mode of incurring such a volume of expenditure which the appellant claims it as capital expenditure. The appellant relied upon a judgment of ITAT Ahmedabad D Bench in the case of Rajat B Mehta vs ITO (ITA No 19/2011-12) This Judgment of the Hon'ble ITAT will not come to rescues as according to the appellant the renovation charges were incurred much before the registered date. Therefore, On the facts and in the circumstance of the case also considering appellant's claim of deduction under section 54 is misconceived and clearly lack of clarity, in that the renovation charges were stated to be Incurred much before the agreement for executing the renovation charges and particularly the fact that the appellant stated to have Incurred much capital 6 ITA No.542/DEL/2023 expenditure than the registered value of the property for which the document was registered. In the circumstances, I uphold the findings given by the AO and reject the ground of appeal agitated by the appellant.” 5. Against the above order, assessee has filed appeal before the ITAT. I have heard both the parties and perused the records. 6. As per the undisputed facts of the case, the assessee has purchased house property at plot no. B-303, Sector-B in residential colony known as Greenfields situated at Faridabad, Haryana on 11.12.2012 at a sale considerations of Rs.60,00,000/- paid stamp duty of Rs.4,80,000/- , commission of Rs.65,000/- in respect of purchase of property and Rs.24,24,127/- for capital expenditure to bring the new house in the habitable condition. The assessee has purchased the aforesaid flat in unfinished condition from the builder. The assessee has incurred the necessitate capital expenditures which amount to Rs.24,24,127/- in the form of electrification of house and water facilities, wooden works, glass works, works to carry out cooking activities, bath room fittings and fixings and painting of wall, doors and windows, in support of which necessary evidences has been provided to the AO vide letter dated 05.02.2016 to make the new property in the habitable condition since the flat so purchased was in unfinished/in a state of general disrepair and was inhabitable. AO has denied assessee’s claim under section 54 of the Act without cogent reasons. Ld. CIT (A) also called the expenditure incurred to bring the house 7 ITA No.542/DEL/2023 inhabitable condition as renovation expenses. As per the facts of the case, the house was purchased in inhabitable condition and expenditure was necessary for the proper electrification, water facilities, wood work, glass work, etc. as detailed above. It cannot be at all called renovation expenses. Assessee’s claim is appropriate and assessee should get exemption u/s 54 of the Act on this expenditure also. ITAT Ahmedabad D Bench in the case of Rajat B Mehta (supra) is applicable on the facts of this fact and ld. CIT (A) has erred in distinguishing the said case law. Accordingly, in the background of the aforesaid discussion, I set aside the orders of the authorities below and decide the issue in favour of the assessee. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 12 th day of July, 2024. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Dated the 12 th day of July, 2024 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A) 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.