SHRI KAILASH PARASHAR, AJMER V. INCOME TAX OFFICER, WARD-1-3, AJMER

ITA 572/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0389 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 22-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Cost of acquisition; Valuation report; Set aside
• Section: 2(14); 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 572/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2016-17. SHRI KAILASH PARASHAR CHOTI BASTI, PUSHKAR, AJMER. CUKE VS. THE INCOME TAX OFFICER, WARD 1(3), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AKIPP 8496 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SUNIL PORWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : MS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.12.2019 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/12/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 13.03.2019 OF LD. CIT (A), AJMER FOR THE ASSESSMENT YEAR 2016-17. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- UNDER THE FACTS & CIRCUMSTANCES OF CASE THE LD. C IT (APPEALS) HAS ERRED IN :- 1) NOT GRANTING THE BENEFIT OF COST OF CONSTRUCTION IMPROVEMENT ON THIS AGRICULTURAL LAND BESIDES THIS ALSO COST OF WE LL AND IRRIGATION SYSTEM. 2) NOT GRANTING THE BENEFIT OF INDEXATION ON PROPER CO ST OF ACQUISITION AND IMPROVEMENT. 3) ANY OTHER MATTER WITH THE PRIOR PERMISSION OF CHAIR . 2 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE ASSESSE E IS REGARDING DENIAL OF GRANTING DEDUCTION OF INDEX COST OF CONST RUCTION, IMPROVEMENT AS WELL AS COST OF ACQUISITION OF AGRICULTURAL LAND SO LD BY THE ASSESSEE WHILE COMPUTING THE LONG TERM CAPITAL GAIN. 2. THE ASSESSEE IS AN INDIVIDUAL AND HAS FILED HIS RETURN OF INCOME ON 20 TH MARCH, 2017 DECLARING TOTAL INCOME OF RS. 14,80,340 /-. IN THE SCRUTINY ASSESSMENT, THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATI ON THE ASSESSEE HAS SOLD HIS IMMOVABLE PROPERTY BEING LAND SITUATED AT KHASRA NO . 1/2689, KHATA NO. 93 (OLD 72), PUSHKAR, AJMER FOR A CONSIDERATION OF RS. 2,71 ,00,000/-. THE AO WAS OF THE VIEW THAT THE PROPERTY IN QUESTION IS A CAPITAL ASS ET AS DEFINED UNDER SECTION 2(14) OF THE IT ACT. HOWEVER, THE ASSESSEE HAS DECLARED THE CAPITAL GAIN OF RS. 2,70,00,000/- FROM SUCH SALE AS EXEMPT INCOME. AFTER CONDUCTING AN ENQUIRY, THE AO FINALLY MADE AN ADDITION OF LONG TERM CAPITAL GAIN OF RS. 2,67,1 9,488/-. THE AO ALLOWED THE INDEXED COST OF ACQUISITION OF RS. 3,80,512/-. THE ASSESSEE CHALLENGED THE SAID ACTION OF THE AO BEFORE THE LD. CIT (A) AND SUBMITT ED THAT THE ASSESSEE HAS CARRIED OUT MAJOR CONSTRUCTION ON THE SAID LAND WHICH INCLU DES 12 ROOMS, 10 WASH ROOMS, ONE ATTACH LAT-BATH ROOM AND ONE SWIMMING POOL ALON G WITH BOUNDARY WALL. THE ASSESSEE HAS ALSO CLAIMED THAT HE HAS INCURRED EXPE NDITURE TOWARDS LAND FILLING AND LEVELING AND, THEREFORE, THE ASSESSEE CLAIMED THE I NDEXED COST OF CONSTRUCTION AND IMPROVEMENT OF THE LAND AS DEDUCTION FROM THE CAPIT AL GAIN. THE LD. CIT (A) CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, THE AO D ENIED TO HAVE ACCEPTED THE SAID CLAIM ON THE GROUND THAT THE ASSESSEE HAS NEIT HER CLAIMED SUCH COST OF CONSTRUCTION OR IMPROVEMENT IN THE RETURN OF INCOME NOR DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, SUCH A CLAIM CANNOT BE ADMI TTED AT THIS STAGE. THE LD. CIT 3 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. (A) AFTER CONSIDERING THE REMAND REPORT HAS REJECTE D THE CLAIM OF COST OF CONSTRUCTION AND IMPROVEMENT OF THE LAND. 2. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE HAS PURCHASED THIS LAND IN THE YEAR 1994 AND AS PER THE SALE DEED DATED 19.07.1994 WHAT WAS ACQUIRED BY THE ASSESSEE WAS ONLY AGRICULT URAL LAND, NO CONSTRUCTION OR ANY OTHER STRUCTURE WAS IN EXISTENCE AT THAT POINT OF TIME. HE HAS ALSO REFERRED TO THE SALE DEED DATED 08.03.2016 WHEREBY THE LAND WAS SOLD BY THE ASSESSEE IN THE YEAR 2016 AND SUBMITTED THAT AS PER THE DESCRIPTION OF THE PROPERTY SOLD BY THE ASSESSEE, IT IS CLEAR THAT APART FROM THE LAND, THE RE WERE CONSTRUCTION OF 12 ROOMS, ONE SWIMMING POOL, 10 LAT-BATH, ONE ATTACHED ROOM W ITH LAT-BATH AND BOUNDARY WALL. FURTHER THERE WAS A TUBE-WELL ALONG WITH ELEC TRICITY CONNECTION AT THE TIME OF SALE. THUS THE LD. A/R HAS SUBMITTED THAT WHEN THE CONSTRUCTION MADE BY THE ASSESSEE IS PROVED FROM THE SALE DOCUMENT ITSELF, T HEN THE INDEXED COST, BENEFIT OF CONSTRUCTION COST AND IMPROVEMENT OF THE LAND OUGHT TO HAVE BEEN ALLOWED. IN SUPPORT OF THE CLAIM OF COST OF CONSTRUCTION, HE HA S REFERRED TO THE VALUATION REPORT DATED 18.01.2016 OF THE REGISTERED VALUER WHO HAS D ETERMINED THE COST OF CONSTRUCTION AT RS. 9,65,000/- AS ON 10.04.1995. T HE LD. A/R HAS ALSO REFERRED AN AFFIDAVIT OF THE TRACTOR OWNER WHO HAS CLAIMED TO H AVE DONE THE FILLING WORK ON THE LAND AS WELL AS THE BROKERAGE CHARGES PAID TO THE B ROKER AT THE TIME OF SALE OF THE PROPERTY. THUS THE LD. A/R HAS SUBMITTED THAT WHEN THE ASSESSEE HAS PRODUCED ALL THE DOCUMENTS ESTABLISHING THE FACT THAT THE CONSTR UCTION AND IMPROVEMENT WORK HAS BEEN CARRIED OUT BY THE ASSESSEE ON THE LAND AND BR OKERAGE CHARGES WERE PAID, THEN ALL THESE DEDUCTIONS OUGHT TO HAVE BEEN ALLOWED WHI LE COMPUTING THE LONG TERM CAPITAL GAIN ARISING FROM THE SALE OF THE LAND. 4 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. 3. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE ASSESSEE HAS NOT FILED ANY EVIDENCE FOR INCURRING THE EXPENDITURE FOR ALLE GED CONSTRUCTION ON THE LAND. EVEN IN THE RETURN OF INCOME THE ASSESSEE HAS COMPUTED T HE CAPITAL GAIN OF RS. 2,70,00,000/- BUT HAS CLAIMED THE SAME AS EXEMPT UN DER SECTION 2(14) OF THE IT ACT. THEREFORE, EVEN AT THE TIME OF FILING OF RETU RN OF INCOME, THE ASSESSEE HAS NOT CLAIMED ANY SUCH COST OF CONSTRUCTION OR IMPROVEMEN T OF THE LAND. THE LD. D/R HAS FURTHER CONTENDED THAT THE AO HAS ISSUED A SHOW CAU SE NOTICE ASKING THE ASSESSEE AS TO WHY CAPITAL GAIN SHOULD NOT BE COMPUTED, AND IN RESPONSE TO THE SAID SHOW CAUSE NOTICE THE ASSESSEE HAS NOT CLAIMED ANY COST OF CONSTRUCTION OR IMPROVEMENT. THEREFORE, ALL THESE CLAIMS ARE AFTER-THOUGHT AND W ITHOUT ANY SUPPORTING CORROBORATIVE EVIDENCE. SHE HAS RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT CLAIMED ANY COST OF CONSTRUCTION A ND IMPROVEMENT IN RESPECT OF THE LAND IN QUESTION. HOWEVER, WHEN THE ASSESSEE HAS CL AIMED THE COST OF CONSTRUCTION AND IMPROVEMENT BEFORE THE LD. CIT (A), THE LD. CIT (A) HAS CALLED FOR A REMAND REPORT FROM THE AO ON THE SAID CLAIM, THEN THE DOCU MENTS PRODUCED BY THE ASSESSEE SHOULD HAVE BEEN CONSIDERED AND EXAMINED BY THE AO IN THE REMAND PROCEEDINGS FOR THE PURPOSE OF DETERMINING THE FAIR AND REASONA BLE COST OF CONSTRUCTION AND IMPROVEMENT CARRIED OUT BY THE ASSESSEE ON THE LAND IN QUESTION. IT IS PERTINENT TO NOTE THAT AS PER THE SALE DEED DATED 19 TH JULY, 1994 THE ASSESSEE HAS PURCHASED THE LAND IN QUESTION WITHOUT HAVING ANY CONSTRUCTION OR STRUCTURE ON IT, WHEREAS IN THE SALE DEED DATED 8 TH MARCH, 2016 AS PER THE SCHEDULE OF THE PROPERTY IT IS STATED THAT 5 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. THERE IS A CONSTRUCTION OF 12 ROOMS, 10 BATH ROOMS, ONE SWIMMING POOL ALONG WITH PLATFORM, ONE SEPARATE ROOM WITH ATTACHED BATH AS W ELL AS BOUNDARY WALL ON THE SAME LAND. THEREFORE, THE STRUCTURE ON THE LAND EXI STED AT THE TIME OF SALE IS CLEARLY APPEARING IN THE SALE DEED DATED 8 TH MARCH, 2016. THE ASSESSEE HAS CLAIMED THE COST OF CONSTRUCTION ON THE BASIS OF THE VALUATION REPOR T DATED 18.01.2016 AND THE QUANTUM OF COST OF CONSTRUCTION IS SUBJECT TO VERIF ICATION. WE FURTHER NOTE THAT THERE ARE DISCREPANCIES IN THE VALUATION REPORT FILED BY THE ASSESSEE AS THE VALUER HAS STATED THAT THE VALUATION IS DONE AS ON 01.04.1995 WHEREAS IN THE OTHER PART OF THE VALUATION REPORT IT IS STATED THAT VALUATION OF CIV IL WORK AS ON 01.04.2001. THUS IT IS NOT CLEAR WHETHER THE CONSTRUCTION WORK WAS DONE IN THE YEAR 1995 OR IN THE YEAR 2001. AS REGARDS THE OTHER EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS THE FILLING OF THE LAND, HE HAS JUST FILED AN AFFIDAVIT OF ONE SHRI SHIVRAJ, TRACTOR OWNER, WHO HAS CLAIMED TO HAVE CARRIED OUT THE WORK OF SAND FILLIN G AND OTHER WORKS. THE ASSESSEE HAS ALSO PRODUCED THE RECEIPTS OF THE BROKERS FOR B ROKERAGE CHARGES. ALL THESE DOCUMENTS ARE REQUIRED TO BE EXAMINED AND VERIFIED AND FURTHER IF THE AO IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE REGARDING THE COST OF CONSTRUCTION AND IMPROVEMENT, THEN THE ISSUE CAN BE EXAMINED THROUGH THE DVO FOR DETERMINING THE COST OF CONSTRUCTION. ONCE THE STRUCTURE ON THE LA ND IS FOUND TO BE EXISTED, THEN THE ONLY DISPUTE REMAINS BETWEEN THE PARTIES IS REGARDI NG THE ACTUAL COST OF CONSTRUCTION. EVEN DURING THE REMAND PROCEEDINGS, THE AO HAS NOT VERIFIED THIS FACT WHETHER THE STRUCTURE IS IN EXISTENCE ON THE LAND I N QUESTION. THE LD. CIT (A) HAS NOT PASSED A SPEAKING ORDER ON THIS ISSUE AND HAS D ISMISSED THE GROUND OF THE ASSESSEE IN A SUMMARY MANNER AS UNDER :- 6 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. (II) IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER AND REMAND REPORT, I AM OF THE CON SIDERED VIEW THAT THE AO HAD RIGHTLY ALLOWED THE INDEXED CO ST OF ACQUISITION AT RS. 3,80,512/-. THE DEDUCTION HAS B EEN ALLOWED BY THE AO ON THE BASIS OF EVIDENCE AVAILABLE ON REC ORD. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. THUS WE FIND THAT THIS ISSUE REQUIRES A PROPER VERI FICATION AND EXAMINATION AS WELL AS DETERMINATION OF COST OF CONSTRUCTION AND IMPROVEME NT, IF ANY. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR DECIDI NG IT AFTER CONDUCTING A PROPER ENQUIRY AND DETERMINING THE FAIR COST OF CONSTRUCTI ON AS WELL AS THE YEAR IN WHICH THE CONSTRUCTION WAS CARRIED OUT. 5. AS REGARDS THE BROKERAGE CHARGES, SINCE IT IS AN ACCEPTED PRACTICE OF PAYMENT OF BROKERAGE CHARGES AT A CERTAIN PERCENTAGE OF THE SALE CONSIDERATION, THE ASSESSEE HAS CLAIMED THE BROKERAGE CHARGES @ 2% WHICH IS IN LINE WITH THE PREVAILING RATE OF BROKERAGE CHARGES. ACCORDINGLY THE SAID CLAIM OF B ROKERAGE CHARGES IS ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23/12/20 19. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/12/2019. DAS/ 7 ITA NO. 572/JP/2019 SHRI KAILASH PARASHAR, AJMER. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KAILASH PARASAR, AJMER. 2. IZR;FKHZ@ THE RESPONDENT-THE ITO WARD 1(3), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 572/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR