Devaki Thirunavukarasu, CHENNAI V. DCIT, Pondicherry

ITA 606/CHNY/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6353 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S RANGARAJAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Cost of acquisition; Fair market value; Revenue expenditure; Capital Gains
• Section: 143(3); 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.606/CHNY/2014 % &% /ASSESSMENT YEAR: 2009-10 SMT. DEVAKI THIRUNAVUKARASU, 27/14, SENGUNTHAR STREET, ORIEANPET, PONDICHERRY. [PAN: AADPT 1024G] VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-I, PONDICHERRY. ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE )*'( + , /RESPONDENT BY : SHRI S. RANGARAJAN, JCIT - + .# /DATE OF HEARING : 10.01.2019 /0& + .# / DATE OF PRONOUNCEMENT : 31.01.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE APPELLANT DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHE NNAI (CIT(A) FOR SHORT) DATED 15.01.2014 FOR THE ASSESSMENT YEAR (AY ) 2009-10. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) VI, CHENNAI DATED 15.01.2014 IN LT.A.NO.501/13-14 FOR T HE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS , AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO.606/CHNY/2014 (AY: 2009-10) :- 2 -: 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF RS.29,19500/- BEING THE DEVELOPMENT EXPENSES FORMED PART OF THE COST OF ACQUISITION/COST OF IMPROVEMENTS IN THE COMPUTAT ION OF ASSESSABLE CAPITAL GAINS WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF INTEREST AGGREGATING TO RS.9,69,000/- FORMED PART OF THE COS T OF ACQUISITION/COST OF IMPROVEMENTS IN THE COMPUTATION OF ASSESSABLE CA PITAL GAINS WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE APPLIC ATION OF SECTION 50C OF THE ACT IN THE COMPUTATION OF LONG/SHORT TERM CA PITAL GAINS OVERLOOKING THE PROVISIONS IN SECTION 50C(2) OF THE ACT WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF RS.64,62,300/- INCURRED ON RENOVATION CARRIED OUT T O THE BUILDING IN THE COMPUTATION OF SHORT TERM CAPITAL GAINS WITHOUT ASS IGNING PROPER REASONS AND JUSTIFICATION. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE FINDINGS IN THE REMAND REPORT DATED 19.11.2013 IN THIS REGARD WERE WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW A ND OUGHT TO HAVE APPRECIATED THAT NON CONSIDERATION OF GROUND NO.5 R AISED BEFORE HIM WOULD VITIATE HIS ACTION IN THIS REGARD. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE COMPUTATION OF LONG TERM CAPITAL GAINS ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER AND SUSTAINED IN THE APPELLATE ORDER WAS WRONG, ERRONEOUS, UNJUST IFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE COMPUTATION OF SHORT TERM CAPITAL GAINS ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER AND SUSTAINED IN THE APPELLATE ORDER WAS WRONG, ERRONEOUS, UNJUST IFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 9. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JU STICE IS NULLITY IN LAW. 10. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL G ROUNDS/ARGUMENTS AT THE TIME OF HEARING. ITA NO.606/CHNY/2014 (AY: 2009-10) :- 3 -: 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF DEVELOPMENT OF PROPERTY. THE RETURN OF INCOME FOR T HE AY 2009-10 WAS FILED ON 22.12.2009 DISCLOSING TOTAL INCOME OF RS. 68,66,260/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPL ETED BY DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, PONDICHERRY V IDE ORDER DATED 31.12.2011 PASSED U/S. 143(3) OF THE INCOME TAX ACT , 1961 (FOR SHORT THE ACT) DECLARING TOTAL INCOME OF RS. 2,18,53,06 0/-. WHILE DOING SO, THE ASSESSING OFFICER (AO) HAS DISALLOWED THE DEVELOPME NT EXPENDITURE OF RS.29,19,500/- IN RESPECT OF PLOTS SOLD AT ARIYANKU PPAM, JAYA NAGAR, REDDIARPALAYAM, SUDHAGAR NAGAR ON THE GROUND THAT T HE APPELLANT COULD NOT SUBSTANTIATE THE EXPENDITURE INCURRED TOWARDS T HE DEVELOPMENT OF THE PLOT SOLD. THE AO ALSO DISALLOWED THE INTEREST ON CAPITAL BORROWED FOR THE PURPOSE OF BUYING THE PROPERTY SOLD ON THE GROUND T HAT THE SAME CANNOT BE ALLOWED AS DEDUCTION. THE AO ALSO MADE ADDITION OF RS. 46,36,000/- INVOKING THE PROVISION OF S. 50C OF THE ACT IN RESP ECT OF THE PROPERTY SOLD AT SUDHAGAR NAGAR. THE AO ALSO DISALLOWED SUM OF R S. 64,62,300/- BEING THE EXPENDITURE INCURRED TOWARDS THE RENOVATI ON OF THE BUILDING CLAIMED AS REVENUE EXPENDITURE HOLDING TO BE CAPITA L EXPENDITURE. ITA NO.606/CHNY/2014 (AY: 2009-10) :- 4 -: 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DISMISSED THE APPEAL. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US IN THE PRESENT APPE AL. 5. GROUND NO.1, 9 & 10 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. GROUND NO.2 CHALLENGES THE DISALLOWA NCE OF DEVELOPMENT EXPENDITURE OF RS. 29,19,500/- CLAIMED WHILE COMPUT ING THE CAPITAL GAINS ON THE SALE OF PROPERTIES. 6. THE AO HAS DISALLOWED THE CLAIM FOR THE REASON O F FAILURE OF THE APPELLANT TO SUBSTANTIATE THE SAME EVEN BEFORE LD. CIT(A). THE APPELLANT HAS NOT FILED ANY EVIDENCE EVEN BEFORE US. THIS EX PENDITURE IS TO BE INCURRED ON THE CONSTRUCTION OF COMPOUND WALL JUST BEFORE THE SALE OF THE PROPERTIES. THE ONLY EVIDENCE FILED BY THE APPELLA NT IN SUPPORT OF THE CLAIM IS THE CERTIFICATE ISSUED BY HONEY DESIGNER & BUILDERS, PONDICHERRY CERTIFYING THE ESTIMATED COST OF COMPOUND WALL, WHI CH DOES NOT SPEAK OF WHO CONSTRUCTED THE COMPOUND WALL WHEN IT WAS CONST RUCTED ETC. THUS, THE CERTIFICATE FURNISHED BY THE APPELLANT DOES NOT SERVE ANY PURPOSE AND IT IS A MATTER OF RECORD THAT DURING THE COURSE OF PROCEEDINGS BEFORE THE LD. CIT(A), A REMAND REPORT WAS CALLED FROM THE AO AND THE APPELLANT HAD NOT EVEN COOPERATED DURING THE COURSE OF REMAND PROCEEDINGS. KEEPING IN VIEW OF THESE CIRCUMSTANCES, WE INFER TH AT THE APPELLANT HAS NO EVIDENCE IN SUPPORT OF THE CLAIM OF THE EXPENDIT URE OF INCURRED ON THE ITA NO.606/CHNY/2014 (AY: 2009-10) :- 5 -: CONSTRUCTION OF THE COMPOUND WALL. THEREFORE, WE C ONFIRM THE ADDITION OF RS. 29,19,500/-. HENCE, GROUND NO.2 FILED BY THE APPELLANT IS DISMISSED. 7. GROUND NO.3 CHALLENGES THE DISALLOWANCE OF INTER EST EXPENDITURE INCURRED ON THE LOANS BORROWED FOR THE PURCHASE OF THE PROPERTIES WHICH WERE SOLD IN RESPECT OF WHICH THE INCOME WAS OFFERE D TO TAX UNDER HEAD CAPITAL GAINS. THE AO HAD NOT DOUBTED THE GENUINEN ESS OF EXPENDITURE BUT MADE DISALLOWANCE ONLY ON THE GROUND THAT THE I NTEREST EXPENDITURE DOES NOT FORM PART OF COST ACQUISITION OF THE PROPE RTY. THE LD. CIT(A) CONFIRMED THE ADDITION ON MISTAKEN ASSUMPTION THAT THE SAME WAS CLAIMED AS REVENUE EXPENDITURE, WHEREAS THE CLAIM W AS TO ALLOW AS A PART OF THE COST OF THE ACQUISITION. IT IS NOT EVE N THE CASE OF THE AO THAT THE SAME WAS ALLOWED AS REVENUE EXPENDITURE DURING THE HOLDING PERIOD OF THE PROPERTIES PURCHASES IN FACT, THE AO ACCEPTE D THAT THE LOANS WERE BORROWED FOR THE PURPOSE OF PURCHASE OF PROPERTY SO LD. NOW, IT IS THE SETTLED PROPOSITION OF LAW THAT INTEREST PAID DURIN G THE PERIOD OF HOLDING, IF THE LIABILITY HAS INCURRED FOR ACQUIRING THE PROPER TY, THE SAME WOULD FORM PART OF THE COST OF THE PROPERTY, IF IT HAS NOT BEE N ALLOWED AS A DEDUCTION IN COMPUTATION OF THE TAXABLE INCOME AS HELD BY THE DECISION IN THE CASES OF CIT V. MITHLESH KUMARI [1973] 92 ITR 9 (DEL.), A DDL. CIT V. K.S.GUPTA [1979] 119 ITR 372 (AP), CIT V. MAITHREYI PAI [1985 ] 152 ITR 247 ITA NO.606/CHNY/2014 (AY: 2009-10) :- 6 -: (KARN.), NAOZAR CHENOY V. CIT [1998] 234 ITR 95 (AP ) & CIT V. TRISHUL INVESTMENTS LTD. [2008] 305 ITR 434 (MAD.). RESPEC TFULLY FOLLOWING THE DECISIONS CITED ABOVE TO ALLOW THIS GROUND OF APPEA L AND DIRECT THE AO TO ALLOW THE SAME AS A PART OF THE COST OF ACQUISITION ON THE PROPERTIES SOLD WHILE COMPUTING THE INCOME UNDER HEAD INCOME FROM CAPITAL GAINS. HENCE, GROUND NO.3 IS ALLOWED. 8. GROUND NO.4 TO 8 CHALLENGES THE ADDITION U/S. 50 C OF THE ACT ON SALE OF PROPERTY AT SUDHAGAR NAGAR. THE PROVISIONS OF S. 50C OF THE ACT ARE DEEMING PROVISIONS, WHICH PROVIDES THAT IN CASE THE APPARENT CONSIDERATION IS BELOW THE VALUE ASSESSED BY STAMP VALUATION AUTHORITY, THE STAMP DUTY VALUE SHALL BE DEEMED TO BE CONSIDER ATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. HOWEVER, IT IS OPEN TO AN ASSESSEE TO CLAIM THAT THE VALUE ADOPTED FOR STAMP DUTY PURPOSE EXCEEDS THE FAIR MARKET VALUE. THEREFORE, BEFORE I NVOKING THE PROVISIONS OF S. 50C OF THE ACT, THE AO SHOULD GIVEN AN OPPORT UNITY TO THE ASSESSEE TO EXPLAIN AS TO WHY THE STAMP DUTY VALUE SHOULD NO T BE ADOPTED AS A DEEMED CONSIDERATION FOR THE PURPOSE OF THE COMPUTI NG THE CAPITAL GAINS. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE ARE UN ABLE TO DISCERN THAT ANY SUCH OPPORTUNITY WAS GIVEN BY THE AO. IN THE C IRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD BE REMITTED BACK TO THE FILE OF AO FOR DENOVO ASSESSMENT ON THIS ISSUE IN ACCORDANCE WITH LAW ITA NO.606/CHNY/2014 (AY: 2009-10) :- 7 -: THEREFORE, ASSESSMENT ON THIS ISSUE IN ACCORDANCE W ITH THE LAW AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 31 ST DAY OF JANUARY, 2019 IN CHENNAI SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 31 ST JANUARY, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 4. - 5. /CIT 2. )*'( /RESPONDENT 5. 36 ). /DR 3. - 5. ( )/CIT(A) 6. 7% 8 /GF