Pravin Virsingbhai Makwana, Ahmedabad V. The ITO, Ward-4(2)(5), Ahmedabad

ITA 706/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7489 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Cost of acquisition
• Section: 147; 56; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 706/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2010-11 Pravin Virsinghbhai Makwana, 4, Dharmraj Nagar Society, Nr. Shyona City, Ghatlodia, Ahmedabad-380061. PAN: AMJPM3225C Vs. I.T.O., Ward-4(2(5), Ahmedabad. (Applicant) (Respondent) Assessee by : None Revenue by : Shri Kamlesh Makwana, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 11/11/2021 घोषणा कᳱ तारीख /Date of Pronouncement: 29/11/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-4, Ahmedabad, dated 07/03/2019 arising in the matter of assessment order passed under s. 143 r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2010-11. ITA no.706/AHD/2019 A.Y. 2010-11 2 2. The assessee has raised the following grounds of appeal: 1. The Id. CIT(A) has erred in law and on facts of the case by confirming the action of Id. AO in reopening the assessment u/s 147 of the Act. Under the facts and circumstances of the case the action of reopening is without jurisdiction and not permissible either in law or on facts. The present proceedings, therefore, are required to be quashed. 2. The Id. Commissioner of Income Tax (Appeals) erred in law and on facts of the case in confirming the action of Id. AO in making addition of Rs.12,40,0007- u/s 56 of the Act on account undisclosed income derived from sale of immovable property. 3. Both the Id. Authorities have erred in law and on facts of the case in appreciating the fact that what could have been taxed was net profit / gain arising from the sale of the impugned immovable property and not the entire alleged sales consideration. 4. Both the Id. Authorities have erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the assessment proceedings and not properly appreciating various facts and laws in its proper perspective. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s. 234A/B/C/D of the Act. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in initiating penalty u/s.271(1)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 3. When the matter was called for hearing there was nobody attended from the side of the assessee despite the fact that the notice intimating the date of hearing was duly served upon the assessee. This fact can be verified from the acknowledgement issued by the post office which is available on record. In the absence of any communication from the side of the assessee, we deem it fit to proceed to adjudicate the dispute involved in the appeal ex parte to the assessee and after hearing the learned DR of the Revenue. 4. The assessee in ground No. 1 has challenged the validity of the assessment framed under section 147 read with section 143(3) of the Act. ITA no.706/AHD/2019 A.Y. 2010-11 3 5. In the present case, the reopening was made by the AO under the provisions of section 147 of the Act on account of escapement of income from the sale of 2 flats. The AO based on the AIR/ITS information came to know that the assessee has sold 2 flats but there was no return filed by him. Accordingly, the proceedings were initiated under section 147 of the Act. Admittedly, the assessee has not filed the return of income for the year under consideration under the provisions of section 139 of the Act. Thus, in such a situation there remains no remedy with the Department except to initiate the proceedings under the provisions of section 147 of the Act on account of escapement of income. Accordingly, we confirm the initiation of the proceedings under section 147 of the Act and dismissed the ground of appeal of the assessee. 6. The 2 nd issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for ₹ 12,40,000/- on account of sale of property and taxing the same as income from other sources without deducting the corresponding expenses. 7. The assessee in the year under consideration has sold two flats bearing number E/422 and E/423 of plot No. 194 at vejalpur Ahmadabad for ₹ 6,20,000/- each aggregating to ₹ 12,40,000/-. But the assessee has not disclosed any income by filing the income tax return qua to sale of the impugned properties. On question by the AO the assessee vide letter dated 8 th November 2017 and 11 th November 2017 claimed to be engaged in the business of real estate as broker on commission basis. As such the assessee on sale of the above flats have earned only a sum of ₹ 31,000/- per flat aggregating to ₹62,000 only as commission. 7.1 However the AO disagreed with the contention of the assessee by observing as under: The assessee failed to calculation of his investment made in immovable property, the details available in the department, his not disclosed income derived from sale of immovable property. The assessee identified as a Real Estate Broker, hence, the difference of sale consideration amount treated as his income from other source. No deduction ITA no.706/AHD/2019 A.Y. 2010-11 4 allowable as per provision of the Act u/s.56 of Rs.12,40,000/- [The ITS details are duplicate in nature, for the natural justice Rs.12,40,000/- taken only]. Therefore, the difference amount of sale consideration of Rs.12,40,000/- added back to the total income of the assessee for the year under consideration. 8. Aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the order of the AO by observing as under: The remand report and the rejoinder by the appellant have been considered. The appellant has not been filing return of income. During remand proceedings the appellant has claimed that the total sale proceeds have been brought to tax. The appellant desired that the purchase cost should be allowed to be deducted from the total consideration so receipt. The detail of the payment made is as under: Date of Payment Amount(Rs.) Mode of Payment 09-05-00 2.20.000/- Cash, 10-08-01 2,QQ,OQQ/- Cash 17-02-02 2.00.000/- Cash 1.4.2008(0 15.02.2009 4.80.000/- Cash Total. 11,00,000/- Cash' As can be seen above, the payment of Rs.6,20,000/- are claimed to have been made before 17.02.2002. No remedial action can be taken by the department even if the developer is giving confirmation. The basic issue for satisfaction of AO is missing as neither the amounts have been routed through banking channel nor shown to the department in any manner as the appellant is not filing return of income. Similarly, no convincing explanation supported by credible evidences filed for Rs.4,80,0007- which has been paid in A.Y.2009-10. It is emphasized that no return of income is filed for A.Y. 2009-10. The AO has pointed out that the property .(two flats) has been transferred by the appellant; therefore, the sale proceeds have been rightly assessed in the hands of appellant. 4.1 I have considered all the documents filed in paper book(1-50) and reach to the conclusion that the onus has not been discharged by the appellant in spite of adequate opportunity as per principle of natural justice, has been granted. The appellant is real estate broker and doing business for many years. No case law has been relied by the appellant on the issue, The claim of purchase expenditure of Rs.11,00,000/- is not being allowed, as the onus has not been discharged by the appellant. In view of facts as recorded above and circumstances of the case, I am constrained to agree with the AO and decide not to interfere. The addition : u/s.56 of Rs.12,40,000/- is confirmed. The ground no.1 is dismissed. ITA no.706/AHD/2019 A.Y. 2010-11 5 9. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 10. The learned DR before us vehemently supported the order of the authorities below. 11. We have heard the learned DR and perused the materials available on record. In the case on hand, the basis for reopening the assessment under section 147 of the Act was the information received about the sale of properties for ₹12,40,000/- only. As per the assessee, he has earned only commission income of ₹ 62,000 as broker against the sale of properties. Accordingly, the entire amount of sale consideration of ₹12,40,000/- cannot be treated as income of the assessee. However, the AO treated the whole of the amount of sale consideration of ₹12,40,000/- as income from other sources under the provisions of section 56 of the Act which was subsequently confirmed by the learned CIT (A). 11.1 Before we proceed to adjudicate whether the amount of sale consideration is chargeable to tax under the head capital gain or the income from other sources. We are inclined to test the order of the authorities below on the parameter whether the gross amount of sale consideration can be treated as income of the assessee. The answer stands in negative. It is for the reason that the income accrues to the assessee only after meeting the corresponding expenses. In other words, the income of the assessee cannot be determined without allowing the setoff of the corresponding expenses. 11.2 Undeniably, the amount of ₹ 12,40,000/- represents the gross sale consideration against the flats which cannot be brought to tax without allowing the corresponding expenses. The assessee in the case on hand has claimed Rs. 11 lakhs ITA no.706/AHD/2019 A.Y. 2010-11 6 as the cost of acquisition of such flats which was sold for ₹ 12,40,000/- which was purported to be incurred in cash. Admittedly, the cost of acquisition for the flat is the subject matter of verification. As the cost of ₹ 11 lakhs was incurred in cash, there lies a heavy burden upon the assessee to justify the same based on documentary evidence. In the present case, the assessee has produced copy of letter of delivery of title paper of flats, allotment letter, possession letter of flats and no due certificated and the confirmation from the builder. To our understanding, the onus was shifted from the assessee to the revenue to reject the confirmation filed by the assessee based on cogent reasons. The confirmation from the builder is one of the vital piece of evidence which cannot be denied on surmise and conjecture, particularly in the facts where such confirmation was also supported based on the allotment letter, title paper, possession letters and no due certificate. Thus, we are of the view that the learned CIT (A) cannot reject these documents without assigning any cogent reasons. Accordingly we hold that, the assessee is entitled for deduction of ₹ 11 lakhs against the amount of sale consideration. Thus, the effective income which is liable to tax is of ₹ 1,40,000/- only being the difference in the sale consideration and purchase price of the property. Thus we direct the AO to delete the amount of addition made by him except a sum of ₹ 1,40,000/- which we hold that it represents the income of the assessee against the sale of flats. Thus the addition to the extent of Rs. 11,00,000.00 is deleted and the addition for the balance amount of Rs. 1,40,000.00 is sustained. Hence the ground of appeal of the assessee is partly allowed. 12. The issue raised by the assessee in ground in ground number 5 & 6 is either ITA no.706/AHD/2019 A.Y. 2010-11 7 consequential or premature to adjudicate. Hence the same is dismissed being infructuous. 13. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the Court on 29/11/2021 at Ahmedabad. Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 29/11/2021 Manish