The ACIT, Circle-5(2), Ahmedabad V. Shri Himanshu Jayantilal Kamdar, Ahmedabad

ITA 746/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8142 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P PATHAK
• Assessee Lawyers: S V AGRAWAL
• Keywords: Cost of acquisition; Fair market value; Surrender of tenancy right
• Section: 54F

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.746/AHD/2015 ( ASSESSMENT YEAR : 2010-11) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-5(2), AHMEDABAD / VS. SHRI HIMANSHU JAYANTILAL KAMDAR, D-3, STATUS APARTMENT, OPP. NAVRANGPURA TELEPHONE EXCHANGE, ELLISBRIDGE, AHMEDABAD 380006 ./ ./ PAN/GIR NO. : ABMPK0506C ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI O. P. PATHAK, SR. D.R. / RESPONDENT BY : SHRI S. V. AGRAWAL, A.R. DATE OF HEARING 02/05/2018 !'# / DATE OF PRONOUNCEMENT 05/06/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE CIT(A)-5, AHMEDABA D (CIT(A) IN SHORT), DATED 29.01.2015 ARISING IN THE ASSESSMENT ORDER DATED ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 2 - 11.03.2013 PASSED BY THE ASSESSING OFFICER (AO) U/S .143(3) OF THE INCOME TAX ACT, 1961; (THE ACT) CONCERNING ASSESSME NT YEAR 2010- 11. 2. AS PER ITS GROUND OF APPEAL, THE REVENUE HAS CHA LLENGED THE ACTION OF THE CIT(A) IN REVERSING THE ADDITIONS MAD E TO THE LONG TERM CAPITAL GAINS ON ACCOUNT OF COST OF ACQUISITIO N/COST OF IMPROVEMENT. 3. BRIEFLY STATED, THE ASSESSEE SOLD A PLOT OF LAND AT RANIP, AHMEDABAD ON 08.03.2010 FOR A CONSIDERATION OF RS.9 5 LAKHS. THE ASSESSEE HAD EARLIER PURCHASED THE AFORESAID PLOT O N 06.01.2004 FOR A CONSIDERATION OF RS.1,06,530/-. THE ASSESSEE ALSO P URCHASED A NEW RESIDENTIAL HOUSE AT NAGAR SHETH VANDA, GHEEKANTA, AHMEDABAD FOR WHICH PAYMENT OF RS.84,13,719/- WAS SHOWN BY THE AS SESSEE TOWARDS COST OF ACQUISITION. WHILE COMPUTING LONG TERM CAPITAL GAINS (LTCG) ARISING ON SALE OF PLOT AT RANIP, THE ASSESSEE CLAIMED DEDUCTION UNDER S.54F QUA THE NEW RESIDENTIAL HOUSE ACQUIRED. IN THE COURSE OF SCRUTINY ASSESSMENT, HOWEVER, ASSESSI NG OFFICER DISPUTED THE COST OF ACQUISITION/COST OF IMPROVEMEN T OF THE NEW RESIDENTIAL HOUSE. THE AO NOTED THAT THE ORIGINAL COST OF PURCHASE OF HOUSE STANDS AT RS. 19,08,290/-. IT WAS OBSERVE D BY THE AO THAT THE ASSESSEE HAS IN ADDITION TO THE ORIGINAL COST O F PURCHASE, THE ASSESSEE HAS ALSO CLAIMED RS.35 LAKHS ON ACCOUNT OF PURPORTED PAYMENT MADE TO TENANT (ARTIBEN J. VAIDHYA) TOWARDS COST OF VACATING THE PROPERTY AS PART OF COST OF ACQUISITIO N OF NEW PROPERTY. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS MADE ANOTHER CLAIM OF RS.30,05,429/- TOWARDS COST OF REPAIRS AND RENOV ATION OF NEW RESIDENTIAL HOUSE AS PART OF COST OF ACQUISITION FO R THE PURPOSES OF DEDUCTION UNDER S.54F OF THE ACT. THE AO DISPUTED THE COST CLAIMED ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 3 - AS PART OF ACQUISITION OF NEW RESIDENTIAL HOUSE WIT H REGARD TO BOTH PAYMENTS MADE TOWARDS VACATING THE PROPERTY (RS.35 LAKHS) AS WELL AS REPAIR AND RENOVATION COSTS (BY 30.05 LAKHS) CLA IMED TO BE INCURRED BY THE ASSESSEE FOR MAKING IT HABITABLE. 3.1 WITH REFERENCE TO THE PAYMENT OF RS.35 LAKHS MA DE TO TENANT FOR VACATING THE NEW RESIDENTIAL HOUSE, THE AO OBSE RVED THAT THE AFORESAID PAYMENT WAS MADE IN CASH WHICH IS NOT A B ELIEVABLE PROPOSITION AND THE ASSESSEE COULD NOT EVEN PRODUCE ANY PAN OR ANY OTHER ASSESSMENT DETAILS IN RESPECT OF THE PURPORTE D TENANT, NAMELY MS. ARTIBEN J. VAIDHYA. THE AO THUS TOOK A VIEW TH AT SUCH COST ALLEGEDLY INCURRED ON ACCOUNT OF VACATING THE NEW P ROPERTY IS NOT A LEGITIMATE EXPENDITURE FOR DETERMINATION OF COST OF ACQUISITION OF NEW HOUSE. 3.2 WITH REFERENCE TO THE REPAIRS AND RENOVATION EX PENSES OF RS.30,05,429/- CLAIMED TO BE INCURRED BY THE ASSESS EE AND THUS CLAIMED TO BE PART OF COST OF ACQUISITION OF NEW HO USE, THE AO OBSERVED THAT THE EXPENDITURE CLAIMED IS VERY UNREA SONABLE HAVING REGARD TO THE ORIGINAL COST OF THE PROPERTY OF RS.1 9,08,290/-. IT WAS FURTHER OBSERVED THAT ALMOST ALL THE PAYMENTS HAVE BEEN MADE IN CASH ONLY AND THE ASSESSEE IS SHOWING STAGGERING OU TSTANDING PAYABLE AS ON 31.03.2011 AT RS.14,30,638/-. THE AO ACCORDINGLY PROCEEDED TO ESTIMATE THE COST OF POSSIBLE RENOVATI ON AT 20% OF THE CLAIM SO MADE. ACCORDINGLY, THE AO WORKED OUT THE COST OF REPAIRS, RENOVATION ETC. AT RS.6,01,085/- AND DISALLOWED THE BALANCE AMOUNT OF RS.24,04,344/- OUT OF TOTAL EXPENSES CLAIMED TOW ARDS REPAIRS ETC. AT RS.30,05,429/-. THE AO ACCORDINGLY REVISED THE E NTITLEMENT TOWARDS DEDUCTION UNDER S.54F OF THE ACT AS PER COS T OF ACQUISITION DETERMINED BY HIM. ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 4 - 4. AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BEF ORE THE CIT(A). 4.1 THE CIT(A) REVISITED THE FACTS CONCERNING THE AFORESAID TWO ITEMS OF COST OF ACQUISITION/COST OF IMPROVEMENT AN D FOUND MERIT IN THE CLAIM OF ASSESSEE. AS REGARDS PAYMENT MADE TO TENANT FORMING PART OF THE COST OF ACQUISITION AMOUNTING TO RS.35 LAKHS, THE CIT(A) OBSERVED FEW SALIENT FEATURES, NAMELY; (I) THE PURCHASE DEED FOR THE PURCHASE OF NEW HOUSE HAS PROVIDED FOR THE FACT THAT THE NEW HOUSE IS OCCUPIED BY THE TENANTS AND LIABILITY TO VACATE THE TENANT WILL BE ON PURCHASER ; (II) THE ASSESSEE FILED LEGAL SUIT FOR ABANDONMENT OF TENANCY RIGHT B Y TENANTS IN FAVOUR OF THE ASSESSEE; (III) THE ASSESSEE NEGOTIAT ED LOWER PRICE WITH THE SELLER DUE TO EXISTING ENCUMBRANCE OF TENA NCY; (IV) PAYMENT IN CASH IS IRRELEVANT AND IS NOT DEBARRED M ORE SO, ON ACCOUNT OF THE FACT THAT THE PAYMENT IS EVIDENCED B Y DETAILED SETTLEMENT AGREEMENT EXECUTED IN WRITING BY THE TEN ANT IN FAVOUR OF THE ASSESSEE FOR SURRENDER OF TENANCY RIGHT FOR SPE CIFIED CONSIDERATION (RS.35 LAKHS) BEFORE NOTARY. THE CIT (A) ALSO TOOK NOTE OF THE FACT THAT THE MARKET VALUE OF THE NEW P ROPERTY WAS CONSIDERABLY HIGHER THAN THE ORIGINAL COST OF ACQUI SITION BY THE ASSESSEE OWING TO TENANCY ENCUMBRANCE. THE CIT(A) ALSO SIMULTANEOUSLY OBSERVED THAT THE TENANT WAS HOLDING LEGAL AS WELL AS ILLEGAL POSSESSION AND ANNUAL RENT OF RS.582/- WAS FORMALLY PAID BY THE TENANT FOR OCCUPATION OF THE PROPERTY. ON THE CONSPECTUS OF THE FACTS AND CIRCUMSTANCES, THE CIT(A) FOUND THAT THE COST INCURRED BY THE ASSESSEE TO CURE THE ENCUMBRANCES AND TO ABANDO N TENANCY RIGHT DO FORM PART OF THE COST OF ACQUISITION FOR THE PUR POSES OF SECTION 54F OF THE ACT. ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 5 - 4.2 WITH REFERENCE TO ANOTHER EXPENSE TOWARDS REPAI RS AND RENOVATION AMOUNTING TO RS.30,05,429/-, THE CIT(A) OBSERVED THAT THE AO HAS NOT POINTED OUT ANY DEFECT IN THE SUPPOR TING BILLS TOWARDS LABOUR CONTRACTOR, ELECTRICAL CONTRACTOR, R CC CONTRACTOR BILLS, COLOUR CONTRACTOR BILLS, PLUMBING CONTRACTOR BILLS ETC. THE CIT(A), THUS, WAS OF THE VIEW THAT ENTIRE EXPENDITU RE IS SUPPORTABLE BY EVIDENCE AND THERE IS NO CASE FOR DISALLOWING A PORTION OF THE EXPENDITURE CLAIMED. THE CIT(A) ACCORDINGLY ADMITT ED THE ENTIRE CLAIM OF RS.30,05,429/- AS AGAINST RS.6,01,085/- DE TERMINED BY AO. 5. THE REVENUE IN THE PRESENT APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) ON BOTH COUNTS. 5.1 LEARNED DR FOR THE REVENUE RELIED UPON THE ORDE R OF THE AO AND SUBMITTED THAT THE CIT(A) WAS NOT CORRECT IN GR ANTING WHOLESOME RELIEF TO THE ASSESSEE WHEN THE COST INCU RRED FOR TENANCY RIGHTS, IF ANY, IS NOT PROVED AS NOTED BY THE AO. THE LEARNED DR SIMILARLY POINTED OUT THAT THE CIT(A) HAS MERELY RE LIED UPON UNVOUCHED EXPENDITURE CLAIMED TO BE INCURRED BY THE ASSESSEE TOWARDS REPAIRS AND RENOVATION AND OMITTED TO TAKE NOTE OF THE VITAL FACT THAT THE PAYMENT IS CLAIMED TO HAVE BEEN MADE IN CASH WHICH IS NOT VERIFIABLE AND MAJORITY OF THE PAYMENT (RS.14,3 0,638/-) IS CLAIMED TO BE OUTSTANDING WHICH IS NOT BELIEVABLE. LEARNED DR SUBMITTED THAT IT IS NOT KNOWN AS TO WHEN THE PURPO RTED OUTSTANDING LIABILITY HAVE BEEN DISCHARGED AND FROM WHAT RESOUR CES. LEARNED DR ACCORDINGLY SUBMITTED THAT THE CIT(A) HAS MISDIR ECTED ITSELF IN LAW AND ON FACTS IN ACCEPTING THE CLAIM OF THE ASSE SSEE IN A COSMETIC MANNER DISREGARDING FACTUAL OBSERVATIONS MADE BY TH E AO. ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 6 - 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MAT ERIAL PLACED ON RECORD. THE CENTRAL CONTROVERSY INVOLVED IN THE PR ESENT CASE IS TOWARDS DETERMINATION OF TOTAL COST OF ACQUISITION OF NEW HOUSE FOR THE PURPOSES OF CLAIM OF DEDUCTION UNDER S.54F OF T HE ACT WHILE COMPUTING LTCG ON SALE OF PLOT. THE ASSESSEE HAS A LSO INCLUDED THE COST INCURRED TOWARDS VACATING THE NEW PROPERTY FRO M TENANT AMOUNTING TO RS.35 LAKHS AS WELL AS CERTAIN COSTS I NCURRED TOWARDS REPAIRS AND RENOVATION OF THE NEW HOUSE AS PART OF COST OF ACQUISITION OF NEW HOUSE IN ADDITION TO ORIGINAL CO ST INCURRED FOR ITS PURCHASE. THE ORIGINAL COST OF ACQUISITION OF THE NEW HOUSE WAS THUS INCREASED BY THE ASSESSEE TOWARDS COST OF REMO VAL OF ENCUMBRANCES AND COST OF REPAIRS AND RENOVATION OF NEW HOUSE. 6.1 AS REGARDS THE COST OF REMOVAL OF ENCUMBRANCES, WE STRAIGHTWAY FIND OURSELVES IN COMPLETE AGREEMENT WI TH THE OBSERVATIONS MADE BY THE CIT(A) DEALING WITH ISSUE. THE CIT(A) HAS OBJECTIVELY ANALYZED THE FACTS EXISTING IN THE CASE WITH REFERENCE TO THE ABANDONMENT OF TENANCY RIGHT AS NOTED IN EAR LIER PARAS AND HAS COME TO THE RIGHTFUL CONCLUSION IN THE GIVEN SE T OF FACTS. AS POINTED OUT, THE PURCHASE AGREEMENT ITSELF SPECIFIE S THE EXISTENCE OF ENCUMBRANCE. AS FURTHER NOTED, THE ASSESSEE HAS AL SO DEMONSTRATED THAT THE ORIGINAL COST OF ACQUISITION WAS QUITE LOW ER VIS--VIS FAIR MARKET VALUE HAVING REGARD TO THE EMBEDDED ENCUMBRA NCE. SUFFICE IT TO SAY, THAT THE CIT(A) HAS DRAWN CONCLUSIONS IN FA VOUR OF THE ASSESSEE BASED ON TELL-TALE EVIDENCES. THEREFORE, WE DO NOT SEE ANY REASON TO UPSET SUCH CONCLUSIONS OF CIT(A). THE OR DER OF THE CIT(A) IS THUS WELL FOUNDED WITH REGARD TO THE COST INCURRED FOR REMOVAL OF THE TENANCY RIGHTS. THE OBJECTION OF TH E REVENUE ON THIS SCORE THUS CANNOT BE SUSTAINED AND HENCE DISMISSED. ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 7 - 6.2 WITH REFERENCE TO THE REPAIRS AND RENOVATION EX PENSES, HOWEVER, WE FIND SOME MERITS IN THE CASE MADE OUT B Y THE REVENUE. AS AGAINST THE TOTAL COSTS CLAIMED TO BE INCURRED B Y THE ASSESSEE AMOUNTING TO RS.30,05,429/-, THE OUTSTANDING HAS BE EN SHOWN AT RS.14,30,638/- WHICH IS NEARLY 50% OF THE TOTAL CLA IM. MOST OF THE PAYMENTS ARE ADMITTEDLY MADE IN CASH AND, AT TIMES, BASED ON SIMPLE VOUCHERS. SUCH HUGE OUTSTANDING AND CASH PAYMENTS ENJOIN GREATER ONUS ON THE ASSESSEE. THE ASSESSEE HAS NOT DISCHAR GED THE ONUS FULLY TOWARDS INCURRING OF SUCH EXPENSES MORE PARTI CULARLY THE WHEREABOUTS OF SUBSTANTIAL OUTSTANDING PAYMENTS AS NOTED ABOVE. THE CIT(A) HAS TOTALLY OMITTED TO ADDRESS THIS VITA L ASPECT. IN THESE SET OF FACTS, THE AO HAS FAIRLY ADMITTED THE CLAIM TO THE EXTENT OF 20% ON ESTIMATED BASIS WHICH STANDS AT RS.6,01,085/ - ON A PROPERTY OF RS.19.08 LAKHS. THE CIT(A) HAS CURSORILY DEALT WITH THE ISSUE AND HAS BLAMED THE AO FOR NON VERIFICATION WHICH HE COULD HAVE DONE ITSELF IF HE FOUND THE AO WANTING ON THIS SCOR E. IN THE ABSENCE OF PROPER EVIDENCES BEFORE US TOWARDS IDENTIFICATIO N OF THE PARTIES INVOLVED AND ACTUAL WORK CARRIED OUT, WE ARE UNABLE TO COMMENT ANY FURTHER. A CLOSER LOOK AT CASH BOOK FILED BEFORE US UNFOLDS QUITE ABNORMAL FEATURES. THE ASSESSEE HAS SHOWN HUGE OPEN ING BALANCES IN CASH BOOK (RS.16.68 LAKHS AS ON 01.04.2009) AGAINST WHICH MEAGER HOUSEHOLD EXPENSES OF RS.15000/- OR THEREABOUT CLAI MED. THE CASH IN HAND HAS GONE UP FURTHER AND AT ONE POINT OF TIM E IT IS NEARLY RS.40 LAKHS. COUPLED WITH THIS, THE PATTERN OF CAS H DEPOSITS AND CASH WITHDRAWALS AS REFLECTED IN THE CASH BOOK PLAC ED BEFORE US DOES NOT INSPIRE MUCH CONFIDENCE. THE PROFILE OF THE AS SESSEE AND THE COST OF PURCHASE OF THE RESIDENTIAL HOUSE DO NOT LE ND CREDENCE TO THE CLAIM OF THE ASSESSEE FOR SUCH HUGE REPAIRS AND REN OVATION. IN OUR VIEW, THE ASSESSEE COULD NOT DISCHARGE THE ONUS FOR SUCH CLAIM AS REQUIRED IN THE GIVEN FACTS. THEREFORE, IN OUR VIE W, THE CIT(A) WAS ITA NO. 746/AHD/15 [SHRI HIMANSHU J. KAMDAR VS. ACIT] A.Y. 2010-11 - 8 - NOT JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSE E SUMMARILY. THE AO, ON THE OTHER HAND, HAS RIGHTLY RESORTED TO ESTI MATIONS AT CERTAIN PERCENTAGE WHICH IN OUR VIEW IS JUSTIFIED IN KEEPIN G WITH THE ORIGINAL COST OF ACQUISITION. THUS, THE ORDER OF T HE AO AS REGARDS ESTIMATION OF REPAIRS AND RENOVATION COSTS DESERVES TO BE APPROVED IN SUPERSESSION TO THE ORDER OF THE CIT(A). THE RE LIEF GRANTED BY THE CIT(A) TOWARDS COST OF REPAIRS, RENOVATION ETC. IS THUS SET ASIDE AND ORDER OF THE AO IS RESTORED ON THIS SCORE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 05/06/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 05/06/201 8