Dr. Navneet Malhotra, Haryana V. ITO, Rewari

ITA 789/DEL/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0116 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Cost of acquisition; Wrong claim; Difference of opinion
• Section: 54F; 54; 139

Judgement Text

1 ITA NO. 789/DEL/14 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER I.T.A .NO.-789/DEL/2014 (ASSESSMENT YEAR-2008-09) NAVNEET MALHOTRA PROP. M/S JEEWAN HOSPITAL, MODEL TOWN, REWARI HARYANA ABZPM9572B (APPELLANT) VS ITO WARD-2 REWARI (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. ROBIN RAWAL, JCIT ORDER PER S. V. MEHROTRA, AM THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDE R DATED 2/12/2013 OF CIT(A)ROHTAK, , NEW DELHI IN APPEAL NO. 8/RTK/2012- 13. 2. THE ASSESSEE HAS FILED HIS RETURN OF INCOME DECL ARING AN INCOME OF RS.4,61,180/-. THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAD SOLD A RESIDENTIAL PLOT NO. 285 SECTOR 2HSIDC, CROTH CENTRE, BAWAL, DI STT, REWARI ON 3 RD MARCH 2008 FOR A CONSIDERATION OF RS. 10 LAKHS. THE ASSE SSEE HAD CLAIMED DEDUCTION U/S 54 TO THE TUNE OF RS. 5,55,00/- IN HIS RETURN OF IN COME. THE COMPUTATION OF CAPITAL GAIN, FILED BY THE ASSESSEE, ALONG WITH HIS RETURN OF INCOME, IS REPRODUCED HEREUNDER:- 285, SECTOR-2, G.C. BAWAL 1/3/2008 1000000 SALES CONSIDERTION DATE OF HEARING 24.06.2015 DATE OF PRONOUNCEMENT 29 .06.2015 2 ITA NO. 789/DEL/14 LESS: INDEXED COST PURCHASE COST 144593 F.Y 2003-04 121500/463*551 IMPROVEMENT COST 92981 F. Y 2004-05 81000/480*551 IMPROVEMENT COST 97534 F. Y 2005-06 87975/497*551 IMPROVEMENT COST F/YEAR 2006-07 45115 IMPROVEMENT COST F/YEAR 2007-08 40100 420323 579677 DEDUCTION U/S 54 555000 555000 24677 3. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO F ILE DOCUMENTARY EVIDENCES SUCH AS DEED RECEIPTS ETC FOR THE PURCHASE AND IMPR OVEMENT EXPENSES AS SHOWN BY THE ASSESSEE. HE HAS OBSERVED THAT ASSESSEE FILED THE DETAILS OF THE EXPENSES OF THE COST BUT NO DOCUMENTARY EVIDENCES IN SUPPORT WERE F ILED BY THE ASSESSEE. IN REPLY TO ASSESSING OFFICERS QUERY, THE ASSESSEE FILED TH E DETAILS OF INVESTMENTS MADE OVER THE YEARS INTER ALIA POINTING OUT THAT THE PAY MENTS WERE MADE THROUGH DD. THE DETAILS ARE AT PAGES 2 & 3 OF THE ASSESSMENT OR DER. THE ASSESSEE ALSO FILED THE ALLOTMENT LETTER DATED 27 TH JULY 2003 IN RESPECT OF PROPERTY NO. 285 SECTOR 2HSIDC, BAWAL. THE ASSESSEE FILED FOLLOWING REPLY: - THAT ALL THE PAYMENTS TO HSIDC(GOVT. INDUSTRIAL C ORP) ARE MADE THROUGH DD. THE BANK STATEMENT REGARDING DD ISSUED AND SOM E RECEIPTS ARE ENCLOSED. FURTHER THE COPY OF CONVEYANCE DEED EXEC UTED WITH THAT CORPORATION BEFORE EXECUTING THE SALE, WHICH IS MAN DATORY, IS ALSO ENCLOSED WHERE IT IS CLEARING MENTIONED THAT PAYMENT OF RS.3 24000/- HAS ALREADY BEEN MADE SINCE 21/7/2003. 4. THE ASSESSING OFFICER ACCEPTED THAT ASSESSEE HAD PURCHASED THIS PROPERTY FOR RS. 3,24,00/-AND HAD INCURRED EXPENDITURE OF RS. 20 ,200/- FOR THE CONVEYANCE DEED. HE ACCORDINGLY COMPUTED COST OF ACQUISITION, INDEX ED COST AND LONG TERM CAPITAL GAIN AS UNDER:- 3 ITA NO. 789/DEL/14 DESCRIPTION COST INDEXED COST REMARKS COST OF PROPERTY AS PER BALANCE SHEET AS ON 31/3/2007 2,90,557/- 3,35,103/- AS CLAIMED. THE BALANCE COST I.E 3,24,000-290557 ASSUMED TO BE PAID DURING THE F.Y 2007-08. 33,443/- 33,443/- NO DOCUMENTARY EVIDENCE FURNISHED. EXPENSES ON CONVEYANCE DEED INCURRED DURING F.Y 2007-08 20,200/- 20,200/- AS PER CONVEYANCE DEED FURNISHED. TOTAL: 3,44,200/- 3,88,751/- IN VIEW OF FOREGOING DISCUSSION, LONG TERM CAPITAL GAIN OF THE ASSESSEE IS COMPUTED AS UNDER:- SALE CONSIDERATION AS PER SALE DEED. RS.10,00,00 0/- LESS INDEXESD COST OF ACQUISITION AS DISCUSSED ABOV E RS.3,88,751/- LONG TERM CAPITAL GAIN RS. 6,11,249/- 5. THE ASSESSING OFFICER FURTHER SHOW CAUSED THE AS SESSEE AS TO HOW DEDUCTION U/S 54 WAS ALLOWABLE TO HIM ON SALE OF A PLOT AND F URTHER REQUIRED TO FILE DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CONTENTION. THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSES CHANGED HIS CONTENTION AND C LAIMED THE DEDUCTION U/S 54F. THE ASSESSING OFFICER NOTICED FROM THE DOCUMENTS FI LED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM FOR DEDUCTION U/S 54F, THAT ASSESSEE H AD MADE INVESTMENT OF RS.5,55,00/- IN A PLOT WITH CHD DEVELOPERS KARNOL. THE ASSESSING OFFICER NOTICED THAT THOUGH ASSESSES HAD SHOWN THAT HE HAD MADE AN INVESTMENT IN FLAT BUT AS PER ALLOTMENT LETTER ISSUED BY CHD DEVELOPERS. THE ASSESSEE HAD BEEN ALLOTTED A PLOT BY THE CHD DEVELOPERS. ACCORDINGLY, ASSESSE E WAS AGAIN SHOW CAUSED AS TO HOW DEDUCTION U/S 54F WAS ALLOWABLE TO HIM ON PURCH ASE OF PLOT BECAUSE AS PER THE ALLOTMENT LETTER OF CHD DEVELOPERS, ASSESSEE WAS AL LOTTED A RESIDENTIAL PLOT IN CHD CITY SECTOR 54 KARNOL. THE ASSESSES FILED FOLL OWING REPLY:- DEDUCTION U/S 54F: THE DOCUMENTS REGARDING ALLOTMENT OF FLAT LAND OF CHD DEVELOPERS ARE ON RECORD WITH AN EARLIER REPLY. MEMBERSHIP OF FLAT 4 ITA NO. 789/DEL/14 SOCIETY I.E HOUSING SOCIETY IS DULY COVERED UNDER U /S 54F READ WITH SECTION 54F AS PER VERDICT OF THE LD. GUJRAT HIGH COURT IN THE CASE OF CIT VS. JUNDAS PREMCHAND GANDLIN IN (2005) 279 ITR 552. 6. THE ASSESSING OFFICER, AFTER CONSIDERING THE ASS ESSESES REPLY AND THE PROVISIONS OF SECTION 54F, DENIED THE ASSESSEES C LAIM FOR THE FOLLOWING REASONS:- (I) AS PER PROVISIONS OF SECTION 54F, THE ASSESSEE WAS REQUIRED TO INVEST WHOLE OF THE SALE CONSIDERATION IN NEW ASSET I.E FOR PURC HASE OF RESIDENTIAL HOUSE OR FOR CONSTRUCTION OF RESIDENTIAL HOUSE. (II) IF THE ASSESSEE WAS NOT IN THE POSITION TO INV EST WHOLE OF THE AMOUNT UNDER ANY CIRCUMSTANCE, HE WAS REQUIRED TO DEPOSIT THE AM OUNT IN CAPITAL GAIN ACCOUNT BEFORE THE DUE DATE OF FILING OF HIS RETURN OF INCO ME U/S 139 (1) OF THE INCOME TAX ACT. HE POINTED OUT THAT NONE OF THE CONDITIONS CO NTEMPLATED U/S 54 HAD BEEN COMPLIED BY ASSESSSEE. HE, ACCORDINGLY, DETERMINATI ON THE LONG TERM CAPITAL GAIN AT RS.6,11,249. 7. THE ASSESSING OFFICER FURTHER NOTICED FROM THE P ROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT ASSESSEE PAID INTEREST OF RS.32,600/- TO SMT. PREM LATA JAIN. AFTER CONSIDERING THE POSITION OF INVESTMENTS MADE BY ASS ESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEES INVESTMENT IN NON BUSI NESS ASSETS IN MUCH MORE THAN HIS CAPITAL. HE FURTHER NOTED THAT DURING THE YEAR ASSESSEE HAD INVESTED RS.8,76,642/- IN SHARES AND SECURITIES. ACCORDINGL Y, HE DISALLOWED THE INTEREST PAID TO SMT. PREM LATA AMOUNTING TO RS.32,600/- BEING FO R NON BUSINESS PURPOSES. 8. LD. CIT(A) ALLOWED PROPORTIONATE DEDUCTION U/S 5 4F AND CONFIRMED THE ADDITION IN RESPECT OF UNDER POINT OF DISALLOWANCE OF INTEREST. 9. THE ASSESSING OFFICER LEVIED PENALTY U/S 271 (1 ) (C). LD. CIT(A) DISMISSED THE ASSESSSEES APPEAL AFTER CONSIDERING THE ASSESS EES WRITTEN SUBMISSIONS. 10. THE ASSESSEE IN HIS WRITTEN SUBMISSIONS FILED B EFORE ME THROUGH POST,INTER ALIA, SUBMITS THAT BEFORE THE LD. CIT(A) THE WRITTE N SUBMISSIONS DATED 9/11/2013 5 ITA NO. 789/DEL/14 WERE FILED EXPLAINING THE MAIN ISSUE OF INVESTMENT AND CLAIM U/S 54F WAS ACCEPTED AND PROPORTIONATE DEDUCTION ALLOWED. ON DISALLOWAN CE OF EXPENSES ON PROPERTY AND INTEREST PAID ON LOAN WHICH WERE SUPPORTED BY C OMPLETE PARTICULARS AND VOUCHERS COULD NOT PROVE THE INTENTION ON THE PART OF THE ASSESSEE TO CONCEAL THE PARTICULARS. FURTHER THE DISALLOWANCES UPHELD IN A PPEAL DO NOT AMOUNT TO CONCEALMENT OF INCOME NOR FURNISHING INACCURATE PAR TICULARS OF INCOME. THE ASSESSEE HAS RELIED ON FOLLOWING DECISIONS:- (I) ASHOK PAI VS. CIT (2007) 292 ITR 11 (S.C.) (II) DALIP N. SHIEORALL VS. CIT (2007) 291 ITR 519 (S.C.) (III) PUNJAB & HARYANA HIGH COURT IN THE CASE OF CI T VS. RUBBER UDYOG VIKAS (P) LTD REPORTED IN (2011) 335 ITR 558 (IV) DELHI HIGH COURT IN THE CASE OF CIT VS. IFCE R EPORTED IN (2011) 199 TAXMAN 21. (V) PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. S. S. LTD REPORTED IN (2010) 189 TAXMAN 282. (VI) CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. REPOR TED IN (2010) 322 ITR 158 11. AS REGARDS THE PENALTY APROPOS CLAIM OF INTERES T PAID IN THE WRITTEN SUBMISSION LD. AR SUBMITS THAT THE ASSESSEE HAS INT EREST WAS DULY RETURNED BY PERSON TO WHOM IT WAS PAID. FURTHER, THE CONFIRMAT ION AND OTHER DOCUMENTS ARE ON RECORD WHICH WERE FURNISHED DURING ASSESSMENT PROCE EDINGS. 12. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS AND T HE SUBMISSIONS OF LD. DR. THE FACTS ARE NOT IN DISPUTE. THE ASSESSEE HAD ADVA NCED CLAIM IN REGARD TO COMPUTATION OF LONG TERM CAPITAL GAIN AFTER GIVING THE DETAILS OF PURCHASE COST AND THE IMPROVEMENT COST OVER 4 YEARS. THE INDEXED COS T OF ACQUISITION WAS ACCORDINGLY COMPUTED. THE ASSESSING OFFICER, HOWEV ER, ONLY TOOK INTO CONSIDERATION THE AMOUNT PAID AS PER ALLOTMENT LETT ER AND EXPENSES ON CONVEYANCE DEED. THE ASSESSEE IN ITS REPLY, AS REPRODUCED EARL IER, STATED THAT ALL THE PAYMENTS WERE MADE THROUGH DD. THE AO DID NOT ACCEPT THE ENT IRE COST OF ACQUISITION CLAIMED AT RS.4,20,323/-.MERE DISALLOWANCE OF CERTA IN EXPENSES CLAIMED BY 6 ITA NO. 789/DEL/14 ASSESSEE AS COST OF ACQUISITION COULD NOT LEAD TO T HE CONCLUSION THAT ASSESSEE HAD ADVANCED ANY FALSE CLAIM ONLY BECAUSE ASSESSEE WAS UNABLE TO SUBSTANTIATE THE SAME WITH REFERENCE TO SPECIFIC VOUCHERS. THE NEXT ISSUE IS REGARDING ASSESSEES CLAIM U/S 54F. LD. CIT(A) HAS CLEARLY OBSERVED THAT ASSESSEE IS ENTITLED TO PROPORTIONATE DEDUCTION U/S 54F AND, THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAD ADVANCED ANY FALSE CLAIM. IT IS NOT IN DISPUTE THA T ASSESSEE HAD BEEN ALLOTTED A RESIDENTIAL PLOT IN CHD CITY SECTOR 45 KARNOL ON TH E BASIS OF WHICH HE HA ADVANCED CLAIM U/S 54 F WHICH WAS IN PRINCIPLE ACCE PTED BY LD. CIT(A) BUT SINCE THE TOTAL CONSIDERATION WAS ONLY RS. 5,55,00/- AS A GAINST RS. 10,000/- BEING THE SALE CONSIDERATION THEREFORE, HE ALLOWED ONLY PROPORTION ATE DEDUCTION. THIS WAS SOLELY ON ACCOUNT OF DIFFERENCE IN OPINION BETWEEN ASSESSE E AND LD. CIT(A). UNDER THESE FACTS THERE IS NO QUESTION OF LEVYING PENALTY IN VI EW OF VARIOUS CASE LAWS RELIED BY LD. COUNSEL FOR THE ASSESSEE IN THE WRITTEN SUBMISS ION. 13. AS REGARDS THE LEVY OF PENALTY APROPOS DISALLOW ANCE OF INTEREST PAID TO SMT. PREM LATA JAIN, I FIND THAT THE DISALLOWANCE HAS BE EN MADE ONLY BECAUSE THE CAPITAL OF THE ASSESSEE WAS MUCH LOWER THAN THE INVESTMENTS MADE BY ASSESSEE IN PROPERTIES AND SHARES. HOWEVER, IT IS NOT IN DISPU TE THAT ASSESSEE HAD SHOWN BUSINESS ASSETS AGGREGATING TO RS. 3,28,856/-. THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO SHOW AS TO WHY INTEREST PAID TO SMT . PREM LATA JAIN RS.32,600/- BE NOT DISALLOWED AS INVESTMENT IN NON BUSINESS ASSETS , PROPERTIES AND SHARES WAS MUCH MORE THAN CAPITAL. ON THIS BASIS IT WAS INFERR ED THAT LOAN OF SMT. PREM LATA JAIN HAD NOT BEEN UTILIZED FOR BUSINESS PURPOSE. T HE ASSESSING OFFICER HAS NOT DEMONSTRATED ANY NEXUS BETWEEN THE AMOUNTS RECEIVED FROM SMT. PREM LATA JAIN AND ITS UTILIZATION FOR NON BUSINESS PURPOSES. IN MY OPINION IS CANNOT BE A BASIS FOR AT LEAST LEVYING PENALTY BECAUSE THERE IS NO F INDING THAT LOAN WAS ACTUALLY UTILIZED FOR NON BUSINESS PURPOSES. IN VIEW OF ABO VE DISCUSSION, I SET ASIDE THE ORDER OF BOTH THE LOWER REVENUE AUTHORITIES AND CAN CEL THE PENALTY. 7 ITA NO. 789/DEL/14 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH OF JUNE 2015. SD/- (S. V. ME HROTRA) ACCOUNTANT MEMBER DATED:- 29 /06/2013 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT A SSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 25.06.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 26.06.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .06.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 8 ITA NO. 789/DEL/14 7. FILE SENT TO THE BENCH CLERK .06.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.