Jayanti Lakkaraju, USA, Hyderabad V. DDIT-I (intl. Taxn.), Hyd, Hyderabad

ITA 85/HYD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0856 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 28-04-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 25-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMANA RAO
• Keywords: Capital asset; Capital Gains
• Section: 143(3); 195; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.85/HYD/2016 ASSESSMENT YEAR: 2011 - 12 JAYANTI LAKKARAJU, 13981 UMBRIA WAY, POWAY, CA 92064, USA. PAN: ACLPL 6962 D VS. DY. DIRECTOR OF INCOME TAX - 1 (INTERNATIONAL TAXATION), IT TOWERS, AC GUARDS, HYDERABAD 500 004 (TS). (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMANA RAO REVENUE BY: SRI ROHIT MUJUMDAR, DR DATE OF HEARING: 28/04/2021 DATE OF PRONOUNCEMENT: 13 /07/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) - 10, HYDERABAD IN APPEAL NO. 0003/CIT(A) - 10/2014 - 15, DATED 05 - 10 - 2015 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE AY: 2011 - 12. 2. ASSESSEE HAS RAISED SEVEN GROUNDS AND ONE ADDITIONAL GROUND IN HER APPEAL HOWEVER, THE CRUXES OF THE ISSUES ARE THAT: (I ) THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO BEING DISALLOWANCE OF EXPENDITURE 2 INCURRED TOWARDS COST OF IMPROVEMENT OF THE PROPERTY AMOUNTING TO RS. 23,52,968/ - WHILE COMPUTING THE LTCG OF THE ASSESSEE. (II) THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. AO BEING DISALLOWANCE OF EXPENDITURE INCURRED FOR THE TRANSFER OF THE CAPITAL ASSET AMOUNTING TO RS. 11,61,843/ - . (III) ADDITIONAL GROUND: THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE L D. AO ON ACCOUNT OF INTEREST CHARGEABLE U/S. 234A, B AND C OF THE ACT BECAUSE THE ENTIRE LTCG TAX PAYABLE BY THE ASSESSEE IS DEDUCTIBLE AT SOURCE BY THE PURCHASER OF THE PROPERTY U/S. 209 SIC 195 OF THE ACT SINCE THE ASSESSEE IS A N NRI. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON - RESIDENT INDIVIDUAL, EARNING INCOME UNDER THE HEAD HOUSE PROPERTY, CAPITAL GAINS AND OTHER SOURCES. THE ASSESSEE FILED HER RETURN OF INCOME BELATEDLY ON 31/8/2012 DECLARING INCOME OF RS. 2,77,64,879/ - . THEREAFTER, ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 25/2/2014. 4. GROUND NO.1: DISALLOWANCE OF EXPENDITURE TOWARDS COST OF IMPROVEMENT OF THE PROPERTY RS. 23,52,960/ - : 3 5. AS PER THE RETURN OF INCOME THE ASSESSEE HAD DISCLOSED THE SALE OF HER PROPERTY PLOT NO. 74, BUDDHA HEIGHTS, HYDERABAD FOR RS. 4,04,72,800/ - AND OFFERED LTCG ON THE TRANSACTION FOR RS. 2,82,80,323/ - . WHILE COMPUTING THE LTCG, THE ASSESSEE HAD CLAIMED THE F OLLOWING EXPENDITURE AS COST OF IMPROVEMENT OF THE PROPERTY. (I) RS. 3,00,000 TOWARDS CONSTRUCTION OF WATCHMEN QUARTERS IN THE YEAR 2000 - 2001 (II) RS. 9 LAKH TOWARDS STONE CUTTING CHARGES IN THE LAND . (III) RS. 37,062/ - TOWARDS POWER CHARGES. (IV) RS. 9,06,000/ - TOWARDS SECURITY CHARGES. (V) RS. 55,594/ - TOWARDS TELEPHONE CHARGES. (VI) RS. 1,54,212/ - TOWARDS TRAVELLING EXPENSES. 6. THE LD. AO DISALLOWED THE AMOUNT OF RS. 3 LAKHS BEING THE EXPENDITURE INCURRED TOWARDS CONSTRUCTION OF WATCHMAN QUARTERS BECAUSE THE SALE DEED DID NOT MENTION ABOUT THE EXISTENCE OF THE SAME IN THE PLOT OF LAND. THE ASSESSEE HAS ALSO NOT PRODUCED ANY EVIDENCE TO SHOW THE EXISTENCE OF THE WATCHMAN QUARTERS OTHER THAN AN AFFIDAVIT OF SRI S. PARVATALU CONFIRMING THE RECEIPT OF PAYMENT TOWARDS CONSTRUCTION OF WATCHMAN QUARTERS ALONG WITH HIS PAN. . O N APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER OF THE LD. AO. THE LD. AR ARGUED BY STATING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION OF THE 4 WATCHMAN QUARTERS IS GENUINE. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD. REVENUE AUTHORITIES. AFTER HEARING BOTH SIDES AND EXAMINING THE ISSUE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LD. REVENUE AUTHORITIES BECAUSE ASSESSEE HAS NOT F URNISHED ANY COGENT EVIDENCE FOR HAVING PAID THE AMOUNT OF RS. 3 LAKHS TO SRI S. PARVATALU OTHER THAN AN AFFIDAVIT FROM HIM. IT IS ALSO NOT BROUGHT OUT WHETHER THE WATCHMAN QUARTER IS A TEMPORARY CONSTRUCTION OR A PERMANENT CONSTRUCTION. SINCE, THE AMOUNT OF EXPENDITURE IS ONLY RS. 3 LAKHS IT APPEARS THAT EVEN IF THE WATCHMAN QUARTER IS BUILT IT COULD BE ONLY A TEMPORARY CONSTRUCTION TO SHELTER A WATCHMAN IN ORDER TO LOOK AFTER THE PROPERTY. THEREFORE, THIS EXPENSE DOES NOT ADD TO THE VALUE OF THE PROPERTY. HENCE , THE DISALLOWANCE MADE BY THE LD. REVENUE AUTHORITIES ON THIS ISSUE IS HEREBY CON FIRMED. 7. THE ASSESSEE HAD ALSO CLAIMED AN AMOUNT RS. 9 LAKHS TOWARDS COST OF IMPROVEMENT OF THE PROPERTY AMOUNTING TO RS. 9 LAKHS BEING STONE CUTTING EXPENSES INCURR ED DURING THE FY 2001 - 02 AND 2002 - 03. HOWEVER, THE ASSESSEE COULD NOT PRODUCE ANY EVIDEN CE FOR THE PAYMENT OF RS. 9 LAKHS OTHER THAN A NOTARIZED AFFIDAVIT FROM G. RAJESH CONFIRMING THE RECEIPT OF RS. 9 LAKHS AND SOME PHOTOGRAPHS OF THE LAND. FOR LACK OF EVIDENCE THE LD. AO HAD DISALLOWED THE EXPENDITURE FOR RS. 9 LAKHS TOWARDS COST OF IMPROVE MENT ON STONE CUTTING EXPENDITURE INCURRED BY THE ASSESSEE WHICH WAS FURTHER CONFIRMED BY THE LD. CIT (A). ON 5 PERUSING THE FACTS OF THE CASE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. REVENUE AUTHORITIES BECAUSE EVEN BEFORE US THE ASSESSEE HAS NOT PRODUCED ANY COGENT EVIDENCE FOR THE PAYMENT MADE FOR RS. 9 LAKHS. THEREFORE, THIS ADDITION ALSO STANDS CONFIRMED. 8. THE ASSESSEE HAD CLAIMED RS. 37,062/ - TOWARDS POWER CHARGES, RS. 9,06,000/ - TOWARDS SECURITY CHARGES, RS, 55,594/ - TOWA RDS TELEPHONE CHARGES AND RS. 1,54,312/ - TOWARDS TRAVELLING CHARGES WHICH ARE ATTRIBUTABLE TOWARDS COST OF IMPROVEMENT OF THE PROPERTY. THE LD. AO DISALLOWED THIS EXPENDITURE WHILE COMPUTING THE LTCG OF THE ASSESSEE BECAUSE THE MODE OF COMPUTATION STATED IN SECTION 48 OF THE ACT ONLY STIPULATES DEDUCTION TOWARDS EXPENDITURE INCURRED ONLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE PROPERTY AND TOWARDS COST OF IMPROVEMENT OF THE PROPERTY. THE LD. AO WAS OF THE VIEW THAT THE EXPENDITURE INCURRED B Y THE ASSESSEE WAS NOT TOWARDS IMPROVEMENT OF THE ASSET BUT ONLY TO MAINTAIN THE ASSET . THE LD. AO HAD ALSO RELIED ON CERTAIN DECISIONS MENTIONED IN HIS ORDER AND THEREAFTER MADE THE DISALLOWANCE FOR THE ABOVE STATED AMOUNTS WHICH WAS FURTHER CONFIRMED BY THE LD. CIT (A). ON THESE ISSUES ALSO WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD .AO BECAUSE THESE EXPENSES ARE INCURRED FOR THE PURPOSE OF GUARDING THE PROPERTY AND NOT FOR THE PURPOSE OF THE IMPROVEMENT OF THE PROPERTY AND THERE IS NO SCOPE FOR 6 ANY DEDUCTION U/S. 48 OF THE ACT FOR THE SAME AS HELD BY THE LD. REVENUE AUTHORITIES. 9. A CCORDINGLY, THE DISALLOWANCE OF EXPENDITURE MADE BY THE LD. AO WHICH WAS FURTHER SUSTAINED BY THE LD. CIT (A) TOWARDS COST OF IMPROVEMENT OF THE PROPERTY FOR RS. 23,52,960/ - WHILE COMPUTING THE LTCG OF THE ASSESSEE IS HEREBY CONFIRMED. 10. GROUND NO.2: DI SALLOWANCE OF RS. 11,61,843/ - TOWARDS EXPENDITURE INCURRED FOR TRANSFER OF CAPITAL ASSET: 11. THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 8 LAKHS AS BROKERAGE CHARGES FOR THE SALE OF THE PROPERTY BEING THE PAYMENT MADE TO SRI UTTAM KUMAR A.K.A T. UTTAM RAO AND RS. 5 LAKHS TOWARDS TRAVELLING AND BO ARDING EXPENSE OF SRI RAVI KIRAN LAKKARAJU IN CONNECTI ON WITH THE SALE OF THE PROPERTY. WITH RESPECT TO THE EXPENDITURE INCURRED FOR RS. 8 LAKHS THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE OTHER THAN A KACCHA RECEIPT FROM UTTAM RAO ALONG WITH THE XEROX COPY OF HIS PAN CARD. THEREFORE, THE LD. AO DISALLOWED TH E EXPENDITURE INCURRED TOWARDS BROKERAGE WHICH WAS FURTHER CONFIRMED BY THE LD. CIT (A). AS REGARDS THE TRAVELLING AND BOARDING EXPENSES OF RS 5 LAKHS INCURRED BY SRI RAVI KIRAN LAKKARAJU THE LD. AO ON VERIFYING THE FLIGHT TICKETS CAME TO A CONCLUSION THAT THE ASSESSEE HAS SPENT AN AMOUNT OF RS. 2,76,314/ - FOR THE SAME. SINCE SRI RAVI KIRAN LAKKARAJU HAD ALSO EXECUTED ANOTHER SALE DEED BELONGING TO HIS BROTHER SRI CHANDRASEKHAR LAKKARAJU, THE 7 LD. AO ALLOWED 50% OF THE EXPENDITURE INCURRED TOWARDS TRAVELLING AS ALLOWABLE DEDUCTION WHICH WORKS OUT TO RS. 1,38,157/ - . SINCE THERE WERE NO EVIDENCE FOR ANY EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS TRANSFER OF THE PROPERTY OTHER THAN THE ABOVE, THE BALANCE AMOUNT OF RS. 11,61,843/ - WAS DISALLOWED BY THE LD. AO W HICH WAS FURTHER CONFIRMED BY THE LD. CIT (A). ON THIS ISSUE ALSO, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. REVENUE AUTHORITIES, BECAUSE THE ASSESSEE HAS NOT PROVIDED ANY COGENT EVIDENCE TO ESTABLISH THAT SHE HAD PAID THE AMOUNT FOR INCURRING BROKERAGE EXPENSES. THE LD. REVENUE AUTHORITIES AFTER EXAMINING THE FACTS OF THE CASE HAVE FAIRLY GRANTED DEDUCTION OF RS. 1,38,157/ - BEING 50% OF EXPENDITURE INCURRED TOWARDS TRAVELLING FOR THE PURPOSE OF TRANSFER OF THE PROPERTY. ACCORDING LY, THE ORDER OF THE LD. REVENUE AUTHORITIES ARE HEREBY CONFIRMED. 12. IT IS PERTINENT TO MENTION THAT THE ASSESSEE IS A NRI AND SINCE SHE DOES NOT HAVE ANY SCOPE TO GENERATE CASH IN INDIA THE PAYMENT IF AT ALL MADE HAS TO BE B Y CHEQUE OR TRANSFER FROM HER BANK ACCOUNT. NEITHER THE ASSESSEE NOR HER COUNSEL HAS CLARIFIED AS TO HOW THE PAYMENTS WERE MADE WITH EVIDENCE. IN THIS SITUATION THE CLAIM OF THE ASSESSEE THAT THE PAYMENT WERE MADE TO CERTAIN INDIVIDUALS BY OBTAINING A RECEIPT OR AFFIDAVIT FROM THEM CANNOT BE RELIED UPON. 8 1 3 . GROUND NO.3: ADDITIONAL GROUND : LEVY OF INTEREST U/S. 234A, B AND C OF THE ACT : 1 4 . AT THE OUTSET, THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE IS A NRI THEREFORE THE ENTIRE TAX PAYABLE BY THE ASSESSEE IS DEDUCTIBLE AT SOURCE BY THE PURCHASE OF THE PROPERTY ACCORDING TO SECTION 209 SIC 195 OF THE ACT. THE LD. AR FURTHER ARGUED THAT FOR THE ABOVE STATED REASON THE ASSESSEE IS DIS CHARGED FROM THE LIABILITY FOR PAYMENT OF ADVANCE TAX AND HENCE INTEREST IS NOT CHARGEABLE U/S. 234A, B AND C OF THE ACT . ACCORDINGLY, IT WAS PLEADED THAT THE LEVY OF INTEREST IN THE HANDS OF THE ASSESSEE U/S. 234A, B AND C OF THE ACT IS NOT APPROPRIATE AND THEREFORE IT MAY BE DELETED. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE LEVY OF INTEREST U/S. 234A, B AND C OF THE ACT ARE CONSEQUENTIAL IN NATURE AND THE ASSESSEE IS LIABLE FOR THE LEVY OF INTEREST U/S. 234A, B AND C OF THE ACT. 1 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. INTEREST U/S. 234A, B AND C OF THE ACT ARE WITH RESPECT TO THE DEFAULT ON THE PART OF THE ASSESSEE. SECTION 195 OF THE ACT ALSO IMPOSED AN OBLIGATION TO DEDUCT TAX AT A SPECIFIED RATE ON THE PART OF A PERSON RESPONSIBLE FOR PAYING ANY AMOUNT TO A NON - RESIDENT WHICH IS CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT . HOWEVER, IT DOES NOT ABSOLVE THE NON - RESIDENT FROM PAYMENT OF TAX ON THE PRETEXT THAT THE PAYER WOULD HAVE DEDUCTED TAX AT SOURCE. THEREFORE, AS PER THE 9 PROVISIONS OF THE ACT, THE NRI ASSESSEE WOULD ALSO BE RESPONSIBLE FO R REMITTANCE OF INCOME TAX IN THE GOVERNMENT TREASURY IF THE PAYER FAILS TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO THE NRI ASSESSEE WHICH IS CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT . HENCE, EVEN IN THE CASE OF THE ASSESSEE THE PROVISIONS OF SECTION 234A, B AND C OF THE ACT ARE CONSEQUENTIAL IN NATURE AND THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LD. REVENUE AUTHORITIES ON THIS ISSUE. 1 6 . IN THE RESU LT, APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE 13 TH JULY, 2021. S D/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 13 TH JULY , 2021 OKK COPY TO: - 1) JAYANTI LAKKARAJU, 13981 UMBRIA WAY, POWAY, CA 92064, USA. (II) JAYANTI LAKKARAJU C/O. P.S.N. RAVISHANKER & ASSOCIATES, CHARTERED ACCOUNTANTS, FLAT NO. 205, B - BLOCK, KUSHAL TOWERS, D.NO. 6 - 2 - 975, KHAIRATABAD, HYDERABAD 500 004 (TELANGANA STATE). 2) DY. DIRECTOR OF INCOME TAX - 1, INTERNATIONAL TAXATION DIVISION, IT TOWERS, AC GUARDS, HYDERABAD. 3) THE CIT (A) - 10, HYDERABAD. 4) THE CHIEF COMMISSIONER OF INCOME TAX (IT) (SZ), BENGALURU . (II) THE CHIEF COMMISSIONER OF INCOME TAX (IT & TP), HYDERABAD. 5) TH E DR, ITAT, HYDERABAD 6) GUARD FILE