M/s N.K. Radhamani, Cochin V. DCIT, Ernakulam

ITA 856/COCH/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4643 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENTJR
• Assessee Lawyers: MOHANAN KUTTICKAT
• Keywords: Cost of acquisition; Valuation report
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.856/COCH/2008 ASSESSMENT YEAR:2005-06 N.K.RADHAMANY , RAMARADHANILAYAM, PALARIVATTOM, KOCHI-25. PA NO.AAYPR 3683C VS. THE DY. C OMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, KOCHI. (APPELLANT) ( RESPONDENT ) & I.T.A.NO.866/COCH/2008 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, KOCHI. VS. N.K.RADHAMANY , RAMARADHANILAYAM, PALARIVATTOM, KOCHI-25. PA NO.AAYPR 3683C (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI MOHANAN KUTTICKAT RE VENUE BY SHRI T.J.VINCENT,JR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND DEPARTMENT. THESE APPEALS ARE DIRECTED AGAINST TH E ORDER OF THE LD. CIT(APPEALS)-I, KOCHI, DATED 19-05-2008 , RELATING TO THE ASSESSMENT YEAR 2005-06 AND ARISE OUT OF THE ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 2 ASSESSMENT COMPLETED U/S.153A R.W.S.153C AND143(3) OF THE I.T.ACT. 2. THE ASSESSEE IS THE WIFE OF MR. V.S.RADHAKRISHNA N, WHO IS A DEALER IN USED BOTTLES. ACCORDING TO THE ASS ESSEE, THIS BUSINESS IS ALSO CARRIED ON BY A PARTNERSHIP WITH T HE MEMBERS OF HIS FAMILY AT KOCHI, COIMBATORE, BANGALO RE, MADURAI, ETC. A SEARCH WAS CONDUCTED ON 24-08-2005 IN THE RESIDENTIAL PREMISES U/S.132 AND VARIOUS INCRIMINAT ING DOCUMENTS AND MATERIALS. IN RESPONSE TO NOTICE U/ S.153A, ASSESSEE FILED A RETURN DECLARING AN INCOME OF RS.81,09,607/-, IN ADDITION TO THE AGRICULTURAL INC OME OF RS.96,000/-. ACCORDING TO THE ASSESSING OFFICER, ASSESSEE HAS NOT FILED ANY RETURN OF INCOME PRIOR TO THE SEA RCH. 2.1 IN 153A RETURN, ASSESSEE HAD DECLARED AGRICUL TURAL INCOME THOUGH HE HAD NOT DECLARED IN 139(1) RETURN. IN 153A RETURN, ASSESSEE CLAIMED NET AGRICULTURAL INCO ME, BEING SALE OF COCONUTS PLANTED IN 81 CENTS OF LAND IN PANAIGOUNDANPUDUR IN HIS OWN NAME AND 182 CENTS HEL D JOINTLY WITH HIS WIFE. THE ASSESSING OFFICER OPIN ED THAT NOT A SINGLE PAPER INDICATING THE AGRICULTURAL INCOME W AS FOUND DURING SEARCH. NO CREDIBLE EVIDENCE HAS BEEN PRODU CED THAT ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 3 THE ASSESSEE THAT SHE HAD BEEN DOING ANY CULTIVATI ON DURING THE PREVIOUS YEAR 1999-2000. THE AMOUNT STAKED IS VERY HIGH. AFTER A LAPSE OF SEVERAL YEARS THE ASSESSE E HAS MADE AA CLIAM WHICH IS NOT VERIFIABLE. HENCE, ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND ADDED A SUM OF RS.96,000 TO THE TOTAL INCOME. HOWEVER, ASSESSING OFFICER GRANTED CREDIT FOR THE SAME IN EXPLAINED TH E INVESTMENTS MADE DURING THE YEAR. 2.2 DURING THE YEAR UNDER CONSIDERATION, ASSESSEE S OLD JOINT PROPERTY OF LAND AND BUILDING BELONGING TO TH E ASSESSEE AND HIS WIFE AT CHITOOR ROAD, NR. KACHERIPADY, ERNA KULAM, FOR A CONSIDERATION OF RS.3 CRORES. THE PROFIT OF SALE OF THE PROPERTY WAS OFFERED FOR CAPITAL GAINS TAX AT RS.1, 95,07,061 IN HER NAME AND IN THE NAME OF HER HUSBAND. THE S HARE OF THE ASSESSEE WAS APPORTIONED TO RS.78,07,200. ON E NQUIRY REGARDING THE MARKET VALUE OF THE PROPERTY AND ADJA CENT LAND, AO FOUND THAT 15.454 CENTS OF LAND WAS PURCHA SED BY THE ASSESSEE IN 1969 CLAIMING RS.4,01,500. BUT TH E COST OF ADJACENT LAND PURCHASED IN DECEMBER 1980 WAS RS.1,2 8,900, WHICH WORKS OUT TO RS.10,000 PER CENT. THEREFORE, ASSESSING OFFICER ADOPTED THE PURCHASE VALUE OF THE PROPERTY PER CENT AT RS.10,000/- AND 50% SHARE OF THE ASSESS EES ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 4 CAPITAL GAIN WAS DETERMINED AT 50% RS.6,18,495 AND ADDED TO THE TOTAL INCOME. 2.3 DURING THE YEAR 1986-87, ASSESSEE CONSTRUCTED A RESIDENTIAL HOUSE AT A COST OF RS.10,40,000/- BUT A SSESSEE IS UNABLE TO FURNISH ANY EVIDENCE AND SOURCE. AC CORDING TO THE ASSESSING OFFICER, THERE IS NO PROOF THAT A PRO PERTY WAS CONSTRUCTED AND ACCORDINGLY BOTH INDEXED COST OF RS.35,65,714 WAS NOT ALLOWED AND ADDED TO CAPITAL GAIN DECLARED 50% RS.35,65,714. 2.4 ASSESSEE CLAIMED THAT HE HAD SPENT DURING 19 93094, A SUM OF RS.16,50,000/- FOR CONCRETING THE LAND WHICH WAS USED FOR HIS FACTORY. IT IS THE CLAIM OF THE ASSE SSEE THAT THE FACTORY AND RESIDENCE WERE IN THE ADJOINING PLOTS. IN THIS CLAIM ALSO ASSESSEE WAS UNABLE TO FURNISH ANY EVIDE NCE OF EXPENDITURE INCURRED BY HIM. ACCORDING TO THE ASS ESSEE AS SHE HAD BEEN ADVISED BY HIS AUDITORS NOT TO RETAIN ANY DOCUMENTS BEYOND 10 YEARS, HE WAS UNABLE TO FURNISH THE EVIDENCES. THE ASSESSING OFFICER WAS OF THE VIEW THAT IF THIS EXPENDITURE INCURRED FOR FACTORY PREMISES, THE N THE EXPENSES WOULD IN ALL PROBABILITY HAVE BEEN INCLUDE D IN THE ACCOUNTS OF ANY OF HER BUSINESS OR FIRMS IN WHICH S HE IS A ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 5 PARTNER. ONUS IS ON THE ASSESSEE TO RETAIN THE DO CUMENTS IN SUPPORT OF ANY CLAIM TO BE MADE BY HIM IN FUTURE . THE DEPARTMENT CANNOT ALLOW ANY IMAGINARY FIGURES OR PR ESUME THE YEAR OF ADDITION. SINCE IT IS A FACTORY BUILD ING, THE DIFFERENCE IS SHORT TERM CAPITAL GAIN AND NO INDEXA TION WAS ALLOWABLE. THUS ACCORDING TO HIM, ADDITION TO THE CAPITAL GAIN DECLARED WAS THEREFORE THE INDEXED COST OF HIS HOUSE PROPERTY OR 50% RS.32,45,902. 2.5 ON A SIMILAR FASHION ASSESSEE CLAIMED THAT HE CONSTRUCTED A BOUNDARY WALL IN 1993-94 AT A COST OF RS.2 LAKHS. NO EVIDENCE WAS FURNISHED. HENCE, ADDITIO N TO THE CAPITAL GAIN DECLARED WAS THE INDEXED COST CLAIMED OR 50% RS.3,93,442/-. 2.6 AS DISCUSSED IN THE ABOVE SUB PARAS, THE ASS ESSING OFFICER COMPUTED THE ASSESSEES ASSESSABLE CAPITAL GAIN AT RS.1,09,38,376/- AND DETERMINED ASSESSEES TOTAL INCOME AT RS.1,13,36,783/-. AGAINST THE ABOVE ADD ITIONS MADE BY THE ASSESSING OFFICER, AS DISCUSSED ABOVE, THE ASSESSEE APPROACHED THE LD. CIT(APPEALS)-I,KOCHI. ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 6 3. THE FIRST ISSUE DEALT WITH BY THE LD. CIT(APPEAL S) IS IN RESPECT OF AGRICULTURAL INCOME. THE LD. CIT(APPE ALS) FOUND THAT DURING THE COURSE OF SEARCH, DOCUMENTS OF PROP ERTIES PURCHASED BY THE ASSESSEE WAS SEIZED. IN FACT, AS SESSEE FAILED TO PRODUCE ANY EVIDENCE REGARDING THE INCOME DERIVED FROM AGRICULTURAL ACTIVITIES. CONSIDERING THE SU BMISSIONS OF THEE ASSESSEE AND EXTENT OF LAND HOLDINGS BY THE A SSESSEE, THE FIRST APPELLATE AUTHORITY DIRECTED THE ASSESSIN G OFFICER TO TREAT RS.48,000/- AS AGRICULTURAL INCOME AND ADOPT RS.48,000/- FOR AGGREGATION AND RATE PURPOSE. 4. TURNING TO ADDITION OF RS.31,31,176/- BEING THE SHARE OF THE ASSESSEE IN THE TOTAL ADDITION OF RS.78,23,5 53/- IN RESPECT OF CAPITAL GAIN ON THE SALE OF PROPERTY JOI NTLY HELD BY THE ASSESSEE AND HER HUSBAND, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE LAND WAS PURCHASED ON V ARIOUS DATES FROM DECEMBER 1980 TO AUGUST 1993 AND THAT IN RESPECT OF CAPITAL GAIN IN RESPECT OF 15.454 CENTS OF LAND PURCHASED ON 28-5-1986, THE DATE WAS INADVERTENTLY TYPED AS 28-5-1969, BUT THE INDEXED COST OF ACQUISITION W AS BASED ON THE INDEX FOR 1986. THOUGH THE ASSESSEE HAD PO INTED OUT THIS MISTAKE, THE ASSESSING OFFICER REFUSED TO RECTIFY THE MISTAKE. ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 7 4.1 IT WAS FURTHER SUBMITTED THAT A RESIDENTIAL BUI LDING MEASURING 2600 SQ.FT. WAS CONSTRUCTED DURING 1986-8 7 FOR A COST OF RS.10,40,000/- AND AFTER THAT TWO ADJACENT PLOTS OF 18.016 CENTS AND 11.59 CENTS WERE PURCHASED IN OCTO BER 1989 AND OCTOBER 1993 RESPECTIVELY AND THAT DURING 1993- 94 THE TOTAL COMPOUND WAS STARTED TO BE USED AS FAC TORY PREMISES AND FOR THIS AN AMOUNT OF RS.16,50,000/- W AS SPENT FOR CONSTRUCTION COMPOUND WALLS AND THAT THIS BUILDING WHICH WAS USED AS RESIDENCE CUM OFFICE WAS TOTALLY USED AS BUSINESS PREMISES FROM 1995-96 ONWARDS. IT WAS SU BMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM FOR WANT OF EVIDENCE. IT IS THE ARGUMENT OF THE LD. COUNSEL F OR THE ASSESSEE THAT WHEN THE PROPERTY WAS SOLD, THOSE REC ORDS WERE DESTROYED AS ADVISED BY THE AUDITORS. THE LD . COUNSEL PRAYED FOR ACCEPTING THE CERTIFICATE OBTAINED FROM THE COCHIN MUNICIPAL CORPORATION CONFIRMING THAT THIS BUILDING ( WHICH IS CONSTRUCTED AS EXTENSION OF THE OLD BUILDING) RETAI NING THE SAME MUNICIPAL NUMBER HAS BEEN CONSTRUCTED DURING T HE YEAR 1986-87. 4.2 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. CO UNSEL FOR THE ASSESSEE, THE LD. CIT(APPEALS) OBSERVED THAT IT IS THE DUTY OF THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF D EDUCTION ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 8 BY VALID EVIDENCES IN THE FORM OF BILLS AND VOUCHER S, VALUATION REPORTS ETC. THE SUBMISSION OF THE ASSE SSEE THAT THE DOCUMENTS WERE DESTROYED ON THE ADVICE OF THE A UDITORS IS NOT A VALID REASON FOR NOT PRODUCING ANY EVIDENC E IN SUPPORT OF ITS CLAIM FOR COMPUTATION OF CAPITAL GAI N. HOWEVER, THE REASON STATED FOR THE ABSENCE OF EVIDE NCE RELATING TO THE OLD YEARS SEEMS TO BE REASONABLE AN D FAIR. CERTIFICATE OF THE COCHIN CORPORATION PROVES CONSTR UCTION OF A BUILDING DURING 1986-87 BUT THERE IS NO EVIDENCE REGARDING THE COST OF CONSTRUCTION INCURRED. ACCEPTING THE PERIOD OF CONSTRUCTION AS 1986-87, HOWEVER, THE LD. CIT(APPEA LS) ALLOWED RS.3 LAKHS AS COST OF CONSTRUCTION. 4.3 REGARDING THE INDEXED COST TO BE ADOPTED FOR TH E LAND MEASURING 15.454 CENTS, VERIFYING THE COPY OF SALE DEED PRODUCED, THE LD. CIT(APPEALS) FOUND THAT THE DATE OF PURCHASE WAS ON 28-5-1986 AND ACCORDINGLY ASSESSING OFFICER WAS DIRECTED TO ADOPT THE INDEX FOR THE 198 6-87 FOR COMPUTING THE INDEXED COST OF ACQUISITION OF THIS L AND. 4.4 REGARDING THE CLAIM OF INVESTMENT FOR CONCRETIN G THE PREMISES AND CONSTRUCTION OF THE COMPOUND WALL, CONSIDERING THE NATURE OF BUSINESS CONDUCTED BY THE ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 9 ASSESSEE, CONCRETING THE LAND USED AS FACTORY PREMI SES, POSSIBILITY OF INCURRING SUCH EXPENDITURE, THE LD. CIT(APPEALS) ALLOWED RS.3 LAKHS AS COST INCURRED FO R CONCRETING AND RS.75000/- AS COST FOR THE COMPOUND WALL. 5. NOW THE ASSESSEE IS ON SECOND APPEAL BEFORE THE TRIBUNAL ON THE SUSTENANCE OF DISALLOWANCE WHEREAS THE DEPARTMENT IS ON APPEAL AGAINST THE DELETION OF DIS ALLOWANCE MADE BY THE ASSESSING OFFICER. 6. IN OTHER WORDS, THE ASSESSEE IS ON APPEAL ON TWO ISSUES, VIZ. AGAINST THE FINDING OF THE LD. CIT(APP EALS) IN RESPECT OF COMPUTATION OF LONG TERM CAPITAL AND SUS TENANCE OF DISALLOWANCE IN RESPECT OF ESTIMATING THE COST O F CONSTRUCTION OF RESIDENCE CUM OFFICE BUILDING, CONC RETING CHARGES AND COMPOUND WALL EXPENSES WHEREAS THE RE VENUE IS ON APPEAL AGAINST RESTRICTING THE ADDITION MADE UNDER OTHER SOURCES AMOUNTING, ALLOWING RS.3 LAKHS AS CO ST INCURRED FOR CONCRETING AND RS.75000 AS COST FOR TH E COMPOUND WALL WHILE COMPUTING CAPITAL GAINS AND CON TENDING THAT THERE IS VIOLATION OF RULE 46A BY THE LD. CIT( APPEALS). ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 10 7. WE HAVE HEARD BOTH SIDES IN DETAIL. SIMILAR ISS UES WERE RAISED IN ITA NOS.855/COCH/2008 & 865/COCH/2008 DA TEED 1-4-2011 (COPY ON RECORD) IN THE CASE V.S.RAMAKRISH NAN, HUSBAND OF THE PRESENT ASSESSEE, ON THE VERY SAME P ROPERTY. IN THOSE APPEALS ALSO THE ASSESSEE AND THE REVENUE WERE IN APPEAL. HENCE, IT IS NOT NECESSARY FOR US TO REPE AT THOSE REASONING HERE ONCE AGAIN. ACCORDINGLY, ON THE IS SUE OF LONG TERM CAPITAL GAINS, CONCRETING AND COMPOUND WA LL EXPENSES, WE HAVE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. FOLLOWING THOSE REASONS, IN THIS CASE ALSO, WE ALLOW THE CLAIM OF THE ASSESSEE. THUS, T HE APPEAL OF THE ASSESSEE STANDS ALLOWED. 8. TURNING TO THE APPEAL OF THE REVENUE, GROUND NO. 4 RAISED IN THIS APPEAL AND IN ITA NO.866/COCH/2008 I S ONE AND SAME AND IN THE APPEAL OF THE ASSESSEE IN ITA N O. 856/COCH/2008 WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, T HE REVENUES GROUND ON THIS ISSUE FAILS. 9. IN RESPECT OF RESTRICTING THE ADDITION MADE UND ER OTHER SOURCES, SIMILAR ISSUE WAS CONSIDERED AND DECIDED I N ITA NO.865/COCH/2008 IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. WE FOLLOW THE SAID FINDINGS IN THIS CASE ALSO. ITA NOS. 856 & 866/COCH/2008 N.K.RADHAMANY 11 10. IN RESPECT OF VIOLATION OF RULE 46A(3) ALSO WE HAVE REJECTED THE GROUND OF APPEAL OF THE REVENUE IN ITA NO.865/COCH/2008. AS THE FACTS OF THE CASE ARE SI MILAR, IN THIS PRESENT CASE ALSO WE SEE NO REASON TO TAKE A D IFFERENT VIEW THAN THAT OF ITA NO.865/COCH/2008. ACCORDING LY, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 05 TH APRIL,2011. PM. COPY FORWARDED TO: 1. N.K.RADHAMANY, RAMARADHANILAYAM, PALARIVATTOM, KOCHI-25. 2. THE ACIT/,DCIT., CENTRAL CIRCLE-2, KOCHI. 3. CIT(A)-I, KOCHI. 4. CIT, CENTRAL,KOCHI. 5. D.R.