Smt. Tehmida Lakhani, V. Assistant Commissioner of Income-tax,

ITA 975/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9304 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.975/PUN/2014 / ASSESSMENT YEAR : 2007-08 S MT. TEHMIDA LAKHANI, 318, M.G. ROAD, PUNE 411 001. PAN NO.AAKPL 7247 E. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE -4, PUNE. . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A) II, PUNE DT.3 0.12.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM BUSINESS, HOUSE PROPERTY AND OTHER SOURCES. ASSESSEE FILED HER R ETURN OF INCOME FOR A.Y. 2007-08 ON 02.11.2007 DECLARING TOTAL TAXABL E INCOME AT RS.65,12,110/-. THE CASE WAS SELECTED FOR SCRUT INY AND / DATE OF HEARING : 25.05.2017 / DATE OF PRONOUNCEMENT: 14.06.2017 2 THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT ON 29.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,85,25,166/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.31.12.2013 IN (APPEAL NO.PN/CIT(A)-II/ACIT,CIR-4,PN/486/2009-10) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS: 1. ON FA CT S A ND C I RC UM S TANCES OF TH E CASE AND IN LAW THE LEARNED C OMMI SS ION E R O F INCOM E TAX, APPEAL I I PUNE ERRED IN CONFIRMING A D IS ALLO W ANCE O F RS 5584964 C LAIMED A S COS T OF IMPROVEMENT WHILE CA L C UL A TING INCOME F ROM CAP I TAL GAINS. THE ADDITION SO CONFIRMED MAY KINDL Y B E DELETED. 2. O N F ACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED C OMMISSIONER OF INCOME T AX , APPEAL II PUNE ERRED IN CONFIRMING A DISALLOWANCE OF RS 5584964 WHICH WAS CLAIMED AS COS T OF I MPRO V EMENT WHILE COMPUTING THE CAPITAL GAINS UNDER THE G UISE THAT TH ERE AR E NO SUPPORTING DOCUMENTS FOR SUCH EXPENSES AND ALSO THAT S UCH EX PENSES C A NNOT BE TREATED AS COST OF IMPROVEMENT U / S 48(II) OF TH E INCOME TAX ACT , 1961 . IT BE HELD THAT THE AMOUNT OF RS 5584964 INCURRED AS COST O F IMPROVEMENT BE DEDUCTED WHILE COMPUTING INCOME FROM CAPITAL GAINS . 3. THE CASE FILE REVEALS THAT ON EARLIER OCCASIONS THE CAS E WAS ADJOURNED AT THE REQUEST OF ASSESSEE. ON THE DATE OF HEARING I.E., ON 25.05.2017 NONE APPEARED ON HER BEHALF NOR ANY ADJOU RNMENT APPLICATION WAS FILED. WE THEREFORE PROCEED TO DISPOSE OF T HE APPEAL EX-PARTE QUA THE ASSESSEE AFTER HEARING THE LD.D .R. AND ON THE BASIS OF MATERIAL ON RECORD. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICE D THAT ASSESSEE HAD ENTERED INTO TWO TRANSACTIONS OF SALE OF CAPITAL ASSETS AND HAD CLAIMED IMPROVEMENT COST OF RS.1,19,97,569/- . THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS AND JUS TIFY THE 3 CLAIM. AO HAS NOTED THAT ASSESSEE FAILED TO PRODUCE OR S UBMIT ANY DETAILS. HE ACCORDINGLY DISALLOWED THE CLAIM OF IMPROVEMENT COST OF RS.1,19,97,569/-. AGGRIEVED BY THE ORDER OF AO, ASSESSE E CARRIED THE MATTER BEFORE LD.CIT(A). LD.CIT(A) VIDE ORDER DT.30.12.2013 AND AFTER CONSIDERING THE REMAND REPORT OF A O AND ASSESSEES REJOINDER TO REMAND REPORT, GRANTED PARTIAL RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER : 3.6 THE SUBMISSION MADE BY THE APPELLANT HAS BEEN CONSIDERED AND THE MATERIAL ON RECORD PERUSED. THE ONLY POINT OF DISPUTE IS WITH RESPECT TO THE TOTAL DISALLOWANCE OF THE EXPEN SES INCURRED ON IMPROVEMENT OF THE CAPITAL ASSET SOLD BY THE APPELL ANT ALONG WITH HER HUSBAND SHRI. TOUFIK LAKHANI. THE ASSESSING OFF ICER DURING THE ASSESSMENT PROCEEDINGS HAS NOT DISPUTED THE OWN ERSHIP OF THE ASSETS HELD BY THE APPELLANT JOINTLY WITH HER HUSBA ND IN THE RATIO OF 50:50 AS ONLY THE CAPITAL GAINS EARNED BY THE AP PELLANT HAS BEEN TAXED BY THE ASSESSING OFFICER. THE POINT OF D ISPUTE AROSE WHEN THE ENTIRE COST OF IMPROVEMENT CLAIMED FOR THE TWO PROPERTIES AMOUNTING TO RS.1,19,97,569/- WAS DISALLOWED BY THE ASSESSING OFFICER. THE MATERIAL ON RECORD CLEARLY INDICATES T HE SHARE OF THE APPELLANT IN THE TWO PROPERTIES SOLD TO BE 50% AND THE OTHER 50% SHARE BELONGED TO HER HUSBAND WHO HAS CLAIMED TO HA VE OFFERED THE FIFTY PERCENT OF THE CAPITAL GAIN TO TAX. IN SU CH A SET OF FACTS, THE ENTIRE DISALLOWANCE OF EXPENSES IN THE HANDS OF THE APPELLANT DO NOT APPEAR TO BE JUSTIFIED. THE ONLY REASON QUOTED BY THE ASSESSING OFFICER FOR THE ENTIRE DISALLOWANCE OF EXPENSES IN THE HANDS OF THE APPELLANT IS NON-FURNISHING OF THE DETAILS OF THE R ETURN OF INCOME ALONG WITH THE COMPUTATION OF INCOME AND OTHER RELA TED DETAILS BY THE APPELLANT. THE ASSESSING OFFICER IN THIS REGAR D OUGHT TO HAVE CARRIED OUT FURTHER ENQUIRY AND PROBED THE MATTER BE FORE RESORTING TO THE DISALLOWANCE, MORE SO FOR THE FACT THAT THE CAPITAL GAIN TO THE EXTENT OF 50% BEING APPELLANT'S SHARE 'HAS BEEN TAX ED. IN THE CIRCUMSTANCES. IT IS HELD THAT THE DISALLOWANCE OF THE EXPENSES INCURRED ON IMPROVEMENT OF THE CAPITAL ASSETS CAN B E CONSIDERED ONLY TO THE EXTENT OF FIFTY PERCENT OF THE TOTAL EX PENDITURE IN THE HANDS OF THE APPELLANT AND FOR THE REMAINING 50% OF THE EXPENSES THE ASSESSING OFFICER MAY INTIMATE THE ASSESSING OF FICER HAVING JURISDICTION TO VERIFY THE CONTENTION RAISED BY THE APPELLANT IN THIS REGARD. 3.7 SO FAR AS THE ISSUE RELATING TO THE DISALLOWANC E OF THE EXPENSES ON IMPROVEMENT IS CONCERNED, IT IS NOTICED THAT THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS FAILED TO PRODUCE DETAIL S OF EXPENSES AND EVEN DURING THE REMAND PROCEEDINGS WAS ABLE TO FURNISH DETAILS OF EXPENSES ONLY AMOUNTING TO RS.8,27,641/- RELATING TO THE LAND AT WANOWRIE OUT OF RS.38,23,748/-. THE APPELLA NT WAS NOT ABLE TO FURNISH ANY SUCH DETAILS OF EXPENSES ON IMP ROVEMENT WITH RESPECT TO THE PROPERTY AT ERANDAVANE OR WAS ABLE T O JUSTIFY THE CLAIM MADE IN THIS REGARD; THE APPELLANT HAS BEEN P ROVIDED AMPLE OPPORTUNITY TO PROVE THE CLAIM OF THE INCURRENCE OF EXPENSES ON 4 IMPROVEMENT OF THE ASSETS SOLD, HOWEVER, THE APPELL ANT HAS NOT BEEN ABLE TO FURNISH THE COGENT PROOF/EVIDENCE AND ALSO FAILED TO BRING ON RECORD ANY SUCH MATERIAL WHICH COULD JUSTI FY THE CLAIM. THE ASSESSING OFFICER HAS ALSO DOUBTED THE GENUINEN ESS OF THE EXPENDITURE INCURRED FOR ERANDWANE PROPERTY. MOREOV ER THE NATURE OF EXPENSES INCURRED BY THE APPELLANT AND CLAIMED T O BE LEADING TO COST OF IMPROVEMENT OF THE PROPERTY IS APPARENTLY N OT FOUND TO BE ACCEPTABLE. IN THE CASE OF KIRAN BANSAL VS ACIT, 10 ITR 180 (ITAT DEL) AND S. SUDHA VS ACIT, 131 ITD 575 (CHENNAI), T HE EXPENDITURE ON GENERAL MAINTENANCE OF PROPERTY SUCH AS LAYING OF TILES, WHITEWASHING, ELECTRICAL RE-WIRING, WOOD WOR K WERE HELD TO BE NOT FOR IMPROVEMENT OF PROPERTY AND HENCE' NOT D EDUCTIBLE WHILE COMPUTING CAPITAL GAINS. SECTION 48(II) PROVIDES FO R THE: DEDUCTION OF 'COST OF IMPROVEMENT' WHILE COMPUTING CAPITAL GAINS AND THE MEANING OF 'COST OF IMPROVEMENT' HAS BEEN STATED AS AN EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITION OR ALTERATION TO THE CAPITAL ASSET BY THE ASSESSEE AFT ER IT BECOMES HIS PROPERTY AND ANY SUCH EXPENDITURE IS NOT DEDUCTIBLE FROM INCOME CHARGEABLE UNDER ANY OTHER HEAD. THUS, ON CONSIDERI NG THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE IT BECOMES APPA RENT THAT THE EXPENDITURE CLAIMED TO HAVE BEEN INCURRED DOES NOT QUANTIFY AS COST OF IMPROVEMENT FULLY AS OUT OF THE TOTAL EXPEN DITURE OF RS.1,19,97,569/-, A SUM OF RS. 8,27,641/- CAN BE RE DUCED AS THE APPELLANT HAS BEEN ABLE TO JUSTIFY THE INCURRENCE O F EXPENSES FOR IMPROVEMENT AND ALSO EXAMINED BY THE ASSESSING OFFI CER. THUS THE TOTAL EXPENSES WHICH BECOMES DISALLOWABLE WORKS OUT TO RS. 1,11,69,928/- (1,19,97,569/- - 8,27,641/-) AND THE APPELLANT'S SHARE BEING 50% IN THE PROPERTIES, THE EXPENSES TO THE EXTENT OF RS. 55,84,964/- BECOMES DISALLOWABLE IN THE HANDS OF TH E APPELLANT AND THE OTHER REMAINING DISALLOWANCE HAS TO BE DONE IN THE CASE OF APPELLANT'S HUSBAND WHO IS THE OWNER OF THE REMAINI NG 50% SHARE IN THE PROPERTIES. IN THE RESULT OUT OF THE TOTAL D ISALLOWANCE OF RS. 1,19,97,569/- THE DISALLOWANCE TO THE EXTENT OF RS. 55,84,964/- IS UPHELD AND THE REMAINING AMOUNT IS DIRECTED TO BE D ELETED GIVING THE APPELLANT PARTIAL RELIEF. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 5. BEFORE US, LD.D.R. TOOK US THROUGH THE ORDER OF LD.C IT(A) AND SUBMITTED THAT EVEN IN THE REMAND PROCEEDINGS, ASSE SSEE HAS NOT FURNISHED THE REQUIRED DETAILS AND IN SUCH A SITUATION, THE ACTION OF AO IN DENYING THE CLAIM OF EXPENDITURE CANNOT BE FAULTED. HE THUS SUPPORTED THE ORDER OF AO. 6. WE HAVE HEARD THE LD.D.R. AND PERUSED THE MATERIAL O N RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT T O 5 DISALLOWANCE OF IMPROVEMENT COST INCURRED BY THE ASSESSE E. LD.CIT(A) WHILE DECIDING THE ISSUE HAS NOTED THAT THE ASSE SSEE HAD SOLD TWO PROPERTIES DURING THE YEAR WHICH WERE OWNED B Y ASSESSEE ALONG WITH HER HUSBAND AND HER SHARE IN THE PROPERTIES WAS 50%. IT IS AN UNDISPUTED FACT THAT ASSESSEE DID NOT FURNISH A NY DETAILS OF EXPENDITURE INCURRED FOR IMPROVEMENT BEFORE THE AO BUT O NLY IN THE REMAND PROCEEDINGS ASSESSEE COULD FURNISH THE DETAILS OF RS.8,27,641/-. LD.CIT(A) AFTER CONSIDERING THE FACT THAT ASSE SSEES SHARE IN THE PROPERTY WAS 50%, HELD THAT DISALLOWANCE OF T HE EXPENSES ON ACCOUNT OF IMPROVEMENT IN THE HANDS CAN TH EREFORE ONLY BE CONSIDERED TO THE EXTENT OF 50%. HE ACCORDIN GLY AND AFTER CONSIDERING THE DETAILS OF EXPENSES FURNISHED BEFORE HIM, GR ANTED RELIEF TO THE EXTENT OF RS.55,84,964/-. BEFORE US, NO MATERIA L HAS BEEN PLACED BY THE ASSESSEE TO POINT OUT ANY FALLACY IN T HE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH T HE ORDER OF LD.CIT(A) AND THUS THE GROUNDS OF ASSESSEE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 14 TH DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 14 TH JUNE, 2017. YAMINI 6 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT-(A)-3, PUNE. CIT-2, PUNE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // //// // TRUE COP // /// TRUE // //COPY // TRUE COPY // /.// // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.