MRS. INDU MALHOTRA,DEHRADUN V. ITO, DEHRADUN

ITA 53/DDN/2023

AI Insights

The case involves an appeal by Mrs. Indu Malhotra against the order of the National Faceless Appeal Centre (NFAC), which upheld the additions made by the Income Tax Officer (ITO) regarding unreported sale consideration and disallowed costs of improvement claimed by the assessee. The primary contention was the alleged 'on-money' of Rs. 74,26,000 related to the sale of a property, which the assessee argued was not an unreported income but part of the legitimate sale proceeds. The Tribunal found that the documents relied upon by the ITO were not conclusive and directed the deletion of the addition. Additionally, the Tribunal partially allowed the claim for cost of improvement, directing a re-computation based on the evidence provided.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 34912 (ITAT-DEHRADUN)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-08-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 05-07-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. S. RANA
• Assessee Lawyers: K. K. JUNEJA
• Keywords: Sale consideration of property below Jantri Value; Capital Gains; TDS; Valuation report; Competent authority
• Section: 148; 54; 50C; 133A; 20; 101

Judgement Text

"Page | 1 THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH, NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER, AND SHRI VIMAL KUMAR, JUDICIAL MEMBER (Through Video Conferencing) ITA No. 53/DDN/2023 (Assessment Year: 2015-16) Mrs. Indu Malhotra, C/o. N. Kumar Gupta & Associates, 34F, Narendra Vihar, Kaulagarh Road, Dehradun Vs. ITO, Dehradun (Appellant) (Respondent) PAN:AJQPM9614B Assessee by : Shri K. K. Juneja, Adv Revenue by: Shri A. S. Rana, Sr. DR Date of Hearing 21/08/2024 Date of pronouncement 19/11/2024 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.53/DDN/2023 for AY 2015-16, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC, in short] in Appeal No. ITBA/NFAC/S/2023- 24/1052765783(1) DATED 11.05.2023 against the order of assessment passed u/s 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 18.06.2018 by the ITO, Ward-1(3), Dehradun (hereinafter referred to as „ld. AO‟). 2. The assessee has raised the following grounds of appeal:- “GROUND NO.1 That the impugned assessment is bad in law, is void ab-initio and a nullity whereas CIT appeals have erred in facts and law by upholding the additions ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 2 made by AO, the action of learned CIT (A) is invalid and the addition upheld needs to be deleted. GROUND NO. 2 That the learned CIT(A) has erred in law and facts in confirming the addition on account of alleged on money of Rs. 74,26,000/- The addition has been made ignoring the assessment position of the seller and other submissions made during the assessment proceedings. GROUND NO. 3 That the learned CIT(A) has erred in law and facts in confirming disallowance of Rs. 12,69,270/- made by the AO on account of cost of improvement taken by the assessee which was actually incurred and is allowable from the sale proceeds. GROUND NO. 4 That the learned CIT(A) has erred in law and facts in confirming addition and not considering the submissions made by the appellant. GROUND NO. 5 That the order upheld by the learned CIT(A) is bad in law since the learned AO's original order is based on conjecture and surmises as the Learned AO has totally ignored the submissions filed by the assessee during the assessment proceedings and misdirecting his investigation based on bias towards the assesse.” 3. We have heard the rival submissions and perused the material available on record. The assessee is an individual and earned income from house property, capital gains and other sources. A survey operation u/s 133A of the Act was conducted on 08.09.2015 at the business premises of Shri Amit Kumar Sharma, proprietor of M/s. Shiva Electricals, wherein certain documents belonging to assessee were found and impounded. The information was passed on to the Assessing Officer of the assessee. Accordingly, notice u/s 148 of the Act stood issued to the assessee on 12.07.2016. The assessee submitted that the return already filed on 17.05.2016 be treated as a return in response to the notice u/s 148 of the Act. The ld AO observed that during the course of survey operation u/s 133A of the Act at the business/office premises of Shri Amit Kumar Sharma, 6-Shastri Nagar, Hardwar Road, Rishikesh and at 3-New Friends Colony, Dehradun, certain books of accounts, documents, ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 3 diaries etc. were found, inventorized and impounded by the Survey team. Transactions recorded in page No.25 of Annexure-A/SE/07, page No. 101 of Annexure LP-6 impounded from Rishikesh premise and page No. 186 of Annexure LP impounded from Dehradun premise reveal that transactions for purchase of house property at 65/2, Balbir Road, Dehradun with Smt. Indu Malhotra, 65/2, Balbir Road, Dehradun at present R/o Villa No. 5. Block-C, Om City, Near Indresh Hospital, Dehradun during the F.Y. 2014-15 and paid total Rs.2,30,00,000/- including payment of Rs.1,20,00,000/- through draft No. 785022 dated 26.12.2014, Cheque No. 483921 dated 09.10.2014 for Rs.20,00,000/- of UCO Bank, Rishikesh and balance by cash on different dates mentioned in these documents relating to these transactions. It was observed that page no. 101 of Annexure LP-6 impounded from Rishikesh premises and page no. 186 of Annexure LP impounded from Dehradun premises reveal that assessee has made transactions for sale of house property at 65/2, Balbir Road, Dehradun with Shri Amit Kumar Sharma s/o Shri Jai Prakash Sharma during F.Y. 2014-15 and Smt. Indu Malhotra had received total amount of Rs.2,30,00,000/- including payments of Rs.1,20,00,000/- through draft No. 785022 dated 26.12.2014, cheque No. 483921 dated 09.10.2014 for Rs.20,00,000/- of UCO Bank, Rishikesh and balance by cash on different dates mentioned in the documents. In response to the summons dated 02.02.2016 issued by the DCIT, Circle 4(1). Rishikesh, Shri Naveen Gupta, CA (AR for the assessee) furnished a reply dated 02.03.2016 enclosing therewith copy of sale deed dated 26.12.2014 and stated that the assessee has been allotted two PANs and TDS on sale of property was deducted on PAN AJQPM9614B whereas the assessee was filing her returns of income using other PAN ACNPM2810P, and stated that therefore, the return for the A.Y. 2015-16, though has been prepared but kept in abeyance. Thereafter, case was adjourned for 15.03.2016 but nobody attended and made any compliance. From the copy of sale deed provided by the learned A.R. for the assessee, it ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 4 was found that the property in question was purchased by the assessee Smt. Indu Malhotra on 15.06.1993. 4. During the year under consideration, the assessee sold a residential property at 65/2, Balbir Road for Rs. 1,48,75,560/- on 29.12.2014 to Amit Kumar Sharma and Smt Sadhna Kumar. The assessee during the course of assessment proceedings sought for the documents impounded during the course of survey proceedings of Shri Amit Kumar Sharma from the ld AO. The same were duly provided by the ld AO. The assessee also sought for copy of the statement recorded from Shri Amit Kumar Sharma specifically with regard to transaction of sale of property to him. The ld AO furnished the impounded documents of Shri Amit Kumar Sharma namely LP-6 pages 101 and 186 which was found to be cogent with corroborative evidence against the assessee that she has sold residential property situated at 65/2, Balbir Road, Dehradun for Rs. 2,30,00,000/-. 5. The ld AO observed that sale consideration of residential property reported by the assessee in the capital gain computation filed along with return of income in response to notice u/s 148 of the Act was Rs. 1,55,74,000/- (eventhough actual sale consideration was Rs 1,48,75,560/-). The consideration determined by the stamp valuation authority for the purpose of stamp duty in terms of section 50C of the Act was Rs. 1,55,74,000/-. The assessee claimed deduction towards indexation cost of acquisition as under:- 1,01,000 X 1024 /244 Rs. 423869/- The assessee claimed deduction towards indexed cost of improvement as under:- 5,00,000/- X 1024 /426 (FY 2001-02) Rs. 12,01,878/- ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 5 Rs. 20 lakhs X1024/497 (FY 2004-05) Rs. 41,20,725/- 6. The assessee also made investment in capital gains account scheme to be spent later for construction of house property at Dehrakhaas for Rs. 62 lakhs for which deduction u/s 54 of the Act was claimed together with a sum of Rs. 30 lakhs being the amount already spent for construction of house property at Dehrakhaas. Hence, Rs. 92 lakhs was spent as deduction u/s 54 of the Act. 7. The ld AO observed that as per impounded documents during the survey from Shri Amit kumar Sharma had transpired that assessee had sold the property for Rs. 2,30,00,000/-. The consideration in terms of Section 50C of the Act for the said property was Rs. 1,55,74,000/-. Accordingly, the ld AO proceeded to treat the differential sale consideration of Rs. 74,26,000/- (Rs. 2,30,00,000/- - Rs. 1,55,74,000/-) as excess sale consideration not reported by the assessee and made an addition thereon. 8. Further, due to non cooperation from the side of the assessee in furnishing requisite details regarding cost of improvement claimed by the assessee, the ld AO observed that assessee had not filed any evidence for the same but she had filed an estimate for completion and renovation of house for Rs. 19 lakhs valued on 15.10.2004 by the registered valuer AS Gupta & Co. The ld AO also observed that the assessee had taken loan of Rs. 15 lakhs during the FY 2004-05 to fund the construction. Accordingly, the ld AO took the cost of construction as Rs. 15 lakhs in FY 2004-05 and granted deduction towards indexed cost of improvement of Rs. 40,53,333/- as against the claim of the assessee of Rs. 53,32,603/-, thereby making the disallowance of Rs. 12,69,270/-. 9. This action of the ld AO was upheld by the ld CIT(A). ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 6 10. At the outset, we find that the claim of the revenue is that the assessee had sold a residential property to Shri Amit Kumar Sharma for Rs. 2,30,00,000/-. According to the revenue, this sum is reflected in the documents impounded during the survey of Shri Amit Kumar Sharma (buyer of the property from the assessee) but assessee had sought for the copy of the statement recorded from Shri Amit Kumar Sharma qua this purchase transaction of the property. Admittedly, this statement despite requests from the assessee was never supplied by the revenue to the assessee. Obviously the document impounded from Shri Amit Kumar Sharma during his survey could have been confronted to Shri Amit Kumar Sharma during survey proceedings and statement recorded from him. The revenue was not able to place on record the contents of those statement of Shri Amit Kumar Sharma as to what explanation he had given in connection with purchase transaction of the property. Either way, the presumption in terms of section 292C of the Act would go against Shri Amit Kumar Sharma as it was impounded from his premises. On the contrary, the assessee had declared sale consideration as per Section 50C of the Act at Rs. 1,55,74,000/- in the capital gains computation filed in the return of income as against the actual consideration of Rs. 1,48,75,560/-. We find the audited balance sheet of Shri Amit Kumar Sharma is placed on record by the assessee together with his income tax return, computation of total income and tax audit report for the relevant assessment year in pages 30 to 61 of the paper book filed. From the perusal of the audited financial statements in fixed asset schedule of M/s. Shiva Electricals, proprietary concern of Shri Amit Kumar Sharma, there is addition towards land and building of Rs. 1,56,64,490/- during the year under consideration. The break up of the same is as under:- Purchase consideration of the property brought from assessee – Rs. 1,48,75,560/- Add-Stamp Duty Rs. 7,78,700/- Add- incidental expenses of registration Rs.10,230/- ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 7 Total Rs. 1,56,64,490/- 11. This total purchase consideration of Rs. 1,56,64,490/- matches with the fixed asset schedule of Shri Amit Kumar Sharma shown in his audited balance sheet. While this is so, it could be safely concluded that Shri Amit Kumar Sharma had not accepted to have received any on-money payment from the assessee. Hence, the documents impounded namely LP 6 at pages 101 and page 186 which had been relied upon by the ld AO for making an addition of Rs. 74,26,000/- in the hands of the assessee has absolutely no basis and is not supported with any other corroborative material found in the course of survey of Shri Amit Kumar Sharma. Rather the corroborative material are in the form of registered sale deed for Rs. 1,48,75,560/- and audited balance sheet of Shri Amit Kumar Sharma reflecting the purchase consideration actually paid by him to the assessee and to the Stamp Valuation Authorities. Hence, the impounded documents of Shri Amit Kumar Sharma are merely dumb documents qua the assessee herein. Hence, there is absolutely no basis for making an addition of Rs. 74,26,000/- in the hands of the assessee. The ld AO is hereby directed to delete the same. Accordingly, the ground No. 2 raised by the assessee is hereby allowed. 12. Ground No. 1, 4 and 5 raised by the assessee are general in nature and does not require any specific adjudication. 13. Ground No. 3 raised by the assessee is challenging the disallowance of Rs. 12,69,270/- on account of cost of improvement of the property. 14. We have heard the rival submissions and perused the material available on record. The assessee claimed that she had spent of Rs. 5 lakhs in FY 2001- 02 and Rs. 20 lakhs in FY 2005-06 towards cost of improvement and accordingly, claimed indexation benefit in the return of income under ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 8 computation of capital gains. The assessee also submitted the loan statement for Rs 15 lacs before the ld AO which had been used for construction of the house property. The ld AR submitted that the building map was approved in the year 1998 and placed evidence to this effect. After this approval, the assessee started construction. Mussoorie Dehradun Development Authority (MDDA) is the competent authority to approve the building map. Rs. 5 lakhs stated to be spent on cost of improvement comprises of building map approval fees, land leveling work etc. Obviously building approval fees is an expenditure paid to the statutory body without which no building plan could be subjected to approval. Admittedly, the assessee had indeed carried out construction on the land purchased by it. Hence, the said land need to be leveled so that construction could be carried out smoothly, for which purpose , land leveling charges ought to have been incurred by the assessee. Though, there is no direct evidence submitted by the assessee with regard to incurrence of such expenditure on actual basis, the incurrence of such expenditure per se cannot be denied. Hence, we deem it fit and appropriate to estimate the cost of construction incurred for AY 2001-02 at Rs. 2,50,000/- eligible for indexation thereon. The ld AO is directed to recompute the indexed cost of improvement in FY 2001-02 accordingly. 15. With regard to claim of Rs. 20 lakhs made by the assessee towards cost of improvement in FY 2004-05, we find that the assessee had indeed filed an estimate for completion and renovation of house valued at Rs. 19 lakhs way back on 15.10.2004 itself, out of which housing loan of Rs. 15 lakhs was borrowed by the assessee, which stood to be accepted by the ld AO. Even the survey in the hands of Shri Amit Kumar Sharma had happened on 08.09.2015, whereas the said estimate for cost of construction of the house for Rs. 19 lakhs was available with the assessee dated 15.10.2004 given by registered valuer AS Gupta & Co. Hence, the credibility of the said valuation report cannot be doubted. The ld AO also does give credence to the said aspect of ITA No. 53/DDN/2023 Mrs. Indu Malhotra Page | 9 the valuation in part while giving credit of Rs. 15 lakhs. Hence, some concrete evidence is available in the form of valuation report to the tune of Rs. 19 lakhs. Hence we hold that the assessee should be entitled for deduction towards cost of construction in FY 2004-05 for Rs. 19 lakhs and consequentially eligible for indexation benefit accordingly. Ld AO directed accordingly to re-compute. The Ground No. 3 raised by the assessee is partly allowed for statistical purposes in the above mentioned terms. 16. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 19/11/2024. -Sd/- -Sd/- (VIMAL KUMAR) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 19/11/2024 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "