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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri A. Mohan Alankamony & Shri S.S. Godara
O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y 2015-16 arises from the Commissioner of Income Tax (Appeals)-7, Hyderabad’s order dated 01.10.2019, in case No.0287/CIT(A)-7/2017-18 involving proceedings under section 143(3) of Income Tax Act, 1961 (in short, “the Act”).
Case called twice. None appears at the assessee’s behest. He accordingly proceeded ex-parte.
2. The assessee pleads the following substantive grounds in the instant appeal.
3. Learned departmental representative next took us to the CIT(A)’s detailed discussion affirming the Assessing Officer’s action on all counts as under :
“4.1. During the appellate proceedings, the AR of the appellant made the following written submissions and the contents of the same are reproduced as under: "Your appellant was NRI and purchase property D.No.1425/93 for Rs.2000/- and paid registration charges. I have taken passion of the plot and construction of boundary wall by incurring an expenditure of Rs.3, 99,500/- Your appellant in the year 1993 refilling of sand and rock blasting I have level the land in the year 1996-97 incurred Rs.2,60,375/- refill the sand again I have refill sand and repair the boundary wall in 2002. The Ld. Income Tax Officer erred in passing the order rather than considered the only cost of construction and raised the unnecessary demand on your appellant. During the year, I have purchase flat and the learned income tax officer has not given exemption u/s.54 of the Income Tax Act, 1961, but the Ld. Income Tax Officer not considered exemption and raise unnecessary demand it is burden on your appellant. The appellant requested the honorable Commissioner of Income Tax Appeals to direct the income tax officer to assessee the correct income and pass the order. In view of the above, the appellant once again request the honorable Commissioner of Income Tax Appeal to kindly direct the income Tax Officer to considered the cost of construction and exemption u/s 54 of the Income Tax Act, 1961 for which I shall be thankful and oblige. " 4.2. This office vide letter in F.No.287/17-18/CIT(A)2018-19 dated 0310-2018 has called for a remand report from the Assessing Officer on the written submissions filed by the appellant. The Assessing Officer vide his letter dated 31-07-2019 along with forwarding comments of Addl. CIT, Range-9, Hyderabad has furnished the following remand report. "Kind reference is invited to the above.
The contentions of the assessee in the written submissions made during the course of appellate proceedings are (i) he has incurred expenditures of Rs.22,12,895/- for construction of boundary wall, refilling of sand, cutting of rocks during the years 1992-93, 1996-97 and 2001-02. (ii) He is eligible for exemption u/s 54 of Income Tax Act, 1961. The contentions of the assessee are examined and it is submitted that the same are not acceptable in the following reasons: (a) (i) With regard to the contention of the assessee that he has incurred expenditure! of Rs.22,12/895/-, the assessee was given an opportunity of being heard. In response, the assessee has filed a letter on 29.10.2018 along with a notarized affidavit, dated 20.10.2018 issued by Mr. Abid Ali Khan wherein Mr. Abid Ali Khan confirmed that he was in receipt of Rs.22,13/000/- from the assessee Sri Alqureshi Mahmood for construction of boundary wall, refilling of sand, cutting of rocks during 199293, 1993-94/ 199,6-97 and 200i - 02. Further, summons u/s 131 were issued to Sri Abid Ali Khan on 02.11.2018 and statement was recorded on 05.11.2018. During the course of hearing, neither the assessee Sri Alqureshi Mahmood nor Sri Abid Ali Khan were produced any evidences in support of their huge transactions of Rs. 22/13, OOO/. Out of the total transaction of Rs. 22/13/ 000/-, the major transaction shown by the assessee in computation of capital gains was during 1992- 93 itself amounting to Rs. 18/49/500/-. The assessee filed a letter on 12.06.2019 in which he has produced the information of construction work done by Mr.Abid Ali Khan. On perusal of the same it is noticed that the assessee has shown each brick cost @ 2.75, 1 tonne sand @ Rs.1650/- and one cement bag @ 195/-. The rates mentioned by the assessee are very high. On enquiry by the IT! of this office with the local construction companies, it is gathered that during the year 1992-93/ one brick rate was around 0.75 Np, one tonne sand was around Rs.600/- and one bag cement was around Rs. 95/- only. (ii) The cost of construction of boundary wall, refilling of sand, cutting of rocks shown by the assessee during the year was very high. Hence, it is understood that the assessee simply claimed huge expenditure to iu-v tax. The assessee has also failed to prove that he was having huge funds dun; 9 the year 1992-93. Moreover, the assessee did not file his return of income voluntarily. He has filed his return of income in response to notice u 5 148 of I. T. Act, 1961 and claimed huge expenditure to lower the capital gain tax.
(iii) Hence, the contention of the assessee that he has incurred expenditures of Rs.22,12,895/- for construction of boundary wall, refilling of sand, cutting of rocks during the years 1992-93, 1996-97 and 2001-02 is not acceptable. (b) The second contention of the assessee is that he is eligible for exemption u/s 54F of IT Act 1961. The benefits of exemption uls 54F available only When an individual or HUF sells any long term asset other than residential property shall be exempt in full, if the entire net sales consideration is Invested in purchase of one residential house within 1 year before or 2 years after the date of transfer of such asset. However, the assessee has sold the property on 09.04.2014 (Sale deed document No. 855/2014, dated 09. 04.2014) and purchased house property on 1A.03.2017 (Sale deed document no. 1013/2017, dated 14.03.2017). The assessee purchased a residential house property after expiry of time limits prescribed in the provisions of Section 54F. Hence, the second contention of the assessee is also not acceptable.
In View of the above, the Hon'ble Commissioner of Income Tax(Appeals)-VII, Hyderabad may kindly be considered the appeal on the merits of the case.”
4.3 In response to the remand report of the Assessing Officer dated 3107-2019, the appellant did not make any explanation on the issue of working of capital gains. 4.4. I have considered the submissions of the appellant, findings of the Assessing Officer in the order of the assessment and remand report carefully. The assessing officer did not allow the claim of expenses of Rs.22,12,895/_ for construction of boundary wall, refilling of sand and cutting of rocks during the year 1992-93, 1996- 97 and 2001-02 for want of documentary evidence. Even in the appellate proceedings, the appellant did not adduce any documentary evidence in support of the claim of expenditure. The claim of deduction under section 54F of the IT was denied by the assessing officer on the ground that the assessee did not comply with the conditions laid down under the provision of the section 54F of the IT Act. The appellant did not purchase residential house e prescribed time limit fixed under section 54F of the IT Act. The appellant did not rebut the observations of the assessing officer with any documentary evidence. Hence, I confirm the addition made by the assessing officer.”
It is sufficiently clear with the able assistance coming from the Revenue side that both the learned lower authorities have declined the assessee’s explanation regarding cost of acquisition and development of the capital asset as well as that claiming re- investment of capital gains in a residential property u/s 54 of the Act. Learned D.R. fails to dispute that neither the Assessing Officer in the course of assessment nor in his remand report dt.03.10.2018 has considered the clinching fact as to what was the nature of the capital asset acquired by the assessee in the year 1993 vis-à-vis that sold in the relevant previous year. We make it clear that the assessee had claimed to have incurred the cost of construction of compound wall as well as the construction of the property in the intervening period running into more than two decades. Coupled with this is the clinching fact that cost of maintenance on day-to-day basis for such a long holding period could not be altogether ruled out.
The factual position is no different regarding the assessee’s latter section 54F claim of re-investment of capital gains in the corresponding house property as well since the Assessing Officer has himself made it clear that the registered purchase document to this effect is dt.14.03.2017 as against of transfer of the capital asset falling on 09.04.2014. Both these relevant dates are well within a period of a 3 years only u/s 54F(1) of the Act. 6. Faced with the situation, we are of the opinion that all these assessee’s grounds require the Assessing Officer’s afresh adjudication as per law within three effective opportunities of hearing. We order accordingly. 7. This assessee’s appeal is allowed for statistical purposes in above terms.