SHRI BRIJ RAJ YADAV,JAIPUR vs. ITO, WARD-6(1), JAIPUR

Briefly the facts of the case are that the assessee is an individual against whom the proceedings U/s 147 were initiated by issuance of notice U/s 148 dated 18.03.2016 pursuant to which the assessee filed its return of income declaring total income of Rs. 1,97,810/-. Thereafter the assessment was completed U/s 144 r.w.s. 147 of the IT Act wherein the income was assessed at Rs. 13,33,000/- whereby the Assessing Officer has brought to tax long term capital gain and unexplained cash credit of Rs. 3,90,000/-. Against the said order, the assessee moved an appeal before the ld. CIT(A) who after considering the submissions of the assessee has allowed the benefit of cost of acquisition of the property for calculating the capital gains and has directed the Assessing Officer to rework the capital gains at Rs. 2,42,809/- by deducting Rs. 6,62,191/- being the cost of acquisition from sale consideration of Rs. 9,05,000/- however, the cost of improvement of Rs. 65,000/- and transfer expenses of Rs. 18,000/- claimed by the assessee were not allowed. Further out of total additions of Rs. 3,90,000/- made by the Assessing Officer U/s 68 of the Act, the ld. CIT(A) has allowed the relief of Rs. 1,70,000/- and the balance addition of Rs. 2,20,000/- has been sustained. Against the said findings, the assessee is in appeal before us.

In ground no. 1, the assessee has challenged the initiation of proceeding U/s 147 of the Act by issuance of notice U/s 148 of the Act. In this regard, the ld. AR submitted that the Assessing Officer has issued notice U/s 148 on account of escapement of income on the basis of AIR information. It was submitted that the AIR information can be a basis to initiate the enquiry by the Assessing Officer however, the same cannot be the sole basis for issuance of notice U/s 148 of the Act. For issuance of notice U/s 148, the satisfaction must of the AO himself and the borrowed satisfaction cannot be treated as satisfaction of the Assessing officer. In support, reliance was placed on the Hon’ble Rajasthan High Court in case of CIT vs. Shree Rajasthan Syntex Ltd. 313 ITR 231. Further drawing our reference to reasons recorded by the Assessing Officer, it was submitted that the AO has recorded the reasons stating that the assessee has sold the property for total consideration of Rs. 6,70,360/- which has been valued at Rs 905000 for purposes of charging of stamp duty. It was further submitted that this is factually not correct for the reasons that the sale consideration of property is Rs. 9,05,000/- which was valued at Rs. 6,70,360/- by the stamp authorities. It was therefore, submitted that only basis for issuance of notice U/s 148 of the Act was on wrong facts. It was further submitted that the Assessing Officer misguided the higher authorities by mentioning the wrong facts and got the approval for issuance of notice U/s 148 which is unjustified and not permissible in the eye of law. It was further submitted that the higher authorities have also not bothered to verify the facts from the records and given the sanction in mechanical manner by putting the words “YES” and the affixing their signature without applying their mind. It was accordingly submitted that

Per contra, the ld. DR is heard who has submitted that it is a case where the assessee has sold an immovable property and has not disclosed the same to the tax authorities as the assessee has not filed his return of income. It was accordingly submitted that it is therefore, clearly a case of escapement of income and therefore, the notice U/s 148 of the Act has been rightly issued by the Assessing Officer after seeking approval from the higher authorities. Regarding the contention of the ld. AR that the AO has recorded wrong facts while recording the reasons, it was submitted that it was merely inter-change of sale consideration and value taken for the purposes of stamp duty however, the facts of the matter is that there is clearly transfer of an immovable property which has not been reported to tax therefore, merely because

We have heard the rival contentions and pursued the material available on record. It is a case where the assessee has sold a property and the said sale transaction has not been reported to the Revenue authorities as the assessee has not filed any return of income. Therefore, where the AO is in possession of information that the assessee has sold a property during the year under consideration and the same has not been reported in the return of income, it is clearly a case of escapement of income in terms of capital gains which will arise on sale of such property. Basis such tangible piece of information even where received through AIR, where the AO forms a prima facie opinion that the income has escaped assessment and has recorded the reasons and sought the permission from the higher authorities before issue of notice u/s 147 of the Act, we donot see any infirmity in the action of the AO in acquiring jurisdiction under section 147 of the Act. The reasons for escapement of income is capital gains arising on the sale transaction of the property and not that sale consideration is less than the value adopted for stamp duty purposes, therefore, mere inter- change of sale consideration and value adopted for the purposes of stamp duty in the reasons so recorded cannot be treated as fatal which can deny the acquisition of jurisdiction by the AO. Further, basis this tangible piece of information in possession of the AO which shows that capital gains has escaped assessment, where the approval has been accorded by the higher authorities, we donot see any infirmity therein. In the result, ground of appeal is dismissed.

In Ground No. 2, the assessee has challenged the action of the ld. CIT(A) in not allowing the deduction of expense incurred by the assessee on account of cost of improvement of the house property and the transfer expenses.

In this regard, it was submitted by the ld AR that the assessee has incurred Rs. 65000/- on account of colour paint, flooring and other repair works after purchase of this property under consideration. The expenses so incurred is very petty amount and this much amount can be easily be expended on these types of works. The assessee is not maintaining regular books of accounts because he is not supposed to maintain, hence the requirement of maintaining bills and vouchers of this small expense is not applicable on the assessee. The assessee is eligible for deduction of this amount out of the capital gain. It was submitted that the expenses on account of general improvement incurred for this house only. It is a general human tendency that before entering into a new house the new color paint and general repairs work has to take place and only after that the property is going to be used, hence the expense so incurred are having the nature of allowable expenses.

It was further submitted that the ld. CIT(A) has not allowed the benefit of transfer expenses like brokerage paid to the property broker who helped the assessee to sale out this property. This is a settled marked conditions that amount 2% of the sale proceeds is required to be paid to the property broker, in case the sale transaction takes place through the property broker. Here in this case the assessee paid Rs. 18000/- as 2% of the sale consideration of Rs. 905000/- to the property

Per contra, the ld DR submitted that regarding the cost of improvement, the assessee has not submitted any evidence in support of the cost of the improvement, therefore, in the absence of the same the AO has rightly disallowed the said claim of the assessee. Similarly, regarding the commission expenses, no details have been submitted by the assessee and in absence of the same, claim has been rightly denied by the AO.

We have heard the rival contentions and pursued the material available on record. It is a case where the assessee has purchased the property on 29.04.2008 and has sold the same in less than a month on 19.05.2008, therefore, the contention of the ld AR that the property was to be used for residential purposes and hence, the assessee has incurred certain expenditure before moving into the said house doesn’t inspire any confidence in our mind. At the same time, where certain expenditure has been incurred before selling the property, the assessee can claim the same provided he is able to substantiate the same through any verifiable evidence. In the instant case, there is nothing on record which remotely support the contention so advanced by the assessee either in terms of any physical attributes of the property at the time of purchase and at the time of sale of the said property or any third party evidence which corroborates the act of incurrence of such expenditure as so claimed by the assessee. Similarly, for claiming

In Ground No. 3, the assessee has challenged the sustenance of addition of Rs 220000/- u/s 68 by the ld CIT(A).

In this regard, the ld AR submitted that the assessee is not maintaining regular books of accounts as he is not obliged to maintain the same. The provisions of section 68 are applicable only in case where any amount credited into books of accounts and the explanation offered are not upto the satisfaction of the assessing officer. In this case, there are no books of accounts so maintained by the assessee, therefore the addition u/s 68 cannot be made. Hence the addition of Rs. 390000/-made u/s 68 as well as the act of Ld CIT(A) about sustaining of the addition of Rs. 220000/- are not in accordance with law therefore liable to declared as illegal and against the law. It was further submitted that the bank account cannot be treated as the regular books of accounts of any assessee.

It was further submitted that the assessee had submitted the affidavits of all the persons from whom the amount was taken and in the affidavits, all the persons have accepted the fact that

Per contra, the ld DR submitted that the ld. CIT(A) has allowed necessary relief to the assessee basis the examination of the affidavits so filed by the assessee and for the remaining, she has given her findings in respect of which the additions have been sustained. It was accordingly submitted that there is no infirmity in the order of the ld CIT(A) and the same should be sustained.

We have heard the rival contentions and pursued the material available on record. We find that the assessee has submitted necessary affidavits in support of gift of money received from his family members and close relatives. The affidavits contain the necessary particulars about the donor, their address, PAN and Aadhaar number as well as their current occupation and source of money so gifted to the assessee. In absence of any material on record disputing the contents of the affidavits so filed by the assessee, the initial onus cast on the assessee has been satisfied and the addition so sustained by the ld CIT(A) is hereby deleted. In the result, the ground of appeal is allowed.