DIGVIJAY SINGH,DEHRADIM vs. DCIT,CENTRAL CIRCLE, DEHRADUN

The only effective issue to be decided in this appeal is as to whether the learned CIT(A) was justified in confirming the addition made by learned Assessing Officer in the sum of Rs.1 crore as unexplained investments made by the payment in cash to Sh. Jagat Bhushan Batra in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials available on record. A search and seizure operation was carried out under section 132 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) in the Doon Valley Distillers/Breweries group of cases on 18.03.2016. One Shri Rameshwar Havelia Kuanwala, Dehradun, was belonging to Doon Valley group, was also searched, wherein certain papers relating to assessee were found. After recording satisfaction, a notice under & 117/Del/2019 AYs: 2015-16 & 2016-17 section 153C of the Act was issued to the assessee on 16.11.2017.

The documents related to the assessee which were found in the course of search action of Sh. Rameshwar Havelia are as under:

With regard to the document referred in 'A' above, the assessee agreed to pay Rs. 2 crores to Sh. Jagat Bhushan Batra in the following manner:

The aforesaid two cheques were issued from Miyanwal, Kisan Sewa Sahkari Samiti by the asessee.

We find that the learned AR had placed on record a copy of the assessment order framed in the hands of Sh. Rameshwar Havelia under section 153A(1)(b) read with section 143(3) of the Act, dated 28.12.2018 for assessment year 2015-16 by DCIT, Central, Circle, Dehradun (who is the same officer assessing the assessee also), wherein, in para 7 of the said order, the Assessing Officer of Sh.

Since the search assessment order of Sh. Rameshwar Havelia for assessment year 2015-16 could not be placed on record by the assessee before the learned CIT(A) as it was obtained by him after passing of order of learned CIT(A), this fact could not be addressed by the assessee before the learned CIT(A). In any case, these are only orders of the Income Tax Department, which clearly shows a divergent stand taken by the very same Assessing Officer for the very same assessment year for two different assessees on the very same transaction. Hence, we direct the learned AO to delete the addition made in the sum of Rs. 1 crore paid in cash to Sh. Jagat Bhushan Batra.

Since the relief is granted to the assessee on merits, the other legal grounds raised by the assessee need not be gone into and they are left open. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed. AY: 2016-17 11. The only issue to be decided is as to whether the CIT(A) was justified in confirming the denial of deduction on account of cost of Page 7 of 14 & 117/Del/2019 AYs: 2015-16 & 2016-17 acquisition and expenses incurred in connection with transfer of property while computing short term capital gains in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials on record. The assessee filed his return of income for assessment year 2016-17 on 31.03.2017 declaring total income of Rs. 23,38,840/-. The assessee offered capital gains in respect of transfer of immovable property in the return of income after reducing the cost of acquisition, including stamp duty and registration charges and various expenses incurred in connection with transfer, from sale consideration. The AO did not dispute the sale consideration reported by the assessee.

We find that the learned AO denied the deduction on account of registration charges paid in the sum of Rs.34,730/- to Stamp Authority at the time of purchase of property. This, in our considered opinion, is not correct in view of the fact that the assessee had produced the purchase deed of immovable property before the learned AO and this sum of Rs.34,730/- is duly reflected thereon as paid by him for the purpose of registering the property in & 117/Del/2019 AYs: 2015-16 & 2016-17 his name. It is not the case of the revenue that the source for making the said payment is not explained by the assessee. Hence, this sum of Rs. 34,730/- becomes part of cost of acquisition of the assessee eligible for deduction while computing capital gains.

The assessee had incurred mutation fees of Rs.1,200/-, which in our considered opinion, is the part of cost of acquisition incurred in connection with transfer of property. Accordingly, the same is eligible for deduction while computing capital gains.

The assessee has paid legal counsel fees for drafting of registered deeds amounting to Rs.5,100/-, which is a direct expenditure incurred in connection with transfer of property.

The assessee has incurred a sum of Rs.599/- for performing Puja of the land. This has got nothing to do with the property and cannot be construed as an expenses incurred in connection with the transfer of the property. Hence, it is not eligible for deduction while computing capital gains. & 117/Del/2019 AYs: 2015-16 & 2016-17

The assessee has paid a sum of Rs.1,001/- to Sh. Pradip Joshi (Pandit) for performing puja on the said land. This has got nothing to do with the property and cannot be construed as expenses incurred in connection with transfer of the property.

The assessee has paid a sum of Rs.1,77,590/- to a civil contractor, Sh. Sandip Kumar from whom the work of demarcation and construction of partition for three plots sold was carried out. In this regard, we find that the assessee had purchased land consisting of 508.55 sq. meters and had demarcated the land into three plots and finally sold these plots to three different persons as under:

For the purpose of aforesaid partition of land into different plots, the assessee has engaged the services of civil contractor, Sh. & 117/Del/2019 AYs: 2015-16 & 2016-17 Sandip Kumar. We find that the assessee has also placed evidence on record in the form of letter of confirmation dated 21.05.2018 from Sh. Sandeep Kumar, civil contractor confirming the fact of rendering the demarcation and partition services to the assessee at the final cost of Rs.1,77,590/- and also confirming the fact that the entire payments were received by him on different dates from time to time in cash. He further confirmed that he was also paid commission of Rs.40,200/- for sale of two plots in three installments by the assessee. The said confirmation also include the copy of Income Tax Returns together with computation of income of Sh. Sandeep Kumar evidencing the fact of disclosing the amounts received from assessee as income of Sh. Sandip Kumar. These documents are enclosed in pages 22 to 24 of the paper-book.

With regard to payment of Rs.21,200/- as commission to Smt.

In view of the aforesaid discussions, out of the total disallowance made by the learned AO in the sum of Rs.2,81,620/- while computing capital gains, Rs.1,600/- (Rs.599 + Rs.1,001) should be disallowed and remaining amounts should be allowed as deduction while computing capital gains.

Since, substantial relief has been granted to the assessee on merits, various other issues raised by the assessee on legal grounds & 117/Del/2019 AYs: 2015-16 & 2016-17 need not be gone into and they are left open. Accordingly, the grounds raised by the assessee are partly allowed.

In the result, appeal of the assessee for assessment year 2016-17 is partly allowed.

To sum up, appeal for assessment year 2015-16 is allowed and appeal for assessment year 2016-17 is partly allowed.