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Facts
The appeals arise from a common order concerning AY 2017-18. The revenue has challenged the CIT(A)'s deletion of additions related to unexplained cash deposits and investments. The assessee's appeal challenges the rejection of indexation claims and additions to capital gains.
Held
The Tribunal held that cash deposits explained by prior withdrawals are acceptable, and unexplained investment additions were unwarranted as the source was verified. Regarding capital gains, the period of holding is to be computed from the date of allotment, and the AO is directed to recompute long-term capital gains.
Key Issues
Whether additions for unexplained cash deposits and investments are justified. Whether capital gains should be treated as long-term and if indexation claims are admissible.
Sections Cited
143(3), 46A, 69, 48, 2(47)(ii), 54, 54F, 250(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, DELHI
Before: MS. MADHUMITA ROY & SHRI KHETTRA MOHAN ROY
The cross appeals preferred by the assessee and the revenue are directed against the common order dated 27.05.2024 passed by the Ld. National Faceless Appeal Centre (NFAC), Delhi, arising out of the Assessment Order dated 30.12.2019, passed by the ACIT, Circle 30(1), Delhi, under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2017-18.
ITA No. 3480/Del/2024 (Revenue’s Appeal)
“1. That on facts and circumstances of the case and in law, the CIT(A) has erred in deleting addition of Rs. 16,00,000/- on account of un-explained cash deposit without verifying the source, creditworthiness and genuineness of deposits.
2. That on facts and circumstances of the case and in law, the CIT(A) has erred in partly deleting addition of Rs. 1,89,27,259/- without affording an opportunity to Revenue to examine the evidence submitted by assessee during course of appellate proceedings thereby violating provision of Rule 46A of IT Rules, when no evidences were submitted by the assessee during assessment proceedings.
3. That on facts and circumstances of the case and in law, the CIT(A) has erred in deleting addition of Rs. 12,24,00,000/- on account of unexplained investment without verifying the source of investment and also not calling for remand report from AO in this regard thereby violating provision of Rule 46A of IT Rules.
The appellant reserves right to add, alter or amend the grounds of appeal on or, before the date of disposal of appeal.”
2. The factual matrix reported below as per Form 35 the CIT(A) has given relief on the ground of cash deposit holding as follows:
& 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18)
3.2 Adjudication of ground no.2(c); It is clear from above tables that appellant had sufficient cash withdrawals prior to cash deposits. The law well settled that assessee can show earlier cash receipts or withdrawals from bank account as source of subsequent cash deposits unless the revenue is able to show that the cash so available is used for some other purposes. In this case there is no information that the cash withdrawn was consumed elsewhere. The Karnataka High Court in the case of S.R. Ventakaratnam Vs CIT, Karnataka-I & Others (127 (TR 807) has held that once the assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the Assessee merely on the surmise that it would not be probable for the Assessee to keep the money unutilized. If the revenue wants to disbelieve the plea of the Assessee then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account, which was not done in this case. The Delhi ITAT on identical issue in the case of Neeta Breja (ITA No.524/Del/2017) held that assessing officer or the learned CIT (A) did not show that above cash was not available in the hands of the assessee or have been spent on any other purposes. Further the coordinate bench in ACIT vs Baldev Raj Charla 121 TTJ 366 (Delhi) also held that merely because there was a time gap between withdrawal of cash and cash deposits explanation of the assessee could not be rejected and addition on account of cash deposit could not be made particularly when there was no finding recorded by the assessing officer or the Commissioner that apart from depositing this cash into bank as explained by the assessee, there was any other purpose it is used by the assessee of these amounts. The tribunal relied on the decision of Delhi High court in case of Kulwant rai in 291 ITR 36. As per various decisions, previous cash withdrawals from bank accounts can be shown by the appellant as source of subsequent cash deposits. Respectfully following above decisions, it is held that the explanation of the appellant that cash was deposited from earlier withdrawals is acceptable. As a result, ground no. 2c is allowed.
3. The CIT(A) has further giving on account of fixed deposit by holding as follows:
4.2 Adjudication of ground no. 2(d); Fund flow and Time deposits mentioned in the above table are reflected in the Standard Chartered Bank statement submitted by the appellant. It is seen that total FD made during the year was of Rs.2,04,00,000/- and the source of making these FD's are also verified. However the AO has made the same addition 6 times. Basic enquiries regarding SFT information were not conducted by the AO with the bank, may be due to paucity of time. In the absence of any other information even as remand report, the appellant's contention that Time Deposits of only Rs.2,04,00,000 was invested, have to be accepted. As the appellant has explained the source of this FD with bank statement, the addition u/s 69 is held to be unwarranted. As a result, ground no 2(d) is allowed.
& 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18)
4. There is no infirmity in the order of the CIT(A) compelling us to take different view. As regards the ground of capital gain is concerned, we find that before the AO the following computation was submitted:
“8. As per submission provided by the assessee, she has ciaimed Capital gains on sale of commercial properties as shown:
Commercial Property 25/10/2016 Value u/s 50C 13500000 Sales Consideration Received 13500000 13500000 Sales Consideration Less: Transfer Expenses 0 13500000 Less: indexed Cost Commercial Property 8247820 F.Y. 1989-90 1261000/172*1125 Commercial Property 1703880 F.Y. 1900-91 275650/182*1125 ……………
9951700
3548300
2. Flat 02/07/2016 Value u/s 50C 5421000 Sales Consideration Received 5421000 Sales Consideration 5421000 Less: Transfer Expenses 0 5421000 Less indexed Cost Flat 8975559 F.Y. 2008-09 4643356/582*1125 …………. 8975559
-3554559 & 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18)
-6259 Total Long Term Capital Gain Capital Loss Rs. 6259/- will not set off from any other head of income
Further in the absence of documentary evidences of sales and purchase deed deduction under Section 48 of Rs.127, 23,329/- towards cost of acquisition and Rs.13,08,880/- towards cost of improvement was disallowed. The Ld. CIT(A) has recalculated the capital gain by holding as follows:
5.1 Regarding Flat No. C at DCM Building Plot No. 16 Barakhamba Road Connaught Place New Delhi, the appellant submitted a purchase agreement dated 06.01.1990 signed by her late husband. Even though sale deed is not available, benefit of doubt is being given to appellant and sale agreement is accepted as proof of purchase price. As per the agreement the cost of the property was Rs. 12,61,000 as mentioned above. However the appellant did not submit proof of payment of Rs. 1703880. So the Long Term Capital gain from sale of flat in Delhi shall be calculated as follows; Sales Consideration Received 13500000 Less: indexed Cost (1261000x1125/172) 8247820 Total Long term capital gain = Rs. 5252180
The ld. DR failed to pin point the pertinent additional evidence as was submitted by the assessee. Hence, the ground referred violation of Rule 46A is rendered infructous. The action of CIT(A) is circumscribed under Section 250(4) of I.T. Act, 1961 and no irregularity is visible.
The appeal of the revenue is dismissed.
“(1) That the order dated 27/05/2024 passed by National Faceless Appeal Centre(NFAC) New Delhi in rejecting the claim of indexation and the amount & 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18) spent on the flats sold during the year is bad in law, incorrectly made & against the fact of the case.
That the learned National Faceless Appeal Centre(NFAC) New Delhi has greatly erred in law and on facts of the case in:- a. Rejecting the claim of indexation and the amount spent claimed by the assessee in the Return of income Filed. b. Not appreciating the written submissions filed by the Assesse wherein the assessee in the submissions before the National Faceless Appeal Centre(NFAC) complete details of purchase and further payments made by the assessee. Documentary evidence of all payments made and purchase deeds were furnished along with the appeal. c. That the no opportunity to explain her case was allowed before the disposal of appeal with regard to disallowing the claim of the capital gain calculations submitted in the written submissions filed by the assessee.
That the order passed by the National Faceless Appeal Centre(NFAC) is unfair, unjust and outside the scope of the law and natural justice.
4. That the appellant seeks permission to put forth detailed arguments and submissions before the Hon'ble ITAT during the course of hearing and further to add/amend any ground of appeal. PRAYER Prayed that the impugned order dated 27/05/2024 passed by National Faceless Appeal Centre(NFAC) New Delhi be set aside relating to the addition upheld for Capital Gains for Rs 62,61,449 and adequate relief afforded to the Appellant who is super Citizen Women.”
8. The assessee has failed to submit any evidence regarding cost of improvement considering that the flat has been acquired in 1988-89 there is no evidence regarding the cost of improvement. The prayer of appellant is not established by any cogent and reliable evidence. Accordingly, the ground is dismissed. Thus, the addition of Rs.17,03,880/- is sustained. The appellant has also inter-alia challenged the taxability on sale of flat at Dehradun short term capital gain. The CIT(A) has held as follows while adjudicating the matter:
& 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18)
“5.2 With respect to Flat No.401/Tower No. FH 19 Dehradun, the appellant submitted purchase agreement and allotment letter dated 21.11.2009. As per another letter dated 19.11.2015 the builder has offered possession of the completed apartment and the appellant was asked to occupy the apartment by 12.12.2015 after completing registration formalities. A chart of payments made by the appellant was attached to the letter by builder, showing total payment of Rs.44,65,731 received from the appellant through bank during various dates between 2006 to 2015 (final payment was made on 15.11.2015). In the absence of purchase deed, the date of possession shall be taken as the date of purchase. However, the appellant entered into a sale agreement on 19.10.2015 to sell this apartment for Rs.54,75,000. In this transaction also registered sale deed is not available. From the documents, it is clear that the appellant sold the property before taking possession. However the date of final payment by the appellant to the builder and the date of prospective possession fall in the FY 2015-16. So the year of transfer will be taken as 2015-16. Date of sale is claimed by the appellant as 02/07/2016. So Short Term Capital Gain is calculated as follows; Sales Consideration Received - Rs.54,75,000 Cost of acquisition - Rs.44,65,731 Total Short Term Capital Gain - Rs. 10,09,269
9. The AO has relied on the following two judgments: i. ITAT No.20/Ahd/2021 Shri Rajesh Suderdas Vaswani v/s DCIT, ITA Ahmedabad Bench Shri Sanjay Kumar Kamath V/s ACIT ITAT Indore Bench
The capital gain should be long term in nature, since, the property was held w.e.f 21.11.2009 and assessee has held the property for more than 36 months. The nature of capital gain is accordingly long term in nature. The very same issue was considered by the hon’ble Indore Bench in the case of Sanjay Kumar Kamath which has held as follows:
“8.We have considered the rival submissions and have gone through the orders of the authorities below and also deliberated on the judicial pronouncement cited by the ld. Senior DR with reference to the factual matrix of the case. Here, the question involves regarding right acquired by the assessee through allotment letter issued by the builder. Vide this allotment letter, the assessee was allotted Flat No.1202 at 12th Floor of Multi-storied building named as Raheja Tipco, Mumbai. Vide this allotment letter, builder M/s. K.Raheja Universal Pvt.Ltd, & 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18) agreed to sell the flat to the assessee for Rs. 33,15,750/- besides other charges of Rs. 1,32,480/-. After signing the said letter of allotment and paying the booking amount, the assessee acquired the right in the said flat. Payment of flat was made as under :-
Date Payment (Rs.) 22.01.2005 1,00,000/- 26.01.2005 5,23,150/- 09.07.2005 3,11,575/- 28.04.2006 1,40,209/- 03.01.2007 11,21,672/- 23.03.2007 1,40,209/- 24.05.2007 1,40,209/- 21.09.2007 1,40,209/- 06.11.2007 1,40,209/- 31.03.2008 2,80,418/-
After the entire payment was made by the assessee, agreement was executed on 27.2.2009, thereafter,the assessee sold the flat on 5.3.2009. Thus, all the rights in the flat was duly acquired by the assessee on 22.1.2005, when he was given letter of allotment which clearly described the precise number of flat so allotted to him. As per the provisions of Section 2(47)(ii) “Transfer” in relation to capital assets includes the extinguishment of any right therein. This letter of allotment extinguishes the rights of builder in the said flat in favour of the assessee in respect of this flat and by signing the letter of allotment, the assessee agreed to buy the same and for which payment was also made according to the latter of allotment. Decisions cited by ld. Senior DR are distinguishable on facts. We found that CBDT vide Circular No. 4781 dated 15.10.1986 and Circular No.672 dated 16.12.1993 held as under :-
“The allottee gets title to the property on the issue of the allotment letter and the payment of instalment is only a follow up action and taking the delivery of possession is only a formality.”
10. Board vide circular no. 672 after referring Circular No. 471 extended the facility of exemption u/s 54 & 54F in respect of allotment of flat/house. Thus, as per the CBDT Circular also, the assessee acquired the rights/title in the flat by way of allotment letter on 22.1.2005. This allotment letter was duly confirmed by the assessee by making various payment as narrated above. Out of total payment of Rs. 33.15 lakhs, the assessee made payment of Rs. 6.23 lakhs in the month of allotment itself i.e. January, 2005. Subsequent payment was also made as per the terms agreed with the builder. Only after receipt of entire amount, the builder has executed agreement with the assessee on 27.2.2009. The assessee has sold the said flat on 05.03.2009. Since the assessee has acquired all the rights in the flat on 22.01.2005, the period of holding is to be computed with respect to the date of allotment i.e. 22.01.2005. Taking the date of sale as 05.03.2009, the holding period of flat with the assessee was more than 36 months, therefore, there is no infirmity in the order of CIT(A) for allowing assessee’s claim for exemption u/s 54/54F, by treating the capital assets so sold as long term capital assets.”
& 3480/Del/2024 Phoola Rani Chadha (AY: 2017-18)
The period of holding must be considered from date of allotment. Possession and payment are only follow up activities. The departmental representative failed to controvert the issue. However, we do not concur with the methodology to calculate the indexed cost of acquisition. The indexation must be linked with the payment schedule. AO is directed to recomputed long term capital gain accordingly.
In the result, the appeal of the assessee is partly allowed for statistical purpose.