MAHENDRA PRATAP SINGH,MUMBAI vs. INCOME TAX OFFICER -WARD -41(3)(2), MUMBAI

That all the appeal grounds raised are independent grounds and without prejudice to one another.

That the appellant craves the leave to amend alter substitute and or to raise new or additional grounds of appeal at the time of hearing.

All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in upholding the addition made by the AO. Therefore, we have decided to adjudicate these grounds by way of this consolidated order.

The Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the Revenue Authorities.

On the contrary, the Ld. DR relied on the orders passed by the Revenue Authorities.

We have heard the counsel for both the parties, perused the material placed on record, the judgments cited before us, and also the orders passed by the Revenue Authorities. From the records, we noticed that the total expenditure claimed by the assessee amounting to Rs. 37,16,244/- was disallowed/rejected by the AO.

Before we come to the merits of the case, it is necessary to evaluate the facts of the present case. As per the facts, the assessee had filed the computation of capital gains in respect of 4 residential flats sold during the year under consideration. The details of the flats sold during the year under consideration, the deductions claimed which were not allowed by the AO, and the other particulars are as under and the same is reproduced herein below:

Since the case of the assessee was reopened, the assessee also filed a revised computation during the assessment proceedings and the same is reproduced hereinbelow:

However, the claim of the assessee was rejected by the AO mainly on two grounds. Firstly, the assessee had not raised the claim in the original return of income and subsequently had also not filed a revised return of income. Secondly, the AO was of the view that the brokerage paid by the assessee was after the completion of the purchase and sale of the property in question.

Since the claim of the assessee was rejected mainly on these two grounds, we will deal with the merits of the grounds of rejection mentioned by the AO.

It is an undisputed fact that the entire expenditure claimed by the assessee was incurred through banking channels and no amount was paid in cash. This fact has not been disputed at all by the AO or by the Ld. CIT(A) during the course of the proceedings. Moreover, the claim of brokerage paid by the assessee was rejected merely on the ground that the payments were made after the completion of the sale and purchase of the property in question and not before that. Whereas, it is a fact that brokerage becomes payable only after the completion of the entire transaction and not before. Therefore, the assessee was not expected to make any payment before the completion of the entire transaction. Thus, in our view, the reasons recorded by the AO do not inspire confidence and, therefore, we are not in agreement with the findings of the AO for rejecting the claim of the assessee merely on the ground that the payment was made after the completion of the transaction. The fact still remains that the making of the payment and the incurring of the expenditure have not at all been doubted by the AO. Therefore, we set aside the findings of the AO and the Ld. CIT(A) to this effect.

As far as the other reason for rejecting the claim of the assessee is concerned, the AO held that the assessee had not raised this claim while filing the original return of income under Section 139 or in the return of income filed in response to the notice issued under Section 148 of the Income-tax Act. Relying upon the decision in Goetze (India) Limited vs. Commissioner of Income Tax (284 ITR 343) (Supreme Court), the AO was of the view that a fresh claim of deduction is not allowable.

Whereas, in this regard, after hearing the parties at length, we found that the expenditure claimed on account of the cost of improvement incurred in respect of the aforesaid flats was claimed for the first time in the revised computation furnished during the course of the assessment proceedings, and this fact has already been acknowledged by the AO.

Apart from this, all the supporting documents were filed by the assessee while claiming the said deductions, and the AO also verified all the supporting documents filed during the course of the assessment proceedings in order to examine the said deduction. It is also an undisputed fact that the documents relied upon by the assessee in support of its contention were thoroughly examined. This fact is evident from the record, as the AO had also issued notices under Section 133(6) of the Income-tax Act to the respective parties to whom the payments were made by the assessee.

Even otherwise, the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders in ITA No. 3908 of 2010, wherein the Hon'ble Jurisdictional Bombay High Court, after considering various decisions of the Hon'ble Supreme Court, including the judgment rendered in Goetze (India) Limited (supra), held as under:

A Division Bench of the Delhi High Court dealt with a similar submission in Commissioner of Income Tax v. Jai Parabolic Springs Limited (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment, held that the Supreme Court dismissed the appeal, making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and is necessary for the just decision of the case."

The said decision of the Hon'ble Jurisdictional High Court has categorically settled the legal proposition by holding that the power of the AO to entertain a claim for deduction otherwise than by a revised return is limited, whereas the powers of the Tribunal are wide, and the appellate authority can entertain additional grounds or additional claims and, if found allowable, grant relief to the assessee. Thus, the rights of the assessee cannot be scuttled merely on technicalities.

Therefore, while considering the above legal proposition as laid down by the Hon'ble Jurisdictional High Court, we are of the view that the assessee is entitled to the legitimate deductions claimed by him even if such claims are made for the first time.

Further, as per the facts of the present case, the assessee had already revised its computation by raising the said claims before the AO during the course of the assessment proceedings, and the AO had not doubted the genuineness of these expenses, having verified and examined the documents relied upon by the assessee in support of the claim.

Therefore, considering the above facts and circumstances, we are of the view that the assessee is entitled to claim the deduction before the appellate authorities if found entitled. Since, in the present case, the assessee had already filed the revised computation during the assessment proceedings and the claims raised by the assessee had already been examined, we direct the AO to delete the additions made in the present case.

In the result, appeal filed by the Assessee stands allowed.