MOOL RAJ GUPTA vs. COMMISSIONER OF INCOME TAX, AMRITSAR (PUNJAB)

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ITA/379/2018HC Punjab & HaryanaPHHC01119242201813 March 2019Author: MR. JUSTICE AJAY KUMAR MITTAL,MRS. JUSTICE MANJARI NEHRU KAUL7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose from the Tribunal's order. Regarding the claim of ₹10,31,906 for repair and renovation of the property sold, the Tribunal upheld the CIT(A)'s finding that the assessee had only produced a quotation dated 26.6.1999, which was not evidence of actual expenditure. The CIT(A) noted that the original bills were allegedly stolen, and an FIR was filed, but the architect's report was merely a quotation for work done at a different time. The Tribunal further observed that the assessee failed to provide bills of material and labour or any other proof of incurring the expenditure, despite opportunities. Regarding the ₹4,95,000 paid for renovation of the newly purchased house, the contractor stated that only petty renovation like whitewashing was done, costing approximately ₹90,000-95,000. The CIT(A) allowed a partial relief of ₹1,00,000. The Tribunal upheld the CIT(A)'s order, finding no substantive or corroborative material produced by the assessee. The Court found no illegality or perversity in the findings of the CIT(A) and the Tribunal. The second issue concerning the distinction between criminal and civil jurisprudence was not addressed as the appeal was dismissed on merits.

What were the facts?

The assessee, Mool Raj Gupta (deceased), filed an appeal against the order of the Income Tax Appellate Tribunal (Tribunal) for Assessment Year 2006-07. The assessee had sold a property for ₹50,00,000, claiming long-term capital gain. He claimed deductions for the cost of acquisition and indexed cost of renovation amounting to ₹13,18,399 for the property sold. He also claimed exemption for investment towards repair and renovation of a newly purchased house amounting to ₹4,95,000, paid via cheques to Sh. Kamal Kishore Gupta. The Assessing Officer (AO) made an addition of ₹16,85,547. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's order but deleted ₹1,00,000 out of ₹5,00,000 claimed for renovation of the new house. The Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal.

What were the issues?

1. Whether, under the facts and circumstances, the Tribunal's findings were unreasonable in declining the claim for capital expenditure under Section 48(ii) read with Explanation (iv) and Section 49(1)(iv) of the Income Tax Act, 1961, while determining the chargeability of capital gain under Section 45 of the Act? Assessee's contention: The assessee argued that the Tribunal's findings were unreasonable in disallowing the claim for capital expenditure related to renovation. The assessee relied on a quotation dated 26.6.1999 for renovation work amounting to ₹10,31,906 and payments made via A/c payee cheques for renovation of the newly purchased house. Revenue's contention: The revenue contended that the assessee failed to provide sufficient evidence to substantiate the claims for renovation expenditure. The AO and CIT(A) rejected the claim for ₹10,31,906 as mere quotation was not proof of actual expenditure. For the ₹4,95,000 payment, the contractor stated only petty renovation was done. The Tribunal upheld the orders of the lower authorities for lack of substantive or corroborative material. 2. Whether the principle of law applicable to criminal jurisprudence is distinguishable from law applicable to civil proceedings, given the distinct degrees of proof required, pursuant to decisions in Iqbal Singh Marwah vs. Meenakshi Marwah and M.S. Sheriff v. State of Madras?

Which sections of the Income-tax Act were involved?

Section 48,Section 49,Section 45,Section 143(1),Section 281B,Section 143(3),Section 254(2),Section 131,Section 260A

AI-generated summary — verify with the full judgment below

ITA-379-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-379-2018 (O&M) Date of Decision: 13.3.2019 Mool Raj Gupta (deceased) through his legal Heirs Smt. Neeraj Gupta, Jatinder Mahajan and Vivek Mahajan ....Appellant. Versus Commissioner of Income Tax, Amritsar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Sachin Bhardwaj, Advocate for the appellant. *** AJAY KUMAR MITTAL, J.

1.

Delay of 77 days in refiling the appeal is condoned.

2.

This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 31.10.2017 (Annexure A-15) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 553/Asr/2016, for the assessment year 2006-07, claiming the following substantial questions of law:- I. Whether under the facts and circumstances of the case, Tribunal findings are unreasonable, while declining the grant of claim for capital expenditure u/s 48(ii) r.w. Explanation (iv), Section 49(1)(iv) GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -2- while arriving at the chargeability of capital gain u/s 45 of the Income Tax Act, 1961? v. State of Madras AIR 1954 SC 397?

3.

A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. Shri Mool Raj Gupta filed the return of income for Assessment Year 2006-07 on 28.3.2007 at an income of `1,82,480/- as is clear from the income of computation (Annexure A-1). The said return was processed under Section 143(1) of the Act on 17.5.2007. Shri Mool Raj Gupta expired on 24.5.2007 and his wife Smt. Neeraj Gupta also expired. Thus, the property at Railway Link Amritsar was inherited by their sons, namely, Jatinder Mahajan and Vivek Mahajan which was in a very bad depilated shape requiring urgent repairs. The inherited property was purchased in the year 1999 by Shri Mool Raj Gupta, which was sold during the period relevant to the assessment year 2006-07 for an amount of `50,00,000/- resulting in a long term capital gain. The deductions on account of cost of acquisition of ` 8,93,503/- and indexed cost of construction/renovation amounting to ` 13,18,399/- was claimed. The sale consideration was invested in the purchase of NABARD Bonds amounting to ` 20,00,000/-; residential house along with legal costs GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -3- `6,54,000/- and ` 5,00,000/- on renovation of the purchased house resulting in the negative long term capital gain at ` 3,65,902/-. The assessee claimed deduction on account of repair and renovation works undertaken prior to the sale by him amounting to ` 10,31,906/- (indexed cost ` 13,18,399/-) which had been incurred in accordance with the quotation dated 26.6.1996 (Annexure A-2) issued by the contractor. According to the assessee, the dispute related to the disallowance of claim for repairs and renovation qua the indexed cost of ` 13,18,399/- before the sale of the property at Railway road and also relating to exemption for investment towards repair and renovations of ` 4,95,000/- which were paid through A/c payee cheques to Sh. Kamal Kishore Gupta, in respect of the newly purchased house, the details of which are as under:- Date Cheque No. Amount 08.12.2005 407807 2,00,000/- 18.08.2005 396971 1,45,000/- 15.10.2005 396980 1,50,000/- Total: 4,95,000/- Besides, ` 5000/- was paid in cash to Sh. Kamal Kishore Gupta.

4.

The Assessing Officer framed the assessment under Section 143(3) of the Act vide assessment order dated 23.12.2008 (Annexure A-3) at an amount of ` 16,85,547/- and provisional attachment under Section 281B of the Act was also made. Feeling aggrieved by the order, Annexure A-3, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the “CIT(A)”]. The CIT(A) vide order dated 12.11.2012 (Annexure A-4) upheld the assessment order and dismissed the appeal. Still dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 18.3.2013 (Annexure A-5) dismissed the GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -4- appeal for non-prosecution. The assessee moved an application dated 8.5.2013 under Section 254(2) before the Tribunal for recalling the order dated 18.3.2013. The Tribunal vide order dated 30.9.2014 restored the case of the assessee and remanded the case to the Assessing Officer to examine the two issues, i.e. (i) cost of improvement of ` 10,31,906/- for the property sold and (ii) cost of renovation/improvement of ` 4,95,000/- of the newly purchased house property. Pursuant thereto, notice under Section 143(2) of the Act was issued to the assessee on various dates. The Assessing Officer vide order dated 16.12.2015 (Annexure A-9) rejected the claim of the assessee and framed the assessment at ` 17,14,382/- under Section 143(3) of the Act. The assessing officer rejected the claim of the assessee relating to the issue of expenditure of `10,31,906/- and also `5,00,000/- alleged to have been paid to Sh. Kamal Kishore Gupta for improvement/renovation of the newly purchased house. Feeling aggrieved by the order, Annexure A-9, the assessee filed an appeal before the CIT(A) on 22/23.12.2015 (Annexure A-10). The assessee also furnished written pleadings dated 1.9.2016 (Annexure A-11) before the CIT(A). The CIT(A) vide order dated 8.9.2016 (Annexure A-12) partly allowed the appeal by deleting the addition of ` 1,00,000/- out of ` 5,00,000/- on account of renovation. Against the order, Annexure A-12, the assessee filed an appeal before the Tribunal on 23.11.2016 (Annexure A-13). The assessee also submitted the written pleadings dated 26.7.2017 (Annexure A-14) before the Tribunal. The Tribunal vide order dated 31.10.2017 (Annexure A-15) upheld the order of the CIT(A) and dismissed the appeal. Hence, the present appeal.

5.

After hearing learned counsel for the assessee, we do not find any merit in the appeal. GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -5-

6.

The Assessing Officer framed the assessment at ` 17,14,382/- under Section 143(3) of the Act. On appeal, the CIT(A) upheld the order of the Assessing Officer except deleting the addition of ` 1,00,000/- out of ` 5,00,000/- on account of renovation. The assessee is stated to have spent ` 5 lakhs for renovation through Shri Kamal Kishore Gupta, contractor. The said contractor in his statement recorded under Section 131 of the Act had stated that very petty renovation was made and white washing etc. was got done and about ` 90,000-95,000 was spent on renovation. The plea of the assessee that he had made the payment for renovation through A/c payee cheques was also rejected by the CIT(A) in the absence of any supportive material. However, the CIT(A) held that Sh. Kamal Kishore Gupta, had conduced renovation of ` 1,00,000/- only. The Tribunal held that no substantive or corroborative material was produced by the assessee with regard to the renovation works done and, therefore, upheld the order of the CIT(A).

7.

Adverting to the addition of ` 10,31,906/-, it may be noticed that the Assessing Officer made the addition of ` 10,31,906/- on account of repair and renovation of the property by recording that mere furnishing of quotation was not sufficient to prove that actual renovation was made and the amount had actually been spent. The CIT(A) confirmed the said addition of ` 10,31,906/- by observing as under:- “I have considered the submission of the appellant and the assessment order. The appellant had made out a case that, inter alia, original bills of the renovation expenses claimed at ` 10,31,906/- were stolen during the theft and filed the copy of the FIR dated 14.07.2008 in support of GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -6- his claim. For this reason the bills could not be produced before the AO during assessment proceedings. Further, the appellant relied upon the certificate from architect whose copy was submitted in the paper book. However, the perusal of working of the architect given on page 14 to 16 of the paper book reveals that the said report of the architect dated 26.6.1999 was only a 'quotation for renovation work' at building known as Hotel Pegasus, Opp. Railway Station, Amritsar belonging to Sh. Mool Raj Gupta and which was valued at ` 10,31,906/-. The said quotation dated 26.6.1999 is not an evidence of the actual expenditure incurred on renovation work of the hotel which was carried out much later by the appellant. Accordingly, the said quotation of the architect cannot be accepted as an evidence of renovation expenditure incurred by the appellant and is dismissed. In absence of any evidence in the form of bills of material and labour or any other proof of having incurred renovation expenditure on the hotel building by the appellant before the AO or before the undersigned, the AO was justified in rejecting the claim of the appellant of renovation expenditure of ` 10,31,906/- and the addition of ` 10,31,906/- is confirmed.

8.

Further, The Tribunal upheld the addition of ` 10,31,906/- made on account of repair and renovation of the property by concluding that GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

ITA-379-2018 -7- from the documents available on record, nowhere it was specified by the assessee as to when the renovation of hotel and from whom the same was done. The assessee had only relied upon quotation dated 26.6.1999 which was rejected by the Assessing Officer and the CIT(A) that the said quotation was not an evidence of actual expenditure incurred on renovation works in the hotel. In the absence of the bills of material and labour or any proof of having incurred renovation expenditure on the hotel building, the claim of the assessee was rightly rejected by the CIT(A). The Tribunal had further observed that the assessee got various opportunities to substantiate his claim, but he failed to establish his case.

9.

In view of the above, no illegality or perversity could be pointed out by learned counsel for the assessee in the findings recorded by the CIT(A) and affirmed by the Tribunal which may warrant interference by this Court. No question of law, much less, substantial question of law arise in the appeal.

10.

Accordingly, finding no merit in the appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE March 13, 2019 (MANJARI NEHRU KAUL) gbs JUDGE Whether Speaking/Reasoned Yes/No Whether Reportable Yes/No GURBACHAN SINGH 2019.03.25 16:35 integrity of this document

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