NARSHI GOPALJI MANGE,MUMBAI vs. ITO 27(2)(4), MUMBAI

4. On the facts, and in circumstances of the case, and in law, the learned Commissioner of Income-tax (Appeal), NFAC erred in upholding the action of the assessing officer in not allowing the claim of brokerage paid of RS 300,000 as expense, on purchase of the shop against the sale proceeds of the very same shop while calculating capital gains without appreciating the fact that, there are various decisions of hon'ble High Courts A.Y. 2013-14 Narshi Gopalji Mange and hon'ble ITAT allowing the claim of expense at the first appellate authority if the expenses were not claimed at the time of filing the return of income and, also if the same were denied by the assessing officer during the assessment proceedings.

5. Your Appellant craves leave to add to, amend, alter, modify, and/or delete any of the above grounds of appeal at or before final disposal of appeal.”

Brief facts of the case are as under: 2. The assessee is an individual and derives income from business, capital gains and other sources. It filed his return of income declaring total income of Rs. 8,44,622/- on 28.10.2013. The return was process u/s 143(1) of the Act and subsequently was selected for scrutiny under cash. Notice u/s 143(2) and 142(1) was issued to assessee in response to which representative of the assessee appear before the Ld. AO and filed requisite details has called for. 2.1 The Ld. AO observed that assessee was running a proprietary concern in the name of M/s Forum Enterprises. It was noted that, the assessee offered short term capital gain of Rs. 6,37,030/- during the year under consideration. Assessee was thus called upon to submit working of the same. On going through the submission filed by the assessee, the Ld. AO noted that the property sold was on 14.05.2012 for a consideration of Rs. 1,65,00,000/- that had stamp duty valuation of Rs. 2,04,90,000/-. 2.2 The Ld. AO observed that, the property was originally purchased by the assessee vide agreement dated 03.12.2012 for an amount of Rs. 1,59,00,000/- and Rs. 7,95,000/- was spend towards stamp duty and Rs. 30,00,000/- towards registration.

A.Y. 2013-14 Narshi Gopalji Mange The assessee thus treated the transaction as short term capital gains. 2.3 The Ld. AO noted that the assessee obtained loans towards the purchase of the property and capitalized the interest paid against loan. Ld. AO noted that the assessee capitalized the interest paid during the year and repayment of loan was made by assessee’s brother that was shown as liability under unsecured loan in assessee’s balancesheet. For the year under consideration the assessee submitted returns of his brother and copy of the loan confirmation ledger. 2.4 Ld. AO noted that, there was mismatch of the signature of this brother and therefore doubted the transaction. He thus disallowed the interest claimed by the assessee towards working of the short term capital gain due to lack of substantial evidence. 2.5 Ld. AO further noted that during the year under consideration the assessee deposited cash in his bank account on two occasions amounting to Rs. 5,15,000/- and 2,50,000/- in support of the cash deposit assessee furnished cash flow statement. The Ld. AO disallowed the entire cash credit by observing that no sufficient evidence was provided in order to prove the source of cash. Aggrieved by the order of the Ld. AO assessee has preferred of appeal before Ld. CIT(A).

3. The Ld. CIT(A) upheld the disallowances made by the Ld. AO. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before this Tribunal.

1. Assessment for Assessment Year 2013-14 in my case was completed under section 143 (3).

4. Order in this case was passed by learned Commissioner of Income-tax (Appeal) on 19/02/2023 and sent by email although I had opted for communication by physical mode (kindly refer to form no. 35)

9. I solemnly affirm that the contents of this affidavit are true and correct to the best of my knowledge and belief, and conceal nothing, and no part thereof is false to the best of my knowledge and belief.”

A.Y. 2013-14 Narshi Gopalji Mange 4.1 It is submitted that the assessee was not aware about the proceeding before the Ld. CIT(A) and no notice was issued to the assessee physically. It was submitted that the assessee was not aware about the online issuance of notices and thus the assessee was also not aware about the impugned order being passed. He thus submitted that the assessee may be granted an opportunity of being heard by condoning the delay, as belated filing of appeal before this tribunal was beyond the control of the assessee. 4.2 On the contrary, Ld. DR though could not controvert the submission of the assessee. The assessee was notices of hearing virtually and therefore plea of the assessee that he was not aware about it may not be considered. We have perused the submission advance from both the sides. “5. In the present facts, what needs to be examined is whether the reason stated by the assessee to seek condonation of delay is sufficient and whether, there exist sufficient cause for not presenting the appeal before this Tribunal within the period of limitation. It is for the assessee to explain the reasons for delay. 5.1. In the present fact of the case, the assessee explained the delay in filing the appeals before this Tribunal was because the assessee presumed that the notices will be received by the assessee physically. The Ld.AR referring to Form 35 filed before the Ld.CIT(A) submitted that the assessee had opted for physical mode of communication. And since the assessee never received any notice physically, he was under the bonafide belief that the appeal is still pending with the Ld.CIT(A). 5.2. It is also submitted that the earstwhile authorised representative was not responding and thus when the assessee approached another professional, the assessee was informed about the appeal being passed by the Ld.CIT(A). This being the position, it constitutes sufficient cause for filing the appeals belatedly. 5.4. In case of People Education & Economic Development Society Vs. ITO reported in 100 ITD 87 (TM) (Chen), it was held that; “when substantial justice and technicalities are pitted against each other, the cause of substantial justice deserves to be A.Y. 2013-14 Narshi Gopalji Mange preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay”. 5.5. The next question that arises is whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not able to file the appeals within the period of limitation. The cause for the delay therefore deserves to be considered, when there exist a reasonable cause, and therefore the period of delay may not be relevant factor. In support, we rely on the decision of Hon’ble Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Hon’ble Madras High Court thus condoned nearly 21 years of delay in filing the appeal. As compared to 21 years, delay of about 1000 to 2000 days cannot be considered to be inordinate or excessive. 5.6. We therefore feel that the reasons assigned by the assessee inability to present the appeal within time before Ld.CIT(A) deserves consideration based on the principles laid down by Hon'ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471. 5.7. Reliance is placed on following observations by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 wherein, Hon’ble Court observed as under:- “The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits". The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy.

And such a liberal approach is adopted on principle as it is realized that :

A.Y. 2013-14 Narshi Gopalji Mange 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.” Accordingly based on the above discussion the assessee has made out reasonable cause for delay to be condoned.

5. Accordingly we allow the application dated 11/12/2024 seeking condonation of delay. On the merits of the case the Ld. AR submitted that the assessee purchased shop on 03.12.2010 for Rs. 1,59,00,000/- against which he paid stamp duty of Rs. 8,25,940/-. The shop was financed through financial institution (Reliance Capital Limited). A financial papers of assessee was not strong, loan was sanctioned in name of assessee’s brother, whose name was also included in the property documents. However, it was always an understanding between assessee and his brother that the assessee was the owner of this property. 5.1 The assessee received possession of the shop on 06/01/2012. The interest cost attributable up to the period of possession of the shop stood to the tune of RS. 3,127,030 which was capitalized and added to the cost of the property of assessee and the total cost of the property calculated as under: Basic cost 15,900,000 Stamp duty 825,940 Interest Capitalized 3,127,030 5.2 It is further submitted that as business of the assessee did not pick up well, and on account of financial difficulties, assessee was forced to sell the property for RS. 16,500,000 for which the stamp duty valuation under section 50C stood at RS. 20,490,000 on the deemed consideration of RS. 20,490,000 as mandated under section 50C. It is submitted that the assessee offered Short Term Capital gain of Rs. 637,030/- (20,490,000/- - 19,852,970/- ) in his return of income. 5.3 The Ld.AO called for various information/documents in support of claim of interest cost. The assessee submitted following documents before the Ld.AO in response. • Interest Certificate received from the financial institution supporting claim of interest paid • Copy of loan confirmation from Vithaldas Gopalji Bhanushali - Brother of your appellant • Copies of Computation of total income, ITR V, Audit Report of Vithaldas Gopalji Bhanushali 5.4 The Ld.AO after considering the submissions of the assessee disallowed the interest claimed by the assessee in the cost of assets Aggrieved by the order of Ld.AO, the assessee preferred appeal before the Ld.CIT(A).

6. Ld.CIT(A) upheld the disallowance made by the assessee. Aggrieved by the order of Ld.CIT(A) the assessee is in appeal before this Tribunal.

Ground No. 2:-

A.Y. 2013-14 Narshi Gopalji Mange 7. Ld. AR submitted that Ld.AO did not verify the details, however made disallowances by merely holding that the signature of assessee’s brother do not tally. 7.1 The Ld. AR submitted that claim of the assessee to add interest to the cost of the shop has been upheld in the following decision of coordinate benches of this Tribunal and various high court in the case of ACIT V. Frontline Realty Pvt. Ltd. & 7473/Mum/2018, ITO v. Ramabrahmam 57 SOT 130 (Chennai ITAT), CIT v. K. Raja Gopal Rao-252 ITR 459 (Madras HC),CIT v. Sri Hariram Hotels Pvt Ltd-229 CTR 455 (Karnataka НС),CIT v. Mithlesh Kumari - 92 ITR 9 (Delhi HC), Addl CIT v. K. S. Gupta - 119 ITR 372 (Andhra Pradesh HC), SAS Hotel Ltd v. ITO-4 ITD 297 (Madras ITAT), S. Balan alias Shanmugam Balkrishnan ChettiaF V. DCIT - 120 ITD 469 (Pune ITAT), Praveen Gupta v. ACIT - 137 TTJ 307 (Delhi ITAT} and Burmah Castrol Plc, In re - 175 Taxman 353 (AAR) He submitted that the copy of the loan and interest certificate from Reliance Capital and ING Vaisya Bank support the proof of payment of interest. 7.2 On the contrary, Ld. DR submitted that it is not known whether the loan taken by the assessee was meant towards purchasing of property under consideration or any other property. He submitted that the excess between the loan and the sale of shop could not be established by the assessee. However he submitted that the interest claimed cannot be completely considered while computing the cost of the assets but has to be restricted to the quantum of the actually payment. We have perused advance submission of both the sides in the light of the record placed before.

A.Y. 2013-14 Narshi Gopalji Mange 8. It is noted that interest was capitalized amounting to Rs. 31,27,030/-. The issue raised by the Ld.DR now can’t be verified has it doesn’t arise out of the assessment order. However disallowances of interest made by the Ld.AO is without any basis or verification. There is no denial that the assessee borrowed money for acquiring the immovable property. The Ld.AO has also not questioned the cost of acquisition. Under such circumstance, any interest that is paid against the loan taken by the assessee towards acquisition of the assets cannot be denied. It is also a fact, that the assessee offered the short term capital gains to tax as per the provision of sec. 50(C). There is nothing on record brought by revenue to establish any malafide intention on the part of the assessee. 8.1 Be that as it may assessee has to produce the certificate of interest paid from the bank/financial institutions in order to verify its claim we don’t see the certificate issued by the bank in the paper book filed before us. Under the circumstances Ld. AO is directed to verify the interest paid based on the certificate issued by the bank and considered the claim of the assessee in accordance with law for year under consideration. The Ld.AO may also verify if provision of sec.50 is applicable before computing the capital gains in the hands of the assessee. Accordingly ground No.2 raised by the assessee stands partly allowed for statistically purposes.

A.Y. 2013-14 Narshi Gopalji Mange 9.1 It is admitted fact that, assessee is not maintaining books of account. There is nothing on record to show the source of the cash deposited by the assessee. In our opinion the issue deserves to be verified de-novo and assessee is directed to furnished all relevant documents in support of its claim. Accordingly ground No. 3 raised by the assessee is partly allowed for statistical purposes.