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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
Both these appeals filed by the assessees are directed against the orders of CIT(A) – 12, Hyderabad, for AY 2007-08. As identical issues are involved in these appeals, the same were clubbed and heard together, therefore, a common order is passed for the sake of convenience.
Brief facts as taken from ITA No. 594/Hyd/2017 are, the assessee filed his return of income for AY 2007-08 on 28/07/2007 admitting total income of Rs. 10,99,450/-. The AO issued a scrutiny notice u/s 143(2) to the assessee, against which, the AR of the assessee furnished the information called for.
2.1 During the course of assessment proceedings, the AO observed that the assessee admitted Short term Capital Gain at Rs. 6,00,250/-, being owner of 50% share in sale consideration of at Rs.
2 ITA Nos. 594 & 595/Hyd/17 V. Siva Kota Reddy & V. Sumathi 20,00,000/-, on sale of flat, whereas, as per the SRO valuation, the value of the property was shown as Rs.49,14,000/-, as such the assessee's 50% share was re-worked out at Rs.24,57,000/-, as against Rs.20,00,000/- admitted. Further, details on acquisition of the property, showed that the assessee acquired 120 Sq.yds as undivided share for Rs.3,37,500/- and shown to have incurred an amount of Rs.5,00,000/- towards his share for agreed consideration for construction. However, the assessee claimed Rs.13,99,750/- towards cost of acquisition while computing Short Term Capital Gain. On being questioned on this issue, the assessee could not produce supporting proof, hence the Assessing Officer completed the assessment by recomputing the Short Term Capital Gain at Rs.16,19,500/-, by adopting the higher sale consideration towards share of the assessee and disallowing the claim of expenses for additional/improvement cost, to reduce the claim of cost from Rs.13,99,750/- to Rs.8,37,500/-.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) and contended that he had incurred an expenditure on interiors, lappam finish etc., in addition to cost of acquisition and claimed expenses of Rs.13,99,750/-, as against which the AO allowed only Rs.8,37,500/-. It was also submitted that the application for rectification of mistake was rejected by the AO. Regarding the disallowance of claim in assessment order, it was submitted that he incurred additional cost of Rs.8,00,000/- towards works on interiors etc., for which there is no proof and he was not able to substantiate his claim, as no supporting evidence was produced/available.
After considering the submissions of the assessee, the CIT(A) confirmed the order of AO by observing as under: 6. Perused the submissions of appellant as appeared through Statement of Facts/Grounds of Appeal and the observations of the Assessing Officer in the Assessment Order. As could be seen from the facts of the case, the additions made are on
3 ITA Nos. 594 & 595/Hyd/17 V. Siva Kota Reddy & V. Sumathi account of recomputation of Short Term capital gain. While the AO recomputed the capital gains basing on the material available, the assessee, though being accorded opportunities could not submit documentary proof in support of his claim towards cost of acquisition, could not explain the claim made and the basis of computation of capital gain. In fact, the re- computation of capital gains was on account of adopting the share of sale consideration of flat at Rs.24,57,000/-, in assessment order, as against of Rs.20,00,000/- adopted by the assessee in Return of Income. Further, the cost of acquisition and improvement was claimed at Rs.13,99,750/- by the assessee, whereas the assessing officer restricted it to Rs.8,37 ,500/-, with cost of acquisition of land adopted at Rs.3,37,500/- as his share and cost of share of construction at Rs.5,00,000/- (50% of Rs.10,00,000/-). Thus, the claim was reduced to Rs.8,37,500/- from Rs.13,99,750/-. This has resulted in increased short term capital gains on sale of flat. The claim of cost of further improvement was disallowed on the ground that assessee failed to furnish needed evidence in this regard and the appellant failed to prove the said cost of improvement, even during appellate proceedings. Accordingly, the further disallowance made in assessment order and the assessed income in assessment order is upheld. The grounds related to this addition made in assessment order, thus are treated as dismissed.”
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
“1. The learned CIT (A) has not passed a speaking order while dismissing the appeal before him, regarding the evidence filed before Assessing Officer and the Appellate Commissioner regarding cost of improvement. 2. The learned CIT(A) has not considered the evidence produced before him on 21.11.2016 during appellate proceedings, in the form of bill copies from different contractors for works undertaken with regard to completion of flat in the form of interiors, cupboards, final finishing, distemper coloring and other allied expenditure amounting to Rs.5,62,250 /-. 3. Any other ground that may be urged at the time of hearing.”
4 ITA Nos. 594 & 595/Hyd/17 V. Siva Kota Reddy & V. Sumathi 6. Ld. AR brought to our notice the facts of this case and submitted that assessee has filed 154 petition which was rejected. He submitted that assessee has filed copies of bills on additions made in the building. Still, the ld. CIT(A) has sustained the addition. Further, he submitted that the bench may grant reasonable benefits to the assessee.
Ld. DR, on the other hand, relied on the orders of revenue authorities.
Considered the rival submissions and perused the material on record. We notice that assessee has claimed cost of acquisition at Rs. 13,99,750/-, whereas, AO allowed only to the extent of Rs. 8,37,500/-. For the difference of Rs. 5,62,250/-, assessee has submitted the respective bills before CIT(A) but CIT(A) has not considered the same. Aggrieved, assessee is in appeal before us. We noticed that these bills are in support of making addition in the building like interior works, cupboards, final finishing, distemper and other allied works. As per the details submitted before us, the bills are: a) Wardrobes and other furniture Rs. 8,47,000 b) Tiles fittings Rs. 1,15,200 c) False Ceiling Rs. 1,80,000 d) Painting Rs. 1,65,000 e) Electrical works Rs. 47,000 Total Rs.13,54,200 ========== From the above, significant amount was spent on furniture and making wardrobes and shelves. Other items can be considered as part of improvement to the property. AO already allowed significant portion of the cost claimed at Rs. 8,37,500/-. The furniture is mostly removable but certain additions like attachment in kitchen & wardrobes cannot be removed. However, the cost quoted by assessee for this addition seems to be too high. Since, the assessee has brought on record some evidence which was not submitted before AO,
5 ITA Nos. 594 & 595/Hyd/17 V. Siva Kota Reddy & V. Sumathi we are inclined to allow Rs. 2 lakhs as proper cost on this addition. Accordingly, grounds raised by the assessee is partly allowed.
In the result, appeal of the assessee is partly allowed.
As the facts and grounds in ITA No. 595/Hyd/2017 are materially identical to ITA No. 594/Hyd/2017, following the conclusions drawn therein, we are inclined to allow Rs. 2 lakhs as proper cost on the addition. Accordingly, grounds raised in this appeal are partly allowed.
In the result, both the appeals of the assessee are partly allowed. Pronounced in the open Court on 6th September, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 6th September, 2019 kv
Copy to:- 1) Shri V. Siva Kota Reddy & V. Sumathi, C/o, A.V. Raghu Ram & P. Vinod, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad. 2) ACIT, Circle – 6(1), Hyderabad. 3) CIT(A)-12, Hyderabad 4) Pr.CIT-6, Hyderabad. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File.