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Income Tax Appellate Tribunal, “SMC”“B”BENCH, BENGALURU
Before: Shri B.R. Baskaran
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”“B”BENCH, BENGALURU Before Shri B.R. Baskaran, Accountant Member IT(IT)A No.229/Bang/2022 (Assessment Year:2018-19) Shri Prasanna Kumar Dy. Commissioner of Income Tax 4-3-298/12, Palemar International Taxation Vs. Bejai Church, Cross Road Circle - 2(2), Bangalore Mangalore 575004 PAN –BFAPK0601P Appellant Respondent Appellant by: Smt. Sheetal, Advocate Respondent by: Shri Ganesh R. Ghale, Advocate Standing Counsel for Revenue Date of Hearing: 26.05.2022 Date of Pronouncement: 30.05.2022
O R D E R Per: B.R. Baskaran, AM The assessee has filed his appeal challenging the assessment order dated 28.01.2022 passed by the AO for AY 2018-19 under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereafter "the Act") in pursuance of directions given by the learned Dispute Resolution Panel (DRP).
The assessee is aggrieved by the decision of the AO on the following issues: (a) Rejection of claim of cost of improvement (b) Right of carry forward of loss
The facts relating to the first issue are that the assessee is a non- resident and he filed his return of income declaring total income of Rs.1,01,010/- and claimed refund of tax of Rs.22.63 lakhs. The refund has arisen because, TDS was deducted from the sale consideration of land sold by the assessee to a person named M/s. Ahbideed Developers Pvt. Ltd. The assessee had declared long term capital loss on sale of land
2 IT(IT)A No. 229/Bang/2022 Shri Prasanna Kumar mentioned above. The AO examined the details of computation of long term capital gain. As per the sale deed executed by the assessee, the sale consideration was shown at Rs.1,03,27,023/-. However, the valuation as per the stamp duty authorities was Rs.1,32,74,160/-. It was noticed that the assessee has adopted the valuation as per the registration authorities in terms of Section 50C of the Act for the purpose of computation of capital gain. So there is no dispute with regard to the sale consideration.
With regard to the cost of purchase of land the assessee had claimed cost of purchase of land of Rs.75,47,900/- (purchase consideration of Rs.70 lakhs + registration charges of Rs.5,49,900/-). In addition of the above, the assessee had also claimed the indexed cost of improvement of Rs.45 lakhs as deduction against the sale consideration. The dispute is related to the above said claim of Rs.45.00 lakhs.
The AO noticed that the assessee has purchased the land on 17.01.2011 from M/s. Sundari and others and the purchase consideration was shown at Rs. 70 lakhs in the conveyance deed. On the very same day of executing the conveyance deed, the sellers have issued a receipt for receiving Rs.45 lakhs towards improvement of land. Though the receipt was dated 17.01.2011, the above said amount of Rs. 45 lakhs had been paid earlier on 10.07.2010 to 20.09.2010. The receipt has been given on a stamp paper having value of Rs.2/-. The AO took the view that the assessee should have included the amount of Rs.45 lakhs in the sale consideration at the time of executing the sale deed instead of using a stamp paper having value of Rs.2/-. The assessee submitted that the sellers had insisted for payment of cost of improvement of Rs.45 lakhs separately and hence it was not included in the value of sale consideration shown in the conveyance deed. The AO did not accept the explanation given by the assessee. He expressed the view that the receipt issued by the seller only mentions the survey number of the land without mentioning the boundaries and further the payments have been made prior to the date of executing the conveyance deed. He also noticed that the payment of Rs.45 lakhs have been made from the bank account of Shri J. Krishan Palemar who is father and GPF holder of the assessee. The AO also took the view
3 IT(IT)A No. 229/Bang/2022 Shri Prasanna Kumar that there is no clarity as to how the money of Rs.45 lakhs was repaid by the assessee to the creditor. Accordingly he rejected the claim of cost of improvement of Rs.45 lakhs. Accordingly the AO computed the long term capital gain at Rs.9,91,959/-. The same was confirmed by Ld DRP.
Before the learned DRP the assessee had claimed carry forward of long term capital loss but the same was rejected for the reason that the AO has computed the long term capital gain. Aggrieved, the assessee filed this appeal before the Tribunal.
I heard the parties and perused the record. I noticed that the assessee has paid an amount of Rs.45 lakhs to the seller of the land, namely M/s. Sundari and others. The case of the AO is that
(a) the receipt issued by the seller was given on a stamp paper having value of Rs.2/- only (b) the assessee should have included the above said amount in the value of the sale consideration at the time of purchasing of the property. (c) the payment has been made by the father the GPF holder of the assessee. From the observations made by the AO, I noticed that the AO has not doubted the genuineness of the payment of Rs.45 lakhs towards cost of improvement of land, since he has not made any enquiry from the seller of the land with regard to the payment of Rs.45.00 lakhs. The various observations made by the AO, in my view, show the opinion of the AO as to how the transaction of purchase of land should have been executed. There should not be any doubt that the AO cannot enter into the shoes of the assessee and dictate the manner in which a particular transaction should be executed. It was the convenience of the assessee and the seller of land to complete the transaction in a particular manner. So long as there is no doubt on the genuineness of the payment made by the assessee towards purchase cost of land and the cost of improvement, in my view, there is no reason to deny the claim of cost of improvement made by the assessee while computing capital gain. With regard to the observation of the AO that
4 IT(IT)A No. 229/Bang/2022 Shri Prasanna Kumar the cost of improvement of Rs.45 lakhs was paid by the father and GPF holder of the assessee, the learned A.R. submitted that the same has been duly accounted for in the sundry creditors balance in the Balance Sheet of the assessee. In any case, the same would depend upon the understanding between assessee and his father and it cannot be a ground to reject the claim of cost of improvement.
Accordingly I am of the view that the assessee would be entitled for indexed cost of improvement of Rs.45 lakhs claimed by him. Accordingly I set aside the order passed by the AO on this issue and direct the AO to allow indexed cost of improvement of Rs.45 lakhs mentioned above.
With regard to the right to carry forward the loss, the learned A.R. submitted that the assessee is a partner in a partnership firm named M/s. Prasanna Developers having PAN AADFP2952K. She submitted that the said partnership firm is subject to audit under Section 44AB of the Act and hence the due date for filing return of income for the assessee, being partner of the above said partnership firm, would be 30th September. However, for AY 2018- 19 the CBDT has extended the due date, vide its order dated 8th October, 2018 in F. No. 225/358/2018/ITA.II to 31st October, 2018. The learned A.R. submitted that the assessee has filed his return of income on 22.10.2018, i.e. within the extended due date under Section 159(1) of the Act and hence the loss arising on sale of land would be carried forward.
Considering the facts mentioned above by the assessee I am of the view that the assessee would be entitled to carry forward the loss and accordingly direct the AO to allow carry forward of loss.
In the result, the appeal filed by the assessee is allowed.
Dictated and pronounced in the open Court on 30th May, 2022.
Sd/- (B.R. Baskaran) Accountant Member Bengaluru, Dated: 30th May, 2022
5 IT(IT)A No. 229/Bang/2022 Shri Prasanna Kumar Copy to:
The Appellant 2. The Respondent 3. The DRP-2, Bangalore 4. The CIT concerned 5. The DR, ITAT, Bengaluru 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.