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Income Tax Appellate Tribunal, HYDERABAD BENCH “A” HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMEBR
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A” HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMEBR ITA No. 667/Hyd/2018 Assessment Year: 2007-08 & S.A No. 187/Hyd/2018 Assessment Year: 2007-08 Arun P Gala, vs. ITO Hyderabad. Ward – 5(3), Hyderabad. PAN – AAPPG6494B
(Applicant) (Respondent) Assessee by : Shri Ajay Gandhi Revenue by : Shri Niranjan Dey
Date of hearing : 07-05-2019 Date of pronouncement : 29-05-2019 ORDER PER P. MADHAVI DEVI, J.M.: This is assessee’s appeal for the A.Y 2007-08 against the order of the Ld. CIT(A)-4, Hyderabad dated 24.01.2018.
Brief facts of the case are that the assessee is an individual. In order to bring the capital gains on sale of property to tax, a notice u/s 148 of the Act was issued to the assessee for the A.Y 2007-08 on 26.03.2014. There was no response to the notices issued u/s 142(1) of the Act
2 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. and therefore the A.O deputed inspector to make enquiries regarding the whereabouts of the assessee. Subsequently, the assessee represented by his Chartered Accountant (CA) furnished the reply along with the return of income on 31.10.2007. From the computation of capital gain worked out by the assessee, the A.O noticed that that assessee has claimed to have paid Rs. 1 lakh towards brokerage but no proof was produced. He therefore disallowed the said brokerage expenses, both on the ground that the evidence is not produced and also that the percentage of claim is also too high i.e 6% approximately. Further, he observed that the assessee has claimed the net area of the plots as 276 Sq. yds and the cost of acquisition for 150 Sq. yds. was proportionately worked out to Rs. 3,30,709/- whereas in the sale deed the cost of acquisition was mentioned at Rs. 6,08504/- for 381.99 Sq Yds and not for 276 Sq. Yds. and accordingly he adopted the cost of acquisition for 150 Sq. Yds at Rs. 2,38,947/- and after adopting the indexed cost at Rs. 4,78,817/- he computed the capital gains. Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the order of the A.O and the assessee
3 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. is in second appeal before us by raising the following grounds of appeal:
“1. The Order of the Commissioner (Appeals) of Income Tax is in gross violation of the provisions of law and hence is bad in law. 2. The Commissioner of Appeals has erred in dismissing the appeal. 3. The Commissioner of Appeals has erred in upholding the reopening of assessment u/s 148. 4. The Commissioner of Appeals has erred in upholding the additions and disallowances made by the assessing officer. 5. The Commissioner has erred in sustaining the disallowance of brokerage expenses of Rs.l,00,000/incurred on the sale of immovable property. 6. The Commissioner has erred in sustaining the adoption of cost of acquisition of the property as Rs. 2,38,947. 7. The Commissioner has erred in sustaining the assessment of the capital gains at Rs. 11,77,683. 8. The Commissioner has erred in sustaining the assessment of total income at Rs. 12,50,533. 9. The Commissioner has erred in sustaining the non- granting of credit for the advance tax payment of Rs. 1,50,000/-. 10. The Commissioner has erred in sustaining the non- granting of credit for the self-assessment tax of Rs. 36,551/-. 11. Any other ground that may be urged at the time of hearing”.
The Ld. Counsel while reiterating the assessee’s contentions before the authorities below, did not advance
4 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. any arguments on the grounds against reopening u/s 148 of the Act. As regards the merits of the case are concerned, he submitted that the assessee has purchased three plots whose aggregate are was 345.99 Sq. yds and that each of the plots also was sold with common passage of 12 Sq. yds being 36 Sq. yds in total. Thus, the total purchase was of 381.99 Sq. yds for which the consideration paid was Rs. 6,64,188/- other than stamp duty and registration charges. He submitted that thereafter, there was an encroachment of 40 Sq. yds by a neighbour without compensation and the assessee has also filed a criminal case against him which is pending before the Hon’ble High Court. It was further submitted that the common passage was enlarged by further 30 Sq. yds and therefore net ownership of the assessee was only 276 Sq. yds out of which, the assessee has sold 150 Sq. yds. He submitted that the assessee had calculated proportionately the total cost of acquisition of Rs. 6,64,188/- to arrive at Rs. 6,08,504/- for over 276 Sq. yds to arrive at Rs. 3,30,709/- whereas the A.O has considered that the total area purchased by the assessee was 381.99 Sq. yds and therefore according to him, the cost of acquisition should
5 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. also be spread over 381.99 Sq. yds. He accordingly computed the capital gain and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the order of the A.O ex-parte to the assessee by holding that the assessee has not furnished the information called for. The Ld. Counsel for the assessee has referred to the copies of the purchase deeds filed before us to demonstrate that the common passage was also purchased by the assessee and also to page 53 of the paper book which contains the computation of capital gains by the assessee.
The Ld. DR, on the other hand, supported the orders of the authorities below.
Having regard to the rival contentions and material on record, we find that total area purchased by the assessee is 381.99 Sq. yds, out of which, due to common passage and the encroachment and the additional common passage the net ownership of the assessee is claimed to be 276 Sq. yds only. While computing the cost of acquisition, we find that the assessee has apportioned the cost over the net area of 276 Sq yds and not on the total area acquired by the
6 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. assessee and the A.O as well as the CIT(A) have held that it should be apportioned over the total area. However, the facts of the criminal case and additional common passage were not placed before the A.O or CIT(A). As per the sale deed, the common passage area is also purchased by the assessee and therefore, it shall become part of the area sold also, therefore the common areas cannot be excluded to arrive at the net area owned by the assessee. It at all anything is to be excluded it can only be the area encroached and not in possession of the assessee. In view of the same, we deem it fit and proper to remand the issue to the file of the A.O with a direction to examine the area retained by the assessee and if the area encroached by the neighbour is not with the assessee, then only such extent be reduced and the cost of acquisition be apportioned accordingly. The A.O is also directed to verify the assessee’s claim of Rs. 1 lakh towards brokerage. Needless to mention that the assessee shall be given a fair opportunity of hearing. Since, the appeal is disposed of, the stay application needs no adjudication, hence dismissed.
7 ITA.No. 667/Hyd/2018 Arun P. Gala., Hyderabad. 6. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes and stay application of the assessee is dismissed.
Pronounced in the open court on 29th May, 2019
Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 29th May, 2019 KRK 1) Arun P. Gala, 4-4-926/C/5, Sultan Bazar, Hyderabad – 500 095/- 2) ITO, Ward – 5(3) Hyderabad. 3) CIT(A)-4, Hyderabad. 4) Pr.CIT-4, Hyderabad. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File.