SYED SAFIUDDIN,HYDERABAD vs. INCOME TAX OFFICER, WARD-14(1), HYDERABAD

Brief facts of the case are that the assessee is an individual and worked in Saudi Arabia till 2005 and then returned to India and purchased a plot of land with an intent to construct a building and sell the same. Land purchased was registered as AGPA and not as a sale deed. Subsequently, construction work was undertaken in 2007. After the building was completed in 2009, it was sold on 18/05/2009 vide a sale deed. The assessee initially has not filed any return of income. The Assessing Officer on a specific information came to know that the assessee has sold property in the assessment year 2010-11 for Rs. 41,45,000/-. Accordingly notice u/s 148 was issued on 24/03/2017 by calling the assessee to file the return of income. Assessee has not filed any reply. The Assessing Officer has issued a show cause notice against dated 23/11/2017 and in response, the assessee has filed return of income on 14/12/2017 and submitted that during the year under consideration, he was engaged in the business of developing properties and the same is sold for Rs. 41,45,000/- and also claimed expenditure of Rs. 38,12,155/-. The assessee has not field any proof in support of its claim and therefore, the A.O. has treated that the activity carried on by the assessee is not a business activity and computed the short term capital gains by considering the sale consideration received by the assessee of Rs. 41,45,000/- and allowed the expenditure of Rs. 9,50,000/- by estimating the cost of construction.

On appeal, CIT(A) confirmed the order of the A.O. on the ground that the assessee has not filed any details and also on the ground that the activity carried on by the assessee is not a business activity. On being aggrieved, assessee carried the matter in appeal before the Tribunal.

Learned Counsel for the Assessee submitted that the assessee has purchased a plot of land with an intent to carry on the business of construction and therefore, the Assessing Officer treating the sale consideration received by the assessee as short term capital gains is not correct. Alternatively, it is submitted that the assessee has incurred expenditure to the tune of Rs. 38,12,155/- whereas the A.O. allowed Rs. 9,50,000/- which is very meagre and submitted that the Valuation Officer valued the expenditure at Rs. 39,32,000/- and submitted that the same may be allowed.

On the other hand, Ld DR supported the orders of the lower authorities.

I heard both the parties and perused the orders of the lower authorities as well as the material on record. The assessee has purchased a plot of land and constructed a double storey residential house and the same is sold for Rs. 41,45,000/- (as per the SRO). The assessee initially has not filed the return of income. Subsequently, in

So far as the alternate ground raised by the assessee is that the assessee’s claim of an expenditure was allowed by the A.O. only to the extent of Rs. 9,50,000/-. Before the Tribunal, the assessee has filed a valuation report dated 26/09/2017 wherein the Govt. Approved Valuer vide his report dated 26/09/2017 estimated the cost of construction @ Rs. 39,32,000/-. I find that this report is filed neither before the A.O. nor before the CIT(A). However, I find that the A.O. has estimated the cost of construction at Rs. 9,50,000/- on the claim made by the assessee of Rs. 38,12,155/- whereas the Govt. Approved Valuer

In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 24th May, 2019. Sd/- (V. DURGA RAO) JUDICIAL MEMBER Hyderabad, Dated: 24th May, 2019.