VIJAYKUMAR PREMNATH BHATT,,PUNE vs. INCOME-TAX OFFICER, WARD - 4(3),, PUNE

आदेश / ORDER

PER R.S.SYAL, VP : These two appeals by different but related assessees relate to the common assessment year 2013-14. Since most of the issues raised in these appeals are common, we are, therefore, proceeding

2 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

to dispose them off by this consolidated order for the sake of

convenience.

Vijaykumar Premnath Bhatt along with his wife, the other

assessee, namely, Ms. Shahi Bala, transferred certain piece of land

for a consideration of Rs.2.12 crore on 18-06-2012. The case was

selected for scrutiny under Computer Assisted Scrutiny Selection

(CASS). The assessee had shown long term capital gain of

Rs.50,41,580/- against the sale consideration of Rs.2.12 crore.

After claiming certain expenditure of sale, i.e. development of

land, commission expenses and after indexation of cost of land and

further claiming exemption u/s.54F etc., the assessees claimed total

long term capital gain at Nil. The Assessing Officer (AO) verified

certain aspects of such computation of capital gain. Out of total

commission of Rs.22.00 lakh claimed to have been paid by the

assessee to six persons, for which deduction was claimed in the

computation of capital gains, the AO called for information

u/s.133(6) from such persons. Four persons out of such six

commission receivers, confirmed the receipt of commission and

the other two persons, namely, Punam R. Desai and Ramchandra

3 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

Desai to whom the assessee had claimed to have paid commission

at Rs.4.00 lakh each, did not respond. Accordingly, the AO did

not allow deduction for the said sum of Rs.8.00 lakh. The ld.

CIT(A) confirmed the addition because the assessee could not file

any evidence in support of such payment before him as well.

material on record. The ld. AR contended that the assessee was

not having good terms with these two persons to whom payment of

Rs.8.00 lakh was made through banking channel. It was explained

that the amount was genuinely paid to these two persons. It is seen

as an admitted position that the assessee could not produce these

two persons before the AO despite request made by him in this

regard. In view of the fact that the ld. AR has claimed that these

two persons can be now made available, we are of the considered

opinion that the ends of justice would meet adequately if the

impugned order on this score is set aside and the matter is restored

to the file of AO. We order accordingly and direct him to examine

the claim of the assessee in respect of commission paid to these

two persons at Rs.8.00 lakh which is shared by both the assessees

in question.

4 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

claimed by the assessee at Rs.28,93,620/-.

month of June, 2003 at a total cost of Rs.4,84,700/-. Thereafter,

expenses were incurred for the development of such land in the

form of construction of boundary wall, borewell expenses,

excavation work, electrical pump, water tank and labour payment

etc. It was only such developed land which was sold to the

purchaser. The assessee was called upon to submit the bills and

vouchers in respect of such expenses. The assessee claimed that

all bills were not readily available. Copies of certain bills were

produced. The AO deputed Inspector to verify the assessee’s claim

of development of land. The Inspector submitted a report to the

AO, which has been reproduced on page 6 of the assessment order.

The AO disallowed 10% of total expenses incurred by the assessee

and computed capital gains accordingly. The ld. CIT(A) affirmed

the view taken by the AO on this count.

material on record, it is observed that the assessee lodged a claim

before the AO that he incurred land development expenses at

5 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

Rs.28,93,620/-. The Inspector, on physical verification, reported

that “development of land has been made by the assessee, e.g.

boundary wall, leveling of land, construction of bore-wells (3 nos.-

2 in the sold land, i.e. admeasuring 39R and 1 in the residential

house premises admeasuring approx. 6 ½ R) electrical pump sets,

electrical connections, underground drainage connections, water

pipeline connections, water tank etc. has been made by the

assessee”. Thus, it is apparent from the report of the Inspector that

the claim of the assessee stood verified and vouched that he carried

out development of land by constructing boundary wall, borewells,

installation of electrical pump sets etc. When the report of the

Inspector was given to the AO fortifying the claim of the assessee,

there could have been no reason to disallow 10% of the

expenditure incurred by the assessee in this regard. Such an ad

hoc addition, in our considered opinion, cannot be sustained. We,

therefore, order to delete the addition.

the Act.

he incurred expenditure of Rs.24,36,997/- on the construction of

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residential house at the remaining plot of the unsold land. Out of

such expenditure, the assessee claimed “only a sum of Rs.20.00

lakh was devoted to residential house”. The Inspector who carried

out verification, reported that the unsold land was developed by the

assessee and his wife by means of boundary wall, leveling of land,

construction of borewells, electrical pump sets etc., underground

drainage connections and water pump connections etc., purchase of

woods for doors and windows. The AO disallowed 10% of the

expenditure claimed at Rs.20.00 lakh, against which the assessees

have come up in appeal before the Tribunal.

material on record, it is seen that the AO once again resorted to ad

hoc disallowance of the assessees’ claim when the Inspector, who

visited the site, accepted the assessees’ claim of having carried out

construction of residential house. Under these circumstances, such

an ad hoc disallowance cannot be sustained. We, therefore, order

for deletion of the addition.

both the appeals under consideration, there is another issue raised

7 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

in the case of Shahi Bala about the denial of exemption u/s.54F to

the tune of Rs.6,66,000/-.

the Act on the construction of residential house at Amritsar,

Punjab. Cost of plot was shown at Rs.13.44 lakh and the

remaining amount of Rs.6,66,000/- was shown towards

construction. The AO allowed cost of plot but did not allow

exemption u/s.54F in respect of cost of construction by observing

that no bills and vouchers etc., except certain self-made vouchers,

were produced. The ld. CIT(A) sustained the action of the AO.

material on record. It is observed that the AO, while rejecting the

assessee’s claim, has observed that “further construction of the

house is going on at Amritsar, Punjab. Physical verification of the

same is not possible due to paucity of time and distance from

Pune”. The assessee also could not produce any invoices of the

construction material claimed to have been purchased and used in

respect of its Punjab property. Under these circumstances, we are

of the considered opinion that the ends of justice would meet

adequately if the impugned order on this score is set-aside. We

8 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

order accordingly and direct the AO to verify the assessee’s claim

in this regard with relevant documents. The assessee is directed to

produce documents in support of the claim. Needless to say, the

assessee will be allowable reasonable opportunity of hearing.

address an additional ground raised by the ld. AR in both the

appeals to the effect that the AO exceeded his jurisdiction in

finalizing CASS scrutiny case beyond the scope of CBDT Circular

and without following due process. The ld. AR contended that the

AO initiated limited scrutiny in respect of exemption u/s.54F etc.

By examining other issues, it was claimed, that the AO

transgressed his jurisdiction. This was countered by the ld. DR.

the relevant material on record, we find from para 8 of the

assessment order that “the case was selected for scrutiny under

CASS under the category Non-Corporate assessees having no

business” and “who have claimed much deduction

u/s.54B/54C/54D/54G/54GA of the Act” and “Capital Gains

consideration in ITR is less than sale of property reported in AIR”.

It is evident from the above extracted portion of the assessment

9 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

order that the limited scrutiny was qua exemption, inter alia,

u/s.54 etc. and capital gain consideration. All the issues taken note

by the AO in the case of both the assesses are qua the computation

of the ultimate amount of capital gains from the transfer of the

same property. It is not as if the AO, after initiating limited

scrutiny for examination of capital gains, proceeded to make some

other addition under some other heads etc. As such, no fault can

be found in the action of the AO in examining different facets of

the computation of capital gain. We, therefore, dismiss the

additional ground raised in both the appeals.

Order pronounced in the Open Court on 19th March, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 19th March, 2019 सतीश

10 ITA Nos.998 & 999/PUN/2018 Vijaykumar P. Bhatt & Shahi Bala

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-3, Pune 4. The Pr. CIT-2, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “SMC” / DR ‘SMC’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 18-03-2019 Sr.PS 2. Draft placed before author 18-03-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *