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Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER MAHAVIR PRASAD, JUDICIAL MEMBER :
These are four appeals by the assessee against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, dated 15/03/2016, 15/03/2016, 10/03/2016 & 16/03/2016 for the Assessment Years (AYs) 2009-10, 2010-11, 2011-12 & 2012-13 respectively.
Since in all four appeals assessee are same and issues are common only amounts and assessment years are different. Therefore, for the sake of convenience, we would
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
like to dispose of all four appeals by way of a common order.
First we take up ITA No.1678/Ahd/2016 for A.Y. 2009-10. Following Grounds has taken by the assessee in this appeal. “1. Ld. CIT (A) erred in law in confirming order of AO framing assessment u/s.143 (3) r w s 153A of the Act in absence of any incriminating material regarding any undisclosed income pertaining to the appellant found during the course of search. Ld. CIT (A) ought to have quashed the order being illegal, unlawful and therefore void ab initio. It be so held now. 2. Ld. CIT (A) erred in law and on facts in holding that AO granted adequate opportunity to the appellant by elaborately discussing grounds for rejection of the claim in the order. Ld. CIT (A) failed to appreciate that failure to issue show-cause notice as regards the claims made in the return of income before any modification by AO vitiates the assessment proceedings. 3. Ld. CIT (A) erred in law in and on facts confirming disallowance made by AO of interest expenses of Rs.1,69,442/- on borrowings for acquisition of rented property. Ld. CIT(A) ought to have deleted disallowance of interest paid to Axis Bank on borrowing for acquiring rented property and rent is assessed as house property income by AO. 4. Both the lower authorities erred in law and on facts failing to ascertain the documentary evidence substantiating that property acquired from Axis Bank loan is rented to Reliance Fresh fetching rental income offered to tax Ld. CIT (A) ought to have allowed interest claimed u/s 24(b) of the Act. 5. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271 (1)(c) of the Act is unjustified.”
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
The relevant facts as culled out from the materials on record are as under:- The appellant is an individual and derives income by way of share from partnership firms. He had filed his original return of income u/s.139 for A.Y.2009-10 on 29/03/2011 declaring total income of Rs.14,49,660/-.
4.1 A search operations was carried out u/s.132 on 27/04/2011 and thereafter in case of Savvy Group wherein statement of the partners of the firm and others were recorded and a disclosure was made. Some of the places of business were covered under survey. Hence, the proceedings u/s.153A were initiated by issuing notice on 22/09/2011 in response to which the appellant filed return on 20/12/2012 declaring same income of Rs. 14,49,660/-.
4.2 The AO also noticed that the appellant had shown STCG of Rs.10,95,402/- on sale of agriculture land at Plot jointly owned at C. G. Road, and while computing the profit he had claimed dalali, legal and other exps. of Rs.98,000/-, registration and stamp exps. of Rs.2,06,598/-. The AO by order sheet entry dated 23/01/2014 proposed to disallow the said exps., of course without giving any cogent reasoning. The appellant by reply dated 10/03/2014 pointed out that registration & stamp duty were incurred as per the provisions of relevant law and it was a genuine expenditure for computing profit on sale of immovable property. However, the AO concluded that the said exps. were to be generally by the buyer and there was no proof of the exps., borne by the buyer. The appellant submits that the AO has failed to appreciate the understanding between
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
the appellant and the buyer, apart from the explanation that the same were incurred normally in cash and the same be deducted from the sale consideration in case, they are paid initially by the purchaser. Similarly, as regards the dalali exps, of Rs.98,000/-, there was no documentary proof.
4.3 The AO also noticed that the appellant had claimed interest exps. of Rs.1,69,442/- against property income without giving any details. The appellant by reply dated 10/03/2014 in response to the order sheet entry dated 03/03/2014 submitted that the interest was claimed in respect of borrowings used for the rented property situated at Mauyra Atria, Opp. Atithi Restaurant which was purchase out of loan taken from AXIS Bank, Law Garden branch and the copy of bank certificate was enclosed. However, the AO concluded that the books of accounts did not reflect AXIS bank account nor copy of said bank account was enclosed with the reply so that the explanation could not believed.
Against the said order appellant filed appeal before the ld. CIT(A) who partly allowed the appeal.
We have gone through the relevant record and impugned order. So far ground nos.1 and 2 are concerned. Appellant did not want to press these grounds. Same are dismissed as not pressed.
So far ground nos. 3 & 4 are concerned. Ld. AO has discussed this issue in his order at Page No.3 & 4, Para 5 & 5.2. In support of its contention regarding disallowance of
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
interest of Rs.1,69,442/- to paid on loan taken from Axis Bank for purchase of rental property situated at Maurya Atria Complex, Opp. Atithi Restaurant, Ahmedabad. It was submitted by the appellant that loan was taken from Axis Bank for purchase of property from which the rent was received and income was assessed as house property income. He furnished copy of statement of Axis Bank showing payment of installments. He claimed deduction u/s.24(b) of the Act in paper book filed before us. Same are reflected at Page No.45 to 50. In view of the above explanation given by the appellant, we are satisfied with the contention of the appellant, hence, we allow this ground of appeal of the appellant.
So far ground no.5 with regard to charging of interest u/s.234A, 234B, 234C & 234D of the Act is concerned. Same is consequential and need not to be adjudicated.
So far ground no.6 with regard to initiation of penalty proceedings u/s.271(1)(c) of the Act is concerned. Same is premature and need not to be adjudicated.
In the result, appeal of the assessee in ITA No.1678/Ahd/2016 for Asst. Year 2009-10 is allowed.
Now we come to ITA No.1679/Ahd/2016 for Asst Year 2010-11: “1. Ld. CIT (A) erred in law in confirming order of AO framing assessment u/s.143 (3) r w s 153A of the Act in absence of any incriminating material regarding any undisclosed income pertaining to the appellant found during the course of search. Ld. CIT (A) ought to
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
have quashed the order being illegal, unlawful and therefore void ab initio. It be so held now. 2. Ld. CIT (A) erred in law and on facts in holding that AO granted adequate opportunity to the appellant by elaborately discussing grounds for rejection of the claim in the order. Ld. CIT (A) failed to appreciate that failure to issue show-cause notice as regards the claims made in the return of income before any modification by AO vitiates the assessment proceedings. 3. Ld. CIT (A) erred in law in and on facts confirming disallowance by AO of Rs.10,91,728/- depreciation claimed on motor car. Ld. CIT(A) ought to have held depreciation as allowable u/s.32(1) of the Act on motor car used for the purpose of business of land trading and of the partnership firms. 4. Ld.CIT(A) erred in law and on facts in confirming action of AO treating profit from land trading activity as ‘income from other sources’ instead of ‘income from business’ and thereby disallowing depreciation on motor car. Ld. CIT(A) ought to have held profit from frequent & regular transaction of trading in land as ‘business income’ warranting to allowing depreciation on asset used for earning this income u/s.57(iii) of the Act. 5. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271 (1)(c) of the Act is unjustified.”
So far ground nos.1 and 2 are concerned. Appellant did not want to press these grounds. Same are dismissed as not pressed.
So far ground nos. 3 & 4 with regard to confirmation of disallowance of Rs.10,91,728/- for depreciation claimed on motor car are concerned, same are interconnected.
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
Lower authorities held that the appellant was not being any business. Therefore, he was not entitled for depreciation.
Ld. AR drew out attention towards the CIT(A)’s order at Page No.4, Para 7 & 7.2, in which appellant stated that he was engaged in the activity of purchase and sale of land held for trading. The profit was offered for tax as business income, he prepared the accounts which justified the claim of the assessee that he carried out an adventure and business of trading in land which amounted to business activity. We are convinced with the contention of the appellant and allow this ground of appeal.
So far ground no.5 with regard to charging of interest u/s.234A, 234B, 234C & 234D of the Act is concerned. Same is consequential and need not to be adjudicated.
So far ground no.6 with regard to initiation of penalty proceedings u/s.271(1)(c) of the Act is concerned. Same is premature and need not to be adjudicated.
In the result, appeal of the assessee in ITA No.1679/Ahd/2016 for Asst. Year 2010-11 is allowed.
Now we come in ITA No.1680/Ahd/2016 for Asst Year 2011-12: “1. Ld. CIT (A) erred in law in confirming order of AO framing assessment u/s.143 (3) r w s 153A of the Act in absence of any incriminating material regarding any undisclosed income pertaining to the appellant found during the course of search. Ld. CIT (A) ought to have quashed the order being illegal, unlawful and therefore void ab initio. It be so held now.
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
Ld. CIT (A) erred in law and on facts in holding that AO granted adequate opportunity to the appellant by elaborately discussing grounds for rejection of the claim in the order. Ld. CIT (A) failed to appreciate that failure to issue show-cause notice as regards the claims made in the return of income before any modification by AO vitiates the assessment proceedings. 3. Ld. CIT (A) erred in law in and on facts confirming disallowance by AO of Rs.2,92,500/- of brokerage while computing LTCG/STCG on sale of land. Ld. CIT(A) ought to have allowed deduction of incidental expenses incurred in connection with transaction of land u/s.48 of the Act. 4. Ld.CIT(A) erred in law and on facts in not adjudicating contention raised without prejudice to above ground that disallowance in any case deserved to be deleted since against investment of Rs.1,49,15,380/- in the new agricultural land LTCG was claimed only to extent of Rs.1,22,99,290/-. 5. The ld. CIT(A) erred in law in and on facts confirming disallowance made by AO of cost of improvement of Rs.9,60,000/- indexed at Rs.20,82,093/- computing long term capital gain on sale of agricultural land at Makarba. Ld. CIT(A) ought to have allowed cost of improvement incurred and rightfully claimed on land purchased in 1995 by the appellant. 6. Ld. CIT(A) erred in law and on facts in not adjudicating contention raised without prejudice to above ground that total investment in new agricultural land to be considered as against which exemption is claimed. Thus even if the improvement cost is added, LTCG would still be computed considering total investment in new agricultural land. 7. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 8. Initiation of penalty proceedings u/s 271 (1)(c) of the Act is unjustified.”
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
So far ground nos.1 and 2 are concerned. Appellant did not want to press these grounds. Same are dismissed as not pressed.
So far ground nos. 3 & 4 with regard to LTCG/STCG are concerned. AO has discussed at Page No.2 & 3, Para 5 & 5.4 and Page No.3 & 4, Para 6 & 6.2. Same has discussed by ld. CIT(A) at Page No.7 & 8, Para 8 & 8.2. So far brokerage expenses Rs.2,92,500/- are concerned. Appellant sold property at Lilapur and earned long term capital gains. Similarly, land was sold in Shilaj, Block No.65 and earned Short Term Capital Gains. The appellant claimed that he has incurred expenses of brokerage of Rs.2,25,000/- and Rs.67,500/- and he has stated that payment of brokerage of Rs.2,25,000/- was made by account payee cheque for sale of land in Lilapur. The expenses were incurred in relation to transaction of the land which was allowable deduction u/s.48 of the Act. We have gone through the relevant record and impugned order and paper book filed by the appellant. No such ledger account for payment of brokerage, was furnished. Contention of the appellant that even without reducing cost of brokerage the investment made in the new agricultural land was more than a capital gain earned was misleading and distorted form of contention which was contrary to the provision of the law. In our considered opinion, any claim made by the appellant, which was not substantiated with any concrete proof. Such expenses cannot be allowed u/s.48 of Income Tax Act. Therefore, these grounds of appeal are dismissed.
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
So far ground no.5 with regard to cost of improvement of Rs.9,60,000/- indexed at Rs.20,82,093/- computing long term capital gain on sale of agricultural land at Makarba is concerned. Ld. AR submitted that cost of improvement incurred rightfully claim on land purchased in 1995 but despite of the fact that several opportunities were given by the lower authorities. Appellant did not discharge his ones by producing bill of the expenses incurred for improvement in support of his claim. In our considered opinion, we must have spent some amount maintaining the land, therefore, 50% of the amount should be allowed. Therefore, we direct the AO to calculate the 50% cost of improvement of the agricultural land and give the effect of the same to the appellant.
So far ground no.7 with regard to levying of interest is concerned, same to be calculated as per law by the AO.
So far ground no.8 with regard to initiation of penalty proceedings u/s.271(1)(c) of the Act is concerned. We do not want to adjudication because same is premature.
In the result, appeal in ITA No.1680/Ahd/2016 is partly allowed.
In the last we come to ITA No.1681/Ahd/2016 for Asst Year 2012-13:
“1. Ld. CIT (A) erred in law in confirming order of AO framing assessment u/s.143 (3) r w s 153A of the Act in absence of any incriminating material regarding any undisclosed income pertaining to the appellant
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
found during the course of search. Ld. CIT (A) ought to have quashed the order being illegal, unlawful and therefore void ab initio. It be so held now. 2. Ld. CIT (A) erred in law and on facts in holding that AO granted adequate opportunity to the appellant by elaborately discussing grounds for rejection of the claim in the order. Ld. CIT (A) failed to appreciate that failure to issue show-cause notice as regards the claims made in the return of income before any modification by AO vitiates the assessment proceedings. 3. Ld. CIT (A) erred in law in and on facts confirming disallowance by AO of Rs.4,00,314/- depreciation claimed on motor car. Ld. CIT(A) ought to have held depreciation as allowable u/s.32(1) of the Act on motor car used for the purpose of business of land trading and of the partnership firms. 4. Ld.CIT(A) erred in law and on facts in confirming action of AO treating profit from land trading activity as ‘income from other sources’ instead of ‘income from business’ and thereby disallowing depreciation on motor car. Ld. CIT(A) ought to have held profit from frequent & regular transaction of trading in land as ‘business income’ warranting to allowing depreciation on asset used for earning this income u/s.57(iii) of the Act. 5. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 6. Initiation of penalty proceedings u/s 271 (1)(c) of the Act is unjustified.”
So far ground nos.1 and 2 are concerned. Appellant did not want to press these grounds. Same are dismissed as not pressed.
So far ground nos. 3 & 4 with regard to depreciation claimed on motor car are concerned. In ITA No.1679/Ahd/2016, we have already given relief to the
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
appellant and allowed the depreciation claimed on motor car and same depreciation is allow u/s.32(1) of the Act.
So far ground no.5 is concerned. Same is consequential and need not to be adjudicated.
So far ground no.6 with regard to initiation of penalty proceedings u/s.271(1)(c) of the Act is concerned. Same is premature and need not to be adjudicated.
In the result, appeal of the assessee in ITA No.1681/Ahd/2016 for Asst. Year 2012-13 is allowed.
In the result, appeals filed by the assessee in ITA Nos.1678, 1679 & 1681/Ahd/2016 are allowed and ITA No.1680/Ahd/2016 is partly allowed. This Order pronounced in Open Court on 21/03/2018
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Ahmedabad; Dated 21/03/2018 Priti Yadav, Sr.PS
ITA Nos.1678, 1679, 1680 &1681/Ahd/2016 Shri Alkesh Laxmanbhai Patel Asst.Years – 2009-10, 2010-11, 2011-12 & 2012-13
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 11, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 06/03/2018 (dictation-pad 7 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member .. 07/03/2018. 3. Other Member... 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the f 6. air order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order come 7. s back to the Sr.P.S./P.S……. 8. Date on which the file goes to the Bench Clerk………………… 9. Date on which the file goes to the Head Clerk…………………………………... 10. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………True Copy