SH. ALOK SWARUP,UTTAR PRADESH vs. ITO, MUZAFFARNAGAR

PER SUSHMA CHOWLA, VP These two appeals are filed by different assessees against separate orders of CIT(A), Muzaffarnagar, relating to assessment years 2010-11 against the order passed under section 143(3) and 147/143(3) of the Income-tax Act, 1961 (in short ‘the Act’).

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consideration, the assessee along with Shri Anil Swarup had sold on

09.03.2010 an immovable property bearing Khasra No.361/1, 363M & 364M in

Rakhba Village, Yusufpur ander Hudud. The assessee had declared the sale

consideration for the said property at Rs.38,92,000/-. The cost of acquisition

as on 01.04.1981 after indexation was claimed at Rs.29,41,530/-; cost of

improvement at Rs.5,69,000/- and the capital gains was declared at

Rs.3,81,470/-. The assessee is having one third share in the property along

with Shri Anil Swarup and M/s V.K. Singh (HUF). The Assessing Officer during

the assessment proceedings noted that the circle rate of the said property was

Rs.1,16,74,725/- as against the sale consideration shown at Rs.38,92,000/-.

The assessee explained that the property in question was under dispute for a

long time and documents regarding litigation were filed before the Assessing

Officer. The Assessing Officer also noted from the property documents that the

said property was registered in the name of two persons i.e. Shri Alok Swarup

and Shri Anil Swarup; but the assessee has declared 1/3rd share in the said

property. The assessee was asked to explain the same. The Assessing Officer

also asked the assessee to produce evidences regarding cost of improvement at

Rs.5,69,000/-. The assessee in its reply along with affidavit claimed that the

property in question was ancestral and it was mutated in the assessee’s and

his brother’s name in revenue record, though the property belongs to three

persons. The Assessing Officer on verification of the sale deed noted that the

property was sold by two owners i.e. Shri Alok Swarup and Shri Anil Swarup

S/o Late Vinod Kunwar Singh and concluded that the two were co-owners and

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M/s. V.K. Singh (HUF) being 1/3rd co-owner was not accepted. Further, the

Assessing Officer also referred valuation of the property to Valuation Officer in

light of provisions of section 50C of the Act; but since valuation report was not

received till the date of passing of the assessment order and the matter was

getting time barred, the Assessing Officer computed the capital gains by taking

the circle rate of the sale consideration. As the assessee failed to file any

evidence regarding the expenditure incurred on cost of improvement, the same

was not allowed. The net capital gain of Rs.87,33,195/- was distributed

amongst two co-owners and assessed in the hands of the assessee.

forwarded to the Assessing Officer for remand report and in reply, the assessee

filed the rejoinder also. The DVO’s report was also received and in the valuation

report, he had made adjustment of 50% on account of distress sales and 7.5%

of each on account of shape and size. The CIT(A) requisitioned the Valuation

Officer, Merrut, to explain the basis of such adjustments made. The CIT(A)

compared the assessed and declared value on the date of valuation at page-13

of the appellate order and directed the Assessing Officer to re-compute the

Income from Long Term Capital Gain on the basis of Valuation report of the

DVO, after making necessary verification from the parties.

computation of Income from Long Term Capital Gains in the hands of the

assessee.

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dated 30.03.2013 and the valuation report of the DVO is dated 18.04.2013.

Since, the same was received on later date, CIT(A) gave partial relief on this

account. He referred to the chart at page-13 of the appellate order and pointed

out that the difference between the declared value by the assessee and the

assessed value by the DVO is about 4.92%. He stressed that where the

difference is assessed less than 10% then the sale consideration as declared by

the assessee may be adopted. He placed reliance on series of the decisions in

this regard. He further pointed out that the cost of improvement has been

disallowed in the hands of the assessee and the claim was only with regard to

1/3rd of Rs.5,96,000/-. He pointed out that the said cost of improvements has

been allowed in the hands of M/s V.K. Singh (HUF). The next aspect which was

pointed out by the Ld. AR for the assessee was that the said asset was owned

by three co-owners i.e. Shri Alok Swarup, Shri Anil Swarup and M/s V.K.

Singh (HUF). First of all, he pointed out that in the hands of the M/s V.K.

Singh (HUF), 1/3rd share was declared and has been accepted; in the

succeeding year also, same transaction has been accepted. Our attention was

drawn to the copy of sale deed which is placed at page 254 to 289 of the year

under consideration and at pages 207 to 235 for the succeeding year. He

pointed out that the same narration was there in the two sale deeds and joint

co-ownership of three persons has been accepted. As regards ground no.5

linked to the issue of computation of income from capital gains, the same was

not pressed by the Ld. AR for the assessee.

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owned by three entities has to be proved by the documents. The sale deed talks

of two persons, though in the return of income, the capital gains has been

declared in three hands. He placed reliance on the orders of authorities below.

issue which is raised in the present appeal is with regard to the computation of

income from capital gains in the hands of the assessee for which ground of

appeal nos. 3 to 5 have been raised by the assessee. The ground of appeal no.5

raised by the assessee is not pressed and the same is dismissed as not

pressed.

assessee. In view of the section 50C of the Act, the value adopted by the State

Registration Authority are to be taken as sale consideration. In the case of the

assessee, the sale value declared in the sale deed was at Rs.38,92,000/-,

whereas as per the Registered sale deed, the value was Rs.1.16 Crores. The

Assessing Officer made reference to the DVO who in-turn has valued both the

pieces of land at Rs.40,86,000/-. The CIT(A) has adopted the said value

assessed by the DVO and had directed the AO to re-compute the income in his

hands. Where the difference between the value declared by the assessee and

value assessed by the DVO is 4.74% i.e. marginal difference which is less than

10% of difference between value declared and value estimated. Since it is case

of estimation of value by the DVO, the Courts have held that the marginal

difference needs to be ignored. We place reliance on the ratio laid down in 6

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Honest Group of Hotels vs ACIT (2000) 177 CTR 232 and Rahul Construction

vs DCIT in ITA No.1547/Pune/2007. Accordingly, we direct the Assessing

Officer to adopt the sale value declared by the assessee for computing the

Income from Long Term Capital Gains in the hands of the assessee.

assessee claimed that it is an ancestral property which was owned by three co-

owners i.e. Shri Alok Swarup, Shri Anil Swarup, both sons of Late V. K. Singh

and M/s V.K. Singh (HUF). The AO on the perusal of the sale deed noted that

the same was executed by two co-owners i.e. Shri Alok Swarup and Shri Anil

Swarup and consequently was of the view that income to the extent of 50% is

to be assessed in the hands of each assessee. In this regard, it may be pointed

out that the third co-owner is V.K. Singh(HUF) and the assessment of the V.K.

Singh(HUF) has already been completed and 1/3rd Income from Long Term

Capital Gain has been assessed in its hands. The same income now cannot be

assessed in the hands of balance of two co-owners. Another point also to be

noted is that in the succeeding year, similar transaction of sale of similar piece

of land jointly owned by three co-owners was declared i.e. 1/3rd share each and

same has been accepted in each of the hands. Our attention was drawn to the

sale deed for the year under consideration and also for the succeeding year.

Both the sale deed have been executed by two co-owners and the sale

consideration has been bifurcated amongst three persons. In these facts and

circumstances, we find no merit in the orders of the authorities below and

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direct the Assessing Officer to adopt 1/3rd net capital gains in the hands of the

assessee and balance 1/3rd share in the hands of the Shri Anil Swarup.

Rs.5,69,000/-(100%). The said expenditure was disallowed as no evidence was

filed by the assessee. We are of the view that principle of justice would meet in

case Rs.1,00,000/- each is allowed as cost of improvement. Accordingly, we

hold so. Thus, the ground of appeal nos. 3 and 4 are allowed.

deposited in the bank accounts. The addition of Rs.25,06,088/- has been made

on account of unexplained deposits in HDFC bank and addition of

Rs.3,13,097/- has been made on account of unexplained deposits in State

Bank of India.

the saving accounts with HDFC Bank in which cash was deposited on different

dates. The assessee explained that the source of cash was out of sale proceeds

of 1/3rd share in the property. However, the assessee’s contention was found to

be not acceptable and addition of Rs.25,06,088/- was made in the hands of the

assessee. Further, in the State Bank of India, sum of Rs. 3,13,097/- was

deposited by cash/cheques during the year. This bank account was also not

shown by the assessee in the return of income and the assessee failed to

explain the source of deposits. Hence, the same were treated as unexplained in

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the hands of the assessee. The Ld. CIT(A) upheld the addition against which

the assessee is in appeal before us.

of sale proceeds of the property and rental income and also out of agricultural

income shown. This was explanation of source of cash in the bank accounts in

HDFC bank. He pointed out that out of the total addition, cash deposit was

Rs.19,65,500/-, cheque deposits were Rs.5,40,349/- and interest was Rs.239/-

. With regard to the deposits in State Bank of India, the Ld. AR for the assessee

pointed that the cash was withdrawn from the account of ASJ Developers,

where he was partner and part of it was deposited in the account. From the

perusal of the assessment order, we find that the assessee had failed to

produce the necessary evidence with regard to the cash deposits and also the

source of cash deposits before Assessing Officer. In the interest of justice, we

are of the view that the onus is upon the assessee to strictly explain each and

every deposits in two bank accounts i.e. HDFC bank and State Bank of India,

as both these accounts were not declared in the return of income. Following

the principal of natural justice, we are of the view that the matter may be set-

aside to the file of the Assessing Officer with direction to the assessee to file

necessary evidence explaining the source of cash deposits or by cheque in the

aforesaid accounts. The Assessing Officer shall allow reasonable opportunity of

hearing to the assessee and decide the issue accordingly. The ground nos. 1

and 2 are thus allowed.

ITA No. 5928/Del/2016 ITA No.2919/Del/2015 17. In the case of Anil Swarup, the ground of appeal no.1 raised by the

assessee is general in nature.

dismissed.

Order pronounced in the open court on 22nd September, 2020.

Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) लेखा सद�य / ACCOUNTANT MEMBER उपा�य� / VICE PRESIDENT

�द�ल� / �दनांक Dated : 22nd September, 2020 Shekhar,

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त ( अपील ) / The CIT(A) 10

ITA No. 5928/Del/2016 ITA No.2919/Del/2015 4. मु�य आयकर आयु�त / The Pr. CIT 5. �वभागीय ��त�न�ध , आयकर अपील�य अ�धकरण , �द�ल� / DR, ITAT, Delhi 6. गाड� फाईल /Guard file.

आदेशानुसार/ BY ORDER,

स�या�पत ��त //True Copy// सहायक रिज��ार, आयकर अपील�य अ�धकरण ,�द�ल� Assistant Registrar, ITAT, Delhi