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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
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’).
Both appeals relating to connected assessees were heard together and are being disposed of by this consolidated order for the sake of convenience.
In both the appeals one common issue has been raised, i.e. against the computation of Long Term Capital Gain in the hands of the assessee and second is against the addition made on account of cash deposits in the bank accounts.
Before proceeding further, it may be pointed out that the appeal in the case of Anil Swarup in has been filed after delay of two days which being minor is condoned and we proceed to decide the appeals.
Briefly in the facts of the case, the assessee individual had furnished the return of income declaring income from salary, income from property and other sources and also income from Long Term Capital Gains. During the year under 2 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 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.
Before the CIT(A), the assessee filed written submissions which were 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.
The assessee is in appeal against the order of the CIT(A) with regard to computation of Income from Long Term Capital Gains in the hands of the assessee.
The Ld. AR for the assessee pointed out that the assessment order is 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.
The Ld. DR for the Revenue pointed out that the claim of the land being 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.
We have heard the rival contention and perused the records. The first 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.
11. Now, coming to the adoption of the sale value in the hands of the 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 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.
Now, coming to the aspect of extent of ownership of the assessee. The 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 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.
Now coming to the last linked issue i.e. cost of improvement claimed at 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.
14. Now coming to the next issue raised with regard to source of cash 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.
15. Briefly in the facts relating to the issue, the assessee had not declared 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 the hands of the assessee. The Ld. CIT(A) upheld the addition against which the assessee is in appeal before us.
The Ld. AR for the assessee pointed out that the cash deposits were out 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.
In the case of Anil Swarup, the ground of appeal no.1 raised by the assessee is general in nature.
Ground no.2 is against the initiation of proceeding under section 147 of the Act. The ground of appeal no.3, to 5 is against the computation of income from Long Term Capital Gain. We have already adjudicated this issue in the case of Shri Alok Swarup. Following the same parity of reasoning, we allow the claim of the assessee in this regard. Since, we have decided the issue on merits, we find that the issue of reassessment proceedings is academic and dismissed.
18. Ground of appeal no.6 raised by the assessee is against the levy of interest under section 234A, 234B and 234C of the Act, which is consequential in nature.
In the result, both appeals of different assessee are allowed.
Order pronounced in the open court on 22nd September, 2020.