KORRA BALAJI NAIK,,VISAKHAPATNAM vs. THE ITO,, VISAKHAPATNAM

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 231/VIZ/2017 (Asst. Year : 2010-11) Korra Balaji Naik, vs. ITO, Ward-4(2), D.No. 37-12-54/2, NGO’s Visakhapatnam. Colony, Muralinagar, Visakhapatnam. PAN No. BPEPK 8663 M (Appellant) (Respondent)

Assessee by : Shri C. Subrahmanyam – FCA. Department By : Shri Deba Kumar Sonawal, CIT DR

Date of hearing : 24/07/2018. Date of pronouncement : 31/07/2018. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax -2, Visakhapatnam, dated 13/03/2017 for Assessment Year 2010-11. 2. Facts of the case, in brief, are that assessee is an individual, not filed his return of income for Assessment Year 2010-11. The Assessing Officer has issued a notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'Act') to the

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assessee on 08/11/2013 calling for the return of income based on the information available with the department with regard to sale of property. In response thereto, the assessee filed income tax return by admitting taxable income of Rs.1,95,168/-. It is noticed from the computation of total income enclosed to the return that the assessee admitted long term capital loss of Rs. 21,565/- by claiming cost of acquisition and cost of improvement amounting to Rs. 22,55,065/- (Rs. 5,21,565 + Rs.17,33,500/-). The said property was purchased by the assessee on 28/11/2007 vide document No. 613/2008 for a consideration of Rs. 5,21,565/-. With regard to assessee’s admission of capital loss of Rs. 21,565/- it is found that assessee’s claim in this regard is not correct as the transaction of sale of property by the assessee resulted in short term capital gain but not long term capital loss as the acquired property was in the possession of the assessee for less than 03 years. As regards, development/improvement expenditure claimed at Rs. 17,33,500/- while computing the long term capital loss, the assessee has not filed any documentary evidence before the Assessing Officer in support of the claim of expenditure incurred for the improvement of ground floor and first floor amounting to Rs. 17,33,500/-, which needs to be disallowed and added back to the assessee’s income. Instead of making this disallowance, the

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Assessing Officer accepted both the claims of the assessee and completed the assessment on 24/02/12015, which is erroneous and prejudicial to the interest of the revenue and, therefore, ld.Commissioner has issued notice under section 263 vide letter dated 06/12/2006 calling for the assessee’s objections, if any, as to why revisionary action should not be taken and the assessment should not be set aside for the Assessment Year 2010-11. In response to the show-cause notice, reply was filed on 31/01/2017 stating that the house purchased by the assessee on 28/11/2007 for Rs. 5.00 lakhs was in an unfinished stage and hence he made some improvements to it by investing a sum of Rs. 17,33,500/-. It is further submitted that he filed necessary bills before the Assessing Officer in support of his claim of expenditure incurred for improvements. The assessment was made on the strength of the valuation report submitted by the assessee and requested that the proceedings under section 263 may be dropped. The ld.Commissioner has considered the explanation given by the assessee and observed that the Assessing Officer has not examined improvement expenditure incurred by the assessee and only based on the valuation report, assessee’s claim is allowed. So far as long term capital loss is concerned, no explanation is given. Therefore, ld. Commissioner observed that the order

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passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue and directed the Assessing Officer to redo the assessment after considering all the details and after giving reasonable opportunity to the assessee and accordingly set aside the order passed by the Assessing Officer. 3. On being aggrieved, assessee carried the matter in appeal before the Tribunal. 4. Ld. counsel for the assessee only relied on the ground of appeal. 5. Ld. Departmental Representative strongly supported the order passed by the ld. Commissioner under section 263 of the Act. 6. We have heard both the sides, perused the material available on record and orders of the authorities below. 7. In this case, the Assessing Officer has allowed capital loss of Rs. 21,565/- and development expenditure of Rs. 17,33,500/-. In the course of the assessment proceedings, the Assessing Officer has not examined both the above aspects. When we pointed out to the Authorized Representative for the assessee that Assessing Officer has asked any question in respect of improvement cost incurred by the assessee, he was not able to answer the same. Even before the ld. Commissioner, the

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assessee has not filed any details in respect of improvement expenditure incurred by him, except stating that valuation report has been field before the Assessing Officer. When assessee has incurred huge expenditure for development, than the purchased value of the property, the Assessing Officer ought to have been examined all the details and passed assessment order. So far as long term capital loss is concerned, the assessee has not submitted any details before the ld. Commissioner. By considering all the facts and circumstances of the case and the detailed order passed by the ld. Commissioner, we are of the opinion that ld. Commissioner has rightly invoked jurisdiction under section 2623 of the Act and directed the Assessing Officer to redo the assessment. Therefore, we find no infirmity in the order passed by the ld. Commissioner under section 263 of the Act and no interference is called for. 8. In the result, appeal filed by the assessee is dismissed. Order Pronounced in open Court on this 31st day of July, 2018.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated : 31st July, 2018. vr/-

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Copy to: 1. The Assessee – Korra Balaji Naik, D.No. 37-12-54/2, NGO’s Colony, Muralinagar, Visakhapatnam. 2. The Revenue – ITO, Ward-4(2), Visakhapatnam. 3. The Pr.CIT-2, Visakhapatnam. 4. The D.R., Visakhapatnam. 5. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.