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Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI N.V. VASUDEVANAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The appeal filed by the assessee is directed against the order dated 18-10-2019 passed by Ld CIT(A)-1, Bengaluru and it relates to the assessment year 2015-16. 2. The assessee is aggrieved by the decision rendered by Ld CIT(A) in respect of cost of construction claimed by the assessee while computing long term capital gains arising on sale of a house property. The assessee has also raised grounds seeking further
Mr. Varghese Stephen, Bangalore
Page 2 of 9 deduction u/s 54 of the Act in respect of additional expenses incurred by the assessee.
The facts relating to the issues are discussed in brief. During the year under consideration, the assessee has sold a residential house property located at No.9, Block No.C, Sector No.XIV, Noida, Ghaziabad, U.P (near Delhi) for a sum of Rs.10.00 crores. The residential property was constructed on a plot allotted to the assessee’s father in the year 1981 by NOIDA authority. After the demise of assessee’s father, the property was transferred to the assessee’s mother, who wrote will in favour of the assessee. After her demise on 22.11.2002, the assessee became exclusive owner of the property. The assessee claimed cost of property as on 1.4.1984 as Rs.44.92 lakhs and claimed deduction of indexed cost of acquisition at Rs.3.76 crores. Accordingly the Long term capital gains was determined by the assessee at Rs.6.24 crores. The assessee claimed deduction u/s 54 of the Act to the tune of Rs.5.77 crores in respect of new residential property purchased by him.
Accordingly, the taxable amount of longterm capital gains was worked out at Rs.47.40 lakhs in the return of income.
The AO, during the course of scrutiny proceedings, noticed that the assessee has paid the amount of Rs.5.77 crores towards purchase of new house property on the strength of “Agreement to sell” and further no Sale deed was registered till the date of passing of assessment order, meaning thereby, the assessee has not Mr. Varghese Stephen, Bangalore
Page 3 of 9 obtained possession of the new house property. The AO took the view that obtaining the possession of house property is important for claiming deduction u/s 54 of the Act. Since the assessee did not obtain possession, he disallowed the claim for deduction u/s 54 of the Act.
With regard to the claim for deduction of indexed cost of acquisition, the assessee produced before the AO certain documents relating to Permission obtained for construction and did not produce any document to show that the building was actually constructed in 1984. Accordingly, the AO took the view that, in the absence of proof for period and details of construction, the whole claim of indexation is to be disallowed. Accordingly he disallowed a sum of Rs.3.63 crores.
In the appeal filed before Ld CIT(A), the first appellate authority allowed the claim for deduction u/s 54 of the Act.
With regard to the Cost of construction, the assessee submitted before Ld CIT(A) that he has submitted a valuation report obtained from a Government Approved Valuer named Shri B P Singh, who had valued the cost of construction. The cost of construction was arrived at under the following heads:-
Cost of construction of super structure - 17,67,180 2. Cost of final finishing - 17,20,000 3. Cost of constn of compound wall - 6,30,000 ------------------ 41,17,180 ===========
Mr. Varghese Stephen, Bangalore
Page 4 of 9 It was submitted by the assessee that the assessee has furnished the valuation report before the AO. Hence the Ld CIT(A) called for a remand report from the assessing officer. In the remand report, the AO submitted that the assessee has not furnished break-up details of expenses incurred on “cost of final finishing” and “cost of construction of compound wall”. Accordingly, the Ld CIT(A) restricted the claim of cost of final finishing to 30% of Rs.17,20,000/- and confirmed the disallowance of balance amount.
He also confirmed disallowance of cost of construction of compound wall.
Aggrieved, the assessee has filed this appeal.
The Ld. A.R. submitted that he is not pressing ground No.2.
Accordingly the same is dismissed as not pressed. He submitted that ground No.1 is general in nature.
The Ld. A.R. submitted that ground Nos.3 to 7 relate to disallowance in cost of construction confirmed by Ld. CIT(A). The Ld. A.R. submitted that the A.O., in his remand report, has observed that the assessee has not furnished breakup details of expenses incurred on ‘cost of final finishing’ and ‘construction of the compound wall’. He submitted that the assessee has since obtained breakup details from the Government Approved Valuer (GAV) and furnishing the same as additional evidence. The L. A.R. submitted that the assessee was in the process of shifting his residence from Delhi to Bangalore when the remand proceedings
Mr. Varghese Stephen, Bangalore
Page 5 of 9 were going on and hence, he could not contact the GAV for getting the details sought by the A.O. Accordingly, he submitted that there was reasonable cause for the assessee for not submitting the details before A.O. Accordingly, he prayed that the additional evidences furnished by the assessee may kindly be admitted and the issue may be restored to the file of the A.O. for examining the same afresh.
On the contrary, the Ld. D.R. objected to the admission of additional evidence by stating that the assessee did not furnish the relevant details before the AO in assessment proceedings as well as in remand proceedings. Accordingly she submitted that the additional evidence should not be accepted. In this regard, the Ld. D.R. placed her reliance on the decision rendered by Hon’ble Punjab & Haryana High Court in the case of Jawahar Lal Jain (HUF) Vs. CIT (2015) 59 taxmann.com 374 and also decision rendered by Chandigarh Bench of ITAT in the case of Rishi Sagar Vs. ITO (2013)
36 taxmann.com 508.
We heard the parties and perused the record. Admittedly, the breakup details of expenses incurred under the heads “cost of final finishing” and “cost of construction of compound wall” were not furnished before the A.O. along with valuation report submitted during the course of assessment proceeding. It is also a fact that the assessee could not submit the breakup details even during remand proceedings. In this regard, it has been submitted by the Mr. Varghese Stephen, Bangalore
Page 6 of 9 assessee that he was in the process of shifting his residence from Delhi to Bangalore and hence he could not contact the GAV who was having the relevant details. It has been submitted that the breakup details have since been obtained and accordingly they are placed as additional evidence. Considering the explanations furnished by the assessee, we are of the view that the assessee was prevented by sufficient cause in not furnishing the relevant details before the A.O. during the course of remand proceedings. We also notice that the A.O. did not examine the valuation report furnished by the assessee during the course of assessment proceedings.
Under these set of facts, in the interest of natural justice, we are of the view that the additional evidences furnished by the assessee deserves to be admitted. Accordingly, we admit the additional evidences. We notice from the break-up details that there is variation between the amount claimed by the assessee towards Cost of final finishing and cost of construction of compound wall. We notice that the GAV has valued the cost of compound wall at Rs.2,86,500/- as against the claim of Rs.6,30,000/-. The cost of final finish has been estimated by GAV at Rs.17,30,000/- as against Rs.17,20,000/- initially declared by the assessee. Hence the claim of the assessee by way of furnishing of additional evidences requires examination at the end of the A.O. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and Mr. Varghese Stephen, Bangalore
Page 7 of 9 restore the same to the file of the A.O. for examining the issue afresh.
Ground No.8 relates to claim for deduction u/s 54 of the Act in respect of additional expenses incurred on new property. The Ld. A.R. submitted that the assessee had not registered the new residential house property in his name, at the time when the return of income was filed for the year under consideration. Hence the assessee claimed actual amount that had been spent at that point of time as deduction u/s 54 of the Act. He submitted that the assessee has incurred the expenses by way of VAT, service tax, registration charges and stamp duty, aggregating to about Rs.56 lakhs, subsequent to the filing of return of income. He submitted that these expenses have been incurred within 3 years from the date of transfer of original asset. Accordingly, he submitted that the assessee is eligible for deduction of the additional expenses u/s 54 of the Act. Accordingly, he prayed that the A.O. may be directed to allow the additional expenses as deduction u/s 54 of the Act.
The Ld. D.R. on the contrary, submitted that the assessee is making a new claim before the ITAT and the said claim has not been made either before the A.O. or Ld. CIT(A). The Ld. D.R. further submitted that the assessee can very well move appropriate petition before the A.O. seeking his claim as per law. Accordingly she submitted that the ITAT should not admit this ground of the assessee.
Mr. Varghese Stephen, Bangalore Page 8 of 9 15. Having heard the rival submissions, we find merit in the contentions of Ld. D.R. We notice that the assessee is making claim for additional deduction for the first time before Tribunal. We notice that this claim is factual in nature and further relevant details are not available on record. Hence, we are of the view that the assessee should first seek appropriate remedy before the A.O in accordance with law. Accordingly, we reject the ground No.8 of the assessee.
Ground No.9 relates to cost of land adopted by the A.O. It is the submission of the assessee that the A.O. has adopted the cost of land at Rs.91,743/- as against Rs.1 lakh. Since this is a factual matter requiring verification at the end of the A.O., we restore this issue to the file of the A.O.
Ground No.10 relates to interest charged u/s 234B & 234D of the Act. This is consequential in nature.
In the result, the appeal filed by the assessee is treated as partly allowed.
Order pronounced in the open court on 10.07.2020.