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Income Tax Appellate Tribunal, DELHI BENCHES “SMC” : DELHI
Before: SHRI BHAVNESH SAINI
Date of Hearing : 13.07.2018 Date of Pronouncement : 06.08.2018 ORDER
This appeal by assessee has been directed against the Order of the Ld. CIT(A)-13, New Delhi, Dated 12.06.2015, for the A.Y. 2006-2007.
Briefly, the facts of the case are that in this case notice under section 148 was issued on 19.03.2012 after recording reasons. The assessee stated before the A.O. that 2 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. return already filed declaring total income of Rs.8,88,380/- on 30.10.2006, in response to notice under section 148 of the I.T.
Act, 1961. The A.O. noted that the assessee declared income under the head "Short Term Capital Gains" to the tune of Rs.3,62,847/-. In support of the capita! gain computation, the assessee has placed on record P & L A/c from where it was noticed that assessee has claimed certain expenses which are not as per the computation of capital gains under section 48 of the Income Tax Act, 1961, which are Bank charges, Brokerage paid, Depreciation, Interest on loan, Interest on TDS, Professional Expenses, Short and Excess transfer fees, Miscellaneous Expenses and Bank charges (ICICI). The A.O. referred to Section 48 of the I.T. Act because the computation of capital gain made by assessee was not as per Income Tax Act.
The same reads as under :
“The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a 3 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. result of the transfer of the capital asset the following amounts, namely
(i) Expenditure incurred wholly and exclusively in connection with such transfer
(ii) The cost of acquisition of the asset and the cost of any improvement thereto;”
2.1. The A.O. considered Section 48 of the I.T. Act above and noted that expenditure as mentioned by the assessee except brokerage paid and transfer fees, are not wholly and exclusively in connection to the transfer of the property as per sub-section (i) of Section 48 of the I.T. Act. Accordingly, expenditure, except brokerage and transfer fees, which amounts to Rs.2,98,103/- is disallowed and added to the total income of the assessee. The income was computed at Rs.11,86,480/-.
2.2. The assessee submitted before Ld. CIT(A) that he is a commission agent and has income from commission from sale/purchase of properties. The assessee purchased two
4 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. properties during the A.Y. 2005-2006 and sold the same in A.Y.
2006-2007 and has made a short term capital gain. It was submitted that there is a direct nexus between the loans taken, on which, interest is charged and the payment made for the purchase of the property. The assessee relied upon several decisions in support of the same. The Counsel for the Assessee made submission regarding disallowance of interest on loan Rs.2,80,336/- and giving up the remaining claim of disallowance of other expenses. The Ld. CIT(A) noted that the main contention of the assessee is that interest on borrowed capital used for the acquisition of the asset should be included in the cost of acquisition as per Section 48(ii) of the I.T. Act. The Ld. CIT(A), however, noted that interest paid by the assessee is towards service of the loan and not a part of the capital asset.
Since the interest on borrowed capital is also allowed as revenue expenditure under the Act, therefore, it cannot be considered as capital expenditure. This ground of appeal of assessee were dismissed. As regards the reopening of the assessment, Ld. CIT(A) noted that assessee did not raise the issue of validity of 5 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. notice under section 148 before A.O. as well as in the submissions before him. Ld. CIT(A) also noted that since part of the expenditure disallowed by A.O. is accepted by the assessee are disallowable, therefore, it would prove that there was escapement of income. Therefore, there is justification for initiating re-assessment proceedings. This ground was also dismissed. The appeal of assessee has been dismissed.
I have heard the Learned Representatives of both the parties and perused the material on record. Earlier, this appeal of assessee was dismissed for default. Assessee, however, filed M.A. giving reasons for non-appearance. The assessee in his M.A. has also given an undertaking that he will not seek any adjournment in the aforesaid matter in future. The Tribunal after considering the explanation of assessee and the undertaking above, allowed the M.A. of assessee and appeal was re-fixed for hearing on merits. The assessee moved for adjournment that reasons for reopening of the assessment have not been provided and made a request for inspection of the 6 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. assessment record in April, 2016 and till today, no inspection have been done. Considering it is a old appeal for A.Y. 2006- 2007 and that assessee did not obey his undertaking given before the Tribunal in M.A. that assessee would not seek adjournment in future, the request for adjournment is rejected.
Learned Counsel for the Assessee reiterated the submissions made before the authorities below regarding disallowance of interest of Rs.2,80,336/- and submitted that interest was paid on borrowed funds which was utilized for acquisition of an asset. Therefore, assessee is entitled for inclusion of the cost of the interest in the cost of acquisition of asset as per Section 48(ii) of the I.T. Act. In support of his contention, he has relied upon the following decisions :
(i) Mr. Praveen Gupta vs. ACIT (2012) 20 taxmann.com 309 (Del.) (Tribu.) (ii) CIT vs. Mithlesh Kumar (1973) 92 ITR 9 (Del.) (HC) (iii) Pratibha Paliwal vs. ACIT (2012) 19 taxmann.com 355 (Del.) (Tribu.)
7 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. (iv) Gayatri Maheshwari vs. ITO, Ward-1(2), Jodhpur (2017) 88 taxmann.com 757 (Jodhpur) (Tribu.)
On the other hand, Ld. D.R. relied upon the orders of the authorities below.
After considering the rival submissions, I am of the view that the matter requires reconsideration at the level of the A.O. The A.O. has examined the issue in the light of Section 48(i) of the I.T. Act and noted that except brokerage paid and transfer fee, other expenditure were not incurred wholly and exclusively in connection to the transfer of the property. The A.O. did not examine the issue whether interest was paid on borrowed capital which was used for acquisition of the asset.
No details have been mentioned in the impugned orders and even no specific details have been referred to during the course of arguments. Therefore, interest of justice requires that the matter should be re-examined by the A.O. in the light of contention of the assessee, in the light of provisions of Section 48(ii) of the I.T. Act and the decision relied upon by the Learned
8 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. Counsel for the Assessee. I, accordingly, set aside the orders of the authorities below on this issue and restore the matter in issue to the file of A.O. with a direction to re-decide the above issue strictly on merits, as per law, by giving reasonable, sufficient opportunity of being heard to the assessee.
The assessee in the present appeal also raised the issue of initiation of re-assessment proceedings under section 147/148 of the I.T. Act. Learned Counsel for the Assessee stated that he is not in a position to argue this ground because he is not having even copy of the reasons recorded under section 148 of the I.T. Act. In the absence of any material on record and any serious challenge to the issue of re-assessment proceedings, I am of the view that no interference is called for in the order of the Ld. CIT(A) in rejecting this ground of appeal of assessee.
This ground of appeal of assessee is accordingly dismissed.
In the result, appeal of assessee is partly allowed for statistical purposes.
9 ITA.No.4885/Del./2015 Shri Jatinder Singh Taneja, New Delhi. Order pronounced in the open Court.