PANKAJ KUMAR JAIN,DELHI vs. ITO, NEW DELHI

This appeal filed by the assessee is directed against the order dated 19.05.2015 of the CIT(A)- 20, New Delhi relating to assessment year 2011-12.

Facts of the case, in brief, are that the assessee is an individual and derives income from house property, contract receipts and income from other sources. He filed his return of income on 30.07.2011 declaring total income of Rs.3,32,754/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee, in his computation of income for the year under consideration, has declared Nil income under the head “capital gains”. As per the AIR information, the assessee was reported to have sold immovable property for a consideration of Rs.60 lakhs. The Assessing Officer asked the assessee to furnish the details of the property sold. The assessee explained that he had sold an immovable property at 132, Chitra Vihar, Delhi for a consideration of Rs.60 lakhs on 30.04.2010 and has purchased a residential property subsequently valued at Rs.23.40 lakhs. After claiming indexed cost of acquisition at Rs.36,75,412/- from the sale consideration of Rs.60 lakhs, long term capital gain of Rs.23,24,588/- was earned on which deduction u/s 54 was claimed on account of cost of new residential property purchased at Rs.23,40,000/-. Accordingly, the capital gain was declared to be Nil.

The Assessing Officer observed that the assessee, for computing the indexed cost of acquisition, had claimed expenses of Rs.70,000/- on account of commission and stamp charges and Rs.7,30,000/- towards cost of improvement.

In appeal, the ld. CIT(A) upheld the action of the Assessing Officer.

Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :-

We have considered the rival arguments made by both the sides and perused the material available on record. So far as disallowance of Rs.7,30,000/- on account of expenditure incurred towards improvement made to the property is concerned, it is the submission of the ld. counsel for the assessee that during the assessment year 2007-08, the assessee had incurred the said expenditure. It was the submission of the ld. counsel for the assessee that the assessee, in the capital account as on 31st March, 2007, copy of which is placed at page 34 of the Paper Book, has declared drawings of Rs.13,40,292/- which includes the cost of improvement of Rs.7,30,000/-. It is also his submission that in the preceding year, there was no such huge withdrawal shown and since the asset was a personal asset, therefore, the assessee has not separately shown the cost of improvement by increasing the value of the asset. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the personal Balance Sheet/capital account of the assessee for the preceding and subsequent assessment years and find out as to whether there is any substantial variation in the drawings declared by the assessee. In case the personal withdrawals in the assessment year 2007-08 is substantial and the assessee can prove that there is no expenditure other than the expenditure incurred for improvement of the house, the Assessing Officer subject to verification of other details and circumstantial evidences, may consider the allowability of such claim of the assessee towards cost of improvement. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per facts and law. The first issue raised by the assessee in the grounds of appeal is accordingly allowed for statistical purposes.

So far as claim of Rs.70,000/- towards expenses incurred on commission or other court expenses is concerned, the ld. counsel for the assessee submitted that given an opportunity he is in a position to produce the broker before the Assessing Officer for his examination and the relevant details towards court expenses. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the above issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his claim by producing the broker to whom such commission has been paid for the examination of the Assessing Officer. Similarly, the assessee is also hereby directed to produce the relevant details substantiating the court expenses incurred by him. The second issue raised by the assessee is accordingly allowed for statistical purposes.

So far as addition of Rs.7,37,000/- is concerned, it is the submission of the ld. counsel for the assessee that if the cash flow statement is properly appreciated then there was no justification in making the addition on account of deposit in the bank account. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate that various deposits made in the bank account is out of withdrawals made by the assessee from other bank accounts and the cash available with the assessee. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 26th July, 2018.