HANUMAN PRASAD GUPTA,JAIPUR vs. ITO, JAIPUR

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ITA 807/JPR/2016Status: DisposedITAT Jaipur05 January 2017AY 2008-099 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the construction was indeed made by the assessee, based on the contractor's agreement, payment details, and electricity bills. Therefore, the lower authorities erred in not allowing the benefit of the indexed cost of construction.

What were the facts?

The assessee sold a house and claimed indexed cost of construction for improvements made in FY 1993-94 and 1994-95. The Assessing Officer and CIT(A) disallowed this claim due to lack of evidence, including the inability to produce the contractor and proof of payment.

What were the issues?

Whether the indexed cost of construction for improvements made in earlier financial years should be allowed as a deduction for calculating long-term capital gains, despite the absence of the contractor and direct evidence of payment?

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES (SMC

Before: SHRI BHAGCHANDvk;dj vihy la-@ITA No. 807/JP/2016

For Appellant: Shri P.C. Parwal, CA jktLo dh vksj ls@
Hearing: 28/12/2016

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 807/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Shri Hanuman Prasad Gupta The ITO Vs. A-17, Barkat Nagar , Ward – 6(3), Tonk Phatak, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ANXPG 5215 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by: Shri P.C. Parwal, CA jktLo dh vksj ls@ Revenue by: Shri R.A. Verma, Addl.CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 28/12/2016 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 5 /01/2017 vkns'k@ ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT(A)-2 , Jaipur dated 25`-04-2016 for the assessment year 2008-09 raising following ground of appeal. ‘’The ld. CIT(A) has erred on facts and in law in not accepting the contention of the assessee regarding construction cost incurred by him in F.Y. 1993-94 and 1994-95 and thus upholding the action of AO in not allowing the indexed cost of improvement at Rs.

2 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

9,59,734/- and Rs. 2,12,741/- respectively and computing the Long term capital gain at Rs. 31,46,668/- is against Long term capital gain at Rs. 19,74,193/- computed by the assessee.’’

2.1 The facts of the case as emerges from the order of the ld. CIT(A) is

as under:-

‘’2.3 I have perused the facts of the case, the assessment order and the submission of the appellant. The facts of the case are that, on the basis of information available with the Assessing Officer, that the assessee had sold a house for a consideration of Rs. 35,00,000/- as per Ikrarnama, notice under section 148 of the I.T. Act, 1961 was issued as no return of income had been filed. In the return filed in response to this notice, the assessee besides claiming cost of acquisition at Rs. 1,43,000/- in Financial Year 1992-93 also claimed cost of construction of Rs. 4,25,000/- in F.Y. 1993-94 and Rs. 1,00,000/- in F.Y. 1994- 95. The evidences regarding the cost of improvement had been filed and even after opportunities, the assessee could not produce any details for the same and hence the same was not allowed by the Assessing Officer.

In the present proceedings, the appellant submitted that it had purchased a house property which had one room at that time. Now construction of two room, drawing-dining kitchen, Bath were constructed. It was further stated that the agreement for construction could not be traced during assessment proceedings and the same had been traced and may be admitted as additional evidence. The same was admitted and forwarded to the Assessing Officer for his comments.

In the remand report dated 14-03-2016, the Assessing Officer stated that the assessee had been asked to produce the Constructor Shri Lal Chand. The Authorized

3 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

Representative had admitted that case being very old, the contractor could not be produced. The assessee was also asked the mode of payment to the contractor and whether return of income for F.Y. 1993-94 and 1994-95 had been filed by the assessee, it was informed that the payment was made in cash and the assessee had not filed his return of incomes for those years. The Assessing Officer thus submitted that the claim of the assessee was not allowable.

In the rejoinder filed to the remand report, it had been stated that since the matter is very old, it is not possible to produce the contractor. Further, it is stated that the agreement now filed should be accepted and expenditure incurred allowed.

As already discussed earlier, the fact of the construction having got done through a contractor or the name of the contractor was not mentioned in the original proceedings. It was not the case of the assessee that the fact of the construction through the contract had been mentioned and only the agreement could not be produced. Further, the returns for these years are also not filed, no evidences for payments made have been adduced. All payments are made in cash. Further, the agreement itself appears to be an afterthought as it is not corroborated, secondly the period of construction for just two rooms, as per the agreement, is spread over 18 months i.e. from 1-4-1993 to 31-10-1994, the total payment shown by the assessee is Rs. 4,25,000/- but if the amounts received, shown on the reverse of the agreement and advance received at the time of signing the agreement are taken, it comes to Rs. 4,50,000/-. No other identification of the contractor has been produced. All the factors clearly point out that the agreement now filed cannot be given any credence. The cost of construction claimed by the appellant cannot be allowed. The ground of appeal is dismissed.’’

4 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

2.2 During the course of hearing, the ld. AR of the assessee submitted

that the ld. CIT(A) has erred in not allowing the benefit of cost of

construction carried out by the assessee in F.Y. 1993-94 and 1994-95.

2.3 The ld. DR relied on the order of the ld. CIT(A).

2.4 I have heard the rival contentions and perused the materials

available on record. It is noted from the records that the assessee filed the

return declaring total income of Rs. 1,40,700/- on 31-07-2008. The AO

on the basis of the information noticed that the assessee had sold house

No. A-17, Adrash Basti, Tonk Phatak, Jaipur for a consideration of Rs.

35.00 lacs to Smt. Asha Gupta r/o 3-NA-4, Jawahar Nagar Jaipur as per

Ikrarnama dated 15-02-2008 and 15-06-2008 and affidavit dated 11-11-

2010. The AO further noticed that the assessee had received the sale

consideration of Rs. 25.00 lacs through cheques as per details as under:-

Cheque No. Date Amount 614196 27-03-2008 5,00,000 614197 28-03-2008 7,00,000 614198 28-03-2008 5,00,000 614199 28-03-2008 8,00,000 Total 25,00,000

Balance Rs. 10.00 lacs were taken in cash and post dated cheque. The AO

observed that the possession was also handed over to the buyer in Feb.

2008. Thus the transaction relating to sale of the immovable property

5 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

stood completed in F.Y. 2007-08 but the assessee had neither disclosed

this transaction in his return filed for A.Y. 2008-09 on 31-07-2008 nor the

capital gain arising on sale of house had been shown in the return. The

AO observed that since the income chargeable to tax had escaped

assessment on account of assessee's failure to disclose the capital gain in

the return and pay due taxes thereon, the proceedings u/s 147 were

initiated by issuance of notice 148 dated 18-03-2013 which was duly

served upon the assessee. In response to said notice, the assessee filed the

return electronically showing total income of Rs. 21,14,890/- and

showing Long term capital gain of Rs. 19,74,193/-. The assessee also paid

tax of Rs. 7,16,490/-. After receipt of return in response to notice u/s 148,

notices u/s 143(2) and 142(1) were issued to the assessee. Before the AO,

the assessee submitted that the assessee had sold his house No. A-17l,

Adarsh Basti, Tonk Phatak, Jaipur to Smt. Asha Gupta as per Ikrarnama

dated 15-02-2008 and 15-06-208 for Rs. 35.00 lacs but the capital gain

was not shown in the return. In the computation of total income filed with

the return, the assessee had shown Long term capital gain as under:-

6 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

Sale Consideration Rs. 35,00,000/- Less: Indexed cost F.Y. 1992-93 143000/223*551 Rs. 353332 F.Y. 1993-94 425000/244*551 Rs. 959734 F.Y. 1994-95 100000.259*551 Rs. 212741

Rs. 15,25,807/- Rs. 19,74,193/- The AO observed that the assessee had filed the registered sale deed

dated 23-05-1992 in support of purchase of the house from Smt. Imrati

and his sons for Rs. 1,25,000/- on which stamp duty of Rs. 14,780/- was

paid. However, no evidence or details regarding the cost of improvement

claimed had been filed. During the course of assessment proceedings, the

AO required the assessee to furnish complete details and evidence in

support of the claim of indexed cost of acquisition / improvement as

claimed in the return for which the assessee filed the reply before the AO.

From the reply filed by the assessee before the AO, the AO noted that the

assessee had no details of evidence in support of construction made on

the said plot. The only detail furnished was copies of some electricity

bills showing consumption of electricity in the months of April 2001 (400

Unit), Oct. 2002 (1000 Unit), April 2002 (400 Unit) etc. The AO thus

observed that in absence of details of evidence whatsoever to support the

construction supported to have been made in 1993-94 and 1994-95, the

7 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

claim of indexed cost of improvement made by the assessee is not subject

to verification and therefore, cannot be allowed. The AO thus observed

that in such a situation when there is no iota of evidence on record to

support the claim of indexed cost of improvement, the Long term capital

gain was worked out as under:-

Sale Consideration Rs. 35,00,000/- Less: Indexed cost of acq. F.Y. 1992-93 143000/223*551 Rs. 3,53,332/- LTCG Rs. 31,46,668/-

In first appeal, the ld. CIT(A) confirmed the action of the AO as to Long

term capital gain computed by the AO. It is noted from the contentions of

the assessee that there is no dispute as to the fact when the assessee

purchased the property, only one room was constructed on it. However,

when the assessee sold the property, two rooms alongwith latrine,

bathroom, kitchen etc was constructed as stated by the Smt. Asha Devi

Gupta, buyer of the property in her statement dated 16-01-2012 before the

AO (Assessee's paper book page 50). It is also noted that such

construction is also evident from the copy of the electricity bills where

the consumption of electricity units between April 2001 to Nov. 2007 was

ranging from 400 Units to 1000 (Assessee's paper book pages 13 to 20).

Hence it shows that the construction was made by the assessee on this

8 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

plot after he purchased the house. It is also noted from the contractor’s

agreement dated 01-04-1993 executed between the assessee and

Contractor Shri Lal Chand (assessee's paper book page 5- stamp paper of

Rs. 5/- purchased on 31-03-1993) whereby Shri Lal Chand Thekedar was

to demolish the old room and construct 2 rooms, kitchen, drawing, dining

and latrine, bathroom having an area of 1175 sq.ft for Rs. 5.25 lacs

inclusive of material and labour. It is also noted on the backside of this

stamp paper that datewise details of the payment received by Shri Lal

Chand Thekedar is mentioned. This agreement dated 01-04-1993 was

also produced before the ld. CIT(A) as an additional evidence and the

same was admitted by him (assessee's paper book page 4).It also appears

from the assessee's paper book page 7 whereby the assessee had

specifically mentioned to the AO in remand proceedings vide letter dated

14-03-2016 that Shri Lal Chand Contractor who carried out the

construction at that time was living in Tila No.5, Jawahar Nagar, Kaschi

Basti Jaipur but after construction he was not in contact with the assessee

and the contractor was of around 65 years of age in the year 1993.

Looking into all these facts, circumstances of the case and also the

evidences produced before the Bench, it is established that the

9 ITA No. 807/JP/2016 Shri Hanuman Prasad Gupta vs. ITO, Ward- 6 (3), Jaipur

construction was made by the assessee and the lower authorities erred in not allowing the benefit of indexed cost of construction carried out by the assessee in F.Y. 1993-94 and 1994-95. Hence, the appeal of the assessee is allowed 3.0 In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 5 /01/2017. Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 5/01/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Hanuman Prasad Gupta, Jaipur izR;FkhZ@ The Respondent- The ITO, 6(3), Jaipur 2. 3. vk;dj vk;qDr¼vihy½@ CIT(A). vk;dj vk;qDr@ CIT, 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 807/JP/2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

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