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Assessee by : Sh. N.M. Porwal Advocate Revenue by : Sh.M.C. Omi Ningshen (Sr DR) Date of hearing : 03.07.2018 Date of Pronouncement : 29.08.2018 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This group of three case, out of which two cross appeals and Cross Objection by assessee are directed against the order of Commissioner (Appeals)- 27, Mumbai dated 24.02.2013, which in turn arises from assessment order dated 21.03.2014 passed under section 143(3) read with section (rws) 263 of Income–tax Act for assessment year 2007-08. The assessee has raised following grounds of appeal; (1) On the facts and circumstances of the case, the Commissioner (Appeals) erred in confirming the addition of unexplained expenditure of Rs. 28 lakhs of the total Marriage expenses of Rs. 35 Lakhs disallowed by ld. assessing officer after allowing a sum of Rs.7 lakhs to be treated as explained expenditure. (2) The Commissioner (Appeals) erred in not appreciating the total unexplained Marriage expenses of Rs.9,63,309/- by Sh. Kaku Bhatia (father) and Sh. Tusidass Bhatia(Grandfather) was paid in India out of which a sum of the Rs.7 lakhs has been allowed by the Commissioner (Appeals). (a) Kaku Bhatia (father) Rs.6.72,997/- (b) Tulsidass Bhatia (Grand Father) Rs.2,90,312/-
2. The assessee vide his application dated 2nd February 2018, raised following additional grounds of appeal:
(1) The Commissioner (Appeals) erred in observing on page No. 17 – para 2.4.9 that AR submitted that a substantial part of Marriage expenditure, was borne by appellant’s relatives in Dubai but no evidence in the form of such credit cards /cheque numbers / bills have been submitted. This finding is contrary to the material/ credit cards/ Cheque No’s was submitted to Commissioner (Appeals) vide written submission dated 1st January 2014 acknowledged by Commissioner (Appeals) staff on 3rd January 2014. (2) The Commissioner (Appeals) erred in observing the appellant has not been able to discharge the onus of proving the source of the estimated expenditure when the assessee had submitted names of all the relatives and their credit cards vide copy of written submission appearing at page No.380 to 387 on the paper book volume I (b) comprising page No. 1 to 301 duly acknowledged by Commissioner (Appeals) staff on 3rd January 2014.
(3) The ld CIT(A) erred in not appreciating that major expenditure in Dirhmas 1,29,095/- (equallent to Rs. 21,94,619/-) was incurred/ paid outside India in Dubai by the appellant’s real brother, Sh. Dilip Bhatia NRI who is permanently residing in Dubai, through his Credit Cards. 3. The revenue in its cross appeal has raised following grounds of appeal:
(1) Whether on the facts and circumstances of the case and in law, the ld CIT(A) erred in allowing the expenses of Rs.1,02,60,480/-incurred on the development work of the property and which was claimed to be entitled for computation of long- term capital gain without ascertaining genuineness of expenses ? (2) Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in allowing expenses of Rs.7 lacks on the occasion of her sons marriage which remained unexplained expenditure under section 69 ?
On the service of notice of revenue’s appeal the assessee has filed his cross objection raising the following grounds; (1) On the facts and in the circumstances of the case and in law, the ACIT erred in observing on page No.8 of her Assessment Order that both the assessee / contractor tried to create a illusion of some work done on the land and that there was no question of any demolition of old building / structures etc, and the claim of the assessee of having done any development on the property cannot be accepted.
(2) The ACIT erred in observing on page No.9 of her Assessment Order (para viii) that the assessee has arranged fake bills in the guise of development/improvement on land to avoid legitimate payment of taxes.
(3) The ACIT erred in observing on page No.6 - para 2 of the Assessment Order that the first part payment was made to the contractor on 18/12/2006 after the contractor having raised three bills aggregating to Rs.1.64 Crores on 9/10/2006, 10/11/20067 and 1/12/20067 thereby raising doubt about genuinity of these bills as no contractor would carry out any work without advance.
(4) The ACIT failed to appreciate the following correspondence exchanged between the assessee and M/s. National Trade Board Ltd and that appointment of M/a. Omprakash Amarnath was at the instance of M/s. National Trade Board Ltd who had instructed M/s.Omprakash Amarnath to start the work in the last week of September,
2006 and they had taken responsibility to pay M/s.Omprakash Amarnath if the assessee failed to pay vide their letter dated 30/9/2006. a) Assessee / Sandip Jain's letter dated 7/8/2006. b) M/s.National Board of Trade Ltd letter dated 21/8/2006 c) Assessee / Sandip Jain's letter dated 26/9/2006. d) M/s.National Board of Trade Ltd letter dated 30/9/2006 (5) The ACIT failed to appreciate the purchase agreement dated 25th July, 1998 towards purchase of land along with structures & buildings vide which there were following structures and buildings as on 25th July, 1998:- i. Nurses' Quarters - I ii. Nurses' Quarters - II iii. Nursing Home Building iv. Office &OPD Building v. Doctor's Quarters vi. Maternity & General Check-up Building vii. Canteen Shed viii. Well (6) The ACIT failed to appreciate that as on the date of Sale Deed dated 15th January, 2007 there was only one structure "built up area -1200 sq.ft" as against eight structures as on 25/7/1998 thereby proving that prior to the sale of the said land, all the remaining seven structures / buildings were demolished and filled in with plump concrete etc.
Brief facts of the case are that the assessee filed return of income for assessment year 2007-08 declaring total income at Rs.1,37,55,900/-. The return was selected for scrutiny and assessment order under section 143(3) was completed on 18th September 2009, accepting the returned income declared by assessee.
Subsequently, the assessment was revised by learned CIT-16 under section 263 on 29th March 2012. The assessing officer was directed by ld. CIT -16 to re- frame the assessment order the de novo. The assessing officer completed the 4 assessment order in accordance with the direction of CIT-16 and pass fresh assessment order on 21 March 2013 under section 143 (3) rws 263. The assessing officer while passing assessment order made addition of Rs. 1.02 Crore by disallowing expenses incurred on the development work of the property, on the sale of which the assessee claimed long-term capital gain. The assessing officer also disallowed marriage expenses of assessee’s son of Rs.35 lakhs as unexplained expenditure. On appeal before CIT (A) the expenses incurred on development of property of Rs. 1.02 Crore was allowed, however the marriage expenses was allowed only to the extent of Rs. 7.00/- lacks. Therefore, being aggrieved both the parties have filed their cross appeals raising the grounds of appeal are referred above. On service of notice of revenue’s appeals, the assessee filed cross objections raising various grounds of objections as referred above.
6. First we are taking the appeal filed by the assessee vide ITA No. 1783/M/2014.
7. We have heard the submissions of learned authorised representative (AR) of assessee and the departmental representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee has filed an application for admitting the additional grounds of appeal. The ld. AR of the assessee submits that no new facts are necessary to be brought on record for considering the additional grounds of appeal. The additional grounds raised by the assessee are emanating from the record of lower authorities. The ld. AR of the assessee in support of his submission relied upon the decision of Hon’ble Supreme Court in National Thermal Power Corporation Ltd (NTPC) Vs CIT (29 ITR 383 SC). On merits the ld AR submits that, the assessee filed his letter dated 12 March 2012 before ACIT /assessing officer explaining that the marriage took place in Dubai in United Arab Emirate (UAE), all expenses were incurred by relatives and other family members in Dubai. The ld CIT(A) appeals allowed only Rs.7.00/- lakhs out of total expenditure of Rs.35 lacks and balance of Rs. 28 lacks was sustained. In the letter furnished to be assessing officer on 12th March 2012 the assessee explained the facts in the following way;
(A) Expenditure incurred in India (i) By Kaku T Bhatia (father) Rs.6,72,997/- (ii) By Tulsidass Bhatia ( Grandfather) Rs.2,90,312/- Total Rs. 9,63,309/- Expenditure incurred in India allowed by CIT(A) Rs. 7,00,000/- Balance confirmed Rs. 2,63,309/- (B) Expenditure incurred in Dubai Dirham Rupee (i) by Dilip T Bhatia ( Uncle NRI) 1,29,095.24 21,94,169/- 2,6,375.00 4,48,375/- (ii) by Vinod Bhatia ( father in law NRI) 1,55,470.24 26,42,544/- The ld. AR of the assessee further submitted that all the payments were made by credit cards and from State Bank of India accounts. The assessee furnished all the evidences showing the payments by way of credit card statement as well as 6 cheque No. of the respective bank through payments were made and debited to the respective four persons, copies of which are filed at page No 258 to 356 of the paper book. It was submitted that the moot point for consideration is when the payments were made by three persons through, the credit card statements of which is on record, how the same can be disallowed in the hands of the assessee.
The ld. AR of the assessee has explained the exchange rate of currency of Dubai about the expenses incurred by persons in the following manner; Name of person Payments in Payment in Dirhams Total in Rupees Converted into Rs. Rupees 1. Dilip Bhatia (Uncle) 1 ,29, 095.24/- X Rs.17/- 21,94,619.08/- 2. Tulsidass Bhatia 2,90,312/- 2,90,312.00/- ( Grandfather) 3. Vinod Bhatia (Father 26,375/- X Rs.17/- 4,48,375.00/- in law) 29.33,306.08/- In support of his submission the learned AR of the assessee relied upon the decision of the High Court in case of Yadu Hari Dalmia Vs CIT (ITR 126 48)
(Delhi). The ld AR prayed that the entire addition may be deleted.
On the other hand ld. DR for the revenue supported the order of authorities below. The ld DR for the revenue submits that the assessee could not substantiate the contention by furnishing documentary evidences either before the assessing officer or before ld. CIT(A) that the marriage expenditure was incurred by his relative. The assessee furnished evidences in respect of expenditure of Rs. 7.00 lakhs only, therefore, the CIT(A) appeals sustained the addition to the extent of Rs. 28.00 lakhs. On the application for additional 7 grounds of appeal
the ld. DR for the revenue submits that these facts which is raised by the assessee are not available on record therefore the assessee has no right to raise such additional grounds of appeals. The ld. DR prayed for dismissal of the application for raising additional grounds of appeal and appeal as well.
9. We have considered the rival submission of the parties and gone through the orders of authorities below, we have also deliberate on the decisions referred by lower authorities as well as cited by ld representative of the parties. During the assessment proceeding the assessing officer noted the assessee failed to provide complete detail of the expenses on the marriage of his son and o substantiate that the marriage expenses were incurred by his son hence the assessing officer made addition on account of unexplained expenditure. The ld CIT(A) sustained the addition to the extent of Rs. 28 lakhs on his observation that the assessee did not provide any evidence to show that actual payment are made by his son or his relative or other family members in Dubai. The ld CIT(A) observed that the assessee claimed that all the expenses were borne by relatives and mostly by credit cards, but the assessee was not able to provide the evidence. It was further noted by ld CIT(A) that the assessee could provide the bills of Rs. 6.66 lakhs only, the learned CIT(A) concluded that at the best a sum of Rs. 7.00 lakhs is said to be explained by the assessee, and granted the relief to that extent only. Rest of the addition of Rs. 28 lacks was sustained.
Before us the ld AR for the assessee has submitted the detailed explanation and submitted that all the details of expenditure incurred by the relatives were furnished to the staff of ld CIT(A) along with the submission dated 01.01.2014 received on 03.01.2014. However, the ld CIT(A) has referred in its order that the assessee failed to substantiate his expenditure by evidences. We have further noted that the application of the assessee dated 01.01.2014 is duly acknowledged by official of the ld CIT(A) vide acknowledgement dated 03.01.2014. Further, we have noted that the assessing officer in para 7.3 of his order has recorded the contention of the assessee that the expenses of marriage in Dubai, was incurred by his son. Considering the corroborative contention of the assessee before the assessing officer as well as before ld CIT(A), that the marriage expenses were incurred by the relatives and the assessee has furnished statement of credit card payments and the bank statement of his relatives, we admits the additional grounds of appeal
raised by the assessee vide his application dated 02.02.2018.
11. In the additional grounds of appeal the ld AR for the assessee has raised the grounds that despite filing the evidences in the form of details of the credit cards and cheques numbers and explaining the source of the expenditure incurred on the marriage of his, by his relative, the additions was made at the hands of the assessee. We have noted that the lower authorities has not examined the evidences furnished by assessee as claimed by him, therefore, we deem it appropriate to restore the additional grounds of appeal and original grounds of appeal to the file of assessing officer to examined the issue afresh and pass the order in accordance with law; after considering the evidences furnished by the assessee. Needless to order that before passing the order the assessing officer shall grant opportunity to the assessee of hearing. The assessee is also directed to provide all information and the evidence in his possession to the assessing officer and not to seek the dates without valid reasons. As this case relates to AY 2007-08, the assessing officer shall make all endeavours to conclude the proceedings as early as possible. In the result the grounds of the appeal raised by the assessee is allowed for statistical purpose.
12. In the result the grounds of the appeal is allowed for statistical purpose. I TA No.3358/M/2014 by Revenue.
13. Ground No. 1 relates to deleting the disallowance of cost of development. The ld. DR for the revenue supported the order of assessing officer. The ld. DR further submits that there is no reference in the sale deed about the removal of the structure on the land/ asset, on which the assessee has claimed to have incurred expanses on account of improvement, on sale of which the assessee claimed long-term capital gain. The learned DR for the revenue prayed that the order of CIT (A) may be reversed and assessing officer may be restored.
14. On the other hand the ld. AR of the assessee supported the order of CIT (A). The ld. AR further submits that at the time of purchase of the land the structure of buildings were duly mentioned in the agreement dated 25th July 1998, the said land was purchased with structure. As per agreement dated 25.07.1998 there was structure of (i) Nurses Quarter-I, (ii) Nurses Quarter-II, (iii) Nursing Home Building, (iv) Office and OPD Building, (v) Doctors Quarter, (vi) Maternity and General Check up building, (vii) Canteen shed and (viii) Well. Whereas as per sale deed dated 15.01.2007, copy of which is also filed on the paper book, clearly shows that there was only one structure, out of eight structures against the agreement dated 25th July 1998. This fact clearly establishes the structure except one was demolished and was filled up with plump concrete. The job work of demolition was carried out by M/s Omprakash Amarnath, which cannot be considered as bogus. The assessee has furnished all the details of the work executed by M/s Omprakash Amarnath. The ld. CIT (A) after considering the evidences deleted the addition made by assessing officer by disallowing the cost of development on the land. In support of his submissions the ld AR for the assessee relied on the decision of Tribunal in DCIT Vs Vijay Grihnirman Pvt Ltd (2016) 46 CCH 0549 (Mum Tri) and decision of Hon’ble Supreme Court in Manglore Ganesh Beedi Works Vs CIT (2015)94 CCH 54 (SC)/ 378 ITR 640 (SC).
We have considered the rival submissions of the ld. AR/DR of the parties, deliberated on the various laws relied by the lower authorities and the decisions relied by the parties and the material placed before us. In the return of income the assessee claimed long term capital gain on sale of land at Indore. The assessee worked out the capital gain in the following manner;
Particulars Amounts in Rs. Cost Price 1,65,95,000 Improvement cost 2,99,15,000 Expenses in connection with sale 12,000 Total 4,77,10,000 Sale consideration 9,00,00,000 Profit 4,22,90,000 Assessee’s Share @ 32.10% 1,35,75,090 16. The assessee explained that the said land was purchased by a group of five person including the assessee vide sale deed dated 25th July 1998 for total consideration of Rs. 1,50,30,000/-. Further additional cost on account of stamp duty of Rs. 14,27,860/-, Rs. 1,20,000/-on registration, and Rs. 17,140/- on miscellaneous expenses were incurred, thus additional total cost of Rs. 165,95,000/- was incurred. The assessee invested Rs. 58,25,000/- in the said 12 land as his share being 33%. The land was purchased in the individual capacity of all the partners by using the amount invested in the land. The said land was sold to M/s National Board of Trade Ltd at the sale consideration of Rs. 9.00 Crore. The total sale consideration Rs. 4.37 Crore was agreed, out of which Rs. 2.99 Crore was paid to M/s Omprakash Amarnath a contractor for development of the land, which was required by the purchaser before the transfer of land. The said contractor M/s Omprakash Amarnath demolished the seven structure and the site was levelled, dry well was filled up with the concrete, the foundation of the building structure was also filled up by concrete, septic tanks were removed and boundary wall was also prepared. The assessee also furnished all bills and the details of the work executed by M/s Omprakash Amarnath. The contentions of the assessee were not accepted by the assessing officer. The assessing officer concluded that the assessee tried to create a illusion by having executed work on the land, however, there is no mention of any structure built on the land. The assessing officer also doubted about the cost incurred on the land, therefore, the cost of improvement was denied to the assessee and worked out the capital gain of the assessee in the following manner;
Particulars Amount in Rupees Cost Price 16595000 Improvement cost Nil
Expenses in connection with sale 117 6000 Total 17771000 Sale consideration 90000000 Profit 72229000 Share of assessee @ 33% 23835570 17. The assessee has already shown capital gain of Rs. 1,35,75,090/-in his return of income therefore Rs. 1,02,60,480/- (Rs. 2,38,35,570 -1,35,75,090) was added to the capital gain of the assessee.
Before ld CIT (A) the assessee explained the facts as explained before us. The assessee also filed his written submission and the details of expenses incurred in the development of the said land. The assessee also explained that the Scheduled-II attached with sale deed dated 25 July 1998, (purchase deed) wherein the details of various buildings and the structure are mentioned. Copy of which are on our record at page No. 1to 130 and the Schedule-II (site plan of land with buildings) is at page No.131ofof PB. The learned CIT(A) after considering the contention of the assessee further observed that National Board of Trade Ltd made a number of correspondence with the purchaser in respect of development of work which was required by them before transfer of land. The learned CIT(A) also observed that the development of work was actually carried out on the site, however, it was not believed by the assessing officer. Therefore, an addition of Rs. 1.02 crore was made to the share of assessee. The learned 14 CIT(A) also observed that the development work carried out at the land was at instance of National Board of Trade Ltd as communicated in their letter dated 21 August 2006 addressed to Shri Sandeep Jain, the fact was also placed before assessing officer, wherein it is mentioned that the work was done at the stance of purchases. The learned CIT(A) also examined various other correspondence, between the purchaser and the attorney of the assessee who was negotiating the deal, copy of which were placed before assessing officer as well as before CIT(A). On his observation the learned CIT(A) concluded that in the purchase deed of land and in the Schedule annexed thereto, there are Eight Structure, and the assessee could not have visualised, that in some later years, the assessee had to be sold and that the structure was fictitiously created. The learned CIT(A) held that it was clearly mentioned in the transfer deed / sale deed that only one building admeasuring 1200 Sq ft. remains out of the eight structure along with the well, which was demolished and filled up with boulders etc.
The learned CIT(A) also examined the details of excavation and the abstract seat of the complete work undertaken by M/s Omprakash Amarnath, copies of which are filed at page No. 151 to 224 of the PB. The learned CIT(A) also examined the profit and loss account of M/s Omprakash Amarnath, who has shown contract revenue of Rs. 7.23 crore in his return of income. On the basis of his observation the learned CIT(A) came to the conclusion that substantial piece of evidence brought on record, which cannot be brushed aside without bringing any contrary material on record to suggest that entire work done by M/s Omprakash Amarnath was a make-believe story. The learned CIT(A) also concluded that assessing officer has not doubted the genuineness of the payment made to M/s Omprakash Amarnath and thus the categorical concluded that entire excavation work done by them was fictitious, would be contrary to the facts available on record. Therefore, on the basis of his conclusion the learned CIT(A) appeal accepted the contention of assessee about the expenses incurred on development of the said land.
The Hon’ble Supreme Court in case of Mangalore Ganesh Beedi Works versus CIT(supra) held that when there was clear finding of fact by Tribunal that legal expenses incurred by assessee were for protecting the business and the expenses were incurred, no reasons to reverse this finding of fact particularly since nothing was shown to conclude that the finding of facts was perverse in any manner. Before us, the revenue has failed to bring any contrary material to take any other view, to the view taken by learned CIT(A). No contrary law is brought to our notice by learned DR. Therefore, we do not find any merit in the grounds of appeal
raised by revenue.
21. In the result the ground No. 1 of appeal raised by the revenue is dismissed.
22. Ground No. 2 relates to deleting the addition of Rs. 7.00 lakhs, out of the total additions/ disallowance of Rs 35.00 lakhs made by assessing officer on account of unexplained marriage expenses. The ld DR for the revenue supported the order of the assessing officer. The ld DR further submits that the assessee failed to substantiate the expenses incurred on his marriage son. The assessee merely submitted that the expenses were borne by his relative. No details were furnished by the assessee, therefore, entire additions/ disallowance would have been confirmed by the ld CIT(A).
On the contrary the ld AR for the assessee submits that the assessee not only explained the expenses incurred by assessee but also furnished the documentary evidences foe the expenses borne by his relatives, however, the ld CIT(A) allowed relief in respect of the expenses incurred by assessee to the extent of Rs. 7.00 lakhs. The ld. AR also relied on the submission made in support of his grounds of appeal
in assessee’s appeal.
24. We have considered the rival submission of the parties and gone through the orders of the authorities below, we have also deliberated on the decisions referred by the lower authorities. As noted earlier, the assessing officer noted the assessee failed to provide complete detail of the expenses on the marriage of his son and o substantiate that the marriage expenses were incurred by his son hence the assessing officer made addition of Rs. 35 lakhs on account of unexplained expenditure. During first appellate stage it was noted by ld CIT(A) that the assessee could provide the bills of Rs. 6.66 lakhs only, the learned CIT(A) concluded that at the best a sum of Rs. 7.00 lakhs is said to be explained by the assessee, and granted the relief to that extent only. The ld DR failed to bring in our notice any fact that the assessee was not been able to prove the expenditure of Rs. 7.00 lakhs. No contrary law is also brought to our notice.
Therefore, we do not find any reason to interfere with the finding of ld CIT(A).
Hence, the ground No. 2 of the appeal raised by revenue is dismissed. 25. In the result the appeal of the revenue is dismissed.
CO No. 105/M/2018 in ITA No. 3358/M/2014. 26. We have noted that the ld. AR for the assessee has not submitted anything in support of his Cross objections at the time of making submission in support of his appeal as well as while opposing the grounds of appeal raised by the revenue.
Even otherwise the cross objections are filed after 1406 days of prescribed period of limitation. Therefore, the cross objections are treated as not pressed hence dismissed in limine. Order announced in the open court on this 29th day of August 2018.