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(Respondent through Shri Rajesh Kumar Yadav (DR) Date of reserve on 26th April 2018 Order announced on 27 April 2018 Order under section 254(1) of Income-tax Act Per, Pawan Singh, Judicial Member; 1. The instant appeal by assessee is directed against the order of Commissioner (Appeals)-36, Mumbai dated 15 January 2018, for assessment year 2011- 12. The appeal before learned Commissioner (Appeals) arises from the assessment order passed on 14 March 2014 under section 143(3) of the Act. The assessee has raised following grounds of appeal; (i) On the facts and circumstances of the case and in law, learned Commissioner (Appeals) erred in confirming addition under section 69 of the Act of Rs. 14,75,000/-. (ii) On the facts and circumstances of the case and in law, the learned Commissioner (Appeals)erred in confirming the action of assessing officer of not granting deduction of cost of acquisition of Rs.14,75,000/- and the indexation thereon while computing long-term capital gain. (iii) On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in not adjudicating the additional ground regarding levy of interest under section 234B and 234C of the Act. (iv) On the facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in not adjudicating the ground regarding initiation of penalty under section 271(1)© of the act.
2. Brief facts of the case are related with the issue raised herein is that assessee, an individual engaged in providing architectural design and drafting services filed his return of income for assessment year 2011-12 on 29 September 2011, declaring total income of Rs. 49,02,522/-. In the return of income the assessee claimed long-term capital gain on cancellation of booking of a flat from Spam Construction Company Private Limited. The assessing officer while passing the assessment order disallowed a part of cost of acquisition of flat to the extent of Rs. 14,75,000/-. On appeal before Commissioner (Appeals) the action of assessing officer was confirmed. Thus, further aggrieved by the order of ld. Commissioner (Appeals) the assessee has filed present appeal before us.
3. We have heard learned Authorized Representative (ld. AR) of the assessee and the learned Departmental Representative (ld. DR) for the revenue and perused the material available on record. At the outset of hearing the learned AR of the assessee submits that is not pressing ground No 3 and 4.
Considering the submission of learned AR the ground No 3 and 4 are dismissed as not pressed. The ld AR for the assessee further submits that during the assessment years 2006-07, the assessee had booked the residential premises at A-1607, Swapanlok Towers, Pimpro Road, Mallard (E), with Spain Construction Company Limited, on 18 August 2005 for Rs. 35,40,000/-. The consideration of Rs. 14,75,000/- for the said flat was paid by assessee from Citibank, Washington, America, while the assessee was serving in USA. The assessee was non-resident Indian during the relevant period and was not filing return of income in India. The remaining consideration of Rs.20,65,000/- was paid by assessee from Bank of India after returning to India. During the assessment year under consideration the assessee cancelled the booking. The assessee received a sum of Rs.73,95,000/- in lieu of compensation. The assessee started maintaining books of accounts from assessment year 2007-08, when he started business. Thus, payment made up to 31 March 2006 aggregating to Rs.14,75,000/- when the assessee was not in India, staying in US A, was inadvertently missed to be accounted in the books as an opening balance of capital brought forward. Therefore, while computing the capital gain on cost of the said flat was inadvertently taken at Rs. 20,65,000/- instead of total amount paid Rs.35,40,000/-. During the assessment the assessee requested the assessing officer to consider the revise cost of acquisition for computation of capital gain. The assessing officer instead of considering the contention of the assessee treated this amount as unexplained investment under section 69 of the Act. The assessing officer also concluded that the cost of Rs. 14,75,000/- was not claimed in the original return of income and was brought to the notice during the course of assessment proceeding without filing the revise return of income. Before the first appellate authority, the assessee raised the contention that the assessee is entitled to raise additional ground of appeal in view of the decision of Hon’ble jurisdictional High Court in case of CIT Vs Pruthvi Broker and Shareholder Ltd (349 ITR 336) (Bombay). The assessee also urged all before the ld. Commissioner (Appeals) to consider the additional claim, and allow the claim of cost of acquisition. The ld. Commissioner (Appeals) instead of considering the additional grounds of appeal, concluded that the explanation offered by the assessee is not reasonable.
The investment made by assessee was not reflected in the books of account of the assessee and assessee has not filed return of income in earlier years.
The assessee tried to rectify the alleged inadvertent mistake only after detection.
On the other hand the ld. DR for the revenue supported the order of authorities below. The ld DR further submits that the assessee has not shown the amount of Rs. 14,75,000/- in the statement of account nor the assessee was filing return of income in earlier years, the addition under section 69 was made when the investment was detected. The amount claimed by assessee was nothing but unexplained investment. In the rejoinder submission the ld. AR of the assessee submits that all amount was remitted through bank account maintained by assessee in Citibank Washington, USA. The assessee was not resident Indian and no income was earned or accrued in India, during the assessment year 2006-07, thus, the assessee was not liable to file return of income. In support of his submission the landed AR of the assessee relied upon the decision of Mumbai Tribunal in Shankar R. Mhatre Versus ACIT [2009] 117 ITD 241 (Mumbai), decision of Gujarat High Court in Ushakant N Patel Versus CIT (282 ITR 553) (Gujarat), Rajasthan High Court in Roopchand Gandhi Versus CIT (216 CTR 273) (Rajasthan) Allahabad High Court in Shri Ram Jaiswal Versus CIT (226 ITR 235). The ld AR also relied upon the decision of jurisdictional High Court in Pruthvi Brokers and Shareholder Private limited Versus CIT (349 ITR 336 Bombay).
We have considered the rival submission of the parties and gone through the orders of authorities below. The assessing officer during the assessment proceeding asked the assessee to furnished the details of working of long-term capital gain. The assessee vide his submission dated January 2013, submitted that the assessee booked the said flat on 18 August 2005, pursuant to that the assessee paid Rs. 35,40,000/-, which consist of payment of Rs. 20,65,000/- made through Bank of India and Rs.14,75,000/- through Citibank, Washington, America. The assessee also furnished the date wise details of payment made to the builder along with the copy of passbook. The assessee further submitted that while computing the cost of the said flat the assessee inadvertently taken the cost at Rs. 20,65,000/- instead of Rs. 35,40,000/-, due to errors the capital gains was computed at Rs. 53,30,000/- instead of Rs. 23,00,734/-. The assessee requested the assessing officer to consider the revise computation. The assessing officer instead of considering the contention of the assessee, issued show cause as to why the amount of Rs. 14,75,000/- should not be added under section 69 as unexplained investment. In response to the so- cause notice the assessee contended that during the assessment year 2006- 07, he send the amount through his bank account with Citibank in America as the assessee was having a status of Non-Resident and was not having taxable income earned or accrued in India. Thus, the assessee was not required to file return of income in India. The contention of the assessee was not accepted by assessing officer holding that investment claimed by assessee is not reflecting in his regular books of account further the contention of the assessee that money was invested out of NRE account is not tenable. The assessee has not disclosed this transaction in his earlier return of income nor in the year under consideration. Therefore, the contention of assessee was not accepted and the investment of Rs.14,75,000/- was treated as undisclosed investment within the meaning of section 69 of the Act. We have noted that ld. Commissioner (Appeals) has confirmed the action of assessing officer with similar line.
Before us the assessee has furnished various documentary evidences, which consist of computation of income. Audited accounts of the assessee.
The working of capital gain furnished before the assessing officer vide letter dated 3 December 2013. The letter dated 13 December 2013, revising claim of capital gain. Cost of acquisition and allotment letter of the flat on which capital gain was claimed. The copy of Citibank NRE account evidencing payment of part of the cost of acquisition to the extent of Rs. 14,75,000/-. Passbook of Bank of India NRE account evidencing payment of balance cost of acquisition to the extent of Rs. 20,65,000/-.
Copy of letter dated 30 December 2013 explaining the circumstances of the cost of acquisition to the extent of Rs. 14,75,00/-, which was not part of the accounts. The ld AR of the assessee furnished a certificate that all these documents were furnished/ available with assessing officer and before Commissioner (Appeals). The perusal of bank statement of Citibank Washington America clearly shows that the following payments was send /remitted to Span Construction company;
Date Amount (Rs.) 17 August 2015 225000 24 October 2005 300000 7 November 2005 150000 9 December 2005 150000 6 January 2006 150000 13 February 2006 150000 Total 14,75,000/- 7. The copy of passbook of Citibank against each and every remittance clearly shows “draft Payable to Span Construction Private Limited”.
Therefore, the said amount was remitted/ sent to Span Construction Private Limited. Span Construction Private Limited has also confirmed the receipt of Rs. 35,40,000/-, received against the allotment of flat No.A/1601, Swapanalok Tower, Filmcity Road, Goregaon (East). The amount received by Span Construction Private Limited consist of Rs. 14,75,000/0 received through Citi Bank and remaining through Bank of India. During the relevant period, (from August 2005 to Feb 2006) when the remittance was sent to Span Construction Private Limited, the assessee was having status of non-resident Indian. The assessing officer has not disputed the status of assessee during the relevant period. The assessing officer has not brought any material on record that assessee was having any taxable income in India or under obligation to file return of income under Income-tax Act, during the period when the assessee made the payment against the flat through his bank account in Citi Bank, Washington America. We have further noted that during the assessment proceeding the assessee furnished revise computation of long-term capital gains. The assessing officer instead of considering the revised computation of long-term capital gain dated the amount as investment of undisclosed income. Here, we may refer the Circular No.14 (XL) dated 11th April 1955, issued by CBDT directing the officers of the Department not to take advantage of ignorance of an assessee as to his right. The CBDT further directed that it is their duty to assist the taxpayer in every reasonable way, particularly in the matter of claiming and securing relief and in this regard the officers should take initiative in guiding the taxpayer where proceeding or other particulars before them indicate that some found no relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that they may be short of writing a square deal from the Department. We have noted here that the assessing officer and the ld. Commissioner (Appeals), instead of adhering to the instruction of CBDT and considering the legitimate contention of the assessee made the addition under section 69 of the Act. In our considered view the assessee has proved beyond reasonable doubt that amount of Rs. 14,75,000/- was paid against the cost of acquisition of flat. Therefore, the assessee is entitled for inclusion of cost of Rs. 14,75,000 /-, while claiming long-term capital gain.
Moreover, the income of Rs. 14,75,000/- relates to assessment years 2006- 07, which cannot be added in the assessment year under consideration. As we have already observed that the assessee having a status of non-resident Indian was not under obligation to filed return of income under income tax Act for assessment year 2006-07. Further, the assessee has himself brought the said amount in his books of accounts, soon after the mistake realized by him in not claiming the said amount in computation of long term capital gain. The revenue official should not have doubted the bonafide claim of the assessee, when he has explained the inadvertent mistake. In view of the above discussion the ground No.1 and 2 of appeal raised by assessee are allowed.
In the result appeal of the assessee is allowed.