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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, A.M :
This is an appeal filed by the assessee against the order dated 17.03.2015 passed by the Commissioner of Income Tax (Appeals), Muzaffarnagar, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”), relating to assessment year 2010-11.
At the outset, ld. counsel for the assessee sought permission to adduce additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, which is Architect’s certificate for valuation of construction at Rs.59,48,600/-. The assessee’s reliance is primarily on the decision of Hon’ble Jurisdictional High Court in the case of Text Hundred India Pvt. Ltd. (order dated 14.01.2011), 197 taxmann.com 128, wherein, it has been, inter-alia, held that discretion lies with the Tribunal to admit additional evidence in the interest of justice and once the Tribunal forms an opinion that doing so would be necessary for proper adjudication of the matter, the additional evidence should be admitted. Ld. DR strongly objected to the admission of additional evidence sought to be filed by assessee at this stage of proceedings and pointed out that the assessee has not explained as to what was the sufficient cause which prevented him from filing this Architect’s certificate before the Assessing Officer.
Before coming to any conclusion, it is necessary to refer to the facts leading to filing of the additional evidence in the form of Architect’s certificate. The Assessing Officer received information through AIR regarding transaction in property. He required the assessee to furnish the detail of all the transactions during the year for which the assessee furnished copies of sale deed of three flats constructed at Plot No.B-14, Patel Nagar, Ghaziabad measuring 172.94 sq.mtrs. which was acquired by the assessee in the preceding assessment year on 30.04.2008 for Rs.24,60,000/-. The details of capital gain/loss as furnished by the assessee was as under :-
Cost of acquisition Cost of purchase - Rs.24,60,000/- Stamp duty charges - Rs. 2,46,000/- Registry office charges - Rs. 10,020/- Charges paid to GDA - Rs. 2,74,486/- Total purchase cost of land - Rs.29,90,506/- B/F Total purchase cost of land Rs.29,90,506/- Cost of construction Rs.60,25,471/- Total cost of land & flats Rs.90,15,977/- Rs.90,15,977/- Cost of sale Sale of Ground Floor Rs.30,00,000/- Sale of First Floor Rs.21,50,000/- Sale of IInd Floor (with roof) Rs.37,55,000/- Rs.89,05,000/- Rs.89,05,000/- Capital Loss Rs. 1,10,977/-
The Assessing Officer required the assessee to furnish the details of cost of construction claimed by him in construction of flats at Rs.60,25,471/- with reference to books of account, bills and vouchers maintained by him. The Assessing Officer did not accept the assessee’s claim for the following reasons :-
(a) The assessee expressed his inability to produce all bills and vouchers to support his claim for cost of construction except furnishing some of the bills of bricks, iron bars, wooden chowkhat and labours.
(b) The Assessing Officer noted following discrepancies in the bills furnished by assessee :-
(i) the assessee furnished two bills dated 23.10.2008 of M/s Babu Ram Shri Chand Kabari both amounting to Rs.13,668.75 for wooden doors & windows Chaukhats. The first bill from Book No.01, Sl. No.001 having detail/measurement of chaukhats and the second bill is also having Book No.01, Sl.No.001 without detail/measurement but mentioning therein 12 numbers of windows/chaukhats in different sizes. Only second bill is having mode of transportation UP15C/9831 and first one is silent about the transportation. (ii) the assessee furnished bills of electric fans from Classic Distributors dt.25.02.2009, 29.05.2009 & 31.05.2009 out of which only one bill dated 31.05.09 bearing book no.03 Sl.No.141 is having detail of VAT charges etc. and appears to be authentic and other two bills have no detail about VAT etc., signatures on the bills are also not matching with each other. (iii) He observed that it was surprising to note that nowhere in the sale-deed, it was mentioned that the flats were well furnished and equipped with the electric accessories, beds and mattresses, etc.. He, therefore, concluded that it could not be said that these bills were actually for the fans installed & mattresses put in the flats. (iv) There is also a bill from M/s Balaji Enterprises bearing book no.04 serial no.175 whereby sale of iron bars amounting to Rs.4,75,310/- has been shown. It is also worth to mention here that from the perusal of sale-deed of IInd Floor Flat, it is seen that the said flat was sold out on 04.05.2009 for Rs.37,55,000/- and at Page No.11 of the sale-deed photo-graph of the building is shown. On the first look of this photo-graph even a layman can say that the Flats were ready on 04.05.2009 but the bill for as much as 17.490 M.T. or iron bars has been furnished which cannot be said to be used for the aforesaid construction. Such are other bills of cement dated 21.10.2009 (400 Bags) Rs.91,200/-, dt.25.10.2009 (500 Bags) Rs.1,14,000/- & 30.10.2009 (500 Bags) Rs.1,14,000/- even these bills do not bear the mode of transportation of cement. (v) Order-sheet entry dated 18.02.2013 point no.6, the assessee was required to furnish the completion certificate of the flats from the GDA but the same was not furnished. (vi) The assessee did not file any valuation report from a Government approved valuer to justify the claim.
(c) The Assessing Officer adopted the cost of construction as per value of the Stamp Valuation Officer at the rate of Rs.7,500/- per sq.mtrs. and determined the cost of construction at Rs.27,28,125/- observing as under :- “2.3 It is also worth to mention here that the assessee has declared the sale price of the flats exactly as per the value of Stamp Valuation Officer (D.M.) whereas the actual value of flats in the vicinity is not less than Rs.50 lacs having super covered area of 121.25 Sq.Meter (One Drawing/ dining Room, Four Bed Rooms, One Kitchen, Lobby & two toilets) but inflated the cost of construction. The cost of construction adopted by the Stamp Valuation Officer is Rs.7,500/- per Sq.Meter & is according to the Govt. Rates which has been applied by the Stamp Valuation Officer. Thus, the cost of construction of all the three floors comes to Rs.27,28,125/- (Rs.7,500 X 121.25 X 3 Floors). The rates of construction by the Government although represents on the higher side than the actual cost of construction by the private contractors but giving benefit of the same to the assessee and considering the same reasonable & authentic, the cost of construction is adopted @ Rs.7,500/- per Sq.Meter.”
He, accordingly, computed the capital gains at Rs.31,86,370/- as against the loss of Rs.1,10,977/- declared by the assessee. Before ld. CIT(A), the assessee had explained the reasons for discrepancies pointed out by the Assessing Officer which are in the written submissions reproduced in the ld. CIT(A)’s order from page 3 onwards. The assessee also pointed out that the Stamp Valuation Authority adopt the value on the basis of ready reckoner which prescribes area-wise flat rates. It was pointed out that the ready reckoner was being prepared and maintained by stamp authorities for the purpose of collecting stamp duty. It had no statutory force and it could not form a foundation to determine the value of an asset. It was further submitted that ready reckoner does not provide a realistic value of all the properties for the simple reason that there cannot be a rule of thumb in the matter of property prices. The details mentioned in this regard are contained at page 5 and 6 of ld. CIT(A)’s order. However, ld. CIT(A) confirmed the Assessing Officer’s action observing as under :-
“The order of the AO and the submission of the appellant have been considered. First of all the AO has given a categorical finding in the assessment order that the appellant expresses his inability to produce all bills and vouchers to support his claim for cost of construction except furnishing some of the bills of bricks, iron bars, wooden chaukhat and labours. This finding of the AO has not been controverted by the appellant. This proves that the appellant could not produce all the bills and vouchers in support of his claim of construction of Rs.60,25,471/-. As regards the discrepancies in the bills are concerned, the appellant could not explain the reason why the bills of iron bars and cement relate to the period after the flat was sold. The appellant’s explanation in this regard is as follows:- “The material was taken on credit and when the flat was sold he made the payments to the suppliers and asked for the bills.” The above explanation is not acceptable as nobody will give the bills after the payment is received. In fact, on credit sale it is more important for the sellers to raise the bill and take acknowledgement from the purchaser. No evidence has been produced in this proceeding to substantiate the claim of expenditure amounting to Rs.6025471/-. In view of these facts, the AO was justified in rejecting the claim of the appellant. The AO has been reasonable in adopting the rate of Rs.7500 per sq. meter for cost of construction which is the prescribed government rate. The order of the AO is confirmed. The ground of appeal no.1 is dismissed.”
6. Ld. counsel referred to page 148 of Paper Book, wherein, details of all purchases made with name of parties, address, TIN Number, PAN Number, details of Item Purchased and Mode of Payment is given. Ld. counsel submitted that the Assessing Officer is not competent to make valuation of property and he should have referred the matter to an expert such as Government approved valuer or DVO. Ld. counsel further referred to ld. CIT(A)’s findings, as reproduced earlier, and pointed out that he has not examined the details furnished by assessee. Ld. DR submitted that onus was on assessee to establish the cost of construction which he failed to substantiate and, therefore, the additional evidence in the form of Architect’s certificate should not be admitted.
7. I have considered the submissions of both the parties and perused the record of the case. Admittedly, the Assessing Officer has adopted the cost of construction as per Stamp Valuation Ready Reckoner which cannot substitute the actual cost of construction provided assessee is able to substantiate his claim. However, if assessee is not able to substantiate its claim then valuation of property needs to be referred to a Registered Valuer/ DVO for determination of value of property. Whatever the discrepancies were pointed out by the Assessing Officer for rejecting the assessee’s claim were explained before ld. CIT(A), however, ld. CIT(A) has not commented upon the same in detail. The Hon’ble Delhi High Court in the case of Text Hundred India Pvt. Ltd. (supra) has, inter-alia, held as under :-
“13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motu action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well-settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.”
Considering the entirety of facts, I consider it in the interest of justice that the Architect’s certificate being that of an expert should be admitted to advance the cause of substantial justice. The Assessing Officer would be free to refer the valuation of property to DVO for proper determination of cost of construction of property. After taking into consideration the opinion of two experts, he will frame the assessment de-novo. In the result, the assessee’s application under Rule 29 of ITAT Rules, 1963 is allowed and the matter is restored back to the file of the Assessing Officer for de-novo assessment in terms of aforementioned observations.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 09th day of March, 2017.