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Income Tax Appellate Tribunal, DELHI BENCHES : SMC-I : NEW DELHI
Before: SHRI R.S. SYAL
ORDER This appeal filed by the assessee is directed against the order passed by the CIT(A) on 4.12.2015 in relation to the assessment year 2008-09.
At the very outset, it is mentioned that the Department has moved adjournment applications in all the cases fixed before the Bench today. The ld. AR appearing for the assessee strongly objected to the grant of adjournment. I am convinced with the non-granting of such en bloc adjournments. As such, I am proceeding to dispose of the appeal ex parte qua the Revenue.
The first issue raised in this appeal is against the confirmation of addition of Rs.6,93,000/-. Briefly stated, the fact of this issue are that the assessee deposited a sum of Rs.11,41,000/- in cash in his bank account, comprising of two amounts, namely, Rs.4,23,000/- and Rs.6,93,000/-.
The instant dispute is only about the second item of cash deposit in the bank account amounting to Rs.6,93,000/-. On being show caused to explain the nature of this cash deposit, the assessee submitted that the Board of Directors of Fusion Electrodes India Pvt. Ltd., authorized the assessee to sell the land registered in the name of the company. It was only pursuant to such authorization by the company that the assessee sold the property and received a sum of Rs.6,93,000/-. The AO noticed from the resolution passed by the Board of Directors on 4.5.2007 that the assessee owned right to sell the lease right in the property. No documentary evidence was filed to substantiate the cost of acquisition of the property by the assessee. Accordingly, sale amount of Rs.6,93,000/- 2 was treated by the AO as short-term capital gain. The ld. CIT(A) upheld the addition.
After considering the submissions advanced on behalf of the assessee and perusing the relevant material on record, it is relevant to reproduce the Board Resolution pursuant to which the assessee sold the leasehold right in the land, as under:-
“Resolved that the company and its present Director relinquish all their rights in the lease hold land held in the name of its Director Mr. Mohinder Goyal at Gurukul Inderprastha, Sarai Khawaja, Faridabad, measuring 2 Kanal 14 Marla (1640 s. yards.) This is further resolved that from today i.e., 04.05.2007, he (Mohinder Kumar Goyal) is the absolute owner of the above land and got all rights to the title of the land and can deal or use, sell hypothecate or do anything in any manner, to sign lease deed or any other document, to appear in court of law to defend any case and to Appear before appropriate authority. Further resolved that he (Mohinder Kumar Goyal) will be responsible to pay all amounts, lease money or any other taxes of Govt. from today and company will not be responsible.
From perusal of the above Resolution passed by the company, it becomes clear that the company relinquished all the rights in the leasehold land in favour of the assessee, who was earlier shareholder of this company before liquidation, w.e.f. 4.5.2007 from which date the assessee became “the absolute owner of the above land and got all the rights to the title of the land.” The text of the Resolution passed by the company belies the contention put forth before the AO that the assessee was simply assigned the task of selling the property for and on behalf of the company.
To a pertinent query, it was admitted by the ld. AR that the company did not offer any income from transfer of such lease hold right in land in its return of income and, further, no evidence has been adduced either before us or the authorities below to demonstrate that the said amount of Rs.6,93,000/- was ever transferred to the company. The ld. AR admitted that certain amount was due to the assessee from the company which went into liquidation and it was in settlement of such a claim that the assessee was given right in this leasehold property. In view of the foregoing discussion, it becomes clear that the assessee’s contention about his selling the property for and on behalf of the company does not stand anywhere. Income from the sale of this property is liable to be taxed in the hands of the assessee alone.
The next pertinent question is about the computation of capital gain.
The amount of Rs.6,93,000/- added by the AO is admittedly the sale 4 consideration for the transfer of leasehold right which has been taken as short-term capital gain in the hands of the assessee. Any income chargeable to tax under the head ‘Capital gains’ is computed by reducing cost of acquisition, cost of improvement and expenses incurred in relation to the transfer of property from the full value of consideration received on the transfer of property. Under no circumstance, the entire sale consideration can be treated as the amount of capital gain, as has been done extantly. In view of the fact that the assessee acquired the ownership of property in satisfaction of his claims due from the company, it is this amount, being the claim due from the assessee company, in satisfaction of which the assessee was given lease hold right in the property, would become the cost of acquisition in the hands of the assessee. There is no material available on record to show the amount representing such cost of acquisition of the property in the hands of the assessee. As such, I am of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of AO for computing the capital gain in the hands of the assessee, after reducing the cost of acquisition, etc. from the full value of 5 consideration of Rs.6,93,000/-. Needless to say, the assessee will be obliged to furnish such information to the AO.
The next ground is against the sustenance of addition of Rs.8,000/- under the head ‘Telephone expenses.’ The assessee claimed telephone expenses at Rs.72,973/-. The AO made disallowance of Rs.14,600/-. The assessee argued before the ld. CIT(A), which was also mentioned in the office note of the assessment order, that a sum of Rs.48,623/- was disallowed by the assessee himself towards expenses of personal nature.
Such disallowance was suo motu made @ 20% of telephone expenses and vehicle depreciation. The ld. CIT(A) restricted the addition to Rs.8,000/- against which the assessee has come up in appeal.
After considering the submissions made on behalf of the assessee and the relevant material, it is observed that the AO made addition @ 20% of telephone expenses at Rs.14,600/-. When the assessee himself disallowed 20% of telephone expenses on account of personal user in his computation of income, there remains no valid reason for making or sustaining any further addition on this score. I order to delete the addition of Rs.8,000/- sustained by the ld.CIT(A).
Ground No.3 is against confirmation of addition of Rs.50,000/- towards personal expenses in the purchases made through credit cards.
On perusal of the copies of credit cards maintained by the assessee, the AO made the following details :-
Particulars Card No. Expenditure incurred 1. Stan Chart Card 5444388756041044 & Rs.1,65,566/- 4196074946138899 2. ICICI Bank 447747353687550 Rs.3,78,719/- 3. HDFC 4050281000052339 Rs.3,89,109/- 4. AMEX 376939328161000 Rs.3,61,980/- 5. American Express 376916720221004 Rs.2,38,536/-
After going through such details, the AO noticed that some of the expenses incurred were personal in nature. On being confronted with the fact, the assessee agreed to surrender a sum of Rs.50,000/- out of total expenses booked through credit cards. Accordingly, the AO made addition of Rs.50,000/-, which came to be upheld in the first appeal.
Having regard to the facts of the instant case, I am not inclined to disturb the sustenance of this addition because it was the assessee himself who agreed for the addition when certain personal expenses were found to have been incurred through his credits that were debited in the books of account of the assessee. I, therefore, uphold this addition of Rs.50,000/-.
This ground fails.
The next ground is against confirmation of addition of Rs.10,000/- out of conveyance expenses, staff welfare, inward remittance, printing, advertisement and sale promotion, etc. The assessee incurred the following expenses which were debited in his books of account:-“
Conveyance Expenses 83,961/- Staff & Worker Welfare 4,071/- Inward Remittance 10,151/- Printing & Advertisement 13,062/- Sales Promotion/Sample 12,924/-
The AO made disallowance of Rs.10,000/- out of such expenses. No ground was taken before the ld.CIT(A) against such disallowance. The ld. AR has placed on record the copy of a letter dated 24.2.2012 shown to have been addressed to the CIT(A) raising additional ground challenging the sustenance of addition of Rs.10,000/-. There is no reference of this letter in the impugned order. This letter dated 24.2.2012 also does not bear any stamp of the office of the ld. CIT(A). This shows that either this letter was not filed before the ld. CIT(A) or it was not admitted for adjudication. Since the ground for disallowance of Rs.10,000/- out of the above referred five expenses does not arise from the impugned order, the same cannot be entertained. Even otherwise, the disallowance of Rs.10,000/- out of the above expenses due to lack of proper evidence, etc., appears to be reasonable. I, therefore, dismiss this ground of appeal.
14. The next ground is against the addition of Rs.3,000/- on account of donations u/s 80G. The AO made disallowance towards the amount claimed as deduction u/s 80G as no documentary evidence was filed in support of this claim. The ld. CIT(A) sustained the addition.
15. Having regard to the facts of the instant issue, it is found from a copy of the computation of income filed on page 1 of the paper book that the assessee voluntarily added back Donation of Rs.3,000/-. As such, there could have been no reason for making a further disallowance of Rs.3,000/-. The ld. AR contended that only a sum of Rs.1,000/- was actually claimed as deduction for which there was no receipt and, hence, the disallowance may be sustained to this extent. I agree with the contention so advanced and, accordingly, restrict the addition to Rs.1,000/-.
In the result, the appeal is partly allowed.
The order pronounced in the open court on 06.06.2016.