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Income Tax Appellate Tribunal, [ DELHI BENCH “B”: NEW DELHI ]
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
This appeal is filed by Shri Chanan Lal Dhingra - the assessee for assessment year 2014-15 against the order of the Commissioner of Income Tax (Appeals), Ghaziabad,[ the Ld CIT (A) ] dated 31.10.2017 passed in appeal preferred by assessee before him against the order passed under Section 143(3) of the Income Tax Act, 1961 (the Act) on 13.12.2016 by the Dy. Commissioner of Income Tax, Circle – I, Ghaziabad, [ the Ld AO] for the impugned assessment year wherein a return filed by the assessee on 25.01.2015 at Rs. 18,00,000/- was assessed at Rs. 1,71,02,674/-, was dismissed.
In the assessment order , ld. Assessing Officer made the following four additions to the total income of the assessee:- i. An addition of Rs. 4,10,250/- on account of short term capital gain not shown in the return of income; ii. An addition of Rs. 1,02,38,300/- on account of the long term capital gain disallowing the loss of Rs. 11,67,034/- shown by Page | 1 the assessee and computing the long term capital gain of the above sum; iii. The assessee has shown long term capital loss of Rs. 4,57,373/- , which was computed by the ld. Assessing Officer at Rs.3,20,424/-; & iv. An addition of cash deposit of Rs. 14,50,000/- as unexplained.
The assessee preferred appeal before the ld. CIT (Appeals) un-successfully and all the four above adjustments / additions were confirmed and, therefore, assessee is in appeal before us.
The assessee has raised in all five grounds of appeal as under:-
“1. The Ld. CIT (A), Ghaziabad has erred by confirming the action of the Ld. Assessing officer for addition of Rs.4,10,250/- as short term capital gain instead of long term capital gain by treating the date of purchase as 13.08.2013 i.e. date of registry instead of 06.07.2010 i.e: date of allotment and by taking the cost value as Rs.45,74,000/- instead of actual cost by Rs.56,71,728/- (inclusive of other benefits). The Ld. CIT (A) also kept silent on the addition of Rs.95,000/- u/s 50C while during the course of assessment proceedings no query was raised.
2. The Ld. CIT (A), Ghaziabad has erred by dismissing the appeal for the addition of Rs.1,02,38,300/- made by Ld. Assessing Officer by disallowing the additions in the building construction by Rs.32,00,000/- ignoring the fact that the same has been duly shown in the submitted Balance Sheet and valuation report of registered valuer.
3. That the Ld. CIT (A), Ghaziabad and the Ld. Dy. Commissioner of income Tax, Circle-1, Ghaziabad have erred in law and on facts in making the addition of Rs.32,04,124/- as long term capital gain by not allowing the benefit of additions by ignoring the fact that during the course of hearing the assessee submitted the year wise details of additions for justification of additions. Also the value of the cost has taken for different value for which an application u/s 154 has already been submitted before the Ld. Assessing officer.
4. That the Ld. CIT (A), Ghaziabad and the Ld. Dy. Commissioner of income Tax, Circle-1, Ghaziabad have erred in law and on facts by not giving the exemption u/s 54 about the investment made in residential property out of the fund received from long term capital gain, while the same was claimed by the assessee with the evidences.
5. That the Ld. CIT (A), Ghaziabad and the Ld. Dy. Commissioner of income Tax, Circle-1, Ghaziabad have erred in law and on facts in making the addition of Rs.14,50,000/- on account of cash deposit was made by ignoring the fact that at the time of hearing the assessee submitted all the evidences about the source of income of cash deposit of Rs.25,00,000/- with Bank.
6. Any additional ground, if any, may be submitted with your kind permission. It is, therefore, prayed that the above additions may kindly be deleted and the Page | 2
appeal of the appellant assessee may be allowed on merits of the case. “
The first ground is with respect to the addition of Rs. 4,10,250/- as short term capital gain. The facts of the case shows that assessee has shown long term capital loss of Rs. 11,51,846/- on sale of property at National Highway 58, Meerut Road, Ghaziabad, vide sale deed dated 21.12.2013 for Rs 53,00,000/- which was stated to be acquired on 6.07.2010 based on allotment letter at Rs 56717128/- [ Indexed cost of acquisition Rs 6451846/- . The ld. Assessing Officer verified the purchase deed and noted that this property was purchased on 13.08.2013 at a consideration of Rs. 42,75,000/- and, therefore, the date of acquisition of the property is 13.08.2013 and not 6/7/2010. Property is sold on 21.12.2013. Therefore, assessee sold short-term capital assets. He further found that the sale consideration shown by the assessee is Rs. 53,00,000/- whereas the actual Stamp Duty value of the property is Rs. 53,95,000/-. Therefore, he computed the short-term capital gain on the property. The sale consideration was Rs. 53,95,000/- under Section 50C of the Act. The total cost of acquisition was Rs. 45,74,000/-. The short-term capital gain was computed at Rs. 8,20,500/-. The share of the assessee is 50%. Therefore, Rs. 4,10,250/- was added to the total income. Before the ld. CIT (Appeals) the assessee submitted that the above property, namely, of Villa in the Anandam Estate, Gurgaon was allotted to the assessee on 27.07.2010 and the payments were made to the builder i.e. Hari Buildwell Pvt. Ltd. in installments. As the allotment was made to the assessee on 27.07.2010 and assessee has made substantial payment to the above party, the date of acquisition of the property is 27.07.2010. It is also a right to acquire that property. Therefore, the property cannot be held to be a short-term capital asset. The ld. CIT (Appeals) held that as the property is purchased in January 2013 and sold in December 2013, hence, it is a short-term capital asset and he confirmed the action of the Assessing Officer.
The ld. AR submitted that the allotment letter clearly shows that the above property was allotted to the assessee on 6.07.2010. He referred to the allotment letter placed at page Nos. 201 to 203 of the paper book. He also referred to the agreement of the purchase where the assessee paid 30% of the amount for booking. He, therefore, stated that there was a part Page | 3 performance of transferring the asset. His argument either was that property includes ‘any interest in any asset in any manner’ by way of an agreement or otherwise should be considered. Therefore, he submitted that the asset transfer is not a short-term capital asset, but a long-term capital asset. He also referred to the decision of the Hon’ble Delhi High Court in 413 ITR 249 (Del.) as well as the decision of Hon’ble Bombay High Court in the case of Pr. CIT Vs. V. Vaidyanathan (2019) 413 ITR 248 (Bom.) 7. The ld. DR vehemently supported the orders of the lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee, Shri Chanan Lal Dhingra and Shri Sanjay Kumar Dhingra jointly were allotted a Villa vide agreement dated 27th of January, 2010 by Hari Buildwell Pvt. Ltd. in project Villa Anandam at National Highway 58, Ghaziabad. The description of the Villa was Plot No. 50 admeasuring 140 Sq. Mtrs. with a super built up area of 1810 sq. ft. at a total sale price of Rs. 42,75,000/- and other charges of maintenance etc. Thus, the total purchase price of the property was Rs. 45,90,000/-. The above property was constructed and possession was given to the assessee on 24th May 2013. The purchase deed of the property was executed on 13.08.2013. It was sold on 20.12.2013 for a consideration of Rs. 53,00,000/-. Stamp duty value of the property is Rs 5395000/-, Therefore, the Revenue treated that the property transferred was a short term capital asset treating the date of acquisition of the property of the capital asset from the date of purchase deed of 13.08.2013 whereas the assessee claims the date of acquisition as 27th July, 2010. We find that the above issue is clearly covered in favour of assessee by the decision of Hon’ble Bombay High Court in the case of Pr. CIT Vs. V. Vaidyanathan (supra) wherein it has been held that the assessee has acquired the property on the date on which the allotment letter is issued by the builder. The Hon’ble High Court also relied on Circular No. 471 dated 15.10.1986 and Circular No. 672 dated 16th December 1993. In view of this, respectfully following the decision of the Hon’ble Bombay High Court in Pr. CIT Vs. V. Vaidyanathan (supra), we hold that the date of acquisition of the property should be taken from the date of allotment letter issued to the assessee. Therefore, the impugned property is a long-term capital asset.
However with respect to the adoption of the market value for computation of capital gain we confirm the action of the learned assessing officer to adopt the deemed sale consideration according to the provisions of Section 50 C of the act. This is so because the assessee has never objected before the assessing officer the adoption of the above sum for computation of long- term capital gain.
Accordingly, ground No. 1 of the appeal of the assessee is partly allowed and the Assessing Officer is directed to consider the sale of the above property as a long-term capital gain. 11. Ground No. 2 of the appeal is with respect to the addition of Rs. 1,02,38,300/- as long term capital gain against the capital loss of Rs. 11,67,034/- shown by the assessee. The brief facts of the case shows that assessee has shown sale of property at Hapur Road, Ghaziabad, which was claimed to have been purchased on 8/02/1970 at Rs. 30,000/-. The assessee also claimed that it has incurred the cost of construction prior to 1.04.1981 of Rs. 2,00,000/-. In 1981 to 1990 it incurred Rs. 7,00,000/-, in 1990 to 2000 Rs. 15,00,000/- and from 2001 to 2005 Rs. 8,00,000/-. Therefore, the claim of the assessee is that the cost of the property was Rs. 30,000/-, but he has incurred the cost of improvement or construction over those years of Rs. 32,00,000/-. Thus, the assessee computed the index cost of acquisition and improvement of the property at Rs. 1,11,67,034/-. This property was sold as a sole consideration of Rs. 1 crore and thus computed the long term capital loss of Rs. 11,67,034/-. The Assessing Officer held that the sale consideration, according to the provisions of Section 50C of the Act is Rs. 1,05,20,000/- and, therefore, same should be deemed sale consideration. The Assessing Officer asked the proof of construction or improvement which was not submitted by the assessee at all. Therefore, he computed the long term capital gain on the sale of property at Rs. 1,02,38,300/- considering the deemed sale consideration under Section 50C of the Act of Rs. 1,05,20,000/- and granting index cost of acquisition to the assessee of cost of acquisition of Rs. 30,000/- which is indexed to Rs. 2,81,700/-. Before the ld. CIT (Appeals), assessee merely submitted a copy of the valuation report. He rejected the same that assessee has not submitted any details regarding the cost of construction and nor filed the copies of the balance sheet to substantiate that assessee has incurred cost Page | 5 of Rs. 32,00,000/- as construction cost. He upheld the action of the Assessing Officer.
The ld. AR submitted that when the property was purchased only foundation work was done. He referred to the purchase deed placed at page No. 144 of the paper book. He referred to the sale deed placed at page No. 31 of the paper book wherein it is mentioned that the property sold is constructed with RC construction having basement, a residential house, and commercial shops. He submitted that the construction is approximately 30 years old and in the valuation report, the same was considered. With respect to the improvement and the cost of construction, he referred to page No. 151 of the paper book and stated that assessee has provided the approximate details of expenses of Rs. 32,16,000/- on construction. He also referred to page No. 199 of statement of affairs of the assessee at on 31st of March 2013 where the same value was shown. He, therefore, submitted that the computation of capital gain of the assessee deserves to be upheld.
The ld. DR submitted that the valuation report couldn’t be said to be the proof of incurring the cost of construction. It was further submitted that details submitted by the assessee at page No. 151 is merely the computation of capital gain and not the details of the cost of construction. He further referred to page No. 199 of the paper book, which is the balance sheet of the assessee as on 31st of March 2013 stating that this balance sheet does not help the case of the assessee at all. To show the cost of acquisition and the cost of improvement the assessee needs to show the evidence that he has incurred the cost of construction. Merely showing the balance sheet as at 31st of March 2013 does not fulfill the requirement of the cost of improvement. He therefore submitted that there is no infirmity in the order of the lower authorities.
We have carefully considered the rival contention and perused the orders of the lower authorities. The assessee stated to have purchased the property in 1974 ₹ 16,000. The assessee after that has sold this property on 9/4/2013 for Rs 1 crore. Stamp duty value of the above property is Rs 10 5,20,000. The assessee has claimed that he has incurred the cost of improvement to the property of ₹ 32 lakhs in staggered manner over a period starting from 1/4/1981 till 31st of March 2005. However, there is no Page | 6
evidence of incurring this cost by the assessee except the valuation report submitted by the assessee. The claim of the assessee is that when this property was purchased it was clearly mentioned that on the land, only foundation work was done and no construction was carried out thereon. We have carefully considered the purchase deed of the above property wherein it is clearly mentioned that only foundation work has been done. This happened in 1970. The above property was sold on 9/4/2013 wherein it is mentioned that it has a basement area and above that, there is construction of three shops. The total construction area is shown to be 26.94 m². Further, there is another construction of residential house in which there are 16 rooms and two galleries along with the other amenities. It is also mentioned that the construction is RCC based. Therefore it is apparent that assessee has purchased the property where there is no construction however when it has been sold, there is a huge construction thereon. The assessee has stated that he has incurred a cost of ₹ 32 lakhs however there is no evidence except the valuation report, which is placed at page number 152 – 156 of the paper book. The valuation report dated 25/3/2013 by a registered valuer wherein it has been stated that that the year of the cost of construction is 30 years old. In addition, the assessee has constructed the above property either directly or by employing a contractor. It is further stated that for items of work done on contract and the copies of the agreement et cetera is available with the owner i.e. assessee. Therefore, the assessee has necessary proof available with him to show the cost of construction however same were not furnished before the assessing officer or before the learned CIT – A. According to the provisions of Section 48 of the act, the capital gain shall be computed by deducting from the full value of consideration because of transfer the cost of acquisition of the asset and the cost of any improvement thereto. Therefore, necessarily the cost of construction is required to be granted as deduction to the assessee. However, the onus lies on the assessee to show that he has incurred the cost of construction as well as the cost of improvement on the above property. The assessee should have demonstrated this based on the documents available with him. It cannot be a case that the huge construction has been made by the assessee without obtaining any municipal approval/substantial withdrawal from the bank Page | 7 accounts/agreement with the contractors as stated by the valuer. Merely producing the valuation report does not help the case of the assessee as it only shows the fair market value as on which date the assessee has stated to have constructed the property. Merely showing the same in the balance- sheet immediately prior to the year of the sale also do not help the case of the assessee. It cannot replace the fact of incurring the cost of construction or cost of improvement to the property. Even the valuer states in his valuation report that the evidence of incurring cost of construction/improvement are with the assessee, we are surprised that why they have not been produced before the learned lower authorities. The onus lies on the assessee to show that he should be taxed only on the net consideration reduced by the indexed cost of acquisition and the indexed cost of improvement thereof. If the case of the assessee is that it has shown the sum in the balance sheet as on 31st of March 2013, it would have shown the annual accounts of the assessee for the respective years if there maintained, in the year in which the cost of construction is incurred. These are not the credible evidences based on which the assessee can be granted deduction from the sale consideration of the property for working out the capital gain. In view of this we set aside this issue back to the file of the learned assessing officer with a direction to the assessee to show before the learned assessing officer the evidences of incurring of the cost of acquisition as well as the cost of improvement for construction of such magnitude on the impugned property sold. The learned assessing officer may examine the same and decide the issue in accordance with the law.
With respect to the adoption of the fair market value is deemed sales consideration in view of the provisions of Section 50 C of the act we do not find any infirmity in the orders of the lower authorities as assessee has failed to object the same before the assessing officer. Therefore, the learned assessing officer has correctly adopted the stamp duty value as deemed sale consideration for computing the capital gain.
Accordingly, ground number 2 of the appeal of the assessee is allowed in favour of the assessee with above directions.
Ground No. 3 of the appeal is against the confirmation of the addition of Rs. 32,04,124/-. The fact shows that the assessee has sold property situated at Modi Nagar, Ghaziabad, in two parts as per Sale Deed dated 27.12.2013 Page | 8 and 22.03.2014. This property was purchased as claimed by the assessee on 28.10.1983 for a sum of Rs .8,138/-. The assessee has shown the computation of the long term capital gain declaring a loss of Rs.4,57,373/-. The computation of capital gain made by the assessee shows that the above property was sold for Rs. 32,70,000/-. The purchase cost of the property on 28.10.1983 is Rs. 8,138/- and the index cost of acquisition Rs.65,876/-. To this extent there is no dispute between the parties. However, the assessee says that it has incurred cost of Rs. 2,50,000/- in the year 1983 and Rs. 3,00,000/- in 1983 to 1990. Both these construction cost are indexed and assessee claimed the deduction of Rs. 35,61,498/-. The ld. Assessing Officer did not grant this cost of construction as deduction to the assessee as assessee failed to produce any evidence about the same. The CIT (Appeals) also confirmed the action of the Assessing Officer.
The ld. AR submitted that in the balance sheet for 31st of March, 2013 placed at page No. 199 of the paper book shows that this property is shown in the balance sheet at Rs.5,58,138/-. Therefore, the ld. AR stated that it should be granted to the assessee as deduction.
The ld. DR vehemently supported the order of the ld. Lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The only dispute with respect to the above transaction of computation of long term capital gain is with respect to the deduction of cost of construction incurred by the assessee in 1983 of Rs. 2,50,000/- and 1983-1990 of Rs. 3,00,000/-. The assessee has only stated that as it is recorded in the statement of affairs as at 31st of March, 2013, the ld. Assessing Officer should grant deduction of the same to the assessee. The assessee has produced the Sale Deed of the property sold on 26.12.2013 and 22.03.2014 for Rs. 23,42,000/- and Rs. 9,28,000/- respectively. The Sale deed for Rs. 23,42,000/- shows that the impugned sale of property is mere plot of land. Further the sale of property for Rs. 9,28,000/- also do not show any construction on the property. In view of this, we do not find any infirmity in the orders of the lower authorities in rejecting that any cost of construction is incurred by the assessee. Merely showing a sum in the balance sheet as on 31.03.2014 without producing
any details of obtaining permission of construction from Municipal authorities or other respective authorities, any withdrawal or source of funds from the books of accounts of the assessee and not even a single bill of the cost of construction shows that the claim of the assessee is not sustainable. Accordingly, ground No. 3 of the appeal is dismissed.
Ground No. 4 of the appeal is with respect to the claim of the assessee for deduction under Section 54 of the Act. The claim of the assessee is that he has invested a sum of Rs. 78,68,972/- by investing in 5 different properties at different point of times and, therefore, the Assessing Officer should have granted him the deduction under Section 54 or 54F of the act. This ground was raised before the ld. CIT (Appeals), which was rejected by him for the reason that such claim was made by way of a letter dated 20.10.2016 before the Assessing Officer and was not claimed in the return of income and, therefore, he confirmed the order of the ld. Assessing Officer.
The ld. AR submitted that if the assessee is eligible for the same, same should have been granted to the assessee. It cannot be rejected on the ground that the claim was made as per letter. He submitted that as assessee has shown long term capital loss, there was no reason for the assessee to claim the same in the return of income.
The ld. DR vehemently supported the order of the Assessing Officer.
We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that the claim of the assessee was made during the course of assessment proceedings for the reason that according to the assessee he has returned long-term capital loss which got converted into long term capital gain at the time of assessment. When the liability for capital gain has arisen the assessee made a claim by way of a letter for computation of capital gain. In fact by that time there was no time available with assessee for filing any revised return. Therefore, in the interest of justice, we set aside the issue of granting exemption under Section 54 and 54F of the Act back to the file of the Assessing Officer. The assessee is directed to submit the details before the Assessing Officer in complete manner within 90 days of this order with respect to this claim. The ld. Page | 10
Assessing Officer after that deal with the same in accordance with law. Accordingly, this ground of appeal is allowed for statistical purposes.
25. Ground No. 5 of the appeal is with respect to the addition of Rs.14,50,000/- on account of cash deposited in the bank account.
26. The brief facts shows that the assessee has deposited cash of Rs. 25,00,000/- on 19.12.2013. The assessee was asked to give the explanation. The ld. Assessing Officer out of the sum of Rs.25,00,000/- considered Rs. 10,50,000/- as source available with the assessee which was withdrawn from another bank was considered as explained and balance sum was added. The ld. CIT (Appeals) confirmed the same stating that assessee could not show that he has received any cash no cash flow statement was furnished. He further held that bank account also shows intermittent cash deposit. Therefore, same was confirmed.
The ld. AR submitted that assessee was not given any exempt detail of which Rs. 14,50,000/- was considered as unexplained by the assessee out of the total source of the funds of Rs. 32,45,000/- submitted before the Assessing Officer. He referred to para No. 8 of the assessment order. The assessee also stated that he has received certain amounts from the trust on imprest amount, which was deposited in the bank account of the assessee. Therefore, he submitted that there cannot be any addition made in the hands of the assessee.
Ld. DR relied upon the orders of the lower authorities. 29. We have carefully considered the rival contentions and perused the orders of the lower authorities. Apparently para 8 of the assessment order shows that the assessee was asked to explain cash deposit of Rs. 25,00,000/- on 19.12.2013. The assessee explained the above fact by producing a statement which is also reproduced in the assessment order. The claim of the assessee is that as on the date of deposit of Rs.25,00,000/- on 19.12.2013 he was having a sum of Rs. 32,45,000/- in his hands. The ld. Assessing Officer noted that out of that sum of Rs. 18.25 lakhs has been withdrawn by the assessee from one bank and deposited in another bank and, therefore, the same is unexplained. Further assessee has claimed Rs. 7,50,000/- received on 19.12.2013 from Modern Academy and on the same Page | 11
date Rs. 2,00,000/- from Shanti Niketan Trust as imprest. The ld. Assessing Officer also did not grant the benefit of such amount. Before the CIT (Appeals) assessee submitted certificate from these two entities. However, in the certificate it was not mentioned that the above amount has been received by the assessee in cash. No ledger account of the assessee was also submitted. We find that assessee has submitted the imprest account of Shanti Niketan Trust at page No. 205 and 206 of the paper book and also submitted the ledger account from Modern Academy. Both these account shows that assessee was paid some imprest. However, if the assessee has received cash imprest from two other institutes, it is highly improbable that the assessee would deposit the same in his bank account. Further now no transactions are to be carried out same could have been done from the bank account of those trusts. However, it is clear that out of the sum of Rs. 25,00,000/- for which source of funds of Rs. 32,45,000/- was explained by the assessee, the ld. Assessing Officer made an addition of Rs. 14,50,000/- without mentioning anything that which entries or source of funds are accepted by him and which are denied. Further, we do not find any reason that if the assessee withdraws from one bank account and deposit in another bank account why it is not considered as proper explanation of source in absence of any other contrary material. In view of the above facts, we set aside the whole matter back to the file of the Assessing Officer with a direction to the assessee to explain the deposit of Rs.25,00,000/- in the bank account of the assessee in cash. The Assessing Officer may enquire the imprest amounts received from the two entities in accordance with law ascertaining whether there was any practice of giving any imprest sum to the trustees. In view of this, ground No. 5 of the appeal of the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on : 16/11/2021.