SANDRA NADAR,MUMBAI vs. ITO 19(1)(4), MUMBAI

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ITA 3260/MUM/2013Status: DisposedITAT Mumbai24 February 2016AY 2009-107 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the balance sheets of the partnership firm, which reflected a higher building cost accepted by the AO in prior years, should be considered. For the deemed let out property issue, the Tribunal restored the matter to the AO for re-examination.

What were the facts?

The assessee sold a property and claimed a certain cost of construction for capital gains. The Assessing Officer (AO) used a lower value from a VDIS declaration, while the assessee argued for a higher value based on balance sheets from a partnership firm. The assessee also had two vacant flats, and the AO treated one as deemed let out.

What were the issues?

The primary issues were the correct cost of construction for capital gains calculation and the deemed rental income from vacant properties.

Which sections of the Income-tax Act were involved?

Section 24

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR

Pronounced: 24.02.2016

O R D E R

PER C.N. PRASAD, JM:

1.

This appeal is filed by the assessee against the order of the Ld. CIT(A)-30, Mumbai dated 11.2.2013 pertaining to assessment year 2009-10.

2.

The first issue in the appeal of the assessee is that the Ld. CIT(A) erred in confirming the construction cost at Rs. 6,06,000/- instead of Rs. 22,92,41/- as taken by the appellant while calculating capital gain on sale of building.

3.

The assessee raised additional ground on 27.7.2015 contended that lower authorities erred in prematurely terminating their proceedings without conducting proper enquiries in full and without considering material more particularly available on past assessment records thereby denying your appellant an adequate opportunity of being heard.

4.

The Ld. Counsel for the assessee submits that this ground of appeal is not pressed. Thus, the additional ground raised by the assessee is dismissed as not pressed.

5. Coming to ground No. 1 of regular grounds, brief facts are that the assessee during this assessment year sold property known as Kenny’s Housing Complex at Tirunelveli. In the return of income, the assessee offered Long Term Capital gain of Rs. 22,39,858/- after claiming indexation for the cost of purchase of land and construction thereon. The AO required the assessee to file supporting documents for the claim for indexation for plot purchased and constructed building thereon. The assessee filed letter dated 27.12.2011 stating that assessee is a second wife of her late husband Mr. Nadar who is the resident of the place Tirunelveli Village, Tamilnadu. As the reason of enmity between both the wives after the death of their husband, the first wife alongwith her four sons do not allow the second wife to enter their place. It was the submission of the assessee that the records of her late husband who built the building in his lifetime are with the first wife and it is not possible to get any co-operation with them and therefore not possible to produce the records of building being built in lifetime of her late husband. It was the submission that the land was purchased on 17.9.1993 for a sum of Rs. 1,99,500/- and this document which was available with the assessee was already submitted.

5.1. It was further submitted that the building has been built is also a fact as the sale documents were furnished before the AO and also records show that cost of building was reflected. As such it was requested that the estimated value of the same for the purpose of computation of capital gain could be taken. However, the AO has taken cost of building of the assessee at Rs. 6,06,000/- as declared by Kenny’s Housing Complex under VDIS Scheme 1997, since, it was described in the VDIS that this amount was spent on construction of housing complex at Tirunalveli, Tamil Nadu for the assessment years 1994-95 and 1995-96. Thus, the AO computed the Long Term capital gain of Rs. 6,06,000/- instead of Rs. 22,92,441/- adopted by the assessee for computing Long Term Capital Gain.

6.

The assessee preferred an appeal before the Ld. CIT(A). There was no representation before the Ld. CIT(A) that notices were issued to the assessee on six occasions, the assessee appears to be requested time for four occasions and nobody appeared on two occasions. Thus, the Ld. CIT(A) decided on merit affirming the order of the AO.

7.

The Ld. Counsel for the assessee submits that the Assessing Officer adopted the building cost at Rs. 6,06,000/- based on the VDIS certificate issued on 11.2.1998. The Ld. Counsel referring to page-36 which is the assessment order for assessment year 2005-06, submits that rental income was shown from the building and Assessing Officer has taken note of the fact that this building was jointly held with her husband in partnership firm M/s. Kenny’s Housing Complex and after the death of her husband on 26.2.2004, she became the owner of the property and firm was dissolved. Therefore, the Ld. Counsel submits that there is no justification in taking only the value declared by the assessee in the VDIS certificate.

8.

The Ld. Departmental Representative submits that assessee has not given any details in respect of the cost of construction of the building and the only evidence which is on record is that the VDIS declaration made by the Kenny’s Housing Complex to suggest that the cost of construction of the housing complex is Rs. 6,06,000/- only. Therefore, he submits that the AO justified in adopting the cost of construction of Rs. 6,06,000/- instead of Rs. 22,92,441/- adopted by the assessee.

9.

We have heard both sides and perused the orders of the lower authorities, evidences produced before us. It is the contention of the assessee that it had incurred Rs. 22,92,441/- for the construction of the building as against Rs. 6,06,000/- adopted by the AO. The contention of the assessee is that the AO himself admits that the assessee has shown rental income of Rs. 7,68,900/- in the assessment year 2005-06 and the property which was held jointly with her husband in partnership became the property of the assessee on the death of her husband on 26.2.2004 on dissolution of the firm. Therefore, it is the contention of the Ld. Counsel that the assessee has spent Rs. 22,92,41/- as cost of construction, it should be taken for the purpose of indexation in computing long term capital gain. However, the AO adopted the value declared by the firm Kenny’s Housing Complex in the VDIS Scheme at Rs. 6,06,000/- though the assessee contends that cost of construction was at Rs. 22,92,441/-.

9.1. From the Paper Book pages 25,28 and 35, the balance sheets of Kenny Housing Complex for the years 2008, 2007 and 2005 March 31st respectively clearly show that the building cost was reflected at Rs. 24,91,941/-. This was accepted by the Assessing Officer for these years. Having accepted that the assessee incurred cost of construction at Rs. 24,91,941/- on the building in Tamilnadu, we do not see a valid reason for rejecting the assessee’s contention that the cost of construction is not Rs. 6,06,000/- but is Rs. 22,92,441/-. Thus we direct the AO to consider the cost of construction of building at Rs. 22,92,441/- as taken by the assessee for computing capital gains and indexation.

10.

The next issue in the appeal of the assessee is that the Ld. CIT(A) erred in confirming the addition of Rs. 2,57,888/- on account of estimated deemed let out value of the second property owned by the appellant.

11.

Brief facts are that the AO while completing the assessment noticed that the assessee has not offered any income in respect of the two flats owned by her one at Santacruz and one at Bandra which were vacant throughout the year. The AO has taken 7% of the flat value of Bandra flat as ALV and after deducting 30% u/s. 24, the balance of Rs. 2,57,888/- was subjected to tax under income from house property.

12.

The assessee preferred an appeal before the Ld. CIT(A) but the Ld. CIT(A) in the absence of any representation affirmed the order of the AO.

13.

The Ld. Counsel for the assessee submits that the AO has taken one of the properties i.e. flat at Sanatacruz as self occupied property and computed the ALV of the flat at Bandra. The Ld. Counsel submits that instead of taking Santacruz as self occupied property, the AO should have taken Bandra flat as self occupied property and computed the ALV for the Santacruz flat. He submits that the assessee had option to choose which should be taken as self occupied property as per sub-section 4 of Sec. 24. Therefore, he requested that the AO be directed to consider Bandra flat as self occupied property instead of Santacruz property.

14.

The Ld. Departmental Representative supports the orders of the lower authorities.

15.

On hearing both the sides, we are inclined to set aside this issue to the file of the AO for re-examining the claim of the assessee in accordance with law. Thus, we restore this issue to the file of the AO for fresh adjudication in accordance with law.

16.

In the result, the appeal filed by the assessee is partly allowed for statistical purpose.

Order pronounced in the open court on 24th February, 2016.

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