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Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 18/10/2022 pertaining to the Assessment Year 2012-13. 2. The effective ground raised by the assessee read as under:
That the Commissioner of Income-tax (Appeals) is wrong in making additions amounting to Rs. 33,55,505/- on account of disallowance of cost of improvement of asset even though the payment made to the third person against the improvement of asset years ago and such persons has verified the same through sworn notarized affidavit and through personal presence before the Ld. AO.
3. At the outset, it is noticed that this is the second round of appellate proceedings before the Tribunal. In the first round, the matter relating to the land development and other miscellaneous expense claimed by the assessee was remitted back to the file of the AO and the relevant findings of the Coordinate Bench read as under:
23. We have gone through the material placed before us. The assessee has submitted details of transfer expenses in the form of stamp duty, commission, land development and misc. expenses from the periods from 1999 to 2011. Since the stamp duty is statutory expense and a certain percentage of commission varying from 1% to 2% on land deals is also a normal trend in the land deals, the same may be given benefit of. Regarding the land development and other misc. expense the matter is being sent back to the file of the Assessing Officer to given an opportunity to the assessee to submit any documentary evidences or proof thereof and allow reasonable expenditure based on the evidences submitted 3.1 In the set aside proceedings, notice was issued to the assessee and in response, Ld. Counsel for the Assessee attended and the matter was discussed. Regarding details of expenditure incurred, assessee filed the details as part of its reply dt. 05/09/2018 which are contained at para 6 of the assessment order and the contents thereof read as under:
6. As directed by the Hon'ble ITAT Chandigarh, the assessee has been given opportunity vide notice u/s 142(1) dated 23.08.2018 and 27.08.2018 wherein asking the specific queries in relation to the cost of improvement of asset. In response to this, the assessee in its reply dated 05.09.2018 has provided the following details as cost of acquisition including purchase amount, stamp duty amount, commission, land development, misc. Expenses:
The cost of acquisition for the land sold in village Charaunda including the purchase amount, stamp duty amount and commission, land development and misc expenses are as follow:
Date of Purchased Stamp Duty Commission, Net Net Amount purchased Amount Expenses Land Purchase indexation Development Amount and Misc Expenses 05.02.1987 12,000.00 1,500.00 16,000.00 29,500.00 16,54,10.71 19.01.1989 40,000.00 5,000.00 24,000.00 69,000.00 3,36,428.57 13.06.1989 19,000.00 2,375.00 16,625.00 38,000.00 1,73,430.23 29.11.1989 40,000.00 5,000.00 26,000.00 71,000.00 3,24,040.70 23.07.1992 65,000.00 8,125.00 30,500.00 1,03,625.00 3,64,778.59 02.03.1995 1,20,000.00 15,000.00 40,500.00 1,75,500.00 5,31,920.85 07.09.1995 1,20,000.00 15,000.00 31,500.00 1,66,500.00 4,65,133.45 23.05.1996 1,04,000.00 13,000.00 29,000.00 1,46,000.00 3,75,770.49 25.05.1996 50,000.00 6,500.00 25,000.00 81,500.00 2,09,762.30 04.06.2002 1,46,500.00 18,320.00 41,680.00 2,06,500.00 3,62,645.41 14.08.2006 7,50,000.00 30,000.00 63,000.00 8,43,000.00 12,75,057.80 Total 14,66,500.0C 1,19,820.00 3,43,805.00 19,30,125.00 45,84,379.11 The cost of acquisition for the land sold in Village Basma & Kheri including the purchase amount, stamp duty amount and commission, land development and misc expenses are as follows: Date of Purchased Stamp Duty Commission, Net Net Amount purchased Amount Expenses Land Purchase Amount indexation Development and Misc Expenses 01.09.1999 4,90,000.00 40,000.00 1,50,000.00 6,80,000.00 13,72,237.00 12.12.2000 3,25,000.00 40,000.00 1,70,000.00 5,35,000.00 10,34,421.00 Total 8,15,000.00 80,000.00 3,20,000.00 12,15,000.00 24,06,658.00 18.082004 5,00,000.00 50,000.00 1,75,000.00 7,25,000.00 11,85,677.00 16.08.2005 1,50,000.00 15,000.00 1,30,000.00 2,95,000.00 4,65,946.00 Total 6,50,000.00 65,000.00 3,05,000.00 10,20,000.00 16,51,623.00 31.03.2011 4,35,000.00 35,0000.00 50,000.00 5,20,000.00 Short Term 3.2 In this regard, the AO noted that Rs. 6,75,000/- was paid to Shri Swaran Singh for purchase of land at Kheri Gurna and Basma Villages and Rs. 3,43,805/- were paid to Shri Rajveer Singh for purchase of land at Village Gharaunda. Thereafter, summons were issued by the AO under section 131 to these two persons. However, they same were returned unserved. Thereafter, notice under section 142(1) was issued to the assessee to produce these two persons alongwith there ID and other documentary evidence. In response, Shri Jatin Aggarwal, son of the assessee produced two persons and their statements were recorded by the AO under section 131 and the contents of those statements found mention at para 6.3 and 6.6 of the assessment order. Thereafter, the AO recorded his findings regarding payment to Shri Swaran Singh at para 6.4 and regarding to payment Shri Rajbir Singh in para 6.7 and we deem it appropriate to reproduce the relevant findings so recorded by the AO which read as under:
“6.4 As the statement reveals, following conclusions are drawn:- In question no. 3 of the statement Sh. Swaran Singh was asked that he is identifying himself as R/o Village Chharbar, SAS Nagar Mohali but as per his self declaration dated 18.04.2015 in which he has detailed the transactions with Sh. Ashok Kumar Aggarwal, he has stated to be the R/o Village Budanpur. To this Sh. Swaran Singh replied that Budanpur was written in self declaration by mistake. Thus this arises a reasonable doubt in any sound mind as to the genuineness of the person produced.
2. Sh. Swaran Singh was confronted to explain each and every transaction (Q. No. 7 to Q. No. 23 of statement recorded under oath) which he had stated to have received from Sh. Ashok Kumar Aggarwal in the self declaration dated 18.04.2015. To every transaction which happens over a period of 1999 to 2011 Sh. Swaran Singh replied that these amounts were cash payments made by the assessee to him in lieu of land levelling charges. Thus Sh. Swaran Singh in his statement stated that total sum of Rs. 6,75,000/- was received by him over a period of 12 years (for 04.09.1999 to 31.03.2011) for levelling of land. In the words of Sh. Swaran Singh he was paid by Sh. Ashok Kumar Aggarwal for filling pits with mud. Sh. Swaran Singh was asked in question no. 21 to provide detail of total land levelled by him and duration in which levelled. To which he replied that he had levelled 10 to 12 Killas and levelling wai> done from 1999 to 2011. It is common sense that a period of 12 years cannot be consumed in levelling of land. Also if land is levelled once why would it need repeated levelling? Without prejudice to the above, even if it is assumed that different lands were levelled at different time and levelling cost incurred by the assessee, the cost of levelling services over this scattered period are highly exaggerated considering the inflation index of relevant periods. For instance the assessee has claimed that for a land purchased on 16.08.2005 for purchase amount of Rs.1.5 lacs an additional cost of Rs. 1.3 lacs was paid to Sh. Swaran Singh. Similarly for a land purchased on 18.08.2004 for purchase amount of Rs.5 lacs an additional cost of Rs. 1.75 lacs was paid to Sh. Swaran Singh. For a land purchased on 12.12.2000 for purchase amount of Rs.3.25 lacs an additional cost of Rs. 1.70 lacs was paid to Sh. Swaran Singh. For a land purchased on 01.09.1999 for purchase amount of Rs.4.90 lacs an additional cost of Rs. 1.5 lacs was paid to Sh. Swaran Singh. The costs stated to have incurred on land-levelling are certainly over-stated considering the fact that unfortunately India is among the countries where such services as land levelling, hiring of tractors etc are available at very reasonable rates even today. This office made general market inquiries regarding current land levelling rates in villages-Kheri, Basma & Gharaunda and surrounding area.
It was found that current rate as on date is Rs. 500-600 per hour for a tractor inclusive of diesel and labor expenses. Current diesel rate is Rs. 70 per litre (approx). Normally average of a 30 horsepower tractor ranges from 4.5-6.5 litre per hour. Taking it as 5.5 litre per hour, the diesel consumption amounts to Rs. 385 per hour. So labour varies from Rs. 115 to Rs. 215 per hour. Receiving Rs. 80,000/- in 1999 for land levelling means when diesel rate was Rs. 14 per litre, assuming similar average of tractor(though we have better performing machines today!) Rs. 77 would be the cost of fuel per hour. Considering labour component in re-imbursement be in same ratio as today i.e 33%, the compensation for 1 hour for land levelling (fuel + labour) comes out to Rs. 115.50/-. Receiving Rs. 80000/- for land levelling means having spent 692.64 hours to level the land. Considering the total land held by assessee at different periods of time and the fact that land in these areas is generally known to be more or less level, 692.64 hours of time spent in levelling is nothing but a blatant exaggeration on the part of assessee to claim inflated costs of improvement.
Another important revelation that came up on recording statement u/s 131 of the Act of Sh. Swaran Singh was that the assessee has claimed that he paid Rs. 6,75,000/- to Sh. Swaran Singh as "Commission, land development and Misc. Expenses". In the statement recorded under oath, when Sh. Swaran Singh was asked to explain every transaction of payment received from the assessee (refer question no. 8 to question 20 of the statement), Sh. Swaran Singh described the payment as reimbursement towards land levelling that he had provided for the assessee's lands. He was categorically asked in question no. 23 as to whether he had ever helped Sh. Ashok Kumar Aggarwal in any property purchase and whether he had earned commission from Sh. Ashok kumar Aggarwal for the same. Sh. Swaran Singh has denied receiving any commission from the assessee for any purchase of property. He has stated that there is only one instance 7-8 years back in which he had helped the assessee purchase one Bigha from some Sh. Karnail Singh and for which Sh. Karnail Singh gave him Rs. 10,000/- as commission. It is also matter of fact that this is not the land in question. Hence, it is concluded that the assessee's claim of having paid commission expenses to Sh. Swaran Singh is false.
4. Also Sh. Swaran Singh is a man of meagre means. He is a peasant and has never filed return of income As per his statements he knew assessee in the capacity of providing menial services to him such as cleaning, delivery documents to various offices & following pits with mud etc. Thus it is very clear from the statement recorded under oath u/s 131 of Sh. Swaran Singh that there does not lie any grain of truth in the claim of assessee.
No documentary evidence in the form of bank account statements for the relevant year was produced. The mode of receipt of payment was stated to be cash.” “6.7 As the statement reveals, following conclusions are drawn:-
1.
In question no. 1 of the statement Sh. Rajbir Singh identified himself as Rajbir Singh S/o Jagat Ram R/o Village Mohidinipur, Karnal but as per assessee's submission regarding commission expenses, the document submitted is a self declaration by some Sh. Rajveer Singh R/o Village Modipur, Karnal dated 29.04.2015 in which he has detailed the transactions with Sh.Ashok Kumar Aggarwal. The self declaration has been signed in full name "Rajveer Singh". The person produced has identified himself as Sh. Rajbir Singh and signed the statement recorded under oath as "Rajbir Singh". The copy of PAN and Driving Licence has also been taken on record and they too carry the signature "Rajbir Singh". Thus this arises a reasonable doubt in any sound mind as to the genuineness of the person produced.
2. Without prejudice to the above, Sh. Rajbir Singh was confronted to explain each and every transaction (refer Q.No. 6 to Q. No. 20 of statement recorded under oath) which he had stated to have undertaken with Sh. Ashok Kumar Aggarwal in the self declaration 29.04.2015. As per the self declaration, it is stated that certain payments were made to Sh. Rajveer Singh by the assessee for purchase of land on different dates - Rs. 16,000/- on 05.02.1987, Rs. 24,000/- on 19.01.1989, Rs. 16,625/- on 13.06.1989, Rs. 26,000/- on 29.11.1989, Rs. 30,500/- on 23.07.1992, Rs. 40,500/- on 02.03.1995, Rs. 31,500/- on 07.09.1995, Rs. 29,000/- on 23.05.1996, Rs. 25,000/-on 25.05.1996. Interestingly these transactions pertain to periods when Sh. Rajbir Singh was mere 15 years old, 17 years, 18 years, 20 years, 23 years and 24 years old. A person who starts earning commission income on sale/purchase of property at such a tender age must be a person with huge potential of personal growth and by this age of 47 years must have build a reasonable career for himself. However, as per his statement, he practices farming in a joint agricultural land of total three acres held jointly by six brothers. Apart from this, he works as a daily wager. Regardless, each and every transaction was confronted to Sh. Rajbir Singh in the statement recorded under oath. In every answer, Sh. Rajbir Singh has denied of having any knowledge regarding land purchased by Sh. Ashok Kumar Aggarwal and has clearly stated that he has not received any commission whatsoever on account of land purchased from the assessee. He has also stated that the assessee would engage him in small jobs such as changing tyres of vehicles, handing over documents to various offices etc and would reimburse him for the same. He also stated that he does not remember the amounts of the reimbursement he had received. Regarding the payments of Rs. 20,000/- received on 19.06.2002, Rs. 21,680/- received on 10.07.2002, Rs. 30,000/- on 17.08.2006 and Rs. 33,000/- on 19.09.2006, Sh. Rajbir Singh again reiterated that these must pertain to small jobs that assessee would assign to him. He does not remember whether any payment was received on these dates and even if he had received, he does not remember the amount received.
3. Like Sh. Swaran Singh, Sh. Rajbir Singh is also a man of meagre means. He is also a peasant. As per his statements he knew assessee in the capacity of providing menial services to him such as cleaning, delivering documents to various offices & following pits with mud etc.
No documentary evidence in the form of bank account statements for the relevant year was produced. The mode of receipt of payment was stated to be cash. Thus it is very clear from the statement recorded under oath u/s 131 of Sh. Swaran Singh that there does not lie any grain of truth in claim of assessee.”
3.3 Basis the aforesaid analysis of the statements so recorded and other material available on record, the AO finally recorded his finding stating that the assessee’s claim of Rs. 6,75,000/- paid to Shri Swaran Singh for purchase of land at Village Kheri Gurna and Basma Villages and Rs. 3,43,805/- to Shri Rajveer Singh for purchase of land at Village Gharaunda on account of commission, land development and miscellaneous expenses is false and the same was disallowed.
4. Against the said findings, the assessee carried the matter in appeal before the Ld.CIT(A) who has sustained the said addition.
5. Against the said findings and the direction of the Ld. CIT(A), the assessee is in appeal before us.
During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities and it was submitted that the two persons to whom the assessee has made the payment has confirmed the same through their sworn notarized affidavits and also through their personal presence before AO that they have received the payment from the assessee. It was submitted that the AO disregarding the same has disallowed the cost of improvement. It was further submitted that the order passed by the AO was based on the assumptions and presumptions and it is well settled law that any order passed on surmises and conjectures cannot have legal validity. It was submitted that no opportunity against the addition made was given before passing the order by the AO which is against the principal of natural justice and even no opportunity to cross examine the third parties was provided to the assessee. It was further submitted that the assessee has filed detailed rebuttal to the findings of the AO before the ld CIT(A) on 14/112019 and which have not been appreciated and the findings of the AO have been confirmed and our reference was drawn to the submissions so filed and the contents thereof read as under:
“Submission on the objections raised in the statement of Sh. Swaran Singh 1. Identity of the person : Sh. Swaran Singh The Ld. AO has questioned the identity of the person due to the mistake of village in the self declaration dated 18-04-2015. Submission: • The village Budanpur and Village Chhabar is adjoining village and are usually spoken jointly. • The village name typed on the self declared statement is a typographical error / mistake which can be happened with anyone. For Instance in the order of the Ld. AO; (Page No. 21) name Swaran Singh is typed instead of Rajbir Singh. • Sh. Swaran Singh has provided his Aadhar Card (Page No. 8) issued by the Government of India, and details of the cash received were sworn before a notarised officer, Panchkula to prove the genuiness of identity and transaction. • No person will provide notarised affidavit claiming to receive money unless and until the person has actually received money.
Payment made to Sh. Swaran Singh The Ld. AO has questioned the payment made to Sh. Swaran Singh over the period of 12 years i.e. from 1999 to 2011. Submission: • Transfer of properties is a technical work; the assessee met Sh. Swaran Singh, who agreed to help the assessee in purchase of properties; since Sh. Swaran Singh was a local person from Banur and had good knowledge and whereabouts for transfers of properties. Further, Sh. Swaran Singh also agreed to level the land purchased and other work on the land to make it usable and distinguishable. Sh. Swaran Singh was paid consideration from time to time against his services of levelling and transfer of property. It was agreed that all the expenses related to the transfer of property (typing expenses, mutation, jamabandi, etc.) and levelling of land will be covered in the consideration fixed. • The assessee had initially purchased the land in the year 1999 against which total consideration of Rs. 1,50,000/- was fixed for transferring of land in the assessee name; levelling of purchased land to make it usable etc. The assessee paid Rs. 1,50,000/- in parts on 04-09-1999; 10-10-1999 and 26-10-1999 as fixed.
• Thereafter the assessee purchased adjoining land in the year 2000 against which total consideration of Rs. 1,70,000/- was fixed for transferring of land in the assessee name; levelling of purchased land to make it usable etc. The payment was made accordingly. • Thereafter again the assessee purchased adjoining land in 2004; in the year 2005 and later in the year 2011 against which consideration were fixed at Rs. 1,75,000/-; Rs. 1,30,000 and Rs. 50,000/- respectively. Sh. Swaran Singh had issued receipt of the money received dated 18-04-2015 and notarised affidavit dated 08-10-2018 against the money received. The Ld. AO had stated that a period of 12 years cannot be consumed in levelling of land. The Ld. AO had forgot that the assessee had purchased the land over the period of 12 years and expenses related to the transferring of land and maintenance of land to make it usable were borne during the period of purchase and not during the period of 12 years. The Ld AO has forgot to add the expenses of travelling to the