What did the Tribunal hold?

The Tribunal held that based on the construction sanction date and a subsequent letter indicating completion of multiple floors by 2005, it was reasonable to assume the investment was made prior to the relevant financial year. Therefore, the addition was unjustified.

The assessee claimed an investment of Rs. 15,00,000/- in construction for the assessment year 2005-06. The Assessing Officer added this amount to the income, stating the assessee could not prove it was spent prior to the relevant financial year.

What were the issues?

Whether the investment in construction was made in the assessment year under consideration or prior to it, and if the addition made by the AO was justified.

Smt. Minakshi Popli, Shimla vs DCIT | ITAT Chandigarh 2018

Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH

Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA

Hearing: 08.02.2018Pronounced: 04.05.2018

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 28.07.2016 of the Commissioner of Income

Tax(Appeals)-3, Gurgaon [hereinafter referred to as CIT(A)].

The assessee has taken following ground of appeal:

That in the facts and circumstances of the case the Ld. CIT(A) is not justified in upholding the addition of Rs. 15,00,000/- made to the taxable income of the assessee on account of alleged unexplained investment though no such investment was made in the assessment year under consideration.

ITA No.1067/Chd/2016- Smt. Minakshi i Popli, Shimla 2

The sole issue raised by the assessee is relating to the addition

made by the Assessing officer into the income of the assessee on

account of alleged unexplained investment in the construction of

flat at Kasumpti. The Assessing officer noted that the assessee

purchased a plot in Kasumpti, Shimla on 17.8.2002 and

constructed flats on the said plot which were sold by her to

different persons from time to time. On being asked to explain

about the amount spent in construction of the flats, the assessee

submitted the details as under:-

A.Y. Amount spent on construction (in Rs.)

2003-04 Rs. 15,00,000/- 2004-05 Rs. 2,50,000/- 2005-06 Rs. 1,00,000/- 2006-07 Rs. 1.00,000/- 2007-08 Rs. 1,40,000/- 2008-09 Rs. 75,000/- 2009-10 Rs. 75,000/- 2010-11 Rs. 4,00,000/- Total Rs. 26,40,000/-

The Assessing officer, however, observed that the assessee

could not prove with documentary evidence that the amount of Rs.

15 lacs was spent by the assessee in financial year 2003-04 or

prior to 1.4.2004 i.e. prior to the financial year under

consideration. He, therefore, made the addition of the said amount

taking it to be spent in the year under consideration. The assessee

contested the matter before the CIT(A), but remained

unsuccessful.

ITA No.1067/Chd/2016- Smt. Minakshi i Popli, Shimla 3

Before us, Ld. Counsel for the assessee has submitted that

the amount of Rs. 15 lacs was spent prior to the financial year

relevant to the assessment year under consideration. The Ld.

counsel has relied on the copy of the sanction letter dated

3.5.2003, whereby, the assessee was granted sanction to construct

on the plot. He has further submitted that after getting sanction

for construction, the assessee had immediately started the

construction. That the entire RCC was completed prior to 31.3.2004. The a flat in the said building was sold prior to 31 s t

March, 2004. Hence, it is the case of the assessee that substantial

construction had been competed prior to the year 2004, and hence

the amount of Rs. 15 lacs was not spent during the year under

consideration but prior to commencement of the financial year

relevant to the assessment year under consideration. The Ld.

counsel has further relied upon the sanction letter dated 12.9.2005

issued by the office of Special Area Development Authority,

Shimla, whereby, it has been mentioned that the assessee Smt.

Minakshi Popli has submitted the existing and proposed plan comprising basement, ground, Ist, 2 nd and third floor ‘exiting’ and sloping roof ‘proposed’ on land bearing Khasra No. 99/3,

Kasumpti, Shimla (emphasis applied). It has been further

mentioned in the said letter that the plan for the existing building

has been found correct and further the same as per the

compounding policy guidelines is regularized / retained after

receiving of the compounding fee. Further, permission for

ITA No.1067/Chd/2016- Smt. Minakshi i Popli, Shimla 4

proposed plan i.e. only for sloping roof is also accorded. A

perusal of the aforesaid sanction letter dated 12.9.2005 reveals

that by 12.9.2005, the major portion of the building i.e basement, ground, Ist, 2 nd and 3 r d floors were complete / in-existence. The

Ld. Counsel for the assessee has submitted that before the

commencement of the financial year 2004-05, one of the floors

had already been completed and sold by the assessee. That under

the circumstances, it cannot be said that the entire investment was

made by the assessee after 1.4.2004.

The Ld. DR, on the other hand, has relied upon the findings

of the lower authorities.

We have considered the rival submissions. The sanction for

construction of the building was given to the assessee on

3.5.2003. It is the case of the assessee that she had immediately

started the construction after getting the sanction. Further, that on 12.9.2005, the construction of basement, ground, Ist, 2 nd and 3 r d floor was in-existence, hence, in view of the above

submissions, it can be reasonably assumed from the facts that the

assessee would have started the construction in the year 2003

itself and that is why the four stories of the building were

completed by 12.9.2005. There is otherwise no evidence that the

amount in question has been spent by the assessee during the

assessment year under consideration. The assessee has given

bifurcation of the amount spent from year to year basis. In our

view, considering the date of the sanction plan and date of the

ITA No.1067/Chd/2016- Smt. Minakshi i Popli, Shimla 5

further sanction letter for sloping roof, wherein, it has been mentioned that by the said date of 12.09.2005, the four stories of the flat were completed, it can be well assumed from the above facts that the assessee might have spent the a mount of Rs. 15 lacs prior to 1.4.2004 on the construction of the flat. No contrary evidence has been brought to our notice by the Ld. DR from which it can be otherwise assumed that assessee had not started the construction in the year 2003 or prior to 1.4.2004.

In view of this, we do not find justification on the part of the lower authorities in making the impugned addition, the same is, therefore, ordered to be deleted.

In the result, the appeal of the assessee is hereby allowed.

Order pronounced in the Open Court

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 04.05.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR

SMT. MINAKSHI POPLI,SHIMLA vs. DCIT, CHANDIGARH

What did the Tribunal hold?

What were the facts?

What were the issues?

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