ANIL KUMAR,NEW DELHI vs. ACIT, CENTRAL CIRCLE-30, NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH F: DELHI
Before: SHRI CHANDRA MOHAN GARG & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F: DELHI)
BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
ITA No.2098/Del/2022 Assessment Year: 2019-20
Sumit Dang, C/o ACIT, Central Circle-30, Anil Jain DD & Co., 611, Delhi. Vs. Surya Kiran Building, 19-K.G. Marg, New Delhi (PAN:AHEPD5091M) (Appellant) (Respondent)
ITA No.2099/Del/2022 Assessment Year: 2019-20
Ramesh Chand, C/o ACIT, Central Circle-30, Anil Jain DD & Co., 611, Delhi. Vs. Surya Kiran Building, 19-K.G. Marg, New Delhi (PAN:AADPC5642D) (Appellant) (Respondent)
ITA No.2097/Del/2022 Assessment Year: 2019-20
Anil Kumar, C/o ACIT, Central Circle-30, Anil Jain DD & Co., 611, Delhi. Vs. Surya Kiran Building, 19-K.G. Marg, New Delhi (PAN:AAJPK5714A) (Appellant) (Respondent)
2 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
ITA No.2100/Del/2022 Assessment Year: 2019-20
Rajeev Kumar, C/o ACIT, Central Circle-30, Anil Jain DD & Co., 611, Delhi. Vs. Surya Kiran Building, 19-K.G. Marg, New Delhi (PAN:AAFPD2572D) (Appellant) (Respondent)
ITA No.2021/Del/2022 Assessment Year: 2019-20
Jagannath, C/o ACIT, Central Circle-30, Anil Jain DD & Co., 611, Delhi. Vs. Surya Kiran Building, 19-K.G. Marg, New Delhi (PAN:AAHPN7779E) (Appellant) (Respondent)
Present for: Appellant by : Shri Anil Jain, CA Respondent by : Ms. Suneeta Verma, CIT-DR
Date of Hearing : 13.09.2023 Date of Pronouncement : 13.10.2023
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
These five appeals filed by the separate assessees are against the
respective order of learned Commissioner of Income-tax(Appeals), Delhi –
3 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
in Appeal Nos. 10449/2018-19, 10442/2018-19, 10446/2018-19,
10444/2018-19 and 10448/2018-19, dated 28.07.2022 against their
respective assessment orders under Section 143(3) of the Income-tax Act,
1961 (hereinafter referred to as the “Act”), dated 20.05.2021 passed by
ACIT, Central Circle-30, Delhi for the common assessment year 2019-20.
Common issue is involved in all the five appeals on account of Long
Term Capital Gain on sale of property which was a joint property of the
five members who are the five appellants in these five appeals.
Accordingly, all the five appeals are disposed of by way of this
consolidated order for the sake of convenience. We will take facts of the
case and observations and findings of the authorities below from one of
the appeals in the case of Shri Jagannath in ITA No.2101/Del/2022 to
adjudicate upon these five appeals. Our observations and findings in this
appeal shall apply mutatis mutandis to all the other four appeals.
Grounds of appeal taken by the assessee in the case of Shri
Jagannath (supra) are reproduced as under:
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has failed to appreciate that the assessment order passed u/s 143(3) is illegal, bad in law and without jurisdiction.
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has failed to appreciate that the approval by the Addl. CIT u/s 153D is illegal, bad in
4 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
law and without application of mind and consequently the assessment order passed requires to be quashed.
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has failed to appreciate that the assessment order being passed in violation of the principle of natural justice and without giving adequate time and opportunity to the assessee to represent its case and to file its replies and clarification, is bad in the eye of law and liable to be quashed.
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has erred in sustaining the addition of Rs.20,24,002/- on account of Long Term Capital Gain on the sale of property.
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has failed to appreciate that the various observations and findings of the learned Assessing Officer in the impugned assessment order is denied being vitiated in law.
That on the facts and circumstances of the case and the provisions of the law, the ld. CIT(A) has failed to appreciate that the learned Assessing Officer has erred in forming an incorrect opinion without confronting the same and in using the same adversely without providing the reasonable opportunity of defending, which inaction of the AO makes the assessment proceedings and consequential assessment order as null and void.
That on the facts and circumstances of the case the ld. CIT(A) has failed to appreciate that the learned Assessing Officer has erred in initiating the proceedings u/s 1AAB(1A) of the Income Tax Act, 1961.
That the interest charged u/s. 234A, 234B and 234C is illegal and without prejudice it is excessive.
At the outset, learned counsel submitted that he is pressing only
on ground no.4, stated above. All other grounds relating to legal issue
5 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
are not pressed. Accordingly, ground nos. 1 to 3 and 5 to 9 are dismissed
as not pressed.
Brief facts of the case are that assessee filed his return of income
on 31.12.2019, reporting total income of Rs.99,30,470 which included
income from salary, house property, capital gain and other sources. In
the year under consideration, assessee had sold joint property at A-2/36
Rajouri Garden, New Delhi for a sales consideration of Rs.7,20,00,000.
The said property was jointly owned by Shri Ramesh Chand, Shri Rajeev
Kumar, Shri Anil Kumar and Shri Sumit Dang along with Shri
Jagannath. All the five aforesaid co-owners are in appeal before the
Tribunal.
5.1 Learned Assessing Officer called for explanation and details in
respect of his share of capital gain earned by the assessee on the sale of
this property. Assessee had furnished purchase deed, sale deed and
other documentary evidences relating to cost of construction incurred by
the assessee to substantiate his claim. Learned Assessing Officer noted
from the purchase deed that property was purchased for Rs.3,18,00,000
which included cost of construction of Rs.43,51,000. According to the
assessee, the old structure was demolished and a new building was
constructed over a period of four years from assessment years 2011-12
6 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
to 2014-15. Out of the four floors constructed in the said property, two
floors were sold for Rs.7.20 crores.
5.2 Assessee furnished the computation of Long Term Capital Gain on
the sale of two floors of the said property which is reproduced as under:
Sales Price (Sales 7,20,00,000 Please see page made on 18.02.2019) no.6,7 and 8 of assessment order.
Less: Indexed Cost Please see page no. Cost of Land 1,59,00,000 2,66,58,683 4 to 13 of the paper (12.11.2010) book.
Cost of Construction: Indexed Cost For complete details FY 2010-11 36,53,781 61,26,100 of the documents FY 2011-12 1,06,73,487 1,62,42,264 filed before the ld. FY 2012-13 53,65,282 75,11,396 AO see page no.4 to FY 2013-14 15,92,001 20,26,184 16 and 23 to 73 of the paper book. Total Cost of Acquisition 5,85,64,627 Net Long Term Capital 1,34,64,627 Gain
Assessee’s share being 26,87,075/- 1’5th of capital gain
5.3 Learned Assessing Officer worked out the cost of construction on
the basis of construction value of the building determined by the stamp
duty valuing authority which was arrived on the basis of notified rates of
construction by the Government considering age factor as recorded in
the registered sale deed. The cost of construction in this respect was
7 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
recorded at a value of Rs.1,48,42,800 from which learned Assessing
Officer reduced the cost of building (old structure) determined at the time
of purchase at Rs.43,51,000 and thus arrived at a net value of cost of
construction at Rs.1,04,91,800. Learned Assessing Officer, thus,
recomputed the Long Term Capital Gain by taking into consideration the
net value of cost of construction and made the addition of Rs.25,86,991
at 1/5th share in the total Long Term Capital Gain for the same. The
said computation is reproduced as under:
Sales Price (Sales made on 7,20,00,000 18.02.2019)
Less: Indexed Cost
Cost of Land 1,59,00,000 2,65,58,683
(12.11.2019)
Cost of Construction Indexed Cost
FY 2010-11 29,66,599 49,54,220 FY 2011-12 29,66,599 45,09,230 FY 2012-13 29,66,599 41,53,938 FY 2013-14 15,92,001 20,26,184
Total Cost of Acquisition 4,23,01,556
Net Long Term Capital 2,96,98,444 Gain.
Assessee’s Share being 59,39,688/- 1/5th of capital gain.
8 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
5.4 Assessee went in appeal before the learned Commissioner of
Income-Tax(Appeals) before whom assessee contended that old structure
of the property purchased by him was demolished and a new building
was constructed. Therefore, reduction of cost of construction of the old
structure from the cost of construction valued in the registered sale deed
by the stamp duty authority was not justified. It was also submitted that
cost of construction adopted by the stamp duty authority is a
depreciated value which has been arrived at on the date of sale whereas
for the purpose of computation of Long Term Capital Gain, it should
relate to the period when this property was constructed, which would be
on a higher side since the property was constructed during the period
from assessment years 2011-12 to 2014-15.
5.5 Considering the submissions made by the assessee, learned
Commissioner of Income-Tax(Appeals) took the cost of construction at
Rs.1,48,42,800 and agreed not to reduce the cost of the old structure
which was demolished, as was reduced by the learned Assessing Officer.
However, learned Commissioner of Income-Tax(Appeals) did not agree to
do the reverse calculation for taking the cost of construction for the
period in which the property was constructed. Based on the findings of
the learned Commissioner of Income-Tax(Appeals), the Long Term
Capital Gain was recomputed by which the additions sustained came to
Rs.20,24,002. The said computation is reproduced as under:
9 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
Shares Price (Sales made on 18.02.2019) 7,20,00,000
Less: Indexed Cost Cost of Land 1,59,00,000 2,66,58,683 (12.11.2010)
Cost of Construction: Indexed Cost FY 2010-11 37,10,700 62,21,533 FY 2011-12 37,10,700 56,46,717 FY 2012-13 37,10,700 51,94,980 FY 2013-14 37,10,700 47,22,709
Total Cost of Acquisition 484,44,622
Net Long Term Capital Gain 2,35,55,378
Assessee’s share being 1/5th of capital 47,11,076/- gain
5.6 Aggrieved, assessee is in appeal before the Tribunal.
Before us, learned counsel reiterated the above stated facts and
contentions taken before the authorities below which are not
repeated for the sake of brevity. The solitary issue on the merits of the
case is in respect of allowing the deduction for indexed cost of
construction (improvement) of the property to arrive at taxable
component of Long Term Capital Gain. The sole grievance canvassed by
the learned counsel before us is to allow the cost of construction to be
recalibrated by considering the age factor since building depreciates year
on year basis and the value assigned towards cost of construction by the
10 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
learned Commissioner of Income-Tax(Appeals) is based on value adopted
by the stamp duty authority on the date of sale. For the purpose of
recalibration, learned counsel proposed that as per normal practice,
value of building depreciates minimum @ 10% per year. Thus, according
to him, if depreciation rate of 10% per year is factored in, the index cost
of construction will come to Rs.3,78,93,593.
Per contra, learned CIT DR placed reliance on the order of learned
Commissioner of Income-Tax(Appeals) who has given justifiable relief of
not reducing the cost of construction relating to old structure. According
to him, computation of Long Term Capital Gain arrived at by the learned
Commissioner of Income-Tax(Appeals) ought to be sustained.
We have heard the rival contentions and perused the material on
record. Present case is a case on estimation of cost of construction
which needs to be allowed as a deduction after indexation for the
purpose of computing Long Term Capital Gain on the sale of two floors of
the property under consideration. It is important to note that bills and
vouchers in respect of cost of construction actually incurred by the
assessee over the period of four years from assessment years 2011-12 to
2014-15 are not available with completeness. Owing to incompleteness of
the records, learned Commissioner of Income-Tax(Appeals) has taken
into account the stamp duty value adopted for the cost of construction
11 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20 which in fact has been arrived at by taking into account the age factor.
Importantly, this value of cost of construction arrived at by the stamp
duty authority is on the date of sale of the impugned property. However,
to compute the Long Term Capital Gain, the cost of construction has to
relate to the period when construction was done. We do find force in the
contention of the learned counsel to consider the age factor for arriving
at the cost of construction. Accordingly, taking the holistic approach to
the facts of the case, we find it proper to jack-up (increase) the cost of
construction of Rs.31,01,700 adopted by learned Commissioner of
Income-Tax(Appeals) in each of the four years from assessment years
2011-12 to 2014-15 by 20% so as to take care of the easing factor of the
building which is subjected to the depreciation. We, thus, direct the
learned Assessing Officer to recompute the Long Term Capital Gain in
terms of our observations aforesaid. Accordingly, ground no.4 taken by
the assessee is allowed for statistical purposes.
The other four appeals which are by the four co-owners of the same
aforesaid property are also allowed for statistical purposes in terms of
our observations and findings as stated above in ITA No.2101/Del/2022.
In the result, all the five appeals of the respective assessees are
allowed for statistical purposes.
12 ITA Nos.2098, 2099,2097, 2100 & 2101/Del/2022 Sumit Dang, Ramesh Chand, Anil Kumar, Rajeev Kumar & Jagannath, Delhi- AY: 2019-20
Order is pronounced in the open court on 13.10.2023.
Sd/- Sd/-
(Chandra Mohan Garg) (Girish Agrawal) Judicial Member Accountant Member
Dated: 13th October, 2023 *Mohan Lal*
