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COMMISSIONER OF INCOME TAX DELHI-VI Vs. TYAGI ANAND & CO. PVT LTD.
November, 01st 2013
$~04
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                       Income Tax Appeal 219/2013

                                    Date of decision:- 11th October, 2013.

      COMMISSIONER OF INCOME TAX DELHI-VI ..... Appellant
                  Through    Ms. Suruchi Aggarwal, Sr.
                  Standing Counsel.

                           versus

      TYAGI ANAND & CO. PVT LTD.             ..... Respondent
                   Through   Mr. Ved Jain, Advocate.

      CORAM:
      HON'BLE MR. JUSTICE SANJIV KHANNA
      HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL)


      Revenue in this appeal under Section 260A of the Income Tax

Act, 1961 (Act, for short) in respect of assessment year 2005-06,

impugns findings recorded by the Income Tax Appellate Tribunal

(tribunal) in their order dated 25th July, 2012.

2.    Return filed for the aforesaid assessment year was made subject

matter of assessment order under Section 143(3) dated 13 th December,

2007 and the income was assessed at Rs.18,89,850/-. Subsequently,

reassessment     proceedings     were      initiated   and   additions   of

Rs.1,69,88,383/- and Rs.1,50,00,000/- were made.

Addition of Rs.1,69,88,383
ITA 219/2013                                             Page 1 of 6
3.      The respondent-assessee vide sale deed dated 25th November,

2004 had sold the second and third floor of a property under

construction to Uttam Enterprises for consideration of Rs.5,67,70,000/.

For the purpose of computing capital gains, the assessee had taken the

cost of construction at Rs.5,65,72,958/- and capital gains of

Rs.1,97,041/- was disclosed and accepted in the original assessment.

4.      The Assessing Officer in reassessment order observed that as per

the valuer's certificate, the total cost of the second and third floor of

the building was Rs.3,95,84,575/-, whereas the assessee had shown the

cost as Rs.5,65,72,958/-. Thus, addition of Rs.1,69,88,383/- was made.

5.      Commissioner of Income Tax (Appeals) reversed the finding of

the     Assessing    Officer,     inter   alia,   recording    that   figure   of

Rs.3,95,84,575/- pertained to actual expenditure incurred till 31st

March, 2005 on construction of second and third floor of the building

and the figure of Rs.5,65,72,958/- was the projected actual cost of

construction relating to second and third floor. He accordingly held

that as capital gains was being taxed in the year in question and there

being     no    dispute   about     the projected      cost, the      figure of

Rs.5,65,72,958/- cannot be ignored. The exact reasoning given by the

Commissioner (Appeals) reads as under:-




                       "8.2. During the year under
               consideration the assessee sold 2nd and 3rd
               floors. The assessee declared capital gains on
ITA 219/2013                                                  Page 2 of 6
           the sale of 2nd and 3rd floors as detailed
           below.
            Sale consideration               Rs.5,67,70,000
            Cost of construction of
            2nd and 3rd floors              Rs.5,65,72,958
                                      ------------------------
                                                1,97,041
                                        -----------------------
           8.3. According to the AO the cost of
           construction was
           Rs.3,95,84,575/- as per the valuer/architect
           certificate. Hence there is unexplained
           investment which is worked out as under.
           Cost according to the AO          Rs.5,65,72,958
             Less: Cost as per valuer's certificate
                                                3,95,84,575
            Difference                 ------------------------
                                               1,69,88,383
                                        -----------------------
           8.4. The A.R. has explained that entire sale
           consideration of Rs.5,67,70,000 was taken
           into account to declare capital gains. The AR
           has clarified that the amount actually incurred
           upto 31.3.05 was Rs.3,95,84,575/-. The
           projected cost of construction of 2nd and 3rd
           floors was Rs.5,65,72,958/- as per 2nd
           valuation certificate. This amount includes the
           amount of Rs.3,95,84,755/- spent already by
           31.3.2005.

           8.5. Following the matching principle, the
           projected cost at Rs.5,65,72,958/- was
           deducted while computing the capital gains.

           8.6. There are two valuation certificates. One
           certificate dt. 4.4.2005 deals with the actual
           amount spent on the entire project. The total
           amount actually spent on the entire project
           was Rs.12,96,24,057/- which includes cost of
           Rs.3,95,84,575/- spent on 2nd and 3rd floors."

           8.7. In the second certificate dt. 10.10.2005 the
           projected cost of the entire project was
ITA 219/2013                                              Page 3 of 6
           Rs.17,69,74,995/- which included projected
           cost of Rs.5,65,72,958/- in respect of 2nd and
           3rd floors.

           8.8. The AO presumed that projected cost of
           construction of Rs.5,65,72,958/- on 2nd and 3rd
           floors as per the second valuation certificate
           was actually spent and worked out the excess
           amount of Rs.1,69,88,383/- to be assessed as
           unexplained investment. I have gone through
           the documents brought on record and found the
           contentions of the AR are tenable and there is
           no case for addition of Rs.1,69,88,383 u/s
           69B."

6.    The said findings have been affirmed by the tribunal after

recording that the departmental representative, who was appearing for

the Revenue, could not contradict the said findings.

7.    The reassessment order which is subject matter of the present

appeal is dated 29th December, 2010.         Learned counsel for the

respondent has stated that by that time, the project was complete.

8.    Copy of the valuation certificates have not been filed before us,

to question and challenge the factual finding of the appellate

authorities. The Assessing Officer in the present case did not go into

the   question   whether    the   estimated/projected      cost   of   Rs.

Rs.5,65,72,958/- was correct or not. He also did not ascertain the

actual cost of construction of the second and third floor. Revenue

before the tribunal did not dispute or question the projected/estimated

cost of construction of second and third floor. Capital gains on transfer


ITA 219/2013                                            Page 4 of 6
was being taxed in the year in question. Actual cost incurred on

construction has to be deducted from the consideration received. This

is the basis/foundation of the order of the Commissioner (Appeals) and

the tribunal. Addition of Rs.1,69,88,383/- cannot be justified on the

ground that as on 31st March, 2005, the assessee had incurred

expenditure of Rs.3,95,84,575/-. During the course of hearing we had

asked counsel for the Revenue whether the property in question was

under construction when the sale deed was executed? Learned counsel

for the Revenue states that as per the sale deed, the property in

question was under construction. Before us and the tribunal, it is not

alleged and argued that the actual cost incurred was different or less.

Break-up and details of cost of construction have not been filed or

contested.




Addtion of Rs.1,50,00,000/-

9.    The Assessing Officer invoked Section 69B of the Act after

making reference to the 3CD report wherein unsecured loans of Rs.4.6

crores and repayment of Rs.4.52 crores were recorded. The Assessing

Officer observed that during the scrutiny proceedings, the respondent-

assessee had shown loan amount of Rs.4.25 crores and repayment of

Rs.3.32 cores. Commissioner (Appeals), on the other hand, came to

the conclusion that the Assessing Officer had made an error in reading

the 3CD report and has recorded that the respondent-assessee had
ITA 219/2013                                         Page 5 of 6
actually received Rs.4.35 crores. The amounts were received from E-

City Entertainment India (P) Ltd. and Taneja Developers &

Infrastructures Ltd.     Similarly, with regard to repayment, the

details/documents was examined and it was held that the respondent-

assessee had paid Rs.4,52,40,721/- to E-City Entertainment India (P)

Ltd. and Taneja Developers & Infrastructures Ltd. The said finding of

fact has been affirmed by the tribunal. In fact, the order of the tribunal

records that the departmental representative was not able to

demonstrate any factual error. No document has been filed before us

to show that the findings recorded by the tribunal are erroneous or

wrong.

10.   The appeal has no merit and is accordingly dismissed. No costs.




                                              SANJIV KHANNA, J.



                                       SANJEEV SACHDEVA, J.
OCTOBER 11, 2013
NA/VKR




ITA 219/2013                                           Page 6 of 6

 
 
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