1 ITA No. 1309/Del/2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `C' NEW DELHI
BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A. No. 1309/DEL/2017 (A.Y. 2012-13)
Geeta Narang, Vs ACIT
2768, Gali Arya Samaj, Circle 46(1),
Bazar Sita Ram New Delhi
Delhi 110 006.
(PAN : AAGPN 2450 D)
(APPELLANT) (RESPONDENT)
Appellant by Sh. Ved Jain, Adv.
Respondent by Sh. S. N. Meena, Sr. D.R.
Date of Hearing 26.11.2019
Date of Pronouncement 03.12.2019
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order of the
Commissioner of Income Tax [Appeals]-16, New Delhi dated 20.12.2016 for
Assessment Year 2012-13.
2. The Grounds of appeal are as under :-
1. "On the facts and circumstances of the case, the order passed by the
learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the
eye of law and on facts.
2(i) On the facts and circumstances of the case, the learned CIT(A) has erred
both on facts and in law in accepting the cost of construction to the extent
of 75% of the value of property estimated by the registered valuer.
(ii) That once accepting in principle that the cost of construction has in fact
been incurred, the learned CIT(A) has erred in estimating the same to the
extent of 75% of value estimated by the registered valuer.
2 ITA No. 1309/Del/2017
(iii) That the learned CIT(A) has erred in estimating the 75% of the value
estimated by the registered valuer without there being any basis for the
same.
(iv) That the learned CIT(A) has erred in taking 75% of the value estimated by
the registered valuer, without pointing out any specific discrepancy in the
said report.
3. On the facts and circumstances of the case, the learned CIT(A) has erred
both on facts and in law in confirming the action of the AO in disallowing
an amount of Rs.5,00,000/- on account of commission on sale of property
paid by the assessee, while computing income under the head `capital
gains'.
4. Without prejudice to the above and in the alternative, the learned CIT(A)
has erred in not giving assessee the benefit of exemption under section 54
of the Act to the extent of Rs.2,13,23,510/- being the investment made in
the residential property.
5. The appellant craves leave to add, amend or alter any of the grounds of
appeal."
3. The assessee is an individual deriving income under the head "income
from business", "income from capital gains" and "income from other sources".
The assessee filed return of income for A.Y. 2012-13 on 31.03.2014 declaring
an income of Rs.42,31,790/-. Thereafter, the case of the assessee was selected
for scrutiny and notice u/s 143(2) of the Income Tax Act was issued to the
assessee. During the year under consideration, the assessee sold a property
situated at Okhla Industrial Area for a consideration of Rs.2.7 crore and earned
capital gains of Rs.1,29,95,449/-. Out of the sale proceeds, the assessee
brought a flat in Noida on 16.07.2012 for a total consideration of
Rs.50,00,000/- and a flat in Gurgaon or 12.11.2012 for a total consideration of
Rs.2,13,23,510/-. The Assessee claimed deduction u/s 54F of the Act for both
the properties and tax was paid on the remaining amount of Rs. 35,54,080/-.
Further, with the cost of acquisition of the property situated in Okhla
Industrial Area, the assessee claimed construction expenses of Rs.63,76,658/-.
3 ITA No. 1309/Del/2017
During the course of assessment proceeding, the Assessing Officer asked the
assessee to produce evidence to support the construction expenses as claimed
by the assessee. In response to which, the assessee filed a reply dated
05.02.2015, stating therein that the records prevailing to the A.Ys. 2002 to
2006 were not available with the assessee. The assessee submitted the copies
of purchase deed of the said property i.e. Okhla Industrial Area property. The
assessee before the Assessing Officer submitted that as per the sale deed of the
said property, it is clearly evident that the assessee sold a constructed property
to M/S Mir Handicrafts Pvt. Ltd. in Feb. 2012 after completing the
construction. Therefore, the assessee got construction done on the said plot
after acquiring it. The Assessing Officer held that since there is no
documentary evidence for claiming aforesaid construction expenses and made
addition to that extent. The Assessing Officer further made addition of
Rs.5,00,000/- on account of commission paid on sale of property. The said
disallowance was made in respect of purchase and sale transaction of the flat
at Gurgaon and Industrial property situated at Okhla Industrial Area which
were done through the same property dealer. The Assessing Officer has not
given exemption u/s 54 to the extent of Rs.2,13,23,510/- as exemption u/s
54F is not available for the investments in property made through borrowed
funds. The said investment was made partly through own funds to the extent
of Rs.44,41,369/- and partly through borrowed fund to the extent of
Rs.1,68,82,141/-.
4. Being aggrieved by the assessment order the assessee filed appeal before
the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. AR submitted that as regards Ground No.2, the assessee had
purchased a plot measuring 200 sq. Mtrs. and sold a built-up property
comprising the total plinth area of 525 Sq. Mtrs. The Assessing Officer, if had
any doubt in the value of construction as adopted by the assessee then the
Assessing Officer could have referred the matter to a valuation officer under
4 ITA No. 1309/Del/2017
Section 142A of the Act for determining the cost of construction. Alternatively,
Ld. AR submitted that the Assessing Officer could have given opportunity to
the assessee to arrange a valuation report from a registered valuer so as to
justify the construction cost as claimed by the assessee. The Ld. AR submitted
that a copy of valuation report as an additional evidence prepared by the
accrued valuers clearly states that the total value was computed to Rs.
62,05,000/-. After considering the valuation report, the CIT(A) asked for the
comments from the Assessing Officer on the report. However, the Assessing
Officer chose not to say anything on the merit of the valuation report. However,
the CIT(A) also disregarded the submissions of the assessee and accepted 75%
of the value as determined by the registered valuer, i.e., Rs. 46,53,750/- and
rejected the cost of construction as claimed by the assessee. There is no
dispute in the fact that the assessee got construction done on the plot situated
in Okhla Industrial Area. The same is evident from the sale deed. Therefore, the
Ld. AR submitted that for completing the above construction certain cost was
incurred which rightly claimed by the assessee while calculating capital gain.
The Ld. AR further submitted that the registered valuer worked out the
construction cost of Rs.62,05,000/- for the approved/permissible area within
MCD by-laws i.e. 3,873.6 sq.ft. whereas the actual construction by the
assessee is much more than that. The Ld. AR submitted the details of the
valuation report. The Ld. AR further submitted that the actual cost incurred by
the assessee is much more than specified in the valuation report as the valuer
himself has accepted the fact that the actual area of construction by the
assessee is much more than the permissible limits of MCD which justifies the
cost of construction incurred by the assessee. The Ld. AR further submitted
that the assessee was issued a completion certificate by Delhi Nagar Nigam on
10.12.2003 stating therein that the construction work done by the assessee on
the industrial plot is completed and declared it to be ready to use. The Ld. AR
submitted that once the CIT(A) accepted the value of the construction cost to
the extent of 75% of the estimated value calculated by the registered valuer
without any basis is bad in law and liable to be deleted.
5 ITA No. 1309/Del/2017
6. The Ld. DR submitted that the CIT(A) has rightly held that some amount
of investment has taken place in the construction of the property and therefore,
rightly directed the Assessing Officer to re-compute the capital gain by
accepting 75% of the value estimated by the Registered Value.
7. We have heard both the parties and perused all the relevant materials
available on record. Since the CIT(A) has already accepted the fact that there
was a construction and has not doubted the valuation report of the Registered
Valuer. Thus, the Assessee before the Assessing Officer has given the
construction cost and the details while incurring the same. Therefore, the same
cost cannot be estimated and cannot be disallowed. The evidences show that
there is a construction cost incurred by the assessee and through the records
the same was properly valued by the Registered valuer. Therefore, the
estimation done by the CIT(A) is not justified in absence of any contrary
material before the Assessing Officer as well as before the CIT(A). Therefore, we
set aside the directions given by the CIT(A). Ground No.2 is allowed.
8. As regards to Ground No. 3 relating to disallowance of Rs.5,00,000/- on
account of commission paid on sale of property, the Ld. AR submitted that
usually for carrying out any purchase and sale transactions in the case of
property, an agent is hired and the same is a common practice. The Ld. AR
submitted that the range of commission in such type of business varies from
1% to 2%, therefore, the payment of commission in the case in hand is very
reasonable commission amounting only to 0.1590% and therefore claim of the
assessee cannot be denied.
9. The Ld. DR relied upon the assessment order as well as the order of the
CIT(A).
6 ITA No. 1309/Del/2017
10. We have heard both the parties and perused all the relevant materials
available on record. As regards commission paid, the assessee has not given
any documentary evidence as regards to the payment made to the so-called
agent. The evidence was not before the Assessing Officer as well as before the
CIT(A). Therefore, in absence of any evidence, the CIT(A) has rightly confirmed
this addition on account of commission expenses. Ground No.3 is dismissed.
11. As regards Ground No.4, in respect of disallowance of exemption u/s 54
of the Act to the extent of Rs.2,13,23,510/-. The Ld. AR submitted that the
assessee sold Industrial property situated at Okhla for Rs.2.7 Crores. However,
to claim the benefit of exemption u/s 54F of the Act the assessee purchased a
flat at Gurgaon for Rs.2,13,23,510/- within the stipulated time as mentioned
in Section 54F of the Act. However, the said investment was made partly
through own funds and partly through borrowed funds. Thus, the total eligible
deduction u/s 54F is Rs.2,13,23,510/- instead of Rs.44,41,369/- as acquired
by the assessee in the return of income. The assessee submitted certain
documents for claiming the additional deduction amounting to
Rs.1,68,82,141/- which was not at all considered by the Assessing Officer as
well as by the CIT(A).
12. The Ld DR submitted that exemption u/s 54F is not available for the
investments in property made through borrowed funds. The Ld. DR further
submitted that the sold property is having more value earned by the assessee
than the purchase property. Therefore, making a submission that the
investment in property is made through borrowed fund does not sustain and
the CIT(A) rightly rejected this plea.
13. We have heard both the parties and perused all the materials available
on records. From the perusal of records, it can be seen that the assessee
submitted certain documents before the Assessing Officer and the CIT(A) in
respect of claiming benefit of exemption u/s 54F of the Act. The fact remains
7 ITA No. 1309/Del/2017
that the assessee sold property situated at Okhla and purchased a flat at
Gurugaon. Whether the transaction of purchase is from borrowed fund or
through own funds has not been properly verified by the Assessing Officer or
the CIT(A) before rejecting the assessee's said claim u/s 54F of the Act.
Therefore, it will be appropriate to remand back this issue to the file of the
Assessing Officer to decide this issue a fresh after taking into consideration all
the documents pertaining to sale and purchase of the properties and determine
whether the investment is made either through borrowed fund or own fund.
Needless to say, the assessee be given opportunity of hearing by following
principles of natural justice. Ground No. 4 is partly allowed for statistical
purpose.
14. In the result, appeal of the assessee is partly allowed for statistical
purpose.
Order pronounced in the Open Court on 3rd day of December, 2019.
Sd/- Sd/-
(N. K. BILLAIYA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 03/12/2019
Priti Yadav, Sr. PS *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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