* 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.
TYAGI ANAND & CO. PVT LTD. ..... Respondent
Through Mr. Ved Jain, Advocate.
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
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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
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the sale of 2nd and 3rd floors as detailed
Sale consideration Rs.5,67,70,000
Cost of construction of
2nd and 3rd floors Rs.5,65,72,958
8.3. According to the AO the cost of
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
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
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
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Rs.17,69,74,995/- which included projected
cost of Rs.5,65,72,958/- in respect of 2nd and
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
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
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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
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
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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
10. The appeal has no merit and is accordingly dismissed. No costs.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
OCTOBER 11, 2013
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