TMI Blog2014 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the consistent view taken by the Tribunal in similar cases - Decided against the revenue. Capital Gains - valuation - The owners got four flats along with appurtenant lands in lieu of sale consideration of flats which was partitioned between the co-owners. For registration purpose, the flats and appurtenants lands were valued at different rates depending upon the floors. This value has been wrongly taken as the sale value of the land transferred by the assessee to the developer by the assessing officer and the CIT(A) has rightly deleted the addition made by the assessing officer. - Decided against revenue. Exemption u/s 54F - whether the property purchased by the assessee was capable of being used as residential accommodation. - Held that:- no infirmity in the view taken by the CIT(A) as to the residential nature of the property purchased by the assessees, considering the factual aspects - Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT [2005 (10) TMI 231 - ITAT DELHI-G]. - Decided against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account books. It was submitted that the said account books were seized during search and the AO without verifying the same made the addition. 4. On appeal, the CIT(A) deleted the addition made by the assessing officer, observing as follows:- On due verification of the evidences produced by the assessee, I am convinced that the source of investment in the said land was satisfactorily explained by the assessee. The payments were made by cheque which were duly reflected in the assessee s bank statement and his books of account. Hence, the addition made by the AO is deleted. 5. The second issue involved in this appeal is against the addition of Rs 3,40,000/- made on account of unexplained investment in purchase of land at Madhapur. 6. Facts in relation to this issue are that during the assessment proceedings, the assessee explained that the investment was made by cheque and duly reflected in the bank statement and account books. However, the AO was not satisfied with this explanation. He made the addition holding that the return of income filed by the assessee did not reflect any withdrawal for making the said investment. 7. During the appeal proceedings before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The learned CIT(A) ought to have not admitted those fresh evidences submitted by the assessee which is against Rule 46 of the I.T. Act. 11. We heard both the parties. It is mentioned by the CIT(A) at para 2.2. at Page 2 of his order that during the Appellate Proceeding., the Ld.AR filed the copies of sale deed, cash book, ledger, and the bank statement evidencing the payments made by cheque and duly recorded in the accounts books. The CIT(A) has also observed that the said account books were seized during search and the assessing officer made the addition without verifying the same. In the circumstances, we are of the opinion that the additional evidence was not placed by the assessee before the assessing officer and hence the learned CIT(A) ought not to have admitted fresh evidences and should have followed the procedure under Rule 46A of the Income Tax Rules. 12. Further, the learned CIT(A) at para 3.,2 at page 3 of this order has observed as follows:- During the appeal proceedings, ld.AR filed the copies of the sale deed relevant bank statement and cash book to show that the payments are duly recorded in the books of account and properly explained 13. Here agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, some material was found from the residence of one shri C.V.Ramana Reddy. The assessing officer on the basis of the presumption under Section 132(4) of the Act made additions in the hands of the present assessee. However, on appeal, the CIT(A) held that presumption under Sec.132(4) is applicable only in respect of persons from whose custody or possession, seized material was found and it cannot be applied to third parties The CIT(A) placed reliance on the third member decision of this Tribunal in the case of Rama Traders V/s, first ITO (1982) 32 TTJ (Patna) 483 (TM), wherein it was held that presumption provided in Section 132(4) is only in respect of persons from whose custody the document was seized and the presumption cannot be extended to third parties. Since the CIT(A) found that the presumption cannot be extended to third persons, following the third Member decision of this Tribunal cited above, we find no infirmity in the order of the CIT(A) on this issue. We accordingly uphold the same and reject the grounds of revenue on this issue 20. Facts and circumstances of the case on hand being identical, respectfully following the above decision of the co-ordinate bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timate the income @ 15% of sales turnover. He vehemently opposed the estimation of income on work in progress in assessment year 2001-02. The learned authorized representative filed copies of audited accounts during the appeal proceedings. 25. The CIT(A) deleted the impugned additions made by the assessing officer, by observing as follows:- I have duly considered the submissions of the assessee and the material available on record. I do not agree with the contention of the ld.AR that if the books of account are audited, the same cannot be rejected and income cannot be estimated. It is the duty of the assessee to produce the books of account and vouchers for verification of the AO. In this case, the same were not produced before the AO during the assessment proceedings. Hence, I uphold the action of the AO rejecting the book result and estimating the income, however the income estimated @ 15% of the sales turnover is on higher side. The AO has not given any basis or reason for adopting the net profit rate of 15%. The various Courts and Tribunals, especially the ITAT, Hyderabad in the case of M.Bhaskar Reddy (ITA No 168/H/2006 order dated 19/120.2007) have approved the net pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added the differential amount to the income returned. 32. In his written submissions filed before the CIT(A), learned Authorised Representative stated that capital gains tax is leviable on the sale of land jointly held with Sri. M. Koti Reddy. The entire land was transferred to the developer M/s BRR Constructions for Rs.54,00,000/- This amount was accepted and allowed as cost of land by the assessing officer in the assessment of Sri. B. Rami Reddy proprietor of M/s BRR Constructions. The long term capital gain has to be computed in respect of land transferred, 50% of which amounting to Rs.27,00,000 has been offered for tax. The value of flat no. 501, and appurtenant land shown in the partition deed dated 16.8.2002 was for the purpose of registration of partition deed between the assessee and Sri. M. Koti Reddy. The same cannot be taxed as long term capital gains/Ld/ AR filed the copies of partition deed to support the contention. 33. The CIT(A) decided this issue in favour of the assessee in the following manner- I have duly considered the submission of the assessee and the material available on record. AO has confused the computation of capital gains arising on the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structions, the assessee received flat NO.501, along with the appurtenant lands. The flat was valued at Rs.16 lakhs and the same was claimed for deduction u/s.54F of the Act. The assessing officer observed that the appurtenant land admeasuring 2,830 sq. ft. was the extra gain to the assessee which should be taxed as long term capital gains. He valued the said appurtenant land at Rs 23,20,600 @ Rs. 410/- per sq. ft. and added to the income returned. 37. The Learned Counsel for the assessee, Shri Murali Mohana Rao, submitted that the entire land was transferred to the developer, BRR Constructions, for Rs.64 lakhs and this amount was accepted and allowed as cost of land by the assessing officer in the assessment of Shri V.Rami Reddy, proprietor of BRR Constructions and hence long term capital gain has to be computed on that basis, in respect of land transferred and 50% of it amounting to Rs.27 lakhs has been offered for tax. 38. The learned counsel further submitted that the value of flat No. 501 and the appurtenant land shown in the partition deed dated 16.08.2002 was for the purpose of registration of the partition deed between the assessee and Shri Koti Reddy and the same can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntee issued by the bank approval of Director General of Fire Services and Govt. G.O. permitting the construction of residential complex. Learned authorized Representative also filed copies of all these evidences as additional evidences as per the provisions of Rule 46A. 44. The aforesaid additional evidences were forwarded to the assessing officer for verification and comments vide CIT(A) s office letter dated 17.3.2009. The assessing officer vide his letter dated 4.5.2009 objected to the admission of additional evidences, though no comments were offered on the veracity and relevance of the evidences. 45. The CIT(A) by the impugned order however, accepted the claim of the assessee for relief under S.54F of the Act, in the following manner- I have duly considered the submissions and evidences filed by the appellant and other material available on record. AO has referred to the registered sale deed dated 14.8.2004, seized vide Annexure No.A/MVSR/4/page No.38 by which the appellant and his sister Ms. M. Harinitha Reddy had purchased 5840 sq/ft/ of unfinished structure of western block of third floor of the complex along with covered parking of 480- sq.ft. and undivided share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avir Prasad Gupta vs JCIT (2006) 5 SOT 353. where the assessee let out the new property for commercial use due to which AO disallowed the claim of deduction u/s 54F. Hon ble Tribunal held that the only requirement of sec. 54F is the construction or purchase of a residential house by the assessee. The use of the property is not the relevant criteria to consider the eligibility of sec. 54F benefit. It was held that mere non residential use would not render a property ineligible for benefit u/s 54F, if it is otherwise a residential house. If it is capable of being used for the purpose of residence, then the requirement of sec 54F is satisfied, Hon ble Tribunal distinguished sec 54F from sec 54 of the Act where the user of the premise as a residence is a condition. In this case, Tribunal allowed the deduction u/s 54F to the assessee on the purchase of basement floor of property which was allegedly used for non residential purposes. It was held that since basement floor of property was capable of being used as residential accommodation assessee was entitled for deduction u./s 54F of the Act. Considering all the facts and circumstances of the case, deduction u/s 54F is allowed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n used for non-residential purposes, on that ground, the deduction u/s.54F cannot be denied. Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT (5 SOT 353). Respectfully following the said decision of the Tribunal, we are of the opinion that the CIT(A) had rightly allowed deduction u/s.54F. 49. Further, we find that there is no merit in the grounds raised by the department with respect to Rule 46 of the I.T Rules as the CIT(A) had given, due opportunity to the assessing officer, by remanding the matter, to examine the evidences as required under Rule 46A of I.T. Rules and therefore, there cannot be any grievance for the department on that count. 50. Consequently, both these appeals of the department are dismissed. ITA No.1020/Hyd/2009 : Assessment year 2005-06 ITA No.1022/Hyd/2009 : Assessment year 2005-06 51. In both these appeals, the only effective grievance of the Department relates to additions made by the assessing officer on account of unexplained investment in the purchase of a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value recorded in the sale deed. It was held by the Hon ble Court that the payments over and above the amount mentioned in the registered document though widely prevalent would require investigation to establish the same where such payment was denied since the burden of proving that the appellant is not real falls on the revenue. There can be no presumption of on money payment. The decision of the Hon ble Madras High Court was affirmed by the Apex Court in the decision reported in 294 ITR 49. Similar ratio was laid down by the Hon ble Rajasthan High Court in the case of CIT vs Raja Narendra ( 210 ITR 250) CIT Vs Bhanwarlal Murwatiya (2008) (215 CTR 489) where it was held that even if it were to be assumed that the price of the land was different than the one recited in the sale deed, unless it is established on record by the department that as a matter of fact the consideration as alleged by the department did pass to the seller from the purchaser it cannot be said that the department had any right to make an addition. An allegation that the assessee had paid a consideration larger than what is indicated in the registered sale deed cannot be lightly made since the law of evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any third person,. This decision was followed by Hon ble ITAT Hyderabad in the case of Shri.V.Y. Sivaramakrishna (Supra) . In fact the Hon ble Supreme Court in the case of P.R. Metrani vs CIT (287 ITR 209) held that the presumption u/s 132 (4A) is neither conclusive nor applicable to the assessment proceedings.. The document seized from the residence of Shri Harshavardhan Reddy, relied upon by the AO was in respect of some dispute with Sri. P. Prabhakar Reddy where the property in Punnaiah Plaza was proposed to be exchanged with some property in Ooty and shares in HPS Hotels. In that context the property of Punnaiah plaza was valued at Rs 1.48,00,000/- The seized document no where mentioned that the actual consideration Paid for this property was Rs 1,48,00,000/- In the absence of a positive evidence brought on record by AO that appellant paid on money in the purchase of said property, the addition made on account of unexplained investment can not be sustained. The addition of Rs 54,00,000/- is accordingly deleted 54. The next grievance of the Department in these appeals for assessment year 2005-06 against the addition of Rs. 12,85,487 made on account of unexplained invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was spent unaccounted for centralized air conditioning of the building. The expenses were to be incurred by lessee M/s App Lab Technologies P. Ltd as per MOU dated 14.12.2004. Learned Authorised Representative for the assessee filed copies of audited accounts of M/s P. Rajasree Others for Assessment years 2005-06 to 2007-08 to show that the cost of construction of Punnaiah Plaza shown in the audited accounts and the seized documents were one and the same and no unaccounted expenditure was incurred by the owners in the construction. 58. The CIT(A) deleted the disputed additions made by the assessing officer in the following manner (as taken from the order of the CIT(A) in the case of Shri Ramakrishna Reddy) On due consideration of the relevant documents I find force in the argument of the appellant, The construction account statement seized from the residence of Shri. P.R. Gopalakrishna Reddy contains the year wise details of construction expenses incurred from F.Y. 1998-99 to 30.6.2005. The total cost of construction up to 30.6.2005 was mentioned at Rs 4,17,90,346/- The total cost of construction up to 30.3.2005 I was Rs 3,71,69,349/- ^The same was mentioned at Rs 3,70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain settlement with Shri. P. Prabhakar Reddy, in which the appellant was not a party. The appellant was not aware of the said disputes and was not aware of the said seized document. No evidence was found during search showing that the appellant had made any amount over and above the purchase consideration mentioned in the registered sale deed. Hence no addition can be made on account of unexplained investment in the said property. The Ld counsel for the assessee relied on the third Member decision of ITAT, Patna in the case of Rama Traders vs ITO (32 TTJ 483) and decision of ITAT, Hyderabad in the case of Shri. Y. Shivarama Krishna (ITA No. 969 -970/Hyd/08 order dated 7.11.2008) 62. The learned Departmental Representative, Smt. Mythili Rani relied on the order of the assessing officer. 63. We had heard both the parties. In the case of Shri Y.Shivarama Krishna in ITA No 969-970/Hyd/08, relied upon by the ld counsel for the assessee, it has been held by the co-ordinate bench of this Tribunal has held as follows:- Search and seizure operations were conducted on 07.10.2004. In the premises of the person relating to Sujana group of companies, including the assessee. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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