TMI Blog2018 (5) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... year and does not represent the stock of the day. The survey team on the basis of this, worked out the difference of ₹ 3,99,951/- and on being confronted the assessee being a doctor and not aware of the facts accepted the same and agreed to offer as income at the time of the survey. But later on, on examination, he could point out the error. Thus, this amount cannot be added as income of the assessee. It is a settled law, an amount offered or surrendered under a mistaken belief cannot be a ground for making addition - Decided in favour of assessee Addition on account of business promotion expenses - denial by receiver of payment of any receipt - cross-examination denied - Held that:- The basis for drawing adverse inference against the assessee is the statement of Mr. Hardeep Bisht. Since, cross-examination of Mr. Hardeep Bisht has not been given to the assessee, the said statement cannot be used against the assessee. Cross-examination is an important aspect of appreciation of evidence. Mere denial by a person in the statement may not be sufficient to lead to the conclusion that the transaction is not genuine. Such person need to be confronted with the other evidences such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the learned AR that the use of the property is not the relevant criteria to consider the eligibility of the benefit of section 54 of the Act. There is no such condition that the property should be occupied as a residence for claiming the exemption. As against this it may be relevant to mention that section 54B providing for exemption in respect of agriculture land specifically provides that such agriculture land was being used for agricultural purposes. In the absence of any such specific condition in Section 54, no such condition can be read. - Decided in favour of assessee. - ITA No. 3648/DEL/2014 - - - Dated:- 16-5-2018 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Sh. Ved Jain, Sh Ashish Goel, CAs For The Revenue : Sh. Ravi Kant Gupta, Sr. DR. ORDER PER H.S. SIDHU, JM The Assessee has filed the Appeal against the Order dated 04.3.2014 of the Ld. CIT(A)-XXVIII, New Delhi pertaining to assessment year 2009-10 on the following grounds:- 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee under Section 54 of the Act. ( ii)That the above disallowance has been confirmed despite the fact that the assessee fulfills all the conditions for being eligible to get exemption under Section 54 of the Act. ( iii) 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 AO in holding that the property sold was not residential property at the time of sale. ( iv) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the evidences submitted by the assessee in support of its contention that the property sold being the first floor was residential property and as such eligible for exemption under Section 54 of the Act. ( v) On the facts and circumstances of the case, the addition has been confirmed despite the AO having. used the material collected at the back of the assessee and without confronting the same and in gross violation of the provision of Section 142(3) of the Act. 8. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. The brief facts of the case are that assessee filed return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 54F of Act. The AO denied the benefit of the exemption on the ground that the property sold is not a residential property and assessed the income of the assessee at 3,53,20,840/ u/s. 143(3) of the Act vide order dated 30.12.2011. Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A), who vide his impugned order dated 04.3.2014 gave a partial relief in respect of the disallowance of the travelling expenses. The Ld. CIT(A) also gave a partial relief regarding addition on account of difference in one of the creditor that is Inter Medics. Aggrieved by the impugned order passed by the Ld. CIT(A), the assessee is in appeal before the Tribunal. 3. As regards, Ground No. 1 and 8 are concerned, the same are general in nature and hence need no adjudication. 4. As regards Ground No. 2 is concerned, which is relating to addition of ₹ 17,98,122/- made by the AO on account of the cash sales not accounted for, for the period from 1st February, 2009 to 7th February, 2009. We note that as per the AO, the assessee has offered this amount at the time of the survey but has not included the same in the return. The assessee in its reply dated 16th Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee has offered this amount at the time of the survey and during assessment proceedings, has failed to substantiate its explanation that the amounts has been considered and included in the income returned by it. 5. We have heard both the parties and perused the records, especially the impugned order. The issue here is addition of ₹ 17,98,122/- offered by the assessee at the time of the survey on account of the fact that receipts for the period from 1st February, 2009 to 7th February, 2009 were not found recorded. The assessee s explanation is that these receipts have been included in the books of account post survey and as such this amount form part of the income returned by it. During the course of the assessment the AO rejected the explanation of the assessee. In the appellate proceedings the Ld. CIT(A) called for a remand report whereby the assessee submitted a detailed reconciliation. That reconciliation has been rejected by the Ld. CIT(A) on the ground that the name and the amount do not match. Now the issue is whether the Ld. CIT(A) was justified in upholding the addition when the assessee has filed the detailed reconciliation. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the survey team did not appreciate the fact that stock in the trail balance as per the tally software represents the opening stock of the year and does not represent the stock of the day. The survey team on the basis of this, worked out the difference of ₹ 3,99,951/- and on being confronted the assessee being a doctor and not aware of the facts accepted the same and agreed to offer as income at the time of the survey. But later on, on examination, he could point out the error. Thus, this amount cannot be added as income of the assessee. It is a settled law, an amount offered or surrendered under a mistaken belief cannot be a ground for making addition. Accordingly, we delete the addition in dispute and allowed the Ground No. 3. 8. Ground No. 4 is relating to addition of ₹ 24,24,650/- on account of business promotion. During the course of the assessment proceeding, the AO noted that assessee has incurred an expenditure of ₹ 24,24,650/- on account of business promotion expenses. This payment has been made to M/s Dhara Prakashan Pvt. Ltd. The assessee submitted the details of the expenses along with the supporting vouchers. The AO in order to verify the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romotion through painting on walls etc. is the most effective way. The assessee has incurred the expenditure and has produced the necessary evidences. 8.1 On the contrary, Ld. DR relied upon the orders of the authorities below. It was submitted by the Ld. DR that Mr. Hardeep Bisht have denied the bills being issued by him, the AO was justified in drawing adverse inference and it is not sacrosanct always to allow cross-examination. 9. We have heard both the parties and perused the records, especially the impugned order. We note that during the year, an expenditure of ₹ 24,24,650/- has been incurred by the assessee on account of sale promotion. The assessee in support thereof has submitted the details along with the invoices. The AO has doubted the same and recorded the statement of Mr. Hardeep Bisht. It is an admitted fact that this statement was recorded at the back of the assessee. Though, the assessee was asked to submit reply in response to the statement recorded but the time given during the assessment proceeding was only of 1 day. In the appellate proceeding, the Ld. CIT(A) referred the matter to the AO for remand. In the remand proceedings also, no cross-examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords, especially the impugned order and the Paper Book. We note that this payment has been made by the assessee to the municipality for use of the electricity for commercial purposes. The assessee is carrying on its profession in a residential property. However, since the property is being used for profession, the corporation consider the use as commercial and hence levy commercial charges. Accordingly, in our view such charges cannot be considered to be a penalty so as to fall in the Explanation to Section 37(1) of the Act. Hence, the addition in dispute is deleted and ground no. 5 is allowed. 13. As regards Ground No. 6 which is relating to addition of ₹ 5,07,741/- on account of Sundry Creditors is concerned, we note that Ld. CIT(A) has set aside for verification. The AO has made the above addition on the ground that outstanding balance as per assessee in respect of M/s Inter Medics was ₹ 6,00,322/- whereas as per the reply received from the said party, the balance was only ₹ 92,581/-. During the appellate proceeding, the Ld. CIT(A) called for a report from the AO and it transpired that the difference during the year as per the copy of account is only of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l property. In this regard, it was submitted that in Sundar Nagar Market, the ground floor is commercial for shops and first floor is residential. This has been the policy not only for Sundar Nagar Market but also for other areas particularly in the NDMC areas like Khan Market and Sarojini Nagar market. In support thereof our attention was invited to the agreement for lease dated 22nd February, 1951 entered into between the President of India and the then Lessee Smt. Vidyavati placed at PB. Pg. 306 311. It was submitted that in clause II at PB. Pg. 307 of the said agreement to lease it is clearly stated that the building for use as shop at ground floor and first floor as residence. Further attention was invited to clause XIII at PB. Pg. 309 whereby it has been stated that the land should be used only for the purposes expressly stated in clause II hereof and there is a restriction on use for any other purposes. It was submitted that Perpetual Lease Deed also has the same clauses. The property was constructed accordingly by the then lessee comprising of a shop on the ground floor and the residential portion on the first floor and the Barsati floor as is evident from the document pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the property should be residential and there is no condition that such property should have been occupied for the purpose of residence at the time of sale so as to claim the benefit. For claiming the exemption the property should be a residential property. From the facts on record it is clear that the First floor and the barsati floor have been constructed as residential property and has continued be so as there is no alteration/ modification. The property was constructed by Mrs. VidyaWati and has continued to be so. It is also not the case of the AO that the assessee has reconstructed this property so as to convert the residential property into a commercial property. It was further contended that it is not also the case of the AO that this property was being used by the assessee for commercial purposes before its sale by him. The subsequent change in usage of property by the buyer without prejudice to the above facts, in any case will not disentitle the assessee being the seller for its claim. The Ld. AR placed reliance on the following Judgments: 1. Mahavir Prasad Gupta Vs Joint Commissioner of Incometax [2006] 5 SOT 353 (DELHI) 2. ShyamlalTandonv. Income-tax Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the basis by the AO to make allegation. On going through the same we not that in para 7, it is clearly stated that ground floor of the said property is under the tenancy of M/s JaganNath Hem Chand and the first floor and the Barsati floor are in possession of Mr. Subhash Jain as tenants. Thus, these are two distinct portion. The ground floor was with the firm as a commercial property allowed as per the lease deed and the first floor was with an individual as a tenant and hence cannot be assumed as a commercial property. In our view, the AO has gone wrong in drawing adverse inference on the basis of these documents. In fact, these documents supports the case of the assessee. Further these facts also negates the contention of the AO whereby he has relied upon the photograph taken by the inspector at the time of the visit placed at page 12 of the assessment order where the firm name M/s JaganNath Hem Chand is appearing. As the above referred purchase deed dated 17th December, 1993 clearly shows that it was the ground floor which was on rent with M/s JaganNath Hem Chand and the first floor was with another tenant namely Mr. Subhash Jain. Thus, this photograph also do not support the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the instant case, the assessee is eligible for claim of exemption under section 54F of the Act. To the extent it is necessary for our purpose, we note that section 54F envisages exemption of long-term capital gain, if the net consideration thereof is appropriated towards the construction of a new residential house. The new property, in the instant case, has been let out for commercial use, and thus revenue seeks to deny the exemption under section 54F. In our view, the use of the property is not the relevant criterion to consider the eligibility of section 54F benefit. A bare reading of the provisions of section 54F reflect that what is required is investment in a new residential house. Therefore, the question that arises in the instant case is as to whether the new property constructed by the assessee is a residential house or not. Mere non-residential use would not render a property ineligible for section 54F benefit, if it otherwise is a residential house. On this aspect, we do not find any positive finding by the lower authorities and neither is there any relevant material before us to arrive at a finding. Thus, for this limited purpose, the issue is restored to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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