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TMI Blog2021 (7) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of building without appreciating the BBMP Katha Extract dtd: 14-06-2013 and 23-12- 2014 wherein the nature of building was stated as residential. Same as above The Ld. CIT(A) has erred in holding the building as commercial in nature without appreciating the valuation report dtd: 31-05-2014 wherein the building situated at Site No. 8/1, BBMP Katha No. 3646/8/8/1 Kattigenahalli Village, Jala Hobli, Bangalore North Taluk was residential building. Same as above The Ld. CIT(A) has erred in not considering the cost of additional construction of Rs. 48,00,000/- beiig a part of total cost of construction of Rs. 1,28,18,724/- on the ground that the building constructed was commercial. Same as above The Ld. CIT(A) has erred in holding that the Valuation Report was related to some other residential house without appreciating the fact that in Column 6 of the Valuation Report that the location of the building was clearly mentioned and the same was personally inspected by the Valuer on 31-05-2014 as per declaration provided in Part -III of the Valuation Report dtd: 31-05-2014 Same as above The Ld. ,CIT(A) has erred in not admitting the additional evidence of Bills and Vouc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,405/-. 3. The assessee after purchase of the New Asset at Kattigenahalli village mentioned above, has constructed a Residential House measuring 2500 sq.ft inclusive of the existing building measuring 500 sq.ft on the Strength of the same plan already obtained by the Erst-while owner. The construction of the new residential building was made between June 2012 to May 2014 and the construction Cost was certified by the Approved Valuer vide Valuation Certificate dtd: 31-05-2014 at Rs. 48,10,594/-. 4. The assessee had invested the Sale Consideration of Original Property of Rs. 1,87,00,000/-, a sum of Rs. 85,28,405/- inclusive of Stamp Duty and Registration Fee for purchase of a New Asset being Land and Building consisting of a Site together with a Building measuring 500 sq.ft and thereafter constructed a New Building by investing a sum of Rs. 48,10,594/-. Thus the assessee had claimed deduction of Rs. 1,33,38,999/- (Site and Old Building Cost of Rs. 85,28,405/- + Cost of New Building of Rs. 48,10,594/-) out of which the assessee had claimed deduction u/s. 54F on prorate basis amounting to Rs. 1,28,18,405/- as detailed below. Sale Consideration of Property 1,87,00,000/- Situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was declared. 8. The assessee submits that he was a Tenant of the property No. 82/10, RBI Colony, 2nd Cross, Jayanagar East, 8th Main, Bangalore 560011 mentioned above and the One Riyaz Ahmed was the Building Owner and the relevant documents in support of the ownership were produced before the AO and in the Remand Report dtd: 06-07-2018 it was accepted by the AO. 9. The Property bearing No. 9, 100 ft Road, BTM Layout, Bangalore was a Commercial Property and an Inspector was deputed to cause enquires in respect of the said property and the Inspector submitted Enquiry Report (A copy which was enclosed to the Remand Report dtd: 06-07-2018). In the said Enquiry Report it was reported that the said Building consisting of Ground Floor, First Floor and Second Floor and it was a Commercial Building over the period of 10 years and the said Building was not a residential building. Thus the AO in the remand report dtd: 06-07-2018 in para 3 and 4 has admitted that the assessee did not own more than one house as on the date of transfer of Old Asset and acquisition of New Asset during the period 2012 to 2014. In this view of the matter it is submitted that it is an undisputed fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mail, one was dated 09-01-2013 and the other rental agreement was dtd: 25-02-2014. 11. In these two agreements, the AO reported that the Address of Sri. Ismail is given as, presently at Ayyappa Bakery, Baglur Main Road, Bangalore - 64, on this basis the AO formed a opinion that the Ayyappa Bakery was already in existence and Sri, Ismail was running the bakery from past 10 years. However, the above facts were retracted in the conversation held with Inspector on 02-07-2018. Further the AO has relied upon the footage from Google Maps which indicates the existence of Sri. Ayyappa Bakery even in the year 2010. In this regard the assessee submits that the AO was not justified to come to the Conclusion that the said building was commercial building for the following reasons. i. The description of the property in the Sale Deed dtd: 02-06-2012, (placed at page 26 to 33 of the Paper Book) establishes the fact that the House Site of the Schedule property was 5750 sq.ft and the plinth area comprised in the Schedule Property was 500 sq.ft which was constructed with Bricks and Cement Marter. It has RCC Roofing and Cement floor with electricity amenities. There is no mention in the said Deed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be true that the said property was put to use subsequently for commercial use. Merely because of change in the use of such property for non-residential purposes, it cannot be said that what was acquired by the assessee was not a residential property, but a commercial one. Subsequent change in the user of the property does not disentitle the assessee to relief under S.54F of the Act, as held by Hyderabad Bench B of this Tribunal in the case of Shri M. V. Subramanyeswara Reddy(HUF), Hyderabad (supra), wherein this Tribunal vide its order dated 27.12.2011, has held, vide para 48 thereof, as follows 48. We have heard both the parties. We find that the CIT(A) has accepted the claims of the assessees for relief under the provisions of S.54F of the Act, keeping in view the following factual aspects of the matter a) Perusal of the sale deed shows that the property was a residential property especially the narration at para 10 at Page 14 of the deed, which has been reproduced by the CIT(A) at page 4 at para 2.4 of his order. b) The plan attached to the sale deed shows the construction of bed room, Kitchen, study etc., showing that the property is residential one. c) The MC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a foolproof evidence to contend that the property was commercial at the time of purchasing on 02-06-2012. 11.2 In para 8 of the Remand Report the AO reported that on the basis of two rental agreement dtd: 09-01-2013 and 25-02-2014, the address of Ismail was given as "Ayyappa Bakery, Baglur Main Road, Bangalore - 64". In this view of the matter the Assessee submits that the two rental agreements relied upon by the AO mentioned the existence of Ayyappa Bakery was at Baglur Main Road, Bangalore - 64 and not in the premises bearing No. 8/1, Kattigenahalli which is situated away from Baglur Main Road and therefore there is no conclusive evidence to show that the Ayyappa Bakery was in existence at the premises of the New Asset purchased and constructed by the Assessee. 11.3 The AO at the Outset relied upon the enquiry report of the Inspector who was stated to have conducted Spot Inspection on 02-07-2018 after lapse of 6 years from the date of acquisition of the New Asset. The AO, upon such report has submitted a Remand Report without causing any enquiry by herself except placing reliance on third party report which is not permissible in law. 11.4 The Assessee submits that the Garnet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (SC). 11.8 The Ld. CIT(A) was not justified to hold that the Katha Extract placed at Page 45 and 46 issued by the BBMP do not have evidentiary value. The BBMP is constituted under the Municipal Act to monitor all the issues relating to the immovable properties situated in Bangalore and the BBMP is a statutory local body and the Katha Certificate issued are to be followed. 11.9 The Ld. CIT(A) was not justified to decide the issues on the basis of Remand Report since the Remand Report was based on the additional evidence which was rejected by the CIT(A). The CIT(A) was not justified to hold that the Assessee has not produced any proof in respect of the construction made investing a sum of Rs. 48.00.000/- since the newly constructed building of 2000 sq.ft from the comparison of the Katha Certificates where 500 sq.ft building was in existence in the year 2012-13 and New construction measuring additional 2000 sq.ft was in existence in the year 2013-14. 12. Under these facts and circumstances the orders of the authorities below are arbitrary, unreasonable and opposed to law and facts of the case and hence they are liable to be cancelled in the interest of justice and equity. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his claim, the Inspector of Income Tax of this Officer was sent for spot verification. The Inspector submitted a report (copy enclosed as Annexure - 1) that it is a commercial property with Corporation Bank in the Ground Floor, few offices and a Gym in first and second floor. The Branch Manager Corporation Bank informed the Inspector that the Bank is functioning from the current premises from Past 10 years and there is no residential accommodation in that building. Taking into consideration the amount of property tax paid and the spot verification conducted by the Inspector of this office it is accepted that the property at No. 9, 100 feet Road, BTM Layout, Bangalore was a commercial property even during the period relevant to the A.Y 2012-13." 13. It was submitted by learned AR that the Ld. CIT(A) in para 4.20 to 4.22 has discussed the issue and held that the new Asset purchased at No. 8/1, Kattigenahalli Bangalore was commercial property as on 02-06-2012 being the date of purchase. In this regard the assessee submits that the Ld. CIT(A) has relied upon the AO's Report which was based on Inspector's Enquiry Report and held that at the time of purchase the new Asset was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Lease Deed dtd: 09- 01-2013 placed at page 47 of the Paper Book) is reproduced as under "Mr. P. Ismail Aged about 45 years S/o Sri. Adbul Khader Residing at Fathimas P.K. Poyil Kannur, Kerala - 670673 Ayyappa Bakery B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore - 560064. 16. The AR submits that Sri. Ismail said to be Owner of Ayyappa Bakery was admittedly carrying on the Bakery Business in the name of Ayyappa Bakery situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore which is away from the Assessee's New Asset being No. 8/1, Kattigenahalli, Bangalore. In this view of the matter the Assessee submits that Ayyappa Bakery was not in existence at the time of purchasing the new Asset at No. 8/1, Kattigenahalli, Bangalore which was a residential building consisting of 500 sq.ft situated on a big site measuring 5750 sq.ft. The existence of the Building is found recorded in the BBMP Katha Certificate dtd: 14-06-2013 (placed at Page 45 of the Paper Book) and subsequently new building was constructed measuring 200 sq.ft and the total building old and new was measuring 2500 sq.ft which is evident from the BBMP Katha Certificate dtd: 23-122014 place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stop, Bagalur Main Road, Bangalore. Therefore the Ld. .0IT(A) has passed the Appellate Order on-misrepresented facts without application of mind and hence the findings are not justifiable. 18. Without prejudice to the above submissions, the assessee submits that the nature of the property said to be commercial after lapse of six years can be a ground to deny the deduction claimed u/s. 54F of the Act. However, the AO who has completed the Assessment has not denied the deduction on the basis of the nature of building (whether residential or commercial) but the deduction was denied mainly on the ground that the assessee had owned more than one residential house as on the date of purchase of new Asset which was ultimately found to be false and untrue as admitted by the AO in the Remand Report. The assessee submits that the Hon'ble ITAT Hyderabad, Jodhpur and Delhi have held that the subsequent change of property cannot be a ground to disallow the deduction claimed u/s. 54F of the Act since the requirement of the law is that the property is to be a residential house as on the date of purchase. The assessee begs to place reliance on the following decisions i. Decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period June, 2012 to May, 2014 by incurring cash expenditure of Rs. 48,00,000/-. The assessee was asked by the AO to furnish necessary documentary evidence to prove his claim. In response to the same the assessee furnished various details. After examining the same the AO made following observations: * As per purchase deed dated 02.06.2012, a building already existed on the site and as such the assessee had wrongly claimed that he had constructed a residential house on this site. * The land site with a building was purchased by the assessee on 02.06.2012. As per the assessee he had incurred expenses of Rs. 10 lakhs in cash for the purpose of construction of residential house on the said site within 13 days. No details of such expenditure i.e., to whom the payments were made and on what account the payment were made has been specified. * The assessee has not produced any evidence in support of construction of. a residential house on the site. * Although the assessee has claimed that he had spent an amount of Rs. 32,70,100/- in cash for purpose of construction (as per the details given in pares 7 of the assessment order), however no details regarding as to whom the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, while in the. remand report the AO had held that no residential house was constructed and that the building constructed by the assessee was a commercial property and as such he was not eligible for the benefit of Section 54F of the Act. The assessee argued that the report of the AO should be rejected. * The assessee has submitted that the AO's report was based on the report of an Inspector who had carried put field visit and that .as per the report there were 5 shops existing on the said property. The assessee has submitted that the nature of the property Was never disputed by the AO in the assessment order and so the same could not be disputed now. by Inspector in 2018 and by that time he had, already carried out alteration in the residential house to change the character of the building to a commercial property. The assessee has submitted that such alteration was done by him a after a period of 3 years from the date of transfer of the original asset. * The assessee has submitted that the shops were let out in FY 2016-17 onwards and such finding of the AO would not have any bearing on the character of the residential property constructed earlier for the claim of benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the house was incomplete and constructed beyond the prescribed limitation of time, in view of various decisions he was entitled to the benefit of Section 54F of the Act. Assessee has also filed affidavits from various tenants to show and claim that the rental agreements were signed after AY 2013-14 and that the tenants were not aware of the status of the property prior to the sale. As regards the statement of registered valuer, as made before the AO that he was not sure if the property which he had valued was the same as the property at No. 8/1, Kattigenahalli, the assessee submitted that the Valuer should have been taken to the premises by the AO and the matter should have been decided only thereafter. The assessee submitted that the AO could not have conducted any inquiries on the basis of the directions of the CIT(A) as the assessment proceedings were already over. 25. Learned AR for the assessee submitted that sufficient opportunity was not given to the assessee by the AO during remand proceedings. This argument of the assessee is without merit. This is noted that each and every document relied upon by the AO was duly confronted to the assessee and his replies were also con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to ascertain as- to whether the assessee had constructed some commercial building on the land. However, since during appellate proceedings the assessee had filed additional evidence by way of invoices/bills relating to construction activities, which were not produced before the AO earlier, the AO had every right to examine the veracity of the same and whether the investment made by the assessee was in a residential house or not. This was also required to be done by the AO specifically when directions were issued by the CIT(A) to conduct necessary investigation into the matter regarding eligibility of the assessee related to its claim. So, this argument of the assessee that the AO could not have carried out any further inquiries or it should have restricted himself to the reasons given in the assessment order, is without any merit. 28. Learned DR submitted that the next issue which needs to be looked into is whether there was construction of a- residential house on the land, as claimed by the assessee to had been carried out by him after demolishing the existing building on the land or not. In this regard the reliance of the AO is on the following facts: a. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shows built up area of residential house as 2460 s ft. There is no reference of any 500 sq ft building, as existed on the site although during assessment proceedings as well as during appellate proceedings the earlier claim of the assessee was that the building of 500 sq was demolished and residential house of 2500 sq ft was constructed, however on being confronted by the evidence during remand proceedings of existence of the 500 sq ft building still on the site, the assessee changed his stand and submitted that the residential house construction was of 2000 Sq ft and the remaining 500 sq ft was the building already existing on land (para 20 of reply dt 10.10.2018). The relevant part of the reply is reproduced as follows: "20. The Assessee submits that he has in addition to the then existing building of 500 sq.ft as on 02-06-2012 being the date of purchase, has further constructed an additional construction of 2000 sq.ft of residential house between the period 2012 to 2014 as evidenced by the BBMP Katha Extract dtd: 23-12-2014 ((Annexure D) mentioned above, that the extent of Residential Building measuring 2500 sq.ft was in existence as against 500 sq.ft of old building menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt 14.06.2013 does not shows the existence of any tenant while the katha extract dt 31.12.2014 shows existence of tenants and that the usage as residential. In contradiction to the same the assessee has claimed that the property was given to tenants in FY 2016-17 and FY 2017-18 and as such no earlier tenant was there except Mr P Ismail who was given commercial property on rent in FY 2012-13. These aspects show that the Katha extracts do not reflect the correct state of affairs and cannot be considered to have any worthwhile evidentiary value. 32. The DR submitted that as regards the nature of building on the property at the time of purchase, the details brought on record by the AO clearly show that the same was a commercial, building occupied by Ayyapa Bakery. The argument of the assessee that images from Google Earth Maps are not conclusive evidence is without any merit. The said website shows the history imagery of the various sites on earth and it can clearly be seen from the same that the Ayyapa Bakery existed prior to FY 2012-13 and still exists at the same place. So, the building was a commercial building and not a residential house as being claimed by the assessee. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what prevented it from producing such documents before the AO at the time of assessment proceedings, especially when sufficient opportunity of being heard was given to it by the AO. The assessee has not brought anything on record to show that the documents could not have been produced by it before AO despite its best efforts. Admission of the additional evidence cannot be claimed as a matter of right and it is the duty of the assessee to explain the circumstances which prevented it from submitting such document before the lower authorities. Since the assessee has failed to provide sufficient cause to furnish these documents before the AO, the same cannot be admitted at this stage. The ITAT, Bangalore in case of Annpom Kothari, ITA No 837 (Bang) 2012 held that for admission of additional evidence, it is required for the assessee to show that authorities had decided its grounds without giving sufficient opportunity to adduce evidence. The ITAT Chandigarh vide order dated 23-05-2013 in the case of Rishi Sagar v ITO, 36 taxmann. corn 508 had held that where assessee had failed to produce documents during assessment and failed to establish reasonable cause thereof, additional evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 38,70,100 36. As a proof of this, in support of this expenditure, assessee filed payment vouchers before us which are placed in record from page Nos.77 to 149. These evidences were also filed before the lower authorities. The lower authorities have brushed it aside on the reason that these are self-made vouchers or are not having sufficient details regarding the various expenditure incurred by the assessee. In our opinion, without examining the parties concerned, lower authorities have precluded in rejecting the evidence submitted by assessee in the form of bills and vouchers. 37. Being so, the assessee's property No.9 at 100 Ft. Road, BTM Layout, Bengaluru, cannot be considered as a residential property and also expenditure incurred by assessee towards construction of new residential property cannot be brushed aside. Further, evidence brought by assessee in the form of Khatha show that originally at the time of acquisition of property, there was only 500 sq. ft. of built-up area at 3646/8/8/1 as per Khatha extracted at pages 22, 23 of written submissions, the construct area in property bearing No. 8/1, Kattigenahalli Village, Bengaluru, was 500 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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