TMI Blog2021 (7) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure, assessee filed payment vouchers before us - 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. 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 - 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 sq. ft. - as per Khatha dated 23.12.2014 issued by BBMP, the constructed area in the said property was at 2500 sq.ft. Thus, it means that there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Vouchers relating to the expenditure of ₹ 8,05,876/- incurred for land levelling, compound and gate expenses without appreciating the fact that the Ld. AO has not given sufficient opportunity to the Assessee. Same as above The Ld. CIT(A) ought to have appreciated the fact that the Assessee cannot be held to be disentitled for deduction u/s. 54F of the Act without appreciating the fact that the inspection by the Inspector was carried out in the year 2018 whereas the relevant Assessment year was 2012- 13. Same as above The Assessee craves leave to add, alter, amend and delete any of the grounds at the time of hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of Original Property of ₹ 1,87,00,000/-, a sum of ₹ 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 ₹ 48,10,594/-. Thus the assessee had claimed deduction of ₹ 1,33,38,999/- (Site and Old Building Cost of ₹ 85,28,405/- + Cost of New Building of ₹ 48,10,594/-) out of which the assessee had claimed deduction u/s. 54F on prorate basis amounting to ₹ 1,28,18,405/- as detailed below. Sale Consideration of Property 1,87,00,000/- Situated at Bukkasagar Village Less: Land Levelling and Compound Cost 8,05,876/- Sale Consideration 1,78,94,124/- Less: Indexed Cost of Old Asset Sold 6,84,275/- (26586 X 785 / 305) Net Sale Consideration 1,72,09,849/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee did not possess more than one house as on the date of transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the occupancy of the tenant Sri. Ismail and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... Property in the year 2018 cannot be 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v/s. Kelvinator of India (2010) 320 ITR 561 (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 ₹ 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 henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 4 of the remand report dtd: 06-07-2018 admitted that it is a Commercial Property. The relevant para 4 of the remand report is submitted as under for kind reference 4. The next aspect mentioned in the Assessment order is that the Assessee hasdeclared property tax paid reeipt for the year 2012- 13 and 2014-15. The Assessee has paid ₹ 1,72,845/- as tax for above mentioned property. In order to ascertain the veracity of 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Ismail said to be the owner of the Ayyappa Bakery was not in occupation of the New Asset situated at No. 8/1, Kattiegenahalli Jala Hobli, Bangalore prior to the date of Purchase of the new Asset. It is evident from the Lease Deed placed at Page 47 of the Paper Book that Sri. Ismail was carrying on his Ayyappa Bakery business situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore, the Bakery Address mentioned in the lease deed (being the first page 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore. The Ld. AO has misconstrued the facts relying upon the Inspector's Report on the basis of the enquiry conducted in July 2018 after lapse of nearly six years from the date of purchase of new Asset. The AO has misrepresented the facts before the Ld. CIT(A) who has believed the misrepresented facts as true facts without appreciation of the documentary evidence being the Lease Deed dtd: 09-01- 2013 (referred cy him) wherein the address of Ayyappa Bakery was mentioned as 3.S.F.S.T.S Bus 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 purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had declared long term capital gain (LTCG) arising out of sale of certain land on 31.03.2012. The assessee had also claimed exemption under Section 54F of the Act on the basis of investment to the extent of ₹ 1,33,28,405/-. As per the assessee, for the benefit of Section 54F of the Act he had purchased certain land for a total consideration of ₹ 85,28,405/- (including stamp duty and registration charges) vide purchase deed dated 02.06.2012 and thereafter he had constructed a residential house on the site during the period June, 2012 to May, 2014 by incurring cash expenditure of ₹ 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 ₹ 10 lakhs in cash for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by BBMP showed that built up area on the site was 500 sq. ft. and the Khata extract dated 23.12.201.4 as provided by BBMP showed built up area of 2500 sq. ft. So as such construction was duly carried out on the land purchased by him. The assessee has submitted that. in the remand report, the AO has changed the basis of disallowance of exemption under Section 54F of the Act from that mentioned in the assessment order. The assessee has submitted that in the assessment order the exemption was denied by holding that the -assessee was having more than one residential house property, 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has submitted that the finding of the AO that purchase bills were bogus was also incorrect. 24. The learned DR submitted that the assessee wrongly submitted that footage of Google map was not a conclusive evidence for showing existence or non-existence of the residential property at specific point of time. The assessee submitted that during remand proceedings the AO could not have asked it to provide documents like occupancy certificate, electricity bills or any other utility bills to show that the property constructed by him was a residential house. The assessee submitted that even 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house on the date of transfer of the original asset (Para 13 of the assessment order). No construction of residential house was carried out by the assessee (Para 10 and 11 of the assessment order) and that the documents produced by him during assessment proceedings were not reliable (Para 9 of the assessment order). 27. According to the learned DR, since each one of the above reasons was sufficient to disallow the benefit of Section 54F of the Act, no further inquiry into other reasons or satisfaction of the other conditions laid down in under Section 54F of the Act was required to be carried out by the AO. The AO was not required 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated in the valuation report were the same or not. Despite of the fact that this statement of the Valuer was duly confronted to the assessee, he never sought his cross examination. The argument of the assessee that the AO should have taken the valuer to the site is without any merit as the statement of the Valuer had already brought out the true facts. The assessee could have cross examined him, but the assessee chose to not do so. Further taking the valuer to the site would not have served any purpose as the building existing on the site was a commercial site and the valuation report indicated a residential house. In addition, it is important to note that the valuer report 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al house and the same became part of the new construction of 2500 sq ft (2000 sq ft new and 500 sq ft old). For this the assessee has relied upon the katha extract. However, a perusal of the same shows that nowhere in the katha extract dt 14.06.2013 it is indicated that there was a residential property on the land. Further the katha indicates built up area of 500 Sq ft and vacant land of 5750 Sq ft. Thus, total area is 6250 sq ft. In contrast in the katha extract dt 31.12.2014 the built-up area is indicated as 2500 sq ft and vacant land of 3250 sq ft. This totals to 5750 sq ft. Thus although the site dimension remained same the total area has reduced from 6250 sq ft to 5750 sq ft. Further the katha extract 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 aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee has submitted that the same may be admitted as additional evidence. However, the assessee is not able to explain as to why the same were not produced during assessment proceedings. It is noted that during assessment proceedings the assessee just furnished a statement of expenditure without any supporting evidence. For admission of the additional evidence the assessee has to give explanation as to why the same could not be produced before AO during the assessment proceedings. The assessee has however failed to give any such explanation. The assessee has not given any details of bona fide reason for not furnishing these documents before the AO to support its case. The assessee has not given any reasonable explanation as to 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 54F of the Act cannot be denied. The next contention of the DR is that the assessee has not carried on the construction at 8/1, Kattigenahalli Village, Bengaluru. The assessee furnished details of payment made towards construction of the house which are as follows: Date Amount Mode Narration 15.06.2012 10,00,000 Cash Paid for construction Without any details 05.07.2012 5,00,000 Cash - Without any details 06.08.2012 7,50,000 Cash Paid for construction Without any details 12.10.2012 7,50,000 Cash Paid for construction Without any details 05.11.2012 5,15,600 Cash Paid for construction Without any details ..... X X X X Extracts X X X X X X X X Extracts X X X X
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