TMI Blog2023 (4) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... ented on these documents. The assessee was not given an opportunity to refuted these allegations so made. Before us also except the findings of the CIT(A) there is no comment on the documents and its veracity of these documents and merely based on surmised and conjecture the claim which is supported by documents and the source of the payment made is not disbelieved the claim of the assessee cannot be disbelieved on the reason that as on the date of inspector visit during the pendency of the assessment at the given address the person not found. The reasons canvassed cannot be a base to disbelieve the claim which is supported by the various evidence placed on record - Claim of the assessee for an amount cannot be disbelieved and thus, we hold that the revenue has erred in not allowing the claim of the assessee and therefore, we direct the ld. AO to allow the claim of the assessee to the extent of the share of the assessee in this payment - Decided in favour of assessee. Not allowing the benefit paid for acquiring title in the land sold resulting into charging of capital gain at very high figure i.e. the substitution of stamp duty valuation - Considering the wider scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in ITA no. 59/JP/2013 praying for recalling of the order contending that the Hon ble Punjab Haryana High Court has decided the issue while considering the judgement of the Hon ble Supreme Court in the case of B. C. Srinivasa Setty. The co-ordinate bench vide order dated 29-06-2017 recalled the order dated 30-01-2014 to be decided on merits in the light of judgment relied upon by the revenue. 3. The fact as culled out from the records is that the assessee filed the return of income for the assessment year 2009-10 on 04.08.2009 declaring total income of Rs. 1,45,630/-. The assessee has shown the Long Term Capital Gain on sale of residential property at Rs. 36,07,507/-. The assessee has shown the long term capital gain on sale of residential property at Rs. 36,07,507/- which has been computed as under: Land and Building at Ajmer Road, Jaipur on 08-07-2008 Value Rs. 48,00,000/- Sales consideration received Rs. 48,00,000/- Sales consideration Rs. 48,00,000/- Less: Transfer E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Long term capital gain Rs. 65,75,438/- Deduction u/s 54 Investment in new asset Rs. 32,09,810/- (Purchase consideration registry charges) Long term capital gain Rs. 33,65,628/- 4. Income from other sources as shown Rs. 73,906/- Gross total income Rs. 35,31,258/- Less: Deduction under chapter VIA Rs. 20,000/- Total income Rs. 35,11,258/- R/o Rs. 35,11,260/- 4. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) challenging the computation of capital gain. The assessee did not find any favour, carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under and filed ITR of the appellant declaring said LTCG :- Sale Consideration of Residential House (40%) 48,00,000 Less : Transfer Expenses : 9,53,640 Paid to JDA for issue of Patta Registry etc. (Paid th. Ch. No. 744572 dated 23/06/2008) Less : FMV as at 01/04/1981 @ Rs. 100/- per sq. sq. mtr 2,38,853 (40% of Rs. 1,02,600 i.e. Rs 41,040 ) (Indexed cost : 41,040 * 582/100) -------------- Taxable Capital Gains 36,07,507 Less : Deduction u/s 54 : Investment in House property : 38,29,810 Purchase consideration as per Registry 30,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by considering a sum of Rs. 6,20,000 claimed to had been paid to contractor for constructing first floor in the house, just after purchasing the same. This fact is confirmed from the registered purchase deed of said property by the appellant which shows that the appellant had purchased only ground floor constructed thereon. A photograph of the property is also being submitted proving construction of first floor thereon. The matter was carried in appeal before the Ld. CIT (A) who sustained the order of the ld. AO. On further appeal the Hon`ble Bench allowed the appeal on the ground that since the land had been acquired without incurring any cost of acquisition and hence no Capital Gain can be taxed by relying on the judgement of the Hon`ble SC in the case of CIT v/s B.C. Srinivas Shetty (128 ITR 294) vide order dated 30.01.2014. The ld. AO filed an MA before the Hon`ble Bench vide MA No. 167/JP/2016 and the Hon`ble Bench recalled the order vide its order dated 29.06.2017 by holding that reliance on the case of B.C. Srinivas Shetty was misconceived. Hence the present hearing. For the sake of convenience with your honour`s permission I would like to take ground no. 3 first. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s quite aware about non availability of the title with the appellant, his mother and brother (as the lease deed was obtained from JDA by active involvement of the buyer only) he and the appellant entered into a compromise cum Settlement with above named M/s. Jai Mahal Hotels P Ltd. and the buyer party had paid a sum of Rs. 70,00,000 to Jai Mahal Hotels P Ltd. (APB 48-50). From the documents it is quite apparent that the above said sum of Rs. 70,00,000 was paid by the buyer to Jai Mahal Hotels P Ltd. for buying title in the land. It is also relevant to mention that from the events narrated hereinabove the said payment of Rs. 70,00,000 which was to be done by the appellant, his mother and brother has been paid by the buyer on their behalf. The value of any land assessed by registering authority (which is called as DLC rate) is for a land with clear title and without any encumbrance whereas in the instant case the property sold by the appellant was not having any legal title and whatever title was obtained was due to some wrong entry in the revenue records of JDA. Due to non availability of clear title in the name of the appellant, his mother and brother the buyer agreed for buying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the appellant and hence there was no dispute about title of the land. She seems to had not read the full contents of both the documents. It is therefore sincerely requested that the above said sum of Rs. 70,00,000 paid by the buyer to M/s Jai Mahal Hotels P Ltd. may please be considered as part of cost incurred by the appellant for buying title. Therefore the cost of acquisition of the property may please be increased with Rs. 28,00,000 (being 40% of above said sum) and same may please be taken at Rs. 30,38,853 (i.e. Rs 238853 + 2800000) for computing LTCG on the deal. The appellant relies on V. Lakshmi Reddy v/s ITO (241 CTR 364) wherein the Hon`ble Madras High Court held that expenditure incurred for curing defect in title deserves to be allowed as cost of the property sold. In this case the property sold by the assessee was under litigation and in order to get the property free from litigations she had to pay substantial amounts and such amounts were held to be deductible by the Hon`ble Madras High Court. It is therefore sincerely submitted that the appellant may kindly be allowed deduction for Rs. 28,00,000 being 40% of Rs. 70,00,000 paid for buying title in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round floor was purchased by the assessee on 16.01.2009 and the contract for construction of first floor was given on 03.06.2009 and hence the const so incurred deserves to be allowed for deduction u/s 54 of the Income Tax Act, 1961. It is therefore sincerely requested that the claim of the appellant for spending additional sum of Rs. 6,20,000 for making the house inhabitable may please be allowed and same may be considered for working out deduction u/s 54 of the Income Tax Act, 1961. Therefore the computation of LTCG may please be directed to be made as under :- Sale Consideration of Residential House (40%) 77,67,931 Less : Transfer Expenses : 9,53,640 Paid to JDA for issue of Patta Registry etc. (Paid th. Ch. No. 744572 dated 23/06/2008) Less : FMV as at 01/04/1981 @ Rs. 100/- per sq. sq. mtr 30,38,853 (40% of Rs. 1,02,600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions of construction (APB-60 61), the source of payment for this expenditure is also supported by the bank account withdrawal (APB-63) and was having the electric connection on the disputed property (APB page 26). The ld. AR of the assessee based on these evidences further submitted that the name of the contractor is also appearing in the bank statement which categorically proves the identity of the person to whom the construction expenses were paid. As regards the name of Shri Ashok Gupta appearing in bank statement, he has submitted that it is the practice of the bank to write the name of person who goes to collect the cash. Merely the other person s name is written and not of the contractor the payment which is supported by the receipt cannot be considered that the payment is not made to the contractor. Thus, the only basis for not granting the relief by the lower authorities on the reasons that the contractor not found on the address by the inspector and thus the deduction was not considered. The ld. AR of the assessee based on these evidences submitted that there is no adverse comment on the evidences so placed on record and based on these set of evidence the ld. AR of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called bill/receipt it is seen that the signatures on the Ikrarnama and bill are indeed different. 2. On perusal of the bank pass book of the appellant in the Bank of Rajasthan Ltd. and the bill/receipt allegedly given by Shri Lalit Saini (the contractor) there appear to be discrepancies in the submissions. For example, as the payment of Rs.2,00,000/- was shown to have been received on 20/04/2009 by Lalit Saini whereas as per the details of the bank a/c of the appellant it is seen that Rs.2,00,000/- were paid by cheque to Shri Ashok Gupta on 20/04/2009. 3. Two payments have been made on 18/6/2009 vide cheque of Rs.50,000/- each to Lalit but it is not known whether it was the same Mr. Lalit Saini or somebody else in view of the fact that he was not traceable at the given address. 4. For the balance amount of Rs.3,20,000/- the bills correlate to the cash withdrawals made from the a/c of the appellant. On perusal of the bank statement it is seen that there are regular cash deposits in the bank a/c of the appellant as well which have not been explained. Moreover, no capital a/c, details of investments during the year and household expenditure were submitted so it cannot be es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self it has clearly been mentioned as follows: Therefore, as per the sale deed the assessee had a title to this land which was transferred to M/s Sukh Shanti Estates Pvt. Ltd. In the Compromise/Settlement Document also nowhere has any finding been given regarding the title of the said land or whether the appellant and his relatives were authorized to transfer the impugned land or not. It has merely been mentioned that Rs.70,00,000/- was being transferred from M/s Sukh Shanti Estates Pvt. Ltd. to Jai Mahal Hotels Pvt. Ltd. and as per the Compromise Settlement the subject matter of the suit namely the right, title and interest over the land measuring 1019.67 sq. meter as mentioned in the suit has been wholly settled. Thus the Hon'ble Court has not given a specific finding as to title or the interest in land etc. Both the submissions of the AR that the sale of land was a distress sale and that the valuation of the possession of the land and building be taken at Rs.2,38,853/- as declared by him cannot be accepted. Because though unauthorized possession may have been taken by his father, on the date of transfer he had clear title of ownership as per the lease deed of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to be made which is in accordance with agreement executed on stamp paper with a terms and conditions of construction (APB-60 61). The source of payment for this expenditure is also supported by the bank account withdrawal (APB-63), the name of the contractor is also appearing in the bank statement at page 63 in the paper book. We have gone through the contentions of the assessee and revenue based on the evidences placed before us. We believe that once the name of the payee is appearing in the bank statement the identity of the payee is established at the time of payment. Merely, at the time of assessment the inspector did not find the payee on the address cannot be reason to disbelieve the claim of expenditure which are based on the independent evidence and the veracity of the same is not doubted by the revenue but there are certain observations of ld. CIT(A). On this issue we have also perused the finding of the ld. CIT(A) recorded at para 5.3 of his order wherein his objection while rejecting the claim was that the signature was not matching, in one of the payments instead of the name of Shri Lalit Saini name of Shri Ashok Gupta is written. On two payment date ld. CIT(A) stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re i.e. the substitution of stamp duty valuation at Rs. 1,94,19,827/-. Before us the ld. AR of the assessee in its fairness agreed though the assessee has no legal title on the property sold the property at distress value and the same was at Rs. 1,20,00,000/- where in the share of the assessee is 40%. The stamp duty authority in the first instance valued that property at Rs. 5,76,54,492/- and thereafter, the same was reduced to Rs. 1,94,19,827/- vide order dated 15-06- 2009. As per provision of section 50C while computing the amount of capital gain chargeable to tax the ld. AO has applied that revised stamp assessed value as actual consideration received thus value of consideration has been substituted from Rs. 1,20,00,000/- to Rs. 1,94,19,827/-. We find force in the arguments of the ld. AR of the assessee when the revenue is substituting the sales consideration the assessee has not objected but submitted before the ld. CIT(A) based on the additional evidences that the effect of expenditure in curing the title of the property be allowed. The ld. CIT(A) has on this issue called for the remand report of the assessing officer and the assessing officer objected the claim on the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 is claimed by the assessee to the extent of his share @ 40%. To understand the claim of the assessee in the light of the provision of section 48, the relevant provision is reiterated here in below; Mode of computation. 48. The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely : ( i ) expenditure incurred wholly and exclusively in connection with such transfer; ( ii ) the cost of acquisition of the asset and the cost of any improvement thereto; 38 [( iii ) in case of value of any money or capital asset received by a specified person from a specified entity referred to in subsection (4) of section 45, the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner 39 :] Thus, section allow the expenditure incurred wholly and exclusively in connection with such transfer for which capital gain is charged is allowable. The claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 25,00,000 with the Registrar of this Court to be kept in fixed deposit with the Allahabad Bank free from lien and all attachments until further orders of this Court. This was done in order to effectuate the transfer of the assets of these two firms after securing payment of the liability towards the Allahabad Bank in respect of one of the firms. It appears that there was but one sale comprising of the assets of both the firms and the bid of one Ganesh Prasad at Rs. 3,51,00,000 was accepted as the highest bid and that the payment towards the same was made in driblets from time-to-time. 4.2 From the assessment order, it appears that this whole amount was brought at the hands of the assessee for being assessed for short-term capital gains. There is nothing to show that there was a separate sale of the assets of Gobindo Sheet Metal and those of Gopee Nath Paul. It clearly appears from the orders and the terms of settlement, which was substituted subsequently, as it appears from the supplementary paper book at page 14, that the assets of both the firms were sold through one auction and the whole receipt was assessed at the hands of the assessee. From the order of confirmation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. CIT (Appeals) at pages 43-44 of the paper book have found that the short-term capital gain arising out of the sale of the assets pertaining to the erstwhile business of the appellant in the name and style of Gobindo Sheet Metal Works Foundry and on the sale of the factory and assets of the erstwhile business through public auction, the total consideration received was Rs. 3,66,24,005. From the details of the expenses and liabilities claimed, it was seen that an amount of Rs. 27,85,523 had been shown as payable to the Allahabad Bank. However, the CIT (Appeals) found that there was no pre-condition that the appellant could not sell its assets without settling the dues of the Allahabad Bank and even if it was, it would be a case of application of the income. 5.3 As discussed above, in this case the sale could not be effected without meeting the liability, as it appears from the different orders passed by this Court in the latter suit wherefrom it is apparent that the former suit was transferred to this Court and was ultimately settled between the parties through Lok Adalat. 5.4 But from the facts as discussed above, we are of the view that the orders passed by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the said case. However, the alternative argument of the assessee was that the corporation had overriding title over the property. The amount paid was clearly relatable to title. Thus, it appears that there was no claim that the payment of that amount was an expenditure incurred wholly and exclusively in connection with the transfer. There is another distinguishing feature so far as the present case is concerned. Here the entire assets of the business of the two firms as ongoing concern were sought to be sold but could not be sold without removing the liability towards the Allahabad Bank. The assets included the whole business of the two firms and if the liability was not met before the sale, in that event, in this present case the sale consideration would have been reduced by the liability payable to the Allahabad Bank. Therefore, the decision cited does not help us in the facts and circumstances of the case to take a different view. 6.3 The decision in R.M. Arunachalam s case ( supra ) dealt with the question of cost of acquisition, which is not a case here. It was not related to the perfection of title. Therefore, this decision does not help us in the context in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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