Kanwar Deep Anand, New Delhi vs Department Of Income Tax

ITO Kanwar Deep Anand, Ward - 5(3), Shop No- 2686, Kashmere, New Delhi Vs. Delhi Pan No. AAEPA8811H

(Appellant) (Respondent)

Appellant by : Gaurav Dudeja, Sr. DR Respondent by : Rohit Jain Adv,Deepshree Rao CA, S. Mehta CA

Date of Hearing 31.03.2015 Date of pronouncement 24.04.2015

ORDER PER A. T. VARKEY, JUDICIAL MEMBER

This appeal filed by the Revenue is directed against the Order dated 02.5.2012 passed by the Ld. CIT(A)-VIII, New Delhi pertaining to assessment year 2008-09.

2. The Revenue has raised the following grounds in its Appeal:-

"(1) The order of the Ld. CIT(A) is erroneous and contrary to facts and law.

(2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.

2,68,21,050/- on account of exemption u/s. 54F claimed by the assessee.

(3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 95,38,589/- on account of share transactions.

ITA NO. 4212/Del/2012

(4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 16,60,521/- on account of payment made through credit card.

(5) The assesseecraves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing."

3. The facts in brief are that in the e-Return filed by the assessee on 30.7.2008, he declared total income of Rs. 16,59,450/-. The case was selected for scrutiny through CASS. The assessee is an individual and is the Director of M/s Anand NVH Products P Ltd. and M/s Kromex International Pvt. Ltd. and has shown income under the head "salary, Capital Gain and Income from other sources". As per computation of income filed by the assessee, assessee has shown "Nil" income under the head "Long Term Capital Gain" after claiming the deduction u/s. 54F of the Act amounting to Rs. 2,68,21,050/-. As per an AIR information received by the AO, the assessee made payments to the tune of Rs. 17,47,917/- through credit card and has made a share transaction of Rs. 95,38,589/- during the year under consideration. In the assessment order, the AO notes that none appeared on 23.11.2010, 25.11.2010 and notice to the assessee to attend the proceeding on 06.12.2010, giving the final opportunity to appear or the assessee was informed that ex-parte assessment will be made for non compliance of this notice. On failure of the assessee to turn-up, the AO completed the assessment u/s. 143(3) of the Act and made the various additions vide his order dated 09.12.2010.

4. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide his order dated 02.5.2012 has partly allowed the appeal of the assessee.

5. Now the Revenue is in appeal before us.

6. Ground No.1 and 5 are general in nature, so it is dismissed.

7. Ground No.2 is regarding deletion of addition of Rs.2,68,21,050/- on account of exemption u/s 54F of the Income Tax Act, 1961 (herein after 'the Act').

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8. Ld. DR, Gaurav Dudeja relied upon the order of the AO and as per him,

the relevant facts are that the assessee sold certain shares on 12.12.2007 of a company called Bright Days Property Pvt. Ltd on which a long term capital gain of Rs.2,68,21,050/- accrued to him. Thereafter the assessee along with other co-owners purchased agricultural land situated in Bijwasan, Vasant Vihar, New Delhi vide sale deed dated 28.12.2007. The total value of the sale deed was Rs.15.00 crores and 1/5th share of the assessee, out of the same aggregated thus to Rs.3.00 crores. In its return of income an exemption u/s 54F was claimed in respect of purchase of agricultural land by contending it as an investment in a residential house. The Assessing Officer however did not allow the claim for exemption by holding that the assessee purchased an agricultural land and did not "construct a residential house" and therefore the exemption is not available. According to the AO, the reason for such a finding was (a) the sale deed dated 28.12.2007 describes the immovable property as a piece of agricultural land, and (b) as mentioned in the sale deed the said land was being used for agricultural purposes and therefore no house could have been constructed there. (c). the assessee did not file any justification for its claim during the course of assessment proceedings in spite of several opportunity provided to him.

9. According to ld DR, however during the appellate proceedings it was contended by the assessee that the site plan was duly approved by MCD, and notification was issued by MCD dated 24.10.1994 declaring certain areas in and around Bijwasan village as residential area; and photograph of the house and Inspector's Spot verification Report dated 20.01.2012 which allegedly substantiated that a house had been constructed on the said land within the period of 3 years. According to the ld DR, the CIT (Appeal), erred while deciding this issue in favour of the assessee by accepting these contentions.

10. The ld DR further submitted that the key issue that is to be decided whether the assessee constructed a residential house prior to 11.12.2010 (i.e 3 years from the date of capital gain accrued to him on account of sale of

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shares on 12.12.2007. According to the ld DR upon a close examination and analysis of the evidence placed on record, vide Paper Book dated 06.03.2013 and subsequent Paper Book dated, 30.O1.2015 there are several infirmities and incongruities in the evidence adduced by the assessee. According to him much emphasis has been placed upon the Architect's Certificate dated 05.04.2011 which is available on page 62 of the Paper Book dated 30.01.2015. It has been certified by the ld AR in the paper book that the same was available before the lower authorities i.e. Assessing Officer as well as CIT(A). However, it was pointed out by the ld DR that as per the original assessment records the said certificate was not filed during the assessment proceedings. Further, according to him, it is also not mentioned in the submissions filed before CIT(Appeals) dated 27.3.2011, 27.7.2011 and 18.8.2011. The ld DR pointed to the written submissions of the assessee dated 18.08.2011 (Page 138 to 171 of Paper Book dated 06.03.2013) which mentions about MCD's notification, DDA's Zonal Plan, Architect bill, plumbing bill, civil construction bill etc, however, there is no mention about the architect's certificate dated 05.04.2011. Therefore, according to him the said document is clearly an additional evidence which was brought on record for the first time before us apart from being a self serving document and it should not be admitted. The ld DR pointed out to page 59 of paper book date 30.01.2015and submitted that the final bill for electricity works is dated 20.07.2011 much beyond the end date of 11.12.2010 which according to the ld DR belies the claim of the assessee. Further the ld DR took our attention to page 58 of the paper book Dated 30.01.2015 and submitted that the bill of the architect i.e. "Guild of Architect" is dated 14.11.2008 towards "architectural design and interior professional fees". As per documents filed by the assessee, allegedly the civil work was completed in the year 2010, so the ld DR wondered as to how the architect can raise a bill for interior work in the year 2008. According to him it is a matter of common knowledge that the interior work is commenced after completion of the building structure. And according to him, amongst all the bills furnished there is no bill towards work

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relating to wooden frame for doors and windows and shutters. According to him, at page 139 of paper book dated 06.03.2013. It has been emphasized in written submission dated 18.08.2011 that MCD has sanctioned plan for construction of a house. However, the assessee has willfully not brought the same on record. Further, upon completion of a house the completion certificate is issued by MCD which would validate the construction date of a house property. The assessee has also not filed the same. The ld DR submitted that the ld CIT(A) erred in placing reliance on the Inspector's Report on Page 177 of PB dated 06.3.2013, which according to the ld DR merely affirms the existence of a house, however, the question is whether the said house was constructed within a period of 3 years i.e. prior to 11.12.2010. According to him, the inspector's report merely states that Shri Bhupender Singh told him that the property was purchased in 2007 and construction has been completed in the month of September, 2010, which evidence alone does not support assessee's claim that property was constructed by September, 2010. The ld DR has submitted that the assessee has also placed reliance upon the assessment order of Joint purchaser of the plot who had also claimed exemption u/s 54F namely Smt. Inderjeet Kaur Anand and Savneet Kaur Anand referred to Page 48 to 57 of PB dated 30.01.2015. In this regard, it was submitted by the ld DR that an oversight in a particular assessment proceeding cannot be relied upon in the present proceeding to argue that similar view is required to be taken.

11. In view of the aforesaid contention, according to ld DR it would be evident that the house has not been constructed prior to 11.12.2010. And there is no evidence of payments being made by the assessee to various contractors and suppliers. According to him there are numerous incongruities and infirmities in the bills submitted by the assessee. According to him, the assessee has not brought on record the MCD's sanction plan and the completion certificate and thus additional evidence which was not available before lower authorities is being brought on record before us for the first time

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and therefore, it would be in the interest of justice that the appeal is remanded back to the Assessing Officer for considering the issue afresh.

12. On the contrary, Ld. Sr Counsel, Sh Ajay Vohra for the assessee has relied upon the order of the Ld. CIT(A) and took us through the paper book to counter the contention raised by the ld DR and we have appreciated the matter after perusal of the evidence adduced by the assessee on record. The ld Sr counsel does not wants to interfere in the impugned order of the CIT (A) and requested that the same may be upheld.

13. We have heard both the parties and perused the records. We find that Ld. CIT(A) has observed that the assessee has submitted a copy of a site plan approved by the MCD, notification issued by the MCD dated 24.10.1994 declaring certain areas in an around the land purchased by the assessee as residential/commercial and also details regarding the construction made on the above land along with photograph of the house built in his property. During the remand proceedings, an ITI was deputed by the AO to visit the premises of the assessee. The ITI in his report has stated that the property was in the joint ownership of the assessee along with his other family members. The property tax receipts were also in the name of the three persons. The ITI has also reported that he had verified the electricity bill which was in the name of the assessee. The ITI has further stated that it was a posh residential area and no agricultural activity was seen in the surrounding area. It has also been reported that the assessee was living in the house which had been constructed. In the remand report, the AO after verification has confirmed the fact that other family members who had invested their capital gain from sale of shares and had invested in the same property had been granted exemption under section 54F by the AO in their respective cases. This was verified by the AO from the assessment orders in the case of the other joint owners Smt. Inderjeet Kaur Anand and Smt. Savneet Kaur Anand. The facts discussed above clearly show that the capital gains which were received by the assessee had been duly invested in purchase of land and construction of the residential house thereon. In view of the findings above and in view of the

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facts on record and the report of the AO and the ITI, the disallowance made by the AO on account of deduction claim u/s 54F is not as per law. And in the light of the Certificate issued by the Counsel for the assessee dated 30.01.2015 in the paper book, wherein it has been clearly stated that no new evidence is adduced in the Paper Book for the first time before us so, we are not inclined to disbelieve the said certificate issued by the Ld. Counsel of the assessee that the Architect's Certificate dated 05.04.2011, was filed before the authorities below which is annexed at page No.62 in its Paper Book-II, which is reproduced below:-

"Sharad Trivedi Architects Sector-C, Block-1, H.No. 1066, Vasant Kunj, New Delhi - 110 070 Ph: 9811580135 Ref: CERT/E-15/PUSP/R001 Dated : 05/04/2011 To Mrs. Savneet Kaur Anand & Others E-15, Puspanjali Vill : Bijwasan, New Delhi - 110 061 This is to certify on basis of site-inspection and the records made available by the owners, that construction work for the residential building on (Khasra No. 6//11/2, 6//20/3, 7/15,7/1 min & 7/27 of village Bijwasan) Plot No. E-15, Puspanjali, Village Bijwasan, New Delhi belonging to Ms. Savneet Kaur Anand (2/5 part), Mrs. Inderjeet Kaur Anand (2/5 part) and Mr. Kanwardeep Singh Anand (1/5 part) has been carried out and completed during years 2008- 2010 and same is occupied.

Sd/-

Sharad Kr. Trivedi Architect, CA/87/10939"

14.1 The aforesaid certified issued by the architect clearly shows that house was constructed before 2008-2010 and it was occupied when it was inspected and report submitted vide 05.04.2011. We find that other than the averments made before us, no evidence was adduced by the Revenue before us so that we can take a different view. We find that in the instant case, the material on record discloses that the assessee had invested the entire amount of Long Term Capital Gain (LTCG) within the period prescribed by law i.e. 3 years from the date of realization of sale proceeds of shares. The

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report of the inquiry conducted by the Department also discloses that a residential house had been constructed in the land purchased by the assessee. The assessee had produced the registered sale deed showing the transfer of the said property in his favour. The evidence on record reveals that the assessee had invested the sale consideration (LTCG) in acquiring an agriculture land which was notified by MCD as residential area wherein the assessee has constructed a house and has taken possession of the residential building and is living in the said premises. The object of enacting section 54 of the Act i.e., to encourage investment in a residential building and in our view that is fulfilled. In the instant case, it is seen that the assessee had purchased land on which construction was done subsequently. CBDT Circular No. 667 dated 18.10.1993 states that the cost of land is an integral part of the cost of residential house and therefore if the amount of capital gain for the purposes of section 54F is appropriated towards purchase of plot and also towards construction of the residential house thereon then the aggregate cost should be considered for determining the quantum of deduction U/S 54F provided that the acquisition of plot and also the construction thereon are completed within the period specified in the section. The assessee purchased the land on 28.12.2007 and construction was undertaken on this land which was completed within a period of 3 years as required under the provisions of section 54F of the Act. The Hon'ble Karnataka High Court in the case of CIT Vs. Sambandam Udaykumar 2012 - TIOL- 217 - HC - KAR - IT has held as under.-

"The intention of the legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated,

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he cannot be denied the benefit of section 54F of the Act. Similarly, if he has invested the money in construction of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F of the Act. The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit."

14.2 In the light of the afore-stated facts and the ratio laid by the Hon'ble High Court the disallowance made by the AO was rightly deleted by the ld CIT (A). In the background of the aforesaid discussions, we find no infirmity in the impugned order of the ld CIT(A) and has passed a well reasoned order, which does not need interference from our part, hence, we uphold the same. Therefore, the ground No.2 raised by the Revenue is rejected.

15. With regard to ground No.3 regarding deletion of addition of Rs.95,38,589/- on account of Share transactions is concerned, we find that the AO while making the addition on account of share transaction of Rs.95,38,589/- had observed that no details were filed during the assessment proceedings in respect of purchase and sale of shares and therefore the above amount was added back to the appellant's income. During the course of appellate proceedings, the evidences regarding the same were filed by the assessee which were sent to the AO for his report as per Rule 46A of the Income Tax Rules, 1962 (herein after 'the Rules') .In the remand report (page No.130 paper book ii) the AO has observed that the assessee had submitted the copy of the ledger account in respect of the transaction in shares which were made through a share broker namely Sh. Parasram Holding, so the details regarding the share transactions were perused by the AO while preparing the remand report. A perusal of the details show that the share transactions were entered into through brokers namely M/s. Satguru Capital and Finance Ltd. and Sh. Parasram Holdings (P) Ltd. The assessee had

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entered into purchases of shares of Rs. 86,77,297/- and sales of shares aggregating into Rs. 35,17,8001 through Satguru Capital and Finance Ltd. and purchases of Rs. 51,06,685/- and sale of Rs. 8,84,925/- through M/s. Parasram Holdings (P) Ltd. All the transactions were through bank account. A perusal of Copy of bank account (paper book -ii page No.101-113) reveals that the details of the share transactions have been submitted by the assessee has been looked into by both the authorities below and corroborated the aforesaid fact. The contention of the AO in the assessment order that no details regarding the investment in shares have been filed by the assessee need to be seen in the light of all these evidences which was adduced before the appellate authority support the contention of the assessee that no opportunity was granted to him to adduce these evidence by the AO. All the payments for purchase of shares has been made from the bank account of the assessee and therefore, it cannot be said that the source for investment of funds in purchase of shares is not explained. Copy of ledger accounts of Satguru Capital and Finance (P) Ltd. Parasram Holdings (P) Ltd. has been filed by the assessee which were duly sent to the AO. The AO has not brought any facts on record to show that the above purchases or sales of shares were not from the bank account of the assessee. We find that securities transactions tax of Rs.15,235/- has been paid on the purchases of share of Rs.86,72,297/- and sale of Rs.35,17,800/- entered into by the assessee through M/s. Satguru Capital and Finance (P) Ltd; and Securities Transaction tax of Rs.7,489/- on purchases of shares of Rs.51,06,685/- and sale of shares of Rs.8,84,925/- has been made by Sh. Parasram Holdings (P) Ltd. The assessee has also submitted its copy of account of purchase and sale of shares as existing in the books of account of M/s. Satguru Capital and Finance (P) Ltd. and Sh. Parasram Holdings (P) Ltd. We find that the purchase and sale of shares has been made through the bank account of the assessee, securities transactions tax has been paid on the transactions, all the payments have been made and received through cheque and the transactions have been confirmed by the brokers by way of the ledger accounts, the disallowance

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made by the AO was not justified, and therefore it was rightly deleted by the ld CIT (A). We do concur with the finding of the ld CIT(A) and we need not interfere in the reasoned order of the ld CIT(A), hence, we uphold the same. Therefore, the ground No.4 raised by the Revenue is rejected.

16. With regard to ground No.4 regarding deletion of addition of Rs.16,50,521/- on account of payment made through credit card is concerned, we find that AO has made the said addition on the ground that no detail has been filed by the assessee. During the course of appellate proceedings, the assessee had filed evidences regarding the payment made through credit card. These evidences were sent to the AO for his report. The AO in his remand report had submitted that most of the expenses were incurred by the assessee while on foreign tour and the ledger account filed by the assessee does not validate that the payment were made on behalf of the company in which the assessee was Director. After considering the evidences filed by the assessee and the remand report of the AO it is seen that the assessee was the director of Mls. Kromax International (P) Ltd. and Anand NVH (P) Ltd. The expenditure incurred by the assessee by way of credit cards had been claimed by the above companies in its return of income and has also been accepted in the assessment order of these companies u/s 143(3) of the Act. No adverse inference regarding the said expenditure claimed by these companies had been brought on record by the AO in their respective scrutiny assessment order. No evidences have been brought on record by the AO to show that the expenditure was either personal in nature or not related to the business. We concur with the observation of the ld CIT (A) that in the absence of any findings or evidence on record to show that the expenditure was incurred by the assessee was for non business purposes and also in view of the fact that the payments have been made through cheques by the companies in which the assessee is a director and also in view of the fact that the above expenditure has been accepted by the department in the assessments of these companies in which the assessee is a director, the disallowance made by the AO is not

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based on facts and it cannot be said that the credit card expenses were not incurred on behalf of the companies for business purpose in which the assessee was a director. However the ld CIT(A) have considered the fact that some personal expenditure could also have been incurred by the assessee, so the disallowance made by the AO was rightly restricted to 5% of credit card expenses of Rs 17,47,917/-. The remaining disallowance was rightly deleted by the ld CIT (A). In the background of the aforesaid discussions, we do not find any infirmity in the impugned order on this issue and we are inclined to uphold the same. Therefore, the ground No.4 raised by the Revenue is rejected.

17. In the result, the Revenue's Appeal is dismissed.

Order pronounced in the Open Court on 24/04/2015.

-Sd/- -Sd/- (N.K.SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:24/04/2015 A K Keot

Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi

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