Nandubhai Nathabhai Patel, Ahmedabad vs Assessee

Shri Nandubhai Nathabhai Patel, Vs Income-tax Officer, 82-I, Gambha Sheri, Ward-11(2), Ahmedabad. Nr. Krishi Bhavan, Kocharab, Paldi, Ahmedabad. (Appellant) (Respondent) PA No.AFXPP 6614 D

Appellant by Ms. Urvashi Shodhan, AR Respondent by Shri Roopchand, Sr. DR

Date of hearing: 24/4/2015 Date of pronouncement: 15/5/2015

ORDER

PER Shri Rajpal Yadav, Judicial Member.

The assessee is in appeal before us against the order of CIT(A)

dated 22nd June, 2011 passed for AY 2008-09. The solitary

substantial ground of appeal raised by the assessee is that ld. CIT(A)

has erred in confirming the computation of short-term capital gain at

Rs.25,65,800/- as against Rs. 2,88,415/- computed by the assessee. ITA No.2109/Ahd/2011 2 Asst. Year 2008-09

2. The brief facts of the case are that the assessee is an

individual. He has filed his return of income on 26th March, 2009

declaring total income of Rs.50,970/-. The case of the assessee was

selected for scrutiny and notice under section 143(2) of the I.T. Act,

1961 was issued and served upon the assessee. On scrutiny of the

accounts it revealed to the AO that assessee had shown capital gain

of Rs.2,88,415/-. It emerges out from the record that assessee had

purchased a piece of agricultural land bearing survey No.334/1/2/1/2

in revenue area Thaltej, Ahmedabad measuring 2675 sq.mtrs. This

piece of land was purchased on 27th March 2006 for a sum of

Rs.6,00,000/-. It was sold on 22nd January, 2008 for a sum of

Rs.31,65,800/-. The land sold by the assessee is an agricultural land.

The assessee had computed short-term capital gain of Rs.2,88,415/-.

He claimed expenditure of Rs.28,77,315/-. This claim was made on

account of improvement made in the land. The AO rejected this claim

on the ground that assessee failed to substantiate the alleged

expenditure incurred for improving the land.

3. On appeal the ld. first appellate authority has reappreciated the

facts and circumstances of the case and concurred with the AO. The ITA No.2109/Ahd/2011 3 Asst. Year 2008-09

discussion made by the ld. CIT(A) in paragraph 2.3 & 2.4 is worth

noting in this regard.

''2.3 The appellant during the course of appellate proceedings, had claimed the expenditure of Rs.1,05,000/- on account of stamp duty of Rs.70,000/- and advocate fees Rs.35,000/- as part of cost of land. However, no any evidence was produced as to from where these expenses were incurred. There is no any bill or money receipt for the payment of Advocate fees. Therefore, these expenses cannot be allowed as part of the cost of land. The appellant had also claimed Rs. 7,12,315/- as expenses incurred out of his own account and claimed the expenses of Rs.7,50,000/- and Rs.7,10,000/- as incurred respectively by his two sons Shri Nitin Patel and Shri Himanshu Patel. These expenses were stated to be incurred towards drainage, bore, matipuran, fertilizers and small unit of dwelling unit. It is not acceptable that any expenditure was incurred for any dwelling unit as there is no reference of sale of any dwelling unit or construction of such dwelling unit in the sale deed dated 22.01.2008. The claim of so called expenses incurred towards drainage, bore, matipuran and fertilizers were not made before the AO and no any bills or vouchers for these expenses were ever produced before the AO or during the appellate proceedings. It is an entirely new claim to reduce the incidence of tax and are not allowable in absence of any supporting evidence. The total claim made during the appellate proceedings is for Rs.22,77,315/- (Rs.70,000/- stamp duty + Rs.35,000/- advocate fees + Rs.7,12,315/- expenses incurred out of own account + Rs.7,50,000/- expenses incurred by his son Nitin Patel + Rs.7,10,000/- expenses incurred by his son Himanshu Patel) whereas in the concluding para, the claim was made for Rs.28,77,315/-. I have gone through the copies of the bills and vouchers and noticed that the details are for the expenditure of Rs.29,28,911/- out of which payments for Rs.28,48,815/- were stated to be made. Out of the total expenses of Rs.29,28,911/- the expenses of Rs.6,00,000/- were for the cost of land and there is no dispute about it, the expenses of Rs.70,000/- were stated to be incurred on stamp duty (no source of incurring of expenses) Rs.35,000/- for Advocate fees (no bill or money receipt or no source of expenditure), ITA No.2109/Ahd/2011 4 Asst. Year 2008-09

Rs.1,55,750/- were stated to be incurred for fertilizer and matipuran and construction of wall and gate (no bills or vouchers and no any details of dates of expenditure and source of expenditure). The rest of the expenses of Rs.20,68,161 (as per the details of 43 bills) are relating to the construction related material and the same cannot be allowed as expenses incurred for improvement of the landed property. I have tried to examine the bills and vouchers of these expenses filed before the Assessing Officer and copies also filed before me. It was noticed that the same were only relating to construction material and related labour. From the copies of 43 bills filed. It was noticed that the expenses are relating to electric work, wooden labour, colour work, polish work, flooring work, steel bars, angles, wood, ceramics, Ghana teak, pipes and handware and so on. Not a single bill is relating to improvement of the land. These expenses are mainly seen to be for the finishing work of any building. From the examination of these expenses it can be inferred that the expenses on the whole building were not less than a crore of rupees and such building was not found constructed on the land so sold. These expenses may be relating to any other building of assessee's sons. Thus, these expenses incurred on construction material and related labour cannot be linked to the land sold and cannot be allowed as improvement expenses of the land. Likewise the expenses of Rs.70,000/- stated to be incurred on stamp duty (no source of incurring of expenses), Rs.35,000/- for advocate fees (no bill or money receipt or no source of expenditure) and Rs.1,55,750/- stated to be incurred for fertilizer and matipuran and construction of wall and gate (no bills or vouchers and no any details of dates of expenditure and source of expenditure) cannot be allowed for the reasons mentioned against them in bracket. It is also to be mentioned here that the land was purchased and sold by the appellant. The expenses incurred by his sons on the construction of any dwelling units cannot be allowed to the appellant in the name of improvement expenses.

2.4 Considering the above discussion, it is held that the Assessing Officer had correctly computed the short term capital gain of Rs.25,65,800/- on account of sale of land by the appellant. The cost of the land for Rs.6,00,000/- are the only allowable expenses for the detailed reasons discussed in para 2.2 and para 2.3 above. The ITA No.2109/Ahd/2011 5 Asst. Year 2008-09

finding of the AO with reference to computation of short term capital gain of Rs.25,65,800/- is hereby sustained and the addition so made to the total income is confirmed. All the grounds of appeal are dismissed.''

4. With the assistance of ld. representatives, we have gone

through the record carefully. Section 48 of the I. T. Act, 1961 provides

the mode of computation of the capital gain. This section

contemplates that the income chargeable under the head ''capital

gain'', 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 -

(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.

According to the assessee the expenditure incurred for stamp duty,

advocate's fees, falls within sub-clause (1) of section 48 i.e. it is

connected with transfer of the capital assets. She contended that a

sum of Rs.70,000/- was incurred towards stamp duty and Rs.35,000/-

was paid towards advocate's fees. The other sums have been

incurred for improvement of the asset. The ld. counsel for the ITA No.2109/Ahd/2011 6 Asst. Year 2008-09

assessee has reiterated the stand of the assessee canvassed before

the ld. first appellate authority. She took us to paragraph 2.1 of CIT(A)

's order where submissions of the assessee have been reproduced.

5. On the other hand, the ld. DR relied upon the order of CIT(A).

6. On due consideration of the facts and circumstances we are of

the view that ld. first appellate authority has made a detailed analysis

of each item of expenditure claimed by the assessee towards the

improvement of the asset as well as incurred in connection with the

transfer. It is to be appreciated that assessee has claimed expenses

of Rs.1,55,750/- incurred towards fertilizer and matipuran. The total

land is measuring 2675 sq.mtrs. which is just equivalent to half acre

of land. Even somebody wants to put warmi-post or cowdung as

fertilizer it cannot cost Rs.1,55,750/-. The land has been sold as an

agricultural purpose. This is highly exaggerated amount which has

been claimed by the assessee without submitting any evidence.

Similarly the assessee has claimed that he must have filled the land

with sand for leveling purposes though no direct evidence has been

placed on record. The assessee could only produced his account as

well as account of his sons wherein their books, they have claimed ITA No.2109/Ahd/2011 7 Asst. Year 2008-09

incurred expenditure but the assessee could not bring any

demonstrative evidence exhibiting that some physical changes were

brought in the asset. Considering the well reasoned finding of the

CIT(A) vis-à-vis the claim made by the assessee, we are of the view

that ends of justice would meet if a sum of Rs.1,50,000/- is allowed to

the assessee on an estimate basis for leveling and putting some

fertilizer etc. towards improvement of the asset. The ld. AO shall

recomputed the capital gain after allowing the improvement cost of

Rs.1,50,000/- to the assessee.

7. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open Court on 15/5/2015

Sd/- Sd/-

(G. D. Agrawal) (Rajpal Yadav) Vice President Judicial Member

Mahata/-

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File ITA No.2109/Ahd/2011 8 Asst. Year 2008-09

BY ORDER

Dy. Registrar, ITAT, Ahmedabad

1. Date of dictation: 12/5/2011

2. Date on which the typed draft is placed before the Dictating Member:13/5/2011 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk:

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: