Navneet Malhotra, Haryana vs Assessee

Navneet Malhotra ITO Prop. M/s Jeewan Hospital, Ward-2 Model Town, Rewari vs Rewari Haryana ABZPM9572B (RESPONDENT) (APPELLANT)

Appellant by None Respondent by Sh. Robin Rawal, JCIT

Date of Hearing 24.06.2015 Date of Pronouncement 29 .06.2015

ORDER PER S. V. MEHROTRA, AM

The assessee has filed this appeal against the order dated 2/12/2013 of CIT(A)Rohtak, , New Delhi in Appeal No. 8/RTK/2012-13.

2. The assessee has filed his return of income declaring an income of Rs.4,61,180/-. The assessing officer noticed that the assessee had sold a residential plot no. 285 Sector 2HSIDC, Croth Centre, Bawal, Distt, Rewari on 3rd March 2008 for a consideration of Rs. 10 lakhs. The assessee had claimed deduction u/s 54 to the tune of Rs. 5,55,00/- in his return of income. The computation of capital gain, filed by the assessee, along with his return of income, is reproduced hereunder:-

" 285, Sector-2, G.C. Bawal 1/3/2008 1000000 Sales Considertion 2 ITA No. 789/Del/14

Less: Indexed Cost Purchase Cost 144593 F.Y 2003-04 121500/463*551 Improvement Cost 92981 F. Y 2004-05 81000/480*551 Improvement Cost 97534 F. Y 2005-06 87975/497*551 Improvement Cost F/Year 2006-07 45115 Improvement Cost F/Year 2007-08 40100 420323 579677 Deduction u/s 54 555000 555000 24677

3. The Assessing Officer required the assessee to file documentary evidences such as deed receipts etc for the purchase and improvement expenses as shown by the assessee. He has observed that assessee filed the details of the expenses of the cost but no documentary evidences in support were filed by the assessee. In reply to Assessing Officer's query, the assessee filed the details of investments made over the years inter alia pointing out that the payments were made through DD. The details are at pages 2 & 3 of the assessment order. The assessee also filed the allotment letter dated 27th July 2003 in respect of property No. 285 Sector 2HSIDC, Bawal. The assessee filed following reply:-

" That all the payments to HSIDC(Govt. Industrial Corp) are made through DD. The bank statement regarding DD issued and some receipts are enclosed. Further the copy of conveyance deed executed with that corporation before executing the sale, which is mandatory, is also enclosed where it is clearing mentioned that payment of Rs.324000/- has already been made since 21/7/2003."

4. The Assessing Officer accepted that assessee had purchased this property for Rs. 3,24,00/-and had incurred expenditure of Rs. 20,200/- for the conveyance deed. He accordingly computed cost of acquisition, indexed cost and long term capital gain as under:-

3 ITA No. 789/Del/14 Description Cost Indexed Cost Remarks Cost of property as per 2,90,557/- 3,35,103/- As claimed. balance sheet as on 31/3/2007 The balance cost i.e 33,443/- 33,443/- No documentary 3,24,000-290557 assumed evidence furnished. to be paid during the F.Y 2007-08. Expenses on conveyance 20,200/- 20,200/- AS per conveyance deed incurred during F.Y deed furnished. 2007-08 Total: 3,44,200/- 3,88,751/-

In view of foregoing discussion, long term capital gain of the assessee is computed as under:-

Sale consideration as per sale deed. Rs.10,00,000/- Less Indexesd cost of acquisition as discussed above Rs.3,88,751/-

Long Term Capital gain Rs. 6,11,249/-"

5. The assessing officer further show caused the assessee as to how deduction u/s 54 was allowable to him on sale of a plot and further required to file documentary evidence in support of his contention. The assessing officer has observed that assesses changed his contention and claimed the deduction u/s 54F.

The Assessing Officer noticed from the documents filed by the assessee in support of his claim for deduction u/s 54F, that assessee had made investment of Rs.5,55,00/- in a Plot with CHD Developers Karnol. The Assessing Officer noticed that though assesses had shown that he had made an investment in Flat but as per allotment letter issued by CHD Developers. The assessee had been allotted a plot by the CHD Developers. Accordingly, assessee was again show caused as to how deduction u/s 54F was allowable to him on purchase of plot because as per the allotment letter of CHD Developers, assessee was allotted a residential plot in CHD City Sector 54 Karnol. The assesses filed following reply:-

" Deduction u/s 54F: The documents regarding allotment of flat land of CHD Developers are on record with an earlier reply. Membership of flat 4 ITA No. 789/Del/14

society i.e Housing society is duly covered under u/s 54F read with Section 54F as per verdict of the Ld. Gujrat High Court in the case of CIT VS. Jundas Premchand Gandlin in (2005) 279 ITR 552."

6. The assessing officer, after considering the assessese's reply and the provisions of Section 54F, denied the assessee's claim for the following reasons:-

(i) As per provisions of Section 54F, the assessee was required to invest whole of the sale consideration in new asset i.e for purchase of residential house or for construction of residential house.

(ii) If the assessee was not in the position to invest whole of the amount under any circumstance, he was required to deposit the amount in capital gain account before the due date of filing of his return of income u/s 139 (1) of the Income Tax Act. He pointed out that none of the conditions contemplated u/s 54 had been complied by assesssee. He, accordingly, determination the long term capital gain at Rs.6,11,249.

7. The Assessing Officer further noticed from the profit and loss account of the assessee that assessee paid interest of Rs.32,600/- to Smt. Prem Lata Jain. After considering the position of investments made by assessee, the assessing officer observed that the assessee's investment in non business assets in much more than his capital. He further noted that during the year assessee had invested Rs.8,76,642/- in shares and securities. Accordingly, he disallowed the interest paid to Smt. Prem Lata amounting to Rs.32,600/- being for non business purposes.

8. Ld. CIT(A) allowed proportionate deduction u/s 54F and confirmed the addition in respect of under point of disallowance of interest.

9. The Assessing Officer levied penalty u/s 271 (1) (c). Ld. CIT(A) dismissed the assesssee's appeal after considering the assessee's written submissions.

10. The assessee in his written submissions filed before me through post,inter alia, submits that before the Ld. CIT(A) the written submissions dated 9/11/2013 5 ITA No. 789/Del/14

were filed explaining the main issue of investment and claim u/s 54F was accepted and proportionate deduction allowed. On disallowance of expenses on property and interest paid on loan which were supported by complete particulars and vouchers could not prove the intention on the part of the assessee to conceal the particulars. Further the disallowances upheld in appeal do not amount to concealment of income nor furnishing inaccurate particulars of income. The assessee has relied on following decisions:-

(i) Ashok Pai Vs. CIT (2007) 292 ITR 11 (S.C.)

(ii) Dalip N. Shieorall Vs. CIT (2007) 291 ITR 519 (S.C.)

(iii) Punjab & Haryana High Court in the case of CIT VS. Rubber Udyog Vikas (P) Ltd reported in (2011) 335 ITR 558

(iv) Delhi High Court in the case of CIT Vs. IFCE reported in (2011) 199 Taxman 21.

(v) Punjab & Haryana High Court in the case of CIT vs. S. S. Ltd reported in (2010) 189 Taxman 282.

(vi) CIT Vs. Reliance Petro Products (P) Ltd. Reported in (2010) 322 ITR 158

11. As regards the penalty apropos claim of interest paid in the written submission Ld. AR submits that the assessee has interest was duly returned by person to whom it was paid. Further, the confirmation and other documents are on record which were furnished during assessment proceedings.

12. I have considered the written submissions and the submissions of Ld. DR. The facts are not in dispute. The assessee had advanced claim in regard to computation of long term capital gain after giving the details of purchase cost and the improvement cost over 4 years. The indexed cost of acquisition was accordingly computed. The assessing officer, however, only took into consideration the amount paid as per allotment letter and expenses on conveyance deed. The assessee in its reply, as reproduced earlier, stated that all the payments were made through DD. The AO did not accept the entire cost of acquisition claimed at Rs.4,20,323/-.Mere disallowance of certain expenses claimed by 6 ITA No. 789/Del/14

assessee as cost of acquisition could not lead to the conclusion that assessee had advanced any false claim only because assessee was unable to substantiate the same with reference to specific vouchers. The next issue is regarding assessee's claim u/s 54F. Ld. CIT(A) has clearly observed that assessee is entitled to proportionate deduction u/s 54F and, therefore, it cannot be said that assessee had advanced any false claim. It is not in dispute that assessee had been allotted a residential plot in CHD City Sector 45 Karnol on the basis of which he ha advanced claim u/s 54 F which was in principle accepted by Ld. CIT(A) but since the total consideration was only Rs. 5,55,00/- as against Rs. 10,000/- being the sale consideration therefore, he allowed only proportionate deduction. This was solely on account of difference in opinion between assessee and Ld. CIT(A). Under these facts there is no question of levying penalty in view of various case laws relied by Ld. Counsel for the assessee in the written submission.

13. As regards the levy of penalty apropos disallowance of interest paid to Smt. Prem Lata Jain, I find that the disallowance has been made only because the capital of the assessee was much lower than the investments made by assessee in properties and shares. However, it is not in dispute that assessee had shown business assets aggregating to Rs. 3,28,856/-. The assessing officer had required the assessee to show as to why interest paid to Smt. Prem Lata Jain Rs.32,600/- be not disallowed as investment in non business assets, properties and shares was much more than capital. On this basis it was inferred that loan of Smt. Prem Lata Jain had not been utilized for business purpose. The assessing officer has not demonstrated any nexus between the amounts received from Smt. Prem Lata Jain and its utilization for non business purposes. In my opinion is cannot be a basis for at least levying penalty because there is no finding that loan was actually utilized for non business purposes. In view of above discussion, I set aside the order of both the Lower Revenue Authorities and cancel the penalty.

7 ITA No. 789/Del/14 10. In the result, the appeal of the assessee is allowed.

.

The order is pronounced in the open court on 29th of June 2015.

Sd/-

(S. V. MEHROTRA) ACCOUNTANT MEMBER Dated:- 29 /06/2013

*R. Naheed*

Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(Appeals)

5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

Date

1. Draft dictated on 25.06.2015 PS

2. Draft placed before author PS 26.06.2015

3. Draft proposed & placed before the JM/AM second member

4. Draft discussed/approved by Second JM/AM Member.

5. Approved Draft comes to the .06.2015 PS/PS Sr.PS/PS

6. Kept for pronouncement on PS 8 ITA No. 789/Del/14

7. File sent to the Bench Clerk .06.2015 PS

8. Date on which file goes to the AR

9. Date on which file goes to the Head Clerk.

10. Date of dispatch of Order.