Upende Kumar Gupta, New Delhi vs Department Of Income Tax

ITO, Ward 28 (2), vs. Shri Upender Kumar Gupta, New Delhi. 4273, Gali Bhairon Nai Sarak, Delhi - 110 006.

(PAN : AAEPG6222A)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri P.K. Jain, Advocate REVENUE BY : Shri P. Dam Kanunjna, Senior DR

Date of Hearing : 01.06.2015 Date of Pronouncement : 03.06.2015

ORDER

PER GEORGE GEORGE K., JM :

This appeal, at the instance of the department, is directed against the

order of the Commissioner of Income-tax (Appeals)-XXV, New Delhi

dated 28.05.2013. The relevant assessment year is 2010-11.

2. The revenue has raised six grounds. Grounds No.1 & 2 relate to the

issue whether the CIT (A) is justified in allowing the appeal and directing

the Assessing Officer to refer the case for valuation of property to the

DVO and thereafter make an assessment as provided under section 50C(2)

and 50C(3) of the Income-tax Act, 1961. Grounds No.3, 4 & 5 relate to 2 ITA No.4531/Del./2013

the issue whether the CIT (A) is justified in deleting the addition of

Rs.14,00,000/- made by the Assessing Officer on account of unexplained

cash credits. Ground No.6 relates to the deletion of addition of

Rs.2,57,500/- made by the Assessing Officer on account of disbelieving

the cost of improvement incurred on properties which was sold.

3. We shall take up the issues ground-wise as under.

GROUNDS NO.1 & 2

4. The assessee had sold a property. The consideration shown in the

sale deed was Rs.15,00,000/-. While computing the capital gains, the

assessee has taken the sale consideration at Rs.15,00,000/-. The Assessing

Officer computed the capital gains after taking the circle rate/stamp duty

valuation which was at Rs.28,40,000/- as provided u/s 50C of the Act.

Therefore, the Assessing Officer has made an addition of Rs.13,40,000/-

(Rs.28,40,000/- minus Rs.15,00,000/-).

5. Aggrieved the assessee preferred an appeal before the CIT (A). It

was submitted before the CIT (A) that the fair market value of the property

as per valuation report is only Rs.15,00,000/-. It was further submitted that

the assessee had objected to the adoption of the circle rate/stamp duty

valuation before the Assessing Officer vide his letter dated 01.01.2013.

Therefore, it was submitted that the valuation of the property was to be

referred to the DVO and assessment is to be completed subsequent to the

receipt of the valuation report of the DVO. The CIT (A) directed the 3 ITA No.4531/Del./2013

Assessing Officer to refer the impugned property for valuation to the DVO

and on receipt of the valuation report, complete the assessment. The

relevant finding of the CIT (A) reads as under :-

"4.4. It is apparent from the order of the AO that the AO has followed the deeming provisions of section 50C (1) without following the other provision u/s 50C(2) and has not referred the valuation of the property to the DVO when the assessee had objected and the assessee had in fact pleaded before the AO in the letter dated 01/01/2013 that the valuation of the property may be referred to the DVO and the valuation of the DVO should be adopted as provided u/s 50C(1), 50C(2) & 50C(3). After considering all the facts and circumstances of the case, I am of the view that the AO has not followed the complete provisions of section 50C(2) and accordingly, the AO is directed to refer the valuation to the DVO and make the assessment as provided u/s 50C(1), 50C(2) & 50C(3) and as such the alternate appeal of the assessee is allowed."

6. The revenue, being aggrieved, is in appeal before us.

7. Ld. DR relied on the assessment order. On the other hand, the AR

reiterated the submissions made before the Income-tax Authorities and

placed reliance on the findings of the CIT (A).

8. We have heard the rival submissions and perused the material on

record. On perusal of material placed on record, it is clear that assessee

had filed objections against adoption of the circle rate/stamp duty valuation

before the Assessing Officer (the objections filed by the assessee dated

01.01.2013 placed at pages 43 - 44 of the paper book filed by the

assessee.). When assessee has filed objections before the Assessing 4 ITA No.4531/Del./2013

Officer that circle rates are above the fair market value, the Assessing

Officer was duty bound to refer the impugned property for valuation to the

DVO before proceeding to make an assessment of long term capital gains.

The CIT (A) has only directed the Assessing Officer to refer the matter for

valuation to the DVO and thereafter conclude the assessment. The

directions of the CIT (A) has legal sanctity by various judicial

pronouncements, including the judgment of the Hon'ble Madras High

Court in the case of N Meenakshi vs. ACIT reported in 326 ITR 229.

Therefore, we see no reason to interfere with the order of CIT (A) on this

score and we uphold the directions of the CIT (A) as correct and in

accordance with law. It is ordered accordingly. Grounds no.1 & 2 are

rejected.

GROUNDS No.3, 4 & 5

9. The Assessing Officer had made an addition of Rs.14,00,000/- by

observing as under :-

"7. During the course of assessment proceeding it was noticed that the assessee has deposited a sum of Rs.6,00,000/- on 11.02.10, Rs 3,00,000/- on 12.02.10 and a sum of Rs 5,00,000/- on 13.02.10 in his saving a/c no 0221053000019589 with South Indian Bank Ltd Chandni chowk New Delhi. The assessee was asked to explain the source of deposit in his saving bank account. The assessee vide his letter dated 30th October 2012 submitted that the Cash deposited in account represent the advance received for and on behalf of Mrs. Anjana Gupta for prospective sale of property. The assessee was further asked to produce 5 ITA No.4531/Del./2013

confirmation of the same from prospective buyer vide order sheet entry dated 17.12.2012. However the assessee has failed to produce any confirmation. Hence in the absence of any confirmation the sum of Rs.14,00,000/- is added to the income of the assessee as unexplained cash credits u/s 68 of Income Tax Act 1961."

10. On further appeal, the addition made by the Assessing Officer was

deleted by the CIT (A). The relevant findings of the CIT (A) read as

follows :-

"6.3. I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submission of the assessee that the AO is not justified to make the addition of the cash deposits without considering the simultaneous or corresponding cash withdrawals which are for the purpose of business. It is not uncommon for the business people to make frequent cash deposits and withdrawals in the bank accounts as per the requirement of business convenience. After considering all the case facts and circumstances of the case, I am of the view that there is no proper justification for making the addition of Rs 14,00,000/- of the cash deposits and accordingly, the addition made by the AO is deleted."

11. The revenue, being aggrieved, is in appeal before us.

12. The ld. DR strongly supported the assessment order. On the other

hand, the AR relied on the findings of the CIT (A).

13. We have heard the rival submissions and perused the material on

record. The cash deposited of Rs.14,00,000/- in assessee's accounts were

duly and fully explained in the cash flow statement with supporting

evidence consisting of assessee's bank statements and the sale deed

executed by the assessee as General Power of Attorney for his wife, 6 ITA No.4531/Del./2013

Anjana Gupta. The copies of the cash flow statement, bank statement and

various sale deeds are placed on record. The receipt of sale consideration

in cash is duly supported by the sale deeds. Therefore, the addition of

Rs.14,00,000/- as unexplained cash credit u/s 68 of the Act is unwarranted

and CIT (A) was justified in deleting the same. It is ordered accordingly.

Grounds No.3, 4 & 5 are rejected.

GROUND NO.6

14. The assessee has sold several properties and also claimed cost of

improvement on these properties. The cost of improvement claimed was

Rs.5,15,000/-. The Assessing Officer disallowed 50% of the cost of

improvement while computing the long term capital gains and hence, made

an addition of Rs.2,57,500/-. The relevant finding of the Assessing

Officer in making the addition reads as follows :-

"6. During the course of assessment proceedings, it is noticed that the assessee has claimed to have got renovation done in property No.4279, Gali Bhairav, Nai Sarak, Delhi amounting to Rs.2,65,000/- and property No. 1374, Maliwara, Vaidwara, Nai Sarak, Delhi-110006 amounting to Rs.2,50,000/-, totaling to Rs.5,15,000/-. The AR of the assessee was asked to furnish the documentary evidence / bills & vouchers of these expenses. In response to this, the AR of the assessee has furnished receipts on plain paper from Shri Daulat Ram Saini s/o Shri Sukhlal Saini R/o Village Kesri Pura, Tehsil Baswa, Distt. Dosa, Rajasthan and claimed that the payment were made to Shri Daulat Ram Saini for carrying renovation work including the cost of material. The statement of Shri Daulat Ram Saini was recorded on oath on 05.03.2013 which is placed on record however, the statement of Shri Daultat Ram Saini was not satisfactory. The evidence produced by the AR is 7 ITA No.4531/Del./2013

insufficient and not reliable, hence in order to cover the possible leakage of revenue 50% of the amount claimed which comes to Rs.2,57,500/- is disallowed on account of non production of complete bills and vouchers."

15. The CIT (A) deleted the addition by observing as under :-

"7.3. I have considered the order of the AO and the submission of the assessee and I find considerable merit in the submission of the assessee that the AO is not justified to disallow the claim cost of improvement without any valid reasons and accordingly, the addition made by the AO is deleted."

16. We have heard the rival submissions and perused the material on

record. The confirmation of expenses on improvement of property before

its sale has been placed on record and statement of Shri Daulat Ram Saini

was recorded on oath. Confirmation and statement has been rejected by

the Assessing Officer on the ground "not satisfactory, insufficient and not

reliable" which are vague and based on surmises and conjectures.

Therefore, the CIT (A) is justified in deleting the same. Hence, ground

no.6 raised by the revenue is rejected.

17. In the result, the appeal filed by the revenue is dismissed.

Order pronounced in open court on this 3rd day of June, 2015.

Sd/- sd/- (N.K. SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER 8 ITA No.4531/Del./2013

Dated the 3rd day of June, 2015 TS

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-XXV, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.