Income Tax Appellate Tribunal - Ahmedabad
Yogesh Chimanlal Vankawala, Surat vs Assessee on 4 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA No. 2595 & 2851/Ahd/2012 A.Y: 2008-09 ITO, Ward 5(1), Surat. Vs M/s. Chimanlal Kalidas Vankawala, Prop. of M/s. S.K. Marketing, 1/2045, Bara Hazari Street, Napura, Surat.
PAN AAKPV5349P
(Revenue) (Assessee)
ITA No. 352 & 639/Ahd/2013
A.Y: 2008-09
Yogesh Chimanlal Vs I.T.O., Ward 5(4), Surat.
Vankawala, 1/2045,
Bara Hazari Street,
Nanpura,
Surat.
PAN AAKPV 5352Q
(Assessee) (Revenue)
ITA No. 353 & 636/Ahd/2013
A.Y: 2008-09
Pareshbhai Chimanlal Vs I.T.O., Ward 5(3), Surat.
Vankawala, 1/2045,
Bara Hazari Street,
Nanpura,
Surat.
PAN AAKPV 5350N
(Assessee) (Revenue)
Revenue by : Shri O.P. Batheja, Sr.D.R.
Assessee(s) by : Shri Mitish S. Modi, A.R.
सुनवाई कȧ तारȣख/
/ Date of Hearing : 04/07/2013
घोषणा कȧ तारȣख /Date of Pronouncement: 31/07/2013
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -2- आदे श/O R D E R PER BENCH:
Out of these six appeals, there are cross appeals filed by the assessee and the Revenue in respect of three different assessees for the same assessment year, i.e., A.Y. 2008-09. All these three assessees were the co-owners of the property in question which was sold during this year resulting into long term capital gain and therefore, the issue involved is common and interconnected and, therefore, all these appeals were heard together and are now being disposed of by this common order for the sake of convenience. These appeals are directed against three separate order of learned CIT (A)-I, Surat, dated 30.8.2012 in respect of Shri Chimanlal Kalidas Vankawala, dated 19.12.2012 in respect of second assessee being co-owner, Shri Yogesh Chimanlal Vankawala and dated 20.12.2012 in the case of third assessee being co-owner, Shri Pareshbhai Chimanlal Vankawala.
2. Brief facts are common in all these three cases except difference in amount in respect of one assessee, i.e., Pareshbhai Chimanlal Vankawala because in his case, the due date for filing of return of income was 30th July, 2008 whereas in remaining two cases, the due date for filing of return of income was 30th September, 2008 and accordingly, the claim of the assessee regarding deduction under Section 54 of the Act was arrived at Rs.5,89,588/- in the case of Sri Pareshbhai Chimanlal Vankawala to the extent of 1/3rd of expenses incurred in construction of new house till 31.7.2008 whereas in remaining two cases, such deduction under Section 54 of the IT Act was allowed to the extent of Rs.7,26,160/- being 1/3rd of the amount invested in construction of new house till 30th September, 2008.
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -3-
3. Brief facts till the assessment stage are noted by the learned CIT(A) in paragraph 8.1 of his order in the case of Sri Chimanlal Kalidas Vankawala . The same is reproduced below:-
"8.1 Assessing Officers "s contention:-
The relevant portion of the Assessing Officer's contention is reproduced herein under:- .
3. On perusal of the facts of the case it was observed that the assessee along with other two co-owners had sold a joint property during the F.Y.2007-08 and the sale was registered on 18/08/2007 for Rs.70,50,000/-................................ 3.1. The assessee has submitted the purchase price of the sold out property at Rs.92,410/- , cost of improvement, indexation and capital gain on the same has been worked out as under:-
Land Purchase (F.Y. 1984-85):
92410 * 551/125 = 4,07,343/-
Construction (F.Y. 1988-89):
436973* 551/161 = 14,95,479/-
Construction (F.Y. 1989-90):
250701* 551/172 = 8,03,118
Construction (F.Y. 1990-91):
269085 * 551/182 = 8,14,647/-
Construction (F.Y. 1991-92):
131420 * 551/199 = 3,63,882/-
Total cost of acquisition 38,84,469/-
Less: Sale of Property in 2007-08 70,50,000/-
Total capital gain incurred 31,65,531/-
3.2. On verification of the balance sheet of the assessee as on 31.03.2007 it was found that no such property has been shown there in, so it is not verifiable as to what were the actual costs of acquisition and improvement w.r.t. the property in question. So as to ascertain the correct position the assessee was asked to show cause as under:-
"You are requested please to provide the supporting evidence regarding values adopted as above, like Balance sheets of ail the co-owners from 1984-85 and for the years of improvements and for A. Y.2006-07 and 2007-08.
4. On being asked you had furnished Xerox copies of the bills/vouchers as a proof towards cost of improvement.
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -4- 4.1. You are requested please to submit the balance sheets of all the three co-owners for the respective years as to substantiate your claim. During the course of assessment proceedings your AR had claimed that the cost of improvements were incurred and debited from the capital account of individual co-owners, the same may please be substantiated with detailed capital account, returns of income for the respective years in question.
5. Secondly, the Xerox copies of the bills and vouchers submitted are required to be substantiated with supportings as to whether those expenses were accounted for or not. So you are requested please to substantiate these expenses , with detailed capital accounts of all the co-owners. It is needless to bring to your notice that the Xerox copies submitted by you were copies of the bills raised by the other parties and for some of the payments receipts have been produced, so you are requested please to prove that these payments were actually made towards construction of the house property.
06. Without prejudice to the above observation, it is seen that cost of improvement for f.Y.1991-92 has been claimed by you at Rs.1,31,420/- where as the supportings have been submitted for only Rs.59,982/-. So you are required to show cause as to why the indexed cost of improvement for F.Y.1991-92 should net be restricted to Rs.165,080/- (59982 x 551/199) and accordingiy the capita/' gain be recomputed ot Rs 33,63,333/-. This is subject to, submission.^/ the details to my satis/action, as called for w.r.t. composite and year wise working of the cost of improvement and it may vary on submission/non submission of the details.
7. It is seen that you have claimed exemption u/s.54F of the Act for capital gain arisen from the transaction. You are required to prove the applicability of section 54F of the Act because 54F applies to the properties other than house properties.
8. It is seen that the construction of new house was not completed till the due date of filing of the return of income and after the due date you have failed to deposit the amount specified in section 54 of the IT Act in the designated "Capital gain account" within the meaning of section 54 of the Act.
9. The Xerox copies were verified and total of the expenses towards construction of new house upto due date of filing of return of income in your case is determined as under:-
Amount of expenditure in A.Y. 2007-08 8,16, 079 /-
Amount of expenditure upto due date
i.e. 30/09/2008 10,62,403/-
Total 18,78,482/-
9.1. Total capital gain as arrived at vide para No.6 is Rs.33,63,333/-. Out of which capital gain chargeable in your hands comes out to be Rs .11,21,111/--. However the totai amount invested in construction of new house till 30/09/2008, as per the provision of section 54 of The Act, is Rs.18,78,482/-, out of that your contribution is arrived atRs6,26,160/-. The difference of Rs.4,94,951/- is required to be taxed under section 45 of the Act. You are required to show cause as to why the capital gain be recomputed accordingly.
3.3. The assessee vide his reply dated 27.12.2010 has submitted the part details and sought for an adjournment. The AR of the assessee was apprised of the facts that the matter is getting ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -5- barred from the limitation but for the sake of natural justice the adjournment was granted till the evening which was subsequently adjourned to 29/12/2010 but till date nothing has been heard from his side. The submission of the assessee is reproduced here under:- :
"The assessee has claimed deduction u/s. 54 against the cap/to! gain in the year consideration. Evidences of raw materials for construction of new house were given in earlier hearing. Considering the same your good self has allowed investment u/s. 54 for Rs. 1S,78,4S2/- & balance amount is proposed to be taxed under the head of capital gain.
Your good self has asked for the evidences for construction of old residential house situated at City light, Surat. The assessee has produced bills of construction of the said house. The assessee has constructed the old house in 1984-85 to 1991-92. It means the construction of old house was constructed before 16 years. Your good self has asked for the evidences like balance sheet or construction account of those years. Now the assessee has no records before 16 years. As I have asked to ihs assessee, he stated that old records are not available no .v & most of the records were destroyed in flood calamity in August, 2006. The assessee has debited the, amount of construction in their respective capita! at the relevant years. Considering section 54, your good self has stated that if the assessee has not invested the sale money of old house in capital gain account with any bank, the money should be utilized on or before due date of filing of return of income. The assessee has given all bills of raw materials used in the construction of new house. Verification of the said bills, your good self has allowed investment u/s. 54 F for Rs. 1878482/- & balance amount of capital gain proposed to be taxed under the head of capital gain. In connection to said, it is reply that the assessee has given of raw materials used In the construction of new house. Labour bills of construction of house were not given which are given herewith up to the period of 30.09.2008 which comes to Rs.1839735/-. Copies of labour bills are attached here with. Considering the same, the assessee is not liable for capital gain u/s. 45 of the Act. Therefore, you are requested to consider the bills of labour charges & above information & allowed investment u/s. 54 F of the Act & oblige."
3.4. The assessee has claimed that the old house was constructed way back in 1984 to 1990 and all the details except for the inills of items purchased have been lost in the infamous flood of 2006. The assessee was asked to submit any supporting where from he can prove that there was any damage at his residence due to flood but he could not substantiate it with any supporting such as FIR or insurance claim etc. It is pertinent to mention that the assessee himself has furnished the original bills claimed to have been expenses towards construction of the residential property but he could not submit the capital accounts for any of the years in question. The most important question here is whether the assessee had ever incurred those expenses and if incurred then whether those were incurred towards construction of the same house which has been sold off. It is unverifiable from the bills as to whether payments were made by the assessee or not. The cost of construction and cost of improvement can only be substantiated if the assessee submits the proofs towards payments of the expenses from bank or in the form of receipts issued by the parties who had issued the bills. There are chances that the assessee might have constructed any other property or traded in the items shown in the bills as produced. From these bills it cannot be ascertained as to whether the assessee has used these items for construction of the same house in question.
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -6- 3.5. The assessee had argued that the amounts were debited from the capital accounts of the respective year but the basic question is the sources of the amounts available in the capital accounts and subsequent debits from the same. It cannot be ascertained as to whether the cost of construction and cost of improvement were incurred out of the accounted income or otherwise. If any unaccounted expenditure had been made at the time of original purchase/ construction then the same can subsequently not be claimed as the cost of construction and cost of improvement while calculating the capital gain. That is why the maintenance of books of accounts and capita! accounts for the respective year is essential. Had the value of the asset been shown in the balance sheet of the assessee as on 31.03.2007 or in any year from the date cf acquisition then it could have easily been presumed that the assessee had accounted the investments but in the instant case the assessee did not reflect the value so arrived at in his balance sheet so the veracity of his claim cannot be verified and requires to be rejected.
3.6. In view of the above, the cost of acquisition of the plot is accepted but the cost of construction and cost of improvement, as adopted by the assessee, are rejected for the reasons elaborated here above. The indexed cost of acquisition and capital gain of the assessee is worked out as under:-
Land Purchase (F.Y. 1984-85):
92410 * 551/125 = Rs.4,07,343/- Total cost of acquisition Rs.4,07,343/- Less: Sale of Property in 2007-08 Rs.70,50,000/- Total capital gain Rs.66,42,657/- 1/3 rd in the case of the assessee Rs.22,14,219/-
3.7. The assessee has also claimed deduction u/s 54 of the Act but it is seen that the construction of new house was not completed till the due date of filing of the return of income and after the due date the assessee had failed to deposit the amount, as specified in section 54 of the IT Act, in the designated ''Capital gain account" within the meaning of section 54 of the Act.
3.8. It was noticed that the assessee has purchased a plot of land and started construction of a new residential property on the same but could not complete the same till the due date of filling of return. The assessee did not open any capital gain account on/after the due date and continued the construction of the house. So as to verify the claim u/s. 54 of the Act, the AR of the assessee was asked to produce the supporting to substantiate the cost of construction, cost of improvement, indexed cost of improvement and working u/s 54 of the Act. The assessee produced the original bills toward cost of improvement of the property sold by the assessee and bills and receipts towards cost of construction of the new residential property.
3.9. The bills and other details were verified and Xerox copies of all the papers produced were placed on record. The detailed analysis of the bills and supporting was made and actual cost of improvement and indexation cost thereof were arrived at on the basis of the details furnished by the assessee. Along with the submission the assessee has furnished the labour bill and payment details as under:-
Labour charges of construction at 12, VAsundhara Society, Vesu Road, Surat.
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -7-
(i) Bill of Hardik Construction (Civil Rs. 9,38,0007- Works)
(ii) Bill of Nayan Electricals (Light Fitting) Rs. 1,38,621/-
(iii) Bill of Jagdish Mistry (Carpenter) Rs. 6l,762/-
(iv) Bill of Ramesh Motibhai Bariya Rs. 1,23,126/-
(Plumber)
(v) Prakash Chauhan (Flooring, Kitchen) Ss. 5,78,229/-
Total Rs. 18,39,738/-
Payment by cheque Hardic Construction and virat builders S.No Date Amount (Rs.) S.No Date Amount (Rs,)
1. 20,02.2008 50,000/- 7 25.11.2008 1,00,000/-
2 07.03.2008 50,000/- 8 27.12.2008 1,00,000/-
3 28.04.2008 50,000/- 9 03.01.2009 1,00,000/-
4 20.06.2008 50,000/- 10 26.04.2010 50,000/-
5 06.08.2008 50,000/- Total 8,50,000/-
6 27.10.2008 2,00,000/-
Cash payments Prakash Flooring
S.No Date Amount (Rs.) S.No Date Amount (Rs.)
1 16.01.2009 25,000/- 9 26.06.2009 50,000/-
2 27.01.2009 25,000/- 10 22.07.2009 50,000/-
3 24.02.2009 25,000/- 11 01.10.2009 40,000/-
4 13.03.2009 25,000/- 12 16.10.2009 50,000/-
5 22.05.2009 25,000/- 13 24.11.2009 50,000/-
6 05.06.2009 25,000/- 14 23.12.2009 50,000/-
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -8- 7 10.06.2009 25,000/- 15 17.04.2010 50,000/-
8 20.06.2009 50,000/- Total 5,65,000/-
Nayan Electrical
S.No Date Amount (Rs.) S.No Date Amount (Rs.)
1 22.10.2008 10,000/- 8 22.12.2009 10,000/-
2 13.01.2009 10,000/- 9 29.12.2009 10,000/-
3 08.04.2009 5,000/- 10 08.02.2010 10,000/-
4 03.06.2009 5,000/- 11 11.05.2010 15,000/-
5 29.09.2009 15,000/- 12 04.06.2010 25,000/-
6 15.10.2009 5,000/- 13 Total 1,30,000/-
7 28.10.2009 10,000/-
Ramesh Plumber
S.No Date Amount (Rs.) S.No Date Amount (Rs.)
1 24.10.2008 5,000/- 7 14.10.2009 10,000/-
2 13.01.2009 15.000/- 8 23.10,2009 10,000/-
3 08.04.2009 15,OCO/- 9 22.12.2009 10,000/-
4 08.07.2009 5,000/- 10 21.04.2010 1o,ooo/-
5 07.08.2009 5,000/- 11 30.04.2010 25,000/-
6 29.09.2009 10,000/- Total 1,20,000/-
Jagdish Carpenter
S.No Date Amount (Rs.) S.No Date Amount (Rs.)
1 29.07.2009 7,500/- 03.10.2009 39,000/-
2 07.08.2009 10,000/- 09.11.2009 10,000/-
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09 -9- 3 29.09.2009 10,000/- Total 76,500/-
3.10. The submission of the assessee has been considered and the same is required to be accepted partly. It is true that the assessee ought to he incurred some labour expenses but it is evident from the details of the payments that most of the payments were made after 30.09*2008 so there is no question of accepting the contention of the assessee.
3.11. The AR of the assessee was asked to substantiate the payments made to M/s Hardik Construction and Virat builders it was submitted that upto 30.09.2008 only the following payments were made by the assesses:
Date Amount (Rs.} 20.02.2008 50,000/- 07.03.2008 50,000/- 06.08.2008 50,000/- 01.05.2008 50,000/- 20.06.2008 50,000/- 06.08.2008 50,000/- Total 3,00,000/- 3.12 Second bill as submitted by the assessee is electricity labour work bills issued by
Shri Prakashbhai Patel (Prop. Of M/s Nayan Electricals). It is pertinent to mention that none of the labour bill bears any date on it so it is not verifiable as to what were the actual payments made by the assessee towards these expenses.
3.13. The third bill is from Jagdish Mistry, the carpenter. The crucial point is the date on this bill, which is 01.09.2009 i.e. after the due day of filing of return so these expenses being made after the due date, can not be considered for the purpose of section 54 of the Act. 3.14. The fourth bill is with respect to Plumber Shri Rameshbhai Motibhai Bariya. It is seen from the face of the bill that there is no date / month / year to clarify the period and the payments made by the assessee so the critical issue of payments made towards these expenses is not ascertainable so it is presumed that these expenses were made after the due date of filing of ROI.
3.15. The fifth document is a quotation with respect to furniture work issued by the Prakash Chauhan. The quotation it self is dated 20.11.2008 i.e. after the due date of filing of ROI within the meaning of section 54 of the Act.
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3.16. In view of the jbove, it is clear that assessee could substantiate only payments of Rs.3,00,000/- towards labour expenses and no other expenses could be proved to have been made by the assessee till 31.09.2008.
3.17. In view of the above discussion it is clear that the assessee is not eligible for the complete deduction u/s 54 of the Act, only part deduction is allowable. As per the provision of section 54 of the Act
54. 1(1)] [Subject to fte provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in ihis section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased],, or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,--
(i) if the amount of the capital gain [is greater than the cost of the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilised whnlly-0" partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,--
ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
4. In view of the above discussion the capital gain of the assessee and deduction u/s 54 of the Act is recomputed.
The Xerox copies were verified and total of the expenses towards construction including labour work expenses of new house up to due date of filing of return of income is determined as under.-
Amount of expenditure in A.Y.2007-08 Rs .8,16,079/-
Amount of expenditure upto
due date i.e. 30/09/2008 Rs.10,62.403/-
Payment.made to Hardik construction
and Virat Construction towards Rs. 3,00,000/-
Labour payments
Total Rs 21,78,482/-
1/3 rd of the same attributable to the assessee Rs.7,26,160/-
5. Total capital gain as arrived at vide para No.3.6 is Rs. 66,42,657/-. Out of which capital gain chargeable in the hands of the assessee comes out to be Rs .22,14,2197-. However the total amount invested in construction of new house till 30/09/2008, as per the provision of section 54 of The Act, is Rs 21,78,482/-, out of that contribution of the assessee is arrived at Rs .7,26,160/- The difference between the capital gain working as above and contribution of the assessee in the construction of new residential property till 30.09.2008 i.e. Rs 14,88,059/- is required to be taxed under section 45 of the Act and the same is added to the total income of the assessee as long term capital gain."
4. Being aggrieved, the assessee carried the matter in appeal before the learned CIT (A). In all the three cases, it was held by the learned CIT (A) that regarding the cost of construction/improvement of the house sold by the assessee in the present year, the same has to be determined to the extent of four times of the indexed cost of land on the reasonable estimate and in this manner, he determined the total cost of construction at Rs.1,39,376/- which was indexed. To such indexed cost of construction, indexed cost of land at Rs.4,07,343/- was added and total indexed cost of property was determined at Rs.20,36,719/- and ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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long term capital gain was worked out at Rs.50,13,281/- as against Rs.66,42,657/- worked out by the AO and the same was divided equally in the hands of these three assessees and was worked out at Rs. 16,71,094/- each as against Rs.22,14,219/- worked out by the A.O. Regarding the deduction claimed by the assessee under Section 54 of the IT Act, it was held by the learned CIT(A) that the assessee can be allowed deduction of the amount invested till due date of filing of return of income under Section 139(1) because the return of income was filed by the assess by this date and in this manner, he determined the deduction allowable to one of the assessee, i.e., Sri Pareshbhai Chamanlal Vankawala at Rs.5,89,588/- being 1/3 of the amount invested in new house till 31.7.2008 and in remaining two cases, this deduction was allowed by the learned CIT(A) to the extent of Rs. 7,26,160/- in each of these two cases being 1/3rd of the total investment made in the new house till 30.9.2008. Now, the Revenue is in appeal before us in all the three cases for the relief allowed by the learned CIT (A) and the assessee is in appeal before us in all the three cases for the part addition confirmed by the learned CIT (A).
5. It was submitted by the learned AR for the assessee before us that old property in question i.e. land has been purchased on 13.11.1984 and the construction work was carried out during financial year 1988-89 to financial year 1991-92 out of own capital. He also submitted that regarding the supporting for cost of construction expenses incurred by the assessee, the assessee has duly furnished a copy of bills for the said construction cost of Rs.10,88,179/-. Regarding the objection of the AO that the assessee could not furnish the books of accounts, balance sheet and capital account for the period beyond 15 years showing the said construction expenses towards the cost of acquisition of old sold house being ancestral property, it was submitted that the ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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same is not valid because the assessee is not supposed to maintain such old records and it was also submitted that the books of account and other relevant documents of the firm were destroyed in the flood in Surat in August, 2006 and, therefore, the cost of construction claimed by the assessee should have been accepted by the AO. Regarding the basis adopted by the learned CIT (A), he submitted that the same is also not correct. Regarding deduction to be allowed to the assessee under Section 54 of the IT Act, it was submitted that the cost of construction incurred up to due date for filing the return of income under Section 139(4) of the IT Act, i.e., up to 31st July, 2010 should be considered which comes to Rs.76,62,194/- and learned CIT(A) was not justified to restrict the same till the date of filing the return of income as per the provisions of Section 139(1) and in support of this contention, he placed reliance on the following decisions :-
(i) Smt. Rajneet Sandhu Vs. DCIT reported in (2010) 133 TTJ (Chd.) 64.
(ii)Ms. Vijayalakshmi Adimoolam Vs. ITO, ITAT Mumbai, in ITA No.6424/Mum/2010.
(iii) CIT Vs. Rajesh Kumar Jalan reported in (2006) 286 ITR 374 (Gauhati)
(iv) Nipun Mehrotra Vs. ACIT reported in (2008) 297 ITR (AT) 110 Bangalore.
(v) CIT Vs. Jagtar Singh Chawla (2013) 259 CTR (P&H) 388.
(vi) Harsutrai J. Raval Vs. CIT reported in 255 ITR 315.
6. As against this, learned D.R. for the Revenue supported the assessment order.
7. We have considered the rival submissions and perused the material available on record. We have to decide mainly two aspects. One aspect is what ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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was the cost of construction of the old house sold by these three assessees who are equal co-owners of the same. The second aspect is for determining the amount of deduction allowable to the assessee under Section 54 where the assessee has not deposited any amount in the special deposit scheme and hence, it is to be decided as to whether the cost of construction of new house should be considered till the date of actual filing of return by the assessee being the due date under Section 139(1) or whether the same should be considered till the due date for filing the return of income under Section 139(4). Regarding the first aspect as to what was the cost of construction of the old house sold by these assessees in the present year, we find that it is the claim of the assessee that the land was purchased by the assessee on 13.11.1984 for an amount of Rs.92,410/- . Indexed cost of the land is worked out by the assessee as well as by the learned CIT(A) and AO at Rs.4,07,347/- and hence, there is no dispute on this account. Regarding the cost of construction, we find that it is the claim of the assessee that the house was constructed during financial year 1988-89 to financial year 1991-92. The year-wise detail of the cost of construction has been stated as under:-
(a) Financial Year 1988-89 --- Rs.4,36,973/-
(b) Financial Year 1989-90 --- Rs.2,50,701/-
(c) Financial Year 1991-92 --- Rs.2,69,085/-
(d) Financial Year 1991-92 --- Rs.1,31,420/-
Total --- Rs. 10,88,179
8. In support of this, the assessee has furnished xerox copy of bills and vouchers. Regarding the same, it is observed by the AO that out of total cost of construction claimed for Financial Year 1991-92 at Rs.1,31,420, the supporting submitted by the assessee was only of Rs.55982 and the assessee failed to ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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substantiate these supporting by showing that these expenses were shown in the books of account and the same was incurred out of known source of income. The finding given by the authorities below is that assessee could not furnish even the balance sheet for the year ending on 31.3.2007 to bring on record the declared cost of construction as per the books of account till 31.3.2007. Before us also, the said balance sheet was not brought on record. Regarding the claim of the assesses that the books of account and other records have been destroyed in the flood at Surat in the year 2006, it is very surprising that the books of account and other records including balance sheet, etc. were destroyed in the floods but the bills for purchase of material etc. in financial year 1988-89 to 1991-92 were available. Xerox copy of the bills are available in the paper book also and the same are available before us along with name of the assessee, i.e. Paresh Bhai Chimanlal Vankawala. But from the same, it cannot be determined as to whether these expenses have been incurred for this very property or the same were incurred for some trading purposes or for some other property. Not even the valuation report of the property at any point of time was brought on record. No wealth tax return copy has been brought on record to show the value of this property declared for wealth tax purposes. Assessee has also not shown as to whether this property was declared as self occupied or let out or lying vacant during this long period. In fact, apart from these bills, nothing has been brought on record to support the cost of construction claimed by the assessee. Regarding this objection of the learned CIT (A) that as against the cost of land of Rs. 92,410/- only being purchased in the year 1984 - 85, the cost of construction claimed to have been incurred at Rs. 10,88,179/- is very highly disproportionate, no reasonable explanation could be offered. Under these facts, in our considered opinion, the said cost of construction has to be worked out on some reasonable estimate basis and it cannot be held that no cost of construction ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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was at all incurred by the assessee as has been done by the AO. At the same time, in the facts of the present case, it also cannot be accepted that since the construction is said to have been done 15 years back, the cost of construction as claimed by the assessee should be accepted even if the same is much disproportionate to cost of land and when no supporting is brought on record except some bills, for which also, it could not be established that the same are really for this property. These bills can be for trading of building materials or for some other property. But this is also not acceptable that no cost was incurred for construction. We, therefore, do not approve the stand taken by the AO that the deduction is allowable only for cost of acquisition for land and not for any cost of construction of the house. The basis adopted by the learned CIT (A) to estimate the cost of construction is very reasonable in our considered opinion. He has adopted the basis that the cost of construction of the house can be fairly estimated to the extent of four times of the indexed cost of land in the year of completion of the construction. In this manner, he has worked out the cost of construction at Rs.588,468/- and indexed cost, thereof has been worked out at Rs.16,29,376/- and in this manner, he has worked out long term capital gain at Rs.50,13,2781/- as against Rs.66,42,657/- worked out by the AO and thereafter, he has apportioned the said capital gain in equal proportion to these three assessees which has been worked out by the learned CIT(A) at Rs.16,71,094/- each as against Rs.22,14,219/- worked out by the AO.
9. In view of the above discussion, we do not find any reason to interfere in the order of the learned CIT(A) on this aspect and hence, we confirm the order of the learned CIT(A) on this aspect i.e. amount of capital gain. Now the second issue to be decided is about the amount for which the assessee should be allowed deduction under Section 54 by considering the cost of construction of ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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the new house till the due date of filing the return of income under Section 139(4), i.e., 31.3.2010 or whether the same should be restricted till the date of filing the return of income under Section 139(1) being the actual date of filing of return of income by these three assessees. It was noted by the AO in the assessment order that the first assessee, i.e. Chimanlal Kalidas Vankawala filed the return of income on 30.9.2008. Similarly in the case of second assessee, i.e., PareshBhai Chimanlal Vankawal, it was noted by the AO in the assessment order that the return of income was filed by this assessee on 31.7.2008 and in the case of third assessee, i.e, Yogeshbhai Chimanlal Vankawala, it was noted by the AO in the assessment order that the return of income was filed by this assessee on 1.10.2008. Now in the light of these facts, we examine the applicability of various judgments cited by learned AR for the assessee. First judgment cited by him is with regard to the first aspect of the matter, i.e., determination of cost of construction. This judgment is of Hon'ble Madras High Court rendered in the case of Hastimal (S) Vs. CIT as reported in (1963) 49 ITR 273 (Mad.). In that case, the dispute was regarding the source of capital credited in his favour in the books of account of the firm made in the year 1947. It is noted by Hon'ble Madras High Court in that case that the assessee has been able to point out the source of this sum of Rs.15,000/- and his explanation could not be rejected by the mere disability of the department to find out whether G was V's agent. In that case, it was the claim of the assessee that he borrowed money at Jodhpur and out of such borrowing, he contributed Rs.15,000/-. Hence, it is seen that in that case for such an old transaction, some evidence have been brought on record by the assessee and under these facts, it was held by Hon'ble Madras High Court that after the lapse of 10 years, the assessee should not be placed upon the rack and he should not be called upon to explain not merely the origin and source of his capital contribution but the origin of ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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origin and the source of source as well. In the present case, the department is not asking for the origin of origin and source of source. The department has only asked for the source of investment in the old house in the years, i.e., Financial Years 1988-89 to 1991-92. Hence, this judgment of Hon'ble Madras High Court is not applicable in the facts of the present case because in the present case, the assessee has not been able to establish source of source.
10. The remaining judgments cited by learned AR for the assessee are regarding to the second aspect as to whether the due date for filing the return of income u/s 139 (1) should be the determining factor for computing deduction allowable to the assessee under Section 54 or the same should be extended up to the date of filing as per the provision of Section 139(4) of the IT Act. On this aspect, the first tribunal decision on which reliance has been placed by learned AR for the assessee is rendered in the case of Sri Rajneet Sandhu vs. CIT (supra). In this case, the facts are that the assessee had invested full sale consideration received on the sale of original asset in the purchase of plot of land and thereafter invested further amount in the construction of building and the assessee claimed deduction under Section 54F of the IT Act. The same was denied on the ground that the construction of house has not been completed within the period of three years from the date of transfer of the property. Hence, it is seen that the dispute in this case was different as to whether the construction of the house be completed within three years and if it is not then what is the impact on the allowability of deduction under Section 54F. It was held in that case that if the entire amount deposited in the bank account, is utilized in the construction of house, there is no basis to withdraw the deduction on the ground that the residential house is not completed. The dispute in the ITA No.2595 & 2851/Ahd/2012, 353, 636, 356 &639/Ahd/2013 ITO Vs. Chimanlal Kalidas, Yogesh Chimanlal, Pareshbhai A.Y. 2008-09
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present is different, i.e, regarding the investment of the sale proceeds itself and hence, this Tribunal decision is not relevant in the present case.
11. The next decision cited by the learned AR for the assessee is the Tribunal decision rendered in the case of M/s. Vijay Laxmi Adimoolam vs. ITO (supra). In this case also, the assessee had purchased two residential plots at a price of Rs.15 lacs on 22.10.2007 which was within the stipulated time allowed under Section 54 of the IT Act. In that case, the return of income was filed by the assessee on 28.3.2008 and under these facts, it was held that when investment is made before due date, the same is to be considered for the deduction under Section 54. In the present case also, the learned CIT (A) has allowed deduction under Section 54 till the date of filing of return of income and, therefore, this tribunal decision is not rendering any help to the assessee in respect of allowability of the deduction under Section 54 beyond the actual date of filing of return of income by the assessee. The next judgment on which reliance has been placed by learned AR for the assessee is the judgment of Hon'ble Guwahati High Court in the case of CIT vs. RajeshkKumar Jalan (supra). In this case also, it is noted by Hon'ble Gauhati High Court in Para no.6 that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of income tax under Section 139 of IT Act and Section 139 mentioned in Section 54(2) cannot be made only Section 139(1) but it means all sub sections of Section 139 of the IT Act. Hence in this case also, it was held by Hon'ble Gauhati High Court that such deficit should be deposited in the bank account before the date of furnishing the return of income and hence, the assessee does not get any benefit as per this judgment for the period beyond the actual date of filing the return of income.
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12. The next decision on which reliance has been placed is Tribunal decision rendered in the case of Nipun Mehrotra vs. ACIT (supra). In this case also, it is noted by the Tribunal in paragraph 8 that it is not disputed that sale consideration has been utilized before the date of filing the return of income under Section 139(4) whereas in the present case, the assessee is claiming for deduction beyond the actual date of filing of return of income which cannot be allowed even as per this tribunal's decision cited by the learned AR of the assessee.
13. The next judgment cited by learned AR of the assessee is the judgment of Hon'ble Punjab and Haryana High Court rendered in the case of CIT vs. Jagtar Singh Chawla (supra). In this case also, Hon'ble Punjab and Haryana High Court has decided the issue in dispute by simply following the decision of Hon'ble Guahati High Court rendered in the case of CIT Vs. Rajeshkumar Jalan (supra), wherein it was held that the deposit in the special account should be made before furnishing of return of income and hence, this judgment is also not rendering any help to the assessee in the present case. As per the above discussion, we have seen that none of the judgments cited by the learned AR for the assessee is rendering any help to the assessee. In fact, learned AR of the assessee could not cite any judgment in support of this contention that amount invested by the assessee after the date of actual filing of return of income should also be considered for the purpose of determining the deduction allowable to the assessee under Section 54 of the IT Act and it should be allowed till the due date of filing of return of income u/s 139 (4) even if the return was actually filed prior to that. The learned CIT(A) has already allowed the deduction to the assessee under Section 54 of the IT Act till the date of actual filing of return of income and therefore, we do not find any reason to interfere in the order of learned CIT(A) on this issue also.
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14. In the result, all the three appeals of the assessee and all the three appeals of the Revenue are dismissed.
Sd/- Sd/-
(D.K. TYAGI) (A.K. GARODIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Prabhat Kr. Kesarwani, Sr. P.S.
TRUE COPY
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-III, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad