Income Tax Appellate Tribunal - Chennai
Urmilla Prakash, Chennai vs Ito Non Corporate Ward 3(5), Chennai on 27 March, 2017
आयकर अपील य अ धकरण, 'बी' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH: CHENNAI
ी जॉज माथन, या यक सद!य एवं
ी एस जयरामन, लेखा सद!य के सम&
BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND
SHRI S. JAYARAMAN, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.2550/Chny/2017
नधारण वष /Assessment Year: 2013-14
Mrs.Urmilla Prakash, Vs. The Income Tax Officer,
No.5, Rutland Gate Fourth Street, Non-Corporate Ward-3(5),
Nungambakkam, Chennai.
Chennai-34.
[PAN: AJZPP 5601 Q]
(अपीलाथ(/Appellant) ()*यथ(/Respondent)
अपीलाथ( क+ ओर से/ Appellant by : Mr.N.Quadir Hoseyn, Adv. &
Mr.L. Natarajan, CA
)*यथ( क+ ओर से /Respondent by : Ms.Vijayaprabha, JCIT
सुनवाई क+ तार ख/Date of Hearing : 27.03.2018
घोषणा क+ तार ख /
: 27.03.2018
Date of Pronouncement
आदे श / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
ITA No.2550/Chny/2017 is an appeal filed by the assessee against
the Order of Commissioner of Income Tax (Appeals)-4, Chennai, in ITA No.40/2016-17/2013-14/CIT(A)-4 dated 19.08.2017 for the AY 2013-14.
2. Ms. Vijayaprabha, JCIT, represented on behalf of the Revenue and Mr.N.Quadir Hoseyn, Adv. & Mr.L.Natarajan, CA, represented on behalf of the assessee.
ITA No.2550/Chny/2017
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3. It was submitted by the Ld.AR that the assessee is an individual who is a lady of nearly 50 years. It was a submission that the assessee had received a flat at Kotturpuram from her husband's mother through Settlement Deed dated 18.08.2008. The assessee sold the said flat during the relevant Assessment Year for a sale consideration of Rs.2.25 Crs. and had disclosed the Long Term Capital Gains of Rs.62.50 lakhs. The assessee had claimed deduction u/s.54 in respect of the new construction by her at Thirukazhukundram. It was a submission that the construction was done through one M/s.Rajan Engineering Contractor for a total consideration of Rs.1,54,91,094/-. It was a submission that in the course of the assessment, the AO had issued notice u/s.131 to the Proprietor of M/s.Rajan Engineering Contractor, being one Mr.K.M.Rajan and his statement was recorded u/s.131 on 04.11.2015. The AO, subsequently, recorded the statement of the assessee on 02.02.2016 and was asked to prove the construction of the new house. It was a submission that the assessee was informed that M/s.Rajan Engineering Contractor had stated of renovation of an old house and on the ground that the bills & vouchers were not produced in respect of the assessee's claim of deduction u/s.54 of the Act, the claim was denied. It was a submission that on account of the non-available of the documentary proof, the assessee's claim of deduction u/s.54 of the Act was withdrawn in the statement recorded from her on 02.02.2016. It was a submission that on appeal, the Ld.CIT(A) had confirmed the action of the AO. It was a submission that the statement recorded from the Contractor Mr.K.M.Rajan, who is the ITA No.2550/Chny/2017 :- 3 -:
Proprietor of M/s.Rajan Engineering Contractor, was at Page Nos.19-28 of the Paper Book. The Ld.AR drew our attention to the statement recorded from the assessee on 02.02.2016 at Page Nos.29 & 31 of the Paper Book. It was a submission that in the statement of the Contractor more specifically at Question Nos.9 to 11 and the answers thereto which read as follows:
9: In Nerumbur, before constructing the house, whether the plot was vacant or any building existing thereon?
A 9: In Nerumbur, there was already an old house. We raised the new house, after demolishing the existing structure.
Q 10: In Nerumbur, by whom and when the old house situated on the site of Mrs.Urmila Prakash was demolished?
A 10: By the end of March 2013, I did demolish the old house of Mrs. Urmila Prakash in Nerumbur with my workers.
Q 11: For the construction of Mrs. Urmila Prakash's house, how much, when and how you received the amounts?
A 11: For constructing Mrs. Urmila Prakash's house, I received Rs.40,000/- to Rs.50,000/- every week since the first week of April 2013 till the end of September 2014 and in the aggregate I had received Rs.1,50,00,000/-.
4. He also drew our attention to Question No.15 and the Answer thereto, which is as follows:
Q 15: When did you complete construction and hand over the house to Mrs.Urmila Prakash?
A 15: I have fully completed the construction and handed over the house to Mrs.Urmila Prakash by the end of September, 2014.
Wherein, the construction is stated to have been completed by the end of September, 2014. The Ld.AR further drew our attention to the statement recorded from Mr.K.M.Rajan at Question No.4 and the Answer thereto which reads as follows:ITA No.2550/Chny/2017
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Q 4: Could you explain the details of your Income Tax? A 4: My Permanent Account Number (PAN) AJAPR 1826 L. I will submit copies of acknowledgment for the returns filed for the year 2013-14 and 2014-15.
5. It was a submission that the existence of the new house, even though, claimed could be verified, even now, has not been done by the AO but had disallowed the claim of deduction u/s.54. It was a prayer that the assessee may be granted the claim of deduction u/s.54 in respect of the new house constructed after demolishing the old existing structure. In regard to Ground Nos.9 & 10, in respect of the indexed cost of acquisition in respect of the house sold, the Ld.AR did not press the said grounds.
6. In reply, the Ld.DR submitted that the assessee has claimed the construction of new house after demolishing of the old house. It was a submission that the AO on enquiry, in the form of statement recorded from the Contractor showed that renovation had been done and the same was handed over to the assessee. The assessee had withdrawn the claim of deduction u/s.54. It was a submission that the Ld.DR drew our attention to the statement recorded from the assessee which has been extracted in the Assessment Order in respect of Question No.5 and Answer thereto at Page No.2 of the Assessment Order. It was a submission that the claim of deduction u/s.54 has been made in respect of the existing building and no demolition has been done and minor renovation, if at all, has been done and the same would not entitle the assessee u/s.54. The ITA No.2550/Chny/2017 :- 5 -:
Ld.DR drew our attention to the order of the Ld.CIT(A) at Para No.17 to submit that even though, the Ld.CIT(A) has granted the assessee another opportunity to prove the claim for deduction u/s.54, the assessee was unable to produce even a single documentary evidence to substantiate the claim. It was a submission that the claim of deduction u/s.54 was an afterthought and was not substantiated as has been recorded by the Ld.CIT(A) in Para No.17 of his order was made with malafied intention.
7. She vehemently supported the order of the AO & the Ld.CIT(A).
8. We have considered the rival submissions.
9. At the outset, a perusal of the statement recorded from Mr.K.M.Rajan, Proprietor of M/s.Rajan Engineering Contractor, has been recorded by the AO by invoking the powers u/s.131 of the Act on 04.11.2015. The statement in its entirety reads as follows:
"SWORN STATEMENT OF Mr.K.M.RAJAN, Proprietor/Contractor, Rajan Engineering, S/o Mathew, residing at No:146, Dhargha Road, Katcherimalai, Old Pallavaram, Chennai: 600 043 taken under Section 131 of Income Tax Act, 1961 on 04-11-2015.
OATH ADMINISTERED
OATH TAKEN
Question 1: Did you understand the implications and punishments of furnishing false statement under the Income Tax Act?
Answer 1: After your explanation, I have understood the implications and punishments of giving false statement.
Q 2: Could you explain about yourself and your profession? A 2: I had been working as a mason in the construction industry for the past several years. During the past ten years, I have been executing piecemeal works in the name of Rajan Engineering Contractor.ITA No.2550/Chny/2017
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Q 3: Do you maintain account books for your construction works? A 3: I am not maintaining account books for my construction works. Every year, I estimate my income and file my returns accordingly.
Q 4: Could you explain the details of your income tax? A 4: My Permanent Account Number (PAN) AJAPR1826L. I will submit copies of acknowledgement for the returns filed for the year 2013-14 and 2014-15. Q 5: Could you give details about what are all the banks in which you keep accounts since 01.04.2013?
A 5: I am having account with SBI Pallavaram Branch SB A/c No.300251841. I shall furnish the bank statement from 01.04.2013 to 11.09.2015. Q 6: How do you know Mrs. Urmila Prakash? What sort of professional exchange you are having with her?
A 6: I had executed several pieces of construction works at her Rutland Gate House in Nungambakkam. Later on, at her behest, I built her house in Nerumbur coming under the Thirukaghukundram Panchayat.
Q 7: Did you enter into any agreement in constructing the aforesaid house. Give a copy of that agreement.
A 7: I entered into an agreement on 05-03-2013 with Mrs.Urmila Prakash. I shall submit the copy to you.
Q 8: Do you have any plan approval for building this house? A 8: We did not obtain any plan approval for building this house because it comes under the jurisdiction of the Gram Panchyats limits.
Q 9: In Nerumbur, before constructing the house, whether the plot was vacant or any building existing thereon?
A 9: In Nerumbur, there was already an old house. We raised the new house, after demolishing the existing structure.
Q 10: In Nerumbur, by whom and when the old house situated on the site of Mrs.Urmila Prakash was demolished?
A 10: By the end of March 2013, I did demolish the old house of Mrs. Urmila Prakash in Nerumbur with my workers.
Q 11: For the construction of Mrs. Urmila Prakash's house, how much, when and how you received the amounts?
A 11 :For constructing Mrs. Urmila Prakash's house, I received Rs.40,000/- to Rs.50,000/- every week since the first week of April 2013 till the end of September, 2014 and in the aggregate I had received Rs.1,50,00,000/-.
Q 12: For constructing the aforesaid house, from whom and how did you purchase the requisite materials such as bricks, bluestones, sands, cement and iron rods? Also furnish the names and addresses and the bills given by them? A 12: For cements and rods, I paid cash and purchased from Vinayaga Hardwares, Nerumbur. For this, I do not have any bills. I also paid cash in purchasing bricks, sand and bluestones (jalli) from Balu of Nerumbur. I don't know the address or mobile phone numbers of the aforesaid persons.
ITA No.2550/Chny/2017
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Q 13: Explain the area and the number of rooms that you constructed for Mrs. Urmila Prakash in Nerumbur?
A 13: In the land of Mrs Urmila Prakash at Nerumbur, spread over 100 acres, I constructed 2160 sq.ft. ground floor and an upper storey with a swimming pool. In the ground floor, there are three bedrooms, one kitchen, one hall and three bathrooms with a sitout. In the upperstorey, I constructed a hall, two bedrooms, one kitchen and two bathrooms. I also constructed a swimming pool measuring an extent of 30'x18'. Q 14: Till August 31, 2013 how much money did you receive from Mrs.Urmila Prakash? A 14: I received Rs.25.00 lakhs in cash till 31.08.2013 for labour and materials put together.
Q 15: When did you complete construction and hand over the house to Mrs.Urmila Prakash?
A 15: I have fully completed the construction and handed over the house to Mrs. Urmila by the end of September, 2014.
Q 16: For constructing the aforesaid house, did you give any bill in writing to Mrs. Urmila Prakash?
A 16: Mrs. Urmila Prakash used to give cash every week and with that I constructed the house after paying for labour and materials. I have not given any bills to Mrs. Urmila Prakash.
Q 17: How many workers were used in constructing the aforesaid house? How did you disburse the wages to them? Whether you have any voucher for that? A 17: I employed six mastri (supervisors) and eight helpers for constructing the house. I have paid them wages/labour charges every week. I have not kept any voucher for these payments.
Q 18: Mrs. Urmila Prakash has submitted your final invoice dated 20.01.2015. Have a look at it. Is the Invoice given by you? While answering to Question Number-16 you stated that you have not given any bill. Explain this.
A 18: The signature in the final Invoice dtd. 20.01.2015 shown by you is mine. But the details in the Invoice and attached other bill of quantities have been prepared by Mrs.Urmila Prakash who obtained my signature.
Q. 19: In your final Invoice dtd. 20.01.2015, there appears six items that show a gross amount of Rs.1,54, 91,000/-. But in responding to Question-3 you said that you do not maintain any account books. While this be the case, how is it that you entered an exact sum of Rs.24,54,466/- for each and every work such as designing and supervising charges. How is it feasible?
A 19: The details and the amounts specified in the final Invoice dtd. 20.01.2015 have been typed in my letter-head by Mrs Urmila Prakash and my signature obtained thereon. Since I did not maintain books of accounts, I signed the final Invoice prepared by her for the amount paid by her.
Q 20: In the aforesaid final Invoice dtd. 20.01.2015, it is written that a sum of Rs.1,55,00,000/- as advance has been received by you in June 2013. But in responding to Question Number-14, you had stated that you had received Rs.25.00 lakhs till 31.08.2013. Explain this.
A. 20: As stated in Question Number-14, I received about Rs.25.00 lakhs till 31.08.2013 in cash from Mrs. Urmila Prakash. While responding to Question Numbers 18 and 19, the final Invoice dtd. 20.01.2015 was prepared by Mrs. Urmila Prakash and she obtained my signature thereon. I have not received Rs.1,55,00,000/- in June 2015. ITA No.2550/Chny/2017
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Q 21: Did you construct any other house like the aforesaid house? A 21: I have been executing only piecemeal work as stated earlier. I have not constructed any other house for anybody like this house.
Q 22: Did you keep any memorandum book for constructing this house? A 22: I have not kept any memorandum book for constructing this house. Q 23: The attachments accompanying the final Invoice reveals BoQ. For executing the work detailed thereon, beams/pillars must perforce have to be erected. Besides, laying weathering course, plastering, masonry, painting and polishing and other incidental works ought to be done. For executing this dexterous work skilled manpower is required. Whom did you employ to execute all these works?
A 23: I have not done all the works listed above. I laid weathering course and did plastering and painting, besides laying tiles in some places. I do not know about carpentry/woodwork. Mrs. Urmila Prakash engaged some other persons for carpentry. I did plastering for the roof in a few places. I have not done any other work. Q 24: Do you want to say anything else?
A 24: As I have stated earlier, I have done only some construction work. I do not know the details of other works shown in the final Invoice dated 20.01.2015. Those jobs have been done by other persons employed by Mrs. Urmila Prakash. Other than this, I have nothing else to say.
Sd/-
Rajan 04.11.2015 The aforementioned sworn statement has been read out and explained sans coercion or under duress. The said statement is taken as given by me.
Sd/-
Rajan 04.11.2015 T.N.Guruprasad Income Tax Officer Non-Corporate Ward -- 3(5) Chennai.
10. The statement of the assessee dated 02.02.2016 in its entirety which reads as follows:
Sworn statement taken u/s.131 from Smt. Urmila Prakash, W/o. Buchi Prakash, aged about 60 years, residing at No.5, 4th Street, Rutland Gate, Nungambakkam, Chennai-600 034 on 02.02.2016.
Oath taken Oath administered Q 1: Are you aware of the consequence of giving a false statement on oath.
Ans: Yes. I am aware of giving a false statement on oath. Q 2: Please identify yourselves.
ITA No.2550/Chny/2017
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Ans: I am Smt. Urmila Prakash residing at No.5, 4th Street, Rutland Gate, Nungambakkam, Chennai-600 034. I am a small entrepreneur as wedding consultant for bridal wear.
Q 3: I am furnishing you a copy of the sworn statement taken from Shri K.M. Rajan, Prop. Rajan Engineering Contractor, 146, Dharga Road, Katchery Malal, Old Pallavararn. Chennai- 600 043, on 04.11.2015. Please go through the same. From the contents of his deposition, it appears that your claim of deduction u/s.54 is incorrect. Please explain.
Ans: I have constructed a new house for Rs.1,55,00,000/- under my own supervision. Since I was under the impression that the bills/vouchers were not necessary but only the construction is essential, I was not maintaining the bills/vouchers. As stated by Shri K.M.Rajan, he did only certain civil works for which I had paid him. I had engaged other persons for doing carpentary, plumbing and other works for which I paid them separately. Since I didn't maintain the bills/vouchers issued for the work undertaken and in order to give documentary evidence for the construction of the house. I had prepared a composite Invoice under the letter head of Shri K.M.Rajan's proprietary concern and submitted to you for record purposes. Hence, a new residential house has come in place, the claim of deduction u/s.54 is indeed correct.
Q 4: It is seen from the particulars of the Invoice dated 20.01.2015 that it is only for renovation of the house and not for new construction of the house. Also produce necessary copy of approval from the local authorities in proof of new construction. Ans: I have demolished the old house and constructed a new house as per the old plan. The fact about the existence of the new house could be verified even now. As already stated above only for the purpose of giving documentary ecidwence for construction of the house. I had prepared the Invoice under the letter head of Shri K.M.Rajan's proprietary concern and submitted to you. He was chosen because he is our family contractor while all others who provided petty services could not be located. The entire capital gains have been invested in the new house. However, yourself insist that proof of new construction has to be supported by an approved plan from local authorities. Since I pulled down the old house and reconstructed it, there was no need to obtain plan approval. Q 5: The contents of the Invoice exhibit that it is a renovation of the old house. Even you are not categorical in your statement that an independent new residential unit was constructed. Pulling down the old house and reconstruction should necessarily be supported by plan approval. Bills/vouchers are not produced. Hence, the claim of deduction u/s.54 is unsupportive, although a new structure has come in place of the old one. Ans: I agree. But the new house is created by extensively renovating the bid house. I am now apprised that renovation is not eligible [or exemption. My health, age and family circumstances do not provide me the necessary time and energy to agitate further on this issue. It is true that the new construction has come up. The statement of Shri K.M.Rajan also confirms it. However, in the absence of supporting documentation and in order to avoid protracted litigation, I am withdrawing the claim of exemption u/s.54. Q 6: Have you got anything else to say?
Ans: Though I had a new house constructed, I am compelled to withdraw the exemption u/s54 for want of documentary proof. I will pay the taxes due immediately.
11. The facts here clearly show that the assessee had made a claim of deduction u/s.54 in respect of the construction of a new independent house. The assessee had given the name and address of the Contractor. The AO did not believe in the assessee and took it upon himself to issue ITA No.2550/Chny/2017 :- 10 -:
the notice u/s.131 and record the statement of the said Contractor on 04.11.2015. Thus, clearly the statement recorded by the AO from Mr.K.M.Rajan, Contractor, becomes evidences collected by the AO. A perusal of this evidence shows that the said Mr.K.M.Rajan is an Income Tax assessee, has filed returns for the relevant Assessment Year, has executed several pieces of construction work at the assessee's house at Nungambakkam and as per the Answer to Question No.6, he built her house at Nerumbur being the house in respect of which the claim of deduction u/s.54 has been made. The said statement in reply to Question No.7 talks of the agreement dated 05.05.2013 which has also been produced before the AO. The agreement is seen at Page Nos.43 to 49 of the Paper Book. Admittedly, the said agreement is on a plain paper which talks of the cost of construction at Rs.1.55 Crs. and of an advance of Rs.40.00 lakhs having been paid on 05.03.2013 at the time of signing of the agreement. The said agreement also talks of the demolition of the existing old house standing in the land and constructing the new house in the same place after strengthening and re-structuring the foundation of the building. The demolish debris is also to be removed and the Contractor is permitted to retain the sale value arising out of the demolishing the debris. The statement of Mr.K.M.Rajan in reply to Question No.9, talks of an old house already existing and the new house being constructed after demolishing of the existing structure. In Question No.10 and Answer thereto the demolishing of the old house was done by March, 2013. The Contractor, Mr.K.M.Rajan, in reply to Question No.13 ITA No.2550/Chny/2017 :- 11 -:
has also given the details of the land and the house which has been put up. In the statement recorded from Mr.K.M.Rajan, he has specifically confirmed that it is only the structural, which has been done by him and that carpentry and other dexterous work where skilled manpower is required has been done by other persons engaged by the assessee. When this is compared with the statement recorded from the assessee, the same stand supported by the reply of the assessee to Question Nos.3 & 4 of the statement recorded on 02.02.2013. Thus, clearly, the statement recorded from the Contractor by the AO is evidence collected in favour of the assessee by the AO, such evidence cannot be wished away especially when it has been collected by the AO behind the back of the assessee and is in favour of the assessee. In fact, the statement made by the assessee that the construction was done, though, M/s.Rajan Engineering Contractor stood verified on examination and the non-availability of the bills & vouchers has been explained. The contract also clearly specifies the amount of Rs.1.55 Crs. being the cost of construction and in the statement of the assessee, the assessee has also stated that the construction can be verified. If at all, the AO had any doubt, it was very much open to the AO to have the construction examined by the DVO for determining the cost of construction and as to whether the construction is old or new. Even, this has not been done by the AO. When the evidence was available with the AO and had been collected by the AO and which is in favour of the assessee, such evidence cannot be discarded only on the ground that the assessee is not able to produce any independent evidence ITA No.2550/Chny/2017 :- 12 -:
in her favour. This being so, we are of the view that the assessee has constructed new residential house at Thirukazhukundram as claimed by the assessee and as evidenced by the statement recorded by the AO u/s.131 from the Contrator, Mr.K.M.Rajan on 04.11.2015. Consequently, the assessee is entitled to the claim of deduction u/s.54 and the AO is directed to grant the benefit of deduction as claimed. Ground Nos.9 & 10 of the assessee's appeal stands dismissed as withdrawn.
12. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Open Court on March 27, 2018, at Chennai.
Sd/- Sd/-
(एस जयरामन) (जॉज माथन)
(S. JAYARAMAN) (GEORGE MATHAN)
लेखा सद!य/ACCOUNTANT MEMBER या यक सद!य/JUDICIAL MEMBER
चे नई/Chennai,
2दनांक/Dated: March 27, 2018.
TLN
आदे श क+ ) त3ल4प अ5े4षत/Copy to:
1. अपीलाथ(/Appellant 4. आयकर आयु6त/CIT
2. )*यथ(/Respondent 5. 4वभागीय ) त न ध/DR
3. आयकर आय6
ु त (अपील)/CIT(A) 6. गाड फाईल/GF