Income Tax Appellate Tribunal - Pune
Subhash Jagannath Kakade,, Ahmednagar vs Income-Tax Officer,, on 18 November, 2016
आयकर अपील�य अ�धकरण पुणे �यायपीठ एक-सद�य मामला पुणे म�
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
सु�ी सुषमा चावला, �या�यक सद�य के सम�
BEFORE MS. SUSHMA CHOWLA, JM
आयकर अपील सं. / ITA No. 1428/PN/2016
�नधा�रण वष� / Assessment Year : 2011-12
Subhash Jagannath Kakade,
Kakade Sadan,
Near Balasaheb Deshpande Hospital,
Nagare Galli,
Ahmednagar - 414001 .... अपीलाथ�/Appellant
PAN: AATPK0899C
Vs.
The Income Tax Officer,
Ward 1, Ahmednagar .... ��यथ� / Respondent
आयकर अपील सं. / ITA No. 1429/PN/2016
�नधा�रण वष� / Assessment Year : 2011-12
Smt. Kakade Vijaya Subhash,
Kakade Sadan,
Near Balasaheb Deshpande Hospital,
Nagare Galli,
Ahmednagar - 414001 .... अपीलाथ�/Appellant
PAN: AASPK8848C
Vs.
The Income Tax Officer,
Ward 2(3), Aurangabad .... ��यथ� / Respondent
अपीलाथ� क� ओर से / Appellant by : Smt. Deepa Khare
��यथ� क� ओर से / Respondent by : Smt. Sumitra Banerji
सुनवाई क� तार�ख / घोषणा क� तार�ख /
Date of Hearing : 18.10.2016 Date of Pronouncement: 18.11.2016
2
ITA No s.1428 & 1429/PN/2016
Shri Subhash Jagannath Kakade & Anr.
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
Both the appeals filed by related assessee are against separate orders of CIT(A)-2, Pune, both dated 15.02.2016 relating to assessment year 2011-12 against respective orders passed under section 143(3) of the Income-tax Act, 1961 (in short 'the Act').
2. Both the appeals relating to related assessee on identical issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts in ITA No.1428/PN/2016 to adjudicate the issue.
3. The assessee in ITA No.1 428/PN/2016 has filed the revised grounds of appeal, which read as under:-
1. On facts & circumstances prevailing in the case & as per provision of law it be held that the disallowances on account of DEVELOPMENT EXPENSES INCURRED in Land at Survey No.50/4/1/2/1/3a/3 at Chaurana Budruk amounting to Rs.2,00,000/-, INDEXED TO Rs.3,18,120/- and Rs.1,00,000/- in Property at Survey No.83/2B/l at NALEGAON. Total Disallowances Rs.4,18,120/- is unwarranted, unjustified & improper & contrary to the provisions of the law & facts prevailing in the case. The addition so made arbitrarily be deleted. The appellant be granted just & proper relief in this respect.
2. The Receptions had CONFIRMED to have received the Money for Vacating Encroachment, Development Work, Commission and other related works. They had confirmed on OATH before the Assessing Officer while recording their Statements" to have received the said amounts for their respective Deed/Works". They also had executed AFFIDAVITS confirming to have executed the respective works and received the amounts. Their Confirmations be considered and the expenses claimed may please be allowed fully.
3. The Learned Commissioner of Income Tax (Appeals) has not appreciated the Fact of the case and submissions filed before him during the course of hearing and passed the Order, rejecting the submission and confirming the Assessing Officer's Order, which is improper and against justice.3
ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
4. The Order passed by the Commissioner of Income Tax (Appeals) II is passed in violation of rules of Natural Justice and this may please be held as Vitiated and be set aside.
4. The issue arising in the present appeal is with regard to allowability of development expenses incurred in respect of land sold by the assessee.
5. Briefly, in the facts of the case, the assessee had furnished the return of income declaring total income of Rs.11,41,292/- and agricultural income of Rs.88,200/-. The assessee was engaged in the profession of Advocate and had also declared income from capital gains, agricultural activity and other sources. As per AIR information received, the assessee had sold two immovable properties and had shown the capital gains for these transactions. The assessee claimed expenses on account of commission, development and expenses for removing encroachments. The assessee filed six vouchers in support of the same. The Assessing Officer issued summons to the said persons. The Assessing Officer also notes that the case of Mrs. Vijaya S. Kakade, wife of assessee was selected for scrutiny to verify the taxability on sale of immovable property. The assessee out of four persons, produced three parties but was unable to produce Shri Vishal Ashok Gaikwad to whom Rs.1 lakh was paid for removing encroachments. The assessee was asked to produce atleast one of the persons to whom money was given for removing encroachments. On the next date of hearing, the said Shri Vishal Ashok Gaikwad was produced. On scrutinizing the statements, the Assessing Officer was of the view that the claim of assessee was not correct and the claim was not allowable in the hands of assessee. In respect of second property also, similar observations were made by the Assessing Officer. In reply, the 4 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
assessee furnished affidavits of the said persons. The Assessing Officer however, denied the claim of expenses on account of commission, development and re-worked the capital gains and also made an addition of Rs.1 lakh on account of payment to Shri Vishal Ashok Gaikwad.
6. Before the CIT(A), the assessee furnished written submissions which are incorporated at pages 2 to 5 of the appellate order. The CIT(A) noted that the issue arising in the appeal was with regard to disallowance of Rs.7,50,000/- claimed on account of development and other expenses and aggregate addition of Rs.7,84,033/-. The CIT(A) upheld the order of Assessing Officer in respect of addition of Rs.7,84,033/- i.e. denied claim of exemption under section 54B of the Act. Further, the assessee had claimed development expenses which were disallowed by the Assessing Officer and the CIT(A) in this regard upholds the order of Assessing Officer observing as under:-
"4.3.2 In view of the above, I am of the considered view that the appellant has claimed ingenuine deductions by making false claim of expenses on account of development and removal of encroachment with the intention to reduce the income from capital gain. The conclusion drawn by the A.O. after making investigations in this regard deserves to be upheld."
7. The assessee is in appeal against the order of CIT(A).
8. The learned Authorized Representative for the assessee pointed out that the limited issue arising in the facts of Subhash Jagannath Kakade is the addition to the extent of Rs.2 lakhs and Rs.1 lakh in the properties sold by him, whereas in the facts of Smt. Vijaya Subhash Kakade, development expenses agitated are to the extent of Rs.7,50,000/-. The learned Authorized Representative for the assessee pointed out that the assessee had furnished the copies of receipts before the Assessing Officer, who had examined the said 5 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
parties and the said parties had confirmed that the amounts were received by them, but some things were not remembered and hence, the amounts were disallowed in the hands of assessee. Attention was drawn to the documents filed before the Assessing Officer, which are placed in the Paper Book along with statements recorded of the said parties with translation at pages 6 to 40 of Paper Book.
9. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.
10. On perusal of record and after hearing both the learned Authorized Representatives, the limited issue arising in the present appeal is against the disallowance of development expenses incurred by the assessee. The assessee had sold one land at Chahurana Budruk and had claimed development expenses to the extent of Rs.2 lakhs which were indexed to Rs.3,18,120/-. In respect of second property at Nalegaon, the assessee had claimed development expenses of Rs.1 lakh and had shown short term capital gains with regard to the same. However, the claim of assessee of incurring the development expenses for both the properties was denied by the Assessing Officer and was upheld by the CIT(A). In respect of claim of Rs.2 lakhs on account of development expenses and removal of encroachment, the assessee had furnished vouchers and the statements of recipients were recorded. The Assessing Officer had not allowed the claim of assessee since complete explanation could not be given by the recipients. The assessee claims that it had purchased the agricultural land and incurred development expenses of Rs.1 lakh for laying Muram and connected works and further Rs.1 lakh was 6 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
paid for fixing the compound wall on the land. The work of Muram was got done from Shri Namdeo Vishwanath Karale and payment was made in cash. The stamped receipts were filed before the Assessing Officer and the CIT(A). The Assessing Officer recorded the statement of Shri Namdeo Vishwanath Karale, who in turn, stated that he had never done any work in 2002-03. He claims that he had received payment of Rs.1,50,000/- for the work done in 2009-10. On the other hand, the assessee claimed that the payments were made as per receipts dated 27.12.2002 and 06.01.2003. The explanation of assessee in this regard was that the statement of Shri Karale was not correct as he was under pressure and he wrongly mentioned the work as 2009-10. The claim was disallowed by the Assessing Officer. Before the CIT(A), the assessee stressed that when the expenditure was actually made, it should be allowed. It was also pointed out that due to typographical error, the recipient wrongly stated the Chahurana Budruk instead of Nalegaon property and the same should be allowed as deduction from short term capital gains. The CIT(A) further noted that sum of Rs.1 was claimed to have been paid to Shri Vishal Ashok Gaikwad against removal of encroachments, his statement was also recorded by the Assessing Officer and he admitted that his residential address was Pimplegaon and he was unable to furnish single proof of having his residence at Chahurana Budruk for the period 1999-2000. Another claim of assessee was regarding compound wall which work was claimed to be done by Shri Sanjay Jagnnath Kasar of Walki and the assessee claimed that sum of Rs.1 lakh in this regard. The said person in his statement admitted to have carried out the said work and received the said payment, against which receipt was also issued. However, he was unable to give certain details vis-à-vis proof of poles erected by him. The plea of assessee before the Tribunal was that 7 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
since the development work and other activities were carried out many years ago and the persons being uneducated could not give complete details. Each case of the persons is dealt hereinafter. In respect of first person, Shri Namdeo Vishwanath Karale, to whom the assessee claimed to have paid Rs.1 lakh, the said person has categorically stated that he had not done any work in 2002-03. He states that he had received an amount of Rs.1,50,000/- with the work completed in 2009-10. First of all, there is difference in the amount claimed and received by the said person. The assessee's claim was of Rs.1 lakh, whereas the said person claimed to have received Rs.1,50,000/- for work completed in the later years. The assessee has failed to establish its case and hence, the disallowance of Rs.1 lakh is warranted. In respect of second disallowance of Rs.1 lakh, amount being paid to Shri Vishal Ashok Gaikwad for removal of encroachments. The assessee has failed to establish that the said person was residing at the said property against which, the said charges for removal of encroachments have been paid in cash. In the absence of any proof of residence of said person on the said property, there is no merit in the claim of assessee and the same is dismissed.
11. Now, coming to the last claim of assessee of Rs.1 lakh, which is claimed to be incurred on construction of compound wall. The recipient has admitted to have carried on the said work and also admitted to have received the amount. However, he did not remember exact number of poles and only for this minor issue, the claim of assessee cannot be rejected. The Assessing Officer is directed to allow the claim of assessee to the extent of Rs.1 lakh. Accordingly, the order of CIT(A) is modified in restricting the disallowance to Rs.2 lakhs and 8 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
allowing the claim of assessee to the extent of Rs.1 lakh. The grounds of appeal raised by the assessee are thus, partly allowed.
12. Now, coming to the factual aspects in ITA No.1429/PN/2016 , which is the case of wife of assessee. Though the issue is same, but there is difference in facts. The assessee had sold her immovable properties situated at S.No.83/2B/2 and 105/1 jointly with two other persons for Rs.1,05,90,000/-. The assessee received her share of Rs.22,46,666/-, Government valuation of her share at Rs.31,05,236/-. The total purchase cost of said property was shown at Rs.9,40,093/- being 1/3rd of total purchase cost including stamp duty and registration charges. While computing the short term capital gains, the assessee claimed aggregate expenditure amounting to Rs.7,50,000/- on account of development expenses in respect of said property. The Assessing Officer noticed certain discrepancies in the vouchers and the bank statements filed by the assessee which are summarized by the CIT(A) under para 4.2, which reads as under:-
"4.2 During the scrutiny proceedings, on going through the vouchers and bank statements, the AO noticed following discrepancies:
(i) The appellant claimed development expenses at Rs.2,50,000/- in respect of the property situated at survey no.83/2B/2. In support of the same, she filed 3 vouchers amounting to Rs.2,80,000/- as against claim of Rs.2,50,000/-. And, in respect of another property situated at survey no.150/1 the expenses claimed @ Rs.5,00,000/-
however, appellant enclosed 2 vouchers for development expenses of Rs.1,20,000/- and 3 vouchers for removing encroachments of Rs.3,00,000/- i.e. totalling to Rs.4,20,000/- as against claim of Rs.5,00,000/-.
(ii) During the asst. proceedings, Sh. Wagh Abhijit Eknath, Civil Engineer, who completed the work of compound wall of both properties and charged Rs.1,50,000- and Rs.70,000/- for the same, was confronted. However in his statement recorded on 17/10/2013, he was not even able to state the area of plot, number of poles & binding wire used for the compound.
9
ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
(iii) The appellant claimed expenses on account of removing encroachment at Rs.3,00,000/- and furnished 3 vouchers in the name of Sh.Chemate Sahebrao Ananda, Sh. Kulat Asaram Bhagwanta & Sh. Chavan Laxman Ganpat. The appellant was requested to produce the above three persons and statement of Sh. Kulat Asaram Bhaqwanta was recorded in the presence of assessee's son named as Sh. Saurabh Subhash Kakade, Advocate. In his statement, Sh. Kulat stated that he had been residing there since 2000, and there were another 3 houses whereas the assessee had paid amount for 3 houses. However, he could not tell the names of other 3 persons who were his neighbours.
13. The Assessing Officer in view thereof, noted that the assessee had claimed total expenses of Rs.16,05,650/- during the year on account of investment and development of said properties, out of which Rs.12,90,000/- was paid in cash and no supporting evidence could be filed by the assessee during the course of assessment proceedings. Considering the same, the Assessing Officer disallowed development expenses amounting to Rs.7,50,000/-. The CIT(A) upheld the order of Assessing Officer since the assessee had allegedly made the said payments in cash and in respect of development expenses, no corresponding withdrawal entries were reflected in her bank account statements. Further, the assessee could not produce any corroborative evidence either during the course of assessment proceedings or the appellate proceedings, which could prove the fact of any development work done. Thus, it was held by the CIT(A) that the genuineness and the veracity of same could not be ascertained. Further, in respect of expenses incurred for removal of encroachments, the assessee could not substantiate the claim that there was any house on the said land and even the documents were found to be silent over the said fact. In view thereof, the CIT(A) held that the assessee had made false claim of expenses on account of development and removal of encroachments with the intention to reduce the income from short term capital 10 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
gains. In view of the investigations carried out by the Assessing Officer, disallowance of Rs.7,50,000/- was upheld.
14. The case of assessee before the Tribunal is that where the parties had confirmed the receipt of payment, then there was no justification for making the addition. Similar plea was raised in the case of husband of assessee and the learned Authorized Representative for the assessee pointed out that the issue arising in the case of wife was identical to the facts in Subhash Jagannath Kakade. However, I find that the facts are slightly at variance. The assessee has claimed that the income declared by her was under the head 'Income from short term capital gains', wherein certain payments were made in cash. The total expenditure of assessee on account of purchase of new property, development expenses and investment for making the deduction under section 80C of the Act was to the extent of Rs.16,05,650/-, out of which commission of Rs.3,15,000/- was paid by cheque and the same was accepted. However, the balance sum of Rs.12,90,000/- was paid in cash. The case of Revenue is that no corresponding withdrawals appeared in the bank statements of SBI and ADCC Bank during the course of assessment proceedings or thereafter, even before the Tribunal, the assessee has not met the said stand of the Revenue authorities. However, the Assessing Officer has been fair enough to partly accept the claim of assessee and disallowed the development expenses only to the extent of Rs.7,50,000/-. In other words, part of claim of assessee has been accepted out of total expenditure of Rs.12,90,000/- and only balance of Rs.7,50,000/- has been disallowed for want of source of making the said payment and whether the expenditure was incurred by the assessee and was allowable in the hands of assessee is a secondary factor. The first fact it has to 11 ITA No s.1428 & 1429/PN/2016 Shri Subhash Jagannath Kakade & Anr.
be proved by the assessee in the present set of facts is whether the assessee had requisite cash available with her to undertake the development work. In the absence of assessee proving the same, there is no merit in the claim of assessee and the same is rejected. The grounds of appeal raised by the assessee are thus, dismissed.
15. In the result, appeal of assessee in ITA No.1428/PN/2016 is partly allowed and appeal of assessee in ITA No.1429/PN/2016 is dismissed.
Order pronounced on this 18th day of November, 2016.
Sd/-
(SUSHMA CHOWLA)
�या�यक सद�य / JUDICIAL MEMBER
पुणे / Pune; �दनांक Dated : 18th November, 2016.
GCVSR
आदे श क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to :
1. अपीलाथ� / The Appellant;
2. ��यथ� / The Respondent;
3. आयकर आयु�त(अपील) / The CIT(A)-2, Pune;
4. आयकर आयु�त / The Pr. CIT-1, Pune;
5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, पुण,े एक-सद�य मामला / DR 'SMC', ITAT, Pune;
6. गाड� फाईल / Guard file.
आदे शानुसार/ BY ORDER, स�या�पत ��त //True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune