Income Tax Appellate Tribunal - Mumbai
Suman Agarwal , vs Department Of Income Tax
1
ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "I"
BEFORE SHRI D. MANMOHAN, VP AND SHRI P.M. JAGTAP, A.M.
ITA No. 7270/Mum/2008
Assessment Year 2005-06
ITO Ward -18(2)(3), Smt. Suman Agarwal,
Piramal Chambers, Apte House, 3rd Floor,
Mumbai. 1076, Dr. E. Moses Road,
Vs. Worli,
Mumbai. 18
PAN AETPA9506Q
Appellant Respondent
ITA No. 5409/Mum/2008
Assessment Year 2005-06
Smt. Suman Agarwal, ITO Ward -18(2)(3),
Apte House, 3rd Floor, Piramal Chambers,
1076, Dr. E. Moses Road, Mumbai.
Worli, Vs.
Mumbai. 18
PAN AETPA9506Q
Appellant Respondent
Assessee by Shri S.C. Tiwari
Department by Shri Sunil Kumar Singh
ORDER
PER P.M. JAGTAP, A.M.
These two appeals, one filed by the Revenue being ITA No. 7270/Mum/2008 and the other filed by the assessee being ITA No. 5409/Mum/2008 are cross appeals which are directed against the order of ld. CIT(A) XVIII dated 23.7.08.
2ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal
2. At the outset, we may note that there is a delay of 71 days on the part of the Revenue in filing its appeal. The Revenue has filed an application seeking condonation of the said delay. In the said application as well as in the submissions made in writing subsequently in support thereof, the Revenue has submitted that the impugned order of the ld. CIT(A) was received in the office of the concerned CIT on 13.8.08. A scrutiny report thereon prepared by the A.O. was submitted by the A.O. on 27.8.08 on which the ld. CIT gave the following directions:-
1) Please file application to CIT(A) for misrepresentation by the assessee before him for issue of summons u/s 131 and request to refer the commission to valuation cell to ascertain one residential unit or two separate residential houses.
2) Please file appeal, if request is rejected by him.
As per the direction of the ld. CIT, an application was moved by the A.O. to the ld. CIT(A) -XVIII, Mumbai seeking rectification of his appellate order dtd. 23.7.08. The said application was rejected by the ld. CIT(A), XVIII, Mumbai vide order dtd. 24.10.08. The said order of the ld. CIT(A) was received in the office of the A.O. on 4.11.08 who made a request to the ld. CIT(A) for issue of authorization memo to file an appeal before the Tribunal. The CIT issued the authorization memo on 21.11.08 which was received in the office of the A.O. on 24.12.08 and the appeal was also filed on the very same day i.e. 24.12.08 before the Tribunal. Referring to this sequence of events, the ld. D.R. has submitted that the delay on the part of the Revenue in filing the present appeal before the Tribunal was as a result of alternative remedy which was being pursued by the Department by filing an application for rectification of the impugned order of ld. CIT(A) and there was thus a sufficient cause.
3. The learned counsel for the assessee, on the other hand, strongly opposed the application filed by the Revenue for condonation of delay by submitting that perusing other remedy cannot be accepted as sufficient cause for delay in filing the appeal before the Tribunal. He has contended that the Revenue could have filed the appeal before the 3 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal Tribunal simultaneously with application for rectification which was moved before the ld. CIT(A).
4. We have considered the rival submissions on this issue and also perused the relevant material on record. It is observed from the chronology of events given by the learned D.R. that the delay in filing this appeal before the Tribunal has occurred due to alternative remedy which was being pursued by the Revenue by filing the application for rectification of the impugned order of the ld. CIT(A). On rejection of the said application by the ld. CIT(A), the Revenue, however, has immediately taken the necessary steps to file its appeal before the Tribunal without any further delay. After considering the rival submissions and perusing the relevant material on record, it is observed that a similar issue had come up for consideration before the Hon'ble Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadar & Others 153 ITR 596 wherein it was held that in deciding the question whether the appellant had sufficient cause for presenting the appeal within the prescribed time, the most relevant factor to be taken into account is whether the party concerned has bonafide prosecuted some other proceedings, because of which delay has occurred in filing the appeal. It was held that if a party had bonafide prosecuted other remedies, that should be taken into account while exercising in condoning the delay. Keeping in view of the decision of the Hon'ble Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadar & Others 153 ITR 596 and having regard to the relevant facts of the case, we are of the view that there was a sufficient cause which resulted in the delay on the part of the Revenue in filing its present appeal before the Tribunal. We, therefore, condone the said delay and proceed to dispose of the said appeal of the Revenue on merit along with the cross appeal filed by the assessee.
5. The relevant facts of the case giving rise to this appeal are that the assessee is an individual who filed his return of income on 24.8.05 declaring a total income of ` 3,70,420/-. During the year under consideration, the assessee had sold her flat in Kamani 4 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal House, Peddar Road, Mumbai for a consideration of ` 2.75 crores vide an agreement dtd. 7.10.04. After deducting brokerage, legal fees and transfer fees amounting to ` 3,25,090, ` 65,000/- and ` 12,500 respectively from the said consideration and after claiming deduction on account of indexed cost of acquisition and cost of improvement, the net capital gain was shown by the assessee at ` 1,86,16,650/-. This entire capital gain was claimed to be exempt by the assessee u/s 54 in view of the investment made by her in purchase of residential flat in the building known as "SIMRAN" at Bandra-Khar. During the course of assessment proceedings, working of long term capital gain given by the assessee was examined by the A.O. During the course of such examination, he sent notices to the concerned persons to whom brokerage and renovation charges were claimed to be paid by the assessee. Such notice issued by the A.O. to one of the parties returned 'unserved' by the postal department whereas the other parties did not turn up for their examination by the A.O. on the given date. Meanwhile, in a reply given vide letter dtd. 22.10.07 to the enquiry made by the A.O., the Secretary, Kamani House CHS Ltd. intimated that there was no permission given to the assessee by the said society to carry out the renovation work in her flat. All these adverse findings of his enquiry were confronted by the A.O. to the assessee and she was asked to offer her explanation. In reply a letter dtd. 14.12.07 written by Shri Naresh Mahadik & Shri Santosh Dalvi addressed to the office of the A.O. was filed by the assessee confirming the renovation work carried out by them in the flat of the assessee. The copies of their bank statements were also filed showing the receipt of amount paid by the assessee for renovation work. A letter dtd. 20.12.07 procured from Kamani House CHS Ltd. was also filed by the assessee stating therein that Society Rules do not require permission from the Society for renovation work undertaken by the flat owners in their flats so long as no structural changes are contemplated. The assessee, however, could not produce Shri Naresh Mahadik and Shri Santosh Dalvi for their examination before the A.O. From the bank statements of the said persons, it was noted by the A.O. that they had opened the bank accounts only on 2.2.05 by depositing a cash of ` 100/- and almost the entire sum received from the assessee towards renovation work was immediately withdrawn by 5 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal them. He also noted that the said amount was paid by the assessee only after a period of 6-7 months from the date when renovation work was completed. He, therefore, held that the claim of the assessee of having carried out the renovation work in her flat before sale was not genuine and the deduction claimed by the assessee for the renovation charges while computing the long term capital gain was disallowed by him. As regards the claim of the assessee for exemption in respect of capital gain u/s 54 amounting to ` 1,86,16,650/-, the A.O. found that the corresponding investment was actually made by the assessee in purchase of two residential flats i.e. Flat No. 701 & 702 in the building known as "SIMRAN" at Bandra-Khar. In this regard, a photocopy of the lay out plan of the flats acquired by her was submitted by the assessee before the A.O. to show that the two flats acquired were actually one only. According to the A.O., it was however not very clear as to how and when the two flats purchased by the assessee under two separate agreements have become one. According to him, there was failure on the part of the assessee to establish on evidence that the flats purchased by her were not two but there was purchase of only one flat. He, therefore, restricted the claim of the assessee for exemption u/s 54 to ` 1,01,72,389/- being the cost of acquisition of one flat ie. Flat No. 701 which was larger than Flat No. 702. Accordingly, the long term capital gain chargeable to tax in the hands of the assessee was worked out by the A.O. at ` 98,36,272/- in the assessment completed u/s 143(3) vide an order dated 24.12.07.
6. Against the order passed by the A.O. u/s 143(3), an appeal was filed by the assessee before the ld. CIT(A) and after considering the submissions made on her behalf before him as well as the material available on record, the ld. CIT(A) decided the main issue relating to assessee's claim for exemption u/s 54 vide paragraph No. 17 of his impugned order which reads as under:-
"The bigger issue however pertains to the disallowance of claim u/s 54. The Assessing Officer has noticed that the appellant had purchased two flats i.e. 701 and 702 at Simran Apartments, Bandra-Khar, Mumbai. The appellant has shown that the said two flats are adjoining and connected to each other. There is a common 6 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal entrance to the same and common passage. The same is intended to be utilized and treated as single dwelling unit. The facts of the case are similar as reported in the case of ITO vs. Mrs. Sushila M. Jhaveri [107 ITD 327] (Special Bench, Mumbai ITAT). The main contents of which are reproduced as above (para 11). In that case decided by the Hon'ble ITAT, it was held that the exemption u/s 54 was allowable in respect of investments in two adjacent or contiguous units converted into one residential house by having common passage/staircase, common kitchen etc. intended to be used as single house for the residence of the family. The Hon'ble ITAT further held that the exemption u/s 54 could be restricted to one out of two houses in a situation where the two residential properties involved were independent even if located in the same complex. In view of this binding judgment, the Assessing Officer is directed to allow the exemption u/s 54 covering both the flat Nos. 701 and 702 particularly because the Hon. Calcutta High Court has also decided this matter in the favour of the appellant as per the case of B.B. Sarkar vs. CIT [132 ITR 159](Cal)"
The ld. CIT(A) thus allowed the entire claim of the assessee for exemption u/s 54 in respect of investment made in Flats No. 701 & 702 treating the same as a single dwelling unit relying on the decision of Special Bench of ITAT at Mumbai in the case of ITO vs. Ms. Sushila M. Jhaveri (107 ITD 327) [SB] and also that of Hon'ble Calcutta High Court in the case of B.B. Sarkar vs. CIT (132 ITR 159).
7. As regards the other issue relating to disallowance made by the A.O. on account of renovation charges and brokerage, the ld. CIT(A) decided the said issue vide para No. 15 & 16 which are reproduced below:-
"The Assessing Officer issued summons to both the above parties. The summons to M/s Naresh Interiors however was not served. As far as M/s S.D. Corporation is concerned, the summons was duly served but the concerned person did not attend. As clear from the discussion as above, the payments have been made through A/c payee cheques. It is understandable that doubts have arisen in the minds of the Assessing Officer on account of the fact that no advance payment has been received by these contractors and the payments have been made to these persons rather late. There is a suspicion also on account of the fact that the concerned society admitted of not having received any communication/application from the appellant for renovation. However, upon examining the details of the expenses from the bills, I observe that no structural alterations were involved. The society has also clarified in a letter already placed before the Assessing Officer that no permission/communication is required in case there is no structural additions/alterations. In order to carry out investigations, the Assessing Officer issued summons but the Assessing Officer had not pursued his own summons to the logical conclusions. There is nothing on the record to show that any coercive 7 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal measure was taken to enforce attendance. It is not a case of a creditor which remains in sustained relationship with the appellant. It is a case of a contractor whose relationship with the appellant gets almost terminated with the work of having been finished from their side. Still the appellant had made efforts to submit the PAN, other particulars, bank statement etc. establishing that the payments have been made through A/c payee cheques. The Assessing Officer could have come to the conclusion only if the attendance had been enforced and a logical conclusion could have been built on this issue. However, as far as the case of M/s Naresh Interiors is concerned, since the summons were returned back, I disbelieve the submissions of the appellant on this issue. I, therefore, hold that the Assessing Officer has correctly made the addition of ` 6,47,695/- pertaining to this contractor (where even the basis onus of establishing identity of the contractor has not been discharged by the appellant). However, the disallowance of ` 4,30,800/- pertaining to M/s S.D. Corporation is deleted.
For the similar reasons, the payments made as brokerage to Mr. tarun Mehta and Mr. Sameer Kamani amounting to ` 3,25,090/- is allowed and the addition made by the Assessing Officer is deleted to this extent."
The ld. CIT(A) thus allowed the claim of the assessee for deduction on account of brokerage paid while computing the long term capital gain and also allowed the deduction claimed by her on account of renovation charges to the extent of ` 4,30,800/- being the amount paid to M/s S.D. Corporation. He, however, confirmed the disallowance made by the A.O. on account of renovation charges to the extent of ` 6,47,695/- being the amount paid to M/s Naresh Interiors. Aggrieved by the order of the ld. CIT(A), the Revenue and assessee both are in appeal before the Tribunal.
8. Ground No. 1 raised by the Revenue in its appeal is general in nature seeking no specific decision thereon.
9. As regards ground No. 2, the learned representatives of both the sides have agreed that the issue raised therein relating to assessee's claim for exemption u/s 54 is squarely covered by the decision of Mumbai Special Bench of ITAT in the case of ITO vs. Ms. Sushila M. Jhaveri (supra) wherein it was held that where more than one unit are purchased by the assessee which are adjacent to each other and are converted into one house for the purpose of residence having common passage, common kitchen etc. then it would be a case of investment in one residential house and consequently the assessee 8 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal would be entitled to exemption. As found by the ld. CIT(A), the assessee in the present case has purchased two flats which are adjoining and connected to each other. There is a common entrance and common passage to the said two flats which are intended to be utilized and treated by the assessee as single dwelling unit. At the time of hearing before us, the learned D.R. has not brought anything on record to controvert/rebut this finding of fact recorded by the ld. CIT(A) and this being so and relying on the decision of Special Bench of ITAT in the case of Ms. Sushila M. Jhaveri (supra), we uphold the impugned order of the ld. CIT(A) allowing the entire claim of the assessee for exemption u/s 54 in respect of investment made in two flats. Ground No. 2 of the Revenue's appeal is accordingly dismissed.
10. The remaining grounds of the Revenue's appeal i.e. ground No. 3 & 4 and the solitary substantive ground raised in the assessee's appeal involve a common issue relating to the assessee's claim for deduction on account of brokerage and renovation expenses.
11. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the claim of the assessee of having carried out the renovation work was supported by the confirmations issued by the parties who had done the said work. In the aid confirmations, Permanent Account No. and other particulars were also furnished by the said parties. Even the copies of their bank statements were also filed by the assessee to establish that the renovation charges were paid to the said parties through A/c payee cheques. The, A.O., however, still did not accept the claim of the assessee of having actually done the renovation work for several reasons. Firstly, he noted that the relevant bank accounts were opened by the concerned parties recently by depositing a sum of ` 100/- in cash and the amount deposited in the said accounts on account of renovation charges received by the assessee was immediately withdrawn by them. As rightly held by the ld. CIT(A) in this context this noting by the A.O. was just enough to create a suspicion but the same was not enough to draw any adverse inference 9 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal about the genuineness of the assessee's claim of having carried out the renovation work which was duly supported by documentary evidence. Similarly, the objection raised by the A.O. on the basis of letter received from the concerned society informing non- obtaining of the permission by the assessee for renovation work was duly met by the assessee by establishing on evidence that no such permission was actually required as per Rules of the Society in case of renovation work carried out in the flats so long as no structural changes are contemplated. As rightly held by the ld. CIT(A), the assessee thus had met the objections raised by the A.O. while disallowing her claim for deduction on account of renovation expenses and brokerage and what remained was only sufficient to give rise to suspicion about the assessee's claim which could not take place of the documentary evidence produced by the assessee to support and substantiate her claim for the said deduction. The ld. CIT(A), in our opinion, therefore was fully justified in allowing the claim of the assessee for renovation charges paid to M/s S.D. Corporation and brokerage paid to Mr. Tarun Mehta and Mr. Sameer Kamani.
12. The ld. CIT(A), however, confirmed the disallowance made by the A.O. on account of assessee's claim for renovation charges paid to M/s Naresh Interiors mainly because the summons sent by the A.O. to the said party had returned back ignoring the fact that similar details and documents as filed in respect of S.D. Corporation were also filed by the assessee in respect of payment made to M/s Naresh Interiors. It is pertinent to note here that the ld. CIT(A) himself has mentioned in his impugned order that the relationship between the assessee and the parties who did the interior decoration work is not like creditor which remains sustained. He observed that it was a case of contractor whose relationship with the assessee got almost terminated immediately after the work was finished. He also noted that the assessee, however, had made efforts to submit the relevant details of the contractors including copies of their bank statements and still no efforts were made by the A.O. to enforce their attendence. Having made all these observations, the ld. CIT(A) still confirmed the disallowance made by the A.O. on account of payment of renovation charges to Naresh Interiors merely because the 10 ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal summons sent by the A.O. to the said party had returned back which, in our opinion, was not justified. We, therefore, modify the impugned order of the ld. CIT(A) and direct the A.O. to allow the assessee's claim for deduction on account of payment of renovation charges made to M/s Naresh Interiors. We may note here that while challenging the action of the ld. CIT(A) in deleting the disallowance made by the A.O. on account of brokerage and renovation charges paid to M/s S.D. Corporation, the Revenue in the relevant grounds has relied on the provisions of section 69-C. The said provision, however, is applicable only when the assessee is found to have incurred the corresponding expenses but has failed to explain the source thereof. In the present case, payments of expenses on account of brokerage and renovation charges were made by the assessee by A/c payee cheques drawn from her bank account regularly maintained and there was no allegation made by the A.O. that source of the said payment made by the assessee from her regular bank account had remained unexplained. Section 69-C thus has no application to the facts of the assessee's case and the reliance of the Revenue on the provisions of section 69-C thus is clearly misplaced. Ground No. 3 & 4 of the Revenue's appeal are accordingly dismissed and the solitary ground raised in the assessee's appeal is allowed.
13. In the result, appeal of the Revenue is dismissed whereas appeal of the assessee is allowed.
Order pronounced on 28th January, 2011.
Sd/- sd/-
(D. MANMOHAN) (P.M. JAGTAP)
VICE PRESIDENT ACCOUNTANT MEMBER
Mumbai, dated 28th January , 2011.
RK
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ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal
Copy to...
1. The appellant
2. The Respondent
3. The CIT(A) XVIII - Mumbai
4. The CIT- M.C. XVIII, Mumbai
5. The DR Bench, F
6. Master File
// Tue copy//
BY ORDER
DY/ASSTT. REGISTRAR
ITAT, MUMBAI
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ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal
Date Initials
1 Draft dictated on 11.1.11,13.1.11,19,1.11 Sr. PS
2 Draft placed before the Author 18.1.11,20.1.11 Sr. PS
3 Draft placed before the second
Member
4 Approved draft comes to the Sr. PS
Sr. PS
5 Kept for pronouncement on Sr. PS
6 File sent to the Bench Clerk Sr. PS
7 Date on which file goes to the
Head Clerk
8 Date on which file goes to the
AR
9 Date of dispatch of order
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ITA 7270/Mum/08, ITA 5409/M/08, Mrs. Suman Agarwal