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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal of the asse ssee is d irected against the order dated 06.01.2026of ld. CIT(A)/NFAC, Delhi passedu/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”)whereinaddition made vide assessment order dated 31.12.2019 was confirmed and the appeal of the assessee was dismissed.
Facts in brief as narrated in the order of the lower authorities are that the assessee is an individual and is engaged in the business of p lacement consultancy and filed return of income for A.Y. 2012-13 on 28.09.20 12 declaring income at Rs.7,15,510/- showing income from salary, business &profe ssion, capital gain, income from other sources. Subseq uently, the case was reopened on the basis of information received from investigation wing , Delhi regarding multiple entities maintaining bank accounts and inter-bank/assessee transaction of very high value fund transferred/RTGS having RTGS inward immediately followed by fund transferred outward s/RTGS outwards on the same day. Subseq uently, case was reopened in issuing notice u/s 148 of the Act. In compliance of the notice u/s 148 of the Act, the assessee filed return of income dated 07.11.20 19 declaring income at Rs.7,15,510/-. Accord ingly, notice u/s 143(2) of the Act dated 24.11.2019 was issued and reply was filed by the assesse on IT BA portal which was examined and it was observed that the assessee has shown much lesse r total receipt as co mpared to credits in the bank account as enumerated in para 3.1 and 3.2 of the Asse ssment Order extracted below as under:
“3 .1 O n p er us a l of t he de ta i ls f ile d b y t he as s e s se e it wa s ob se rv ed t hat t h e ass es s ee ha s s h ow n m u c h l ess e r t ot a l r ec e ip t c om p a r ed to c r ed its i n b a nk ac c ou nt s as u nd e r: -
S . N a m e A / c N o . B a n k N a m e T o t a l C r e d i t N o . ( A . Y . 1 2 - 1 3 ) 1 . M r . R a j a n R a m a n e e 0 0 2 6 1 5 0 0 0 1 1 4 2 7 HD F C B a n k 6 , 9 3 , 7 6 , 1 2 8 2 . M / s A J P l a c e m e n t 0 2 6 2 3 2 0 0 0 2 1 4 1 H D F C B a n k 8 5 , 7 3 , 9 1 3 C o n s u l t a n t 3 . M / s A J P l a c e m e n t 0 0 2 6 5 6 0 0 0 0 4 4 2 0 H D F C B a n k 4 0 , 0 0 0 C o n s u l t a n t 4 . M / s A J P l a c e m e n t 0 0 2 6 2 2 6 0 0 0 0 0 7 5 H D F C B a n k 4 5 , 0 1 , 7 3 9 C o n s u l t a n t 5 . M / s A J P l a c e m e n t 0 2 3 2 8 3 9 0 0 0 0 0 0 1 1 Y e s B a n k 3 2 , 2 4 , 6 0 0 C o n s u l t a n t 6 . O t h e r b a n k a c c o u n t s 5 , 7 3 , 2 5 , 7 0 9 c r e d i t T o t a l 1 4 , 3 0 , 4 2 , 0 8 9
3.2T he d at a r e v e a ls t ha t t he a ss es s ee has m a d e c as h dep o s i ts o f Rs. 14 ,3 0 ,4 2, 08 9 / - d ur i ng t h e F Y 2 0 1 1 -1 2 . T he as s e ss e e has s ho w n f ol l o w i ng s ou rc e o f c r ed its in h is ba nk ac c o u nt d ur i ng F Y 2 0 1 1 -1 2 as un d e r:
P a r t i c u l a r s A m o u n t G r o s s r e c e i p t R s . 8 5 , 5 9 , 4 6 2 / -S a l e o f i m m o v a b l e p r o p e r t y R s . 3 , 1 9 , 1 1 , 7 1 9 / -U n s e c u r e d l o a n R s . 1 , 2 8 , 1 0 , 7 7 3 / -T o t a l r e c e i p t b y t h e a s s e s s e e ( A ) R s . 5 , 3 2 , 8 1 , 9 5 4 / -
| T o t a l c r e d i t s i n b a n k a c c o u n t s o f t h e a s s e s s e e d u r i n g F Y 2 0 1 1 - 1 2 ( B ) | R s . 1 4 , 3 0 , 4 2 , 0 8 9 / - |
| E x c e s s c r e d i t r e m a i n u n e x p l a i n e d i n t h e b a n k a c c o u n t s o f t h e a s s e s s e e ( B ) – ( A ) | R s . 8 , 9 7 , 6 0 , 1 3 5 / - |
It w as further observed that the asse ssee did not file the complete justificatio n of credit entries in the bank accounts and had the excess credit entries in the bank account as Rs.8 ,97,60,131/-. Accordingly, presuming the net profit of the assessee @ 10% of the gross sale/receipt during the year, an additio n of Rs.89,76,013/- being 10% o f Rs.8 ,97,60,135/- was added as inco me of the assessee. Similarly, ano ther addition was made in respect of claim of improvement cost on properties to the tune of Rs.87,34,628/- alongwith claim of deduction u/s 54F of Rs.37,40,598/-.Thus, the total addition of Rs.1 ,24,75,226/- was made on account of claim of improvement cost as well as claiming deduction u/s 54F of the Act on account of capital gain due to transfer of certain capital asse ts.
Aggrieved by the assessment order, the assessee filed appeal before the ld . C IT(A) who by passing a unreasoned/insufficient reasons order has dismissed the appeal on all co unts upholding the addition made in the Assessment Order.
Aggrieved by the impugned order, the assessee is in appeal and has raised the fo llowing grounds of appeal:
“1 . Ld . C I T (App ea l) ha s e rre d in l aw an d o n fa ct s in up h old ing a s c or r e ct th e ac t i o n o f A ss es s in g O ff ic e r in tr ea t in g Rs .5 ,5 4 ,82 ,10 7 /- a s r ec t if i ed u nex p la in e d c re d it an d t ax in g t he s a me b y es t im at ing bus in es s p r of it @1 0 % tr ea t in g it a s b us i nes s t u r nov e r . T h e As s es si n g O f f ic e r a nd C IT ( Ap p ea l ) s ho uld hav e a pp r ec i at e d t h at a ll c re d it s in t he ba nk a c c o unt c ann ot b e t r eat e d as b us in es s r ec e ip ts /r ec ei pt s f o r i m p os i ng o r es t im at in g t he inc o m e @1 0 % .
2.Ld. CI T (Ap p ea l) ha s f ur t h e r e rr e d in law a n d o n fa c ts in no t ap p r ec iat ing t h at ap p e ll ant had d u l y fu rni s h ed d et a il e d ex p la na t io n, c o n fir mat i o n and r ec onc i l iat io n es t ab lis hin g th at t h e s a id a l l c r ed its no t c o nst it ut es b us in es s tra ns a c t io n. T h e c r ed it le ft in t he ba n k ac c o unt a re e it he r c r os s ent rie s w it h d r aw n f r om o ne a c c o unt a nd d ep o s it e d in ot he r b a nk ac c o u nt o f t he a p p e lla nt t h er efo r e c o nc lu d in g 5,5 4, 82 ,1 07 / - t he le ft o u t cr ed its c an not b e t r eat ed as bus in es s re c e ipt s f or t h e p u r p os es of c a lc ula t in g t he es t i ma t ed inc om e @10 % . T he re f o r e, t he ac t i on o f t he As s es s in g O ff ic e r i s n ot c o rr ec t a nd t he a ct io n o f t he C I T (A pp ea l) in not ap pr ec ia t in g a nd a c c ept ing t h e r ec o nc ili at io n a nd p r od uc t ion o f a l l ba nk a c co un t w h e r eb y th e c r ed its st a nds e xp la i ne d a n d t h e bus in es s in c om e as r et ur ne d s ho u ld ha ve b e e n ac c e pt ed .
3.T ha t t h e a c t i o n o f t he Ass es s i ng O ff ic e r, a s s us t a in e d by th e C IT (Ap p e al ), h as r es u lt ed in d oub le t ax at i o n ina s m uc h as th e s am e re c ei pt s ha ve d ul y b e e n s ub j ec t e d t o ta x un d e r ap p ro p r ia t e he ad o f inc om e . S inc e t he ap p e l lan t ha d ma i nt a in ed 17 b a nk a c c ou nts a nd th e a pp e lla nt ha d fu r ni sh ed /s ub m it t ed all t h e b an k ac c o u nt a nd t he pe rus a l/r ec onc iliat io n w as r eq ui r ed t o b e viz a viz t h e dep o s i t (C r e d i t e nt r ies ) a nd t he w it h dr a wa ls whi c h f lo w o n e ac c o u nt t o an ot h er t he r ef o r e c a n no t b e tr ea t ed as b us in es s r ec e ip ts fo r th e p urp os e s o f es t ima t i ng t he inc o m e wit h t h e c re d it en t ri es o f t he b a nk a c co u nt o nly. W it h o v e ral l e ff ec t t he ad d it io n m ad e by t he As s e ss i n g O f f ic er a nd c o n fi rm e d b y C IT (Ap p e a l) a r e inc o rr ec t, i l leg a l an d n ot s ust a i n ab l e. T he re f o re , o rd er d e se rv e t o b e s et as id e .
4.T h at t he Ld . C IT (Ap p ea l) h as e r r ed i n la w and o n f a c t s in s ust a i ning t h e ac tio n o f t h e A s s es si ng O ffic er in dis a llow ing t h e c la im o f c os t of im p r o ve m ent in r esp ect of int er es t p a id o n b o r r ow e d c a p it a l ut iliz e d fo r ac q u is it i on of t he p ro p er t y w hi c h has t o be c ap it al iz e d.
5.T ha t t h e Ld . C I T ( Ap p e a l) fa i le d t o app r ec iat e t hat t he int er es t p a id o n bor r ow e d f u nds , w h ic h w er e d ir ec t ly ut i liz ed f o r a c q ui s it io n of c a p it a l as s et s , fo r m s p a rt o f t he c ap i ta l as s et s o r c o st o f i mp ro ve m e nt i n t e rm s o f s ec t io n 48 o f t he I nc o m e T a x A ct .
6.T ha t t h e L d . CI T ( App e a l ) ha s er r ed b ot h i n la w an d o n fac ts i n u p ho ld in g t he act io n o f t he As s es s i n g O f fic e r i n de nyi ng e xem pt i o n c la im ed b y A pp e lla nt u nde r s ec t io n 54 /54 F on t he a l le g ed gr o und t hat a p pe lla nt o wn ed m ult ip l e pr op e rt ies . T h e As s ess in g O ff ic er a nd C IT ( Ap p e al ) b ot h ha ve fa i l ed t o ap p r e cia t e t hat t he a pp e ll ant d ur i ng t he y ea r und er c o ns id e ra t i o n ha d s o ld 4 a s s et s ( r es id e nt ia l/ p lo t s ) . T he reb y t he re wa s n o inc o m e f r om r es id e nt ia l ho us e o w n e d by t he ap p e l l ant th e re f o r e t he a p p ell a nt w e re ent it led t o s e ek ex e mp t io n und er sec t i o n 5 4 / 5 4 F o f t he I nc o m e T ax Ac t as app l ic ab l e as p e r la w . T he ob s er va t io n o f ass es s i ng o ffi ce r t hat ap p el lan t a r e ow n e r of v ar i o us res id e nt ia l p r op e rt ies fo r de nia l o f e xem pt i on is inc o r r ec t .
7.T h at t h e d e n i al of e x e mp t io n has be en m ad e w it h out pr op e r v er if ic at ion of na t ur e o f pro p e rt ies a nd co n d it io n pr es c r ib ed u nd e r s ec t io n 54 /5 4F .
Ad d i ti on al l eg al g r ou n d (n ot sp e ci f ic al l y r ai se d)
8.Ld . CIT (A pp e a l) h as er r ed b o t h in law a nd o n fa c ts up h old ing t he ac t io n o f t he AO t r ea ti ng t he as we ll a s uns e c ur ed l oa n r ec e iv ed a nd s ub s eq u en tly r ec e ive d b a c k as bus in es s c r ed it s. T he s a id fa ct s be in g a va il ab le b ut not s pec i fica l ly c o nta ined i n t he g ro und o f ap p e a l b e fo r e CI T Ap p ea l a r e b e i ng p la c ed fo r c ons id e ra t io n a nd a re n ot hin g but e xt rac t e d le ga l pos it io n a ri si ng f r o m t h e a s s es s m ent o rd e r p a s sed by t h e a s s es s in g of f ic er w ho ins p it e o f a ll ba nk ac co unt ha v e n ot a pp r ec i at ed t he c r ed i t ent r ies a nd th e s o urc es t h er e o f t he r efo r e t h e as s e ss i ng of f ic er d id not c ar r ied o ut his d u ty o f fr am i ng c or rect a ss e s sm e nt of inc o m e .
9.W he r eas t h e a pp ell a n t t im e a nd a gai n p lac ed his ar gum ents /s ub m is s io ns t hat t h e c r ed it e nt r ie s a r e c o -r e la t ed a nd i nt er d ep en d ent o n on e ba nk t o in t ra b a nk dep o s i t /cr e d its t h e Ass es s ing Of fic e r c o n f ine d h ims e lf o nly to c re d it ent r i es w it ho ut e x am inin g t he s o u rc e t he re of th e re f o r e t he o r d e r o f t he a s s es s ing off ic er is d ev oi d of jus t ic e and is n ot s u st a i na b le .
T he a bo v e gro un ds ar e s u bj ect m a t t e r o f ext r a c t io n o f t he ob se rv at io n ma d e b y t h e a s s es s ing o ff ic er a nd t hes e le ga l gr o u nd w er e no t ra is ed in a b o vem e nt i on ed g ro u n d b e for e th e CIT A pp ea l a t f irs t app ella t e s ta ge .
Ab o v e t w o ad d it io n a l g r o und s a r e l eg a l gr o und s w h ic h m ay be p er m itt e d t o b e ra is e d in t he int er es t o f j ust ic e f o r pla c ing s ubm is s io n and a r gum e nts in t he li g ht of t he c el eb r at ed j ud gm ent o f Nat io na l Th e rm al P ow e r Co r p o ra t io n Vs . CIT of ap e x c ou rt r ep o rt ed as [19 98 ] 22 9 IT R 38 3 (S C). ”
We have heard the ld. AR and the ld. DR and examined the record and also perused the writte n submissions filed by the ld. AR on behalf o f assessee. We have noticed that the challenge before us is with respect to the three additions made in the assessment order. Hence, we will consider and decide each additio n separately as under.
With respect to unexplained credits in the bank accounts of the asse ssee to the tune of Rs.8,97,60,135/-, during the arguments, it was brought to our notice that on moving a rectification application u/s 154 of the Act with r espect to the gross receipts having been wrongly taken from the bank accounts as they were bouncing of the cheques and re-credits in the bank account and the figures were taken repeatedly tw ice and according ly the Assessing Officer passed rectification order and reduced the unexplained credits from Rs.8 ,97,60,135/- to Rs.5,54,82,107/- thus reducing the additio n by applying 10% rate of profit on unexplained credits to Rs.5,54,82 ,107/-. It has been argued on behalf of assessee that the appellant participated in the proceeding and submitted 17 bank statements along with respective led ger accounts explaining the nature of transaction and deposit made in the bank account, thereby justifying the claim of the appellant that all the cred its appearing in the bank acco unt have been duly accounted for and are explainable. He further argued that the Assessing Officer for the purpose of calculation of unexplained credits have considered those very bank accounts but d id no t appreciate that the ledger accounts and the reconciliation so submitted clarified all those credits entry in the bank account which has been treated as cash deposits and actually does not form par t of the income as no part o f those deposits remain unexplained. It is further submitted that the factual aspects of the se entr ies is also appear ing in the paper book from page nos. 2 to 251 tr ansaction wise explaining all the entries in the bank acco unt which w as subject matter of scrutiny due to information from the investigatio n wing. It is argued that ld.AO has not co nsidered the se material facts and evidence and the ld. CIT(A) also failed to consider the submissions made in that regard and wrongly concluded that there is unexplained credits of Rs.5,54,82 ,187/- and thus wrongly made addition @10% of the said amount considering the profit aspects despite that everything was explained with r espect to the credit e ntries in the bank acco unt and therefor e said addition needs to be deleted.
The ld. DR, on the o ther hand, sub mitted that the addition has been r ightly made as the assessee has failed to explain the credit entries in the bank account to the satisfaction of the Assessing Officer and accordingly the addition has been rightly and legally upheld by the ld. CIT(A).
We have examined the Assessment Order as well as theld. CIT(A) finding to appreciate the above arguments with respect to the first addition. The ld. AO while making the said addition has observed in para 3 .3 of the assessme nt order as under:
“ 3 .3 T he as s es s e e w as as k ed t o f il e t h e j us t i fic at io n of e nt r ies re c ei ved i n b a nk ac c o u nt. H o w e ver , t he a ss e s s ee d id n ot f ile t he c om p le te j us t i f ic at io n of cr ed it e nt r i es in b a nk a c co unts . S i nc e , t he a s s es s ee h as exc es s c r ed it e nt r ies in t he b a n k ac co u nt o f Rs . 8, 97, 6 0 ,1 3 5 / - f o r w hic h t he a s sess ee has n ot fu r nis h ed ju st if ic a t io n of t he c r ed it s . F ur t h er , o n p e r us a l of ne t p ro f it of t h e as s es s e e, it is s e e n t ha t t h e a s sess e e has n et p ro f it @ 10 % of gr o s s s a le / rec e ipt d uri n g t he ye ar . Acco r d i ngl y, it w ou ld b e r ea s o na b le t o a ss e s s t he u n e xp l a in ed c r ed i t s i n t h e b an k ac c o unt s @ 1 0 % p r o f it . T he r efo r e t h e s um of Rs. 89 ,7 6 ,01 3 / - (b e in g 1 0 % of Rs .8 ,9 7 ,6 0, 135 /-) is b ei n g t r e at ed th e inc o m e o f t h e a s sess e e . P ena l t y p ro c e ed in gs u /s 27 1 (1 )(c ) of t he I T Act i s b e in g in it i at ed fo r c o nc e al m ent o f inc om e by f ur nis hin g in ac c ur at e pa rt ic ula r of inc o m e . ”
The ld. CIT(A) has decide d the three additions in para 5.2 o f the impugned order, extracted below as under:
“ 5 .2 . D is po s it i o n O f G r o und s O f Ap p e a l:
G r ou n d I : A d d i tion on A cc ou n t of Un e xp l a in e d Ba n k Cr ed i t s
T he p r ima ry g r ie va nc e o f t he App e lla nt c o nc e r ns t he ad d it io n o f 1 0 % o n un ex p la ine d b a nk cr e d its . I ni t ia lly , t he Asse s s ing O ffic e r (AO ) i d e nt if i ed t ot al c r ed it s of Rs .1 4 ,3 0 , 42 , 0 8 9, le ad ing t o a n un ex p la i ne d ex c es s o f Rs . 8 ,9 7, 6 0 ,1 3 5 .
A n al ys i s of Re ct ifi ca t i on an d Su st ai n ed A d d i ti on :
F o l lo w ing t h e Ap p e lla nt 's a pp lic a t io n, t h e AO p as s ed a r ec t i f ic at i on o rd e r o n 0 1 .0 4 .20 2 1, ac kn o w l ed gin g t ha t Rs . 3 ,4 2, 78 ,02 8 /- of t h e c r ed its w e re a tt r ib u t ab l e to EM I b ou nc es a nd s el f -b a nk t ra n s fer s . Co ns e q ue nt ly, t he "Exc es s c red it r em a in i ng u ne xp la in ed " was r ed uc ed t o Rs . 5 , 5 4 ,82 , 10 7 /- . T he App e lla nt c o nt in ues t o c la im t hat fu rt he r am ou nt s , s uc h a s lo ans r ec e iv e d b ac k fro m fa m ily (Rs .4 , 50 ,0 6 , 200 / - ) a nd m in o r uns ec ur ed l o a n d if f e re nc es , s ho u ld b e e xc lud ed . H o we ve r, I f in d t ha t t h e App e ll a nt has fa ile d t o p r o vid e v er if iab le , c o nc r et e e vid enc e t o s ubs ta nt ia t e t he s o urc e , c r ed it w o rt hin ess , a nd ge nuin en es s o f th es e p urp or t e d f a m ily lo a ns . As n ot ed i n th e a s s es s m e nt or d e r , t h e t ra ns ac t i ons a pp ea r ed t o b e a n a tt em pt a t " lay er in g " w it h out b us ines s r at i on al e . T he AO ' s d ec isi o n t o a pp ly a 1 0 % p r of it ra te o n t h es e u n e xp l a in ed c r ed it s a s in c om e is d ee me d r eas onab le a n d is h e r eb y SU ST AI N E D a t t he r ec t i fi ed a m o unt of Rs .55 ,4 8 , 21 0 / -.
G r ou n d I I: Dis a l l owan c e of C ost o f I mpr o v em e n t (R s. 8 7, 34,6 28 )
T he App ell ant c la im ed s ign i fic a nt e xp en s es f or p r op er t y im p r ov e m e nt . Th e A O d is a l low ed t his c la im b ec a us e t he Ap p e l lan t f a ile d t o f ur nis h a n y b il ls , inv o ic es , o r c o n t rac t o r a gr e e m e nt s t o v e ri fy t h e ex p e nd i t ur e.
D e ci si on :
T he Ap p e ll ant 's co nt e nt io n t h at t hes e c o s ts r ep r es e nt in t er e st o n s ec ur ed l oa ns o r b ui ld e r p ay m ents is no t s up p o r t e d by t he r eq u ir e d p r im a r y d oc um e n t at i on ( vo uc he rs /in vo ic es ) .M e r e ly c la im in g t hat c o- o w ne rs h ad t h ei r c laim s a ll ow ed d o es n ot a bso l ve t he App el la nt fr o m t he b u rd en o f p ro o f i n h is o w n ass es s m e nt . In t h e ab s e nc e o f v er if iab le e vid e nc e, t he add it i o n o f Rs . 8 7, 3 4 ,6 28 is U PH E LD .
G r ou n d I I I: Di s al l owan c e o f D ed u ct i on u / s 54 F (R s. 3 7, 40,5 98 )
T he Ap p e l la nt s o ug ht d ed u c t io n und er s ect io n 5 4 F f o l l ow ing p r op er t y s al es . T he AO d is a ll ow ed t his b a s ed o n t h e m an d a t o ry p ro vi s o o f s ec t io n 5 4F , w hic h p ro h ib its t h e d ed uc t i o n if t h e a ss e s se e o w ns mo r e t ha n on e re s id e nt ia l h o us e on t he d at e o f t he t ra ns fe r.
D e ci si on :
P er t he r eco r d s , t he Ap p e l la nt ow n e d mu l t ip le p r op ert i e s ( Pra ga t i T o w e r, G h awa l P ha r i, etc . )at t he t im e o f t he s al e. T he r efo r e , t h e Ap p e lla nt is leg a ll y i ne l igi b le f o r t h e s ec t io n 5 4 F d ed uc t io n . T h e a dd it io n of Rs . 37 ,4 0 , 59 8 is U PH EL D . ”
It is thus event from the extracts of the Assessment Order that the ld. Assessing Officer has made the addition of unexplained credits just stating that the assessee did not file complete justification of credit e ntries in the bank accounts. Unfortunately, the ld . C IT(A) has failed to consider the elaborate submissions made before him in that re gard and has just approved the Assessment Order confirming the addition of unexplained credits, simply observing that the appellant has failed to provide verifiable, co ncrete evidence to substantiate the source, creditworthiness and genuinene ss of these purported family loans and further observed that as noted in the assessment order, the transactions appear to be an attempt at layering without business rationale, hence upheld thesaid additio n stating that the AO's decision to apply 10% profit rate on these unexplained credits as income is deeme d reasonable and is accordingly sustained. The observation of the ld. CIT(A) has shown that he has simply acceded to the observation o f the ld. AO and has no t independently applied his mind to the submissions made and has approved the addition @ 10% profit rate in a mechanical manner. In vie w of these facts and circumstances, we are of the considered opinion that both the ld. lower authorities have failed to appreciate that the submissions and the evidence in respect of the addition made on account of unexplained credits especially the evidence which is being claimed to be part of the paper book from page nos. 2 to 251. Accord ingly, this issue is restored to the file of the AO with the direction to consider the entire material facts and evidence contained from page nos. 2 to 251 of the paper book and accordingly decide the issue and if the conte nts of the docume nts and the submissions are found true, the add ition made on account of unexplained credits be accord ingly deleted after giving an effective opportunity of hearing to the assessee and considering the observation made by us as above. The impugned order with respect to first addition of Rs.89,76,013/-is accordingly set aside and the ground in that regard is according ly allow ed for statistical purposes.
Seco nd additio n is on account of disallowance of cost of improveme nt of Rs.87 ,34,628/-. It has been argued that the ld. Assessing Officer has made the said addition observing that the assessee did not file any detail/bills/invoices of expenses incurred on improvement o f properties and further that the appellant have not produced the vouchers and evidence of the cost of improvement. It is argued that the ld. A.O . has made tho se observatio ns w itho ut appre ciating that the appellant had made bookings o f the r ights in re spect of the flats/plots whose instalments had been paid by the appellant, on which the appellant had capitalized the interest par t of the home loan taken for respective properties. It is further argued that since the possessio n had not been delivered and the rig hts in respect of the properties were not transferred, therefore, interest part capitalized was taken as cost of improvement ov er and above the amount stood paid for acquiring the rights in respect o f the property sold. It is further argued that the bank acco unts, the loan accounts and the corresponding bookings of the allotment was sufficient enough to allow the leverage and the ground for claiming cost improvement. It is further submitted that the said fact brought before the Assessing Officer as well as the ld. CIT(A) has not been considered and appreciated to the e ffect that the said cost o f improvement stood explained and the appellant has rightly claimed the said cost of improvement in the returns, books of accounts as placed before the ld . lower authorities. It is further submitted that all the documents in respect of said claim form part of the paper book from page nos. 252 to 571 for appreciation so that the said claim is to be allowed. It is further submitted that in view o f these material aspects, the observation that voucher, bills and docume nts to prove the cost of improvements were not produced, is not justified and is of no co nseq uences. It is there fore sub mitted that the addition so made is required to be deleted.
We have appreciated these submissions by examining the assessment order as well as the impugned order and admittedly both the ld. lower author ities has no t co nsidered these submissions in the manner as being claimed before us and simply made the additio n ob serving that the claim of the assessee to the effect that the cost of improvement represented interest on secured loans or builder payment is not supported by the require d primary documentation, (vouchers/invoices) and mere ly claiming that the co-owner had the ir claims allowed on that account does not absolve the appellant from the burden of proof in his own assessment, especially in the absence o f verifiable evidence and accordingly upheld the addition of Rs.87 ,34,628/-.
Consider ing these aspects and the submissions of the assessee who has claimed that the submissions has not been considered in proper perspective and there is no justification for making the disallowance on that account and has claimed that the material and the evidence in respect of claim of cost of improveme nt is contained and already submitted before the lower authorities forming part of page nos. 252 to 571 of the paper book, we are of the view that the material evidence being claimed in support of said claim of improvement cost contained in page nos. 252 to 571 of the paper book has no t been considered. We accordingly remit this issue pertaining to the cost of improvement of Rs. 87,34,628/- disallowed by assessment order upheld by the impugned order to the file of the ld. AO to consider the same afre sh in view of the submission noted by us above with the direction to consider the material contained in page nos. 252 to 571 of the paper book and in case the said material /evidence is fo und to be correct, the ld. AO is accordingly dire cted to delete the addition so made to the tune of Rs. 87,34,628/- claimed as cost of improveme nt b y the assesse e. The impugned order is according ly set aside in that regard and accordingly the grounds raised with re spect to claim of improvement co st are allowed for statistical purposes.
The third addition for disallow ance is pertaining to deduction of Rs.37,40,598/- claimed by the assesseeu/s 54F of the Act. The appellant has sought a deduction u/s 54F of the Act following property sales but the AO has disallowed the same based on the mandatory provision of section 54Fof the Act which prohibits the deductio n if the assessee owns more than one residential house on the date of transfer. During arguments, it was submitted that the observation of the Assessing Officer to the effect that appellant owned various residential properties in his name and was not entitled for exemption u/s54F of the Act as recorded in para 6.4 is not correct and the owning of the vario us property is inaccurate because tho se properties which has been sold or are mere bookings cannot form as par t of residential properties thus entitling the appellant for the claim u/s 54F of the Act. It is further submitted that admittedly the appellant has other immovable properties, detailed in para 6.2 of the assessment order, but the same were either the plots or bookings with various developers and builders o r booking of commercial sites, which all co nstitutes immovable property. It is further submitted that the restrictio n for claiming deduction u/s 54 F of the Act is on account of more than one residential ho use and the propertie s which has been considered for denial of deduction u/s 54F of the Act were not the residential properties and the nature of tho se properties is explained in the written submissions, extracted below as under:
S . No . N a m e o f t h e p r o p e r t y N a t u r e o f P r o p e rt y 1 . G -4 , G - 5 , P r a g a t i T o w er , R a j , S e l f- o cc u p i e d o f f ic e s p a c e N e w De l h i 2 . B - 1 4 , G ha w a l P h a r i, G u r g a o n Va c a t e d L a n d 3 . B - 4 , P r a g a ti T o w e r s, R a j e n d r a S e l f- o cc u p i e d o f f ic e s p a c e P l a ce 4 . 1 0 0 2 , P r a ga t i T o w e r, R a j e n d r a S e l f- o cc u p i e d o f f ic e s p a c e P l a ce 5 . 8 2 / 2 / 1 , G h a w a l P h a r i, G u r g a o n Va ca t e d L a n d 6 . P N A 0 1 1 3 , P in a cle C i t y , G u r g a o n F la t B o o k i n g r ig h t s
We have examined the assessment order as we ll as impugned order with respect to the claim o f deduction u/ s 54F of the Act as co ntained in the par a 6.2, 6.3 & 6.4 as under:
“6 .2 T he assessee was as ked to file t o furnish he details of improvement of costo n pr operti es al ongwi th doc umentary e vidences and details o f house properties already owned. In r esponse to t hi s the ass es see did not file any detail s/bills/invoi ces of expens es incur red on impr ovem ent of properties. The assess ee has also not s ubmitt ed t he evide nce to claim the deducti on u/s 54F of the IT Act. Further, on perus al of t he co mputation of i nc ome for FY 2010-11 it was observ ed that the ass essee has follo wi ng house properties :-S . N o . N a m e o f t h e p r o p e r t y 1 . G - 4 , G - 5 , P r a g a t i T o w e r , R a j , N e w D e l h i 2 . B - 1 4 , G h a w a l P h a r i , G u r g a o n 3 . B - 4 , P r a g a t i T o w e r s , R a j e n d r a P l a c e 4 . 1 0 0 2 , P r G A T I T o w e r , R a j e n d r a P l a c e 5 . 8 2 / 2 / 1 , G h a w a l P h a r i , G u r g a o n 6 . P N A 0 1 3 , P i n a c l e C i t y , G u r g a o n
6.3The mandat ory conditions f or claiming d educti on u/s 54F is as follows:-Capital gain on t ransfer of certai n c apital as sets not t o be c harge d i n case of inves tment i n residential house.
54F. (1 ) Subj ect to the provisions of sub-s ecti on (4 ), where, i n the case of a n ass ess ee bei ng an individual or a Hindu undivided f amily, the capital gai n a rises from the trans fer of any j long-t erm capital as set, not bei ng a r esidential hous e (herea fter in this sec tion r eferr ed to a s the o ri ginal asset ), and the assess ee ha s, withi n a peri od of one year befor e or two years after the date on whic h the transfer took plac e purchased, or ha s withi n a peri od of thr ee years aft er that dat e constructed, one residential house in India (he reafter i n this s ecti on ref erred t o as the new asset), the capital gai n s hall be dealt with i n accor dance with t he followi ng provisions of this section, t hat is to say,—
(a)if the c ost o f t he new asset is not less than the net c onsiderati o n in respect of the ori gi nal asset, the whol e of such capital gai n shall not be char ged under section 45 ;
(b)if t he cost of t he new asset is l ess than the ne t consideration in respect of the ori gi nal asset, so muc h of the capital gain as bears to t he whole of the capital gain the same proportion as the cost of the new asse t bear s t o the net c onsi deration, shall not be c harged under section 45 :
Provided that not hi ng contained in this sub-secti on shall appl y whe re—
(a)the assess ee, —
(i)owns mor e than one residential house, ot her t han the new asset, on the da te of tr ansfer of the ori gi nal ass et; or
(ii)purc has es any res idential house, ot her than the new ass et, wit hi n a period of o ne year afte r the dat e of transfer of the ori gi nal asset; or
(iii ) constructs any resi dential house, other than t he new ass et, wit hi n a peri od of ' three years aft er the dat e of tra nsfer of the original asset; and
(b)t he inc ome fr om s uc h residential hous e, ot her t han the one r esident ial house o wned on the date of transfer of the ori gi nal asset, is chargeable under t he head "Income from house proper ty".
6.4As the ass essee has more t han o ne house property the deduction u/s 54F is not allowable to the ass ess ee. Furt her, wit h re gard to the expens e claimed on improvement of immovabl e proper ty, the assesse e has not fur nished the bills and vouche rs of e xpendit ur e co ntract agreeme nt with t he contract or as additional expenditure i nc urred by the assess ee for improvement of t he properties . The assess ee has not furnished t he property wis e details of expenses i nc urred on improvement. The ass essee has als o not fur nis hed t he details of what type of improvements m ade by t he assessee i n t hese properti es.
6.4Since, the assesse e has not furnished t he desir ed details of expens es i ncur red and type of improvement the ge nui neness of t he expens es claimed by t he assessee canno t be verifi ed . Accordingly, the amo unt claimed by the assess ee on account of cost of improvement o n properti es o f Rs. 87,34,628/- and deduction claim ed u/s 54F of Rs . 37,40,598/- to tal amounti ng to Rs. 1,24,75,226/- is bei ng ; disallowed and added to t he income of the assesse e. C harge tax at the applicabl e rate @20% of the Act. Penalt y proc eedi ngs u/s 271(1)(c) of t he IT Act is bei ng initiat ed for c oncealment of income by furnishi ng inaccurate particul ar of inc ome. ”
From the extracts of the assessment order as above, we have no ticed that the Assessing Officer has simp ly mentioned the property no. 1 to 6 but has stated nothing as to how these properties are residential houses and not the properties nature of which has been explained in writte n sub missions explained and extracted above by us. T hus, the primary o nus of show ing tho se properties as residential house has not be en discharged by the Assessing Officer and the appellant has successfully explained before us that the said properties which are being claimed as residential properties by the Assessing Officer are either o ffice space, vacant land or flat bookings rights only. The ld. CIT( A) in his order in para 4 page 7 has noted the submissions of the assessee with respect to the denial of deduction u/s 54 F of the Act and extracted below as under:
However, the ld. CIT(A) has disposed off those submissions without g iving any reasons in a mechanical mannersubmissions without giving any reasons in a mechanical mannesubmissions w ithout giving any re asons in a mechanical manne observing at the end of para 5.2 at p age 10 of the impugnedimpug ned order stating that as per the record, the app ellantappellant ownedow ned multiple properties, (Pragati Tower, Ghawal Pahari etc.) at the time of the sale. Therefore, the appellant is legally ineligibleinelig ible for section 54F deduction and addition of Rs.37,40,598/- is upheld
In that regard, we have noticed that the assessee has successfully claimed the deduction u/s 54F54 F on the basis of docume ntary evidence submitted before the AO as well as before the ld. CIT(A) and the material in that regard and the submissions made therein has not been considered either by AO or by ld. CIT( A)and the reasons given by them for making and confirming the additions on that acco unt are unsatisfactory as being based on assumption and surmises. Nothing has been mentioned either by the ld. AO or by the ld. CIT(A) with respect to the claim that the similar deduction claimed by wife of the assessee and father of the assessee in their respective assessment has been allowed and the submission in that regard were made before the ld. CIT(A)on 20.10.2021 which has no t been admitted ly co nsidered. Nothing has been mentioned by the AO or the ld. C IT( A)with respect to the allo wing of such deduction by the co-owners i.e. wife and father for the property so sold. T herefore, we are of the considered opinion that the assessee has successfully made the claim for deduction u/s 54F of the amount Rs.37,40 ,598/- which has been unjustifiably and illegally denied by the ld. lower authoritie s. Fo r the above reason, the assessee is entitled to the deduction claimed u/s 54F of the Act to the exte nt of Rs.37 ,40,598/-. The impugned order in that regard is accord ingly set aside and the grounds raised by the assessee questioning the addition of Rs.37,40,598/- by disallowance u/s 54F is accordingly allowed. The addition made u/s 54F of the Act is accord ing ly deleted.
In the re sult, the appeal of the assessee is partly allowed.