Ita/203/2011 Of The Commission Of Income Tax -Ii Cochin v. Sri.v.s.ramakrishnan

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 20TH DAY OF FEBRUARY 2014/1ST PHALGUNA, 1935 ITA.No. 203 of 2011 () ----------------------- ITA .NO. 855/COCH/2008 FOR THE ASSESSMENT YEAR 2005-06 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN --------------- APPELLANT/RESPONDENT : ------------------------------------------- THE COMMISSIONER OF INCOME TAX - II COCHIN. BY SENIOR ADVOCATE SRI. P.K. RAVINDRANATHA MENON BY ADV. SRI.JOSE JOSEPH, SC, INCOME TAX RESPONDENT/APPELLAN T : -------------------------------------------- SRI.V.S.RAMAKRISHNAN RAMARADHANILAYAM, PALARIVATTOM, KOCHI-682025. BY ADV. SRI. P. BALAKRISHNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-02-2014, ALONG WITH ITA NO. 7/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Mn ...2/- ITA.No. 203 of 2011 () APPENDIX APPELLANTS' ANNEXURES : RESPONDENT'S ANNEXURES : NIL //TRUE COPY// P.S. TO JUDGE Mn Manjula Chellur, C.J. & A.M. Shaffique, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= I.T.A. Nos. 203/2011 & 7/2012=-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=Dated this, the 20[th]day of February, 2014. J U D G M E N T Shaffique, J. These two appeals arise out of a common order passed inI.T.A.No. 855/Coch/2008 and I.T.A. No. 865/Coch/2008 of theIncome Tax Appellate Tribunal , Cochin Bench. Appeals beforethe Tribunal were filed by the assessee as well as the Revenue.The assessment year involved is 2005-2006. 2.The facts involved in the above cases would disclosethat the assessee's business premises and his residentialpremises were searched under Section 132 of the Income-tax Act(hereinafter referred to as the Act) and several documents wereseized, including title deeds of properties held by the assesseeand his family members. Pursuant to notice under Section153A, he filed return of income on 19.12.2006 declaring totalincome of Rs. 1,85,18,440/- in addition to agricultural income ofRs. 71,000/-. Assessment was completed as per order dated31.12.2007 determining total income at Rs. 2,63,53,242/-. 3.The assessee preferred an appeal before the CIT(Appeals) and the Appellate Authority reduced the total incometo Rs. 2,40,48,818/- and the agricultural income to Rs. 35,000/-. 4.The assessee as well as the Revenue preferredappeals before the Tribunal, which resulted in the impugnedorder. 5.The Tribunal allowed the assessee's appeal in part andthe Revenue's appeal was dismissed. I.T.A. Nos. 203/2011 & 7/2012 -: 2 :- 6.The Revenue, while preferring his appeal, hasraised the following substantial questions of law: “1.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in allowing theentire amount claimed by the assessee asexpenses towards indexed cost of acquisition andindexed cost of improvements without any proofor without any material evidence of the sameand only on the basis of mere presumptions andassumptions?of the case, the Tribunal is right in allowing theentire amount claimed by the assessee asexpenses towards indexed cost of acquisition andindexed cost of improvements without any proofor without any material evidence of the sameand only on the basis of mere presumptions andassumptions? 2.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in -of the case, the Tribunal is right in - (a)accepting the contention of assessee thatamount of Rs. 5 lakhs was actually paid after theend of the financial year even though the fact iscontrary to the evidence 2.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in -of the case, the Tribunal is right in - (a)accepting the contention of assessee thatamount of Rs. 5 lakhs was actually paid after theend of the financial year even though the fact iscontrary to the evidence (b)accepting fresh evidence in violation ofRule 46A(3).Rule 46A(3).3.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in holding thatthere is no violation of Rule 46A(3) by the CIT(A)?of the case, the Tribunal is right in holding thatthere is no violation of Rule 46A(3) by the CIT(A)? 4.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law and factin deleting the entire addition of Rs. 46,92,378/-under the head capital gains?of the case, the Tribunal is right in law and factin deleting the entire addition of Rs. 46,92,378/-under the head capital gains? 5.Whether, on the facts and in the circumstancesof the case, the ITAT is right in allowing theentire amount claimed by the assessee asexpenses towards addition of assets and cost ofimprovements without any proof?”of the case, the ITAT is right in allowing theentire amount claimed by the assessee asexpenses towards addition of assets and cost ofimprovements without any proof?” 7.Heard the learned standing counsel as well as thelearned counsel appearing for the assessee. 8.The first issue is with reference to the finding ofthe Tribunal allowing the entire amount claimed by theassessee as expenses towards indexed cost of acquisitionand indexed cost of improvements, which, according to theRevenue, is without any evidence and based only onpresumptions and assumptions. 9.The issue relates to the addition ofRs. 43,21,418/-, which was the share of the assessee in thetotal amount of Rs. 78,23,553/- in respect of capital gain ofsale of property jointly held by the assessee and his wife.The assessee has taken up a contention that the land waspurchased on various dates from December 1980 to August,1993. In respect of capital gain with reference to 15.454cents of land purchased on 28.5.1986, the date wasinadvertently shown as 28.5.1969 but the indexed cost ofacquisition was based on the index for 1986. This mistakewas not rectified by the Assessing Officer. It was alsocontended that the assessee has constructed a residentialbuilding during 1986-87, which involved cost ofRs.10,40,000/-. Subsequently, two adjacent plots werepurchased in October, 1989 and October, 1993 and theentire compound was used as factory premises for which anamount of Rs. 16,50,000/- was spent for construction. Thesaid building was used as residence-cum-office since 1995-96. According to the assessee, materials were available forconstruction of the building though the records were notavailable at that point of time. The First Appellate Authority I.T.A. Nos. 203/2011 & 7/2012 -: 4 :- I.T.A. Nos. 203/2011 & 7/2012 -: 4 :- took a view that in the absence of evidence, it may not bepossible for the assessee to prove the same, but in theabsence of material regarding cost of construction, theAppellate Authority allowed Rs. 3 lakhs as cost ofconstruction. The Assessing Officer was thereafterdirected to adopt the index for the year 1986-1987 forcomputing the indexed cost of acquisition of the land. TheTribunal found in regard to the dispute regarding theassessee's appeal on computation of capital gain for theland purchased during December 1980 to August 1993 thatthe same was sold in April, 2004. As far as accounts areconcerned, since they were old documents, there was noreason to retain the same and those were destroyed. In thesale deeds, the value of the building is mentioned as Rs. 10lakhs, which was not appreciated by the Assessing Officeras well as the First Appellate Authority. The Tribunalconsidered the other factual issues involved in the matter.It is found that during the previous year relevant to theassessment year under consideration, the assessee sold57.950 cents of land and a building thereon for a totalconsideration of Rs. 3 crores. The said property belonged tothe assessee and his wife. The assessee conceded Rs. 1.95crores as capital gains in his return of income after availingindexation benefit. The assessee also claimed benefit forthe cost of construction of the building in 1986-87. Thecost of concreting of around 22000 sq. ft. of floor area to beused as factory premises and compound wall was shown as I.T.A. Nos. 203/2011 & 7/2012 Rs. 2 lakhs. Therefore, the estimated total cost ofconstruction of the building with a constructed area of26000 sq. ft. came to Rs. 10,40,000/-, which was at the rateof Rs. 400 per sq. ft. Despite this explanation, the AssessingOfficer proceeded on the basis that no materials werefurnished though the assessee consistently mentioned thatold records were not available and they had destroyed thesame. The assessee brought to the notice of the AssessingOfficer the date of acquisition of 15.45 cents included in thearea of 57.950 cents was on 28.5.1969 instead of 28.5.1986.The assessee availed the indexation cost of acquisition ofland by using the year of purchase as 140 as index for theyear 1986-1987, whereas the Assessing Officer adopted andreduced the actual cost of acquisition of the property fromRs. 3,25,602/- to Rs. 1,55,150/- and reduced the indexedcost of acquisition of the land by Rs. 6,18,495/-. TheAssessing Officer therefore used the index of the year ofpurchase at 140 and not 100, which resulted in the capitalgain. 10.On these facts, the Tribunal found that when it isan admitted fact and it is accepted by the CIT (Appeal) thatthe certificate produced by the Corporation confirms thatthe assessee had constructed the building during the year1986-87 and when the fact remains that the assessee couldnot have produced any other records to prove the cost ofconstruction as the matter came up for considerationbeyond the period of 10 years, it is not proper to deny the I.T.A. Nos. 203/2011 & 7/2012 indexation benefit for computation of capital gain for thepurpose of assessment. The Assessing Officer has usedindexation of the year of purchase at 140 which would showthat the claim of the assessee is tenable and the reason fornon-production of direct evidence was found to bereasonable. It is in the said circumstances that the Tribunalaccepted the contention of the assessee and it was foundthat the claim of expenditure incurred for concreting theentire 22000 sq. ft. land and constructing the compoundwall is for the business and as such the assessee's appeal isliable to be allowed. We do not think that there is anyperversity with these factual findings, which requires anyinterference. I.T.A. Nos. 203/2011 & 7/2012 indexation benefit for computation of capital gain for thepurpose of assessment. The Assessing Officer has usedindexation of the year of purchase at 140 which would showthat the claim of the assessee is tenable and the reason fornon-production of direct evidence was found to bereasonable. It is in the said circumstances that the Tribunalaccepted the contention of the assessee and it was foundthat the claim of expenditure incurred for concreting theentire 22000 sq. ft. land and constructing the compoundwall is for the business and as such the assessee's appeal isliable to be allowed. We do not think that there is anyperversity with these factual findings, which requires anyinterference. 11. In respect of cross appeal of the Revenue, it waswith reference to reduction in the indexation cost, whichwas already considered by the Tribunal and upheld by us. 12.One another contention urged is with referenceto violation of Rule 46A(3). When the Tribunal found thatthe powers of the First Appellate Authority is co-terminuswith that of the Assessing Officer and therefore it is wellwithin the powers of the First Appellate Authority to get anyissue clarified, in the absence of any other material toindicate that the First Appellate Authority was not entailedto invoke such powers, we do not think that any otherquestion of law arises for consideration in the presentappeal. 13.Having regard to the nature of contentions urged I.T.A. Nos. 203/2011 & 7/2012 -: 7 :- on behalf of the Revenue and the finding of fact by theTribunal, we do not think that there is any reason tointerfere with the said findings. In the result, the appeals are dismissed. Sd/- Manjula Chellur, Chief Justice Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.