TaxTMI 
TaxTMI 
2017 (10) TMI 313
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.... of Acquisition Rs. 10,06,301/- Cost of Improvement after indexation Rs.1,82,72,582/- Expenditure on transfer 0 Balance (-) Rs. 62,883/- 2.1 During the course of assessment proceedings, the assessee was asked to furnish copy of purchase deed, copy of sale deed and documentary evidence/s in support of cost of improvement shown. The assessee submitted the bifurcation of the cost of improvement as under:- Indexed cost of land filing, Site development, ground levelling and boundary walls in the year 2001 Rs. 26,35,200/- Compensation paid to M/s U.P. Bone Mills (P) Ltd. Rs. 1,56,37,380/- 2.2 The assessee was further asked by the AO to show cause as to why the amount shown as paid as compensation to M/s U.P. Bone Mills (P) Ltd. amounting to Rs. 1,56,37,380/- be not disallowed. The assessee in his reply before the AO submitted that he had paid the amount on account of breach of purchase agreement dated 01.07.2008 which he had executed with the said company and that he was forced to pay said compensation to safe guard his rights on the said property. It was the assessee's submission that the same should be considered as cost incurr....
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.... him in the year 2001 and included cost of land levelling, earth filling, boundary wall and other related site development activities to protect the undue trespassing by the anti social elements. The assessee also submitted that as the said amount was incurred by the assessee in the F.Y. 2001-02, the evidence for the same cannot be produced immediately. The AO was of the opinion that as no supportive document/s in respect of site development, boundary wall etc. were furnished, assessee's claim could not be accepted and, accordingly, cost of improvement shown at Rs. 19,28,859/- was also disallowed. 2.4 Aggrieved, the assessee filed an appeal before the Ld. CIT (A) and reiterated before the Ld. First Appellate Authority that he had paid the amount of Rs. 1,56,37,380/- to M/s U.P. Bone Mills (P) Ltd on account of breach of purchase agreement dated 1.07.2008, which the assessee had executed with the said company for sale of part of land. It was reiterated that the assessee apprehended that the proposed buyer was planning to take forceful possession of the entire piece of land i.e. even the piece of land which was not a part of said agreement and he was, thus, was forced to pay the s....
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....al." 3. The Ld. AR assailed the action of both the lower authorities in rejecting the assessee's claim of deduction of Rs. 1,56,37,380/- as allowable deduction u/s 48 of the Act as genuine cost of improvement. The Ld AR vehemently submitted that the only point which was raised by the AO in the assessment proceedings was the allowability of the impugned payment as cost of improvement within the meaning of section 48 of the Act. The Ld AR referred to the assessment order and submitted that the following aspects were not called in question by the AO i) that there was a written agreement dated 1/07/2008 (paper book pages 39 to 41) for sale of given land on a Rs. 100 stamp paper; ii) that said agreement contained a covenant that in event of land being not sold to the buyer, the seller will compensate the buyer at the agreed sum; iii) that ultimately the assessee sold the land to some other buyer and could not sell the land to the proposed buyer as the land was mortgaged with State Bank of India and No Objection Certificate (NOC) could not be obtained as agreed; iv) that the aforesaid amount is duly disclosed as income in the hands of the recipient buyer in its audited Profit/Loss acc....
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....uate to foist any tax liability on assessee. Ld AR submitted that the importance of specific and valid show cause notice could not be substituted by a ritualistic "order sheet" entry. He placed reliance on the CBDT Instruction no. 20 of 2015 dated 29/12/2015 which clarified the existing and prevalent legal position on show cause notice that a valid show cause notice is a must before making any addition. Ld AR stated that since no show cause notice was issued before making subject additions, the same may be deleted on this short count itself. Ld AR relied on following case laws to support his plea: i) Delhi High court in Kuldeep Singh (12/08/2014) ii) Kolkata ITAT in Satyabrata Dey (14/05/2013) iii) Delhi High Court in Eagle Theatres 205 Taxman 449 iv) Bombay High Court in 190 ITR 56 v) Madras High Court in 261 ITR 222 3.4 Apropos the second issue of Rs. 19,28,859/-, the Ld AR submitted that since the matter was old and the cost of improvement was genuinely incurred, just for want of specific documentary evidence/s, the AO cannot reject it where it has been expressly submitted that said cost was incurred in year of acquisition of land i.e. in financial year 2001-20....
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....n agreement to sell and purchase and the rights created there-from in the case of Sanjeev Lal reported in 369 ITR 389 (SC). The Hon'ble Apex Court observed as under: "...23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immoveable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed...". 5.2 Coming to the facts of the present case, the Ld. CIT (A) has doubted the genuineness of the agreement and has even hinted at the possibility of the asses....