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2021 (7) TMI 553
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....the addition made by the AO with change of opinion as to the nature of building without appreciating the BBMP Katha Extract dtd: 14-06-2013 and 23-12- 2014 wherein the nature of building was stated as residential. Same as above The Ld. CIT(A) has erred in holding the building as commercial in nature without appreciating the valuation report dtd: 31-05-2014 wherein the building situated at Site No. 8/1, BBMP Katha No. 3646/8/8/1 Kattigenahalli Village, Jala Hobli, Bangalore North Taluk was residential building. Same as above The Ld. CIT(A) has erred in not considering the cost of additional construction of Rs. 48,00,000/- beiig a part of total cost of construction of Rs. 1,28,18,724/- on the ground that the building constructed was commercial. Same as above The Ld. CIT(A) has erred in holding that the Valuation Report was related to some other residential house without appreciating the fact that in Column 6 of the Valuation Report that the location of the building was clearly mentioned and the same was personally inspected by the Valuer on 31-05-2014 as per declaration provided in Part -III of the Valuation Report dtd: 31-05-2014 Same as above The Ld. ,CIT(A)....
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....5,28,405/- inclusive of Stamp Duty of Rs. 4,48,000/- and Registration Fee of Rs. 80,405/-. 3. The assessee after purchase of the New Asset at Kattigenahalli village mentioned above, has constructed a Residential House measuring 2500 sq.ft inclusive of the existing building measuring 500 sq.ft on the Strength of the same plan already obtained by the Erst-while owner. The construction of the new residential building was made between June 2012 to May 2014 and the construction Cost was certified by the Approved Valuer vide Valuation Certificate dtd: 31-05-2014 at Rs. 48,10,594/-. 4. The assessee had invested the Sale Consideration of Original Property of Rs. 1,87,00,000/-, a sum of Rs. 85,28,405/- inclusive of Stamp Duty and Registration Fee for purchase of a New Asset being Land and Building consisting of a Site together with a Building measuring 500 sq.ft and thereafter constructed a New Building by investing a sum of Rs. 48,10,594/-. Thus the assessee had claimed deduction of Rs. 1,33,38,999/- (Site and Old Building Cost of Rs. 85,28,405/- + Cost of New Building of Rs. 48,10,594/-) out of which the assessee had claimed deduction u/s. 54F on prorate basis amounting to Rs. 1,28,....
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....e residential address mentioned in S4le Deed dtd: 12-081996 relating to Bukkasagar Village. ii. Property No. 9, 100 ft Road, BTM Layout, Bangalore out of which the rental income was declared. 8. The assessee submits that he was a Tenant of the property No. 82/10, RBI Colony, 2nd Cross, Jayanagar East, 8th Main, Bangalore 560011 mentioned above and the One Riyaz Ahmed was the Building Owner and the relevant documents in support of the ownership were produced before the AO and in the Remand Report dtd: 06-07-2018 it was accepted by the AO. 9. The Property bearing No. 9, 100 ft Road, BTM Layout, Bangalore was a Commercial Property and an Inspector was deputed to cause enquires in respect of the said property and the Inspector submitted Enquiry Report (A copy which was enclosed to the Remand Report dtd: 06-07-2018). In the said Enquiry Report it was reported that the said Building consisting of Ground Floor, First Floor and Second Floor and it was a Commercial Building over the period of 10 years and the said Building was not a residential building. Thus the AO in the remand report dtd: 06-07-2018 in para 3 and 4 has admitted that the assessee did not own more than on....
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....ear admission, it was stated that Rajil was told to that the Shop was taken on lease only four years back. He produced a copy of Two Rental Agreements between Kandeer Ahmed (Assessee) and Sri. Ismail, one was dated 09-01-2013 and the other rental agreement was dtd: 25-02-2014. 11. In these two agreements, the AO reported that the Address of Sri. Ismail is given as, presently at Ayyappa Bakery, Baglur Main Road, Bangalore - 64, on this basis the AO formed a opinion that the Ayyappa Bakery was already in existence and Sri, Ismail was running the bakery from past 10 years. However, the above facts were retracted in the conversation held with Inspector on 02-07-2018. Further the AO has relied upon the footage from Google Maps which indicates the existence of Sri. Ayyappa Bakery even in the year 2010. In this regard the assessee submits that the AO was not justified to come to the Conclusion that the said building was commercial building for the following reasons. i. The description of the property in the Sale Deed dtd: 02-06-2012, (placed at page 26 to 33 of the Paper Book) establishes the fact that the House Site of the Schedule property was 5750 sq.ft and the plinth ar....
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....eement was entered into was to construct a residential property. Municipal permission has also been obtained only for construction of a residential complex. Ultimately, the assessee has received possession of such residential property. It may be true that the said property was put to use subsequently for commercial use. Merely because of change in the use of such property for non-residential purposes, it cannot be said that what was acquired by the assessee was not a residential property, but a commercial one. Subsequent change in the user of the property does not disentitle the assessee to relief under S.54F of the Act, as held by Hyderabad Bench B of this Tribunal in the case of Shri M. V. Subramanyeswara Reddy(HUF), Hyderabad (supra), wherein this Tribunal vide its order dated 27.12.2011, has held, vide para 48 thereof, as follows 48. We have heard both the parties. We find that the CIT(A) has accepted the claims of the assessees for relief under the provisions of S.54F of the Act, keeping in view the following factual aspects of the matter a) Perusal of the sale deed shows that the property was a residential property especially the narration at para 1....
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....ds on this issue are partly allowed for statistical purposes" 11.1 The New Asset being Land and Building was purchased on 02-06-2012 whereas the enquires by the Inspector was conducted in February 2018 after lapse of 6 years and the mere existence of the Commercial nature of Property in the year 2018 cannot be a foolproof evidence to contend that the property was commercial at the time of purchasing on 02-06-2012. 11.2 In para 8 of the Remand Report the AO reported that on the basis of two rental agreement dtd: 09-01-2013 and 25-02-2014, the address of Ismail was given as "Ayyappa Bakery, Baglur Main Road, Bangalore - 64". In this view of the matter the Assessee submits that the two rental agreements relied upon by the AO mentioned the existence of Ayyappa Bakery was at Baglur Main Road, Bangalore - 64 and not in the premises bearing No. 8/1, Kattigenahalli which is situated away from Baglur Main Road and therefore there is no conclusive evidence to show that the Ayyappa Bakery was in existence at the premises of the New Asset purchased and constructed by the Assessee. 11.3 The AO at the Outset relied upon the enquiry report of the Inspector who was stated to have conducte....
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....he said view was not held by the AO who has completed the Assessment and therefore the new version adopted by the successor AO in the Remand Report is nothing but a change of opinion which is not permissible in view of the decision of the Hon'ble Supreme Court in the case of CIT v/s. Kelvinator of India (2010) 320 ITR 561 (SC). 11.8 The Ld. CIT(A) was not justified to hold that the Katha Extract placed at Page 45 and 46 issued by the BBMP do not have evidentiary value. The BBMP is constituted under the Municipal Act to monitor all the issues relating to the immovable properties situated in Bangalore and the BBMP is a statutory local body and the Katha Certificate issued are to be followed. 11.9 The Ld. CIT(A) was not justified to decide the issues on the basis of Remand Report since the Remand Report was based on the additional evidence which was rejected by the CIT(A). The CIT(A) was not justified to hold that the Assessee has not produced any proof in respect of the construction made investing a sum of Rs. 48.00.000/- since the newly constructed building of 2000 sq.ft from the comparison of the Katha Certificates where 500 sq.ft building was in existence in the year ....
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....hat it is a Commercial Property. The relevant para 4 of the remand report is submitted as under for kind reference "4. The next aspect mentioned in the Assessment order is that the Assessee hasdeclared property tax paid reeipt for the year 2012- 13 and 2014-15. The Assessee has paid Rs. 1,72,845/- as tax for above mentioned property. In order to ascertain the veracity of his claim, the Inspector of Income Tax of this Officer was sent for spot verification. The Inspector submitted a report (copy enclosed as Annexure - 1) that it is a commercial property with Corporation Bank in the Ground Floor, few offices and a Gym in first and second floor. The Branch Manager Corporation Bank informed the Inspector that the Bank is functioning from the current premises from Past 10 years and there is no residential accommodation in that building. Taking into consideration the amount of property tax paid and the spot verification conducted by the Inspector of this office it is accepted that the property at No. 9, 100 feet Road, BTM Layout, Bangalore was a commercial property even during the period relevant to the A.Y 2012-13." 13. It was submitted by learned AR that the Ld. CIT(A) in para 4.....
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....the New Asset situated at No. 8/1, Kattiegenahalli Jala Hobli, Bangalore prior to the date of Purchase of the new Asset. It is evident from the Lease Deed placed at Page 47 of the Paper Book that Sri. Ismail was carrying on his Ayyappa Bakery business situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore, the Bakery Address mentioned in the lease deed (being the first page of the Lease Deed dtd: 09- 01-2013 placed at page 47 of the Paper Book) is reproduced as under "Mr. P. Ismail Aged about 45 years S/o Sri. Adbul Khader Residing at Fathimas P.K. Poyil Kannur, Kerala - 670673 Ayyappa Bakery B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore - 560064. 16. The AR submits that Sri. Ismail said to be Owner of Ayyappa Bakery was admittedly carrying on the Bakery Business in the name of Ayyappa Bakery situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore which is away from the Assessee's New Asset being No. 8/1, Kattigenahalli, Bangalore. In this view of the matter the Assessee submits that Ayyappa Bakery was not in existence at the time of purchasing the new Asset at No. 8/1, Kattigenahalli....
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....pon the Inspector's Report on the basis of the enquiry conducted in July 2018 after lapse of nearly six years from the date of purchase of new Asset. The AO has misrepresented the facts before the Ld. CIT(A) who has believed the misrepresented facts as true facts without appreciation of the documentary evidence being the Lease Deed dtd: 09-01- 2013 (referred cy him) wherein the address of Ayyappa Bakery was mentioned as 3.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore. Therefore the Ld. .0IT(A) has passed the Appellate Order on-misrepresented facts without application of mind and hence the findings are not justifiable. 18. Without prejudice to the above submissions, the assessee submits that the nature of the property said to be commercial after lapse of six years can be a ground to deny the deduction claimed u/s. 54F of the Act. However, the AO who has completed the Assessment has not denied the deduction on the basis of the nature of building (whether residential or commercial) but the deduction was denied mainly on the ground that the assessee had owned more than one residential house as on the date of purchase of new Asset which was ultimately found to be false and ....
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....sing out of sale of certain land on 31.03.2012. The assessee had also claimed exemption under Section 54F of the Act on the basis of investment to the extent of Rs. 1,33,28,405/-. • As per the assessee, for the benefit of Section 54F of the Act he had purchased certain land for a total consideration of Rs. 85,28,405/- (including stamp duty and registration charges) vide purchase deed dated 02.06.2012 and thereafter he had constructed a residential house on the site during the period June, 2012 to May, 2014 by incurring cash expenditure of Rs. 48,00,000/-. The assessee was asked by the AO to furnish necessary documentary evidence to prove his claim. In response to the same the assessee furnished various details. After examining the same the AO made following observations: • As per purchase deed dated 02.06.2012, a building already existed on the site and as such the assessee had wrongly claimed that he had constructed a residential house on this site. • The land site with a building was purchased by the assessee on 02.06.2012. As per the assessee he had incurred expenses of Rs. 10 lakhs in cash for the purpose of construction of residential hou....
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.... 14.06.2013 provided by BBMP showed that built up area on the site was 500 sq. ft. and the Khata extract dated 23.12.201.4 as provided by BBMP showed built up area of 2500 sq. ft. So as such construction was duly carried out on the land purchased by him. • The assessee has submitted that. in the remand report, the AO has changed the basis of disallowance of exemption under Section 54F of the Act from that mentioned in the assessment order. The assessee has submitted that in the assessment order the exemption was denied by holding that the -assessee was having more than one residential house property, while in the. remand report the AO had held that no residential house was constructed and that the building constructed by the assessee was a commercial property and as such he was not eligible for the benefit of Section 54F of the Act. The assessee argued that the report of the AO should be rejected. • The assessee has submitted that the AO's report was based on the report of an Inspector who had carried put field visit and that .as per the report there were 5 shops existing on the said property. The assessee has submitted that the nature of the property ....
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....ouse at the time of transfer of the original asset. The assessee has submitted that the finding of the AO that purchase bills were bogus was also incorrect. 24. The learned DR submitted that the assessee wrongly submitted that footage of Google map was not a conclusive evidence for showing existence or non-existence of the residential property at specific point of time. The assessee submitted that during remand proceedings the AO could not have asked it to provide documents like occupancy certificate, electricity bills or any other utility bills to show that the property constructed by him was a residential house. The assessee submitted that even if the house was incomplete and constructed beyond the prescribed limitation of time, in view of various decisions he was entitled to the benefit of Section 54F of the Act. Assessee has also filed affidavits from various tenants to show and claim that the rental agreements were signed after AY 2013-14 and that the tenants were not aware of the status of the property prior to the sale. As regards the statement of registered valuer, as made before the AO that he was not sure if the property which he had valued was the same as the property....
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....€¢ The assessee was having more than one residential house on the date of transfer of the original asset (Para 13 of the assessment order). • No construction of residential house was carried out by the assessee (Para 10 and 11 of the assessment order) and that the documents produced by him during assessment proceedings were not reliable (Para 9 of the assessment order). 27. According to the learned DR, since each one of the above reasons was sufficient to disallow the benefit of Section 54F of the Act, no further inquiry into other reasons or satisfaction of the other conditions laid down in under Section 54F of the Act was required to be carried out by the AO. The AO was not required to ascertain as- to whether the assessee had constructed some commercial building on the land. However, since during appellate proceedings the assessee had filed additional evidence by way of invoices/bills relating to construction activities, which were not produced before the AO earlier, the AO had every right to examine the veracity of the same and whether the investment made by the assessee was in a residential house or not. This was also required to be done by the AO specifi....
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....rly admitted that had never verified whether the property inspected by him and that indicated in the valuation report were the same or not. Despite of the fact that this statement of the Valuer was duly confronted to the assessee, he never sought his cross examination. The argument of the assessee that the AO should have taken the valuer to the site is without any merit as the statement of the Valuer had already brought out the true facts. The assessee could have cross examined him, but the assessee chose to not do so. Further taking the valuer to the site would not have served any purpose as the building existing on the site was a commercial site and the valuation report indicated a residential house. In addition, it is important to note that the valuer report shows built up area of residential house as 2460 s ft. There is no reference of any 500 sq ft building, as existed on the site although during assessment proceedings as well as during appellate proceedings the earlier claim of the assessee was that the building of 500 sq was demolished and residential house of 2500 sq ft was constructed, however on being confronted by the evidence during remand proceedings of existence....
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....ilding. The assessee is now trying to claim that the same was a residential house and the same became part of the new construction of 2500 sq ft (2000 sq ft new and 500 sq ft old). For this the assessee has relied upon the katha extract. However, a perusal of the same shows that nowhere in the katha extract dt 14.06.2013 it is indicated that there was a residential property on the land. Further the katha indicates built up area of 500 Sq ft and vacant land of 5750 Sq ft. Thus, total area is 6250 sq ft. In contrast in the katha extract dt 31.12.2014 the built-up area is indicated as 2500 sq ft and vacant land of 3250 sq ft. This totals to 5750 sq ft. Thus although the site dimension remained same the total area has reduced from 6250 sq ft to 5750 sq ft. Further the katha extract dt 14.06.2013 does not shows the existence of any tenant while the katha extract dt 31.12.2014 shows existence of tenants and that the usage as residential. In contradiction to the same the assessee has claimed that the property was given to tenants in FY 2016-17 and FY 2017-18 and as such no earlier tenant was there except Mr P Ismail who was given commercial property on rent in FY 2012-13. These aspects....
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.... self-made vouchers and some bills to support its claim. The assessee has submitted that the same may be admitted as additional evidence. However, the assessee is not able to explain as to why the same were not produced during assessment proceedings. It is noted that during assessment proceedings the assessee just furnished a statement of expenditure without any supporting evidence. For admission of the additional evidence the assessee has to give explanation as to why the same could not be produced before AO during the assessment proceedings. The assessee has however failed to give any such explanation. The assessee has not given any details of bona fide reason for not furnishing these documents before the AO to support its case. The assessee has not given any reasonable explanation as to what prevented it from producing such documents before the AO at the time of assessment proceedings, especially when sufficient opportunity of being heard was given to it by the AO. The assessee has not brought anything on record to show that the documents could not have been produced by it before AO despite its best efforts. Admission of the additional evidence cannot be claimed as a matte....
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....uk. Therefore, on this count exemption under section 54F of the Act cannot be denied. The next contention of the DR is that the assessee has not carried on the construction at 8/1, Kattigenahalli Village, Bengaluru. The assessee furnished details of payment made towards construction of the house which are as follows: Date Amount Mode Narration 15.06.2012 10,00,000 Cash Paid for construction Without any details 05.07.2012 5,00,000 Cash - Without any details 06.08.2012 7,50,000 Cash Paid for construction Without any details 12.10.2012 7,50,000 Cash Paid for construction Without any details 05.11.2012 5,15,600 Cash Paid for construction Without any details 12.01.2013 3,54,500 Cash Paid for construction Without any details Total 38,70,100 36. As a proof of this, in support of this expenditure, assessee filed payment vouchers before us which are placed in record from page Nos.77 to 149. These evidences were also filed before the lower authorities. The lower authorities have brushed it aside on the reason that these are se....