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Treatment of investment on construction of house under section 69C of IT

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Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in deleting the addition of ` 15,12,750/- made by the Assessing Officer on account of unexplained investment on construction/ renovation of 1st floor of House u/s. 69C of the Income Tax Act, 1961. The Ld. Commissioner of Income Tax (A) has erred in appreciation following facts and circumstances:- a) It is undisputed fact that the loan from LIC Housing Finance was for the purposes of construction of house which has been confirmed by Sh. R.T. Sharma, Panel Valuer of LIC Housing Finance under statement u/s. 131.

Citation :
Income Tax Officer,Ward-4, Hisar (Appellant) Vs. Smt. Suman Saini, W/o Sh. Vinod Kumar Saini, C/o Sh. S.K. Jain, Advocate,696/8, Ganga Bagh,Hansi-125003, (Haryana)(PAN/GIR NO.: AEZPS6199F)(Respondent)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “G” New Delhi

BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 717/Del/2012

A.Y.: 2007-08

Income Tax Officer,

Ward-4,

Hisar

(Appellant)

Vs.

Smt. Suman Saini, W/o Sh. Vinod

Kumar Saini,

C/o Sh. S.K. Jain, Advocate,

696/8, Ganga Bagh,

Hansi-125003,

(Haryana)

(PAN/GIR NO.: AEZPS6199F)

(Respondent)

AND

C.O. No. 286/Del/2012

(In ITA No. 717/Del/2012)

A.Y. 2007-08

Smt. Suman Saini, W/o

Sh. Vinod Kumar Saini,

C/o Sh. S.K. Jain, Advocate,

696/8, Ganga Bagh,

Hansi-125003,

(Haryana)

(PAN/GIR NO.: AEZPS6199F)

(Appellant)

Vs.

Income Tax Officer,

Ward-4, Hisar (Haryana)

 (Respondent)

Assessee by: Sh. S.K. Jain, Adv.

Department by: D r. Prabha Kant, Sr. D.R.

ORDER

PER SHAMIM YAHYA : AM

This appeal by the Revenue and Cross Objection by the assessee emanate out of order of the Ld. Commissioner of Income Tax (Appeals), Rohtak dated 01.2.2011 and pertain to assessment year

2007-08.

2. Assessee’s cross objection. At the threshold in this case, ld. Counsel of the assessee su bmitted that he shall be withdrawing the cross objection filed by the assessee. The Ld. Departmental Representative did not have any objection to this proposition. Hence, upon careful consideration, we permit the withdrawal of the cross objection. Accordingly, the cross objection stands dismissed.

3. The grounds raised in the Revenue’s appeal read as under:-

“(1) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in deleting the addition of ` 15,12,750/- made by the Assessing Officer on account of unexplained investment on construction/ renovation of 1st floor of House u/s. 69C of the Income Tax Act, 1961. The Ld. Commissioner of Income Tax (A) has erred in appreciation following facts and circumstances:-

a) It is undisputed fact that the loan from LIC Housing Finance was for the purposes of construction of house which has been confirmed by Sh. R.T. Sharma, Panel Valuer of LIC Housing Finance under statement u/s. 131.

b) The Assessing Officer has referred to the copy of application made by the assessee to LIC Housing Finance, in para 2 of the assessment order. This application in Col. No. 3 entitled as “Loan Information” mention “as per valuation” and the valuation report is attached as Annexure-III. Assessee has signed verification at the end of application, certifying all information to be true. Therefore,  assessee cannot simply deny the facts contained in valuation report. It is erroneous appreciation that valuation report is an evidence of the department and assessee needs cross verification of the same, since, the assessee has already given verification of facts contained in the valuation report. The onus of disregarding the contents of the valuation report is on the assessee.

(2) The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off. of the hearing.”

4. The facts of the case are as under:-

“The appellant filed return of income on 13.1.2008 declaring total income of 1,38,580/-. On the basis of certain information received from ADIT (Inv.), Hisar, the Assessing Officer issued notice u/s. 148 after recording the reasons. It has come to the notice of the Assessing Officer that the assessee has purchased agriculture land measuring 29 killas and 11 marlas situated at village Chortapur Distt. Bhhiwani, registered vide sale deed dated 13.10.2006 for a consideration of ` 8,47,000/- and also constructed first fllor and renovated the existing house situated at Kalidevi Road, Hansi. With regard to the investment in agriculture land, the assessee submitted that she raised a loan of ` 8.50 lacs from LIC Housing Finance Ltd., Karnal. The Assessing Officer issued summons to the Area Manager, LIC Housing Finance Ltd., Karnal requesting him to furnish corroborative evidence as to whether the loan sanctioned was actually utilized by the assessee for the purpose for which it was given. The Area Manager, furnished copy of sale deed in favour of the appellant, copy of application form, copy of valuation before the sanction of loan and copy of valuation for the final disbursement of loan.

From the above documents, the AO noted that the assessee applied for a loan of Rs 15.00 lacs to LIC Housing Finance Ltd. and loan of only Rs 8.50 lacs was sanctioned. From the bank a/c of the assessee, the AO noted that she received the first installment of loan of Rs 6.00 lacs on 21.04.2006 which was withdrawn on 22.04.2006 and 25.04.2006 and the second installment of Rs 2.50 lacs was given on 26.06.2006 which was withdrawn on the very next day i.e. 27.06.2006. The loan amount was utilized for constructing the first floor and renovation of the existing house situated at Kalidevi Road, Hansi in which the assessee is residing. Inspection report dated 26.05.2006 of the authorized representative of the LIC Housing Finance Ltd. clearly

mentioned that an amount of Rs 15,12,750/ - has been spent on the repair/construction of the said house. The above documents were supplied by the AO to the assessee in response to which the assessee filed affidavit dated 22.12.2010 and a letter dated 23.12.2010 stating that the entire amount of loan of Rs 8.50 lacs taken from LIC Housing Finance Ltd. has been invested in the purchase of agriculture land and no part thereof has been invested/utilized in the construction/repair of the existing house. The assessee deposed in her affidavit that she has no knowledge as to what documents/reports, if any, were got prepared and managed by the Agent for sanction of  loan from LIC Housing Finance Ltd. as she was assured by the Agent that she will not have to comply with any paper formalities with LIC Housing Finance Ltd.

The AO held that the explanation of the assessee can't be accepted in its entirety as the loan from LIC Housing Finance Ltd. has been withdrawn from bank as and when it was received in the months of April & June 2006 but, the assessee purchased agriculture land during the month of Oct. 2006. Thus, it appears that the assessee has utilized the entire loan on construction of the first floor and renovation of the house. The AO held that the assessee invested Rs 8.50 lacs in purchasing of agriculture land and Rs 15,12,750/- in the construction of first floor and renovation of the existing house but she could explain only Rs 8.50 lacs received from LIC Housing Finance Ltd., which was invested in the purchase of agriculture land. Cash flow statement furnished during the assessment proceedings shows that no amount has been withdrawn for the purpose of construction of house. However, inspection report dated 26.05.2006 of the panel valuer of LIC Housing Finance Ltd. prepared in response to the loan sanctioned to assessee clearly mentioned that the actual amount spent on repair/construction of the property IS Rs 15,12,750/-. In view of the above, the AO made an addition of Rs. 15,12,750/- u/s 69C of the IT Act.”

5. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) considered the submissions and concluded as under:-

“I have carefully considered the issue and the submissions made by the AR. The action of the AO in making addition of Rs 15,12,750/- on account of unexplained investment in the construction/renovation of house property is erroneous due to the following:-

i) The concerned personnel of LIC Housing Finance Ltd., Karnal have not been offered for cross examination to the assessee.

ii) The affidavit dated 22.12.2010 and letter dated 23.12.2010 of the assessee have been disbelieved without examining the assessee and collecting. adverse evidence.

(iii) The certified copies of assessment register for the year 1999L2000 supplied by Municipal Council, Hansi demonstrate that the construction of the house property comprising ground and first floors have been completed by the year 1998.

(iv) The report of SDO, Electricity Department, Hansi demonstrates that the entire electricity connections were installed latest by July, 1997.

(v) The technical opinion report dated 30.04.2008 states that ground floor shops were constructed in 1990-91 and construction of house on ground floor and first floor was completed during 1992-98. This report appears to be authentic as it was made by a competent authority on the direction of Director General, SWB (H) Panchkula in connection with a complaint against Sh. Vinod Kumar, husband of the assessee, after personal inspection of the impugned house building.

(vi) The AO has not made any efforts to verify the authenticity /veracity of the additional evidence submitted by the assessee. No comments have been made in this regard by the AO.

(vii) The statement of Sh. RT. Sharma taken by the AO during remand proceedings on 19.10.2011 is not affirmative / categorical as he stated that the building appears to be 'fresh' and the possibility of demolition of erstwhile building for construction/renovation of a new building can not be ruled out'. Had Sh. RT. Sharma, approved valuer, made physical inspection of the property and prepared the reports dated 15.02.2006 and 26.05.2006, such unconfirmed/ evasive replies would not arise.

(viii) From the facts, it appears that the assessee with a view to obtain housing loan at lower rates from Lie Housing Finance Ltd., has approached an Agent for procuring the loan with the purpose of investing the same in agriculture property. The entire documentation and valuation reports appear to have been made to enable grant of housing loan to the assessee.

(ix) No evidence has been brought on record by the AD that the assessee has· constructed/renovated the house property during the year under consideration. The Municipal Committee and Electricity Department records show that the house property was constructed by the year 1998. If the erstwhile building has been demolished and a new building has been constructed, it would not have escaped the attention of the Municipal Committee and Electricity Department.

In view of the above, the addition made by the AD of Rs 15,12,750/- u/s 69C of the Act is deleted.”

6. Against the above order the Revenue is in appeal before us.

7. We have carefully considered the rival contentions and perused the records. We find that Ld. Commissioner of Income Tax (A)’s in this case has given a reasonable order which does not need any interference on our part. We agree with the Ld. Commissioner of Income Tax (A) that statement of LIC Housing Finance (Valuer) which has been used by the assessee were not offered for cross examination of the assessee. Furthermore, we note that Assessing Officer has relied upon the statement of Sh. RT Sharma, valuer of the LIC Housing Finance. We also note that in the statement of Sh. RT Sharma has observed that the building “appears” to be fresh and the possibility of demolition of erstwhile building for construction/ renovation of new\ building cannot be ruled out. Thus, we find that it is only a doubt and not a conclusive proof of construction. We agree with the Ld. Commissioner of Income Tax (A) that no evidence has been brought on record by the Assessing Officer that assessee has constructed/ renovated the house property during the year under consideration. The Municipal Committee and Electricity Department records showed that the house property was constructed by the year 1998. We further note that Assessing Officer has not referred the matter to the DVO. Hence, reliance on doubtful statement given by the LIC Valuer cannot be the basis of addition made in this regard. Accordingly, we affirm the order of the Ld. Commissioner of Income Tax (A).

8. In the result, the revenue’s appeal as well as assessee’s cross objection stand dismissed.

Order pronounced in the open court on 07/9/2012.

                                                       SD/-                               SD/-

                                            [I.C. SUDHIR]            [SHAMIM YAHYA]

                                      JUDICIAL MEMBER ACCOUNTANT MEMBER

Date:- 07/9/2012

SRBHATNAGAR

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches

 

CS Bijoy
on 05 November 2012
Published in Income Tax
Views : 1482
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