2017 (7) TMI 357 - AT - Income Tax

Revision order u/s. 263 - payment of compensation - acceptance of fresh claim of the assessee - Held that - The fact that the assessee is one of the co-owner and the coowners claimed deduction of ₹ 50 lakhs paid as compensation to M/s. Opal Constructions. We perused the documents and material in support of payment of ₹ 70 lakhs where it was stated in the joint development agreement executed on 20.05.2003 between the assessee and other co-owners and Allied Majestic Developers confirming that the Opal Constructions, at the time of execution of development agreement paid sum of ₹ 20 lakhs to the co-owners and after the discussions and arrangements between the co-owners and erstwhile developer Opal Constructions the present developer Allied Majestic made arrangement for payment referred at page 163 and inner page 3 of the Memorandum of understanding that out of ₹ 70 lakhs (Rs. 20 lakhs pertains to initial payment plus a compensation of ₹ 50 lakhs) was paid as the full and final settlement towards dues. We found the assessee has claimed in the Return of income filed for the assessment year 2004-05 compensation of ₹ 50 lakhs paid to Opal Constructions and subsequently in the order passed u/s. 143(3) r.w.s. 263 of the Act. The Ld. AO allowed the compensation claim of ₹ 50 lakhs only, but before the Ld. CIT(A), assessee made fresh claim of ₹ 20 lakhs, which is not allowable after passing the assessment order u/s. 143(3) r.w.s. 263 in confirmity with Revision order. Hence, we are of the opinion that Ld. CIT(A) was not justified in directing additional claim of ₹ 20 lakhs based on the fresh claim by the assessee. The provisions of section 263 of the Act is for the benefit of Revenue and not for assessee. Accordingly, we are inclined to set aside the order of CIT(A) on this ground and restore the order of Assessing Officer allowing the claim of ₹ 50 lakhs only and allow this ground of the appeal of the Revenue. Work out the appropriate cost of indexation of old building, on par with index value of land. The Ld. - Held that - there seems to be a building existing right from the purchase of the property from the year 1997 to the year 2001 and the fact being that the building was under existence. Now the question arises the assessee has claimed indexation on the value of building as per the valuer report. We find the Assessing Officer has not referred to the valuation report and made observations only on Hibbah document executed on 02.05.2003 between co-owners, where these facts of the old building was not mentioned. Prima Facie, on perusal of the supportive documents there was existence of building but the value was not determined. Even the valuation report was not produced before us by the Ld. AR. We are of the opinion that the assessee should get the benefit of existence of building and are of the opinion that the reasonable amount should be quantified based on the location of the property and the commercial infrastructure available in the area. We find the Ld. CIT(A) has directed the Assessing Officer to workout the appropriate cost which we consider it as reasonable as the assessee substantiated with evidence of building till year 2001. Accordingly, we are not inclined to interfere with the order of the CIT(A) on this disputed issue. Revenue appeal is partly allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Allowance of compensation paid to M/s. Opal Constructions.
3. Determination of cost of indexation for the old building.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the revision order u/s. 263 of the Income Tax Act with a delay of 762 days. The Tribunal examined the affidavit and reasons provided for the delay but found them unconvincing and insufficient. The Tribunal emphasized that the law assists those who are vigilant and that negligence or inaction cannot be excused. Citing several judicial precedents, the Tribunal concluded that the delay was inordinate and not supported by valid reasons, thus declining to condone the delay. Consequently, the appeals filed by the four co-owners were dismissed as unadmitted.

2. Allowance of Compensation Paid to M/s. Opal Constructions:
The Revenue appealed against the CIT(A)'s direction to allow ?70,00,000 as compensation instead of ?50,00,000 claimed by the assessee. The Tribunal noted that the assessee initially claimed ?50,00,000 in the return of income, which was allowed by the Assessing Officer. However, the CIT(A) erroneously accepted a fresh claim of ?20,00,000 during appellate proceedings without proper justification. The Tribunal held that the provisions of section 263 are for the benefit of the Revenue and not for the assessee. Therefore, the Tribunal set aside the CIT(A)'s order on this ground and restored the Assessing Officer's decision to allow only ?50,00,000 as compensation.

3. Determination of Cost of Indexation for the Old Building:
The second issue was whether the CIT(A) erred in directing the Assessing Officer to work out the appropriate cost of indexation for the old building. The Tribunal reviewed the evidence, including sale deed documents, the Memorandum of Understanding, and the General Power of Attorney, which indicated the existence of an old building. Despite the building being demolished in 2001, the Tribunal found that the CIT(A) was reasonable in directing the Assessing Officer to consider the cost of indexation for the old building based on its existence up to 2001. The Tribunal upheld the CIT(A)'s decision on this issue, affirming that the assessee should benefit from the indexed cost of the old building.

Conclusion:
The Tribunal dismissed the assessee's appeals due to the inordinate delay in filing. For the Revenue's appeals, the Tribunal partly allowed them by restoring the Assessing Officer's decision to allow only ?50,00,000 as compensation and upheld the CIT(A)'s direction to consider the cost of indexation for the old building. The final order pronounced that the assessee's appeals were dismissed, and the Revenue's appeals were partly allowed for statistical purposes.