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2019 (10) TMI 919 - AT - Income TaxValidity of reassessment proceedings - As alleged order passed by the I.T.O., Ward 7(2), Jaipur without jurisdiction - Jurisdiction over the case of assessee lies with Income Tax Officer, Ward-6(4) and not with the Income Tax Officer, Ward-7(2) who has passed the impugned reassessment order - HELD THAT - Since the assessee has not filed any return of income U/s 139(1) of the Act and further it is not a case of the assessee that he is regular assessed to tax under a different ITO, therefore, the notice issued by the I.T.O., Ward 7(2), Jaipur based on the assessee s particulars and address which is falling under his jurisdiction, cannot be disputed after completion of the assessment and particularly when the assessee has participated in the assessment proceedings. As per provisions of Section 124(3)(b) of the Act, no person is allowed to call in question the jurisdiction of an Assessing Officer when he has not made any return of income after expiry of time allowed, inter alia, notice issued U/s 148 - assessee did not object the jurisdiction of the A.O. as per the time period given U/s 124(3)(b) of the Act and even up to the date of the assessment order passed by the A.O. Since the jurisdiction of the assessee was not predetermined prior to notice issued U/s 148 of the Act as the assessee has not filed any return of income, therefore, the objection raised by the assessee after the assessment order passed by the A.O., cannot be entertained. Disallowance of brokerage charges in respect of sale/purchase of land - CIT(A) has considered the claim and found that in absence of proof of brokerage payment produced before the A.O., the same cannot be allowed as accepted at this stage - HELD THAT - When the transaction of sale of land is not in dispute then as per normal practice prevailing in such transactions, a brokerage at the rate of 2% is being paid. Though, during the assessment proceedings, the assessee did not file any evidence in support of the brokerage payment, however, before the ld. CIT(A), the assessee produced confirmation alongwith ID proof of these two persons. CIT(A) has rejected the claim of the assessee only on the ground that the proof was not produced before the A.O. Once the claim of the assessee is not found to be excessive and it is in accordance with the prevailing practice of brokerage @ 2% then the same cannot be denied. The sale and purchase of the immovable property transactions are generally carried out only through the brokers who played a very crucial role of soliciting the sale and purchase transactions between the parties. Accordingly, the A.O. is directed to allow brokerage payment @ 2% of the sale proceeds. Disallowance of brokerage charges in respect of agricultural land purchased by the assessee as well as the expenditure incurred on the agricultural land towards levelling etc . - assessee purchased two agricultural lands during the year under consideration and claimed deduction U/s 54B - HELD THAT - As regards the brokerage charges, since the assessee has claimed 2% brokerage charges which is otherwise a general practice prevailing in such transaction of purchase and sale of immovable properties, therefore, in view of my findings in respect of ground No. 2 on this issue, the brokerage charges @ 2% is allowed. Expenditure incurred for levelling and other work done at the agricultural land - receipt produced by the assessee says the working of tractor for some hours, however, it is not clear whether the said lady was having the tractor and other labour force for doing the work. Thus, in absence of the details of the JCB and tractor for which the charges are paid by the assessee, the claim of the assessee cannot be accepted - when the assessee has failed to even furnish the relevant details regarding the particulars of the machinery and whether the lady who has executed the receipt was having those machineries, claim cannot be accepted. Disallowance of cost of construction while allowing deduction U/s 54F - assessee claimed the cost of construction of residential house for the purpose of exemption U/s 54F - A.O. has rejected the said claim on the ground that the valuation report filed by the assessee is in the name of one Smt. Sushma Bairwa as the single owner of the property - On appeal assessee filed rectified report of the valuer, however, the ld. CIT(A) has confirmed the action of the A.O. in rejecting the claim - HELD THAT - It is pertinent to note that that valuation report filed by the assessee was though in respect of the property owned by the assessee bearing No. D-350, Jagdamba Nagar, behind Heerapura, Ajmer Road, Jaipur, however, the name of some other person appeared in the valuation report due to the mistake of exchanging first page of the report with the other valuation report. This fact was brought on record and the rectified valuation report was filed during the appellate proceedings and remand proceedings. Once this substance of the valuation report remains same and the subject matter is also remained same then only because the name of the owner is mistakenly given of some other person due to exchange of the one page of the report which was subsequently rectified, the claim of the assessee ought to have not been disallowed. When the period of construction is also given in the valuation report and the A.O. as well as the ld. CIT(A) has rejected the claim on technical grounds instead of examining the issue on the merits is not justified. Accordingly, once the construction of house is not in dispute then only the valuation or the cost of the construction aspect is required to be verified. Therefore, any typographical mistake or other inadvertent mistake in the valuation report would not have prevail over the substantial issue of cost of construction of the property in question. Neither the A.O. nor the ld. CIT(A) has even proceeded to examine the said issue of correctness of the cost of construction. Therefore, in view of the fact that the assessee produced the valuation report as well as rectified report showing the correct name of the owner then the assessee has discharged his onus to prove the claim of cost of construction of the house. Accordingly, the claim of the assessee U/s 54F of the Act towards the cost of construction is allowed.
Issues Involved:
1. Validity of the reassessment order passed without jurisdiction. 2. Disallowance of brokerage expenses of ?76,390. 3. Disallowance of brokerage expenses and expenses on agricultural land totaling ?3,18,620. 4. Disallowance of deduction under Section 54F of ?23,22,500. 5. Addition of ?10,44,216 as undisclosed income under Section 68. Issue-wise Detailed Analysis: 1. Validity of the reassessment order passed without jurisdiction: The assessee contended that the reassessment order was invalid as it was passed by I.T.O., Ward 7(2), Jaipur, instead of the correct jurisdiction, I.T.O., Ward 6(4), Jaipur. The Tribunal noted that the assessee did not file a return under Section 139 and did not challenge the jurisdiction during reassessment proceedings. The Tribunal upheld that under Section 124(3)(b), the jurisdiction cannot be disputed post-assessment completion, especially when the assessee participated in the proceedings without objection. 2. Disallowance of brokerage expenses of ?76,390: The assessee claimed brokerage expenses for the sale of land, which were disallowed by the A.O. for lack of evidence. The Tribunal found that the brokerage payment at 2% is a prevailing practice in land transactions. Despite the evidence being submitted at the appellate stage, the Tribunal directed the A.O. to allow the brokerage payment at the rate of 2% of the sale proceeds, acknowledging the general practice of such transactions. 3. Disallowance of brokerage expenses and expenses on agricultural land totaling ?3,18,620: The assessee claimed brokerage expenses and levelling costs for agricultural land, which were disallowed by the A.O. The Tribunal allowed the brokerage expenses at 2%, consistent with prevailing practices. However, the Tribunal disallowed the levelling expenses due to insufficient evidence, noting that the receipt provided did not adequately explain the machinery and labor involved. 4. Disallowance of deduction under Section 54F of ?23,22,500: The assessee's claim for construction cost under Section 54F was rejected due to a valuation report error. The Tribunal accepted that the initial report contained a mistake, which was rectified later. The Tribunal emphasized that the substance of the report remained unchanged and the construction was not disputed. Thus, the Tribunal allowed the deduction, noting that the technical error should not overshadow the substantive issue. 5. Addition of ?10,44,216 as undisclosed income under Section 68: This issue was deemed consequential to the resolution of the Section 54F deduction. Since the Tribunal allowed the deduction under Section 54F, this ground became infructuous and was not separately addressed. Conclusion: The Tribunal partially allowed the appeal, validating the jurisdiction of the reassessment, allowing brokerage expenses at 2%, disallowing levelling expenses due to lack of evidence, granting the Section 54F deduction after rectifying the valuation report error, and rendering the addition of ?10,44,216 as infructuous. The order was pronounced on 18th October 2019.
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