2024 (5) TMI 796 - AT - Income Tax

Scope of enquiry in cases under limited scrutiny - Assessment order was selected for limited scrutiny under CASS on two issues, i.e., (i) sale consideration of the property in ITR is less than sale consideration of property reported in AIR and (ii) large investment in property as compared to total income - HELD THAT - AO has made inquiry in respect of sale of property, which was purchased by the assessee in AY 2013-14. The property was sold on 26.08.2014 for a consideration of Rs. 95,00,000/-. It is the claim of the assessee that the purchase value was Rs. 60,87,883/- and she incurred further expenditure of Rs. 47,38,280/- towards additional work. After collecting the evidence and explanation of the assessee, the AO has recomputed STCG on sale of the property at Rs. 34,12,162/- in lieu of short term capital loss of Rs. 13,26,113/- claimed by the assessee. Therefore, this issue is within the scope and ambit of the first issue of the limited scrutiny . Large investment in property as compared to total income - If the value adopted by the Stamp Valuation Authority is considered, it would be Rs. 43,80,219/-. Therefore, the total investment in property as compared to the total income declared by the assessee in her ITR is much higher. It is clear that the AO has not expanded the scope of inquiry under limited scrutiny by CASS. We also find that the enquiry made by the AO are directly on the issue for which the case was selected for limited scrutiny . Therefore, the contention of the Ld.AR that the AO exceeded his jurisdiction in passing the impugned assessment order is not correct, both in law and on facts. The same is therefore dismissed. Computation of capital Gain - Disallowance being expenses towards the additional work undertaken by the assessee in respect of the flat purchased by her for a consideration - Payment of margin money to contractors for additional work are submitted. It is further submitted that the husband of the appellant has neither incurred any cost nor repaid any part of housing loan nor credited the sale consideration in his books of account. He has also not reflected any apart of the capital gains in his ITR. Both the purchase as well as sale and the consequent STCG have been reflected in the ITR of the appellant only. The income from house property in respect of the whole flat is also reflected in the hands of the appellant and not in the hands of her husband - It is clear that the appellant has provided sufficient evidence to show that the expenditure was incurred by her for the additional work. She has given the bank statement to prove the source of expenditure and there is no evidence on record that the payment made to the contractors where received back in cash by the appellant. Hence, the claim of the appellant for incurring of expenditure towards the additional work is accepted and the disallowance made by the AO and confirmed by the CIT(A) is hereby deleted. This ground of assessee s appeal is allowed. Addition u/s 56(2) - There is no street light, no drainage, no road and no water supply in the area. The plot is also at lower level than normal level. Due to low level of the land, lot of garbage and rain water gets stored in the area. Due to above reasons, the fair market value of plot is much less than the jantri value. Therefore, assessee requested to refer the matter to DVO for ascertain the fair market value as per the proviso below u/s 56(2)(vii) - AO accepted to the request of the assessee and sent for valuation before DVO. However, no report from the DVO has been received. AR has stated that due to location of flat in an under-developed area and for the reasons stated during the assessment year, it is likely to fetch less price as compared to the properties in the area. However, he has not been able to furnish any evidence to support his claim. The burden of proof lies on the assessee which has not been discharged with cogent evidence and details. At this stage, it may be stated that the Ld.AR argued that no such addition has been made in case of other co-owners of assessee. However, he has not able to give the assessment order of other co-owners to establish that the impugned issue was duly examined by the AO of the other co-owners. It is common knowledge that only a few cases are picked up for scrutiny and if the case of some other persons have not been picked up for scrutiny and accepted under u/s 143(1) of the Act, the same cannot be a ground for not making the addition, which is otherwise sustainable on facts and clear operation of law at the relevant point of time. The report of DVO has also not been given to us to reconsider the amount of addition made by the AO. Therefore, we sustain the addition made by the AO. Accordingly, this ground of assessee is dismissed.

Summary

Issues Involved:
1. Sustaining the addition of Rs. 47,38,280/- by AO denying the deduction of additional cost of construction.
2. Sustaining the addition of Rs. 3,04,819/- u/s 56(2) of the I.T. Act, 1961.
3. Charging of interest u/s 234A/234B/234C/234D of the Act.

Summary:

1. Sustaining the Addition of Rs. 47,38,280/- by AO Denying the Deduction of Additional Cost of Construction:
The assessee filed her return for AY 2015-16 declaring a total income of Rs. 6,23,160/-. The case was selected for "limited scrutiny" u/s 143(2) of the Act. The assessee sold a flat for Rs. 95,00,000/- and claimed the cost of the flat at Rs. 1,08,26,113/-, including additional work of Rs. 47,38,280/-. The AO disallowed the additional work cost as the contractors could not be verified, and recomputed the STCG at Rs. 34,12,167/-. The CIT(A) upheld the AO's decision. The Tribunal, however, accepted the assessee's evidence of payments made through banking channels and deleted the disallowance, allowing the ground of appeal.

2. Sustaining the Addition of Rs. 3,04,819/- u/s 56(2) of the I.T. Act, 1961:
The assessee purchased a property for Rs. 7,00,000/- with a co-owner, while the stamp duty value was Rs. 13,09,638/-. The AO added Rs. 3,04,819/- to the assessee's income u/s 56(2)(vii)(b)(ii) of the Act, which was upheld by the CIT(A). The Tribunal dismissed the assessee's appeal, stating that the burden of proof was not discharged with cogent evidence, and no DVO report was provided to reconsider the addition.

3. Charging of Interest u/s 234A/234B/234C/234D of the Act:
This issue was deemed consequential and did not require adjudication.

Conclusion:
The appeal was partly allowed, with the Tribunal deleting the disallowance of Rs. 47,38,280/- but sustaining the addition of Rs. 3,04,819/- and the consequential interest charges. The order was pronounced on 15/05/2024.