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TMI Blog2017 (5) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, we are of the view that the A.O. was erred in working out indexed cost of land based on the purchase cost of the property, ignoring the provisions of section 48 of the Act, as well as the SRO value fixed by the State Government. The CIT(A) after considering relevant provisions of the Act, has rightly directed the A.O. to allow cost of acquisition of the land as on 1.4.1981. We do not find any error in the order of the CIT(A). Hence, we uphold the CIT(A) order and reject the ground raised by the revenue. Indexed cost of building - Held that:- The assessee has incurred an amount of ₹ 1,77,624/- towards construction of building for the financial year 1988-89 which was declared in the books of accounts. The A.O. never doubted the source of expenditure incurred for construction of building. But, he doubted the genuineness of the expenditure for failure to file the return of income by the assessee. Therefore, we are of the view that the A.O. was incorrect in disallowing the cost of building, despite the assessee has proved the cost of building with necessary evidences and also which was further supported by the sale deed wherein the existence of building was recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents has directed the A.O. to allow a sum of ₹ 22 lakhs out of ₹ 24,70,000/- claimed by the assessee towards expenses of transfer being compensation paid for resolving dispute and also expenses of litigation. We do not find any error in the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. - I.T.A.Nos.7 & 8/Vizag/2012 - - - Dated:- 28-4-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.N. Murthy Naik, DR For The Respondent : Shri G.V.N. Hari, AR ORDER PER Shri G. Manjunatha, Accountant Member: These two appeals filed by the revenue and two cross objections filed by the assessee are directed against common order of the Commissioner of Income Tax (A), Guntur dated 9.11.2011 for the assessment year 2007-08 and 2008-09. Since, the facts are identical and issues are common, they are clubbed, heard together and disposedoff by way of this common order for the sake of convenience. 2. The brief facts of the case are that the assessee is a company in which the public are not substantially interested was incorporated in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls on the date of hearing. Therefore, a letter was issued on 11.10.2010 calling for certain information. Since the assessee failed to appear before the A.O., the A.O. has given two more opportunities of hearing on various dates as mentioned in his assessment order. Since, the assessee failed to appear before the A.O. to furnish the necessary information for completion of assessment, the A.O. proceeded to pass ex-parte assessment order u/s 144 of the Act, based on the information available on record. While completing the assessment, the A.O. has reworked long term capital gain computed by the assessee for the assessment year 2007-08 and 2008-09, by disallowing expenses of transfer and also re-working indexed cost of land and building and improvement for both the assessment years. The A.O. disallowed expenses of transfer being brokerage and commission on the ground that the assessee failed to furnish any supporting evidences and also failed to deduct tax at source u/s 194H of the Act, therefore, disallowed expenditure u/s 40(a)(ia) of the Act. In so far as indexed cost of acquisition being cost of land and building and development, the A.O. observed that inspite of repeated opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a compromise with the litigant before the court of law and the compensation has been paid by way of demand draft. The assessee further submitted that the A.O. disallowed impugned amount merely on the ground that the assessee has not filed the return of income. Once the genuineness of the expenditure was not doubted, the expenditure cannot be disallowed on the ground that the assessee has not filed return of income. The filing of return of income is based on the taxability of income, in case the assessee does not have taxable income need not to file return of income under the provisions of income tax Act, 1961, therefore, the A.O. was erred in disallowing the expenditure for non-filing of return of income, even though the assessee has proved the expenditure. 7. The CIT(A) after considering the explanations of the assessee, held that the provisions of section 48 of the Act, clearly indicates that wherever the property was acquired prior to 1.4.1981, the assessee has option either to adopt the fair market value as on 1.4.1981 or actual cost of the property. Since, the land was purchased prior to 1.4.1981, the A.O. is not correct in adopting the purchase consideration of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure only on the ground that the assessee has not filed return of income for the earlier years. Merely because the return of income was not filed, the genuineness of expenditure cannot be doubted, despite the fact that the assessee has proved the expenditure with necessary evidences. Therefore, directed the A.O. to allow expenditure of ₹ 22 lakhs as against expenditure claimed by the assessee of ₹ 24,70,000/-. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 9. The first issue that came up for our consideration is re-working indexed cost of land and building. The A.O. re-worked indexed cost of land and building based on the cost of land and building appeared in the balance sheet. According to the A.O., the assessee has claimed a cost of acquisition of ₹ 36,737/- whereas, claimed fair market value as on 1.4.1981 at ₹ 40/- per sq.yd. which is much higher side, therefore, re-worked cost of acquisition of land based on the purchase cost of the property as per books of accounts. It is the contention of the assessee that the impugned land was purchased in the year 1962 and as per the provisions of section 48 of the Act, the assessee at its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnoring the provisions of section 48 of the Act, as well as the SRO value fixed by the State Government. The CIT(A) after considering relevant provisions of the Act, has rightly directed the A.O. to allow cost of acquisition of the land as on 1.4.1981. We do not find any error in the order of the CIT(A). Hence, we uphold the CIT(A) order and reject the ground raised by the revenue. 12. The next question is indexed cost of building. The assessee has claimed cost of building of ₹ 1,77,624/- for the financial year 1988-89 and computed indexation to work out indexed cost of ₹ 5,72,089/-. The A.O. disallowed indexed cost of land for the reason that the assessee has failed to prove the cost of land with necessary evidences. The A.O. further observed that the assessee has not filed return of income for the earlier years, therefore, it is difficult to ascertain the genuineness of cost of building claimed by the assessee. We do not find any merits in the observations of the A.O., for the reason that the assessee has claimed cost of building as per the books of accounts and financial statements filed for the respective financial years. The assessee has incurred an amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable income for the relevant assessment years,. In case the assessee does not have taxable income, the assessee need not to file the return of income. Just because return of income was not filed it cannot be held that the assessee has not proved the expenditure. In this case, the assessee has filed balance sheets filed with the ROC, wherein the amount incurred for construction of building has been disclosed. The assessee also disclosed the existence of building in the sale deed. Therefore, we are of the view that the A.O. was completely erred in disallowing expenses incurred towards improvement of building. The CIT(A) after considering relevant facts has rightly directed the A.O. to allow cost of development/improvement. We do not find any error in the order of the CIT(A), hence we inclined to uphold the CIT(A) order and reject ground raised by the revenue. 14. The next issue that came up for our consideration is disallowance of brokerage and commission. The A.O. disallowed brokerage and commission u/s 40(a)(ia) of the Act, for failure to deduct tax at souirce. It is the contention of the assessee that the A.O. was erred in disallowing brokerage and commission u/s 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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