M/s.R. Vasudev Pillai, Hyderabad v. A.O Ward -6(3), Hyderabad

ITA 1257/HYD/2010 | 1996-1997
Pronouncement Date: 28-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 125722514 RSA 2010
Assessee PAN AABHP4694L
Bench Hyderabad
Appeal Number ITA 1257/HYD/2010
Duration Of Justice 3 month(s) 29 day(s)
Appellant M/s.R. Vasudev Pillai, Hyderabad
Respondent A.O Ward -6(3), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 1996-1997
Appeal Filed On 29-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI AKBER BASHA ACCOUNTANT MEMBER . ITA NO.1257/HYD/2010 : ASSESSM ENT YEAR 1996-97 SRI R. VASUDEV PILLAI HYDERABAD. (PAN: AABHP 4694 L) VS ASSESSING OFFICER WARD-6(3) HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.G. SARDA RESPONDENT BY : DR. B.V. PRASAD REDDY O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF HE CIT (A)-IV HYDERABAD DATED 3-8-2010 PER TAINING TO THE ASSESSMENT YEAR 1996-97. 2. THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE IN THIS APPEAL:- 1. THE LD. CIT (A) GROSSLY ERRED IN LAW IN CONFIRMI NG THE ASSESSMENT UNDER THE HEAD CAPITAL GAINS IN REMAND ASSESSMENT WHEN THERE WAS CATEGORICAL FINDING RECORDED BY THE THEN CIT (A) IN EARLIER APPEAL ORDER DATED 22-1 -2002 FOR THE SAME ASSESSMENT YEAR THAT THERE IS NO TRANSFER WITHIN ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 2 THE MEANING OF SECTION 45 WHICH FINDING HAS ATTAINED F INALITY AS IT WAS NEVER CHALLENGED EITHER BY THE REVENUE OR B Y THE ASSESSEE BEFORE ITAT IN ITA NO.499/HYD/2002. 2. THE LEARNED CIT (A) GROSSLY ERRED IN LAW IN NOT AP PRECIATING THE PROVISIONS OF SECTION 51 WHICH PROVIDES THAT ANY AM OUNT RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF FAILED CAPITAL TRANSACTION IS TO BE REDUCED FROM COST OF ASSETS. 3. WITHOUT PREJUDICE TO THE ABOVE GROUND THE LD. CI T(A) ALSO GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE COMPUTATION OF CAPITAL GAINS: 3.1. IN TAKING COST OF CONSTRUCTION AT RS.500 PER SQ. FEE T WHEN THE COST OF CONSTRUCTION PREVAILING IN AY 1996-97 IS ALREADY RECORDED AT RS.300 IN THE ORIGINAL ASSESSMENT ORD ER DATED 31-3-1999. 3.2. IN DISALLOWING 19.5% OF TOTAL INDEXED COST OF L AND PLUS SUPER STRUCTURE INSTEAD OF ONLY INDEXED COST OF LAND. 3.3. IN DENYING THE BENEFIT OF INVESTMENT I N RESIDENTIAL HOUSE UNDER SECTION 54 IN SPITE OF THE FACT THAT THE COST OF RESIDENTIAL HOUSE HAS BEEN RECKONED FOR THE COMPUTATION OF CAPITAL GAINS. 3.4. IN DISALLOWING 50% OF DEVELOPMENT COSTS INCURRED IN 1986. 4. THE ASSESSEE CRAVES LEAVE TO ADD AMEND OR DELETE ANY OF THE ABOVE GROUNDS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN IND IVIDUAL HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UN DER CONSIDERATION ON 24-2-1998 ADMITTING THEREIN THE NET INCOME OF ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 3 RS.24 17 750/-. THE SAID INCOME IS INCLUSIVE OF THE IN COME OFFERED UNDER THE HEAD CAPITAL GAINS TO THE TUNE OF RS.23 77 270/-. ON THE RETURN FILED BY THE ASSESSEE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED BY HE THEN ASSESSING OFFICER ON 31-3-1999 WHERE IN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.61 87 311/- AS AGAINST THE INCOME ADMITTED BY THE ASSESSEE. WHILE DETERMINING THE INCOME THE THEN ASSESSING OFFICER HAD NOT ACCEPTED THE INCOME RETU RNED BY THE ASSESSEE AND MADE CERTAIN ADDITIONS SO AS TO ARRIVE AT THE ABOVE INCOME FIGURE. THE RELEVANT FACTS OF THE CASE AS MENTIONED BY THE ASSESSING OFFICER ARE THAT THE ASSESSEE SRI VASUDEVA PILLAI BEING THE OWNER OF THE PROPERTY BEARING 16-8-927 MALAKPET HYDERABAD WHICH COMPRISES OF AN AREA OF 1900 SQ. YARDS HAD ENTERED INTO AN AGREEMENT WITH A DEVELOPER I.E. . SRI RAJENDER PERSHAD GOEL FOR CONSTRUCTION OF R ESIDENTIAL-CUM- COMMERCIAL COMPLEX. BESIDES THE SUPER STRUCTURE OF 5000 SQ. FEET ALONG WITH PROPORTIONATE LAND PROPOSED TO BE RECEIVED THE ASSESSEE RECEIVED AN AMOUNT OF RS.45 00 000 WHICH IS A NON REFUNDABLE DE POSIT AT THE TIME OF AGREEMENT. THE ASSESSEE FILED THE RETURN OF IN COME COMPUTING THE CAPITAL GAINS INVOLVED IN THIS TRANSACTION. WHILE A RRIVING AT THE CAPITAL GAINS THE ASSESSEE ESTIMATED THE COST OF THE SUPER STRUCTURE HE IS GOING TO RECEIVE FROM THE BUILDER AT RS.15 LAKHS AN D HE ADDED THIS VALUE TO THE AMOUNT OF RS.45 LAKHS HE HAD ALREADY RECE IVED FROM THE DEVELOPER. ACCORDINGLY HE TOOK AN AMOUNT OF RS.60 LA KHS AS SALE CONSIDERATION RECEIVED OR RECEIVABLE AND COMPUTED THE CAP ITAL GAINS. FROM THE CAPITAL GAINS SO ARRIVED HE DEDUCTED AN AMOUN T OF RS.13 50 000 WHICH IS THE ESTIMATED VALUE OF THE SUPER ST RUCTURE GOING TO RECEIVE FROM THE BUILDER AS DEEMED TO HAVE BEEN IN VESTED IN RESIDENTIAL PROPERTY AND ACCORDINGLY CLAIMED DEDUCTION UNDER SECTION 54 OF THE ACT. HOWEVER THE ASSESSING OFFICER ESTIMATED THE COST OF THE SUPER STRUCTURE WHICH IS GOING TO BE RECEIVED FROM THE B UILDER AT RS.32 00 000 AS AGAINST THE VALUE OF RS.15 LAKHS REFLE CTED BY THE ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 4 ASSESSEE AND COMPUTED THE CAPITAL GAINS. HE FURTHER MENTIO NED IN HIS ASSESSMENT ORDER THAT SINCE NO CONSTRUCTION TOOK PLACE EVEN A FTER EXPIRY OF 38 MONTHS BASING ON THE REPORT OF INSPECTOR AND DENI ED THE DEDUCTION CLAIMED UNDER SECTION 54 OF THE ACT. AGGRIEVED THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A) AND SUBMITTED THAT BECAUSE THE DEVELOPER HAS NOT COMMENCED ANY CONSTRUCTION THE AGREEME NT ENTERED WITH THE DEVELOPER WAS CANCELLED AND THEREFORE THERE WAS NO TRANSFER IN THE TRANSACTION INVOLVED. THE CIT (A) HAD HELD THAT THE ARGUMENT OF THE ASSESSEE IS CORRECT WITH REGARD TO TRANSFER HOWEVER HE HE LD THAT THE AMOUNT OF RS.45 LAKHS RECEIVED BY THE ASSESSEE SHOULD BE ASSE SSED UNDER SECTION 56(1) OF THE ACT. AGGRIEVED WITH THE OR DER OF THE CIT(A) THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER IN ITA NO.499/HYD/2002 DATED 9-5-2008 SET ASIDE THE ORDER OF THE CIT(A) AND SENT THE MATTER BACK TO HE FILE OF THE ASSE SSING OFFICER. MEANWHILE THE ASSESSING OFFICER HAD PASSED CONSEQUENTIAL ORD ER GIVING EFFECT TO THE ORDER OF THE CIT (A). THE ASSESSEE AGAIN FILED AN APPEAL AGAINST THE CONSEQUENTIAL ORDER WHICH WAS DISMISSED BY THE CIT (A). HE AGAIN TOOK THE MATTER TO TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER IN ITA NO.124/HYD/05 DATED 4-7-2008 SET ASIDE AND RESTORED TH E MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRE SH AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. AS PER THE DIRECTION OF THE TRIBUNAL THE CASE IS TAKEN UP SCRUTINY AND DETAI LS WERE CALLED FOR. IN RESPONSE TO THE NOTICES ISSUED THE AUTHORIZED REPRESE NTATIVE OF THE ASSESSEE APPEARED AND FURNISHED EXPLANATIONS AS PER THE D ETAILS SUBMITTED BY HE AR OF THE ASSESSEE IT IS OBSERVED THAT T HE ASSESSEE UNILATERALLY RESCIND THE AGREEMENT ENTERED INTO WITH THE DEVELOPER BECAUSE THE DEVELOPER HAS NOT PERFORMED HIS OBLIGATIONS. HOWEVER THE AP HIGH COURT GAVE FURTHER TIME TO THE DEVELOPER TO PERFORM HIS OBLIGATIONS STIPULATED IN THE ORIGINAL AGREEMENT. O N THIS JUDGMENT OF HIGH COURT HE ASSESSEE PREFERRED AN APPEAL BEFORE THE HO NBLE ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 5 SUPREME COURT. THE APEX COURT GRANTED STAY ON THE O PERATION OF THE HIGH COURT AND ALLOWED STATUS QUO ON THE PROPERTY VIDE ORDER DATED 5- 12-2005 AND HENCE AS PER THE INFORMATION SUBMITTED BY THE ASSESSEE NO FURTHER CONSTRUCTION TOOK PLACE ON THE SAID PROPERTY AND STATUS QUO IS BEING MAINTAINED. AT THIS JUNCTURE THE AR OF THE A SSESSEE ARGUED THAT THE DEPARTMENT HAS NOT PREFERRED APPEAL AGAINST THE O RDER PASSED BY THE CIT(A) WHERE IN THE CIT(A) HELD THAT THERE WAS N O TRANSFER OF CAPITAL ASSET THE DEPARTMENT CANNOT PROCEED TO TAX THE CAPITAL GAINS AGAIN TREATING THAT TRANSFER IS COMPLETE AND IT IS FURTHER SU BMITTED THAT THE AMOUNT OF RS.45 00 000 RECEIVED BY THE ASSESSEE ALSO CANNO T BE TAXED AS INCOME FROM OTHER SOURCES IN VIEW OF THE PROVISIONS OF SECTION 51 OF INCOME-TAX ACT AND AS PER THE RATIO LAID DOWN BY THE HO NBLE APEX COURT IN THE CASE OF M/S TRAVANCORE RUBER & TEA CO. LTD. VS. CIT (243 ITR 158). SINCE MANY INTRICACIES ARE INVOLVED IN HIS CASE T HE SAME IS REFERRED TO THE ADDL. CIT UNDER SECTION 144A VIDE THI S OFFICE LETTER DATED 5-6-2009 SEEKING DIRECTIONS. THE ADDL. CIT RANGE-6 HYDERABAD VIDE ORDER DATED 9-12-2009 ISSUED DIRECTION TO ASSESS THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAINS ONLY. THE ASSESSING OFFICER AFTER CONSIDERING THE FACTS OF THE CASE ELABORATELY IN HIS ORDE R DETERMINED THE INCOME OF THE ASSESSEE AT RS.54 87 311/- AS AGAINST THE RET URNED INCOME OF RS.24 17 750/- UNDER SECTION 143(3) OF THE AC T. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT (A). ON APPEAL THE CIT (A) BY DISCU SSING THE ISSUES ELABORATELY IN HIS ORDER DECIDED THE ISSUES AGAINST THE A SSESSEE. HENCE HE UPHELD THE DECISIONS OF THE ASSESSING OFFICER AND DISMISSE D THE APPEAL FILED BY THE ASSESSEE. FURTHER AGGRIEVED THE A SSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) GROSSLY ERRED IN LAW IN CONFIRMING THE ASSESSMENT UNDE R THE HEAD ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 6 CAPITAL GAINS IN REMAND ASSESSMENT WHEN THERE WAS CATEGORICA L FINDING RECORDED BY THE THEN CIT (A) IN EARLIER APPEAL ORDER DATED 22-1-2002 FOR THE SAME ASSESSMENT YEAR THAT THERE IS NO TRANSFER WITHIN THE MEANING OF SECTION 45 WHICH FINDING HAS ATTAINED FINALITY AS IT WAS NEVER CHALLENGED EITHER BY THE REVENUE OR BY THE ASSESSEE BEFO RE THE TRIBUNAL. IT IS FURTHER CONTENDED THAT THE CIT(A) GROSSLY ERRED IN LAW IN NOT APPRECIATING THE PROVISIONS OF SECTION 51 WHICH PROVIDES T HAT ANY AMOUNT RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF FAILED CAPITAL TRANSACTION IS TO BE REDUCED FROM COST OF ASSET AND THE CI T(A) ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE COMPUTATION OF CAPITAL GAINS BY TAKING COST OF CONSTRUCTION AT RS.500 PER SFT. WHEN THE CO ST OF CONSTRUCTION PREVAILING IN ASSESSMENT YEAR 1996-97 IS ALREA DY RECORDED AT RS.300 IN THE ORIGINAL ASSESSMENT ORDER DATED 31-3-19 99 AND IN DISALLOWING 19.5% OF TOTAL INDEXED COST OF LAND PLUS SUP ER STRUCTURE INSTEAD OF ONLY INDEXED COST OF LAND. IT IS FURTHER CON TENDED THAT DENYING THE BENEFIT OF INVESTMENT IN RESIDENTIAL HOUSE UNDER SECTION 54 IN SPITE OF THE FACT THAT THE COST OF RESIDENTIAL HOUSE H AS BEEN RECKONED FOR THE COMPUTATION OF CAPITAL GAINS AND HE IS NOT JUS TIFIED IN DISALLOWING 50% OF DEVELOPMENT COSTS INCURRED IN 1986. 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL RE PRESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ARGUMENT OF THE LE ARNED COUNSEL FOR THE ASSESSEE THAT FIRST APPELLATE AUTHORITY NOT RIGHT IN CONFIRMING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER THE HEA D CAPITAL GAINS IN REMAND ASSESSMENT WHEN THERE WAS CATEGORICAL FINDI NG RECORDED BY THE THEN CIT (A) IN EARLIER APPEAL ORDER DATED 22-1-2002 FOR THE SAME ASSESSMENT YEAR THAT THERE IS NO TRANSFER WITHIN THE MEANING ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 7 OF SECTION 45 WHICH FINDING HAS ATTAINED FINALITY AS IT WAS NEVER CHALLENGED EITHER BY THE REVENUE OR BY THE ASSESSEE BEFO RE THE TRIBUNAL. THE FACT THAT NO SECOND APPEAL WAS PREFERRED BY THE DEP ARTMENT AGAINST CIT (A)S ORDER DATED 22-1-2002 IS HAS NO ANY SIGNIFICAN CE AS THE ENTIRE MATTER HAS BEEN REVERTED BACK TO THE ASSESSING OFFICER F OR FRESH ADJUDICATION ON THIS MATTER. THERE CAN BE VARIOUS REASO NS WHY IN THE LIGHT OF FACTS AVAILABLE AT THAT TIME THE DEPARTMEN T NOT DECIDED TO CHALLENGE THE ORDER OF THE CIT (A). ONE OF THE REASO NS MAY BE BECAUSE CIT (A) BROUGHT TO TAX AN AMOUNT OF RS.45 LAKHS UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE THE ENTIRE MATTER WAS REMAND ED BACK TO THE ASSESSING OFFICER BY THE TRIBUNAL THE ORDER OF THE CIT( A) HOLDING THAT THERE WAS NO TRANSFER BECOME REDUNDANT. ONCE THE MATTE R IS OPENED BEFORE THE ASSESSING OFFICER FOR FRESH ADJUDICATION HE CAN VERY WELL ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE SUBSEQUENT DISPUTES HAVE NO EFFECT IN THE INCIDENT OF THE TRANSFER OF PROPERTY WHICH HAD ALREADY TAKEN PLACE IN THE FINANCIAL YEAR 1995-96 . AS PER THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF D R. MAYA SHENOY VS. ACIT (ITA NO.266/HYD/2005 DATED 24-10-2008) IT IS C LEAR THAT THE FIRST PHASE OF THE CAPITAL GAINS HAS TO BE COMPUTED IN THE YEA R IN WHICH THE ASSESSEE ENTERS INTO AN IRREVOCABLE AGREEMENT. IN THE CASE UNDER CONSIDERATION IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT CUM SALE AGREEMENT WITH THE DEVELOPER ON 25-1-1996 WHICH WAS EVIDENCED FROM THE DEVELOPMENT CUM SALE AGR EEMENT CUM IRREVOCABLE POWER OF ATTORNEY AND THE ASSESSEE HAD ALSO H ANDED OVER THE PROPERTY TO THE DEVELOPER AS PER THE SAID AGREEME NT. THE ASSESSEE ALSO RECEIVED THE SUM OF RS.45 LAKHS AS PART OF THE CONSIDE RATION IN LIEU OF THE LAND OFFERED FOR DEVELOPMENT AND FOR SALE PUR POSE WHICH WAS NON REFUNDABLE. IT IS ALSO AN ADMITTED FACT THAT THE DEV ELOPER EVEN DEMOLISHED THE PREMISES. UNDER THE CIRCUMSTANCES EVEN IF THE ASSESSEE UNILATERALLY RESCINDED THE SAID AGREEMENT ON ACCOU NT OF THE ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 8 FACT THAT THE DEVELOPER DID NOT CARRY OUT THE CONSTRUCT ION EVEN AFTER 38 MONTHS IT CANNOT BE SAID THAT THE DEVELOPMENT CUM SAL E AGREEMENT CUM IRREVOCABLE POWER OF ATTORNEY HAD CEASED TO EXIST. IT IS ALSO A FACT THAT RECOGNIZING THE LEGAL SANCTITY OF THE SAME THE HO NBLE JURISDICTIONAL HIGH COURT HAS GRANTED FURTHER TIME TO DEVELOP PERFOR MING HIS OBLIGATIONS AS STIPULATED THEREIN. FURTHER EVEN THE HONBLE SUPREME COURT HAD ALLOWED ONLY STATUS QUO ON THE PROPERTY AND THESE FACTS CLEARLY ESTABLISH THAT HE DEVELOPMENT CUM SALE AGREEMEN T UNILATERALLY RESCINDED BY THE ASSESSEE IS A VALID AND LEGAL DOCUMENTATI ON AND IS TO CARRY ITS SIGNIFICANCE FROM THE DATE IT WAS SIGNED I.E. O N 25-1-1996. IN OUR CONSIDERED VIEW THE ISSUE IS COVERED AGAINST THE ASSESSE E BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF DR. MAYA SHENOY (SUPRA). ACCORDINGLY THE CAPITAL GAIN IN THE SAID TRANSACTION HA S TO BE COMPUTED DURING THE ASSESSMENT YEAR RELEVANT TO THE FINANCIAL YEA R 1995-96. IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL MENTIONE D SUPRA THE FIRST PHASE OF THE CAPITAL GAINS IN THE SAID TRANSACTION HAS TO BE COMPUTED DURING THE ASSESSMENT YEAR RELEVANT TO THE FINANCIAL YEA R 1995-96 I.E. FOR ASSESSMENT YEAR 1996-97. IN VIEW OF THE ABOVE WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AND HENCE WE CONFIRM THEIR FINDINGS ON THIS ISSUE. SINCE WE HELD THAT THE AMO UNT RECEIVED BY THE ASSESSEE IS TAXABLE UNDER THE HEAD CAPITAL GAINS THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO THE PROVISIONS OF SECTION 51 OF THE ACT BECOMES INFRUCTUOUS AND ACCORDINGLY THE SAME IS REJECTED. HE NCE THESE GROUNDS ARE DECIDED AGAINST THE ASSESSEE. 7. NOW WE WILL TAKE UP THE ALTERNATIVE GROUNDS TAK EN BY THE ASSESSEE WITH REGARD TO THE COST OF CONSTRUCTION CONSIDERED BY THE ASSESSING OFFICER AT RS.500/- PER SFT. AS AGAINST COST OF CON STRUCTION WHICH WAS RECORDED AT RS.300/- PER SFT. IN THE ORIGINAL ASSESSMENT ORDER DATED 31.03.1999 AS PREVAILED DURING THE ASSESSME NT YEAR UNDER ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 9 CONSIDERATION. WE FIND FROM THE ORIGINAL ASSESSMENT ORD ER PASSED BY THE ASSESSING OFFICER DATED 31-3-1999 EVEN THOUGH THE A SSESSING OFFICER MENTIONED THAT AS PER THE AVAILABLE DATA IN HIS OFF ICE THE COST OF CONSTRUCTION IS RS.300/- PER SFT. BUT FINALLY CONCLUDED TH AT RS.600/- PER SFT. IS THE PREVAILING MARKET RATE AT THE RELEVA NT POINT OF TIME FOR THE RESIDENTIAL FLATS. AFTER CONSIDERING THE TOTALITY OF F ACTS AND THE CIRCUMSTANCES OF THE CASE IN OUR VIEW ENDS OF JUSTICE WOULD BE MET IF THE COST OF CONSTRUCTION IS TAKEN AT RS.400/- PER SFT. AS AGAINST RS.300/- PER SFT. CLAIMED BY THE ASSESSEE AND RS.500/- ADOPTED BY THE ASSESSING OFFICER IN THE PRESENT ASSESSMENT PROCEEDINGS. 8. WITH REGARD TO THE DISALLOWANCE OF 19.5% OF THE T OTAL INDEXED COST OF LAND PLUS SUPER STRUCTURE INSTEAD OF TAKI NG ONLY INDEXED COST OF LAND WE FIND THAT THE CIT (A) NOTICED FROM TH E AGREEMENT ENTERED BETWEEN THE DEVELOPER AND THE ASSESSEE THAT THE ASSESSEE WAS TO GET 5000 SFT. TOGETHER WITH PROPORTIONATE LAND A ND HENCE OUT OF 1900 SQ. YARDS THE ASSESSEE HAD NOT TRANSFERRED PROPORTIONATE LAND OF 5000 SFT. WHICH WORKS OUT TO 19.5% OF THE TOTAL LAND. ACCOR DINGLY THE LOWER AUTHORITIES DID NOT ALLOW THE PROPORTIONATE COST OF LA ND AND PROPORTIONATE IMPROVEMENT CLAIMED AS EXEMPTION FROM THE VALUE OF SA LE CONSIDERATION. ACCORDINGLY WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AND HENCE THE SAME ARE CONFIRMED. HENCE THI S GROUND OF THE ASSESSEE IS REJECTED. 9. WITH REGARD TO DENIAL OF BENEFIT OF INVESTMENT IN RESIDENTIAL HOUSE UNDER SECTION 54 OF THE ACT WE FIND THAT THE C IT(A) OBSERVED THAT THE PROVISIONS OF SECTION 54 HAVE BEEN BROUGHT ON THE STATUTE WITH THE SPECIFIC PURPOSE OF PROMOTING RESIDENTIAL HOUSING AND THE MERE FACT THAT SUBSTANTIAL INVESTMENT WAS MADE TOWARDS SALE CANNOT BE CONSTRUED AS CONSTRUCTION OF A NEW RESIDENTIAL UNIT AND FURTHER FO UND THAT THE ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 10 ASSESSEE WAS NOT TO PAY ANY FURTHER AMOUNT TO THE BUILD ING AND THE VALUE OF CONSTRUCTION HAD BEEN TAXED NO RESIDENTIAL UN IT HAD PHYSICALLY COME INTO EXISTENCE AND THEREFORE HE DECIDED AGAINST TH IS ISSUE AGAINST THE ASSESSEE. WE FIND MERIT ON THE OBSERVATIONS AND FINDI NGS OF THE LEARNED CIT [A]. AFTER CONSIDERING THE FACTS AND THE CI RCUMSTANCES OF THE CASE ON THIS ISSUE WE DO NOT FIND ANY FLAW IN THE FINDINGS OF THE CIT (A) AND HENCE WE UPHOLD HIS FINDING AND REJECT THE GR OUND RAISED BY THE ASSESSEE ON THIS ISSUE. 10. THE LAST GROUND OF APPEAL IS WITH REGARD TO THE DISALLOWANCE OF THE 50% OF THE DEVELOPMENT EXPENSES INCURRED IN 198 6. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS CONTENDED BE FORE THE CIT (A) THAT IN VIEW OF THE SITUATION OF THE LAND AND TH E FAIR MARKET VALUE AS ON 1-4-1981 THE ASSESSEES CLAIM REGARDING DEVELOPMENT M ADE IN THE PROPERTY IN 1986 CANNOT BE DOUBTED AND FURTHER CONTE NDED THAT THE ASSESSEE DID NOT KEEP ANY RECORD OF THE SAME AS THE COST IS C LAIMED AS INCURRED OUT OF HIS SAVINGS. THE CIT(A) HELD THAT IN THE ABSENCE OF ANY RECORD OF THE EXPENDITURE OR ANY OTHER EVIDENCE IN TH IS REGARD CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO THE DISALLOWANCE OF 50% OF THE DEVELOPMENT COST INCURRED IN 1986. THE DISALLOWANCE WAS RIGHTLY MADE BY THE LOWER AUTHORITIES IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. IF THE ASSESSEE REALLY HAD ANY DOCUMENTARY EVIDENCE FOR THE DEVELOPMENT EXPENDITURE INCURRED BY HIM HE COULD HAVE VERY WELL PRODUCED BEFORE US. THE ASSESSEE FAILS TO D O SO. IN VIEW OF THE ABOVE WE DO NOT SEE ANY INFIRMITY IN THE ORD ERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND ACCORDINGLY THE SAME ARE UPH ELD. ITA 1257/HYD/10 R. VASUDEV PILLAI HYD. 11 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED IN PART. ORDER WAS PRONOUNCED IN THE COURT ON - -01-20 11. (N.R.S. GANESAN) (AKBER BASHA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 01-2011 COPY FORWARDED TO: 1. SRI R. VASUDEV PILLAI C/O R.G. SARDA & ASSOCIATES CAS 214 PARAS CHAMBERS 3-5-890 HIMAYATNAGAR HYDERABAD. 2. 3. 4. AO WARD-6(3) IT TOWERS HYDERABAD. CIT (A)-IV HYDERABAD. CIT A P HYDERABAD. 5. THE D.R. ITAT HYDERABAD JMR