Ravikumar Tirupati Parthasarathy Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that merely for the reason that the assignment agreement is not registered, the actual outflow from the hands of the assessee towards acquisition of the property cannot be ignored for computing the capital gains.
Facts-
The assessee is a non-resident individual working in Netherlands. The case was selected for scrutiny. The assessee being an eligible assessee as per the provisions of section 144C of the Act, the AO completed the assessment u/s. 143(3) r.w.s. 144C by issuing a draft assessment order in which an addition of Rs.52,89,346 was made towards capital gains. Aggrieved, the assessee filed its objections before the DRP, who confirmed the said addition. AO in the final assessment order considered the correct indexation value of the year of acquisition and revised the addition to Rs.64,60,469. The assessee is in appeal before the Tribunal against the final order of assessment in accordance with the directions of the DRP.
The only issue contended in this appeal through various grounds raised by the assessee is the cost of acquisition considered by the AO at Rs.49,08,340 as against Rs.70,00,000 considered by the assessee while computing the capital gains.
Conclusion-
Held that we see merit in the argument that merely for the reason that the assignment agreement is not registered, the actual outflow from the hands of the assessee towards acquisition of the property cannot be ignored for computing the capital gains.
It is further noticed that the assessee has claimed several items towards cost of improvement for which bills and invoices were submitted before the AO. However, the breakup of the amount considered by the AO as of acquisition i.e.Rs.40,94,980 is not available on record and the reference given in the assessment order also does not provide any clarity on how this amount is arrived at. In view of this discussion we remit the issue back to the AO for arriving at the cost of acquisition with proper breakup. The AO while doing so is directed to consider the actual amount paid by the assessee as per the Assignment Agreement including amounts paid to L& T and stamp duty based on evidences / supporting documents submitted in this regard. The AO is also directed to verify the bills and documents with regard to cost incurred towards brokerage of Rs.1,55,000, interiors, painting etc., and consider these amounts for the purpose of arriving at the capital gains in accordance with law. Needless to say that the assessee may be given an opportunity of being heard.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is against the final order of assessment passed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] dated 14.7.2022 for the assessment year 2019-20.
2. The assessee is a non-resident individual working in Netherlands. The assessee filed the return of income for the AY 20 19- 20 on 20.7.2019 admitting total income of Rs.2,95,600. The case was selected for scrutiny. The assessee being an eligible assessee as per the provisions of section 144C of the Act, the AO completed the assessment u/s. 143(3) r.w.s. 144C by issuing a draft assessment order in which an addition of Rs.52,89,346 was made towards capital gains. Aggrieved, the assessee filed its objections before the DRP, who confirmed the said addition. The AO in the final assessment order considered the correct indexation value of the year of acquisition and revised the addition to Rs.64,60,469. The assessee is in appeal before the Tribunal against the final order of assessment in accordance with the directions of the DRP.
3. The only issue contended in this appeal through various grounds raised by the assessee is the cost of acquisition considered by the AO at Rs.49,08,340 as against Rs.70,00,000 considered by the assessee while computing the capital gains.
4. The assessee also raised additional grounds with regard to maintainability of the draft assessment order for opting DRP route for a non-resident for the year under consideration and also for AO not considering the brokerage / selling expenses of Rs. 1,55,000 while computing capital gains.
5. The additional grounds raised are pure legal issue, which does not require investigation of new facts. Hence, placing reliance on the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), we admit the additional grounds.
6. We notice that as per the Explanatory Memorandum to Finance Bill, 2020, though the amendment to include non-residents as eligible assessee with effect from 1.4.2020, it is mentioned that, “if the AO proposes to make any variation after this date, in case of eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable”. This would mean that all pending assessments for which orders are passed after 1.4.2020, would get covered by the amended section of 144C whereby the non-residents would be eligible assessees for taking up the DRP route. In assessee’s case, the AO has issued the draft assessment order on 27.9.2021 and accordingly the amended provisions of section 144C would become In view of this, the additional ground raised by the assessee is dismissed.
7. We will now consider the issue on merits. During the year under consideration, the assessee sold a property for a consideration of 1,55,00,000. In the statement of income the assessee computed the capital gain as under:-
