SAROJ DEVI AGARWAL, Jaipur V. ITO, Jaipur

CO 10/JPR/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3246 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 18-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA SINGH
• Assessee Lawyers: S L PODDAR DHK
• Keywords: Capital asset; Additional evidence; Competent authority; Reassessment proceedings
• Section: 143(3); 54F; 147; 148; 54; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 397/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE INCOME TAX OFFICER, WARD-1(2) JAIPUR. CUKE VS. SMT. SAROJ DEVI AGARWAL, 5, MAHA LAXMI MARKET, NATANIYON KA RASTA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPA 7478 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ C.O. NO. 10/JP/2016 ( ARISING OUT OF ITA NO. 397/JP/2016 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. SMT. SAROJ DEVI AGARWAL, 5, MAHA LAXMI MARKET, NATANIYON KA RASTA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD-1(2) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPA 7478 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA SINGH (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.09.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 05/10/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE BY THE REVENUE IS FILED AGAINST THE ORDER OF LD. CIT (A)-I, JAIPUR DATED 05.02.2016 PERTAINING TO ASSESSMENT YE AR 2009-10 WHEREAS THE ASSESSEE HAS FILED THE CROSS OBJECTION. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL : 2 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING THE D EDUCTION U/S 54F OF RS. 54,12,140/-. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ADMITTING ADDITIO NAL EVIDENCE IN VIOLATION OF PROVISIONS OF RULE 46A OF I.T. RULES, 1962. THE APPELLANT CRAVES THE INDULGENCE TO MODIFY, ALTE R, ADD ANY OTHER GROUND OF APPEAL. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS RE- OPENED AFTER RECORDING REASONS AND ISSUING NOTICE U NDER SECTION 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE A CT, 1961. ORIGINALLY THE ASSESSMENT WAS COMPLETED ON 14.11.2011 UNDER SECTIO N 143(3) OF THE ACT ON THE RETURNED INCOME OF RS. 9,00,540/-. IN THE RETURN F ILED UNDER SECTION 139(1) OF THE ACT, THE ASSESSEE CLAIMED DEDUCTION OF RS. 54,12,14 0/- UNDER SECTION 54F OF THE ACT AGAINST LONG TERM CAPITAL GAIN OF RS. 54,12,140/- O N SALE OF PLOT OF LAND FOR RS. 58,60,000/- ON THE GROUND THAT SALE CONSIDERATION W AS INVESTED IN CONSTRUCTION OF HOUSE PROPERTY SITUATED AT PLOT NO. 3, NEW COLONY, M.I. ROAD, JAIPUR. LATER ON, FINDING THAT THE CLAIM OF DEDUCTION U/S 54F WAS NOT ADMISSIBLE TO THE ASSESSEE, AFTER RECORDING REASONS, NOTICE UNDER SECTION 148 OF THE ACT WAS SERVED ON THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE SUBMITTED THAT TH E RETURN FILED UNDER SECTION 139(1) ON 30.07.2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148. THE ASSESSING OFFICER FINALIZED THE AS SESSMENT UNDER SECTION 143(3)/147 OF THE ACT BY DISALLOWING THE DEDUCTION CLAIMED UNDER SECTION 54F OF THE ACT OF RS. 54,12,140/-. AGGRIEVED BY THIS, THE ASS ESSEE PREFERRED AN APPEAL BEFORE 3 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 3. GROUND NO. 1 AND 2 RELATES TO ALLOWING DEDUCTION U/S 54F OF RS. 54,12,140/- AND ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF P ROVISIONS OF RULE 46A OF IT RULES, 1962 RESPECTIVELY. 3.1. THE LD. D/R SUPPORTED THE ORDER OF THE ASSESSI NG OFFICER AND SUBMITTED THAT THE ASSESSEE COULD NOT SATISFY THE REQUIREMENT OF P ROVISIONS OF SECTION 54F FOR CLAIMING THE DEDUCTION. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ZORASTER AND COMPANY VS. CIT, (1987) 163 ITR 858 (RAJ.). 3.2. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE WRITTEN SUB MISSIONS OF THE ASSESSEE ARE AS UNDER :- 1. THERE IS NO DISPUTE TO THE FACT THAT A RESIDENTIAL HOUSE WAS CONSTRUCTED BY THE ASSESSEE. THE ONLY DISPUTE IS WHETHER A RESIDENTIAL HOUSE, CONSTRUCTED ON A COMMERCIAL PLOT IS ELIGIBLE FOR DEDUCTION U/S 54F. THE ASSESSEE SUBMITS THAT THERE IS PLETHORA OF DECI SIONS TO PROCLAIM THAT, WHAT IS MOST VITAL IN SECTION 54F, IS THE INVESTMENT IN PURCHASE / CONSTRUCTION OF A RESIDENTIAL HOUSE. SOME OF THEM ARE LISTED HEREUNDER TO SUPPORT THE CO NTENTION OF THE ASSESSEE- I. SHYAM SUNDER MAKHIJA VS. ITO [38 ITD 125 (JAIPUR IT AT)] A FARM HOUSE, ACCORDING TO THE DICTIONARY MEANING, IS A FARMERS HOUSE ATTACHED TO A FARM. IN THE PRESENT CASE THERE IS NO EVIDENCE THAT THERE WAS ANY FARM IN EXISTENCE. THE ASSESSEE HAD P AID RS. 7560 ON 7TH APRIL,1984 AS CONVERSION CHARGES. HE AGAIN PAID RS. 4200 AS DEVELOPMENT CHARGES. THE EXPRESSION RESIDENTIAL HO USE USED IN S. 54F HAS NOT BEEN DEFINED. THE POPULAR MEANING OF THE WO RD HOUSE IS A PLACE OR BUILDING USED FOR HABITATION OF MAN. 'RESI DENTIAL HOUSE' IS A DWELLING HOUSE AS DISTINCT FROM A HOUSE OF BUSINESS , WAREHOUSE, OFFICE, SHOP, ETC. IN OTHER WORDS, RESIDENTIAL HOUSE IS A B UILDING USED AS A 4 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. PLACE OF ABODE IN WHICH PEOPLE RESIDE OR DWELL IN C ONTRA-DISTINCTION TO ONE WHICH IS USED FOR COMMERCIAL OR BUSINESS PURPOS ES. A FARM HOUSE IS ALSO A RESIDENTIAL HOUSE. THEREFORE, THE ITO COU LD NOT TAKE THE VIEW THAT WHAT WAS IN EXISTENCE COULD NOT BE CALLED AS A RESIDENTIAL HOUSE. SINCE A HOUSE IS CALLED RESIDENTIAL HOUSE WITH REFE RENCE TO THE PURPOSE OF ITS USER, IT MAY NOT BE NECESSARY THAT SOMEBODY SHOULD LIVE IN IT CONTINUOUSLY. IT IS ENOUGH IF IT WAS A HOUSE FOR RE SIDENCE. THE DESCRIPTION OF THE CONSTRUCTION, WHICH IS NOT IN DI SPUTE, SHOWS THAT IT WAS A COMPLETE UNIT HAVING A BIG HALL, KITCHEN, TOI LET AND VERANDAH NOTWITHSTANDING THE SIZE OF THE SWIMMING POOL, WHIC H WAS ALSO THERE. AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, T HERE WAS NO PROHIBITION REGARDING THE CONSTRUCTION OF A RESIDEN TIAL HOUSE ON AGRICULTURAL LAND. THEREFORE, THE ASSESSEE IS ENTIT LED TO THE DEDUCTION CLAIMED UNDER S. 54F, THERE BEING NO OTHER ASPECT O R OBJECTION FROM THE SIDE OF THE DEPARTMENT ABOUT THE CLAIMING OF SU CH DEDUCTION. THE AO IS ACCORDINGLY DIRECTED TO DEAL WITH THE MATTER OF ASSESSABILITY OF THE CAPITAL GAINS TAKING INTO CONSIDERATION THE EXE MPTION ALLOWABLE TO THE ASSESSEE UNDER S. 54F II. ACIT VS. OM PRAKASHGOYAL [ 53 SOT 158 (JAIPUR ITAT) ] BENEFIT OF S. 54F CANNOT BE DENIED ON GROUND THAT L AND ON WHICH CONSTRUCTION WAS DONE WAS AGRICULTURAL IN NATUREAL L THE CONDITIONS FOR CLAIMING EXEMPTION U/S. 54F HAVE BEEN FOUND SAT ISFIEDIT IS ESTABLISHED THAT ASSESSEE PURCHASED A PLOT OF LAND AND THEN CONSTRUCTED A RESIDENTIAL HOUSE ON ITHOUSE CONSTRU CTED ON AGRICULTURAL LAND OR ON OTHER LAND DOES NOT MATTER, BUT THE FACT THAT HOUSE SHOULD BE CONSTRUCTEDTHEREFORE, ORDER OF CIT (A) CONFIRMED REVENUES APPEAL DISMISSED III. SMT. SUNITA OBEROI VS. INCOME TAX OFFICER (2009) 30 DTR 474 CAPITAL GAINSEXEMPTION UNDER S. 54FINVESTMENT IN PROPERTY SITUATED IN A COMMERCIAL BLOCK VIS-A-VIS RESIDENTIA L USEWHEN A HOUSE IS LOCATED IN A COMMERCIAL COMPLEX, IT CANNOT BE AC CEPTED THAT IT IS A RESIDENTIAL HOUSE OR THAT IT WAS USED FOR RESIDENTI AL PURPOSES, IN THE ABSENCE OF ANY EVIDENCE ON RECORD IN SUPPORT OF USE R OF THE HOUSE AS A 5 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. RESIDENCE OF THE ASSESSEEASSESSEE HAS GIVEN A DIFF ERENT ADDRESS IN HER RETURNIF SHE WAS REALLY STAYING IN THAT PROPER TY, SHE SHOULD HAVE GIVEN THAT ADDRESS AS HER HOME ADDRESS IN THE RETUR NNO DOCUMENTARY EVIDENCE VIZ., RATION CARD, BANK PASS B OOK, DRIVING LICENCE, ETC. WAS FURNISHED BY THE ASSESSEE TO SUBS TANTIATE HER CLAIM ON THE CONTRARY, SHE HAS BEEN RECEIVING RENTAL INCO ME FOR THE SAME PROPERTY AND IT WAS FOUND THAT THE PROPERTY WAS BEI NG USED ONLY FOR COMMERCIAL PURPOSE BY ASSESSEE'S HUSBANDFURTHER, N O OTHER PERSON WAS STAYING IN THIS BLOCK AND USING THE PROPERTY FO R RESIDENTIAL PURPOSETHEREFORE, IT CANNOT BE ACCEPTED THAT THIS PROPERTY WAS USED FOR RESIDENTIAL PURPOSES AND EXEMPTION UNDER S. 54F CANNOT BE ALLOWED IN RESPECT OF INVESTMENT IN THE SAID PROPER TY. IV. B SIVA SUBRAMANIUM VS. ITO [ ITA NO. 01/MDS/2013 (I TAT CHENNAI) 2014] HEREIN WHILE DISCUSSING THE ISSUE OF ALLOWABILITY O F DEDUCTION U/S 54F, THE HONBLE ITAT HELD AS UNDER: THE PROVISIONS OF SECTION 54F MANDATES THE CONSTRUC TION OF A RESIDENTIAL HOUSE, WITHIN THE PERIOD SPECIFIED. HOW EVER, THERE IS NO CONDITION THAT THE BUILDING PLAN OF THE RESIDENTIAL HOUSE CONSTRUCTED SHOULD BE APPROVED BY THE MUNICIPAL CORPORATION OR ANY OTH ER COMPETENT AUTHORITY. IF ANY PERSON CONSTRUCTS A HOUSE WITHOUT APPROVAL OF BUILDING PLAN, HE WILL BE RAISING CONSTRUCTION AT HIS OWN RI SK AND COST. AS FAR AS FOR AVAILING EXEMPTION U/S.54F, APPROVAL OF BUILDING PL AN IS NOT NECESSARY. THE APPROVED BUILDING PLAN, CERTIFICATE OF OCCUPATION E TC. ARE SOUGHT TO SUBSTANTIATE THE CLAIM OF NEW CONSTRUCTION THUS IN THE CASE OF THE ASSESSEE THE OBJECTION RAIS ED BY THE ASSESSING OFFICER THAT THE APPROVAL OF PLAN BY THE JMC WAS ON LY FOR COMMERCIAL COMPLEX AND SO THE RESIDENTIAL HOUSE RAISED ON SUCH LAND WAS NOT ELIGIBLE FOR DEDUCTION U/S 54F IS NOT SUSTAINABLE, AND THE DEDUCTION IS RIGHTLY CLAIMED, AS THERE IS NO DISPUTE TO THE FACT THAT A RESIDENTIAL HOUSE HAS BEEN RAISED, AND THE COST OF CONSTRUCTION IS SUBSTANTIATED WITH THE VALUERS REPORT FILED DURING THE ORIGINAL ASSESSMENT 6 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. PROCEEDINGS. ALSO FURTHER THAT THE ASSESSEE WAS USI NG THE SAID PREMISES FOR RESIDENTIAL PURPOSES, AND HAD THE ADDR ESS OF THE SAID PREMISES ON HER RATION CARD ETC. [SEE PG. 43 OF PAP ER BOOK] THUS THE OBJECTION RAISED BY THE ASSESSING OFFICER REGARDING NON ADMISSION OF THE CLAIM U/S 54F ON THE ABOVE GROUND IS NOT SUSTAINABL E. 2. THE ASSESSEE HAS SUBMITTED THE DECLARATION IN THE F ORM OF AFFIDAVIT, BY THE CO- OWNERS OF THE LAND, SAYING THAT THE ASSESSEE WAS TH E ABSOLUTE OWNER OF THE CONSTRUCTION ON THE 1 ST AND 2 ND FLOOR WHICH CONSISTED OF THE RESIDENTIAL UNIT OF T HE ASSESSEE [ PAPER BOOK PAGE NO. 40.] THUS THE OWNERS HIP OF THE SAID RESIDENTIAL HOUSE VESTS COMPLETELY WITH THE ASSESSEE.. 3. ALSO THE ASSESSING OFFICER HIMSELF AT PARA 2 (A) OF THE SHOW CAUSE NOTICE ISSUED PURSUANT TO THE NOTICE U/S 148, AND REPRODUCED IN T HE ASSESSMENT ORDER FRAMED U/S 143(3) R.W.S. 148 AT PAGE 3 HAS STATED AS UNDER: A) YOU HAVE CLAIMED CONSTRUCTION OF BUILDING ( GROUND, 1 ST AND 2 ND FLOOR) ON PLOT NO. 3, NEW COLONY, JAIPUR HAVING AREA OF 846 SQ. YA RDS WHICH WAS PURCHASED IN JUNE, 1990 FROM ONE SMT. NILOFAR BEGUM QUARESHI, AS PER SALE DEED LYING ON RECORD. AS PER THIS SALE DEED, YOUR SHARE IN THE LA ND IS 1/8 TH ON PERUSAL OF THE ABOVE FINDING OF THE ASSESSING OF FICER IT IS VERY CLEAR THAT SHE WAS THE OWNER OF THE LAND WITH 1/8 TH PORTION, ON WHICH SHE HAD CONSTRUCTED THE BUILDING , THUS THE OBJECTION RAISED REGARDING THE OWNERSHIP OF THE SAID RESIDENTIAL HOUSE STANDS QUASHED. 4. AS REGARDS THE OBJECTION OF THE ASSESSING OFFICER T HAT THE CONSTRUCTION OF THE RESIDENTIAL HOUSE HAD STARTED 7 MONTHS BEFORE THE S ALE OF PLOT, THE ASSESSEE HUMBLY SUBMITS THAT, IT HAS HELD AS UNDER BY THE HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. H K KAPOOR [150 CTR 128], P ERUSAL OF THE ABOVE PROVISION WILL SHOW THAT IT DOE S NOT LAY DOWN THAT THE CONSTRUCTION OF ANY HOUSE MUST BE BEGUN AFTER THE S ALE OF THE OLD RESIDENTIAL HOUSE AND THAT THE SALE PROCEEDS OF THE OLD RESIDEN TIAL HOUSE MUST BE USED FOR THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE. WE A RE, THEREFORE, OF THE OPINION THAT THE ASSESSEE COMPLIED WITH THE REQUIRE MENT OF THE S. 54 IN RESPECT OF THE CONSTRUCTION OF THE HOUSE AT 64 SURY A NAGAR, AGRA AND THAT HE IS ENTITLED TO THE EXEMPTION OUT OF THE CAPITAL GAI NS FROM THE SALE OF THE HOUSE AT GOLF LINK TO THE EXTENT OF THE COST OF CONSTRUCT ION OF THE HOUSE AT 64, SURYA NAGAR, AGRA. WE, THEREFORE, DIRECT THE ITO TO MODIF Y THE ASSESSMENT ACCORDINGLY.' THE QUESTION FOR CONSIDERATION IS WHETHER EXEMPTION ON CAPITAL GAINS COULD BE REFUSED TO THE ASSESSEE SIMPLY ON THE GROUND THAT T HE CONSTRUCTION OF THE SURYA NAGAR, AGRA HOUSE HAD BEGUN BEFORE THE SALE O F THE GOLF LINK HOUSE. 7 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE T HE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. J.R. SUBRAMANYABHAT (1987) 64 CTR (KAR) 286 : (1987) 165 ITR 571 (KAR) : TC 22R.219 . IN THE CASE BEFORE THE KARNATAKA HIGH COURT, THE DATE OF THE SALE OF THE OLD BUILDIN G WAS 9TH FEB., 1977. THE COMPLETION OF THE CONSTRUCTION OF THE NEW BUILDING WAS IN MARCH, 1977, ALTHOUGH THE COMMENCEMENT OF CONSTRUCTION STARTED I N 1976. ON THESE FACTS, THE KARNATAKA HIGH COURT HELD THAT IT WAS IMMATERIA L THAT THE CONSTRUCTION OF THE NEW BUILDING WAS STARTED BEFORE THE SALE OF THE OLD BUILDING. WE FULLY AGREE WITH THE VIEW TAKEN BY THE KARNATAKA HIGH COU RT. THE TRIBUNAL WAS RIGHT IN HOLDING THAT CAPITAL GAINS ARISING FROM TH E SALE OF THE GOLF LINK HOUSE TO THE EXTENT IT GOT INVESTED IN THE CONSTRUCTION O F THE SURYA NAGAR HOUSE, WILL BE EXEMPTED UNDER S. 54 OF THE ACT THUS, THE OBJECTION THAT CONSTRUCTION WAS STARTED B EFORE THE SALE OF ASSET IS ALSO NOT SUSTAINABLE. BASED ON ABOVE CONTENTIONS THE ASSESSEE HUMBLY SUBM ITS THAT, THE CLAIM FOR DEDUCTION U/S 54F HAS BEEN CORRECTLY MADE BY THE ASSESSEE, AN D HENCE OUGHT TO BE ALLOWED AS PER THE ORIGINAL ASSESSMENT ORDER. 3.3. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D THAT THE LD. CIT (A) HAD DEALT WITH THE ISSUES AT LENGTH AT PARA 3.2.2 AT PAGES 14 TO 22 OF HIS ORDER AND TAKING INTO CONSIDERATION VARIOUS PRONOUNCEMENTS OF HONBLE SUP REME COURT, HIGH COURTS AND THE TRIBUNAL ALLOWED THE DEDUCTION. THE OBSERVATION S OF THE LD. CIT (A) ARE REPRODUCED AS SUNDER :- 3.2.2 DETERMINATION (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATI ON, THE APPELLANT HAS SOLD A PLOT OF LAND AT TARRUCHHAYA NAGAR AND CLAIME D DEDUCTION OF LTCG U/S 54F, FOR THE CONSTRUCTION OF 1 ST AND 2 ND FLOORS AT 3, NEW COLONY, MI RAOD, JAIPUR. THE BASEMENT, GROUND FLOOR AND THE THIRD FLOOR 8 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. OF THE SAID PROPERTY ARE USED BY THE OTHER CO-OWNER S FOR COMMERCIAL PURPOSE. (II) THE AO DISALLOWED THE CLAIM U/S 54F IN RESPECT OF 1 ST AND 2 ND FLOORS CONSTRUCTED BY THE APPELLANT FOR HER RESIDEN TIAL PURPOSES ON ACCOUNT OF FOUR OBJECTION/FINDINGS. DURING APPELLAT E PROCEEDINGS, THE AR CONTESTED EACH OF THE FOUR FINDINGS OF THE AO AND P LACED RELIANCE ON A NUMBER OF JUDICIAL PRONOUNCEMENTS. THESE ARE BEING DISCUSSED AS UNDER: AO (1)- THE LAND ON WHICH CONSTRUCTION WAS DONE IS A COMMERCIAL LAND, NO PERMISSION FOR THE RESIDENTIAL PURPOSE HAS BEEN GIVEN BY THE JDA. HENCE THE CONSTRUCTION ON THE 1 ST THE 2 ND FLOORS CANNOT BE TREATED AS RESIDENTIAL HOUSE WITHIN THE MEANIN G OF SEC. 54F (III) IT WAS THE CONTENTION OF THE AR THAT THERE IS NO DISPUTE TO THE FACT THAT A RESIDENTIAL HOUSE WAS CONSTRUCTED BY THE APP ELLANT. THE DISPUTE IS WHETHER A RESIDENTIAL HOUSE, CONSTRUCTED ON A CO MMERCIAL PLOT IS ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT OR NOT. (IV) IT WOULD BE RELEVANT TO REPRODUCE HERE THE EXT RACTS FROM THE DECISION OF HONBLE ITAT, JAIPUR IN THE CASE OF SHY AM SUNDER MAKHIJA VS. ITO [138 ITD 125 (JAIPUR ITAT) WHEREIN IT WAS H ELD THAT: THE EXPRESSION RESIDENTIAL HOUSEUSED IN S. 54F H AS NOT BEEN DEFINED. THE POPULAR MEANING OF THE WORD HOUSEIS A PLACE OR BUILDING USED FOR HABITATION OF MAN. RESIDENTIAL H OUSE IS A DWELLING HOUSE AS DISTINCT FROM A HOUSE OF BUSINESS , WAREHOUSE, OFFICE, SHOP, ETC. IN OTHER WORDS, RESIDENTIAL HOUS E IS A BUILDING USED AS A PLACE OF ABODE IN WHICH PEOPLE RESIDE OR DWELL IN CONTRA-DISTINCTION TO ONE WHICH IS USED FOR COMMERC IAL OR BUSINESS PURPOSES. A FARM HOUSE IS ALSO A RESIDENTIAL HOUSE. THEREFORE, THE ITO COULD NOT TAKE THE VIEW THAT WHAT WAS IN EXISTE NCE COULD NOT BE CALLED AS A RESIDENTIAL HOUSE. SINCE A HOUSE IS CALLED RESIDENTIAL HOUSE WITH REFERENCE TO THE PURPOSE OF ITS USER, IT MAY NOT BE NECESSARY THAT SOMEBODY SHOULD LIVE IN IT CO NTINUOUSLY. IT IS ENOUGH IF IT WAS A HOUSE FOR RESIDENCE. THE DESC RIPTION OF THE CONSTRUCTION, WHICH IS NOT IN DISPUTE, SHOWS THAT I T WAS A 9 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. COMPLETE UNIT HAVING A BIG HALL, KITHEN, TOILET AND VERANDAH NOTWITHSTANDING THE SIZE OF THE SWIMMING POOL, WHIC H WAS ALSO THERE. AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSE SSEE, THERE WAS NO PROHIBITION REGARDING THE CONSTRUCTION OF A RESI DENTIAL HOUSE ON AGRICULTURAL LAND. THEREFORE, THE ASSESSEE IS EN TITLED TO THE DEDUCTION CLAIMED UNDER S. 54F, THERE BEING NO OTHE R ASPECT OR OBJECTION FROM THE SIDE OF THE DEPARTMENT ABOUT THE CLAIMING OF SUCH DEDUCTION. (V) FURTHER, HONBLE ITAT, JAIPUR IN THE CASE OF AC IT VS. OM PRAKASH GOYAL [53 SOT 158 (JAIPUR ITAT) HELD THAT: BENEFIT OF S. 54F CANNOT BE DENIED ON GROUND THAT LAND ON WHICH CONSTRUCTION WAS DONE WAS AGRICULTURAL IN NATURE-AL L THE CONDITIONS FOR CLAIMING EXEMPTION U/S 54F HAVE BEEN FOUND SATISFIED-IT IS ESTABLISHED THAT ASSESSEE PURCHASED A PLOT OF LAND AND THEN CONSTRUCTED A RESIDENTIAL HOUSE ON IT- HOU SE CONSTRUCTED ON AGRICULTURAL LAND OR ON OTHER LAND DOES NOT MATT ER, BUT THE FACT THAT A HOUSE SHOULD BE CONSTRUCTED-THEREFORE, ORDER OF CIT(A) CONFIRMED-REVENUES APPEAL DISMISSED (VI) IT MAY BE MENTIONED THAT THE PROVISIONS OF SEC TION 54F MANDATES THE CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THE SPECIFIED PERIOD. HOWEVER, THERE IS NO CONDITION THAT THE BUILDING PL AN OF THE RESIDENTIAL HOUSE CONSTRUCTED SHOULD BE APPROVED BY THE MUNICIP AL CORPORATION OR ANY OTHER COMPETENT AUTHORITY. IF ANY PERSON CONSTR UCTS A HOUSE WITHOUT APPROVAL OF A BUILDING PLAN, HE WILL BE RAI SING CONSTRUCTION AT HIS OWN RISK AND COST. IN THE INSTANT CASE UNDER CONSID ERATION, IT IS AN UNDISPUTED FACT THAT THE JMC APPROVED THE BUILDING PLAN OF A COMMERCIAL COMPLEX ON THE LAND UNDER CONSIDERATION. THE ESSENTIAL REQUIREMENT FOR CLAIMING DEDUCTION U/S 54F IS TO SE E WHETHER A RESIDENTIAL HOUSE WAS CONSTRUCTED OR NOT. THE AO HA S NOT DISPUTED THE CONSTRUCTION OF A RESIDENTIAL HOUSE BY THE APPELLAN T FOR WHICH IT CLAIMED DEDUCTION U/S 54F OF THE ACT. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION 10 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. AND THE JUDICIAL PRONOUNCEMENTS OF HONBLE ITAT, JA IPUR, THIS GROUND OF AO FOR REJECTION OF CLAIM OF APPELLANT U/S 54F DOES NOT HOLD GOOD. AO (2)-THE ASSESSEE IS THE OWNER OF 1/8 TH PORTION OF LAND ONLY. HENCE CONSTRUCTION OF 1 ST AND 2 ND FLOORS ON THE ENTIRE AREA OF LAND CANNOT BE TREATED AS IN OWNERSHIP OF ASSESSEE. (VII) THE SECOND GROUND ON WHICH THE AO DID NOT ALL OW THE DEDUCTION U/S 54F WAS THAT THE APPELLANT WAS THE OWNER OF ONL Y ONE PORTION OF LAND. HENCE FIRST AND SECOND FLOOR CONSTRUCTION ON THE ENTIRE LAND CANNOT BE TREATED IN THE OWNERSHIP OF THE APPELLANT . DURING APPELLANT PROCEEDINGS, IT WAS SUBMITTED THAT THE DECLARATION IN THE FORM OF AFFIDAVIT BY THE CO-OWNERS OF THE LAND THAT THE APP ELLANT WAS THE ABSOLUTE OWNER OF THE CONSTRUCTION ON THE FIRST AND SECOND FLOOR WHICH CONSISTED OF THE RESIDENTIAL UNIT OF THE APPELLANT AND THUS THE OWNERSHIP OF THE SAID RESIDENTIAL HOUSE VESTS COMPLETELY WITH THE APPELLANT. (VIII) IT MAY BE MENTIONED THAT IN THE CASE OF CIT VS. P.R. SESHADRI [2010] 228 CTR 334 (KAR.), IT HAS BEEN HELD THAT: THOUGH THE LAND MAY BE IN THE OWNERSHIP OF ASSESSE ES SPOUSE, NEVERTHELESS THE TRIBUNAL HAD RECORDED A CATEGORICA L FINDING THAT CONSTRUCTION WORK WAS IN PROGRESS DURING 21-4-1995 TILL 31-8- 1996 AND THE WIFE OF THE ASSESSEE COULD HAVE INCLUD ED THE VALUE OF CONSTRUCTION FOR MORTGAGE PURPOSES BUT THAT ALON E DID NOT MEAN THAT CONSTRUCTION WAS CARRIED OUT BY THE WIFE OF THE ASSESSEE OUT OF HER OWN FUNDS SO AS TO DENY THE ASS ESSEE THE BENEFIT OF DEDUCTION UNDER SECTION 54F. THERE WAS N O IMPEDIMENT IN THE ASSESSEES CLAIM FOR RELIEF UNDER SECTION 54 F, AS THE ASSESSEE HAD CLAIMED RELIEF TO THE EXTENT OF RS. 20 ,96,008 AS HIS CONTRIBUTION TOWARDS THE COST OF CONSTRUCTION OF TH E BUILDING AND THIS AMOUNT WOULD FALL WITHIN THE COST OF THE BUILD ING 11 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. (IX) THEREFORE, IN VIEW OF THE ABOVE DECISION OF HO NBLE KARNATAKA HIGH COURT THIS GROUND OF AO FOR REJECTION OF CLAIM OF APPELLANT U/S 54F DOES NOT HOLD GOOD. AO(3)- THE CONSTRUCTION OF THE SAID FLOORS STARTED ON 9.4.2008. HOWEVER IN THE BALANCE SHEETS AS ON 31.03.2008 AND 2009, NO ASSET IN THE FORM OF PLOT OF LAND WAS SHOWN BY THE ASSESSEE. THIS PROVES THAT THE ASSESSEE WAS NOT THE OWNER OF LAND ON THE DATE OF CONSTRUCTION, AND HENCE NOT ELIGIBLE FOR DEDUCTI ON US 54 IN ABSENCE OF RIGHT OF OWNERSHIP. (X) THE AO ALSO OBSERVED THAT THE CONSTRUCTION OF T HE SAID FLOORS STARTED ON 9.4.2008 BUT IN THE BALANCE SHEETS AS ON 31.03.2008 AND 2009 OF THE APPELLANT, NO ASSET IN THE FORM OF PLOT OF LAND WAS SHOWN AND THUS THE APPELLANT WAS NOT THE OWNER OF LAND ON THE DATE OF CONSTRUCTION, AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S 54 IN ABSENCE OF RIGHT OF OWNERSHIP. (XI) DURING APPELLATE PROCEEDINGS, A COPY OF THE PU RCHASE DEED DATED 02.06.1990 OF 1/8 TH SHARE OF THE PLOT NO. 3, NEW COLONY, JAIPUR HAS BEEN FILED WHICH SHOWS THAT THE APPELLANT PURCHASED THE PROPERTY FROM SMT. NILOFAR BEGUM FOR A CONSIDERATION OF RS. 1,99, 000/-. THIS CLEARLY ESTABLISH THE OWNERSHIP OF THE APPELLANT OVER 1/8 TH SHARE OF THE PLOT NO. 3, NEW COLONY, JAIPUR. THEREFORE, THIS GROUND OF AO FOR REJECTION OF CLAIM OF THE APPELLANT U/S 54F DOES NOT HOLD GOOD. AO(4) DATE OF CONSTRUCTION IS 9.04.2008, AND THE SA LE OF PLOT OF LAND IS 22.10.2008. THUS THE CONSTRUCTION HAS START ED ALMOST SEVEN MONTHS BEFORE THE SALE OF ORIGINAL ASSET, AND AS PER THE PROVISIONS OF SEC 54F THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION. (XIII) IT MAY BE MENTIONED THAT AS PER PROVISIONS O F SECTION 54F OF THE ACT FOR CLAIMING DEDUCTION, A RESIDENTIAL HOUSE PRO PERTY IS TO BE CONSTRUCTED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF 12 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. ANY LONG TERM ASSET. IT MAY BE MENTIONED THAT IN TH E CASE OF CIT VS. H.K. KAPOOR 150 CTR 128, IT HAS BEEN HELD BY THE HO NBLE ALLAHABAD HIGH COURT THAT: PERUSAL OF THE ABOVE PROVISION WILL SHOW THAT IT D OES NOT LAY DOWN THAT THE CONSTRUCTION OF ANY HOUSE MUST BE BEG UN AFTER THE SALE OF THE OLD RESIDENTIAL HOUSE AND THAT THE SALE PROCEEDS OF THE OLD RESIDENTIAL HOUSE MUST BE USED FOR THE CONSTRUC TION OF THE NEW RESIDENTIAL HOUSE. WE ARE, THEREFORE, OF THE OP INION THAT THE ASSESSEE COMPLIED WITH THE REQUIREMENT OF THE S. 54 IN RESPECT OF THE CONSTRUCTION OF THE HOUSE AT 64 SURYA NAGAR, AG RA AND THAT HE IS ENTITLED TO THE EXEMPTION OUT OF THE CAPITAL GAINS FROM THE SALE OF THE HOUSE AT GOLF LINK TO THE EXTENT OF THE COST OF CONSTRUCTION OF THE HOUSE AT 64, SURYA NAGAR, AGRA. WE, THEREFORE, DIRECT THE ITO TO MODIFY THE ASSESSMENT ACCORDINGLY. THE QUESTION FOR CONSIDERATION IS WHETHER EXEMPTIO N ON CAPITAL GAINS COULD BE REFUSED TO THE ASSESSEE SIMPLY ON TH E GROUND THAT THE CONSTRUCTION OF THE SURYA NAGAR, AGRA HOUSE HAD BEGUN BEFORE THE SALE OF THE GOLF LINK HOUSE. SIMILAR QUE STION CAME UP FOR CONSIDERATION BEFORE THE KARNATAKA HIGH COURT I N THE CASE OF CIT VS. J.R. SUBRAMANYA BHAT (1987) 64 CTR (KAR) 28 6: (1987) 165 ITR 571 (KAR) : TC 22R.219. IN THE CASE BEFORE THE KARNATAKA HIGH COURT, THE DATE OF THE SALE OF THE O LD BUILDING WAS 9 TH FEB., 1997. THE COMPLETION OF THE CONSTRUCTION OF THE NEW BUILDING WAS IN MARCH, 1977, ALTHOUGH THE COMMENCEM ENT OF CONSTRUCTION STARTED IN 1976. ON THESE FACTS, THE K ARNATAKA HIGH COURT, HELD THAT IT WAS IMMATERIAL THAT THE CONSTRU CTION OF THE NEW BUILDING WAS STARTED BEFORE THE SALE OF THE OLD BUILDING. WE FULLY AGREE WITH THE VIEW TAKEN BY THE KARNATAKA HI GH COURT. THE TRIBUNAL WAS RIGHT IN HOLDING THAT CAPITAL GAINS AR ISING FROM THE SALE OF THE GOLF LINK HOUSE TO THE EXTENT IT GOT IN VESTED IN THE CONSTRUCTION OF THE SURYA NAGAR HOUSE, WILL BE EXEM PTED UNDER S. 54 OF THE ACT. (XIII) IT MAY BE MENTIONED THAT IN THE CASE OF CIT VS. BHARTI MISHRA [2014] 41 TAXMANN.COM 50 (DEL), IT HAS BEEN HELD BY THE HONBLE HIGH COURT OF DELHI THAT: 13 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. 13. FOR THE SATISFACTION OF THE THIRD CONDITION, IT IS NOT STIPULATED OR INDICTED IN THE SECTION THAT THE CONS TRUCTION MUST BEGIN AFTER THE DATE OF SALE OF THE ORIGINAL OLD AS SET. THERE IS NO CONDITIONS OR REASON FOR AMBIGUITY AND CONFUSION WH ICH REQUIRES MODERATION OR READING THE WORDS OF THE SAID SUB-SEC TION IN A DIFFERENT MANNER. THE APPREHENSION OF THE REVENUE T HAT THE ENTIRE MONEY COLLECTED OR RECEIVED ON TRANSFER OF T HE ORIGINAL CAPITAL ASSET WOULD NOT BE UTILIZED IN THE CONSTRUC TION OF THE NEW CAPITAL ASSET, I.E, RESIDENTIAL HOUSE, IS ILL-FOUND ED AND MISCONCEIVED. THE REQUIREMENT OF SUB-SECTION (4) IS THAT IF CONSIDERATION WAS NOT APPROPRIATED TOWARDS THE PURC HASE OF THE NEW ASSET ONE YEAR BEFORE DATE OF TRANSFER OF THE O RIGINAL ASSET OR IT WAS NOT UTILIZED FOR PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FILING OF RETURN UNDER SECTION 1 39 OF THE ACT, THE BALANCE AMOUNT SHALL BE DEPOSITED IN AN AUTHORI ZED BANK ACCOUNT UNDER A SCHEME NOTIFIED BY THE CENTRAL GOVE RNMENT. FURTHER, ONLY THE AMOUNT WHICH WAS UTILIZED IN CONS TRUCTION OR PURCHASE OF THE NEW ASSET WITHIN THE SPECIFIED TIME FRAME STAND EXEMPT AND NOT THE ENTIRE CONSIDERATION RECEIVED. 14. SECTION 54F IS A BENEFICIAL PROVISION AND IS AP PLICABLE TO AN ASSESSEE WHEN THE OLD CAPITAL ASSET IS REPLACED BY A NEW CAPITAL ASSET IN FORM OF A RESIDENTIAL HOUSE. ONCE AN ASSES SEE FALLS WITHIN THE AMBIT OF A BENEFICIAL PROVISIONS, THEN THE SAID PROVISION SHOULD BE LIBERALLY INTERPRETED. THE SUPREME COURT IN CCE V. FAVOURITE INDUSTRIES, [2012] 7 SCC 153 HAS SUCCINCT LY OBSERVED:- 21.FURTHERMORE, THIS COURT IN ASSOCIATED CEMENT CO MPANIES LTD. V. STATE OF BIHAR [(2004) 7 SCC 642], WHILE EXPLAIN ING THE NATURE OF THE EXEMPTION NOTIFICATION AND ALSO THE MANNER I N WHICH IT SHOULD BE INTERPRETED HAS HELD: (SCC P. 648, PARA 1 2). 12 LITERALLY XEMPTION IS FREEDOM FROM LIABILITY, TAX OR DUTY. FISCALLY IT MAY ASSUME VARYING SHAPES, SPECIALLY, I N GROWING ECONOMY. IN FACT, AN EXEMPTION PROVISION IS LIKE AN EXCEPTION AND ON NORMAL PRINCIPLE OF CONSTRUCTION OR INTERPRETATI ON OF STATUTES IT IS CONSTRUED STRICTLY EITHER BECAUSE OF LEGISLATIVE INTENTION OR ON ECONOMY JUSTIFICATION OF INEQUITABLE BURDEN OF PROG RESSIVE APPROACH OF FISCAL PROVISIONS INTENDED TO AUGMENT S TATE REVENUE. BUT ONCE EXCEPTION OR EXEMPTION BECOMES APPLICABLE NO RULE OR PRINCIPLE REQUIRES IT TO BE CONSTRUED STRICTLY. TRU LY SPEAKING LIBERAL AND STRICT CONSTRUCTION OF AN EXEMPTION PROVISION I S TO BE INVOKED AT DIFFERENT STAGES OF INTERPRETING IT. WHEN THE QU ESTION IS 14 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. WHETHER A SUBJECT FALLS IN THE NOTIFICATION OR IN T HE EXEMPTION CLAUSE THEN IT BEING IN THE NATURE OF EXCEPTION IS TO BE CONSTRUED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT APPLICABILITY IS LIFTED AND THE SUBJECT FALLS IN TH E NOTIFICATION THEN FULL PLAY SHOULD BE GIVEN TO IT AND IT CALLS FOR A WIDER AND LIBERAL CONSTRUCTION. (SEE UNION OF INDIA V. WOOD PAPER LTD . [(1990) 4 SCC 256 : 1990 SCC (TAX) 422] AND MANGALORE CHEMICA LS AND FERTILISERS LTD. V. DY. CCT [1992 SUPP (1) SCC 21] TO WHICH REFERENCE HAS BEEN MADE EARLIER.) 22. IN G.P. CERAMICS (P) LTD. V. DY. COMMISSIONER, TRADE TAX (2009) 2 SCC 90], THIS COURT HAS HELD: (SCC PP. 101 -02, PARA 29) 29. IT IS NOW A WELL-ESTABLISHED PRINCIPLE OF LAW T HAT WHEREAS ELIGIBILITY CRITERIA LAID DOWN IN AN EXEMPTION NOTI FICATION ARE REQUIRED TO BE CONSTRUED STRICTLY, ONCE IT IS FOUND THAT THE APPLICANT SATISFIES THE SAME, THE EXEMPTION NOTIFIC ATION SHOULD BE CONSTRUED LIBERALLY. [SEE CIT V. DSM GROUP OF INDUS TRIES [(2005) 1 SCC 657] (SCC PARA 26); TISCO LTD. V. STATE OF JH ARKHAND [(2005) 1 SCC 272] (SCC PARAS 42-45); STATE LEVEL C OMMITTEE V. MORGARDSHAMMAR INDIA LTD. [(1996) 1 SCC 108]; NOVOP AN INDIA LTD. V. CCE & CUSTOMS [1994 SUPP (3) SCC 606]; A.P. STEEL RE- ROLLING MILL LTD. V. STATE OF KERALA [(2007) 2 SCC 725] AND REIZ ELECTROCONTROLS (P.) LTD. V. CCE. [(2006) 6 SCC 213 ] THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, THE OBJ ECTION OF THE AO THAT CONSTRUCTION WAS STARTED BEFORE THE SALE OF ASSET IS ALSO NOT SUSTAINABLE. (XIV) IN VIEW OF THE ABOVE, DISCUSSION IT IS EVIDEN T THAT NONE OF THE FOUR OBJECTIONS OF THE AO FOR DENYING EXEMPTION U/S 54F IS SUSTAINABLE AND THUS IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN DE NYING EXEMPTION U/S 54F OF THE ACT. HENCE THIS GROUND OF APPEAL IS ALLO WED. THE ISSUE OF ENTITLEMENT OF BENEFIT OF SECTION 54F OF THE ACT WOULD DEPEND UPON THE FACTS OF EACH CASE. IN THE PRESENT CASE, THE ASSES SEE IS SEEKING EXEMPTION ON THE 15 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. GROUND THAT IT HAS CONSTRUCTED A RESIDENTIAL HOUSE. SUCH BENEFIT OF DEDUCTION IS AVAILABLE IF THE ASSESSEE IS IN POSITION TO DEMONST RATE THAT ALL CONDITIONS AS ENVISAGED IN THE PROVISION OF SECTION 54F HAVE BEEN FULFILLED. AS PER SECTION 54F(1) THERE HAS TO BE A TRANSFER OF CAPITAL ASSET REFERRE D TO AS ORIGINAL ASSET, AND SUCH TRANSFER GIVES RISE TO CAPITAL GAIN. FOR AVAILING B ENEFIT OF EXEMPTION FROM TAX, THE ASSESSEE IS REQUIRED TO PROVE THAT IT HAS PURCHASED A RESIDENTIAL HOUSE WITHIN ONE YEAR BEFORE OR TWO YEARS AFTER THE TRANSFER OF THE ORIGINAL ASSET OR HAS WITHIN THREE YEARS AFTER THE DATE OF TRANSFER CONSTRUCTED THE RE SIDENTIAL HOUSE IN INDIA. 3.4. IN THE PRESENT CASE, THERE IS NO DISPUTE SO FA R CONSTRUCTION OF HOUSE IS CONCERNED. THE OBJECTION OF ASSESSING OFFICER ARE T HREE-FOLD, FIRSTLY THE ASSESSEE HAS 1/8 TH RIGHTS OVER THE PROPERTY ON WHICH THE NEW ASSET IS CONSTRUCTED; SECONDLY, THE CONSTRUCTION STARTED PRIOR TO TRANSFER OF ORIGINAL ASSET AND THIRDLY THE NEW ASSET CAN NOT BE TREATED AS RESIDENTIAL HOUSE AS SAME HAS BEE N CONSTRUCTED ON THE COMMERCIAL LAND. AS PER ASSESSEE BY WAY OF SETTLEMENT AMONGST THE CO-OWNERS, THE ASSESSEE WAS GIVEN ABSOLUTE RIGHTS OVER THE NEW ASSET. THERE FORE, THE ASSESSEE IS ENTITLED FOR EXEMPTION AS CLAIMED. IT IS FURTHER STATED THAT LAW DOES NOT PROHIBIT CONSTRUCTING A RESIDENTIAL HOUSE ON A COMMERCIAL LAND. IT IS ALSO ARGUED THAT CONSTRUCTING A RESIDENTIAL HOUSE IN A COMMERCIAL COMPLEX WOULD NOT IPSO FACTO ALTER THE RESIDENTIAL HOUSE INTO A COMMERCIAL PREMISES. 3.5. WE FIND THAT THE REVENUE HAS NOT BROUGHT ANY M ATERIAL ON RECORD SUGGESTING THAT ON COMMERCIAL LAND NO RESIDENTIAL HOUSE CAN BE CONSTRUCTED. EVEN THERE IS NO MATERIAL SUGGESTING THAT ANY UNAUTHORIZED CONSTRUCT ION BY THE ASSESSEE WOULD DEBAR IT FROM CLAIMING EXEMPTION U/S 54F. IN THE ABSENCE OF SUCH MATERIAL, IN OUR 16 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. CONSIDERED VIEW BENEFIT OF SECTION 54F CANNOT BE DE NIED. ANOTHER OBJECTION OF THE AO IS WITH REGARD TO THE FACT THAT CONSTRUCTION OF RESIDENTIAL HOUSE WAS STARTED PRIOR TO TRANSFER OF ORIGINAL ASSET. THIS OBJECTION IS A LSO MISPLACED WHEN THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 54F IF THE RESIDENTIAL HO USE IS PURCHASED ONE YEAR BEFORE THE TRANSFER OF THE ORIGINAL ASSET. THEREFORE, IN O UR CONSIDERED VIEW MERELY BECAUSE THE CONSTRUCTION WAS STARTED PRIOR TO TRANSFER OF O RIGINAL ASSET, IF SAME IS COMPLETED WITHIN THREE YEARS OF TRANSFER OF ORIGINAL ASSET, W OULD NOT COME INTO WAY OF ENTITLEMENT OF EXEMPTION. ANOTHER OBJECTION OF THE AO IS THAT THE ASSESSEE IS HAVING 1/8 TH SHARE IN THE COMMERCIAL LAND ON WHICH THE NEW ASSE T HAS BEEN CONSTRUCTED. THE EXPLANATION OF THE ASSESSEE IS THAT BY WAY OF S ETTLEMENT THE ASSESSEE WAS GIVEN ABSOLUTE RIGHTS ON THE NEW ASSET. WE ARE OF THE VI EW THAT THIS CLAIM OF THE ASSESSEE REQUIRES VERIFICATION AT THE END OF THE AO. THEREFO RE, WE MODIFY THE FINDING OF LD. CIT (A) TO THE EXTENT THAT AO WOULD VERIFY FROM OTH ER CO-OWNERS ABOUT THE FACTUM OF RELINQUISHMENT OF THEIR RIGHTS INTO NEW ASSET. IF THE AO FINDS CORRECTNESS INTO THE CLAIM OF THE ASSESSEE, HE WOULD ALLOW THE ENTIRE CL AIM LEST HE WOULD RESTRICT THE SAME TO THE EXTENT OF 1/8 TH OF THE COST OF CONSTRUCTION OF NEW ASSET. GROUND N O. 1 OF THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTI CAL PURPOSE IN THE TERMS INDICATED HEREINBEFORE. 4. APROPOS TO GROUND NO. 2, LD. D/R COULD NOT POINT OUT THE VIOLATION OF RULE 46A BY LD. CIT (A). HENCE GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 17 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. 6. NOW WE TAKE UP THE CROSS OBJECTION NO. 10/JP/2016 OF THE ASSESSEE. THE EFFECTIVE GROUND OF THE ASSESSEE IS IN RESPECT OF CONFIRMING THE ACTION OF THE AO IN ISSUING NOTICE U/S 148/147 AND RE-OPENING OF THE ASSESSMENT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT (A) HAS REJECTED THE GROUND OF THE ASSESSEE BY OBSERVING IN PARA 3.1.2. AS UNDER :- 3.1.2. DETERMINATION : I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IN THIS CASE ASSESSAMENT U/S 143(3) WAS MADE ON 14.11.2011 DETER MINING TOTAL INCOME AT RS. 9,00,540/-. THE CASE WAS SUBSEQUENTLY REOPENED U/S 147 OF THE ACT AND THE ASSESSMENT WAS COMPLETED ON 29.10.2014 AT A TOTAL INCOME OF RS. 63,12,680/-. THE APPELLANT HAS CHALLENGED THE REOPENING U/S 147 OF THE ACT. IN FACT, THE SIMILAR CONTENTIONS WERE RAISED BEFORE THE AO WHICH WERE DISPOSED OFF BY THE AO VIDE HIS SPEAKING ORDER DATED 01.10.2014 WHICH WAS ANNEXED A S ANNEXURE-A TO THE ASSESSMENT ORDER DATED 29.10.2014. I HAVE DULY CONSIDERED THE CONTENTIONS OF THE APPELLANT AND THE ABOVE ORDER DA TED 01.10.2014 OF THE AO AND IT IS OBSERVED THAT THE AO HAS DEALT WIT H THE ALL THE OBJECTIONS OF THE APPELLANT RAISED AGAINST REOPENIN G OF THE ASSESSMENT U/S 147 OF THE ACT. I AGREE WITH THE ORDER DATED 01 .10.2014 OF THE AO IN THIS REGARD AND CONSEQUENTLY, IT IS HELD THAT TH E AO HAS RIGHTLY INITIATED REASSESSMENT PROCEEDINGS U/S 147 OF THE A CT. THEREFORE, THIS GROUND OF APPEAL IS REJECTED. IN VIEW OF THE ABOVE REASONING GIVEN BY LD. CIT (A) , WE AFFIRM HIS ORDER AND DISMISS THE CROSS OBJECTION OF THE ASSESSEE. 18 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR. 8. IN TOTALITY, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 05.10.2 017. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 05/10/2017. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ITO, WARD-1(2), JAIPUR. 2. THE RESPONDENT SMT. SAROJ DEVI AGARWAL, JAIPUR . 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 397/JP/2016 & CO 10/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 19 ITA NO. 397/JP/2016 & CO 10/JP/2016 SMT. SAROJ DEVI AGARWAL, JAIPUR.