Pallavi Agarwal, Gurgaon V. DCIT International Taxation, Gurgaon

CO 32/DEL/2021

AI Insights

The case revolves around the eligibility of the assessee, Pallavi Agarwal, to claim a deduction under section 54F of the Income Tax Act, 1961, for the assessment year 2017-18. The Revenue appealed against the decision of the CIT(A) which allowed the deduction, arguing that the assessee had not claimed this benefit during the assessment nor provided complete evidence to support the claim. The Tribunal examined the submissions and evidence presented, including a similar case involving a co-owner of the property, Smt. Charu Aggarwal, and found that the assessee had indeed met the requirements for the deduction under section 54F.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115792 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 13-07-2021
• Other Referred Cases: Smt. Charu Aggarwal vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Capital Gains
• Section: 54; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA No1793/Del/2020 Assessment Year: 2017-18 DCIT, International Taxation, Gurgaon. Vs. Pallavi Agarwal, Tower B-3, Flat 1203, Parsvnath Exotica, Gurgaon, Haryana. PAN: ACPPA0596E CO No.32/Del/2021 (ITA No1793/Del/2020) Assessment Year: 2017-18 Pallavi Agarwal, Tower B-3, Flat 1203, Parsvnath Exotica, Gurgaon, Haryana. PAN: ACPPA0596E Vs. DCIT, International Taxation, Gurgaon. (Appellant/Cross Objector) (Respondent) Assessee by : Shri Rakesh Garg, Advocate Revenue by : Shri Sanjay Kumar, Sr. DR Date of Hearing : 10.02.2023 Date of Pronouncement : 28.02.2023 ORDER PER C.M. GARG, JM: This appeal has been filed by the Revenue against the order of the CIT(A)-43, New Delhi, dated 27.05.2020 for AY 2017-18. 2. The grounds of appeal raised by the Revenue read as under:- ITA No.1793/Del/2020 2 “1. Whether on fact and the circumstances of the case, the Ld. CIT(A) erred in holding that the assessee is eligible for claiming deduction U/s 54F of the Income Tax Act, 1961 inspite of knowing the facts that the assessee has neither claimed this benefit during the course of assessment nor provided the complete evidences in support of this claim. 2. Whether on fact and the circumstances of the case, the Ld. CIT(A) erred in allowing deduction u/s 54F of the Income Tax Act, 1961 relying upon fresh evidence without providing an opportunity to the assessing officer for verifying it or calling the remand report? 3. Whether on fact and the circumstances of the case, the Ld. CIT(A) erred in allowing the deduction u/s 54 of the Income Tax Act, 1961 without appreciating or indicating in his order as to how and on what evidence he has come to conclusion that the assessee satisfied the condition for allowing of deduction of u/s 54F of the IT Act 1961 including that the assessee had only one house in India. 4. The appellant craves to add, amend, modify or alter any grounds of appeal at any time or before the hearing of the appeal.” 3. The ld. Sr. DR, pressing into service the grounds of the Revenue, submitted that the ld.CIT(A) has erred in holding that the assessee is eligible for claiming deduction U/s 54F of the Income Tax Act, 1961 (for short, ‘the Act’) in spite of knowing the facts that the assessee has neither claimed this benefit during the course of assessment nor provided the complete evidences in support of this claim. He further contended that the Ld. CIT(A) has erred in allowing deduction u/s 54F of the Income Tax Act, 1961 relying upon fresh evidence without providing an opportunity to the assessing officer for verifying it or calling the remand report. The ld. Sr. DR also contended that ld. CIT(A) was not justified in allowing the deduction u/s 54 of the Income Tax Act, 1961 without appreciating or indicating in his order as to how and on what evidence he has come to conclusion that the assessee satisfied the condition for allowing of deduction of u/s 54F of the Act including that the assessee had only one house in India. ITA No.1793/Del/2020 3 4. The ld. Sr. DR took us through the relevant part of the assessment order and submitted that the assessee, by way of show cause notice dated 11.04.2019 was asked to furnish the documentary evidences to fulfill the conditions laid down in section 54F of the Act and the assessee submitted her reply dated 29.11.2019 which was not tenable as the assessee only stated that the exemption u/s 54F of the Act is also otherwise allowable to the assessee on the capital gain income. The ld. Sr. DR submitted that para 3.2.3 of the assessment order clearly reveals that the AO, after considering the reply of the assessee rightly noted that the assessee while making an alternative claim, has simply stated that the criteria with regard to investment of consideration received on sale of any existing property has been fully invested in new property, but, the AO rightly concluded that mere investment in new property is not only the criteria which, if fulfilled, would make an assessee eligible for claiming such exemption. The ld. Sr. DR submitted that unless and until the assessee demonstrates that all the required conditions as per the requirement of section 54F are fulfilled, then, the said claim cannot even be evaluated or considered on merits. Therefore, the AO was right in taxing the income out of sale of property under the head ‘Long term capital gain.’ He further submitted that the ld.CIT(A) has granted relief to the assessee by considering irrelevant material and facts, therefore, the impugned first appellate order be kindly be set aside and the order passed by the AO may be restored. 5. Replying to the above, the ld. Counsel of the assessee, first of all, submitted that the issue is squarely covered in favour of the assessee by the order of the ITAT, Delhi in the case of co-owner of the property sold by the assessee, Smt. Charu Aggarwal, in ITA No.1367/Del/2020 for AY 2017-18, order dated 08.02.2022, wherein ITA No.1793/Del/2020 4 the Tribunal held that the assessee is entitled to get benefit of section 54 of the Act and the AO was directed to verify the calculation of deduction u/s 54 of the Act. He also drew our attention to para 14 of the Tribunal order and submitted that the issue has been decided by the Tribunal in favour of the co-owner Smt. Charu Aggarwal, therefore, the Department cannot be allowed to take a different stand for taxing the amount of long-term capital gain in the hands of the assesee despite the clear fact that the assessee had made investment of Rs.7,42,40,524/- in purchase of residential property during the relevant assessment year. 6. The ld. Counsel also submitted that the assessee did not file any new evidence supporting the claim which was not before the AO during assessment proceedings, therefore, the allegation of the Revenue that the ld.CIT(A) has relied on fresh evidence without providing an opportunity to the AO for verifying it or calling the remand report. Therefore, the grounds of the Revenue may be dismissed by upholding the order of the ld. First appellate authority. 7. On careful consideration of above rival submissions, first of all, we may point out that on being asked by the Bench the ld. Sr. DR, from the first appellate order, could not show us any instance, wherein the assessee has submitted any fresh evidence which was required to be confronted to the AO as per the requirement of Rule 46A of the IT Rules. From the first appellate order, we observe that the ld.CIT(A), in para 2, has reproduced the grounds of appeal, in para 3 statement of facts and in para 4 written submissions of the appellant and in para 5 recorded his findings and determination of the issue raised by the assessee in Form No.35. Therefore, ground No.2 of the Revenue fails. ITA No.1793/Del/2020 5 8. We further note that the ld.CIT(A) has granted relief to the assessee with the following findings and determination:- “5. Findings/ Determination; The aforesaid appeal is against an addition under the head ‘capital gains’ made by the AO for the AY 2017-18. During the course of assessment proceedings the AO held that the assessee had claimed deduction u/'s 54. While discussing the said deduction, the AO noted that “3.2.1 The facts of the case in hand are important for consideration. As a matter of fact, the assessee has received a consideration of Rs. 7,31,76,075/- against the sale of two plots located at Radice Road (Gokhale Marg), Lucknow during the subject year and at the time of execution of sale deed, the capital assets are plot instead of a house. The same is evident from sale deed of both the plots wherein the property description is described as a plot. Furthermore, also at the time of executing agreement to sell on 02-09-2016, the said property was described as a plot. It is pertinent to mention here that there is no relevance whether there was a house in the past or not, the only fact is that, at the time of executing the sale deed the capital assets is a plot and therefore, the exemption claimed by the assessee U/s 54 is disallowed.” 5.2 The AO further noted that the consideration received by the appellant was on account of sale of 2 plots of land located at Radisson Road, Lucknow. As the said property was not a residential house, deduction u/s 54 could not be claimed by the appellant as the same was available only in the case of capital gain arising from sale of a residential house. The AO also held that the satisfaction of condition u/s 54F was not furnished by the appellant and therefore no deduction under the said section could be allowed. During the course of appeal proceedings, it was seen that the appellant had actually sold properties which were plots of land allotted at 22, Radisson Road, Lucknow. The said data fee registration also clearly shows that the property is only a plot of land. As a result, the basic contention given u/s 54 is not satisfied by the appellant. The AO’s action not allowing deduction u/s 54 is therefore correct. The issue of the cost ofacquisition of the house and its FMV is therefore not relevant for the purpose of decision as the full consideration is to be considered for the eligibility of deduction under 54F. In any case however the value adopted by the AO is correct since there is no evidence for the construction on the said plot of land. The registered valuer has valued it by including the cost of construction which is not substantiated in any manner. The AO however did not allow any deduction under the section 54F as the same had not beer, claimed and the conditions for the eligibility of the same had not beer, tested. ITA No.1793/Del/2020 6 5.3 The appellant during the course of appeal proceedings was specifically asked to submit details or evidence so as to establish that the conditions referred to in section 54F are satisfied. The appellant vide his submission dated 24/02/2020 stated that a residential property was acquired in Mumbai. The appellant also submitted that the bill of the house property was given during the course of assessment proceedings also. The documents related to purchase of the said flat on 14/09/2016 has also been furnished by the appellant. It is therefore clear that the appellant has invested an amount of Rs.7,42,40,524/- in purchase of residential property for the said year. 5.4 The appellant has also stated that the only one other residential house was owned by the appellant at the time of acquisition or investment in residential property in FY 2016-17. The condition required under sub- section (2) of section 54F is also herewith satisfied. The appellant is therefore eligible for deduction under section 54F to the extent the consideration is invested in acquisition of new residential house.” 9. On careful consideration of rival submissions, stand of the AO and determination by the ld.CIT(A), first of all we note that the ld.CIT(A) rightly noted that the consideration received by the assessee was on account of sale of two plots of land located at 22, Radice Road (Gokhale Marg), Lucknow which was not a residential house. Therefore, deduction u/s 54 of the Act should not be claimed by the assessee as the same was available only in the case of capital gain arising from sale of a residential house. 10. The ld. CIT(A) further proceeded to consider the claim of the assessee of deduction u/s 54 of the Act. The AO, in the assessment order, as noted above, alleged that the assessee has not substantiated or satisfied all the required conditions mentioned in the provisions of section 54F of the Act for claiming such deduction, therefore, he denied the same. However, the ld.CIT(A) noted that the assessee actually sold property which was a plot of land allotted at 22, Radice Road (Gokhale Marg), Lucknow and the relevant documents of sale also show that the property was ITA No.1793/Del/2020 7 only a plot of land, therefore, he upheld the action of the AO in not allowing deduction u/s 54 of the Act. 11. Neither the AO nor the ld. Sr. DR controverted the factual position that the assessee received consideration of Rs.7,31,76,075/- as consideration of sale of plots and had invested an amount of Rs.7,42,40,524/- in purchase of residential property during the relevant financial period in which the property was sold. It has also not been controverted that at the time of selling the plots and purchasing residential property, the assessee was owning only one other residential house during FY 2016- 17. For making claim u/s 54F, the cost of acquisition of house and full consideration, its fair market value is not relevant for the purpose of adjudication of claim of the assessee because the full consideration has to be considered for eligibility for deduction u/s 54F of the Act and, in the present case, the assessee has demonstrated that she has invested higher amount in purchase of residential property than the total amount of consideration received by her against sale of plots. Therefore, the ld.CIT(A) was right in holding that the condition required under sub-section (2) of section 54F of the Act and other requirements have been successfully satisfied by the assessee, therefore, the assessee was eligible for deduction u/s 54F to the extent of consideration invested in acquisition of new residential property which is undisputably higher than the amount of consideration received by the assessee on sale of plots. Therefore, we are unable to see any valid reason to interfere with the findings arrived and recorded by the ld.CIT(A) and, thus, we uphold the same. Accordingly, grounds of the Revenue are dismissed. 12. The ld. Counsel submitted that assessee does not want to press her cross objection, hence, the same is dismissed. ITA No.1793/Del/2020 8 13. In the result, the appeal filed by the Revenue and Cross Objection of the assessee are dismissed. Order pronounced in the open court on 28.02.2023. Sd/- Sd/- (PRADIP KUMAR KEDIA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28 th February, 2023. dk Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi