DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(2), KOLKATA, AAYKAR BHAWAN POORVA V. PRITIBALA HARSHAD AJMERA, KOLKATA

ITA 447/KOL/2025

AI Insights

The case revolves around the appeal by the revenue against the order of the ld. CIT(A) which allowed the assessee's claim for exemption under sections 54 and 54F of the Income Tax Act for the assessment year 2015-2016. The assessee had declared an income of Rs.1,44,45,430/- and faced scrutiny, leading to an assessment of Rs.3,15,00,000/-. The primary contention was whether the assessee was eligible for exemptions under sections 54 and 54F despite owning more than one residential property at the time of the transfer. The tribunal examined the remand report, the rejoinder, and the documentary evidence, ultimately agreeing with the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772232 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2015-2016
• Other Referred Cases: CIT Vs. D.P. Sandu Bros. Chembur P. Ltd. (SC) in (2005) 273 ITR 0001, Ramdas Sitaram Patil v. ACIT in [2024] 166 taxmann.com 222
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.B.CHAKARABORTHY
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Capital asset; Cost of acquisition; Capital receipt; Capital Gains; Principle of natural justice
• Section: 144; 54; 271(1)(c); 54F

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER आयकर अपील सं/ITA No.447/KOL/2025 (निर्धारण वर्ा / Assessment Year : 2015-2016) DCIT,Central Circle-3(2) Kolkata Vs Pritibala Harshad Ajmera, 7A, Dwarka, Sarat Bose Road, Kolkata-700020 PAN No. :AEDPA 3992 A (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) रधजस्व की ओर से /Revenue by : Shri S.B.Chakaraborthy, Sr. DR निर्धाररती की ओर से /Assessee by : Shri Miraj D.Shah, AR सुनवाई की तारीख / Date of Hearing : 13/08/2025 घोषणा की तारीख/Date of Pronouncement : 28/08/2025 आदेश / O R D E R Per Pradip Kumar Choubey, JM : The revenue has filed the instant appeal against the order dated 31.01.2025, passed by the ld. CIT(A), Kolkata-21 for the assessment year 2015-2016. 2. Facts of the present case of the assessee are that the assessee filed her return of income for A.Y.2015-2016 declaring at Rs.1,44,45,430/- . The case of the assessee was selected for scrutiny. Notice u/s.143(2) of the Act was issued to the assessee. Finally a show cause notice was also issued to the assessee by asking to explain as to why the provision of Section 144 of the Act could not be attracted in his case but the assessee did not make any compliance, as a result of which, the Assessing Officer assessed the income of the assessee at Rs.3,15,00,000/- and added the same to the total income of the assessee. Aggrieved by the said order, the assessee preferred appeal before the ld.CIT(A) wherein the appeal of the assessee has been allowed. Printed from counselvise.com ITA No.447/KOL/2025 2 3. Being aggrieved and dissatisfied with the order of ld. CIT(A), the revenue has preferred this appeal on the following grounds :- Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of the assessee under section 54F of the Act despite the fact that the assessee had herself admitted before the AO during the remand proceedings that she had relinquished all the rights in the property situated at 29, Rafi Ahmed Kidwai Road, North 24 Parganas vide MoU dated 31-03- 2014, which falls within the definition of \"transfer\" as per section 2(47)(ii) of the Act and since, to be eligible for exemption section 54F of the Act, the assessee should not own more than one residential property other than the new property on the date of transfer of original asset, and the assessee was in possession of both Flat 4A, Dwarka, Sarat Bose Road, Kolkata and Flat 5A, Dwarka, Sarat Bose Road, Kolkata on the date of signing of MoU (31-03-2014), and Flat 4A, Dwarka, Sarat Bose Road, Kolkata was sold on 02-05-2014 only, the assessee was not eligible for claiming exemption under section 54F of the Act?.” 4. Contrary to that, ld. AR supported the impugned order thereby submitting that the assessee being an individual has filed her return of income declaring total income at Rs.1,44,45,430/- which mainly included the income from business and income from other sources. It has been contended by the ld.AR that the assessee had claimed exemption from Long Term Capital Gain accrued to her on sale of house property and non-residential tenancy property and the property in her occupation since long and that has been duly reflected in the ITR, however, there occurred some inadvertent errors in the return of income and error in the return have been explained and rectified by the assessee during the assessment proceedings. Ld.AR further submitted that before allowing the appeal of the assessee the ld. CIT(A) has called remand report from the Assessing Officer and after going over the remand report, rejoinder to the remand report and considering the documentary evidence filed by the assessee allowed the appeal of the assessee. Printed from counselvise.com ITA No.447/KOL/2025 3 5. Upon hearing the submission of the counsel of the respective parties, we have perused the order of the ld. CIT(A) and found that before allowing the appeal of the assessee the ld. Cit(A) has called a remand report, the remand report had been produced by the ld. CIT(A) in its impugned order. Going over the remand report and its rejoinder, following facts have been emerged which reads as under :- i) The assessee purchased a new residential property amounting to Rs.4,74,85,106/- on 02.09.2014 at Flat 4A. The assessee claimed exemption from the capital gain against the purchase of this residential property u/s.54F of the Act ii) In the income tax return filed by the assessee it is mentioned that the total sale consideration was shown at Rs.3,15,00,000/- (1,50,00,000 her sale value of house property + 1,65,00,000/- for compensation received on transfer of tenancy right). The assessee did not claim index cost of acquisition in the ITR. iii) Flat No.4A and 5A at Dwarka, 7A, Sarat Bose Road, Kolkata to be used as one single residential unit/duplex flat since purchase on 27.03.2002 till a part of it i.e.Flat 4A was sold during the year as such only one residential was around by the assessee throughout the period. iv) The assessee had sold her flat No.4A in Dwarka Building located at 7A, Sarat Bose Road, Kolkata on 02.09.2014 leaving the assessee in possession of only one flat bearing No.5A in Dwarka building. v) The assessee had relinquished and transferred her tenancy right at another property at 29 Rafi Kidwai Road at 10/4A Elgin Road, Kolkata as it is evident from the MOU dated 31.03.2014 executed by and between the assessee and the said GM Enclave Private Limited and other Printed from counselvise.com ITA No.447/KOL/2025 4 documents submitted to the Assessing Officer from time to time which have been fairly admitted by the assessing authority. 6. Going over the above facts, it appears that no consideration has been received on 31.03.2014. The consideration has only been received on 31.07.2014 and 01.08.2014 and, thus, the final possession was handed over after receipt of the full consideration only on 01.08.2018. The ld. CIT(A) in its order has discussed the remand report, objection to the remand report and also considered facts of the case thereby passed the impugned order. The operative portion of the order is essential to be reproduced hereunder: - I have perused the submissions of the appellant along with the paper book filed by the appellant consisting of the relevant documentary evidences to substantiate the claims being made. I have also perused the impugned assessment order dated 14.12.2017, the Remand Report submitted by the Ld. AO and the subsequent rejoinder filed by the appellant. The appeal thereafter is being disposed in a ground-wise manner: Ground 1,3 & 4 & Additional Ground1C All these grounds agitate against the action of the Ld. AO in making an addition of Rs.3,15,00,000/- towards Long term capital gain and disallowing the claim of deductions under section 54 & 54F in the return of income filed by the appellant. The facts of the case are that the Appellant had sold/ transferred two capital assets during the FY 2014-15 related to AY 2015-16. The first one, being a residential flat, being Flat no. 4A, Dwarka, at 7A, Sarat Bose Road, Kolkata-700020 which was sold to ShriS ailesh kumar Rasiklal Desai vide Deed No. I-03926/2014 dated 02.05.2014 for Rs. 1,50,00,000/-, The value of the said property as per West Bengal Stamp Duty Valuation authority was assessed at Rs. 1,50,00,000/-. As per the said deed of conveyance as well as other documentary evidences, it is observed that the proceeds from sale of such property were received during the FY: 2014-15. The appellant also received a consideration of Rs.1,65,00,000/- from relinquishment of tenancy/occupancy rights of a non- residential property measuring an area of 4 cottahs, R.S Dag No. Printed from counselvise.com ITA No.447/KOL/2025 5 774 & 772, under Hal Khatian No. 736, at Mouza Shyamnagar under PS Dumdum and, as per the AO, located at 29, Rafi Ahmed Kidwai Road, North 24 Parganas at Rs.1,65,00,000/- during the AY: 2015-16. As such, total sale/ transfer consideration received by the Appellant was Rs. 3,15,00,000/- from the sale/transfer of above mentioned properties or rights. It is further observed that the Appellant has claimed to have invested the said entire consideration money of Rs.3,15,00,000/- for buying a new residential property at Rameshwara Mansion, 10th Floor, Flat 10A, 10/4A Lala Lajpat Rai Sarani, Kolkata 700020 for a total consideration of Rs.4,23,00,000; utilizing the entire sale proceeds of Rs.1,50,00,000/- and Rs.1,65,00,000/- received on sale/transfer of the above mentioned properties and claimed the same for deduction/ exemption of Rs. 1,50,00,000/- under section 54 of the Act against sale of old residential flat and of Rs. 1,65,00,000/- under section 54F of the Act in respect of transfer of tenancy/ occupancy rights of a non-residential property. The Ld. AO in his assessment order, has made an addition of Rs.3,15,00,000/- towards long term capital gain, by disallowing the deductions under section 54 and 54F of the Act as the appellant did not comply to the various notices issued by the Ld. AO and did not submit any documents before the Ld. AO to substantiate the claims of deductions under section 54 and 54F, The appellant, on the other hand, in the Form 35 filed and her submissions filed has agitated that she did not receive the notices due to change of her address and that the notices were addressed to the appellant's old address. It has been further stated that notice dated 01.12.2017 issued by the Ld. AO was also not served on the Appellant nor it came to her notice otherwise until she received the said notice through a durwan/gatekeeper at her old address on 13.12.2017. During the course of appeal proceedings, the appellant had submitted all the requisite documents, deed(s) of conveyance etc. in support of her claim. Considering these claims of the appellant, and for the sake of natural justice, the documents filed by the appellant were forwarded to the Ld. AO for verification and her comments. It is observed from the Remand Report filed by the Ld. AO, that the claim of deduction under section54 has been accepted by the Ld. AO to the extent of Rs. 97,54,100/-, wherein the AO has allowed the appellant the benefit of indexation on the cost of acquisition to the extent of Rs.52,46,185/-. However the Ld. AO has held the claim of deduction under section54F as untenable owing to the following two reasons: 1. Since section 54F is being claimed on the capital gains arising out of relinquishment of tenancy/occupancy rights of a non- residential property at Rs. 1,65,00,000/-, which is on the basis of a memorandum of understanding dated 31.03.2014, the Ld. AO has Printed from counselvise.com ITA No.447/KOL/2025 6 held the date of such transfer/ relinquishment of tenancy/occupancy rights to be 31.03.2014. 2. It has been further stated by the Ld. AO that the appellant was the owner of following two properties on the date of said relinquishment i.e. 31.03.2014. The details of the properties held are given below:- Address of the property Date of purchase Date of sale Value of the property (Rs.) Address of Property 1:- 27.03.2002 02.05.2014 Sale value- Rs.1,50,00,00/- Flat 4A. “Dwarka”, 7A, Sarat Bose Road, Kolkata- 700020 Address Property 2 Flat 5A. “Dwarka”, 7A, Sarat Bose Road, Kolkata- 700020 As per the Ld. AO, since the assessee was holding more than 1(one) house property on the date of transfer of the said tenancy right i.e. 31.03.2014, the appellant was ineligible for deduction under section 54F as per extant provisions of Section itself. The Ld. AO has also stated that the receipt of Rs.1,65,00,000/- from relinquishment of tenancy/occupancy rights of a non-residential property should be treated as Income from Other Sources. I find that in the instant case, in this case it is an admitted fact that the sum of Rs.1,65,00,000/- from relinquishment of tenancy/occupancy rights of land alongwith dilapidated structure/building measuring an area of 4 cottahs, R.S Dag No. 774 & 772, under Hal Khatian No. 736, at Mouza Shyamnagar under PS Dumdum and as per the Ld. AO is located at 29, Rafi Ahmed Kidwai Road, North 24 Parganas. The appellant in the return of income filed has stated full value of consideration as Rs. 3,15,00,000/- and the Ld. AO during the course of assessment has also made addition of Rs.3,15,00,000/-under the head \"Long Term Capital Gains\". The appellant during the course of appeal proceedings has submitted a Memorandum of Understanding regarding relinquishment of tenancy/occupancy rights. The Ld. AO, I find has not been able to bring forth any evidence to disprove such MoU between the appellant and M/s GM Enclave Pvt Ltd and that such money received by the appellant is not from relinquishment of tenancy/occupancy rights of the aforesaid property. Therefore, once the nature of the transaction is admitted to be from relinquishment of tenancy/occupancy rights, I cannot agree with the contention of the Ld. AO that the claimed Capital Gain is essentially in the nature of compensation received for vacating the piece of said land. This dispute as to whether such receipts from relinquishment of tenancy/occupancy rights are to be taxed under Capital Gains or Income from Other Sources has been laid to rest by the Hon. Apex Printed from counselvise.com ITA No.447/KOL/2025 7 Court in CIT Vs. D.P. Sandu Bros. Chembur P. Ltd. (SC) in (2005) 273 ITR 0001: (2005) 193 CTR 0578: (2005) 142 ΤΑΧMAN 0713, wherein the Hon. Apex Court, pointed out that there is no dispute that a tenancy right is a capital asset, the surrender of which would attract section 45 so that the value received would be a capital receipt and assessable if at all only under Item E of section 14. That being so, it cannot be treated as a casual or non-recurring receipt under section 10(3) and be subjected to tax under section 56. The argument of the appellant that even if the income cannot be chargeable under section 45, because of the inapplicability of the computation provided under section 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed under section 45, it cannot be taxed at all. Thus, the consideration on tenancy rights, normally, would be subjected to capital gains under section 45 of the Income Tax Act. That being the case, it is now imperative to consider the date of relinquishment of such tenancy/oscupancy rights. As per the submissions of the appellant before the Ld. AO, the appellant relinquished her Tenancy Rights in the property at 29, Rafi Ahmed Kidwai Road, North 24 Parganas after receipt of the consideration of Rs. 1,65,00,000/- in terms of MOU dated 31.03.2014 and the receipts were on 30.07.2024 and 01.08.2014. A copy of said MOU alongwith a copy of relevant Bank Statement highlighting receipt of said sum respectively on 30.07.2024 and 01.08.2014 was submitted before the Ld. AO and it has been submitted that it was immediately upon receipts of the last installment of consideration by the appellant on 01.08.2014 that the possession of said tenanted property was handed over to GM Enclave Pvt Ltd. As per contents of the said MOU, it has been stated that the consideration of Rs.1,65,00,000/- shall become due and payable on or by 31.08.2014. The Ld. AO has not brought any evidence on record which would prove that possession of the said property was relinquished by the appellant on 31.03.2014, especially in the scenario, when the appellant has demonstrated that the proceeds were received during the FY: 2014-15 i.e. on 30.07.2024 and 01.08.2014. The Ld. AO's contention is further contradictory in view of her own opinion to tax the amount of Rs.1,65,00,000/- as capital gains in AY: 2015-16. So, when the consideration is being taxed in AY: 2015-16, there is nothing to dispute the appellant's contention that the date of relinquishment of tenancy/occupancy rights is on 01.08.2014, the date on which the entire consideration is received. Since, it has been adjudicated that the date of relinquishment of tenancy/occupancy rights is on 01.08.2014, on such date the appellant had only one residential property i.e. Flat 5A, Dwarka, 7A, Sarat Bose Road, Kolkata 700020. So, the appellant, it is evident from above, is eligible for deduction under section 54F. The appellant has submitted the requisite documentary evidence to substantiate that she invested the said entire consideration money Printed from counselvise.com ITA No.447/KOL/2025 8 of Rs.3,15,00,000/- for buying a new residential property at Rameshwara Mansion, 10th Floor, Flat 10A, 10/4A Lala Lajpat Rai Sarani, Kolkata 700020 for a total consideration of Rs.4,23,00,000/- . The appellant, therefore, as discussed above is eligible to get deduction under section 54 and 54F simultaneously for investment in Flat 10A, Rameshwara Mansion. Further, there is no bar under the Income Tax Act, 1961, to claim deduction simultaneously under section 54 and section 54F, in respect of the same asset. The Hon. ITAT PUNE BENCH 'B', in the case of Ramdas Sitaram Patil v. ACIT in [2024] 166 taxmann.com 222 has also taken similar view. Therefore, the crucial fact which needs to be determined in the present case is the date of purchase of the new residential property. In this case, the sale of Flat 4A, Dwarka \", 7A, Sarat Bose Road, Kolkata 700020 was made on 02.05.2014 and the relinquishment of tenancy/occupancy rights is held to be made on 01.08.2014 (and on this date the appellant was having only one residential house and so the condition that Taxpayer should not own more than one residential house on the date of sale also stands satisfied) and the new residential house was purchased on 02.09.2014 at a consideration of Rs.4,23,00,000/-. It is settled position of law that the crucial date for the purpose of determination is when the property is purchased for the purpose of section 54/54F and the date when the possession and control of the property is given to the purchaser's hands and in this case the Ld. AO has not raised any doubt regarding the date of handing over of possession, and has recorded that copy of Occupancy Certificate(O.C) as provided by the developer has been placed on record. Therefore, in view of the above discussion, the amount chargeable under the head \"long term capital gain\" for AY: 2015-16 comes to Nil as the appellant is eligible to get deduction under section 54 to the tune of Rs.97,54,100/- (along with the benefit of indexed cost of acquisition to the tune of Rs.52,46,185/-) as well as deduction under section 54F to the tune of Rs. 1,65,00,000/-. The addition made by the Ld. AO to the tune of Rs.3,15,00,000/-, therefore, stands deleted. These grounds raised by the appellant are allowed. Additional Grounds 1A & 1B These are other legal grounds agitating against the action of the Ld. AO in making an addition of Rs.3, 15,00,000/- towards Long Term Capital Gain. In view of the adjudication made in Grounds 1, 3 & 4, these grounds are now academic in nature and need no adjudication. Ground 2 is against charging of interest and initiation of penalty. The issue of charging of interest is consequential in nature and the Ld. AO is directed to recompute the interest as per law at the time of giving effect to this order. The ground raised regarding initiation Printed from counselvise.com ITA No.447/KOL/2025 9 of penalty under section 271(1)(c) is premature and stands rejected. In the result, this ground is partly allowed. In the result, the appeal is partly allowed. 7. Keeping in view the above discussion and considering the order of the ld.CIT(A), we do not find any infirmity in the order of the ld. CIT(A). Accordingly, we uphold the same and dismiss the appeal of the revenue. 10. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 28/08/2025 SD/- (RAJESH KUMAR) SD/- (PRADIP KUMAR CHOUBEY) लेखा सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य / JUDICIAL MEMBER कोलकाता Kolkata; ददनाांक Dated 28.08.2025 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलार्थी / The Appellant- 2. प्रत्यर्थी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ड फाईल / Guard file. सत्यापपत प्रतत //True Copy// Printed from counselvise.com "