HITESH HASMUKHLAL JAIN,MUMBAI V. WARD 42(1)(2), KAUTILYA BHAWAN MUMBAI

ITA 2955/MUM/2024

AI Insights

The case involves Hitesh Hasmukhlal Jain, who appealed against the order of the Commissioner of Income Tax (Appeals) - Faridabad, which confirmed the Assessing Officer's decision treating the gains from the sale of a flat as short-term capital gains and denying exemption under Section 54. The flat was sold for Rs. 1,02,50,000, and the assessee claimed the gains as long-term capital gains, having held the property since its allotment on 26/10/2009. The Assessing Officer argued that the property was not a long-term capital asset as the agreement with the builder was executed on 15/09/2011, and the sale occurred on 03/09/2013. The Tribunal, referencing the Bombay High Court's decision in Pr. CIT vs. Vembu Vaidyanathan, ruled in favor of the assessee, recognizing the date of allotment as the date of acquisition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28594 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2014-2015
• Other Referred Cases: Pr. CIT vs. Vembu Vaidyanathan in ITA No. 1459 of 2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASIF KAR MALI; DR
• Assessee Lawyers: PARAS SAVLA AW SHREYAS SARDESAI; ARS
• Keywords: Capital asset; Additional evidence; Question of law; Cost of acquisition; Capital Gains; Principle of natural justice
• Section: 143(3); 54; 54F

Judgement Text

" | आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “J(SMC)” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 2955/Mum/2024 Assessment Year: 2014-15 Hitesh Hasmukhlal Jain, Mumbai 602, Adeshwar Height Sodawala lane Borivali (West) Mumbai - 400092 [PAN: ADNPJ4776E] Vs Ward 42(1)(2), Kautilya Bhawan, Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Paras Savla a/w Shreyas Sardesai, A/Rs Revenue by : Shri Asif Karmali, Sr. D/R सुनवाई की तारीख/Date of Hearing : 06/02/2025 घोषणा की तारीख /Date of Pronouncement: 11/02/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the ld. Addl./JCIT(A) - Faridabad [hereinafter ‘the ld. CIT(A)’] dated 28/03/2024, pertaining to AY 2014-15. 2. The grievance of the assesse reads as under:- “1. General On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in dismissing the appeal and thereby confirming the order passed under 143(3) of the Income Tax Act, 1961 ('Act). 2. Natural justice violated On the facts and circumstances of the case and in law, the CIT(A) failed to grant sufficient opportunity to present the case and thus principles of natural justice are grossly violated. 3. Long-term capital gains wrongly treated as short-term capital gains I.T.A. No. 2955/Mum/2024 2 a) The Ld. CIT(A), by confirming the Assessment order, has erred in treating the long- term capital gain arising out of the transfer of a residential unit as a short-term capital gain. b) The Ld. CIT(A), by confirming the Assessment order, has failed to appreciate that the period of holding has to be reckoned from the date of allotment and not from the date of purchase agreement. c) The Ld. CIT(A), by confirming the Assessment order, has erred in taking Rs.68,68,800/- as cost of acquisition instead of Rs.72,39,895/- incurred by the Appellant. 4. Denial of exemption u/s 54 The Ld. Assessing officer erred in denying the exemption u/s 54 on account of investment of long-term capital gain in a residential house. 5. Interest u/s 234A, 234B, and 234C On merits, the Appellant denies its liability to the levy of penal interest u/s. 234A, 234B and 234C, hence the interest levied may be directed to be deleted. 6. The Appellant submits that all the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, alter, delete or substitute any of the aforesaid grounds at any time before or at the time of hearing of the matter with the Income Tax Appellate Tribunal.” 3. Briefly stated, the facts of the case are that the assessee is an individual and has shown income under the heads Salary, Business & Profession, Capital Gain and income form other sources. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. While scrutinising the return of income, the AO noticed that the assessee has sold immovable property being Flat at Vireshwar Heights, Ville Parle (E), Mumbai for consideration of Rs.1,02,50,000/- and claimed the gains arising from sale of flat as long term capital gain and thereafter purchased another property on which it claimed exemption u/s 54 of the Act. 4. The AO denied the claim of long term capital gain as the date of agreement executed with builder for purchase of flat, which has been I.T.A. No. 2955/Mum/2024 3 sold by the assessee is 15/09/2011 and the date of sale of the impugned flat is 03/09/2013. Therefore, the asset was not a long term capital asset and re-computed the capital gains as short term capital gains denying the claim of exemption u/s 54 of the Act. 5. The assessee carried the matter before the ld. CIT(A) but without any success. 6. Before us, the ld. Counsel vehemently stated that the impugned flat was allotted to the assessee on 26/10/2009 as per the allotment letter and the sale agreement is dated 03/09/2013 which makes the asset a long term capital asset on which the assessee has claimed exemption u/s 54 of the Act. Per contra, the ld. D/R strongly supported the findings of the ld. AO and vehemently stated that the completion certificate given to the builder was in the month of January, 2010 and the date of acquisition cannot be prior to that date. 7. We have carefully considered the orders of the authorities below. The undisputed fact is that the assessee had been allotted the flat on 26/10/2009 as per the allotment letter and the assessee had already paid Rs.22 lakhs, which is not in dispute. The assessee had paid around 40% of the total consideration of Rs.58.75 Lakhs which was subsequently revised by the Municipal corporation for stamp duty purposes at Rs.64.50 lakhs. We are of the considered view that, on the given facts, there is no doubt that the assessee was entitled for the impugned flat on 26/10/2009 which has to be taken as the date of acquisition and since the I.T.A. No. 2955/Mum/2024 4 date of sale is 03/09/2013, it makes the holding period more than 36 months and the asset, a long term capital asset. 8. Our view is fortified by the decision of the Hon’ble High Court of Bombay in the case of Pr. CIT vs. Vembu Vaidyanathan in ITA No. 1459 of 2016 wherein, the Hon’ble Court was seized with the following substantial question of law:- “Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in treating the gain arising from the sale of capital asset as Long Term Capital Gain without appreciating the fact that mere letter of allotment does not lead to creation of proper and effective right over the capital asset sought to be acquired, but only on execution of an agreement spelling out all the exact terms and conditions for acquisition?\" 8.1. And the Hon’ble Court answered as under:- “4. Having heard learned counsel for the parties, we notice that the CBDT in its circular No.471 dated 15th October, 1986 had clarified this position by holding that when an assessee purchases a flat to be constructed by Delhi Development Authority (“D.D.A.” for short) for which allotment letter is issued, the date of such allotment would be relevant date for the purpose of capital gain tax as a date of acquisition. It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow up action and taking the delivery of possession is only a formality. 5. This aspect was further clarified by the CBDT in its later circular No.672 dated 16th December, 1993. In such circular representations were made to the board that in cases of allotment of flats or houses by cooperative societies or other institutions whose schemes of allotment and consideration are similar to those of D.D.A., similar view should be taken as was done in the board circular dated 15th October, 1986. In the circular dated 16th December, 1993 the board clarified as under: “2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the cooperative societies or other institutions are similar to those mentioned in para 2 of Board's Circular No.471, dated 15101986, such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Incometax Act.” It can thus be seen that the entire issue was clarified by the CBDT in its above mentioned two circulars dated 15th October, 1986 and 16th December, 1993. In terms of such clarifications, the date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in I.T.A. No. 2955/Mum/2024 5 the present case was materially different from the terms of allotment and construction by D.D.A.. In that view of the matter, CIT appeals of the Tribunal correctly held that the assessee had acquired the property in question on 31st December, 2004 on which the allotment letter was issued. 6. Learned counsel for the revenue has also argued that in any case the assessee was not entitled to exemption under Section 54F of the Income Tax Act, 1961 (“the Act” for short). Since the assessee had held multiple residential units which would disqualify the assessee from claiming the exemption on it as was held by the Assessing Officer. From the record we notice that before the CIT appeals the assessee had produced additional evidence to suggest that the other units previously held by the assessee were discarded earlier and that at the relevant time the assessee did not hold any other residential unit. Quite apart from it being a pure question of fact, we do not find any indication in the impugned judgment of the Tribunal though the revenue had argued such a contention in its appeal before the Tribunal. 7. In the result, the Income Tax Appeal is dismissed.” 8.2. Considering the aforementioned decisions of the Hon’ble Jurisdictional High Court, we have no hesitation in treating the said flat as long term capital asset. 9. Having held that it is a long term capital asset, the AO is directed to examine the claim of exemption u/s 54 of the Act and decide the issue afresh. 10. In the result, appeal of the assesse is allowed. Order pronounced in the Court on 11th February, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 11/02/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs I.T.A. No. 2955/Mum/2024 6 आदेश की \u0015ितिलिप अ\u001aेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001c / The Appellant 2. \u0015\u001dथ\u001c / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "