Smt. M. Saraswati, Hyd, Secunderabad V. ITO Ward 10 (3), Hyderabad

ITA 1019/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77884 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: CH G MURALIKRISHNA MURTHY
• Keywords: Additional evidence; Cost of acquisition
• Section: 54F; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1019/HYD/11 (ASSESSMENT YEAR 2006 - 07) SMT. M.SARASWATHI HYDERABAD ( PAN - AAFTS 3414 F) V/S. INCOME TAX OFFICER WARD 10(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CH.G.MURALIKRISHNA MURTHY RESPONDENT BY : SHRI SOLGY JOSE T. KOTTARAM DR DATE OF HEARING 06.3.2014 DATE OF PRONOUNCEMENT 25.04.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX( APPEALS) VI HYDERABAD DATED 11.1.2011 FOR THE ASSESSMENT YEAR 2006 - 07. 2. MAIN AND EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO COMPUTATION OF CAPITAL GAINS AND DENIAL OF RELIEF UNDER S.54F OF THE INCOME - TAX ACT, 1961. 3. FACTS OF T HE CA S E IN BRIEF LEADING TO THE FILING OF THE PRESENT APPEAL ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND OWNER OF P L OT AD MEASURING 350 SQ. YARDS LOCATED IN S E CUN D ERABAD. ASSESSEE GAVE THIS LAND FOR DEVELOPMENT TO ON E SHRI M. CHANDRA S EKHAR, PROPRIETOR OF A CONCERN BY NAME, M/S. ABODE CON S T R U C TIONS. VIDE A DEVELOP M ENT AGREEMENT DATED 22.4.2004, THE ASSESSEE GAVE THE ABOVE MENTIONED LAND FOR THE DEVELOPMENT OF A PROJECT BY NAME ABODE SAPPHIRE . A S PER CLAUSE 6 OF THE DEVELOPMENT AGREEMENT ASSESSEE GRANTED AN IRREVOCABLE RIGHT TO THE BUIL D ER, SHRI M.CHANDRA SEKHAR, AND AS PER THE AGREEMENT, THE OWNER OF THE SITE WAS ENTITLED FOR 40% OF T H E BUILT UP AREA IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 2 AND 40% OF PARKING SPACE. FURTHER, AS PER THE AGREEMENT, ASSESSEE WAS ENTITLED FOR RS.1,00,000 AS A GOODWI LL AT TH E TIM E OF ENTERING INTO THE AGREEMENT, AND R S .3,00,000 AFTER THE SANCTION OF PLAN WAS O BTAINED F R OM TH E CO N CERNED AUTHORITY, I.E. HUDA/MAL K A J GIRI MUNICIPALITY. AS AGREED BY BOTH THE P ARTIES, THE ASSESSEE RECEIVED THREE CONSTRUCTED FLATS BEARING FLA T NOS.101, 501 AND 403 OF THE NEW VENTURE, CALLED ABODE SAP P HIRE. TH E R E AFTER, THE ASSESSEE SOLD THESE THREE FLATS AS UNDER: FLAT NO. DATE OF SALE DEED SALE CONSIDERATION 403 24.03.2006 RS.6,41,000 501 31.03.2006 RS.8,11,000 101 07.07.2006 RS.8,50,000 THE ASSESSEE CLAIMED THE RESULTANT CAPITAL GAINS AS EXEMPT FROM TAX UN D ER S.54F, AS SHE INV E STE D THE SAME FOR THE PU R CHASE OF AN OPEN PLOT WITH AN INTENTION TO CON S TRUCT A RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD. 4. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THERE WAS A SURVEY OPERATION U/S. 133A OF THE ACT CON D U C TED IN THE PREMISES OF SHRI M.CHANDRA SEKHAR, PROP. ABODE C ON ST RUCTIONS ON 20.0 7.2006. IN THE SWORN STATEMENT RECORDED FROM HIM, IT APPEA R S THAT HE DEPOSE D THAT HE SOLD THE BUILT UP AREA IN THE VENTURE AB O DE SAPPHIRE AT R S .1,100 PER SFT. AND R S .1,25,000 TOWARDS CAR PARKING FOR EACH FLAT. TAKING THE SAME AS THE BASIS, THE ASSESSING OFFICER WORKED OUT THE SALE CON S I D ERATION RECEIVED BY THE ASSESSEE ON THE SALE OF DEVELOPED AREA RECEIVED BY HER, AS UN D ER - CASH RECEIVED RS. 4,00,000 MARKET VALUE O F 3 FL A TS MEASURING 4402 SFT AT RS.1,100 PEER SFT. RS.48 ,42,200 MARKET VALUE O F CAR PARKIN G AT RS.1,25,000 PER FLAT RS. 3,75,000 TOTAL RS. 56,17,200 IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 3 5. AFTER ALLOWING THE CO S T OF ACQUISITION OF THE LAND OF RS.5,25,000, AS DEDUCTION, THE BALANCE OF RS.50,92,200 WAS BROUGHT T O TAX UNDER THE HEAD LONG TERM CAPITAL GAIN, AND ACCORDINGLY, ASSESSMENT ORDER WAS PASSED UNDER S.143(3) OF THE ACT . 6. AGGRIEVED ASSESSEE PREFERRED APPEAL, FURNI S HIN G VARIOUS DETAILS LIKE COPIES O F THE SALE DE E DS, STATEMENT OF THE ASSESSEE, AND ALSO FURNISHED DURING THE C O UR S E OF APPELLATE PROCEEDINGS, A LETTER DATED NIL, SEEKING TO FURNISH ADDITIONAL EVIDENCE RELEVANT TO G R OUNDS OF APPEAL, UNDER RULE 46A(1) OF THE IT ACT, 1961, AND ALSO RAISED THE FOLLOWING CO NTENTIONS - A THE ASSESSING OFFICER HAS NO T TAKEN INTO ACCOUNT THE SRO VALUE WHIL E ARRI VI NG AT COST AND ADOP T ED AN ARBITRARY RATE WITHOUT ANY ADDITIONAL EVIDENCE ON RECORD. HE R E LIED ON THE DECISION IN THE C ASE OF ABDUL QUAYUME V/S CIT(184 ITR 404) IN THI S BEHALF. B THE ASSESSING OFFICER SUBJECTED THE SALE PROCEEDS OF THIRD FLAT TO TAX FOR THE ASSESSMENT YEAR 2007 - 08 WHICH WAS ER R ON E OUS AND THERE CANNO T B E DOUB L E TAXATION FOR SINGLE TRANSFER IN TWO DIFFERENT ASSESSMENT YEARS. C THE ASSESSING OFFICER DECL INED TO CONSIDER T O GIVE EXEMPTION U/S. 54F OF THE IT ACT D. THE ASSESSING OFFICER FAI L ED TO CON S I D ER THE SRO VALUATION WHI C H WAS RS.605 PER SFT. WITH REGARD TO SALE O F LAND AND SOLELY RELIED UPON THE STATEMENT OF THE BUILDER. 7. THE CIT(A) FORWARDED TH E ABOVE SUBMISSIONS CONSTITUTING ADDITIONAL EVI D ENCE TO THE ASSESSING OFFICER AND CALLED FOR A REMAND REPORT. THE ASSESSING OFFICER PLEADED THAT THE SAME ARGUMENTS WERE MADE BEFORE THE ASSESSING OFFICER DURIN G TH E ASSESSMENT PROCEEDI N GS FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 AS WELL AND THERE WAS NO ADDITIONAL EVIDENCE WORTH IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 4 CON S ID E RING. IN THIS VI E W O F THE MATTER, AND CON S I D ERIN G THE CONTENTION S O F THE ASSESSEE IN THE LIGHT OF THE SAID REMAND REPORT OF THE ASSESSING OFFICER, AND ON VARIOUS ISSUES, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN ADOPTING A RATE OF R S .1,100 PER SFT. OF CON S TRUCTED AREA WHILE COMPUTING CAPITAL GAINS; MAKING S EPARATE ADDITION OF R S .4 LAKHS ON ACCOUNT OF CASH RECEIVED BY THE ASSESSEE FROM THE BUILDER IN TERMS OF DEVELOPMENT AGREEMENT; DETERMINING THE CO S T OF ACQUI S ITI O N OF THE LAND, ELIGIBLE FOR DEDUCTION IN TH E COMPUTATION OF CAPITAL GAIN S AT R S .5,25,000; AND D ENIAL OF RELIEF CLAIMED UNDER S .54F OF THE ACT, AND ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE. 8. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATING THE CON T ENTION S URGED BEFORE THE REVENU E AUTHORITI E S SUBMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE ORDER FO THE ASSESSING OFFICER IN TOTO WITHOUT CONSIDERING THE FACT THAT THE FLATS SOLD WERE IN SEMI - FINISHED STAGE AND THAT WOULD NO R FETCH THE PRICE AS THAT OF A COMPLETED FLAT. THE CIT(A) OUGHT TO HAVE ALSO TAKEN INTO ACCOUNT THE LETTER FIL E D BY THE BUILDER SHOWING TH E ADDITIONAL COST O F CONSTRUCTION AFTER THE SALE OF FLATS AS REFLECTED IN HIS BOOKS OF ACCOUNT BY WAY OF SEPARATE HEAD OF INCOME. FURTHERMORE, THE CIT(A) DID NOT GRANT RELIEF UNDER S.54F, CONFIRMING THE ACTION OF THE ASSESSING OFFICER. WITH RESPECT TO THE PLOT, HE SUBMITTED THAT LONG TERM CAPITAL GAINS WOULD APPLY SINCE THE PLOT WAS PURCHASED MORE THAN THREE YEARS AGO AND THE CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER T O ADOPT THE SALE VALUE OF THE LAND FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS, WITH REGARD TO THE FLATS, THE ASSESSEE SOLD THE SAME AT THE RATE IT WAS ACQUIRED, SINCE THE FLATS WERE IN SEMI - FINISHED STAGE AND THE PURCHASER INCURRED THE BALAN CE AMOUNT FOR COMPLETING THE SAME. THE COST AND SALE PRICE OF THE PROPERTY ARE IDENTICAL AND HENCE, THERE WOULD NOT BE ANY SHORT - TERM CAPITAL GAINS. FURTHER, IT IS SUBMITTED THAT THE ASSESSING OFFICER HAD DISREGARDED THE VALUATION CLAIMED BY THE ASSESSEE BEING THE COST OF CONSTRUCTION OF SEMI - FINISHED FLAT AT RS.605 PER SQ. FT., AND RELIED ON THE STATEMENT RECORDED FROM THE BUILDER DURING THE SURVEY OPERATION, WHEREIN THE IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 5 BUILDER STATED THE COST OF CONSTRUCTION OF COMPLETED FLAT AT RS.1,100 PER SQ. FT. AS FOR THE CLAIM FOR RELIEF UNDER S.54F, AND MORE SPECIFICALLY WITH REGARD TO THE COMPLETION OF THE PERIOD OF THREE YEARS, IT WAS SUBMITTED THAT THE PERIOD OF THREE YEARS HAS NOT LAPSED BETWEEN THE DATE OF SALE AND DATE OF INVESTMENT IN THE NEW RESIDENTIA L PROPERTY. THE DATE OF SALE IS MARCH, 2006 AND THE DATE OF INVESTMENT IN THE NEW PROPERTY MUST BE BEFORE MARCH, 2009. THE ASSESSEE HAS SOLD SEMI - FINISHED FLAT IN MARCH, 2006 AND JULY, 2006; REINVESTED THE PROCEEDS IN ACQUIRING A NEW PLOT OF LAND AROUND 2008, AND AS PER THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE IN RELATION TO THE SAID PLOT OF LAND ACQUIRED, THE BUILDER HAD AGREED TO HAND OVER THE POSSESSION OF THE LAND IN AUGUST, 2009. HOW E VER, THE PROPERTY WAS HANDED OVER BY THE DEVELOPER I N FEBRUARY, 2009 ITSELF. EVEN OTHERWISE, THE LEARNED COUNSEL RELIED ON THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF NARASIMHA RAJU RUDRA RAJU V/S. ACIT (2013)35 TAXMANN.COM.90.HYD, WHEREIN IT WAS HELD THAT ASSESSEE IS ENTITLED TO BENE FIT UNDER S.54F OF THE ACT, ONCE THE SALE CONSIDERATION IS INVESTED EITHER IN PURCHASING OR CONSTRUCTING A RESIDENTIAL HOUSE EVEN THOUGH THE CONSTRUCTION IS NOT COMPLETE. HENCE, IT WAS SUBMITTED THAT THE ASSESSING OFFICER AND THE CIT(A) WERE NOT RIGHT IN DENYING THE BENEFIT UNDER S.54F OF THE ACT WHICH THE ASSESSEE IS ENTITLED TO. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE CONTRARY, SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 11. WE HE A RD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. AS FOR THE COMPUTATION OF LONG TERM CAPITAL GAINS IN RELATION TO THE PLOT OF LAND, INDEXATION OF COST OF ACQUISITION OF THE LAND HAS TO BE DONE AS PER THE DIRECTION OF THE CIT(A). WITH RESPECT TO SHORT TERM CAPITAL GAINS, IT IS THE CASE OF THE ASSESSEE THE FLATS RECEIVED FROM THE BUILDER AND SOLD ARE IN SEMI - FINISHED CONDITION AND THERE IS NO EXCESS AMOUNT RECEIVED AT THE TIME OF SALE FOR THE SEMI - FINI SHED FLATS , AND CONSEQUENTLY, NO CAPITAL GAINS HAVE BEEN DERIVED TO THE ASSESSEE FOR BEING TAXED AS SHORT TERM CAPITAL GAINS . WE FIND THAT THE CIT(A) HAS TAKEN THE RATE IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 6 OF RS.1100 PER SFT. AS THE COST, BASED ON THE DEPOSITION OF THE BUILDER IN THE COURSE OF SURVEY ACTION ON THE PREMISES OF THE BUILDER. SINCE THAT RATE DEPOSED BY THE BUILDER RELATES TO FLATS IN RESPECT OF WHICH CONSTRUCTION IS COMPLETE IN ALL RESPECTS, ACCORDING TO THE ASSESSEE, THAT RATE DOES NOT APPLY TO THE THREE FLATS IN QUESTION SOLD B Y THE ASSESSEE, WHICH HAVE BEEN RECEIVED BY THE ASSESSEE FROM THE BUILDER IN SEMI - FINISHED CONDITION AND SOLD AS SUCH. WE FIND SOME FORCE IN THIS CONTENTION OF THE ASSESSEE. IN ANY EVENT, IN THE ABSENCE OF ANY MATERIAL BROUGHT ON RECORD TO INDICATE THAT T HE ASSESSEE HAS RECEIVED ANYTHING OVER AND ABOVE THE SALE CONSIDERATION RECEIVED ON THE SALE OF FLATS IN QUESTION, ONE CANNOT PROCEED TO ESTIMATE THE SALE CONSIDERATION BASED ON THE DEPOSITION OF A THIRD PARTY. IT IS ALSO ASSESSEES CASE THAT CAPITAL GAINS IN RESPECT OF THIRD FLAT HAS ONCE AGAIN BEEN BROUGHT TO TAX IN THE ASSESSMENT YEAR 2007 - 08 , WHICH RESULTED IN TAXING THE VERY SAME AMOUNT TWICE IN DIFFERENT YEARS . AS FOR RELIEF UNDER S.54F OF THE ACT, IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED THE FLATS FROM THE DEVELOPER OF THE LAND ACQUIRED ON INVESTMENT OF THE CAPITAL GAINS, BEING TAXED IN THIS YEAR, IN FEBRUARY, 2009 ITSELF, I.E. WITHIN THREE YEARS FROM THE YEAR OF RECEIPT OF SUCH CAPITAL GAINS, AND SHE IS VERY MUCH ENTITLED FOR EX EMPTION UNDER S.54F OF THE ACT. ALL THESE ASPECTS OF THE MATTER, REQUIRE VERIFICATION AND EXAMINATION BY THE ASSESSING OFFICER. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) ON THESE ISSUES, AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 25.04.2 0 1 4 SD/ - SD/ - ( CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 25 TH APRIL, 2014 IT A NO. 1019/ HYD/20 11 SMT. M.SARASWATHI, HYDERABAD 7 COPY FORWARDED TO: 1. SMT. M.SARASWATHI, C/O. SHRI CHY.G.KRISHNA MURTHY & CO., CHARTERED ACCOUNTANTS, 133/1, PRENDERGHAST ROAD, SECUNDERABAD 500 003.I 2 . INCOME TAX OFFICER WARD 10(3) , HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) VI, HYDERABAD 4. COMMISSIONER OF INCOME - TAX HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S