Sh. Harmesh Kumar Kalsi, Mohali V. ITO, Mohali

ITA 1035/CHANDI/2013

• Counselvise Citation: 103521514 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: N K SAINI
• Keywords: Capital asset; Valuation report
• Section: 54; 139; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.1035/CHD/2013 ASSESSMENT YEAR:2009-10 SH. HARMESH KUMAR KALSI, VS. ITO D-129, INDUSTRIAL AREA WARD 6(3) PHASE VII MOHALI MOHALI PAN NO. AHKPK6895Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. N.K. SAINI RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 01/09/2015 DATE OF PRONOUNCEMENT :24/09/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), CHANDIGARH DT. 27/08/2013. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RETURN O F INCOME FOR THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAD SHOWN INCOME FROM CAPITAL GAIN AMOUNTING TO RS. 1,16,463/-. DURING ASSESSMENT PROCEEDINGS, O N BEING ASKED TO FURNISH DETAIL OF THE SAME, THE ASSESSEE SUBMITTED THAT THE CAPITA L GAIN AROSE ON SALE OF HIS PROPERTY BEING HOUSE NO. 10, SECTOR 70, MOHALI, W HICH HE HAD SOLD ON 01/09/2008 FOR A CONSIDERATION OF RS. 65,00,000/- A ND INCURRED EXPENSES OF RS. 7,00,000/- ON SALE. THE ASSESSEE FURTHER SUBMITTED THAT THE IMPUGNED PROPERTY HAD BEEN PURCHASED ON 25/07/2003 FOR A COST OF RS. 15,14,000/- AND FURTHER EXPENSES ON CONSTRUCTION WERE INCURRED AMOUNTING TO RS. 12,33,680/-. BY APPLYING INDEXATION TO THE COST, AND REDUCING THE S AME FROM THE SALE 2 CONSIDERATION, A CAPITAL GAIN OF RS. 29,76,123/- HA D BEEN EARNED BY THE ASSESSEE. THE ASSESSEE STATED THAT HE INVESTED A SU M OF RS. 28,59,650/- ON 22/07/2009 IN A LAND MEASURING 4 RAKBA, 1 BIGHA, 1 BISWA, 10 BISWASI AT MORINDA ON LUDHIANA BYE PASS ROAD AND CLAIMED EXEMPTION U/S 54 ON ACCOUNT OF THE SAME FROM THE CAPITAL GAIN EARNED. THUS, THE BALANC E CAPITAL GAIN OF RS. 1,16,463/- WAS OFFERED TO TAX IN HIS RETURN FILED O N 26/09/2009. FURTHER THE ASSESSEE STATED DURING ASSESSMENT PROCE EDING THAT NO CONSTRUCTION HAD BEEN MADE ON THE LAND PURCHASED AN D NO AMOUNT WAS ALSO DEPOSITED IN THE CAPITAL GAIN SCHEME. THE AO THEREF ORE DENIED THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 54 OF THE ACT AMOUNTING TO RS. 28,59,650/-. 3. IN APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE STA TED THAT HE WOULD LIKE TO RELY UPON THE STATEMENT OF FACT SUBMITTED WITH THE APPEAL DOCUMENT. THE LD. CIT(A) HELD THAT SINCE THE ASSESSEE HAD ONLY SUBMIT TED THAT DEDUCTION CLAIMED UNDER SECTION 54 HAD BEEN ADDED, IN THE STATEMENT O F FACTS, AND IN VIEW OF THE FACT THAT NEITHER ANY HOUSE HAD BEEN PURCHASED OR C ONSTRUCTED WITHIN THE STIPULATED PERIOD NOR WAS THE AMOUNT OF CAPITAL GAI N INVESTED IN THE CAPITAL GAIN SCHEME, THE EXEMPTION UNDER SECTION 54 CLAIMED BY THE ASSESSE HAD BEEN RIGHTLY DENIED BY THE AO. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED THIS PR ESENT APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN UPHOLDING THE ORDER PASSED BY THE ASSESSING OFFICER WHEREIN DEDUCTION CLAIMED MADE UNDER SECTION 54 OF THE ACT WAS DISALLOWED IN AS MUCH AS THAT THE ASSESSEE HAD ALREADY CONSTRUCTED A RESIDENTIAL UNIT ON THE LAND PURCHASED BY HIM WHICH FACT WAS NOT BROUGHT ON RECORD BY HIS COU NSEL AND AS SUCH THE ORDER PASSED IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW IN UPHOLDING THE ORDER PASSED BY ASSESSING OFFI CER ON ACCOUNT OF DISALLOWANCE OF CLAIM UNDER SECTION 54 ALTHOUGH ASS ESSEE HAD ALREADY MADE INVESTMENT OF RS. 28,19,650/- (26,01,500 + 2,08,150 /- + 10,000= 28,19,650/-) ON PURCHASE OF LAND OUT OF TOTAL CAPITAL GAINS OF RS. 28,59,650/- AND ASSESSEE WAS REQUIRED TO DEPOSIT ONLY AN AMOUNT OF RS. 39,910/- IN THE CAPITAL GAINS SCHEME BEFORE DUE DATE APPLICABLE IN THE CASE OF THE ASSES SEE FOR FURNISHING THE RETURN 3 OF INCOME UNDER SUB-SECTION(1) OF SECTION 139 WHICH WAS 30.09.2009. ASSESSING OFFICER COULD HAVE MADE A DISALLOWANCE OF MAXIMUM O F RS. 39,910/-. 5. BEFORE US THE LD. AR SUBMITTED THAT AS PER CBDT CIRCULAR NO. 667 DT. 18/10/1993 , COST OF RESIDENTIAL HOUSE FOR THE PURP OSE OF EXEMPTION UNDER SECTION 54 INCLUDED THE COST OF PLOT OF LAND ALSO. THEREFORE, THE LD. AR ARGUED THAT SINCE THE ASSESSEE HAD PURCHASED A PLOT OF LAN D BEFORE THE DATE OF FURNISHING OF RETURN U/S 139 AND EVEN IF NO CONSTRU CTION HAD BEEN DONE ON THE SAME, EXEMPTION UNDER SECTION 54 WAS TO BE ALLOWED TO THE ASSESEE. THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE I TAT HYDERABAD BENCH, IN THE CASE OF SMT. PUSHPA DEVI TIRBREWALA VS. ITO IN ITA NO. 1763/HYD/2011 DT. 22/03/2013, IN SUPPORT OF THE ABOVE CONTENTION. BES IDES THE LD. AR CONTENDED THAT IT HAD ALREADY CONSTRUCTED A RESIDENTIAL UNIT ON THE LAND PURCHASED. AS EVIDENCE OF THE SAME, THE LD. AR PLACED BEFORE US A N AFFIDAVIT OF THE ASSESSEE DT. 18/02/2015 WHICH STATED THAT OUT OF THE SALE PR OCEEDS OF HIS HOUSE IN SECTOR- 70, MOHALI, HE HAD PURCHASED A PLOT IN MORINDA AND HAD CONSTRUCTED A HOUSE ON THE SAME CONSISTING OF ONE LIVING ROOM, KITCHEN AND TOILET ALONGWITH BOUNDARY WALL. IT WAS FURTHER STATED IN THE AFFIDAV IT THAT THIS FACT HAD BEEN COMMUNICATED TO THE AO DURING THE ASSESSMENT PROCEE DINGS BUT DUE TO SOME COMMUNICATION GAP, THE AO HAD CONSTRUED THAT NO CON STRUCTION HAD BEEN DONE. THE LD. AR THEREFORE PLEADED THAT THE ASSESSE ES CLAIM UNDER SECTION 54 / 54F WAS JUSTIFIED. 6. THE LD. DR ON THE OTHER HAND ARGUED THAT THE PUR CHASE OF LAND IN ITSELF WOULD NOT MAKE THE ASSESSEE ELIGIBLE FOR EXEMPTION UNDER SECTION 54/54F SINCE THE SUBSTANTIAL CONDITION TO BE FULFILLED FOR CLAIM ING EXEMPTION IS THE PURCHASE OR CONSTRUCTION OF HOUSE WITHIN THE SPECIFIED PERIOD. THE LD. DR STATED THAT SINCE THE ASSESSEE HAD HIMSELF ADMITTED DURING ASSESSMENT PROCEEDING THAT NO HOUSE HAD BEEN CONSTRUCTED ON THE SAME, THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 54/54F OF THE INCOME TAX AC T, 1961. THE LD. DR FURTHER 4 STATED THAT IN ANY CASE THE ASSESSEE WAS NOT ENTITL ED TO CLAIM EXEMPTION U/S 54, SINCE THE LAND PURCHASED WAS AGRICULTURAL LAND. 7. THE LD. AR IN RESPONSE SUBMITTED THAT FOR THE PU RPOSES OF CLAIMING EXEMPTION U/S 54 IT DID NOT MATTER WHETHER THE HOUS E WAS CONSTRUCTED ON AGRICULTURE LAND OR OTHERWISE. HE PLACED RELIANCE O N THE DECISION OF THE JAIPUR BENCH OF THE ITAT IN THE CASE OF ACIT VS. OM PRAKAS H GOYAL 53 SOT 158 IN SUPPORT OF HIS ABOVE CONTENTION. 8. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE DOCUMENTS PLACED BEFORE US. 9. THE ONLY ISSUE BEFORE US IS REGARDING THE ASSESS EES CLAIM OF EXEMPTION OF CAPITAL GAIN U/S 54 OF THE INCOME TAX ACT, 1961. 10. TO APPRECIATE THE RIVAL CONTENTIONS, THE PROVIS ION OF SECTION 54 ARE REPRODUCED HERE UNDER: 54. (1)SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY], THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET ***, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY' (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHIC H THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE, THEN, INSTEAD OF THE CAPITAL GAI N BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFE R TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THI S SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF TH E CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT O F THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF T HREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET AN Y CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURC HASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. *** 5 (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE , OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET B EFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DE POSITED BY HIM BEFORE FURNISHING SUCH RETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFIC ATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTR UCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB-SECTIO N IS NOT UTILISED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE N EW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN, (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UND ER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEAR S FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. A BARE READING OF THE PROVISION OF SECTION 54, REVE ALS THAT WHERE CAPITAL GAIN ARISES ON THE TRANSFER OF LONG TERM CAPITAL ASSET B EING BUILDING OR LAND APPURTENANT THERETO AND BEING RESIDENTIAL HOUSE, TH E ASSESSEE CAN CLAIM EXEMPTION OF THE SAID CAPITAL GAIN, EITHER BY PURCH ASING A RESIDENTIAL HOUSE ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSFER , OR CONSTRUCTING A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER. IN CASE THE AMOUNT IS NOT SO UTILIZED BEFORE THE DATE OF FURNIS HING OF RETURN OF INCOME UNDER SECTION 139, THE UNUTILIZED AMOUNT, IF DEPOSITED IN A BANK ACCOUNT, SHALL BE DEEMED TO BE COST OF NEW ASSET. THUS WHEN BOTH THE SUB-SECTIONS ARE READ TOGETHER IT IS SEEN THAT THE SECTION TAKES CARE OF BOTH SITUATIONS WHEN AMOUNT IS UTILIZED OR WHEN IT REMAINS UNUTILIZED WITHIN THE P ERIOD SPECIFIED IN SUB-SECTION 1. THE EMPHASIS IN BOTH THE SUB SECTION IS ON THE UTIL IZATION OF THE LONG TERM CAPITAL GAIN. CAPITAL GAIN IS COMPUTED WITH REFERENCE TO TH E ASSESSMENT YEAR IN WHICH TRANSFER TAKES PLACE. PURCHASE OR CONSTRUCTION OF A HOUSE CAN TAKE PLACE TWO OR THREE YEARS THEREAFTER. THEREFORE, THE PROVISION OF SECTION 54, ENVISAGES THAT IN THE YEAR IN WHICH CAPITAL GAIN TAKES PLACE, THE ENT IRE AMOUNT MAY NOT BE UTILIZED AND THE HOUSE MAY STILL BE UNDER CONSTRUCT ION. THEREFORE IN THE YEAR IN 6 WHICH CAPITAL GAIN IS EARNED AND EXEMPTION U/S 54 I S CLAIMED , WHAT IS ONLY TO BE SEEN IS THAT THE AMOUNT IS UTILIZED FOR CONSTRUC TION OF A NEW HOUSE EITHER ACTUALLY OR BY WAY OF DEPOSIT IN THE SPECIFIED ACCO UNT. IT IS ONLY AFTER THE END OF THE PERIOD SPECIFIED IN SUB-SECTION (1) I.E. THREE YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET, THAT COMPLETION OF CONSTRUCTION OF HOUSE CAN BE SEEN. 11. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT T HE ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS ON SALE OF RESIDENTIAL HOUSE, A MOUNTING TO RS. 29,76,113/-. THUS THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION U /S 54 OF THE INCOME TAX ACT, 1961, PROVIDED IT UTILIZED ITS CAPITAL GAIN FOR INV ESTMENT IN CONSTRUCTION OR PURCHASE OF A RESIDENTIAL HOUSE WITHIN THE PRESCRIB ED PERIOD. IT IS AN ADMITTED FACT THAT THE ASSESSEE INVESTED THE CAPITAL GAIN IN THE PURCHASE OF A LAND ON 22/07/2009, I.E; BEFORE FILING ITS RETURN U/S 139 O N 26/09/2009 AND CLAIMED EXEMPTION U/S 54 THEREOF. IN VIEW OF THE ABOVE ADMI TTED FACTS, AND IN VIEW OF THE CONDITIONS OF SECTION 54 DISCUSSED ABOVE, IT IS TO BE SEEN WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION U/S 54, ON THE LAND PURCHASED ONLY WITHOUT HAVING SHOWN ANY CONSTRUCTION OR PURCHASE O F HOUSE PROPERTY. 12. AT THIS JUNCTURE WE WOULD LIKE TO REFER TO CBDT CIRCULAR NO. 667 DT. 18/10/1993 WHICH STATES AS FOLLOWS: SUBJECT: INTERPRETATION OF SECTIONS 54 AND 54 F OF INCOME-TAX ACT, 1961-REGARDING SECTION 54 AND 54 F PROVIDE FOR A DEDUCTION IN CASE S WHERE AN ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFT ER THE DATE ON WHICH THE TRANSFER OF A CAPITAL ASSET TAKES PLACE, PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HO USE. THE QUANTUM OF DEDUCTION IS ITSELF DEPENDENT UPON THE COST OF SUCH NEW ASSET . IT HAS BEEN REPRESENTED TO THE BOARD THAT THE COST OF CONSTRUCTION OF THE RESI DENTIAL HOUSE SHOULD BE TAKEN TO INCLUDE THE COST OF THE PLOT, AS IN A SITUATION OF PURCHASE OF ANY HOUSE PROPERTY, THE CONSIDERATION PAID GENERALLY INCLUDES THE CONSI DERATION FOR THE PLOT ALSO. 2. THE BAORD HAS EXAMINED THE ISSUE WHETHER, IN CAS ES WHERE THE RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN THE SPECIFIED PERIOD, T HE COST OF SUCH RESIDENTIAL HOUSE CAN BE TAKEN TO INCLUDE THE COST OF THE PLOT ALSO. THE BOARD ARE OF THE VIEW THAT THE COST OF THE LAND IS AN INTEGRAL PART OF TH E COST OF THE RESIDENTIAL HOUSE, WHETHER PURCHASED OR BUILT. ACCORDINGLY, IF THE AMO UNT OF CAPITAL GAIN FOR THE PURPOSES OF SECTION 54F, IS APPROPRIATED TOWARDS PU RCHASE OF A PLOT AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE THEREON , THE AGGREGATE COST SHOULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEDUCT ION UNDER SECTION 54/54F, 7 PROVIDED THAT THE ACQUISITION OF PLOT AND ALSO THE CONSTRUCTION THEREON ARE COMPLETED WITHIN THE PERIOD SPECIFIED IN THESE SECT IONS. 3. THIS MAY BE BROUGHT TO THE NOTICE OF ALL THE ASS ESSING OFFICERS IN YOUR REGION. AS PER THE ABOVE CIRCULAR IF CAPITAL GAIN IS APPROP RIATED TOWARDS PURCHASE OF LAND AND ALSO TOWARDS CONSTRUCTION OF A RESIDENTIAL HOUSE IT IS TO BE CONSIDERED TO BE INVESTED IN PURCHASE/CONSTRUCTION OF HOUSE PR OPERTY FOR THE PURPOSE OF SECTION 54. THE USE OF THE WORD AND BETWEEN PURCH ASE OF LAND AND CONSTRUCTION OF HOUSE IMPLIES, THAT IT IS ONLY WHEN LAND IS PURCHASED FOR THE PURPOSE OF CONSTRUCTING A RESIDENTIAL HOUSE THEREON THE BENEFIT U/S 54 WILL BE AVAILABLE TO THE ASSESSEE. THIS INTERPRETATION OF T HE CIRCULAR IS IN CONSONANCE WITH THE INTENTION AND OBJECTIVE OF THE SECTION, WHICH I S TO PROMOTE INVESTMENT IN RESIDENTIAL HOUSES. THEREFORE IN INSTANCES WHERE ON LY LAND IS PURCHASED, IN THE YEAR IN WHICH CAPITAL GAIN ACCRUES, THE INTENTION O F CONSTRUCTING A RESIDENTIAL HOUSE HAS ALSO TO BE ESTABLISHED FOR CLAIMING EXEMP TION U/S 54. IT IS PERTINENT TO ADD AT THE SAME TIME, THAT IT IS MERELY THE INTENTI ON TO CONSTRUCT A RESIDENTIAL HOUSE WHICH IS TO BE ESTABLISHED BY THE ASSESSEE AN D EXAMINED BY THE AO. AS FOR THE ISSUE WHETHER THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HOUSE, THE SECTION, PROVIDES A PERIOD OF THREE YEARS FOR THE S AME AND THEREFORE THIS ISSUE IS TO BE EXAMINED IN THE YEAR IN WHICH THE PERIOD OF T HREE YEARS EXPIRES AND NOT IN THE YEAR IN WHICH EXEMPTION U/S 54 IS CLAIMED. 13. THIS VIEW HAS BEEN HELD BY THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF SMT. PUSHPA DEVI TIBREWALA VS. ITO, HYDERABAD, I N ITA NO. 1763/HYD/2011, WHEREIN IT WAS HELD AT PARA 12 AND 14 OF THE ORDER: 12. THE RATIO LAID DOWN BY THE COORDINATE BENCH AS ABOVE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE AS PROVISION CONTAINE D U/S. 54 OF THE ACT IS PARI MATERIA WITH S. 54 F OF THE ACT. THEREFORE, FOLLOWI NG THE AFORESAID RATIO LAID DOWN BY THE COORDINATE BENCH, WE HOLD THAT EXEMPTION CLA IMED BY THE ASSESSEE UNDER S. 54 OF THE ACT CANNOT BE DENIED ON THE GROU ND THAT THE ASSESSEE HAS NOT UTILISED THE SALE CONSIDERATION RECEIVED FROM THE S ALE OF FLATS ITSELF, IN PURCHASING THE PLOT. LAW IS WELL SETTLED BY THE JUDICIAL PRECEDENTS THAT INVESTMENT IN PURCHASE 8 OF PLOT FOR CONSTRUCTION OF HOUSE WOULD ENTITLE AN ASSESSEE TO CLAIM EXEMPTION U/S 54 OR 54 F OF THE ACT. BOARDS CIRCULAR NO. 667 DAT ED 18/10/1993 ALSO SAYS SO. 14. EVEN ASSUMING THAT THE CONSTRUCTION WAS NOT COM PLETED WITHIN THE PERIOD OF THREE YEARS, WHICH, OF COURSE, IS NOT THE CASE IN T HE PRESENT APPEAL, IF AT ALL ANY DISALLOWANCE HAS TO BE MADE, THEN, IT HAS TO BE MAD E IN THE YEAR IN WHICH THE PERIOD OF THREE YEARS EXPIRES AND NOT IN THE IMPUGN ED ASSESSMENT YEAR, IN WHICH THE DEPARTMENT IS OBLIGED IN THE FIRST PLACE TO GRA NT DEDUCTION UNDER S.54 OF THE ACT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE TO CLAIM EXE MPTION OF THE AMOUNT OF RS. 69,61,500/- INVESTED IN PURCHASE OF LAND UNDER S. 5 4 OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SAME TO T HE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ON THIS ASPECT, VIZ. GROUNDS NO. 2 AND 3 ARE ALLOWED. IN THE PRESENT CASE, WE FIND THAT IT IS AN UNDISPUT ED FACT THAT THE ASSESSEE HAD INVESTED CAPITAL GAIN AMOUNTING TO RS. 28,19,650/- IN PURCHASE OF LAND AT MORINDA, LUDHIANA BYE PASS ROAD. BUT THE FACT THAT LAND WAS PURCHASED WITH THE INTENTION OF CONSTRUCTING A RESIDENTIAL HOUSE T HEREON HAS NOT BEEN EXAMINED BY THE AO. WE FIND THAT BOTH THE LOWER AUTHORITIES LAID EMPHASIS ON THE FACT OF CONSTRUCTION OF RESIDENTIAL HOUSE FOR GRANTING EXEM PTION U/S 54. THIS, AS WE HAVE STATED ABOVE IS NOT NECESSARY CONDITION TO BE FULFI LLED IN THE YEAR OF CLAIMING EXEMPTION. IT IS THE INTENTION OF CONSTRUCTING A RESIDENTIAL HOUSE BY THE ASSESSEE ON THE LAND PURCHASED WHICH HAS TO BE ESTA BLISHED BY THE ASSESSEE AND EXAMINED BY THE LOWER AUTHORITIES BEFORE GRANTI NG EXEMPTION U/S 54 READ WITH CIRCULAR NO. 667 DT. 18/10/1993 AS DISCUSSED A BOVE. WE FIND THAT SINCE THIS ISSUE HAD NOT BEEN EXAMINED BY THE AO, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO, TO EXAMINE AFRESH WHETHER THE LAND WAS PURCHASED BY THE ASSESSEE FOR THE PURPOSE OF CONSTR UCTING A RESIDENTIAL HOUSE THREON. MOREOVER, WE FIND NO FORCE IN THE CONTENTION OF THE LD. DR THAT SINCE THE LAND PURCHASED BY THE ASSESSEE WAS AGRICULTURAL LAND THE ASSESSEE WAS NOT ENTITLED TO CLAIM BENEFIT U/S 54 OF THE ACT. THE ONLY REQUIR EMENT FOR CLAIMING EXEMPTION U/S 54 AS STATED ABOVE IS THAT THE CAPITAL GAIN SHO ULD BE INVESTED FOR PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE. INVESTMENT IN LAND IS TO BE TREATED AS INVESTMENT IN CONSTRUCTION OF HOUSE AS PER CIRCULAR NO. 667(SUPRA). THERE IS NO 9 PROHIBITION REGARDING CONSTRUCTION OF A RESIDENTIAL HOUSE ON AGRICULTURAL LAND. MOREOVER IN THE CASE OF ACIT VS. OM PRAKASH GOYAL ( 2012) 53 SOT 158, IT HAS BEEN HELD AS UNDER: THE HOUSE CONSTRUCTED ON AGRICULTURAL LAND OR ON OTHER HANDS DOES NOT MATTER, BUT THE FACT THAT HOUSE SHOULD BE CONSTRUCTED AND F ROM THE REPORT IT IS VERY MUCH CLEAR THAT A RESIDENTIAL HOUSE WAS CONSTRUCTED AS T HIS FACT HAS BEEN MENTIONED BY VALUER IN HIS VALUATION REPORT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING TH E CLAIM OF THE HOUSE. ACCORDINGLY, THE ORDER OF COMMISSIONER (APPEALS) IS CONFIRMED. [PARA 8] IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSED . CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ISSUE OF ELIGIBILITY OF THE ASSESSEE TO CLAIM EXEMPTION U/S 54 OF THE ACT OF RS. 28,19,650/- ON ACCOUNT OF INVESTMENT MAD E IN PURCHASE OF LAND BE REMITTED BACK TO THE FILE OF THE AO TO BE DECIDED A FRESH IN THE LIGHT OF THE CBDT CIRCULAR NO. 667 DT. 18/10/1993 AND THE JUDGMENT OF THE ITAT HYDERABAD BENCH IN THE CASE OF PUSHPA DEVI TIBREWALA IN ITA NO. 172 3/HYD/2011. THE AO IS DIRECTED TO EXAMINE WHETHER THE PURPOSE FOR PURCHAS E OF LAND BY THE ASSESSEE, WAS FOR CONSTRUCTING A RESIDENTIAL HOUSE THEREON. T HE ASSESSEE MAY BE GRANTED ADEQUATE OPPORTUNITY OF HEARING AND IS FREE TO FURN ISH ALL EVIDENCES AND DOCUMENTS IN SUPPORT OF HIS CONTENTION BEFORE THE A O. ACCORDINGLY GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATIST ICAL PURPOSES. 14. IN GROUND NO.1 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A), ON THE GROUND THAT HE WAS ELIGIBLE TO CLAIM EXEMPTI ON U/S 54, SINCE HE HAD CONSTRUCTED A HOUSE WITHIN THE SPECIFIED PERIOD, BU T THIS FACT HAD NOT BEEN COMMUNICATED BY HIS COUNSEL TO THE AO. 15. THE LD. AR PLACED BEFORE US AN AFFIDAVIT DT. 18 /02/2015 STATING THAT OUT OF THE SALE PROCEEDS OF HIS HOUSE IN SECTOR-70, MOHALI , HE HAD PURCHASED A PLOT IN MORINDA AND HAD CONSTRUCTED A HOUSE ON THE SAME CON SISTING OF ONE LIVING 10 ROOM, KITCHEN AND TOILET ALONGWITH BOUNDARY WALL. I T WAS FURTHER STATED IN THE AFFIDAVIT THAT THIS FACT HAD BEEN COMMUNICATED TO T HE AO DURING THE ASSESSMENT PROCEEDINGS BUT DUE TO SOME COMMUNICATIO N GAP, THE AO HAD CONSTRUED THAT NO CONSTRUCTION HAD BEEN DONE. 16. WE FIND THAT THE ABOVE DOCUMENT CONSTITUTES ADD ITIONAL EVIDENCE AND SINCE THE SAME IS NOT IN CONFORMITY WITH RULE 29 OF THE APPELLATE TRIBUNAL RULES, 1963, WE REJECT THE SAME. NO COGNIZANCE IS THEREFOR E BEING TAKEN OF THE AFORESTATED AFFIDAVIT. 17. IN VIEW OF THE SAME THE ASSESSEES CONTENTION T HAT EXEMPTION U/S 54 BE GRANTED SINCE HE HAD CONSTRUCTED A RESIDENTIAL HOUS E, IS HEREBY REJECTED GROUND NO.1 OF THE ASSESSEE IS THEREFORE DISMISSED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :24/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR