J.A. Chowdary, Hyderabad V. ACIT Circle 16(3), Hyderabad

ITA 1072/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2850 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Gift; Cost of acquisition; Assessment record
• Section: 143(3); 54F; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B : MUMBAI BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1072/HYD/2011 ASSESSMENT YEAR 2006-2007 J.A.CHOWDARY HYDERABAD PAN ABZPJ3167D VS. A CIT, CIRCL E 16 (3) HYDERABAD (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI V.RAGHAVENDRA RAO (A.R.) FOR RESPONDENT : SHRI D.SUDHAKAR RAO (CIT) DATE OF HEARING : 15-04-2013 DATE OF PRONOUNCEMENT : 17-06-2013 ORDER PER SAKTIJIT DEY, J.M. THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF THE CIT, HYDERABAD FOR THE A.Y. 2006-2007 ON THE ORDER PASSE D UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED T HE FOLLOWING EFFECTIVE GROUNDS : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX - IV, HYDERABAD DATED 25.3.2011 IS ERRONEOUS, CONTRARY TO LAW, FACTS OF T HE CASE AND DEVOID OF MERIT. 2. THE COMMISSIONER OF INCOME TAX ERRED IN LAW IN HOLD ING THAT THE ASSESSMENT MADE ON 17.12.2008 U/S. 143(3) OF THE AC T BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE IN SO FAR AS THE ISSUE OF COMPUTATION OF LO NG TERM CAPITAL GAINS ON ESOP SHARES AND EXEMPTION CLAIMED U/S 54F OF THE ACT. 3. THE COMMISSIONER OF INCOME TAX OUGHT NOT HAVE HELD THAT FURTHER ENQUIRY AND EVIDENCE IS NECESSARY IN RESPECT OF COM PUTATION OF LONG TERM CAPITAL GAINS ON ESOP SHARES INSPITE OF THE LE TTER OF CONFIRMATION DATED 26.2.2006 ISSUED BY PORTAL PLAYER INDIA (P) L TD., CONFIRMING THE PRICE AT WHICH THE SHARES WERE ISSUED. 2 4. THE COMMISSIONER OF INCOME TAX GROSSLY ERRED IN DIR ECTING THE ASSESSING OFFICER TO WITHDRAW THE EXEMPTION ALLOWED U/S.54F OF THE ACT HOLDING THAT THE ASSESSEE OWNS MORE THAN ONE RE SIDENTIAL HOUSE AND THEREFORE NOT ENTITLED TO EXEMPTION U/S. 54F OF THE ACT. 5. THE COMMISSIONER OF INCOME TAX FAILED TO SEE THAT P ROPERTY BEARING PLOT NO.7, IN BANGALORE IS IN THE NAME OF THE APPEL LANT'S DAUGHTER AND IT BELONGS TO HIS DAUGHTER AND HENCE IT IS NOT PROP ER JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO WITHDRAW EXEMPTI ON ALLOWED U/S.54F ON THE GROUND THAT THE ASSESSEE OWNS MORE T HAN ONE RESIDENTIAL HOUSE. 6. FOR ALL OF THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS MOST RESPECTFULL Y PRAYED THAT THIS HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL AND THE RESPONDENT BE DIRECTED TO ACCEPT THE COMPUTATION OF LONG TERM CAPITAL GAINS ON ESOP SHARES AND NOT TO WITHDRAW EXEMPTION ALLOWED U/S 54F OF THE ACT BY THE ASSESSING OFFICER WHILE COMPL ETING THE ASSESSMENT U/S. 143(3) FOR THE ASSESSMENT YEAR 2006 -07 IN THE INTEREST OF JUSTICE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS AN INDIVIDUAL. FOR THE A.Y. UNDER DISPUTE THE ASSESSEE FILED HIS R ETURN OF INCOME ON 31.7.2006 DECLARING TOTAL INCOME OF RS.5,15,06,540/ -. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) VIDE ORDER DATED 17.12.2008 BY ACCEPTING THE INCOME RETURNED. THE COMMISSIONER OF INCOME TAX IN EXERCISE OF HIS POWERS UNDER SECTION 263 OF THE ACT CALLED FOR THE ASSESSMENT ORDERS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR FOR EXAMINATION. AFTER EXAMINING THE ASSESSMENT RECORDS THE COMMISSI ONER OF INCOME TAX PRIMA FACIE WAS OF THE OPINION THAT THE ASSESSMENT ORDER DATED 17.12.2008 IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF RE VENUE AS THE ASSESSING OFFICER HAS NEITHER MADE ENQUIRY NOR APPLIED HIS MI ND TO THE FOLLOWING ISSUES : (I) M/S. PORTAL PLAYER INC. HAD ALLOWED 2,94,077 S HARES AT 0.15 CENTS PER SHARE TO THE ASSESSEE ON 2.6.2004 ON EMPLOYEES STOCK OPTION SCHEME. DURING THE YEAR THE ASSESSEE HAD SOLD 70000 SHARES OUT OF THIS FOR A SALE CONSIDERATION OF RS.7,44,62,203/ -. HOWEVER, WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF SHARES ASSESSEE HAD ADOPTED PURCHASE COST OF 70000 SHARES AT RS.14,17,5 00/- INSTEAD 3 OF RS.4,76,910/- WHICH HAS RESULTED IN UNDER ASSESS MENT OF CAPITAL GAINS TO THE TUNE OF RS.9,75,892/-. (II) ASSESSEE HAS CLAIMED EXEMPTION U/S. 54F OF AN AMOUNT OF RS.1,21,03,459/-. HOWEVER, AS THE ASSESSEE WAS THE OWNER OF MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S. 54F AS PER PROVISO (I) TO SUB-SECTIO N 1 OF SECTION 54F. (III) THE ASSESSING OFFICER HAS NOT LEVIED INTEREST U/S. 234C OF THE ACT. (IV) THE ASSESSING OFFICER HAD NOT CALLED FOR AND E XAMINED THE EVIDENCE IN SUPPORT OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS ON SALE OF SHARES. (V) THE ASSESSING OFFICER HAS NOT CALLED FOR AND EX AMINED THE BANK ACCOUNTS HELD BY THE ASSESSEE FOR THE PERIOD 1.4.20 05 TO 31.3.2006. (VI) THE ASSESSING OFFICER HAD NOT EXAMINED THE SAL E OF AGRICULTURAL LAND FOR AN AMOUNT OF RS.26,00,000/-. (VII) THE ASSESSING OFFICER HAD NOT EXAMINED THE IN VESTMENT MADE BY THE ASSESSEE IN VARIOUS RESIDENTIAL HOUSES. 3. THE COMMISSIONER OF INCOME TAX, THEREFORE, ISSUE D A NOTICE DATED 27.1.2011 UNDER SECTION 263 OF THE ACT, DIRECTING T HE ASSESSEE TO SHOW CAUSE. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSES SEE SUBMITTED THAT THE PURCHASE PRICE OF EACH STOCK WAS ENHANCED BY THE CO MPANY FROM 0.15 CENTS TO 0.45 CENTS VIDE GRANT NO.482. AS PER THE GRANT, 98025 STOCKS WERE ALLOTTED AT 0.45 CENTS PER STOCK UNDER REVERSE SPLI T, WORKING OUT TO US $ 44,111.5 (INR RS.19,85,006/-) FOR 98025 SHARES. THE REFORE, PROPORTIONATE VALUE OF 70000 STOCKS WAS RIGHTLY CLAIMED AT RS.14, 17,500/- AS THE PURCHASE VALUE OF STOCKS WHILE COMPUTING LONG TERM CAPITAL GAIN. SO FAR AS THE ISSUE OF EXEMPTION CLAIMED U/S. 54F IS CONCERNE D, IT WAS SUBMITTED THAT ON THE DATE OF ACQUISITION OF THE NEW ASSET, THE AS SESSEE DID NOT POSSESS MORE THAN ONE RESIDENTIAL HOUSE. FURTHER EXPLAINING , THE ASSESSEE SUBMITTED THAT THE PROPERTY AT PLOT NO.249, PRASHAS AN NAGAR, ROAD NO. 72, 4 JUBILEE HILLS WAS ACTUALLY THE OFFICE PREMISES WITH M/S. PORTAL PLAYER PVT. LTD. AND DID NOT BELONG TO THE ASSESSEE. RESIDENTIA L FLAT NO. 2C DOYEN HOSPITAL APARTMENTS, SRINAGAR COLONY, HYDERABAD THO UGH WAS OWNED BY THE ASSESSEE BUT IT WAS SOLD ON 22.4.2003 AND SALE WAS DISCLOSED IN THE RETURN OF INCOME ALSO. THE ASSESSEE SUBMITTED THAT RESIDEN TIAL HOUSE AT PLOT NO. 113/114, BANGALORE, WHICH IS THE NEW ASSET, WAS ACQ UIRED ON 26.10.2005 AND THE INVESTMENT MADE IN THE SAID HOUSE WAS RS.1, 21,03,459/- UPTO 13.6.2006, THE DATE OF FILING OF RETURN. IT WAS SUB MITTED THAT THE ONLY OTHER RESIDENTIAL HOUSE OF THE ASSESSEE IS AT GACHIBOWLI, IVRCL, HYDERABAD WHICH IS THE SELF-OCCUPIED PROPERTY OF THE ASSESSEE CONST RUCTION OF WHICH WAS GOING ON AND ASSESSEE OCCUPIED IT IN FINANCIAL YEAR 2007- 08. SO FAR AS THE PLOT NO.7 AT BANGALORE IS CONCERNED, IT WAS SUBMITTED TH AT THE PROPERTY WAS OWNED BY HIS MAJOR DAUGHTER J.NAGA SHRAVANI AND THE PROPERTY WAS REGISTERED AND HELD BY HER. HOWEVER, SHE HAS TO RET URN AN AMOUNT OF RS.2,24,096/- ON ACCOUNT OF CERTAIN PAYMENTS TO BE MADE TO THE ASSESSEE. 4. THE COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PASSED AN ORDER UNDER SECTION 263 OF T HE ACT VIDE ORDER DATED 25.3.2011 SETTING ASIDE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY HOLDING IT TO BE ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE DUE TO THE FOLLOWING REASONS. 5. SO FAR AS THE PURCHASE VALUE OF ESOPS SHOWN BY T HE ASSESSEE AT RS.14,17,500/- IS CONCERNED, THE COMMISSIONER OF IN COME TAX HELD AS UNDER : 3.1. THE FIRST ISSUE IS REGARDING ESOPS ALLOTTED T O THE ASSESSEE BY HIS EMPLOYER COMPANY I.E. PORTAL PLAYER INC ( PARENT COMPANY OF PORTAL PLAYER INDIA PVT.LTD ] IN FEBRUARY, 2002 @ $0.15 FOR 2,94,077 SHARES. SUBSEQUENTLY, IN THE YEAR 2004, THE PARENT COMPANY, AT THE TIME OF IPO, HAS RESTRUCTURED ITS SHARE HOLD ING PATTERN WHEREIN, THE NUMBER OF SHARES HAVE BEEN REDUCED TO ONE THIRD OF HOLDING CONSEQUENT UPON REVERSE SPLIT. ACCORDING TO THE ASSESSEE, THIS RESU LTED 5 IN INCREASE IN COST OF ITS SHARES I.E. FOR INSTANCE US $ 0.15 CENTS IS AUTOMATICALLY RAISED TO 0.45 CENTS ON ACCOUNT OF REVERSE SPLIT. IN THE COURSE OF THE PRES ENT PROCEEDING A LETTER WAS ADDRESSED TO THE COMPANY I. E. PORTAL PLAYER INDIA PVT. INDIA, HYDERABAD REQUESTIN G FOR CLARIFICATION AND INFORMATION REGARDING THE TRANSACTION IN QUESTION. THE REPLY WAS RECEIVED ON 23.03.2011 SAYING THAT THE COMPANY HAD DISCONTINUED ITS ACTIVITIES AFTER ITS BUSINESS WAS SOLD TO NVIDI A. THE REPLY HAS BEEN SIGNED BY AN ACCOUNTANT WHO WAS AN EMPLOYEE WHEN THE COMPANY WAS IN BUSINESS. THE REPLY REPEATS THE VERSION GIVEN BY THE ASSESSEE. EV EN THE ASSESSMENT RECORDS OF THE COMPANY HAVE BEEN TRANSFERRED FROM HYDERABAD INCOME TAX JURISDICTION TO BANGALORE INCOME TAX JURISDICTION. IN VIEW OF THIS SURROUNDING FACT, IT IS VERY NECESSARY TO MAKE ENQUIRIES IN ORDER TO FIND OUT CLINCHING EVIDENCE A S TO THE ACTUAL COST OF ACQUISITION OF ESOPS IN QUESTION . THE ASSESSING OFFICER IS DIRECTED TO MAKE ENQUIRIES WIT H THE PARENT COMPANY, AS WELL AS THE ASSESSING OFFICE R IN POSSESSION OF THE ASSESSMENT RECORDS OF THE COMPANY I.E. PORTAL PLAYER INDIA PVT. LTD. , BANGAL ORE I.E. NVIDIA. THE ASSESSEE HAS PRODUCED COPY OF LETT ER DATED 26.02.2006. BUT IT WOULD NOT BE CONCLUSIVE. FURTHER ENQUIRY AND EVIDENCE IS NECESSARY TO DETERMINE THIS ISSUE. 6. WITH REGARD TO CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT, THE COMMISSIONER OF INCOME TAX ACCEPTED ASSESSEES CONT ENTION IN RESPECT OF HOUSE PROPERTY AT PLOT NO. 249, PRASHASAN NAGAR, HY DERABAD AND RESIDENTIAL FLAT NO. 2C, DOYEN HABITAL APARTMENT, SRINAGAR COLO NY, HYDERABAD. THE COMMISSIONER OF INCOME TAX, HOWEVER, DID NOT ACCEPT ASSESSEES CONTENTION WITH REGARD TO THE PROPERTY AT PLOT NO.7, BANGALORE STANDING IN THE NAME OF ASSESSEES DAUGHTER AND TREATED IT TO BE ASSESSEES RESIDENTIAL HOUSE. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO WITHDR AW THE EXEMPTION OF 6 RS.1,21,03,459/- CLAIMED UNDER SECTION 54F OF THE A CT ON THE FOLLOWING OBSERVATIONS : 3.2. THE SECOND ISSUE IS REGARDING GRANT OF EXEMPTION OF RS.1.21 CRORES U/S. 54F AGAINST LONG TERM CAPITAL GAINS. THE ASSESSEE HAD CLAIMED THE EXEMPTION AND WAS ALLOWED THE SAME BY THE ASSESSING OFFICER IN TH E SCRUTINY ASSESSMENT. IN THE SHOW CAUSE NOTICE ON TH IS MATTER, FIVE RESIDENTIAL PROPERTIES WERE LISTED WHI CH WERE SUPPOSED TO BE IN THE NAME OF THE ASSESSEE. TH E ASSESSEE SUBMITTED THAT THE PROPERTY AT PLOT NO. 24 9, PRASHASAN NAGAR, ROAD NO. 72, JUBILEE HILLS, HYDERABAD IS THE ADDRESS OF THE OFFICE PREMISES OF M/S. PORTAL PLAYER PVT. LTD. THE PROPERTY IS OWNED BY SRI N. SAMBASIVA RAO WHICH HAD BEEN LEASED OUT TO THE COMPANY. HE HAD USED THE ADDRESS IN HIS RETURN FOR THE PURPOSE OF EASY COMMUNICATION. THIS VERSION OF THE ASSESSEE IS FOUND TO BE FACTUALLY CORRECT AND T HE SAME IS ACCEPTED. THE PROPERTY AT FLAT NO. 2C, DOYE N HABITAT APARTMENT, SRINAGAR COLONY, HYDERABAD OWNED BY THE ASSESSEE HAD BEEN SOLD IN APRIL, 2003 AND HENCE THE PROPERTY WAS NOT IN THE POSSESSION OF THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS SUBMISSION IS ALSO ACCEPTED. HOWEVER, THE RESIDENTIAL HOUSE AT PLOT NO. 113/114, BANGALORE WAS APPARENTLY IN THE NAME OF THE ASSESSEE, AND IT WAS IN POSSESSION OF THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO THE ASSESSEE, THE RESIDENTIAL HOUSE AT GACHI BOWLI, IVRCL, HYDERABAD, WAS UNDER CONSTRUCTION DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS OCCUPIED IN THE FINANCIAL YEA R 2007-08. AS REGARDS THE PROPERTY AT PLOT NO. 7, BANGALORE, THE ASSESSEE SUBMITTED, THAT THIS PROPER TY IS OWNED BY HIS DAUGHTER J. NAGA SHRAVANI AND THE PROPERTY WAS REGISTERED AND HELD IN HER NAME, THAT A 7 SUM OF RS.2,24,096/- WAS ADVANCED TO HER BY THE ASSESSEE. THE AUTHORISED REPRESENTATIVE SUBMITTED A COPY OF THE SALE DEED. THE SALE DEED DATE IS 16.09.2005. ON THE DATE OF EXECUTION OF THE SALE DE ED, THE ASSESSEE'S DAUGHTER J. NAGA SHRAVANTI WAS 20 YEAR OLD PURSUING HER STUDIES (VIDE ORDER SHEET NOT ING DATED 04.03.2011) THE ASSESSEE SRI J.A.CHOWDARY IS A HOLDER OF POWER OF ATTORNEY IN RESPECT OF J.NAGA SHRAVANTI. IN THE COURSE OF HEARING, ASKED AS TO TH E SOURCES OF INVESTMENT IN THE SAID PROPERTY, THE AUTHORISED REPRESENTATIVE FAIRLY ADMITTED THAT THE DAUGHTER'S INVESTMENT IN THE SAID PROPERTY HAS COME FROM GIFTS MADE TO HER BY THE ASSESSEE IN THE EARLI ER YEARS. IN OTHER WORDS, THE ENTIRE INVESTMENT HAS CO ME FROM THE ASSESSEE, AND THE ASSESSEE HOLDS THE POWER OF ATTORNEY IN RESPECT OF THE PROPERTY. THE ASSESSE E'S RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION EVIDENCES - SELF OCCUPIED PROPERTY (NO ADDRESS GIVE N). BUT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.24(B) I. E. AN AMOUNT OF RS.1,50,000/- OUT OF INTEREST PAID ON HOUSING LOAN I.E. RS.3,19,836/-. THE SELF OCCUPIED PROPERTY, OFCOURSE, IS IN HYDERABAD. THE ASSESSEE I S FOUND TO BE THE OWNER OF THE TWO PROPERTIES IN BANGALORE ( ONE IN HIS OWN NAME AND ONE STANDING IN THE NAME OF HIS DAUGHTER). IN OTHER WORDS, ON THE MATERIAL DATE, THE ASSESSEE WAS CERTAINLY OWNING MORE THAN ONE RESIDENTIAL PROPERTY. IN VIEW OF THES E FACTS, THE ASSESSEE IS CERTAINLY NOT ENTITLED TO TH E EXEMPTION U/S.54F. HENCE, THE ASSESSING OFFICER IS DIRECTED TO WITHDRAW THIS EXEMPTION OF RS.1,21,03,459/ - AND BRING THE SAME TO TAX. 7. THE COMMISSIONER OF INCOME TAX ALSO DIRECTED THE ASSESSING OFFICER TO LEVY INTEREST UNDER SECTION 234C OF THE ACT AND EXA MINE WHETHER THE SHARE TRANSACTIONS ARE IN THE NATURE OF TRADE. FURTHER, T HE COMMISSIONER OF INCOME TAX DIRECTED THE ASSESSING OFFICER TO EXAMIN E AND ENQUIRE INTO THE 8 TRANSACTIONS MADE IN VARIOUS BANK ACCOUNTS INCLUDIN G FOREIGN BANK ACCOUNTS. THE COMMISSIONER OF INCOME TAX DIRECTED T HE ASSESSING OFFICER TO BRING TO TAX AN AMOUNT OF RS. 26 LAKHS BEING THE SA LE CONSIDERATION RECEIVED ON SALE OF AGRICULTURAL LAND. HE ALSO OBSERVED THAT SOURCE OF INVESTMENT MADE BY THE ASSESSEE IN RESIDENTIAL HOUSES ARE ALSO REQUIRED TO BE EXAMINED. 8. THE LEARNED A.R. REITERATING THE STAND TAKEN BEF ORE THE COMMISSIONER OF INCOME TAX IN COURSE OF THE PROCEEDING UNDER SEC TION 263 SUBMITTED THAT AS THE NUMBER OF SHARES WERE REDUCED TO ONE THIRD O F HOLDING CONSEQUENT UPON REVERSE SPLIT THERE WAS AN INCREASE IN COST OF EACH SHARE FROM 0.15 CENT TO 0.45 CENT. THE LEARNED A.R. SUBMITTED THAT DUE TO RESTRUCTURING OF SHARE HOLDING PATTERN BY M/S. PORTAL PLAYER INC. TH E NUMBER OF SHARES WERE REDUCED TO 98025 SHARES FROM 294077 SHARES WHICH RE SULTED IN INCREASE IN PRICE OF EACH SHARE. IN THIS CONTEXT, HE REFERRED T O THE LETTER DATED 23.3.2011 SUBMITTED IN THE PAPER BOOK. THE LEARNED AR SUBMITT ED THAT DUE TO INCREASE IN VALUE OF SHARE THE ASSESSEE HAS CORRECTLY SHOWN THE PURCHASE VALUE WHILE COMPUTING LONG TERM CAPITAL GAIN. ON THE ISSUE OF C LAIM OF EXEMPTION U/S. 54F OF THE ACT, THE LEARNED A.R. SUBMITTED THAT COM MISSIONER OF INCOME TAXS CONCLUSION TO THE EFFECT THAT ASSESSEE WAS TH E OWNER OF MORE THAN ONE HOUSE IS ON CONSIDERING THE PROPERTY AT PLOT NO.7, BANGALORE AS ASSESSEES PROPERTY. THE LEARNED AR SUBMITTED THAT THE SAID PR OPERTY DOES NOT BELONG TO THE ASSESSEES MAJOR DAUGHTER IN WHOSE NAME THE PROPERTY IS REGISTERED. THE ENTIRE INVESTMENT IN ACQUIRING THE PROPERTY WAS ALSO MADE BY HER OUT OF THE GIFTS RECEIVED IN EARLIER YEARS. THE LEARNED A. R. FURTHER SUBMITTED THAT THE PROVISO TO SUB-SECTION 1 OF SECTION 54F WILL AL SO NOT APPLY AS THE SAID PROPERTY AT BANGALORE IS ONLY A PLOT OF LAND AND NO T A RESIDENTIAL HOUSE. IN THIS CONTEXT, THE LEARNED A.R. REFERRED TO THE SALE DEED DATED 26.10.2005 AT PAGE 27 OF THE PAPER BOOK. THE LEARNED A.R. SUBMITT ED THAT THE ASSESSING OFFICER HAVING EXAMINED ALL THESE ASPECTS, THE ASSE SSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. 9. THE LEARNED D.R. ON THE OTHER HAND, STRONGLY SUP PORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX. 9 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AFTER PERUSAL OF THE FACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW THAT THE INITIATION OF PROCEEDING U/S. 263 IS VALID AS THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF R EVENUE AS THE ASSESSING OFFICER HAS FAILED TO ENQUIRE ON VARIOUS ISSUES U/S . 263 OF THE ACT. CERTAINLY THERE IS NON-APPLICATION OF MIND BY THE ASSESSING O FFICER. APART FROM THE QUESTIONNAIRE THERE IS NO MATERIAL BEFORE US WHICH COULD HAVE SUGGESTED THAT THE ASSESSING OFFICER HAD CONDUCTED ENQUIRY OR TAKEN FOLLOW-UP ACTION AFTER APPLYING HIS MIND ON VARIOUS ISSUES. IN FACT, FROM ASSESSEES REPLY TO THE SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT AS WELL AS GROUND OF APPEAL RAISED BEFORE US, IT IS CLEAR THAT THE ASSES SEE HAS ACCEPTED THE ORDER PASSED UNDER SECTION 263 ON ALL OTHER ISSUES EXCEPT ING CITS DIRECTION WITH REGARD TO ESOPS AND CLAIM OF EXEMPTION U/S. 54F. EV EN WITH REGARD TO THESE TWO ISSUES ALSO, THERE IS NO CONVINCING ARGUMENT SO FAR AS INVOKING OF JURISDICTION U/S. 263 IS CONCERNED. THEREFORE, WE A RE OF THE VIEW THAT PROCEEDING UNDER SECTION 263 OF THE ACT HAS BEEN VA LIDLY INITIATED AS THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE DUE TO INAPPLICATION OF MIND BY THE ASSESSING OFFICER. 11. NOW COMING TO THE MERITS OF DIRECTIONS OF THE C OMMISSIONER OF INCOME TAX, IT IS SEEN THAT AS PER THE STOCK OPTION EXERCI SE NOTICE DATED 2.6.2004 OF PORTAL PLAYER INC (PAGE 14 OF PAPER BOOK) THE ASSES SEE WAS GRANTED 2,94,077 NUMBER OF SHARES AT THE PRICE OF 0.15 CENT PER SHAR E FOR A TOTAL CONSIDERATION OF US $ 44,111.55. THE ASSESSEE ALSO EXERCISED HIS OPTION AND PAID THE AMOUNT OF US $ 44,111.55 PER CHEQUE (A COPY OF WHIC H IS AT PAGE 16 OF PAPER BOOK). THERE IS NO OTHER DOCUMENT EXCEPTING T HE LETTER DATED 23.3.2011 (PAGE 24 OF PAPER BOOK) WHICH CLEARLY SPE LLS OUT THAT THE VALUE OF SHARES SOLD BY THE ASSESSEE DID INCREASE FROM 0.15 CENT TO 0.45 CENT. EVEN THE LETTER DATED 23.3.2011 WAS SUBMITTED FOR THE FI RST TIME BEFORE THE COMMISSIONER OF INCOME TAX. THEREFORE, THE PURCHASE VALUE OF SHARES SHOWN BY THE ASSESSEE AT ENHANCED VALUE OF RS.14,17 ,500/- REQUIRED PROPER VERIFICATION WHICH WAS NOT DONE BY THE ASSESSING OF FICER AT THE TIME OF 10 ASSESSMENT. THE COMMISSIONER OF INCOME TAX HAS ONLY DIRECTED THE ASSESSING OFFICER TO MAKE PROPER ENQUIRY AND THEREA FTER, DETERMINE THE ISSUE. HENCE, WE DO NOT FIND ANY INFIRMITY WITH REG ARD TO COMMISSIONER OF INCOME TAXS DIRECTION IN RESPECT OF THIS ISSUE. SO FAR AS CITS DIRECTION TO THE ASSESSING OFFICER TO WITHDRAW THE EXEMPTION CLA IMED U/S. 54F OF THE ACT IS CONCERNED, AS IT CAN BE SEEN THE CIT HAS COME TO SUCH CONCLUSION BY CONSIDERING THE FOLLOWING THREE PROPERTIES. SL.NO. DETAILS OF PROPERTIES REMARKS 1. -- -- 2. -- -- 3. RESIDENTIAL HOUSE, PLOT NO.7, BANGALORE AS SEEN FROM THE SCHEDULE-3-FIXED ASSETS TO BALANCE SHEET AS AT 31.03.2006. 4. RESIDENTIAL HOUSE AT GACHI BOWLI, IVRCL, HYDERABAD. UNDER CONSTRUCTION. AS SEEN FROM THE SCHEDULE-3-FIXED ASSETS TO BALANCE SHEET AS AT 31.03.2006. 5. RESIDENTIAL HOUSE, PLOT NO.114, BANGALORE. AS SEEN FROM THE SCHEDULE-3-FIXED ASSETS TO BALANCE SHEET AS AT 31.03.2006. YOU HAD CLAIMED EXEMPTION U/S. 54F IN RESPECT OF THIS PROPERTY FOR A.Y. 2006-07. 12. IT IS THE CLAIM OF THE ASSESSEE THAT THE RESIDE NTIAL HOUSE AT GACHIBOWLI, IVRCL, HYDERABAD AND RESIDENTIAL HOUSE AT PLOT NO.1 14, BANGALORE ARE THE ONLY RESIDENTIAL HOUSES OWNED BY THE ASSESSEE. IT I S FURTHER CONTENTION OF THE ASSESSEE THAT THE EXEMPTION OF RS.1,21,03,459/- CLA IMED U/S. 54F OF THE ACT IS IN RESPECT OF PLOT NO. 114, BANGALORE. SO FAR AS PROPERTY AT PLOT NO.7, BANGALORE IS CONCERNED, THE LEARNED A.R. HAS CONTES TED THE FINDING OF THE CIT FIRSTLY ON THE GROUND THAT THE PROPERTY IS REGI STERED IN THE NAME OF HER MAJOR DAUGHTER WHICH SHE HAD ACQUIRED BY MAKING HER OWN INVESTMENTS AND SECONDLY ON THE GROUND THAT THE SAID PROPERTY I S ONLY A PLOT OF LAND AND NOT A RESIDENTIAL HOUSE. IT IS A FACT THAT THE ASSE SSEE HAD SHOWN THE PROPERTY AT PLOT NO.7, BANGALORE AS RESIDENTIAL HOUSE AS FIX ED ASSETS IN THE BALANCE SHEET FILED ALONG WITH HIS RETURN. HOWEVER, COPY OF THE SALE DEED (AT PAGE 27 OF PAPER BOOK) DOES REVEAL THE FACT THAT THE PROPER TY IS REGISTERED IN THE NAME OF J.NAGA SHRAVANI WHO HAPPENS TO BE THE MAJOR DAUGHTER OF THE ASSESSEE. THEREFORE, BEFORE COMING TO THE CONCLUSIO N THAT THE INVESTMENT MADE FOR ACQUIRING THE AFORESAID PROPERTY WAS OUT O F ASSESSEES INCOME, 11 PROPER ENQUIRY HAS TO BE MADE TO PROVE SUCH CONCLUS ION. THE ASSESSEE MUST ALSO BE GIVEN A FAIR CHANCE TO PROVE THE CLAIM THAT INVESTMENT WAS MADE BY HER DAUGHTER ONLY. EVEN ASSUMING FOR THE ARGUMENTS SAKE THAT THE SAID PROPERTY BELONGS TO THE ASSESSEE, THE CLAIM MADE BY THE ASSESSEE THAT IT IS ONLY A PLOT OF LAND AND NOT A HOUSE MERITS CONSIDER ATION AND CANNOT BE BRUSHED ASIDE LIGHTLY. THE REGISTERED SALE DEED COP Y (PAGE 27 OF PAPER BOOK) MENTIONS THE PROPERTY AS A RESIDENTIAL SITE. THEREF ORE, IF ACTUALLY THE PROPERTY AT PLOT NO.7 IS A RESIDENTIAL SITE AND NOT A RESIDENTIAL HOUSE, THEN PROVISO TO SUB-SECTION 1 OF SECTION 54F OF THE ACT CLEARLY WOULD NOT BE APPLICABLE AND THE ASSESSEE WOULD BE ENTITLED TO EX EMPTION U/S. 54F OF THE ACT AS THE ASSESSEE WILL BE OWNING ONLY ONE RESIDEN TIAL HOUSE OTHER THAN THE NEW ASSET. WITHOUT PROPERLY VERIFYING WHETHER THE P ROPERTY AT PLOT NO.7, BANGALORE IS A RESIDENTIAL HOUSE OR SIMPLY A PLOT O F LAND ASSESSEES CLAIM OF EXEMPTION U/S. 54F OF THE ACT CANNOT BE WITHDRAWN. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM IN THIS REGARD AND TAKE A DECISION WITH REGARD TO ASSESSEES CLAIM OF EXEMPTI ON U/S. 54F OF THE ACT. THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT, IS MODIFIED TO THE EXTENT INDICATED ABOVE. THE GROUNDS RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17-06-2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 17 TH JUNE, 2013. VBP/- COPY TO 1. SRI J.A.CHOWDARY, VILLA 41, HILLRIDGE VILLAS, GATCH IBOWLI, HYDERABAD 32 PAN ABZPJ3167D. 2. ACIT, CIRCLE 16(3 ), HYDERABAD 3. C OMMISSIONER OF I NCOME T AX, HYDERABAD. 4. JCIT, RANGE 16, HYDERABAD 5. DR B BENCH, ITAT, HYDERABAD