ITO, Erode V. Shri Hiralal K.Jain, Erode

ITA 1176/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64145 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA; VI KRAMADITYA
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Sale consideration of property below Jantri Value
• Section: 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1176/MDS/2010 (ASSESSMENT YEAR: 2007-08) THE INCOME TAX OFFICER, WARD-I(3), NO.15, GANDHIJI ROAD, ERODE-638 001. VS. SHRI HIRALAL K.JAIN C/O.SHRI T.N.SEETHARAMAN,ADVOCATE 384 (OLD NO.196) LLOYDS ROAD, CHENNAI-600 086. PAN:AGRPJ9611P (APPELLANT) (RESPONDENT) & ITA NO.1201/MDS/2010 (ASSESSMENT YEAR: 2007-08) SHRI HIRALAL K.JAIN C/O.SHRI T.N.SEETHARAMAN,ADVOCATE 384 (OLD NO.196) LLOYDS ROAD, CHENNAI-600 086. PAN:AGRPJ9611P VS. THE INCOME TAX OFFICER, WARD-I(3), NO.15, GANDHIJI ROAD, ERODE-638 001. (APPELLANT) (RESPONDENT) REVENUE BY : MR. VIKRAMADITYA, JCIT & DR. S.MOHARANA, CIT DR ASSESSEE BY : MR. T.N.SEETHARAMAN, ADVOCATE DATE OF HEARING : 10 TH JULY, 2012 DATE OF PRONOUNCEMENT : 22 ND AUGUST, 2012 O R D E R PER BENCH: THE PRESENT SET OF APPEALS I.E. ITA NO.1176/MDS/20 10 & ITA NO.1201/MDS/2010 HAVE BEEN FILED BY THE REVE NUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER O F THE CIT(A)-I, COIMBATORE DATED 12.05.2010 RELEVANT TO T HE ITA NO.1176 & 1201/MDS/2010 2 ASSESSMENT YEAR 2007-08. THE COMMON AND THE ONLY I SSUE INVOLVED IN BOTH THE APPEALS IS EXEMPTION OF CAPITA L GAINS UNDER THE PROVISIONS OF SECTION 54F OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF HIS INCOME RELEVANT TO THE ASSESSMENT YEA R 2007-08 ON 26.03.2009 ADMITTING TOTAL INCOME OF ` 1,26,720/- AND AGRICULTURAL INCOME OF ` 40,000/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) DATED 8.9.2009 WAS ISSUED TO THE ASSESSEE. THE ASSE SSEE HAD PURCHASED A VACANT LAND JOINTLY WITH OTHER CO- OWNERS ON 26.03.1980. THE ASSESSEE HAD INVESTED ` 23,960/- AS HIS 1/4 TH SHARE IN THE PURCHASE OF THE SAID PROPERTY. DURING THE FINANCIAL YEAR 1981-82, THE ASSESSEE AND THE CO-OWN ERS CONSTRUCTED COMPOUND WALL ON THE AFOREMENTIONED PRO PERTY. THE ASSESSEE CONTRIBUTED ` 37,500/- AS HIS SHARE ON THE CONSTRUCTION OF THE COMPOUND WALL. THE JOINT PROPER TY WAS PARTITIONED BETWEEN THE CO-OWNERS ON 8.12.1988. RES ULTANTLY THE VACANT PLOT MEASURING 22,866 SQ.FT. WITH COMPO UND WALL CAME TO THE SHARE OF THE ASSESSEE. THE ASSESSEE SO LD HIS ITA NO.1176 & 1201/MDS/2010 3 SHARE OF LAND ON 1.11.2006 FOR ` 34,53,000/-. FROM THE SALE PROCEEDS OF THE LAND SOLD, THE ASSESSEE HAD PURCHAS ED ANOTHER PROPERTY ON 7.11.2006 AND ON THE SAID LAND THE ASSESSEE INVESTED ` 14,50,000/- ON THE CONSTRUCTION OF RESIDENTIAL HOUSE DURING THE YEAR ENDED ON 31.3.200 7. THEREAFTER THE ASSESSEE INVESTED ANOTHER SUM OF ` 20,05,000/- IN CONSTRUCTION OF THE BUILDING ON THE LAND IN QUESTION DURING THE PERIOD FROM 1.4.2007 TO 31.10.2 007. THUS, THE TOTAL AMOUNT SPENT BY THE ASSESSEE IN THE CONST RUCTION OF THE BUILDING WAS ` 34,54,995/-. WHILE FILING THE RETURN RELEVANT TO THE ASSESSMENT YEAR 2007-08 THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT. THUS, AS PE R THE COMPUTATION OF THE ASSESSEE THE CAPITAL GAINS WER E NIL. THE ASSESSING OFFICER DID NOT ACCEPT THE COMPUTATION OF THE ASSESSEE. THE ASSESSING OFFICER OBTAINED GUIDELINE VALUE IN RESPECT OF THE PROPERTY SOLD BY THE ASSESSEE FROM T HE OFFICE OF THE SUB REGISTRAR. THE ASSESSING OFFICER FURTHER INSTEAD OF ALLOWING THE ENTIRE AMOUNT OF INVESTMENT MADE BY TH E ASSESSEE ON THE CONSTRUCTION OF NEW BUILDING/NEW RE SIDENTIAL HOUSE ALLOWED ONLY ` 25,06,723/- AS EXEMPTION UNDER SECTION ITA NO.1176 & 1201/MDS/2010 4 54F. THUS, THE ASSESSING OFFICER VIDE ASSESSMENT OR DER DATED 31.12.2009 ARRIVED AT NET CAPITAL GAIN OF ` 34,62,736/-. THE ASSESSING OFFICER ALSO SEPARATELY INITIATED PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AGAI NST THE ASSESSEE. 3. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-I COIMBATORE. THE CIT(A) DISCARDED THE GUIDELINE VALUE ADOPTED BY TH E ASSESSING OFFICER. THE CIT(A) OPTED TO RELY ON THE VALUE FIXED BY THE DISTRICT REVENUE OFFICER FOR STAMP DUTY I.E . ` 53,54,400/-. THE CIT(A) AFTER DEDUCTING THE AMOUNT INVESTED IN THE NEW RESIDENTIAL HOUSE BEING EXEMPTED UNDER S ECTION 54F OF THE ACT ARRIVED AT THE NET CAPITAL GAINS AT ` 15,84,479/-. THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE REVE NUE AND THE ASSESSEE BOTH HAVE COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 4. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) PRIMARILY ON THE FOLLOWING GROUNDS:- ITA NO.1176 & 1201/MDS/2010 5 4. THE LEARNED CIT(A) OUGHT TO HAVE OBSERVED THAT THE ASSESSEE HAS INCURRED THE CAPITAL GAINS OF ` 14,50,000/- UPTO 31.3.2007 TOWARDS CONSTRUCTION OF RESIDENTIAL BUILDING AND HAS CLAIMED FULL EXEMPTION OF CAPITAL GAINS OF ` 34,54,995/- IN HIS RETURN OF INCOME WITHOUT DEPOSITING THE UNUTILIZED PORTION OF CAPITAL GAINS IN A SPECIFIED CAPITAL GAI NS ACCOUNT. FURTHER, THE ASSESSEE HAS UTILIZED THE REMAINING PORTION OF CAPITAL GAINS OF ` 20,04,995/- DURING THE NEXT FINANCIAL YEAR I.E. 01.04.2007 TO 31.03.2008. 5. THE LEARNED CIT(A) HAS FAILED TO NOTE THE ASSESSEES NON-COMPLIANCE IN FILING HIS RETURN OF INCOME FAR BEYOND THE TIME LIMIT ON WHICH THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ALLOW FULL EXEMPTION U/S.54F OF THE I.T. ACT WHICH IS AGAINST THE LAW. 6. THE LEARNED CIT(A) FAILED TO NOTE THAT THE ASSESSEE HAS NOT INCURRED THE ENTIRE CAPITAL GAINS WITHIN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO NOT COMPLIED WITH THE PROVISIONS OF SECTION 54F(4) OF I.T. ACT T HAT THE UNUTILIZED PORTION OF THE CAPITAL GAINS SHOULD HAVE BEEN DEPOSITED INTO CAPITAL GAINS ACCOUNT SCHEME, 1988 AND SUCH DEPOSIT RECEIPT SHOULD HAVE BEEN ENCLOSED TO THE RETURN OF INCOME. AS THE ITA NO.1176 & 1201/MDS/2010 6 ASSESSEE HAS NOT COMPLIED AS ABOVE, HE IS NOT ELIGIBLE FOR FULL EXEMPTION OF CAPITAL GAINS AS PE R THE PROVISIONS OF SECTION 54F OF I.T.ACT. 5. ON THE OTHER HAND, THE ASSESSEE HAS TAKEN AS MA NY AS 10 GROUNDS IN HIS APPEAL ASSAILING THE ORDER OF THE CIT(A). HOWEVER, PRIMARILY THERE ARE TWO GROUNDS, THE REMA INING ARE SUPPORTING GROUNDS. THE MAIN GROUNDS OF APPEAL OF T HE ASSESSEE ARE AS UNDER:- 2. THE CIT(A) ERRED IN HOLDING THAT THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY ( ` 53,54,400/-) FOR THE SALE OF THE VACANT SITE SHOUL D BE ADOPTED FOR PURPOSES OF DETERMINATION OF CAPITAL GAINS. 6. THE CIT(A) ERRED IN NOT ACCEPTING THE APPELLANTS CLAIM THAT HE WAS ELIGIBLE FOR EXEMPTIO N FROM CAPITAL GAINS UNDER SECTION 54F, AS THE ENTIRE (ACTUAL) SALE CONSIDERATION WAS INVESTED BY HIM IN THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME . 6. SHRI T.N.SEETHARAMAN, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS FIXED THE VA LUE OF THE ITA NO.1176 & 1201/MDS/2010 7 LAND SOLD AT ` 53,54,400/- ON THE BASIS OF THE VALUE FIXED BY DISTRICT REVENUE OFFICER. HE HAS PLACED ON RECORD A N AFFIDAVIT OF THE ASSESSEE, WHICH IS AT PAGE 1 & 2 OF THE PAPE R BOOK STATING THAT THE VALUE DETERMINED BY THE DISTRICT R EVENUE OFFICER AND THE STAMP DUTY PAYABLE THEREON IS NOT B INDING ON HIM AS NO NOTICE WAS ISSUED TO HIM IN COMPLIANCE WI TH THE PROVISIONS OF SECTION 47A(2) OF THE INDIAN STAMP AC T, 1899 READ WITH RULE 4 TO TAMIL NADU STAMP RULES, 1968 AN D THE VALUE OF ` 53,54,400/- HAS BEEN DETERMINED WITHOUT AFFORDING HIM ANY OPPORTUNITY OF HEARING AND WITHOUT GRANTING OPPORTUNITY TO FILE HIS OBJECTIONS. IN ORDER TO SUP PORT HIS CONTENTIONS, THE COUNSEL POINTED OUT TO THE PROCEED INGS BEFORE THE DISTRICT REVENUE OFFICER, COIMBATORE WHE REIN A COMMUNICATION HAS BEEN ADDRESSED TO THE VENDEE OF T HE PROPERTY SOLD BY THE ASSESSEE. THE ASSESSEE SUBMITT ED THAT SINCE THE PROVISIONS OF THE STAMP ACT HAVE NOT BEE N COMPLIED WITH, THEREFORE, THE VALUE OF LAND TAKEN B Y THE CIT(A) SHOULD NOT BE TAKEN INTO CONSIDERATION. THE COUNSE L FURTHER SUBMITTED THAT SINCE THE ASSESSEE WAS NOT A PARTY B EFORE THE ITA NO.1176 & 1201/MDS/2010 8 DISTRICT REVENUE OFFICER AT THE TIME OF FIXATION O F VALUE OF THE LAND, THEREFORE, THE SAME IS NOT BINDING ON THE ASS ESSEE. 7. ON GROUND NO. 6 TO 9, THE COUNSEL FOR THE ASSESS EE SUBMITTED THAT SECTION 50C IS ONLY DEEMING PROVISIO N THEREFORE, THE SAME CANNOT BE EXTENDED TO SECTION 5 4F. WHEN THE ASSESSEE HAS INVESTED FULL VALUE OF CONSIDERATI ON RECEIVED FOR TRANSFER OF ASSETS IN EXEMPTED ASSETS, IT IS NO T NECESSARY TO LEVY CAPITAL GAINS TAX AND CONSEQUENTLY, THE PR OVISIONS OF SECTION 50C IS NOT APPLICABLE. IN ORDER TO SUPPORT HIS SUBMISSIONS, THE COUNSEL HAS RELIED ON THE ORDER OF THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF GYAN CHAND BAT RA VS. ITO REPORTED AS 133 TTJ (JP) 482 AND THE ORDER OF T HE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF B.N. P ROPERTIES HOLDINGS P. LTD., REPORTED AS 6 ITR (TRIB) 1 (CHENN AI). 7. ON THE OTHER HAND, SHRI VIKRAMADITYA AN D DR. S. MOHARANA REPRESENTING THE DEPARTMENT SUB MITTED THAT NO SUCH OBJECTION WAS EVER RAISED BY THE ASSES SEE BEFORE THE ASSESSING OFFICER. THE AFFIDAVIT AT PAGE 1 & 2 OF THE PAPER BOOK HAS BEEN FILED BY THE ASSESSEE IN TH E YEAR 2010 WHEREAS THE ASSESSING OFFICER HAD PASSED THE ITA NO.1176 & 1201/MDS/2010 9 ASSESSMENT ORDER ON 31.12.2009. THEREFORE, THE STAN D TAKEN BY THE ASSESSEE IN THE AFFIDAVIT IS NOT TENABLE. TH E D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAD FILED RETUR N BELATEDLY. THE CIT(A) HAS FAILED TO TAKE INTO CONSIDERATION TH E FACT THAT THE ASSESSEE HAD NOT COMPLIED WITH THE PROVISIONS O F THE ACT IN FILING OF THE RETURN OF INCOME WITHIN THE TIME L IMIT, RATHER THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW FULL EXEMPTION UNDER SECTION 54F OF THE ACT WHICH IS AGAINST THE L AW. THE LEARNED DRS FURTHER CONTENDED THAT AS PER THE PROVI SIONS OF SECTION 54F(4), THE ASSESSEE WAS DUTY BOUND TO DEBI T EXCESS AMOUNT INTO CAPITAL GAIN ACCOUNT SCHEME, 1988 AND THE DEPOSIT RECEIPTS SHOULD BE ATTACHED WITH THE RETUR N OF INCOME. SINCE, THE ASSESSEE HAS NOT COMPLIED WITH T HE UTILIZATION OF FUNDS, AS PER THE PROVISIONS OF SECT ION 54F OF THE ACT, THE ASSESSEE IS NOT ELIGIBLE FOR FULL EXEMPTI ON OF CAPITAL GAINS. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE RESPECTIVE PARTIES AND HAVE ALSO GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS/ORDERS REFE RRED TO BY THE COUNSEL FOR THE ASSESSEE. THE COUNSEL FOR THE A SSESSEE ITA NO.1176 & 1201/MDS/2010 10 HAS SUBMITTED THAT THE VALUE DETERMINED BY THE DIST RICT VALUATION AUTHORITY IS HIGHER THAN THE MARKET VALUE , THEREFORE, IT SHOULD BE RESTRICTED TO ACTUAL CONSIDERATION REC EIVED AS THE PROVISIONS OF SECTION 50C ARE VERY CLEAR ON THIS CO UNT. THE ASSESSEE HAD ALSO PLEADED THAT THE PROPERTY SHOULD BE REFERRED TO VALUATION OFFICER AS THE PROVISIONS OF SECTION 50C(2) HAVE NOT BEEN COMPLIED WITH WHILE ADOPTING THE VALUE. THE VALUE ADOPTED BY THE STAMP VALUATION AUT HORITY IS ALREADY UNDER LIS IN APPEAL. WE ARE OF THE CONSIDE RED VIEW THAT THE CIT(A) HAS FAIRLY ADOPTED THE VALUE FIXED BY THE DISTRICT REVENUE OFFICER, COIMBATORE. THE CIT(A) W HILE PARTLY ALLOWING THE APPEAL OF THE ASSESSEE AFTER GRANTING EXEMPTION UNDER SECTION 54F OF THE ACT ON INVESTMENT IN NEW HOUSE HAS COME TO THE CONCLUSION THAT THE ASSESSEE IS ELIGIBL E FOR CAPITAL GAINS TAX AT ` 15,80,479/-. THE CONTENTION OF THE LEARNED COUNSEL THAT THE VALUE DETERMINED BY THE DISTRICT R EVENUE OFFICER IS NOT BINDING ON THE ASSESSEE, AS THE ASS ESSEE WAS NOT A PARTY TO THE VALUATION PROCEEDINGS AND NO OP PORTUNITY WAS AFFORDED TO THE ASSESSEE FOR FILING OBJECTION IS NOT TENABLE. THE PROCEEDINGS UNDER THE STAMP ACT ARE SE PARATE ITA NO.1176 & 1201/MDS/2010 11 AND INDEPENDENT PROCEEDINGS. IF THE ASSESSEE IS AGG RIEVED BY THE VALUATION OF PROPERTY BY THE DISTRICT REVENUE O FFICER, THE ASSESSEE MAY CHALLENGE THE SAME BEFORE THE APPROPRI ATE FORUM. THE ASSESSEE IN THE INCOME-TAX PROCEEDINGS C ANNOT TAKE THE PLEA THAT SINCE HE WAS NOT A PARTY IN OTHE R PROCEEDINGS, THE SAME IS NOT BINDING ON HIM. IN TH E PRESENT CASE, THE VALUE OF THE LAND ADOPTED BY THE DISTRICT REVENUE OFFICER FOR THE PURPOSE OF FIXATION OF STAMP DUTY, IS BINDING ON THE ASSESSEE. THERE IS NO FORCE IN THE APPEAL OF TH E ASSESSEE. 9. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A ) ALSO ON THE GROUND THAT THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT UNDER THE PROVISIONS OF SECTION 54F AS THE RETURN WAS FILED BY THE ASSESSEE FAR BEYOND THE TIME LIMIT. WE DO NOT AGREE WITH THE SUBMISSIONS MADE BY THE D.R. THE ASSESSMENT WAS COMPLETED UNDER THE PROVISIONS OF SECTION 143(3). A T NO POINT OF TIME BEFORE THE CIT(A) THE PLEA OF BELATED RETUR N WAS RAISED BY THE REVENUE. EVEN OTHERWISE, THE DELAY IN FILING OF THE RETURN HAS NO BEARING ON EXEMPTION TO WHICH THE ASS ESSEE IS ITA NO.1176 & 1201/MDS/2010 12 ENTITLED UNDER THE PROVISIONS OF THE INCOME TAX ACT . THEREFORE, THIS GROUND OF THE REVENUE FAILS. 10. LASTLY, THE REVENUE HAS ASSAILED THE ORDER OF T HE CIT(A) ON THE GROUND THAT NEITHER THE ASSESSEE USED THE ENTIRE AMOUNT OF CAPITAL GAINS WITHIN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION NOR THE UNUTILIZED PORTION OF THE CAPITAL GAINS WAS DEPOSIT ED BY THE ASSESSEE IN CAPITAL GAINS ACCOUNT SCHEME, 1988, THE REFORE, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF FULL EXEMPTION UNDER SECTION 54F OF THE ACT. IT IS AN ADMITTED FAC T THAT THE ENTIRE AMOUNT OF CAPITAL GAINS HAS BEEN INVESTED BY THE ASSESSEE IN THE CONSTRUCTION OF NEW RESIDENTIAL HO USE WITHIN THE PERIOD PRESCRIBED UNDER THE PROVISIONS OF SECTI ON 54F(1) OF THE ACT. SINCE THE ASSESSEE HAS COMPLIED WITH TH E PROVISIONS OF THE ACT WITHIN THE TIME FRAME SPECIFI ED, THE ASSESSEE IS ENTITLED TO EXEMPTION OF THE AMOUNT INV ESTED IN THE CONSTRUCTION OF A NEW RESIDENTIAL HOUSE. THERE IS NO FORCE IN THE ARGUMENT OF THE LEARNED D.R. THEREFORE, THIS GROUND OF THE APPEAL OF THE REVENUE IS ALSO DISMISSED. ITA NO.1176 & 1201/MDS/2010 13 11. IN VIEW OF OUR AFORESAID FINDINGS, BOTH THE AP PEALS I.E. APPEAL OF THE REVENUE AND THE APPEAL OF THE ASSESSE E ARE DISMISSED BEING DEVOID OF ANY MERIT AND THE ORDER P ASSED BY THE CIT(A) IS AFFIRMED. ORDER PRONOUNCED IN THE OPEN COURT ON WEDNESDAY, THE 22 ND DAY OF AUGUST, 2012 AT CHENNAI. SD/- SD/- ( ABRAHAM P.GEORGE ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 22 ND AUGUST, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F .