Suresh Haribhau Bhujbal, Pune V. Income-tax Officer,

ITA 1232/PUN/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5880 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Cost of acquisition; Benefit of exemption; Capital Gains
• Section: 143(3); 54F; 139(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1232/PUN/2016 / ASSESSMENT YEAR : 2011-12 SURESH HARIBHAU BHUJBAL, BHUJBAL VASTI, WAKAD, HINJEWADI ROAD, HINJEWADI, TAL: HAVELI, PUNE-411057. PAN : BBHPB0938B ....... / APPELLANT / V/S. ITO, WARD- 4(6), PUNE. / RESPONDENT ASSESSEE BY : SHRI M. K. KULKARNI REVENUE BY : SHRI S. P. WALIMBE / DATE OF HEARING : 17.09.2020 / DATE OF PRONOUNCEMENT : 22.09.2020 / ORDER PER P.M. JAGTAP, VP : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-3, PUNE DATED 01.03.2016 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO SOLD THE IMMOVABLE PROPERTY JOINTLY OWNED BY HIM AT SURVEY NO.43/1/1, VILLAGE WAKAD, TAL: MULSHI, PUNE DURING THE YEAR UNDER CONSIDERATION AND RECEIVED HIS SHARE OF SALE CONSIDERATION AMOUNTING TO RS.67,50,000/-. AFTER CLAIMING DEDUCTION ON ACCOUNT OF THE INDEXED COST OF ACQUISITION AND SOME EXPENSES INCURRED IN RELATION TO THE SALE OF PROPERTY, A LONG TERM CAPITAL GAIN AS WORKED OUT AT RS.61,00,344/- WAS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 31.07.2012 AND THE SAME WAS CLAIMED TO BE 2 ITA NO.1232/PUN/2016 EXEMPT U/S 54F OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE INVESTMENT TO THAT EXTENT WAS MADE BY THE ASSESSEE IN THE CONSTRUCTION OF HOUSE WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SALE OF THE IMMOVABLE PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE DUE DATE FOR FILING OF THE RETURN OF INCOME BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS 31.07.2011 AND SINCE NO INVESTMENT WAS MADE BY THE ASSESSEE IN THE CONSTRUCTION OF HOUSE TILL THAT DATE, HE WAS REQUIRED TO DEPOSIT THE AMOUNT OF NET CONSIDERATION WHICH HAD REMAINED UNUTILIZED IN THE SPECIFIED BANK ACCOUNT AS PER THE PROVISIONS OF SUB- SECTION (4) OF SECTION 54F OF THE ACT. SINCE NO SUCH DEPOSIT WAS MADE BY THE ASSESSEE IN THE SPECIFIED BANK ACCOUNT AS REQUIRED BY THE PROVISIONS OF SUB- SECTION (4) OF SECTION 54F OF THE ACT, THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54F WAS DISALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 20.03.2014. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), RELIANCE WAS PLACED ON BEHALF OF THE ASSESSEE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K. RAMACHANDRA RAO, 56 TAXMANN.COM 163 TO CONTEND THAT THE INVESTMENT IN CONSTRUCTION OF NEW HOUSE HAVING BEEN MADE BY THE ASSESSEE DURING THE PRESCRIBED PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSETS, THERE WAS A SUBSTANTIAL COMPLIANCE OF THE CONDITIONS PRESCRIBED MAKING THE ASSESSEE ELIGIBLE FOR EXEMPTION U/S 54F EVEN IF THE NET CONSIDERATION WAS NOT DEPOSITED BY THE ASSESSEE IN THE SPECIFIED BANK ACCOUNT BEFORE THE DUE DATE OF FILING OF HIS RETURN U/S 139(1) OF THE ACT. 3 ITA NO.1232/PUN/2016 4. THE LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO.3.5 OF HIS IMPUGNED ORDER :- 3.5 THE APPELLANT HAS SUBMITTED A KARNATAKA HIGH COURT JUDGMENT IN CIT VS K.R. RAO (2015) 56 TAXMANN.COM 163 (KAR) FOR THE PROPOSITION THAT SECTION 54F(4) IS NOT ATTRACTED IF THE INTENTION IS NOT TO RETAIN CASH, BUT TO INVEST IN CONSTRUCTION OR PURCHASE OF PROPERTY. HOWEVER, THE FACTS OF THE CASE BEFORE KARNATAKA HIGH COURT WERE THAT THE ASSESSEE ALREADY HAD A LAND ON WHICH CONSTRUCTION WAS ONGOING SINCE 1 YEAR PRIOR TO THE TRANSFER OF OLD ASSET AND HENCE, THE NEW ASSET WAS ALREADY ONGOING ON THE DATE OF TRANSFER. THIS NEW ASSET WAS TO BE TAKEN AS ELIGIBLE ASSET U/S 54F. IN THIS CONTEXT THE HIGH COURT HELD THAT 'IT WAS NOT THE INTENT OF THE ASSESSEE TO RETAIN CASH, BUT TO INVEST IN CONSTRUCTION OR PURCHASE OF SUCH PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED'. THE PECULIARS FACTS OF THE CASE BEFORE THE KARNATAKA HIGH COURT PLACE THE ISSUE ON AN ENTIRELY DIFFERENT FOOTING. IN THE CASE OF THE APPELLANT THERE WAS NO ONGOING CONSTRUCTION AND HENCE, THE KARNATAKA HIGH COURT JUDGMENT IS DISTINGUISHABLE ON FACTS. THEREFORE, IT IS HELD THAT THE APPELLANT HAS FAILED TO OBSERVE THE CONDITION FOR ELIGIBILITY FOR DEDUCTION U/S 54F AND GROUND NO.2 IS ALSO DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THERE WERE TWO QUESTIONS THAT HAD ARISEN FOR CONSIDERATION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K. RAMACHANDRA RAO (SUPRA) AS FOLLOWS :- 1) WHETHER THE ASSESSEE IS ENTITLED TO THE BENEFIT CONFERRED UNDER SECTION 54F WHEN THE SALE CONSIDERATION IS UTILIZED FOR CONSTRUCTION OF A RESIDENTIAL HOUSE ON A SITE WHICH IS OWNED BY HIM WITHIN ONE YEAR FROM THE DATE OF TRANSFER? 2) WHEN THE ASSESSEE INVESTS THE ENTIRE SALE CONSIDERATION IN CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER, CAN HE BE DENIED EXEMPTION UNDER SECTION 54F ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE IT ACT? 6. IT IS OBSERVED THAT THE FACTS INVOLVED IN THE CASE OF K. RAMACHANDRA RAO (SUPRA) AS HIGHLIGHTED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER TO DISTINGUISH THE SAID CASE WITH THAT OF THE ASSESSEE WERE RELEVANT TO THE ISSUE INVOLVED IN FIRST 4 ITA NO.1232/PUN/2016 QUESTION AS RAISED BEFORE THE HONBLE KARNATAKA HIGH COURT WHEREAS THE ISSUE INVOLVED IN THE PRESENT CASE WAS SIMILAR TO THE ONE INVOLVED IN QUESTION NO.2 THAT WAS RAISED BEFORE THE HONBLE KARNATAKA HIGH COURT AND THE SAME WAS ANSWERED BY THEIR LORDSHIPS IN PARAGRAPH NO.4.1 AS UNDER :- 4.1 RE.QUESTION NO.2 : AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF THE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1), IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F, THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS IF HE WANTS TO CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN THE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT. 7. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K. RAMACHANDRA RAO (SUPRA) THUS CLEARLY HELD THAT IF THE INVESTMENT IN CONSTRUCTION OF NEW HOUSE WAS MADE BY THE ASSESSEE WITHIN THE STIPULATED PERIOD OF 3 YEARS, THEN SECTION 54F(4) WAS NOT AT ALL ATTRACTED AND THE ASSESSEE COULD NOT BE DENIED THE BENEFIT OF EXEMPTION U/S 54F MERELY BECAUSE HE HAD NOT DEPOSITED THE AMOUNT IN SPECIFIED BANK ACCOUNT AS STIPULATED. AT THE TIME OF HEARING BEFORE US, EVEN THE LD. DR HAS NOT BEEN ABLE TO RAISE ANY MATERIAL CONTENTION TO DOUBT OR DISPUTE THIS LEGAL POSITION CLEARLY PROPOUNDED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K. RAMACHANDRA RAO (SUPRA). HE HOWEVER HAS CONTENDED THAT THE CLAIM OF THE ASSESSEE OF HAVING INVESTED THE AMOUNT OF NET CONSIDERATION IN THE CONSTRUCTION OF THE NEW HOUSE WITHIN THE STIPULATED PERIOD OF 3 YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSETS HAS NOT BEEN VERIFIED EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(A). HE HAS CONTENDED THAT AN OPPORTUNITY MAY THEREFORE BE GIVEN TO THE ASSESSING OFFICER TO VERIFY THIS CLAIM OF THE ASSESSEE. WE FIND MERIT IN THIS CONTENTION RAISED BY THE LD. DR AND SINCE LD. COUNSEL FOR THE ASSESSEE HAS ALSO 5 ITA NO.1232/PUN/2016 NOT RAISED OBJECTION FOR SENDING THE MATTER BACK TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF SUCH VERIFICATION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54F OF THE ACT AFTER VERIFYING THE ACTUAL AMOUNT OF INVESTMENT MADE BY THE ASSESSEE IN THE CONSTRUCTION OF NEW HOUSE WITHIN THE STIPULATED PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSETS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 22 ND DAY OF SEPTEMBER, 2020. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) ( P.M. JAGTAP ) JUDICIAL MEMBER VICE PRESIDENT / PUNE; / DATED : 22 ND SEPTEMBER, 2020. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-3, PUNE. 4. THE PR. CIT-2, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.