K.K.Srinivasan, Salem V. ITO, Salem

ITA 1263/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5027 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Keywords: Cost of acquisition; Valuation report
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, A (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1263/MDS/2017 / ASSESSMENT YEAR : 2007-2008 SHRI. K.K. SRINIVASAN, NO.43, CAR STREET, SALEM 636 001. [PAN ACZPS 4713M] VS. THE INCOME TAX OFFICER, WARD 1(1) SALEM. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 02-01-2018 !' /DATE OF PRONOUNCEMENT : 04-01-2018 % / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGRI EVED THAT ITS CLAIM FOR EXEMPTION U/S.54F OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) FOR INVESTMENT MADE IN A RESIDENTIAL HOUSE WAS NOT ALLOWED WHILE COMPUTING CAPITAL GAINS. 2. ASSESSEE HAD SOLD A PROPERTY ON 25.10.2006 FOR A CONSIDERATION OF D41,56,800/-. ASSESSEE HAD COMPUTE D LONG TERM CAPITAL GAINS OF D30,29,272/- ARISING FROM THIS ABO VE TRANSACTION, AFTER ITA NO.1263 /MDS/2017 :- 2 -: REDUCING INDEXED COST OF ACQUISITION OF D11,27,578/ -. ASSESSEE HAD CLAIMED EXEMPTION U/S.54F OF THE ACT FOR THE ENTIR E CAPITAL GAINS, BASED ON AN INVESTMENT OF D35,76,800/- MADE BY HIM IN A NEW RESIDENTIAL HOUSE. AS PER THE ASSESSEE, HE HAD CON STRUCTED A RESIDENTIAL HOUSE 314-1A/200A, IN PLOT NO.20, ALAG UVINAYAGAR STREET, REDDIYUR VILLAGE, SALEM. ASSESSEE ALSO FILED A VAL UATION REPORT DATED 10.07.2014 WHICH INTER ALIA MENTIONED THAT THE CON STRUCTION HAD STARTED IN JANUARY, 2007 AND WAS COMPLETED IN MARCH , 2008. HOWEVER, LD. ASSESSING OFFICER WAS OF THE OPINION THAT ASSE SSEE OUGHT HAVE INVESTED THE NET CONSIDERATION FROM SALE IN A RES IDENTIAL HOUSE WITHIN ONE YEAR FROM THE DATE OF TRANSFER OF PROPERTY OR O UGHT HAVE CONSTRUCTED A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM SUCH DATE OF TRANSFER. AS PER THE LD. ASSESSING OFFICER, ASSESS EE WAS ALSO OBLIGED TO DEPOSIT THE SUMS NOT USED FOR SUCH ACQUISITION/CONS TRUCTION IN THE SPECIAL CAPITAL GAINS SCHEME ACCOUNT. ACCORDING T O THE LD. ASSESSING OFFICER THESE CONDITIONS WERE NOT SATISFIED. FURTH ER, ACCORDING TO HIM, THE RETURN FOR THE IMPUGNED ASSESSMENT YEAR WAS FIL ED BY THE ASSESSEE ONLY ON 11.07.2014, AFTER THE ISSUE OF NOTICE U/S .148 OF THE ACT. HENCE, HE HELD THAT ASSESSEE WAS NOT ENTITLED FOR E XEMPTION U/S.54F OF THE ACT. SUCH CLAIM FOR EXEMPTION WAS DENIED. ITA NO.1263 /MDS/2017 :- 3 -: 3. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCO ME TAX (APPEALS) DID NOT MEET WITH ANY SUCCESS. WHAT WAS H ELD BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), AT PARA 5.1 O F HIS ORDER IS REPRODUCED HEREUNDER:- 5.1. SECTION 54F STIPULATES THAT THE ASSESSEE SHOULD EITHER UTILIZE THE SALE PROCEEDS TO ACQUIRE A RESIDENTIAL PROPERTY OR TO CONSTRUCT A RESIDENTIAL PROPERTY WITHIN THE STIPULATED TIME THEREIN. ALTERNATELY, THE ASSESSEE SHOULD DEPOSIT THE SALE PROCEEDS IN THE CAPITAL GAIN SCHEME DULY NOTIFIED BY THE CENTRAL GOVERNMENT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS FILED SEVERAL CASE LAWS, WHERE IN IT HAS BEEN HELD THAT I F THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F, THE ASSESSEE SHOULD EITHER ACQUIRE OR CONSTRUCT OR DEPOSIT THE SAID CAPITAL GAIN AMOUNT IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN THE INSTANT CASE, THE ASSESSEE NEITHER DEPOSITED THE AMOUNT OF NET CONSIDERATION IN ANY CAPITAL GAIN SCHEME SPECIFIED BY THE CENTRAL GOVERNMENT NOR UTILIZED. FURTHER, THE ASSESSEE HAS NOT FILED RETUR N OF INCOME FOR THE A.Y.2007-08 WITHIN THE DUE DATE FOR FURNISHING RETURN U/S.139(1) OR U/S. 139(4). THE ASSESSEE HAS FILED THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S.148 ONLY ON 11.07.2014. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION U/S.54F OF THE INCOME TAX ACT, 1961. HENCE, I DO NOT FIND ANY REASON TO INTERFERE WITH T HE ASSESSMENT ORDER AND THE GROUNDS OF APPEAL ARE DISMISSED. 4. WHEN THE CASE WAS CALLED UP FOR HEARING, NOBODY APP EARED ON BEHALF OF THE ASSESSEE. 5. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTIN G THE ORDERS OF THE LOWER AUTHORITIES SUBMITTED THAT ASS ESSEE HAD FAILED TO ITA NO.1263 /MDS/2017 :- 4 -: PROVE THE COMPLETION OF CONSTRUCTION OF THE NEW RES IDENTIAL HOUSE BEFORE THE END OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ASSET GIVING RISE TO CAPITAL GAINS. LOWER AUTHORIT IES, ACCORDING TO HIM WERE THEREFORE JUSTIFIED IN DENYING EXEMPTION CLAI MED U/S.54F OF THE ACT. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, ASSESSEE COULD NOT EVEN PRODUCE ANY ELECTRICITY BILLS TO SUBSTANTIATE ITS CLAIM FOR COMPLETION OF THE NEW HOUSE WITHIN THE STIPULATED T IME LIMIT. 6. I HAVE PERUSED THE ORDERS AND HEARD THE LD. DEPAR TMENTAL REPRESENTATIVE. IT IS NOT DISPUTED THAT AS EVIDEN CE FOR CONSTRUCTION OF NEW RESIDENCE, ASSESSEE HAD PRODUCED A VALUATION RE PORT DATED 10.07.2014. ASSESSEE HAD FILED A LETTER DATED 16.0 3.2017 BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DURING THE COURSE OF THE HEARING BEFORE HIM AND WHAT WAS STATED BY HIM WITH REGARD TO CONSTRUCTION OF NEW RESIDENTIAL HOUSE IS REPRODUCE D HEREUNDER:- II. SUBSTANTIAL CONSTRUCTION MADE AND LIVABLE HOUSE BROUGHT INTO EXTENCE (V) COPIES OF ELECTRICITY BILLS DATED 04-10-2007 AND 07-1-2-2007 ARE ENCLOSED. (VI) COPY OF PROPERTY TAX RECEIPT DATED 24-12-2007 PERTAINING TO HALF-YEAR ENDED 30-09-2007 IS ENCLOSED. EVEN ON FACTS, THUS, NET SALE CONSIDERATION WAS INVESTED IN COST OF CONSTRUCTION AS REQUIRED BY THE SECTION. ITA NO.1263 /MDS/2017 :- 5 -: IT IS THEREFORE NOT CORRECT TO DENY BENEFIT, AS APPELLANT INVESTED NET CONSIDERATION IS NEW ASSET, THOUGH WITHOUT DEPOSITING IT UNDER THE SCHEME. (VII) CONSTRUCTION WAS COMMENCED IN JANUARY, 2007 AND MAJOR WORK COMPLETED PRIOR TO 31-07-2007 BRINGING INTO EXISTENCE A LIVABLE HOUSE. WORK ON COMPOUND WALL, WOOD WORK, CEMENT PAVEMENT SURROUNDING THE HOUSE, GATE, SOME OF THE ELECTRICAL FITTINGS ETC WERE DONE AFTER 31- 07-2007. (VIII) THE REGISTERED VALUER'S REPORT STATES THE CONSTRUCTION'S COMPLETION AS MARCH, 2008, ONLY BECAUSE RATES WHICH PREVAILED DURING YEARS ENDED 31-03-2007 AND 31-03-2008 WERE ADOPTED. ILL. CONSTRUCTION MADE PRIOR TO 31-03-2008, TIME ALLOWED BY SECTION 139(4) SATISFIES: (A) ASSESSEE HAS PROVED INCURRING SUBSTANTIAL AMOUN T FOR ACQUISITION . OF RESIDENTIAL PROPERTY PRIOR TO DUE DATE UNDER SECTION 139(4). CONTENTION OF REVENUE THAT DE POSIT IN CAPITAL GAIN SCHEME SHOULD HAVE BEEN MADE PRIOR TO DUE DATE UNDER SECTION 139(1) IS UNTENABLE (259 CTR 388 P&H) - COPY ENCLOSED. (B) INVESTMENT UNDER SECTION 54 B CAN BE MADE WITHIN THE PERIOD PRESCRIBED BY SECTION 139(4) - 172 TTJ 412 J P, 173 TTJ 634 CHD , 125 DTR 314 CHD . ASSESSEE HAD SPECIFICALLY RELIED ON THE JUDGMENT OF HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. RAJESH KUMAR JAL AN 286 ITR 282 AND THAT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN T HE CASE OF CIT VS. MS. NAGRITI AGARWAL, 339 ITR 610. HONBLE PUNJAB AND HARYANA HIGH COURT IN THE LATTER CASE HAD CLEARLY HELD THAT S UB SECTION (4) TO SEC. ITA NO.1263 /MDS/2017 :- 6 -: 139 OF THE ACT WAS IN FACT A PROVISO TO SUB SECTION (1) TO SECTION 139 OF THE ACT. WHAT WAS HELD BY THEIR LORDSHIPS AT PA RA 9 TO 11 OF ITS JUDGMENT ARE REPRODUCED HEREUNDER:- 9. ON THE OTHER HAND, LEARNED COUNSEL FOR THE RESPONDENT RELIES UPON A DIVISION BENCH JUDGMENT OF THE KARNATAKA HIGH COURT REPORTED AS FATIMA BAI V. ITO [2009] 32 DTR 243 , WHERE IN SOMEWHAT SIMILAR CIRCUMSTANCES, IT HAS BEEN HELD THAT THE TIME LIMIT FOR DEPOSIT UNDER THE SCHEME OR UTILISATION CAN BE MADE BEFORE THE DUE DATE FOR FILING OF RETURN UNDER SECT ION 139(4) OF THE ACT. LEARNED COUNSEL FOR THE RESPONDE NT ALSO RELIES UPON A DIVISION BENCH JUDGMENT OF THE GAUHATI HIGH COURT REPORTED AS CIT V. RAJESH KUMAR JALAN [2006] 286 ITR 274 (GAUHATI). 10. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, W E ARE OF THE OPINION THAT SUB-SECTION (4) OF SECTION 139 OF THE ACT IS, IN FACT, A PROVISO TO SUB-SECTION (1 ) OF SECTION 139 OF THE ACT. SECTION 139 OF THE ACT FIXE S THE DIFFERENT DATES FOR FILING THE RETURNS FOR DIFFEREN T ASSESSEES. IN THE CASE OF THE ASSESSEE AS THE RESPONDENT, IT IS THE 31ST DAY OF JULY OF THE ASSESSMENT YEAR IN TERMS OF CLAUSE (C) OF EXPLANATI ON 2 TO SUB-SECTION (1) OF SECTION 139 OF THE ACT, WHE REAS SUB-SECTION (4) OF SECTION 139 PROVIDES FOR EXTENSI ON IN PERIOD OF DUE DATE IN CERTAIN CIRCUMSTANCES. IT READS AS UNDER : '(4) ANY PERSON WHO HAS NOT FURNISHED A RETURN WITHIN THE TIME ALLOWED TO HIM UNDER SUB-SECTION (1), OR WITHIN THE TIME ALLOWED UNDER A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142, MAY FURNISH THE RETURN FOR ANY PREVIOUS YEAR AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER : PROVIDED THAT WHERE THE RETURN RELATES TO A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, ITA NO.1263 /MDS/2017 :- 7 -: 1988, OR ANY EARLIER ASSESSMENT YEAR, THE REFERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENCE TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR.' 11. A READING OF THE AFORESAID SUB-SECTION WOULD SH OW THAT IF A PERSON HAS NOT FURNISHED THE RETURN OF TH E PREVIOUS YEAR WITHIN THE TIME ALLOWED UNDER SUB- SECTION (1), I.E., BEFORE THE 31ST DAY OF JULY OF T HE ASSESSMENT YEAR, THE ASSESSEE CAN FILE RETURN BEFOR E THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THE CASE BEFORE ME, THE VALUATION REPORT FILED B Y THE ASSESSEE CLEARLY SHOW THAT HE HAD COMPLETED THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE BY MARCH, 2008. THAT APART, AS SESSEE HAD ALSO FURNISHED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ELECTRICITY BILLS, DATED 04.10.2007 AND 07.12.2007. ASSESSEE HAVING COMPLETED THE CONSTRUCTION BEFORE 31.03.2008, IN MY OPINION JUDGMENT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CAS E OF MS. NAGRITI AGARWAL (SUPRA ) WILL COME TO ITS AID. THE QUESTION IS WHETHER THE CONSTRUCTION WAS CARRIED OUT WITHIN THE TIME LIMIT AVAILABLE U/S.139 OF THE ACT. THE DATE OF ACTUAL FILING OF RETURN BY THE ASSESSEE IS IRRELEVANT FOR CONSTRUING THE TIME LIMITS WITHIN WHICH THE IN VESTMENTS HAVE TO BE MADE FOR AVAILING EXEMPTION U/S.54F OF THE ACT. SIN CE THE ASSESSEE HAD INVESTED IN THE NEW RESIDENTIAL HOUSE WITHIN TH E TIME LIMITS SPECIFIED UNDER THE ACT, THE QUESTION OF DEPOSITING THE CONSIDERATION RECEIVED ON THE SALE OF THE PROPERTY IN AN ACCOUNT UNDER THE CAPITAL GAINS ACCOUNT SCHEME ALSO DOES NOT ARISE. I AM TH EREFORE OF THE ITA NO.1263 /MDS/2017 :- 8 -: OPINION THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING EX EMPTION U/S.54F OF THE ACT. LD. ASSESSING OFFICER IS DIRECTED TO GIVE SUCH EXEMPTION. ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 4TH DAY OF JAN UARY, 2018, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:4TH JANUARY, 2018 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF