Sudarshan Zumbarlal Bafna, Ahmednagar V. Pr. Commissioner of Income tax -1, Pune

ITA 1272/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3141 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NANDITA KANCHAN
• Assessee Lawyers: VIPIN GUJARATHI
• Keywords: Cost of acquisition; Capital expenditure; Capital Gains
• Section: 54F; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI ANIL CHATURVEDI , AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO.1272 /PUN/20 17 / ASSESSMENT YEAR : 2012 - 13 SUDARSHAN ZUMBARLAL BAFNA, BAFNA PATH, SHRIRAMPUR, DIST. AHMEDNAGAR, PIN - 413709. PAN : AAVPB3556D ....... / APPELLANT / V/S. THE PR. COMMISSIONER OF INCOME TAX - 1, PUNE. / RESPONDENT A SSESSEE BY : SHRI VIPIN GUJARATHI REVENUE BY : MRS. NANDITA KANCHAN / DATE OF HEARING : 13 . 11 .2019 / DATE OF PRONOUNCEMENT : 13 .11 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX - 1, PUNE DATED 29.03.2017 FOR THE ASSESSMENT YEAR 2012 - 13 PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 2. THE CRUX OF THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL AS PER THE GROUNDS OF APPEAL ON RECORD IS THE ASSUMPTION OF REVISIONARY JURISDICTION U/S.263 OF THE ACT BY THE L D. PR. COMMISSIONER OF INCOME TAX. 3. A SHOW CAUSE NOTICE WAS ISSUED BY THE LD. PR. COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT DATED 15.07.2016 WHICH RELATES TO THE CLAIM OF EXEMPTION U/S .54F OF THE ACT BY THE ASSESSEE AND THE OBSERVATIONS CONTAINED THEREIN THAT THE EXEMPTION U/S.54F OF THE ACT IS WITH REGARD TO THE COST OF ONLY NEW ASSETS AND HOWEVER, WHETHER THAT WOULD ALSO INCLUDE THE DEPOSIT S MADE IN THE CAPITAL GAIN SCHEME AND THE COS T OF INTERIOR WORK DONE BY THE ASSESSEE THEREIN. THAT ACCORDING TO THE LD. PR. COMMISSIONER OF INCOME TAX , ON THIS , NEITHER ANY ENQUERY WAS DONE BY THE ASSESSING OFFICER NOR THERE WAS ANY APPLICATION OF MIND BY THE ASSESSING OFFICER AND THEREFORE, ORDER PA S SED BY THE ASSESSING OFFICER ACCORDING TO THE LD. PR. COMMISSIONER OF INCOME TAX WAS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT AT PAGE 88 OF THE PAPER BOOK FILED BEFORE US, THERE IS A DETAIL ED QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER ALONG WITH NOTICE U/S.142(1) OF THE ACT WHEREIN POINT NOS. 6 AND 7 STATES AS FOLLOWS: 6. YOU HAVE CLAIMED DEDUCTION U/S.54F OF RS.10 CRORES, HOWEVER, NO EVIDENCE IN SUPPOR T OF SUCH CLAIM IS FURNISHED SO FAR. WHY THE CLAIM SHOULD NOT BE DISALLOWED. 7. IT IS NOTICED FROM WORKING OF LONG TERM CAPITAL GAIN THAT YOU HAVE CLAIMED STAMP DUTY OF SALE DEED AS YOUR EXPENDITURE WHICH IS NOT CORRECT. WHY THE SAME SHOULD NOT BE DISALLO WED, PLEASE EXPLAIN. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER ASKED REGARDING THE CLAIM OF DEDUCTION U/S.54F OF THE ACT AND ALSO ASKED FOR EVIDENCES IN 3 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 SUPPORT OF SUCH CLAIM. THAT FURTHER, THE STAMP DUTY OF SALE DEED WAS CLAIMED AS EXPENDITURE, THAT WAS ALSO ENQUIRED BY THE ASSESSING OFFICER. 4.1 THAT REFERRING TO PAGE 5 OF THE PAPER BOOK, THE LD. AR INVITED OUR ATTENTION THEREIN. THE ASSESSEE HAD GIVE N THE ENTIRE DETAILS OF DEDUCTION CLAIMED U/S.54F OF THE ACT BEFORE THE ASSESSING OFFICER AT PAGES 5 & 6 WHICH HAS BEEN ANNEXED IN THE PAPER BOOK. THAT FURTHER AT PAGE 8 OF THE PAPER BOOK, AT POINT NOS. 6 AND 7, THE ASSESSEE HAS STATED REGARDING CAPITAL GA IN AND HE HAS ENCLOSED THE COPY OF COMPUTATION OF INCOME GIVING DETAIL ED WORKING OF CAPITAL GAIN ALONG WITH XEROX COP IES OF ALL SALE AND PURCHASE DEED BEFORE THE ASSESSING OFFICER. THAT EVEN THE COPY OF THE RELEVANT PURCHASE DEED WAS ALSO ENCLOSED AND ALRE ADY BEEN FILED BEFORE THE DEPARTMENT. 5. THE LD. AR VEHEMENTLY ARGUED THAT THE ISSUE RAISED IN THE SHOW CAUSE NOTICE U/S.263 OF THE ACT WERE ALL ENQUIRED INTO SPECIFICALLY BY THE ASSESSING OFFICER AND DETAILED REPLY HAVE BEEN FILED BEFORE HIM BY THE ASSE SSEE. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS AND ALSO NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THIS PROPOSITION, THE LD. AR HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: (I) CIT VS. FINE JEWELLERY (I) LTD. , 372 ITR 303 (BOM.) (II) CIT VS. SUNBEAM AUTO LTD., 332 ITR 167 (DELHI) 5.1 THE LD. AR OF THE ASSESSEE FURTHER TOOK US TO THE ASSESSMENT ORDER AND REFERRED TO PARAS 5.1, 5.2, 5.3 AND 5.4 AND SUBMITTED THAT IT IS EVIDENT THAT THE ASSESSING OFFICER HAD ASKED TO PRODUCE EVIDENCES IN SUPPORT OF SALE CONSIDERATION, COST OF ACQUISITION AND PROOF OF DEDUCTION U/S.54F OF THE ACT IN 4 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 RESPECT OF SALE OF LAND. THE ASSESSMENT ORDER ALSO STATES, ASSESSEE SUBMITTED THE COPY OF SALE AND PURCHASE DEED AND AGREEMENT OF PROPE RTY PURCHASE D FOR RESIDENTIAL PURPOSE IN SUPPORT OF CLAIM U/S.54F OF THE ACT. THAT REFERRING TO THESE PARAS IN THE ASSESSMENT ORDER, THE LD. AR VEHEMENTLY CONTENDED THAT THE ASSESSING OFFICER APPLIED HIS MIND WHILE FRAMING ASSESSMENT AND THERE IS NO DO UBT, THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. PER CONTRA, THE LD. DR SUBMITTED THAT EXEMPTION U/S.54F OF THE ACT IS ONLY WITH REGARD TO COST OF ACQUISITION OF NEW ASSETS AND IT DOES NOT COVER ANY COST OF IN TERIOR DECORATION. 7. IN THE COUNTER ARGUMENT SUBMITTED BY THE LD. AR ON FACTS, HE INVITED OUR ATTE NTION TO PAGES 46, 47 AND 49 OF THE PAPER BOOK WHEREIN IT IS EVIDENT THAT CERTAIN WORKS WERE TO BE CARRIED OUT BY THE ASSESSEE HIMSELF WHICH ARE AS FOLLOWS: A) ALL INTERNAL WALLS; B) FLOORING; C) ALL THE BATHROOMS, WHICH INCLUDES BATHROOM FITTINGS, FLOORING AND TILING; D) ALL DOORS; E) ENTIRE ELECTRIFICATIONS. THAT FURTHER, THESE EXPENSES AS PER AGREEMENT BETWEEN PROMOTER AND THE PURCHASER I.E. THE ASSESSEE HEREIN ARE NECESSARY EXPENSES FOR HABITATION IN THAT FLAT. THESE EXPENSES ARE NOT FOR ANY DECORATION PURPOSES RATHER THEY ARE NECESSARY TO LIVE SUITABLY IN T HAT FLAT. THE LD. AR FURTHER SUBMITTED THE HONBLE COURTS IN VARIOUS DECISIONS HELD THAT ANY EXPENSES INCURRED BY THE 5 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 ASSESSEE FOR SUITABLE HABITATION WOULD ALSO BE COVERED U/S.54F OF THE ACT EXEMPTION. FOR THIS PROPOSITION, THE LD. AR HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: ( I ) RAHANA SIRAJ VS. CIT, 128 DTR 0302 (KAR.) ( II ) SALEEM FAZEBHOY VS. DCIT, 108 TTJ 0894 ( MUM.) 8. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE U S. IN THIS CASE, REVISIONARY JURISDICTION U/S.263 OF THE ACT HAS BEEN ASSUMED BY THE LD. PR. COMMISSIONER OF INCOME TAX ON THE ISSUE THAT REGARDING CLAIM OF DEDUCTION U/S.54F OF THE ACT BY THE ASSESSEE, NECESSARY ENQUIRY WERE NOT CONDUCTED AND WHETHER COST OF INTERIOR DECORATION WAS ALLOWABLE OR NOT, THESE WERE NOT SPECIFICALLY ENQUIRED INTO BY THE ASS ESSING OFFICER WHILE FRAMING ASSESSMENT AND THEREFORE, THE LD. PR. COMMISSIONER OF INCOME TAX HELD THE ORDER OF THE ASSESSING O FFICER IS ERRONEOU S SO AS TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. PER CONTRA, THE LD. A R DEMONSTRATED BEFORE US THAT THE ASSESSING OFFICER HAD SPECIFICALLY ASKED FOR DETAILS REGARDING CLAIM OF EXEMPTION U/S.54F OF THE ACT ALONG WITH NECESSARY EVIDENCES FROM THE ASSESSEE AND IN RESPECT THERE TO, THE ASSESSEE HAS FURNISHED SPECIFIC REPLY TO AL L ENQUIRIES RAISED BY THE ASSESSING OFFICER. MORE SPECIFICALLY ON THE ISSUE OF EXEMPTION U/S.54F OF THE ACT, THE ASSESSEE HAS ALSO PROVIDED COPIES OF SALE DEED AND PURCHASE DEED BEFORE THE DEPARTMENT. THESE FACTS ALSO COME OUT FROM ASSESSMENT ORDER AT PARA S 5 AND ITS SUB PARAS ONWARDS. THUS, IT IS EVIDENT THAT THE ASSESSING OFFICER CONDUCTED NECESSARY ENQUIRY AND HAS RAISED SPECIFIC QUESTIONS 6 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 REGARDING THE CLAIM OF EXEMPTION U/S.54F OF THE ACT BY THE ASSESSEE AND HAD ALSO TAKEN INTO CONSIDERATION THE REPL Y FILED BY THE ASSESSEE ON THOSE ISSUES. 10. IN THE CASE OF CIT VS. FINE JEWELLERY (INDIA) LTD. (SUPRA.) , THE HONBLE BOMBAY HIGH COURT HAS HELD AND OBSERVED THAT THE TRIBUNAL RECORDED FACT THAT SPECIFIC QUERIES WERE MADE DURING ASSESSMENT PROCEEDINGS W ITH REGARD TO DETAILS OF EXPENDITURE CLAIMED UNDER HEAD MISCELLANEOUS EXPENSES AGGREGATING TO RS.2.94 CRORES. THE ASSESSEE HAS RESPONDED TO SAME AND ON CONSIDERATION OF RESPONSE OF ASSESSEE, AO HELD THAT AMOUNT OF RS.17.98 LAKHS INCURRED ON ACCOUNT OF RE PAIRS AND MAINTENANCE OUT OF RS.2.94 CRORES WAS CAPITAL EXPENDITURE. THIS ITSELF WOULD BE INDICATION OF APPLICATION OF MIND BY AO WHILE PASSING IMPUGNED ORDER. THE HONBLE HIGH COURT FURTHER CONSIDERED THE DECISION IN THE CASE OF IDEA CELLULAR LTD. VS. DEP UTY COMMISSIONER OF INCOME TAX & ORS. (2008) 301 ITR 407 ( BOM.) AND HELD THAT IF QUERY IS RAISED DURING ASSESSMENT PROCEEDINGS AND RESPONDED TO BY THE ASSESSEE, MERE FACT THAT IT IS NOT DEALT WITH IN AO WOULD NOT LEAD TO A CONCLUSION THAT NO MIND HAD BEEN APPLIED TO IT. 11. THAT FURTHER, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (SUPRA.) HAS HELD THAT IF THERE IS AN ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER UNDER S.263, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. IN THIS CASE, THE HONBLE DELHI HIGH COURT MADE DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IN THE ISSUE ON WHICH ORDER U/S.263 OF THE ACT HAS PASSED, HAS BEEN ENQUIRED BY THE AO AND EVE N IF THE SAID ENQUIRY IS 7 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 INADEQUATE AS PER THE CIT THAT WOULD NOT BY ITSELF GIVE THE CIT JURISDICTION TO PASS ORDER U/S.263 OF THE ACT. 12. REVERTING TO THE FACTS OF THE PRESENT CASE, AS DEMONSTRATED BEFORE US BY THE LD. AR, THE ISSUE ON WHICH 263 JURIS DICTION WAS ASSUMED BY THE LD. PR. COMMISSIONER OF INCOME TAX, TO THOSE ISSUES, THE ASSESSING OFFICER HAS ENQUIRED INTO AND REPLIES WERE ALSO FILED IN DETAIL BY THE ASSESSEE IN RESPONSE THERETO. IN SUCH SCENARIO, THE LD. PR. COMMISSIONER OF INCOME TAX COUL D NOT HAVE ASSUMED THE JURISDICTION U/S.263 OF THE ACT. THAT FURTHER, REGARDING CONTENTIONS OF THE LD. DR THAT SECTION 54F PERTAINS TO THE COST OF ACQUISITION OF THE NEW ASSETS AND IT DOES NOT COVER THE COST OF INTERIOR DECORATION, IN THIS REGARD, AS EVIDE NT FROM THE AGREEMENT ENTERED INTO BETWEEN THE PROMOTER AND THE ASSESSEE THEREIN CERTAIN ESSENTIAL ITEMS AS MENTIONED HEREIN ABOVE IN THE ORDER WERE TO BE CARRIED OUT BY THE ASSESSEE HIMSELF. THESE EXPENSES ARE NECESSARY TO SUITABLY LIVE IN THAT PARTICULAR FLAT. THESE EXPENSES ARE NECESSARY FOR HABITATION IN THAT PARTICULAR FLAT. THEY DO NOT PERTAIN TO ANY DECORATION ITEM RATHER THEY ARE ALL ESSENTIAL TO MAKE A FLAT FIT FOR LIVING. 13. IN THE CASE OF RAHANA SIRAJ VS. COMMISSIONER OF INCOME TAX (SUPRA.) , THE HONBLE KARNATAKA HIGH COURT HAS OBSERVED THAT QUESTION AROSE FOR CONSIDERATION WAS IF ITAT WAS RIGHT IN HOLDING THAT ASSESSEE WAS NOT ENTITLED TO MAKE DEDUCTION IN RESPECT OF ADDITIONS/ALTERATIONS MADE TO PROPERTY AFTER PURCHASE IN ORDER TO HAVE NOR MAL LIVING IN COMPUTING DEDUCTION U/S.54F, WHEN NO SUCH RESTRICTION HAS BEEN PROVIDED U/S.54F, PROPERTY PURCHASED BY THE ASSESSEE WAS HABITABLE BUT HAD LACKED CERTAIN AMENITIES SO ASSESSEE SPENT NEARLY ABOUT RS.18 LAKHS TOWARDS REPAIRS, SECTION 54F PROVIDE THAT IF COST OF NEW ASSET HAD TO BE TAKEN INTO CONSIDERATION WHILE DETERMINING CAPITAL 8 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 GAIN, WORDS USED AS COST OF NEW ASSET AND NOT CONSIDERATION FOR ACQUISITION OF THE NEW ASSET, I T WAS PERMISSIBLE FOR ASSESSEE TO ACQUIRE VACANT SITE AND PUT UP CONS TRUCTION THEREON AND COST OF NEW ASSET WOULD BE COST OF LAND PLUS(+) COST OF CONSTRUCTION. THEREFORE, ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF DEDUCTION IN DETERMINING CAPITAL GAINS. APPROACH OF AUTHORITIES THAT ONCE HABITABLE ASSET WAS ACQUIRED, ANY A DDITIONS OR IMPROVEMENTS MADE ON THAT HABITABLE ASSET WAS NOT ELIGIBLE FOR DEDUCTION, WAS CONTRARY TO THE STATUTORY PROVISIONS. 14. IN THE CASE OF SALEEM FAZEBHOY VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA.) , THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SECTION 54F ARE INCENTIVE PROVISIONS INTENDED TO AUGMENT THE INVESTMENT IN RESIDENTIAL HOUSES. IT IS THE SETTLED LEGAL POSITION THAT INCENTIVE PROVISIONS SHOULD BE CONSTRUED LIBERALLY IN SUCH A MANNER THAT OBJECT OF THE STATUTE IS F ULFILLED RATHER THAN THE MANNER IN WHICH MAY FRUSTRATE THE OBJECT. INVESTMENT IN RESIDENTIAL HOUSE WOULD NOT ONLY INCLUDE THE COST OF PURCHASE OF THE HOUSE BUT ALSO THE COST INCURRED IN MAKING THE HOUSE HABITABLE. AN INHABITABLE PREMISE CANNOT BE EQUATED W ITH A RESIDENTIAL HOUSE. IF ONE PERSON CANNOT LIVE IN A PREMISES, THEN SUCH PREMISES CANNOT BE CONSIDERED AS A RESIDENTIAL HOUSE. REVERTING TO THE FACTS OF THE PRESENT CASE, EXPENSES WERE INCURRED ON FLOOR, BATHROOMS FITTINGS AND ELECTRIFICATIONS ETC. W HICH ARE NECESSARY TO LIVE IN THAT FLAT. 15. IN VIEW OF THE AFORESAID EXAMINATION OF THE FACTS AND LEGAL PARAMETERS, WE ARE OF THE CONSIDERED VIEW THAT THE REVISIONARY ORDER PASSED BY THE LD. PR. 9 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 COMMISSIONER OF INCOME TAX IS NOT CORRECT WITHIN THE LEGAL FRAMEWORK, RATHER ARBITRARY, UN - JUDICIOUS, BAD IN LAW AND LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED ON 13 TH DAY OF NOVEMBER , 201 9 . SD/ - SD/ - ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 13 TH NOVEMBER , 2019 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE PR. CIT - 1, PUNE. 4 . , , , / DR, ITAT, B BENCH, PUNE. 5 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 10 ITA NO. 1272 /PUN/20 17 A.Y. 2012 - 13 DATE 1 DRAFT DICTATED ON 13.11 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 13 . 11 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER