D. Giriyappa, V. ACIT,

ITA 1296/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7008 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD K JT
• Assessee Lawyers: G LAKSHMINARASIMHAN
• Keywords: Capital asset; Cost of acquisition; Corroborative evidences; Reassessment proceedings
• Section: 142(1); 147; 148; 54; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1296/BANG/2013 ASSESSMENT YEAR : 2008-09 SHRI D. GIRIYAPPA, NO.78, 4 TH CROSS, GOVINDANAYAKANAHALLI, KUMARASWAMY LAYOUT 1 ST STAGE, BANGALORE 560 078. PAN : ADYPG 0719M VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI G. LAKSHMINARASIMHAN, ADVOCATE RESPONDENT BY : DR. SHANKAR PRASAD K., JT. CIT(DR) DATE OF HEARING : 09.09.2014 DATE OF PRONOUNCEMENT : 12.09.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 19.6.2013 OF THE CIT(APPEALS)-II, BANGALORE RELATING TO ASSESSME NT YEAR 2008-09. ITA NO.1296/BANG/2013 PAGE 2 OF 9 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN R EJECTING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 54/54F OF THE ACT. 3. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE SOLD A VACANT SITE AT BANASHANKARI (BSK) III STAGE ON 22.9.2007 FOR A TOT AL CONSIDERATION OF RS.24 LAKHS. THE ASSESSEE PURCHASED ANOTHER VACANT SITE ON 15.5.2008 FOR A CONSIDERATION OF RS.11,62,000 AT BSK VI STAGE . THE ASSESSEE FILED RETURN OF INCOME FOR THE A.Y. 2008-09 ON 25.7.2008 DECLARING INCOME OF RS.10,57,479. UNDER THE HEAD LONG TERM CAPITAL G AIN, THE ASSESSEE DECLARED AN INCOME OF RS.10,08,112 WHICH WAS COMPUT ED BY THE ASSESSEE AS FOLLOWS:- LONG TERM CAPITAL GAINS DATE OF TRANSFER 22-SEP-07 SALE CONSIDERATION 24,00,000 LESS: SELLING EXPENSES COMMISSION & BROKERAGE PAID TO SHANTHARAJ 50,000 NET SALE CONSIDERATION 23,50,000 ACQUISITION DETAILS FINANCIAL YEAR COST INDEXED COST PURCHASED FROM BDA 781*551/125 1984-85 7,815 34,449 REGISTERED 310*551/426 2001-02 310 401 INDEXED COST OF ACQUISITION 34,850 ITA NO.1296/BANG/2013 PAGE 3 OF 9 IMPROVEMENT DETAILS FINANCIAL YEAR COST INDEXED COST COST OF CONSTRUCTION COMPOUND WALL - 24750*551/426 2001-02 24,750 32,012 KHATA EXPENSES 762*551/551 2007-08 762 762 INDEXED COST OF IMPROVEMENT 32,774 NET GAIN 22,82,376 EXEMPTIONS INVESTMENT EXEMPTION 54: TRANSFER OF RESIDENTIAL PROPERTY 12,74,264 12,74,264 12,74,264 CAPITAL GAINS 10,08,112 4. THE ASSESSEE GAVE THE FOLLOWING NOTE WITH REGAR D TO ITS EXEMPTION U/.S 54/54F OF THE ACT:- NOTE: 4 THE DETAILS OF CONSTRUCTION OF COMPOUND WALL 2001- 02 AT SITE NO.330. DURING THE YEAR 2001-02 I HAD C ONSTRUCTED A COMPOUND 4 FEET HEIGHT, RIGHT SIDE & FRONT SIDE MEA SURING ABOUT 60 FEET WITH 10 FEET GATE. NATURE OF CONSTRUCTION FOUNDATION, BRICK WALL, PLASTERING, LEVELING. THE CONSTRUCTION IS TAKEN PLACE WITH OWN SUPERVISION. THE TOTAL COST OF THE CONSTRU CTION IS RS.24,750/- (RUPEES TWENTY FOUR THOUSAND SEVEN HUND RED & FIFTY ONLY). 5. THE RETURN OF INCOME WAS ACCEPTED BY THE AO IN THE INTIMATION U/.S 143(1) DATED 5.3.2000. HOWEVER, ON 21.7.2010, THE AO ISSUED A NOTICE U/S. 148 OF THE ACT CALLING UPON THE ASSESSEE TO FI LE A RETURN OF INCOME. THIS NOTICE WAS SERVED ON THE ASSESSEE ON 24.7.2010 . THE ASSESSEE DID NOT RESPOND TO THIS NOTICE. THE AO ISSUED A NOTICE U/S. 142(1) OF THE ACT ON ITA NO.1296/BANG/2013 PAGE 4 OF 9 7.9.2011 AND 24.10.2011. EVEN TO THESE NOTICES, TH ERE WAS NO RESPONSE FROM THE ASSESSEE. THE AO THEREFORE PROCEEDED TO C OMPLETE THE ASSESSMENT U/S. 144 OF THE ACT TO THE BEST OF HIS J UDGMENT. THE AO HELD THAT THE ASSESSEE DID NOT SATISFY THE CONDITIONS NE CESSARY FOR CLAMING EXEMPTION. ACCORDINGLY, THE EXEMPTION OF RS.12,74, 264 CLAIMED BY THE ASSESSEE U/S. 54 (54F) OF THE ACT WAS DISALLOWED BY THE AO. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( APPEALS). IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT MA JOR PORTION OF THE CAPITAL GAIN HAD BEEN INVESTED IN PURCHASE OF VACAN T SITE. THE ASSESSEE POINTED OUT THAT HE HAD CONSTRUCTED A RESIDENTIAL H OUSE WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF APPROVAL OF THE CAPITA L ASSET. THE ASSESSEE ALSO CLAIMED THAT THERE WAS NO QUESTION OF DEPOSIT OF THE CAPITAL GAIN IN THE CAPITAL GAINS ACCOUNT AS THE MAJOR PORTION OF CAPIT AL GAIN HAD BEEN REINVESTED IN PURCHASE OF THE VACANT SITE. THE ASSE SSEE FURTHER POINTED OUT THAT IT HAD CONSTRUCTED A RESIDENTIAL HOUSE WITHIN THE PERIOD ALLOWED UNDER LAW. THE ASSESSEE POINTED OUT THAT CONSTRUCTION HA D COMMENCED BEFORE THREE YEARS AND IT IS NOT NECESSARY THAT IT SHOULD HAVE BEEN COMPLETED WITHIN THE PERIOD OF THREE YEARS, AS WAS HELD BY TH E HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. SAMBANDAM UDAYAKUMAR, 251 CTR 317 . THE ASSESSEE POINTED OUT THAT CONSTRUCTION HAD CO MMENCED IN 2009 AND WAS COMPLETED LATER. THE ASSESSEE ALSO POINTED OUT THAT A SUM OF RS.4.5 LAKHS OUT OF THE SALE PROCEEDS RECEIVED ON S ALE OF SITE WAS ITA NO.1296/BANG/2013 PAGE 5 OF 9 DEPOSITED IN FIXED DEPOSIT WITH THE BANK. THE ASSE SSEE ALSO CHALLENGED THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. 7. THE CIT(APPEALS), HOWEVER, REJECTED ALL THE CONT ENTIONS PUT FORTH BY THE ASSESSEE. ACCORDING TO THE CIT(A), THE ASSESSE E OUGHT TO HAVE FURNISHED EVIDENCE TO SUBSTANTIATE HIS CLAIM AND HA S FAILED TO DO SO AND THEREFORE THE ACTION OF THE AO HAD TO BE UPHELD. TH E CIT(A) ALSO UPHELD THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. THE CIT(A) ALSO FOUND THAT THE ASSESSEE HAD CLAIMED CONSTRUCTION OF COMPO UND WALL AND LEVELING OF THE LAND AND THAT COULD NOT BE CONSIDERED AS COM MENCEMENT OF CONSTRUCTION OF THE RESIDENTIAL HOUSE. ONE OF THE ARGUMENT ADVANCED BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE AO COUL D HAVE CARRIED OUT A SPOT INSPECTION TO FIND OUT WHETHER THE CONSTRUCTIO N HAD COMMENCED BEFORE DENYING THE CLAIM OF THE ASSESSEE FOR EXEMPTION. T HIS SUBMISSION WAS ALSO REJECTED BY THE CIT(A) FOR THE REASON THAT IT WAS FOR THE ASSESSEE TO FULFIL THE CONDITIONS FOR CLAIMING EXEMPTION AND TH E AO WAS NOT BOUND TO CARRY OUT ANY SITE INSPECTION, IN THE ABSENCE OF DO CUMENTARY EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM. FOR ALL T HE ABOVE REASONS, THE CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING O FFICER. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD. CO UNSEL FOR THE ASSESSEE FILED ADDITIONAL GROUNDS OF APPEAL IN WHICH IT IS U RGED THAT THE AO OUGHT TO HAVE ISSUED NOTICE U/S. 143(2) OF THE ACT WITHIN SI X MONTHS FROM THE DATE ON ITA NO.1296/BANG/2013 PAGE 6 OF 9 WHICH THE ASSESSEE FILED RETURN OF INCOME WHICH WAS ON 25.7.2008. FAILURE TO DO SO RENDERS THE ENTIRE REASSESSMENT PROCEEDING S A NULLITY. 9. WE HAVE CONSIDERED THIS SUBMISSION OF THE ASSESS EE AND ARE OF THE VIEW THAT THE SAME IS WITHOUT ANY BASIS. THE FIRST RETURN OF INCOME FILED BY THE ASSESSEE WAS ON 25.7.2008. THIS RETURN WAS ACCE PTED U/S. 143(1) OF THE ACT ON 5.3.2010. THEREFORE, THERE IS NO QUESTI ON OF 143(2) NOTICE WITH REFERENCE TO THIS RETURN OF INCOME. 10. AS FAR AS 148 PROCEEDINGS ARE CONCERNED, IT COM MENCED BY ISSUE OF NOTICE ON 21.7.2010. THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME IN RESPONSE TO THIS NOTICE. THEREFORE, THERE IS NO QU ESTION OF ISSUE OF NOTICE U/S. 143(2) OF THE ACT IN THE PROCEEDINGS U/S. 148 OF THE ACT. 11. THE ADDITIONAL GROUNDS OF APPEAL ARE ACCORDINGL Y REJECTED. 12. AS FAR AS THE MERITS OF THE APPEAL ARE CONCERNE D, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE REASO NS RECORDED FOR REOPENING THE ASSESSMENT HAVE NOT BEEN FURNISHED AN D IT WAS THEREFORE NECESSARY TO EXAMINE AS TO WHETHER THE CONDITIONS R EQUIRED FOR VALID INITIATION OF REASSESSMENT PROCEEDS U/S. 147 OF THE ACT WERE COMPLIED WITH. SECONDLY, THE LD. COUNSEL FOR THE ASSESSEE FILED BE FORE US PHOTOGRAPHS OF THE PROPERTY IN QUESTION SHOWING EXISTENCE OF A RES IDENTIAL HOUSE. HE ALSO SUBMITTED BEFORE US THAT THE ASSESSEE IS AN AGRICUL TURIST AND NOT WELL VERSED IN TAX MATTERS AND WAS ALSO NOT PROPERLY GUI DED. HE ALSO FILED ITA NO.1296/BANG/2013 PAGE 7 OF 9 BEFORE US A LETTER DATED 5.2.2010 OF A CONTRACTOR, WHO HAD CARRIED OUT THE CONSTRUCTION DEMANDING PAYMENT OF COST OF CONSTRUCT ION. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE AS SESSEE SHOULD BE GIVEN AN OPPORTUNITY TO DEMONSTRATE THAT CONSTRUCTION OF HOUSE HAD COMMENCED WELL WITHIN THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF CAPITAL ASSET. 13. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE CIT(APPEALS). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT IN THE PROCEEDINGS BEFORE THE AO AS WELL AS CIT(APP EALS), THE ASSESSEE WAS NOT PROPERLY REPRESENTED. FROM THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAD C LEARLY EXPRESSED HIS INTENTION OF CONSTRUCTING A RESIDENTIAL HOUSE BY PO INTING OUT CONSTRUCTION OF COMPOUND WALL AND LEVELING OF THE SITE HAD BEEN CAR RIED OUT. IT IS ALSO SEEN FROM THE PHOTOGRAPHS FILED BEFORE US THAT THERE EXI STS A HOUSE CONSTRUCTED ON THE SITE PURCHASED BY THE ASSESSEE. THE QUESTIO N IS AS TO, WHEN THE CONSTRUCTION STARTED. THE DATE ON WHICH THE CONSTR UCTION IS COMPLETED MAY NOT BE VERY MATERIAL IN THE LIGHT OF DECISION OF SAMBANDAM UDAYAKUMAR (SUPRA) . THE ASSESSEE HAS FILED BEFORE US THE LETTER WHIC H INDICATES CONSTRUCTION ACTIVITIES HAVING BEEN CARRI ED OUT OVER THE SITE PURCHASED BY THE ASSESSEE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE CAPITAL ASSET. IN THESE CIRCUMSTANC ES, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE AFFORDED AN OPPORTUNITY TO E XPLAIN ITS STAND WITH ITA NO.1296/BANG/2013 PAGE 8 OF 9 SUPPORTING EVIDENCE. WE THEREFORE SET ASIDE THE ORD ER OF THE CIT(APPEALS) AND REMAND THE ISSUE TO THE ASSESSING OFFICER FOR F RESH CONSIDERATION. THE ASSESSEE WILL AT LIBERTY TO SUBSTANTIATE HIS CASE B Y FILING NECESSARY DOCUMENTARY OR ORAL EVIDENCE. 15. WE ARE ALSO OF THE VIEW THAT THE ORDER OF THE A SSESSING OFFICER IS SILENT AS TO THE BASIS ON WHICH THE PROCEEDINGS U/S . 148 WERE INITIATED. A PERUSAL OF THE REASONS RECORDED BEFORE ISSUE OF NOT ICE U/S. 148 OF THE ACT IS NECESSARY TO FIND OUT, IF THE CONDITIONS PRECEDENT FOR INITIATING REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT ARE SATISFIED. WE ARE OF THE VIEW THAT EVEN THIS ISSUE SHOULD BE LEFT OPEN TO BE AGITATED BY TH E ASSESSEE IN THE SET ASIDE PROCEEDINGS BEFORE THE ASSESSING OFFICER. W E HOLD AND ORDER ACCORDINGLY. 16. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 12 TH SEPTEMBER , 2014 . /D S/ ITA NO.1296/BANG/2013 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.