Shri Piyushkumar S.Sandesara, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 1329/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9787 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Deduction for capital gain; Capital asset; Deemed to accrue or arise in india; Additional evidence; Wrong claim
• Section: 143(3); 54F; 142(1); 234B; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM & SHRI MANISH BORAD, AM. ITA NO1329/AHD/2013 ASST. YEAR: 2008-09 SHRI PIYUSHKUMAR S. SANDESARA, 16 FF, VIKRAM CHAMBERS, ASHRAM ROAD, AHMEDABAD. VS. ACIT, CIRCLE-10, AHMEDABAD. APPELLANT RESPONDENT PAN AHEPS 2647A APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SHRI K. MADHUSUDAN, SR. DR DATE OF HEARING: 7/12/2016 DATE OF PRONOUNCEMENT: 09/12/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)XVI, AHMEDABAD DATED 13.02.2013 IN APPEAL NO.CIT(A) XVI/ACIT/CIR.10/735/10-11 ARISING OUT OF ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) DATED 14.12.2010 FRAMED BY ACIT, CIR.10, AHMEDABAD. ASSESSEE HAS RAISED FOL LOWING GROUNDS OF APPEAL :- 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION AS LONG TERM GAINS OF RS. 23,99,798/- WHICH IS AGAINST LAW, FACTS AND EVI DENCE ON RECORD. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 2 2 THAT THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMI NG THE ADDITION OF RS.23,99,798A TO THE INCOME OF THE APPELLANT AS LON G TERM CAPITAL GAIN BY NOT GRANTING DEDUCTION AND RELIEF CLAIMED BY THE AP PELLANT U/S.54F AND 54EC OF THE INCOME TAX ACT. 3. THE APPELLANT HAD SOLD LAND ON 10/03/2008 AND WI TH A VIEW TO CONSTRUCT A HOUSE, INVESTED FUNDS FOR PURCHASE OF LAND, INVESTE D FUNDS WITHIN PRESCRIBED TIME IN SPECIFIED BANK ACCOUNT AND WITHI N STATUTORY PERIOD OF 3 YEARS, CONSTRUCTED THE HOUSE THEREON WHICH ENTITLED HIM FOR THE RELIEF AND DEDUCTION AS CLAIMED BY THE APPELLANT. AS PER THE P ROVISIONS OF SECTION 54F AND 54EC OF THE IT ACT, 1961, THE DEDUCTION BY INVESTMENT MADE FROM LONG TERM CAPITAL GAINS SHOULD BE GRANTED TO THE AP PELLANT. 4. THAT THE LD. ACIT AND LD. CIT (APPEALS) HAVE ERR ED IN NOT GIVING LAND VALUE INVESTED BY THE ASSESSEE FOR CONSTRUCTION OF THE PROPERTY AS DEDUCTION IN COMPUTING CHARGEABLE LONG TERM CAPITAL GAINS IN ASST. YEAR 2008-09. 5. THAT THE LD. ACIT AND LD. CIT (APPEALS) HA VE NOT APPRECIATED THE SCHEME OF ACT FOR GRANTING EXEMPTION TO THE ASSESSEE FOR P URCHASE OR TO CONSTRUCT NEW HOUSE AND STIPULATIONS PROVIDED TO CHANNALISE R ESOURCES FOR INVESTMENT AS PER LAW AND THE APPELLANT HAVING COMP LIED WITH THE PROVISIONS OF LAW AND INTENDING OF ENACTING THE LAW WAS ENTITLED TO DEDUCTIONS AS CLAIMED. 6. THE APPELLANT CONTENDS THAT RELIEF GIVING P ROVISIONS HAVE TO BE LIBERALLY CONSTRUED IN FAVOUR OF THE APPELLANT AND THE APPELL ANT HAVING COMPLIED WITH THE TERMS AND CONDITIONS OF THE PROVISIONS OF THE ACT WAS ENTITLED TO THE RELIEF AND DEDUCTIONS FROM LONG TERM CAPITAL GA IN AS CLAIMED BY THE APPELLANT. 7. THAT THE INTEREST CHARGED U/S. 234A, U/S.23 4B AND U/S.234C BE CANCELLED. 8. IN VIEW OF THE ABOVE AND THAT MAY URGED A T THE TIME OF HEARING, IT IS PRAYED THAT: I) THE ADDITION OF RS.23,99.798/- MADE TO INCOME OF THE APPELLANT AS CHARGEABLE LONG TERM CAPITAL GAINS MAY PLEASE BE DE LETED AND DEDUCTIONS AND RELIEFS CLAIMED MAY PLEASE BE ALLOWED. (II)THAT THE INTEREST CHARGED U/S. 234A, U/S. 234B AND U/S.234C OF THE ACT MAY BE CANCELLED. (III)SUCH OTHER RELIEF OR REDUCTION AS THE FACTS AN D CIRCUMSTANCES OF THE CASE SO REQUIRE BE GRANTED. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 3 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS AN INDIVIDUAL HAVING SOURCE OF INCOME FROM SHARE CAPIT AL GAIN, INTEREST ETC. RETURN OF INCOME FOR ASST. YEAR 2008-09 WAS FI LED ON 31.03.2010 DECLARING TOTAL INCOME AT RS.41,44,240/-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE AC T DATED 31.08.2010 FOLLOWED BY NOTICE U/S 142(1) OF THE AC T ALONG WITH QUESTIONNAIRE WAS DULY SERVED ON THE ASSESSEE. SUBS EQUENTLY, DUE TO CHANGE OF INCUMBENT IN OFFICE, FRESH NOTICE U/S 143(2) ALONG WITH NOTICE U/S 142(1) OF THE ACT AND QUESTIONNAIRE WAS SERVED UPON THE ASSESSEE. NECESSARY DETAILS WERE CALLED FOR AND FUR NISHED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. DURING THE F.Y.2007-08 ASSESSEE EARNED LONG TERM CAPITAL GAIN FROM SALE OF SHARE OF LAND SITUATED AT VILLAGE MAKARWA, MEASURING 10167 SQ.M. ON 10/3/2008 FOR SALE CONSIDERATION OF RS.1,00,01,610/-. THE ONLY DI SPUTE IN THE COMPUTATION OF CAPITAL GAIN RAISED BY ASSESSING OFF ICER RELATED TO DEDUCTION U/S 54F OF THE ACT TOWARDS INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE. ASSESSEE CLAIMED DEDUCTION U/S 5 4 F OF THE ACT OF RS. 23,99,798/- TOWARDS HIS INVESTMENT IN PURCHASE OF LAND JOINTLY WITH OTHER FAMILY MEMBERS FOR A CONSIDERATION OF RS .84,70,670/- OUT OF WHICH ASSESSEES SHARE WAS RS. 23,99,798/- AND T HE SAID LAND WAS PURCHASED ON 31.07.2008 AND IT WAS CLAIMED BY THE A SSESSEE THAT AS PER PROVISIONS OF SECTION 54F OF THE ACT ASSESSEE H AD OPTION TO CONSTRUCT RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF CAPITAL ASSET ON WHICH LONG TERM CAPITA L GAIN IS TO BE ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 4 CALCULATED. WHEREAS AS PER ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS WHICH WAS UNDERGOING SOMEWH ERE IN DECEMBER, 2010 AND ALMOST 33 MONTHS HAD ALREADY PASSED SINCE THE DATE OF SALE OF LAND BY ASSESSEE BUT STILL THE RE WAS NO RESIDENTIAL HOUSE CONSTRUCTED ON THE IMPUGNED LAND. AS PER ASSE SSING OFFICER IT WAS IMPOSSIBLE FOR THE ASSESSEE TO CONSTRUCT RESIDE NTIAL HOUSE IN THE REMAINING 2 MONTHS AND, THEREFORE, HE WAS OF THE VIEW THAT EXEMPTION U/S 54F OF THE ACT IS NOT AVAILABLE FOR P URCHASE OF LAND BUT IT IS FOR PURCHASE OF RESIDENTIAL HOUSE WITHIN ONE YEAR OR WITHIN TWO YEARS FROM THE TRANSFER OF ORIGINAL ASSET OR TO CON STRUCT WITHIN THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET A ND THE ASSESSEE BEING UNABLE TO CONSTRUCT RESIDENTIAL HOUSE, DEDUCT ION U/S 54F OF THE ACT AT RS.23,99,798/- WAS DENIED. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE CIT(A) BUT COULD NOT SUCCEED AS LD. CIT(A) ON THE BASIS OF HIS EXAMI NATION OF THE CONSTRUCTION MADE ON THE LAND CLAIMED BY ASSESSEE A S RESIDENTIAL HOUSE WAS OF THE VIEW THAT AS PER THE PICTURE AVAIL ABLE ON RECORD THE SAID CONSTRUCTION CANNOT BE TERMED AS RESIDENTIAL H OUSE AND ACCORDINGLY SUSTAINED THE ADDITION BY OBSERVING AS FOLLOWS :- 2,7 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE APPELLANT. THE ONLY CONTROVERSY FOUND IN THE CASE IS A S TO WHETHER DEDUCTION U/S. 54F CLAIMED BY THE APPELLANT ON THE PLEA THAT IT HAS CONSTRU CTED A RESIDENTIAL HOUSE WITHIN THREE YEARS OF THE MANDATORY LIMIT IS A VALID LEGALLY ADMISSI BLE CLAIM OR NOT. AS FAR AS SECTION 54F IS CONCERNED, THE CONTEMPORARY LEGAL STIPULATIONS MANDATE THAT DEDUCTION UNDER THE SAID SECTION IS AVAILABLE IF AN ASSESSEE EARNS LTCG FROM SALE OF A LAND AND THE CAPITAL IS EARNED THEREIN IS EITHER UTILISED FOR PURCHASE OF A HOUSE PRO PERTY, WITHIN ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE OF TRANSACTION OF SALE OR HAS WITHIN T HE PERIOD OF THREE YEARS UTILISED THE PROCEEDS FOR CONSTRUCTION OF A 'RESIDENTIAL HOUSE 1 . THE AVAILABILITY OF THE DEDUCTION IS DEPENDENT UPON SATISFACTION OF THIS BASIC CONDITION BY A TAX PAYER. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 5 2.8 AT THE OUTSET IT DESERVES TO BE MENTIONED THAT THERE IS APPARENTLY SOME CONFUSION AS TO WHETHER THE ALLEGED RESIDENTIAL HOUSE WAS CONSTRUCTED BE FORE THE PASSING OF THE ASSESSMENT ORDER ON 14-12-2010 OR AFTER THAT. THE CONFUSION HA S PRIMARILY ARISEN FROM THE SUBMISSIONS MADE BY THE APPELLANT. AS PER THE ASSESSMENT ORDER (P ARA 4.2 & 4.3) THE APPELLANT HAD TAKEN A STAND THAT HE IS IN THE PROCESS OF CONSTRUCTION OF THE IMPUGNED RESIDENTIAL UNIT AND THAT CONSTRUCTION THEREOF WAS NOT COMPLETED TILL THE PASSAGE OF THE ASSESSMENT ORDER. DURING THE COURSE OF CURRENT APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED SUBMISSIONS DATED 10-6- 2012 WHERE AGAIN HE REITERATES THE SAME PROPOSITION THAT THE CONSTRUCTION WAS NOT COMPLETED TILL THE DATE OF THE PASSING OF ASSESSMENT O RDER IT IS INTRIGUING TO FIND THAT IN HIS OTHER SUBMISSIONS THE APPELLANT HAS STATED THAT 'THE A SSESSMENT PROCEEDINGS FOR A Y 2008- 09 WERE BEING FINALISED ON 14-12-2010 AND ON THE RELEVA NT TIME CONSTRUCTION ACTIVITIES HAD BEGUN BUT CONSTRUCTION WAS NOT COMPLETED. THE APPEL LANT HAD GIVEN PLANS FOR CONSTRUCTION TO APPROPRIATE AUTHORITIES AND ALSO UNDERTAKEN TO CONSTRU CT BUILDING ON LAND. THIS CONSTRUCTION WERE GIVEN BY THE APPELLANT ON 25-3-2010. THE CONTRACT OR HAD THEN CONSTRUCTED BUILDING AND COMPLETED THE CONSTRUCTION OF THE BUILDING BY 15-2-2 010. THUS, NEW PROPERTY, A CONSTRUCTED HOUSE WAS READY WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SALE OF LAND. NOW ON ONE HAND APPELLANT SAYS THAT ON 14-12-2010 CONSTRUCTION WAS IN PROCESS, ON THE OTHER HAND HE SAID THAT THE CONTRACTOR HAD COMPLETED THE CONSTRUCTI ON OF THE BUILDING BY 15-2-2010 THIS WITHOUT PREJUDICE TO THE FACT THAT IF CONSTRUCTION WERE GIVEN BY THE APPELLANT ON 25-3-2010. HOW CAN THE CONTRACTOR COMPLETE THE CONSTRUCTION BY 1 5-2-2010. THUS, SEEN IT IS CLEAR THAT THERE IS MUCH MORE IN THE CASE THAN THAT MEETS THE EY E. EVEN THE ADDITIONAL EVIDENCES PURPORTED TO BE INTRODUCED BY THE APPELLANT, WHICH STAND REJECTED IN PRECEDING PARAS, INDICATE THAT THE SO CALLED CONSTRUCTION WAS COMPLETED B EFORE THE PASSING OF THE ASSESSMENT ORDER. THUS, IT IS NOT CLEAR AS TO WHETHER APPELLAN T WANTS TO TAKE AN ARGUMENT THAT THE SO CALLED RESIDENTIAL HOUSE WAS CONSTRUCTED BEFORE THE PASSING OF THE ASSESSMENT ORDER OR AFTER PASSING OF THE ASSESSMENT ORDER. THE ARGUMENTS OF T HE APPELLANT IN SUPPORT OF ITS CLAIM OF DEDUCTION U/S. 54F, IN VIEW OF THE AVAILABLE DEFICIENCIES, INACCURACIES AND INCONSISTENCIES, THUS ARE FAR FROM CONVINCING. 2.9 WITHOUT PREJUDICE TO THE ABOVE, IT IS SEEN THAT EV EN IF ASSUMING THAT THE SO CALLED RESIDENTIAL UNIT WAS CONSTRUCTED WITHIN THE MANDATORY P ERIOD OF THREE YEARS, THE QUESTION WHICH ARISES IS AS TO WHETHER THE APPELLANT FULFILS THE CONDITION OF CONSTRUCTING A 'RESIDENTIAL HOUSE' STIPULATED U/S. 54F. AT THIS STAGE, IT IS CONSI DERED NECESSARY TO REPRODUCE THE PICTURES AND PLAN ETC OF THE SO CALLED RESIDENTIAL HOUSE. 2.10 A PERUSAL OF THE ABOVE PICTURE SHOWS THAT THE SO CALLED RESIDENTIAL HOUSE CONSTRUCTED BY THE APPELLANT IS A MAKE SHIFT SMALL TENEMENT POSSIBLY CONSTRUCTED ON THE AGRICULTURAL LAND BOUGHT BY THE APPELLANT. THE IMPUGNED TENEMENT IS A ONE PROJECTED BED ROOM PROPERTY AND POSSIBLY CANNOT BE CLASSIFIED AS A RESIDENTIAL UNIT. AS PER INFORMATION PROVIDED BY APPELLANTS A R, APPELLANTS FAMILY COMPRISES OF SELF, WIFE, ONE SO N AND ONE DAUGHTER. IT IS PRACTICALLY IMPOSSIBLE TO BELIEVE THAT THE FAMILY OF FOUR PERSONS OF APPELLANT SOCIAL STANDING WOULD BE RESIDING IN THE SAID ONE BED ROOM TENEMENT LOCATED ON A PIECE OF AN AGRICULTURAL LAND AS PER THE LEGISLATIVE INTENT, THE DEDUCTION U/S. 54F WAS INT RODUCED WITH A VIEW TO PROVIDE TAX BENEFIT TO TAX PAYERS, WHO WERE INVESTING THEIR CAPITAL GAIN S EARNED INTO RESIDENTIAL HOUSES. THE OBJECTIVE WAS TO GIVE A BOOST TO THE HOUSING INDUSTRY IN THE COUNTRY. CERTAINLY THE TAX BENEFIT U/S 54F WAS NOT INTENDED FOR MAKE SHIFT TENEMENTS MAD E ON AGRICULTURAL LANDS. 2.11 THE OBSERVATION THAT THE ALLEGED RESIDENTIAL HOUSE OR RATHER A TENEMENT CONSTRUCTED BY THE APPELLANT IS LOCATED ON A AGRICULTURAL LAND IS EVIDENC ED BY APPELLANTS OWN EVIDENCES AND ARGUMENTS. THE SALE DEED OF THE LAND PRODUCED BY TH E APPELLANT, ON WHICH THE CLAIM OF CONSTRUCTING A RESIDENTIAL HOUSE HAVE BEEN RESTED, IT SELF SHOWS THAT THE IMPUGNED LAND IS AN AGRICULTURAL LAND. THE OBSERVATION IS FURTHER PROVED B Y THE FACT THAT THE APPELLANT HAS NOT ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 6 PRODUCED ANY COPY OF ANY RESIDENTIAL PLANS BEING APPR OVED BY ANY MUNICIPAL AUTHORITY ON THE PLEA THAT SINCE THE LAND IS AN AGRICULTURAL LAND, THE SAME ARE NOT APPLICABLE. 2.12 THUS SEEN, IT IS CLEAR THAT THE APPELLANTS CLAIM OF DEDUCTION U/S. 54F IS NOT A GENUINE CLAIM AS THE SAME SUFFERS FROM THE VICE OF TWISTING AN D TURNING OF FACTS, WITH A VIEW TO AVOID THE INCIDENCE OF TAXATION. IN THE FAMOUS CASE OF ME D OWELLS, HON'BLE APEX COURT HAS OBSERVED THAT WHEREAS THE TAX AUTHORITIES CANNOT ENTE R INTO THE SHOES OF BUSINESSMAN AND DECIDE AS TO HOW A BUSINESS IS TO BE CONDUCTED BUT AT A SAME TIME, THEY ARE FULLY EMPOWERED TO LIFT THE CORPORATE VEIL SO AS TO DISCOVE R THE TRUTH AND REALITY OF A TRANSACTION. IN REALITY, AS IS UNDERSTOOD FROM THE FACTS OF THE CAS E THAT THE APPELLANT HAD SOLD A PIECE OF LAND AND HAD BOUGHT ANOTHER PIECE OF AGRICULTURAL LAND. WI TH A VIEW TO OFFSET THE LONG TERM CAPITAL GAINS EARNED THEREIN AND VIEW A VIEW TO AVOID TRUE INC IDENCE OF TAXATION, THE APPELLANT POSSIBLY GOT CONSTRUCTED A SMALL TENEMENT OR HAS ADV ANCED A CLAIM OF HAVING MADE A RESIDENTIAL HOUSE ON THE IMPUGNED PURCHASED AGRICULTU RAL LAND, SO AS TO MAKE A CLAIM OF DEDUCTION U/S 54F. THE CASE LAWS RELIED UPON BY THE AP PELLANT HAVE ALSO BEEN ANALYSED WITH REFERENCE TO FACTS OF THE CASE ADJUDICATED THEREIN AN D FACTS OF APPELLANTS CASE. IT IS NOTED THAT THE SINCE THE DECISIONS RELIED UPON ARE CLEARLY DISTINGUISH ED ON FACTS, APPELLANTS RELIANCE THEREUPON IS ,'< TOTALLY MISPLACED. ACCORDINGLY, IT IS HELD THAT THE ACT ION OF THE ID A O IN RESTRICTING THE CLAIM OF DEDUCTION U/S. 54F OF THE A PPELLANT AND THEREBY MAKING AN ADDITION OF RS. 23,99,798/- IS B ASED UPON CORRECT UNDERSTANDING OF THE CONTEMPORARY STATUTE AND CORRECT INTERPRETATION OF FACTS. THE ADDITION MADE BY THE I D A 0 IS THEREFORE CONFIRMED AND THE GROUND OF APPEAL NO 1 TO 8 RAISED DISMISSED. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. LD. AR SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD T O THE SALE CONSIDERATION OF 1/4 TH SHARE ON LAND SOLD AND CLAIM OF INDEX COST ON ACQUISITION CLAIMED BY ASSESSEE AND AMOUNT OF CAPIT AL GAIN INVESTED WITH SBI, LALDARWAJA, AHMEDABAD AT RS.33 LACS DEPO SITED BEFORE FILING OF RETURN ON 31.3.2010. THE ONLY ISSUE PERTA INS TO INVESTMENT IN RESIDENTIAL HOUSE AT RS.23,99,798/- (BEFORE LD. CIT (A) THE DISPUTED AMOUNT U/S 54F OF THE ACT MENTIONED BY ASSESSEE IS RS.22,49,420/-). LD. AR SUBMITTED THAT - THE APPELLANT ALONG WITH HIS 3 BROTHERS AS CO-OWNERS OW NED LAND SITUATED AT VILLAGE MAKARBA ADMEASURING TOTAL 10,167 SQ. MTRS. FOR RS.2,32,500/- AND THE SAID PROPERTY WAS SOLD BY ALL CO-OWNERS FOR AN AGGR EGATE SALE CONSIDERATION OFRS.4,00,06,400/- ON 10/03/2008.. THE APPELLANT HAS SOLD UNDIVIDED 1/4 TH SHARE IN THE SAID PROPERTY FOR SALE CONSIDERATION OF RS. 1,00,01,610/- AND OUT OF THIS SALE CONSIDERATION RECEIVED, HE INVESTED RS.22,49,420/- INTO SPECIFIED BANK ACCOUNT FOR THE INVESTMENT INTO NEW ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 7 HOUSE BY CONSTRUCTING PREMISES ON THE LAND PURCHASED BY HIM FOR SALE CONSIDERATION OF RS. 33.00, 000/- ON 22/07/2008 BY CHEQUE NO ; !280976. THUS, THE APPELLANT MADE FOLLOWING INVESTMENTS BEFORE DUE DATE OF 31/07/2008 I..E. DUE DATE OF FILING OF RETURN OF INCOME FOR ASST. YEAR 2008-09 A S UNDER :- [1] INVESTMENT FOR PURCHASE OF LAND RS. 22,49,420/- [2] INVESTMENT INTO SPECIFIED BANK ACCOUNT A S PER PROVISIONS OF SECTIONS 54E/54F OF THE AC T RS. 33,00,000/- TOTAL: RS.55,49,420/- THE LD. A.O. CONSIDERED THAT INVESTMENT IN LAND DID NOT QUALIFY FOR THE PURPOSE OF DEDUCTION U/S.54E/54F OF THE ACT. THE ASSESSEE CAN NOT CONSTRUCT THE HOUSE ON ANY LAND UNLESS AND UNTIL HE HAS PURCHASED LAND AND OWNED THE LAND. THE APPELLANT BY PURCHASE AGREEMENT DATED 10/0/2008 PUR CHASED LAND ADMEASURING 708 SQ. MTRSS. WITH AN INTENTION TO CONSTRUCT THE H OUSE THEREON AND THIS FACT WAS MADE KNOWN TO THE LD. A.O. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. THE APPELLANT HAS WITHIN STIPULATED TIME TO FILE RE TURN OF INCOME, I.E. PRIOR TO JULY. 2008. INVESTED INTO IMMOVABLE PROPERTY AND SPECIFIE D ACCOUNT AS UNDER :- [I] PURCHASE OF LAND ADMEASURING 708 SQ. MTR S. RS. 22,49,420/- [II] INVESTMENT IN SPECIFIED ACCOUNT. RS. 33,00,000/- TOTAL RS. 55,49,420/- THE ASSESSMENT PROCEEDINGS FOR ASST. YEAR 2008-09 W ERE BEING FINALIZED ON 14/12/2010 AND AT THE RELEVANT TIME, CONSTRUCTION A CTIVITIES HAD BEGUN BUT CONSTRUCTION WAS NOT COMPLETED. THE APPELLANT HAD G IVEN PLANS FOR THE CONSTRUCTION TO THE APPROPRIATE AUTHORITIES AND HAD ALSO UNDERTAKEN TO CONSTRUCT THE BUILDING ON LAND. THIS CONSTRUCTION WERE GIVEN BY THE APPELLANT ON 25/3/2010. THE CONTRACTOR HAD THEN CONSTRUCTED BUILDING AND CO MPLETED THE CONSTRUCTION OF THE BUILDING BY 15/02/2010. THUS, NEW PROPERTY, A C ONSTRUCTED HOUSE WAS READY WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF SAL E OF LAND. HON. GUJARAT HIGH COURT IN THE CASE OF SHRI HARSUTR AJ J. RAVA! VS. CIT REPORTED AT 255 ITR 315 WHERE HON. GUJARAT HIGH COURT MADE OBSE RVATIONS AS UNDER WHICH IS REPRODUCED FROM HEAD NOTES OF THE DECISION:- 'THE PROVISIONS OF SECTION 54(1) WILL PREVAIL OVER THE DEEMING FICTION OF SECTION 45 OF THE ACT WHICH TREATS CAPITAL GAIN AS THE DEEMED INCOME OF THE PREVIOUS YEAR. UNDER SECTION 54(1), THE ASSESSE E HAS AN OPTION TO PURCHASE PROPERTY WITHIN ONE YEAR OF THE TRANSFER O F HIS RESIDENTIAL PROPERTY OR TO CONSTRUCT HIS OWN RESIDENTIAL PROPERTY WITHIN TWO YEARS OF SUCH TRANSFER. THE ASCERTAINMENT OF THE DIFFERENCE BETWE EN THE COST OF THE HOUSE PROPERTY SO PURCHASED WITHIN ONE YEAR OR CONS TRUCTED WITHIN TWO ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 8 YEARS OF THE TRANSFER OF THE ORIGINAL ASSET AND THE AMOUNT OF CAPITAL GAIN ARISING FROM THE ORIGINAL ASSET CAN TAKE PLACE ONLY WHEN THE NEW ASSET IS PURCHASED OR CONSTRUCTED AS THE CASE MAY BE. IT, TH EREFORE, FOLLOWS THAT THE ASSESSEE CANNOT BE SUBJECTED TO INCOME-TAX ON H IS CAPITAL GAIN WHICH IS NOT TO BE TREATED AS HIS DEEMED INCOME OF THE PR EVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE UNTIL THE EXPIRY OF THE OUT ER LIMIT OF ONE AND TWO YEARS IN CASE OF PURCHASE AND CONSTRUCTION, RESPECT IVELY, AT THE END OF WHICH ALONE, IT WOULD BE POSSIBLE TO COMPUTE THE DI FFERENCE BETWEEN THE AMOUNT OF CAPITAL GAIN AND THE COST OF THE NEW ASSE T, AND IT IS AT THAT STAGE, THAT THE QUESTION OF CHARGING SUCH DIFFERENC E UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR CAN ARISE. THE INCOME-T AX OFFICER, UNLESS THE TRANSFER OR PURCHASE OR CONSTRUCTION OF THE NEW ASS ET HAS ALREADY TAKEN PLACE WITHIN THE STIPULATED OUTER TIME LIMIT WHEN H E CAN WORK OUT THE DIFFERENCE UNDER THE SPECIAL PROVISIONS OF SECTION 54(1). THEREFORE, MERELY FROM THE FACT THAT THE CAPITAL GAIN WAS NOT CHARGED TO TAX IN THE PREVIOUS YEAR OF THE TRANSFER, IT CANNOT BE INFERRED THAT TH E BENEFIT OF ADJUSTMENT UNDER SECTION 54(1) WAS AVAILED OF BY THE ASSESSEE IN THE PREVIOUS YEAR THOUGH HE HAD NOT PURCHASED OR CONSTRUCTED A NEW AS SET FOR RESIDENTIAL PURPOSES. ' IN VIEW OF THE CLEAR PROVISIONS OF THE ACT, THE APP ELLANT HAS COMPLIED WITH PROVISIONS OF LAW FOR MAKING INVESTMENT OF THE SALE PROCEEDS OF LAND PROPERTY INTO NEW RESIDENTIAL HOUSE, HENCE ADDITION TO THE LONG T ERM CAPITAL GAIN WORKED OUT CHARGEABLE BY THE ID. A O REQUIRES TO BE DELETED BE CAUSE THE APPELLANT HAS COMPLIED WITH ALL PROVISIONS OF LAW. ABSTRACTED PRO VISIONS OF SECTION 54E/54F OF THE ACT IS ATTACHED AT PAGES 86 TO 93. THE APPELLANT IN SUBSTANCE COMPLETED CONSTRUCTION O F THE HOUSE AND REQUISITE BILLS, CONTRACT, VOUCHERS OF THE BUILDING CONSTRUCT ION ARE GIVEN AT PAGE NOS. 66 TO 85 OF THE PAPER BOOK. ASSESSEE HAS ALSO GIVEN COPIES OF PHOTOGRAPH OF PROPERTY. THESE EVIDENCES COULD NOT BE PRODUCED BEFORE THE LD . A.O. AS THE BUILDING WAS UNDER CONSTRUCTION. SINCE THE BUILDING HAS BEEN CON STRUCTED AND THE AMOUNT HAS BEEN PAID FOR THE CONSTRUCTION OF THE HOUSE, THE AP PELLANT IS ENTITLED TO THE EXEMPTION. IT IS CONTENTION OF THE LD. A.O. THAT CAPITAL GAIN EXEMPTION CANNOT BE GIVEN FOR PURCHASE OF AND AS CLAIMED BY APPELLANT. NO HOUSE OR BUILDING CAN BE CONSTRUCTED WITHOUT LAND BEING OWNED BY THE APPELLA NT. IT IS FIRST STEP TO CONSTRUCT THE HOUSE. IF THE APPELLANT PURCHASES HOUSE DULY CONSTRUCTED BY THE DEVELOPER OR PROPERTY OWNER, THEN PROPERTY OWNER WH O HAD PURCHASED THE LAND AND PROPORTIONATE LAND OWNERSHIP WOULD BE GIVEN TO THE PURCHASER. THUS, WITHOUT LAND BEING PURCHASED, CONSTRUCTION IS NOT POSSIBLE. HERE IN THIS CASE, WHEN THE APPELLANT HAD PURCHASED LAND AND HAS CONSTRUCTED BU ILDING THEREON, CAPITAL GAIN EXEMPTION FOR PURCHASE OF LAND SHOULD BE ALLOWED AN D CONSIDERED FOR WORKING CHARGEABLE LONG TERM CAPITAL GAIN. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 9 5. LD. AR FURTHER REFERRED TO SUBMISSIONS MADE BEFO RE LD. CIT(A) ON 4.9.2012 MENTIONING THAT AS PER PROVISIONS OF SE CTION 54F OF THE ACT A PERSON IN ORDER TO CLAIM EXEMPTION NEEDS TO C ONSTRUCT A RESIDENTIAL FROM THE DATE OF TRANSFER OF ORIGINAL A SSET WHEREAS LD. ASSESSING OFFICER PASSED ASSESSMENT ORDER ON 14.12. 2010 WHICH WAS FEW MONTHS BEFORE THE EXPIRY OF STATUTORY TIME LIMIT FOR CONSTRUCTION OF RESIDENTIAL HOUSE. FURTHER ASSESSEE RELIED ON THE DECISION OF HON. MADRAS HIGH COURT IN THE CASE OF C IT VS. SARDARMAL KOTHARI AND ANOTHER (2008) 302 ITR 286 (MAD) WHEREI N HON. COURT DISMISSED REVENUES APPEAL BY OBSERVING THAT IN OR DER TO GET THE BENEFITS UNDER SECTION 54F OF THE ACT, THE ASSESSEE NEED NOT COMPLETE THE CONSTRUCTION OF THE HOUSE AND OCCUPY I T, IT WAS ENOUGH IF THE ASSESSEE ESTABLISHED THE INVESTMENT OF THE ENTI RE NET CONSIDERATION WITHIN THE STIPULATED PERIOD. LD. AR FURTHER SUBMITTED THAT REQUEST WAS MADE BEFORE LD. CIT(A) FOR ADDITIO NAL GROUND ALONG WITH PAPER BOOK BY LETTER DATED 10.12.2010 BUT THE SAME WAS NOT ENTERTAINED AND REJECTED EVEN WHEN THE RESIDENTIAL HOUSE WAS COMPLETED IN THE MONTH OF MARCH, 2010 AND WAS WITHI N THE TIME PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET AS ENVISAGED IN SECTION 54F OF THE ACT. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. ASSESSEE HAS RAISED VARIOUS GROUN DS BUT THE SOLITARY ISSUE IS WITH REGARD TO THE DENIAL OF CLAI M U/S 54F OF THE ACT AT ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 10 RS.23,99,798/- TOWARDS INVESTMENT IN RESIDENTIAL HO USE. WITHOUT REITERATING THE FACTS AGAIN AS DISCUSSED ABOVE, IN NUTSHELL WE OBSERVE THAT LONG TERM CAPITAL GAIN OF RS.98,57,979/- AROSE FROM THE TRANSFER OF JOINTLY POSSESSED LAND. AGAINST THIS LONG TERM C APITAL GAIN ASSESSEE CLAIMED DEDUCTION U/S 54F OF THE ACT, FOR RS.33,00,000/- BEING INVESTED IN SPECIFIED ACCOUNT WITH SBI BEFORE DUE DATE OF FILING OF RETURN AND RS.23,99,798/- TOWARDS PURCHASE OF LA ND FOR CONSTRUCTION OF RESIDENTIAL HOUSE. AS PER OBSERVATI ON OF LD. ASSESSING OFFICER ASSESSEE WAS UNABLE TO PROVE THAT RESIDENTI AL HOUSE HAS BEEN CONSTRUCTED ON THIS PURCHASED LAND WITHIN THREE YEA RS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET WHICH HAPPENED ON 10 TH MARCH, 2008. EVEN WHEN THE MATTER WAS BEFORE LD. CIT(A) REQUEST FOR ADDITIONAL EVIDENCE MADE BY ASSESSEE WAS REJECTED WHICH WAS IN RELATION TO SUBMISSION OF EVIDENCE TO PROVE THAT NECESSARY COND ITIONS OF SECTION 54F HAVE BEEN DULY COMPLIED WITH AND A RESIDENTIAL HOUSE HAS BEEN CONSTRUCTED WITHIN THREE YEARS FROM THE DATE OF TRA NSFER OF ORIGINAL ASSET. HOWEVER, LD. CIT(A) REJECTED THE APPLICATION OF ADDITIONAL EVIDENCE BUT IN HIS APPELLATE ORDER HE HAS ATTACHED PHOTOS OF THE CONSTRUCTION MADE ON THE PURCHASED LAND ALONG WITH MAP OF RESIDENTIAL HOUSE AT PAGE 15 TO 17 OF THE ORDER. AS PER LD. CIT(A) SO CALLED CONSTRUCTION ON THE LAND CANNOT BE TERMED AS A RESIDENTIAL HOUSE AND WAS OF THE VIEW THAT ASSESSEE HAS MADE A WRONG CLAIM U/S 54F OF THE ACT WITH A VIEW TO EVADE TAX. 8. FROM GOING THROUGH THE ABOVE DISCUSSION AND RECO RD PLACED BEFORE US, WE FIND THAT AT THE FIRST INSTANCE THERE WAS A LAPSE ON THE PART OF ASSESSING OFFICER TO PRESUME THAT AS NO CON STRUCTION HAD ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 11 STARTED IN 33 MONTHS, THERE WAS A RARE POSSIBILIT Y OF A RESIDENTIAL HOUSE TO BE CONSTRUCTED WITHIN 2 MONTHS WHICH IS EVIDENCED FROM THE FACT THAT TRANSFER OF CAPITAL ASSET WAS MADE ON 10 TH MARCH, 2008 AND ASSESSMENT WAS FINALIZED ON 14.12.2010. THEREAF TER WHEN THE MATTER WAS BEFORE LD. CIT(A) ASSESSEE MADE REQUEST FOR ADDITIONAL EVIDENCE WHICH WAS VERY CRUCIAL FOR THE PURPOSE OF ADJUDICATION AS IT EVIDENCED THAT THE RESIDENTIAL HOUSE WAS CONSTRUCTE D ON THE LAND PURCHASED FOR RS.23,99,798 AND DATE OF COMPLETION O F CONSTRUCTION WAS AFTER THE DATE OF ASSESSMENT ORDER U/S 143(3) O F THE ACT. LD. CIT(A) ON ONE HAND REJECTED THE APPLICATION FOR ADD ITIONAL EVIDENCE AND ON THE OTHER HAND ATTACHED PHOTOGRAPHS OF THE C ONSTRUCTION MADE ON THE LAND PURCHASED. LD. CIT(A) HAS CONFIRME D THAT THE CONSTRUCTION HAS BEEN DONE BUT IT IS NOT IN THE SHA PE OF PROPER RESIDENTIAL HOUSE AS ENVISAGED IN THE PROVISIONS OF SECTION 54F OF THE ACT. 9. WE FIND THAT PROVISIONS OF SECTION 54F CONTEMPLA TES THAT IF IN THE CASE OF ASSESSEE, IF THE CAPITAL GAIN ARISES FR OM ANY LONG TERM CAPITAL ASSET (WHICH IN THIS CASE NOT BEING A RESID ENTIAL HOUSE) AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFOR E OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PUR CHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED, A RESIDENTIAL HOUSE THEN HE WILL BE ENTITLED TO CLAIM DEDUCTION. APPLYING THE FACTS OF THE CASE TO THESE PROVISIONS WE FIND THAT THE TRANS FER OF CAPITAL ASSET I.E. SHARE OF LAND WAS MADE ON 10 TH MARCH, 2008 AND IF THE ASSESSEE HAS BEEN ABLE TO CONSTRUCT RESIDENTIAL HOU SE BY 9 TH MARCH, 2011 HE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S 54F OF THE ACT. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 12 ASSESSEE IN ORDER TO MAKE A RESIDENTIAL HOUSE PURCH ASED THE LAND FOR RS.23,99,798/- AND STARTED CONSTRUCTIONS SOMEWHERE BEFORE THE END OF 3 RD YEAR. ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLET ED ON 14.12.2010 WHICH WAS APPROX. THREE MONTHS BEFORE TH E LAST DATE OF COMPLETION OF CONSTRUCTION I.E. 9 TH MARCH, 2008. CERTAINLY FACTS WERE BROUGHT BEFORE LD. CIT(A) BUT HE ON HIS OWN DISCRET ION MADE A VIEW THAT CONSTRUCTION SO MADE IS NOT IN THE SHAPE OF RE SIDENTIAL HOUSE. HOWEVER, THE FACT ABOUT THE CONSTRUCTION OF RESIDE NTIAL HOUSE ON THE IMPUGNED LAND WAS NEVER ADJUDICATED BY THE ASSESSIN G AUTHORITY AS THE ASSESSMENT WAS COMPLETED MUCH BEFORE THE LAST D ATE OF EXPIRY FOR CONSTRUCTION OF THE HOUSE. WE ALSO FIND THAT TH ERE IS ANOMALY IN THE FIGURE OF THE PURCHASE OF LAND AS IN THE ASSESS MENT ORDER ADDITION IS RS.23,99,798 WHEREAS IN THE SUBMISSIONS MADE BEF ORE LD. CIT(A) INVESTMENT IN THE LAND IS SHOWN AT RS.22,49,420/-. FURTHER THERE IS CONFUSION ABOUT THE ACTUAL DATE OF COMPLETION OF CO NSTRUCTION AS OBSERVED IN PARA 2.8 BY LD. CIT(A) OF HIS APPELLATE ORDER. LOOKING TO ALL THESE FACTS AND ANOMALIES A QUESTION WAS POSED TO BOTH THE LD. AR AND THE LD. DR THAT WHY NOT ALL THE ISSUES IN THE A PPEAL BE SET ASIDE TO THE ASSESSING OFFICER TO FRAME A FRESH ASSESSMEN T ORDER. BOTH THE LD. REPRESENTATIVES HAD NO OBJECTION IF THE ISSUES IN THE APPEAL ARE SET ASIDE TO THE FILE OF ASSESSING OFFICER. ACCORDINGLY , IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF DISCUS SION MADE ABOVE, WE HEREBY SET ASIDE THE ORDERS OF LOWER AUTH ORITIES AND REMIT BACK ALL THE ISSUES TO THE FILE OF ASSESSING OFFICE R FOR DE NOVO ASSESSMENT AND TO VERIFY ASSESSEES CLAIM OF DEDUCT ION U/S 54F OF THE ACT. NEEDLESS TO MENTION THAT PROPER OPPORTUNIT Y WILL BE GIVEN TO THE ASSESSEE OF BEING HEARD. ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 13 10. IN THE RESULT, APPEAL OF THE APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER, 2016 SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 9/12/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 1329/AHD/2013 ASST. YEAR 2008-09 14 1. DATE OF DICTATION: 7/12/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 8/12/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 9/12/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: