ACIT, CHENNAI V. N.Venkatesh, CHENNAI

ITA 1330/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2488 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 15-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: S SRIDHAR
• Keywords: Tax effect
• Section: 54F; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENN AI BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER .. ITA NO.1330/MDS./2012 ASSESSMENT YEAR:2005-06 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE V, ANNEXE BUILDING, 6 TH FLOOR, 121, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. VS. SHRI N.VENKATESH, NEW NO.6,OLD NO.18, 6 TH CROSS STREET, SHASTRI NAGAR, CHENNAI 600 020. PAN AAPPV 5834 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETGIRI, JCIT D.R. RESPONDENT BY : SHRI S.SRIDHAR, ADVOCATE DATE OF HEARING : 11.06.13 DATE OF PRONOUNCEMENT : 20.0 6.13 O R D E R PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVAN CE IS THAT CIT(A) HELD THE PROPERTIES SOLD BY THE ASSESSEE AS BELONGING TO A HINDU UNDIVIDED FAMILY (HUF) OF WHICH ASSESSEE W AS A KARTHA ITA. 1330 /MDS/12 2 AND THEREBY RULED THAT THE CAPITAL GAINS COULD ONLY BE CONSIDERED IN THE HANDS OF SUCH HUF, WHEN SUCH PROPERTIES WERE SOLD. 2. FACTS APROPOS ARE THAT ASSESSEE, AN INDIVIDUAL, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 30.03.20 06 DECLARING AN INCOME OF ` 6,00,531/-. SUCH RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT THE ACT). THEREAFTER ON 02.07.2009, A NOTICE UNDER SE CTION 148 OF THE ACT WAS ISSUED, PURSUANT TO WHICH ASSESSEE FILED A NOTHER RETURN IN WHICH THE TOTAL INCOME DECLARED WAS ` 3,91,160/-. IN SUCH RETURN, ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTIO N 54F OF THE ACT, FOR REINVESTMENT OF LONG TERM CAPITAL GAINS AR ISING OUT OF THE SALE OF A PROPERTY. ASSESSEE HAD INHERITED ONE THI RD SHARE IN A PROPERTY AT SURVEY NO.227/1 AT PERUNGUDI VILLAGE, TAMBARAM TALUK, KANCHEEPURAM DISTRICT FROM HIS FATHER. HIS FATHER HAD ACQUIRED SUCH PROPERTY IN THE YEAR 1971. THE PROPE RTY WAS SOLD IN THE RELEVANT PREVIOUS YEAR FOR A TOTAL CONSIDERA TION OF ` 2,48,81,850/- OF WHICH ASSESSEES SHARE CAME TO ` 82,93,360/-. THEREAFTER ON 27.08.2004 ASSESSEE ACQUIRED A PROPER TY WITH ADDRESS, PLOT NO.A, ASTALAKSHMI COLONY ROAD, RUKMAN I STREET EXTENSION, BESANT NAGAR, CHENNAI-90 FOR CONSIDERATI ON OF ` 1,10,00,000/-. BASED ON SUCH INVESTMENT, ASSESSEE HAD CLAIMED ITA. 1330 /MDS/12 3 EXEMPTION UNDER SECTION 54F OF THE ACT, ON THE LONG TERM CAPITAL GAINS OF ` 44,53,360/- ARISING OUT OF THE SALE OF THE PROPERT Y AT PERUNGUDI VILLAGE. 3. ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS NOTED THAT ASSESSEE WAS IN POSSESSION O F MORE THAN ONE HOUSE IN ADDITION TO THE NEW ASSET ACQUIRED. A S PER ASSESSING OFFICER, THERE WAS A SIMILAR CLAIM MADE B Y THE ASSESSEE IN ASSESSMENT YEAR 2006-07 ALSO, FOR A SA LE AND INVESTMENT, WHERE ALSO IT WAS NOT ACCEPTED. ASSESS ING OFFICER ALSO NOTED THAT ASSESSMENT ORDER FOR A.Y. 2006-07 W HEREIN SIMILAR CLAIM WAS NOT ALLOWED, WAS UPHELD BY THE CI T(A). HE THUS, DENIED THE CLAIM OF EXEMPTION OF ` 44,53,360/- UNDER SECTION 54F OF THE ACT. 4. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A). A S PER THE ASSESSEE, THE PROPERTY SOLD BELONGED TO A HUF OF WH ICH ASSESSEE WAS A KARTHA. ASSESSEE POINTED OUT THAT T HERE WAS A DEED OF DECLARATION MADE BY HIM ON 20.03.2004 WHER EBY THE PROPERTY INHERITED BY HIM FROM HIS FATHER WAS THROW N INTO THE COMMON HOTCHPOTCH OF THE HUF. FURTHER, AS PER THE A SSESSEE, THE HUF ALONE HAD INDULGED IN THE ACQUISITION OF N EW PROPERTY ON ITA. 1330 /MDS/12 4 27.08.2004 AND CONSTRUCTION OF HOUSE THEREIN. AGA IN AS PER THE ASSESSEE, HUF OF WHICH HE WAS THE KARTHA, HAD FILED RETURN WHEREIN THE SALE OF THE LAND WAS DECLARED AND EXEMP TION UNDER SECTION 54F WAS DULY CLAIMED. HENCE, ACCORDING TO HIM, THE ADDITION MADE TOWARDS THE CAPITAL GAINS IN HIS INDI VIDUAL HAND WAS INCORRECT AND DESERVED TO BE DELETED. AN AFFIDAVIT WAS ALSO FILED BEFORE THE CIT(A) IN SUPPORT. ASSESSEE FURTHER POIN TED OUT THAT THE TRIBUNAL ON ASSESSEES APPEAL FOR ASSESSMENT YE AR 2006-07 HAD REMITTED A SIMILAR ISSUE BACK TO THE CIT(A) FOR CONSIDERATION AFRESH AND THE CIT(A) SUBSEQUENTLY HAD DELETED THE ADDITION MADE FOR THAT YEAR. 5. LD. CIT(A) WAS APPRECIATIVE OF THESE CONTENTION S. ACCORDING TO HIM, HUF HAD FILED A SEPARATE RETURN F OR ASSESSMENT YEAR 2005-06 INCORPORATING SALE OF LAND AND CAPITAL GAINS ARISE THERE FROM. FURTHER AS PER CIT(A), ASSESSING OFFI CER HAD RELIED ON THE SIMILAR DISALLOWANCE MADE FOR ASSESSMENT YEA R 2006-07, WHICH STOOD DELETED ON ASSESSEES APPEAL BY THE CIT (A). IN THE OPINION OF THE CIT(A), HUF WAS NOT HAVING ANY OTHER RESIDENTIAL ASSET ON THE DATE OF INVESTMENT AND THEREFORE, IT W AS ELIGIBLE FOR CLAIMING EXEMPTION UNDER SECTION 54F OF THE ACT. I F THE SAME ITA. 1330 /MDS/12 5 ANALOGY WAS FOLLOWED IN ASSESSEES CASE, HE WAS ELI GIBLE FOR CLAIMING EXEMPTION UNDER SECTION 54F OF THE ACT, AS WELL. 6. NOW BEFORE US, LD. D.R STRONGLY ASSAILING THE O RDER OF THE CIT(A) SUBMITTED THAT IN ASSESSEES APPEAL FOR ASS ESSMENT YEAR 2006-07, THOUGH CIT(A) HAD PARTLY HELD IN FAVOUR O F THE ASSESSEE, REVENUE HAD MOVED IN FURTHER APPEAL BEFO RE THE TRIBUNAL. AS PER LD. D.R, SUCH APPEAL OF THE REVEN UE WAS DISMISSED ONLY FOR THE REASON OF LOW TAX EFFECT. HE NCE ACCORDING TO HIM, ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 20 06-07 COULD NOT BE CONSIDERED SACROSANCT. CLAIM OF ASSESSEE T HAT PROPERTIES SOLD BELONGED TO THE HUF COULD NOT BE AC CEPTED, SINCE THE RETURN FOR THE IMPUGNED ASSESSMENT YEAR WAS FIL ED BY THE ASSESSEE AFTER THE PURPORTED DEAL OF DECLARATION DA TED 20.03.2004, WHEREBY THE INHERITED PROPERTIES WERE A LLEGEDLY THROWN INTO THE COMMON HOTCHPOTCH OF THE HUF. LD. D .R ARGUED THAT THE ASSESSEE HAD NEVER GIVEN SUCH EXPLANATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS TILL THE LAST DATE OF HEARING. AS PER THE LD. D.R, ASSESSEE HAD EVEN FILED VDIS DECL ARATION WHEREIN THE SUBJECT PROPERTY WAS SHOWN AS OWNED BY HIM IN HIS INDIVIDUAL CAPACITY. NEW ASSET WAS ALSO ACQUIRED IN THE INDIVIDUAL CAPACITY OF THE ASSESSEE, QUOTING HIS IN DIVIDUAL PAN ITA. 1330 /MDS/12 6 AND NOT IN HIS CAPACITY AS KARTHA OF ANY HUF. ASSE SSEE HAD EVEN FILED WEALTH TAX RETURN IN HIS INDIVIDUAL CAPACITY WHEREIN THE IMPUGNED PROPERTIES WERE SHOWN. THEREFORE, ACCORDI NG TO HIM, CIT(A) FELL IN ERROR WHEN HE HELD THAT PROPERTY BEL ONGED TO A HUF OF WHICH ASSESSEE WAS THE KARTHA, IGNORING THE RETU RN FILED BY THE ASSESSEE HIMSELF IN HIS INDIVIDUAL CAPACITY WHERE T HE CAPITAL GAINS WAS WORKED OUT AND EXEMPTION CLAIMED. 7. PER CONTRA, LD. A.R STRONGLY SUPPORTING THE ORD ER OF THE CIT(A) SUBMITTED THAT ASSESSEE HAD BY DECLARATION D ATED 20.03.2004 THROWN ALL THE INHERITED PROPERTY INTO T HE HUF HOTCHPOTCH. THE HUF ADMITTEDLY WAS ELIGIBLE FOR CL AIMING EXEMPTION UNDER SECTION 54F OF THE ACT. IT DID NO T OWN MORE THAN ONE RESIDENTIAL PROPERTY. FOR ASSESSMENT YEA R 2006-07, CIT(A) HAD ALLOWED SIMILAR CLAIM FINDING ALL THE P ROPERTY TO BE OWNED BY THE HUF. THE ISSUE WAS SETTLED IN THE SAI D ORDER, SINCE REVENUES APPEAL FOR THE SAID YEAR STOOD DISMISSED BY THE TRIBUNAL. JUST BECAUSE ASSESSEE MADE A MISTAKE IN REPORTING THE CAPITAL GAINS IN HIS INDIVIDUAL RETURN WOULD NOT, I N HIS OPINION, CHANGE THE FACT THAT OWNERSHIP OVER THE SAID PROPER TY WAS VESTED IN THE HUF. ASSESSEE WILL NOT BECOME OWNER OF A P ROPERTY, OF WHICH HE WAS NOT ACTUALLY THE OWNER, SIMPLY DUE TO A REASON THAT ITA. 1330 /MDS/12 7 A TAX RETURN WAS FILED. THEREFORE, ACCORDING TO HI M, CIT(A) WAS JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE. 8. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORI TIES AND HEARD THE RIVAL CONTENTIONS. IN THE FIRST PLACE, W E FIND THAT THE MAIN PLANK OF CONTENTION TAKEN BY THE ASSESSEE IS W ITH REFERENCE TO THE DECISION OF THE CIT(A) ON A SIMILAR CLAIM MA DE IN THE ASSESSMENT YEAR 2006-07. HOWEVER, IT IS A FACT THA T ASSESSEE HAD HIMSELF RETURNED CAPITAL GAINS IN HIS INDIVIDUA L RETURN AND CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT. TH E RETURN WAS FILED ON 08.07.2009. AS AGAINST THIS, CLAIM OF ASS ESSEE BEFORE THE CIT(A) WAS THAT THE PROPERTY WHICH GAVE RISE TO TH E CAPITAL GAINS WAS AN ANCESTORLY DEVOLVED ONE AND WAS THROWN INTO THE COMMON HOTCHPOTCH OF THE HUF, OF WHICH ASSESSEE WAS THE KA RTHA BY MEANS OF DEED OF DECLARATION DATED 20.03.2004. IF SUCH DECLARATION INDEED EXISTED, WE WONDER WHY THE ASSES SEE CHOOSE TO FILE A RETURN IN HIS INDIVIDUAL CAPACITY DECLAR ING CAPITAL GAINS ARISING OUT OF THE TRANSFER OF AN ASSET, WHICH STOO D THROWN INTO THE COMMON HOTCHPOTCH OF THE HUF. NO DOUBT, FOR ASSESS MENT YEAR 2006-07, A SIMILAR CLAIM MADE BY THE ASSESSEE WAS A LLOWED. HOWEVER, IN OUR OPINION, THIS CANNOT BE TAKEN AS A PRECEDENT, SINCE APPEAL OF THE REVENUE AGAINST SUCH ORDER WAS DISMISSED ITA. 1330 /MDS/12 8 BY THIS TRIBUNAL ONLY DUE TO LOW TAX EFFECT. A L OOK AT SEC.54F(1) IS NECESSARY AT THIS JUNCTURE. THE SAID SECTION IS REPRODUCED HEREUNDER:- SEC.54F. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (4), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL A SSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENT IAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE CAP ITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION A S THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER SECTION 45: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL AP PLY WHERE (A) THE ASSESSEE, (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF TH E ORIGINAL ASSET; OR ITA. 1330 /MDS/12 9 (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY PROVISO TO SUB-SECTION (1) STATES THAT THE SAID EX EMPTION CANNOT BE CLAIMED WHERE THE ASSESSEE OWNED MORE THAN ONE R ESIDENTIAL HOUSE OR WHERE THE ASSESSEE HAD PURCHASED ANY RESID ENTIAL HOUSE OTHER THAN THE NEW ASSET OR CONSTRUCTED A NEW HOUSE OTHER THAN THE NEW ASSET WITHIN THE STIPULATED PERIOD. H ERE, ADMITTEDLY, ASSESSEE HAD MADE CERTAIN CLAIMS FOR SALE AND ACQUI SITION FOR ASSESSMENT YEAR 2005-06 AS WELL AS ASSESSMENT YEAR 2006-07. CIT(A) HAD ACCEPTED THE CLAIM OF ASSESSEE BELIEVING ITS AFFIDAVIT THAT INHERITED PROPERTY WAS THROWN INTO THE COMMON HOTCHPOTCH OF THE HUF. IT IS NOT CLEAR FROM THE ORDER OF THE CI T(A) AS TO WHEN THE HUF HAD FILED ITS RETURNS FOR ASSESSMENT YEARS 2005-06 & 2006-07. IN OUR OPINION, CONSIDERING ALL THESE ASPE CTS, THE MATTER REQUIRES FRESH LOOK BY THE ASSESSING OFFICER. ASS ESSING OFFICER HAS TO VERIFY WHETHER THE CLAIM OF ASSESSEE THAT TH E PROPERTY BELONGED TO HUF AND WHETHER THE NEW INVESTMENTS MAD E SATISFIED THE CONDITIONS SET OUT IN SECTION 54F OF THE ACT, BEFORE ALLOWING THE CLAIM. ASSESSING OFFICER HAS TO LOOK INTO THE VERACITY ITA. 1330 /MDS/12 10 OF THE DECLARATION MADE BY THE ASSESSEE THROWING HI S PERSONAL PROPERTY INTO THE COMMON HOTCHPOTCH OF THE HUF OF W HICH ASSESSEE WAS THE KARTHA. ASSESSING OFFICER HAS T O VERIFY WHETHER THE RETURNS OF THE HUF WERE FILED BEFORE OR AFTER THE FILING OF THE INDIVIDUAL RETURN. AFTER CONSIDERING ALL TH ESE ASPECTS, ASSESSING OFFICER HAS TO COME TO A FRESH CONCLUSION REGARDING THE CLAIM OF DEDUCTION/S 54F OF THE ACT. WE THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH I N ACCORDANCE WITH LAW. ASSESSEE SHALL BE GIVEN AN OPPORTUNITY F OR PRESENTING HIS CASE. 9. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 20 TH JUNE, 2013 AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 20 TH JUNE, 2013. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA. 1330 /MDS/12 11