R.Jayabharathi, CHENNAI V. ITO, CHENNAI

ITA 1369/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7372 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2016
• Court: TRIBUNAL
• Department Lawyers: M GOPIKRISHNA JT
• Assessee Lawyers: N DEVANTHAN; A RAJA
• Keywords: Capital asset
• Section: 143(3); 54; 154

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A/SMC, CHENNAI , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.1369/MDS/2016 # $ %&$ / ASSESSMENT YEAR : 2010-11 R.JAYABHARATHI, PROPX: M/S. JEYA TIMBER MART, 40 L.B.ROAD, THIRUVANMIYUR, CHENNAI 600 041. [PAN: AAHPJ 1656Q] ( '( /APPELLANT) VS. INCOME TAX OFFICER, BUSINESS WARD-III(3), CHENNAI 600 034. ( )*'( /RESPONDENT) '( + , /APPELLANT BY : SHRI N.DEVANTHAN, ADVOCATE & SHRI A.RAJA, CA )*'( + , /RESPONDENT BY : SHRI M.GOPIKRISHNA, JT. CI T - % + . /DATE OF HEARING : 23.02.2017 /& + . /DATE OF PRONOUNCEMENT : 31.03.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINS T THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNAI ( CIT(A) FOR SHORT) DATED 24.02.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 25.03.2013 FOR ASSESSMENT YEAR (AY) 2010-11. 2 ITA NO.1369/MDS/2016 (AY 2010-11) R.JAYABHARATHI V. ITO 2. THE APPEAL RAISES THE ISSUE OF MAINTAINABILITY IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEES CLAIM F OR DEDUCTION U/S. 54 IN COMPUTING LONG-TERM CAPITAL GAIN (LTCG), MADE PER H ER RETURN FILED ON 07.10.2010. THE SAME STANDS DENIED ON, PRINCIPALLY, TWO COUNTS. ONE, THAT THE SALE PROCEEDS ( . 58.50 LACS) OF THE TRANSFERRED CAPITAL ASSET (ON 04/12/2009) WERE NOT DEPOSITED IN THE BANK ACCOUNT UNDER THE CA PITAL GAINS ACCOUNT SCHEME AS REQUIRED BY S. 54(2) OF THE ACT AND, IN ANY CASE , NOT KEPT IN A SEPARATE BANK ACCOUNT, BUT DIVERTED TO AND DEPLOYED IN THE ASSESS EES BUSINESS. THE ASSESSEE SUBSEQUENTLY CERTIFYING TO HAVE INCURRED A TOTAL CO ST OF . 154 LACS (INCLUDING A BANK LOAN OF . 100 LACS) ON A RESIDENTIAL HOUSE, CONSTRUCTED WIT HIN THE STIPULATED PERIOD OF THREE YEARS FROM THE DATE OF T HE TRANSFER (I.E., BY 03/12/2012), WOULD THEREFORE BE TO NO CONSEQUENCE. THE ASSESSEES CONTENTION IS, AGAIN, TWO FOLD. FIRSTLY, IT IS SUBMITTED THAT THE PURPOSE OF DEPOSITING THE TRANSFER PROCEEDS, UNLESS UTILIZED FOR THE PURCHASE OR CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE BY THE DUE DATE OF FILING THE RET URN OF INCOME, IN AN ACCOUNT UNDER THE CAPITAL GAINS ACCOUNT SCHEME, REQUIRED TO BE MAINTAINED WITH A SCHEDULED BANK, IS TO EAR MARK THE FUNDS FOR THE ST ATED PURPOSE. ONCE, THEREFORE, THE FUNDS HAVE BEEN DEPLOYED IN A SAVING BANK ACCOU NT WITH A SCHEDULED BANK, THE STATED PURPOSE IS SATISFIED. AS REGARDS THE SEC OND OBJECTION, IT IS NOT CORRECT TO SAY THAT THE AMOUNT HAS BEEN INVESTED IN BUSINES S IN-AS-MUCH AS THE SAME WAS GIVEN TO THE ASSESSEES PROPRIETARY CONCERN TOWARDS PURCHASE OF TIMBER AND TILES, THE TOTAL OF COST OF WHICH WORKS TO . 40.51 LACS, AS SUBSEQUENTLY CERTIFIED BY THE ASSESSEES CHARTERED ACCOUNTANTS (VIDE THEIR LE TTER DATED 25.03.2015, ADDRESSED TO THE LD. CIT(A)/PLACING A COPY OF THE S AME ON RECORD). 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEE CLAIMS TO HAVE RECEIVED THE ENTIRE SA LE PROCEEDS IN A SAVING BANK ACCOUNT WITH INDIAN OVERSEAS BANK. THE LD. AR WOULD DURING HEARING, 3 ITA NO.1369/MDS/2016 (AY 2010-11) R.JAYABHARATHI V. ITO WITH REFERENCE TO THE SALE DEED (PLACING THE COPY O F THE SAME ON RECORD), LISTING THE PAYMENTS, ATTEMPT TO SHOW THAT THE ENTIRE SALE PROCEEDS WERE, AS AND WHEN RECEIVED, DEPOSITED IN HER BANK ACCOUNT WITH INDIAN OVERSEAS BANK, A SCHEDULED BANK. A COMPARISON OF THE SAID BANK ACCOUNT WITH T HE SALE DEED (COPY OF WHICH WAS ALSO ADDUCED DURING HEARING), HOWEVER REVEALS T HAT THE RECEIPT OF . 4,70,000/- (VIDE CHEQUE NO. 764076) IS NOT DIRECTLY FROM THE SELLER ON 22.10.2009, AS CONTENDED; THE SELLER HAVING ISSUED A CHEQUE NO.406987 FOR . 5 LACS. THE BALANCE SALE CONSIDERATION OF . 53.50 LACS FINDS ITS DESTINATION IN THE ASSESSEES BANK ACCOUNT (THERE ARE DIFFERENCES IN T HE CHEQUE NUMBERS, INDICATING THAT THE RECEIPT OF THE SALE PROCEEDS IS NOT IN THE ASSESSEES INDIAN OVERSEAS BANK ACCOUNT). THE CLAIM, ON VERIFICATION, WAS FOU ND INCORRECT TO THE EXTENT OF RECEIPT OF . 5 LACS, AGAINST WHICH THE CORRESPONDING DEPOSIT I S FOR . 4.70 LACS, IMPLYING THAT . 5 LACS STANDS DEPOSITED IN SOME OTHER ACCOUNT, FR OM WHERE, PERHAPS, . 4.70 LACS STANDS TRANSFERRED TO THE ASSESSEES BA NK ACCOUNT WITH INDIAN OVERSEAS BANK. INDEED, THIS IS THE CASE FOR THE OTHER RECEIPTS AS WELL; THOUGH THE AMOUNTS SUBSEQUENTLY TRANSFERRED MATCH. EVEN IF THE SOURCE OF . 4.70 LACS IS DIFFERENT, WHERE THE AMOUNT OF . 5 LACS IS DEPOSITED IN A SEPARATE BANK ACCOUNT, EITHER FOR BEING UTILIZED FOR CONSTRU CTION OR OTHERWISE RETAINED THEREIN, THE SAME CAN BE TAKEN AS HAVING BEEN DEPOS ITED IN A SEPARATE ACCOUNT; THE PURPOSE BEING TO ESCHEW UTILIZATION OF FUNDS BY THE ASSESSEE FOR ANY OTHER PURPOSE, SUBJECT TO THE OTHER BANK ACCOUNT BEING A SCHEDULED BANK, THE ASSESSEE CAN BE SAID TO HAVE COMPLIED WITH THE CONDITION OF S. 54(2). CONTINUING FURTHER, THIS EXERCISE IS A LITTLE CONS EQUENCE AS THE ASSESSEE HAS IMMEDIATELY THEREAFTER TRANSFERRED THE ENTIRE FUNDS TO HER BUSINESS CONCERN. BOTH THE REVENUE AUTHORITIES HAVE GIVEN A CLEAR FIN DING OF THE FUNDS BEING INVESTED IN BUSINESS . THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THIS FIND ING IN ANY MANNER. THE LD. AR STATING THAT THE AMOUNT WAS GIVE N AS AN ADVANCE FOR PURCHASE IS ALSO WITHOUT MERIT. WHEN, IT WAS ASKED , THE ADVANCE WAS GIVEN AND 4 ITA NO.1369/MDS/2016 (AY 2010-11) R.JAYABHARATHI V. ITO WHEN WERE THE PURCHASES MADE, HE COULD NOT FURNISH ANY SATISFACTORY ANSWER? THE EXPLANATION, WHICH IS ADVANCED FOR THE FIRST TI ME AT THIS STAGE, CAN ONLY BE ACCEPTED (OF COURSE, SUBJECT TO VERIFICATION) WHERE IT IS SHOWN (WITH MATERIALS) THAT THE AMOUNT WAS UTILIZED FOR MAKING PURCHASES F OR THE ASSESSEE ONLY AND, ACCORDINGLY, GOODS SUPPLIED TO IT FROM SUCH SPECIFI ED PURCHASERS OR FROM GOODS HELD AS STOCK-IN-TRADE BY THE FIRM. SUPPLY FROM STO CK IN TRADE, THE CONSIDERATION BEING RECEIVED, WOULD BE RATHER MADE IMMEDIATELY. F URTHER, HOW IS IT THAT THE ADVANCES GIVEN FOR TIMBER AND TILES, WHEN THE ASSES SEES CONCERN IS ONLY IN THE BUSINESS OF TIMBER? PURCHASE OF TIMBER WOULD IN FAC T ARISE ONLY AFTER COMMENCEMENT OF CONSTRUCTION, OR AT LEAST AFTER THE PREPARATION OF DRAWINGS, INDICATING THE QUANTITY AND QUALITY OF TIMBER TO BE USED. AGAIN, THE TIMBER FOR FURNITURE CANNOT BE REGARDED AS TOWARD CONSTRUCTION OF RESIDENTIAL HOUSE. THE PURCHASE OF TILES, EVEN ASSUMING THAT THE SAID CONC ERN ALSO DEALS IN TILES, WHICH SHALL REQUIRE BEING PROVED, WOULD TAKE PLACE ONLY TOWARDS THE END OF THE CIVIL CONSTRUCTION. IN FACT, THE ENTIRE AMOUNT HAVING BEE N TRANSFERRED TO THE ASSESSEES CONCERN, SHE WAS LEFT WITH NO MONEY TO START THE CO NSTRUCTION, SO THAT IT IS A CLEAR CASE OF DIVERSION OF FUNDS FOR BUSINESS, FROM WHICH THOUGH FUNDS MAY HAVE BEEN, FROM TIME TO TIME, WITHDRAWN OR OTHERWIS E MAY HAVE BEEN UTILIZED FOR CONSTRUCTION PURPOSE. THE CONDITION OF S. 54(2) IS THUS NOT MET. UPON THIS BEING OBSERVED BY THE BENCH, THE LD. AR WOULD PLEAD FOR BEING ALLOWED EXEMPTION U/S. 54 WITH REFERENCE TO THE AMO UNT UTILIZED FOR CONSTRUCTION OF HOUSE UP TO THE DATE OF FILING THE RETURN. TOWAR D THIS, HE WOULD MAKE THE FOLLOWING CLAIMS: (A) WITHDRAWAL OF LOAN AMOUNT UP TO THE FILING OF THE RETURN U/S. 139(1) IS STATED TO BE AT . 11 LACS. (B) COST INFLATION INDEX. IN THIS REGARD, FIRSTLY, THE TIME LIMIT FOR SUCH U TILIZATION COULD ONLY BE BY THE DATE OF FILING THE RETURN OF INCOME, AS EXPLAIN ED BY THE HON'BLE COURT IN 5 ITA NO.1369/MDS/2016 (AY 2010-11) R.JAYABHARATHI V. ITO HUMAYUN SULEMAN MERCHANT V. CCIT [2016] 73 TAXMANN.COM 2 (BOM). THE VERY FACT THAT THE LAW PROVIDES FOR THE DEPOSIT OF THE UN-UTILIZED AMOUNT PRIOR TO THE DATE OF FILING THE RETURN OF INCOME U/S. 139, I MPLIES THAT BOTH THE UTILIZATION AND DEPOSIT CAN ONLY EXTEND TO THE DATE OF FILING T HE RETURN OF INCOME. EVEN IF THEREFORE NOT LIMITED TO THE DATE SPECIFIED U/S. 13 9(1), AS CLEARLY CLARIFIED IN THE LATER LIMB OF THE PROVISION, IT IS ONLY THE BASIS O F SUCH ACTION (I.E., DEPOSIT OF THE UN-UTILIZED AMOUNT) PERFORMED PRIOR TO THE FILING T HE RETURN, THAT COULD FORM THE BASIS OF A RETURN CLAIMING THE EXEMPTION. THAT IS, FORM A VALID BASIS FOR CLAIMING THE DEDUCTION PER THE RETURN. SURELY, THE LAW DOES NOT PROVIDE ANY CLAIM ON THE BASIS OF A PRESUMED STATE OF AFFAIRS, WHICH WOULD B E HYPOTHETICAL. THAT WOULD, APART FROM DEFEATING THE PURPOSE OF THE DEPOSIT, AM OUNT TO BASING THE DEDUCTION ON FUTURE ACTIONS, WHICH (I.E., FUTURE) BEING UNCER TAIN, MAY OR MAY NOT OBTAIN, I.E., PROVIDES NO DEFINITE BASIS, BUT IS PRESUMPTUO US. AND, MOST IMPORTANTLY, IS DE HORS THE CLEAR LANGUAGE OF THE PROVISION, WHICH PROVIDE S FOR DEPOSIT BEFORE FURNISHING THE RETURN. COMING TO THE SPECIFICS OF THE CLAIMS MADE, I FIND THE SAME AS VALID IN PRINCIPLE. THE ASSESSEE HAS, ALONG WITH HER HUSBAND , TAKEN A LOAN OF .100 LACS FROM TAMIL NADU MERCANTILE BANK. TO THE EXTENT, THE REFORE, THIS LOAN IS SHOWN AS UTILIZED FOR THE CONSTRUCTION OF THE NEW HOUSE, COMPLETED WITHIN THREE YEARS OF THE DATE OF TRANSFER, I.E., BY THE DATE OF FILIN G OF THE RETURN OF INCOME (07.10.2010), THE SAME SHALL BE ELIGIBLE FOR DEDUCT ION U/S. 54. TWO, THE BENEFIT OF COST INFLATION INDEX, AS PROVIDED IN LAW (S. 48) , WOULD, SUBJECT TO VERIFICATION BY THE AO, DEFINITELY INURE TO THE ASSESSEE, WHO SH ALL OF COURSE SUPPLY THE RELEVANT FACTS AND FIGURES IN SUPPORT OF HER CASE. BEFORE PARTING, I MAY ADD THAT THE IMPUGNED ORDER REFERS TO TWO SECTIONS, I.E., S. 54 & S. 54F. CLEARLY, ONLY ONE OF THEM WOULD BE APPLICABLE IN THE FACTS OF THE CAS E OR, IN ANY CASE, MORE BENEFICIAL TO THE ASSESSEE, AND WHICH SHALL THEREFO RE HOLD, WITH THE AO ISSUING A CLEAR FINDING IN THE MATTER. I DECIDE ACCORDINGLY. 6 ITA NO.1369/MDS/2016 (AY 2010-11) R.JAYABHARATHI V. ITO 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MARCH 31, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED, MARCH 31, 2017. EDN 1 + )#.23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 3%67 )#.# /DR 6. 78$ 9 /GF