Anu Kohli , Hyderabad V. Income Tax Officer, Ward-12(2), Hyderabad

ITA 1477/Hyd/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7815 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 20-01-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 27-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: SATYA
• Keywords: Principle of natural justice; Cost of acquisition; Set aside
• Section: 54; 143(3); 54F; 250; 251; 139(1); 139(4)

Judgement Text

ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.1477/HYD/2019 ASSESSMENT YEAR: 2016-17 SMT. ANU KOHLI HYDERABAD PAN:AQCPK1718M VS. INCOME TAX OFFICER WARD 12(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI D.V.ANJANEYULU & SATYA DINAKAR REVENUE BY : SRI KIRAN KATTA, DR DATE OF HEARING: 20/01/2020 DATE OF PRONOUNCEMENT: 23/01/2020 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2016-17 AGAIN ST THE ORDER OF THE CIT (A)-1, HYDERABAD, DATED 28.08. 2019. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, FILED HER RETURN OF INCOME FOR THE A.Y 2016-17 ON 20.07.2016 DECLARING INCOME OF RS.5,97,880/- FROM S ALARY AND OTHER SOURCES. THE CASE WAS SELECTED FOR THE LIMITE D SCRUTINY UNDER CASS TO VERIFY WHETHER DEDUCTION FROM CAPITA L GAINS HAS BEEN CLAIMED CORRECTLY. DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO CALLED FO R THE RELEVANT INFORMATION. THE ASSESSEE FILED THE SALE DEED OF TH E PROPERTY H-22, ADMEASURING 311 SQ. YARDS AT KAILASH COLONY, NEW DE LHI ACCORDING TO WHICH THE PROPERTY WAS ORIGINALLY PURC HASED BY LATE ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 2 OF 6 SRI BODH RAJ ABROL ON 4.6.1959 FROM ONE SHRI DIWAN KISHAN CHAND AND SUBSEQUENTLY HIS LEGAL HEIRS GOT IT ON SU CCESSION. IT WAS OBSERVED THAT THE ASSESSEE, SMT. ANU KOHLI, SUC CEEDED TO THIS PROPERTY ALONG WITH HER BROTHER SRI SUSHIL KUMAR AB ROL AND SISTER SMT. GEETA LUTHRA ON THE DEATH OF HER MOTHER SMT. P RABHA ABROL ON 29.07.2011 AS ONE OF THE LEGAL HEIRS AND THAT SH E GOT THE OWNERSHIP OF 1/3 RD IN THE PROPERTY. THE AO OBSERVED THAT THE ASSESSEE HAS GOT THE PROPERTY UNDER SUCCESSION ONLY FROM 27.09.2011 I.E AFTER THE DEATH OF HER MOTHER. THE A O OBSERVED THAT THE ASSESSEE HAS GIVEN HER SHARE OF THE PROPER TY TO THE DEVELOPER AND GOT HER SHARE IN THE NEW BUILDING WHI CH HAS BEEN SOLD FOR AN AMOUNT OF RS.2.25 CRORES AND HAS CLAIME D DEDUCTION THEREOF U/S 54F OF THE ACT ON INVESTMENT IN THE NE W RESIDENTIAL BUILDING NAMED ANTHEM VISTAS AT DEVARYAMJAL VILLA GE, SHAMIRPET MANDAL, R.R. DISTRICT FOR A CONSIDERATION OF RS.1,20,00,000/- ON 25.02.2016 AND THAT SHE CLAIMED TO HAVE SPENT FURTHER SUM OF RS.73,05,619/- TOWARDS ITS IMP ROVEMENT. THE AO OBSERVED THAT SINCE THE ASSESSEE HAS INCURRE D CERTAIN EXPENDITURE AFTER 31.07.2016 I.E. AFTER THE DUE DAT E OF FILING THE RETURN OF INCOME U/S 139(1) OF THE I.T. ACT, HE RES TRICTED THE CLAIM OF DEDUCTION U/S 54F AND BROUGHT THE INCOME FROM LO NG TERM CAPITAL GAIN AT RS.86,05,120/- TO TAX. AGGRIEVED, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO OBSERVED THAT THE ASSESSEE HAS BECOME THE OWNER OF THE PROPERTY AS PE R PARTITION DEED DATED 13.0-4.2014 AND THEREFORE, THE CAPITAL G AIN THAT HAS ARISEN TO THE ASSESSEE IS SHORT TERM CAPITAL GAIN A ND THERE IS NO ALLOWABILITY OF EXEMPTION U/S 54. ACCORDINGLY, AN E NHANCEMENT NOTICE WAS GIVEN TO THE ASSESSEE. THE ASSESSEE EXPL AINED THAT THE ASSESSEE HAS BECOME THE ABSOLUTE OWNER OF HER SHARE OF THE PROPERTY THROUGH SUCCESSION ON THE DEATH OF THEIR M OTHER AND THEREFORE, SHE SHOULD BE HELD TO BE OWNING THE PROP ERTY THROUGH ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 3 OF 6 ITS PREVIOUS OWNERS AND THEREFORE, THE GAIN DERIVED BY THE ASSESSEE ON PARTING WITH HER SHARE OF THE PROPERTY IS LONG TERM CAPITAL GAIN AND NOT SHORT TERM CAPITAL GAIN AS OBS ERVED BY THE CIT (A). SHE ALSO EXPLAINED THAT IN VIEW OF THE PRO PERTY TO BE RECEIVED UNDER THE DEVELOPMENT AGREEMENT, THE ASSES SEE HAS RECEIVED THE SALE CONSIDERATION FROM THE DEVELOPER AND THE SAME HAS BEEN INVESTED IN A RESIDENTIAL PROPERTY AT HYDE RABAD AND THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U /S 54F OF THE ACT. THE CIT (A) HOWEVER, HELD THAT THE GAIN RECEIVED BY THE ASSESSEE IS SHORT TERM CAPITAL GAIN AND THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 54F. AGGRIEVED, THE ASSESSEE IS I N SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS O F APPEAL: ANNEXURE TO FORM NO. 36 IN THE MATTER OF SMT ANU KOHLI AGAINST THE ORDER U/S 250 OF THE I T ACT PASS ED BY CIT(A) - 1 IN APPEAL NO. 10235/2018-19/ITO 12(2)/CIT(A)1/HYD/2019-20 DATED 28/08/2019 RECEIVED ON 16/09/2019 - AY 2016-17 - REG. 1. THE ORDER OF LD. CIT(A) BY ISSUING ENHANCEMENT NOTICE U/S 251 (2) TREATING LONG TERM CAPITAL GAIN AS SHORT TERM CAPITAL GAIN AND DISALLOWING CLAIM U/S 5 4 & CONFIRMING AO'S ORDER WITHOUT ADJUDICATING THE LEGA L ISSUES RAISED IS ERRONEOUS IN LAW, CONTRARY TO FACT S, PROBABILITIES OF THE CASE AND AGAINST THE PRINCIPLE S OF EQUITY AND NATURAL JUSTICE. 2. THE LD. CIT(A) ERRED IN LAW BY NOT APPRECIATING IN PROPER PERSPECTIVE THE FACT THAT APPELLANT BECAME T HE ABSOLUTE OWNER OF THE PROPERTY SOLD ON 05/11/2015 VIDE THE REGISTERED WILL OF HER LATE GRANDMOTHER DA TED 12/01/2012 AND NOT VIDE PARTITION DEED DATED 13/04/2014 WHICH HAS ONLY REITERATED THE CONTENTS O F THE WILL AND HENCE THE GAIN ARISEN IS TO BE TAXED A S LONG TERM CAPITAL GAIN AGAINST AS SHORT TERM CAPITAL GAI N AS PROPOSED BY LD. CIT(A) VIDE HER ENHANCEMENT NOTICE U/S 251 (2) DATED 17/07/2019, THUS THE ENHANCEMENT IS NULL AND VOID. 3. LD. CIT(A) FURTHER ERRED IN FACTS IN DIRECTING T HE AO TO DISALLOW THE EXEMPTION U/S 54 BY HOLDING THE GAIN T O BE SHORT TERM IN NATURE WHERE IN FACT THE GAIN IS LONG TERM IN NATURE AND ALL THE EXPENDITURE U/S 54 CLAIMED BY APPELLANT OF RS. 1,88,72,754/- IS TOWARDS PURCHASE COST ALONG WITH REGISTRATION EXPENSES AND OTHER EXPENSES INCURRED FOR MAKING THE DWELLING UNIT HABITABLE WHI CH ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 4 OF 6 ARE DULY SUPPORTED BY NECESSARY DOCUMENTS AND HENCE THE CLAIM U/S 54 IS TO BE ALLOWED. 4. FOR THESE AND OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THE HONORABLE TRIBUNAL TO KINDLY DELETE THE ADDITION MADE BY AO A ND CANCEL THE ENHANCEMENT MADE BY CIT(A). 3. AFTER HEARING BOTH THE PARTIES AT LENGTH AND AFT ER CONSIDERING THE MATERIAL ON RECORD, WE FIND THAT TH E PROPERTY WAS ORIGINALLY PURCHASED BY THE GRANDFATHER OF THE ASSE SSEE SRI BODH RAJ ABROL AND ON HIS DEATH, THE ASSESSEES GRANDMOT HER BECAME THE OWNER OF THE PROPERTY AND THE ASSESSEES GRANDM OTHER, HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. NAAD A BUILDTECH PVT LTD ON 2/1/2012 FOR RECONSTRUCTION AND REDEVELO PMENT OF THE SAID PROPERTY TO BE COMPRISING OF STILT, BASEMENT, GROUND, FIRST, SECOND AND THIRD FLOORS WITH TERRACE. THEREAFTER, O N 12/01/2012, SMT. NIRMALA ABROL EXECUTED A REGISTERE D WILL DEED REGISTERED ON 27/01.2012, BEQUEATHING THE 2 ND FLOOR PORTION OF THE PROPOSED DEVELOPED PROPERTY TO THE ASSESSEE BEFORE US. AFTER THE DEATH OF SMT. NIRMALA ABROL ON 7/6/2012, THE ASSESS EE AND OTHER LEGAL HEIRS EXECUTED THE PARTNERSHIP DEED, DATED 30 /10/2014, RECONFIRMING THE SHARES OF THE PROPERTY DEVOLVING A MONGST THEM. THUS, THE ASSESSEES OWNERSHIP OVER HER SHARE OF TH E PROPERTY SHOULD NOT ONLY BE HELD FROM THE DATE OF DEATH OF H ER GRANDMOTHER ON 7.6.2012, BUT ALSO THROUGH HER GRANDPARENTS SINC E THE DATE OF PURCHASE OF THE PROPERTY. WE FIND THAT THE ASSESSEE S GRANDMOTHER HAS ENTERED INTO THE DEVELOPMENT AGREEM ENT AND THE ASSESSEE WAS GIVEN A SHARE OF THE CONSTRUCTED PROPE RTY, AND THE PARTITION DEED ONLY REAFFIRMS THE ASSESSEES SHARE OF THE PROPERTY BY METES AND BOUNDS. THEREFORE, WE ARE SATISFIED TH AT THE GAIN RECEIVED BY THE ASSESSEE IS LONG TERM CAPITAL GAIN AND NOT SHORT- TERM CAPITAL GAIN AS HELD BY THE CIT (A). ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 5 OF 6 4. WITH REGARD TO THE CLAIM OF EXEMPTION U/S 54 OF THE ACT, WE FIND THAT THOUGH THE ASSESSEE HAS CLAIMED T HE ENTIRE AMOUNT TO HAVE BEEN INVESTED IN THE PROPERTY, THE A O HAS HELD THAT THE ASSESSEE HAS INCURRED SOME OF THE EXPENDIT URE AFTER 31.07.2017 I.E. THE DUE DATE FOR FILING OF THE RETU RN OF INCOME U/S 139(1) OF THE ACT. HOWEVER, WE FIND THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(4) OF THE ACT. THE COORDINATE BENCH OF THE TRIB UNAL AT MUMBAI IN THE CASE OF KISHORE H. GALAIYA VS. ITO RE PORTED IN (2012) 137 ITD 229 HAS HELD THAT THE INVESTMENT OF CAPITAL GAIN WITHIN THREE YEARS OF SALE OF THE PROPERTY ON CONST RUCTION OF NEW RESIDENTIAL HOUSE WAS ELIGIBLE FOR EXEMPTION U/S 54 EVEN THOUGH THE POSSESSION OF THE FLAT WAS TAKEN UP AFTERWORDS AND THAT THE NON-DEPOSIT OF BALANCE AMOUNT IN CAPITAL GAIN ACCOU NT WAS ONLY A TECHNICAL DEFAULT AND ALSO THAT THE DUE DATE OF FIL ING U/S 139(1) HAS TO BE CONSTRUED AS DATE OF FILING RETURNS U/S 1 39(4) OF THE ACT. FURTHER, THE COORDINATE BENCH OF THE TRIBUNAL AT PU NE REPORTED IN (2019) 179 ITD 265 PUNE IN THE CASE OF KAMAL MURLID HAR MOKASHI VS. ITO HAS ALSO CONFIRMED THIS VIEW. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DED UCTION U/S 54F OF THE ACT IN RESPECT OF ALL THE EXPENSES INCURRED BY HER BEFORE THE DATE OF FILING HER RETURN OF INCOME U/S 139(4) OF T HE ACT. SINCE THE ASSESSEE HAS CLAIMED TO HAVE INVESTED THE ENTIRE SU M BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(4) OF THE ACT, FOR THE LIMITED PURPOSE OF VERIFYING THE ABOVE CLAIM, THE I SSUE IS SET ASIDE TO THE FILE OF THE AO. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO POINTED OUT THE INCONSISTENCIES IN ADOPTIN G THE COST OF ACQUISITION BY THE AO AND THE PERIOD OF INDEXATION ADOPTED BY THE AO ONLY FROM FINANCIAL YEAR 2011-12 WHEREAS THE PRO PERTY WAS HELD BY THE GRANDPARENTS OF THE ASSESSEE SINCE 1959 . WE DIRECT ITA NO 1477 OF 2019 ANU KOHLI HYDERABAD. PAGE 6 OF 6 THE AO TO CONSIDER ALL THESE ASPECTS AND RECOMPUTE THE LTCG IN ACCORDANCE WITH LAW. 5. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JANUARY, 2020. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 23 RD JANUARY, 2020. VINODAN/SPS COPY TO: 1 M/S.ANJANEYULU & CO. C.AS, 30 BHAGYALAKSHMI NAGAR , GANDHINAGAR, HYDERABAD 500080 2 ITO WARD 12(2) HYDERABAD 3 CIT (A)-1 HYDERABAD 4 PR. CIT 1, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER