ITO, Coimbatore V. K.S.Narasimhan, HUF, Coimbatore

ITA 166/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0999 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Bonafide belief; Capital Gains
• Section: 54F; 54EC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER) .. I.T.A. NO. 166/MDS/2010 ASSESSMENT YEAR : 2004-05 THE INCOME TAX OFFICER, WARD III(1), 63, RACE COURSE ROAD, COIMBATORE 18. (APPELLANT) V. SHRI K.S. NARASIMHAN, HUF, NO. 9/27, GREY TOWN, COIMBATORE 641 018. PAN : AABHK3988E (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI S. SRI DHAR O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANCE IS THAT CIT(APPEALS) ALLOWED DEDUCTION UNDER SECTION 54F OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) TO THE ASS ESSEE. AS PER THE REVENUE, ASSESSEE DID NOT UTILIZE PROCEEDS OF THE T RANSACTION BEFORE THE DUE DATE OF FILING OF THE RETURN AND ALSO HAD N OT DEPOSITED THE SAME IN ANY ACCOUNT UNDER CAPITAL GAINS ACCOUNT SC HEME. I.T.A. NO. 166/MDS/10 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD RETURN ED IN HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR, LONG TERM CAPITAL GAIN AT ` 56,33,678/-. IN A RE-ASSESSMENT PROCEEDING INITIAT ED UNDER SECTION 147 OF THE ACT, ASSESSING OFFICER SUBSTITUTED THE F AIR MARKET VALUE AS ON 1.4.1981 WITH ` 50,000/- PER ACRE, AGAINST ` 2.75 LAKHS PER ACRE SHOWN BY THE ASSESSEE, WHICH RESULTED IN SUCH LONG TERM CAPITAL GAINS GETTING ENHANCED TO ` 82,69,305/-. IT SEEMS THERE WAS NO OBJECTION FROM THE ASSESSEE ON THIS ASPECT. ASSESS EE HAD CLAIMED DEDUCTION UNDER SECTION 54EC OF THE ACT FOR A SUM O F ` 57 LAKHS INVESTED IN BONDS OF NABARD AND THIS WAS ACCEPTED B Y THE A.O. HOWEVER, ASSESSEE ALSO CLAIMED, IN ADDITION TO THE ABOVE, DEDUCTION UNDER SECTION 54F FOR A SUM OF ` 26 LAKHS INVESTED BY HIM IN A RESIDENTIAL HOUSE FOR WHICH CONSTRUCTION WAS COMMEN CED IN MARCH, 2004 AND COMPLETED IN MAY, 2005. HOWEVER, THE A.O. ALLOWED ONLY A SUM OF ` 3,96,000/- AS DEDUCTION UNDER SECTION 54F OF THE A CT OUT OF ` 26 LAKHS CLAIMED BY THE ASSESSEE SINCE THIS WAS TH E AMOUNT SPENT FOR CONSTRUCTION UPTO THE DATE OF FILING OF THE RET URN VIZ. 19.4.2004. A.O. ALSO NOTED THAT ASSESSEE DID NOT DEPOSIT THE U NSPENT BALANCE IN ANY ACCOUNT FALLING IN THE CAPITAL GAINS ACCOUNT S CHEME WHICH WAS A STATUTORY REQUIREMENT UNDER SECTION 54F OF THE AC T. I.T.A. NO. 166/MDS/10 3 3. AGGRIEVED THE ASSESSEE MOVED THE CIT(APPEALS). CONTENTION OF THE ASSESSEE WAS THAT HE BELIEVED THE DEPOSIT IN NABARD OF ` 57 LAKHS WOULD COVER THE REQUIREMENT OF GETTING FULL D EDUCTION FOR THE CAPITAL GAINS AND HENCE CLAIM OF SECTION 54F WAS NO T NECESSARY. ACCORDING TO HIM, REOPENING OF ASSESSMENT, PURSUANT TO WHICH CAPITAL GAINS WAS RECOMPUTED AND ENHANCED, COULD NOT HAVE B EEN VISUALIZED AND HENCE HE COULD NOT DEPOSIT THE SUM IN AN ACCOUN T FALLING IN CAPITAL GAINS ACCOUNT SCHEME. HOWEVER, THE ASSES SEE POINTED OUT THAT HE HAD OPENED A SAVINGS BANK ACCOUNT WITH INDI AN OVERSEAS BANK AND HAD DEPOSITED ENTIRE SALE PROCEEDS IN THIS ACCOUNT. ASSESSEE ALSO FILED COPY OF SUCH SAVINGS BANK ACCOU NT PASS-BOOK. THOUGH THE SAID ACCOUNT WAS NOT OF THE CATEGORY CA PITAL GAINS ACCOUNT SCHEME, ASSESSEE SUBMITTED THAT IT WAS AT PART WITH AN ACCOUNT OPENED UNDER CAPITAL GAINS ACCOUNT SCHEME . AS PER THE ASSESSEE, IT HAD NOT VIOLATED THE MANDATE OF THE SC HEME WHICH WAS TO ENSURE THAT FUNDS DEPOSITED THEREIN WAS UTILIZED ONLY FOR THE PURPOSE OF CONSTRUCTION OR PURCHASE OF RESIDENTIAL HOUSE. ACCORDING TO ASSESSEE, IT HAD CONSTRUCTED A NEW RESIDENTIAL H OUSE WITHIN THE TIME FRAME OF THREE YEARS AND THEREFORE, DEDUCTION UNDER SECTION 54F WHICH WAS A BENEFICIAL PROVISION OUGHT TO HAVE BEEN GRANTED TO HIM. I.T.A. NO. 166/MDS/10 4 THOUGH THE A.O. REFUSED ACCEDE TO THESE ARGUMENTS, LD. CIT(APPEALS) ON APPEAL OF THE ASSESSEE WAS APPRECIA TIVE. ACCORDING TO HIM, INTENTION OF INTRODUCING SECTION 54F IN THE ACT WAS TO ENCOURAGE CONSTRUCTION OF RESIDENTIAL ACCOMMODATION AND CLAUSE (4) THEREOF STIPULATING DEPOSIT OF THE UNUTILIZED AMOUN T IN AN ACCOUNT OPENED UNDER A SCHEME CALLED CAPITAL GAINS ACCOUNT SCHEME WAS ONLY TO PREVENT MISUSE OF THE PROVISION. AS PER TH E LD. CIT(APPEALS), ASSESSEE HAD DEPOSITED THE AMOUNT THOUGH IN A DIFFE RENT ACCOUNT AND DRAWINGS MADE THEREFROM WAS ONLY FOR THE PURPOS E OF CONSTRUCTION OF A HOUSE THAT TOO WITHIN THE PERIOD ALLOWED UNDER SECTION 54F OF THE ACT. HENCE CIT(APPEALS) HELD TH AT THE ASSESSEE WAS ENTITLED FOR THE CLAIM OF DEDUCTION UNDER SECTI ON 54F OF THE ACT. 4. NOW BEFORE US, THE LEARNED D.R. STRONGLY ASSAILI NG THE ORDER OF THE CIT(APPEALS), SUBMITTED THAT IF THE INTERPRETAT ION GIVEN BY THE CIT(APPEALS) WAS ACCEPTED, IT WOULD RENDER SECTION 54F UNWORKABLE. ACCORDING TO LEARNED D.R., A CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF MRS. C.M. VIJAYAKUMARI V. ACIT IN I.T.A. NO . 1600/MDS/1999 BY ITS ORDER DATED 15 TH DECEMBER, 2006 HAD HELD THAT COMPLIANCE WITH THE PROVISION REGARDING DEPOSIT OF UNUTILIZED AMOUN T IN A SPECIFIED I.T.A. NO. 166/MDS/10 5 ACCOUNT WAS MANDATORY AND UNLESS THIS WAS DONE, ASS ESSEE COULD NOT CLAIM DEDUCTION UNDER SECTION 54F OF THE ACT. 5. PER CONTRA, THE LEARNED A.R. SUPPORTING THE ORDE R OF THE CIT(APPEALS) SUBMITTED THAT ANOTHER CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF SHRI MADHUVAN PRASAD V. ITO IN I.T.A. NO. 2485/MDS/2004 BY ITS ORDER DATED 17 TH OCTOBER, 2005, HAD HELD THAT JUST BECAUSE AN ASSESSEE FAILED TO MAKE INVESTMENT IN CAPITAL GAINS ACCOUNT SCHEME AS REQUIRED UNDER SECTION 54F OF THE ACT, THE DEDUCTION STIPULATED THEREUNDER COULD NOT BE DENIED , WHERE ASSESSEE HAD SATISFIED THE ULTIMATE OBJECT OF THE SECTION BY INVESTING IN A RESIDENTIAL HOUSE WITHIN THE TIME FRAME ALLOWED. 6. IN REPLY, THE LEARNED D.R. SUBMITTED THAT DECISI ON RELIED ON BY THE LEARNED A.R. IN THE CASE OF SHRI MADHUVAN PRASA D (SUPRA) WAS EARLIER TO THE DECISION RENDERED IN THE CASE OF MRS . C.M. VIJAYAKUMARI (SUPRA) RELIED ON BY HIM. THEREFORE, ACCORDING TO HIM, IN VIEW OF THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF BHIKA RAM & OTHERS V. UNION OF INDIA REPORTED IN 238 ITR 113, T HE LATTER DECISION HAS TO BE FOLLOWED BY THIS TRIBUNAL, SINCE THERE WE RE TWO CONTRADICTORY VIEWS OF THE CO-ORDINATE BENCH. I.T.A. NO. 166/MDS/10 6 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THERE IS NO DISPUTE AS TO FACTS. ASSESSEE HAD CONS TRUCTED A HOUSE DURING THE THREE YEARS PERIOD STIPULATED UNDER SECT ION 54F OF THE ACT. AT THE SAME TIME, ASSESSEE HAD FAILED TO DEPOSIT TH E SUMS NOT UTILIZED IN SUCH CONSTRUCTION UPTO THE DATE OF FILI NG THE RETURN, IN THE STIPULATED ACCOUNT UNDER CAPITAL GAINS ACCOUNT SCHE ME. NEVERTHELESS IT IS ALSO A FACT THAT ASSESSEE HAD DE POSITED THE CONSIDERATION RECEIVED, IN A SAVINGS BANK ACCOUNT H ELD WITH INDIAN OVERSEAS BANK. ACCORDING TO ASSESSEE, ALL THE DIST INCTIVE FEATURES OF AN ACCOUNT OPENED UNDER CAPITAL GAINS ACCOUNT SCHEM E, STOOD SATISFIED BY IT THOUGH ITS ACCOUNT WAS AN ORDINARY SAVINGS BANK. NO DOUBT AN ACCOUNT OPENED UNDER THE CAPITAL GAINS ACC OUNT SCHEME, HAS CERTAIN RESTRICTIVE FEATURES, SETTING IT APART FROM AN ORDINARY SAVINGS BANK ACCOUNT. HERE THE ASSESSEE HAD KEPT T HE MONEY IN A SAVINGS BANK ACCOUNT ON A BONAFIDE BELIEF THAT ITS 54EC INVESTMENT WOULD COVER THE CAPITAL GAINS LIABILITY AND THERE W AS NO FURTHER NECESSITY TO OPEN A DISTINCT ACCOUNT UNDER THE CAP ITAL GAINS ACCOUNT SCHEME. NEVERTHELESS IT HAD DRAWN MONEY FROM SUCH SAVINGS BANK ACCOUNT ONLY FOR CONSTRUCTION OF RESIDENTIAL HOUSE AND THIS HAS NOT BEEN REBUTTED BY THE REVENUE. HENCE THE RESTRICTIV E FEATURES OF AN I.T.A. NO. 166/MDS/10 7 ACCOUNT UNDER CAPITAL GAINS ACCOUNT SCHEME, WAS S ATISFIED BY THE ASSESSEE, THOUGH THE AMOUNTS WERE HELD BY IT IN AN ORDINARY S.B. ACCOUNT. LD. CIT(APPEALS) AFTER ELABORATING ON THE INTENTION OF THE LEGISLATURE IN INTRODUCING SECTION 54F IN THE ACT, WAS OF THE OPINION THAT JUST BECAUSE ASSESSEE HAD FAILED TO DEPOSIT TH E UNUTILIZED SUMS IN THE SPECIFIED ACCOUNT, HE COULD NOT BE DENIED DE DUCTION UNDER SECTION 54F OF THE ACT IF OTHER ASPECTS WERE SATISF IED. NO DOUBT, LEARNED D.R. STRONGLY RELIED ON THE DECISION OF THI S TRIBUNAL IN THE CASE OF MRS. C.M. VIJAYAKUMARI (SUPRA) WHERE IT WAS HELD AT PARA 4 AS UNDER:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. SECTION 54F IS A BE NEFICIAL PROVISION WHEREIN THE CAPITAL GAIN ON TRANSFER OF C APITAL ASSETS ARE NOT TO BE CHARGED IN CASE OF INVESTMENT IN THE RESIDENTIAL HOUSE. IT IS AN ADMITTED FACT THAT THE ASSESSEE HA S NOT COMPLIED WITH THE CONDITION REGARDING INVESTMENT WITHIN THE DUE DATE OR DEPOSIT THE AMOUNT IN A SPECIFIED ACCOUNT. UNDER T HE CIRCUMSTANCES THE UTILIZATION IS BEYOND THE DUE DATE EVEN THE LAND WAS NOT AT ALL PURCHASED, IN THE ALTERNATIVE, THE DEPOSITS WERE ALSO NOT MADE WITHIN THE SPECIFIED DATE, THE A SSESSEE IS NOT ENTITLED TO THE BENEFIT AS ENVISAGED UNDER SECTION 54F. THEREFORE, WE AGREE WITH THE FINDINGS OF THE LD. CI T(A) AND ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS DISM ISSED. 8. IN OUR OPINION, THIS DECISION MAY NOT BE APPLICA BLE ON FACTS HERE. IN THE SAID CASE, EVEN THE LAND WAS NOT AT A LL PURCHASED BEFORE THE DUE DATE TO FILING OF THE RETURN AND THERE WAS NO UTILIZATION AT ALL. IT I.T.A. NO. 166/MDS/10 8 WAS IN THESE CIRCUMSTANCES, HE TRIBUNAL CAME TO AN OPINION THAT ASSESSEE WAS NOT ENTITLED TO BENEFIT UNDER SECTION 54F OF THE ACT. THERE WAS NO UTILIZATION OF THE SUMS BY THE ASSESSE E THERE NOR ANY INVESTMENT IN RESIDENTIAL HOUSE UPTO THE DUE DATE O F THE RETURN. HERE, ON THE OTHER HAND, ASSESSEE HAD UTILIZED A SUM OF ` 3,96,000/- BEFORE THE DATE OF FILING OF THE RETURN. ASSESSEE FILED H IS RETURN ON 19.4.2004 FOR THE IMPUGNED ASSESSMENT YEAR AND THE DUE DATE F OR FILING RETURN WAS STILL FAR AWAY. THUS THE INTENTION OF THE ASSE SSEE TO UTILIZE THE SUM FOR THE PURPOSE OF CONSTRUCTION OF THE RESIDENT IAL HOUSE COULD NEVER BE DOUBTED. MAY BE THE ASSESSEE FAILED TO KE EP THE SUMS NOT UTILIZED, IN AN ACCOUNT OPENED UNDER CAPITAL GAINS ACCOUNT SCHEME BUT, AS ALREADY MENTIONED BY US, THE REQUIREMENT OF SUCH A DEPOSIT COULD NOT HAVE BEEN ENVISAGED BY IT SINCE ENHANCEME NT IN CAPITAL GAINS AROSE OUT OF A RE-ASSESSMENT PROCEEDING. DES PITE THIS, ASSESSEE HAD DEPOSITED SUCH SUMS IN A SAVINGS BANK ACCOUNT AND THERE IS NO CASE FOR THE REVENUE THAT ASSESSEE WITH DREW THE SUM FOR ANY OTHER PURPOSE THAN CONSTRUCTION OF A HOUSE. AS SESSEE THOUGH IT HAD DEPOSITED ONLY IN AN ORDINARY SAVINGS BANK ACCO UNT, HAVING MADE WITHDRAWALS THEREFROM ONLY FOR THE PURPOSE OF CONSTRUCTION OF A HOUSE, THERE WAS SUBSTANTIAL COMPLIANCE TO THE PROC EDURES. JUST I.T.A. NO. 166/MDS/10 9 BECAUSE THE ACCOUNT WAS NOT NOMENCLATURED AS AN ACC OUNT UNDER CAPITAL GAINS ACCOUNT SCHEME, ASSESSEE COULD NOT HA VE BEEN DENIED DEDUCTION UNDER SECTION 54F OF THE ACT WHEN HE HAD SATISFIED ALL OTHER CONDITIONS. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT THE CIT(APPEALS) WAS JUSTIFIED IN GIVING THE D EDUCTION TO THE ASSESSEE. NO INTERFERENCE IS CALLED FOR. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH FEBRUARY, 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 25 TH MARCH, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) (4) CIT (5) D.R. (6) GUARD FILE