ITO, CHENNAI V. Mrs. Sujatha Shankar, CHENNAI

ITA 171/CHNY/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4923 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 16-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Valuation report
• Section: 143(3); 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , ' # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 171/MDS/2013 / ASSESSMENT YEAR : 2009-10 INCOME TAX OFFICER, COMPANY WARD VI(1), AAYAKAR BHAVAN, NEW BLOCK, 7TH FLOOR, 121, M.G. ROAD, CHENNAI - 600 034. VS. MRS. SUJATHA SHANKAR, NO. 25 'MAHALAKSHMI' KASTHURI RANGAN ROAD, ALWARPET, CHENNAI - 600 018. [PAN: AASPS 6648A] ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT )*% & / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE & /DATE OF HEARING : 16.01.2017 & /DATE OF PRONOUNCEMENT : 11.04.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE HAS FILED APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI IN ITA NO. 135/CIT( A)-V/2011-12 DATED 31.10.2012 PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT. :-2-: I.T.A. NO. 171/MDS/2013 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2.1 THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO GRANT EXEMPTION U/S. 54 OF THE IT ACT. 2.2 THE LD CIT(A) OUGHT TO HAVE NOTED THAT THE ACT CLEARLY SPECIFIED THAT FOR CLAIMING EXEMPTION U/S. 54, THE ASSESSEE SHOULD HAV E CONSTRUCTED RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FR OM THE DATE OF TRANSFER OF ORIGINAL ASSET WHICH THE ASSESSEE FAILED TO DO SO. 2.3 THE LD. CIT(A) RELIED ON THE DECISION OF HON'BL E MADRAS HIGH COURT IN THE CASE OF SARDARMAL KOTHARI (302 ITR 288) (MAD.), ITA T DECISION IN THE CASE OF MRS. SEETHA SUBRAMANIAN (59 ITD 94) (ITAT), (MAD ) AND V.A. THARABAI (VELLORE)(2012 TAXMAN.COM 276 CHENNAI). 2.4 IT IS SUBMITTED THAT THE RELIED UPON DECISIONS BY THE LD. CIT(A) ARE NOT APPLICABLE TO THE FACTS OF THIS CASE 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS MANAGING DIRECTOR OF M/S. SUJATHA SHANKAR ARCHITECTS AND INTERIOR DESIGN ERS PRIVATE LIMITED AND FILED THE RETURN OF INCOME ON 30.09.2009 WITH TOTAL INCOM E OF RS. 7,47,890/- AND THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE A CT ON 13.09.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOT ICE, LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE DETAILS. THE LD. AO FIND AS PER THE AIR INFORMATION, THE ASSESSEE HAS PURCHASED A PROPERTY FOR RS. 83,50,000/- VIDE REGISTERED DOCUMENT NO. 2355/2008. THE LD. AR EXPL AINED THE SOURCE FOR :-3-: I.T.A. NO. 171/MDS/2013 PURCHASE BEING THE PAYMENTS OF RS. 13,75,000/- FROM THE IOB BANK AND RS. 69,75,000/- FROM CAPITAL GAINS ACCOUNT SCHEME AND P RODUCED THE PROOFS BEFORE ASSESSING OFFICER, FURTHER IT WAS EXPLAINED THAT TH E ASSESSEE AS CO-OWNER HAS SOLD THE PROPERTY ALONG WITH OTHERS ON 02.11.2005. THE LD AO ON APPLICATION OF PROVISIONS OF SECTION 54 OF THE ACT IS OF THE VIEW THAT THE ASSESSEE HAS NOT CONSTRUCTED THE RESIDENTIAL PROPERTY WITHIN A PERIO D OF THREE YEARS HENCE, EXEMPTION SHALL BE WITHDRAWN. THE LD. AR EXPLAINED THAT THE ASSESSEE HAS SOLD THE JOINT PROPERTY ON 02.11.2005 AND WORKED OUT LON G TERM CAPITAL GAINS OF RS. 65,82,000/- AND THE SAID AMOUNT WAS DEPOSITED IN CA PITAL GAINS ACCOUNT SCHEME WITH IOB BANK ON 02.02.2006 AND CLAIMED EXEMPTION I N ASSESSMENT YEAR 2006- 07 AND PRODUCED VALUATION REPORT IN RESPECT OF THE PROPERTY ESTIMATING VALUE AS ON 01.04.1981. THE ASSESSEE HAS ENTERED INTO AN UN DERSTANDING TO PURCHASE THE PROPERTY AT COIMBATORE ON 03.03.2006 WITH MR. LAKSH MINARAYANAN, FOR A CONSIDERATION OF RS. 70 LAKHS AND MADE PART PAYMENT OF RS. 60 LAKHS FROM CAPITAL GAINS ACCOUNT SCHEME ON 07.03.2006 AND SINCE THE TR ANSACTION HAS NOT MATERIALISE, THE ASSESSEE HAS RE-DEPOSITED THE AMOU NT IN CAPITAL GAINS ACCOUNT SCHEME ON 31.07.2006. SUBSEQUENTLY, THE ASSESSEE N EGOTIATED TO PURCHASE THE RESIDENTIAL PROPERTY AND PAID TOKEN ADVANCEMENT OF RS 25,000/- TO THE SELLER ON 01.10.2007. BUT, DUE TO LEGAL CLEARANCES AND LAND PATTA ISSUES THE LEGAL OWNERSHIP FINALLY TRANSFERRED IN THE SELLER'S NAME AND THE LEGAL HEIR CERTIFICATE WAS OBTAINED IN THE NAME OF SELLER ON 04.12.2007 AN D NEW PATTA WAS OBTAINED ON 28.01.2008. THE DEMOLITION OF THE EXISTING RESI DENTIAL BUILDING WAS SANCTIONED ON 19.06.2008. THE PROPOSED BUILDING SA NCTION PLAN WAS PLACED WITH :-4-: I.T.A. NO. 171/MDS/2013 CMDA FOR CLEARANCE AND TO COMPLY THE RULES AND THE APPROVED PLAN WAS RECEIVED BY ASSESSEE ON 01.06.2009. THE ASSESSEE HAS INVEST ED AN AMOUNT OF RS. 83,50,000/- IN PURCHASE OF PROPERTY AND CONSTRUCT R ESIDENTIAL HOUSE BY REGISTERED SALE DEED ON 11.09.2008 WHICH IS MORE TH AN SALE CONSIDERATION OF RS. 65,82,000/- AND THE PRIMARY CONSTRUCTION WORK WERE ALREADY COMPLETED. THE LD. AO IS OF THE OPINION, THAT THE ASSESSEE GOT THE SAN CTIONED APPROVED PLAN ONLY ON 11.06.2009, THEREFORE, ASSESSEE HAS NOT CONSTRUCTED THE PROPERTY WITHIN THE PERIOD OF 3 YEARS FROM DATE OF TRANSFER AND THEREFO RE CLAIM OF EXEMPTION U/S. 54 OF THE ACT IN THE ASSESSMENT YEAR 2006-07 RS. 65,82 ,000/- IS WITHDRAWN AND ADDED TO THE RETURNED INCOME FILED FOR THE ASSESSME NT YEAR 2010-11 AND ASSESSED TOTAL INCOME OF RS. 73,29,890/- AND PASSED ORDER U/S. 143(3) OF THE ACT DATED 02.12.2011. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS OF THE ASSESSMENT PROCEEDINGS. THE LD. CIT(A) CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER, WRITTEN SUBMISSI ONS AND PERUSED THE GROUNDS ON WITHDRAWAL OF EXEMPTION OF ASSESSMENT YEAR 2006- 07 AND DEALT AT PAGE 4 TO 7 OF THE ORDER, WHERE THE ASSESSEE HAS FILED THE CHRO NOLOGICAL EVENTS OF PURCHASE AND SALE OF THE PROPERTY FURTHER THE UN-DIVIDEND SH ARE OF THE LAND WAS PURCHASED FOR A CONSIDERATION OF RS. 83,50,000/- AND SOURCE D ATA/PLAN OBTAINED FROM THE CMDA AND FURTHER SUPPORTED WITH LEGAL DECISIONS. THE LD. CIT(A) CONSIDERED THE JUDICIAL DECISIONS AT PAGES 7 TO 12 AND AT PARA 5.3 OF THE ORDER AND OBSERVED :-5-: I.T.A. NO. 171/MDS/2013 THAT THE ASSESSEE HAS COMPLIED THE CONDITIONS OF CO NSTRUCTION OF THE PROPERTY AND INVESTMENT IN THE RESIDENTIAL PROPERTY ON PURCHASIN G UN-DIVIDEND SHARE ON LAND ON 11.09.2008 AND FURTHER DIRECTED THE ASSESSING OF FICER TO ALLOW THE EXEMPTION DEALT AT PAGE 12 PARA 5.4 WHICH READ AS UNDER: '5.4 IN THE CASE OF THE PRESENT APPELLANT, UNDER A PPEAL, ALSO THE APPELLANT HAD SOLD THE PROPERTY ON 02. 11. 2005 RES ULTING IN CAPITAL GAINS OF RS. 65,82,000/- AND THE SAME WAS DEPOSITED- IN T HE CAPITAL GAINS DEPOSIT ACCOUNT ON 02. 02. 2006 OUT OF WHICH A SUM OF RS. 60 LAKHS, VIDE CHEQUES DATED 7/3/2006 FROM APPELLANT'S CAPITAL GAI NS DEPOSIT ACCOUNT, WAS PAID AS PER UNDERSTANDING PURCHASE OF PROPERTY SITUATED AT FLAT NUMBER F1, IN THE BUILDING VILVAM RESIDENCY, WEST C LUB ROAD DE- SA-BA COLONY, COIMBATORE-18 FROM MRS LAKSHMINARAYANAN FOR A CONSIDERATION OF RS. 70 LAKHS. THE SAID TRANSACTION DID NOT MATURE W AS RETURNED TO THE APPELLANT. THEREAFTER THE APPELLANT PURCHASED UNDIV IDED SHARE OF PROPERTY VIDE SALE DEED DATED 15. 09. 2008 FOR A CONSIDERATI ON OF RS. 83, 50, 000/ - AND THE PAYMENT WAS MADE BY CHEQUES DATED 11.09.200 8. THEREAFTER, AS IS CLEAR FROM THE FACTS OF THE CASE DISCUSSED IN TH E SUBMISSIONS OF THE APPELLANT AS ABOVE, THERE WERE CERTAIN LEGAL FORMAL ITIES TO BE COMPLETED BEFORE THE .CONSTRUCTION ON THE SAID PROPERTY COULD BE STARTED AFTER DEMOLITION OF THE EXISTING STRUCTURE THEREON. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEES HAVE INVESTED THE ENTIRE NE T CONSIDERATION OF SALE OF CAPITAL ASSET IN THE LAND ITSELF AND SUBSEQUENTL Y, AS PER THAT IT IS PROVIDED BY THE APPELLANT, THE APPELLANT HAS INVEST ED LARGE SUMS OF MONEY IN THE CONSTRUCTION OF THE HOUSE, THE CONSTRUCTION OF WHICH HAS BEEN STATED TO BE ALMOST COMPLETE IN DECEMBER 2011 EXCEPT FOR T HE FINISHING BANK CARPENTRY, WATERPROOFING AND EXTERIOR PAVING. HOWEV ER; THE APPELLANT HAS INVESTED MORE THAN THE NET CONSIDERATION OF CAPITAL GAINS IN THE PURCHASE OF THE LAND ON WHICH CONSTRUCTION OF HOUSE WAS UNDE RTAKEN. :-6-: I.T.A. NO. 171/MDS/2013 I FIND THE RATIO OF THE ABOVE DISCUSSED DECISIONS TO BE APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE AND HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE APPELLAN T IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54 OF THE ACT. THE AO, THER EFORE, IS DIRECTED TO GRANT SAID EXEMPTION TO THE APPELLANT. THE APPEAL O F THE APPELLANT IS THEREFORE ALLOWED. ' 5. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS F ILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. DR ARGUED THAT THE AS SESSEE HAS NOT COMPLIED THE CONDITIONS REQUIRED U/S. 54 OF THE ACT AND CIT(A) H AS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION IRRESPECTI VE OF FACT THAT THE ASSESSEE HAS NOT CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN THE PE RIOD. CONTRA, THE LD. AR RELIED ON THE ORDERS OF THE CIT(A) AND JUDICIAL DECISIONS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. DR CONTENTION THAT THE CONDITION OF SECTION 54 OF THE ACT ARE NOT COMPLIED WHEREAS, THE LD. AR SUBSTANTIA TED WITH DETAILED SUBMISSIONS AND LEGAL DECISIONS AND COMPLIED THE PR OVISIONS OF THE ACT. WE FIND THE ASSESSING OFFICER HAS DEALT ONLY ON THE ISSUE O F SANCTION OF PLAN, WHEREAS, THE ASSESSEE HAS PURCHASED THE PROPERTY AND MADE AP PLICATION FOR DEMOLISHING AND OBTAINING PERMISSION FROM CMDA WHICH HAS BEEN O VER LOOKED BY THE ASSESSING OFFICER AND EMPHASIZED ON THE COMPLETION OF CONSTRUCTION OF THE PROPERTY. WE FIND THE PROVISIONS OF SECTION 54 OF T HE ACT ARE BENEFICIAL PROVISIONS AND HAVE TO BE CONSTRUED LIBERALLY AND THE ASSESSEE HAS COMPLIED BASIC CONDITIONS OF CONSTRUCTION OF RESIDENTIAL PROPERTY. CONSIDERING THE APPARENT :-7-: I.T.A. NO. 171/MDS/2013 FACTS, WE ARE OF THE OPINION THAT THE ASSESSEE HAS MADE SUBSTANTIAL INVESTMENT IN PURCHASE OF UN-DIVIDEND SHARE OF LAW FOR CONSTRUCTI ON OF PROPERTY BEING MORE THAN EXEMPTION CLAIMED AND THE LD. CIT(A) DEALT EXH AUSTIVELY ON THE FACTS AND PROVISIONS OF SECTION 54 OF THE ACT AND VIS-AS-VIS EXPLANATIONS OF THE ASSESSEE AND ALLOWED THE APPEAL. ACCORDINGLY, WE ARE NOT IN CLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHELD THE ORDER OF CIT(A) AND DISMISS THE GROUND OF THE REVENUE. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 11TH DAY OF APRIL, 2017 AT CHENNAI. SD/ - ( . ) ( A. MOHAN ALANKAMONY ) # / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) ) # /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 11TH APRIL, 2017 JPV & )'23 43 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 )'' /DR 6. 9 /GF