DCIT CIR 3, NAVI MUMBAI V. PRADIP VISHNU SAWANT, THANE

ITA 1752/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0901 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Assessee Lawyers: RAMAKRISHNA R LINGSUR
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3); 54F; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1752/MUM/2017 ASSESSMENT YEAR: 2012 - 13 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 3, ROOM NO. 02, 6 TH FLOOR, ASHAR IT PARK, B - WING, WAGLE INDL. ESTATE, THANE (W) - 400604 VS. SHRI PRADIP VISHNU SAWANT , PLOT NO. 23, NEW MHADA COLONY, VASANT VIHAR, PAWAR NAGAR, THANE (W) - 400610. PAN NO. AGDPS7819J APPELLANT RESPONDENT C.O. NO. 253 /MUM/2018 (ITA NO. 1752 /MUM/2017) ASSESSMENT YEAR: 2012 - 13 SHRI PRADIP VISHNU SAWANT PLOT NO. 23, NEW MHADA COLONY, VASANT VIHAR, PAWAR NAGAR, THANE (W) - 400610. VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 3, ROOM NO. 02, 6 TH FLOOR, ASHAR IT PARK, B - WING, WAGLEINDL. ESTATE, THANE (W) - 400604 PAN NO. AGDPS7819J APPELLANT RESPONDENT REVENUE BY : MR. ABI RAMA KARTIKIYEN , DR ASSESSEE BY : MR. RAMAKRISHNA R. LINGSUR , AR DATE OF HEARING : 23/08 /2018 DATE OF PRONOUNCEMENT : 19/11/2018 ORDER PER N.K. PRADHAN, AM THE APPEAL BY THE REVENUE AND THE CROSS - OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , THANE AND ARISE OUT OF THE ORDER PASSED BY SHRI PRADIP VISHNU ITA NO. 1752/MUM/2017 & C.O. NO. 253/MUM/2018 2 THE ASSESSING OFFICER (AO) U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 1752/MUM/2017 ASSESSMENT YEAR: 2012 - 13 2. THE GROUND OF APPEAL FILED BY THE REVENUE READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO WITHOUT RELYING UPON THE ORDER OF KERALA HIGH COURT IN THE CASE OF CIT V. V.R. DESAI (2011) 197 TAXMAN 52 (KERALA) AS THE ASSESSEE HAS NOT DEPOSITED THE SURPLUS FUND S IN CAPITAL GAIN ACCOUNT SCHEME AS REQUIRED U/S 54F(4) OF I.T. ACT, 1961. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE SOLD A RESIDENTIAL FLAT IN THANE ON 28.07.2011 FOR A TOTAL CONSIDERATION OF RS.1,70,00,000/ - . HE PURCHASED A RESIDENT IAL HOUSE (NEW ASSET) FROM SOHAM ESTATES VIDE ALLOTMENT LETTER DATED 11.07.2011 FOR A TOTAL CONSIDERATION OF RS.95,47,920/ - EXCLUDING APPLICABLE GOVERNMENT CHARGES. THE ASSESSEE PAID THE ENTIRE CONSIDERATION TO THE DEVELOPER/BUILDER OVER A PERIOD OF TIME STARTING FROM 11.07.2011 TILL 13.03.2015. TH E ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2012 - 13 ON 26.12.2012 DECLARING LONG TERM CAPITAL GAINS (LTCG) OF RS.27,51,020/ - . THE RETURN WAS FILED AFTER THE DUE DATE FOR FILING THE RETURN OF INCOME I.E. 31.08.2012. THE ASSESSING OFFI CER (AO) PASSED AN ASSESSMENT ORDER U/S 143(3) ON 18.02.2015 DETERMINING THE LTCG AT RS.1,06,99,181/ - , AFTER ALLOWING INDEXED COST OF ACQUISITION. THE AO DID NOT ALLOW THE CLAIM OF THE ASSESSEE U/S 54 ON THE GROUND THAT (I) RIGHT OF ACQUISITION OF PROPERTY COMES INTO EXISTENCE ONLY AFTER EXECUTION OF REGISTRATION, (II) TRANSFER MEANS SHRI PRADIP VISHNU ITA NO. 1752/MUM/2017 & C.O. NO. 253/MUM/2018 3 GIVING UP THE RIGHT ON AN ASSET WHICH INCLUDES SALE, EXCHANGE, COMPULSORY ACQUISITION UNDER ANY LAW AND SALE IS EFFECTED ONLY WHEN THE TITLE OF ASSET IS TRANSFERRED, SO ALLOTME NT LETTER DOES NOT GIVE THE ASSESSEE A RIGHT TO ACQUIRE AND THEREFORE, REGISTRATION DATE WOULD BE THE APPROPRIATE DATE FOR CONSIDERING DATE OF ACQUISITION OF THE SAID ASSET/PROPERTY/RIGHT AND HENCE THE INVESTMENT IN QUESTION IS NOT MADE WELL WITHIN TIME. WITH THE ABOVE REASONS, THE AO CAME TO A CONCLUSION THAT THE ASSESSEE FAILED TO DEPOSIT HIS SURPLUS FUNDS IN CAPITAL GAINS ACCOUNT SCHEME (CGAS) WITHIN STIPULATED TIME AS REQUIRED U/S 54F(4) AND THEREFORE, HELD THAT THE ASSESSEE WAS LIABLE TO PAY TAX ON L TCG OF RS.1,06,99,181/ - . 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT (I) SINCE THE ASSESSEE HAS PURCHASED A NEW HOUSE WITHIN THE DUE DATE OF FILING THE RETURN OF INCOME, THE QUESTION OF D EPOSITING THE UNSPENT PROCEEDS IN A SEPARATE CAPITAL GAINS ACCOUNT DOES NOT ARISE, (II) THE ASSESSEE HAD PAID SUBSTANTIAL AMOUNT (RS.86,72,462/ - ) TILL 31.03.2014 VIZ. DUE DATE OF FILING RETURN OF INCOME U/S 139(4) OF THE ACT AND WITHIN A PERIOD OF THREE YE ARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE LD. CIT(A) ALSO RELIED ON THE DECISION IN THE CASE OF V.R. DESAI (SUPRA) AND THAKORLAL HARKISHANDAS INTWALA V. ITO 43 SOT 347, WHEREIN IT IS HELD THAT EXEMPTION IN SECTION 54F CAN BE CLAIMED PROVIDED T HE NET SALE CONSIDERATION SHOULD BE DEPOSITED IN CGAS IN BANK OR UTILIZED FOR CONSTRUCTION OF HOUSE BEFORE THE DUE DATE OF FILING OF RETURN. WITH THE ABOVE REASONS THE LD. CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. SHRI PRADIP VISHNU ITA NO. 1752/MUM/2017 & C.O. NO. 253/MUM/2018 4 5. BEFORE US, THE LD. DR SUBMITS THAT THE RIGHT OF ACQUISITION OF PROPERTY COMES INTO EXISTENCE ONLY AFTER EXECUTION OF REGISTRATION AND THEREFORE, THE REGISTRATION DATE IS THE APPROPRIATE DATE FOR EXECUTION OF PROPERTY AND IN THE PRESENT CASE IT IS BEYOND THE DUE DATE OF FILING THE RETUR N OF INCOME. THUS IT IS SUBMITTED BY HIM THAT THE AO HAS RIGHTLY DISALLOWED THE CLAIM MADE BY THE ASSESSEE U/S 54 OF THE ACT. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT IN THE INSTANT CASE THE NEW ASSET WAS PURCHASED ON 11.07.2011 I.E. PRIOR TO THE SALE OF ORIGINAL CAPITAL ASSET ON 28.07.2011 AND THEREFORE, IT DOES NOT REQUIRE UTILIZATION AND DEPOSIT IN SPECIFIED BANK ACCOUNT TO THE EXTENT NOT UTILIZED. IN THIS REGARD, RELIANCE IS PLACED BY HIM ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN HUMAYUN SULEMAN MERCHANT V. CIT (ITA NO. 545 OF 2002 DECIDED ON 18.08.2016). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF HUMAYUN SULEMAN MERCHANT (SUPRA), THE HONBLE BOMBAY HIGH COURT OBSERVED AS UNDER: IT WAS NEXT CONTENDED BY MR. CHATTERJI, LEARNED SENIOR COUNSEL FOR THE APPELLANT THAT THE WORD APPROPRIATION USED IN SECTION 54F(4) OF THE ACT WOULD ALSO APPLY IN THE PRESENT CASE WHERE THE CAPITAL ASSET HAS BEEN SOLD AND SALE PROCEE DS ARE EARMARKED TO BE INVESTED IN CONSTRUCTION OF HOUSE. A PLAIN READING OF SECTION 54F(4) OF THE ACT MILITATES AGAINST IT. AS POINTED OUT BY MR. MALHOTRA, LEARNED COUNSEL APPEARING FOR THE REVENUE, SECTION 54F(4) OF THE ACT DEALS WITH TWO CLASSES OF CASES, ONE WHERE PURCHASE OF NEW RESIDENTIAL HOUSE IS WITHIN A PERIOD OF ONE YEAR BEFORE THE DATE ON WHICH CAPITAL ASSET IS SOLD BY ASSESSEE AND SECOND CLASS OF CASES WHERE THE AMOUNT SUBJECTED TO CAPITAL GAINS ARE UTILIZED FOR PURCHASE/ CONSTRUCTING A FLA T, POST THE SALE OF THE CAPITAL ASSET. IN THE PRESENT FACTS WE ARE CONCERNED WITH THE SECOND CLASS I.E. PURCHASE POST THE SALE OF THE CAPITAL ASSET. SHRI PRADIP VISHNU ITA NO. 1752/MUM/2017 & C.O. NO. 253/MUM/2018 5 THE PARLIAMENT HAS USED THE WORD APPROPRIATED IN THE FIRST CLASS OF CASES I.E. WHERE PROPERTY HAS ALREADY BEEN PURCHASED PRIOR TO THE SALE OF CAPITAL ASSET AND THE AMOUNT RECEIVED ON SALE OF CAPITAL ASSET IS APPROPRIATED TOWARDS CONSIDERATION WHICH HAS BEEN PAID FOR PURCHASE OF THE FLAT. IN THIS CASE WE ARE CONCERNED WITH THE PURCHASE / CONSTRUCTION OF RESIDE NTIAL HOUSING, AFTER THE SALE OF CAPITAL ASSET. THIS REQUIRES THE AMOUNT - WHICH IS TO BE SUBJECTED TO CAPITAL GAIN HAS TO BE UTILIZED BEFORE THE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139 OF THE ACT BY THE ASSESSEE. SECTION 54F(4) OF THE ACT ITSE LF CLEARLY STATES THAT THE AMOUNT NOT UTILIZED IN PURCHASE / CONSTRUCTION OF FLAT / HOUSE SHOULD BE DEPOSITED IN THE SPECIFIED BANK NOTIFIED BY THE GOVERNMENT. THUS THE PLAIN LANGUAGE EMPLOYED IN SECTION 54F(4) OF THE ACT MAKES A CLEAR DISTINCTION BETWEEN CASES OF APPROPRIATION (PURCHASE PRIOR TO SALE OF CAPITAL ASSET) AND UTILIZATION (PURCHASE/CONSTRUCTION AFTER THE SALE OF CAPITAL ASSET). THEREFORE, THE WORD APPROPRIATED WOULD HAVE NO APPLICATION IN CASES OF PURCHASE / CONSTRUCTION OF A HOUSE AFTER THE SALE OF CAPITAL ASSET WITH WHICH WE ARE CONCERNED. 7.1 ALSO IT IS HELD IN CIT V. R. SRINIVASAN (2010) 45 DTR 208 (MAD) THAT AS THE PROVISIONS OF SECTION 54F PROVIDE AN OPTION TO THE ASSESSEE TO INVEST EVEN WITHIN THE PERIOD OF ONE YEAR BEFORE THE DATE O F TRANSFER OF ORIGINAL ASSET, ASSESSEE HAVING PURCHASED THE HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE THE SALE OF CAPITAL ASSET, WAS ENTITLED TO THE RELIEF U/S 54F. IN THE INSTANT CASE, THE NEW ASSET WAS PURCHASED ON 11.07.2011 I.E. PRIOR TO THE SALE OF TH E ORIGINAL CAPITAL ASSET ON 28.07.2011. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE CASE OF HUMAYUN SULEMAN MERCHANT (SUPRA) R. SRINIVASAN (SUPRA) , WE UPHOLD THE ORDER OF THE LD. CIT(A). IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. SHRI PRADIP VISHNU ITA NO. 1752/MUM/2017 & C.O. NO. 253/MUM/2018 6 C.O. NO. 253/MUM/2018 (ITA NO. 1752/MUM/2017) ASSESSMENT YEAR: 2012 - 13 8. AS THE APPEAL FILED BY THE REVENUE IN ITA NO. 1752/M/2017 HAS BEEN DISMISSED BY US, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 19/11/2018. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 19/11/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI