Shri Pardeep Kumar Jain, Zirakpur V. ITO, W-2(3), Chandigarh

ITA 190/CHANDI/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8000 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Period of limitation; Additional evidence; Question of law; Cost of acquisition; Fair market value; Valuation report; Benefit of exemption; Time period of passing order; Set aside; Capital Gains
• Section: 54F; 139(1); 139(4); 55A; 13; 12; 139; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 190/CHD/2019 / ASSESSMENT YEAR : 2012-13 SHRI PRADEEP KUMAR JAIN, FLAT NO.222, ORBIT APARTMENTS, 6 TH FLOOR, ZIRAKPUR THE ITO, WARD 2(3), CHANDIGARH ./PAN NO: ADVPJ6719P / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI PARIKSHIT AGGARWAL, CA ' ! / REVENUE BY : SHRI MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 25/.11/2019 &'() % / DATE OF PRONOUNCEMENT : 21.12. 2019 ')/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 27.02.2017 OF THE COMMISSIONER OF INCO ME TAX (APPEALS)- 1, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT (A) ]. 2. AS PER THE NOTE OF THE REGISTRY, THE APPEAL IS T IME BARRED BY LIMITATION PERIOD OF 646 DAYS. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE IN THIS RESPECT, HOWEVER, THE ASSESSEE V IDE REPLY DATED 8.9.2019 HAS SUBMITTED THAT THE IMPUGNED ORDER WAS PASSED BY THE ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 2 CIT(A) ON 27.2.2017. IT HAS BEEN ALLEGED BY THE DEPARTMENT THAT THE COPY OF THE ORDER SENT THROUGH POST ON 11.3.2017. THAT HOWEVER, THE ASSESSEE NEVER RECEIVED ANY COPY OF THE SAID ORDER. IT WAS ONLY AT TIME OF RECEIPT OF SHOW CAUSE NOTICE REGARDING PENALTY P ROCEEDINGS U/S 271 (1)(C) OF THE INCOME TAX ACT, 1961, THAT THE ASSES SEE CAME TO KNOW ABOUT THE PASSING OF THE APPELLATE ORDER. THEREAFTE R, THE ASSESSEE APPLIED FOR CERTIFIED TRUE COPY OF THE ORDER OF THE CIT(A) WHICH WAS PROVIDED TO HIM ON 20.2.2019 AND THE APPEAL WAS FIL ED IMMEDIATELY WITHIN THE PERIOD OF LIMITATION. THE ABOVE AVERMENT S MADE BY THE ASSESSEE ARE SUPPORTED BY THE AFFIDAVIT OF THE ASSE SSEE. 3. ON THE OTHER HAND, THE DEPARTMENT HAS NOT PRODUC ED ANY DOCUMENTS ON FILE TO SHOW THAT THE COPY OF THE ORDE R SENT THROUGH SPEED POST WAS ACTUALLY DELIVERED TO THE ASSESSEE. SINCE THE ASSESSEES CONTENTION HAVE BEEN SUPPORTED WITH HIS AFFIDAVIT A ND NO CONTRARY EVIDENCE HAS BEEN FILED BY THE REVENUE, HENCE, THE DELAY IN FILING THE PRESENT APPEAL IS HEREBY CONDONED AND WE PROCEED TO DECIDE THE APPEAL ON MERITS. 4. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) IN APPEAL NO. 109/14-15 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF S. 250(6) OF THE INCOME TAX ACT, 1961. ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 3 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN DENYING DEDUCTION U/S 54 OF RS. 31,93,400/- ON ACCOUNT OF PURCHASE OF SECOND FLAT EVEN WHEN THE SECOND FLAT WAS IN THE SAME SOCIETY AND 2 FLATS ACTUALLY BECAME 1 RESIDENTIAL UNIT. 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN DENYING DEDUCTION U/S 54 OF RS. 51,56,500/- ON ACCOUNT OF PURCHASE OF A RESIDENTIAL PLOT ON WHICH CONSTRUCTION WAS NOT COMPLETED SINCE THE CONSTRUCTION WAS STAYED BY THE PUNJAB GOVERNMENT AS PER DIRECTIONS OF HON'BLE P&H HC TO FREEZE ALL THE CONSTRUCTION ACTIVITIES IN VILLAG E KANSAL AND THEREFORE THE SAID EVENT WAS BEYOND THE CONTROLS OF THE APPELLANT. 4. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN TAKING THE FAIR MARKET VALUE OF THE PROPERTY SOLD AT RS. 3,00,000/- AS ON 01.04.198 1 EVEN WHEN THE SAID ESTIMATE DONE BY LD. AO IS ARBITRARY, BIASED, WITHOUT ANY BASIS AND CAME FROM NO-WHERE AND HENCE DESERVES TO BE SET - ASIDE BY RESTORING THE CLAIM OF THE APPELLANT. . \ 5. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING THE ENTIRE CLAIM OF COST OF IMPROVEMENT OF RS. 1,60,200/-IN RESPECT OF 1 ST FLOOR AND RS. 1,64,000/- IN RESPECT OF 2 ND FLOOR WHILE ASSESSING THE INDEXED COST OF IMPROVEMENT OF RESIDENTIAL HOUSE SOLD BY THE APPELLANT EVEN WHEN THE DENIAL BY LD. AO IS ARBITRARY, BIASED, WITHOUT ANY BASIS AND HENCE DESERVES TO BE SET - ASIDE BY RESTORING THE CLAIM OF THE APPELLANT. ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 4 6. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION, DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 5. GROUND NO.1: GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6 . GROUND NOS. 2 & 3 : THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE SOLD HIS SHARE IN BUILT UP RESIDENTIAL PRO PERTY AT CHANDIGARH FOR A CONSIDERATION OF RS. 1.40 CRORES. THEREAFTER, THE ASSESSEE PURCHASED A RESIDENTIAL PLOT NO. 21, AT KANSAL ENCLAVE, VILLAGE KANSAL FOR A CONSIDERATION OF RS. 51,56,500/- ON 16.2.2011, HOWE VER, WHEN THE CONSTRUCTION OF THE RESIDENTIAL PLOT NO. 21 OVER THE SAID PLOT WAS UNDER PROGRESS, THE GOVERNMENT OF PUNJAB THROUGH A NOTIFI CATION BANNED THE CONSTRUCTION ACTIVITY IN VILLAGE KANSAL IN THE MONT H OF MAY 2017. THE ASSESSEE, THEREFORE, COULD NOT CONSTRUCT THE RESIDE NTIAL HOUSE OVER THE SAID PLOT. THEREAFTER, THE ASSESSEE ENTERED INTO AN AGREEMENT TO PURCHASE A RESIDENTIAL FLAT NO. C-2/609 AT NIRMAL CHHAYA, ZI RAKPUR AND AMOUNT OF RS. 32,55,398/- WAS PAID FOR THE PURCHASE OF THE SAID FLAT. FURTHER, THE ASSESSEE PURCHASED ANOTHER FLAT NO. C-3/606 AT NIRM AL CHAYA, ZIRAKPUR FOR RS. 31,93,400/-. THE ASSESSEE SUBMITTED THAT BO TH THE FLATS WERE ADJACENT TO EACH OTHER WHICH ARE BEING USED AS A SI NGLE UNIT. THE ASSESSEE ACCORDINGLY CLAIMED DEDUCTION U/S 54 OF TH E ACT IN RESPECT OF THE AMOUNT OF CONSIDERATION PAID FOR PURCHASE OF TH E PLOT AT KANSAL VILLAGE FOR A SUM OF RS. 51,56,500/- AND FURTHER IN RESPECT OF THE TWO ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 5 ADJACENT FLATS USED AS A SINGLE UNIT FOR RS. 32,55, 398/- PLUS RS. 31,93,400/- TOTALING RS. 6448798/-. THE ASSESSING OFFICER, HOWEVER, DENIED THE DEDUCTION TO THE ASSESSEE U/S 54 OF THE ACT IN RESPECT OF THE CONSIDERATION PAID FOR RESIDENTIAL PLOT AT VILLAGE KANSAL AMOUNTING TO RS. 51,56,500/- AND FURTHER IN RESPECT OF SECOND FL AT BEARING NO.C-3/606 FOR RS. 31,93,400/-. HOWEVER, HE ALLOWED THE CLAI M OF THE ASSESSEE IN RESPECT OF THE FIRST FLAT I.E. C-2/609 FOR A SUM OF RS. 32,55,398/-. 7. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE SO MAD E BY THE ASSESSING OFFICER. THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. A UTHORIZED REPRESENTATIVES OF BOTH THE PARTIES AND GONE THROUG H THE RECORD. FROM THE FACTS IT IS REVEALED THAT AFTER THE SALE OF THE SHARE IN THE RESIDENTIAL PROPERTY, THE ASSESSEE INVESTED A SUM OF RS. 51,56, 000/- FOR PURCHASE OF PLOT NO. 121 AT KANSAL ENCLAVE, VILLAGE KANSAL. TH E ASSESSEE ALSO STARTED CONSTRUCTING THE RESIDENTIAL HOUSE OVER THE SAID PLOT. HOWEVER, IN THE MEANTIME, IN COMPLIANCE OF THE ORDER OF THE HON'BLE PUNJAB & HARYANA HIGH COURT, THE GOVERNMENT OF PUNJAB BANNED THE CONSTRUCTION IN THE KANSAL VILLAGE AREA. THE ASSESSEE WAS, THERE FORE, PREVENTED FROM CONSTRUCTING THE RESIDENTIAL HOUSE OVER THE SAID PL OT FOR THE REASONS BEYOND HIS CONTROL. UNDER THE CIRCUMSTANCES, IT IS NOT A CASE WHERE THE ASSESSEE HAD FAILED TO CONSTRUCT THE HOUSE /RESIDEN CE WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SALE OF HIS PROPERTY, RATHE R, THE ASSESSEE DULY ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 6 PROCEEDED TO PURCHASE A PLOT AND CONSTRUCT RESIDENT IAL HOUSE OVER THAT, HOWEVER, WAS PREVENTED DUE TO THE BAN ON CONSTRUCTI ON BY THE GOVERNMENT WHICH WAS A SUBSEQUENT EVENT. HENCE, THE NON-CONSTRUCTION OF HOUSE OVER THE SAID PLOT WAS DUE TO THE REASONS WHICH WERE BEYOND THE CONTROL OF THE ASSESSEE. THOUGH, AS PER THE PRO VISIONS OF SECTION 54 OF THE ACT, AN ASSESSEE IS REQUIRED TO CONSTRUCT A RESIDENTIAL HOUSE WITHIN 3 YEARS FROM THE DATE OF SALE OF THE PROPER TY, HOWEVER, CONSIDERING THE EXCEPTIONAL FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE, IT CANNOT BE SAID THAT THERE WAS A DEFAU LT ON THE PART OF THE ASSESSEE FOR NON-COMPLYING WITH THE PROVISIONS OF S ECTION 54 OF THE ACT. UNDER THE CIRCUMSTANCES, THE DENIAL OF DEDUCTION U/ S 54 OF THE ACT TO THE ASSESSEE, WHICH IS A BENEFICIAL PROVISION, I N OUR VIEW, IS NOT JUSTIFIED. IN VIEW OF THIS, THE ACTION OF THE LOWER AUTHORITIES IN DENYING THE DEDUCTION IN RESPECT OF THE PURCHASE OF PLOT IN KANSAL ENCLAVE, VILLAGE KANSAL IS SET ASIDE AND IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 54 OF THE I.T. ACT ON THE PURCHASE O F THE SAID PLOT. 9. SO FAR AS THE DENIAL OF THE DEDUCTION TO THE AS SESSEE ON ACCOUNT OF PURCHASE OF TWO FLATS USED AS A SINGLE UNIT IS CON CERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISS UE IS COVERED BY THE VARIOUS DECISIONS OF THE HON'BLE HIGHER COURTS. H E, IN THIS RESPECT HAS RELIED ON THE FOLLOWING DECISIONS:- ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 7 1. CIT(A) VS GITA DUGGAL (357 ITR 153) [2013] DELHI HI GH COURT] 2. CIT VS SYED ALI ADIL ()352 ITR 418) (AP HIGH COURT) 3. CIT VS KG RUKMINIAMMA (321 ITR 211) (KAR. HIGH COUR T) 4. CIT VS ANANDA BASAPPA (309 ITR 329) (KAR. HIGH COUR T) 5. CIT VS RL SOOD (245 ITR 727) (2000) (DEL. HIGH COUR T) 10. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT EVEN IN THE CASE OF CIT VS ANANDA BASAPPA (309 ITR 329), THE HON'BLE KARNATAKA HIGH COURT) HAS HELD THAT IN THE WORD EXPRESSION 'A RES IDENTIAL HOUSE', A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NU MBER. 11. WE FIND THAT THE ISSUE IS SETTLED BY THE VARIOU S DECISIONS OF HIGH COURTS, WHEREIN, IT HAS BEEN HELD THAT WHERE TWO AD JACENT FLATS ARE PURCHASED AND ARE BEING USED AS A SINGLE UNIT, DEDU CTION U/S 54 OF THE ACT IS ALLOWABLE TO THE ASSESSEE IN RESPECT OF PURC HASE OF BOTH THE UNITS. NEXT GRIEVANCE OF THE ASSESSEE IS AGAINST DENIAL OF DEDUCTION U/S 54 OF THE ACT OF THE EXEMPTION OF RS. 31,93,400/- O N ACCOUNT OF PURCHASE OF SECOND FLAT ON 3.12.2012 BY HOLDING THE PURCHASE OF FLAT HAS TO BE MADE BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1). THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAD P URCHASED SECOND FLAT WITHIN THE EXTENDED DATE OF FILING OF THE RET URN U/S 139(4) OF THE ACT. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAGRITI A GGARWAL 339 ITR 610 (2011) (P&H) WHEREIN THE HON'BLE HIGH COURT HAS HEL D THAT - ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 8 AS PER SUB-S. (2) OF S. 54, THE AMOUNT OF CAPITAL GAINS IS REQUIRED TO HE DEPOSITED BY THE ASSESSEE BEFORE FURNISHING THE RETURN NOT LATER THAN THE DUE DATE UNDER S. 139(1) IN A SPECIFIED ACCOUNT ONLY IF SUCH AMOUNT IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OR CONSTRUCTION OF NEW ASSET BEFORE THE DATE OF FURNISHING THUS RETURN UNDER S. 139. THAT SUB-S. (4) OF S.139 IS IN FACT, A PROVI SO TO SUB-S. (1) AND PROVIDES FOR EXTENSION OF PERIOD OF DUE DATE FOR FILING THE RETURN IN CERTAIN CIRCUMSTANCES AND SUCH PROVISION IS NOT AN INDEPENDENT PROVISION BUT RELATES TO THE TIME CONTEMPLATED UNDER SUB-S. ( 1) OF S.139. THAT DUE DATE FOR FURNISHING THE RETURN O F INCOME AS PER S.139(1) IS SUBJECT TO THE EXTENDED PERIOD PROVIDED UNDER SUB-S. (4) OF S. 139. IN THE INSTANT CASE, ASSESSEE SOLD HER RESIDENTIAL HOUSE O N 13 TH JAN., 2006 AND PURCHASED, ANOTHER PROPERTY JOINTLY WITH HER FATHER-IN -LAW ON 2ND JAN, 2007, AND FILED HER RETURN ON 28TH MARCH, 2007, I.E. BEFORE THE EXTENDED DUE DATE OF FILING OF RETURN UNDER S. 139( 4) FOR THE RELEVANT ASST. YR. 2006-07THEREFORE, ASSESSEE IS ENTITLED TO EXEMPTION UNDER S. 54.' MOREOVER, THE ISSUE IS SQUARELY COVERED BY THE DECI SION DATED 5.2.2018 OF THE COORDINATE CHANDIGARH BENCH OF THE TRIBUNAL IN MRS. SEEMA SABHARWAL VS ITO PANCHKULA IN ITA NO. ITA NO. 272/ CHD/2017 FO R ASSESSMENT YEAR: 2013-14, WHEREIN, THE TRIBUNAL AFT ER DETAILED DISCUSSION HAS HELD AS UNDER:- 8. WE HAVE HEARD THE RIVAL CONTENTIONS. BEFORE DELIBERATING FURTHER ON THIS ISSUE WE WOULD LIKE TO REPRODUCE THE RELEVANT PROVISIONS OF SECTION 54 OF THE ACT HEREIN UNDER:- PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDU AL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES F ROM ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 9 THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABL E UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAF TER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AF TER THAT DATE CONSTRUCTED, ONE RESIDENTIAL HOUSE IN IND IA, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCO RDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER THAN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 ; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE O F THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE , OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN [ SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE D UE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 ] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 10 GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT, IF ANY, AL READY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTR UCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSI TED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET : PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB- SECTION IS NOT UTILISED WHOLLY OR PARTLY FOR THE PU RCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN, (I) THE AMOUNT NOT SO UTILISED SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SU CH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.[OMITTED BY THE FINANCE ACT, 1992, W.E .F. 1.4.1993 9. A PERUSAL OF THE ABOVE REPRODUCED PROVISIONS OF SECTION 54 OF THE ACT REVEALS THAT IT DEALS WITH TH E CAPITAL GAINS EARNED ON SALE OF PROPERTY USED FOR RESIDENCE AND AS PER THE PROVISIONS OF SUB SECTION (1) OF SECTION 54 OF THE ACT, IF AN ASSESSEE, AFTER SALE OF HIS RESIDENT IAL PROPERTY, HAS WITHIN A PERIOD OF ONE YEAR BEFORE O R TWO YEARS AFTER THE DATE OF SUCH TRANSFER OR WITHIN A P ERIOD OF THREE YEARS, CONSTRUCTS A RESIDENTIAL HOUSE, THE CA PITAL GAINS WILL NOT BE CHARGED TO TAX UPTO THE EXTENT O F THE AMOUNT SPENT ON THE PURCHASE OR CONSTRUCTION OF RESIDENTIAL HOUSE. SUB SECTION (1) OF SECTION 54 OF THE ACT IS A SUBSTANTIVE PROVISION ENACTED WITH THE PURPOSE OF PROMOTING PURCHASE / CONSTRUCTION OF RESIDENTIAL HO USES. HOWEVER, SUB SECTION (2) OF SECTION 54 IS AN ENABLI NG PROVISION WHICH PROVIDES THAT THE ASSESSEE SHOULD D EPOSIT THE AMOUNT EARNED FROM CAPITAL GAINS IN A SCHEME FR AMED IN THIS RESPECT BY THE CENTRAL GOVERNMENT TILL THE AMOUNT IS INVESTED FOR THE PURCHASE / CONSTRUCTION OF THE RESIDENTIAL HOUSE. THIS PROVISION, IN OUR VIEW, HA S BEEN ENACTED TO GATHER THE REAL INTENTION OF THE ASSESSE E TO INVEST THE AMOUNT IN PURCHASE / CONSTRUCTION OF A RESIDENTIAL HOUSE. AS PER THE PROVISIONS OF SUB SEC TION (1) OF SECTION 54, THE ASSESSEE HAS BEEN GIVEN TWO YEAR S TIME TO PURCHASE AND THREE YEARS TIME TO CONSTRUCT A RESIDENTIAL HOUSE SUBSEQUENT TO THE DATE OF TRANSFE R OF THE ORIGINAL ASSET. AT THE TIME OF THE ASSESSMENT PROCE EDINGS, SUBSEQUENT TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET, AN ASSESSEE MAY CLAIM THAT HE WILL INVEST THE AMOUN T IN PURCHASE / CONSTRUCTION OF A NEW HOUSE, THOUGH NOT HAVE ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 11 TAKEN ANY STEPS TOWARDS THAT DIRECTION TILL THEN. I N SUCH A SCENARIO, THERE SHOULD NOT BE ANY METHOD OR PROCEDU RE BEFORE THE ASSESSING OFFICER THROUGH WHICH HE COULD GATHER THE REAL INTENTION OF THE ASSESSEE, AS THE A SSESSEE, BY SAYING SO, MAY DELAY THE TAXATION OF THE CAPITAL GAINS EARNED AT LEAST FOR THREE YEARS FROM THE DATE OF TR ANSFER OF ORIGINAL ASSET. HENCE, SUB SECTION (2) PUTS AN E MBARGO TO THE ASSESSEE TO CASUALLY CLAIM THE BENEFIT OF SE CTION 54 AT THE TIME OF ASSESSMENT, WITHOUT BEING ANY ACT DO NE TO SHOW HIS REAL INTENTION OF PURCHASING / CONSTRUCTIN G A NEW RESIDENTIAL UNIT. SUB SECTION (2), THEREFORE, GOVERNS THE CONDUCT OF THE ASSESSEE THAT THE ASSESSEE SHOUL D PUT THE AMOUNT OF CAPITAL GAINS IN AN ACCOUNT IN ANY SU CH BANK OR INSTITUTION SPECIFICALLY NOTIFIED IN THIS R ESPECT AND THAT THE RETURN OF THE ASSESSEE SHOULD BE ACCOMPANIED BY SUBMITTING A PROOF OF SUCH DEPOSIT, HENCE, SUB SECTION (2) IS AN ENABLING PROVISION WHI CH GOVERNS THE ACT OF THE ASSESSEE, WHO INTENDS TO CLA IM THE BENEFIT OF THE EXEMPTION PROVISIONS OF SECTION 54. THE REAL PURPOSE OF THE ENABLING PROVISION IS THE COMPL IANCE OF THE SUBSTANTIAL PROVISION OF SUB SECTION (1) TO SECTION 54 OF THE ACT. SUB SECTION (2), IN FACT, REGULATES THE PROCEDURE FOR THE SUBSTANTIVE RIGHTS OF THE EXEMPT ION PROVISIONS U/S 54 OF THE ACT. THIS ENABLING SECTION , IN OUR VIEW, CANNOT ABRIDGE OR MODIFY THE SUBSTANTIVE RIGH TS GIVEN VIDE SUB SECTION (1) OF SECTION 54 OF THE ACT , OTHERWISE, THE REAL PURPOSE OF SUBSTANTIVE PROVISIO N I.E. SUB SECTION (1) WILL GOT DEFEATED. THE PRIMARY GOAL OF EXEMPTION PROVISIONS OF SECTION 54 IS TO PROMOTE HO USING. THE PROCEDURAL AND ENABLING PROVISIONS OF SUB-SECTI ON (2) THUS CANNOT BE STRICTLY CONSTRUED TO IMPOSE STR ICT LIMITATIONS ON THE ASSESSEE AND IN DEFAULT THEREOF TO DENY HIM THE BENEFIT OF EXEMPTION PROVISIONS. IN OUR VI EW, IF THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS, PROVES THAT HE HAS ALREADY INVESTED THE CAPITAL GAI NS ON THE PURCHASE / CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD, THE BENEFIT UNDER THE SUBSTANTIVE PROVISIONS OF SECTION 54(1) CANNOT BE D ENIED TO THE ASSESSEE. ANY DIFFERENT OR OTHERWISE STRICT CONSTRUCTION OF SUB SECTION (2), IN OUR VIEW, WILL DEFEAT THE VERY PURPOSE AND OBJECT OF THE EXEMPTION PROVI SIONS OF SECTION 54 OF THE ACT. OUR ABOVE VIEW, IS FORTIF IED WITH THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SHRI K RAMACHANDRA RAO, ITA NO. 4 7 OF 2014 C/W ITA NO. 46/2014, ITA NO. 494/2013 AND ITA NO. 495/2013, DECIDED VIDE ORDER DATED 14.7.2014 WHEREI N THE HON'BLE HIGH COURT HAS DIRECTLY DEALT WITH THIS ISSUE WHILE INTERPRETING THE IDENTICAL WORDED PROVISIONS OF ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 12 SECTION 54F(2) OF THE ACT. THE FOLLOWING QUESTION OF LAW WAS FRAMED BY THE HON'BLE HIGH COURT ON THIS ISSUE: - 2) WHEN THE ASSESSEE INVESTS THE ENTIRE SALE CONSIDERATION IN CONSTRUCTION OF A RESIDENTIAL HOUS E WITHIN THREE YEARS FROM THE DATE OF TRANSFER CAN HE BE DENIED EXEMPTION UNDER SECTION 54F ON THE GROUND THAT HE DID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE IT ACT? 10. THE SAID QUESTION HAS BEEN ANSWERED BY THE HON' BLE HIGH COURT IN THE FOLLOWING WORDS:- AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF T HE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54 F(1) , IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54 F , THEN HE SHOULD DEPOSIT THE SAID CAPITAL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS IF HE WANT OF CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING THE CASH, THEN THE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTION IS N OT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THEN SECTION 54 F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT. 11. THOUGH THE HON'BLE HIGH COURT IN RELATION TO TH E ISSUE OF CLAIM OF EXEMPTION U/S 54F OF THE ACT HAS HELD THAT WHAT MATTERS IS THE INTENTION OF THE ASSESSEE TO PURCHASE / CONSTRUCT NEW HOUSE. THE HON'BLE KARNATA KA HIGH COURT HAS HELD THAT IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE IN PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THAN SECTION 54F(4) IS NOT AT A LL ATTRACTED. WE MAY CLARIFY HERE THAT PROVISIONS OF S ECTION 54(2) ARE ALMOST IDENTICALLY WORDED AS IN SECTION 5 4F(4) OF THE ACT. ADMITTEDLY, IN THIS CASE, THE ASSESSEE HAS INVESTED THE AMOUNT FOR THE PURCHASE / CONSTRUCTION OF THE HOUSE WITHIN THE STIPULATED PERIOD AS ALSO OBSERVED ABOVE WHILE DECIDING THE FIRST ISSUE. THE ASSESSEE HAS PR OVED SUCH INVESTMENT DURING THE ASSESSMENT PROCEEDINGS AND, THUS, THE ASSESSEE HAS COMPLIED WITH THE REQUIREMEN T OF ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 13 SUBSTANTIVE PROVISIONS AND, THUS, IS ENTITLED TO TH E CLAIM OF EXEMPTION U/S 54F OF THE ACT. IN VIEW OF THIS, W E DIRECT THE ASSESSING OFFICER TO GRANT EXEMPTION TO THE ASSESSEE AS PERMISSIBLE UNDER THE PROVISIONS OF SEC TION 54 OF THE ACT. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED . 12. IN VIEW OF THE ABOVE, THIS ISSUE IS ALSO ACCO RDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. 13. GROUND NOS. 4 & 5 : : VIDE THESE GROUNDS, THE ASSESSEE HAS CONTESTING THE ACTION OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TAKING THE COST OF ACQUISITION OF THE SOLD CAPITAL ASSET / PROPERTY AS PER FAIR MARKET VALUE OF THE P ROPERTY AT RS. 3 LACS AS ON 1.4.1981 AS AGAINST CLAIMED BY THE ASSESSEE AT R S. 6 LACS. APART FROM THAT, THE ASSESSEE CLAIMED INDEXED COST OF THE IMPR OVEMENT OF THE RESIDENTIAL HOUSE AT RS. 1,60,200/- IN RESPECT OF FIRST FLOOR AND RS. 1,64,000/- IN RESPECT OF THE SECOND FLOOR. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD NOT GIVEN AN Y RELIABLE EVIDENCE TO PROVE THE FAIR MARKET VALUE OF THE PLOT AND GROUND FLOOR AND FURTHER NO RELIABLE EVIDENCE HAD BEEN PRODUCED REGARDING THE COST OF IMPROVEMENT I.E. CONSTRUCTION OF FIRST FLOOR AND SECOND FLOOR. THE ASSESSING OFFICER ESTIMATED THE FAIR MARKET VALUE OF THE PLOT AS ON 1 .4.1981 AT RS. 1 LAC AND CONSTRUCTION OF THE HOUSE AT RS. 8 LACS TOTALIN G TO RS. 9 LACS, IN WHICH THE ASSESSEES SHARE @ 1/3 RD OF THE TOTAL HOUSE WAS CALCULATED AT ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 14 RS. 3 LACS AND AFTER INDEXATION, THE BENEFIT OF RS . 23,55,000/- WAS GIVEN. 14. THE ASSESSEE CLAIMED BEFORE THE LD. CIT(A) THAT THE COST OF ACQUISITION AS ON 1.4.1981 WAS ON THE BASIS OF THE VALUATION REPORT OF THE REGISTERED VALUER, HOWEVER, THE SAID REPORT WAS NO T AVAILABLE BEFORE THE ASSESSING OFFICER. THE ASSESSEE ALSO PRAYED BEFORE THE CIT(A) THAT THE SAID REPORT BE ADMITTED AS ADDITIONAL EVIDENCE UN DER RULE 46A OF THE INCOME TAX RULES, 1962. HOWEVER, THE LD. CIT(A) IGN ORED THE ABOVE CONTENTIONS / SUBMISSIONS OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT THE ASSESSING O FFICER HAS ADOPTED THE MARKET VALUE OF THE PROPERTY SOLD BY THE ASSESS EE AS ON 1.4.1981 AT RS. 3 LACS OF HIS OWN WITHOUT MAKING ANY REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER (DVO) U/S 55A OF THE INCOME TAX ACT. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW, THAT THOUGH THE ASSESSEE HAD FAILED TO FURNISH THE REPOR T OF THE REGISTERED VALUER BEFORE THE ASSESSING OFFICER, HOWEVER, THE SAME WAS SUBMITTED BEFORE THE CIT(A). HOWEVER, THE POSSIBILITY CANNOT BE RULED OUT OF SOME INFLATION IN THE REPORT AT THE DIRECTION OF TH E ASSESSEE AS THE REGISTERED VALUER WAS ENGAGED BY THE ASSESSEE HIMSE LF. AT THE SAME TIME, THE ASSESSING OFFICER HAD ALSO NOT REFERRED T HE MATTER TO THE DVO. HE SIMPLY ESTIMATED THE COST OF ACQUISITION OF THE HOUSE AND COST OF ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 15 CONSTRUCTION OF THE HOUSE AS PER HIS OWN ASSUMPTION S EVEN WITHOUT SUGGESTING ANY SCIENTIFIC BASIS FOR THE SAME. 16. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANC ES, SUBMISSIONS OF BOTH THE PARTIES AND ALSO CONSIDERING THE FACT THAT THE COST OF ACQUISITION AND COST OF CONSTRUCTION AS ON 1.4.1981, HAS TO BE ARRIVED ON ESTIMATION BASIS AND ALSO CONSIDERING THE REPORT OF THE REGIST ERED VALUER AS WELL AS ESTIMATION DONE BY THE ASSESSING OFFICER, WE DIREC T THAT THE COST OF THE ACQUISITION / PURCHASE OF THE HOUSE AS ON 1.4.1981 BE TAKEN AT RS. 4.5 LACS AS AGAINST THE CLAIM OF THE ASSESSEE OF RS. 6 .0 LACS. HOWEVER, SO FAR AS THE COST OF IMPROVEMENT IS CONCERNED, THOUGH, T HE ASSESSEE HAS CLAIMED THE SAME TO BE AT RS. 3,24,400/- (RS. 1,64, 000 + RS. 1,60,200), HOWEVER, CONSIDERING THE OVER ALL FACTS OF THE CASE , THE SAME IS DIRECTED TO BE ADOPTED AT RS. 2 LACS AND THE COST OF INDEX ATION BE ACCORDINGLY COMPUTED OVER THE SAID AMOUNT. THESE GROUNDS OF THE APPEAL ARE DISPOSED OF IN THE ABOVE TERMS. 17. GROUND NO. 6: GROUND NO. 6 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2019. SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 31.12.2019 ITA NO. 190-CHD/2019 SHRI PRADEEP KUMAR JAIN, ZIRAKPUR 16 .. '+ ,-.- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , %2 , 34516 / DR, ITAT, CHANDIGARH 6. 157$ / GUARD FILE