Smt Shakeera Begum, Hyderabad V. ITO, Ward-6(3), Hyderabad, Hyderabad

ITA 1910/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98585 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-12-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Capital asset; Gift; Source of fund; Additional evidence; Tangible material; Valuation report
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1910/HYD/2014 ASSESSMENT YEAR: 2010-11 SMT . SHAKEERA BEGUM , HYDERABAD [PAN: BGHPB2851A] VS THE INCOME TAX OFFICER , WARD-6(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHU RAM , AR FOR REVENUE : S HRI RAMA KRISHNA BANDI, DR DATE OF HEARING : 21 - 0 8 - 201 5 DATE OF PRONOUNCEMENT : 16 - 1 0 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD DATED 22-10-2014. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) IS NOT ONLY ERRONEOUS BUT IS PERVERSE TO THE EXTENT IT IS PREJUDICIAL TO THE ASSESSEE. I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 2 -: 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RE JECTING THE CLAIM OF DEDUCTION U/S. 54F AND ADDITION OF RS. 41,25,000/- AS UNEXPLAINED DEPOSIT. 3. THE LEARNED CIT (APPEALS) ERRED IN NOT STATING A S TO HOW THE DECISION RELIED UPON THE ASSESSEE IS NOT APPLICABLE AND FURTHER ERRED IN RELYING ON OTHER DECISIONS WITHOUT PUTTING TO TH E ASSESSEE TO DISTINGUISH THEM. 4. THE LEARNED CIT (APPEALS) ERRED IN RELYING ON DE CISIONS WHICH ARE DISTINGUISHABLE ON FACTS AND FURTHER ERRE D IN HOLDING THAT WHAT THE ASSESSEE HAS DONE IS ONLY IMPROVEMENT TO E XISTING STRUCTURE WHEN IN FACT THE PLAN OF THE OLD BUILDING AND THE PRESENT BUILT UP AREA CLEARLY DEMONSTRATE THAT NEW STRUCTUR E IS MADE AND THEREBY ERRED IN DENYING DEDUCTION U/S. 54F. 5. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH E LEGAL POSITION THAT IF TWO DECISIONS ARE AVAILABLE ON THA T IS FAVOURABLE TO THE ASSESSEE IS TO BE FOLLOWED AND THEREBY ERRED IN FOLLOWING THE DECISION AGAINST THE ASSESSEE THOUGH THERE IS A DEC ISION IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING TH E ADDITION OF RS. 41,25,000/- HOLDING THAT THE ASSESSEE HAS NO T ESTABLISHED THAT IT IS SALE CONSIDERATION AND RELYING ON THE LE TTER OF THE PURCHASER WHEN THE DEPARTMENT ON THE OTHER HAND IS ASSESSING IN THE HANDS OF BUYERS OF EMMAR PROPERTIES IN BOULDER HILLS ADDITIONAL INCOMES AS ON MONEY PAYMENTS ON THE BASI S OF STATEMENT OF THE AGENT THEREBY ADOPTING DIFFERENT S TANDARDS TO DIFFERENT ASSESSEES. 7. THE LEARNED CIT (APPEALS) ERRED IN DISTINGUISHIN G THE DECISION OF SUPREME COURT IN THE CASE OF SMT. P.K. NOORJEHAN STATING THAT THE ASSESSEE HAS SUBSTANTIAL MEANS AND THAT SH E IS A OWNER OF HOUSE WITHOUT APPRECIATING THAT THE RATIO OF THE AP EX COURT REVOLVE ROUND THE SOURCES OF INCOME AND THAT THERE IS NO OT HER EVIDENCE THAT THE ASSESSEE HAS ANY OTHER SOURCE OTHER THAN SALE O F THE PROPERTY AND THEREBY ERRED IN CONFIRMING THE ADDITION. 3. BRIEFLY STATED, ASSESSEE, AN INDIVIDUAL FILED N IL RETURN ON 20-03-2012, BELATEDLY DECLARING LONG TERM CAPITA L GAIN ON SALE OF PROPERTY AND CLAIMING DEDUCTION U/S. 54 OF THE I NCOME TAX ACT [ACT] CLAIMING INVESTMENT IN A HOUSE. WHILE SCRUTI NISIING THE RETURN, ASSESSING OFFICER (AO) DISALLOWED CLAIM OF DEDUCTION U/S. I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 3 -: 54 ON THE REASON THAT THE INVESTMENT WAS MADE MUCH PRIOR TO THE SALE OF PROPERTY GIVING RISE TO CAPITAL GAINS AND T HE INVESTMENT WAS ON AN EXISTING HOUSE, WHICH CANNOT BE CONSIDERED AS NEW HOUSE. IN ADDITION, AO BROUGHT TO TAX CASH DEPOSITS IN BAN K ACCOUNT WHICH ARE TREATED AS UNEXPLAINED, EVEN THOUGH ASS ESSEE EXPLAINED THAT THE SOURCE IS SALE OF PROPERTY. LD. CIT(A) CO NFIRMED BOTH ACTIONS OF AO AND HENCE THE PRESENT APPEAL. 4. GROUND NOS. 2, 3, 4 & 5 PERTAIN TO ISSUE OF CLA IM OF DEDUCTION U/S. 54 OF THE ACT. THERE IS NO DISPUTE WITH REFERENCE TO THE CAPITAL GAIN EARNED. THE DISPUTE IS ONLY WITH REFERENCE TO THE DEDUCTION CLAIMED ON CONSTRUCTION OF A NEW RESIDEN TIAL HOUSE. THE CLAIM OF DEDUCTION U/S. 54 OF RS. 1,37,07,700/- WAS MADE BY ASSESSEE AGAINST THE CAPITAL GAIN EARNED ON SALE OF PROPERTY AT BANGALORE. THE ASSESSEE CLAIMED THAT SHE HAD PURCHASED A PLOT OF 961 SQ. YDS., ON 10-02-2005 AT JUBILEE HILLS, HYDERABAD, THAT SHE HAD CONSTRUCTED A HOUSE PROPERTY OUT OF THE SALE CONSIDERATION (FROM SALE OF PROPERTY AT BANGALORE ON 19-03-2010) DURING THE CURRENT YEAR AND THAT SHE WAS THEREFORE ELIGIBLE FOR EXEMPTION U/S 54. THE ASSESSING OFFICER NOTED THAT AS PER THE SALE DEED, THE PROPERTY AT JUBILEE HILLS CONSISTED OF A HOUSE PROPERTY WITH A BUILT UP AREA OF 3,646 SQ. FT. THE ASSESSIN G OFFICER THEREFORE, DIRECTED ASSESSEE TO EXPLAIN WHY TH E DEDUCTION U/S. 54 SHOULD BE ALLOWED WHEN THE RESIDENTIAL HOUS E HAD BEEN PURCHASED MORE THAN ONE YEAR PRIOR TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET AT BANGALORE. 4.1. ASSESSEE SUBMITTED AS FOLLOWS VI DE HER LETTER DATED 15-12-2012: I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 4 -: 'THE ASSESSEE INVESTED THE LONG TERM CAPITAL GA INS IN HER JUBILEE HILLS HOUSE PROPERTY BY ADDING ADDIT IONAL FLOORS TO MEET THE RESIDENTIAL NEEDS OF THE FAM ILY. IN A WELFARE STATE, IT IS NECESSARY TO SEE THAT CITIZEN S GET PROPER SHELTER FOR SELF AND FAMILY, AS THE TIME PASSES FAM ILY NEEDS ALSO INCREASE DUE TO CHILDREN GETTING MARRIED AND L OOKING FOR PRIVACY AND INDEPENDENT PLACE FOR THEIR NUCLEAR FAM ILY. IT IS NOT POSSIBLE FOR THE CITIZENS TO ACQUIRE OR CONSTRU CT A LARGE HOUSE AT ONE GO DUE TO PAUCITY OF FUNDS AND FINANCI AL CONSTRAINTS. THEN, THE ASSESSEE TRIED TO BUILD THE HOUSE IN STAGES BASED ON THEIR OWN FAMILY NEEDS AND AVAILABI LITY OF FUNDS. THE ADDITIONAL FLOORS CONSTRUCTED ON AN EXIS TING GROUNDS/FIRST FLOOR OF A RESIDENTIAL HOUSE PROPERTY FORM PART OF RESIDENTIAL HOUSE PROPERTY ADDITION TO THE EXIST ING HOUSE AND ARE IN THE NATURE OF NEW ASSET. 4.2. THE ASSESSING OFFICER DID NOT ACCEPT ASSESSEE 'S CLAIM FOR THE FOLLOWING REASONS: A. AS PER THE SALE DEED DATED 10-02-2005, THE PROPERTY PURCHASED CONSISTED OF A HOUSE WITH A BUILT UP AREA OF 3,646 SQ.FT., WITH GROUND AND FIRST FLOOR. THE MUNICIPAL APPROVED PLAN SHOWED A KITCHEN, DINING ROOM, TWO HALLS, 6 BED ROOMS AND ONE STUDY ROOM. THIS SHOWED THAT THE PROPERTY WAS FULL-FLEDGED RESIDENTIAL HOUSE WITH ALL AMENITIES AND IN A FULLY HABITABLE CONDITION. B. ASSESSEE HAD SUBMITTED A PLAN OF THE EXISTING HOUSE WITH SUBSEQUENT CONSTRUCTIONS. THERE WAS NOT MUCH VARIATIONS FROM THE ORIGINAL APPROVED MUNICIPAL PLAN EXCEPT THAT AN ADDITIONAL FLOOR HAD BEEN CONSTRUCTED. ALL THE FLOORS WERE CONNECTED BY A STAIRCASE INTERNALLY AND THE COMPLETE BUILDING FORMED ONE RESIDENTIAL UNIT. THE SECOND FLOOR WAS CONNECTED WITH THE GROUND AND FIRST FLOOR BY WAY OF INTERNAL STAIRCASE, DID NOT HAVE A SEPARATE ENTRANCE FROM THE OUTSIDE AND DID NOT HAVE THE BASIC COMPONENTS SUCH AS KITCHEN FOR AN EXISTENCE AS AN INDEPENDENT RESIDENTIAL UNIT. C. THE INSPECTOR OF INCOME TAX HAD VISITED THE RESIDENTIAL HOUSE AT JUBILEE HILLS AND REPORTED THAT I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 5 -: THE GROUND AND FIRST FLOOR WERE OLD STRUCTURES TO WHICH ASSESSEE HAD MADE A FEW ALTERATIONS AND CONSTRUCTED A SECOND FLOOR AS AN EXTENSION TO THE EXISTING HOUSE. D. ASSESSEE HAD FURNISHED COPIES OF BILLS/INVOICES/ESTIMATES FOR THE EXPENDITURE INCURRED ON THE BUILDING ON WHICH EXEMPTION U/S 54 HAD BEEN CLAIMED. THESE DOCUMENTS SHOWED THAT RENOVATION OF THE COMPLETED BY 19-03-2010, THE DATE OF SALE OF THE PROPERTY AT BANGALORE. THESE DOCUMENTS SHOWED THAT THE CIVIL CONSTRUCTION ACTIVITY HAD BEEN CARRIED OUT WELL BEFORE THE SALE OF THE PROPERTY AT BANGALORE AND AL SO THAT ASSESSEE HAD ONLY CARRIED OUT EXTENSION TO THE EXIS TING HOUSE. E. U/S 54, ASSESSEE WAS REQUIRED TO CONSTRUCT THE RESIDENTIAL HOUSE WITHIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER I.E. 19-03-2010. THE BILLS PERTAINING TO THE PERIOD AFTER 19-03-2010 WERE MERELY IN RESPECT OF FURNITURE AND EXTERNAL FITTINGS AN D SUCH EXPENDITURE COULD NOT BE THE BASIS FOR DEDUCT ION U/S 54. F. ASSESSEE HAD FAILED TO SUBMIT MUNICIPAL APPROVED PLAN FOR THE ALLEGED NEW HOUSE. G. ASSESSEE HAD CLAIMED THAT A NEW BUILDING OF TWO FLOORS WAS CONSTRUCTED AFTER DISMANTLING THE EXISTING BUILDING WHICH WAS FACTUALLY INCORRECT AS NOTED BY THE INSPECTOR. H. AS PER THE COPIES OF INVOICES AND BANK ACCOUNT EXTRACTS, THE SALE PROCEEDS OF THE BANGALORE PROPERTY WERE WITHDRAWN FROM THE BANK ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME ON 31-07-2010. ASSESSEE CLAIMED THAT THE CASH WITHDRAWN HAS BEEN USED FOR CONSTRUCTION. HOWEVER, AS PER THE COPIES OF BILLS, THE EXPENDITURE WAS CLAIMED TO HAVE BEEN INCURRED IN CASH AND WAS THEREFORE, NOT VERIFIABLE. MOST I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 6 -: OF THE BILLS WERE PRIOR TO THE DATE OF SALE OF PROPERTY AT BANGALORE AND WERE IN THE NAME OF SRI WAHID HUSSAIN, SON OF ASSESSEE. AS A RESULT, NO NEXUS HAD BEEN ESTABLISHED BETWEEN THE CASH WITHDRAWN FROM THE BANK AND THE CONSTRUCTION ACTIVITY ALLEGEDLY UNDERTAKEN BY ASSESSEE. I. THE DECISIONS CITED BY ASSESSEE WERE DISTINGUISHABLE ON FACTS AND THEREFORE, NOT APPLICABLE IN THE APPELLANT 'S CASE. THE ASSESSING OFFICER ALSO RELIED ON THE FOLLOWING DECISIONS FOR THE VIEW THAT EXTENSION OF AN OLD BUILDING WAS NOT ELIGIBLE FOR EXEMPTION U/S. 54 OR U/S. 54F. I. CIT VS. PRADEEP KUMAR [290 ITR 90] (MAD): II. ACIT VS. T.N. GOPAL [121 ITD 352] THE ASSESSING OFFICER, THEREFORE, REJECTED THE ASSE SSEE 'S CLAIM OF EXEMPTION U/S. 54 AND ASSESSED THE LONG TERM CAPI TAL GAINS AT RS. 1,25,95,200/-. 4.3. IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE LD.CIT(A), IT WAS SUBMITTED THAT THERE WERE FACTUAL INACCURACIES IN THE ITI'S REPORT, THAT AS PER VALUATION REPORT DATED 07-11-2012 OBTAINED BY ASSESSEE FROM M/S. PRAKASH ASSOCIATES, THE AREA OF GROUND FLOOR WAS 3,245.15 SQ.FT., FIRST FLOOR WAS 3,649.62 SQ.FT., AND SECOND FLOOR 3,649.62 SQ. FT., AGGREGATING TO 10544.39 SQ. FT., WHEREAS AS PER THE ASSESSMENT ORDER THE OLD BUILDING PURCHASED BY THE APPELLANT HAD ONLY 3,646 SQ. FT., AND THAT WHILE THE PROPERTY PURCHASED HAD ONLY 3,646 SQ. FT., CONSISTING OF BOTH GROUND AND FIRST FLOOR, THE NEW STRUCTURE HAD SUBSTANTIALLY MORE CONSTRUCTED AREA. ASSESSEE RELIED ON THE DECISION IN THE CASE OF ASHOK KUMAR (HUF) [ 65 ITO 352] (DEL) FOR THE VIEW THAT EVEN IF AN EXTENSION IS MADE TO I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 7 -: THE EXISTING BUILDING, DEDUCTION U/S. 54 WAS ALLOWABLE. THE AR ALSO SUBMITTED THAT ASSESSEE HAD NOT USED ANY FUNDS BEFORE THE DATE OF TRANSFER, THAT THE INVESTMENT HAD BEEN MADE BY ASSESSEE'S SON AND THAT ASSESSEE HAD INVESTED THE SALE CONSIDERATION AFTER THE DATE OF TRANSFER BY GIVING IT TO HER SON. THE AR ALSO SUBMITTED THAT COMMENCEMENT OF CONSTRUCTION WAS NOT A CRITERIA FOR ALLOWING DEDUCTION AND RELIED ON THE DECISIONS IN THE CASES OF CIT V S. J .R. SUBRAHMANYA BHATT [165 ITR 571] (KAR) AND H.K. KAPOOR [234 ITR 73] (ALL). 4.4. LD. CIT(A) NOTED THAT ASSESSEE VIDE HER LETTE R DATED 15-12-2012 HAD SUBMITTED BEFORE THE ASSESSING OFFIC ER THAT THE SALE CONSIDERATION HAD BEEN INVESTED IN HER JUBILE E HILLS HOUSE PROPERTY BY ADDING ADDITIONAL FLOORS. THE SUBSEQU ENT CLAIM THAT THE ORIGINAL HOUSE PURCHASED VIDE THE SALE DEED DAT ED 10-02-2005 HAD BEEN DEMOLISHED AND A TOTALLY NEW HOUSE CONSTRU CTED IN ITS PLACE WAS THUS TOTALLY CONTRADICTORY TO THE INITIAL CLAIM MADE BY ASSESSEE HERSELF. 5. THEREAFTER, LD. CIT(A) ASKED FOR MUNICIPAL APPR OVALS OF OLD AND NEW BUILDINGS, SO THAT TWO COULD BE COMPARE D. IT WAS ADMITTED THAT NO APPLICATION WAS MADE FOR MUNICIPAL APPROVAL. IT WAS FURTHER SUBMITTED THAT THERE WAS SIGNIFICANT DI FFERENCE BETWEEN THE BUILT-UP AREA OF THE OLD BUILDING AND THE EXIST ING BUILDING IN SUPPORT OF THE CLAIM THAT THE OLD BUILDING HAD BEEN DEMOLISHED AND NEW CONSTRUCTION UNDERTAKEN. LD. CIT(A) NOTED THAT IN THE FIRST PLACE, THERE IS NO EVIDENCE IN THE FORM OF AN APPROVED MUNICIPAL PLAN OR COMPLETION CERTIFICATE OF ASSESSE ES CLAIMS, WHETHER OF ADDITION TO THE BUILDING OR OF DEMOLITIO N AND I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 8 -: RECONSTRUCTION. FURTHER, PRESUMING THAT ASSESSEE H AD, AS ADMITTED BY HER UNDERTAKEN CONSTRUCTION OF ADDITION AL FLOOR AND OTHER MODIFICATIONS TO THE BUILDING PURCHASED BY HE R, THE DIFFERENCE IN THE PLINTH AREA WAS NOT SURPRISING AN D NOTHING TURNS ON IT. 6. FOR THE ABOVE REASONS, LD. CIT(A) DID NOT AGREE AND REJECTED THE CLAIM STATING AS UNDER: 6.10 INDEED, FOR THE SAME REASONS, THE CLA IMS OF THE APPELLANT ARE NOT VERIFIABLE EVEN WITH REGARD TO THE ALLEGED ADDITIONS AND EXTENSIONS. 6.11 EVEN IF THE APPELLANT'S CLAIMS THAT SHE HAD UNDERTAKEN ADDITIONS TO THE HOUSE WERE TO BE ACCEPTED, THE CLAIM OF DEDUCTION U/S 54 WOULD NOT BE ADMISSIBLE IN VIEW OF SEVERAL JUDICIAL DECISIONS WHERE THE COURTS HAVE HELD THAT DEDUCTION U/S 54 IS NOT ALLOWABLE FOR ADDITIONS OR EXTENSIONS MADE TO A RESIDENTIAL HOUSE. IN THE CASE OF CIT V V PRADEEP KUMAR [2007] 290 ITR 90 (MAD), THE COURT HELD THAT IT WAS CLEAR FROM THE CONTEMPORANEOUS EVIDENCE AVAILABLE ON RECORD THAT THERE WERE NO NEW RESIDENTIAL HOUSES EXHIBITED ON THE PLOT IN QUESTION, THAT THE ASSESSEE HAD UNDERTAKEN AN EXTENSION WORK IN THE OLD BUILDING IN THE GROUND FLOOR AND FIRST FLOOR, THAT FROM THE ABOVE FINDING IT WAS CLEAR THAT THERE WAS NO RESIDENTIAL HOUSE AND IT WAS ONLY AN EXTENSION OF THE OLD BUILDING AND THAT A MERE EXTENSION OF THE EXISTING BUILDING WILL NOT GIVE BENEFIT TO THE ASSESSEE AS CONTEMPLATED U/S 54F. 6.12 THIS DECISION OF THE HIGH COURT WAS FO LLOWED IN THE DECISION IN THE CASE OF ACIT V T N GOPAL 121 ITO 352 (CHEN) (TM) WHERE THE ASSESSEE HAD ONLY CONSTRUCTED AN ADDITIONAL FLOOR ON HIS EXISTING HOUSE PROPERTY. THIS DECISION, BEING OF A THIRD MEMBER BENCH, WOULD SERVE AS A BINDING PRECEDENT. 6.13 IN THE CASE OF MEERA JACOB V ITO [2009] 313 ITR 411(KER), THE COURT HELD THAT SINCE THE ASSESSEE HAD ONLY MADE ADDITION TO THE PLINTH AREA, WHICH WAS IN THE FORM OF MODIFICATION OF AN EXISTING HOUSE, SHE WAS NOT ENTITLED TO DEDUCTION U/S S4F. I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 9 -: 6.14 IN THE CASE OF PUSHPA VS ITO (IT APPEAL NOS. 30 & 32 OF 2012 OF MADRAS HIGH COURT, DATED 22.8.2012), THE CAPITAL GAINS CONSTRUCTION/EXTENSION OF/TO THE FIRST FLOOR. THE COURT UPHELD THE VI EW THAT THE OBJECT SOUGHT TO BE ACHIEVED BY SEC.54F IS TO EXC LUDE CAPITAL GAINS ON CAPITAL ASSETS FROM BEING CHARGED PROVIDED THE NEW ASSET IS A RESIDENTIAL HOUSE AND THAT A NEW HOUSE IS NOT SOMETHING WHICH IS EITHER AN EXTENSION OR ADDITION MADE TO AN EXISTING STRUCTURE. WHILE REFERRING TO THE DECISION IN THE CASE OF MEERA JACOB, THE C OURT ALSO WENT ON TO OBSERVE THAT THE OBSERVATION IN THE JUDGMENT IN MEERA JACOB THAT EVEN ADDITION OF A FLOOR OF A SELF- CONTAINED TYPE TO THE EXISTING HOUSE WOULD HAVE QUALIFIED FOR EXEMPTION, WAS NOT A STATEME NT AS TO LAW, TO BE NOTED AS A PRECEDENT BECAUSE THAT CASE WAS NOT ONE SUCH. 6.15 IN VIEW OF THE SEVERAL HIGH COURT DECISIONS, APART FRONT THE THIRD MEMBER DECISION OF THE ITAT, ON THE ISSUE, THE DECISION CITED BY THE AR IS NOT ACCEPTED AND IT IS HELD THAT THE CLAIM OF DEDUCT ION U/S 54 CANNOT BE ALLOWED FOR ADDITIONS AND EXTENSIONS TO AN EXIS TING RESIDENTIAL HOUSE. 6.16 THE ASSESSING OFFICER HAS ALSO POINTE D OUT THAT THE CONSTRUCTION HAD BEEN COMPLETED BEFORE THE DAT E OF TRANSFER OF THE ORIGINAL ASSET. THE ASSESSING OFFICER HAS EXAMINED THE DETAILS OF THE BILLS AND VOUCHERS SUBMITTED BY THE APPELLANT WHICH SHOW THAT THE BILLS FOR THE PERIOD SUBSEQUENT TO 19.3.2010 RELATED MERELY TO FURNITURE AND SIMILAR FITTINGS AND NOT RELATED TO THE COST OF CONSTRUCTION. THESE FACTS HAVE NOT BEEN REBUTTED BY THE AR. 6.17 EXEMPTION U/S. 54 IS AVAILABLE IF AN ASSESSEE 'HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONST RUCTED A RESIDENTIAL HOUSE'. BOTH IN THE CASE OF SUBRAMANYAM BHAT AND H K KAPOOR, THE COURT HELD THAT THE ASSESSEE WAS ENTITLED TO THE DEDUCTION SINCE THE CONSTRU CTION HAD BEEN COMPLETED AFTER THE DATE OF TRANSFER AND T HAT EXEMPTION COULD NOT BE DENIED SIMPLY ON THE GROUND THAT CONSTRUCTION HAD BEGUN BEFORE THE DATE OF TRANSFER. IN OTHER WORDS, FOR THE PURPOSE OF SEC.54 (OR SEC.54F, AS THE CASE MAY BE), IT IS IRRELEVANT WHEN THE CONSTRUCTION BEGAN BUT TO BE ELIGIBLE FOR THE DEDUCTION, THE CONSTRUCTION SHOULD HAVE BEEN COMPLETED AFTER THE DATE OF TRANSFER. 6.18 THE SAME PRINCIPLE HAS ALSO BEEN UPHELD IN I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 10 - : THE CASE OF SHANTABEN P. GANDHI V CIT [1981] 129 ITR 218 (GUJ) WHERE THE ASSESSEE HAD COMPLETED THE CONSTRUCTION IN MARCH, 1968 WHEREAS THE TRANSFER TOOK PLACE IN MARCH, 1970. THE COURT HELD THAT TO CLAIM EXEMPTION UNDER SECTION 54, THE CONSTRUCTION OF THE NEW HOUSE SHOULD BE WITHIN TWO YEARS AFTER THE TRANSFER OF THE EXISTIN G HOUSE AND THAT THE EXEMPTION IS NOT AVAILABLE WHERE THE NEW CONS TRUCTION IS MADE BEFORE THE TRANSFER OR SALE OF THE EXISTING HOUSE. 6.19 IN THE APPELLANT'S CASE, THE NEW A SSET CONSISTED OF A HOUSE THAT HAD BEEN PURCHASED MORE THAN A YEAR PRIOR TO THE SALE OF THE ORIGINAL ASSET AND THE APPELLANT WAS, THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/ S. 54 ON ITS' ACQUISITION. THE INVESTMENT CLAIMED FOR DEDUCTIO N HAD BEEN INCURRED ON MAKING ADDITIONS TO THE NEW ASSET WHICH WAS NOT ELIGIBLE FOR DEDUCTION. FURTHER, EVEN SUCH CONSTRUCTION (ON ADDITIONS) HAD BEEN COMPLETED BEFORE THE SALE OF THE ORIGINAL ASSET AND WAS, THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S 54. 6.20 THE AR HAS ALSO TAKEN THE PLEA THAT HOUSE CONSTRUCTION HAD BEEN UNDERTAKEN WITH MONEY TAKEN ON LOAN FROM THE APPELLANT'S SON AND THE SALE CONSIDERATION FOR THE ORIGINAL ASSET HAD BEEN USED TO R EPAY THIS LOAN. WHAT IS TO BE BORNE IN MIND IN THIS REGARD IS THAT THE DEDUCTION U/S 54 IS AVAILABLE FOR PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE AND NOT FOR REPAYMENT OF LOANS. IN OTHER WORDS, THE DEDUCTION IS GIVEN IN THE EVENT OF CREATION OF OWNERSHIP IN A NEW RESIDENTIAL HOUSE. THE APPELLANT WAS ALREADY THE OWNER OF THE RESIDENTIAL HOUSE. TH E REPAYMENT OF THE LOAN DID NOT CREATE SUCH OWNERSHIP. THE ELIGI BILITY FOR THE DEDUCTION IS TO BE DETERMINED WITH REFERENCE TO THE SATISFACTIONS OF THE CONDITIONS ATTACHED TO PURCHASE OR CONSTRUCTION OF THE NEW ASSET AND NOT WITH REFERENCE TO THE REPAYMENT OF LOANS. THEREFORE, THE REPAYMENT OF LOAN WOULD NOT ENTITLE THE APPELLANT TO DEDUCTION U/S 54 IN THE FACTS OF THE PRESENT CASE. 7. BEFORE US, LD. COUNSEL REITERATED THE SUBMISSIO NS AND REFERRED TO VALUATION REPORT FILED WITH AO ABOUT IN VESTMENT IN NEW HOUSE, PLANS AND MADE A REQUEST FOR SITE INSPECTION VIDE LETTER DT. 21-08-2015 WHICH IS AS UNDER: I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 11 - : PETITION FOR CAUSING 'PERSONAL INSPECTION' OF, OR TO CALL FOR A REMAND REPORT ON THE EXTENT OF CONSTRUCTION MADE BY APPELLANT AT D.NO. 8-2-293/82/J-111/96, PLOT NO. 96-111, SY.NO.403/1(OLD), 120(NEW), ROAD NO.72, JUBILEE HILLS, HYDERABAD 1. ONE OF THE ISSUES IN THE APPEAL RELATE S TO DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 (HENCEFORTH 'THE ACT'). WHILE THE CASE OF THE APPELLANT IS THAT IT HAD LITERALLY DEMOLISHED/MADE SUBSTANTIAL CHANGES TO THE EXISTING BUILDING TO THE PROPERTY WHICH WAS PURCHASED VIDE SALE D EED DATED 10.02.2005, THE CASE OF THE REVENUE IS THAT IT IS ONLY A MODIFICATION AND DOES NOT AMOUNT TO CONSTRUCTING A BUILDING. THE ASSESSING OFFICER BASED ON THE ALLEGED REPOR T OF HIS INSPECTOR HAS COME TO A WRONG CONCLUSION IN THE ASSESSMENT ORDER THAT APPELLANT ONLY MODIFIED THE EXISTING STRU CTURE AND THEREFORE HAS DENIED THE DEDUCTION FOR THIS REASON AND ALSO FOR OTHER REASON THAT CONSTRUCTION STARTED EVEN BEFORE THE SALE OF ORIGINAL ASSET ON 19.03.2010. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE ABOVE FINDING IN SPITE OF THE FACT THAT THE APPELLANT SPECIFICALLY QUESTIONED THE INSPECTION REPORT OF THE INSPECTOR. THE APPELLANT IN THE COURSE OF APPEAL PROCEEDINGS HAS SUBMITTED BEFORE THE LEARNED COMMISSIONER (APPEALS) THAT INSPECTOR WORKING UNDER THE ASSESSING OFFICER, HAS SUBMITTED HIS REPORT WITHOUT STEPPING INTO THE BUILDING BY SIMPLY TAKING PHOTOGRAPHS AND THEREFORE THE SAME CANNOT BE RELIED UPON. HOWEVER, THE COMMISSIONER (APPEALS) HAS BRUSHED ASIDE THIS SUBMISSION AND HAS PLACED HEAVY RELIANCE ON THE MUNICIPAL PERMISSIONS (WHICH THE APPELLANT DID NOT OBTAIN) WHICH CANNOT DETERMINE THE FACT WHETHER THE CONSTRUCTION HAS TAKEN PLACE OR NOT. 2. THE APPELLANT, SUBMITS THAT THE BUIL DING IN JUBILEE HILLS WAS PURCHASED ON 10.02.2005, AND IT WAS RECORDED IN THE SALE DEED THAT THE TOTAL PLINTH AREA CONSTRUCTED WAS TO THE EXTENT OF 3646 SFT ON THE GROUND AN D FIRST FLOOR (ABOUT 1823 SFT EACH ON' GROUND AND FIRST FLOORS, ON LAND ADMEASURING 961 SQUARE YARDS). THE APPELLANT DEMOLISHED THIS STRUCTURE AND HAS BUILD A HOUSE CONTAINING GROUND PLUS TWO FLOORS CONSISTING OF 10,544.39 SQ.FEET (3 245.15 SFT IN THE GROUND FLOOR, 3649.62 SFT IN THE FIRST FLOO R AND 3649.62 SFT IN THE SECOND FLOOR). UNFORTUNATELY, THE APPELLANT DID NOT OBTAIN ANY MUNICIPAL PERMISSION FOR THIS CONSTRUCTION NOR HAS APPLIED FOR ANY 'BUILDING REGULARIZATION AND THEREFORE IS UNABLE TO ESTABLISH, THE FACT AS PER THE RECORDS OF THE S TATUTORY AUTHORITIES. HOWEVER, THE FACT REMAINS THAT THE APPELLANT HAS CONSTRUCTED THE BUILDING WITH GROUND PLUS TWO UPPER FLOORS WITH A TOTAL PLI NTH I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 12 - : AREA OF 10,544.39 SFT. 3. THE HON'BLE TRIBUNAL WILL APPRECIATE THAT THOUQH THE APPELLANT HAS RAISED SPECIFIC OBJECTION THAT THE INSPECTOR ATTACHED TO THE ASSESSING OFFICER'S OFFICE HAS NOT CONDUCTED THE INSPECTION PROPERLY AND THAT HE HAS SIMPLY TAKEN T HE PHOTOGRAPHS FROM OUTSIDE WITHOUT EVEN STEPPING INTO T HE BUILDING, THE COMMISSIONER (APPEALS) HAS NOT GIVEN ANY FINDING ON THIS ASSERTION OF THE APPELLANT. IT IS SUBMITTED THAT IN A CASE OF THIS NATURE WHERE DOCUMENTS IN THE FORM OF STATUTORY APPROVALS ARE AVAILABLE, THE ONLY WAY OUT IS TO CONDU CT 'SITE INSPECTION'. IT IS SUBMITTED THAT THE HON'BLE TRIBUNAL IS THE FINA L FACT FINDING AUTHORITY AND HAS GOT ALL THE POWERS TO EITHER CALL FOR A REMAND REPORT FROM DEPARTMENTAL AUTHORITIES OR TO CONDUCT PERSONAL INSPECTION BY ITSELF BY VISITING THE SITE TO ASCERTAIN THE FACTS. IT IS SUBMITTED THAT GIVEN THE CIRCUMSTANCES IN WHICH THE APPELLANT IS IN, THE ONLY WAY IS EITHER TO CALL FOR A REMAND REPORT OR TO CAUSE 'SITE INSPECTION'. THE APPELLANT THEREFORE EARNESTLY URGES THE HON'BLE TRIBU NAL TO ORDER EITHER OF THE ABOVE TO RENDER JUSTICE. THE HON'BLE SU PREME COURT WHILE INTERPRETING RULE 27 OF INCOME TAX APPELLATE TRIBUNAL RULES, 1963 WITH RESPECT TO THE POWERS OF THE HON'BLE TRIBUNAL TO ADMIT ADDITIONAL EVIDENCE HELD THAT THE 'TRIBUNAL HAS THE POWER TO ALLOW ADDITIONAL EVIDENCE NOT ONLY IF IT REQUIRES SUCH EVIDENCE 'TO ENABLE IT TO PRONOUNCE JUDGEMENT', BUT ALSO FOR 'ANY OTHER SUBSTANTIAL CAUSE'''. IN THE ABOVE SAID CIRCUMSTANCES AND HAVING REGARD TO THE SETTLED POSITION OF LAW ON THE POWERS OF THE TRIBUNAL AS A FINAL FACT FINDING AUTHORITY, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO: (I) TO CALL FOR A REMAND REPORT ON THE TO TAL EXTENT OF CONSTRUCTION MADE BY THE APPELLANT ON THE PROPERTY PURCHASED BY THE APPELLANT VIDE SALE DEED DATED 10.02.2005 AT D.NO.8020293/82/J-L11/96, PLOT NO.96-111, SY.NO.403/1(OLD), 120(NEW), ROAD NO.72, JUBILEE HILLS, HYDERABAD; OR' (II) TO CAUSE 'SITE INSPECTION' OF THE PROPERTY BEARING D. NO. 8020293/82/J-111/96, PLOT NO. 96-111, SY. NO. 403/1 (OLD), 120(NEW), ROAD NO.72, JUBILEE HILLS, HYDERABAD, OWNED BY THE APPELLANT, FOR THE PURPOSE OF ASCERTAINING THE TOTAL EXTENT OF CONSTRUCTION MADE BY THE APPELLANT ON THE ABOVE PROPERTY; AND I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 13 - : (III) PASS SUCH OTHER ORDER (S) AS THE H ON'BLE TRIBUNAL DEEMS FIT AND PROPER IN THE INTEREST OF JUSTICE. HYDERABAD, 21.08.2015 XXXXXX APPELLANT LD. COUNSEL RELIED ON CO-ORDINATE BENCH DECISION IN THE CASE OF DCIT VS. SRI VIDYASAGAR DONTINENI IN ITA NOS. 632 & 1238/HYD/2013, DT. 28-01-2015 BY ITAT A BENCH ALL OWING THE CLAIM U/S. 54 ON THE REASON THAT CONSTRUCTION WAS C OMPLETED LATER TO THE SALE OF PROPERTY GIVING RISE TO CAPITAL GAIN S, EVEN THOUGH CONSTRUCTION STARTED MUCH EARLIER. 8. IN REPLY LD DR SUPPORTED THE ORDERS OF AO AND C IT(A). FURTHER, LD. DR HAD FILED WRITTEN SUBMISSIONS AS UN DER: 1. AS PER THE CLAIM OF THE LD.AR MADE BEFORE THE BENCH, THE ASSESSEE EXTENDED THE BUILT UP SPACE OF AN EXISTING HOUSE FROM 3,646 SFT TO APPROXIMATELY 10,000 SFT AND THEREFORE THE AR CLAIMS THE ASSESSEE IS ELIGIBLE FOR EXEMPTI ON U/S.54 ON CAPITAL GAINS ARISING FROM SALE OF ORIGINAL AS SET. 2. HOWEVER, THE FACTS OF THE CASE DO NOT SUPPO RT ASSESSEE'S CASE. THE FACTS OF THE ASSESSEE'S CASE ARE THAT ---SALE OF THE ORIGINAL ASSET TOOK PLACE ON 19 -03-2010. (I.E., SALE TOOK PLACE AFTER ACQUISITION OF SUPPOSEDLY NEW ASSET. OLD/ORIGINAL ASSET SHOULD GIVE WAY TO NEW ASSET, BUT IN THE INSTANT CASE, THE ORIGINAL ASSET AND THE SUPPOSEDLY NEW ASSET SIMULTANEOUSLY EXISTED.) ---ACQUISITION OF THE SUPPOSEDLY NEW ASSET STRANGEL Y HAPPENED ON 10-02-2005, I.E., MUCH BEFORE THE SALE OF THE ORIGINAL ASSET. I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 14 - : (DESCRIPTION OF THE SUPPOSEDLY NEW ASSET: 961 SQ.YDS + BUILT UP SPACE OF 3,646 SFT) (IN THE NATURAL COURSE, SALE OF ORIGINAL ASSET PRECEDES THE ACQUISITION OF NEW ASSET, WHEREAS IN THE ASSESSEE'S CASE, IT IS EXACTLY OPPOSITE IN TIME DIMENSIO N). ---SINCE THE ASSESSEE FAILED TO PRO VE BEFORE THE DEPARTMENTAL AUTHORITIES THAT THE BUILT UP S PACE OF 3646 SFT OF THE ORIGINAL ASSET HAS NOT BEEN DEMOLISHE D, IT IS PRESUMED THAT THE ASSESSEE HAS NOT DEMOLISHED ANY EXI STING STRUCTURE AND RATHER ONLY MADE ADDITIONAL BUILT UP SPACE THUS BRINGING THE AGGREGATE BUILT UP SPACE TO 10,0 00 SFT. (NOTE: THE NOMENCLATURES OF 'ORIGINAL ASSET' AND 'NEW ASSET' ARE USED IN THE SECTION 54 OF THE IT ACT). 3. AS THINGS STAND AS ABOVE, IT IS IMPORTANT TO ANALYSE SECTION 54 TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSE E'S CASE. SECTION 54 IS REPRODUCED IN FULL. 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 INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDINGS O R LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOU SE PROPERTY' (HEREAFTER 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 PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE , THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME-TAX A S INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,- (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GR EATER 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 S HALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESP ECT 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; I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 15 - : OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS E QUAL 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 WIT HIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AM OUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF 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 CONSTRUCT ION 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 DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139J IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH T HE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, 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, ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEME D 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 T HE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN,- (I) THE AMOUNT NOT SO UTILISED SHALL BE CHA RGED 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 T O WITHDRAW SUCH AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.- [OMITTED BY THE FINANCE ACT, 1992. W.E.F. 1-4- 1993. ] FROM THE SUB SECTION (1) OF SECTION 54, IT IS EVIDENT THAT THE TIME PERIOD FOR ACQUISITION OF NEW ASSET IS AS F OLLOWS ... I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 16 - : (A) IF THE ACQUISITION OF THE NEW ASSET (HOU SE) IS BY WAY OF PURCHASE, THE ASSESSEE CAN PURCHASE THE NEW ASSET (HOUSE) ONE YEAR BEFORE THE DATE OF T RANSFER OF THE ORIGINAL ASSET AND TILL 2 YEARS AFTER THAT DA TE OF TRANSFER. THAT MEANS, THE TOTAL TIME PERIOD AVAILABLE FO R THE ASSESSEE IS 3 YEARS STARTING FROM ONE YEAR BEFORE AND T WO YEARS AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THE ASSESSEE'S DOES NOT FALL UNDER THIS CATEGORY BECAUSE SHE DID NOT PURCHASE A NEW HOUSE. (B) IF THE ACQUISITION OF THE NEW ASSET (HO USE) IS BY WAY OF CONSTRUCTION, THE ASSESSEE CAN C ONSTRUCT THE NEW ASSET (HOUSE) WITHIN 3 YEARS FROM THE DA TE OF TRANSFER OF THE ORIGINAL ASSET. THAT MEANS THE TOTAL TIME PERIOD AVAILABLE FOR CONSTRUCTION OF THE NEW HOUSE IS NOT MORE THAN 3 YEARS COMMENCIN G FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET. THE ASSESSEE'S CASE FALLS UNDER THIS CATEGORY BECAUSE THE ASSESSEE CLAIMS TO HAVE CONSTRUCTED A NEW HOUSE. AS PER THE FACTS OF THE ASSESSEE'S CAS E, THE ASSESSEE CONSTRUCTED THE SUPPOSEDLY NEW HOUSE EVEN MUC H BEFORE THE SALE OF THE ORIGINAL ASSET. IN SUCH CAS E, THE ASSESSEE CANNOT CLAIM EXEMPTION U/S.54 MAINLY BECAU SE THE NEW ASSET CANNOT BE ACQUIRED BEFORE THE REALIZA TION OF SALE PROCEEDS OR IN OTHER WORDS BEFORE THE TRANSFE R OF THE ORIGINAL ASSET. 4. IN THE COURSE OF HEARING ON 20/08/2015, T HE ID .AR MADE SUBMISSION THAT THE ASSESSEE CAN CLAIM EXEMPT ION U/S.54 DESPITE THE FACT THE ASSESSEE DID NOT TRANSFER THE ORIGINAL ASSET AS ON THE DATE OF ACQUISITION OF THE NE W ASSET. FOR THIS PURPOSE HE RELIED ON THE JUDGMENT OF HYDERA BAD BENCH OF ITAT IN THE CASE OF DCIT VS. SRI VIDYASAGAR DONTINENI IN ITA NO'S 632 & 1238/HYD/2013, WHEREIN IT WAS HELD (PARAGRAPH 8.1) THAT THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM EXEMPTION U/S.54 EVEN IF INVESTMENT IS MADE (AS AN EXTENSI ON) IN A HOUSE WHOSE CONSTRUCTION COMMENCED MUCH BEFORE THE SPEC IFIED PERIOD, PROVIDED THE INVESTMENT IS MADE DURING THE SPE CIFIED PERIOD. IN THIS CASE LAW IT IS FURTHER HELD IN PARA 8.1 I N PAGE 10 THAT 'WHAT IS RELEVANT FOR CLAIM OF DEDUCTION U/S. 54 IS (1) THE DATE OF COMPLETION AND (2) PERIOD OF INVESTMENT'. WH EREAS THIS CASE LAW IS NOT APPLICABLE TO THE FACTS OF THE CASE BECAUSE IN THIS SAID CASE, THE ITAT REITERATED THAT EVEN THOU GH THE CONSTRUCTION COMMENCED BEFORE THE SPECIFIED PERIOD BUT RENOVATI ON WORK HAS TO BE COMMENCED AND COMPLETED WITHIN THE SPECIFIED PERIOD. THE SPECIFIED PERIOD IN THE CASE OF CONSTRUCTION(APPLIC ABLE FOR THE SUBJECT CASE) IS 3 YEARS COMMENCING FROM THE DATE OF TRANSF ER (19/03/2010). I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 17 - : ON THE CONTRARY, IN THE INSTANT CASE OF T HE ASSESSEE, THE ID.AO POINTED OUT CLEARLY IN PARAGRAPH 3 IN PAG E 3 OF THE ASSESSMENT ORDER THAT 'THE RENOVATION WORK OF THE HOUSE HAS STARTED FROM JANUARY, 2009 ONWARDS AND MAJOR WORK WAS COMPLETED BY 19-03-2010, THE DATE ON WHICH THE ASSESSEE HAS SOLD THE HOUSE PROPERTY AT 8ANGALORE'. FROM TH IS IT IS VERY CLEAR (FOR A MOMENT PRESUMING THAT THE ASSESSEE W OULD BE ELIGIBLE FOR EXEMPTION EVEN ON RENOVATION/EXTENSION OF AN OLD HOUSE) THAT MOST OF THE RENOVATION WORK HAS BEEN COMPLETED BE FORE THE DATE OF TRANSFER OF THE ORIGINAL ASSET. IN SUCH SCENARIO, THE ASSESSEE WOULD NOT BE ELIGIBLE TO CLAIM EXEMPTION U/S.54. 5. ANOTHER IMPORTANT ASPECT THAT NEEDS TO BE C ONSIDERED IS THE 'APPROPRIATION OF CAPITAL GAINS' AS EVIDENT IN SUB SECTION 2 OF SECTION 54. FOR CLAIMING EXEMPTION U/S.54, TH E AMOUNT EQUIVALENT TO THE CAPITAL GAINS HAS TO BE UTILI SED WITHIN THE SPECIFIED PERIOD FOR ACQUISITION OF NEW ASSET. IN CASE OF PURCHASE OF A HOUSE, THERE CANNOT BE A DI RECT AND COMPLETE NEXUS BETWEEN APPROPRIATION OF CAPITAL GAINS A ND ACQUISITION OF THE HOUSE BECAUSE ACQUISITION PROCESS COMMENCE S ONE YEAR BEFORE THE DATE OF TRANSFER OF THE ORIGINAL A SSET AND THERE COULD BE A CHANCE OF PARTIAL UTILIZATION OF FUND S OUTSIDE THE CAPITAL GAINS FUND, WHEREAS IN THE CASE OF CONSTRUCT ION OF A HOUSE, THERE HAS TO BE A DIRECT, COMPLETE AND WHOLESOM E NEXUS BETWEEN APPROPRIATION OF CAPITAL GAINS FUND A ND CONSTRUCTION OF NEW ASSET (HOUSE, EVEN RENOVATION OF HOUSE) BECAUSE THE CONSTRUCTION PROCESS HAS TO COMMENCE FROM THE DAT E OF TRANSFER OF THE ORIGINAL ASSET. THE ASSESSEE CAN CLAIM E XEMPTION U/S.54 ONLY IF THE CAPITAL GAINS FUNDS HAVE BEEN UTILISED/APPROPRIATED BY THE ASSESSEE TOWARDS CONSTRUCTION OF THE NEW ASSET (OLD OR EXISTING HOUSE) EVEN A S A CONTINUATION OF THE CONSTRUCTION OF THE HOUSE WHICH COULD HAVE COMMENCED BEFORE THE SPECIFIED PERIOD. IN OTHER WORDS, WHAT IS CRUCIAL FOR CLAIM OF EXEMPTION U/S.54 IS 'APPROPRIATION OF THE CAPITAL GAINS FUNDS DURING THE SPECIFIED PERIOD FOR CONSTR UCTION OF THE HOUSE', BUT NOT THE POINT OF COMMENCEMENT OF THE CONSTRUCTION PROCESS AS DECIDED IN THE ABOVE C ASE LAW. IN THE INSTANT CASE, THE CAPITAL GAIN S FUNDS HAVE NOT, AT ALL, BEEN APPROPRIATED BY THE ASSESSEE F OR THE CONSTRUCTION OF THE NEW ASSET (OLD HOUSE) BECAUSE MOST OF THE RENOVATION/EXTENSION WORK OF THE OLD HOUSE HAD BEEN COMPLETED EVEN BEFORE THE DATE OF TRANSFER OF THE ORIG INAL ASSET (19-03- 2010). IF AT ALL THE ASSESSEE CLAIMS THAT SHE IS ENTITLED TO EXEMPTION U/S.54, SHE WOULD BE ELIGIBLE TO CLAIM SU CH EXEMPTION ON THE CAPITAL GAINS FUNDS APPROPRIATED, SUBSEQUEN T TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET, FOR THE PURPO SES OF THE I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 18 - : CONSTRUCTION OF THE NEW ASSET (I.E., EVEN EXTENS ION OF THE OLD HOUSE). PARAGRAPHS 1 TO 3 OF THE ABOVE WRITTEN SUBMI SSIONS STAND ON ONE SIDE OF THE ARGUMENT AND PARAGRAPHS 4 T O 5 STAND ON ANOTHER SIDE OF THE ARGUMENT WHILE WITHOUT CA USING PREJUDICE TO EACH SIDE OF THE ARGUMENTS. THAT MEANS THE ARGUMENTS GIVEN IN PARAGRAPHS 4 TO 5 ARE NOT DEPENDENT UPON THE ARGUMENTS GIVEN IN PARAGRAPHS 1 TO 3 MEANING THEREBY THAT THE ARGUMENTS GIVEN IN PARAGRAPHS 4 TO 5 STILL HOLD GOOD IR RESPECTIVE OF THE FATE OF ARGUMENTS IN PARAGRAPHS IN 1 TO 3. IT IS REQUESTED THAT THE ABOVE WRITTEN SUBMISSIONS MAY BE REPRODUCED AND BE MADE PART OF THE APPELLATE OR DER TO BE PASSED BY THE HON'BLE ITAT, HYDERABAD. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS C AN BE SEEN FROM THE ABOVE, IT IS THE CONTENTION OF ASSESS EE THAT SHE CONSTRUCTED A NEW HOUSE WHEREAS IT IS THE AOS CONT ENTION THAT THERE IS ONLY EXTENSION TO THE EXISTING HOUSE AND T HE SAME CANNOT BE CONSIDERED AS A NEW HOUSE/NEW ASSET. 9.1. AS FAR AS PRINCIPLES OF LAW ARE INVOLVED, IT IS HELD IN THE CASE OF DCIT VS. SRI VIDYASAGAR DONTINENI IN ITA NO S. 632 & 1238/HYD/2013, DT. 28-01-2015 (SUPRA) THAT A CAREFUL READING OF THE RELEVANT PROVISIONS OF SECTION 54 MAKES IT CLEA R THAT CAPITAL GAINS ARISING FROM THE TRANSFER OF LONG TERM CAPITAL ASSE TS BEING RESIDENTIAL HOUSE IS ELIGIBLE FOR DEDUCTION U/S. 54 TO THE EXTE NT THE SAME IS INVESTED OR UTILIZED DURING THE SPECIFIED PERIOD FO R PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE . IN THE ABOVE REFERRED CASE, ASSESSEE WAS OWNING A PLOT IN JUBILEE HILLS WITH A OLD STRUCTURE WHICH WAS DEMOLISHED AND CONSTRUCTION OF NEW HOUSE COMMENCED WAY BACK IN THE YEAR 2002-03. IN THAT CONTEXT, IT WAS HELD THAT WHAT IS RELEVANT IS THE DATE OF COMPLETION OF THE C ONSTRUCTION AS WELL AS THE PERIOD OF INVESTMENT MADE BY ASSESSEE IN SUC H CONSTRUCTION . I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 19 - : ON FACTS, ITAT HELD THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 54 EVEN THOUGH THE CONSTRUCTION STARTED MUCH EARLIER A ND COMPLETED SUBSEQUENTLY TO THE RELEVANT DATE. THERE IS NO DIS PUTE WITH REFERENCE TO THE PRINCIPLE LAID DOWN. HOWEVER, THE HON'BLE KERALA HIGH COURT IN THE CASE OF MEERA JACOB VS. ITO [313 ITR 411] (KER) HAS HELD THAT ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION U/S. 54 F IN RESPECT OF INVESTMENT IN MODIFICATION/EXPANSION OF AN EXISTING RESIDENTIAL HOUSE. ON THE OTHER HAND, CONSTRUCTION OF A HOUSE ONLY QUALIFIES FOR EXEMPTION ON THE INVESTMENT. EVEN AD DITION OF A FLOOR OF A SELF-CONTAINED TYPE TO THE EXISTING HOUSE WOULD H AVE QUALIFIED FOR EXEMPTION . 9.2. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. PRADEEP KUMAR [290 ITR 90) (MAD) HAS HELD THAT BURDEN WAS ON ASSESSEE TO PROVE THAT THEY HAD ACTUALLY CONSTRUCTE D A NEW RESIDENTIAL HOUSE FOR THE PURPOSE OF EXEMPTION U/S. 54F. ASSESSEE SUBMITTED THAT THEY HAD CONSTRUCTED NEW RESIDENTIAL HOUSE BUT THEY WERE UNAUTHORIZED CONSTRUCTIONS AND THE SAME UNAUTH ORIZED CONSTRUCTIONS WERE LATER DEMOLISHED FOR THE PURPOSE OF ALL MODERNIZATION. IN THE PRESENT CASE, THERE WAS NEW TANGIBLE MATERIAL TO EVEN INFER THAT A RESIDENTIAL HOUSE WAS CONSTRUC TED. .. MERE CONSTRUCTION BY WAY OF EXTENSION OF THE OLD EXISTING HOUSE WOULD NOT MEAN CONSTRUCTING A RESIDE NTIAL HOUSE U/S. 54F. THERE WAS NO EVIDENCE OR CONTEMPORANEOUS DOCU MENTS AVAILABLE TO SHOW THAT THERE WERE CONSTRUCTIONS. T HE SUBMISSION OF ASSESSEE ABOUT THE CONSTRUCTION OF RESIDENTIAL HOUS E WAS NOT BASED ON ANY VALID MATERIAL. THEREFORE, ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF SECTION 54F . I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 20 - : 9.3. FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE ABOVE CASE, THE ITAT, CHENNAI IN THE THIRD M EMBER CASE OF ACIT VS. T.N. GOPAL [121 ITD 352] HAS HELD THAT EXEMPTION U/S. 54F COULD NOT BE ALLOWED ON ADDITIONAL CONSTRUCTION IN THE EXISTING HOUSE PROPERTY. SAME EXTENSION OF EXISTING BUILDIN G WILL NOT GIVE ANY BENEFIT TO ASSESSEE U/S. 54F. 10. THUS, THE ABOVE JUDICIAL PRINCIPLES ESTABLISH THAT ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S. 54/54F ONLY WHEN A NEW RESIDENTIAL UNIT COMES INTO EXISTENCE AND MERE EXTENSION OF EXISTING BUILDING WILL NOT GIVE THE BENEFIT. EVEN THOUGH THE CONSTRUCTION COULD START MUCH BEFORE THE SALE OF PR OPERTY GIVING RISE TO LONG TERM CAPITAL GAIN, WHAT IS RELEVANT IS THE COMPLETION OF HOUSE AND INVESTMENT MADE BY ASSESSEE WITHIN THE SPECIFIED PERIOD AS PER THE PROVISIONS OF THE ACT. 11. KEEPING THE ABOVE PRINCIPLES IN MIND, IF WE AN ALYZE ASSESSEES AND REVENUES CONTENTIONS, WE ARE UNABLE TO COME TO ANY CONCLUSION WHETHER ASSESSEE HAS CONSTRUCTED A N EW INDEPENDENT HOUSE. THERE IS NO EVIDENCE ON RECORD THAT THE OLD BUILDING WAS DEMOLISHED. AO VERY CLEARLY STATES TH AT THE EXISTING BUILDING IN THE GROUND FLOOR AND FIRST FLOOR WERE N OT DEMOLISHED AND NEW CONSTRUCTION HAS COME ON EXISTING BUILDING AND THERE BEING ONLY ONE ENTRANCE AND ONE KITCHEN, IT IS ONLY EXTEN SION OF THE HOUSE AND NOT NEW HOUSE. IT IS THE CONTENTION OF A SSESSEE THAT THE OLD BUILDING WAS ONLY 3,646 SQ. FT., WHEREAS THE NE W BUILDING WAS TO AN AREA OF 10,544.39 SQ. FT. IT WAS THE CONTENT ION THAT ASSESSEE HAS RE-MODELED THE ENTIRE HOUSE. IN SUPPORT, ASSES SEE HAS PLACED THE OLD MAPS AS WELL AS NEW PLAN STATED TO HAVE BEE N OF EXISTING NEW BUILDING. THIS PLAN PLACED IN PAGE 66 OF PAPER BOOK IS NOT AN I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 21 - : AUTHENTICATED COPY, AS IT WAS NOT DRAWN UP BY ANY A RCHITECT. MOREOVER, AS ADMITTED BY ASSESSEE, NO PERMISSIONS W ERE TAKEN FROM MUNICIPAL CORPORATION. THEREFORE, AUTHENTICIT Y OF THE PLAN COULD NOT BE VERIFIED BY US. FURTHER, AS SEEN FROM THE VALUATION REPORT PLACED BY ASSESSEE IN SUPPORT OF THE INVESTM ENT IN THE NEW HOUSE, PLACED AT PAGES17 & 18 OF PAPER BOOK ISSUED BY PRAKASH ASSOCIATES, THERE IS A GROUND FLOOR OF 753. 431 AMOUNTING TO 3245.15 SQ. FT OF GROUND FLOOR 753 X 48.6 AREA TO 3649.62 SQ. FT. FIRST FLOOR AND SAME DIMENSIONS OF SECOND FLOOR 364 9.62 SFT., TOTALING TO 10,544.39. THIS PROPERTY WAS VALUED AT 1,300 PER SQ. FT., AT RS. 1,37,07,707/-. 11.1. AS SEEN FROM THE SO CALLED REVISED PLAN PLAC ED IN THE PAPER BOOK AT PG. 66, THERE IS A CELLAR FLOOR CONSISTING OF 26.37 SQ. MTRS ., WHICH IS NOT REPORTED IN THE VALUATION REPORT ST ATED ABOVE. IN ORDER TO EXAMINE THE DIMENSIONS, THEY WE RE STATED IN SQ. MTS AND THERE IS VARIATION IN DESIGN IT SELF. THE GROUND FLOOR AND FIRST FLOOR ARE OF SIMILAR DIMENSIONS, WHEREAS SECO ND FLOOR IS LESSER THAN THAT. THE GROUND AND FIRST FLOOR WAS MENTIONE D AS 302.35 SQ. MTRS., WHEREAS THE SECOND FLOOR AREA WAS SHOWN AT 2 31.35 SQ. MTRS. IN THE VALUATION REPORT THE GROUND FLOOR IS DIFFERENT FROM FIRST AND SECOND WHICH ARE OF SAME DIMENSIONS. THUS, THER E IS VARIATION IN THE BUILDING STRUCTURE ITSELF FROM THE VALUATION REPORT TO THE SO CALLED PLAN PLACED ON RECORD. NOT ONLY THAT, THE P LOT AREA ON WHICH BUILDING WAS CONSTRUCTED AS PER THE ORIGINAL SALE D EED IS TRIANGULAR IN NATURE, WHEREAS THE PRESENT AREA IS ALMOST LIKE A RECTANGLE. FROM WHERE THE ADDITIONAL AREA HAS COME IN THE REVI SED PLANS PLACED ON RECORD WAS NOT EXPLAINED WHEN QUESTIONED. THEREFORE, AS REQUESTED BY ASSESSEE, ONLY SITE INSPECTION CAN CONFIRM WHETHER ASSESSEE HAS INDEED CONSTRUCTED ALTOGETHER A NEW HO USE OR ONLY I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 22 - : MADE EXTENSION TO THE OLD BULDING. THE VARIATIONS NOTED ABOVE ALSO REQUIRE DEEPER EXAMINATION PHYSICALLY. THEREFORE, A O IS DIRECTED TO GIVE AN OPPORTUNITY TO ASSESSEE, TAKE THE TECHNICAL PEOPLE LIKE VALUATION OFFICERS OF THE DEPARTMENT AND EXAMINE WH ETHER THE STRUCTURE AS CLAIMED BY ASSESSEE IS OLD OR NEW, SO AS TO CONSIDER THE ELIGIBILITY OF DEDUCTION U/S. 54. 12. INCIDENTAL TO THE ABOVE, AS SEEN FROM THE VALU ATION REPORT ON THE BASIS OF WHICH ASSESSEE CLAIMED INVES TMENT OF RS. 1,37,07,707/- ON TOTAL AREA OF 10,544.39 SQ. FT., THIS AREA OF 10,544 ALSO INCLUDES THE OLD AREA OF 3,649 SQ.FT. THEREFORE, TECHNICALLY SPEAKING, THE INVESTMENT IN THE NEW BUI LDING AS PER ASSESSEES OWN VALUATION REPORT WOULD NOT BE MORE T HAN RS. 89,63,500/- (APPROXIMATELY, WORKED OUT ON THE BASIS OF ADDITIONAL AREA @ 1300/PER SQ.FT). THEREFORE, IT IS ALSO REQU IRED TO BE EXAMINED AS TO HOW MUCH ASSESSEE HAS INVESTED IN T HE NEW HOUSE. 13. ONE MORE ASPECT WHICH REQUIRE EXAMINATION IS D ATES OF INVESTMENTS. AS NOTED BY THE AO IN THE ASSESSMENT ORDER, ASSESSEE SEEMS TO HAVE CONSTRUCTED THE HOUSE MUCH B EFORE 19-03- 2010, ON WHICH DATE SALE OF BANGALORE PROPERTY OCCU RRED. AS EXTRACTED BY THE AO IN PAGE NOS. 4 & 5 OF ASSESSMEN T ORDER, MOST OF THE CIVIL WORKS WERE COMPLETED BEFORE THE DATE A ND BILLS SUBSEQUENT TO 19-03-2010 PERTAINING TO DECORATIVE F EATURES AND FURNITURE ETC., DOES NOT QUALIFY FOR DEDUCTION U/S . 54F. IN FACT, IN THE CASE OF DCIT VS. SRI VIDYASAGAR DONTINENI IN I TA NOS. 632 & 1238/HYD/2013, DT. 28-01-2015 (SUPRA), AS EXTRACTED BY THE ITAT IN PARA 6 OF THE ORDER, THE LD. CIT(A) HAS EXCLUDED THE ITEMS WHICH DO NOT FORM AN INTEGRAL AND INALIENABLE PART OF THE HOUSE, SUCH AS I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 23 - : MARBLE STATUE, FURNITURE AND FITTINGS ETC., WHICH W ERE NOT REQUIRED TO BE INCURRED TO MAKE THE HOUSE HABITABLE AND SINC E SUCH EXPENDITURE WAS INCURRED MAINLY TO DECORATE THE NEW HOUSE OF ASSESSEE, LD. CIT(A) HELD THAT IT WAS NOT ELIGIBLE FOR DEDUCTION U/S. 54. THIS FINDING OF THE AO WAS NOT CHALLENGED BY A SSESSEE THEREIN. SIMILAR ARE FACTS IN THE PRESENT CASE. ASSESSEE EV EN THOUGH CLAIMED THAT IT HAS INVESTED PART OF THE MONEY BEFO RE 19-03-2010, BUT PART ALSO AFTERWARDS. AOS ORDER INDICATE THAT SUCH EXPENDITURE IS FOR LAND-SCAPING, FURNITURE AND FITT INGS WHICH CANNOT BE CONSIDERED AS NECESSARY FOR MAKING IT HAB ITABLE. THE DECORATIVE ITEMS CANNOT BE CONSIDERED AS PART OF IN VESTMENT FOR THE PURPOSE OF SECTION 54. HOWEVER, ASSESSEE IN THE PA PER BOOK HAS FILED CERTAIN DETAILS OF PAYMENTS STATED TO BE FOR THE HOUSE AT PAGE NO. 7 OF THE PAPER BOOK AS UNDER: S.B A/C NO. 140410100000308 ANALYTICAL SHEEETOF MRS SHAKERA BEGUM ANDHRA BANK, JUBILE HILLS STATEMENT FROM 01-04-2009 TO 31-07-2010 CH.NO DATE AMOUNT REASON 876691 02.04.10 2,50,000.00 SELF FO R CONSTRUCTION EXPENCES 876692 07.04.10 5,00,000.00 SELF FO R CONSTRUCTION EXPENCES 876693 08.04.10 15,00,000.00 SELF F OR CONSTRUCTION EXPENCES 876694 13.04.10 25,00,000.00 DR.MOHD HUSSAIN AS GIFT 876695 15.04.10 1,00,000.00 SELF FOR CONSTRUCTION EXPENCES 876696 16.04.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 876697 21.04.10 3,50,000.00 SELF FOR CONSTRUCTION EXPENCES 876699 21.04.10 1,75,000.00 SELF FOR CONSTRUCTION EXPENCES 876700 30.04.10 2,60,000.00 SELF FOR CONSTRUCTION EXPENCES 877851 5.05.10 20,000.00 SELF FOR CONSTRUCTION EXPENCES 877852 5.05.10 4,20,000.00 SELF FOR CONSTRUCTION EXPENCES 877855 14.05.10 60,000.00 SELF FOR CONSTRUCTION EXPENCES 877854 14.05.10 56,000.00 SELF FOR CONSTRUCTION EXPENCES 877855 15.05.10 40,000.00 SAHEBLAL FOR CONSTRUCTION EXPENCES 877856 17.05.10 3,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877860 21.05.10 5,06,733.00 PRAPURNA IMPEX LIMITED FOR CONSTRUCTION 877862 21.05.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877863 24.05.10 4,00,000.00 MR.WAHED HUSSAIN FOR CONSTRUCTION I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 24 - : 877864 25.05.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877866 27.05.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877866 27.05.10 61,000.00 MOHAD ARIF FOR CONSTRECTION 877867 27.05.10 5,00,000.00 MOHAD ARIF FOR CONSTRECTION 877868 29.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES .877869 01.06.10 1,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877870 03.06.10 3,23,000.00 A/C140410100000894 877871 04.06.10 1,00,000.00 DR MOHD HUSSAIN FOR CONSTRUCTION 877872 04.06.10 1,00,000.00 DR MOHD HUSSAIN FOR CONSTRUCTION 877873 07.06.10 1,91,760.00 KHAJANA FOR CONSTRUCTION 877874 09.06.10 1,00,000.00 SELF FOR CONSTRUCTION EXPENCES 877875 11.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 878427 14.06.10 11,30,000.00 SELF FOR CONSTRUCTION EXPENCES 878428 18.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 878429 19.06.10 1,20,000.00 SELF FOR CONSTRUCTION EXPENCES 878431 22.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 878432 25.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 878433 30.06.10 2,00,000.00 SELF FOR CONSTRUCTION EXPENCES 878436 06.07.10 1,00,000.00 SELF FOR CONSTRUCTION EXPENEES 878434 06.07.10 3,00,000.00 DR MOHD HUSSAIN FOR CONSTRUCTION .878437 20.07.10 3,50,000.00 SELF FOR CONSTRUCTION EXPENCES 237,000.00 TOTAL: 1,29,13,493.00 14. HOWEVER, THIS STATEMENT OF ASSESSEE SHOWING INVESTMENT OF RS. 1,29,13,493/- VARIES WITH THE EXP ENDITURE EXTRACTED BY THE AO IN ASSESSMENT ORDER. THEREFORE , IT IS MORE NECESSARY TO ESTABLISH THE ACTUAL AMOUNT OF INVESTM ENT MADE BY ASSESSEE IN THE HOUSE AND THE PERIOD OF INVESTMENT, EVEN TO CONSIDER THE QUANTUM OF ELIGIBLE AMOUNT. SINCE ASS ESSEE HAS NOT FURNISHED COMPLETE DETAILS LIKE BANK ACCOUNT ON THE BASIS OF WHICH ASSESSEE IS CLAIMING THE AMOUNTS, WE ARE ALSO UNAB LE TO EXAMINE WHETHER ASSESSEES CONTENTIONS ARE CORRECT OR NOT? IN VIEW OF THIS, APART FROM EXAMINING WHETHER THE HOUSE CONSTRUCTED BY ASSESSEE IS EXTENSION OF OLD HOUSE OR A NEW HOUSE, AO IS ALS O DIRECTED TO EXAMINE THE INVESTMENT MADE AND THE PERIOD AND DETE RMINE HOW MUCH OF THE AMOUNT IS ELIGIBLE FOR DEDUCTION, KEEPI NG IN MIND THE OBSERVATIONS MADE ABOVE. IN CASE THE AMOUNTS ARE I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 25 - : INVESTED/CLAIMED TO HAVE INVESTED BY THE FUNDS OF A SSESSEES SON, AO IS ALSO DIRECTED TO EXAMINE THE SOURCE OF FUNDS OF THOSE AMOUNTS SO AS TO DETERMINE THE EXACT AMOUNT OF INVE STMENT IN THE HOUSE. 15. NEXT ISSUE TO BE EXAMINED IS WHETHER THE HOUSE WAS COMPLETED AS ON 19-03-2010 AS CONTENDED BY AO OR SU BSEQUENTLY, AS CONTENDED BY ASSESSEE? THIS CAN ALSO VERIFIED N OT ONLY ON PHYSICAL INSPECTION OF BUILDING BUT ALSO VARIOUS IN VESTMENTS AND BILLS BEING MAINTAINED BY ASSESSEE FOR CONSTRUCTION OF THE HOUSE. WE MAKE IT CLEAR THAT IT IS FOR ASSESSEE TO ESTABLI SH THAT THE HOUSE IS A NEW HOUSE AND INVESTMENT WAS MADE AFTER THE CA PITAL GAIN HAS ACCRUED I.E., AFTER 19-03-2010. IN VIEW OF THIS, W ITHOUT GIVING ANY CLEAR OPINION ON THE CONTENTIONS OF EITHER PARTY, W E ARE OF THE OPINION THAT THE MATTER REQUIRES THOROUGH EXAMINATI ON BY THE AO AFRESH TO ESTABLISH THE FACTS FIRST. NEEDLESS TO SA Y THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY TO SUBSTANTIATE HER CONTENTIONS AND AO SHOULD DEAL WITH THEM IN THE ORDER. THERE S HOULD NOT BE ANY OCCASION TO COMPLAIN, LIKE WHAT ASSESSEE HAS CO MPLAINED BEFORE THE CIT(A) IN THIS PROCEEDINGS THAT ITI HAS NOT INSPECTED THE BUILDING. WE ARE OF THE OPINION THAT THE INSPECTIO N CAN BE UNDERTAKEN BY AO AND THE TECHNICAL PEOPLE OF THE DE PARTMENT ALONG ASSESSEE OR HER REPRESENTATIVES SO AS TO EST ABLISH THE FACTS. WITH THESE OBSERVATIONS, THE ISSUE IN THESE GROUNDS IS RESTORED TO THE FILE OF AO TO EXAMINE THE FACTS FIRST AND CONSI DER THE CLAIM AS PER THE PROVISIONS OF LAW AND PRINCIPLES GOVERNING THE ISSUE. GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURP OSES. 16. GROUND NOS. 6 & 7 PERTAIN TO THE ADDITION OF R S. 41,25,000/- MADE BY THE AO. AO FOUND OUT THAT ASSE SSEE HAS I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 26 - : DEPOSITED CASH INTO BANK ACCOUNT AND ASKED FOR THE SOURCES. ASSESSEE EXPLAINED THAT THE AMOUNT WAS RECEIVED FRO M THE SELLER OF BANGALORE PROPERTY AND FILED REVISED COMPUTATION OF CAPITAL GAIN INCREASING THE SALE CONSIDERATION BY THAT EXTENT. AO DID NOT ACCEPT THE CONTENTIONS AS HE HAS ISSUED LETTER TO THE BUYE R WHO DENIED HAVING PAID THE AMOUNT. SINCE THE NEXUS WITH SALE OF PROPERTY WAS NOT ESTABLISHED, AO MADE SEPARATE ADDITION OF THE A BOVE AMOUNT UNDER THE HEAD OTHER SOURCES AS UNEXPLAINED CASH CREDITS OF ASSESSEE. ASSESSEE CONTESTED BEFORE THE CIT(A), WH O ALSO CONFIRMED THE OPINION OF THE AO. BEFORE US, ASSESS EE FILED A BANK ACCOUNT AND TRIED TO EXPLAIN THAT THE AMOUNT IS NOT HING BUT SALE CONSIDERATION RECEIVED IN CASH. LD. COUNSEL REITER ATED THE SUBMISSIONS MADE EARLIER AND RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SMT. P.K. NOORJEHAN A S RELIED ON BY ASSESSEE IN THE GROUNDS OF APPEAL. 17. WE ARE NOT CONCERNED WITH THE CONTENTIONS IN G ROUND NO. 6 WHICH ARE NOT VERIFIABLE BY US, AS IT IS MERE LY AN ALLEGATION BY ASSESSEE. WHAT STAND REVENUE TAKES IN OTHER CASES SHOULD NOT PRE-JUDGE THE ISSUE OR CAUSE PREJUDICE IN ASSESSEE S CASE. IT IS ASSESSEE WHO IS ASCERTAINING THAT AMOUNT RECEIVED A ND DEPOSITED IN BANK ACCOUNT IS THE SALE CONSIDERATION FROM THE SALE OF PROPERTY. HOWEVER, NOTHING WAS BROUGHT ON RECORD TO ESTABLISH THAT THIS SALE CONSIDERATION WAS RECEIVED AT THE TIME OF EITHER EN TERING INTO AGREEMENT OR AT THE TIME OF REGISTERING THE PROPERT Y. AS SEEN FROM THE STATEMENT OF ANDHRA BANK A/C PLACED ON RECORD I N THE PAPER BOOK, THERE WAS A CASH DEPOSIT OF RS. 20 LAKHS ON 2 ND NOVEMBER, 2009. IT WAS NOT EXPLAINED WHETHER ASSESSEE HAS EN TERED INTO ANY AGREEMENT OF SALE AT THAT POINT OF TIME, EVEN TO CO NSIDER THAT THERE IS SOME NEXUS WITH THE SALE PROPERTY. THERE IS NO EVIDENCE PLACED I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 27 - : ON RECORD THAT THESE AMOUNTS WERE DEPOSITED IN THE BANK ACCOUNT WAS AN ADVANCE RECEIVED IN CASH. GENERALLY, WHENEV ER THERE IS A PROPERTY TRANSACTION, SOME AMOUNT IS PAID BY WAY OF CHEQUE IF THERE IS ANY AGREEMENT OF SALE AND IF THERE IS ANY CASH DEALINGS, CASH IS PAID SEPARATELY. AS SEEN FROM THE BANK A/C , THERE WAS NO SUCH CREDIT OF CHEQUE PAYMENTS IN THE MONTH OF NOVE MBER, 2009, THERE WERE ONLY SOME DEPOSITS BY WAY OF INSTRUMENTS I.E., CHEQUES ON 3 RD DECEMBER, 2009 TO AN EXTENT OF RS. 10 LAKHS WHICH IS NOT PART OF SALE CONSIDERATION, WHICH WAS RECEIVED BY A SINGLE CHEQUE/TRANSFER ON 23-03-2010 TO AN EXTENT OF RS. 1 ,53,60,000/- I.E., CLEARED AFTER PROPERTY WAS REGISTERED ON 19-0 3-2010. THERE WAS CASH DEPOSITS ON 22 ND FEBRUARY, 24 TH FEBRUARY AND 25 TH FEBRUARY TO AN EXTENT OF RS. 4.25 LAKHS, 5 LAKHS AN D 10 LAKHS RESPECTIVELY ON THESE DATES. HERE ALSO THERE IS NO NEXUS ESTABLISHED WITH REFERENCE TO THE SALE TRANSACTION BEING CONTENDED BY ASSESSEE. IN VIEW OF THIS, WE ARE UNABLE TO ACC EPT ASSESSEES CONTENTIONS THAT ASSESSEE HAS RECEIVED ANY CONSIDER ATION IN CASH OVER AND ABOVE THE AMOUNT, WHICH WAS ORIGINALLY RET URNED BY ASSESSEE IN THE RETURN OF INCOME. AS RIGHTLY NOTIC ED BY THE AO, ASSESSEE IN FACT HAS FILED RETURN ON 20-03-2012 BE LATEDLY WHEN THE RETURN WAS DUE IN SEPTEMBER, 2010. THE BELATED RET URN ITSELF INDICATE THAT SUFFICIENT TIME WAS TAKEN BY ASSESSEE TO DECIDE THE MATTERS. THIS DO INDICATE THAT THERE IS NO NEXUS WI TH THE CASH DEPOSITS IN THE BANK A/C TO THAT OF SALE CONSIDERAT ION RECEIVED BY ASSESSEE WHICH WAS ORIGINALLY DISCLOSED IN THE COMP UTATION OF INCOME. SINCE ASSESSEE HAS NOT FURNISHED ANY CORRE LATION WITH REFERENCE TO SALE OF PROPERTY, THE CASH DEPOSITS MA DE INTO THE BANK A/C ARE RIGHTLY CONSIDERED AS UNEXPLAINED INVESTME NT BY THE AO. SINCE ASSESSEE IS SUFFICIENTLY AGED AND HAS A GROWN UP SON PRACTICING AS A DOCTOR AND ALSO ASSESSEE RECEIVES M ONEY FROM I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 28 - : ASSESSEES HUSBAND WHO IS WORKING IN SAUDI AND ALSO OWNS PROPERTIES, THE FACTS IN THE CASE OF SMT. P.K. NOO RJEHAN (SUPRA), DOES NOT APPLY TO THE FACT SITUATION IN ASSESSEES CASE. IT IS FOR ASSESSEE TO ESTABLISH THE SOURCE OF FUNDS AND SINCE THERE IS FAILURE ON THE PART OF ASSESSEE TO EXPLAIN SOURCES OF DEPOS ITS, THE PROVISIONS OF THE ACT ARE AUTOMATICALLY INVOKED. W E DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF AO AND CIT(A ). ACCORDINGLY, GROUND NOS. 6 & 7 ARE REJECTED. 18. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 16 TH OCTOBER, 2015 TNMM I.T.A. NO. 1910/HYD/2014 SMT SHAKEERA BEGUM :- 29 - : COPY TO : 1. SMT. SHAKEERA BEGUM, 8-2-293/A/III/96, PLOT NO. 96- 111, S.NO. 403/1(OLD) 120 (NEW), RD. NO. 72, JUBILE E HILLS, HYDERABAD. C/O. K. VASANT KUMAR, A.V. RAGHU RAM, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-6(3), IT TOWERS, A. C. GUARDS, HYDERABAD. 3. CIT (APPEALS)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.