K.Seshu Jaggaiah, CHENNAI V. ITO, CHENNAI

ITA 2147/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58080 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 1995-1996
• Appeal Filed On: 27-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR STAND ING
• Assessee Lawyers: B RAMAKRISHNAN
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.2147(MDS)/2011 ASSESSMENT YEAR : 1995-96 SMT.SESHU JAGGAIAH, C/O CNGSN & ASSOCIATES, 20-RAJA ST., T.NAGAR, CHENNAI-600 017. PAN AAKPK5993J. VS. THE INCOME-TAX OFFICER, BUSINESS WARD XIV(2), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRISHNAN, FCA RESPONDENT BY : SHRI KEB RENGARAJAN, JR.STAN DING COUNSEL DATE OF HEARING : 20 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 20 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 1995-96. THE APPEAL IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-XI I AT CHENNAI, DATED 21-10-2011. THE APPEAL ARISES OUT O F THE ORDER - - ITA 2147 OF 2011 2 PASSED UNDER SECTION 143(3), READ WITH SECTION 254 OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE, HAD SOLD A PROPERTY IN CHENNAI ON 27-2-1995 FOR A CONSIDERATIO N OF ` 95 LAKHS. IN FILING HER RETURN OF INCOME, THE ASS ESSEE CLAIMED EXEMPTION UNDER SECTION 54 AND RETURNED A TOTAL INC OME OF ` 4,56,710/-. THE CLAIM OF DEDUCTION UNDER SECTION 54 WAS REJECTED BY THE ASSESSING AUTHORITY AND THE INCOME WAS DETERMINED AT ` 81,60,000/-. THE MATTER WAS TAKEN UP BEFORE THE INCOME-TAX APPELLATE TRIBUNAL. THE TRIBUNAL RE MITTED BACK THE FILE TO THE ASSESSING OFFICER TO CONSIDER THE I SSUE OF DISALLOWANCE UNDER SECTION 54 AFTER GIVING A FINDIN G ON THE GENUINENESS OF THE CLAIM OF THE ASSESSEE THAT SHE H AD GIVEN ADVANCES TOWARDS PURCHASE OF A PROPERTY TO CONSTRUC T A RESIDENTIAL HOUSE. THE TRIBUNAL ALSO DIRECTED TO R E-EXAMINE THE QUESTION OF SETTING OFF OF SHORT-TERM CAPITAL LOSS ARISING ON SALE OF SHARES. 3. IN THE CONSEQUENTIAL ASSESSMENT DONE BY THE ASSESSING OFFICER, THE DEDUCTION UNDER SECTION 54 W AS AGAIN - - ITA 2147 OF 2011 3 NEGATIVED AND ALSO THE SHORT-TERM CAPITAL LOSS WAS HELD TO BE SPECULATIVE IN NATURE. 4. IN FIRST APPEAL, THE COMMISSIONER OF INCOME- TAX(APPEALS) ALLOWED THE ISSUE OF SHORT-TERM CAPITA L LOSS, BUT CONFIRMED THE DISALLOWANCE OF DEDUCTION UNDER SECTI ON 54. IT IS ON THAT ISSUE OF SECTION 54 THAT THE ASSESSEE HAS C OME IN SECOND APPEAL BEFORE US, WHICH IS FOR THE SECOND TI ME. 5. THE ONLY GROUND RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS THAT THE COMMISSIONER OF INCOME-T AX(APPEALS) HAS ERRED IN CONFIRMING THE DENIAL OF DEDUCTION UND ER SECTION 54 OF THE INCOME-TAX ACT, 1961. 6. WE HEARD SHRI B.RAMAKRISHNAN, THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE, AN D SHRI KEB RENGARAJAN, THE LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE. 7. IN THE FIRST ROUND OF SECOND APPEAL, THE INCOME -TAX APPELLATE TRIBUNAL HAS DIRECTED TO ADOPT THE FAIR M ARKET VALUE OF THE PROPERTY AT ` 2 LAKHS PER GROUND. ON THAT BASIS THE ASSESSING OFFICER HAS WORKED OUT CAPITAL GAINS AT ` 72,49,400/-. THE CLAIM OF THE ASSESSEE IS THAT SHE HAS PURCHASED A VACANT - - ITA 2147 OF 2011 4 PLOT AT AKSHAYA COLONY FOR A CONSIDERATION OF ` 8,92,136/-, ADMEASURING 2400 SFT.. THE PLOT WAS PURCHASED FOR CONSTRUCTING A RESIDENTIAL PROPERTY THEREIN. THE FURTHER CONTEN TION OF THE ASSESSEE TOWARDS DEDUCTION UNDER SECTION 54 IS THAT THE ASSESSEE HAS GIVEN ADVANCES TO THREE PARTIES FOR AC QUIRING THE NEW PROPERTY AND THAT THE SAME WAS NOT COMPLETE BEC AUSE THE PROPERTY WAS NEITHER CONSTRUCTED BY THOSE PERSONS N OR THE ADVANCES WERE RETURNED IN TIME. ULTIMATELY, THE AS SESSING OFFICER FOUND THAT THE CONSTRUCTION OF THE PROPERTY WAS COMPLETED ONLY DURING 2001-02 AND AS SUCH THE ASSESSEE HAD NO T PURCHASED ANY RESIDENTIAL HOUSE EITHER ONE YEAR PRI OR OR TWO YEARS AFTER THE DATE OF TRANSFER AND ALSO NO RESIDE NTIAL PROPERTY WAS CONSTRUCTED WITHIN THREE YEARS FROM THE DATE OF TRANSFER. THE DEDUCTION WAS DENIED. 8. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE W AS PREVENTED FROM DEPOSITING THE SALE PROCEEDS IN THE CAPITAL GAINS ACCOUNT, AS SHE HAD ADVANCED THE MONEY WITH AN INTE NTION TO PURCHASE A PROPERTY. THE ADVANCES WERE MADE TO SHR I K.RAJANEENATH, SHRI K.MADHUVAN PRASAD AND M/S.NATCO ORGANICS LTD. THE TOTAL OF THE ADVANCES COMES TO ` 50 LAKHS. IT - - ITA 2147 OF 2011 5 IS HER CASE THAT THE SAID AMOUNT WAS ADVANCED FOR P URCHASE OF A RESIDENTIAL HOUSE. THOSE PARTIES DID NOT HAND OVER THE HOUSE, NOR DID THEY RETURN THE ADVANCE IN TIME. SO THE AS SESSEE COULD NOT EITHER CONSTRUCT A HOUSE HERSELF OR ACQUIRE A P ROPERTY HERSELF OR DEPOSIT THE PROCEEDS IN THE DESIGNATED ACCOUNT. THEREFORE, IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE COULD NOT PERFORM WHAT WAS NOT POSSIBLE OF PERFORMANCE. SHE RELIED O N THE CONCEPT OF LEX NON COGIT AD IMPOSSIBILIA . 9. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE JODHPUR BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF JAGAN NATH SINGH LODHA VS. ITO, 85 TTJ (JD) 173. 10. WE CONSIDERED THE ISSUE IN DETAIL. THE CASE O F THE ASSESSEE IS THAT THE ASSESSEE COULD NOT COMPLY WITH THE PROVISIONS OF SECTION 54 WITHIN THE TIME PRESCRIBED FOR REASONS BEYOND HER CONTROL, INASMUCH AS THE MONEY, WHICH WA S BLOCKED BY HER BY PAYING ADVANCES TO PROCURE THE PROPERTY, WAS NOT REALIZED WITHIN THE TIME AND, THEREFORE, SHE COULD NOT MAKE ANY ALTERNATIVE INVESTMENT WITHIN THE PRESCRIBED TIME. IT IS THE CASE OF THE ASSESSEE THAT THE ACQUISITION OF THE PROPERT Y HAS BEEN COMPLETED IN 2001-02 AND, THEREFORE, DEDUCTION UNDE R SECTION 54 - - ITA 2147 OF 2011 6 MAY BE GRANTED, CONDONING THE PERIOD OF DELAY CAUSE D IN COMPLYING WITH THE TIME LIMIT PRESCRIBED UNDER SECT ION 54. 11. THERE ARE INSTANCES OF DECISIONS RENDERED BY VARIOUS BENCHES OF THE TRIBUNAL IN EXTENDING THE BE NEFIT OF DEDUCTION AVAILABLE UNDER SECTION 54 EVEN WHEN THE CONDITIONS WERE COMPLIED WITH BY THE ASSESSEE BEYOND THE PRESC RIBED PERIOD. BUT, IN SUCH CASES THE ASSESSEES COULD NOT HAVE SATISFIED THE CONDITIONS BY PERFORMANCE, AS THE ASS ESSEES WERE PREVENTED BY SUFFICIENT REASONS. THE ASSESSEES WER E PREVENTED FROM PERFORMING THE CONDITIONS BY VIRTUE OF SUPERVE NING IMPOSSIBILITIES, EITHER BY WAY OF JUDICIAL RESTRAIN T OR BY ANY OTHER COGENT REASONS BEYOND THE CONTROL OF THE ASSESSEE. 12. IN THE PRESENT CASE, THE CONSTRAINT STATED BY THE ASSESSEE IS THAT THE ADVANCES GIVEN BY HER TO ACQUI RE THE PROPERTY WERE NOT RETURNED TO HER IN TIME, NOR PROP ERTY WAS ACQUIRED. AS POINTED OUT BY THE ASSESSING OFFICER, THE PAYMENT OF ADVANCES FOR THE PURPOSE OF ACQUIRING THE PROPER TY ITSELF HAS NOT BEEN PROVED BY THE ASSESSEE. IN ADDITION TO TH AT, IT IS TO BE SEEN THAT THE ADVANCES WERE GIVEN ON THE BASIS OF A N AGREEMENT BETWEEN THE PARTIES AND THE ASSESSEE. THOSE ADVANC ES ARE - - ITA 2147 OF 2011 7 STATED TO HAVE NOT BEEN RECEIVED BACK WITHIN THE TI ME. THAT CANNOT BE A SUPERVENING IMPOSSIBILITY BY OPERATION OF ANY UNCONTROLLABLE EVENTS. PAYMENT OF ADVANCE AND RETU RN OF THE SAME ARE ALL MATTERS OF NORMAL COMMERCIAL AGREEMENT S. SUCH THINGS AS SUCH CANNOT ACT AS SUPERVENING IMPOSSIBIL ITIES. 13. IN THE PRESENT CASE, SIMILAR ARGUMENTS OF THE ASSESSEE ARE NOTHING BUT NAIVE, AS TWO OUT OF THE T HREE PERSONS TO WHOM ADVANCES WERE MADE BY THE ASSESSEE, ARE HER OWN SONS. WHEN THE ASSESSEE GOT THE MONEY ON SALE OF T HE PROPERTY, SHE HANDED OVER THE MONEY TO HER SONS AND THEY ENJOYED THE MONEY FOR QUITE A LONG TIME AND THEREAF TER RETURNED THE MONEY TO THE ASSESSEE AND AGAIN THEREAFTER SHE CONSTRUCTED THE RESIDENTIAL PROPERTY BEYOND THREE YEARS OF THE PRESCRIBED TIME LIMIT AND NOW SEEKING DEDUCTION UNDER SECTION 54 ON THE GROUND OF SUPERVENING IMPOSSIBILITIES IN PERFORMING THE CONDITIONS UNDER SECTION 54. THESE EVENTS LEAD US TO A REASONABLE BELIEF THAT THE CONTENTIONS OF THE ASSES SEE ARE NOT SUSTAINABLE IN LAW. 14. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE I S DISMISSED. - - ITA 2147 OF 2011 8 ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 20 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH MARCH, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.