Smt. Archana Kumari, Bangalore V. ITO, Bangalore

ITA 225/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63693 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DINESH
• Keywords: Depreciation; Revised return; Reassessment proceedings
• Section: 54F; 234B; 260A; 147; 148; 54

Judgement Text

PAGE 1 OF 17 ITA NO.225/ BANG/2012 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND BEFORE SHRI JASON P BOAZ, ACCOUNANT MEMBER ITA NO.225/BANG/2012 (ASST. YEAR 2007-08) SMT. ARCHANA KUMARI, 142, PURVA PARKRIDGE, GARUDACHARPALAYA, BANGALORE-48. PA NO.AQCPK3762H VS THE INCOME TAX OFFICER, WARD-5(3), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 13.09.20 12 DATE OF PRONOUNCEMENT : 21.09.2012 APPELLANT BY : SHRI DINESH, ADVOCATE RESPONDENT BY : SHRI SARAVANAN B., JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT (A)-II, BANGALORE DATED 2.12.2011. THE RELEVANT ASSESSMENT YEAR IS 2007-08. 2. THE ASSESSEE HAS, IN HER GROUNDS APPEAL, RAISE D SIX GROUNDS. GROUND NO.6 IS GENERAL IN NATURE AND, THEREFORE, THE SAME IS D ISMISSED AS INCONSEQUENTIAL. GROUND NO.5 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234B OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NA TURE. THE REMAINING GROUNDS ARE RELATING TO THE FOLLOWING ISSUES, NAMEL Y: PAGE 2 OF 17 ITA NO.225/ BANG/2012 2 (1) THAT THE RE-OPENING OF THE ASSESSMENT HAVING NOT BE EN SATISFIED, THE CIT (A) OUGHT TO HAVE HELD THE SAME AS BAD IN L AW; & (2) THAT THE CIT (A) GROSSLY ERRED IN CONFIRMING THE DIS ALLOWANCE OF CLAIM FOR EXEMPTION U/S 54F OF THE ACT. 3. BRIEFLY STATED, THE FACTS OF THE ISSUES ARE AS UNDER: THE ASSESSEE IS AN INDIVIDUAL. SHE FILED HER RE TURN OF INCOME, ADMITTING A TOTAL INCOME OF RS.4,15,530/- WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. HOWEVER, DURING THE COURSE OF A SSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2008-09, IT HAS BEEN NOTICE D BY THE AO THAT THE ASSESSEES CLAIM U/S 54F OF THE ACT IN RESPECT OF R S.1,45,33,925/- REPRESENTING LONG TERM CAPITAL GAINS [LTCG] ON SALE OF SHARES WHICH WAS ALLOWED U/S 143(1) OF THE ACT FOR THE AY 2007-08 WA S WRONG. ACCORDING TO THE AO, THE ASSESSEE HAD NOT INVESTED THE CAPITAL G AINS IN THE CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THE TIME FRAME STIPUL ATED U/S 54F OF THE ACT. TO VERIFY THE AUTHENTICITY OF THE ASSESSEES CLAIM, T HE AO HAD REOPENED THE ASSESSMENT U/S 147 OF THE ACT BY ISSUANCE OF A NOTIC E U/S 148 OF THE ACT AFTER DULY RECORDING THE REASONS. IN COMPLIANCE, TH E AO WAS REQUESTED BY THE ASSESSEE TO TREAT THE RETURN OF INCOME ORIGINAL LY FILED AS THE ONE IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. WHILE C ONCLUDING THE REASSESSMENT PROCEEDINGS U/S 143 (3) R.W. S. 147 OF THE ACT, THE AO BROUGHT TO TAX A SUM OF RS.95,33,925/- AS LTCG FOR THE REAS ONS RECORDED THEREIN. AGGRIEVED, THE ASSESSEE TOOK UP THE TWIN ISSUES - ( I) RE-OPENING OF THE ASSESSMENT U/S 147 OF THE ACT; & (II) BRINGING TO T AX A SUM OF RS.95.33 LAKHS AS LTCG FOR RELIEF. AFTER DUE CONSIDERATION OF T HE ASSESSEES CONTENTIONS, THE CIT (A) DECIDED BOTH THE ISSUES AGAINST THE ASS ESSEE. THE REASONS ADDUCED BY THE CIT (A) ARE EXTRACTED AS UNDER: PAGE 3 OF 17 ITA NO.225/ BANG/2012 3 (I) ACTION U/S 147 OF THE ACT: 3.1. THE AO NOTED THAT CERTAIN AMOUNTS HAD BEEN DEPOSITED IN HER ACCOUNT WITH HDFC BANK DURING THE PERIOD FROM 1/4/2007 TO 26/6/2007 WHICH WAS ATTRIBUTED BY THE APPELLANT TO THE SALE OF SHARES AMOUNTING TO RS.1,49,49,560/- IN M/S. UNIFIED TECHNOLOGIES (P) LTD TO M/S ORG INFORMATICS ON 18/1/2007 AND THAT A PART OF THE CONSIDERATION RECE IVED IN APRIL, 2007 HAD BEEN DEPOSITED IN THE BANK ACCOU NT. THE AO, HOWEVER, FOUND THAT A SUM OF RS.4,15,535/- OUT OF THE LONG TERM CAPITAL GAINS OF RS.1,49,49,460/- HAD BEEN OFFERED FOR TAX IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS WAS DUE TO THE CLAIM OF EXEMPT ION U/S 54EC AND 54F IN SUMS OF RS.50,00,000/- AND RS.95,33,925/- RESPECTIVELY. SINCE, THE ISSUE OF TAXABILITY OF THAT PART OF CAPITAL GAINS AMOUNTING TO RS.95,33,325/- CLAIMED AS EXEMPTION U/S 54F HAD NOT BEEN CONSIDERED AS THE RETURN OF INCOME HAD ONLY BEE N PROCESSED U/S 143(1) AND IT HAD COME TO THE KNOWLED GE OF THE AO THAT NO HOUSE HAD BEEN CONSTRUCTED BY THE APPELLANT, THE AO REOPENED THE ASSESSMENT U/S 147 B Y ISSUE OF A NOTICE U/S 148 OF THE ACT DATED 29/9/201 0 AFTER RECORDING REASONS AS REQUIRED UNDER THE ACT. THE AOS ACTION PER SE IN REOPENING THE ASSESSMENT U/S 147 HAS NOT BEEN QUESTIONED BY THE APPELLANT. (II) ASSESSMENT OF LTCG OF RS.95,33,925: 4.3. AS PER THE I.T ACT, THE APPELLANT IS ELIGIBLE TO EXEMPTION U/S 54F ONLY IF SHE COMPLETES CONSTRUCTION OF A RESIDENTIAL HOUSE ON OR BEFORE 17/1/2010 I.E., WITH IN 3 YEARS FROM THE DATE OF SALE OF ORIGINAL ASSET I.E., 18/1/2007. IT IS CLEAR THEREFORE THAT IT CANNOT BE SAID THAT THE APPELLANT HAD EVEN SUBSTANTIALLY COMPLETED THE CONSTRUCTION OF HOUSE. IN FACT, IT IS CLEAR THAT N O CONSTRUCTION OR ANY INTENTION OF CONSTRUCTION OF A HOUSE WITHIN 3 YEARS IS THERE IN THE PRESENT CASE. IT APP EARS TO PAGE 4 OF 17 ITA NO.225/ BANG/2012 4 BE A CLEAR CASE OF MISUSE OF A BENEFICIAL PROVISION OF I.T. ACT. 4.4..DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE REOPENED CASE, THE A O HAS ONCE AGAIN CONDUCTED ENQUIRIES AND VISITED THE SITE WITH THE INSPECTOR IN THE PRESENCE OF THE APPELLANT S REPRESENTATIVE AND HAS FOUND THAT ON 19/10/2010 THE HOUSE HAD JUST STARTED CONSTRUCTION THAT TOO ON A S MALL AREA OF 300 SQ. FT. IT IS CLEAR THAT NO HOUSE WAS CONSTRUCTED WITHIN 3 YEARS OF THE SALE OF THE ORIGIN AL ASSET. THE APPELLANT HAS ACCEPTED THIS FACT AND HA S FILED A REVISED RETURN OF INCOME FOR THE ASSESSMENT YEAR 201 0-11 DECLARING THE SAID AMOUNT AS HER INCOME FOR THE SAI D YEAR 4.5. THE CASE LAWS CITED BY THE APPELLANT VIZ., CI T V. SARDARMAL KOTHARI [ 302 ITR 286 ] AND SHASHI VARMA (SMT.) V. CIT [ 224 ITR 106 ] DO NOT APPLY TO THE FA CTS OF THE APPELLANTS CASE AS THERE WAS NO SUBSTANTIAL CONSTRUCTION OF THE HOUSE IN THE PRESENT CASE. THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF D.P. MEHTA V. CIT [ 251 ITR 529 ] SQUARELY APPLIES W HERE THE REQUIREMENT TO ACQUIRE/CONSTRUCT A RESIDENTIAL HOUSE WITHIN THE TIME ALLOWED U/S 54F HAS BEEN UPHELD. I N THE APPELLANTS CASE, THERE WAS NO CONSTRUCTION WHATSOE VER EVEN AS ON THE DATE OF ISSUE OF NOTICE U/S 148 OF T HE ACT. IN VIEW OF THE FOREGOING, I HOLD THAT IT IS A CLEAR CASE OF MISUSE OF THE PROVISIONS OF THE I.T. ACT AND UPHOLD THE ACTION OF THE AO IN REJECTING THE APPELLANTS CLAIM FOR EXEMPTION U/S 54F IN RESPECT OF THE SUM OF RS.95,33,925/- AND BRINGING IT TO TAX UNDER THE HEA D LONG TERM CAPITAL GAINS FOR THE ASSESSMENT YEAR IN QUEST ION. 4. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEAL. PAGE 5 OF 17 ITA NO.225/ BANG/2012 5 5. DURING THE COURSE OF HEARING, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT (I) THAT THE CONDITIONS FOR RE-OPENING OF THE ASSES SMENT HAVING NOT BEEN SATISFIED, THE RE-OPENING MADE BY THE AO OU GHT TO HAVE BEEN HELD TO BE BAD IN LAW BY THE CIT (A); (II) THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THA T THE LTCG OF RS.95.33 LAKHS HAVE BEEN INVESTED BY THE ASSESSEE IN PURCHASE OF A SITE, THAT THE BUILDING WAS IN HABITA BLE CONDITION AS ON THE LAST DAY OF THE THREE YEARS PERIOD AND MORE OVER THE CONSTRUCTION ACTIVITY WAS NOT IN THE ASSESSEES HAND AND, THEREFORE, OUGHT TO HAVE HELD THAT THE ASSESSEE ENT ITLED TO CLAIM THE EXEMPTION U/S 54F OF THE ACT; RELIES ON THE CASE LAWS : (A) CIT V. SARDARMAL KOTHARI 302 ITRE 286 (MAD); (B) SHASHI VARMA (SMT) V. CIT 224 ITR 106 (C) SAMBANDAM UDAYAKUMAR IN ITA NO.634/2010 DATED 21.01.2011 5.1 DURING THE COURSE OF HEARING, THE LEARNED AR SOUGHT THE PERMISSION OF THIS BENCH TO PLACE ON RECORD AN APPL ICATION UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES [ATR] 1963 WHEREIN IT HAS BEEN SUBMITTED THAT THE DOCUMENTS SOUGHT TO BE FURNISHED NOW AT SL.NOS.5 TO 7 & 10 HAVE NOT BEEN PRODUCED BEFORE TH E ASSESSING AUTHORITY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO BEFORE THE CIT (A) DURING THE APPELLATE PROCEEDINGS SINCE THE APPELLANT WAS UNDER A BONA-FIDE BELIEF THAT THE DETAILS THE APPELLANT HAD FURNISHED EITHER BEFORE THE ASSESSING OFFICER OR CI T (A) WERE ADEQUATE. THE NON-PRODUCTION OF THE SAID DOCUMENTS WAS ON ACCOUNT OF BONA-FIDE MISTAKE AND N OT DUE TO ANY DELIBERATE OR MALA-FIDE INTENTION. THE A BOVE DOCUMENTS ARE VERY MUCH ESSENTIAL IN ORDER TO PROVE THE PAGE 6 OF 17 ITA NO.225/ BANG/2012 6 ISSUE IN HAND AND THE DOCUMENTS ARE ONLY SUPPORTING THE SUBMISSIONS ALREADY MADE BEFORE THE ASSESSING AUTHO RITY AND CIT (A). ACCORDINGLY, THE ABOVE DOCUMENTS ARE B EING PLACED ON RECORD HERE. IT IS THEREFORE PRAYED THAT THE SAME MAY KINDLY BE ADMITTED 5.2 TO STRENGTHEN THE ASSESSEES CLAIM, THE LEARN ED AR HAD FURNISHED A PAPER BOOK CONTAINING 1 40 PAGES WHIC H CONSIST OF, INTER ALIA, COPIES OF (I) AGREEMENT DATED 6.6.2007; (II) SALE D EED DATED 21.6.2007; (III) CORRESPONDENCE WITH THE AO; (IV) MAHZAR OF THE ITI; (IV) LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF EAGLETON RESIDENTS ASS OCIATION ETC., 6. ON THE OTHER HAND, THE LEARNED DR HAD SUPPORTE D THE STAND OF THE AUTHORITIES BELOW. HE HAD ALSO PLACED STRONG R ELIANCE ON THE FOLLOWING CASE LAWS TO SUPPORT THE REVENUES CONCLUSIONS: ITO V. M.B. RAMESH ITA NO.418/B/2006 DT: 19.6.200 9; M.B.RAMESH V. ITO (2010) 320 ITR 4512 (KAR); D.P.MEHTA V. CIT 251 ITR 529 (DEL); RAJESH SURANA V. CIT (2009) 306 ITR 368 (RAJ); DR. A.S.ATWAL V. CIT (2005) 277 ITR 0462 (P&H); DR. HARSHA N. BILLANGADY V. DCIT ITA NO.1298/B/20 11 DT.20.7.2012 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORDS AND ALSO VA RIOUS CASE LAWS ON WHICH THE LEARNED AR AS WELL AS LEARNED DR HAVE PLACED ST RONG RELIANCE. 7.1 LET US NOW TAKE UP THE ISSUES RAISED BY THE AS SESSEE CHRONOLOGICALLY AS UNDER: PAGE 7 OF 17 ITA NO.225/ BANG/2012 7 (I) RE-OPENING OF THE ASSESSMENT U/S 147 OF THE ACT: THE AO HAD NOTICED CERTAIN AMOUNTS HAD BEEN DEPO SITED IN THE ASSESSEES BANK ACCOUNT DURING THE PERIOD FROM 1/4/ 2007 TO 26/6/2007 WHICH WAS ATTRIBUTED BY THE ASSESSEE TO THE SALE OF SHARES AGGREGATING TO RS.1.40 CRORES. THE AO, HOWEVER, OBSERVED THAT RS. 4.15,535/- OUT OF THE LTCG OF RS.1.49 CRORES HAD BEEN OFFERED FOR TAX IN THE AY UNDER CONSIDERATION. THIS WAS DUE TO THE CLAIM OF EXEMPT ION U/S 54EC AND 54F OF THE ACT IN THE SUMS OF RS.0.5 CRORE AND RS.95,33,92 5/- RESPECTIVELY. SINCE THE ISSUE OF TAXABILITY OF THAT PART OF CAPITAL GAIN S AMOUNT TO RS.95.33 LAKHS CLAIMED AS EXEMPTION U/S 54F HAD NOT BEEN EXAMINED AS HER RETURN OF INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT AND IT HAD COME TO THE NOTICE OF THE AO THAT NO HOUSE HAD BEEN CONSTRUCTED BY THE ASSESSEE, THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT BY ISSUAN CE OF A NOTICE U/S 148 OF THE ACT AFTER DULY RECORDING THE REASONS. THE AO S ACTION PER SE IN REOPENING THE ASSESSMENT U/S 147 OF THE ACT WAS NOT QUESTIONED BY THE ASSESSEE. AS A MATTER OF FACT, BEFORE REOPENING OF THE ASSESSMENT AND ISSUANCE OF A NOTICE, THE AO HAD BROUGHT ON RECORD TO THE EFFECT THAT ON THE DATE OF INSPECTION OF THE SITE, THE SUBJECT PRO PERTY WAS REMAINED A VACANT PLOT. 7.2 CONSIDERING THE FACTS OF THE ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS WITHIN HIS REALM TO REOPEN THE ASSESSMENT BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT TO VERIFY THE CLAIM OF THE ASSESSEE AS TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION OF RS.95,33,925/- U/S 54F OF THE ACT. MOREOVER, THE ASSESSEE HAD NOT OBJ ECTED TO EITHER THE REOPENING OF THE ASSESSMENT OR THE ISSUE OF A NOTIC E U/S 148 OF THE ACT. PAGE 8 OF 17 ITA NO.225/ BANG/2012 8 INSTEAD, THE ASSESSEE IN HER REPLY DATED 9.11.2010 F ILED WITH THE AO ON 10.11.2010 SUBMITTED THAT .. UNDER THE CIRCUMSTANCES, THE ORIGINAL RETURN FILED ON 27.7.2008 (SIC) 27.7.2007 FOR THE A SSESSMENT YEAR 2007-08 MAY BE TREATED AS RETURN FILED IN RESPONSE TO YOUR NO TICE U/S 148. [COURTESY: P 20 21 OF PB AR]. THIS ASSERTION OF THE ASSESSEE MAKES IT IMPLICIT THAT THE ASSESSEE HAD NOT OBJECTED TO WHAT SOEVER THE REOPENING OF THE ASSESSMENT DURING THE REASSESSMENT PROCEEDINGS. 7.3 ON THE FACTS AND CIRCUMSTANCES OF THE STATE O F AFFAIRS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS JUSTIFIED IN REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT WHICH HAS DULY BEEN RATIFIED BY THE CIT (A). IN ESSENCE, NO VALID REASON WAS BROUGHT O N RECORD TO INTERFERE WITH THE FINDINGS OF THE CIT (A). IT IS ORDERED ACCORDI NGLY. (II) ASSESSING OF LTCG OF RS.95.33 LAKHS: 7.4 THE ASSESSEE HAD PURCHASED A SITE VIDE SALE D EED DATED 21.6.2007 FOR RS.41.95 LAKHS WHICH INCLUSIVE OF STA MP DUTY, REGISTRATION FEE ETC., COPY OF THE SALE AGREEMENT DATED 6/6/2007 EVI DENCED PAYMENT OF ADVANCE OF RS.82.62 LAKHS TOWARDS COST OF SITE + DE VELOPMENT CHARGES ETC. IT WAS THE CASE OF THE AO THAT SINCE THE SALE OF SH ARES FOR RS.1.49 CRORES TOOK PLACE ON 18/1/2007 AND AS PER THE PROVISIONS OF S. 54F(1) OF THE ACT, THE ASSESSEE WAS EXPECTED TO CONSTRUCT A RESIDENTIA L HOUSE ON THE SUBJECT PROPERTY (SITE) NOT LATER THAN 18/1/2010. SINCE NO HOUSE WAS CONSTRUCTED WITHIN THE TIME FRAME OF THREE YEARS AS PRESCRIBED I N THE AFORE-SAID SECTION AND EVEN AS ON THE DATE OF ISSUANCE OF A NOTICE U/S 148 OF THE ACT ON 29/9/2010, THE AO BROUGHT TO TAX THE SUM OF RS.95.3 3 LAKHS FOR THE AY PAGE 9 OF 17 ITA NO.225/ BANG/2012 9 UNDER CONSIDERATION BY DISALLOWING THE CLAIM OF EXEM PTION U/S 54F OF THE ACT. 7.5 TURNING TO THE MAIN ISSUE, BRIEFLY, THE ASSESS EE WAS IN RECEIPT OF RS.1.49 CRORES AS ON 18.1.2007 ON SALE OF SHARES AND AS PER S.54F(1) OF THE ACT, THE ASSESSEE WAS OBLIGED TO CONSTRUCT A RESIDE NTIAL HOUSE ON THE SITE SO PURCHASED ON 21.6.2007 NOT LATER THAN 18.1.2010. D URING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO HAD ONCE AGAIN CON DUCTED ENQUIRIES AND MADE A SPOT INSPECTION ON 19.10.2010 ALONG WITH HIS INSPECTOR IN THE PRESENCE OF THE ASSESSEES REPRESENTATIVE. HE FOUN D THAT THE CONSTRUCTION WAS JUST STARTED ON A SMALL AREA OF AROUND 300 SQ. FT. IT WAS CLEAR THAT NO RESIDENTIAL HOUSE WAS CONSTRUCTED WITHIN THREE YEARS OF THE SALE OF THE ORIGINAL ASSET. THE ASSESSEE HAD ACCEPTED THIS VER Y FACT AND FILED A REVISED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 DEC LARING THE SAID AMOUNT AS HER INCOME FOR THE SAID YEAR. 7.6 DURING THE COURSE OF HEARING BEFORE US, THE L EARNED AR, AS MENTIONED SUPRA, SOUGHT THE PERMISSION OF THIS BENC H UNDER RULE 29 OF AT RULES 1963 TO FURNISH CERTAIN DOCUMENTARY EVIDENCE T O STRENGTHEN HIS ARGUMENT. 7.7 WE SHALL NOW DISCUSS THE ISSUE IN DETAIL AS U NDER: (I) CERTIFICATE FROM EAGLETON RESIDENTS ASSOCIATION DAT ED NIL THAT THE BUILDING PLAN OF PLOT NO.N 23/1 WAS APPROVED IN THE MONTH OF SEPTEMBER, 2009 AND CONSTRUCTION ON THE PLOT WAS STARTED IN MONTH OF OCTOBER 2009 BY THE PLOT OWNER USING THEIR OWN RESOURCES; PAGE 10 OF 17 ITA NO.225 /BANG/2012 10 (II) LETTER OF THE SECRETARY, MANCHANAYANAKANAHALLI VILLAG E GRAMA PANCHYATHI DATED: 10.9.2009 THAT THE APPLICATION OF THE ASSESSEE FOR BUILD A HOUSE IS ACCEPTED AND THE LAST DAY OF CONSTRUCTION ENDS ON 9.3.2010; & (III) RESIDENT CERTIFICATE FROM PANCHAYAT DEVELOPMENT OFFI CER, MANCHANAYANAKANAHALLI DATED 5.1.2010 TO THE EFFECT THAT IT IS CONFIRMED THAT FROM 2009 DECEMBER ONE SRI/SMT ARCHANA KUMARI W/O KRISHNA KUMAR RESIDING AT NO.N 2 3/1, EAGLE TOWNSHIP OF MANCHANAYAKANA HALLI VILLAGE GRAMA PANCH AYATHI OF BIDADI HOBLI, RAMANAGAR TALUK, RAMANAGAR DISTRICT. [SOURCE: P 31 35 OF PB AR] 7.8 EVEN THOUGH THE ALLEGED (I) PERMISSION LETTER OF HOUSE CONSTRUCTION DATED 10.9.2009 FROM THE SECRETARY OF M ANACHANAYAKANAHALLI VILLAGE PANCHAYAT AS WELL AS (II) RESIDENT CERTIFICA TE DATED 5.1.2010 FROM THE PANCHAYAT DEVELOPMENT OFFICER OF THE SAID VILLAGE PA NCHAYAT AVERRING THAT THE ASSESSEE IS RESIDING AT NO. N 23/1, EAGLE TOWNS HIP FROM DECEMBER 2009 ETC., WAS IN HER POSSESSION AND WHEN THE REASSESSM ENT PROCEEDINGS WERE CONDUCTED BY THE AO AS LATE AS ON 7.10.2010, 10.11. 2010 AND 23.11.2010, THE MOOT QUESTION LINGERING IN OUR MIND IS WHAT SHOUL D HAVE COME IN THE WAY OF THE ASSESSEE FROM FURNISHING SUCH VITAL PIECE OF E VIDENCES BEFORE THE AO TO STRENGTHEN HER CLAIM? 7.9 HOWEVER, THE AOS MAHZAR HAD AVERRED THUS: TO-DAY ON 19/10/2010 I HAVE VISITED THE EAGLETON THE GOLF VILLAGE SITUATED IN BIDADI HOBLI OF RAMANAGAR TQ & DIST TO VERIFY THE STATUS OF CONSTRUCTION OF RESIDEN TIAL HOUSE BY SMT ARCHANAKUMARI AT SITE NO. N-23/1 SITUAT ED AT EAGLETON THE GOLF VILLAGE, SHANMANGALA VILLAGE , BIDADI HOBLI. ON BEING CALLED, SHRI SHIVAKUMAR G.L, S/O LAXMIPATHI, AN ACCOUNTS-EXECUTIVE OF EAGLETON RESID ENTS PAGE 11 OF 17 ITA NO.225 /BANG/2012 11 ASSOCIATION EAGLETON THE GOLF VILLAGE HAS IDENTIF IED AND SHOWN THE SITE NO. N-23/1, SITUATED AT EAGLETON THE GOLF VILLAGE, SHANMANGALA BELONGS TO SMT ARCHANAKUMARI, WHEREIN THE CONSTRUCTION OF RESIDENTIAL HOUSE IS GO ING ON AS ON DATE I.E., 19/10/2010. ACCORDING TO HIM, THE CONSTRUCTION ON THE SAID SITE HAS STARTED JUST RECE NTLY AFTER GETTING ELECTRICAL AND WATER CONNECTION FROM THE EAGLETON RESIDENTS ASSOCIATION. THE SAID CONSTRUCT ION IS NOT COMPLETE ANY RESPECT AND IS NOT FIT FOR OCCUPATI ON AS ON DATE. [REFER : P 37 OF PB AR] 7.10 ABOVE ALL, CHAMUNDESWARI BUILD TECH PVT LTD, DEVELOPERS AND PROMOTERS, IN ITS LETTER DATED 1.10.2010 ADDRESSED TO THE AO HAD REITERATED THUS: WITH REFERENCE TO THE ABOVE SUBJECT AND THE ABOVE REFERRED LETTER DATED 30/09/2010, WE WISH TO INFORM YOU THAT MRS. ARCHANA KUMARI, OWNER OF PLOT NO.N 23/ 1 IN EAGLETON THE GOLF VILLAGE HAS STARTED THE CONSTRUC TION OF THE HOUSE ON THE SAID PLOT, THE HOUSE IS BEING CONSTRUCTED BY HER OWN CONTRACTORS AND NOT BY OUR COMPANY. FURTHER AS INQUIRED IN YOUR SAID LETTER, IN PARA NO. 2 ABOUT THE PARA NO.8,9,10 & 11 OF THE SALE DEED, WE WISH T O CLARIFY THAT AS PER THE APPROVED PLAN PARA NO.8,9,10 & 11 HAS BEEN COMPLIED WITH THE TERMS & CONDITIONS AND T HE SAME SHALL BE CONFIRMED ONCE THE CONSTRUCTION OF THE HOUSE IS COMPLETED. [ REFER: P 36 OF PB AR ] THE ABOVE ASSERTION OF THE DEVELOPERS AND PROMOTERS , IN OUR CONSIDERED VIEW, HOLDS THE ASSESSEES CLAIM AS FALSE. PAGE 12 OF 17 ITA NO.225 /BANG/2012 12 7.11 TAKING INTO ACCOUNT THE FACTUAL STATE OF AFF AIRS AS DISCUSSED SUPRA, WE DECLINE TO ADMIT THE APPLICATION OF THE A SSESSEE UNDER RULE 29 OF AT RULES 1963. REVERTING BACK TO THE MAIN ISSUE, A S RIGHTLY HIGHLIGHTED BY THE CIT (A), THE AO HAD, DURING THE COURSE OF REASS ESSMENT PROCEEDINGS, CONDUCTED ENQUIRIES, MADE A SPOT INSPECTION ON 19.L 0.2010 ALONG WITH HIS INSPECTOR AND IN THE VERY PRESENCE OF THE ASSESSEES REPRESENTATIVE FOUND TO HIS SURPRISE THAT THE CONSTRUCTION WAS JUST COMM ENCED AND WAS IN AN INITIAL STAGE. THE ABOVE GROUND REALITIES MAKE IT I MPLICIT THAT NO RESIDENTIAL HOUSE WORTH THE NAME WAS CONSTRUCTED WITHIN THE THR EE YEARS FROM THE SALE OF THE ORIGINAL ASSET AS CONTEMPLATED U/S 54F OF TH E ACT. THIS VERY FACT HAS UNRESERVEDLY BEEN ACKNOWLEDGED BY NONE OTHER THAN THE ASSESSEE HERSELF BEFORE THE AO VIDE HER LETTER DATED 9.11.2010; THE RELEVANT PORTION OF WHICH [AT THE COST OF REPETITION] IS REPRODUCED AS UNDER: DUE TO FINANCIAL CONSTRAINTS, THE CONSTRUCTION WOR K COULD NOT BE COMPLETED BEFORE THE STIPULATED PERIOD OF 3 YEARS I.E., 18.1.2010. HOWEVER, AS ON THIS DATE THE CONSTRUCTION WORK HAS FULLY COMPLETED. A REVISED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 HAS BEEN FILED ON 27.10.2010 OFFERING THE UNUTILIZED LONG TERM CAPITAL GAIN AND TAXES PAID FULLY. A COPY OF THE SAME HAS BEEN FURNISHED TO YOU. THEREFORE, NO LONG TERM CAPITAL GAIN IS LIABLE TO B E CHARGED FOR THE ASSESSMENT YEAR 2007-08. UNDER THE CIRCUMSTANCES THE ORIGINAL RETURN FILED ON 27.7.200 8 (SIC) 27.7.2007 FOR THE ASSESSMENT YEAR 2007-08 MAY BE TREATED AS RETURN FILED IN RESPONSE TO YOUR NOTICE U /S 148. [REFER: P 21 OF PB AR] PAGE 13 OF 17 ITA NO.225 /BANG/2012 13 7.12 LET US NOW TURN OUR ATTENTION TOWARDS THE CA SE LAWS ON WHICH THE ASSESSEE HAD REPOSED HER CONFIDENCE. (1) SAMBANDAM UDAYKUMAR V. DCIT ITA NO.634/BANG/2010 DT: 21.1.2011: THE HONBLE EARLIER BENCH HAD, AFTER DUE CONSIDE RATION OF AN IDENTICAL ISSUE TO THAT OF THE PRESENT ONE, COME TO THE CONCLUSION THAT: 6.7.2. IN THE PRESENT CASE, THE BUILDER HAS GIVEN A LETTER DETAILING THE PAYMENTS MADE. IN THE SAID LETTER, IT ALSO STATED THAT SUBSTANTIAL CONSTRUCTION WAS COMPLETED AS ON 12.11.08 (3 YEAR PERIOD FROM THE DATE OF SALE OF SHARE GIVING RISE TO CAPITAL GAIN) AND ONLY MINOR FITTING LIKE WINDOW SHUTTERS AND SOME ELECTRICAL WORK WERE REQUI RED TO BE MADE. IN OTHER WORDS, THE VILAS WERE SUBSTAN TIALLY READY AND HABITABLE WITH WATER CONNECTION AND ALSO TEMPORARY ELECTRICAL CONNECTION. HOWEVER, TO SUSTAI N THE STAND OF THE AO, THE LD. CIT (A) TOOK SANCTUARY IN T HE RULING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT V. YELLAMMA DASAPPA HOSPITAL REPORTED IN (2 007) 290 ITR 353 (KAR). THE ISSUE BEFORE THE HONBLE CO URT WAS THAT WHETHER THE TRIBUNAL WAS CORRECT IN LAW IN HOLDING THAT THE RESPONDENT-ASSESSEE WAS ENTITLED T O CLAIM DEPRECIATION ALLOWANCE AS THE MACHINERY WERE R EADY FOR USE? 6.8. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DISCUSSED COMPREHENSI VELY IN THE PRECEDING PARAGRAPHS, WE ARE OF THE UNANIMOU S VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DEPRIVING THE EXEMPTION LEGITIMATELY CLAIMED BY THE ASSESSEE U/S 54F OF THE ACT.. [EMPHASIS IS SUPPLIED SELECTIVELY] PAGE 14 OF 17 ITA NO.225 /BANG/2012 14 7.13 NOT SATISFIED WITH THE FINDINGS OF THE TRIBU NAL, THE REVENUE FILED APPEAL UNDER SECTION 260A OF THE ACT BEFORE T HE HONBLE JURISDICTIONAL HIGH COURT. HOWEVER, THE HONBLE HIGH COURT IN ITS JUDGMENT REPORTED IN (2012) 206 TAXMAN 150 (KAR) DISMISSED THE APPEAL OF THE REVENUE. THE RELEVANT PORTIONS OF THE HONBLE COURTS OBSERVATIO NS ARE EXTRACTED AS UNDER: 14. IN THE INSTANT CASE, THE MATERIAL ON RECORD D ISCLOSES THAT THE ASSESSEE HAD INVESTED RS.2,16,61,670/- AS ON 31.10.2006 WITHIN TWELVE MONTHS FROM THE DATE OF REALIZATION OF SALE PROCEEDS OF SHARES. THE DEVELO PER ACKNOWLEDGING THE SAID AMOUNT HAS GIVEN PARTICULARS OF THE STAGE OF CONSTRUCTION. ACCORDING TO HIM, ONLY M INOR FITTINGS LIKE WINDOW SHUTTERS AND SOME ELECTRICAL W ORK WERE REQUIRED TO BE MADE. IN FACT, THE REPORT OF T HE INQUIRY CONDUCTED BY THE DEPARTMENT ALSO DISCLOSES TH E FLOORING WORK, ELECTRICAL WORK, FITTING OF DOOR AND WINDOW SHUTTERS WERE STILL PENDING. THE ASSESSEE HAS PROD UCED BEFORE THE AUTHORITIES THE REGISTERED SALE DEED DAT ED 7.11.2009 SHOWING THE TRANSFER OF THE PROPERTY IN HI S FAVOUR. THE SAID DOCUMENT DISCLOSES MARBLE TILES F LOORING HAS BEEN DONE, ELECTRICITY, WATER AND SANITARY CONNECTIONS HAVE BEEN GIVEN WOOD USED IS TEAK IN RE SPECT OF DOORS AND WINDOWS. THE ASSESSEE HAS BEEN PUT IN POSSESSION OF THE PROPERTY AND HE IS IN OCCUPATION . THEREFORE, THE ASSESSEE HAS INVESTED THE SALE CONSIDERATION IN ACQUIRING A RESIDENTIAL PREMISE AN D HAS TAKEN POSSESSION OF THE RESIDENTIAL BUILDING AND IS LIVING IN THE SAID PREMISES . THE OBJECT OF ENACTING SECTION 54 OF THE ACT I.E., TO ENCOURAGE INVESTMENT IN A RESIDENT IAL BUILDING IS COMPLETELY FULFILLED. 15. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS JUSTIFIED IN EXTENDING THE BENEFIT OF SECTION 54F O F THE ACT TO THE ASSESSEE AND THE SAID ORDER DOES NOT SUF FER FROM ANY INFIRMITY WHICH CALLS FOR INTERFERENCE. [EMPHASIS IS SUPPLIED S ELECTIVELY] PAGE 15 OF 17 ITA NO.225 /BANG/2012 15 7.14 WITH DUE RESPECTS, WE HAVE PERUSED THE OBSER VATIONS OF THE EARLIER BENCH OF THE TRIBUNAL AS WELL AS THE RULING OF THE HONBLE COURT IN THE CASE OF SAMBANDAM UDAYAKUMAR (SUPRA). IN THIS CONNE CTION, WE WOULD LIKE TO POINT OUT THAT, THAT ASSESSEE HAD BEEN PUT IN POSSE SSION OF THE PROPERTY (RESIDENTIAL HOUSE) AND HE WAS IN ACTUAL POSSESSION . THE ASSESSEE HAD INVESTED THE SALE CONSIDERATION IN ACQUIRING A RESI DENTIAL PREMISE AND TOOK POSSESSION OF THE RESIDENTIAL BUILDING AND WAS LIVI NG IN THE SAID PREMISES. THEREFORE, THE HONBLE COURT TOOK A VIEW THAT THE OBJECT OF ENACTING SECTION 54 OF THE ACT I.E., TO ENCOURAGE INVESTMENT IN A RESIDENTIAL BUILDING IS COMPLETELY FULFILLED. HOWEVER, IN THE PRESENT CASE UNDER DISPUTE, THE ASSESSEE WAS EXPECTED TO CONSTRUCT A RESIDENTIAL HO USE NOT LATER THAN 18.1.2010 WHEREAS WHEN THE AO MADE A SPOT INSPECTIO N ALONG WITH HIS INSPECTOR AS LATE AS ON 19.10.2010 AND FOUND IN THE PRESENCE OF THE ASSESSEES REPRESENTATIVE THAT THE CONSTRUCTION WAS JUST STARTED AND THE VERY FACT HAS BEEN ACKNOWLEDGED BY THE ASSESSEE HERSE LF. SHE HAD ACCORDINGLY FILED A REVISED RETURN FOR THE AY 2010-1 1 ADMITTING THE SAID AMOUNT AS HER INCOME FOR THE SAID ASSESSMENT YEAR [C OURTESY: P 21 OF PB AR]. 7.15 IN VIEW OF THE ABOVE FACTS, WE ARE OF THE FI RM VIEW THAT THE RULING OF THE HONBLE HIGH COURT (SUPRA) IS CLEARLY DISTINGUISHABLE AND IT CANNOT COME TO THE RESCUE OF THE ASSESSEE IN ANYWAY A S HER CASE IS ON A DIFFERENT FOOTING. ON THE OTHER HAND, THE HONBLE EARLIER BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. M.B.RAMESH [ITA NO.4 18/B/06 DATED 19.6.2009] TOOK A DIVERGENT VIEW AND, ACCORDINGLY, O BSERVED THAT THE PAGE 16 OF 17 ITA NO.225 /BANG/2012 16 ASSESSEE WAS NOT ENTITLED FOR EXEMPTION U/S 54 OF T HE ACT FOR THE REASONS THAT - 14. (I) ON A PHYSICAL VERIFICATION AND INSPECTION O F THE PROPERTIES IN QUESTION, THE LD. AO HAD VERY EMPHATIC ALLY STATED IN HER REPORT THAT TEMPORARY MUD BRICK STRUCTURES WITH ASBESTOS OR TIN SHEETS FOR ROOF WER E FOUND EITHER ON THE SAME SITE OR ON ANOTHER EMPTY SI TE ADJACENT OR OPPOSITE TO THE SITE WHERE A RESIDENTIA L PROPERTY WAS UNDER CONSTRUCTION. OTHERWISE, THE SIT ES REMAINED EMPTY WITHOUT ANY STRUCTURES AS STATED BY THE ASSESSEE; (II) SITE NOS: 16 & 17 PURCHASED BY SHRI KHANNA AND HIS WIFE WERE FENCED TOGETHER WITH CEMENT BRICKS. A SM ALL HOUSE BEING BUILT IN ONE CORNER WITH HOLLOW CEMENT BRICKS WHICH WAS AROUND 10 X 5 FT. ON ENQUIRY, IT WAS FOUN D THAT THE CONSTRUCTION WORK HAD STARTED ONLY RECENTLY AND B Y APPEARANCE, IT APPEARS TO BE A TEMPORARY WATCHMANS SHED. OTHERWISE, THERE WAS NO OTHER SIGN OF ANY HOUSE/FOUNDATION ON THE SITE WHICH DID NOT HAVE THE LOOK OF A WELL DEVELOPED AND MAINTAINED; 7.16 AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WI TH THE HONBLE HIGH COURT FOR RELIEF. ON HEARING THE RIVAL PARTIES, TH E HONBLE HIGH COURT HAD, IN ITS RULING REPORTED IN (2010) 320 ITR 451 (KAR), OB SERVED THAT THE ASSESSING AUTHORITY REFUSED EXEMPTION UNDER S.54 ON A FACTUAL VERIFICATION OF THE PLACE WHERE THE ASSESSEE CLAIMED TO HAVE HAD THE RE SIDENTIAL PROPERTY AS HE FOUND ONLY A MUD STRUCTURE NOT WORTHY OF A RESIDENTIA L HOUSE. THE TRIBUNAL ALSO FOUND THAT AS A MATTER OF FACT THERE WAS NEVER ANY STRUCTURE FITTING INTO DESCRIPTION OF HABITABLE RESIDENTIAL HOUSE O N THE PROPERTY WHICH HAD BEEN INITIALLY SOLD BY THE ASSESSEE AND, THEREFORE, A LLOWED THE APPEAL OF THE PAGE 17 OF 17 ITA NO.225 /BANG/2012 17 REVENUE, REVERSED THE FINDING OF THE FIRST APPELLAT E AUTHORITY AND AFFIRMED THE ORDER OF THE ASSESSING AUTHORITY. SUCH FINDING OF FACT BY TRIBUNAL CANNOT BE INTERFERED WITH UNDER S.260A. 7.17 IN AN OVERALL CONSIDERATION OF ALL THESE FAC TS AND CIRCUMSTANCES OF THE ISSUE AS DEBATED IN THE FORE-GOING PARAGRAPH S, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUSTIFIED IN U PHOLDING THE ACTION OF THE AO IN REJECTING THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT IN RESPECT OF THE SUM OF RS.95.33 LAKHS. IT IS ORDERE D ACCORDINGLY. 8. IN THE RESULT, THE ASSESSEES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.