ITO, Pudukkottai V. (Late) M.Sethuraman Chettiar By L/H SV. Umayal, Madurai

ITA 227/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77212 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB CIT D R SHRI
• Keywords: Capital asset; Benefit of exemption
• Section: 143(3); 54F; 68; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.227/MDS./2013 ( / ASSESSMENT YEAR :2008-09) THE INCOME TAX OFFICER, WARD-I(2), PUDUKKOTTAI. VS. (LATE) M.SETHURAMAN CHETTIAR BY L/H S.V.UMAYAL, 4,BESANT ROAD, CHOKKIKULAM, MADURAI 625 002. PAN AAEPC 5037 B ( &' / APPELLANT ) ( #(&' / RESPONDENT ) / APPELLANT BY : SHRI SHAJI P.JACOB, ADDL.CIT D.R. / RESPONDENT BY : SHRI C.MARUTHAPPAN,C.A. / DATE OF HEARING : 10.03.2014 ! /DATE OF PRONOUNCEMENT : 10.04.2014 ) / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALL I DATED ITA NO. 227/MDS13/ 2 08.11.2012 IN ITA NO.460/10-11 PASSED UNDER SECTION 143(3) READ WITH SECTION 250 OF THE INCOME TAX ACT, 1961. 2. THE REVENUE HAS SEVEN ELABORATE GROUNDS IN ITS APPEAL, AND THEY ARE CONCISED HEREIN BELOW FOR ADJUDICATION. I) LD. CIT (A) HAD ERRED BY DELETING THE ADDITION M ADE U/S. 68 OF THE ACT FOR ` 4,85,079/- BEING THE AMOUNTS STANDING TO THE CREDIT OF MSPM RICE MILL AS ON 31.03.2008, SINCE TH E ASSESSEE HAD NOT OFFERED ANY EXPLANATION TO THE LD. ASSESSING OFFICER REGARDING THE SAME. II) LD. CIT (A) HAD ERRED FOR DELETING THE ADDITIO N MADE TOWARDS LONG TERM CAPITAL GAINS (LTCG), SHORT TERM CAPITAL GAINS (STCG) WITH RESPECT TO SALE OF LAND AT KALLAMBAL V ILLAGE BY HOLDING THAT THE LAND IN QUESTION BELONGED TO THE A SSESSEES DECEASED SON SHRI M.S.ANNAMALAI AND THE SAME WAS ACCOUNTED IN THE DECEASED BOOKS OF ACCOUNTS. III) LD. CIT (A) HAD ERRED BY ALLOWING THE CLAIM O F EXPENDITURE OF ` 5,50,000/- AS THE COST OF IMPROVEMENT FOR THE SALE OF 42 CENTS OF LANDS IN SURVEY NO.216/2B. ITA NO. 227/MDS13/ 3 IV) LD. CIT (A) HAD ERRED BY ALLOWING THE CLAIM OF EXEMPTION U/S. 54 OF THE ACT SINCE THE ASSETS SOLD WAS RICE MILL A ND NOT HOUSE PROPERTY THE INCOME OF WHICH DO NOT FALL UNDER THE INCOME FROM HOUSE PROPERTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A SENIOR CITIZEN, ENGAGED IN THE BUSINESS OF MONEY LENDING, RUNNING A RICE MILL AT ODDANCHATRAM DINDIGUL DISTRICT, DERIVING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS FROM RICE MILL AND MONEY LENDING ACTIVITIES. HE EXPIRED ON 10.04. 2009. THEREAFTER HIS DAUGHTER BEING THE LEGAL HEIR SMT S.V.UMAIYAL, FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON BEHALF OF THE DEMISED ASSESSEE ON 29.03.2010, ADMITTING TOTAL INCOME OF ` 84,640/-. INITIALLY THE RETURN WAS PROCESSED U/S. 143 (1) OF THE ACT ON 23.07.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS IN ORDER TO VERIFY THE PURCHASE OF AN IMMOVABLE PROPER TY VALUED AT ` 37,50,000/- BY THE ASSESSEE AT MADURAI AND THEREAFT ER THE ASSESSMENT WAS COMPLETED ON 29.12.2010 WHEREIN THE LD. ASSESSING OFFICER MADE VARIOUS ADDITIONS. ITA NO. 227/MDS13/ 4 4. GROUND NO.1. ADDITION U/S. 68 OF THE ACT FOR ` `` ` 4,85,079/- :- DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE LD. ASSESSING OFFICER OBSERVED THAT IN THE BALANCE SHEE T OF MSP RICE MILL ODDANCHATRAM, AN AMOUNT OF ` 4,85,079 WAS STANDING AS A CREDIT BALANCE AS ON 31.03.2008. SINCE THE ASSESSEE S LEGAL REPRESENTATIVE COULD NOT EXPLAIN THE TRANSACTION, T HE AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. WHEN THE MATTER WAS PLACED BEFORE THE LD. CIT (A), THE LD. C IT (A) AFTER EXAMINING THE DETAILS CAME TO A CONCLUSION THAT THE CREDIT BALANCE IN THE BOOKS OF ACCOUNTS OF M/S. MSP RICE RICE MILL RE PRESENTED THE FUNDS TRANSFERRED FROM THE ASSESSEES VALAYAPATTI H EAD OFFICE ACCOUNT. BEFORE THE LD. CIT (A), THE ASSESSEE WAS I N A POSITION TO EXPLAIN THE ABOVE SAID TRANSACTIONS. THEREFORE, THE LD. CIT (A) DELETED THE ADDITION MADE BY THE LD. ASSESSING OFFI CER. BEFORE US, THE LD.AR RELIED ON THE ORDER OF THE LD. CIT (A) AN D THE LD. D.R RELIED ON THE ORDER OF THE LD. ASSESSING OFFICER. AFTER C ONSIDERING THE FACTS PRESENTED BEFORE US AND PERUSING THE MATERIALS ON R ECORD WE FIND THAT THE LD. CIT (A) HAD VERIFIED THE TRANSACTION AND MA DE A CATEGORICAL ITA NO. 227/MDS13/ 5 FINDING THAT THE AMOUNT WAS TRANSFERRED FROM THE AS SESSEES VALAYAPATTI HEAD OFFICE ACCOUNT. THEREFORE WE DO N OT FIND IT NECESSARY TO PERUSE THE MATTER ANY FURTHER RATHER T HAN ACCEPTING THE FINDINGS OF THE LD. CIT (A). ACCORDINGLY WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. 5. GROUND NO.2. DELETION OF THE ADDITION BY LD. CIT ( A) FOR THE ADDITION MADE TOWARDS SHORT TERM CAPITAL GAIN FOR T HE SALE OF LAND AT KALLAMBAL VILLAGE:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER MADE AN ADDITION OF ` 2,64,830/- BEING THE SHORT CAPITAL GAIN ARISING FROM SALE OF LAND AT KALLAMBAL VILLAGE, SINCE THE LAND WAS PURCHASED ON 16.12.2004 AND SOLD ON 07.06. 2007 AND THE PERIOD OF HOLDING WAS LESS THAN 36 MONTHS. HOWEVER WHEN THE MATTER CROPPED UP BEFORE THE LD. CIT (A), BASED ON THE EVIDENCE SUCH AS PURCHASE DEED AND AS WELL AS THE BALANCE SH EET FIELD BY THE ASSESSEES DECEASED SON SHRI M.S.ANNAMALAI, IT WAS REVEALED THAT THE LAND IN QUESTION DID NOT BELONG TO THE ASSESSEE BUT BELONG TO SHRI ITA NO. 227/MDS13/ 6 M. ANNAMALAI AND THE SAME WAS ACCOUNTED IN HIS BOOK S OF ACCOUNTS. THEREFORE, THE LD. CIT (A) DELETED THE ADDITION IN THE HANDS OF THE ASSESSEE. WHEN THE FACTS ARE SO AND THE SAME IS NO T DISPUTED BY THE REVENUE BY BRINGING ANY COGENT MATERIALS ON RECORD, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. CI T (A). ACCORDINGLY, THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSE E. 6. GROUND NO.3. DISALLOWANCE OF EXPENDITURE OF ` `` ` 5,50,000 TOWARDS COST OF IMPROVEMENT IN RESPECT TO SALE OF P ROPERTY AT SURVEY NO.216/2B:- WHILE COMPUTING THE CAPITAL GAINS OF THE ASSESSE E WITH RESPECT TO SALE OF 42 CENTS OF LAND IN SURVEY NO.216/2B, TH E LD. ASSESSING OFFICER DISALLOWED ` 5,50,000 CLAIMED BY THE ASSESSEE FOR COST OF IMPROVEMENT OF THE PROPERTY. HOWEVER, LD. CIT (A) OBSERVES THAT THE ASSESSEE HAD SHOWN THE COST OF IMPROVEMENT AS ADDIT IONS TO THE ASSET IN THE BALANCE SHEET AS ON 31.03.2007. MOREO VER, SINCE THE LD. ASSESSING OFFICER DID NOT ACT UPON THE RETURN O F INCOME FOR THE ASSESSMENT YEAR 2007-08, THE LD. CIT (A) OPINED THA T SUCH ITA NO. 227/MDS13/ 7 DISALLOWANCE SHOULD NOT BE GIVEN EFFECT FOR THE COM PUTATION OF LONG TERM CAPITAL GAIN FOR THE RELEVANT ASSESSMENT YEAR 2008-09. BOTH THE PARTIES ARGUED IN SUPPORT OF THEIR CLAIM. AFTER HEA RING BOTH THE SIDES AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN PARTICULAR WHEN THE ASSESSEE IS NO MORE, WE DO NOT FIND IT NEC ESSARY TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) AT THIS STAGE, BECAUSE THE LD.AO HAD FAILED TO EXERCISE HIS POWERS TO EXAMINE THE GENUINENESS OF THE CLAIM OF THE ASSESSEE FOR THE RELEVANT ASSES SMENT YEAR. THEREFORE, WE HEREBY CONFIRM THE ORDER OF THE LD. C IT (A) ON THIS ISSUE. 7. GROUND NO.4. DENIAL OF EXEMPTION U/S. 54 OF THE A CT:- THE LD. ASSESSING OFFICER HAD COMPUTED THE CAPITA L GAIN WITH RESPECT TO THE SALE OF 42 CENTS OF LAND IN SURVEY N O. 216/2B AND 47 CENTS OF LANDS IN SURVEY NO.216/1B AT ` 1,99,70,317/-. TOWARDS THE CAPITAL GAINS SO COMPUTED, THE ASSESSEE HAD CLAIMED EXEMPTION U/S. 54F OF THE ACT IN RESPECT OF PURCHASE OF PROPERTY O N 30.06.2007 FOR A SUM OF ` 40,50,000/- AT DOOR NO.45B, CORONATION STREET, ARA SARADI , ITA NO. 227/MDS13/ 8 MADURAI. THE LD. ASSESSING OFFICER DENIED THE BENEF IT OF SEC.54F OF THE ACT BECAUSE OF THE FOLLOWING REASONS:- A) THE ASSESSEE OWNED MORE THAN ONE RESIDENTIA L PROPERTY WHICH DISENTITLES THE ASSESSEE TO CLAIM THE BENEFIT U/S. 54(1) PROVISO (A)(1) OF THE ACT. THE PROPERTIES OWNED BY THE ASSESSEE ON THE DATE OF TRANSFER OF THE ORIGINAL AS SETS WERE AS FOLLOWS I) RESIDENTIAL HOUSE PROPERTY AT DOOR NO.8 DOCTOR MANGALAM HOSPITAL ROAD, VALYAPATTI PUDUKOTTAI DISTRICT. II) DOOR NO.16 ODDANCHATRAM AS THE ASSESSEE WAS IN POSSESSION OF PROPERTY TILL 31.03.2008 THOUGHT THE SALE AGREEMENT WAS EXECUTED ON 04.04.2007. B) THE ASSESSEE HAD ALSO PURCHASED THE FOLLOWIN G THREE PROPERTIES ON THE FOLLOWING DATES:- SR. NO. PARTICULARS DATE OF PURCHASE 1. DOOR NO.16 MOULANA SAHIB STREET, 09.05.2007 ITA NO. 227/MDS13/ 9 ANNA NAGAR, MADURAI. 2. SOUTH PERUMAL MAISTRI STREET, MADURAI 13.06.2007 3. 73, PT RAJAN ROAD, NARIMEDU MADURAI (THIS PROPERTY WAS PURCHASED WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF TRANSFER OF ORIGINAL ASSET) 25.04.2008 C) THE LD. ASSESSING OFFICER FURTHER OBSERVED THA T:- BOTH THE DOCUMENTS FOR PURCHASE OF PROPERTY AT NO.16,MOULANA SAHIB STREET, ANNA NAGAR, MADURAI AND AT SOUTH PERUMAL MAISTRY STREET, MADURAI ARE IN THE NA ME OF THE ASSESSEES INDIVIDUAL P.A. NO.AAEPC5037B. HENCE , APPLICATION OF SECTION 54-F ARISES ONLY IN RESPECT OF THE PROPERTY AT NO.16,MOULANA SAHIB STREET, ANNA NAGAR, MADURAI, PURCHASED FOR ` 11 LAKHS AND NOT IN RESPECT OF THE THIRD PROPERTY AT SOUTH PERUMAL MAISTRY STREET, MAD URAI. HOWEVER, AS STATED ABOVE, THE ASSESSEE HAS PURCHASE D ANOTHER HOUSE ON 25/04/2008 I.E. WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET; TH E ASSESSEES CLAIM FOR EXEMPTION U/S. 54F IS NOT ADMISSIBLE. ITA NO. 227/MDS13/ 10 8. BEFORE THE LD. CIT (A), THE ASSESSEE HAS MADE T HE FOLLOWING SUBMISSIONS:- THE ASSESSEE HAD CLAIMED THE BENEFIT OF EXEMPTION U/S. 54 /54F IN RESPECT OF A PROPERTY PURCHASED ON 30.06.07 FOR ` 40,50,000/- PROPERTY AT NO.45B,CORONATION STREET, ARASARADI, MADURAI. THIS CLAIM WAS REJECTED BY THE AO WHO OBSERVED THAT THE ASSESSEE OWNS A NUMBER OF HOUSE PROPERTIES AND, THEREFORE, IS HIT BY THE MISCHIEF O F CLAUSE (A)(I) OF PROVISO TO SEC.54F(1). IT WAS MISTAKE THAT SEC.5 4F WAS MENTIONED IN THE STATEMENTS ACCOMPANYING THE RETURN FOR ASSESSMENT YEAR 2008-09. HOWEVER, IT WAS CLARIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DA TED 25.11.2010 ADDRESSED TO LD. ASSESSING OFFICER THAT THE CLAIM OF EXEMPTION IS U/S. 54 AND NOT SEC.54F. ACCORDING TO SEC.54(1),WHERE IN THE CASE OF INDIVIDUAL THERE IS LTCG ON THE SALE OF HOUSE PROPERTY AND THE ASSESSEE HAS WIT HIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER SUCH S ALE PURCHASE A HOUSE PROPERTY, THEN, THE COST OF PURCHA SE OF NEW ITA NO. 227/MDS13/ 11 HOUSE PROPERTY SHALL BE ELIGIBLE FOR EXEMPTION. YOUR APPELLANT ALSO WISHES TO SUBMIT THAT THE NEW HOUSE PROPERTY WAS PURCHASED ON 30.06.07 AND THE TRANSFER OF THE H OUSE PROPERTY [COMPRISED IN S.NO.216/2B] WAS ON THE BASI S OF THE AGREEMENT OF SALE DATED 04.04.2007. THUS, THE PURC HASE OF THE NEW HOUSE PROPERTY WAS WITHIN A PERIOD OF 3 MON THS FROM THE SALE OF THE OLD HOUSE PROPERTIES AND THUS THE P ROVISIONS OF SEC.54(2) [PRESCRIBING COMPULSORY DEPOSIT OF UNUTIL IZED SALE CONSIDERATION IN SPECIFIED BANK ACCOUNT] MAY NOT AP PLY. IT IS SUBMITTED THAT THE ASSESSEE SATISFIES ALL THE CONDI TIONS PRESCRIBED AND HENCE IS RIGHTLY ELIGIBLE FOR THE EX EMPTION U/S. 54. IT IS PRAYED THAT THE CLAIM OF EXEMPTION U/S. 5 4 OF ` 40,50,000/- MAY PLEASE BE ALLOWED AND JUSTICE REND ERED. 8.1. LD. CIT (A) FOLLOWING THE DECISION OF THE F OLLOWING CASES AND AFTER VERIFYING THE SUBMISSIONS OF THE ASSESSEE ALL OWED THE BENEFIT OF SEC.54 TO THE ASSESSEE. I) MRS.LEELA P.NANDA VS. ACIT (2006) 286 ITR (AT ) 113 (MUM.) ITA NO. 227/MDS13/ 12 II) SHIVNARAIN CHOWDARY VS. CWT (1997) 108 ITR 104 (ALL.) & III) KC KOUSHIK VS.PB RANE, VS. ITO (1990) 185 ITR 499 (BOM.) 9. LD. D.R. ARGUED BEFORE US SUPPORTING THE ORDER OF THE LD. A.O. STATING THAT THE ASSESSEE HAD CLAIMED BENEFIT U/S. 54F OF THE ACT AND THE SAME WAS NOT PERMISSIBLE WHILE AS THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE BENEFIT U/S. 54 OF THE ACT AND NOT U/S. 54F OF THE ACT AND THEREFORE, THE ORDER OF THE LD. CIT (A) IS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. IT WAS THEREFORE P RAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE UPHELD. 10. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 54 OF THE ACT WAS WITH RESPECT TO THE SALE OF A RESIDENTIAL PROPERTY IN SURVEY NO.216/2B VIDE AGREEMENT DATED 4.4.07 FOR A SALE CONSIDERATION OF ` 83,58,746/-. PART SALE PROCEEDS ARISING FROM THE SALE OF THE RESIDENTIAL P ROPERTY WAS UTILIZED BY THE ASSESSEE TO PURCHASE A RESIDENTIAL HOUSE AMO UNTING TO ` 40,50,000/- AT 45/B CORONATION STREET, ARASARADI, MADRUAI. THEREFORE, IT IS OBVIOUS THAT THE ASSESSEE IS ENTIT LED TO CLAIM THE ITA NO. 227/MDS13/ 13 BENEFIT U/S. 54 OF THE ACT. SEC.54 OF THE ACT PROV IDES THAT WHERE THE ASSESSEE BEING AN INDIVIDUAL, HAD DERIVED LONG TERM CAPITAL GAINS BY TRANSFERRING THE LONG TERM CAPITAL ASSET BEING BUIL DING OR LAND APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD INCOME FROM HOU SE PROPERTY AND IF THE ASSESSEE HAS WITHIN THE STIPULATED PERIO D FROM THE DATE OF TRANSFER OF THE OLD ASSET PURCHASED A RESIDENTIAL H OUSE, THEN THE ENTIRE CAPITAL GAIN IF INVESTED IN THE PURCHASE OF A RESIDENTIAL HOUSE OR IN PROPORTION TO THE AMOUNT OF CAPITAL GAIN INVE STED WILL BE EXEMPT FROM CAPITAL GAIN TAX, SUBJECT TO THE FULFILLMENT O F THE OTHER CONDITIONS LAID DOWN IN THE ACT. IN THE RELEVANT CASE BEFORE U S, THE ASSESSEE HAS INVESTED ` 40,50,000/- FOR THE PURCHASE OF A RESIDENTIAL HOUS E. THUS, THE ASSESSEE WILL BE ENTITLED TO THE BENEFIT OF SEC .54 OF THE ACT PROPORTIONATELY IN ACCORDANCE WITH SECTION 54(1)(II ) OF THE ACT SINCE THE AMOUNT INVESTED BY THE ASSESSEE FOR THE PURCHAS E OF THE NEW ASSET IS LESS THAN THE CAPITAL GAIN EARNED BY THE A SSESSEE. ACCORDINGLY THE LD. AO IS HEREBY DIRECTED TO RE-COM PUTE THE TAXABLE CAPITAL GAIN ACCORDING TO OUR AFORESAID FINDINGS AN D DECISION. ITA NO. 227/MDS13/ 14 11. IN THE RESULT, THE APPEAL OF REVENUE IS PARTL Y ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON 10 TH APRIL, 2014 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD ) (A.MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH APRIL, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE