ANUBHAV KAPOOR, LUCKNOW V. INCOME TAX OFFICER - 2(1)(1), GHAZIABAD

ITA 2364/DEL/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2112 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 21-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Salary income; Principle of natural justice; Cost of acquisition; Fair market value; Wrong claim; Ignorance of law; Capital Gains
• Section: 54; 143(3); 50C; 54F; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘A’: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.2364/DEL/2023 [Assessment Year: 2016-17] Anubhav Kapoor, M-5, Gole Market, 2 nd Floor, C/o-S N Kapur Mahanagar, Lucknow, Uttar Pradesh-226006 Vs Income Tax Officer-2(1)(1) CGO Complex-1, Purani Hapur Chungi, Ghaziabad, Uttar Pradesh-201002 PAN-BIVPK0383E Assessee Revenue Assessee by Sh. Sanjay Kumar, CA, Sh. Akarsh Garg, Adv. and Sh. Subhash Singh, Adv. Revenue by Sh. Kanv Bali, Sr.DR Date of Hearing 07.05.2024 Date of Pronouncement 29.05.2024 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi, dated 23.06.2023 pertaining to Assessment Year 2016-17. 2. The grounds of appeal raised by the assessee reads as under:- “1 the authorities below have erred in law and on facts, in taking fair market value of residential property situated at Triveni Nagar, Mohalla - Ahibarnapur, Sitapur Road, Lucknow at Rs.1,62,47,700/- as against actual sale consideration realised by the appellant, at Rs.1,50,00,000/-. 2 ITA No.2364/Del/2023 2. on a due consideration of facts and circumstances of the case, particularly that (i) property in question (that had been sold by the appellant), was surrounded by Classic Motors at both sides; (ii) at property in question, widowed mother of the appellant had been residing, whereas her son had been residing far away from Lucknow; (iii) the Classic Motors situated in the neighbourhood of the property in question had been creating nuisance, to the widowed lady residing alone in the property that had been sold by the appellant; (iv) the Classic Motors themselves were interested in the said property for their own use, owing to which they have been harassing the potential buyers; (v) so much so that after the property had been sold in a distress sale, the new occupant had been harassed by undesirable elements, as had been deployed by Classic Motors, and that new buyer had to lodge First Information Report (FIR) in police station; (vi) the neighbours of both sides i.e. Classic Motors had been harassing the guests/ visitors of the lady, for discouraging them to buy the property in question; (vii) information about FIR, that had been lodge by the new buyer, had duly been made available to the Id. Assessing Officer and such FIR could not have been ignored by the Authorities below, on the ground that copy of FIR had not been produced before them; (viii) such FIR could not have been ignored even on the ground to the effect that "the assessee himself had not filed such FIR"; (ix) cumulative fact of all the factors as mentioned above, the appellant had to make distress sale of the property in question and such factors had duly been brought to the notice of the ld. Assessing Officer and other attendant facts and circumstances of the case, to which attention of the ld. Assessing Officer had duly been invited by the appellant; (3) after the authorities below had duly been apprised of distressing factors as mentioned above, they themselves should have made a reference to the DVO under section 3 ITA No.2364/Del/2023 50C(2) of the Act so as to ascertain fair market value of the property in question at the time of sale; (4) notice under section 143(2), even if issued on 27.09.2017, could not have been said to be put into 'computer recourse, before 30.09.2017, the outer limit for service of such notice, and accordingly the assessment order dated 28.09.2018 itself was bad in law; (5) the authorities below have erred in law and on facts in denying appellant's claim for exemption under section 54, on the ground that the consideration realized on sale of property in question, had not been invested in purchase of residential flat, within the time prescribed under section 139(1) of the Act; (6) the express term used under section 54(2) referred to investment made prior to filing of "return of income" under section 139, without any suffix thereto, so as to hold that even if the "return" had been filed belatedly, under section 139(4) of the Act, no such benefit could have been denied to the assessee/vendor, which is supported by large number of judicial pronouncements; (7) order appealed against is contrary to facts, law and principles of natural justice.” 3. Brief facts of the case: In this case, the assessment order for AY 2016-17 dated 28.09.2018 u/s 143(3) of the Act was passed determining the Long Term Capital Gain (LTCG) at Rs.1,02,91,568/- as against Rs.4,88,868/- offered by the assessee. The AO noted that this case was selected for scrutiny through CASS under ‘limited scrutiny’ to examine the following issue:- (i) Large deduction claim u/s 54B, 54C, 54D, 54G, 54GA (schedule CG of ITR) 3.1. The AO noted that during the year under consideration, the assessee sold a residential property at Triveninagar, Mohalla-Ahibranpur, Sitapur Road, Lucknow for a sum of Rs.1,50,00,000/-(value as per section 50C of Rs.1,62,47,700/-) to Dr. Mamta Gaur and Dr. Ajay Kumar on 17.02.2016. The AO noted that this property was received by the 4 ITA No.2364/Del/2023 assessee through Will executed on 19.03.2004 from his grandmother Smt. Sarojni Devi Kapoor and the assessee had worked out the capital gains as under:- Sale consideration of the property Rs.1,50,00,000/- Less: Indexed cost of acquisition Rs. 43,56,132/- Long Term Capital Gain Rs.1,06,43,868/- Less: Deduction u/s 54 of the IT Act, 1961 Rs. 1,01,55,000/- Net Long Term Capital Gain Rs. 4,88,868/- 3.2. The AO noted that the assessee while calculating the LTCG had not adopted the sale consideration of the property as per section 50C of the Act. The AO further noted that the assessee had purchased new residential property for Rs.95,00,000/- and had paid stamp duty of Rs.6,55,000/- on 08.08.2016. The AO on examination on details of payments made to the seller to acquire new residential house property found that the assessee made the payment to the seller to claim deduction u/s 54F of the Act as under:- 1. Rs.16,00,000/- through RTGS on 04/07/2016 2. Rs.78,05,000/- through RTGS on 10/08/2016 3. Rs.95,000/- as TCS on 09/08/2016 4. Rs.6,55,000/- for stamp duty on registration of the property on 08.08.2016 3.3. The AO further noted that the assessee was a salaried person and the extended due date for filing of return for AY 2016-17 was 05.08.2016. On examination of the details of the investment made by the assessee to 5 ITA No.2364/Del/2023 acquire the property, the AO found that the assessee had invested Rs.78, 05,000/- on 10.08.2016, Rs.95,000/- on 09.08.2016 and Rs.06,55,000/- on 08.08.2016 and noted that these investments were made by the assessee after the due date of filing of ITR in the case of the assessee. The AO after analyzing the provision of section 54(2) of the Act held that assessee should have deposited LTCG of Rs.85,55,000/-, which was not utilized to acquire new property before the due date of filing of ITR i.e. 05.08.2016 in the capital gain account and then after making withdrawal from it, the assessee should have invested to acquire new property, which was not done by the assessee in this case. The AO relying upon the provisions of section 54(2) held that the LTCG of Rs.85,55,000/- invested to acquire new property after due date of filing of ITR without depositing to the capital gain account was not eligible for deduction u/s 54(2) of the Act and restricted the deduction at Rs.16,00,000/- as against Rs.1,01,55,000/- claimed by the assessee. 3.4. In this regard, on both the issues, i.e. adoption of sale consideration of the property not as per the provision of section 50C of the Act and wrong claim deduction u/s 54(2) of the Act, a show cause notice dated 23.08.2018 issued by the AO. 3.5. In reply, the assessee submitted that property was sold at a lower price due to continued violence and threat by adjacent land lord, who wanted to acquire their property. Regarding the reasons for not depositing the capital gain amount in the capital gains account, the assessee submitted that he was not aware about the legal consequences of not 6 ITA No.2364/Del/2023 depositing the capital gains within the due dates in capital gain account and other compulsions. The reply of the assessee is reproduced as under “Though the valuation as per section 50C was higher than the sale price, I had no other option than to sell the property at lower rates because of scarcity of time and means to find a buyer deal for the higher valuation of 1.62 crores. The main reason of selling the Lucknow property at 1.50 er was the continued violence and threats by the adjacent landlord (Classic Motors Owner, having property on both the sides of my house), me and my family were bothered every now and then and they even tried to cause physical harm to me. They wished to acquire our property also. As my mother was living there alone, it was very unsafe. We therefore decided to do away with the property ASAP and the among the best available deal, sold the property at 1.50 crores. Even after we left the premises, there was still violence and FIR lodged by the new occupants for physical assault done o them by those peoples." "Depositing the amount in Capital Gain amount could not he done due to 3 prime reasons: - a) I was not aware about the consequences of not depositing the Capital Gain amount within the due dates in Capital Gain Bank Account. b) We had to do the registry in early August however due to strike in Ghaziabad Court we were sent back and had no choice but to wait (in July last week and August first week also), and c) The seller (Mr. Gurpreet Singh Sohal) was residing in Canada and he was due to travel to India in the last week of July for registry, however he could not come and the Registry was done by his mother in law (on power of auorney). This was one more reason for the delays in registry. Hence, we were always in a perplexed situation for opening the CG account." 3.6. The AO did not agree with the assessee mainly because of not furnishing any evidence to support his claim of violence by the adjacent land lord and that ignorance of law was no defence and he rejected the 7 ITA No.2364/Del/2023 other claims of the assessee in this regard. The AO discussed the matter as under and recomputed the LTCG at Rs.1,02,91,568/- accordingly: “The reply of the assessee is not acceptable as the assessee did not furnish any evidence i.e. copy of FIR lodged against the owners of M/s Classic Motors for doing violence and threatening to the assessee with the intention to acquire property forcefully. Besides, the assessee did not furnish any evidence for taking legal action against the owners of M/s Classic Motors for their misbehaviour. Thus, in view of the above, the assessee's contention for not adopting the sale consideration as per section SOC of the IT Act, 1961 for computation of LTCG is not acceptable. Besides, the assessee's contention that he was not aware of the provisions of section 54(2) of the IT Act, 1961 is not acceptable "as ignorance of law is no excuse". In addition to this, the assessee submitted that "due to strike in Ghaziabad Court we were sent back and had no choice but to wait (in July last week and August first week also)". This contention of the assessee is also not acceptable if there was strike in Ghaziabad Court then he should have deposited unutilized LTCG in the Capital Gain Account but he did not deposit the unutilized LTCG to the capital gain account, therefore the assessee did not comply with the provisions of section 54(2) of the IT Act, 1961. Further, the assessee submitted that "seller (Mr. Gurpreet Singh Sohal) was residing in Canada and he was due to travel to India in the last week of July for registry, however he could not come and the Registry was done by his mother in law (on power of attorney)". The provisions of section 54(2) of the IT Act, 1961 mandates that the investment must be before the due date of filing of ITR and unutilized LTCG must be deposited in the capital gain account be before the due date of filing of ITR as provided u/s 139(1) of the IT Act, 1961. The transfer of the property can be done after due date of filing ITR. Therefore, the contention of the assessee that the seller could not come and the registry was done in August-2016 is not acceptable. Therefore, in view of the above discussion and facts, the LTCG has been worked out as under:- Sale consideration of the property (as per sec: 50C) Rs.1,62,47,700/- Less: Indexed cost of acquisition Rs.43,56,132/- Long Term Capital Gain Rs.1,18,91,568/- Less: Deduction u/s 54 of Rs.16,00,000/- 8 ITA No.2364/Del/2023 the IT Act, 1961 (invested before due date of filing of ITR) Net Long Term Capital Gain Rs.1,02,91,568/- Thus in view of the above, the income of the assessee is recomputed as under:- 1 Salary income Rs.7,73,213/- 2 Income from other sources Rs.93,703/- 3 Less: Deduction under Chapter VIA Rs.1,41,645/- 4 Net Taxable income Rs.7,25,271/- 5 Long Term Capital Gain Rs.1,02,91,568/- 4. Aggrieved with the order, the assessee filed an appeal before the National Faceless Appeal Centre (in short NFAC). The NFAC, vide an order dated 23.06.2023 agreeing with the findings of the AO, dismissed the appeal of the assessee. 5. Aggrieved with the order of the NFAC/Ld. CIT(A), the assessee is in appeal before us. 6. The Ld. AR on the issue of 50C, submitted that the variation between the stated sale consideration (Rs.1,50,00,000/-) vis-à-vis stamp duty valuation (Rs.1,62,47,700/-) was less than 10% of the sale value received and relying upon the judgment of the co-ordinate Bench in the case of Amrapali Cinema vs ACIT, Circle-1, Meerut, reported in [2021] 127 taxmann.com 376 (Delhi-Trib.) submitted that amendment made in the scheme of section 50C(1) by inserting third proviso by the Finance Act, 2020 enhancing tolerance band for variations between the stated sale 9 ITA No.2364/Del/2023 consideration vis-à-vis stamp duty valuation from 5% to 10% are effective from date on which section 50C, itself was introduced i.e. 01.04.2003 and therefore, the adoption of Rs.1,62,47,700/- as sale consideration of properties by the AO was not correct. 6.2. Further, as regards the non-deposit of the capital gains amount in the capital gains account before the due date of the filing of the return, the Ld. AR relied upon the decision of the Co-ordinate Bench in the case of Smt. Manider Kartik vs DCIT in ITA No.5649/Del/2017, order dated 20.09.2023, wherein the Bench followed the decision of the CIT vs Venkat Dilip Kumar (277 taxmann 463) where it was held that where the assessee is in position to satisfy the requirements as envisaged in u/s 54(2) of 54(1) of the Act, the assessee could not be denied exemption u/s 54 of the Act for mere non-compliance of requirement u/s 54(2) of the Act. 7. The ld. Sr. DR relied upon the orders of the authorities below. 8. We have heard both the parties and perused the material available on record. In this case, the difference of Rs.12,47,700/- between the stamp duty value and the sale consideration is less than 10% of Rs.1,50,00,000/- i.e. the sale consideration received in this case. Therefore, in view of the decision of the Co-ordinate Bench in the case of Amrapali Cinema vs ACIT (supra), the action of the AO is not justified and therefore, the AO is directed to adopt the sale consideration at Rs.1,50,00,000/- as offered by the assessee in computing the capital gains. Further, in this case, in view of the difficulties explained by the 10 ITA No.2364/Del/2023 assessee, the capital gains amount of Rs.85,55,000/- could not be deposited in the capital gains account before the due date of filing of return on 05.08.2016. The Co-ordinate Bench in the case of Smt. Maninder Kartik (supra) noted that in the case laws relied by the assessee, it has been held that depositing the unutilized amount in a special account is only a procedural matter, and non-compliance thereof cannot result in negating the deduction claimed u/s 54 of the Act, if the other requirements are complied with. As seen in the present case, the assessee had complied with the other requirements of section 54 of the Act. However, the assessee has deposited the amount of Rs.85,55,000/- on or before 10.08.2016, which was five days later than the due date of filing of the ITR on 05.08.2016 in the case of the assessee. In the case relied by the ld. AR also, the ld. CIT(A) had allowed deduction for the amount spent up to the date of filing of return of Rs.27,00,000/- only and did not allow the rest of the payment, which was paid in the next week of the due date of the filing of the return. However, the Co-ordinate Bench allowed the full deduction including the amount, which was paid in the next week after the due date of the filing of the return. In the present case also, the assessee deposited the amount within five days of the due date of file of the return. Therefore, the facts being similar in the case of the assessee, the decision of the Co-ordinate Bench in the case of Smt. Maninder Kartik (supra) will be squarely applicable. Respectfully following the decision, it is held that the deposit/payment of stamp duty of Rs.85,55,000/- is as per the provisions of section 54(2) of the Act and the AO is directed to allow the full claim of deduction of Rs.1,01,55,000/- as claimed by the assessee. 11 ITA No.2364/Del/2023 8.1. Therefore, in view of the discussion, the AO is directed to accept the LTCG of Rs.4,88,868/- as offered by the assessee in his return of income and the addition of Rs.98,02,700/- under LTCG is hereby deleted. 9. Ground no.1 and ground no.5 are allowed. Thus, the other grounds of appeal became academic and are not being adjudicated and are kept open. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29 th May, 2024. Sd/- Sd/- [ KUL BHARAT] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 29.05.2024. ff^ ff^ff^ ff^? ?? ? Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi