ITO, CHENNAI V. Smt. Latha Saravanan, CHENNAI

ITA 2621/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7819 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 09-09-2016
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: S VENUGOPALAN
• Keywords: Non compliance
• Section: 143(3); 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C' BENCH, CHENNAI , . ' #, % #& BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2621/MDS/2016 / ASSESSMENT YEAR : 2013-14 INCOME TAX OFFICER , NON-CORPORATE WARD 11(5), CHENNAI - 600 006. VS. LATHA SARAVANAN, NO.12, NANI BASHA STREET, PUDUPAKKAM, ROYAPETTAH, CHENNAI 600 014. [PAN: ANHPS 1310B] ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI PATHLAVATH PEERYA , CIT DR - 2 ,-'( ) * / RESPONDENT BY : SHRI S.VENUGOPALAN , C.A ' ) . /DATE OF HEARING : 01.12.2016 /0 ) . /DATE OF PRONOUNCEMENT : 01.03.2017 /O R D E R PER BENCH: THE REVENUE HAS FILED APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 13, ITA NO. 87/CIT(A)-13/201 3-14 DATED 28.06.2016 PASSED U/S. 143(3) OF THE INCOME TAX ACT. :-2-: I.T.A. NO.2621/MDS/2016 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, HAVING INCOME FROM HOUSE PROPERTY AND FROM OTHER SOURCES. HE FILED HIS RETURN OF INCOME ELECTRONICALLY FOR AY 2013-14 ON 18.11.2013 WITH TOTAL INCOME OF RS. 4,22,170/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 31.01.2014. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY, AND NOTICE U/S. 143 (2) OF THE ACT ISSUED. IN RESPONSE OF THE NOTICE, THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS. THE LD AO DIRECTED THE ASSESSEE TO FUR NISH THE DETAILS OF PROPERTIES PURCHASED, INCOME AND EXPENDITURE ACCOUNT, BANK STA TEMENTS AND OTHER FINANCIAL DETAILS. THE LD. ASSESSING OFFICER ON PERUSAL OF P URCHASE DEED OF THE PROPERTY CALLED FOR CERTAIN CLARIFICATIONS AND THE ASSESSEE FILED LETTER DATED 03.07.2015 AND EXPLAINED THAT THE ASSESSEE HAS SOLD JOINT PROPERT Y ON 26.03.2010 FOR A CONSIDERATION OF RS. 2 CRORES OF WHICH HER SHARE IS RS. 1 CRORE ONLY. SUBSEQUENTLY, THE ASSESSEE ENTERED INTO AGREEMENT ON 07.10.2010 TO PURCHASE A RESIDENTIAL PROPERTY WITH M/S LAND MARK CONSTRUCTION CO LTD FO R TOTAL COST, INCLUDING MAINTENANCE AND OTHER WORKS, OF RS. 2,34,46,080/-, AND THE ASSESSEE PAID RS. 1,60,46,080/- AT THE TIME OF AGREEMENT. AS PER TH E CLAUSE 11 OF THE CONSTRUCTION AGREEMENT, THE POSSESSION OF RESIDENTIAL PROPERTY H AS TO DELIVERED WITHIN 24 MONTHS AND THE ASSESSEE FURTHER PAID A SUM OF RS. 29,53,92 0/- AS PER THE AGREEMENT DATED 07.10.2010. BUT THE DUE TO LEGAL DISPUTES AND SOME TECHNICAL PROBLEMS ON CONSTRUCTION, THE BUILDER FAILED TO CONSTRUCT THE PROPERTY AND PROMISED TO COMPENSATE WITH OTHER RESIDENTIAL PROPERTY. THE BU ILDER IDENTIFIED RESIDENTIAL PROPERTY FOR THE ASSESSEE AND PAID THE AMOUNT DIR ECTLY TO THE SELLER OF THE PROPERTY AND THE SAID RESIDENTIAL PROPERTY WAS RE GISTERED IN THE NAME OF THE ASSESSEE ON 22.03.2013 . THE LD ASSESSING OFFICER IS OF THE OPINION THAT AS PER THE :-3-: I.T.A. NO.2621/MDS/2016 PROVISIONS OF SEC. 54F OF THE ACT, THE ASSESSEE HAS TO PURCHASE A RESIDENTIAL PROPERTY WITHIN ONE YEAR BEFORE SALE OF ORIGINAL ASSET OR WI THIN TWO YEARS AFTER THE SALE OF ORIGINAL ASSET/PROPERTY OR CONSTRUCT A RESIDENTIAL HOUSE PROPERTY WITHIN THREE YEARS FROM THE DATE OF SALE. WHEREAS THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE PURCHASED A RESIDENTIAL PROPERTY ON 22.03.2013, AF TER A PERIOD OF TWO YEARS FROM THE DATE OF SALE OF THE PROPERTY, BEING 26.03.2010. THE LD AO IS OF THE OPINION THAT THERE WAS DELAY IN PURCHASING THE PROPERTY , IRRESP ECTIVE OF THE FACT THAT THE ASSESSEE HAS ENTERED INTO AGREEMENT TO PURCHASE TH E RESIDENTIAL PROPERTY WITH M/SLAND MARK CONSTRUCTION CO LTD ON 07.10.2010. FU RTHER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT INVESTED THE CO NSIDERATION WITHIN THE STIPULATED TIME IN THE RESIDENTIAL PROPERTY. AND SHOULD HAVE D EPOSITED IN CAPITAL GAINS ACCOUNTS SCHEME ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/SEC139(1) OF THE ACT. WHEREAS THE ASSESSEE MADE THE PAYMENT TO THE BUILDER ON 29.09.2010 AND 07.10.2010 AND HAS FAILED TO COMPLY THE PROVISI ONS OF SECTION 54F(4) OF THE ACT, BY NOT DEPOSITING THE SAID AMOUNT IN CAPITAL GAINS ACCOUNTS SCHEME BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/SEC139(1) OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 AND WITHDRAWN THE EXEMPTION GRANTED AND P ASSED ORDER U/SEC 143(3) OF THE ACT ON 14.10.2015. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL WITH LD. CIT(A). IN THE APPELLATE PROCEEDINGS THE ASSESSEE ARGUED THE GROUN DS AND SUBMITTED THAT HE HAS COMPLIED WITH THE PROVISIONS OF SECTION. 54F OF THE ACT AND THERE IS NO DISPUTE ON THE PAYMENTS. THE LD. CIT(A) OBSERVED THAT THE ASSESSE E HAS SOLD JOINT PROPERTY ALONG WITH THIS WIFE ON 26.03.2010 AND RECEIVED SHARE SALE CONSIDERATION RS 1 CRORE,AND ENTERED IN TO AGREEMENT WITH BUILDER AND PAID RS. 1,14,00,000/- TO :-4-: I.T.A. NO.2621/MDS/2016 PURCHASE A RESIDENTIAL PROPERTY, WHEREAS AS THE B UILDER COULD NOT COMPLETE THE CONSTRUCTION OF THE PROPERTY WITHIN TWO YEARS DUE T O LEGAL DISPUTES. THE BUILDER IDENTIFIED ANOTHER RESIDENTIAL PROPERTY FOR THE ASS ESSEE AND PAID THE AMOUNT DIRECTLY TO THE SELLER AND THE PROPERTY WAS REGIS TERED ON 22.03.2013 IN THE NAME OF THE ASSESSEE AND HIS WIFE. THE AO HELD THAT THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS OF SEC. 54F(4) OF THE ACT IN THE ASS ESSMENT YEAR 2010-11 AND BROUGHT TO TAX THE EXEMPTION CLAIMED. THE LD. CIT(A) CONS IDERED THE GROUNDS AND FINDINGS OF THE ASSESSING OFFICER AND APPLICABLE PROVISIONS U/S. 54F OF THE ACT AND THE VARIOUS ASPECTS AND THE REASONS OF THE ASSESSEE FOR NOT PURCHASING THE PROPERTY WITHIN THE TIME DUE TO LEGAL DISPUTES ENCOUNTERED WITH THE BUILDER. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE MADE A SUBSTANTIAL PAYM ENTS FOR PURCHASE OF PROPERTY TO THE BUILDER IN THE YEAR2010 AND RELIED ON JUDICI AL DECISION BY HIGH COURT IN CIT V. MRS. HILLA J.B. WADIA 216 ITR 376 AND OBSERVED AT PAGE 12 OF HIS ORDER A ND ALLOWED THE APPEAL WHICH READ AS UNDER: IN THE INSTANT CASE THE ASSESSEE HAS INVESTED SUB STANTIAL AMOUNT OF RS. 1,14,00,000/- ON 20.04.2010 AND AMOUNT OF RS. 7 6,00,000/- ON 30.09.2010 AND THEREAFTER THE PURCHASE OF RESIDENTI AL PROPERTY WAS CONCLUDED ON 22.03.2013. RESPECTFULLY FOLLOWING TH E DECISION OF THE HON'BLE COURTS AS REFERRED ABOVE, IN THE CASE OF AS SESSEE, THE ASSESSEE HAS FULFILLED HE CONDITION LAID UNDER SECTION 54F. ACCORDINGLY, I DIRECT THE AO THAT THE ASSESSEE IS NOT IN DEFAULT / FAILUR E ON HER PART AS RELYING ON THE DECISIONS OF CASE LAWS CITED ABOVE THE ASSES SEE HAS FULFILLED THE CONDITION STIPULATED U/S. 54F OF THE INCOME TAX ACT , 1961. HENCE, THE AO IS DIRECTED TO ALLOW THE ASSESSEES EARLIER CLAI M OF EXEMPTION U/S. 54F OF THE INCOME TAX ACT, 1961 IN THE AY 2010-11 A ND THEREFORE, THE SAME IS DIRECTED NOT TO BRING TO TAX IN THE ASSESSM ENT YEAR UNDER CONSIDERATION AS THE ASSESSEE HAS FULFILLED THE CON DITIONS OF SECTION. 54F. THE GROUND OF APPEAL ON THIS ISSUE IS ALLOWED . :-5-: I.T.A. NO.2621/MDS/2016 4. AGGRIEVED BY THE ORDER, REVENUE HAS FILED AN APP EAL. THE LD DR SUBMITTED THAT THE LD. CIT( A ) ERRED IN DIRECTING ASSESSING OFFICE TO ALLOW EXEM PTION UNDER SECTION 54F OF THE ACT. THE LD. DR CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE SALE PROCEEDS IN THE CAPITAL GAINS ACCOUNTS SCH EME BEFORE DUE DATE OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT AND THE ASSE SSEE HAS VIOLATED THE PROVISIONS UNDER SECTION 54F OF THE ACT. THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM AND PRAYED FOR SETTING ASIDE OF ORDER OF THE LD. CIT(A) AND R ESTORE THE ORDER OF THE ASSESSING OFFICER. CONTRA, THE LD.AR RELIED ON THE ORDER OF THE CIT(A) AND FILED PAPER BOOK WITH EVIDENCE OF INVESTMENTS AND JUDICIAL DECISIONS OF H IGH COURTS AND TRIBUNAL AND OPPOSED TO THE GROUNDS OF THE REVENUE. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ISSUE INVOLVED IS THE WITHDRAWAL OF THE DEDUCTI ON U/S. 54F, CLAIMED AND ALLOWED IN THE ASSESSMENT OF CAPITAL GAIN FOR AY 20 10-11 AT RS. 89,22,756/-. THE REASON FOR THE SAME IS THAT THE CONDITION OF SEC. 5 4F(2), I.E., OF THE PURCHASE OF A RESIDENTIAL HOUSE (NEW ASSET) WITHIN TWO YEARS FROM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET (I.E., 26.03.2010 ), SUBJECT TO WHICH THE EXEMPTION U/S. 54F WAS ALLOWED FOR THAT YEAR, HAS NOT BEEN MET IN-AS-MUCH AS THE PURCHASE OF THE NEW ASSET STANDS CONCLUDED ONLY ON 22.03.2013. THE ARGU MENT OF NOT DEPOSITING THE NET CONSIDERATION IN THE CAPITAL GAINS ACCOUNT SCHEME, ALSO ASSUMED BEFORE US BY THE LD. DR, IS NOT VALID AS THE SAME COULD BE TAKEN ONL Y FOR AY 2010-11. SIMILARLY, WE OBSERVE THAT THE PAYMENT OF RS. 76,00,000/- TO THE BUILDER IS ALSO BEYOND THE DUE DATE OF THE FILING OF THE RETURN FOR AY 2010-11,I.E ., 31.07.2010. IN FACT, BOTH THIS AMOUNT AS WELL AS THE EARLIER PAYMENT OF RS. 114,00 ,000/- (ON 20.4.2010) TO THE :-6-: I.T.A. NO.2621/MDS/2016 BUILDER, WHICH THE LD. CIT(A) NOTES IN HIS ORDER (R EFER PARA 4 ABOVE), ARE TOTAL PAYMENTS TO THE BUILDER, OF WHICH THE ASSESSEE'S SH ARE IS ONLY ONE HALF, I.E., RS. 95,00,000/-. HOWEVER, ALL SUCH OBJECTIONS COULD BE RAISED ONLY FOR AY 2010-11 AND NOT THE CURRENT YEAR. THE ONLY OBJECTION WHICH THER EFORE SURVIVES IS OF THE PURCHASE OF THE RESIDENTIAL HOUSE (NEW ASSET) HAVING NOT BEE N COMPLETED WITHIN TWO YEARS OF THE SALE DATE (OF THE ORIGINAL ASSET), I.E., BY 25. 03.2012. IN OUR CONSIDERED VIEW, WHERE THE ASSESSEE ENTERS IN AN AGREEMENT WITH THE DEVELOPER, MAKING PAYMENT OVER THE TERM THEREOF, AL ONG WITH THE PROGRESSION OF THE CONSTRUCTION, THE SAME HAS TO BE REGARDED AS A CASE OF CONSTRUCTION OF A RESIDENTIAL HOUSE AS OPPOSED TO ITS PURCHASE. THE REASON IS SI MPLE. A PURCHASE COULD ONLY BE OF AN EXISTING ASSET, I.E., AT THE TIME OF PURCHASE , WHILE THERE IS NO EXISTING RESIDENTIAL HOUSE AS ON THE DATE OF AGREEMENT, I.E. , 07.10.2010, AND THAT THE BUILDER HAS ONLY AGREED TO CONSTRUCT A RESIDENTIAL HOUSE FO R THE ASSESSEE FOR A CONSIDERATION, WHICH ASSET IS THUS ONLY UNDER CONTEMPLATION AND IS TO MATERIALIZE ONLY IN FUTURE. THE MATERIAL DATE FOR THE ACQUISITION OF THE RESIDENTIA L HOUSE FOR THE PURPOSE OF SEC. 54F(2) WOULD THUS BE THREE YEARS FROM THE TRANSFER DATE, I.E., 25.03.2013 AND NOT 25.03.2012. THE NEW ASSET HAS BEEN ADMITTEDLY ACQU IRED BY THE ASSESSEE ON 22.03.2013 . ACCORDINGLY, THE CONDITION OF 54F(2) IS SATISFIE D, AND THERE IS NO CASE OF NON COMPLIANCE OF THE SAID SECTION, I.E., IN-SO-FAR AS ITS COGNIZANCE COULD BE TAKEN OF FOR THE CURRENT YEAR. WE, ACCORDINGLY, FOR THE SAID REASONS AFORE-STATED, FIND NO REASON FOR INTERFERENCE, AND UPHOLD THE DELETION OF THE WITHDR AWAL OF EXEMPTION U/S. 54F FOR AY 2010-11. WE DECIDE ACCORDINGLY. :-7-: I.T.A. NO.2621/MDS/2016 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON WEDNESDAY THE 1 ST DAY OF MARCH, 2017 AT CHENNAI. SD/- SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER ( . ' # ) (G. PAVAN KUMAR) % /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 1 ST MARCH, 2017 EDN 3 ) ,%.45 650. /COPY TO: 1. '( /APPELLANT 2. ,-'( /RESPONDENT 3. ' 7. )/CIT(A) 4. ' 7. /CIT 5. 5 89 ,%.% /DR 6. 9:; < /GF