SHILPA AJAY VARDE, MUMBAI V. PRINCIPAL CIT 22, MUMBAI, MUMBAI

ITA 2627/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1762 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2013-2014
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K S DEHIYA
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Capital asset; Revision of order; Opportunity of being heard; Cost of acquisition; Valuation report
• Section: 143(3); 54F; 2(14); 54; 263

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.2627/ MUM/2018 ( / ASSESSMENT YEAR : 2013 - 14) SHILPA AJAY VARDE, B - 3, RAMANIKA, PLOT NO. 26 - 27, DAULAT NAGAR, SANTA C RUZ (W), MUMBAI 400054 / V. P RINCIPAL C OMMISSIONER OF I NCOME T AX - 22, R.NO. 409, 4 TH FLOOR PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400012 ./ PAN : AABPV5824G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. M SUBRAMANIAN REVENUE BY : SHRI. L.K.S. DEHIYA, CIT(DR) / DATE OF HEARING : 11.10.2018 / DATE OF PRONOUNCEMENT : 14 .11 .2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILE D BY ASSESSEE, BEING ITA NO. 262 7/MUM/2018, IS DIRECTED AGAINST ORDER DATED 12.03.2018 PASSED BY LEARNED PRINCIPAL COMMI SSIONER OF INCOME TAX - 22, MUMBAI (HEREINAFTER CALLED THE PR. CIT ), FOR ASSESSMENT YEAR 2013 - 14 U/S 263 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) SETTING ASIDE ASSESSMENT ORDER DATED 20.10.2015 PASSED BY LEARNED ASSESSING OFFICER U/S 143(3) OF THE 1961 ACT , HOLDING THE SAME TO BE ERRONEOUS SO FAR AS IS PREJUDICIAL TO THE INTEREST OF REVENUE AND DIRECTING THE AO TO FRAME FRESH ASSESSMENT AFTER CONDUCTING PROPER I NQUIRY ON THE ISSUES WITH REGARD TO THE CORRECTNESS OF THE COMPUTATION OF LONG TERM CAPI TAL GAINS I.T.A. NO.2627/MUM/2018 2 ARISING FROM THE AFORESAID ASSESSMENT ORDER DATED 20.10.2015 PASSED EARLIER BY THE AO U/S 143(3) OF THE 1961 ACT . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINA FTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED C.I.T. ERRED IN PASSING AN ORDER U/S. 263 OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT APPRECIATING FULLY AND PROPERLY THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. ERRED IN HOLDING T HAT THE ORDER PASSED BY THE ITO 22(3)(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ALTHOUGH THE SAME WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED C .I.T. ERRED IN PASSING AN ORDER U/S. 263 OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT CONSIDERING THE WRITTEN SUBMISSION AND OBJECTION RAISED BY THE APPELLANTS AND REFERRING TO THE SUPPORTING CASE LAWS SUPPORTING THE OBJECTIONS OF THE APPELLANTS. THE APPELL ANT CA VES LEAVE TO ADD, ALTER, AMEND OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL AT ANY TIME. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN PROVIDING CONSULTANCY SERVICES IN THE NAME AND STYLE OF M/S S.V.SERVICES . DURING THE YEAR U NDER CONSIDERATION , THE AS SESSEE DERIVED INCOME FROM HOUSE P ROPERTY , BUSINESS OR PROFESSION, CAPITAL G AIN S AND FROM OTHER S OURCES IN THE FORM OF BANK INTEREST. THE ASSESSEE FILED RETURN OF INCOME WITH REVENUE ON 30.07.2013 DECLARING TOTAL INCOME OF RS. 8,17,590/ - AND ASSESSMENT WAS FRAMED BY REVENUE U/S 143(3) OF THE 1961 ACT , VIDE ASSESSMENT ORDER DATED 20.10.2015 WHEREIN RETURNED INCOME OF THE ASSESSEE WAS ACCEPTED BY THE REVENUE , DETAILS OF WHICH ARE AS HEREUNDER: - I.T.A. NO.2627/MUM/2018 3 I INCOME FROM HOUSE PROPERTY (AS PER STATEMENT) 3,91,978 II PROFITS/GAINS FROM BUSINESS/PROFESSION (AS PER STATEMENT) 3,15,838/ - III LONG TERM CAPITAL GAIN (AS PER STATEMENT) 15,982/ - IV INCOME FROM OTHER SOURCES (AS PER STATEMENT) 1,25,842/ - GROSS TOTAL INCOME 8,49,640 LESS: DEDUCTION UNDER CHAPTER VI - A 32054 TOTAL INCOME 8,17,586 ROUNDED OFF TO (U/S.288A) 8,17,590 THE ASSESSEE I N THE RETURN OF INCOME FILED WITH REVENUE DECLARED INCOME FROM LONG TERM CAPITAL GAINS TO THE TUNE OF RS. 15,982/ - WHICH WAS ACCEPTED BY REVENUE IN ASSESSMENT FRAMED U/S 143(3) , VIDE ASSESSMENT ORDER DATED 20.10.2015 , AS DETAILED BELOW: - 4. THE LD. PR. CIT FROM VERIFICATION OF THE RECORDS NOTICE D FROM THE COMPUTATION OF INCOME IN RESPECT OF LONG TERM CAPITAL G AIN S THAT THE ASSESSEE COMPUTED LONG TERM CAPITAL GAINS, AS DETAILED ABOVE. THE LD. PR. CIT NOTICED FROM REGISTERED DEVELOPMENT AGREEMENT DATED 31.1 2 .2012 FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED EARLIER BY THE AO THAT THE ASSESSEE ALONG WITH NET SALE CONSIDERATION RS.1,32,42,500 LESS: INDEXED COST 2,82,100*852/100 RS.24,03,492/ - LONG TERM CAPITAL GAIN RS.1, 0 8, 39,008 LESS: AMOUNT INVESTED IN HOUSE * CAPITAL GAIN/NET CONSIDERATION 44,87,500*1,08,39,008/ 13242500 36,73,026 LESS AMOUNT INVESTED IN 54EC 71,50,000 TAXABLE LTCG RS.15,982/ - I.T.A. NO.2627/MUM/2018 4 HER RELATIVES ENTERED INTO DEVELOPMENT AGREEMENT WITH DEVELOPER FOR DEVELOPMENT OF THEIR PROPERTY OF WHICH THE ASSESSE E ALONG WITH HER RELATIVES HELD OWNERSHIP RIGHTS IN THE SAID PROPERTY . IT WAS OBSERVED BY LD. PR. CIT THAT THE SAID DEVELOPMENT AGREEMENT IS BETWEEN THREE CO - OWNERS NAMELY SHRI GAUTAM U DIVADKAR, MRS. SHILPA AJAY VARADE (THE ASSESSEE) AND MRS. SHARMILA VINAY TELENGE WITH M/S. HONEST INFRA ( HEREINAFTER CALLED THE DEVELOPERS ) WHEREIN THESE THREE CO - OWNERS WH O ARE RELATIVES ENTERED INTO REGISTERED DEVELOPMENT AGREEMENT DATED 31.12.2012 WITH THE SAID DEVELOPER AND AT PAGE NO. 8 PARA 3B OF THE SAID REGISTERED DEVELOPMENT AGREEMENT, THE ASSESSEE WAS TO GET CONSIDERATION FROM THE DEVELOPER OF RS. 40 LA C S ON MONE TARY TERMS AS WELL FOUR RESIDENTIAL FLATS ON OW NERSHIP BASIS FREE OF COST AND SIX CAR PARKINGS FREE OF COST. T HE LD. PR. CIT OBSERVED THAT THE DETAIL/DESCRIPTION OF THE SAID FOUR RESIDENTIAL FLATS ( FLAT NO. 701, 702, 1001 AND 601) ARE GIVEN IN THE SAID R EGISTERED DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE ALONG WITH OTHER CO - OWNERS WITH HONEST INFRA. THE SAID DEVELOPMENT AGREEMENT WAS REGISTERED WITH SUB - R EGISTRAR KALYAN O N 10.01.2013 AND AS PER INDEX - II, THE CONSIDERATION WAS SHOWN AS RS. 3,13,75,216/ - ON WHICH STAMP DUTY WAS PAID AND THE SAME WAS DISTRIBUTED BETWEEN THE AFORESAID THREE CO - OWNERS AS DETAILED HERE UNDER: - VENDOR - 1 GAUTAM U DIVADKAR RS.53,12,500/ - (1FLAT + RS.20,00,000/ - ) VENDOR - 2 SHILPA A VARDE (ASSESSEE) FLAT NO - 701 RS.22,43,750/ - FLAT NO - 702 RS.22,43,750/ - FLAT NO - 1001 RS.23,87,500/ - FLAT NO - 601 RS.23,87.500/ - RS.92,62,500/ - ADD: CONSIDERATION PAID RS.40,00,000/ - TOTAL RS.1,32,62,500/ - I.T.A. NO.2627/MUM/2018 5 VENDOR - 3 MRS. SHARMILA TELANG RS. 1,28,00,000/ - I.E (4 FLATS + RS.40,00,000/ - ) TOTAL ( 1+2+3 ) = RS.3,13,75,000/ - THE MAIN GRIEVANCES OF LD. PR. CIT IN INVOKING PROVISIONS OF S ECTION 263 BY ISSUANCE OF NOTICE DATED 28.11.2017 WAS THAT THESE FOUR NEW RESIDENTIAL FLATS ( FLAT NO. 701,702,601 AND 1001) WHICH WERE TO BE GIVEN TO THE ASSESSEE AS PART OF CONSIDERATION ALONG WITH MONETARY CONSIDERATION OF RS. 40 LACS WERE TO BE TAKEN AS GAINS FROM THE ABOVE PROPERTIES BUT SINCE THESE FOUR NEW RESIDENTIAL FLATS WERE NOT IN THE POSSESSION OF THE ASSESSEE AS THES E ARE FUTURE TRANSACTION S OF YET TO BE CONSTRUCTED FLAT AND H ENCE THE SE TWO NEW RESIDENTIAL FLATS NAMELY FLAT NO. 701 AND 702 OUT OF FOUR FLATS TO BE RECEIVED BY THE ASSESSEE AS PART OF HER SHARE OF CONSIDERATION , TAKEN BY THE ASSESSEE AS AN INVESTMENT IN NEW RESIDENTIAL FLATS FOR COMPUTING DEDUCTION U/S 54F AT TH IS STAGE CANNOT BE ALLOWED ON THE PREMISE THAT THESE TWO NEW RESIDENTIAL FLATS ARE NOT YET CONSTRUCTED . FURTHER IT WAS OBSERVED BY LD. PR. CIT THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 54EC OF RS. 71,50,000/ - , WHICH IS TO BE RESTRICTED TO RS. 50,00,000/ - AS PROVIDED U/S 54EC . THE LD . PR. CIT ISSUED NOTICE DATED 28.11.2017 U/S 263 TO THE ASSESSEE TO EXPLAIN THE SAME . THE LD. PR. CIT WAS OF THE VIEW THAT THE AO HAS NO T MADE PROPER I NQUIRY WITH REGARD TO THE CORRECTNESS OF THE COMPUTATION OF LONG TERM CAPITAL GAIN SUBMITTED BY THE ASSESSEE AND HENCE THE IMPUGNED ASSESSMENT ORDER DATED 20.10.2015 PASSED U/S 143(3) FOR THE AY 2013 - 14 SUFFERS FROM THE VICE OF BEING ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN MEANING OF SECTI ON 263 OF THE 1961 ACT AND DIRECTIONS WERE ISSUED BY LD. PR. CIT TO AO TO CARRY OUT PROPER INVESTIGATION ON BOTH THE ISSUES UNDER CONSIDERATION BY THOROUGHLY SCRUTINIZING THE RECORDS OF THE ASSESSEE AND BY VERIFYING THE FACTS AFTER GIVING THE ASSESSEE AN ADEQUATE OPPORTUNITY OF BEING HEARD , VIDE ORDERS DATED 12.03.2018 PASSED U/S I.T.A. NO.2627/MUM/2018 6 263 OF THE 1961 ACT WHEREIN THE ASSESSMENT ORDER DATED 20 - 10 - 2015 PASSED BY THE AO U/S 143(3) WAS SET ASIDE BY LEARNED PR. CIT WITH AFORESAID DIRECTIONS. 5. AGGRIEVED BY THE OR DER DATED 12 - 03 - 2018 PASSED BY LEARNED PR. CIT U/S 263 OF THE 1961 ACT, THE ASSESSEE FILED AN APPEAL WITH THE TRIBUNAL. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED THAT SEVERAL WRITTEN REPLIES WERE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS CONDUCTED BY THE AO U/S. 143(3) R.W.S. 143(2) IN RESPONSE TO THE QUERIES RAISED BY THE AO , WHICH CULMINATED IN TO AN ASSESSMENT ORDER DATED 20.10.2015 PASSED U/S. 143(3) WHEREIN ASSESSEE CLAIM OF COMPUTATION OF LONG TERM CAPITAL GAIN WAS ACCEPTED BY TH E AO . OUR ATTENTION WAS DRAWN TO PAGE 31 OF PAPER BOOK WHEREIN ALL DETAILS RELATED TO THIS DEVELOPMENT AGREEMENT WAS SUBMITTED WHICH INCLUDED VALUATION REPORT, DEVELOPMENT AGREEMENT, COPIES OF BONDS FOR CLAIMING DEDUCTION U/S 54EC FO R INVESTMENTS MADE IN T HE BONDS, WORKING OF CAPITAL GAINS ETC. . THE ASSESSEE HAS FILED PAPER BOOK CONTAINING 159 PAGES WHICH , INTERALIA ,CONTAINED COPY OF DEVELOPMENT AGREEMENT, COPIES OF REPLIES FILED BEFORE THE AO AND COPIES OF SUBMISSIONS MADE BEFORE LEARNED PR. CIT. THE SAID PAPER BOOK IS PLACED IN FILE. OUR ATTENTION WAS DRAWN TO PAGE 129 - 131/PAPER BOOK WHEREIN NOTE ON LONG TERM CAPITAL GAINS IS PLACED WHICH ELABORATELY EXPLAIN ED ITS COMPUTATION AND BACKGROUND OF LONG TERM CAPITAL GAINS EARNED BY THE ASSESSEE. I T WAS SU BMITTED THA T AO HAS THOROUGHLY SCRUTINISED THE CLAIM OF COMPUTATION OF LONG TERM CAPITAL GAIN , WHEREIN THE ASSESSEE ALSO CLAIMED DEDUCTION U/S. 54 F AND 54EC OF THE 1961 ACT WHICH WAS CORRECTLY ALLOWED TO THE ASSESSEE BY THE AO WHILE FRAMING ASSESSMENT U /S 143(3) . IT WAS ALSO SUBMITTED BEFORE US THAT IN THE CASE OF CO - OWNER MRS SHARMILA TELANG(SISTER OF THE ASSESSEE), THE REVENUE HAS ALLOWED DEDUCTION U/S 54 F VIDE ASSESSMENT ORDER DATED 05.03.2016 WHILE DEDUCTION U/S 54EC WAS RESTRICTED TO RS. 50,00,000/ - IN THE CASE OF MRS SHARMILA TELANG(SISTER). IT WAS SUBMITTED THAT THE LD. PR. CIT WHILE PASSING I.T.A. NO.2627/MUM/2018 7 ORDER U/S 263 HAS TAKEN A VIEW THAT SINCE THE ASSESSEE WAS NOT IN POSSESSION OF FLAT NO 701 AND 702 WHICH SHE IS TO GET FROM THE BUILDER HONEST INFRA AFTER B EING CONSTRUCTED , IN VIEW OF LD. PR. CIT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 54F . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT VIEW OF LD. PR. CIT IS NOT A CORRECT VIEW . WITH RESPECT TO DENIAL OF DEDUCTION OF RS.21,50,000/ - U/S 54EC WHI CH WAS IN EXCESS OF RS. 50,00,000/ - , ALBEIT TOTAL CLAIM OF DEDUCTION U/S 54EC OF RS.71,50,000/ - WAS MADE IN TWO SUCCESSIVE FINANCIAL YEARS , AS THE INVESTMENT IN ELIGIBLE BONDS WAS MADE WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER ALBEIT IN TWO SUCCESSIVE FINANCIAL YEARS SO THAT IN ONE FINANCIAL YEAR THE INVESTMENT IN BONDS DID NOT EXCEEDED RS. 50,00,000/ - . IT WAS SUBMITTED THAT AMENDMENT TO SECTION 54EC WAS BROUGHT BY FINANCE ACT 2014 WITH EFFECT FROM 01.04.2015 WHEREIN DEDUCTION U/S 54EC IS T O BE RESTRICTED TO RS. 50 LACS EVEN IF MADE IN TWO SUCCESSIVE YEARS AS PROVIDED IN SECOND PROVISO TO SECTION 54EC(1) AND IT WAS CLAIMED THAT SINCE THE IMPUGNED ASSESSMENT YEAR IS AY 2013 - 14, THE SAID ABSOLUTE RESTRICTION /CEILING OF RS. 50 LACS FOR DEDUCTIO N U/S 54EC DOES NOT APPLY . THE ASSSESSEE WOULD REPLY ON DECISIONS OF ITAT, MUMBAI IN THE CASE OF ITO V. BHARAT RAOJIBHAI PATEL REPORTED IN (2016) 159 IT 473(MUM - TRIB.) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MOIL LIMITED V. CIT REPORTED I N (2017) 396 ITR 244(BOM.) TO SUPPORT ITS CONTENTIONS . 6 . THE LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW . IT WAS SUBMITTED BY LEARNED DR THAT CLAIM OF DEDUCTION U/S 54F WAS MADE WITH RESPECT TO THE FLATS WHICH ARE NOT YET CONSTRUCTED WHICH IS NOT PERMISSIBLE . IT WAS SUBMITTED THAT E VEN CONSTRUCTION OF THE BUILDING BY THE DEVELOPER DID NOT STARTED TILL THE END OF THE PREVIOUS YEAR AS THESE ARE FUTURE PROPERTIES TO BE CONSTRUCTED AND NO DEDUCTION U/S 54F CAN BE ALLOWED. 7 . W E HAVE CON SIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS CITED BY THE RIVAL PARTIES . WE HAVE I.T.A. NO.2627/MUM/2018 8 OBSERVED THAT THE ASSESSEE IS IN THE BUSINESS OF PROVIDING CONSULTANCY SERVICES. THE ASSESSEE IS CO - OWNER OF PROPERTY ALONG WITH HER BROTH ER AND SISTER , OF LAND BEARING NUMBER CTS 2878A ( EARLIER CTS 2878, 2879, 2880 , 2881, 2882 AND 2911) TOTALLY ADMEASURING 4960 SQUARE METERS ALONG WITH TWO STRUCTURES STANDING THEREON NAMED AS SADASHIV NIWAS AND NEW D IVADKAR BUILDING CONSISTING OF GRO UND+ TWO UPPER FLOOR AND GROUND+ONE UPPER FLOOR AT SHIVAJI CHOWK, AGRA ROAD, KALYAN WITHIN LIMITS OF KALYAN - DOMBIVILI MUNICIPAL LIMITS . THE ASSESSEE ALONG WITH OTHER CO - OWNERS ENTERED INTO AN REGISTERED AGREEMENT DATED 31.12.2012 WITH M/S. HONEST INFRA ( HEREINAFTER CALLED DEVELOPERS ) , FOR DEVELOPMENT OF THEIR AFORESAID PROPERTY . THE SAID AGREEMENT WAS REGISTERED ON 10.01.2013. THE ASSESSEE AS HER PART OF CONSIDERATION WAS TO GET RS. 40 LAC AS MONETARY CONSIDERATION AND THE ASSESSEE IS ALSO TO GET FOUR RESIDENTIAL FLATS ON OWNERSHIP BASIS BEARING NUMBER 701, 702,1001 AND 601 FROM THE DEVELOPER HONEST INFRA IN LIEU OF HANDING OVER THEIR PROPERTY TO THE DEVELOPER FOR DEVELOPMENT . THE OTHER CO - OWNERS ALSO SIMILARLY GOT PART CONSIDERATION IN MONETAR Y TERMS WHILE THE OTHER PART OF THE CONSIDERATION WAS RECEIVED BY WAY OF ALLOTMENT OF NEW RESIDENTIAL FLATS , AS CONSIDERATION FOR DEVELOPMENT OF THEIR SHARE OF PROPERTY FROM M/S HONEST INFRA . THE ASSESSEE HANDED OVER PHYSICAL POSSESSION OF THE PROPERTY TO THE DEVELOPER ON 10.01.2013 FOR DEVELOPMENT AS PER REGISTERED AGREEMENT DATED 31.12.2012. THE DEVELOPMENT AGREEMENT IS PLACED ON RECORD WHICH WAS ALSO PLACED BY THE ASSESSEE BEFORE THE AO. THE ASSESSEE COMPUTED LONG TERM CAPITAL GAINS BY INCLUDING THEREIN THE MONETARY CONSIDERATION OF RS. 40 LACS AS WELL VALUATION OF THE FOUR RESIDENTIAL FLATS WHICH IT WAS TO GET FROM THE DEVELOPERS , AS HER SHARE OF CONSIDERATION UNDER DEVELOPMENT AGREEMENT DATED 31.12.2012. THE ABOVE CONSIDERATION TRANSLATED IN MONETARY TERMS TO RS. 1,32,42,500/ - BASED ON VALUATION OF FLATS AS PER STAMP DUTY VALUATION. THE ACTUAL CONSIDERATION WAS HIGHER THAN STAMP DUTY VALUATION AND HENCE THE SAME WAS ADOPTED BY THE ASSESSEE AS FULL VALUE OF CONSIDERATION ARISING FROM THE DEVELOPMENT AGR EEMENT DATED I.T.A. NO.2627/MUM/2018 9 31.12.2012. THE ASSESSEE AFTER COMPUTING LONG TERM CAPITAL GAINS BY DEDUCTING INDEXED COST OF ACQUISITION FROM FULL VALUE OF CONSIDERATION DEDUCTED VALUE OF TWO NEW RESIDENTIAL FLATS BEING FLAT NO. 701 AND 702 WHICH SHE WAS TO GET FROM THE DEV ELOPER , AS DEDUCTION U/S 54F OF THE 1961 ACT. THE ASSESSEE DID NOT SELL ANY FLAT WHICH SHE IS TO GET FROM THE DEVELOPER . THE ASSESSEE HAS SUBMITTED VALUATION REPORT OF THE SAID PROPERTY WHICH WAS GIVEN TO HONEST INFRA FOR DEVELOPMENT , AS ON 01 - 04 - 1981 WHICH IS PLACED ON RECORD TO COMPUTE COST OF ACQUISITION . THE PURCHASE AGREEMENT OF THE AFORESAID PROPERTY DATED 06.10.1944 IS ALSO PLACED IN FILE. THERE IS NO DISPUTE SO FAR AS VALUATION OF THE PROPERTY AS ON 01.04.1981 OR SALE CONSIDERATION OR VALUATION OF THE NEW FLATS WHICH THE ASSESSEE IS ENTITLED TO GET FROM DEVELOPER. THE DISPUTE BETWEEN RIVAL PARTIES CONCERNS AS TO ENTITLEMENT OF THE ASSESSEE FOR DEDUCTION U/S 54F OF THE VALUE OF THE TWO NEW RESIDENTIAL FLATS BEARING NUMBER 701 AND 702 WITHIN PROVI SIONS OF SECTION 54F OF THE 1961 ACT ON THE GROUNDS THAT THE SAID FLATS ARE NOT EVEN BEING CONSTRUCTED BY THE DEVELOPER HONEST INFRA AND THEY ARE FUTURE PROPERTIES , THUS THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 54F . THE ASSESSEE HAS ALSO CLAIMED DEDUCTION OF RS. 71,50,000/ - ON ACCOUNT OF INVESTMENTS MADE IN NHAI BONDS WHICH WERE OTHERWISE EL I GIBLE FOR DEDUCTION U/S 54EC OF THE 1961 ACT. THE ASSESSEE I NVESTED RS. 50,00,000/ - ON 14.03 .2013 , RS. 18,50,000/ - ON 11 .06.2013 AND RS. 3,00,000/ - ON 2 6.06.2 013 IN NHAI BONDS WHICH WERE ELIGIBLE FOR DEDUCTION U/S 54EC . THE EVIDENCES ARE PLACED IN PAPER BOOK/PAGE 100 - 105 FILED WITH TRIBUNAL TO SUPPORT CONTENTIONS THAT IN AGGREGATE RS. 71,50,000/ - WAS INVESTED IN NHAI BONDS WHICH WERE OTHERWISE ELIGIBLE FOR DEDU CTION U/S 54EC OF THE 1961 ACT . THE SAID INVESTMENT WAS MADE WITHIN SIX MONTH FROM THE DATE OF TRANSFER AND WAS MADE IN TWO SUCCESSIVE FINANCIAL YEAR, FIRSTLY IN THE PREVIOUS YEAR RELEVANT TO THE YEAR WHEN THE TRANSFER TOOK PLACE I.E. RS. 50,00,000/ - WHILE THE BALANCE RS. 21,50,000/ - WAS INVESTED IN IMMEDIATELY SUCCEEDING YEAR. THE AO ALLOWED DEDUCTION OF RS. 71,50,000/ - U/S 54EC OF THE 1961 ACT AFTER CONSIDERING THE SUBMISSIONS /EVIDENCES FILED BY THE I.T.A. NO.2627/MUM/2018 10 ASSESSEE. THE COMPLETE DETAILS OF THE TRANSACTION WERE DISCLOSED IN THE RETURN OF INCOME FILED WITH THE REVENUE AND WAS ALSO PLACED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT . W E HAVE OBSERVED FROM PAPER BOOK FILED BY TH E ASSESSEE WITH THE TRIBUNAL , THAT ASSESSEE HAS GIVEN DETAILED REPLIES DATED 30.0 6 .2015, 04.08.2015 AND 10.0 8 .2015 BEFORE THE AO TO PROVE CORRECTNESS OF COMPUTATION OF LONG TERM CAPITAL GAINS WHEREIN THE ASSESSEE HAS , INTER - ALIA GIVEN FOLLOWING DOCUMENTS ALONG WITH REPLIES, AS UNDER: - (I) COPY OF VALUATION REPORT AS ON 01.04.1981 (II) COPY OF DEVELOPMENT AGREEMENT DATED 31.12.2012 (III) COPY OF PURCHASE DOCUMENTS DATED 06 - 10 - 1944 FOR THE SAID PROPERTY WHICH WAS BEING DEVELOPED BY THE ASSESSEE VIDE DEVELOPMENT AGREEMENT DATED 31.12.2012 (IV) COPY OF PROPERTY CARD OF THE LAND GIVEN FOR DEVELOPMENT (V) COPIES OF INVESTMENT IN CAPITAL GAIN BONDS U/S. 54EC (V I ) COPY OF WORKING OF CAPITAL GAINS THE ASSESSEE GAVE ALL THESE DOCUMENTS CONNECTED WITH CORRECTNESS OF COMPUTATION OF LONG TERM CAPITAL GAINS ARISING FROM DEVELOPMENT OF THE AFORESAID PROPERTY , TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S 143(3) READ WITH S ECTION 143(2) AND THE AO FRAMED AN ASSESSMENT ORDER DATED 20.10.2015 AFTER DULY CONSIDERING THE AFORESAID DOCUMENTS WHICH ARE PART OF THE RECORD. THIS CLEARLY REVEALS THAT THE AO MADE PROPER INQUIRY DURING ASSESSMENT PROCE EDINGS AND ARRIVED AT THE INFORMED DECISION AS TO THE CORRECTNESS OF COMPUTATION OF LONG TERM CAPITAL GAINS SUBMITTED BY THE ASSESSEE. IT WILL BE HIGHLY PREPOSTEROUS TO BELIEVE THAT THE AO ALLOWED THE CLAIM OF DEDUCTION U/S 54F AND 54EC OF THE 1961 ACT WITHOUT DUE APPLICATION OF MIND. TH US IT WILL NOT BE CORRECT TO SAY THAT THE AO DID NOT MADE ANY INQUIRY OR DID NOT MADE PROPER I NQUIRY BEFORE ALLOWING THE CLAIM OF THE ASSESSEE . FURTHER EVEN ON MERITS , WE HAVE OBSERVED THAT ASSESSEE ALONG WITH CO - OWNERS OF THE PROPERTY HAS ENTERED INTO AN REGISTERED DEVELOPMENT AGREEMENT WITH THE DEVELOPER ON 31.12.2012 WHICH WAS REGISTERED ON 10.01.2013 AND POSSESSION I.T.A. NO.2627/MUM/2018 11 WAS HANDED OVER ON 10.01.2013. THE ASSESSEE WAS TO GET RS. 40 LACS AS MONETARY COMPENSATION AND ALSO TO GET FOUR NEW RESIDENTIAL FLATS I N CONSIDERATION UNDER THE SAID DEVELOPMENT AGREEMENT FROM THE DEVELOPER HONEST INFRA AS HER SHARE OF CONSIDERATION UNDER DEVELOPMENT AGREEMENT DATED 31.12.2012 . THE FOUR NEW RESIDENTIAL FLATS BEARING NUMBERS 701, 702 , 1001 AND 601 IN THE BUILDING ARE TO BE CONSTRUCTED ON SAID PROPERTY BY THE DEVELOPER, THUS, WHAT THE ASSESSEE IS TO GET FROM DEVELOPERS ARE YET TO BE BUILT NEW RESIDENTIAL FLATS BEARING FLAT NO. 701, 702, 1001 AND 601 IN THE BUILDING PROPOSED TO BE CONSTRUCTED BY HONEST INFRA UNDER THE S AID REGISTERED DEVELOPMENT AGREEMENT DATED 31.12.2012 , THESE FLATS WERE ALLOTTED SPECIFICALLY BY THE DEVELOPER IN FAVOUR OF THE ASSESSEE UNDER DEVELOPMENT AGREEMENT WHICH ENTITLED ASSESSEE TO SELL , DISPOSE OF OR EVEN CREATE CHARGE ON THESE FLATS. THUS, EFFECTIVELY IT COULD BE SAID THAT THE SHARE OF CONSIDERATION IN LIEU OF PROPERTY FOR DEVELOPMENT GIVEN BY THE ASSESSEE TO THE DEVELOPER, TO THE EXTENT OF THESE FOUR RESIDENTIAL FLATS IS RETAINED BY THE BUILDER WHICH WILL BE INVEST ED BY THE DEVELOPER BY UT ILISING ITS OWN FUNDS FOR CONSTRUCTING THESE FLATS ON BEHALF OF THE ASSESSEE. THIS EFFECTIVELY MEANS THAT CONSIDERATION UNDER THE DEVELOPMENT AGREEMENT DATED 31.12.2012 WHICH OTHER WISE ASSESSEE WAS ENTITLED TO RECEIVE IS NOW WITHHELD BY THE DEVELOPER WH ICH WILL BE INVESTED FOR CONSTRUCTING THESE FLATS ON BEHALF OF THE ASSESSEE WHICH WILL SATISFY THE REQUIREMENT OF MAKING INVESTMENT IN CONSTRUCTION OF NEW RESIDENTIAL FLAT AS IS PROVIDED U/S 54F OF THE 1961 ACT . SECTION 2(14) IS VERY WIDELY DEFINED TO MEA N PROPERTY OF ANY KIND HELD BY AN TAX - PAYER , WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION. THE EXCEPTIONS ARE ALSO PROVIDED U/S 2(14) WHEREIN PROPERTY SHALL NOT BE INCLUDED IN THE DEFINITION OF CAPITAL ASSET. WE HAVE ALSO OBSERVED THAT CBDT OWN CIRCULARS BEARING 471 DATED 15.10.1986 AND 672 DATED 16.12.1993 ARE RELEVANT , WHEREIN ALLOTMENT OF FLAT UNDER SELF FINANCING SCHEME IS HELD TO BE CONSTRUCTION FOR THE PURPOSES OF CAPITAL GAINS . THUS, IN OUR CONSIDERED VIEW THE AO RIGHTLY ALLOWED DEDUCTION U/S 54F OF THE 1961 ACT TO THE ASSESSEE VIDE ASSESSMENT ORDER DATED I.T.A. NO.2627/MUM/2018 12 20.10.2015 PASSED U/S 143(3) BY THE AO AND TO THAT EXTENT THE SAID ASSESSMENT ORDER CANNOT BE TERMED AS PERVERSE OR ERRONEOUS SO FAR SO IT IS PREJUDICIAL TO THE INTEREST OF REVENUE CALLING FOR INTERFERENCE U/S 263 OF THE 1961 ACT . SO, FAR AS DEDUCTION U/S 54EC OF THE 1961 ACT IS CONCERNED, THE ASSESSEE MADE INVESTMENT OF RS. 50,00,000/ - DURING THE YEAR UNDER CONSIDERATION IN NHAI BONDS WHICH IS AN ELIGIBLE INV ESTMENT UNDER SECTION 54EC OF THE 1961 ACT AND FURTHER INVESTMENT OF RS. 21,50,000/ - WAS MADE BY THE ASSESSEE IN ELIGIBLE NHAI BONDS IN THE IMMEDIATELY SUCCEEDING FINANCIAL YEAR , BUT WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF TRANSFER. THE DEDUCTION U/S 54EC WAS RIGHTLY ALLOWED BY THE AO FOR AN AGGREGATE AMOUNT OF RS. 71,50,000/ - AS THE AMENDMENT TO SECTION 54EC WAS BROUGHT BY FINANCE ACT, 2014 W.E.F. 01.04.2015 WHICH RESTRICTED /CAPPED THE DEDUCTION U/S 54EC TO A MAXIMUM SUM OF RS. 50,00,000/ - FOR IN VESTMENT MADE IN QUALIFIED BONDS DURING THE YEAR IN WHICH TRANSFER TOOK PLACE AS ALSO BY INCLUDING INVESTMENT IN ELIGIBLE BONDS IN IMMEDIATELY SUCCEEDING YEAR. REFERENCE IS DRAWN TO DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. C. JAICHANDER REPORTED IN (2015) 370 ITR 579(MAD.) AND DECISION OF MUMBAI - TRIBUNAL IN THE CASE OF TULIKA DEVI DYAL V. JCIT REPORTED IN (2018) 89 TAXMANN.COM 442(MUM - TRIB.). THUS , ON THE BOTH THE ISSUES ON WHICH LEARNED PR. CIT INVOKED PROVISIONS OF SECTION 263 , IT COU LD NOT BE SAID THAT THE ASSESSMENT ORDER DATED 20 - 10 - 2015 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT WAS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE CALLING INTERFERENCE U/S 263 OF THE 1961 ACT. THUS, NOT ONLY DID THE AO MADE PROPER INQUIRY WITH RESPECT TO CORRECTNESS OF CLAIM OF COMPUTATION OF CAPITAL GAIN FILED BY THE ASSESSEE BUT ALSO APPLIED LAW CORRECTLY BY ALLOWING THE SAID CLAIM (S) OF THE ASSESSEE IN THE RETURN OF INCOME FILED WITH REVENUE . THE ASSESSEE HAS RIGHTLY RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MOIL LIMITED V. CIT REPORTED IN (2017) 396 ITR 244(BOM.). THUS, IN OUR CONSIDERED VIEW, THE ORDER OF THE LD. PR. CIT DATED 12.03.2018 PASSED U/S. 263 IS NOT SUSTAINABLE IN THE EYE S OF LAW AND WE HEREBY ORDER I.T.A. NO.2627/MUM/2018 13 QUASHING OF THE AFORE SAID ORDER DATED 12.03.2018 PASSED BY LD. PR. CIT U/S 263 OF THE 1961 ACT . THE ASSESSEE SUCCEEDS IN THIS APPEAL. WE ORDER ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 1 4 .1 1 .2018. 1 4 .1 1 .2 018 S D / - S D / - (JOGINDER SINGH) (RAMIT KOCHAR) VICE PRESIDDNT ACCOUNTANT MEMBER MUMBAI, DATED: 1 4 .11 .2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI