Bhagwan Swaroop Agarwal, Jaipur V. ITO, Jaipur

ITA 263/JPR/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1957 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PUNAM RAI DCIT DHK
• Keywords: Business expenditure; Source of fund; Cost of acquisition; Corroborative evidences; Valuation report; Onus to prove
• Section: 54B; 54F; 54

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 263/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI BHAGWAN SWAROOP AGARWAL, B-76, SHIV SHAKTI NAGAR, JAGATPURA ROAD, MALVIYA NAGAR, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AFOPA2295N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI PUNAM RAI (D.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/10/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/10/2017 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.01.2014 OF LD. CIT(A)-II, JAIPUR FOR THE A.Y. 20 09-10. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS AS UNDER:- 1.(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN COMPUTING THE LONG TERM CAPITAL GAIN AT RS. 44,94,343/- AGAIN ST THE DECLARED LONG TERM CAPITAL GAIN AS NIL. THE ACTION OF THE LD . CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 2 PLEASE BE GRANTED BY ASSESSING THE LONG TERM CAPITA L GAIN AS DECLARED BY THE ASSESSEE. (B) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN REDUCING THE COST OF CONSTRUCTION RESULTING INTO INCREASE IN LONG TER M CAPITAL GAIN. THE CONSTRUCTION COST AS PER THE ASSESSEE AND AO (W ITHOUT INDEXATION IS AS UNDER:- AS PER ASSESSEE AS PER AO FLOORS CONSTRUCTED A.Y. RELATE D TO CONSTRUCTION COST OF CONSTRUCTION A.Y. RELATED TO CONSTRUCTION COST OF CONSTRUCTION DECREASE IN COST OF CONSTRUCTION. GROUND FLOOR 2005 - 06 12,25,000/ - AT THE TIME OF ALLOTMENT - 12,25,000/ - FIRST FLOOR 2006 - 07 4,00,000/ - 1991 - 92 1,89,600/ - 2,10,4 00/ - SECOND FLOOR 2007 - 08 10,55,000/ - 2007 - 08 5,95,270/ - 4,59,730/ - TOTAL 26,80,000/ - 7,84,870/ - 18,95,130/ - THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIE D, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE B E GRANTED BY ACCEPTING THE CONSTRUCTION COST OF RS. 26,80,000/- AS DECLARED BY THE ASSESSEE. (C) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DENYING THE EXEMPTION U/S 54 OF RS. 39,19,596/-. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FAC TS OF THE CASE. RELIEF MY PLEASE BE GRANTED BY ALLOWING THE EXEMPTION OF R S. 39,19,596/- U/S 54. 2.(A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE CIT(A) HAS ERRED IN NOT ADMITTING THE ADDITIONAL GR OUND RAISED DURING THE COURSE OF APPELLATE PROCEEDINGS. THE ACT ION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY ADMITTING THE ADDITION GROUND RAISED DURING THE COURSE OF FIRST APPELLATE PROCEED INGS WHILE DISPOSING OFF THE APPEAL. (B) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IS NOT CONSIDERING INTEREST OF RS. 5,82,565/- PAID ON LOAN FACILITY A S PART OF COST OF CONSTRUCTION U/S 48 OF THE IT ACT, 1961. THE ACTION OF THE LD. CIT(A) ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 3 IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY CONSIDERING THE INT EREST PAID AS PART OF COST OF CONSTRUCTION AND INDEXATION BENEFIT SHOU LD BE ALLOWED ACCORDINGLY. (C) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IS NOT CONSIDERING INTEREST OF RS. 5,82,565/- PAID ON LOAN FACILITY AV AILED FOR CONSTRUCTION U/S 24(B) OF THE IT ACT, 1961. THE ACT ION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY ALLOWING THE AMOUNT PAID AS INTEREST ON LOAN FACILITIES U/S 24(B) OF INCOME TAX ACT, 1961. 2. GROUND NO. 1 IS REGARDING THE ADDITION MADE BY T HE AO IN COMPUTING THE LONG TERM CAPITAL GAIN AT RS. 44,94,3 43/- AGAINST THE DECLARED LONG TERM CAPITAL GAIN AS NIL. THE ASSESS EE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS. 1,51,200/- ON 17.03.2 010. THE AO NOTED THAT THE ASSESSEE SOLD HIS PROPERTY SITUATED AT MA LVIYA NAGAR, JAIPUR ON 05.06.2008 FOR A CONSIDERATION OF RS. 60,00,000/- AND COMPUTED THE LONG TERM CAPITAL GAIN AT RS. 27,00,122/- WHICH WAS CLAI MED AS EXEMPT U/S 54 ON ACCOUNT OF PURCHASE OF TWO HOUSES AT PRATAB NAG AR AND SHIV SHAKTI NAGAR RESPECTIVELY. THE AO FOUND THAT THE DETAILS A ND COST OF CONSTRUCTION AS CLAIMED BY THE ASSESSEE IS CONTRARY TO THE DETAI LS OF TIME OF CONSTRUCTION AS GIVEN IN THE VALUATION REPORT WITH THE ICICI BANK FOR OBTAINING THE LOAN. FURTHER NO BOOKS OF ACCOUNTS WE RE MAINTAINED BY THE ASSESSEE REGARDING THE COST OF CONSTRUCTION. THE AS SESSING OFFICER ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 4 COMPUTED THE LONG TERM CAPITAL GAIN AT RS. 44,94,34 3/- ON THE BASIS OF RE- WORKING OF THE COST OF CONSTRUCTION. THE AO REJECTE D THE CLAIM OF THE ASSESSEE THAT THE FIRST FLOOR OF THE HOUSE WAS CONS TRUCTED IN THE YEAR 2006- 07. THE AO TOOK THE COST OF CONSTRUCTION AS PER VAL UATION REPORT WITH THE ICICI BANK FOR OBTAINING THE HOUSE LOAN AND THEREFO RE, THE ASSESSING OFFICER HELD THAT THE CONSTRUCTION OF FIRST FLOOR W AS COMPLETED IN THE YEAR 1991-92 AS AGAINST THE CLAIM OF THE ASSESSEE IN THE YEARS 2005-06 AND 2006-07. FURTHER, THE COST OF CONSTRUCTION WAS ALSO RECOMPUTED BY THE ASSESSING OFFICER BY APPLYING PWD RATES AGAINST THE CLAIM OF THE ASSESSEE. THUS THE AO HAS SUBSTANTIALLY REDUCE THE COST OF CONSTRUCTION OF RS. 26.80 LACS TO RS. 7,84,870/- SO FAR AS THE CONSTRU CTION OF FIRST FLOOR AND SECOND FLOOR HOUSE IS CONCERNED . THE GROUND FLOOR HOUSE WAS PART OF THE ORIGINAL ALLOTMENT IN THE YEAR 1981-82 AND HENCE W AS NOT IN DISPUTE. THEREFORE, THE CLAIM OF THE ASSESSEE COST OF CONSTR UCTION WAS REDUCED BY THE ASSESSING OFFICER BY A SUM OF RS. 18,95,130/-. AGGRIEVED BY THE ACTION OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE C IT(A) AND CONTENDED THAT THE VALUATION REPORT WITH THE ICICI BANK FOR O BTAINING THE HOUSE LOAN CANNOT BE TAKEN AS THE VALUE OF COST OF CONSTRUCTIO N OF THE HOUSE WHEN THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS , CASH FLOW STATEMENT AS WELL AS THE SOURCE OF FUND BEING LOAN TAKEN FROM TH E BANK. THE LD. CIT(A) ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 5 DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND C ONFIRMED THE ACTION OF THE AO. 3. BEFORE THE TRIBUNAL, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT SINCE IT IS NOT EXPENDITURE CLAIMED AGAINST ANY BUS INESS ACTIVITY, THEREFORE, THE BILLS VOUCHERS AND PAYMENT BY CHEQUE FOR CONSTR UCTION AND IMPROVEMENT ARE NOT NECESSARY FOR THE EXPENDITURE W HICH IS NOT A BUSINESS EXPENSES. THE ASSESSEE IS NOT HAVING ANY BUSINESS ACTIVITY, THEREFORE, THE BOOKS OF ACCOUNTS ARE NOT REQUIRED T O BE MAINTAINED. THE LD AR OF THE ASSESSEE HAS FURTHER SUBMITTED THAT FOR T HE PURPOSE OF CONSTRUCTION OF HIS HOUSE, THE ASSESSEE HAS TAKEN T HREE HOUSING LOAN FROM ICICI BANK AND ALSO AVAILED ONE BANK OVER DRAFT FAC ILITY. HE HAS REFERRED TO THE DETAILS IN THE STATEMENT OF OVER DRAFT ACCOUNT AS WELL AS LOAN ACCOUNTS AT PAGE NO. 30,49,54 AND 57 OF THE PAPER BOOKS. HE HAS FURTHER SUBMITTED THAT SOME OF THE LOANS ARE IN THE JOINT NAME OF THE ASSESSEE AND HIS SON AND THE BANK STATEMENT OF THE SON OF THE ASSESSEE A LSO PRODUCE TO PROVE THE CONSTRUCTION ACTIVITY. THE LD. AR HAS FURTHER C ONTENDED THAT THE PAYMENTS WERE MADE TO M/S BANSAL TRADER FOR CONSTRU CTION OF HOUSE. THUS HE HAS CONTENDED THAT THE ASSESSEE HAS ALREADY PROV IDED ALL THE CONCLUSIVE EVIDENCE TO SUBSTANTIATE THE CLAIM OF CONSTRUCTION OF THE HOUSE. ONCE THE ASSESSEE HAS FURNISHED THE RELEVANT RECORD TO SHOW SOURCE OF FUNDS AND WITHDRAWAL OF THE CASH FROM THE BANK ACCOUNT THEN I N ABSENCE OF ANY ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 6 OTHER ACTIVITY OF BUSINESS AND ANY OTHER USE OF CAS H WITHDRAWAL THEN SUCH WITHDRAWAL IS UTILIZED ONLY FOR THE PURPOSE OF CONS TRUCTION OF HOUSE. THE LOWER AUTHORITIES HAVE RELIED UPON VALUATION REP ORT WITH THE BANK WHICH IS PATENTLY WRONG IN TERMS OF PERIOD OF CONSTRUCT ION OF VARIOUS FLOORS OF THE HOUSES. THE VALUATION REPORT HAS MENTIONED THAT THE AGE OF PROPERTY BEING 15 YEARS WHEREAS THE AGE OF PROPERTY IS 22 Y EARS AS IT WAS ALLOTTED BY THE RAJASTHAN HOUSING BOARD IN THE YEAR 1984. FU RTHER THE CONVEYANCE DEED EXECUTED BY THE RAJASTHAN HOUSING BOARD ON 21 .12.1994 MENTIONS THAT THE HOUSE BEING CONSISTED OF GROUND FLOOR (BHU TAL) ONLY. THE LD. AR HAS THUS ARGUED THAT THE FIRST FLOOR OF HOUSE WAS C ONSTRUCTED ONLY AFTER 21.12.1994 AS ON THE SAID DATE CONVEYANCE DEED HA S CLEARLY STATED THAT THE PROPERTY WAS CONSISTED ONLY GROUND FLOOR. THE V ALUATION REPORT MENTIONS THE CONSTRUCTION DURING THE YEAR 1991 WHIC H IS CONTRARY TO THE FACT RECORDED IN THE CONVEYANCE DEED. THUS VALUATIO N REPORT CANNOT BE PLACED RELIANCE UPON FOR DECIDING THE PERIOD OF CON STRUCTION OF DIFFERENT FLOOR OF THE HOUSE. THE AUTHORITIES BELOW HAVE IGNO RED THE BANK LOAN STATEMENT AND SOLELY RELIED UPON THE VALUATION REPO RT BOTH THESE ARE INDIRECT EVIDENCE AVAILABLE TO CONTRADICTING TO EAC H OTHER THEREFORE, ACCEPTING ONE INDIRECT EVIDENCE AND REJECTING THE O THER IS NOT JUSTIFIED. THE LD. AR AS THUS STRESSED THAT THE AO AS WELL AS LD CIT(A) BOTH HAVE ERRED IN PLACING BLIND RELIANCE ON THE VALUATION REPORT OF ICICI BANK FOR THE ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 7 PURPOSE OF DETERMINING THE PERIOD OF CONSTRUCTION W HEN THE VALUATION REPORT IS UNSUBSTANTIATED. THE PERIOD OF CONSTRUCTI ON AS CLAIMED BY THE ASSESSEE IS FINANCIAL YEAR 2005-06 TO 2007-08 HAS BEEN SUPPORTED BY THE CORROBORATIVE EVIDENCE OF CASH WITHDRAWAL FROM THE BANK, PAYMENT MADE BY THE ASSESSEE AND HIS SON TO BANSAL TRADERS WHICH HAS BEEN IGNORED BY THE AUTHORITIES BELOW. IT WAS FURTHER SUBMITTED THA T VALUATION DONE BY THE BANKER WAS FOR AN ENTIRELY DIFFERENT PURPOSE AND IN TENT, WHICH IS CONFLICT WITH THE PURPOSE AND INTENT OF INCOME TAX LAW. THE BANKER ARE ADOPTING THE MOST CONSERVATIVE APPROACH AND HAVING FOUND T HE PURPOSE FULLY SERVED IN THAT SITUATION THE VALUATION ADOPTED FOR PROCESSING AND SANCTIONING THE LOAN CANNOT BE TAKEN AS ACTUAL COST OF CONSTRUCTION. THE ASSESSEE COULD NOT BE OBJECT FOR SUCH A VALUATION D ONE BY BANKER FOR THE REASON THAT IT DID NOT IN ANY WAY, ADVERSELY AFFECT THE INTEREST OF THE ASSESSEE BEING BARROWER. 4. ALTERNATIVELY THE LD. AR OF THE ASSESSEE HAS SUB MITTED THAT WITHOUT PREJUDICE TO THE CLAIM AND CONTENTION OF THE ASSESS EE, THE ASSESSING OFFICER NOT BEING SATISFIED WITH THE CLAIM OF COST OF ACQUISITION/ IMPROVEMENT SHOULD HAVE REFERRED THE CASE TO THE DE PARTMENTAL VALUATION OFFICER U/S 55A(B)(II) OF THE IT ACT. THE AO IS N OT AN EXPERT OF VALUATION AND THEREFORE, CARRYING OUT THE VALUATION HIMSELF O N THE BASIS OF VAGUE PRESUMPTION IS NOT JUSTIFIED. HENCE, THE LD. AR HA S PLEADED THAT WHEN THE ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 8 ASSESSEE HAS SUBMITTED ALL THE CONCLUSIVE EVIDENCES AND THE ACTION OF THE AUTHORITY BELOW IS BASED ON SOLE DOCUMENT IGNORING THE RELEVANT EVIDENCE FILED BY THE ASSESSEE, THEREFORE, THE SAME IS NOT J USTIFIED AND DESERVED TO BE QUASHED. 5. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE OVER DRAFT LOAN WAS TAKEN AGAINST THE SAME PROPERTY WHEREIN THE PR OPERTY WAS CLEARLY SHOWN CONSTRUCTION UPTO FIRST FLOOR THEREFORE, IT I S CLEAR THAT THE LOAN WAS NOT TAKEN FOR THE PURPOSE OF CONSTRUCTION OF THE FI RST FLOOR OF THE PROPERTY. THE ASSESSEE HAS FAILED TO FILE ANY DETAILS OF CONS TRUCTION, SOURCE OF INVESTMENT, SOURCE OF CASH DEPOSITED IN THE OVER DR AFT ACCOUNT. FURTHER, NO EVIDENCE WAS PRODUCED BY THE ASSESSEE REGARDING PUR CHASE OF CONSTRUCTION MATERIAL AND EXPENDITURE INCURRED BY T HE ASSESSEE ON THE CONSTRUCTION OF THE HOUSE. THE AO HAS GIVEN THE DET AILS OF THE BANK ACCOUNTS WHICH ARE NOT IN THE NAME OF THE ASSESSEE BUT IT IS IN THE NAME OF ONE MRS. ANAND AGARWAL SON OF THE ASSESSEE. THUS IT IS CLEAR FROM THE BANK ACCOUNTS WHICH ARE RELIED UPON BY THE ASSESSEE THAT THE LOANS WERE AVAILED BY THE OTHER FAMILY MEMBERS OF THE ASSESSEE AND NOT BY THE ASSESSEE INDIVIDUAL. THE LD. DR HAS FURTHER POINTED OUT THAT THE CASH WITHDRAWAL SHOWN IN THE BANK ACCOUNT OF THE ASSESSE E ARE VERY SMALL AMOUNTS AND IN THE ABSENCE OF ANY SUPPORTING EVIDEN CE THESE SMALL AND PETTY WITHDRAWALS ARE NORMALLY USED FOR OTHER HOUS EHOLD AND PERSONAL ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 9 EXPENDITURE AND NOT FOR THE CONSTRUCTION OF THE HOU SE. NO CONFIRMATION OF CONSTRUCTION MATERIALS SUPPLIER OR CONTRACTOR HAS B EEN FURNISHED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. THUS THE ASSESSE E FAILED TO DISCHARGE PRIMARY ONUS TO PROVE WITH SUPPORTING EVIDENCE THAT THE CONSTRUCTION OF THE HOUSE WAS CARRIED OUT IN THE F.Y. 2005-06 ONWAR DS. THE LD. DR HAS REFERRED TO THE VALUATION REPORT WHICH WAS PREPARED FOR THE PURPOSE OF OBTAINING THE LOAN FROM THE ICICI BANK AND SUBMITTE D THAT THE REPORT HAS CLEARLY MENTIONED THE PROPERTY CONSIST GROUND + FIR ST FLOOR AND THEREFORE, AT THE TIME OF THE SAID VALUATION REPORT THE FIRST FLOOR WAS VERY MUCH INEXISTENCE. HENCE, THE CLAIM OF ASSESSEE REGARDING THE COST OF CONSTRUCTION IS UNACCEPTABLE. THE ASSESSING OFFICER HAS APPLIED PWD RATES WHICH ARE PROPER AND JUSTIFIED THEREFORE, NO FAULT CANNOT BE FOUND IN THE VALUATION ADOPTED BY THE AO. THE PAYMENT WAS CLAIME D TO M/S BANSAL TRADERS AND AGARWAL TRADERS BUT IT HAS NOT BEEN EXP LAINED THE PURPOSE FOR WHICH THESE PAYMENTS TO BANSAL TRADER AND AGARW AL TRADER WERE MADE WHETHER IT WAS FOR SUPPLY OF CONSTRUCTION MATERIAL OR FOR OTHER PURPOSES. HE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BEL OW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL A S RELEVANT MATERIAL ON RECORD. THE DISPUTE IS CONFINED ON THE ISSUE T HE PERIOD DURING WHICH THE CONSTRUCTION OF FIRST FLOOR OF THE HOUSE WAS MA DE. THE ASSESSEE HAS PLACED RELIANCE ON THE CONVEYANCE DEED DATED 21.12 .1994 AND SUBMITTED ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 10 THAT AS PER THIS CONVEYANCE DEED ONLY GROUND FLOOR OF THE HOUSE WAS IN EXISTENCE AND THEREFORE, THE ASSESSEE HAS CONSTRUC TED THE FIRST FLOOR AFTER 21.12.1994. ON THE OTHER HAND, THE AO HAS PLACED RE LIANCE ON THE VALUATION REPORT WHICH WAS PREPARED FOR THE PURPOSE OF LOAN TAKEN FROM THE ICICI BANK AGAINST THE SAID PROPERTY. THE SAID VALUATION REPORT MENTIONS THAT THE CONSTRUCTION WAS MADE DURING THE YEAR 1991. THE ASSESSEE HAS ALSO RELIED UPON THE VARIOUS BANKS LOA N OBTAINED BY THE ASSESSEE AS WELL AS THE FAMILY MEMBERS OF THE ASSES SEE FOR THE PURPOSE OF CONSTRUCTION OF THE HOUSE IN QUESTION. IT IS PERTI NENT TO NOTE THAT THE PROPERTY IN QUESTION WAS ALLOTTED BY THE RAJASTHAN HOUSING BOARD TO THE ASSESSEE IN THE YEAR 1984 VIDE LETTER OF ALLOTMENT DATED 03.03.1984. IT IS FURTHER NOTE THAT THE ORIGINAL ALLOTMENT WAS MADE O N 31.08.1981 IN THE NAME OF ONE SHRI GANPATRAM YADAV AND SUBSEQUENTLY T HE ALLOTMENT WAS TRANSFERRED IN THE NAME OF THE ASSESSEE IN THE YEAR 1984. AT THE TIME OF ALLOTMENT PROPERTY WAS CONSISTENT OF GROUND FLOOR. THE CONVEYANCE DEED OF THE PROPERTY WAS EXECUTED ON 21.12.1994 BY THE R AJASTHAN HOUSING BOARD WHEREIN THE DESCRIPTION OF THE PROPERTY WAS G IVEN AS GROUND FLOOR ONLY. IT IS PERTINENT TO NOTE THAT THE CONVEYANCE D EED IS ONLY TRANSFER OF RIGHT WHICH WAS ORIGINALLY ALLOTTED AND THEREFORE, THE CONVEYANCE DEED WAS EXECUTED ONLY IN RESPECT OF THE PROPERTY WHICH WAS ORIGINALLY ALLOTTED CONSISTING ONLY GROUND FLOOR. HENCE, THE CONVEYAN CE DEED IS NOT A ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 11 DOCUMENT LEADING TO THE CONCLUSIVE PROOF OF FURTHER CONSTRUCTION POST THE ALLOTMENT OF THE HOUSE. EVEN OTHERWISE THE CONVEYAN CE DEED CANNOT CERTIFY THAT THERE WAS NO FURTHER CONSTRUCTION HEN CE, THE CONVEYANCE DEED CANNOT BE TAKEN AS EVIDENCE OF FURTHER CONSTRUCTIO N OR NO CONSTRUCTION BUT IT IS ONLY EVIDENCE TO SHOW THE EXISTENCE OF TH E PROPERTY AT THE TIME OF ALLOTMENT IN THE YEAR 1984. AS REGARDS THE VALUATIO N REPORT OBTAINED FOR THE PURPOSE OF LOAN AGAINST THE PROPERTY THERE IS N O QUARREL ON THE POINT THAT THE VALUATION OF THE PROPERTY AS PER ESTIMATES OF THE VALUER FOR THE PURPOSE OF LOAN AGAINST THE PROPERTY CANNOT BE TAKE N AS CONCLUSIVE PROOF OF VALUATION FOR THE PURPOSE OF INCOME TAX. FURTHER THE VALUATION WAS GOT PREPARED BY THE BANK FOR THEIR OWN PURPOSE OF SECUR ING THE LOAN GIVEN TO THE ASSESSEE AND NOT AS ACTUAL COST OF CONSTRUCTIO N INCURRED BY THE ASSESSEE FOR THE CONSTRUCTION OF THE HOUSE. THE VAL UATION REPORT GIVES THE ESTIMATED VALUE OF PROPERTY AT THAT RELEVANT POINT OF TIME CANNOT SUBSTITUTE THE REAL COST OF CONSTRUCTION INCURRED BY THE ASSES SEE AT A DIFFERENT POINT OF TIME. THOUGH, THE VALUATION AS ESTIMATED IN THE VALUATION REPORT GOT PREPARED BY THE BANK FOR THE PURPOSE OF GRANTING LO AN IS NOT CONCLUSIVE PROOF HOWEVER, THE FACT RECODED IN THE VALUATION RE PORT OF EXISTENCE OF THE FIRST FLOOR CANNOT BE DOUBTED AS THIS IS NOT ON THE BASIS OF ANY ESTIMATE BUT THIS FACT IS BASED ON THE EXISTENCE OF THE STRUCTUR E ON THE PLOT OF LAND. THEREFORE, TO THE EXTENT THE EXISTENCE OF THE FIRST FLOOR AS ON THE DATE OF ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 12 VALUATION REPORT PREPARED FOR THE PURPOSE OF LOAN T HE SAME CANNOT BE DENIED. STILL QUESTION OF ACTUAL COST OF CONSTRUCTI ON REMAINS TO BE EXAMINED ON THE BASIS OF THE PROPER ENQUIRY AND VERIFICATION OF THE RECORD. IN CASE THE COMPLETE RECORD IS NOT AVAILABLE TO ASCERTAIN THE ACTUAL COST OF CONSTRUCTION WHEN THE CONSTRUCTION OF HOUSE ITSELF IS NOT IN DISPUTE AND THEREFORE, THE ASSESSING OFFICER CAN TAKE THE HELP OF THE DEPARTMENT VALUER FOR ASCERTAINING THE COST OF CONSTRUCTION. A T THE SAME TIME, THE ASSESSEE CAN ALSO SUBMIT A REPORT FROM A REGISTERED VALUER TO SUBSTANTIATE ITS CLAIM I MAY MAKE IT CLEAR THAT THE VALUATION RE PORT HAS ESTABLISHED ONLY ONE FACT THAT AT THE TIME OF PREPARATION OF VALUATI ON REPORT FOR THE PURPOSE OF LOAN TAKEN FROM THE BANK THE FIRST FLOOR OF THE PROPERTY WAS IN EXISTENCE. HOWEVER, IT IS NOT A CONCLUSIVE PROOF AS TO WHEN TH IS FIRST FLOOR WAS CONSTRUCTED PRIOR TO THAT DATE OF VALUATION REPORT. ACCORDINGLY IN THE ABSENCE OF ANY COGENT MATERIAL THIS ISSUE CANNOT BE DECIDED CONCLUSIVELY. THUS THE ASSESSEE HAS REFERRED TO DETAILS OF VARIOU S LOANS FROM THE BANK AT DIFFERENT TIME HOWEVER, SOME OF THE LOANS ARE IN THE JOINT NAME OF THE ASSESSEE AND HIS FAMILY MEMBERS SHOWING THE TRANSAC TIONS ARE OF WITHDRAWAL AND DEPOSIT IN CASH. THEREFORE THE BANK STATEMENT ITSELF CANNOT GIVE A DEFINITE IDEA OF PURPOSE AND USED OF THE FUN DS WITHDRAWN IN SMALL AMOUNT OF CASH BY THE ASSESSEE AND HIS FAMILY MEMBE RS. AS REGARDS THE PAYMENTS MADE TO THE TWO PARTIES NAMELY BANSAL TRAD ER AND AGARWAL ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 13 TRADERS IN THE ABSENCE OF FURTHER DETAILS AND EXPLA NATIONS WHETHER THESE TWO PARTIES ARE DEALING WITH THE CONSTRUCTION ACTIV ITY OR SUPPLY OF CONSTRUCTION MATERIAL CANNOT BE SAID THAT THE PAYME NTS WERE MADE FOR THE PURPOSE OF CONSTRUCTION OF THE HOUSE. HENCE, I FIN D THAT THIS ISSUE REQUIRES A PROPER VERIFICATION AND EXAMINATION BY CONSIDERIN G THE VALUATION REPORT OF THE DVO AS WELL AS THE VALUATION REPORT, IF ANY, TO BE FILED BY THE ASSESSEE FROM THE REGISTERED VALUER. HENCE, THIS IS SUE IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE SAME IN LIGHT OF THE ABOVE OBSERVATIONS. 7. GROUND NO. 2(A) IS REGARDING DISALLOWANCES OF CL AIM U/S 54. THE ASSESSEE CLAIMED BENEFIT OF SECTION 54 AS THE ASSES SEE HAS PURCHASED TWO HOUSES IN THE NAME OF HIS WIFE. THE ASSESSING OFFIC ER DENIED THE CLAIM OF THE ASSESSEE AS IT WAS NOT INVESTMENT MADE. IN THE NEW HOUSE PURCHASE BY THE ASSESSEE. THE LD. CIT(A) HAS CONFIRMED THE A CTION OF THE AO IN DENYING THE CLAIM DEDUCTION U/S 54. 8. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS REQUIRED U/S 54 AND THEREFORE, THE ASSESSEE IS ELIGIBLE FOR BENEFIT U/S 54. THE AS SESSEE SOLD RESIDENTIAL HOUSES AND HAS INVESTED THE PROCEEDS INTO TWO RESID ENTIAL HOUSE THE ENTIRE CONSIDERATION FOR PURCHASE OF TWO HOUSE HAS FLOW FR OM THE ASSESSEE AND NOT A SINGLE PENNY RENT WAS CONTRIBUTED BY ANY OTHE R PERSON. HE HAS ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 14 FURTHER SUBMITTED THAT THE ASSESSEE HAS PURCHASED NEW HOUSES IN THE NAME OF HIS WIFE AND ONCE THE ENTIRE INVESTMENTS WA S MADE FROM THE SALE PROCEEDS AND THERE WAS NO CONTRIBUTION FROM THE WIF E THEN THE CLAIM OF SECTION 54 CANNOT BE DENIED IN SUPPORT OF HIS CONTE NTION. HE HAS RELIED UPON THE DECISION OF HONBLE MADRAS HIGH IN CASE OF CIT VS. V. NATARAJAN 287 ITR 271 AS WELL AS DECISION OF HONBLE DELHI HI GH COURT IN CASE OF CIT VS. WAHAL 351 ITR 4 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT THE NEW RESIDENTIAL HOUSE NEED NOT BE PURCHA SED BY THE ASSESSEE IN HIS OWN NAME NOR IT IS NECESSARY THAT IT SHOULD BE PURCHASED EXCLUSIVELY IN HIS NAME. THEREFORE, THE HOUSE PURCHASE IN THE N AME OF HIS WIFE WAS HELD TO BE ELIGIBLE FOR THE BENEFIT U/S 54/54F. THE LD AR HAS ALSO RELIED UPON THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS . RAVINDER KUMAR ARORA 342 ITR 38 AND SUBMITTED THAT THE HONBLE HIG H COURT HELD THAT AS PER SECTION 54 HOUSE SHOULD BE PURCHASED BY THE AS SESSEE AND IT DOES NOT STIPULATE THAT HOUSE SHOULD BE PURCHASED IN THE NAM E OF THE ASSESSEE ONLY. 9. AS REGARDS THE BENEFIT OF SECTION 54 IS AVAILAB LE FOR MORE THAN ONE HOUSE THE LD. AR OF THE ASSESSEE HAS RELIED UPON BY THE DECISION OF HONBLE KARNATKA HIGH COURT IN CASE OF CDIT VS. D. ANANDA BASAPPA 180 TAMAN 4 AND SUBMITTED THAT THE HONBLE HIGH COURT H AS GIVEN INTERPRETATION OF THE PHRASE A RESIDENTIAL HOUSE DOES NOT MEANS ONE ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 15 RESIDENTIAL HOUSE AND IT SHOULD BE UNDERSTOOD IN A N SENSE OF BUILDING SHOULD BE OF RESIDENTIAL IN NATURE AND A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. THE HONBLE HIGH COURT HAS ALLOWED THE CLAIM U/S 54 IN RESPECT OF TWO APARTMENTS PURCHASED BY TH E ASSESSEE IN THE SAID CASE. HE HAS ALSO RELIED UPON THE DECISION OF HON BLE KARNATKA HIGH COURT CIT. VS. K.G. RUKMINIAMMA 331 ITR 211 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS TAKEN A CONSISTENT VIEW ON THIS ISS UE THAT A RESIDENTIAL HOUSE SHOULD NOT BE TAKEN AS SINGULAR AND MORE THA N ONE HOUSES CONSTITUTE A RESIDENTIAL HOUSE FOR THE PURPOSE OF S ECTION 54. 10. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E ASSESSEE HAS PURCHASED TWO HOUSES IN THE NAME OF WIFE AND BOTH A RE SITUATED IN DIFFERENT AREAS AND THEREFORE, CANNOT CONSTITUTE A RESIDENTIAL HOUSE. FURTHER, THE RENTAL INCOME FROM NEW HOUSE WAS OFFER ED IN THE NAME OF THE WIFE AND THEREFORE, THE ASSESSEE CANNOT TAKE DOUBLE BENEFIT OF NOT OFFERING THE RENTAL INCOME OF THE HOUSES IN HIS NAME BUT ALS O CLAIMING THE EXEMPTION U/S 54 OF THE ACT. HE HAS ALSO RELIED UPO N THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF KALIA VS. CIT 208 TAXMAN AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT ASSESSEE WOULD NOT BE ENTITLED TO GET THE EXEMPTION FOR THE LAND PURCHASE D BY HIM IN THE NAME OF HIS SON AND DAUGHTER IN LAW. THE HONBLE HIGH COURT FURTHER OBSERVED THAT THE WORD ASSESSEE USED IN THE INCOME TAX ACT NEEDS TO BE GIVEN A LEGAL ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 16 INTERPRETATION AND NOT A LIBERAL INTERPRETATION. AP PLYING THE SAME RATIO OF THE JURISDICTIONAL HIGH COURT IN CASE OF THE ASSESS EE THE BENEFIT OF SECTION 54 IS NOT AVAILABLE TO THE ASSESSEE WHEN THE NEW H OUSES WERE PURCHASED IN THE NAME OF HIS WIFE AND THE INCOME FROM THE NEW HOUSE WAS OFFERED IN THE HAND OF THE WIFE. THE LD. DR HAS ALSO RELIED UP ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF P AWAN ARYA VS. CIT 200 TAXMAN 66 AND SUBMITTED THAT THE HONBLE HIGH C OURT AFTER CONSIDERING THE DECISION OF HONBLE KARNATKA HIGH C OURT HAS HELD THAT THE EXEMPTION AGAINST THE PURCHASE OF TWO FLATS SITUATE D AT DIFFERENT LOCATION IS NOT AVAILABLE. HE HAS ALSO RELIED UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF SMT. MYRTLE D. SOUZA VS. ITO 53 SOT 236. IN THE REJOINDER THE LD AR OF THE ASSESSEE HAS SUBMITTED T HAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF KALY A VS. CIT (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE AS T HE SAID DECISION IN RESPECT OF THE EXEMPTION U/S 54B AND NOT IN RESPECT OF THE CLAIM U/S 54 WHEREAS THE DECISION RELIED UPON BY THE ASSESSEE AR E DIRECTLY ON SECTION 54 OF THE ACT. 11. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE FIRST ASPECT OF THIS ISSUE IS REGAR DING THE INVESTMENT MADE BY THE ASSESSEE IN THE NEW RESIDENTIAL HOUSES IN TH E NAME OF HIS WIFE AND CLAIM OF EXEMPTION UNDER SECTION 54 AGAINST THE ACQ UISITION OF THESE TWO ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 17 HOUSES. AS REGARDS THE HOUSES PURCHASED IN THE MAN E OF WIFE THERE IS NO EMBARGO OR LEGAL IMPEDIMENT AS HELD BY THE HONBLE HIGH COURT IN CASE OF CIT VS. V. NATARAJAN (SUPRA), CIT VS. KAMAL WAHAL (SUPRA) AS WELL AS CIT VS. RAVINDER KUMAR ARORA (SUPRA). THE HONBLE HIGH COURT HAS GONE EVEN TO THE EXTENT THAT SECTION 54 POSTULATE PURCHASE O F NEW HOUSE BY THE ASSESSEE AND DOES NOT CONTEMPLATE THAT THE HOUSE SH ALL BE PURCHASED IN THE NAME OF THE ASSESSEE ONLY. I FURTHER NOTE THAT WHEN THE ENTIRE PURCHASE CONSIDERATION HAS BEEN FLOWN FROM THE PROC EEDS OF THE SALE OF THE EXISTING HOUSE OF THE ASSESSEE THEN THE CONDITI ON OF INVESTING THE SALE PROCEEDS IN PURCHASE OF NEW HOUSE BY THE ASSESSEE I S SATISFIED. THEREFORE, FOLLOWING THE DECISION OF HONBLE HIGH C OURT AS RELIED UPON BY THE ASSESSEE I HOLD THAT THE MERE FACT OF THE ASSES SEE PURCHASED OF NEW HOUSE IN THE NAME OF HIS WIFE WOULD NOT DISENTITLE THE ASSESSEE FOR CLAIMING THE BENEFIT U/S 54 WHEN THE OTHER CONDITIO NS AS PROVIDED U/S 54 ARE SATISFIED. THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF KALYA VS. CIT(SUPRA) AS RELIED UPON BY THE LD. DR. IS CLEARLY IN RESPECT OF THE CLAIM U/S 54B WHEREIN THE ASSESSEE IS REQUIRED INVEST THE PROCEEDS IN THE AGRICULTURAL LAND. THE HONBLE HIGH COURT HAS D ENIED THE CLAIM OF THE ASSESSEE WHEN THE LAND WAS PURCHASED BY THE ASSESSE E IN THE NAME OF HIS SON AND DAUGHTER AND IT IS NOT A CASE OF PURCHASE OF HOUSE IN THE NAME OF ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 18 WIFE. THEREFORE THE SAID DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT WILL NOT HELP THE CASE OF THE REVENUE. 12. AS REGARDS THE CLAIM OF DEDUCTION U/S 54 AVAILA BLE TO MORE THAN ONE HOUSES. THE LD. AR OF THE ASSESSEE HAS RELIED UPON THE VARIOUS DECISIONS ON THE POINT THAT THE EXEMPTIONS U/S 54 IS AVAILABL E EVEN IN CASE OF MORE THAN ONE HOUSE. I FIND THAT IN CASE OF CIT VS. D. A NANDA SABAPPA (SUPRA) THE HONBLE HIGH HAS CONSIDERED THIS ISSUE IN PARAS 7 AND 8 AS UNDER:- 7. WHEN A HINDU UNDIVIDED FAMILY'S RESIDENTIAL HOUS E IS SOLD, THE CAPITAL GAIN SHOULD BE INVESTED FOR THE PURCHASE OF ONLY ONE RESIDENTIAL HOUSE IS AN INCORRECT PROPOSITION. AFTE R ALL, THE HINDU UNDIVIDED FAMILY PROPERTY IS HELD BY THE MEMBERS AS JOINT TENANTS. THE MEMBERS KEEPING IN VIEW THE FUTURE NEEDS IN EVE NT OF SEPARATION, PURCHASE MORE THAN ONE RESIDENTIAL BUILDING, IT CANNOT BE SAID THAT THE BENEFIT OF EXE MPTION IS TO BE DENI ED UNDER S. 54(1) OF THE INCOME-TAX ACT. 8. ON FACTS, IT IS SHOWN BY THE ASSESSEE THAT THE A PARTMENTS ARE SITUATED SIDE BY SIDE. THE BUILDER HAS ALSO STATED THAT HE HAS EFFECTED MODIFICATION OF THE FLATS TO MAKE IT AS ON E UNIT BY OPENING THE DOOR IN BETWEEN TWO APARTMENTS. THE FACT THAT A T THE TIME WHEN THE INSPECTOR INSPECTED THE PREMISES, THE FLATS WER E OCCUPIED BY TWO DIFFERENT TENANTS IS NOT THE GROUND TO HOLD THAT TH E APARTMENT IS NOT A ONE RESIDENTIAL UNIT. THE FACT THAT THE ASSESSEE COULD HAVE PURCHASED BOTH THE FLATS IN ONE SINGLE SALE DEED OR COULD HAVE NARRATED THE PURCHASE OF TWO PREMISES AS ONE UNIT I N THE SALE DEED IS NOT THE GROUND TO HOLD THAT THE ASSESSEE HAD NO INTENTION TO PURCHASE THE TWO FLATS AS ONE UNIT. THUS, IT IS CLEAR THAT THE CLAIM OF THE ASSESSEE W AS FOR PURCHASE OF APARTMENTS SITUATED SIDE BY SIDE TO MAKE IT ONE UNI T BY OPENING DOOR IN ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 19 BETWEEN TWO APARTMENTS. THEREFORE WHEN MORE THAN ON E APARTMENTS ARE SO SITUATED AND CONTIGUOUS THAT IT CAN BE USED AS O NE RESIDENTIAL UNIT AS PER THE REQUIREMENT OF THE ASSESSEES FAMILY AND PA RTICULARLY THE MEMBERS OF HUF. SIMILARLY IN CASE OF CIT VS. K.G. RUKMINIAM MA (SUPRA) THE HONBLE HIGH COURT HAS AGAIN WAS DEALING WITH A CASE WHEN T HE ASSESSEE HAS ENTERED INTO DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF THE PROPERTY AND UNDER THE SAID JOINT DEVELOPMENT AGREEMENT TOTAL 8 FLATS WERE TO BE CONSTRUCTED OUT OF WHICH 4 FLATS WAS THE SHARE OF THE ASSESSE AND REMAINING 4 FLATS WAS THE SHARE OF THE BUILDER. THE REFORE, IN THOSE FACTS WHEN THE ASSESSEE HAS RECEIVED IN CONSIDERATION A B UILT UP AREA IN THE BUILDING FOR WHICH THE CLAIM U/S 54 WAS MADE WHICH WAS ALLOWED BY THE HONBLE HIGH COURT. IN THESE CASES THE HONBLE HIG H COURTS HAVE TAKEN A VIEW ON THE PECULIAR FACTS OF THE CASE WHERE MORE T HAN ONE HOUSES/ FLATS WERE ACQUIRED BY THE ASSESSEE BECAUSE OF THE SITUAT ION FORCED THE ASSESSEE TO PURCHASE MORE THAN ONE HOUSES/ FLATS BU T ALL WERE SITUATED IN THE SAME BUILDING OR AT THE SAME LOCALITY SO AS TO MEET THE RESIDENTIAL REQUIREMENT OF THE ASSESSEE. IN THE CASE IN HAND TH E ASSESSEE HAS PURCHASE TWO HOUSES AT TWO DIFFERENT LOCALITIES W HICH ARE FAR FROM EACH OTHER THEREFORE, BY ANY STRETCH OF PARAMETER THESE TWO HOUSES CANNOT BE REGARDED CONTIGUOUS BEING USED AS A SINGLE RESIDENT IAL UNIT. THEREFORE THE DECISION AS RELIED UPON THE LD. DR IN CASE OF PAWAN ARYA VS. CIT (SUPRA) IS ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 20 DIRECTLY APPLICABLE TO THE CASE OF THE ASSESSEE. TH E HONBLE HIGH COURT HAS DISCUSSED THE FACT AS WELL AS THE DECISION OF HONB LE KARNATKA HIGH IN CASE OF CIT VS. D. ANANDA BASAPPA AND HELD IN PARA 2 TO 4 AS UNDER:- 2. TINE ASSESSING AUTHORITY GAVE EXEMPTION FOR CAP ITAL GAINS TO THE EXTENT OF PURCHASE OF ONE RESIDENTIAL FLAT. IT WAS FOUND IN THE INSPECTION BY THE INSPECTOR THAT THE RESIDENTIAL FL ATS WERE IN OCCUPATION OF TWO DIFFERENT TENANTS DISCLOSING SEPA RATE ENJOYMENT. THEREFORE, IT IS HELD THAT S' 54(1) OF THE INCOME-T AX ACT DOES NOT PERMIT EXEMPTION FOR THE PURCHASERS FOR MORE THAN O NE RESIDENTIAL PREMISES. THE COMMISSIONER OF INCOME-TAX CONFIRMED THE ORDER OF THE ASSESSING AUTHORITY. THE TRIBUNAL, IN APPEAL SE T ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX AND HELD THAT THE PURCHASE OF THE TWO FLATS MADE BY THE ASSESSEE HAS TO BE TREATE D AS ONE SINGLE RESIDENTIAL UNIT AND THAT THE ASSESSEE IS ENTITLED FOR FUIL EXEMPTION. 3. THE FOLLOWING ARE THE SUBSTANTIAL QUESTIONS OF L AW FRAMED FOR CONSIDERATION : ' (A) WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING T HAT OUT OF THE SALE PROCEEDS OF THE PROPERTY BEARING NO. 9, BRUNTO N ROAD, BANGA LORE' OWNED BY THE ASSESSEE HE COULD INVEST THE SAM E IN TWO RESIDENTIAL FLATS BEARING NO. G-01 AND G-02, AND, C LAIM DEDUCTION IN RESPECT OF BOTH THESE FLATS IN ACCORDANCE WITH S. 5 4 READ WITH S. 54F OF THE ACT FOR THE ASST. YR. 1996-97? (B) WHETHER THE PROVISO TO S. 54F OF THE ACT, AS IT STOOD PRIOR TO THE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT, 2OOO, C AN BE READ TO MEAN THAT FOR THE ASST. 5RR. 1996-97 THE ASSESSE E WOULD BE ENTITLED TO RELIEF IN RESPECT, OF MORE THAN ONE DWE LLING UNIT FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER THE HEAD ' CAPI TAL GAINS' ?' 4. IN THE PROVISION OF S. 54(1) OF THE INCOME-TAX A CT, THE RELEVANT PORTION IS EXTRACTED HEREIN FOR CONVENIENT REFERENC E : ,, SUBJECT TO THE PROVISIONS OF SUB-S. (2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITA L ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD ' INCOME ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 21 FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REF ERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERI OD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFT ER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, THEN, INSTEAD OF T HE CAPITAL GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE PREVI OUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEAL WIT H IN ACCORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THA T IS TO SAY.- FOLLOWING THE DECISION OF HONBLE PUNJAB AND HARYAN A HIGH COURT IN CASE OF PAWAN ARYA VS. CIT (SUPRA) I HOLD THAT THE ASSES SEE IS ENTITLED FOR THE CLAIM OF SECTION 54 OF THE ACT ONLY IN RESPECT OF O NE HOUSE AT THE CHOICE OF THE ASSESSEE. 13. GROUND NO. 2(B) AND 2(C) ARE REGARDING DISALLOW ANCES CLAIM OF INTEREST U/S 48 OF THE ACT AS WELL AS UNDER 24(B) O F THE ACT. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND BEFORE THE LD. CIT( A) REGARDING THE DEDUCTION OF INTEREST OF RS. 5,82,565/- PAID ON THE LOAN FACILITY AS PART OF THE ACQUISITION U/S 48 OF THE ACT. THE ASSESSEE HAS ALSO CLAIMED COST OF THE DEDUCTION U/S 24(B) OF THE ACT WHICH WAS NOT ALLO WED BY THE LD. CIT(A). 14. I HAVE HEARD THE LD. AR AS WELL LD. DR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS CONTENDED THAT T HE LD. CIT(A) HAS REFUSED TO ADMIT THE ADDITION GROUND THOUGH THE AS SESSEE DID NOT RAISE THIS GROUND BEFORE THE AO HOWEVER, WHEN THE INTERES T PAID ON THE BANK LOAN WAS NOT IN DISPUTE THEN THE CLAIM RAISED BY THE ASSESSEE BEFORE THE ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 22 LD CIT(A) COULD HAVE BEEN ADMITTED AND DECIDED ON MERITS. HE HAS ALSO SUBMITTED THAT SIMILARLY CLAIM OF DEDUCTION U/S 24( B) IS AN ALLOWABLE CLAIM WHEN LOAN WAS USED FOR CONSTRUCTION OF THE PROPERTY . ON THE OTHER HAND, THE LD. DR VEHEMENTLY OBJECT TO THE CLAIM OF THE AS SESSEE AND SUBMITTED THAT THE CLAIMS WERE RAISED BEFORE THE LD. CIT(A) F OR THE FIRST TIME BUT IT REQUIRES THE EXAMINATION OF FACTS AND THEREFORE CAN NOT BE ADMITTED. HE HAS RELIED UPON THE ORDER OF THE CIT(A). 15. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THIS ISSUE IS DIRECTLY CONNECTE D WITH THE CLAIM OF THE ASSESSEE REGARDING THE LOAN AVAILED BY THE ASSESSEE AND HIS FAMILY MEMBERS ARE USED FOR THE PURPOSE OF CONSTRUCTION OF THE HOUSE. I HAVE ALREADY SET ASIDE THE ISSUE OF COST OF CONSTRUCTION OF THE HOUSE AS WELL AS USE OF THE BARROWED FUND FOR THE PURPOSE OF CONSTRU CTION OF THE HOUSE TO THE RECORD OF AO. THEREFORE, THIS GROUND OF THE ASS ESSEES APPEAL IS CONSEQUENTIAL TO OUTCOME OF THE ISSUE ALREADY SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER. ACCORDINGLY, IN THE FACTS AN D CIRCUMSTANCES OF THE CASE I SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR CONSIDERATION, EXEMPTION AND ADJUDICATION ALONG WIT H THE OTHER ISSUE REMITTED TO THE RECORD OF THE ASSESSING OFFICER. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA 263/JP/14_ SH. BHAGWAN SWAROOP AGARWAL VS. ITO 23 ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2017. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31/10/2017 *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI BHAGWAN SWAROOP AGARWAL, B-76, SHIV SHAKTI NAGAR, JAGATPURA ROAD, MALVIYA NA GAR, JAIPUR. 2. IZR;FKH @ THE RESPONDENT- THE ITO, WARD 6(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 263/JP/14) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR