RASIKLAL M. PARIKH, MUMBAI V. ACIT 19(2), MUMBAI

ITA 2647/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8343 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Period of limitation; Corroborative evidences; Surrender of tenancy right
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 2647/MUM/2011 ASSESSMENT YEAR-2006-07 SHRI RASIKLAL M. PARIKH, 1-A, KRISHNA KUNJ BLDG., 2 ND TAGORE ROAD, SANTACRUZ (W), MUMBAI-400 054 PAN-AABPP 0421B VS. THE ACIT 19(2), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJIV M. SHAH RESPONDENT BY: SHRI A.B. KOLI DATE OF HEARING :08.10.2012 DATE OF PRONOUNCEMENT:31.10.2012 O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-30 MUMBAI DT.7.1.2011 PERT AINING TO ASSESSMENT YEAR 2006-07. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE DENIAL OF THE EXEMPTION U/S. 54F OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT FO R THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RETURN DECLARING T OTAL INCOME AT RS. 21,05,164/- ON 20.2.2007. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S. ITA NO. 2647/MUM/2011 2 54F OF THE ACT BEING INVESTMENT IN RESIDENTIAL HOUS E. THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 1.67 CRORES ON SURRENDER OF TENANCY RIGHT ON WHICH LEGAL FEES PAID AMOUNTED TO RS. 1,00 ,000/-. THE AO FOUND THAT THE ASSESSEE HAS CLAIMED INVESTMENT OF RS. 1,3 8,32,000/- TOWARDS PURCHASE OF FOUR RESIDENTIAL FLATS AND COMPUTED CAP ITAL GAINS BY CLAIMING FULL EXEMPTION ON THE INVESTED AMOUNT OF RS. 1,38,32,000 /- U/S. 54F OF THE ACT. THE AO SOUGHT CLARIFICATION FROM THE ASSESSEE IN RE SPECT OF THE EXEMPTION SO CLAIMED ON THE FOLLOWING POINTS: A) THE AMOUNT OF CAPITAL GAIN HAS NOT BEEN APPROPRIATE D BEFORE THE DUE DATE FOR FILING THE RETURN AS THE AMOUNT HAS NO T BEEN DEPOSITED IN A DESIGNATED CAPITAL ACCOUNT SCHEME BY THE DUE D ATE OF FILING U/S. 139(1) OF THE ACT. B) NO AGREEMENT HAS BEEN ENTERED DURING THE PERIOD OF 3 YEARS C) THE CAPITAL GAIN IS INVESTED IN 4 FLATS WHEREAS THE EXEMPTION IS AVAILABLE IN RESPECT OF ONE RESIDENTIAL HOUSE AS PE R SEC. 54F OF THE ACT. THE ASSESSEE FILED A DETAILED REPLY IN RESPONSE TO THE QUERIES RAISED BY THE AO AS UNDER: A) SECTION 54F IS A BENEFICIAL PROVISION. THE ASSESSE E HAS ALREADY INVESTED THE ENTIRE AMOUNT IN THE ACQUISITION OF PR EMISES WITHIN THE STIPULATED TIME AS PER SEC. 54F OF THE ACT AS THE A SSESSEE HAS COMPLIED WITH INVESTMENT IN NEW PREMISES , STIPULAT ION REGARDING INVESTMENT IN CAPITAL GAIN DEPOSIT SCHEME, 1988 BEF ORE THE DUE DATE AS PER SEC. 139(1) HAS TO BE CONSTRUED LIBERAL LY. B) ALTHOUGH NO AGREEMENT WAS ENTERED WITH THE BUILDER, THE ASSESSEE HAS RECEIVED FOUR ALLOTMENT LETTERS ALL DT. 7.10.20 05 WHICH CLEARLY ESTABLISHES THE RIGHT TO PURCHASE THE SAID FLATS. ITA NO. 2647/MUM/2011 3 C) OUT OF THE FOUR UNITS BOOKED, ONE FLAT BEARING NO. 1001 HAS BEEN SURRENDERED TO THE BUILDER WITH THE CONDITION THAT ADDITIONAL AMENITIES ARE TO BE PROVIDED FOR IN THE REMAINING FLATS WHICH CONDITION HAS BEEN ACCEPTED BY THE DEVELOPER VIDE T HEIR LETTER DT. 6.2.2008 AND 20.3.2008. 4. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS ALSO BEEN AGREED WITH THE DEVELOPER THAT THE THREE UNITS ARE TO BE MADE ONE U NIT AS THEY ARE ADJACENT TO EACH OTHER. RELIANCE WAS PLACED ON CERTAIN JUDI CIAL PRONOUNCEMENT WHEREIN IT HAS BEEN HELD THAT CONTIGUOUS UNITS ARE TO BE TREATED AS ONE RESIDENTIAL HOUSE. THE ABOVE SUBMISSIONS OF THE AS SESSEE WERE REJECTED BY THE AO. THE AO WAS OF THE OPINION THAT THE ASSESSE E HAS NOT PURCHASED ONE HOUSE BUT THREE DIFFERENT HOUSES FOR WHICH AGREEMEN TS WERE NOT EXECUTED TILL NOVEMBER, 2008, EVEN THE AGREEMENT WHICH WAS SUBSEQ UENTLY ENTERED ARE NEITHER STAMPED NOR REGISTERED. FURTHER THE ASSESS EE HAS NOT DEPOSITED THE AMOUNT OF CAPITAL GAIN IN A DESIGNATED CAPITAL GAIN ACCOUNT SCHEME BY THE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT . THE AO CONCLUDED THAT THE ASSESSEE WENT ON VIOLATING THE PROVISIONS OF LAW ON E AFTER THE OTHER THEREFORE THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE. THE A O FINALLY CONCLUDED THAT THE CASE OF THE ASSESSEE DOES NOT FIT IN THE FOUR CORNE RS OF THE PROVISIONS OF SEC. 54F OF THE ACT AND THE EXEMPTION CLAIMED IS HEREBY DISALLOWED. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT CONSTRUCTED THE HOUSE WITHIN THE PERIOD OF 3 YEARS AS ALLOWED BY SE C. 54F OF THE ACT. FURTHER, THE CLAIM OF THE ASSESSEE THAT THE THREE HOUSES ARE CONTIGUOUS AND ARE ONE UNIT IS WITHOUT ANY SUPPORTING EVIDENCE. THE LD. C IT(A) FINALLY CONCLUDED THAT FROM ALL COUNTS THE ASSESSEE IS NOT ENTITLED F OR DEDUCTION U/S. 54F OF THE ACT BE IT FROM THE LAW POINT OF VIEW OR FROM THE PO INT OF VIEW OF THE CASE LAWS RELIED UPON BY THE ASSESSEE AND ACCORDINGLY CONFIRM ED THE ACTION OF THE AO. ITA NO. 2647/MUM/2011 4 6. AGGRIEVED BY THE FINDING OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE LOWER AUTHORITIES ARGUING THAT AS PER THE LETTER OF ALLOTMENT DT. 7.5.2005, THE ASSESSEE HAS BOOKED THREE FLATS ADJACENT TO EACH OT HER AND 4 TH FLAT ON THE TOP FLOOR. THE LD. COUNSEL FURTHER SUBMITTED THAT THE 4 TH FLAT WAS SURRENDERED AND THE AMOUNT PAID FOR THE BOOKING OF THE 4 TH FLAT WAS APPROPRIATED TOWARDS AMENITIES TO BE PROVIDED BY THE BUILDER IN RESPECT OF THREE CONTIGUOUS FLATS WHICH INCLUDED TO MAKE THREE CONTIGUOUS FLATS AS ON E RESIDENTIAL HOUSE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID A SUM OF RS. 1,32,99,000/- BEFORE THE DUE DATE OF FILING OF RETU RN U/S. 139(4) OF THE ACT. LD. COUNSEL FURTHER CONTENDED THAT U/S. 54F(4) THE MANDATE IS TO DEPOSIT THE AMOUNT NOT USED TOWARDS CONSTRUCTION OF HOUSE BEFOR E FILING OF RETURN U/S. 139. THE PROVISION NOWHERE SPECIFICALLY MENTIONS T HAT IT HAS TO BE ON OR BEFORE THE DUE DATE FOR FILING OF RETURN U/S. 139(1 ) OF THE ACT. THUS ALL THE FACTS CONSIDERED INTO TOTALITY WOULD LEAD TO ONLY O NE CONCLUSION THAT ASSESSEE HAS INVESTED THE NET CAPITAL GAIN TOWARDS CONSTRUCT ION OF A RESIDENTIAL HOUSE AND IS ELIGIBLE FOR DEDUCTION U/S. 54F OF THE ACT. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE RELI ED UPON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. LET US FIRST CONS IDER THE FACTUAL MATRIX. THE ASSESSEE SURRENDERED TENANCY RIGHT ON 13.9.2005 FOR A SUM OF RS. 1.67 CRORES AFTER DEDUCTING THE LEGAL FEES , THE NET CONSIDERA TION CAME TO RS. 1.66 CRORES WHICH WAS ALSO THE AMOUNT OF NET CAPITAL GAIN. AS PER PROVISIONS OF SEC. 54F, THE ASSESSEE WAS SUPPOSED TO CONSTRUCT THE RESIDENT IAL HOUSE WITHIN THREE YEARS OR PURCHASE WITHIN TWO YEARS , TO SAVE HIMSEL F FROM THE LIABILITY OF PAYING CAPITAL GAIN TAX. THE ASSESSEE HEAVILY RELI ED UPON THE LETTER OF ALLOTMENT DT. 7.10.2005. HOWEVER, ON THAT DATE, NO AGREEMENT WAS ENTERED BETWEEN THE DEVELOPER AND THE ASSESSEE. THE ASSESS EE ENTERED INTO AN AGREEMENT FOR SALE ON 24.11.2008 WHICH IS MORE THAN THREE YEARS FROM THE DATE OF THE SURRENDER OF THE TENANCY RIGHT. THE AL LOTMENT LETTER RELIED UPON ITA NO. 2647/MUM/2011 5 BY THE ASSESSEE ONLY SUGGESTS THAT THERE IS A PROPO SAL AND ACCEPTANCE OF SOMETHING WHICH WOULD COME IN-EXISTENCE IN FUTURE. 9. THE ASSESSEE HAS BOOKED FLAT ON THE 9 TH FLOOR OF C WING OF THE PROJECT WHEREAS AS PER THE COMMENCEMENT CERTIFICATE WORK UP TO PODIUM + STILT SLAB LEVEL OF WING A, B & C WERE APPROVED AS PER NOTING DT. 28.3.2005, WHICH MEANS THAT ON THE DATE OF ISSUE OF ALLOTMENT LETTER , THERE WAS NO APPROVAL FROM THE MUNICIPAL AUTHORITIES FOR THE CONSTRUCTION OF THE 9 TH FLOOR. AS PER THE NOTING DT. 18.3.2008, THE CERTIFICATE OF COMMENCEME NT WAS FURTHER EXTENDED FOR THE WING B. STILT + PODIUM + 1 ST TO 17 TH FLOOR, WHICH MEANS THAT EVEN AFTER THE LAPSE OF 5 MONTHS FROM THE DATE OF ALLOTM ENT, THERE WAS NO APPROVAL FOR THE CONSTRUCTION OF 9 TH FLOOR OF C WING. IT IS ONLY ON 7 TH SEPTEMBER, 2010, THE COMMENCEMENT CERTIFICATE IS MADE VALID AND FURT HER EXTENDED FOR ENTIRE WORK FOR WING C STILT + PODIUM + 1 ST TO 9 TH FLOOR AS PER AMENDED PLAN DT. 7.7.2008. THESE FACTS CLEARLY SUGGEST THAT THE ALLO TMENT WAS ONLY FOR A FUTURE EVENT WHICH WAS NOT EVEN IN EXISTENCE AT THE TIME O F THE ISSUING THE ALLOTMENT LETTER. ALTHOUGH THE TENANCY RIGHT WAS SURRENDERED ON 13.9.2005, THE AGREEMENT FOR SALE WAS ENTERED ON 24.11.2008 WHICH ITSELF IS BEYOND THE PERIOD OF LIMITATION PRESCRIBED U/S. 54F OF THE ACT . THE CONTENTION OF THE LD. COUNSEL THAT THE ASSESSEE HAS INVESTED A SUM OF RS. 1.33 CRORES TOWARDS THE CONSTRUCTION OF THE FLAT BEFORE THE DUE DATE FOR FI LING THE RETURN U/S. 139(4) OF THE ACT CANNOT BE ACCEPTED FOR THE SIMPLE REASON TH AT CLAUSE (4) OF SEC. 54 CLEARLY MENTION THAT THE AMOUNT OF NET CONSIDERATIO N WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE CONSTRUCTI ON OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME U/S. 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN (SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB SECTION ( 1) OF SEC. 139). THIS VIEW IS ALSO SUPPORTED BY THE DEPARTMENTAL CIRCULAR NO. 495 DT. 22.9.1987 BY WHICH THE BOARD HAS CLARIFIED THAT THE AMOUNT HAS T O BE DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETURN U/S. 139(1) OF THE ACT. THE ASSESSEE FAILS ON THIS COUNT ALSO. ITA NO. 2647/MUM/2011 6 10. COMING TO THE LAST ARGUMENT THAT THE THREE RESI DENTIAL FLATS BEING ADJACENT TO EACH OTHER AND BEING CONTIGUOUS SHOULD BE TREATED AS ONE RESIDENTIAL UNIT ALSO CANNOT BE ACCEPTED ON THE BAS IS OF THE FACTUAL MATRIX DISCUSSED HEREINABOVE. AS THE CONSTRUCTION IS STIL L UNDER PROGRESS AND EVEN ON THE DATE OF HEARING WHEN WE ASKED THE COUNSEL AB OUT THE PRESENT STATUS, THE COUNSEL STATED THAT THE CONSTRUCTION IS UNDER P ROGRESS. THEREFORE, WE FAIL TO UNDERSTAND HOW THE ASSESSEE CAN SUBSTANTIATE HIS CLAIM THAT THREE FLATS WHICH ARE ADJACENT TO EACH OTHER ARE NOTHING BUT ON E RESIDENTIAL UNIT, WHEN THE CONSTRUCTION IS NOT COMPLETED EVEN AFTER A LAPS E OF MORE THAN 7 YEARS. BY MERELY FILING OF THE DESIGN IN THE FORM OF AN I NTERNAL MAP, WOULD NOT SUFFICE. IT IS ONLY BY PHYSICAL VERIFICATION, T HE CONTENTION OF THE ASSESSEE COULD BE ESTABLISHED THAT THREE FLATS ARE ONE RESID ENTIAL UNIT HAVING ONE COMMON PASSAGE, ONE ELECTRICITY METER AND ONE MUNIC IPAL CORPORATION NUMBER. THESE MANDATORY THINGS COULD BE ESTABLISHE D BY THE ASSESSEE AS THE FLATS ARE YET TO BE COMPLETED. 11. IT IS THE SAY OF THE ASSESSEE THAT THE DELAY IN THE CONSTRUCTION IS ATTRIBUTABLE TO THE BUILDER AND THE ASSESSEE CANNOT BE PENALIZED FOR SOMETHING WHICH IS NOT IN HIS HAND. WE DO NOT AGRE E WITH THIS CONTENTION BECAUSE AS PER THE ENTRIES IN THE CERTIFICATE OF CO MMENCEMENT, THE APPROVAL WAS GIVEN ON 7.9.2010 FOR C WING WHEREAS THE ASSE SSEE HAS FILED RETURN ON 22.2.2007 CLAIMING FULL EXEMPTION U/S. 54F OF THE A CT, WHEN ON THAT DATE NEITHER THE AGREEMENT FOR SALE WAS ENTERED NOR THE C WINGS 9 TH FLOOR WAS APPROVED BY THE LOCAL AUTHORITY. THE ASSESSEE HAS RELIED UPON VARIOUS JUDICIAL DECISIONS CLAIMING THAT THE CONTIGUOUS UNITS ARE TO BE TREATED AS ONE RESIDENTIAL UNIT. WE DO NOT PROPOSE TO DWELL IN TH OSE JUDICIAL DECISIONS FOR THE SIMPLE REASON THAT THE ASSESSEE HAS FAILED TO ESTAB LISH BY BRINGING COGENT MATERIAL ON RECORD THAT THE RESIDENTIAL UNITS ARE C OMPLETE AND ONE. ASSESSEE FAILS ON THIS COUNT ALSO. ITA NO. 2647/MUM/2011 7 12. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, WE HAVE NO HESITATION TO CONFIRM THE FINDING OF THE LD. CIT(A). THE APPEAL F ILED BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF OCTOBER, 2012 SD/- SD/- (D.MANMOHAN) (N.K. BILLAIYA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 31 ST OCTOBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI