VIMAL KUMAR AGARWAL, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 27/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4693 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KARNI DAN
• Assessee Lawyers: PAWAN GARG
• Keywords: Reopening of assessment; Capital asset; Tangible material; Assessment record; Reassessment proceedings
• Section: 54F; 133(6); 148; 54

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA- @ ITA NO. 27/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 SHRI VIMAL KUMAR AGARWAL, 104-B,SHREE JI NAGAR, DURGAPURA, JAIPUR-302018. CUKE VS. THE ITO, WARD-6(4), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABPPA 5997 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI PAWAN GARG (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI KARNI DAN (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/02/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 08/02/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24.11.2017 OF CIT (A), JAIPUR FOR THE ASSESSMENT YE AR 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LD AO HAS GROSSLY ERRED IN INITIATING PROCEEDINGS U/S 147/148 AND LD. CIT(A) FURTHER ERRED IN CONFORMING THE ACTION OF AO. 2. THAT THE LD. CIT(A) HAD ERRED IN DISALLOWING THE DEDUCTION CLAIMED U/S 54F ON THE GROUND THAT ASSESSEE WAS ALR EADY LIVING IN ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 2 THE SAME HOUSE AND ONLY EXTENSION AND RENOVATION CO ULD HAVE TAKEN PLACE AND CANNOT BE CONSIDERED AS NEW CONSTRU CTION. 3. THE APPELLANT CRAVES THE RIGHT TO ADD, DELETE OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF APPEAL. 2. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND A S UNDER:- 1. THAT PRINCIPAL COMMISSIONER HAS NOT ACCORDED PR OPER SATISFACTION IN TERMS OF SECTION 151 FOR REOPENING OF ASSESSMENT U/ 148. 3. SINCE, THE ADDITIONAL GROUND IS LEGAL IN NATURE AND WAS RAISED IN RESPECT OF THE APPROVAL GRANTED BY THE PR. CIT U/S 151 OF THE ACT, THEREFORE, THE BENCH THE DIRECTED TO THE DEPARTMENT TO PRODUCE THE RELEVANT RECORD OF APPROVAL GRANTED BY THE LD. PR. CIT. THE LD. DR HAS PRODUCED THE ASSESSMENT RECORD ALONG WITH THE APPRO VAL GRANTED BY THE PR. CIT. 4. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR ON TH E ADDITIONAL GROUND RAISED BY THE ASSESSEE. FROM THE RECORD PROD UCED BY THE LD. DR, WE FIND THAT THE LD. PR. CIT HAS ACCORDED THE SANCT ION FOR ISSUING NOTICE U/S 148 OF THE ACT ON THE REASONS RECORDED BY THE A O. WE FURTHER NOTE THAT PRIOR TO THE SANCTION GRANTED BY THE PR. CIT E VEN THE ACIT EXAMINED THE RECORD AND GIVEN HIS COMMENTS. THE LD. PR.CIT AFTER CONSIDERING THE REASONS RECORDED BY THE AO HAS GRAN TED APPROVAL AND ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 3 THEREFORE, HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE CASE WHERE THE ASSESSEE HAS NOT DISCLOSED THE TRANSACTIO N OF SALE OF THE CAPITAL ASSET IN QUESTION AS WELL AS THE CAPITAL GA IN IF ANY ARISING FROM THE SAID SALE IN THE ORIGINAL RETURN OF INCOME FILE D BY THE ASSESSEE THEN THE FACTS DO NOT SUPPORT THE CASE OF THE ASSESSEE. ONCE, THE ASSESSEE HAS NOT DISCLOSED THE TRANSACTION OF SALE AND CONSE QUENTLY CAPITAL GAIN THEN, IT IS A PRIMA FACIE CASE MADE OUT BY THE AO W HICH WAS CONSIDERED BY THE LD. PR. CIT WHILE GRANTING APPROVAL FOR ISSU ING NOTICE U/S 148 OF THE ACT. THE AO SENT THE PROPOSAL SEEKING APPROVAL U/S 151 OF THE ACT BY THE RECORD OF REASONS ON 09.03.2016 WHICH WERE C ONSIDERED BY THE LD. ACIT ON 11.03.2016 AND FINALLY THE PR. CIT HAS GRANTED APPROVAL ON 21.03.2016. THEREFORE, IT IS MANIFEST THAT THE REAS ONS RECORDED BY THE AO WERE DULY CONSIDERED BY THE ACIT AND THEREAFTER THE PR.CIT PRIOR TO GRANTING APPROVAL FOR ISSUING NOTICE U/S 148 OF THE ACT. HENCE, WE DO NOT FIND ANY SUBSTANCE OR MERITS IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, THE SAME IS DISMISSED. 5. GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF THE ASSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT. THE LD. AR OF T HE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER WHILE RECORDIN G THE REASONS FOR REOPENING HAS STATED THAT INFORMATION WAS CALLED FO R U/S 133(6) OF THE ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 4 ACT, HOWEVER, THE ASSESSEE DID NOT RECEIVE ANY NOTI CE ISSUED BY THE AO U/S 133(6) OF THE ACT. FURTHER, THE ASSESSEE FILED ITS RETURN OF INCOME ON 06.07.2009 WHICH WAS NOT CONSIDERED BY THE AO AT TH E TIME OF RECORDING THE REASONS FOR REOPENING OF THE ASSESSME NT. THEREFORE, THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND WHILE IS SUING NOTICE U/S 148 OF THE ACT AS REASONS RECORDED BY THE AO HAS NOT DI SCLOSED ANY DIRECT CONNECTION BETWEEN THE REASONS AND FORMATION OF BEL IEF THAT ANY INCOME HAS ESCAPED ASSESSMENT. THE AO HAS EVEN CONS IDERED THE ENTIRE SALE CONSIDERATION AS INCOME ASSESSABLE TO T AX HAS ESCAPED ASSESSMENT. IN SUPPORT OF HIS CONTENTION, HE HAS RE LIED UPON VARIOUS DECISIONS AND CONTENDED THAT THE AO CAN REOPEN THE ASSESSMENT ON THE BASIS OF BELIEF AND NOT ON REASONS TO SUSPECT. IN T HE CASE OF THE ASSESSEE, THE AO ACTED ONLY ON THE BASIS OF SUSPICI ON AND THEREFORE, IT CANNOT BE SAID THAT THE REASONS RECORDED BY THE AO HAS A DIRECT CONNECTION WITH THE BELIEF THAT THE INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. 6. ON THE OTHER HAND, LD DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT DISCLOSED THE TRANSACTION OF SALE OF CAPITAL AS SET AND THE INCOME ARISING FROM THE SAID TRANSFER IN THE RETURN OF INC OME. THE AO SUBSEQUENTLY RECEIVED THE INFORMATION REGARDING THE TRANSACTION OF SALE ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 5 OF CAPITAL ASSET BY THE ASSESSEE AND THEREFORE, THE SAID INFORMATION RECEIVED BY THE AO IS A TANGIBLE MATERIAL TO FORM T HE BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS RECOR DED THE REASONS FOR REOPENING OF THE ASSESSEE HAS HELD AS UNDER:- ON THE BASIS OF INFORMATION AVAILABLE ON RECORD FO R THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD AN IMMOV ABLE PROPERTY OF RS. 851000/-. INFORMATION WAS CALLED FO R U/S 133(6) OF I.T. ACT, IN THIS REGARD WHICH PRIOR APPROVAL FR OM PR. CIT-II, JAIPUR. ASSESSEE HAS NOT FURNISHED ANY REPLY/SUPPOR TING EVIDENCE IN RESPONSE TO NOTICE U/S 133(6). THUS THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS/HER ASSESSMENT. THEREFORE, I HAVE THE REASONS TO BELIEV E THAT THE ABOVE INCOME OF RS. 851000/-, WHICH IS CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS SOLD THE IMMOVABLE PROPERTY FOR CONSIDERATION OF RS. 8,51,000/- AND THEREFORE, THE INFORMATION RECEIVED BY THE AO REGARDING THE SALE OF PROPERTY B Y THE ASSESSEE IS FACTUALLY CORRECT. HOWEVER, THE ASSESSEE HAS NOT DI SCLOSED THESE TRANSACTIONS AND INCOME ARISING FROM THESE TRANSACT IONS IN THE RETURN OF ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 6 INCOME FILED ON 06.07.2009. EVEN IN THE COMPUTATION OF INCOME THE ASSESSEE HAS NOT SHOWN THE TRANSACTION AND THEREFOR E, IT IS A CLEAR CASE OF NON DISCLOSER OF THE TRANSACTION ITSELF. FURTHER , THE TRANSACTION OF SALE OF IMMOVABLE PROPERTY IN QUESTION IS NOT EXEMPT UND ER THE PROVISIONS OF THE ACT BUT THE ELEMENT OF INCOME BEING THE CAPITAL GAIN IS CERTAIN IN THE TRANSACTION OF SALE OF THE IMMOVABLE PROPERTY I N QUESTION. THOUGH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 54F OF THE A CT, HOWEVER, THE DEDUCTION CLAIMED BY THE ASSESSEE DURING THE REASSE SSMENT PROCEEDINGS CANNOT ABSOLVED THE ASSESSEE FROM THE D EFAULT OF NON DISCLOSER OF TRANSACTION AND COMPUTATION OF CAPITAL GAIN IN THE RETURN OF INCOME AS WELL AS COMPUTATION OF TOTAL INCOME ANNEX ED TO THE RETURN OF INCOME. HENCE, IN VIEW OF THE FACTS ON RECORD THAT THE ASSESSEE HAS NOT DISCLOSED THE TRANSACTION OF SALE OF IMMOVABLE PROP ERTY AND CONSEQUENTIAL CAPITAL GAIN ARISING FROM THE SAID TR ANSACTION IN THE RETURN OF INCOME, THE ASSESSING OFFICER WAS HAVING THE REA SONS TO FORM A REASONABLE BELIEVE THAT THE INCOME ARISING FROM TRA NSFER OF THE IMMOVABLE PROPERTY HAS ESCAPED ASSESSMENT. IT IS NO T THE CASE OF A TRANSACTION WHICH MAY NOT NECESSARILY INVOLVED ANY ELEMENT OF INCOME BUT THE TRANSFER OF IMMOVABLE PROPERTY WHICH OTHERW ISE NOT EXEMPTED FROM THE TAX HAS AN ESSENTIAL ELEMENT OF INCOME IN ITSELF. HENCE, NON ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 7 DISCLOSER OF THE SAID TRANSACTION IN THE RETURN OF INCOME AND SUBSEQUENT INFORMATION RECEIVED BY THE AO WOULD TANTAMOUNT THE ESCAPEMENT OF INCOME ASSESSABLE TO TAX. 8. AS REGARDS THE ISSUING NOTICE U/S 133(6) OF THE ACT PRIOR TO THE ISSUING NOTICE U/S 148 OF THE ACT WHEN THE ASSESSEE HAD NOT RESPONDED TO THE SAID NOTICE THEN, IT IS NOT GOING EFFECT THE VALIDITY OF REOPENING OF THE ASSESSMENT AND THE INFORMATION AVAILABLE WITH T HE AO FOR FORMING TO BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPE D ASSESSMENT. THE NOTICE ISSUED U/S 133(6) OF THE ACT IS RELEVANT ONL Y ON THE ASPECT WHETHER THE CAPITAL ASSET TRANSFERRED BY THE ASSESS EE IS OTHERWISE EXEMPT UNDER THE INCOME-TAX ACT. ONCE, THE ASSET IS NOT EXEMPT THEN, DEDUCTION AS CLAIMED BY THE ASSESSEE U/S 54F OF THE ACT IN THE REASSESSMENT PROCEEDING SHALL NOT HAVE ANY EFFECT O N THE FORMATION OF BELIEF AT THE TIME OF RECORD THE REASONS AND ISSUIN G NOTICE U/S 148 OF THE ACT. ACCORDINGLY, WE HOLD THAT THE AO WAS HAVIN G THE REASONS TO BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED AS SESSMENT THOUGH THE AMOUNT OF CAPITAL GAIN WHICH HAS ESCAPED ASSESS MENT IS A SUBJECT MATTER OF SCRUTINY IN THE REASSESSMENT PROCEEDINGS. ACCORDINGLY, WE DO NOT FIND ANY SUBSTANCE IN GROUND NO. 1 OF THE ASSES SEE APPEAL. ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 8 9. GROUND NO. 2 IS REGARDING DISALLOWANCE OF DEDUCT ION U/S 54F OF THE ACT. THE ASSESSEE HAS COMPUTED THE CAPITAL GAIN FROM THE TRANSFER OF THE LAND IN QUESTION AT RS. 5,20,742/- WHICH WAS CLAIMED AS DEDUCTION U/S 54F OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS PURCHASED IMMOVABLE PROPERTY SITUATED AT 104-B, SHR I JI NAGAR, DURGAPURA, JAIPUR. FURTHER, THE ASSESSEE HAS ALSO C LAIMED TO HAVE MADE AN ADDITION OF CONSTRUCTION OF THIS IMMOVABLE PROPE RTY DURING THE YEAR UNDER CONSIDERATION AND CLAIMED THE DEDUCTION U/S 5 4F OF THE ACT IN RESPECT OF THE COST OF THE CONSTRUCTION. THE AO DEN IED THE CLAIM OF DEDUCTION U/S 54F OF THE ACT ON ACCOUNT OF ADDITION MADE IN THE EXISTING RESIDENTIAL HOUSE OF THE ASSESSEE. THE AS SESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NO T SUCCEED. 10. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE HAS PURCHASED THE HOUSE SITUATED AT 104-B, SHRI JI NAGAR, DURGAPURA, JAIPUR WHICH WAS ROW HOUSE WITHOUT PLAST ERWORK, FLOORING, WINDOWS, GATES, CHOWKHATS, LIGHT AND WATER FITTINGS AND CONNECTIONS ETC. THE ASSESSEE CLAIMED THAT IT HAS SPENT RS. 3,2 1,000/- ON COMPLETION OF THE GROUND FLOOR WHICH WAS NOT COMPLE TED AND THEREAFTER THE ASSESSEE HAS ADDED FIRST FLOOR DURING THE YEAR UNDER CONSIDERATION. THUS, THE ASSESSEE HAS INCURRED THE COST OF CONSTRU CTION OF RS. ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 9 5,20,000/- FOR CONSTRUCTION OF FIRST FLOOR OF THE H OUSE DURING THE YEAR UNDER CONSIDERATION. HENCE, THE LD. AR HAS SUBMITTE D THAT THE CONSTRUCTION OF FIRST FLOOR IS A CONSTRUCTION OF RE SIDENTIAL HOUSE AS PER THE PROVISIONS OF SECTION 54/54F OF THE ACT AND THE REFORE, ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT. IN SUPPORT OF HIS CON TENTION, HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT I N CASE OF MRS. RAHANA SIRAJ VS. CIT 232 TAXMAN 327 AS WELL AS THE DECISION OF MUMBAI BENCHES OF TRIBUNAL IN CASE OF SALEEM FAZELBHOY VS . DCIT 108 TTJ 894. THE LD. AR HAS THUS SUBMITTED THAT ONCE THE AS SESSEE HAS CONSTRUCTED THE FIRST FLOOR OF THE HOUSE THEN, THE SAME WILL BE CONSIDERED AS CONSTRUCTION OF NEW HOUSE THE ELIGIBL E FOR DEDUCTION U/S 54F OF THE ACT. 11. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E BENEFIT OF SECTION 54F OF THE ACT IS AVAILABLE ONLY WHEN ASSES SEE PURCHASED A NEW HOUSE OR CONSTRUCT A NEW HOUSE WITHIN THE STIPULATE D PERIOD AS PROVIDED U/S 54F OF THE ACT. IT IS NOT THE OBJECT AND INTENT ION OF THE LEGISLATURE TO GRANT BENEFIT OF DEDUCTION IN CASE OF ANY MODIFICAT ION OR ADDITION MADE IN THE EXISTING HOUSE OF THE ASSESSEE. HE HAS RELIE D UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD. CI T(A) HAS RELIED UPON THE DECISION OF HONBLE KERALA HIGH COURT IN CASE MEERA JACOB VS. ITO. ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 10 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOT D ISPUTED THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF THE WORK CARRIED OUT ON THE GROUND FLOOR OF THE HOUSE WHICH WAS ALREADY IN EXISTENCE AS WELL AS A NEW FIRST FLOOR WAS CONSTRUCTED BY THE ASSESSE E ON THE EXISTING GROUND FLOOR FOR COST OF RS. 5,20,000/-. THE AO HAS DISALLOWED THE CLAIM U/S 54F OF THE ACT ON THE GROUND THAT THE BENEFIT O F SECTION 54F CANNOT BE GRANTED IN RESPECT OF THE EXPENDITURE ON RENOVAT ION AS WELL AS ADDITION MADE IN THE EXISTING HOUSE. IT IS PERTINEN T TO NOTE THAT A RESIDENTIAL HOUSE AS REFERRED IN SECTION 54F OF THE ACT MEANS A DWELLING UNIT AS PER NEED AND REQUIREMENTS OF THE ASSESSEE A ND HIS FAMILY. THEREFORE, THERE CANNOT BE A STANDARD CRITERIA IN T ERMS OF SIZE OR SHAPE OF A RESIDENTIAL HOUSE BUT IT DEPENDS UPON THE REQU IREMENTS OF THE ASSESSEE OR THE FAMILY OF THE ASSESSEE. IN THE CASE IN HAND, THE ASSESSEE STATED THAT HE PURCHASED A ROW HOUSE CONST RUCTED UPTO GROUND FLOOR WITHOUT PLASTERWORK, FLOORING, WINDOWS , GATES, CHOWKHATS, LIGHT AND WATER FITTINGS AND OTHERS CONNECTIONS ETC . THEREFORE, TO MAKE THE SAID STRUCTURE UPTO GROUND FLOOR AS A LIVING HO USE THE EXPENDITURE WORK CARRIED OUT BY THE ASSESSEE WILL BE CONSIDERED IN TERMS OF CONSTRUCTION OF A NEW HOUSE THOUGH THE ORIGINAL INV ESTMENT MADE BY ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 11 THE ASSESSEE IS PRIOR TO THE TIME PERIOD U/S 54F OF THE ACT. THE COST OF WORK CARRIED OUT FOR MAKING EXISTING STRUCTURE IS A LIVABLE HOUSE WILL CERTAINLY BE CONSIDERED AS THE COST OF CONSTRUCTION OF THE HOUSE. THEREFORE, IF THE WORK CARRIED OUT IN THE EXISTING THE HOUSE IS OF SUCH A NATURE THAT IT IS NECESSARY TO MAKE THE EXISTING ST RUCTURE AS A LIVABLE HOUSE AS PER MINIMUM REQUIREMENT OF A RESIDENTIAL H OUSE THEN, THE SAID EXPENDITURE IS ELIGIBLE FOR CONSTRUCTION U/S 54F OF THE ACT. 13. AS REGARDS THE COST OF CONSTRUCTION OF FIRST F LOOR THERE IS NO DISPUTE THAT A COMPLETELY NEW STRUCTURE WAS CONSTRU CTED BY THE ASSESSEE AND THE NATURE OF CONSTRUCTION IS ALSO NOT IN DISPUTE BEING A RESIDENTIAL HOUSE. THE OBJECTION OF THE REVENUE IS THAT IT IS ONLY ADDITION TO THE EXISTING HOUSE AND NOT CONSTRUCTION OF A NEW HOUSE. HOWEVER, IN OUR CONSIDERED OPINION IF THE ADDITIONA L CONSTRUCTION OF FIRST FLOOR IS THE RESIDENTIAL REQUIREMENT OF THE ASSESSE E AND HIS FAMILY THEN, THE SAID ADDITIONAL CONSTRUCTION OF FIRST FLOOR WIL L BE CONSIDERED AS CONSTRUCTION OF NEW HOUSE. THE PURPOSE AND OBJECT OF GRANTING THE BENEFIT OF SECTION 54F IS TO INVEST THE NET CONSIDE RATION OF THE EXISTING ASSET FOR PURCHASE OF A RESIDENTIAL HOUSE OR CONSTR UCTION OF RESIDENTIAL HOUSE. THE PROVISIONS OF SECTION 54F OF THE ACT DOE S NOT SPECIFICALLY REQUIRES THAT THE CONSTRUCTION OF A RESIDENTIAL HOU SE SHALL NOT BE ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 12 RECONSTRUCTION OF THE EXISTING HOUSE. ONLY TO DISTI NGUISH TWO ASSETS ONE WHICH IS SOLD BY THE ASSESSEE AND ONE WHICH HAS BEE N ACQUIRED BY THE ASSESSEE THE RETURN USED IN THE SECTION IS EXISTIN G ASSET AND NEW ASSET RESPECTIVELY. THEREFORE, EVEN IF THE EXPENDI TURE IS INCURRED FOR CONSTRUCTION OF AN ADDITIONAL FLOOR OF THE EXISTING GROUND FLOOR AS PER BONAFIDE NEED AND REQUIREMENTS OF THE ASSESSEE AND HIS FAMILY, THE SAME WOULD BE TREATED AS A CONSTRUCTION OF RESIDENT IAL HOUSE AS PER THE PROVISIONS OF SECTION 54F OF THE ACT. THE HONBLE K ARNATAKA HIGH COURT IN CASE OF MRS. RAHANA SIRAJ VS. CIT (SUPRA) WHILE CONSIDERING THE ISSUE OF THE EXPENDITURE INCURRED BY THE ASSESSEE FOR REP LACING OF THE FLOORING AND ALTERATION OF KITCHEN AS WELL AS CONSTRUCTION O F COMPOUND WALL AND OTHER REPAIRS WORK HAS HELD IN PARA 8 AS UNDER:- 8. INSOFAR AS THE SECOND SUBSTANTIAL QUESTION OF L AW IS CONCERNED, IT IS NOT IN DISPUTE THAT THE PROPERTY P URCHASED BY THE ASSESSEE WAS HABITABLE BUT HAD LACKED CERTAIN AMENI TIES. THE ASSESSEE HAS SPENT NEARLY ABOUT RS.18 LAKHS TOWARDS REMOVAL OF MOSAIC FLOORING AND LAYING OF MARBLE FLOORING, ALTE RATION OF THE KITCHEN, PUTTING UP COMPOUND WALL, PROTECTING THE P ROPERTY WITH GRILL WORK AND ATTENDING TO OTHER REPAIRS. SECTION 54F OF THE ACT PROVIDES THAT IF THE COST OF THE NEW ASSET, WHICH I S TO BE TAKEN INTO CONSIDERATION WHILE DETERMINING THE CAPITAL GA IN, THE WORDS USED IS COST OF NEW ASSET AND NOT THE CONSIDERAT ION FOR ACQUISITION OF THE NEW ASSET. IN LAW, IT IS PERMIS SIBLE FOR AN ASSESSEE TO ACQUIRE A VACANT SITE AND PUT UP A CONS TRUCTION THEREON AND THE COST OF THE NEW ASSET WOULD BE COST OF LAND PLUS ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 13 (+) COST OF CONSTRUCTION. ON THE SAME ANALOGY, EVEN THOUGH HE PURCHASED A NEW ASSET, WHICH IS HABITABLE BUT WHICH REQUIRES ADDITIONS, ALTERATIONS, MODIFICATIONS AND IMPROVEME NTS AND IF MONEY IS SPENT ON THOSE ASPECTS, IT BECOMES THE COS T OF THE NEW ASSET AND THEREFORE, HE WOULD BE ENTITLED TO THE BE NEFIT OF DEDUCTION IN DETERMINING THE CAPITAL GAINS. THE APP ROACH OF THE AUTHORITIES THAT ONCE A HABITABLE ASSET IS ACQUIRED , ANY ADDITIONS OR IMPROVEMENTS MADE ON THAT HABITABLE ASSET IS NOT ELIGIBLE FOR DEDUCTION, IS CONTRARY TO THE STATUTORY PROVISIONS. THE SAID REASONING IS UNSUSTAINABLE. TO THAT EXTENT, THE IMP UGNED ORDER PASSED BY THE TRIBUNAL AS WELL AS THE LOWER AUTHORI TIES REQUIRE TO BE SET-ASIDE AND IT IS TO BE HELD THAT IN ARRIVING AT COST OF THE NEW ASSET, RS.18 LAKHS SPENT BY THE ASSESSEE FOR MODIFI CATION, ALTERATIONS AND IMPROVEMENTS OF THE ASSET ACQUIRED IS TO BE TAKEN NOTE OF. THUS, THE SECOND SUBSTANTIAL QUESTION OF L AW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: THUS, THE HONBLE HIGH COURT HAS HELD THAT THE EXPE NDITURE INCURRED ON A NEW ASSET FOR MAKING IT HABITABLE WILL BECOME TH E COST OF NEW ASSET ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT. THE MUMB AI BENCHES OF TRIBUNAL IN CASE OF SALEEM FAZELBHOY VS. DCIT (SUPR A) IS ALSO CONSIDERED THIS ISSUE IN PARA 8 AS UNDER:- 8. BEFORE PARTING WITH THIS ISSUE, WE WOULD LIKE TO ME NTION THAT THERE IS DISTINCTION BETWEEN EXPENDITURE INCURRED O N MAKING THE HOUSE HABITABLE AND THE EXPENDITURE ON RENOVATION. WE MAY VISUALIZE A SITUATION WHERE ASSESSEE MAY BUY A HABI TABLE HOUSE BUT THE ASSESSEE MAY LIKE TO INCUR EXPENDITURE BY W AY OF RENOVATION TO MAKE IT MORE COMFORTABLE. HE MAY NOT BE HAPPY WITH THE QUALITY OF MATERIAL USED BY THE BUILDER AN D, THEREFORE, HE MAY INCUR THE EXPENDITURE ON IMPROVEMENT OF THE HOU SE. SUCH ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 14 EXPENDITURE CANNOT BE EQUATED WITH THE EXPENDITURE ON MAKING THE HOUSE HABITABLE. WHETHER THE HOUSE PURCHASED BY THE ASSESSEE WAS IN A HABITABLE CONDITION OR NOT WOULD DEPEND ON THE STATE OF CONDITION OF THE HOUSE AT THE TIME OF PURC HASE. HENCE, THIS ASPECT WOULD HAVE TO BE KEPT IN MIND WHILE ADJ UDICATING SUCH ISSUE. IN THE PRESENT CASE, THE AO AS WELL AS THE LEARNED CIT(A) HAD REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT NO EXPENDITURE COULD BE CONSIDERED FOR EXEMPTION UNDER S. 54F WHICH WAS INCURRED AFTER THE DATE OF PURCHASE. THE AO HAD NO OCCASION TO EXAMINE THE STATE OF THE CONDITION OF T HE HOUSE PURCHASED BY THE ASSESSEE. THOUGH THE LIST OF EXPEN DITURE HAS BEEN PROVIDED BY THE ASSESSEE, YET IT IS TO BE EXAM INED WHETHER SUCH EXPENDITURE WAS INCURRED TO MAKE THE HOUSE HAB ITABLE OR JUST TO MAKE THE HOUSE MORE COMFORTABLE. THIS ASPEC T OF THE MATTER REQUIRES EXAMINATION BY THE AO. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE A SSESSEE IS ENTITLED TO EXEMPTION UNDER S. 54F WITH REFERENCE T O THE EXPENDITURE INCURRED FOR MAKING THE HOUSE HABITABLE . HOWEVER, THE FACTUAL MATRIX REQUIRES EXAMINATION. ACCORDINGL Y, THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE AND THE AO IS DIREC TED TO READJUDICATE THE ISSUE IN ACCORDANCE WITH THE GUIDE LINES GIVEN BY US AND AFTER CONSIDERING THE ENTIRE MATERIAL PRODUC ED BY ASSESSEE BEFORE HIM. THE ASSESSEE SHALL BE GIVEN PROPER OPPO RTUNITY TO REPRESENT HIS CASE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS FOLLOWING THE DECISIONS RELIED UPON THE ASSESSEE, W E HOLD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN CARRYING OU T THE WORK FOR ITA NO. 27/JP/2018 SHRI VIMAL KUMAR AGARWAL VS. ITO 15 MAKING IS HABITABLE AS WELL AS CONSTRUCTION OF FIRS T FLOOR ON THE EXISTING GROUND FLOOR IS ELIGIBLE FOR DEDUCTION U/S 54 OF TH E ACT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/02/2019 SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08/02/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VIMAL KUMAR AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-6(4), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 27/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR