Mr. S.R. Jeyashankar, CHENNAI V. ITO, CHENNAI

ITA 2930/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4948 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-10-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Salary income; Cost of acquisition
• Section: 143(3); 54F; 54

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO. 2930/MDS/2016 / ASSESSMENT YEAR :20 1 2 - 1 3 SHRI S.R. JEYASHANKAR, C/O. M/S. RAMESH & RAMACHANDRAN C.AS., NEW NO. 39, OLD NO. 29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN: A A FPJ8999J ] VS. THE INCOME TAX OFFICER , NON - CO RPORATE WARD 16 ( 2 ), CHENNAI. ( / APPELLANT ) ( / RESPONDENT ) ./ I.T.A.NO. 3171 /MDS/201 6 / ASSESSMENT YEAR :20 1 2 - 1 3 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON C ORPORATE CIR CLE 16 , CHENNAI 600 034. VS. SHRI S.R. JEYASHANKAR, 19/13, P.S. SIVASAMY SALAI, MYLAPORE, CHENNAI 600 004. ( / APPELLANT ) ( / RESPONDENT ) ASSESSEE BY : SHRI Y. SRIDHAR , C.A. DEPARTMENT BY : SHRI SHIVA SRINIVAS, JCIT / DATE OF HEARING : 04 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 03 . 0 4 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINST THE ORDE R OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 4, CHENNAI, DATED 3 0.08 .201 6 FOR THE ASSESSMENT YEAR 201 2 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) OUGHT NOT TO HAVE RESTRICTED THE EXEMPTION UNDER SECTION 54 OF THE INCOME TAX I.T.A. NO S . 1 549 & 1 629 /M/ 15 2 ACT, 1961 [ ACT IN SHORT]. ON THE OTHER HAND, THE REVENUE HAS RAISED THE EFFECTIVE GROUND THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 54 OF THE ACT OF .65,08,766/ - . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, EARNING INCOME FROM SALARY AND OTHER SOURCES AND FILED HIS RETURN ADMITTING TOTAL INCOME OF .89,07,595/ - CONSISTING INCOME FROM SALARY AT .36,70,220/ - , INCOME FROM HOUSE PROPERTY AT .6,91,047/ - , .46,08,119/ - FROM LONG TERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES AT .38,209/ - AND CLAIMED DEDUCTION UNDER CHAPTER VIA AT .1,00,000/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 1 43(2) DATED 08.08.2013 WAS SERVED ON THE ASSESSEE ON 16.08.2013. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS AND AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT A SSESSING TOTAL INCOME OF THE ASSESSEE AT .1,97,74,602/ - AFTER MAKING DISALLOWANCE OF EXEMPTION UNDER SECTION 54 OF THE ACT AT .1,08,67,007/ - . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, BOTH THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE RESTRICTION OF DISALLOWANCE UNDER SECTION 54 OF THE ACT, THE LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY A RGUED THAT ONCE THE LD. CIT(A) HAS ACCEPTED THAT THE ASSESSEE HAS, AS PER I.T.A. NO S . 1 549 & 1 629 /M/ 15 3 CONSTRUCTION AGREEMENT , PAID ADVANCE OF .28,17,524/ - AS WELL AS FURTHER PAYMENTS UPTO 10.07.2012 TO THE BUILDER BEFORE DUE DATE FOR FILING OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT, HE SHOULD NOT HAVE REJECTED THE PAYMENTS MADE AFTER 31.07.2012. THE DEPOSIT OF SALE CONSIDERATION BEFOR E DUE DATE IN THE CAPITAL GAIN SCHEME ARISES WHEN OWN CONSTRUCTION IS MADE OR THE ASSESSEE FAILS TO IDENTIFY THE PROPERTY TO BE INVESTED BEFORE DUE DATE FOR FILING OF RETURN. WHEN THE ASSESSEE HAS ENTERED INTO CONSTRUCTION AGREEMENT AND PAID FIRST INSTALME NT OF THE COST OF CONSTRUCTION AND GOT TITLE TO THE PROPERTY, SUCH ALLOTMENT SHOULD BE TREATED AS COST OF CONSTRUCTION FOR THE PURPOSE OF CAPITAL GAINS, THE LD. CIT(A) WAS NOT LEGALLY CORRECT TO DENY FULL BENEFIT UNDER SECTION 54 OF THE ACT AND BY RELYING ON VARIOUS CASE LAW FILED IN THE FORM OF PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE ENTIRE CLAIM OF EXEMPTION UNDER SECTION 54 OF THE ACT SHOULD BE ALLOWED. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT WHEN THE ASSESSEE HA S NOT DEPOSITED THE UNUTILIZED AMOUNT OF .89,66,339/ - IN THE CAPITAL GAINS ACCOUNT SCHEME WITHIN THE TIME ALLOWED UNDER SECTION 139(1) OF THE ACT, THE LD. CIT(A) WAS NOT CORRECT IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 54 OF THE ACT TO THE EXTENT OF .65,08,766/ - . 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS SOL D A RESIDENTIAL HOUSE PROPERTY AT KANATHUR, CHENNAI ALONG WITH HIS PARENTS ON 03.02.2012 FOR I.T.A. NO S . 1 549 & 1 629 /M/ 15 4 A T OTAL CONSIDERATION OF .8,1 0,00,000 I - AND THE ASSESSEE'S SHARE WAS .2,70,00,000/ - . THE ASSESS EE HAS CLAIMED THE INDEXED COST OF ACQUISITION AT .6,11 ,270/ - FOR WHICH COPY OF THE DEED WAS FILL BEFORE THE ASSESSING OFFICER. T HE ASSESSEE HAS ALSO CLAIMED INDEXED COST OF IMPROVEME NT AT . 1,09,13,604/ - FOR WHICH THE ASSESS EE FILED COPY OF THE BALANCE SHEET OF HIS FATHER FOR THE F.Y 2008 - 09, WHEREIN THE INVESTMEN T IN PROPERTY WHICH WAS SOLD, WAS SHOWN AS AN A SSET AT .1,93,10,823/ - . AFTER CLAIMING INDEX COST OF ACQUISITION AND INDEXE D COST OF IMPROVEMENT , THE ASSESSEE HAS ARRIVED AT L ONG T E RM C APITAL G AIN AT .1,54,75,125/ - . THE ASSESSEE CLAIMED EXEMPTION U NDER SECTION 54 OF THE ACT AT .1,08,67, 007/ - BEING INVESTMENT MADE IN A FLAT AT PUNE ALONG WITH HIS WIFE SMT. M. LAKSHMI. THE ASS ESS EE HAS CLAIMED THAT HE HAS PAID .2 8 ,17,524/ - ON 04.02.2 0 11 TOWARDS ADVANCE FOR THE ABOVE TO M/S. SOBHA DEVELOPERS (PUNE) LTD., AND FURNISHED COPY OF THE CONSTRUCTION AGREEMENT AND AGREEMENT FOR LAND PURCHASE, WHICH WERE DATED 03.02.2011. THE ASSESSING OFFICER HAS OBSERVED THAT THE CLAIM OF ASSESSEE UNDER SECTION 54 OF THE ACT HAS TO BE REJECTED AT THRESHOLD. IT IS OBSERVED BY THE ASSESSING OFFICER THAT TO AVAIL EXEMPTION UNDER SECTION 54 OF THE ACT, THERE SHOULD BE A HABITABLE RESIDENTIAL HOUSE PROPERTY IN EXISTENCE EITHER BY PURCHASE CONSTRUCTION BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. OTHERWISE, THE AMOUNT OF CAPITAL GAINS SHOULD BE DEPOSITED IN AN ACCOUNT WITH THE SPECIFIED BANK UNDER THE CAPITAL GAINS A CCOUNTS SCHEME, 1988 BY THAT DATE. AS THE CONDITIONALITIES ENUMERATED UNDER SECTION 54(2) OF THE ACT, S UCH AS THE ASSESSEE HAS NEITHER DEPOSITED I.T.A. NO S . 1 549 & 1 629 /M/ 15 5 THE AMOUNT CAPITAL GAINS ACCOUNTS SCHEME NOR DID HE PURCHASED/ CONSTRUCTED A HOUSE PROPERTY BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME NOR THERE WAS ANY HABITABLE HOUSE IN EXISTENCE BY THE DUE DATE OF FILING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT, THE ENTIRE CAPITAL GAINS EXEMPTION CLAIMED BY THE ASSESSEE WAS BROUGHT TO TAX. 6.1 DURING T HE COURSE OF APPELLATE PROCEEDINGS , AFTER EXAMINING THE DETAILS AS FILED BEFORE THE ASSESSING OFFICER, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS UTILISED AN AMOUNT OF .65,08,766/ - ( . 28,17,524 (ADVANCE GIVEN ON 04.02.2011) + .36,91,242/ - ) BEFORE THE D UE DATE OF FILING OF THE RETURN U NDER SECTION 139(1) OF THE ACT ON OR BEFORE 31.07.20 12 . THE REMAINING PAYMENT S . 89,66,359/ - ( LTCG OF .1,54,75,125/( - ) .65,08,766/ - (AMOUNT UTILISED BEFORE 31.07.20 12 ) WAS MADE BY THE ASSESSEE AFTER 31.07.2012. SINCE T HE ASSESSEE HAS NOT DEPOSITED THE BALANCE AMOUNT OF .89,66,359/ - , IN THE SPECIFIED CAPITAL GAINS ACCOUNT SCHEME , THE LD. CIT(A) HAS RESTRICTED TO THE EXTENT THE AMOUNT UTILIZED BEFORE THE D UE DATE OF FILING OF THE RETURN U NDER SECTION 139(1) OF THE ACT AN D CONFIRMED THE ADDITION OF BALANCE AMOUNT OF .89,66,359/ - . 6.2 THE ASSESSEE CLAIMED EXEMPTION U NDER SECTION 54 OF THE ACT AT .1,08,67, 007/ - BEING INVESTMENT MADE IN A FLAT AT PUNE ALONG WITH HIS WIFE SMT. M. LAKSHMI. FOR PURCHASING THE ABOVE PROPERTY, THE ASSESSEE HAS ENTERED INTO CONSTRUCTION AGREEMENT AND AGREEMENT FOR LAND PURCHASE DATED 03.02.2011 WITH M/S. SOBHA DEVELOPERS (PUNE) LTD., AND PAID ADVANCE OF I.T.A. NO S . 1 549 & 1 629 /M/ 15 6 .2 8 ,17,524/ - ON 04.02.2 011. THE ASSESSEE FURNISHED COPY OF THE ABOVE DOCUMENTS BEFORE THE AU THORITIES BELOW AS WELL AS FILED BEFORE THE TRIBUNAL. WE HAVE PERUSED VARIOUS DOCUMENTS FURNISHED IN THE FORM OF PAPER BOOK AND WHILE DOING SO, AS PER CLIENT LEDGER SUMMARY REPORT, THE ASSESSEE HAS PAID THE FOLLOWING AMOUNT TO THE BUILDER: DATE AMOUNT DE TAILS 07.01.2011 3,00,000.00 CHEQUE NO. 789583; CITI BANK 04.02.2011 28,17,524.00 DD NO. 813473; ING VYSYA BANK 08.12.2011 10,39,175.00 DD NO. 467246; ING VYSYA BANK 16.04.2012 2,86,860.00 DD NO. 009271; ING VYSYA BANK 03.05.2012 10,39,175.00 DD NO. 7 94591; ING VYSYA BANK 10.07.2012 10,39,175.00 DD NO. 794918; ING VYSYA BANK 07.11.2012 10,39,175.00 DD NO. 009754; HDFC 21.01.2013 10,41,225.00 DD NO. 000143; HDFC 22.04.2013 10,39,246.00 DD NO. 000396; HDFC 24.09.2013 5,19,587.00 DD NO. 000878; HDFC 28.11.2013 5,19,587.00 DD NO. 453885; HDFC REGISTRATION CHARGES 1,86,278.00 TOTAL 1,08,67,007.00 6.3 THE ASSESSEE HAS BEEN ISSUED LETTER OF ALLOTMENT OF FLAT NO. A2 - 1063 AT SOBHA FOREST VIEW - OAK VIDE LETTER DATED 07.01.2011 OF THE BUILDER. CONSIDER ING THE DATE OF INVESTMENTS AND PROVISIONS OF LAWS , FOLLOWING DETAILS HAVE BEEN NOTED AS UNDER: - (I) DATE OF TRANSFER OF ORIGINAL ASSET : 03.02.2012 (II) ASSESSEE S SHARE : .2,70,00,000/ - (III) LTCG ARRIVED : .1,54,75,125/ - (IV) DUE DATE OF FILING RETURN FOR THE ASSESSMENT YEAR 2012 - 13 : 31.07.2012 (V) DATE OF CONSTRUCTION AGREEMENT & AGREEMENT FOR LAND PURCHASE : 03.02.2011 (VI) DUE DATE OF FILING OF BELATED RETURN UNDER SECTION 139(4) OF THE ACT : 31.03.2014 I.T.A. NO S . 1 549 & 1 629 /M/ 15 7 THE PROVISIONS OF SECTION 54 OF T HE ACT ARE BENEFICIAL AND ARE TO BE CONSIDERED LIBERALLY FOR REASONABLE BONAFIDE CAUSE BUT INVESTMENT IN RESIDENTIAL PROPERTY IS MANDATORY WHICH THE ASSESSEE HAS PROVED WITH SUBSTANTIAL EVIDENCE BEFORE THE LOWER AUTHORITIES. PRIME FACIE , THE TOTAL AMOUNT P AID FOR ACQUISITION OF NEW FLAT GOT CONSTRUCTED THROUGH THE BUILDER MUCH BEFORE THE EXTENDED DUE DATE U NDER SECTION 139(4) OF THE ACT. THE ASSESSEE HAS DIRECT INVESTMENT IN HOUSE PROPERTY AND THEREFORE NOT OPTED IN CAPITAL GAIN ACCOUNT SCHEME. THE LD. COUN SEL FOR THE ASSESSEE HAS FURTHER SUBSTANTIATED ARGUMENTS WITH JUDICIAL DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. R.L. SOOD 245 ITR 727 (DEL) WERE THE DATE OF AGREEMENT TO PURCHASE SHOULD BE TAKEN AS THE DATE OF PURCHASE. ON APPLYING THE RATIO TO CURRENT CIRCUMSTANCES, THE ASSESSEE ENTERED INTO CONSTRUCTION AGREEMENT AND AGREEMENT FOR LAND PURCHASE ON 03.02.2011, WHICH WAS NOT AT ALL DISPUTED BY THE DEPARTMENT, VERY MUCH BEFORE PROVISIONS OF S EC TION 139( 1 ) OF THE ACT. IN THE CASE OF JAGTAR SINGH CH AWLA OF PUNJAB AND HARYANA HIGH COURT IN ITA NO.71 OF 2012, DATED 20.03.2013 THE ASSESSEE HAS PAID SUBSTANTIAL AMOUNT FOR PURCHASE OF RESIDENTIAL PROPERTY BEFORE THE EXTENDED DUE DATE OF FILING OF RETURN AND THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION AND NOT LIABLE TO PAY ANY CAPITAL GAIN TAX. 6.4 THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER RELIED ON THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF SHRI A.C. SHYAM SUNDAR V. JCIT IN I.T.A. NO. 2279/MDS/2015 DATED 06.05.2016, WHEREIN, THE A SSESSEE WAS ALLOWED LTCG UNDER SECTION 54F OF THE ACT ON SIMILAR FACTS AND CIRCUMSTANCES. CONSIDERING THE FACTUAL ASPECTS, GENUINE NE SS OF TRANSACTIONS I.T.A. NO S . 1 549 & 1 629 /M/ 15 8 AND BENEFICIAL AND LIBERAL ASPECTS OF THE PROVISIONS AND THE JUDICIAL DECISIONS RELIED BY THE ASSESSEE , W E ARE OF THE OPINION THAT ASSESSEE COMPLIED THE CONDITIONS AND IS ELIGIBLE FOR EXEMPTION U NDER SECTION 54 OF THE ACT. THUS, W E SET ASIDE THE ORDER OF LD. CIT(A) RESTRICTING THE EXEMPTION CLAIMED BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT THE FULL LTCG EXEMPTION UNDER SECTION 54 OF THE ACT , WHICH WAS INVESTED IN THE RESIDENTIAL PROPERTY BEFORE DUE DATE U NDER SECTION 139(4) OF THE ACT AND ALLOW THE GROUNDS OF THE ASSESSEE. 6.5 SINCE WE HAVE ALLOWED THE GROUNDS RAISED BY THE ASSESSEE WITH REGAR D TO THE CLAIM OF LTCG EXEMPTION UNDER SECTION 54 OF THE ACT BY SETTING ASIDE THE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE APPEAL FILED BY THE REVENUE AGAINST THE RESTRICTION OF THE DISALLOWANCE IS NOT MAINTAI NABLE AND THUS, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 03 RD APRIL, 2017 AT CHENNAI. SD/ - SD/ - ( CHANDRA PO OJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 03 . 0 4 .201 7 VM/ - I.T.A. NO S . 1 549 & 1 629 /M/ 15 9 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.