ITO, New Delhi V. Shri Joginder Pal, New Delhi

ITA 3135/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3508 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANEESH BAHUGUNA
• Keywords: Capital asset; Additional evidence; Set aside
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AN D SHRI RAJPAL YADAV, JUDICIAL MEMEBR I.T.A NO. 3135/DEL/09 ASSTT. YEAR 2005-06 THE INCOME TAX OFFICER, WARD 25(1) NEW DELHI. VS. SHRI JOGINDER PAL 297, DEEPALI, PITAMPURA, DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANEESH BAHUGUNA, SR. DR RESPONDENT BY: SHRI SALIL AGGARWAL, ADVOCATE ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT (A) DATED 2 ND APRIL, 2009 PASSED FOR ASSTT. YEAR 2005-06. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A ) HAS ERRED IN DELETING THE ADDITION OF RS. 49.02 LACS BY ENTERTAI NING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES 1962. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE I S AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME ON 1 ST AUGUST, 2005 DECLARING AN ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 2 INCOME OF RS. 2,10,928/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 143 (2) OF THE ACT WAS ISSUED ON 26.7.2006 WHICH WAS DULY SERVED UPON THE ASSESSE E. SHRI SANJEEV KAPOOR, CA APPEARED ON BEHALF OF THE ASSESS EE AND SUBMITTED THE REQUISITE DETAILS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDING ON S CRUTINY OF THE DETAILS LD. AO FOUND THAT ASSESSEE HAD NOT OFFE RED ANY INCOME ON ACCOUNT OF CAPITAL GAIN ON SALE OF AGRICU LTURAL LAND. HE HAS ONLY MENTIONED THAT A SUM OF RS. 46.1 LAC WAS I NVESTED IN CANARA BANK CAPITAL GAIN TAX ACCOUNT IN JULY, 2005. ACCORDING TO THE AO ASSESSEE HAS NOT ENCLOSED ANY PROOF OF INVES TMENT WITH THE RETURN. IN ORDER TO DETERMINE WHETHER ANY TAX L IABILITY ON ACCOUNT OF SALE OF AGRICULTURAL LAND HAS ESCAPED AS SESSMENT AND ALSO TO VERIFY THE CLAIM OF EXEMPTION OF SUCH CAPIT AL GAIN, THE AO SOUGHT THE APPROVAL OF ADDITIONAL CIT, RANGE 25 AND ISSUED A NOTICE TO THE ASSESSEE. IN RESPONSE TO THE QUERY OF AO IT WAS CONTENDED BY THE ASSESSEE THAT HE HAS PURCHASED A P IECE OF AGRICULTURAL LAND AT LUMPUR ON 19 TH JULY, 1988 FOR CONSIDERATION OF RS. 1,73,958/-. HE HAS SPENT RS. 50,000/- ON THE CO NSTRUCTION OF ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 3 BOUNDARY WALL, THEREBY THE COST OF THE LAND FOR THE PURPOSE OF THE COMPUTATION OF CAPITAL GAIN COMES OUT TO RS. 2,23,9 58/-. THIS LAND WAS SOLD FOR AN AMOUNT OF RS. 54,62,500/- ON 24 TH FEBRUARY, 2005. IT EMERGES OUT FROM THE ASSESSMENT ORDER THAT ASSESSEE MADE TWO FOLD SUBMISSION BEFORE THE AO. HE FIRSTLY CONTENDED THAT BEING AN AGRICULTURAL LAND IT DID NOT FALL WITHIN THE AMBIT OF DEFINITION OF CAPITAL ASSET AS PROVIDED IN SECTION 2 (14) OF THE INCOME TAX ACT. ALTERNATIVELY ASSESSEE CONTENDED THAT SALE PROCEEDS WERE DEPOSITED IN SAVING BANK ACCOUNT WITH HDFC. THE ASS ESSEE HAD OPENED A NEW CAPITAL GAIN SCHEME ACCOUNT WITH CANAR A BANK ON 7 TH JULY, 2005 BY MAKING INITIAL DEPOSIT OF RS. 10,000 /-. THE ASSESSEE FURTHER ISSUED THREE CHEQUES TOTALLING TO RS. 46,14,885/- FROM ITS HDFC BANK ACCOUNT AND DEPOSITED THEM INTO THE NEWLY OPENED CAPITAL GAIN SCHEME ACCOUNT WITH CANARA BANK . THE ASSESSEE CLAIMED EXEMPTION U/S 54F OF THE ACT ON TH E GROUND THAT CAPITAL GAIN AROSE TO HIM ON ACCOUNT OF SALE OF AGR ICULTURAL LAND HAS BEEN DEPOSITED IN A CAPITAL GAIN SCHEME WITH CA NARA BANK. THIS AMOUNT WAS USED FOR THE PURCHASE OF LAND FOR C ONSTRUCTION OF A NEW HOUSE. THE LAND WAS PURCHASED ON 21 ST FEBRUARY, 2007 FOR A ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 4 CONSIDERATION OF RS. 27,52,000/-. THE REMAINING AMO UNT HAS BEEN USED TOWARDS THE CONSTRUCTION OF A HOUSE. THE AO RE JECTED THE CONTENTION OF ASSESSEE ON THE GROUND THAT LAND SOLD BY THE ASSESSEE IS A CAPITAL ASSET BECAUSE ASSESSEE COULD NOT BRING ANY EVIDENCE ON THE RECORD INDICATING THE FACT THAT IT FALLS IN EXCEPTION CLAUSE OF SECTION 2 (14). THE SECOND FOLD OF SUBMISSION HAS BEEN REJECTED ON THE GROUND THAT ASSESSEE FAILE D TO ENCLOSE THE EVIDENCE EXHIBITING THE DEPOSIT OF CAPITAL GAIN IN A CAPITAL GAIN ACCOUNT ALONG WITH THE RETURN. ACCORDING TO TH E AO AS PER SUB SECTION 4 OF 54F ASSESSEE OUGHT TO HAVE ENCLOSE SUCH EVIDENCE WITH THE RETURN. IN THIS WAY AO HAS TAXE D THE CAPITAL GAIN AROSE TO THE ASSESSEE ON ACCOUNT OF SALE OF AG RICULTURAL LAND. 4. DISSATISFIED WITH THE ASSESSMENT OF CAPITAL GAIN BY THE AO ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT (A). HE REITERATED HIS CONTENTION AS WERE RAISED BEFORE THE AO. WITH A VIEW TO BUTTERACE HIS CONTENTION ASSESSEE HAS PROD UCED COPY OF THE SALE DEED DATED 24 TH FEBRUARY, 2005, PASS BOOK OF CAPITAL GAIN ACCOUNTS, FD RECEIPTS WITH THEIR PAY IN SLIPS, PURC HASE DEED DATED 21 ST FEBRUARY, 2007 CERTIFICATE FROM BANK REGARDING OP ENING OF ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 5 CAPITAL GAIN SCHEME ACCOUNT . LD. CIT(A) ON A DETAI LED ANALYSIS OF THE FACT AND ABOVE DOCUMENTARY EVIDENCE ARRIVED AT A CONCLUSION THAT ASSESSEE HAS DULY FULFILLED THE CON DITION ENUMERATED IN SECTION 54F OF THE ACT AND THEREFORE, HE IS ENTITLED FOR EXEMPTION UNDER THIS SECTION. LD. CIT(A) FURTHE R OBSERVED THAT OBSERVATION OF THE AO THAT ASSESSEE HAS NOT SATISFI ED CONDITIONS OF INVESTING THE SALE CONSIDERATION, EITHER FOR PURCHA SE OF RESIDENTIAL HOUSE, IS A PRE MATURED AND UNFOUNDED ONE, BECAU SE ACCORDING TO THE LD. CIT(A) THE TIME LIMIT FOR CONS TRUCTION OF HOUSE IS OF 3 YEARS AND SUCH TIME LIMIT HAD NOT OVER EVEN UPTO THE TIME OF COMPLETION OF ASSESSMENT PROCEEDING. LD. CIT(A) RECORDED A FINDING OF FACT THAT PURCHASE DEED WAS EXECUTED ON 21 ST FEBRUARY, 2007 AND ASSESSEE HAS COMPLETED THE CONSTRUCTION ON 24 TH FEBRUARY, 2008. THE ASSESSEE HAS PRODUCED THE BANK PASS BOOK INDICATING THE WITHDRAWALS OF FUNDS FROM THE BANK A CCOUNT FOR THAT PURPOSE . SIMILARLY LD. CIT(A) HAS RECORDED A FINDING OF FACT THAT ASSESSEE HAS ESTABLISHED THE INVESTMENT IN THE CAPITAL GAIN SCHEME BY PRODUCING RELEVANT MATERIAL. ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 6 5. LD. DR RELIED UPON THE ORDER OF LD. AO. HE SUBMI TTED THAT ASSESSEE HAS NO INTENTION TO ACCOUNT THE ALLEGED CA PITAL GAIN FOR THE PURPOSE OF INCOME TAX. SUCH AN INTENTION IS DIS CERNABLE FROM THE FACT THAT AT THE FIRST INSTANCE ASSESSEE DID NO T TREAT THE AGRICULTURAL LAND OWNED AND SOLD BY HIM AS A CAPITA L ASSET. ACCORDING TO THE ASSESSEE HIS AGRICULTURAL LAND DI D NOT FALL WITHIN THE AMBIT OF DEFINITION OF CAPITAL ASSET PROVIDED I N SECTION 2 (14) OF THE INCOME TAX ACT. NO DOUBT SECTION 2 (14) PROVIDE EXCLUSION OF AGRICULTURAL LAND FROM THE AMBIT OF CAPITAL ASSET FOR THE PURPOSE OF THE INCOME TAX ACT BUT THERE ARE CERTAIN EXCEPTI ON TO SUCH EXCLUSION AND THE CASE OF ASSESSEE DULY FALL WITHIN THOSE EXCEPTION. HIS LAND WAS NOT SITUATED AT THE DISTANC E OF MORE THAN 8 KM FROM THE LOCAL LIMIT OF ANY MUNICIPALITY OR C ANTONMENT BOARD. SIMILARLY ASSESSEE FAILED TO ESTABLISH THAT THE LAND OF ASSESSEE WAS NOT COMPRISING WITHIN THE JURISDICTION OF A MUNICIPALITY , MUNICIPAL CORPORATION TOWN AREA ETC . WHICH HAS A POPULATION OF NOT LESS THEN RS. 10,000/-. THE SECON D VERSION OF EXEMPTION U/S 54 IS AN AFTER THOUGHT. THE ASSESSEE COULD NOT BRING EVIDENCE ON THE RECORD ESTABLISHING THE COMPLETION OF ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 7 CONSTRUCTION. THEREFORE HE IS NOT ENTITLED FOR THE EXEMPTION AS CLAIMED. LD. DR FURTHER CONTENDED THAT LD. IT(A) HA S ENTERTAINED FRESH EVIDENCE IN THE SHAPE OF BANK PASS BOOK, CERT IFICATE INDICATING THE COMPLETION OF CONSTRUCTION FROM A QU ALIFIED ARCHITECTURE ETC.. HE HAS NOT PROVIDED ANY OPPORTUN ITY OF HEARING TO THE AO. HENCE THE EVIDENCE TAKEN B Y THE LD. CIT (A) FOR THE FIRST TIME DURING APPELLATE PROCEEDINGS DESERVES TO BE IG NORED AS PER THE CONDITIONS PROVIDED IN SUB RULE 3 OF RULE 46A O F INCOME TAX RULES 1962. 6. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND R ELIED UPON THE ORDER OF LD. CIT(A). HE POINTED OUT THAT ASSESS EE HAS SUPPLIED ALL NECESSARY DETAILS TO THE AO . THE CLAIM OF EXEM PTION U/S 54F IS NOT AN AFTER THOUGHT RATHER A NOTE WAS DULY APPENDE D IN THE RETURN ITSELF. THE ASSESSEE HAS MADE A MENTION IN T HE INCOME TAX RETURN ITSELF THAT RS. 46.1 LAC WAS INVESTED IN THE CANARA BANK IN CAPITAL GAIN TAX ACCOUNT IN JULY 2005. THUS THERE I S NO MERIT IN THE CONTENTION OF LD. DR THAT IT IS AN AFTER THOUGHT CL AIM. THE AO HAS REJECTED THE CLAIM OF ASSESSEE NOT ON ACCOUNT OF NO N SUBMISSION OF THE DETAILS EXHIBITING THE INVESTMENT IN THE CAP ITAL GAIN TAX ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 8 ACCOUNT WITH THE CENTRAL BANK, RATHER HE DENIED THE EXEMPTION TO THE ASSESSEE ON THE GROUND THAT SUB SECTION 4 OF SE CTION 54 PROVIDED ENCLOSURE OF SUCH EVIDENCE OF INVESTMENT W ITH THE RETURN ITSELF. THE ASSESSEE FAILED TO SUBMIT SUCH ENCLOSUR ES WITH THE RETURN AND THEREFORE AO HAS DENIED THE EXEMPTION TO THE AS SESSEE. LD. COUNSEL FOR THE ASSESSEE CONCEDED THAT IN SUB SECTI ON 4 IT HAS BEEN PROVIDED THAT RETURN OF AN ASSESSEE CLAIMING E XEMPTION U/S 54 F ON ACCOUNT OF INVESTMENT IN ANY SCHEME SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT. ASSESSEE HAS DISCLOSED THE ACCOUNT NUMBER AND THE BANK WHERE HE HAS MADE T HE DEPOSIT. DURING THE ASSESSMENT PROCEEDINGS ASSESSEE HAS ELABORATED SUCH DEPOSITS AND AO COULD EASILY VERIFY THE CLAIM. THE LD. CIT(A) HAS VERIFIED THIS CLAIM ON FURNISHIN G THE DETAILS FROM THE BANK. CANARA BANK IS A PUBLIC SECTOR UNDERTAKIN G. IT IS IN ANY WAY INTERESTED EITHER TO HELP THE ASSESSEE OR TO TH E REVENUE. IT HAS ISSUED THE PASS BOOK AND OTHER RELEVANT DETAILS IN THE COURSE OF ORDINARY BUSINESS WHICH HAVE BEEN PRODUCED BEFORE T HE LD. CIT(A). IT IS NOT THE CASE THAT ASSESSEE HAS PRODUC ED EVIDENCE FROM THE POSSESSION OF ANY PARTY WHICH CAN BE FABR ICATED OR ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 9 CONSTRUCTED AFTER THE ASSESSMENT ORDER. LD. CIT(A) IS AN AUTHORITY ON HIGHER PEDESTAL IN THE TAX ADMINISTRATION. IT IS THE FIRST APPELLATE AUTHORITY AS WELL AS HAS THE COTERMINOUS POWER OF THE AO. HE HAS EXAMINED ALL THESE FACTS AND ONLY THEREAFTER ACCEPT ED THE CLAIM OF ASSESSEE. NO FRUITFUL PURPOSE WILL BE SERVED EX CEPT INCREASING MULTIPLICITY OF LITIGATION IF ISSUE IS SET ASIDE T O THE FILE OF AO. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTION AND GO NE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO FACT THAT ASSESSEE HAD PURCHASED A PIECE OF LAND ON 19 TH JULY 1988 FOR A CONSIDERATION OF RS. 173958/-. HE HAS SP ENT RS. 50,000/- ON THE CONSTRUCTION OF BOUNDARY WALL. HE HAS SOLD THIS AGRICULTURAL LAND FOR A CONSIDERATION OF RS. 54,62,000/- ON 20 TH FEBRUARY, 2005. IT IS ALSO NOT DISPUTED BY ASSESSEE BEFORE US THAT IT IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2 (14) OF ACT. THE O NLY AREA OF DISPUTE BETWEEN ASSESSEE AND THE AO IS WHETHER CA PITAL GAIN WAS DEPOSITED BY THE ASSESSEE IN ANY CAPITAL GAIN A CCOUNT SCHEME AND SUCH CAPITAL GAIN WAS UTILISED FOR THE PURCHASE OF A HOUSE WITHIN ONE YEAR, OR HE HAS CONSTRUCTED A NEW HOUSE WITHIN THREE YEARS FROM THE DATE OF SALE OF CAPITAL ASS ET. AO IN ASSTT. ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 10 ORDER HAS OBSERVED THAT ASSESSEE FAILED TO ENCLOSE THE PROOF OF DEPOSITS IN A CAPITAL GAIN SCHEME OF CANARA BANK. LD. CIT(A) HAS VERIFIED ALL THESE ASPECTS AND SATISFIED THAT ASSES SEE HAS MADE THE DEPOSITS IN BANK WITHIN THE TIME LIMIT. HE HAS UTI LISED SUCH CAPITAL GAIN FOR CONSTRUCTION OF A HOUSE WHICH HAS BEEN COM PLETED ON 24 TH FEBRUARY 2008 I.E WITHIN THREE YEARS FROM THE SA LE OF CAPITAL ASSET. LD. DR IN HIS ARGUMENT HAS TRIED TO EXTEND T HE SCOPE OF INVESTIGATION BY AO ON THE GROUND THAT ASSESSEE HA S NOT DISCLOSED SUCH DETAILS. WE FIND THAT IN INCOME TAX RETURN ITSELF ASSESSEE HAS APPENDED A NOTE THAT SUM OF RS. 46.1 L AC WAS INVESTED IN CANARA BANK CAPITAL GAIN TAX ACCOUNT. T HIS FACT HAS DULY BEEN NOTICED BY THE AO HIMSELF IN PARAGRAPH NU MBER 3 ON PAGE 1. ASSESSEE THEREAFTER MADE A DETAILED SUBMIS SION WITH REGARD TO HIS CLAIM U/S 54F AND HAS DULY DISCLOSED ABOUT HIS INVESTMENT WITH CAPITAL GAIN ACCOUNT SCHEME OF CANA RA BANK. THE CONTENTION OF ASSESSEE HAS NOT BEEN REJECTED B Y AO ON GROUND THAT ASSESSEE FAILED TO FURNISH THE EVIDENCE OF DEPOSITS DURING ASSTT. PROCEEDING RATHER THIS CONTENTION HA S BEEN REJECTED FOR THE REASON THAT SUCH EVIDENCE WAS NOT ENCLOSED WITH THE ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 11 RETURN AS CONTEMPLATED IN SUB SECTION 4 TO SECTION 54F. LD. CIT(A) HAS OBSERVED THAT ASSESSMENT ORDER WAS PASSED ON 12 .12.2007 ASSESSEE HAS STILL A TIME LAG UPTO 24.2.2008 TO COM PLETE THE CONSTRUCTION. THE DEVELOPMENT SUBSEQUENT TO PASSIN G OF THE ASSTT. ORDER CAN BE FURNISHED TO LD. CIT(A). FROM ASSTT. ORDER IT APPEARS THAT AO WAS NOT VERY MUCH INTERESTED IN CON DUCTING THIS INQUIRY BECAUSE HE SIMPLY REFUSED TO CONSIDER THIS FOLD OF SUBMISSION ON THE GROUND THAT ALONGWITH THE RETUR N EVIDENCE OF DEPOSITING THE AMOUNT IN CANARA BANK WAS NOT ENCLOS ED. TAKING INTO CONSIDERATION THE DETAILED ORDER OF LD. CIT(A ) WE DO NOT FIND ANY SPECIFIC VIOLATION OF RULE 46A BECAUSE ALL THES E DETAILS WERE SUBMITTED TO THE AO ALSO AND WE DO NOT FIND ANY MER IT IN THE APPEAL OF THE REVENUE IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.7.2010. SD/- [G.E. VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED: 23.7.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT ITA NO. 3135/DEL/2009 ASST T. YEAR 2005-06 12 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT