Shri. Praveen kumar, Bengaluru V. Assistant Commissioner of Income-Tax, Circle-3(2)(1), Bengaluru

ITA 3344/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1093 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-03-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 18-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR JCIT BENGALURU
• Assessee Lawyers: LOKESH JAIN
• Keywords: Capital asset; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Capital Gains
• Section: 54F; 234B; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 3 344 /BANG/201 8 ASSESSMENT YEAR : 2013-14 SHRI. PRAVEEN KUMAR, NO.222, K. H. RANGANATHA COLONY MAIN ROAD, OPP BHEL MYSORE ROAD, BENGALURU 560 040. PAN : A DDPK 6151 G VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(2)(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. LOKESH JAIN, CA REVENUE BY : SHRI. A. RAMESH KUMAR, JCIT (DR)(ITAT), BENGALURU DATE OF HEARING : 0 3 . 0 3 .20 20 DATE OF PRONOUNCEMENT : 29 . 0 5 .20 20 O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-3, BENGALURU, DATED 29.10.2018, FOR ASSESSMENT YEAR 2013-14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)('CIT(A)') IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. ITA NO. 3344/BANG/2018 PAGE 2 OF 7 3. THE ORDER IS PASSED AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER ['LD. AO'] OF RS. 65,54,597/- BY DISALLOWING THE EXEMPTION CLAIMED U/S. 54 & 54F OF THE INCOME TAX ACT, 1961. 5. THE LD. CIT(A) AND LD. AO HAS FAILED TO CONSTRUED THE PROVISION OF SECTION 54 & 54F OF INCOME TAX ACT, 1961. 6. THE LD. CIT(A) ERRED IN NOT FOLLOWING THE DIRECTIONS OF LD. PCIT AND PASSED THE ORDER AGAINST THE PRINCIPLE OF NATURAL JUSTICE DESPITE THE APPELLANT HAD PROVIDED PLAUSIBLE EXPLANATION WITH ALL THE SUPPORTING DOCUMENTS FOR THE CLAIM OF EXEMPTION U/S. 54 & 54F OF THE ACT. 7. THE LD. CIT(A) AND LD. AO ERRED IN NOT OBEYING THE DIRECTIONS OF LD. PCIT IN HIS ORDER U/S. 263 TO EXAMINE THE TRANSACTION AND PASS THE ORDER IN ACCORDANCE WITH LAW AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND THUS THE ORDER PASSED BY THE LD. AO IS LIABLE TO BE QUASHED. 8. THE LD. CIT(A) HAD FAILED TO ADJUDICATE THIS GROUND STATING THE SAME BECOME ACADEMIC IN NATURE AND LD. AO ERRED IN CONCLUDING THAT THE APPELLANT HAS CONSTRUCTED A BUILDING CONSISTING OF THREE INDEPENDENT RESIDENTIAL UNITS AND NOT A SINGLE RESIDENTIAL HOUSE. 9. THE LD. CIT(A) HAD FAILED TO ADJUDICATE THIS GROUND STATING THE SAME BECOME ACADEMIC IN NATURE AND THE LD. AO HAD FAILED TO COGNIZANCE THE PRINCIPLES LAID IN THE PROVISIONS OF SECTION 54F(4) OF THE ACT BY STATING THAT THE APPELLANT HAD NOT DEPOSITED THE AMOUNT IN CAPITAL GAINS ACCOUNT AND VIOLATED THE CONDITIONS STIPULATED U/S. 54F TO AVAIL THE EXEMPTION OF CAPITAL GAIN WHEREAS THE INVESTMENT IN RESIDENTIAL PROPERTY HAS BEEN MADE DURING THE FINANCIAL YEAR ITSELF. 10. BOTH LD. CIT(A) AND LD. AO ERRED IN DISALLOWING THE EXEMPTION U/S. 54 & 54F OF THE ACT ON THE GROUNDS THAT THE CONSTRUCTION OF THE RESIDENTIAL PROPERTY WAS NOT COMPLETED WITHIN THREE YEARS FROM THE DATE OF TRANSFER. 11. BOTH LD. CIT(A) AND LD. AO ERRED IN NOT TAKING COGNIZANCE OF THE PRINCIPLES ARISING OUT OF THE FOLLOWING DECISIONS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS: ITA NO. 3344/BANG/2018 PAGE 3 OF 7 I. SRI. SAMBANDAM UDAY KUMAR (KARNATAKA HIGH COURT) (ITA NO. 175/2012); II. SMT. B. S. SHANTHAKUMARI (KARNATAKA HIGH COURT) (ITA NO. 165/2014); 12. THE LD. CIT(A) HAS ERRED IN STATING THAT THE APPELLANT HAS PURCHASED THE RESIDENTIAL PLOT WITHOUT ANY INTENTION TO CONSTRUCT A RESIDENTIAL HOUSE ON THE SAME DESPITE THE APPELLANT HAD PROVIDED PLAUSIBLE EXPLANATION WITH ALL THE SUPPORTING DOCUMENTS. 13. FURTHER, THE LD. CIT(A) HAS ERRED IN STATING THAT IN CASE OF THE APPELLANT THE CONSTRUCTION ACTIVITY HAD NOT EVEN STARTED DURING THE STIPULATED PERIOD OF THREE YEARS DESPITE THE APPELLANT HAD PROVIDED PLAUSIBLE EXPLANATION WITH ALL THE SUPPORTING DOCUMENTS. 14. THE LD. CIT(A) HAD FAILED TO ADJUDICATE THIS GROUND AND THE LD. AO ERRED IN LEVYING INTEREST UNDER SEC. 234B AND 234C OF THE ACT. 2. WE FIND THAT ALTHOUGH THE ASSESSEE HAS RAISED AS MANY 14 GROUNDS OF APPEAL BUT THE ONLY ISSUE IN DISPUTE IS REGARDING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.65,54,597/-UNDER SECTIONS 54 AND 54F OF THE INCOME TAX ACT, 1961. AS PER THE ASSESSMENT ORDER, THIS DISALLOWANCE WAS MADE BY THE AO ON THIS BASIS THAT THE ASSESSEE HAS PURCHASED / CONSTRUCTED MULTIPLE RESIDENTIAL UNITS WHEREAS AS PER THE SECTION, DEDUCTION IS ALLOWABLE ONLY IF THERE IS CONSTRUCTION / PURCHASE OF ONE RESIDENTIAL HOUSE. THE SECOND REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR MAKING THIS DISALLOWANCE IS THAT THE AMOUNT WAS NOT DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME AS PER SUBSECTION (4) OF SECTION 54F. THE THIRD REASON GIVEN BY THE AO IN THE ASSESSMENT ORDER IS THIS THAT THE CONSTRUCTION WAS NOT COMPLETED WITHIN 3 YEARS. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LEARNED CIT(A), LEARNED CIT(A) CONFIRMED THE ORDER OF AO AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO. 3344/BANG/2018 PAGE 4 OF 7 3. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT AS PER PAGE 7 OF THE WRITTEN SUBMISSIONS FILED BY HIM, THESE DETAILS ARE AVAILABLE AS TO HOW MUCH WAS THE SALE CONSIDERATION RECEIVED, HOW MUCH WAS THE INDEXED COST OF ACQUISITION AND HOW MUCH WAS THE LONG TERM CAPITAL GAIN (LTCG) AND HOW MUCH DEDUCTION IS CLAIMED BY THE ASSESSEE. HE POINTED OUT THAT THE ASSESSEE SOLD A FLAT AT KT APARTMENT FOR RS.60 LAKHS AND FOR THIS FLAT, THE INDEXED COST OF ACQUISITION WAS RS.49,63,159/- RESULTING INTO LTCG OF RS.10,36,841/- AND THE ASSESSEE CLAIMED DEDUCTION OF THIS AMOUNT UNDER SECTION 54 OF THE IT ACT AND THE SECOND LONG TERM CAPITAL ASSET SOLD BY THE ASSESSEE IS A SITE AT KAMAKSHIPALYA WHICH WAS SOLD FOR RS.57 LAKHS AND ITS INDEXED COST OF ACQUISITION WAS RS.1,82,244/- RESULTING INTO LTCG OF RS.55,17,756/- AND THE ASSESSEE CLAIMED DEDUCTION OF THIS AMOUNT UNDER SECTION 54F OF THE IT ACT. HE POINTED OUT THAT IN THIS MANNER, FOR SELLING BOTH THE LONG TERM CAPITAL ASSETS, THE TOTAL SALE CONSIDERATION WAS RS.117 LAKHS AND TOTAL LTCG WAS 65,54,597/- AND THE ASSESSEE CLAIMED DEDUCTION PARTLY UNDER SECTION 54 AND PARTLY UNDER SECTION 54F OF THIS AMOUNT OF LTCG RS.65,54,597/-. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. CIT VS. SAMBANDAM UDAYKUMAR IN ITA NO.175/2012 DATED 15.02.2012, COPY AVAILABLE ON PAGES 178 TO 182 OF THE PAPER BOOK AND HE POINTED OUT THAT IN THIS CASE, IT WAS HELD BY HONBLE KARNATAKA HIGH COURT THAT THE INTENTION OF THE LEGISLATURE WAS TO ENCOURAGE INVESTMENTS IN THE ACQUISITION OF RESIDENTIAL HOUSE AND COMPLETION OF CONSTRUCTION / OCCUPATION IS NOT THE REQUIREMENT OF LAW AND THE ONLY REQUIREMENT IS THIS THAT THE ASSESSEE SHOULD MAKE INVESTMENTS IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTION OF THE RESIDENTIAL HOUSE AND MERELY BECAUSE THE CONSTRUCTION WAS NOT COMPLETE IN ALL ASPECTS AND IT WAS NOT IN A FIT CONDITION TO BE OCCUPIED WITHIN THE PERIOD STIPULATED, THAT WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE BENEFIT UNDER SECTION 54F OF THE INCOME TAX ITA NO. 3344/BANG/2018 PAGE 5 OF 7 ACT, 1961. HE SUBMITTED THAT THEREFORE, THIS OBJECTION OF THE AO IS NOT VALID AS PER THIS JUDGMENT OF HONBLE KARNATAKA HIGH COURT. HE ALSO PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF VENKATA RAMANA UMAREDDY VS. DCIT IN ITA NO.552/HYD/2012 DATED 31.01.2012, COPY AVAILABLE ON PAGES 218 TO 222 OF THE PAPER BOOK AND HE POINTED OUT THAT IN THIS CASE, IT WAS HELD BY THE TRIBUNAL THAT SECTIONS 54 AND 54F APPLY UNDER DIFFERENT SITUATIONS BUT THE REQUIREMENT FOR AVAILING EXEMPTION UNDER THESE TWO SECTIONS IS PURCHASE / CONSTRUCTION OF A NEW RESIDENTIAL HOUSE WITHIN THE STIPULATED PERIOD AND THERE IS NO SPECIFIC BAR EITHER UNDER SECTION 54 AND 54F OR ANY OTHER PROVISIONS OF THE INCOME TAX ACT PROHIBITING DISALLOWANCE OF EXEMPTIONS UNDER BOTH THE SECTIONS IN CASE THE CONDITIONS OF THE PROVISIONS ARE FULFILLED. IT WAS HELD IN THIS CASE THAT SINCE LTCGS IS ARISING FROM SALE OF TWO DISTINCT AND SEPARATE ASSETS I.E., RESIDENTIAL HOUSE AND PLOT OF LAND AND THE ASSESSEE HAS INVESTED THE ENTIRE CAPITAL GAIN IN PURCHASE OF THE NEW CAPITAL HOUSE, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION UNDER SECTIONS 54 AND 54F OF THE INCOME TAX ACT, 1961. HE SUBMITTED THAT THIS TRIBUNAL ORDER HELPS THE ASSESSEE. REGARDING THIS OBJECTION THAT THE INVESTMENT IN NEW HOUSE PROPERTY IS MADE IN MORE THAN ONE RESIDENTIAL UNIT, HE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 54F OF THE INCOME TAX ACT, 1961, THERE IS AN AMENDMENT BY THE FINANCE (NO 2) ACT, 2014 AND AS PER THE AMENDMENT, THE WORDS 'CONSTRUCTED, A RESIDENTIAL HOUSE' IS REPLACED BY THE WORDS 'CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA '. HE SUBMITTED THAT IN VIEW OF THESE PROVISIONS OF SECTION 54F OF THE INCOME TAX ACT, 1961, TILL 31.03.2015, EVEN IF THE INVESTMENT IS MADE FOR PURCHASING OR CONSTRUCTING MORE THAN ONE RESIDENTIAL HOUSE, THEN ALSO DEDUCTION IS ALLOWABLE UNDER SECTION 54F AND IT HAS TO BE RESTRICTED ONLY FROM ASSESSMENT YEAR 2015-16. BUT IN THE PRESENT CASE, ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2013-14 AND THEREFORE, THIS OBJECTION OF THE AO IS ALSO NOT VALID. REGARDING THIS OBJECTION THAT THE AMOUNT ITA NO. 3344/BANG/2018 PAGE 6 OF 7 WAS NOT DEPOSITED IN CAPITAL GAIN ACCOUNT SCHEME, AS PER THE REQUIREMENT OF SUBSECTION [4] OF SECTION 54F, HE SUBMITTED THAT IN VIEW OF THIS FACT THAT THE INVESTMENT WAS MADE IN CONSTRUCTING / PURCHASING THE NEW RESIDENTIAL HOUSE, THERE WAS NO REQUIREMENT TO DEPOSIT ANY AMOUNT IN CAPITAL GAIN ACCOUNT SCHEME. HE SUBMITTED THAT HENCE, ALL THE OBJECTIONS OF THE AO ARE INVALID AND THEREFORE, DEDUCTION SHOULD BE GRANTED TO THE ASSESSEE UNDER SECTIONS 54 AND 54F OF THE INCOME TAX ACT, 1961 AS CLAIMED BY THE ASSESSEE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT OUT OF THREE OBJECTIONS OF THE AO AS NOTED BY HIM IN THE ASSESSMENT ORDER, NONE OF THEM IS VALID BECAUSE UP TO 31.03.2015, INVESTMENT CAN BE MADE IN MORE THAN ONE RESIDENTIAL HOUSE AND AS PER THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SAMBANDAM UDAYKUMAR (SUPRA), EVEN IF THE CONSTRUCTION IS NOT COMPLETED WITHIN 3 YEARS THEN ALSO, DEDUCTION IS ALLOWABLE. WHEN THE INVESTMENT IS MADE IN THE RESIDENTIAL HOUSE ITSELF, THERE IS NO REQUIREMENT TO DEPOSIT THE MONEY IN CAPITAL GAIN ACCOUNT SCHEME. HENCE, BY RESPECTFULLY FOLLOWING THESE JUDGMENTS OF HONBLE KARNATAKA HIGH COURT AND OF THE TRIBUNAL AND IN VIEW OF THE ABOVE DISCUSSION, WE DELETE THIS DISALLOWANCE OF RS.65,54,597/-. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- ( PAVAN KUMAR GADALE ) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 29 TH MAY, 2020. /NS/* ITA NO. 3344/BANG/2018 PAGE 7 OF 7 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.