ITO 31(2)(5), MUMBAI V. PRAVIN CHAND SEHGAL (HUF), MUMBAI

ITA 3416/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9671 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Additional evidence; Cost of acquisition; Benefit of exemption
• Section: 54F; 148; 54; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3416/M/2016 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER, 31(2)(5), MUMBAI VS. PRAVIN CHAND SEHGAL (HUF), UNIT NO.204/206, M/S. SHREE MAHAVIR TEXTILES MILLS, KAMLA BHAWAN, SHARMA INDL. ESTATE, GOREGAON (EAST), MUMBAI-400 063 PAN: AAAHP2624R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SHEKHAR GUPTA, A.R. REVENUE BY : MS. POOJA SWAROOP, D.R. DATE OF HEARING : 22.02.2018 DATE OF PRONOUNCEMENT : 28.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 16.02.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) HAS NOT ERRED IN ALLOWING THE BENEFIT O F SECTION 54 OF THE INCOME TAX ACT , 1961 TO THE ASSESSEE AGAINST THE SALE OF RESI DENTIAL FLAT AT MOUNT UNIQUE PEDDAR ROAD , MUMBAI ON THE GROUND THAT THE ASSESSE E HAS AN ALLOTMENT LETTER FROM THE BUILDER IGNORING THE FACT THAT THE ASSESSE E HAS NOT HAVE A REGISTERED PURCHASE AGREEMENT? 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THE ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 2 ORDER OF THE ASSESSING OFFICER MAY BE RESORTED THE APPELLANT CRAVES TO LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH M AY BE NECESSARY FOR DISPOSAL OF THE APPEAL. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RE TURN OF INCOME ON 29.09.2010 DECLARING AN INCOME OF RS.18,85,1 78/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THEREAFTER, THE CASE WAS REOPENED U/S 148 OF THE ACT BY ISSUING NOTICE DATED 18.03.2013. THEREAFTER THE STATUT ORY NOTICES WERE DULY ISSUED AND SERVED UPON THE ASSES SEE. THE ONLY ISSUE UNDER CHALLENGE BEFORE THIS TRIBUNAL IS WITH RESPECT TO DENIAL OF EXEMPTION UNDER SECTION 54 OF THE ACT TO THE TUNE OF RS.2,47,48,087/-. DURING THE ASSESSMENT PROCEED INGS, THE AO NOTICED THAT THE ASSESSEE HAS SOLD PROPERTY BEIN G RESIDENTIAL FLAT AT MOUNT UNIQUE, PEDDAR ROAD, MUMBA I FOR A CONSIDERATION OF RS.3,75,00,000/- ON 10.07.09 RESULT ING INTO A LONG TERM CAPITAL GAIN OF RS.2,47,48,087/- AFTER RE DUCING THE COST OF ACQUISITION WHICH WAS CLAIMED AS EXEMPT UND ER SECTION 54 OF THE ACT IN RESPECT OF INVESTMENT IN NEW FLAT AT ORBIT TERRACE. BEFORE THE AO, THE ASSESSEE SUBMITTED THE DETAILS OF PAYMENT AND ALLOTMENT LETTER DATED 22.10.09 FOR CLA IMING THE EXEMPTION U/S 54 OF THE ACT. SINCE THERE WAS NO REG ISTRATION OF SALE DEED EXECUTED IN FAVOUR OF THE ASSESSEE AS REGARDS NEW FLAT PURCHASED, THE AO ISSUED SHOW CAUSE NOTICE DATED 12.03.2014 AS TO WHY THE CLAIM OF EXEMPTION SHOULD N OT BE REJECTED AS THE ASSESSEE HAS FAILED TO PRODUCE REGI STERED DEED WITHIN THE STIPULATED PERIOD WHICH WAS REPLIED BY T HE ASSESSEE VIDE LETTER DATED 20.03.14 BY SUBMITTING THAT THE LO NG TERM CAPITAL GAIN ARISING OUT OF SALE OF FLAT IN MOUNT U NIQUE BUILDING, PEDDAR ROAD, MUMBAI HAS BEEN INVESTED IN THE PURCHAS E OF ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 3 FLAT IN BUILDING CALLED ORBIT TERRACE VIDE ALLOTMEN T LETTER DATED 22.10.09. THE ASSESSEE ALSO SUBMITTED THAT THE BENEF IT OF EXEMPTION UNDER SECTION 54 CANNOT BE DENIED ON THE GROUND THAT THERE IS NO FORMAL AGREEMENT/SALE DEED ENTERE D WITH THE BUILDER IGNORING THE FACT THAT THE ENTIRE AMOUNT OF CAPITAL GAIN STANDS INVESTED IN THE NEW FLAT AND ALLOTMENT LETTE R HAS BEEN ISSUED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE ALS O SUBMITTED THAT IN THE ALLOTMENT LETTER 22.10.09 GIVEN BY THE BU ILDER IS NOT CONTAINING ANY CLAUSE THAT NO RIGHT AS TO PROVI SIONAL/FINAL ALLOTMENT ACCRUES UNTIL THE BUYERS AGREEMENT IS SI GNED AND AND SECOND, THAT NO RIGHT TO CLAIM TITLE/OWNERSHIP RESULTS FROM THE CONFIRMATION LETTER ITSELF. IN ABSENCE OF SUCH A BAR IN THE ALLOTMENT LETTER, THE ASSESSEE ACQUIRED THE RIGHT I N THE FLAT BY VIRTUE OF THE ALLOTMENT LETTER AND THEREFORE ELIGIB LE FOR EXEMPTION UNDER SECTION 54. HOWEVER THE AO REJECTE D THE CONTENTION OF THE ASSESSEE BY REJECTING THE CLAIM O F EXEMPTION U/S 54 OF THE ACT WHILE FRAMING THE ASSESSMENT. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SUBMIS SION AND THE CONTENTION RAISED BY THE ASSESSEE IN THE APPELL ATE PROCEEDINGS. THE LD. CIT(A) RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SAMBAND AM UDAYKUMAR (2012) 345 ITR 389/206 TAXMAN 150/19 TAXMANN.COM 17 AND THE DECISION OF THE MUMBAI BENCH ES IN THE CASE OF KHEMCHAND FAGWANI VS. ITO (2014) IN ITA NO.7876/M/2010 DATED 10.09.14. ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 4 5. THE LD. D.R. VEHEMENTLY SUBMITTED BEFORE US THAT T HE ACTION OF THE LD. CIT(A) WAS WRONG AND AGAINST THE F ACTS OF THE CASE IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE U/S 54 OF THE ACT. THE LD. D.R. SUBMITTED THAT THE A SSESSEE COULD NOT BE ALLOWED EXEMPTION UNDER SECTION 54 ON THE BASIS OF LETTER OF ALLOTMENT FILED BY THE ASSESSEE WHERE NO REGISTERED SALE DEED HAS BEEN EXECUTED IN FAVOUR OF THE ASSESS EE AND THUS THE ASSESSEE HAS NO RIGHT OR INTEREST ACQUIRED ON THE SAID FLAT. THE LD. D.R. SUBMITTED THAT IN VIEW OF THESE F ACTS THE ORDER OF THE AO NEEDS TO BE RESTORED. 6. THE LD. A.R., ON THE OTHER HAND, RELIED ON THE DECI SION OF THE LD. CIT(A) AND ALSO TOOK US TO VARIOUS DECISION S RELIED UPON BY THE LD. CIT(A) WHILE DECIDING THE ISSUE. TH E LD. A.R. ALSO FILED AN APPLICATION UNDER RULE 29 OF THE ITAT RULES SUBMITTING THE ADDITIONAL EVIDENCES IN THE FORM OF NEWSPAPER CUTTING AND COPIES OF SUIT IN THE BOMBAY HIGH COURT REQUESTING THE SAME TO TAKE ON RECORD AS THE ASSESSEE WAS STIL L NOT GIVEN THE POSSESSION OF THE FLAT AND THEREAFTER THE LITIG ATION ENSUED. IT IS UNDISPUTED FACT THAT ASSESSEE HAS BEEN GIVEN A LETTER OF ALLOTMENT AND THE ASSESSEE HAS INVESTED THE PROFITS IN THE PURCHASE OF NEW FLAT THOUGH THE POSSESSION WAS NOT GIVEN TO THE ASSESSEE. THE CASE OF THE ASSESSEE IS ALSO SUPP ORTED BY A SERIES OF DECISIONS REFERRED BY THE ASSESSEE. IN T HE CASE OF CIT VS. SAMBANDAM UDAYKUMAR (SUPRA) IT HAS BEEN HEL D THAT WHERE THE ENTIRE PAYMENT WAS MADE MERELY BECAUSE A REGISTERED SALE DEED HAS NOT BEEN EXECUTED AND REGI STERED IN FAVOUR OF THE ASSESSEE, THE ASSESSEE CANNOT BE DENI ED THE BENEFIT OF SECTION 54F OF THE ACT. SIMILARLY, IF THE ASSESSEE HAS ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 5 INVESTED MONEY IN THE CONSTRUCTION OF RESIDENTIAL H OUSE, MERELY BECAUSE THE CONSTRUCTION WAS NOT WAS NOT COM PLETE IN ALL RESPECTS AND IT WAS NOT IN A FIT CONDITION TO B E OCCUPIED WITHIN THE PERIOD STIPULATED, THAT WOULD NOT DISENTI TLE THE ASSESSEE FROM CLAIMING BENEFIT U/S 54 OF THE ACT. THE ESSENCE OF THE SAID PROVISION IS WHETHER THE ASSESSEE HAS INVESTED THE CAPITAL GAIN IN A RESIDENTIAL HOUSE AND ONCE IT IS DEMONSTRATED THAT THE GAIN RECEIVED ON TRANSFER HAS BEEN INVEST ED EITHER IN PURCHASING A RESIDENTIAL HOUSE OR IN CONSTRUCTION O F A RESIDENTIAL HOUSE EVEN THOUGH THE TRANSACTIONS ARE NOT COMPLETE IN ALL RESPECTS AND AS REQUIRED UNDER THE LAW, THAT WOULD NOT DISENTITLE THE ASSESSEE FROM THE BENEFIT OF EXEMPTION U/S 54 OF THE ACT. FURTHER, IN THE CASE O F KHEMCHAND FAGWANI VS. ITO (SUPRA) IT HAS BEEN HELD THAT THERE IS NO REQUIREMENT IN THE ACT THAT IT NECESSA RILY HAS TO PRODUCE THE AGREEMENT MORE SO WHEN LETTER OF ALLOT MENT ALONG WITH PROOF OF PAYMENT/INVESTMENT WAS DULY PRO DUCED BEFORE THE CONCERNED AUTHORITIES. SIMILARLY, IN THE CASE OF SANJEEV LAL VS. CIT 365 ITR 389 HONBLE SUPREME COU RT HAS HELD THAT A SALE DEED MAY NOT BE ESSENTIAL IF THE T RANSFER CAN BE DEDUCED FROM THE FACTS OF THE CASE. SIMILARLY, IN THE CASE OF CIT VS. SMT. BRINDA KUMARI (2001) 114 TAXMANN 266 IT HAS BEEN HELD THAT WHEN AN ALLOTMENT LETTER WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSEE ACQUIRED A SUBSTANTIAL DOMAIN OVER A FLAT IN A HOUSING SOCIETY UNDER AGREEMENT WI TH SOCIETY COUPLED WITH PAYMENT OF ALMOST ENTIRE COST OF CONST RUCTION WITHIN A PERIOD OF 2 YEARS FROM DATE WHEN ASSESSEE CONVEYED ORIGINAL PROPERTY TO SOCIETY, ASSESSEE COULD CLAIM EXEMPTION ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 6 UNDER SECTION 54. THE COURT ALSO OBSERVED THAT BOAR D HAS STATED IN CIRCULAR NO.471 & 672 THAT WHEN AN ALLOTME NT LETTER IS ISSUED TO AN ALLOTTEE, UNDER THE SCHEME ON PAYMEN T OF FIRST INSTALLMENT TOWARDS THE COST OF CONSTRUCTION, THE A LLOTMENT IS FINAL UNLESS IT IS CANCELLED. SIMILARLY, IN THE CA SE OF CIT VS. KULDEEP SINGH (2014) 49 TAXMANN.COM 167 IT HAS BEEN HELD THAT IF THE ASSESSEE HAS MADE SUBSTANTIAL INVESTMEN T IN THE FLAT, DEDUCTION UNDER SECTION 54 HAS TO BE GRANTED E VEN THOUGH LEGAL OWNERSHIP HAS NOT VESTED WITH THE ASSE SSEE. SIMILARLY, IN THE OTHER DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HASMUKH N. GALA VS. ITO (201 7) 83 TAXMANN.COM 49 (MUMBAI-TRIB) AND IN THE CASE OF MR. RAJEEV B. SHAH VS. ITO IN ITA NO.262/M/2015 FOR A.Y. 2010-11 VIDE ORDER DATED 08.,07.2016 IT HAS BEEN HELD THAT THE AS SESSEE HAS INVESTED THE GAIN FOR ACQUISITION OF FLAT AND BUILDER HAS ISSUED ALLOTMENT OF LETTER TO THE ASSESSEE THEN THE DEDUCTION UNDER SECTION 54 COULD NOT BE DENIED MERELY ON THE BASIS THAT THE CONSTRUCTION OF FLAT WAS NOT COMPLETED WITHIN T HE STIPULATED PERIOD. 7. IN VIEW OF THE ABOVE DISCUSSION AND THE RATIO LA ID DOWN BY THE VARIOUS COURTS AND JUDICIAL FORUMS, THE APPE AL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.03.2018. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.03.2018. * KISHORE, SR. P.S. ITA NO.3416/M/2016 PRAVIN CHAND SEHGAL (HUF) 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.