Mohammed Shaik Mushtaq, Hyd, Secunderabad V. ITO, Ward-5(1), Hyderabad, Hyderabad

ITA 383/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2581 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 02-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Valuation report
• Section: 50C; 147; 54; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B-SMC, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 383/HYD/2017 ASSESSMENT YEAR: 2007-08 SHRI MOHAMMED SHAIK MUSHTAQ, HYDERABAD. PAN CMVPM5402R VS. THE INCOME TAX OFFICER, WARD 5(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.V. ANIL KUMAR REVENUE BY : SHRI L. RAMJI RAO DATE OF HEARING : 11-09-2017 DATE OF PRONOUNCEMENT : 13-09-2017 ORDER PER D. MANMOHAN, VICE PRESIDENT: THIS APPEAL IS FILED AGAINST THE ORDER PASSED BY CIT(A)-4, HYDERABAD. THE ASSESSEE SOLD IMMOVABLE PROPERTY SITUATED AT NALLAKUNTA, HYDERABAD FOR A CONSIDERATION OF RS. 13,72,000/-. THOUGH THE STAMP DUTY WAS PAID ON THE GOVERNMENT VALUE OF RS. 16,81,750/-, SINCE THE ASSESSEE HAS NOT DECLARED CAPITAL GAINS ON THE ABOVE SAID TRANSACTION, THE A.O ISSUED A NOTICE U/S 147 OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED A LETTER REQUESTING FOR TIME ON THE GROUND THAT THE AUTHORIZED REPRESENTATIVE IS OUT OF CITY. EVEN THOUGH THE CASE WAS ADJOURNED, NONE APPEARED FOR THE ASSESSEE AND THEREFORE, THE A.O GRANTED ONE MORE OPPORTUNITY CALLING UPON HIM TO SHOW CAUSE AS TO WHY ASSESSMENT SHOULD NOT BE MADE U/S 144 OF THE IT ACT. THERE WAS NO RESPONSE EVEN TO THIS LETTER. THEREFORE, THE A.O COMPLETED THE ASSESSMENT BY BRINGING TO TAX SUM OF RS. 16,81,750/- UNDER THE HEAD CAPITAL GAINS. IN THIS REGARD THE A.O TOOK INTO CONSIDERATION THE GOVERNMENT VALUE OF RS. 2 ITA NO. 383/HYD/2017 MD. SHAIK MUSHTAQ, HYDERABAD. 16,81,750/- AS AGAINST THE ALLEGED SALE CONSIDERATION OF RS. 13,72,000/-. 2. AGGRIEVED, THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT HE DID NOT FILE RETURN OF INCOME SINCE THERE WAS NO TAXABLE INCOME. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS A MERE MOTOR CYCLE MECHANIC, WHO WAS NOT WELL AWARE OF THE INTRICACIES OF TAX LAWS. THE PROPERTY AT NALLKUNTA WAS PURCHASED ON 15- 01-1983. AS PER THE VALUATION REPORT THE VALUE OF THE SAME IS RS. 5,50,000/-, BUT THE A.O REDUCED AN AMOUNT OF RS. 1,00,000/- ONLY FROM THE TOTAL CONSIDERATION. IT WAS FURTHER STATED THAT INDEXED COST SHOULD BE REDUCED FROM THE TOTAL CONSIDERATION AND DEDUCTION SHOULD HAVE BEEN ALLOWED U/S 54 OF THE IT ACT SINCE THE SALE CONSIDERATION WAS INVESTED IN CONSTRUCTION OF NEW HOUSE. DETAILS WERE HOWEVER NOT FURNISHED BEFORE THE CIT(A). 3. SHRI RAJENDRA KUMAR, CA APPEARED BEFORE THE CIT(A). THE FIRST CONTENTION OF THE ASSESSEE WAS THAT THE A.O ERRED IN MAKING A BEST JUDGMENT ASSESSMENT. IN THIS REGARD THE LD. CIT (A) OBSERVED THAT SEVERAL OPPORTUNITIES WERE PROVIDED BUT THE ASSESSEE HAS NOT COMPLIED WITH THE NOTICES AND THEREFORE, THE A.O WAS JUSTIFIED IN DISPOSING OF THE APPEAL U/S 144 OF THE IT ACT. 4. AS REGARDS INDEXED COST OF ACQUISITION, LD. CIT(A) ACCEPTED THAT THE ASSESSEE MADE CERTAIN REPAIRS TO THE GROUND FLOOR AND CONSTRUCTED A FIRST FLOOR AND THE INDEXED COST OF ACQUISITION WORKED OUT TO RS. 8,66,775/-. IT MAY BE NOTICED THAT ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, REVENUE HAS NOT PREFERRED EITHER AN APPEAL OR CROSS OBJECTION ON THIS ASPECT AND THE LD. 3 ITA NO. 383/HYD/2017 MD. SHAIK MUSHTAQ, HYDERABAD. DR ALSO COULD NOT PLACE ANY MATERIAL TO CONTRADICT THE STATEMENT OF THE ASSESSEE; IN FACT, THE A.O PASSED A CONSEQUENTIAL ORDER DATED 30-01-2017. 5. WITH REGARD TO APPLICABILITY OF SECTION 50C OF THE IT ACT THE LD. CIT(A) OBSERVED THAT IN THE ABSENCE OF ANY DETAILS FURNISHED BEFORE THE A.O, THE SRO VALUE HAS TO BE ADOPTED. THE ASSESSEE HAS NOT PREFERRED AN APPEAL AGAINST THIS FINDING. 6. IT WAS CONTENDED BEFORE THE CIT(A) THAT A SUM OF RS. 8,66,775/- WAS SPENT ON CONSTRUCTION OF GROUND FLOOR I.E, PLINTH AREA AT 1,359 SQUARE YARDS AT BAHADURPURA. THE BUILDING IS NEAR GRAMMAR SCHOOL AND ACCORDING TO THE ASSESSEE THE CONSTRUCTION WAS COMMENCED IN THE YEAR 2005-06 BUT COMPLETED AFTER SALE OF NALLAKUNTA PROPERTY. 7. THE LD. CIT(A) OBSERVED THAT NO EVIDENCE WAS FURNISHED, TO PROVE CONSTRUCTION OF NEW HOUSE, EITHER BEFORE THE A.O OR BEFORE HER. THEREFORE, THE CLAIM OF DEDUCTION U/S 54 OF THE IT ACT WAS REJECTED. 8. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS: 1. YOUR APPELLANT SUBMITS THAT THE CIT(A) ERRED IN LAW AND FACTS OF THE CASE IN NOT GRANTING DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961, BASED ON THE AVAILABLE INFORMATION SUBMITTED TO CIT(A). 2. YOUR APPELLANT SUBMITS THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT ALL THE CONDITIONS OF SECTION 54 HAVE BEEN COMPLIED WITH, THE SALE CONSIDERATION BEING INVESTED IN THE CONSTRUCTION OF THE NEW HOUSE, MAY HAVE ALLOWED DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961. 4 ITA NO. 383/HYD/2017 MD. SHAIK MUSHTAQ, HYDERABAD. 9. AT THE TIME OF HEARING LD. COUNSEL STRONGLY SUBMITTED THAT THE ASSESSEE HAVING INVESTED THE SALE PROCEEDS FOR CONSTRUCTION OF A HOUSE, DEDUCTION U/S 54 OF THE IT ACT IS ALLOWABLE. IT IS NOT IN DISPUTE THAT THE NALLAKUNTA PROPERTY WAS SOLD ON 06-04- 2006 AND THE ASSESSEE OBTAINED A VALUATION REPORT ON 08-06- 2006 FROM A GOVERNMENT REGISTERED VALUER IN SUPPORT OF THE COST OF CONSTRUCTION OF NEW PROPERTY. THOUGH THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ORIGINALLY THERE WAS A GROUND FLOOR PORTION WHICH WAS REPAIRED AND ANOTHER FLOOR WAS ADDED, THE VALUATION REPORT DOES NOT INDICATE SO. THE ASSESSEE ALSO SUBMITTED THAT U/S 54 OF THE IT ACT CONSTRUCTION CAN BE COMMENCED AT ANY TIME BUT, SO LONG AS THE COMPLETION OF THE CONSTRUCTION HAPPENS AFTER THE DATE OF SALE OF NALLAKUNTA PROPERTY, HE IS ELIGIBLE TO CLAIM DEDUCTION U/S 54 OF THE IT ACT. IN THIS REGARD THE LD. COUNSEL RELIED UPON THE DECISION OF ITAT VISAKHAPATNAM BENCH IN THE CASE OF DY CIT VS. DR. CHALASANI MALLIKARJUNA RAO IN ITA NO. 206 (VIZAG) OF 2013, REPORTED IN [2016] 75 TAXMANN. COM 270 (VISAKHAPATNAM TRIB). LD. COUNSEL FOR THE ASSESSEE WAS CALLED UPON TO FURNISH EVIDENCE IN THE FORM OF PERMISSION GRANTED BY MUNICIPAL AUTHORITIES FOR CONSTRUCTION OF GROUND AND FIRST FLOOR OR WATER, ELECTRICAL CONNECTION OBTAINED FOR WHICH THE LD. COUNSEL SUBMITS THAT IN BAHADURPURA AREA THERE IS NO SUCH PROCEDURE FOR CONSTRUCTION OF PROPERTY AND EVEN AFTER BUILDING REGULATION SCHEME, POST CONSTRUCTION PERMISSION WAS NOT OBTAINED. HOWEVER, HE STRONGLY RELIED UPON THE REGISTERED VALUERS REPORT TO SUBMIT THAT THE ASSESSEE HAS UTILISED THE SALE PROCEEDS FOR CONSTRUCTION OF NEW HOUSE PROPERTY. 5 ITA NO. 383/HYD/2017 MD. SHAIK MUSHTAQ, HYDERABAD. 10. ON THE OTHER HAND LD DR SUBMITTED THAT THE NALLAKUNTA PROPERTY WAS SOLD IN APRIL 2006 AND IMMEDIATELY THEREAFTER, THE ASSESSEE OBTAINED VALUATION REPORT ON 08-06-2006 FOR INCOME TAX / WEALTH TAX PURPOSE AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT AWARE OF THE TAX PROVISIONS. HOWEVER EVEN AS PER THIS VALUATION REPORT THE CONSTRUCTION WAS COMMENCED AND COMPLETED BEFORE MARCH 2006 WHEREAS THE PROPERTY WAS SOLD IN APRIL 2006. HE THEN REFERRED TO THE PROVISIONS OF SEC 54 OF THE IT ACT WHICH CATEGORICALLY SAYS THAT IN THE CASE OF CONSTRUCTION OF PROPERTY AFTER THE DATE OF SALE THE ASSESSEE IS NOT ENTITLED TO DEDUCTION. IT WAS FURTHER CONTENDED THAT THERE IS NO PROOF WITH REGARD TO CONSTRUCTION OF HOUSE EXCEPT THE VALUATION REPORT. 11. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. SECTION 54 OF THE IT ACT SPEAKS OF EXEMPTION, FROM TAXES, OF SALE PROCEEDS IF THE ASSESSEE CONSTRUCTS A NEW RESIDENTIAL HOUSE AFTER THE DATE OF SALE. THE ITAT VISAKHAPATAN BENCH OBSERVED THAT EVEN IF THE CONSTRUCTION COMMENCES BEFORE THE DATE OF SALE, SO LONG AS COMPLETION IS AFTER THE DATE OF TRANSFER OF ORIGINAL ASSET, ASSESSEE CAN CLAIM DEDUCTION U/S 54 OF THE IT ACT. HOWEVER IN THE CASE ON HAND, EVEN AS PER THE CERTIFICATE ISSUED BY THE REGISTERED VALUER, THE CONSTRUCTION WAS COMPLETED BEFORE THE DATE OF SALE OF NALLAKUNTA PROPERTY. IN FACT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN THE FORM OF PERMISSION OBTAINED FROM MUNICIPAL DEPARTMENT, BILLS AND VOUCHERS TOWARDS PURCHASE OF PIPES, ELECTRICAL ITEMS FOR CONSTRUCTION OF NEW HOUSE AND VOUCHERS TOWARDS PAYMENT TO MASONS. NO PAYMENT APPEARS TO HAVE BEEN MADE BY CHEQUE. 12. IN THE ABSENCE OF ANY EVIDENCE TO PROVE THAT THE ASSESSEE CONSTRUCTED A NEW PROPERTY, THAT TOO AFTER THE TRANSFER OF NALLAKUNTA PROPERTY, IT IS DIFFICULT TO ACCEPT THE CONTENTION OF 6 ITA NO. 383/HYD/2017 MD. SHAIK MUSHTAQ, HYDERABAD. THE ASSESSEE SEEKING DEDUCTION U/S 54 OF THE IT ACT AND THEREFORE, THE ORDER PASSED BY THE CIT(A) ON THIS ASPECT DOES NOT CALL FOR ANY INTERFERENCE. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/- (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 13 -09-2017. KRK 1 MD. SHAIK MUSHTAQ C/- M. ANANDAM & CO., CAS, 7A, SURYA TOWERS, S.P. ROAD, SECUNDERABAD. 2 ITO, WARD 5(1), HYDERABAD. 3 THE CIT-4, HYDERABAD 4 THE PR. CIT-4, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE