Smt.Bhama jayakumar, Aluva V. The ITO, Aluva

ITA 41/COCH/2021

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1058 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 04-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Capital Gains
• Section: 54; 263; 143(3); 54F; 153

Judgement Text

ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva IN THE INCOME TAX APPELLATE TRIBUNAL BENCH: COCHIN BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA No.41/Coch/2021 Assessment Year: 2016-17 Smt. Bhama Jayakumar Anizham House Thottakkattukara P.O. Aluva PAN NO : AQAPJ6080B Vs. ITO Aluva APPELLANT RESPONDENT Appellant by : Shri Mathew Joseph, A.R. Respondent by : Smt. J.M. Jammuna Devi, Sr. DR Date of Hearing : 02.08.2022 Date of Pronouncement : 02.08.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of PCIT passed u/s 263 of the Income-tax Act,1961 ['the Act' for short] dated 1.2.2021. The assessee has raised following grounds of appeal:- “1. The learned Pr. CIT went wrong in treating the assessment order passed as erroneous in so far as the deduction u/s 54F is concerned while the assessing officer had found that the net consideration had been invested in the construction of a residential and the construction of the new asset was completed within three years from the date of transfer of the original asset. ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 2 of 7 2. The learnt Pr. CIT went wrong in treating the assessment order passed as erroneous for the reason of not depositing the un used part of net consideration within the time specified in section 54F(4) even after examining the position of law explained by the Hon’ble high court of Karnataka in the case CIT vs K Ramachandra Rao (ITA No47 of 2014 and various courts which was brought to the notice of the Pr.CIT in the course of revisionary proceedings.” 2. Facts of the case are that from perusal of records, it is noticed by the Ld. PCIT that the Assessment Order under Section 143(3) of the Act, dated 07.12.2018, passed by the Assessing Officer for the AY 2016-17, is erroneous in so far as it is prejudicial to the interest of revenue for the reasons mentioned below: 3. The assessee, Smt. Bhama Jayakumar filed her return of Income in ITR-2 electronically for the AY 2016-17 on 16.11.2016 declaring total income of Rs.4,450/-under the head other sources. The case was selected for limited scrutiny under CASS and assessment completed u/s 143(3) on 07.12.2018 making an addition of Rs.62,978/- under the head 'Other sources. 3.1 The case was selected for limited scrutiny to examine the source for cash deposit of Rs.24,00,000/- and transaction made in property during the AY 2015-16. During scrutiny the assessee explained the source for cash deposit as out of the sale proceeds of 2.43 acres of land for Rs.44,00,000/- during the FY 2014-15. The cash deposits were made in Capital Gain Accounts Scheme to avail benefits of section 54 for the AY 2015-16. On 16.04.2015, the assessee sold another property for Rs.44,00,000/- (Fair value determined by the Registrar at Rs. 55 lakhs). During the course of assessment, assessee informed that the sale proceeds for this transaction were received in piecemeal and was utilized for the ongoing construction of the new house and hence not deposited in the Capital Gain Accounts ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 3 of 7 Scheme. The assessee further claimed that the sale consideration of Rs. 44 lakhs (received during AY 2015-16) together with the amount withdrawn from the Capital Gain Accounts Scheme was utilized for the construction of the new house. The construction of the house was started in FY 2014- 15 and completed in FY 2017-18. After verification of the bank account statements produced and the explanations offered by the assessee, AO completed the assessment accepting the assessee 's explanations. 3.2 However, the assessee has neither purchased, nor constructed a house before the due date of filing the return of income for the AY 2016- 17 nor deposited the amount in Capital Gain Scheme. Also, the copy of the plan submitted by the assessee as evidence for construction of new house was approved by the authority on 28.09.2016 only and hence claim of starting construction from FY 2014-15 is also not acceptable. The assessee had to deposit the entire sale consideration received during the AY 2015-16 in a capital gain account scheme and since she had neither deposited nor purchased or constructed the house the sale consideration should have been taxed in the hands of the assessee under the head 'Capital Gains; but the AO has failed to do so. Ld. PCIT observed that the AO has mistakenly and erroneously omitted to consider the above facts while completing the assessment, thereby causing prejudice to the interest of revenue. 3.3 Accordingly, a show-cause notice under Section 263 of the Act dated 07.12.2020 was issued to the assessee proposing for revision of assessment under Section 263 of the Act. 4. Ld. PCIT observed that assessee has claimed in her written submission that she sold her property being land during April, 2015 for Rs.55,00,000/- and constructed another property being residential house within 3 years without referring to any specified dates of such occurrence. While various issues like ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 4 of 7 assessee's claim of construction in the absence of planning permission, failure to deposit in long term capital accounts scheme within the stipulated time and other such issues highlighted in the show cause notice cited supra, assessee’s reply has relied on judicial decisions without explaining the actual facts as applicable to her particular case. She has not disputed that plan of the construction of new house was approved by the Kadungallur grama panchayath only on 28.09.2016 and valid only from 28.09.2016. In the absence of such approval, whether a person would have embarked on constructing a residential house allegedly for Rs.55,00,000/-before a period of 3 years prior to such approval, is to be decided only on facts on record. Ld. PCIT opined that the AO has not applied his mind to this important aspect of the case. The submission of the assessee filed during the present revisionary proceedings also does not throw any light on the matter. Merely stating that sale consideration received was utilized for construction of new residential property without reference to specified dates mentioned in the relevant sections namely 54, 54F, etc. will not help the cause of the assessee. It is clear that the Assessing Officer in the impugned assessment order has incorrectly assumed the facts of the case and has incorrectly applied the law as applicable to the issue at hand. Ld. PCIT observed that the AO has failed to note important aspects of the case and in my view has committed an error in the assessment which is also prejudicial to the interests of the revenue and AO has passed an erroneous order which is prejudicial to the interests of the revenue. ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 5 of 7 4.1 The above omission by the Assessing Officer in the Assessment Order is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the Assessment Order on the above issues is set aside to the Assessing Officer for de-novo examination and to pass a speaking order in accordance with law as per time limit specified under Section 153 of the Act, after affording due opportunity to the Assessee. Against this assessee is in appeal before us. 5. We have heard the rival submissions and perused the materials available on record. Assessee has sold a property on 16.4.2015 for a consideration of Rs.55 lakhs. Assessee worked out the capital gain against which assessee claimed deduction u/s 54 of the Act. The AO granted the same. The Ld. PCIT was of the opinion that the construction of new house approved by Kadungallur Gram Panchayat only on 28.9.2016 and valid only from 28.9.2016. In the absence of such approval in the assessment year under consideration, where a person would be embarked on constructing residential house allegedly for Rs.55 lakhs before a period of 3 years, prior to such approval, is to be decided only on facts on record. According to the PCIT, AO has not applied his mind while granting exemption u/s 54 of the Act. As such, Ld. PCIT invoked jurisdiction u/s 263 of the Act and remitted the matter to decide it afresh by AO. Before us, the submission of Ld. A.R. is that the amount of sale consideration has been actually utilized for the purpose of construction of new house and this fact has not been disputed because of the only reason for exercise of jurisdiction by ld. PCIT u/s 263 of the Act was that approval for construction of new house was obtained on 28.9.2016. The Ld. A.R. submitted that the construction of house started from financial year 2014-15 and completed in financial year 2017-18. After considering this AO allowed the claim ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 6 of 7 of assessee u/s 54 of the Act and the net utilization of the amount has not been doubted both by AO as well as by Ld. PCIT. In such circumstances, in our opinion, the claim of assessee u/s 54/54F of the Act cannot be denied as held by Hon’ble Karnataka High Court in the case of CIT Vs. K. Rama Chandra Rao reported in 230 Taxmann 334 (karn), wherein held as under: As is clear from Sub Section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct.” 5.1. In view of the above decision of the Hon’ble Karnataka High Court, the assessee is entitled for deduction u/s 54/54F of the Act as granted by AO. In view of this the exercise of jurisdiction by Ld. PCIT u/s 263 of the Act is unwarranted. Accordingly, we quash the order of Ld. PCIT passed u/s 263 of the Act. ITA No.41/Coch/2021 Smt. Bhama Jayakumar, Aluva Page 7 of 7 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 2 nd Aug, 2022 Sd/- (George George K. ) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 2 nd Aug, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.