Sh. Gurdit Singh, Mohali V. The Pr. C.I.T, Chandigarh -1

ITA 440/CHANDI/2022

AI Insights

The case involves two appeals filed by the assessee, Shri Gurdit Singh, against the orders of the PCIT and CIT(A) concerning the assessment year 2017-18. The appeals are interlinked, addressing the denial of deductions under sections 54B and 54F of the Income Tax Act, 1961, related to the purchase of agricultural land and a house, respectively. The PCIT exercised revision jurisdiction under section 263, setting aside the assessment order for de novo assessment, while the CIT(A) upheld the AO's denial of deductions in a rectification order under section 154. The Tribunal examined the issues of entitlement to deductions under sections 54B and 54F and the proper application of depreciation on buses claimed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115350 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-12-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 18-05-2022
• Other Referred Cases: Mrs. Seema Sabharwal vs. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Benefit of exemption; Capital Gains
• Section: 54; 263; 63; 154; 2; 15; 143(3); 54B; 54F; 250; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, “A”, CHANDIGARH Before Shri Sanjay Garg, Judicial Member & Shri Vikram Singh Yadav, Accountant Member I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali............................................................... Appellant C/o Shri Tejnohan Singh, Adovocate, #527, Sector 10D, Chandigarh – 160011. [PAN: BLWPS9390B] vs. PCIT, Chandigarh-1............................................................................ Respondent Appearances by: Shri Tej Mohan Singh, Advocate, appeared on behalf of the appellant. Shri Vivek Nangia, CIT, DR, appeared on behalf of the Respondent. Date of concluding the hearing : December 15, 2022 Date of pronouncing the order : January 16 , 2023 ORDER Per Sanjay Garg, Judicial Member: The pr esent ar e two a pp eals fil ed by the a ssesse e, o ne against the or der of the Ld. Principal Commissio ner of Inco me Tax ( i n short“ the PCIT”) date d 21. 10.20 22 passed u/ s 2 63 of the Incom e Tax Act, 1961 (hereinafter call ed 'the Act') where by, he, ex ercisi ng his revi sion juri sdi ction, has set a side the asse ssment order for de no vo a ssessment and the o ther one is against the order of the Commissio ner of Income Tax (App eals) [ in short, “ the CIT(A)] dated 3 0/ 03/2 02 2 i n an app eal filed by the assessee against the order pa ssed u/ s 154 of the Act, whe reby, the a ssessee ha s agitated the denial of deductio n u/ s 54F of the Act. Si nce the is sues in both the a ppeals ar e i nterlinked, rather to say are intermingled, ther efore, we proce ed to d ecide both the app eals by this common order. I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 2 2. The brief fa cts o f the case ar e tha t the assessee sold his agricultural land on 20. 09.2 01 6. The as sessee deposited the sale considerati on in the ca pita l gains ac co unt and thereafter claime d ded ucti on u/ s 54 F a nd 54B of the Ac t on acco unt of purchase of another piece agri cultural land within two year s from the d ate o f sal e. The a ssessee also clai med d educ tion u/ s 5 4F of the Act on acco unt of a purchase of a house within stipul ated time perio d. The Assessi ng Officer (i n short, “the AO”), however, did no t look into the aforesai d claim of the assessee a nd pa ssed the assessment or der u/s 14 3(3) of the Act dated 11.12.2 01 9. Ther eafter, the a ssessee mo ved a rectification applicatio n u/s 1 54 of the Act to the AO stating that his claim r elati ng to d eduction u/ s 5 4B of the Ac t and 54F has not been co nsi dered by the AO. Upon the said appli catio n of the assessee, the AO passed an order u/s 154 of the Act o n 6.1.2020, whereby , the AO allowed the claim of the a ssessee u/s 5 4B of the Act a t a l esser a mount i.e. at Rs.8000000/- as against Rs. 9590000/-, wher eas, the Ld. AO denied the claim in relatio n to the ded uction u/ s 54F of the Income Tax Act. At this s tage, it is releva nt to mentio n here that assessee apart fro m filing an applicatio n u/ s 15 4 of the Act al so filed an appeal b efor e the Ld. CIT( A) u/ s 250 of the Act, whereby, the asse ssee co nte sted the a ction of the AO in not granting him deductio n u/ s 54B and 54F of the Inco me Tax Act. As sta ted by the L d. Co unsel, the sai d appeal i s still p ending befor e the Ld. CIT(A). I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 3 In respect of the order passed by the AO u/ s 154 of the Act dated 0 6/01/2020 rea d with the original a ssessm ent or der passed u/ s 143( 3) of the Act da ted 1 1/ 12 /2 01 9, the Ld. PCIT exer cised his r evi sion juri sdi ction u/s 263 of the Act a nd noted that the order pa sse d by the AO u/ s 15 4 read with section 14 3(3) of the I ncome Tax Act wa s erroneo us a nd prej udicial to the intere st of Revenue a s the AO had wrongly allowed the de ductio n to the a ssessee u/s 5 4B of the Act. The Ld. PCIT further noted tha t the assessee ha d claimed depreca tion o n the b uses a nd mobiles, the sa me ha s b een allowed by the AO witho ut veri fying the rel eva nt docum ents including evi dence of pur cha ses as well as written down value of the bus es for the year und er c onsid eratio n. While holding so, the Ld. PCIT obser ved tha t the asses see by showing wro ng facts has claimed extended date of filing of return of income, as applicable to the assessee w ho ar e r equir ed to get their acco unts audited, wher eas, the assessee was no t required his acco unts to be audited. Therefo re, da te of filing of return of the as sessee wa s 5.8.2 01 7, whe rea s, the ass essee had claimed the sam e as 7.11.2017 and tha t by the due date on 5.8.2017, the a ssesse e had not d epo sited the pro ceed s o f the sale of property into the ca pital ga in acco unt. The Ld. PCIT, ther efore, set a side the a ssessment or der d ate d 1 1/12 /2 01 9 passed u/s 143(3) rea d with ord er da ted 06.01. 20 20 u/ s 15 4 of the Act for de no vo asses sment. Being aggri eved by the said order of the L d. PCIT, the ass essee ha s come in appeal befor e us vide I TA No 439/ Chandi/2022. I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 4 3. It is fur ther pertinent to me ntio n here that since the Ld. AO had partly a llowed the reli ef to the a ssessee in resp ect of the applica tion filed before him u/s 1 54 of the Act, whereby, the claim of the asse ssee of ded uction u/ s 54B was allowed at a lesser amo unt and claim u/s 54F was r ejected, the as sessee pref err ed a ppea l before the CIT(A). However, the Ld. CI T( A) dismissed the appeal of the assesse e vi de order d ated 30/ 03 /2 02 2, ag ainst whic h, the assess ee has come in a pp eal befor e us vide I TA No. 440/ Cha ndi/202 2. 4. From the facts noted abo ve, ther e are two iss ues involved in the appeal against revisio n order passed u/s 26 3 of the Act, firstly, w hether the assessee is entitle d to ded uctio n u/s 54B of the Income Tax Act a nd secondly, whether the AO ha s rightly allowed the claim of deprecia tion on b uses to the assessee. Whereas, in the appeal relating to ord er pa ssed u/s 154 of the Act, the issues ar e whether the assessee is entitl ed to d eductio n u/s 54F of the Act and further abo ut the qua ntum of the amount of claim u/s 54 B of the Act. Issue of deduction u/s 54B of the Act.– This iss ue has b een raised by the L d. PCIT in his or der passed u/ s 26 3 of the Act observing that the a ssess ee ha d not depo sited the proceeds and the sale of land into the ca pital gain ac count in tim e a nd that fur ther the AO ha s exce eded his j urisdiction in giving relief to the assessee in thi s resp ect i n an ord er passe d u/s 154 of the Ac t. 5. We have consider ed the rival contentions of the Ld. Co unsel of the p arties. The sole ground o n whic h the Ld. PCIT is of the view that the assessee is no t entitle d to deduc tio n I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 5 u/ s 5 4B of the Act is that the assessee has no t deposited the sale pro ceeds i nto the capital gain acco unt befor e the due date of filing of the r etur n b ut on a la ter da te. This issue is sq uarely cover ed by the d eci sio n of the Coordina te Chandigarh Bench of the Tribunal in the ca se of “Mrs. Seema Sa bharwal vs. I ncome Tax Officer” ITA No. 2 72/Chd /201 7 vide or der dated 05.0 2.201 8 r ep orted in 2018- TIOL-88 3-ITAT- CHD: [ 20 18] 91 taxma nn. com 2 (Chd.- tribunal) (Judicial Memb er her ein, bei ng the part o f the Bench in the said case also) wher ein, it has b een held that sub Section (1) of sec tion 54 of the Act is a sub stantive provisio n ena cted with the purpo se of pro moting p ur cha se / co nstr uction of resi dential ho uses, however, sub sectio n (2) of sectio n 54 i s an e nabling provi sion, ena cted to gather the real intention o f the assessee to invest the amount in pur chase / constructio n of a residential ho use. That if a n a ssess ee at the time of assessment pro ves that he has already i nvested capital gains to p urcha se /constr uct a new residential ho use within the stipul ated perio d, ex emption u/s 54 canno t be denied to such an a ssess ee even if the amount wa s not dep osited by the assessee in the capi tal gain account schem e before filing of inco me tax retur n as r eq uir ed u/ s 54(2) of the Act. The relevant par t of the ord er of the Tribunal, fo r the sa ke of ready r ef erence, is reproduced a s under: “9. A perusal of the above reproduced provisions of section 54 of the Act reveals that it deals with the capital gains earned on sale of property used for residence and as per the provisions of sub section (1) of section 54 of the Act, if an assessee, after sale of his residential property, has within a period of one year before or two years after the date of such transfer or with in a period of three years, I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 6 constructs a residential house, the capital gains will not be charged to tax upto the extent of the amount spent on the purchase or construction of residential house. Sub Section (1) of section 54 of the Act is a substantive provision enacted with the purpose of promoting purchase / construction of residential houses. However, sub section (2) of section 54 is an enabling provision which provides that the assessee should deposit the amount earned from capital gains in a scheme framed in this respect by the Central Government till the amount is invested for the purchase / construction of the residential house. This provision, in our view, has been enacted to gather the real intention of the assessee to invest the amount in purchase / construction of a residential house. As per the provisions of sub section(1) of section 54 , the assessee has been given two years’ time to purchase and three years’ time to construct a residential house subsequent to the date of transfer of the original asset. At the time of the assessment proceedings, subsequent to the date of transfer of the original asset, an assessee may claim that he will invest the amount in purchase / construction of a new house, though not have taken any steps towards that direction till then. In such a scenario, there should not be any method or procedure before the Assessing officer through which he could gather the real intention of the assessee, as the assessee, by saying so, may delay the taxation of the capital gains earned at least for three years from the date of transfer of original asset. Hence, sub section (2) puts an embargo to the assessee to casually claim the benefit of section 54 at the time of assessment, without being any act done to show his real intention of purchasing / constructing a new residential unit. Sub section (2), therefore, governs the conduct of the assessee that the assessee should put the amount of capital gains in an account in any such bank or institution specifically notified in this respect and that the return of the assessee should be accompanied by submitting a proof of such deposit, hence, sub section (2) is an enabling provision which governs the Act of the assessee, who intends to claim the benefit of the exemption provisions of section 54. The real purpose of the enabling provision is the compliance of the substantial provision of sub section (1) to section 54 of the Act. Sub section (2), in fact, regulates the procedure for the substantive rights of the exemption provisions u/s 54 of the Act. This enabling section, in our view, cannot abridge or modify the substantive rights given vide sub section (1) of section 54 of the Act, otherwise, the real purpose of substantive provision I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 7 i.e. sub section (1) will got defeated. The primary goal of exemption provisions of section 54 is to promote housing. The procedural and enabling provisions of sub-section (2) thus cannot be strictly construed to impose strict limitations on the assessee and in default thereof to deny him the benefit of exemption provisions. In our view, if the assessee at the time of assessment proceedings, proves that he has already invested the capital gains on the purchase / construction of the new residential house within the stipulated period, the benefit under the substantive provisions of section 54(1) cannot be denied to the assessee. Any different or otherwise strict construction of sub section (2), in our view, will defeat the very purpose and object of the exemption provisions of section 54 of the Act. Our above view, is fortified with the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Shri K RamachandraRao, ITA No. 47 of 2014 c/w ITA No. 46/2014, ITA No. 494/2013 and ITA No. 495/2013, decided vide order dated 14.7.2014 wherein the Hon'ble High Court has directly dealt with this issue while interpreting the identical worded provisions of section 54F(2) of the Act.” Si nce the provi sions of sectio n 54B are almost identical and are i n parima ter ia to the provisi ons of section 5 4 a nd 54 F of the Act, ther efore, the abo ve decisio n of the Tribunal ca n be safely applied i n this ca se also in relation to the issue of purchase of agr icultural land within the stipula ted period. Moreover, the f acts of the present ca se ar e o n better footing as o therwise, in this ca se, the asse ssee had d epo sited the proceed s of the sale deed in the ca pital g ains account, tho ug h, a little bit b elatedly a s per the ob servation of the Ld. CIT(A), whereas, the assessee had claimed that he had deposi ted the sale deed proceeds within due date. In vi ew of the decisio n of the Coordinate Bench of the Tribunal (supra), since the a ssessee had p ur chased the agricultur al land within the stip ulated period a nd also produce d the evidence of the same at the tim e of a sses sment proceedi ngs a nd fur ther there I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 8 was no do ubt abo ut the intention of the assessee from very beginning to i nvest the said amount for purchase of agricultural land, ther efore, the vi ew of the L d. PCIT is not correc t i n exer cising her r evisio n juri sdi ction u/s 263 of the Act o n thi s issue. 6. Claim of Depreciation on buses: Exercise of revision Jurisdiction by the PCIT: The Ld. PCIT in thi s resp ect ha s noted tha t the assessee has mentio ned that he is in the business of plying buses. That the a ssessee during the year ha d p ur cha sed one new b us for Rs.105000 0/- Tha t the assessee ow ned 7 buse s and claimed deprecia tio n upon those buses. However, no details r egarding acq ui sitio n of the said 7 buses were f urnished by the a sses see b efor e the AO, nor were called for by the AO. The AO allowed the claim of deprecia tio n of Rs. 857973/- witho ut verifying the value of the b uses a nd their date of acqui sitio n. The l d. AR o n the other hand ha s str essed that the issue was examined by the AO. However, after co nsid ering the rival sub missions, we are of the view that the L d. PCIT ha s rig htly dir ected the AO to examine this factual aspect. The order of the PCIT, ther efor e, on this i ssue is upheld a nd the AO is directed to verify the deprecia tion claim o n b uses. 7. Claim of deduction u/s 54F of the Act: This issue ha s been agitated by the assessee i n his app eal ITA No.440/Chd /2022 whic h is against the or der of the CI T(A) in rela tion to the rectificatio n or der pas sed by the AO u/s 15 4 of the Act stating that the assessee ha d fur ni shed additio nal evi dence before the Ld. CIT(A) in r espect of the aforesaid I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 9 claim which the Ld. CIT(A) has refused to admit. After co nsi deri ng the rival submissio ns, we restor e this issue to the file of the Assessing Officer with a direc tion to admi t the evi dence/do cuments rela ting to the above claim, exami ne the said documents and ex planatio ns furnished by the assessee and decide the issue a fr esh i n accordance with the law. 8. Issue relating to grant of lesser claim u/s 54B of the Act: At thi s stag e, the Ld. co uns el fo r the asse ssee has bro ught to our attention to the ground No . 3 of the a pp eal in I TA No. 440/Chd/ 2022 which is agai nst the or der of the CIT(A) i n relatio n to the rec tifica tion ord er passed u/s 1 54 of the Act to submi t that the AO has agai n given lesser r elief u/s 5 4B of the Act a t Rs. 80 lacs o nly, whereas, the claim of the assessee was of Rs. 95,90, 00 0/-. This issue, i n our view, is also req uired to be examine d by the asse ssing officer. So, this issue is r estor ed to the file of the a ssessing officer for the limited purpose with the direction tha t the AO will examine the quantum of claim allowable to the a ssesse e u/ s 5 4B of the Act. 9. Befor e par ting with the ord er, it is to be pointe d out that since all the grounds r elati ng to de ductio n u/s 54 B a nd 54 F sta nd adjudicated by us in the ter ms a s ind icated above, ther efore, the ap peal of the asse ssee p ending befo re the CI T(A) in rela tion to the order pa ssed u/s 143(3) o f the Act ha s become infructuous. The a ssessee i s sup posed to withdraw the same. I.T.A. Nos.439 & 440/CHANDI/2022 Assessment Year: 2017-18 Shri Gurdit Singh, Mohali 10 10. In the r esult the appe al of the assessee bearing No.439/ Chd/20 22 agi tating ag ainst the ord er of the P CI T passed u/s 2 63 is treate d as p artly allowed, whereas the I TA No.440/ chd /2 02 2 in rela tion to the order passed u/ s 1 54 of the Act is treated as allowed for sta tistical purposes. Chandigarh, the 16 th January, 2023. Sd/- Sd/- [Shri Vikram Singh Yadav] [Sanjay Garg] Accountant Member Judicial Member Dated: 16.01.2023. RS Copy of the order forwarded to: 1. Shri Gurdit Singh, Mohali 2. PCIT, Chandigarh-1 3. CIT(A)- 4. CIT- , 5. CIT(DR), ITAT, Chandigarh //True copy// By order Assistant Registrar 1. Date of Dictation.............................................. 2. Date on which the typed order is placed before the dictating Member and other Member..................................................... 3. Date on which the order came back to Sr. PS.......................................... 4. Date on which the file goes to the Bench Clerk....................................... 5. Date on which the file goes to the O.S....................................... 6. Date on dispatch of the order.............................................