ITO, New Delhi V. Sh. Mahinder Kumar Chawla, New Delhi

ITA 4585/DEL/2013

• Counselvise Citation: 458520114 RSA 2013
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KEYUR PATEL
• Keywords: Wrong claim
• Section: 54

Judgement Text

ITA NO. 4585 .DEL.13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A .NO.-4585/DEL/2013 (ASSESSMENT YEAR-2008-09) ITO, WARD-33(2),ROOM NO-1602, 16 TH FLOOR, TOWER-E-2, DR. S.P.MUKHERJEE CIVIC CENTRE, J.L.NEHRU ROAD, NEW DELHI (APPELLANT) VS MAHINDER KUMAR CHAWLA, 17-A/60, AJMAL KHAN ROAD, KAROL BAGH, NEW DELHI PAN-AAEPC0874E (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: SH. KEYUR PATEL, SR. DR ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER DATED 09.05.2013 OF CIT(A)-XXVI, NEW DELHI PERTAINING TO 2008-09 AS SESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THE CIT(A) HAS ERRED IN DELETING DISALLOWANCE O F RS.13,50,000/- MADE BY THE A.O. OUT OF EXEMPTION CLAIMED U/S 54 OF THE I.T.ACT, 1861. 2. THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FAC T THAT THE EXEMPTIONS U/S 54 IS AVAILABLE FOR ONLY ONE RESIDENTIAL UNIT AND T HE ASSESSEE HAD PURCHASED DIFFERENT UNITS OF THE BUILDING AS SEPARATE PROPERT IES VIDE SEPARATE REGISTRIES. 3. THE APPELLANT CRAVES TO ADD, ALTER OR AMEND ANY/ ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING O F THE APPEAL. 2. NO ONE WAS PRESENT AT THE TIME OF HEARING ON BEH ALF OF THE ASSESSEE RESPONDENT. HOWEVER AFTER GOING THROUGH THE RECORD IT WAS CONSIDERED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-P ARTE QUA THE ASSESSEE RESPONDENT ON MERIT AFTER HEARING THE LD. SR DR MR. K. PATEL. ITA NO. 4585 .DEL.13 2 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE WHO IS AN INDIVIDUAL RETURNED AN INCOME OF RS. 11,30,062/- WHICH WAS PRO CESSED U/S 143(1). HOWEVER THE AO RECEIVED INFORMATION FROM ITO (INV.), UNIT-V I(4), NEW DELHI THAT THE ASSESSEE HAD SOLD THE PROPERTY NO-17A/60, AJMAL KHA N ROAD, KAROL BAGH, NEW DELHI ON 05.03.2008 FOR A TOTAL CONSIDERATION OF RS .44,00,000/- AND CLAIMED EXEMPTION U/S 54 AMOUNTING TO RS.29,12,355/- WHICH RESULTED IN A WRONG CLAIM OF CAPITAL GAIN OF RS.13,50,000/- U/S 54 OF THE IN COME TAX ACT. THE RELEVANT GIST OF THE REPORT EXTRACTED IN THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER:- FURTHER SH. NITIN CHAWLA HAS STATED IN HIS STATEME NT RECORDED ON OATH ON 19/05/2010 THAT PROPERTY NO.13/14, WEA, KAROL BAGH, NEW DELHI WAS PURCHASED 35 YEARS AGO BY HIS GRANDFATHER LATE SH. MOTI RAM CHAWLA AND SAME WAS SOLD OUT ON 5 TH MARCH 08 FOR RS.44,00,000/- BY HIS FATHER SH. MAHI NDER KUMAR CHAWLA. OUT OF THIS SALE, CONSIDERATION HIS FATHER SH. MAHINDER KUMAR CHAWLA HAS FURTHER INVESTED IN PROPERTY NO 17A/60, BASEMENT, AJMAL KHAN ROAD, KAROL BAGH, NEW DELHI MEASURING AREA OF 234 S Q. YARD ON 05/03/2008 AND CLAIMED EXEMPTION U/S 54 OF THE INCOME TAX OF R S.29,12,355/-. IT IS OBSERVED FROM THE DETAILS FILED THAT SH.MAHINDER KU MAR CHAWLA HAS CLAIMED EXEMPTION UNDER SEC. 54 OF THE INCOME TAX ACT AMOUN TED TO RS.29,12,355/- FOR A.Y. 2008-09 IN HIS COMPUTATION OF INCOME, WHICH IS NOT ALLOWABLE ON THE BASEMENT PORTION AS PER INCOME TAX ACT, THEREFORE, THE EXEMPTION OF CAPITAL GAIN ON TRANSFER OF ASSETS ON PURCHASE OF BASEMENT PORTI ON MOUNTING RS.13,50,000/- IS NOT ALLOWABLE AS PER INCOME TAX ACT. THEREFORE, WR ONG CLAIM OF CAPITAL GAIN U/S 54 OF THE INCOME TAX ACT AMOUNTING TO RS.13,50,000/ - SHOULD BE TAXED. 4. ACCORDINGLY PROCEEDINGS WERE INITIATED U/S 148. THE RECORD SHOWS THAT THE ASSESSEE PUT IN APPEARANCE IN-COMPLIANCE TO THE NOT ICE AND CLAIMED THAT THE ASSESSEE HAD INVESTED THE SALE PROCEEDS OF THE RESI DENTIAL PROPERTY FOR PURCHASE OF ANOTHER RESIDENTIAL PROPERTIES TO CLAIM EXEMPTION F ROM CAPITAL GAINS TAX. IN SUPPORT OF THE SAID CONTENTION, COPIES OF THE SALE DEED AS WELL AS PURCHASE DEED WERE FILED BEFORE THE AO. THE AO REQUIRED THE ASSE SSEE TO PRODUCE EVIDENCE TO DEMONSTRATE THAT THE PROPERTY PURCHASED WAS UTILIZE D FOR RESIDENTIAL PROPERTIES PRIOR TO AND AFTER THE PURCHASE THEREOF. THE AO BE ING OF THE VIEW THAT THE MERE FACT THAT THE PROPERTY WAS PURCHASED IN A RESIDENTI AL AREA DID NOT PROVE THAT IT WAS ITA NO. 4585 .DEL.13 3 USED FOR RESIDENTIAL PURPOSES. IN THE ABSENCE OF S UCH EVIDENCE WHICH DESPITE OPPORTUNITY WAS NOT PRODUCED THE A.O HELD THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE PROPERTY WAS USED FOR RESIDEN TIAL PURPOSES. HE FURTHER HELD THAT THE BASEMENT CANNOT BE UTILIZED FOR RESIDENTIA L PURPOSES AS BASIC FACILITIES AS WATER COMMUNICATION, COMMUNICATION TO SEWERAGE AND ACCESS TO THE NATURAL LIGHT WERE MISSING WHICH MAKES THE PROPERTY UN-INHABITABL E FOR RESIDENTIAL PURPOSES. ACCORDINGLY THE EXEMPTION CLAIM WAS DISALLOWED AND AN ADDITION OF RS.13,50,000/- WAS MADE IN THE HANDS OF THE ASSESSE E. 5. AGGRIEVED BY THIS THE ASSESSEE CAME IN APPEAL BE FORE THE FIRST APPELLATE AUTHORITY. BEFORE WHOM AS PER PARA 4 OF THE IMPUGN ED ORDER , FOLLOWING SUBMISSIONS WERE MADE:- 1. THAT THE LD. INCOME-TAX OFFICER DISALLOWED THE EXEMPTION U/S 54 BY MAKING AN ARBITRARY ADDITION OF RS.13,50,000.00 BY EXCLUDING THE VALUE OF BASEMENT PORTION IN THE PROPERTY NO.17A/60, W.E.A, AJMAL KHAN ROAD, KAROL BAGH, NEW DELHI-110005. THE LD. INCOME TAX OFFICER HAS NTO APPRECIATED THAT THE APPELLANT PURCHASED THE SAID RESIDENTIAL PROPER TY OF WHICH THE BASEMENT IS A COMPOSITE PART AND THE SAME CANNOT BE EXCLUDED WHIL E COMPUTING CAPITAL GAIN U/S 54 OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. ASSESSING OFFICER, WHILE MAKING TH E ABOVE ARBITRARY ADDITION OF RS.13,50,000.00 HAS NOT APPRECIATED THA T THE APPELLANT EARNED A CAPITAL GAIN OF RS.29,12,355.00, WHICH WAS FULLY UT ILIZED BY THE APPELLANT IN THE PURCHASE OF THE HOUSE PROPERTY INCLUDING BASEMENT A REA OF THE IMPUGNED PROPERTY FOR TOTAL CONSIDERATION OF RS.57,10,500.00 , WHICH ITSELF WITHOUT ANY PRESUMPTION OR ASSUMPTION PROVES THAT THE CAPITAL G AIN HAS BEEN FULLY UTILIZED. 3. WITH PREJUDICE TO THE FACT, THE LD. ASSESSING OF FICER HAS FAILED TO APPRECIATE THAT EVEN IF THE BASEMENT AREA IS NOT INCLUDED, FOR WHICH A SEPA RATE REGISTRY OF RS.13,50,000.00 HAS BEEN MADE, THE BALANCE INVESTME NT IN THE PURCHASE OF GROUND, FIRST AND SECOND FLOOR PORTION OF THE PROPE RTY ALSO EXCEEDS THE AMOUNT OF CAPITAL GAIN OF RS.29,12,355. 00, WHICH CLEARLY DENOTES THAT THE ADDITION OF RS.13,50,000.00 IS BAD IN LAW. 5.1. CONSIDERING THE SUBMISSIONS THE CIT(A) CAME TO THE FOLLOWING CONCLUSIONS:- 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS OF THE APPELLANT. ON CONSIDERING THE FACTS OF THE CASE, I FIND THAT THE ASSESSING OFFICER HAD NOT APPRECIATED THE FACTS BROUGHT ON RECORD BY THE APPE LLANT. I FIND THAT THE APPELLANT HAD DULY FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ITA NO. 4585 .DEL.13 4 SHOWING LONG TERM CAPITAL GAIN OF RS.29,12,355/- ON SALE OF GROUND AND SECOND FLOOR OF PROPERTY NO.13/14, WEA, KAROL BAGH, NEW DE LHI. THE LONG TERM CAPITAL GAIN HAD BEEN CLAIMED EXEMPT U/S 54 OF THE IT ACT, 1961. ON PERUSAL OF THE STATEMENT OF LONG TERM CAPITAL GAIN FILED BY THE AP PELLANT, I FIND THAT EXEMPTION U/S 54 WAS CLAIMED IN RESPECT OF THE FOLLOWING INVE STMENTS:- SALE PROCEEDS INVESTED IN BELOW MENTIONED PROPER TY PROPERTY:17A/60, AJMAL KHAN ROAD, KAROL BAGH, NEW D ELHI 1. PURCHASE PROCEEDS (2007-08/5.3.2008) RS.27,00,000 .00 (GROUND FLOOR AND FIRST FLOOR) 2. PURCHASE PROCEEDS (2007-08/5.3.2008) RS.13,50,000 .00 (SECOND FLOOR AND TERRACE) RS.40,00,000.00 ADD: STAMP DUTY & CORPORATION TAX RS. 2,29,500. 00 TOTAL VALUE RS.42,79,500.00 THUS, THE CAPITAL GAIN OF RS.29,12,355/- STOOD FULL Y INVESTED BY THE APPELLANT RESULTING IN NIL CAPITAL GAIN. THE INVESTMENT OF RS .13,50,000/- FOR PURCHASE OF BASEMENT WAS NOT A PART OF THE ABOVE INVESTMENT OF RS.42,79,500/- AND THE AMOUNT OF RS.13,50,000/- INVESTED IN BASEMENT WAS N OT INCLUDED IN TOTAL INVESTMENT OF RS.42,79,T;00/- OUT OF WHICH EXEMPTIO N OF RS.29,12,355/- WAS CLAIMED U/S 54 OF THE IT ACT, 1961. IT MAY BE MENTI ONED THAT ALTHOUGH THE APPELLANT HAD PURCHASED 3 RESIDENTIAL UNITS ON DIFF ERENT FLOORS IN THE SAME BUILDING AND CONVERTED THEM INTO A SINGLE RESIDENCE , HE IS ENTITLED TO DEDUCTION U/S 54 IN RESPECT OF THE INVESTMENT MADE IN THE PURCHASE OF THE ABOVE THREE FLOORS AND TERRACE. THEREFORE, CONSIDER ING THE FACTS OF THE CASE, I SEE NO JUSTIFICATION FOR THE ASSESSING OFFICER TO M AKE AN ADDITION OF RS.13,50,000/- BEING THE INVESTMENT MADE IN THE PUR CHASE OF BASEMENT THAT WAS NOT INCLUDED BY THE APPELLANT IN THE TOTAL INVE STMENT OF RS.42,79,500/-. THE EXEMPTION U/S 54 OF THE I.T.ACT, 1961 WAS CLAIM ED FOR AN AMOUNT OF RS.29,12,355/- OUT OF THE TOTAL INVESTMENT OF RS.42 ,79,500/- MADE IN PURCHASE OF GROUND, FIRST AND SECOND FLOOR (INCLUDING TERRAC E) OF THE SAID PROPERTY. THE EXEMPTION U/S 54 WAS NOT CLAIMED FOR THE PURCHASE O F BASEMENT. ACCORDINGLY, THE ADDITION OF RS.13,50,000/- MADE BY THE ASSESSIN G OFFICER IS DELETED. 5.2. THE LD. SR. DR PLACES RELIANCE UPON THE ASSESS MENT ORDER HOWEVER THE FINDINGS AVAILABLE ON RECORD WERE NOT ASSAILED BY A NY EVIDENCE OR ARGUMENTS. 6. HAVING HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD, IN THE ABSENCE OF ANY MATERIAL FACT OR EVID ENCE TO THE CONTRARY WE FIND NO GOOD REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). IT IS SEEN THAT THE CATEGORIC FINDING THAT ALL RELEVANT FACTS WERE DISC LOSED IN THE RETURN FILED SHOWING A LONG TERM CAPITAL GAIN OF RS.29,12,355/- ON SALE OF SPECIFIC GROUND AND SECOND FLOOR OF PROPERTY NO-13/14, WEA, KAROL BAGH, NEW D ELHI WAS SHOWN AS ITA NO. 4585 .DEL.13 5 INVESTED IN GROUND, FIRST AND SECOND FLOOR OF 17A/6 0, AJMAL KHAN ROAD, KAROL BAGH DISCLOSED. THE CIT(A) HAS REPRODUCED THE SPEC IFIC STATEMENT OF LONG TERM CAPITAL GAIN FILED BY THE ASSESSEE WHICH HAS BEEN E XTRACTED IN THE EARLIER PART OF THIS ORDER. HE HAS ALSO GIVEN A FINDING THAT THE I NVESTMENT OF RS.13,50,000/- FOR PURCHASE OF BASEMENT WAS NOT A PART OF THE INVESTME NT OF RS.42,79,500/- AND THE AMOUNT OF RS.13,50,000/- INVESTED IN THE BASEMENT A CCORDINGLY WAS NOT INCLUDED IN THE TOTAL INVESTMENT OF RS.42,79,500/-. SINCE TH E CAPITAL GAIN OF RS.29,12,355/- STOOD FULLY INVESTED IN THE PURCHASE OF PROPERTY WH ICH FACTS HAVE NOT BEEN DEMONSTRATED TO BE INCORRECT BY ANY EVIDENCE LET AL ONE A COGENT EVIDENCE. IN THESE CIRCUMSTANCES, WHERE THERE IS NO EVIDENCE ASS AILING THIS RELEVANT FINDING, THE DEPARTMENTAL GROUND IS DISMISSED. THE SAID ORD ER WAS PRONOUNCED ON THE DATE OF HEARING IN THE OPEN COURT. 7. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS DI SMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OF JANUARY, 2014. SD/- SD/- (B.C.MEENA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 31/01/2014 *AMIT KUMAR/R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT RE GISTRAR ITAT NEW DELHI ITA NO. 4585 .DEL.13 6