Rakesh Kumar Kalra, Noida UP V. ITO ward-47(3), New Delhi

ITA 4647/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9876 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 22-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER MEENA
• Assessee Lawyers: BHUPINDERJEET
• Keywords: Corroborative evidences; Capital Gains
• Section: 13; 54

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 4647/DEL/2019 [ASSESSMENT YEAR: 2013-14] RAKESH KUMAR KALRA VS. THE INCOME TAX OF FICER A 600, SECTOR - 46 WARD - 47(3) NOIDA, GAUTAM BUDH NAGAR NEW DELHI UTTAR PRADESH PAN: AADPK 3694 F [APPELLANT] [RESPONDENT] DATE OF HEARING : 02.01.2020 DATE OF PRONOUNCEMENT : 06.01.2020 ASSESSEE BY : SHRI BHUPINDERJEET, ADV REVENUE BY : SHRI SURENDER MEENA, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 16, NEW DELH I DATED 19.03.2019 PERTAINING TO ASSESSMENT YEAR 2013-14. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ASSESSME NT THEREBY DENYING BENEFIT OF SECTION 54 OF THE INCOME TAX ACT , 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. 3. REPRESENTATIVE OF BOTH THE SIDES WERE HEARD AT L ENGTH. CASE RECORDS CAREFULLY PERUSED. 4. FACTS EMANATING FROM THE ASSESSMENT ORDER SHOW T HAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 28.09.20 13 DECLARING TOTAL INCOME OF RS. 8.90 LAKHS. RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT THROUGH CASS AND, ACCORDINGLY, STATUTORY NOTICES WE RE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF SCR UTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS COMPUTED HIS INCOME DECLARING CAPITAL GAIN AS UNDER : FULL VALUE OF CONSIDERATION RS. 1,10,00,000/ - LESS : EXPENDITURE ON TRANSFER RS. 1,05,000/- LESS : INDEXED COST ACQUISITION RS. 18,50,000/- LESS : INDEXED COST OF IMPROVEMENT RS. 40,00,000/- CAPITAL GAIN RS. 50,45,000/- 3 5. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF CLAIM OF DEDUCTION WHILE CALCULATING THE CAPITAL GAIN FROM S ALE OF PROPERTY. 6. IN HIS REPLY, THE ASSESSEE STATED THAT HE, ALONG WITH HIS BROTHER WHO WAS THE CO-OWNER OF THE PROPERTY, SOLD THE PROPERTY FOR A CONSIDERATION OF RS. 2.20 CRORES, AN D ACCORDINGLY, THE ASSESSEES SHARE OUT OF THE SALE CONSIDERATION WAS RS. 1.10 CRORES. IT WAS EXPLAINE D THAT 1% WAS PAID AS COMMISSION TO THE COMMISSION AGENT AS T RANSFER EXPENSES. IT WAS FURTHER EXPLAINED THAT THE SAID P ROPERTY WAS PURCHASED IN THE YEAR 2001 FOR AN AMOUNT OF RS. 18.50 LAKHS AND THE ASSESSEES SHARE CAME TO RS. 9.25 LAK HS WHICH WAS INDEXED AS PER THE PROVISIONS OF LAW AND INDEXE D COST WAS TAKEN AT 18.50 LAKHS. IT WAS FURTHER EXPLAINED THAT THE SAID PROPERTY WAS COMPLETED IN F.Y. 2003 AND TOTAL COST OF CONSTRUCTION WAS RS. 43.50 LAKHS. TAKING HIS 50% S HARE, COST OF CONSTRUCTION WAS TAKEN AT RS. 21.73 LAKHS AND AF TER INDEXATION, IT WAS AT RS. 40 LAKHS. 7. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURN ISH DETAILS OF EXPENSES INCURRED TOWARDS COMPLETION OF SOLD PROPER TY AMOUNTING TO RS. 21.73 LAKHS WHICH WAS INDEXED AT RS. 43.50 LAKH S. 4 8. THE ASSESSEE FURNISHED A DOCUMENTARY EVIDENCE IN THE FORM OF A DOCUMENT FROM THE STAMP DUTY VALUATION AUTHORITY SH OWING THE MINIMUM COST OF CONSTRUCTION EFFECTIVE FROM 01.04.2 002 WHICH WAS RS. 8000/- PER SQ. METRE. NOT SATISFIED WITH THIS EVID ENCE, THE ASSESSING OFFICER AGAIN ASKED THE ASSESSEE TO SUBSTANTIATE TH E CLAIM FOR COST OF CONSTRUCTION /IMPROVEMENT WITH SUPPORTING EVIDENCES . 9. ON RECEIVING NO PLAUSIBLE REPLY, THE ASSESSING O FFICER COMPUTED THE CAPITAL GAIN FROM TRANSFER OF THE PROPERTY AS U NDER: IN SUCH CIRCUMSTANCES COST OF CONSTRUCTION/ IMPROVEMENT CLAIMED BY THE ASSESSEE IN HIS COMPUTAT ION OF CAPITAL GAIN IS NOT FULLY ALLOWABLE. HOWEVER, IT IS ' OBSERVED FROM THE SALE DEEDS OF PROPERTIES THAT THE PROPERTY, WHEN IT WAS PURCHASED HAS COVERED AREA OF 60.14 SQ, MOTOR ONLY AND WHEN IT WAS SOLD IT HAS COVE RED AREA OF 439.06 SQ, MOTOR, THEREFORE, THIS FACT CANNOT B E DENIED THAT THE ASSESSEE HAS MADE CONSTRUCTION AFTE R ACQUIRING THE ABOVE PROPERTY. HOWEVER, IN ABSENCE O F ANY SUPPORTING DOCUMENTARY EVIDENCES, COST OF CONSTRUCT ION/ IMPROVEMENT IS TAKEN AS MINIMUM COST OF CONSTRUCTIO N AS PER THE GOVERNMENT RATE, COVERED AREA OF SOLD PROPE RTY IS 439.56 SQ, METER AND MINIMUM COST OF CONSTRUCTION 5 PREVAILING AT THE TIME OF CONSTRUCTION IS RS.8,000/- P ER SQ, METER, THEREFORE, THE COST OF CONSTRUCTION IS CALCULATED AS RS.35,16,480/-, FOR WHOLE OF THE PROPERTY , SINCE ASSESSEES SHARE IN THE PROPERTY WAS 50%, THEREFORE, RS.17,58,240/- IS TAKEN AS COST OF CONSTRUCTION ON PART OF THE ASSESSEE IN THE YEAR 2003, THUS INDEXED COST OF CONSTRUCTION / IMPROVEMENT FOR THE YEAR UNDER CONSIDERATION COMES OUT TO BE RS.32,35,46 5/- WHICH IS ALLOWED WHILE CALCULATING CAPITAL GAIN. 2:6 THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, CAPI TAL GAIN FROM TRANSFER OF THE PROPERTY DURING THE YEAR UNDER CONSIDERATION BY THE ASSESSEE IS CALCULATED AS UND ER: FULL VALUE OF CONSIDERATION RS. 1,10,00,000/- LESS: EXPENDITURE ON TRANSFER RS, 1,05,000/- LESS: INDEXED COST ACQUISITION RS. 18,50,000/-- LESS: INDEXED CONST, OF IMPROVEMENT RS. 32,35.465/- CAPITAL GAIN RS, 58,09,535/- 10. PROCEEDING FURTHER, THE ASSESSING OFFICER SOUGH T EXPLANATION FROM THE ASSESSEE FOR CLAIM OF EXEMPTION U/S 54 OF THE A CT. 6 11. IN HIS REPLY, THE ASSESSEE SUBMITTED THAT HE HA S PURCHASED A PROPERTY FOR RS. 53 LAKHS. COPY OF PURCHASE DEED W AS FURNISHED. THE ASSESSING OFFICER, NOT CONVINCED, FURTHER ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF EXEMPTION U/S 54 OF THE ACT. THE ASSE SSEE REPLIED THAT CONSTRUCTION IS GOING ON, ON THE SAID PLOT. ACCORDI NGLY, AN INSPECTOR WAS DEPUTED BY THE ASSESSING OFFICER FOR PHYSICAL V ERIFICATION AND IN HIS REPORT, THE INSPECTOR SUBMITTED THAT CONSTRUCTION I S STILL GOING ON AND IS NOT YET COMPLETED. 12. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF TH AT SINCE THE PROPERTY WAS SOLD ON 07.05.2012, THE ASSESSEE SHOUL D HAVE COMPLETED THE CONSTRUCTION BY 07.05.2015, AND SINCE NO CONSTR UCTION WAS COMPLETED WITHIN THREE YEARS, THE ASSESSING OFFICER DENIED EXEMPTION U/S 54 OF THE ACT AND MADE ADDITION ON LONG TERM CA PITAL GAIN AT RS. 58,09,535/-. 13. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 14. THE FIRST APPELLATE AUTHORITY DISMISSED THE CLA IM OF THE ASSESSEE FOR WANT OF DOCUMENTARY EVIDENCE TOWARDS COST OF IM PROVEMENT/ CONSTRUCTION. 7 15. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEH EMENTLY SUBMITTED THAT THE ASSESSEE HAS ALREADY INVESTED RS. 64.74 LA KHS TOWARDS COST OF CONSTRUCTION, WHICH IS MUCH HIGHER THAN THE CAPITAL GAIN COMPUTED BY THE ASSESSING OFFICER AT RS. 58.09 LAKHS. IT IS TH E SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT EVEN IF THE COMPUTATION OF TH E ASSESSING OFFICER IS ACCEPTED, THEN ALSO, SINCE THE ASSESSEE HAS INCU RRED MORE THAN THE CAPITAL GAINS, HE IS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT. 16. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THA T THE ASSESSEE IS SUPPOSED TO COMPLETE THE CONSTRUCTION OF THE HOUSE WITHIN THREE YEARS FROM THE DATE OF SALE OF PROPERTY ON WHICH CAPITAL GAIN AROSE AND SINCE THE ASSESSEE HAS FAILED TO COMPLETE THE CONSTRUCTIO N HE IS NOT ELIGIBLE FOR CLAIM OF EXEMPTION. 17. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE DID INVEST RS. 53 LAKHS IN PURCHASE OF LAND WITHIN THE SPECIFI ED PERIOD. THE ASSESSING OFFICER DID NOT ALLOW EXEMPTION TO THE AS SESSEE ON THE GROUND THAT RESIDENTIAL HOUSE WAS NOT CONSTRUCTED W ITHIN THREE YEARS 8 OF SALE OF HOUSE PROPERTY AND EVEN AT THE END OF TH E STIPULATED PERIOD OF THREE YEARS, THE HOUSE WAS INCOMPLETE. 18. IN OUR UNDERSTANDING OF THE LAW, WHEN QUESTION OF ALLOWANCE OF BENEFIT OF SECTION 54 IS REQUIRED TO BE CONSIDERED, IT IS ENVISAGED IN THE STATUTORY PROVISION THAT THE HOUSE TO BE CONSTRUCTE D AT THAT STAGE MIGHT BE UNDER CONSTRUCTION AND CAPITAL GAIN AT THA T TIME NOT ONLY APPROPRIATED OR UTILISED. IT IS, THEREFORE, NOT CO RRECT TO INSIST THAT THE ASSESSEE SHOULD ESTABLISH THAT RESIDENTIAL HOUSE IS COMPLETE AND THEN ASK FOR BENEFIT U/S 54 OF THE ACT. WHAT IS REQUIRED UNDER THE SECTION IS THAT THE ASSESSEE SHOULD TAKE STEPS TO MAKE INVESTM ENT IN A RESIDENTIAL HOUSE. THUS, EMPHASIS IS ON THE UTILISATION OR INV ESTMENT OF CAPITAL GAIN IN CONSTRUCTION OF RESIDENTIAL HOUSE. 19. CONSIDERING THE FACTS OF THE PRESENT CASE, CLAI M OF THE ASSESSEE IS THAT HE HAD INVESTED FULL SALE CONSIDERATION, AND O VER AND ABOVE THAT, SOME MORE MONEY AND TOTAL INVESTMENT IS AT RS. 64.7 4 LAKHS. 20. THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF SMT. SHASHI VARMA 224 ITR 106 HAS HELD THAT WHILE ALLOWI NG EXEMPTION U/S 54 OF THE ACT, INVESTMENT FOR ACQUISITION OF FLAT U NDER THE SCHEME OF 9 DDA, WHERE FIRST INSTALMENT WAS PAID, WAS MUCH MORE THAN THE CAPITAL GAINS, DEDUCTION IS TO BE ALLOWED AS SECTION 54 DOE S NOT REQUIRE THAT THE CONSTRUCTION OF NEW HOUSE SHOULD NECESSARILY BE COMPLETED WITHIN TWO YEARS WHERE SUBSTANTIAL INVESTMENT IS MADE IN C ONSTRUCTION OF HOUSE. 21. REQUIREMENT OF SECTION 54 OF THE ACT IS FOR THE ASSESSEE TO HAVE EITHER PURCHASED A RESIDENTIAL HOUSE, BEING A NEW A SSET, WITHIN THE STIPULATED PERIOD OR CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER. THE SECTION DOES NOT PRESCRIBE THE COMPLETION OF CONSTRUCTION OF RESIDENTIAL HOUSE AND THE THRUST IS ON THE INVESTMENT OF NET CONSIDERATION RECEIVED ON SAL E OF ORIGINAL ASSET AND START OF CONSTRUCTION OF A NEW RESIDENTIAL HOUS E. 22. IN OUR UNDERSTANDING OF THE FACTS AND LAW, IT I S CLEAR THAT FOR THE ASSESSMENT YEAR IN QUESTION, ALL THAT IS REQUIRED F OR THE ASSESSEE TO AVAIL EXEMPTION CONTAINED IN THE SECTION IS TO UTIL ISE THE AMOUNT OF CAPITAL GAIN FOR PURCHASE AND ACQUISITION OF NEW AS SET. 23. SINCE THE ASSESSEE HAS CLAIMED THAT HE HAS INVE STED RS. 64,74,946/-, WHICH IS HIGHER THAN THE AMOUNT OF CAP ITAL GAIN COMPUTED 10 BY THE ASSESSING OFFICER, THE ASSESSEE IS VERY MUCH ELIGIBLE FOR CLAIM OF EXEMPTION U/S 54 OF THE ACT. 24. HOWEVER, SINCE NO DOCUMENTARY EVIDENCES HAVE BE EN FURNISHED AND ONLY A CLAIM HAS BEEN MADE, WE DEEM IT FIT TO R ESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO DEMONSTRATE THAT HE HAS ALREADY INVESTED RS. 64,74, 946/- TOWARDS CONSTRUCTION OF HOUSE AND THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE DOCUMENTARY EVIDENCES AND IF FOUND CORRECT, ALL OW BENEFIT OF SECTION 54 OF THE ACT. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED FOR STATI STICAL PURPOSES. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IN ITA NO. 4647/DEL/2019 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.01. 2020. SD/- SD/- (BHAVNESH SAINI) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 TH JANUARY, 2020. VL/ 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER