K.Ramgopal, Coimbatore V. ITO, Coimbatore

ITA 475/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64423 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MDS; SHAJI P JACOB CIT ITA NOS
• Assessee Lawyers: N DEVANATHAN; R K VARADARAJ
• Keywords: Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 54F; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 704 /MDS/2011 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD-III(2), COIMBATORE. V. SHRI K. RAM GOPAL, NO. 53A, III CROSS, CO-OP. COLONY, UPPILIPALAYAM, COIMBATORE-641 015. (PAN : ABSPR3207R) AND ITA NO. 475/MDS/2011 ASSESSMENT YEAR : 2007-08 SHRI K. RAM GOPAL, V. THE IN COME TAX OFFICER, NO. 53A, III CROSS, WARD -III(2), CO-OP. COLONY, COI MBATORE. UPPILIPALAYAM, COIMBATORE-641 015. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI N. DEVANATHAN, ADVOCATE & SHRI R.K. VARADARAJ, CA DEPARTMENT BY : SHRI SHAJI P. JACOB, ADDL. CIT ITA NOS. 704 & 475/MDS/2011 2 DATE OF HEARING : 12.09.2012 DATE OF PRONOUNCEMENT : 17.10.201 2 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE CROSS APPEALS BY THE REVENUE AND THE ASSESS EE ARE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-I, C OIMBATORE DATED 11-01-2011 FOR THE ASSESSMENT YEAR 2007-08. 2. IN THE APPEAL FILED BY THE REVENUE, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LD. CIT(A)-I IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE AO AFTER MAKING PROPER INQUIRY WITH THE SUB REGISTRAR OF THE CONCERNED AREA IN COIMBATORE, ADOPTED THE FAIR MARKET VALUE @ ` 7,500/- PER CENT ON 01-04-1981. THIS WORKS OUT TO ` 17.25 PER SQ. FT. 2.A. THE LD. CIT(A)-I ERRED IN DIRECTING THE AO TO ADOPT THE FAIR MARKET VALUE OF ` 40/- PER SQ. FEET INSTEAD OF ` 17.25 ORIGINALLY ADOPTED BY THE ASSESSING OFFICER IN THE ORDER U/S 143(3) OF THE IT ACT, 1961 . 2.B. THE LD. CIT(A)-I HAS ERRED IN NOT APPRECIATI NG THE FACT THAT PROPER REFERENCE WAS MADE TO THE STAM P VALUATION AUTHORITIES TO FIND OUT THE EXACT FAIR MA RKET VALUE OF THE PROPERTY AS ON 01/04/1981. 3. THE LD. CIT(A)-I HAS ERRED IN NOT APPRECIATING T HE FACT THAT PROPER REFERENCE WAS MADE TO THE STAMP ITA NOS. 704 & 475/MDS/2011 3 VALUATION AUTHORITIES TO FIND OUT THE EXACT FAIR MA RKET VALUE OF THE PROPERTY AS ON 01/04/1981. 3.A. IN THIS CASE THE ASSESSEE INHERITED THE PROPERTY WHEN THE ORIGINAL OWNER EXPIRED AND THE ASSESSEE HAS HELD THE PROPERTY SINCE 26/03/1999. THIS FALLS IN THE FINANCIAL YEAR 1998-99 AND THE CO ST INFLATION INDEX FOR THIS YEAR OF 351 IS CORRECTLY A DOPTED IN THE NUMERATOR. 4. THE LD. CIT(A)-I ERRED IN ALLOWING INVESTMENT IN HOUSE CONSTRUCTION FROM NOVEMBER, 2006 TO 31/07/2007. 4.A. IT IS TO BE MENTIONED HERE THAT THE ASSESSEE HAD PURCHASED A PROPERTY MEASURING ROUGHLY 25 CENTS ONLY ON 06/02/2007. THE BUILDING PLAN APPROVAL WAS OBTAINED ONLY ON 02/04/2007. HENCE THE EXPENDITURE INCURRED BY THE ASSESSEE FROM 06/02/2007 TO 31/07/2007 WAS ALLOWED TO BE DEDUCTED FROM THE CAPITAL GAINS BY THE AO. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A)-I MAY BE CANCELLED AND THAT OF THE AO RESTORED. 3. IN THE APPEAL FILED BY THE ASSESSEE THE FOLLOWIN G GROUNDS HAVE BEEN RAISED : 1) THE APPELLANT HAD SOLD HIS OLD ANCESTRAL PROPERT Y FOR ` 2,16,50,000/- ON 20.09.2006 AND UTILIZED THE SALE PROCEEDS AS HEREUNDER: ITA NOS. 704 & 475/MDS/2011 4 A) PURCHASE OF HOUSE SITE PURCHASE ` 34,68,960.00 (ACCOUNTING YEAR 2006-07) B) CONSTRUCTION OF HOUSE I) ACCOUNTING YEAR 2006-07 ` 47,70,700.00 II) ACCOUNTING YEAR 2007-08 01-04-2007 TO 31.07.2007 ` 56,52,281.00 01-08-2007 TO 31-03-2008 ` 42,14,084. 00 ` 98,66,365.00 ACCOUNTING YEAR 2008-09 ` 4,90,490.00 ` 1,51,27,555.00 __________ __ TOTAL(A+B) ` 1,85,96,515.00 2) THE APPELLANT DID NOT DEPOSIT THE SALE PROCEEDS IN CAPITAL GAINS ACCOUNT SCHEME. 3) THE ASSESSING OFFICER HAD ALLOWED THE DEDUCT ION U/S 54 FOR THE PURCHASE OF HOUSE SITE FOR ` 34,68,960/-. 4) THE LEARNED CIT(A) HAS ALLOWED THE FOLLOWING RELIEF. A) THE FAIR MARKET VALUE AS ON 01.04.1981 AS ` 40/- PER S.FT. WHILE THE ASSESSING OFFICER HAD ADOPTED ` 17.25 PER S.FT. B) THE CONSTRUCTION EXPENSES IS ALLOWED BY THE HONBLE CIT(A) AS HEREUNDER WHILE THE ASSESSING OFF ICER HAD NOT ALLOWED THE CONSTRUCTION EXPENSES. I) ACCOUNTING YEAR 2006-07 ` 47,70,700/- II) ACCOUNTING YEAR 2007-08 ` 56,52,281/- ____________ TOTAL ` 1,04,22,981.00/- ----------------------- THE BALANCE BUILDING EXPENSES ` 4704574/- (4214084 + 490490) WAS NOT ALLOWED BY THE HONBLE CIT(A). ITA NOS. 704 & 475/MDS/2011 5 5) THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DOES NOT DEAL THE ENTIRE ELIGI BLE AND LEGAL DEDUCTIONS AVAILABLE FOR THE APPELLANT IN THE CONSTRUCTION EXPENSES. 6) THE FAIR MARKET VALUE AS ON 01.04.1981 IS ESTIMATED BY THE CHARTERED ENGINEER IS ` 97.50 PER SQ.FT. FOR THE LAND WHEREAS THE CIT(A) HAS ALLOWED ONLY ` 40/- PER SQ. FT. THE CHARTERED ENGINEER HAS ARRIVED BASED ON CE RTAIN SALE TOOK PLACE IN THAT AREA. THE VALUE ADOPTED BY THE CIT(A) IS VERY LOW COMPARED TO THE CHARTERED ENGINEER VALUATI ON. 7) THE CIT(A) HAS NOT ALLOWED THE EXPENSES INC URRED AFTER 31.07.2007. THE PERSONAL BALANCE SHEET AS ON 31.03.2008WAS ALSO FILED BEFORE THE ASSESSING OFFIC ER AND THE HONBLE CIT(A) FOR HAVING INCURRED THE EXPENSES DUR ING THE ACCOUNTING YEAR 2007-08 ALSO. THE FOLLOWING ARE TH E BUILDING CONSTRUCTION EXPENSES BY THE APPELLANT. A) 2006-07 ACCOUNTING YEAR ` 47,70,700 B) 2007-08 ACCOUNTING YEAR: I) 01-04-2007 TO 31-07-2007 ` 56,52,281 II) 01-08-2007 TO 31-03-2008 ` 42,14,084 ` 98,66,365 C) 2008-09 ACCOUNTING YEAR ` 4,90,490 ----------- ` 1,51,27,555 ------------------ THEREFORE FROM THE ABOVE FACTS, IT IS WELL EVIDENCE D THAT THE APPELLANT HAD USED THE ENTIRE SALE PROCEEDS FOR THE CONSTRUCTION OF HIS DREAM HOUSE AND THE INTENTION WAS ONLY TO USE THE SALE PROCEEDS OF HIS OLD HOUSE FOR CONSTRUCTION OF NEW HOUSE. THE FUNDS WERE NOT INVE STED IN ANY OTHER BUSINESS OR VENTURES. THE UNUSED MONEY W AS KEPT IN BANK ACCOUNT AND IN UTI BONDS. THEREFORE THE APPELLANT RELIED ON THE FOLLOWING CAS E LAWS. I) CIT VS. RAJESKUMAR JALAN (2006) ITR 0274 GAUHAT I HIGH COURT. ITA NOS. 704 & 475/MDS/2011 6 II) JAGAN NATH SING LODHA VS. ITO (2004) 85 TTJ (ITAT) 173 ITAT JODHPUR BUT THE HONBLE CIT(A) HAS NOT CONSIDERED OUR ABOVE CLAIM OF INVESTMENT IN HOUSE AFTER 31.07.2007 WHICH IS AGAIN ST THE LAW. THEREFORE THE APPELLANT PRAYS FOR THE FOLLOWING CLA IM. A) ADOPTING THE FAIR MARKET VALUE ` 97.50 PER SQ. FT. OF LAND AS VALUED BY THE CHARTERED ENGINEER. B) THE BUILDING CONSTRUCTION EXPENSES INCURRED EVE N AFTER 31-07-2007 WHICH AMOUNTS TO ` 4704574/-. 01-08-2007 TO 31-03-2008 ` 42,14,084 ACCOUNTING YEAR 2008-09 ` 4,90,490 ` 47,04,574 ---------------- IT IS PRAYED THAT THE JUSTICE MAY BE RENDERED AND T HE ADDITIONAL POINTS MAY BE ADDUCED AT THE TIME OF HEA RING. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CO TTON COMMISSION AGENT AND DERIVES COMMISSION INCOME. TH E ASSESSEE FILED A RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2007-08 BELATEDLY ON 25-07-2008 BY DECLARING TOTAL INCOME OF ` 3,39,270/-. THE RETURN WAS PROCESSED UNDER SEC. 1 43(1) OF THE INCOME TAX ACT, 1961 ('THE ACT' FOR SHORT) I NITIALLY. AFTER ISSUING A NOTICE U/S 143(2) THE ASSESSMENT W AS COMPLETED U/S 143(3) OF THE ACT AND THE TOTAL INCO ME OF THE ITA NOS. 704 & 475/MDS/2011 7 ASSESSEE WAS ASSESSED AT ` 1,79,00,080/-. THE ASSESSEE SOLD HIS RESIDENTIAL PROPERTY BY WAY OF SALE AGREEM ENT ON 20- 09-2006 FOR THE TOTAL CONSIDERATION OF ` 2,16,50,000/- TO M/S. MARUTHAM DEVELOPERS. THE ASSESSEE OBTAINED THE PRO PERTY BY WAY OF WILL DATED 30-11-1998 CREATED BY HIS FATH ER, MR. KONDASAMY. MR. KODASAMY HAD OBTAINED THE PROPERTY WAY OF WILL DATED 9-9-1959 FROM HIS FATHER. THE ASSESS EE BY WAY OF INHERITANCE BECAME THE ABSOLUTE OWNER OF THE PRO PERTY ON 26.3.1999 AFTER THE DEATH OF HIS FATHER, MR. KONDAS AMY. THE ASSESSEE IN THE RETURN OF INCOME WORKED OUT THE CAP ITAL LOSS TO THE TUNE OF ` , 1,48,000/-. THE ASSESSEE SOLD LAND MEASURING 15273 SQ.FT. AND TOOK THE FAIR MARKET VAL UE AS ON 1981 AT ` .264.77 PER SQ.FT. THE ASSESSEE DID NOT OPEN ANY CAPITAL GAINS ACCOUNT IN ANY NATIONALIZED BANK AND U SED ALL THE SALE PROCEEDS FOR THE CONSTRUCTION OF A RESIDEN TIAL HOUSE. THE ASSESSING OFFICER CALCULATED THE VALUE OF THE P ROPERTY AS ON 1.4.1981 ADOPTING THE GUIDELINE VALUE OF ` 7500 PER CENT. THE ASSESSING OFFICER ALSO CALCULATED THE INDEXED C OST OF ACQUISITION FROM THE FINANCIAL YEAR 1998-99 WHEN TH E ASSESSEE BECAME THE REAL OWNER OF THE PROPERTY. TH E CAPITAL GAIN WAS CALCULATED BASED ON THE INDEXED COST OF AC QUISITION ITA NOS. 704 & 475/MDS/2011 8 FROM THE FINANCIAL YEAR 1998-99. THE ASSESSING OFF ICER HAS ALSO NOT CONSIDERED THE INVESTMENT MADE IN THE HOUS E CONSTRUCTION FOR THE PURPOSE OF DEDUCTION U/S 54F O F THE ACT. 5. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE LEARNED CIT(APPEALS). IT WAS SUBMITTED B EFORE THE LEARNED CIT(APPEALS) THAT THE FAIR MARKET VALUE ADOPTED BY THE ASSESSING OFFICER IS VERY MUCH LESSER AND BE LOW THE GUIDELINE VALUE AND WITHOUT CONSIDERING THE CERTIFI CATE OF THE CHARTERED ENGINEER. THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD A S UNDER : 12. I HAVE GONE THROUGH ALL THE INFORMATION ON RECORD AND EXAMINED ALL THE FACTS. THE CHARTERED ENGINEER HAD TAKEN THE SALE VALUE OF THE PROPERTY IN THE VICINITY OF THE LAND AND BUILDING SOLD BY THE APPELLANT FOR COMPARISON PURPOSE SINCE NO PROPERTY WAS SOLD IN THE YEAR 1981 TO ADOPT THE FAIR MARKET VALUE. THE SALE INSTANCE WAS IN MARCH 1989 BUT THE PROPERTY WAS LOCATED BEHIND THE APPELLANTS PROPERTY AND WAS NOT ON THE MAIN ROAD. THE LAND VALUE AS PER THE DOCUMENT WAS ` 79.59 PER SQ.FT. THE ENGINEER ESTIMATED THE LAND VALUE (GUIDELINE VALUE) AT ` 39 PER SQ. FT. AS ON 1.4.81 AND MENTIONED THAT IT IS ON THE BACK SIDE ITA NOS. 704 & 475/MDS/2011 9 OF THE APPELLANTS PROPERTY WITH A NARROW LANE. THE APPELLANTS PROPERTY IS ON THE MAIN ROAD NEARER TO AVINASHI ROAD AT LAKSHMI MILLS BUS STOP. THE ENGINEER DETERMINED THE FAIR MARKET VALUE OF THE SOLD PROPERTY AT ` 97.50 PER SQ.FT. TAKING THESE FACTS INTO CONSIDERATION AND ALSO THE GUIDANCE VALUE AND MARKET VALUE AT WHICH THE APPELLANT SOLD THE PROPERTY IN 2006, IN MY OPINION, THE FAIR MARKET VALUE OF ` 40 PER SQ.FT. APPEARS TO BE REASONABLE. THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE MARKET VALUE OF ` 40 PER SQ.FT. TO DETERMINE THE COST OF THE LAND. THE BUILDING VALUE HAS TO BE ADOPTED AT ` 1,56,000/- AS ADOPTED BY THE APPELLANT. THE APPELLANT GETS PARTIAL RELIEF ON THIS ISSUE. 6. INSOFAR AS THE COST INFLATION INDEX IS CONCERNED , THE LEARNED CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO CALC ULATE THE COST OF INFLATION INDEX TAKING THE BASE YEAR OF COST IND EXATION AS ON 1981-82 SINCE THE PROPERTY WAS ACQUIRED BY THE ASSE SSEE THROUGH INHERITANCE FROM HIS FATHER LATE KONDASAMY BY WAY OF WILL. 7. INSOFAR AS THE BENEFIT U/S 54F OF THE ACT IS CON CERNED, THE LEARNED CIT(APPEALS) HELD AS UNDER : ITA NOS. 704 & 475/MDS/2011 10 20. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER ALONG WITH THE REMAND REPORT. OUT OF SALE PROCEEDS OF THE RESIDENTIAL HOUSE AT BHARATHIAR ROAD , COIMBATORE, THE APPELLANT PURCHASED ONE HOUSE AT COOPERATIVE COLONY, COIMBATORE FOR ` 34,68,960/-. AS SEEN FROM THE FACTS SUBMITTED BY THE APPELLANT, THE SAID VENDOR MR. C.S. NANDAGOPAL HAD MORTGAGED THE PROPERTY WITH BANK OF BARODA, TIRUPUR FOR THE CREDIT FACILITY AVAILED BY HIS COMPANY NAMELY DEVI GARMENT S PRIVATE LTD. THE SAID COMPANY HAD BECOME SICK AND COULD NOT PAY THE BANK DUES. THE BANK INITIATED LE GAL PROCEEDINGS WITH THE DEBT RECOVERY TRIBUNAL. IN TH E MEANTIME MR. NANDAGOPAL NEGOTIATED WITH THE BANK AS A COMPROMISING PROPOSAL TO SELL THE MORTGAGED PROPERTY. THE BANK HAD AGREED FOR SETTLEMENT OF ` 37.12 LAKHS OUT OF WHICH ` 5 LAKHS WAS PAID BY MR. NANDAGOPAL. THE BALANCE OF ` 32.12 LAKHS WAS PAID BY THE APPELLANT MR. RAMGOPAL. THE PAYMENTS WERE MADE DIRECTLY TO THE BANK BY MR. RAMGOPAL FROM HIS BANK ACCOUNTS. THE APPELLANT FILED LETTER DATED 15.09.0 6 SHOWING THE PAYMENTS MADE BY HIM TO BANK OF BARODA AND THE PAYMENTS WERE ALSO ACKNOWLEDGED BY BANK OF BARODA. A PERUSAL OF THESE LETTERS SHOWS THAT PAYMENTS TO THE BANK WERE MADE BY MR. RAMGOPAL IN SEPTEMBER, 2006. THE APPELLANT ALSO FILED A COPY O F THE APPLICATION FOR APPROVAL OF THE HOUSE SITE BY T HE ITA NOS. 704 & 475/MDS/2011 11 LOCAL PLANNING AUTHORITY BY PAYING THE DEVELOPMENTA L CHARGES OF ` 55,455/-. 21. THE CORPORATION HAD APPROVED THE SITE AS ON 31.12.2006 ITSELF WHICH IS EVIDENT FROM THE DETAILS FURNISHED BY THE APPELLANT. THE SITE PLAN SUBMITTE D FOR APPROVAL WAS SIGNED BY THE APPELLANT MR. K. RAMGOPA L. ONCE THE SITE IS APPROVED BY THE LOCAL PLANNING AUTHORITY, IT IS ELIGIBLE FOR CONSTRUCTION OF THE H OUSE AND THUS MR. RAMGOPAL STARTED CONSTRUCTION OF COMPOUND WALLS RIGHT FROM NOVEMBER 2006 ITSELF, I.E. FROM TH E DATE OF HAVING POSSESSION OF THE PROPERTY. AFTER T HE SALE DEED WAS EXECUTED, THE HOUSE PLAN WAS APPROVED BY THE MUNICIPAL CORPORATION. FURTHER, AS SEEN FRO M THE AFFIDAVIT FILED BY THE APPELLANT, THE BILLS ALO NG WITH THE AMOUNT SPENT FOR CONSTRUCTION AND THE BALANCE SHEET FILED ALONG WITH THE RETURN SHOW THAT THE APPELLANT HAS INVESTED AN AMOUNT OF ` 47,07,700/- TOWARDS HOUSE CONSTRUCTION. IT IS TO BE OBSERVED H ERE THAT THE ASSESSEE FAILED TO DEPOSIT THE CAPITAL GAI NS AMOUNT IN ANY OF THE NATIONALIZED BANK BY OPENING CAPITAL GAINS ACCOUNT. IN THE CONTEXT OF SUB-SEC TION (2) OF SECTION 54 OF THE INCOMETAX ACT, AMOUNT OF T HE CAPITAL GAIN WHICH IS NOT APPROPRIATED BY THE ASSES SEE TOWARDS THE PURCHASE OF NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE OR WHICH IS NOT UTILIZED BY HIM FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME U/S ITA NOS. 704 & 475/MDS/2011 12 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SU CH RETURN (SUCH DEPOSITS BEING MADE IN ANY CASE NOT LA TER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SEC. 139 IN AN ACCOUNT IN ANY SUCH B ANK OR INSTITUTION AS MAY BE SPECIFIED AND UTILIZED IN ACCORDANCE WITH ANY SCHEME WITH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSE OF SUB SECTION (1), THE AMOUNT, IF ANY ALRE ADY UTILIZED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMO UNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET. 22. THE SUB SECTION (2) OF SECTION 54 OF THE INCOMETAX ACT MAKES IT CLEAR THAT WHERE THE INVESTMENT IS NOT MADE IN THE ASSET BEFORE THE DUE DATE OF FURNISHING OF THE RETURN OF INCOME UNDER SECTION 139(1), IT SHALL BE DEPOSITED BY HIM IN A DEPOSIT SCHEME AS NOTIFIED BY THE CENTRAL GOVERNMENT. IF AN ASSESSEE COMPLIES WITH THIS PROVISO OF INVESTING IT BEFORE THE DUE DATE FOR FIL ING THE RETURN OF INCOME, THE WHOLE OF SUCH AMOUNT SHALL BE TAKEN AS INVESTMENT IN THE NEW ASSET. IN THE INSTANT CASE, THE DUE DATE FOR FILING OF THE RE TURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 FALLS ON 31.07.07. IN VIEW OF THE PROVISO OF SECTION 54(1) ITA NOS. 704 & 475/MDS/2011 13 READ WITH SEC. 54(2), THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION U/S 54F ONLY WITH REGARD TO THE INVESTMENT MADE IN THE HOUSE UP TO 31.07.07 FROM THE PURCHASE OF THE PROPERTY IN QUESTION. THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION REGARDING THE INVESTMENT IN THE PURCHASE OF LAND AND AMOUNT INVESTED IN CONSTRUCTION OF THE RESIDENTIAL HOUSE UPTO 31.07.07. 8. ON BEING AGGRIEVED, BOTH THE ASSESSEE AS WELL AS THE REVENUE CARRIED THE MATTER BEFORE THE TRIBUNAL. 9. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 10. THE FIRST ISSUE RELATES TO ADOPTION OF FAIR MAR KET VALUE. ACCORDING TO THE ASSESSING OFFICER THE GUIDELINE VA LUE AS PER THE SUB REGISTRAR OFFICE WAS ` 8,000 PER CENT. AS ON 1.4.1981 WHEREAS THE ASSESSING OFFICER ADOPTED ` 7500/- PER CENT. THE LEARNED CIT(APPEALS) OBSERVED THAT AS PER THE SUB R EGISTRAR OFFICE, COIMBATORE THE FAIR MARKET VALUE OF THE PRO PERTY SOLD WAS ` 7500 PER CENT., I.E. ` 17.25 PER SQ.FT. THE ASSESSEE HAS TAKEN THE FAIR MARKET VALUE AT ` 264.77 PER SQ.FT. AS PER THE CHARTERED ENGINEERS REPORT THE LAND VALUE WAS AT ` 39/- PER S.FT. AS ON 1.4.1981 AND THE CHARTERED ENGINEER HAS DETERMINED THE FAIR MARKET VALUE AT ` 97.50 PER S.FT. ON THE BASIS OF THE ITA NOS. 704 & 475/MDS/2011 14 ABOVE, THE LEARNED CIT(APPEALS) ESTIMATED THE FAIR MARKET VALUE AT ` 40 PER S.FT. AND PARTIAL RELIEF WAS GIVEN TO THE ASSESSEE. 11. WE FIND FROM THE ORDER OF THE LEARNED CIT(APPEA LS) THAT HE HAS GIVEN VARIOUS FIGURES AND ALSO CONSIDERED TH E CHARTERED ENGINEERS REPORT. HE HAS FAILED TO CONSIDER AS TO IN WHICH SURVEY NUMBER THE PROPERTY WAS SITUATED AND WHAT IS THE GUIDELINE VALUE OF THAT SURVEY NUMBER. WE ARE UNAB LE TO UNDERSTAND HOW THE LEARNED CIT(APPEALS) COULD ESTIM ATE THE FAIR MARKET VALUE WITHOUT CONSIDERING THE SURVEY NU MBER IN WHICH THE PROPERTY IS SITUATED AND WHAT IS THE FAIR MARKET VALUE AS ON THE DATE OF SALE OR NEARER TO THAT DATE. WE THEREFORE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(APPEALS) AND REMIT THE MATTER BACK TO THE ASSESSING OFFICER WITH THE D IRECTION TO ASCERTAIN AS TO WHAT IS THE SURVEY NUMBER IN WHICH THE PROPERTY IS SITUATED, WHAT IS THE GUIDELINE VALUE AVAILABLE AS ON THE DATE OF SALE OF THE PROPERTY BY THE ASSESSEE. ACCORDING LY, THE FAIR MARKET VALUE HAS TO BE DECIDED. 12. WITH REGARD TO THE COST OF INDEXATION, ACCORDIN G TO THE ASSESSEE, THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS OBTAINED A WILL CREATED BY HIS FATHER MR. KONDASAMY ON 30-11-1 998. THE ITA NOS. 704 & 475/MDS/2011 15 ASSESSEES FATHER OBTAINED THE PROPERTY BY WAY OF A WILL ON 9-9- 1959 FROM HIS FATHER. THE ASSESSEE BECAME THE ABSO LUTE OWNER ON 260-3-1999 ON THE DEATH OF HIS FATHER. TH E ASSESSING OFFICER HAS OBSERVED IN HIS ORDER THAT TH E ASSESSEE WAS THE ABSOLUTE OWNER OF THE PROPERTY AFTER 26-3-1 999. THE ASSESSING OFFICER HAS ADOPTED THE DENOMINATOR AS 35 1 WHICH RELATES TO THE ASSESSMENT YEAR 1999-2000. ACCORDIN G TO THE ASSESSEE THE DENOMINATOR HAS TO BE ADOPTED AS 100 F OR CALCULATING THE INDEXED COST OF ACQUISITION AND THE FAIR MARKET VALUE IS TO BE TAKEN AS ON 1.4.1981. THE LEARNED C IT(APPEALS) DIRECTED THE ASSESSING OFFICER TO CALCULATE THE COS T INFLATION INDEX TAKING THE BASE YEAR OF COST INDEX AS ON 198 1-82 SINCE THE PROPERTY WAS ACQUIRED BY THE ASSESSEE THROUGH I NHERITANCE FROM HIS FATHER LATE KONDASAMY BY WAY OF WILL. 13. THE ISSUE IS ABOUT THE COST OF INDEXATION OF PR OPERTY AND THE YEAR IN WHICH THE PROPERTY IS ACQUIRED. AS PER THE FACTS AVAILABLE ON RECORD THE ASSESSEE HAS ACQUIRED THE P ROPERTY WAY OF WILL CREATED BY HIS FATHER ON 30-11-1998. THE A SSESSEE BECAME THE ABSOLUTE OWNER OF THE PROPERTY ON 26-3-1 999 ON EXPIRY OF HIS FATHER. BUT THE LEARNED CIT(APPEALS) HAS TAKEN THE COST OF INDEXATION AS ON 1981-82 SINCE THE PROP ERTY WAS ITA NOS. 704 & 475/MDS/2011 16 ACQUIRED THROUGH INHERITANCE FROM HIS FATHER LATE K ONDASAMY BY WAY OF WILL. ON GOING THROUGH THE ENTIRE ORDER OF THE LEARNED CIT(APPEALS) AND THE ASSESSING OFFICER THE FACTS AR E NOT CLEAR. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO EXAMI NE ALL THE RELEVANT FACTS AND DECIDE THE ISSUE AFRESH IN ACCOR DANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASS ESSEE OF BEING HEARD. 14. THE NEXT ISSUE FOR CONSIDERATION IN THIS APPEAL RELATES TO DEDUCTION UNDER SECTION 54F OF THE ACT. THE CASE O F THE ASSESSEE IS THAT HE HAD TAKEN THE POSSESSION OF THE SITE IN SEPTEMBER, 2006 AND STARTED THE CONSTRUCTION OF WEL L IN ADVANCE BEFORE THE APPROVAL OF THE PLAN. THE SALE DEED WAS EXECUTED ON 6.2.2007. THE PLAN WAS SUBMITTED FOR A PPROVAL AND APPROVAL WAS OBTAINED. THE CONSTRUCTION WAS ST ARTED IN THE MONTH OF DECEMBER, 2006 AND WAS COMPLETED IN TH E MONTH OF APRIL, 2008. THE TOTAL COST OF THE HOUSE AS PER THE VALUATION REPORT IS ` 1.38 CRORES. THE SALE DEED WAS REGISTERED ON 6-2- 2007. THE BUILDING PLAN WAS OBTAINED FROM THE AUTH ORITIES ON 2.4.2007. THE LEARNED CIT(APPEALS) HAS OBSERVED IN HIS ORDER THAT THE ASSESSEE HAD PURCHASED ONE HOUSE AT BHARATH IAR ROAD, COIMBATORE FOR ` 34,68,960/-. THE VENDOR MR. C.S. NANDAGOPAL ITA NOS. 704 & 475/MDS/2011 17 HAD MORTGAGED THE PROPERTY WITH BANK OF BARODA, TIRUP UR FOR THE CREDIT FACILITY AVAILED BY HIS COMPANY NAMELY D EVI GARMENTS PVT. LTD. THE SAID COMPANY HAD BECOME SICK AND COU LD NOT PAY THE BANK DUES. THE BANK INITIATED LEGAL PROCEEDING S AND ULTIMATELY THE BANK AGREED FOR THE SETTLEMENT OF TH E LOAN TAKEN BY MR. NANDAGOPAL AT ` 37.12 LAKHS, OUT OF WHICH MR. NANDAGOPAL PAID ` 5 LAKHS AND THE BALANCE OF ` 32.12 LAKHS WAS PAID BY THE ASSESSEE, MR. RAMGOPAL. PAYMENTS W ERE MADE DIRECTLY TO THE BANK BY THE ASSESSEE FROM HIS BANK ACCOUNTS. THE ASSESSEE FILED A LETTER DATED 15-09- 2006 SHOWING THE PAYMENTS MADE BY HIM TO BANK OF BARODA AN D THE PAYMENTS WERE ALSO ACKNOWLEDGED BY BANK OF BARODA. A PERUSAL OF THESE LETTERS SHOWS THAT PAYMENTS TO THE BANK WERE MADE BY MR. RAMGOPAL IN SEPTEMBER, 2006. THE ASSES SEE ALSO FILED COPY OF THE APPLICATION FOR APPROVAL OF THE H OUSE SITE BY THE LOCAL PLANNING AUTHORITY BY PAYING THE DEVELOPM ENTAL CHARGES OF ` 55,455/-. WITH THE ABOVE OBSERVATION, THE LEARNED CIT(APPEALS) CAME TO THE CONCLUSION THAT THE ASSESS EE HAS INVESTED ` 47,70,700/- TOWARDS THE HOUSE CONSTRUCTION. HE FURTHER WENT ON SAYING THAT THE ASSESSEE HAS COMPLI ED WITH THE PROVISIONS OF SEC. 54. IN THE PRESENT CASE THE RET URN OF INCOME ITA NOS. 704 & 475/MDS/2011 18 FOR THE ASSESSMENT YEAR 2007-08 WAS DUE TO BE FILED ON 31.07.2007. ACCORDING TO THE LEARNED CIT(APPEALS) IN VIEW OF THE PROVISO OF SECTION 54(1) READ WITH SEC. 54(2) O F THE ACT THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION U/S 54F ON LY WITH REGARD TO THE INVESTMENT MADE IN THE HOUSE UPTO 31- 07-2007 FROM THE DATE OF PURCHASE OF THE PROPERTY IN QUESTI ON. ACCORDINGLY, THE LEARNED CIT(APPEALS) WAS DIRECTED TO ALLOW THE DEDUCTION IN REGARD TO THE INVESTMENT MADE IN THE P URCHASE OF THE LAND AND THE AMOUNT INVESTED IN THE CONSTRUCTIO N OF THE RESIDENTIAL HOUSE UPTO 31-07-2007. PARTIAL RELIEF WAS GIVEN TO THE ASSESSEE. 15. WE FIND THAT IN THIS CASE THE BASIC FACTS WERE NOT AVAILABLE ON RECORD AND THE LEARNED CIT(APPEALS) WI THOUT CONSIDERING THOSE BASIC AND NECESSARY FACTS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WHEN THE ASSESSEE HAD E NTERED INTO AN AGREEMENT WITH THE VENDOR MR. NANDAGOPAL WAS NOT AVAILABLE. WHAT ARE THE CONTENTS OF THE SALE AGREE MENT? WHETHER THIS AGREEMENT PROVIDED IMMEDIATE POSSESSIO N OF THE PROPERTY? WHEN THE ADVANCE WAS PAID BY THE ASSESS EE? WHEN THE FINAL PAYMENT WAS MADE? WHEN THE ASSESSEE APPLIED FOR THE PLAN APPROVAL (DATE, MONTH & YEAR) ? WHEN THE ITA NOS. 704 & 475/MDS/2011 19 ASSESSEE GOT THE APPROVAL (DATE, MONTH & YEAR)? AL L THESE FACTS ARE NECESSARY TO DECIDE THIS ISSUE. WE FIND THAT THESE FACTS WERE NOT PROPERLY EXAMINED BY THE LEARNED CIT (APPEALS). WE THEREFORE SET ASIDE THE ORDER PASSED BY THE LEAR NED CIT(APPEALS) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW. IN THE CIRCUMSTANCES THE ENTIRE APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE TO BE DECIDED BY CONSI DERING ALL THE NECESSARY FACTS IN DETAIL AND DE NOVO ASSESSMENT HAS TO BE PASSED AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 16. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 17 TH OF OCTOBER, 2012, AT CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) ( V.DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 17 TH OCTOBER, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE