Daram Indrasena , Hyderabad V. Income Tax Officer, Ward-11(4) , Hyderabad

ITA 511/Hyd/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6094 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB-B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Valuation report; Benefit of exemption; Capital Gains
• Section: 147; 148; 143(3); 54F; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) B EFORE SH RI SA TBEER SING H GODA RA, JU DI CIA L MEM BER AND SHR I L AXMI PR AS A D SAHU , AC COUNT ANT MEMBE R ITA No. 511/Hyd/2020 Assessment Year: 2010-11 Daram Indrasena, Hyderabad. PAN – AEJPD0923Q Vs. Income-tax Officer, Ward –11 (4), Hyderabad. (Appellant) (Respondent) Assessee by: Shri S. Rama Rao Revenue by: Smt. Matta Padma Date of hearing: 09/12/2021 Date of pronouncement: 20/12/2021 O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Assessee is directed against CIT(A) - 1, Hyderabad’s order dated 20/11/2019 for AY 2010-11 involving proceedings u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 ; in short “the Act on the following grounds of appeal: “1. The order of the learned CIT (A) is erroneous to the extent it is prejudicial to the appellant. ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 2 -: 2) The learned CIT (A) erred in confirming the action of the Assessing Officer in initiating proceedings ul s 147 of the I.T. Act. 3) The learned CIT (A) erred in applying the provisions of Sec. 5OC of the I.T.Act and in considering the full value of the consideration at Rs. 72,30,000/- for the purpose of determining the capital gain. 4) The learned CIT (Appeals) ought to have seen that the valuation cell has valued the property and determined the market value as on the date of transfer at Rs.52,60,000/ - and the same is also not considered. 5) The learned CIT (A) ought to have considered the fact that even the valuation report is unjust as the valuation officer did not take into consideration the deficiencies for determining the market value at Rs.38,12,000/- by the appellant. 6) The learned CIT (A) erred in not allowing the claim for deduction u/s S4F of the I.T. Act. 7) Any other ground or grounds that may be urged at the time of hearing.” 2. We notice at the outset that assessee’s instant appeal suffers from 167 days delay in filing before the ITAT. Considered the submissions of the ld. AR that the assessee was prevented by reasonable cause for not filing the appeal within the stipulated time. We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 3 -: substantial justice. We accordingly hold that assessee’s impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits. 3. As per the information available with the Department that the appellant sold some immovable property on 14.07.2009 which attracts capital gains provisions, the assessing officer issued/served notice under section 148 and initiated proceedings u/s.147. Though, there was no response to the several notices and subsequent opportunities including show cause letter, the appellant filed his return of income on 23.12.2017 subsequent to the show cause notice arriving the capital gains at Nil. The assessing officer completed the assessment u/s.147 r.ws. 143(3) of the Income Tax Act on 29.12.2017 determining the total income at Rs.71,91,981/-, by observing in the assessment order as under: "In this context, it is to mention that in spite of several opportunities, the assessee has not complied with the notices/ letters issued by the department. Consequent to the show cause notice issued, the assessee filed return of income and filed letter objecting to the value to be adopted as per the provisions of section SOC of the Act at the fag end, leaving no time to the department to carry out the proceedings in a systematic manner. However, to comply with the provisions of section SOC of the Act, the property has been immediately referred ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 4 -: to the Departmental Valuation Officer on 28.12.2017 itself. The report from the DVO is awaited. In the sale deed, in the schedule to the market value statement, it is clearly mentioned that the total market value of the property was to the tune of Rs. 76,23,000/- In view of the time barring nature of the assessment and subject to the outcome of the valuation to be made by the Departmental Valuation Officer, the full value of consideration is adopted at Rs. 72,30,000/ - as per the provisions of section SOC of the Income-tax Act,1961 and long term capital gains is arrived at.” 3.1 Regarding deduction u/s 54F of the Act, the AO disallowed the assessee’s claim of deduction u/s 54F by observing as under: “The assessee claimed exemption under sec.54F of the Act to the tune of Rs.34,91,011/ - in the return of income filed out of the capital gains admitted. During the course of hearing on 28.12.2017, when the assessee's AR appeared, she was asked to furnish evidence as under: (1) Evidence to the effect that the building was _constructed within the time specified under the provisions of the Act In response, the assessee's AR stated that the asssessee constructed, a residential house in the name of his wife Smt. D. Anitha and the deduction was claimed in respect of that residential house. In support of his claim, the assessee furnished the following information: (1) photograph of the building stated to have been constructed ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 5 -: (2) Proceedings of the GHMC, dt. 30.10.2009 for regularization of unapproved plot. (3) GHMC building permit order (4) Electricity bills relating to December,20 17 and municipal receipts relating to 2016-17 and 2015-16 (5) Valuation report from a registered valuer. As per the provisions of section 54F, the assessee should have constructed a residential property within three years from the date of transfer and if the amount of net consideration is not reinvested in construction of a residential house up to the last date of filing of return of income under sec. 139, then the same amount should be deposited in the capital gains deposit account scheme with a specified bank and the proof of deposit is required to be attached with the return of income of that year. In the present case, the assessee has not furnished any of the above details. Further, as per the municipal receipts, the owners of the building are mentioned as Daram Anitha and Darani Nagarani. The assessee has not explained the relationship with Daram Nagarani. The report given by the Regd. Valuer also does not mention about the period of construction and stage wise construction. Since the assessee has not proved the fulfillment of conditions laid down under the provisions of section 54C, the deduction is not allowable and accordingly, the same disallowed.” 4. When the assessee preferred an appeal before the CIT(A), the CIT(A) regarding adopting the value fixed by the SRO as full value of consideration, held that as the valuation ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 6 -: report of the DVO is presently available with the AO, the AO is directed to adopt the value as given in the valuation report i.e. Rs. 52,60,000/- and arrive at the capital gains. 4.1 With regard to deduction u/s 54F of the Act, the CIT(A) confirmed the action of the AO by holding that the assessee except making a few statements, had not produced any proof relating to this issue. 5. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT. 6. Before us, the ld. AR of the assessee submitted that the learned CIT (A) erred in applying the provisions of Sec. 5OC of the I.T. Act and in considering the full value of the consideration at Rs. 72,30,000/- for the purpose of determining the capital gain. He further submitted that the learned CIT (Appeals) ought to have seen that the valuation cell has valued the property and determined the market value as on the date of transfer at Rs.52,60,000/ - and the same is also not considered and ought to have considered the fact that even the valuation report is unjust as the valuation officer did not take into consideration the deficiencies for determining the market value at Rs.38,12,000/- by the appellant. ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 7 -: 7. The ld. DR, on the other hand, relied on the orders of revenue authorities. 8. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. Before us, the ld. AR of the assessee referred paged No. 41 of the paper book, which is valuation report. He wanted to get more relief from the influenced factors adopted by the DVO while arriving valuation of the property. On perusal of the same, we observe that the DVO has considered all the aspects and, therefore, no influencing factors could be given to the assessee. Therefore, we do not find any infirmity in the order of the CIT(A) in directing the AO to adopt the value as given in the valuation report of Rs. 52,60,000/- for computation of capital gains. Accordingly, ground Nos. 2 to 5 are dismissed. 9. As regards ground No. 6 regarding claim for deduction u/s 54F of the Act, the AO disallowed the assessee’s claim u/s 54F on the ground that the assessee has not complied and fulfilled the conditions laid down under the provisions of section 54F of the Act. Even the CIT(A) held that the assessee has not produced any proof to substantiate his claim. ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 8 -: 10. After hearing both the parties and perusing the material on record as well as the orders of revenue authorities, it is observed that before the AO, the assessee’s AR stated that the assessee constructed a residential house in the name of his wife Smt. D. Anitha and the deduction was claimed in respect of that residence. In support of his claim, the assessee furnished the following information: 1. Photograph of the building stated to have been constructed. 2. Proceedings of the GHMC, dt. 30/10/2009 for regularization of unapproved plot. 3. GHMC building permit order. 4. Electricity bills relating to December, 2017 and municipal receipts relating to 2016-17 and 2015-16 5) Valuation report from the registered valuer. 10.1 In this connection we rely on the decision of the Hon’ble coordinate bench of ITAT, Bengaluru in the case of Krishnappa Jayaramaiah Vs. ITO, [2021] 125 taxmann.com 110 wherein the coordinate bench on the similar issue as in hands of the case, observed as under: “6. We have heard the rival contentions, perused and carefully considered the material on record. Section 54F which reads as follows : 54F. CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE (1) Subject to the provisions of sub-section (4), where in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or wo years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 9 -: be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 : Provided that nothing contained in this sub-section shall apply where—(a) the assessee,—(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset ; or(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset ; or(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset ; and(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”. Explanation For the purposes of this section,—“net consideration”, in relation to the transfer of a capital asset means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such new asset is transferred. ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 10 -: (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—(i) the amount by which—(a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1),exceeds(b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset,shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and(ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. 7. The objection of the ld. DR is that the assessee has purchased new residential house in the name of Smt. Shailaja J, who is married widowed daughter of the assessee. According to the ld. DR, the Income Tax Act needs to be given legal interpretation not a liberal interpretation as contended by the ld.AR. If the www.taxguru.in 8 ITA No.405/Bang/2020 word ‘assessee’ used in the Income Tax Act is to be given liberal interpretation, it would be tantamount to giving free hand to the assessee and its legal heirs, it shall curtail the revenue of the Government, which the law does not permits. 8. On the other hand, the contention of the learned Authorised Representative is that the assessee has not made investment in the name of any unknown person. It was made in the name of his dependent married widowed daughter who is the legal heir of the assessee. Admittedly, in this case purchase consideration for purchase of new residential house was paid by the assessee out of sale consideration of property situated at 70, Kannamangala Vilalge, Kasaba Hobli, Devanahalli Taluk, Bangalore. ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 11 -: There is a direct nexus between the sale consideration received and utilized investing in residential house in the name of Smt. Shylaja J, who is married widowed daughter of the assessee. It is to be noted that a purposive consideration is to be preferred as against literal consideration, more so when even in calling the literal consideration, there is nothing in the Section 54F of the Act to show that the house should be purchased in the name of the assessee only. As a matter of fact, Section 54F of the Act in terms does not required that the new residential property shall be purchased in the name of the assessee, it merely says that the assessee should have purchased/constructed a “residential house”. www.taxguru.in 9 ITA No.405/Bang/2020 9. Now let us examine the applicability of various case laws decided by various Courts. In the case of CIT Vs. Natarajan [(2007) 287 ITR 271 (Mad)] wherein it was held that the assessee has purchased a property in the name of his wife, the Hon'ble Court held that the assessee will be eligible for exemption u/s. 54F of the Act. 9.1 In the case of Gurunam Singh [(2010) 327 ITR 278 (P&H)], it was held that the assessee purchased residential house in the name of wife and the assessee has paid entire sale consideration and merely has included his wife as owner of the property, it would not make any difference and in fact such a contract has to be encouraged which helps in empowerment of women and that the government itself has floated various schemes permitting joint ownership with wife. The Court further observed that the assessee therein should be a constructive owner of the property. 9.2 Further the A.P. High Court in the case of Late Gulam Ali Khan v. CIT [165 ITR 228 (AP)] wherein it was held that the object of granting exemption u/s. 54F of the Act, is that a person who sells a residential house for the purpose of purchasing another convenient house must be given exemption so far as capital gains are concerned. As long as the sale of the house and purchase of another house are part of the same scheme, the lapse of sometime between the sale and purchase makes no difference. The word “assessee” must be given a wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word “assessee” as that would frustrate the object of granting the exemption. 9.3 In the case before us, the assessee's married widowed daughter is having no independent source of income and is fully dependent on the assessee, on the death of her husband on 20.12.2017. This fact was also clarified by filing a Joint Affidavit by Smt. Shailaja J and the assessee dt.11.12.2018. Being so, in our opinion, the statute should be construed liberally; since the provisions permit economic growth has to be interpreted liberally, restriction on it too has to be construed so as to advance the objective of the provisions not to frustrate it. Accordingly, we are of the opinion that the assessee has invested the sale consideration on transfer of ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 12 -: Capital Asset in purchasing a new residential property in the name of Smt. Shailaja J who is being married widowed dependent daughter of the assessee and also legal heir of the assessee. Accordingly, we direct the Assessing Officer to grant exemption u/s. 54F of the Act on the amount invested in purchase of residential house in his daughter’s name. This ground of appeal of assessee is allowed.” 10.2 Following the above decision of the coordinate bench, we direct the AO to give the benefit of exemption u/s 54F in the light of the above judgment, if the assessee is entitled for the benefit of exemption u/s 54F of the Act. Accordingly, this ground is allowed for statistical purposes. 11. Ground Nos. 1 & 6 are general in nature and ground No. 2 is regarding the action of the CIT(A) in confirming the action of the AO in initiating proceedings u/s 147 of the Act. The CIT(A) treated this ground as general in nature. Hence, this ground is not emanated from the order of CIT(A). 12. In the result, appeal of the assessee is partly allowed for statistical purposes in above terms. Pronounced in the open court on 20 th December, 2021. Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 20 th December, 2021. kv ITA No.. 511/Hyd/2020 S r i D a r a m I n d r a s e n a, H y d . :- 13 -: Copy to : 1 Sri Daram Indrasena Plot No. 77 & 78, Laxminagar Colony, Suraram Village, Quthbullapur Mandal, Medchal District. 2 ITO, Ward – 11(4), Hyderabad. 3 CIT(A) - 1, Hyderabad. 4 Pr. CIT – 5, Hyderabad 5 ITAT, DR, Hyderabad. 6 Guard File.