Sri Ch Krishna Kannaiah(HUF), Tanuku V. The ITO, Ward-1, Tanuku

ITA 512/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50319 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Gift; Principle of natural justice; Revised return
• Section: 143(3); 54B; 54F; 133A; 148; 54; 263

Judgement Text

ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.512/VIZAG/2010 ASSESSMENT YEAR: 2007-08 CH. KRISHNA KANNAIAH (HUF) TANUKU ITO WARD-1 TANUKU (APPELLANT) PAN NO: AAAHC 6368P VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20-09- 2010 PASSED BY LD CIT, RAJAHMUNDRY U/S 263 OF THE A CT AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS CHALLENGING THE PROCEEDING I NITIATED BY LD CIT(A) U/S 263 OF THE ACT IN ORDER TO DENY THE EXEMPTION ALLOW ED U/S 54F OF THE ACT IN RESPECT OF INCOME FROM LONG TERM CAPITAL GAIN. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE HEREIN IS ASSESSED IN THE STATUS OF HUF. DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE SOLD AN AGRICULTURAL LAND, HAVING EXTE NT OF 3.36 ACRES, FOR A TOTAL CONSIDERATION OF RS.4,08,46,000/-. THE ASSES SEE CLAIMED DEDUCTION UNDER SECTION 54B AS WELL AS UNDER SECTION 54F OF T HE ACT IN THE RETURN OF INCOME FILED ORIGINALLY. THE DEPARTMENT CARRIED OU T A SURVEY OPERATION U/S 133A OF THE ACT IN THE HANDS OF A FIRM M/S GOLD STA R CABLE NETWORK, TANUKU, IN WHICH THE KARTHA OF THE ASSESSEE WAS THE MANAGING PARTNER. DURING THE COURSE OF THAT SURVEY OPERATION, THE ASS ESSEE HEREIN WAS ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 2 OF 10 QUESTIONED ABOUT THE ELIGIBILITY OF CLAIM UNDER SEC TION 54B OF THE ACT, AFTER NOTICING THAT THE ASSESSEE HAD CLAIMED EXEMPTION BO TH UNDER SECTION 54B AND 54F OF THE ACT. THE ASSESSEE AGREED TO REVISE ITS RETURN OF INCOME BY DELETING THE EXEMPTION UNDER SECTION 54B OF THE ACT AS THE SAID EXEMPTION IS AVAILABLE FOR INDIVIDUALS. ACCORDINGLY, THE ASS ESSEE FILED A REVISED RETURN OF INCOME ADMITTING LONG TERM CAPITAL GAIN OF RS.1, 58,46,290/-, AFTER CLAIMING EXEMPTION ONLY U/S 54F OF THE ACT. THE SA ID RETURN WAS REGULARIZED BY ISSUING NOTICE U/S 148 AND THE ASSES SING OFFICER COMPLETED THE ASSESSMENT BY ACCEPTING THE INCOME DISCLOSED BY THE ASSESSEE. THE EXEMPTION UNDER SECTION 54F OF THE ACT CLAIMED ON T HE AMOUNT RS.2,18,99,910/- INVESTED BY THE ASSESSEE IN PURCHA SE OF TWO ADJACENT BLOCK OF PLOTS HAVING AN AGGREGATE EXTENT OF 4478 S Q. YARDS IN SURVEY NO.106/1 AT DOLLAR HILLS COLONY, UPPALGUDA VILLAGE, RAJENDRA NAGAR, RANGA REDDY DISTRICT. THE EXEMPTION U/S 54F OF THE ACT ON THE ABOVE SAID INVESTMENT WORKED OUT AT RS.1,95,83,009/-. THE MAN NER OF COMPUTATION OF LONG TERM CAPITAL GAIN AND EXEMPTION UNDER SECTION 54F, AS COMPUTED BY THE ASSESSEE IS GIVEN BELOW: TOTAL SALE CONSIDERATION 4,08,46,000 LESS:- EXPENSES IN CONNECTION WITH THE SALE 12,25,000 ----------------- NET SALE CONSIDERATION 3,96,21,000 LESS:- INDEXED COST OF PURCHASE 41,91,703 ----------------- NET LONG TERM CAPITAL GAIN 3,54,29,297 LESS:- EXEMPTION U/S 54F:- 3,54,29,297 / 3,96,21,000 X 2,18,99,910/- 1,95,83,009 ----------------- NET CAPITAL GAIN CHARGEABLE TO TAX 1,58,46,288 ======== 4.. THE LD CIT INITIATED REVISION PROCEEDING U/ S 263 OF THE ACT, AS HE WAS OF THE VIEW THAT THE EXEMPTION U/S 54F OF THE A CT IS NOT AVAILABLE TO THE ASSESSEE FOR THE FOLLOWING TWO REASONS: (A) THE ASSESSEE HAS CLAIMED DEDUCTION ON T HE VALUE OF PURCHASE OF PLOTS, WHERE AS THE EXEMPTION U/S 54F IS AVAILABLE FOR THE PURCHASE/CONSTRUCTION OF A RESIDENTIAL HOUSE PROPER TY. ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 3 OF 10 (B) THE ASSESSEE IS OFFERING RENTAL INCOME FROM OUT OF TWO PROPERTIES, WHILE THE CONDITION FOR ALLOWING EXEMPTION U/S 54F IS THAT THE ASSESSEE SHOULD HAVE ONLY ONE RESIDENTIAL HOUSE PROPERTY. IN THE REVISION PROCEEDING, IT WAS SUBMITTED THAT T HE ASSESSEE HEREIN IS THE OWNER OF ONLY ONE BUILDING; THAT THE OTHER BUILDING BELONGS TO HIS MINOR CHILDREN, WHO HAD ACQUIRED THE SAME BY WAY OF GIFT FROM THEIR GRAND PARENTS. IN THIS REGARD, IT WAS SUBMITTED THAT THE ASSESSEE HAD WRONGLY DECLARED THE RENTAL INCOME FROM THE BUILDING BELONG ING TO THE MINORS IN THE STATUS OF HUF, WHICH IS NOT REQUIRED UNDER THE LA W. THE LEARNED CIT ACCEPTED THE SAID CONTENTIONS OF THE ASSESSEE AND A CCORDINGLY HELD THAT THE ASSESSEE IS THE OWNER OF ONE RESIDENTIAL BUILDING O NLY. WITH REGARD TO THE CONDITION OF PURCHASE/ CONSTRUCTION OF A RESIDENTIA L BUILDING, IT WAS SUBMITTED THAT THE ASSESSEE, AFTER THE PURCHASE OF PLOTS CITED ABOVE, HAD MADE INVESTMENT OF RS.37,87,958/- AND RS.51,52,845/ - IN THE FINANCIAL YEARS ENDING 31.3.2008 AND 31.3.2009 TOWARDS CONSTR UCTION OF HOUSE ON THE SAID PLOTS. HENCE, THE LD CIT, AFTER MAKING DU E VERIFICATION OF SUPPORTING DOCUMENTS FILED IN THIS REGARD, WAS CONV INCED WITH THE COMPLIANCE OF SAID CONDITION ALSO. 5. HOWEVER, THE LD CIT TOOK THE VIEW THAT THE ASSESSEE COULD CLAIM EXEMPTION U/S 54F ONLY ON AN INVESTMENT OF RS.1,26, 07,285/-, AS AGAINST THE AMOUNT OF RS.2,18,99,910/- INVESTED BY THE ASSE SSEE. THE BACK GROUND OF THE SAID REASONING IS STATED IN BRIEF HER E UNDER. AS STATED EARLIER, THE ASSESSEE HAD PURCHASED TWO BLOCK OF AD JACENT PLOTS, VIZ., PLOT N HAVING AN EXTENT OF 2578 SQ. YARD FOR A CONSIDERATI ON OF RS.1,26,07,285/- AND PLOT M HAVING AN EXTENT OF 1900 SQ. YARD FOR A CONSIDERATION OF RS.92,92,625/-, BOTH AGGREGATING TO 4478 SQ. YARDS WITH A PURCHASE VALUE OF RS.2,18,99,910/-. THE ASSESSEE CONSTRUCTED BU ILDING ONLY ON PLOT N AND THE PLOT M WAS TREATED AS LAND APPURTENANT TO T HE SAID BUILDING. HOWEVER, THE LD CIT WAS OF THE VIEW THAT THE PLOT M HAVING AN EXTENT OF 1900 SQ. YARDS CANNOT BE CONSIDERED AS LAND APPURTE NANT TO THE BUILDING. BEFORE LEARNED CIT, IT APPEARS THAT THE ASSESSEE HA S PUT A REQUEST TO ALLOW ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 4 OF 10 EXEMPTION ON THE INVESTMENT MADE ON THE CONSTRUCTIO N OF THE BUILDING. HENCE THE LEARNED CIT EXPRESSED THE VIEW THAT THE A SSESSEE COULD NOT CLAIM EXEMPTION U/S 54F FOR THE COST OF CONSTRUCTIO N OF BUILDING. THE OBSERVATIONS MADE BY THE LD CIT(A) IN THIS REGARD A RE EXTRACTED BELOW:- SINCE THE PLOTS COMPRISING OF THE BALANCE AREA OF 1900 SQUARE YARDS CANNOT BE SAID TO BE THE LANDS APPURTE NANT TO THE RESIDENTIAL HOUSE CONSTRUCTED, THE INVESTMEN T OF RS.92,92,625/- MADE IN THE PURCHASE OF SUCH PLOTS F ROM THE BALANCE NET SALE CONSIDERATION MUST NECESSARILY HAVE TO BE EXCLUDED FROM THE BENEFIT OF DEDUCTION U/S 54 F OF THE ACT. HENCE, THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION U/S 54F OF THE ACT TO THE EXTENT OF THE V ALUE OF INVESTMENT OF RS.1,26,07,285/- MADE IN THE PURCHASE OF A PLOT COMPRISING OF 2578 SQUARE YARDS. NEEDLESS TO MENTION THAT THE QUANTUM OF ADDITIONAL INVESTMENT M ADE IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE FROM T HE BALANCE NET CAPITAL GAINS, IN RESPECT OF WHICH TAX HAD BEEN PAID WILL NOT QUALIFY FOR FURTHER DEDUCTION FOR THE SIMPLE REASON THAT THE AMOUNT OF NET CAPITAL GAINS OF RS.2,18,99,910/- IN RESPECT OF WHICH PROPORTIONATE DEDUCTION OF RS.1,95,83,009/- U/S 54F OF THE ACT HA S BEEN CLAIMED, STOOD ALREADY INVESTED IN THE PURCHASE OF LANDS AND, HENCE, MERELY ON THE BASIS OF THE ADDITIONAL INVESTMENT FROM A DIFFERENT SOURCE IN THE CONSTRUCT ION OF RESIDENTIAL HOUSE, THE ASSESSEE DOES NOT BECOME ELI GIBLE FOR FURTHER DEDUCTION U/S 54F OF THE ACT. 6. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEA L BEFORE US WITH THE FOLLOWING TWO EFFECTIVE GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX IS NO T JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DE DUCTION U/S 54F BY CONSIDERING AN INVESTMENT OF RS.1,26,07,285/- AS AGAINST RS.2,18,99,910/- ON THE GROUND THAT THE BALANCE INV ESTMENT IS IN RESPECT OF LAND NOT APPURTENANT TO THE RESIDENTIAL HOUSE. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COM MISSIONER OF INCOME TAX OUGHT TO HAVE DIRECTED THE ASSESSING OFF ICER TO CONSIDER THE INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUS E FOR PURPOSES OF RECOMPUTING THE EXEMPTION U/S 54F. 7. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE ASSESSING OFFICER HAS APPLIED HIS MIND ON THE CLAIM OF EXEMPTION MADE BY THE ASSESSEE AND ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 5 OF 10 IN THIS REGARD, HE INVITED OUR ATTENTION TO THE QUE STIONS POSED TO THE ASSESSEE DURING THE COURSE OF SURVEY OPERATION. HE FURTHER SUBMITTED THAT THE LD CIT HAS INITIATED THE IMPUGNED REVISION PROC EEDING, AS HE WAS OF THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR THE EXEMPTION U/S 54F OF THE ACT ON TWO GROUNDS. HOWEVER, AFTER BEING SATISFIED WITH THE EXPLANATIONS OF THE ASSESSEE AND EVIDENCES FURNISHED BEFORE HIM, TH E LD CIT HAS DIRECTED THE ASSESSING OFFICER TO RESTRICT THE EXEMPTION TO THE COST OF ONE BLOCK OF PLOT WHILE REJECTING THE CLAIM OF THE ASSESSEE THAT THE ADJACENT BLOCK OF PLOTS SHOULD BE TAKEN AS THE LAND APPURTENANT TO TH E HOUSE PROPERTY. ACCORDINGLY, HE SUBMITTED THAT THERE ARE TWO POSSIB LE VIEWS IN RESPECT OF THIS MATTER AND THE PROCEEDING U/S 263 DOES NOT LIE AS THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS IN THE INSTANT CASE. THE LD A.R , BY INVITING OUR ATTENTION TO THE PLAN SKETCH OF THE IM PUGNED PLOTS AND ALSO PHOTO VIEW OF THE BUILDING, SUBMITTED THAT THE ENTI RE BLOCK OF PLOTS HAVE BEEN AGGREGATED AND CONVERTED AS A SINGLE PLOT BY T HE ASSESSEE FOR THE PURPOSE OF CONSTRUCTION WHICH HAVE ALSO BEEN ENCLOS ED BY A SINGLE COMPOUND WALL. IN THIS REGARD, THE LD A.R PLACED R ELIANCE ON THE DECISION OF THE DELHI BENCH OF HONBLE ITAT IN THE CASE OF A DDL. CIT VS. NARENDRA MOHAN UNIYAL REPORTED IN (2009) (34 SOT 152) TO SU BMIT THE INVESTMENT MADE IN THE LAND APPURTENANT TO THE RESIDENTIAL BUI LDING IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. 8. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSING OFFICER DID NOT DISCUSS ANY THING IN THE ASSESSMENT ORDER ABOUT THE EXEMPTION UNDER SECTION 54F OF THE ACT CLAIMED BY THE ASSESSEE. HEN CE IT IS NOT CLEAR WHETHER THE ASSESSING OFFICER HAS ACTUALLY APPLIED HIS MIND ON THE IMPUGNED ISSUE OR NOT. THE ASSESSEE HAD PURCHASED TWO PLOTS AND HAS CONSTRUCTED BUILDING ONLY ON ONE OF THE PLOTS. HEN CE THE LD CIT HAS DIRECTED THE ASSESSING OFFICER TO DISALLOW THE EXEM PTION CLAIMED ON THE COST OF ADJACENT BLOCK OF PLOTS. THE LEARNED D.R SUBMIT TED THAT AREA OF THE LAND APPURTENANT TO THE BUILDING SHOULD BE REASONAB LE, ON WHICH THERE CANNOT BE TWO POSSIBLE VIEWS. THE LD CIT WAS REASO NABLE ENOUGH TO ALLOW ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 6 OF 10 EXEMPTION ON THE VALUE OF ABOUT 2/3 RD PORTION OF THE TOTAL LAND. WITH REGARD TO THE DECISION RELIED UPON THE ASSESSEE, TH E LD D.R SUBMITTED THAT THE SAME CANNOT HAVE BINDING FORCE ON THE PRESENT B ENCH. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE VALIDITY OF INITIATION OF PROCEEDING U/S 263 OF THE ACT HAS TO BE EXAMINED IN THE LIGHT OF DECISIONS RENDERED BY THE HONBLE SUPR EME COURT IN VARIOUS CASES. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF POWER LTD., (2010) (329 ITR 289) HAS EXTRACTED THE FOLLOWING O BSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR IN DUSTRIAL CO. LTD. (2000) (243 ITR 83). 18. FURTHER, EVEN IF TWO VIEWS WERE POSSIBLE, AND THE VIEW TAKEN BY THE ASSESSING OFFICER WAS PLAUSIBLE ONE, I T BY THE COMMISSIONER OF INCOME-TAX, THAT WOULD NOT PROVIDE SUFFICIENT GROUND FOR THE COMMISSIONER OF INCOME-TA X TO ASSUME JURISDICTION UNDER SECTION 263 OF THE ACT ME RELY BECAUSE HE HAD A DIFFERENT VIEW. IN MALABAR INDUSTR IAL CO. LTD. [2000] 243 ITR 83, THE SUPREME COURT GAVE THE FOLLOWING INTERPRETATION TO THIS PROVISION (HEAD-NO TE) : 'A BARE READING OF THIS PROVISION MAKES IT CLEAR THAT THE PRE-REQUISITE TO EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PRE-JUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PRO-VISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 7 OF 10 THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE `PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT CONFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NO T CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS T O LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE `PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE LAW AND IT HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW.' 10. IN THE INSTANT CASE, AS ALREADY STATED, THE ASSESSEE CLAIMED EXEMPTION BOTH UNDER SECTION 54B AND 54F OF THE ACT IN ITS ORIGINAL RETURN OF INCOME FILED ON 25.3.2008. HOWEVER, DURING THE COURSE OF SURVEY OPERATION CONDUCTED ON 17-9-2008, THE ASSESSING OFF ICER EXAMINED THE COMPUTATION OF IMPUGNED LONG TERM CAPITAL GAIN AND DETECTED THAT THE EXEMPTION CLAIMED UNDER SECTION 54B IS NOT IN ACCOR DANCE WITH THE LAW. HENCE THE ASSESSING OFFICER HAS RAISED A SPECIFIC Q UESTION, I.E. Q.NO.9 IN THE STATEMENT TAKEN DURING THE COURSE OF SURVEY, ME ANING THEREBY THE ASSESSING OFFICER WAS OTHERWISE SATISFIED WITH THE EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. SUBSEQUENTLY, THE ASSESSEE HAS FILED A REVISED RETURN OF INCOME BY REVISING THE COMPUTATION OF LO NG TERM CAPITAL GAIN AND THE SAID RETURN WAS REGULARIZED BY THE ASSESSIN G OFFICER BY ISSUING THE NOTICE U/S 148 OF THE ACT WITH THE REASONING THAT T HE ASSESSEE HAS ADMITTED ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 8 OF 10 ADDITIONAL INCOME, I.E. LONG TERM CAPITAL GAIN. LA TER THE ASSESSMENT WAS COMPLETED U/S 143(3) BY ACCEPTING THE INCOME RETURN ED BY THE ASSESSEE AFTER HAVING DISCUSSIONS WITH THE THEN AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE. FROM THE EVENTS NARRATED ABOVE, IT CAN B E SEEN THAT THE VERY PURPOSE OF COMPLETING THE INSTANT ASSESSMENT IS TO ASSESS THE LONG TERM CAPITAL GAIN MODIFIED BY THE ASSESSEE IN ITS REVISE D RETURN. HENCE, IT CANNOT BE SAID THAT THE ASSESSING OFFICER DID NOT APPLY HI S MIND ON THE IMPUGNED ISSUE. 11. NEXT, WE NOTICE THAT THE LD CIT HAS INITIA TED THE PROCEEDING U/S 263 OF THE ACT AS HE WAS OF THE VIEW THAT THE ASSESSEE HAS MADE INVESTMENT ONLY IN THE LAND AND FURTHER THE ASSESSEE IS POSSES SING TWO RESIDENTIAL HOUSES. HOWEVER, ON BOTH THE POINTS THE LD CIT WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, I.E. THE ASSESSEE IS THE OWNER OF ONLY ONE RESIDENTIAL HOUSE PROPERTY AS ON THE DATE OF SALE O F AGRICULTURAL LAND AND FURTHER THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HOUSE ON THE LANDS PURCHASED BY THE ASSESSEE. THUS, WE NOTICE THAT, A FTER BEING SATISFIED WITH THE POINTS ON WHICH THE REVISION PROCEEDINGS WERE I NITIATED U/S 263 OF THE ACT, THE LD CIT HAS PROCEEDED TO RAISE A NEW ISSUE OF LAND APPURTENANT TO THE RESIDENTIAL HOUSE PROPERTY. THERE CANNOT BE A NY DISPUTE THAT THE ACT DOES NOT PRESCRIBE ANY LIMIT WITH REGARD TO THE ARE A OF LAND THAT SHOULD BE CONSIDERED AS THE LAND APPURTENANT TO THE RESIDENT IAL BUILDING. IT IS ALSO STATED THAT THE ASSESSEE HAS ENCLOSED THE ENTIRE LA ND BY A COMPOUND WALL, MEANING THEREBY THE INTENTION OF THE ASSESSEE IS TO USE THE ENTIRE PORTION OF THE PLOTS AS A SINGLE RESIDENTIAL HOUSE. THIS B EING THE CASE, IN OUR VIEW, THE QUESTION WHETHER THE ASSESSEE CAN JOIN THE ADJA CENT PLOTS WITH THE PLOTS ON WHICH IT HAS CONSTRUCTED A RESIDENTIAL BUI LDING AND TREAT THE SAME AS LAND APPURTENANT TO THE BUILDING? BECOMES A D EBATABLE QUESTION, ON WHICH THERE COULD BE TWO POSSIBLE VIEWS. IN THAT C ASE, THE VIEW OF THE ASSESSING OFFICER IN ACCEPTING THE STAND OF THE ASS ESSEE SHOULD BE CONSIDERED AS ONE OF THE POSSIBLE VIEWS. IN THAT C ASE, IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MA LABAR INDUSTRIAL CO. ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 9 OF 10 LTD, (SUPRA), THE PROCEEDING U/S 263 DOES NOT LIE I N RESPECT OF THE IMPUGNED ISSUE. 12. THE ASSESSEE HAS RAISED A GROUND SEEKING EX EMPTION U/S 54F ON THE INVESTMENT MADE IN THE CONSTRUCTION OF THE RESIDENT IAL HOUSE. IT MAY BE NOTICED THAT THE LD CIT HAS OBSERVED THAT THE ASSES SEE CANNOT BE ALLOWED EXEMPTION ON THE VALUE OF INVESTMENT MADE IN THE RE SIDENTIAL HOUSE. HOWEVER, WE NOTICE FROM THE COPY OF RETURN FILED BY THE ASSESSEE THAT IT HAS CLAIMED EXEMPTION U/S 54F OF THE ACT ONLY ON TH E COST OF LAND AND THE ASSESSING OFFICER HAS ALSO ALLOWED THE SAID EXEMPTI ON ONLY ON THE COST OF LAND. HENCE THE ISSUE OF CLAIMING OR ALLOWING EXEM PTION U/S 54F OF THE ACT ON THE INVESTMENT MADE IN THE CONSTRUCTION OF RESID ENTIAL BUILDING DOES NOT ARISE FROM THE ASSESSMENT ORDER. IN THE ABSENCE OF ANY SUCH ISSUE BEFORE THE ASSESSING OFFICER, WE ARE OF THE VIEW THAT THER E IS NO NECESSITY FOR THE LD CIT TO ISSUE ANY DIRECTION ON THE SAME NOR THE A SSESSEE IS ENTITLED TO RAISE SUCH CLAIM BEFORE LEARNED CIT IN THE REVISION PROCEEDING. IN THAT CASE, THE SAID GROUND RAISED BY THE ASSESSEE ALSO B ECOMES REDUNDANT AND ACCORDINGLY WE DISMISS THE SAME. 13. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SE T ASIDE THE IMPUGNED ORDER OF LD CIT. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13.7.2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 13 TH JULY, 2011 ITA NO.512/VIZAG/2010 CH. K. KNNAIAH (HUF), TANUKU PAGE 10 OF 10 COPY TO 1 CH. KRISHNA KANNAIAH, (HUF), D.NO.4-5-3, NARENDRA NATH ROAD, OLD TOWN, TANUKU 2 ITO, WARD-1, TANUKU 3 THE CIT RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM