A.Rajalakshmi, CHENNAI V. ITO, CHENNAI

ITA 514/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4187 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVI IRS
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Capital asset; Search and seizure; Cost of acquisition
• Section: 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHENNAI B BENCH, CHENNAI , ! ' #! ' $ . %& , '() BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER ./ ITA NO. 514/MDS/2017 ' * !+* / ASSESSMENT YEAR : 2012-2013. A. RAJALAKSHMI, NEW NO.12, OLD NO.3, 3 RD STREET, ZAKARIA COLONY, CHOOLAIMEDU, CHENNAI 600 094. [PAN AGBPR 6558F] V. THE INCOME TAX OFFICER, CORPORATE WARD 5(4) CHENNAI 600 034. ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 /APPELLANT BY : SHRI. G.BASKAR, ADVOCATE ./,-01 /RESPONDENT BY : SHRI. K. RAVI, IRS, JCIT. ' !02 /DATE OF HEARING : 08.06.2017 34+ 02 /DATE OF PRONOUNCEMENT : 21.06.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, CHENNAI IN ITA NO.34/2015- 16/CIT(A)-3, DATED 31.01.2017 FOR THE ASSESSMENT YE AR 2012-2013. 2 ITA NO.514/MDS/2017 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSE SSEE TRANSFERRED HIS PROPERTY VIDE AGREEMENT DATED 07.02.2012 TO M/S. RA JKHAM BUILDERS PVT LTD BY AGREEMENT OF SALE FOR A CONSIDERATION OF H1, 45,80,000/-. THE COMPANY ALLOTTED FULLY PAID UP SHARES IN THEIR BOAR D MEETING DATED 30.01.2012 TO THE TUNE OF H1,80,00,000/-. LD. ASSE SSING OFFICER CONSIDERED THIS AMOUNT AS SALE CONSIDERATION AND FR OM THAT HE DEDUCTED COST OF ACQUISITION OF H21,51,078/- AND PAID LONG TERM CAPITAL GAINS ON TRANSFER OF CAPITAL ASSETS ON H1,58,48,922/-. THE A SSESSEE CLAIMED DEDUCTION U/S. 54 OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) TOWARDS PURCHASE OF PROPERTY AT MADHURAPAKKAM VILLA GE, TAMBARAM TALUK FOR A CONSIDERATION OF H68,01,600/- WHICH WA S DENIED BY THE LD. ASSESSING OFFICER. 3. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFOR E LD. COMMISSIONER OF INCOME TAX (APPEALS). BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE CLAIMED DEDUCTION U/S. 54 OF TH E ACT. AFTER PERUSING THE RECORDS, THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) DENIED DEDUCTION U/S. 54 OF THE ACT BY OBSERVING AS UNDER: - (1) APPELLANT HAD FAILED TO PURCHASE A NEW HOUSE ONE YEAR PRIOR TO THE DATE OF TRANSFER OF ORI GINAL ASSET. (2) APPELLANT HAD FAILED TO PURCHASE A NEW HOUSE WITHIN TWO YEARS; AFTER THE DATE OF TRANSFER OF OR IGINAL ASSET. (3) APPELLANT HAD FAILED TO CONSTRUCT A NEW HOUSE WITHIN. THREE YEARS FROM T HE DATE OF TRANSFER OF THE DATE OF TRANSFER 3 ITA NO.514/MDS/2017 OF ORIGINAL ASSET. (4) A PPELLANT HAD FAILED TO DEPOSIT THE SALE PROCEEDS, ARISING OUT OF SALE OF ORIGINAL ASSET, IN THE SPECIFIED CAPITAL GAINS ACCOUNT SCHEME BEFORE FILIN G THE RETURN OF INCOME U/S. 139(1) OF THE ACT. (5) APPELLANT STATED TO HAVE PURCHASED A PLOT ON 17.10.2013 FOR A CONSIDERATION OF RS.68 LAKHS WHICH IS NOT ELIGIBLE U/S.54 AS THE APPELLANT HAS FAILED TO PURCHASE A FLAT OR HOUSE. (6) APPELLANT HAD INVESTED IN THE PIECE OF LAND STATED TO HAVE, BEEN REGISTERED FOR RS. 68,01,600/ - OUT OF BORROWED MONEY BUT NOT MONEY RECEIVED FROM THE SALE CONSIDERATION OF ORIGINAL ASSET. 3.1 FURTHER, HE ENHANCED THE ASSESSMENT BY AN AMOUN T OF H1,61,00,000/- ON THE REASON THAT AN AMOUNT OF H25, 00,000/- EACH VIDE CHEQUE NOS.155952 & 155953, OF INDIAN OVERSEAS BANK DATED 27.03.2013 HAS BEEN PAID TO ONE MR. T.K. MOHAN RAJ. THEREFORE, THE FACTS CLEARLY ESTABLISH THAT AN AMOUNT OF H50 LA KHS HAS BEEN PAID TO MR. T.K. MOHAN RAJ BUT NOT MR. T. SIVAKUMAR. IT IS FURTHER STATED THAT AN AMOUNT OF H11,00,000/- PAID ON DIFFE RENT DATES FROM 25.01.2012 TO 19.06.2012 VIDE CHEQUE NOS.12357 6, 123577, 123580 123581 COULD NOT BE VERIFIED FROM THE COPY OF THE BANK ACCOUNT AS ASSESSEE FILED BANK STATEMENTS FOR THE PERIOD FROM 08.02.2013 TO 31.03.2013 AS THE SAID PAYMENTS WERE STATED TO HAVE BEEN PAID PRIOR TO THIS PERIOD. COMING TO THE MAJOR AMOUNT OF RS.1 CRORE, STATED TO HAVE BEEN PAID, TO SHRI T. SIVAKUMAR ON 27.03.2013 VIDE CHEQUE NOS.848322 TO 848325 IS ALSO FOUND 4 ITA NO.514/MDS/2017 INCORRECT. COPY OF THE BANK ACCOUNT OF INDIAN OVERSE AS BANK FILED BEFORE HIM WHICH WAS IN THE SAME OF MR. ARUMUGAM M. ON PERUSAL OF HIS BANK ACCOUNT, IT WAS OBSERVED THAT AN AMOUNT OF H50 LAKHS VIDE CHEQUE NO.848322 AND 848324 WAS PAID TO MR. K. SHANRMUGAM ON 28.03.2013. FURTHER, IT WAS NOTICED T HAT AN AMOUNT OF H 50 LAKHS VIDE CHEQUE NOS.848325 AND 848324 WAS RAID TO MR. T. SIVAKUMAR ON 28.03.2013. THESE FACTS CLEARLY ESTABLISH THAT ASSESSEE HAS NOT MADE PAYMENT TO MR . T. SIVAKUMAR THROUGH THE BANKING CHANNELS. ON THE OTHE R HAND, ASSESSEE HAS GOT THE PROPERTY REGISTERED IN HIS NA ME FOR AN AMOUNT OF H68,01,600/- WHICH FACT HAS NOT BEEN DISPUTED. IT WAS ALSO STATED THAT OVER AND ABOVE THE REGISTERED PRIC E, ASSESSEE HAS FURTHER INVESTED AN AMOUNT OF H92,98,400/-, THE RE GISTERED PRICE OF H68,01,600/- AND THE ADDITIONAL INVESTMENT OF H9 2,98,400/- COMES TO H1,61,00,000/ - FOR WHICH THE SOURCE HAS NOT BEEN EXPLAINED: AGAINST THIS, ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD AND VARIOUS CASE LAWS CITED BY BOTH THE PARTIES. I N OUR OPINION, IF THE ASSESSEE PURCHASES NEW HOUSE WITHIN TWO YEARS FROM THE DATE OF TRANSFER OF CAPITAL ASSET OR IF IT IS A CONSTRUCT ION WITHIN THREE YEARS FROM THE DATE OF TRANSFER, ASSESSEE IS ENTITLED FOR DED UCTION U/S.54 OF THE ACT. IF THE ASSESSEE INTENT TO CONSTRUCT A RESIDENTIAL H OUSE WITHIN A PERIOD OF 5 ITA NO.514/MDS/2017 THREE YEARS FROM THE DATE OF TRANSFER OF CAPITAL AS SET U/S. 54(2) OF THE ACT, THE AMOUNT HAS TO BE DEPOSITED IN A BANK UND ER CAPITAL GAINS SCHEME AS NOTIFIED BY THE CENTRAL GOVERNMENT WITHI N A TIME LIMIT AVAILABLE TO FILE RETURN OF INCOME U/S. 139(4) OF T HE ACT HAS HELD BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F CIT VS. JAGRITI AGGARWAL 339 ITR 610 . IF THE ASSESSEE COMPLETES THE CONSTRUCTION OF A NEW RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE D ATE OF SALE OF CAPITAL ASSET, ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 54 O F THE ACT. NOW THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE IS THAT ASSESSEE HAS NOT APPROPRIATED TOWARDS CONSTRUCTION OF NEW RESID ENTIAL HOUSE AS IT WAS NOT COMPLETED. IN OUR OPINION AS HELD BY HONBLE K ARNATAKA HIGH COURT IN THE CASE OF CIT VS SMT. V.S. SHANTHA KUMARI 126 DTR 436 COMPLETION OF CONSTRUCTION WITHIN THREE YEARS WAS NOT MANDATOR Y AND IT WAS NECESSARY THAT CONSTRUCTION SHOULD BE COMMENCED, IT SHOULD BE PROVED BY THE ASSESSEE THAT CONSTRUCTION IS FOR RESIDENTI AL HOUSE. THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MUNEER KHAN VS. ITO, 41 SOT 504, HAD HELD THAT ASSESSEE MAY USE BORROWED FUNDS FOR CONSTRUCTION OF NEW RESIDENTIAL PROPERTY AND DEDUCT ION U/S.54 OF THE ACT DENIED ON THE REASON THAT ASSESSEE USED SOME FUND OTHER THAN CONSIDERATION RECEIVED ON TRANSFER OF CAPITAL ASSET . BEING SO, ON THAT REASON DEDUCTION U/S.54 OF THE ACT CANNOT BE DENIED . HENCE, WE REMIT THE ENTIRE ISSUE IN DISPUTE WITH REGARD TO SEC. 54 OF THE ACT TO THE FILE OF 6 ITA NO.514/MDS/2017 THE LD. ASSESSING OFFICER WITH A DIRECTION TO THE LD. ASSESSING OFFICER TO VERIFY WHETHER ASSESSEE HAS ACTUALLY MADE INVESTM ENTS IN CONSTRUCTION OF NEW RESIDENTIAL PROPERTY, THOUGH IT WAS NOT COMP LETED AND DECIDE THEREUPON. 5. REGARDING ENHANCEMENT OF ASSESSMENT, LD. COMMISSIO NER OF INCOME TAX (APPEALS) OBSERVED THAT THE PAYMENTS WAS NOT MADE WITH REFERENCE TO THE CONSTRUCTION OF RESIDENTIAL HOUSE. HENCE, HE TREATED THE AMOUNT AS UNEXPLAINED INVESTMENTS. 6. BEFORE US, LD. AUTHORISED REPRESENTATIVE EXPLAINED THAT THE PAYMENTS CONSIDERED BY LD. CIT (APPEALS) FOR ENHANC EMENT WHERE NOT RELATED TO ASSESSMENT YEAR UNDER CONSIDERATION. TH ESE PAYMENTS RELATES TO DIFFERENT ASSESSMENT YEARS. IF THESE PAYMENTS WE RE NOT RELATE TO ASSESSMENT YEAR UNDER CONSIDERATION, IT CANNOT BE ADDED IN THIS ASSESSMENT YEAR TOWARDS THE SAID PAYMENT AND THE A PPROPRIATE ACTION TO BE TAKEN IN THE RELEVANT ASSESSMENT YEAR ONLY, IF SO ADVISED. FURTHER, THERE WAS AN ARGUMENT BY THE LD. AUTHORISED REPRESE NTATIVE THAT THESE PAYMENTS WERE MADE TO OTHER PARTIES AS PER INSTRUCT ION OF ASSESSEES CONTRACTOR. WHETHER PAYMENTS MADE TOWARDS CONSTRUC TION TO OTHER PARTIES ON THE INSTRUCTION OF ASSESSEES CONTRACTOR , IT IS TO BE EXAMINED BY ENQUIRING THOSE PARTIES AND IT SHOULD BE SEEN THAT IT IS PROPERLY REFLECTED IN THEIR BOOKS OF ACCOUNTS AS PER LAW. WITHOUT EXAMINING THEM, IT IS NOT POSSIBLE FOR US TO SUSTAIN THE ADDI TION ON THIS COUNT. 7 ITA NO.514/MDS/2017 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE ARE INCLINED TO REMIT THIS ISSUE ALSO BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR FURTHER ENQUIRY. THIS GROUND IS ALSO REMITTED TO T HE FILE OF THE LD. ASSESSING OFFICER FOR FRESH CONSIDERATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 21 ST DAY OF JUNE, 2017, AT CHENNAI. SD/- SD/- ( ' #! ' $ . %& ) (DUVVURU R.L. REDDY) ' /JUDICIAL MEMBER ( ) (CHANDRA POOJARI) /ACCOUNTANT MEMBER /CHENNAI, I /DATED, THE 21ST JUNE, 2017 KV J 0 .'2KL ML+2 / COPY TO: 1 . ,- / APPELLANT 3. ' N2 () / CIT(A) 5. L!OP .'2' / DR 2. ./,- / RESPONDENT 4. ' N2 / CIT 6. P&* Q / GF 8 ITA NO.514/MDS/2017 9 ITA NO.514/MDS/2017