ACIT, New Delhi V. Sh. Mohinder Kumar Jain, New Delhi

ITA 5254/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5081 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C DANDAYA
• Assessee Lawyers: SSH R S SINGHVI
• Keywords: Rule of consistency
• Section: 54; 143(3); 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E , NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 5254 /DE L/ 2014 ASSESSMENT YEAR : 2011 - 12 ACIT, CIRCLE - 27(1), NEW DELHI VS. SH. MOHINDER KUMAR JAIN, B - 78 - 79, MAYAPURI INDL. AREA, PHASE - 1, NEW DELHI PAN : AAGPJ1935P (APPELLANT) (RESPONDENT) APPELLANT BY SH. R.C. DANDAYA, SR.DR RESPONDENT BY S/SH. R.S. SINGHVI & SATYAJEET GOEL, CA S DATE OF HEARING 13.07.2017 DATE OF PRONOUNCEMENT 04.08.2017 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER DATED 31/07/2014 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - XXIV, NEW DELHI [ IN SHORT THE CIT - ( A ) ] FOR ASSESSMENT YEAR 2011 - 12 , RAISING FOLLOWING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS ERRED IN - 1. ALLOWING THE RELIEF OF RS. 1,59,77,680/ - U/S 54F OF THE I.T. ACT. 2. IGNORING THE FACT THAT THE ASSESSEE AFTER EXPANDING MORE THAN RS. 1 CRORES IN PREVIOUS YEARS UNABLE TO MAKE THE 'MEHENDI FARM' TO HABITUAL CONDITION. 2 ITA NO . 5254/DEL/2014 3. IGNORING THE FACT THAT THE ASSESSEE ACCEPTED THE DISALLOWANCE OF RS. 86,00,000/ - U/S 54F OF THE ACT F OR THE AY 2010 - 11. 4. DELETING THE ADDITION OF RS. 50,000 MADE ON ACCOUNT OF BUSINESS PROMOTION IGNORING THE PERSONAL ELEMENT. 5. DELETING THE ADDITION OF RS. 1,20,000/ - MADE ON ACCOUNT OF VEHICLE RUNNING EXPENSES AND IGNORE THE PERSONAL ELEMENT. 6. THE APPELLANT CRAVES THE RIGHT TO ADD, ALTER OR AMEND ANY GROUND APPEAL. 2. T HE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READY - MADE GARMENTS FOR LADIES AND KIDS WEAR IN THE NAME OF PRO PRIETARY CONCERN M/S. CHELSEA MILLS. DURING THE YEAR, THE ASSESSEE SOLD 5 HOUSE PROPERTIES AND INVESTED SALE CONSIDERATION RECEIVED IN CONSTRUCTION OF ANOTHER PROPERTY. THE ASSESSEE FILED RETURN OF INCOME ON 30/09/2011 DEC LARING TOTAL INCOME OF RS. 1,73,68 ,240/ - . IN THE RETURN OF INCOME FILED, THE ASSESSEE CLAIMED DEDU CTION UNDER SECTION 54F OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) FOR INVESTMENT IN RESIDENTIAL HOUSE AGAINST THE CAPITAL GAIN ON SALE OF HOUSE PROPE RTIES . THE CASE WAS SELECTED FOR SC RUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPLIED NOTICES ISSUED AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 25/10/2013 AND INCOME WAS ASSES SED AT RS.3,83,60, 278/ - . THE ASSE SSEE FILED APPEAL BEFORE THE LD. CIT - ( A , WHO ALLOWED PART RELIEF ON THE ADDITIONS MADE BY THE ASS ESSING OFFICER. AGGRIEVED, THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. THE GROUNDS NO. 1 TO 3 OF THE APPEAL ARE R ELATED TO THE DEDUCTION AMOUNTING TO RS.1,59,77, 680/ - UNDER SECTION 54F OF THE ACT, WHICH HAS BEEN ALLOWED BY THE LD. CIT - ( A ) . 3 ITA NO . 5254/DEL/2014 5. THE FACTS IN BRIEF IN RESPECT OF ISSUE IN DISPUTE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SOLD FOLLOWING FI VE PROPERTIES AND COMPUTED THE CAPITAL GAIN AND DEDUCTION UNDER SECTION 54F OF THE ACT FOR INVESTMENT IN CONSTRUCTION OF HOUSE AT , 9, MEHANDI FARMS, BHATTI MINES, NEW DELHI AS UNDER: S . NO. DESCRIPTION OF PROPERTY SALE CONSIDERATION LONG TERM CAPITAL GAIN AFTER INDEXED VALUE REMARKS 1 COMMERCIAL SHOP NO. GF - 17, SECTOR - 43, GURGAON (PEACH TREE), RS. 43,37,280/ - RS. 5,97,212 / - CLAIMED U/S 54F 2 PLOT NO. 403, BLOCK A - 1, SUSHANT LOK - I, GURGAON RS. 1,00,00,000/ - RS. 73,13,294/ - - - DO - - 3 PLOT NO. A - 1/404, SUSHANT LOK - LL, GURGAON RS. 1,10,44,000/ - RS.81 ,03,976/ - -- DO -- 4 PLOT NO. 209, SECTOR - 32, AMBALA RS. 7,00,000/ - (RS. 39,802/ - ) -- DO -- 5 (A) A - 201, KIRTI NAGAR INDUSTRIAL AREA, NEW DELHI RS. 1,17,27,200/ - RS. 81,50,632/ - TAX PAID ON GAIN (B) BUILDING ON ABOVE RS. 47,22,800/ - RS. 44,95,088/ - ADJUSTED AGAINST BLOCK OF ASSETS OF BUILDING 6. A S REGARDING CLAI M OF DEDUCTION UNDER SECTION 5 4F OF THE ACT, THE ASSESSING OFFICER INFORMED THE ASSESSEE THAT DEDUCTION UNDER SECTION 54 F OF THE ACT HAS ALREADY BEEN ALLOWED IN ASSESSMEN T YEAR 2009 - 10 AMOUNTING TO RS.47,84, 000/ - FOR INVE STMENT MADE IN CONSTRUCTION OF H OUSE AT 9, MEHANDI FARMS, BHATTI MINES, NEW DELHI. HE FURTHER NOTED THAT CLAI M OF DEDUCTION UNDER SECTION 5 4F IN ASSESSMENT YEAR 2010 - 11 WAS WITHDRAWN DURING ASSESSMENT PROCEEDING. ACCORDING TO THE ASSESSING OFFICER, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET , THE ASSESSEE OWNED MORE THAN ONE RESIDENTIAL HOUSE AND THEREFORE IT WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT. THE ASSESSEE SUBMITTED THAT IT WAS HAVING ONLY ONE RESIDENTIAL HOUSE AT D - 3/8 VASANT VIHAR, NEW DELHI , APART FROM THE HOUSE AT 9, MEHANDI FARMS FOR WHICH 4 ITA NO . 5254/DEL/2014 HE CLAIMED DEDUCTION UNDER SECTION 54 F OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEP T THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE DEDUCTION AMOUNTING TO RS.1,59,77, 680/ - CLAIMED B Y T H E ASSESSEE. 7. T HE LD. CIT - ( A ) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE ALLOWED THE DEDUCTION UNDER SECTION 54F OF THE ACT WITH OBSERVATIONS AS U NDER: 5.1 IT IS FURTHER NOTED THAT ALTHOUGH THE APPELLANT HAD ONE HOUSE AT D - 3/8 VASANT VIHAR, NEW DELHI, THE SAME WAS LET OUT DURING THE YEAR, WHICH IS ALSO EVIDENT FROM THE COMPUTATION OF INCOME FOR THE RELEVANT ASSESSMENT YEAR, WHEREIN THE RENTAL INCOM E FROM THE SAME HOUSE HAS BEEN DECLARED AS INCOME FROM HOUSE PROPERTY. THIS INDICATES THAT THE APPELLANT WAS NOT USING THAT HOUSE AS HIS RESIDENCE DURING THE RELEVANT ASSESSMENT YEAR. AT THE SAME TIME, THE CONSTRUCTION OF RESIDENTIAL HOUSE AT 9, MEHENDI FA RMS, BHATI MINES, CHHATARPUR NEW DELHI WAS ALSO NOT COMPLETE AND THE APPELLANT WAS RESIDING DURING THE RELEVANT PERIOD IN A RESIDENTIAL PROPERTY IN THE NAME OF HINDU UNDIVIDED FAMILY AT E - 222,NARAINA VIHAR, NEW DELHI. THIS FACT IS ALSO EVIDENT FROM THE DOC UMENTS SUCH AS TELEPHONE BILL, COPY OF PASSPORTS AND COPY OF CORRESPONDENCES WITH IFCI. THE APPELLANT SHIFTED TO HIS RESIDENTIAL HOUSE AT 9, MEHENDI FARMS, BHATI MINES, CHHATARPUR, NEW DELHI AT 21.7.2010 WHICH IS EVIDENT FROM THE COMPLETION CERTIFICATE AS WELL AS THE OTHER EVIDENCES SUCH AS COPIES OF PASSPORTS, IDENTITY CARDS ISSUED BY THE ELECTION COMMISSION OF INDIA ETC. WHICH IS AVAILABLE ON THE RECORD. IT IS WORTHWHILE TO MENTION HERE THAT SECTION 54F IS A BENEFICIAL SECTION AND IT HAS TO BE INTERPRETED LIBERALLY, AS HELD BY VARIOUS COURTS. 5.2 IT IS FURTHER OBSERVED THAT PROVISO OF SUBSECTION (1) OF SECTION 54F ITSELF PROVIDES THAT SUB SECTION (1) OF SECTION 54F SHALL NOT APPLY WHERE THE ASSESSEE OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NE W ASSET ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET. EVEN IF IT IS ACCEPTED THAT THE APPELLANT WAS HAVING ONE RESIDENTIAL HOUSE AT D - 3/8 , VASANT VIHAR DELHI, THE APPELLANT WAS NOT OWNING ANOTHER HOUSE OTHER THAN THE NEW ASSET I.E 9, MEHENDI FARMS, BHAT I MINES, CHHATARPUR, NEW DELHI ON THE DATE OF TRANSFER OF THE ORIGINAL ASSETS (IN THIS CASE, LANDS AND SHOP, AS DISCUSSED EARLIER). THEREFORE, IT IS CLEAR THAT THE APPELLANT WAS NOT HAVING MORE THAN ONE RESIDENTIAL HOUSE (I.E. AT VASANT VIHAR) OTHER THAN T HE NEW ASSET (I.E. AT 9, MEHENDI FARMS, BHATI MINES, CHHATARPUR, NEW DELHI) ON THE DATE OF TRANSFER OF ORIGINAL ASSET. THEREFORE, IN MY HUMBLE OPINION, THE 5 ITA NO . 5254/DEL/2014 APPELLANT IS ELIGIBLE FOR DEDUCTION AS PER THE PROVISO OF SECTION 54F, OF THE INCOME TAX ACT, IN RES PECT OF THE LONG TERM CAPITAL GAINS EARNED DURING THE RELEVANT ASSESSMENT YEAR. 5.3 IT IS FURTHER OBSERVED THAT THERE IS NO BAR IN SECTION 54F FOR CLAIMING DEDUCTION SECOND TIME OR THIRD TIME FOR THE SAME PROPERTY IF COST OF THE PROPERTY IS WITHIN THE CAPITAL GAIN ARISEN TO THE APPELLANT. IN THE INSTANT CASE, TOTAL CAPITAL GAIN ARISEN TO THE APPELLANT IN ALL THE THREE YEARS 2009 - 10 TO 2011 - 12 WAS LESS THAN THE COST OF CONSTRUCTION OF THE RESIDENTIAL PROPERTY AT 9, MEHENDI FARMS, BHATI MINES, CHHATARPUR, NEW DELHI. ON THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED OPI NION THAT THE APPELLANT IS ELIGIBLE FOR THE DEDUCTION U/S 54F OF THE INCOME TAX ACT AND THE AO IS DIRECTED TO IMPUGNED ADDITION OF RS. 1,59,77,680/ - . 8. B EFORE US THE LD. S ENIOR DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE HAD ALREADY AVAILED DEDUCTION UNDER SECTION 54F OF THE ACT FOR INVESTMENT IN CONSTRUCTION OF THE PROPERTY AT MEHANDI FARMS AND WHICH CONSTITUTED ANOTHER RESIDENTIAL PROPE RTY AND THEREFORE , THE ASSESSEE CANNOT BE ALLOWED DEDUCTION UNDER SECTION 54 F OF THE ACT FOR INVESTMENT IN CONSTRUCTION OF THE SAME RESIDENTIAL PROPERTY. 9. THE LD. COUNSEL, ON THE OTHER HAND , RELIED ON THE ORDER OF THE LD. CIT - ( A ) , AND SUBMITTED THAT CONS TRUCTION OF THE SAID HOUSE PROPERTY AT MEHANDI FARMS WAS NOT COMPLETED AND THEREFORE SAME COULD NOT BE TERMED AS ANOTHER RESIDENTIAL PROPERTY FOR DISQUALIFICATION FOR DEDUCTION UNDER SECTION 54F OF THE ACT. 10. WE HAVE HEARD THE RIVAL SUBMISSION AND PERU SED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LD. CIT - ( A ) HAS ALLOWED THE DEDUCTION UNDER SECTION 54F OF THE ACT ON THE FOLLOWING THREE GROUNDS: 1 . IN THE ASSESSMENT YEAR 2009 - 10, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION UNDER SECTION 54 F OF THE ACT ON SAME SET OF 6 ITA NO . 5254/DEL/2014 CIRCUMSTANCES AND THEREFORE IN VIEW OF THE PRINCIPLE OF CONSISTENCY, THE DEDUCTION UNDER SECTION 54F OF THE ACT, IN THE YEAR UNDER CONSIDERATION, IS ALSO ALLOWABLE. 2 . THE HOUSE PROPERTY D - 3/8 VASANT VIHAR, NEW DELHI WAS LET OUT DUR ING THE YEAR AND THE ASSESSEE WAS NOT USING THAT HOUSE FOR A RESIDENCE DURING THE YEAR UNDER CONSIDERATION. AT THE SAME TIME CONSTRUCTION OF THE RESIDENTIAL HOUSE 9, MEHANDI FARMS WAS ALSO NOT COMPLETE. THUS THE CONDITION THAT THE ASSESSEE WAS OWNING MORE THAN ONE RESIDENTIAL HOUSE WAS NOT SATISFIED. 3 . THE NEW ASSET I.E. 9, MEHANDI FARMS, BHATI MINES , NEW DELHI WAS UNDER CONSTRUCTION AND CANNOT BE SAID RESIDENTIAL HOUSE OWNED BY THE ASSESSEE. 4 . THERE IS NO BAR IN THE SECTION 54F OF THE ACT FOR CLAIMING DEDUCTIO N FOR SECOND TIME O R THIRD TIME FOR THE SAME PROPERTY , IF THE COST OF THE PROPERTY IS WITHIN THE CAPITAL GAIN AROSE TO THE ASSESSEE. 11. THE LD. SR. DR CONTENDED THAT ASSESSEE HAS A CCEPTED THE DISALLOWANCE OF RS.86,00, 000 / - UNDER SECTION 54F OF THE ACT F OR ASSESSMENT YEAR 2010 - 11 AND THEREFORE THE DEDUCTION IN THE YEAR UNDER CONSIDERATION SHOULD ALSO BE DISALLOWED. WE ARE NOT CONVINCED WITH THIS ARGUMENT OF THE LD. S ENIOR DR AS IN WHAT CIRCUMSTANCES THE DEDUCTION WAS WITHDRAWN BY THE ASSESSEE IN THE PRECE DING YEAR, IS NOT RELEVANT FOR US. WHAT IS RELEVANT IS WHETHER THE ASSESSEE SATISFIES THE CONDITIONS OF SECTION 54F OF THE ACT IN THE YEAR UNDER CONSIDERATION. BEFORE US, THE LD. SENIOR DR COULD NOT CONTROVERT FINDINGS OF THE LD. CIT - ( A ) . IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54 F OF THE ACT BECAUSE HOUSE PROPERTY AT 9, MEHANDI FARMS WAS UNDER CONSTRUCTION DURING THE YEAR UNDER CONSIDERATION AND IT CANNOT BE SAID AS ANOTHER RESIDENTIAL HOUSE OWNED BY THE ASSESSEE. AS THE ASSESSEE OWNED ONLY ONE 7 ITA NO . 5254/DEL/2014 RESIDENT IAL HOUSE AT D - 3/8 VASANT VIHAR , NEW D ELHI, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54F ACT FOR INVESTMENT IN CONSTRUCTION OF THE HOUSE PROPERTY AT 9, MEHA NDI FARMS. IN OUR CONSIDERED OPINION, THE FINDING OF THE LD. CIT - (A) ON THE ISSUE IN DISPUTE IS WELL REASONED AND WE FIND NO ERROR IN THE SAID FINDING. ACCORDINGLY, GROUNDS NO. 1 TO 3 OF THE APPEAL OF THE R EVENUE ARE DISMISSED. 12. IN GROUND NO. 4 , THE R E VENUE HAS CHALLENGED DELETION OF ADDITION OF RS.50, 000/ - ON ACCOUNT OF BUSINESS PROMOTIONS. IN GROUND NO. 5 , THE R EVENUE HAS CHALLENGED DELETION OF THE ADDITION OF RS. 1,20,000/ - ON ACCOUNT OF VEHICLE RUNNING EXPENSES . 13. BEFORE US , THE LD. S ENIOR DR RELIED ON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE LD. COUNSEL RELIED ON THE ORDER OF THE LD. CIT - ( A ) . 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING O FFICER MADE DISALLOWANCE OF RS. 50,00 0/ - ON THE GROUND THAT INVOLVEMENT OF PERSONAL NATURE OF EXPENSES CANNOT BE RULED OUT. DISALLOWANCE OF RS.1,20,000/ - OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES WAS MADE ONLY ON THE GROUND OF THE STATUS OF THE ASSESSEE. THE LD. CIT - ( A ) DELETED BOTH THE ADDITIONS OBSERVING AS UNDER: 5.4 IN THE SECOND GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF BUSINESS PROMOTION ON ESTIMATE BASIS OF RS. 50, 000 / - AND ON ACCOUNT OF VEHICLE MAINTENANCE ON ESTIMATE BASIS AT RS. 1,20,000/ - . IT IS NOTED THAT THE ASSESSING OFFICER HAS MADE THE AFORESAID DISALLOWANCE ONLY ON SURMISES AND WITHOUT BRINGING ANY EVIDENCE ON RECORD OF THE PERSONAL USE OF THE BUSINESS PROMOTIO N EXPENSES AND THE VEHICLE RUNNING AND MAINTENANCE EXPENSES. NOT A SINGLE VOUCHER OF EXPENSE HAS BEEN POINTED OUT BY THE ASSESSING OFFICER TO INDICATE THAT THE BUSINESS PROMOTION EXPENSES OR THE VEHICLES WERE USED BY THE APPELLANT FOR HIS PERSONAL PURPOSES . MOREOVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR MAKING THE AFORESAID DISALLOWANCES. IN THE ABSENCE OF ANY COGENT MATERIAL EVIDENCE ON 8 ITA NO . 5254/DEL/2014 RECORD OF THE PERSONAL USE OF THE BUSINESS PROMOTION EXPENSES AND THE VEHICLES, THE ESTIMATED DISALLOWANCE M ADE BY THE ASSESSING OFFICER ON THESE ACCOUNTS ARE HEREBY DIRECTED TO BE DELETED. 15. B EFORE US, THE LD. SENIOR DR COULD NOT CONTROVERT THE FINDING OF THE LD. CIT - (A) . WE HAVE OBSERVED THAT THE ASSESSING OFFICER HA S FAILED TO BRING ON RECORD ANY DOCUM ENTARY EVIDENCE TO ESTABLISH THAT BUSINESS PROMOTION EXPENSES WERE UTILISED FOR PERSONAL PURPOSE. SIMILARLY REG ARDING FOR DISALLOWANCE OUT OF VEHICLE R UNNING AND MAINTENANCE EXPENSES , THE ONLY BASIS ADOPTED BY THE ASSESSING OFFICER , IS STATUS OF THE ASSESS EE AND NO OTHER COGENT MATERIAL HAS BEEN BROUGHT ON RECORD FOR DISALLOWING THE EXPENSES. IN OUR OPINION, THE FINDING OF THE LD. CIT - (A) ON THE ISSUE IN DISPUTE IS WELL REASONED AND NO FURTHER INTERFERENCE IS REQUIRED IN SAID FINDING. ACCORDINGLY, WE DISMIS S BOTH THE GROUND NO. 4 AND 5 OF THE APPEAL. 16. IN THE RESULT, APPEAL OF T HE R EVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 4 T H AUGUST , 201 7 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 T H AUGUST , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI