Sunil Miglani, Ghaziabad V. DCIT, Ghaziabad

ITA 5829/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3952 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 03-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VANSHITA TANEJA
• Keywords: Sale consideration of property below Jantri Value; Deduction for capital gain; Capital asset; Benefit of exemption; Capital Gains
• Section: 50C; 54F; 205; 48; 54

Judgement Text

1 ITA NO. 5829/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 5829/DEL/2016 ( A .Y 2009-10) SUNIL MIGLANI KJ-2, KAVI NAGAR NEW DELHI (APPELLANT) VS DCIT CENTRAL CIRCLE GHAZIABAD (RESPONDENT) APPELLANT BY SH. VANSHITA TANEJA, ADV RESPONDENT BY SH. H. K. CHOUDHARY CIT DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 20/01/2016 PASSED BY CIT(A)-IV, KANPUR, FOR ASSESSMENT YEAR 2 009-10. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS OF THE CASE AND IN LAW, THE C OMMISSIONER OF INCOME TAX (APPEAL-IV), KANPUR ERRED TO CONFIRM THE ACTION OF THE ASSESSING OFFICER IN TAXING THE LONG TERM CAPITAL GAIN THAT WAS FURTHER ENHANCED TO 64,07,515/- IN PLACE OF AN AMOUNT OF RS. 30,17,456/- AS DECLARED I N THE RETURN OF INCOME. THE ENHANCEMENT IS MADE WITHOUT APPLYING JUDICIOUS MIND AND THE SAME IS UNJUSTIFIED, UNWARRANTED, ILLEGAL, BAD IN LAW AND I N ANY CASE WITHOUT MERITS. DATE OF HEARING 19.02.2020 DATE OF PRONOUNCEMENT 02.03.2020 2 ITA NO. 5829/DEL/2016 2. THAT ON THE FACTS OF THE CASE AND IN LAW, THE CO MMISSIONER OF INCOME TAX (APPEAL-IV), KANPUR MISDIRECTED HIM TO CALCULATE AN D ASSESS THE LONG TERM CAPITAL GAIN ON THE SALE OF THE PROPERTY AT RS. 64, 07,515/- THEREBY IGNORING ALL TOGETHER THE INVESTMENT MADE IN THE PURCHASE OF THE NEW RESIDENTIAL HOUSE AS PROVIDED UNDER SECTION 54F(1)(A) OF THE ACT. THE LO NG TERM CAPITAL GAIN ENHANCED IS UNJUSTIFIED, UNWARRANTED WITHOUT FOLLOW ING THE PROVISIONS CONTAINED UNDER SECTION 54F(1)(A) OF THE ACT AND TH US BAD IN LAW. 3. RETURN WAS FILED ON 31.07.2014 DECLARING INCOME OF RS. 12,00,080/- AGAINST WHICH ASSESSMENT WAS COMPLETED ON A TOTAL I NCOME OF RS. 42,17,536/- ON 31.03.2015. THE ASSESSING OFFICER MADE ADDITION OF RS. 30,17,456/- FOR LONG TERM CAPITAL GAIN. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DISMISSED THE APPEAL OF T HE ASSESSEE. 5. THE LD. AR SUBMITTED THAT FOR THE ADDITION MADE THERE HAD BEEN NO SPECIFIC NOTICE AND THE ASSESSEE DID NOT GET PROPER OPPORTUNITY TO EXPLAIN THE WORKING OF THE LONG TERM CAPITAL GAIN. THE ASSESSEE DECLARED CORRECT WORKING OF THE CAPITAL GAIN FOR WHICH EXEMPTION WAS CLAIMED UN DER SECTION 54F OF THE ACT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE AL ONG WITH HIS WIFE SOLD TWO PROPERTIES (EACH HAVING SHARE) AND THE SALE PROCE EDS WERE INVESTED IN THE PURCHASE OF RESIDENTIAL HOUSE. THE PROPERTIES WERE SOLD FOR A TOTAL VALUE OF RS.2,60,61,000/- WHILE THE STAMP DUTY PAID ON A TOT AL VALUE OF RS.4,71,91,000/-. THE CAPITAL GAIN ON THE SALE OF T HE PROPERTY WAS CLAIMED AS EXEMPT BY THE ASSESSEE IN VIEW OF THE PROVISIONS CO NTAINED IN SECTION 54F(1)(B) OF THE ACT. THE ASSESSING OFFICER WHILE NOT DISPUTI NG THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54F(1)(B) OF THE ACT IN RESPECT O F INVESTMENT OF LONG TERM CAPITAL GAIN HAS CALCULATED AND WORKED OUT THE ADDI TION OF RS.30,17,456/- TO THE INCOME AS PER WORKING CONSIDERING THE FULL VALU E OF CONSIDERATION AS PER SECTION 50C WHILE DETERMINING EXEMPTION. THE ASSESS EE FILED APPEAL BEFORE THE 3 ITA NO. 5829/DEL/2016 CIT(A), GHAZIABAD. THE LD. AR FURTHER SUBMITTED THA T PENDING THE DISPOSAL OF THE APPEAL FILED BEFORE THE CIT(A), GHAZIABAD, A SE ARCH WAS CONDUCTED ON 19.02.2013 BY THE DEPARTMENT AT THE BUSINESS PREMIS ES OF THE COMPANY AND ALSO AT THE RESIDENCES OF THE DIRECTORS. AS A RESUL T OF WHICH THE CASES WERE CENTRALIZED WITH THE ACIT, AND LIKEWISE, THE APPEAL WHICH WAS PENDING WITH CIT(A), GHAZIABAD WAS TRANSFERRED TO THE CIT(A), KA NPUR. THE CIT(A), KANPUR VIDE ORDER DATED 29.03.2016 WHEREBY THE CAPITAL GAI N ASSESSED BY THE ASSESSING OFFICER AT RS.30,17,056/- WAS ENHANCED TO THE RS.64,07,515/- AS PER CALCULATIONS GIVEN IN THE ORDER. THE CIT(A) HEL D THAT NO EXEMPTION WOULD BE AVAILABLE SINCE THE ASSESSEE HAS SUFFERED CAPITAL L OSS, EVEN THOUGH CAPITAL GAIN IS BEING CHARGED TO TAX AFTER APPLICATION OF SECTIO N 50C OF THE ACT. THE ADDITION OF LONG TERM CAPITAL GAIN WAS ENHANCED BY THE CIT(A ), KANPUR FROM THE ASSESSED LONG TERM CAPITAL GAIN OF RS.30,17,456/- T O RS.64,07,515/-. THE LD. AR SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS RELATING TO WORKING ADOPTED FOR CALCULATING THE BENEFIT OF EXEMPTION AVAILABLE TO THE ASSESSEE UNDER SECTION 54F(1)(B) OF THE ACT. THE ONLY DISPUTE WITH THE ASS ESSING OFFICER IS WITH THE WORKING OF THE EXEMPTION AS CLAIMED U/S 54 OF THE A CT. THE ASSESSEE CALCULATED EXEMPTION U/S 54 FOR THE INVESTMENT MADE BY THE ADO PTING THE FIGURE OF ACTUAL SALE CONSIDERATION RECEIVED AND THE LEARNED ASSESSI NG OFFICER CALCULATED THE EXEMPTION U/S 54 OF THE INVESTMENT MADE BY ADOPTING THE FIGURE OF THE SALE CONSIDERATION BY INVOKING SECTION 50C OF THE ACT. T HE CIT(A) HAS MISDIRECTED AND ENHANCED THE ADDITION. THE INVESTMENT MADE IN T HE PURCHASE OF NEW RESIDENTIAL HOUSE, THE ESSENTIAL CRITERIA FOR ALLOW ING BENEFIT OF DEDUCTION U/S 54F(1)(B) OF THE ACT WAS IGNORED. THE LD. AR SUBMIT TED THAT SECTION 54F CLEARLY STATES THAT IF THE COST OF NEW ASSET IS LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ASSET TRANSFERRED, SO MUCH OF THE CAPITAL GA IN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN, THE SAME PROPORTION AS THE COST O F THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED U/S 54F. NO WHERE DOES IT MENTION CONSIDERATION AS PER SECTION 50C. THE FICTION U/S 5 0C IS EXTENDED ONLY TO THE ASPECT OF COMPUTATION OF CAPITAL GAINS AND THE SAME DOES NOT EXTEND TO THE CHARGING SECTION OR THE EXEMPTIONS TO THE CHARGING SECTION. THE LEGISLATURE 4 ITA NO. 5829/DEL/2016 CONSCIOUSLY INTENDED TO APPLY THE FICTION UNDER SEC TION 50C ONLY TO THE EXPRESSION USED IN SECTION 48 AND NOT IN ANY OTHER PLACE. SECTION 50C HAS NO EFFECT FOR CALCULATING EXEMPTION U/S 54F. THE LONG TERM CAPITAL GAIN EXEMPTION IS ADMISSIBLE U/S 54F(1)(B) OF THE ACT AS PER WORKI NG PROVIDED BY THE ASSESSEE WHEREIN TOTAL TAXABLE GAIN IS RS.2,68,830/- ONLY. D EEMING FICTION CREATED IN SECTION 50C IS LIMITED ONLY TO THE EXTENT AND FOR T HE PURPOSE OF SECTION 48 AND THIS DEEMING FICTION CANNOT BE EXTENDED OR INTERPRE TED AS MEANT FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT INCLUDING SE CTION 54F. THE PROCESS OF ARRIVING AT CAPITAL GAINS AND EXEMPTIONS ARE DISTIN CT AND SEPARATE AND ONE DOES NOT OVERRIDE THE OTHER. SECTION 54F IS AN EXEMPTION PROVISIONS AND A COMPLETE CODE IN ITSELF AND SINCE IT IS A COMPLETE CODE IN I TSELF, COMPUTATION OF ELIGIBLE EXEMPTION HAS TO BE WORKED OUT WITHIN ITS FRAMEWORK AS FAR AS POSSIBLE AND DEEMING FICTION CONTAINED IN ANY OTHER PROVISION CA NNOT BE BROUGHT INTO SECTION 54F. SECTION 54F HAS TO BE APPLIED ONLY FOR THE DEF INITE AND LIMITED PURPOSE FOR WHICH IT IS CREATED. THE LD. AR SUBMITTED THAT IT I S NOT PERMISSIBLE TO SUB-JOIN OR TRACK A FICTION UPON FICTION. THUS, THE LD. AR S UBMITTED THAT AS FAR AS THE EXEMPTION ALLOWABLE U/S 54F, ONE HAS TO STRICTLY FO LLOW THE PROVISIONS OF THE PARTICULAR SECTION AND COMPUTE THE EXEMPTION ACCORD INGLY WITHOUT IMPOSING ANY SECTION CREATING A LEGAL FICTION INTO THE SECTI ON. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: I. SMT. SABITA DEVI AGARWAL VS. ITO, WARD-2(3), SIL IGURI [2019] 69 ITR(T) 231 (KOLKATA TRIB.) II. ANANT CHETAN AGARWAL VS. CIT, [2018] 172 ITD 52 5 (LUCKNOW TRIB.) III. ITO VS. RAJ KUMAR PARASHAR [2017] 167 ITD 237 (JAIPUR TRIB.) IV. DCIT VS. DR. CHALASANI MALLIKARJUNA RAO (2016) 161 ITD 721 (VISAKHAPATNAM TRIB.) V. NAND LAL SHARMA VS. ITO [2015] 40 ITR(T) 518 (JA IPUR TRIB.) VI. DHANVEER SINGH GAMBHIR VS. ITO, 3(2), INDORE [2 015] 56 TAXMANN.COM 205 (INDORE TRIB.) VII. PRAKASH KARNAWAT VS. ITO (2011) 16 TAXMANN.COM 357 (JAIPUR) VIII. GYAN CHAND BATRA VS. ITO [2010] 6 ITR(T) 147 (JAIPUR) IX. RAJ BABBAR VS. ITO (2013) 29 TAXMANN.COM 11 (MU MBAI TRIB.) X. COMMISSIONER OF INCOME TAX VS. GEORGE HENDERSON AND CO. LTD. [1967] 66 ITR 622 (SC) XI. CIT VS. SMT. NILOFER I. SINGH (2008) 309 ITR 23 3 (DELHI HC) 5 ITA NO. 5829/DEL/2016 XII. ITO VS. MANJIT SINGH [2010] 128 TTJ 82 (CHANDI GARH) (UO) XIII. CIT, PANJI VS. V. S. DEMPO COMPANY LTD. [2016 ] 387 ITR 354 (SC) XIV. CIT VS. ACE BUILDERS (P.) LTD. (2005) 281 ITR 210 (BOM. HC) XV. CIT VS. ASSAM PETROLEUM INDUSTRIES (P.) LTD. (2 003) 262 ITR 587 (GAU. HC) BESIDES THIS, THE LD. AR ALSO SUBMITTED THAT IN CAS E OF ASSESSEES WIFE, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE WIFE BY THE TRIBUNAL IN ITA NO. 2235/DEL/2016 ORDER DATED 18.11.2019 (ANIT MIGLANI VS. ITO). THUS, THE LD. AR SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. 6. THE LD. AR FURTHER SUBMITTED THAT THE CASE LAWS RELIED BY THE ASSESSING OFFICER IS NOT APPLICABLE TO THE FACTS OF THE ASSES SEES CASE AS JUDGMENT STATES THAT SECTION 50C WILL BE APPLICABLE TO DETERMINE SA LE CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AND NOT FOR PURPOSE OF EXEMPTION. THE JUDGMENT IS NOT IN RESPECT OF APPLICABILITY OF SECT ION 50C ON EXEMPTION CLAIMED ON CAPITAL GAIN. THE LD. AR FURTHER SUBMITTED THAT THE CASE LAWS RELIED BY THE CIT(A) ONLY SUPPORTS THE CASE OF THE ASSESSEE WHERE BY IT IS HELD THAT THE DEEMING FICTION CREATED BY VIRTUE OF SECTION 50C IN DETERMINING THE CAPITAL GAIN CANNOT BE EXTENDED TO SECTION 54F AND THE CAPITAL G AINS ARISING FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSETS FOR THE PU RPOSES OF SECTION 54F HAS TO BE WORKED OUT THE APPLYING SECTION 48 WITHOUT IMPOS ING SECTION 50C INTO IT. 7. THE LD. DR RELIED UPON THE ORDER OF CIT(A) AND S UBMITTED THAT THE CIT(A) HAS TAKEN THE COGNIZANCE OF THE HONBLE KARNATAKA H IGH COURTS DECISION IN CASE OF M/S. GAULI MAHADEVAPPA VS. ITO 259 CTR 579. THE LD. DR SUBMITTED THAT THE ENHANCEMENT IS PROPERLY JUSTIFIED BY THE C ALCULATION GIVEN BY THE CIT(A) IN THE ORDER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORDS. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER ADMITTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54F(1)( B) IN RESPECT OF INVESTMENT ON LONG TERM CAPITAL GAIN BUT INSTEAD OF TAKING ACT UAL SALE CONSIDERATION 6 ITA NO. 5829/DEL/2016 RECEIVED, HAS ADOPTED THE FIGURE OF SALE CONSIDERAT ION BY INVOKING SECTION 50C. THIS IS NOT IN ACCORDANCE WITH THE PROVISION OF SEC TION 50C WHICH HAS CREATED A DEEMING FICTION. SECTION 54F IS AN EXEMPTION PROVIS ION AND IT HAS GIVEN ITS APPLICABILITY IN ITSELF, THEREFORE, SECTION 50C WIL L NOT COME UNDER PICTURE. THE LONG TERM CAPITAL GAIN EXEMPTION IS ADMISSIBLE U/S 54F(1)(B) OF THE INCOME TAX ACT, 1961 WHEREIN TOTAL TAXABLE GAIN COMES TO R S.2,68,830/- ONLY AS THE INVESTMENT MADE BY THE ASSESSEE ADOPTING THE FIGURE OF THE ACTUAL SALE CONSIDERATION RECEIVED IN CONSEQUENCE WITH SECTION 54F OF THE INCOME TAX ACT. THEREFORE, THE CIT(A) WHILE ENHANCING THE ADDITION HAS IGNORED THE VERY EFFECT OF THE PROVISIONS OF SECTION 54F. BESIDES THIS, THE CI T(A) WHILE ENHANCEMENT HAS NOT GIVEN ANY REASONS AS TO WHY THE ENHANCEMENT IS NECESSARY AND WHY THE ASSESSEE IS NOT JUSTIFIED IN ADOPTING THE FIGURE OF THE ACTUAL SALE CONSIDERATION RECEIVED. THUS THE ASSESSING OFFICER AS WELL AS CIT (A) FAILED TO JUSTIFY THE STAND BY MAKING ADDITION OF RS.30,17,456/- IN RESPECT OF LONG TERM CAPITAL GAIN WITHOUT GRANTING EXEMPTION U/S 54F OF THE INCOME TA X ACT. IT IS PERTINENT TO NOTE THAT WE HAVE ALREADY TAKEN A VIEW IN CASE OF A SSESSEES WIFE SMT. ANITA MIGLANI (SUPRA) WHEREIN THE SAME ORDER OF THE CIT(A ) WAS UNDER CHALLENGE THAT THE ENHANCEMENT WAS NOT RIGHT. THE FACTS OF THE PRE SENT CASE THAT OF ASSESSEES CASE IS IDENTICAL, THEREFORE, THE APPEAL OF THE ASS ESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 2ND MARCH, 2020. SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 02/03/2020 R. NAHEED COPY FORWARDED TO: 7 ITA NO. 5829/DEL/2016 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 20.02.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.02.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 0 2 .0 3 .2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 0 2 .0 3 .2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 0 2 .0 3 .2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER