ITO, Agra V. Smt. Rekha Rani Singh, Agra

ITA 639/AGR/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6775 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MISHRA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.638/AGR/2008 ASST. YEAR: 2005-06 INCOME-TAX OFFICER 1(3), VS. SHRI UDAI RAJ SI NGH, AGRA. 18, NASHEMAN, KHANDARI ROAD, AGRA. (PAN : AIBPS 8238 F) . ITA NO.639/AGR/2008 ASST. YEAR: 2005-06 INCOME-TAX OFFICER 1(3), VS. SMT. REKHA RANI SINGH, AGRA. 18, NASHEMAN, KHANDARI ROAD, AGRA. (PAN : AQQPPS 4663 P). (APPELLANT) (RESPONDENTS) APPELLANT BY : SHRI A.K. MISHRA, SR. D.R. RESPONDENT BY : SHRI ANIL VERMA, ADVOCATE ORDER PER P.K. BANSAL, A.M.: SINCE BOTH THE APPEALS FILED BY THE REVENUE HAVE TH E COMMON ISSUE, THEREFORE, BOTH ARE DECIDED BY THIS COMMON ORDER. RESPECTIVE APPEALS H AVE BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 05.08.2008 AND 05.08.2008 RESPECTIVELY BY TAKING THE FOLLOWING EFFECTIVE COMMON GROUNDS IN BOTH THE APPEAL :- 2. GROUNDS OF APPEAL:- 1(A) THAT THE CIT(APPEALS)-I, AGRA HAS ERRED IN LA W AND ON FACTS IN DELETING THE ADDITION OF RS.7,04,698/- MADE ON ACCOUNT OF IN CORRECT CLAIM OF INDEXED COST 2 OF ACQUISITION AND DEDUCTION U/S 54 OF I.T. ACT, 19 61, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE; (B) IN DOING SO THE CIT(APPEALS)-I, AGRA HAS ALSO E RRED IN LAW AND ON FACTS BY IGNORING THE FACT THAT THE ASSESSEE CLAIMED BENEFIT OF INDEXATION OF COST OF ACQUISITION FROM THE YEAR PRIOR TO THE FIRST YEAR I N WHICH THE ASSET WAS FIRST HELD BY THE ASSESSEE (THE ASSESSEE CLAIMED BENEFIT OF INDEX ATION OF COST OF ACQUISITION FROM 1.1.98 INSTEAD OF 08.4.1999 I.E. THE DATE ON WHICH SHE INHERITED THE PROPERTY). LD. CIT(A) ALSO IGNORED THE FACT THAT THE ASSESSEE DID NOT CONSTRUCT THE HOUSE WITHIN THE STIPULATED PERIOD U/S 54F OF I.T. ACT, 1961 AND THEREFORE, WAS NOT ELIGIBLE FOR DEDUCTION U/S 54F OF I.T. ACT, 1961. 2. THAT THE CIT(APPEALS)-I, AGRA HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.4,56,500/- MADE ON ACCOUNT OF UN EXPLAINED INVESTMENT BEING SHARE OF THE ASSESSEE OF THE DIFFERENCE OF RS.9,13, 000/- BETWEEN THE INVESTMENT OF RS.15,00,000/- SHOWN BY THE ASSESSEE IN A RESIDENTI AL PROPERTY AND THE INVESTMENT ASSESSED BY THE DVO AT RS.24,13,000/-, WITHOUT PROP ERLY APPRECIATING THE FACTS OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES PARENTS HAS ACQUIRED PROPERTY ON 15.12.1956 WHICH WAS INHERITED BY BOTH THE ASSESSES (BROTHER A ND SISTER) ON 08.04.1999 ON THE DEMISE OF THEIR PARENTS. THE SALE DEED FOR THE SAID PROPERTY WAS EXECUTED BY THEM FOR RS.50,00,000/- ON 31.12.2004. EACH OF THE ASSESSEE HAS SHOWN ONE OF THE SHARES AS LONG TERM CAPITAL GAIN (LTCG). THE CAPITAL GAIN HAS BEEN COMPUTED BY TAKI NG BASE AS ON 19.01.1981 TO 1982. REST OF THE CAPITAL GAIN WAS INVESTED IN ELIGIBLE BOND AND RESIDENTIAL HOUSE. EXEMPTION UNDER SECTION 54EC AND 54F OF THE INCOME-TAX ACT, 1961 (THE ACT HEREINAFTER) WAS CLAIMED. THE A.O. HAS TAKEN THE CONSIDERATION AT RS.50,49,220/- IN VIEW O F SECTION 50C WHILE COMPUTING THE LTCG INSTEAD OF RS..50,00,000/-. THE A.O. DID NOT ALLOW THE INDEXATION OF COST TO THE ASSESSEE ON THE FAIR MARKET VALUE AS ON 01.04.1981. HE WAS OF THE VIEW THAT THE BENEFIT OF INDEXATION IS TO BE ALLOWED FROM THE FIRST YEAR IN WHICH THE ASSESSEE H AS INHERITED THE PROPERTY I.E. FROM FINANCIAL YEAR 1999-2000 AND THUS WORKED OUT THE INDEX COST A S UNDER :- 3 2,75,000/- AS ON 01.04.1981 X 480/389 = 3,39,825/- 4. AFTER DEDUCTING THIS AMOUNT FROM RS.50,49,220/-, LTCG WAS WORKED OUT AT RS.47,09,395/- PRIOR TO ALLOWING THE EXEMPTION UNDE R SECTION 54EC AMOUNTING TO RS.16,50,000/- IN THE CASE OF EACH OF THE ASSESSEES. THE A.O. ALS O DID NOT ALLOW DEDUCTION UNDER SECTION 54F CLAIMED AT RS.7,49,188/- TAKING THE VIEW THAT IN TH E SALE DEED THE TRANSFER DATE IS 31.12.2004. THE ASSESSEE HAS CONSTRUCTED THE PROPERTY PRIOR TO THE SAID DATE AND NOT AFTER THE DATE OF TRANSFER OF THE PROPERTY WHILE THE RESIDENTIAL PROPERTY HAS TO BE CONSTRUCTED WITHIN A PERIOD OF 3 YEARS. THUS, THE LTCG AT RS.7,04,698/- WAS TAXED IN THE CA SE OF EACH OF THE ASSESSEE. EACH OF THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT (A) DELETED THE ADDITION OF RS.7,04,698 BUT CONFIRMED THE SALE CONSIDERATION AT RS.50,49,220/-. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. WE NOTED THAT IN THIS CASE THE A.O. HAS INTERPRETED THE EXPLANATION (III) TO SECTION 48 AND HAS APPLIED THE COST INFLATION INDEX APPLICABLE TO THE FINANCIAL YEAR 19 99-2000 BEING THE YEAR IN WHICH EACH OF THE ASSESSEE INHERITED THE PROPERTY FROM THEIR PARENTS. THE WORDS YEAR IN WHICH THE ASSESSEE FIRST HAS THE CAPITAL ASSET IS INTERPRETED BY HIM TO BE THE YEAR IN WHICH EACH OF THE ASSESSEE SUCCEEDED TO THE ASSETS OF THEIR PARENTS. WE FIND THAT SECTI ON 2(42A) ALSO USES SOMEWHAT SIMILAR EXPRESSION. EXPLANATION 1 TO SECTION 2(42A) PROVID ES THAT IN DETERMINING THE PERIOD FOR WHICH THE ASSET IS HELD BY THE ASSESSEE IN THE CASE OF CA PITAL ASSET WHICH BECAME THE PROPERTY OF THE ASSESSEE IN ANY OF THE CIRCUMSTANCES MENTIONED UNDE R SECTION 49(1) THE PERIOD FOR WHICH THE ASSET IS HELD BY PREVIOUS OWNER SHALL BE INCLUDED I F THE PERIOD FOR WHICH THE PREVIOUS OWNER HAS HELD THE ASSET IS TO BE INCLUDED FOR DETERMINING TH E PERIOD OF HOLDING OF CAPITAL ASSET BY AN 4 ASSESSEE. DIFFERENT CONSIDERATIONS CANNOT BE APPLIE D WHILE COMPUTING THE CAPITAL GAIN UNDER SECTION 48. IF SECTIONS 2(42A), 47(III), 49(1)(II) (III) AND SECTION 55(2)(B)(II) ARE READ TOGETHER THEN IT APPEARS THAT IN LAW NO TRANSFER OF A CAPITA L ASSET IS CONSIDERED TO TAKE PLACE ON INHERITANCE AND SUCCESSION. THE CAPITAL GAIN ARISES ONLY WHEN THE CAPITAL ASSET IS ACTUALLY SOLD BY THE SUCCESSOR IN ASSESSING THE CAPITAL GAIN IN THE HAND S OF THE SUCCESSOR, THE DATE OF ACQUISITION AND THE PERIOD OF HOLDING IS DETERMINED BY TAKING INTO CONSIDERATION THE COST FOR WHICH THE FIRST OWNER ACQUIRES THE CAPITAL ASSET. SECTION 2(42A) U SES THE EXPRESSION IN DETERMINING THE PERIOD FOR WHICH CAPITAL ASSET IS HELD BY THE ASSESSEE. SECTION 48 IS MERELY A COMPUTATION PROVISION AND CANNOT OVERRIDE THE CHARGING PROVISION. THE SC HEME OF TAXATION OF CAPITAL GAIN TO BE UNDERSTOOD BY APPLYING THE PROVISIONS OF SECTION 2( 42A), 2(47), 47(II), 48, 49(1)(II) & 55(2)(B)(II) OF THE ACT. THEREFORE, AS PER THE PR OVISIONS OF THESE SECTIONS, WHERE AN ASSESSEE SELLS AND INHERITS CAPITAL ASSET, THE CAPITAL GAIN IS COMPUTED WITH REFERENCE TO THE PERIOD OF HOLDING AND COST OF ACQUISITION INCURRED BY PREVIOU S OWNER. IF IT IS SO CONSIDERED, THE COST INFLATION INDEX HAS ALSO TO BE CONSIDERED WITH REFE RENCE TO THE PREVIOUS OWNER. SIMILAR VIEW HAS BEEN TAKEN BY CALCUTTA BENCH OF THE TRIBUNAL IN THE CASE OF SMT. MINA DEOGUN VS. ITO, 117 TTJ 121 (CAL) AND IN THE CASE OF VIJAYSINH R. RATHORE V S. ITO (AHD.) SPECIAL BENCH, 106 ITD 153. NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE B Y THE LD. D.R. WE ARE, THEREFORE, OF THE VIEW THAT THE CIT(A) HAS RIGHTLY HELD THAT THE COST OF INDEXATION HAS TO BE APPLIED TO THE FAIR MARKET VALUE AS ON 01.04.1981 WHILE COMPUTING THE C APITAL GAIN UNDER SECTION 48 OF THE INCOME TAX ACT, 1961. 6. COMING TO THE SECOND ISSUE IN GROUND NO.1 WE NOT ED THAT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT EVEN THOUGH THE SALE DEED WAS EXECUTED ON 31.12.2004 BUT IN FACT 5 PHYSICAL POSSESSION OF IMPUGNED LAND WAS GIVEN TO T HE PURCHASER BY THE ASSESSEE VENDOR ON 18.06.2001. THE RELEVANT PARA OF THE SALE DEED WAS REPRODUCED UNDER PARA NO. 2.2 OF HIS ORDER. THE CIT(A) TOOK THE VIEW THAT AS PER THE PROVISIONS OF SECTION 2(47) OF THE ACT THE TRANSFER TOOK PLACE ON 18.06.2001 AND SINCE EACH OF THE ASSESSEE HAS CONSTRUCTED THE PROPERTY WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET THE Y ARE ENTITLED FOR THE EXEMPTION UNDER SECTION 54F. THE LD. D.R. BEFORE US MERELY RELIED ON THE O RDER OF THE A.O. BUT DID NOT OBJECT THAT THE TRANSFER HAS NOT TAKEN PLACE ON 18.06.2001. EVEN N O COGENT MATERIAL IN THIS REGARD WAS FILED BEFORE US. UNDER THESE FACTS AND CIRCUMSTANCES, IF THE FINDING THAT THE TRANSFER HAS TAKEN PLACE ON 18.06.2001 IS UNDISPUTED, THE ASSESSEE IN OUR OPINI ON IS ENTITLED FOR THE EXEMPTION UNDER SECTION 54F AS THE ASSESSEE HAS CONSTRUCTED THE PROPERTY WI THIN 3 YEARS. THUS, THE ORDER OF THE CIT(A) IS ALSO CONFIRMED ON THIS PART OF THE GROUND. ACCORDI NGLY, GROUND NO.1 TAKEN BY THE REVENUE STANDS DISMISSED. 7. THE NEXT GROUND RELATES TO THE DELETION OF THE A DDITION OF RS.4,56,500/- IN THE CASE OF EACH OF THE ASSESSEE ADDED BY THE A.O. AS UNEXPLAINED IN VESTMENT. THE ASSESSEE HAS SHOWN THE INVESTMENT IN THE SAID PROPERTY AT RS.15,00,000/- W HILE THE D.V.O. HAS VALUED THE PROPERTY AT RS.24,13,000/- WHICH WAS OBJECTED BY THE ASSESSEE O N LEGALITY AS WELL AS ON MERIT. THE CIT(A) AFTER CONSIDERING THE RECONCILIATION OF THE DIFFERE NCE BETWEEN THE INVESTMENT SHOWN BY THE ASSESSEE AND INVESTMENT AS MADE BY THE D.V.O. WORKE D OUT THE VALUE OF THE ESTIMATED INVESTMENT AT RS.20,45,000/- AND TOOK THE VIEW THAT THESE INVE STMENTS WERE MADE BY THE ASSESSEE DURING THE THREE FINANCIAL YEAR 2002-03, 2003-04 & 2004-05. T HE INVESTMENTS MADE DURING THE YEAR WERE RS.3,06,750/- AGAINST THE INVESTMENT SHOWN AT RS.2, 50,000/- BY EACH OF THE ASSESSEE. HE NOTED 6 THAT THE DIFFERENCE WAS MERELY 7.6% WHICH IS WITHIN THE TOLERANCE LIMIT AND ACCORDINGLY DELETED THE ADDITION OF RS.4,56,500/-. 8. LD. D.R. RELIED ON THE ORDER OF THE A.O. WHILE T HE LD. A.R. RELIED ON THE ORDER OF THE CIT(A) AND VEHEMENTLY CONTENDED THAT THE INVESTMENT S IN THE CONSTRUCTION HAS BEEN MADE BY BOTH THE ASSESSEES DURING THE FINANCIAL YEARS 2002- 03, 2003-04 & 2004-05 WHILE THE A.O. MADE THE ADDITION ONLY IN ONE A.Y. HE REFERRED TO THE R ECONCILIATION IN THE COST AS INCURRED BY THE ASSESSEE AND AS HAS BEEN ESTIMATED BY THE D.V.O. WH ICH IS AVAILABLE AT PAGE NO.10 OF THE ORDER OF THE CIT(A). THUS, IT WAS CONTENDED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE A.O. HAS MADE THE ADDITION IN ONE YEAR ON THE BASIS OF THE COST AS ESTIMATED BY THE D.V.O. AND EVEN THOUGH THE CONSTRUCTION TOOK PL ACE IN 3 YEARS, THE TOTAL COST SHOWN BY THE ASSESSEE IS AT RS.15,00,000/-. THE ASSESSEE HAS PO INTED OUT THE DEFECTS IN THE DVOS REPORT TO THE EXTENT OF RS.6,05,211/- ON THE VARIOUS ITEMS POINTI NG OUT THAT THE COST OF MARBLE FLOORING, CRAZY FLOORING, KOTA STONE FLOORING, GLAZED TILE ETC. WER E TAKEN AT A VERY HIGH RATES. IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAS USED OLD BRICKS AND EMERG ING GRITS ETC. OF THE OLD HOUSE. IT WAS ALSO POINTED OUT THEREIN THAT NO ARCHITECTURE FEES WAS P AID AND THERE IS SETTLED LAW THAT DIFFERENCE IN CPWD AND PWD RATES ARE UPTO 10 TO 15%. IN OUR OPIN ION, THE CIT(A) HAS RIGHTLY CONSIDERED ALL THESE POINTS AND TOOK THE VIEW ON THE BASIS OF THE VALUE ESTIMATED BY THE D.V.O. HIMSELF IN ANOTHER CASE OF SMT. KAMINI AGARWAL FOR THE A.Y. 20 04-05 AT RS.20,45,000/-. THE COST ESTIMATED BY THE CIT(A) IN OUR OPINION IS FAIR AND REASONABLE AND IS BASED ON THE JUDICIALLY ACCEPTED VALUATION NORMS. WE COULD NOT SEE ANY ERR OR WHICH MAY COMPEL US TO REVERSE THE COST 7 AS ESTIMATED BY THE CIT(A). UNDER THESE FACT AND C IRCUMSTANCES, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A). THUS, THIS GROUND ALSO STANDS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE STAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.06.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH JUNE, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY