Shri. H. Hanumanthappa, Bangalore V. ITO, Bangalore

ITA 681/BANG/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8841 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 18-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P H NARAGUNDKAR
• Keywords: Revised return; Capital Gains
• Section: 54B; 234B; 139(1); 139(4); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH SMC BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.681(BNG)/10 (ASSESSMENT YEAR : 2004-05) SHRI H. HANUMANTHAPPA, NO.224, 4 TH CROSS, 4 TH BLOCK, BASAVESHWARANAGAR, 4 TH STAGE, BANGALORE-79. VS. THE INCOME TAX OFFICER, WARD 8(3), BANGALORE. APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE. RESPONDENT BY : SHRI P.H. NARAGUNDKAR, ADDL. CIT. O R D E R THIS APPEAL IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THE AP PEAL : 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PRO BABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A)IS NOT JUSTIFIED IN SUSTAINING A PART OF THE DISALLOWANCE TOWARDS COST OF IMPROVEMENT AMOUNTING TO RS.79,481 HOLDING THAT THE BILLS ISSUED ARE NOT IN THE NAME OF THE APPELLANT UNDER T HE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN ENHANCING TH E ASSESSMENT AND DIRECTING THE LEARNED A.O. TO WITHDRAW THE DEDUCTIO N ALLOWED UNDER SECTION 54B OF THE ACT TO THE EXTENT OF RS.3,00,000 UNDER T HE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HON'BLE CCIT / DG THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED T O INTEREST UNDER SECTION 234A AND 234B OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE AND THE LEVY DESERVES TO BE CANCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAYBE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE AP PEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED C OSTS IN PROSECUTING THE ITA NO.681(BNG)/10 - 2 - APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITU TION FEES AS PART OF THE COSTS. 2. THE FACTS OF THE CASE AR E THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED RETURN OF INCOME FOR THE ASST. YEAR 2004-05 ON 3.1. 2005 DECLARING AN INCOME OF RS.45,000. SUBSEQUENTLY, ON 13.1.2005, THE ASSESSE E FILED REVISED RETURN OF INCOME DECLARING AN INCOME OF RS.45,000 AS INCOME FROM OTH ER SOURCES AND CLAIMED THAT THIS INCOME IS ELIGIBLE FOR EXEMPTION UNDER SECTION 54B AGAINST THE CAPITAL GAINS ARISING ON ACQUISITION OF AGRICULTURAL LAND IN S.NO.44, MALLAT HAHALLY, BANGALORE BY BDA FOR RS.11,93,076. DURING THE ASSESSMENT PROCEEDINGS U/ S. 143(3), THE A.O. OBSERVED THAT THE ASSESSEE HAS COMPUTED INCOME FROM CAPITAL GAINS AT RS.4,64,004 AGAINST WHICH HE HAS CLAIMED EXEMPTION UNDER SECTION 54B ON THE GROU ND THAT HE HAS INVESTED RS.4,60,204 IN PURCHASING AGRICULTURAL LAND. HE FU RTHER OBSERVED FROM THE COMPUTATION OF CAPITAL GAINS THAT THE ASSESSEE HAS PURCHASED TH E SAID LAND AT RS.1,61,055 AND COST OF IMPROVEMENT IS SHOWN AT RS.2,10,000 AND IN SUPPO RT OF IMPROVEMENT EXPENSES, THE ASSESSEE HAS FILED DETAILS OF DIGGING THE BORE WELL , PURCHASE OF MOTOR PUMP, STARTER, PANEL BOARD, FITTINGS AND STONE PILLARS FOR COMPOUN D WALL AND LABOUR CHARGES ETC. TO VERIFY THE CORRECTNESS OF THESE DETAILS, THE ASSESS ING OFFICER ISSUED SUMMONS TO THE RESPECTIVE PARTIES BUT THE SUMMONS WERE RETURNED BY THE POSTAL AUTHORITIES WITH REMARKS AS NO SAID FIRM IN THE ADDRESS OR INSUFF ICIENT ADDRESS, ETC. THEREFORE HOLDING THAT THE ASSESSEE HAS NOT MADE ANY IMPROVEM ENT IN THE LAND AS CLAIMED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE AMOU NT OF RS.2,10,000 ON INDEXATION AT ITA NO.681(BNG)/10 - 3 - RS.3,98,484. AGGRIEVED BY THE SAID DISALLOWANCE, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONSIDERED THE APPEAL SUBMITT ED BY THE ASSESSEE AND HELD THAT THE BILLS WHICH ARE IN THE NAME OF ASSESSEE ARE ALL OWABLE AND CERTAIN BILLS WHICH ARE NOT IN THE NAME OF THE ASSESSEE CANNOT BE ALLOWED. HE THEREFORE ALLOWED A SUM OF RS.1,31,150 AND DISALLOWED AN AMOUNT OF RS.79,481. AGGRIEVED OF THE SAID DISALLOWANCE, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE AFTER HAVING PURCHASED LAND HAS MADE IMPROVEMENT TO THE SAID LAN D WHICH WAS LATER ON ACQUIRED BY THE BDA. HE SUBMITTED THAT THE CIT(A) HAD CONSIDER ED THE BILL FOR PURCHASE OF PUMP SET, STARTER, PANEL BOARD, GI PIPE, BOREWELL FITTIN GS, ETC AND HAS ALLOWED THE EXPENSES AS REGARDS DIGGING OF BORE WELL AND LAND DEVELOPMEN T WORK AND HAS DISALLOWED ONLY THE AMOUNT RELATING TO PURCHASE OF PUMP SET, PURCHASE O F GI PIPE AND BORE WELL FITTINGS AND PURCHASE OF STONES FOR FENCING AND COMPOUND WALL WO RK. HE SUBMITTED THAT ONCE IT IS ACCEPTED THAT THE ASSESSEE HAS DUG THE BORE WELL AN D HAS ALSO CARRIED OUT LAND DEVELOPMENT WORK AND HAS ALSO ALLOWED THE EXPENSES RELATING TO PURCHASE OF CABLE AND PURCHASE OF STARTER AND PANEL BOARD, IT IS NOT UNDE RSTANDABLE AS TO HOW THE EXPENSES INCURRED FOR THE PURCHASE OF PUMP SET AND PURCHASE OF GI PIPE AND BORE WELL FITTINGS CAN BE DOUBTED AND DISALLOWED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PERSON IN WHOSE NAME THE BILLS HAVE BEEN ISSUED I.E. SRI BASAVARAJ WAS THE TECHNICIAN ENGAGED FOR THE FITTING OF PUMP SET INTO THE BORE-WELL AND THEREFORE BILLS ITA NO.681(BNG)/10 - 4 - WERE ISSUED IN HIS NAME AND THE EXPENSES RELATING T O THE FITTING OF THE BORE-WELL SHOULD BE ALLOWED IN FULL. 4. THE LEARNED D.R. SUPPORTED THE ORDER OF THE CIT( A). 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE CIT(A) HAD ACCEPTED IN PART THAT THE ASSESSEE HAS CARRIED OUT IMPROVEMENT OF TH E LAND AFTER PURCHASING THE SAME. THE IMPROVEMENT OF LAND CONSISTS OF EXPENSES RELATI NG TO THE SINKING OF BORE WELL AND FITTINGS OF PUMP SET AND ALSO OF LAND DEVELOPMENT W ORK. THE ASSESSEE HAS FILED COPIES OF THE BILLS AND SEQUENCE OF THE DATES ON WHICH THE BILLS WERE ISSUED CLEARLY SHOWS THAT SINKING OF BORE WELL TO FITTING OF PUMP SET HAS BEE N CARRIED IN THE MONTH OF OCTOBER, 1994 TO JAN., 1995. ONCE IT IS ACCEPTED THAT THE A SSESSEE HAS SUNK THE BORE WELL AND ALSO PURCHASE OF STARTER AND PANEL BOARD AND PURCHA SE OF CABLE IS ACCEPTED WHICH ARE VERY MUCH ESSENTIAL FOR THE FIXING OF PUMP SET, MER ELY BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE BILLS IN HIS NAME, THE EXP ENSES CANNOT BE DISALLOWED. EVEN IF IT IS PRESUMED THAT THE BILLS WHICH ARE NOT IN HIS NAME DO NOT PERTAIN TO HIM, IT HAS TO BE ASSUMED THAT THE ASSESSEE WOULD HAVE PURCHASED T HE PUMP SET AT SOME COST FOR FITTING INTO THE BORE WELL AND THE BILLS PRODUCED B Y THE ASSESSEE CAN BE ACCEPTED AS CORROBORATIVE EVIDENCE FOR THE PRICE AT WHICH SAID MATERIAL CAN BE PURCHASED. THE STARTER, PANEL BOARD AND CABLE ARE THE NECESSARY AC CESSORIES FOR FITTING OF THE PUMP SET AND WOULD BE USELESS WITHOUT THE SAME. IN VIEW OF THE SAME, WE ARE INCLINED TO ITA NO.681(BNG)/10 - 5 - ACCEPT THE CONTENTION OF THE ASSESSEE AND ALLOW THE ENTIRE AMOUNT AS EXPENDITURE FOR IMPROVEMENT OF THE LAND. THE SECOND GROUND OF APPE AL IS ACCORDINGLY ALLOWED. 6. AS REGARDS THE GROUND NO. 3, THE BRIEF FACTS OF THE CASE ARE THAT AFTER RECEIVING THE SALE CONSIDERATION FROM BDA WHO HAS A CQUIRED THE ASSESSEES AGRICULTURAL LAND, THE ASSESSEE CLAIMED THAT HE HAS INVESTED THE SALE PROCEEDS IN THE PURCHASE OF AGRICULTURAL LAND AND HAS CLAIMED EXEMPTION UNDER S ECTION 54B OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER ALLOWED THE EXEMPTION UNDER SECTION 54 OF THE ACT. HOWEVER DURING THE APPEAL BEFORE THE CIT(A), CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT INVESTED OR DEPOSITED THE SALE PROCEEDS WITHIN THE SPECIFIED PERIOD UNDER THE ACT AND THEREFORE SOUGHT TO DISALLOW THE SAID EXEMPTION AND ENHANCE THE ASSESSMENT. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PURCHASED AGRICULTURAL LAND ON 27.4.2005 AND HE HAD ENTERED INTO AN AGREEMENT IN RESPECT OF PURC HASE OF PROPERTY ON 26.11.2004 AND HAD PAID THE ADVANCE OF RS.1,25,000 ON THE SAI D DATE AND THEREAFTER PAID A SUM OF RS.2 LAKHS ON 23.3.2005 AND A SUM OF RS.1,00,000 ON 20.04.2005. AND AS THE ASSESSEE HAD INVESTED THE SALE CONSIDERATION BEFORE THE DUE DATE UNDER SECTION 139(4) OF THE ACT, THERE IS NO JUSTIFICATION FOR MAKING ANY ENHAN CEMENT ON THIS SCORE. HE PLACED RELIANCE ON THE DECISION OF THE ITAT IN THE CASE O F NIPUN MEHROTRA VS. ACIT REPORTED IN 297 ITR (AT) 110. THE CIT(A) AFTER CON SIDERING THE ASSESSEES CONTENTION AND ALSO THE DECISION OF THE NIPUN MEHROTRA (SUPRA) HELD THAT THE ASSESSEE HAS PAID THE ADVANCE OF RS.1,20,000 BEFORE THE DUE DATE UNDE R SECTION 139(4) AND THEREFORE ITA NO.681(BNG)/10 - 6 - ONLY THE SAID AMOUNT IS ELIGIBLE FOR DEDUCTION UNDE R SECTION 54B OF THE ACT AND HE WITHDREW THE EXEMPTION UNDER SECTION 54 OF THE ACT OF RS.3 LAKHS SINCE IT HAS BEEN PAID AFTER FILING OF THE RETURN OF INCOME. AGGRIEVE D THE ASSESSEE IS IN APPEAL BEFORE ME. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS INVESTED IN AGRICULTURE LAND AND THEREFORE THE ENTIRE AMOUNT SHOULD BE ALLOWED AS EXEMPT UNDER SECTION 54B OF THE INCOME TAX ACT, 1961. ACCORDING TO ASSESSEE, HE HAS PAID AN ADVANCE ON 26.11.2004 WHICH IS WITHIN THE TIME LIMI T FOR THE PURCHASE OF AGRICULTURE LAND AND THEREFORE THE ENTIRE AMOUNT IS EXEMPT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE INVESTED IN THE NEW ASSET I.E. AGRICULTURE LAND BEFORE THE DUE DAT E OF FILING OF THE RETURN UNDER SECTION 139(1) I.E. BEFORE 31.7.2004 AND IF THERE I S ANY BALANCE CONSIDERATION LEFT, IT OUGHT TO HAVE PUT IN ANY BANK OR INSTITUTION AS MAY BE SPECIFIED IN THE ACT OR SCHEME NOTIFIED BY THE CENTRAL GOVERNMENT BUT THE ASSESSEE HAS FAILED TO FULFILL THESE CONDITIONS. THUS ACCORDING TO HIM, THE ORDER OF TH E CIT(A) IS TO BE UPHELD. 9. HAVING HEARD BOTH THE PARTIES, I FIND THAT ONLY QUESTION BEFORE US IS WHETHER THE ASSESSEE COMPLIED WITH THE CONDITIONS SPECIFIED IN SECTION 54B OF THE INCOME TAX ACT, 1961 TO EXEMPT CAPITAL GAINS ARISING OUT OF TH E ACQUISITION OF AGRICULTURE LAND OF THE ASSESSEE BY BDA. THE ASSESSMENT YEAR IN QUESTI ON IS 2004-05 AND THE RELEVANT ITA NO.681(BNG)/10 - 7 - PREVIOUS YEAR IS 2003-04. THE DUE DATE OF FILING O F THE RETURN UNDER SECTION 139(1) FOR THE RELEVANT A.Y. IS 31.7.2004 AND THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139(4) IS 31.3.2005 OR THE DATE OF FILING OF THE RE TURN OF THE ASSESSEE UNDER SECTION 139(4) WHICHEVER IS EARLIER. IN THE CASE ON HAND, THE ASSESSEE HAS FILED RETURN ON 3.1.2005 AND A REVISED RETURN ON13.1.2005. THEREFO RE THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139(4) IS EITHER 3.1.2005 OR 1 3.1.2005 IF THE REVISED RETURN OF INCOME IS ACCEPTED. IT IS SEEN FROM THE ORDER OF T HE CIT(A) THAT THE ASSESSEE HAS PAID THE AMOUNT OF RS.4,25,000 ON THE FOLLOWING DAT ES : 26.11.2004 RS.1,25,000 26.3.2005 RS.2,00,000 20.4.2005 RS.1,00,000 RS.4,25,000 THUS IT CAN BE SEEN THAT THE ASSESSEE HAS PAID RS.1 ,25,000 ONLY BEFORE THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139(4). THE DEC ISION OF THE ITAT, BANGALORE BENCH IN THE CASE OF NIPUN MEHROTRA VS. ACIT REPORTED IN 297 ITR (AT) 110 ONLY LAYS DOWN THAT RETURN OF INCOME FILED UNDER SECTION 139(4) SH OULD BE CONSIDERED WHILE CONSIDERING THE EXEMPTION UNDER SECTION 54 OF THE INCOME TAX AC T, 1961. THUS IT IS SEEN THAT THE AMOUNT OF RS.3 LAKHS HAVE BEEN INVESTED AFTER THE D UE DATE OF FILING OF THE RETURN UNDER SECTION 139(4) OF THE INCOME TAX ACT, 1961. SUB-SECTION (2) OF SECTION 54B OF THE ACT, PROVIDES THAT THE AMOUNT OF CAPITAL GAINS WHICH IS NOT UTILIZED BY THE ASSESSEE ITA NO.681(BNG)/10 - 8 - FOR THE PURPOSE OF PURCHASE OF THE NEW ASSET BEFOR E THE DATE OF FURNISHING OF RETURN OF INCOME UNDER SECTION 139, IT SHALL BE DEPOSITED IN THE BANK ACCOUNT OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILIZED IN ACCORDANCE WIT H THE SPECIFIED SCHEME OF CENTRAL GOVERNMENT AND THE ASSESSEE SHALL FILE PROOF OF SUC H DEPOSIT ALONG WITH THE RETURN OF INCOME. IN CASE OF FAILURE ON THE PART OF THE ASS ESSEE TO DO SO, THEN THE AMOUNT NOT SO UTILIZED SHALL BE TREATED AS INCOME OF THE ASSE SSEE. AS THE ASSESSEE HAS NOT DEPOSITED THE SAID AMOUNT IN THE BANK ACCOUNT OR SP ECIFIED SCHEME OF THE CENTRAL GOVERNMENT BEFORE THE DATE OF FILING OF THE RETURN, WE ARE OF THE OPINION THAT THE CIT(A) IS CORRECT IN WITHDRAWING THE EXEMPTION TO T HE EXTENT OF RS.3 LAKHS AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). IN VIEW OF THE SAME, THE ASSESSEES GROUND OF APPEAL NO.3 IS REJECTED. 10. AS REGARDS THE GROUNDS OF APPEAL NOS.4 TO6 URGE D ONLY BEFORE THE TRIBUNAL AND NOT BEFORE THE CIT(A), WE FIND THAT THE INTEREST UN DER SECTIONS 234A & 234B IS CONSEQUENTIAL IN NATURE AND THEREFORE IS ADMITTED A ND THE ASSESSING OFFICER IS DIRECTED TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESS EE. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND SEPTEMBER, 2010 AT BANGALORE. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER ITA NO.681(BNG)/10 - 9 - COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. * GPR BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.