S.Rammohan, CHENNAI V. ACIT, CHENNAI

ITA 718/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8840 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVASRINIVAS IRS
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Period of limitation; Cost of acquisition; Time period of passing order
• Section: 54F; 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! , '!# BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 718/MDS/2016 ' $ %$ / ASSESSMENT YEAR : 2009-2010. S. RAMMOHAN, NO. 977, LAKSHMAN SWAMY SALAI, K.K.NAGAR, CHENNAI 600 078. [PAN AWUPS 7011H] VS. THE ASSISTANT COMMISSIONER OF TAX, SALARY CIRCLE 5, CHENNAI 600 006. ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. N. VIJAYKUMAR, C.A. *+&' ( ) /RESPONDENT BY : SHRI. SHIVASRINIVAS, IRS, JCIT. ( , / DATE OF HEARING : 09-08-2016 -.% ( , / DATE OF PRONOUNCEMENT : 17-08-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHEN NAI, IN ITA NO.335/ CIT(A)-5/13-14, DATED 03.02.2016 FOR THE AS SESSMENT YEAR ITA NO.718/MDS/2016. :- 2 -: 2009-2010 PASSED U/S.143(3), 271 (1) (C) AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE AC T). 2. THE ONLY SUBSTANTIVE GROUND RAISED BY THE ASSESSEE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER TH FACTS AND CONFIRMED LEVY OF PENALTY OF <1,40,000/- U/S.271(1) (C) OF THE ACT . IN RESPECT OF PORTION OF UNUTILIZED AMOU NT IN CAPITAL GAINS ACCOUNTS SCHEME IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS THREE YEARS PERIOD FROM DATE OF TRANSFER OF ORIGINAL ASSE T TO UTILIZE THE SAID AMOUNT FOR CLAIMING EXEMPTION U/S.54F OF THE ACT. FURTHER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON THE F ACTS THAT THE ASSESSEE IS AN INDIVIDUAL THOUGH FOLLOWING CASH SYS TEM OF ACCOUNTING AND OFFERED INTEREST ACCRUED ON BANK DEPOSITS TO IN COME TAX IN ASSESSMENT PROCEEDINGS TO PURCHASE PEACE WITH DEPAR TMENT AND CO- OPERATED IN ASSESSMENT PROCEEDINGS. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE HA S FILED RETURN OF INCOME ON 28.07.2009 WITH TOTAL INCOME OF <17,72,760/- AND THE RETURN OF INCOME WAS PROCESSED U/S.143(1) O F THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS AND NOTICES U/S.143(2) AND U/SE. 142(1) OF THE ACT WIT H QUESTIONNAIRE WAS ISSUED. IN COMPLIANCE TO NOTICES, THE LD. AUTHORIS ED REPRESENTATIVE OF ASSESSEE APPEARED AND FILED DETAILS AND THE LD. ASS ESSING OFFICER FOUND ITA NO.718/MDS/2016. :- 3 -: THAT THE ASSESSEE HAS SOLD IMMOVABLE PROPERTY ON 0 6.09.2008 FOR <.65,22,000/- AND CLAIMED EXEMPTION U/S.54F OF THE ACT BY DEPOSITING THE NET SALE CONSIDERATION IN CAPITAL GAINS ACCOUNT S SCHEME. THE ASSESSEE HAS PURCHASED PROPERTY IN THE YEAR 1999 AND CLAIMED INDEXED COST OF ACQUISITION OF PROPERTY. THE ASSES SEE UTILIZED SALE PROCEEDS IN CAPITAL GAINS ACCOUNTS SCHEME IN TWO IN STALLMENTS FOR CONSTRUCTING OF A RESIDENTIAL FLAT ON THE SITE ORI GINALLY OWNED BY FATHER-IN-LAW, WHICH THE FATHER-IN-LAW, SETTLED 1/3 SHARE OF UDS LAND IN FAVOUR OF THE DAUGHTER AND THE DAUGHTER HAS SETT LED THE SAME IN FAVOUR OF THE ASSESSEE. THE ASSESSEE HAS BUILT THIR D FLOOR ON THE BUILDING AND INVESTED <59,75,491/- AND PRODUCED CO NSTRUCTION AGREEMENT, COPY OF PLAN APPROVAL AND OTHER DETAILS OF CONSTRUCTION MATERIALS WITH BILLS. THE LD. ASSESSING OFFICER HAV ING SATISFIED WITH THE CONSTRUCTION COST FOUND THAT SINCE THE ASSESSEE HA S CLAIMED EXEMPTION U/S. 54F OF THE ACT WERE THE ENTIRE SALE PROCEEDS SHOULD HAVE BEEN INVESTED IN CONSTRUCTION OF RESIDENTIAL P ROPERTY BUT DUE TO VARIATION OF VALUE OF INVESTMENT MADE AN ADDITION F OR A DIFFERENTIAL AMOUNT OF <4,91,905/- AND IN RESPECT OF BANK INTERE ST, THE LD. ASSESSING OFFICER BASED ON AIR INFORMATION FOUND TH AT THE ASSESSEE HAD FIXED DEPOSITS IN STATE BANK OF INDIA AND ICIC I BANK AND THE INTEREST ACCRUED AGGREGATING TO <1,05,543/- ALONG WITH INTEREST ON SAVING BANK ACCOUNT WAS ADDED TO THE RETURNED INCO ME AND ORDER ITA NO.718/MDS/2016. :- 4 -: WAS PASSED ORDER U/S.143(3) OF THE ACT DATED 21.12. 2011. SUBSEQUENTLY, THE LD. ASSESSING OFFICER ISSUED NOTI CE U/S.274 OF THE ACT FOR LEVY OF PENALTY AND IN THE PENALTY PROCEEDI NGS, THE LD. ASSESSING OFFICER CONSIDERED THE FINDINGS OF THE AS SESSMENT ON RESIDENTIAL PROPERTY CLAIM OF EXEMPTION U/S.54F OF THE ACT AND BANK INTEREST INCOME. THE ASSESSEE FILED EXPLANATIONS O N THE INADVERTENT MISTAKE OF NOT OFFERING BANK INTEREST AS ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING AND THE ASSESSEE HAS INVESTED ENTIRE CONSIDERATION IN THE CAPITAL GAINS ACCOUNTS SCHEME AND UTILIZED FOR CONSTRUCTION OF RESIDENTIAL HOUSE PROPERTY AND FURTHER CERTAIN WORKS ARE PENDIN G AND THE ASSESSEE HAS SUFFICIENT TIME TO UTILIZE THE BALANCE IN CAPITAL GAINS ACCOUNTS SCHEME. BU THE LD. ASSESSING OFFICER IS OF THE OPINION THAT THE ASSESSEE HAS WRONGLY CLAIMED EXEMPTION LONG TE RM CAPITAL GAINS FOR EVADING OF TAXES AND LEVIED PENALTY OF <1,40 ,000/- AND PASSED THE ORDER U/S.271(1) OF THE ACT DATED 22.06.2012. 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE THE LD. ASSESSING OFFICER AND THERE IS NO CONCEALMENT OR ANY FURNISHING OF INACCURATE PARTICULARS FOR LEVY OF PENALTY U/S.271( 1) (C) OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE GROUNDS OF ITA NO.718/MDS/2016. :- 5 -: THE ASSESSEE AND WRITTEN SUBMISSIONS FILED ON 27.0 1.2016 REFERRED AT PAGE 3 TO 8 OF HIS ORDER EXPLAINING THE FACTS WITH PROVISIONS OF LAW AND JUDICIAL DECISIONS CHALLENGING THE LEVY OF PENALTY . BUT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FINALLY CONCLU DED BY RELYING ON THE JUDICIAL DECISION OF MANPREET KAUR VS. CIT (PUNJAB & HARYANA HIGH COURT) IN ITA NO.354 OF 2014, DATED 17.08.2015 AND THE ASSESSEE HAS WRONGLY CLAIMED EXEMPTION U/S.54F OF THE ACT AN D ALSO NOT DISCLOSED INTEREST INCOME AND CONFIRMED THE PENALTY LEVIED BY THE LD. ASSESSING OFFICER. AGGRIEVED BY THE ORDER, THE A SSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE REITER ATED THE SUBMISSIONS MADE IN ASSESSMENT, PENALTY AND APPELL ATE PROCEEDINGS THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME NOR FILED ANY INACCURATE PARTICULARS. ON THE FIRST GROUND, THE ASSESSEE HAS SOLD IMMOVABLE PROPERTY ON 06.09.2008 AND DEPOSITED THE SALE CONSIDERATION IN TWO INSTALLMENTS IN CAPITAL GAINS ACCOUNTS SCHEME. SUBSEQUENTLY UTILIZED NET SALE CONSIDERATION DEPOSI TED ON CAPITAL GAINS ACCOUNTS SCHEME TOWARDS CONSTRUCTION TO THE EXTENT OF <59,75,491/-. THE LD. ASSESSING OFFICER HAS DISALLOWED THE PARTIA L CLAIM AS THE ASSESSEE HAS NOT UTILIZED THE FULL NET CONSIDERAT ION. THE LD. AUTHORISED REPRESENTATIVE FURTHER EXPLAINED THAT AN Y DISALLOWANCE ITA NO.718/MDS/2016. :- 6 -: SHALL BE EFFECTED IN THE ASSESSMENT YEAR 2012-13 AN D NOT IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE FOLLOWING CASH SYSTEM OF ACCOUNTING, THEREFORE INTEREST ACCRUED ON DEPOSITS WERE NOT REFLECTED IN THE RETURN OF INCOME BUT IN THE ASSESSMENT PROC EEDINGS TO BUY PEACE WITH THE DEPARTMENT THE ASSESSEE HAS ACCEPTED THE ADDITIONS AND THERE IS NO CONCISE ATTEMPT TO CONCEAL ANY INC OME OR FURNISH INACCURATE PARTICULARS AND PRAYED FOR DELETING THE PENALTY. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RE LIED ON THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER AND OPPO SED TO THE GROUNDS. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD, AND JUDICIAL DECISIONS CITED. THE CRUX OF THE ISSUE THAT THE LD. ASSESSING OFFICER LEVIED PENALTY ON THE BASIS OF EX CESS CLAIM OF EXEMPTION U/SEC. 54F OF THE ACT. WE FOUND ON PERU SAL OF THE ASSESSMENT ORDER U/S.143(3) OF THE ACT, THE PROPERT Y WAS SOLD ON 06.09.2008 AND AS THE PROVISIONS OF SEC. 54F OF T HE ACT THE ASSESSEE HAS TO PURCHASE AND CONSTRUCT RESIDENTIAL HOUSE WIT HIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ASSET BEIN G 05.09.2011. THE ASSESSEE IN COMPLIANCE WITH INCOME TAX PROVISIONS HAS DEPOSITED THE NET SALE CONSIDERATION IN CAPITAL GAINS ACCOUNTS SC HEME AND WITHDREW ITA NO.718/MDS/2016. :- 7 -: THE AMOUNTS FOR CONSTRUCTION OF RESIDENTIAL PROPERT Y WHICH IS NOT DISPUTED BY THE LD. ASSESSING OFFICER BUT THE DIFF ERENTIAL AMOUNT <4,91,905/- WAS ADDED TO THE RETURNED INCOME. THE PROVISION OF SEC. 54F OF THE ACT ARE BENEFICIAL PROVISIONS AND THE M AIN AIM OF THE LEGISLATURE IS TO PROMOTE CONSTRUCTION OF RESIDENTI AL PROPERTIES. FURTHER, THE ASSESSEE HAS TIME TILL 05.09.2011 TO U TILIZE THE MONEY FROM CAPITAL GAINS ACCOUNTS SCHEME AND IF IT IS NO T UTILIZED THE SAME IS TAXABLE IN THE YEAR WHEN THE LIMITATION PERIOD E XPIRES. THE ASSESSEE IS AN INDIVIDUAL AND MADE FIXED DEPOSITS IN SBI AND ICICI BANK AND FOLLOWING CASH SYSTEM OF ACCOUNTING. IN THE ASSESS MENT PROCEEDINGS, THE LD. ASSESSING OFFICER RELIED ON INFORMATION OF AIR AND MADE AN ADDITION WHICH THE ASSESSEE HAS ACCEPTED FOR PEACE AND CO-OPERATED WITH THE DEPARTMENT. THE BONAFIDE ACTION OF THE A SSESSEE IS NOT TO SUPPRESS THE INCOME BUT EFFECTED BY THE LEGAL FICTI ON OF THE PROVISIONS AND THE LEVY OF PENALTY CANNOT BE MANDATORILY INITI ATED. WE CONSIDER THE APEX COURT DECISION OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD 322 ITR 158(SC) AND THE LEVY OF PENALTY CANNOT BE AUTOMATIC AND ADDITION IN ASSESSMENT PROCEEDINGS CANNOT BE A GAT EWAY FOR LEVY OF PENALTY. WE ALSO DRAW SUPPORT FROM THE PRINCIPLES LAID DOWN IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 , (KARNATAKA) WERE IT WAS HELD THAT THE PENALTY PROCE EDINGS ARE NOT AUTOMATIC AND THEY ARE DISTINCT. CONSIDERING THE FA CTUAL MATRIX, LEGAL ITA NO.718/MDS/2016. :- 8 -: DECISIONS AND SUBMISSIONS, WE DELETE THE PENALTY LE VIED BY THE LD. ASSESSING OFFICER AND ALLOW THE GROUNDS OF THE ASSE SSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.718/MDS/2016 IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 17TH DAY OF AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . ) (ABRAHAM P. GEORGE) /ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 0 / DATED: 17.08.2016 KV 1 ( *',23 43%, / COPY TO: 1 . &' / APPELLANT 3. 5, () / CIT(A) 5. 389 *',' / DR 2. *+&' / RESPONDENT 4. 5, / CIT 6. 9:$ ; / GF