Sr. N Prathap Kumar , Bangalore V. The Assistant Commissioner of Income Tax Circle-5(2)(1), Bangalore

ITA 751/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2572 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-08-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H KABILA
• Assessee Lawyers: G S PRASHANTH
• Keywords: Principle of natural justice; Tax effect; Capital Gains
• Section: 54F; 142(1); 234B; 143(2); 13; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES C BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND S MT BEENA PILLAI, JUDICIAL MEMBER ITA. NO. 751/BANG/2019 ASSESSMENT YEAR: 2013 - 1 4 SRI. N. PRATHAP KUMAR, PROP: PRATHAP ELECTRICALS, NO. 32/2, 5 TH MAIN, CHAMARAJPET, BENGALURU 560 018. PAN: ADZPK5497K VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 5 (2) (1), BENGALURU. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI G.S. PRASHANTH, CA FOR REVENUE : SMT. H. KABILA, ADDL. CIT (DR) DATE OF HEARING : 23.08.2021 DATE OF PRONOUNCEMENT : 11 .10.2021 ORDER PER BEENA PILLAI , JM . PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 26/02/2019 PASSED BY THE LD.CIT(A) - 5, BANGALORE ON FOLLOWING GROUNDS OF APPEAL: SL. NO. GROUNDS OF APPEAL TAX EFFECT IN RS. 1. A) THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS IT I S AGA I NST TH E APPELLANT, I S OPPOSED T O LAW , WEIGHT OF EVIDENCE, NATURAL JUSTICE , PROBABILITIES , FACTS AND CIRCUMSTANCES OF - PAGE 2 OF 9 ITA NO. 751/BANG/2019 THE APPELLANT'S CASE. B) THE APP E L LAN T DENIES HIMS E L F T O BE ASSESSED ON A T O T A L INCOME OF R S . 62,61 , 360 / - AS AGAINST THE INCOME RETURNED BY THE APPE LLANT OF RS.1 ,24,96,436/ - O N THE FACTS A ND C I RCUM S TA N CES OF THE CASE . 2. A) THE AUTHORITIES BELOW ERRED IN DENYING EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT OF RS.62,35.074/ - UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE AUTHORITIES BELOW ERRED I N NOT APPRECIATING THAT THE APPELLANT HAD NOT OBTAINED THE POSSESSION OF THE IMPUGNED SIX FLATS AT ANY POINT IN TIME AND CONSEQUENTLY THE APPELLANT DID NOT OWN MORE THAN ONE RESIDENTIAL HOUSE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 19,26,640/ - 3. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE MANDATORY CONDITIONS OF 'TRANSFEREE BEING IN POSSESSION' AND 'WILLINGNESS TO PERFORM' AS ENVISAGED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1 882 WAS NOT SATISFIED IN THE CASE INSTANT AND THUS THERE COULD HAVE BEEN NO POSSESSION TO RESULT IN DEEMED OWNERSHIP UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. - 4. THE LEARNED CIT(A) GROSSLY ERRED IN TREATING THE APPELLANT AS THE OWNER OF SIX FLA TS WHEN THE APPELLANT WAS NEITHER IN POSSESSION NOR A DEED OF CONVEYANCE WAS REGISTERED IN HIS FAVOUR UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. - 6. A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT DIE CONSTRUCTION WAS NOT REASONABLY COMPLETED AS PER TERMS OF TH E CONTRACT AND ACCORDINGLY THE DEVELOPER FAILED TO PERFORM HIS PART OF CONTRACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE AUTHORITIES BELOW FURTHER FAILED TO APPRECIATE THAT THE DEVELOPER HAD NOT ADHERED TO THE CONDITIONS IN THE CONTRACT - PAGE 3 OF 9 ITA NO. 751/BANG/2019 FOR ISSUANCE OF NOTICE INDICATING THE DATE OF HANDING OVER THE POSSESSION TO THE APPELLANT AND CONSEQUENTLY THE DEVELOPER HAD NOT PERFORMED HIS PART OF THE CONTRACT AND THUS THE PROVISIONS OF SECTION 53 A OF THE TRANSFER OF PROPERTY ACT DO NOT APPLY. 7. THE APPELLANT DENIES HIMSELF LIABLE TO BE LEVIED TO INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT AND FURTHER THE COMPUTATION OF INTEREST WAS NOT PROVIDED TO THE APPELLANT AS REGARD TO THE RATE, PERIOD AND METHOD OF CALCULATION OT INTEREST UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT EXPRESSLY URGES THAT THE PERIOD OF LEVY OF INTEREST IS NOT IN ACCORDANCE WITH SECTIONS 234B AND 234C OF THE ACT. 7,28,300/ - 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. - 9. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. - BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE DERIVES INCOME FROM HOUSE PROPERTY, BUSINESS, CAPITAL GAINS AND OTHER SOURCES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 30/09/2013 DECLARING TOTAL INCOME OF RS.62,61,362/ - . ACCORDINGLY, NOTICE UNDER SECTION 143(2) WA S ISSUED ALONG WITH NOTICE UNDER SECTION 142(1) OF THE ACT. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVES OF ASSESSEE APPEARED BEFORE THE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR . 3. THE LD.AO OBSERVED THAT ASSESSEE CLAIMED DEDUCTION UNDER SEC TION 54. ASSESSEE WAS ASKED TO FURNISH DETAILS OF THE CAPITAL PAGE 4 OF 9 ITA NO. 751/BANG/2019 GAINS AND EXEMPTIONS CLAIMED IN THE COMPUTATION OF INCOME. ASSESSEE ACCORDINGLY VIDE LETTER DATED 4/12/2016 FILED WORKING OF CAPITAL GAINS REFLECTING SALE OF LAND AND SALE OF SUPER BUILT UP AREA RESULTING IN LONG TERM CAPITAL GAIN OF RS.62,35,074/ - AND SHORT TERM CAPITAL GAIN ON TRANSFER OF 3 FLATS OF RS.11,81,295/ - . THE LD.AO NOTED THAT, LONG - TERM CAPITAL GAIN OF RS.62,35,074 WAS CLAIMED AS EXEMPTION UNDER SECTION 54F. THE LD.AO CALLED FOR EVIDE NCES IN RESPECT OF CAPITAL GAINS AND ALSO PROOF OF EXEMPTION CLAIMED UNDER SECTION 54F . 4. THE ASSESSEE FURNISHED DETAILS OF JOINT DEVELOPMENT AGREEMENT IN RESPECT OF 34 GUNTAS OF LAND BEARING SURVEY NO.157/3 AT BEGUR VILLAGE, BANGALORE. AS PER THE AGREE MENT ASSESSEE WAS TO RECEIVE 42% OF THE CONSTRUCTED SUPER BUILT UP AREA , AS AGAINST UNDIVIDED SHARE THAT WAS SURRENDERED BY ASSE SSEE. THE LD.AO OBSERVED THAT ON SURRENDERING OF 21,475 FT. OF UNDIVIDED INTEREST IN THE LAND, ASSESSEE WAS TO GET 32,840 FT. OF SUPER BUILT UP AREA IN THE APARTMENT COMPLEX WHICH RESULTED IN 24 FLATS COMING TO ASSESSEES SHARE. 5. THE LD.AO NOTED THAT , ASSESSEE SOLD 3 FLATS FALLING IN HIS SHARE FROM THE JDA DURING THE YEAR UNDER CONSIDERATION R ESULTING IN LONG TERM CAPITAL GAINS . ASSESSEE PURCHASED PROPERTY ON 25/06/2015 FROM M/S APRANJE JEWELLERS PVT LTD. THE LD.AO ASKED ASSESSEE TO FURNISH BANK ACCOUNT STATEMENT EVIDENCING INVESTMENT AND HOUSE PROPERTY FOR CLAIMING EXEMPTION UNDER SECTION 54 AND TO JUSTIFY THE CLAIM AS ASSESSEE WAS ALREADY IN POSSESSION OF 4 FLATS AS PER THE JDA. FROM THE SUBMISSIONS FILED, THE LD.AO NOTED THAT AMOUNT OF RS.65 LACS WAS DEPOSITED IN THE CAPITAL GAINS ACCOUNT SCHEME IN PAGE 5 OF 9 ITA NO. 751/BANG/2019 CANARA BANK ON 30/07/2013 WHICH WAS SAID TO HAVE BEEN UTILISED FOR PURCHASE OF PROPERTY FOR A CONSIDERATION OF RS.3.60 CRORES ON 25/06/2015 BEING THE NEW ASSET. THE LD.AO WAS OF THE OPINION THAT ASSESSEE WAS ALREADY IN POSSESSION OF FLATS THAT HAVE COME INTO HIS SHARE FROM THE JDA AND THEREFORE THE DEDUCTION CLAIMED UNDER SECTION 54F IS INCORRECT. THE ASSESSEE WAS CALLED UPON AS TO WHY THE DEDUCTION UNDER SECTION 54F SHOULD NOT BE DISALLOWED UNDER SUCH CIRCUMSTANCES. 6. IN RESPONSE TO THE SAID NOTICE, ASSESSEE SUBMITTED A LETTER FROM THE DEVELOPER STATING THAT THE DEVELOPMENT WORK WAS COMPLETED BY APRIL 2011 AND 24 FLATS WERE ALLOTTED TO ASSESSEE WHICH STARTED SELLING FROM JULY 2011. IT WAS SUBMITTED THAT O UT OF 24 FLATS , 15 FLATS WERE SOLD DURING THE PREVIOUS YEAR 2011 - 12 AND 3 FLATS WERE SOLD DUR ING THE RELEVANT YEAR UNDER CONSIDERATION. IT WAS ALSO STATED BY THE DEVELOPER THAT THE POSSESSION OF THE FLATS WERE NEVER HANDED OVER TO ASSESSEE BUT POSSESSION WAS GIVEN DIRECTLY TO THE ULTIMATE PURCHASER OF THE FLAT THE DEVELOPER FURTHER SUBMITTED THAT REMAINING 6 FLATS WERE NOT DELIVERED TO THE ASSESSEE BUT WERE HANDED OVER TO THE ULTIMATE BUYERS. 7. THE LD.AO ON PERUSAL OF THE SUBMISSIONS BY ASSESSEE WAS OF THE OPINION THAT , POSSESSION OF THE FLATS HAVING DIRECTLY HANDED OVER TO THE ULTIMATE PURCHASER DOES NOT IN ANY WAY ALTER THE OWNERSHIP OF THE FLATS. IT WAS HELD THAT, ONCE DEVELOPMENT WORK WAS COMPLETED BY APRIL 2011 AND THE FLATS STARTED TO BE SOLD, IT DEEMED TO HAVE BEEN HANDED OVER TO ASSESSEE. IT WAS THE OPINION OF THE LD.AO THAT , ONCE DEVELOPM ENT OF THE PROPERTY IS COMPLETED THE RIGHT OVER THE FLATS FALLING INTO ASSESSEES SHARE V ESTS IN HIM. THE LD.AO HELD THAT , THE PAGE 6 OF 9 ITA NO. 751/BANG/2019 UNSOLD FLATS ARE NOTHING BUT MORE THAN ONES SELF OCCUPIED PROPERTY AND THE REFORE PROVISIONS OF SECTION 5 4F STANDS VIOLATED AS ON THE DATE OF PURCHASE OF NEW ASSET DURING THE YEAR UNDER CONSIDERATION . THE LD. AO THUS DENIED THE EXEMPTION CLAIMED BY ASSESSEE UNDER SECTION 54F AMOUNTING TO RS. 62,35,074/ - . AGGRIEVED BY THE ORDER OF THE LD. AO, ASSESSEE PREF ERRED APPEAL BEFORE THE LD.CIT (A). 8. THE LD.CIT(A) UPHELD THE ACTION OF LD.AO. THE LD.CIT(A) ALSO EMPHASISED THAT THE CONDITIONS STIPULATED IN THE JDA IS VERY CLEAR REGARDING EFFECTIVE OWNERSHIP EMBEDDED IN ASSESSEES SHARE . THE LD.CIT(A) HELD THAT ASSESSEE ALL ALONG HAD SUBST ANTIAL OWNERSHIP IN MORE THAN ONE FLAT DURING THE YEAR UNDER CONSIDERATION, THAT EXCEEDED THE REQUIRE MENT UNDER SECTION 5 4F OF THE A CT. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) ASSESSEE IS IN APPEAL BEFORE US NOW. 9. WE HAVE HEARD BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS THE CASE OF ASSESSEE THAT AS ON THE DATE OF PURCHASE OF NEW ASSET, ASSESSEE DID NOT OWN ANY FLATS OTHER THAN THE NEW ASSET. IT IS SUBMITTED BY ASSESSEE THAT POSSESSION OF NEW FLATS WER E NOT HANDED TO ASSESSEE AND THEREFORE SEC. 53A OF TRANSFER OF PROPERTY ACT DID NOT APPLY. 10. THE LD.DR SUBMITTED THAT AS ON DATE OF PURCHASE OF NEW ASSET, ASSESSEE OWNED 6 RESIDENTIAL UNITS AND THAT EFFECTIVE OWNERSHIP WAS HELD BY ASSESSEE. HE THUS AR GUED THAT ASSESSEE DO NOT FULFILL THE NECESSARY CONDITION TO CLAIM BENEFIT U/S. 54F OF THE ACT AS ASSESSEE WAS OWNER OF MULTIPLE HOUSES AS ON DATE OF PURCHASE OF NEW ASSET. PAGE 7 OF 9 ITA NO. 751/BANG/2019 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLAC ED BEFORE US. 11.1 ADMITTEDLY AS PER THE JDA, ASSESSEE RECEIVED 42% OF CONSTRUCTED MULTISTORIED RESIDENTIAL APARTMENT S WITH CORRESPONDING CAR P ARKING, GARDEN USABLE AREA. IT WA S ALSO AGREED IN THE JDA THAT ASSESSEE WOULD HANDOVER THE ORIGINAL DOCUMENTS OF TITLE TO THE DEVELOP ER ON THE EXECUTION OF THE JDA WHICH IS A REGISTERED DOCUMENT. ASSESSEE WAS THUS ALLOTTED 24 RESIDENTIAL UNITS UPON COMPLETION. 11.2 DURING ASSESSMENT YEAR 2012 - 13 THE DEVELOPER SOLD 15 FLATS BELONGING TO ASSESS EE. 11.3 SUBSEQUENTLY , FOR ASSESSMENT YEAR 2013 - 14 BEING THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, THE DEVELOPERS SOLD 3 FLATS. ASSESSEE INVESTED THE CAPITAL GAINS ARISING FROM THE SALE OF 3 FLATS DURING THE YEAR UNDER CONSIDERATION. IT W AS SUBMI TTED THAT ASSESSEE ACQUIRED A RESIDENTIAL PROPERTY ON 25/05/2013 FOR SALE CONSIDERATION OF RS.3,60,00,000/ - AGAINST WHICH SUM OF RS.3,27,93,600/ - WAS PAID FROM THE CAPITAL GAINS ACCOUNT SCHEME . AT THE TIME OF PURCHASE OF NEW ASSET, ASSESSEE WAS HOLDING ON TO 6 RESIDENTIAL UNITS IN THE CONSTRUCTED PREMISES AS PER THE JDA. 11.4 WE HAVE PERUSED THE JOINT DEVELOPMENT AGREEMENT PLACED AT PAGE S 30 TO 44 OF PAPER BOOK , WHEREIN , THE SALE CONSIDERATION DETERMINED AS AGAINST THE TRANSFER OF RIGHT TITLE AND INTEREST IN THE LAND BY ASSESSEE FOR THE PURPOSES OF DEVELOPMENT WA S 42% OF THE CONSTRUCTED PREMISES BEING 24 RESIDENTIAL UNITS . IN THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE IS OWNER OF 6 FLATS THAT ARE UNSOLD UNDER THE JDA. IN AD DITION TO THIS, ASSESSEE THE OWNER OF PAGE 8 OF 9 ITA NO. 751/BANG/2019 FOLLOWING RESIDENTIAL PROPERTIES AS PER STATEMENT OF INCOME FOR A.Y. 2013 - 14 PLACED AT PAGE 2 OF THE PAPER BOOK. INCOME FROM HOUSE PROPERTY 1899250 SELF OCCUPIE D HOUSE ADDRESS : 32, PROP.PRATHAP ELECTRICALS. 3RD CROSS. 16 C MAIN. 4TH BLOCK. KORAMANGALA, BANGALORE, KARNATAKA - 560025 NIL ANNUAL VALUE - 150000 LESS: INTEREST U/S 24(B) LET OUT NAME OF TENANT SAMPANGIRAMNAGAR BUILDING ADDRESS . 73. SAMPANGIRAMNAGAR BUILDING, 1 ST CROSS, SAMPANGIRAMNAGAR, BANGALORE. KARNATAKA - 560019 ANNUAL VALUE 1440000 LESS: STANDARD DEDUCTION U/S 24(A) - 432000 TAX ABLE INCOME FROM HOUSE PROPERTY 1008000 LET OUT NAME OF TENANT TVS AUTOMOBILE ADDRESS KOODLUGATE. BANGALORE. KARNATAKA - 560068 ANNUAL VALUE 1487500 LESS: STANDARD DEDUCTION U/S 24(A) - 446250 TAXABLE INCOME FROM HOUSE PROPERTY 1041250 THE ABOVE PROPERTIES ARE IN ADDITION TO THE NEW PROPERTY PURCHASED FOR THE YEAR UNDER CONSIDERATION BARING NO. 769, 80 FEET ROAD, 4 TH BLOCK, KORAMANGALA, BANGALORE 560 034. 11.5 WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE VIEW TAKEN BY THE LD.CIT( A) THAT ASSESSEE OWNED MULTIPLE FLATS AS ON DATE OF PURCHASE OF NEW ASSET. THE RELEVANT ASSESSMENT YEAR BEING 2013 - 14, THE AMENDMENT WOULD BE APPLICABLE TO THE PRESENT FACTS AND ASSESSEE WONT BE ENTITLED TO THE BENEFIT U/S. 54F. PAGE 9 OF 9 ITA NO. 751/BANG/2019 ASSESSEE HAS RAISED ADD ITIONAL GROUNDS THAT DOES NOT ARISE OUT OF THE ORDER PASSED BY THE LD.CIT(A). A CCORDINGLY THE ISSUES RAISED BY ASSESSEE STANDS DISMISSED . IN THE RESULT APPEAL FILED BY ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 T H OCTOBER, 2021. S D / - S D / - ( CHANDRA POOJARI) ( BEENA PILLAI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 1 T H OCTOBER, 2021. /MS/ COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE