Vinod Kumar Sharma, Haryana V. ITO ward-2(5), Haryana

ITA 7629/DEL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2338 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 17-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AKSHAY ABROL
• Keywords: Cost of acquisition; Fair market value; Capital Gains
• Section: 143(3); 142(1); 143(2); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 7629/DEL/2019 ASSESSMENT YEAR: 2016-17 VINOD KUMAR SHARMA, VS. ITO, WARD 2(5), 241, SECTOR-19, FARIDABAD FARIDABAD HARYANA-121002 HARYANA-121002 (PAN: AAAPS9524P) (ASSESSEE) (RESPONDENT) ASSESSEE BY : SH. AKSHAY ABROL, ADVOCATE REVENUE BY : SH. PRADEEP SINGH GAUTAM, SR. DR. ORDER THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER DATED 21.08.2019 PASSED BY THE LD. CIT(A), FARIDABAD RELATING TO ASS ESSMENT YEAR 2016-17. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED HIS E-RETURN ON 28.07.2016. THE CASE OF THE ASSESSEE WAS SELECTED THROUGH CASS FOR LIMITED SCRUTINY. IN THIS CASE NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS ISSUED REQUIRIN G THE ASSESEE TO SUBMIT INFORMATION ON OR BEFORE 18.09.2017. IN RESPONSE T HERETO THE ASSESSEE FILED THE REPLY ON 16.09.2017 ALONGWITH COMPUTATION OF TAXABLE INCOME, BANK ACCOUNT STATEMENT, COLLABORATION AGREEMENT AND CONSTRUCTION AGREEMENT. NOTICES U/S. 142(1) OF THE ACT ALONGWITH CERTAIN QUERIES WERE ISSUED ONLINE ON 15.6.2018 REQUIRING ASSESSEE TO FU RNISH INFORMATION AS 2 REQUIRED ON OR BEFORE 25.06.2018. ANOTHER NOTICE U /S. 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 19.7.2018 REQUIRING H IM TO FURNISH DESIRED INFORMATION ON OR BEFORE 26.07.2018. HOWEVER, NO RE PLY WAS FURNISHED. AO ISSUED FRESH NOTICE TO THE ASSESSEE ON 22.9.2018 REQUIRING HIM TO FURNISH INFORMATION AS REQUIRED ON OR BEFORE 01.10. 2018. IN RESPONSE THERETO THE ASSESSEE SUBMITTED REMARKS THROUGH HIS E-FILING PORTAL REQUESTING FOR GRANTING OF EXTENSION FOR 60 DAYS AL ONGWITH REMARK ASSESSEE FURNISHED EVIDENCE OF OCCUPATION CERTIFICA TE OF BUILDING H.NO. 241, SECTOR-19, FARIDABAD. FRESH NOTICE U/S. 142(1) OF THE ACT DATED 12.11.2018 REQUIRING ASSESSEE TO FURNISH INFORMATIO N AS REQUIRED ON OR BEFORE 19.11.2018. IN RESPONSE THERETO ASSESSEE AGA IN SOUGHT ADJOURNMENT TILL END OF NOVEMBER, 2018. FINALLY, A SHOW CAUSE NOTICE ALONGWITH NOTICE U/S. 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 12.12.2018 REQUIRING HIM TO FURNISH REPLY TO THE SH OW CAUSE ON OR BEFORE 17.12.2018. IN RESPONSE NO REPLY WAS FURNISHED AND THEREFORE, THE ASSESSMENT PROCEEDINGS WERE FINALIZED ON THE BASIS OF DETAILS FILED BY THE ASSESSEE. AO OBSERVED THAT THE ASSESSEE WAS FOUND TO HAVE ENTERED INTO A COLLABORATION AGREEMENT WITH SH. KRISHAN LAL (SEC OND PARTY) ON 04.10.2012 FOR DISMANTLING OF OLD BUILDING OF PLOT NO. 241, SECTOR-19, FARIDABAD MEASURING 350 SQ.YDS. AND CONSTRUCTION OF GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR. AS PER THE COLLABORATION AG REEMENT THE ASSESSEE WILL KEEP THE RIGHTS OF GROUND FLOOR AND SECOND FLO OR WITH ROOF RIGHTS OF FIRST FLOOR. THE ASSESSEE IN THE COMPUTATION DECLA RED THE FAIR MARKET VALUE OF THE PROPERTY AT RS. 1,25,10,000/-. AFTER R EDUCING THE INDEXED COST OF ACQUISITION AT RS. 21,16,515/-, DECLARED LO NG TERM CAPITAL GAIN AT 3 RS. 1,03,93,485/-. THE ASSESSEE THEN CLAIMED EXEMP TION U/S. 54 OF THE ACT AT RS. 1,24,50,000/- ON LONG TERM CAPITAL GAIN. THE CLAIM OF EXEMPTION U/S. 54 OF THE ACT CANNOT BE ACCEPTED FU LLY AS THE ASSESSEE SOLD THE RIGHTS OF FIRST FLOOR TO THE BUILDER, AND KEPT GROUND AND SECOND FLOOR TO HIMSELF UNDER COLLABORATION AGREEMENT, THE REFORE, LONG TERM CAPITAL GAIN ON PROPORTIONATE SALE VALUE OF FIRST F LOOR WHICH COMES TO RS. 34,64,495/- (1/3 RD OF LONG TERM CAPITAL GAIN AS CALCULATED BY ASSESSE E AT RS. 1,03,93,485/-), IS THE DEEMED LONG TERM CAPI TAL GAIN ON TRANSFER OF RIGHTS OF FIRST FLOOR TO THE SECOND PARTY SH. KRIS HAN LAL AND WAS TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE VIDE SHOW CAUSE LETTER DATED 12.12.2018, HAS TO FURNISH HIS REPLY AS TO WH Y LONG TERM CAPITAL GAIN SHOULD NOT BE CHARTED ON PROPORTIONATE SALE VA LUE OF FIRST FLOOR WHICH COMES TO RS. 34,64,495/- (1/3 RD OF LONG TERM CAPITAL GAIN AS CALCULATED BY YOU AT RS. 1,03,93,485/). THE ASSESSEE HAS NOT FUR NISHED ANY REPLY TO THE SHOW CAUSE NOTICE IMPLYING THAT HE HAS NOTHING TO SAY WITH REGARD TO DEEMED LONG TERM CAPITAL GAIN ON TRANSFER OF RIGHTS FIRST FLOOR OF RS. 34,64,495/-. ACCORDINGLY, AN ADDITION OF RS. 34 ,64,495/- WAS MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF DEEMED LON G TERM CAPITAL GAIN AND INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 45 ,92,515/- U/S. 143(3) OF THE ACT VIDE ORDER DATED 28.12.2018. AGAINST TH E ASSESSMENT ORDER DATED 28.12.2018, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 21.8.2019 HAS DISMISSED THE AP PEAL OF THE ASSESSEE AND ENHANCED THE INCOME U/S. 251(1) OF THE ACT. AGGRIEVED WITH THE IMPUGNED ORDER DATED 21.8.2019, ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL. 4 3. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE STATED THAT ASSESSEE CONSTRUCTED HIS OLD HOUSE OF THE ENTIRE BU ILDING CONSISTING OF GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR THROUGH A BUILDER VIDE COLLABORATION AGREEMENT 27.09.2012 IN LIEU OF PARTI NG WITH FIRST FLOOR OF THE ABOVE PROPERTY. HE SUBMITTED THAT ASSESSEE DID NOT GET ANY AMOUNT FROM THE BUILDER SH. KRISHAN LAL AND THE AMOUNT OF LONG TERM CAPITAL GAINS WAS CALCULATED ON THE BASIS OF FAIR MARKET VA LUE OF THE PROPERTY AT THE TIME OF COLLABORATION AGREEMENT. THE ASSESSEE CLAIMED DEDUCTION U/S. 54 OF THE ACT SINCE THE ENTIRE CONSIDERATION F OR THE FIRST FLOOR OF THE PROPERTY WAS REINVESTED IN THE CONSTRUCTION OF THE GROUND FLOOR, SECOND FLOOR OF THE ABOVE MENTIONED PROPERTY IN DISPUTE. HE FURTHER SUBMITTED THAT THE AO VIDE HIS ORDER DATED 28.12.2018 CONSI DERED THE 1/3 RD OF PRESUMED COST OF CONSTRUCTION AS CAPITAL GAINS AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE WITHOUT APPRECIATING THE FA CT THAT ON THE BASIS OF COLLABORATION AGREEMENT, THE BUILDER HAS INCURRED A LL THE COSTS FOR THE CONSTRUCTION OF THE PROPERTY. HE FURTHER SUBMITTED THAT ASSESSEE HAS NOT PARTED WITH ANY PART OF THE RESIDENTIAL PROPERTY EX CEPT THE FIRST FLOOR OF THE HOUSE PROPERTY IN LIEU OF CONSTRUCTION OF THE E NTIRE PROPERTY BY THE BUILDER. BUT THE AO HAS WRONGLY MENTIONED THAT THE ASSESSEE HAS SOLD THE SECOND FLOOR OF THE PROPERTY. FINALLY, HE SUBMI TTED THAT THE ASSESSEE IN LIEU OF THE SALE CONSIDERATION OF THE FIRST FLOO R OF THE PROPERTY, GOT THE GROUND FLOOR AND THE SECOND FLOOR OF THE PROPERTY C ONSTRUCTED FROM THE BUILDER WHICH IS ONLY ONE UNIT AND AS SUCH THE ASSE SSEE IS ENTITLED TO EXEMPTION OF CAPITAL GAINS IN FULL AND NOT PROPORT IONATELY AS MENTIONED IN THE ASSESSMENT ORDER. HE FURTHER SUBMITTED TH AT THE SIMILAR ISSUE 5 HAS ALREADY BEEN ADJUDICATED AND DECIDED BY THE HO NBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS . GEETA DUGGAL IN ITA NO. 1237/2011 VIDE JUDGMENT DATED 21.02.2013. H E DRAW OUR ATTENTION TOWARDS THE RELEVANT PORTION OF THE AFOR ESAID JUDGEMENT AND REQUESTED THAT BY RESPECTFULLY FOLLOWING THE SAID R ATIO THE ADDITION IN DISPUTE MAY BE DELETED BY ALLOWING THE APPEAL OF TH E ASSESSEE. 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS P ASSED BY THE REVENUE AUTHORITIES AND STATED THAT THE REVENUE AUTHORITY HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE, KEEPING IN VIE W OF THE PROVISION OF THE LAW. THEREFORE, THE APPEAL FILED BY THE ASSESSEE MA Y BE DISMISSED. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES ALONGWITH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AS WELL AS THE PROVISIONS OF SECTION 54 OF THE I.T. ACT AND THE CASE LAWS RELIED BY THE ASSESSEES AR AND L D. CIT(A) IN THE IMPUGNED ORDER. I AM OF THE CONSIDERED VIEW THAT E XACTLY SIMILAR ISSUE HAS ALREADY BEEN ADJUDICATED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. GEETA DUGGAL IN ITA NO. 1237/2011 VIDE JUDGMENT DATED 21.02.2013. THE HELD PORTION OF THE AFORESAID JUDGMENT IS REPR ODUCED AS UNDER:- 18. THERE COULD ALSO BE ANOTHER ANGLE. SECTION 54/54F USES THE EXPRESSION ''A RESIDENTIAL HOUSE'. THE EXPRESSION USED IS NOT ''A RESIDENTIAL UNIT', THIS IS A NEW CONCEPT INTRODUCED BY THE ASSESSING OFFICER INTO THE SECTION. SECTION 54/54F REQUIRES THE 6 ASSESSEE TO ACQUIRE A 'RESIDENTIAL HOUSE' AND SO LONG AS THE ASSESSEE ACQUIRES A BUILDING, WHICH MAY BE CONSTRUCTED, FOR THE SAKE OF CONVENIENCE, IN SUCH A MANNER AS TO CONSIST OF SEVERAL UNITS WHICH CAN, IF THE NEED ARISES, BE CONVENIENTLY AND INDEPENDENTLY USED AS AN INDEPENDENT RESIDENCE, THE REQUIREMENT OF THE SECTION SHOULD BE TAKEN TO HAVE BEEN SATISFIED. THERE IS NOTHING IN THESE SECTIONS WHICH REQUIRE THE RESIDENTIAL HOUSE TO BE CONSTRUCTED IN A PARTICULAR MANNER. THE ONLY REQUIREMENT IS THAT IT SHOULD BE FOR THE RESIDENTIAL USE AND NOT FOR COMMERCIAL USE. IF THERE IS NOTHING IN THE SECTION WHICH REQUIRES THAT THE RESIDENTIAL HOUSE SHOULD BE BUILT IN A PARTICULAR MANNER, IT SEEMS TO US THAT THE INCOME TAX AUTHORITIES CANNOT INSIST UPON THAT REQUIREMENT. A PERSON MAY CONSTRUCT A HOUSE ACCORDING TO HIS PLANS AND REQUIREMENTS. MOST OF THE HOUSES ARE CONSTRUCTED ACCORDING TO THE NEEDS AND REQUIREMENTS AND EVEN COMPULSIONS. FOR INSTANCE, A PERSON MAY CONSTRUCT A RESIDENTIAL HOUSE IN SUCH A MANNER THAT HE MAY USE THE GROUND FLOOR FOR HIS OWN RESIDENCE AND LET OUT THE FIRST FLOOR HAVING AN INDEPENDENT ENTRY SO A HIS INCOME IS AUGMENTED. IT IS QUITE COMMON TO FIND SUCH ARRANGEMENTS, PARTICULARLY POST-RETIREMENT. ONE MAY BUILD A HOUSE CONSISTING OF FOUR BEDROOMS (ALL IN THE SAME OR DIFFERENT FLOORS) IN SUCH A MANNER THAT AN 7 INDEPENDENT RESIDENTIAL UNIT CONSISTING OF TWO OR THREE BEDROOMS MAY BE CARVED OUT WITH AN INDEPENDENT ENTRANCE SO THAT IT CAN BE LET OUT. HE MAY EVEN ARRANGE FOR HIS CHILDREN AND FAMILY TO STAY THERE, SO THAT THEY ARE NEARBY, AN ARRANGEMENT WHICH CAN BE MUTUALLY SUPPORTIVE. HE MAY CONSTRUCT HIS RESIDENCE IN SUCH A MANNER THAT IN CASE OF A FUTURE NEED HE MAY BE ABLE TO DISPOSE OF A PART THEREOF AS AN INDEPENDENT HOUSE. THERE MAY BE SEVERAL SUCH CONSIDERATIONS FOR A PERSON WHILE CONSTRUCTING A RESIDENTIAL HOUSE. WE ARE THEREFORE, UNABLE TO SEE HOW OR WHY THE PHYSICAL STRUCTURING OF THE NEW RESIDENTIAL HOUSE, WHETHER IT IS LATERAL OR VERTICAL, SHOULD COME IN THE WAY OF CONSIDERING THE BUILDING AS A RESIDENTIAL HOUSE. WE DO NOT THINK THAT THE FACT THAT THE RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CAN BE PERMITTED TO ACT AS AN IMPEDIMENT TO THE ALLOWANCE OF THE DEDUCTION UNDER SECTION 54/54F. IT IS NEITHER EXPRESSLY NOR BY NECESSARY IMPLICATION PROHIBITED. 5.1 AFTER GOING THROUGH THE AFORESAID JUDGEMENT O F THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GITA DUGGAL (SUPR A) AND THE ORDERS OF THE REVENUE AUTHORITIES ON THE ISSUE IN DISPUTE, I AM OF THE VIEW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE AFORESAID DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GITA DUGGAL. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF 8 THE HONBLE HIGH COURT OF DELHI, I DELETE THE ADDIT ION IN DISPUTE AND ALLOW THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 06/12/2019. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 06/12/2019 SRB COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES