Nallamanikalva Madhav Reddy, Tirupathi, Hyderabad V. DCIT, Central Circle, Tirupathi, Tirupathi

ITA 807/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2980 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-05-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained investment; Capital asset; Depreciation; Search and seizure; Assessment record
• Section: 54F; 153A; 263; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES CIRCUIT BENCH A AT TIRUPATI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA. NOS. 807 & 808/HYD/2017 (A.YS 2007 - 08 AND 2009 - 2010) NALLAMANIKALVA MADHAV REDDY, PLOT NO.44, 7/92, PADMAVATHIPURAM, TIRUUPATHI. PAN: ADQPM 0925 M VS DCIT, CENTRAL CIRCLE, R.NO.407, 4 TH FLOOR, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. APPELLANT RESPONDENT ASSESSEE BY SHRI K.A. SAI PRASAD REVENUE BY SMT. KOMALI KRISHNA, DR DATE OF HEARING 17.05.2018 DATE OF PRONOUNCEMENT 23 .05.2018 ORDER PER D. MANMOHAN, VP: THESE TWO APPEALS ARE FILED AT THE INSTANCE OF THE ASSESSEE AND THEY PERTAIN TO ASSESSMENT YEARS 2007 - 08 AND 2009 - 10. IN THE APPEAL FOR THE A.Y. 2007 - 08, ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 15,08,145/ - TOWARDS UNEXPLAINED INVESTMENT. 2. THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE ADDITION OF RS. 15,08,145/ - WAS AS DIRECTED IN THE ORDER U/S 263. 3. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED IN NOT ADJUDICATING THE ISSUE OF ADDITION OF RS. 15,08,145/ - ON MERITS. 2. BRIEF FACTS OF CASE, NECESSARY TO APPRECIATE THE CONTENTION OF THE ASSESSEE, ARE THAT ON ACCOUNT OF SEARCH AND SEIZURE OPERATIONS CARRIED OUT ON 27.11.2007 IT HAS COME TO THE NOTICE OF THE REVENUE THAT THE ASSESSEE PURCHASED A VACANT SITE FOR RS. 1.22 CRS BUT COULD NOT EXPLAIN THE SOURCES FULLY. IN OTHERWORDS, THE ASSESSEE WAS ABLE TO EXPLAIN THE SOU RCES FOR RS. 79,22,228/ - ONLY. UN EXPLAINED INVESTMENT WAS 2 APPORTIONED FOR ASSESSMENT YEARS 2006 - 07 TO 2008 - 09. HOWEVER, WHILE MAKING AN ASSESSMENT U/S 153A OF THE ACT, THE A.O. DID NOT BRING TO TAX ALLEGED UNEXPLAINED INVESTMENT IN THE YEAR UNDER REFEREN CE T HOUGH , HE MADE AN ADDITION OF RS. 15,70,000/ - FOR THE A.Y. 2008 - 2009. IN OTHERWORDS, NO ADDITION WAS MADE FOR THE A.Y. 2007 - 08. 3. ON VERIFICATION OF THE RECORD, THE COMMISSIONER OF INCOME TAX, IN EXERCISE OF POWER VESTED IN HIM U/S 263 OF THE IT ACT 1961, WAS OF THE OPINION THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE S INCE THE INCOME ORIGINALLY ASSESSED TO TAX IN THE A.Y. 2007 - 08, TO THE TUNE OF RS. 15,08,145/ - , WAS NOT CONSIDERED IN THE PROCEEDINGS U/S 153A OF THE ACT. HE THEREFORE SET ASIDE THE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE - EXAMINE THE UNEXPLAINED INVESTMENT FOR THE THREE YEARS I.E., AYS 2006 - 07 TO 2008 - 09. 4. WHILE GIVING EFFECT TO THE ORDER PASSED BY THE REVISIONAL AUTHORITY, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE SUPPRESSED PROFESSIONAL RECEIPTS BUT THE ASSESSEE HAVING BEEN TAXED ON INVESTMENT BASIS, THE SUPPRESSION OF PROFESSIONAL RECEIPTS NEED NOT BE TAXED SEPARATELY. HE ALSO OBSERVED THAT SOME METHOD NEEDS TO BE FOLLOWED IN THE ABSENCE OF COMPLETE DETAILS FOR TAXING THE UNEXPLAINED INVESTMENT. SINCE A SUM OF RS. 18,33,785/ - WAS ALREADY ASSESSED IN THE A.Y. 2008 - 09 , THE BALANCE WAS BROUGHT TO TAX IN THE AYS 2006 - 07 AND 2007 - 08 AT RS. 9,47,767/ - AND 15 ,08,145/ - RESPECTIVELY. HE ACCORDINGLY COMPLETED THE ASSESSMENT FOR THE A.Y. 2007 - 08 BY ADDING A SUM OF RS. 15,08,145/ - TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF VACANT SITE . 5 . ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT THERE IS NO INVESTMENT DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2007 - 08 BUT SINCE THERE IS A SPECIFIC DIRECTION BY THE COMMISSIONER OF INCOME 3 TAX U/S 263 OF THE ACT, THE A.O. WAS HELD TO BE JUSTIFIED IN BRINGING TO TAX , AS UNEXPLAINED INVESTMENT , A SUM OF RS. 15,08,145/ - . RELEVANT OBSERVATIONS OF THE CIT (A) ARE EXTRACTED FOR IMMEDIATE REFERENCE. REGARDING THE ORDER U/S 263 IS CONCERNED, THE FACTS ARE THAT THE CIT HAS PASSED THE ORDER FOR THE A.Y. 2007 - 2008 AND DIRECTED THE ASSESSING OFFICER TO CONSIDER THE UNEXPLAINED INVESTMENT OF RS. 15,08,145/ - AND RE - COMPUTE THE INCOME. THERE IS NO DISPUTE REGARDING TOTAL INVESTMENT BEING RS. 1,22,09,295/ - AND THE SOURCES TO THE EXTENT OF RS. 79,22,2 28/ - LEAVING RS. 42,87,067/ - TO BE EXPLAINED. THERE IS NO DISPUTE REGARDING THE YEAR OF INVESTMENT BEING FINANCIAL YEAR 2007 - 2008. THIS BEING THE CASE, THE INVESTMENT IS TO BE CONSIDERED IN THE ASSESSMENT YEAR 2008 - 2009 ONLY. HOWEVER, THERE IS A SPECIFI C DIRECTION GIVEN BY CIT U/S 263 OF THE ACT FOR THE ASSESSING OFFICER TO CONSIDER THE UNEXPLAINED INVESTMENT OF RS. 15,08,145/ - . THIS BEING THE CASE, THE ASSESSING OFFICER HAS NO OPTION BUT TO FOLLOW THE DIRECTION OF THE CIT. ACCORDINGLY, THE ADDITION MA DE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2007 - 2008 AT RS. 15,08,145/ - IS CONFIRMED. 6 . AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IS LIMITED TO THE INVESTMENT MADE IN THE SITE PURCHASED BUT THE FACT REMAINS THAT THE SITE WAS PURCHASED IN THE SUBSEQUENT YEAR I.E., ON 20.09.2007. IT IS NOT THE CASE OF THE REVENUE THAT SOME ADVANCES / PAYMENTS WERE MADE DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2007 - 08. SUCH BEING THE CASE, ADDITION TOWARDS UNEXPLAINED INVESTMENT WOULD NOT HAVE BEEN MADE IN THE YEAR UNDER CONSIDER ATION. IT WAS ALSO SUBMITTED THAT THE DIRECTION GIVEN BY CIT , U/S 263 OF THE ACT , IS WRONGLY INTERPRETED BY THE CIT (A). HE ADVERTED OUR ATTENTION TO THE ORDER PASSED U/S 263 OF THE ACT TO HIGHLIGHT THAT THERE WAS A GENERAL DIRECTION TO RECONSIDER THE IS SUE IN ACCORDANCE WITH LAW AND THEREFORE, WHILE RECONSIDERING THE MATTER THE A.O. OUGHT TO HAVE VERIFIED AS TO WHETHER ANY INVESTMENT WAS MADE IN THE YEAR UNDER CONSIDERATION AND IF THERE IS NO INVESTMENT, THERE IS NO ROOM FOR MAKING ADDITION TOWARDS UNEXP LAINED INVESTMENT. IT IS NOT OUT OF PLACE TO MENTION THAT THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION TOWARDS SUPPRESSED 4 PROFESSIONAL RECEIPTS ; THEREFORE ADDITION, IF ANY, HAS TO BE IN TUNE WITH THE ISSUE ON HAND I.E., WHETHER THERE IS ANY INVESTMENT MADE IN THE YEAR UNDER CONSIDERATION. HE ALSO ADVERTED OUR ATTENTION TO THE ORDER PASSED BY LD CIT (A) TO CONTEND THAT THE FIRST APPELLATE AUTHORITY HAVING AGREED THAT THERE IS NO INVESTMENT MADE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007 - 08, A DDITION COULD NOT HAVE BEEN SUSTAINED TOWARDS UNEXPLAINED INVESTMENT. HE FURTHER CONTENDED THAT THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS A SPECIFIC DIRECTION GIVEN BY THE CIT U/S 263 OF THE ACT THOUGH THE FACT REMAINS THAT THE DIRECTION WAS LIMITED T O RE - CONSIDER THE MATTER IN ACCORDANCE WITH LAW. PAGE 23 TO 26 OF THE PAPER REFERS TO THE ORDER PASSED U/S 263 OF THE ACT AND IN PARA 6 THEREOF THE DIRECTION WAS LIMITED TO EXAMINE THE ISSUE OF UNEXPLAINED INVESTMENT MADE DURING THE YEAR AND THERE IS NO S PECIFIC DIRECTION TO ADD THE SAID SUM IN THE YEAR UNDER CONSIDERATION. LEARNED COUNSEL FOR THE ASSESSEE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER, CONFIRMED BY THE LD. CIT(A), IS BAD IN LAW. 8 . ON THE OTHER HAND, LEARNED DEPARTM ENTAL REPRESENTATIVE RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS PASSED U/S 263 OF THE ACT. IN OUR OPINION, THERE IS N O SPECIFIC DIRECTION TO MAKE A DISALLOWANCE TOWARDS UNEXPLAINED INVESTMENT BY THE REVISIONAL AUTHORITY ; RATHER HE SET ASIDE THE ORDER PASSED U/S 153A TO RE - CONSIDER THE MATTER IN ACCORDANCE WITH LAW. THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE APPLIED HIS MIND AS TO WHETHER THERE CAN BE ANY ADDITION TOWARDS UNEXPLAINED INVESTMENT IN THE ABSENCE OF ANY INVESTMENT MADE IN THE YEAR UNDER CONSIDERATION. LD. CIT(A) ALSO ADMITTED THAT THERE IS NO INVESTMENT MADE IN THIS YEAR BUT WRONGLY CONCLUDED THAT THERE I S A SPECIFIC DIRECTION GIVEN BY THE REVISIONS AUTHORITY. HAVING REGARD TO THE 5 CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IN THE ABSENCE OF ANY SPECIFIC DIRECTION GIVEN BY THE REVISIONAL AUTHORITY, LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE A .O. HAS PASSED THE ORDER IN TUNE WITH THE SPECIFIC DIRECTION GIVEN BY THE REVISIONAL AUTHORITY. THE FINDING OF LD. CIT(A) THAT THERE IS NO INVESTMENT MADE IN THIS YEAR WAS ALSO NOT CHALLENGED BY THE REVENUE , EITHER BY FILING A CROSS OBJECTION OR BY FILING A CROSS APPEAL. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDERS PASSED BY THE ASSESSING OFFICER AS WELL AS CIT (A) BY HOLDING THAT THE ADDITION OF RS. 15,08,145/ - MADE BY THE A.O. IS NOT IN ACCORDANCE WI TH LAW. 10 . IN SO FAR AS A.Y. 2009 - 10 IS CONCERNED, THE ONLY GROUND URGED BY THE ASSESSEE READS AS UNDER: 1. THE LD. CIT(A) IS NOT JUSTIFIED, IN THE FACT AND CIRCUMSTANCES OF THE CASE, IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER, DENYING THE EXEMPT ION U/S 54F. 1 1 . THE ASSESSEE SOLD TWO PIECES OF LAND ON 10.04.2008 FOR A TOTAL CONSIDERATION OF RS.27,84,000/ - AND CLAIMED THE RESULTANT LONG TERM CAPITAL GAIN AS EXEMPT U/S 54F OF THE ACT BY STATING THAT AN AMOUNT OF RS. 1,05,84,000/ - WAS INVESTED ON 29.11.2007 IN PURCHASE OF SITE TO CONS TRUCT RESIDENTIAL HOUSE. THE A.O. OBSERVED THAT THE COST OF THE SITE WAS RS. 1,05,84,000/ - WHEREAS THE ASSESSEE SOLD THE LANDS FOR A CONSIDERATION OF RS. 48,16,000/ - AND RS. 27,84,000/ - DURING THE FINANCIAL YEARS 200 7 - 08 AND 2008 - 09 RESPECTIVELY AND CLAIMED EXEMPTION U/S 54F IN BOTH THE YEARS STATING THAT THE ENTIRE SALE CONSIDERATION OF RS. 76,00,000/ - WAS INVESTED IN PURCHASE OF THE ABOVE SAID SITE. 1 2 . A.O. OBSERVED THAT IN ORDER TO CLAIM BENEFIT U/S 54F OF THE ACT, THE ASSESSEE HAS TO INVEST IN PURCHASE OR CONSTRUCTION OF A RESIDENTIAL HOUSE WHEREAS THERE IS NO SUCH INVESTMENT MADE FOR PURCHASE OF 6 RESIDENTIAL HOUSE. FROM THE APPROVAL DATED 22.11.2008 ISSUED BY THE COMMISSIONER, MUNICIPA L CORPORATION, TIRUPATI, THE APPROVAL WAS GRANTED FOR CONSTRUCTION OF HOSPITAL BUILDING CONSISTING OF 4 FLOORS (INCLUDING STILT FLOOR AND GROUND FLOOR). WHEN CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CLAIM OF EXEMPTION SHOULD NOT BE DENIED, T HE ASSESSEE SUBMITTED TH AT THE THIRD FLOOR OF THE BUILDING IS PURELY FOR RESIDENTIAL PURPOSES WHICH CAN BE VERIFIED FROM THE COPY OF THE APPROVED MUNICIPAL PLAN WHEREIN IT HAS BEEN CLEARLY MENTIONED THAT THE THIRD FLOOR CONSISTS OF KITCHEN, BED ROOMS, UTIL ITY ETC., WHICH ARE ESSENTIAL FOR RESIDENTIAL PURPOSES. IN FACT TWO FLOORS ARE MEANT FOR HOSPITAL PURPOSES AND THIRD FLOOR IS MEANT FOR RESIDENTIAL PURPOSE. HOWEVER, WHILE GIVING THE APPROVAL IT HAS BEEN WRONGLY MENTIONED THAT THE THIRD FLOOR IS ALSO FOR HOSPITAL PURPOSES. 1 3 . A.O. REJECTED THE CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE APPROVAL WAS GRANTED ON 21.11.2008 AND THE ASSESSEE HAS AMPLE TIME TO RECTIFY THE MISTAKE AND GET THE APPROVAL FOR CONSTRUCTION OF RESIDENTIAL HOUSE BUT NO SUCH APPROVAL WAS OBTAINED AND H ENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS INVESTED IN PURCHASE / CONSTRUCTION OF RESIDENTIAL HOUSE. 1 4 . MOREOVER, SECTION 54F OF THE ACT STIPULATES SPECIFIC PERIOD WITHIN WHICH THE INVESTMENT HAS TO BE MADE FOR PURCHASE OF HOUSE AND FOR CONSTRUCTION OF HOUSE. FOR PURCHASE OF HOUSE IT IS ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE. SO FAR AS CONSTRUCTION IS CONCERNED IT SHOULD BE WITHIN A PERIOD OF THREE YEARS AFTER THE DATE ON WHICH TRANSFER TOOK PLACE. IN THE I NSTANT CASE, THE LAND WAS SOLD ON 10.04.2008 AND 03.07.2008 AND HENCE THE SAME OUGHT TO HAVE BEEN INVESTED WITHIN THREE YEARS FROM THE DATE OF SALE OF LAND. AS PER THE CLAIM OF THE ASSESSEE A SUM OF RS. 27,84,000/ - WAS INVESTED IN CONSTRUCTION OF RESIDENT IAL HOUSE ON 29.11.2007 WHICH IS WITHIN ONE 7 YEAR BEFORE THE SALE OF LAND BUT THIS CAN BE APPLIED ONLY IN THE CASE OF PURCHASE OF RESIDENTIAL HOUSE BUT NOT FOR CONSTRUCTION OF RESIDENTIAL HOUSE. MOREOVER, THE ASSESSEE HAS ALSO FAILED TO DEPOSIT THE NET CONSIDERATION BEFORE THE DATE AND IN THE MANNER PROVIDED IN SECTION 54F OF THE ACT. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS REJECTED AND LONG TERM CAPITAL GAINS W AS COMPUTED BY THE A.O. 1 5 . AGGRIEVED, ASSESSEE CONTENDED BEFORE CIT (A) THAT ON SALE OF LAND, ASSESSEE INVESTED IN PURCHASE OF HOUSE SITE ON 29.11.2007 FOR THE PURPOSE OF CONSTRUCTION OF RESIDENTIAL HOUSE WITH ONLY ONE FLOOR, BUT IN ORDER TO S HIFT HIS CLINIC, WHICH WAS RUNNING IN RENTED PREMISES, HE PROPOSED TO CONSTRUCT FOUR STOR IED BUILDI NG WHEREIN ONE IS MEANT FOR CELLAR PARKING , WATCHMAN RESIDENCE ETC., AND TWO FLOORS ARE MEANT FOR HOSPITAL PURPOSES , WHEREAS THIRD FLOOR WAS FOR RESIDENCE. HE THEREFORE CONTENDED THAT THE REJECTION OF THE CLAIM OF E XEMPTION U/S 54F IS NOT IN ACCORDANCE WITH LAW. IT WAS CONTENDED BEFORE THE CIT (A) THAT THE THIRD FLOOR WAS MEANT FOR RESIDENTIAL PURPOSES ONLY AND IN FACT THE ASSESSING OFFICER HAS ALLOWED THE CLAIM U/S 54F FOR THE A.Y. 2008 - 09, AFTER MAKING FIELD ENQUIRY THROUGH INCOME TAX INSPECTOR (ITI). IT WAS FURTHER CONTENDED THAT THE PERIOD WITHIN WHICH THE INVESTMENT W AS MADE IS ALSO IN ACCORDANCE WITH THE PROVISIONS OF SECTION 54F OF THE ACT. 1 6 . LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE. IN THIS REGARD, HE OBSERVED THAT THE ASSESSEE S OLD TWO PIECES OF LAND FOR A TOTAL CONSIDERATION OF RS. 27,84,000/ - IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 WHEREAS THE ASSESSEE INVESTED AN AMOUNT OF RS. 1,05,84,000/ - ON 29.11.2007 WHEREIN HE HAS UTILISED THE SALE PROCEEDS OF ANOTHE R LAND WHICH TOOK PLACE IN THE FINANCIAL YEAR 2007 - 08. IN OTHERWORDS, THE ENTIRE SALE CONSIDERATION AMOUNTING TO RS. 76,00,000/ - WAS INVESTED IN PURCHASE OF SITE WHICH IS MEANT FOR CONSTRUCTION OF A RESIDENTIAL HOUSE. 8 1 7 . LD. CIT(A) OBSERVED THAT THE CO NDITIONS PRECEDENT FOR CLAIMING EXEMPTION U/S 54F OF THE ACT ARE PROPERLY EVALUATED BY THE ASSESSING OFFICER I.E., (A) THERE MUST BE A TRANSFER OF A LONG TERM CAPITAL ASSET; (B) IN CASE OF PURCHASE OF HOUSE, THE PROCEEDS MUST BE USED WITHIN ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH TRANSFER OF CAPITAL ASSET TAKES PLACE; (C) THERE MUST BE A CONSTRUCTION OF A RESIDENTIAL HOUSE AND IT SHOULD BE COMPLETED WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF CAPITAL ASSET IN CASE OF CONSTRUCTIO N OF RESIDENTIAL HOUSE AND (D) ASSESSEE SHOULD NOT OWN MORE THAN TWO HOUSES INCLUDING THE NEW ASSET. HE OBSERVED THAT THE APPROVAL GRANTED BY THE MUNICIPAL CORPORATION DATED 22.11.2008 SHOWS THAT THE CONSTRUCTION OF THE BUILDING UNDER DISPUTE WAS MEANT FO R HOSPITAL AND NOWHERE IT WAS MENTIONED THAT IT IS A RESIDENTIAL BUILDING. THE ASSESSEE HAVING MADE A CLAIM FOR CONSTRUCTION OF HOUSE AND NOT FOR PURCHASE OF RESIDENTIAL HOUSE, THE CONDITION OF ONE YEAR BEFORE THE DATE OF SALE OF CAPITAL ASSET CANNOT BE U PHELD. HE WAS THEREFORE OF THE VIEW THAT THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS LAID DOWN U/S 54F OF THE ACT. THE FOLLOWING OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED FOR IMMEDIATE REFERENCE: I HAVE EXAMINED THE DOCUMENT OF PLAN SUBMITTED B EFORE THE MUNICIPAL CORPORATION, TIRUPATI AND ALSO THE APPROVAL ACCORDED BY THE CITY CORPORATION, TIRUPATI WHEREIN IT WAS CLEARLY MENTIONED IN THE PROCEEDINGS DT: 22.11.2008 THAT THE CONSTRUCTION OF THE BUILDING UNDER DISPUTE IS MEANT FOR HOSPITAL AND NO W AY IT WAS MENTIONED THAT IT IS A RESIDENTIAL BUILDING. THE APPELLANT MADE A CLAIM FOR CONSTRUCTION OF HOUSE BUT NOT FOR PURCHASE OF RESIDENTIAL HOUSE. THEREFORE, THE CONDITION OF ONE YEAR BEFORE THE DATE OF SALE OF CAPITAL ASSET CANT BE APPLIED. THIS B EING THE FACT OF THE CASE, THE SUBSEQUENT INCIDENTS SUCH AS A CERTAIN PORTION I.E., FIRST FLOOR OF THE BUILDING IS MEANT FOR HOUSE AND THE APPELLANT IS INDEED LIVING THERE BESIDES THE ASSESSMENT RECORDS OF THE MUNICIPAL CORPORATION AND NON - CLAIMING OF DEPR ECIATION WILL NOT CHANGE THE CHARACTER OF THE BUILDING BEING COMMERCIAL AS PER THE APPROVAL ACCORDED BY THE MUNICIPAL CORPORATION. SECTION 54F CONFERS BENEFIT TO THE INDIVIDUALS EITHER FOR PURCHASE OF HOUSE OR CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN TH E STIPULATED TIME FRAME. IN THIS CASE, THE APPELLANTS PLEA THAT HE HAS INVESTED PROCEEDS OF THE CAPITAL GAINS BEFORE ONE YEAR I.E., 29.11.2007 IS ONLY APPLICABLE FOR PURCHASE OF A RESIDENTIAL UNIT BUT NOT FOR THE CONSTRUCTION OF HOUSE. FACTUALLY, THE ON E YEAR PERIOD BEFORE SALE OF CAPITAL ASSET TO BE RECKONED AS 03.07.2007 BUT 9 NOT AS 29.11.2007 CLAIMED BY THE APPELLANT IF THE DATE OF SALE IS CONSIDERED FROM 03.07.2008. IF IT IS PURCHASED AFTER TWO YEARS OF DATE OF SALE OF CAPITAL ASSET, THE DATE COULD B E 03.07.2010. IN THE LIGHT OF THESE FACTS, I FIND NO REASON TO INTERFERE IN THE DECISION OF THE ASSESSING OFFICER. ACCORDINGLY, THE ORDER OF THE ASSESSING OFFICER DENYING THE EXEMPTION OF THE CAPITAL GAIN OF RS. 27,26,014/ - IS CONFIRMED. 1 8 . AGGRIEVE D, ASSESSEE IS IN APPEAL BEFORE US. 1 9 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HOUSE SITE WAS PURCHASED ON 29.11.2007 ON WHICH THE ASSESSEE INTENDED TO CONSTRUCT A HOUSE. THE CLAIM OF THE ASSESSEE IS THAT IT HAS INVESTED THE SALE PROCEEDS FOR CONSTRUCTION OF A HOUSE IN WHICH EVENT IT CAN BE CONSTRUCTED WITHIN THREE YEARS AND , IN THIS PROCESS , HE HAS INVESTED THE AMOUNT , WITHIN A PERIOD OF THREE YEARS . IN FACT, IN THE IMMEDIATELY PRECEDING YEAR THE ASSESSING OFFICER ACCEPTED THE PLEA OF THE ASSESSEE THAT THE THIRD FLOOR PORTION OF T HE BUILDING WAS MEANT FOR RESIDENTIAL PURPOSE AND ALLOWED THE CLAIM OF EXEMPTION U/S 54F OF THE ACT. T HEREFORE, IN THIS YEAR IT CANNOT BE SAID THAT IT WAS NOT MEANT FOR RESIDENTIAL PURPOSE MERELY BECAUSE THE SANCTION PLAN WRONGLY MENTIONED THAT IT WAS MEA NT FOR HOSPITAL PURPOSES , DESPITE THE SITE PLAN STATING THAT THIRD FLOOR IS MEANT FOR OWNERS RESIDENCE. HE ALSO CONTENDED THAT THE HOUSE TAX RECEIPT (PAGE 10 OF THE PAPER BOOK) CLEARLY SHOWS THAT CELLAR IS MEANT FOR PARKING, GROUND FLOOR AND FIRST FLOOR ARE MEANT FOR HOSPITAL AND SECOND FLOOR (THIRD FLOOR) IS MEANT FOR RESIDENTIAL PURPOSE, WHICH IS IN THE OCCUPATION OF THE OWNER. IN OTHERWORDS, THE MUNICIPAL AUTHORITIES HAVE ADMITTED THAT ONE FLOOR IS UTILISED FOR RESIDENTIAL PURPOSE. HE ALSO ADVERTED O UR ATTENTION TO THE SCHEDULE OF FIXED ASSETS (PAGE 24 OF THE PAPER BOOK - DEPRECIATION CHART ) TO SUBMIT THAT DEPRECIATION WAS CLAIM ED ONLY ON THE HOSPITAL PORTION WHEREAS FOR THE RESIDENTIAL PORTION ASSESSEE HAS NOT CLAIMED WHICH REINFORCES THE CLAIM THAT THE PROPERTY WAS CONSTRUCTED FOR RESIDENTIAL PURPOSE. HE THUS STRONGLY SUBMITTED THAT ASSESSEE IS ENTITLED TO EXEMPTION U/S 54F MORE PARTICULARLY BY RELYING ON THE REPORT OF THE ITI 10 FOR THE IMMEDIATELY PRECEDING YEAR WHICH WAS ACCEPTED BY THE ASSESSING OF FICER. 20 . LEARNED COUNSEL FOR THE ASSESSEE ADVERTED OUR ATTENTION TO PAGE 2 OF THE PAPER BOOK (ASSESSMENT ORDER FOR THE A.Y. 2008 - 09) WHEREIN THE A.O. CATEGORICALLY MENTIONED THAT THE THIRD FLOOR WAS CONSTRUCTED FOR RESIDENTIAL PURPOSE AND ADMITTED (VI DE PAGE 3 OF THE PAPER BOOK) THAT THE ASSESSEE HAS INVESTED THE SALE PROCEEDS IN CONSTRUCTION OF THE HOSPITAL BUILDING IN WHICH THE THIRD FLOOR IS RESIDENTIAL IN NATURE AND CONSTRUCTION WAS COMPLETED BEFORE 31.03.2011 AND ACCORDINGLY ACCEPTED THE CLAIM OF EXEMPTION U/S 54F OF THE ACT. PAGE 6 OF THE PAPER BOOK REFERS TO THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT (A) HIGHLIGHT ING THAT THE THIRD FLOOR WAS EARMARKED FOR CONSTRUCTION OF A DOUBLE BED ROOM RESIDENTIAL HOUSE. PAGE 10 AND 11 OF THE PAPER BOOK IS THE MUNICIPAL TAX RECEIPT INDICATING THAT THE MUNICIPAL AUTHORITIES HAVE ACCEPTED THAT ONE PORTION IS MEANT FOR RESIDENTIAL PURPOSE. PAGE 17 IS THE SCHEDULE OF FIXED ASSETS TO HIGHLIGHT THAT DEPRECIATION WAS NOT CLAIMED ON THE RESIDENTIAL PORTION. 21 . ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 2 2 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE A.O. AS WELL AS THE CIT (A) OVERLOOKED THE FACT THAT THE IMPUGNED SALE PROCEEDS WERE NOT INVESTED IN PURCHASE OF SITE BUT ONLY FOR CONSTRUCTION OF RESIDENTIAL HOUSE S INCE THE SAL ES ARE MADE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009 - 2010. IN RESPECT OF CONSTRUCTION COMPLETED BEFORE 31.03.2011 , THE ASSESSEE WOULD BE ENTITLED TO CLAIM EXEMPTION U/S 54F, AS WAS ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED FOR THE A.Y. 2008 - 2009. SINCE THERE IS NO DISPUTE WITH REGARD TO THE INVESTMENT IN CONSTRUCTION OF THE 11 RESIDENTIAL HOUSE ( WHICH WAS WRONGLY CONSIDERED AS THE AMOUNT UTILISED FOR PURCHASE OF SITE), WE ARE OF THE VIEW THAT THE CLAIM OF EXEMPTION U/S 54F IS JUSTIFIED. HOWEVER, FOR THE PURPOSE OF VERIFICATION OF THE DATES OF CONSTRUCTION ETC., WE SET - ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE DATE OF INVESTMENT OF THE IMPUGNED SALE PROCEEDS TOWARDS CONSTRUCTION OF THE RESIDENTIAL HOUSE AND ACCORDINGLY ALLOW THE CLAIM OF EXEMPTION U/S 54F OF THE ACT. WITH THESE OBSERVATIONS, THE APPEAL FILED BY THE ASSE SSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/ - SD/ - (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTAT MEMBER VICE PRESIDENT HYDERABAD , DATED: 23 RD MAY, 2018. OKK, SR.PS COPY TO 1. C/O. CH. PARTHASARATHY & CO, 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOKNAGAR, HYDERABAD - 500020. 2. ACIT, CENTRAL CIRCLE, R.NO.407, 4 TH FLOOR, AAYAKAR BHAVAN, K.T. ROAD, TIRUPATI. 3. CIT(A) - 3 , VISAKHAPATNAM. 4. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), VISAKHAPATNAM. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE.