B.V. Satyanarayana Rao, Malur V. CIT, Bangalore

ITA 976/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95383 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R CHANDRASHEKAR
• Keywords: Capital asset; Cost of acquisition
• Section: 54F; 2

Judgement Text

ITA.976/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NO.976/BANG/2014 (ASSESSMENT YEAR : 2009-10) SHRI. B. V. SATYANARAYANA RAO, PATALAMMA EXTENSION, MALUR .. APPELLANT PAN : BEVPS5461M V. COMMISSIONER OF INCOME-TAX- IV, BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. R. CHANDRASHEKAR, ADVOCATE REVENUE BY : SHRI. SANJAY KUMAR, CIT -III HEARD ON : 19.11.2015 PRONOUNCED ON : 27.11.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE, ITS GRIEVANCE IS THAT CIT-V, INVOKED THE POWERS VESTED ON HIM U/S.263 OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), DESPITE ASSESSEE HAVING EXPLAINED ALL THE I SSUES RAISED IN THE NOTICE ITA.976/BANG/2014 PAGE - 2 U/S.263 OF THE ACT BEFORE THE AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. 02. FACTS APROPOS ARE THAT ASSESSEE A DOCUMENT WRIT ER, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING I NCOME OF RS.1,62,510/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ED THAT ASSESSEE HAD OMITTED TO INCLUDE HIS TRANSACTIONS IN AN ACCOUNT W ITH CANARA BANK, MALUR, IN HIS ACCOUNTS. ASSESSEE STATED THAT THERE WAS A CASH DEPOSIT OF RS.30,90,000/- IN THE SAID ACCOUNT WHICH CAME OUT O F SALE OF FOUR SITES NOT DISCLOSED IN THE RETURN OF INCOME. ASSESSEE THEREA FTER OFFERED RS.11,58,289/- AS SHORT TERM CAPITAL GAINS AND RS.5 ,55,525/- AS LONG-TERM CAPITAL GAINS AFTER CLAIMING EXEMPTION U/S.54F OF T HE ACT, FOR INVESTMENT IN A RESIDENTIAL PROPERTY. AO THEREAFTER COMPLETED TH E ASSESSMENT MAKING ADDITION FOR SHORT-TERM AND LONG-TERM CAPITAL GAINS . 03. ON 20.02.2012, CIT ISSUED A NOTICE U/S.263 OF T HE ACT, INTER ALIA STATING THAT AO HAD NOT VERIFIED THE NEXUS BETWEEN SALE CONSIDERATION OF THE SITES AS APPEARING IN THE RESPECTIVE CONVEYANCE DEE DS AND THE CASH DEPOSITS APPEARING IN THE BANK ACCOUNT. FURTHER, AS PER THE CIT ASSESSEE HAD NOT DEPOSITED THE CAPITAL GAINS NOT USED FOR ACQUIRING THE NEW ASSET IN A BANK ACCOUNT AS SPECIFIED U/S.54(2) OF THE ACT. CIT ALS O NOTED THAT ASSESSEE ITA.976/BANG/2014 PAGE - 3 WOULD NOT BE ELIGIBLE FOR THE CLAIM OF EXEMPTION U/ S.54F OF THE ACT SINCE THE ADMISSION OF CAPITAL GAINS WAS AFTER DETECTION BY THE DEPARTMENT AND NOT VOLUNTARY. ASSESSEE MADE A REPLY TO THE ABOVE NOTICE STATING THAT THE SB ACCOUNT WITH CANARA BANK, MALUR WAS PLACED BEFOR E THE AO, WHO HAD CONSIDERED IT BEFORE COMPLETING THE ASSESSMENT. FU RTHER AS PER THE ASSESSEE, SALE OF TWO OF THE SITES FOR RS.15 LAKHS WAS MADE ON 06.06.2008 PRIOR TO THE INVESTMENT IN RESIDENTIAL PROPERTIES M ADE ON 06.08.2008 AND 13.08.2008. ASSESSEE ALSO POINTED OUT THAT IT HAD PRODUCED THE SALE DEEDS OF THE SITES BEFORE THE AO AND THE AO WAS SATISFIED THAT THE SOURCE OF AMOUNTS DEPOSITED WITH THE CANARA BANK ACCOUNT WAS THE SALE PROCEEDS. AS PER THE ASSESSEE, THERE WERE FOUR SITES WHICH WE RE SOLD AND THE TOTAL REALISATIONS THEREFROM WAS RS.30.36 LAKHS. 04. HOWEVER, CIT WAS NOT IMPRESSED WITH THE ABOVE R EPLY. ACCORDING TO HIM ASSESSEE HAD SOLD TWO SITES ON 24.07.2008 FO R RS.15 LAKHS. PURCHASE OF ONE RESIDENTIAL HOUSE FOR RS.2,18,000/- WAS DONE BY THE ASSESSEE ON 13.03.2008 AND ANOTHER HOUSE FOR RS.6,84,000/- ON 0 6.08.2008. RELYING ON CLAUSE (II) OF PROVISO (A) TO SECTION 54F(1) OF THE ACT, CIT HELD THAT ASSESSEE HAD PURCHASED ONE ANOTHER RESIDENTIAL HOUS E WITHIN ONE YEAR FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSET THEREBY DISENTITLING IT FROM CLAIM OF ITA.976/BANG/2014 PAGE - 4 DEDUCTION U/S.54F OF THE ACT. FURTHER AS PER THE C IT IT WAS DIFFICULT TO ESTABLISH NEXUS BETWEEN CASH DEPOSITS AND SALE OF S ITES IN THE ABSENCE OF CORROBORATIVE EVIDENCE. HE THUS HELD THE ASSESSMEN T ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. EXERCISIN G THE POWERS VESTED ON HIM U/S.263 OF THE ACT, HE REMITTED THE CASE BACK T O THE AO FOR REDOING THE ASSESSMENT AS PER HIS DIRECTIONS. 05. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF CIT SUBMITTED THAT THE NOTICE U/S.263 OF THE ACT AND THE FINAL OR DER U/S.263 OF THE ACT WERE AT TOTAL VARIANCE. ACCORDING TO HIM, THE FIRST ISS UE RAISED BY CIT IN THE NOTICE WAS THAT ASSESSEE HAD NOT DEPOSITED THE SALE CONSIDERATION IN BANK BEFORE APPROPRIATING IT FOR PURCHASE OF THE NEW ASS ET. HOWEVER, IN THE FINAL ORDER U/S.263 OF THE ACT, THERE IS NO FINDING ADVER SE TO THE ASSESSEE ON THIS POINT. SECONDLY, ACCORDING TO THE LD. AR, AO HAD C AREFULLY CONSIDERED ASSESSEES EXPLANATION THAT DEPOSITS IN THE BANK AC COUNT WERE OUT OF CONSIDERATION RECEIVED FROM SALE OF FOUR SITES AND WAS SATISFIED. CIT, AS PER THE LD. AR, WAS ONLY TRYING TO MAKE A ROVING ENQUIR Y IN THE GUISE OF EXERCISE OF POWERS U/S.263 OF THE ACT. FURTHER AS PER THE LD. AR, THE VIEW TAKEN BY THE CIT IN THE NOTICE THAT EXEMPTION U/S.5 4F OF THE ACT WOULD NOT BE AVAILABLE TO THE ASSESSEE SINCE CAPITAL GAINS WE RE RETURNED AFTER DETECTION ITA.976/BANG/2014 PAGE - 5 BY THE ASSESSEE, HAD NO LEGAL LEG TO STAND. EVEN O THERWISE, AS PER THE LD. AR THIS WAS NOT APPEARING IN THE FINAL ORDER PASSED BY THE CIT U/S.263 OF THE ACT. RELIANCE WAS PLACED ON THE JUDGMENT OF HO NBLE MUMBAI HIGH COURT IN THE CASE OF CIT V. FINE JEWELLERY (INDIA) LTD [ITA.296 OF 2013, DT.03.02.2015] AND ALSO THAT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ASHISH RAJPAL (320 ITR 674). 06. PER CONTRA, LD. DR SUBMITTED THAT AO HAD NOT DO NE THE ENQUIRY AS REQUIRED UNDER THE LAW FOR CORRELATING THE DEPOSITS IN THE BANK ACCOUNT WITH THE SALE OF THE ASSETS. FURTHER ACCORDING TO HIM O NCE AN ASSESSEE PURCHASED ONE ANOTHER RESIDENTIAL PROPERTY EITHER WITHIN A PE RIOD OF TWO YEARS FROM THE DATE OF TRANSFER OR WITHIN A PERIOD OF ONE YEAR PRIOR TO THE DATE OF TRANSFER, THEN HE COULD NO MORE CLAIM DEDUCTION U/S .54F OF THE ACT, BY VIRTUE OF SUB-SECTION (1) THEREON. THUS ACCORDING TO HIM ORDER PASSED BY AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS O F REVENUE AND CIT WAS JUSTIFIED IN TAKING THE VIEW. 07. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. NOTICE ISSUED BY THE CIT U/S.263 OF THE ACT IS REPRODUCED HERE UNDER : ITA.976/BANG/2014 PAGE - 6 A) THE AMOUNT OF CAPITAL GAINS WHICH WAS NOT APPRO PRIATED BY YOU TOWARDS THE NEW ASSET WAS NOT DEPOSITED IN ANY BANK OR INSTITUTOR SPECIFIED BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME, IN TERMS OF SECTION 54(2) OF THE ACT. B) NO NEXUS HAS BEEN DRAWN BY THE ASSESSING OFFICER BETWEEN THE SALE CONSIDERATION OF THE CAPITAL ASSET AS APPEARING IN THE CONVEYANCE DEED AND THE AMOUNT OF CASH DEPOSITS APPEARING IN YOUR BANK ACCOUNT. AS NO LINKAGE IS ESTABLISHED, THE CASH DEPOSITS APPEARING IN THE BANK ACCOUNTS OUGHT TO HAVE BEEN TAXED ULS.68 OF THE ACT AS CASH CREDITS WITHOUT REFERENCE TO THE SALE OF THE CAPITAL ASSET. C) FURTHER, IT IS ONLY THE SALE CONSIDERATION AS MENTI ONED IN THE CONVEYANCE DEED THAT WOULD BE, AT BEST, TAKEN AS VALUE OF SALE AND BE REDUCED FROM THE INDEXED COST OF ACQUISITION, IF ANY AND NOT THE CASH DEPOSITS APPEARING IN THE BANK ACCOUNT. D) EVEN IF INDEXED, YOU ARE NOT ELIGIBLE FOR ANY EXEMP TION U/S.54F AS THE ADMISSION IS ON ACCOUNT OF DETECTION BY THE DEPARTMENT AND NOT A VOLUNTARY OFFER BY YOU. SINCE THE ASSESSMENT ORDER MADE IN YOUR CASE FOR TH E A. Y. 2009-10 IS SILENT ON THESE POINTS, THE ASSESSMENT CONCLUDED HA S BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN VIEW OF THE ABOVE, IT IS PROPOSED TO INVOKE THE PROVISIONS OF SECTION 263(1) AND IN THIS CONNECTION AN OPPORTUNITY IS GIV EN TO EXPLAIN YOUR CASE. 08. RELEVANT PART OF THE ORIGINAL ASSESSMENT OR DER IN WHICH THE ISSUE REGARDING THE DEPOSITS IN THE CANARA BANK ACCOUNT O F THE ASSESSEE HAS BEEN DEALT WITH BY THE AO, IS REPRODUCED HEREUNDER : DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE TRANSACTIONS MADE IN CANARA BANK, MALUR. THE ASSESSEE'S AUTHORISED REPRESENTATIVE TOLD THAT THE ASSESSEE HAD OMITTED ITA.976/BANG/2014 PAGE - 7 THE ACCOUNTS OF THIS BANK INADVERTENTLY WHILE PREPARING THE ACCOUNTS. THE AUTHORISED REPRESENTATIVE STATED THAT THE CASH DEPOSIT OF RS.30,90,000/- IN CANARA BANK, MALUR BRANCH WAS ON ACCOUNT OF SALE OF FOUR SITES WHICH HAD NOT BEEN DISCLOSED IN THE RETURN OF INCOME INADVERTENTLY. THE ASSESSEE AND HIS AUTHORISED REPRESENTATIVE AGREED TO OFFER RS.11,58,289/- AS SHORT TERM CAPITAL GAINS AND RS.5,55,525/- AS LONG TERM CAPITAL GAINS (AFTER INDEXATION AND CONSIDERIN G THE RE-INVESTMENT IN RESIDENTIAL HOUSE PROPERTY AND ALLOWING EXEMPTION U/S 54F OF THE IT ACT. 1961) VID E THE ASSESSEE'S LETTER DATED 12/10/2011 . 09. WHAT WE FIND IS THAT AO HAD DONE AN ENQUIRY AND ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE DEPOSIT OF RS.30.90 LAKHS IN CANARA BANK HAD COME OUT OF THE SALE OF FOUR SITES. THE CAPITAL GAINS A RISING FROM SUCH SALES THOUGH NOT RETURNED BY THE ASSESSEE IN HIS RETURN OF INCOME WAS ADMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PURSUA NT TO AO SEEKING SOURCE OF DEPOSITS IN ASSESSEES CANARA BANK ACCOUN T. TO TAKE A PRESUMPTION THAT AN ITEM WHICH HAS BEEN DISCOVERED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR WHICH EXPLANAT IONS WERE GIVEN BY THE ASSESSEE AND WHICH EXPLANATIONS WERE ACCEPTED, WERE SO ACCEPTED, WITHOUT ENQUIRY, WOULD BE NAIVE. IT IS NOT A CASE WHERE AS SESSEE HAD RETURNED AN AMOUNT AND THE AO HAD OMITTED TO CONSIDER ITS ADMIS SIBILITY OR OTHERWISE. IT IS A CASE WHERE AO HAD DISCOVERED DEPOSITS IN TH E BANK ACCOUNT WHICH WERE EXPLAINED BY THE ASSESSEE TO BE OUT OF SALE OF FOUR SITES. IT IS AN ITA.976/BANG/2014 PAGE - 8 ADMITTED POSITION THAT THE SALE DEEDS OF THE SITES WERE PRODUCED BY THE ASSESSEE BEFORE THE AO. IN THE FACE OF THIS, TO SA Y THAT THE AO HAD NOT DONE ANY ENQUIRY WOULD BE INCORRECT. AT THE BEST IT CAN BE A CASE OF ENQUIRY NOT TO THE SATISFACTION OF THE CIT. IT CANNOT BE DENIE D THAT AN ENQUIRY WAS DONE BY THE AO. AS TO THE QUESTION WHETHER CLAIM OF EXE MPTION U/S.54F OF THE ACT, WAS AVAILABLE TO THE ASSESSEE, NOTICE ISSUED B Y CIT SIMPLY MENTIONS THAT SECTION 54F OF THE ACT COULD NOT BE ALLOWED SI NCE ASSESSEE HAD RETURNED CAPITAL GAINS AFTER THE DETECTION. THERE IS NOTHING IN LAW WHICH PREVENTS AN ASSESSEE TO CLAIM AN EXEMPTION, FOR A R EASON THAT THE CLAIM OF EXEMPTION HAD ITS GENESIS ON A DISCOVERY DONE BY TH E REVENUE, EARLIER NOT DISCLOSED BY THE ASSESSEE. IN ANY CASE IN THE FINA L ORDER U/S.263 OF THE ACT, CIT HAS SIMPLY STATED THAT ASSESSEE WAS NOT ELIGIBL E FOR CLAIM U/S.54F(1) OF THE ACT, IN VIEW OF PROVISO (A). PROVISO (A) TO SU B-SECTION (1) OF SECTION 54F IS REPRODUCED HEREUNDER : (A) THE ASSESSEE,- (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSE T ; OR (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANS FER OF THE ORIGINAL ASSET ; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE ORIGINAL ASSET; AND ITA.976/BANG/2014 PAGE - 9 10. CIT IN HIS ORDER MENTIONS THAT ASSESSEE HAS SOL D TWO SITES ON 24.07.2008, WHEREAS THE FIRST PROPERTY AGAINST WHIC H EXEMPTION U/S.54F OF THE ACT WAS PURCHASED ON 13.03.2008 AND THE SECOND PROPERTY WAS PURCHASED ON 06.08.2008. OBVIOUSLY TH E FIRST PROPERTY WAS PURCHASED PRIOR TO THE SALE OF THE SIT ES ON 24.07.2008. DISABLING CLAUSES (II) AND (III) ABOVE ONLY MENTION S PURCHASE OR CONSTRUCTION WITHIN A PERIOD OF ONE YEAR / THREE YE ARS AFTER THE DATE OF TRANSFER. IT DOES NOT DEAL WITH A CASE WHERE TH E PURCHASE IS PRIOR TO THE DATE OF TRANSFER. EVEN FROM THIS ANGLE WE C ANNOT SAY THAT THE AOS DECISION TO ALLOW THE CLAIM U/S.54F OF THE ACT WAS BASED ON A VIEW WHICH WAS UNLAWFUL OR ILLEGAL OR NOT POSSIBLE. IN OUR OPINION EFFORT OF THE CIT WAS TO SUBSTITUTE HIS VIEW IN PLA CE OF A POSSIBLE AND LAWFUL VIEW TAKEN BY THE AO, THAT TOO AFTER ENQ UIRIES. IN OTHER WORDS, WE ARE OF THE OPINION THAT THE ORDER OF AO D ID NOT HAVE ANY ERROR WHICH WAS PREJUDICIAL TO THE INTERESTS OF REV ENUE. ORDER OF CIT U/S.263 OF THE ACT IS SET ASIDE. ITA.976/BANG/2014 PAGE - 10 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH DAY OF N OVEMBER, 2015. SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR