Shri Sanjay K. Rana, Ahmedabad V. The Income Tax Officer, Ward-7(1), Ahmedabad

ITA 996/AHD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0294 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Reasonable cause; Benefit of exemption
• Section: 143(3); 54F; 54; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .. , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.996/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) SHRI SANJAY K. RANA 22 B, 2 ND FLOOR TITANIUM BUILDING NR. SAFAL PROFITAIRE PRAHLADNAGAR CORPORATE ROAD PRAHALADNAGAR, AHMEDABAD / VS. THE INCOME TAX OFFICER WARD-7(1) AHMEDABAD $ ./ ./ PAN/GIR NO. : ADWPR 4409 H ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SMT. ARTI N. SHAH ($'*) / RESPONDENT BY : MR.PRASOON KABRA, SR.DR + ,*-. / DATE OF HEARING 28/09/2016 /012*-. / DATE OF PRONOUNCEMENT 18/10/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, AHMEDABAD, DATED 03/02/2014 FOR THE ASSESSMENT YEAR (AY) 2010-11. THE ASSESSEE HAS RECEIVED THE FOLLOWING EFFECTIVE GROUND:- ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 2 - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I , AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIR MING THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE CLAIM OF THE APPELLANT MADE U/S.54F, AND ACCORDINGLY, HAS ERRED IN CONFIRM ING THE DISALLOWANCE OF RS.23,95,405/- MADE BY THE ASSESSIN G OFFICER. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE ASSESS MENT ORDER ARE AS UNDER:- 2.1. ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS OR PROFESSION. THE ASSESSEE WAS ASKED BY THE ASSESS ING OFFICER TO SHOW REASON WHY THE DEDUCTION U/S.54F SHOULD NOT BE REST RICTED TO RS.42,00,000/-. THE ASSESSEE ALSO ASKED TO SHOW RE ASONS WHY SALES CONSIDERATION OF RS.87,500,000/- RECEIVED OUT OF SA LE OF LAND AT SURVEY NO.290/2 ADMEASURING 1840 SQ.MTR. OF NON-AGRICULTUR E LAND SHOULD NOT BE TREATED AS SHORT TERM CAPITAL GAIN. THE ASSESSEE E XPLAINED THAT THE ASSESSEE PURCHASED THIS LAND AT RS.13,20,600/- ON 1 6.02.2006 AND THE SALES OF THIS LAND HAPPENED ON 03.03.010 AND HENCE IT IS A LONG TERM CAPITAL ASSETS. THE ASSESSEE WAS ASKED TO SHOW REA SONS WHY THE AMOUNT OF DEDUCTION CLAIMED U/S.54F SHOULD NOT BE RESTRICT ED FOR PURCHASE OF SAFAR AMRAKUNJ, BUNGALOW NO.101 TO THE EXTENT OF RS.42,00,000/-. THE ASSESSEE IS ASKED TO SHOW REASONS WHY THE EXEMP TION CLAIMED U/S.54F TO THE EXTENT OF RS.65,95,405/- SHOULD NOT BE RESTRICTED TO RS.42,00,000/- AS THE ASSESSEE HAS INVESTED A NEW C APITAL ASSETS BEING NEW RESIDENTIAL HOUSE. THE ASSESSEE IS ALSO ASKED TO SHOW REASON WHY THE DEDUCTION OF U/S.54F SHOULD NOT BE DISALLOWED A S THE ASSESSEE HAS ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 3 - ALREADY ONE HOUSE PROPERTY IN HIS POSSESSION ON THE BASIS OF WHICH HE TOOK HOUSING LOAN. THE ASSESSEE VIDE REPLY DATED 0/01/2013 SUBMITTED THAT BEFORE THE DUE DATE AS PER SECTION 139(4), I.E . 31-03-2012, HE HAS DULY MADE INVESTMENT IN RESIDENTIAL PROPERTY AND TH EREFORE QUESTION OF DEPOSITING THE CONSIDERATION RECEIVED ON SALE OF PL OT IN CAPITAL GAIN SCHEME WITH NATIONALIZED BANK DOES NOT ARISE AND TH E DUE DATE PROVIDED U/S.54F DOES NOT MEAN ONLY MEAN DUE DATE U/S.139(1) BUT IT ALSO MEANS DUE DATED U/S.139(4) FOR THE PURPOSE OF MAKING INVE STMENT IN CAPITAL GAINS SCHEME. THIS CONTENTION IS SUPPORTED BY GAUH ATI HIGH COURT DECISION IN THE CASE OF CIT VS. RAJESH KUMAR JALAN 286 ITR 274, WHEREIN IT WAS HELD THAT DISMISSING THE APPEAL, THAT FROM A READING OF SUB-SECTION (2) OF SECTION 54 OF THE ACT IT IS CLEAR THAT ONLY SECTION 139 HAS BEEN MENTIONED THEREIN IN THE CONTEXT THAT THE UNUTILIZE D PORTION OF THE CAPITAL GAINS ON THE SALE OF PROPERLY USED FOR RESIDENCE SH OULD BE DEPOSITED BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INC OME UNDER SECTION 139 OF THE I.T.ACT, 1961. THE AO DID NOT ACCEPT THE A RGUMENT OF THE ASSESSEE FOR THE REASONS THAT THE PROVISION OF SECT ION 54F(4) IMPOSES THE REQUIREMENT IN THE PART OF THE ASSESSEE FOR AVAILIN G THE BENEFIT AND THE SECTION ENVISAGES THE DEADLINE FOR EITHER MAKING IN VESTMENT IN ELIGIBLE ASSET OR IN CAPITAL GAINS ACCOUNTS SCHEME ON OR BEF ORE THE DUE DATE FOR THE FILING OF RETURN OF INCOME AS PER PROVISION OF SECTION 139(1) OF THE ACT. IN THE CASE OF THE ASSESSEE THE DUE DATE WAS 30/11/2011 AS PER THE PROVISION OF SECTION 139(1). THE ASSESSEE FAILED T O FURNISH ANY ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 4 - REASONABLE CAUSE WHICH COMPELS HIM TO DELAY IN THE INVESTMENT IN NEW RESIDENTIAL HOUSE OR IN CAPITAL GAIN ACCOUNTS SCHEM E. IN THE CASE REFERRED BY THE ASSESSEE CIT VS. RAJESH KUMAR JALAN (286 ITR 274) THE FACTS OF THE CASE WAS TOTALLY DIFFERENT. IN THAT CASE, THE ASSESSEE TOOK POSSESSION OF THE PROPERTY AND THE DOCUMENTS SUGGES TED PART PERFORMANCE OF THE CONTRACT. IN THE INSTANT CASE, THE ASSESSEE DID NOT TAKE POSSESSION OF THE PROPERTY AD THERE WAS NO TRANSFER OF THE PRO PERTY TILL THE DUE DATE. IN VIEW OF THE ABOVE, THE AMOUNT OF DEDUCTION CLAIM ED U/S.54F IS RESTRICTED TO THE DATE 30/11/2010. THE ASSESSEE HA S INVESTED AMOUNT OF RS.42,00,000/-. ASSESSEE CLAIMED DEDUCTION U/S.54 F AT RS.65,95,405/- WHICH IS RESTRICTED TO RS.42,00,000/- AND BALANCE A MOUNT OF RS.23,95,405/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSEE FILED HIS RETURN OF INCOME ON 15/10/2010 DECLARING THE TOTAL INCOME AT RS.8,98,740/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') VIDE ORDER DATED 22/02/2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.32,94,150/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO), ASSESSEE CARRI ED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DATED 03/02/2014 (I N APPEAL NO.CIT(A)- I/WD.7(1)/308/2013-14) DISMISSED THE APPEAL OF THE ASSESSEE. 2.2. THE LD.CIT(A) HAS DISMISSED THE ASSESSEES APP EAL BY OBSERVING AS UNDER:- ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 5 - 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS OF THE A.R. OF THE APPELLANT CAREFULLY. THE ONLY CONTENTION OF TH E APPELLANT IS THAT AS PER THE DECISIONS OF THE COURTS THE DATE UPTO WHICH THE INV ESTMENT CAN BE MADE IN ACQUISITION OF THE PROPERTY IS THE DATE PRESCRIBED U/S.139(4) AND NOT THE DATE PRESCRIBED U/S.139(1) OF THE ACT. THE CONTENTION O F THE APPELLANT IS MISPLACED BECAUSE IN THE INSTANT CASE THE APPELLANT HAS ALREA DY FILED HIS RETURN OF INCOME ON 15.10.2010. ONCE THE APPELLANT HAS FILED THE RETURN OF INCOME U/S.139(1) OF THE ACT THEN THERE IS NO QUESTION OF TIME U/S.139(4) OF THE ACT. IT IS SEEN THAT ON THE DAY WHEN THE APPELLANT HAD FILE D HIS RETURN OF INCOME THE INVESTMENT IN THE NEW PROPERTY PURCHASED WAS ONLY T O THE EXTENT OF RS.42,00,000/-. IN THE SAID RETURN OF INCOME THE A PPELLANT COULD NOT CLAIM DEDUCTION U/S.54F OF THE INVESTMENTS HE HAD NOT YET MADE. IT IS SETTLED LAW THAT DEDUCTION CAN ONLY BE CLAIMED IF THE INVESTMEN T HAS ALREADY BEEN MADE. THERE CANNOT BE A CASE WHEN THE CLAIM OF DEDUCTION IS MADE WITHOUT ACTUALLY MAKING THE SPECIFIED INVESTMENT. THE MECHANISM FOR MAKING INVESTMENT AT A LATER DATE IS PERMITTED ONLY IF THE GAINS FROM TRAN SFER OF THE EARLIER CAPITAL ASSET ARE KEPT IN SPECIFIED ACCOUNT AS MENTIONED IN THE ACT. 6.1. THE RELIANCE OF THE AR OF THE APPELLANT ON THE DECISION IN THE CASE OF CIT VS. RAJESH KUMAR JALAN REPORTED IN 286 ITR 274 GAU) IS MISPLACED BECAUSE IN THAT CASE ALSO IT HAS BEEN HELD THAT THE DUE DATE MEANS THE DATE AS PRESCRIBED U/S.139(4) OF THE ACT ONLY IN THE CASE O F THE ASSESSEE WHO HAS NOT FURNISHED HIS RETURN OF INCOME BY THE DATE PRESCRIB ED U/S.139(1) OF THE ACT. 6.2. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE APP ELLANT IS NOT ENTITLED TO DEDUCTION OF THE AMOUNTS INVESTED AFTER THE FILING OF RETURN OF HIM. THE ADDITION MADE BY THE AO IS JUSTIFIED. THE SAME IS CONFIRMED. 7. GROUND NO.3 IS OF GENERAL NATURE, NO SEPARATE OR DER NEEDS TO BE PASSED FOR THE SAME. 8. IN THE RESULT, THE APPEAL IS DISMISSED. 2.3. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 6 - 3. THE LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) AND SUBMITTED THAT THE PRESENT ISSUE IS COVERED BY THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT-BANGALOR E VS. K. RAMACHANDRA RAO (56 TAXMANN.COM 163). ON THE OT HER HAND, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND R ELIED ON THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS. CHIEF CIT (73 TAXMANN.COM 2). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISIONS RELIED UPON BY BOTH THE PA RTIES. WE FIND IN THIS CASE THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS C OVERED BY THE JUDGEMENT OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF C IT VS. K. RAMACHANDRA RAO (SUPRA). IN THIS CASE, IT IS HELD THAT EXEMPTION IN THE CASE OF INVESTMENT IN RESIDENTIAL HOUSE WAS GIVEN I N FAVOUR OF ASSESSEE BECAUSE ALL INVESTMENTS MADE UNDER CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN A STIPULATED PERIOD AND EXEMPTION WAS DULY GIVEN. ON THE OTHER HAND, LD.SR.DR CITED A JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HUMAYUN SULEMAN MERCHANT VS. CCIT(SUPRA), W HICH IS CONTRARY TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K.RAMACHANDRA RAO(SUPRA), BUT IT IS WELL SETTLED LA W HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD. REPORTED IN (1973) AIR 927, 1973 SCR (3) 448 THAT WHERE THE RE IS CONTRARY ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 7 - FINDINGS OF DIFFERENT TWO HIGH COURTS AND IN THE AB SENCE OF DIRECT CITATION OF HONBLE JURISDICTIONAL HIGH COURT, THEN BENEFIT OF CITATION WHICH IS IN FAVOUR OF ASSESSEE TO BE APPLIED. WE THEREFORE RE PRODUCE THE RELEVANT PORTION OF THE AFORESAID JUDGEMENTS HEREUNDER:- 1. PORTION OF JUDGEMENT OF HONBLE HIGH COURT OF KARNATAKA - IN THE CASE OF CIT VS. K. RAMACHANDRA RAO SECTION 54(F) DEALS WITH CAPITAL GAINS ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT ON HOUSE. SECTION 54F(1) PROVIDES, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE AND THE ASSESS EE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRA NSFER TOOK PLACE, PURCHASED OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE SA ID PROVISION. THIS IS SUBJECT TO THE PROVISIONS OF SUB-SECTION (4). SUB- SECTION (4) STIPULATES IF THE AMOUNT OF NET CONSIDE RATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE O F THE NEW ASSET MADE WITHIN ONE YEAR BEFORE THE DATE ON W HICH TRANSFER OF THE ORIGINAL ASSET TOOK PLACE OR W HICH IS NOT UTILIZED BY HIM FOR THE PURCHASE OR CONSTRUCTIO N OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 13 9 SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RETURN IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SECTION 139(1) IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS SPECI FIED AND UTILIZED IN ACCORDANCE WITH ANY SCHEME WHICH THE CENTRAL GO VERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE FRAMED IN THIS BEHALF. SUB- SECTION (4) IS ATTRACTED ONLY TO A CASE WHERE THE S ALE CONSIDERATION IS NOT UTILIZED EITHER FOR PURCHASE OR FOR CONSTRUCTION OF A RESIDE NTIAL HOUSE. IT HAS NO APPLICATION TO A CASE WHERE THE ASSESSEE INVESTS THE SALE CONSI DERATION DERIVED FROM THE TRANSFER EITHER IN PURCHASING THE PROPERTY OR CONSTRUCTING T HE RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1). THE PROVISO TO SECTION 54F PUTS AN EMBARGO ON THE A PPLICATION OF SECTION 54F TO CASES WHICH ARE MENTIONED IN THE SAID PROVISO. THAT IS TO BE ELIGIBLE FOR THE BENEFIT UNDER SECTION 54F(1) THE ASSESSEE SHOULD NOT BE OWN ING MORE THAN ONE RESIDENTIAL ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 8 - HOUSE OTH ER THAN THE NEW ASSET ACQUIRED OR HE SHOULD NOT PUR CHASE ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF O NE YEAR AFTER THE DATE OF TRANSFER OF RESIDENTIAL ASSET OR CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE RESIDENTIAL ASSET. IN THE ENTIRE SCHEME THERE IS NO PROHIBITION FOR TH E ASSESSEE PUTTING UP CONSTRUCTION OUT OF SALE CONSTRUCTION RECEIVED BY SUCH TRANSFER OF A SITE WHICH IS OWNED BY HIM AS IS CLEAR FROM THE LANGUAGE USED. IT IS OPEN FOR THE ASSESSEE TO PUT UP A RESIDENTIAL CONSTRUCTION OR TO PURCHASE A RESIDENTIAL HOUSE. IT IS NOT THE REQUIREMENT OF LAW THAT HE SHOULD PURCHASE A RESIDENTIAL SITE AND THEN PUT- UP CONSTRUCTION. THEREFORE, IN THE IN STANT CASE ADMITTEDLY THE ASSESSEE HAS PURCHASED A VACANT SITE ON 31-3-2001. HE SOLD THE ORIGINAL ASSET ON 27-8- 2003 ON WHICH DATE HE ALREADY OWNED A SITE. IN FACT EVEN BEFORE SALE OF THE ORIGINAL AS SET HE HAD STARTED CONSTRUCTION ON SUCH SITE BY AVAILING LOAN FROM THE BANK. IN TERMS OF SECTION 54F(1) ALL INVESTMENTS MADE IN THE CONSTRUCTION OF THE RESIDENTIAL HOUSE O F THE SAID SITE WITHIN A PERIOD OF ONE YEAR PRIOR TO 27-8- 2003 WOULD BE ELIGIBLE FOR EXEMPTION UNDER SECTION 54F(1). SIMILARLY ALL INVESTMENTS IN THE SAID CONSTRUCTION AFTER 27-8- 2003 WITHIN A PERIOD OF THREE YEARS THERE FROM IS ALSO ELIGIBLE FOR EXEMPTI ON. THEREFORE, THE ARGUMENT THAT SUCH INVESTMENT IN PUTTING UP A RESIDENTIAL CONSTRU CTION CANNOT BE MADE ON A SITE OWNED BY HIM TO BE ELIGIBLE F OR EXEMPTION IS WITHOUT ANY SUBSTANCE. BOTH THE APPELLATE AUTHORITIES HAVE RIGHTLY EXTENDED THE BEN EFIT TO THE ASSESSEE AND THERE IS NO ERROR COMMITTED BY THEM WHICH CALLS FOR INTERFERENC E. AS IS CLEAR FROM SUB-SECTION (4) IN THE EVENT OF TH E ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54F(1 ), IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54F, THEN HE SHOULD DEPOSIT THE SAID CAP ITAL GAI NS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER W ORDS IF HE WANTS TO CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING T HE CASH, THEN THE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTIO N IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THEN SECTION 54F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS STIPULATED AND THEREFORE, HE IS NOT ENTI TLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT.[PARA 4] FOR THE AFORESAID REASONS BOTH THE SUBSTANTIAL QUES TIONS OF LAW ARE ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. THEREFO RE, ALL THE FOUR APPEALS ARE DISMISSED.[PARA 5] ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 9 - 2. PORTION OF THE JUDGEMENT OF HONBLE HIGH COURT OF BOMBAY - IN THE CASE OF HYMAYUN SULEMAN MERCHANT V/S CCIT ___________________________________________________ ________ SECTION 54F IS PART OF CHAPTER IV WHICH INTER ALIA PROVIDES FOR COMPUTATION OF TOTAL INCOME AND FOR THAT PURPOSE, SETS OUT THE VARIOUS H EADS OF INCOME. PART E OF CHAPTER VI DEALS WITH THE HEAD OF INCOME VIZ. CAPITAL GAINS. IT PROVIDES FOR COMPUTATION OF CAPITAL GAINS AND ALSO FOR EXEMPTION AVAILABLE THEREUNDER. SECTION 54F INTRODUCED INTO THE ACT WITH EFFECT FROM 1-4- 1983 BY THE FINANCE ACT, 1982 PROVIDES EXEMPTION FROM CAPITAL GAIN ON TRAN SFER OF ANY LONG- TERM CAPITAL ASSET IN CASE THE SAME IS INVESTED IN A RESIDENTIAL HOUSE. H OWEVER, SECTION WHEN INTRODUCED PROVIDED THAT ANY CAPITAL GAIN ARISING FROM TRANSFE R OF LONG TERM CAPITAL ASSET WOULD NOT BE CHARGEABLE TO CAPITAL GAINS TAX, IF THE S AME WERE UTILIZED FOR PURCHASE OF AN HOUSING ACCOMMODATION WITHIN A YEAR BEFORE OR AFTER THE DATE ON WHICH THE TRANSFER OF AN CAPITAL ASSET TOOK PLACE OR WAS USED FOR CONS TRUCTION OF A RESIDENTIAL HOUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRA NS FER OF THE CAPITAL ASSET.[PARA 6(E)] THUS, SECTION 54F AS INCORPORATED MADE AVAILABLE TH E BENEFIT OF EXEMPTION TO PURCHASE A HOUSE WITHIN ONE YEAR (AMENDED TO TWO YE ARS) OR CONSTRUCT A RESIDENTIAL HOUSE WITHIN A PERIOD OF 3 YEARS FROM THE DATE ON W HIC H CAPITAL ASSET HAS BEEN SOLD. HOWEVER, WHILE IMPLEMENTING SECTION 54F, IT WAS NOT ICED THAT AT TIMES ASSESSMENTS WERE COMPLETED PRIOR TO THE EXPIRY OF ABOVE PERIOD OF TWO/THREE YEARS FROM THE DATE OF SALE OF THE CAPITAL ASSET AND THE ASSESSEE HAD N OT UTILI ZED THE AMOUNT WITHIN THE PRESCRIBED PERIOD PROVIDED IN SECTION 54F. THIS WOU LD LEAD TO ASSESSMENT ORDERS BEING RECTIFIED BY APPROPRIATE ORDERS,TO DETERMINE THE AVAILABILITY OF BENEFIT OF EXEMPTION UNDER SECTION 54F.[PARA 6(F)] THIS LED TO THE INTRODUCTION OF SUB- SECTION (4) TO SECTION 54F BY THE FINANCE ACT, 1987 WITH EFFECT FROM 1-4-1988. BESIDES INTRODUCING SUB- SECTION (4) TO SECTION 54F THE FINANCE ACT, 1978, ALSO AMENDED SUB- SECTION (1) OF SECTION 54F TO MAKE IT SUBJECT TO PROVISION OF SUB-SECTION (4) THEREOF.[PA RA 6(G)] AS THE INSTANT CASE IS FOR ASSESSMENT YEAR 1996- 97, IT IS THE AMENDED PROVISION WHICH APPLIES. THEREFORE, NOW SECTION 54F(1) WHICH GRANTS EXEMPTION FROM CAPITAL GAIN TAX WHERE A FLAT IS PURCHASED EITHER WITHIN ON E YEAR PRIOR TO THE SALE OF CAPITAL ASSET OR WITHIN 2 YEARS AFTER THE DATE OF SALE OF THE CAPITAL ASSET O R WHERE A RESIDENTIAL HOUSE IS CONSTRUCTED WITHIN 3 YEARS FRO M THE DATE OF SALE OF THE CAPITAL ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 10 - ASSET, IS NOW SUBJECT TO THE PROVISIONS OF SECTION 54F(4). THUS , WHERE THE CONSIDERATION RECEIVED ON SALE OF CAPITAL ASSET IS NOT APPROPRIATED (WHERE PURCHASE WAS EARLIER THAN SALE) OR UTILIZED (WHERE PURCHASE IS AFTER THE SALE) THEN THE SAME WOULD BE SUBJECT TO THE CHARGE OF CAPITAL GAIN TAX, UNLESS THE UNUTILIZED AM OUNTS ARE DEPOSITED IN SPECIFIED BANK ACCOUNT AS NOTIFIED IN TERMS OF SECTION 54F(4). THE EXEMPTION WOULD BE AVAILABLE TO THE UNUTILIZED AMOU NTS ONLY IF THE MANDATE OF SUB- SECTION (4) OF SECTION 54F IS COMPLIED WITH. FURTHE R THE PROVISO TO SUB-SECTION (4) OF SECTION 54F, SAFEGUARDS THE REVENUE WHERE THE ASSES SEE HAD NOT INVESTED THE AMOUNTS CHARGEABLE TO CAPITAL GAINS WITHIN THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 54F. THIS BY PROVIDING THAT IN SUCH CASES, CAPITAL GAIN UNDER SECTION 45 WOULD BE CHARGED ON THE UNUTILIZED AMOUNT AS INCOME OF THE P REVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF TR ANSFER OF THE CAPITAL ASSET EXPIRES. [PARA 6(H)] ON THE BASIS OF THE ABOVE BROAD ANALYSIS, THE FACTS OF THE INSTANT CASE NEED TO BE ANALYSED. THE SALE OF CAPITAL ASSET TOOK PLACE ON 2 9-4- 1995 FOR A CONSIDERATION OF RS.85.33 LAKHS. THE AGREEMENT FOR PURCHASE OF CONST RUCTION OF FLAT FOR CONSIDERATION OF RS.69.90 LAKHS WAS ENTERED INTO BY THE ASSESSEE ON 16-7- 1996. AN AMOUNT OF RS.35 LAKH S WERE UTILIZED BY THE ASSESSEE IN PURCHASE OF FLAT BEFORE THE RETURN OF INCOME WAS FILED ON 4-11-1996 UNDER SECTION 139. HO WEVER, THE MANDATE UNDER SUB- SECTION (4) OF SECTION 54F IS THAT THE AMOUNT NOT U TILIZED TOWARDS THE PURCHASE OF THE FLAT HAS TO BE D EPOSITED BEFORE THE DUE DATE OF FILING RETURN OF IN COME UNDER SECTION 139(1) IN THE SPECIFIED BANK ACCOUNT. IN THIS CASE ADMITTEDLY THE ENTIRE AMOUNT OF CAPITAL GAINS ON SALE OF ASSET WHICH IS NOT UTILIZE D HAS NOT BEEN DEPOSITED IN A SPECIFIED BANK ACCOUNT BEFORE DUE DATE OF FILING OF RETURN UNDER SECTION 1 39(1). THEREFORE, WHERE THE AMOUNTS OF CAPITAL GAINS IS UT ILIZED BEFORE FILING OF THE RETURN OF INCOME IN PURCHASE/CONSTRUCTION OF A RESIDENTIAL HO USE, THEN THE BENEFIT OF EXEMPTION UNDER SECTION 54F IS A VAILABLE. IT IS AN UNDISPUTED POSITION THAT EXCEPT RS.35 LAKHS, THE BALANCE OF THE AMOUNTS SUBJECT TO CAPITAL GAINS TAX HAS NOT BEEN UTILIZED BEFORE DATE OF FURNISHING OF RETURN OF INCOME, I.E., 4-11- 1996 UNDER SECTION 139.THEREFORE, ON PLAIN INTERPRETATIO N OF SECTION 54F, IT APPEARS THAT THE IMPUGNED ORDE R OF THE TRIBUNAL CANNOT BE FAULTED. [PARA 6(I)] THE MANDATE OF SECTION 54F(4) IS CLEAR THAT AMOUNT WHICH HAS NOT BEEN UTILIZED IN CONSTRUCTION AND/OR PURCHASE OF PROPERTY BEFORE FIL ING THE RETURN OF INCOME, MUST NECESSARILY BE DEPOSITED IN AN ACCOUNT DULY NOTIFIE D BY THE CENTRAL GOVERNMENT, SO AS TO BE EXEMPTED. [PARA 6(O)] FURTHER, SECTION 54F(4) SPECIFICALLY PROVIDES THAT THE AMOUNTS WHICH HAVE NOT BEEN INVESTED EITHER IN PURCHASE/CONSTRUCTION OF HOUSE HAVE TO BE DEPOSITED IN THE SPECIFIED ACCOUNTS BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 11 - 139(1). [PARA 6(P)] IT IS A SETTLED POSITION IN LAW THAT NO OCCASION TO GIVE A BENEFICIAL CONSTRUCTION TO A STATUTE CAN ARISE WHEN THERE IS NO AMBIGUITY IN THE PROVISION OF LAW WHICH IS SUBJECT TO INTERPRETATION. THUS, IN THE FACE OF THE CLEAR W ORDS OF THE STATUTE THE INTENT OF PARTIES AND/OR BENEFICIAL CONSTRUCTION IS IRRELEVAN T. IN THE INSTANT FACTS THE PROVISION OF SECTION 54F(4) A RE VERY CLEAR. THERE IS NO AMBIGUITY. THUS, THERE I S NO OCCASION TO APPLY LIBERAL/BENEFICIAL CONSTRUCTION WHILE INTERPR ETING THE SECTION AS CONTENDED BY THE ASSESSEE.[PARA 6(S)] AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE WORD 'APPROPRIATION' USED IN SECTION 54F(4) WOULD ALSO APPLY IN THE INSTANT CASE WHERE THE CAPITAL ASSET HAS BEEN SOLD AND SALE PROCEEDS ARE EARMARKED TO BE INVESTED IN CONSTRUCTION OF HOUSE. A PLAIN READING OF SECTION 54F(4) MILITATES AGAINST I T. AS POINTED OUT BY THE REVENUE , SECTION 54F(4) DEALS WITH TWO CLASSES OF CASES, ONE WHERE PURCHASE OF NEW RESIDENTIAL HOUSE IS WITHIN A PERIOD OF ONE YEAR BE FORE THE DATE ON WHICH CAPITAL ASSET IS SOLD BY ASSESSEE AND SECOND CLASS OF CASES WHERE THE AMOUNT SUBJECTED TO CAPITAL GAINS AR E UTILIZED FOR PURCHASE/CONSTRUCTING A FLAT, POST T HE SALE OF THE CAPITAL ASSET. IN THE INSTANT FACTS WE ARE CONCERNED WITH T HE SECOND CLASS, I.E., PURCHASE POST THE SALE OF THE CAPITAL ASSET.[PARA 6(T)] THE PARLIAMENT HAS USED THE WORD 'APPROPRIATED' IN THE FIRST CLASS OF CASES, I.E., WHERE PROPERTY HAS ALREADY BEEN PURCHASED PRIOR TO THE SALE OF CAPITAL ASSET AND THE AMOUNT RECEIVED ON SALE OF CAPITAL ASSET IS APPROPR IATED TOWARDS CONSIDERATION WHICH HAS BEEN PAID FOR PURCHASE OF THE FLAT. THE I NSTAN T CASE IS CONCERNED WITH THE PURCHASE/CONSTRUCTION OF RESIDENTIAL HOUSING, AFTER THE SALE OF CAPITAL ASSET. THIS REQUIRES THE AMOUNT WHICH IS TO BE SUBJECTED TO CAP ITAL GAIN HAS TO BE UTILIZED BEFORE THE DATE OF FILING OF RETURN OF INCOME UNDER SECTIO N 139 BY THE ASSESSEE. SECTION 54F(4) ITSELF CLEARLY STATES THAT THE AMOUNT NOT UT ILIZED IN PURCHASE/CONSTRUCTION OF FLAT/HOUSE SHOULD BE DEPOSITED IN THE SPECIFIED BAN K NOTIFIED BY THE GOVERNMENT. THUS THE PLAIN LANGUAGE EMPLOYED IN SECTION 54F(4) MAKES A CLEA R DISTINCTION BETWEEN CASES OF APPROPRIATION (PURCHASE PRIOR TO S ALE OF CAPITAL ASSET) AND UTILIZATION (PURCHASE/CONSTRUCTION AFTER THE SALE O F CAPITAL ASSET). THEREFORE THE WORD 'APPROPRIATED' WOULD HAVE NO APPLICATION IN CASES O F PURCHASE/CONSTRUCTION OF A HOUSE AFTER THE SALE OF CAPITAL ASSET WHICH IS OF C ONCERN IN THE INSTANT CASE.[PARA 6(U)] IN THE INSTANT CASE, THE RETURN OF INCOME IS ADMITT EDLY FILED ON 4-11- 1996. IN TERMS OF SECTION 54F(4) INTERPRETED BY THE GAUHATI HIGH COUR T IN CIT V.RAJESH K UMAR JALAN [2006] 286 ITR 274/157 TAXMAN 398 THE AMOUNT SUBJECT TO CAPITAL GAIN ON SALE OF THE CAPITAL ASSET FOR PURPOSE OF EXEMPTION, HAS TO BE UTILIZED BEFORE THE DATE ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 12 - OF FILING OF RETURN OF INCOME. IN INSTANT CASE 4-11 - 1996 IS THE DATE OF FILING THE RETURN OF INCOME. IT IS NOT DISPUTED THAT ON 4-11- 1996 WHEN THE RETURN OF INCOME WAS FILED, THE ENTIRE AMOUNT WHICH WAS SUBJECT TO CAPITAL GAIN TAX HAD NOT BEEN UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF NEW HOUSE NOR WERE THE U NUTILIZED AMOUNTS DEPOSITED IN THE NOTIFIED BANK ACCOUNTS IN TERMS OF SECTION 54F( 4) BEFORE FILING THE RETURN OF INCOME. IT IS ALSO TO BE NOTED THAT, THE ASSESSING OFFICER HAD TAKEN INTO ACCOUNT ALL AMOUNTS UTILIZED FOR CONSTRUCTION OF A HOUSE BEFORE FILING THE RETURN OF INCOME ON 4- 11- 1996 FOR EXTENDING THE BENEFIT OF EXEMPTION UNDER S ECTION 54F. THEREFORE, IN THE INSTANT FACTS, THE DECISION OF THE GAUHATI HIGH COU RT IN RAJESH KUMAR JALAN'S (SUPRA) WO ULD NOT APPLY SO AS TO HOLD THAT THE ASSESSEE HAD C OMPLIED WITH SECTION 54F(4). [PARA 6(W)] IN VIEW OF THE ABOVE, THE APPELLATE TRIBUNAL WAS RI GHT IN HOLDING THAT THE ASSESSING OFFICER HAD RIGHTLY COMPUTED THE DEDUCTION UNDER SE CTION 54F, RESTRICTING THE INVESTMENT IN THE NEW ASSET AT RS.35 LAKHS AND, THU S, RESTRICTING THE EXEMPTION UNDER SECTION 54F PROPORTIONATELY TO THE AMOUNT INVESTED. [PARA 6(X)] IN THE ABOVE VIEW, THE APPEAL IS DISMISSED. [PARA 7 ] 3. PORTION OF THE JUDGEMENT OF HONBLE APEX COURT - IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. WE MUST FIRST DETERMINE WHAT IS THE MEANING OF THE EXPRESSION THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM IN 271 ( 1) (A) (I), DOES IT MEAN THE AMOUNT OF TAX ASSESSED UNDER S. 143 OR THE AMOU NT OF TAX PAYABLE UNDER S. 156. THE WORD ASSESSED IS A TERM OFTEN U SED IN TAXATION LAWS. IT IS USED IN SEVERAL PROVISIONS IN THE ACT. QUANTI FICATION OF THE TAX PAYABLE IS ALWAYS REFERRED TO IN THE ACT AS A TAX ASSESSED. A TAX PAYABLE IS, NOT THE SAME THING AS TAX ASSESSED. THE TAX PAYABLE IS THAT AMOUNT FOR WHICH A DEMAND NOTICE IS ISSUED UNDER S. 156. IN DETERMINING THE TAX PAYABLE, THE TAX ALREADY PAID HAS TO BE DED UCTED. HENCE THERE CAN BE NO DOUBT THAT THE EXPRESSION THE AMOUNT OF THE TAX, IF ANY, PAYABLE BY HIM REFERRED TO IN THE FIRST PART OF S. 271 (1) (A ) (I) REFERS TO THE TAX PAYABLE UNDER A DEMAND NOTICE. WE NEXT COME TO THE QUESTION WHAT IS THE MEANING TO TIC ATTACHED TO THE WORDS THE TAX FOUN D IN THE LATTER PART OF THAT PROVISION. IT MAY BE NOTED THAT THE EX-PRESSIO N USED IS NOT TAX BUT ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 13 - THE TAX. THE DEFINITE ARTICLE THE MUST HAVE REF ERENCE TO SOMETHING SAID EARLIER. IT CAN ONLY REFER TO THE TAX, IF ANY, PAYABLE BY THE ASSESSEE MENTIONED IN THE FIRST PART OF S. 271 (1) (A) (I). IT IS TRUE THE EXPRESSION TAX IS DEFINED IN S. 2(43) THUS : TAX IN RELATION TO THE ASSESSMENT YEAR COMMENCI NG ON THE 1ST DAY OF APRIL, 1965 AND ANY SUBSEQUENT ASSESSMENT YE AR MEANS INCOME- TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AN D SUPER-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR T O THE AFORESAID DATE. BUT THE DIFFICULTY IN THIS CASE IS, AS MENTIONED CA RRIER THE EXPRESSION USED IS NOT TAX BUT THE TAX. THAT EXPRESSION CAN BE REASONABLY UNDERSTOOD AS REFERRING TO THE EXPRESSION EARLIER U SED IN THE PROVISION NAMELY THE AMOUNT OF THE TAX, IF ANY PAYABLE BY T HE ASSESSEE. AT ANY RATE, THE PROVISION IN QUESTION IS CAPABLE OF MORE THAN ONE REASONABLE INTERPRETATION . TWO HIGH COURTS NAMELY CALCUTTA AND MYSORE HAVE TAKEN THE VIEW THAT THE EXPRESSION THE TAX I N S. 271(1) (A) (I) REFERS TO THE TAX, IF ANY, PAYABLE (BY THE ASSESSEE) MEN TIONED IN THE EARLIER PART-OF THE SECTION. IT IS TRUE THAT LAHORE AND DEL HI HIGH COURTS HAVE TAKEN A DIFFERENT VIEW. BUT THE VIEW TAKEN BY THE C ALCUTTA AND MYSORE HI,-,IT COURTS CANNOT BE SAID TO BE UNTENABLE VIEW. HENCE, PARTICULARLY IN VIEW OF THE FACT THAT WE ARE INTERPRETING, NOT MERE LY A TAXING PROVISION BUT A PENALTY PROVISION AS WELL, THE INTERPRETATION PLACED BY THE CALCUTTA AND MYSORE HIGH COURTS CANNOT BE REJECTED.. FURTHER AS SEEN EARLIER, THE CONSEQUENCES OF ACCEPTING THE INTERPRETATION PLACED BY THE REVENUE MAY LEAD TO HARSH RESULTS. FOR THE REASONS MENTIONED AB OVE, THIS APPEAL IS DISMISSED WITH, COSTS. 4.1. AS THE HONBLE APEX COURT HAS HELD IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD.(SUPRA) AS WELL AS SUPPORTED BY SEVERAL DECISIONS OF SUPERIOR COURT THAT WHERE THERE ARE TWO DIFFEREN T DECISIONS HAVE BEEN ITA NO.996/AHD/ 2014 SHRI SANJAY K. RANA VS. ITO ASST.YEAR 2010-11 - 14 - TAKEN BY THE DIFFERENT HIGH COURT AND THERE IS NO D IRECT JUDGEMENT OF JURISDICTIONAL HIGH COURT ON THE SUBJECT MATTER, TH EN WHICHEVER JUDGEMENT IS IN FAVOUR OF THE ASSESSEE, SHALL APPLY . THEREFORE KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE KARNATAKA H IGH COURT IN THE MATTER OF CIT VS. K. RAMACHANDRA RAO (SUPRA), WE S ET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO DELETE THE DISAL LOWANCE MADE OF RS.23,95,405/-. THUS, GROUND OF ASSESSEES APPEAL IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 18 /10/2016 .. ( ) () ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/ 10 /2016 6...,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 78- + 9- / CONCERNED CIT 4. + 9- ( ) / THE CIT(A)-I, AHMEDABAD 5. :;<-78 , .782 , / DR, ITAT, AHMEDABAD 6. <=>, / GUARD FILE. / BY ORDER, (:-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD