Mohhammed Zaffer Baikadi, Udupi V. Deputy Commissioner Of Income Tax, International Taxation, Circle-2(2), Bangalore

ITITA 562/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3191 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 17-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 54; 54F; 250; 246A; 54EC

Judgement Text

IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER IT(IT)A No.562/Bang/2022 Assessment Year: 2017-18 Mohhammed Zaffer Baikadi #1, Thonse Health Centre Hoode, Udupi 576 115 PAN NO : BDUPB1386E Vs. Deputy Commissioner of Income-tax Intl Taxation Circle 2(2) Bangalore APPELLANT RESPONDENT Appellant by : Shri S.V. Ravishankar, A.R. Respondent by : Shri Ganesh R. Ghale, Standing Counsel Date of Hearing : 18.08.2022 Date of Pronouncement : 18.08.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of Ld. CIT(A) dated 13.5.2022. The assessee has raised following grounds of appeal:- 1. “The order passed by the learned Commissioner Income Tax(Appeals), passed under section 250 of the Act is so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies himself liable to be assessed to an income of Rs. 41,70,426/-against the loss returned of Rs. (-)22,91,723/- on the facts and circumstances of the case. IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 2 of 7 3. Claim of deduction U/s 54F: a) The learned CIT(A) was not justified in confirming the disallowance under section 54F of the Act, of Rs. 45,29,064/-, on the facts and circumstances of the case. b) The learned CIT(A) was not justified in appreciating that the total investment in the house property was Rs. 1,33,01,697/- and higher than the sale consideration of the original asset and the entire investment was eligible for claim of deduction under section 54F of the act, on the facts and circumstances of the case. c) The authorities below failed to appreciate that the improvements made in building the compound wall ought to have been reduced after indexation, in computing the capital gains, on the facts and circumstances of the case. d) Without prejudice and not conceding that the investment made for commencing the construction prior to the date of sale was to be considered foithe claim of deduction under section 54F of the act, the investment made in AY 2018-19 and 2019-20, amounting to Rs. 87,72,633/- ought to have been considered entirely, for the computation of eligible deduction under section 54F of the act, on the facts and circumstances of the case. e) The learned CIT [A] failed to appreciate that the Appellant has met the broad parameters and conditions as laid down by the provisions of Section 54F of the Act on the facts and circumstances of the case. f) The learned CIT [A] failed to appreciate that provision of Section 54F is a benevolent provision and must be interpreted liberally keeping in mind the objective for which the provision was enacted on the facts and circumstances of the case. g) The lower authorities failed to take note of the language of Section 54 of the Act, being or has within a period of three years after that date constructed one residential house which implies completion of the constructed house and not work in progress and thus ought to have interpreted the provision to grant exemption rather than deny exemption on the facts and circumstances of the case. h) The lower authorities failed to appreciate that the pith and substance in legislative interpretation is to interpret the provisiops to achieve the objects of the same rather than frustrate the same by hyper technical interpretation which would deny the Appellant the exemption u/s. 54 of the Act on the facts and circumstances of the case. i) The learned CIT(A) failed to appreciate that the utilisation of the capital gains for the acquisition of the house property was not IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 3 of 7 required to be met out of the funds from the sale of the original asset, itself, on the facts and circumstances of the case. 4. The learned CIT(A) ought to have appreciated the submissions filed online and available on record, to draw an erroneous inference that the appellant has not furnished information and thus the claim was not submitted, on the facts and circumstances of the case. 5. Without prejudice, the authorities below ought to have estimated the cost of construction of the residential house and no inference could have been made, that the documents have not been submitted to their satisfaction, on the facts and circumstances of the case. 6. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 B of the Income Tax Act under the facts and circumstances of the case. 7. The appellant contends that the levy of interest under section 234A, 234 B and 234D of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 8. The appellant craves to add, alter, amend, substitute, change and delete any of the grounds of appeal. 9. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered. 2. The crux of the ground Nos.3 to 5 are with regard to non- granting of deduction u/s 54F of the Income-tax Act,1961 ['the Act' for short]. 3. Facts of the case are that the assessee filed his return of income for A.Y. 2017-18 on 10.7.2017 declaring a current loss of Rs.22,91,723/-. During the course of scrutiny proceedings, in the IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 4 of 7 absence of evidence, the improvement claims of Rs.10,00,000/- towards construction of fencing wall was disallowed while working out the long-term capital gain. Besides this the sum invested in the construction of the property prior to the date of transaction of the property was disallowed while computing the eligible deduction for the claim under section 54F of the IT Act. Aggrieved by this, the assessee filed appeal u/s 246A of the Act. 4. The Ld. CIT(A) observed that the assessee had sold a property for a consideration of Rs.1,04,00,000/- during the year. In the LTCG computation the assessee had claimed a cost of improvement of Rs.10,00,000/-. However, no evidence with reference to this cost of Rs.10,00,000/- incurred was submitted by the assessee before the AO. The assessee had also not made use of many opportunities given now to submit evidence with reference to the cost of improvement claimed. The assessee had merely made a claim that he had transferred Rs.10,00,000/- to his CEO. The details of transfer, details of work undertaken and any proof of construction of compound wall are not submitted before the undersigned. Moreover, the transfer deed also does not make any mention of the existence of any compound wall around the property sold. In view of the cumulative reasons as above the claim of the assessee towards cost of improvement of Rs.10,00,000/- cannot be honored now. This ground was rejected by Ld. CIT(A). 5. Further, Ld. CIT(A) further observed that the assessee had also claimed deduction u/s 54F of the Act for an amount of Rs.45,29,064/-. However, as reported by the AO, the investment in the property had been completed a year prior to the sale of property. As per details submitted, the assessee has claimed to IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 5 of 7 have invested Rs.14,86,918/- during FY 2014-15, Rs.6,10,927/- during FY 2015-16 and Rs.24,31,219/- during FY 2016-17. However, the details of expenditure and evidence of construction have also not been submitted. Moreover, the assessee has violated the specific losses - given in sec.54F of the Act. The assessee has pleaded a liberal and extended approach for allowing deduction u/s. 54F of the Act. However, it is seen that the revenue authorities are bound by the strict wordings of beneficial clauses. The action of the AO in denying deduction u/s. 54F of the Act is sustained. 6. Against this assessee is in appeal before us. The Ld. A.R. submitted that assessee has actually made investment in construction of new house in the assessment year 2017-18, 2018-19 & 2019-20 to the tune of Rs.1.03 crores, which is more than the net capital gain and also invested Rs.14 lakhs in bonds entitled for exemption u/s 54EC of the Act. Thus, total investment made by the assessee on construction of new house and also bond exempted u/s 54EC of the Act is more than the net sale consideration. As such, entire long term capital gain of the assessee was at Rs.93,47,895/- is exempted from taxation. 7. Further, he submitted that even if the assessee has made investment in residential house before sale of original asset cannot be a reason to deny the exemption u/s 54F of the Act. For this purpose he relied on the following judgements:- CIT Vs. J.R. Subrahmanya Bhatt 165 ITR 571 (Karn) CIT Vs. Bharati Missionary 265 CTR 374 (Del.) DCIT Vs. Dr. Chalasani Mallikarjuna Rao 161 ITD 721 (Vskp.) 8. On the other hand, Ld. D.R. relied on the order of lower authorities. IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 6 of 7 9. I have heard the rival submissions and perused the materials available on record. As per section 54F of the Act, if the investments under consideration in construction of new residential house, assessee is eligible for exemption u/s 54F of the Act. The objection of the lower authorities is that assessee has not made required investment in residential house after the sale of immovable property and certain investments were made before sale of immovable property, which is not considered exemption u/s 54F of the Act. However, as rightly brought on record by assessee in various cases cited (supra), it is not possible to deny the deduction u/s 54F of the Act if the assessee commences construction of new house before sale of original asset. Reference came be made to judgement of Hon’ble Karnataka High Court in the case of J. Subrahmanya Bhatt cited (supra). Hence, in the interest of justice, I remit the entire issue in dispute to the file of AO for reconsideration to grant deduction u/s 54F of the Act in line with the judgement of Hon’ble Karnataka High Court in the case of J. Subrahmanya Bhatt cited (supra). 10. Ground Nos.6 & 7 are consequential in nature, which do not require any adjudication. Of the Income-tax Act,1961 ['the Act' for short] 11. Ground Nos.8 & 9 are general in nature. 12. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 18 th Aug, 2022 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 18 th Aug, 2022. VG/SPS IT(IT)A No.562/Bang/2022 Mohhammed Zaffer Baikadi, Udupi Page 7 of 7 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.