RAVI KUMAR ,HYDERABAD V. INCOME TAX OFFICER, WARD 4(4), HYDERABAD

ITA 167/HYD/2024

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The case involves Ravi Kumar, the assessee, who entered into a joint development agreement with M/s Gayathri Construction Company, which was not initially disclosed in his income tax return. This led to a reassessment under section 147 of the Income Tax Act, 1961, for the assessment year 2011-12. The Assessing Officer recomputed the long-term capital gains and disallowed certain deductions, which were upheld by the CIT(A). The Tribunal found that the lower authorities did not adequately examine the conditions for claiming deduction under section 54F, particularly regarding the completion of the new residential property within the stipulated time and the validity of the revised return filed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28993 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: A. SRINIVAS
• Keywords: Set aside; Revised return; Reassessment proceedings; Capital Gains
• Section: 147; 148; 139(1); 54F; 139; 139(4)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad SM ‘B’ Bench, Hyderabad Before Shri Laliet Kumar, Judicial Member and Shri Manjunatha G., Accountant Member आ.अपी.सं /ITA No.167/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2011-12) Ravi Kumar Hyderabad [PAN : ADOPK6597R] Vs. Income Tax Officer Ward-4(4) Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri A.Srinivas, AR रधजस् व द्वधरध/Revenue by: Dr.Sachin Kumar, DR सुिवधई की तधरीख/Date of hearing: 20/01/2025 घोर्णध की तधरीख/Date of Pronouncement: 04/02/2025 आदेश / ORDER PER. MANJUNATHA G., A.M: This appeal filed by the assessee is directed against the order dated 17.01.2024 of the learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, pertaining to A.Y.2011-12. 2. The brief facts of the case are that, the assessee, an individual entered into a development agreement cum General Power of Attorney vide document number 560/2011 dated 24.03.2011 with M/s Gayathri Construction Company for joint development of a property. The assessee had not disclosed the transaction in his return of income. Therefore, the assessment 2 ITA 167/Hyd/2024 Ravi Kumar has been reopened u/s 147 of the Income Tax Act, 1961 (“the Act”) for the reasons to believe that the income chargeable to tax has escaped assessment and accordingly, notice u/s 148 of the Act dated 28.03.2018 was issued and served on the assessee on 30.03.2018. In response to the notice u/s 148 of the Act, the assessee filed his return of income on 15.11.2018, declaring total income at Rs.11,42,204/- which consist of long-term capital gains derived from transfer of property, in pursuant to joint development agreement. During the course of assessment proceedings, the Assessing Officer called upon the assessee to file relevant evidences, to prove long-term capital gains declared from transfer of property in pursuant to joint development agreement and also necessary evidences in support of cost of improvement of Rs.66,72,435/-. The Assessing Officer had also called upon the assessee to file relevant evidences to prove deduction u/s 54F of the Act for reinvestment of capital gains for purchase of new residential house property. In response, the assessee had furnished copies of development agreement along with photocopies of building. The Assessing Officer, after considering relevant submissions of the assessee and also taking note of provisions of section 54F of the Act, recomputed capital gains derived from transfer of property, pursuant to joint development agreement and disallowed the cost of improvement claimed by the assessee, on the ground that no evidences has been furnished to justify the cost of improvement. The Assessing Officer had also restricted the deduction claimed u/s 54F of the Act to an amount 3 ITA 167/Hyd/2024 Ravi Kumar of Rs.21,03,072/-, after considering the amount of investment by the assessee’s wife for Rs.10,17,753/- for purchase of new house property. Thus, the Assessing Officer had computed the long- term capital gains of Rs.78,19,886/- and after deducting long- term capital gains reported by the assessee for Rs.9,45,600/-, the balance amount of Rs.68,74,286/- has been added back to total income. 3. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee challenged the additions made by the Assessing Officer towards recomputation of capital gains, after disallowing cost of improvement and deduction u/s 54F of the Act. The assessee had also made a fresh claim of deduction u/s 54F of the Act, towards amount of capital gains derived from transfer of property, in pursuant to joint development agreement, by filing revised return on 27.12.2018. The Ld.CIT(A), after considering the submissions of the assessee and also taking note of certain judicial precedents, rejected the ground taken by the assessee, challenging the disallowance of indexed cost of improvement and also deduction u/s 54F of the Act in respect of deduction claimed in original return of income filed on 15.11.2018. Further, in respect of deduction claimed u/s 54F of the Act, on the basis of revised return filed on 27.12.2018, the Ld.CIT(A) observed that the assessee failed to prove that the new residential house property constructed in pursuant to joint development agreement has been completed within three years from the date of transfer of the 4 ITA 167/Hyd/2024 Ravi Kumar original asset. Therefore, rejected the arguments of the assessee and sustained the additions made by the Assessing Officer towards capital gains. 4. Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal. 5. The learned counsel for the assessee submitted that the Ld.CIT(A), having accepted in principle, that the assessee is entitled for deduction u/s 54F of the Act, in respect of five flats received in pursuant to joint development agreement before the assessment year 2015-16, but erred in rejecting the claim of the assessee only on the ground that the assessee could not furnish evidences of completion of construction within three years from the date of transfer of original asset. The learned counsel for the assessee, further referring to the date of joint development agreement, submitted that the assessee had entered into joint development agreement on 24.03.2011 and as per the said joint development agreement, builder is supposed to complete construction within 18 months from the date of agreement. The municipal authorities have issued occupation certificate on 05.12.2012. From the date of joint development agreement and the occupation certificate issued by the municipal authority, it is evident that the construction of new residential house property was completed within three years from the date of transfer of asset and therefore, the assessee is eligible for deduction u/s 54F 5 ITA 167/Hyd/2024 Ravi Kumar of the Act, however, the Ld.CIT(A) without considering the relevant facts simply sustained the additions made by the Assessing Officer. Therefore, he submitted that to verify the facts with regard to completion of project within the stipulated period as required u/s 54F of the Act, the matter may be set aside to the file of the Assessing Officer. 6. The Ld.DR, supporting the order of the Ld.CIT(A) submitted that the assessee is not entitled for deduction u/s 54F of the Act, because the assessee has not satisfied the conditions prescribed therein, including filing of return of income on or before the due date provided u/s 139 of the Act. Further, assuming for a moment, the return of income filed by the assessee, in response to notice u/s 148 is considered as if the said return was filed u/s 139 of the Act, but the fact remains that in the first return filed by the assessee, in response to notice u/s 148, the assessee has not made any claim for deduction u/s 54F of the Act. Further, when the Assessing Officer has disallowed the cost of improvement and recomputed the long-term capital gains, the assessee came with a new and fresh claim of deduction u/s 54F of the Act for all five flats received in pursuant to joint development agreement. The Assessing Officer, after considering the relevant facts has rightly computed the long-term capital gains and the Ld.CIT(A), after considering the relevant facts, rightly sustained the additions and therefore, their order should be upheld. 6 ITA 167/Hyd/2024 Ravi Kumar 7. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has not filed his return of income u/s 139(1) / 139(4) of the Act and declared capital gains, if any arising out of transfer of property, in pursuant to joint development agreement dated 24.03.2011. It is also an admitted fact that the assessee has not filed the return of income in response to the notice u/s 148 on or before the date provided in the reassessment notice. Further, the assessee has filed return of income in response to notice u/s 148 on 15.11.2018 and declared total income at Rs.11,42,204/-, which consist of long-term capital gains of Rs.9,45,600/- from transfer of property, in pursuant to joint development agreement. Further, when the Assessing Officer has recomputed the long-term capital gains by disallowing cost of improvement and deduction u/s 54F of the Act, the assessee has filed revised return on 27.12.2018, i.e., one day before the Assessing Officer has passed order on 28.12.2018. Therefore, the Assessing Officer has no occasion to examine the issue of deduction u/s 54F of the Act, claimed by the assessee towards the long-term capital gains derived from transfer of property, in pursuant to joint development agreement. 8. The Ld.CIT(A) has examined the issue and in principle, agreed that before amendment to section 54F of the Act from 01.04.2015, multi flats investment could be considered as one residential unit and if assessee receives more than one house, in 7 ITA 167/Hyd/2024 Ravi Kumar pursuant to joint development agreement, then the assessee is eligible for deduction u/s 54F, however, rejected the claim of the assessee, on the ground that no evidence has been furnished to prove the completion of house property within three years from the date of transfer of original asset. Now, the learned counsel for the assessee has furnished a copy of occupancy certificate issued by Greater Hyderabad Municipal Corporation dated 05.12.2012 and argued that the construction of residential building was completed and occupancy certificate was received on 05.12.2012 and if we consider the said occupancy certificate, the property was constructed within three years from the date of transfer of original asset. To this extent, there is no dispute, however, the fact remains that neither the Assessing Officer nor the Ld.CIT(A) examined the eligibility of the assessee to claim deduction u/s 54F of the Act in the reassessment proceedings and further, none of the authorities below have examined the fact with regard to one of the conditions for claiming deduction u/s 54F of the Act, i.e. filing of return of income on or before the due date for filing the return of income as provided u/s 139 of the Act and further as per section 54F of the Act, although the appellant claims that it has filed revised return on 27.12.2018, but the fact remains that whether the said return is valid or not and further from filing the said revised return, whether the assessee has satisfied the conditions for claiming deduction u/s 54F of the Act or not has not been verified by the lower authorities. Since the assessee has filed the occupancy certificate issued by the Greater Hyderabad 8 ITA 167/Hyd/2024 Ravi Kumar Municipal Corporation dated 05.12.2012 for the first time before us and further the facts with regard to conditions for claiming deduction u/s 54F of the Act have not been verified or examined by the authorities below, in our considered view, the matter needs to go back to the file of the Assessing Officer for ‘denovo’ consideration. Thus, we set aside the order of the Ld.CIT(A) and restore the issue back to the file of the Assessing Officer for ‘denovo’ consideration of the issue, after providing an opportunity of hearing to the assessee. The assessee is directed to furnish relevant evidences to justify claim of deduction u/s 54F of the Act. 9. In the result, appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the Open Court on 4th February, 2025. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (MANJUNATHA G.) ACCOUNTANT MEMBER Hyderabad, dated 4th February, 2025 L.Rama, SPS 9 ITA 167/Hyd/2024 Ravi Kumar Copy to: 1. Shri Ravi Kumar, 3-4-759/2, Suryadaya, Barkatpura, Hyderabad 2. The Income Tax Officer, Ward-4(4), Hyderabad 3. The Pr.CIT, Hyderabad 4. The DR-ITAT, Hyderabad 5. Guard File By Order "