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Income Tax Appellate Tribunal, [ DELHI BENCH : “F” NEW DELHI ]
Before: DR. B. R. R. KUMAR & SH. YOGESH KUMAR U.S.
This appeal is filed by the Revenue for assessment year 2014-15 against the orders of the ld. Commissioner of Income Tax (Appeals)-42, New Delhi, dated 25.06.2019.
2 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND
2. The Revenue has raised the following substantive grounds of appeal :-
“1. On the facts and circumstances of the case, the order dated 25.06.2019 passed by the Ld. CIT (Appeals) is erroneous and bad in law and that the case falls in the exception laid down in Para 10(c) of the Circular No. 3/2018 dated 11.07.2019.
2. On the facts and circumstances of the case, the Ld. CIT (Appeals) has erred in deleting the addition based on additional evidence provided by the assessee without calling for Remand Report from the Assessing Officer as mandated by Rule 46A of the Income Tax Rules.”
Brief facts of the case are that, the return of income u/s 139(1) of the Act filed declaring gross total income of Rs. 1,96,640/- after claiming exemption u/s 54 of the Act of Rs. 1,02,78,673/-. The capital gain arising to the assessee in the original return were claimed to be reinvested by the assessee in a residential project of M/s IREO Victory Valley Pvt. Ltd. in Gurgaon. The assessment for the Assessment Year 2014-15 was completed by accepting the income of the assessee at Rs. 1,96,640/- which has been declared by the assessee in the return of income and by allowing the exemption claimed by the assessee u/s 54 of the Act with respect to capital gain.
Further vide rectification order u/s 154 R/W Section 143 (3) of the Act dated 29/06/2018, the Ld. A.O. has disallowed the claim of deduction u/s 54/54F of the Act on the following grounds.
3 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND “ 1. Exemption claimed by the assessee u/s 54 of the Income Tax Act, 1961 with respect to the capital gain on sale of property in Bangalore on the ground that exemption u/s 54 is not allowed to the assessee as the assessee sold a residential plot in Bangalore and as per the provision of Income Tax act, the exemption is not allowed u/s 54.
The capital gain on the sale of residential property in Dwarka on the ground that the amount of capital gain has not been invested within the time period Specified u/s 54.”
As against the rectification order dated 29/06/2018, the assessee has preferred an appeal before the Ld.CIT (A). The Ld.CIT (A) vide order dated 25/06/2019 allowed the appeal filed by the assessee and deleted the addition made in the order of rectification.
Aggrieved by the order of the Ld. CIT(A) dated 25/06/2019 the Department has filed the present appeal on the grounds mentioned above.
We have heard the parties perused the material available on record and gave our thoughtful consideration.
The Ld.CIT(A) while deciding the appeal of the assessee has elaborately considered the facts of the case and made following observations.
“5.2 The relevant facts of the case are that the assessee filed a return of income on 29.08.2014 declaring an income of Rs. 1,.86,640/-. The AO accepted the returned income after scrutinizing the case u/s 143(3) of the Income Tax Act vide order dated 13.06.2016.
4 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND 5.3. However, the AO issued notice u/s 154/155 of the Income Tax Act on 04.05.2018. The AO took note of the fact that the exemption of Rs. 1,02,78,673/- u/s 54 of the Act was claimed and allowed in this case. The facts of the case are that the assessee had sold a residential plot at Bangalore on 18.09.2013 for a sum of Rs. 1,17,75,000/- where the capital gain was computed at an amount of Rs. 45,26,682/- Further, on 14.03.2014, the assessee sold a flat in Dwarka for a sum of Rs. 80 Lakh where the capital gain was to the tune of Rs. 57,51,810/-. The assessee had booked a property in Gurgaon for a sum of Rs. 1,16,66,537/- on 05.07.2010 and claimed exemption u/s 54 of the Act against investment in this property. 5.4 The AO observed during the rectification proceedings that the deduction u/s 54/54F of the Act can be claimed only if the residential house has been purchased within a period of one year before or 2 years after the date on which the transfer took place or has within period of three years after that date constructed one residential house. The AO further observed that in this case, the new house at Gurgaon was purchased in June 2010 whereas the plot at Bangalore was sold in September 2013 and flat at Dwarka was sold in March 2014. The AO found that the condition to claim deduction u/s 54/54F of the Act was not satisfied because the purchase of property (apartment in Gurgaon) was not within a period of one year before the date of transfer of plot at Bangalore and flat at Dwarka. Hence, the AO denied the exemption u/s 54 after giving one opportunity to the assessee for rectification of mistake in the assessment order.
5 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND 5.5 Appellant contended that the notice u/s 154 of the Act was not served on him. Accordingly, the appellant claimed that the order passed u/s 154 is null and void. Further, the appellant took a plep that the issue involved in this case is highly debatable and therefore, the same is not covered by the provisions of section 154 of the Act. In this regard, the appellant has relied on the decision of Hon'ble Supreme court in the case of T.S.Balram Vs. Volkart Brothers, 82 ITR 50(SC). The appellant highlighted following facts to impress upon that the issue is debatable: a) The appellant purchased the flat in the residential project of M/s IREO VICTORY VALLEY PVT LTD vide agreement dated 05.07.2011 attached on page (16-44 of Ann 'A'). An examination of the same would reveal that the Builder was yet to construct the flat. The same is evident from clauses B,C,D,E,F,G,H,I,J,K (Page 18-19 Ann 'A'), Para lclause l,J,K,L,N (Page 21 Ann 'A'), completion certificate requirement (Page 22 Ann 'A'), Floor plan definition (Page 22 Ann 'A') and payment plan on (Page 44 Ann 'A'). The LD AO treats the above agreement dated 05.07.2011 as purchase of a completed flat and not to be purchase of flat under construction. In the following cases it has been held that the purchase b) of a flat to be constructed on account of Builders Buyers agreement is a case of construction and not purchase of completed flat ACIT Vs. Akashay Sobti, (ITA No. 5900-01/Del/2015) Dated • 10.05.2019 (Page no 4 of Ann 'B') Mustansir I Tehsildar Vs. Income Tax Officer (Mumbai) (2018) 168 • ITD 523 (Mumbai-Tribunal) (Page no 15 of Ann 'B') CIT Vs. Mrs Hilla J B Wadia (1995) 216 ITR 376 (Bombay High • Court)
6 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND c) In view of above submission it is clear that the AO has treated the flat under construction as purchase of ready to move flat and not a case of construction, Whereas The Hon'ble Tribunal and the Court decision cited above treats the same as case of construction and not a purchase of completed flat. Therefore the issue whether the flat purchased under construction is a purchase of completed flat or flat under construction is debatable.
5.6. I find that the main issue involved in this case is that whether the appellant has purchased the house in 2010 at Gurgaon as held by the AO or the appellant has purchased a right in the apartment (to be constructed) at Gurgaon from a builder as claimed by the appellant? I have gone through the apartment buyers agreement dated 05.07.2011 with M/s IREO Victory Valley Pvt. Ltd. The agreement clearly highlights that on the date of agreement, the builder was in possession of land and construction was to be made in phases in future. The appellant has made payment for this property starting from FY 2011-12 to FY 2014-15. Accordingly, I find that the decision of AO to treat the investment in property at Gurgaon as an instance of purchase in June 2010 is a debatable issue and therefore, the AO is wrong in deciding this issue by invoking the provisions of Section 154 of the Act.
5.7. Further, it is relevant to note that in this case, the last payment for apartment has been made on 21.05.2014 and possession has been handed over upon receipt of occupation certificate (refer Clause 13.1 of the agreement) vide letter bearing memo No. ZP-358/SD(BS)/2016/14990 dated 25.07.2016 & ZP358/Vol.l/SD(BS)/2017/24532 dated 28.09.2017. Accordingly, the possession has been handed over within 3 years of the date of transfer of the property. Thus, the present case does satisfy the condition of construction within 3 years of date of transfer. Hence, the ground of appeal is allowed.”
7 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND
It is found that the Ld. A.O. during the rectification process observed that deduction u/s 54/54F of the Act can be claimed only if the residential house has been purchased within a period of one year before or 2 years after the date on which the transfer took place or has within period of 3 years after the date constructed one residential house. The Ld. A.O. further observed that, the new house at Gurgaon was purchased in June 2010, where as the Plot at Bangalore was sold in September 2013 and Flat at Dwarka was sold in March 2014. Therefore, the Ld. A.O. was of the opinion that the condition to claim u/s 54/54F of the Act was not satisfied since the purchase of property (Apartment in Gurgaon) was not within the period of one year before the date of transfer of plot at Bangalore and Flat at Dwarka.
It is not in dispute that the assessee has entered into an agreement with M/s IREO Victory Valley Pvt. Ltd. on 05/07/2011 to purchase house in Gurgaon. The agreement clearly highlights that as on the date of the agreement, the builder was in a possession of the land and construction was to be made in phases in future. The assessee made payments for the said property starting from Financial Year 2011-12 to 2014-15. Therefore, the decision of the A.O. to treat the investment in property at Gurgaon as an instance of purchase in June, 2010 is a debatable issue which cannot be decided u/s 154 of the Act. Therefore, the Ld. A.O. has committed an error in invoking Section 154 of the Act. Further admittedly the last payment for the apartment has been made on 21/05/2014 and the possession has been handed over upon receipt of occupation certificate dated 25/07/2016 and 28/09/2017. Thus, it is clear that even the possession has been handed over within three years of the date of transfer of property. Therefore, we do not find any error or legal infirmity in the order of the Ld.CIT(A). Thus, the grounds of appeal of the Revenue are devoid of merit.
8 ITA. 7525/Del/2019 ACIT Vs. Rajan Govil, ND
In the result, Appeal filed by the Revenue is dismissed.
Order pronounced in the Open Court on : 17.01.2023.