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Facts
The Revenue appealed against an order of the CIT(A) that allowed the assessee's claim for deduction under Section 54F. The original asset sold was described as an old house on a plot of land, and the assessee claimed exemption on the purchase of a new house.
Held
The Tribunal held that the additional grounds raised by the Revenue required factual verification and could not be admitted at the second appellate stage. The Tribunal found that the transaction entered into by the assessee for purchasing the new property was contrived and did not meet the conditions for exemption under Section 54F.
Key Issues
Whether additional grounds of appeal can be admitted at the second appellate stage if they require factual verification? Whether the transaction for the purchase of a new residential house qualifies for exemption under Section 54F of the Income Tax Act, 1961?
Sections Cited
54F, 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH “F”, DELHI
(A.Y.2006-07) Deputy Commissioner of Income Tax, Circle-31(1), R. No. 1405, 14th Floor, E-2 Block, Pratyakshkar Bhawan, Civic Centre, JLN Marg, ...... अपीलाथ�/Appellant New Delhi बनाम Vs. Niranjan Koirala, 27, Akbar Road, New Delhi ..... �ितवादी/Respondent PAN: AAUPK-0483-B Assessee by : Shri Tarandeep Singh, Advocate Department by : Shri Manoj Kumar, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 23.05.2025 घोषणा क� ितिथ/ Date of pronouncement : : 19.08.2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XXX, New Delhi (hereinafter referred to as 'the CIT(A)') dated 18.02.2010, for assessment year 2006-07.
This appeal was decided by the Tribunal vide order dated 20.07.2018. Thereafter, the Revenue filed Miscellaneous Application seeking rectification in the order of Tribunal on the ground that the additional grounds of appeal raised by the Revenue vide application dated 13.08.2014 remained to be decided. The Tribunal in MA No. 732/Del/2018 vide order dated 10.07.2023 recalled the order (AY 2006-07) dated 20.07.2018 for the limited purpose of considering Revenue’s application dated 13.09.2014 (sic) for admission of additional grounds. Hence, the appeal was listed before us for the limited purpose of considering application for admission of additional grounds raised
by the Revenue vide application dated 13.08.2014.
3. The additional grounds raised by the Revenue are as under:- “(i) The CIT(A) has erred in holding that the assessee's claim u/s 54F was legally correct whereas M/s EKPL itself has admitted before the High Court that it still has all the right of the said land and at no point of time any right has been transferred to any person. (ii) Without prejudice to the above, the Claim of the assessee u/s 54F is also not legally correct since the property in question is a dairy farm land and not a residential property as observed by the Hon'ble High Court. (iii) Without prejudice to the above, can assessee purchase a land from M/s EKPL which is only a lease right holder and not an owner of the said land and whether such transaction is eligible for exemption u/s 54F of the I.T. Act.."
4. Shri Tarandeep Singh, appearing on behalf of the assessee at the outset submitted that the additional grounds raised by the Revenue does not emanate either from the assessment order or the impugned order. Hence, the additional grounds raised by the Revenue should not be admitted.
5. Per contra, Shri Manoj Kumar representing the department submitted that the additional grounds of appeal are in respect of assessee’s claim of exemption u/s. 54F of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). This issue was very much in dispute before the Assessing Officer (AO) as well as before the the CIT(A). The additional grounds raised by the Revenue are connected to the validity of assessee’s claim u/s. 54F of the Act.
(AY 2006-07) 6. Both sides heard, orders of the authorities below examined. At the outset we may observe that the Revenue has not filed any application for admission of additional grounds of appeal
, rather, additional grounds of appeal have been filed as revised grounds in Form No.
36. Disregarding this procedural infirmity we accept the said revised grounds as additional grounds. The assessee while filing his return of income for AY 2006-07 had claimed exemption u/s. 54F of the Act. The AO disallowed assessee’s claim of exemption u/s. 54F of the Act after recording following facts and reasons: “2.1……..With regard to this transaction, the following facts need to be highlighted:- (i) The exemption/deduction has been claimed in respect of an old house at Keventer Lane, Sardar Patel Marg, New Delhi. (ii) The property in question on which capital gains have been shown is a plot measuring 22.95 acre (owned by M/s Edward Keventer (Successors) Pvt. Ltd., as perpetual lease holder) and the old house in respect of which 54F has been claimed is located on this very property (iii) As per the Will of wife of assessee, Mrs. lla Dalmia Koirala dated 7.11.2001, the assessee has become 51% share holder in respect of the stake of his wife in M/s Edwerd Keventer (Successors ) Pvt. Ltd. Therefore, in his capacity as share holder in M/s Edwerd Keventer (Successors ) Pvt. Ltd., the assessee was the owner of proportionate share in the above property of 22.95 acres at Keventer Lane, Sardar Patel Marg, New Delhi, which was sold to M/s DLF Universal Ltd.. (iv) Considering the assessee's share holding of 60,168 shares out of 9,61,500 shares of M/s M/s Edwerd Keventer (Successors) Pvt. Ltd, the proportionate ownership of the assessee in the property comes to 1.4361 Acres (Approx. 7180 sq. mtrs.) (v) As per the agreement for sale of 2715 sq. yards house alongwith the old construction on this plot, dated 27.5.2005 (the house for which 54F claim has been made) the assessee has been stated as resident of the Bungalow lying towards the North corner of the property (22.95 acres) situated at Block No. 48, (AY 2006-07) Sardar Patel Marg, Chanakaya Puri, New Delhi (first para on page 2 of the agreement). Further, it has also been stated that an area of approximately 2715 sq. yards alongwith a residential bungalow and out-house built thereon has been in uninterrupted occupation and possession of assessee's wife Mrs. lla Dalmia Koirala and after her death it has been in continuous possession of assessee. (vi) As per the Escrow Agreement, dated 7.5.2005 between M/s DLF Universal Ltd., M/s EKPL and other parties, the main transaction involved in the sale is in fact the sale of 22.95 acres of land at Block no. 48, Sardar Patel Marg, Chankaya Puri, New Delhi. In fact there is no other asset in the name of M/s EKPL. Para 2.1(a), 2.1(b) make it very clear that the amount of Rs. 430 Crores paid by M/s DLF Universal Ltd. to the share holders of M/s EKPL is in fact the payment for the real estate value of the plot of 22.95 acres located at the address mentioned above. Schedule Ill, para 1 to 6 further make it clear. The value however is nowhere close to the actual market value as on date in view of the fact that the property is under lot of litigation. (vii) As per the bank account statement of HSBC Bank, the so called consideration of Rs. 10,50,01,820/-, for purchase of new house (for which section 54F claim has been made has been paid on 30.5.2005, which is the same date on which the assessee has received the consideration (for his share in the plot of 22.95 acre) from M/s. DLF Universal Ltd. amounting to Rs.26,90,82,126/-. (viii) Benefits of section 54F are available on the long term capital gains arising on the sale of original asset which should not be a residential house. ix) Since the assessee was residing in an old house on a part of the plot of 22.95 acres, the sale of this asset is in fact the sale of a residential property. 2.2 From the above facts, it is obvious that the assessee had sold an old residential property cum plot (in which he was a part owner) and at the time of sale of the original asset the assessee has contrived the facts in such a way that he has entered into another agreement for re-purchase of a part of the old residential property. This fact is also clear from the agreement for sale dated 27.5.2005 wherein the assessee has entered into an agreement with M/s EKPL through its Managing Director Sh. Gunnidhi Dalmia. Had it been a genuine purchase of house property (eligible for deduction claimed u/s 54F), the assessee should have entered into an agreement with M/s DLF Universal Ltd. who had (AY 2006-07) taken over all the ownership rights of the property through ESCROW agreement dated 7.5.2005. The fact that the assessee did not enter into purchase agreement with M/s DLF Universal Ltd. clearly shows that this is a contrived transaction. 2.3 Provisions of section 54F are very clear. The original asset cannot be a residential house or a residential property. It hardly needs to be re-iterated that the law is long settled that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. Even if there be a causus omissus, the defect can be remedied only by legislation and not by judicial interpretation. It is the duty of the adjudicating authority to give effect to the words used without scanning the wisdom or policy of the Legislature and without engrafting, adding on or implying anything which is not congenial to or inconsistent with such express intent of the law-giver. If the statute is a taxing statute, it has to be assumed that the law making authority does not commit a mistake or make an omission. These trite propositions in law have been exposited in a catena of judgements, one of which was pronounced in Smt. Tarulata Shyam Vs. CIT 108 ITR 345 (SC). It is also well settled that there is no room for purposive interpretation under the direct tax laws and in this connection one may advert to the ratios in (1998) 234 ITR 261 (MP) Laxmandas Pranchand Vs. Union of India & Ors.; (1999) 236 /TR 595 (Cal) CIT Vs. Central Concrete & Allied Products Ltd. and (2001) 252 ITR 1 (SC) CIT Vs. A.M. H. Ghaswala & Ors. 2.4 The legislative intent behind introduction of section 54F and subsequent amendments has always been to encourage purchase or construction of a new residential house after the disposal of an older original asset. The new asset to be acquired cannot be a part of the original or old asset. If the assessee enters into some contrived transaction to unjustly claim the benefits of section 54F the same could not be allowed by the adjudicating authority. It is a trite law that if the assessing officer finds that the apparent or what has been presented before him is not the real or true, he can go behind the veil and decide the issue after taking all the facts into account. Large number of judgments of the Hon'ble Supreme Court and various High Courts have upheld the right of the assessing officer to go behind the veil and see with his naked eyes as to what is the real state of Affairs.
(AY 2006-07) 2.5 Hon'ble Supreme Court, has further held that a colorable device can not be a part of tax planning as it is wrong to encourage or entertain the belief that it is honorable to avoid payment of tax by resorting to dubious methods. It is the obligation of every taxpayer to pay taxes honestly without resorting to subterfuge {McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC)}. These trite propositions in law have also been exposited in a catena of other judgements which include Twinstar Holdings Ltd. Vs. DCIT (2003) 260 ITR; R.Krishnamurthy Vs. CIT (2003) 261 ITR 623(Mad); Bhagat Construction Co.(P) Ltd Vs. CIT(2001) 250 /TR 291 (Delhi;, Workmen of Association Rubber Industry Ltd. Vs. Associated Rubber Industry Ltd. (1986) 157 ITR 77 (SC;, Mittal Belting and Machinery Stores Vs. CIT (2002) 253 ITR 341 (P&H), Avasasala Automation Ltd. Vs. JCIT (2004) 266 ITR 178 (Kar.). 2.6 A show cause letter was issued to the assessee on 21.10.2008 asking him to explain as to why the claim of deduction u/s 54F may not be rejected. Assessee has filed his reply on 3.11.2008. The reply of the assessee has been examined in detail. The assessee has reiterated its earlier claim that the original asset owned by him was not the house property but the shares of the company i.e. M/s EKPL. This claim of the assessee does not hold much water in view of the discussion in para 2.1 above and in particular in para 2. 1(vi) above. 2.7 In view of the facts discussed above, it is held that the claim of the assessee, for deduction u/s 54F of the Income tax Act, 1961, in respect of the purchase of house property located at Block No. 48, Keventer Lane, Sardar Patel Marg, Chankaya Puri, New Deihi, is not a valid claim and it does not meet all the conditions laid down in section 54F of the I.T.Act, 1961. The claim for deduction is therefore disallowed. On this account, an addition of Rs. 10,51,01,820/- is made to the income of the assessee from 'long term capital gains'. Penalty proceedings u/s 271(1)© of the I.T.Act, 1961 are being initiated separately for furnishing inaccurate particulars of income.”
Aggrieved by the assessment order, the assessee carried the issue in appeal before the CIT(A). The First Appellate Authority accepted assessee’s claim of exemption u/s.54F of the Act. In appeal by the Revenue, the Tribunal vide order dated 20.07.2018 affirmed findings of the CIT(A).
(AY 2006-07) 8. It is a well settled legal position that if the additional ground relates to a legal issue even if not raised before the authorities below and no fresh evidences are required to be adduced for adjudication of additional ground, the said additional ground can be admitted for adjudication by the Tribunal [Re. National Thermal Power Co. Ltd. vs CIT, 229 ITR 383 (SC)]. If the additional ground raised by the appellant require factual verifications and examination of documents that were not part of assessment or part of first appellate proceedings and fresh evidences are required to be brought on record or where the additional grounds are entirely new and unrelated to the original assessment such additional grounds cannot admitted.
9. After examining the additional grounds of appeal raised by the Revenue, we find that the grounds raised require factual verifications. The AO while passing the assessment order has nowhere referred to any of the High Court order which now the Revenue is referring to in additional grounds. Further, the Revenue is alleging that the property in question is a Diary Farm Land and not a residential property. Whereas in the assessment order there is no such finding given by the AO, the Revenue is now trying to make out a new case before the second Appellate Authority, which is not permissible. The Revenue in appeal cannot go beyond the assessment order. Even in First Appellate proceeds these new facts on the basis of which additional grounds have been raised were not brought out.
10. Since, the additional grounds raised by the Revenue are factual and for adjudication of same additional evidences/records are required to be examined, therefore, said grounds cannot be admitted at second appellate stage. Thus, no case for admission of additional grounds is made out. Hence the same is rejected.