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आदेश/Order
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the assessee against the order dt. 03/01/2020 of Ld. CIT(A), Hisar.
Following grounds have been raised in this appeal:
That the learned Commissioner of Income Tax (Appeals)-Hisar has erred both in law and on facts in upholding the determination of total income of the appellant at Rs. 31,28,950/- as against declared income of Rs. 1,41,950/- in an order of assessment 14.11.2018 under section 147/143(3) of the Act. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/143(3) of the Act without appreciating that the same were without jurisdiction and hence deserved to be quashed as such. 2.1 That the .learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no specific relevant, reliable and tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable.
2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that even otherwise there was no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment and as such action u/s 147 was in excess of jurisdiction; 2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded mechanically without application of mind do not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of the Act. 2.4 That in absence of any valid approval obtained under section 151 of the Act, initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/143(3) of the Act are invalid and deserve to be quashed as such. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining a disallowance of claim of deduction by Rs. 29,87,000/- u/s 54F of the Act. 2.1 That finding and conclusion that "assessee had not furnished a return of income for the instant assessment year under section 139(1) of the Act and even under section 139(4) and the return was submitted after issuing of notice u/s 148 on 16.10.2018" and therefore appellant is not entitled to claim of deduction u/s 54F of the Act is misconceived and wholly untenable. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the investment in residential house was not disputed then mere fact claim was not made in the return of income u/s 139(1 )/l 39(4) of the Act, the same could not be a ground to deny the claim of deduction u/s 54F of the Act. 2.3 That the learned Commissioner of Income Tax (Appeals) has recorded various adverse findings in the order while sustaining the above disallowance are not based on correct appreciation of facts on record and statutory provisions of law and also without granting a proper opportunity to the appellant and therefore, disallowance so sustained is unsustainable. 2.4 That both the authorities below have framed the impugned order without granting fair and meaningful opportunity and, as such, the same is contrary to principles of natural justice, apart from being without jurisdiction. 4. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding the levy of interest of Rs. 5,35,330/-u/s 234A of the Act, interest of Rs. 5,53,790/- u/s 234B of the Act and interest of Rs. 6,050/- u/s 234C of the Act which are not leviable on the facts of the instant case. Prayer: It is therefore, prayed that it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) deserves to be quashed as such. It be further held disallowance made and upheld by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant be allowed.
At the first instance the Ld. Counsel for the assessee argued Ground No. 2 to 2.4 relating to the sustenance of addition by denying the claim of deduction under section 54F of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) amounting to Rs. 29,87,000/- for the reasons that the assessee had not furnished the return of income for the instant assessment year either under section 139(1) of the Act or under section 139(4) of the Act.
Facts of the case in brief are that the proceedings under section 147 of the Act were initiated in this case, on the basis of possession of certain information that the assessee had deposited cash of Rs. 29,87,000/- in saving bank account maintained with Central Bank of India, Rania during the year under consideration. In response the assessee furnished the copy of Income Tax Return filed on 26/10/2018. The A.O. asked the assessee to explain the source of the above said deposits. In response the assessee submitted as under:
….That the plots are sold on 22.03.2011 and whole consideration has been deposited in saving account with Central Bank of India, Rania on the following dates:- Date Amount 23.03.2011 19,00,000/- 25.03.2011 10,87,000/- 29,87,000/-
This amount was transferred in capital gain scheme account No. 31421713928 on 19.09.2011. Later on the amount was utilized to purchase house on 15.11.2011 at New Delhi from Parmod Bhatia…
4.1 The A.O. observed that the assessee had sold the residential property for sale consideration of Rs. 29,87,000/- and claimed total indexed cost of the said property at Rs. 7,99,875/-, consequently earned the Long Term Capital Gain(LTCG) of Rs. 21,87,125/- which was claimed to be exempted under section 54F of the Act 1961. The A.O. further observed that deduction under section 54F was allowable to the assessee if the amount of net consideration which was not appropriated by the assessee towards the purchase of the new assets made within one year before the date on which the transfer of the original asset took
place or which was not utilized by him for the purchase or consutrction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return(such deposits being made in any case not later than due date applicable in the case of the assessee for furnishing the return of income under sub section (1) of section 139) in an account in any such bank or institution as made be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit.
4.2 The A.O. also observed that as the assessee was required to deposit the amount of net consideration in the capital gain account scheme before the date of furnishing the return of income under sub section(1) of section 139 of the Income Tax Act, 1961 ( due date of filing return 31.07.2011) but the assessee has deposited the amount in capital gain account on 17.09.2011 i.e after the due date of filing of return.
4.3 The A.O. asked the assessee to give the reasons for claiming entire capital gain as exempt. In response the assessee submitted as under:
… In the following judgements of various High Court, it was held that if the investment has-been made before the due date of filing of return u/s 139(4), then deduction u/s 54F can not be disallowed:- i ) CIT. Rohtak Vs Jagtar Singh Chawla )ITA No. 71 of 2012 ( Punjab and Haryana High Court. ii) C1T-11, Chandigarh Vs Miss Jagrity Aggarwal (15 Taxaman. Com 146) Punjab and Haryana High Court. iii) Fatimabai Vs ITO (2009) 32 DTR 2143( Karnatka High Court) CIT I s Rajesh Kumar Jalan 256 [TR 274 (Gauhati High Court) iv) Seema Sabharval Vs ITO W-4. Chandigarh (ITA No. 272/Chd/2017) v) R.K.P Elayarajan Vs DC IT Vellore (23 Taxamann. Comm 206 (Chennai). vi) Ashok Kapasiawala Vs ITO Ward 7(1) Sural (ITD No. 2692/hd/2016... vii)
4.4 The A.O. however did not find merit in the submissions of the assessee and made the addition of the impugned amount by observing as under:
i) If the assessee was required to purchase the new residential property and proposes to make the payments after the due date of filing of return of income, the payments required to made after that date for the new residential house, should be deposited in capital gain scheme account with the nationalized bank before the due date of filing of the return of income . The subsequent payments for the new residential house are then required to be made from such capital gain scheme account. But the assessee failed to do so.
ii) The assessee failed to comply with the statutory provisions of section 139(1) and filed onlythe Income-tax return in compliance to notice u/s 148 of the Income-tax Act, 1961.
iii) The case law referred by the assessee has been perused. These are entirely different from the facts of the assessee's case. In the Judgements reported by the assessee. it was held that subsection (4) of section 139 has to be read alongwith sub- section (1) and, hence extended period under section 139(4) has to be considered for the purposes of utilization of amount of capital gain, assessee could not be said to defaulted in not depositing amount under capital gain scheme, as it had utilized entire capital gain before extended period u/s 139(4).
iv) Here it is pertinent to mention the findings of Hon'ble Supreme Court of India's decision in Prakash Nath Khanna and Another Vs C1T(204)266 ITR 1(SC), more particularly, die term " due date" the Apex Court found that the due date means the due date for filing the return u/s 139(l)'and not 139(4).
v) The Apex Court has also observed that " The time within which the return is to be furnished is indicated only in sub section (1) of section 139 and not in ITA No. 646/Coch/2013 ITA No. 663/Coch/2013 sub-section 4 of section 139. That being so, even if a return is filed in terms of sub section of section 139 that would not dilute the infraction in not furnishing return in due time as prescribed under sub- section (1) of section 139. Otherwise, the use of the expression" in due time' would lose its relevance and it can not be said that the said expression was used without any purpose.
vi) Reliance is also placed in the case of Rosamma Korah Vs ITO wd-1 Kannur (ITA No. 646/Choch/2013) and ITO wd-1 Vs Kannur Rosamma Korah ((ITA No. 663/Choch/20I3) (ITAT Cochin)
vii) In the case of the assessee , the assessee has purchased the residential house on 15.11.2011 i.e. within two years in which the transfer took place but failed to comply with the
viii) procedure laid down by the law, of deposit in such an account, and also [ailed to file return of income as per provisions of section I39( I) of the Income-tax Act,I%1.therefore, the assessee is not entitled to tax exemption.
ix) The assessee can not be allowed to defeat the purpose of statutory provisions. If the assessee is allowed to enjoy such unreasonable benefit on the plea of the assessee that the assessee has deposited net consideration on 17.09.2011 and purchased the residential property on 15.1 1.201 I , it would be an
injustice to other innocent taxpayers who have taken conscious pain in ensuring compliance to legal provisions.
x) Had the proceedings u/s 147 of the Income-tax Act, 1961 not been initiated in the case of the assessee, the assessee would have succeeded in evading tax to the extent of Rs. 29,87.000/-.
In view of the above , the assessee is not entitled to claim the exemption of capital gain u/s 54F of the Income-tax, of Rs. 29,87.000/- and the same is the long term capital gain of the assessee and is taxed accordingly.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) who reproduced the statement of facts and extract of assessment order in para 3 of the impugned order. The submission of the assessee had been incorporated by the Ld. CIT(A) in para 4 at page no. 6 to 50 of the impugned order, for the cost of repetition the same is not reproduced herein.
5.1 The Ld. CIT(A) after considering the submissions of the assessee sustained the addition made by the A.O. by observing in para 5 of the impugned order as under:
“5. Appellate Decision:-I have carefully considered the facts of the case, assessment order and submission of the appellant alongwith case laws and find that: In the instant case the assessee deposited a sum of Rs. 29,87,000/- in the capital gain account scheme on 17.09.2011 which was utilized to purchase residential house on 15.11.2011 at New Delhi. The AO held that the assessee had not furnished a return of income for the instant assessment year under section 139(1) of the Act and even under section 139(4). The return was submitted after issuing of notice u/s 148 on 16.10.2018.The assessee had deposited the amount in the capital gain account scheme on 17.09.2011 after due date of filing of return of income on 31.07.2011 under section 139(1). On the other hand the counsel of the assessee submitted that exemption may be allowed in accordance with Section 54F read with section 139 of the Act. This issue was further discussed in CIT Vs. Jagriti Aggarwal(2011) 15 Taxmann 146, P&H High court. The Hon’ble Court has held that the due date of furnishing the return of income as per section 139(1) of the Act is subject to the extended period provided under sub-section (4) of section 139 of the Act. Sub-section (4) is in relation to the time allowed to an assessee under sub-section (1) to file return. Therefore, such provisions are not independent provisions, but related to time contemplated under sub-section (1) of section 139. Therefore, such sub-section(4) has been to be read alongwith sub- section(l). Consequently, the question of law was answered in favour of assessee. The submission made by the assessee alongwith case law has been perused and found that the fact in the case law relied by appellant in CIT Vs. Jagriti Aggarwal(2011) 15 Taxmann 146, P&H High court and CIT Vs. Jagtar Singh
Chawla reported in 259 CTR 388, the appellant filed his return u/s 139(4) but in the instant case the assessee has not filed return under section 139(1) and 139(4) but filed the return in consequence to notice u/s 148 on 16.10.2018 which does not support contention of assessee. The assessee did not comply with the provisions of section 54 of the Act. The submission made by the assessee is thus not accepted in view of the provisions of the Act and decision of jurisdictional Hon'ble P&H High Court's in the above discussed case. Therefore, the ground of appeal of the assessee is dismissed.
Now the assessee is in appeal.
The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that he A.O. as well as the Ld. CIT(A) has not doubted the investment made by the assessee in the residential house but the deduction under section 54F of the Act was not allowed for the reason that the assessee had not filed the return of income within the time prescribed under section 139(1) of the Act. It was contended that the assessee deposited the amount of Rs. 29,87,000/- after selling the residential plot for Rs. 29,87,000/- and the total indexed cost of the said property sold was Rs. 7,99,875/- thus the assessee earned LTCG of Rs. 21,87,125/- which was claimed to be exempt by virtue of the provisions of Section 54F of the Act. It was submitted that the assessee deposited the amount of net consideration in the capital gain account scheme, therefore, the A.O. was not justified in disallowing the claim of the assessee and the Ld. CIT(A) wrongly sustained the action of the A.O. The reliance was placed on the following case laws:
• Smt. Tupel Raja Iyengar Shakuntala Vs. The ITO, Ward-7(2)(4), Bangalore in ITA No. 64/Bang/2019 vide order dt. 10/05/2019 of SMC “A” Bench of Bangalore. • Bhagwan Swroop Pathak Vs. ITO, Ward-1(3), Gurgaon in ITA No. 2754/Del/2019 vide order dt. 05/03/2020 of I(2) + SMC Bench New Delhi. • CIT Vs. Jagtar Singh Chawla [2013] 259 CTR 388 (P&H) • CIT Vs. Ms. Jagriti Aggarwal [2011] 339 ITR 610 (P&H)
In his rival submissions the Ld. Sr. DR reiterated the observations made by the authorities below and strongly supported the impugned order passed by the
ld. CIT(A). It was further submitted that since the assessee had deposited the amount in the capital gain account scheme after due date of filing the return under section 139(1) of the Act therefore the deduction under section 54F was rightly denied by the A.O. and the Ld. CIT(A) was fully justified in confirming the action of the A.O.
We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is not in dispute that the assessee sold the residential plot for a sum of Rs. 29,87,000/- and earned LTCG of Rs. 21,87,125/- which was claimed to be exempt under section 54F of the Act, as the amount was deposited in the capital gain account scheme on 17/09/2011 which was utilized for purchasing the house on 15/11/2011. However, the A.O. denied the exemption claimed by the assessee. The main reason for denying the exemption claimed by the assessee was that the return of income was not furnished in accordance with the time allowed under section 139(1) of the Act.
9.1 On a similar issue the ITAT, SMC “A” Bench, Bangalore in the case of Smt. Tupel Raja Iyengar Shakuntala Vs. ITO, Ward-7(2)(4), Bangalore in ITA No. 64/Bang/2019 for the A.Y. 2009-10 vide order dt. 10/05/2019 held in para 5.2.3 as under:
5.2.3 Having held that the CIT(A) ought to have admitted the additional evidence filed by the assessee before him, u/R 46A of the Rules, it is seen that the assessee had filed the computation of capital gains before the CIT(A). As per this computation, it is seen that the assessee had computed the long term capital gains (LTCC) at Rs.19,54,873/- on the sale proceeds of the said property at Rs.46,65,000/-, after claiming indexed cost of acquisition. It is also seen that the assessee had purchased a residential property for a consideration of Rs.37,50,830/- on 22.05.2008, i.e., within 7 days from the sale of original property on 16.05.2008. I also find that the AO, after examination of details / documents filed by the assessee before the CIT(A); has reported in his remand report dated 30.01.2018, that the documents produced by the assessee have been examined. No adverse remarks have been made by the AO with regard to the computation of LTCG as well as the entitlement to claim exemption under section 54 of the Act. It is, therefore, clear that the AO was satisfied about the sale / purchase of the said properties and the investment benefit available to the assessee under section 54 of the Act. In the remand report, the AO has only remarked that there
is a claim for exemption under section 54 of the Act and that no return of income has been filed by the assessee for Assessment Year 2009-10. In my view, this remark by the AO cannot be a factor to deny the assessee its legitimate claim for exemption under section 54 of the Act. There is no prohibition under the Act on the assessee in claiming exemption under section 54 of the Act in case it has not filed a return of income. Such a legal claim can be put forth at any stage of assessment / appellate proceedings and should be considered on merits in the light of the details / documents / corroborative evidence filed in this regard. Having considered the entire material on record on this issue and taking into account the peculiar facts and circumstances of the case on hand, I am of the considered view that the assessee is entitled to exemption under section 54 of the Act and therefore the entire sale consideration of Rs.46,65,000/- assessed by the AO is hereby deleted. It is held and directed accordingly. In the present case also the assessee deposited the Long Term Capital Gain earned, in LTCG account scheme in the bank and also utilized the same, therefore, the assessee was entitled to claim the deduction under section 54F of the Act even when the return of income was not filed in due time allowable under section 139(1) of the Act, as has been held in the aforesaid referred to case.
9.2 On a similar issue the Coordinate Bench of the ITAT at New Delhi in the case of Bhagwan Swroop Pathak Vs. ITO Ward-1(3), Gurgaon in ITA No. 2754/Del/2019 for the A.Y. 2010-11 vide order dt. 05/03/2020 held as under:
We have heard both the parties and perused the material available on record. It is pertinent to note that the assessee has demonstrated before the Assessing Officer as well as the CIT(A) that the purchase of property in the name of the son was acquired by the assessee himself through the consideration received from the sale deed of earlier old property. The bank statement and the cheque issued to the builder as well as the confirmation received from the builder demonstrated that the payment was made by the assessee for purchase of new property within the stipulated time as prescribed u/s 54. Though, the assessee is not filed any return and at that stage never claimed Section 54, once the reopening u/s 148 has been issued, the assessee cannot be denied his entitlement /claim for deduction or exemption under income tax statute on the sole ground that no return was filed. The benefit of income tax act and its provisions related to exemption and deduction has to be taken into account while computing the income of the assessee and it is the proper procedure on the part of the Assessing Officer to follow all the aspect of taxation within the corners of Income Tax Act. As regards the name under whom the property is purchased, it can be seen that the son of the assessee is a direct relation and as per the Hon’ble Delhi High Court decision in case of CIT(A) Vs. Kamal Vahal 351 ITR 4 where assessee purchased new house in name of his wife, the claim under Section 54 is held valid. Thus, the exemption could not be denied if entire investment had come out of proceeds of old property. Thus, the order of the CIT(A) is not justified in light of
the decision in case of Kamal Vahal (supra). Therefore, the appeal of the assessee is allowed. In the present case also although the assessee had not filed the return of income under section 139(1) of the Act but deposited the total sale consideration from residential plot held as LTCG asset in the bank account and also utilized the same for purchase of the house within the time allowed. Therefore, the deduction claimed under section 54F of the Act by the assessee cannot be denied on the sole ground that no return of income was filed by the assessee under section 139(1) of the Act. We therefore, by respectfully following the aforesaid referred to orders by the Coordinate Benches of the ITAT, are of the view that the A.O. was not justified in denying the claim of the assessee for deduction under section 54F of the Act and the Ld. CIT(A) was not justified in confirming the action of the A.O. therefore, the addition made by the A.O. and sustained by the Ld. CIT(A) is deleted.
In the result, appeal of the assessee is allowed.
(Order pronounced in the open Court on 23/07/2021)
Sd/- Sd/- आर.एल. नेगी एन.के.सैनी, (R.L. NEGI ) ( N.K. SAINI) �या�यक सद�य/ Judicial Member उपा�य� / VICE PRESIDENT AG Date: 23/07/2021 आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File