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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP SINGH KARHAIL
PER SANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 24/05/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [―learned CIT(A)‖], for the assessment year 2016–17.
The present appeal is delayed by 159 days. In his affidavit seeking condonation of delay in filing the present appeal, the assessee has made the following submissions:-
Shri Anil Premchand Motiramani ITA no.3017/Mum./2022
―1. That the order dated 24.05.2022 of the Commissioner of Income–tax (Appeals) was available for download on even date on my e–filing portal for income–tax assessment year 2016–17. that the appeal was accordingly, due to be filled with Tribunal on 22nd 2. June 2022. However, the appeal to the Honourable Tribunal is filed on 28th November 2022, thereby a delay of 159 days. 3. that the delay in filing the appeal is, for the reason that I missed noticing the mail sent by the Department informing me that the CIT(A) order was available for download on my e-filing portal. As such, the CIT(A) order was not sent to my Chartered Accountants to proceed in the matter. It totally slipped from my mind. It was only on 31st October, 2022 that when I received notice from the Assessing Officer requiring me to show cause as to why penalty under section 271(1)c should not be levied, I scanned through my e-filing portal and downloaded the CIT(A) order. I, thereafter, immediately sent the order together with relevant appeal papers to the Chartered Accountants for filing the appeal with the Tribunal, and as such there is a delay in filing the same within the statutory time limit.‖
In view of the above, the assessee has requested to condone the delay as the same is unintentional. On the other hand, the learned Departmental Representative (“learned DR‖) opposed the prayer for condonation of delay and submitted that the assessee cannot be said to be ignorant as the order passed by the learned CIT(A) will be uploaded on the portal.
We have considered the submissions of both sides and perused the affidavit filed by the assessee. In the present case, the assessee is not disputing that the impugned order passed on 24/05/2022 was available for download on the same date on the e-filing portal, however, has claimed that he missed checking the e-mail sent by the Department intimating the availability of the order for download on the e-filing portal. Therefore, the aforesaid circumstances have resulted in the delay in filing the present appeal within the limitation period. In the present case, it cannot be disputed that the assessee did not stand to benefit from the late filing of the appeal. It is the
Shri Anil Premchand Motiramani ITA no.3017/Mum./2022
claim of the assessee that as soon as he became aware of the impugned order, he downloaded the copy of the order passed by the learned CIT(A) from the e- filing portal and immediately sent the same along with the relevant papers to the Chartered Accountant for filing the appeal before the Tribunal. We find that the reasons stated by the assessee for seeking condonation of delay fall within the parameters for grant of condonation laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In view of the above and having perused the affidavit, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the present appeal by the assessee and we proceed to decide the appeal on merits.
In this appeal, the assessee has raised the following grounds:–
―1. The Commissioner of Income-tax (Appeals) at National Faceless Appeal Centre (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assistant Commissioner of Income-tax, Circle 2, Thane (hereinafter referred to as the Assessing Officer) in not allowing exemption of Rs 11,77,218 claimed under section 54F of the Act, on the ground that the flat which has been purchased (Flat No 1701, Mayfair Building) is beyond one year from the date of transfer of the flat (Flat No 1102, Raviraj Palm) which has given rise to capital gains and as such, per the CIT(A) the conditions of the provisions of section 54F of the Act have not been satisfied. The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the exemption claimed under section 54F of the Act inasmuch as the appellant has satisfied the conditions of the provisions of section 54F of the Act.
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The CIT(A) erred in upholding the action of the Assessing Officer in making an ad-hoc addition of Rs 2,01,600 under section 23(4) of the Act by estimating the deemed rental value of the house properties at Rs 24,000 per month (in aggregate of the three properties) on the ground that no evidences have been filed by the appellant. The appellant contends that on the facts and in the circumstances of the case and in law, the impugned addition is bad in law inasmuch as the CIT(A) has not correctly appreciated the facts of the case. The appellant craves leave to add to, alter or amend the aforestated grounds of appeal.‖
The issue arising in ground No. 1, raised in assessee’s appeal, is pertaining to the claim of deduction under section 54 of the Act.
The brief facts of the case, pertaining to this issue, are: The assessee is an architect and has shown income from his profession, house property, other sources, and long term capital gain. For the year under consideration, the assessee filed his return of income on 08/10/2016 declaring a total income of Rs.98,77,340. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, on perusal of a copy of the registered sale deed dated 19/01/2015 in respect of the new flat, it was observed that the assessee has booked the flat and made the payment of the first instalment on 10/02/2014 by cheque, and therefore the investment in the said flat is beyond a period of one year from the date of sale/transfer of the old flat. Accordingly, the assessee was asked to show cause as to why the deduction claimed under section 54 of the Act be not denied. In response thereto, the assessee submitted that he was given possession of the new flat after 31/12/2015 and therefore the claim made by Page | 4
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him under section 54 of the Act is correct and thus be allowed. The Assessing Officer (“AO”) vide order dated 14/12/2018 passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the assessee sold the old flat on 11/02/2016 and thus in order to claim deduction under section 54 of the Act the assessee should have purchased a new residential property within a period of one year before the transfer/sale and this period ends on 11/02/2015. However, the assessee purchased a new flat on 10/02/2014 when he made the payment of the first instalment of Rs. 10 lakh. Further, the agreement for sale of the new flat is dated 14/12/2014 and the same was registered on 19/01/2015, therefore, these two dates are not within the period of one year from the date of transfer/sale of the old flat on 11/02/2016. From the perusal of the Ledger Account, the AO held that in respect of the old flat, the assessee received Rs. 11 lakh on 20/01/2016 and Rs. 23,50,000 during the financial year 2016-17. Therefore, the assessee had not received any amount in advance during the financial year 2013-14 out of the sale of old flat, and thus, booking of the new flat on 10/02/2014 is not out of any sale consideration received from the old flat. The AO further held that the date of investment in the new flat for the purpose of claiming deduction under section 54 of the Act will not be counted from the date of possession but it is the payment of the first instalment of Rs. 10 lakh made by the assessee on 10/02/2014 which decides that the said flat was actually purchased by the assessee on 10/02/2014, and therefore is beyond a period of one year from the date of transfer of the old flat. Accordingly, the AO rejected the claim of deduction under section 54 of the Act and brought to tax an amount of Rs. 11,77,218 as long-term capital gain. The learned CIT(A), vide impugned order, Page | 5
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dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee along with his brother were co-owners, with an equal share, of the property, i.e. Flat No. 1102, Raviraj Palm (“old flat”), which was acquired on 19/05/2010 for Rs. 30,55,500. The said flat was sold for a consideration of Rs.70 lakh as per the sale deed dated 11/02/2016. After indexing the cost of acquisition, the assessee has shown his share of long-term capital gains at Rs. 11,77,218 and has claimed deduction under section 54 of the Act by purchasing a residential property namely Flat No. 1701, Mayfair Building (“new flat”) for a total consideration of Rs. 2,43,88,000, as per the sale deed dated 14/12/2014, which was registered on 19/01/2015. The assessee and his wife have contributed equally towards the purchase of the new flat. There is no dispute regarding the aforesaid facts amongst the parties. The AO denied the deduction claimed under section 54 of the Act on the basis that the assessee purchased a new flat on 10/02/2014 when he made the payment of first instalment of Rs. 10 lakh. Further, the agreement for sale of the new flat is dated 14/12/2014 and the same was registered on 19/01/2015. Thus, both these dates are also not within the period of one year from the date of transfer/sale of the old flat, i.e. 11/02/2016. The AO also held that the booking of the new flat is not out of any sale consideration received from the old flat.
Before proceeding further, it is relevant to note the provisions of section 54 of the Act, which reads as under:- Page | 6
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―54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—―
Therefore, as per section 54 of the Act, if the assessee within a period of one year before or two years after the date of transfer of a original residential house purchases a new residential house, or within a period of three years after such date constructs a new residential house then the benefit of section 54 will be available to the assessee on the capital gains so arisen on the transfer of the original residential house. From the letter of allotment issued by Mayfair Housing Pvt. Ltd., forming part of the paper book on page 26, we find that upon payment of full agreed consideration in respect of the new flat, the possession of the new flat was handed over on 07/04/2016. We find that the Hon’ble jurisdictional High Court in CIT v/s Smt. Beena K. Jain, [1996] 217 ITR 363 (Bom.) in a similar factual matrix affirmed the findings of the Tribunal that the relevant date for the purpose of section 54F of the Act is the date when the assessee paid the full consideration amount and obtained the possession of the new flat. The relevant findings of the Hon’ble jurisdictional High Court, in the aforesaid decision, are as under:-
―The assessee who is the respondent before us had sold office premises on 23- 7-1987 which resulted in long-term capital gains of Rs. 24,05,050. Prior to the sale she had entered into an agreement for purchase of a residential flat which agreement was dated 4-9-1985. The agreement was for purchase of a flat for Page | 7
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the total consideration of Rs. 12,26,751. On the date of agreement of sale the assessee paid a sum of Rs. 1,35,000 as earnest money. This agreement was registered on 27-10-1985. The construction of the flat was finally completed in July 1988. The assessee paid the consideration amount of Rs. 10,44,375 plus Rs. 47,376 on 29-7-1988 and she was put in possession of the said flat on 30-7-1988. The assessee claimed the benefit of exemption under section 54F of the Income-tax Act, 1961 ('the Act'). She has accordingly been granted by the Tribunal exemption of Rs. 11,04,423 under section 54F. The department has made this application under section 256(2) of the Act for raising the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing exemption of Rs. 11,04,423 under section 54F of the Income- tax Act, 1961 considering the date of possession of the new residential premises instead of date of sale agreement and date of registration ?"
Under section 54F in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, not being a residential house and the assessee has, within a period of one year before or two years after the date of which the transfer took place purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in long-term capital gains. According to the department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is 29-7-1988 when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and came to the conclusion that purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on 29-7-1988 and handing over of possession of the flat on the next day.
3.In the premises the application is dismissed and the rule is discharged with costs.‖
Since in the present case also upon payment of full agreed consideration, the possession of the new flat was handed over to the assessee along with his wife on 07/04/2016, which falls within a period of two years from the date of sale of the old flat, i.e. 11/02/2016, therefore respectfully following the aforesaid decision of the Hon’ble jurisdictional High Court we are Page | 8
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of the view that the assessee is entitled to claim deduction under section 54 of the Act in respect of capital gains from the sale of old flat. Accordingly, ground No. 1 in assessee’s appeal is allowed.
During the hearing, the learned Authorised Representative wishes not to press ground No. 2 raised in assessee’s appeal. Accordingly, ground No. 2 is dismissed as not pressed.
In the result, the appeal by the assessee is partly allowed. Order pronounced in the open Court on 06/06/2023
Sd/- Sd/- B.R. BASKARAN SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06/06/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai