COMMISSIONER OF INCOME TAX vs. M/S NAKODAR CO-OP SUGAR MILLS LTD.

ITA/265/2005HC Punjab & HaryanaPHHC01076063200524 April 2006Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE M.M. KUMAR6 pages
AI SummaryDismissed

What were the facts?

The assessee, Pawan Kumar Garg, filed an appeal before the Punjab and Haryana High Court challenging an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 1998-99. The ITAT had reversed the order of the CIT(A) which had allowed the assessee's claim for deduction under Section 54F of the Income Tax Act, 1961. The Assessing Officer (AO) had disallowed the deduction, holding that the capital gain was invested in a plot for construction, not directly in constructing a residential house. The AO relied on a report indicating only a boundary wall and two small rooms with AC sheet roofing were constructed. The CIT(A) had allowed the deduction, considering the cost of land integral and the two rooms as a dwelling unit, and noting the construction period had not expired at the time of filing the return. The ITAT, however, found no substantial construction of a residential house within the stipulated three-year period.

What did the High Court hold?

The High Court held that no substantive question of law arose for determination. The court found that the ITAT had recorded pure findings of fact, concluding that the assessee failed to fulfill the primary requirement of proving the construction of a residential house within the stipulated period of three years from the date of transfer of shares (22.4.1997), which was by 22.4.2000. The ITAT relied on reports indicating minimal construction (two rooms with AC sheet roofing, less than 150 sq. ft.) and the assessee's admission of demolition and removal of foundation. The court reasoned that since no residential house was constructed within the statutory period, the questions concerning the CBDT circular (Questions I and II) and the timing of addition (Question III) did not arise, as they presupposed the existence of a residential house. Similarly, questions regarding perverse findings (Question IV) and misdirection (Question V) involved re-appreciation of evidence, which is impermissible for the High Court under Section 260A. Therefore, the appeal was dismissed.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was justified in confirming the AO's action and reversing the CIT(A)'s order by disallowing the legal deduction claimed under Section 54F of the Income Tax Act, 1961, by ignoring the CBDT Circular binding on the AO, which allows deduction for purchase of a plot for further construction of a residential house? 2. Whether, on the facts and circumstances, the ITAT was justified in confirming the AO's action and reversing the CIT(A)'s order by disallowing the legal deduction claimed under Section 54F of the Income Tax Act, 1961, by ignoring the CBDT Circular which clearly states that the purchase of a plot for further construction of a residential house qualifies for deduction, making the denial of deduction for the plot purchased from PUDA bad in law and a perverse finding? 3. Whether, without prejudice, even if the AO was not satisfied with the construction of the residential house within three years, the addition should have been made in the year the three-year period lapsed, as provided in Section 54F(4), and not before, thus making the addition liable to be set aside? 4. Whether the findings of the ITAT are perverse and against the evidence on record, thus unsustainable in law? 5. Whether the ITAT misdirected itself by being influenced by irrelevant factors and applying erroneous criteria while deciding the issue? Assessee's Contentions: The assessee argued that the ITAT wrongly reversed the CIT(A)'s order, ignoring CBDT Circular No. 667 dated 18.10.1993, which allows deduction for the purchase of a plot for constructing a residential house. They contended that the construction of two rooms constituted a dwelling unit and that any addition should have been made in the year the three-year period lapsed. They also argued that the ITAT's findings were perverse. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions, but their appeal to the ITAT suggests they supported the AO's disallowance of the Section 54F deduction.

Which sections of the Income-tax Act were involved?

Section 260A,Section 54F,Section 143(1)(a),Section 143(2),Section 271(1)(c),Section 54F(4),Section 5

AI-generated summary — verify with the full judgment below

ITA No. 265 of 2007 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 265 of 2007 (O&M) Date of decision 30. 7 .2007 Pawan Kumar Garg .. Appellant Versus CIT Aaykar Bhawan, Ludhiana .. Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE AJAY KUMAR MITTAL PRESENT: Mr.Rajiv Sharma, Advocate for the Appellant

M.M.Kumar, J. This appeal filed under Section 260A of the Income Tax Act,1961 (for brevity 'the Act') challenges order dated 24.5.2006 passed by the Income Tax Appellate Tribunal, Chandigarh Bench arising out of ITA No.262/Chandi/2004 for the assessment year 1998-99 ( Annexure A/1). The assessee has also filed an application under Section 5 of the Limitation Act,1963 read with Section 260A of the Act for condonation of 294 days delay in filing the appeal. The appellant has claimed that following substantive questions of law would arise for our determination: “ I.Whether, on the facts and circumstances of the case, the ITAT was justified in confirming the action of A.O. and by wrongly reversing the orders of CIT(A) in not allowing legal deduction as claimed by the appellant u/s 54F of the Income Tax Act,1961 by completely ignoring the CBDT

The order continues below.

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