ASHOK KUMAR,GHAZIABAD vs. ITO WARD - 24(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “A”: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA.No.1160/Del./2020 Assessment Year 2014-2015 Shri Ashok Kumar, The Income Tax Officer, 102, Ground Floor, Jaipuria Enclave, Ward-24(1), Kushambi, Ghaziabad. vs., Uttar Pradesh. New Delhi. PIN - 201 010 PAN AALPK7006R PIN -110 002 (Appellant) (Respondent) For Assessee : Shri Rakesh Jain, Advocate Shri Gurjeet Singh, C.A. For Revenue : Mrs. Alka Gautam, Sr. D.R. Date of Hearing : 28.01.2021 Date of Pronouncement : 02.02.2021 ORDER PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-25, New Delhi, Dated 28.02.2020, for the A.Y. 2014-2015 on the following grounds :

2 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

3 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. loss of Rs.52,01,327/- from sale of properties. The details of the same are noted in the assessment order which were in respect of two properties i.e., 380, Ramnagar, Delhi and 80 Shanti Vihar, Delhi. The assessee is claiming long term capital loss of Rs.52,01,327/- on sale of these properties after deducting indexed cost of acquisition, indexed cost of improvement expenses and claiming an exemption, details of which are summarised in the assessment order as under:

4 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. 3.1. The A.O. in respect of property at 380 Ramnagar, Delhi, has taken indexed cost of acquisition at Rs.3,97,917/- and in respect of property at 80 Shanti Vihar, Delhi taken the indexed cost of acquisition at Rs.12,31,475/-. The assessee claimed transfer expenses and cost of improvement also which were disallowed by the A.O. The assessee also filed revised computation of capital gains which is reproduced in the assessment order as under:

3.2. The A.O, however, rejected the revised computation of capital gains because no revised return have been filed under section 139(5) of the I.T. Act by relying

5 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. upon the Judgment of the Hon’ble Supreme Court in the case of Goetz India P. Ltd., vs., Commissioner of Income Tax 284 ITR 323 (SC). The A.O. did not rely upon the Judgment of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Jai Parabolic Springs Ltd., [2008] 306 ITR 42 (Del.). Therefore, revised computation was rejected. The A.O. noted that assessee has claimed exemption of Rs.77,34,426/- in the income tax return and in the revised computation at Rs.99,22,300/-. This exemption has been claimed under section 54 on account of purchase of residential house property at Ground Floor D-50, Kushambi, Ghaziabad, Uttar Pradesh. On perusal of the Purchase Deed filed by assessee it was observed that this house was purchased on 19.02.2013 whereas the residential property at 80 Shanti Vihar, Delhi was sold on 24.02.2014. The A.O. noted that the exemption under section 54 is allowable only if the assessee purchased the residential house within one year before or two years after the date on which transfer of capital asset took place. The

6 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. details of sale and purchase of property is tabulated in the assessment order as under :

3.3. The A.O, therefore, found that assessee is not entitled to claim exemption under section 54 in respect of capital gains arising on sale of property at 80 Shanti Vihar, Delhi. The A.O, therefore, allowed exemption under section 54 only in respect of long term capital gains on sale of property at 380 Ram Nagar, Delhi. However, the claim of exemption in respect of long term capital gains earned on sale of property at 80 Shanti Vihar, Delhi was disallowed. The A.O. computed the long term capital gains as under :

7 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

The A.O. made addition of Rs.80,18,525/- on account of long term capital gains.

3.4. The assessee challenged the addition before the Ld. CIT(A). The written submissions of the assessee is reproduced in the appellate order. The A.O. also filed remand report. The assessee filed rejoinder. The assessee requested that the additional evidence under Rule 46A may be admitted with regard to improvements made in the property and submitted documentary evidences in support of the same. The assessee explained that at the time of assessment proceedings the documentary evidences could

8 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. not be submitted because same were not traceable at that time. The Ld. CIT(A), however, did not accept the contention of assessee and dismissed the appeal of assessee. His findings in paras 5 to 5.19 of the Order are reproduced as under :

“5. Findings/Determination are as hereinafter:

I have considered the material on record including written submission of the AR of the appellant filed in course of appellate proceedings. I have also perused the assessment order u/s 143(3) of the Act. On perusal I find that the appellant has raised four grounds of appeal.

5.1. In Ground No.1, the appellant has contended that the addition u/s. 54 of the Act of Rs.8018525/- has been made on surmise basis without considering the facts on record. The long term capital gain claimed by the assessee is in terms of the Act. Thus the addition made is unjustified illegal & void and therefore be deleted for justice.

9 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

10 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

11 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

12 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. required. He has submitted that due to this reason the seller M/s. Mahalakshmi Buildcon entered into a Supplementary Agreement on the same day i.e., 19.02.2013 mentioning the same facts and also mentioned in the Supplementary Agreement that the Seller [First Party] had taken back the physical possession of the above said property from the Assessee [Second Party] from dated 19.02.2013 to dated 19.04.2013 for finishing and completion of the pending work of the above said property and after completion of the entire work, the Seller will handover the physical possession to the assessee on or before 19.04.2013. It is also mentioned in the Supplementary Agreement that Sale Deed was executed on 19.02.2013 because of time binding of Sale Deed registration. He has, therefore, submitted that since possession of the property in question have been taken after completion on Dated 19.04.2014 through the Possession Agreement, therefore, possession given by the Builder /Seller has to be taken as date of acquisition of new property for computing the capital gain under section 54 of

13 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. the I.T. Act, 1961. Learned Counsel for the Assessee in support of the above contention relied upon Order of ITAT, Mumbai D-Bench, Mumbai in the case of Smt. Ramita Mahendra Mehta, Mumbai vs., ITO-9(2)(3), Mumbai, Dated 13.09.2017 in ITA.No.4535/Mum/2014 and Order of ITAT, Delhi F-Bench, Delhi in the case of Shri Rajiv Madhok vs., ACIT [2020] 59-CCH-163-Del.-Tribu. Learned Counsel for the Assessee submitted that since revised computation of claim was made before A.O, therefore, there is no bar on the powers of the Appellate Authority to consider the issue afresh and relied upon Judgment of Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Jai Parabolic Springs Ltd., [2008] 306 ITR 42 (Del.). He has also referred to copy of construction bills at Pages 112-214 of the PB to show improvements in the property. He has, therefore, submitted that the issue is covered by the aforesaid decision of the Tribunal and, therefore, assessee is entitled for deduction under section 54 of the I.T. Act, 1961 and as such entire addition may be deleted.

14 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that no claim was made in the return of income. The assessee merely filed revised computation of income without filing a revised return, therefore, assessee is not entitled for deduction and relied upon Judgment of the Hon’ble Supreme Court in the case of Goetz India P. Ltd., vs., Commissioner of Income Tax 284 ITR 323 (SC) .

15 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. capital asset and as such assessee is not entitled for any deduction under section 54 of the I.T. Act, 1961. Learned Counsel for the Assessee referred to Supplementary Agreement Dated 13.02.2013 i.e., on the day when Sale Deed was executed. Copy of the Supplementary Agreement is filed at Pages 99-100 of the PB. In the Supplementary Agreement it is specifically mentioned that the Seller [First Party] has taken back the physical possession of the property in question from the Assessee [Second Party] from Dated 19.02.2013 to 19.04.2013 for finishing and completion of the pending work of the above said property and after completion of the entire work First Party will handover the physical possession of the property to the assessee on or before 19.04.2013. It is also mentioned in the Supplementary Agreement that Sale Deed of the property was executed on 19.02.2013 because of the time binding of Sale Deed registration decided by the parties. Copy of the Sale Deed Dated 19.02.2013 is also filed at Pages 11 to 98 of the PB in which at page-39 the photograph of the property in question is affixed which

16 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. clearly reveal that property under sale was incomplete and renovation work was going on and as such it was not in habitable condition. Due to this fact, the Supplementary Agreement was executed for completion of the work by the Seller i.e., M/s. Mahalakshmi Buildcon. It would, therefore, strengthen the submissions of the Learned Counsel for the Assessee that physical possession of the property after completion of the entire work was handed-over to the assessee on 19.04.2013 and as such it would fall within one year before the date of transfer of property at 80, Shanti Vihar, Delhi. Thus, assessee would be entitled for deduction under section 54 of the I.T. Act, 1961. Same view is taken by ITAT, Mumbai D-Bench, Mumbai in the case of Smt. Ramita Mahendra Mehta, Mumbai vs., ITO-9(2)(3), Mumbai (supra) in which in paras 6 to 11 it is held as under :

“6. We have heard the rival submissions perused the orders of the

authorities below. The assessee sold residential house during this

Assessment Year by entering into sale agreement on 11.09.2009 and this

17 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

18 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

19 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

20 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

21 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

22 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

23 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

24 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

6.1. Similar view is taken by ITAT, Delhi F-Bench, Delhi in the case of Rajiv Madhok vs., ACIT (supra), in which in paras 4.10 to 10 it is held as under :

25 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

4.10 Accordingly, submitted that in view of the possession of the flat taken on 06/07/2012, which is well within period of two years from the transfer of the original asset (i.e. between 18.08.2011 to 18.08.2013) and thus the assessee is entitled for the benefit of section 54F of the Act.

4.11 The Tribunal in the case of Ayushi Patni (supra) after following the decision of the Hon’ble Bombay High Court in the case of CIT Vs Smt. Beena Jain, 217 ITR 363, treated the date of the taking possession as the date of the purchase of the flat and allowed benefit of section 54F of the Act observing as under:

“6. We have heard the submissions made by rival sides and have perused the orders of authorities below. We have also perused the decisions on which the ld. A.R. has placed reliance. The solitary issue raised in the present appeals by the assessee and Revenue is:

Whether the assessee is eligible for claiming exemption u/s 54F in respect of residential flat / house for which the assessee has entered into an agreement for purchase more than one year before the date of transfer of capital asset ?

26 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

The dates qua, transfer of capital asset, execution of agreement for purchase of residential flat and possession of the flat are not in dispute.

"12. Nothing contained in this Agreement shall be construed to as to confer upon the Purchaser any right whatsoever into or over the said property or the said new building or any part thereof including the said premises on execution of this agreement. It is agreed by and between the parties that conferment of title in respect of the said premises shall take place in favour of the Purchasers only on the Purchaser's making full payment of consideration to the Developers and complying with the terms and conditions of this Agreement

27 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

and on the Purchaser being admitted as a member of the said society as herein provided."

The aforesaid clause makes it unambiguously evident that the assessee has no right whatsoever in the property on mere execution of agreement. The assessee shall be conferred title of property only on making full payment of consideration to the builder. In the instant case, full consideration has been paid by the assessee for purchase of residential flat within a period of one year before the date ITA Nos.1424 & 1707/PUN/2016 of transfer of capital asset. Thereafter, actual possession of the flat was delivered to assessee on 17.09.2010 i.e., within a period of one year prior to the date of transfer of capital asset. It is an un-rebutted fact that at the time of execution of agreement, the residential property was not in existence. Therefore, taking into consideration facts of the case, the date of possession of flat is the date of actual purchase for the purpose of claiming exemption u/s 54F of the Act.

28 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

exemption u/s 54F to the assessee. The substantial question for consideration before the Hon'ble High Court was :

"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 the date of sale agreement and the date of registration ?"

The Hon'ble High Court decided the issue in favour of the assessee by answering the question as under :

"2. Under section 54F of the Income-tax Act, 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 on 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 the 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,

29 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

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 July 29, 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 come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day."

30 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad.

utilized for purchase of residential property. Consequently, the appeal of the assessee is allowed and the appeal of Revenue is dismissed.”

4.12. In the instant case before us also, the assessee has brought of attention to clause 46.0 of the buyers agreement (which is available on page 41 of the paper book), which is identical to clause 12 in the case of Ayushi Patni (supra) reproduced in para 8 of the decision. The relevant clause 46.0 of the buyer’s agreement is reproduced as under: “46.0 The Allottee understands and confirms that the execution of this Agreement shall not be construed as sale of transfer under any applicable law and the title to the Allottee hereby allotted shall be conveyed and transferred to the Allottee only upon his fully discharging all the obligation undertaken by the Allottee including payment of the entire sale price and other applicable charges/dues, as mentioned herein and only upon the registration of the conveyance/sale deed in his favour. Prior to such conveyance, the allottee shall have no right or title in the apartment.”

31 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. 9. In view of the identical facts and circumstances, the ratio of the above decision in the case of Ayushi Patni (supra) is squarely applicable over the facts of the instant case and thus accordingly, we hold that the new asset i.e. residential house has been purchased within two years from the date of transfer of the original asset i.e shares, and thus, the assessee is entitled for benefit of section 54F of the Act. The finding of the Ld. CIT(A) on the issue in dispute is accordingly set aside and the Assessing Officer is directed to allow the benefit of section 54F of the Act amounting to Rs.2,07,62,580/-. The grounds of the appeal of the assessee are accordingly allowed.

6.2. The Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Jai Parabolic Springs Ltd., (supra) considering the decision of Hon’ble Supreme Court in the case of Goetz India Ltd., (supra) has held as under :

32 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. “Held, dismissing the appeal, that there was no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for the just decision of the case. There was no infirmity in the order of the Tribunal.”

6.3. Since the assessee filed revised computation of income before A.O, therefore, there is no bar on the powers of the Commissioner of Appeals being the First Appellate Authority to consider the case of assessee. The assessee also filed copies of the bills to show renovation in the property. Considering the entire material on record in the light of above decisions of the Tribunal, we are of the view that assessee is entitled for deduction under section 54 of the I.T. Act, 1961. In view of the above discussion, we set aside the Orders of the authorities below and delete the entire addition. Accordingly, appeal of the Assessee is allowed.

33 ITA.No.1160/Del./2020 Shri Ashok Kumar, Ghaziabad. Order pronounced in the open Court.

Sd/- Sd/- [ANIL CHATURVEDI] (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 02nd February, 2021. VBP/- Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT “A” Bench 6. Guard File //By Order//

Asst. Registrar : ITAT : Delhi Benches : Delhi.