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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI G. MANJUNATHA
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the Revision order passed by the Principal Commissioner of Income Tax, Chennai u/s.263 of the Income-Tax Act, 1961 (hereinafter the ‘Act’), in Revision C.No.218/U/s.263/PCIT-1/2020-21 dated 16.03.2021. The assessment was framed by the Income Tax Officer, Non-Corporate
2 Ward 22(1), Chennai u/s.143(3) of the Act for the assessment year 2015-16 vide order dated 28.07.2017.
At the outset it is noticed that this appeal is time barred by 22 days as the order of PCIT was received by assessee on 17.03.2021 and appeal was to be filed before Tribunal on or before 16.06.2021, instead the appeal was filed by assessee only on 07.06.2021 thereby delay of 22 days. The Ld.counsel for the assessee stated that the delay was due to Covid-19 pandemic and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of the directions of Hon’ble Supreme Court, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication.
The only issue in this appeal of assessee is against the revision order passed by PCIT with direction to AO to redo the assessment after considering the part of sale consideration of Rs.98 lakhs as Short Term Capital Gain. For this, assessee has raised various
3 grounds numbering 18, which are exhaustive, argumentative and hence, need not to be reproduced but limited to one issue only.
Brief facts are that the assessee sold one property at Medavakkam Main Road, Kilkattalai for a sum of Rs.3.26 crores vide sale deed dated 12.03.2015. This property was purchased by the assessee on 31.10.1988 for a consideration of Rs.3,74,380/-. The assessee while filing return of income declared Long Term Capital Gain (LTCG) on this transaction amounting to Rs.42,859/- claiming deduction u/s.54 of the Act. Subsequently, the assessee revised working of Long Term Capital Gain and submitted vide letter dated 19.07.2017, during the course of assessment proceedings, declaring LTCG at Rs.59,55,501/-. The AO also allowed claim of exemption u/s.54F of the Act at Rs.1,44,63,358/-. Subsequently, the PCIT issued show cause notice for the reason that the claim of assessee u/s.54F of the Act on sale of immovable property at Medavakkam Main Road, Kilkattalai is not as per the provisions of law and accordingly, assessment framed by AO is erroneous as well as prejudicial to the interest of Revenue. The PCIT also noted that the source of purchase of land and construction of building was not examined by the AO during original assessment proceedings. The PCIT finally observed as under:-
4 “In view of the above, the cost of land at Nanmangalam and construction cost amounting to Rs.1,61,50,000/- is not eligible for deduction u/s 54F and the Long Term Capital Gain on the Rs.2,28,00,000/- had to be brought to tax.
It is pertinent to mention here that the land at Nanmangalam was purchased on 18.09.2014 as per Sale Deed No.7876/2014, but this land was shown in the Balance Sheet as on 31.03.2014 under the head “Land and Building” and as on 31.03.2015 as “Land at Nanmangalam” which is also not verified by the Assessing Officer. and also observed “From the above, it is clear that assessment order passed by the AO is erroneous insofar as the applicability of deduction u/s 54F and sources for the purchase of land and construction therein are not properly examined/scrutinized by the AO which is prejudicial to the interest of revenue. It is, therefore, proposed to exercise revisionary powers conferred under Section 263 of the Act, by adding the differential amount in the above mentioned head in your assessed income.”
4.1 The PCIT consequent to the above show cause notice finally directed the AO to consider the capital gain for an amount of Rs.98 lakhs as Short Term Capital Gain after verification of facts and accordingly, he set aside the assessment vide para 16 as under:- 16. The written submission dated 10.02.2021 filed by the assessee has been perused. The contention of the assessee is not acceptable. Assessee had sold land along with building for a sale consideration of Rs.3,26,00,000/-. As per Registration Sale Deed, only vacant land had been acquired by the assessee by way of Settlement Deed vide Doc.No.1075/2010 dated 04.03.2010. Though the assessee furnished a commercial building plan approved on 06.03.2009, vacant land alone has been conveyed as per the Sale Deed Doc.No.2339/2015 dated 12.03.2015. Further the assessee constructed building in F.Y 2014-15 on the land before the sale. The building value admitted is Rs.1,40,26,000/-. But the assessee
5 adopted the Guideline Value assessed by the SRO of Rs.98,00,000/-. But the same claimed in the deduction. Since the building was constructed after acquisition of the land, STCG on the transfer of building amounting to Rs.98,00,000/- has to be brought to tax. Hence this is a fit case to invoke the provisions of Sec. 263 of the Act. Moreover the details, submitted by the assessee at time of hearing require fresh examination by the Assessing Officer. Therefore, in conclusion the Assessing Officer has failed to make a complete verification with respect to the aspects as discussed supra and had passed the Assessment Order u/s 143(3) of the Act, without proper diligent application of mind and enquiry, and hence in my considered opinion the assessment order so passed is both erroneous and prejudicial to the interest of the revenue. Accordingly, the assessment order is hereby set aside u/s 263 of the Act, with a direction to the Assessing Officer to examine the issues, as discussed in the order, during the Accounting Year in question and pass a fresh order after granting opportunity to the assessee, within stipulated time. The assessee can furnish documents which were not available at the time of assessment in the records of the Assessing Officer for fresh examination. Aggrieved, now assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. Before us, the ld.counsel for the assessee first of all argued that the AO has examined the entire issue and he took us through the assessment order wherein the AO has considered the claim of capital gains exemption u/s.54 of the Act and the entire discussion in the assessment order is as regards to this capital gain only. The ld.counsel for the assessee stated that the AO has raised queries and assessee vide letter dated 23.06.2017 submitted complete details as under:-
6 “7. During the Financial year I have sold Land & Bilding at Medavakkam Main Road for Rs.3,26,00,000/- and purchased vacant land at Elumalai Street, Nanmangalam for Rs.74,35,800/- Copies of Purchase, Plan approval copy for Construction both for sold property and purchased property is hereby enclosed. 8 (i) Calculation for capital Gain Exemption is hereby enclosed for the perusal of the Assessing Officer. (ii) There is no mismatch of Turnover explained as detailed below Turnover as per I.T.R Return : Rs.4,10,91,500 Turnover as per Audit Report: Rs.4,10,91,500 The ld.counsel further drew our attention to explanation submitted vide letter dated 18.07.2017 that the assessee has invested a sum of Rs.1,61,50,000/- out of the above sale proceeds of Rs.3.26 crores for the purchase of this land at Elumalai Street, Nanmangalam and construction thereon. It was also explained vide letters dated 18.07.2017 & 19.07.2017 at the time of assessment before the AO.
On the other hand, the ld.CIT-DR, Shri M. Rajan supported the revision order passed by PCIT.
We noted from the assessment order and the relevant details filed by the assessee before AO during original assessment proceedings that the AO has examined the complete details before passing a speaking order on the very issue. From the assessment
7 order, it can be gathered that the AO has formed an opinion and a view is taken which is one of the possible view. Admittedly, the assessee purchased one property at Medavakkam Main Road in 1998 for a sum of Rs.3,74,380/- which includes the building cost of Rs.3,10,540/-. Before construction of residential house on this property, the assessee has to demolish this building and accordingly, the building was demolished in 2012 but assessee has purchased this land along with residential building. Hence, it cannot be a case of Short Term Capital Gain as directed by PCIT. Therefore, we find no infirmity in the order of AO accepting the Long Term Capital Gain declared by assessee. Hence, we reverse the revision order and allow the appeal of assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 21st September, 2022 at Chennai.