TRISHLA JAIN,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, BHARATPUR

PER BHAGCHAND, AM

The assessee has filed an appeal against the order of the ld. CIT(A),

Alwar dated 10-10-2017 for the Assessment Years 2014-15 raising

therein following grounds of appeal.

‘’1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in making the addition of Rs. 55,10,833/- to the total income by disallowing legitimate exemption claimed by the assessee under the provisions of section 54 as well as 54F of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case.

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

Relief may please be granted by allowing the exemptions as claimed by the assessee under section 54 & 54F of the I.T. Act, 1961. 2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the addition of Rs. 2,63,887/- made by AO as concealed income of the assessee under section 271(1)(c ) of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case.’’

2.1 Apropos Ground No. 1 of the assessee, brief facts of the case are

that the assessee electronically filed the return of incoe on 31-08-2014

declaring total income of Rs. 21,09,060/-. The case of the assessee was

selected for limited scrutiny through CASS and accordingly notice u/s

143(2) of the Act was issued on 21-09-2016 by the ITO, ward Behror

which was served on the assessee. Further notice u/s 142(1) of the Act

alongwith questionnaire was issued on 17-10-2016 to complete the

assessment proceeding. The ld.AR of the assessee attended the

assessment proceeding time to time and furnished the details before the

assessing officer. The assessee had declared long term capital gain of Rs.

21,09,057/- after reducing indexed cost of acquisition of Rs. 33,24,060/-

from total sales consideration of Rs. 1,09,44,000/- on transfer of property

situated at Plot No. C-95, UCO Bank Ke Samne, Naya Katla, Dausa. The

assessee claimed deduction u/s 54 of the Act of Rs. 55,10,883/- as under:-

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

S.N. Section under which Amount of Cost of new Date of its deduction claimed deduction asset (Rs. ) acquisition / (Rs. ) construction 1. 54F 25,28,068/- 25,28,069/- 16-09-2014 2. 54F 29,82,816/- 43,84,492/- 16-09-2014 Total deduction claimed 55,10,883/-

The AO observed that the assessee invested the proceeds of transfer into a new residential house at Flat No. 303, 3rd Floor, SDC Aura, Plot No. B-1,

Kisan Marg, Near Teja Ji Temple, Barkat Nagar, Tonk Road, Jaipur. The

Registered deed dated 16-09-2014 was submitted before the AO. The AO

during the course of assessment proceeding required the assessee to

furnish the following information.

‘’On perusal of the return of income for the year under consideration, it is noted that you have sold 3 shops and one property having commercial area also to various persons on 22-03-2014. In this context you are required to furnish following information and documents. 1. Certified copy of will. 2. It is also noticed that you have not utilized the amount of capital gain towards the purchase of new asset made within one year before the date on which the transfer of the original asset took place or which has not utilized for the purchase of construction of new asset before the date of furnishing the return of income u/s 139(1) of the Act and also failed to deposit the amount of capital gain in the case of section 54 or net sale consideration in the case of section 54F of the Act in the Capital Gain Account Scheme, 1988 as per provisions of sec 54(2) and 54F(4) of the Act before the due date of furnish the return u/s 139(1) of the Act i.e. 31-07-2014 in your case. Please furnish show cause as to why the exemption claimed u/s 54 and 54F of the Act should not be disallowed and added to your total income for the year under consideration.’’

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

The ld.AR of the assessee filed the reply before the AO but the AO was

not convinced with the submissions of the assessee and the case laws

relied upon by the assessee. The AO noted that it is clear from the

submissions of the assessee that the assessee had purchased a residential

property on 16-09-2014. The AO noted from the records available before

him that the assessee did not utilize the amount of net sale consideration

in purchasing or constructing the new residential house before the due

date of furnishing the return u/s 139(1) of the Act i.e. 31-07-2014.

According to the AO, the assessee had to deposit the entire sale

consideration in the Capital Gain Account Scheme, 1988. On asking

about it by the AO, the assessee submitted before the AO as under:-

‘’the sale proceeds of property were receivable through postdated chequesas appearing in sale deed copies submitted alongwith our letter dated 26-10-2016. Therefore, said consideration was received by the assessee in bits and pieces between 26-03-2014 to 26-08-2014. The assessee was of the bona fide belief that if all the cheques given by the purchaser are not cleared the sale transaction cannot be said to be complete lawfully and in case of any kind of dispute the assessee may be required to refund even the part amounts received by her to claim here title back on the property sold by her. This, before the clearance of full amount of consideration received by way of postdated cheques, which finally took place on 26-08-2014 the assessee was neither in the position to the invest the money into a new property nor said amount could be deposited in the capital gain account scheme, on a safe side even.’’

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

The AO thus noted that in the instant case the assessee had acquired the

residential plot as per registered deed dated 16-09-2014 which is after the

due date of filing the of return i.e. 31-07-2014 for the Assessment Year

under consideration. Hence, the AO made the addition of Rs. 55,10,883/-

by observing as under:-

‘’12. On perusal of the bank accounts maintained by the assessee, it is seen that the assessee neither deposited the amount of sale consideration which had been paid by the purchaser at the time of registration of the documents before the Sub-Registrar, in the Capital Gain Account Scheme nor purchased or constructed a residential house before the due date of furnishing the return i.e. 31-07-2014 as stipulated in the section54(2) and 54F(4) of the I.T. Act, however, the same amount had been utilized by the assessee for other purposes. 13. In view of the above fact, it is held that the assessee had not deposited the amount of Rs. 55,10,883/- in the Capital Gain Account Scheme, 1988. In such a situation, the exemption from long term capital gain will not be allowed and added to the total income of the assessee for the Assessment Year under consideration.’’

2.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO

by observing as under:-

5.4 I have considered the above mentioned facts of the case. The basic question involved in this case is whether the appellant is fulfilling the condition specified in section 54 and 54F of the Act to claim the deduction under the provisions of the Act or not?

It would be prudent to go into the question of sec 54 and 54F of the Act.

54(2) ….. 5

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

54F (1)… (4) ….

If we look at the provision of section 54 and 54F of the Act, the salient features that are applicable in the present case are as under:- 1. The incidence of capital gain arisen out of transfer of the property covered under section 54 and 54F is paramount.

Now in view of the foregone provision of the act, let us examine the facts of the present case.

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

Thus in view of the above unambiguous provision of Act and the factual matrix as discussed above, it is my considered view that the AO is justified in denying the benefit of section54 and 54F of the Act. Accordingly, the addition of Rs. 55,10,833/- is sustained and the appellant’s ground of appeal on the issue is dismissed.’’

2.3 During the course of hearing, the ld.AR of the assessee prayed for

deletion of addition of Rs. 55,10,833/- confirmed by the ld. CIT(A). The

ld.AR of the assessee filed the written submission which has been taken

into consideration.

2.4 On the other hand, the ld. DR supported the orders of the lower

authorities.

2.5 We have heard the rival contentions and perused the materials

available on record. In this case, it is noted that the AO made the addition

of Rs. 55,10,883/- on the ground that the assessee neither deposited the

amount of sale consideration which had been paid by the purchaser at the

time of registration of the documents before the Sub-Registrar in the

Capital Gain Account Scheme nor purchased or constructed a residential

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

house before the due date of furnishing the return i.e. 31-07-2014 as

stipulated in the section 54(2) and 54F of the I.T. Act, 1961. The AO

further noted that the same amount had been utilized by the assessee for

other purposes. In first appeal, the ld. CIT(A) has confirmed the action of

the AO. During the course of hearing the ld.AR of the assessee prayed for

quashing of the assessment order with following submissions.

Taking into consideration the various factual aspects which needs

verification at the level of AO, we hold that that it will be in the interest

of equity and justice to restore the matter to the file of the AO to decide it

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

afresh by providing adequate opportunity of being heard to the assessee.

Thus the Ground No. 1 of the assessee is allowed for Statistical purposes.

3.1 In Ground No. 2, the assessee is aggrieved that the ld. CIT(A) has

erred in confirming the addition of Rs. 2,63,887/- made by the AO as

concealed income u/s 271(1)(c ) of the Act. The AO during the course of

assessment proceeding observed that the assessee had filed revised ITR

for A.Y. 2014-15 on 25-10-2016 declaring capital gain of Rs. 23,02,515/-

and total income of Rs. 23,02,515/-whereas in the original return filed on

31-08-2015 the assessee had declared capital gain of Rs. 21,09,057/- and

total income of Rs. 21,09,057/-. The assessee had submitted the reply to

the query raised by the AO as to the issue in question but the AO did not

find it convincing with following observation.

‘’14….the reply of the assessee has been considered carefully. The assessee was not entitled to file revised return after expiry of one year from the end of the relevant A.Y. or before the completion of the assessment whichever is earlier in the light of section 139(5) of the Act. Therefore the return filed by the assessee on 25-10-2016 is an invalid/ belated return and no cognizance can be given…

The AO further noted that in other words the assessee had computed

Sales consideration of Rs. 1,09,44,000/- while the Stamp Duty value is

Rs. 1,12,07,887/-. The AO took the support of Section 50C(1) of the I.T.

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

Act, 1961 ‘’where the consideration received or accruing as a result of

the transfer by an assessee of a capital asset, being land or building or

both, is less than the value adopted or assessed (or assessable) by any

authority of a State Govt. (hereinafter in this section referred to as the

‘’Stamp Valuation Authority” for the purpose of stamp duty in respect of

such transfer the value so adopted or assessed (or assessable) shall for

the purpose of section 48, be deemed to be the full value of the

consideration received or accruing as a result of such transfer. The AO

taking into consideration the provision of Section 50C(1) of the Act

adopted the Stamp Duty Value at Rs. 1,12,07,887/- for capital gain

instead of Rs. 1,09,44,000/- . The AO thus made an addition of Rs.

2,63,887/- and noted that the return was revised only after the case was

selected for scrutiny and further noted that if the case of the assessee was

not selected for scrutiny the concealed income could not be unearthed.

Therefore, the assessee is liable to levy of penalty u/s 271(1)© of the Act.

3.2 In first appeal, the ld. CIT(A) has confirmed the addition of Rs.

2,63,887/- made by the AO by observing as under:-

‘’6.3 I have considered the order passed by the AO and submissions filed by the appellant. On the reasons and facts as given in adjudication of ground of appeal No. 1,2, and 3, the addition of Rs.

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

2,63,887/- is sustained. Appellant’s ground of appeal on the issue is dismissed.’’

3.3 During the course of hearing, the ld.AR of the assessee prayed for

deletion of addition made by the AO amounting to Rs. 2,63,887/- on

account of concealed income of assessee u/s 271(1) (c) of the Act. The

ld.AR of the assessee further submitted that there was no willful default

on the part of assessee in not offering the capital gain as well as

exemption by having reference to the stamp duty value of the property.

The moment assessee got to know about such mistake the assessee

corrected on her own by making payment of difference in tax liability.

3.4 On the other hand, the ld. DR supported the order of the lower

authorities.

3.5 We have heard the rival contentions and perused the materials

available on record. We have taken into consideration the submissions of

the ld.AR of the assessee but it did not find merit to controvert the

findings of the lower authorities. In such a situation, we find no reason

to interfere with the order of the ld. CIT(A). Thus Ground No. 2 of the

assessee is dismissed.

ITA No.1009/JP/2017 Smt. Trishla Jain vs DCIT, Circle-Bharatpur

9.0 In the result, the appeal of the assessee is partly allowed for Statistical purposes.. Order pronounced in the open Court on 04 -04-2018.

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