KESHAV DUTT SHREEDHAR,SHIMLA vs. DCIT, SHIMLA

आदेश/ORDER PER DIVA SINGH

The present appeal has been filed by the assessee wherein the correctness of the order dated 09/11/2015 of CAT(A) Shimla pertaining to 2008–09 assessment year is assailed on the following grounds :

ITA 8 /CHD/2016 A.Y. 2008-09 Page 2 of 15

submitted that in the facts the present case the assessee is

challenging the jurisdiction of the assessing officer in

reopening the case beyond the period of 4 years. Referring to

the provisions of law it was his submission that in the facts

the present case the reopening has been done beyond the

stipulated period of 4 years. In the circumstances, it was

submitted that the settled legal position is that the Revenue

has to de monstrate the deficiency in the material placed

before the assessing officer in the scrutiny proceedings. It

was his submission that no such effort has been made by the

Revenue. On the contrary, it was submitted full facts were

made available to the AO. The AO has specifically raised

specific questions on the issue. Replies have been given and

considered. Accordingly, it was his submission that in the

facts of the present case, the present exercise by the

Revenue is merely a case of change of opinion. The fact that

change of opinion, it was argued, was also based on an

incorrect appreciation of facts and law has been ignore d by

the CIT(A). Attention was invited to the paper book page No.

20 which is a copy of the return filed. Reference was made

to the paper book page 21 and 22 which depicts that the

receipt of long term capital gain on sale of residential house

on 25/09/2007 was disclosed to the AO. Referring to the

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calculation which have not been disputed, it was submitted

that it reflected that deduction under section 54 was claimed

for an amount of Rs. 38,61,259/-. The assessing officer,

considering the claim, issued a questionnaire on 21/04/2010

copy of which is available at pages 24&25. The specific

question referred to for the purpose of the present

proceedings, it was submitted, was question No. 8 at page 25

wherein the assessing officer required the assessee to

“furnish complete working of Long Term Capital Gains with

evidences of sale deed/purchase deed/additions made in

each year and also explain deduction claimed u/s 54 at Rs.

38,61,259/-.”

2.1 Inviting further attention to page 26 and 27 which

contains the copy of the reply by the assessee to the

assessing officer dated 21/06/2010, it was his submission

that the assessee gave the following specific reply to

question No. 8. For the sake of completeness the same is

reproduced hereunder :

“8. During the year the assessee has sold a residential house property on 25/09/2007 for a consideration of Rs. 55,40,000/- and the same amount was invested in house property purchased be the assessee. The copy of allotment letter is being annexed herewith for your kind verification” (emphasis supplied)

2.2 The Ld. AR inviting atte ntion to the supporting fact

referred to in para 8 highlighted in the reproduction made

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above referred to paper book page 29 and 30 which is a copy

of the allotment letter dated 20/10/2008 addressed by

Manager-Customer Services to the assessee. The following

contents of the relevant portion of the extract from the

aforesaid letter were relied upon to support the claim made :

Subject: Allotment of a Unit no. /Apartment no .F1-F10-1004 in the residential project situated in "THE VIEWS" at Mohali Hills in Sector -105, S.A.S. Nagar, District Mohali, Punjab. Dear Mr.K.D Shreedhar We thank you for registering your interest in allotment of a premium residential complex in "The Views" at Mohali Hills. We would like to congratulate you on your allotment of the Unit. We welcome you to the Emaar MGF family. With reference to your application dated 25.09.2008 where you have proposed to register your interest for the allotment of Unit/Apartment in "The Views" at Mohali Hills. We confirm having received Rs.4988782/- (RUPES FORTY NINE LAKH EIGHTY EIGHT THOUSAND SEVEN HUNDRED AND EIGHT TWO ONLY) vide cheque no:765011-I drawn on ICICI has been deposited by you towards the same. ………………………… (emphasis supplied) 2.3. Specific attention was invited to unnumbered Para two

of the above extract so as to emphasize that the application

for registration was dated 25/09/2008. It was his

submission that the said date is important as it was very

much before the due date for filing of the return of income.

The due date for filing of the return, which it was submitted,

was 30.09.2008. Inviting attention to paper book page 31 it

was his submission that the copy of assessee’s bank account

would show that on the specific date 29/09/2008 the

assessee had paid by way of the specific cheque No. 765011-I

the specific amount Rs.4988782/- as mentioned in the

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aforesaid allotme nt letter. The said information, it was

submitted, was made available to the assessing officer in the

scrutiny proceedings which resulted in the passing of the

order dated 29/11/2010. Copy of this order passed under

section 143(3), it was submitted, has been filed at page 34 of

the paper book filed. On a reading therefrom it was his

submission, it would be seen that the following facts were

recorded by the assessing officer :

“Return declaring income of Rs. 16675690/- was tiled by the assessee on 30.09.2008. The return of income was processed u/s 143(1) of IT. Act, 1961. Subsequently, the case was picked up tor scrutiny assessment under CASS. Statutory notice u/s 143(2) issued to regularize the assessment proceedings. Notices u/s 142(1) & 143(2) along with detailed questionnaire were issued to the assessee on 21.04.2010. In compliance to the notices, Sh. Vipul Sood, CA, counsel of the assessee attended the assessment proceedings from time to time and produce/tiled the requisite information'documents/details alongwith books of account, bills and vouchers as required. 2 The assessee is an Advocate. During the year under consideration apart from business/profession income, the assessee has shown income from other sources andincome from short term capital gain. Documents/ informations/details furnished by the assessee have been examined on test check basis and no adverse inference has been found. Case discussed with the counsel of the assessee and after discussions, income returned by the assessee is assessed at Rs. 16675690/-as declared.” (emphasis supplied)

2.4 Reading therefrom it was his submission that there is a

sanctity and a relevance to be accorded to a recording of an

Assessing Officer that he has seen and examined that too

after the plethora of e vidence available on record to justify

the claim that the issue had been considered after giving due

time and attention leading to the forming of opinion of being

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satisfied. In the light of this factual background, attention

was invited to paper book page 40 which is a copy of the

notice issued under section 148 dated 28/03/2014. It was

his submission that the reopening has been done beyond the

period of 4 years which position of facts is not disputed by

the CIT(A) also. It was submitted that there is no wrong fact

or incorrect appreciation of law noticed by the AO in the

second round. The said submission was made after inviting

further attention yet again to the assessment order dated

26/11/2014 passe d under section 143(3)/147 of the Income

Tax Act,1961 which was under challenge before the CIT(A)

and in view of the dismissal of assessee's appeal, the

challenge still remains. The relevant extract was read out.

For the sake of completeness the same is extracted

he reunder : The assessee had deposited and purchased FDR o/f Rs. 55,00,000/- with Canara Bank Shimla and source of FDR was sale of Flat at Delhi. It is further stated that the sale proceed was wrongly deposited by hank in SBA ( No. 2677) being maintained by the wife of the assessee jointly. Thus, the sale proceeds had been deposited by him in the form of FDR with the Canara Bank, Shimla. In reply to questionnaire dated 21/06/2010 at Sr. No.8 it was stated that assessee had sold a residential house property, on 25.09.2007 for a consideration of Rs. 55,40,000/- and the same was invested in house properly purchased by him. The copy of allotment letter is annexed. A perusal of allotment letter dated 20.10.2008 issued by elevated livings. The views at Mohali hills revealed that allotment of unit No./Appointment No. F1-F10-1004 in the residential project situated in " the views" at Mohali hills in sector 105, SAS Nagar, District Mohali, Punjab. The allotment of Unit was given to the assessee on 20.10.200S and in second last para of the said letter it was also stated that the allotment of the said unit, apartment is subject to your agreeing to the unit No. allotted to you and on receipt of written confirmation we shall be sending the terms and conditions to yon. From the above letter it is clear that the assessee had purchased the new house at Mohali after 20.10.2008 i.e. after sending his

ITA 8 /CHD/2016 A.Y. 2008-09 Page 7 of 15 confirmation to agree on the above allotment. The assessee had not deposited his capital gain amounting to Rs. 3861259/- in the capital gain account scheme but he had purchased the FDR of Rs. 54,00,000/- received from sale consideration The due date of filling the IT return in the above case was 30.09.2008 and he had not -purchased the new residential house before the due date. The assessee had neither purchased the new residential house before 30.09.2008 nor he had deposited the capital gain amount in to the capital gain deposit a/c. scheme. Therefore exemption claimed /allowed to him u/s 54 needed in be disallowed. Thus the capital gain amount of Rs. 3861259/- needed to be added back to taxable income and charged to tax.” 2.5 In the said background it was his submission referring

to the relevant provision namely sub-section (1) of section 54

of the Income Tax Act that the law does not require that it is

the same money which has been received on the sale of the

asset is required to be invested. The law requires that the

assessee within the period of one year before or 2 years after

the date on which the transfer took place or has within the

period of 3 years after that had constructed one residential

house in India. In the facts of the present case, admittedly

the assessee had within the period of one year and before the

filing of the return had already invested the required

amount. It was submitted that had the investment not been

made within time, the Revenue may have had a case. The

fact that the assessee had invested the amount received from

sale of house in FDR and had without breaking the Fixed

Deposit, invested the required amount for purchase of a new

residential house property before the filing of the return

cannot be so read by the Revenue to leading to a situation of

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escapement of income. This fact, it was submitted, had been

noticed by the AO in the scrutiny proceedings and opinion

was formed. The opinion so forme d, it was submitted, was

not in conflict with the settled legal position. For the said

argument, attention was invited to page 15 of the Paper Book

which contains the reference to the legal position thereon as

argued before the CIT(A) and is relied upon in the present

proceedings also. Reliance, accordingly, yet again was placed

on Ajit Vaswanit V. CIT92001)117 Taxman 123 (delhi), CIT

Vdr. P.S. Pasricha (2008) 20 SOT 468 (Mum), Ishar Singh

Chawla vs. Deputy Commissioner of Income-tax [2010] 130

TTJ 108(MUM.)(UO), J.V. Krishna Rao V/s. Deputy

Commissioner of Income -tax, Circle 3(3), Hyderabad IT

APPEAL NOs. 1866 & 1867 (HYD.) OF 2011 amongst others.

Thus, this fact noticed by the AO, it was submitted, had

already been examined in the original proceedings. Even

otherwise, it was argued, it in no way detracts the assessee’s

claim as the assessee was under a legal obligation only to

invest the amount in the purchase of the new house and not

invest the “same money”. It was his submission that the

capital gains earned by the assessee can be utilised for other

purposes as long as the assessee fulfils the conditions by

investing the equivalent amount in the asset qualifying for

relief under section 54F. The law, it was argued, does not

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insist that there should be a live link between the amount of

capital gain and the cost of the new asset. This position of

law, it was his submission, has been addressed in various

decisions as argued. In the facts of this case the assessee

has made the investment of the amounts e quivalent to the

capital gains realized.

2.6 Reliance was also placed upon the decision of the

jurisdictional High Court in the case of CIT Vs M/s Ruchira

Papers Ltd. Kala Amb (ITA No. 22 of 2007 dated 18.06.2012).

Specific attention was invited to page 7 paras 10 and 11 of

the said decision to submit that full and complete disclosure

had been made which was a necessary hurdle for the

Revenue in the re-assessment proceedings beyond the 4

years. The relevant extract is reduced hereunder for the sake

of completeness: “10. We are of the considered view that Section 149 of the Act governs that field which is not covered by the proviso to Section 147 of the Act. The proviso to Section 147 of the Act is a specific provision laying down a special limitation in cases of assessment made on scrutiny where there has been full and complete disclosure of material facts. In such cases, the limitation is four years. Section 149 of the Act also lays down a limitation of four years even in cases where the income has escaped assessment due to non-disclosure of material facts. However, in case the income escaping assessment is more than Rs. 1,00,000/- (Rs.50,000/- earlier) then the limitation would be six years. Therefore, even under Section 149 of the Act, the notice cannot be issued after four years of the end of the relevant assessment year unless the income escaping assessment is more than Rs. 1,00,000/- in which case the limitation would be six years. After six years obviously no notice could be issued. 11. It is clear that: (a) when there is full, complete and true disclosure of all material facts, the limitation is only four years from the end of the assessment year concerned; (b) when there is non disclosure of facts the limitation is four years in case the Income escaping assessment is less than Rs. 1,00,000/-; and (c) in case there is non-disclosure of facts and the income escaping assessment is more than

ITA 8 /CHD/2016 A.Y. 2008-09 Page 10 of 15 Rs. 1,00,000/- the limitation is six years. This is the only interpretation which can be given to Sections 147 to 149.”

2.7 On query it was responded that the fact that the

amounts had been invested from a different bank account

was noticed by the assessing officer. He agreed that this fact

is not coming out from the order as it has not been

discussed by the AO. It was submitted that how the AO

writes his order cannot be determined by the assessee. The

fact that the order is cryptic, cannot be held against the

assessee especially in the face of the questionnaires and the

detailed replies alongwith supporting evidences. The

Revenue as per law, it was argued, is required to show the

insufficiency of material which is not the case.

2.8 Even otherwise, it was argued that if on the basis of the

reasons recorded the reopening is considered to be justified,

even then in the facts of the present case the Revenue, it

was argued, has not demonstrated any shortcoming on the

part of the assessee. The other objection on merits which has

been taken note of by the tax authorities is the fact that the

specific flat was not allotted to the assessee, it was

submitted, also is not a valid argument. It was his

submission that the fact of allotment or completion of the

construction was not in the hands of the assessee and there

are various decisions of the ITAT on the said issue. Attention

was invited to the order of the Chandigarh Bench in the case

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of Bhawna Cuccria Vs ITO (2017) 82 taxmann.com 306

(Chandigarh–Trib.).

2.8 Accordingly, it was his submission that in the facts of

the present case the reopening was not justified and even on

merits the order passed is contrary to law and facts.

position of law as considered by the various Benches namely

Ajeet Vaswani, Isher Singh Chawla and Bhawna Cuccria etc.

as argued and relied upon was not distinguished with.

material available on record. A perusal of the record shows

that in the facts of the present case on account of sale of a

specific property, capital gains to the tune of Rs.

38,61,259/- arose to the assessee. The relevant facts

relatable to the factum of sale and accrual of amount of

capital gains are not being referred to in greater details as

there is no dispute amongst the parties on the said issue.

The fact that the assessee before the filing of the return i.e.

before 30.09.2008 invested an amount of Rs. 49,88,782/-

vide cheque No. 765011-I drawn on ICICI Bank for acquiring

a residential flat is an admitted fact. The specific cheque

was cleared by the Bank on 29.09.2008 is also not in

dispute. The fact that said evidence was available to the AO

as questionnaires were issued by the AO during the original

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scrutiny proceedings to justify the claim of deduction u/s 54

of the Act and the reply of the assessee are also facts on

record. The fact that sale proceeds were deposited in Canara

Bank Account which was probably a joint account of the

assessee with his wife and were further converte d in Fixed

Deposits and the investment was not made from the bank

where sale proceeds were deposited and were instead made

from ICICI account which was the assessee's account where

professional receipts were deposited, are also the facts on

record. The Revenue attempts to draw strength for re-

opening and sustaining addition on me rits solely on the

ground that there was no live link with sale proceeds and the

amount invested. The said legal position as understood by

the Revenue is not in accordance with the letter and the

spirit of law and is a subject matter of many decisions. Some

of these have been cited by the assessee. No contrary

decision or rebuttal/distinguishing fact is offered by the

Revenue. In these facts, since the lack of discussion in the

original scrutiny assessment order, where the only new fact

which could thus be said to come to light in the re-

assessment proceedings is that on the sale of the specific

property, the assessee deposited the sale receipts of Rs. 55

lacs with Canara Bank, Shimla wherein the Saving Bank

Account was jointly maintained with his wife and the sale

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proceeds were converted into FDR. The investme nt in the

specific property at Mohali, accordingly, was made from the

assessee's professional income. In these circumstances, the

case of the Revenue, as noted, presumably is build on the

fact that it is not the very same colour of the specific notes

received from the sale of property which is deposited in the

acquisition of the new asset. There are plethora of decisions

on the issue which hold that the law nowhere requires that

there should be a live link between the amount of capital

gain and in the purchase of the new asset where the asset is

purchased within the stipulated time of filing of return. The

law does not require the assessee to hold on to the very same

money and de monstrate that the very same money is utilized

in the acquisition of the asset. Requirement of the law is

that the money so available to the assessee to that extent on

which exemption u/s 54 is sought to be claimed ought to be

invested in the acquisition of the specific asset within the

stipulated time. It would be appropriate here to support our

conclusion by making a reference to C. Aryama Sundaram Vs

CIT (2018) 407 ITR 1 (Mad). The Court considering the

require ments of Section 54 of the Income Tax Act held as

under : “22. It is axiomatic that Section 54(1) of the said Act does not contemplate that the same money received from the sale of a residential house should be used in the acquisition of new residential house. Had it been the intention of the Legislature that the very same money that had been received as

ITA 8 /CHD/2016 A.Y. 2008-09 Page 14 of 15 consideration for transfer of a residential house should be used for acquisition of the new asset, Section 54(1) would not have allowed adjustment and/or exemption in respect of property purchased one year prior to the transfer, which gave rise to the capital gain or may be in the alternative have expressly made the exemption in case of prior purchase, subject to purchase from any advance that might have been received for the transfer of the residential house which resulted in the capital gain.

4.1 We also find that by way of investing more than Rs.

49.88 lacs odd, the amount for which exemption is sought

(Rs. 38.61 lacs odd) which was paid to the “The View” MGF”

the assessee had done all it could have the position of law

which has been well appreciated by the Delhi High Court in

CIT Vs R.L. Sood (2000) 245 I TR 727; CIT Vs Kuldeep Singh

(2014) 226 Taxman 133; CIT Vs Smt. B.S. Shanthakumari

(2015) 60 taxmann.com 74 and CI T Vs Sardar Mal Kuthari

302 ITR 286. The sum total of the legal view can be

summarized that where the assessee having invested

substantial amount in the purchase of a new asset within

the specified period, the assessee could be said to have

acquired substantial domain over the property entitling him

for claim of exemption. The Board’s Circular clarifying the

position for DDA allotme nts as referred to in Circular No.

471 (1986) 162 ITR (S.C.) 41 dated 15 t h Oct.,1986 may also

be referred to. Accordingly, not-withstanding the fact that

no specific information was noticed by the Revenue on the

basis of which re-opening has been made, the fact re mains

that there is nothing placed on record by the Assessing

ITA 8 /CHD/2016 A.Y. 2008-09 Page 15 of 15

Officer or tax authorities to justify the claim that the re-

opening was warranted beyond the period of four years. In

the facts of the present case, we find that on merits, the

case of the assessee deserves to be allowed. The addition

made by way of a disallowance on the claim of exemption

cannot be upheld for the detailed reasons addressed herein

above which are in line with the position of law as argued

before the CIT(A) and canvassed before us. Even otherwise

we find that in the facts of the present case, nothing has

been brought on record by the revenue to demonstrate that

the action was warranted beyond a period of four years in

the facts as they stand. Accepting the explanation offered

and on consideration of facts, circumstances and position of

law as discussed herein above, the appeal of the assessee is

allowed.

Order pronounced in the Open Court on 25 th September,2019. Sd/- Sd/- ( अ�नपूणा� गु�ता ) ( �दवा �संह ) (ANNAPURNA GUPTA) (DIVA SINGH) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member