ITO, W-4, PANCHKULA vs. SMT. SEEMA BISHNOI, PANCHKULA

PER N.K. SAINI, VICE PRESIDENT :

This is an appeal by the Department against the order dt. 22/11/2017 of Ld. CIT(A)-, Panchkula

i) Whether on the facts and the circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is right in law in considering the Farm House a residential house for the purpose of claiming exemption under Section 54F of the Income Tax Act, 1961?

ii) Whether on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is right in law in holding that the Assessee fulfilled all the conditions required for claiming deduction under Section 54F of the Income Tax Act, 1961?

iii) Whether on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is right in law in holding that there being no claim in the return and during the proceedings before Deputy Director of Income Tax (Investigation) for deduction under Section 54F of the Act, the claim under Section 54F could be considered? iv) Whether the Ld. Commissioner of Income Tax (Appeals) is right in law in holding that the Assessing Officer ought to have examined the claim under Section 54F ignoring the fact that the Assessing Officer considered both the claims as per law? v) It is prayed that the order of the Ld. CIT(A) be set-aside and that of the A.O. be restored.

vi) The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.

The Assessing Officer also received information from the DDIT (Investigation) Unit 1(1) New Delhi on the basis of which he recorded the reasons and issued notice under section 148 of the Act. The Assessing Officer observed that as per the information from DDIT (Investigation) the assessee claimed that the land purchased was an agriculture land however as per the enquiry carried out by the said office no agricultural activity was being carried out on the said land and therefore the deduction under section 54B of the Act was no admissible. The Assessing Officer also visited the said premises to ascertain its nature and found that the land was not being used for agriculture purposes, the water level was observed to be too low for carrying out agricultural activity, surrounding area was residential area and was fully developed, photos of the land showed a large residential construction and that the said premises was being occupied by the relatives of the assessee. The Assessing Officer also observed that the assessee had not declared any agricultural income for any Assessment Year and therefore no agricultural operations were being performed. The Assessing Officer also

enquired about the status of this land from the Municipal Corporation of Delhi who replied that the land comes in the municipal limit as per notification no. 1405 of Government of India dt. 18/06/2013 and this area comes in lower density residential area. Therefore the assessee was not eligible for claiming exemption under section 54B of the Act.

"i. The assessee in his computation clearly stated that this exemption is being claimed for purchase of agricultural land. Therefore the assessee is not eligible for this deduction.

ii. Even the DDIT (Inv) also stated in the letter that the assessee has claimed deduction u/s.54B, hence not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961.

iii. On perusal of registry of the question land it was noticed that the whole amount of the purchased assets was related to land only not for any residential house. As this amount is not related to any residential house, therefore the assessee is not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961.

iv. In its reply the assessee stated that due to clerical error, it has mentioned as exemption u/s.54B instead of 54F of the I T Act, 1961. This plea is not acceptable as the assasee claimed many times exemption u/s.54B of the Income Tax act. 1961. This exemption not only claimed in this office but also in the office of DDIT(lnv), New Delhi and DDIT(lnv),Panchkula. This shows that the assessee was actually claiming deduction u/s.54B of the Income Tax Act, 1961 then suddenly it turned its view and claimed deduction u/s.54F of the I T Act, 1961.

v. The assessee clearly stated in her affidavit that she is residing at Panchkula only. It again shows that the land has not been purchased for residential purpose.

vi. During the course of physical inspection of the said premises statement of Shri Saurabh Kumar who was found in the premises at Delhi has been recorded u/s.131 of the I T Act, 1961 in which he has stated that he is residing in the said premises since December, 2014. This again shows that this land has not been purchased for residential purpose of the assessee. Hence not eligible for deduction u/s.54F of the Act.

vii. The assessee has claimed exemption in its computation for the purchase amount of land only. It shows that this investment has been made only for purchase of land only not for purchase of residential house. If this exemption would have been claimed for residential house, then the assessee would claim it for the both amount i.e. land purchase amount and construction of house amount but the assessee claimed exemption for purchase of land only not for construction of house amount. Therefore, the assessee is not eligible for claiming exemption u/s.54F of the Income Tax Act.

amounting to Rs. 61,13,24,357/- which was added back to the taxable income of the assessee. The reliance was placed on the following case laws :

• Rasiklal Chimanlal Nagri Vs. CIT, 56 ITR 608 • Raja Mustafa Ali Khan Vs. CIT, 16 ITR 330 • CIT Vs. Raja Benoy Kumar Suhas Roy, 32 ITR 466 (SC) • State of UP Vs. Nand Kumar Aggarwal, AIR 1998 SC 473, 476 • Vallabdas Narainji Vs. Development Officer, AIR 1929 PC 163 • Tea Estates India Private Ltd. Vs. Commissioner of Wealth Tax • CIT Vs. Gemini Pictures, 220 ITR 43 • Sarifabibi’s Case [ 1993] 204 ITR 631 (SC) • CWT Vs. Officer-in Charge (Court of Wards), Paigah [1976] 105 ITR 133 (SC) • T. Sarojini Devi V. Sri Kristna, AIR 1944 Mad 401 • CIT Vs. V.A. Trivedi [1988] 172 ITR 95 • CIT Vs. Siddharth J. Desai [1981] 139 ITR 628 9. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submissions on 24/11/2016 the relevant portion of which had been incorporated by the Ld. CIT(A) in para 4.5 of the impugned order which is reproduced verbatim as under : “ In this regard the appellant submit that the appellant is legally entitled to claim deduction U/s 54F of the Act. The appellant complies with the requirement of provisions of section 54F of the Act, which can be summarized as under:-

i. Appellant has purchased another house within one year from the date of sale of the old long term asset; ii. She does not own any other house property on the date of transfer of original asset; iii. Income from the newly purchased premises is chargeable under income from house property u/s 23(2) of the Act as self-occupied assets. Therefore since the appellant has complied with the provisions of section 54F of the Act, the Learned Assessing Officer should have allowed deduction U/s 54F of the Act. However Learned Assessing Officer chose to deny the same on flimsy reasons. The allegation made by the Learned Assessing Officer for disallowing the exemption is totally baseless. Our submission on the allegation of Assessing Officer is as under: The assessee in his computation clearly stated that this exemption is being claimed for purchase of agricultural land. Therefore the assessee is not eligible for this deduction.

The allegation of the Learned Assessing Officer is not correct. In computation the appellant has clearly mentioned that she is claiming exemption u/s.54F/54B of the Income Tax Act, 1961. This can be verified from the Assessment Order, where in on pg no 2, the Learned Assessing Officer reproduced the computation of the total income, in this it is clearly reflect that the appellant claim the exemption u/s.54F/54B of the Act. The reiteration of the claim u/s.54F of the Act during the course of the assessment is merely an extension of the alternate claim made in the return of income. Further the said claim of appellant based on the documentary evidence in the form of purchase agreement, evidence collected by the Assessing Officer during the course of assessment etc, which proves that the appellant has purchased the residential house with the land appurtenant thereto. ii. Even the DDIT (Inv) also stated in the letter that the assessee has claimed deduction u/s.54B, hence not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961.

At the outset the appellant submit that correspondence received from the DDIT(lnv) has not been shared with the assessee. Further as regards to the reply submitted by the assessee we submit that in response to the notices/enquiry by the DDIT(lnv), New Delhi, appellant has submitted copy of her return of income along with computation of total income . In the said computation reference of both section was mentioned, hence conclusion drawn by the DDIT(lnv), New Delhi is based on the documents submitted with them and no negative inference can be drawn from the preliminary findings of the DDIT(lnv), New Delhi. Therefore the allegation of the Learned Assessing Officer that the assessee is claimed deduction from time to time u/s54B is not sustainable. iii. On perusal of registry of the question land it was noticed that the whole amount of the purchases assets was related to land only not for any residential house. As this amount is not related to any residential house, therefore the assessee is not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961. In this regard we submit that appellant has entered into sale deed dated 19.10.2012 with Shri Karon Gupta for purchase of land with constructed house therein for a total consideration of Rs.59,50,00,000/-. This fact is clear from the agreement itself on page no 6.which reads as under: “AND WHEREAS the vendor for this bonafide needs and requirements has agreed to sell and the vendor has agreed to purchase the said land i.e. agriculture land measuring 12 Bighas, bearing Mustatil No. 18 Kill No. 5 (2-18), 6 min (3-3), 7 min (1- 2), 14 min (1-2) and 15 min (3-15), with Boundary Wall, Tube-Well , Electric connection and Build-Up Farm house thereon, situated at village Jonapur, Tehsil Mehrauli, New Delhi with all right of ownership, possession privileges, easements and appurtenances attached thereto, for a total sale consideration of Rs. 59,50,00,000/-(Rupees Fifty Nine Crores Fifty Lacs Only)." Further in recital of the said agreement it is clearly mentioned that the vendor has taken approval from the concerned authority for construction of residential house (Farm House) by the M.C.D. vide their file no 336/B/HQ/2006/94/AEI dated 07.06.2006. These facts clearly states that the appellant purchased the residential with land duly approved by the concerned authority. Copy of sale deed is enclosed on page no 5-14. for Your Honours ready reference and records. Therefore the allegation of Learned Assessing Officer that the assessee merely purchased land lacks merit, hence needs to be rejected. iv. In its reply the assessee stated that due to clerical error, it has mentioned as exemption u/s.54B instead of 54F of the I T Act, 1961. This plea is not acceptable as the assessee claimed many times exemption u/s.54B of the Income Tax Act, 1961. This exemption not only claimed in this office but also in the office of DDIT(lnv), New Delhi and DDIT(lnv), Panchkula. This shows that the assessee was actually claiming deduction u/s.54B of the Income Tax Act, 1961 then suddenly it turned its view and claimed deduction u/s.54F of the IT Act, 1961. The appellant submit in the computation of total income the claim of deduction was mentioned u/s.54B/54F of the Act. As stated earlier during the assessment proceedings the appellant has simply drawn the attention of the AO towards the alternate claim of the assessee. The appellant further submit that even if the appellant claimed deduction under wrong section than it is duty of the officer to give the assessee claim of exemption in a right section of the Act. In this regard attention is invited to the DT Circular no 14.(XL-35), dated 11-4-1955, which read as under:

"IT Officers must not take advantage of ignorance of an assessee "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should -

a. draw their attention to any refund or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; b. freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs."

Further Bombay High Court in the case of Balmukund Acharya Vs. Deputy Commissioner Of Income Tax & Ors.: 310ITR 310, held that 31. Having said so, we must observe that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under theAct are required to assist him and ensure that only legitimate taxes due are collected [see S.R. Koshti vs. CIT (2005) 193 CTR (Guj) 518 : (2005) 276 ITR 165 (Guj), CPA. Yoosuf vs. ITO (1970) 77 ITR 237 (Ker), CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del), CIT vs. Archana R. Dhanwatey (1981) 24 CTR (Bom) 142 : (1982) 136 ITR 355 (Bom)]. 1. If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel [see Dy. CSTvs. Sreeni Printers (1987) 67 SCC 279]. 2. This Court in the case of Nirmala L. Mehta vs. A. Balasubramaniam, CIT (2004) 191 CTR (Bom) 8 : (2004) 269 ITR 1 (Bom) has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the AO to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field."

The same view was held by the Indore Tribunal in the case of Paramjeet Singh Chhabra v. ITO (2013) 59 SOT 165 wherein the assessee claimed the exemption under wrong section but the Hon'ble IT AT directed the AO to allow the claim under correct section. The fact of the case was as under: "The assessee sold a shop and worked out the capital gains. He invested the sale consideration in construction of residential house and claimed exemption under sections mentioning sections 54B, 54D and 54F in the return. The Assessing Officer denied exemption claimed on ground that assessee had mentioned wrong sections while claiming exemption. Held where due to ignorance wrong section had been mentioned by assessee in return. On appeal the Tribunal held that the Assessing Officer was required to advise assessee about correct claim and also to assess tax legitimately. Tribunal referred the Circular no 14.(XL-35), dated 11-4- 1955 and letter No.F.81 /27/65-IT(B) dated 18-5-1965) and directed the Assessing Officer to allow the claim under section 54F after providing due opportunity of hearing." Further attention is invited to the provisions of section 292B of the Act, which states that return of income shall not be invalid merely by reason of any mistake, defect or omission if such return of income is in substance and in effect in conformity with or according to the intent and purpose of the Act. Considering the above judicial pronouncements, provisions of law and facts of the case it is clear even if the assessee has claimed deduction under wrong section, it is duty of the Assessing Officer to guide the assessee and allow deduction under correct provisions of law if the same is in substance in conformity with the Act. Therefore allegation of the Learned Assessing Officer that the claim was made in return of income U/s 54B and not 54F is not sustainable and needs to be rejected. v. The assessee clearly stated in her affidavit that she is residing at Panchkula only. It again shows that the land has not been purchased for residential purpose.

vi. During the course of physical Inspection of the said premises statement of Shri Saurabh Kumar who was found in the premises at Delhi has been recorded u/s.131 of the I T Act, 1961 in which he has stated that he is residing in the said premises since December, 2014. This again shows that this land has not been purchased for residential purpose of the assessee. Hence not eligible for deduction U/S.54F of the Act. In this regard we submit that it is general practice in India that on various legal document there is a particular address which could either belongs to him/her or any of his/her relative. Similarly in this case the appellant prior to acquisition of this property was using her earlier address on all legal documents including return of Income but it does not mean that the appellant does not own new acquired property which is duly supported with legal documents. The Ld AO has wrongly drawn inference from the address used on affidavit which clearly shows that he does not have valid grounds to reject the legal claim of appellant. Further reliance on the statement of Shri Saurabh Kumar, part of which is reproduced on page 23 of the order, wherein he has confirmed that he is staying in the house for two years and Seema Bishnoi, who is owner of the house is his cousin sister, is also support the claim of appellant that the property purchased by the appellant is a residential property. The reliance on this statement does not reflected in his action, as he has not made any addition on account of rental income and treated the newly acquired as self-occupied property of the assessee. Even otherwise for claiming the exemption u/s.54F it is not the condition that the assessee should reside in the house which she purchased. The same view was held by the Hon'ble IT ATDelhi Bench in the case of Amit Gupta v. Deputy Commissioner of Income-tax, 6 SOT 403, on which the appellant placed its reliance. It was held that: "The requirement of section 54F is that the property should be a residential house. The expression 'residential house' has not been defined in the Act. The popular meaning of the word is a place or building used for habitation of people. It is used in contradistinction to a place which is used for the purpose of business, office, shop, etc. It is not necessary that a person should reside in the house to call it a residential house. If it is capable of being used for the purpose of residence, then the requirement of section 54F is satisfied. The fact that the asressee did not actually use the same for his residence would not disentitle him to the claim of exemption under section 54F”

Thus from the above it is clear that for claiming the exemption is that the property should be a residential house, there is no restriction for claiming the exemption that the assessee is not residing in the same house. The assessee has claimed exemption in its computation for the purchase amount of land only. It shows that this investment has been made only for purchase of land only not for purchase of residential house. If this exemption would have been claimed for residential house, then the assessee would claim it for the both amount Le. land purchase amount and construction of house amount but the assessee claimed exemption for purchase of land only not for construction of house amount Therefore, the assessee is not eligible for claiming exemption u/s.54F of the Income Tax Act

In this regard we submit that the appellant on 19th October 2012 purchased farm house along with its surrounding land for a consideration of Rs. 62,47,51,100/-. In the agreement it is clearly mentioned that the appellant purchased the land with residential house built over there. As per the section 54F of the Act, the assessee is eligible for claiming the exemption under section 54F if assessee invest the sum in purchasing or construction of the house. In the present case the appellant purchased the farm house along with its surrounding land. Now the question arises whether farm house comes under the purview of the residential house or not. The Hon'ble Jaipur IT AT in the case of Shyam Sunder Mukhija vs Income-Tax Officer, 38 ITD125 held that "the Farm House can be treated as residential house for the purpose of the claiming exemption u/s.54F of the Act." The relevant finding (of the case is as under:

“ The expression ‘residential house' used in section 54F has not been defined. The popular meaning of the word 'house' is a place or building used for habitation of

man. 'Residential house' is a dwelling house as distinct from a house of business, warehouse, office, shop, etc. In other words, residential house is a building used as a place of abode in which people reside or dwell in contra-distinction to one which is used for commercial or business purposes. Since a house is called residential house with reference to the purpose of its user, it may not be necessary that somebody should live in it continuously. It is enough if it was a house for residence. A farm house is also a residential house. A farm house, according to the dictionary meaning, is a farmer's house attached to a farm. In the present case, there was no evidence that there was any farm in existence. The assessee had paid Rs. 7,560 on 7-4-1984 as conversion charges. He again paid Rs. 4,200 as development charges to the UlTon 26-5-1984. Therefore, the ITO could not take the view that what was in existence could not be called as a residential house. The description of the construction, which was not in dispute, showed that it was a complete unit having a big hall, kitchen, toilet and verandah notwithstanding the size of the swimming pool, which was also there. As rightly pointed out by the assessee, there was no prohibition regarding the construction of a residential house on agricultural land. Therefore, the assessee was entitled to the deduction claimed under section 54F." The appellant purchased the farm house along with its surrounding land. The Assessing Officer due to its surrounding land come to the conclusion that the assessee has purchase the land, hence not eligible for the exemption ufs.54F of the Act. The land which is vacant land appurtenant to and forming part of the residential unit is to be considered for the claim of exemption under section 54F of the Act. It is not necessary the residential unit is to be constructed on the whole land. The same view was held by the Hon'ble Delhi Bench in the case of ACIT vs Narendra Mohan Uniyal, 34 SOT 152 . The finding of the said case law is as follows: "It is crystal clear from plain reading of sections 54 and 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is not any rider under section 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. Therefore, the contention of the revenue, that there is a distinction with respect to investment in appurtenant land as per sections 54 and 54F, was not tenable at all. In the instant case, there was no dispute to the fact that investment of capital gains was made within the statutory period and moreover within the same financial year. Another plot of land which was purchased by the assessee was adjacent to the plot already purchased during the relevant year itself out of capital gains. Only because construction was made on the first plot of land, the exemption claimed in respect of investment made in adjacent plot of land could not be declined when all the other conditions as stipulated under section 54F were being satisfied. While dealing with the objection of the Assessing Officer, the Commissioner (Appeals) had categorically given a finding that the land so purchased was one piece of plot having area of 2,000 sq. mtr. Both these plots were having 1,000 sq. mtr., of land. Both the plots formed part of one residential unit and were contiguous and adjoining to each other. The comment of the Assessing Officer to the effect that exemption under section 54F was eligible only for construction of house was not tenable insofar as even cost of land forming part of the residential unit on which no construction was done was also eligible for exemption under section 54F. Thus, the cost of vacant land appurtenant to and forming part of the residential unit was to be considered for claim of exemption under section 54F even if no construction had been done on the appurtenant land. The provisions of section 54 clearly provide for exemption if the net consideration received as a result of transfer of any capital asset, other than a residential house, is invested in the purchase or construction of a residential house. The new residential house is not debarred from having a land appurtenant to any size and it was also not the case of the Assessing Officer that the land appurtenant to the building was not entitled to exemption under section 54F. Had it been a case of land not appurtenant to the building so constructed, then the contention of the Assessing Officer to the effect that investment of capital gains made in the second plot which was not appurtenant to the building so constructed was not eligible for exemption, could be favourably accepted. [Para 10]

In view of the above discussion and keeping in view the detailed observation made by the Commissioner (Appeals), it could safely be concluded, on a proper appreciation of material available on record, that the property purchased by the assessee was a single unit and was being used for residential purposes. Therefore, investment made in respect of both the plots was eligible for claim of exemption under section 54F, Therefore, the order of Commissioner (Appeals) was to be upheld. [Para 11] In the result, the appeal of the revenue was to be dismissed, whereas cross- objection filed by the assessee was to be allowed. [Para 12]." Thus from the above it is clear that the appellant is eligible for claiming the exemption u/s.54F of the Act, hence the same should be allowed to the appellant. In view of the above facts and circumstances, in the light of the above submission, it is respectfully prayed that the additions made is deserves to be deleted. This being our brief submission we shall please to provide details/ explanation in case your Honour do not convince with our above submissions. "

Second ground of appeal:- That, alternatively, on the facts of the case and in law, the learned assessing officer has erred in disallowing the exemption u/s 54F of the Act in respect of the aforesaid long term capital gain. Assessee is not eligible for exemption u/s 54F on the following reasons:- 1. Exemption u/s 54F is available for purchase of the residential house, not for purchase of agricultural land. The assessee in his computation clearly stated that this exemption is being claimed for purchase of agricultural land. Therefore the assessee is not eligible for this deduction. 2. As discussed above, DDIT(Inv.), New Delhi himself stated in his letter that the assessee has claimed deduction u/s 54B in his office. Therefore, the assessee is not eligible for claiming deduction u/s 54F of the Income Tax Act, 1961. 3. On perusal of registry of the question land it was noticed that the whole amount of the purchases assets was related to land only not for any residential house. As this amount is not related to any residential house, therefore, the assessee is not eligible for claiming deduction u/s 54F of the Income Tax Act, 1961."

10.1 In response to the above remand report of the Assessing Officer the assessee furnished the rejoinder vide letter dt. 23/08/2017 the contents of the same were as under: “ We ha ve been provided with the copy of remand report dated 25.07.2017, on which we make our observations as under:-

On perusal of the remand report it is seen that the assessing officer has not raised any new issue nor has rebutted the arguments submitted by the appellant during the course of appellate proceedings. The assessing officer was simply reiterated the reasoning given in the assessment order itself for disallowing the claim of the assessee. On various issues raised in remand report we submit as under:- During the course of assessment proceedings itself, the assessee vide letter dated 30.03.2016 has submitted that the exemption has been claimed u/s 54F for the purchase of constructed residential house and land appurtenant thereof and not for the purchase of agricultural land. The fact regarding the claim made by the assessee u/s 54F during the course of assessment proceedings has been confirmed by the assessing officer himself in Para 6 of the remand report. Thus it is

very clear and is being admitted that there is no claim for deduction u/ s 54B and the claim of the appellant is only u/s 54F of the Income Tax Act. For disallowing the claim of the appellant u/s 54F, the AO in Para 1 has only stated that the exemption u/s 54F is available for purchase of residential house & not for purchase of agricultural land. Since the assessee has made the claim for purchase of agricultural land so the assessee is not eligible for deduction u/s 54F. In this regard we submit that the assessee vide letter dated 30.03.2016 has clarified the issue regarding claim for deduction u/s 54F stating that the claim is for the purchase of residential house. It is a matter of fact that the assessee has purchased build up farm house along with the land appurtenant thereto. Therefore the claim of the assessee u/s 54F is as per the provisions of law. In Para 2, the AO has stated that the assessee before the DDIT (Inv.) has submitted that the exemption has been claimed u/s 54B. In this regard it is submitted that the assessee has never been confronted with the report of DDIT(Inv) and no opportunity has been given to the assessee to submit her observations on the same. However as per the assessee, the assessee has only furnished the computation of income before the DDIT(Inv) wherein both the sections i.e. 54B/54F were mentioned and the DDIT (Inv) has formed his own opinion on the same. In the absence of any statement by the assessee before the DDIT(Inv) we submit that no adverse inference on the same be withdrawn.

Even if for the sake of argument it is assumed that the assessee has made a statement regarding claim u/ s 54B before the DDIT(Inv), it would not disentitle the assessee to make the claim under the correct section of the Income Tax Act during the assessment proceedings. Since the issue regarding claim of deduction has been clarified during the course of assessment proceedings and the said fact has been admitted by the AO in Para 6 of the remand report, we submit that the AO is not justified in denying the claim u/s - F of the Income Tax Act. In Para 3 the AO has stated that on perusal of the registry it was noticed that the whole amount ofpurchased asset relates to land only & not for residential house, therefore the assessee is not eligible for claiming deduction u/s 54F. In this regard we would like to draw your kind attention towards Para 3 on Page 2 of the purchase deed wherein it has been written as under:- "Whereas the vendor is the sole, absolute and exclusive owner/bhumidar and is in possession of agricultural land measuring 12 Bighas bearing Mustatil No. 18 Kill No, 5 (2-18), 6 Min (3-3) 7 Min (1-2) 14 Min (1-2) and 15 Min (3-15) with boundary wall, Tube well, electric, connection and build up Farm house thereon, situated at Village J onpur, Tehsil Mehrauli, New Delhi, (hereinafter referred to as "THE SAID LAND")

Para 2 on Page 6 of the purchase deed wherein it has been written as under :- "AND whereas the vendor for this bonafide needs and requirements has agreed to sell and the vendor has agreed to purchase the said land i.e. agriculture land measuring 12 Bighas bearing Mustatil No. 18 Kill No. 5 (2-18), 6 Min (3-3) 7 Min (1-2) 14 Min (1-2) and 15 Min (3-15) with boundary wall, Tube well, electric, connection and build up Farm house thereon, situated at Village Jonpur, Tehsil Mehrauli, New Delhi with all right of ownership, possession privileges, easements and appurtenances attached thereto, for a total consideration ofRs. 59,50,00,000/- (Rupees Fifty Nine Crores Fifty Lacs only) " Further on Page 4 of the conveyance deed it is clearly mentioned that the vendor has taken approval from the concerned authority for construction of residential house (Farm House) by the M. C. D. vide their file No: 336/B/HQ/2006/94/AE1 dated 07.06.2006. These facts clearly prove that the appellant had purchased a residence house along with land appurtenant thereto. Therefore, the allegation of Learned Assessing Officer that the assessee has purchased land only lacks merit, hence needs to be rejected. Further the farm house is to be considered as residential house for the -purpose of exemption u / s 54F for which reliance is placed on the following judicial pronouncement.

The Honb'le Jaipur ITAT in the case of Shy am Sunder Makhija Vs. Income-Officer, 38 ITD 125 held that "the Farm House can be treated as residential house for the purpose of the claiming exemption u/s. 54F of the Act.” In view of the above, the AO has erred in alleging that the payment has been made for purchase of land only and the contentions drawn by the AO are not tenable. It is further submitted that we rely upon the submissions made before your goodself and alternatively even if it is assumed that the assessee has claimed exemption u/s 54 B and has made a wrong claim in the return of income, even then, the assessee cannot be denied the benefit for claim of exemption if he fulfills & is eligible for claim under some other section. Also it is an accepted fact that the assessee has made a correct claim before the assessing officer during the course of assessment proceedings. The assessee cannot be debarred of any benefit if he is eligible under the provisions of the act and the assessing officer is duty bound to allow the benefit to the assessee and should not take the benefit of ignorance of law of the assessee. For this we rely on the CBDT Circular No: 14.(XL-35) dated 11.04.1955 which reads as under:- "Officers of the department must not take advantage of ignorance of an assessee as to his rights. " The same view was held by the Indore Tribunal in the case of Paramjeet Singh Chhabra v. ITO (2013) 59 SOT 165 URO wherein the assessee claimed the exemption under wrong section but the Hon'ble IT AT directed the AO to allow the claim under correct section. In view of the above we request that the AO be directed to allow the claim of the assessee u/s 54F and the appeal be allowed."

even if the assessee had not made claim of deduction while filing his return of income and had subsequently during the course of assessment proceeding made the claim of such deduction than it has the right to avail all the deduction if it satisfies all the eligibility criteria for the said deduction and that the deduction cannot be denied merely on the ground that it was omitted to be claimed at the time of filing the return of income. The reference was made to the CBDT Circular No. 14 (XL-35) dt. 11/04/1955, the Ld. CIT(A) also referred to the decision of the ITAT in the case of Paramjeet Singh Chhabra Vs. ITO (2013) 59 SOT 165 wherein the asssessee claimed the exemption under wrong section but the ITAT directed the Assessing Officer to allow the claim under the correct section after providing due opportunity of hearing. She also referred to the decision of Hon’ble Bombay High Court in the case of Balmukund Achayra Vs. DCIT and others reported at 310 ITR 310 wherein the issue of giving relief was admissible to the assessee even if it was not claimed in the return of income.

11.1 Ld. CIT(A) categorically stated that in the present case the assessee in the computation of income, filed alongwith return of income, claimed the exemption as “ under section 54F / 54B”, the said computation sheet had been reproduced in the assessment order at page no. 2. She therefore held that there was claim by the assesee for exemption under section 54F or 54B of the Act in alternate.

11.2 Ld. CIT(A) observed that the Assessing Officer did not deny that the assessee had made the claim for exemption under section 54B and had meticulously met enquiry for examining the eligibility of the assessee for this exemption and that the assessee had subsequently claimed exemption under section 54 during the assessment proceeding vide here letter dt. 30/03/2016, on the basis of registered purchase deed, claiming purchase of residential house with land appurtenant thereto. Therefore in the interest of natural justice the assessee’s claim of exemption under section 54F could not have been rejected even if by bonafide mistake she has wrongly claimed exemption under section 54B. Ld. CIT(A) referred to the condition required to be fulfilled for claim of exemption under section 54F as under: i. Assessee has invested the capital gains in purchase of a residential house within a period of one year before or two years from the date of sale of the original asset; or has within a period of three years constructed one residential house. ii. the assessee does not own more than one other house property on the date of purchase of new asset; or does not purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or does not construct any residential house, other than the

new asset within a period of three years after the date of transfer of the original asset. iii. Income from the newly purchased residential house is chargeable under the head Income from house property.

11.3 Ld. CIT(A) observed that the property purchased by the assessee was being used for residential purposes alone which had been proved by the Assessing Officer during his enquiry, therefore the status of the property being residential had not been disputed by the Assessing Officer which was also clear from the registered sale deed dt. 19/10/2012 relevant para of which reads as under:

'AND WHEREAS the vendor for this bonafide needs and requirements has agreed to sell and the vendor has agreed to purchase the said land i.e. agriculture land measuring 12 Bighas, bearing Mustatil No. 18 Kill No. 5 (2-18), 6 min (3-3), 7min (1- 2), 14 min (1-2) and 15 min (3-15), with Boundary Wall, Tube- Well, Electric connection and Build-Up Farm house thereon, situated at village Jonapur, Tehsil Mehrauli, New Delhi with all right of ownership, possession privileges, easements and appurtenances attached thereto, for a total sale consideration of Rs. 59,50,00,000/-(Rupees Fifty Nine Crores Fifty Lacs Only)."

11.4 The Ld. CIT(A) was of the view that the assessee had purchased a pre- constructed farm house in Mehrauli Low Density Residential Area of Municipal Corporation of Delhi with appurtenant land and total consideration had been mentioned in the purchase deed in which it was clearly mentioned that the original owner had taken approval from the concerned authority i.e; Municipal Corporation of Delhi for construction of farm house on the said land on 07/06/2006 and it was not the case of the Assessing Officer that the farm house was not existing at the time of purchase of the property. The Ld.CIT(A) also mentioned that the photographs of the impugned property were also incorporated in the assessment order which showed that it was a farm house bungalow with extensive landscaped garden and driveways. The farmhouse was being used by the assessee for residential purpose as self occupied property. She also pointed out that the farm house could be considered as a residential house for the purpose of claiming exemption under section 54F of the Act. The reliance was placed on the decision of ITAT Jaipur Bench in the case of Shyam Sunder Makhija Vs. ITO reported at 38 ITD 125.

11.5 Ld. CIT(A) pointed out that the relevant notification of Ministry of Urban Development (Delhi Division) permitted development of farm house on a land area measuring between one to two hectares in Low Density Residential Area till 2013. The Ld. CIT(A) also pointed out that the purchase of the said residential property had been made within the statutory period of two years from the date of receipt of the capital gains and the assessee had also submitted that she did

not own any other residential house as on the date of purchase of the said asset and this was only residential house she possessed till date, the purchase was made on 19/10/2012 i.e; before furnishing of Income Tax Return for the relevant A.Y. 2013-14, therefore there was no requirement of depositing the gains in the capital gain account with the bank. The Ld. CIT(A) accordingly held that the assessee was eligible for claim of exemption under section 54F of the Act, since all the conditions required for the claim were being made by her. Therefore, the addition made by the Assessing Officer was deleted and the Assessing Officer was directed to allow the exemption under section 54F to the assessee.

• CIT Vs. M. Kalpagam 227 ITR 722(Mad) • DCIT Vs. Kalyana Raman Nalraja 82 Taxman.com 93 Chennai • Addl. CIT Vs. Narender Mohan Uniyal ITA No. 1624/Del/2009 dt. 31/08/2009 • Amt Gupta Vs. DCIT 6 SOT 403 (Del Trib)

The powers of the Assessing Officers under the Act are quasi-judicial in nature and they are duty-bound, therefore, to act fairly in the discharge of their functions. They are also invested with the authority to do justice to the assessees. In a case where it is apparent on the face of the record that the assessee has included in his return, an income which is exempted from payment of income-tax, on account of ignorance or by mistake, the Assessing Officer is bound to take into account that fact in a proceeding under section 143 of the Income-tax Act, 1961. In other words, if the capital gains on a transaction are exempted from payment of tax, the Assessing Officer has a duty to refrain from levying tax on the capital gains and the Assessing Officer cannot, in such cases, refuse to grant relief under section 143 of the Act to the assessee on the technical plea that the assessee has not filed a revised return. It is so since the paramount duty of the Assessing Officer is to complete the assessments in accordance with law.

The assessee received a sum of Rs. 1,28,43,192 in the year 2014-15 by way of compensation for land acquired from him for the Kochi Metro Rail Project. The assessee, at the relevant time was under the impression that the capital gains resulting from the acquisition of the land was exigible to tax under the Act. Consequently, in the return filed by the assessee under the Act for the assessment year 2015-16, he had disclosed the capital gains resulting from the acquisition of the land and paid tax on that basis. Tor that purpose, the assessee had worked out the indexed cost of the land reckoning its fair market value as on April 1,1981 at Rs. 50,000 per cent. The return was taken under scrutiny. The deduction claimed by the assessee under the head "Capital gains" was the issue identified for examination. An inquiry was started. In the meanwhile, in the light of section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the court held in a number of cases that compensation payable to persons for the lands acquired under the statute was exempted from payment of tax under the Act. In the circumstances, in so far as the acquisition of the land of the assessee was under that statute, the assessee submitted a reply to the notice requesting the Assistant Commissioner to drop the proceedings initiated against him under section 143 of the Act. Since the Assistant Commissioner did not consider the request made by the assessee, the assessee filed a writ petition challenging the continuance of the proceedings under section 143. The writ petition was admitted on July 24, 2017 and an interim order was passed on July 24, 2017 restraining the Assistant Commissioner from continuing the proceedings. In the meanwhile, the assessee was served with an order dated July 14, 2017, by which the Assistant Commissioner completed the proceedings raising a demand for Rs. 9,95,070. On a writ petition:

Held, that this was a clear case where the Assistant Commissioner had penalised the assessee for having paid tax on an income which was not exigible to tax. The order, in the circumstances, was liable to be quashed.

In the present case, even if the assessee claimed the deduction under both section i.e; 54F and 54B of the Act, it was the duty of the Assessing Officer to allow the right deduction for which the assessee was eligible. 18. As regards to the admissibility of the claim made during the course of assessment proceeding, the CBDT issued a Circular No. 14 dt. 11/04/1955 which reads as under:

"IT Officers must not take advantage of ignorance of an assessee Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should - (a) draw their attention to any refund or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs."

From the aforesaid Circular, it is crystal clear that the Assessing Officer must not take advantage of ignorance of the assessee as to his rights & liabilities, it is one of the duty of the officer to advice when approached by the assessee as to his rights and liability and as to the procedure to be adopted for claiming refund and relief.

18.1 In the present case the assessee claimed deduction under section 54F of the Act, during the course of assessment proceeding and also duly mentioned in the computation of income for the said deduction. So, it was the duty of the Assessing Officer to allow the claim under section 54F of the Act if it was legally allowable to the assessee. In our opinion the Ld. CIT(A) rightly directed the Assessing Officer to allow the claim of the assessee under section 54F of the Act.

“12. Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residential house. The provision contemplates computing the cost of the residential building, but the value of the plot on which the farm house stands and the land appurtenant could also be considered.”

20.1 Similar view has been taken by the ITAT, Jaipur Bench in the case of Shyam Sunder Mukhija Vs. ITO [1991]38 ITD 125 wherein it has been held as under: “ The expression ‘residential house’ used in section 54F has not been defined. The popular meaning of the work ‘house’ is a place or building used for habitation of man. ‘Residential House’ is a dwelling house as distinct from a house of business, warehouse, office, shop, etc. In other words, residential house is a building used as a place of abode in which people reside or dwell in contra-distinction to one which is used for commercial or business purpose. Since a house is called

residential house with reference to the purpose of its user, it may not be necessary that somebody should live in it continuously. It is enough if it was a house for residence. A farm house is also a residential house. A farm house, according to the dictionary meaning, is a farmer’s house attached to a farm. In the present case, there was no evidence that there was any farm in existence. The assessee had paid Rs. 7,560 on 7-4-1984 as conversion charges. He again paid Rs. 4,200 as development charges to the UIT on 26-5-1984. Therefore, the ITO could not take the view that what was in existence could not be called as a residential house. The description of the construction, which was not in dispute, showed that it was a complete unit having a big hall, kitchen, toilet and verandah notwithstanding the size of the swimming pool, which was also there. As rightly pointed out by the assessee, there was no prohibition regarding the construction of a residential house on agricultural land. Therefore, the assessee was entitled to the deduction claimed under section 54F.”

20.2 Moreover, the Assessing Officer in the present case, himself admitted at page no. 16 of the assessment order that land purchased by the assessee came into Municipal Limit and in lower density residential area, the relevant observation of the Assessing Officer reads as under: “ It is pertinent to mention here that this land also comes within the purview of Municipal limits therefore it cannot be taken as agricultural land. A letter has been issued to the Chief Executive Officer, Municipal Corporation of Delhi(South), New Delhi for asking the municipal limited of the said land. In its response Executive Engineer(BLDG)-II South Zone replied that this land comes under municipal limit area. Again as per notification no. 1405 Government of India dated 18/06/2013, this area comes in lower density residential area. Therefore it shows that the investment in land is not for agricultural purposes. It is only a huge investment in urban area. It is purely capital assets for taxation purpose.”

20.3 In the instant case the Assessing Officer on the one hand reproduced the photographs of the farmhouse at page no. 6 of the assessment order which clearly shows the constructed farmhouse, on the other hand he mentioned in para (vii) at page no. 23 of the assessment order that the assessee claimed exemption in its computation for the purchased amount of land only and not for the purchase of residential house, the relevant observation of the Assessing Officer reads as under: “ vii) The assessee claimed exemption in its computation for the purchase amount of land only. It shows that this investment has been made only for purchase of land only not for purchase of residential house. If this exemption would have been claimed for residential house, then the assesee would claim it for the both amount i.e. land purchase amount and construction of house amount but he assessee claimed exemption for purchase of land only not for construction of house amount. Therefore, the assessee is not eligible for claiming exemption u/s 54F of the Income Tax Act.”

carried out on the land in question and the said property was being used for residential purpose which had been approved by the Assessing Officer during the enquiries. Ld. CIT(A) after verifying the record, mentioned in para 5.6 of the impugned order that in the purchase deed it was clearly mentioned that the original owner had taken approval from the concerned authority i.e; Municipal Corporation of Delhi for construction of farmhouse on the said land on 07/06/2006 which clearly established that the assessee purchased the residential property with appurtenant land, duly approved by the concerned authority. The purchase of the said residential property had been made within the statutory period of two years from the date of receipt of capital gains and the assessee also submitted that she had not owned any other residential house as on the date of purchase made on 19/10/2012 i.e; before furnishing of Income Tax Return for the year under consideration, therefore, the assessee fulfilled all the conditions to claim the exemption under section 54F of the Act and the Ld. CIT(A) rightly directed the Assessing Officer to allow the claim of the assessee for deduction under section 54F of the Act.

(Order pronounced in the open Court on 20/02/2019)

Sd/- Sd/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT Dated : 20/02/2019 AG Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR