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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Mahavir Prasad & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2013-14, arises from order of the CIT(A)- 7, Ahmedabad dated 19-10-2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised following grounds of appeal:- “1.1 The order passed u/s.250 on 19-10-2016 for A.Y.2013-14 by CIT(A)-7, Abad upholding the rejection of exemption u/s 54F of RS. 41 lacs and disallowances expenses aggregating to Rs.1,88,706/-made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned additions. 2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming the disallowance of exemption claimed u/s.54F of Rs.45 lakhs (later on reduced to Rs.30
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lakhs). The Ld. CIT(A) has failed to appreciate that the conveyance deed for purchase of new residential house could not be completed within the period of two years from the transfer of the original asset for sufficient and bonafide reasons so that the time involved in legal proceedings should be excluded and in the substance of the matter, there was proper compliance. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the denial of exemption u/s.54F. 3.1 The Ld. CIT(A) has erred in law and on facts in confirming the disallowance of claim of depreciation of Rs. 1,21,639/- and business expenses of Rs.67,067/-. 3.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld disallowance of claim of depreciation of Rs.1,21,639/- and business expenses of Rs.67,067/-.
2.1 The Ld. Counsel has stated that ground no.1.1 and 1.2 are of general and the ground of appeal no. 2.1&2.2 are the effective grounds of appeal. These grounds of appeal are connected to the common issue, therefore for the sake of convenience they are adjudicated together as under:-
The brief fact of the case is that return of income declaring income of Rs. 8,63,230/- was filed on 14th March, 2014. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 4th Sep, 2014. During assessment, the assessee was asked to furnish the details with respect to deduction claimed u/s. 54F of the act for long term capital gain invested in residential house. From the detail filed by the assessee, it was noticed that assessee has purchased one residential house and made payment of Rs. 30 lacs within the stipulated time period of two years, however, the payment of remaining amount and the documentation of the purchase of property was completed after expiry of stipulated time. The assessee explained because of death of the seller of the property Shri Tanumal J Kachbani the sale deed was registered after clearance of the title. The assessing officer has not accepted the explanation of the assessee stating that deed was registered on 16th Sep, 2015 much later on the date of furnishing of return of income for assessment year 2013-14. Consequently, the assessing officer has stated that assessee has not fulfilled the conditions laid down therefore, she was not entitled for deduction u/s. 54F of the act.
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The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant part of the decision of the ld. CIT(A) is reproduced as under:- "7.2 1 have considered the assessment order and the submissions made by the appellant. A perusal of the same shows that the deed in respect of the purchase of property, on which exemption u/s. 54F has been claimed, is dated 16.09.2015. This is much beyond the statutory period which is prescribed in Section 54F of the Act. The appellant has not made any submission to show that there was any agreement in respect of this property prior to the registration as per which she had been given possession of the said property. From a plain reading of this registered agreement, it is very clear that the possession of the property and the rights over it have passed to the appellant only on 16.09.2015 on payment by her of the total payment of Rs.45 lakhs. Therefore, the appellant's contention that the amount of Rs.30 lakhs had been paid by her towards the said property in the year under consideration cannot be accepted, because there was no agreement in respect of this property at that time and the purchase has been effected only in September 2015. The case-laws relied on by the appellant are also based on different facts and are not relevant to the appellant's case. The AO has on pages 11 & 12 of the assessment order distinguished each case relied on by the appellant from the facts of the case in hand. 7.2.1 In view of the above discussion, the action of the AO denying exemption u/s. 54F to the appellant is confirmed. Ground of appeal No. 4 is dismissed.”
During the course of appellate proceedings before us, the ld. counsel has furnished paper book giving details of submission made before the assessing officer and ld. CIT(A). During the course of appellate proceedings, he has also placed reliance on the decision of Sanjeev Lal vs. CIT (2014) 365 ITR 389. He has contended that ld. CIT(A) is not correct in disallowing the claim of deduction u/s. 54F without considering the bona fide reason for delay in completion of conveyance deed because of legal proceedings.. On the other hand, ld. departmental representative has supported the order of the ld. CIT(A).
We have heard both the sides and perused the material on record carefully. The assessing officer has not allowed the claim of deduction u/s. 54F of the act stating that the assessee should have purchased a new house on or after 9th Nov, 2011 on or before 8th Nov, 2014, however, the assessee has purchased residential house property on 16th Sep, 2015 which was beyond the two years prescribed limit u/s. 54F(1) of the act. On perusal of material on record it is noticed that there was an agreement on sale of immovable property between the
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seller Shri Tanumal Janimal Kachwani as a seller of the property and assessee as purchaser of the property dated 14th Feb, 2013 for sale of property for consideration of 55 lacs. The assesseee has paid payment of Rs. 30 lacs vide two cheques of Rs. 15 lacs each drawn on bank bearing No. 267004 and 267005 dated 29th Jan, 2013. However, the first party Sh.Tanumal J Kachwani was expired on 30/08/2014 which resulted delay in execution of the sale deed. Because of pending legal proceedings the final sale deed of the property was executed by the son of the seller Shri Manohar Lal T. Kacahwani on 16th Sep, 2015 and the remaining balance of Rs. 15 lacs was paid vide cheque No. 212382 and 218383 of Rs. 7 lacs and 8 lacs dated 11th Sep, 2015. In the light of the above facts and circumstances we observed that on expiry of the seller the title of the property was cleared after some time in favour of Shri Mohan Mohanlal T. Kachbani which resulted in execution of sale deed on 16/09/2015. We have perused the decision in the case of Sanjeevlal case of the Hon’ble Supreme Court wherein the assessee has entered into an agreement to sell the house on 27th Dec, 2002 and the sale deed could not be executed for the reason that the assessee had been prevented from dealing with the residential house by the order of the court due to pending litigation. The relevant part of the judgment of hon’ble supreme court of India in the case of Sanjiv Lal vs. CIT 365 ITR 389 para 23 to 26 is reproduced as under:- "23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated. 25. In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer" as defined under Section 2(47) of the Act, we are of the view that the
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appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house. 26. The appeals are, therefore, allowed with no order as to costs. The impugned judgments are quashed and set aside and the Authorities are directed to re-assess the income of the appellants for the Assessment Year 2005-2006, after taking into account the fact that the appellants were entitled to the relief, subject to fulfilment of other conditions." It is crystal clear that the decision in the case of Sanjeevlal was delivered after taking into account the peculiar facts of the case that the sale deed could not be executed because of the pending litigation and the competent court has prohibited the assessee to execute the sale deed therefore it is held that the assessee was entitled for relief inder section 54 of the act. In the case of the assessee also the property in question could not be purchased because of unavoidable circumstances as the first party seller of the property was expired before execution of the sale deed because of legal proceedings related to the clearance of tile of the property there was delay in execution of final sale deed as elaborated supra in this order. However, we consider that the assessee has only invested an amount of Rs. 30 lacs as explained above in this order within the stipulated period prescribed in the provision of section 54F of the act , therefore, we restrict the deduction u/s. 54F of the act to the amount of Rs. 30 lacs as final agreement could not be executed because of unavoidable circumstances in the form of pending legal proceedings due to sudden demise of the first party seller of the property. Accordingly the appeal of the assessee is partly allowed.
Ground No. 3.1 and 3.2 7. These grounds of appeal are pertained to the disallowance of claim of depreciation of Rs.1,21,639 & business expenses of Rs. 67,067/-. We have heard the rival contention on this issue and find that it is very clear that the assessee has only earned from stitching during the year under consideration and assessee has failed to substantiate its claim with relevant supporting material
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therefore, we do not find any error in the decision of the Ld.CIT(A). Accordingly the appeal of the assessee on this issue is dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 11-10-2018
Sd/- Sd/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 11/10/2018 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद