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Income Tax Appellate Tribunal, Hyderabad B Bench, Hyderabad
Before: SHRI K. NARASIMHA CHARY & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M: This appeal is filed by Shri Madhusudhan Jaju (“the assessee”) and Cross Objection (“C.O.”) filed by the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 10.07.2023 for the A.Y. 2013-14.
The assessee has raised the following grounds :
“1. The order of Ld. CIT(A) is erroneous both on facts and in law.
2. The Ld. CIT(A) ought to have annulled the reassessment u/s 143(3) r.w.s. 147 of the Act dated 22-12-2019.
3. The Ld. CIT(A) ought to have appreciated the fact that the reassessment u/s 143(3) r.w.s 147 is erroneous as no tangible material was found which indicates that the assessee has escaped the income.
4. The Ld. CIT(A) ought to have appreciated the fact that the reassessment cannot be initiated merely due to change in opinion of AO.
5. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in issuing notice u/s 148 dated 22.11.2018 which is barred by limitation.
6. The Ld. CIT(A) erred in not considering that the AO and Valuation officer ought to have appreciated the fact that the land being in disputed land and in unequal dimensions, the land was sold by the seller in a distress.
7. The Ld. CIT(A) erred in not considering that the AO and Valuation officer ought to have appreciated the fact that the land being encroached by local area people and community and no proper survey being done in spite of numerous attempts, the assessee was forced to sell the land in a distress sale.
8. The Ld. CIT(A) erred in not considering that the AO and valuation officer ought to have appreciated the fact that the land in question was in disputes towards tittle of property and in respect of its boundaries.
9. The Ld. CIT(A) erred in not considering that the AO ought to have appreciated the fact there were also the court case going or (O.P. No. 7 of 2008 and O.S. No. 39 of 2009) in regard to the tittle of the property.
10. The Ld. CIT(A) ought to have appreciated that AO and Valuation officer erred in not appreciating the fact that the market value of land at Rs.39,75,000/- as per the valuation report submitted by the appellant was fair and correct.
11. The Ld. CIT(A) erred in not considering the valuation report submitted by appellant, as in facts of our case, title was in dispute and valuation as per DVO cannot be conclusive one.
12. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in recomputing the long term capital gains of Rs. 66,16,700/- by not considering the point that valuation report was prepared by chartered engineer after proper inspection and survey.
13. The Ld. CIT(A) erred in confirming the computation of long term capital gains of Rs. 66,16,700/- as determined by the AO in the reassessment.
14. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in disallowing the cost of improvement claimed for Rs. 7,50,000/- with out considering the fact that the data relates to long back years.
15. The Ld. CIT(A) ought to have appreciated that the AO erred in disallowing the cost of selling of Rs. 12,00,000/- with out considering the fact that the data relates to long back years.
16. The Ld. CIT(A) erred in not considering the fact that the AO ought to have appreciated the submissions and evidences submitted at the time of proceedings. 17. The Ld. CIT(A) erred in not considering the fact that the AO ought to have allowed the claim u/s 54F of the Act as it is settled by various judicial decisions that the claim of deposit in CAGS cannot be denied even if the return is filed belatedly but well before the date of filing of return of income. 18. The Ld. CIT(A) ought to have appreciated that on the facts and in the circumstances of the case, the adoption of sale consideration of Rs. 66,16,700 and the denial of exemption claimed u/s 54F of the Act for in the same Asst. year under consideration is erroneous on the part of the AO. 19. The Ld. CIT(A) ought to have appreciated that the AO has erred in not granting exemption u/s 54F of the Act in computing the Long term capital gains. 20. The Ld. CIT(A) ought to have appreciated the fact that the AO erred in taxing the exemption claimed u/s 54F in the AY 2013-14. 21. The assessee may add, alter, or modify or substitute any other points to the grounds of appeal at any time before or at the time of hearing of appeal.”
The Revenue has filed the C.O. with delay of 254 days, for which they have filed one combined condonation petition in the form of Affidavit. Learned Department Representative (“Ld. DR”)
submitted that, during the relevant period of delay of the C.O., there was transfer of the Ld. AO, nomination of the Ld. AO for election duty and there were time barring assessment, penalty cases, reopening of assessment, etc. For these reasons, delay has been caused in filing of the C.O. He prayed before the bench to condone the delay in filing of the appeal. After hearing the Ld. AR, we found that there was reasonable cause behind the filing of C.O. by the Revenue. Accordingly, we condone the delay and allow the C.O. for adjudication.
The brief facts of the case are that, the assessee is an individual, filed its Return of Income (“ROI”) for A.Y. 2013-14 on 5.3.2015 admitting total income of Rs.3,21,052/-. The Learned Assessing Officer (“Ld. AO”) was on receipt of information that the assessee had sold land during the year under consideration and shown the sales consideration at Rs.45 lakhs. However, the value as per the Stamp Duty Valuation (“SDV”) was Rs.96,20,000/-. Therefore, the case of the assessee was reopened u/s.147 of the Income Tax Act, 1961 ('the Act') and notice u/s.148 of the Act was issued to the assessee. In response to the notice u/s.148 of the Act, the assessee filed its ROI on 02.01.2019 admitting total income of Rs.3,11,050/- in the ROI. But in the ROI so filed, again the assessee had shown sales consideration of land at Rs.45 lakhs, instead of the value as per the SDV of Rs.96.20 lakhs. During the assessment proceedings, the assessee filed a revised computation of income (page nos.2 & 3 of the paper book). As per the revised computation of income, the assessee had claimed expenditure of Rs.12 lakhs towards payment made to litigants of the land and litigation expenses. The assessee had also claimed the expenditure of Rs.7.50 lakhs towards cost of improvement and accordingly claimed index cost of the improvement at Rs.13,68,697/-. After claiming all the expenses, the assessee worked out Long Term Capital Gain (“LTCG”) of Rs.18,14,003/- and claimed exemption u/s.54F of the Act. Finally, the assessee had shown Rs.Nil on account of LTCG on sale of land. The Ld. AO disallowed the claim of exemption on account of payments to litigants and litigation expenses of Rs.12 lakhs, cost of improvement of Rs.7,50,000/- (index cost of Rs.13,68,697/-) contending that no evidence in support of these expenses were produced by the assessee. As there was difference in the value of sale consideration shown by the assessee and the value as per SDV, at the request of the assessee, the Ld. AO referred the issue to the Learned Departmental Valuation Officer (“ Ld. DVO”) for valuation. The Ld. DVO valued the land at Rs.67,34,000/-.
Accordingly, the Ld. AO considered the sale consideration of land at Rs.67,34,000/- instead of Rs.45 lakhs, as shown by the assessee. The Ld. AO found that, the assessee had claimed exemption of Rs.18,14,003/- u/s.54F of the Act on account of investment of Rs.45 lakhs in Capital Gain Account Scheme (“CGAS”). The Ld. AO disallowed the exemption claimed by the assessee u/s.54F contending that, the assessee had deposited the amount in CGAS after the due date specified u/s.139(1) of the Act. Finally, the Ld. AO completed the assessment u/s.143(3) r.w.s. 147 of the Act on 22.12.2019 considering the sales consideration at Rs.67,34,000/-, allowing the deduction of Rs.1,17,300/- on account of Index Cost of acquisition of land and made addition of Rs.66,16,700/- on account of LTCG.
Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) upholding the findings of the Ld. AO, dismissed the appeal of the assessee.
Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that, in this appeal, four issues are involved. The first issue is related to substitution of sale consideration of Rs.67,34,000/- in place of Rs.45 lakhs. The second issue is disallowance of cost of improvement of Rs.7.50 lakhs, the third issue is relating to the disallowance of cost of expenses of Rs.12 lakhs on account of payments made to litigants and litigation expenses and the fourth issue is relating to denial of exemption u/s.54F of the Act.
With regard to the first issue, the Ld. AR submitted that the assessee has sold the land for a consideration of Rs.45 lakhs. However, the valuation of the property as per stamp duty authority was Rs.96,20,000/-. During the assessment proceedings, the case was referred to the Ld. DVO for the purpose of valuation of the property, who valued the fair market value at Rs.67,34,000/- and on the basis of the valuation done by the DVO, the Ld. AO treated Rs.67,34,000/- as the sale consideration of the land for the purpose of LTCG. The Ld. AR further submitted that, the land which has been sold was subject to litigation for which the Ld. AR brought our attention to page nos.11 to 37 of the paper book containing the evidences related to litigation. The Ld. AR further submitted that, due to the litigation, the assessee was able to realize only Rs.45 lakhs from the sale of the land. Further, the sale consideration of the land has been acknowledged by the purchaser before the Sub-Registrar concerned. The Ld. AR also submitted that, the Ld. AO also did not brought any evidence on record regarding receiving of any ‘on money’ by the assessee from the purchaser of the land. The Ld. AR relying on the decision of co-ordinate bench of ITAT in the case of DCIT Vs. Sunil Narang (ITA No.1506/Hyd/2017), submitted that, where the property is under litigation, the actual sale consideration received by the assessee should not be disturbed. Finally, the Ld. AR prayed before the bench to accept the sale consideration of land at Rs.45 lakhs.
7.1 Per contra, the Ld. DR relied on the orders of the Revenue authorities.
7.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the page nos.11 to 37, the documents related to litigation, from which it is clear that the land which has been sold was subject to litigation. We have also gone through the decision of co- ordinate bench of ITAT in the case of DCIT Vs. Sunil Narang (supra), wherein the Tribunal accepted the amount actually realized by the assessee as sale consideration. Respectfully following the decision of co-ordinate bench of ITAT in the case of DCIT Vs. Sunil Narang (supra), we hold that, as the property was under litigation, the actual amount received by the assessee should only be considered as sales consideration. Accordingly, we direct the Ld. AO to consider the sales consideration of the land at Rs.45 lakhs instead of Rs.67,34,000/-.
7.3 In the result, the first issue of the assessee is allowed.
With regard to second issue, related to cost of improvement of Rs.7,50,000/-, the Ld. AR submitted that, the assessee has incurred cost of Rs.2.50 lakhs; Rs.2 lakhs; Rs.2 lakhs and Rs.1 lakh during the F.Ys. 2000-01, 2001-02, 2007-08 and 2009-10 respectively. However, the assessee could not maintained the evidences in support of those expenses. Due to non-furnishing of evidences, both the revenue authorities disallowed the cost of improvement of Rs.7,50,000/- for the purpose of calculation of LTCG. The Ld. AR further submitted that, it is not practicable for an individual-assessee to keep and maintain evidences for quite long time and therefore, he prayed before the bench to allow the claim of the assessee.
8.1 Per contra, the Ld. DR relying on the order of revenue authorities, submitted that, it is the duty of the assessee to substantiate his claim with relevant bills and vouchers. As the assessee could not submit any evidence in support of the cost of improvement, the same are not liable to be allowed.
8.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. The assessee has claimed the cost of improvement of Rs.7,50,000/- (Rs.2.50 lakhs, Rs.2 lakhs, Rs.2 lakhs and Rs.1 lakh during the F.Ys. 2000-01, 2001-02, 2007-08 and 2009-10 respectively). However, neither before the revenue authorities nor before us, the assessee produced any evidence in support of his claim. In our considered opinion, any claim in absence of relevant evidence is not permissible under the Act. Therefore, in the absence of any supporting evidence towards expenditure of Rs.7,50,000/-, we are not inclined to allow the claim of the assessee. Accordingly, this claim of the assessee is dismissed.
8.3 In the result, the second issue of the assessee is dismissed.
With regard to the third issue, the Ld. AR submitted that, the assessee had to made a payment of Rs.11 lakhs to the person who were parties to the litigation and the assessee had to incur the litigation expenditure of Rs.1 lakh. Therefore, the Ld. AR submitted that, all these expenses are directly related to the sale of the land and are to be deducted from the sale proceeds of the land.
9.1 With regard to the third issue, the Ld. AR drew our attention to page nos.42 & 43 of the paper book relating to Memorandum of Understanding (“MOU”) executed by the assessee with the litigants, in terms of which, the assessee had to pay Rs.11 lakhs to the litigants on account of the land under consideration.
9.2 Per contra, the Ld. DR relying on the orders of revenue authorities submitted that, payment of Rs.11 lakhs made to litigants are not eligible for deduction and hence liable to be disallowed. The Ld. DR further submitted that, on account of litigation expenditure of Rs.1 lakh, the assessee could not produce any evidence. Therefore, these expenses are liable to be disallowed.
9.3 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the page nos.11 to 37 of the paper book related to orders relating to litigation of land and found that there is no doubt that, the litigation was there with regard to the impugned land. We also gone through the page nos.40 to 43 of the paper book, wherein, MOU has been executed by the assessee with the litigants and found that the assessee has paid total amount of Rs.11 lakhs to the litigants. Therefore, in our considered opinion, the payment made by the assessee is eligible for deduction from the sale consideration of land. Further, as we have found that, there is a litigation with regard to the impugned land, incurring of litigation expenses cannot be denied. However, as the assessee could not produce any evidence in support of the expenses, we thought it appropriate to allow Rs.50,000/- on account of litigation expenses. Accordingly, we allow total deduction of Rs.11,50,000/- out of total claim of Rs.12 lakhs.
9.4 In the result, the third issue of the assessee is partly allowed.
With regard to fourth issue, the Ld. AR submitted that, the assessee had invested total amount of Rs.45 lakhs in CGAS before the date of filing of ROI and claimed exemption u/s.54F of the Act. As the date of deposit in CGAS was after the specified due date u/s.139(1) of the Act, the Ld. AO disallowed the exemption of Rs.18,14,003/- u/s.54F of the Act. The Ld. AR relying on the decision of Hon'ble High Courts and Tribunals (page nos.1 to 53 of the case laws of paper book) and submitted that even if the amounts are invested in CGAS after the due date specified u/s.139(1) of the Act, but before filing of ROI u/s.139(4) of the Act, the assessee is eligible for exemption u/s.54F of the Act. Accordingly, the Ld. AR prayed before the bench to allow the claim of the assessee.
10.1 Per contra, the Ld. DR relied on the orders of revenue authorities.
10.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. The only question before us to decide, whether the exemption u/s.54F of the Act will be available on the amount deposited in CGAS after the due date specified u/s.139(1) of the Act, but before the date of filing of the ROI u/s.139(4) of the Act. It is relevant to refer to the relevant provision contained u/s.54F of the Act, which is to the following effect :
“ 139 (4) Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the 54[return for any previous year at any time before three months prior to] the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. (4A) 55Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1). (4B) 55The chief executive officer (whether such chief executive officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(4C) Every— (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (ca) person referred to in clause (23AAA) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub- clause (iiiab) or sub-clause (iiiad) or sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (iiiac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10; (ea) Mutual Fund referred to in clause (23D) of section 10; (eb) securitisation trust referred to in clause (23DA) of section 10; (eba) Investor Protection Fund referred to in clause (23EC) or clause (23ED) of section 10; (ebb) Core Settlement Guarantee Fund referred to in clause (23EE) of section 10; (ec) venture capital company or venture capital fund referred to in clause (23FB) of section 10; (f) trade union referred to in sub-clause (a) or association referred to in sub-clause (b) of clause (24) of section 10; (fa) Board or Authority referred to in clause (29A) of section 10; (g) body or authority or Board or Trust or Commission (by whatever name called) referred to in clause (46) of section 10; (h) infrastructure debt fund referred to in clause (47) of section 10, shall, if the total income in respect of which such research association, news agency, association or institution, person or fund or trust or university or other educational institution or any hospital or other medical institution or trade union or body or authority or Board or Trust or Commission or infrastructure debt fund or Mutual Fund or securitisation trust or venture capital company or venture capital fund is assessable, without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form56 and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
(4D) Every university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35, which is not required to furnish return of income or loss under any other provision of this section, shall furnish the return in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1). (4E) Every business trust, which is not required to furnish return of income or loss under any other provisions of this section, shall furnish the return of its income in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply* if it were a return required to be furnished under sub- section (1). (4F) Every investment fund referred to in section 115UB, which is not required to furnish return of income or loss under any other provisions of this section, shall furnish the return of income in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).” From the perusal of the provisions contained u/s.54F(4) of the Act, it is abundantly clear that, to claim the exemption u/s.54F of the Act on account of deposit made in CGAC, the deposit has to be made not later than the due date of furnishing of ROI specified u/s.139(1) of the Act. We have also gone through the cases relied on by the Ld. AR (page nos.1 to 53 of the paper book), wherein, the Hon'ble ITAT / Courts have held that if the amount deposited in CGAS is subsequently investedt in the purchase / construction of residential property in accordance with the provision of section 54F, then only the amount so deposited in CGAS after the due date specified u/s.139(1) of the Act, but before filing of ROI u/s.139(4) of the Act can be allowed as exemption u/s.54F of the Act. There is no dispute about the fact that the amount in the present case has not been deposited within the due date specified u/s.139(1) of the Act. Hence, to decide whether the amount deposited in CGAS by the assessee after the due date, will be eligible for exemption u/s.54F of the Act or not, it depends on the investment made by the assessee in subsequent periods. The same is required to be verified from the records of the assessee along with the supporting evidences. Therefore, we remand the issue to the file of the Ld. AO to verify, whether the investment made by the assessee out of the amount deposited in CGAS, is within the time specified u/s.54F of the Act or not. We also direct the Ld. AO to allow the exemption u/s.54F of the Act to the assessee if the amount invested in CGAS is utilised by the assessee for the purpose of purchase / construction of residential house property within the time allowed u/s.54F of the Act. Accordingly, the ground is allowed for statistical purposes.
10.3 In the result, the fourth issue of the assessee is partly allowed for statistical purpose.
Accordingly, the appeal of the assessee is partly allowed for statistical purpose.
C.O. No.7/Hyd/2023 (By Revenue)
The Revenue has raised the following grounds of in C.O. :
Whether Ld. CIT(A) ought to have appreciated that the assessee is not eligible for claim of deduction u/s.54F, since he owns more than one residential house, on the date of transfer of the original asset ?
The Ld. DR submitted that, the only issue in the C.O. is that, the assessee was owner of more than one residential house on the date of transfer of the original assets. To justify his submission, the Ld. DR brought to our attention to page no.4 of the paper book containing the copy of the ITR filed by the assessee, wherein, the assessee has shown income from two house properties. Accordingly, the Ld. DR further submitted that, it is evident from the record that the assessee was owner of more than one house property. Therefore, he prayed before the bench to deny the claim of the assessee u/s 54F of the Act.
Per contra, the Ld. AR submitted that, one of the property as shown in ITR is a commercial property and the assessee was owner of only one residential property at the time of transfer of the original assets. Hence, there is no violation of section 54F of the Act in this regard and the assessee is eligible for exemption u/s.54F of the Act.
We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. There is no dispute on the facts between both the parties that the exemption u/s.54F of the Act will not be available to the assessee, if the assessee was owner of more than one residential house property as on the date of transfer of original assets. There is also no quarrel that the assessee has shown income from two house properties. Now it is a matter of verification, whether both the properties are residential or not. Therefore, we remand this issue to the file of Ld. AO to verify the nature of both the properties. If on verification, it is found by the Ld. AO, that both the properties are residential and the assessee was owner of both the properties as on the date of transfer of original assets, then the exemption u/s.54F of the Act should be denied to the assessee, otherwise, the Ld. AO should allow the same to the assessee. Accordingly, the C.O. of the Revenue is allowed for statistical purposes.
In the result, the C.O. of the Revenue is allowed for statistical purposes.
To sum up, the appeal of the assessee is partly allowed for statistical purposes and C.O. of Revenue is allowed for statistical purposes.
Order pronounced in the open Court on 15th Jan., 2025.