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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘C’, NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER
ITA No.218/Del./2016 Assessment Year: 2011-12
Shri Rohtash Singh, Vs. DCIT, L-32/5, DLF Phase-II, Circle-2, Gurgaon Gurgaon PAN :AHIPS2749B (Appellant) (Respondent)
Appellant by Shri P.C. Yadav, Adv. Respondent by Shri Bhagwati Charan, Sr.DR
Date of hearing 04.11.2020 Date of pronouncement 06.11.2020
ORDER PER O.P. KANT, AM:
This appeal by the assessee is directed against order dated 21/10/2015 passed by the learned CIT(Appeals)-2, Gurgaon [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds: 1. That on the facts and circumstances of the case, the order dated 30th March, 2014, as passed by the Deputy Commissioner of Income-tax, Circle-2, Gurgaon [hereinafter referred to as “the A.O.”] and as upheld by the Commissioner of Income-tax (Appeals)-II, Gurgaon [hereinafter referred to as “the CIT(A)] vide order 21st October, 2015 is void ab initio. 2. That on the facts and circumstances of the case, the CIT(A) erred in upholding the disallowance to the tune of Rs.17,28,000/- on account of fencing and commission expenses.
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That on the facts and circumstances of the case, the CIT(A) grossly erred in holding that AO was correct in restricting the benefit of section 54B only to the investments made by the Appellant upto the date of filing of Income-tax return. All the above mentioned grounds are without prejudice and Independent of each other. That the appellant prays for leave to add, alter, amend and/or vary the ground(s) of appeal at or before the time of hearing.
Briefly stated facts of the case are that the assessee, an individual, filed return of income for the year under consideration on 29/09/2011, declaring income of ₹ 8,63,99,390/- and agriculture income of ₹ 9,51,286/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices were issued and complied with. In the scrutiny assessment completed on 30/03/2014 under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’), the learned Assessing Officer made certain additions/disallowances. On further appeal, the Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Income- tax Appellate Tribunal (in short ‘the Tribunal’) raising the grounds as reproduced above. 3. Before us, the parties appeared through Videoconferencing facility. The learned Counsel of the assessee also filed a written synopsis electronically. 4. The assessee has raised three grounds. The first ground is general in nature and ground No. 2 is in relation to disallowance of ₹ 17,28,000/- claim to have been incurred by the assessee on fencing of land and commission expenses. The ground No.3 is in respect of restriction of benefit of section 54B of the Act by the Learned CIT(A).
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Firstly, we take ground No. 3 of the appeal. The brief facts qua the ground raised are that the assessee in the return of income claimed deduction of ₹ 5,53,52,300/- under section 54B of the Act against the long-term capital gain for following investments made for purchase of agriculture land: Date Area Amount (In Rs.) 19/08/2010 26K 8835000 30/03/2011 15K 19M 15765000 04/07/2011 19K 19M 3887825 04/08/2011 5K 0m 8218200 02/09/2011 2K 0m 1322500 27/09/2011 4K 0m 2367500 07/03/2012 2K 0m 1322500 07/03/2012 OK 11 m 362200 07/03/2012 7K 10m 4936900 07/03/2012 2K 14m 1781900 07/03/2012 3K 18m 2212750 07/03/2012 24 K 5 m 15929350
5.1 According to the Assessing Officer, the investment of ₹ 88,35,000/- made on 19/08/2010, was prior to the date of the sale of the land on which the capital gain arose and therefore, it was not eligible for deduction under section 54B of the Act. 5.2 Further, The Assessing Officer held that only the amount utilized/invested till the due date of the filing of the return of income under section 139(1) was eligible for deduction under section 54B of the Act and the remaining amount would be eligible for deduction only is such amount was deposited in the account in a specified bank or institution before the due date as provided under section 139(1) of the Act. The Assessing Officer found that only two amounts i.e. ₹ 1,57,65,000/- invested on
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30/03/2011 and ₹ 38,87,825/- invested on 04/07/2011, totalling to ₹ 1,96,52,825/- was eligible for deduction under section 54B of the Act. 5.3 The Ld. CIT(A) followed his own decision in the case of Sh Vijay Choudhary in appeal No. 74/14-15 for assessment year 2012-13, wherein he discussed the decisions of the jurisdictional High Court in the case of CIT-2, Chandigarh Vs. Jagriti Agrawal (2011) 15 Taxman.com 146 (Punjab and Haryana) and other decisions. In the case of the Vijay Choudhary (supra), the Ld. CIT(A) concluded, the legal requirement for eligibility of deduction under section 54 of the Act as under:
“6.17 Keeping in view the aforesaid case laws and circular, the legal position that emerges is that an assessee would be eligible for deduction u/s 54 on unutilized portion of capital gains only if he satisfies the following two conditions:- 1. The unutilized portion is deposited in a an account in a specified bank or institution before actually furnishing the return of income and such return of income is accompanied by the proof of such deposit ( Reference : Hon'ble Kerala High Court decision in the case of CIT, Cochin V/s V.R. Desai (Supra)). 2. Such deposits being made not later not later than the extended date as applicable in the case of assessee for furnishing the income u/s 139(4) (Reference: The Hon’ble Punjab & Haryana Court decisions in the case of Suit. .Jugriti Aggnrwal (Supra) and Sh. Jagtar Singh Chawla (Supra). Thus the benefit of utilizing the capital gains upto the extended date as provided u/s 139(4) or depositing the unutilized part of capital gains in an account in a specified hank or institution upto the extended date as provided u/s 139(4) would be allowable only upto the date of actual filing of return by the asssessee.”
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5.4 Following the above principle, the Ld. CIT(A) restricted the deduction under section 54B of the Act till the date of filing of return of income by the assessee observing as under: “6.4 The provisions of section 5413 arc para materia to the provisions of section 54. It is a fact on record that the appellant had filed his return on 29.09.2011, Therefore, the amount utilised by him towards purchase of agricultural land or deposited in an account in a specified bank or institution, till that date only can be allowed as deduction u/s 54BB of the IT Act. It is also a fact on record that the appellant had utilised only following amounts towards purchase of agricultural land by that date: 30/03/2011 15K 19M 15765000 04/07/2011 19K 19M 3887825 04/08/2011 5K 0 m 8218200 02/09/2011 1322500 2K Om 27/09/2011 4K 0m 2367500
Further, no amount was deposited in an account in a specified bank or institution till the date of actually filing the return of income. I he appellant was therefore eligible for deduction u/s 5413 only on the amount invested on purchase of agricultural land as above out of which deduction of Rs. 1.96.52.825 on account of investments made on 30/03/2011 and 04/07/2011 has already been allowed by the A(). The AC) is accordingly directed to allow further deduction u/s 54B in respect of amount utilized towards purchase of agricultural land upto the date of actual filing of return for the current assessment year. The disallowance of excess deduction claimed by the appellant on account of amount spent on purchase of agricultural land after the date of actual filing of return of income made by the AO is confirmed.”
5.5 Before us, the Learned Counsel of the assessee submitted that in the case of Vijay Choudhary, the Tribunal in ITA No. 6432/Del./2015 for assessment year 2012-13, reversed the decision of the Ld. CIT(A) and held that investment in specified scheme of government bank is not a precondition for claim of the deduction under section 54, if investment is made in purchase or
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construction of residential house. The Learned Counsel also submitted that in view of the decision of the jurisdictional High Court in the case of Jagriti Agrawal (supra), the assessee is eligible for deduction under section 54B of the Act for the investment made in purchase of agriculture land till the extended date of filing of the return of income as provided under section 139(4) of the Act. 5.6 On the other hand, the Learned DR relied on the order of the lower authorities and submitted that in view of the decision of the Hon’ble Supreme Court in the case of the Prakash Nath Khanna Vs CIT (2004) 266 ITR 1, the due date of the filing of the return of income should be under section 139(1) of the Act and not under section 139(4) of the Act. 5.7 We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) in the case of Vijay Choudhary (supra) has discussed the decision of the Hon’ble Supreme Court in the case of Prakash Nath Khanna(supra) and decision of the Hon’ble Punjab and Haryana High Court in the case of Jagriti Agrawal (supra). The Ld. CIT(A) himself has admitted that decision of the Hon’ble Supreme Court in the case of Prakash Nath Khanna (supra) is not with regard to the provision of section 54 of the Act. In the impugned order, Ld. CIT(A) has reproduced the relevant part of his decision in the case of Vijay Choudhary, which is reproduced as under: “6.15 However, keeping in view the fact that the Hon’ble Jurisdictional High Court has decided this issue in the two cases referred to above as being the extended period upto the date provided u/s 139(4), the decision of Hon’ble Supreme Court referred to above not being specifically with regard to the provisions of Section 54 of the IT Act and the decision of Hon’ble Jurisdictional
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High Court referred to above being later decision, I respectfully following the decisions of the Hon’ble Jurisdictional High Court on this issue.”
5.8 Thus, the Ld. CIT(A) has claimed to have followed the decision of the Hon’ble Jurisdictional High Court in the case of Jagriti Agrwal (supra), but according to him, the benefit of utilising the capital gains amount to the extended date as provided under section 139(4) would be allowable only to the date of the actual filing of return of income by the assessee. In this case, limitation for filing of the return of income in terms of section 139(4) expires on 31/03/2012 but the actual return of income was filed on 29/09/2011 and, therefore, the Ld. CIT(A) restricted the deduction for the amount invested in purchase of the agriculture land till 29/09/2011. 5.9 We find that Hon’ble Punjab and Haryana High Court in the case of Jagriti Agrawal (supra) held as under:
“10. Having heard learned counsel for the parties, we are of the opinion that sub-s. (4) of s. 139 of the Act is, in fact, a proviso to sub- s. (1) of s. 139 of the Act. Sec. 139 of the Act fixes the different dates for filing the returns for different assessees. In the case of assessee as the respondent, it is 31st day of July of the assessment year in terms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 of the Act, whereas sub-s. (4) of s. 139 provides for extension in period of due date in certain circumstances. It reads as under : "(4) Any person who has not furnished a return within the time allowed to him under sub-s. (1), or within the time allowed under a notice issued under sub-s. (1) of s. 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier : Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, the reference to one year aforesaid
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shall be construed as a reference to two years from the end of the relevant assessment year." 11. A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-s. (1) i.e., before 31st day of July of the assessment year, the assessee can file return before the expiry of one year from the end of the relevant assessment year. 12. The sale of the asset having taken place on 13th Jan., 2006, falling in the previous (sic—assessment) year 2006-07, the return could be filed before the end of relevant asst. yr. 2007-08 (sic— 2006-07) i.e. 31st March, 2007. Thus, sub-s. (4) of s. 139 provides extended period of limitation as an exception to sub-s. (1) of s. 139 of the Act. Sub-s. (4) is in relation to the time allowed to an assessee under sub-s. (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-s. (1) of s. 139. Therefore, such sub-s. (4) has to be read along with sub-s. (1). Similar is the view taken by the Division Bench of Karnataka and Gauhati High Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra) respectively. 13. In view of the above, we find that due date for furnishing the return of income as per s. 139(1) of the Act is subject to the extended period provided under sub-s. (4) of s. 139 of the Act.”
5.10 We also note that the coordinate bench in the case of Smt. Vatsala Asthana in ITA No. 5635/Del/2016 for assessment year 2012-13 has allowed benefit of deduction under section 54 of the Act for the payment made towards purchase of the residential house up to the due date of the filing of the return of income prescribed under section 139(4) of the Act. The relevant finding of the Tribunal is reproduced as under: “15. Regarding the payment made by the assessee before 31/03/2014, Hon'ble High Court of Rajasthan in the case of Shankar Lai Saini (supra) held that, where assessee, an individual deposited unutilized sale consideration in capital gains scheme within the due date of filing of belated tax return under section 139(4), the capital gains relief under section 54F of the Act would be allowable. In the case of K. Ramachandra Rao (supra), the Hon'ble Karnataka High Court held that assessee having invested entire sale consideration in construction of residential house within three
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years from the date of the transfer, he could not be denied exemption under section 54F on the ground that he did not deposit said amount in capital gains account scheme before due date prescribed under section 139(1) of the Act. In the case of Kishore H Galaya (supra), the coordinate bench has held that the date of filing return of income under section 139(1) for the purpose of utilization of the amount for purchase/construction of residential house has to be construed with respect to the due date prescribed for filing return of income under section 139(4) of Act. The relevant finding is reproduced as under:
"Amount exceeding capital gains arising from sale of old residential house having been paid by assessee to a builder within three years for construction of new residential house, assessee was entitled to exemption under s. 54 notwithstanding that assessee obtained possession after three years and also failed to deposit capital gains in the capital gains account scheme before due date of filling return of income under s. 139(1) for relevant year."
In view of the above decisions, the payment made by the assessee towards purchase of residential house up to the due date of filing of the return of income prescribed under section 139(4) of the Act i.e. 31/03/2014 is allowable for considering deduction under section 54F of the Act. Respectfully, following the above decisions, we accordingly direct the Assessing Officer to consider amount utilized by the assessee for purchase of the house till 31/03/2014(which includes the payment of Rs.50,36,422/- made up to 31/07/2012) for deduction under section 54F of the Act.”
5.11 Further, the Ld. CIT(A) in the instant case has relied on his decision in the case of Vijay Choudhary(supra). The tribunal in the case of Vijay Choudhary(supra), reversed the decision of the Ld. CIT(A) observing as under: “7. We have heard both the parties and perused all the material available on record. The Hon’ble Karnataka High Court in case of Shri K Ramchandra Rao (supra) held as under:
“3………… 2) Whether the assessee invests the entire sales consideration in construction of a residential house within three years from the date of transfer can he be denied exemption under Section 54F on the ground that he did not
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deposit the said amount in capital gains account scheme before the due date prescribed under Section 139(1) of the IT Act? ……….. 4. Re. Question No. 2: As is clear from Sub Section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct. 5. For the aforesaid reasons both the substantial questions of law are answered in favour of the assessee and against the Revenue. Therefore, we do not see merit in any of the appeals. Accordingly, all the four appeals are dismissed. ”
In the present case, the assessee has purchased the residential plot from the sale proceeds of the earlier residential house. The sale proceeds were utilized for construction of residential house with the three years itself. The decision of the Hon'ble Karnataka High Court is apt in the present case as the Hon'ble High Court held that it is not a pre-condition to invest the money in the specified Central Govt. Scheme of the sale proceeds if the property is purchased and constructed for residential purposes. Though the Ld. DR tried to distinguish the factual matrix but the same is not tenable as the ratio and the facts determined by the Hon'ble Karnataka High Court are similar to the present assessee’s case as well. Therefore, the appeal of the assessee is allowed.”
5.12 The Section 54B is pari-materia with Section 54 of the Act. Thus, the case in hand is squarely covered by the above decision of Hon’ble High Court of Punjab & Haryana and decision of the Tribunal. Before us, parties could not get verified the exact
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amount invested in purchase of agricultural land till the qualifying period, thus, we feel appropriate to set aside the finding of the Ld. CIT(A) and restore the issue in dispute of deduction under section 54B of the Act to the file of the Learned Assessing Officer for verifying the investment in purchase of agriculture land and decide the issue of deduction u/s 54B of the Act afresh in accordance with law after providing adequate opportunity of being heard to the assessee. As per the record, we find that against the order of the Learned CIT(A), the Revenue is not in appeal, which means the Revenue has accepted the decision of the Ld CIT(A). In view of this factual position, the Learned Assessing Officer is further directed that he shall not withdraw the deduction already granted by learned CIT(A) and not put the assessee in a position worse than the position after the impugned order of the Learned CIT(A). The ground No. 3 of the appeal of the assessee is accordingly allowed for the statistical purposes. The ground No. 3 relates to disallowance of ₹ 17,28,000/-on 6. account of fencing and commission expenses. We have heard rival submission of the parties on the issue in dispute. We find that the assessee claimed expenditure of ₹ 9,00,000/- and ₹ 8,28,000/- against income from capital gains on account of the payments made to Sh. Pratap Singh and Sh. Rajvir Singh respectively against commission and fencing work. According to the Assessing Officer and the Ld. CIT(A) sufficient evidence in support of the claim has not been filed by the assessee, whereas according to the assessee, he has filed confirmation of the parties and, therefore, the onus was on the Assessing Officer and Ld.
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CIT(A) to examine the said parties. We have already restored the issue in dispute of the deduction under section 54B of the Act to the file of the Assessing Officer. In the facts and circumstances of the issue-in-dispute and in the interest of the justice, we feel it appropriate to restore this issue also to the file of the Assessing Officer afresh for necessary verification of the claim of the assessee. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal are accordingly allowed for statistical purposes. 7. In the result, the appeal of the assessee is allowed for statistical purposes Order pronounced in the open court on 6th November, 2020.
Sd/- Sd/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 6th November, 2020. RK/-(D.T.D.S.) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi