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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAVISH SOODShri Krishnan Muthukumar
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 1 ITA No. 7450/Mum/2019 – A.Y 2016-17
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H” MUMBAI BEFORE SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA No.7450/MUM/2019 (Assessment Year: 2016-17) ACIT, Circle-1 Shri Krishnan Muthukumar 1st Floor, Mohan Plaza, Vs. 31/348, Aksharmahol CHS, Wayale Nagar, Kalyan, Telang Cross Road, West – 421301 Road No.1, Matunga (East) Mumbai -400 019 PAN No. AAKPM0170D (Revenue) (Assessee)
Assessee by : Ms. Ritu Kamal Kishore, A.R Revenue by : Shri Gurbinder Singh, D.R
Date of Hearing : 09/06/2021 Date of pronouncement : 06/09/2021 ORDER PER RAVISH SOOD, J.M: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-2, Mumbai, dated 12.09.2019, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short ‗Act‘), dated 17.12.2018 for A.Y. 2016-17. The revenue has assailed the impugned order on the following grounds before us: ―1. On the facts and circumstances of the case, and in Law, the Ld. CIT(A) has failed to appreciate the fact that the assessee purchased flat in 'Indiabulls Greens', Panvel vide agreement dtd. 11.09.2012 made between m/s Lucina Land Development Ltd. and Mrs. & Mr. Krishanan Muthukumar. Thus, it is clear that as on date of investment, the assessee was the owner of two houses which includes property at Matunga.
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 2 ITA No. 7450/Mum/2019 – A.Y 2016-17
On the facts and circumstances of the case, and in Law, the Ld. CIT(A) stressed upon capability of generating income from house property ignoring the ownership which is evident from the records. 3. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored. 4. The appellant craves leave to add, amend, alter or delete any ground of appeal.‖ 2. Briefly stated, the assessee had filed his return of income for A.Y. 2016- 17 on 10.10.2016, declaring a total income of Rs.1,84,03,513/-. Subsequently, the case of the assessee was selected for scrutiny assessment through ―Computer Aided Scrutiny Selection ― (for short ―CASS‖).
During the course of the assessment proceedings, it was observed by the A.O that the assessee had during the year under consideration sold shares of M/s Monarch Catalyst Pvt. Ltd (for short ―MCPL‖). It was observed by the A.O that the assessee had claimed the Long Term Capital Gain (for short ―LTCG‖) of Rs. 18,13,71,487/- arising from the aforesaid transaction of sale of shares as exempt under Sec. 54F of the Act. It was observed by the A.O that the assessee had sold 49,584 shares of MCPL which were held by him in his name. Also, as observed by the A.O, the wife of the assessee had sold 5,000 shares of MCPL that were gifted to her by the assessee and the LTCG arising there from was clubbed under Sec. 64(1)(iv) in the hands of the assessee. The assessee had claimed exemption of the entire amount of LTCG arising from the aforesaid transaction of sale of 54,584 shares u/s 54F of the Act. However, the assessee‘s claim for exemption u/s 54F was rejected by the A.O for two fold reasons, viz. (i). that the assessee on the date of transfer of the original asset i.e shares of MCPL was an owner of more than one residential house, i.e (a) residential house No. 31/348, Akshar Mahol, Telang Cross Road, Matunga, Mumbai- 400 019; and (b) Flat No. 2602, Indiabulls Greens, Panvel, Sawala, Apta Road, Navi Mumbai – 410 221 AND ; (ii). that the assessee could not substantiate his claim of having purchased a new residential property by placing on record the copy of the purchase agreement/allotment letter of the new residential property. Rebutting the
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 3 ITA No. 7450/Mum/2019 – A.Y 2016-17
aforesaid observations of the A.O the assessee tried to impress upon him that his claim for exemption u/s 54F was in order. It was submitted by the assessee that as he was holding the aforementioned residential properties jointly alongwith his wife and was not the ‗absolute owner‘ of the same, therefore, he could not be held to be the owner of ‗a residential house‘ as on the date of transfer of the shares of MCPL. Apart from that, it was submitted by the assessee that as the Flat No. 2602, Indiabulls Greens, Panvel, Mumbai, was an under construction property on the date of transfer of the original asset i.e the shares of MCPL, therefore, it could not be treated as a ‗residential house‘ on the said date. However, neither of the aforesaid contentions of the assessee found favor with the A.O. Relying on the judgment of the Hon‘ble High Court of Karnataka in the case of M.J. Siwani Vs. CIT, ITA No. 216-218/2007, dated 11.04.2014, it was observed by the A.O that the Hon‘ble High Court had held that where an assessee on the date of sale of a Long Term Capital Asset owned more than one residential house even jointly with another person, then, he would not be eligible to claim the benefit of exemption u/s 54F of the Act. It was further observed by the A.O that the aforesaid judgment of the High Court had thereafter been upheld by the Hon‘ble Supreme Court while dismissing the ‗Special Leave Petition‘ (for short ―SLP‖) filed by the assessee in M.J Siwani Vs. CIT (2015) 232 Taxman 335 (SC). As such, the A.O by drawing support from the aforesaid position of law rejected the assessee‘s claim that as he was a joint owner of the properties in question, therefore, he could not be held to be the owner of more than one residential house on the date of transfer of the original asset. Insofar the claim of the assessee that as one of the property in question i.e Flat No. 2602, Indiabulls Greens, Panvel, Mumbai, was an under construction property on the date of transfer of the original asset, therefore, the same could not be brought within the meaning of a residential house u/s 54F of the Act, the same too was rejected by the A.O. It was observed by the A.O that as the assessee had claimed exemption u/s 54F on the basis of the investment that was made by him in an under construction residential property at Matunga, which as per
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 4 ITA No. 7450/Mum/2019 – A.Y 2016-17
him was to be construed as an investment in a residential house, therefore, on a similar footing the purchase of flat by him at Indiabulls Greens, Panvel, though under construction, was to be similarly construed and considered as a residential property within the meaning of Sec. 54F of the Act. In sum and substance, it was observed by the A.O that if the new residential property i.e property at Matunga which was under construction was to be construed as a residential house within the meaning of Sec. 54F of the Act, then, a different meaning could not be given to the under construction flat at Indiabulls Greens, Panvel, Mumbai that was owned by the assessee. Accordingly, on the basis of his aforesaid observations, the A.O was of the view that as the assessee on the date of transfer of the original asset was an owner of more than one residential house, therefore, he was ineligible to claim exemption u/s 54F of the Act. Backed by his aforesaid observations, the A.O after, inter alia, disallowing the assessee‘s claim for exemption of Rs. 18,13,71,487/- u/s 54F of the Act, vide his order passed u/s 143(3), dated 17.12.2018 assessed his income at Rs.20,14,44,920/-.
Aggrieved, the assessee assailed the order passed by the A.O before the CIT(A). After deliberating at length on the contentions advanced by the assessee, the CIT(A), observed, that as the assessee had vide his letter dated 10.12.2018 filed with the A.O the copy of the registered purchase deed of the new asset, therefore, the A.O was not correct in concluding that the assessee had failed to prove that he had invested the sale proceeds of the original asset in a new asset. As regards the assessee‘s claim that as he was a joint owner of the residential house at 31/348, Akshar Mahol Matunga, therefore, not being the ‗absolute owner‘ of the said property he could not be held to be the owner of a residential house within the meaning of Sec. 54F of the Act, the same did not find favor with the CIT(A). Relying on the judgment of the Hon‘ble High Court of Karnataka in the case of CIT & Anr. Vs. M.J Siwani (2014) 366 ITR 356 (Kar) it was observed by the CIT(A) that the Hon‘ble High Court had held that where the assessee on the date of sale of long term
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 5 ITA No. 7450/Mum/2019 – A.Y 2016-17
capital asset owned more than one residential house even jointly with another person, he was to be treated as the owner of the house in which he has share, as his right, title and interest was exclusive to the extent of his share, and that he was the owner of the entire undivided house till it was partitioned. It was further observed by the CIT(A) that the aforesaid view of the High Court had been approved by the Hon‘ble Supreme Court while dismissing the SLP filed by the assessee in M.J Siwani vs. Commissioner of Income-tax (2015) 232 Taxman 335 (SC). It was, thus, concluded by the CIT(A) that the assessee on the date of sale of the original asset i.e shares of MCPL was the owner of a residential house at 31/348, Akshar Mahal, Telang Cross Road, Matunga within the meaning of Sec. 54F of the Act. However, it was observed by the CIT(A) that as the property of the assessee i.e Flat No. 2602, Indiabulls Greens, Panvel, Mumbai, at the time of transfer of the original asset was an under construction property that was not capable of generating income from house property, therefore, the same did not satisfy the requirement contemplated in condition (b) of the ‗proviso‘ to Sec. 54F of the Act. Backed by his aforesaid observations, the CIT(A) observed that as the assessee on the date of transfer of the original asset was the owner of only one residential house, viz. residential house at 31/348, Akshar Mahol, Telang Cross Road, Matunga, that was capable of generating house property income, therefore, he was duly eligible for claim of deduction u/s 54F of the Act. Also, it was observed by the CIT(A) that from the verification of the return of income filed by the assessee for the preceding years, it was therein discernible that the assessee had never claimed deduction under Sec. 54F in any of the previous years other than the year in question i.e A.Y. 2016-17. Further, it was observed by the CIT(A) that the exemption allowed to the assessee u/s 54F would be withdrawn if he, viz. (i) sells or transfer the new house within three years of its purchase; or (ii) purchases within a period of two years of transfer of the original asset OR constructs within a period of three years of transfer of the aforesaid asset, a residential house other than the new house. Backed by
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 6 ITA No. 7450/Mum/2019 – A.Y 2016-17
his aforesaid observations the CIT(A) partly allowed the appeal of the assessee.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Departmental Representative (for short ‗D.R‘) relied on the assessment order. It was submitted by the ld. D.R that as the assessee at the time of transfer of the original asset i.e shares of MCPL owned two residential houses, therefore, as observed by the A.O, and rightly so, he was not eligible for exemption u/s 54F of the Act. The ld. D.R in order to buttress his aforesaid contention took us through the relevant observations of the A.O. It was submitted by the ld. D.R that the CIT(A) had wrongly concluded that as the residential property owned by the assessee at Indiabulls Greens, Panvel, Mumbai was on the date of transfer of the original asset an under construction property, therefore, it could not be brought within the meaning of a residential house u/s 54F of the Act. It was, thus, submitted by the ld. D.R that the order passed by the CIT(A) may be set-aside and that of the A.O be restored.
Per contra, the ld. Authorized representative (for short ‗A.R‘) for the assessee relied on the order passed by the CIT(A). It was submitted by the ld. A.R that as the property at Indiabulls Greens, Panvel, Mumbai, at the time of transfer of the original asset i.e shares of MCPL was an under construction property, therefore, considering the said material fact the CIT(A) had rightly concluded that as the said property could not generate any income which would be chargeable under the head ‗house property‘, thus, it could not be brought within the meaning of a residential house as contemplated in clause (a)(i) to the ‗1st proviso‘ r.w clause (b) of the ‗1st proviso‘ to Sec. 54(1) of the Act. It was submitted by the ld. A.R that as the assessee owned only one residential house i.e House no. 31/348 Akshar Mahol, Matunga, Mumbai, on the date of transfer of the original asset, therefore, the CIT(A) had rightly concluded that the assessee satisfied the requisite conditions for availing the exemption contemplated u/s 54F of the Act.
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 7 ITA No. 7450/Mum/2019 – A.Y 2016-17
We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. As is discernible from the records, the assessee had during the year under consideration sold 49,584 shares of MCPL which were held by him in his own name. As the wife of the assessee had also inter alia sold 5,000 shares of MCPL that were gifted to her by the assessee, thus, the LTCG arising therefrom was clubbed u/s 64(1)(iv) in the hands of the assessee. On a perusal of the records, we find, that the LTCG of Rs. 18,13,71,487/- earned by the assessee on sale of the aforesaid 54,584 shares of MCPL [49,584 shares (+) 5,000 shares] was claimed as exempt u/s 54F of the Act. As per the details filed by the assessee in the course of the assessment proceedings the LTCG on sale of 54,584 shares of MCPL was worked out by him as under :
Particulars For 49,584 For 5,000 Total shares shares (Rs.) (Rs.) (Rs.) Sale Consideration 18,32,98,645/- 1,84,83,506/- 20,17,82,151/- Less: Expenses (Professional Fees) (79,13,173/-) Nil (79,13,173/-) Net Sale consideration 17,53,85,472/- 1,84,83,506/- 19,38,68,978/- Less : Indexed Cost (1,13,71,449/-) (11,26,042/-) (1,24,97,491/-) Capital Gain as per Indexation 16,40,14,023/- 1,73,57,464/- 18,13,71,487/-
Further, the aforesaid LTCG of Rs. 18,13,71,487/- was claimed as exempt by the assessee u/s 54F of the Act, as under :
Particulars For 49,584 For 5,000 Total shares shares (Rs.) (Rs.) (Rs.) Capital Gain as per Indexation 16,40,14,023/- 1,73,57,464/- 18,13,71,487/- Less Exemption u/s 54F (Amount invested (16,40,14,023/-) (1,73,57,464/-) (18,13,71,487/-) in Residential Flat is Rs. 17,84,30,000/-) Calculation of exemption u/s 54F: Lower of Rs. 18,13,71,487/- or [Capital Gain * Amount Invested/
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 8 ITA No. 7450/Mum/2019 – A.Y 2016-17
Net Sales Consideration] [Rs.18,13,71,487/-*17,84,30,000/- /17,53,85,472] = Rs. 18,45,19,926.63 Net Capital Gain Nil Nil Tax @20% Nil Nil Add Surcharge @12% Nil Nil Nil Nil Add Education Cess @3% Nil Nil Total Tax Payable Nil Nil Net Tax Payable Nil Nil
As observed by us hereinabove, the controversy involved in the present appeal revolves around the eligibility of the assessee for claim of exemption u/s 54F of the Act. On a perusal of the orders of the lower authorities, we find that the claim of the assessee for exemption u/s 54F was declined by the A.O for two reasons, viz. (i). that the assessee on the date of transfer of the original asset owned more than one residential house; and (ii). that the assessee could not substantiate his claim of having invested in a new residential house on the basis of supporting documentary evidence. Insofar the observation of the A.O that the assessee could not support his claim of having invested in a new residential house, the same, had been dislodged by the CIT(A) and the revenue has not assailed the same any further before us. As regards the claim of the assessee that he on the date of transfer of the original asset did not own more than one residential house, the same, as observed by us at length hereinabove comprised of two limbs, viz. (i). that as the assessee was a joint owner of the residential house at 31/348, Akshar Mahol, Matunga, thus, not being the ‗absolute owner‘ of the said property he could not be held to be the owner of a residential house within the meaning of Sec. 54F of the Act; and (ii). that as the residential property owned by the assessee at Indiabulls Greens, Panvel, Mumbai was on the date of transfer of the original asset an under construction property, therefore, it could not be brought within the meaning of a residential house u/s 54F of the Act. Insofar the claim of the assessee that as he was a joint owner of the residential house
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 9 ITA No. 7450/Mum/2019 – A.Y 2016-17
at 31/348, Akshar Mahol Matunga, thus, not being the ‗absolute owner‘ of the said property he could not be held to be the owner of a residential house within the meaning of Sec. 54F of the Act is concerned, the same was rejected by the A.O and his view was thereafter upheld by the CIT(A). As the assesssee has not assailed the order of the CIT(A) before us, thus, her view that the assessee on the date of transfer of the original asset was owner of the residential house, viz. 31/348, Akshar Mahol Matunga had attained finality.
In the backdrop of the aforesaid facts, the solitary issue that survives and has been assailed by the revenue before us is the sustainability of the view taken by the CIT(A) that as the property owned by the assessee at Indiabulls Greens, Panvel, Mumbai was on the date of transfer of the original asset an under construction property, therefore, it could not be brought within the meaning of a residential house u/s 54F of the Act. As is discernible from the order of the CIT(A), we find, that she had inter alia observed that an assessee would be eligible for claim of exemption u/s 54F, if he on the date of transfer of the original asset does not own more than one residential house (other than the new house), income from which is chargeable under the head ‗Income from house property‘. Insofar, the aforesaid observation of the CIT(A) is concerned, we are of the considered view that the same does not suffer from any infirmity. On a perusal of the ―1st proviso‖ of Sec. 54(1) of the Act, we find that the same sets out certain disqualifying riders qua an assessee‘s eligibility for claim of exemption u/s 54, viz. (i). ownership of more than one residential house by the assessee, other than the new asset, on the date of transfer of the original asset; and (ii). purchase or construction of a new residential house thereafter by the assessee within a specified period from the date of transfer of the original asset; and reads as under: “Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 10 ITA No. 7450/Mum/2019 – A.Y 2016-17
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". (emphasis supplied by us) On a perusal of the aforesaid, the conditions contemplated in Clause (a)(i) to (iii) to the ‗1st proviso‘ of Sec. 54F(1) can be summed up as, viz. (i) that the assessee on the date of transfer of the original asset should not own more than one residential house, other than the new asset; or (ii) that the assessee shall not purchase any residential house, other than new asset within a period of one year after the date of transfer of the original asset; or (iii) that the assessee shall not construct any residential house, other than the new asset within a period of 3 years after the date of transfer of the original asset. At the same time, we find that the embargo contemplated in the Clause (a)(i) to (iii) to the ‗1st proviso‘ of Sec. 54F(1) is further supplemented by Clause (b) to the ‗1st proviso‘ of Sec. 54F(1), which provides that the income from such residential property, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head ‗income from house property. In the case before us, we are concerned with the scope and gamut of Clause (a)(i) to the ‗1st proviso‘ of Sec. 54F(1) r.w Clause (b) to the ‗1st Proviso‘ of Sec. 54F(1) of the Act, which for the sake of clarity is culled out as under: “Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) ……………………………………………………………………………; (iii)……………………………………………………………………………..; and
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 11 ITA No. 7450/Mum/2019 – A.Y 2016-17
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property". (emphasis supplied by us) As is discernible from the aforesaid position of law, in a case where the assessee on the date of transfer of the original asset owned more than one residential house, other than the new asset, then, his entitlement towards claim of exemption u/s 54F would be jeopardized in a case where the income from such residential house i.e other than the one residential house owned on the date of transfer of the original asset is chargeable under the head ‗Income from house property‘. On a perusal of the order of the CIT(A), we find, that she had after relying on the rule of strict literal interpretation had observed, and rightly so, that the legislature had used the word ―and‖ amongst the two parts of the ‗1st proviso‘ i.e (a) and (b), which in the common parlance being used as a conjunctive would thereby require that all the requirements therein listed must be satisfied. It was, thus, observed by the CIT(A) that the word ‗and‘ requires that the assessee has to satisfy both the conditions, i.e a(i) or a(ii) or a(iii) and condition (b). Accordingly, it was observed by the CIT(A), that to be eligible for exemption u/s 54F the assessee should not have more than one residential house which is capable of generating house property income. For the sake of clarity the relevant extract of the observation of the CIT(A) is culled out as under : ―7.3 Thus from all the judgments, it is clear that nothing can be added or substituted in any section unless expressly provided or unless some ambiguity is arising out of the plain reading. The proviso to Section 54F is clear and there is no ambiguity as regards it. The plain reading of the section and its proviso states that the benefit of deduction shall be allowed to a person if he fulfils certain conditions. As per the principles of interpretation, words are to be construed strictly. In this case, the legislature has used the word “and” amongst the two parts of the proviso (a) and (b). As per English Grammar, use of the word ‗and‘ is conjunctive, meaning whereby that all the listed requirements must be satisfied. The word ‗and‘ requires that the appellant assessee has to satisfy both conditions, (a)(i) or (ii) or (iii) and condition (b). Hence, to be eligible for exemption u/s 54F, the appellant should not have more than one residential house which is capable of generating house property income.‖
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 12 ITA No. 7450/Mum/2019 – A.Y 2016-17
As observed by the CIT(A), as the property owned by the assessee at Indiabulls Greens, Panvel, Mumbai, on the date of transfer of the original asset was an under construction property, therefore, the same, as observed by her, and rightly so, could not have generated any income chargeable under the head ―Income from house property‖. Backed by her aforesaid observation, the CIT(A) was of the view that as the property in question, viz. Indiabulls Greens, Panvel, Mumbai did not satisfy the condition (b) of the ‗1st proviso‘ to Sec. 54F, therefore, it could safely be concluded that the assessee as on the date of transfer of the original asset owned only one residential house, other than the new asset, which was capable of generating house property income. As such, the CIT(A) in our considered view had rightly observed that in the absence of a cumulative satisfaction of the conditions contemplated in Clause (a)(i) to ‗1st proviso‘ of Sec. 54F(1) AND Clause (b) to ‗1st proviso‘ of Sec. 54F(1) w.r.t the property at Indiabulls Greens, Panvel, Mumbai, the assessee could safely be held to be the owner of only one residential house that was capable of generating house property income. Observations of the CIT(A) in context of the issue in question, on merits, in the backdrop of the aforesaid position of law are reproduced as under :
―8.1 Now, the appellant has also invested in another property at Indiabulls Greens, Panvel, Navi Mumbai which is under construction and consequently this property is not capable of generating income from house property. Therefore it does not satisfy condition (b) of the proviso to section 54F. Hence, in my considered view, the appellant as on the date of transfer of original asset has only one residential house which was capable of generating house property income. Furthermore, during the appellate proceedings, I have examined income tax returns of previous years and verified that the appellant had never claimed deduction u/ 54F in any of the previous years other than A.Y 2016-17. Hence, the appellant is eligible for claiming exemption u/s 54F of RS. 18,13,71,487/-. However, the exemption u/s 54F is to be withdrawn if the appellant (i) Sells or transfers the new house within three years of its purchase (ii). Purchases within a period of 2 years of transfer of shares of Original asset (Monarch Catalyst Pvt. Ltd.) or constructs within a period of 3 years of transfer of such asset a residential house other than the new house.‖
ACIT, Circle-1, Kalyan West Vs. Shri. Krishna Muthukumar 13 ITA No. 7450/Mum/2019 – A.Y 2016-17
We have deliberated on the issue in question, and concur with the view taken by the CIT(A) that as the conditions contemplated in clause (a)(i) r.w. clause (b) to the ‗1st proviso‘ of Sec. 54F(1) qua the under construction property of the assessee at Indiabulls Green, Panvel, Mumbai, were not found to have been cumulatively satisfied, therefore, the assessee on the date of transfer of the original asset could safely be held to have owned only one residential house, viz. House No. 31/348, Akshar Mahol, Telang Cross Road, Matunga, Mumbai, other than the new asset.
Now, coming to the grievance of the revenue, that the CIT(A) had failed to appreciate that as the assessee had purchased the flat at Indiabulls Greens, Panvel, vide agreement dated 11.09.2012 executed between M/s Lucina Land Development Ltd. and Mrs. & Mr. Krishanan Muthukumar, therefore, he was on the date of investment an owner of two houses i.e including the house at Matunga. In our considered view, the aforesaid claim raised by the revenue before us does not arises from the orders of the lower authorities, and in fact militates against the factual position that was admitted by the A.O and formed the very basis for framing the assessment. As is discernible from the records, it was the claim of the assessee that as on the date of transfer of the original asset his property at Indiabulls Greens, Panvel was an under construction property, therefore, the same could not be held to be a residential house owned by him. Not rebutting the claim of the assessee that the property in question was an under construction property, the A.O had rejected the said claim of the assessee, for the reason, that now when he had claimed exemption u/s 54F on the basis of an investment that was made by him in an under construction residential property at Matunga, which as per him was to be construed as an investment in a new residential house, therefore, on a similar footing the property, viz. Indiabulls Greens, Panvel, though under construction, was to be similarly construed and taken as a residential property within the meaning of Sec. 54F of the Act. Observations of the A.O in context of the aforesaid issue are for the sake of clarity culled out as under :
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―5.7 The submission of the assessee is carefully examined and was not found acceptable. 1. In this submission, the assessee has contested that, the flat purchased by the assessee in ―Indiabulls Greens, Panvel is under construction and hence cannot be construed as a residential property. This contention of the assessee is not acceptable. The assessee has claimed exemption upon investment in a residential property at Matunga. That residential property is also under construction as on date. Therefore there cannot be two contradictory views on the same issue. The assessee is stating that, since the Panvel flat is under construction, the assessee is owner of only one residential property and on the other hand he is claiming exemption on investment in residential property which is also under construction saying that, only investment in residential house is sufficient to establish the right of the assessee on the ‗new asset‘. Therefore the assessee is taking two contradictory views on the issue. For fulfilling condition of only one residential house at the time of transfer of shares, he is taking view that, since the flat is under construction he cannot be said to be the owner of the residential property and while claiming exemption on the ‗new asset‘ he is saying that, only investment makes the assessee owner of the residential property and even if the property is not constructed, the assessee is owner of the ‗new asset‘. This is self-contradictory and hence not acceptable.‖ Although, it was further observed by the A.O that in the registered purchase deeds pertaining to both the flats at ‗Akshar Mahol‘ and ‗Indiabulls Greens‘ as were filed by the assessee in the course of the assessment proceedings the name of the assessee and his wife was clearly mentioned as purchasers, therefore, they were owners of both the residential properties, but then, he had at no stage denied the fact that the property in question, viz. Indiabulls Greens, Panvel was an under construction property on the date of transfer of the original asset by the assessee. In fact, it is a matter of fact borne from the record that both the lower authorities had adjudicated the issue in hand considering the fact that the property in question, viz. Indiabulls Greens, Panvel was an under construction property on the date of transfer of the original asset. In our considered view, the department on the basis of certain facts which are not borne from the record is trying to change the entire complexion of the case and is seeking to improve upon the assessment, which we are afraid is not permissible under Sec. 254 of the Act. Our aforesaid conviction is fortified by the order of the ‗Special Bench‘ of the ITAT,
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Mumbai in the case of ACIT Vs. Prakash L. Shah (2008) 115 ITD 167 (Mum)(SB). Elaborating on the limitation on the powers of the department qua raising of contentions that are found to be contrary to the stand taken by the A.O, the ‗Special bench‘ of the ITAT, Mumbai in the case of Mahindra & Mahindra Ltd. Vs. DCIT 122 ITD 216 (Mum)(SB) (2009) 122 TTJ 577 (Mum)(SB), had observed, that the department cannot be permitted to take a stand contrary to the one taken by the A.O. Also, we find that the Hon‘ble High Court of Punjab & Haryana in the case of CIT(Central), Ludhiana Vs. S.A Builders Ltd. (2013) 38 taxmann.com 255 (P&H), had held, that the Tribunal cannot allow a party to change its stance by referring to new facts that were not pleaded or asserted before the Assessing Officer or Commissioner (Appeals). Apart from that, we find that the ld. D.R had neither placed on record any material in support of the aforesaid claim of the revenue nor raised any contention to the said effect before us. In our considered view, the department on the basis of its totally unsubstantiated claim is trying to build up a fresh case on the basis of certain facts which are not available on record. Further, it was in the backdrop of the aforesaid admitted facts i.e the property in question, viz. Indiabulls Greens, Panvel was an under construction property on the date of transfer of the original asset that the CIT(A) had thereafter adjudicated the issue under consideration. Backed by our aforesaid deliberations, we are of the considered view that the revenue by now raising the aforesaid claim is trying to change the entire complexion of the case by making a complete volte face and improving upon the assessment by canvassing facts which are not borne from the records. Accordingly, we are of the considered view that the aforesaid claim raised by the revenue before us, which as observed by us hereinabove clearly militates against the factual position that was admitted by the A.O in the course of the assessment proceedings and formed the very basis of framing the assessment order cannot be accepted, specifically when neither any material in support thereof is available on record or filed in the course of the proceedings before us, nor
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any contention to the said effect had been raised by the ld. D.R. The Grounds of appeal No. 1 & 2 are dismissed in terms of our aforesaid observations.
The Grounds of appeal Nos. 3 & 4 being general are dismissed as not pressed. 12. We, thus, finding no infirmity in the view taken by the CIT(A), therein concur with the view taken by her. Accordingly, the order passed by the CIT(A) is upheld in terms of our aforesaid observations.
Resultantly, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 06.09.2021
Sd/- Sd/- (Rajesh Kumar) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 06.09.2021 *PS: Rohit Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai