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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.2115/Bang/2019 Assessment Year : 2012-13 Shri. Khadeer Ahmed Khan, The Assistant Commissioner of No.42, Doddkallasandara, Income-tax, Kankapura Main Road, Vs. Circle – 4(2)(1), Bengaluru – 560 062. Bengaluru. PAN : AAVPK 1742 Q ASSESSEE RESPONDENT Assessee by : Shri. H. Guruswamy, ITP Revenue by : Smt. R. Premi, JCIT (DR)(ITAT), Bengaluru Date of hearing : 07.04.2021 Date of Pronouncement : 14.06.2021
O R D E R Per Shri. Chandra Poojari, AM: This appeal by the assessee directed against the order of CIT(A)-3, Bengaluru, dated 30.08.2019. The assessee has raised the following grounds: Grounds of Appeal Tax effect relating to each Ground of appeal The impugned Appellate order dated: 30-08-2019 passed by the Ld. CIT(A), Bangalore-3 is opposed to law, facts and circumstances of the case. The Ld. CIT(A) has erred in confirming the addition Rs. 38,27,030/- of Rs.1,28,18,724/- disallowed u/s. 54F by holding that the building was a commercial property as per AO's Remand Report and the same was not a ground of disallowance as per Assessment Order.
ITA No.2115/Bang/2019 Page 2 of 36 The Ld. CIT(A) has erred in confirming the Same as above addition made by the AO with change of opinion as to the nature of building without appreciating the BBMP Katha Extract dtd: 14-06-2013 and 23-12- 2014 wherein the nature of building was stated as residential. The Ld. CIT(A) has erred in holding the Same as above building as commercial in nature without appreciating the valuation report dtd: 31-05-2014 wherein the building situated at Site No. 8/1, BBMP Katha No. 3646/8/8/1 Kattigenahalli Village, Jala Hobli, Bangalore North Taluk was residential building. The Ld. CIT(A) has erred in not considering the Same as above cost of additional construction of Rs. 48,00,000/- beiig a part of total cost of construction of Rs. 1,28,18,724/- on the ground that the building constructed was commercial. Same as above The Ld. CIT(A) has erred in holding that the Valuation Report was related to some other residential house without appreciating the fact that in Column 6 of the Valuation Report that the location of the building was clearly mentioned and the same was personally inspected by the Valuer on 31-05-2014 as per declaration provided in Part —III of the Valuation Report dtd: 31-05-2014 Same as above The Ld. ,CIT(A) has erred in not admitting the additional evidence of Bills and Vouchers relating to the expenditure of Rs. 8,05,876/- incurred for land levelling, compound and gate expenses without appreciating the fact that the Ld. AO has not given sufficient opportunity to the Assessee. Same as above The Ld. CIT(A) ought to have appreciated the fact that the Assessee cannot be held to be disentitled for deduction u/s. 54F of the Act without appreciating the fact that the inspection by the Inspector was carried out in the year 2018 whereas the relevant Assessment year was 2012- 13. The Assessee craves leave to add, alter, amend and delete any of the grounds at the time of hearing.
ITA No.2115/Bang/2019 Page 3 of 36 2. The facts are that the assessee sold property at Sy.No.149, Bukkasagara Village, Anekal Taluk for a sale consideration of Rs.1.87 Crores and purchased a residential property at 8/1, Kattigenahalli Village, Bengaluru on 02.06.2012 for a consideration of Rs.1,33,28,405/- (including construction on it). The assessee claimed exemption under section 54F of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The AO disallowed the claim under section 54F of the Act on the reason that the assessee is owning more than 1 house other than the new asset on the date of purchase of residential side. Further, the assessee claimed land levelling, compound and gate expenses at Rs.8,05,876/- and construction cost of Rs.48 lakhs which was denied on account of insufficient details. Against this, assessee is in appeal before us. The learned AR submitted that the assessee along with his Cousin Mr. Nassar Ahmed Khan had jointly owned lands at Sy. No. 149, Bukkasagara Village, Jigni Hobli, Anekal Taluk, Bangalore District, measuring 2 Acres 12 Guntas. The said land was jointly sold by the assessee and his Cousin through a Registered Sale Deed dtd: 31-03-2012 in favour of a Purchaser M/s. Kirloskar Toyota Textile Machinery Ltd for a Sale consideration of Rs. 3,74,00,000/- out of which the assessee had received his one-half share amounting to Rs. 1,87,00,000/-. The assessee out of the sale consideration had purchased a New Asset being Site and Building situated at No. 8/1, Kattigenahalli, Baglur Road, Bangalore, through a Registered Sale Deed dtd: 02-06-2012 measuring 5750 sq.ft of land together with a Building measuring 500 sq.ft for a sale consideration of Rs. 85,28,405/- inclusive of Stamp Duty of Rs. 4,48,000/- and Registration Fee of Rs. 80,405/-.
The assessee after purchase of the New Asset at Kattigenahalli village mentioned above, has constructed a Residential House measuring 2500 sq.ft inclusive of the existing building measuring 500 sq.ft on the Strength of the
ITA No.2115/Bang/2019 Page 4 of 36 same plan already obtained by the Erst-while owner. The construction of the new residential building was made between June 2012 to May 2014 and the construction Cost was certified by the Approved Valuer vide Valuation Certificate dtd: 31-05-2014 at Rs. 48,10,594/-.
The assessee had invested the Sale Consideration of Original Property of Rs. 1,87,00,000/-, a sum of Rs. 85,28,405/- inclusive of Stamp Duty and Registration Fee for purchase of a New Asset being Land and Building consisting of a Site together with a Building measuring 500 sq.ft and thereafter constructed a New Building by investing a sum of Rs. 48,10,594/-. Thus the assessee had claimed deduction of Rs. 1,33,38,999/- (Site and Old Building Cost of Rs. 85,28,405/- + Cost of New Building of Rs. 48,10,594/-) out of which the assessee had claimed deduction u/s. 54F on prorate basis amounting to Rs. 1,28,18,405/- as detailed below.
Sale Consideration of Property 1,87,00,000/- Situated at Bukkasagar Village Less: Land Levelling and Compound Cost 8,05,876/- Sale Consideration 1,78,94,124/- Less: Indexed Cost of Old Asset Sold 6,84,275/- (26586 X 785 / 305) Net Sale Consideration 1,72,09,849/- Less: Pro-rata Basis Deduction in respect of Investment in New Asset claimed u/s. 54F 1,28,18,724/- (1,72,09,849 X 1,33,28,404 / 1,78,94,124/-) Capital Gains on Sale of Old Asset 43,91,125/- As on 31-03-2013
The assessee has further invested the entire Capital Gains mentioned above in construction of New Building in the subsequent Financial Year and thus the entire Sale Consideration of Old Asset was invested in acquisition of
ITA No.2115/Bang/2019 Page 5 of 36 New Asset and therefore the deduction was claimed u/s. 54F of the Act. The assessee in support of the acquisition of Site together with Building measuring 500sq.ft has submitted a Copy of BBMP Katha Extract dtd: 14-06-2013 wherein the Built-up area and the extent of Vacant Land was mentioned measuring 500 sq.ft and 5750 sq.ft respectively. A Copy of the said Katha Extract is placed at Page No 45 of the Paper Book. The assessee after construction of the New building measuring additional 2000 sq.ft has obtained the Katha dtd: 23-12-2014, wherein the Built-up area was mentioned at 2500 sq.ft and the Vacant Land at 3250 sq.ft. In the said Katha Extract at Column 10 the Nature of the property was mentioned as residential. The said Katha Certificate dtd: 23-12-2014 is placed at Page 46 of the Paper Book.
The Ld. AO at para 15 of the Assessment Order has held that the assessee had owned more than one house other than the New House Purchased on the date of transfer of land i.e., 31-03-2012 and therefore the claim of the assessee for deduction u/s. 54F of the Act was held inadmissible and the exemption claimed in computation of Capital Gain on transfer of Land at Sy. No. 149, Bukkasagara Village was disallowed and brought to tax.
The assessee submits that the Ld. AO in para 12 of the Assessment Order has held that the following two properties were owned by the assessee as on the date of transfer.
i. House No. 82/10, RBI Colony, 2nd Cross, Jayanagar East, 8th Main, Bangalore 560011. (As per the residential address mentioned in S4le Deed dtd: 12-081996 relating to Bukkasagar Village.
ii. Property No. 9, 100 ft Road, BTM Layout, Bangalore out of which the rental income was declared.
ITA No.2115/Bang/2019 Page 6 of 36
The assessee submits that he was a Tenant of the property No. 82/10, RBI Colony, 2nd Cross, Jayanagar East, 8th Main, Bangalore 560011 mentioned above and the One Riyaz Ahmed was the Building Owner and the relevant documents in support of the ownership were produced before the AO and in the Remand Report dtd: 06-07-2018 it was accepted by the AO.
The Property bearing No. 9, 100 ft Road, BTM Layout, Bangalore was a Commercial Property and an Inspector was deputed to cause enquires in respect of the said property and the Inspector submitted Enquiry Report (A copy which was enclosed to the Remand Report dtd: 06-07-2018). In the said Enquiry Report it was reported that the said Building consisting of Ground Floor, First Floor and Second Floor and it was a Commercial Building over the period of 10 years and the said Building was not a residential building. Thus the AO in the remand report dtd: 06-07-2018 in para 3 and 4 has admitted that the assessee did not own more than one house as on the date of transfer of Old Asset and acquisition of New Asset during the period 2012 to 2014. In this view of the matter it is submitted that it is an undisputed fact that the assessee did not possess more than one house as on the date of transfer of the Old Asset and therefore the deduction disallowed as per para 15 of the Assessment Order by the AO was neither justifiable nor maintainable in law and hence the assessee prays that the Order of the Authorities below be set- aside and be pleased to pass orders that the assessee is entitled for deduction u/s. 54F of the Act. Change of Opinion and Substitution of New Colour and New Dimensions to the existing facts of the case:-
The Assessee submits that it is an undisputed fact that he did not possess more than one house as on the date of transfer and the same was also
ITA No.2115/Bang/2019 Page 7 of 36 admitted by the AO in the Remand Report dtd: 06-07-2018. However, the AO in the Remand Report has shifted the stand and attempted to substitute New Colour and New Dimension to the existing fact in the Remand Report dtd: 06- 07-2018, that the New Asset being Land and Building was a Commercial Property which was not entitled for the deduction u/s. 54F of the Act. The AO's Remand Report was squarely based upon the Enquiry Report of the Inspector who has stated to have conducted spot inspection of the Property No. 8/1, Kattigenahalli, on 02-07-2018 and submitted a Report to the AO on 03-07-2018. On the basis of the said Enquiry Report, the AO was of the opinion that no Residential Building was in existence at any point of time and there are five commercial shops on the said site. It was further reported that a Shop by name Sri Ayyappa Bakery was in existence even during the period in which One Sri. Jayapal Reddy was exercising his ownership rights. The AO on the basis of the Inspector's Report came to the conclusion that it was commercial building. The AO in order to strengthen her stand, a Summons dtd: 26-06-2018 was stated to have been issued to One Sri. Ismail said to be the owner of Sri Ayyappa Bakery for his appearance on 02-07-2018. However, the said Ismail has not appeared on 02-07-2018 but it was reported that his Son Sri. Rajil appeared on behalf of Ismail. It was admitted by the AO that Sri. Rajil could not provide any authentic information on the ground that he was unaware of any facts. In spite of such clear admission, it was stated that Rajil was told to that the Shop was taken on lease only four years back. He produced a copy of Two Rental Agreements between Kandeer Ahmed (Assessee) and Sri. Ismail, one was dated 09-01-2013 and the other rental agreement was dtd: 25-02-2014.
In these two agreements, the AO reported that the Address of Sri. Ismail is given as, presently at Ayyappa Bakery, Baglur Main Road,
ITA No.2115/Bang/2019 Page 8 of 36 Bangalore - 64, on this basis the AO formed a opinion that the Ayyappa Bakery was already in existence and Sri, Ismail was running the bakery from past 10 years. However, the above facts were retracted in the conversation held with Inspector on 02-07-2018. Further the AO has relied upon the footage from Google Maps which indicates the existence of Sri. Ayyappa Bakery even in the year 2010. In this regard the assessee submits that the AO was not justified to come to the Conclusion that the said building was commercial building for the following reasons.
i. The description of the property in the Sale Deed dtd: 02-06-2012, (placed at page 26 to 33 of the Paper Book) establishes the fact that the House Site of the Schedule property was 5750 sq.ft and the plinth area comprised in the Schedule Property was 500 sq.ft which was constructed with Bricks and Cement Marter. It has RCC Roofing and Cement floor with electricity amenities. There is no mention in the said Deed the occupancy of the tenant Sri. Ismail and also running a Bakery Business in the name of Ayyappa Bakery. Without prejudice to the above submissions, the assessee begs to place reliance on the decision of the Hon'ble ITAT Hyderabad "B" Bench in the case of Shri. Shyamlal Tandon dtd: 21-01-2014 in ITA No. 1774/HYD/2012 and the relevant findings are reproduced as under for immediate reference.
"5. The learned counsel for the assessee reiterating the contentions urged before the lower authorities submitted that the assessee is very much entitled for relief under S.54F of the Act. He submitted that the assessee has given land for development and got in return constructed residential property, which is eligible for relief under S.54F of the Act. He further submitted that the land was given by the assessee to the developer for construction of a residential building. In this behalf, he furnished before us a copy of the approved plan of the building.
ITA No.2115/Bang/2019 Page 9 of 36
He also placed reliance on the decision of the Tribunal dated 27.12.2011 in ITA No.1014/Hyd/2009 and others in the case of Shri M. V. Subramanyeswara Reddy (HUF), Hyderabad and others and submitted that subsequent change in the usage of the property does not disentitle the assessee to the relief under S.54F, if what was acquired was originally a residential property. He further submitted that the CIT(A) is not justified in relying on the information gathered from the internet, such as `Google Earth' which not an authentic proof to hold that the property in question is a commercial property. 6. The Learned Departmental Representative, on the other hand, strongly supported the orders of the lower authorities and submitted that the property acquired, has clearly been demonstrated by the CIT(A) in the impugned order to be a commercial property and as such the assessee was clearly held to be not eligible for exemption under S.54F of the Act. 7. We have considered the rival submissions and perused the orders of the Revenue authorities. It is evident from the impugned orders of the lower authorities and other material on record that intention of the parties when the development agreement was entered into was to construct a residential property. Municipal permission has also been obtained only for construction of a residential complex. Ultimately, the assessee has received possession of such residential property. It may be true that the said property was put to use subsequently for commercial use. Merely because of change in the use of such property for non-residential purposes, it cannot be said that what was acquired by the assessee was not a residential property, but a commercial one. Subsequent change in the user of the property does not disentitle the assessee to relief under S.54F of the Act, as held by Hyderabad Bench B of this Tribunal in the case of Shri M. V. Subramanyeswara Reddy(HUF), Hyderabad (supra), wherein this Tribunal vide its order dated 27.12.2011, has held, vide para 48 thereof, as follows 48. We have heard both the parties. We find that the CIT(A) has accepted the claims of the assessees for relief under the provisions of S.54F of the Act, keeping in view the following factual aspects of the matter- a) Perusal of the sale deed shows that the property was a residential property especially the narration at para 10 at Page 14 of the deed, which has been reproduced by the CIT(A) at page 4 at para 2.4 of his order.
ITA No.2115/Bang/2019 Page 10 of 36 b) The plan attached to the sale deed shows the construction of bed room, Kitchen, study etc., showing that the property is residential one. c) The MCH permission dated 10.05.2000 has approved the property as "residential complex" d) The bank guarantee for security deposit given by State Bank of India to MCH also refers to the property as residential complex. e) Permission / No objection certificate given by the Fire Service Department also refers to the property as residential complex f) The memorandum of understanding dated 14.01.2001 entered for the joint development and construction of the said property also refers to the construction of residential complex. We find no infirmity in the view taken by the CIT(A) as to the residential nature of the property purchased by the assessees, considering the factual aspects noted above. Even though the property was subsequently leased out to M/s.APP Lab Technology P Ltd, and it has been used for nonresidential purposes, on that ground, the deduction u/s.54F cannot be denied. Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT (5 SOT 353). Respectfully following the said decision of the Tribunal, we are of the opinion that the CIT(A) had rightly allowed deduction u/s.54F." 8. Facts and circumstances in the present case being similar to those considered by the Tribunal in the above case, consistent with the view taken in the above order, to which one of us, viz. the author member, is a party, we hold that notwithstanding the change in the user of a property, assessee is entitled to relief under S.54F of the Act, if what was sought to be acquired and originally acquired is a residential property. In that view of the matter, we set aside the impugned order of the CIT(A), and restore the matter to the file of the Assessing Officer, with a direction to consider the assessee's claim for exemption under S.54F of the Act, subject to fulfillment of other conditions, in accordance with law and after giving reasonable opportunity of hearing to the
ITA No.2115/Bang/2019 Page 11 of 36 assessee. Assessee's grounds on this issue are partly allowed for statistical purposes"
11.1 The New Asset being Land and Building was purchased on 02-06-2012 whereas the enquires by the Inspector was conducted in February 2018 after lapse of 6 years and the mere existence of the Commercial nature of Property in the year 2018 cannot be a foolproof evidence to contend that the property was commercial at the time of purchasing on 02-06-2012. 11.2 In para 8 of the Remand Report the AO reported that on the basis of two rental agreement dtd: 09-01-2013 and 25-02-2014, the address of Ismail was given as "Ayyappa Bakery, Baglur Main Road, Bangalore - 64". In this view of the matter the Assessee submits that the two rental agreements relied upon by the AO mentioned the existence of Ayyappa Bakery was at Baglur Main Road, Bangalore — 64 and not in the premises bearing No. 8/1, Kattigenahalli which is situated away from Baglur Main Road and therefore there is no conclusive evidence to show that the Ayyappa Bakery was in existence at the premises of the New Asset purchased and constructed by the Assessee. 11.3 The AO at the Outset relied upon the enquiry report of the Inspector who was stated to have conducted Spot Inspection on 02-07-2018 after lapse of 6 years from the date of acquisition of the New Asset. The AO, upon such report has submitted a Remand Report without causing any enquiry by herself except placing reliance on third party report which is not permissible in law. 11.4 The Assessee submits that the Garnet of whole exercise of conducting the sport inspection by a sub-ordinate officer of the AO and reporting the existence of a commercial property in the year 2018 after lapse of 6 years was based upon the jurisdiction assumed by the AO on the strength of the directions given by the CIT(A) during the Appellate Proceedings. However the assumption of the jurisdiction for conducting enquiry and submitting a remand report was not permissible under the law since the CIT(A) himself has rejected the Additional Evidence. When that being the case the AO or his sub-ordinate officials cannot assume the jurisdiction after the completion of the Original Assessments and the same amounts to assumption of jurisdiction not permitted under the law to redo the Assessment in the guise of submission of Remand Report which was considered by the Ld. CIT(A) without jurisdiction since he cannot travel being the Grounds of Appeal where the Assessee contended that the AO who has completed the Original Assessment denied the deduction admissible u/s. 54F mainly on the ground presumed that the Assessee had
ITA No.2115/Bang/2019 Page 12 of 36 possessed or owned more than one house and in the course of the Assessment proceedings nowhere it was stated that it was a commercial property. In that event the successor in office cannot go beyond the findings of the Assessment Order, especially when it was proved to be a fact that the Assessee did not possess more than one property. 11.5 The AO in the guise of submission of a Remand Report based on her sub-ordinates report attempting to undo the findings of the predecessor AO who has completed the Assessment on different findings by adding a new colour and new dimension to the existing facts of the case. 11.6 The AO has attempted to obtain a seal of approval of the CIT(A) to disallow the deduction which is otherwise admissible u/s. 54F of the Act by shifting the original version of the facts to new version that the new asset acquired was a commercial property. 11.7 The AO has adopted a New Strategy to hold that the New Asset acquired was a Commercial property and the said view was not held by the AO who has completed the Assessment and therefore the new version adopted by the successor AO in the Remand Report is nothing but a change of opinion which is not permissible in view of the decision of the Hon'ble Supreme Court in the case of CIT v/s. Kelvinator of India (2010) 320 ITR 561 (SC). 11.8 The Ld. CIT(A) was not justified to hold that the Katha Extract placed at Page 45 and 46 issued by the BBMP do not have evidentiary value. The BBMP is constituted under the Municipal Act to monitor all the issues relating to the immovable properties situated in Bangalore and the BBMP is a statutory local body and the Katha Certificate issued are to be followed. 11.9 The Ld. CIT(A) was not justified to decide the issues on the basis of Remand Report since the Remand Report was based on the additional evidence which was rejected by the CIT(A). The CIT(A) was not justified to hold that the Assessee has not produced any proof in respect of the construction made investing a sum of Rs. 48.00.000/- since the newly constructed building of 2000 sq.ft from the comparison of the Katha Certificates where 500 sq.ft building was in existence in the year 2012-13 and New construction measuring additional 2000 sq.ft was in existence in the year 2013-14.
ITA No.2115/Bang/2019 Page 13 of 36 12. Under these facts and circumstances the orders of the authorities below are arbitrary, unreasonable and opposed to law and facts of the case and hence they are liable to be cancelled in the interest of justice and equity.
The assessee submits herewith the details of the following Buildings mentioned in the Assessment order.
Sl. Location of the Ownership Nature of Remarks No. Buildin. the Building 1. No.82/10, RBI Riyaz Residential The Assessee was a tenant and the Ahmed building was owned by One Sri. Colony, 2nd Riyaz Ahmed. The AO in Cross, Jaianagar, the remand report dtd: 06-07- East, 8th Main, 2018 placed at page 1 of the Bangalore - Paper Book in para 3 has 560011 accepted the factual position that the building was owned by One Riyaz and property tax and Encumbrance Certificate were examined. Therefore the Assessee was not the owner of the said building No. 82/10, RBI Colony, 2nd Cross, Jayanagar, East 8th Main, Bangalore — 560011 as on the date of purchase of new property situated at No. 8/1, Kattigenahalli, Bangalore.
ITA No.2115/Bang/2019 Page 14 of 36 2 Residential The Assessee submits that a vacant CITB No. 186, Jointly held (Renumbered as by the site was jointly purchased by the Assessee and his wife vide Sale Deed dtd: Site No. 11 after Assessee Formation of and his 31- 03-1997. Thereafter a BDA) BDA Wife residential building was constructed and the Assessee has been living in the Extension, Byrasandra, said building. In view of the above it is Jayanagar 1st submitted that the Assessee had owned the above residential building jointly Block East, Bangalore with his wife and other than the said building he did not own any 560011 other residential building. Therefore it is submitted that the Assessee is entitled for deduction u/s. 54F in respect of the new Asset being land and building purchased as per Sale Deed dtd: 02-06-2012 by investing the sale proceeds of the original property situated at Sy. No. 149, of Bukkasagar Village, Bangalore. The Assessee has been owning jointly with his brother a Commercial property situated at No.9, 100 feet Road, BTM 3 No.9, 100 feet Layout, Bangalore. The Ld. AO in para Road, BTM Layout, 4 of the remand report dtd: 06-07-2018 Bangalore admitted that it is a Commercial Property. The relevant para 4 of the remand report is submitted as under for kind reference
ITA No.2115/Bang/2019 Page 15 of 36 "4. The next aspect mentioned in the Assessment order is that the Assessee hasdeclared property tax paid reeipt for the year 2012- 13 and 2014-15. The Assessee has paid Rs. 1,72,845/- as tax for above mentioned property. In order to ascertain the veracity of his claim, the Inspector of Income Tax of this Officer was sent for spot verification. The Inspector submitted a report (copy enclosed as Annexure — 1) that it is a commercial property with Corporation Bank in the Ground Floor, few offices and a Gym in first and second floor. The Branch Manager Corporation Bank informed the Inspector that the Bank is functioning from the current premises from Past 10 years and there is no residential accommodation in that building. Taking into consideration the amount of property tax paid and the spot verification conducted by the Inspector of this office it is accepted that the property at No. 9, 100 feet Road, BTM Layout, Bangalore was a commercial property even during the period relevant to the A.Y 2012-13."
It was submitted by learned AR that the Ld. CIT(A) in para 4.20 to 4.22 has discussed the issue and held that the new Asset purchased at
ITA No.2115/Bang/2019 Page 16 of 36 No. 8/1, Kattigenahalli Bangalore was commercial property as on 02-06-2012 being the date of purchase. In this regard the assessee submits that the Ld. CIT(A) has relied upon the AO's Report which was based on Inspector's Enquiry Report and held that at the time of purchase the new Asset was a commercial building occupied by Ayyappa Bakery as per the Google Earth Map and the Ayyappa Bakery existed prior to F.Y 2012-13 and still exists at the same place and therefore the building was said to be a commercial building and not a residential house as on 02-06-2012. Further the Ld. CIT(A) held that the purchase deed refers the site as house site but does not refer the building as residential house but the house was construed with the bricks and cement marter. If it were a residential house the sale deed would have indicated the same. A Lease deed was drawn on 09-01-2013 (wrongly mentioned as 09-10- 2013) shows that the Ayyappa bakery was a tenant. In this regard the assessee submits that the Ld. CIT(A) has wrongly construed that the Ayyappa Bakery was in existence prior to the date of purchase of the new Asset No. 8/1, Kattigenahalli Bangalore which was purchased on 02-06-2012. The Ld. CIT(A) has misconstrued the facts to hold that the Ayyappa Bakery was in existence without proper examination of the documents. The CIT(A) has not relied upon the Leased Deed dtd: 09-01-2013 which was executed in favour of Sri. Ismail owner of Ayyappa Bakery.
The AR submits that the New Asset at No. 8/1, Kattigenahalli Bangalore was purchased as per Sale Deed dtd: 02-06-2012 and in the Schedule of the Sale Deed it was clearly mentioned that the new asset was a House Site together with a Building measuring 500 squares. The existence of the Ayyappa Bakery as a tenant was not mentioned in the Sale Deed since the Ayyappa Bakery was not in existence and also it is evident from the lease deed dtd: 09-01-2013 that the Ayyappa bakery came as a tenant after purchasing the new Asset and on remodelling by way of additional
ITA No.2115/Bang/2019 Page 17 of 36 constructions. In this regard it is submitted that the Inspector has conducted Spot verification on 02-07-2018 as per enquiry report enclosed as Annexure - 2 to the Remand Report
This shows that the said Ismail said to be the owner of the Ayyappa Bakery was not in occupation of the New Asset situated at No. 8/1, Kattiegenahalli Jala Hobli, Bangalore prior to the date of Purchase of the new Asset. It is evident from the Lease Deed placed at Page 47 of the Paper Book that Sri. Ismail was carrying on his Ayyappa Bakery business situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore, the Bakery Address mentioned in the lease deed (being the first page of the Lease Deed dtd: 09- 01-2013 placed at page 47 of the Paper Book) is reproduced as under
"Mr. P. Ismail Aged about 45 years S/o Sri. Adbul Khader Residing at Fathimas P.K. Poyil Kannur, Kerala — 670673 Ayyappa Bakery B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore — 560064.
The AR submits that Sri. Ismail said to be Owner of Ayyappa Bakery was admittedly carrying on the Bakery Business in the name of Ayyappa Bakery situated at B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore which is away from the Assessee's New Asset being No. 8/1, Kattigenahalli, Bangalore. In this view of the matter the Assessee submits that Ayyappa Bakery was not in existence at the time of purchasing the new Asset at No. 8/1, Kattigenahalli, Bangalore which was a residential building consisting of 500 sq.ft situated on a big site measuring 5750 sq.ft. The existence of the Building is found recorded in the BBMP Katha Certificate dtd: 14-06-2013 (placed at Page 45 of the Paper Book) and subsequently new building was
ITA No.2115/Bang/2019 Page 18 of 36 constructed measuring 200 sq.ft and the total building old and new was measuring 2500 sq.ft which is evident from the BBMP Katha Certificate dtd: 23-122014 placed at Page 46 of the Paper Book.
The AR submits that the Ld. CIT(A) has relied upon the AO's Remand Report which was based on Inspector's Enquiry Report. The Inspector being a Subordinate to the AO has submitted her enquiry report against to the facts supported by the BBMP Katha Certificates and Lease Deeds. The Ld. CIT(A) has imagined that the Ayyappa Bakery was in existence in the New Asset purchased by the assessee prior to the date of purchase being 02-06-2012. The assessee submits that if Ayyappa Bakery were to be in existence prior to 02- 06-2012 there was no necessity for the Ayyappa Bakery owner to approach the assessee on 09-01-2013 the date on which the lease deed was drawn which clearly establishes the facts that the ayyappa bakery was not in existence in the new assets purchased by the assessee prior to 02-06-2012 and the Ld. CIT(A) has inferred the false facts in support of his uncalled for finding. It is further evident from the Lease Deed dtd: 0901-2013 placed at page 47 of the Paper Book, that the Ayyappa Bakery owner was carrying on the Bakery Business at Bagalur Main Road which is away from the New Asset being the land and residential building purchased by the assessee situated at 8/1, Kattieganhalli, Jala Hobli, Bangalore North Taluk. Therefore the Ld. CIT(A) was not justified to hold that the New Asset purchased by the assessee was a commercial property as on the 02-06-2012 being the date of purchase. The CIT(A)'s findings are based on mere presumption and he was carried away by the AO's version that the New Asset was a commercial asset without proper examination of the records. The AO before sending the remand report appears to have not verified the Lease Deed dtd: 09-01-2013 which was collected from Sri. Ismail said to be the Ayyappa Bakery owner, the Address of which was mentioned as B.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore. The Ld.
ITA No.2115/Bang/2019 Page 19 of 36 AO has misconstrued the facts relying upon the Inspector's Report on the basis of the enquiry conducted in July 2018 after lapse of nearly six years from the date of purchase of new Asset. The AO has misrepresented the facts before the Ld. CIT(A) who has believed the misrepresented facts as true facts without appreciation of the documentary evidence being the Lease Deed dtd: 09-01- 2013 (referred cy him) wherein the address of Ayyappa Bakery was mentioned as 3.S.F.S.T.S Bus Stop, Bagalur Main Road, Bangalore. Therefore the Ld. .0IT(A) has passed the Appellate Order on-misrepresented facts without application of mind and hence the findings are not justifiable.
Without prejudice to the above submissions, the assessee submits that the nature of the property said to be commercial after lapse of six years can be a ground to deny the deduction claimed u/s. 54F of the Act. However, the AO who has completed the Assessment has not denied the deduction on the basis of the nature of building (whether residential or commercial) but the deduction was denied mainly on the ground that the assessee had owned more than one residential house as on the date of purchase of new Asset which was ultimately found to be false and untrue as admitted by the AO in the Remand Report. The assessee submits that the Hon'ble ITAT Hyderabad, Jodhpur and Delhi have held that the subsequent change of property cannot be a ground to disallow the deduction claimed u/s. 54F of the Act since the requirement of the law is that the property is to be a residential house as on the date of purchase. The assessee begs to place reliance on the following decisions
i. Decision of the Hon'ble ITAT Hyderabad in the case of Shyamlal Tandon v/s. ITO Ward - 7(4) in ITA No. 1774/HYD/2012 dtd: 21-01-2014 (placed at Page No 165 to 171 of Paper Book — 1)
ITA No.2115/Bang/2019 Page 20 of 36 ii. Decision of the Hon'ble ITAT Delhi in the case of Mahavir Prasad Gupta v/s. JCIT (2006) 5 SOT 353 (ITAT(Delhi))
iii. Decision of the Hon'ble ITAT Jodhpur in the case of ITO v/s. Saida Mohammad in ITA No. 270/Jodh/2016 dtd: 22-052017
In view of the ratio laid down in the above cases the assessee cannot be held to be disentitled for deduction u/s. 54F of the Act on the ground that the New Asset was a Commercial Asset in view of the fact that the deduction was not disallowed in the Assessment Order on the nature of the New Asset but the claim was disallowed on the ground that the assessee had owned more than One residential property as on 02- 062012 being the date of purchase of new asset. The AO with her undue anxiety has stated to have caused enquiries through her Inspector who has not reported the facts properly and the commercial use of the property was a new colour and dimension added to the existing facts of the case which is not permissible under the law. Therefore, the assessee submits that the Hon'ble ITAT be pleased to consider the documentary evidence such as lease deed dtd: 09-01-2013, BBMP Katha Certificates and also the Sale Deed dtd: 02-06-2012 relating to the Purchase of New Asset bearing No. 8/1, Kattigenahalli, Jala Hobli, Bangalore North Taluk, Bangalore.
Learned DR submitted that the grounds of appeal 2 and 3 relate to action of the AO in rejecting the claim of the assessee under Section 54F of the Act and not accepting the claim of the assessee regarding expenditure incurred on land leveling. In brief, during assessment proceedings this was observed by the AO that the assessee had filed a revised return of income on 19.01.2013, in which he had declared long
ITA No.2115/Bang/2019 Page 21 of 36 term capital gain (LTCG) arising out of sale of certain land on 31.03.2012. The assessee had also claimed exemption under Section 54F of the Act on the basis of investment to the extent of Rs. 1,33,28,405/-. As per the assessee, for the benefit of Section 54F of the Act he had purchased certain land for a total consideration of Rs. 85,28,405/- (including stamp duty and registration charges) vide purchase deed dated 02.06.2012 and thereafter he had constructed a residential house on the site during the period June, 2012 to May, 2014 by incurring cash expenditure of Rs. 48,00,000/-. The assessee was asked by the AO to furnish necessary documentary evidence to prove his claim. In response to the same the assessee furnished various details. After examining the same the AO made following observations: As per purchase deed dated 02.06.2012, a building already existed on the site and as such the assessee had wrongly claimed that he had constructed a residential house on this site. The land site with a building was purchased by the assessee on 02.06.2012. As per the assessee he had incurred expenses of Rs. 10 lakhs in cash for the purpose of construction of residential house on the said site within 13 days. No details of such expenditure i.e., to whom the payments were made and on what account the payment were made has been specified. The assessee has not produced any evidence in support of construction of. a residential house on the site. Although the assessee has claimed that he had spent an amount of Rs. 32,70,100/- in cash for purpose of construction (as per the details given in pares 7 of the assessment order), however no details regarding as to whom the payments were made, from where the material was purchased, the quantity of material purchased, details of labour engaged etc. were provided. The cash book. produced by the assessee to explain the expenditure is forged one. This aspect is discussed by the AO in para 8 and 9 of the assessment order: Despite being given sufficient opportunity, the assessee has failed to produce any copy of the permission taken from the competent
ITA No.2115/Bang/2019 Page 22 of 36 authority for the construction of house and the completion of construction certificate from the competent authority. The assessee has not carried out ant. construction of residential house on the said site, which already had a building as indicated in the sale deed in the ‘schedule of property’. The assessee was having more than one residential house at the time of the sale of the original asset.
Learned DR drew our attention to the assessee’s letter dated 10.10.2018. In rejoinder the assessee has submitted as follows: The AO has accepted that he did not own more than one residential house on the date of transfer of original asset. After purchase of site vide sale deed dated 02.06.2012 for a total consideration of Rs. 85,28,405/- (including stamp duty and registration fee), a residential house was constructed by him on the basis of Plan obtained by the erstwhile owner. The assessee has submitted that the construction was carried out during period June 2012 to May 2014 and thereafter a valuation certificate dated 31.05.2014 was obtained by him from an approved valuer. The valuer certified the cost of construction at Rs. 48,10,594/-. So as such a total investment of Rs. 1,33,38,999/- (including cost of land) was made for a construction of new residential house. The assessee has submitted that Khata extract dated 14.06.2013 provided by BBMP showed that built up area on the site was 500 sq. ft. and the Khata extract dated 23.12.201.4 as provided by BBMP showed built up area of 2500 sq. ft. So as such construction was duly carried out on the land purchased by him. The assessee has submitted that. in the remand report, the AO has changed the basis of disallowance of exemption under Section 54F of the Act from that mentioned in the assessment order. The assessee has
ITA No.2115/Bang/2019 Page 23 of 36 submitted that in the assessment order the exemption was denied by holding that the -assessee was having more than one residential house property, while in the. remand report the AO had held that no residential house was constructed and that the building constructed by the assessee was a commercial property and as such he was not eligible for the benefit of Section 54F of the Act. The assessee argued that the report of the AO should be rejected. The assessee has submitted that the AO's report was based on the report of an Inspector who had carried put field visit and that .as per the report there were 5 shops existing on the said property. The assessee has submitted that the nature of the property Was never disputed by the AO in the assessment order and so the same could not be disputed now. by Inspector in 2018 and by that time he had, already carried out alteration in the residential house to change the character of the building to a commercial property. The assessee has submitted that such alteration was done by him a after a period of 3 years from the date of transfer of the original asset. The assessee has submitted that the shops were let out in FY 2016-17 onwards and such finding of the AO would not have any bearing on the character of the residential property constructed earlier for the claim of benefit under Section 54F of the Act. The assessee has submitted that even if there was any alteration of the residential property in future time, the necessary action to disallow the benefit can be in such a year and not in the year under consideration. The assessee also submitted that the AO had not given him proper opportunity during the remand proceedings (order sheet entry dt 12.11.2018).
ITA No.2115/Bang/2019 Page 24 of 36 22. The learned DR submitted that as regards the admission of additional evidence, the assessee had wrongly contended the documents like bills/invoices produced before the AO, however in the assessment order the AO had held otherwise. So, in the interest of justice the additional evidence is admitted. However, since the assessee had argued that sufficient opportunity of being heard was not given to him by the AO during remand proceedings, so a copy of the rejoinder filed by the assessee was forwarded to the AU and he was asked to give an opportunity of being heard to the assessee and also carry out further investigation, if required to ascertain the true facts. This aspect was duly informed to the assessee (order sheet entry dt 12.11 2018).
Learned AR submitted that the AO has not given any opportunity of being heard and as such his report should not be taken into account. The assessee has submitted that the AU has given an incorrect finding that during the relevant year there was no residential property on the land and was a commercial property which was constructed by him. The assessee has submitted that this fresh finding of the AU needs to be rejected as reason for disallowance under Section 54F as indicated in the assessment order was entirely different, being that the assessee was having more than one residential house at the time of transfer of the original asset. The assessee has submitted that the finding of the AO that purchase bills were bogus was also incorrect.
The learned DR submitted that the assessee wrongly submitted that footage of Google map was not a conclusive evidence for showing existence or non-existence of the residential property at specific point of time. The assessee submitted that during remand proceedings the AO could not have asked it to provide documents like occupancy certificate,
ITA No.2115/Bang/2019 Page 25 of 36
electricity bills or any other utility bills to show that the property constructed by him was a residential house. The assessee submitted that even if the house was incomplete and constructed beyond the prescribed limitation of time, in view of various decisions he was entitled to the benefit of Section 54F of the Act. Assessee has also filed affidavits from various tenants to show and claim that the rental agreements were signed after AY 2013-14 and that the tenants were not aware of the status of the property prior to the sale. As regards the statement of registered valuer, as made before the AO that he was not sure if the property which he had valued was the same as the property at No. 8/1, Kattigenahalli, the assessee submitted that the Valuer should have been taken to the premises by the AO and the matter should have been decided only thereafter. The assessee submitted that the AO could not have conducted any inquiries on the basis of the directions of the CIT(A) as the assessment proceedings were already over.
Learned AR for the assessee submitted that sufficient opportunity was not given to the assessee by the AO during remand proceedings. This argument of the assessee is without merit. This is noted that each and every document relied upon by the AO was duly confronted to the assessee and his replies were also considered by A.O. So, this argument of the assessee is rejected. Secondly the assessee has objected to the action of the AO in carrying out fresh investigation into the facts during remand proceedings. So the issue whether CIT(A) can direct the AO to carry out any inquiries during the pendency of the appellate proceedings or not. In this regard it is important to look into
ITA No.2115/Bang/2019 Page 26 of 36
provisions section 250(4) of the Act. The same is reproduced as follows: "Procedure in appeal. 250. ------------------------------------- (4) The Commissioner (Appeals) may,- before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals)…...
The learned DR submitted that the next issue is regarding the basis of addition made in the assessment order. The assessee has wrongly contended that the same cannot be changed during the pendency of appellate proceedings. However, this argument of the assessee is also misconceived. This is a settled law that the powers of the CIT(A) are - coterminous with that of AO and appellate proceedings before him are extension of the assessment proceedings. The CIT(A) can even enhance income of the assessee. The CIT(A) has all powers to confirm an addition on a basis which might not be the reason specified by the AO in the assessment order. So even if the AO has not given proper reasons for making a disallowance but the CIT(A) finds that for some other valid reasons such disallowance should have been made, the CIT(A) can always do so. Further in the case under consideration, in the assessment order the AO has given following findings: The assessee was having more than one residential house on the date of transfer of the original asset (Para 13 of the assessment order). No construction of residential house was carried out by the assessee (Para 10 and 11 of the assessment order) and that the
ITA No.2115/Bang/2019 Page 27 of 36
documents produced by him during assessment proceedings were not reliable (Para 9 of the assessment order).
According to the learned DR, since each one of the above reasons was sufficient to disallow the benefit of Section 54F of the Act, no further inquiry into other reasons or satisfaction of the other conditions laid down in under Section 54F of the Act was required to be carried out by the AO. The AO was not required to ascertain as- to whether the assessee had constructed some commercial building on the land. However, since during appellate proceedings the assessee had filed additional evidence by way of invoices/bills relating to construction activities, which were not produced before the AO earlier, the AO had every right to examine the veracity of the same and whether the investment made by the assessee was in a residential house or not. This was also required to be done by the AO specifically when directions were issued by the CIT(A) to conduct necessary investigation into the matter regarding eligibility of the assessee related to its claim. So, this argument of the assessee that the AO could not have carried out any further inquiries or it should have restricted himself to the reasons given in the assessment order, is without any merit.
Learned DR submitted that the next issue which needs to be looked into is whether there was construction of a- residential house on the land, as claimed by the assessee to had been carried out by him after demolishing the existing building on the land or not. In this regard the reliance of the AO is on the following facts:
ITA No.2115/Bang/2019 Page 28 of 36 a. The assessee has not carried out any construction of residential house on the said site, which already had a building as indicted in the sale deed. b. Spot verification by the Inspector showed that only a commercial building existed on the site. The building as indicated in the purchase deed (a shop-of approx 500Sq Ft rented to Ayappa Bakery) was still existing and no demolished as claimed by the assessee. c. The Ayappa Bakery existed on the same location as per Google Map (Google Earth Pro Historical imagery) even during FY 2011-12 and the historical imagery also showed that no residential property ever existed on the site during any of the years after FY 2011-2012. d. The inquiries conducted by the Inspector showed that there wasn't. wiy residential property on the said site any time in earlier years. e. The purchase bills related to construction were fabricated. f. The assessee could riot produce any occupancy certificate, electricity bills or any other utility bills pertaining to AY 2012-13 or later years to show the existence of residential house. g. The affidavits of the tenants as submitted by the assessee are not reliable. h. In his statement recorded under oath the registered valuer had submitted that his report was not valid for the said property as he had visited and valued some other property but the address of the property in the valuation report was given by him as that given by the assessee's contact person without carrying out any verification that the same was actually that of the inspected property or not.
According to DR, a perusal of the same shows that the Valuer had clearly admitted that had never verified whether the property inspected by him and that indicated in the valuation report were the same or not. Despite of the fact that this statement of the Valuer was duly confronted to the assessee, he never sought his cross examination. The argument of the assessee that the AO should have taken the valuer to the site is without any merit as the statement of the Valuer had
ITA No.2115/Bang/2019 Page 29 of 36
already brought out the true facts. The assessee could have cross examined him, but the assessee chose to not do so. Further taking the valuer to the site would not have served any purpose as the building existing on the site was a commercial site and the valuation report indicated a residential house. In addition, it is important to note that the valuer report shows built up area of residential house as 2460 s ft. There is no reference of any 500 sq ft building, as existed on the site although during assessment proceedings as well as during appellate proceedings the earlier claim of the assessee was that the building of 500 sq was demolished and residential house of 2500 sq ft was constructed, however on being confronted by the evidence during remand proceedings of existence of the 500 sq ft building still on the site, the assessee changed his stand and submitted that the residential house construction was of 2000 Sq ft and the remaining 500 sq ft was the building already existing on land (para 20 of reply dt 10.10.2018). The relevant part of the reply is reproduced as follows:
“20. The Assessee submits that he has in addition to the then existing building of 500 sq.ft as on 02-06-2012 being the date of purchase, has further constructed an additional construction of 2000 sq.ft of residential house between the period 2012 to 2014 as evidenced by the BBMP Katha Extract dtd: 23-12-2014 ((Annexure D) mentioned above, that the extent of Residential Building measuring 2500 sq.ft was in existence as against 500 sq.ft of old building mentioned in the BBMP Katha Extract dtd: 14-06-2013 (Annexure — C). Therefore the Assessee submits that he has purchased the New Property situated at No. 8/1, Kattigenahalli Village, Bangalore consisting of 500 sq.ft of building and thereafter addition of construction of residential building was made within the prescribed time limit of three years from the date of transfer of Original Asset and further submits that he has retained the same property being residential upto a period of three years as per law without any transfer of alternation/ renovation/medication. Therefore the Assessee is entitled
ITA No.2115/Bang/2019 Page 30 of 36 for deduction u/s. 54F of the Act since he has fulfilled the relevant conditions envisaged under he said provisions.” 30. Thus, although the valuation report shows that the entire building of 2500 sq ft was newly constructed during 2012 to 2014 without referring to the old building, the assessee is now submitting that 500 sq ft of the total area of 2500 sq ft was old and only 2000Sq ft was new. So, this aspect also shows that the valuation report was of some other residential house and the Valuer had correctly admitted in his statement that the valuation was not done of any residential property located on a site for which he had given the valuation report but of some other property. So, the valuation report of the evidence of construction of residential house and that for investment in the residential house needs to be rejected.
Learned DR submitted that in addition to above, the sale deed refers to existence of a building of 500 sq ft on the land without indicating the nature of such building. The assessee is now trying to claim that the same was a residential house and the same became part of the new construction of 2500 sq ft (2000 sq ft new and 500 sq ft old). For this the assessee has relied upon the katha extract. However, a perusal of the same shows that nowhere in the katha extract dt 14.06.2013 it is indicated that there was a residential property on the land. Further the katha indicates built up area of 500 Sq ft and vacant land of 5750 Sq ft. Thus, total area is 6250 sq ft. In contrast in the katha extract dt 31.12.2014 the built-up area is indicated as 2500 sq ft and vacant land of 3250 sq ft. This totals to 5750 sq ft. Thus although the site dimension remained same the total area has reduced from 6250 sq ft to 5750 sq ft. Further the katha extract dt 14.06.2013 does not shows the
ITA No.2115/Bang/2019 Page 31 of 36
existence of any tenant while the katha extract dt 31.12.2014 shows existence of tenants and that the usage as residential. In contradiction to the same the assessee has claimed that the property was given to tenants in FY 2016-17 and FY 2017-18 and as such no earlier tenant was there except Mr P Ismail who was given commercial property on rent in FY 2012-13. These aspects show that the Katha extracts do not reflect the correct state of affairs and cannot be considered to have any worthwhile evidentiary value.
The DR submitted that as regards the nature of building on the property at the time of purchase, the details brought on record by the AO clearly show that the same was a commercial, building occupied by Ayyapa Bakery. The argument of the assessee that images from Google Earth Maps are not conclusive evidence is without any merit. The said website shows the history imagery of the various sites on earth and it can clearly be seen from the same that the Ayyapa Bakery existed prior to FY 2012-13 and still exists at the same place. So, the building was a commercial building and not a residential house as being claimed by the assessee. In fact, the purchase deed refers to the site as 'House site' but does not refer the building as a residential house but a building constructed with bricks and cement mortar. If it were a residential house the sale deed would have indicated the same. The argument of the assessee that he had given the shop on rent to Ayyapa Bakery vide lease deed dt 09th October, 2013 is also found to be incorrect as the lease deed itself shows the date as 09th January 2013. The said lease agreement was entered into by the assessee as he
ITA No.2115/Bang/2019 Page 32 of 36
had purchased the site and as discussed supra the Ayyapa Bakery was already there being tenant of the seller.
The DR submitted that it is further noted that all the investment in construction of building is stated to be in cash and there is nothing to show about the actual date of investment in construction so as to look into applicability of other conditions laid down in Section 54F of the Act regarding depositing of the unutilized amount in the Capital Gain Account Scheme. However, since this is already held supra that the assessee had not constructed any residential house and construction, if any, was that of a commercial building, so the assessee is not eligible for the benefit of Section 54F of the Act. The satisfaction of other conditions become academic and the same is not being looked into.
Learned DR submitted that as regards expenditure of Rs. 8,05,876/- on land leveling, compound and gate expenses, the assessee has produced a statement showing expenditure incurred in cash on different dates. The assessee has also filed copies of some self-made vouchers and some bills to support its claim. The assessee has submitted that the same may be admitted as additional evidence. However, the assessee is not able to explain as to why the same were not produced during assessment proceedings. It is noted that during assessment proceedings the assessee just furnished a statement of expenditure without any supporting evidence. For admission of the additional evidence the assessee has to give explanation as to why the same could not be produced before AO during the assessment
ITA No.2115/Bang/2019 Page 33 of 36
proceedings. The assessee has however failed to give any such explanation. The assessee has not given any details of bona fide reason for not furnishing these documents before the AO to support its case. The assessee has not given any reasonable explanation as to what prevented it from producing such documents before the AO at the time of assessment proceedings, especially when sufficient opportunity of being heard was given to it by the AO. The assessee has not brought anything on record to show that the documents could not have been produced by it before AO despite its best efforts. Admission of the additional evidence cannot be claimed as a matter of right and it is the duty of the assessee to explain the circumstances which prevented it from submitting such document before the lower authorities. Since the assessee has failed to provide sufficient cause to furnish these documents before the AO, the same cannot be admitted at this stage. The ITAT, Bangalore in case of Annpom Kothari, ITA No 837 (Bang) 2012 held that for admission of additional evidence, it is required for the assessee to show that authorities had decided its grounds without giving sufficient opportunity to adduce evidence. The ITAT Chandigarh vide order dated 23-05-2013 in the case of Rishi Sagar v ITO, 36 taxmann. corn 508 had held that where assessee had failed to produce documents during assessment and failed to establish reasonable cause thereof, additional evidence could not be accepted in appeal. This decision was affirmed by the HC in the case of Rishi Sagar v. Commissioner of Income-tax, Ludhiana[2o17] 88 taxmann.com 600 (Punjab & Haryana). Considering above, the additional evidence is not admitted.
ITA No.2115/Bang/2019 Page 34 of 36 35. We have heard the rival submissions. In the first ground with regard to denial of exemption under section 54F of the Act, the assessee claimed deduction under section 54F on the sale of property bearing survey No.149, Bokkasagara Village, Anekal Taluk on the reason that he has purchased another house on 02.06.2012 situated at 8/1, Kattigenhalli Village, Bengaluru. In support of this, the assessee filed purchased deed dated 02.06.2012. The claim of the assessee was denied firstly on the reason that the assessee has not constructed residential house at Kattigenahalli, Bengaluru and the payment said to be made towards construction was met by assessee by cash. Further, it was observed that the assessee having one more property bearing No.9, 100 Ft. Road, BTM Layout, Bengaluru. According to AO, it is a residential property. However, on enquiry by the Inspector of the Department, it was revealed that the said property consists of ground floor, first floor and second floor and it was a commercial building evident from page No.24 of the written submissions which is not countered by the learned DR and it was not a residential building and AO in his remand report dated 06.07.2018 in paras 3 and 4 admitted that assessee did not own more than one house as on date of transfer of property survey No.149, Bokkasagara Village, Anekal Taluk. Therefore, on this count exemption under section 54F of the Act cannot be denied. The next contention of the DR is that the assessee has not carried on the construction at 8/1, Kattigenahalli Village, Bengaluru. The assessee furnished details of payment made towards construction of the house which are as follows:
ITA No.2115/Bang/2019 Page 35 of 36 Mode Narration Date Amount Without any details 10,00,000 Cash Paid for construction 15.06.2012 05.07.2012 5,00,000 Cash - Without any details Paid for construction Without any details 7,50,000 Cash 06.08.2012 Paid for construction Without any details 12.10.2012 7,50,000 Cash Paid for construction Without any details 05.11.2012 5,15,600 Cash Paid for construction Without any details 12.01.2013 3,54,500 Cash Total 38,70,100
As a proof of this, in support of this expenditure, assessee filed payment vouchers before us which are placed in record from page Nos.77 to 149. These evidences were also filed before the lower authorities. The lower authorities have brushed it aside on the reason that these are self-made vouchers or are not having sufficient details regarding the various expenditure incurred by the assessee. In our opinion, without examining the parties concerned, lower authorities have precluded in rejecting the evidence submitted by assessee in the form of bills and vouchers.
Being so, the assessee’s property No.9 at 100 Ft. Road, BTM Layout, Bengaluru, cannot be considered as a residential property and also expenditure incurred by assessee towards construction of new residential property cannot be brushed aside. Further, evidence brought by assessee in the form of Khatha show that originally at the time of acquisition of property, there was only 500 sq. ft. of built-up area at 3646/8/8/1 as per Khatha extracted at pages 22, 23 of written submissions, the construct area in property bearing No. 8/1, Kattigenahalli Village, Bengaluru, was 500 sq. ft. However, as per Khatha dated 23.12.2014 issued by BBMP, the constructed area in the said property was at 2500 sq.ft. Thus, it means that there is addition construction between 14.06.2013 to 23.12.2014 and also supported by the bills and vouchers submitted by the assessee and due consideration to be given to these
ITA No.2115/Bang/2019 Page 36 of 36 evidences. Considering the above findings brought on record by the assessee, we are inclined to grant deduction under section 54F of the Act as claimed by the assessee.
In the result, assessee’s appeal is allowed.
Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (BEENA PILLAI) (CHANDRA POOJARI) Judicial Member Accountant Member Bangalore, Dated: 14.06.2021. /NS/* Copy to: 1. Asse ssees 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore.