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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश /O R D E R
Per G. MANJUNATHA, AM:
This appeal filed by the assessee is directed against order of learned Commissioner of Income Tax (Appeals)-9, Chennai, dated 31.12.2018 and pertains to assessment year 2012-13.
The assessee has raised the following grounds of appeal:-
Grounds The Order of CIT(A) is opposed to Law, Facts and circumstances of the case. On Quantum of Disallowance and additions 1". The Learned Commissioner of Income Tax (Appeals) -9 erred in law as well as on facts while confirming the following additions: I. Claim of Exemption u/s 54 Claim u/s 54 restricted to Rs of the Income Tax Act 28,00,000 instead of Rs 58,00,000/- II. Restriction of Cost of Cost of Improvement restricted to Improvement Rs 3,50,000 instead of Rs3,00,000/-
2. Claim of Exemption u/s 54 of the Income Tax Act 1) The Honorable CIT (A)-9 has erred in overlooking the Provisions of Sec 54 of the Income tax Act where the word used is that the "cost of the residential house So Purchased" and nowhere the section talks about the sale consideration in sale deed or sale agreement. 2) The appellant places reliance on Delhi High court Decision in the case of Balraj v. CIT [20021 723 Taxman 290 (Delhi), which was pronounced duly taking into consideration the Apex court decision in the case of [1979] 120 ITR 46 (SC] CIT v. T.N. Aravinda Reddy in support of the appellants contention 3)The Honorable CIT(A) erred in not considering the appellants Contention that ACIT had acted purely on suspicion, surmise and conjecture thereby restricting the claim u/s 54 which is against the Apex court decision reported in 26 ITR 775 . 4) The Honorable CIT(A)-9 erred in not considering the evidences provided before the ACIT both as documentary Proof and response made by the seller to confirm the transaction value as Rs 58,00,000/-in response to notice u/s133(6) issued by the ACIT. 5) The Honorable CIT(A)-9 Went wrong in stating that the confirmation furnished by G. Murugesan (seller) on Account of sale of the property was not officially corroborated through his return of Income , where the seller G. Murugesan had confirmed the transaction value as Rs 58,00,000/- in response to notice u/s133(6) issued by the ACIT.
6) The Honorable CIT (A) went wrong in not treating the confirmation in the form of response to notice u/s 133(6) by the seller and the sale agreement as corroborative evidence. 7)The Honorable CIT (A) should have accepted both the response to notice u/s 133(6) by the seller and sale agreement as corroborative evidence. 8) The Honorable C.I.T (A)-9, is more concerned about the seller's Income Tax Return rather than the factual evidences provided before both ACIT and CIT (A)-9. 9) The Honorable C.I.T (A)-9 erred deciding the consideration as Rs 28,00,000/- as admitted by the seller in his return by overlooking the consideration received amounting to Rs 58,00,000/- admitted by the seller in response to the notice u/s133(6) issued by the ACIT and also as per agreement. 10) The Appellant prays to consider the value of consideration as Rs 58, 00,000/- and not as Rs 29,00,000/- by considering the grounds placed before the Honorable ITAT and render justice.
Restriction of Cost of Improvement u/s 55 1) The Honorable CIT(A) and the Income tax authorities(ACIT) Failed to appreciate the Normal Practice of providing 80 to 85% of the total value of the project cost as loan by the Financial Institutions . Thus the total Cost of the Project being Rs 3,50,000/- out of which on an average of 85% of the cost being Rs 3,00,000/- was provided by the bank as a loan and the balance was spent by the appellant which by itself becomes a proof for incurring such cost by the appellant. 2) The Honorable CIT(A) and the Income tax authorities(ACIT) failed to appreciate the fact that the earlier order passed by the AO u/s143(3) had allowed the entire cost of improvement after due consideration. Thereby it is evident that the order passed by ACIT only goes to show a change in opinion from that of the predecessor AC and which is uncalled for with particular reference to facts of the case. 3) The Honorable CIT (A) -9 failed to appreciate the above grounds and also the normal market practice for providing Housing Loan and the margin money required.
4) The appellant prays to consider the cost of Improvement as Rs 3,50,000/- as originally considered and allowed in the order/s 143(3)
The Appellant craves leave to add or alter any of the ground of appeal before or at the time of Hearing.”
3. The brief facts of the case are that during the year under consideration, the assessee has sold a property for a consideration of Rs.2,80,00,000/- and computed long term capital gain after claiming deduction towards cost of acquisition and cost of improvement. The assessee had also claimed deduction u/s.54F of the Income Tax Act, 1961 (hereinafter the ‘Act’ for Rs.58,00,000/- towards purchase of new residential house from Shri G. Murugesan vide sale agreement and sale deed dated 06.02.2012. The AO has re-computed long term capital gain by restricting cost of improvement to Rs.3,00,000/- as against Rs.3,50,000/- claimed by the assessee, on the ground that the assessee has proved source for cost of improvement to the extent of Rs.3,00,000/- only, by way of loan taken from M/s. Canara Bank. The AO had also allowed exemption u/s.54F of the Act, to the tune of Rs.28 lakhs as against Rs.58 lakhs claimed by the assessee, on the ground that though the assessee has paid a sum of Rs.58 lakhs to Shri
G. Murugesan for purchase of property but, property has been registered for a consideration of Rs.28 lakhs and thus, as per evidence on record, the assessee can claim deduction u/s.54F of the Act to the extent of value shown in the registered sale deed. The assessee carried the matter in appeal before the first appellate authority and reiterated her arguments made before the AO. The CIT(A) for the reasons stated in his appellate order rejected grounds taken by the assessee and confirmed additions made by the AO towards long term capital gain by re-working cost of improvement and also exemption claimed u/s.54F of the Act to the tune of Rs.28 lakhs on the basis of registered sale deed. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
4. The first issue that came up for our consideration from Ground No.2 of assessee appeal is disallowance of deduction claimed u/s.54F of the Act, to the extent of Rs.30 lakhs. The ld.AR for the assessee submitted that the ld.CIT(A) has erred in sustaining addition made by the AO towards disallowance of exemption to the extent of Rs.30 lakhs, even though the assessee has demonstrated that she had paid a sum of Rs.58
lakhs for purchase of property and entire consideration has been paid through cheque/demand draft. The ld.AR for the assessee further referring to the registered sale deed and agreement to sale, both dated 06.02.2012 submitted that evidences placed on record clearly indicate that transaction is a genuine transaction and entire consideration is paid through bank. Merely for the reason that the property was registered for lesser amount as per requirement of stamp and registration Act, total consideration paid for purchase of property cannot be ignored, more particularly when both parties agreed that sale consideration for property was at Rs.58 lakhs.
The ld.DR on the other hand strongly supporting order of the ld.CIT(A) submitted that although the assessee has paid consideration in cheque but, the purpose of payment of excess amount is not discharged because the consideration as per registered sale deed was at Rs.28 lakhs. Therefore, in absence of any documentary evidence to substantiate the claim of payment of consideration for purchase of property, deductions cannot be allowed for entire consideration.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no doubt with regard to the fact that the assessee has purchased new residential house for a consideration of Rs.58 lakhs, which is evident from the fact that there is a sale agreement between the parties dated 06.02.2012, as per which the property was purchased for an agreed consideration of Rs.58 lakhs and further, entire consideration has been paid by cheque / demand draft. It is also an admitted fact that the AO has collected information from the seller u/s.133(6) of the Act, for which the seller Shri G. Murugesan has responded and confirmed that the property has been sold for a consideration of Rs.58 lakhs. The assessee has also placed bank statements of the seller which clearly indicate payment of consideration by cheque. Further, both agreement to sale and registered sale deeds are entered into on 06.02.2012. Under these facts and circumstances, denying the benefit of deduction u/s.54F of the Act for excess consideration paid over and above consideration shown in registered sale deed is not correct because, merely for the property was registered for a lesser consideration, the genuine transaction between the parties cannot be doubted
when it comes to allowing benefit under exemption / deduction provisions. Therefore, we are of the considered view that the ld.AO as well as the ld.CIT(A) has erred in sustaining addition towards disallowance of exemption claimed u/s.54F of the Act, to the tune of Rs.30 lakhs towards consideration paid for purchase of property. Hence, we direct the AO to delete addition made towards disallowance u/s.54F of the Act.
The next issue that came up for our consideration from Ground No.3 of assessee appeal is restriction of cost of improvement to the tune of Rs.3 lakhs as against cost of improvement claimed by the assessee for Rs.3,50,000/-.
The assessee has claimed cost of improvement to the property for Rs.3,50,000/- and the source for cost of improvement has been explained, out of own capital of Rs.50,000/- and bank finance from Canara Bank of Rs.3 lakhs. The AO has restricted cost of improvement to the extent of Rs.3 lakhs, which is supported by bank finance. The remaining amount of Rs.50,000/- has been ignored on the ground that no source of income has been explained for cost of improvement.
It was the explanation of the assessee before the AO that generally bank would finance 75% to 80% of cost of project including purchase or construction of any property and thus, the assessee has arranged Rs.3 lakhs loan from Canara Bank and balance Rs.50,000/- was sourced out of her savings from salary income and income from other sources.
Having heard both the sides and considered material on record, we find that the AO has not given any valid reasons for rejecting cost of improvement to the extent of Rs.50,000/- incurred by the assessee, when he has not doubted genuineness of expenditure incurred for improvement of the property. Further, it is a known fact how banks would finance purchase / construction of property. The assessee being an employee of Canara Bank had availed loan from the bank to the tune of Rs.3 lakhs and balance Rs.50,000/- was sourced out of her salary savings. Therefore, we are of the considered view that when the assessee has explained source for cost of improvement, out of her savings and bank finance then the AO is erred in not accepting the source out of past savings, when he has accepted the genuineness of expenditure incurred for cost of improvement. The ld.CIT(A) without appreciating the facts simply confirmed addition made by the AO. Hence, we reverse the findings of the ld.CIT(A) and direct the AO to allow cost of improvement of Rs.3,50,000/- as claimed by the assessee.
In the result, the appeal filed by the assessee is allowed.