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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAVAN KUMAR GADALE
आदेश / O R D E R PER PAVAN KUMAR GADALE - JM:
The assessee has filed the appeal against the order of the CIT(A)-3, Mumbai passed u/s 143(3) r.w.s 263 and 250 of the Act. The assessee has raised the following the grounds of appeal:
“1. In the facts and the circumstances of the case and in law, the A.O erred in passing the order u/s 143(3) Dhanraj Raut., Mumbai - 2 - r.w.s 263 and therefore rendering the whole reassessment bad in law on the basis of barrowed satisfaction, presumption and surmises.
2. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of deduction claimed by the appellant u/s 54F for investment made in residential property consisting 12 units on 5th, 6th & 7th Floor in Sidhivinayak Tower.
3. In the facts and circumstances of the case and in law, the CIT(A) erred in overlooking the facts that under income Tax for the purpose of deduction u/s 54 or u/s 54F holding of legal title i.e registration of immovable property is not necessary because if the tax payer pays full consideration or substantial portion of it, before the due date of filing return u/s 139, exemption u/s 54F is available, even if possession is handed over after the stipulated period of the sale or even when sale deed is registered later on.
4. In the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of deduction amounting to Rs. 1,69,08,169/- claimed by the appellant u/s 54F by overlooking the submissions and case laws filed by the appellant.
5. The A.O wrongly charged interest u/s 234 and initiated penalty u/s 271(1)(c).
6. In the facts and circumstances of the case and in law, the CIT(A) erred in dismissing all the grounds of appeal on merits without appreciating the written submissions filed.
Brief facts of the case are that, the assessee is engaged in the business and has income from trading in country liquor, transport and video centers. The Dhanraj Raut., Mumbai - 3 - assessee has filed the return of income for the A.Y 2009-10 on 22.09.2008 with total income of Rs. 23,71,200/-. The case was selected for scrutiny under the CASS and the assessment was completed u/s 143(3) of the Act with total income of Rs. 25, 41,262/- on 28.09.2011.Subsequently, it was found that the assessee had sold land for consideration of Rs. 1.9 crores, and the said amount was used for purchase of 12 residential flats in building known as ‘Sidhi Vinayak Towers” from M/S Siddhi Constructions. The assessee has entered into agreement of purchase of 12 flats for a consideration of Rs. 1,69,25,000/.- whereas, no stamp duty was paid or document was registered.Therefore,theassessment order u/sec143(3) of the Act was set aside by the CIT by revision u/s 263 of the Act dated 18.02.2014 with a direction to the A.O to redo the assessment de-novo and also provide adequate opportunity of hearing. As per the revision order directions, the A.O has issued notice u/s 142(1) of the Act along with annexure. In compliance, the Ld. AR of the assessee appeared from time to time and made the submissions. The Ld. AR submitted that the assessee has claimed the ITA No. 3632/Mum/2017 Dhanraj Raut., Mumbai - 4 - exemption u/s 54F of the Act. The contentions of the assessee referred at para-3 of the assessment order that the investment in 12 residential flats should be treated as investment in one house and claimed exemption u/s 54F of the Act. Whereas, the A.O found the contentions and explanations submitted in letter dated 20.01.2015 are not acceptable and dealt on the disputed issues at para 4 of the order and further denied the claim, as the assessee has no credible evidence in the form of registered sale deed or agreements and multiple units have been combined to create one dwelling unit. The A.O. has issued notice u/s 133(6) of the Act to M/s Siddhi Constructions to verify the ownership of the flats and letter dated 25.02.2015 was filed. The A.O referred to the observations of the inspector on a visit report made during the revisionary proceedings. The assessee has purchased the multiple flats in a building spread over 3 floors and they are independent units and therefore the 12 independent flats cannot be treated as one residential house and denied the claim of exemption u/s 54F of the Act and assessed the total income of Rs. 1,94,49,430/- and ITA No. 3632/Mum/2017 Dhanraj Raut., Mumbai - 5 - passed the order u/s 143 r.w.s 263 of the Act dated 26.03.2016. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). Whereas the CIT(A) has confirmed the action of the Assessing officer and dismissed the assessee’s appeal. Aggrieved by the order, the assessee has filed an appeal with Tribunal.
At the time of hearing none appeared on behalf of the assessee nor any adjournment petition filed. We heard the submissions of Ld. DR and perused the material on record. The first disputed issue is with respect to the denial of claim of exemption under Sec. 54F of the Act that the agreement of sale was not registered. On perusal of paper book filed by the assessee at page 32 to 49, the copy of agreement for sale of flats between the M/s Siddi Constructions and the assessee is enclosed. The A.O. has not disputed the agreement of sale entered by the assessee with M/s Siddi Constructions but he only alleged that the document is not registered and accept the facts that the M/s Siddhi Construction has delivered and confirmed that the assessee has purchased 12 flats as per the agreement of sale in 3 floors and the registration formalities have to be completed. Under Dhanraj Raut., Mumbai - 6 - the provisions of Sec. 54F of the Act, the residential property should be purchased within a specified time for claim of exemption and the A.O. has not disputed. Further, there is no mandatory requirement of registration at the time of entering into agreement. Therefore, we are of the view, that though residential property is not registered but the assessee was able to prove the possession and confirmed by the builder, the exemption cannot be denied on this ground..
The matrix of the second disputed issue is with respect to denial of exemption under Section 54F of the Act to the assessee by the Assessing Officer. The contentions of the assessee before the lower authorities are that the assessee is entitled for exemption under Section 54F of the Act for more than one residential flat in the same complex. The amendment to Section 54F of the Act in Finance Act, 2014 is effective from Assessment Year 2015-16. Hence we consider it appropriate to refer to the provisions of Section 54F of the Act which are read as under :-
54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital Dhanraj Raut., Mumbai - 7 - gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45.
We also rely on the observations of the Hon'ble Madras High Court in the case of CIT Vs. V R Karpagam (ITA No.301 of 2014 Dt.18.8.2014), where it was held that the Amendment to Section 54F of the Act being Para Materia to the Section 54 of the Act with regard to substitution of “Residential Unit by Finance Act No.2, 2014” was operative only effective w.e.f. 1.4.2015 whereby exemption for more than Dhanraj Raut., Mumbai - 8 - one unit /flat (residential house) is to be withdrawn. However, prior to the aforesaid amendment a residential house would include multiple flats, residential units in the same apartment building. Similarly, the Hon’ble Karnataka High Court in the case of CIT Vs. Smt. K.G. Rukminiamma 331 ITR 211, has held – “ Expression “a residential house” used in s. 54 should be understood in a sense that the building should be of residential nature and “a” should not be understood to indicate a singular number; assessee was entitled to claim exemption under s. 54 in respect of four residential flats acquired by her.”
We considering the provisions of law, Amendment being effective from Assessment Year 2015-16 and the decisions of the Hon’ble High Court are of the substantive opinion that the assessee is entitled for residential flats exemption under Section 54F of the Act. Accordingly, we set aside the order of CIT (Appeals) and direct the Assessing Officer to grant exemption under Section 54F of the Act as discussed above and allow the grounds of appeal in favour of the assessee.