SMT. AMARJEET KAUR,DELHI vs. ITO, NEW DELHI

Facts in their short compass are that the assessee is an individual, and was deriving income from business i.e., interest on capital with M/s Amar Enterprises as a partner and other sources. For the assessment year 2012-13, she had filed the return of income on 15/02/2013 declaring taxable income of Rs.1,44,220/-.

During the assessment proceedings, it has come to light that the assessee had purchased the plot number H-358, Vikas Puri, New Delhi (“hereinafter referred to as ‘original property’”) from one Jaswinder pal Singh for a consideration of Rs.2,60,000/- as evidenced by an agreement of sale dated 03/01/1996. She sold this property to oneSmt. Jaspreet Kaur for a consideration of Rs.1.23 crores under sale deed dated 29/4/2011.

Learned Assessing Officer observed that to claim the exemption under section 54F of the Income Tax Act, 1961 (for short “the Act”), the assessee had to invest the capital gains arising out of the sale of the long term capital asset within one year before or two years after the date of transfer, and/or in the construction of a residential house property within three years after the date of such transfer provided the house property purchasedor constructed, is not transferred within a period of three years from the date of acquisition. However, according to the assessee there was a tacit understanding between her and the purchaser of the property to the effect that the assessee will purchase back a portion of the house constructed on the original asset; that the basic structure of the house was ready within one year; thatthe assessee agreed to purchase the upper ground floor of the property for a consideration of Rs.1.23crores with an understanding that the possession of the upper ground floor shall be handed over to the assessee after the completion of the finishing work; that a formal agreement of sale to this effect was executed on 30/3/2012; and that the sale deed was executed on 9/7/2015 in favour of the assessee by Smt. Jaspreet Kaur. Based on this, the assessee contended before the ld. Assessing Officer that the

Learned Assessing Officer, however, on a consideration of the entire material before him, observed that at no point of time the assessee declared the long term capital gains, so also Smt. Jaspreet Kaur did not declare any short term capital gains. He further observed that Smt. Jaspreet Kaur was not carrying on the business as builder under the head “income from business & profession” and had not shown any income under such a head. Learned Assessing Officer, therefore, while not believing the plea taken by the assessee as to the purchase of property within the stipulated period, held that the very condition required under section 54F of the Act was not satisfied inasmuch as the assessee did not invest the money before 29/4/2013 or 29/4/2014 whereby the time for purchase of house of two years or construction of a house within three years expired. As a consequence thereof learned Assessing Officer brought the long term capital gains to tax.

Aggrieved by such an action of the learned Assessing Officer, assessee preferred an appeal. Ld. CIT(A) on a reappraisal of the material before him, considered the plea taken by the assessee and also the assessment order and reached a conclusion that the plea taken by the assessee is not supported by any evidence and is only an afterthought. According to the authorities below, if really the assessee invested the

Aggrieved by the findings of the Ld. CIT(A), assessee preferred this appeal before us stating that the assessee had purchased the residential property within one year from the date of sale and therefore the authorities below were wrong in making the addition of Rs.1,15,73,665/- and sustaining the same. It is the argument of the Ld. AR that when the investment was complete within the stipulated time, it is immaterial if the possession is taken at a later point of time. He placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Smt. BS Shanthakumari (2015) 60 taxman.com 74 (Karnataka) for the principle that when it is established that there was investment of the entire net consideration in construction of a residential house within stipulated period, it would meet the requirement of section 54F of the Act and the assessee would be entitled to get benefit of section 54F of the Act.

Per contra, it is the submission on behalf of the Revenue that in this case the plea of assessee to have purchased the residential house from Smt. Jaspreet Kaur is only an afterthought because if it were true,

We have gone through the record in the light of the submissions made on either side. There is no dispute that,as is evidenced by the agreement of sale dated 03.01.1996, the assessee purchased the original property from one JaswinderPal Singh for a consideration of Rs.2.6 Lacs, and sold the same to one Smt. Jaspreet Kaur under sale deed dated 29.04.2011.It is also not in dispute that by sale deed dated 9.7.2015, title to the property in the entire upper ground floor without there is/proof rights of a Freehold built up property bearing No. 358, area measuring 282 square meters in Block- H, situated in the layout plan of Vikas Puri Residential Scheme along with 1/4th proportionate share of stilt parking etc.

Entire dispute in this matter revolves around the contention of the assessee to the effect that the assessee purchased the property on

It could be seen from the impugned order, Ld. CIT(A) recorded that inasmuch as the sale deed dated 29.4.2011 clearly shows that on the sale of the residential plot, the assessee realised a sum of Rs.1.23 crores and on account of such sale she realises the capital gain. However, such capital gain is not declared by the assessee by filing the return of income.

Assessee claims to have purchased the property of upper ground floor under the agreement of sale dated 30.3.2012 and for that matter, the sale deed dated 9.7.2015 also contains a recital to the effect that the entire consideration amount of Rs. 1.23 crores was already received by the vendors which the assessee had paid on 30.3.2012 by transfer of book entry. However, the assessee did not claim the exemption under section 54/54F of the Act on account of this investment in the house property by filing the return of income. When the assessee parted with the whole amount of Rs.1.23 crores by way of investment into the house property, nothing prevented her from declaring the same in her return of income.

When a sum of Rs.1.23 crores was paid by way of agreement of purchase, nothing prevented the parties from getting such an instrument registered so as to establish that, as a matter of fact, on a particular date

It is only when the case was selected for scrutiny and the Assessing Officer had confronted the assessee regarding the sale of plot, the assessee came forward with the explanation that she had purchased the upper ground floor from Mrs Jaspreet Kaur to whom she had sold the plot for the very same price.

It could also be seen that when the Assessing Officer verified the income tax return of Mrs. Jaspreet Kaur, who has been assessed to tax vide PAN AANPM9447K, he found that she filed return of income declaring income of Rs.6,85,570/-in Form ITR 2 and the examination of the schedule of capital gains revealed that she has not declared income under the head ‘capital gains’ either long-term or short-term. It is the observation of the learned Assessing Officer that since Mrs. Jaspreet Kaur purchased the plot in the month of April, 2011 and sold the ground floor in March, 2012, there will be short term capital gains in her hands. So also if at all Mrs Jaspreet Kaur is carrying on any business as a builder, as claimed by the assessee, there would have been income under the head “income from business or profession”, but no such sort of income was declared by Mrs Jaspreet Kaur.

For these reasons, the authorities below reached a conclusion that the contention of the assessee that she had invested the whole sale consideration for purchase of house was not an acceptable one, in view of the fact that there is nothing contained in section 54 or 54F of the Act

Before us also, the Ld. AR had pressed the point that it is a case where the assessee invested the entire consideration amount received in respect of the sale of original property, in the new property within the stipulated time in terms of section 54F of the Act but inasmuch as the construction was not complete within 3 years, former possession thereof was taken subsequently and sale deed dated 9.7.2015 was executed at that point of time, and therefore, there is substantial compliance with the requirement of section 54F of the Act and she is entitled to get benefit of section 54F of the Act. Reliance for this purpose is placed on the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Smt. BS Shantakumari (2015) 60 taxman.com 74 (Karnataka).

In view of the facts narrated above, the dispute in this matter not taking possession of the land beyond 3 years as stipulated in section 54F of the Act, provided the purchase of property and/or investment of the amount within such stipulated period is proved. But the dispute relates to the question whether really the assessee invested the amount in purchase of the property before the expiry of the period prescribed under section 54F of the Act. Sale deed dated 29.4.2011 clearly establishes that the original property was sold for a consideration of Rs.1.23 crores and such an amount was paid by way of cheques drawn on the Punjab National Bank, Shalimar Bagh, Delhias listed in the sale deed. This clearly does not spell out any intention of the vendors to purchase back any portion of the building that is to be constructed on such plot.

The sale deed dated 9.7.2015 is clearly beyond the period of 3 years from the date of sale of property since the period of 3 years expires by 29.4.2014. Except the self-serving statement of the assessee that there was an intervening agreement of sale dated 30.3.2012, absolutely there is no evidence to establish such a transaction. It is stated in the sale deed dated 9.7.2015 that the entire consideration amount of Rs.1.23crores was received by the vendors thereunder on 30.3.2012 itself. However by way of an insertion, by hand, it is stated that by transfer of book entry. We do not know what sort of book entry the parties had made and what is the occasion there for. Further, the sale deed dated 9.7.2015, the consideration was received on 30.3.2012 whereas the agreement dated 30.3.2012 does not read that the amount was received under such an instrument but it was already received. Recital regarding the book entries is conspicuously absent in this agreement to sell or in the sale deed executed in favour of Smt. Jaspreet Kaur. When the sale deed dated 29.4.2011 is silent on the aspect of the intentions of the parties about the future transaction of the vendor under the sale deed dated 29.4.2011 intending to purchase any constructed portion of the building at a future point of time.It also remains unexplained why such book entry was not resorted to when the property was sold to Smt. Jaspreet Kaur.

Moreover, when the entire sale consideration was paid to the vendors under agreement to sell dated 30.3.2012 on 30.3.2012 itself or on an earlier date, nothing prevented the parties from obtaining a regular sale deed on the date itself reciting therein that the position would be taken as and when the construction is complete. Agreement dated

Further the doubt entertained by the authorities below is well corroborated by the conduct of the parties themselves, inasmuch as neither the sale of plot nor the purchase of flat is declared by the assessee either in her capital gains or by way of claiming exemption under section 54F of the Act. So also, there is no denial of the fact recorded by the learned Assessing Officer that the examination of the income tax return filed by Smt. Jaspreet Kaur established that she had not declared any capital gains under the head “capital gains” either long- term or short-term and also, she has not shown any income derived from the business or profession, if at all it has to be taken that Smt. Jaspreet Kaur carried on any business as a builder as claimed by the assessee. The statement of the assessee is not supported by her conduct.In this set of facts and circumstances, we are not inclined to believe the genuineness of the agreement to sell dated 30.3.2012. If this agreement is taken out of consideration, there is nothing on record to suggest that at any time prior to 9.7.2015, the assessee invested the amount for purchase of the residential house or that she had taken possession thereof within the time stipulated for the purpose of investment under law.

For these reasons, we are of the considered opinion that it is unsafe to place reliance on the agreement of sale dated 30.3.2012 to hold that as on such date there was a transaction of purchase of the entire ground floor of the property or that any amount was paid under such an instrument on that day, but only because the basic structure of

In the result, appeal of the assessee is dismissed