SHIVAJI RAMDAS SAKHARE,PUNE vs. INCOME-TAX OFFICER, WARD - 2(4), PUNE

आदेश / ORDER PER S. S. GODARA, JM :

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registry has sent many notices to the assessee out of which four of them stand received back unserved. We thus proceed ex-parte against the assessee.

“1. The learned CIT(A) has erred in facts and circumstances of the case in confirming the disallowance of the Assessing Officer for not producing any sanctioned plan or completion certificate of the house. 2. The learned CIT(A) has erred in facts and circumstances of the case and in law in not appreciating the facts that the bills and documents produced during the appellate proceedings justify the construction of property. 3. The learned CIT(A) has erred in facts and circumstances of the case by denying the valuation report produced which justifies the construction of the property and the learned CIT(A) has accepted the fact that the valuation report gives valuation for 5 flats. 4. The learned CIT(A) has erred in facts and circumstances of the case and in law in not appreciating the fact that construction of property was completed on the land owned by the father of the Appellant whereas the same was disallowed on the fact that the land is not in the name of the Appellant neither is the co-owner. 5. The Appellant submits the Gram panchayat certificate which mentions the fact that the construction of house property was completed.”

“4. The only issue raised in the sole ground of appeal is against disallowance of deduction claimed by the appellant u/s. 54F of the Act. Facts in this regard are that the appellant during the year sold an immovable property co-owned by him. His share in the sale consideration was Rs. 95,00,000/-. After deducting indexed cost acquisition, Long Term Capital Gain was worked out at Rs.93,60,191/-. Against this the appellant claimed deduction of Rs. 93,05,492/- u/s 54F

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of I T Act. The Assessing Officer during the assessment proceeding required the assessee to furnish details and evidences of the house constructed as it was argued by the assessee that he had constructed the house before the due date of filing of return and therefore no amount was left to be deposited under capital gain accounts scheme. The assessee submitted some bills of construction materials in support of his submission. However, the Assessing Officer required the assessee to furnish detailed sanctioned plan along with completion certificate issued by the Competent Authority in respect of new house constructed. However, it was stated before the Assessing Officer that he does not possess any such document. In view of the evading reply of the assessee, the Assessing Officer held that there is no evidence to support that the new house was constructed before the due date and therefore the disallowed the claim made u/s.54F. 4.1 During the appellate proceedings, the appellant argued against the stand taken by the Assessing Officer by filling a written submission as under: “ Grounds of appeal are merged in written submission wherever applicable I have furnished the return of income for the AY 12-13 declaring total income of Rs.2,35,844/-. The income includes Income from business & Income from other Sources. While computing total income, Income under the head Capital Gains, the appellant has claimed deduction u/s 54F towards investment in residential house. While completing the assessment the Lad. A.O has totally disallowed deduction claimed u/s.54F of the IT Act, 1961. I am furnishing the written submission regarding allowability of claim u/s. 54F. 1. Income under the head Capital Gains : Disallowance of exemption claimed in respect of Investment in residential House u/s 54F. I have sold the land at S.No.92/2, 96/2 & 96/3 village, Hinjewadi, Tal Mulshi, Pune in the year 2011-12 along with the other co- owners on 08/06/2011 for a total consideration of Rs.4,00,00,000/- out of which my share was Rs.95,00,000/-. Sale proceeds of the land were further invested towards construction of residential house. Construction of house was made at S.No. 87/1/1 (P), Sakhare Wasti, Hinjewadi, Mulshi, Pune – 411 057. The plot on which construction is made is inherited by me. Copy of the 7/12 extract of the plot is attached. I have

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claimed an exemption u/s 54F in respect of the construction of the house. The Ld A.O. has disallowed the claim of Rs.93,60,191/- on the premise that construction of the house was not completed before the limitation time as provided u/s 54F of the Act. During the assessment proceedings, I have submitted bills pertaining to the construction of the house. I am furnishing additional evidence under Rule 46A(b)/(c) of the Income Tax Rules, 1962 which goes to the root of the matter in respect of the addition made in respect of disallowance of construction expenses. Exhaustive submission in respect of additional evidence is enclosed & marked as Annexure A. I am enclosing a copy of gas connection bill and electricity bill of the residential house constructed. Also find enclosed a copy of valuation report issued by registered valuer. I am also enclosing copies of construction bills & summary of construction expenses incurred. From the above enclosures, Your Honour will find that the house has been constructed within the due date of filing of return i.e. 31.07.2012, even though statutory period for the construction of the house is upto 07.06.2014. On perusal of the copy of the valuation report, Your Honour will observe that aggregate construction cost amounts to Rs.1,44,05,687/- which includes cost of the plot amounting to Rs.47,43,000/-. I have claimed deduction u/s 54Famounting to Rs.93,05,492/-. The Ld. A.O. has also disallowed the claim of brokerage expenses incurred for the sale of the land at S.No. 92/2, 96/2 & 9613 village, Hinjewadi, Tal : Mulshi, Pune. The brokerage expenses paid are incurred wholly & exclusively in connection with the above sale transaction. A copy of confirmation of brokerage paid is also attached. On perusal of the confirmation letter, Your Honour will find the identify & genuineness of brokerage expense incurred. I therefore, urge Your Honour to kindly allow the claim of brokerage expenses amounting to Rs.95,000/-. In CIT vs. K Ravindranathan Nair (2003) 131 Taxman 743 (Ker), it was held that an a consideration of the provisions of Rule 46A particularly sub rule(4) thereof the provisions of section 250(1) conferring the power on the Commissioner (Appeals), it is clear that inspite of the provisions of the rule 46A(1), the provisions of section 250 enables the Commissioner (Appeals) to accept the additional evidence in appropriate cases, which power has been preserved by sub rule (4) of rule 4-6A also. In the instant case, proof of construction expenditure is proved & genuineness of the expenditure incurred has also been established. Kindly also find enclosed a copy of the bank statement i.e. a) Saraswat Coop Bank & b) IDBI Bank, Cash Book Book and suppliers ledger.

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I urge Your Honour to kindly allow the disallowance made by the Ld A.O. amounting to Rs.93,60,191/- u/s 54F on the basis of the above facts & evidences leading to actual incurrence of the construction expenditure”. 4.2 I have gone through the facts of the case and arguments taken on behalf of the appellant. In this regard it is relevant to go through the provision of sec.54F(1) which reads 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 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 8[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 a 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:

4.2.1 On a plain reading of the aforesaid provision, it is clear that the deduction is available only when the assessee has either constructed or purchased new property being a residential house within the prescribed time limit i.e. one year before or two/three years after as the case may be, from the date of transfer of the original asset. That means an assessee has to submit details and evidences to prove that he has either constructed or purchased a new house within the prescribed time limit. The Assessing Officer in the present case during the assessment proceeding required the assessee to submit the plan approval as well as completion certificate from the concerned authority to prove his point but the appellant failed to do so. He only could file copy of some bills and invoices of some construction material like sand, cement, plumbing

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material, LPG/Electricity connection etc. I am of the opinion that these bills do not prove anything and maximum it shows that the appellant might have purchased some materials or might have taken some new LPG/Electric connection. It is further noticed that all the payments have been claimed to be made in cash and therefore genuineness of these bills also becomes questionable. The appellant is supposed to produce documentary evidences to prove that the house has been actually constructed on a land belonging to him within the prescribed time limit. In spite of specific requisition by the Assessing Officer to furnish sanctioned plan and completion certificate, the same was not filed before him neither the same was produced during the appellate proceeding.

4.2.2 On a perusal of the paper book filed during the appellate proceeding, it is observed that the land on which the construction of new house has been claimed is not even in the name of appellant. In the 7/12 extract produced the land is shown to be owned jointly by around twenty people. The name of the appellant does not figure anywhere in the 7/12 extract. A Scanned copy of the 7/12 extract of land ownership is reproduced as under:

Space intentionally left blank

4.2.3 Thus the basic foundation of the appellant does not survive as because the appellant is not mentioned as owner of the land on which he claims to have constructed the house. Once the ownership of the new residential asset is not established by the appellant then he cannot be eligible for deduction u/s 54F of the I T Act. This proposition has been held by Hon’ble Bombay High Court in the case of Prakash vs. ITO (173 taxman 311) (Bom.). Hon’ble jurisdictional High Court while dealing with an identical issue held as under :

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“For qualifying for the exemption u/s 54F, it is necessary and obligatory to have the investment made in residential house in the name of the assessee only. Thus, investment of sale proceeds of agricultural land by the assessee in purchasing plot and constructing residential house thereon in name of his only adopted son would not qualify for exemption u/s 54F”.

4.2.4 Hon’ble Delhi High Court as well in the case of Bipin Malik vs. CIT (183 Taxman 296) (Del.) held that to claim benefit of sec.54F, residential house, purchased or constructed has to be of the same assessee whose agricultural land is sold. 4.2.5 As discussed above, the appellant is not the owner of the land on which he claims to have constructed a house. Even he is not mentioned as one of the co-owner of the land. Thus the basis of the claim itself does not survive. 4.2.6. During the appellate proceedings, the appellant filed a copy of valuation report of an approved valuer claiming to be as additional evidence. During the assessment proceeding, assessee was specifically requested to furnish evidences in support of claim of deduction u/s 54F of the I T Act. However except some copy of bills of construction material nothing else was found. It is therefore necessary to make reference to Rule 46A of the IT Rules, which reads as under: (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals) [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :-

(a) Where the [Assessing Officer] has refused to admit evidence which ought to have been admitted; or (b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer]; or (c) Where the appellant was prevented by sufficient cause producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal; or

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(d) Where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

4.2.7 As discussed in the preceding paragraph, the appellant during the assessment proceeding was provided adequate opportunities and in- spite of that the appellant failed to furnish details in support of his claim in the return. In his submission he failed to prove as to how he was denied the opportunity of filing such evidences before the Assessing Officer. The appellant has failed to show as to how he is falling under any one of four exceptional clauses as mentioned in Rule 46A of the IT Rules.

4.2.8 On a perusal of Rule 46A, it would be seen that the appellant shall not be entitled to produce before the Appellate Authority any evidence, whether oral or documentary, which was not produced in the course of the proceedings before the AO except in specified circumstances. Thus, the appellant has a right to produce additional evidence only in the circumstances specified in the rule and the appellant may be permitted to produce additional evidence in a fit case which falls under one of the specified circumstances. The present case does not fall within the first category and the appellant has no right to produce additional evidence before the appellate authority. In the present case adequate opportunities were given by the AO to produce evidence in support of various claims in the return but no evidence whatsoever was given. Under these circumstances, I refuse to admit fresh evidence at the appellate stage. 9.7 Hon’ble Allahabad HC in the case of Ram Prasad Sharma vs. CIT, 119 ITR 867 with regard to applicability of Rule 46A, has held by mentioning facts as under: “For the assessment year 1976-77, the assessee filed a return in compliance with notice under section 139(2). His persistent defaults entailed an ex parte assessment under section 144 and the ITO included in the taxable income, as income from undisclosed sources, the two alleged loans of Rs.28,000 for want of any evidence about their genuineness. On appeal , the assessee

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sought to produce certificates from the alleged creditors before the AAC who refused to accept fresh evidence and confirmed the entire addition. On further appeal, the Tribunal also rejected the assessee’s plea for admission of the requisite evidence and confirmed the addition. On reference : Held Within the bounds of specified circumstances, it was within the discretion of the AAC [under rule 46A of the Income Tax Rules] and of the Tribunal [under rule 29 of the Income-tax (Appellate Tribunal) Rules] to admit or not to admit further evidence at the appellate stage. In the present case, the assessee failed to produce evidence before the ITO despite repeated opportunities. The appellate authorities, therefore, did not act arbitrarily or capriciously and were justified in refusing to allow production of fresh evidence at the appellate stage.”

4.2.9 Hon’ble Gujarat High Court in the case of Fairdeal filaments Ltd. Vs. CIT, 302, ITR 173 has held that when sufficient opportunity by the Assessing Officer then CIT(A) and Tribunal were justified in dismissing the plea of the assessee for admission of additional evidences. Hon’ble Court has made detailed analysis of Rule 46A of IT Rules as well as Rule 29 of ITAT rules and has held as under : “The position in law as regards admission of additional evidence, both in relation to rule 46A of the Income-tax Rules and rule 29 of the Income-tax (Appellate Tribunal) Rules is similar. No person is entitled to seek admission of additional evidence as a matter of right. In fact opening portions of both the rules are couched in negative terminology and place an emerge on a person from seeking admission of the additional evidence. The only exception being fulfillment of the stipulated conditions. Therefore, the appellate authorities are vested with a discretion whether to admit or to reject an application for production of additional evidence and for this purpose the only test which is relevant is whether discretion has been validly exercised in the facts and circumstances of the case, in other words, is supported by reasons and is not capricious or arbitrary in any manner.

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Before the Tribunal the limited question that was whether the Commissioner (Appeals) had rightly turned down the request made by the assessee for production of additional evidence. Alternatively, it was contended on behalf of the assessee that the Tribunal may exercise discretion vested in the Tribunal vide rule 29 of the Income-tax (Appellate Tribunal) Rules and admit additional evidence. The Tribunal came to the conclusion that there was no infirmity in the order of the Commissioner (Appeals) rejecting the plea of the assessee for production of additional evidence because, according to the Tribunal, the Commissioner (Appeals) had rightly come to the conclusion that sufficient opportunities had been granted to the assessee by the Assessing Officer regarding production of additional evidence. Held that if both the appellate authorities had concurrently came to the conclusion that sufficient opportunities were granted to the assessee, it was not possible to go behind the said findings which were primarily based on appreciation of evidence on record. So far as admitting additional evidence under rule 29 of the Income- tax (Appellate Tribunal) Rules was concerned the Tribunal had come to the conclusion that the benefit under the said rule was not available to a person who was negligent, non-co-operative and recalcitrant; and the Tribunal was not required to give another chance or opportunity to a person to cover up its own lapses. Applying the tests mentioned above to the facts of the case, it was to be held that the Tribunal had approached the matter correctly and once the Tribunal had exercised discretion legally in accordance with law it was not possible to come to the conclusion that in the facts and circumstances of the case, such exercise of discretion was either coloured by irrelevant considerations or was capricious or arbitrary.

4.2.10 In the light of the afore said discussion on the facts of the case, Rule 46A of the IT Rules and Judicial pronouncements as cited supra I

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hold that since sufficient opportunities were granted by the Assessing Officer to the assessee during the assessment therefore, additional evidence filed during the appellate stage are not admissible. The appellant can produce additional evidences only in the circumstances specified in the rule however the present case does not fall under any of exceptions provided in the rule. The additional evidences filed are accordingly held inadmissible. 4.2.11 Otherwise also the valuation report also does not prove anything and it just gives valuation of five flats and the same is based on the market value. 4.2.12 On the basis of discussion made in preceding paragraph following facts emerge: (i) The land on which the construction of the new house has been claimed is not in the name of the appellant neither he has been shown as one of the co-owner and therefore the very foundation of the claim u/s 54F is not tenable. (ii) The appellant has failed to file any sanctioned plan or completion certificate of the house which claims to have been constructed. (iii) Some Kuchha bills of construction materials for which payment have been claimed to be made in cash does not prove anything and maximum it may reflect some purchases of materials although utilization of the same is not proved as to on which sites they were used. Genuineness of the bills were also questionable in nature as because all the payments are claimed to be made in cash. (iv) The copy of LPG/Electricity connection also cannot prove anything as the same can be taken by any person even in a old house.

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(v) Approved valuer’s certificate just gives valuation of 5 flats on the basis of market value and is more in the nature of self-serving document. (vi) As per the cited decisions as referred supra, the ownership of new house has to be in the name of the assessee and as per the facts of the present case the appellant is not the owner of the land even.” 5. Ld. DR vehemently contended both the lower authorities have rightly declined the assessee’s impugned section 54F deduction claim in view of the clinching fact that he could not prove re-investment of the corresponding capital gains in a residential house by way of producing the title deed of the new asset forming a mandatory condition in the statutory provision herein. We find merit in revenue’s arguments as it has come on record that there is no evidence of the assessee having reinvested his capital gains in forgoing terms. He fails in his instant appeal therefore. Ordered accordingly. 6. This assessee’s appeal is dismissed in above terms Order pronounced in the Open Court on this 27th day of April, 2022.

Sd/- Sd/- (DR.DIPAK P.RIPOTE) (S.S. GODARA) लेखध सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य/JUDICIAL MEMBER पपणे / Pune; ददनधांक / Dated : 27th April, 2022. Ashwini आदेश की प्रनतनलनप अग्रेनषत / Copy of the Order forwarded to : अपऩलधथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A)-2, Pune. 4. The Pr.CIT-2,Pune. 5. नवभधगऩय प्रनतनननध, आयकर अपऩलऩय अनधकरण, “ए” बेंच, पपणे / DR, ITAT, “A” Bench, Pune. गधर्ा फ़धइल / Guard File. आदेशधनपसधर / BY ORDER, 6. // True Copy // Senior Private Secretary आयकर अपऩलऩय अनधकरण, पपणे / ITAT, Pune.

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S.No. Details Date Initials 1 Draft dictated on 20.04.2022 2 Draft placed before author 25.04.2022 Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement on 7 Date of uploading of Order 8 File sent to Bench Clerk 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order