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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri S.S.Godara & Dr. A.L.Saini
आदेश /O R D E R PER S.S.Godara, Judicial Member:-
These nine assessees have filed their instant as many appeals for assessment year 2014-15 against the Principal Commissioner of Income Tax-1, Kolkata’s separate orders; all dated 16.03.2018, assuming revision proceedings vested u/s 263 of the Income Tax Act (in short ‘the Act’).
Heard Shri A.K Tulsiyan, FCA, authorized representative representing assessees and Shri Vijay Sankar, CIT-DR appearing at the Revenue’s behest.
It transpires at the outset with the able assistance of learned representatives that the relevant factual backdrop involved in all these cases qua assumption of revision proceedings is identical. These nine assessees are stated to be belonging to the same family. They had derived long-term capital gains on sale of painting(s) in the relevant previous year. These assessees thereafter chose to reinvest the same in REC bonds within six months to the tune of Rs.50,00,000/- each in two financial years 2013-14 & 2014-15. We thus take up in case of Shri Rajnish Agarwal, as the ‘lead’ case.
Coming to the foregoing lead case, we notice that this assessee had received two payments of Rs.90,00,000/- and Rs.10,00,000/- on 07.08.13 and 19.10.13 as sale price of the painting(s) sold followed by reinvestment on 01.11.13 and 28.04.14 Rs.50 lakh each; to 1185/Kol/2018 Assessment Year: 2014-15 Page 4 respectively. The Assessing Officer framed regular assessment in his case on 22.03.16 accepting the income of Rs.62,47,970/-. The PCIT has invoked his revision jurisdiction vested u/s 263 of the Act to term the said regular assessment as an erroneous one causing prejudice to interest of the Revenue as under:
“8. Now, the second error noticed by me in the assessment order has been examined. As against the second error, the Ld. AR has argued that for calculation of six months, deed of sale should be considered. He further explained that in case of the assessee, he made an agreement with the party (purchaser) on 07/08/2013 and received advance payment for Rs.90 lakh for sale of painting with a condition that the painting will be handed over only on receiving the full payment. A copy of the said agreement has also been filed by the Ld. AR along with its written submission. By quoting from said agreement, the Ld. AR has pointed out that it has also been agreed between the parties that sale of painting shall be completed only on payment of full prices of the painting and executing delivery of the painting. The balance payment of Rs.10 lakh was received on 19/10/2013 and the painting was handed over after that. Therefore, it has been argued by the Ld. AR that the sale was actually executed on 19/10/2013. It is further explained that the assessee made the first investment of Rs.50 lakh on 02/11/2013 and second investment of Rs.50 lakh was made on 28/04/2014. Then, it has been pointed out that both the investments were made within six months from the date of actual sale/handed over. In view of the Ld. AR, there is no error in allowing the deduction u/s.54EC of the Act. He further pointed out that in the course of assessment preceding, this issue was explained to AO. 9.1 I have considered the above argument of the Ld. AR and carefully gone through the assessment record of the assessee, Sri Rajnish Agarwal. In the assessment record, nowhere any such agreement between the assessee and purchaser of painting has been found available, I have also not found any such noting in the note sheet available on record. In fact, after submission of the letter giving details of earning of LTCG on sale of painting made by the assessee during the assessment proceeding that was enclosed with the show cause notice issued to the assessee (and the same has been examined by the Ld. AR before making submission in this proceeding), no further details either has been called for by the AO or submitted by the assessee suo moto in connection with earning of LTCG on sale of painting. Therefore, the submission of the Ld. AR that this issue was explained during the course of assessment proceeding is not found to be correct as no such agreement was filed during the assessment proceeding. Contrary to the submission of the Ld. AR claiming that there was a sale agreement between the assessee and purchaser of painting, M/s. Ambition Suppliers Pvt. Ltd. as per which, sale was to be completed only on making a final payment, there is a sale bill available in the assessment record in which, it is recorded as "being sale of painting". A scan copy of this bill is reproduced as under :- to 1185/Kol/2018 Assessment Year: 2014-15 Page 5
9.2 Had there been any agreement between the assessee and the purchaser of painting as now, produced before me, it would have been certainly mentioned in the sale bill stating as "being sale of painting as per agreement dated 07.08.2013", Absence of any such narration in the said bill, it shows that the agreement now, being produced before me is doubtful in nature. On the basis of the sale bill as reproduced as above, it is very clear that the sale was done on 07.08.2013. In case of any movable property, the date of issue of sale bill is taken as the date of transfer. Therefore, in my considered opinion, the date of transfer of painting in the present case for LTCG of Rs.99,99,900/- is on 07/08/2013. Therefore, the first investment made on 02/11/2013 of Rs.50 lakh is within the period of six months but the second investment made on 28/04/2014 of Rs.50 lakh is beyond the period of six months. 10.1 Even if, the argument of the Ld. AR about taking the date of transfer as 19/10/2013 is accepted, the investment made on 28/04/2014 is also beyond six months because the period of Six months in section 54EC is to be taken from the date of transfer, not from the end of the month in which transfer took place. Therefore, on counting six months from the date of transfer, it will end on 18/04/2014 and in no circumstances, six months can extend up to 28/04/2014. For justifying six months period being as Calendar month, the Ld. AR has argued in Para 8.7 of his written submission stating that the period mentioned in section 54EC is Calendar month and not the period of 180 days. In this regard, he has referred to a decision of ITAT, Spl. Bench, Ahmedabad. It is respectfully submitted that such interpretation is not as per the provision of the Act because wherever period is recorded from the end of the month, it has been mentioned in the respective provision of the Act. 10.2 However, in case of the assessee, there is no need of such interpretation because the sale of the assessee was completed on 07/08/2013 as per the sale bill, which now, the Ld. AR is trying to show that the sale was made as per the agreement, specifying that sale will be completed after final payment. I have already discussed that this agreement was not filed at the time of assessment proceeding. Since, this agreement has not been filed during the to 1185/Kol/2018 Assessment Year: 2014-15 Page 6 assessment proceeding, its validity is required to be examined by the AO in the light of the details filed by the assessee during the assessment proceeding. Therefore, the matter relating to allowability of deduction u/s.54EC on second investment made by the assessee in the bond of Rural Electrification Corporation Ltd, on 28.04.2014 is set aside and restored back to the file of the AO. While deciding the allowability u/s.54EC for the second investment, the AO is directed to examine as to what was the sufficient cause before the assessee of not filing this agreement during assessment proceeding and if, any such agreement existed, why the same was not mentioned in the sale bill produced to the then AO. On the basis of the explanation of the assessee, the AO shall decide about the validity of such agreement and then, the date of transfer for the purpose of computing LTCG shall be decided by the AO. After deciding the date of transfer on account of sale of painting for the purpose of computation of LTCG, the six months period shall be taken by the AO form the date of transfer and not from the end of the month in which transfer took place. Therefore, for computing six months, number of days taken in six months is to be computed to find out whether second investment made by the assessee is within six months or not and accordingly, a fresh assessment order shall be passed computing the LTCG on sale of painting allowing the deduction u/s.54EC as per my direction as discussed in this order.
In the result, the assessment order u/s 143(3) dated 22/03/2016 is set aside and restored back to the file of the A.O to the extent of computing LTCG on sale of painting and then allowing deduction u/s 54EC as per the provision of the Act, keeping in view my above direction as discussed in previous para.”
We have heard rival pleadings. Learned authorized representative inter alia submits that the PCIT has erred in law and on facts in invoking his section 263 revision jurisdiction. He invites our attention to the twin dates of receipts of painting(s) sale consideration i.e. 07.08.13 and 19.10.13 coupled with the corresponding reinvestment of Rs.50,00,000/- each as on 01.11.13 and 28.04.14. Learned counsel then referred to the corresponding painting(s) sale agreement dated 07.08.13 and more particularly Clause 5 therein that “the sale of the painting shall be complete only on payment of full price of the painting and successful delivery of painting”. Learned counsel pleads that since the latter and final payment of Rs.10,00,000/- was received only on 19.10.13 and the assessee has reinvested the impugned sums for six months of the transfer, he is very much entitled for section 54EC deduction in question.
Learned CIT-DR draws vehement support from the PCIT’s revision direction extracted hereinabove. He sought to emphasize that the Assessing Officer had not examined the instant issue of computation of correctness of assessee’s section 54EC deduction claim during the course of scrutiny. And also that assessee’s painting’s sale agreement does not form part of assessment record as well. Mr. Sankar’s argument is that this assessee has not reinvested his capital gains as well within six months from the date of transfer so as to be eligible for the impugned deduction. And that the PCIT has merely directed the Assessing to 1185/Kol/2018 Assessment Year: 2014-15 Page 7 Officer to examine the impugned issue afresh and therefore, the assessee ought not to have any locus standi at this pre-mature stage.
We have given our thoughtful consideration to rival contentions. We make it clear that hon’ble apex court’s landmark decision in Malabar Industries Co. vs. CIT [2000] 243 ITR 83(SC), CIT vs. Max India Limited [2007] 295 ITR 282(SC) and CIT vs. Kwality Steel Suppliers Complex (2017) 395 ITR 1(SC) settle the legal position regarding invocation of section 263 revision jurisdiction that an assessment has to be both erroneous as well as causing prejudice to interest of the Revenue; simultaneously, before the CIT or the PCIT, sets in motion the impugned mechanism. And also that each and every instance of loss of revenue does not attract section 263 revision jurisdiction if the Assessing Officer has adopted one of the two possible views. We keep in mind the same and proceed to deal with facts involved in the instant lis.
There is no dispute between the parties about the two dates each of receipt of sale consideration of painting(s) of Rs.90,00,000/- as on 07.08.13 and Rs.10,00,000/- on 19.10.13 followed by reinvestment of Rs.50,00,000/- each in REC bonds pm 01.11.13 and 28.04.14; respectively. Although learned CIT-DR has made his sublime effort to support the PCIT’s findings that the relevant agreement dated 07.08.13 was nowhere examined during the course of assessment, the same is far from convincing since the fact remains that the PCIT has himself passed his order on merits after holding the assessees not entitled for section 54EC relief hereinabove going by the very dates only. Hon’ble Delhi high court’s decision in ITO vs. D.G. Housing Projects [2012] 343 ITR 319(Delhi) distinguishes the twin aspects of lack of enquiry and error in judgment at the instance of assessing authority vis-à-vis section 263 revision jurisdiction. Their lordships are of the opinion that once the assessing authority decides the case on merits which is stated to trigger section 263 mechanism in motion, it cannot be held that the same is an instance for remitting the matter back to the Assessing Officer in revision. We thus decline the Revenue’s foregoing first argument that the assessee’s instant grievance seeking to reverse the PCIT’s revision direction is pre-mature or the alleged agreement dated 07.08.13 does not form part of record.
Next comes the second issue between the parties about assessee’s eligibility to claim section 54EC deduction after having reinvested his long-term capital gains in the specified REC bonds. We find that various judicial precedents Chachal Kumar Sircar vs ITO (2012) 18 taxmann.com 304(Kol), Mr. Lemes E. D’Souza vs. ITO in 5802/Mum/2013 dated to 1185/Kol/2018 Assessment Year: 2014-15 Page 8 10.04.2017, CIT vs. Janardhan Dass 170 Taxman 113 (Allahabad) & S. Gopal Reddy vs. CIT 181 ITR 378 (AP) support the assessee’s case that the specified time period of six months for reinvestment of capital gains u/s 54EC claim has to be reckoned from actual receipt of sale consideration only.
We are of the view in above-stated factual backdrop that the assessee’s reinvestment falls within six months from the date of transfer. He is entitled for the impugned section 54EC deduction. We make it clear that the legislature has amended section 54EC by inserting 2nd proviso to sub-section(1) of the Act by the Finance Act 2014 w.e.f. 01.04.15 restricting the reinvestment amount to a lumpsum of Rs.50,00,000/-; even if it involves more than one financial year, w.e.f 01.04.15 only without having retrospective effect. We wish to reiterate here that we are dealing with assessment year 2014-15.
Learned CIT-DR at this stage quoted the legislative expression “at any time within a period of six months from the date of such transfer” in section 54EC that the assessee’s latter reinvestment as on 28.04.14 falls very well beyond the period of six months from the final date of receipt of sale consideration i.e. 19.10.13. We notice herein as well that this tribunal’s special bench’s decision in Alkaben B. Patel vs. ITO (2014) 43 taxmann.com 333 (Ahmedabad) (SB) followed in (2020) 113 taxmann.com 586 (Cal) Kartick Chandra Mondal vs. PCIT holds that the foregoing legislative expression has to be read as within six british calendar months than going by the specific dates of receipt of consideration and reinvestment. It further emerges from the case records that the learned special bench had came across the concerned assessee’s date of receipt of sale consideration as 10.06.08 and reinvestment of the corresponding capital gains on 17.12.08 only. We therefore adopt the learned Special Bench’s reasoning mutatis mutandis and hold that the assessee’s impugned reinvestment dated 28.04.14 after receiving final amount of consideration on 01.11.13 as very well beyond six months and therefore, he is entitled for the impugned section 54EC deduction. The PCIT’s impugned revision action in the above-narrated facts and circumstances is not sustainable since the Assessing Officer’s alleged failure in either or not examining the case or disallowing the above-stated deduction relief has not caused any prejudice to interest of the Revenue. His assumption of section 263 revision jurisdiction stands reversed therefore. The Assessing Officer’s regular assessment herein dated 22.03.16 stands revived as a necessary corollary. to 1185/Kol/2018 Assessment Year: 2014-15 Page 9