SMT. SHALINI AGARWAL ,KOLKATA vs. DCIT, C.C. - 2(3), KOLKATA , KOLKATA

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.

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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 :-

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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

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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. 11. 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.”

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Officer to examine the impugned issue afresh and therefore, the assessee ought not to have any locus standi at this pre-mature stage.

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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.

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