KAMAL KISHORE JAISWAL,DEHRADUN vs. DCIT, DEHRADUN

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘D’, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA No.4724/Del/2015 Assessment Year: 2007-08 Shri Kamal Kishore Vs. DCIT, Jaiswal, Central Circle, Dehradun 23/25, Pritam Road, Dehradun. PAN :ACDPK1166C (Appellant) (Respondent) Appellant by Shri Tarandeep Singh, CA Respondent by Shri J.K. Mishra, CIT(DR)

Date of hearing 20.12.2018 Date of pronouncement 26.12.2018 ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 20/05/2015 passed by the Commissioner of Income Tax (Appeals), Dehradun [in short ‘the Ld. CIT(A)’] for assessment year 2007-08 raising following grounds: The Appellant respectfully craves leave to object to the impugned order appealed against on the following grounds: 1. That the learned Commissioner(Appeals) erred on the facts and circumstances of the appellant’s case and in law in confirming the impugned addition of Rs.8,67,367/- on account of long term capital gains to the total income of the appellant

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by the learned AO consequent to disallowance of appellant’s claim for exemption u/s 54F of the IT Act. The Appellant craves leave to reserve his right to add to, delete from, amend, alter or modify his “Grounds of Appeal” at any time before or at the time of hearing.” 2. Briefly stated facts of the case are that the assessee, an individual, filed return of income for the year under consideration on 31/03/2008 in terms of section 139 of the Income-tax Act, 1961 (in short ‘the Act’). In the return of income filed, the assessee shown long-term capital gain (LTCG) of Rs.22,62,367/- out of which LTCG of Rs.13,95,000/- was claimed as exempt under section 54F of the Act for investment in the purchase of residential house property and balance amount of Rs.8,67,367/- was offered to tax under the head capital gains. The assessee purchased the residential house property costing Rs. 38, 95,000/- at Pritam Road, Dehradun and for which, the assessee taken loan amount of Rs. 25 lakhs from the HDFC bank. Thus, the assessee claimed deduction of Rs. 13,95,000/- under section 54F of the Act for the investment excluding the loan amount of Rs. 25 lakhs. 2.1 Subsequently, a search and seizure action under section 132 of the Act was carried out at the premises of the assessee. Consequent to the search action, the Assessing Officer issued a notice under section 153A of the Act asking the assessee to file return of income. In the return of income filed in response to notice under section

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153A of the Act, the assessee claimed entire long-term capital gain as exempt under section 54F of the Act. In scrutiny proceedings under section 153A of the Act, the assessee contended that as per the provisions of section 54F, it was entitled for entire amount of investment in a new property for exemption under section 54F of the Act including the investment made out of the loan amount. According to the Assessing Officer, the assessee was entitled for deduction under section 54 of the Act in respect of the amount paid out of the capital gains amount of the plot sold and not in respect of the investment met by way of housing loan of Rs. 25 lakhs from the HDFC. Accordingly the Assessing Officer made addition in the assessment orders passed on 21/03/2013. On further appeal, the Ld. CIT(A), though agreed with the contention of the assessee of eligibility of deduction under section 54F of the Act for the entire amount including the loan amount of Rs. 25 lakh, however according to the Ld. CIT(A), the assessee was not eligible for making this claim in the return filed under section 153A of the Act. The finding of the Ld. CIT(A) on the issue in dispute is reproduced as under: “6. I have duly considered the facts and circumstances of the case. At the very outset, it is important to state that the AO is incorrect in her interpretation of the provisions of section 54F of the Act, in holding that it is the same money that is received on the sale of an asset , which is to be used in the purchase of the new asset. This is disproved by the fact that the exemption under section 54F of the Act is also available, if the house property has been purchased even within one year prior to the sale of the capital asset. Thus, it quite naturally follows is that what is mandated is that an

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equivalent amount (to the capital gains) should be vested for availing the benefits of section 54F of the Act and the assessee should not own more than one residential house other than the new asset on the transfer of the old asset or purchase any residential house other than the new asset within an year of sale of the old asset. In the circumstances the fact that Rs 25,00,000/- of the cost of the new house was met through the proceeds of a loan, would not, in itself, disentitle the assessee to claim the exemption under section 54F of the Act for the entire capital gains of Rs 22,62,367/- ,instead of just the balance investment of Rs 13,95,000/-, as the total amount of capital gains was less than the value of the new asset(which stood at Rs 38,95,000/-). Having said that, the real issue to be decided in this appeal is not whether the Assessing Officer has made the disallowance on correct grounds but whether the assessee is at all entitled to claim this exemption in the return filed in response to notice under section 153A of the Act, if he has not claimed the same in the return filed under section 139 of the Act. In the case of Shri Charchit Agarwal Vs. Asstt. Commissioner of Income Tax, Central Circle Delhi (2009) 34 SOT 348 (Del) the Hon’ble ITAT, relying on the judgment of the Hon. Supreme Court in the case of CIT Vs. Sun Engineering Works (Pvt.) Ltd. (1992) 64 Taxman 442 (SC), Held that the provisions of section 153A are directed to assess or reassess the income for six assessment years based on search proceedings and hence the assessment proceedings under section 153A are beneficial to the revenue. In other words the proceedings under section 153A are initiated to assess or reassess the undisclosed income. In the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 2971 Hon'ble Supreme Court has held that section 147 being for the benefits of the revenue and not for the assessee, assessee cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise and seek relief in respect of items earlier rejected or claimed relief in respect of items not claimed in the original assessment proceedings unless relatable to escaped income even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped income are accepted, still the allowance of such claim has to be limited to the extent to which they reduce the income to the level originally assessed. The income, for the purpose of reassessment cannot be reduced beyond the income originally assessed. In

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the assessment years before us, returns of income for assessment years 2000-01 to 2005-06 have been accepted under section 143(1) and, therefore, in view of the decision of Hon’ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra), the assessee cannot be permitted to claim the benefit of closing stock by changing the method of valuation as it becomes favourable to the assessee." Similarly in the case of Jai Steels India (Pvt) Ltd, in ITA number 53/2011 vide it’s order dated 24/05/2013, the Hon Rajasthan High Court held, "Consequently it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed by it in the original return, which assessment already stands completed, only because an assessment under section 153A of the Act, in pursuance of a search or requisition is required to be made” 7. In view of the settled legal position on the matter, it is held that since the assessee himself offered a sum of Rs 8,67,367/- for tax in the return filed by him under section 139 of the Act and since the same had been processed and the time for issue of notice under Section 143(2)had lapsed, the assessment stood finalized. The assessee was entitled to revise this return u/s 139(5) and also to file rectification application under section 154 of the Act in regular course. However, he could not seek to convert the proceedings under section153A of the Act into an opportunity to claim relief in respect of items not claimed in the original assessment proceedings. As the same is outside the scope of assessments under section 153A of the Act, the claim of the assessee is this regard is denied and the addition upheld.” 2.2 Aggrieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal, raising the grounds as reproduced above. 3. Before us, the Ld. counsel of the assessee relied on the submission filed before the Ld. CIT(A) and submitted that as per the provisions of section 54F, the assessee is entitled for deduction for the investment made in new property irrespective of the source of such investment.

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assessment under Section 153A of the Act in pursuance of search or requisition is required to be made.” 6. In the case of assessee also the original return of income was filed on 31.03.2008 and processing under 143(1) of the Act was completed. The limitation for issue of notice under Section 143(2) also expired prior to search action. Thus, the assessment proceedings already stand finalized before the search action or issue of notice under Section 153A of the Act. 7. In view of the above decisions and respectfully following the decisions of the Hon’ble Supreme Court and Rajasthan High Court, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute. The ground of the appeal of the assessee is, accordingly, dismissed. 8. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 26th December, 2018.

Sd/- Sd/- [BHAVNESH SAINI] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26th December, 2018. RK/-[d.t.d.s] Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi