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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI R. K. PANDA
PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 13.10.2017 of CIT(A)- 12, New Delhi relating to assessment year 2008-09.
Grounds of appeal no.1 and 2 by the assessee read as under :-
“1. That on facts and circumstances of the case & in law, the learned CIT(A) erred in upholding the addition of Rs. 60,62,443/- made by the learned Assessing Officer, by denying exemption claimed u/s 54 F of the Act, which was originally allowed by CIT(A) in original proceedings. The present proceedings were in consequence of the Order of ITAT on technical ground u/r 46A of IT Rules 1962.
2. That the learned CIT(A) erred in holding that the Assessee failed in constructing the House within 3 years, ignoring the facts & evidences submitted during the Appellate proceedings, merely because the notice issued under section 133(6) of the Act, by the Assessing Officer, to the Contractor and architect returned back. The learned CIT(A) & learned A.O. did not appreciate that the notice has been sent after about six years.”
This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that the original assessment in this case was completed u/s 143(3) on 01.09.2007 wherein the Assessing Officer had made addition of Rs.60,62,433/- on account of long term capital gain by disallowing the claim of the assessee on account of exemption u/s 54F of the I.T. Act, 1961. The assessee during the assessment year under consideration had sold a property on 01.09.2007 for Rs.65,00,000/- and purchased a plot at Noida for Rs.67,16,225/-.
The assessee had claimed exemption u/s 54F on account of long term capital gain of Rs.60,62,433/-. The Assessing Officer disallowed the claim of exemption u/s 54F on the ground that the assessee had neither purchased nor constructed any house and the amount of sale consideration was utilized in purchase of plot which cannot be treated as residential house.
In appeal, the ld. CIT(A) deleted the disallowance made by the Assessing Officer and on appeal by the Revenue, the Tribunal vide order dated 10.11.2014 restored the matter to the file of the Assessing Officer by observing as under :-
“6. We have heard both the counsel and perused the records. We find that Ld. D.R. in ground no. 1 has force in his contention that Ld. CIT(A) has not provided sufficient opportunity to thoroughly examine the additional evidences, which is arbitrary in the eyes of law. In our considered opinion, in the interest of natural justice, this issue requires thorough investigation at the level of the Assessing Officer. Hence, we remit the ground no. 1 relating to addition Rs. 60,62,443/- made by the AO in regard to the disallowance u/s. 54F of the I.T. Act with the directions to consider the same, after giving adequate opportunity of being heard.”
Subsequently, the Assessing Officer issued notice to the assessee asking him to furnish the required details. From the various details furnished by the assessee, the Assessing Officer observed that after purchase of land the assessee had paid an amount of Rs.2,00,000/- by Cheque dated 13.02.2010 to the construction company namely M/s Manya & Bhuwan Infrastructure (P) Ltd. and an amount of Rs.6,57,850/- has been made in cash. The assessee also furnished a Valuation Report dated 23.07.2010 from Shri Khurshid Ahmad & Associates, Architect showing the cost of construction of 903 sq.ft. on the said plot at Rs.8,57,850/-. In order to verify the claim of the assessee, the Assessing Officer issued notices u/s 133(6) to M/s Manya & Bhuwan Infrastructure (P) Ltd. and M/s Khurshid Ahmad & Associates. However, both the notices were returned unserved by the postal authorities. The Assessing Officer, therefore asked the assessee to produce the abovementioned parties for his verification and also to furnish the following documents :-
(a) Copy of approval of construction of house of the authority. (b) Copy of electricity bill for the period from June 2010 onwards. (c) Copy of bills related to construction of house.
The assessee in his reply dated 25.11.2016 submitted a copy of approval letter for construction issued by NOIDA Authority dated 27.05.2013. The Assessing Officer observed that this document is contrary to the claim of assessee that the construction was completed by June, 2010. In absence of any documentary evidence to prove that the house was constructed and it became habitable within the stipulated time and in absence of filing of any document in respect of completion of house or electricity connection provided to the assessee, the Assessing Officer discarded the copy of water bills paid for the period from April, 2008 to June, 2013 and held that the assessee’s claim u/s 54F is not allowable. Rejecting the various submissions and other details furnished by the assessee, the Assessing Officer rejected the claim of deduction u/s 54F on account of the following grounds :-
“a. The assessee applied for approval of construction of house in 28.07.2012. This was two years after the date of permissible time limit. b. The assessee has not obtained any electricity connection till date. In absence of electricity connection the claim of the assessee remains to be established. c. The copies of bills relating to purchase of material and labour contractors remained unverified. d. The valuation report remained verified as the notice issued by this office was returned unserved. e. No evidence to show that investment made in plot and claimed construction of residential was in the form of habitable residential construction. The investment in house would be complete only when such house becomes habitable. In this case, the assessee has not been able to show that the house was habitable. f. The assessee failed to discharge his onus to establish that the investment was made as per the provisions of Section 54F of the Act.”
He accordingly rejected the claim of deduction u/s 54F amounting to Rs.60,42,443/- and added the same to the total income of the assessee.
In appeal, the ld. CIT(A) upheld the action of the Assessing Officer. The argument of the assessee that he spent more than the entire amount of sale consideration of the original asset before the last date of filing of income tax return for assessment year 2008-09 and that he had submitted contractor bills for construction of house and water bills, substantiating the evidence of incurring of expenditure of Rs.8,57,850/- was rejected by him. The further contention of the assessee that the law requires construction of the residential house and not the approval from the local authorities was also rejected by him.
Rejecting the various explanations given by the assessee and observing that the notices issued by the Assessing Officer u/s 133(6) to the contractor and the architect were returned unserved and construction of the house was not completed, the CIT(A) upheld the action of the Assessing Officer.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.
Ld. counsel for the assessee referring to the decision of the Tribunal in the case of Bhavna Cuccria vs. ITO reported in 165 ITD 124 submitted that where substantial amount of capital gain has been invested by assessee for the purpose of purchasing a new house, deduction u/s 54 cannot be denied for reason that construction was not completed within three years or house was not purchased within two years.
Referring to the decision of the Chennai Bench of the Tribunal in ITO vs. Mrs. Saroja Naidu reported in [2017] 53 ITR (Trib.) 250, he submitted that the Tribunal in the said decision has held that once the assessee demonstrates that the consideration received on transfer has been invested either in purchasing a residential house or in constructing a residential house, even though the construction is not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from availing benefit u/s 54F of the I.T. Act.
Referring to the decision of the Hyderabad Bench of the Tribunal in the case of Pradeep Kumar Chowdhry vs. DCIT vide order dated 31.12.2014, he submitted that the Tribunal in the said decision has held that section 54F is a beneficial provision and, therefore, has to be interpreted so as to give the benefit of residential unit i.e. flat instead of house in the present state of affairs. It was further held that even if only advance is given the benefit still will be available for exemption u/s 54F of the I.T. Act.
Referring to the decision in the case of Seetha Subramanian reported in 55 ITD 94, he submitted that the Tribunal in the said decision has held that the assessee need not complete the construction of the house and occupy the same within the stipulated period. It is sufficient, if the assessee has made substantial investments in the construction of the house. He accordingly submitted that since the assessee in the instant case has constructed the residential house which is within the stipulated period of three years of sale of the original asset i.e. by 31.08.2010 and the Assessing Officer has merely on suspicion rejected the bona-fide claim of the assessee which was upheld by the ld. CIT(A), therefore, by interpreting the second proviso to section 54F liberally the claim of exemption should be allowed. The ld. counsel for the assessee further submitted that the Assessing Officer has taxed the allowable capital gain at normal rate instead of @ 20% as per the provisions of section 112 of the I.T.
Act.
The ld. DR on the other hand heavily relied on the orders of the Assessing Officer and ld. CIT(A). He submitted that the Assessing Officer had given the reasons for denial of claim of exemption u/s 54F of the I.T. Act. The assessee not only failed to complete the construction of the house before the stipulated date but also failed to produce the contractor who had constructed the house property and the architect who had issued the certificate valuing the cost of construction. Since the house property in the instant case was not habitable, therefore, under the facts and circumstances of the case, the denial of exemption u/s 54F by the Assessing Officer which has been upheld by the ld. CIT(A) is justified. The grounds raised by the assessee, therefore, should be dismissed.
I have considered the rival arguments made by both the sides and perused the material available on record. It is an admitted fact that the assessee has sold a property on 01.09.2007 for Rs.65,00,000/- and claimed exemption u/s 54F on account of long term capital gain of Rs.60,62,443/- on account of purchase of plot at Noida for Rs.67,16,225/- and construction expenses of Rs.8,57,850/-. I find the Assessing Officer disallowed the claim of deduction u/s 54F on the ground that the notice issued u/s 133(6) issued to the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. and the architect M/s Khurshid Ahmed & Associates were returned unserved and the assessee was unable to produce them for their verification. Further, the assessee could not produce copy of electricity bills and Noida Development Authority had confirmed that electricity connection was not given to the house. Further, the construction of the residential house was not in the form of habitable construction. It is the submission of the ld. counsel for the assessee that substantial amount of the capital gain has been invested by the assessee for construction of the house and merely because house is not habitable the same cannot be a ground to deny the benefit of deduction u/s 54F of the I.T. Act. It is an admitted fact that out of sale proceeds of the property of Rs.65,00,000/-, the assessee has purchased the plot at Noida for Rs.67,16,225/- and claimed to have spent an amount of Rs.8,57,850/- towards construction of the house on this plot before June, 2010.
The assessee has also produced the water bills for the period from April, 2008 to June, 2013 which is not in dispute. However, it is an admitted fact that no other bills such as electricity connection and approval from the Noida Development Authority was produced before the Assessing Officer to substantiate that the house was constructed and it became habitable within the stipulated period. The only other corroborative evidence which could have established the construction of the house is by producing the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. to whom payment of Rs.2,00,000/- had been paid by Cheque and Rs.6,57,850/- has been made in cash and M/s Khurshid Ahmed & Associates, the architect who had submitted valuation report dated 23.07.2010 who had certified that the assessee had constructed 903 sq.ft. on the said plot for Rs.8,57,850/- for the examination of the Assessing Officer. No doubt the provisions of section 54F should be construed liberally and it is also held in various decisions that where substantial amount of the capital gain has been invested for construction of the house property, exemption u/s 54F may be allowed notwithstanding that the property is not fully complete or that the house is not in habitable condition. However, in the instant case, the assessee could not produce the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. who had constructed the house and the architect who had issued the certificate certifying the cost of construction of 903 sq.ft. on the said plot of Rs.8,57,850/- for the examination of the Assessing Officer to find out about the completion of the construction. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to produce the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. and the architect M/s Khurshid Ahmed & Associates for examination of the Assessing Officer. The Assessing Officer upon satisfaction may allow the deduction u/s 54F of the I.T. Act as per fact and law. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
Ground no.3 was not pressed by the assessee for which ld. DR has no objection. Accordingly, the above ground is dismissed as not pressed.
Ground no.4 by the assessee reads as under :-
“4. That the learned CIT(A) erred in upholding the contention of the learned Assessing Officer in respect of charging interest u/s 234D of the Act, on the facts of the case and as per law. a. Without prejudice to the above, the interest levied u/s 234D of the Act, is excessive, as interest @12% p.a. has been levied against 6% p.a.”
After hearing both the sides, I deem it proper to restore the issue to the file of the Assessing Officer with a direction to charge interest u/s 234D as per fact and law.
Ground no.5 by the assessee reads as under :-
“5. That the learned CIT(A) erred in upholding the contention of the learned Assessing Officer in respect of charging interest u/s 234B of the Act till the date of the passing Reassessment Order consequent to the Order u/s 254 passed by ITAT. Whereas on the facts, provision of Section 234B(4) shall be invoked and consequently the figure of interest originally levied in regular Assessment Order dated 01.12.2010 shall not be increased in Order u/s 254/143(3) of the Act.”
After hearing both the sides, I find the grievance of the assessee in the impugned ground is levy of interest u/s 234B. It is the submission of the ld. counsel for the assessee that interest u/s 234B should have been levied upto the date of regular assessment order which was passed in December, 2010 whereas the Assessing Officer has calculated the interest u/s 234B upto the date of order passed u/s 254/143(3) of the I.T. Act. According to the ld. counsel for the assessee, the interest u/s 234B should have been at Rs.1,90,167 as against Rs.6,54,255/- computed by the Assessing Officer. It is also his submission that the Hon'ble Supreme Court in the case of Modi Industries Ltd. Etc. Etc. vs. CIT reported in 216 ITR 759 has defined the term “regular assessment” which means original assessment u/s 143/144. The Delhi Bench of the Tribunal in the case of Freightship Consultants (P.) Ltd. vs. ITO reported in 110 ITD 377 has held that the Assessing Officer is duty bound to charge interest u/s 234B upto date of original assessment passed by him and not upto date of reassessment order passed by him in pursuance of order of the Tribunal. I find the Tribunal at para 29 of the order has held as under :-
“29. Now, we shall be deciding on merits as to whether after the decision of ITAT, the assessing officer was justified in charging the interest under Section 234B of the Act up to the date of assessment order or up to the date of order passed by the assessing officer in consequence of the order passed by the ITAT by passing an order under Section 254/154 of the Act. In the instant case, the assessing officer has charged interest under Section 234B of the Act up to the date of the order passed by him in consequence of the order of IT AT by passing an order under Section 254/ 154 of the Act. This is certainly against the decision of the Apex Court in the case of Modi Industries Ltd. (supra) as well as Full Bench decision of Bombay High Court in the case of Carona Sahu Co. Ltd. (supra) (approved by the Apex Court) and, hence, the order passed by the assessing officer under Section 254/154 of the Act charging interest under Section 234B of the Act up to the date of the order passed by him in consequence of the order of the ITAT is against the provisions of Law and, hence, the same cannot be upheld and consequently the same has been wrongly been p upheld by the Commissioner (Appeals) and, accordingly, the order of the Commissioner (Appeals) in this regard is set-aside to this extent. In the light of above findings the grounds of appeal taken by the assessee stands disposed of accordingly.”
21. I find the ld. CIT(A) has not adjudicated the issue by passing a speaking order on account of chargeability of interest u/s 234B. Since the deduction u/s 54F has been restored to the file of the Assessing Officer, therefore, I deem it proper to restore this issue also to the file of the Assessing Officer with a direction to levy interest u/s 243B as per law keeping in mind the judicial precedents cited above. The Assessing Officer shall decide the issue as per law after giving due opportunity of being heard to the assessee. I hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on this 30th July, 2018.