PR COMMISSIONER OF INCOME TAX vs. KESHAV DUTT SHREEDHAR

IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA ON THE 27th DAY OF DECEMBER, 2021 BEFORE HON’BLE MS. JUSTICE SABINA & HON’BLE MR. JUSTICE SATYEN VAIDYA INCOME TAX APPEAL NO. 11 OF 2020 Between:- PR. COMMISSIONER OF INCOME TAX, SHIMLA. ….APPELLANT (BY SH. VINAY KUTHIALA, SENIOR ADVOCATE WITH MS. VANDANA KUTHIALA, ADVOCATE)

AND

SH. KESHAV DUTT SHREEDHAR, LEGALIES, NEAR MARINA HOTEL, THE MALL SHIMLA. ..RESPONDENT (MR. VISHAL MOHAN, ADVOCATE) ________________________________________________________________________ This appeal coming on for orders this day, Hon’ble Mr. Justice Satyen Vaidya, passed the following: J U D G M E N T Heard. 2. By way of instant appeal, the appellant has assailed the order dated 25.09.2019 passed by Income Tax Appellate Tribunal, Chandigarh in ITA No. 8/CHD/2016. 3. Respondent filed his income tax return for the A.Y. 2008-09 on 30th September, 2008 and declared income of Rs.1,66,75,690/- This included income from long term capital gain of Rs.38,61,259/- (on sale of flat at Delhi for a consideration of Rs.54,00,000/-). An

2 exemption under Section 54 of the Income Tax Act (for short ‘the Act’) was claimed. On 29.11.2010 assessment under Section 143(3) of the Act was completed and returned income was accepted. 4. An objection was raised by the Revenue audit that assessee (respondent herein) had neither purchased the new residential house before 30.09.2008 nor he had deposited capital gain amount in the capital gain deposit account scheme. On this premise, exemption allowed to the assessee was recommended to be disallowed and the capital gain account of Rs.38,61,259/- was proposed to be added back to the taxable income and charged to tax. Accordingly, the case of respondent was reopened and assessment under Section 143(3)/147 of the Act was completed on 26.11.2014. The exemption claimed by the respondent was disallowed and total income was assessed at Rs.2,05,36,949/-. The Assessing Officer held that the assessee had neither invested sale proceeds of the asset in new residential house nor he had deposited the capital gains to the capital gain account within the stipulated period. 5. Respondent assailed the above referred order of Assessing Officer before CIT(A), Shimla, but remained unsuccessful. CIT(A), Shimla vide order dated 09.11.2015 rejected the appeal of respondent. Respondent further assailed the order of CIT(A) before the ITAT, Chandigarh and vide order dated 25.09.2019, the ITAT,

3 Chandigarh accepted the appeal of respondent/assessee. The instant appeal is against the aforesaid order of ITAT Chandigarh. 6. The contention of the Revenue, in the instant appeal, is that the decision of ITAT is not acceptable on account of failure of assessee to produce any credible evidence about the purchase/allotment of flat before due date of filing return. On this account, the Revenue seeks indulgence of this Court under Section 260-A of the Act to answer the following question, which according to the Revenue forms substantial question of law:- “i) Whether on the facts and circumstances of the case, the Hon’ble ITAT is right in holding that there should be a live link between the amount of capital gain and in the purchase of the new asset where the asset is purchased before the time prescribed by law.” 7. The revenue has not assailed the findings of fact recorded by the ITAT before this Court on any ground whatsoever muchless the ground of perversity. Thus, the findings of fact recorded and taken into consideration by the ITAT needs notice for disposal of instant appeal as under:- “4. We have heard the rival submissions and perused the material available on record. A perusal of the record shows that in the facts of the present case on account of sale of a specific property, capital gains to the tune of Rs.38,61,259/- arose to the assessee. The relevant facts relatable to the factum of sale and accrual of amount of capital gains are not being referred to in greater details as there is no dispute amongst the parties on the

4 said issue. The fact that the assessee before the filing of the return i.e. before 30.09.2008 invested an amount of Rs. 49,88,782/ vide cheque No. 765011-1 drawn on ICICI Bank for acquiring a residential flat is an admitted fact.] The specific cheque was cleared by the Bank on 29.09.2008 is also not in dispute. The fact that said evidence was available to the AO as questionnaires were issued by the AO during the original scrutiny proceedings to justify the claim of deduction u/s 54 of the Act and the reply of the assessee are also facts on record. The fact that sale proceeds were deposited in Canara Bank Account which was probably a joint account of the assessee with his wife and were further converted in Fixed Deposits and the investment was not made from the bank. where sale proceeds were deposited and were instead made from ICICI account which was the assessee's account where professional receipts were deposited, are also the facts on record…...” 8. On the strength of aforesaid facts, it has been held by the ITAT that there was substantial compliance with the provisions of Section 54 of the Act as the respondent/assessee had invested an amount of Rs.49,88,782/- vide cheque No. 765011 drawn on ICICI bank for acquiring residential flat and the said cheque was cleared by the bank on 29.09.2008 i.e. before the last date for filing of income tax return i.e. 30.09.2008. Relying upon paragraph 22 of the judgment of Madras High Court in C. Aryama Sundaram vs. CIT (2018) 407 ITR 1 (Mad), the ITAT held that merely because

5 the amount received by the respondent/assessee from the sale of flat was lying in deposit with Canara Bank by way of FDR and the amount invested for purchase of new flat by the respondent/assessee was from another account maintained by him with ICICI bank cannot be a justifiable ground to deny the benefit of Section 54(1) of the Act to respondent/assessee. It has further been held by the ITAT that the assessee having invested amount in the purchase of new asset within the specified period, the assessee could be said to have acquired substantial domain over the property, entitling him for claim of exemption. 9. To qualify legal requirement to be called a substantial question of law, it has to be shown that the same emerges from foundation in the pleadings as also from the substantial findings of facts. Further, it is also required to be satisfied that the question posed should not merely be a proposition of law, but should be a debatable question having bearing on the merits of the case. In absence of any challenge to the facts recorded by the ITAT, the question so posed by the Revenue cannot be termed as substantial question of law as it has no foundation in the factual matrix of the case. The ITAT, in its impugned order, has recorded that law no- where requires existence of live link between the amount of capital gain and in the purchase of new asset, where the asset is purchased within the stipulated time of filing of return. It has further been held that law does not require the assessee to hold on to the very same money and demonstrate that the very same

6 money is utilized in the acquisition of the asset. Neither before the ITAT nor in this Court the Revenue has been able to show on record that the legal position is otherwise. 10. In view of the above discussion, we do not find any illegality or infirmity in the impugned order passed by the ITAT, Chandigarh. No substantial question of law arises in the instant appeal, hence the same is dismissed.

( Sabina ) Judge

December 27, 2021 ( Satyen Vaidya )

(naveen) Judge