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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH,
Before: SHRI B.P. JAIN
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘SMC’ BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER [A.Y. 2009-10] Smt. Vinay Mehta Vs. The I.T.O A-19/3, Ground Floor Ward 20(4) Rana Pratap Bagh New Delhi Delhi PAN : AJCPM 5177 F [Appellant] [Respondent] Date of Hearing : 12.10.2017 Date of Pronouncement : 16.10.2017 Assessee by : Shri Salil Agarwal Shri Shailesh Gupta, Advs Revenue by : Shri T. Vasanthan Sr. DR ORDER This appeal of the assessee arises from the order of the ld. CIT(A), Faridabad vide order dated 22.11.2016 for A.Y. 2011-12.
The assessee has raised the following grounds of appeal:
1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining the additions so made by learned assessing officer on account of long term capital gain declared by the assessee appellant in respect of sale of property situated at Ghaziabad for a sum of Rs. 77, 25, 000/-, by denying the benefit of exemption under section 54 of the Act amounting to Rs. 48, 11, 161/-and also by not giving the full benefit of indexation on account of cost of improvement amounting to Rs. 25, 82, 368/-, as claimed by the appellant.
1.1 That the learned Commissioner of Income Tax (Appeals) has further, failed to appreciate the fact that the assessee - appellant had duly furnished the requisite documents/ evidences in order to establish that she is eligible to claim exemption under section 54 of the Act and as such, the enhancement so made by learned CIT (A), wherein, the exemption under section 54 of the Act, was denied by learned CIT (A) is contrary to material available on record and is misconceived and misplaced in law and should be deleted, as such.
1.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the basic fact that the appellant had acquired a right to get a particular flat from the builder and substantial payments were also made by assessee - appellant and further, while denying the exemption under section 54 of the Act, learned CIT (A) has given factually incorrect findings and also findings contrary to material available on record and thus, the said addition needs to be deleted, as such.
1.3 That further, the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining the denial of full benefit of indexation on account of cost of improvement amounting to Rs. 25, 82, 368/- as claimed by the assessee - appellant, and in doing so, the learned CIT (A) has ignored the documentary evidences/ materials filed by assessee - appellant with respect to the said cost of improvements and thus, the addition so sustained by learned CIT (A) is based on extraneous and irrelevant considerations and should be deleted, as such.
1.4 That the learned Commissioner of Income Tax (Appeals) has further erred in placing reliance on the judgments which are wholly inapplicable to the facts of the case of the appellant assessee and further, the enhancement so made by learned CIT (A) is also contrary to statutory and judicial discipline and should be deleted, as such.”
3. Facts of the, in brief, as emanating from the order of the Assessing Officer, as observed by the ld. CIT(A) are reproduced hereinbelow:
“As against the returned income of Rs.3,95,858/- the income was assessed u/s 143(3) vide order dated 20.12.2011 at an income of Rs.25,59,480/- after making additions of Rs.21,63,617/-. The Assessee is in Appeal against the additions. Ground No. 1 to 7 All the Grounds of Appeal are taken up together. The Observations of the Assessing Officer in the Assessment Order are reproduced in Para 8, the Submissions of the Appellant are reproduced in Para 9 and the Decision alongwith the reasons appear under Para 10.
Observations of the Assessing Officer The Assessing Officer has inter alia observed as under in the Assessment Order u/s 143(3) dated 20.12.2011 " Return of income for A.Y. 2009-10, declaring total income of Rs. 3,95,858/- was filed on 23/02/2010 vide acknowledgement no. 108573990230210. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as Act) on 23.08.2010.
The case was selected for scrutiny. Accordingly notice u/s 143(2) of the Act, was issued on 26.08.2010 which was duly served upon the assessee. In response to said <§ subsequent notices Shri Anil Kumar, Accountant, AR, duly authorized on behalf of the assessee appeared for hearing from time to time and filed requisite information and documents which have been duly placed on record.
The assessee has declared long term capital gain under the head "income from long term capital gain" of Rs.3,31,471/- and interest income under the head "income from other, sources" of Rs. 84,249/- totaling to Rs.4,15,720/-. Out of this assessee has claimed deduction u/s 80C & 80D of Rs. 14,214/- and Rs. 5,648/- respectively leaving thereby taxable income of Rs.3,95,858/-. The main issue involved in this case is that during the year under assessment assessee has sold a property for consideration of Rs. 77,25,000/-. Accordingly, assessee was asked to file the details in this regard. Computation of income as well as long term capital gain as submitted by the assessee are reproduced here as under: Since, the above computation was not in accordance with I.T. Act, a questionnaire was issued on 16.09.2011 requiring the assessee to file following details:
Copy of latest Wealth Tax Returns. In case of discontinuation, 1. please explain the reason of the same. As per Wealth Tax Return for A. Y2000-01, the value of house at 2.
Ghaziabad is taken at Rs.6,07,600/-. This includes indexed cost of purchase as well as construction on that date. Accordingly, you are requested to rework the cost of acquisition. Also file statement of affairs of the assessee for A. Y.2008-09 3. and 2009- 10. File evidence in support of construction carried out during the 4. F.Y 2007- 08. Also file calculation of deduction/ exemption claimed u/s 54F of 5. the I. T.Act.
The reply to the above queries were filed by the AR on 09.11.2011 which is also produced here as under:
"1. The assessee is not having any taxable wealth therefore the Wealth Tax return is not being filed by her. The cost of land and the building was Rs. 607600 as per the 2. assessment order of the Wealth Tax Officers Circle-24(l) (copy at page no. 2) the same has accordingly been indexed. The assessee does not prepare any statement of affairs.
The assessee drew a sum of Rs.25000/- on 09.04.2007and another 4. sum - of Rs. 1,00,000/- on 23.04.2007 to make the saleable because it was an old house and could not be sold as such therefore the sum of Rs. 1,25,000/- was spent on its renovation to make it saleable. Copy of pass book is at page no. 3 to 5. The calculation of deduction/exemption u/s 54F is as per return 5. Filed in your office copy of the computation is as page no. 6."
The queries at point 2, 4 and 5 are having impact on computation of taxable capital gain and are discussed one by one.
The cost value shown in the Wealth Tax Return and assessed by the AO represents the value as on last date of the financial year i.e. the value shown at Rs. 6,07,600/- in the wealth tax return for A.Y 2000-01 represents the cost of land as well as construction cost (including appreciation) as on 31.03.2000. Accordingly, this will be taken as cost as on 01.04.2000 and for working cost of acquisition for F.Y 2008-09 relevant to A.Y 2009-10, same will be appreciated by considering base index of 389 for F.Y 2000-01 and that for A.Y 2009-10 at 582. Assessee has claimed cost of improvement amounting to Rs. 1,25,000/- during F. Y 2007-08 but after specific query no evidence has been filed except that assessee has withdrawn the amount of Rs. 1,00,000/- and Rs. 25,000/- on 23.04.2007 and 09.04.2007 respectively, withdrawal from the bank is not an evidence in the absence of bills of building material or labour cost etc. In view of this improvement cost shown at Rs.1,25,000/- as claimed by the assessee is disallowed. Though, assessee has claimed the exemption from capital gain u/s 54F, however computation in this regard has been filed even after specific query raised vide questionnaire dated 16.09.2011. Assessee has only filed date-wise investment in residential house at TDI. To make the computation for eligible deduction u/s 54F the relevant portion of section 54F is reproduced here as under: "54F: [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- if the cost of the new asset is not less than the net consideration (a) in respect of the original asset, the whole of such capital gain shall not be charged under section 45; if the cost of the new asset is less than the net consideration in (b) respect of the original asset, so much of the capital gain as bears to the with capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged u/s 45”.
4. The ld. CIT(A), in fact, confirmed the action of the Assessing Officer and at the same time withdrew the exemption u/s 54F of the Act and the Assessing Officer was directed to determine the long term capital gain in view of the decision of the ld. CIT(A) accordingly, against which the assessee is in appeal before me.
I have heard the rival submissions and have perused the relevant material on record. The house in Ghaziabad was sold on 29.05.2008 for Rs. 77,25,000/- is not under dispute. The house was purchased on13.08.1986 for Rs. 97,365/- and there was improvement in the year 1990 to the extent of Rs. 5,10,235/- making total cost at Rs. 6,07,600/- apart from the addition made on 11.4.2003 and 30.4.2007 for Rs. 1,60,000/- and Rs. 1,25,000/- but indexed cost of the same was worked out by the assessee as submitted before the authorities below at Rs. 25,82,368/- as per details below: Date Cost of Acquisition Indexed cost of acquisition a) 13.8.1986 97,365/- 4,04,760/- b) 1990 5,10,235/- 18,44,451/- c) 11.4.2003 1,60,000/- 2,01,123/- d) 30.4.2007 1,25000/- 1,32,033/- 25,82,367/- Say Rs. 25,82,368/-. The mistake, in fact, done by the Assessing Officer and the ld. CIT(A) is that the cost of acquisition as on 13.8.1986 and in the year 1990 amounting to Rs. 97,365/- and Rs. 5,10,235/- totaling to Rs. 6,07,600/- was taken to be the indexed cost of acquisition which, in fact, is not the case and the ld. DR could not controvert the same after the arguments of the ld. counsel for the assessee and after the query from the bench. In fact, the indexed cost of acquisition should be at Rs. 25,82,368/- and accordingly, the long term capital gain has to be computed accordingly. It is directed to the Assessing Officer to act upon accordingly.
As regards the second issue, for the claim of deduction u/s 54 of the Act, the assessee had invested the amount out of sale of residential property in purchasing a built up property in Kundli, Haryana and deduction u/s 54 of the Act was to be claimed which by mistake was written as section 54F of the Act. The assessee realized the mistake and accordingly rectified the mistake in the submissions made before the ld. CIT(A), who, in fact, did not agree to the submissions of the ld. counsel for the assessee and who withdrew the exemption u/s 54F of the Act and accordingly directed the Assessing Officer to compute long term capital gain.
In fact, correct income has to be computed and correct income has to be given under the Income tax Act is the scheme of the Act and spirit of law and in this regard, the assessee having purchased a property in Kundli for which necessary papers were adduced before the ld. CIT(A) and also before us, which could not be controverted by the ld. DR and, therefore, in all fairness, and in the facts and circumstances of the case, the Assessing Officer is directed to allow the exemption u/s 54 of the Act as claimed before the ld. CIT(A) and accordingly, the addition so made is directed to be deleted. Grounds raised by the assessee are allowed.
In the result, the appeal of the assessee in is allowed. The order is pronounced in the open court on 16.10.2017.