MAJEEDA SHAHIDA BEGUM,CHENNAI vs. ITO INTERNATIONAL TAXATION 1(1), CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

1. In this appeal filed by the assessee, directed against an order dated 01.09.2017 of Commissioner of Income-tax (Appeals)- 16, Chennai, it has taken altogether eight grounds of which grounds 1, 7 & 8 are general, needing no specific adjudication.

2. Through its grounds 2 to 4, assessee assails disallowance of a claim made by her u/s.54F of the Income Tax Act, 1961 (in short ’the Act’’) on long term capital gains. Through its grounds 5 & 6, assessee assails the order of the ld. Commissioner of Income Tax (Appeals) in so far as he declined to admit her claim that the land sold which gave rise to the gains was an agricultural one and hence outside the ambit of levy of capital gains tax.

Facts apropos are that assessee had filed her return for the 3. impugned assessment year disclosing income of �1,27,63,670/-.

During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had claimed deduction of �2,40,00,000/- under Section 54F of the Act from the gains arising out of sale of 4.84 acres of land at survey Nos.59/2A, 2B, 2C, 2D, 2E, 60/1,2,3,4 at No.127 Panruti Village, Sriperumpudhur Taluk. Total sale consideration came to �3,87,20,000/-. The deduction was claimed for investment in a new residential house. Ld. Assessing Officer required the assessee to produce evidence in support of the claim of deduction u/s.54F of the Act. Assessee’s ld. Authorised Representative thereupon stated that the records furnished to him by his client were lost due to Chennai floods and they were unable to retrieve it. However, thereafter assessee did produce copy of building sanction plan, proof for payment of brokerage and commission �7,75,000/-, proof for purchase of material for of construction etc.

On analyzing the above documents, ld. Assessing Officer noted that there were certain lacuna which were listed by him as under:-

2 .In the copy of property receipt furnished, it has been noticed that the assessee has stated to have paid Rs.632/- for the property tax for the period 2014-15 and it is not reasonable that for the building measuring 3398 Sq.ft, only an amount of Rs.632/- is determined as property tax’’.

‘’During the course of Inspection on 23.02.2015, the undersigned has met one Mr. Ramamoorthy, Manager, Suriyadevi Complex, who has located and identified the land purchased by the assessee Mrs. Majeeda Shahida Kamaludin Begum. It has been noticed that the landed property purchased by the Assessee i.e, land to the extent of 8280 Sq.ft. as per Patta New Survey No.44/8B2 has no building structure as claimed by the assessee vide building plan submitted to this office The land is situated diagonally opposite to the Car Company M/s. Renault Nissan and the land consist of bushes & old trees and in the right side, there exists one small shed measuring 60 to 70 sq.ft. and it seems like bathroom/toilet/gen-set room. There has been no evidence of using this land for any purpose- and it was kept unused for a long time. On enquiry also, it is ascertained that this land was not used by anybody and it was locked with rusted grilled front-gate. In view of this, the undersigned is satisfied that the land (where the building stated to have been built) has no structure at all and it has areas covered under bushes and trees and no area has evidence of habitable condition’’.

Ld. Assessing Officer then considered the photos of the construction done by the assessee and came to the following conclusion:-

‘’The assessee's claim that the Contractors have constructed a caretaker quarter, compound wall and laid foundation for the new bungalow is also not correct when the First hand information revealed that there is one small room measuring 70 to 80 Sq.ft which also seems to be not constructed recently and it has also been ascertained that it was not in habitable condition. A building, in order to be habitable, is ordinarily required to have minimum facilities like a washroom, kitchen. living room, electricity, sewerage etc. One could not put up sheds for use without basic living amenities and claim that the structure constructed is a "house". Therefore, one small room measuring 70 to 80 sq.ft. existed in the land could not be considered as house. The pictures shown above are the clear indicators to arrive at a conclusion that the assessee has not constructed any building within the time limit specified in the section’’.

He thus denied the deduction claimed by the assessee u/s.54F of the Act and completed the assessment.

Aggrieved, assessee moved in appeal before ld. 5.

Commissioner of Income Tax (Appeals). Apart from assailing the disallowance of claim made u/s.54F of the Act, assessee also preferred a fresh claim stating that the asset sold, which gave to the gains was not a capital asset since it was an agricultural land. As per the assessee, before the ld. Assessing Officer, she was unable to properly present the facts and had failed to make the claim that land sold was agricultural in nature. Assessee also furnished the following records before the ld. Commissioner of Income Tax (Appeals).

1. Xerox copy of the certificate issued by the HQ Deputy Tahsildar, Sri perumbudur.

Contention of the assessee was that the land which was sold was agricultural in nature and so proved by the revenue records. Reliance was placed on the judgment of Hon’ble Jurisdictional High Court in the case of Principal CIT vs. Mansi Finance Chennai Ltd, 388 ITR 514 and Mrs. Sakunthala Vedachalam & Mrs. Vanitha Manickavasagam vs. ACIT, 369 ITR 558. Assessee also submitted before the ld. Commissioner of Income Tax (Appeals) that proceedings before the latter were to be construed as an extension of the assessment proceedings and he had wide powers to entertain such claim.

However, ld. Commissioner of Income Tax (Appeals) refused to consider the fresh claim of the assessee and held as under:-

‘’The appellant fresh claim in terms of Rule 46A of the Income Tax Rules, 1962 is not maintainable on the ground that appellant was not prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer. Therefore additional ground of appeal made by the appellant is dismissed’’.

Ld. Commissioner of Income Tax (Appeals) also upheld the order of the ld. Assessing Officer, denying the claim of deduction made u/s.54F of the Act.

According to him, though the assessee did not prefer such a claim before the ld. Assessing Officer, when there were irrefutable documents to show that the land sold was agricultural, ld. Commissioner of Income Tax (Appeals) ought have adjudicated the issue. According to him, the question of deduction claimed u/s.54F of the Act would arise only if the land sold, which gave rise to the gains was not agricultural.

Per contra, ld. Departmental Representative strongly 7.

supporting the order of the ld. Commissioner of Income Tax (Appeals) submitted that assessee could not show, what prevented her from claiming the nature of the land to be agricultural before ld. Assessing Officer. According to him, ld. Commissioner of Income Tax (Appeals) was justified in rejecting a fresh claim made by the assessee.

We have considered the rival contentions and perused the 8. orders of the authorities below. It is not disputed by the assessee that nature of land which was sold giving rise to the gains was never an issue before ld. Assessing Officer nor raised by her before him. It is also true that assessee herself had computed capital gains from the sale of such property and claimed deduction u/s.54F of the Act in her return of income. Nevertheless, assessee did prefer a claim before the ld. Commissioner of Income Tax (Appeals) that the land sold was agricultural in nature and would not be capital asset within the meaning of Section 2(14) of the Act. In support of this assessee placed before ld. Commissioner of Income Tax (Appeals) a number of records to substantiate such claim. Ld. Commissioner of Income Tax (Appeals) declined to admit the claim made by the assessee, citing a reason that Rule 46A did not permit admission of additional evidence, due to assessee’s failure to produce the evidence before the ld. Assessing Officer . However, a reading of the assessment order clearly show that assessee’s representative had mentioned loss of documents provided by the client to him in the Chennai floods. Letter dated 29.12.2015, filed by the ld. Authorised Representative before ld. Assessing Officer which is relevant and it is reproduced hereunder:-

‘’We are in receipt of your notice dt.l1.12.2015 and noted the contents and in that connection, we wish to state as follows: We have received documents/records from the client, due to recent floods our office is worst affected. We are recovering all documents/records using room heaters/ hot air blowers etc. We are facing uphill task since our office is submerged with 5 feet water for two days. We request you to give us two week's time to recover the documents/records. We regret the inconvenience caused to you"

If the land sold by the assessee was indeed agricultural in nature, gains arising from such sale would not be exigible for capital gains tax, since agricultural land is not a capital asset under Section 2(14) of the Act. We are of the opinion that the question whether the land sold was agricultural or not was a fundamental issue and this claim ought not have been brushed aside by the ld. Commissioner of Income Tax (Appeals), citing Rule 46A of the Income Tax Rules, 1962. When a particular receipt is not taxable under the Act, it would not become taxable solely for a reason that an assessee returned such income on a wrong understanding of law. Whether a receipt is taxable is to be determined by testing it against the provisions of the Act. Considering the facts and circumstances, we are of the opinion that assessee’s claim that land sold was agricultural in nature requires consideration. We therefore set aside the orders of the lower authorities and remit the issue whether land sold by the assessee was agricultural or not and whether it was exigible to capital gains to the file of the Assessing Officer for consideration in accordance with law. Needless to say the question whether assessee’s claim u/s. 54F of the Act merited admission is kept open.

Order pronounced on Wednesday, the 11th day of July, 2018, at Chennai.