MR.ZAMIR MIRZA ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH 'B' BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA No.98/Bang/2017 (Asst. Year 1996-97) Shri Zamir Mirza, Flat No.4A, IV Floor, Mayfair Apartments No.31, Berlie Street, Langford Town, Bengaluru. . Appellant PAN – ACAPM2850L. Vs. The Dy. Commissioner of Income-tax Circle-1(1), Bengaluru. . Respondent Appellant by : Shri K.Y Ningoji Rao, C.A Respondent by : Smt. Padmameenakshi, JCIT Date of Hearing : 26-09-2017 Date of Pronouncement : -10-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER:

This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals) -7, Bangalore dated 2/9/2016 for asst. year 1996-97 for upholding the order of

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assessment passed u/s 143(3) r.w.s 260A of the Income-tax Act, 1961 (in short ‘the Act’) dated 27/3/2014. PETITION FOR CONDONATION OF DELAY IN FILING APPEAL FOR ASST. YEAR 1996-97 BEFORE THE TRIBUNAL 2.1 Along with the appeal memo in Form No.36, the assessee has filed a petition seeking condonation of delay of 57 days in filing this appeal before the Tribunal, accompanied by an Affidavit dated 13/1/2017 sworn to by the assessee. In this Affidavit, the assessee has put forth the following reasons for delay of 57 days in filing this appeal for asst. year 1996-97.

“2. That the said appeal is being filed by me out of the date specified u/s 253(3) of the Income Tax Act, 1961 and I have this day made an application u/s 253 (5) of the Act seeking condonation of delay caused; 3. That the delay in filing the said appeal is due to the following reasons: a. The said assessment was challenged on appeal before the Commissioner of Income Tax (Appeal) 7, Bengaluru who by his order dated 2.9.2016 in ITA No.298/CIT(A)-7/BR/2014-15, dismissed the Appellant's appeal on ground that as against the appellant's right to get deduction of Rs.74,80,000/- u/s 54 the AD has accepted the amount of exemption to the extent of Rs.77,50,000/- with a

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finding of fact that the same is the exemption sought in the return of income filed by the appellant; b. The said finding of fact and the said Appellate Order being erroneous, the Appellant on being advised, sought rectification of mistake u/s 154(2)(b) of the Act vide his application filed on 7.11.2016 before the First Appellate Authority with the belief and hope that the First Appellate Authority will grant the sought relief at the earliest. Though the Appellant made repeated requests, First Appellate Authority has so far not disposed off the said application for rectification; c. It is under these circumstances the Appellant could not file the accompanying appeal before the Hon'ble Appellate Tribunal within the time specified in Section 253 (3) of the Income Tax Act, 1961, which according to the Appellant ought to have been filed on or before 27th day of November, 2016. Thus a delay of about 57 days is caused. d. Therefore the appellant prays that the Hon'ble Appellate Tribunal may, please, condone the delay caused till the day of filing the said appeal and to admit the said appeal under section 253(5) of the Income Tax Act, 1961.

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2.2 We have heard the rival contentions and perused and carefully considered the material on record. Taking into account the facts and circumstances of the case, the reasons cited in the Affidavit for the delay in filing the appeal and respectfully following the principles laid down by the Hon’ble Apex Court in the case of MST Katiji & Others (167 ITR 467) (SC) for considering matters of condonation of delay, we are of the opinion that this is a fit case for condonation of 57 days in filing this appeal before the Tribunal and do so. Consequently, this appeal is admitted for adjudication. 3. Briefly stated, the facts of the case relevant to this appeal are as under:- 3.1 The assessee had sold a property No:1/13, Albert Street, Richmond Town, Bangalore for a consideration of Rs.2,11,62,500/- vide sale deed dated 11/9/1995 and claimed exemption of Rs.77,50,000/- u/s 54F of the Act on the ground that an amount of Rs.57,50,000/- was deposited in the specified capital gains scheme and Rs.20 lakhs was paid as advance to one Shri Surat Prasad for purchase of a residential house as per agreement dated 2/8/1995. The assessment was completed u/s 143(3) of the Act vide order dated 30/8/1996, wherein the AO accepted the income as returned by the assessee. Subsequently, by an order u/s 154 of the Act dated 30/3/2001, the AO withdrew the exemption granted to the assessee

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u/s 54F of the Act to the extent of Rs.20 lakhs advanced to Shri Surat Prasad as the agreement was rescinded and the assessee purchased another property using the very same amount. The assessee filed an appeal challenging the AO’s rectification order u/s 154 of the Act dated 30/3/3001, which was dismissed by the ld CIT(A). On further appeal by the assessee, the co-ordinate bench of ITAT, Bangalore Bench vide order in ITA No.22/Bang/2004 dated 7/1/2006 allowing the assessee partial relief of Rs.6,67,493/- after accepting the calculation of proportionate amount which bears the same ratio as the cost of new asset bears to the net consideration as per section 54F of the Act. The assessee filed an M.P No.48/Bang/2006 in respect of the aforesaid order of the Tribunal (Supra), which was disposed vide order dated 2/5/2006. In its order in the M.P No.48/Bang/2006, the Tribunal dismissed the miscellaneous petition and thereby rejected the assessee’s claim for exemption u/s 54 instead of sec. 54F of the Act on the ground that it was the assessee himself who claimed exemption u/s 54F of the Act, which was accepted by the AO and not challenged by the assessee in the appeal filed against the said order of assessment. 3.2 Aggrieved by the orders of the Tribunal for asst. year 1996-97 dated 7/1/2006 and 2/5/2006, the assessee went up in further appeal before the Hon’ble Karnataka High Court. The Hon’ble High Court in its order in ITA No.1090/2006 dated 7/8/2012, remanded the matter of the assessee’s claim for exemption u/s 54 of the Act to the file of the AO for fresh consideration. The operative portion of the Hon’ble High Courts decision from the framing of the substantial

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question of law to the directions issued to the AO in respect of consideration of the assessee’s claim for exemption u/s 54 of the Act at paras 4 to 8 thereof are extracted hereunder:-

"4. The following substantial question of law has been formulated in the memorandum of appeal and on reconsideration of the substantial question of law, following substantial question of law is framed for consideration: "Whether the AO while passing rectification u/s 154 should have to give benefits to assessee available u/s 54, even though there is no claim made by the assessee to that effect"? 5. Learned counsel for the appellant submits that, the Appellant Tribunal has committed a mistake in declaring that the assessee is entitled to benefit u/s 54, but while computing the benefit has followed the section 54F. Thus states that, it has resulted in wrong computation of the benefit u/s 54. 6. The Learned counsel for the appellant further submitted that, the AO in the course of rectification order assumes that the amount invested in the capital gain account scheme, has to be given due deduction while computing the benefit, whether or not assessee makes an application to that effect and also when the

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assessee has made wrong calculation and claims lesser benefits, it is the duty upon the AO to grant benefit entitled to under law. 7. The Learned counsel for the respondent strenuously submitted that, the fact that whether the assessee had invested Rs.20,00,000/- in the capital gain account within the prescribed time is the fact to be considered and also it is further to be found out that, whether the assessee fulfills all the requirements of section 54 to claim benefits under the said section, the said aspect requires further investigation of the facts by the AO. 8. Keeping in view all the submissions made at the bar, the order of the Tribunal is set aside. The matter is remanded to AO for fresh consideration. The AO shall also keep in mind the decision of this Court in Fathima Bai vs. Income Tax Officer reported in (2009) 32 DTR (Kar) 243 with respect of deposit of Rs.17,40,000/- in the capital gain account scheme as to whether it is within the stipulated period, The AO shall consider the claim of the assessee for deductions u/s 54 as required under law.”

3.4 Subsequent to the aforesaid order of the Hon’ble High Court of Karnataka, the AO once again completed the order of assessment for

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asst. year 1996-97 u/s 143(3) r.w.s 260A of the Act vide order dated 27/3/2014 by accepting the income of Rs.91,18,563/- as returned by the assessee in the return of income filed for the year under consideration. On appeal, the CIT(A)-7, Bangalore dismissed the assessee’s appeal vide the impugned order dated 2/9/2016 for asst. year 1996-97. 4.0 Aggrieved by the order of CIT(A)-7, Bangalore dated 2/9/2016 for asst. year 1996-97, the assessee has filed this appeal wherein it has raised the following grounds:-

“1. The impugned order of the Commissioner of Income Tax (Appeals) - 7, Bengaluru and that of the Assessing Officer are liable to set aside in so far as they incorrect, improper, irregular, opposed to facts and circumstances of the case, opposed to the law and made in defiance of the order of the Jurisdictional High Court.. 2. The Learned Commissioner of Income Tax (Appeals) erred in upholding the act of the Assessing Officer in denying to grant the exemption of Rs.74,80,000/- u/s 54 (2) of the Act, acting in defiance of the Hon'ble High Court of Karnataka. 3. The Learned Commissioner of Income Tax (Appeals) erred in upholding the impugned order of the Assessing Officer on the mistaken fact that the Assessing Officer has allowed the deduction of Rs.77,50,000/- u/s

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54 of the Act as claimed by the Appellant in his Return of Income on 30.8.1996. 4. The Learned Commissioner of Income Tax (Appeals) erred in dismissing the Appellant's appeal challenging the impugned order of the Assessing Officer who failed to grant the exemption of Rs.74,80,000/- u/s 54 (2) of the Act acting in defiance of the Hon'ble High Court of Karnataka. 5. The Learned CIT (Appeals) erred in dismissing the Appellant's appeal challenging the impugned order of the Assessing Officer with complete disregard to the facts of the case, applicable law and to the binding decision of Jurisdictional Hon'ble High Court of karnataka.”

5.0 Grounds 1 and 5 5.1 In these grounds (Supra), the assessee challenges the orders of the authorities below, i.e, AO/CIT(A) as being incorrect, improper, irregular, opposed to the facts and circumstances of the case and made in defiance to the order of the Hon’ble Karnataka High Court. It is further contended that the ld CIT(A) erred in upholding the impugned order of the AO in complete disregard to the directions issued in the binding decision of the Hon’ble High Court of Karnataka. 5.2.1 We have heard the rival contentions of the ld AR for the assessee and the ld DR for Revenue and carefully perused the directions issued by the Hon’ble High Court of Karnataka in its order

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in ITA No.1090/2006 in the assessee’s case for asst. year 1996-97 (extracted supra at 3.3 of this order) while remanding the assessee’s claim for exemption u/s 54 of the Act to the file of the AO for fresh consideration. In this regard, we have also carefully perused the order of assessment for asst. year 1996-97 passed u/s 143(3) r.w.s 260A of the Act vide order dated 27/3/2014 and the impugned order of the ld CIT(A) dated 2/9/2016. 5.2.2 The order of assessment passed by the AO u/s 143(3) r.w.s 260A of the Act vide order dated 27/3/2014 reads as under:- “ASSESSMENT ORDER The assessee has filed the Return of Income for the A.Y. 1996-97 on 30.08.1996 declaring an income of Rs. 91,18,5681-. The return was processed u/s 143(1) of Income Tax Act, 1961. The scrutiny assessment u/s. 143(3) was completed on 17.02.1999 by accepting the return of income filed. Subsequently, it was noticed that the assessee has mode a wrong claim of Rs. 20,00,0001- u/s. 54(2) of the I. T. Act. Accordingly, a notice u/s 154 was issued on 14.08.2000 and the order u/s. 143(3) was modified on 30.03.2001 by adding the wrong claim made by the assessee. Aggrieved by the order passed u/s 154, assessee filed an appeal before CIT(A). The CIT(A) has dismissed the assessee's appeal. Further to this, the assessee preferred an appeal before ITAT, where the ITAT has partially allowed the appeal. Aggrieved by the decision of the ITAT, the assessee

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preferred an appeal before the High court, who in turn allowed The assessee 's appeal and remanded the matter back to the Assessing Officer for fresh consideration of allowing deduction of u/s. 54 instead of 54F claimed by the assessee. As per the directions of the High Court, re-assessment proceedings were initiated by issue of notice to the assessee. The case has been heard on different dates, the assessee has furnished the details as called for during The course of hearings. After examining the details furnished, and discussing the case with the AR, the assessment is completed by accepting the original return filed by the ossessee. Accordingly, the assessment is completed as under:

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5.2.3 In our considered view, a perusal of the order of assessment dated 27/3/2014 for asst. year 1996-97, as extracted above, clearly establishes the assessee’s averment that the AO has passed this order brazenly, ignoring the binding decision of the Hon’ble Karnataka High Court for fresh consideration of the assessee’s claim for exemption u/s 54 instead of u/s 54F of the Act as originally claimed. We find that there is not even a whisper in the order of assessment to show that the AO complied with the binding decision of the Hon’ble High Court of Karnataka in considering the assessee’s claim u/s 54 of the Act and adjudicating thereon in the light of the Hon’ble Courts observations/directions in this regard. The ld CIT(A)’s finding in the impugned order to the contrary; that the AO has complied with the directions of the Hon’ble High Court (Supra) in considering the assessee’s claim for exemption u/s 54 of the Act; is, in our view, not borne out from a plain reading of the order of assessment dated 27/3/2014 for asst. year 1996-97 (extracted Supra) and appears to be more a figment of his imagination based on nonexistent assumptions. In this view of the matter, we are of the considered opinion that the order of assessment for asst. year 2006- 07 passed by the AO u/s 143(3) r.w.s 260A of the Act dated 27/3/2014 is to be set aside, as evidently the AO has not followed the Hon’ble High Courts directions for consideration of the assessee’s claim for exemption u/s 54 of the Act in accordance with law and the Hon’ble courts observations in this regard. We accordingly set aside the impugned orders of the authorities below i.e of the AO/CIT(A), and remand the issue of consideration of the assessee’s claim for

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exemption us/ 54 of the Act to the file of the AO for fresh consideration and to pass a reasoned, speaking order thereon in accordance with the directions of the Hon’ble Karnataka High Court in its order in ITA No.1090/2006 dated 7/8/2012 (extracted Supra at para 3.3 of this order) after affording the assessee adequate opportunity of being heard in the matter and to file details/submissions in this regard. We hold and direct accordingly. Consequently, the assessee’s grounds at S.Nos.1 and 5 are allowed for statistical purposes. Grounds 2 to 4 – on Merits 6. 6.1 Since we have set aside the impugned orders of the authorities below for asst. year 1996-97 and remanded the matter of the assessee’s claim to exemption u/s 54 of the Act to the file of the AO for fresh consideration in accordance with the directions of the Hon’ble High Court of Karnataka in its order in ITA No.1090/2006 dated 7/8/2012 (Supra) we deem that it is not appropriate for us to examine and adjudicate these grounds no.2 to 4 raised on the merits of the issue which will now be under fresh consideration before the AO. 7. In the result, the assessee’s appeal for asst. year 1996-97 is allowed for statistical purposes as indicated above. Order pronounced in the open court on October, 2017. Sd/- Sd/- (SUNIL KUMAR YADAV) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated : /10/2017 Vms

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Copy to :1. The Assessee 2. The Revenue 3.The CIT concerned. 4.The CIT(A) concerned. 5.DR 6.GF By order Sr. Private Secretary, ITAT, Bangalore