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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals) - 3, Chennai in dated 31.07.
2017 for assessment year 2009-10.
Shri Abhijit Bhandari, the assessee, was a principle shareholder of Royal Images Direct Marketing Pvt. Ltd. He has entered into a share purchase agreement along with other shareholders, sold 70% of shareholding on 05.05.2007 for Rs. 22,42,72,478/-. In the return filed for assessment year 2008-09, he claimed deduction u/s. 54 towards purchase of flats bearing nos 607 and 612 located at Olympus Building, Altamount Road, Cumballa Hills, Mumbai. This claim was accepted in the original assessment order dated 22.12.2010. Thereafter, the said assessment was re-opened and completed u/s. 143(3) r.w. 147 on 31.03.2014, again allowing the claim u/s. 54F.
Thereafter, the CIT set aside the assessment order passed u/s. 143(3) r.w.
147 u/s. 263. The assessee challenged the order u/s. 263 before the Hon’ble High Court which allowed Writ Petition No. 11596/2060 and WMP No 9995/2060 dated 02.06.2017 of the assessee and set aside the order under
Thus, the order passed u/s. 143(3) r.w. 147 treating both flat nos. 607 & 612, supra, as a single unit has attained finality for assessment year 2008- 2.1 During this assessment year i.e. for assessment year 2009-10, the assessee sold certain shares for a consideration of Rs. 11,24,14,809/-. Out of the sale consideration, he invested in capital gain account scheme with bank of India at 6.1 crores and Rs. 40 lakhs towards purchase of property at Alibaug Taluka at Raigarh District, Maharashtra and claimed deduction u/s. 54F. The original assessment order passed u/s. 143(3) on 12.12.2011 travelled up to the Hon’ble ITAT, which has set aside the two issues to the file of the AO for re-examination. The relevant portion of the ITAT order is reproduced as under:
“After considering the remand reports and the order of the first appellate authority, we find that there is no discussion by the Assessing Officer about the issue of investment in capital gains accounts scheme amounting to Rs. 6, 10,00,000/- and Rs. 40,00,000/- and advance paid for the purchase of property. It means that the Assessing Officer has not given any comments regarding this issue. Being so, in our opinion, it is appropriate to remit this issue back to the Assessing Officer, as there is violation of Rule 46A. Accordingly, we remit the issues for fresh consideration with regard to investment/n capital gains accounts scheme and the advance paid for the purchase of property totalling at Rs. 6,50,00,000/- back to the Assessing Officer, as he has only investment in flat Nos. 607 & 612, Altamount Cumballa Hills, for which the assessee has already claimed deduction u/s. 54F for assessment year 2008-09 and allowed by the Assessing Officer in the assessment year 2008-09. Therefore, the same cannot be considered once again in the assessment year 2008-09. This issue to be decided afresh by the Assessing Office.”
2.2 As directed by the Hon’ble ITAT, the AO found the two set aside issues are in order but again disallowed the claim u/s. 54 and also the investment made towards purchase of property at 40 lakhs. Thus, the AO made an addition of Rs. 6.5 crores under 143(3) r.w.
Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) held that “section 54F has been amended and introduced the concept of investment in one residential house by the Finance Act, 2014 w.e.f. 1.4.2015. In my considered opinion, this amendment is applicable from the AY 2015-16 onwards. The case of appellant pertains to AY 2009-10. Therefore, in my opinion, appellant has taken the benefit of existing provision of Section 54F pertaining to AY 2009-10. Further, I found the arguments of the learned AR with regard to exceeding the mandate given by the ITAT by the AO have substance. The two issues set aside by the Hon’ble ITAT have been examined and found in order. Beyond that, no direction was given by the ITAT. In my considered opinion, the AO should have confined to two set aside issues and completed the assessment adhering to judicial discipline. In view of the above discussions, I hold that the contentions raised by the learned AR have merit. Therefore, I direct the AO to allow the claim u/s 54F and delete the addition of Rs.6,50,00,000/-. The grounds of appeal taken by the appellant are allowed.”
Aggrieved, the Revenue filed this appeal with the following grounds:
“1. The order of the ld CIT(A) is contrary to law and facts and circumstances of the case. 2.1 The ld CIT(A) erred in deleting the disallowance of deduction u/s 54F claimed by the assessee to the tune of Rs.6.50 crores made by the AO. 2.2 The ld CIT(A) erred in holding that the AO should have confined only to two issues set aside by the Tribunal and disallowance made u/s 54F is not as per judicial discipline. 2.3 The ld CIT(A) ought to have noted that the disallowance u/s 54F was made by the AO in the original assessment u/s 143(3) itself and in the giving effect order to the directions of the Tribunal, the AC had, apart from focusing the set aside issues remitted by the Tribunal, considered the issue of deduction u/s 54F afresh and sustained the disallowance u/s 54F on merits. 2.4 The ld CIT(A) failed to note that the issue of disallowance u/s 54F is not a fresh one considered for the first time by the AO in the giving effect order, but it was already considered in the order u/s 143(3) and disallowance was made on a protective basis, since the same issue was diallowed in AY 2008-09 in assessee’s case in the order u/s 143(3) r.w.s 263 and the issue had not reached finality since against quashing of order u/s 263 by the Hon’ble Court, the Department had preferred Writ Appeal before the Hon’ble High Court. 3.1 The ld CIT(A) erred in holding that the amendment made by the Finance Act, 2014 w.e.f 1.4.2015, whereby reinvestment is permissible in respect of one residential house only, is not applicable to the current year, i.e., AY 2009-10. 3.2 The ld CIT(A) failed to appreciate that the proviso (a)(i) to Sec.54F was introduced by the Finance Act, 2000 w.e.f 1.4.2001 itself, which is applicable to the year under consideration, whereby if the assessee owns more than one residential house, other than the new asset, as on the date of transfer of the original asset, he becomes ineligible for deduction u/s 54F.
4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.”
4. The DR presented the case on the lines of the appeal and pleaded that the order of the CIT(A) may be set aside. Per contra, the AR submitted that the Hon’ble ITAT in its order in & 1900/Mds/2013 for assessment years 2008-09 & 2009-10 dated 08.04.2015 had remanded the matter to the Assessing Officer with specific direction to examine the issues for fresh consideration as to whether (1) the investment in capital gain account scheme of Rs. 610 lakhs and (2) the advance paid for the purpose of property at Rs. 40 lakhs, totalling 6.5 crores back to the AO, because he has not considered them but considered only the investment in flat nos. 607 & 612 on which the assessee has already claimed deduction in 2008-09 and has been upheld as a single unit, which has attained finality. The Assessing Officer having verified the matter and confirmed in para 6 of the impugned order that the claim of the assessee, he should not have travelled beyond the direction of the ITAT and disallowed the claim u/s. 54F, upholding that the assessee was in possession of two residential units viz, flat nos. 607 & 612 and hence it is not entitled for claim of deduction u/s. 54F. In view of that, the AR pleaded in upholding the order of the CIT(A)
We heard the rival submissions. It is clear from the order of the ITAT, supra, that the ITAT has clearly held that the investment in flat nos. 607 & 612 attained finality in 2008-09. Therefore, the same cannot be considered once again in the assessment year 2008-09 (sic, should be 2009-10). It is specifically directed the AO to verify the investment in the capital gains account scheme and for the purchase of property. The Assessing Officer having verified and specified that the claim is in order, as held by the CIT(A) should not have travelled beyond the order of the ITAT. Hence, the AO’s observation in para 7 of his order is invalid. Thus, the order of the CIT(A) does not require any interference. The Revenue’s appeal is dismissed.
In the result, the Revenue’s appeal is dismissed.
Order pronounced in Open Court on 11th April, 2018, 2018 at Chennai.