SMT NUPUR JOSHI,KOLKATA vs. ITO, WARD 44(1), KOLKATA, KOLKATA

ORDER Per M.Balaganesh, AM

Smt. Nupur Joshi A.Yr. 2009-10 3. The Ground No. 9 is with regard to charging of interest u/s 234B of the Act which is consequential in nature and does not require any specific adjudication.

5. The issues to be decided in this appeal are as under:- a) Whether the ld CITA and the ld AO were justified in treating the assessee as a ‘Resident’ instead of ‘Non-Resident’ in the facts and circumstances of the case. b) Whether the ld CITA was justified in upholding the addition made towards credit found in the bank account to the tune of Rs 71,00,000/- in the facts and circumstances of the case. c) Whether the ld CITA was justified in not giving any direction with regard to allowability of cost of construction of the property transferred by the assessee, in the facts and circumstances of the case. d) Whether the ld CITA was justified in upholding the action of the ld AO in denying the exemption u/s 54 of the Act in the facts and circumstances of the case. All these issues are interconnected and hence are taken up together and disposed off together for the sake of convenience.

Smt. Nupur Joshi A.Yr. 2009-10 no scope of adoption of value u/s 50C of the Act. However, the assessee had received Rs 2,21,00,000/- from the buyer of the property in tranches and deposited the same in his Vijaya Bank, Shyambazar Branch. The assessee also offered Rs 2,21,00,000/- as his sale consideration towards property in the return. The assessee also filed an objection before the ADSR-II, Kolkata on 17.6.2017 on the issue of not providing certificate of market value as required to be mentioned in the Deed of Conveyance. The ld AR informed that no reply was received in this regard by the assessee. The following facts pertaining to the property are relevant :- a) The assessee bought the property at No.45, Bhupen Bose Avenue , Kolkata in Financial Year 1999-2000 for Rs 55,54,000/- from four co-owners. b) The assessee undertook construction activities in the said property during Financial Year 2001-02 and total cost of construction as per registered valuation report was Rs 64,31,517/-. c) The assessee sold this residential property in April 2008 for Rs 2,21,00,000/- and consideration received from buyer and found credited in the Vijaya Bank, Shyambazar Branch, Kolkata are as below:- 16.4.2008 - 9,00,000/- 16.4.2008 - 9,00,000/- 16.4.2008 - 6,00,000/- 16.4.2008 - 9,00,000/- 16.4.2008 - 9,00,000/- 16.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 50,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 3

Smt. Nupur Joshi A.Yr. 2009-10 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 9,00,000/- 21.4.2008 - 3,00,000/- 21.4.2008 - 21,00,000/- 21.4.2008 - 6,00,000/- 21.4.2008 - 9,00,000/- ----------------- 2,21,00,000/- d) The sale consideration reflected in the sale deed was only Rs 1,50,00,000/-. There was no valuation made by the Stamp valuation authority for the subject mentioned property at the time of registration of the said sale deed. Hence there is no scope for determining the value u/s 50C of the Act.

6.1. The assessee considered the sale consideration at Rs 2,21,00,000/- and worked out capital gains accordingly. The assessee claimed exemption u/s 54F of the Act in the sum of Rs 1,33,93,317/-. During the course of assessment proceedings, the assessee filed a revised computation of income dated 23.3.2015. The assessee filed an affidavit during the course of assessment proceedings duly notarized on 27.3.2015 that she had received total sale consideration of Rs 2,21,00,000/- on sale of property.

7. The ld AO observed that the assessee ought to have shown this amount of Rs 2,21,00,000/- in the year 2008 and not in the year 2015 and accordingly rejected the plea of the assessee. Accordingly, he proceeded to treat the excess credit lying in the bank account over and above the sale consideration reflected in the sale deed amounting to Rs 71,00,000/- as unexplained cash credit u/s 68 of the Act.

7.1. The ld AO with regard to the claim of section 54F of the Act observed that the assessee vide original return claimed an amount of Rs 1,33,93,317/- and vide revised computation filed during the assessment, claimed Rs 1,48,33,019/- towards purchase of four flats bearing numbers 22A, 22B, 23A and 23B at Krishnachura Tower-2 , New 4

Smt. Nupur Joshi A.Yr. 2009-10 Town, Kolkata which the authorized representative of the assessee contended to be a Pent house. The ld AO observed that from the perusal of the allotment letter submitted during the course of hearing, it was seen that the different flats were purchased on different dates. Hence the same cannot be considered as a single unit and accordingly observed that exemption u/s 54F of the Act cannot be given to the assessee. He also observed that in order to give the claim of section 54F, one needs to understand the fact that an investment in residential flat has to be made from the proceeds of sale of property. However, it is clearly explained vide proviso to section 54F, that if an individual already has a residential property, the claim u/s 54F of the Act cannot be availed. He observed that the assessee is deriving income from house property and during the course of assessment proceedings, the AR of the assessee produced a municipal tax receipt of United Kingdom (Council Tax Bill 2007/2008 dated 24.10.2007) which was addressed to Mr N Joshi , 2, Narayratna Lane, West Bengal, Kolkata- 700004, India. The said tax bill was towards the property situated at 7, Fairlawns, Brownlow Road, London N11 2DH. This clearly states that the assessee already had a residential house in her possession in London, UK. Thus when the assessee is already in possession of a residential hosue, the question of claiming deduction u/s 54F of the Act for another property does not arise. With these observations, he stated that the assessee is not entitled for claiming deduction u/s 54F of the Act.

7.2. The ld AO computed the Long Term Capital Gains at Rs 1,50,00,000/- being the sale consideration reflected in the sale deed without giving any deduction towards cost of acquisition of the said property. The ld AO independently added a sum of Rs 71,50,000/- ( instead of Rs 71,00,000/-) as unexplained cash credit u/s 68 of the Act as explained supra.

Smt. Nupur Joshi A.Yr. 2009-10 8. Before the ld CITA, the assessee produced the photo-copy of the pay in slip on account of two cheques (i) Cheque No. 174501 dated 18.4.2008 drawn on Indian Overseas Bank, Posta Branch, Kolkata for Rs 50,00,000/- and (ii) Cheque No. 987962 dated 17.4.2008 drawn on Development Credit Bank , Shakespeare Sarani Branch, Kolkata for Rs 21,00,000/- aggregating to Rs 71,00,000/- , which according to the assessee is only sale proceeds of the property at 45, Bhupen Bose Avenue, Kolkata – 700004 received from the buyers of the property namely Ajoy Dalchand Gupta and Amit Dalchand Gupta residing at GUPTA House, Sanpara Railway Station, Navi Mumbai – 400905. It was pleaded that the plea of the assessee has been completely disbelieved by the ld AO without making any enquiry with the bankers to understand which would have made things clear that these amounts of Rs 71,00,000/- were given only by the buyers of the property. Alternatively, if the verification had been carried out with the buyers , whose address was very much available with the ld AO, things might have been very clear. Without resorting to any verification, the ld AO simply disbelieved the version of the assessee. The assessee produced the latest addresss of the buyers of the property before the ld CITA. Communication was also made with the ACIT, Circle 22(1), Piramal Chambers, 9th Floor, Jijibhoy Lane, Laibaug, Parel, Mumbai – 400012 who is the AO of the buyer of the property vide letter dated 29.8.2016 and delivered on 30.8.2016. Thereafter 4 remainders were sent to the address of the buyer of the property on 5.11.2016, 7.11.2016 , 10.11.2016 and finally on 15.11.2016 but unfortunately the buyers kept silent without responding to the communication of the assessee even after receiving the letters addressed to them for the reason best known to them.

8.1. It was further pleaded that the ld AO failed to deduct the cost of acquisition of the land together with construct cost of the building comprised of Ground plus 4 storied building having built up area of 6750 sq.ft, valuation of which is arrived as under:-

Smt. Nupur Joshi A.Yr. 2009-10 8.2. The assessee further pleaded before the ld CITA for grant of deduction towards cost of construction of the property that was sold, the valuation of which is supported by a registered valuation report for Rs 64,31,517/-.

8.3. The assessee also pleaded for claim of deduction u/s 54 of the Act and also stated that the claim was erroneously made u/s 54F of the Act in the return and in the assessment proceedings, as admittedly, the assessee had sold both land as well as the building to the buyer of the propery, which is quite evident from the sale deed , which is part of the records.

8.4. The ld CITA directed the ld AO to grant deduction towards cost of acquisition duly indexed subject to verification of the quantum thereon, but did not give any direction for grant of deduction towards cost of construction of the property. The ld CITA also upheld the action of the ld AO with regard to claim of exemption u/s 54F of the Act.

Smt. Nupur Joshi A.Yr. 2009-10

6. For that on the facts of the case, the Ld. CIT(A) was wrong that the status of the appellant is “Resident” in place of ‘Non-Resident Indian’ which is completely arbitrary, unjustified and illegal.

Arrival Date Departure Date No. of Days 15.6.2005 26.8.2005 (15+31+26) = 72 2006 to 2008 Did not come to India 30.5.2009 10.8.2009 (1+30+31+10) = 72 9.6.2010 3.10.2010 (21+31+31+30+3)= 116 11.6.2011 18.8.2011 (19+31+18) = 67

Smt. Nupur Joshi A.Yr. 2009-10 23.2.2013 28.2.2013 5 5.6.2014 21.7.2014 (25+21) = 46 2.6.2015 13.7.2015 (28+13) = 41 8.6.2016 29.6.2016 21 5.7.2017 25.7.2017 20 The year under appeal is Asst Year 2009-10 and hence the relevant date of arrival into India and departure from India during that year would be relevant. From the aforesaid table, it could be found that the assessee had not come to India during the Asst Year 2009-10 at all and hence retains the status of Non-Resident. We also find from the copy of the passport submitted by the ld AR that the same was issued to the assessee in London, clearly mentioning the place of birth as Calcutta and place of issue as London. The date of issue of passport was 2.5.2000. The date of expiry of the said passport is 1.5.2020. The File No. mentioned in the passport is LON/PPT/4020/12226/00. The address mentioned in the passport is as under:- Present Address 3, Wylye House, Odstock Road, Salisbury District General Hospital Permanent Address 7, Fairlans, Brownlow Road, London N 11 2DH.

All the aforesaid documents conclusively prove that the assessee is a non-resident Indian and hence the action of the ld AO in treating the assessee as a ‘Resident’ is unwarranted. The ld AR argued that the assessee being a non-resident , would inturn have a direct bearing on the merits of the additions made in as much as there is no avenue for the assessee to earn any undisclosed income in India. We hold that the explanation given by the assessee that the amount found credited in the bank account of the assessee in the sum of Rs 71,00,000/- represents sale consideration received by the 9

Smt. Nupur Joshi A.Yr. 2009-10 assessee on sale of property is to be believed in the absence of any other source for the assessee other than meager rental income. We are inclined to accept this argument of the ld AR that the credit of Rs 71,00,000/- represents sale consideration received on sale of subject mentioned property over and above the value mentioned in the sale deed at Rs 1,50,00,000/-. Accordingly the total sale consideration of property was Rs 2,21,00,000/- which has been rightly considered by the assessee for the purpose of computation of capital gains on sale of property. In any case, we find that the ld AO had erroneously added a sum of Rs 71,50,000/- instead of Rs 71,00,000/-. We hold that the assessee being a non-resident , could not have any other source other than the sale of subject mentioned property and the retnal income from yet another property which has been subjected to tax. In the instant case, the action of the assessee in depositing the two cheques received in the sum of Rs 71,00,000/- ( 50,00,000 + 21,00,000) in the same Vijaya Bank Account along with other sale proceeds of Rs 1,50,00,000/- comprising of various cheques, goes to prove the bonafide intention of the assessee in not hiding any amount from the eyes of the income tax department. There cannot be any other source for Rs 71 lacs for the assessee other than being part and parcel of sale proceeds of the property. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case of CIT vs Smt P.K. Noorjahan reported in (1999) 237 ITR 570 (SC) wherein it was held that :- 2. The appeals relate to the assessment years 1968-69 and 1969-70. The assessee is a Muslim lady who was aged about 20 years during the previous year relevant for the assessment year 1968-69. On 15-11-1967 she had purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was Rs. 34,628. On 27-11-1968, she purchased another 12 cents of land at Ernakulam and the total investment for this purchase was Rs. 25,902, the explanation of the assessee regarding the source of the purchase money for these investments was that the same were financed from out of the savings from the income of the properties which were left by her mother's first husband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the ITO who made an addition of Rs. 32,628 as income from other sources in the assessment year 1968-69 and an addition of Rs. 25,902 in the assessment year 1969-70. The said orders were affirmed in appeal by the AAC. The Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case, it was not possible for the assessee to 10

Smt. Nupur Joshi A.Yr. 2009-10 earn the amount invested in the properties and that by the stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected. Section 69 of the Income-tax Act, 1961 ('the Act') conferred only a discretion on the ITO to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the income as income of the assessee as soon as the latter's explanation happened to be rejected. On that view the Tribunal allowed the appeals of the assessee and cancelled the assessment made by the ITO. Thereafter the Tribunal at the instance of the revenue referred the question abovementioned to the High Court for its opinion. The High Court has agreed with the said view of the Tribunal and has held that in the instant case, it could not be said that the Tribunal was wrong in having differed from the ITO and the AAC in the matter of exercising judicial discretion as to whether even after rejecting the explanation of the assessee the value of the investments were to be treated as the income of the assessee. According to the High Court, the Tribunal had not committed any error in taking into account the complete absence of resources of the assessee and also the fact that having regard to her age and the circumstances in which she was placed she could not be credited with having made any income of her own and in these circumstances, the Tribunal was right in refusing to make an addition of the value of the investments to the income of the assessee. (underlining provided by us) Respectfully following the ratio laid down in the aforesaid case and applying the same to the facts and circumstances of this case, we hold that the additional amount credited in the bank account in the sum of Rs 71,00,000/- could not have emanated to the assessee out of some undisclosed sources but rather would have emanated only out of sale proceeds of the property requires to be believed and no addition could be made thereon u/s 68 of the Act, when the assessee had considered the entire sum of Rs 2,21,00,000/- as sale consideration for the purpose of computation of capital gains. Hence the question nos. 1 & 2 raised above is answered in favour of the assessee.

10.1. We find that the assessee had indeed made investment in purchase of new flats in the following manner:-

Smt. Nupur Joshi A.Yr. 2009-10 We find from the money receipts issued by M/s Bengal Shelter Housing Development Ltd, the assessee had invested in a Pent House having interconnections with Flat No 22A and 23A and between Flat No. 22B and 23B.

Smt. Nupur Joshi A.Yr. 2009-10 10.2. We find that the assessee has furnished a cash flow statement which is enclosed in page 52 of the paper book containing the total receipts and payments of the assessee including the payment made before the end of the previous year i.e 31.3.2009 towards purchase of new property for Rs 1,60,16,103.50. Hence there is no dispute of investment in new property to the tune of Rs 1,60,16,103/- during the Asst Year 2009- 10 itself, warranting claim of deduction u/s 54 of the Act. We find from the copy of the sale deed, that assessee had sold land as well as the building at 45, Bhupen Bose Avenue, Kolkata – 700004 during the year and is accordingly entitled for claim of exemption u/s 54 of the Act. In this regard, we hold that the entire approach of the ld AO in denying the claim of deduction u/s 54F of the Act is not tenable as per law, eventhough the assessee had erroneously claimed u/s 54F in the return of income. For the purpose of granting exemption u/s 54 of the Act, there is no restriction of having only one house by the assessee. Reliance in this regard is placed on the decisions of Hon’ble Delhi High Court in the case of CIT vs Gita Duggal reported in (2013) 357 ITR 153 (Del) and Hon’ble Karnataka High Court in the case of CIT vs D.Anand Bassappa reported in (2009) 309 ITR 329 (Kar).. Hence the arguments advanced by the ld DR in this regard are not warranted and hence not considered relevant in this regard.

10.3. We find that though the ld AO had not given deduction towards cost of acquisition of the property that was the subject matter of transfer, the same was directed to be granted by the ld CITA subject to verification by the ld AO about the veracity of the quantum claimed. Against this direction, the revenue is not in appeal before us.

10.4. We find that the assessee having purchased the land in the financial year 1999- 2000 had carried out construction during the financial year 2001-02 which is supported by the registered valuation report . The value as per registered valuation report (enclosed in pages 55 to 76 of the paper book ) is Rs 64,31,517/-. It is not in dispute that the assessee was a non-resident even during the financial year 2001-02 which is 13

Smt. Nupur Joshi A.Yr. 2009-10 also evident from the fact that the passport was issued to her in London on 2.5.2000. Hence out of her earnings in London, the construction cost could have been met by the assessee. In any case, there is no dispute with regard to the source for cost of construction carried out by the assessee. Hence we hold that the assessee is entitled for deduction towards cost of construction at Rs 64,31,517/- and subject to indexation benefits. Accordingly, the question number 3 raised above is answered in the affirmative in favour of the assessee.

10.5. With regard to the claim of deduction u/s 54 of the Act, we have already held that the assessee having reinvested a sum of Rs 1,60,16,103/- before 31.3.2009 is entitled for claim of exemption u/s 54 of the Act. Accordingly, the question number 4 raised above is answered in the affirmative in favour of the assessee.

10.6. We hold that if all the aforesaid findings are considered, there would be no liability of capital gains and hence the grounds raised by the assessee are allowed.

Order pronounced in the Court on 28.03.2018