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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
ORDER PER H.S. SIDHU, JM: These are the Cross Appeals filed by the Assessee as well as Revenue against the impugned Order dated 20/1/2014 passed by the Ld. Commissioner of Income Tax (Appeals)-XXIII pertaining to assessment year 2009-10. Since the issues involved in both the appeals are related with the same assessment year, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience.
The grounds raised in the Assessee’s Appeal No. 1615/Del/2014 (AY 2009-10) read as under:-
That the Ld. CIT(A) has erred in law and on facts in not allowing the claim of the assessee under section 54 of the Income Tax Act, 1961.
2. That the Ld. CIT(A) has erred in law and on facts in not considering the GPA given by the seller and rejecting the claim of the assessee, under section 54 of the Income Tax Act, 1961 by solely considering the agreement to sell. 3. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 4. That the appellant craves leave to add. Alter any/ all grounds of appeal before or at the time of hearing of the appeal.
3. The grounds raised in the Revenue’s Appeal No. 1649/Del/2014 (AY 2009-10) read as under:-
1. Whether on the facts and in the circumstances of the case, ld. CIT(A) has erred in deleting the disallowance of Rs. 61,97,460/- on account of setting off of long term capital loss against long term capital gain on sale of property, though apparently, the transaction of purchase of property from her husband was a sham transaction to claim deduction u/s. 54. 2
2. Whether on the facts and circumstances of the case, ld. CIT(A) has erred in allowing cost of additions / improvements amounting to Rs. 17,40,000/- though no such evidence was filed by the assessee.
3. On the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT(A) is perverse both in facts and law.
4. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal.
ASSESSEE’S APPEAL (ITA NO. 1615/DEL/2014 AY- 2009-10)
The brief facts of the case are that the return of Income declaring net income of R.28,42,810/- was filed on 31.10.2009. The return was processed u/s. 143(1) of the I.T. Act, 1961. Later, the case was selected for scrutiny and statutory notice u/s. 143(2)of the Act was issued on 20.08.2010. During the year under consideration, the assessee had declared income from business or profession, income from long term capital and income from other sources. The income from business has been declared u/s. 44AF of the I.T. Act. During the year under consideration the assessee has shown Long Term Capital Loss on sale of Hauz Khas property, on which benefit of indexation has been taken. Further, the assessee has shown Long Term Capital Gain on sale of residential house at Noida, on which apart from benefit of Indexation, the assessee has claimed deduction u/s. 54 as well as u/s. 54EC. The Long Term Capital Loss on sale of Hauz Khas property has been set-off against Long Term Capital Gain on sale of Noida house. The Assessing Officer found that the Hauz Khas property was sold by the assessee to her husband Dr. Charanjit Chanana. AO also found at the claim of the assessee for a deduction u/s. 54 of the Act was with reference to purchase of a residential house at Mumbai for Rs.1.20 crores, which was purchased by her from her daughter Ms. Anjali Chanana vide an Agreement to Sell dt. 30.10.2008 on a non-judicial stamp paper of Rs.50/-, which was signed by both the parties without any witnesses. Accordingly, the AO issued a questionnaire to the assessee stating that this whole story appeared to be a manufactured one, to off-set and minimize the Capital Gain tax. All the properties remained within the family of the appellant and all the transactions were within the family. The AO required the assessee to explain why transaction for sale of property at Hauz Khas and Mumbai may not be treated as bogus sales. The AO considered the reply given by the assessee, but he did not accept the contention of the assessee that her sale of 60% portion of her Hauz Khas property to her own husband was genuine, despite the fact that the sale deed of the property was registered at Circle Rate and Stamp Duty was duly paid thereon. The AO also did not accept the alleged sale of Mumbai flat by the assessee's daughter Ms.
Anjali Chanana to her mother, since, the sale deed with reference to this property was not registered and the Agreement to Sell was only on a non-judicial stamp paper of Rs.50/- without any witnesses. The AO held that both these transactions were bogus transactions, entered into by the assessee to minimize the tax incidence on Long Term Capital Gain earned by the assessee on sale of her residential house in Noida. Therefore, the AO brought to tax the capital gain earned by the assessee on sale of Noida property, after disallowing the capital loss claimed by the assessee on sale of Hauz Khas property and deduction u/s. 54 for purchase of residential flat at Mumbai. Further, while calculating the capital gains with regards to the Noida property, the AO restricted the cost of improvement and additions of Rs.17,40,OOO/- pertaining to F.Y. 1992-93 to Rs.10 lacs only. He also did not allow carry forward and set-off of brought forward losses of Rs.4,90,202/- in the absence of any evidence whatsoever. Accordingly, the AO assessed the income of the assessee at Rs. 2,34,61,770/- vide his order dated 9.12.2011 passed u/s. 143(3) of the I.T. Act, 1961.
Aggrieved with the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 20.1.2014 has upheld the action of the AO of not allowing the exemption u/s. 54 of the I.T. Act, 1961.
Now the Assessee is aggrieved against the impugned order and filed the present appeal before the Tribunal.
Ld. Counsel of the Assessee has stated that the only issue in the assessee’s appeal is against not allowing the exemption u/s. 54 of the I.T. Act, in respect of flat of Rs. 1,20,00,000/- purchased by the assessee from her daughter on the ground that the house was not registered in the name of the assessee. He further stated that Section 54 requires that the house should be purchased and it is a settled law that it is not necessary that the housel should be registered in the name of the assessee. He further stated that everbody is entitled to arrange his affairs within the parameters of law, even if it results into the reduction of total tax liability and referred the decision of the Hon’ble Supreme Court of India in the case of UOI vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC).
An the contrary, Ld. DR relied upon the orders of the lower authorities on the issue in dispute.
We have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). We find that only issue in the assessee’s appeal is against not allowing the exemption u/s. 54 of the Act in respect of flat of Rs. 1,20,00,000/- purchased by the assessee from her daughter on the ground that the house was not registered in the name of the assessee. We also find that Section 54 of the Act requires that the house should be purchased. It is also a settled law that it is not necessary that the house should be registered in the name of the assessee. In our view everybody is entitled to arrange his affairs within the parameters of law, even if it results into the reduction of total tax liability. Our aforesaid view is fully supported by the Hon’ble Supreme Court decision in the case of Union of India vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC). In view of the above, we allow the claim of the assessee under section 54 of the I.T. Act, 1961 and accordingly, the allow the ground of appeal. As a result, the appeal of the assessee is allowed.
10. With regard to ground no. 1 relating to deletion of disallowance of Rs. 61,97,460/- on account of setting off of long term capital loss against long term capital gain on sale of property at Hauz Khas on its transfer.
10.1 On this issue, Ld. DR relied upon the order of the AO and reiterated the contents of the grounds of appeal.
10.2 On the other hand, Ld. Counsel of the assessee relied upon the order of the CIT(A).
10.3 We have heard both the parties and perused the records especially the order of the Ld. CIT(A). We find that Ld. CIT(A) has given factual finding that husband of the assessee has purchased 60% share in Hauz Khas property and got the deed registered and that such transaction was legal transaction as per the Transfer of Property Act, and the payment of Rs. 1.20 crores was made as per the circle rate and stamp duty has been paid and that though assessee and her husband are staying together but they are not on good terms. Therefore, Ld. CIT(A) has rightly observed that AO cannot deny the legality of the transaction between the assessee and her husband Dr. Charanjit Chanana, whereby, the assessee has sold 60% of her share in her Hauz Khas property to her husband and accordingly, the AO has no option but to allow the resultant Long Term Capital Loss to the assessee. We also allowed the claim of the assessee under section 54 of the I.T. Act, 1961 in assessee’s appeal, as aforesaid. In view of the above, the Ld. CIT(A)’s action of allowing the set off loss of Rs. 61,97,640/- against long term capital gain does not need any interference on my part, hence, we uphold the same and dismiss the ground no. 1 raised by the Revenue.
With regard to ground no. 2 relating to allowing cost of additions /improvements amounting to Rs. 17,40,000/-.
11.1 On this issue, Ld. DR relied upon the order of the AO and reiterated the contents of the grounds of appeal.
11.2 On the other hand, Ld. Counsel of the assessee relied upon the order of the CIT(A).
11.3 We have heard both the parties and perused the records especially the order of the Ld. CIT(A). We find that Ld. CIT(A) has dealt the issue in dispute vide para no. 4.3 at page no. 6 to 7 of the impugned order. The relevant para read as under:-
“4.3 In Ground No.2, the appellant has impugned the restricting of indexed cost of Noida house to Rs.1,05,75,256/- against the indexed cost of Rs.1,25,06,557/- as claimed by the appellant. The ld. AR of the appellant has submitted that the appellant has old immovable property at Noida during the year under consideration for Rs.3.75 crores. She had acquired a plot of land during F.Y. 1982-83 from Noida Authority for Rs.3,60,130/-. She carried out construction on the said plot during F.Y. 1992-93 by spending a sum of Rs.17,40,000/-, out of which she had spent
Rs.15,84,000/- on cost of construction, which was paid to the contractors M/s. Abdul Wazid & Sons and a sum ofRs.1,56,000/- was further incurred for development and making changes as per the requirement of Noida
Authority for issuance of Completion Certificate.
Accordingly, the Occupancy Certificate was issued by Noida Authority on 21.05.1994, which is placed on record. She has also placed on record copy of receipts issued by the contractor M/s. Abdul Wazid & Sons dt.
10.05.1993. The appellant has accordingly calculated indexed additions and improvements, taking into calculation the amounts spent at Rs. 17,40,000/-.
However, the AO has restricted this amount of Rs. 10 lacs. I have carefully considered the facts of the case, the assessment order, the submissions of the appellant and the arguments of the ld. AR. The ld. AR has submitted that the AO has made a pure estimate giving general observations to restrict the amount to Rs.10 lacs. He could have made a reference to the Valuation Officer within the meaning and scope of Section 55A of the Act.
However, he did not do so. The complete details of the expenses incurred was provided to the AO in the receipt issued by the contractor. The expenses were incurred around twenty years back in F.Y. 1992-93. Under these facts and circumstances and in the light of the fact that the Completion Certificate was issued by Noida Authority on 21.05.1994, I am of the opinion that the AO should not have restricted the cost of additions/improvements to Rs.10 lacs on estimate basis as he was not technically competent to do so and he had done this by giving a vague argument saying that “It would not be feasible to allow such a huge expense on the basis of such casual receipts. Therefore, the AO is directed to allow indexation on full amount of Rs. 17,40,000/-. This ground is decided in favour of the appellant.
11.4 After going through the findings of the Ld. CIT(A), as aforesaid, we find that the assessee has sold immovable property at Noida during the year under consideration for Rs.3.75 crores. She had acquired a plot of land during F.Y. 1982-83 from Noida Authority for Rs.3,60,130/-. She carried out construction on the said plot during F.Y. 1992-93 by spending a sum of Rs.17,40,000/-, out of which she had spent Rs.15,84,000/- on cost of construction, which was paid to the contractors M/s. Abdul Wazid & Sons and a sum ofRs.1,56,000/- was further incurred for development and making changes as per the requirement of Noida Authority for issuance of Completion Certificate. Accordingly, the Occupancy Certificate was issued by Noida Authority on 21.05.1994. We also seen the copy of receipts issued by the contractor M/s. Abdul Wazid & Sons dt. 10.05.1993. The assessee has accordingly calculated indexed additions and improvements, taking into calculation the amounts spent at Rs. 17,40,000/-. However, the AO has restricted this amount of Rs. 10 lacs. We find that during the appellate proceedings the AR of the assessee has stated that AO has made a pure estimate giving general observations to restrict the amount to Rs.10 lacs and he could have made a reference to the Valuation Officer within the meaning and scope of Section 55A of the Act.
However, he did not do so. We find that the complete details of the expenses incurred was provided to the AO in the receipt issued by the contractor. The expenses were incurred around twenty years back in F.Y. 1992-93. Under these facts and circumstances and in the light of the fact that the Completion Certificate was issued by Noida Authority on 21.05.1994, Ld. CIT(A) was of the opinion that the AO should not have restricted the cost of additions/improvements to Rs.10 lacs on estimate basis as he was not technically competent to do so and he had done this by giving a vague argument saying that “It would not be feasible to allow such a huge expense on the basis of such casual receipts. In view of above, Ld. CIT(A) has rightly directed the AO to allow indexation on full amount of Rs. 17,40,000/- which does not need any interference on my part, hence, we uphold the same and dismiss the ground no. 2 raised by the revenue.
In the result, the appeal of the Assessee stands allowed and Revenue’s appeal stands dismissed.
Order pronounced in the Open Court on 16/12/2016.