ALAUDDIN,AGRA vs. ITO, WARD 1(1)(1), AGRA, AGRA
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI SUNIL KUMAR SINGH & SHRI MANISH AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 241/Agr/2024 Assessment Year: 2015-16
Alauddin, 21/22, Ghatiya Mamu Vs. Income-tax Officer, Bhanja, Thana-Mantola, Agra- Ward 1(1)(1), Agra. 282003 (UP) PAN : AAUPA2351G (Appellant) (Respondent) Assessee by Sh. Rajesh Malhotra, C.A. Department by Sh. Shailendra Srivastava, Sr. DR Date of hearing 19.05.2025 Date of pronouncement 20.06.2025
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER: This appeal has been preferred by assessee against the impugned order dated 01.05.2024 passed in Appeal No. NFAC/2014-15/10137403 by the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi u/s. 250 of the
Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2015-16, wherein the ld. CIT(Appeals) has dismissed assessee’s first appeal.
Briefly stating, the facts, leading to the present appeal, are that the assessee filed his return of income in ITR-4S on 26.03.2018, declaring an income of Rs.3,98,560/-. Subsequently, an information was received by the
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Assessing Officer from ADIT/DDIT(Inv.)-1, Agra that the assessee had sold
an immovable property for a consideration of Rs.45,00,000/- which fetches
capital gain tax payable in the year under consideration. However, the
Assessing Officer on verification of ITR and other records, noticed that the
assessee had neither disclosed any capital gain as per sec. 2(14) of the Act
on the sale of the said immovable property nor provided any details of such
capital gains in his return of income filed in ITR-4S.
Based on the aforesaid facts, Ld. Assessing Officer initiated
proceedings u/s. 147 by issuing notice dated 31.03.2021 u/s. 148 of the Act
after taking prior approval of the ld. PCIT as per provisions of section 151 of
the Act. The statutory notice dated 31.03.2021 issued u/s. 148 and
subsequent notice issued u/s. 142(1) with questionnaire dated 15.11.2021
stood un-responded by the assessee. The assessee, however, submitted
his reply dated 20.02.2022 in response to notice u/s. 142(1) dated
24.12.2021, which as per Assessing Officer, was not found satisfactory.
Thereafter, show cause notice dated 19.03.2022 was issued to the
assessee, in response to which the assessee submitted his reply dated
21.03.2022, stating that the appellant/assessee had sold residential
properties No. 15/28, 15/29 and 15/30 registered in the joint names of
assessee and his wife, Smt. Shahnaz Begum at Bari Athai, Nai Ki Mandi,
Agra on 29.08.2014 for a consideration of Rs.45,00,000/-, on which no 2 | P a g e
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capital gain is exigible to tax, as the appellant/assessee had purchased two
new residential house properties bearing No. 19/180 (in his name) and
19/01(jointly with his wife), situated at Tila Ajmeri Khan, Ghati Mamu
Bhanja, Agra on 04.02.2014 for Rs.8,50,000/- and Rs.28,00,000/-
respectively, hence, in terms of deduction envisaged u/s. 54 of the Act,
there would be no capital gain payable by the assessee on the sale of
immovable property.
The contention of the assessee with regard to deduction u/s. 54 of the
Act did not find favour with the Learned Assessing Officer on the following
premise:
(i). that as per respective conveyance deed, the second property bearing No. 19/1, consisting of 4 shops on ground floor and one room on the top floor purchased by the assessee for the consideration of Rs.28,00,000/-, cannot be treated as residential house property for the purpose of claiming deduction u/s. 54 of the Act;
(ii). that as per details of house properties furnished by assessee before the DDIT(Inv)-Unit-2, the assessee had shown to have purchased two separate immovable properties on 04.02.2014, which are now being claimed as one residential unit.
(iii). that the selling parties of both the properties purchased on 04.02.2014 were different and situated at different places; and
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(iv). that the assessee failed to establish with corroborative documentary evidence to establish as to how he has claimed the entire long-term capital gain as exempt from tax.
Learned Assessing Officer, therefore, disallowed the claim of the
assessee and computed the long term capital gain on sale of immovable
properties as under :
Price Indexed for F.Y. 2005-06: (497) (Purchase value Rs. 3,71,000/-) Price indexed for F.Y. 2014-15 (1024) Sale consideration of property for the year 2014-15: Rs. 45,00,000/- Less: Indexed cost of acquisition = 371000 x 1024/497 = Rs. 764394/- of property for the year 2014-15. Long Term Capital Gain for 2014-15: Rs. 37,35,606/-
However, while giving benefit of deduction claimed by assessee u/s.
54 of the Act from the capital gain of Rs.37,35,606/-, learned Assessing
Officer allowed deduction to the extent of Rs.9,31,060/- (sale consideration
of Rs.8,50,000/- plus Stamp Duty of Rs.81,060/-) pertaining to purchase of
first new residential house property No. 19/180, Tila Ammeri Khan, Ghati
Mamu Bhanja, Agra, treating it as a new residential house property, but
disallowed the balance claim of Rs.28,04,546/- made by the assessee with
respect to purchase of second new property No. 19/1, situated at Tila
Ajmeri Ghati Mamu Bhanja, Agra consisting of 4 shops and one room,
treating it as a commercial property and added the same to the total income
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of the assessee, vide assessment order dated 30.03.2022 passed u/s. 147
r.w.s. 144 and 144B of the Act.
Aggrieved, the assessee preferred an appeal before the ld.
CIT(Appeals), who dismissed the appeal on the premise that during the
A.Y. under consideration, the assessee was entitled for claim of deduction
in respect of only one residential house property purchased within the
stipulated period, where as in the year under consideration, the assessee
had claimed deduction in respect of two separate and distinct properties,
which as per Assessing Officer and conveyance deeds are sold by different
sellers and situated at different locations. Ld. CIT(Appeals) further observed
that the provision of section 54 amended by Finance Act, 2019 w.e.f.
01.04.2020, allowing the option of such deduction with respect to two
house properties, is applicable from A.Y. 2020-21. Learned CIT(Appeals)
has also affirmed the stand of the Assessing Officer regarding commercial
character of second property No. 19/1, Tila Ajmeri, Ghati Mamu Bhanja,
Agra.
This appeal has been preferred on the following grounds :
“1-BECAUSE, upon the facts and in overall circumstances of the case, the appellant denies its liability in terms of Notice dated 31/03/2021 issued under section 148 of the Income Tax Act which was only uploaded on Portal and was not served on the Appellant by other modes of services as mentioned in section 282 of the Act. 2- WITHOUT PREJUDICE TO ABOVE, BECAUSE, upon the facts and in overall circumstances of the case the appellant denies its 5 | P a g e
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liability in terms of Notice dated 31/03/2021 issued under section 148 of the Income Tax Act as the reasons recorded by the ld Jurisdictional Assessing officer (JAO) are infact no reasons in the eyes of law. There was no income chargeable to tax was escaped assessment, therefore section 147 has been wrongly invoked by the ld Assessing officer. 3- BECAUSE, upon the facts and in overall circumstances of the case, the appellant denies its liability in terms of Notice dated 31/03/2021 issued under section 148 of the Income Tax Act as the notice issued under section 148 is barred by limitation given in section 149 of the Act. Since there was no escapement of any income chargeable to tax of an amount of Rs. One lakh or more therefore clause (b) of sub section (1) of section 149 does not apply.
4- BECAUSE, upon the facts and in overall circumstances of the case, the appellant denies its liability in terms of Notice dated 31/03/2021 issued under section 148 of the Income Tax, as no approval was taken from the Principal Commissioner of Income Tax 1 or alternatively the approval was granted by the Ld PCIT in a casual and mechanical manner. The approval of the Id PCIT was not provided to the Assessee during the course of Assessment proceedings. 5- Because upon the facts and in overall circumstances of the case the Notice issued under section 148 and 142(1) of the Income Tax Act issued by Jurisdictional Assessing Officer (JAO) are invalid and bad in law and are in gross violation of provisions of section 151A of the Income Tax Act. 6-BECAUSE, upon the facts and in overall circumstances of the case the appellant denies its liability as per Impugned Assessment order as the same has been passed without complying to the provisions of section 144B of the Income Tax Act.
7-BECAUSE, upon the facts and in overall circumstances of the case the ld Commissioner of Income Tax (Appeals) NFAC was wrong and unjust in confirming the addition made by the ld Assessing officer without properly appreciating the facts of the case and ignoring the submission made and evidences filed during the course of assessment and appellate proceedings.
8-BECAUSE, upon the facts and in overall circumstances of the case the ld Commissioner of Income Tax (Appeals) NFAC was wrong and unjust in confirming the amount of long term capital gain wrongly computed by the Ld Assessing officer, taking incorrect amount of sale, cost of acquisition and indexed cost of acquisition into consideration while calculating the amount of long term capital gain. 6 | P a g e
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The Ld AO also failed to appreciate the fact that the share of the Assessee in the residential house sold was only 50%, however he had calculated the amount of capital gain taking into consideration the 100% of sales consideration. 9-BECAUSE, upon the facts and in overall circumstances of the case the ld Commissioner of Income Tax (Appeals) NFAC was wrong and unjust in not allowing the benefit of section 54 of the Act ignoring the vital fact that the Assessee had invested in two residential house property which were adjoining to each other and was in fact a single residential unit. The said residential house in fact was owned and sold by one Owner. 10- BECAUSE, upon the facts and in overall circumstances of the case the ld Commissioner of Income Tax (Appeals) NFAC was wrong and unjust in not allowing the benefit of section 54 of the Act on the wrong appreciation of the fact that the new property purchased by the Assessee was commercial property. In fact the property purchased by the Appellant was residential property and being used by the Assessee for his residential purposes. Though it is mentioned in registered sale deed that there were shops at the ground floor and residential house at first floor, but in fact this was residential property at both the floors and being used by the Appellant for its residential purposes. 11. Because the order appealed against is illegal, contrary to the facts, material on record, law and principle of natural justice. The appellant craves leave to add or alter one more ground(s) during the course of proceedings.”
Perused the records and heard learned representative for the
assessee and learned departmental representative for the Revenue.
Based on the aforesaid grounds, the following points are to be
determined :
(i) Whether the proceedings initiated u/s. 147 and notice issued u/s. 148 are invalid, being barred by limitation, having been based on mechanical approval by competent authority and without proper service of notice u/s. 148 in terms of section 282 of the Act ?
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(ii) Whether CIT(Appeals) has erred in confirming the assessment order, denying the claim of assessee u/s. 54 of the Act ?
Learned representative for the appellant/assessee has reiterated all
the grounds taken in the appeal in general, however, specifically submitted
that the Revenue has denied the claim of the assessee for the benefit of
section 54 of the Act mainly on the ground that one of the properties
purchased is commercial property, whereas the nature of the property
mentioned in the sale deed dated 04.02.2014 is residential. Learned AR
has further submitted that the share of the assessee in the residential
house sold by sale deed dated 29.08.2014 was only 50%, whereas the
Revenue has computed the capital gain on 100% sale consideration.
Prayed to set aside the impugned order and allow assessee’s claim u/s. 54
of the Act in respect of the same.
Learned DR has submitted that the Revenue has already allowed
benefit of section 54 in respect of one of the residential properties No.
19/180, Tila Ajmeri, Ghati Mamu Bhanja, Agra whereas the purchase deed
dated 04.02.2014 with respect to second property No. 19/1, Tila Ajmeri,
Ghati Mamu Bhanja, Agra specifically shows that there are 4 shops built at
ground floor with one room at top floor, hence, the property not being
residential, the assessee’s claim u/s. 54 in respect of this commercial
property has rightly been denied by the impugned order. 8 | P a g e
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It is pertinent to give findings on the aforesaid issues formed on the
basis of 11 grounds raised in the appeal. We first take up the point No. 1.
This issue is framed in such a manner so as to cover the grounds No. 1 to
Assessee has neither raised these legal grounds before the learned
Assessing Officer nor before Ld. CIT(Appeals). However, keeping the
nature of these grounds as legal, we deem it fit to adjudicate on these legal
grounds (issue) first.
We have gone through the entire records and find that the matter
relates to the assessment year 2015-16. It will not be out of place to
mention that the procedure for reopening assessment under the old regime
has been substantially overhauled by the Finance Act, 2021 w.e.f.
01.04.2021. The proceedings u/s. 147 have been initiated by issuance of
notice dated 31.03.2021 u/s. 148 of the Act in the instant case, hence, the
old regime, i.e., prior to the Finance Act, 2021 will apply. Examining the
assessment proceedings chronologically, we notice that the ld. Assessing
Officer has specifically mentioned that on the basis of an information
received by the Jurisdictional Assessing Officer from ADIT/DDIT(Inv)-1,
Agra, it was noticed that the assessee had sold immovable properties for
Rs.45,00,000/-, on which capital gain tax was payable during the financial
year 2014-15 relevant to assessment year 2015-16. Learned Assessing
Officer verified the Income-tax return, which was filed by the assessee on 9 | P a g e
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26.03.2018 declaring an income of Rs.3,98,560/-. It was further noticed by
the Revenue that the assessee did not show capital gain as per section
2(14) of the Act. Finding no details of capital gain tax on sale of immovable
property, learned jurisdictional Assessing Officer framed his reason to
believe that the income has escaped assessment and with the prior
approval of the jurisdictional Principal Commissioner of Income-tax u/s. 151
of the Act, issued notice dated 31.03.2021 u/s. 148 of the Act. Ld. AR has
failed to show the illegality in framing the reasons to believe before initiating
the proceedings u/s. 147 of the Act. It shows that the ld. Assessing Officer
followed the procedure for reopening of assessment by first framing the
reasons to believe that the income in the form of capital gains chargeable
to tax has escaped assessment.
In the old regime, section 149(ii) prescribes the time limit for issuing
notice u/s. 148 as four years, but not more than six years from the end of
the assessment year if the income chargeable to tax, which has escaped
assessment amounted to or was likely to amount Rs.1,00,000/- or more. In
the instant case, ld. Assessing Officer found that the income/sale
consideration of Rs.45,00,000/- under the head capital gain, which was not
depicted in assessee’s ITR, was surely over one lakh rupees. Hence, notice
dated 31.03.2021 issued u/s. 148 of the Act before six years from the end
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of the assessment year 2015-16, falls within the time limit prescribed u/s.
149 of the Act of the old regime.
It further transpires from the perusal of the assessment order that
prior approval of the jurisdictional Principal Commissioner of Income-tax
was taken in accordance with section 151 of the Act of the old regime
before initiating assessment proceedings u/s. 147/148 of the Act. Learned
AR has, though, mentioned that such approval was casual and in a
mechanical manner, however, failed to elaborate the same. The assessee
has not made any efforts to procure the said approval either through the
process of this Tribunal or by any other mode available under law. Hence, it
cannot be accepted that the approval/sanction was given in a casual or
mechanical manner by the sanctioning authority.
As regards service of notice u/s. 148 dated 31.03.2021, it is an
admitted fact that the Revenue issued notice through electronic platform on
assessee’s email ID available with the department in consonance with
section 282 r.w.s. 292BB of the Act. All modes of service of notice are not
required to be effected. The service through either of the given modes of
service is sufficient. It also transpires that the assessee participated in the
assessment proceedings, which were being proceeded in the faceless
manner u/s. 144B of the Act and entire procedure of faceless assessment
of income escaping assessment was adopted by the Assessing Officer as 11 | P a g e
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provided u/s. 151A of the Act. We accordingly, do not find any illegality or
invalidity either in the notice u/s. 148 r.w.s. 142(1) of the Act or at any stage
of the assessment proceedings. In view of the aforesaid discussion, the first
point is accordingly determined against the assessee and in favour of the
department.
Now, we advert to the second core point covering the remaining
grounds No. 7 to 11, on merit as to whether an immovable property
consisting predominantly four shops at the ground floor along with a single
room at the first floor, can be treated as a “residential house” within the
meaning of section 54 of the Act, thereby qualifying for exemption of capital
gains. Admittedly, the assessee has claimed deduction u/s. 54 of the Act in
respect of capital gains arising from the transfer of a long term capital asset
on the ground that the assessee had invested in other residential properties
within the stipulated period. One of such two properties purchased by the
assessee comprises four shops at the ground floor and one room at the
first floor. The ld. AR contends that the property qualifies as a residential
house for the purpose of section 54, and thus, the capital gain arising from
the sale of capital asset is also eligible for exemption under the said
section.
A perusal of section 54 of the Act shows that this section provides
exemption from capital gains tax if the capital gains arise from the transfer 12 | P a g e
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of a long-term capital asset being a residential house (buildings or lands
appurtenant thereto), the income of which is chargeable under the head
“income from house property”, and the assessee has, within the prescribed
time, invested in the purchase or construction of another residential house.
The term “residential house” is not specifically defined under the Act, but
the legislative intent makes it clear that the nature and usage of the
property are key determinants of the true character of the said property.
The property should not be predominantly commercial in character. In the
present case, the immovable property in question admittedly consists of
four shops at ground floor and one room at first floor, which is also
substantiated by the conveyance deed dated 04.02.2014 submitted by the
assessee through his paper book. In common parlance, shops are not
capable to be characterized as residential house. Based on the
composition and functional usage of the property, it is evident that the
property purchased by the assessee was predominantly commercial in
nature. The presence of a single room at the first floor of the commercial
structure does not alter the dominant character of the property as the same
is expected to be used for incidental and ancillary activities/for commercial
purposes. The primary usage and income generation from the property
appear to be from commercial activity and not from residential house,
thereby disqualifying the eligibility of capital gains for exemption u/s. 54 of 13 | P a g e
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the Act. The ld. AR has utterly failed to adduce any corroborating evidence
like electricity bills, municipal records etc. to justify the property in question
to be a residential house. Hence, we do not find any infirmity in the findings
of the revenue authorities that the investment in second new property does
not qualify for exemption from capital gain tax.
The sale deed dated 29.08.2014, which is part of assessee’s paper
book at page 8 to 24 shows that the assessee Hazi Alauddin and his wife
Smt. Hajjan Shahnaz Begum are shown to be the joint sellers/owners of the
property. Hence, the share of the assessee in the sale consideration of
Rs.45,00,000/- is half, whereas the Revenue has computed the capital gain
after considering the entire sale consideration of Rs.45,00,000/- in the
hands of the assessee. The Revenue seems to have ignored this fact that
only 50% of the sale consideration can be taken into account for
computation of capital gains in the hands of the assessee. For this limited
point, the Assessing Officer is directed to re-compute the capital gain on
50% share of the aforesaid sale consideration in the hands of assessee.
The second point is accordingly determined partly in favour of the
assessee. The impugned order is, therefore, not sustainable in part to this
extent only.
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In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 20.06.2025.
Sd/- Sd/- (MANISH AGARWAL) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20.06.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra
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