DCIT 9(3)(2), MUMBAI vs. SARITA SHASHIKANT GARWRE, MUMBAI

Whether on the facts and in the circumstances of the case, the Ld CITA) erred in allowing deduction u/ s 54 on the sale of 2 flats bearing No. 1501 and 1502 at Kowli Rameshwaram Apt whereas deduction u/ s 54 of the Act is available only to the extent &f sale of 1 residential flat as held by the Hon'ble ITAT in the judgement ITO US: Sushila M Jhaveri following the judgement of jurisdictional High Court in the case of KC Kaushik VI s ITO.

Whether on the facts and in the circumstances of the case; the Ld. CITA) erred in holding that the entire capital gain which accrued to the assessee and was invested in 4 units was a single unit though no evidence was brought on record by the assessee establishing that there is a common passage, common kitchen etc: so that the claim of 4 residential units being a single unit be allowed 4 The appellant craves leave to add, amend; vary; omit Or substitute any of the aforesaid grounds of appeal at any time before Or at the time of 'hearing of the appeal 5. The appellant prays that the order of the Id Mumbai CITA)-16, on the above grounds be set aside and that assessing of the officer be restored 2_ The brief facts of the case are that the assessee had e-filed her return of income on 29.09.2011, declaring total income Rs.2,33,30,718/- at The assessee revised her return of 03.03.2012, declaring revised income on income at Rs. 2,33,30,718/-, along with 5 Long Term Capital Gain (for short LTCG) on sale of her residential flats No.1501 and 1502, at Kowli Rameshwaram Apartment, Phalkewadi, Kashinath Dhuru Road, Off. Veer Savarkar Marg; Prabhadevi, Mumbai 400 028, which after claim of deduction by the assessee u/s 54 of the 'Act' in her revised return of income stood reduced to Rs. Nil. 3 . The case of the assessee was taken up for scrutiny proceedings u 143(2) of the 'Act'. That during the course of the assessment proceedings, the A.O while deliberating on the claim of deduction u/s 54 of the 'Act, as was raised by the assessee in her revised return of income, therein observed that the assessee in her revised computation of |income had disclosed sale of Flats No.1501 and 1502 at Kowli Rameshwaram Apartment, Phalkewadi, Kashinath Dhuru Road, Off, Veer Savarkar Marg; Prabha Devi, Mumbai, for a consideration of Rs/15,25,00,000/-, against which it had claimed deduction u/s 54 in respect of four new flats, i.e Flat No(s): 901, 902, 1001 and 1002, at Raheja Empress, Veer Savarkar Marg, Prabha Devi; Mumbai-400028, which were purchased by her for a total consideration of Rs/16,90,12,559/-, vide purchase deeds dated: 07.01,2011. The A.O being of the view that as the entitlement of the assessee towards claim of deduction u/s 54, as per the mandate of law, was liable to be restricted only as regards the investment made by the assessee in one residential property, thus in the backdrop of his aforesaid view called upon the assessee to explain as to why the said claim u/s 54 s0 raised in her return of income' , may not be restricted only with respect to the investment made by her in one flat: The assessee submitted before the A.D that the Flats No. 901 and 902 which were on the 9th floor, and the other two Flats No. 1001 and 1002 which were on the 1Oth floor, wefe interconnected by a capsule lift, to make all the four flats as one composite residential house. Thus the assessee in the backdrop aforesaid of the facts, therein submitted that as she had invested towards purchase of fouf Ilats at Raheja Empress, Prabha Devi, Mumbai, 077.01.2011, on which were joined and being used family, by her alongwith her as & single residential unit, wherein the flats No. 901 were and 902 being used as bedrooms, while for the flats No. 1001 were and 1002 used as kitchen and drawing room, and as such had made investment towards purchase of one residential house, her claim for deduction u/s 54 so raised in the return of income, was well in order: That during the course of the assessment proceedings, the AO called upon the assessee to furnish documentary evidence to substantiate the legality of installation of the 'Capsule lift' joining the respective flats on gth and 1Oth floor: The assessee filed with the A.O a CQpy of certificate issued by one Shri A.D Savardekar, Consulting engineer, giving his opinion that the lifts can safely be installed without endangering the structural stability and safety of the in building any way. The assessee further on being called place upon by the A.O to on record the documentary evidence as regards the approval of the BMC with regard to the installation of the capsule lift to the| four flats connect from inside, though expressed her inability to produce anyl such document; as no such approval was sought by her , however placed but on record of the A.0 a copy of a No Objection Certificate' (for short NOCI dated 27.04.201 her |from 1, which was obtained by Raheja Empress Apartment Owners Association; Munbay Thaf the A.0 however on the basis of certain hyper technical reasons, rejected the certificate of the consulting that engineer; as well as the NOC;, was placed on record by the assessee. The A.O thus holding a strong conviction that the investment made by the assessee towards purchase of four flats, i.e on the 9th: floor and 1Oth floor at Raheja 5 Empress, Prabha Devi, Mumbai, could not be construed as an investment made towards purchase of one residential property' specifically in light of the fact that each of the four flats were having separate two kitchens, coupled with the fact that the assessee had also failed to substantiate that she was legally authorized to make the strpctural changes in the aforesaid flats, and thus convert them into a single residential unit, thus rejected the claim of the assessee that the aforesaid four flats were being exploited as a single residential unit. The AO further fortified his view by observing that though the assessee had purchased the aforesaid four flats in January, 2011, however the letter issued by M/s Bluestar Elevator (India) Ltd-,dated. 15.10.2011, therein revealed that the two home lifts were handed over to the assessee much subsequent to the purchase of the aforesaid flats, and thus it could be safely concluded that at the time of taking physical possession, the aforesaid four flats were not connected from inside, and as such were totally separate units. Thus on the basis of his aforesaid observations, the A.O being of the view that the new four flats purchased by the assessee in Raheja Empress, Prabha Devi, Mumbai;, were independent residential units, thus restricted the entitlement of the assessee towards claim of deduction u/s 54 in respect of the LTCG' of Rs. 11,09,43,276/ - arising on the sale of two flats at Rameshwaram Apartment; Prabha Devi, Mumbai, only to the extent of the investment of Rs.4,87,24,255/- made by the assessee towards purchase of one flat (out of the 4 flats), and thus recasted the claim of deduction under Sec. 54 in the hands of the assessee. 5 The assessee assailing the assessment order, therein carried the matter in appeal before the CIT(A): That during the course of the proceedings before the said first appellate authority, the assessee in order to further fortify her claim that the four flats purchased by her at Raheja Empress, Prabha Devi, Mumbai, were being used by her alongwith her family members, as one residential unit, therein moved an application for admission of certain documents by way of 'additional evidence' under Rule 464 of the Income Tax Rules, 1963, as under: i) Copy of Maintenance bill/ Property Tax for Flats No. 901-902 and 1001-1002. (ii) . No Objection certificate of Tanna Builders Ltd for installation of capsule lift. (jii) . Certificate of consulting engineer certifying that the capsule lift can be installed safely. (iv) : NOC from Raheja Empress Apartment Owners Association install the lift. to The CIT(A) being of the view that the assessee sufficient was prevented by cause from producing the aforesaid Alop documents before the a8 the latter had at no stage during the course of the assessment proceedings, expressed any doubts as regards the veracity of genuineness and the documents which were placed on record by the assessee to substantiate her claim that the four at Raheja flats purchased by her Empress, Prabha Devi, Mumbai, were interconnected capsule lift; by a and further observing that the technically said documents though were in the nature of an 'additional evidence', simply but the same proved the fact that the flats the purchased by the assessee were in nature of one composite tesidential from unit , which was & fact bore the material available on the record of the same_ A.O, thus admitted the The CIT(A) in the backdrop of the facts before observed that him, therein it was an undisputed fact; well within the knowledge of the A.O, that the Flats No(s): 901 and 902 on the 9th floor and Flats No(s).1001 and 1002 on the IOt floor; in Raheja Empress(supra), were interconnected by a capsule lift: The CIT(A) further observed that the A.0 instead of verifying the claim of the assessee that the aforesaid four flats in Raheja Empress (supra) were interconnected by a capsule lift and as such were being used as a single residential house, which he could have easily done by deputing his inspector to carry out a spot inspection; had however declined to accept the claim of the assessee, by rejecting the documents which were placed on his record by the assessee during the course of the assessment proceedings, on the basis of certain hyper technical reasons. Thus, in the backdrop of the aforesaid observations, it was concluded by the first appellate authority, that sufficient evidence had already been placed on record by the assessee before the A.O, to support her contention that the four flats purchased by her at Raheja Empres (supra), were interconnected by capsule lift, and were used by her as a single residential property. The CIT(A) further referring to the documents which were furnished by thellassessee during the course of the appellate proceedings, therein categorically observing that though technically the same were in the nature of 'additional evidence', but as the same simply proved a fact, which already emerged from the documents furished by the assessee during the course of the assessment proceedings, therefore dispensed with the forwarding of the same to the A.O, for his comments The CIT}A) thus going by the material already available on the assessment record, therein concluded that the four flats purchased by the assessee at Raheja Empress, Prabha Devi, Mumbai, were being used by the assessee and her family members as a composite residential house. The CIT(A) in the backdrop of his aforesaid factual observations, relying on the order of the 'Special Bench' of the 8 Tribunal in the case of: ITO V8. Mrs. Sushila M. Jhaveri (2007) 107 ITp327 (Mum) (SB), wherein it was held as under- #However where more than one unit are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, kitchen common etc , the, it would be a case of investment in residential one house and consequently; the assessee would be entitled to exemption". thus concluded that as the aforesaid four flats the were being used by assessee alongwith her family members as uhit , a single Tresidential therefore the assessee was duly entitled towards deduction u/s claim of 54, as was sO raised by her in the thus allowed return of income, and the appeal of the assessee. The department_ being aggrieved with the order of the therein carried the matter CITIA), had in appeal before us. That the Ld. DR at the very outset of the hearing of the appeal, assailed the admission of the 'additional evidence' by the CIT(A) under Rule 46A, without affording any opportunity to the Ao. It was averred by the learned D.R, that as Per Rule 46A(8), it is mandatory on the part of the CIT(A) reasonable opportunity to to allow a the A.O, before admitting evidence' which is filed any *additional by an assessee in the course of the pfoceedings, before him: appellate That on the other hand, the Ld. Authorized Representative (for short AR) for the assessce, the documents therein submitted that which were furnished with the CIT(A), fact which was only fortified a already borne from the record of the A.O. The Ld: AR in support of his aforesaid contention; therein submitted, that it was categorically observed by the CIT(A) in the body of his that the fresh documents appellate order, which were filed by the assessee during the course of the appellate proceedings, before him, were only supportive of the facts, which were already borne from the assessment records; and for the said reason had dispensed with the forwarding of the said documents to the A.O, for his comments. Alternatively, it was submitted by the Ld AR, that though it was a fact that the CIT(A) while concluding that the four Ilats of the assessee at Raheja Empress (supra) were interconnected by a capsule lift;, and used as a composite residential house by the assessee and her family members, had though not taken into account the fresh documents which were furnished by the assessee by way of 'additional evidence' before him, for arriving at the aforesaid conclusion, but as averred hereinabove, had gone by the documents which were furnished by the assessee during the course of the assessment proceedings with the A.O, however, even if the version of the revenue was accepted, then keeping in view the very fact that the documents which were furnished by the assessee before the CIT(A) were in the nature of clinching evidence, which did not lead to revelation of any new fact; but only fortified a fact which was borne from the assessment record, and as such did not leave room for any doubt or controversy, and thus put the matter to rest, therefore, no useful purpose would had been served on the performing the ritual of forwarding the evidence/material to the A.O and obtain his report: The Ld: AR in support of his aforesaid contention had relied on the order of ITAT, Hyderabad Bench 'A' , in the case of DCIT, Circle 16(1), Hyderabad Vs. NE Technologies India (P) Ltd (2014) 47 taxmann com 405 (Hyderabad Trib): 8 We have heard the Ld. Representative of both the parties, perused the orders of the lower authorities, as well as the records before us. We are of the considered view, that though it is a matter of fact that certain documents were furnished by the assessee by way of 10 'additional evidence' during the course of the appellate proceedings, before the CIT(A), however;, we find that the said first appellate authority had categorically observed, that the said documents only did gq to further fortify the fact that the four flats purchased by the assessee at Raheja Empress (supra), were interconnected by a capsule lift, and were used by the assessee alongwith her family members as one single residential house, a fact which was borne from the assessment record: We are of the considered view, that the fact which the assessee had tried to fortify by placing on record fresh documents before the CIT(A), was already bomne from the documents which were furnished by the assessee during the course of the assessment proceedings We find that though a reference of the fresh which documents were furnished by the assessee during the course of the appellate proceedings, do find a mention in the body of the appellate order, but then a careful perusal of the Order of the CIT(A) reveals, that thel said first appellate authority had not taken into account the aforesaid documents for concluding that the four residential flats purchased by the assessee at Raheja Empress, Prabha Devi, Mumbai, were interconnected and being used as a but rather composite residential house, had absolutely gone by the facts as were already available on the record of the AO. We though are not oblivious of the fact that Rule 464(3) clearly provides that a reasonable afforded opportunity has to be by the CIT(A) to the A.O, however, we are of the considered view that mere filing of the fresh documents /evidence by the assessee would not in itself call for allowing of an opportunity to the A.O, but rather a perusal of the clearly worded Rule 464(3), therein reveals beyond any scope of doubt; that the occasion for affording of such an opportunity to the A.0, to examine o rebut such additional evidence, would arise only when the CIT(A) had decided such to take into account any documentary evidence, which is produced before him by the 11 assessee under sub Rule(l) of Rule 464. Thus in the backdrop of the facts in the case of the present assessee, we are of the considered view that now when the CIT(A) in the present case, though had referred about the documents which were furnished by the assessee before him by way of 'additional evidence' U/Rule 464, and also had elucidated the nature of the said documents, in the body of his appellate order, but it is a matter of fact that the CIT(A) had not taken into account the same for concluding that the four flats purchased by the assessee at Raheja Empress (supra) were interconnected by a capsule lift, and used as a composite resident by the assessee alongwith her family. We are thus in the backdrop of our aforesaid observations, of the considered view, that now when the additional evidence had not been taken into account by the CIT(A), who a8 observed by us hereinabove, had| clearly gone by the facts borne from the assessment records, therefore the order passed by the CIT(A) could not be held to be erroneous. We further find force in the alternative contention of the Ld. AR, that even if the version of the revenue that the CIT(A) had erred in admitting the 'additional evidence' , is accepted, still in the backdrop of the fact that the said fresh documents were in the nature of clinching evidence, which even if acted upon by the CITIA), would not lead to revelation of any new fact, but would only fortify the claim of the assessee that the four flats at Raheja Empress (supra) were interconnected by a capsule lift, and were used as a single residential unit, which was a fact that could fairly be gathered from the documentary evidence which were furnished by the assessee with the A.O, and as such was not a new fact, therefore no useful purpose would had been served on performing the ritual of forwarding the evidence/ material to the A.O, for his comments. We find strong reasoning in the aforesaid contention of the Ld A.R, that now when the very existence of the aforesaid fact borne from the assessment 12 reford, would not be effected, and would continue to remain as such, even if the fresh documents in the nature of additional evidence were not acted upon by the appellate authority, therefore not forwarding of the said 'additional evidence' which only goes to further fortify a fact existing on record, and not a revelation of a new fact, would have no material bearing on the conclusion arrived at by the CIT(A): We find outselves to be in agreement with the view adopted by the coordinate bench of the Tribunal, in the case of: NE Technologies India (P) (supra): Thus in light of our aforesaid observations, the 'Ground of appeal no.1' raised by the revenue is dismissed 9_ We now take up "Ground of appeal No. 2' SO raised by the revenue before us. We find that the 'Ground of appeal No. 2' so raised by the revenue before u8, therein assailing the order of the CIT(A) on the ground that the latter had erred in allowing the deduction u/s 54 on the sale of 2 flats bearing No. 1501 and 1502 at Kowli Rameshwaram Apt; whereas deduction 4/s 54 is available extent of sale of only to the one residential flat, is absolutely misconceived, said issue s0 as the assailed by the revenue before us, neither arises impugned from the order , i.e the order of the CIT(A), disallowance/addition nor any on the said ground was made by the A.O while framing the assessment: We thus, in light of the fact that assailed by the the issue revenue by way of 'Ground of appeal No 3 , does not arise from the orders of the lower authorities, and the revenue cannot be allowed to build up a new case before us, therefore refrain from adjudicating the 'Ground of appeal No. 2 SO before raised by the revenue us. The 'Ground of appeal No. 2' is thus reason that the dismissed, for the same does not arise from the us_ impugned order before 13 10_ We now advert to 'Ground of appeal No. 3' raised by the revenue before us. That it was submitted by the Ld. DR, that the CIT(A) in the absence of any 'material' being placed on record by the assessee, which could go to establish that the Flat No(s). 901, 902, 1001 and 1002, in Raheja Empress, Veer Savarkar Marg, Prabha Devi, Mumbai;, were being used as a composite residential house, had therein erred in allowing the deduction under Sec: 54, in terms of the claim raised by the Jassessee in her return of income. That on the other hand the Ld. A.R submitted that during the course of the assessment proceedings, substantial material was placed on record by the assessee, which therein inescapably proved that the four flats purchased by the assessee at Raheja Empress (Supra), were interconnected by a capsule lift, and used by the assessee alongwith her family members, as a composite residential house. That during the course of the hearing of the appeal, the Ld. AR referring to the observations of the A.O, that though the assessee had purchased the four flats in January 2011, while for the letter issued by M/s Bluestar Evevator (India) Ltd_ dated. 15.10.2011, therein revealed that at the time the four flats in Raheja Empress (supra) were purchased by the assessee, the same were not interconnected from inside, therein drew our attention to a letter dated 17.12.2010, which was addressed by the assessee to the aforesaid M/s Bluestar Elevator (India) Ltd (supra), from where it could be fairly gathered that an order for purchase of the aforesaid two home lifts was already placed on the aforesaid company as on 18.12.2010, and an advance of 20% already stood paid to the company. It was thus averred by the Ld. A.R, that in light of the aforesaid facts, the aforesaid adverse inferences so drawn by the the AO by referring to the date of purchase of the lifts, therein did not hold any ground. 14 11_ We have heard the Ld: Representative of both the parties, perused the orders of the lower authorities and the material available on record. We are of the considered view that it remains as a matter of fact; that substantial evidence was brought on record by the assessee during the course of the assessment proceedings, from where it could be safely concluded that the four flats purchased by the assessee at Raheja Empress, Prabha Devi, Mumbai; were interconnected by a capsule lift, and were being used by the assessee alongwith her family nembers, as a composite residential unit: We find that despite the fact that the assessee had categorically stated during the course of the assessment proceedings, that the Flats No(s): 901 and 902 on the 9th floor were being used as bedrooms, while for the Flats No(s): 1001 and 1002 at the top of the flats on the 9th floor, were being used as kitchen and drawing room, and had also placed on record of the A.O the opinion of an engineer, therein certifying that the installation of the lifts would not endanger the structural stability and the safety of the building, as well as had furnished with him & copy of the NOC' which was obtained by the assessee from Raheja Empress Apartment Owners Association; Mumbai; the A.O proceeded with in a whimsical manner , and had drawn adverse inferences as regards the claim raised by the assessee. We find, that the AO did not find favor with the |documents which were placed on record by the assessee, to substantiate her claim that the aforesaid four flats were interconnected by a capsule lift, and were used as single residential house, and had rejected the same on hyper technical grounds We further find, that the A.O instead of clarifying his doubts the as regards authenticity of the aforesaid claim of the assessee, instead of carrying out any independent verifications, which to our considered view hhe could have fairly done by getting a spot inspection through his inspector; rather sat tight and chose to refrain from carrying out any 15 such verifications on his part, nor placed on record any material, which could either g0 to prove that the respective documents furnished by the assessee were bogus, or could go to dislodge the aforesaid claim of the assessee, by proving the same to be an inauthentic claim: We are of the considered view that the adverse inferences drawn by the A.O, as regards the claim of the assessee, that thelaforesaid four flats were interconnected by way of a capsule lift, is notbased on any material available on record, but is merely supported by fanciful observations of the A.O. We are unable to persuade ourselves to subscribe to the view of the A.O, that as the assessee had failed to place on record the approval from the BMC as regards installation of the capsule lift to interconnect the aforesaid four flats, the same would g0 to disprove the claim of the assessee, that the aforesaid four flats were interconnected by a capsule lift We are of the considered view, that in light of the facts available on record, it can safely be concluded that the four flats, i.e Flats No(s) 901 and 902 on the(9th floor and the Flats No(s). 1001 and 1002 on the IOth floor, at Raheja Empress, Prabha Devi, Mumbai, were interconnected by a capsule lift, and were used by the assessee and her family members, as single residential property: We are of the considered view that though the assessee to her level best had proved her aforesaid claim before the A.O, however the latter had desperately failed to disprove the same. We thus in light of our aforesaid observations, find ourselves to be in agreement with the claim of the assessee, that the four flats, i.e Flats No(s): 901 and 902 on the 9th floor and the Flats Nols). 1001 and 1002 on the 1Oth floor, at Raheja Empress, Prabha Devi; Mumbai, were interconnected by a capsule lift, and were used by the lassessee and her family members, as a single residential unit: We are of the considered view that in the backdrop of the facts of the present case, now when the assessee, as observed by us hereinabove, 16 had invested towards purchase of four flats, which were interconnected by a capsule lift and used by the assessee and her family members as a single residential house, it can safely be cdncluded that the assessee had invested towards purchase of one residential house, and as such would duly stand entitled towards claim of deduction under Sec. 54, as regards the aggregate of the investment s0 made by her towards purchase of the said four flats, as claimed in the return of income. That our aforesaid view is fortified by the order 0f the 'Special Bench' of the Tribunal in the case of: Sushila M Jhaveri (supra); wherein the Tribunal had held that where an assessee had purchased more than one residential units, which are adjacent to each other, and had converted the same into one residential house, then the same would be a case of investment in one 'residential house' , and the assessee would duly stand entitled towards claim of deduction under Sec 54 and Sec. 54F' of the 'Act' as regards the aggregate of such investments: We find no reason to take different view as regards the entitlement of the assessee towards claim of deduction u/s 54,as had been so adopted by the CIT(A) 12_ The 'Ground of appeal 3' raised by the revenue is dismissed. 13_ That the Ld. DR had not raised any contention in context of 'Ground of appeal No. 4 and 'Ground of appeal No 5', therefore the same are dismissed, as not pressed 14 The appeal of the revenue is dismissed. Order pronounced in the open court on 18/01/2017. 17 - (B.R BASKARAN) ACCOUNTANT MEMBER (RAVISH SOOD) JUDICLAL MEMBER Mumbai, Date 18th, January, 2017 Copy to 2) The Appellant The Respondent The CIT(A) concered 3 The CIT concerned The DR, ' Bench, Mumbai Guard file By Order Dy IAsstt Registrar IT.A.T, Mumbai