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Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH
Before: SHRI. SANJAY GARG & DR. B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’A’, CHANDIGARH BEFORE SHRI. SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.407/Chd/2012 Assessment Year: 2007-08
Sh. Parveen Kumar Vs. The ITO M/s Malikpuria Paints Ward-4 Railway Road, Kaithal Kaithal
PAN No. ABFPK5832N ITA No.408/Chd/2012 Assessment Year: 2007-08
Sh. Parveen Kumar Vs. The ITO L/H Late Smt. Darshana Devi Ward-4 W/o Sh. Purshotam Dass, Kaithal 486/6 Chaudharian Mohalla Bada Katehra, Kaithal
PAN No. AKNPJ1824L (Appellant) (Respondent)
Assessee By : Shri. Deepak Aggarwal Revenue By : Smt. Chandrakanta
Date of hearing : 14/08/2018 Date of Pronouncement : 28/09/2018
ORDER PER DR. B.R.R. KUMAR, A.M:
Both the above appeals have been filed by the Assessee against the order of the Ld. CIT(A), Karnal dt. 10/01/2012.
Assessee has raised the following grounds in ITA No. 407/Chd/2012:
That the order of the learned Commissioner of Income Tax( Appeals) is against law and facts. 2. That in the facts and circumstances of the case of the appellant, the order of the Commissioner of Income Tax(Appeals) in confirming the orders of the Assessing Officer in adopting the valuation of Land situated at prime location of the town as on 1.4.1981 at Rs.21.77 per Sq.Yds. against valuation declared at Rs. 142.86 per Sq.Yds inspite of overwhelming evidence is altogether arbitrary, low beyond imagination, illegal, void and uncalled for. 3. That in the facts and circumstances of the case of the appellant the learned Commissioner of Income Tax(Appeals) has grossly erred in confirming the order of
the Assessing Officer in estimating the construction cost of property at Rs.l 18374/- as against Rs.2,00,000/- which is altogether arbitrary, illegal, void and uncalled for. 4. That the order of the learned Commissioner of Income Tax( Appeals) in confirming the orders of the Income Tax Officer with regard to disallowance of deduction u/s 54 in respect of amount paid at Rs.788398/- during the period 3.10.2005 to 14.11.2005 for purchase of flat at Baddi(HP) is altogether arbitrary illegal, void and uncalled for.
That in the facts and circumstances of the case of the appellant the order, the learned Commissioner of Income Tax(appeals) in confirming the order of the AO in making addition of Rs.20,84,070/- as taxable Long Term Gain on sale of property is altogether arbitrary, illegal, void and uncalled for.
That the order of the learned Commissioner of Income Tax(Appeals) in confirming the addition of Rs.l37000/- for alleged low Household expenses is arbitrary, illegal and uncalled for.
2.1 Revised ground of ITA 407/Chd/2012 reads as under:
Ground No. 2 : That in the facts and circumstances of the case of the appellant, the order of the Commissioner of Income Tax (Appeals) in confirming the orders of the Assessing Officer in adopting the valuation of Land situated at prime location of the town as on 1.4.1981 at Rs.21.77 per Sq. Yds. against valuation declared at Rs,5007- per Sq. Yds. inspite of overwhelming evidence is altogether arbitrary, low beyond imagination, illegal, void and uncalled for.
2.2 Assessee has raised the following grounds in ITA No. 408/Chd/2012 :
That the order of the learned Commissioner of Income Tax( Appeals) is against law and facts.
That the order of the learned Commissioner of Income Tax(Appeals) in confirming initiation of proceedings u/s 148 is altogether, illegal, bad in law and uncalled for.
That in the facts and circumstances of the case of the appellant, the order of the Commissioner of Income Tax(Appeals) in confirming the orders of the Assessing Officer in adopting the valuation of Land situated at prime location of the town as on 1.4.1981 at Rs.21.77 per Sq.Yds. against valuation declared at Rs.500/- per Sq.Yds inspite of overwhelming evidence is altogether arbitrary, low beyond imagination, illegal, void and uncalled for.
That in the facts and circumstances of the case of the appellant the learned Commissioner of Income Tax( Appeals) has grossly erred in confirming the order of the Assessing Officer in estimating the construction cost of property at Rs. 118374/- as against Rs.2,00,000/- made by her husband in 1981 -82 which is altogether arbitrary, illegal, void and uncalled for.
That in the facts and circumstances of the case of the appellant the order, the learned Commissioner of Income Tax(appeals) in confirming the order of the AO in working out taxable Long Term Gain on sale of property at Rs.l 569826/- is altogether arbitrary, illegal, void and uncalled for. 6. That the order of the learned Commissioner of Income Tax(Appeals) in confirming disallowance of Interest of Rs.73048/- in respect of alleged interest free advances to Smt.Kusum Rani is altogether arbitrary, illegal and uncalled for.
2.3 Revised ground of ITA 408/Chd/2012 reads as under: Ground No. 7 That the CIT (A) is not justified in confirming the order of the Ld. AO in adopting the Cost Inflation Index (Cll) for the year 1997-98 in place of Cll for the year 1981- 82 on the ground that the assessee inherited the property in the year 1997-98, whereas, as per the assessee the benefit is itself enshrined in section 49(1).
Since the issues raised in both the above appeals are common therefore they are being disposed of by way of this common order. For the sake of convenience ITA No. 408/CHD/2012 is taken as a lead case.
Brief facts of the case are that the assessee sold property measuring 1609 Sq. Yrds. situated at Patti, Kayasth Seth, Kaithal. The Assessing Officer has determined the value of the land @ Rs. 21.77 per yard as cost of acquisition as on 01/04/1981. The Assessing Officer has determine this value based on the sale deeds entered in the year 1981 which ranged from Rs. 8.00 to Rs. 41.81 per sq. yrds. Further the Assessing Officer has adopted cost inflation index of F.Y. 1997-98 for determining the cost of acquisition as the assessee has acquired the property in the said year. The Assessee argued that the cost of plot as on 01/04/1981 was taken at Rs. 500 per sq. yrds because the plot is situated at a prime location. The property was sold in the year 2006-07.
The Ld. CIT(A) confirmed the capital gains calculated by the Assessing Officer.
During the hearing before us, the Ld. AR has submitted that the assessment order of M/s Randhir Palace, Kaithal for the A.Y. 2011-12 and also of Kishore Kumar Khurania for the A.Y. 2008-09 . As per the assessment order in the case of Kishor Kumar Khurania the Assessing Officer has accepted price of land in the area Patti Kayasth Seth, Kaithal was determined at the rate of Rs. 341 per sq. yrds as on 01/04/1981 and for the property at the similar locality the price was taken at Rs. 400/- per sq. Yards. Hence, the Ld. AR argued that once the Revenue has accepted the rate of Rs. 345/- per sq. yrds and Rs. 400/- per sq. yrds the determination of cost @ Rs. 21.77 per sq. yrds. lacks equity justice and is arbitrary. He argued that rate of Rs. 500/- per sq . yrds be determined as the correct price, keeping in view the locality of the property and the comparative prices of the other two assessees mentioned.
On the other hand Ld. DR argued that the rates vary drastically within the range of 500 meters of the locality and hence the value determined by the Assessing Officer taking into cognizance of the sale deeds of the year 1981 be considered as correct.
We have heard the Ld. Representatives of both the parties and perused the material available on record before us.
We find that the Registering Authority of Kaithal has determined the price of the land @ Rs. 345/- per sq. yrds as on 01/04/1981. Hence, we feel that the ends of the justice would be met by restoring the matter back to the file of the Assessing Officer to determine the value of the land by making necessary enquiries after giving an opportunity to the assessee and on considering the stand of the Revenue in the similar cases.
The second issue relates to as to whether the benefit of indexation be given from the year 1997-98 the year from which the assessee acquired the asset on death of the earlier owner or from the year from which the asset was held by the predecessor owner.
The Assessing Officer relied on the Section 49(iiia) and explanation (iii) to Section 48 while determining the cost of acquisition. This matter of determining the cost of acquisition in the case of the asset acquired by succession, inheritance, or devolution has been settled by the decision of Special Bench of the Tribunal in case of DCIT Vs. Manjula J. Shah, 35 SOT 105. This decision was confirmed by Hon’ble Bombay High Court in the case of CIT Vs. Manjula J. Shah, 16 Taxman 42. Similar view has been taken even by Hon’ble Delhi High Court in the case of Arun Shungloo Trust Vs. CIT, ITA No. 116/2011 wherein the decision of Hon’ble Bombay High Court interest the case of CIT Vs. Manjula J. Shah was agreed. The Special Bench of the Tribunal in the case of DCIT Vs. Manjula J. Shah was held as under:
“Section 48 of the Income Tax Act,1961 – Capital gains-Computation of- Assessment Year 2004-05- Whether for purpose of computing ltcgl in hands of an assessee who has acquired an asset under a gift, indexed cost of acquisition of such capital asset is to be computed with reference to year in which previous owner first held asset- Held, yes.” 11.1 The above decision has been confirmed by the Hon’ble Bombay High Court in 16 Taxman 42. Even Hon’ble Delhi High Court vide para 21 has observed as under:
“21. We are entirely in agreement with the findings /ratio recorded by the Hon’ble Bombay High Court in the case of Manjula J.Shah (Supra)”.
11.2 And hence following the above judgments we hereby direct the Assessing Officer to determine the capital gains , keeping in view the cost of acquisition of the asset by the previous owner of the property .
The third issue in the case of Shri. Parveen Kumar in ITA No. 407/CHD/2012 relates to exemption under section 54. The Assessing Officer held that the assessee had an agreement on 14/11/2005 that is much before the date of sale of house on 27/06/2006, with a private builder to purchase a flat in the apartment which was yet to be constructed. He made a payment of Rs. 788398/- in installments for the flat to the builder during the financial year 2005- 06 i.e. before the date of sale of residential house. The assessee has claimed exemption of Rs. 1766880/-, which include the payment of Rs. 788398/- made before ate of sale, out of capital gain. Now the question to be answered is whether the assessee purchased the residential house(flat) or constructed the residential house(flat). The question is very vital because in the case of construction of house, the investment made within three years after the date of transfer of original asset qualifies for exempt where as in case of purchase of house, the investment made on year before or two year after the date of transfer qualifies for exemption under section 54(1). As per CBDT Circular No. 471 dt. 15/10/1986 allotment of a flat by the DDA under the self financing scheme shall be treated as a construction. Similarly, according to CBDT Circular No. 672 dated 16/12/1993, allotment of a flat or a house by a co-operative society of which the assessee is a member is also treated as construction of the house. On the same analogy, the assessee was allotted a flat, the construction of which was not started till the date of allotment. The Assessing Officer held that in view of CBDT’s above circulars, it is held that it was a case of construction and not a case of purchase of house. As such the payment made by the assessee of Rs. 788398/- during the financial year 2005-06 and before the date of transfer of original asset does not qualify for exemption under section 54(1).
The Ld. CIT(A) accepted with the above argument and the analogy given by the Assessing Officer on the grounds that since there was no such house in
existence on the date of purchase of flat it cannot be held to be a case of construction of flat as held by the Assessing Officer.
Before us, Ld. AR argued that the CBDT Circular has been misinterpreted by the Authorities below. While Ld. DR relied heavily on the arguments of the Assessing Officer and the CIT(A).
We have gone through the facts of the case. The pertinent question raised by the Assessing Officer that whether the assessee purchased the residential house (flat) or constructed the residential house (flat) is vital to the issue. In this case we find that the assessee has utilized the amounts for purchase of a living dwelling which is not in dispute. The intention of the legislature is to utilize and plough back the monies obtained out of the sale of house for the purpose of purchase of another house. The interpretation have to be made keeping in view the overall circumstances and peculiarities of each case. The assessee has indeed paid the amounts for acquisition of a new residential house. Having decided that the assessee intended to purchase the house the provisions related to purchase would be applicable which reads as under:
“ and the assessee has within a period of one year or before or two years after the date on which the transfer took place purchased or has within a period of three years after that date constructed one residential house in India then,” 15.1 In the light of the above, the facts of the case are being revisited.
15.2 The date of sale of the property is 27/06/2005. The dates of payments made by the assessee for purchase of house are as under: Date of payment Amount paid Cheque No. Name of Bank 03/10/2005 270059 151415DD Canara Bank 12/11/2005 255562 151418DD -do- 27/02/2006 262577 148406DD -do- 14/11/2005 200 Agreement exp. 11/10/2006 174700 0129712 HDFC Bank 22/12/2006 175000 0127184 -do- 02/01/2007 175000 0170976 Corporation Bank 03/01/2007 175000 0170978 -do-
15.3 Hence keeping in view the factual matrix of the case in the provisions of the Act and the Circulars of the CBDT, we hereby hold that the assessee is
eligible for exemption of the capital gains utilized for the purpose of purchase of a new house.
As a result, both the above appeals of the Assessee are partly allowed for statistical purposes.
Order pronounced in the open Court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 28/09/2018 AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR