LAKSHMI NARAYAN AGARWAL,KOLKATA vs. INCOME TAX OFFICER -WARD37(3), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “D”, BENCH KOLKATA BEFORE SHRI K. NARASIMHA CHARY, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.01/Kol/2014 ("नधा"रण वष" / Assessment Year :2004-2005) Lakshmi Narayan Agarwal, Vs. The Income Tax Officer, “Sparsh”4th Floor, 35/8, Ward-37(3), Kolkata- Poddopukur Road, Kolkata- 700001 700020 "थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ACVPA 3271 C .. (अपीलाथ" /Appellant) (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee by : Shri A.K.Tibrewal, FCA राज"व क" ओर से /Revenue by : Subhro Das, JCIT सुनवाई क" तार"ख / Date of Hearing : 07/10/2016 घोषणा क" तार"ख/Date of Pronouncement 19/10/2016 आदेश / O R D E R Per Dr.Arjun Lal Saini, AM: The captioned appeal filed by the assessee pertaining to the assessment year 2004-2005, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-XXIV, in Appeal No.1219/CIT(A)- XXIV/Set-aside/37(3)/12-13, dated 19.12.2012, which in turn arises out of an order passed by the Assessing Officer u/s.147/143(3) of the Income Tax Act (in short the ‘Act’), dated 29.12.2010. 2. Brief facts of the case qua the assessee are that the assessee’s income tax return for assessment year 2004-05 was assessed by AO u/s.143(3) of the Act. Subsequently, the AO detected that the assessee invested in a property and not shown the amount of capital gain of Rs.13,45,760/-. Therefore, the AO presumed that there was an excess claim of Rs.13,45,760/- U/s.54F of IT Act. Hence, believing the reason that income chargeable to tax escaped assessment for the year, the AO has issued notice u/s.148/147 of the IT Act. The AO observed that the assessee has invested in a property and thus claimed the excess amount

of Rs.13,45,760/- as an exemption U/s.54F of the Act. Therefore, based

on the above reasoning, the AO added Rs.13,45,760/- to the total income

of the assessee.

filed an appeal before the ld. CIT(A), who has also confirmed the addition

made by the AO observing as under :-

“3.3 The additional evidences sent to the A.O. for remand report. The A.O. sent the remand report on 16.09.13 which was received on 17.09.2013 which is as under:- "In compliance, the A.R. of the assessee appeared and made submission stating that as per I. T. Act, exemption U/s. 54F is available if the assessee invested the consideration of L. T. Capital Gain amount for a residential property one year before or 3 year after the Long Term Capital Gain and the I. T. Act nowhere stated that the consideration of L..T. Capital Gain should be appropriated for purchasing of residential property which was the reason for the initiating such proceeding u/ s. 148 of the Act. In the instant case, proceedings for reassessment was initiated stating that the assessee invested in a property by not appropriating the amount of Capital Gain. Assessee submitted some case laws to defend his case i.e. in support of his claim. I have gone through the submission of the assessee, the recorded reasons for initiating proceedings u/s. 148 and assessment order u/s. 143(3}/147 dated 29.12.2010. Considering the above submission and facts of the case, it is appeared that there is no such irregularity in this submission of the assessee." 3.4 The additional evidences admitted under Rule 46A of the I. T. Rules after giving proper opportunity to the A.O. The copy of the Remand Report given to the A/R for rejoinder. The A/R filed rejoinder which is as under:- "In the said Remand Report, the learned assessing officer stated ''that there is no irregularity in the submission of the assessee" based on our submissions and other documentary evidences and examination of books of accounts for the financial year 2002-03 & 2003-04. " Our submission is that.-

"The learned Assessing Officer was wrong in denying the deduction u/ s. 54F without assigning any reason for the same at the time of passing the assessment order U/s. 147/143(3). He did not mention a word on Long Term Capital Gain and deduction u/s. 54F in his said assessment order.”

The learned Assessing Officer has finalized his assessment order u/s. 147/143(3) on 29.12.2010 in hurry without giving proper attention to the merit of the assessment.

However, the learned Assessing Officer, at the time of passing his assessment order u/ s. 143 dated 17.11.2006, has mentioned in the 2nd and 3rd paragraphs on his order that the assessee has earned Long Term Capital Gain of Rs. 13,45,760/- and claimed deduction U/s. 54F by investing the same in the residential property. The copy of the said Assessment Order U/s 143(3) is enclosed for your ready reference.

The learned Assessing Officer in his Remand Report dated 17.09.2013 has clearly mentioned that:-

"I have gone through the submission of the assessee, the recorded reasons for initiating proceedings u/s. 148 and assessment order u/s. 143(3)/147 dated 29.12.2010. Considering the above submission and facts of the case, it is appeared that there is no such irregularity in this submission of the assessee. "

The assessee has claimed the deduction u/ s. 54F for the amount invested in the Residential Flat during the period i.e. one year before and two year after the date of transfer of long term capital asset as per the time limits stipulated in the said section. Therefore, we request you to please allow the exemption of Rs. 13,45,760/ - to our client as provided in section 54F of Income tax Act, 1961. 3.5 I carefully considered the assessment order, submission of the appellant, additional evidences filed by the appellant and copy of the remand report and its rejoinder. I found that the capital gains arise of Rs. 13,45,760/- out of sales of shares of various companies. The appellant shown the investment in flat. The appellant given the advances to the M/s. TOLLY Nirman Private Ltd. On going through the details and evidence filed by the appellant, I found that the appellant taken the possession after 10th January, 2007. Tolly Nirman Pvt. Ltd. written a letter to the appellant which is as under:-

'The company has made arrangement for delivery of possession of the above mentioned flat along with one covered car parking space to you. The keys of the said flat are lying with the site-supervisor. On production. of this letter, the said site-supervisor will handover you the keys of the flat. You are therefore, requested to kindly issue a letter (copy of which is enclosed) regarding your obtaining delivery of the peaceful possession.

You shall abide by the following terms and conditions:-

1) Do not cut/break or damage any concrete member (i.e column, beam and slab), otherwise structural failure may/ shall occur in future.

2) Do not change the DB position and electrical layout without prior intimation.

3) No split unit/A. C unit or related pipeline to be fixed outside the flat area. Out door unit of the Split A.C. to be fixed inside the Balcony only.

4) Balacony internal painting colour to be with White Acrylic and all grills colour to be balck (Matt finish)

5) All balcony grills at upper part to be maintained as per our drawing.

6) Do not carry any heavy material in the elevator.

7) Do not make any elevator / windows/ sewerage lines/pipelines. addition/ alteration in outer elevator/windows / sewerage lines/pipelines.

From the above letter it established that the appellant takes possession after 10.01.2007. The registration of this property also held on 23.02.2007. The exemption u/s. 54F entitled:-

"Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has within a period of one year 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, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say:-

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the not consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45. From the above, it proved that the flat was completed on 10.01.2007 and the appellant also not taken the possession of the flat before 10.01.2007. Hence, it established that the appellant purchased the flat beyond 2 year from the capital gain arised. The case law relied upon by the appellant are not related to the purchase of property within stipulated time. Hence, the appellant is not entitled the exemption u/s. 54F of the I. T. Act. Therefore, I confirm the addition made by the A.O. of Rs.13,45,760/- by rejecting the claim u/s 54F of the I. T. Act. This ground of appeal is not allowed.”

Not being satisfied with the order of CIT(A), the Assessee is in further

appeal before us.

grounds of appeal but at the time of hearing the solitary grievance of the assessee has been confined to the issue that reassessment

u/s.147/148 was without jurisdiction, illegal and without any tangible

material.

and capital gain thereof Rs.13,45,760/- ( Excess exemption claimed by the assessee U/s 54F of the Act) as escaped assessment. The documents and the papers relating to the addition under consideration

were available before the AO at the time of original assessment

u/s.143(3), hence, the AO did not bring any new or cogent evidence on record to show that the income has escaped assessment. It is merely a the assessment cannot be reopened. However, the assessee did not raise this ground properly before the ld. CIT(A). In addition to this, the Ld.

AR has relied on the following judgments :-

(1). Mahesh Pal Arora Vs. ITO: ITA No. 206/Kol/2016: Hon`able ITAT has observed the followings:

“7.2 We also find from the provisions of section 54F(4) of the Act that in any case the claim of exemption u/s. 54F could not be disturbed in A.Y 2005-06 even if the construction of residential house has not been completed by the assessee within 3 years from the date of transfer. For the sake of convenience, the provisions of section 54F(4) of the Act is reproduced herein below:- Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. ) 54F (1) *** *** *** *** *** *** (a) *** *** *** *** *** *** (b) *** *** *** *** *** *** (2) to (3) *** *** *** *** *** *** (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of assessee for furnishing the return of income under sub- section(1) of section 139 in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset: Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-

(i) The amount by which- (a) The amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) The amount that would not have been so charged had the amount actually utilized by the assessee for the purchase or construction of the new asset within the period specified in subsection (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) The assessee shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid.”

7.3 We also find that the decision of the Hon’ble Delhi High Court as relied upon by the assessee in the case of CIT Vs. Kuldip Singh (supra) is well placed, wherein it has been held as under:-

• The basic purpose behind section 54 is to ensure that the assessee is not taxed on the capital gains, if he replaces his house with another house and spends money earned on the capital gains within the stipulated period [Para 12]

• The view taken gets support from sub-section (2) to section 54. The aforesaid sub-section requires the assessee to deposit unspent amount not utilized by the assessee for purchase or construction of a new asset before the date of furnishing of return, in a specified account. It further states that the amount, if already utilized for purchase or construction of the new asset, the amount so deposited will be deemed to be cost of a new asset subject to the proviso. The word ‘purchase’ is used in subsection (2) and indicates that the said word is not restricted or confined to registered sale deed or even possession but has a wider connotation.

• The proviso supports the aforesaid interpretation and stipulates that the amount deposited but not utilized wholly or partly for purchase or construction of new asset within the specified period will be charged to tax under section 45 in the previous year in which the period of three years from the date of transfer of original asset expired. The period of three years is stipulated as this is longer period specified in the subsection (1) to section 54. It is only the balance amount which is not utilized which is to be brought and charged to tax. The entire amount of sale consideration or the capital gains is not to be brought to tax, but the unspent amount/figure is taxed. [Para 13] • In view of the aforesaid position, no substantial question of law arises and thus the present appeal is dismissed. [ Para 14]” 7.4 Hence, we are convinced that there is no case for the ld.AO to disturb the claim of exemption u/s. 54F of the Act in A.Y 2005-06. Accordingly, the basic reason on an issue for which the assessment was re-opened fails. Hence, any addition made other than the reason for which the assessment was reopened would also automatically fail as the assumption of jurisdiction itself fails on the part of the ld.AO. This issue is now well settled by the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd reported in 331 ITR 236 Bom.) 8. Respectfully following the aforesaid judicial precedents, we have no hesitation to quash the re-assessment proceedings on the ground that there was no tangible material with the ld.AO for initiation of re-assessment proceedings. We also find that in view of provisions of section 54F(4) r.w. proviso thereon, there is no scope for making any addition in A.Y 2005-06. Hence, there could not be any reason to believe that income has escaped assessment for the A.Y 2005-06. Accordingly, ground nos. 1 & 2 raised by the assessee are allowed.

The assessee also relied on the following judicial pronouncements :-

i) Dhadda Exports Vs. ITO, [2015] 58 taxmann.com 176 (Rajasthan); ii) CIT Vs. M/s EIH Ltd., ITA No.6 of 2014 (Calcutta High Court); iii) Shree Sayan Vibhag Sahakari Vs. DCIT, [2016] 69 taxmann.com 245 (Gujarat) iv) CIT Vs. Kelvinator of India Ltd., [2010] 187 TAXMAN 312 (SC) and CIT Vs. m/s Telaijan Tea Co. Ltd., ITA No.49 of 2008 (Cal HC) v)

The sum and substance of all the judgments cited above, is that ld. AO

merely reviewed the assessment order and tried to arrive at different

conclusion that income has been escaped assessment without brining

any tangible material on record.

that notice issued u/s.147/148 was correct because it has been issued by the AO after recording valid reasons and after taking prior approval of the Additional Commissioner of Income Tax. The ld. DR also submitted that the there was no information available before the AO at the time of original assessment order. In addition to this, ld. DR has primarily reiterated the stand taken by the AO, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 7. Having heard the rival contentions, perused the material available on record, we are of the view that there is a merit in the submissions of the ld. AR, as the proposition canvassed by the ld. AR of the assessee are supported by facts narrated above. Ld. AR has clearly stated that ld. AO has reviewed the assessment order which is not allowed under the Act. The ld. AO did not bring any tangible material on record to show that the income has escaped assessment. Therefore, considering the above factual position and the case law, we allow the appeal filed by the assessee.

उप/सहायक पंजीकार (Asstt.