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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal of the Revenue and Cross Objection by the assessee are directed against common order of the Commissioner of ITA No. 415/2015 & :- 2 -: CO.43/2015 Income-tax (Appeals)-VI, Chennai for the assessment year 2005-06 in dt 30.10.2014 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
There is a delay of 47 days in filing the appeal by the 2.
Department. At the time of hearing the ld. Departmental Representative has filed an affidavit explaining the reasons for delay and the ld. AR has no serious objections for condonation of delay.
After hearing the submissions, we are satisfied with sufficient and reasonable cause for filing the appeal belatedly and we therefore condone the delay and admit the appeal.
The Brief facts of the case that the assessee is an individual 3. having income from salary, income from house property and interest income and filed return of income on 17.03.2006 with total income of �5,28,430/-. The assessee made investments during the financial year and notice was issued u/s.148 of the Act and assessment was completed on 04.12.2009 determining total income at �9,65,440/-.
Subsequently, the Assessing Officer found that assessee has sold shares of CTL amounting to �81,63,440/- and claimed exemption u/s.54EC and �10,00,000/- by investing in NABARD bonds and for balance claimed exemption u/s.54F by utilizing the funds in the ITA No. 415/2015 & :- 3 -: CO.43/2015 construction of flat in Bangalore. The ld.Assessing Officer found the assessee has not submitted proof of investment in bond �10,00,000/- and also not disclosed value of flat �72,00,000/- in the balance sheet as on 31.03.2005 and believed that the income chargeable to tax has escaped assessment and issued notice u/s148 of the Act. In compliance to notice, the assessee filed letter dated 13.07.2012 to teat original return of income filed for assessment purpose. The ld. Authorised Representative of the assessee appeared and furnished proof of investment of �10,00,000/- in NABARD Capital Gains Bond and explained that the assessee claimed exemption u/s.54F of the Act by investing in residential property. The ld. Authorised Representative also produced copies of sale agreement and construction agreement of flat No.4B, Bearyers Acacia Lakeview, Bangalore. On perusal of the agreements, the Assessing Officer found that the agreement was entered on 13.12.2006 and not complied capital gain accounts scheme before due date u/s..139(1) of the Act and alleged the said investment of �72,00,000/- in the property after due date and observed that assessee has utilized net consideration only after due date of filing of return u/s.139(1) of the Act and denied exemption u/s.54F of the Act and assessed total income of �54,48,750/- and raised demand.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals).
ITA No. 415/2015 & :- 4 -: CO.43/2015
In the appellate proceedings, the ld. Authorised Representative reiterated the submissions made in assessment proceedings and challenged the validity of reopening of assessment as reopening was based on Audit objection and alleged the order of re- assessment is bad in law. The ld. Authorised Representative further argued that the Assessing Officer is not correct in observing that the assessee has not invested the net consideration in the capital gain scheme but assessee has completed the construction of the residential property within the stipulated time and disclosed in Balance Sheet as on 31.03.2008. The assessee advanced money at initial stage and entered into agreement only in 2006 and completed construction within three years from the date of transfer of property which in not disputed by the Assessing Officer except that amount was not deposited in Capital Gain Scheme 1988 before due date u/sec. 139(1) of the Act. The ld. Commissioner of Income Tax (Appeals) perused the grounds and considered the findings of the Assessing Officer and submissions made in the appellate proceedings on the ground of validity of reassessment proceedings, the Commissioner of Income Tax (Appeals) has dealt on the reasons for issue of notice u/s.148 of the Act as there was no evidence in earlier assessment to prove the assessment record is complete and discussed in para 3 & 4 of his order as reasons being genuine and there was a scope for ITA No. 415/2015 & :- 5 -: CO.43/2015 escapement of income. The ld. Assessing Officer has applied his mind carefully before recording reasons and issued notice u/s.148 of the Act as the information of investment in NABARD capital bond u/s.54EC of the Act and the purchase and construction of property are not supported with evidence. Therefore the ld. Assessing Officer has sufficient reasons and re-opening of assessment is in order and confirmed the order of the Assessing Officer and rejected the assessee ground.
On the grounds of claim for deduction u/s.54F of the Act, 5. the assessee has invested the net consideration in construction of residential property only after due date of filing of return. The ld. Authorised Representative filed written submissions dated 27.10.2014 supporting the claim of deduction u/s.54F of the Act alongwith legal provisions and judicial decisions. The ld. Commissioner of Income Tax (Appeals) has considered submissions at page 5 to 9 of his order, with findings and factual aspects of investments, found that the assessee is an individual and due date of filing of return of income is 31.07.2005 and date for filing belated return u/s.139(4) of the Act being 31.03.2007 and the assessee has spent �68,00,000/- for purchasing and construction of the property till 31.03.2007. On comparison with the sale consideration of �81,63,440/- the assessee
ITA No. 415/2015 & :- 6 -: CO.43/2015 has utilized �68,00,000/- before the extended date of filing of return u/s.139(4) of the Act. The property was sold on 14.02.2005 and new residential property was constructed and possession was taken on 15.12.2007, which is within three years period from the date of transfer of asset. The ld. Commissioner of Income Tax (Appeals) found that substantial part of sale consideration was utilized for acquisition of new asset within the stipulated extended time and the assessee has complied with the basic conditions u/s. 54F(1) of the Act. With these findings, ld. Commissioner of Income Tax (Appeals) observed at para 5.2.1 of his order as under:-
‘’5.2.1 I have considered the findings of the AO and also submissions made by the AR of the appellant and also perused the copy of the judgements filed with the submission. In the instant case, the due date of filing return of income u/s 139(1) of the IT Act was 31.07.2005 and due date for filing of return of income u/s 139(4) of the IT Act was 31.03.2007. The appellant has spent ₹68 lakhs till 31.03.2007 for the purpose of purchasing house property. Therefore, out of the total sale consideration of Rs.81,63,440/-, the appellant has utilized ₹.68 lakhs before the extended date of filing of return of income u/s 139(4) of the IT Act. Possession of new property was taken on 15-12-2007 within period of 3 years from date of transfer of original asset i.e on 14-02-2005. Thus, the appellant has purchased the property within the stipulated period u/s 54F(1) of the IT Act. The issue involved in the appeal is whether the assessee is eligible for deduction u/s 54F of the I.T Act in a case where substantial part of sale consideration was utilized for acquisition of new asset within extended date of filing of return of income u/s 139(4) of the I.T Act 1961 particularly when main conditions u/s 54F(1) were fulfilled. The Hon'ble High Court of Punjab & Haryana in the case of CIT vs Jagtar Singh Chaw!a reported in [2013] 215 Taxman 154 held that the assessee is not liable for payment of capital gains tax when substantial amount of sales consideration for purchase of ITA No. 415/2015 & :- 7 -: CO.43/2015 residential property was made before the extended period of limitation of filing of return of income i.e. 139(4) of the IT Act. The Ho'ble ITAT A Bench in the case of Anil Kumar Aurora reported in [2013] 37 CCH 221 (Mum) also held the similar view. The Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan reported in 286 ITR 274 held that the capital gains is not chargeable when the appellant has purchased the new property before the extended due date of filing of return u/s 139(4) of the IT Act for the purpose of claim of deduction u/s 54 of the IT Act. Utilization of the funds in constructing the residential house within the stipulated period should be treated as sufficient compliance of Sec. 54 of the IT Act in the cases decided by Jurisdictional Tribunal in the case of Madhuvanprasad in and K.S.Ramachandran in ITA No.941/Mds/2011. The wording of the Sec.54 & 54F in the manner of utilization of the funds are similar. Therefore, since in this case RS.68 lakhs was utilized by the appellant before 31.03.2007 i.e. the due date of filing of return of income u/s 139(4) of the IT Act in the case of the appellant, the AO shall consider the claim of granting the deduction proportionate to the investment in the new property as on 31.03.2007. Therefore, the AO is directed to recalculate the allowable deduction as per the directions of the above and grant relief accordingly‘’. and deleted the addition. Aggrieved by the order, the Revenue has assailed an appeal before Tribunal.
Before us, the ld. Departmental Representative reiterated the findings of the Assessing Officer and argued that the Commissioner of Income Tax (Appeals) erred in deleting the addition and also failed to appreciate that the assessee has utilized net consideration after due date of filing of return. Further as per capital gain scheme for claiming exemption u/s.54F, the assessee should purchase or construct new asset within three years from the date of transfer of asset and the amount should be deposited under Capital Gain Account
ITA No. 415/2015 & :- 8 -: CO.43/2015 Scheme before due date of return u/s.139(1) of the Act. Therefore, action of the Commissioner of Income Tax (Appeals) in deleting the addition is not in accordance with law.
Contra, the ld. Authorised Representative argued that the 7. assessee has passed through the second round of re-assessment as the earlier assessment was completed u/s.143(3) of the Act r.w.s 147 on 4.12.2009 and on same issue with change of opinion, the Assessing Officer has denied the exemption u/s.54F on the ground that assessee has not utilized the net sale consideration before due date of filing of return of income and the assessee has substainted with evidence of investments before the lower authorities and relied on the order of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal.
We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Departmental Representative contention being the assessee though constructed the property by investing, the net sale consideration but not before the due date of return u/s.139(1) of the Act nor said amount was deposited in Capital Gain Account Scheme. The argument of ld. Departmental Representative was in respect of the period of ITA No. 415/2015 & :- 9 -: CO.43/2015 construction and there is no dispute on investment of the net consideration in residential property and provision of Sec. 54F(1) of the Act are as under:-
‘’54F. (1) [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 net 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:
[Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.] & :- 10 -: CO.43/2015 The assessee has complied the provisions considering the dates as under:- (i) Date of transfer of original asset : 14.02.2005. (ii) The date of filing of return : 17.03.2006. (iii) Due date of return for the Assessment year 2005-06 : 31.07.2005. (iv) Due date of filing belated return : 31.03.2007. (v) Possession of the property : 15.12.2007.
On considering the provisions of law and facts of the case, the assessee has invested �68,00,000/- before due date of filing belated return i.e. 31.03.2007 and took the possession as per the findings of the Commissioner of Income Tax (Appeals) on 15.12.2007, being within three years from the date of transfer/sale of original asset being 14.02.2005. The assessee has not invested in Capital Gain Account Scheme before 139(1) of the Act but complied with the conditions u/s.54F(1) of the Act by purchasing and construction of residential property within three years from the date of transfer of original asset which is not disputed in the assessment proceedings or in appellate proceedings. The provisions of Sec. 54F are beneficial provisions and are to be considered liberally in the aspect of limitation period. But the investment in residential property is must which the assessee has proved with evidence and complied before the lower authorities. The ld. Commissioner of Income Tax (Appeals) relied on the legal provision and submissions of the assessee exhaustively with judicial decisions. Considering the factual aspects, genuiness of the & :- 11 -: CO.43/2015 transactions and beneficial aspects of the provisions, we are of the opinion that the Commissioner of Income Tax (Appeals) has rightly construed the findings and the explanation of the assessee with observation in his order and allowed the deduction u/s.54F of the Act.
Therefore, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and dismiss the ground of the Revenue.
The assessee has filed Cross objection and submitted that 9. the reassessment proceedings are bad in law and erroneous as assessment was reopened only on audit objection, which amounts to change of opinion which is not permissible. The assessee complied the audit objections by submitting the explanation with proof of investments u/s.54EC of the Act and assessee hold only one residential property on the date of sale and other properties are commercial properties.
We find that the reassessment have been initiated only 10. because of non availability of evidence on record. The ld. Commissioner of Income Tax (Appeals) has considered the factual aspects, objections and findings and relied on judicial decisions and rejected the assessees contention and we do not find any infirmity in & :- 12 -: CO.43/2015 the order of Commissioner of Income Tax (Appeals) on the ground of validality of reassessment proceedings and uphold the same. The C.O. filed by the assessee is dismissed.
In the result, the appeal of the Revenue and C.O. of the assessee are dismissed.
Order pronounced on Friday, the 22nd day of April, 2016, at Chennai.