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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
Assessment Year : 2010-11 Vinodbhai Ugardas Patel Dy.CIT, Cir.2(1)(1) Nirma House Vs Ahmedabad. B/h. Petrol Pump Ashram Road Ahmedabad 38009. PAN : AAVPP 9679 F. (Applicant) (Responent) : Shri S.N. Soparkar, Sr.Advocate Assessee by Revenue by : Ms.Saumya Pandey Jain, Sr.DR सुनवाई क� तारीख/Date of Hearing : 20/06/2024 घोषणा क� तारीख /Date of Pronouncement: 06/09/2024 आदेश/O R D E R आदेश आदेश आदेश PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This is Assessee’s appeal against the order of the ld. Commissioner of Income Tax(A), Delhi dated 26.07.2023 passed under section 250 of the Income Tax Act, 1961 (“the Act” for short) for the assessment year 2010-11.
The grounds raised in the appeal of the assessee read as under:
“1. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts.
2. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming addition on account of exemption claimed u/s 54F of Income Tax Act of Rs 59,32,904.
2 3. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming interest u/s 234B of Rs 12,37,715.
4. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming interest u/s 234C of.Rs 5,816.
In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in confirming demand of Rs 24,56,978/-.
6. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in not deciding ground of initiating penalty proceedings u/s 271(l)(c) of IT Act.”
The present appeal is barred by limitation by 105 days’ delay. An application explaining reasons for delay was filed, stating that it was on account of Accountant of the assessee, who was handling the tax matters, and who in turn forgot to submit the appellate order to the assessee, that the delay occurred. An affidavit of the accountant, Shri Suraj Darbar, stating the said fact was also filed before us.
The ld.DR objected to the condonation of delay arguing that the assessee had not adduced sufficient cause for the same.
Considering the arguments made by both the parties before us, we consider it a fit case for condoning the delay noting sufficient cause adduced by the assessee for the same. Surely the assessee cannot be faulted for the delay in filing of appeal on account of inaction on the part of his accountant, who has taken responsibility for the same. Accordingly the delay is condoned, and the appeal of the assessee taken up for adjudication hereunder.
Though the assessee has raised as many as six grounds in the appeal, the sole issue pressed for adjudication arising in the present appeal which has come up before us in second round, relates to the 3 disallowance of claim of exemption of capital gains under section 54F of the Act amounting to Rs.59,32,904/-.
The facts pertaining to the same being that the assessee had alongwith other co-owners sold land in the impugned year for Rs.2,29,46,000/-, his share in the same being Rs. 64,75,000/- .The assessee had computed capital gains earned thereon and claimed exemption thereof under section 54F of the Act on account of investment of the capital gains in a new residential property amounting to Rs.59,32,904/-. The AO noted that the assessee had purchased two plots of land prior to the selling of old asset for Rs.67,19,250/- and Rs.67,14,600/- and noting that the investment in land had been made prior to the selling of original asset, and also noting that no documentary evidences towards construction of the residential house, which was necessary condition for claiming exemption under section 54F of the Act, was filed by the assessee, he denied the assessee’s claim of exemption. The same was confirmed by the ld.CIT(A) in the first round, but the ITAT restored the issue back to the AO to verify the entire issue de novo and satisfy himself that conditions of the section 54F of the Act had been complied with by the assessee. The ITAT, at the same time, noted that mere delay in construction and completion of the construction activities of the residential house will not act as fetter for allowability of section 54F of the Act. The order of the ITAT was placed before us, and the findings are contained in para 8 to 11 of the order as under:
“8. We have considered the rival submissions. The controversy in the instant case revolves around the eligibility of deduction of S. 54F in the facts of the case. In this instant case, the assessee has claimed deduction under section 54F on the ground that a plot of land has been purchased on which residential house was constructed by the assessee. It is the case of the assessee that the assessee is entitled to the benefit of benevolent provision of section 54F on deployment of net consideration arising on sale of 'original asset' ( transfer
4 of a long term capital asset not being a residential house) for the purpose of construction of residential house notwithstanding delay in construction within the stipulated period of 3 years. At the threshold, we find ourselves in agreement with the proposition canvassed on behalf of the assessee that section 54F of the IT Act is a beneficial provision for promoting the construction of residential house and therefore requires to be construed liberally for achieving that purpose. The intention of literature is to encourage investments in the acquisition of residential house and completion of construction or occupation is not the strict requirement of the law so long as the consideration has been appropriated for construction of a residential house. The condition of construction of residential house within a period of 3 years has been somewhat read down and relaxed by the judicial precedents as relied upon by the assessee. We, thus observe that merely because the construction could not be completed within a stipulated period of three years after the date of transfer of original asset as contemplated under section 54F of the Act, this by itself would not act as an handicap for availing benefit of 54F.
We, however, simultaneously note that several objections on facts have been recorded by the CIT(A) while denying section 54F of the Act. The objections ranges from purchase of only plot of land and no evidence of construction cost tagged thereon to objection in the form of purchase of plot prior to transfer of original asset in derogation of condition stipulated under S. 54F of the Act whereby deployment of funds in construction activity only after the transfer of original asset is eligible for relief. These objections recorded by CIT(A) as extracted supra are essentially factual in nature. The money stated to be utilized and appropriated towards purchase of plot of land and construction of residential house thereon after the transfer of original asset in terms of S. 54F is required to be ascertained to determine the eligibility of claim. In the absence of factual details before us, we are unable to address the factual controversies involved. It was asserted on behalf of the assessee that the construction of a residential house has been eventually completed. Copies of some electricity bills were produced to lend support to such assertions. However, a bare reading of S. 54F would suggest that construction of house beyond stipulated time limit of 3 years is not the only condition precedent for eligibility of deduction claimed. The other conditions would thus continue to apply.
Pertinent here to note that investment made for the purposes of construction of new residential House prior to the sale of original asset would not be entitled for deduction under section 54F of the Act. The money deployed in purchase of land and construction of residential house thereon after the sale of original asset is however required to be considered for the purposes of determination of eligibility under section 54F of the Act subject to fulfillment of other conditions.
Thus, in the totality of circumstances, we consider it expedient that the matter is examined afresh after granting proper opportunity of being heard to the assessee. It will be open to the AO to verify the entire issue de novo and satisfy himself that the conditions of section 54F of the Act have been duly complied with. However, in the same vain, we clarify that mere delay in completion of construction activity of the residential house will not act as a fetter for eligibility of deduction under section 54F of the Act. The issue is thus 5 set aside and remitted back to the file of the AO in terms of directions noted above.
As is evident from the above, the ITAT interpreted the provision of section 54F of the Act and reading down the stipulation contained therein of completion of construction of residential house within three years held that merely because the construction could not be completed within three years, exemption under section 54F could not be denied. However, at the same time, it was noted that the facts relating to the amount invested by the assessee in the construction of new asset were not available on record, and accordingly, pointing out that, though the completion of new construction would not act as fetter for claiming exemption under section 54F of the Act, however, at the same time, the ITAT restored the issue to the file of the AO to denovo examining the claim of exemption of the assessee.
9. Subsequently, we have noted that, in the set aside proceedings before the AO, the assessee did not file any evidence of construction activity carried out by it, despite several opportunities given by the AO, and the AO accordingly reiterated the addition made to the income of the assessee by denying grant of exemption under section 54F of the Act of Rs.59,32,904/-. Before the ld.CIT(A) also none appeared on behalf of the assessee, and accordingly, the ld.CIT(A) passed an ex parte order confirming the addition made by the AO.
The pleadings of the ld.counsel for the assessee before us was that, the assessee be granted one more opportunity to make out its case. It was pointed out that in the first round itself, the ITAT had noted that the assessee was in possession of the evidences of construction of new property by way of some electricity bills, which were noted in the order of the ITAT to have been filed by the assessee.
6 The contention of the ld.counsel for the assessee was also that the CIT(A)’s order is ex parte and therefore is without considering the submissions, which the assessee wants to make in support of its case.
11. The ld.DR vehemently objected to the same, stating that the assessee had not cooperated even before the AO, and there was no occasion to give the assessee another opportunity to prove its claim. Without prejudice to his objection, he stated that instead of the issue being restored to the ld.CIT(A), it may be restored to the AO, since the facts, if any brought out by the assessee in support of its claim of the exemption would need verification.
We have heard contentions of both the parties.
The short point for consideration is, whether the issue be restored back to the file of the Revenue authorities below for giving the assessee another opportunity to prove its claim of exemption under section 54F of the Act of Rs.59,32,904, to be decided in accordance with the directions of the ITAT in the first round. Undeniably, the assessee has not given any submissions in support of its claim before the AO, and has failed to participate in the appellate proceedings also. It is clear, therefore, that the assessee has been lax in pursuing its matter before the Revenue authorities. No plausible reasons for the same have been adduced before us. In the light of the same, though the assessee ideally should not be given any further opportunity, but in the interest of justice considering that even the ITAT noted the assessee to be in possession of certain facts/ documents to prove construction activity being carried out by it on the land purchased and the direction of the ITAT being that the assessee be allowed exemption even if construction is incomplete, we consider it fit to restore the matter back to the AO, giving the assessee
7 one more opportunity to prove its claim of exemption under section 54F of the Act. The AO is directed to examine the issue afresh in accordance with the directions of the ITAT in the first round. The assessee is directed to cooperated in the proceedings failing which the AO is at liberty to reiterate his order passed earlier.
Further the matter is restored back subject to levy of cost of Rs.1000/- on the assessee for giving no plausible reason for not attending the assessment as well as appellate proceedings. The assessee is directed to deposit the same with the Gujarat State Legal Services Authority, Ahmedabad. Thus, the appeal of the assessee is allowed for statistical purpose in the terms given above, and subject to payment of cost of Rs.1000/- as directed above.
Order pronounced in the Court on 6th September, 2024 at Ahmedabad.
Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad, dated 06/09/2024 vk* आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड# फाईल / Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार