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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 23.02.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 27.08.2019 passed by learned ITO- 1(1), Ujjain [“AO”] u/s 144 read with section 263 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2014-15, the assessee has filed this appeal the grounds mentioned in Appeal-Memo.
Heard the learned Representatives of both sides at length and case- records perused.
Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15
The facts giving rise to this appeal are such that the assessee filed his return declaring a total income of Rs. 2,00,790/- after claiming exemption u/s 54F. The assessment of assessee was framed u/s 143(3) vide order dated 29.07.2016 accepting the returned income. Subsequently, the PCIT, Ujjain passed revision-order dated 25.02.2019 u/s 263 wherein the assessment-order was set aside and the AO was directed to re-examine the claim of exemption u/s 54F. Pursuant to such revision-order, the AO passed a newer assessment-order dated 27.08.2019 u/s 144 read with section 263 whereby the exemption claimed by assessee u/s 54F amounting to Rs. 36,37,171/- was denied. Aggrieved, the assessee carried matter in first- appeal but could not succeed. Now, the assessee has come before us assailing the orders of lower-authorities.
The controversy subsisting between assessee and revenue is qua the allowability of exemption u/s 54F. Ld. AR for assessee explained as to why this controversy has cropped. He submitted that the assessee and two other joint owners (they were uncles of assessee) sold a co-owned property on 17.04.2013 for Rs. 10,20,00,000/- in which assessee’s share was Rs. 1,70,00,000/- (1/6th) which gave rise to a long-term capital gain of Rs. 36,37,171/- chargeable in the hands of assessee. After selling impugned property, the assessee purchased two residential properties, namely Ruby Vila No. 4 for Rs. 31,64,050/- (1/3rd of 94,92,150/-) and Ruby Villa No. 6 for Rs. 35,78,150/- and on the strength of investment, the assessee claimed exemption u/s 54F. However, the AO denied benefit of exemption on the footing that the assessee had purchased two residential houses whereas section 54F permits purchase of only one residential house and prohibits purchase of second house.
Ld. AR does not have any quarrel with the legal provision that section 54F prohibits purchase of second residential house as being claimed by revenue. But he submits that the assessee’s case fits in that legal provision
Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15 and in fact does not violate the same. He submitted that both of the residential houses purchased by assessee, namely Ruby Vila No. 4 and 6 are adjacent to each other for which the assessee filed map to lower-authorities; that one house was purchased from husband and other was purchased from wife; and that both houses were purchased on same date. He submitted that the assessee and other joint owners are family members (uncle-nephew in relation) and the two side-by-side properties were purchased for occupation and use by entire family. He pleaded that in such circumstances, although two properties are identified by separate numbers as Vila No. 4 and 6, but in reality and for practical purposes, they constitute a “single property”. He submitted that in such situations, the courts have accepted claim of exemption; Ld. AR has also filed copies of certain judicial rulings, namely ACIT Vs. Reshmi P. Loyalka (ITAT-Kolkata) CIT Vs. Gita Duggal (2013) 357 ITR 153 (Delhi HC), Navin Jolly Vs. ITO (2020) 424 ITR 462 (Karnataka HC), CIT Vs. Smt. K.G. Rukminiamma (2011) 331 ITR 211 (Karnataka HC), by way of a compilation. Lastly, Ld. AR also submitted that there were three owners (including assessee) in the newly purchased two properties; therefore one can safely conclude that one person is owner of one property only. Ld. AR submitted that the revenue authorities should take a practical and holistic view of assessee’s case and should give benefit of exemption u/s 54F to assessee instead of denying the same.
Per contra, Ld. DR for revenue submitted that the CIT(A) has rejected the claim of assessee by making a clear observation that the two residential houses cannot be treated as ‘single investment’. He relied upon the order of CIT(A) vehemently and urged to uphold the same.
We have considered rival submissions of both sides and perused the orders of lower-authorities carefully.
Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15 (i) Firstly, we find that the AO has passed assessment-order denying exemption u/s 54F by observing thus:
“After receipt of the order u/s 263 a notice u/s 143(2) r.w.s. 263 of the Act was issued on 24.04.2019, fixing the case for hearing on 13.05.2019. On the given date not appeared or no written submission was made by the assessee in response of notice u/s 143(2) r.w.s. 263 for assessment year 2014-15. Notice u/s 142(1) r.w.s. 263 of I. T. Act with detailed questionnaire was issued on 03.05.2019, fixing the case for hearing on 17.05.2019 which has been duly served. On that date neither assessee nor AR appeared; neither sought adjournment nor made any submission in response to said notice. Hence, in view of the above, I am of the opinion that the assessee has given enough opportunity to explain the same but the assessee has not made any compliance in this regard. Therefore, the exemption claimed u/s 54 by the assessee is hereby disallowed and addition of Rs. 36,37,171/- is being made. Since, the assessee furnished inaccurate particular of income penalty u/s 271(1)(c) is being initiated separately.” But the assessee has filed a copy of written-submission dated 17/05/2019 filed to AO in response to the notice dated 03.05.2019 u/s 142(1) at Page No. 14 to 20 of Paper-Book under S.No. 3 of the Index in Paper-Book with a certificate that the same was duly filed before AO.
(ii) Then, the CIT(A) has noted in Para No. 5.1 of his order, as under:
“5.1 Since, the appellant assessee in the above submission has pointed out that he was not given adequate opportunities of being heard, a comprehensive remand report on allowability of the deduction claimed u/s 54F on or before 01.01.2023 after causing verification as deemed fit is called for from the AO by providing adequate opportunity to appellant assessee on 23.11.2022. A reminder is sent on 05.01.2023 to comply by 01.02.2023. Till date no remand report is received. Thus, the case is adjudicated based on the information available on record.” (iii) Further, during the course of hearing when we questioned Ld. AR, it emerged from Ld. AR’s submissions that the sold property as well as the new residential houses belonged to three owners (including assessee); therefore all three owners have declared capital gains and Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15 also claimed exemption in their respective returns qua the same transactions. Therefore, when the Bench questioned Ld. AR about the status of exemption in the hands of other two owners, Ld. AR instantly submitted that the department has allowed exemption in their hands without any questioning.
Thus, from above, it is clearly noticeable that the AO has passed assessment-order u/s 144 and rejected claim of exemption u/s 54F with the reasoning of non-filing of any details by assessee whereas the assessee claims to have filed a reply to the AO. Further, the CIT(A) asked the AO to submit a comprehensive remand-report on exemption u/s 54F which the AO did not submit and ultimately the CIT(A) passed order without AO’s representation. Therefore, the AO’s adjudication at the stage of assessment and the AO’s representation during first-appeal is not effective. Further, it is also a submission of Ld. AR that the exemption u/s 54F has been allowed to other co-owners without any objection and it is only the assessee to whom the department has denied exemption. But there is no proof of this submission and the proceedings conducted in the cases of other owners.
Hence, this fact also remains un-verified and requires a probe. Because of all these reasons, we think it most appropriate to remand this issue back to the file of AO for a fresh adjudication. Needless to mention that the AO has shall afford sufficient opportunities to the assessee to put forward all evidences including the proof to the effect that exemption had been allowed to joint owners. Thereafter, the AO shall take a fresh call on the issue taking
Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15 into account all facets of the case in the light of decided judicial rulings as also the view taken by department in joint owners. Consequently, this issue is allowed for statistical purposes.
Before parting, we are hastened to add here that there was also an observation flowing from the revision-order passed by PCIT (which is also incorporated in the assessment-order passed by AO) to the effect that the assessee also purchased two residential plots in additions to the impugned two residential houses. With regard to this, Ld. AR pointed out that the assessee has not claimed any exemption based on investment in those two plots. Further, the purchase of plots does not dis-entitle the assessee from claiming exemption u/s 54F and this aspect has already been accepted by Ld. CIT(A) in Para No. 5.3 of appeal-order, the order of CIT(A) is re-produced below for the sake of an immediate reference:-
“5.3 Secondly, “purchase of plots” after the transfer of original assets s not particularly mentioned in the circumstances “when exemption granted under Section 54F may be withdrawn” in other words, “when it is not exempted”. What the assessee has to be mindful is that “if the assessee purchases within a period of two years of the transfer of original asset or constructs within a period of 3 years of the transfer of such assets, ‘a residential house’ other than the new asset”, only then the assessee falls into the peril of withdrawal of the exemption u/s 54F. Hence, on this ground, the assessee plea is accepted.”
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Shri Harvinder Singh Kalra, Ujjain vs. ITO 1(1), Ujjain AY 2014-15 On perusal of provisions of section 54F, we agree and the Ld. DR for revenue also expressed consent to the above conclusion made by CIT(A). Therefore, AO is directed not to raise this point i.e. the investment in residential plots, again while making adjudication afresh.
Resultantly, this appeal of assessee is allowed for statistical purpose.
Order pronounced in the open court on 03.10.2023.