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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MANISH BORAD&
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is directed against the order dated 28.02.2019 passed by the Ld. PCIT, Ujjain under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y. 2010-11.
There is a delay of 1 day in filing the instant appeal before us. Having regard to the case made out by the assessee such delay hereby condoned.
The brief facts leading to the case is this that the assessment under Section 143(3) r.w.s. 147 was completed on 27.10.2016 accepting the total income of Rs. 19,740/- as declared by the assessee in the return of income filed. The assessee is an individual and not having any income liable to tax as stated. The assessee along with her sister Smt. Sunita Mitra inherited a
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property lying and situated at House No. 9, Ghyan Shree, Itwara Road, Bhopal after the demise of their father Shri Nitin Mehta on 10.12.2001. Subsequently, on 13.03.2012 the said house property was sold for a consideration of Rs. 29,00,000/- and 50% of it being the equal share to the tune of Rs. 14,50,000/- was paid to the assessee and her sister. The assessee, thereafter, constructed a house property at 2nd Floor, 122, Tilak Path, Mahidpur (Ujjain). It is relevant to mention that the assessee did not file her Income Tax Return for Assessment Year 2010-11 since her total income did not exceed the maximum amount which are not chargeable to income tax. However, notice under Section 133(6) dated 24.04.2012 on the basis of AIR Information was served upon the assessee whereupon on 23.09.2016 the return of income was filed. The assessee filed the following details and/or working in regard to the capital gain in response to the notice under Section 147 of the Act upon filing her return of income showing total income of Rs. 19,740/-: Computation of Capital Gains Sale Consideration received Rs. 29,00,000 Market Value of the property sold Rs. 42,52,000 PARTICULARA SALES MARKET VALUE CONSIDERATION 50% share in house property 14,50,000 21,26,000 sold (Itwara, Bhopal) Indexed Cost of Acquisition 15,80,000 15,80,000 (2,50,000 x 632 / 100) Long Term Capital Gain (-) 1,30,000 5,46,000 Less : Deduction u/s. 54 of the 6,75,000 6,75,000 Act (Construction at 122, Tilak Path, Mahidpur) Taxable Capital Gain Nil Nil
Being satisfied with the documents produced by the assessee and the reply filed by her the deduction under Section 54 as claimed was allowed on 27.10.2016 and the re-assessment under Section 147 of the Act was completed upon accepting the total income filed by the assessee at Rs. 19,740/-.
ITA No.631/Ind/2019 Sangeeta Chopra vs. PCIT Asst.Year –2010-11 - 3 – Subsequently, on 21.02.2019 the Ld. PCIT issued a notice under Section 263 of the Act for the relevant assessment year. Finally, considering the reassessment order passed under Section 147(3)/147 dated 27.10.2016 by the Ld. AO as erroneous and prejudicial to the interest of Revenue the Ld. PCIT under Section 263 of the Act quashed the reassessment order and set aside the file of the Ld. AO with a direction upon him examine the issue afresh. Hence, the instant appeal before us.
The case of the Revenue is this that the assessee has not invested the sale proceeds in constructing a new asset rather made the 2nd Floor of an already existing house which should be treated as mere improvement to an existing house. The Revenue is of the opinion that exemption will only be allowed when the sale proceeds are invested into a new asset. Thus, the order passed by the Ld. AO under Section 143(3) r.w.s. 147 dated 27.10.2016 for the year under consideration is erroneous as well as prejudicial to the interest of Revenue.
On the other hand, the case of the assessee is this that the AO in the present case in hand allowed the claim of deduction under Section 54 of the Act on the basis of the bank statement, sale deed, valuation report, approval from Nagar Palika and other documents. Further that according to the assessee the house property for the purpose of Section 54 has the same meaning as the concept of house property under Section 22 to 27 which make it clear that the expression for “house property” takes into account an independent residential unit. On this aspect, they have relied upon the order passed by the Hon’ble Delhi High Court in the case of Addl. CIT vs. Vidya Prakash Talwar, reported in 25 (1981) CTR 220 (Del). Thus, according to the assessee the claim under Section 54 of the Act should be allowed.
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We have heard the rival submissions made by the respective parties we have also perused the relevant materials available on record.
We also find that before the Ld. PCIT the assessee filed the following written submissions which is available at Page 5 & 6 of the Paper Book filed before us; the content wherein is as follows:
GROUNDS OF APPEAL AS TAKEN BEFORE THE HON'BLE “B. ITAT IS AS UNDER:
That on the facts and in the circumstances of the case and in law, the Ld Pr. CIT erred in setting-aside the order passed by the assessing officer under section 143[3]/147 of the Act by invoking the provisions of section 263 of the Act even when the order as passed by the assessing officer was neither erroneous nor prejudicial to the interests of the revenue. The order passed without properly appreciating the facts of the assessee submission made before him is wrong and bad in law. 2. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act even when the order was passed by the assessing officer under section 143[3] / 147 of the Act after conducting necessary enquiries and after due application of mind. 3. That on the facts and in the circumstances of the case and in lav/, the Ld Pr. CIT erred in setting-aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act without establishing that the case is covered by any of the four conditions prescribed under Explanation 2 to Section 263(1) of the Act. 4. The appellant reserves his right to add, alter and modify the grounds of appeal as taken by him. GROUND OF APPEALS No. 1 to 3:
1.1 The appellant in this appeal has challenged the validity of the order as passed under section 263 of the Act as— A. the order passed by the AO u/s. 143 [3] / 147 of the Act was neither erroneous nor prejudicial to the interests of the revenue, B. the order was passed by the assessing officer under section 143 [3] /147of the Act after conducting necessary enquiries and after due application of mind,
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C. The order has been passed without establishing that the case is covered by any of the four conditions prescribed under Explanation 2 to Section 263(1) of the Act. 1.2 The learned A.O. allowed deduction under section 54 as claimed by the appellant on account of construction of new house after verifying and examining Sale Deed, necessary approvals, Valuation Report, Bank Statements and other relevant documents submitted and produced during the course of assessment. 1.3 It is also important to note that there is no dispute as to the cost of acquisition of house property sold and amount of investment in new house property.”
On this aspect we have further considered judgment relied upon by the assessee in the matter of Addl. CIT vs. Vidya Prakash Talwar, reported in (1981) 25 CTR 220. While dealing with the relevant issue the Hon’ble High Court was pleased to observe as follows: “6. So far as the present case is concerned, we think, it clearly falls both within the intendment and language of section 54 if two important considerations are kept in mind. The first is that when the section talks of house property it does not mean an independent and complete house in the sense in which the term used to be understood once upon a time. House property for the purposes of s. 54 has the same meaning as the concept of house property under ss. 22 to 27 which make it clear that the expression "house property" takes into account an independent residential unit. In fact, there can be no doubt, that the section takes into account all independent residential units particularly in these days when multi-storeyed flats are becoming the order of the day. That the expression "house property" would also take into account a unit of house property has also been accepted in CIT vs. Tikyomal Jasanmal (1971) 82 ITR 95 (Guj) . Here for the purpose of the present case, the two units comprising the house in South Extension could be occupied independently. The second consideration to be kept in mind in the light of the above is that we are not concerned here with what happened prior to 29th Dec., 1964, when the house at Darya Ganj was sold but only with what constructions the assessee put up thereafter. The ground floor which had been constructed before 29th Dec., 1964, was a separate independent unit and its construction cannot affect the applicability of s. 54 because it was anterior to the date of sale of the Darya Ganj property. On the other hand, the first floor and the barsati constituted a separate independent residential unit, the construction of which was no doubt started in March, 1964, but gained momentum towards the end of that year and was eventually completed in November, 1966. So far as this residential unit is concerned it was constructed by the assessee within a period of two years from the date on which Darya Ganj property was disposed of. It has also been found as a fact by the Tribunal that the investment by the assessee in this property was to the extent of Rs. 76,694 between January, 1965, and November,
ITA No.631/Ind/2019 Sangeeta Chopra vs. PCIT Asst.Year –2010-11 - 6 – 1966, and this was more than sufficient to absolve the capital gains realised by the assessee on the sale of the Darya Ganj property. If these two aspects of the case are kept in mind it seems to us pretty plain that in the present case the conditions for exemption under s. 54 are clearly fulfilled. To sum up : the assessee sold the Darya Ganj property on 29th Dec., 1 964 : he realised a capital gain of Rs. 42,550; he invested an amount more than the amount of this capital gain in the construction of a house property which was completed within a period of two years after that date; and the house property so completed was admittedly used by the assessee for the purposes of his own residence. In the face of the above findings, we1 are of opinion that the assessee was entitled to the. exemption under s. 54. The question, as referred to us, proceeds on the basis that the assessee had constructed "a portion" of a house property in South Extension but as already pointed out by us the two residential units of the South Extension property should be considered separate and the real question that arises in the present case is "Whether, on the facts and in the circumstances of the case, the assessee is entitled to the exemption of the capital gains of Rs. 42,550 under s. 54 of the Act ?" We make the slight modification in the frame of the question and answer it in the affirmative and in favour of the assessee. As the CIT has failed, he will pay the cost of the assessee. Counsel's fee Rs. 350.”
We have considered the entire aspect of the matter. In our opinion reinvestment in residential property need not be a complete house further that it is sufficient if reinvestment is made in an independent residential unit even though part of existing house. On that basis it has been decided already by the different forums that the assessee under this situation is liable for exemption under Section 54 of the Act. We accept the proposition made by the Hon’ble Delhi High Court in the above judgment to this effect that this section takes into account all independent residential units particularly in these days when multistoried flats are becoming the order of the day.
It further appears from the records that the assessment has been completed under Section 143(3)/147 of the Act on 27.10.2016 upon verification of the entire set of documents relating to the income of the assessee and the documents relating to the sale and purchase of property made
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by the assessee. Further that the assessment has been finalized under Section 148 of the Act upon accepting the total returned income of Rs. 19,740/- as filed by the assessee. Needless to mention we do not find any flaw in the reassessment made under Section 147/148 of the Act which could not be said to be erroneous or prejudicial to the interest of the Revenue particularly keeping in view of the law as decided by different judicial forum in respect of exemption under Section 54 of the Act on the identical facts.
Thus, we find no justification in reopening the assessment under Section 263 of the Act. Under this facts and circumstances of the case in our considered opinion the order impugned under Section 263 is, thus, bad in law and the same is hereby quashed.
In the result, the appeal filed by the assessee is allowed. 11. This Order pronounced in Open Court on 31 /01/2022
Sd/- Sd/- SD Sd/- (MANISH BORAD) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 31/01/2022 TRUE COPY TANMAY, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, (Dy./Asstt.Registrar) ITAT, Indore