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Income Tax Appellate Tribunal, BENCH : COCHIN
Before: SHRI N. V. VASUDEVAN & Ms. PADMAVATHY S.
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : COCHIN BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND Ms. PADMAVATHY S., ACCOUNTANT MEMBER
ITA No.247/Coch/2021 Assessment Year : 2016-17
Palakunnathu Kannampathu Vs. The Principal Commissioner Sushil Kumar, of Income Tax, Auto World, Chakkorathukulam, Kozhikode. Nadakkavu – 673 011. PAN : BQRPS 9446G APPELLANT RESPONDENT
Assessee by : Shri Richard Mathew, CA Revenue by : Shri M Rajasekhar, CIT(DR)
Date of hearing : 07.12.2022 Date of Pronouncement : 19.12.2022 O R D E R Per Padmavathy S, Accountant Member: This appeal is against the order of the Principal Commissioner of Income Tax [PCIT], Kozhikode u/s. 263 of the Income-tax Act, 1961 [the Act] dated 22.3.2021 for the assessment year 2016-17 on the following grounds:- • Learned Principal commissioner of Income Tax, Kozhikode erroneously conceived the fact and wrongly passed an assessment order for the A.Y 2016-17. • Deduction for two independent flats in two different floors was allowed in the case of CIT v. Gita Duggal (357 ITR 153 ( 2013) (Delhi HC). As per the observation
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of the High Court Section 54F uses the expression "a residential house". The expression used is not "a residential unit". Section 54F requires the assessee to acquire a "residential house" and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the Section should be taken to have been satisfied. The Assessing officer without a cross verification passed the Assessment order which is unlawful and against natural justice. • Another case decision in favour of the assessee where capital gain exemption was available for multiple flats obtained under Joint Development Agreement is Ganga Poorna Prasad Vs ACIT (ITAT Bangalore) ITA No. 41/Bang/2020. • Retrospective application of beneficial provision of Section 45(5A) would result in taxation of capital gains in the year of issue of completion certificate. There would not have been a question of inappropriate claim of deduction under section 54F as pointed out by PCIT had the provisions of Section 45(5A) been inserted with effect from AY 16-17. The asssessee had no option to defer tax on capital gains in the year in which joint development agreement was entered into. Section 45(5A) introduced to minimise genuine hardship faced by landowners in paying capital gains tax in the year of transfer will not provide any relief to the assessee if it is not retrospectively applied. • For these and other reasons that may be urged at the time of hearing, it is prayed before the honourable commissioner to give all legal benefits to the appellant and set aside the demand.
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The assessee an individual filed a return of income for AY 2016- 17 declaring a total income of Rs.2,27,21,700. The return was selected for scrutiny under CASS with a limited purpose to verify the large long term capital gain declared by the assessee. The assessment was completed accepting the income returned by the assessee. The PCIT on verification of assessment records noticed that the assessee has entered into a joint development agreement and as a consideration for transfer of right in land to the extent of 29.78 cents in Nellikkode village had received 2 flats valued at Rs.82,22,022 and had claimed the entire amount as a deduction u/s. 54F. The PCIT held that as per the provisions of section 54F, the assessee is not eligible to claim deduction u/s. 54F for both the flats and to that extent, the order of the AO is erroneous and prejudicial to the interest of the revenue.
Before us, the ld. AR submitted that the PCIT has rejected the deduction u/s. 54F on the ground that the assessee is owning 2 flats in the same building and it was submitted that both the flats have to be considered for the purpose of section 54F. The ld. AR also presented arguments with regard to the year of transfer and also with regard to the value considered for the purpose of calculating capital gains. The ld. DR supported the order of PCIT,
We heard the rival submissions and perused the material on record. The assessee in the year under consideration has offered the income arising out of capital gains towards transfer of land. The assessee has entered into the land development agreement dated
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31.1.2015. The AO concluded the assessment accepting the income returned by the assessee and there is nothing on record evidencing the verification carried out by the assessee with regard to the impugned transaction. The PCIT exercised revisionary powers with regard to the assessee’s claim u/s. 54F towards 2 flats one Type A flat having a built up area of 1104 sq.ft. at the 7th floor and one Type F flat having a built- up area of 1383 sq.ft. at 9th floor at a value of Rs.3306 per sq.ft. . We notice that the assessee though has offered the income to capital gains tax in the year under consideration, had made submissions before the PCIT with regard to the year of transfer. We also notice that the assessee has also raised contentions with regard to the value per sq.ft. adopted by the PCIT at Rs.3306 whereas the cost of construction as certified is at Rs.2885 per sq.ft. On perusal of records, it is also not clear whether the assessee is having any other asset, other than the new flats acquired by the joint development agreement. In these circumstances and considering the facts of the case, we are of the considered view that the above contentions need proper verification by the AO and also eligibility of the assessee with regard to the deduction u/s. 54F as amended w.e.f. 1.4.2015 needs to be examined. We therefore uphold the order of the PCIT u/s. 263 with the modification that the AO is directed to verify the details de novo and take independent decision in accordance with law. It is ordered accordingly.
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In the result, the assessee’s appeal is dismissed.
Pronounced in the open court on this 19th day of December, 2022.
Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER
Bangalore, Dated, the 19th December, 2022. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order
Assistant Registrar, ITAT, Bangalore/Cochin.