SHRI SABBIRBHAI DAWOODBHAI SHAIKH,SURAT vs. INCOME TAX OFFICER WARD-3(1)(4), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 121/SRT/2018 (AY 2010-11) (Hearing in Virtual Court) Shri Sabbirbhai Dawoodbhai Income Tax Officer, Ward- Shaikh, 3(1)(4), Anavil Business Vs 7/4539, Galemandi, Centre, Adajan, Surat- Lakkad Kot, 395009 Surat PAN : AEQPS 5688 Q Appellant / assessee Respondent / Revenue

Assessee by Shri Yogesh B Shah, Advocate Revenue by Shri Deependra Kumar, SR-DR Date of hearing 10.11.2021 Date of pronouncement 18.01.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. Commissioner of Income tax (Appeals)-3, Surat [‘CIT(A)’ for short] dated 21.12.2017 for assessment year (AY) 2010-11, which in turn arise from the assessment order passed under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.03.2015. The assessee has raised the following grounds of appeal:- “1. The learned C.I.T.(Appeals)-3,Surat has erred in deciding only one ground of appeal whereas the assessee had raised 11 grounds of appeal including illegal reopening the case of the assessee under section 147 of the Act. On the facts and in the circumstances of the case and as per law, the reopening of the case of the assessee u/s 147

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh is against the law, and consequential passing of orders u/s143(3) r.w.s. 147 by the Assessing Officer and u/s 250 by the C.I.T.(A) deserves to be quashed in the interest of justice. 2.Thelearned C.I.T.(Appeals)-3,Surat has erred is disallowing the claim of exemption u/s 54-F of the Act as the assessee had rightly opened Capital Gain scheme account before his return of income u/s 139(4) and purchased a residential house property within the prescribed time limit of 2 years as prescribed u/s 54-F on the facts and in the circumstances of the case and as per law the deduction u/s 54-F be given to the assessee and 3. All the undecided grounds of appeal by the C.I.T.(Appeal) in his appellate order be heard and to be decided on merits in the interest of justice. 4.The appellant may be permitted to withdraw to amend, modify and ground duly raised and to introduce new grounds of appeal.” 2. Brief facts of the case are that assessee is an individual, filed his return of income for assessment year (AY) 2010-11 under section on 31.03.2011 declaring income of Rs.10,230/-. The return of income was filed under section 139(4). The case of assessee was reopened under section 147 of the Act on 21.03.2014. The case of assessee was reopened on the basis of AIR information that assessee sold property for Rs.51,37,500/- and acquired bonds of Rs.5.00 lakh, source of which is not proved by the assessee. On the basis of such information, the Assessing Officer was of the view that income of Rs. 56,37,500/- has escaped assessment for AY 2010-11 by reasons of

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh failure of assessee to disclose fully and truly all material facts necessary in the return of income. 3. Notice under section 148 dated 21.03.2014 was issued and served upon the assessee. In response to notice under section 148, the assessee filed his reply and contended that return of income filed originally on 31.03.2011 be treated as return in response to notice under section 148 of the Act. The assessee demand it reasons of reopening. The reasons of reopening was supplied to the assessee. The assessee filed his objection vide dated 08.05.2014, objecting the reopening under section 148.The Assessing Officer nowhere mentioned in his order whether objection was decided / disposed or not. During the assessment, the assessee was confronted with the fact that as per AIR information, the assessee sold immovable property at a consideration of Rs.51,37,500/- on 26.02.2010 and acquired bonds of National Highway Authority of India (‘NHAI’ in short) of Rs.10 lakh on 26.03.2010 but the same were not reflected in his return of income. The assessee in response to query raised by the Assessing Officer furnished the evidence relating to sale of the property and stated that assessee has ½ share in the said property (asset) and received consideration of Rs.25,68,750/- through cheque on 26.02.2010 in favour of UCO Bank, Surat. The assessee further explained that out saleconsideration he acquired bonds of NHAI of Rs.10 lakh on

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh 26.03.2010. The assessee furtherexplained that before filing return of income, the assessee deposited entire sale consideration and purchased bonds of NHAI, the assessee invested Rs.15 lakh on 11.08.2010. The return of income was filed on 31.03.2011. 4. The explanation furnished by assessee was not accepted by the Assessing Officer. The Assessing Officer held that Rs.14,94,166/- was not deposited before due date of filing return of income under section 139(1). Due date for filing of return of income for assessment year 2011-12 was 31.07.2010. Accordingly, the claim of exemption to the extent of Rs.14,94,166/- was disallowed and the same was added to the income of the assessee. 5. Aggrieved by the reopening as well as in making addition in the assessment, the assessee filed an appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written submission. The detailed written submission of the assessee are extracted on pages 3 to 11 in para-7 of his order. In his written submission, the assessee in sum and substance stated that he filed return of income manually on 31.03.2011 alongwith return of income, he furnished computation of income, copy of ITR filed before ITO Ward-7(4) Surat, with computation of income. The assessee further explained that he alongwith his cousin brother sold immovable property jointly owned by him on 26.02.2010 for a consideration of Rs.51,37,500/-. On sale of asset /

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh immovable property, the assessee earned capital gains of Rs.,24,94,166/- after claiming indeed cost of acquisition. The working of capital gains was also furnished. The assessee further submits that he invested in the bonds of NHAI of Rs.10 lakh on 26.03.2010, within six months from the date of sale. Further Rs.15 lakh was deposited in capital gains account on 11.08.2010.The assessee further submits that he purchased residential property in Ganga Sagar Co-Op Society, Adajan Road, Surat on 22.09.2011 for a consideration of Rs.40,39,800/-, within two years from the date of sale of old asset. The entire sale consideration, which was received on sale of old asset was utilized by him in acquiring new residential house. The assessee also explained that all details of investment in capital gains and purchase of new residential house was shown in the return of income filed on 31.03.2011 and submitted that he assumed that return have been processed at CPC Bangalore. 6. The assessee also challenged the validity of reopening. On the validity of reopening, the assessee submitted that as per AIR information received by department, the assessee sold property of Rs.51,37,000/- and acquired NHAI Bonds of Rs.5 lakh. The source of which was not proved by the assessee. On the basis of which the AO had reasons to believe that income of Rs.56,37,500/- as escaped assessment by reason on failure on the part of

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh assessee, to disclosed fully and truly. The assessee objected that there was no question of escapement of income. The information was wrongly transmitted to the Department. The assessee is a co-owner and received a consideration of Rs.25,68,750/- and not Rs.51,37,500/-. Secondly, the assessee purchased NHAI Bonds of Rs.10 lakh and not Rs.5 lakh on sale of such property.The assessee stated that there was no omission or failure on the part of the assessee and that notice under section 148 reliable to be quashed. The assessee made reference to Addl. CIT, Range-3(1) Surat u/s 144A of the Act for appropriate directions. The Add CIT has not verified the facts. The Assessing Officer has not disposed of the objection. The assessee also relied on the certain case laws. 7. On the merit of allowance of exemption under section 54-F, the assessee submitted that on plain reading of sub-section (4) of section 54-F, it is clear that only section 139 was mentioned in section 54-F(4) in the context of consideration which is not appropriated by assessee towards purchase of new assets made within one year before the date on which transfer of original asset took place or which is not utilized by him for the purchase and or construction of new asset before furnishing return under section 139. Section139 cannot mean any section, it means all sub-section of section 139. Under sub-section (4) of section 139, any person who has to furnished return

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh within time allowed to him under sub-section (1) of section 142, may furnish return of any previous year at any time before the expiry of one year, from the end of relevant assessment year, or before completion of assessment year whichever is earlier. Such being the situation, it is the case of the assessee that it could fulfil the requirement of section 54-F for exemption of capital gains charged to income-tax. The assessee also relied on the basis of decision of Hon'ble Guwahati High Court in the case of CIT vs. Rajesh Kumar Jalan (2007) 286 ITR 274 (Gau). 8. The Ld. CIT(A) after considering the submission of assessee upheld the action of Assessing Officer in making disallowance of exemption under section 54-F by taking view that assessee purchased asset under section 54-F on 22.09.2011. The assessee made deposit in capital gains account beyond the due date as per section 139(1) and investment in purchase / construction of eligible asset is beyond the due date under section 139(4) of the Act. The Ld. CIT(A) referred and relied upon the decision of Tribunal in the case of Sanjay K Rana in ITA No. 996/AHD/2014.No order on reopening on the validity of reopening was made Ld. CIT(A). Further, aggrieved, assessee filed present appeal before this Tribunal. 9. We have heard the submission of Ld. Authorized Representative (AR) for the assessee and Ld. Senior Departmental Representative (Sr.DR) for the

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh Revenue and have gone through the orders of authorities below. The ld. AR of the assessee submits that assessee challenged the validity of reopening before Ld. CIT(A) and filed detailed written submission challenging the validity of reopening contending that there was no failure on the part of assessee in disclosing fully and truly all material while filing return of income. The reasons recorded by Assessing Officer was not valid reasons. The assessee objected the validity of reopening and no order on the objection was passed by Assessing Officer. The Ld. CIT(A) despite recording written submission of the assessee not decided the grounds of appeal related to the validity of reopening. The Ld. AR of the assessee submits that in absence of disposal of objection, the assessment order passed on reopening on the basis of is invalid. 10. On the merit of the case, the ld. AR of the assessee submits that before filing return of income, the assessee deposited entire capital gains in the capital gains account and purchased NHAI Bonds. The Ld. AR of the assessee submits that he has already placed on record, the copy of NHAI Bonds purchased by assessee. The Ld. AR of the assessee submits that section 139 of Income tax Act, cannot mean only section 139(1) but it means all sub- sections of 139 of Income Tax Act as per section 139(4) any person who has not furnished return of income within time allowed to him under sub-section

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh 142 may furnish return for any previous year at any time before the expiry of one year from the end of relevant assessment year or before the completion of assessment whichever is earlier. The assessee filed return of income under section 139(4) on 31.03.2011, before expiry of one year from the end of relevant assessment year. Thus, the return of income is a valid return and the assessee cannot be denied benefit of section 54-F. The Ld. AR of the assessee submits that ultimately the assessee invested his entire sale consideration / capital gains in purchased of new residential house. The Ld. AR of the assessee submits that filing of return of income on 31.03.2011 and purchased of NHAI Bonds of Rs.10 lakh on 26.03.2010 and Rs 15 lakh on 11.08.2010 and purchased of new residential house on 22.09.2011 are not in dispute. Ld. AR of the assessee submits that assessee is entitled to exemption section 54-F.Thus, the assessee is liable to be succeeded on valid reopening as well as on merit. 11. To support his contention, Ld.AR of the assessee relied upon the following decisions:-  CIT vs. Rajesh Kumar Jalan (2006) 206CTR361 (Gau)  Ashok Kapasiawala vs. ITO ITA No.2692/AHD/2014 dated 10.09.2015  CIT vs. Shri K Ramachandra Rao TA No.46 of 2014 14.07.2014  Fathima Bai vs. ITO (2009) 32 DTR 243 (Kar)  CIT vs. Shri Jagtar Singh Chawla TA No. 71 of 2012 (O&M) (P&H)  CIT-Ii vs. Ms. Jagriti Aggarwal TA No. 176 of 2011 dated 03.10.2011  Sri Nipun Mehrotra Vs. ACIT 113 TTTJ 223 (Bang.Tribunal) 9

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh  Shri Shankar Lal Saini vs. ACIT in ITA No.75/JP/2016 dated 22.11.2016 12. On the other hand, Ld. Senior departmental representative ( Sr –DR) for the Revenue supported the orders of authorities below. The Ld. Sr-DR for the Revenue submits that deposits of Rs.15 lakh in capital gains account on 11.08.2010 was beyond the due date of filing return of income under section 139(1). Therefore, Ld. CIT(A) has rightly upheld the order passed by Assessing Officer. 13. We have considered the rival submissions of both the parties and have gone through the orders of authorities below. The Assessing Officer disallowed the exemption by taking view that held that Rs.14,94,166/- was not deposited by assessee before due date of filing return of income under section 139(1). Due date for filing of return of income for assessment year 2011-12 was 31.07.2010. Therefore, the claim of exemption to the extent of Rs.14,94,166/- is not allowable and disallowed and added to the income of the assessee. The Ld. CIT(A) upheld the action of Assessing Officer by taking view that assessee purchased asset under section 54-F on 22.09.2011. The assessee made deposit of Rs. 14,94,166/- in capital gains account beyond the due date as per section 139(1) and investment in purchase / construction of eligible asset is beyond the due date under section 139(4) of the Act. We find that there is no dispute that the assessee sold his asset on

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh 26.02.2010 and purchased of NHAI Bonds of Rs.10 lakh on 26.03.2010 and Rs 15 lakh on 11.08.2010, the assessee filed return of income under section 139(4) on 31.03.2011. Further, the assessee purchased of new residential house on 22.09.2011 and appropriated entire capital gain. 14. We find that Hon’ble Gauhati High Court in CIT Vs Rajesh Kumar Jalan in the context of section 54 held that a plain reading of sub-section (2) of section 54, it is clear that only section 139 is mentioned in section 54(2) in the context that the unutilised portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the income-tax under section 139. Section 139 cannot mean only section 139(1) but it means all sub-sections of section 139. Under sub- section (4) of section 139, any person who has not furnished a return within the time allowed to him under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Such being the situation, it was the case of the assessee that he could fulfil the requirement under section 54 for exemption of the capital gain from being charged to income-tax on the sale of property used for residence, could be furnished before the expiry of one

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier, under sub-section (4) of section 139. 15. We find that the provisions of Section 54F(4) of the Act are pari-materia with Section 54(2) of the Act. Section 54 deals with the profit on sale of a residential house, whereas Section 54F deals with the transfer of any long term capital assets not being a residential house. 16. Further we find that Hon’ble Punjab & Haryana High Court in CIT Vs Jagtar Singh Chawla (supra) followed the decision of Gauhati High Court in Rajesh Kumar Jalan (supra) and passed the following order;

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier." 10. The said judgment was relied upon by a Division Bench of the Karnataka High Court in Fathima Bai v. ITO, ITA No.435 of 2004 Decided on 17th October 2008, wherein it was held to the following effect:- "11. The extended due date under section 139(4) would be 31.3.1990. The assessee did not file the return within the extended due date, but filed the return on 27.2.2000. However, the assessee had utilized the entire capital gains by purchase of a house property within the stipulated period of section 54(2) i.e., before the extended due date for return under section 139. the assessee technically may have defaulted in not filing the return under section 139(4). But, however, utilized the capital gains for purchase of property before the extended due date under section 139(4). The contention of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention." 11. A Division Bench of this Court in which one of us (Hemant Gupta, J.) was a member, had an occasion to consider the provisions of Section 54(2) of the Act, wherein it has been held that sub-section (4) of Section 139 of the Act is in fact a proviso to Section 139(1) of the Act. Therefore, since the assessee has invested the sale proceeds in a residential house within the extended period of limitation, the capital gain is not payable. The judgments in Rajesh Kumar Jalan's case (supra) and Fathima Bai's case (supra) were referred to. It has been held as under:- "Having heard learned counsel for the parties, we are of the opinion that sub-section (4) of Section 139 of the Act is, in act, a proviso to sub- section (1) of Section 139 of the Act. Section 139 of the Act fixes the different dates for filing the returns for different assesses. In the case of assessee as the respondent, it is 31st day of July, of the Assessment Year in terms of clause (c) of the Explanation 2 to sub-section 1 of Section 139 of the Act, whereas sub-section (4) of Section 139 provides for extension in period of due date in certain circumstances. It reads as under:- "(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier;

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year." A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-section (1) i.e. before 31st day of July of the Assessment Year, the assessee can file return before the expiry of one year from the end of ever relevant Assessment Year." 12. In the present case, the assessee has proved the payment of substantial amount of sale consideration for purchase of a residential property on or before 31.3.2008, that is within extended period of limitation of filing of return. Only a sum of Rs.24 lacs was paid out of total sale consideration of Rs. Two Crores on 23.4.2008, though possession was delivered to the assessee on execution of the power of attorney on 30.3.2008. Since the assessee, has acquired a residential house before the end of the next Financial Year in which sale has taken place, therefore, the assessee is not liable to pay any capital gain. Such is the view taken by the Income Tax Appellate Tribunal. 13. In view of the above, we do not find any merit in the present appeal. Hence, the same is dismissed. 17. In view of the aforesaid legal discussions, when the assessee has deposited Rs. 15 lakhs of capital gain in purchasing the Bond of NHAI before due date of filing of return of income under section 139(4), his claim for exemption under section 54 –F was not to be disallowed. Hence, we direct the AO to allow the entire capital gain earned by the assessee as exempted under section 54F. In the result, the ground No. 2 of the appeal raised by the assessee is allowed.

ITA No.121/SRT/2018 (A.Y. 10-11) Sh. Sabbirbhai D Shaikh 18. We find that the assessee has raised a specific ground of appeal, challenging the validity of reopening under section 147, however, the ld. CIT(A) despite recording the detailed written submission on the issue, has not adjudicated the relevant ground of appeal. Considering the facts that we have allowed relief to the assessee on merit, therefore, the adjudication on the validity of reopening have become academic. 19. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 18/01/2022 in the open court and the result was also placed on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 18/01/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Assistant Registrar, ITAT, Surat