DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), RAIPUR vs. SHRI RAKESH SINGH, RAIPUR

आयकर अऩीऱीय अधधकरण, रायऩुर न्यायऩीठ, रायऩुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR श्री रविश सूद, न्याययक सदस्य एवं श्री अरुण खोड़वऩया, ऱेखा सदस्य के समक्ष । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अऩीऱ सं./ITA No.231/RPR/2019 (ननधाारण वषा / Assessment Year :2015-2016) ACIT-3(1), Raipur Vs Shri Rakesh Singh, A-4, Mahaveer Singh, Tagore Nagar, Raipur (C.G.) PAN No. : ACWPS 6453 R (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. राजस्व की ओर से /Revenue by : Shri G.N.Singh, Sr. DR ननधााररती की ओर से /Assessee by : None सुनिाई की तारीख / Date of Hearing : 28/07/2022 घोषणा की तारीख/Date of Pronouncement : 21/09/2022 आदेश / O R D E R Per Arun Khodpia, AM :

This appeal is filed by the against the order passed by the CIT(A), Raipur, 09.08.2019 for the assessment year 2015-2016. 2. None appeared on behalf of the assessee even the case was called for second round of hearing. Therefore, the Bench proceeded the dispose off the appeal after considering the arguments of ld. Sr. DR and the relevant material available on record. 3. Facts in brief are that the assessee filed his return of income electronically on 31.08.2015 declaring total income of Rs.51,22,500/-, which was duly processed, later on the case was selected for limited scrutiny through CASS, statutory notice U/s 143(2) and questionnaire u/s 142(1) were issued to the assessee, in response to which the assessee filed his written submissions. During the course of assessment

2 ITA No.231/RPR/2019 proceedings, the AO found that the assessee has shown the house property income at Rs.70,019/-, income from long term capital gain at Rs.19,80,027/- and income from other sources at Rs.32,32,450/-. On verification of one of the reasons for selection of case for scrutiny, the AO found that during the year under consideration the assesse has sold house at Tikrapara, Raipur at Rs.3,60,00,000/- and claimed deduction u/s.54 of the Act at Rs.2,34,95,096/-. The deduction u/s 54 was claimed on account of investment in new house for Rs. 23.00 Lakh and amount deposited in capital gain account scheme of Rs. 220.00 Lakh. 4. In this regard, the AO asked the assessee to submit the proof of investment made in a new house at Rs.23,00,000/-, however, the assessee could not substantiate its claim. Therefore, the AO added the same to the total income of the assessee. Similarly, with respect to depositing the amount in capital gain account, assessees has submitted its saving bank account, which was not considered as a deposit under capital gain scheme by the AO. AO also observed that the assessee already has a residential house so benefit of section 54 cannot be allowable. Finally, being dissatisfied, the AO disallowed Rs.2,11,95,096/- the deduction claimed by the assessee u/s.54 of the Act and added the same to the total income of the assessee. 5. Being aggrieved with the assessment order, the assessee preferred appeal before the CIT(A) and the CIT(A) allowed the appeal of the assessee.

3 ITA No.231/RPR/2019 6. Against the above order of CIT(A), the revenue is in appeal before the Tribunal. 7. Ld. Sr.DR relied on the order of AO and written submissions of the department stated in statement of facts, which are reproduced as under:- Statement of Facts In this case the return of income was filed by the assessee on 31.08.2015 declaring total income at Rs. 51,22,500/-. The case was selected for limited scrutiny through CASS and assessment u/s. 143(3) of the Act was completed on 26.12.2017 by making addition on account of disallowance on deductions claimed u/s54F amounting to Rs. 2,34,95,096/-. The additions were made since the assessee failed to produce any evidence to substantiate his claims. Aggrieved by the addition, the assessee filed an appeal before CIT(A). Order of the Ld. CIT(A):- The Ld. CIT(A) vide order no. 909/17-18 dated 09.08.2019 stated that ―Deduction u/s 54F has been disallowed due to the reason that there is no evidence of construction of new house and there is no evidence of depositing amount of Rs.2,20,00,000/- in the capital gain account. In the above submission the appellant has submitted that appellant has duly deposited an amount of Rs.2,12,00,000/- in the capital gain account with IDBI bank. Copy of capital gain account No. 0056104000369077 with IDBI bank, branch Gwalior, IFSC code IBKL0000056 wherein there is a credit ofRs.2,12,00,000/- on 31/07/2015. Thus, the claim was duly substantiated before the AO. The AO appears to be not aware that the Capital Gains are of two types – saving and TDR. A customer can opt for either of the two accounts depending on his requirements and just because it is Capital Gains Savings accounts, the customer does not become ineligible for deduction u/s 54F. The assessee through his AR has submitted the documentary evidence regarding investment made in new house of Rs.23 lakhs and deposit of amount in capital gain account with IDBI bank. However, the Ld AO has not taken cognizance of these documents without assigning any reason. There is no reason to disallow the claim of deduction u/s 54F. Therefore the disallowance of Rs.23,00,000/- and Rs.2,11,95,096/- are hereby deleted.’

The order of the Ld. CIT(A) allowing the appeal of the assessee is not acceptable for the following reasons:- 6. The observation of the Ld. CIT(A) that AO has made disallowance of deduction u/s 54F due to reason that there is no

4 ITA No.231/RPR/2019 evidence of construction of new house and there is no evidence of depositing amount of Rs.2,20,00,000/- in the capital gain account. In the submission the appellant has submitted that appellant has duly deposited an amount of Rs.2,12,00,000/- in the capital gain account with IDBI ban. Copy of capital gain account no. 0056404000369077 with IDBI ban, branch Gwalior, IFSC code IBKL0000056 wherein there is a credit of Rs.2,12,00,000/- on 30/07/2015. Thus, the claim was duly substantiated before the AO. The AO appears to be not aware that the capital gains accounts are of two types – savings and TDR. A customer can opt for either of the two accounts depending on his requirements and just because it is Capital Gains Savings accounts, the customer does not become ineligible for deduction u/s 54F. During the assessment proceeding assessee failed to submit documentary evidence which can substantiate his claim that he has deposited Rs.2,12,00,000/- in the Capital Gains Savings account. ii. The observation of the Ld. CIT(A) that the appellant has submitted details of investment made for Rs.25,16,286/- alongwith bill with latter dated 17/11/2017. That the appellant has already made investment in construction of new house for Rs.2,69,77,525/- upto 31/03/2017 which was more than deduction claimed u/s 54 of the I. T. Act, 1961 by the appellant. As the appellant has constructed the new house and deposited the amount in capital gain account within time so disallowances u/s 54 of the I. T. Act, 1961 not justified in this case is not found acceptable as... a. During the assessment proceeding assessee was given ample of opportunity to submit documentary evidence to substantiate theconstruction of a new house by the assessee but he failed to do so. Further, the assessee has not provided any corroborative evidence regarding utilization of fund deposited into capital gain account scheme for construction of a new residential house within stipulated period of time, b. if, during the appellate proceeding, assessee had submitted copies of bills and other evidences in support of its claim of construction of new house of the latter dated under sub rule 1 of rule 46A of the Income Tax Rules, 1962, (herein after referred as the Rule) Ld. CIT(A) had not allowed any opportunity to examine the said evidences as mandated in sub rule 3 of rule 46A of the Rule. In view of the above, the order of the Ld. CIT(A) is not acceptable. Since the tax effect involved in the case is Rs. 54,48,734/- which is above the prescribed limit (i.e. Rs. 50,00,000/-).Further, the case does not fall under any exceptional clause of Circular No. 17/2019 dated 08.08.2019 by the CBDT, New Delhi, as well as amended para issued vide letter dated 20.08.2018, therefore filing of further appeal before the Hon’ble ITAT is recommended in this case on below mentioned grounds of appeal.

5 ITA No.231/RPR/2019 8. We have heard the pleadings of the Departmental Representative and perused the material available on record. 9. The first dispute raised by the department is that the bills of material purchase or advance payment issued just before filing of return cannot be considered as a proof for investment in a new residential house, in absence of any cogent evidence like agreement with contractor etc. In this regard Ld CIT(A) has categorical mentioned that the AR of the assessee has vide its letter dated 16/10/2017 has submitted copy of sale deed, copy of purchase deed, details of construction of house, details of investment in new house etc. However, the AO has not taken cognigence to any of such documents, also no reason have been assigned by the AO in its Assessment Order. On this issue since the revenue is still agitating that no such evidences were submitted by the assessee during the assessment proceedings. If during the appellate proceedings assessee had submitted such evidences before the Ld CIT(A), there is a clear violation of provisions of rule 46A of the Income Tax rules, 1962, since no opportunity to examine such evidences was afforded to the AO as per rule 3 of rule 46A. 10. Apropos, the second ground of controversy raised by the department that disallowance of Rs. 2.20 Crore for deduction claimed by the assessee u/s 54 IT Act made by the AO was correct, because the assessee had not submitted copy of capital gain account, instead the assessee had submitted copy of his saving bank account. Ld CIT(A) on this issue has observed that the AO appears to be not aware that the

6 ITA No.231/RPR/2019 Capital Gain accounts are of two types – saving and TDR and therefore the assessee cannot become ineligible for deduction u/s 54F. However, from the order of Ld CIT(A) it does not transpires that this aspect was ever confronted with the AO to clarify that the CIT(A) and AO have referred the same documents. On this issue it is also observed that the assessee has submitted before the CIT(A) that the amount deposited in capital gain account was Rs. 2.12 Crore whereas before AO a computation was submitted by the assesse showing amount deposited for Rs. 2.20 Crore. This also shows that there are some differences in the version of assessee’s submission before the two revenue authorities. 11. We have carefully examined the above facts, however there are difference of opinion and understanding between the CIT(A) and AO with respect to the same facts and documents of the assessee. Ld DR on this aspect has alleged that there are additional documents submitted before the CIT(A) and the same are admitted by the Ld CIT(A) without following the procedure laid down under rule 46A of the Income Tax Rules 1962. To appreciate this aspect in the present case, it is pertinent to refer to Rule 46A, which reads as under:- [Production of additional evidence before the [Deputy Commissioner (Appeals)] [and Commissioner (Appeals) ]. 46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :— (a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to

7 ITA No.231/RPR/2019 produce by the [Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]

8 ITA No.231/RPR/2019 applied in the present case by the CIT(A), however, whether Rule 46A is applicable in the present case, we cannot offer any comment in absence of the paper book. 13. Further as per Rule 46A(4) the Commissioner (Appeals)] can direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.] However, no such action has been taken by the CIT(A) in the present case before passing the impugned order. 14. We therefore are of the considered opinion that this matter needs to be remanded back to the CIT(A) to readjudicate the issues as per law, on the basis of records available after affording reasonable opportunity to the AO to examine the documents submitted by the assessee before CIT(A) and to submit a remand report. The assessee should also be provided the liberty to rebut with his submission on the remand report in order to attain the desired justice. 15. In the result, the appeal of assessee is allowed for statistical purposes. Order pronounced in pursuance to Rule 34(4) of ITAT Rules, 1963 on 21/09/ 2022. Sd/- Sd/- (RAVISH SOOD) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER रायऩुर/Raipur; ददनाांक Dated 21/09/2022 Prakash Kumar Mishra, Sr.P.S.

9 ITA No.231/RPR/2019 आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. 2. प्रत्यथी / The Respondent- आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. विभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, रायऩुर/ DR, ITAT, 5. Raipur गार्ड पाईऱ / Guard file. 6. आदेशानुसार/ BY ORDER, सत्यावऩत प्रयत //True Copy// (Assistant Registrar) आयकर अऩीऱीय अधधकरण, रायऩुर/ITAT, Raipur