Loading..
Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition

in part

Attorney(S)
Acts
  • s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act")
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition

in part

Attorney(S)
Acts
  • s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act")
See more information ...
Smart Summary

Structured Summary of the Opinion: ITA No.377/AHD/2018 (AY 2013-2014)

Factual and Procedural Background

This appeal arises from an assessment under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2013-2014. The appellant (assessee) is Shri Sangram J. Patel (PAN: ACXPP6793J), a non-resident individual. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-13, Ahmedabad dated 27/09/2017, which confirmed the Assessing Officer's disallowance of claims made under sections 54 and 54F of the Act.

In the assessment proceedings the Assessing Officer denied the exemption claimed under section 54/54F because, according to the AO, the assessee had not filed documentary evidence proving purchase of a new property within the statutory time limit; the only document was an agreement lacking payment schedule and there was allegedly no bank evidence of payments. The assessee appealed to the CIT(A), who upheld the AO's view on the ground that the requisite purchase/possession occurred after the two-year limit applicable for acquiring a newly constructed flat. The assessee has further appealed to the Income Tax Appellate Tribunal (D Bench, Ahmedabad).

Legal Issues Presented

  1. Whether the assessee is entitled to exemption under section 54/54F of the Income Tax Act for the amount paid (recorded as ₹50,51,000/- for construction/purchase) despite possession being handed over after two years from the date of transfer, by applying the three-year period applicable to construction cases.
  2. Whether the assessee deposited ₹14,00,000/- in the Capital Gains Account Scheme (CGAS) within the time prescribed and is therefore entitled to exemption for that amount under the relevant provisions.

Arguments of the Parties

Appellant's (Assessee's) Arguments

  • The assessee paid ₹50,51,000/- to M/s Sarnam Properties in the financial year in which the original property was transferred; the bank statement showing payment to the builder was placed before the Tribunal.
  • The assessee deposited ₹14,00,000/- on 3 April 2013 in the Capital Gains Account Scheme before the due date for filing the return under section 139(1).
  • The possession of the property was handed over by the builder on 15 March 2016. Where the assessee booked a newly constructed flat and paid installments to a builder who would hand over possession on completion, the activity should be treated as construction of a new house and the time limit for completion should be three years (relying on Kishore H. Galaiya vs. ITO, 24 taxmann.com 11).
  • The assessee was a co-owner along with his brother, and an identical claim by the brother before the same Assessing Officer had been accepted; hence consistency required similar treatment of the assessee's claim.

Respondent's (Revenue's) Arguments

  • The revenue contended that the assessee was required to purchase the house within two years and the assessee failed to comply with that requirement.
  • The revenue asserted there was no proof that ₹14,00,000/- was deposited in the Capital Gains Account Scheme; the bank entry did not clearly establish deposit into CGAS.
  • The Assessing Officer's acceptance of the brother's claim (if any mistake) did not oblige the AO to repeat the same in the assessee's case; principles of consistency were not applicable as argued by the assessee.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Kishore H. Galaiya vs. ITO, reported in 24 taxmann.com 11 Where an assessee books a flat with a builder, pays installments and the builder is to hand over possession on completion, such action is to be treated as construction of a new residential house; accordingly the time limit to complete construction/purchase extends to three years from date of transfer. The Tribunal relied on this authority to treat the assessee's payments to the builder as part of a construction scenario and to hold that the assessee is entitled to the extended three-year period; consequently the assessee could not be denied exemption under sections 54/54F due to delay attributable to the builder.

Court's Reasoning and Analysis

The Tribunal identified two connected factual/legal issues: (i) whether the assessee completed purchase/construction within the statutory period for claiming exemption under section 54/54F, and (ii) whether the assessee had deposited ₹14,00,000/- into the Capital Gains Account Scheme.

On the first issue the Tribunal noted:

  • It was not disputed that the payment of ₹50,51,000/- was made to the builder in the financial year in which the original property was transferred; the paper book contained a bank statement showing a payment to the builder for that amount.
  • Possession was handed over to the assessee after the expiry of two years, which on a literal reading would contravene section 54.
  • However, applying the principle in Kishore H. Galaiya (cited by the assessee), when an assessee books a flat and makes payments to a builder who will deliver possession on completion, the transaction is to be treated as construction of a new residential house and the applicable time limit for completion extends to three years from the date of transfer of the original asset.
  • On that basis the Tribunal concluded that the assessee should not be denied the benefit of the exemption under sections 54/54F due to delay caused by the builder.

On the second issue (the alleged deposit of ₹14,00,000/- into the Capital Gains Account Scheme), the Tribunal observed:

  • The bank statement showed a payment of ₹14,00,000/-, but the entry did not explicitly indicate that the amount was deposited into the Capital Gains Account Scheme.
  • The assessee's representative did not produce direct evidence establishing that the payment represented a deposit into the CGAS.
  • The Revenue, however, had not undertaken any enquiry or produced materials to disprove the assessee's contention.
  • In the interest of fairness, the Tribunal remitted the question of whether the ₹14,00,000/- represented a deposit in the CGAS to the Assessing Officer for verification.

The Tribunal further noted the parallel fact that the assessee was a co-owner with his brother and that an identical claim by the brother had been accepted by the same Assessing Officer. The Tribunal considered that the Assessing Officer should have maintained consistency; this fact weighed in favour of the assessee.

On the totality of these findings, the Tribunal was not convinced by the findings of the authorities below and directed deletion of the addition made by the AO in respect of the amount claimed under section 54/54F, while remitting the CGAS-related issue for verification.

Holding and Implications

Holding:

PARTLY ALLOWED

Implications and Direct Consequences:

  • The Tribunal set aside the finding of the CIT(A) and directed the Assessing Officer to delete the addition made by him in respect of the exemption claimed under sections 54/54F for the amount paid to the builder (₹50,51,000/- as claimed by the assessee).
  • The Tribunal remitted the specific issue whether the sum of ₹14,00,000/- was deposited in the Capital Gains Account Scheme to the file of the Assessing Officer for verification and appropriate action.
  • The appeal was allowed in part and the result recorded as "partly allowed for statistical purposes" by the Tribunal.
  • This order does not purport to create or announce an original principle beyond applying the precedent relied upon; the Tribunal applied the cited precedent (Kishore H. Galaiya) to the facts before it and directed fact-specific verification on the CGAS deposit issue.

Order pronounced on 25/10/2021 by the Income Tax Appellate Tribunal, "D" Bench, Ahmedabad (Judicial Member: Ms. Madhumita Roy; Accountant Member: Shri Waseem Ahmed).

Show full summary ...

    Shri Sangram J Patel,, Baroda v. DCIT,(International Taxation),, Vadodara

    आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ

    IN THE INCOME TAX APPELLATE TRIBUNAL,

    '' D '' BENCH, AHMEDABAD

    (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD)

    BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER

    And

    Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.377/AHD/2018 िनधारण वष/Asstt. Year: 2013-2014

    Shri Sangram J. Patel, C/o. Shri Nimesh Gandhi, Chartered Accountants, 217, Phonic Complex, Nr. Suraj Plaza Complex, Sayaji Gunj, Baroda-390007. PAN: ACXPP6793J Vs. D.C.I.T., International Taxation, Baroda.
    (Applicant) (Respondent)

    Assessee by : Shri M.J. Shah, A.R
    Revenue by : Dr. Shyam Prasad, Sr.D.R

    सुनवाई क तारीख/Date of Hearing : 05/08/2021

    घोषणा क तारीख /Date of Pronouncement: 25/10/2021

    आदेश/O R D E R

    PER WASEEM AHMED, ACCOUNTANT MEMBER:

    The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-13, Ahmedabad, dated 27/09/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-2014.

    1

    2

    2. The assessee has raised the following grounds of appeal:

    The Appellant objects to the order U/s 250 dated 27.09.2017 passed by Hon Commissioner of Income tax (Appeals)-13,Ahmedabad on the following amongst other grounds of appeal.

    (1) (a) That the Hon C I T (APPEALS) has erred in not allowing deduction of RS 6450000 u/s 54 for investment in acquiring of new flat.

    (b) That on the facts and in the circumstances of the case and in law the appellants genuine claim for investment of RS 6450000 ought to be allowed u/s 54 of the I T ACT 1961

    (2) (a) That the Hon C I T(Appeals) erred in observing and holding that the for acquiring a newly constructed flat the time-limit is two years and not three years.

    (b) That on the facts and in the circumstances of the case the Appellate had acquired the flat in the scheme which is newly constructed.

    (3) (a) That the learned C IT (Appeals) erred in holding that the newly Acquired flat ought to have be acquired within two years.

    (b) That on the facts and circumstances of the case the time period applicable is three years and not two years.

    (4) (a) That the learned C I T(Appeals) failed to appreciate the fact that Substantial part of the payment of RS 5 051000 was paid at the time of booking.

    (5) (a) The Hon CI T (Appeals) erred in observing that the appellate has not satisfied the conditional enumerated by the Act therefore not entitled for deduction u/s 54 of the Act.

    (b) That on the facts and the circumstances of the case and in law, it ought to be held the condition enumerated under provision of the Act are fulfilled and that the appellant is entitled to deduction of investment under 54 of that Act. Without prejudice to the Ground No 5(a) and (5)(b) .suitable amount to be directed to be allowed towards investment u/s 54 of the Act.

    The Appellant reserve right to add, amend and/or delete any grounds of appeal as and when the occasion arises

    3. The only interconnected issue raised by the assessee is that the learned CIT

    (A) erred in confirming the order of the AO by denying the exemption claimed under section 54 of the Act for ₹ 64,50,000/- only.

    4. The necessary facts as culled out from the order of the authorities below are that the assessee in the present case is an individual and non-resident assessee. The assessee in the year under consideration has claimed exemption under section 54F of the Act for an amount of ₹ 50,51,000/- only and ₹ 14 lakh under 54(2) of

    3

    the Act. The impugned amount of exemption was on account of the investment made in the construction of the property for ₹ 50,51,000/- and the deposit of ₹ 14 lakh in the capital gain account scheme.

    4.1 However, the AO during the assessment proceedings found that the assessee has not filed any documentary evidence establishing the fact that he has purchased any property within the time prescribed under the provisions of section 54F of the Act except the agreement for purchase of the property. In such agreement, there was no detail appearing for the payment to be made or payment schedule against the purchase of the property. Likewise, the assessee has not brought anything on record such as the bank statement depicting the payment for the purchase of the property. Accordingly, the AO denied the claim of the assessee under section 54F and 54 of the Act and added the same to the total income of the assessee.

    5. Aggrieved assessee preferred an appeal to the learned CIT (A).

    6. The assessee before the learned CIT (A) contended that he has made the payment of ₹ 50, 51,000/- for the purchase of the property within the financial year under consideration to M/s Sarnam Properties. Likewise, he has deposited a sum of ₹14 lakhs dated 3rdApril 2013 in the capital gain account scheme much before the due date of filing the return of income as specified under section 139(1) of the Act. Accordingly, the assessee contended that he is eligible for deduction/exemption under section 54 of the Act. The assessee, similarly, also submitted that the possession of the property was handed over to him by the builder vide letter dated 15thMarch 16.

    7. However, the learned CIT (A) rejected the contention of the assessee by observing that the provisions of section 54/54F of the Act requires to purchase the new residential property within 2 years from the date when the property was sold. As such, the time limit for purchase of the new property expired on 15 March 2015 whereas the assessee received the possession dated 15 March 2016 which is almost

    4

    after the lapse of one year. Thus the condition as specified under section 54 has not been fulfilled. Thus the learned CIT (A) disregarded the contention of the assessee and confirmed the order of the AO.

    8. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.

    9. The learned AR before us filed a paper book running from pages 1 to 34 and contended that the entire amount for the purchase of the property was paid and deposited in the capital gain account scheme within the prescribed time. The learned AR for this purpose drawn our attention on page 2 of the paper book where the bank statement of the assessee was placed.

    9.1 The learned AR further contended that the benefit is extended to the assessee if he constructs the house within a period of 3 years from the date of transfer of the property. As the assessee has given money to the builder for the construction of the house, then the time limit for the assessee should be extended for 3 years from the date of transfer of the property. Thus in such a scenario, the assessee got the possession on 15thMarch 2016 which is well within a period of 3 years. The learned AR in support of his contention relied on the order of Mumbai Tribunal in the case of Kishore H. Galaiya vs. ITO reported in 24 taxmann.com 11

    9.2 The learned AR also contended that the impugned property was held by the assessee jointly along with the brother, who also made investment for the purchase of the property from the same builder and deposited the sum of ₹ 14 lakhs in the capital gain account scheme. The AO of the brother of the assessee was also the same. As such the AO, in the case of the brother of assessee has accepted the claim of the assessee. Accordingly the learned AR, contended that the facts of the case on hand are identical to the facts of the case of the brother of the assessee. Accordingly, the learned AR contended that the assessee should be allowed the benefit of exemption under section 54 of the Act as the present case is identical to

    5

    the facts of the case of the brother of the assessee. For this purpose, the learned AR drew our attention on the assessment orders of the assessee's brother which is placed on record.

    10. On the other hand the learned DR before us contended that the assessee was required to purchase the house within a period of 2 years but he has failed to do so. Likewise, there was no evidence filed by the assessee establishing the fact whether he has deposited a sum of ₹ 14 lakhs in the capital gain account scheme. Even the entry shown in the bank account of the assessee does not suggest so.

    11. The learned DR further submitted that any mistake committed by the AO in the case of the brother of the assessee does not mean that the same mistake should be repeated by the same AO in the case of the assessee. Accordingly the learned DR was of the view that the principles of consistency cannot be applied in the case of the assessee. The ld. DR vehemently supported the order of the authorities below.

    12. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the dispute is on two folds. The 1stissue relates whether the assessee has purchased the property within a period of 2 years from the date of transfer and therefore he is eligible for deduction under section 54 of the Act for ₹ 50,51,000/-. The 2ndissue relates whether the assessee has deposited a sum of ₹ 14 lakhs in the capital gain account scheme.

    12.1 In connection with the 1stissue, we note that the payment of ₹ 50,,51,000/- was made to the builder in the financial year in which the property was transferred by the assessee and this fact was also not disputed by the authorities below. In this regard, we also perused the bank statement of the assessee available on page 2 of the paper book. In the bank statement, the name of the builder was appearing showing the payment of ₹ 50,51,000/- within the financial year under consideration. Moving further, the flat was handed over to the assessee after the expiry of 2 years

    6

    which contravenes the provisions of section 54 of the Act. However we find that the Mumbai tribunal in the case of Kishore H. Galaiya (supra) has held that once the assessee booked flat with builder and started making payment of instalment. Further, the builder was to handover the possession of the flat to assessee on completion of construction. Then such act of the assessee is to be considered as construction of new residential house not the purchase of property. Accordingly the time limit will extend to 3 years from the date of transfer of property to complete the construction.

    12.2 In view of the above, we hold that the assessee cannot be denied the benefit of exemption available to him under the provisions of section 54/54F of the Act on account of the delay on the part of the builder.

    12.3 With respect to the deposit of ₹ 14 lakhs in the capital gain account scheme, we have perused the bank statement filed by the assessee and note that there is a payment of ₹14 lakhs. But this payment does not indicate the fact that the assessee has deposited the same in the capital gain account scheme. The learned AR, at the time of hearing has also not brought anything on record establishing the fact that the impugned amount represents the money deposited under the capital gain account scheme. However, the revenue has also not conducted any enquiry to disprove the contention of the assessee based on the cogent materials. Nevertheless, in the interest of justice and fair play we are inclined to remit this issue to the file of the AO to verify whether the impugned amount represents the deposits made under the capital gain account scheme or not.

    12.4 It is not also out of place to mention that the assessee was the co-owner in the property along with his brother. The claim of the assessee's brother by the same AO was accepted and the deduction/exemption was allowed for the investment made by the co-owner with M/s Sharnam builders for the purchase of the property. In such a situation, we are of the view that the AO was to maintain the consistency. In simple words, the AO cannot reject the claim of the assessee whereas in the case

    7

    of the brother of the assessee in the identical facts and circumstances, the same was accepted. Accordingly on this count, we are not convinced with the finding of the authorities below. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is partly allowed for the statistical purposes.

    13. In the result the appeal of the assessee is partly allowed for the statistical purposes.

    Order pronounced in the Court on 25/10/2021 at Ahmedabad. Sd/- Sd/-

    (MADHUMITA ROY) (WASEEM AHMED)

    JUDICIAL MEMBER ACCOUNTANT MEMBER

    (True Copy)

    Ahmedabad; Dated 25/10/2021 Manish

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Shri Sangram J Patel,, Baroda v. DCIT,(International Taxation),, Vadodara
    (Oct 25, 2021)