TaxTMI 
TaxTMI 
2023 (7) TMI 605
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.... The assessee revised the grounds of appeal after the remand report was submitted by the AO. On the facts and in the circumstances of the case whether the ld. CIT(A) was justified in accepting the revised ground of appeal u/s 54 for which no opportunity was provided to the Revenue to examine the conditions stipulated u/s 54 of the Act. Therefore, additional grounds of appeal accepted by the ld.CIT(A) was in violation of Rule 46A. C.O. No. 2/JP/2023 - A.Y. 2013-14 (Assessee) 1. Alternatively the AO has erred in disallowing deduction claimed by the assessee u/s 54F of Rs. 94,39,201/- and the ld. CIT(A) has erred in not deciding alternate Ground No. 4 of the assessee which was before him on this issue. 2. The AO has erred in reopening the case of the assessee after rejecting most genuine objections of the assessee against reopening of the case without following proper procedure as laid down by Hon'ble Supreme Court and ld.CIT(A) has erred in rejecting this Ground of appeal.'' 2.1 At the outset of the hearing, the Bench noted that there is delay 92 days in filing the Cross Objection by the assessee for which the assessee submitted that total tax effect in this case was only Rs. 1....
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....nt Net Income from Long Term Capital Gain declared by the assessee was NIL. During the course of assessment proceedings, the assessee observed some mistake in the computation of LTCG income and therefore filed a revised computation of income along with covering letter dated 28.12.2015 declaring sale consideration of plot at Rs. 1,00,00,000, Investment in new house property Rs. 1,00,37,910 and deduction u/s 54F Rs. 94,39,201 and LTCG income at Rs. Nil and total income of Rs 18,21,680/- (Copy at Paper book page no 10 to 13). The assessment was completed under section 143(3) by the DCIT, Circle 7, Jaipur on 24/2/2016 and the returned income was accepted. (Copy of order at Paper book page no 14.) Thereafter, the assessee received one notice under section 148 dated 18/7/2017. (Copy at Paper book page no 15). In reply to this notice u/s 148 the assessee filed return of income on 9/8/2017 declaring total income of Rs 18,21,680/- after claiming deduction u/s 54 for Rs 94,39,201 (Copy at Paper book page no 16 to 18.). The assessee asked for the reasons for reopening of the case by letter dated 14.8.2017 (Copy at Paper book page no. 19). The AO supplied the reasons for reopening vide letter ....
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....d by the AO on 28/12/2018 after disallowing deduction of Rs 94,39,201/- claimed by the assessee under section 54F, in the original assessment. 3.2 Against this order of the AO, the assessee filed an appeal before ld. CIT(A) through e-filing on 9/1/2019 along with form No. 35 and Grounds of appeal. However, since there was some factual mistake in the original grounds of appeal, the revised grounds of appeal were filed before ld. CIT(A) along with written submissions dated 8.12.2021 (Copy at Paper book page no. 89 to 104) with the following request: ''In the above case, the assessee has filed the appeal through e-filing on 9/1/2019 along with form No. 35 and Grounds of appeal. However, now the assessee wants to file Revised Grounds of Appeal, which are as under and which may kindly be taken on record.'' Thus the Original Grounds of appeal and Revised Grounds of appeal of the assessee before ld. CIT(A)/ NFAC are as under:- Original grounds of appeal of the assessee as per Form No. 35 filed on 9/1/2019 Revised grounds of appeal, as filed in written submissions dated 8.12.2021 before NFAC 1. The order of the learned AO under section 147/143(3) of Income Tax Act 1961 is bad in law....
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....nds of appeal the assess didn't mentioned the change in section from section 54F to 54.' 2. 'The assessee revised the grounds of appeal after the remand report was submitted by the AO. On the facts and in the circumstances of the case whether the Ld. CIT(A) was justified in accepting the revised ground of appeal u/s 54 for which no opportunity was provided to the Revenue to examine the conditions stipulated u/s 54 of the Act. Therefore, additional grounds of appeal accepted by the Ld. CIT(A) was in violation of Rule 46A.'' Submissions of the assessee on Ground No 1 of the department: 'On the facts and in the circumstances of the case, whether the Ld. CIT(A) was justified in deleting the addition of Rs 94,39,201/- made by disallowing the deduction claimed u/s 54F and considering the same u/s 54 of the IT Act even when in the original grounds of appeal the assess didn't mentioned the change in section from section 54F to 54.' On the above ground, the following is submitted: 1. It is submitted that the assessee filed the appeal before CIT(A) through efiling on 9.1.2019. The Revised Grounds of Appeal were filed before the CIT(A) along with written submission dated 8.12.2021, d....
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....ea of Plot sold was 345.5 sq., meter in which one room, toilet and boundary wall was constructed having covered area of 200 sq. Feet. Therefore, the property sold by the assessee was a Residential House fit for residence of a family. 3. It is submitted that the assessee relies on the decision by jurisdictional ITAT in the case of - Seema Singh Beniwal v. DCIT (2017) 88 taxmann.com 359 (ITAT -Jaipur) ( Copy at case law paper book page no. 1 to 5) - in which a 10'x20' i.e. 201 sq. ft. (23.33 sq. yards) constructed area on plot of land of 3500 Sq ft. (388 sq. yards) was considered to be a 'residential house' and deduction u/s 54 was allowed to the assessee. The findings given by the ITAT are as under: 'Held that the question whether constructed are of size 10'x20', i.e., 201 sq. Ft. can be treated as a residential house or not. It is clarified by the CBDT that purchase of plot of land is a part of residential house for claiming of deduction under section 54F. The revenue itself has admitted that it is a habitable as a servant quarter, which in other words, was habitable for human being either servant or master or any employee. There is no restriction as to what percentag....
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....sed for residence. 54. 39[(1)] 40[41[Subject to the provisions of sub-section (2), where, in the case of an assessee42 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 43[***], being buildings or 44lands appurtenant thereto, and being a residential house44, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of 45[one year before or two years after the date on which the transfer took place purchased46], or has within a period of three years after that date 47[constructed, one residential house in India], 46then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain 48[is greater than the cost of 49[the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the n....
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....vestment in residential house. 54F. (1) 59[Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a 60residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 61[two years] after the date on which the transfer took place 60purchased, or has within a period of three years after that date 62[constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be....
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....rovisions of the Act, the whole discussions as to whether or not the assessee was owning more than one Residential Houses, other than new asset, on the date of transfer of original asset, has become redundant as the assessee, in return filed in response to notice u/s 148, had claimed deduction u/s 54 of Income tax act and there is no such restriction on the assessee under that section. 15. It is submitted that in the case of Income Tax Officer v. Armine Hamied Khan [2022] 142 taxmann.com 14 (Mumbai - Trib.) ( Copy at Case law paper book page no. 6 to 7) the Hon'ble Mumbai ITAT permitted the assessee, during the course of assessment proceedings, to claim deduction under section 54F in place of under section 54 (as claimed by the assessee while filing the return of income). It was held that it was not a fresh claim. The findings of Hon'ble ITAT are as under: 'Whether since a claim for exemption was rightly made by assessee and only a wrong section was quoted while making said claim, same would be qualitatively different from making a fresh claim and, thus, assessee would be entitled to claim exemption under section 54F without filing revised return - Held, yes [Para 8] [In favour....
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....y and the restriction on exemption should be construed so as to advance objective and not to frustrate it. The exact findings of the Hon'ble court are as under: 'Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it.' In this matter kindly also see the judgements in the case of CIT v. Krishna Copper & Steel Rolling Mills [1992] 60 Taxman 93/193 ITR 281 (SC), CIT v. Baby Marine Exports [2007] 160 Taxman 160/290 ITR 323 (SC) and followed in Arvind Gupta v. ITO [2008] 116 TTJ 92 (JP). Therefore, the benefit of liberal interpretation of law should be given to the assessee. 19. Therefore, the learned CIT(A) has correctly allowed deduction u/s 54 of Income tax act and his order should be upheld. Submissions of the assessee on Ground No. 2 of the department. 'The assessee revised the grounds of appeal after the remand report was submitted by the AO. On the facts and in the circumstances of the case whether the Ld. CIT(A) was justified in accepting the revised ground of appeal u/s 54 for which no opportunity was provided to the ....
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....ed deduction under section 54F of Income Tax Act. The learned CIT(A), after understanding full facts of the case, accepted Ground No. 2 and gave deduction to the assessee u/s 54. 4. It is submitted that the powers of CIT(A) are co-terminus with that of AO. Therefore, the CIT(A) can do what the AO can do. We draw your kind attention towards provisions of sub-section (4) of section 250 of Income Tax Act which deals with 'Procedure in Appeal'. As per sub-section (4) the CIT(A) 'may' direct the AO to make further enquiry and report result of the same to him. The use of the word 'may' signify intention of the law that CIT(A) 'may' or 'may not' refer any matter to the AO to make further enquiry. 'May' is a word which is different from the word 'shall'. Therefore, in this case since the assessee had claimed deduction u/s 54 in return filed in response to notice under Sec. 148, the CIT(A) was satisfied with the arguments and submissions of the assessee, therefore he allowed the appeal to the assessee without referring the matter to AO. The CIT(A) was well within his right u/s 250(4) and fully empowered to take an independent call in the matter. Reliance is placed on the decision in....
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....dences. The learned CIT (A) after considering the remand report of the AO accepted the additional evidences. After submission of this remand report the CIT(A) did not consider any necessity of taking a fresh remand report from the AO. The learned CIT (A) has also discussed this fact in para 5 and para 6.2.2 of his order. 9. Therefore, the CIT(A) after examining all the facts and documentary evidences, has rightly allowed the appeal of the assessee by allowing him deduction under section 54. CROSS OBJECTIONS OF THE ASSESSEE The assessee has e-filed the cross objections in form no. 36A dated 22.2.2023 along with application for condonation of delay and affidavit. The same may kindly be allowed. The Cross objections of the assessee are as under: 1. 'Alternatively, the learned AO has erred in disallowing deduction claimed by the assessee under section 54F Rs 94,39,201/- and the learned CIT(A) has erred in not deciding alternate Ground No.4 of the assessee which was before him on this issue.' 2. The learned AO has erred in reopening the case of the assessee after rejecting most genuine objections of the assessee against reopening of the case without following proper procedure ....
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....dvertent mistake of the assessee, it was shown as House 2 in the Balance Sheet of the assessee. 6. In this so-called structure, the undivided share of the assessee was ½ which comes to only 5.62 square metres. (60.5 sq. ft.) By no stretch of imagination, such a small construction can be called an independent residential house, so as to disentitle the assessee a deduction u/s 54F of income tax act. Further, the assessee was not the exclusive owner of such property. Therefore, it cannot be said that he was the owner of two-house properties on the date of transfer of original asset. Reliance is placed on the following decision: 2022] 144 taxmann.com 127 (Mumbai - Trib.) Anant R Gawande v. Assistant Commissioner of Income-tax (Copy at case law paper book page no. 13-16) Section 54F of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house (Ownership of more than one house) - Assessment year 2013-14 - Whether where a residential property is jointly owned by two persons that would not preclude an assessee from claiming exemption under section 54F, as assessee would not be hit by proviso to section 54F being not an exclusive ow....
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..... 27/7/2012) in which this property is shown as vacant land. (copy at Paper book page no. 79) Learned AO has refused to accept this evidence ( at page no. 8 of AO order) for the reason that it was not neither having signature nor any seal of the issuing department. In this regard, it is submitted that it was copy of the Ledger Account of Nagar Nigam which is the authority authorized by State Govt for maintenance of land records. If the learned AO had any doubt, he could have easily deputed Inspector of the department to make necessary enquiry from Nagar Nigam, Jaipur. Learned AO has failed in doing so and simply brushed aside this important piece of evidence filed by the assessee. 9. Vibhajan Patra: It is further submitted that Plot No. 160, Indira Colony, Banipark, Jaipur was in the joint name of the assessee and his wife Dr Smt. Madhu Rathuri. This plot was purchased sometime in January 2001. At the time of purchase there was some small construction in the Southern Portion of the plot (kindly see Map at Paper Book Page No. 67 and 75). The assessee and his wife divided this plot of land in two portions amongst themselves by signing and executing a Vibhajan Patra on 10/6/2011 (co....
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....ue shown in the Balance Sheet of the assessee in Schedule 1 of Fixed Assets as House 2 along with Stamp Duty and other charges 4,38,675 27/10/2004 Demolition of Old Structure on the above plot of land through Contractor Shri Gopal Lal Kumawat 10/6/2011 Division of above plot of land between the assessee and his wife Dr Madhu Rathuri as per Vibhajan Deed - Deed of Partition 27/7/2012 Sale of Residential House by assessee on which the assessee had Capital Gain on which deduction under section 54/54F was claimed 1,00,00,000 12. In view of above facts and circumstances it is submitted that this old super structure on the land was demolished by the assessee in the year 2004 and further after division of the land between the assessee and his wife on 10/6/2011, the assessee was having only vacant land at Plot no. 160 Indira Colony, Jaipur as on 27/7/2012 i.e. the date of sale of impugned property by the assessee for Rs. 1,00,00,000/-. 13 The learned AO has also confused himself with the Advance for Flat Rs. 75,91,427, shown by the assessee in Annexure for Investments (Copy at Paper book page no...9...). In fact, this was the advance given by the assessee for pu....
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....sibilities in this case: a. Both the houses were residential houses. b. Both the houses were commercial houses. c. One house was residential and the other house was commercial house property. From the balance sheet, how the learned AO could gather the information that both the houses shown in balance sheet were residential houses. How the learned AO ruled out the other two possibilities to form a belief that on the date of transfer of original asset, the assessee was the owner of two residential houses. 6. The assessee had filed his objections in the above matter vide letter dated 26.9.2017. Learned AO, while passing the order disposing of the objections of the assessee, has observed as under: (paper book page no. 27) 'I have gone through the objections raised by the assessee and found the same are not acceptable for the reason that the assessee himself shown in schedule-I of Fixed Assets attached to the Balance Sheet and given details of House (Rs 574405) and House-2 (Rs 4,38,675) which clearly shows that the assessee was having two houses. The assessee did not mention any remarks against House-2 that this is a vacant plot and this vacant plot is being used as house ga....
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.... this issue. Due to above reasons assessment order passed by the learned AO, in violation of principles as laid down by Hon'ble Supreme Court, is bad in law and deserves to be quashed. '' 3.5 We have heard both the parties and perused the materials available on record and the judgment cited by the respective parties. For deciding the controversy in question raised by the Department by raising grounds appeal, it is necessary to deal with the facts of the case first. As per the facts of the case, the assessee is a doctor by profession and filed the return of income declaring total income at Rs. 18,21,680/- alongwith audited balance sheet and profit and loss account etc; .During the course of assessment proceedings, the assessee after observing some mistake has revised the computation of income and the assessee had shown sale consideration of plot at Rs. 1.00 lac and made investment in house property amounting to Rs. 1,00,37,910/- and thus shown deduction u/s 54F of Rs. 94,39,201/- and LTCG income at Rs. Nil. The assessment was completed u/s 143(3) of the Act and the returned income was accepted. Thereafter, the case of the assessee was reopened by issuing notice u/s 148 of the Act....
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....rder of the ld. CIT(A) and also filed the written submission concerning this appeal of the Department. The Ground No. 1 raised by the assessee is reproduced as under:- ''1. Alternatively the AO has erred in disallowing deduction claimed by the assessee u/s 54F of Rs. 94,39,201/- and the ld. CIT(A) has erred in not deciding alternate Ground No. 4 of the assessee which was before him on this issue.'' After having gone through the facts of the present case and the documents relied upon by both the parties with regard to Ground of Appeal No. 1 raised by the Revenue relating to deletion of addition made by the AO by disallowing deduction u/s 54F of the Act and considering the same u/s 54 of the Act, for deciding this controversy, it is necessary to evaluate the original ground as well as revised ground by the assessee before the ld. CIT(A)/ NFAC and the same are given hereunder in table form. Original grounds of appeal of the assessee as per Form No. 35 filed on 9/1/2019 Revised grounds of appeal, as filed in written submissions dated 8.12.2021 before NFAC 1. The order of the learned AO under section 147/143(3) of Income Tax Act 1961 is bad in law and against facts of the case. 2....
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.... and after deliberating on the said ground, had passed the detailed order thereby allowing relief to the assessee u/s 54 of the Act. It is important to mention here that the assessee had already made specific assertion that while filing response to notice u/s 148 of the Act, the assessee had specifically claimed deduction of Rs. 94,39,201/- u/s 54 of the Act and has also revised the grounds before the ld. CIT(A). Therefore, the ld. CIT(A) was well within his right to grant relief to the assessee. Apart from this very fact which are relevant for deciding this ground that the assessee had sold a residential house at Plot No. 6/390, Vidhyadhar Nagar, Jaipur vide registered sale deed dated 27-07- 2012 for Rs. 1,00,00,000/- and the copy of the sale deed has been placed at PB pages 35 to 40. It was further submitted that there was one residential house constructed on the plot of land which is mentioned on page 6 of the Registered Sale Deed. It is specifically mentioned that Plot of 345.50 sq. meter was sold with Roof Right, constructed area, kiwad jodian, bai barna, Khidki, Darvaja, upar ki chat etc. It is noted from the page No. 7 of the Registered Deed (PB Page No. 39) wherein it is sp....
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....assessee. The findings given by the ITAT are as under: 'Held that the question whether constructed are of size 10'x20', i.e., 201 sq. Ft. can be treated as a residential house or not. It is clarified by the CBDT that purchase of plot of land is a part of residential house for claiming of deduction under section 54F. The revenue itself has admitted that it is a habitable as a servant quarter, which in other words, was habitable for human being either servant or master or any employee. There is no restriction as to what percentage of the size of flat should be used for residential purposes under the income-tax law; but there is a restriction of maximum construction by the local authorities of the respective States. Thus, deduction claimed by the assessee should be allowed.' 4. The assessee purchased a new residential house being Flat No. 304 in building known as "Mayfair' at Jamnalal Bajaj Marg, Jaipur for total cost of Rs. 1,00,37,910 by registered sale deed dated 17/7/2014 (Copy at Paper book Page no 41 to 54) As per purchase deed of the New Flat the assessee had made payment for the purchase of new flat of Rs 75,96,377/- before the due date of furnishing of return, i.e....
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....n individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 43[***], being buildings or 44lands appurtenant thereto, and being a residential house44, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of 45[one year before or two years after the date on which the transfer took place purchased46], or has within a period of three years after that date 47[constructed, one residential house in India], 46then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain 48[is greater than the cost of 49[the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of th....
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....ng an individual or a Hindu undivided family], the capital gain arises from the transfer of any longterm capital asset, not being a 60residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 61[two years] after the date on which the transfer took place 60purchased, or has within a period of three years after that date 62[constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: [Provided that nothing contained in this sub-section shall apply where- (a) The assessee,- (i) o....
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....h restriction on the assessee under that section. Even otherwise, second claim of the assessee u/s 54 of the Act cannot be treated as fresh claim as at very first instance i.e. in first notice issued u/s 148 of the Act, the assessee filed return thereby specifically claimed deduction u/s 54 of the Act. On this aspect, our attention was drawn to the Coordinate Bench decision of ITAT Mumbai Bench in the case of ITO vs Armine Hamied Khan (2022) 142 taxmann.com 14 (Mum.) whose relevant para is mentioned as under:- ''It is submitted that in the case of Income Tax Officer v. Armine Hamied Khan [2022] 142 taxmann.com 14 (Mumbai - Trib.) ( Copy at Case law paper book page no. 6 to 7) the Hon'ble Mumbai ITAT permitted the assessee, during the course of assessment proceedings, to claim deduction under section 54F in place of under section 54 (as claimed by the assessee while filing the return of income). It was held that it was not a fresh claim. The findings of Hon'ble ITAT are as under: 'Whether since a claim for exemption was rightly made by assessee and only a wrong section was quoted while making said claim, same would be qualitatively different from making a fresh claim and, thus, ....