TaxTMI 
TaxTMI 
2023 (7) TMI 605
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.... change in Section from Section 54F to Sec. 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. 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 w....
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....Gain Rs 94,28,948/- and after claiming deduction under section 54F of the same amount 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....
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....dated 13/11/18, 14/11/2018 and 29/11/2018 (copy at Paper book page no. 31 to 34). The reassessment of the assessee was completed 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....
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....as 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.' 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: ....
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....paper book page no. 39) it is mentioned that the assessee had taken Water and Electricity connection on the said property, which were also transferred to the buyer of property. c. On page 9 of the Registered Deed, (paper book page no. 40) it is mentioned that the area 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 ....
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....rn the assessment was completed u/s 143(3) and an order was passed in which the claim of the assessee was disallowed u/s 54F vide order dated 28.12.2018. 9. Provisions of section 54 and 54F, as applicable in the relevant assessment year, are reproduced below for the ease of discussions: Sec. 54: Profit on sale of property used for residence. 54. ^39[(1)] ^40[^41[Subject to the provisions of sub-section (2), where, in the case of an assessee^42 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 house^44, 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 purchased^46], 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 to....
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.... (i) the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Sec. 54F: [Capital gain on transfer of certain capital assets not to be charged in case of investment 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,- ....
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....ng understanding the facts. This mistake has arisen because of the reason that the provisions of Sec. 54 and Sec. 54F are identical in nature and many a time assessee is confused as to under which law, he should claim deduction. 13. Attention is drawn on para 6.2.3 and 6.2.4 and 6.2.5 of the order of learned CIT(A) where he has thoroughly discussed the claim of the assessee for deduction u/s 54 and finally allowed the claim u/s 54. Learned CIT(A) has done only what the learned AO failed to do. 14. In view of specific provisions 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 proceedin....
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....whom it is imposed by law, officers should: a. Draw their attention to a refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other. b. Freely advise them when approached by them as to their rights and liabilities and as to procedure to be adopted for claiming refunds and reliefs." 18. Reliance is placed on the decision of Hon'ble SC in the case of Bajaj Tempo Limited (196 ITR 188) where Hon'ble Supreme Court has held that provisions giving incentive for growth and development should be interpreted liberally 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 (....
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.... the AO has disallowed claim u/s 54F (which was allowed to the assessee in original assessment) by alleging that the assessee was owning more than one residential house on the date of transfer of original asset. 3. It is submitted that the assessee filed revised grounds of appeal before the CIT(A) but no fresh claim for any deductions were made for him. The assessee had claimed deduction under section 54 only in the return filed before the AO in response to notice under section 148 and in the revised grounds of appeal also in Ground No.2, before CIT(A), the assessee claimed deduction under deduction 54 only. In alternate ground No.4 the assessee claimed 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....
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.... clinching evidence leaving no further room for any doubt or controversy, in such a case no useful purpose would be served by forwarding evidence/material to Assessing Officer to obtain his report and in such exceptional circumstances, said requirement may be dispensed with. 7. Attention is drawn to provisions of Rule 46A of Income Tax Rules which deals with production of additional evidence before the CIT(A). As per clause (3) of Rule 46A, CIT(A) is prohibited from taking into account any additional evidences unless the AO has been allowed reasonable opportunity to examine the same and give his comments. 8. In this case the assessee filed application under rule 46A of Income tax Rules for acceptance of additional evidences. 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 ass....
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....i (Copy at Paper book page no. 59 to 75) in which he assessee had ½ undivided share in each. In this manner, the assessee and his wife were the joint owners of this property. These sale deeds were for plot having total area of 266.66 sq. yards. (222.95 sq. metres) On this plot it is mentioned in the sale deed ( paper book page no. 66 and 74) that there was some construction on, the southern side, which was 43 years old of one room, kitchen and toilet having area of around 11.24 sq. metres (121 Sq Ft) only. This was made of Chuna and Patti only. 5. This old old structure made of Chuna Patti, which was 43 years old, was not fit for residence of any family and for all practical purpose it was only a 'vacant land' and cannot be called a 'residential House' by any stretch of imagination. However, due to inadvertent 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 as....
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....sessment without calling for requisite details and information from the assessee. It is submitted that the old structure was demolished by the Contractor Shri Gopal Lal Kumawat, son of Late Shri Suwalal Kumawat, r/o Plot No. 51-A, Shiv Colony, New Sanganer Road, Sodala, Jaipur 302019. In support of this the assessee filed an affidavit dated 2.12.2021 of said Shri Gopal Lal Kumawat, (copy at Paper book page no. 77 to 78) as an additional evidence under Rule 46A of Income tax Rules. This fully takes care of the objection of the AO that identity of the person who signed the receipt was not verifiable. 8. Ledger account copy of Nagar Nigam: During the course of assessment proceedings, the assessee also filed copy of Ledger Account of Plot No. 160 Indira Colony Jaipur in the books of Nagar Nigam Jaipur on 4.6.2012 (which is a date prior to date of sale of original asset i.e. 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 tha....
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....ighbor in Green saree c) Son of neighbor Tanmoy Bhattacharya who was born on 23/11/20000 and he was the age of around 4 years plus at that time. d) Assessee also seen in the picture. He is sitting on chair and his back was towards camera. In this photograph it can be clearly seen that no room or super construction is visible on the land of Plot No. 160, Indira Colony, Banipark, Jaipur. This evidence is being filed Under Rule 46A of Income Tax Rules. 11. Complete sequence of events can be summarized in the following table: Date Value 29/1/2001 Purchase of ½ undivided share in Plot No. 160, Indira Colony, Bani park, Jaipur jointly with wife Smt. Madhu Ratudi 3,50,000 30/1/2001 Purchase of ½ undivided share in Plot No. 160, Indira Colony, Bani park, Jaipur jointly with wife Smt. Madhu Ratudi 3,50,000 Total 7,00,000 ½ share of the assessee 3,50,000 Value 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....
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....cted in most arbitrary manner. 2. The assessee had informed the learned AO vide letter dated 26.9.2017 (copy at paper book page no. 22 to 23) that the reasons recorded by him were factually incorrect and away from the facts. 3. The learned AO had recorded the reasons as under: 'In instant case, the assessee owned on the date of transfer, more than one residential houses. It was proved from the balance sheet of 31st March 2013; in schedule 1 of fixed assets assessee had shown two residential houses'. 4. In this regard it was submitted that the assessee was not owner of more than one Residential House. 5. In Schedule I of Fixed Assets attached to the Balance Sheet (Copy at Paper book page no. 7) the assessee had given following information: SN. Particulars 1. House 574405.00 2. House 2 438675.00 In this schedule the assessee had nowhere stated that these two houses were residential houses. It is not clear from where the AO gathered the information that these two houses were residential houses. There could be following possibilities in this case: a. Both the houses were residentia....
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....s subject matter of examination. AO, being a quasi-judicial authority, is expected to arrive at a subjective satisfaction, independently based on objective criteria. Recording of 'reasons to believe' and not 'reasons to suspect' is the prerequisite to the assumption of jurisdiction under Section 147. Sec. 147 cannot be invoked for making fishing or roving enquiries in the matter. 9. The learned AO has failed in passing any speaking order on the specific issue raised by the assessee in his Objections- as to how the AO considered both the houses shown in the Balance Sheet as Residential Houses - which is in direct violation of law laid down by the Honorable Supreme Court in the case of GKN Drive Shaft Limited. 10. Learned CIT(A) in para 6.1 of his order has simply stated that: 'Objections raised by the appellant were disposed by the AO by way of passing a speaking order and then only reassessment was completed u/s 143(3) r.w.s. 147 of the Act. Therefore, the AO had followed the proper procedure and has framed the assessment u/s 143(3) r.w.s. 147 of the Act. Hence ground of appeal no. 1 and 3 are dismissed.' Therefore, CIT(A) has also not given any ....
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....le of a capital assets being the residential house shall be exempt subject to the provision of the Act. Having gone through the facts of the case and provision of Section 54, the appellant is entitled to exemption on sale of the residential house at Vidhyadhar Nagar u/s 54 as the assessee had purchase a new flat on the sale of proceeds of the said impugned property. The addition made by the AO of Rs. 94,39,201/- u/s 54F is deleted the relief is allowed u/s 54 of the Act. The ground of the appeal is allowed.'' Aggrieved by the said relief by the ld. CIT(A), the Revenue has challenged the order of the ld. CIT(A) before us on the ground mentioned hereinabove. The first and foremost ground raised by the Revenue is challenging the order of the ld. CIT(A) in deleting the addition made by disallowing deduction claimed u/s 54F and considering the same u/s 54 of the Act. The ld. DR specifically relied upon the order passed by the AO and reiterated the same before us. Apart from this, the ld DR also relied upon his submissions as made in pages 25 to 89 of the paper book and also AO report on cross objection of the assessee from pages 90 to 93 of the paper book. On the contrary, the ld. AR....
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.... Rs. 94,39,201 under section 54 of Income Tax Act in return filed in response to notice u/s 148, which should have been allowed to him. 3. The learned AO has erred in reopening the case of the assessee after arbitrarily rejecting the most genuine objections of the assessee against reopening without following proper procedure as laid down by Hon'ble Supreme Court. Alternatively, the learned AO has erred in not allowing deduction of Rs 94,39,201/- under section 54F of Income Tax Act in most arbitrary manner and on flimsy grounds. 5. The assessee craves his right to add, alter, amend or delete any grounds of appeal at the time of hearing or earlier. From the above ground, it is manifestly clear that the assessee has taken the specific ground in his revised ground that the AO has erred in applying the provision of Section 54F of Income Tax Act to determine the claim of the assessee for deduction whereas the assessee had claimed deduction of Rs. 94,39,201/- u/s 54 of the Income Tax Act in the return filed in response to notice u/s 148 which should have been allowed to him. Since this ground was specifically raised by the assessee before the ld. CIT(A) and the ld. CIT(A) by e....
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.... house constructed on the plot of land is evident from the following: a. On page 6 of the Registered Sale deed (last three lines) ( Paper book page no. 38- back page) it is mentioned that the plot of 345.50 Sq Meters was sold with Roof Right, constructed area, kiwad jodian, bai barna, khidki, darvaja, upar ki chat etc. b. On page 7 of the Registered Deed, (paper book page no. 39) it is mentioned that the assessee had taken Water and Electricity connection on the said property, which were also transferred to the buyer of property. c. On page 9 of the Registered Deed, (paper book page no. 40) it is mentioned that the area 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. 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....
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....tice u/s 148 of the Act, the assessee filed the return of income on 9-08-2017 in which he correctly claimed deduction of Rs. 94,32,201/- u/s 54 of the Act. On this return the assessment was completed u/s 143(3) and an order was passed in which the claim of the assessee was disallowed u/s 54F vide order dated 28-12-2018 by the AO. Although, the assessee had already claimed deduction u/s 54 of the Act by filing return of income in response to the notice u/s 148 of the Act which was not considered by the AO yet the ld. CIT(A) while considering the said plea gave relief to the assessee u/s 54 of the Act. Since the Revenue has taken a specific ground that the assessee could not have been given relief u/s 54 of the Act as he had claimed deduction u/s 54F only but in this regard the submission of the ld. DR factually incorrect. It is noticed that the assessee while filing the return of income in response to notice u/s 148 of the Act in which he has specifically claimed deduction of Rs. 94,23,201/- u/s 54 of the Act which at PB pages 16 to 18. Before proceeding further, we want to evaluate Section 54 and Section 54F of the Act which are reproduced below. ''Sec. 54: Profit....
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....in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme^54 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Se....
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....asset, on the date of transfer of original asset is not there in Section 54. Therefore, in our view, the assessee can claim deduction u/s 54 of the Act if he constructs/ purchases a new house property within the stipulated time irrespective of any number of residential houses owned by him. As per facts of this case, the assesseee has fully complied with all the conditions of Section 54 of the Act, therefore, he is entitled to claim a deduction u/s 54 of the Act as the assessee had specifically claimed deduction u/s 54 of the Act in his return filed in response to notice u/s 148 of the Act. However, the AO has disallowed claim u/s 54F by alleging that the assessee was owning more than one residential house on the date of transfer of asset. Therefore, in our view, the entire assessment passed by the AO is wrong application of facts. Even otherwise, the ld. CIT(A) was competent enough to appreciate the entire facts of the case in his order and in para 6.2.3 to 6.2.5 the ld. CIT(A) has thoroughly discussed the claim of the assessee for deduction u/s 54 of the Act and finally allowed the claim u/s 54 of the Act. Therefore, in our view the whole discussion as to whether or not the assess....
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....r some reason the AO wanted to withdraw the deduction given u/s 54F in the original assessment, then in that eventuality, AO should have considered the claim of the assessee for deduction u/s 54 in the return filed in response to notice u/s 148. In this regard, our attention was drawn to Department Circular NO. 14(XL-35) of 1955 dated 11-4-1955 (Copy at Paper book page no. 58) in which Central Board of Revenue has advised the Department Officers as under: "Officers of the department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings on other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for, it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assesses on whom it is imposed by law, officers should: ....