TaxTMI 
TaxTMI 
2019 (2) TMI 2148
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces of the case the Ld. Commissioner of Income Tax (Appeals) is right in law in holding that there being no claim in the return and during the proceedings before Deputy Director of Income Tax (Investigation) for deduction under Section 54F of the Act, the claim under Section 54F could be considered? iv) Whether the Ld. Commissioner of Income Tax (Appeals) is right in law in holding that the Assessing Officer ought to have examined the claim under Section 54F ignoring the fact that the Assessing Officer considered both the claims as per law? v) It is prayed that the order of the Ld. CIT(A) be set-aside and that of the A.O. be restored. vi) The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off. 3. From the above grounds it is gathered that only grievance of the Department in this appeal relates to the deduction directed to be allowed which was claimed by the assessee under section 54F of the Income Tax Act, 1961 (hereinafter referred to as 'Act'), by considering the Farm House as his residential house. 4. Facts of the case in brief are that the assessee e-filed return of income on 10/10/2013 decla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for any Assessment Year and therefore no agricultural operations were being performed. The Assessing Officer also enquired about the status of this land from the Municipal Corporation of Delhi who replied that the land comes in the municipal limit as per notification no. 1405 of Government of India dt. 18/06/2013 and this area comes in lower density residential area. Therefore the assessee was not eligible for claiming exemption under section 54B of the Act. 7. During the course of assessment proceeding the assessee vide letter dt. 30/03/2016 invited attention of the Assessing Officer that the exemption was alternatively claimed under section 54F of the Act but the said claim was not accepted by the Assessing Officer for the reasons given in para 2.4 of the assessment order which read as under: "i. The assessee in his computation clearly stated that this exemption is being claimed for purchase of agricultural land. Therefore the assessee is not eligible for this deduction. ii. Even the DDIT (Inv) also stated in the letter that the assessee has claimed deduction u/s. 54B, hence not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961. ii....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ● Rasiklal Chimanlal Nagri Vs. CIT, 56 ITR 608 ● Raja Mustafa Ali Khan Vs. CIT, 16 ITR 330 ● CIT Vs. Raja Benoy Kumar Suhas Roy, 32 ITR 466 (SC) ● State of UP Vs. Nand Kumar Aggarwal, AIR 1998 SC 473, 476 ● Vallabdas Narainji Vs. Development Officer, AIR 1929 PC 163 ● Tea Estates India Private Ltd. Vs. Commissioner of Wealth Tax ● CIT Vs. Gemini Pictures, 220 ITR 43 ● Sarifabibi's Case [ 1993] 204 ITR 631 (SC) ● CWT Vs. Officer-in Charge (Court of Wards), Paigah [1976] 105 ITR 133 (SC) ● T. Sarojini Devi V. Sri Kristna, AIR 1944 Mad 401 ● CIT Vs. V.A. Trivedi [1988] 172 ITR 95 ● CIT Vs. Siddharth J. Desai [1981] 139 ITR 628 9. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submissions on 24/11/2016 the relevant portion of which had been incorporated by the Ld. CIT(A) in para 4.5 of the impugned order which is reproduced verbatim as under : " In this regard the appellant submit that the appellant is legally entitled to claim deduction U/s 54F of the Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enquiry by the DDIT(lnv), New Delhi, appellant has submitted copy of her return of income along with computation of total income . In the said computation reference of both section was mentioned, hence conclusion drawn by the DDIT(lnv), New Delhi is based on the documents submitted with them and no negative inference can be drawn from the preliminary findings of the DDIT(lnv), New Delhi. Therefore the allegation of the Learned Assessing Officer that the assessee is claimed deduction from time to time u/s54B is not sustainable. iii. On perusal of registry of the question land it was noticed that the whole amount of the purchases assets was related to land only not for any residential house. As this amount is not related to any residential house, therefore the assessee is not eligible for claiming deduction u/s.54F of the Income Tax Act, 1961. In this regard we submit that appellant has entered into sale deed dated 19.10.2012 with Shri Karon Gupta for purchase of land with constructed house therein for a total consideration of Rs. 59,50,00,000/-. This fact is clear from the agreement itself on page no 6.which reads as under: "AND WHEREAS the vendor for this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rance of an assessee "Officers of the department must not take advantage of 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 or other particulars before them indicate that some refund 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 assessee on whom it is imposed by law, officers should - a. draw their attention to any refund 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 the procedure to be adopted for claiming refunds and reliefs." Further Bombay High Court in the case of Balmukund Acharya Vs. Deputy Commissioner Of Income Tax & Ors.: 310 ITR 310, he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee about correct claim and also to assess tax legitimately. Tribunal referred the Circular no 14.(XL-35), dated 11-4-1955 and letter No.F.81 /27/65-IT(B) dated 18-5-1965) and directed the Assessing Officer to allow the claim under section 54F after providing due opportunity of hearing." Further attention is invited to the provisions of section 292B of the Act, which states that return of income shall not be invalid merely by reason of any mistake, defect or omission if such return of income is in substance and in effect in conformity with or according to the intent and purpose of the Act. Considering the above judicial pronouncements, provisions of law and facts of the case it is clear even if the assessee has claimed deduction under wrong section, it is duty of the Assessing Officer to guide the assessee and allow deduction under correct provisions of law if the same is in substance in conformity with the Act. Therefore allegation of the Learned Assessing Officer that the claim was made in return of income U/s 54B and not 54F is not sustainable and needs to be rejected. v. The assessee clearly stated in her affidavit that she is residing at Panchkula onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess, office, shop, etc. It is not necessary that a person should reside in the house to call it a residential house. If it is capable of being used for the purpose of residence, then the requirement of section 54F is satisfied. The fact that the assessee did not actually use the same for his residence would not disentitle him to the claim of exemption under section 54F" Thus from the above it is clear that for claiming the exemption is that the property should be a residential house, there is no restriction for claiming the exemption that the assessee is not residing in the same house. The assessee has claimed exemption in its computation for the purchase amount of land only. It shows that this investment has been made only for purchase of land only not for purchase of residential house. If this exemption would have been claimed for residential house, then the assessee would claim it for the both amount Le. land purchase amount and construction of house amount but the assessee claimed exemption for purchase of land only not for construction of house amount Therefore, the assessee is not eligible for claiming exemption u/s.54F of the Income Tax Act In this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....house on agricultural land. Therefore, the assessee was entitled to the deduction claimed under section 54F." The appellant purchased the farm house along with its surrounding land. The Assessing Officer due to its surrounding land come to the conclusion that the assessee has purchase the land, hence not eligible for the exemption ufs.54F of the Act. The land which is vacant land appurtenant to and forming part of the residential unit is to be considered for the claim of exemption under section 54F of the Act. It is not necessary the residential unit is to be constructed on the whole land. The same view was held by the Hon'ble Delhi Bench in the case of ACIT vs Narendra Mohan Uniyal, 34 SOT 152. The finding of the said case law is as follows: "It is crystal clear from plain reading of sections 54 and 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is not any rider under section 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the building so constructed, then the contention of the Assessing Officer to the effect that investment of capital gains made in the second plot which was not appurtenant to the building so constructed was not eligible for exemption, could be favourably accepted. [Para 10] In view of the above discussion and keeping in view the detailed observation made by the Commissioner (Appeals), it could safely be concluded, on a proper appreciation of material available on record, that the property purchased by the assessee was a single unit and was being used for residential purposes. Therefore, investment made in respect of both the plots was eligible for claim of exemption under section 54F, Therefore, the order of Commissioner (Appeals) was to be upheld. [Para 11] In the result, the appeal of the revenue was to be dismissed, whereas cross-objection filed by the assessee was to be allowed. [Para 12]." Thus from the above it is clear that the appellant is eligible for claiming the exemption u/s.54F of the Act, hence the same should be allowed to the appellant. In view of the above facts and circumstances, in the light of the above submission, it is respe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itself, the assessee vide letter dated 30.03.2016 has submitted that the exemption has been claimed u/s 54F for the purchase of constructed residential house and land appurtenant thereof and not for the purchase of agricultural land. The fact regarding the claim made by the assessee u/s 54F during the course of assessment proceedings has been confirmed by the assessing officer himself in Para 6 of the remand report. Thus it is very clear and is being admitted that there is no claim for deduction u/ s 54B and the claim of the appellant is only u/s 54F of the Income Tax Act. For disallowing the claim of the appellant u/s 54F, the AO in Para 1 has only stated that the exemption u/s 54F is available for purchase of residential house & not for purchase of agricultural land. Since the assessee has made the claim for purchase of agricultural land so the assessee is not eligible for deduction u/s 54F. In this regard we submit that the assessee vide letter dated 30.03.2016 has clarified the issue regarding claim for deduction u/s 54F stating that the claim is for the purchase of residential house. It is a matter of fact that the assessee has purchased build up farm house along with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....land i.e. agriculture land measuring 12 Bighas bearing Mustatil No. 18 Kill No. 5 (2-18), 6 Min (3-3) 7 Min (1-2) 14 Min (1-2) and 15 Min (3-15) with boundary wall, Tube well, electric, connection and build up Farm house thereon, situated at Village Jonpur, Tehsil Mehrauli, New Delhi with all right of ownership, possession privileges, easements and appurtenances attached thereto, for a total consideration of Rs. 59,50,00,000/- (Rupees Fifty Nine Crores Fifty Lacs only) " Further on Page 4 of the conveyance deed it is clearly mentioned that the vendor has taken approval from the concerned authority for construction of residential house (Farm House) by the M. C. D. vide their file No: 336/B/HQ/2006/94/AE1 dated 07.06.2006. These facts clearly prove that the appellant had purchased a residence house along with land appurtenant thereto. Therefore, the allegation of Learned Assessing Officer that the assessee has purchased land only lacks merit, hence needs to be rejected. Further the farm house is to be considered as residential house for the -purpose of exemption u / s 54F for which reliance is placed on the following judicial pronouncement. The Hon'ble Jaip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture land measuring 12 Bighas at Village Jonapur, Tehsil Mehrauli, New Delhi, the Assessing Officer conducted full enquiry into the issue and held that the land purchased was not an agriculture land. She also observed that this fact was brought out clearly in the registered sale deed dt. 19/10/2012 therefore the deduction under section 54B would not be granted and the Assessing Officer rightly denied the claim of the assessee under section 54B of the Act. The Ld. CIT(A) pointed out that during the course of assessment proceeding the assessee herself stated vide letter dt. 30/03/2016 that the exemption was claimed under section 54F and not under section 54B of the Act and the same was reiterated before her vide letter dt. 07/10/2016 therefore the assessee was ineligible for this claim under section 54B of the Act. As regard to the claim of exemption under section 54F of the Act, the Ld. CIT(A) observed even if the assessee had not made claim of deduction while filing his return of income and had subsequently during the course of assessment proceeding made the claim of such deduction than it has the right to avail all the deduction if it satisfies all the eligibility criteria for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or does not construct any residential house, other than the new asset within a period of three years after the date of transfer of the original asset. iii. Income from the newly purchased residential house is chargeable under the head Income from house property. 11.3 Ld. CIT(A) observed that the property purchased by the assessee was being used for residential purposes alone which had been proved by the Assessing Officer during his enquiry, therefore the status of the property being residential had not been disputed by the Assessing Officer which was also clear from the registered sale deed dt. 19/10/2012 relevant para of which reads as under: 'AND WHEREAS the vendor for this bonafide needs and requirements has agreed to sell and the vendor has agreed to purchase the said land i.e. agriculture land measuring 12 Bighas, bearing Mustatil No. 18 Kill No. 5 (2-18), 6 min (3-3), 7min (1-2), 14 min (1-2) and 15 min (3-15), with Boundary Wall, Tube- Well, Electric connection and Build-Up Farm house thereon, situated at village Jonapur, Tehsil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re being made by her. Therefore, the addition made by the Assessing Officer was deleted and the Assessing Officer was directed to allow the exemption under section 54F to the assessee. 12. Now the Department is in appeal. 13. The Ld. CIT DR strongly supported the order passed by the Assessing Officer and reiterated the observation made in the assessment order. The reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Municipal Corporation of Delhi & Another Vs. Shri Naresh Kumar And Others, order dt. 10/03/1997 (copy of the said order was furnished which is placed on record). It was further submitted that the assessee claimed the exemption under section 54B of the Act in the return of income therefore she was not permitted to change the head of exemption under section 54F of the Act, later on which was clearly an afterthought. 14. In his rival submission the Ld. Counsel for the Assessee reiterated the submission made before the authorities below and further submitted that the assessee had made a claim for exemption under section 54F of the Income Tax Act in the computation sheet and as per the CBDT Circular dt. 11/04/1955, the Assessing Officer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....] 402 ITR 400 (Ker) held as under: Under article 265 of the Constitution no tax shall be levied or collected except by authority of law. The powers of the Assessing Officers under the Act are quasi-judicial in nature and they are duty-bound, therefore, to act fairly in the discharge of their functions. They are also invested with the authority to do justice to the assessee. In a case where it is apparent on the face of the record that the assessee has included in his return, an income which is exempted from payment of income-tax, on account of ignorance or by mistake, the Assessing Officer is bound to take into account that fact in a proceeding under section 143 of the Income-tax Act, 1961. In other words, if the capital gains on a transaction are exempted from payment of tax, the Assessing Officer has a duty to refrain from levying tax on the capital gains and the Assessing Officer cannot, in such cases, refuse to grant relief under section 143 of the Act to the assessee on the technical plea that the assessee has not filed a revised return. It is so since the paramount duty of the Assessing Officer is to complete the assessments in accordance with law. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was eligible. 18. As regards to the admissibility of the claim made during the course of assessment proceeding, the CBDT issued a Circular No. 14 dt. 11/04/1955 which reads as under: "IT Officers must not take advantage of ignorance of an assessee Officers of the department must not take advantage of 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 or other particulars before them indicate that some refund 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 assessee on whom it is imposed by law, officers should - (a) draw their attention to any refund 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residential house. The provision contemplates computing the cost of the residential building, but the value of the plot on which the farm house stands and the land appurtenant could also be considered." 20.1 Similar view has been taken by the ITAT, Jaipur Bench in the case of Shyam Sunder Mukhija Vs. ITO [1991]38 ITD 125 wherein it has been held as under: " The expression 'residential house' used in section 54F has not been defined. The popular meaning of the work 'house' is a place or building used for habitation of man. 'Residential House' is a dwelling house as distinct from a house of business, warehouse, office, shop, etc. In other words, residential house is a building used as a place of abode in which people reside or dwell in contra-distinction to one which is used for commercial or business purpose. Since a house is called residential house with reference to the purpose of its user, it may not be necessary that somebody should live in it continuously. It is enough if it was a hou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reads as under: " vii) The assessee claimed exemption in its computation for the purchase amount of land only. It shows that this investment has been made only for purchase of land only not for purchase of residential house. If this exemption would have been claimed for residential house, then the assessee would claim it for the both amount i.e. land purchase amount and construction of house amount but the assessee claimed exemption for purchase of land only not for construction of house amount. Therefore, the assessee is not eligible for claiming exemption u/s 54F of the Income Tax Act." 21. We are unable to understand from the aforesaid observation of the Assessing Officer that how a residential farmhouse can be separated from the land when it is constructed on the same land. Therefore, we are of the view that the Ld. CIT(A) rightly allowed the claim of the assessee for deduction under section 54 F of the Act, particularly when the Assessing Officer himself mentioned in the assessment order that no agricultural activity were being carried out on the land in question and the said property was being used for residential purpose which had been approved by the Assessing ....