Income Tax Appellate Tribunal - Chennai
Amarchand Dilipchand, Tiruvannamalai vs Ito Ward 1, Tiruvannamalai on 6 February, 2019
आयकर अपीलीय अिधकरण, बी'
बी यायपीठ,
अिधकरण 'बी यायपीठ चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL
' B' BENCH : CHENNAI
[BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER]
आयकर अपील सं./I.T.A. No. 699/CHNY/2018
िनधा रण वष /Assessment year : 2013-2014.
Amarchand Dilipchand, Vs. The Income Tax Officer,
No.105, Car Street, Ward I,
Tiruvannamalai 606 601. Tiruvannamalai.
[PAN AADPD 9553G]
अपीलाथ /Appellant)
अपीलाथ
(अपीलाथ यथ /Respondent)
( यथ
अपीलाथ क ओर से/ Appellant by : Shri. K. Balasubramanian, Adv
यथ क ओर से /Respondent by : Shri. Sridhar Dora, IRS, JCIT.
सुनवाई क तारीख/Date of Hearing : 06-02-2019
घोषणा क तारीख /Date of Pronouncement : 12-02-2019
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Assessee in this appeal, which is directed against an order dated 19.09.2017 of ld. Commissioner of Income Tax (Appeals)-13, Chennai has raised the following grounds.
''1.1 Appellant having purchased a property at 76, Thirumanjana Gopuram St., Tiruvannamalai at a total cost of Rs.1,22,82,440 on 12-12-2012, out of sale proceeds of Ruby & Navratan stones and claimed exemption u/s 54F, CIT (A) erred in confirming the disallowance of claim u/s 54F of the Act for the reason that the new asset is only :- 2 -: ITA No.699/CHNY/2018.
commercial property.
1.2. Inspite of producing building plan, valuation report etc., and proving that out of 2500 of built up area, residential house was on 1996 sft and only 504 sft of shops were there in the front [GF & FFJ, relying on A/O's observation that there were 6 commercial EB connections, but disregarding the fact that there were 2 domestic connection for residence, he erred in agreeing with the A/O that this is only a commercial' property.
1.3 Learned CIT (A) erred in not allowing, at least the alternative claim, that proportionate exemption of Rs.1,07,34,OOO, u/s 54F should be allowed for the residential house viz., 1996 sft on the basis of valuation certificate filed before him.
1.4 Authorities below having accepted the genuineness of sale of precious stones to M/s.Abhilasha Jewellers, Jaipur at Rs.66,94,260 and reinvested the same in the above property erred in not allowing deduction u/s 54F to this extent but erred in taxing it as LTCG.
1.5 Authorities below erred in invoking Sec.69 while actually appellant accounted for the investment in new property vide B/S for YE 31-3-2014 and hence it is not a case of investment not recorded in the books of accounts.
2. Contrary to facts and inspite of all evidence filed, CIT (A) erred in confirming the addition of Rs.41,00,000/- towards unexplained investment u/s 69 in residential property at Tiruvannamalai ie., cash deposits appearing in bank etc alleged to have received from Samyak Gems.
2. Facts apropos are that assessee having income from income from house property and long term capital gains had filed his return for the impugned assessment year disclosing income of Rs.9,17,080/- and agricultural income of Rs.1,82,516/-. Assessee had disclosed long :- 3 -: ITA No.699/CHNY/2018.
term capital gains on sale of precious stones in the return and claimed deduction u/s.54F of the Income Tax Act, 1961 (in short ''the Act'') on the gains arising from such sale. Details of the sale of precious stones given by the assessee were as under:-
Sl.No Name and address PAN & Invoice No.
Details of Amount
of the purchaser Jurisdiction product Rs.
sold
1 M/s. Samyak AIMPJ1307P 12 of 12-13 Navaratan 41,00,000
Gems and Jewels ITO, Ward dated Beads,
5270, K.G.B. 7(3) 28.08.2012 Navaratan
Jaipur stones
Karasta, Joahri and ruby
Bazar, Jaipur
2 M/s. Abhilasha AXPPS8793J 4/2012-13, Navaratan 65,26,550
Jewellers, K.G.B. ITO, Ward dated Beads,
Karasta, Joahri 2(2) 6.8.2012 Navaratan
Jaipur stones
Bazar, Jaipur 302 and ruby
003.
Assessee had claimed the proceeds from above sale to have been
received through banking channels in its bank account with M/s. HDFC Bank, Tiruvannamalai.
3. Ld. AO made enquiries for ascertaining the genuineness of the claim of sale of precious stones by issuing a commission u/s.131(1) (d) of the Act. Based on commission report, ld. AO accepted the sale claimed by the assessee to M/s. Abhilasha Jewellers, Jaipur. However, as per the ld. AO, the commission report :- 4 -: ITA No.699/CHNY/2018.
led him to a conclusion that the sale claimed to have been made to M/s. Samyak Gems and Jewels was bogus. As per the ld. AO, enquiries conducted by ITO, Jaipur indicated that M/s. Samyak Jewels and Gems had not filed any returns since assessment year 2011-12, and they could not be located at the given address. Though the assessee produced PAN of M/s. Samyak Gems and Jewels and their sales tax registration certificate dated 29.08.2011, these were not accepted by the ld. AO. He thus held the claim of sale of precious stones to M/s. Samyak Gems and Jewels to be bogus. The sum of Rs.41,00,000/- shown as consideration received on such sale was taken as unexplained income of the assessee.
4. Against the capital gains arising on the sale of the precious stones assessee had made a claim of exemption u/s.54F of the Act. This claim was on the purchase of a new asset bearing No.77, Thirumanja Gopuram Street, Tiruvannamalai. Ld. AO made enquires on this claim and obtained information from Electricity Department by invoking powers vested on him u/s.133(6) of the Act. Electricity Department gave the details of the connections in the above premises as under:-
:- 5 -: ITA No.699/CHNY/2018.
Sl. SC No Consumer Domestic Current status Tariff from
No Name tariff or - date of 13.9.12 upto
commercial connection DC disconnection
tariff from date
1.4.12 to
12.9.12
1 22-004-318 P. Velayudham Domestic DC on 15.1.13
2 22-004-328 P. Velayudham Domestic Do
3 22-004-239 Annadurai Commercial Do
4 22-004-321 P. Velayudham Commercial DC on 18.2.13
5 22-004-231 Annadurai Commercial DC on 20.2.13
6 22-004-113 Annadurai Commercial DC on 20.4.13
7 22-004-238 Annadurai Commercial DC on 20.4.13
8 22-004-65 Annadurai Commercial DC on 20.4.13
As per the ld. AO, Thirumanja Gopuram Street, where the newly
acquired asset was estimated was a business and commercial area and the claim of the assessee that he had invested the proceeds from sale of precious stones in a residential property in the said street could not be accepted. Thus, the ld. AO denied the claim of exemption u/s.54F of the Act, on the proceeds of sale of precious stones to M/s. Abhilasha Jewellers, which sale was accepted as genuine.
5. Against denial of claim u/s.54F of the Act and the addition of Rs.41,00,000/- assessee moved in appeal before ld. CIT(A).
:- 6 -: ITA No.699/CHNY/2018.
According to the assessee, even if a part of the property newly purchased by him was put to commercial use, he was still eligible for claiming exemption u/s.54F of the Act, on the residential part. According to him, portion let out for commercial purpose was only 480 sq.ft. out of a total built up area of 2500 sq.ft and the balance 2020 sq.ft. was used soley for residential purposes. As per the assessee, confirmation from the Electricity Department relied upon by the ld. AO, clearly indicated that atleast two of the connections were charged on domestic rates. Therefore it was claimed by the assessee that he was eligible atleast for a prorata deduction u/s.54F of the Act
6. Viz-a-viz, the addition for unexplained investment of Rs.41,00,000/-, submission of the assessee before the ld. CIT(A) was that he had given the PAN, Sales tax registration of the buyer and should not be fastened with a liability for the non availability of the buyer when enquires were conducted by the Revenue.
7. However, ld. CIT(A) was not appreciative of the above contentions. According to him, the new asset on which Section 54F of the Act claim was made, was in a busy commercial area and therefore the building could not be considered as residential in nature. Viz-a-viz the claim of sale of diamonds for Rs.41,00,000/-, ld. CIT(A) was of the opinion that assessee could not give a confirmation :- 7 -: ITA No.699/CHNY/2018.
from M/s. Samyak Jewels and Gems for the sale of stones claimed to have been made to them. With these observations, he dismissed the grounds taken by the assessee.
8. Now before us, ld. Authorized Representative strongly assailing the orders of the lower authorities, placed reliance on the purchase deed dated 12th September, 2012 through which assessee acquired the property on which deduction u/s.54F of the Act was claimed and submitted that schedule of the property given therein clearly indicated existence of an R.C.C. house and a shop which was constructed in front of the house, as also a shop in first floor. This according to him, clearly proved that atleast a part of the new asset was residential in nature. Reliance was also placed on a plan prepared by one Shri. V. Ramamoorthy, Licenced Surveyor which indicated that house area was 1996 sq .ft and shop area was 504 sq.ft. Thus, according to him, assessee could not have been denied deduction u/s.54F of the Act on that part of the area which was clearly a residential property.
9. Adverting to the addition made u/s.69 of the Act, ld. AR submitted that assessee had given PAN and address of M/s. Samyak Jewels and Gems. According to the ld. AR, proceeds from the sale of :- 8 -: ITA No.699/CHNY/2018.
the precious stones were received through banking channels and therefore it could not have been disbelieved. As per the ld. AR, even a copy of the Sale Tax Registration certificate of M/s. Samyak Jewels and Gems was produced by the assessee. Contention of the ld. AR was that assessee could not have been faulted for failure of M/s. Samyak Jewels and Gems to file their return of income. Thus, according to him, addition of Rs.41,00,000/- was unjustified.
10. Per contra, ld. Departmental Representative submitted that an enquiry was conducted by an Inspector of Income Tax on 11.06.2018 based on earlier directions of this Bench. According to him, the Inspector of Income Tax in the enquiry report has clearly stated that there was a new building at No.76, Thirumanjana Gopura Street, Tiruvannamalai and the said building was having four EB connections all of which were for commercial purpose. Thus, according to the ld. DR, the claim of the assessee u/s.54F of the Act could not be allowed. As for the claim of sale to M/s. Samyak Jewels and Gems, contention of the ld. DR was that assessee could not prove the genuineness of the sale.
11. We have considered the rival contentions and perused the orders of the authorities below. First dealing with the enquiry report :- 9 -: ITA No.699/CHNY/2018.
of Inspector, Income Tax Department dated 11.06.2018 with regard to the nature of the building at No.76, Thirumanjana Gopura Street, Tiruvannamalai, what has been stated in the report is reproduced hereunder:-
When I visited, I saw that a new two storeyed building namely, "DAGA" seems to have been completed or nearing completion and not yet opened in the above said address. The shutters of the building are closed. Hence, I could not see the inner view of the building.
The building is located in the Thirumanjana Gopura street, Tiruvannamalai, which is the commercial area only.
When I enquired nearby shops, it reveals that the constructed new building is a commercial bl:1i1ding and not a residential building. I took photograph of the building (outside front view), which is enclosed herewith for the kind perusal.
As the building is new and nearing completion, no tenants are occupied as on date. Local nearby shop persons also told that old building was demolished and new building has been constructed and building is not yet opened and no person occupied as on today, i.e. 11- 6-2018 As the building is newly constructed and shutters of the building are closed at the time of my visit, I could not verify the number of electricity connections available in the building. However, I went to Electricity Board office at Tiruvannamalai town and enquired about the electricity connections provided to the said building. Enquiry reveals that they provided four (4) 3-Phase commercial purpose connections to said building bearing SC.No.202-004-434, 202-004- 450, 202-004-451 and 2002- 004-452 on 12.03.2014, 16.11.2017, 16.11.2017 & 16.11.2017 respectively.
It is clear from the report that building which was inspected by the Inspector was a new one. Ld. AO at para 21 of his order has observed that enquires made on 28.03.2015, revealed a new building under construction. Thus in our opinion, report on an enquiry done on :- 10 -: ITA No.699/CHNY/2018.
11.06.2018 would be of little help, if any, in deciding whether the property purchased by the assessee during financial year ending 31st March, 2013, on which deduction claimed u/s.54F of the Act was residential or not. Schedule of the property as given in the purchase deed read as under:
''Tiruvannamalai Registration district, Tiruvannamalai sub-registration tiruvannamalai town, Tiruvannamalai 4th ward, 22nd block, Thirurnanjanaqopura Street, town survey NO.1464 square feet 5120 the boundary description is West of Street, East of Lakshmana Chettiar garden, North of Lakshmana Chettiar house, South of late Annadurai vagaiyara's house property in between east to west northern side 158 feet, North to south with a WALL lower side 31 2/2in upper side 34 feet, with a place which falls just southern side of well according to sub division 5120 square feet basement plot, for which total square meter is 475.66 in between a R.C.C. house which was constructed just 20 years back terraced house a shop which was constructed in front of the house and a shop in first floor, with all fixtures door, Main door, windows with E.B. service connections bearing E.B.Nos. 202 004 318, 202 004 328, 202 004 239, 202 004 321, 202 004 231, 202 004 113, 202 004 238, 202 004 065 with its deposits, and water connection bearing its assessment No. 2806 with its deposits, with well rightshalf share out of one, and 1. H.P. electric motor, house tax assessment No. 18768 18770, 18771,18772,18773,18774 its door No is 76 the same was given to you as in the form of registered sale deed.
The market value of the property is Rs.1,14,00,000/-''. It is clear from the above schedule that there indeed was a house at the time when the assessee acquired it. The plan from the Licenced Surveyor placed by the assesseee at paper book No.22 indicates that out of the total area, 2872 sq.ft. was vacant land, 1996 sq.ft was :- 11 -: ITA No.699/CHNY/2018.
house area and 504 sq.ft was shop area. No doubt deduction u/s.54F of the Act is not available for any construction other than a residential house. However, there is nothing in Section 54F of the Act what would bar an assessee from claiming deduction under the said Section for the residential part of a building acquired by it. Assessee had acquired a property, which partly comprised of residential house and partly shops. Even the report from the Electricity Department, heavily relied on by the ld. AO, show that there was atleast two residential electricity connection. In such circumstance, we are of the opinion that assessee can claim deduction u/s.54F of the Act in so far as it relates to the pro rata consideration paid for the residential part of the property, if it satisfied other conditions, stipulated in Section 54F of the Act.
12. Coming to the question whether sale of precious stones of Rs.41,00,000/- claimed to have been made to M/s. Samyak Gems and Jewels was genuine or not, it is not disputed that assessee had filed a copy of the sale tax registration certificate of the said concern, its PA Number and also given its address. Ld. AR also submits before us that the assessee if required was willing to produce the partner of the said M/s. Samyak Gems and Jewels for proving its case.
:- 12 -: ITA No.699/CHNY/2018.
13. Considering the facts and circumstances of the case, we are of the opinion that the issues involved have to go back to the ld. AO for consideration afresh. Ld. AO has to give prorata deduction u/s.54F of the Act for that part of the newly acquired asset comprising of the residential house and assessee has to produce necessary records to satisfy the ld. AO with regard to the area occupied for residential house and its prorata cost. Viz-a-vz. Sale of precious stones, assessee has to produce the authorized person from M/s. Samyak Gems and Jewels for corroborating its claim. Ld. AO thereafter has to proceed in accordance with law.
14. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on Tuesday, the 12th day of February, 2019, at Chennai.
Sd/- Sd/-
(N.R.S. GANESAN) (ABRAHAM P. GEORGE)
याियक सद य/
सद य JUDICIAL MEMBER लेखा सद य/
सद य ACCOUNTANT MEMBER
चे ई/Chennai
दनांक/Dated:12th February, 2019.
KV
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant 3. आयकर आयु (अपील)/CIT(A) 5. िवभागीय ितिनिध/DR
2. यथ /Respondent 4. आयकर आयु /CIT 6. गाड फाईल/GF
:- 13 -: ITA No.699/CHNY/2018.