Income Tax Appellate Tribunal - Delhi
Parveen Soni Prop. Of Ragnik Exports, ... vs Department Of Income Tax on 30 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'F' BENCH
BEFORE SHRI U.B.S. BEDI, JM & SHRI A.N. PAHUJA, AM
ITA No.999/D/2012
Assessment year:2006-07
ACIT,Circle 25(1), V/s. Mr. Praveen Soni Prop. of
Room no. 315D,3 r d Floor, Ragnik Exports, 65, W est
Vikas Bhawan , New Delhi Avenue Road, 2 n d Floor,
W est Punjabi Bagh, New
Delhi
[PAN AAUPS 1917 J]
(Appellant) (Respondent)
Assessee by Shri Subhash Khanna, AR
Revenue by Dr. B.R.R. Kumar, DR
Date of hearing 02-05-2012
Date of pronouncement 04-05-2012
ORDER
A.N.Pahuja:- This appeal filed on 29.02.2012 by the Revenue against an order dated 30.12.2011 of the learned CIT(A)-XXIV, New Delhi, raises the following grounds:-
i) "On the facts and circumstances of the case, the CIT(A) erred in deleting the disallowance of deduction u/s 80IB of the Income-tax Act, 1961 amounting to ``9,28,986/-.
ii) On the facts and circumstances of the case, the CIT(A) erred in deleting the disallowance of exemption u/s 54 of the Income-tax Act, 1961 amounting to `34,80,464/-.
The appellant craves the right to add any other ground of appeal."
2 ITA no.999/Del./2012
2. Adverting first to ground no.(i) in the appeal, facts, in brief, as per relevant orders are that return declaring income of ``38,73,559/- filed on 30.10.2006 by the assessee, manufacturing readymade garments in the proprietorship concern, M/s Ragnik Exports, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act). During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee claimed deduction of ``9,28,986/- u/s 80 IB of the Act. To a query by the AO, the assessee replied that claim of deduction u/s 80IB had been disallowed by the AO in the AY 2004-05, the unit having not claimed any deduction even after six years of existence and there being no claim in the initial year of manufacturing i.e., assessment year 1998-99. The disallowance was maintained by the ld. CIT(A) & the ITAT. The assessee pointed out that deduction was admissible , the unit having fulfilled all the requirements stipulated u/s 80 IB of the Act. However, the AO did not accept the submissions of the assessee on the ground that the ITAT in their order dated 6th June, 2008 in I.T.A. No.2277/D/07 for the AY2005-06 upheld the findings of the ld. CIT(A), confirming the disallowance of deduction u/s 80 IB of the Act, the conditions stipulated u/s 80 IB(2) of the Act having not been fulfilled. In the light of findings of the ITAT, the AO disallowed the claim for deduction u/s 80IB of the Act in the year under consideration also.
3. On appeal, the ld. CIT(A) allowed the claim of the assessee in view of decision dated 29th March, 2011 of Hon'ble jurisdictional High Court in the assessee's own case in I.T.A. No.1145 of 2009 for the AY 2004-05.
4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the ouitset, both the parties agreed 3 ITA no.999/Del./2012 the issue is squarely covered by the decision dated 29th March, 2011 of Hon'ble jurisdictional High Court in the assessee's own case in I.T.A. No.1145 of 2009 for the AY 2004-05.
5. We have heard both the parties and gone through the facts of the case. Indisputably, facts & circumstances obtaining in the year under consideration are similar to the facts & circumstances in the AY 2004-
05.We find that on an appeal filed by the assessee against the decision of the ITAT in the AY 2004-05, Hon'ble High Court in their aforesaid order dated 29.03.2011 concluded as under:-
"5. It is, thus, clear that on two grounds, the benefit of Section 80IB was denied to the assessee-appellant and for these reasons, the aforesaid two substantial questions of law in respect of these two grounds were framed while admitting this appeal. As far as second question of law is concerned, viz., whether the assessee can be denied the benefit of Section 80IB of the I.T. Act simply because of the reason that he did not avail this benefit in the initial assessment year, i.e., 1998-99, it should not detain us for long. Section 80IB is a special provision giving benefits to certain class of industries. It provides for deduction in respect of profits and gains to industrial undertakings other than infrastructure development undertakings. The conditions for claiming this benefit are stipulated in sub- section (2) thereof. One of the conditions, with which we are concerned, is that the assessee manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India. Special provision is made in respect of those industrial undertakings which fulfill the conditions prescribed in sub-section (2) of Section 80IB of the I.T. Act, if such industrial undertaking happens to be small scale industries. This is incorporated in sub-section (3) of Section 80IB of the I.T. Act. In such a case, the amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years.
4 ITA no.999/Del./2012
6. If the assessee fulfils the requirement of small scale industrial undertaking which aspect shall be dealt while answering other question of law, it is not in dispute that the assessee would have qualified for this deduction from the Assessment Year 1998-99. Had the assessee claimed this benefit in that year, he would have been allowed this benefit for 10 consecutive years, i.e., till Assessment Year 2007-08. The assessee, thus, becomes entitled to claim the benefit in the Assessment Year 1998-99. However, merely because of the reason that though the assessee was eligible to claim this benefit, but did not claim in that year would not mean that he would be deprived from claiming this benefit till the Assessment Year 2007- 08, which is the period for which his entitlement would accrue. The provisions contained in Section 80IB of the I.T. Act, nowhere stipulates any condition that such a claim has to be made in the first year failing which there would be forfeiture of such claim in the remaining years. It is not the case of the assessee that he should be allowed to avail this claim for 10 years from the Assessment Year 2004-05. The assessee has realized his mistake in not claiming the benefit from the first Assessment Year 1998-99. At the same time, the assessee foregoes the claim upto the Assessment Year 2003-04 and is making the same only for the remaining period. There is no reason not to give the benefit of this claim to the assessee if the conditions stipulated under Section 80IB of the I.T. Act are fulfilled.
7. This question of law is thus answered in favour of the assessee and against the Revenue.
8. The other question as to whether it is incumbent upon the assessee that it is registered under the IDR Act for claiming the benefit under sub-section (3) of Section 80IB of the I.T. Act. The answer to this depends on the interpretation which is to be given to Clause (g) of sub- section (14) of Section 80IB of the I.T. Act, which reads as under:
"(g) "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951."
5 ITA no.999/Del./2012
9. As pointed out above, as per sub-clause (3) of Section 80IB of the I.T. Act where industrial undertaking is small industrial undertaking, it is entitled to deduction of 25% of the profits and gains derived from such industrial undertaking for a period of 10 consecutive years. Small scale industrial undertaking for this purpose is defined in Clause (g) sub-Section (14) of Section 80IB of the I.T. Act reproduced above. As per this provision, small scale industrial undertaking is regarded as "small-scale industrial undertaking under Section 11B of the IDR Act". The IDR Act is enacted to provide for development and regulation of certain industries. For the purpose of regulating those industries in the meaning prescribed under the Act, industrial undertaking is defined in Section 3(d) to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government.The first schedule attached to the said Act specifies those industries. In order to regulate these scheduled industries, Section 10 mandates that all existing industrial undertaking have to get registered under this Act. Section 11 of the I.D.R Act deals with new industrial undertaking which would come into existence after the passing of the Act and establish any new industrial undertaking, except under and in accordance with a license issued in that behalf by the Central Government. However, in case of small scale industrial undertaking, exemption and favourable benefits are provided which means those small scale industrial undertakings which fulfill the conditions of being small scale industrial are not to be regulated as per the provisions of I.D.R. Act. It is in this context, Section 11B is inserted in the statute which gives power to the Central Government to specify the requirements which shall be complied with by small scale industrial undertakings. Omitting those portions of Section 11B, which are not relevant for our purposes, rest of the Section is extracted below:
"11B. POWER OF CENTRAL GOVERNMENT TO SPECIFY THE REQUIREMENTS WHICH SHALL BE COMPLIED WITH BY THE SMALL SCALE INDUSTRIAL UNDERTAKINGS.
(1) The Central Government may, with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemptions or other favourable treatment under this Act to enable them 6 ITA no.999/Del./2012 to maintain their viability and strength so as to be effective in :-
(a) promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and
(b) securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common goods, specify, having regard to the factors mentioned in sub-section (2), by notified order, the requirements which shall be complied with by an industrial undertaking to enable it to be regarded, for the purposes of this Act, as an ancillary, or a small scale industrial undertaking and different requirements may be so specified for different purposes or with respect to industrial undertakings engaged in the manufacture or production of different articles :
Provided that no industrial undertaking shall be regarded as an ancillary industrial undertaking unless it is, or is proposed to be, engaged in :-
(i) the manufacture of parts, components, sub-
assemblies, tooling or intermediates; or
(ii) rendering of services, or supplying or rendering, not more than fifty per cent of its production or its total services, as the case may be, to other units for production of other articles.
(2) The factors referred to in sub-section (1) are the following, namely :-
(a) the investment by the industrial undertaking in :-
(i) plant and machinery, or
(ii) land, buildings, plant and machinery;
(b) the nature of ownership of the industrial undertaking;
7 ITA no.999/Del./2012
(c) the smallness of the number of workers employed in the industrial undertaking;
(d) the nature, cost and quality of the product of the industrial undertaking;
(e) foreign exchange, if any, required for the import of any plant or machinery by the industrial undertaking; and
(f) such other relevant factors as may be prescribed."
10. Section 29B of the I.D.R. Act gives power to the Central Government to exempt, inter alia, such small scale industrial undertakings from the provisions of I.D.R. Act.
11. As is clear from the reading of Section 11B of the I.D.R. Act, it is for the Central Government to specify the requirements which shall be complied with by the industrial undertaking to enable it to be regarded for the purpose of the said Act as small scale industrial undertaking. Appropriate exercise in this behalf has been carried out by the Central Government by issuing notification dated 10.12.1997. Operative portion of the said notification lays down the following conditions to be fulfilled by the industrial undertakings before it could be regarded as a small scale or ancillary industrial undertakings:
"Now, therefore, in exercise of the powers conferred by sub-section (1) of Section 11B and sub-section (1) of section 29B of the said ct, and in supersession of the notification of the Government of India in the Ministry of Industry (Department of Industrial Development) number S.O.232(E), dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act:-
1. Small scale industrial undertaking: An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms of on lease or on hire purchase, does not exceed rupees three crores;
8 ITA no.999/Del./2012
2. Ancillary industrial undertaking: An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts components, sub-assemblies, tooling or intermediates, or the rendering of services, and undertaking supplies or proposes or supply or renders not more than fifty per cent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three crores."
12. At the end of this notification, it is provided that every industrial undertaking which has been issued a certificate of registration under Section 10 of the said Act or a license under Sections, 11, 11A and 13 of the I.D.R. Act by the Central government and are covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered at the discretion of the owner as such within a period of 180 days from the date of publication of this notification. Two things follow from the reading of the aforesaid notification:
(a) To be regarded as a small scale industrial undertaking - such an undertaking should be given which has invested in fixed assets in plant and machinery either on ownership terms of on lease or on hire purchase.
(b) Worth of said asset does not exceed ``3 Crores.
The prescription of ``3 Crores was reduced to `1 Crore vide amendment notification dated 04.12.1995.
13. It is not in dispute that the appellant-assessee fulfils these requirements.However, as mentioned above, benefit is denied only on the ground that it is not registered under the provisions of I.D.R. Act. We are of the considered opinion that the registration under the I.D.R. Act will be of no consequence for availing the benefit under Section 80IB of the I.T. Act. Clause (g) of sub-section (14) of Section 80IB of the I.T. Act only mandates that such an industrial undertaking should be regarded as small scale industrial undertaking under Section 11B of the I.D.R. Act.
9 ITA no.999/Del./2012 As per Section 11B of the I.D.R. Act, it is for the Central Government to lay down the conditions which are required to be fulfilled as regards small scale industries. In the aforesaid notification, the conditions which are mentioned for being regarded as small scale industries are the ownership of plant and machinery and value thereof. Registration of such an undertaking under the I.D.R. Act is not a condition for treating the same as small scale industrial undertaking. That registration is prescribed for altogether different purpose, viz., to avail the benefit under the I.D.R. Act either of Section 11B or Section 29B. Thus, insofar as extending the provision of Section 80IB of the I.T. Act is concerned, the only aspect which is relevant and is to be considered is as to whether the conditions stipulated in the notification issued under Section 11B of the I.D.R. Act for regarding the same as small scale industrial Act are fulfilled or not. It would be of interest to note that Section 80IB (14)(g) used the expression regarded as small scale industrial undertaking under Section 11B of the I.D.R. Act. Likewise, even the notification dated 10.12.1997 while laying down the conditions for claiming the benefit of small scale industrial undertaking used the same expression when it states following factors on the basis of which an industrial undertaking is regarded as small scale industrial undertaking.
14. When we look into the mandatory Form prescribed for availing this benefit, viz., Form 10CCB, such a form has to be filled and submitted by the assessee to the AO for claiming the benefit. The details which are required to be given as per this form include the information which is to be supplied to ascertain, whether such industrial undertaking would be regarded as small scale industrial undertaking for the purpose of Section 11B of the I.D.R. Act in as much the assessee is called upon to give the value of machinery or plant, number of workers employed in the manufacturing process, total sales of the undertaking and also profits and gains derived by the undertaking from the eligible business and deduction under Section 80IB of the I.T.Act.
15. The purpose for industrial undertaking to be regarded as small scale industrial undertaking as per Section 11B of the I.D.R. Act is not far to seek. It was to maintain parity in prescribing the conditions which are 10 ITA no.999/Del./2012 required to be fulfilled by the industrial undertaking to qualify itself as small scale industrial undertaking. Since the Central Government has to prescribe such conditions by notification in view of provisions of Section 11B of the I.D.R. Act, the Legislature in its wisdom deemed it fit to incorporate those conditions for the purpose of I.T. Act as well. This issue came up for consideration before the Gujarat High Court, albeit, in the context of depreciation which is to be allowed to an assessee under Section 32 of the I.T. Act. We may point out that explanation (3) of Section 32(1) of the I.T. Act also gives special benefit to the small scale industrial undertaking and reads as under:
"(3) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant installed, as on the last day of the previous year, for the purpose of the business of the undertaking does not exceed seven hundred and fifty thousand rupees; and for this purpose the value of any machinery or plant shall be, -
(a) in the case of any machinery or plant owned by the assessee, the actual post thereof to the assessee; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant."
16. The question which was posed for consideration before the Gujarat High Court in the case of Commissioner of Income-tax Vs. J.H. Kharawala 208 ITR 691 was as to whether it was incumbent upon a small scale industrial undertaking to have registration under the I.D.R. Act to claim the benefit of depreciation under Section 32 of the I.T. Act. Replying in the negative and holding that there was no such requirement of such registration to avail the said benefit, the Gujarat High Court held as under:
"Section 32 provides for depreciation. Sub-section (1) provides for depreciation in respect of building, machinery, plant or furniture owned by the assessee and used for the purposes of his business or profession. Clause (vi) of sub-section (1) provided for one time depreciation of 20 per cent. on the actual cost of 11 ITA no.999/Del./2012 ship, aircraft, machinery or plant. It gave an option to assessee to claim depreciation either in the year in which the machinery or plant was installed or the year in which the assessee had put it to use. But this special depreciation was confined to small scale industrial undertakings. Thus, it was a special provision made for the benefit of small-scale industrial undertakings. By the Explanation, "new ship" and "new machinery or plant"
were defined. The Legislature also provided by that Explanation as to which undertaking was to be regarded as a small-scale industrial undertaking. By the said Explanation, it also provided how the value of the machinery or plant was to be determined. Thus, it cannot be gainsaid that the Legislature thought it fit to make a special provision in this behalf. If registration of an industrial undertaking with the respective State department was to be regarded as sufficient for making such undertaking a small-scale industrial undertaking, then the Legislature would not have made this special provision. Moreover, that would have resulted in discrimination in as much as the test laid down for treating an industrial undertaking as a small-scale industrial undertaking might have varied from State to State. Thus, the Legislature, in order to see that there was uniformity, made this special provision and for that reason, it will have to be held that for the purpose of determining whether an industrial undertaking is a small- scale undertaking or not, resort had to be taken to the Explanation to section 32(1)(vi) and not to any other provision of law whereby an industrial undertaking was to be regarded as a small-scale industrial undertaking for other purposes. The Tribunal was, therefore, in error in proceeding on the basis that since the assessee was registered as a small-scale industrial undertaking with the Small-Scale Industries Department, the benefit of section 32(1)(vi) was available to it irrespective of different provision made by that Explanation in that behalf."
17. The upshot of the aforesaid discussion is to answer this question of law in favour of the assessee, as otherwise, there is no dispute that the assessee fulfils eligibility conditions prescribed under Section 80IB of the I.T. Act and is to be regarded as small scale 12 ITA no.999/Del./2012 industrial undertaking. We direct the AO to give the benefit of deduction claimed by the assessee under Section 80IB of the I.T. Act for the Assessment Year in question, i.e., 2004-05."
5.1 In the light of aforesaid view taken by Hon'ble High Court, especially when the Revenue have not placed before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different in the matter nor brought to our notice any contrary decision, we have no alternative but to uphold the findings of the ld. CIT(A). Accordingly, ground no.1 in the appeal is dismissed.
6. Ground no.2 in the appeal relates to disallowance of claim for deduction u/s 54 of the Act. The AO noticed during the course of assessment proceedings that the assessee reflected capital gain on sale of this property at Saraswati Vihar in the computation of income enclosed with the return deduction & claimed deduction u/s 54 of the Act as under:-
[In `] "Long Term Capital Gains:
Saraswati Vihar-D756 Date of transfer 06.01.2006 Sale value 50,00,000 Less: Indexation cost of acquisition 15,19,536 Long term capital gain `34,80,464 Capital Bond to be purchased `14,00,000 Exemption u/s 54 (Residential House Purchase+Capital gain: `21,60,000 Long Term Capital Gain Nil 6.1 To a query by the AO, seeking evidence in support of deduction u/s 54 of the Act, the assessee did not submit any proof.
Instead the assessee replied that an amount of `21,60,000/- has been paid for purchasing property at Punjabi Bagh and he had booked a flat on 20.02.2004 at Uniworld City and an amount of ``73,13,486/- was paid for, of which 50% stake belonged to the assessee. Accordingly, the assessee claimed that an amount of ``36,56,743/- having been invested 13 ITA no.999/Del./2012 towards construction of house property, deduction u/s 54 may be allowed. The payments for this property are stated to have been made on the following dates:-
i) 20.02.2004
ii) 24.03.2004
iii) 23.04.2004
iv) 28.05.2004
v) 14.06.2004
vi) 05.08.2004
vii) 17.08.2004
viii) 23.09.2004
ix) 26.10.2004
x) 07.01.2005
xi) 17.11.2005
xii) 08.07.2006
xiii) 11.07.2006
6.2 However, the AO did not accept the submissions on the ground that
payment for purchase of property at Uniworld City had been made prior to the sale of property at Saraswati Vihar. While referring to provisions of section 45 and 54 of the Act, the AO concluded that payment for purchase of flat at Uniworld City having been made prior to the date of transfer of the original asset i.e., the property at Saraswati Vihar, deduction u/s 54 was not admissible. Inter alia, the AO relied upon the decision in Smt. Shantaben P. Gandhi Vs. CIT, 129 ITR 218 (Gujarat) and Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323 (2006)(SC).
7. On appeal, the ld. CIT(A),without recording any findings on the facts pointed out by the AO in the assessment order, allowed the claim of the assessee in the following terms:-
"4.3 I have given careful consideration to the arguments of both sides. I have also perused the case laws relied upon by both sides. I agree with the arguments of the appellant that he is entitled to deduction u/s. 54 of the amount of Rs.43,20,000/- invested by him in the new residential unit purchased in West Punjabi Bagh since he had exclusively invested in this residential unit out of the funds generated by 14 ITA no.999/Del./2012 the sale of Saraswati Vihar property. Even copy of bank passbook was submitted by the appellant to the AO as proof of his contention, thus, establishing a direct nexus between the house sold at Saraswati Vihar and the house purchased at West Punjabi Bagh. In my opinion, it does not matter that the new residential house was purchased by the appellant in joint name along with his wife Mrs. Poonam Anand Soni, as long as the money was exclusively provided by the appellant. He was entitled for deduction u/s. 54 to the extent of long term capital gains earned by him on sale of Saraswati Vihar property.
4.4 I agree with the contention of the appellant that the ratio of the judgment in the case of M/s. Goetze India Ltd. (supra) is not applicable in the instant case since, no claim was deduction was made by the assessee in the case of M/s.
Goetze India Ltd. (supra). On the other hand, the appellant has made a claim of deduction u/s. 54 in his original return of income, although, mistakenly he has restricted it to 50% of the purchase amount of West Punjabi Bagh property. Reliance is placed in the case of Jute Corporation of India Ltd. Vs. CIT (1991) 187 ITR 688 (SC), wherein the Hon'ble Apex Court has held that:
"(i) Power to tax on discovery of a new source of income is quite different from granting deduction on the admitted facts fully supported by the decision of the Supreme Court. If the tax liability of the assessee is admitted and if the Income-tax Officer is afforded an opportunity of hearing by the appellate authority in allowing the assessee's claim for deduction on the settled view of the law, there is no good reason to curtail the powers of the appellate authority under section 251 (1)(a) of the Income-tax Act, 1961.
(ii) An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer."
15 ITA no.999/Del./2012 4.5 Furthermore, in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC), a three-judge bench of the Hon'ble Supreme Court of India held that:
"Under section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income- tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
In the case of Jute Corporation of India Ltd. v. CIT [1991J 187 ITR 688, this court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant 16 ITA no.999/Del./2012 Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also."
4.6 The case law relied upon by the appellant, namely, the case of Smt. Armeda K Bhaya (supra) is also applicable to the facts of the present case. In this case, the Hon'ble ITAT, Mumbai "F" Bench held as under:
"The term 'purchase' is not defined in the IT Act. Therefore, the same is to be understood as in common parlance. It is evident that the assessee paid the entire purchase consideration together with all the expenses. The mother and father have deposed that they have no right, title or interest in the impugned flat and that their names have been added for various legal conveniences. Sec. 45 of the Transfer of Property Act gives importance to the ratio of payment made by respective owners and refers to any contract to the contrary, which may be in existence. As the facts emerge, it is implicitly clear from the conduct of the parties that there was an agreement in existence that the flat will be the property of the assessee and mother and father will have no right, title or interest therein and the purchase consideration with expenses will be borne by the assessee. Under these circumstances, the assessee can be treated as purchaser of the property in terms of Section 54. Thus, the assessee is purchaser of the flat and the entire amount spent by her has to be considered towards the purchase price paid by her for the new flat entitled to be computed while allowing deduction under Section 54."
4.7 In the case of Smt. Saraswati Ramanathan (supra) relied upon by the appellant, again the circumstances were more or less similar to that of the instant case. In this case also, the Hon'ble Delhi ITAT 'SMC' Bench held as under:
"The assessee invested the proceeds of sale of shares in Rural Electrification Bonds. The investment was in the joint names of herself and her son. The assessee claimed exemption from capital gains tax under section 54EC of the Income-tax Act, 1961, which was negatived by the Assessing Officer on the ground that the investment in the bonds was in joint names which was not permitted. The 17 ITA no.999/Del./2012 Commissioner (Appeals) held that there was no such requirement in the section and the assessee having invested the sale proceeds of the shares in the bonds without any contribution from her son the section was complied with and the exemption could not be denied. On appeal:
Held, dismissing the appeal, that there was no requirement in the section that the investment should be in the name of the assessee. The object of insertion of section 54EC was to give an incentive to the development of infrastructure. In 2001 the section was widened to include bonds issued by Rural Electrification Corporation Ltd. If development of infrastructure was the object, it would not matter whether the investment was made in the name of the assessee exclusively or in the joint names of the assessee and somebody else. The only condition was that the funds used for the investment must be traceable to the sale proceeds of the capital asset. That condition was satisfied by the assessee. The Commissioner (Appeals) had found that the son did not contribute anything to the investment and this finding was not in dispute. The consequences that flow from including the son's name as a joint name were not relevant for the purpose of granting exemption under section 54EC to the assessee. The Commissioner (Appeals) had noted that the assessee was 69 years of age at the relevant time and it was only a matter of convenience and to avoid any problem in future that the son's name was included. The assessee was eligible for the exemption under section 54EC of the Act."
4.8 In view of the above discussion and in view of the authorities cited above, I am of the opinion that the appellant was eligible for exemption u/s. 54 of the Act, both of the grounds of investment of Rs.43,20,000/- in West Punjabi Bagh property, as well as on the grounds of investment in the flat in Gurgaon, whose possession was taken by him on 06.11.2006. Therefore, the grounds of appeal taken by the appellant are allowed.
5. As a result, the appeal of the assessee is allowed."
18 ITA no.999/Del./2012
8. The Revenue is now in appeal before us against the aforesaid findings of the ld.CIT(A).The ld. DR supported the order of the AO and contended that the ld. CIT(A), without recording any findings on the facts pointed out by the AO in the assessment order and without affording even any opportunity to the AO concluded that the assessee is eligible for exemption u/s. 54 of the Act, both on the grounds of investment of Rs.43,20,000/- in West Punjabi Bagh property, as well as on the grounds of investment in the flat in Gurgaon, whose possession was taken by him on 06.11.2006. The ld. DR vehemently argued that the ld. CIT(A) did not analyse as to how the assessee fulfilled the conditions u/s 54 of the Act when the AO concluded that payment for purchase of property at Uniworld City had been made prior to the sale of property at Saraswati Vihar. Moreover, the ld. CIT(A) did not allow any opportunity to the AO before concluding that the entire investment in purchase of property at Punjabi Bagh was made by the assessee and not merely 50% as claimed before the AO. On the other hand, the ld.AR on behalf of the assessee supported the findings in the impugned order.
9. We have heard both the parties and gone through the facts of the case. Indisputably, the assessee sold his property at D-756, Saraswati Vihar, New Delhi and reflected long term capital gains from the sale of the said property of ``34,80,464/-. In the computation of income, the assessee claimed deduction u/s 54 of the Act on the ground that he would invest in capital bonds of `14,00,000/- and that he purchased residential house for `21,60,000/-. During the course of assessment proceedings ,when queried by the AO, the assessee did not furnish any evidence of investment in capital bonds and instead claimed to have made investment in a flat at Uniworld City on 20.2.2004.The AO, however, found that investment in the flat was made much prior to sale of property at Saraswati Vihar and accordingly, denied the claim for deduction u/s 54 of the Act. On appeal, the assessee took up an altogether different plea that 19 ITA no.999/Del./2012 he had utilized the capital gains towards purchase of property at Punjabi Bagh and entire investment in the said property was made by him and not 50% as claimed earlier .Before the AO, it was claimed that he had 50% share in the property purchased by the assessee and his wife Smt. Poonam Anand. The ld. CIT(A) without recording any findings on the facts pointed out by the AO in the assessment order and without affording even any opportunity to the AO concluded that the assessee is eligible for exemption u/s. 54 of the Act, both on the grounds of investment of Rs.43,20,000/- in West Punjabi Bagh property, as well as on the grounds of investment in the flat in Gurgaon, whose possession was taken by him on 06.11.2006. This approach of the ld. CIT(A) accepting an altogether new plea, which was never taken before the AO and without allowing any opportunity to the AO, is not in accordance with law. Hon'ble Gujrat High Court in their decision in the case of CIT vs. Valimohmed Ahmedbhai,134 ITR 214(Guj) observed that ordinarily, the appeal would be decided on the basis of material submitted by the assessee in the course of assessment proceedings. The rules of natural justice are not codified nor are they unvarying in all situations, rather they are flexible. They may, however, be summarized in one word : fairness. In other words, what they require is fairness by the authority concerned. Of course, what is fair would depend on the situation and the context. Lord Esher M.R. in Voinet vs. Barrett (1885) 55 L.J. QB 39, observed: "Natural justice is the natural sense of what is right and wrong." In view of the fact that the assessee has been continually changing his stances and the ld. CIT(A) did not allow any opportunity to the AO before accepting a new plea made before him for the first time nor recorded his specific findings on the facts pointed out by the AO in the assessment order, we consider it fair and appropriate to vacate the findings of the ld. CIT(A) and restore the matter to his file for deciding the issue raised in the ground no. ii) in the appeal, afresh in accordance with law in the light of our aforesaid observations, after 20 ITA no.999/Del./2012 analyzing the facts pointed out by the AO in the assessment order and of course, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, bringing out clearly as to whether or not the case of the assessee falls within the provisions of sec. 54 of the Act. Subject to these directions, ground no. (ii) in the appeal is disposed of.
10. No additional ground having been raised before us in terms of residuary ground in the appeal, accordingly, this ground is dismissed.
11. No other plea or argument was made before us.
12. In result, appeal is partly allowed but for statistical purposes.
Order pronounced in open Court
Sd/- Sd/-
( U.B.S. BEDI) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Assessee
2. ACIT,Circle 25(1),Room no. 315D,3 r d Floor, Vikas Bhawan , New Delhi
3. CIT concerned.
4. CIT (Appeals)-XXIV, New Delhi
5. DR, ITAT,'F' Bench, New Delhi
6. Guard File.
By Order, Deputy/Asstt.Registrar ITAT, Delhi