Income Tax Appellate Tribunal - Nagpur
Smt. Shashikala Rajkumar Kabra vs Income Tax Officer on 31 August, 1998
Equivalent citations: (1998)64TTJ(NAG)754
ORDER
K. P. T. Thangal, JM These appeals are by the assessee for the assessment year 1995-96. ITA No 6371Nag11995
2. Though the assessee has raised as many as five grounds of appeal, the only effective ground is against the order of the learned Commissioner (Appeals) in enhancing the income under the head "Capital gains" from Rs. 39,399 to Rs.1,27,568 wherein the assessment was completed by making prima facie adjustments. According to the assessee, the adjustments were beyond the scope of s. 143(1)(a) and enhancement was not justified.
3. The assessee, an individual, derives income from interest. For the assessment year under consideration, the assessee earned long-term capital gains from the sale of shares. According to the Revenue, the assessee filed the return on 29th March, 1996, whereas the same was due on 30th June, 1995. In this return, the assessee has shown only interest to the tune of Rs. 4,957 and the long-term capital gain shown was claimed as exempt under s. 54F of the Income Tax Act, 1961, on the ground that "the assessee has purchased old house and constructing the house by investing the above amount of capital gain which is deposited in bank and pass book is enclosed." In account No. 9405 with the Bank of Baroda, Itwari, Nagpur, on 13-5-1995, the assessing officer found that a sum of Rs. 1,42,425 was deposited. Since this deposit was not in terms of s. 54F(4) of the Income Tax Act, Rs. 39,399 being the difference between the amount of Rs. 1,81,824 and the deposited amount was treated as charging to tax and the assessing officer made prima facie adjustments under s. 143(1)(a) of the Act.
4. The assessee carried the matter before the first Appellate Authority. The first objection of the assessee was that it was beyond the scope of prima facie adjustment on the ground that the assessee has clearly mentioned that she has purchased old house and was constructing a new house by investing the amount of long-term capital gains which was deposited in her bank account. The first Appellate Authority noticed that this was an ordinary saving bank account and not as contemplated under s. 54F(4) and, therefore, he opined that the assessing officer was right in making the prima facie adjustments. However, the Commissioner (Appeals) was of the view that the entire amount of Rs. 1,84,284 being the difference between the investment and the sale price of Rs. 2,03,000 should have been deposited in bank as contemplated under s. 54F(4) and since the same has not been complied with, the entire amount was to be taxed. Before the Commissioner (Appeals), the assessee contended that though the sale took place on 27-10-1994, the amount was received by the assessee after five months, i.e., on 13-5-1995. The assessee deposited the amount in the bank account and utilised the same for construction of a residential house which she purchased on 10-2-1995. For Rs. 3,82,000. The assessee further contended that since she invested the entire amount for residential house, there was no capital gain. Investment may be before or after earning of the long-term capital gain. The sale consideration has not been reflected or deposited in Capital Gains Account Scheme, 1988 since the amount was already invested for the purchase and construction of residential house and further, it was not necessary to realise the entire sale proceed routed through bank account, contended the assessee. However, the learned Commissioner (Appeals) rejected the assessee's contentions for the reasons stated by him in para. 7 of his order which reads as under :
"I have considered arguments of the appellant's counsel, that of the assessing officer and entire material on record. Prima facie adjustment under s. 143(1)(a) can rightly be made based on the information, documents, accounts enclosed along with the return of income. In this case, the appellant had derived long-term capital gains from the sale of shares. Sale proceeds out of Rs. 2,03,000, which was not utilised by the appellant for the purchase or construction of residential house before due date of furnishing return of income under s. 139, should have been deposited by him before furnishing such return in accordance with the Capital Gains Account Scheme, 1988. The appellant by enclosing copy of bank pass book of saving bank a/c has himself admitted that an amount of Rs. 1,42,425 out of sale proceeds of Rs. 2,03,000 was deposited by him in saving bank account on 13th May, 1995, and hence provisions of s. 54F(4) were violated. In terms of footnote given by the appellant along with the computation of capital gains, it should be accepted that Rs. 60,575 (2,03,000 - 1,42,425) has been utilised by the appellant for construction of old house and construction thereon in accordance with s. 54F. Since copy of the bank pass book enclosed with the return of income clearly shows that a sum of Rs. 1,42,425 has not been deposited in accordance with the Capital Gains Account Scheme, 1988, the assessing officer should have made prima facie adjustment in respect of Rs. 1,27,568 (1,81,824 x 1,42,425/2,03,000). The above conclusion drawn is based on the information supplied by the appellant along with the return of income. Hence any other facts here not material. The assessing officer should tax Rs. 1, 27,568 as capital gain."
On the basis of the above, the Commissioner (Appeals) held that the amount of Rs. 1,27,568 should have been taxed as capital gain. It is against this order, the assessee is in appeal before the Tribunal.
5. The learned counsel for the assessee firstly objected to the observations of the Commissioner (Appeals) in para 7 which reads as under :
"Sale proceeds out of Rs. 2,03,000 which was not utilised by the appellant for the purpose or construction of residential house before due date of furnishing return of income under s. 139, should have been deposited by him before furnishing such return in accordance with the Capital Gains Account Scheme, 1988.
The counsel submitted that the assessee has utilised the amount of capital gain for the purpose of the house before the due date of filing of the return. He further contended that the claim of the assessee is based on utilisation of the amount for purchase of the house and not on the basis that the assessee deposited the amount in the account as contemplated under s. 54F(4) of the Act. Therefore, he contended that there is no violation of the provisions of s. 54F and enhancement of the income under the head "Capital gains" was not correct. The learned counsel for the assessee submitted that purchase of the house may be before or after the sale but it should be within a year before the sale of the property and it may be three years after sale but in that case, the amount of sale should have been deposited in the account as contemplated under s. 54F of the Act. He further submitted that it is not necessary that the very same amount should have been invested by the assessee for acquisition of the new r#sidential. property to get the benefit of the said section. The learned counsel further submitted that the stand of the Revenue that the assessee has violated the provisions of s. 54F is not correct. He further submitted that under the provisions of the said section the assessee was not bound to give details and to furnish details of investment in the property and, therefore, the adjustment was beyond the scope of s. 143(1)(a) and the learned Commissioner (Appeals) was also not justified in making enhancement. Sec. 54F contemplates to furnish the details of a "proof of such deposit which is applicable only in case of an assessee who has deposited the amount in an account in any bank or institution, that is, specified in and utilised in accordance with the scheme and the return shall be accompanied by the proof of such deposit. The counsel submitted that the Act demands the assessee to furnish the proof of only deposit if the amount remained unutilised for purchase of the old house and investing the amount in construction of a new house. Thus, the learned counsel confined his arguments to the following :
(a) It cannot be said that the amount was not utilised before the date of furnishing of return;
(b) appropriated does not mean that the same amount is to be utilised as it can never be in a case before the date of transfer;
(c) in any case, the assessee having purchased the new asset and appropriated the entire consideration received on transfer, the cost under s. 54F(4) shall be Rs. 3,82,000;
(d) there cannot be any prima facie adjustment as the assessee was not bound to give any proof of purchase of any asset;
(e) in any case, there cannot be prima facie adjustment on a debatable point; and lastly,
(f) no adjustment can be made as per the Board's circular, summed up the learned counsel.
Opposing the above contentions of the learned counsel for the assessee, the learned departmental Representative submitted that it was within the permissible scope of prima facie adjustment as from the pass book of the assessee, it was reflected that the assessee has shown a different amount than the sale proceeds of the share as deposit and she further submitted that the learned Commissioner (Appeals) was justified in enhancing the amount as much as it was deposited not in an account as contemplated under s. 54F of the Act. She placed reliance on the following decisions (1) 196 ITR 71 (sic) (2) Indian Aluminium Co. Ltd. v. CIT (1992) 93 CTR (Cal) 275.- (1992) 198 ITR 202 (Cal) (3) CIT vs. B.M. Bricks Industries (1994) 120 CTR (PM) 370: (1995) 212 ITR 516 (P&H)
7. Replying to the above, the learned counsel submitted that the decision in (1995) 212 ITR 516 (P&H) (supra) is not an authority and it only says that the addition can be made on obvious ground.
8. I have considered the rival submissions, gone through the orders of the Revenue authorities and the decisions relied upon by the contending parties. The stand of the assessee is that since the assessee has invested the amount for the purchase of new house or construction, it was not necessary for her to invest the amount as contemplated under sub-section (4) of s. 54F. The 'claim of the assessee is based on the actual spending and not on the basis that she has deposited the amount as contemplated under s. 54F(4). Sec. 54F(4) is reproduced below :
"The amount of the net consideration which is not appropriated by the assessee towards the purchase of new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, shall be deposited by him before furnishing such return [such deposit being made 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 s. 139] in an account in any such bank or institution as may be specified and utilised in accordance with any scheme 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 utilised by the assessee for the purchase or construction of new asset together with the amount so deposited shall be deemed to be the cost of the new asset."
Section states, in a case where the deposit is made as contemplated in the section under sub-section (4), then the return should be accompanied by proof of such deposit and not in a case where the same has been utilised for acquisition of new asset. However, in the instant case, the assessee has attached a copy of the bank account as a proof of depositing the sale proceeds in her account. The amount of Rs. 1,42,425, according to the assessee, was a portion of the sale proceeds of the capital asset. There is no evidence that the assessee has utilised the very same amount for acquisition of the new asset. Sec. 54F stipulates that the assessee should appropriate net consideration towards the purchase of a new asset made within one year before the date on which the transfer of original asset took place.
9. Chamber's Twentieth Century Dictionai3~ Sixth Impression 1971, gives the meaning of the word 'appropriate' as follows :
"to make to be the private property of any one., to make to oneself as one's own; to filch; to set apart for a purchase., assign; to suit (with to) adj. set apart for a purpose - peculiar; suitable."
It means that the sale proceeds of the old asset should be appropriated, set apart for a purpose and the purpose should be the purchase of a new asset purchased before one year of the sale of the old asset.
10. Explanation to s. 54F defines "net consideration" as in relation to the transfer of a capital asset, means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by an expenditure incurred wholly and exclusively in connection with such transfer. The assessee had deposited the amount received amounting to Rs. 1,42,425 in the account on 13th May, 1995. There is no evidence that the assessee appropriated this amount towards purchase of a new asset by withdrawing this amount. There is no evidence to show that the assessee appropriated the sale proceed for acquisition of the new asset. The very purpose of the section is defeated if an assessee is allowed to utilise some other amount for the acquisition of the new asset but claims the benefit of s. 54F on the ground that the assessee had acquired an asset one year before or two years after the date of the sale of the old asset. In the instant case, the assessee made the claim by way of footnote. The pass book was produced as an evidence. It does not prove that the assessee appropriated the sale proceeds of the old asset towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place.
11. 1 am unable to agree with the proposition that it is impossible to appropriate the sale consideration towards a purchase of a new asset which took place within one year before the sale of the old asset. A sober look to the section will show what the section contemplates is assessee acquired new asset but payment towards the purchase was delayed, and then, paid from the consideration of the sale of the old asset. This is all the mere evident from the section which contains the definition of the net consideration. It speaks of not only of the consideration received but also the consideration accruing as a result of transfer of capital asset. The benefit can be extended to assessee only if the assessee appropriated the sale consideration of the old asset received/ accrued towards the acquisition of the new asset.
12. In the light of the above facts and the position of law, the decision relied upon by the counsel does not fit in the case before me.
In the interest of justice, taking the facts and circumstances of the case, 1 remand the matter back to the file, of the assessing officer for fresh consideration. The assessee is at liberty to adduce an evidence to show that the sale proceeds were appropriated towards the acquisition of the new asset; ordered accordingly.
13. The appeal by the assessee is allowed for statistical purposes.
ITA No. 674/Nag/1997.14. Since I have allowed the assessee's appeal as above for statistical purposes, this appeal arising from the order under s. 154 of the Income Tax Act is dismissed as infructuous.