Income Tax Appellate Tribunal - Chennai
P.Saranakumari, Chennai vs Ito, Chennai on 6 November, 2017
आयकर अपील य अ
धकरण, B/'SMC' यायपीठ, चे नई ।
IN THE INCOME TAX APPELLATE TRIBUNAL
B/"SMC" BENCH, CHENNAI
ी. चं पज
ू ार लेखा सद य , के सम ।
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
I.T.A.No.325/Mds./2017
( Assessment Year : 2010-11 )
Smt.P.Saranakumari, The Income Tax Officer,
Flat No.4,Hamsadwani, Vs. Non-corporate ward 15(1),
No.11/20,Canal First Cross street, Chennai.
Chennai 600 020.
PAN BIFPS 3168 H
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से / Appellant by : Ms.A.sushma Harini, &
Ms.S.Sriniranjani,Advocates
यथ क ओर से/Respondent by : Mr.B.Sagadevan, JCIT, D.R
सन
ु वाई क तार"ख/ Date of hearing : 06.11.2017
घोषणा क तार"ख /Date of Pronouncement : 06.11.2017
आदे श / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-15, Chennai dated 12.12.2016 pertaining to assessment year 2010-11. 2 ITA No. 325/Mds/2017
2. The assessee has raised the following grounds for consideration.
1. The Commissioner of Income-tax (Appeals) erred in dismissing the Appeal of the Appellant herein in a summary manner.
2. The Commissioner of Income-tax (Appeals) went wrong in holding that exemption u/s 54 can be availed only in respect of the entire capital gains utilized within the time prescribed u/s 139(1) and not 139(4).
3. The Commissioner of Income-tax (Appeals) failed to note that the appellant acquired the flat within one year prior to the transfer and payments made over a period of time.
4. In any event, the Commissioner of Income-tax (Appeals) erred in not granting exemption u/s. 54F in respect of the payments made at least up to due date for filing the return of income u/s.139(1) of the Act.
3. The brief facts of the case are that the assessee along with other two co-owners had sold a vacant land on 03/02/2010 for a total consideration of `75,00,000/-and her share of consideration was at `25,50,000/-. The assessee was asked by the concerned Assessing Authority to produce the relevant return of income. In response, it was submitted by the assessee that she had not furnished her return of income for the relevant year under consideration. However, it was 3 ITA No. 325/Mds/2017 contended by the assessee that she had invested the entire sale consideration of `25,50,000/- in the purchase and construction of new residential property. In the meantime, the assessee e-filed return of income on 22/11/2012 admitting income from Long Term Capital Gain at `1,81,870/-. However, the return was not filed within the extended due date and hence, was non est. Perusal of the relevant details revealed that the assessee had invested in the property only after the due date for filing of her return of income u/s139(1) i.e. 31/07/2010 and the net sale consideration was also not deposited in the Capital Gain Account Scheme as envisaged in section 54F. Hence, in view of the above facts and circumstances of the case; the case was reopened u/s.147 by issuance of notice u/s.148 on 13/12/2012 which was duly served on the assessee. The assessee filed a letter dated 07/01/2013 stating to treat the return filed on 22/11/2012 as return filed in response to notice u/s 148 of the Act. It was submitted by the assessee that the net sale consideration was invested by her towards construction of residential house through M/s. Vasavi Builders and exemption of `19,74,569/-was claimed u/s 54F. The claim of the assessee was rejected by the AO on the 4 ITA No. 325/Mds/2017 ground that the assessee had failed to qualify the conditions as enumerator under subsection (1) and (4) of section 54F. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A).
3.1 On appeal, the Ld.CIT(A) endorsed the view of the ld. Assessing Officer in rejecting the claim of the assessee u/s 54F. For justifying the action of the AO, the Ld.CIT(A) observed that as stipulated u/s 54F, the assessee was required to file the relevant return of income within the due date or within the extended due date as belated return of income to claim the benefit of section 54F. However, the assessee did not file her return of income. The return of income filed on 22.11.2012 was non est. Accordingly, the assessee had failed to qualify for the deduction. Further, Ld.CIT(A) observed that the net sale consideration was required to be utilized either towards purchase or construction of new property within the due date for filing of return of income u/s.139(1). And the unutilized net sale consideration was to be deposited in Capital Gain Account Scheme as envisaged in section 54F. In the present case of the assessee, neither the net sale consideration was utilised towards construction of 5 ITA No. 325/Mds/2017 new property nor was the same kept in the Capital Gain Account Scheme. Hence, on this account also the assessee failed to qualify for the deduction under section 54F.
3.2 Ld.CIT(A) was of the opinion that the construction of the new house property was not completed within the period of three years from the date of sale of the original asset. Interestingly, the construction of new house property was incomplete on the date of passing of the assessment order on 20/08/2013. Therefore, on this ground also the assessee is found to be ineligible for deduction u/s As claimed by the assessee, she had invested `1,00,000/-on 24/06/2009 and `3,78,286/-on 16/11/2009, totaling to `4,78,286/- towards construction of new asset, paid to the builder M/S Vasavi Builders before the due date for filing of the return of income. Since the payment of `4,78,286/-was made prior to the sale of original asset which took place on 03/02/2010, the assessee was not eligible to claim the deduction of this amount of `4,78,286/- as well. Section 54F envisages that the new residential property should have been constructed within three years from section 54F, the amount of 6 ITA No. 325/Mds/2017 `4,78,286/-, which was utilised prior to the date of sale of original asset, cannot be considered for the deduction.
3.3 Therefore, Ld.CIT(A) arrived at a conclusion that the assessee was not eligible for deduction u/s 54F of the Act . Moreover, since the relevant provisions of section 54F are clear and unambiguous and the relevant Circulars and press releases, as discussed in the assessment order, also support the stand taken by the AO, the finding of the AO is confirmed and the entire claim of `19,74,569/-u/s 54F is rejected. Against the order of Ld.CIT(A), now the assessee is in appeal before us.
4. I have heard both the parties and perused the material on record. In the present case, the assessee along with other two co- owners had sold a vacant land on 03/02/2010 for a total consideration of `75,00,000/-and her share was at `25,50,000/-. The assessee has not filed her return of income within the time allotted u/s.139(1) of the Act i.e. 31.07.2010 on the reason that the income of assessee was below the taxable limit. However, the assessee invested the entire consideration of `25,50,000/- in the purchase and construction of a new residential property before the time allotted to file her return 7 ITA No. 325/Mds/2017 of income u/s.139(4) of the Act and she contended that she is entitled for deduction u/s.54F of the Act. However, the ld. Assessing Officer issued notice u/s.148 for reopening of assessment u/s.147 dated 13.12.2012, which was duly served on the assessee. The assessee claimed that the assessee is entitled for deduction u/s.54F of the Act, which was invested by her towards construction of a residential house through the builder M/s. Vasavi Builders and claimed an amount of ` 19,74,569/- u/s.54F of the Act.
4.1 On the other hand, the contention of the ld.D.R is that the assessee is not entitled u/s.54F of the Act as the assessee not filed her return either u/s.139(1) or 139(4) of the Act. In my opinion, the argument of ld.D.R is having no merit. The income of assessee, if excluded the capital gain that the impugned amount of addition, is below the taxable income. Being so, the assessee is not liable to file her return u/s.139 of the Act. Since the assessee has invested the impugned amount in construction of a new residential house within the time is allowed u/s.139(4) of the Act, the assessee is entitled u/s.54F of the Act. This view of myself is fortified by the order of Co- 8 ITA No. 325/Mds/2017 ordinate Bench in the case of Rajalakshmi in ITA No.514/Mds./2017 dated 21.06.2017 wherein held that:-
"4. We have heard both the.parties and perused the material on record and various case laws cited by both the parties. In our opinion, if the assessee' purchases new house within two years from the date of transfer of capital asset or if it is a construction within three years from date of transfer, assessee is entitled for deduction u/s.54 of the Act. If the assessee intent to construct a residential house within a period of three years from the date of transfer of capital asset u/s. 54(2) of the Act, the amount has to be deposited in a bank under capital gains scheme as notified by the Central Government within a time limit available to file return of income u/s. 139(4) of the Act has held by the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Jagriti Aggarwal 339 ITR 610. If the assessee completes the construction of a new residential house within three years from the date of sale of capital asset, assessee is entitled for deduction u/s.. 54 of the Act. Now the contention of the Id. Departmental Representative is that assessee has not appropriated towards construction of new residential house as it was not completed. In our opinion as held by Hon'ble Karnataka High Court in the case of CIT vs Smt. VS. Shantha Kumari 126 DTR 435 completion of construction within three years was not mandatory and it was necessary that construction should be commenced, it should be proved by the assessee that construction is for residential house. The Hyderabad Bench of the Tribunal in the case of Muneer Khan vs. ITO, 41 SOT 504, had held that assessee may use borrowed funds for construction of new residential property and deduction u/s.54 of the Act denied on the reason that assessee used some fund other than consideration received on transfer of capital asset. Being so, on that 9 ITA No. 325/Mds/2017 reason deduction u/S.54 o e Act cannot be denied. Hence, we remit the entire issue in dispute with regard to Sec. 54 of the Act to the file of the ld. Assessing Officer with a direction to the ld. Assessing Officer to verify whether assessee has actually made investments in construction of new residential property, though it was not completed and deide thereupon."
4.2 In the present case there is no dispute regarding investment made by the assessee in a new residential house within the time allowed u/s.139(4) of the Act. In my opinion, there is no case to give direction to ld. Assessing Officer to examine the actual investments in the construction of a new residential property. Accordingly, this ground of appeal raised by the assessee stands allowed.
5. In the result, the appeal of assessee is allowed.
Order pronounced on 06th November, 2017.
Sd/-
(चं पज ू ार ) (CHANDRA POOJARI) लेखा सद य /ACCOUNTANT MEMBER Chennai, Dated the 06th November, 2017.
K s sundaram.
आदे श क )त*ल+प अ,े+षत/Copy to:
1. अपीलाथ /Appellant 3. आयकर आयु-त (अपील)/CIT(A) 5. +वभागीय )त)न2ध/DR
2. यथ /Respondent 4. आयकर आयु-त/CIT 6. गाड5 फाईल/GF