Income Tax Appellate Tribunal - Jodhpur
Jagan Nath Singh Lodha vs Income Tax Officer on 15 June, 2004
Equivalent citations: (2004)85TTJ(JODH)173
ORDER
Hari Om Maratha, J.M.
1. Both these appeals arise out of common appellate order and are cross appeals which pertain to asst. yr. 1995-96. So these are being disposed of by this common order for the sake of convenience and brevity.
2. The facts, in brief, which are relevant for the disposal of these appeals are that the assessment order was passed under Section 143(3) r/w Section 147 of the IT Act, 1961 (hereinafter referred to as 'the Act'). In appeal, the learned CIT(A) granted certain reliefs to the assessee. So, both the parties are in appeal against the same appellate order.
3. Ground No. 1 of assessee's appeal and ground Nos. (i) and (ia) of the Department's appeal relate to an addition on account of denial of exemption under Section 54F.
4. The appellant is employed in the Public Health Engineering Department (PHED). He had sold a plot at Jaipur on 4th Jan., 1995, relevant to asst. yr. 1995-96 for a total consideration of Rs. 5 lakhs. A copy of the agreement is placed at pp. 13 to 19 of the paper book. The assessee entered into an agreement to purchase a residential house situated at Vivek Vihar, Jaipur, and paid earnest money of Rs. 2 lakhs to Shri P.K. Singhvi. This agreement did not materialise because the flat was occupied by a tenant who did not vacate it. Eventually, the agreement was cancelled and earnest money was returned back to the assessee on 17th Dec., 1995. After cancellation of the earlier agreement, the assessee again entered into an agreement to purchase another house at Lodha Tower, Jodhpur on 6th Jan., 1996 for a sum of Rs. 4,01,000 and paid an earnest money of Rs. 21,000 on 6th Jan., 1996 and balance price was paid on 30th March, 1996. The assessee's case is that the money received as consideration of sale of plot on 4th Jan., 1995 was further invested in the purchase of flat by 30th March, 1996, i.e., within two years from the date of sale of plot. So, according to the assessee, he was entitled to the claim of exemption under Section 54F of the Act.
5. The AO refused to accept the claim of the, assessee on the reason that as per the provisions of Section 54F, in case the entire consideration is not invested by the assessee before the filing of the return for the relevant year, then the unutilised amount had to be deposited in the Capital Gains Account Scheme. Since the assessee had not deposited the sale consideration in any such account, the AO disallowed the claim to the assessee and made addition of entire amount of Rs. 4,34,847.
6. The learned CIT(A) accepted the intention of the assessee and reinvested the same in residential house as bona fide and allowed the claim for exemption under Section 54F to the extent of Rs. 2 lakhs only being the amount invested by the assessee to purchase the flat at Jaipur on 16th April, 1995, i.e., before filing of the return under Section 139. The learned CIT(A) accepted the claim in respect of the flat which was ultimately not purchased, but rejected the claim in respect of the flat wherein actual investment was finally made by the assessee. Both the parties are aggrieved and have filed respective appeals.
7. We have heard the rival submissions and have perused the evidence on record.
8. The learned Authorised Representative has submitted that Section 54F was introduced by the Finance Act, 1982, which permitted reinvestment of the proceeds received on transfer of a capital asset in the purchase within a year or construction within three years of a residential house to avoid payment of capital gain tax. This provision was introduced with the sole intention to purchase or construct a house. Proviso 4 to this section was introduced by the Finance Act, 1987, which reads as under :
"Under the existing provisions of Sections 54, 54B, 54D and 54F, long-term capital gains arising from the transfer of any immovable property used for residence, land used for agriculture...... and other capital assets are exempt from income-tax, if such gains are reinvested in new assets within the time allowed for the purpose. The original assessment needs rectification whenever the taxpayer fails to acquire the corresponding new assets."
[The above is not the fourth proviso but portion of Circular No. 495, dt. 22nd Sept., 1987-- Ed.]
9. The assessee had sold plot on 4th Jan., 1995 (asst. yr. 1995-96) and invested the sale consideration by 30th March, 1996 (asst. yr. 1996-97), i.e. one year from the sale of the plot, as provided under Section 54F(1). The assessee had made an attempt to purchase a house at Vivek Vihar, Jaipur immediately on 16th April, 1995 after sale of plot on 4th Jan., 1995. This agreement could not materialise due to the inability of the seller, to handover the vacant plot. The earnest money of Rs. 2 lakhs was received on 17th Dec., 1995 and the same was immediately invested in the purchase of flat in Lodha Tower, Jodhpur on 6th Jan., 1996. Thus the assessee invested the amount within the stipulated time. The only fault committed by the assessee in this case seems to be that the assessee failed to deposit the unutilised amount meant for reinvestment in the capital gain account scheme before filing of the return under Section 139 of the Act. The learned Authorised Representative has relied on the following various decisions at p. 4 of the paper book :
1. Bajaj Tempo Ltd. v. CUT (1992) 196 ITR 188 (SC) wherein it has held by the Hon'ble Supreme Court that a provision in taxing statute granting incentives for promoting growth and development should be construed liberally.
2. CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 196 ITR 149 (SC) wherein it was held by the Hon'ble Supreme Court that it is a settled law that the expressions used in the taxing statutes would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention.
3. M.A.C. Khaleeli v. Dy. CIT (1993) 47 TTJ (Mad) 639 : (1994) 48 ITD 191 (Mad). The facts were that the assessee's claim for exemption under Section 54F was denied in respect of capital gains as surplus was not deposited under Section 54F(4) in a specified bank account but deposited in a housing division of assessee's business to be utilised for construction of residential accommodation. The Madras Bench of the Tribunal, while answering the question in positive, held that the act of the assessee amounted to utilisation of consideration for construction of residential house within the meaning of Section 54F(1). It was further held that the purpose of Sub-section (4) requiting the deposit of unutilised funds in a specified account is not for depriving the assessee the use of funds, but only for avoiding rectification of assessment by bringing to tax the amount which had been earlier claimed as exempt by reason of re-investment.
10. The. clear-cut of the case of the assessee is that the assessee had invested an amount of Rs. 4,01,000. The fact that the purchase price and taking possession of the flat at Lodha Tower, Jodhpur by 30th March, 1996 when the plot at Jaipur was sold on 4th Jan., 1995 for Rs. 5 lakhs, in view of the aforesaid decisions, this amount of Rs. 4,01,000 invested by the assessee in the purchase of flat is to be held exempt under Section 54F. The intention of the assessee from the very beginning was to purchase a flat. When due to certain unavoidable circumstances, the contract did not materialise, it cannot be said that there was any hanky panky on the part of the assessee to avoid payment of tax. The assessee ultimately purchased a flat within two years from the sale of plot. The default committed by the assessee was a technical default that the assessee did not deposit the amount meant for reinvestment in the capital gain account scheme before filing return under Section 139 of the Act. Keeping in view the totality of the facts and circumstances of the case and the decisions relied by the learned Authorised Representative, we are of the considered opinion that the amount of Rs: 4,01,000 out of Rs. 5 lakhs which were ultimately invested within the stipulated time is to be exempt from tax although the assessee failed to technically deposit the same in the capital gain account. The intention of the Act as well as the intention of the assessee are to be considered in a right perspective. It is not the case of the Department that the assessee wanted to utilise the amount for other purpose than to purchase a house within two years to the extent it has been utilised. As a result, we delete the addition of Rs. 4,01,000 out of Rs. 5 lakhs as per rules and sustain the remaining amount. Thus this ground of appeal is partly allowed.
11. Ground No. (ii) of Department's appeal is regarding deletion of addition of Rs. 2 lakhs on account of alleged unexplained deposit in Vijaya Bank.
12. It is a fact that the assessee had deposited this amount in Vijaya Bank, Jaipur, on 31st March, 1995 from the money withdrawn by him from his account in SBBJ, Jodhpur. The assessee was transferred to Jaipur in December, 1994 and did not have any bank account at Jaipur at that time. The assessee transferred the requisite amount from Jodhpur to his account at Jaipur. Thus the deposit made by assessee in Vijaya Bank, Jaipur stands explained from the withdrawal made from SBBJ, Jodhpur. The learned CIT(A) had rightly deleted the addition made by the AO to the extent of Rs. 2 lakhs. The account in Vijaya Bank was opened on 2nd Feb., 1995. The assessee had made total withdrawal of Rs. 3,14,000 in SBBJ, Jodhpur from January, 1995 to March, 1995 against which he made a total deposit of Rs. 3 lakhs in Vijaya Bank, Jaipur, which included single deposit on 31st March, 1995. Thus the learned CIT(A) was right in holding that the deposits made by assessee in Vijaya Bank, Jaipur stand well explained from the withdrawals made from SBBJ Bank, Jodhpur and he had rightly deleted the addition made by AO. We do not find any infirmity in the order of the learned CIT(A). As a result we decline to interfere with the impugned order of the learned CIT(A).
13. The Department has. withdrawn ground No. (iii) of its appeal, so it is dismissed as withdrawn.
14. Ground No. 2 of the assessee is same as ground No. (iii) of Department's appeal which relates to charging of interest under Sections 234A and 234B which is consequential in nature. So, these are being decided accordingly. And will have effect in view of our aforesaid finding.
15. In the result, the appeal of the Department is dismissed and the appeal of the assessee is partly allowed.