Referred Sections:
Section 143(3) of the Income-tax Act, 1961
Section 54 of the Act.
Section 234B of the Act,
Section 271(1)(c).
Section 2(47) of the Act,
Referred Cases / Judgments:
Abodh Borar vs. ITO in ITA No. 5114/Del/2016 (AY 2013-14)
Varun Seth vs. ACIT 47(1) (2019) 107 taxmann.com 133 (Delhi – Trib.).
Sanjeev Lal Vs. CIT [2014] 365 ITR 389 (SC)
Act. In the case of Oxford University Press v. CIT [2001] 3 SCC 359
IN THE INCOME TAX APPELATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No. 1402/Del/2016
A.Y. : 2012-13
NUTAN CHOPRA, Vs. ACIT, CENTRAL CIRCLE 54(1),
3, RING ROAD, NEW DELHI
NEW SBI,
LAJPAT NAGAR-IV,
NEW DELHI
(PAN: AACPC0788P)
(Appellant) (Respondent)
Assessee by : Sh. Ridhi Karan Aggarwal, CA
Department by : Ms. Ashima Neb, Sr. DR.
ORDER
PER H.S. SIDHU, JM
This appeal by the Assessee is directed against the Order dated
04.1.2016 of the Ld. Commissioner of Income Tax (Appeals)-18, New Delhi
pertaining to assessment year 2012-13.
2. The grounds of appeal raised in the assessee's appeal read as under:-
1. That the Commissioner of Income-tax (Appeals) [in short
"CIT(A)"] on the facts and in law in confirming the addition
made by the assessing officer aggregating Rs.81,66,515/-
in the assessment order dated 02.03.2014 passed under
section 143(3) of the Income-tax Act, 1961 ('the Act') is
bad in law.
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2. That on the facts and circumstances of the 'case and in
law, the CIT (A) has failed to appreciate the provisions of
section 54 and has made the addition ultra vires of section
54.
2.1. That the assessee has rightly claimed the deduction under
section 54 as per the provision of the Act.
2.2. That on the facts and circumstances of the case and in law,
the CIT (A) has failed to understand the intention of the
provisions of deduction available under section 54 i.e. for
the investment/utilization of capital gain proceeds in
another eligible property.
2.3. The CIT (A) has erred in law and facts in making the
addition where the assessee has already invested
Rs.l,14,51,375 in residential plot before filing of return and
therefore utilized the entire capital gain and satisfying the
condition of section 54 of the Act.
3. That the CIT (A) has erred in facts and in law in
appreciating that the assesse could not get the possession
of the plot, due to the reason beyond the control of the
appellant, hence could not start the construction on the
residential plot. Thus the appellant was prevented by
sufficient cause for not starting the construction. However,
the entire capital gain proceeds have already been utilized
in purchase of the plot hence satisfying the conditions of
section 54.
4. Without. prejudice, the CIT(A) and assessing officer have
erred in facts and in law in failing to understand the
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provisions of section 54 where in case of any failure to
fulfill the conditions for investment in construction of house
property within stipulated time the utilized amount shall be
taxable in the previous year in which period of three years
expire and therefore not in the year of capital gain.
5. That the CIT (A) has erred in upholding of charging
interest under section 234B of the Act, without giving any
directions in the assessment order about levy of interest.
6. That the CIT(A) has erred in law and facts in upholding
initiating of penalty proceedings under section 271(1)(c).
7. That the assessee craves to add, to amend, to delete any
other ground of appeal.
3. The brief facts of the case are that the assessee is an individual having
income from business or profession, house property, capital gain and other
sources during the assessment year 2012-13. The assessee filed her return
of income on 24.09.2012 declaring an income of Rs. 73,32,060/-. The
case of the assessee was selected for scrutiny through CASS. Accordingly,
notice u/s. 143(2) of the Income Tax Act, 1961 (in short "Act") was issued
on 06.8.2013 and served upon the assessee. Subsequently, notice u/s.
142(1) of the Act alongwith questionnaire was issued and served upon the
assessee. In response to the same, the AR of the assesee attended the
proceedings from time to time. During the under consideration, assessee
sold residential property situated at 28/28, East Patel Nagar, New Delhi for a
total consideration of Rs. 300 lacs, however, assessee's share was 1/3rd in
the said residential property which comes to Rs. 100 lacs and accordingly
claimed the deduction of entire capital gain under section 54 of the Act for
Rs. 81,66,515/- by investing Rs. 1,14,51,375/- in residential plot of
Greenbay Gold Village GB Nagar UP for the purpose of construction of
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residential house. The assessee could not get the possession of the said
residential plot within the stipulated time for the reasons beyond the control
of assessee and delay on the part of the developer. However, the AO
completed the assessment u/s. 143(3) of the Act at Rs. 1,54,98,570/- vide
order dated 02.03.2015 by denying the benefit of deduction under section
54 of the Act for Rs. 81,66,515/- on the contention that the construction
could not be started within the stipulated time and added the same amount
in the income of the assessee on account of long term capital gain. Against
the assessment order, assessee appealed before the Ld. CIT(A) who vide his
impugned order dated 04.10.2016 has dismissed the appeal of the assessee.
Aggrieved the impugned order, assessee is in appeal before the Tribunal.
4. Ld. Counsel for the assessee stated that Ld. CIT(A) erred in confirming
the addition made by the Assessing Officer aggregating to Rs.81,66,515/- in
the assessment order dated 02.03.2014 passed u/s. 143(3) of the Act and
further submitted that Ld. CIT (A) has also failed to appreciate the
provisions of section 54 of the Act and has made the addition ultra vires of
section 54 of the Act. It was further submitted that the assessee has rightly
claimed the deduction u/s. 54 of the Act. He further submitted that Ld.
CIT(A) has failed to understand the intention of the provisions of deduction
available under section 54 of the Act i.e. for the investment/utilization of
capital gain proceeds in another eligible property. It was further submitted
that Ld. CIT(A) has erred in making the addition where the assessee has
already invested Rs.1,14,51,375/- in residential plot before filing of return
and therefore utilized the entire capital gain and satisfying the condition of
section 54 of the Act. It was further submitted that Ld. CIT (A) has erred in
appreciating that the assesse could not get the possession of the plot, due to
the reason beyond the control of the assessee, hence assessee could not
start the construction on the said residential plot. Thus the assessee was
prevented by sufficient cause for not starting the construction. However, the
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entire capital gain proceeds have already been utilized in purchase of the
plot hence satisfying the conditions of section 54 of the Act. It was further
submitted that Ld. CIT(A) and Assessing Officer have erred in in
understanding the provisions of section 54 of the Act where in case of any
failure to fulfill the conditions for investment in construction of house
property within stipulated time the utilized amount shall be taxable in the
previous year in which period of three years expire and therefore not in the
year of capital gain. In support of his contention, he filed the copy of the
ITAT, `A' Bench decision dated 18.11.2019 passed in the case of Abodh
Borar vs. ITO in ITA No. 5114/Del/2016 (AY 2013-14) and stated that the
issue in dispute in hand is squarely covered by the aforesaid decision
wherein exactly similar issue has been adjudicated by the Tribunal in favour
of the assessee and against the revenue by following the ITAT, Delhi Bench
decision in the case of Varun Seth vs. ACIT 47(1) (2019) 107 taxmann.com
133 (Delhi Trib.). In view of above, he requested that the disallowance
made and confirmed by the lower authorities may kindly be deleted and
appeal of the assessee may be allowed.
5. On the contrary, Ld. DR relied upon the order of the authorities below
and stated that the Ld. CIT(A) has passed a well reasoned order which does
not need any interference, hence, the same may be affirmed. No contrary
decision has relied upon by the Ld. DR.
6. We have heard both the parties and perused the records available with
us, especially the orders passed by the Revenue authorities. On going
through the facts, we note that during the year under consideration the
assessee has sold a residential house property having her 1/3rd share
therein situated at East Patel Nagar New Delhi for Rs. 100 lacs and had a
long term capital gain of Rs. 81,66,515/-. The assessee claimed the
deduction under section 54 of the Act by investing the entire sale proceeds
(aggregate investment of Rs. 1,14,51,375 and details thereof as shown at
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page no. 39, 42 & 41 of the Paper Book) before the due date of filing
Income Tax Return u/s. 139 of the Act for the purchase of another
residential property at Green Bay Gold Village, Yamuna Expressway, Distt.
Gautam Budh Nagar, UP. Construction on the said land could not be
completed within the stipulated period of three years for the reasons beyond
the control of the assessee i.e. Farmers agitation against Yamuna Authority
related to the area in which plot was located, as seen from page 21-31 of
the Paper Book and change of developer as Silverglades Pvt. Ltd. sold the
project to other developer Orris Infrastructure. In such circumstances,
we are of the view that benefit of deduction cannot be denied to the
assessee. Our aforesaid view is fortified by the ITAT, `A' Bench decision
dated 18.11.2019 passed in the case of Abodh Borar vs. ITO in ITA No.
5114/Del/2016 (AY 2013-14) wherein by respectfully following the ITAT,
Delhi Bench decision in the case of Varun Seth vs. ACIT in ITA No.
1388/Del/2019 dated 14.05.2019 wherein, it has been held as under:-
"6. We have heard the rival submission and
perused the relevant finding given in the impugned
orders passed by the authorities below and the
paper book filed by the assessee.The only issue in
the appeal is the denial of deduction claimed by the
assessee under section 54 and 54F of the Act. It is
an undisputed fact that, firstly, the assessee has
earned capital gain and has invested the same in
purchase of a residential plot; secondly, the
assessee has made a total investment of
Rs.63,03,005/- which is more than the exemption
of Rs.52,90,424/- claimed by her; and lastly,
the assessee made this investment
within the prescribed period. This payment was
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made to the developer Omaxe Chandigarh Extension
Developers Pvt. Ltd. Consequent to that, the developer
issued allotment letter and also entered into an agreement
dated 05.07.2011. As per the agreement the developer
was supposed to hand over the possession of plot within
18 months from the date of allotment letter. However, the
developer did not deliver the possession. Hence, the
assessee could not complete the construction within the
prescribed period of 3 years. This delay in construction was
not attributable to the assessee. Thus, the AO and the CIT
(A) have denied the exemption in view of the provision of
section 54 and 54F of the Act. Further, the AO and the CIT
(A) both have ignored the fact that the assessee has made
a full payment to the developer and such payment was
more than the amount of the deduction claimed by the
assessee. Since, the delay was not on the part of the
assessee but on the part of the developer and thus it was
beyond the control of the assessee. In such circumstances,
we are of the view that benefit of deduction cannot be
denied to the assessee. Our view is supported by the
judgment of coordinate bench of the ITAT in the case of
Varun Seth vs. ACIT ITA No.1388/Del/2019 dated
14.05.2019, wherein it has been held as under:-
"9. The real issue in the present case is that
new residential house has not been
constructed within a period of three years from
the date of the transfer of the residential
property which resulted in the long-term
capital gain. On this issue, the assessee's
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contention has been that inspite of having
made payment for the plot, the Jaypee
(Developer) failed to offer possession and
execute sale deed even up till the expiry of
three years from the date of sale of property
by him, because of reasons beyond his control
which cannot be disputed. This vital fact
assumes great significance as assessee had
taken all the steps to make the investment for
the purchase of house, and also assessee had
deposited 25,10,000/- in the capital gain
account with PNB so as to construct the house.
This unequivocally demonstrate that assessee
really intended to construct the new residential
house thereon. It was based on this bonafide
intention assessee had claimed exemption
under section 54 of the Act. Without the
purchase of land, house could not have been
constructed. The first step was to purchase the
land, which was done. Thereafter the
developer was to handover the plot, so that
assessee could have constructed the house
within time allowed of 2 years. However, no
step could be put forward thereafter because
possession of land was not given by the
Developer, for reasons beyond the control of
the assessee. If an assessee sells his house
property and utilises the money for acquiring a
plot for the construction of the house and if
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facts and circumstances point out that
assessee intended to construct the house,
which has been found so, then it is clear that
he wants to avail exemption as provided under
the law. Now if the developer after receiving
the money could not fulfill the obligation within
time, then can assessee be held responsible for
not complying the law.
10. The Hon'ble Supreme Court in the case of
Sanjeev Lal Vs. CIT [2014] 365 ITR 389 (SC)
has laid down the purposive interpretation of
section 54 to give a liberal approach to the
assessee who clearly intended to claim benefit
of section 54. Their Lordships held that section
54 is a beneficial provision and is to be
construed keeping in view the intention of the
Legislature to give relief in the matter of
payment of tax on the long-term capital gain,
relevant observation of their Lordships reads
as under: -
"22. In addition to the fact that the term
"transfer" has been defined under section
2(47) of the Act, even if looked at the
provisions of section 54 of the Act which
gives relief to a person who has
transferred his one residential house and
is purchasing another residential house
either before one year of the transfer or
even two years after the transfer, the
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intention of the Legislature is to give him
relief in the matter of payment of tax on
the long term capital gain. If a person,
who gets some excess amount upon
transfer of his old residential premises
and thereafter purchases or constructs a
new premises within the time stipulated
under section 54 of the Act, the
Legislature does not want him to be
burdened with tax on the long-term
capital gain and, therefore, relief has
been given to him in respect of paying
income-tax on the long-term capital
gain. The intention of the Legislature or
the purpose with which the said provision
has been incorporated in the Act, is also
very clear that the assessee should be
given some relief. Though it has been
very often said that common sense is a
stranger and an incompatible partner to
the Income-tax Act and it is also said
that equity and tax are strangers to each
other, still this court has often observed
that purposive interpretation should be
given to the provisions of the Act. In the
case of Oxford University Press v. CIT
[2001] 3 SCC 359 this court has
observed that a purposive interpretation
of the provisions of the Act should be
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given while considering a claim for
exemption from tax. It has also been
said that harmonious construction of the
provisions which sub-serve the object
and purpose should also be made while
construing any of the provisions of the
Act and more particularly when one is
concerned with exemption from payment
of tax. Considering the afore stated
observations and the principles with
regard to the interpretation of statute
pertaining to the tax laws, one can very
well interpret the provisions of section 54
read with section 2(47) of the Act, i.e.,
the definition of "transfer", which would
enable the appellants to get the benefit
under section 54 of the Act."
11. If we apply the law as clarified by the
Hon'ble Apex Court, on the facts of the instant
case, then we are of the opinion that the
amount utilized by the assessee in the
acquisition of land should be construed as
amount invested in purchase/ construction of
residential house. The intention of the statute
as provided in section 54 has been fully
satisfied by the assessee in the present case.
Thus, on the facts of the present case, we hold
that the assessee is entitled for exemption
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under section 54 of the Act and AO is directed
to allow the exemption us/ 54."
7. Respectfully following the above decision which is
applicable on the facts of the present case also, we hold
that assessee is entitled to the exemption claimed by her
and direct the AO to delete the disallowance.
8. In the result, the appeal of the assessee is allowed."
6.1 Keeping in view the aforesaid discussions and respectfully following
the precedent, as aforesaid, which is applicable on the facts of the present
case also, we hold that assessee is entitled to the exemption claimed by her
and, therefore, delete the disallowance in dispute by allowing the appeal of
the assessee.
7. In the result, the appeal filed by the Assessee stands allowed.
Order pronounced on 13/12/2019.
Sd/- Sd/-
[DR. B.R.R. KUMAR ] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date: 13/12/2019
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4.CIT (A) 5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
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