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Income Tax Officer Ward-6(1), Surat Room No. 614, 6th Floor, Aayakar Bhavan, Majura GaTe, Surat Vs Shri Arjundbhai Dolat Desai, (HUF) Nanavat Falia, Mota Varachha, Surat
March, 14th 2014
            IN THE INCOME TAX APPELLATE TRIBUNAL
                     AHMEDABAD "D" BENCH

             Before: Sri N.S. Saini, Accountant Member
               and Shri Kul Bharat, Judicial Member

                       ITA No. 2799/Ahd/2010
                      Assessment Year 2007-08


     Income Tax Officer                     Shri Arjundbhai Dolat
     Ward-6(1), Surat                       Desai, (HUF) Nanavat
     Room No. 614, 6 t h Floor,       Vs    Falia, Mota Varachha,
     Aayakar Bhavan, Majura                 Surat
     GaTe, Surat                            PAN: AABHA9165P
     (Appellant)                            (Respondent)



         Revenue by:            Sri K.C. Mathews, Sr.D.R.
         Assessee by:           Sri S.B. Vaidya, A.R.


       Date of hearing                      :   11-03-2014
       Date of pronouncement                :   13-03-2014




                               /ORDER

PER : N.S. SAINI, ACCOUNTANT MEMBER:-

      This is a appeal filed by the revenue against the order of Ld. CIT(A)-
IV Surat dated 01-07-2010 by taking the following grounds of appeal:-
      1.     On the facts and circumstances of the case and in law, the Ld.
      CIT(A) has erred in deleting the disallowances of claim of exemption
      u/s. 54 B of the Act of Rs. 66,72,750/-
I.T.A No. 2799 /Ahd/20    A.Y. 2007-08                            Page No    2
ITO vs. Arjundbhai Dolat Desai, (HUF)
      2.    On the facts and circumstances of the case and in law , the Ld.
      CIT(A) has erred in accepting the additional evidences furnished
      during the appellate stage without remanding the same to AO.

      3.    On the facts and in the circumstances of the case, and in Law,
      the Ld. CIT(A), Surat ought to have upheld the order of the Assessing
      Officer.

      4.   It is, therefore, prayed that the order of Ld. CIT(A)-IV, Surat
      may be set aside and that of the Assessing Officer restored."




2.    The brief facts of case are that the assessee sold non-agricultural plots
at village Mota Varachha and derived net sale consideration of Rs.
66,72,750/- after exemption of proportionate non-agricultural expenses of
Rs. 3,84,100/- from the total consideration of Rs.70,56,850/-. The assessee
has invested 38,69,000/- in plot of land and Rs. 28,10,000/- in capital gain
scheme,    1988.     During the course of assessment proceedings, the AO
observed that the assessee had sold the land which was converted into non-
agricultural status before the same was sold and also purchased the new land
in Athwa area Surat city which was falling in town planning scheme on
which non-agricultural activities could be carried out and the assessee had
claimed exemption u/s. 54B of the Act amounting to Rs. 66,72,750/-. On a
query from the AO the assessee clarified that it was a typographical error in
mentioning section 54B instead of 54F and the claim was meant to be u/s.
54F of the Act for selling non-agricultural land situated within 10 kilometers
of boundary of Surat city.      The AO did not accept the contention and
clarification of the assessee on the ground that the assessee had claimed
exemption u/s. 54B in the computation and also in the assessment
proceedings.       The AO observed that when the fault was found by the
assessee during the assessment proceedings which led to change in the claim
I.T.A No. 2799 /Ahd/20    A.Y. 2007-08                           Page No    3
ITO vs. Arjundbhai Dolat Desai, (HUF)
which was nothing but an afterthought. The AO stated that the assessee
neither sold nor purchased agricultural land and unless these requirements
are satisfied, the assessee could not claim the benefits of provisions of
section 54B.     The assessing officer observed that alternatively if the
assessee's contention is considered regarding the claim of section 54F, it
was gathered in inquiry made through an inspector that no new house was
constructed on the newly purchased land in the last 3 years and if the field
report contradicted the claim of the assessee that construction of residential
house on the said land was complete and therefore the AO rejected the claim
for exemption u/s. 54F also to the assessee.


3.    On appeal, the ld. CIT(A) allowed the claim of the assessee by
observing as under:-
      "I have gone through the assessment order as well as the contentions
      of the AR. It is observed from the assessment order that the assessing
      officer mainly rejected the claim of the appellant on two grounds viz.
      that the appellant intended to claim exemption U/s. 54B but later on
      during assessment proceedings, claimed the exemption U/s. 54F and
      according to AO, there was no typographical mistake but it was an
      after thought claim. The other ground of rejecting the claim was the
      Inquiry report of the inspector who reported that there was no
      construction on the site. Now coming on to the first argument of the
      AO that the claim was made U/s. 54B and not U/s. 54F, it is observed
      from the assessment order itself vide para 4.4 that during the course
      of assessment proceedings, the AR of the appellant clarified the
      typographical error in mentioning section 54B instead of Section 54F.
      it appears that it was a bonafide typographical error on the part of
      the AR who filed the return of income and represented the case
      because the evidences on record suggested that the appellant had
      opened a special bank account under Capital Gains Account Scheme
      with State Bank of India, Nanpura, Surat on 23-07-2007 before the
      return was filed on 31-07-2007 and it started applying the funds from
      the said bank account from the very next month for construction
      activities. The appellant had also purchased a plot of land during the
I.T.A No. 2799 /Ahd/20    A.Y. 2007-08                           Page No    4
ITO vs. Arjundbhai Dolat Desai, (HUF)
      financial year relevant to assessment under appeal. These facts
      clearly showed the intention of the appellant of constructing a
      residential house out of sales proceeds of non agricultural land sold
      by it. I also found force in the argument of the AR that if there was
      any intention of claiming exemption U/s, 54B of the Act then the
      appellant would not have utilized the amount from the Capital Gain
      Scheme Account for the purpose of construction activities of
      residential house immediately after opening the said account. The
      development permission issued by the Surat Municipal Corporation
      shows that the same was issued on 21-07-2007 which was before the
      return of income filed by the appellant. Therefore, 1 am inclined to
      believe that it was a clear case of typographical error in mentioning
      Section 54B instead of Section 54F as all corroborative evidences
      suggested that the appellant intended to claim exemption U/s. 54F.
      Moreover the appellant's authorized representative had already
      clarified the mistake during the course of assessment proceedings
      itself and therefore, the assessing officer was duty bound to allow the
      legitimate claim of the appellant within the provisions of the Law.

             Now coming to the other contention of the AO that the
      appellant's claim even under Section 54F was not correct as the
      inspectorial inquiry suggested that no house was constructed on the
      said land. It is observed that the said report of the inspector appeared
      to be contrary to the facts of the case. The assessing officer did not
      seek any clarification on this issue during the assessment proceedings.
      All the evidences put before me were Government documents like
      registered purchase deed of land, Development Permission and
      Building Use Certificate issued by the Surat Municipal Corporation
      where there is no reason of raising any doubt against such evidences.
      The Building Use Certificate suggested that the permission for
      construction work was sought on 22-03-2007, the permission was
      granted on 22-07-2007 and the same was completed on 25-08-2008
      and the said certificate was issued on 27-10-2008. All these facts
      suggested that the appellant had completed the residential work of
      residential house within the time limit prescribed U/s. 54F of the Act.
      A copy of pass book of Capital Gains Scheme Account also showed
      the application of the entire deposited amount towards construction
      work and therefore, I have no reason to believe the fact of inspector's
      report that there was no existence of any construction of a building on
      the plot of land. Thus, all the facts and evidences clearly proved that
I.T.A No. 2799 /Ahd/20    A.Y. 2007-08                            Page No    5
ITO vs. Arjundbhai Dolat Desai, (HUF)
      the appellant had legitimately claimed exemption U/s. 54F of the Act
      and therefore, the assessing officer is not justified in rejecting the
      claim of exemption of Rs. 66,72,750/-."

4.    Ld. DR submitted before us that the revenue in the appeal filed before
the Tribunal by way of ground no. 2 as raised a ground of appeal that the Ld.
CIT(A) has erred in accepting the additional evidences furnished during the
appellate stage without remanding the same to the AO. He pointed out from
the order of Ld. CIT(A) that the additional evidences filed by the assessee
were registered purchase deed of land, development permission and building
use permission certificate issued by the Surat Municipal Corporation It was
therefore his prayer that the matter should be restored back to the file of AO
for adjudication of the issue afresh after considering the additional evidences
which were filed before the Ld. CIT(A) for the first time.





5.    On the other hand the Ld. AR of the assessee submitted that copy of
inspector's report was never given to the assessee. He also argued that even
otherwise assessee is eligible for claim u/s. 54F because the assessee
invested the sale consideration of Rs. 38,69,000/- in purchase of another plot
of land and Rs. 28,10,000/- in capital gain account scheme 1998.            He
however agreed that he has no objection if the submission of the Ld. DR are
accepted by the Tribunal and the matter is restored back to the file of AO for
adjudication of the issue afresh after considering all the evidences which the
assessee may file at the time of set aside proceedings before the AO.
I.T.A No. 2799 /Ahd/20    A.Y. 2007-08                           Page No    6
ITO vs. Arjundbhai Dolat Desai, (HUF)
6.     After considering the rival submissions and perusing the material on
record as both the parties have agreed that the issue should be restored back
to the file of AO for adjudication of the issue afresh after examining all the
evidences in connection with the claim of the deduction u/s. 54F to the
assessee, we set aside the orders of lower authorities and remand the matter
back to the file of AO to adjudicate the issue afresh after examining all the
evidences in connection with the claim of the assessee for deduction u/s. 54F
of the Act.    Needless to mention he shall allow reasonable and proper
opportunity of hearing to the assessee before adjudicating the issue afresh as
per law.    This ground of appeal of the revenue is allowed for statistical
purpose.


7.     In the result, the appeal of the revenue is allowed for statistical
purpose.
     Order pronounced in open court on the date mentioned
     hereinabove at caption page

          Sd/-                                             Sd/-
   (KUL BHARAT)                                     ( N.S. SAINI)
 JUDICIAL MEMBER                               ACCOUNTANT MEMBER
Ahmedabad : Dated 13/03/2014
ak
     / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
                                                                By order/  ,
                                                               / 
                                                            ,
                                                                      

 
 
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