Arunkumar Purshotamlal Khanna Vs PCIT (ITAT Pune)
Held that a residential house for the purpose of section 54F(1) deduction can indeed cover multiple units in same or different towers or residential blocks
Facts-
The main issue in the present case is that the assessee claimed reinvestment of his LTCG u/s. 54F in respect of the purchase of twin residential units. Notably deduction was allowed in the regular assessment u/s 143(3). However, PCIT sought to invoke its 263 revision jurisdiction on the ground that the above stated regular assessment was an erroneous one causing prejudice interest of the Revenue.
Being aggrieved, the assessee preferred the present appeal.
Conclusion-
Held that assessee had purchased the twin residential units in the year 2014 (supra) itself whereas the clinching amendment to section 54F(1) is applicable with prospective effect from 1.4.2015 only. Case law CIT vs. Smt. K.G. Rukmaniamma 331 ITR 291 (Kar.), CIT vs. Geeta Dugal 357 ITR 153 (Delhi), CIT vs. V.R. Karbagam 373 ITR 122 (Mad.) and CIT vs. Gumanmal Jain 394 ITR 666 (Mad.) have already rejected the Revenue’s identical stand thereby holding that “a residential house” for the purpose of section 54F(1) deduction can indeed cover multiple units in same or different towers or residential blocks; as the case may be.
Concluded that learned PCIT has erred in treating the assessee’s reinvestment of capital gains in purchase of these two flats as wrongly allowed u/s 54F in the Assessing Officer’s regular assessment.
FULL TEXT OF THE ORDER OF ITAT PUNE
This assessee’s appeal for assessment year 2015-16 arises against the Pr.CIT (Central), Pune’s order dated 31.03.2021 passed in case no. ITBA/REV/F/REV5/2020-21/1032111768(1) involving proceedings u/s 263 of the Income Tax Act, 1961; in short “the Act”.
Heard both the parties. Case file perused.
2. The assessee’s instant appeal challenges correctness of learned PCIT’s section 263 revision directions issued to the Assessing Officer that his corresponding section 143(3) regular assessment dated 14.12.2017 framed an erroneous one so far as it causes prejudice to interest of the Revenue in accepting the former’s section 54F deduction claim.
A few relevant facts may be noticed.
We note from the assessee’s detailed paper books running into 232 pages that the he had derived his corresponding long term capital gains from sale/transfer of equity shares held in M/s. Emcure Pharmaceuticals Pvt. Ltd. and UTH Beverage Factory Pvt. Ltd.; as the case may be. His total long term capital gains came to be Rs.10,86,37,509/-. There is further no issue that this assessee inter alia purchased flat nos.3123 and 3124 in residential project “Clover Palisades” on 23rd June and 23rd July, 2014 from M/s Raj K. Bhansali (HUF) for Rs.2.60 crores and Rs.2.40 crores; followed by stamp duty and registration charges of Rs.15,90,100/- and Rs.14,70,100/-; respectively, coming to Rs.2,75,90,100/- and Rs.25,47,100/-, aggregating to Rs.53,06,200/-. He also claimed cost of alteration/modification of Rs.1,91,37,784/- and investment in capital gains account scheme of Rs.1 crore; respectively. He therefore raised an aggregate section 54F deduction claim amounting to Rs.8,21,97,984/-. Suffice to say, the Assessing Officer accepted disallow the same in his section 143(3) regular assessment dated 14.12.2017 thereby not making any addition in returned income amounting to Rs.7,76,60,770/-.
3. The PCIT thereafter sought to invoke its 263 revision jurisdiction on the ground that the above stated regular assessment was an erroneous one causing prejudice interest of the Revenue. He issued his show cause dated 11.03.2021 to the assessee as follows :-
“NOTICE FOR THE HEARING
M/s/Mr/Ms
Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961 – Assessment Year 2015-16.
In this regard, a hearing in the matter is fixed on 18/03/2021 at 03:30 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in
Sub:- Show cause notice u/s 263 of the I T Act 1961 in the case of Shri Arunkumar Purushotamlal Khanna, for A.Y. 2015-16 – Reg.
***********************
Kindly refer to the above.
In the above mentioned case, on verification of case records for A.Y. 2015-16 it has been observed that the assessment order passed u/s 143(3) of the Income Tax Act 1961 dtd. 14.12.2017 is erroneous and prejudicial to the interest of the revenue.
Brief facts of the case are as under : –
The assessee is a share holder and Director of Emcure pharmaceuticals Pvt ltd. During the AY 2015-16, the assessee has sold his shares of Emcure Pharmaceuticals Pvt Ltd and UTH beverage factory Pvt. Ltd. The assessee has made a claims of deduction under section 54F of the Income Tax Act during the year of Rs 7,81,35,690/-and Rs 50,00,000/- under section 54 EC as against the net consideration received from the sale of shares. The total net consideration received out of sale shares is Rs 11,42,85,600/-. These claims were made in the return of income filed during the said year on 31/08/2015.
The case was subsequently selected in scrutiny via CASS for AY 2015-16 under Limited Scrutiny Category. The reason for selection of case in Scrutiny was to examine deductions claimed by assessee under the head capital gains. The AO has subsequently examined the claim of assessee during scrutiny proceedings on the issue of capital gains deduction under section 54EC and Section 54F of the act and has allowed the claim of the assessee. The assessment order under 143(3) of the income tax act 1961 was passed on 14/12/2017 allowing the claim of deduction under capital gains.
During the assessment proceedings the assessee gave a detailed explanation of the claim made by him of Rs 8,31,35,690/-. The claims have been made under section 54EC and Section 54F of the Act. The assessee has purchased NHAI bonds of Rs 50,00,000/- on 31/01/2015 and claimed deduction section 54EC of the Act. Further, the assessee has made a claim of Rs 7,81,35,690/- under section 54F of the act. This claim has been made by the assessee in respect of purchase of two houses by the assessee. The breakup of the claim made by the assessee under section 54F is as under:
Calculation of Exemption u/s 54F
Cost of New House Purchased
