Case Law Details

Case Name : Nirmala Subramanian Vs CIT (A) (ITAT Mumbai)
Appeal Number : ITA No. 3746/Mum/2019
Date of Judgement/Order : 20/09/2022
Related Assessment Year : 2007-08

Nirmala Subramanian Vs CIT (A) (ITAT Mumbai)

The short question in this appeal is whether the assessee is entitled to deduction under Section 54 of the Act or not and what is the date of acquisition of new residential house for the purpose of deduction under Section 54 of the Act. Provision of Section 54 shows that whether any individual or a HUF invest, the capital gain arise on transfer of residential house within a period of 1 year before or two years after the date of transfer of the house property then the amount of capital gain invested in purchase of new house property, the capital gain was not chargeable to tax. Here the fact shows that the residential property was sold on 12th May, 2006 and agreement to purchase the new house property was registered on 16th March, 2005, whereas the possession of the new house property was granted to the assessee on 16th July, 2005. It is also admitted fact that the date of possession was not available before the learned Assessing Officer and therefore, he took the date of agreement to sale as the date of purchase of the property. Therefore, he denied the deduction under Section 54 of the Act. This fact was available before the learned CIT (A), however, he rejected the same stating that this is additional evidence filed by the assessee and same is not in conformity with the Rule 46A of the Income Tax Rules, 1962.

We find that Rule 46A, does not mandate compulsorily by making return application for admission of additional evidence. It is for the learned CIT (A) to record the reason if such additional evidences are admitted. Therefore, according to us, the learned CIT (A) rejected the claim of the assessee on flimsy ground. In view of this, we set aside the whole issue to the file of the learned Assessing Officer with a direction to the assessee to submit the evidence of possession letter of the new property, the learned Assessing Officer may examine the same and decide the issue whether the claim of the assessee is eligible for deduction under Section 54F of the Act or not. The learned Assessing Officer may grant an opportunity of hearing to the assessee. After hearing, the learned Assessing Officer may decide the issue on the merits of the case. Accordingly, the appeal of the assessee is allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

01. This appeal is filed by the assessee against the appellate order passed by learned Commissioner of Income-tax (Appeals)-26, Mumbai dated 26.06.2018 for A.Y. 2007-08. The assessee has raised following grounds of appeal:-

“1. In the facts and the circumstances of the case and in law, the learned CIT appeal erred in confirming disallowance of exemption claimed u/s 54 of the Income-tax Act, 1956 on account of Long Term Capital Gain of ₹15,52,100/- on sale of residential house property.”

02. The appeal of the assessee is filed late causing delay of 250 days. Assessee has submitted an application of condonation of delay in the form of affidavit of accountant as well as of assessee. According to the affidavit of accountant, it was stated that the accountant received the order of the learned CIT(A) on 23rd July, 2018, however, the appellate order got mixed up with other documents relating to finalization of accounts and further, the accountant was not keeping good health, due to this the appeal was not filed in time. Subsequently, when the Income Tax Officer asked about payment of the taxes in the third week of May, 2019, the assessee came to know that the appeal has not been filed. The order of the learned CIT (A) was served on 23rd July, 2018. However, the appeal was filed on 29 May 2019 causing the above delay.

03. The Learned Counsel of the assessee relied upon several judicial precedents, read out the affidavit of the accountant, and submitted that there is a sufficient cause for delay in filing of the appeal. He further referred to Page No. 7-12i of the paper book, wherein it was shown that Mr. S.B. Subramaniyam, husband of the assessee was suffering from cancer and ultimately, passed away on 12th February, 2019. He also stated that he was suffering from the above disease for a quite long time due to this also; the assessee was busy in her treatment and therefore, could not attend to the order of the learned CIT (A). He therefore submitted that there is a sufficient cause for delay in filing of the appeal and that delay deserves to be condoned.

04. The learned Departmental Representative opposed the application of condonation of delay.

05. We have carefully considered the application for condonation of delay. The fact shows that the order of the learned CIT(A) was received by assessee on 23rd July, 2018, against which the appeal is filed before us on 29th May, 2019. This appeal should have been filed on or before 23rd Sep, 2018. The delay was on account of first & inadvertent ignorance on the part of the accountant of the assessee. The accountant of the assessee is 63 year old and also sick personal. However, the major reason for the delay is the ill health of the husband of the assessee who was suffering from cancer since July, 2018, which resulted into his unfortunate death on 11th February, 2019. The assessee has also stated on an affidavit that due to death of her husband she was mentally devastated to look into any of her affairs. As soon as call was received from the learned AO about non-payment of tax, assessee got an alert and filed the appeal. On the above facts and circumstances, we find that delay caused in filing of the appeal is because of sufficient reasons. Even otherwise, if the technicalities and merits are pitted with each other the issue deserves to be looked on merit. Accordingly, we condone the impugned delay and admit the appeal of the assessee.

06. Coming to the facts of the case, we find that assessee is an old lady (date of birth 16th March 1944) earning a meager salary and rental income. She is also partner in a partnership firm from where she is earning a meager interest on capital. She has also dividend income and interest income on FDRS, etc She filed her return of income on 28th March, 2008, declaring total income ₹3,01,130/-. The return was processed under Section 143(1) of the Act.

07. Subsequently, information was received from the ITO-16 (1) (2). As per letter dated 19th September, 2013 that assessee has sold an immovable property on 12th May, 2006 for consideration of ₹32,00,000/- and market value of such property on the basis of the stamp duty valuation is ₹ 37.10 lacs. The learned AO noted that assessee has not offered any income or loss from the capital gains of such sale of property. Therefore, notice under section 148 was issued on 04th Nov, 2013. The assessee reiterated her return of income originally filed as per letter dated 11th Feb, 2015.

08. During the assessment proceedings, the facts were made clear that assessee has sold a property on 12th May, 2006, for a total consideration of ₹32 lacs, however, the market value of the above property is ₹37.10 lacs. In her return of income on sale of the above property long term capital gain of ₹15,52,100/- was offered by considering the deemed consideration of ₹37,10,000/-. However, the above long term capital gain was claimed as an exempt under Section 54 of the Act for the reason that assessee has purchased a new residential house property at Flat no.B-1704, Neel Siddhi Towers, Plot no.195, Sector 12, Vashi, Navi Mumbai, by registering an agreement to sale on 16th March, 2005. The learned Assessing Officer stated that she has purchased a new house on 16th March, 2005 whereas sale of old residential house property was on 25 May 2006. The assessee is not entitled to deduction under Section 54 of the Act. The learned Assessing Officer further noted that assessee is also owner of another flat having 50% ownership at Navi Mumbai and therefore, he denied the deduction under Section 54 of the Act and computed the total income of the assessee at ₹18,36,910/- by an order dated 9th March, 2015 under Section 143(3) read with section 147 of the Act.

09. The assessee preferred the appeal before the learned CIT (A). During the course of hearing before him, assessee submitted that assessee has purchased new residential property for consideration of ₹29,81,000/- as per sale agreement dated 16th march, 2005 and paid a sum of ₹8,81,000/- as the building was under construction. Thereafter, on 16th July, 2005, the possession of the residential house property was obtained as per possession letter dated 16th July, 2005. Therefore, assessee is entitled to deduction under Section 54 of the Act. Assessee further relied upon several judicial precedents, wherein it has been held that when the sale deed is registered should be the date of acquisition of the property. The learned CIT (A) noted the above facts and rejected the claim of the assessee holding that the possession letter was not submitted before the learned Assessing Officer despite the opportunities available with the assessee. Further, assessee has submitted the additional evidence in the form of possession letter for which no application for admission has been made under Rule 46A of the Act.

Accordingly, he dismissed the appeal of the assessee.

010. Therefore, aggrieved with that order, assessee is in appeal before us on the solitary grounds.

011. The learned Authorized Representative vehemently referred to the documents placed at page no.13 to 79 of the Paper Book which is a purchase agreement of the new property. He submitted that for the purpose of section 54 of the Act purchase date of the property is required to be seen. He submitted that an agreement to sale was made by the assessee for property under construction. However, the possession was given later on and share certificate was also issued on 27th March, 2007. He further stated that as the possession of the property was granted later on, that date should be considered for the purpose of date of purchase of the property. He further referred to page no.8 of the agreement to show that the payment was to be made in installments during the construction period. He therefore, submitted that assessee is entitled to deduction under Section 54 of the Act. He submitted that the learned CIT (A) was also incorrect in stating that additional evidences submitted by the assessee are not admitted.

012. The learned Departmental Representative supported the orders of the lower authorities.

013. We have carefully considered the rival contention and perused the orders of the lower authorities. The short question in this appeal is whether the assessee is entitled to deduction under Section 54 of the Act or not and what is the date of acquisition of new residential house for the purpose of deduction under Section 54 of the Act. Provision of Section 54 shows that whether any individual or a HUF invest, the capital gain arise on transfer of residential house within a period of 1 year before or two years after the date of transfer of the house property then the amount of capital gain invested in purchase of new house property, the capital gain was not chargeable to tax. Here the fact shows that the residential property was sold on 12th May, 2006 and agreement to purchase the new house property was registered on 16th March, 2005, whereas the possession of the new house property was granted to the assessee on 16th July, 2005. It is also admitted fact that the date of possession was not available before the learned Assessing Officer and therefore, he took the date of agreement to sale as the date of purchase of the property. Therefore, he denied the deduction under Section 54 of the Act. This fact was available before the learned CIT (A), however, he rejected the same stating that this is additional evidence filed by the assessee and same is not in conformity with the Rule 46A of the Income Tax Rules, 1962. We find that Rule 46A, does not mandate compulsorily by making return application for admission of additional evidence. It is for the learned CIT (A) to record the reason if such additional evidences are admitted. Therefore, according to us, the learned CIT (A) rejected the claim of the assessee on flimsy ground. In view of this, we set aside the whole issue to the file of the learned Assessing Officer with a direction to the assessee to submit the evidence of possession letter of the new property, the learned Assessing Officer may examine the same and decide the issue whether the claim of the assessee is eligible for deduction under Section 54F of the Act or not. The learned Assessing Officer may grant an opportunity of hearing to the assessee. After hearing, the learned Assessing Officer may decide the issue on the merits of the case. Accordingly, the appeal of the assessee is allowed for statistical purposes.

014. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 20.09.2022.

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