Where assessee sold his agricultural land and deposited part of consideration with a builder for purchase of a plot on which no construction activity could be started within a period of 3 years because no plot was ever handed over to him, benefit of section 54F was not available to assessee – The main thrust of the section 54F is construction of a residential house; the Legislation in its wisdom has specifically provided the period of three years, it cannot be enlarged to indefinite period.
IN THE ITAT INDORE BENCH
Pankaj Wadhwani
V/s.
Commissioner of Income-tax-I, Indore
IT APPEAL NO. 58 (IND.) OF 2011
[ASSESSMENT YEAR 2006-07]
JANUARY 25, 2012
ORDER
Joginder Singh, Judicial Member – By way of this appeal, the assessee seeks to challenge the order of the learned CIT-I, Indore, dated 17.3.2011 on the ground that the learned CIT was not justified in holding that the order passed by the AO u/s 147/143(3) of the Act was erroneous and prejudicial to the interest of the revenue.
2. During hearing, we have heard Smt. Richa Parwal, learned counsel for the assessee and Shri Keshave Saxena, learned CIT DR. The crux of arguments on behalf of the assessee is that the ld. CIT passed order u/s 263 by holding that the deduction u/s 54F was wrongly allowed by the Assessing Officer. The original assessment was claimed to be framed u/s 147 r.w.s. 143(3) of the Act as the reason for reopening was the issue of capital gain. It was strongly contended that since the subject matter u/s 147 was capital gain and the ld. Assessing Officer extensively and exhaustively verified the calculation, that too with the help of supporting material and after due inquiry, therefore, the assessment order was claimed to be passed within the parameters of the law, that too, after due application of mind, therefore, invocation of revisional jurisdiction u/s 263 is against the provisions of the Act. Plea was also raised that the original order is neither erroneous nor prejudicial to the interest of the Revenue. It was also pointed out that failure to comply with the provisions of Section 54F would render its effect only after laps of three years and not at the stage of invoking revisional jurisdiction by the ld. CIT. A strong plea was raised that non-construction of the house was due to failure on the part of the coloniser to hand over the plot to the assessee.
3. On the other hand, the ld. CIT/DR strongly defended the invocation of revisional jurisdiction u/s 263 of the Act by the ld. CIT on the plea that till today, the house has not been constructed by the assessee and the prescribed limit of three years provided under the Act has already lapsed. It was strongly contended that the assessment order was very much prejudicial to the interest of the Revenue because it was framed without fulfilling the conditions provided u/s 54F of the Act for claiming exemption, therefore, the ld. CIT rightly invoked his revisional jurisdiction u/s 263 of the Act.
4. We have considered the rival submissions and perused the material available on file. The facts, in brief, are that the assessee declared income of Rs. 1,43,990/- in its return filed on 31.10.2006. It was noticed by the Assessing Officer, from the return of income, that the assessee sold an agricultural land for a sum of Rs. 5,40,000/- and claimed exemption u/s 54F from long term capital gain. As per the Assessing Officer, the long term capital gain which works out to Rs. 65,449/- should have been shown in the return of income instead of nil, therefore, he issued notice u/s 148 on 4.1.2008 to the assessee. The assessee, in response to the notice, filed return on 22.2.2008 declaring total income at Rs. 2,03,100/-. It is pertinent to mention here that after reopening the case u/s 147 of the Act, the assessee worked out the long term capital gain at Rs. 59,118/- and offered the same in the revised return filed on 22.2.2008. As per the Assessing Officer, if scrutiny notice would not have been issued to the assessee, the amount of capital gain would have escaped taxation, therefore, he also ordered for initiation for penalty proceedings u/s 271(1)(c) of the Act. Admittedly, as contained in para 2 of the assessment order, the details filed by the assessee were duly examined by the Assessing Officer. The main grievance of the assessee is that while invoking the revisional jurisdiction u/s 263 of the Act by the ld. CIT, the time limit of three years for claiming exemption u/s 54F was available to the assessee, therefore, ld. CIT exceeded its jurisdiction. On questioning from the Bench whether the assessee has started construction even today, it was clarified that no construction has yet started as the plot has not been handed over to the assessee by the builder/coloniser. Before coming to any conclusion, we are reproducing hereunder the relevant provisions of Section 54F of the Act:
54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house—(1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
Provided that nothing contained in this sub-section shall apply where—
(a) the assessee,—
(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.
Explanation.—For the purposes of this section,-
