Date of Possession of Flat to be taken for Section 54F exemption

Shri Yogesh Jhingan Vs DCIT (Central) (ITAT Indore)

Since the addition in the instant appeal crops out of the issue referred above pertaining to A.Y. 2008-09, we will have to examine the correctness of the claim made by the assessee u/s 54F of the Act for A.Y. 2008-09. As far as sale of land is concerned it was sold vide deed executed on 28.12.2007, placed at pages 12 to 19 of the paper book. The stamp used for registering the sale documents are dated 28.12.2007. Both the parties have signed before registering authorities on 28.12.2007. For sale of this land an agreement was entered on 06.12.2007 and part payment of Rs.15,00,000/- was made. Since, the final payment was made on 28.12.2007 for all good reasons the date of sale of land is 28.12.2007.

Now for claiming deduction u/s 54F of the Act as made by the assessee in the revised return of income assessee is required to purchase the residential house within one year before the date of sale or two years after the date of sale or should have constructed residential house within three years from the date of sale. The assessee has claimed that it has purchased residential house within one year before the date of sale in the form of flat at Thane, Mumbai claimed to be purchased on 10.02.2007. The assessee has stated that the sale deed for purchase of residential flat is dated 12.12.2006 but the possession was given on 10.02.2007. This is the only point of difference between the revenue authorities and assessee. The revenue authorities have claimed that the flat was purchased on 12.12.2006 and assessee’s claim the date of purchased as 10.02.2007. From perusal of records we find that registered sale deed placed at pages 20 to 34 was executed on 12.12.2006 but on perusal of paper book pages 35 to 38 we find that the possession of the said flat was given to the assessee on 10.02.2007. The transfer of residential flat in favour of the assessee is completed only when the possession is given i.e. 10.02.2007. On adopting the date of purchase of flat on 10.02.2007 the assessee’s claim for section 54F of the Act would be valid as it is within one year.

We also find that the revenue authorities have adopted the date of sale of land on the basis of registered sale deed dated 28.12.2007 but have not considered the date of possession given by the assessee of the said land on 06.12.2007 but for the purchase of flat revenue authorities have adopted the date of purchase as the registered deed i.e. 12.12.2006 but not considered the date of possession of flat received by the assessee on 10.20.2007. If for sake of academic discussion the basis of possession of the immovable property is taken then also the assessee succeeds as the date of sale of land would be 06.12.2007 and purchase of flat would be 10.02.2007.

We, therefore, under the given facts and circumstances of the case, are of the considered view that the assessee has rightly claimed the deduction u/s 54F of the Act for purchase of residential flat on 10.02.2007 which is within one year from the date of sale of the land on 28.12.2007( when the total payment for sale of land was received) and since we have held the claim of section 54F of the Act for deduction against Long Term Capital Gain at Rs.22,99,270/- as valid, the impugned addition of not utilizing the deposit in Capital Gain Account Scheme will not stand for and therefore, the addition made by the Ld. Assessing Officer of Rs.22,99,270/- stands deleted.

FULL TEXT OF THE ORDER OF ITAT INDORE

The above captioned appeal filed at the instance of the assessee for Assessment Year 2010-11 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-3 (in short ‘Ld. CIT], Bhopal dated 21.02.2017 which is arising out of the order u/s 153C r.w.s. 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 27.01.2014, framed by DCIT-(Central), Bhopal.

The assessee has raised following grounds of appeal in IT(SS)ANo.100/Ind/2017:

1. That on the facts and circumstances of the case, the order of the ld. lower authorities is vitiated on several grounds, hence the same may kindly be quashed.

2. That the order passed is illegal, unlawful and opposed to the provision of law.

3. That the Ld. AO erred and was not justified in making and the Ld. CIT(A) in confirming the addition of Rs.22,99,270/- on account of capital gains on sale of agricultural land.

4. That the Ld. Assessing Officer erred and was not justified in disallowing ant the ld. CIT(A) in upholding the disallowance u/s 54F of the Act claimed by the appellant.

5. The appellant craves leave to add, amend, alter, substitute modify any of the above grounds on or before the final hearing.

2. The assessee has also made an application under Rule 11 of Appellate Tribunal Rules 1963 for allowing the appellant to take additional grounds in appeal stating that the additional grounds of appeal are raised for legal issue and raised in view of the judgment of Hon’ble Supreme Court in the case of NTPC v. CIT (1998) 229 ITR 383. Following additional grounds have been raised:

1. That the appellant prays leave of this Hon’ble Tribunal to urge the following additional grounds in its appeal:-

A.Whether the order passed by the Assessing Officer is contrary to the decision of the Jurisdictional Hon’ble Court in CIT vs. Mis Mechmen [2016] 380 ITR 591 (MP) in which the Hon’ble MP H.C has categorically held that u/s 153C the proper satisfaction has to be recorded by the Assessing officer of the searched person before assuming jurisdiction over the assessee & Failure to record satisfaction renders the assessment order null and void? B.Whether absence of satisfaction uls 153C in the hands of the searched person i.e. Sagar Group by the AO of the searched person renders the present assessment order passed uls 153C in the case of the appellant illegal, void and without jurisdiction ? 2.That the aforesaid grounds are purely legal grounds . Raising of such an alternative claim as additional grounds is permissible as held in the case of NTPC v. CIT (1998) 229 ITR 383 SC. Moreover ground no.2 of the appellants’ memo of appeal already raises the issue of assessment order being illegal, unlawful and opposed to the provisions of law. Thus these additional grounds are in a way extension of the aforesaid ground no.2.

3. That it is therefore prayed that the appellant be allowed to raise and argue these additional grounds alongwith ground no.2 since they go to the root of the matter and are essentially legal grounds.

3. From perusal of the above additional grounds we find that it is a legal issue which can be raised at any stage as held by Hon’ble Supreme Court in the case of NTPC vs. CIT (supra). Accordingly we admit additional grounds.

4. Brief facts as culled out from the records are that the assessee is a proprietor of M/s Vindhyachal Process Corp. and earning income from business, salary and other sources. A search operations were conducted u/s 132 of the Act at the business premises of Sagar Group located at 250, Sagar Plaza, M.P. Nagar, Zone-II, Bhopal which is commenced on 21.10.2011 and concluded on 22.10.2011. During the course of search various documents belonging to the assessee were found and seized as per Annexure LPS-3 pages 152 to 156 of the Panchnama dated 22.10.2011. After recording the reasons notice u/s 153C of the Act was served upon the assessee and in response thereto return of income for A.Y. 2010-11 filed on 07.10.2013, declaring income of Rs.27,36,540/-. Original return was filed on 15.10.2010 showing income of Rs.27,36,540/-. During the course of search assessment proceedings assessee was asked to furnish detail of investment out of Capital Gain Account Scheme deposit of Rs.23,00,000/- and also asked to show cause why deduction claimed by the assessee be not rejected as the conditions of section 54B of the Act are not fulfilled. Ld. Assessing Officer also observed that the assessee has sold agricultural land during F.Y. 2007­08 for a consideration of Rs.25,00,000/- and to avoid liability of long Term Capital Gain Tax made deposit in the Capital Gain Account Scheme at Rs.23,00,000/-. In reply assessee submitted that within one year before the date of sale of the land, the assessee had purchased a residential flat at Pune. Inadvertently due to wrong advice by the consultant, investment was made in the Capital Gain Account Scheme at the time of filing original return of income even though the assessee was eligible for deduction u/s 54F of the Act. It was also submitted that the return in compliance to notice u/s 153C of the Act should be treated as the final and correct return of income and the original return should not be considered for assessing the income. However, Ld. Assessing Officer was not satisfied and he was of the view that the actual date of sale of land is 28.12.2007 and not 06.12.2007 and the residential flat at Thane was purchased on 12.12.2006 and not on 10.02.2007 claimed by the assessee and therefore since flat was not purchased within one year of date of sale of land claim made u/s 54F of the Act at Rs.22,99,270/- cannot be allowed. Ld. Assessing Officer accordingly added back the deduction claimed in A.Y. 2008-09 for deposit in Capital Gain Account and assessed the income at Rs.50,35,810/- and also agricultural income at Rs.50,000/-.

5. Aggrieved assessee preferred an appeal before the ld. CIT(A) challenging the addition of Rs.22,99,270/- but failed to succeed as Ld. CIT(A) confirmed the view taken by the Ld. AO observing as follows(relevant extract):

During assessment proceedings for A.Y 2010-11, the ACIT (Central), Bhopal has made an addition of Rs. 22,99,270/- on account of unutilized Capital Gain. The claim of the assessee that he has made investment in flat no 1002, 10^th Floor, Building No. lA, Siddhachal Phase VIII Co Operative Housing Society, Thane, Mumbai was rejected. The assessee at the time of filing of original return was aware of the fact regarding purchase of flat at Mumbai but the assessee chose not to claim deduction U/S 54 on account of this. The assessing officer has given detailed reasoning as to why such a claim of deduction was not made by the assessee. It has been mentioned clearly in the order that the date of selling of land was 28.12.2007 and not 06.12.2007. The said fact was also admitted by the assessee during the course of assessment proceedings and is also evident from the computation of total income filed along with the return of income. As the assessee at the time of filing of return was fully aware about the purchase of flat in Mumbai then, why was the money received on sale of land deposited in Capital Gain Account Scheme and deduction u/s 54F was not claimed? The assessee’s plea that he was not aware of the provisions of the act and that is why he changed his mind to not utilize the sum deposited in Capital Gain Account Scheme and rather claim deduction U/S 54 F on account of purchase of flat is not at all convincing. No prudent man would do such an act and it is beyond comprehension. The assessee when he realized that the amount deposited in the Capital Gain Account Scheme has to be utilized either before one year or within two years after the sale of land and the time limit for utilization of the amount so deposited had expired, decided to claim deduction in respect of the residential house U/S 54F which is clearly an afterthought. The appellant assessee was fully aware and it was in his knowledge that the amount of Rs.22,99,270/- claimed as a deduction on account of deposits in Capital Gain Account Scheme and the time period for utilization for this deposit has expired on 29.12.2009, hence this after thought to claim deduction on account of residential house at Thane, Mumbai.

The A. a has given detailed reasoning and has examined the claim of the appellant assessee at length and in great detail At that time of filing of original return the assessee was fully aware of the purchase of flat by him at Thane, Mumbai.

In view of the above there was no need for him to deposit the money in Capital Gain Account Scheme. He should have straight away claimed deduction on account of purchase of flat. No reasons what so ever have been filed before the A.a or at the appellate stage that why the assessee showed no claim of the deduction on account of purchase of flat in Thane, Mumbai and deposited that money from sale of land in Capital Gain Account Scheme. Under what circumstance later on he changed his mind to claim deduction on account of purchase of flat.

Thus, it is abundantly clear that the appellant has deliberately tried to claim deduction on account of residential house once he realized that the time limit for utilization of the amount deposited in Capital Gain Account Scheme had expired. This is clearly an afterthought. When the appellant has been filing returns of income regularly and even if he was not aware of the provisions regarding capital Gains he had the where with all to seek the advice of an expert or professional.

I have considered the submissions of the learned ARs, the various decision cited and perused the assessment order. In view of the above, the finding of the A.a that Rs. 22,99,270/-is chargeable to tax in A.Y 2010-11 as unutilized amount in capital gain account scheme calls for no interference. The addition of Rs. 22,99,270/- for A.Y 2010- Il is confirmed.

The ground of appeal for A. Y 2010-11 is dismissed

6. Aggrieved assessee is in appeal before Tribunal raising a legal issue in the additional ground and also has challenged the quantum addition.

7. As regards the legal issue, Ld. Sr. Counsel for the assessee referred to the judgment of Hon’ble jurisdictional High court in the case of CIT vs. M/s Mechmen (2016) 380 ITR 591 (MP) stating that “no proper satisfaction was recorded by the Ld. AO of the searched person before assuming jurisdiction over the assessee, the assessment order framed in the case of assessee is null and void”.

8. As regards the quantum issue it was submitted that the sale of agricultural land was on 28.02.2007. However the possession was given on 06.12.2007 and the purchase of flat at Thane, Mumbai was executed on sale deed dated 12.12.2006 but possession was taken on 10.02.2007. It was contended that the sale of land was effected on 28.10.2007 and within one year i.e. 10.02.2007 possession of flat was received and thus the assessee is eligible for deduction u/s 54F of the Act at Rs.22,99,270/-. Reliance was placed on plethora of judgments placed in the paper book dated 16.09.2019.

9. Per contra ld. DR referring to the paper book dated 06.01.2020 and 28.09.2020 submitted that the ld. AO of the searched person and the assessee is the same and a proper satisfaction note was prepared in the case of searched person by observing that certain documents belonging to the Mr. Yogesh Jhingan and other family members were found during the course of search proceedings u/s 153C of the Act should be initiated. As regards the quantum issue Ld. CIT-DR submitted that the agricultural land was sold on 28.12.2007 and the flat was purchased on 12.12.2006 and the difference is more than one year and therefore the claim of assessee u/s 54F of the Act should not be entertained.

10. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by the Ld. Counsel for the assessee.

11. We will first take up the legal issue raised by the assessee in the additional ground challenging the validity of the assessment order on the ground that proper satisfaction has not been recorded by the Ld. Assessing Officer of the searched person and absence of satisfaction u/s 153C of the Act renders the assessment proceedings u/s 153C of the Act illegal void and without jurisdiction.

12. We find that the Revenue has filed the following copy of satisfaction note on 03.03.2020 prepared by the Ld. Assessing Officer of the searched person after examining the seized records of the M/s Sagar Group wherein search was conducted on 21.10.2011.

“Name: M/s. Vindhyachal Process Corporation

116, Malviya Nagar, Bhopal

PAN: ACUPJ6175D

Reasons for issue of notice u/s 153C of the Act, 1961

Search & seizure operations were carried out in the business/residential premises of M/s Sagar Group on 21.10.2011 and during the course of search, Following books of accounts/documents belonging to the assessee M/s Vindhyachal Process Corporation were also found and seized:-

1. Books of accounts/documents found and seized from the premises of 250, Sagar Plaza, M.P. Nagar, Zone-1, Bhopal

Thus, I am satisfied that books of accounts/documents seized abofe belonging to M/s Vindhyachal Process Corporation. Thus, I am satisfied that it is a fit case for initiation of proceeding u/s 153C of the Act 1961.

Sd/-
Asst. Commissioner of Income Tax –Central
Bhopal (M.P.)

13. From perusal of the above satisfaction note we find that a proper satisfaction note has been recorded by the ld. Assessing Officer of the searched person with regard to the seized documents pertaining to the assessee. It is also not in dispute that the Ld. Assessing Officer of the searched person and the assessee is same. Hon’ble Apex Court in the case of M/s Super Malls Pvt. Ltd. vs. Pr. CIT SLP(C) Nos. 8449-50/2017 dated 05.03.2020 has laid down a ratio that “in case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself”.

14. In light of the above ratio laid down by the Hon’ble Supreme Court in the case of M/s Super Malls Pvt. Ltd.(supra) and on examining the satisfaction note reproduced above we are of the considered view that a proper satisfaction note of the Ld. Assessing Officer has been prepared having jurisdiction over the searched person as well as the assessee for initiating the proceeding u/s 153C of the Act and therefore we find no merit in the additional legal ground raised by the assessee. We accordingly dismiss the same.

15. As regards the grounds raised on merits we find that the assessee sold agricultural land vide registered deed dated 28.12.2007 for a consideration of Rs.25,00,000/-. Possession of the said land was given on 06.12.2007. Indexed cost of acquisition of the land was Rs.2,00,730/-. Net Long Term Capital Gain was Rs.22,99,270/- from sale of said land. There is no dispute for the Long Term Capital Gain of Rs.22,99,270/-. Assessee deposited Rs. 23,00,000/- in Capital Gain Account Scheme on 29.09.2008 and claimed the deduction in the return of income filed for A.Y. 2008-09 on 30^th September 2008. Subsequently, when the assessee was issued a notice u/s 153C of the Act he again filed the return of income declaring same income as was shown in the original return of income. However, in the computation of total income attached with the return of income filed on 07.10.2013, the assessee made change in the deduction claimed against the Long Term Capital Gain of Rs.22,99,270/- by claiming deduction u/s 54F of the Act at Rs.22,99,270/- ( as against the deduction for deposit in Capital Gain Account Deposit Scheme of Rs.23,00,000/- made in the original return of income), for purchase of a residential flat at Thane, Mumbai on 10.02.2007.

16. Both the lower authorities were not satisfied with this claim and added the Long Term Capital Gain claimed as deduction for deposit in Capital Gain Account during A.Y. 2008-09, as income for A.Y. 2010-11 alleging that the amount deposited in Capital Gain Account Scheme has not been utilised for the purpose for which it was stated at the time of filing the original return of income.

17. We observe that the assessee filed the revised return in compliance to notice u/s 153C of the Act. Once a revised return is accepted by the department, the original return losses it existence. In the instant case since the Ld. Assessing Officer has accepted the revised return, there remain no reason to refer to the original return and the information mentioned therein. The assessment proceedings impugned before us are based on the revised return filed in compliance to notice u/s 153C of the Act.

18. Since the addition in the instant appeal crops out of the issue referred above pertaining to A.Y. 2008-09, we will have to examine the correctness of the claim made by the assessee u/s 54F of the Act for A.Y. 2008-09. As far as sale of land is concerned it was sold vide deed executed on 28.12.2007, placed at pages 12 to 19 of the paper book. The stamp used for registering the sale documents are dated 28.12.2007. Both the parties have signed before registering authorities on 28.12.2007. For sale of this land an agreement was entered on 06.12.2007 and part payment of Rs.15,00,000/- was made. Since, the final payment was made on 28.12.2007 for all good reasons the date of sale of land is 28.12.2007.

19. Now for claiming deduction u/s 54F of the Act as made by the assessee in the revised return of income assessee is required to purchase the residential house within one year before the date of sale or two years after the date of sale or should have constructed residential house within three years from the date of sale. The assessee has claimed that it has purchased residential house within one year before the date of sale in the form of flat at Thane, Mumbai claimed to be purchased on 10.02.2007. The assessee has stated that the sale deed for purchase of residential flat is dated 12.12.2006 but the possession was given on 10.02.2007. This is the only point of difference between the revenue authorities and assessee. The revenue authorities have claimed that the flat was purchased on 12.12.2006 and assessee’s claim the date of purchased as 10.02.2007. From perusal of records we find that registered sale deed placed at pages 20 to 34 was executed on 12.12.2006 but on perusal of paper book pages 35 to 38 we find that the possession of the said flat was given to the assessee on 10.02.2007. The transfer of residential flat in favour of the assessee is completed only when the possession is given i.e. 10.02.2007. On adopting the date of purchase of flat on 10.02.2007 the assessee’s claim for section 54F of the Act would be valid as it is within one year.

20. We also find that the revenue authorities have adopted the date of sale of land on the basis of registered sale deed dated 28.12.2007 but have not considered the date of possession given by the assessee of the said land on 06.12.2007 but for the purchase of flat revenue authorities have adopted the date of purchase as the registered deed i.e. 12.12.2006 but not considered the date of possession of flat received by the assessee on 10.20.2007. If for sake of academic discussion the basis of possession of the immovable property is taken then also the assessee succeeds as the date of sale of land would be 06.12.2007 and purchase of flat would be 10.02.2007.

21. We, therefore, under the given facts and circumstances of the case, are of the considered view that the assessee has rightly claimed the deduction u/s 54F of the Act for purchase of residential flat on 10.02.2007 which is within one year from the date of sale of the land on 28.12.2007( when the total payment for sale of land was received) and since we have held the claim of section 54F of the Act for deduction against Long Term Capital Gain at Rs.22,99,270/- as valid, the impugned addition of not utilizing the deposit in Capital Gain Account Scheme will not stand for and therefore, the addition made by the Ld. Assessing Officer of Rs.22,99,270/- stands deleted. We thus set aside the finding of Ld. CIT(A) and allow the grounds no.3 & 4 raised on merit by the assessee. Other grounds are general in nature which needs no adjudication.

22. In the result, assessee’s appeal in IT(SS)ANo.100/INd/2017 is partly allowed.

The order pronounced as per Rule 34 of ITAT Rules, 1963 on 05.10.2021.