MRS. ARUNA MALIK, GURGAON v. THE CIT(A)-XXII/ AO-XXII,

ITA 978/MUM/2008 | 2004-2005
Pronouncement Date: 25-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 97819914 RSA 2008
Assessee PAN AFHPM9237M
Bench Mumbai
Appeal Number ITA 978/MUM/2008
Duration Of Justice 2 year(s) 14 day(s)
Appellant MRS. ARUNA MALIK, GURGAON
Respondent THE CIT(A)-XXII/ AO-XXII,
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 25-02-2010
Date Of Final Hearing 13-10-2009
Next Hearing Date 13-10-2009
Assessment Year 2004-2005
Appeal Filed On 11-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI. BEFORE SHRI R.K. GUPTA J.M. AND SHRI J. SUDHAKAR REDDY A.M. I.T.A. NO. 97 8/MUM/2008 ASSESSMENT YEAR : 2004-05. MRS. ARUNA MALIK THE I NCOME-TAX OFFICER DSK LEGAL 46 ARADHANA VS. 22(2)(1) MUMBAI. CHANAKYAPURI NEW DELHI. PAN AFHPM9237M. APPELLANT RESPONDENT I.T.A. NO. 222 /MUM/2008 ASSESSMENT YEA R : 2004-05. THE INCOME-TAX OFFICER VS. MRS. ARUNA P. MALIK 22(2)(1) MUMBAI. NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY : SHRI SATISH MODY. DEPARTMENT BY : MS. MAHUA SARKAR. O R D E R PER J. SUDHAKAR REDDY A.M. ITA NO. 978/MUM/2008 IS FILED BY THE ASSESSEE AND IS ON THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAINS AS WELL AS GRANTING OF RELIEF U/S 54 OF THE ACT. 2. ITA NO. 222/MUM/2008 IS FILED BY THE REVENUE DI RECTED AGAINST THE ORDER OF THE CIT(APPEALS)-XXII MUMBAI DATED 26-11-2007 DISPUTING THE CANCELLATION OF PENALTY U/S 271(1)(C) . 3. WE FIRST TAKE UP THE QUANTUM APPEAL. 2 FACTS IN BRIEF: THE ASSESSEE IS AN INDIVIDUAL. SHE FILED HER RETU RN OF INCOME ON 01-11-2004 DECLARING INCOME UNDER THE HEAD INCO ME FROM OTHER SOURCES AMOUNTING TO RS.39 529/-. IN THIS RETURN O F INCOME SHE CLAIMED EXEMPTION FROM LONG TERM CAPITAL GAINS IN TERMS OF SECTION 54. THE ASSESSEE SOLD THE PROPERTIES INCLUDING THE ONE SITU ATED AT VILLAGE DEONAR KURLA TALUKA. THE ASSESSEE CLAIMS THAT SHE INVESTED THE AMOUNT FOR CONSTRUCTION OF A NEW RESIDENTIAL HOUSE AT PLOT NO. K 1483 PALAM VIHAR GURGAON HARYANA. THE CONCISE GROUNDS OF THE ASSESS EES APPEAL READ AS FOLLOWS : I. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO IN D ENYING THE BENEFIT OF DEDUCTION U/S. 54 OF THE ACT WITHOUT AP PRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ACCOUNT OPENED WITH HDFC BANK WAS SPECIFICALLY FOR THE PURPOSE OF DEPOSITING THE AMOUNT RECEIVED ON ACCOUNT OF SALE OF RESIDENTIAL P ROPERTY AND UTILIZATION THEREOF FOR THE PURPOSE OF CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE. 3. WITHOUT PREJUDICE TO ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) OUGHT TO HAVE ALL OWED THE BENEFIT U/S 54 TO THE EXTEND OF RS.74 97 000/- BEING THE AM OUNT PAID FOR THE PURCHASE OF LAND FOR THE CONSTRUCTION OF RESIDENTIA L HOUSE AND RS.3 30 450/- BEING CONSTRUCTION EXPENSES BEFORE F ILING OF THE RETURN OF INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) FAILED TO APPRECIATE THE FACT THAT CONSTRUCT ION WAS COMPLETED WITHIN THE PERIOD OF THREE YEARS AS CERTIFIED BY TH E ARCHITECT AND ONLY OCCUPATION CERTIFICATE WAS RECEIVED ON 19/01/2007. II. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE A.O. IN ACCEPTING THE VALUATION OF THE PROPERTY AS ON 1/4/81 @ RS.200/- P ER SQ.FT.MTR. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE SALE INSTANCE OF 1985 TO MISS PUSHPA THADANI WAS NOT AN ARMS LENGTH TRANSAC TION AND HENCE 3 THE SAME COULD NOT BE RELIED UPON FOR MAKING THE VA LUATION AS ON 1/4/81. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT WHIL E VALUING THE PROPERTY AS ON 1/4/81 THE APPELLANT HAD RELIED ON THE VALUATION REPORT OF THE REGISTERED VALUER WHO HAD VALUED THE SAID PROPERTY @ RS.1000/- SQ. MTRS. BY RELYING ON THE STAMP DUTY RE ADY RECKONER. III ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF A.O. IN TRE ATING THE SALE CONSIDERATION AT RS.4 35 78 000/- INSTEAD OF RS.4 3 2 50 000/- WHICH IS ACTUALLY RECEIVED. IV ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF A.O. IN TER MS OF U/S 234B AND 234C WITHOUT APPRECIATING THE FACT THAT IF AT ALL I NTEREST U/S 234C IS LEVIABLE IT WILL BE LEVIABLE ONLY FOR THE LAST QUAR TER AS THE SALE HAS TAKEN PLACE IN THE LAST QUARTER OF THE FINANCIAL YEARS. 4. WE HAVE HEARD MR. SATISH MODY LEARNED COUNSEL FOR THE ASSESSEE AND MS. MAHUA SARKAR LEARNED DR. 5. COMING TO GROUND NO. 1 IT IS A GENERAL GROUND AND IT WOULD BE ADJUDICATED WHILE CONSIDERING GROUND NO. 3. 6. COMING TO GROUND NO. 2 THE ASSESSEE HAD DEPOSI TED THE SALE PROCEEDS IN A BANK ACCOUNT OPENED WITH HDFC BANK. T HE LAW REQUIRES THAT THE ASSESSEE SHOULD DEPOSIT THE AMOUNT IN QUES TION IN A CAPITAL GAINS ACCOUNT WHICH IS NORMALLY OPEN IN A NATIONALISED BANK. THOUGH THE ASSESSEE HAS OPENED THE BANK ACCOUNT AND DEPOSITED THE MONEY AS IT IS NOT A CAPITAL GAINS ACCOUNT AS STIPULATED UNDER THE ACT BENEFIT OF SECTION 54F CANNOT BE GRANTED. THUS GROUND NO. 2 IS TO BE DISMISSED. 7. COMING TO GROUND NO.3 IT IS THE CASE OF THE AS SESSEE THAT THOUGH SHE HAS NOT DEPOSITED THE AMOUNT IN A CAPITA L GAINS ACCOUNT AS STIPULATED UNDER THE ACT SHE HAS INVESTED AN AMOUN T OF RS.74 97 000/- ON THE PURCHASE OF LAND FOR THE CONSTRUCTION OF A RES IDENTIAL HOUSE AND HAD 4 ALSO INCURRED EXPENDITURE OF AN AMOUNT OF RS.3 30 4 50/- PRIOR TO THE DATE OF FILING OF THE RETURN. IN OUR CONSIDERED OPINION IF THE ASSESSEE HAD UTILISED THE SAID AMOUNT PRIOR TO THE FILING OF THE RETURN OF INCOME FOR THE CONSTRUCTION OF THE HOUSE THE SAME SHALL NOT BE RE QUIRED TO BE DEPOSITED IN A CAPITAL GAINS ACCOUNT. THIS IS CLEAR FROM A PL AIN READING OF SUB- SECTION (2) OF SECTION 54. THUS RELIEF U/S 54 CANNO T BE DENIED TO THE ASSESSEE ON AN AMOUNT OF RS.74 97 000/- AND AN AMOU NT OF RS.3 30 450/- FOR THE REASON THAT THESE AMOUNTS WERE NOT DEPOSITE D IN A CAPITAL GAINS ACCOUNT AS SPECIFIED. THE ASSESSEE BY PURCHASING A LAND ON 9 TH JULY 2004 FOR THE PURPOSE OF CONSTRUCTING THE HOUSE HAS UTIL ISED THE AMOUNT FOR THE CONSTRUCTION OF A NEW ASSET BEFORE THE DATE OF FURN ISHING OF RETURN OF INCOME U/S 139. THUS WE DIRECT THE AO TO ALLOW THE BENEFIT U/S 54 ON THESE AMOUNTS SUBJECT TO OUR DECISION ON THE OTHER GROUNDS. 8. GROUND NO.4 IS ON THE ISSUE WHETHER THE ASSESSE E HAD COMPLETED THE CONSTRUCTION OF THE HOUSE WITHIN A PE RIOD OF 3 YEARS. THE AO CAME TO A CONCLUSION THAT THE CONSTRUCTION OF T HE HOUSE WAS NOT COMPLETED BASED ON OCCUPANCY CERTIFICATE ISSUED ON 19-04-2007 WHICH IS AT PAGE 46 OF THE PAPER BOOK. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITS THAT THE DATE OF COMPLETION OF THE BUILDING IS SEPARATE AND DIFFERENT FROM THE DATE OF OCCUPATION CERTIFICATE. HE POINTS OUT THAT THE ARCHITECT HAS CERTIFIED THE COMPLETION OF THE CONST RUCTION OF THE RESIDENCE ON 24-12-2006. BASED ON THIS CERTIFICATE AND ON AN APPLICATION MADE THE OCCUPANCY CERTIFICATE IS GIVEN. ON A PERUSAL OF THE PAPERS ON RECORD WE ARE OF THE CONSIDERED OPINION THAT IN THE APPLICATI ON MADE FOR GRANT OF OCCUPANCY CERTIFICATE THE ASSESSEE HAS CATEGORICAL LY STATED THAT THE BUILDING IS COMPLETED ON 10-12-2006. BASED ON THIS APPLICATION AN OCCUPANCY CERTIFICATE IS GIVEN ON 19-01-2007. NOWHE RE IN THE OCCUPANCY CERTIFICATE THE FACT OR CLAIM OF THE ASSESSEE THAT THE BUILDING HAS BEEN 5 COMPLETED ON 10-12-2006 HAS BEEN DISPUTED. ON THE O THER HAND THE ARCHITECT HAS CERTIFIED THAT THE BUILDING HAS BEEN COMPLETED ON 24-12- 2006. ON THIS FACTUAL MATRIX WE GIVE A FINDING OF FACT THAT THE CONSTRUCTION OF THE BUILDING WAS COMPLETED PRIOR TO 24-12-2006 AND AS THE ACT CONTEMPLATES COMPLETION OF CONSTRUCTION TH E ASSESSEE HAS NOT VIOLATED THE REQUIREMENTS OF SECTION 54. THUS WE DE CIDE GROUND NO. 4 IN FAVOUR OF THE ASSESSEE. 9. GROUND NOS. 5 6 AND 7 ARE ON THE ISSUE OF DETE RMINATION OF FAIR MARKET VALUE AS ON 01-04-1981. THE AO BASES HI S FINDING ON INSTANCE OF SALE OF AN ADJOURNING PROPERTY SOLD BY MRS. MALT I A. NOWROJI IN THE YEAR 1985 AT THE RATE OF RS.250/- PER SQ. MT. THE A SSESSEE CLAIMED THE VALUE OF THE PROPERTY AS ON 01-04-981 AT RS.1000/- PER SQ. MT. BASED ON VALUATION REPORT OF THE REGISTERED VALUER. THE CAS E OF THE ASSESSEE IS THAT THE MARKET RATE AT THE SUB REGISTRARS OFFICE WAS R S.1200/- PER SQ.FT. AND THAT AS THE ASSESSEES SITE WAS AT SOME DISTANCE FR OM THE MAIN ROAD IN VIEW OF ASSESSABILITY THE LAND RATE WAS TAKEN AT R S.1000/- PER SQ. MT. AS ON 01-04-1981 BY THE REGISTERED VALUER. IT WAS FURT HER SUBMITTED THAT THE SALE OF THE ADJOURNING LAND IN THE YEAR 1985 IS NOT A COMPARABLE INSTANCE FOR THE REASON THAT THAT PROPERTY WAS UNDER THE O CCUPATION OF A TENANT AND A PRIOR AGREEMENT OF SALE WAS ENTERED ON 05-08- 1985 WITH THE BROTHER OF THE SELLER MR. B.C. TANDANI. IT WAS SUBMITTED TH AT THE BROTHER PAID RS.3 LAKHS TO MS. MALTI . NOWRAJI THE SELLER AND AS SH E WAS NOT IN A POSITION TO PAY THAT AMOUNT CHOSE TO SELL THE PROPERTY ALONG WITH THE DEPRESSION FACTOR OF TENANCY. ON THE OTHER HAND IT WAS SUBMIT TED THAT THE REGISTERED VALUER HAS GONE ABOUT BY CONSIDERING THE MARKET VAL UES OF THE PROPERTIES AS PER THE STAMP DUTY READY RECKONER AND REDUCED TH E VALUE SLIGHTLY FROM THE POINT OF VIEW OF ACCESSABILITY OF THIS PLOT OF LAND. THE LEARNED 6 COUNSEL POINTS OUT THAT SUMMONS WERE ISSUED BY THE AO U/S 131 TO SHRI DHARMADHIKARI AND THE BASIS OF VALUATION WAS EXPLAI NED BY HIM. 10. THE LEARNED DR RELIES ON THE ORDER OF THE AO A S WELL AS THE CIT(APPEALS) AND ARGUES THAT THE INSTANCE OF SALE I S A COMPARABLE INSTANCE AND THE REPORT GIVEN BY MR. DHARMADHIKARI IS INCORRECT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AR E OF THE CONSIDERED OPINION THAT THE SALE INSTANCE OF A TENA NTED PROPERTY CANNOT BE TAKEN AS A COMPARATIVE FOR THE PURPOSE OF ARRIVING AT THE MARKET VALUE OF THE PROPERTY AS ON 01-04-1981. THE STATEMENT OF THE APPROVED VALUER THAT THE MARKET VALUE OF THE PROPERTY WAS DETERMINED BY HIM BASED ON THE STAMP DUTY READY RECKONER IS NOT FACTUALLY CONTRADI CTED BY THE AO. IN FACT WHEN IT COMES TO SALE RATE OF THE PROPERTY THE AO HAS INVOKED SECTION 50C AND ADOPTED THE VALUE ASSESSED BY THE AUTHORITY OF THE STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF TRANSFER. WHILE SO WE DO NOT SEE ANY REASON AS TO W HY THE VALUATION WHICH IS BASED ON THE MARKET VALUE DETERMINED BY THE SUB REGISTRAR FOR THE PURPOSE OF COLLECTION OF STAMP DUTY WITH SUITABLE ADJUSTMENTS SHOULD NOT BE TAKEN AS THE MARKET VALUE AS ON 01-04-1981 SPEC IFICALLY WHEN THE SALE INSTANCE IN QUESTION IS NOT COMPARABLE. THUS WE AGR EE WITH THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND ALLOW GROUND NOS. 5 6 AND 7. THE AO IS DIRECTED TO ADOPT THE FAIR MA RKET VALUE OF THE PROPERTY AS ON 01-04-1981 AT RS.1000/- PER SQ. MT. 12. GROUND NO. III IS ON THE ISSUE OF APPLICABILIT Y OF SECTION 50C. THIS IS DISMISSED AS NOT PRESSED AS THE LEARNE D COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE IS AGAINST THE ASSESSEE. 7 13. THE LAST GROUND IS ON THE COMPUTATION OF INTER EST U/S 234B AND 234C. WE HOLD THAT THE LEVY OF INTEREST IS CONS EQUENTIAL IN NATURE. AS THE ASSESSEE SUBMITS THAT THE CAPITAL GAINS AROSE I N THE LAST QUARTER OF THE FINANCIAL YEAR THE COMPUTATION OF INTEREST SHOULD ACCORDINGLY BE MADE WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR FR ESH ADJUDICATION. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART. 15. THIS BRINGS US TO ITA NO. 222/MUM/2008 ON THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C). THE PENALTY HAS BEEN LEVIED ON THE CLAIM OF SECTION 54F AS THE ASSESSEE HAD NOT DEPOSITED THE A MOUNT IN A CAPITAL GAINS ACCOUNT. THE SECOND ASPECT ON WHICH THE PENAL TY IS LEVIED IS ON THE GROUND THAT THE ASSESSEE HAS NOT COMPLETED THE CONS TRUCTION OF THE HOUSE WITHIN THE PERIOD OF 3 YEARS BUT AT THE SAME TIME W RONGLY CLAIMED DEDUCTION U/S 54F. 16. AFTER HEARING THE RIVAL CONTENTIONS WE FIND T HAT THE ASSESSEE DUE TO HER IGNORANCE HAS WRONGLY DEPOSITED THE SALE PROCEEDS IN A BANK ACCOUNT WHICH IS NOT A CAPITAL GAINS ACCOUNT. WE AG REE WITH THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT WAS DUE TO IGNORANCE THAT SUCH A MISTAKE IS OCCURRED. 17. COMING TO THE ISSUE OF COMPLETION OF CONSTRUCT ION IN THE QUANTUM APPEAL WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THUS ON THIS FACTUAL MATRIX WE UPHOLD THE FINDING OF THE CIT(APPEALS) AT PARA 2.3 PAGE 3 AND 4 OF HIS ORDER WHEREIN HE HELD AS FOLLOWS : I HAVE GONE THROUGH THE ORDER OF THE ASSESSING OF FICER AND THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE DECISIONS OF THE HONBLE COURTS IN THECASE OF CIT VS. VSK ADI CH ETTY SURAVEL CHETTY (2003) 127 TAXMAN 543 (MAD) CIT VS HARSHVAR DHAN CHEMICALS & MINERALS LTD. (2003) 259 ITR 21 CHANDR A PAL BAGGA 8 VS ITAT (2003) 128 TAXMAN 632 (RAJ) DEENA KAK VS I NCOME TAX OFFICER (2001) 70 TTJ (JODH) 375 CIT VS G M GUPTA (2003) SOT 230 (DELHI). IN THE ABOVE SAID CASES IT WAS SPECIF ICALLY HELD THAT NO PENALTY IS LEVIABLE WHERE THE ASSESSEE HAS DISCL OSED CAPITAL GAINS AND CLAIMED EXEMPTION INCORRECTLY BECAUSE OF IGNORANCE OF LAW EVEN IF THE CLAIM IS DISALLOWED BY THE ASSESSIN G OFFICER. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND DECISIONS CITED ABOVE IT IS CONCLUDED THAT THE PEN ALTY PROCEEDINGS ARE SEPARATE THAN THE ASSESSMENT PROCEEDINGS. SINCE IN THIS CASE THE APPELLANT HAS NOT FULFILLED THE CONDITIONS AS L AID DOWN U/S 54 FOR CLAIMING DEDUCTION BUT ON THE WHOLE WHERE THE DEDU CTION IS ALLOWABLE OR NOT IS A LEGAL ISSUE. THE APPELLANT HA S NOT CONCEALED PARTICULARS OF INCOME OR SUBMITTED ANY INACCURATE P ARTICULARS WHICH IS PRECONDITION FOR LEVYING PENALTY U/S 271(1 )(C) OF THE I.T. ACT 1961. MERELY BY TAKING THE PLEA THAT ADDITION MADE HAS BEEN CONFIRMED IN APPEAL IS NOT A GROUND FOR IMPOSING PE NALTY. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE PE NALTY LEVIED BY THE ASSESSING OFFICER OF R.55 84 436/- IS DELETED. 18. IN THE RESULT WE DISMISS THIS APPEAL OF THE R EVENUE. ORDER PRONOUNCED ON THIS 25 TH DAY OF FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 25 TH FEBRUARY 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR A-BENCH. (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITA T MUMBAI BENCHES MUMBAI.