2017 (3) TMI 1247 - HC - Income Tax

Admission of Additional evidence by the ITAT- exemption u/s 54F - an opportunity to the Appellant to rebut the detrimental conclusions - Held that - In this case the appellant produced the additional evidence and admittedly after making submissions in support of it being allowed to be produced, also made submissions on merits. The petitioner/appellant did not call upon the Tribunal to pass an on order on his application to produce additional evidence contained in the AEPB before making his submissions on merits and therefore proceeded upon the understanding that the application has been allowed. The Tribunal has taken into consideration the submissions of counsel for the appellants based on the documents forming part of AEPB. There is no doubt in our mind that the Tribunal had permitted the appellants to make submissions on the basis of these documents. If that were not to be case, there may have been something to be said in favour of the appellants, however, in the present case the appellants were aware that the attention of the Tribunal had been invited to the documents in question and the Tribunal had in fact considered contents of the documents on merits and as to how it would affect the appellants case. Having done so, in our view no injustice has been caused to the appellants. Had the Tribunal declined to consider the documents in our view it would have been appropriate that some reasons will have to be given by them for depriving the parties the benefit of the submissions to be made on the basis of such additional documents. This, in our view is necessary since the rules itself provide for the right to seek reliance upon additional documents. We have no doubt that in the present case the Tribunal did not commit any error in the facts and circumstances of the present case in not having passed the order on the application for leading additional evidence contained in AEPB before proceeding to pass the order on merits of the controversy in the appeal. - Decided in favour of revenue Applicability of Section 54F(1) juxtaposed with Section 54F(4) - non-completion of construction of the building in which the appellant assessee had agreed to purchase flats - contiguity of three flats which the appellant assessee had agreed to purchase - Held that - We have already observed that we are not required to go into this aspect in order to answer the question, since on first principles, we find that the assessee had not complied with Section 54F. In our view it is not necessary to consider this aspect of challenge and hence reference to said decision is of no avail to the assessee. The other cases enlisted by us in this judgment have no bearing on the facts of the case of the Appellant herein. In the course of the submissions in support of the Appellants case over exemption under section 54F Mr. Shah has strenuously argued and tried to draw a parallel between the provisions of Section 24(2) of the 1922 Act and Section 72 contending they are in pari materia. Likewise Sections 22 and 22(2A) were in pari materia with Sections 139 and 80 respectively of the 1961 Act. However, in our view this does not come to assistance of Mr. Shah inasmuch as the language of Section 54 will not admit of such an interpretation. We have already taken a view that the consequences of the amount of capital gains or difference between amount spent for purchase of house and the total amount of capital gains not being deposited in the specified account in the case of Humayun Suleman Merchant (2016 (9) TMI 70 - BOMBAY HIGH COURT). We find no reason to take a different view in the facts and circumstances of the present case. - Decided in favour of revenue Tribunal infringed the principles of natural justice in not providing an opportunity to rebut the conclusion of the Tribunal based on circular no.495 - Held that - It becomes evident that the appellant had argued his appeal entirely. Therefore we believe that if the appeal had been decided in favour of the appellant the appellant, he probably may not have considered the procedure followed by the Tribunal as ad-hocism. The Revenue could have possibly objected to the course followed by the Tribunal. In the circumstances we do not find that the Tribunal infringed upon the principles of natural justice in not providing an opportunity to the Appellants to rebut the conclusions described as detrimental. In any event this Court is not in a position to verify whether in fact the contents of the circular were put to the assessee or whether the assessee had dealt with the submissions before the Tribunal. These are matters within knowledge of the Tribunal and if a diligent assessee would have approached the Tribunal for rectification, if he felt there was justification.However, that not having been done, we do not find that the Tribunal can be faulted in present set of facts - Decided in favour of revenue

Summary

Issues Involved:
1. Application for admission of additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963.
2. Denial of exemption under Section 54F of the Income Tax Act, 1961.
3. Alleged infringement of principles of natural justice by the Tribunal.

Detailed Analysis:

The First Question: Application for Admission of Additional Evidence

1. The appellant filed an appeal against the Assessment Order dated 26th December 2008, which was upheld by the Commissioner of Income Tax (Appeals) on 7th July 2011. During the appeal before the Tribunal, the appellant submitted an application on 9th July 2012 for the admission of additional evidence.

2. The appellant argued that the additional evidence, which included various certificates, letters, and a sketch plan, was fundamental to meet the ends of justice. The Tribunal, however, did not pass a separate order on the application to admit additional evidence but used the documents to decide against the appellant.

3. The appellant contended that the Tribunal should have first passed an order on the application, either allowing or rejecting it with reasons. The Tribunal's failure to do so was argued to be a serious error causing grave prejudice.

4. The Tribunal's approach was challenged, with the appellant relying on the provisions of Rules 18 and 29 of the ITAT Rules, which outline the procedure for submitting and admitting additional evidence.

5. The Tribunal's reliance on the additional documents without a formal order was argued to be perverse and procedurally incorrect. However, the court found that the Tribunal did not commit any error as the appellant was allowed to make submissions based on the additional documents, and no injustice was caused.

6. The court answered the first question in the negative, favoring the Revenue and against the appellant.

The Second Question: Denial of Exemption under Section 54F

1. The appellant argued that he had invested a significant amount towards the construction of new flats before the due date for filing the return under Section 139(4) of the Act and should be entitled to the exemption under Section 54F.

2. The appellant contended that Section 54F(4) should be read as a proviso to Section 54F(1), allowing the benefit of exemption if the investment was made before the due date for filing the return under Section 139(1).

3. The appellant relied on various judgments to support his argument that the word "shall" in Section 54F(4) is directory and not mandatory, and that the interpretation should be beneficial to the assessee.

4. The court, however, found that the appellant did not comply with the mandatory conditions of Section 54F, particularly the requirement to deposit the unutilized amount in a specified account before the due date under Section 139(1).

5. The court referred to the judgment in Humayun Suleman Merchant, which held that the consequences of not depositing the amount in the specified account are clear and cannot be ignored.

6. The court answered the second question in the affirmative, favoring the Revenue and against the appellant.

The Third Question: Alleged Infringement of Principles of Natural Justice

1. The appellant argued that the Tribunal infringed the principles of natural justice by not providing an opportunity to rebut the conclusions based on Circular No.495 dated 22nd September 1987.

2. The court found that the Tribunal referred to the circular only to clarify the requirement of depositing the amount before the due date under Section 139(1). Since the appellant did not comply with this requirement, the question of being affected by the circular did not arise.

3. The court noted that the appellant had argued the appeal entirely and had the opportunity to address the additional documents during the hearing. The procedure followed by the Tribunal did not cause any injustice to the appellant.

4. The court answered the third question in the negative, favoring the Revenue and against the appellant.

Conclusion:
The appeal was disposed of with no order as to costs, and all questions were answered in favor of the Revenue and against the appellant.