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TMI Blog2013 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ested an amount of ₹ 50 lakhs out of the advance money received on the basis of the agreement to sale, therefore, following the spirit of the CBDT Circular No.359 dated 10-05-1983 in the context of section 54E - Following decision of Bhikulal Chandak HUF Vs. ITO [2009 (6) TMI 605 - ITAT NAGPUR] - Decided in favour of assessee. Deduction u/s.54 - No approval for building plan and no structural design of the property - Held that:- although the construction was unauthorised, however the same has been regularized in the amnesty scheme and the investment towards construction of the property has been made before the due date of filing of the return u/s.139(4) and that he is in a position to produce the architect and also furnish the details towards the construction of the property. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his case by producing the architect before him for his examination. The Assessing Officer also shall give an opportunity to the assessee to produce the various details w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri S K Singh ORDER:- PER : R. K. Panda These are cross appeals, the first one filed by the assessee and the second one filed by the Revenue and are directed against the order dated 21-10-2011 of the CIT(A)-II, Pune relating to Assessment year 2008-09. For the sake of convenience these were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee is an individual and filed return of income on 31-03-2009 declaring total income of ₹ 8,31,07,890/-. During the course of assessment proceedings the Assessing Officer noted that the assessee has sold the property at Mukund Nagar on 05-04-2007 for a total consideration of ₹ 16 crores. After claiming indexed cost of acquisition at ₹ 4,88,09,205/- the assessee has offered an amount of ₹ 11,11,90,795/- as Long Term Capital Gain. Further, the assessee has claimed exemption u/s.54F amounting to ₹ 1,84,07,799/- by investing the same in the construction of new residential property. The assessee has further claimed exemption of ₹ 50 lakhs u/s.54EC by investing the same in Rural Electrification Corporation Ltd. on 02-02-2007. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted further bills amounting to ₹ 38,57,443/-. Thus the total of the bills produced before the Assessing Officer was ₹ 2,29,22,667/-. The Assessing Officer noted that all the bills are raised in the name of M/s. The Southern Machine Industries . Even the assessee has also submitted the ledger extracts of the respective parties as appearing in the books of M/s. The Southern Machine Industries. He noted that the said firm is a partnership firm wherein the assessee and his wife are partners. The firm is running business of manufacturing mechanical equipments from the factory shed which has composite structure along with the so-called residential property. He noted that the bills produced for ₹ 2.29 Crores include the total payments for labour charges at ₹ 85,01,375/- which are paid in cash on various dates. The vouchers are self made vouchers drawn by M/s. The Southern Machine Industries. The percentage of such labour charges to the total bills works out to 37%. Since the amount was incurred in cash the Assessing Officer was of the opinion that the genuineness of the same cannot be verified. Further, the construction cost includes bills for purchase of computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has claimed indexation w.e.f., 01-04-1981 though the property came into assessee s hands only during the year 2003-04. He, therefore, asked the assessee to explain as to why for indexation purpose the year of acquisition should not be taken as 2003-04. Rejecting the various explanations given by the assessee and relying on certain decisions the Assessing Officer held that the provisions of section 55(2)(b)(ii) are very clear and unambiguous. Referring to provisions of section 49(1), Explanation 1(b) to section 2(42A) and provisions of Explanation (iii) to section 48 the Assessing Officer took the indexation for the F.Y. 2003-04 as the basis and re-determined the cost of indexation at ₹ 69,39,000/-. After deducting the same from the sale proceeds of ₹ 16 crores the Assessing Officer determined the capital gain at ₹ 15,30,61,000/- as against ₹ 11,11,90,795/- offered by the assessee. Thus, he made addition of ₹ 4,18,70,205/- being the income from Long Term Capital Gain on account of sale of land. 4. Before the CIT(A) the assessee made elaborate arguments and filed detailed submissions. The assessee also relied on various case decisions. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the land at ₹ 40,91,400/- as against ₹ 71,18,920/- by the assessee on the basis of the valuation given by the Registrar of Stamp duty the Ld. CIT(A) allowed the claim of the assessee on the ground that the assessee has adopted the valuation as on 01-04-1981 on the basis of valuation report obtained from Government approved valuer. According to him, the valuation by the Stamp authority is based on the circle rates which are uniform for the entire locality and which does not consider the peculiar features of a particular property. According to him, even on a particular area on account of locational factors and possibilities of its use there can be wide variation in the price of the property. The circle rates or the ready reckoner rates adopted for Stamp duty purpose disregards all these factors and a uniform rate has been taken into consideration for all the properties in that particular area. Relying on the decision of the Delhi Bench of the Tribunal in the case of Ravikant Vs. ITO reported in 110 TTJ 297 and various other decisions the Ld. CIT(A) held that the addition made by the Assessing Officer on the basis of Stamp duty valuation is not correct and deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 01.04.1981 of ₹ 71.18.920/- merely by referring to and relying on a case law given in context of Sec 50C of the Income-tax Act, 1961. 4. The learned Commissioner of Income-tax (Appeals) grossly erred in negating the stand taken by the Assessing Officer in adopting the Cost Inflation Index for the Financial Year 1993-94 as against the year 1981-82 applied by the assessee. 5. The learned Commissioner of Income-tax (Appeals) grossly erred in holding that for the purpose of determining the indexed cost of acquisition in respect of an asset acquired under a gift or will, the cost inflation index has to be worked out by taking the date of acquisition by the previous owner. 6. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that as per clause (iii) of the Explanation to section 48, the Cost Inflation Index to be taken on the denominator has to be necessarily the index for the first year in which the asset was held by the assessee and not by any previous owner. 7. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that under the scheme of the Act, the benefit of indexation can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of the asset, the amount so invested will qualify for exemption u/s.54E. Although in the instant case the issue is u/s.54EC, however, we find the language in the above section is similar to that of section 54. Therefore, we find force in the arguments of the Ld. Counsel for the assessee that earnest money or advance money is a part of sale consideration. 8.2 We find the Nagpur Bench of the Tribunal in the case of Bhikulal Chandak (HUF) Vs. ITO 126 TTJ 545 has held that assessee cannot be treated as defaulter in making investment in bonds as required u/s.54EC on receipt of advance as per the agreement to sell property and claiming exemption u/s.54EC. So far as the decision of the Hon ble Bombay High Court in the case of Hindustan Unilever Ltd. (Supra) relied on by the Ld. CIT(A) is concerned we find the same is distinguishable and not applicable to the facts of the present case. The Hon ble Court in the said case has held that for the purpose of claiming deduction under the provisions of section 54EC, the date of investment by the assessee must be recorded as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not produced the architect. 9.1 It is the argument of the Ld. Counsel for the assessee that although the construction was unauthorised, however, the assessee subsequently availed of the amnesty scheme. Referring to page 8 of the Paper Book No.2 the Ld. Counsel for the assessee drew the attention of the Bench to the detailed submissions given before the Assessing Officer. Referring to Page 57 of Paper Book No.1 the Ld. Counsel for the assessee drew the attention of the Bench to the property tax assessment notice to the assessee which is dated 05-02-2009. Similarly, he also drew the attention of the Bench to the Municipal tax receipt dated 20-02-2009 and Municipal tax receipt dated 25-03-2010 placed at Paper Book Page No. 54 and 51 respectively. 9.2 Referring to the decision of Hon ble Punjab Haryana High Court in the case of Ms. Jagrit Aggarwal reported in 339 ITR 610 the Ld. Counsel for the assessee submitted that the assessee can claim exemption on account of capital gain either by purchasing a residential property or deposit in specified account before the due date of furnishing the return of income and such date for furnishing the return can be the date u/s.139(4). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was unauthorised, however the same has been regularized in the amnesty scheme and the investment towards construction of the property has been made before the due date of filing of the return u/s.139(4) and that he is in a position to produce the architect and also furnish the details towards the construction of the property. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his case by producing the architect before him for his examination. The Assessing Officer also shall give an opportunity to the assessee to produce the various details which according to him is relevant for deciding the issue. While doing so, the Assessing Officer shall also keep in mind the decision of the Hon ble Punjab Haryana High Court in the case of Ms. Jagrit Aggarwal (Supra) and the decision of Hon ble Bombay High Court in the case of Dr. P.S. Pasricha. This ground by the assessee is accordingly allowed for statistical purposes. ITA No.152/PN/2012 (By Revenue) : 10. Grounds of appeal No. 1 to 3 by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Stamp duty would not Ipso facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence and that the Assessing Officer is obliged to bring on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty was upheld by the Hon ble High Court. 10.2 From the copy of the valuation done by the District Registrar Stamp Collector we find he has adopted the value of land at ₹ 1200/- per square meter as on 01-04-1981 taking the valuation rate of ₹ 3,000/- per square meter during 1989. The Registered valuer on the other hand has considered the sale instance in 1985 at ₹ 2,721.23 per square meter and considered the rate of ₹ 2,276.69 per square meter. The sale instance of 1985 is more closer to valuation in 1981 as against the sale instance of 1989. 10.3 We further find the Ld.CIT(A) while allowing the claim of the assessee has held as under : 6.2 I have considered the submissions of the appellant and the material available on the record. The valuation adopted by the appellant as on 01-04-1981 is on the basis of valuation rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's blind reliance on circle rates is unjustified. The: DVO has simply adopted the average circle rate of residential and commercial area, on the ground that interior area of the locality, where the assessee's property is situated, is mixed developed area i.e. shops and offices on the ground floor and residence on the upper floors. When DVO's valuation required to compare the same with the valuation by the stamp valuation authority, it is futile to base such a report on the circle report itself. Such an approach will render exercise under s. 50C(2) a meaningless ritual and an empty formality. In our considered view, in such a case, the DVO's report should be based on consideration stated in the registration documents for comparable transactions, as also factors such as inputs from other sources about the market rates. The A.O. has dismissed the valuation report submitted by the appellant during the assessment proceedings, The clarification given by the Architect for the valuation and in support of his claim regarding fair market value as on 01.04.1981, has also not been considered at all by the A.O. The valuation has been based on sale instance of the nearby a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thed to him as per his father s will in the year 2003-04. The assessee valued the property by claiming indexation w.e.f. 01-04-1981. However, according to the Assessing Officer since the property came into assessee s hands during 2003-04, therefore, for the purpose of indexation the year of acquisition should be taken as 2003-04. Rejecting the various explanations given by the assessee and rejecting the various decisions cited before him the Assessing Officer adopted the year 2003-04 for the purpose of indexation. In appeal the Ld. CIT(A) following the decision of the Special Bench of the Tribunal in the case of DCIT Vs. Manjula J. Shah reported in 318 ITR 417 held that the cost inflation index and the indexed cost of acquisition has to be worked out by taking the date of acquisition by the previous owner in respect of the property received by the assessee from his father by way of a will. 11.2 As per the provisions of section 49(i)(ii) where the capital asset became the property of the assessee under a gift or will the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any impro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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