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TMI Blog2016 (1) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains in accordance with law, after providing adequate opportunity to the assessee. Cost of improvement disallowed - Held that:- This has to be examined by the Assessing Officer with reference to the bills produced by the assessee and decide the issue in accordance with law. Thus, we restore the issues back to the file of the Assessing Officer to decide the same afresh in accordance with law. X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the bills were dated in January and February, 2004 which is after the date of bill issued by the contractor. Therefore Commissioner of Income Tax (Appeals) was of the view that the cost of improvement was an afterthought and bills were prepared subsequently, thus the claim for cost of improvement is rejected. 6. Counsel for the assessee submits that during the assessment year 2010-11, assessee had sold a piece of land at Church Road, Mogappair village, Ambattur Taluk, Thiruvallur Dist. for ₹ 1,13,82,850/-. He submits that the said land was purchased in August, 2003 for ₹ 12,99,452/- and its indexed cost comes to ₹ 17,73,766/-. Counsel submits that assessee has carried on extensive improvement on the land by way of filling up of low lying areas and has erected a solid iron gate of 7" in height besides constructing a compound wall running to 293 running feet. He further submits that the assessee also dug a well of 50 feet depth and constructed a shed. All these improvement cost ₹ 9,55,350/- during the year 2003-04 for which contractors certificate with bills were produced before the Income Tax Officer when the Commissioner of Income Tax (Appeals) remande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved on sale of land was not deposited in specified bank account, the assessee is not entitled to claim entire deduction under section 54F of the Act and only the amount paid upto the date of filing of return alone is eligible for deduction. Counsel submits that nondeposit of net consideration in specified bank is only a venial breach or technical fault and deduction under section 54F need not be denied on this score. He submits that section 54F being beneficial provision must receive liberal construction and purposive interpretation is to be derived on it, so that benefits intended can be conferred. Therefore, counsel submits that assessee has entered into a valid agreement with M/s. Ozone Projects Pvt. Ltd. on 13.04.2010 within one month after the date of sale of land on 22.03.2010, since the total amount payable in installment is ₹ 1,02,96,546/-, thus the sum is required to be taken into account while allowing the deduction under section 54F of the Act. He submits that by entering into agreement on 13.04.2010, within the specified period the assessee has paid / invested the amount as per the definition of the word "paid" given in section 43(2) of the Act. He further submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siting of sale proceeds into capital gains account is only a technical fault. While holding so, the Tribunal held as under:- "5. In relation to the merits, the learned AR relied on the decisions reported in 48lTD 191 (Mad) and 85 ITJ (Jodh) 173 and stated that 3 mere procedural infirmity by way of non investment in the capital gains account scheme should not come in the way-of the claim for exemption particularly when the· ultimate objective of providing for the exemption is satisfied. 6. The learned DR on the other hand vehemently argued. that the reopening was justified since there was a lack of disclosure on the part of the appellant of the capital gains and further since there was no original assessment but only a processing under section 143( l ) and therefore the question of a change of opinion does not arise. The learned DR on the merits contended that the non investment in the capital gains account scheme was fatal to the allowance of exemption u/s.54 and that a liberal view in the matter cannot be taken. 7. We have considered the rival submissions. In so far as the issue relating to the reopening of assessment is concerned we find that the. appellant has onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deposited in the housing division of its construction business for the purpose of building another residential building. The Tribunal held that this amounted to utilization of funds for the purpose of his own residential house and that since the amount was in fact utilized for construction of a residential house, the exemption was allowable. In this case the Tribunal observed that the purpose of section 54F requiring the deposit of unutilized fund is not for depriving the assessee the use of funds but only for avoiding the rectification of the assessment by bringing to tax the amount, which had been earlier claimed as exempt by reason of reinvestment. We find that the Board has in its circular no.495 dated 22nd September, 1987 at paragraphs 26.1. and 26.2 stated that this is the purpose of bringing in the amendments in sections 54, 54B, 54D and 54F requiring investment in a capital gains account scheme. 9. In the instant case, the appellant has apparently satisfied the ultimate objective of the section by investing in a residential house by way of construction within the time allowed u/s.54. What the appellant has failed to do is to make an investment in the capital gains ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "that there is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement, there is no such maxim known to the law." 10. The Mumbai Bench of the Tribunal in the case of Kishore H. Galaya Vs. ITO (supra) held as under:- "The assessee had booked a new residential flat with the builder jointly with his wife and he had paid booking amount of ₹ 1,00,000 to the builder before the due date of filing of the return of income u/s. 139(1) for the A.Y.2006-07 and the balance amount had been paid in instalments after the said date. The builder was to handover the possession of the flat after construction. It has, therefore, to be considered as a case of construction of new residential house and not purchase of flat. This position has been clarified by the CBDT in Circular No.672, dated 16-12- 1993 in which it has been made clear that the earlier Circular No.471, dated 15-10-1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat, would apply to co-operative societies and other institutions. The builder would fall in the category of &q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any immovable property used for residence, land used for agriculture …..and other capital assets are exempt from income-tax, if such gains are reinvested in new assets within the time allowed for the purpose. The original assessment needs rectification whenever the taxpayer fails to acquire the corresponding new assets." [The above is not the fourth proviso but portion of Circular No. 495, dt. 22nd Sept., 1987-- Ed.] 9. The assessee had sold plot on 4th Jan., 1995 (asst. yr. 1995- 96) and invested the sale consideration by 30th March, 1996 (asst. yr.1996-97), i.e. one year from the sale of the plot, as provided under Section 54F(1). The assessee had made an attempt to purchase a house at Vivek Vihar, Jaipur immediately on 16th April, 1995 after sale of plot on 4th Jan., 1995. This agreement could not materialise due to the inability of the seller, to hand over the vacant plot. The earnest money of ₹ 2 lakhs was received on 17th Dee., 1995 and the same was immediately invested in the purchase of flat in Lodha Tower, Jodhpur on 6th Jan., 1996. Thus the assessee invested the amount within the stipulated time. The only fault committed by the assessee in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, the contract did not materialise, it cannot be said that there was any hanky panky on the part of the assessee to avoid payment of tax. The assessee ultimately purchased a flat within two years from the sale of plot. The default committed by the assessee was a technical default that the assessee did not deposit the amount meant for reinvestment in the capital gain account scheme before filing return under Section 139 of the Act. Keeping in view the totality of the facts and circumstances of the case and the decisions relied by the learned Authorised Representative, we are of the considered opinion that the amount of ₹ 4,01,000 out of ₹ 5 lakhs which were ultimately invested within the stipulated time is to be exempt from tax although the assessee failed to technically deposit the same in the capital gain account. The intention of the Act as well as the intention of the assessee are to be considered in a right perspective. It is not the case of the Department that the assessee wanted to utilise the amount for other purpose than to purchase a house within two years to the extent it has been utilised. As a result, we delete the addition of ₹ 4,01,000 out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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