9911796707
TMI Blog2009 (6) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... on, flooring and plastering and devoid of any basic facilities like water and electricity for a decent human habitation; qualify for exemption u/s. 54. 4. The CIT(A) has also failed to appreciate that when even after 10 years the area is very difficult for human habitation then 10 years earlier how bad the living condition would have been. 5. The CIT(A) has also failed to appreciate the contradiction in the assessee's arguments that on the one hand, the assessee claims to have invested in a residential property, 10 years ago for which development expenditure of ₹ 79.70 lakhs were incurred for developing the land including 4 house properties. He also claims that rent ranging from ₹ 800 to ₹ 2000 p.m. were received by him for each of these properties for which he could not produce any receipts or rental agreements. On the other hand, the description of the properties bought and sold subsequently in the sale deeds both by the seller from whom the assessee purchased and by one of the purchaser to whom they were sold by the assessee refer to these 'house properties' as mud structures with mangalore tiles. It is the intent of the legislation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing. 4. Both these appeals are considered together and disposed of by this common order for the sake of convenience. Let us first deal with the Revenue's appeal. The brief facts of the appeal are that the assessee - a HUF - furnished a return of income on 21.12.98, showing a loss of ₹ 420390 from business. He had sold a property to the extent of 98040 sft. (out of 151375 sft) situated at 24, Lalithamahal Road, Mysore for a consideration of ₹ 1.7 crores and in the process had paid a sum of ₹ 20 lakhs to the tenant being compensation, thus the net consideration received was ₹ 1.5 crores. While computing the capital gains [CG], the assessee had set off index cost of the property at ₹ 1,18,52,900/- leaving a CG of ₹ 31,47,100/- and also claimed exemption u/s 54F of the Act for having purchased residential properties amounting to ₹ 79,70,000/- which, according to the assessee, the computation had resulted in Nil income. On the other hand, the AO took a stand that the assessee had not declared the CG accruing on the transfer of the property resorting to incorrect computation. The case was reopened by issuance of notice u/s 148. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. As already mentioned above, there was already elapse of too much time in between and the material evidences physically present in the sites are hard to come by. But, in a situation like this, credible circumstantial evidences can also be counted. The AO, who visited the site, has already made elaborate analysis of the ground reality. In any case, it is the Officer's assessment that there were no four residential properties at the material time. However, could safely assume that at least there must be one piece of structure. Shri Khanna, who has no any stake in the ongoing dispute between the revenue and the appellant, has stated that there was one small structure. The house tax payment also suggest that there was a house at No. 16. In the overall analysis, I am persuaded by the surrounding circumstances that there must be a small, temporary, kutcha structure which can also be called a 'residential property'. As argued by the appellant's representative, there is no definition or prescribed parameter to describe 'a structure' or 'a building'. As regards the rest of the residential structure, there are no credible evidences to establish that there ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid of any basic facilities like water and electricity for a decent human habitation do not qualify for exemption u/s 54; (ii) when even after ten years the area was very difficult for human habitation, then ten years earlier, how bad the living condition would have been; (iii) the contradiction in the assessee's arguments that on the one hand, the assessee claims to have invested in a residential property, ten years ago for which development expenditure of ₹ 79.7 lakhs were incurred for developing the land including four house properties. He also claims that rent ranging from ₹ 800 to ₹ 2000/month were received by him for each of the house properties for which he could not produce any receipts or rental agreements; On the other hand, the description of the properties bought and sold subsequently in the sale deeds both by the seller from whom the assessee purchased and by one of the purchasers to whom they were sold by the assessee refer to these 'house properties and mud structures with Mangalore tiles. It is the intent of the Legislation that exemption u/s 54 be given when residential property is acquired or constructed and not for tempora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing circumstances that there must be a small, temporary, kucha structure which can also be called a 'residential property'............ From a plain reading of the CIT(A)'s observation, one could assume that he had recognised the ground realities as reported by the AO who had physically visited the place and made spot enquiries. However, he was carried away by the averment of Shri Khanna who had stated that there was one small structure (without describing the contents of the structure). 11. The relevant portion of the AO's report which is crucial to the issue on hand, is extracted as under: 1.3 ............. The assessee has sold the four sites to two different parties who have purchased two adjacent sites together in 2001. Site Nos:16 and 17 are purchased by Sri Vivek Khanna and his wife Smt. Mitra Khanna. The two sites were fenced together with cement bricks. A small house was being built in one corner with hollow cement bricks which will be around 10 ft. by 5 ft. Enquiries with the workers there at work revealed that the construction had started only recently. By the looks of it, it appears to be a temporary watchman's shed. Otherwise, there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made by the assessee. Additionally, the construction was of the garage and servant quarters. AAC referred to some personal visits and found that there was actually no occupation by any servant or tenant and even there was no cooking. In view of the accepted statement of assessee that the building was not worth occupying and was not inhabitable, conclusion that the assessee was not entitled to the exemption is in order. (b) The Hon'ble High Court of Punjab and Haryana in the case of Dr. A.S. Atwal vs. CIT reported in (2005) 277 ITR 462 in an identical issue has observed thus: Property sold by the assessee i.e., plot with a tin shed, was not a house as the tin shed had no bath room or kitchen or electricity connection, and even if the same is considered as a house, assessee is not entitled to exemption under s.54 on the sale of said property as it was not occupied by the assessee or a parent of his for their residence in the two years immediately preceding the date of transfer. 13. Reliance was also placed on the decision of the Hon'ble H.C. of Rajasthan in the case of Rajesh Surana vs. CIT reported in (2008) 215 CTR 482. On a perusal of the said decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 2000/month for the house Nos: 7, 8 and 16 and 17 respectively, the assessee was unable to state the names and occupation of his tenants. No lease agreements entered into with the alleged tenants were forthcoming; (vi) There was neither water connection nor electricity drawn. The assessee's contention that mud structures which were temporary in nature, without any foundation, flooring and plastering and devoid of any basic facilities like water and electricity is intriguing; (vii) With regard to development of properties for which the assessee had alleged to have invested an exorbitant amount of approx. ₹ 50 lakhs for development of the said properties, the LD. CIT(A) had observed in the impugned that the investment of development charges has not been substantiated; (viii) The CIT(A) in the concluding paragraph has stated that, 11.......Shri Khanna who eventually purchased the property clearly mentioned that this particular plot there was a kutcha mud structure of only about 250 sft. Does the investment of ₹ 28.60 lakhs befits a kutcha mud structure of 250 square feet dimension? Viewed from all probabilities of human judgment, this proposition i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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