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TMI Blog2017 (3) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 – asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal 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 - INCOME TAX APPEAL NO.314 OF 2013 - - - Dated:- 10-3-2017 - M. S. SANKLECHA A. K. MENON, JJ. Mr. Sanjiv M. Shah for the Appellant. Ms. Shehnaz Bharucha for the Respondent. JUDGEMENT (PER A.K. MENON, J.) 1. This appeal under Section 260A of the Income Tax Act, 1961(the Act) assails the order dated 31st October, 2012 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order relates to Assessment Year 2006-07. 2. This appeal was admitted on 28th January, 2015 on the following substantial questions of law:- (A) Whether on the facts and in the circumstances of the case and in law, the Tribunal grossly erred in not, at the outset, deciding the application for admission of additional evidence filed under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 read with the additional evidence paper book before proceeding to pass an order on the merits of the controversie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal on 8th October, 2012, the appellant contended that certain additional and material documents accompanying the application were sought to be introduced for the first time before the Tribunal that do not really, in the strict sense, constitute fresh evidences . It was submitted that the additional evidence be admitted since it is fundamental in order to meet the ends of justice.9 6. The Additional Evidence Paper Book (AEPB) consists of (i) Commencement Certificate dated 29th July, 2003 as amended on 7th September, 2010, (ii) Occupancy Certificate in respect of Wing A and Wing B' dated 29th January, 2008 and 2nd June, 2010, (iii) A pamphlet issued by the developer in relation to the housing project (iv) copies of 4 letters addressed by the developers to the appellant and (v) a Sketch Plan of flat nos.901, 902 and 903. Mr. Shah submitted that on the scheduled date of hearing i.e. 8th October, 2012 the appeal was heard finally. The grievance of the appellant before the Tribunal was that the CIT(A) incorrectly denied exemption under Section 54F of the Act. Mr. Shah submitted that the appeal was then heard but came to be dismissed on 31st October, 2012 and a copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Thus the Tribunal had grossly erred in referring to two documents filed by the appellant in the AEPB, without passing an order permitting or rejecting the application. He submitted that the impugned order is therefore vitiated. In the course of his submissions, Mr. Shah relied upon the provisions of the 'ITAT Rules. He invited our attention to Rules 18 and 29 of ITAT Rules which are reproduced below for ease of reference:- 18. (1) If the appellant or the respondent, as the case may be, proposes to refer or rely upon any document or statements or other papers on the file of or referred to in the assessment or appellate orders, he may submit a paper book in duplicate containing such papers duly indexed and paged at least a day before the date of hearing of the appeal along with proof of service of a copy of the same on the other side at least a week before : Provided, however, the Bench may in an appropriate case condone the delay and admit the paper book. (2) The Tribunal may suo motu direct the preparation of a paper book in triplicate by and at the cost of the appellant or the respondent containing copies of such statements, papers and documents as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation stating the reasons for filing such additional evidence. He submitted that the application made by the appellant on 9th July, 2012 constitutes an application contemplated in Rule 18(4). He submitted that upon such application being filed, the Tribunal was bound to consider the same in accordance with law and pass an order giving reasons for accepting or rejecting the same. However, in the instant case, the Tribunal adopted a different course, omitting to pass an order on the application yet using the contents of the some of the documents in order to arrive at its conclusions in the appeal. Reasons for allowing or rejecting the AEPB could have to be recorded in the final order but was not. The course adopted by the Tribunal was perverse and therefore he submitted question A be answered in the affirmative. 10. In support of his contentions in respect of question (A), Mr. Shah, learned counsel for the appellants referred to the following judgments : (i) Commissioner of Income Tax v/s. Asian Techs Ltd. 233 ITR 715 (Ker); (ii) Commissioner of Income Tax v/s. Travancore Titanium Products Ltd. 203 ITR 685'; (iii) R.S.S. Shanmugam Pillai Sons vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry or oral. In the present case, the appellant assessee had himself filed the AEPB well before the date of hearing and the Revenue had notice of the application. The appellant-assessee therefore was fully aware of the additional material he sought to rely upon. As against this, in the case in Asian Techs (supra) the Tribunal had called for certain information on its own then there was no notice to the Revenue as to whether the additional material had been admitted as additional evidence or even the basis of the same having admitted. The Court held that it is important in regard to the material that the party to the appeal viz. the Assessee and the Revenue should have notice and knowledge of the same. Such are not the facts in the instant case. 12. As far as Travancore Titanium Products Ltd. (supra) is concerned, we note that the Court found that the Tribunal relied upon the documents which were tendered for the first time and that the grounds of appeal before the Commissioner were also not part of the paper book and the Tribunal had considered a working sheet that had been prepared and which was not a part of the documents tendered before the Tribunal as additional evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order to be passed in appeal. The issue was not in respect of production of additional documents but on the issue of raising additional grounds before the Tribunal, therefore has no application to the present facts. 16. Assam Hindu Mission Upper Nawprem (supra) has no relevance to the instant facts. In Smt. Suhasinibai Goenka (supra) the Court had occasion to consider Rule 29 of the ITAT Rules and observed that the Tribunal had sufficient cause for receiving additional documents filed for fair and just disposal of the case and that the Tribunal should have allowed the assessee to file additional document on record and should have given an opportunity to the Revenue to place the material in support thereof. In Kum. Satya Setia (supra) the Madhya Pradesh High Court had made reference while interpreting Rule 29 of the ITAT Rules, this Rule is in pari materia with Order 41 Rule 27 of the CPC and reiterated that it is within the discretion of the appellate authority to allow production of additional evidence and the Tribunal had jurisdiction in the interests of justice to allow production of a crucial document. Mr. Shah had submitted that the word allow found in Rule 29 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the case of the Appellant given the fact situation in the present case since according to us the Tribunal had taken note of the Appellants submissions based on the AEPB. 19. Mr. Shah had relied upon the observations of the S upreme Court in M. Laxmi Co. (supra) quoted in Gopal Chandra Chaudhury (supra) to the effect that the Court took notice of subsequent events due to altered circumstances to shorten the litigation. In the instant case, the subsequent events namely the issuance of the amended commencement certificate could not be brought to the attention of the Assessing Officer or the Commissioner of Income Tax (Appeals) and therefore it was necessary to take notice of the changed circumstances for doing complete justice to the assessee and the Court ought not to shut its eyes to such developments. We are unable to find merit in his submissions since we do not see how this would make any material difference to the Appellants since he had not complied with the mandatory conditions of Section 54. 20. No doubt ordinarily in an application seeking admission of additional evidence one would expect an order to be passed on the application. This would be the appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condly, non-completion of construction of the building in which the appellant assessee had agreed to purchase flats and Thirdly, contiguity of three flats which the appellant assessee had agreed to purchase. Mr. Shah referred to the impugned order and submitted that relevant portions of the impugned order are to be found in paragraph 8 to 11 thereof. He submitted that the assessee surrendered tenancy on 13th September, 2005 and received net consideration of ₹ 1.66 crores. The assessee had invested a sum of ₹ 1.33 crores towards construction cost of the new flats before the due date for filing the return under Section 139(4) of the Act. He submitted that even before the due date of filing the return under Section 139(1), a sum of ₹ 55 lakhs had been paid over but the benefit was denied to him. 22. Mr. Shah drew our attention to the provisions of Section 54F and submitted that Section 54F(4) provides that the net amount of consideration which is not appropriated by the assessee towards the purchase of the new asset within one year or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax vs. Punjab Financial Corporation 254 ITR 6 and submitted that the question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. He further submitted that in Section 54F the words 'shall' be deposited by him before furnishing such return (such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of Section 139), is indicative of its directory nature and it is not mandatory to deposit such sum before the specified date and non-deposit would not be fatal to the appellant assessee's claim for exemption. 26. According to Mr.Shah the interpretation placed on Section 54F by the impugned order results in absurdity since the appellant - assessee had paid entire consideration demonstrating his intention to purchase new premises. Having paid the entire consideration he was not required to deposit monies in any specified account. On account of construction of premises/building being incomplete, the assessee was deprived of benefit of Section 54. Such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 22(1). Thus, a return so submitted is a valid return. It further held that if two views are possible, the view one which is favourable to the assessee must be accepted. In that case the appellant assessee had two points to urge, firstly, that the delay in submission of the return be condoned and return should have been treated as having made under Section 22(3) which Mr. Shah submitted is similar to Section 139(4). In such case there would have been valid return under Section 22(2A). He submitted that Section 22(2A) was in pari materia to Section 80. Furthermore, Mr. Shah pointed out that Section 24(2) which was in pari materia to section 22, providing for carrying forward of business loss, contained a specific provision whereunder, if the assessee sustains a loss of profit or gain in any year being a previous year, in any business, profession or vocation, the loss cannot be partly or wholly set off or the whole loss, (where the assessee had no other head of income) could be carried forward to the following year demonstrating a beneficial interpretation. 29. Mr.Shah submitted that provisions of Section 54 should have been interpreted in manner beneficial to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable to agree. 31. In our view the submission of Mr. Shah that the expression 'shall' appearing in Section 54F(4) is not mandatory but only directory has no merit inasmuch as not only Section 54F(4) used the word 'shall' be deposited it is followed by the bracketed portion which reads : (such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of Section 139) In view of this clarification Mr.Shah's submitted that the word 'shall' is not mandatory but only directory cannot be sustained and reliance placed on K.P. Varghese (supra) that in interpreting Section 54 we must eschew literalness in interpretation of the section and arrive at an interpretation which is not absurd, is of no avail. 32. In Aditya V. Birla (supra) the court observed that an exemption provision must be interpreted as the situation demands and not in a technical sense. We do not see how this decision assists Mr. Shah. As far as possible a beneficial provision should be liberally but not if to the extent that renders the intent of the provision redundant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35. In R. L. Sood (supra) it was held that a substantial amount being paid, the assessee acquired substantial domain over new premises and merely because the builder failed to hand over possession of the flat within the period of one year, the assessee cannot be denied the benefit of the benevolent provisions of Section 54. We observed in that case, an agreement of purchase had been entered into within one year of sale of old residential home. On facts, therefore, it clearly can be differentiated. Moreover, the assessee in that case had the benefit of board circular no.471 which clarifies that under the allotment letter issued by DDA under the self-financing scheme, the allottee gets title to property which is not so in the case at hand. We are of the view that the issue pertaining to incomplete construction and that of contiguity of flats need not be gone at this stage since on very first issue, we are not satisfied with the eligibility of the appellant assessee to claim exemption under Section 54F. Such being the position, in our view it is not necessary to consider the aspect of non-completion of construction and flat being reportedly contiguous since these are aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice in not providing an opportunity to rebut the conclusion of the Tribunal based on circular no.495, Mr. Shah submitted that the assessee had no opportunity to deal with contents of the circular referred to by the Tribunal in its order. He relied upon circular dated 28th September, 1987 which dealt with scheme for 100% deduction in cases of long term capital gain fell to new scheme of deposit of capital gain under Section 54B, 54D and 54F and submitted that the Tribunal ought not to have relied upon said circular to decide the issue against the assessee. In support of his submission on question (C) Mr.Shah placed reliance on the observations of House of Lords in Breen Vs. Amalgamated Engineering Union (1971) 1 All England Reports 1148 to buttress arguments that providing reasons was a basic rule of natural justice and one of the fundamentals of good administration. Relying upon this observation Mr. Shah submitted that although the impugned order dealt with documents the same were held against the appellant without providing the appellant an opportunity to meet any doubt that the Tribunal may have had. 39. We do not find that the Tribunal has based its decision on the effe ..... 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