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TMI Blog2017 (4) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has purchased two separate house vide two agreements duly executed, in accordance with layout of plan, which is clearly evident from the certificate issued by MCGM. 2. On the facts and in the circumstances, the Commissioner of Income-tax (Appeals) has erred in allowing the benefit of sections 54 and 54F to the assessee for investment in two separate house properties which were converted into one residential unit illegal after taking possession. 3. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) has erred in accepting the additional evidence i.e. report of structural engineer (an employee of the assessee), submitted by the assessee during the appellate proceedings without providing opportunity to the Assessing Officer in view of rule 46A(3)(a) of the Income-tax Rules, 1962. 4. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) has erred by ignoring the documentary evidence already available on record, while allowing deduction under sections 54 and section 54F. 5. For the abovementioned reason and any other reasons that may be urged at the time of hearing, it is requested that the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 2601 and 2602 in C-Wing of the building known as "Beau Monde", Prabhadevi, Mumbai. In support of his claim, he drew our attention upon the following documentary evidences which were certified to be made available to the lower authorities also : (1) Floor plan as well as layout plan issued by the builder, Sheth Developers Pvt. Ltd. who had planned the aforesaid flats showing that there was one flat of 4 bedrooms ; (2) Certificate from Shri Bhushan N. Sanghavi (consulting structural engineer) dated May 8, 2014 certifying that the impugned flat was one flat ; (3) Certificate dated March 20, 2014 issued by Beau Monde, C Tower Co-operative Housing Society Ltd. certifying that the impugned flat was one flat only. 7. It was submitted that all these documentary evidences were made available before the lower authorities, i.e. the Commissioner of Income-tax (Appeals) as well as the Assessing Officer. The Assessing Officer had full liberties to examine physically whether the impugned flat was one flat or two different flats. Without examining the same, the Assessing Officer should not have rejected the claim merely on the basis of surmises and conjectures and other irrelevant cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no denying the fact that legally the assessee purchased two separate residential house property on March 9, 2011. (iii) These two residential flats were constructed as two residential house properties as it was proven by the completion certificate granted by the competent authority on January 10, 2012 and construction was completed on December 19, 2011 and the same was also the intention of the authorities as it was evident by ULC certificate issued by Additional Collector. (iv) These two residential house properties were converted into one residential house property after December 19, 2011 and no legal permission of doing so was obtained. Being the legal owner of these flats (as the assessee became the legal owner of the flats on March 9, 2011 through registered sale agreement) the assessee was supposed to obtain such permission. In the absence of the legal permission for doing so, the conversion of these two residential house properties into one residential house property is illegal. (v) The assessee alleged that this conversion was planned and done by the developer however he has submitted no credible evidences in this regard. On the other hand, independent and credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. During the course of appeal before the learned Commissioner of Income-tax (Appeals), the assessee brought out complete facts in detail and also submitted various evidences showing that the flats were constructed as one residential unit by the builder and it has one common kitchen, entrance, etc. These evidences were sent by the Commissioner of Income-tax (Appeals) to the Assessing Officer for examination in the remand proceedings. The Assessing Officer had sent a remand report which was duly considered by the learned Commissioner of Income-tax (Appeals) and thereafter the learned Commissioner of Income-tax (Appeals) held that the assessee owns "one" residential unit irrespective of the fact whether these were built as "one" residential unit by the builder or these were joined subsequently by the assessee. Relying upon the judgment of the hon'ble Bombay High Court, this issue was decided in favour of the assessee by him by observing as under : "4.5 I have perused the assessment order, remand report, submissions of the appellant, and the facts and circumstances of the case very carefully. I find that the only dispute is whether or not the two residential units purchased by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nothing but one residential house, even if two separate agreements might have been entered segregating the area in two units. I find that the assessment order itself speaks of the assessee having asked for physical inspection of the flat and the building by deputing any official from the Department to verify the claim of the assessee. I find it high handed on the part of the Assessing Officer not to adhere to such request of the appellant, which could have revealed the truth. (ii) Another important fact revealed by the appellant is that every floor in the same building has two adjoining flats and occupied as one residential unit by concerned owner/their family on all floors. This fact had further been certified by the appellant's building society. This is an important fact to establish the floor plan of the building as originally constructed, leave aside the approved plan. Even if any changes in approved plan are made by the appellant after getting possession, it is highly improbable that exactly the same changes would have been made by all flat owners. It is also highly improbable that all flat owners in the building would have purchased two flats together on each floor, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. (iv) In the remand proceedings, the Assessing Officer has objected to the admission of the certificate from the structural engineer by questioning his independence. It is important to note that the said certificate clearly stipulates that there is no sign of extension, alteration, renewal, replacement, removal or renovation in the said unit and it appears to be in original shape and condition and there is no sign of detachment of any structure or fittings in the said residential unit. The Assessing Officer could have verified the authenticity of the said certificate by independent enquiry if he really doubted the same. (v) The appellant in his written submissions during present appellate proceedings reiterated these facts, which were forwarded to the Assessing Officer so that the appellant's various contentions could be rebutted justifiably. However, on-going through the remand report, I find that it was more a repetition of facts already contained in the assessment order, and no new facts were brought on record, which could have been gathered by conducting physical inspection of the building, or by further enquiring with the builder about sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over legality, as far as the provisions of sections 54 and 54F are concerned, which in my opinion are beneficial provisions, and hence should be interpreted liberally. In the latest decision of the jurisdictional High Court in the case of CIT v. Devdas Naik [2014] 366 ITR 12 (Bom) (I. T. A. No. 2483 of 2011, dated June 10, 2014), the court held as under (page 13) : 'It is urged that the factual position has been completely misread and construed so as to allow the claim. Mr. Ahuja, learned counsel appearing in support of this appeal submits that the law laid down by the Mumbai Bench of the Tribunal in the case of ITO v. Ms. Sushila M. Jhaveri reported in [2007] 292 ITR (AT) 1 (Mum) [SB] ; [2007] 107 ITD 327 (Mum) [SB] and confirmed by this court in the case of CIT v. Raman Kumar Suri (Income-tax Appeal No. 6962 of 2010, decided on November 27, 2012) reported in [2014] 3 ITR-OL 127 (Bom), is applicable only when the house purchased is a single unit. According to Mr. Ahuja, in the present case, two flats, one acquired in the respondent-assessee's name and another jointly in the names of respondent- assessee and his wife but under two distinct agreements and from different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to one unit. Once there is a single kitchen then, the plans can be relied upon. We do not think that the conclusion is in any way impossible or improbable so as to entertain this appeal. In this peculiar factual backdrop, this appeal does not raise any substantial question of law. The appeal is devoid of any merit and is dismissed. No order as to costs.' In view of the above, I hold that the appellant has made investments in 'a residential house property' and hence the exemption claimed under sections 54 and section 54F of the Act is to be allowed. Therefore, the additions made to long-term capital gains of Rs. 3,00,48,820 and Rs. 19,91,71,462 are deleted accordingly. Therefore, the grounds of appeal are allowed." 10. We have carefully analysed the orders of the Assessing Officer as well as that of the learned Commissioner of Income-tax (Appeals) and also considered the evidences shown to us as well as the judgments of the hon'ble Bombay High Court relied upon by the learned Commissioner of Income-tax (Appeals). The issue involved before us is whether the assessee is eligible for the benefit of deduction under section 54/54F which were partly denied by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute one residential house property. Thus, there is no dispute on the principle. According to the Assessing Officer also, principally speaking, the benefit of deduction under section 54/54F is allowable to the assessee. But the Assessing Officer was adversely influenced by the fact the assessee converted two residential house into one subsequent to its acquisition and that too without following due procedure as prescribed under the applicable local law. 13. Thus, the only dispute that is left to be resolved by us is whether the approach followed by the Assessing Officer was fair and justified and in accordance with law and facts of this case or not. In this regard, our considered view is that the Assessing Officer has gone wrong on law as well as on facts. As far as legal position is concerned, the issue before us is whether the assessee is eligible to claim exemption under section 54/54F on the basis of his investment in acquisition of one residential house property or not. In our considered view, whether the house property is built upon an approved plan or not and whether the two flats have been converted into one after obtaining requisite approvals from the local authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the issue before us. Our attention was drawn on the typical floor plan of Tower "C", 25th Floor of Beau Monde Bldg., Prabhadevi, Mumbai constructed by M/s. Sheth Developers Pvt. Ltd. It was shown by the learned counsel on the basis of internal lay out plan that though two separate numbers were assigned to the flat, but it was planned to be constructed as one flat only right from the beginning. Further, our attention was also drawn on the certificate given by Shri Bhushan N. Sanghavi dated May 18, 2014 wherein he had submitted report on the structural members of the flat as per his visual survey. The relevant part of his report is reproduced below : "To whom it may concern Sub : Report on structural members as per visual survey. This is to state that we have carried out visual inspection and complete survey of residential unit bearing flat Nos. 2601 and 2602 in 'C' wing of the building known as 'Beau Monde', Prabhadevi, Mumbai at the request of the owner Mr. Sanjay B. Pahariya. On physical inspection of the said residential unit by us, we state that there is no sign of extension, alteration, renewal, replacement or removal of structural members, i.e. sl ..... 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