9911796707
TMI Blog2017 (10) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... and direct that these additional evidences be and are hereby admitted in the interest of justice and matter be restored to the file of the AO for necessary verification / enquiry with respect to these additional evidences as to the bonafide and genuineness of the assessee’s claim on merits to be conducted by the AO and issue be decided on merits by the AO in denovo proceedings in accordance with law. Denied deduction to the assessee u/s. 54 - assessee has not purchased the residential flat within two years from the date of transfer /sale of residential flat on 17-02-2009 - Held that:- The allotment of flat by the Builder under self financing scheme has to treated as construction and period of three years window will be available for availing deduction u/s 54. The assessee has invested 26 lacs in new residential flat at ‘H’wing on 03-03-2011 i.e. within three years from the date of sale/transfer of flat on 17-02-2009 wherein substantial cost of the said flat was paid by the assessee as total cost was 32.76 lacs . The Builder later issued fresh letter of allotment on 15-10-2011 wherein the builder treated 26 lacs as part consideration towards said residential flat at ‘H’ Wing , which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal before the Hon'ble Tribunal with a prayer to delete such additions." 3. The brief facts of the case are that the assessee is an individual engaged in the business of estate agency. 3.2 During the previous year under consideration, the assessee has sold immovable property being residential flat at Sahyadri Apartment, Pimpri Pada on 17.02.2009 for a consideration of ₹ 30,35,000/- and while computing long term capital gains on sale of the aforesaid flat , the assessee had claimed expenses of ₹ 25,000/- as transfer fee of ₹ 30,000/- as brokerage , which was disallowed by the AO as the assessee neither submitted any explanation nor any proof of payment was submitted. The AO observed that the said flat was acquired by the assessee on 18-11-2003 i.e. in the financial year 2003-04 and was sold on 17-02-2009 i.e. in the financial year 2008-09 . The AO observed that the said flat was acquired by the assessee for ₹ 6,30,152/- whose indexed cost of acquisition worked out to be ₹ 7,92,113/- as against the indexed cost wrongly taken by the assessee at ₹ 15,03,067/- . The A.O worked out long term capital gains chargeable to tax on sale of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO rejected contentions of the assessee . As per A.O., the assessee is required to purchase the residential unit within two years from date of sale transaction i.e. on or before 17th February, 2011 or the assessee has to construct the flat within three years from the date of said transfer, for which the AO observed that the assessee has not submitted conclusive documentary evidences. The A.O disbelieved that after lapse of 28 months of payment to the builder of ₹ 26,00,000/- out of total cost of ₹ 30,37,500/- , the assessee has not executed registered purchase agreement with builder and as per A.O the assessee may have provided finance or loan to the builder against security of the flat and it was also possible for the assessee to have cancelled the flat and got back refund of booking amount. It was held by the AO that as per provisions of Stamp Act , transaction in immovable property is not valid unless proper stamp duty is paid and property is registered. It was held that mere issue of allotment letter and payment receipt is not conclusive and sufficient evidence for allowing deduction u/s. 54 and hence the AO held that the assessee has not purchased new residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther observed that even during the course of assessment proceedings, the AR of the assessee vide letter dated 24.11.2011 submitted details in respect of the flat no. B-203 which was reported to have been cancelled on 30.07.2009. v. The.AO further mentioned that the assessee has yet not submitted copy of purchase agreement of new flat H-104 even if it was unregistered. This itself belies the claim of the assessee that he intended to purchase of property. Copy of receipt of payment of service tax was not conclusive proof especially since no agreement seems to have been executed between the assessee and the developer. Accordingly the AO submitted that the denial of claim u/s.54 was justified in the facts of the case." 4.3 The copy of the Remand Report was given by learned CIT(A) to the assessee for his comments and the assessee replied as under in response to remand report:- " i. It was submitted that the AO has erred in. equating the construction of residential house with the purchases, without referring to the CBDT Circular no. 471 and 672 as per which the allotment of flat should be treated at par with the construction of house and accordingly the claim u/s. 54 should be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, there is nothing mentioned in respect of the request for change of flat etc. It is letter for cancellation of the booking of flat No. B-203 in the said scheme. iii. The aforesaid chronology of the facts makes it is clear that within the span of 3 days of booking done on 28.07.2009, payment was made on 27.09.2009(sic.29-07-2009) and on the next very day payment made i.e. on 30.07.2009, the assessee requested for cancellation of the allotment of the flat no. B-203 in the said scheme, together with surrender of allotment letter and original receipt of payment. iv. It is to be noted here that the assessment year under consideration is A.Y. 2009-10 and the Return of Income was filed by the assessee for this Assessment Year on 18.02.2010. Accordingly as on date of filing of the return by the assessee i.e.18.02.2010, the assessee had no valid booking of flat leave aside any purchase of the flat in respect which the assessee could have made a claim of deduction u/s.54 of the Act against the capital gain earned towards the sale of its flat in Sahyadri Apartments. Accordingly such claim of deduction under section 54 of the Act in the appellant's return is factually incorrec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed that the payment made to the builder for acquisition of flat should be considered towards the construction of flat through the developer and therefore the time limit of 3 years from the date of sale of original property as provided in the section 54 should be applied and deduction should be allowed. In support of such contention of the assessee, the assessee has relied upon the CBDT Circular no. 471 and 672. In this respect it is stated that such circulars are in respect of self financing scheme of DDA and of such Co-operative societies and other institutions whose schemes of allotment and construction are similar those of DDA. Therefore such circulars are not applicable in the facts of the assessee's case where the flat is being developed by a developer who on commercial basis undertakes the construction and sale of flats. x. The assessee in support of the application of CBDT circular no. 471 and 672 has relied upon many decisions, citations of which have been given hereinabove. In respect of such decisions it is stated that in none of the decisions apply to the peculiar facts of the case of the assessee's case wherein the booking of the flat against which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant should not have been made any claim of deduction u/s.. 54 of the Act in respect of this flat in his return of income filed on 18.02.2010. The facts in respect of the other flat viz. H-104 have been discussed hereinabove. Such flat was booked on 03.03.2011 and till date it neither has been handed over to the assessee nor has been registered in his name. Further there is no claim of deduction in respect of this flat in the return of income of the assessee and further there was no such claim which was made by the appellant in respect of this flat before the AO. Simply because there was a payment of ₹ 26 lacs to the builder on 29.7.2009 which either remained with the builder, or otherwise would not amount to either purchase or construction of flat within the time allowed u/s. 54 of the Act. Accordingly the action of the AO in denying deduction u/s. 54 is found to be justifiable and is accordingly upheld." Based upon the above findings , the learned CIT(A) dismissed the appeal of the assessee , vide appellate order dated 30-12-2013 passed by learned CIT(A). 5 . Aggrieved by the appellate order dated 30-12-2013 passed by learned CIT(A) , the assessee has filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and later new residential flat being constructed by the said builder was purchased within three years from the date of sale in lieu of earlier cancelled flat. It was submitted that strict law of evidence is not applicable to incometax proceedings. It was submitted that payment of ₹ 26,00,000/- was made to the Builder on 29.07.2009 itself which flat was cancelled on 30-07-2009 and money was shifted from one flat to the another and builder has given another flat to the assessee within three years from the date of sale of original flat . It was submitted that fault is on the part of the builder and section 54 is benevolent provision which should be liberally construed. It was submitted that there is no mala fide on the part of the assessee rather it is the fault of the Builder and the assessee should not be penalised for the same. It was submitted that allotment of the flat by the Builder shall be deemed to be construction of flat and period of three years will be applicable for construing limit for availing the benefit of Section 54. 5.3 The ld. D.R on the other hand submitted that construction should have been completed within three year while in the instant case the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that he was not informed by his AR about requirement of furnishing these documents before the AO and hence he did not furnish said evidences at the assessment stage is an plausible explanation which cannot be rejected at threshold to be not a reasonable or bonafide reasonable explanation more-so on perusal of invoices for both these expenses which are placed in paper book/page 72-74 the payments were made by the assessee through cheque/banking channel. The powers of learned CIT(A) is co-terminus with the powers of the AO and while deciding the appeal the learned CIT(A) should have caused enquiry of its own or directed AO to make an enquiry to verify bonafide and genuineness of the claim of the assessee instead of rejecting the claim of the assessee at threshold . We are of the considered view and direct that these additional evidences be and are hereby admitted in the interest of justice and matter be restored to the file of the AO for necessary verification / enquiry with respect to these additional evidences as to the bonafide and genuineness of the assessee's claim on merits to be conducted by the AO and issue be decided on merits by the AO in denovo proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priated ₹ 26 lacs as part consideration towards said new residential flat as against total consideration of ₹ 32.76 lacs (page 79/pb). The said builder also issued one receipt dated 25-07-2012 of ₹ 66,950/- towards service tax w.r.t. above flat which was paid by the assessee vide cheque issued from his Allahabad bank (page 80/pb). The assessee has also produced approval letters from Slum Rehabilitation Authority issued in favour of Neeta Developers dated 17-07-2007 and 27-07-2011 for approval for development permission and grant of commencement certificate which , inter-alia, included 'B' Wing as also 'H' of the Building being developed by the Builder-Neeta Developr . The assessee has also produced letter dated 20- 08-2013 issued by Neeta Developer to the ITO, Ward 21(3)(2), Mumbai confirming all the aforesaid facts in reply to enquiry made u/s 250(4). The authorities below denied deduction to the assessee u/s. 54 of the Act on the ground that assessee has not purchased the residential flat within two years from the date of transfer /sale of residential flat on 17-02-2009 . The assessee booked the flat in 'B' Wing which was allotted by the builder on 28- 07-2009 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein regulation over builders were not stringent had to accept standard conditions imposed by the builders , wherein flat buyers has to sign on the standard documentation, agreements , contracts as prepared by the builder and the timing of registration was also decided by the builders due to their strong dominating positions vis-a-vis middle income and low income group buyers , wherein it was not uncommon that builders used to delay delivery of homes to the buyers. Thus to read Section 54 which is a beneficial provision in an absolutely strictest terms will lead to denial of benefits u/s. 54 to many of the legitimate and genuine buyers of residential flats and its strict interpretation will lead to the defeat of the very purpose for which Section 54 was legislated. No doubt that exemption provisions at the initial stages is to be construed strictly and onus is on the tax-payer to establish its entitlement to exemption but once the tax payers establish its entitlement to the exemption provision, full benefit is to be given to the exemption provision to achieve the intended purposes for which the said provisions are legislated which in the case of Section 54 was to encourage housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in case of construction of a house, the benefit is available if the investment is made within three years from the date of the transfer. 2. The Board had occasion to examine as to whether the acquisition of a flat by an allottee under the Self-Financing Scheme (SFS) of the D.D.A. amounts to purchase or is construction by the D.D.A. on behalf of the allottee. Under the SFS of the D.D.A., the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the scheme. The allotment is cancelled only under exceptional circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a followup action and taking the delivery of possession is only a formality. If there is a failure on the part of the D.D.A. to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession. 3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the, D.D.A. takes up the construction work on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted ₹ 26 lacs as part consideration towards said residential flat at 'H' Wing , which is again within three years from the date of sale of flat at Sahayadri Apartments by the assessee on 17-02-2009 on which income from long term capital gain arose. The assessee also paid through the builder service tax on the said payment of ₹ 26 lacs to the government which is duly acknowledged by the Builder. The Revenue also made direct enquiry with the builder and it could not be shown that these transactions are not genuine or are colourable device adopted by the assessee in collusion with the Builder to defraud revenue. The assessee has also brought on record government approvals for construction of 'H'Wing on the plot developed by Builder. The assessee , thus got right , title and interest in the said flat within three years from the sale of flat on which the long term capital gain arose and the assessee will be entitled for deduction u/s 54. The decision of the Mumbai tribunal in Mukesh G Desai vs. ITO (supra) and also decision of Hon'ble High Court of Bombay in the case of CITv. Mrs Hilla J.B.Wadia(1993) 69 taxman 114(Bom) also supports the contention of the assessee. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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