TMI Blog2012 (12) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the original asset as contemplated u/s 54F. Assessee was expected to construct a residential house not later than 18.1.2010 whereas when the AO made a spot inspection along with his Inspector as late as on 19.10.2010 and found in the presence of the assessee’s representative that the construction was just started and the very fact has been acknowledged by the assessee herself. She had accordingly filed a revised return for the AY 2010-11 admitting the said amount as her income for the said assessment year. Therefore rejecting the assessee’s claim for exemption u/s 54F. In favour of revenue - ITA No.225/Bang/2012 - - - Dated:- 21-9-2012 - George K and Jason Boaz, JJ. Appellant Rep by: Shri Dinesh, Adv. Respondent Rep by: Shri Saravanan B, JCIT ORDER Per: George George K: This appeal filed by the assessee is directed against the order of the CIT (A)-II, Bangalore dated 2.12.2011. The relevant assessment year is 2007-08. 2. The assessee has, in her grounds appeal, raised six grounds. Ground No.6 is general in nature and, therefore, the same is dismissed as inconsequential. Ground No.5 is not maintainable as charging of interest u/s 234B of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,535/- out of the long term capital gains of Rs.1,49,49,460/- had been offered for tax in the assessment year under consideration. This was due to the claim of exemption u/s 54EC and 54F in sums of Rs.50,00,000/- and Rs.95,33,925/- respectively. Since, the issue of taxability of that part of capital gains amounting to Rs.95,33,325/- claimed as exemption u/s 54F had not been considered as the return of income had only been processed u/s 143(1) and it had come to the knowledge of the AO that no house had been constructed by the appellant, the AO reopened the assessment u/s 147 by issue of a notice u/s 148 of the Act dated 29/9/2010 after recording reasons as required under the Act. The AO s action per se in reopening the assessment u/s 147 has not been questioned by the appellant . (ii) Assessment of LTCG of Rs.95,33,925: 4.3. As per the I.T Act, the appellant is eligible to exemption u/s 54F only if she completes construction of a residential house on or before 17/1/2010 i.e., within 3 years from the date of sale of original asset i.e., 18/1/2007. It is clear therefore that it cannot be said that the appellant had even substantially completed the construction of house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, ought to have held that the assessee entitled to claim the exemption u/s 54F of the Act; Relies on the case laws: (a) CIT v. Sardarmal Kothari 302 ITRE 286 (Mad); (b) Shashi Varma (Smt) v. CIT 224 ITR 106 (c) Sambandam Udayakumar in ITA NO.634/2010 dated 21.01.2011 5.1 During the course of hearing, the learned AR sought the permission of this Bench to place on record an application under rule 29 of the Appellate Tribunal Rules [ATR] 1963 wherein it has been submitted that the documents sought to be furnished now at Sl.Nos.5 to 7 10 have not been produced before the assessing authority during the course of assessment proceedings and also before the CIT (A) during the appellate proceedings since the appellant was under a bona-fide belief that the details the appellant had furnished either before the assessing officer or CIT (A) were adequate. The non-production of the said documents was on account of bona-fide mistake and not due to any deliberate or mala-fide intention. The above documents are very much essential in order to prove the issue in hand and the documents are only supporting the submissions already made before the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. As a matter of fact, before reopening of the assessment and issuance of a notice, the AO had brought on record to the effect that on the date of inspection of the site, the subject property was remained a vacant plot. 7.2 Considering the facts of the issue, we are of the considered view that the AO was within his realm to reopen the assessment by issuance of a Notice u/s 148 of the Act to verify the claim of the assessee as to whether the assessee is entitled to claim exemption of Rs.95,33,925/- u/s 54F of the Act. Moreover, the assessee had not objected to either the reopening of the assessment or the issue of a Notice u/s 148 of the Act. Instead, the assessee in her reply dated 9.11.2010 filed with the AO on 10.11.2010 submitted that ..under the circumstances, the original return filed on 27.7.2008 (sic) 27.7.2007 for the assessment year 2007-08 may be treated as return filed in response to your notice u/s 148. [courtesy: P 20 21 of PB AR]. This assertion of the assessee makes it implicit that the assessee had not objected to whatsoever the reopening of the assessment during the reassessment proceedings. 7.3 On the facts and circumstances of the state of affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he building plan of plot No.N 23/1 was approved in the month of September, 2009 and construction on the plot was started in month of October 2009 by the plot owner using their own resources; (ii) Letter of the Secretary, Manchanayanakanahalli Village Grama Panchyathi dated: 10.9.2009 that the application of the assessee for build a house is accepted and the last day of construction ends on 9.3.2010; (iii) Resident certificate from Panchayat Development Officer, Manchanayanakanahalli dated 5.1.2010 to the effect that It is confirmed that from 2009 December one Sri/Smt Archana Kumari w/o Krishna Kumar residing at No.N 23/1, Eagle Township of Manchanayakana halli village Grama Panchayathi of Bidadi Hobli, Ramanagar taluk, Ramanagar District. [source: P 31 35 of PB AR] 7.8 Even though the alleged (i) Permission letter of house construction dated 10.9.2009 from the Secretary of Manachanayakanahalli village Panchayat as well as (ii) Resident Certificate dated 5.1.2010 from the Panchayat Development Officer of the said village panchayat averring that the assessee is residing at No. N 23/1, Eagle township from December 2009 etc., was in her possession and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly highlighted by the CIT (A), the AO had, during the course of reassessment proceedings, conducted enquiries, made a spot inspection on 19.10.2010 along with his Inspector and in the very presence of the assessee s representative found to his surprise that the construction was just commenced and was in an initial stage. The above ground realities make it implicit that no residential house worth the name was constructed within the three years from the sale of the original asset as contemplated u/s 54F of the Act. This very fact has unreservedly been acknowledged by none other than the assessee herself before the AO vide her letter dated 9.11.2010; the relevant portion of which [at the cost of repetition] is reproduced as under: Due to financial constraints, the construction work could not be completed before the stipulated period of 3 years i.e., 18.1.2010. However, as on this date the construction work has fully completed. A revised return of income for the assessment year 2010-11 has been filed on 27.10.2010 offering the unutilized long term capital gain and taxes paid fully. A copy of the same has been furnished to you. Therefore, no long term capital gain is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realization of sale proceeds of shares. The developer acknowledging the said amount has given particulars of the stage of construction. According to him, only minor fittings like window shutters and some electrical work were required to be made. In fact, the report of the inquiry conducted by the Department also discloses the flooring work, electrical work, fitting of door and window shutters were still pending. The assessee has produced before the authorities the registered sale deed dated 7.11.2009 showing the transfer of the property in his favour. The said document discloses marble tiles flooring has been done, electricity, water and sanitary connections have been given wood used is teak in respect of doors and windows. The assessee has been put in possession of the property and he is in occupation. Therefore, the assessee has invested the sale consideration in acquiring a residential premise and has taken possession of the residential building and is living in the said premises. The object of enacting section 54 of the Act i.e., to encourage investment in a residential building is completely fulfilled. 15. In that view of the matter, the Tribunal was justified in extendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Khanna and his wife were fenced together with cement bricks. A small house being built in one corner with hollow cement bricks which was around 10 x 5 ft. On enquiry, it was found that the construction work had started only recently and by appearance, it appears to be a temporary watchman s shed. Otherwise, there was no other sign of any house/foundation on the site which did not have the look of a well developed and maintained; 7.16 Aggrieved, the assessee took up the issue with the Hon ble High Court for relief. On hearing the rival parties, the Hon ble High Court had, in its ruling reported in (2010) 320 ITR 451 (Kar), observed that the assessing authority refused exemption under s.54 on a factual verification of the place where the assessee claimed to have had the residential property as he found only a mud structure not worthy of a residential house. The Tribunal also found that as a matter of fact there was never any structure fitting into description of habitable residential house on the property which had been initially sold by the assessee and, therefore, allowed the appeal of the Revenue, reversed the finding of the first appellate authority and aff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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