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2015 (10) TMI 479 - ITAT BANGALORE

2015 (10) TMI 479 - ITAT BANGALORE - TMI - Exemption under Section 54 - assessee was in receipt of sale consideration from sale of 12 flats received from the developer consequent to a joint development Agreement (‘JDA’) entered into between the assessee and Wing commander Santosh Kumar Sharma, the developer in respect of certain lands - reopening of assessment - Assessing Officer determined the LTCG on transfer of 60% of the undivided portion of land at ₹ 1,85,10,384; STCG on sale of 11 fl .....

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at the income of an assessee is to be brought to tax correctly in the correct year. If an item of income is taxable in a particular year, then the Assessing Officer can tax that amount in that year only. The scheme of the Act does not envisage that if a particular item of income has escaped taxation in one year, it can be brought to tax in another year solely for the reason that the time limit to reopen the assessment in that year has expired. On an appreciation of the facts additional ground ra .....

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bility of capital gains arising out of the said land by virtue of JDA and GPA dt.18.1.2006 within the ambit of the provision of Section 2(47)(v) of the Act rws 53A of the Transfer of Property Act - Held that:- Since the issue of the year of chargeability of capital gains on transfer of land to the developer vide JDA dt.18.1.2006, raised at Ground No.2, in respect of additional ground, preferred by the assessee on 18.12.2013 and denied admission by the learned CIT (Appeals), has now been admitted .....

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377; 5 lakhs, which claim of the assessee, the Assessing Officer had allowed - Held that:- On a perusal of the impugned order, it is evidently clear that the learned CIT (Appeals)’s action led to an enhancement of the assessee's income to the extent of ₹ 5 lakhs whereby the exemption under Section 54F of the Act was directed to be reduced from ₹ 32,87,252 to ₹ 27,87,252. In such circumstances, as per the provisions of Section 251(2) of the Act, the learned CIT (Appeals) was req .....

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the order of the learned CIT (Appeals) and restore that of the Assessing Officer on this issue. - Decided in favour of assessee.

Cost of Acquisition of 11 flats sold - Held that:- we find that the Assessing Officer’s computation of the cost of acquisition to the assessee in respect to the11 flats sold in the year under consideration was done after obtaining the cost of construction from the developer to arrive at the figure of ₹ 1,97,32,354 (i.e. 18,939 sq. ft. @ ₹ 1,042 .....

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dered accordingly - Decided in favour of assessee.

The action of the learned CIT (Appeals) in reducing the cost of construction of the 11 flats sold by the assessee in the period under consideration, to be in gross violation of the provisions of section 251(2) of the Act, rendering the same illegal and unsustainable in law. We, therefore, reverse the order of the learned CIT (Appeals) and restore the order of the Assessing Officer on this issue. Consequently, Ground No.6 of the assess .....

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iefly, are as under 2.1 The assessee filed its return of income for Assessment Year 2008-09 on 2.4.2009 declaring income of ₹ 13,43,590 from business and Long Term Capital Gains ( LTCG ). The return was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act'). The Assessing Officer observed that on verification of the return of income, it was seen that the assessee was in receipt of sale consideration of ₹ 3,38,00,000 from sale of 12 flats received from .....

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regard the assessee computed LTCG of ₹ 11,92,150, wherein the assessee claimed to have invested ₹ 1,15,89,600 in the development of the said property and included the same in the cost of acquisition/construction of the transferred property. In addition thereto, the assessee also claimed to have invested ₹ 1,99,14,953 in the purchase of land and construction of a residential house and claimed exemption in this regard under Section 54 of the Act. 2.2 The Assessing Officer observe .....

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had escaped assessment and issued notice under Section 148 of the Act to the assessee on 25.1.2010. In response thereto, the assessee filed a return of income on 9.6.2010, in the status of HUF, declaring income of ₹ 83,24,480 which comprised of business income, income from LTCG and income from Short Term Capital Gains ( STCG ). The Assessing Officer rejected the assessee's claim of HUF Status and assessed the income from LTCG and STCG in the assessee's individual lands. The assess .....

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assessment for Assessment Year 2008-09 dt.31.12.2010, the assessee preferred an appeal before the CIT (Appeals) V, Bangalore. The learned CIT (Appeals), disposed off the appeal vide order dt.24.12.2013 allowing the assessee partial relief. 4. Aggrieved by the order of the CIT (Appeals) V, Bangalore dt.24.12.2013 for Assessment Year 2008-09, the assessee is in appeal before the Tribunal raising the following grounds 1. The appellate order dt.24.12.2013 is opposed to law, facts and weight of evide .....

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ansfer of 60% of undivided portion of the land were chargeable to tax for the Assessment Year 2008-09 without appreciating the fact that the transfer of land arose in the year ending 31.3.2006 relevant to the Assessment Year 2006-07, in view of the JDA and GPA dt.18.1.2006 as required under Section 2(47)(v) of the Act r.w.s. 53A of T.P. Act. 4. The learned CIT (Appeals) V, Bangalore has erred in holding that the appellant has not received any refundable/non-refundable deposit without appreciatin .....

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the Act without providing an opportunity to the appellant as required under Section 251(2) of the Act. 6. The learned CIT (Appeals) V, Bangalore has erred in holding that the cost of construction was allowable in respect of 14338 sq. ft. as against the built up of area 18937 sq. ft. allowed by the Assessing Officer in the assessment order relating to the 11 flats sold. 7. The learned CIT (Appeals) V, Bangalore has erred in not following the ratio laid down by the Hon'ble jurisdictional High .....

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of the non-admission by the learned CIT (Appeals) of additional grounds urged by the assessee as regards the year of chargeability of LTCG attributable to transfer of 60% of the undivided interest in land (UDI) by virtue of the JDA dt.18.1.2006 and the GPA dt.18.1.2006. Ground No.3, 4 and 7 in respect of the relevant assessment year of chargeability of LTCG arising out of the transfer of 60% of UDI in the said land by virtue of the JDA and GPA both dt.18.1.2006 within the ambit of Section 2(47)( .....

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, the assessee contends that the learned CIT (Appeals) had erred in not admitting the additional ground raised by the assessee in respect of the year of chargeability of the LTCG attributable to the transfer of 60% of the undivided portion of the land in favour of the developer as per the JDA and GPA dt.18.1.2006. 7.2.1 According to the learned Authorised Representative for the assessee, the assessee owned 22 guntas of land in Survey No.372 and 373 at Kalkere village, K.R.Puram Hobli, Bangalore .....

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earned Authorised Representative submits that an additional ground of appeal was raised before learned CIT (Appeals) vide letter dt.18.12.2013 on the issue of chargeability of LTCG attributable to the transfer of 60% of the undivided portion of land in favour of the developer by virtue of the JDA and GPA dt.18.1.2006. It was contended before the learned CIT (Appeals) that the LTCG in this regard was not chargeable to tax for Assessment Year 2008-09, but was chargeable for Assessment Year 2006-07 .....

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er, the learned CIT (Appeals) had, forwarded the assessee's written submissions to the Assessing Officer which, inter alia, was in respect of the issue of the year of chargeability of LTCG on transfer of 60% of land vide the JDA dt.18.1.2006; calling for his comments in the matter and remand report thereon. It is submitted that inspite of three reminders dt.11.2.2013, 4.6.2013 and 8.11.2013, the Assessing Officer failed to submit the remand report. The learned Authorised Representative conte .....

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oceedings for Assessment Year 2006-07 in the assessee's case. It is argued that in the above factual circumstances, the learned CIT (Appeals) s observation, that the assessee had raised this additional ground with malafide and willful intention to escape the liability to pay tax on LTCG arising on transfer of 60% of share in land to the developer, is not correct as both the learned CIT (Appeals) and the Assessing Officer were aware and had knowledge of the facts of the issue of the year of c .....

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entative supported the impugned order of the learned CIT (Appeals) in not admitting the additional grounds raised by the assessee. 7.4.1 We have heard both parties and perused and carefully considered the material on record. The issue for consideration before us is the non-admission by the learned CIT (Appeals) of the additional ground of appeal raised by the assessee vide letter dt.18.10.2013 in respect of the year of chargeability of the capital gains on transfer of 60% of the undivided portio .....

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8-09; but was chargeable for Assessment Year 2006-07 in view of deemed transfer under the amended provisions of Section 2(47)(v) of the Act rws 53 of the Transfer of Property Act. It is in this regard, the assessee raised additional grounds. The learned CIT (Appeals) rejected the same, alleging mala fide intention on part of the assessee in raising the same after the period of limitation for reopening the assessment for Assessment Year 2006-07 expired on 31.3.2013. In our view, the additional gr .....

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is as the information in this regard was with the authorities below from 24.1.2012. The intention of law is that the income of an assessee is to be brought to tax correctly in the correct year. If an item of income is taxable in a particular year, then the Assessing Officer can tax that amount in that year only. The scheme of the Act does not envisage that if a particular item of income has escaped taxation in one year, it can be brought to tax in another year solely for the reason that the time .....

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see. Since the same has not been examined by the learned CIT (Appeals), we remand the same to his file for consideration and adjudication thereon after affording the assessee adequate opportunity of being heard and to file details/submissions required. It is ordered accordingly. Consequently, Ground No.2 of the assessee's appeal is allowed for statistical purposes. 8. The Ground Nos.3, 4 & 7 (supra) are all raised in respect of and in connection with the year of chargeability of capital .....

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stored to the file of the learned CIT (Appeals) for examination and adjudication, we are of the view that the finding therein would have a bearing on the issues raised in the grounds raised at S.Nos.3, 4 & 7. We, therefore, deem it fit to refrain from adjudicating these grounds at this juncture. 9. Ground No.5 Exemption u/s.54F ₹ 5,00,000. 9.1 In this ground, the assessee contends that the learned CIT (Appeals) erred in directing the Assessing Officer to disallow the exemption of ͅ .....

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F of the Act, which included the sum of ₹ 5,00,000 on account of cost of improvement towards the flat retained by the assessee. It is contended by the learned Authorised Representative that, the learned CIT (Appeals), relying on the decision of the Hon'ble High Court of Kerala in Meera Jacob V ITO (2009) 313 ITR 411 (Ker), disallowed the exemption of ₹ 5 lakhs under Section 54F of the Act, allowed by the Assessing Officer, holding that the cost of improvement claimed by the asses .....

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te opportunity of being heard in the matter; which he failed to do. The learned Authorised Representative submitted that in view of this action of the learned CIT (Appeals) is illegal and unsustainable and requires to be reversed. 9.3. We have heard the rival contentions and perused and carefully considered the material on record. As contended by the learned Authorised Representative, we find that the learned CIT (Appeals) at para 11.3 of the impugned order, has directed the Assessing Officer to .....

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he Act, the learned CIT (Appeals) was required to afford the assessee reasonable opportunity of showing cause against such enhancement; which we find the learned CIT (Appeals) failed to do. In this factual matrix, we find that the action of the learned CIT (Appeals) s action in disallowing the cost of improvement of ₹ 5 lakhs, already allowed by the Assessing Officer to the assessee, to be in gross violation of the provisions of section 251(2) of the Act, rendering the same illegal and uns .....

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allowed by the Assessing Officer in the order of assessment. 10.2 It is submitted by the learned Authorised Representative that in the order of assessment, the Assessing Officer had computed the cost of construction of the 11 flats sold by the assessee with built up area of 18,937 in the year under consideration at ₹ 1,97,32,354 @ ₹ 1042 per sq. ft. as per the cost incurred by the developer. It is contended by the learned Authorised Representative that while computing the capital ga .....

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77; 47,92,158 without issue of appropriate notice. 251(2) of the Act, without putting the assessee on notice of his views on this issue and in affording the assessee adequate opportunity of being heard in violation of the principles of natural justice. 10.3 The learned Authorised Representative contends that, without prejudice to the above contention, the learned CIT (Appeals) was not justified in reducing the cost of construction of the 11 flats, which the Assessing Officer computed and allowed .....

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32,354 as allowed by the Assessing Officer. 10.4.1 We have heard both parties and perused and carefully considered the material on record. As regards the allowability of the cost of acquisition of property to the assessee, we find that the co-ordinate bench of the Tribunal in the case of Smt. Jeeva Vadivelu (supra) at para 31 thereof has held as under 31…………….We are now concerned with the question as to whether the assessee should get the benefit of cost of con .....

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the developer, who developed the properties and arrive at the cost of 8664 sq.ft. ……………………… 10.4.2 In the case on hand, the Assessing Officer had admittedly already obtained the cost of construction from the developer and accordingly allowed the assessee the cost of acquisition of 11 flats sold with built up area of 18,937 sq. ft. at ₹ 1,97,32,354. The ratio of the decision of the case of Smt. Jeeva Vadivelu (supra) is applica .....

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n to the builder/developer need not be considered as the cost of acquisition to the assessee and rendered the cost of acquisition to the assessee at ₹ 1,49,40,196. This, in our considered view, is not in accordance with the ratio of the decision of the co-ordinate bench in the case of Smt. Jeeva Vadivelu (supra), wherein the Assessing Officer was directed to ascertain the cost from the developer, who developed the property, to arrive at the cost of acquisition to the assessee. In the case .....

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