9911796707
TMI Blog2017 (10) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... on with transfer viz. transfer fees of Rs. 25,000/- and brokerage of Rs. 30,000/- incurred in connection with sale of residential flat. Ld. CIT-A erred in confirming the disallowance. 2. On facts and in circumstances of the case and in law, learned A.O. erred in disallowing exemption u/s. 54 and consequently adding Long Term Capital Gains of Rs. 22,42,887/- to the total income of the appellant. Ld. CIT-A erred in confirming the disallowance. 3. Against confirmation of above additions, the appellant 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 Rs. 30,35,000/- and while computing long term capital gains on sale of the aforesaid flat , the assessee had claimed expenses of Rs. 25,000/- as transfer fee of Rs. 30,000/- as brokerage , which was disallowed by the AO as the assessee neither submitted any explanation nor any proof of payment was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Further as assessee is out of town we will get further information regarding any agreement or MOU for the new property in next week. We request you to give adjournment date 16.11.2011 to produce further evidence." The assessee also submitted letter from M/s. Neeta Developers that they have received payment of Rs. 26,00,000/- as earnest money towards purchase of Flat no. 203-B Wing, 2nd Floor, Gulraj Building, Nehru Nagar, Kurla East, Mumbai-24. 3.4 The 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 Rs. 26,00,000/- out of total cost of Rs. 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs after the cancellation of flat no. B- 203 and after 2 years from the date of sale of transaction of property at Sahyadri Apartment on 17.02.2009. Therefore the assessee was not entitled for deduction as per the provision of section 54 of the Act. iv. He further observed that the assessee had made payment of Rs. 26 lacs on 29.07.2009 booking of flat no. H-I04 and that money was lying with the developer for more than 17 months. He further 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his cheque dated 29.07.2009. Subsequently the appellant vide his letter dated 30.07.2009 requested the builder to cancel allotment of the flat and for the purposes, the appellant surrendered original receipt and allotment letter to the builder / developer. Copy of this letter addressed to the builder M/s. Neeta Developers was enclosed by the AO alongwith his remand report. It is further seen that in this letter dated 30.07.2009 of the 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. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 03.03.2011, and as such the event of booking of this flat is beyond the period of two years from the sale of original flat in Sahyadri Appts. Accordingly it cannot be said that the flat No. H-104 was 'purchased 'within the period of two years from the date of sale of the original flat no.17.02.2009. Therefore deduction under section 54 of the Act is not available to the assessee even toward the flat no. H 104. ix. The assessee 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 develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has not handed over to the assessee till date and further the subject flat has been registered in the name of the assessee till date. xiii. In view of the aforesaid facts and circumstances of the case it is clear that the first flat viz. Flat no B-203 against which the assessee has claimed deduction u/s.54 in his return of income actually was cancelled by the assessee within 2 days of booking i.e. on 30.07.2009 and therefore 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 Rs. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) , Nehru Nagar, Kurla (East), Mumbai-24 by the Builder-Neeta Developer. The assessee placed reliance on the decision of the ITAT , Mumbai in the case of Mukesh G Desai (HUF) v. ITO (2009) 120 TTJ 792 (Mumbai). It was submitted that there was no mala fide by the assessee and the said amount of payment of Rs. 26,00,000/- continued with the Neeta Developers since July 2009 although initially flat was cancelled 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 Rs. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the conduct of litigating party seeking admission of additional evidences at the appellate stage. The litigating party is not likely to gain any benefit from non production of such evidences which support and promotes its contentions and cause to seek relief rather non production of said evidences can lead Court to draw presumption against the said litigating party. The explanation offered by 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the proposed building at plot no. 6(pt.) situated at Nehru Nagar, Kurla East, Mumbai-400024. The builder -Neeta Developer allotted said new residential flat to the assessee on 3rd March, 2011 and acknowledged receipt of Rs. 26.00 lacs as EMD towards the said residential flat (page 78/pb). The Builder Neeta Developer issued allotment letter dated 15-10-2011 and appropriated Rs. 26 lacs as part consideration towards said new residential flat as against total consideration of Rs. 32.76 lacs (page 79/pb). The said builder also issued one receipt dated 25-07-2012 of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as acute shortage of housing in Mumbai. No doubt presently the real estate demand and supply position has changed which is tilted in favour of buyers and there is also an advent of stringent laws like establishment of Real Estate Regulatory Authorities to protect buyers from unscrupulous builders. Under these circumstances buyers in that era wherein 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took place and 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 fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Rs. 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 Rs. 32.76 lacs . The Builder later issued fresh letter of allotment on 15-10-2011 wherein the builder treated Rs. 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 Rs. 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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