TMI Blog2019 (1) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... passed the assessment order. Hence, the utilization or non-utilization and any related non-compliance or failure on part of the assessee is an event subsequent to the year under consideration and the same cannot be made the basis for denial of exemption for the impunged assessment year once it has been demonstrated that the amount has been deposited in an account in substantial compliance with the provisions of sub-section (4) to section 54F. Thus in the entirety of facts and circumstances of the case, the assessee is held eligible for exemption under section 54F for the impugned assessment year and the Assessing officer is directed to allow the same. See ACIT vs Dr S. Sankaralingam [2018 (12) TMI 397 - ITAT CHENNAI] - decided in favour of assessee - ITA. No. 517/JP/2013 - - - Dated:- 11-1-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Mahendra Gargieya (Adv.) For the Revenue : Shri Varindar Mehta (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-II, Jaipur dated 04.03.2013 for Assessment Year 2009-10 wherein the assessee has taken the following gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on record. It was further submitted that the assessee was not assisted by any tax consultant at the time of opening up of the account and when the bank itself has represented that it is going to open the capital gain account, no fault could be found with the assessee in its belief of compliance with the relevant provisions of the Act. Though the assessee may be aware of the broad provision and compliance of the law, one cannot expect the assessee to be aware of very minute provisions which needed deep understanding of the provisions of the Act. This contention further finds support from the fact that this was the first return of income of the assessee. It was further submitted that the assessee even deposited the refund of TDS by RIICO which was of substantial amount in the same bank account and has there been any doubt regarding this being a capital gain account, the assessee would never have deposited the same in that account. It was further submitted that the assessee has duly disclosed the bank account number in its return of income as well as in the computation of total income enclosed with the return of income. Thus there was no concealment of any fact and whatever informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of LTCG of ₹ 3.47 crores shown in the original ROI and ₹ 3.59 crores in the revised ROI and held that contention of unawareness cannot be trusted. Whereas the very fact that the appellant in the original ROI wrongly considered a different figure but corrected in the revised ROI proves that he was not aware of the taxation laws and its complexities. 6. It was further submitted that the appellant undisputedly made deposits of the entire amount received ₹ 3,20,04,256/- (after TDS) and even the TDS refund of ₹ 39,34,824/- was also deposited in the bank a/c as per his limited knowledge. Unfortunately even the ld. CIT(A) herself wrongly stated that the assessee deposited only ₹ 3.20 crores completely ignoring that TDS of ₹ 39,34,824/- which was already deducted and not given to the assessee. The assessee therefore, declared the entire compensation of ₹ 3.59 crores in revised ROI. Thus, when the CIT(A) herself committed a mistake how a layman can be expected. A note on the revised ROI, clarification vide letter dated 17.06.2011 and 28.01.2011, were completely ignored hence, no wrong information as such was provided. No bad motive was shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him if he still required the assessee to transfer the funds to some other capital gain a/c vide letter 17.06.2011 but the ld. AO kept a silence. The appellant, thereafter, when attachment was lifted from the said account, transferred the funds to a Nationalized Bank, Union Bank of India meaning thereby the appellant did make all the possible efforts to comply the law with the best of his understanding and capabilities. No bad motive was shown by the AO. The assessee always intended to construct a new house. 10. The ld AR drawn our reference to CBDT circular No.14 dated 11.04.1955 wherein the CBDT has emphasized that the AO should guide the assessee so that the correct income is assessed as per the provisions of the Act. In this circular, the CBDT has emphasized that the Department should not take advantage of the assessee s ignorance. Even the ld. CIT(A) was silent on this aspect. In support, reliance was placed on the cases of Smt. Rajrani Gulati v/s. CIT (2012) 249 CTR 51 (All.), ACIT v. Technofab Engg. Ltd. (2009) TIOL 664 ITAT (Del.). 11. It was submitted that above facts thus, clearly show that a substantive compliance of the law was made by the appellant. The legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain in the flexi deposit scheme in the bank. The assessee claims that he has handed over the cheques to the branch manager to deposit the same in capital gain scheme account but he invested in the flexi deposit scheme of the bank although the assessee s intention was always to invest in the capital gain scheme account. The assessee was always under the bonafide belief that the amount has been invested in the capital gain scheme account only. The copy of letter written by the assessee to the branch manager for forwarding the cheques shows that the intention of the assessee was to invest in capital gain scheme account (copy placed at page 20 of the paper book). The request made to the bank manager was to open a capital gain scheme account. This intention of assessee was always to reinvest in the scheme which qualify for the exception of capital gain tax. Further, the assessee has invested ₹ 2 crores in the purchase of the new house by 23.04.2008 Though the Revenue challenged that same before the Hon ble Punjab and Haryana High Court in ACIT vs Shri Jagtar Singh Chawla (2013) 259 CTR 388/ 87 DTR 217 (P H), but this particular aspect was not at all challenged and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new residential house at 10, Jaishree Nagar, Opp. Malviya Nagar sector-8, Jaipur for ₹ 79,08,495/- (including cost of land of ₹ 41 lakhs). 14. In this regard, our reference was drawn to the written submissions dated 21.11.2011 filed during the course of assessment proceedings and the relevant extracts thereof which reads as under: --------- Report Certificate of Registered Valuer as Well as Inspection of Deptt. Shows Incomplete Structure: A perusal of the report of the registered valuer will show that even the assessee could not complete the flooring, painting, door window work etc. (refer para 12 of the report). Besides in para 9 also, the property has been shown as incomplete. Thus it was beyond imagination to use the same for residential purposes where even the basic work could not be completed. Even in your inspection, the deptt. must have found incomplete construction here and there and absence of wall within the hall as seen from the photographs. Your goodself has considered the property as commercial only from the angle of the current use but the fact is otherwise. Property Given on Lease only w.e.f. 15-10-2011: It is submitted that the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table and as under: He was asked whether the building visited and valued by him i.e. 10, Jaishree Nagar, Jawahar Circle, Jaipur was residential or commercial. He stated that it was incomplete commercial structure (Q.No.-5). Secondly, a perusal of the report of the registered valuer will show that a substantial part of construction was pending and even the appellant could not complete flooring, painting, door window work etc. (refer para 9 12 of the report). Hence it was an incomplete structure only. It was beyond imagination to use the same for residential purposes where even the basic work could not be completed. Thus, it was premature to say whether the subjected construction was residential/ commercial/ something else. There was a toilet already existing at the ground floor and a hall was constructed based on load bearing structure and hence by creating partition walls, rooms could be created to serve the purpose of a house. This was relied upon even by the Approved Valuer himself. 17. It was further submitted that the law contemplates the nature of property to be of residential primarily in the period of 2/3 yrs which can also continue in the same nature but this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill Aug 2008. And in any event the purchase of land qualifies for relief as per the CBDT circular 667 dt 18-10-1993, 204 ITR St 103. 20. It was further submitted that the appellant who is basically a farmer belonging to a Thakur family of village Ranoli district Sikar. The original land on which the assessee was to construct a house, when acquired, the appellant purchased the present land for constructing his own house. The appellant having being resident of a village was used to big and open space. Therefore, while shifting to the city, he dreamed and planned the construction of a big size house providing the same feel and comfort to the extent possible. The family of the appellant consisted of himself, two brothers, with parents at that time. There is no separation in the family till date and they always resided and continues to reside as a one single unit. Because of this strong bonding, the appellant wanted to ensure proper space for his parents, other two brothers and the other cousins. The hall at the ground floor was constructed with a view to have a large size drawing room ( बैठक ) were planned. The construction of the bed rooms, kitchen, toilet e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it is an established principle of law that a person cannot be expected to perform something which is impossible. The well settled principle is that law does not compel doing impossibilities-impossibilium nulla obligatio est. There is no obligation to do impossible things. The ld. Assessing officer wanted the appellant to perform/fulfill a condition which was impossible to perform in as much as Sec.54F permitted to invest sale consideration in the purchase/construction of new house within a period of 2/3 years from the date of sale (when assessee got compensation) i.e. 16/07/2008 and accordingly, the last date for construction of new house was 16.07.2011 whereas the bank a/c with HDFC wherein the entire sale consideration was deposited, was already stood attached u/s 281B vide order no. 1497 dated 01.12.2010 hence no withdrawal or transfer was permissible. Various requests of the appellant dated 09.12.2010, 18.01.2011,28.01.2011 and 12.05.2011 and thereafter even on 12.12.2011, were not considered/rejected and such attachment was further extended for next 6 months vide letter no. 790 dated 01.06.2011 and even further extended for next 6 months i.e. upto 30.06.2012 vide le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence a judgment debt is not sustainable-However, facts demonstrate beyond doubt that the assessee had bona fide made all possible efforts to comply with the order of the IT Department under s. 195(2)-Issues were not within the assessee s control-Assessee has approached each and every forum and Court with a plea that he be allowed to comply with the order passed under s. 195(2) passed by the AO-Courts of Appeal in UK have not permitted it to comply and on the other hand, by directing the assessee to pay the amount into the escrow account of the solicitors, for which even the RBI permitted and thereafter allowing C to withdraw the same, made it impossible for the assessee to deduct tax at source and put the issues beyond the control of the assessee-Doctrine of impossibility of performance applies in all force in this case-Due to uncontrollable circumstances, the performance of the obligation to deduct tax at source and remit the same to the Government became impossible-Under the peculiar facts and circumstances of the case, the assessee cannot be held to be an assessee in default in terms of ss. 201 and 201(1A) In case of Jagdish Malpani v/s ACIT (2005) 94 TTJ 321 (Ind), it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , used to remain much below the prevailing Fair Market Prices and this way, what the assessee could get, was hardly 20% of the prevailing Market Prices and hence the assessee has been put to a great loss and made to suffer on many counts. Considering this aspect, the mere fact of deposit in a Private Bank but not in the designated account was not such a big default (if assumed) so as to deny the whole benefit of the deduction. 27. Needless to say, it is only because of the ignorance of the assessee, who was not much conversant with the complexities of tax laws to take care of such a complicated requirement of law, which even an educated tax payer perhaps could not have known unless advised. Further the awareness program about the provisions of the Income Tax Act existing in a lucid manner, for a layman citizen, is not easily available in our country. The underline purpose having already been achieved being that the subjected sales considerations being out of the pocket of the assessee, it has come into the productive national use as per the intention of the legislature. Thus taking a circumspect view of the entire issue in hand, the assessee fully deserves the benefit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of depositing the compensation received by the appellant. The Bank Manager of HDFC in his affidavit dated 10.03.2015 has affirmed as under: ------------------- --------- The AO during the course of remand proceedings has also recorded the statement of Shri Ashok Kumar Taksali, the then Branch Manager of HDFC Bank. In his statement also, he confirmed that he accepted the deposit in the bank account of the appellant as capital gain account. The appellant has withdrawn the money from the HDFC Bank only for constructing the property. No other investment out of this bank account has been made by the appellant. The compensation deposited but the appellant in HDFC Bank account could not be utilized fully as the AO has attached the bank account on 01.12.2010. In view of the affidavit and statement of Shri Ashok Kumar Taksali, the then Branch Manager of HDFC Bank and keeping in mind the fact that the assessee had first time file the return of income and he was an agriculturist, the contention of the appellant that he had no intention of concealing any particulars of income and he had opened the bank account in HDFC Bank with bonafide belief that it was capital gain acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sense that the amount received from the buyer of the original assets should only be used for purchasing/construction of new residential house. As an interim measure, the assessee has to deposit the net consideration in a capital gain deposit account maintained with a nationalized before the due date for filling of the return and thereafter, the assessee will have to withdrawn the money from that account for making investment in residential house. However, in the instant case, the assessee has deposited the sale proceeds in a normal saving bank account and if any bank employee has given a certificate which is not correct, even then benefit of section 54F cannot be allowed to assessee. It was submitted that the legislature has allowed some relaxation to the taxpayers by allowing them the time relaxation for investment in residential house. It is clearly mentioned in section 54F of the Act that in case the assessee fails to utilize the amount before the date of filing of return or 6 months then he had an option to deposit the unutilized amount in Capital Gain Account Scheme. In the instant case, the assessee has failed to deposit this amount in the specified account, therefore, exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in specified period of 2 years and 3 years. Thus long term capital gains from sale/acquisition of land was rightly assessed at ₹ 3,55,40,752/- and added to the total income of assessee. 35. Further, our reference was drawn to the order of the ld CIT(A) who has confirmed the findings of the Assessing Officer and her relevant findings are reproduced as under:- 10. After going through rival submissions, following points emerge:- 1 Amount of compensation of ₹ 3,59,39,080/- received by the appellant on acquisition on land by RICCO is not disputed. Neither the date of transfer as 16.7.2008 is disputed. 2. For availing exemption u/s 54F the net consideration not used for purchase or construction of a new residential house has to be deposited only in a Capital Gains account. Statute does not say that it can be deposited in a savings bank account. The appellant made a wrong claim in the return that the amount had been deposited in a Capital Gains account. He quoted Capital Gains Account Scheme 1998: 34729250 in the first return filed. Copy of computation showing this wrong information is enclosed as Annexure-1 of this order. In the revised return computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from the points discussed in para 10 above the amount of consideration was NOT deposited in the Capital Gain Account by the appellant, which is now accepted by the appellant also and neither the capital gains was used in construction of a residential house, section 54F credit was rightly denied by the AO, however in the interest of justice capital gains shown at ₹ 3,42,31,39. In the computation filed by the appellant should be taken for taxation of LTCG instead of ₹ 3,55,40,752 taken by the AO because indexed cost of improvement for boundary wall constructed several years back and other incidental expenses like brokerage claimed should be allowed to the appellant in the interest of justice. 36. We have heard the rival contentions and perused the material available on record. The issue under consideration relates to denial of deduction U/s 54F of the Act to the assessee. It would be appropriate to refer to the provisions of Section 54F of the Act, relevant for the impunged assessment year, which reads as under: 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of subsection (1) shall be deemed to be income chargeable under the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions and the quantum of investment made in the new residential house. The above is the primary condition for availing exemption under section 54F of the Act. However, sub-section (1) which contains the said primary condition is subject to sub-section (4) to Section 54F of the Act. It provides that the amount of net consideration which is not appropriated by the assessee towards the purchase/construction of the new residential house before the date of furnishing the return of income U/s 139, it shall be deposited by him in an account in such bank or institution as may be specified as may be specified and the same shall be utilized in accordance with the scheme notified by the Central Government in this regard. Where the amount is so deposited before furnishing the return of income and such deposit is made not later than the due date for furnishing the return of income u/s 139(1), the amount so deposited shall be deemed to be the cost of the new asset for the purposes of sub-section (1) of section 54F of the Act and will thus be eligible for deduction. 38. The legislature has thus framed the scheme in such a manner that the assessee would be eligible for exemption U/s 54F of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia provides for computation of total Income and for that purpose, sets out the various heads of income. Part E of Chapter VI deals with the head of income viz. Capital Gains. It provides for Computation of Capital gains and also for exemption available thereunder. Section 54F of the Act introduced into the Act with effect from 1st April, 1983 by the Finance Act, 1982 provides exemption from Capital gain on transfer of any long term capital asset in case the same is invested in a residential house. However, the Section when introduced provided that any capital gain arising from transfer of long-term capital asset would not be chargeable to capital gains tax, if the same were utilized for purchase of an housing accommodation within a year before or after the date on which the transfer of an capital asset took place or was used for construction of a residential house within a period of three years from the date of transfer of the Capital Asset. (f) Thus, Section 54F of the Act as incorporated made available the benefit of exemption to purchase a house within one year (amended to two years) or construct a residential house within a period of 3 years from the date on which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as Capital Gains Accounts Scheme, 1988 which has been notified for the purposes of availing exemption u/s 54F(4) and other similar provisions of the Act and the salient features of the said scheme reads as under: Deposits how to be made. 3. A deposit or deposits may be made under the provisions of section 54 or section 54B or section 54D or section 54F or section 54G or section 54GB of the Act by any depositor intending to avail of the benefit under the said section or sections of the Act, as the case may be, in accordance with the provisions of this Scheme. Types of deposits. 4. (1) There shall be two types of deposit accounts, namely :- (i) Deposit account-A ; and (ii ) Deposit account-B . (2) The deposit made under account-A shall be in the form of savings deposit and subject to the other provisions of this Scheme, withdrawals under this account can be made from time to time by the depositor. (3) The deposit made under account-B shall be in the form of term deposit with an option to the depositor to keep the deposit as cumulative or non-cumulative deposit. Except as provided under paragraph 7 and paragraph 9, withdrawals under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 8, with effect from the date of deposit in cash or the date of realisation of the proceeds of the cheque or the draft tendered by the depositor. (8) In the case of deposit under account-A, the deposit office shall issue a pass book to the depositor wherein all amounts of deposits, withdrawals, together with interest due, shall be entered over the signature of the authorised officer of the deposit office. (9) In the case of deposit under account-B, deposit office shall issue a deposit receipt wherein the principal amount of deposit, date of deposit, date of maturity of deposit, shall be entered over the signature of the authorised officer of the deposit office. Utilisation of the amount of withdrawal 10. (1) A depositor, withdrawing any amount out of the deposit made in pursuance of sub-section (2) of section 54 or sub-section (2) of section 54B or sub-section (2) of section 54D or sub-section (4) of section 54F or sub-section (2) of section 54G or sub-section (2) of section 54GB , shall utilise the whole or any part of the amount so withdrawn for the purposes specified in sub-section (1) of the section in relation to which the deposit has been made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer who has jurisdiction over the deceased depositor, and the deposit office shall pay the balance standing to the credit in the account of the deceased depositor including the amount of interest accrued, by means of crediting such amount to any bank account of the legal heir : Provided that where there are more than one legal heir of the deceased depositor, the legal heir making the claim individually may do so by producing the letter of disclaimer or letter of authorisation from other legal heirs in his favour : Provided further that before granting the approval for closure of the account under this sub-paragraph, the Assessing Officer shall obtain from the legal heir a succession certificate issued under Part V of the Indian Succession Act, 1925, or a probate of the will of the deceased depositor, if any, or letter of administration to the estate of the deceased in case there is no will in order to verify the claim of such legal heir to the account of the deceased depositor. (4) The depositor or the nominee or the legal heir, in order to obtain payment of the amount standing to the credit in the account shall while applying in Form G or Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also emerging from perusal of records that the assessee was already having a bank account with Oriental Bank of Commerce since 11.08.2005, yet the new bank account with HDFC Bank was opened on 20.07.2008 specifically for the purpose of depositing the compensation received by the assessee. Subsequently, the assessee has purchased a plot of land measuring 381.11 sq yards situated at Plot No. 10, Mitra Grirh Nirman Sahkari Samiti Ltd, Jayshree Nagar, Malviya Nagar, Jaipur from Jaishree Kanwar vide sale deed executed on 19.08.2008. The said plot of land was purchased for ₹ 41 lacs and the amount of ₹ 40 lacs was paid through cheque cleared on 12.09.2018 from the aforesaid savings bank account maintained with HDFC and balance ₹ 1 lacs withdrawn from the said account. The assessee has thereafter carried out certain construction on the said plot of land and has spent ₹ 38,08,495 on such construction which is withdrawn from the said bank account. The return of income for the impunged assessment year was filed on 30.07.2009 wherein the assessee has claimed exemption U/s 54F of ₹ 3,47,29,250 which was subsequently revised at ₹ 3,42,31,397 in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re from the compensation received by the assessee from compulsory acquisition of his land by RIICO and the Revenue has equally not disputed that there are any withdrawals other than for the purposes of purchase of plot of land and construction thereon. 42. Further, it is noted that during the course of assessment proceedings, the assessee has submitted that he was given to understand at the time of account opening by the Branch Manager of HDFC Bank that they would open a capital gain accounts and thus, the assessee was under a bonafide belief that it is the capital gain account which has been opened and in support, certificate dated 11.11.2009 of Branch Manager has been furnished. The said understanding has however been found to be incorrect on subsequent verification by the AO where he found that the account was a normal saving account. Interestingly, during the appellate proceedings (in context of penalty proceedings arising from the impunged transaction), the Branch Manager of the HDFC Bank has subsequently filed an affidavit dated 10.03.2015 and during the remand proceedings, his statement has also been recorded by the Assessing officer where he has again confirmed that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years from the date of sale of the asset which in the present case is for the assessment year 1993-94. 44. At this stage, we may also note that the subject bank account of the assessee was attached by the Department from 1.12.2010 and remain attached atleast till 30.06.2012, therefore, there is no way the assessee could have met the deadline of 16.7.2011 for constructing the new house, being three years from the date of transfer of the original land and the period during which the bank account remain attached has to be excluded as no fault lies with the assessee. In the interim, the assessment order was passed by the Assessing officer on 5.12.2011. In such a situation, firstly, when the bank account of the assessee was attached, how can he be expected to have utilized the amount so deposited in the said account within the prescribed period and secondly, there is no way, the Assessing officer could have verified such utilization by the time he passed the assessment order. Hence, the utilization or non-utilization and any related non-compliance or failure on part of the assessee is an event subsequent to the year under consideration and the same cannot be made the basis for deni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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