Section 54/54F consider adjoining residential properties to be a single unit

Facts and issue of the Case

The assesse raised the following grounds of appeal

1. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant against the order passed by the Learned Assessing Officer (Ld. AO) which is bad in law, invalid and unjustified.

2. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant and in not appreciating that the notice issued under Section 148 of the Income Tax Act, 1961 wrongly stated that the assessee has not filed return of income for the relevant year thus the notice was issued without verification of records, application of mind and making any enquiry; hence deserves to be treated as invalid.

3. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant and in not considering the submissions of the appellant that assumption of the jurisdiction under Section 147 of the Income Tax Act 1961 without specifying that how the appellant had not declared fully and truly all material facts necessary for his assessment for that assessment year is invalid and the assessment is unwarranted in the eyes of law.

4. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant without appreciating that the approval given by the Ld. PCIT under Section 151 of the I.T.Act, 1961 is without independent application of mind.

5. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant and in disallowing the deduction under Section 54F of the IT. Act, 1961 amounting Rs. 17,61,581 without verifying the facts and without considering the submission of the appellant.

6. That the Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant completely ignoring the applicable judicial precedents from different High Courts including the jurisdictional High Court of Punjab and Haryana.

7. That the grounds of appeal are without prejudice to each other.

8. That the appellant respectfully craves to add, amend, alter and /or forego any ground at or before the time of hearing.

At the time of hearing, no one was present on behalf of the assessee. The appeal was passed over. In the second round also, the position remained the same. The assessee was neither present nor represented. However, considering the material available on record, it was deemed appropriate to proceed with the present appeal ex- parte qua the assessee appellant on merits after hearing ld. Sr.DR.

Before addressing the specific issue agitated in the appeal, it is necessary to address the delay of four days pointed out by the Registry in the filing of the present appeal by the assessee. The assessee’ s application is available on record pleading that the copy of the impugned order shown to be dispatched on 11 . 01 . 2020 was received on 14 . 01. 2020 . It has been submitted that if the limitation from thereon is considered then the appeal of the assessee filed on 07 . 07. 2020 is not delayed. The ld. Sr. DR was required to argue the appeal. She relied on the orders.

The relevant facts of the case are that qua the Long Term Capital Gain available to the assessee in the year under consideration deduction u/s 54 of the Act was claimed. The said claim was disallowed holding that the proceeds have been applied to acquiring two separate properties. The assessee has pleaded that these were adjoining properties and may be treated as a single unit in terms of various decisions available. However, the said request was not accepted. The ld. CIT( A) has dismissed the appeal on the legal issue and has held that the assessee has not argued anything further.

The attention of the ld. Sr.DR was invited to the statement of facts recorded by the ld. First Appellate Authority in page 2 of the impugned order itself where it is claimed that two adjoining houses were purchased. Hence, the claim was allowable. The ld. Sr.DR could not controvert the argument. For the record, reliance was still placed on the impugned order.

Observation by the Court

The court had heard the submissions and perused the material on record. On a consideration of the facts and circumstances as available on the record itself, I find that the impugned order cannot be upheld. Before elaborating the reasons on the basis of which the said conclusion has been arrived at, it is necessary to address the grievance of the assessee before the First Appellate Authority. A perusal of the same shows that the following grounds were before the CIT( A) :

(i) That the order passed by the Ld. AO is bad in law invalid and unjustified.

(ii) That the AO has erred on facts and in law in issuing the notice u/s 148 of the Income tax 1961 wrongly stating that the assessee has not filed return of income for the relevant year thus the notice for the relevant year thus the notice has been issued without verification of records, application of mind and making any inquiry, hence deserves to be treated as invalid, (iii) That the AO has erred on facts, and in law in as summing the jurisdiction u/s 147 of the IT Act, 1961 without specifying that how the appellant has not declared fully and truly all material facts necessary for his assessment for that assessment year.

Thus the reasons recorded are invalid and the assessment is unwarranted in the eyes of law.

(iv) That the Ld. CIT has erred on facts and in law in grating the approval as the approval has been granted without independent application of mind.

(v) That the AO has erred on facts and in law in making the assessment at an income of Rs.21,11,011/- against the returned income of Rs.3,49,430/- after disallowing deduction of Rs.17,61,581/-.

(vi) That the AO has erred on facts and in law in disallowing the deduction u/s 54F of the ‘ IT Act, 1961 amounting Rs. 17,61,581/- without verifying the facts and without considering the submission of the appellant.

(vii) That the AO has erred on facts ad in law in disallowing the deduction u/s 54F of the IT Act, 1961 amounting. Rs. 17,61,581/- completely ignoring the applicable judicial precedents from different High Courts.

(viii) That the AO has erred on facts and in law in disallowing the deduction u/s 54F of the IT Act, 1961 amounting Rs.1761.581/-ignoring the fact that the amendment to Sec.74.F was made with effect from 01.04.2015 and is not relevant to the case of appellant.

(xi) That the AO has erred on facts and in law in levying the interest u/ s 234B and 234C of the IT Act, 1961.

(xii) That the appellant respectfully craves to add, amend alter and or forego any ground at or before the time of hearing.

Before parting, it is my painful duty to record wherein the facts of the present case where the assessee is shown to be a senior citizen. The obdurate attitude of ignoring the written pleadings on record are most unfortunate. Unfortunately such arbitrary orders reek of a backlog of a colonial mind set. It needs be kept in mind that the Tax Authorities are acting as servants of the Government of India. Hence, are expected to be live and alert to the citizens for whom and on whose behalf, the functionaries of the State act. In the blind race of showing high disposal the careless ignoring of facts pleaded causes unaccounted harm to the reputation and fairness of the Tax Administration. It erodes the trust and faith of the citizens in the fairness of the functioning of the tax administration. It not only causes harassment to the citizens but also reflects on the arbitrary functioning of the tax administration. Such a reputation and record should not be created.

Accordingly, with the above observations, the impugned order is set aside back to the f ile of the AO with the aforesaid directions. Said order was pronounced in the Open Court at the time of hearing itself.