ITAT Indore: Date of Possession of Flat to be taken for Section 54F exemption
Fact and Issue of the case
Brief facts as culled out from the records are that the assessee is a proprietor of M/s Vindhyachal Process Corp. and earning income from business, salary and other sources. A search operations were conducted u/s 132 of the Act at the business premises of Sagar Group located at 250, Sagar Plaza, M.P. Nagar, Zone-II, Bhopal which is commenced on 21.10.2011 and concluded on 22.10.2011. During the course of search various documents belonging to the assessee were found and seized as per Annexure LPS-3 pages 152 to 156 of the Panchnama dated 22.10.2011. After recording the reasons notice u/s 153C of the Act was served upon the assessee and in response thereto return of income for A.Y. 2010-11 filed on 07.10.2013, declaring income of Rs.27,36,540/-. Original return was filed on 15.10.2010 showing income of Rs.27,36,540/-. During the course of search assessment proceedings assessee was asked to furnish detail of investment out of Capital Gain Account Scheme deposit of Rs.23,00,000/- and also asked to show cause why deduction claimed by the assessee be not rejected as the conditions of section 54B of the Act are not fulfilled. Ld. Assessing Officer also observed that the assessee has sold agricultural land during F.Y. 2007-08 for a consideration of Rs.25,00,000/- and to avoid liability of long Term Capital Gain Tax made deposit in the Capital Gain Account Scheme at Rs.23,00,000/-. In reply assessee submitted that within one year before the date of sale of the land, the assessee had purchased a residential flat at Pune. Inadvertently due to wrong advice by the consultant, investment was made in the Capital Gain Account Scheme at the time of filing original return of income even though the assessee was eligible for deduction u/s 54F of the Act. It was also submitted that the return in compliance to notice u/s 153C of the Act should be treated as the final and correct return of income and the original return should not be considered for assessing the income. However, Ld. Assessing Officer was not satisfied and he was of the view that the actual date of sale of land is 28.12.2007 and not 06.12.2007 and the residential flat at Thane was purchased on 12.12.2006 and not on 10.02.2007 claimed by the assessee and therefore since flat was not purchased within one year of date of sale of land claim made u/s 54F of the Act at Rs.22,99,270/- cannot be allowed. Ld. Assessing Officer accordingly added back the deduction claimed in A.Y. 2008-09 for deposit in Capital Gain Account and assessed the income at Rs.50,35,810/- and also agricultural income at Rs.50,000/-.
Aggrieved assessee preferred an appeal before the ld. CIT(A) challenging the addition of Rs.22,99,270/- but failed to succeed as Ld. CIT(A) confirmed the view taken by the Ld. AO. Aggrieved assessee is in appeal before Tribunal raising a legal issue in the additional ground and also has challenged the quantum addition.
Observation of the Tribunal
The Court will first take up the legal issue raised by the assessee in the additional ground challenging the validity of the assessment order on the ground that proper satisfaction has not been recorded by the Ld. Assessing Officer of the searched person and absence of satisfaction u/s 153C of the Act renders the assessment proceedings u/s 153C of the Act illegal void and 9 without jurisdiction. The court find that the Revenue has filed the following copy of satisfaction note on 03.03.2020 prepared by the Ld. Assessing Officer of the searched person after examining the seized records of the M/s Sagar Group wherein search was conducted on 21.10.2011.
As regards the grounds raised on merits we find that the assessee sold agricultural land vide registered deed dated 28.12.2007 for a consideration of Rs.25,00,000/-. Possession of the said land was given on 06.12.2007. Indexed cost of acquisition of the land was Rs.2,00,730/-. Net Long Term Capital Gain was Rs.22,99,270/- from sale of said land. There is no dispute for the Long Term Capital Gain of Rs.22,99,270/-. Assessee deposited Rs. 23,00,000/- in Capital Gain Account Scheme on 29.09.2008 and claimed the deduction in the return of income filed for A.Y. 2008-09 on 30th September 2008. Subsequently, when the assessee was issued a notice u/s 153C of the Act he again filed the return of income declaring same income as was shown in the original return of income. However, in the computation of total income attached with the return of income filed on 07.10.2013, the assessee made change in the deduction claimed against the Long Term Capital Gain of Rs.22,99,270/- by claiming deduction u/s 54F of the Act at Rs.22,99,270/- ( as against the deduction for deposit in Capital Gain Account Deposit Scheme of Rs.23,00,000/- made in the original return of income), for purchase of a residential flat at Thane, Mumbai on 10.02.2007.
Both the lower authorities were not satisfied with this claim and added the Long Term Capital Gain claimed as deduction for deposit in Capital Gain Account during A.Y. 2008-09, as income for A.Y. 2010-11 alleging that the amount deposited in Capital Gain Account Scheme has not been utilised for the purpose for which it was stated at the time of filing the original return of income. We observe that the assessee filed the revised return in compliance to notice u/s 153C of the Act. Once a revised return is accepted by the department, the original return losses it existence. In the instant case since the Ld. Assessing Officer has accepted the revised return, there remain no reason to refer to the original return and the information mentioned therein. The assessment proceedings impugned before us are based on the 13 revised return filed in compliance to notice u/s 153C of the Act.
Since the addition in the instant appeal crops out of the issue referred above pertaining to A.Y. 2008-09, we will have to examine the correctness of the claim made by the assessee u/s 54F of the Act for A.Y. 2008-09. As far as sale of land is concerned it was sold vide deed executed on 28.12.2007, placed at pages 12 to 19 of the paper book. The stamp used for registering the sale documents are dated 28.12.2007. Both the parties have signed before registering authorities on 28.12.2007. For sale of this land an agreement was entered on 06.12.2007 and part payment of Rs.15,00,000/- was made. Since, the final payment was made on 28.12.2007 for all good reasons the date of sale of land is 28.12.2007.
Now for claiming deduction u/s 54F of the Act as made by the assessee in the revised return of income assessee is required to purchase the residential house within one year before the date of sale or two years after the date of sale or should have constructed residential house within three years from the date of sale. The assessee has claimed that it has purchased residential house within one year before the date of sale in the form of flat at Thane, Mumbai claimed to be purchased on 10.02.2007. The assessee has stated that the sale deed for purchase of residential flat is dated 12.12.2006 but the possession was given on 10.02.2007. This is the only point of difference between the revenue authorities and assessee. The revenue authorities have claimed that the flat was purchased on 12.12.2006 and assessee’s claim the date of purchased as 10.02.2007. From perusal of records we find that registered sale deed placed at pages 20 to 34 was executed on 12.12.2006 but on perusal of paper book pages 35 to 38 we find that the possession of the said flat was given to the assessee on 10.02.2007. The transfer of residential flat in favour of the assessee is completed only when the possession is given i.e. 10.02.2007. On adopting the date of purchase of flat on 10.02.2007 the assessee’s claim for section 54F of the Act would be valid as it is within one year.
We also find that the revenue authorities have adopted the date of sale of land on the basis of registered sale deed dated 28.12.2007 but have not considered the date of possession given by the assessee of the said land on 06.12.2007 but for the purchase of flat revenue authorities have adopted the date of purchase as the registered deed i.e. 12.12.2006 but not 15 considered the date of possession of flat received by the assessee on 10.20.2007. If for sake of academic discussion the basis of possession of the immovable property is taken then also the assessee succeeds as the date of sale of land would be 06.12.2007 and purchase of flat would be 10.02.2007.
We, therefore, under the given facts and circumstances of the case, are of the considered view that the assessee has rightly claimed the deduction u/s 54F of the Act for purchase of residential flat on 10.02.2007 which is within one year from the date of sale of the land on 28.12.2007( when the total payment for sale of land was received) and since we have held the claim of section 54 F of the Act for deduction against Long Term Capital Gain at Rs.22,99,270/- as valid, the impugned addition of not utilizing the deposit in Capital Gain Account Scheme will not stand for and therefore, the addition made by the Ld. Assessing Officer of Rs.22,99,270/- stands deleted. We thus set aside the finding of Ld. CIT(A) and allow the grounds no.3 & 4 raised on merit by the assessee. Other grounds are general in nature which needs no adjudication. In the result, assessee’s appeal is partly allowed.
The tribunal has disposed off the appeal and ruled in favour of the assessee.