High Court Of Gujarat
Nishith Surendrabhai Soni vs. Assistant Commissioner Of Income-Tax, Circle 10
Section 54F
Assessment Year 2009-10
Akil Kureshi And A.J. Shastri,JJ.
Special Civil Application No. 12151 Of 2014
July 4, 2016
JUDGMENT
Akil Kureshi, J. – The petitioner has challenged a notice dated 18.6.2014 issued by respondent Assessing Officer re-opening the petitioner’s assessment for the year 2009-2010.
2. The petitioner is an individual. For the assessment year 2009-2010, the petitioner had filed return of income on 27.3.210 disclosing total income of Rs. 43.86 lacs (rounded off). During the period relevant to the said assessment year, the petitioner had sold two immovable properties, namely, plot at Rancharda and an office in Agrawal complex, Ahmedabad for sale consideration of Rs. 2.84 crores (rounded off) and Rs. 30 lacs respectively. Out of such sale proceeds, the petitioner had claimed exemption of Rs. 2.75 crores (rounded off) under section 54F of the Income Tax Act, 1961 (“the Act” for short). His claim was based on investment made by the assessee in two residential plots being plot nos. 51 and 52 at Basantvihar complex, Bopal which the assessee acquired for sale consideration of Rs. 1.08 and Rs. 1.47 crores respectively.
3. The return of the assessee was taken in scrutiny. The Assessing Officer framed scrutiny assessment under section 143(3) of the Act on 13.12.2011. He made partial disallowance on the assessee’s claim for exemption under section 54F of the Act. To re-open this assessment, the Assessing Officer issued impugned notice which was beyond period of four years from the end of relevant assessment year. He supplied the reasons recorded for issuing such notice to the petitioner which read as under:—
“On verification of the case record of the assessee for A.Y.2009-10, it is noticed that the assessee has sold out the immovable properties i.e. Plot at A/1 Rancharda, Ta: Kalol, Dist: Gandhinagar and an office at SF-1, Agrawal Complex, Ahmedabad, Rs. 2,84,00,800/- and Rs. Rs. 30,00,000/- respectively. The assessee has claimed exemption of Rs. 2,75,84,239/- under section 54F of the Act against the capital gain araised on transfer of said assets. To claim exemption under section 54F of the Act, the assessee has made investment in two residential plots at plot nos. 51 and 52, situated within Basant Bahar complex forming part of non-agricultural residential use bearing Block nos. 565 and 614 of moje Bopal aof Dascroi Taluka, R. 1,08,60,000/- and Rs. 1,47,90,000/- respectively.
The assessee has made investment of capital gain so arised on transfer of long term capital assets in two residential plots. However, as per the provision of section 54F of the Act capital gain on transfer of capital assets not be charged to tax in case of investment made by the assessee in residential house. Section 54F of the Income-Act clearly speaks that the assessee has made investment in two residential plots whereas no such provision in the section 54F of the Act that the assessee should have to make investment in two residential plots. If assessee has made an investment in residential plot, he should have completed the construction activities of such house within three years from the date of transfer of original asset. But the assessee has not filed any proof of construction activities being carried over on the said plots of land during the assessment proceedings. Even though no such detail/information available on record, that the assessee has construction the new house on the said plots.
In the case, the assessee has not fulfilled the conditions as laid down in the section 54F of the Act, to claim exemption of the said capital gain on transfer of capital assets. The assessee himself has written that exemption against purchase of land under section 54F of the Act in the statement of total income. As per provisions of section 54F of the Act, no exemption allowable in case the assessee has made investment in land, the assessee should made an investment in residential house, not residential land. Even though the period about three years from the date of transfer of original assets was near about to be completed. The assessment proceedings under section 143(3) of the Act was completed on 13.12.2011 i.e. period near about three years from the date of transfer of original assets. As the assessee has claimed a huge exemption i.e. Rs. 2,75,84,239/- under section 54F of the Act, this issue should have been verified thoroughly and assessee should have filed sufficient evidences like completion of construction activities completed within the period as provided in section 54F of the Act.
As the assessee has not fulfilled the conditions of section 54F of the Act, an exemption of Rs. 2,75,84,239/- should have to be withdrawn and requires to disallowed and added to the total income of the assessee.
Tax effect comes to Rs. 56,27,183/- + interest.”
4. The assessee thereupon filed his objections against the notice for re-opening under his communication dated 17.7.2014. Such objections were however rejected by order dated 13.8.2014.
5. Learned counsel for the petitioner submitted that there was no failure on the part of the assessee to disclose truly and fully all material facts. Even reasons recorded by the Assessing Officer suggest that his conclusions are based on materials on record. Notices for re-opening beyond period of four years therefore, was invalid. The counsel further submitted that even otherwise, the Assessing Officer had examined the claim in detail in the original assessment. Any addition, now on the same ground would be based on mere change of opinion.
6. Counsel for revenue opposed the petition contending that the exemption under section 54F of the Act was not allowable since the assessee had invested the proceeds of capital assets in open land and not constructed any residential unit. The assessee thus made a wrong claim which was not covered under statutory provisions.
7. Perusal of the reasons would indicate that the assessee having sold long term capital assets, had claimed benefit of section 54F of the Act on the premise that part of the sale proceeds were invested in purchase of two non-agricultural use open plots. In this case, we are not concerned with the validity of the assessee’s claim. We are concerned with the notice for re-opening on the basis of reasons recorded by the Assessing Officer. In this respect, the reasons start with narration “on verification of the case record. . . . .”.
Thus, the conclusions of the Assessing Officer are based on verification of the case record. In other words, there was no material outside of the assessment proceedings which enabled the Assessing Officer to conclude that income chargeable to tax had escaped assessment. This element would be crucial since we are judging validity of the notice for re-opening which has been issued beyond a period of four years from the end of assessment year. Since therefore, there was clearly even according to the Assessing Officer, no failure on part of the assessee to disclose truly and fully all material facts, such notice could not have been issued.
8. Additionally, we have also perused the assessment proceedings, in context of the petitioner’s contention that this question was examined by the Assessing Officer during original assessment. Our belief that the assessee had disclosed full facts is reinforced while examining such contention. In this context, the assessment record would show that during such assessment, the Assessing Officer had raised demand for supply of various details under a letter dated 27.09.2011, one of them being residential proof in connection with exemption under section 54F of the Act. In reply to such query, the assessee had under letter dated 10.12.2011 supplied following information to the Assessing Officer:—
“4. (A) Copies of :
i. Sale Deed dated 11.2.2009 of Plot of Land at Rancharda, Ta: Kalol, Dist: Gandhinagar of Rs. 2,84,00,800/-.
ii. Sale Deed dated 21.11.2008 of office at SF-2, Agrawal Avenue, C.G. Road, Ahmedabad of Rs. 30,00,000/-.
(B) Two (2) Purchase Deed dated 20.6.2008 of Plot of Land at Shobhan Co. Op. H.S. Ltd., Vibhag I, Basant Bahar, Near Sterling Club, Bopal, Ahmedabad of Rs. 1,08,60,000/- and Rs. 1,47,90,000/-.
5. Regarding proof of claim of exemption under section 54F, attention is invited to the purchase of land for residence at (B) above and Computation of Income inclusive of unutilised Capital Gain R. 6,97,904/-.”
9. Thus, the petitioner had pointed out that he had purchased two plots of land under a deed dated 20.6.2008. We are informed that even these purchase deeds were produced on record. We have perused the deeds which clearly contain a narration that what was under sale was an open plot of land for non-agricultural use. After such detailed inquiry, the Assessing Officer passed order of assessment on 13.12.2011 in which in connection with the petitioner’s claim for exemption under section 54F of the Act, he provided as under:
‘During the year under consideration, the assessee has sold one property situated at SF/2, Agarwal Avenue, C.G. Road, Ahmedabad. In this regard, the assessee was called upon to furnish the copy of the purchase deed alongwith the details of cost of the property. On perusal of the purchase deed/Deed of Conveyance, it is seen that the purchase price/consideration of the property is Rs. 9,75,000/-. On further perusal of the said Conveyance deed, it is mentioned at Pg. No. 15 that ” All the expenses such as Stamp Duty, Registration Fees, Transfer fees etc. as also Solicitors/Advocates Fees and all other miscellaneous expenses in respect of the documents to be executed by the Vendor in favour of the purchaser both present and future shall be borne by the Vendor and Purchaser in equal proportions.” assesee has shown the total cost of the property of Rs. 44,86,390/-. Thus, it is clear from the said clause that, assesee has borne only 50% of the expenses whereas while computing the long term capital gain on sale of the property in question, the assesee has claimed the whole expenditure as cost of property inasmuch as the acquisition cost is taken at Rs. 10,48,000/-. The cost of the property includes the following:
Cost of property Rs. 9,75,000/-
Stamp Duty Rs. 73,150/-
Registration etc. expenses Rs. 14,950/-
Rs. 10,63,100/-
The representatives of the assessee was therefore confronted with this fact during the course of hearing on 16.12.2011 and asked to explain as to why the excess cost claimed should not be restricted and accordingly the LTCG should not be recomputed. The assessee has agreed for disallowance in respect of excess cost claimed. Accordingly, the LTCG is computed as under:
Working of LTCG
Total Sale consideration Rs. 3,14,00,800/-
Less: Indexed cost of acquisition in respect of SF/2, Agarwal Avenue, Ahmedabad 10,19,050x 582
Rs. 15,24,646/-
389
Indexed cost of acquisition in respect of Plot No. A/1, Rancharda-as per Statement of income Rs. 15,50,698/-
Rs. 30,75,344/-
Rs. 2,83,25,456/-
Less: Exemption under section 54 and Bank charges-as per statement of income Rs. 2,75,84,239/-
Long term capital gains. . . . Rs. 7,41,217/-
10. Thus, quite apart from the assessee’s placing full material at the disposal of the Assessing Officer, the claim was also examined by the Assessing Officer during assessment proceedings. Having accepted the claim in law, but having made partial disallowance considering the facts, it was thereafter not open for the Assessing Officer to issue notice for reopening, that too, without any additional material which would suggest that the assessee had made a false declaration or provided inaccurate particulars.
11. In the result, the impugned notice dated 18.6.2014 is set aside. Petition is allowed and disposed of.
[Citation : 387 ITR 99]
