C.i.t., Ludhiana v. Ita

ITA No. 808 of 2010 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Smt. Rekha Rani C.I.T., Ludhiana Versus ITA No. 808 of 2010 (O&M) Date of Decision: 13.1.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. S.K. Mukhi, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.Delay in refiling the appeal is condoned. 2.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 21.10.2009 passed by the Income Tax AppellateTribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as“the Tribunal”) in IT(SS) A. No. 3/CHD/2007 for the block period from1.4.1990 to 12.10.2000, claiming the following substantial questions oflaw:- “I. Whether, on the facts and in the circumstances ofthe case, the ITAT was justified in confirming theaction of A.O. and of the CIT(A) in not allowingdeduction as claimed by the appellant u/s 54(1) of the Income Tax Act, 1961 wherein she has dulyinvested her share of sale consideration for thepurchase/construction of the new asset within thestipulated period by completely ignoring the facts andcircumstances, explanations, evidences filed and onrecord and also the case law as relied upon by theappellant? II. Whether, on the facts and in the circumstances of thecase, the findings of ITAT are perverse and againstthe evidences on record thus unsustainable in law? III. Whether the ITAT has misdirected itself in beinginfluenced by irrelevant factors and applyingerroneous criteria while deciding the issue indispute?” 3.The facts necessary for adjudication as narrated in theinstant appear are that the assessee was co-owner of residential housesituated at the Mall Road, Ludhiana. The said house was sold for asale consideration of Rs.99,00,000/- and the assessee received a sumof Rs.9,90,000/- on account of her 10% share. The assessee depositedthe said amount with M/s Tulison Balls, a proprietary concern of herhusband, who along with his mother started construction of a newhouse at Sarabha Nagar, Ludhiana, out of their respective shares in thesaid property. The husband of the assessee spent his share amount aswell as that of the assessee in the construction of said house whereasthe registry of the plot was in the names of the husband and the mother-in-law of the assessee. The assessee claimed set off of long term capital gains arising on the sale of her share against investment inconstruction of the House No. 45-D, Sarabha Nagar, Ludhiana. TheAssessing Officer held that the declaration dated 25.10.2002 of theassessee was not correct. Further, the Assessing Officer whiledisallowing deduction on account of Long Term Capital Gain amountingto Rs.8,26,650/- retained the total undisclosed income of Rs.8,32,800/-.The assessee filed an appeal before the Commissioner of Income Tax(Appeals) [in short “the CIT (A)”] who vide order dated 21.9.2004directed the Assessing Officer to ascertain the veracity of theassessee's claim regarding declaration dated 25.10.2002 filed duringthe assessment proceedings. The Assessing Officer while giving effectto the order of the CIT(A), vide order dated 30.3.2006 concluded thatdeclaration dated 25.10.2002 filed by the assessee was not correct.The CIT(A) dismissed the assessee's appeal against the order on29.11.2006. The assessee filed further appeal before the Tribunal whovide order dated 21.10.2009 upheld the order of the CIT (A) anddismissed the appeal holding that the assessee was not entitled tobenefit of deduction under Section 54 (1) of the Act in respect of allegedinvestment made by her in the construction of the said house on the plotpurchased by her husband. Hence, the present appeal by theassessee. 4.We have heard learned counsel for the appellant. 4.We have heard learned counsel for the appellant. 5.The only point for consideration is whether the assesseewas entitled to benefit of deduction under Section 54 (1) of the Act inrespect of alleged investment made by her from the sale proceeds ofcapital assets in the construction of the house on the plot which was in the name of her husband and mother-in-law. 6. Learned counsel for the assessee has submitted that theassessee was entitled to the said benefit which had been wronglydenied by the Assessing Officer and upheld by the CIT (A) as well asthe Tribunal. He has placed reliance on the following judgments insupport of his submission:- (i)Commissioner of Income Tax v. Podar Cement Pvt. Ltd.and others, (1997) 226 ITR 625 (SC).and others, (1997) 226 ITR 625 (SC). (ii)Commissioner of Income Tax v. T.N. Aravinda Reddy,(1979) 120 ITR 46 (SC).(1979) 120 ITR 46 (SC). (iii)Mysore Minerals Ltd. v. Commissioner of Income Tax,(1999) 239 ITR 775 (SC).(1999) 239 ITR 775 (SC). (iv)Balraj Vs. Commissioner of Income Tax, (2002) 254 ITR22 (DEL).22 (DEL). (v)Commissioner of Income Tax v. Ahmedabad Keiser-E-Hind Mills Co. Ltd., (1981) 128 ITR 486 (Guj).Hind Mills Co. Ltd., (1981) 128 ITR 486 (Guj). (vi)Commissioner of Income Tax v. V. Natarajan, (2006)287 ITR 271 (MAD).287 ITR 271 (MAD). 7.We do not find any merit in the contention of learnedcounsel for the assessee. 8.The Tribunal had noted that the plot was in the name of thehusband and mother-in-law of the assessee and the sale proceedswhich were received by the assessee in May, 1999 were deposited withM/s Tulison Steel Balls, Ludhiana, which was a proprietary concern ofthe husband of the assessee. The Tribunal specifically held that thealleged agreement dated 3.1.2001 was attested by the Notary Public on 30.8.2001 and was an after thought. The declaration dated 25.10.2002submitted by the assessee was incorrect. Further, it had been recordedthat no registered document had been executed for transferring any partof the share in the building to the assessee. The assessee had notutilized the amount for construction of house in Sector 45-D, SarabhaNagar, Ludhiana which was owned by her husband and mother-in-lawand as such she was not entitled to deduction under Section 54(1) ofthe Act. The findings recorded by the Tribunal are as under:- “14.The assessee claims to have invested the saleproceed receipts on the sale of original asset as investmentin the construction of new asset. The assessee hadreceived Rs.9,90,000/- as her share as sale proceeds onsale of her share in property No. 116, The Mall, Ludhiana.The assessee had deposited the said amount in theproprietary concern of her husband, on 4.5.1999 astemporary loan. The assessee claims that as per theagreement executed with her husband Shri Inder MohanTuli, the said amount was invested by him in theconstruction of residential house No. D-45, Sarabha Nagar,Ludhiana upto 31.3.2000. The Assessing Officer in para-5of the assessment order, as reproduced before us, in parahere-in-above, has further noted that the execution of thealleged agreement was on 3.1.2001, which was attested bythe Notary Public on 30.8.2001. The Assessing Officer hasalso noted that a sum of Rs.9,90,000/- was credited in thebooks of M/s Tulison Steel Balls even on 30.4.2001. The Assessing Officer in para-6 has also noted that theagreement dated 3.1.2001 was not filed before theAssessing Officer during the course of assessmentproceedings and the execution of the said agreement washeld to be an after thought which is further apparent fromthe fact that the said sum was not utilized for theconstruction of the house. In the circumstances, thedeclaration dated 25.10.2002 was held to be not correctand the benefit of set off for investment in the new assetwas not allowed from the income determined under thehead income from long term capital gains. Assessing Officer in para-6 has also noted that theagreement dated 3.1.2001 was not filed before theAssessing Officer during the course of assessmentproceedings and the execution of the said agreement washeld to be an after thought which is further apparent fromthe fact that the said sum was not utilized for theconstruction of the house. In the circumstances, thedeclaration dated 25.10.2002 was held to be not correctand the benefit of set off for investment in the new assetwas not allowed from the income determined under thehead income from long term capital gains. 15.The assessee before us has filed the copy of theagreement executed on 3.1.2001 at pages 48 and 49 of thepaper Book. The said agreement is attested by the NotaryPublic on 30.8.2001. As per the agreement the husband ofassessee and the assessee before us have entered into anagreement to the effect that a sum of Rs.9 lacs which waslying with the concern of the husband of the assessee ason 4.5.1999 was invested by him upto 31.3.2000 in theconstruction of residential house at D-45, Sarabha Nagar,Ludhiana. As per the said agreement the husband of theassessee had agreed to part with 5% of his share in thetotal land and building of the assessee. It may be pointedout that search and seizure operation was carried out atthe premises of the assessee on 12.10.2000. Theassessee claims to have executed this agreement on 3.1.2001 in which the investment in the new asset wasshown to have been made upto 31.3.2000. The new assetis in the joint names of the husband and mother-in-law ofthe assessee and the assessee alleged to have enteredinto an agreement with her husband, but on later date, towhich the mother-in-law of the assessee is not a party. Noregistered document had been executed for transferringany part of the share in the building to the assessee beforeus. In the totality of facts and circumstances of the case,we are of the view that the said agreement executedbetween the parties is an after thought. In thesecircumstances, we are in conformity with the finding of theAssessing Officer that the declaration dated 25.10.2002cannot be said to be correct. Accordingly, the assessee isnot entitled to the benefit of set off of the allegedinvestment in the new asset against the income arisingfrom long term capital gains on sale of her share in theproperty. We uphold the order of the CIT(A) in holding thatthe declaration dated 25.10.2002 was just a cover up andsubterfuge to avoid capital gains tax. This is the 2[nd] roundof appeal before us, where limited issue was to beaddressed. There is no merit in the plea of the assesseethat no such addition is warranted in search proceeding inthe absence of evidence found during search. We find thatthe assessee had failed to file any ground of appeal on thisissue before CIT(A) and issue having become final cannot be adjudicated in the 2[nd] round of proceedings. In thetotality of facts, where the agreement between party hasbeen held to be after thought and the declaration dated25.10.2002 held to be incorrect, in the absence ofassessee establishing the transfer of right in the newproperty in her favour and in the absence of any legalformalities for the said transfer, the claim of the assesseebeing eligible for exemption u/s 54(1) of the Act is rejected.We uphold the order of CIT(A). The grounds of appealraised by the assessee are thus dismissed.” 9.In the light of the aforesaid findings, the judgments reliedupon by the learned counsel for the assessee do not advance the caseof the assessee. No perversity had been pointed out by the learnedcounsel for the assessee in the findings recorded by the Tribunal whichmay warrant interference by this Court. Therefore, no substantialquestion of law arises in this appeal.10.The appeal stands dismissed. (AJA Y KUMAR MITTAL) JUDGE January 13, 2011gbs (ADARSH KUMAR GOEL) JUDGE