Commissioner Of Income Tax, Faridabad v. Sh. Prem Narain Bhatia

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 622 of 2009DATE OF DECISION : 03.12.2009 Commissioner of Income Tax, Faridabad Versus Sh. Prem Narain Bhatia .... APPELLANT ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE MEHINDER SINGH SULLARHON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present:Ms. Urvashi Dhugga, Advocate,for the appellant-revenue.for the appellant-revenue. * * * SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of theIncome Tax Act, 1961 (hereinafter referred to as `the Act'), against the orderdated 20.3.2009, passed by the Income Tax Appellate Tribunal, DelhiBench `F' New Delhi (hereinafter referred to as `the ITAT') in ITA No.1766/Del/2008, pertaining to the assessment year 2004-05, raising thefollowing substantial questions of law : (i)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in holding thatthere is part performance of contract of nature referred inSection 53A of the Transfer of Property Act, 1882 eventhough there was no written agreement for the purchaseof property H. NO. 25GF, Friends Colony, New Delhiand the written agreement to sell which has been latercase, the learned ITAT was right in law in holding thatthere is part performance of contract of nature referred inSection 53A of the Transfer of Property Act, 1882 eventhough there was no written agreement for the purchaseof property H. NO. 25GF, Friends Colony, New Delhiand the written agreement to sell which has been later provided to CIT (A) is dated 19.12.2006 i.e. even afterthe date of assessment whereas the property has beenclaimed to be purchased immediately after the sale ofassessee's property? (ii)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in allowing theassessee's claim for deduction u/s 54F of the Act eventhough the sale deed was not executed within two yearsof sale of property, as such it cannot be said the assesseepurchased a new asset within the sale of original propertyand, therefore, no exemption u/s 54F of the Act can beallowed and in sale of immovable properties, the sale canbe said to have taken place on the date of execution ofsale deed? (iii)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in holding that asper provision of Section 2 (47) clause (v) of the Act, anytransaction involving the allowing of possession ofimmovable property to be taken and retained in partperformance of contract of nature referred in section 53Aof the Transfer of Property Act, 1882 will be consideredas transfer in relation to the capital assets even thoughmere delivery of possession of immovable property couldnot by itself be treated as equivalent to conveyance ofimmovable property? (iv)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in holding thatthe possession was taken by the assessee by relying ontelephone bills and the bills of security guard eventhough there was no credible evidences and written agreement to sell or registered sale deed? In the present case, the Assessing Officer, while completing theassessment under Section 143 (3) of the Act for the assessment year 2004-05, vide order dated 10.11.2006, made an addition of Rs. 21,08,853/-, whiledisallowing the exemption of the said amount claimed by the assessee underSection 54F of the Act, on the ground that the assessee had not fulfilled thecondition of Section 54F of the Act, as such, he is not entitled for thededuction under the said provision. On appeal by the assessee, the CIT (A),vide order dated 27.2.2008 deleted the said addition. Aggrieved against thesaid order, the revenue filed appeal. The ITAT, while confirming thefindings recorded by the CIT (A), dismissed the appeal vide the impugnedorder. Hence this appeal by the revenue. In the present case, the Assessing Officer, while completing theassessment under Section 143 (3) of the Act for the assessment year 2004-05, vide order dated 10.11.2006, made an addition of Rs. 21,08,853/-, whiledisallowing the exemption of the said amount claimed by the assessee underSection 54F of the Act, on the ground that the assessee had not fulfilled thecondition of Section 54F of the Act, as such, he is not entitled for thededuction under the said provision. On appeal by the assessee, the CIT (A),vide order dated 27.2.2008 deleted the said addition. Aggrieved against thesaid order, the revenue filed appeal. The ITAT, while confirming thefindings recorded by the CIT (A), dismissed the appeal vide the impugnedorder. Hence this appeal by the revenue. We have heard the arguments of learned counsel for theappellant-revenue. In the present case, on 10.11.2003, the assessee had sold a plotsituated in Sector 14, Faridabad. On this sale, the assessee earned capitalgain of Rs. 21,08,853/-. It is the case of the assessee that he had agreed topurchase a residential house in the New Friends Colony, New Delhi for Rs.70 lacs, out of which he had paid Rs. 26 lacs as earnest money and tookpossession of the said house in part performance of the agreement. He hadutilized the amount of capital gain by making payment of earnest money tohis vendor by pay order dated 27.11.2004 of Syndicate Bank, NIT,Faridabad. The case of the assessee is that he has utilized the aforesaid amount of capital gain within the prescribed time and, therefore, he isentitled for exemption of the same under Section 54F of the Act.As a matter of fact, the CIT (A) as well as the ITAT haverecorded a finding of fact that the assessee had made payment of an amountof Rs. 26 lacs to the vendor Smt. Uminder Kaur by cheque dated 9.8.2004for Rs. 5 lacs and pay order dated 27.11.2004 for Rs. 21 lacs. It has alsobeen found as a fact by both the authorities that after paying the aforesaidamount, possession of the house was taken over by the assessee in the monthof March, 2005. This finding has been recorded by both the authorities onthe basis of the material and evidence, produced by the assessee. In view ofthese facts, the ITAT has come to the conclusion that the Assessing Officerwas not justified in deleting the exemption under Section 54F of the Act, asclaimed by the assessee, when the assessee has proved that within a periodof two years from the date of sale of plot, he has utilized the amount ofcapital gain for purchasing another residential house. In this regard, theITAT has made the following observations : “We had carefully gone through the agreement to sell which isplaced at pages 18-22 of the paper book wherein as per the termNo.1, the vendor has acknowledged the receipt of Rs. 5 lacsand Rs. 21 lacs through cheque and pay order dated 12.8.2004and 27.11.2004 of Syndicate Bank, NIT, Faridabad. As per theterms, the possession of ground floor of the house has beengiven to the assessee on 9.4.2005 on the conditions that balanceamount of Rs. 44 lacs shall be paid to the vendee at the time ofexecution of registration of sale deed. After taking the “We had carefully gone through the agreement to sell which isplaced at pages 18-22 of the paper book wherein as per the termNo.1, the vendor has acknowledged the receipt of Rs. 5 lacsand Rs. 21 lacs through cheque and pay order dated 12.8.2004and 27.11.2004 of Syndicate Bank, NIT, Faridabad. As per theterms, the possession of ground floor of the house has beengiven to the assessee on 9.4.2005 on the conditions that balanceamount of Rs. 44 lacs shall be paid to the vendee at the time ofexecution of registration of sale deed. After taking the possession of the house, the assessee has installed Telephone atthis house and relevant bills for the period 1.9.2005 to31.10.2005 and 1.7.2006 to 31.8.2006 were produced beforethe lower authorities. So far as ground taken by the revenuewith regard to additional documents having been filed by theassessee before CIT (A) is concerned, in terms of Rule 46A, theCIT (A) has sent all the documents to the A.O. for hiscomments and after receiving his reply, he has considered thesame and also asked for rejoinder from the assessee and theocpy of which was also furnished to the A.O for his countercomments. Under these circumstances, it cannot be said thatCIT (A) has accepted the additional evidence without givingopportunity to the A.O. and in contravention of Rule 46A. Wealso found that copies of bills for July/Aug. 2005 for thesecurity guard in the name of the assessee were also furnished.Copy of conveyance deed dated 18.12.2006 between Govt. ofIndia and Uminder Kaur for transfer of lease hold to free holdright for plot No. A-25, N. Friends Colony, New Delhi andagreement dated 19.12.2006 between Uminder Kaur and theassessee that vacant possession of G/F of A-25, N. FriendsColony, New Delhi was given to the assessee on 9.4.2005 onpayment of Rs. 26 lacs as against total consideration agreed atRs. 70 lacs. Copy of the sale deed dated 20.12.2006 for groundfloor, A-25, New friends colony, New Delhi and registered infavour of the assessee were also filed before the lowerauthorities and the same is also placed in the paper book atpages 15-45. As per the provisions of Section 2 (47), clause (v),any transaction involving the allowing of possession of anyimmovable property to be taken and retained in partperformance of the contract of the nature referred to in Section 53A of the Transfer of Property Act 1882, will be considered astransfer in relation to the capital assets. Genuineness of theagreement so furnished by the assessee and which has also beenregistered in the name of the assessee, has not been disputednor the genuineness of which was doubted, which inter-aliaincludes the clause for giving possession of the assessee w.e.f.9.4.2005, which is well within the period of two years from thedate of sale of land for which assessee has claimed exemptionu/s 54 (5), on the plea of its utilization for purchase of anotherresidential house. The detailed finding recorded by the CIT (A)at para 9 to 24 have not been disputed by the learned D.R., weare, therefore, inclined to agree with the learned A.R. of theassessee that CIT (A) was perfectly justified in allowing theassessee's claim for deduction u/s 54F.” Learned counsel for the appellant-revenue argued that in theinstant case, when part of the sale consideration was paid and possessionwas taken, there was no written agreement between the parties andsubsequently, an agreement was produced, therefore, the Assessing Officerwas right in declining the deduction claimed by the assessee. In this regard,learned counsel has relied upon a decision of the Madras High Court inCommissioner of Income-Taxv. G. Saroja,(2008) 301 ITR 124 (Mad). After hearing learned counsel for the appellant-revenue, we donot find any ground to interfere in the impugned order, passed by the ITAT.In our opinion, a finding of fact has been recorded to the extent that anamount of Rs. 26 lacs was paid by the assessee to the vendor for thepurchase of a residential house and also took possession of the house and After hearing learned counsel for the appellant-revenue, we donot find any ground to interfere in the impugned order, passed by the ITAT.In our opinion, a finding of fact has been recorded to the extent that anamount of Rs. 26 lacs was paid by the assessee to the vendor for thepurchase of a residential house and also took possession of the house and when the capital gain of Rs. 21 lacs was actually utilized by the assesseewithin two years from the date of sale of the plot, the Assessing Officer wasnot justified to make addition of Rs. 21,08,853/-. In view of the said findingof fact recorded by both the authorities below, the ITAT has been fullyjustified in upholding the order of the CIT (A) regarding deletion of theaforesaid addition. A finding of fact has also been recorded that thetransaction of purchase of the new house was genuine one. The judgment ofthe Madras High Court inG. Saroja's case(supra), relied upon by learnedcounsel for the appellant-revenue, is distinguishable, as in that case, the saleconsideration was not paid by the assessee during the relevant period. In view of the above, we do not find any illegality in theimpugned order passed by the ITAT and in our opinion, no substantialquestions of law, as raised by the revenue in this appeal, arise from the orderof the ITAT. Dismissed. ( SATISH KUMAR MITTAL )JUDGE December 03, 2009 ndj ( MEHINDER SINGH SULLAR )JUDGE