Ita/177/2017 Of Smt Y Manjula Reddy v. The Income Tax Officer

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23 DAY OF AUGUST 20271. PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: ILT.A. NO.1/77 OF 201 SMT. Y. MANJULA REDDYPRESENTLY R/AT. NO.10103RD FLOOR, 26TH MAIN4TH T BLOCK, JAYANAGAR|BANGALORE-56004 1. (BY SRI. A. SHANKAR, SR. COUNSEL FOR.SRI. BHAIRAV KUTTAIAH, ADV.,) — APPELLANT. AND* THE INCOME TAX OFFICER|WARD-10(2), BMTC BUILDING61TH BLOCK, 80 FIT. ROAKORAMANGALA, BANGALORE-560095.| .., RESPONDENT (BY SRI. E.I. SANMATHI, ADV., FOR|SRI. K.V. ARAVIND, ADV.,) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 02.12.2016 PASSEDIN ITA NO.1755/BANG/2013 FOR THE ASSESSMENT YEAR 2008-O09, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE.APPELLAN!. | (ii) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO.THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY.THELITAT,BENGALURU,“ASBENCH,BENGALURU|LN|LTA!NO.1755/BANG/2013 AND 1780/BANG/2013 DATED 02.12.2016FOR THE ASSESSMENT YEAR 2008-09 VIDE ANNEXURE-A & ETC.) THIS ILT.A. COMING ON FOR’ HEARING, THIS DAY, | ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (nereinafter referred to as the Act for short)nas been preferred by tne assessee against tne orderdated:02.12.2016 passed by Income Tax AppellateTribunal (hereinafter referred to as the tribunal forsnort). Tne subject matter of the appeal pertains to theAssessment year 2008-09. The appeal was admitted bya bench of this Court on the following substantialquestions of law:| “(1) Whether.theTribunalWasjustified in law in aenying tne exemption|under section 54F and consequently passedadperverseorderOf)thefacts|andcircumstances of the case? (11)WhethertheTribunalWasjustified in law in holding that the appellant|has not acquired a property, and _ thtransaction was mere paper _§ transactiwhen the [ssue was not before it andconsequently passed perverse order on the|facts and circumstances of the case?| (iii) Without prejudice whether the|Tribunal ought to have held that theTransaction of release has culminated into aTransfer in favour of the appellant andconsequently the finding of the Tribunal IsDerverseIn|lawOf)thefacts|and|circumstances of the case? (iV) WhethertheTribunalWasjustified in law holding that the release|deed of the property between spouses was|a colorable device and not a proper form for|acquisition of property and consequently|passed a perverse order on the facts andcircumstances of the case?" 2 |Facts leading to filing of this appeal brieflystated are that assessee Is an Individual. The assessee filed the return of income for the Assessment Year.2008-09 on 29.09.2008 declaring total income of.Rs.9,06,856/-. The assessee along with other co-owners.soldtheimmovable|propertyofSy.No.54/1CO Sy.No.54/3 situated in Kalenagrahara Village, Begur|Hobli, Bangalore South Taluk for a sale consideration of Rs.5,35,00,000/- vide sale deed dated 27.10.2007. TheShare of the assessee was Rs.1,60,50,000/- and afterdeduction, the selling expenses and indexing the cost ofacquisition,theLong.TermCapitalGainofRs.1,56,85,225/- was assessed by the assessee. Inrespect of the aforesaid capital gain, the assessee|claimed exemption under Section 54F of the Act to theextent of Rs.1,56,33,8/0/- and offered balance of LongTerm Capital Gain of Rs.51,355/- to tax. 3Theassessment.WaScompletedunder|Section 143(3) of the Act. The Assessing Officer by an.order dated 31.12.2010 inter alia held that the assesseeNas not purchased the asset, in respect of which the claim under Section 54F of the Act has been made andthe assessee without prejudice had re-worked theamount of cost of acquisition of new asset, which was.reduced by the Assessing Officer to Rs.91,5/7,683/-.Accordingly, the claim under Section 54F of the Act was)denied. 3Theassessment.WaScompletedunder|Section 143(3) of the Act. The Assessing Officer by an.order dated 31.12.2010 inter alia held that the assesseeNas not purchased the asset, in respect of which the claim under Section 54F of the Act has been made andthe assessee without prejudice had re-worked theamount of cost of acquisition of new asset, which was.reduced by the Assessing Officer to Rs.91,5/7,683/-.Accordingly, the claim under Section 54F of the Act was)denied. 4The assessee thereupon preferred an appealbefore the Commissioner of Income Tax (Appeals) who.by an order dated 24.09.2013 inter alia held thatassessee is entitled to deduction under Section 54F of.the Act to the extent of 50% of the cost of acquisition oftneNewproperty,whnicnWaSestimatedat.Rs.91,58,083/-, wnich comes to Rs.45,/79,042/-. Beingaggrieved, by the aforesaid order, the assessee as wellas the revenue filed an appeal before the tribunal. Thetribunal vide Common order dated 02.17.7016 inter alia.neld tnat the assessee is not entitled to deduction under.Section 54F of the Act as assessee has failed to provethat sne has acquired a new house by sale proceeds of Original asset sold and further held that the assesseehas not acquired any asset. The appeal preferred by theassessee was dismissed without any adjudication on the)ground that the appeal preferred by the revenue hasbeen allowed. In the aforesaid factual background, this|appeal has been filed. 5.|Learned Senior counsel for the assesseesubmitted that admittedly, the assessee has purchasedthe asset and the tribunal erroneously held that noexemption under Section 54F of the Act can be granted even in respect of 50% of the property owned by theassessee on 24.02.2007. It is also urged tnat thetribunal could not Nave denied the exemption underSection 54F of the Act in respect of an asset purchasedby registered sale deed and it ought to have been.appreciated that the purchase was made by theassessee before one year prior to the transfer. It is alsourged that assessee is entitied to claim exemption ontneentire|propertyand|theTINAINGS|ofthe Commissioner of Income Tax (Appeals) as well as thetribunal are perverse. It is also urged that the tribunaldid not even adjudicate the grounds raised by the)assessee in her appeal. It is submitted that findingrecorded by the tribunal that the assessee is not entitledto benefit of Section 54F of the Act is required to be setaside and the matter deserves to be remitted to tribunal.to adjudicate the issue raised by the assessee in her|appeal in accordance with law. In support of aforesaidSubmissions, reliance has been placed on decisions"NAVIN JOLLY VS. ITO, (2020) 424 ITR 462(KAR.), ‘CIT VS. GITA DUGGAL', (2013) 357 ITR152 (DEL.), ‘MR.M.GEORGE JOSEPH VS DCIT INITA NO.2Z38 OF 2015 DATED 12.07.2021 (KAR.),‘CIT VS. MRS. JENNIFER BHIDE, (2012) 349 ITRSO (KAR.) and‘CIT VS. KAMAL WAHAL’, (2013) 351ITR 4 (DEL.) 6.|On the other hand, learned counsel for therevenue submitted that the Assessing Authority rightly rejected the claim of the assessee as she was owning.more than one house on the date of acquisition of new.property. It is further submitted that as per the balanceSheet, the assessee owns three properties and hadshown income from house property. It is also urged thatthe property purchased jointly with her husband on)24.02.2007 cannot be considered as compliance of.Section 54F of the Act as the assessee was required topurcnase the property in her individual mean. It Is also.Submitted that entitlement of the assessee to claim.benefit under Section 54F of the Act is _ intrinsicallconnected with the grounds raised by her in the appeal,which has not been adjudicated by the tribunal andtherefore, the matter be remitted to the tribunal fordecision afresn. 7We have considered the submissions made§by learned counsel for the parties and have perused therecord. From perusal of Section 54F of the Act, it isevident that if the assessee within a period of one year 7We have considered the submissions made§by learned counsel for the parties and have perused therecord. From perusal of Section 54F of the Act, it isevident that if the assessee within a period of one year before or two years after the date on which transfertook place, purchases, or has within a period of threeyears after that date constructs a residential house, theassessee Is entitled to the benefit of Section 5S4F of theAct. It is noteworthy that in order to claim an exemption.under Section 54F of the Act, it is not necessary thatSame sale consideration should be used for construction of new house property. Section 54F of the Act is abeneficial provision, which nas been enacted with anobject to promote investment on housing and to enablethe assessee to save tax on capital gains. In the instant|case, admittedly, the assessee within one year beforethe date of transfer i.e., on 24.02.2007 has purchasedalong witn otner co-owners a property and had sold thecapital asset on 24.10.2007. Tne revenue nas raisedthe following grounds in appeal: (/) The order of CIT (A) is opposed|to facts of the case. (ii) The CIT (A) ought to haveappreciated the fact, that the assessee isnot eligible to claim deduction underSection 54F to the extent of 50% ofinvestment [in an asset [In which shalready had a stake. (iii) The CIT(A) erred in holding thethree residential houses owned by theassessee in OOtocamund as a_ singleresidential house for the purpose ofclaiming deduction under Section 54Frelying on the Judgment in the case of CITVS. GITA DUGGAL (2013) 257 CTR (DEL)358. (iv)TheappellantCraVvesforpermission to add or delete the grounds ofappeal at the time of hearing the case. 8 _From close scrutiny of the order passed bythe tribunal, it is evident that the tribunal while decidingthe appeal preferred by the revenue has adjudicatedonly grounds 2 and 3 and has not adjudicated the ground with regard to the claim of assessee underSection 54F of the Act in the light of law laid down byDelhi High Court in "CIT VS. GITA DUGGAL', (2013)|257 CTR (DEL.) 208— The tribunal has failed toadjudicate the grounds raised by the assessee in herappeal. The impugned order therefore, cannot be)sustained in the eye of law. It is accordingly quashed.The matter is remitted to the tribunal to decide theappeal preferred by the assessee as well as the revenueafresh in accordance with law laid down by this court in-NAVIN JOLLY, GITA DUGGA, M.GEORGE JOSEPH,M/S JENNIFER BHIDE AND KAMALA WAHALSUDTFa.It is therefore, not necessary for us to answer thesubstantial questions of law. In the result, the appeal is disposed of. Sd/-JUDGE. Sd/-JUDGE.