Ita/28/2014 Of Jagwinder Singh v. Commissioner Of Income Tax, Appeals-Ii, Ludhiana & Ors

ITA No.28 of 2014 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No. 28 of 2014 (O&M)Date of decision: 22.4.20]14 Jagwinder Singh -----Appellant Vs) Commissioner of Income tax, Appeals II, Ludhiana, Punjab andanother. ----Respondents CORAM:-HON’BLE MR. JUSTICK AJAY KUMAR MITTALHON'BLE MR. JUSTICEK JASPAL SING Present: Mr.Aman Bansal, Advocate for the appellant. Ajay Kumar Mittal,J CM No.1017 Cll of 2014 1]The court fee has already been affixed. CM_ stands disposed of, CM No.1018 Cll of 2014 D The delay of 16 days in refiling the appeal 1s condoned. CM stands disposed of. CM No.1019 Cll of 2014 3)Allowed as prayed for. CM stands disposed of, ITA No.28 of 2014 4 This appeal has been preferred by the assessee under | section 260A of the Income Tax Act, 1961 (in short, “the Act’)against the order dated 19.2.2013, Annenxure P.3 passed by theIncome Tax Appellate Tribunal, Chandigarh Bench B, Chandigarh inITA No.944/CHD/2010 for the assessment year 2002-03, proposing toraise following substantial questions of law:- 1) Whether the act on part of the Assessing Officer toinitiate the assessment proceedings under section 148read with section 147 of the Act 1s justified?initiate the assessment proceedings under section 148read with section 147 of the Act 1s justified? 11)Whether the act on part of the Assessing Officer inrejecting the appellants claim under section 54F of theincome Tax Act 1s justified?rejecting the appellants claim under section 54F of theincome Tax Act 1s justified? 111)Whether the act on part of the Assessing Officer tomake the assessment under section 144 of the Act,1961 in exceeding their jurisdiction is_ legallysustainable in the eyes of law?make the assessment under section 144 of the Act,1961 in exceeding their jurisdiction is_ legallysustainable in the eyes of law? iv)Whether in fact and circumstances of the case, theaction of the authorities below, the 1mpugned ordersAnnexures P.1 to P.3 are legally sustainable in the eyesof law’action of the authorities below, the 1mpugned ordersAnnexures P.1 to P.3 are legally sustainable in the eyesof law’ 4S. A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The assessee 1s|an agriculturist and owns land in Village Bhattian,Tehsil Khanna,District Ludhiana. He also owned ™% share of 67 kanals 16/11/1marlas of land situated near Dholewal Military complex 1.e. 33 kanals18/11/24 marlas which was acquired in the year 1955 by the Union ofIndia through Secretary, Ministry of Defence, New Delhi. Theappellant received enhanced compensation on 16.6.2006 of |L15,14,211/- (LC13,14,211/- plusL1,66,563/- TDS) as a co-sharer onaccount of acquisition of his share of land. Respondent No.2 issued! 4 notice under section 148 of the Act on 21.3.2006 and passed theassessment order dated 19.12.2006, Annexure P.l. The claim ofbenefit of provisions of Section 54F of the Act on account ofexpenditure of=a10,34,700/- for raising new construction of housewas rejected. Agerieved by the order, the assessee filed appeal beforethe Commissioner of Income Tax (Appeals) II, Ludhiana |CIT(A)],Vide order dated 22.6.2009, Annexure P.2, the appeal was partlyallowed. The Assessing Officer was directed to consider the incomeof|<a1,20,000/- shown by the appellant as agriculture income as suchfor rate purposes etc. as per provisions of law. However, the findingsrelating to disallowance of benefit under Section 54F of the Act weremaintained. Still not satisfied, the assessee filed appeal before theTribunal. Vide order dated 19.2.2013, Annexure P.3, the Tribunaldismissed the appeal. Hence the present appeal by the assessee. 6]We have heard learned counsel for the appellant andperused the record, TdThe issue that arises for consideration in this appeal iswhether in the facts and circumstances of the case, the assessee 1sentitled for exemption under section 54F of the Act. 6]We have heard learned counsel for the appellant andperused the record, TdThe issue that arises for consideration in this appeal iswhether in the facts and circumstances of the case, the assessee 1sentitled for exemption under section 54F of the Act. |It would be apposite to refer to relevant portion ofsection 54F of the Act, which reads thus:- Capital gain on transfer of certain capital assets|not to be charged In case of Investment Inresidential house. 5AR.(1) Subject to the provisions of sub-section (4),where, in the case of an assessee being an individual or aHindu undivided family, the capital gain arises from thetransfer of any long-term capital asset, not being a residential house (hereafter in this section referred to asthe original asset), and the assessee has, within a periodof one year before or two years after the date on whichthe transfer took place purchased, or has within a periodof three years after that date constructed, a residentialhouse (hereafter in this section referred to as the newasset), the capital gain shall be dealt with in accordancewith the following provisions of this section, that is to %+#- -G) 1f the cost of the new asset 1s not less than the netconsideration 1n respect of the original asset, the whole ofsuch capital gain shall not be charged undersection 455-b) if the cost of the new asset is less than the netconsideration in respect of the original asset, so much ofthe capital gain as bears to the whole of the capital gainthe same proportion as the cost of the new asset bears tothe net consideration, shall not be charged undersectionA4 Providedthat nothing contained in this sub-section shallapply where— 6) the assessee,— -]) owns more than one residential house, other than thenew asset, on the date of transfer of the original asset; or -I]) purchases any residential house, other than the newasset, within a period of one year after the date of transferof the original asset; or -111) constructs any residential house, other than the newasset, within a period of three years after the date oftransfer of the original asset; and -b) the income from such residential house, other than theOne residential house owned on the date of transfer of theoriginal asset, 1s chargeable under the head “Income fromhouse property’. Explanation.—FKor the purposes of this section, “net consideration’, in relation to the transfer of a capitalasset, means the full value of the consideration receivedor accruing as a result of the transfer of the capital assetas reduced by any expenditure incurred wholly andexclusively in connection with such transfer./0000000000(2) to (4) xx Q.Section 54F of the Act deals with capital gain on transfer of certain capital assets which is not to be charged to tax where theassessee invests the consideration in residential house. According tosub section (1) thereof, where the capital gain arises from long termcapital asset other than residential house and the assessee has within!one year before or two years after the date on which the transfer tookplace, purchased or has within a period of three years after that date,constructed a residential house, the capital gain shall be exempt to theextent of investment made in the residential house. The said provisionnowhere relates to investment made in renovation or modification ofan existing house. 10,The CIT(A) while partly upholding the order of theAssessing Officer declined benefit of section 54F of the Act to theassessee and vide order dated 22.6.2009, Annexure P.2 held as under:-“6. I have carefully considered the contention of thelearned counsel for the appellant and perused therelevant record. I[t is the contention of the learnecounsel that the appellant being an agriculturist byprofession and being completely unaware of theprovisions of IT Laws did not obtain any vouchers forthe purchase of building material etc. Though thiscontention of the learned counsel might have somemerit 1t was for him to see as to 1n the absence of such 10,The CIT(A) while partly upholding the order of theAssessing Officer declined benefit of section 54F of the Act to theassessee and vide order dated 22.6.2009, Annexure P.2 held as under:-“6. I have carefully considered the contention of thelearned counsel for the appellant and perused therelevant record. I[t is the contention of the learnecounsel that the appellant being an agriculturist byprofession and being completely unaware of theprovisions of IT Laws did not obtain any vouchers forthe purchase of building material etc. Though thiscontention of the learned counsel might have somemerit 1t was for him to see as to 1n the absence of such bills and vouchers etc. what best evidence could beproduced in support of the contention as above.Admitted position in this case is that neither before theAO nor during appeal proceedings any evidence 1n theform of bills and vouchers for the purchase of materialor labour in respect of the alleged construction has beenproduced. No other evidence has further been filed inthis regard by the appellant at any stage. The learnedcounsel is mainly relying upon the report of theRegistered Valuer. However, as brought out in theassessment order itself the registered valuer hadadmitted before the AO that he had not seen any bills orvouchers and that he had made the report withoutconfirming the year in which the constructon wascarried out. In view of the above statement of ShriRaheja, the registered Valuer, coupled with the report ofthe Inspector who physically inspected the site, the AOcannot be said to be unjustified in concluding thatneither new construction nor the alteration/addition tothe said property was made by the appellant during therelevant period. In the assessment order the AO has alsodiscussed that even the mother of the appellant and theirold servant Shri Gopal working with the appellant formore than 10 years also informed that no new housewas constructed. This would further go to strengthen thefindings of the AO in this regard. Further though it iscontended by the learned counsel that 1f the AO was notsatishied with the report of the registered Valuer thematter should have been referred to the DepartmentalValuer, I do not agree with the learned counsel in thisregard. The above procedure is required to be taken intoaccount when action is taken under the relevantprovisions of section 55A of the Act etc. However, thiswas not a case where the provisions of section 55A were involved. The Valuation Report of the registered Valuerwas rather filed by the appellant in support of its claimthat the construction was carried out during the eligibleperiod and that this had nothing to do with the valuationof the construction etc. Rather in view of the categoricaladmission of the registered valuer that he gave thereport without verifying the actual period ofconstruction etc., and there being no other evidencefiled by the appellant, there was no need to further referthis matter to the departmental Valuer etc. While makingthe statement as above in the presence of ShriR.S.Khera, C.A., the learned counsel for the appellant,the AO has brought out in the assessment order that,even the learned counsel did not cross examine theregistered valuer, though specific opportunity wasallowed by the AQ. Therefore, the facts stated by theregistered Valuer in the statement recorded before theAO are impliedly admitted to be correct.” 11.The Tribunal while affirming the aforesaid findingsdismissed the appeal of the assessee vide order dated 19.2.2013,Annexure P.3 and recorded as under:- 11.The Tribunal while affirming the aforesaid findingsdismissed the appeal of the assessee vide order dated 19.2.2013,Annexure P.3 and recorded as under:- “16(4) A bare perusal of the relevant facts and findingsof the AO and the ClT(Appeals) including the paperbook filed by the assessee reveals that the assesseeappellant has failed to file any evidence, to support hisclaim of exemption under section 54F of the Act. Theassessee merely filed a valuation report, from theRegistered valuer, which 1s a dumb document, as to theyear of renovation of the said residential house. TheRegistered Valuer admitted before AO that no bills orvouchers were made available to him and he made thereport, without confirming the year, in which the construction was carried out. The Valuer also admittedthat such details and tacts should have beenincorporated in the valuation report. However, the samehad not been done. The relevant valuation report hasbeen incorporated by the AO in his findings, reproducedabove wherein it has been specifically admitted by theRegistered Valuer that bills and vouchers ofconstruction material were demanded, but were notmade available by the assessee. It was admitted by theRegistered Valuer before the AO, that the valuationreport was prepared by him, on the basis of statementmade by the appellant, without confirming the year inwhich the construction was made, as required voucherswere not available. Learned AR referred to the valuationreport, as an evidence, to support his contention, in theface of non production of any evidence, whatsoever inthe course of assessment proceedings, proceedingsbefore CIT(Appeals) and even before this Bench. Thecontention raised by the learned AR that Inspector'sreport is bias, 1s merely an _ assertion withoucorroborating by independent evidence, hence the samedoes not carry any evidentiary value. The assessee|appellant has failed to comply with the statutoryconditions of section 54F of the Act, as the assesseefailed to adduce even prima facie evidence, at any stageof proceedings, establishing the construction ofresidential house and eligibility of claim made undersection 54EF of the Act. [t 1s admitted fact that no billand vouchers or any evidence was produced by theappellant to justify his claim. Learned DR_ placedreliance on the order of Hon'ble Jurisdictional HighCourt, in the case of Pawan Kumar Garg v. CIT (supraWherein it has been clearly held that onus to proveconstruction on residential house is on the assessee and in case of failure to discharge such onus, the assessee 1snot entitled for exemption under section 54F of the Act.The relevant part of the decision is reproducedhereunder:- ‘Capital Gains — exemption — Investment of gainsin residential house-burden on assessee to provesuch investment — finding that no residential househad been constructed within the stipulated time —assessee not entitled to exemption under section54F — Income tax Act, 1961. SS54Fin residential house-burden on assessee to provesuch investment — finding that no residential househad been constructed within the stipulated time —assessee not entitled to exemption under section54F — Income tax Act, 1961. SS54F The assessee had shown long term capital gains ofL4,64,400 on the sale purchase of 2,900 shares. He alsoclaimed exemption under Section 54F of the IncomeTax Act, 1961. The claim of the assessee that he hadbuilt two small rooms which constituted an independentdwelling unit and therefore he was entitled toclarification of Circular No.667 dated October 18,1993(see [1993] 204 ITR (St.) 103) 1ssued by the CentralBoard of Direct Taxes was rejected because it was heldthat the construction of those two rooms did notconstitute a dwelling unit and those rooms wereconstructed only in the month of February 2001. Thiswas upheld by the ‘Tribunal which recorded acategorical finding that the assessee had constructedonly two rooms — covering an area which was less than150 sq.ft. and there was virtually no construction at thesite. On appeal to the High Court: Held, dismissing theappeal, that the onus to prove construction of aresidential house was on the assessee which was neverdischarged as he did not furnish evidence to prove theconstruction of the house before April 22, 2000. Hence,he was not entitled to the exemption under section 54F.'16(11) The contention of learned AR that assessee 1s illiterate, lives in a village and does not maintain anyaccounts, cannot absolve the appellant from dischargingthe onus cast on the appellant, for establishing theeligibility of exemption under section 54F of the Act,hence, such assertions are without any factual and legalfoundation. 161). Learned ‘DR’ also placed reliance on thedecision of Kerala High Court in Mrs. Meera Jacob v.ITO (supra) wherein it has been held that for investmentin expansion of existing residential house, the assesseeis not entitled to exemption under section 54F of theAct. The relevant part of the decision 1s reproducedhereunder: ‘Capital Gains -— Long term capital gain-Computation-Deductions-Investment in expansionof existing residential house-Not entitled todeduction under Section 454-F-Income Tax Act,1961-S .S54Computation-Deductions-Investment in expansionof existing residential house-Not entitled todeduction under Section 454-F-Income Tax Act,1961-S .S54 Held, that since the assessee had only made addition tothe plinth area, which was in the form of modificationof an existing house, she was not entitled to deductionclaimed under section 54F of the Income Tax Act, 1961.16(iv) We have also considered the decisions of theHon'ble Supreme Court, relied upon by learned AR asreferred to above and found that the same are factuallydifferent and distinguishable and, hence not applicableto the typical fact situation of the present case. 16(v) In view of the above legal and factual discussions,and having regard to the express provisions of section54F of the Act, we are of the considered opinion that thefindings of learned ClT(Appeals) do not suffer fromany infirmity and, hence the same are _ upheld,Accordingly, Ground No.3 1s dismissed.” ITA No.28 of 2014 (O&M) 12.A perusal of the findings recorded by the CIT(A) and theTribunal clearly spells out that the appellant had failed to comply withthe statutory conditions of Section 54F of the Act. He also failed toadduce any evidence establishing the construction of new residentialhouse. No bills or vouchers were produced by the appellant to justifyhis claim. Therefore, it has been rightly held that the appellant hasfailed to discharge the onus to prove construction of residential houseand thus is not entitled for exemption under Section 54F of the Act. 13.In view of the above findings, which have not beenshown to be perverse or illegal, no substantial question of law arises.Finding no merit in the appeal, the same is hereby dismissed, (Ajay Kumar Mittal)Judge April 22, 20149 *9 (Jaspal Singh)Judge