Shri Arvind Jain v. The Income Tax Officer, Non Corporate Ward 22 (1)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.01.2020 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition No.27949 of 2018& WMP Nos.32518 & 32519 of 2018 Shri Arvind Jain,1/171-B, Mariamman Koil Street, Mugalivakkam,Chennai - 600 125. .... Petitioner Vs 1.The Income Tax Officer, Non Corporate Ward 22 (1), No.7, 1[st] Floor, Ramakrishna Street, West Tambaram, Chennai 600 045. 2. The Principal Commissioner of Income Tax, Chennai - 7, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. .... Respondents PETITION filed under Article 226 of The Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus, calling for the records of the 1[st] and 2[nd] Respondent inPAN: AAFPJ8106M and quash the impugned order dated 21.01.2016 ofthe 1[st] respondent and the consequent order in C.No.7032(4)/Pr.CIT-7/16-17 dated 26.03.2018 of the 2[nd] respondent anddirecting the 1[st] respondent to grant exemption under Section 54Fof the income Tax Act to the petitioner in respect of the returnfiled for the assessment year 2013-14. The petitioner challenges an order of assessment dated21.01.2016 and an order passed by the Commissioner of Income Taxdated 26.03.2018 in terms of Section 264 of the Income Tax Act,1961 (in short 'Act'). https://hcservices.ecourts.gov.in/hcservices/ 2. The petitioner admittedly sold a property atThandalam, Sriperumbudur Taluk on 27.02.2013 for a total saleconsideration of Rs.41.00 lakhs and purchased a property atThirumudivakkam for a total sale consideration of Rs.69,33,800/-under a registered sale deed dated 29.05.2013 with the avowedintention of constructing a house there. Though he commencedefforts in this direction, with the onset of torrential rains inNovember, 2015 that continued till 31.12.2015, and that floodedthe land entirely, the petitioner abandoned the proposal forconstruction. 3. In the meantime, a return of income has been filed forthe Assessment Year (A.Y.) 2013-14 claiming exemption underSection 54F of the Act, which provides for an exemption of theproceeds from sale of residential house if the said proceedswere invested in (i) the purchase of another residentialproperty within a period of 24 months from date of sale or (ii)the construction of an alternate residential property within aperiod of 36 months from date of sale. 4. When the matter came up for completion of assessment,the Chartered Accountant appears to have represented to theAssessing Officer that the petitioner was not pursuing his claimfor exemption under Section 54F, perhaps on account of theabandonment of the Thirumudivakkam project. Recording theaforesaid, the exemption sought was reversed and the capitalgains was brought to tax in order of assessment dated 21.01.2016. 5. The petitioner, thereafter, made an investment in analternate residential property by entering into a constructionagreement on 23.01.2016 with one, Awesome Builders PrivateLimited. The construction agreement is stated to have beenregistered on 26.02.2016 and the flat itself, along with theundivided share in land registered on 26.02.2016. According tothe petitioner, this would suffice for claiming exemption interms of Section 54F. Thus, the petitioner moved theCommissioner of Income Tax seeking revision of order ofassessment dated 21.01.2016. 6. The impugned order of the Commissioner of Income Taxdated 26.03.2018 rejects the claim for exemption under Section54F on the ground that the exemption does not cover investmentmade in a flat that was under development/under construction. 7. The submissions of the Revenue are to the effect that thethree year period in this case, if the investment were to be https://hcservices.ecourts.gov.in/hcservices/ 6. The impugned order of the Commissioner of Income Taxdated 26.03.2018 rejects the claim for exemption under Section54F on the ground that the exemption does not cover investmentmade in a flat that was under development/under construction. 7. The submissions of the Revenue are to the effect that thethree year period in this case, if the investment were to be https://hcservices.ecourts.gov.in/hcservices/ seen as an investment in construction, would expire on27.02.2016, whereas the completion certificate is dated31.07.2017. Thus, the transaction would, according to them,fall within the second limb of Section 54, as being purchase offlat, since it is impossible for the builder to have constructeda flat between 23.01.2016 and 26.02.2016, on which date, theflat is stated to have been handed over to the petitioner. Inthis case, the time available for investment is 24 months from27.02.2013 and the investment having taken place beyond theperiod of two years, the relief sought for by the petitioner isnot liable to be granted. 8. I may refer, in this connection to a decision of thisCourt in the case of Commissioner of Income Tax V. SardarmalKothari and another (302 ITR 286) wherein a Division Bench ofthis Court has held that for the purpose of claim of exemptionunder Section 54F, it would suffice if the assessee were able toestablish that the entire net consideration had been deployed inthe new construction within the stipulated statutory period. Thecompletion of construction per se could extend even beyond. 9. Be that as it may and without further reference to themerits, a perusal of the impugned orders of assessment andrevision reveal to me that the facts of the transaction in thisparticular case have not been looked into at either level. TheAssessing Authority did not have the benefit of examination ofthe facts by virtue of the request of the petitioner forwithdrawal of the claim under Section 54F. As far as theCommissioner of Income Tax is concerned, the claim has beenrejected merely by reference to two Circulars, i.e., 471 and 672dated 15.10.1986 and 16.12.1993 respectively, stating that theCirculars do not cover cases of investment in construction offlats. 10. I am hence of the view that the matter requires properexamination by the Assessing Authority after hearing thepetitioner. 11. In the light of the discussion as aforesaid, theimpugned order of assessment and revision are set aside. Theassessee will appear before the first respondent on Monday, the27[th] of January, 2020 at 10.30 a.m., without expecting anyfurther notice in this regard. After hearing the petitioner andconsideration of all/any materials that may be placed on recordbefore him, an order of assessment shall be passed de novo bythe Assessing Authority within a period of two (2) weeks fromdate of conclusion of personal hearing. It is made clear that none of the observations made in this order shall stand in theway of an independent application of mind by the AssessingOfficer. 12. This Writ Petition is allowed in the aforesaid terms.No costs. Connected Miscellaneous Petitions are closed. Sd/-Assistant Registrar(CS-III) //True copy// Sub Assistant RegistrarslTo 1.The Income Tax Officer, Non Corporate Ward 22 (1), No.7, 1[st] Floor, Ramakrishna Street, West Tambaram, Chennai 600 045.2. The Principal Commissioner of Income Tax, Chennai - 7, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. +1cc to Mr.Ramanakumar, Advocate SR.No.1870 +1cc to Mrs.Hema Muralikrishnan, Advocate SR.No.2005 Writ Petition No.27949 of 2018& WMP Nos.32518 & 32519 of 2018PA(CO)GMY(27/01/2020)