Urmila Singh,, Hyderabad vs Assessee

Mrs. Urmila Singh The Income Tax Officer Hyderabad - 500 018 vs. Ward 6 (2) PAN ANTPS4204J Hyderabad (Appellant) (Respondent)

For Assessee : Mr. V. Raghavendra Rao For Revenue : Mr. D. Sudhakar Rao

Date of Hearing : 27.04.2015 Date of Pronouncement : 30.04.2015

ORDER

PER P.M. JAGTAP, A.M.

This appeal filed by the assessee is directed against the Order of the Ld. CIT-III, Hyderabad dated 25.02.2014 passed under section 263 of the Income Tax Act, 1961.

2. The assessee in the present case is an individual who filed her return of income for the year under consideration on 25.09.2009 declaring total income of Rs.5,31,360. In the assessment completed under section 143(3) vide order dated 27.12.2011 the total income of the assessee was determined by the A.O. at the same figure as declared by the assessee in the return of income. The record of the said assessment subsequently came to be examined by the Ld. CIT and on such examination, he was of the opinion that the order passed by the A.O. under section 143(3) suffered from the following mistakes.

2 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

"(i) The assessee had claimed deduction u/s.54F towards investment in Capital Gain Scheme. To avail the benefit of deduction u/s.54F, the deposit should be made on or before the due date for filing return of income u/s.139(1) of the I.T. Act. In the assessee's case, the due date for filing of return of income was 31.07.2009. However, the assessee deposited an amount of Rs.50 lakhs in the Capital Gains Account Scheme on 11.09.2009. Since the assessee had not deposited the money within the time allowed u/s.139(1), the A.O. ought to have disallowed the deduction claimed u/s.54F which he failed to do.

(ii) The assessee had claimed an expenditure of Rs.2,02,675/- towards interest on Bank Overdraft under the head "Income from other sources". The assessee submitted that the Overdraft of Rs.20 lakhs was utilized for the additional capital in M/s.

Raj Mineral Works. But as per the statement of affairs as on 31.03.2009, the closing debit balance in the name of the firm was Rs.13,52,168/-

showing that there was no nexus either with the capital account or with FDRs. Therefore, the interest claim of Rs.2,02,675 made under the head "Income from other sources" is to be disallowed, which the A.O. failed to do."

2.1. The Ld. CIT accordingly issued a notice under section 263 requiring the assessee to show cause as to why the assessment completed by the A.O. under section 143(3) should not be revised with respect to the above issues by treating the same as erroneous and prejudicial to the interest of the revenue. In reply, the following submission was made by the assessee in respect of the first error allegedly pointed out by the Ld. CIT in the order passed by the A.O. under section 143(3).

(i) Rs.65,00,000/- was deposited on 13.11.2007 by way of FD with Allahabad Bank, Balanagar Branch. Out of this amount, the assessee deposited Rs. 50 lakhs in the Capital Gains Account Scheme on 11.9.2009. It was submitted 3 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

that since the sale consideration had been deposited in a bank account before the due date and was not used for any other purpose, the assessee was eligible to claim deduction u/s 54F of the I.T. Act, 1961.

(ii) The deposit in the Capital Gains Scheme could be made before the due date for filing return u/s. 139(4), which is up to one year from the end of the relevant Asst. Year. It was submitted that in the case of the assessee, the deposit could be made before 31.3.2010 to qualify for deduction u/s 54F of the I. T. Act, 1961. Since the assessee had deposited the amount in the Capital Gains Scheme on 11.9.2009, she was eligible to claim the deduction. Reliance was placed on the decision of Gauhati High Court in the case of CIT vs. Rajesh Kumar Jalan (286 ITR 274) wherein the Court had held that the deposit into the Capital Gains Scheme Account could be made before the due date for filing of return u/s. 139(4) of the I.T. Act, 1961. Hence, the AR contended that deduction u/s. 54F should be allowed.

(iii) As the judicial decisions held that the deposit could be made up to the time available u/s. 139(4) for filing of the return, the assessment order accepting the claim of exemption u/s. 54F was not erroneous. It was submitted that following judicial decisions are applicable:

1. Malabar Industrial Co Ltd Vs CIT 243 ITR 83 (SC)

2. CIT Vs Max India Ltd 295 ITR 282 (SC)

3. CIT Vs Simon Carves Ltd 105 ITR 212 (SC)

4. CIT Vs Mapco Industries 294 ITR 121 (MAD)

(iv) The assessee's Authorized Representative also submitted that the land sold was agricultural land and was situated more than 8 kms away from Hyderabad Municipal limits.

Therefore, it was argued that the question of capital gains liability would not arise in any case.

2.2. As regards the second error allegedly pointed out by the Ld. CIT in the order of the A.O. passed under section 143(3), it was submitted by the assessee that interest of Rs.2,02,675 was paid on the overdraft of Rs. 20 lakhs taken from Bank which was utilized for making investment in the capital account of the assessee with M/s. Raj Mineral Works where she was the partner. It was contended that since the 4 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

interest on the said capital account was chargeable to tax as the business income in the hands of the assessee, interest expenditure of Rs.2,02,675 was allowable as a business expenditure. It was contended that although there was a mistake in claiming the interest expenditure under the head "Income from other sources", the same was not prejudicial to the interest of the revenue calling for revision under section 263 of the Act on this issue.

3. After considering the submissions made by the assessee and the material available on record, the Ld. CIT found that the first issue relating to the assessee's claim of deduction under section 54F was squarely covered against the assessee by the decision of Delhi Bench of the Tribunal in the case of Taran Veer Singh Sahani vs. DCIT 11(1), Delhi wherein it was held that where appropriation of net consideration towards purchase/construction of a house property was not made before the due date of filing of return as mentioned under section 139(1) of the Act and also not deposited in the capital gains account scheme, the assessee was not eligible to claim deduction under section 54F. Relying on the said decision of the Delhi Bench of the Tribunal, he held that there was an error in the order of the A.O. in allowing the claim of the assessee for deduction under section 54F which was prejudicial to the interests of the revenue calling for revision under section 263.

3.1. As regards the other issue relating to the allowability of interest expenditure of Rs.2,02,675, the Ld. CIT held that the same was not properly examined by the A.O. by making sufficient enquiry and the order of the A.O. passed under section 143(3) therefore, was erroneous on this account 5 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

also. He, therefore, set aside the order passed by the A.O. under section 143(3) exercising the powers conferred upon him under section 263 with a direction to the A.O. to complete the same afresh on the issues discussed in his order passed under section 263. Aggrieved by the same, assessee has preferred this appeal before the Tribunal.

4. The Ld. Counsel for the assessee submitted that there was no error in the order of the A.O. passed under section 263 as allegedly pointed out by the Ld. CIT in his impugned order passed under section 263. He submitted that the deposit of Rs. 50 lakhs having been made by the assessee in the capital gain account scheme within the time allowed for filing the revised return under section 139(4), the claim of the assessee for deduction under section 54F was rightly allowed by the A.O. He cited atleast 8 decisions of the different High Courts and the various Benches of the Tribunal wherein a view in favour of the assessee was taken on this issue holding that the due date of furnishing return under section 139 applies for all sub-sections i.e., (1),(2),(3) and (4) and therefore, the utilisation of capital gain up to the date of filing of revised return under section 139(4) was eligible for exemption. He filed the copies of all the relevant 8 orders and contended that the ratio of these decisions clearly shows that the view taken by the A.O. while allowing the claim of the assessee for deduction under section 54F was a possible view and it was not permissible for the Ld. CIT to substitute his own view for such possible view taken by the A.O. in the guise of powers vested with him under section 263.

4.1. As regards the allegation of the Ld. CIT that the claim of the assessee for deduction on account of interest 6 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

expenditure of Rs.2,02,675 was allowed by the A.O. in the assessment completed under section 143 (3) without making proper and adequate enquiries, the Ld. Counsel for the assessee invited our attention to the copy of letter dated 25.11.2011 filed before the A.O. during the course of assessment proceedings to point out that all the relevant details in support of assessee's claim for deduction of interest were called for by the A.O. and only after having satisfied with the details furnished by the assessee, the claim for deduction on account of interest was allowed by him. He contended that there was thus no error in the order of the A.O. on this issue as allegedly pointed out by the Ld. CIT.

5. Learned D.R., on the other hand, strongly supported the impugned order of the Ld. CIT passed under section 263. He contended that the relevant provisions of section 54F are very clear and since there is no ambiguity that the deduction under section 54F is allowable only if the amount of capital gain is deposited by the assessee before the due date of filing of the return of income under section 139(1), the order of the A.O. passed under section 143(3) allowing the claim of the assessee for deduction under section 54F for the deposit made after the due date of filing of return under section 139(1) was clearly erroneous as well as prejudicial to the interest of the revenue as rightly held by the Ld. CIT calling for revision under section 263.

5.1. As regards the other error pointed out by the Ld. CIT in order of the A.O. in allowing the claim of the assessee for deduction on account of interest, the learned D.R. submitted that proper and sufficient enquiries, as call for in the facts and circumstances of the case, were not conducted 7 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

by the A.O. while allowing the claim of the assessee for deduction on account of interest. He contended that the Ld. CIT vide his impugned order passed under section 263 has finally directed the A.O. to make such enquiries before allowing the claims of the assessee and there being no decision rendered on merit, the assessee cannot be said to have any grievance on this issue.

6. We have considered the submissions of both the parties and also perused the relevant material on record. It is observed that the claim of the assessee for deduction under section 54F on account of capital gain deposited in the capital account scheme after the due date of filing of return under section 139(1) but before the due date of filing of return under section 139(4) was allowed by the A.O. in the assessment completed under section 143(3) and since the said deposit was made only after the due date of filing of the return under section 139(1), the Ld. CIT considered the order of the A.O. to be erroneous as well as prejudicial to the interest of the revenue on this issue relying on the decision of the Delhi Bench of ITAT in the case of Taran Veer Singh Sahani (supra) wherein a view against the assessee was taken by the Tribunal on this issue. At the time of hearing before us, the Ld. Counsel for the assessee has cited the following 8 cases wherein a view in favour of the assessee has been taken on this issue holding that the due date of furnishing return under section 139 applies to all sub-sections i.e., (1),(2),(3) and (4) and therefore, the utilisation of capital gain by the assessee before the due date of filing of the revised return under section 134(4) was eligible for exemption.

8 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

1. CIT vs. Rajesh Kumar Jalan (2006) 286 ITR 274 (HC) Gau.)

2. CIT vs. Jagtar Singh Chawla (2013) 259 CTR 388 (P&H) (HC)

3. ITO vs. Smt. Sapana Dimri (2012) 50 SOT 96 (Del.) (Tribu.)

4. Kishore H. Galaiya vs. ITO (2012) 137 ITD 229 (Mum.) (Tribu.)

5. Vinita Awasthee, Indore ITA.No.311/Ind/2010 dt.20.07.2011.

6. P.R. Kulkarni & Sons (HUF) vs. Addl. CIT (2011) 135 TTJ 630 ITAT (Bang.)

7. Sri Prasad Nimmagadda vs. DCIT (2013) 27 ITR 63 (Hyd.) (Tribu.)

8. CIT vs. Smt. Debbie Alemaao (2011) 331 ITR 59 (Bom.) (HC).

7. The ratio laid down in the aforesaid case laws cited by the Ld. Counsel for the assessee clearly shows that the view taken by the A.O. in the assessment order while allowing the claim of the assessee for deduction under section 54F was a possible view and this being so, we find merit in the contention of the Ld. Counsel for the assessee that it was not permissible for the Ld. CIT to substitute his own view for the possible view taken by the A.O. in the guise of powers vested with him under section 263.

8. As regards the other error allegedly pointed out by the Ld. CIT in the order passed by the A.O. under section 143(3) in accepting the claim of the assessee for deduction of interest expenditure without making proper and adequate enquiries, it is observed from the letter dated 25.11.2011 filed by the assessee before the A.O. during the course of assessment proceedings that the relevant details in respect of this claim made by the assessee were called for by the A.O. and only after having satisfied with the said details and on application of mind, the claim of the assessee was allowed by 9 ITA.No.920/Hyd/2014 Mrs. Urmila Singh, Hyderabad.

the A.O. on account of interest expenditure. As such, considering all the facts of the case, we are of the view that there were no errors in the order of the A.O. passed under section 143(3) as alleged by the Ld. CIT in his impugned order under section 263 calling for any revision. In that view of the matter, we set aside the impugned order of the Ld. CIT passed under section 263 and restore that of the A.O. passed under section 143(3) of the Act.

9. In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 30.04.2015.

Sd/- Sd/- (G.C. GUPTA) (P.M. JAGTAP) VICE PRESIDENT ACCOUNTANT MEMBER

Hyderabad, Dated 30th April 2015

VBP/-

Copy to

1. Mrs. Urmila Singh, 8-4-316, Ashok Marg, Erragadda, P Sanath Nagar, Hyderabad - 500 018.

2. The Income Tax Officer, Ward 6(2), 6th Floor, I.T. Towers, Hyderabad.

3. Commissioner of Income Tax-III, Hyderabad.

4. Addl. Commissioner of Income Tax, Range-6, Hyderabad.

5. D.R. ITAT "B" Bench, Hyderabad.

6. Guard File.