IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 622 of 2009 DATE OF DECISION : 03.12.2009 Commissioner of Income Tax, Faridabad .... APPELLANT Versus Sh. Prem Narain Bhatia ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present: Ms. Urvashi Dhugga, Advocate, for the appellant-revenue. * * * SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), against the order dated 20.3.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench `F' New Delhi (hereinafter referred to as `the ITAT') in ITA No. 1766/Del/2008, pertaining to the assessment year 2004-05, raising the following substantial questions of law : (i) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in holding that there is part performance of contract of nature referred in Section 53A of the Transfer of Property Act, 1882 even though there was no written agreement for the purchase of property H. NO. 25GF, Friends Colony, New Delhi and the written agreement to sell which has been later ITA No. 622 of 2009 -2- provided to CIT (A) is dated 19.12.2006 i.e. even after the date of assessment whereas the property has been claimed to be purchased immediately after the sale of assessee's property? (ii) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in allowing the assessee's claim for deduction u/s 54F of the Act even though the sale deed was not executed within two years of sale of property, as such it cannot be said the assessee purchased a new asset within the sale of original property and, therefore, no exemption u/s 54F of the Act can be allowed and in sale of immovable properties, the sale can be said to have taken place on the date of execution of sale deed? (iii) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in holding that as per provision of Section 2 (47) clause (v) of the Act, any transaction involving the allowing of possession of immovable property to be taken and retained in part performance of contract of nature referred in section 53A of the Transfer of Property Act, 1882 will be considered as transfer in relation to the capital assets even though mere delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of immovable property? (iv) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in holding that the possession was taken by the assessee by relying on telephone bills and the bills of security guard even though there was no credible evidences and written ITA No. 622 of 2009 -3- agreement to sell or registered sale deed? In the present case, the Assessing Officer, while completing the assessment 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/-, while disallowing the exemption of the said amount claimed by the assessee under Section 54F of the Act, on the ground that the assessee had not fulfilled the condition of Section 54F of the Act, as such, he is not entitled for the deduction under the said provision. On appeal by the assessee, the CIT (A), vide order dated 27.2.2008 deleted the said addition. Aggrieved against the said order, the revenue filed appeal. The ITAT, while confirming the findings recorded by the CIT (A), dismissed the appeal vide the impugned order. Hence this appeal by the revenue. We have heard the arguments of learned counsel for the appellant-revenue. In the present case, on 10.11.2003, the assessee had sold a plot situated in Sector 14, Faridabad. On this sale, the assessee earned capital gain of Rs. 21,08,853/-. It is the case of the assessee that he had agreed to purchase 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 took possession of the said house in part performance of the agreement. He had utilized the amount of capital gain by making payment of earnest money to his 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 ITA No. 622 of 2009 -4- amount of capital gain within the prescribed time and, therefore, he is entitled for exemption of the same under Section 54F of the Act. As a matter of fact, the CIT (A) as well as the ITAT have recorded a finding of fact that the assessee had made payment of an amount of Rs. 26 lacs to the vendor Smt. Uminder Kaur by cheque dated 9.8.2004 for Rs. 5 lacs and pay order dated 27.11.2004 for Rs. 21 lacs. It has also been found as a fact by both the authorities that after paying the aforesaid amount, possession of the house was taken over by the assessee in the month of March, 2005. This finding has been recorded by both the authorities on the basis of the material and evidence, produced by the assessee. In view of these facts, the ITAT has come to the conclusion that the Assessing Officer was not justified in deleting the exemption under Section 54F of the Act, as claimed by the assessee, when the assessee has proved that within a period of two years from the date of sale of plot, he has utilized the amount of capital gain for purchasing another residential house. In this regard, the ITAT has made the following observations : “We had carefully gone through the agreement to sell which is placed at pages 18-22 of the paper book wherein as per the term No.1, the vendor has acknowledged the receipt of Rs. 5 lacs and Rs. 21 lacs through cheque and pay order dated 12.8.2004 and 27.11.2004 of Syndicate Bank, NIT, Faridabad. As per the terms, the possession of ground floor of the house has been given to the assessee on 9.4.2005 on the conditions that balance amount of Rs. 44 lacs shall be paid to the vendee at the time of execution of registration of sale deed. After taking the ITA No. 622of 2009 -5- possession of the house, the assessee has installed Telephone at this house and relevant bills for the period 1.9.2005 to 31.10.2005 and 1.7.2006 to 31.8.2006 were produced before the lower authorities. So far as ground taken by the revenue with regard to additional documents having been filed by the assessee before CIT (A) is concerned, in terms of Rule 46A, the CIT (A) has sent all the documents to the A.O. for his comments and after receiving his reply, he has considered the same and also asked for rejoinder from the assessee and the ocpy of which was also furnished to the A.O for his counter comments. Under these circumstances, it cannot be said that CIT (A) has accepted the additional evidence without giving opportunity to the A.O. and in contravention of Rule 46A. We also found that copies of bills for July/Aug. 2005 for the security guard in the name of the assessee were also furnished. Copy of conveyance deed dated 18.12.2006 between Govt. of India and Uminder Kaur for transfer of lease hold to free hold right for plot No. A-25, N. Friends Colony, New Delhi and agreement dated 19.12.2006 between Uminder Kaur and the assessee that vacant possession of G/F of A-25, N. Friends Colony, New Delhi was given to the assessee on 9.4.2005 on payment of Rs. 26 lacs as against total consideration agreed at Rs. 70 lacs. Copy of the sale deed dated 20.12.2006 for ground floor, A-25, New friends colony, New Delhi and registered in favour of the assessee were also filed before the lower authorities and the same is also placed in the paper book at pages 15-45. As per the provisions of Section 2 (47), clause (v), any transaction involving the allowing of possession of any immovable property to be taken and retained in part performance of the contract of the nature referred to in Section ITA No. 622 of 2009 -6- 53A of the Transfer of Property Act 1882, will be considered as transfer in relation to the capital assets. Genuineness of the agreement so furnished by the assessee and which has also been registered in the name of the assessee, has not been disputed nor the genuineness of which was doubted, which inter-alia includes the clause for giving possession of the assessee w.e.f. 9.4.2005, which is well within the period of two years from the date of sale of land for which assessee has claimed exemption u/s 54 (5), on the plea of its utilization for purchase of another residential house. The detailed finding recorded by the CIT (A) at para 9 to 24 have not been disputed by the learned D.R., we are, therefore, inclined to agree with the learned A.R. of the assessee that CIT (A) was perfectly justified in allowing the assessee's claim for deduction u/s 54F.” Learned counsel for the appellant-revenue argued that in the instant case, when part of the sale consideration was paid and possession was taken, there was no written agreement between the parties and subsequently, an agreement was produced, therefore, the Assessing Officer was right in declining the deduction claimed by the assessee. In this regard, learned counsel has relied upon a decision of the Madras High Court in Commissioner of Income-Tax v. G. Saroja, (2008) 301 ITR 124 (Mad). After hearing learned counsel for the appellant-revenue, we do not 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 an amount of Rs. 26 lacs was paid by the assessee to the vendor for the purchase of a residential house and also took possession of the house and ITA No. 622 of 2009 -7- when the capital gain of Rs. 21 lacs was actually utilized by the assessee within two years from the date of sale of the plot, the Assessing Officer was not justified to make addition of Rs. 21,08,853/-. In view of the said finding of fact recorded by both the authorities below, the ITAT has been fully justified in upholding the order of the CIT (A) regarding deletion of the aforesaid addition. A finding of fact has also been recorded that the transaction of purchase of the new house was genuine one. The judgment of the Madras High Court in G. Saroja's case (supra), relied upon by learned counsel for the appellant-revenue, is distinguishable, as in that case, the sale consideration was not paid by the assessee during the relevant period. In view of the above, we do not find any illegality in the impugned order passed by the ITAT and in our opinion, no substantial questions of law, as raised by the revenue in this appeal, arise from the order of the ITAT. Dismissed. ( SATISH KUMAR MITTAL ) JUDGE December 03, 2009 ( MEHINDER SINGH SULLAR ) ndj JUDGE