Income Tax Ward 1(3) Meerut Vs. Kalu Ram

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH ‘SMC-2, NEW DELHI)

BEFORE SHRI I.C. SUDHIR : HON’BLE JUDICIAL MEMBER

ITA No. 228/Del/2014

Assessment Year 2009-10

Income Tax Officer Vs. Kalu Ram

Ward – 1(3) Meerut S/O. Shri Deewan, Through L/H

Sh. Katar Singh & Himmat Singh,

R/o. Village – Dungrawali,

P.O. Partapur, Meerut

(Appellant) (PAN : CEMPK5241P)

(ReSPONDENT)

Cross Obj. No. 243/Del/2015

(In ITA No. 228/Del/2014)

Assessment Year : 2009-10

Income Tax Officer Vs. Kalu Ram

Ward – 1(3) Meerut S/O. Shri Deewan, Through L/H

Sh. Katar Singh & Himmat Singh,

R/o. Village – Dungrawali,

P.O. Partapur, Meerut

(Appellant) (PAN : CEMPK5241P)

(ReSPONDENT)

Assessee by ; Shri V.K. Goel, Adv.

Department by : Shri T. Vasudevan, Sr. DR

Date of hearing : 09-10-2015

Date of Pronouncement 04-01-2016

ORDER

The Revenue has questioned First Appellate Order raising the following issues :

Whether on the fact and cirucmstances of the case, the Learend CIT(Appeals) has erred in law in fact in holding the cost of acquisition taken by the A.O. at Rs. 70 per sq. yd., ignoring the fact that the cost of acquisition was calculated by the A.O. after taking into consideration comparative circle raes in the nearby areas and year wise appreciation in the valule of land?
Whether on the fact and circumstances of the case, the Learned CIT(Appeals) has erred in law in the fact in directing the A.O. to allow the deduction U/s 54F of the Income Tax Act, 1961 on account of investment in residential houses in the names of legal heirs of the assessee ignoring the fact that re-rolling benefit is not available to the assessee who has transferred the assets and has invested the sale consideration in the name of his sons?
The assessee on the other hand has raised cross-objection that the Assessing Officer was not justified in taking cost of acquisition as on 01-04-1981 @ Rs. 70 per sq. yd. and Learned CIT(A) by increasing it to Rs. 112.50 per sq. yd., however the assessee had claimed cost of requisition @ Rs. 150 per sq. yd. (revised objection).
Heard and considered the arguments advances by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
The facts in brief are that on the basis of information regarding the sale of an immovable property, notice under section 148 of the Act was issued to the assessee. In reponse, a return of income was filed without declaring any capital gain on the ifnormed transfer of propety. The assessees submitted that the land was sold by three persons, namely, the assessee Shri Kalu Ram, his brother Shri Ram Chander (both sons of Shri Dewan) and Shri Amar Veer Singh S/o. Shri Shyam Singh to a society of brothers of St. Patrick. A computation of captial gain was filed wherein indexed cost of purchase was reduced from the sales consideration and further dedution under sec. 54B and 54F of the Act were claimed. The assessee stated to have 25% of shares in the property sold. The Assessing Officer, however, considered the shares of the assessee in the property at 1/3^rd. The assessee had also claimed the cost of acquisition as on 01-04-1981 @ Rs. 150 per sq. yd. against which the Assessing Officer had adopted the rate at Rs. 70 per sq. yd. The Assessing Officer thus determined the long term capital gain in the hands of the assessee at Rs. 35,77,492 and denined the claimed deduction under sec 54B and 54F of the Act to the assessee on the ground that the new investment was made in the name of his two sons i.e., Shri Katar Singh and Shri Himmat Singh. In absence of evidence that the property was ancestral and thus income arising from its transfer was liable to be assessed in the capacity of HUF was denied by the Assessing Officer in absence of evidence in support.
The Learned CIT(A) held the cost of acquisition of land at Rs. 112.50 per sq. yd. as on 01-04-1981 as against the rate at Rs. 70 per sq. yd. adopted by the Assessing Officer, which has been questoned by the Revenue in issue No. 1 hereinabove. The Revenue in issue No. 2 has also questioned the action of the Learned CIT(A) in directing the Assessing Officer to allow the deduction under sec. 54F of the Act on account of investment in residential house in the names of legal heirs of the assessee.
The assessee in his cross-objection on the other hand has objected the First Appellate Order whereby the Leraned CIT(A) has adopted the cost of acquisition @ Rs. 112.50 per sq. yd.
In support of the issues raised in the appeal preferred by the Revenue, the Learned Senior DR has basically placed reliance on the assessment order where the submissins made on behalf of the assessee before the authorities below have been reiterated by the Learned AR.
On the basis of holding the cost of acquisition of land by the Learned CIT(A) at Rs. 112.50 sq. yd. as on 01-04-1981, I find that the assessee had shown the rate at Rs. 150 per sq. yd. and the Assessing Officer had adopted it @ of Rs. 70 sq. yd. The Learned CIT(A) has found the rate of Rs. 112.50 per sq. yd. as reasonable on the basis that circle rate of land at Partapur on 01-02-1984 was Rs. 250 per sq. yd. and the circle rate of village Khashi was Rs. 200 per sq. yd. the land of assessee was located approximately 500 meter away from Partapur ad 200 k.m. away from village Kash. The Learned CIT(A) has noted furher that the land was 2 km from partapur Railway Station, 1 to 1.5 km. away from Partapur Bus Station and was located in the area called partapur road where the circle rate of the land was at Rs. 200 per sq. yd. He, thereafter, had made reference of decision of Delhi Bench of the ITAT in the case of P.K. Shah in ITA No. 1431/Del/2003 holding that in the absnece of reference to the depatment’s valuer, the acceptance of the valuation by government approved valuer can be endorsed. The Assessing Officer observed that for the area in which the land was situated, no circle rate had been fixed and the land of the assessee was not located in Partapur or Kashi Village. The Assessing Officer did not comment on the report of government approved valuer. He has however, applied the rate of Rs. 150 per sq. yd. on the basis that circle rate of the land fixed by District Magistrate, Meerut as on 01-02-1984 was Rs. 100 per mtr. and thus the Assessing Officer deducted 20% from the same as on account of estimated escalation between 1981 to 1984 and further 20% on account of distance of assessee’s property from Partapur. The Learned CIT(A) from the circle rate list of various localities fied for 01-02-1984 observed that the rate of partapur ranged from Rs. 100 per sq. yd. to Rs. 150 per sq. yd. Hence, he thought in fair and reasonable to adopt as a base the average rate i.e. Rs. 125 per sq. yd. Thereafter, he estimated escalation between 1981 to 1984 @ 10% which also included also the discounting done for distance between Partapur and the land of the assessee. The Learned CIT(A) accordngly adopt the rate at Rs. 112.50 per sq. yd. as the cost of acquisition of land by the assessee as on 01-04-1981. Unfortunately, I find that neither the Assessing Officer nor the LearnedCIT(A) has given reason for not accepting the report of the government approved valuer who is undisputedly an expert of the subject. The authorities below should have estimated the rate only after showing their dissatisfaction with the rate reported by the government approved valuer. I thus while setting aside the orders of the authorities below in this regard direct the Assessing Officer to adopt the rate shown by the government approved valuer to calculate the capital gain. The ground No. 1 of the appeal preferred by the Revenue is rejected and the objection (revised) raised in the cross objection is allowed.
The next issue raised in the appeal preferred by the Revenue is regarding direction of the Learned CIT(Appeals) to the Assessing Officer to allow the deduction under sec. 54F of the Act on account of investment in residental houses in the names of legal heirs of the assessee.
In support of the above issue, the Learned Senior DR contended that the Learned CIT(A) given relief by directing the Assessing Officer to allow deduction under sec. 54F of the Act on account of investment in residential houses in the names of legal heirs of the assessee without appreciating that rerolling benefit is not available to the assessee who has transferred the assets and was invested the sales consideration in the name of his sons.
The Learned AR on the other hand placed reliance on First Appellate Order with the submission that the issue raised is fully covered by the following decisions :
CIT Vs. Kamal Wahal (2013) – 30 Taxmann.com 34 (Del.)
CIT Vs. Gurnam Singh (2008) – 170 Taxman 160 (P & H);
Hyderabad Bench of the ITAT in the cases of N. Ramkumar Vs. ACIT(2012) – 25 Taxmann.com 337 (Hyd.)
Considering the above submission and having gone through the above cited decision, I find that the Hon’ble Delhi HighCourt in the case of CIT Vs. Kamal Wahal (supra) has been pleased to hold that for claiming deduction of capital gain under sec. 54F of the Act, there is no need to purchase new residential house by the assessee exclusively in his own name. The assessee can purchae new house in the name of his heir. In the present case before me, the assessee had purchased new house in the name of his son and thus the Assessing Officer was not justified in denying the claimed deduction under sec. 54F of the Income Tax Act, 1961 to the assessee and the same has been rightly allowed by the Learned CIT(A) in view of the ratios laid down in the above cited decisions. The First Appellate Order in this regard is thus upheld. The ground No. 2 involving the issue in the appeal preferred by the Revenue is accordingly rejected.
In result, the appeal preferred by the Revenue is dismissed and cross objection filed by the assessee is allowed.

Order pronounced in the open court on 04-01-2016

(I.C. SUDHIR)

JUDIVIAL MEMBER

Dated : 04-01-2016

Mohan Lal