Sec 50C cannot be Invoked if No Reference is made to Valuation Officer

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

12. We have heard rival submission of the parties on the issue in dispute and perused the relevant materials on record.

13. We find that the assessee in the course of assessment proceeding filed a claim for deduction under section 54 against long-term capital gain for payment made to M/s Neel Kamal Realtor towards investment made in residential flat at Mumbai. The Learned Assessing Officer did not consider the request of the assessee for allowing deduction under section 54 of the Act. Before the Ld. CIT(A) the assessee again made request for allowing the said claim of deduction. The Ld. CIT(A) called for a remand report from the Assessing Officer. The Assessing Officer objected the deduction on two grounds. Firstly, according to him the assessee had filed return under section 139(4) of the Act i.e. after the due date and further deduction was claimed through letter. According to him the only recourse left for the assessee was to file a revised return, which he didn’t /could not do since the return was filed under section 139(4) of the Act and thus the Assessing Officer cannot entertain the claim in view of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC). Secondly, the Assessing Officer verified by way of issue of notice under section 133(6) of the Act from M/s Neel Kamal Realtor and Builder Private Limited and found that allotment letter was issued on 05/04/2010 for allotment of the flat to the assessee, but the agreement was not yet registered and a payment of ₹ 2,38,13,125/- was paid by the assessee. In view of the Assessing Officer, neither the possession letter was issued nor entire consideration was paid and in absence of any registered sale deed, it was not verifiable whether the new asset was transferred to the assessee within a period of three years of its purchase which is one of the condition for deduction u/s 54 of the Act. The Ld. CIT(A) held that the Assessing Officer was not authorized to accept the claim of the deduction, if not made in the income tax return otherwise then by filing a revised return. The Learned CIT(A) also held that the assessee has not fulfilled the condition of section 54 of the Act that the assessee has purchased another residential house within one year before or two years after the date on which transfer took place or constructed the same within three years after the date of such transfer.

14. Before us, the Learned Counsel of the assessee has submitted that the Ld. CIT(A) is not barred from admitting any claim of the assessee, otherwise then made in the return of income, if same is in accordance with law. The Counsel submitted that in the case of CIT Vs Rajesh Jalan 286 ITR 274 (Gau), the Hon’ble Gauhati High Court has held that claim of deduction under section 54 can be made in the return filed under section 139(4) of the Act. The Learned Counsel further submitted that the assessee has made following payments to the developer:

a. “Payment of Rs.1,00,00,000/- on 25th March 2010 (A.Y 2010-11)

b. Payment of Rs.1,21,38,750/- on 1st April 2010 (A.Y 2011-12)

c. Payment of Rs.16,74,375/- on 28.05.2010 – (A.Y. 2011-12)

d. All above payments were made via banking channel. Total of above payments would be – 2,38,13,125/- (which is approximately 100% of the payments) – Accepted by the AO in remand proceedings.”

15. In view of the above payments, the Learned Counsel submitted that the assessee had already paid the entire payment for the purchase of flat and hence, the assessee was de-facto owner of the property. The Learned Counsel in this regard relied on the decision of the Hon’ble Delhi High Court in the case of CIT vs. R. L. Sood 245 ITR 727 (Del) and CIT Vs R. Krishna 363 ITR 69 (Del) wherein it is held that when the assessee has made substantial payments of the property purchase, then the assessee become owner of the property and merely because registered sale deed is exhibited at a later stage, the assessee cannot be denied the benefit of section 54 of the Act.

16. The Learned Counsel submitted that the assessee fulfill all the required conditions of the section 54 of the Act and therefore matter maybe restored back to the Learned Assessing Officer for allowing the claim in accordance with law.

17. In view of the arguments of the Learned Counsel of the assessee, we are of the opinion that claim of the assessee for deduction under section 54 is admissible if the assessee is found to satisfy all the conditions laid down under section 54 of the Act. Accordingly, we restore the issue in dispute to the file of the Learned Assessing Officer for considering the claim of the assessee for deduction under section 54 in accordance with the law. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard to the assessee. Accordingly the Ground No. 6 of the appeal is allowed for statistical purposes.

18. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 24th February, 2020