Smt. D. Nagamani, Visakhapatnam IN INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER I.T.A.No.247/Vizag/2013 ( Assessment Year: 2008-09) Smt. D. Nagamani, DCIT, Central Circle-1, Visakhapatnam Vs. Visakhapatnam [PAN: AEVPD3787L] ( Appellant) (Respondent) Appellant by : Shri G.V.N. Hari, AR Respondent by : Shri M.N. Murthy Naik, DR Date of hearing : 13.07.2016 Date of Pronouncement : 20.09.2016 ORDER PER V. DURGA RAO, Judicial Member: This appeal filed by assessee is directed against order of CIT(A)-I, Hyderabad dated 31.1.2013 for assessment year 2008-09. 2. Facts are in brief that assessee is individual derived income from pension, house property and agriculture. search and seizure 1 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam operation was conducted in residential premises of Shri P. Rama Raju, Proprietor M/s. Vigneswara Constructions, Visakhapatnam on 22.8.2008. survey u/s 133A of Income Tax Act, 1961 (hereinafter called as 'the Act') was also conducted at business premises of his concern. In course of survey, it was found that assessee had transferred 450 sq.yds. of property at survey no.44/7 of Maddilapalem village, Visakhapatnam to said concern for developing land into apartment in name of Shri Rekha Residency. assessee was to receive consideration in form of built up area of 6500 sq.ft. In her statement recorded u/s 132(4) of Act, she has submitted that she had not filed return of income for assessment year 2008-09 and stated that she is submitting letter dated 17.10.2008 in which she has given computation arrived at capital gain of ` 31,53,280/- and stated that she will pay tax and capital gains shortly. In view of above, assessing officer concluded that there was escapement of income. Accordingly, notice u/s 148 of Act was issued to assessee on 9.8.2009. Assessee filed return of income on 9.11.2009 declaring loss of ` 46,108/- besides agricultural income of ` 42,600/-. However, no capital gain was admitted. During course of assessment proceedings, A.O. has asked assessee to produce purchase deeds in respect of original asset and also 2 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam documental proof in respect of exemption/expenses claimed. However, assessee could not produce any evidence except development agreement. Therefore, A.O. has asked assessee that in absence of any details, why admitted capital gains of ` 31,53,280/- should not be brought to tax for A.Y. 2008-09, subject to furnishing proof regarding cost of acquisition of property and expenditure claimed towards construction. In response, authorized representative of assessee filed computation of capital gains on 18.10.2010 as under: Sale of undivided unspecified share of land including Two flats sold by builder and cash received by you 38,90,000 Less: Cost of land (indexed cost) . 9,59,641 Building value constructed in 1997-98 Including boundary wall . .5,05,829 14,65,470 24,24,530 Less: Cost of one flat claimed as exemption u/s 54 24,24,530 Capital gains Nil 3. A.O. after considering above has observed that assessee was taking different figures in respect of sale consideration and cost of flat claimed as exempt, as under: 3 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam Total Exemption Capital consideration claimed u/s Gains 54F admitted In her statement 56,43,750 10,25,000 31,53,280 dated 17.10.2010 In her letter dated 37,40,000 22,74,450 Nil 16.10.2010 In her letter dated 38,90,000 24,24,530 Nil 18.10.2010 4. From above, assessing officer concluded that assessee was contradicting on each occasion admitting different figures without showing any basis or furnishing any proof. He again issued show cause notice dated 26.10.2010 to substantiate her claim and proposed capital gains computation. In response, assessee filed her explanation along with proof in respect of her agricultural income but could not furnish any evidence, cost of acquisition/improvement. It was submitted before A.O. that assessee has never admitted capital gain of ` 31,53,280/- and that questions were asked and answers were dictated. It was claimed that appellant has received only ` 18,45,000/- towards sale of undivided and unspecified share of land 246 sq.yds. out of 450 sq.yds. and balance of 204 sq.yds. is retained and given by builders to landlord. It was further submitted that initially developer has agreed for consideration towards land by allotting constructed area of 6500 sq.ft., however, only 4325 sq.ft. was finally allotted, balance constructed was sold by developer and 4 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam amount collected of ` 2,45,000/- was taken as share of land. developer never paid ` 24 lakhs to assessee, accordingly assessee has submitted that consideration was only ` 38,90,000/- and not ` 56,43,750/-. A.O. after considering explanation of assessee, he noted that assessee had been changing her stand from time to time to bifurcate things to her convenience in respect of cost of acquisition, expenses claimed as incurred and exemption u/s 54F of Act was never furnished. Therefore, A.O. has adopted sale consideration at ` 56,43,750/- as admitted by assessee in her statement dated 17.10.2010 supported by her computation sheet and report of investing officer. He further noted that exemption u/s 54F of Act had been claimed by assessee in respect of capital asset other than residential house property, whereas it was clear that assessee has not been constructed any building nor incurred any expenditure for such purpose as she could never furnish necessary evidence in this regard. Accordingly, cost of acquisition was taken at ` nil and no credit was allowed towards cost of construction or exemption u/s 54F of Act also. Accordingly, long term capital gain was assessed at ` 56,43,750/-. 5 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam 5. On being aggrieved, assessee carried matter in appeal before Ld. CIT(A). 6. Before CIT(A), it was submitted that Development agreement was entered in assessment year 2005-06 and therefore, capital gains has to be taxed in that year. It is also further contended that since constructed area was handed over in April, 2006, said date has to be reckoned in date of transfer and accordingly, long term capital gain has to be taxed in assessment year 2007-08 and not in assessment year 2008-09. Ld. CIT(A) has considered submissions made by assessee. assessee herself has clearly admitted capital gains for assessment year 2008-09. He has held that A.O. correctly taxed long term capital gain in assessment year 2008-09. relevant portion of order is extracted as under: 7.0 I have gone through facts of case and submissions of appellant. As regards year of taxability, it is true that in view of various judicial pronouncements, Long Term Capital Gains on transfer of capital asset has to be taxed either in year in which Development Agreement is entered into or in year in which possession of constructed area is handed over to landlord. In instant case, however, no such gains were offered to tax in year in which Development Agreement was entered into i.e. in Assessment Year 2005-06. It is being now contended that since constructed area was handed over in April 2006, said date has to be reckoned as date of transfer and accordingly, Long Term Capital Gain is to be taxed in Assessment Year 2007- 08 and not in Assessment Year 2008-09, as has been done by Assessing Officer. On going through facts of case, however, it is seen that appellant has sought to substantiate handing over of constructed area in Financial Year 2006-07 only on basis of certain registered documents, evidencing sale of flats by her. Such documents can indeed be considered as evidence of transfer of properties by appellant, but those cannot establish that properties 6 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam were handed over to her at that time itself. Except for such sale deeds, no other evidence regarding handing over of constructed area could be furnished by appellant at any stage. As against this, in her statement dated 17-2-2008, appellant had given detailed and categorical statement, along with letter dated 17-10-2008 giving computation of Long Term Capital Gains taxable in Assessment Year 2008 09. relevant portion of statement has been reproduced by Assessing Officer in assessment order as under: "Q.3 Please give details regarding acquisition of property at Maddilapalem totalling to 450 sq. yards and sources of investment for same. Ans. This property was acquired in three Financial Years i.e. 19 1995-96 and 1996- 97. sources for this investment is salary income and agricultural income and also PF loan. We have, constructed one house in year Financial Year 1997-98 worth Rs. 3,22,600/- Q.4 Have you admitted capital gain related to sale of land as mentioned above in returns filed by you for Assessment Year 2008-09? Please give details of capital gains obtained in this venture. Ans. I have not filed return for current year yet. I am submitting letter dated 17-10-2008 in which have given computation and arrived at capital gain of R.31,53,280/-. I will pay tax on capital gain shortly." 07.1 From above, it is amply clear that appellant had clearly and categorically admitted Long Term Capital Gains in respect of impugned property in Assessment Year 2008-09 on her own. It is also seen that though search and and survey operations in case Shri P.Rama Raju, Prop. M/s.Vigneswara Constructions, were conducted on 22-8-2008, above stated -w- as-recorded from appellant after considerably long time on 17- 10-2008, by what time any pressure confusion, whatsoever must have been Therefore, there is no merit in contention of Authorised Representative that "questions were asked and answers were dictated". Besides, even though above statement was made on 17-8-2008 itself, it was only in return of income filed on 19-11- 2009 that appellant did not show such capital gains for Assessment Year 2008-09. very time gap between admission and retraction shows that subsequent act of retraction is afterthought only, whereas Long Term Capital Gain was voluntarily admitted in Assessment Year 2008-09 in view of actual handing over of constructed area in previous year 2007-08. Therefore, no infirmity is found in action of Assessing Officer in bringing to tax impugned Long Term Capital gain in Assessment year 2008-09, and accordingly, additional ground taken by appellant is decided against appellant. 7. So far as computation of long term capital gain is concerned, A.O. has adopted amount of ` 56,43,750/-. same was confirmed by CIT(A) by observing as under: 7 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam 08.0 As regards computation of such Long Term Capital Gain, it is seen that in her statement, appellant had categorically admitted that she had received cash consideration of Rs.24 lakhs, along with share of undivided, unspecified portion, which worked out to Rs.32,43,750/-. Therefore, as per appellant's voluntary admission itself, total sale consideration received was Rs.56,43,750/-. During course of appellate proceedings, it is claimed that appellant had only received Rs.10 lakhs as "refundable deposit" It is also claimed that said amount was refunded on completion and handing over of possession. Besides, appellant has claimed that instead of receiving Rs.6500 square feet of constructed area, as mentioned in Development Agreement and also admitted in initial statement, appellant received 4,325 square feet only and towards balance surrendered area, Developer paid her Rs.20,45,000/-. Accordingly, it has now been claimed that consideration was Rs.38,90,000/- only and not Rs.56,43,750/-. However, it is clear that these claims have not been substantiated with any evidence, as against categorical admission made by appellant. As discussed by Assessing Officer, appellant gave different versions regarding quantum and- manner at various times. However, none of such versions, could ever be substantiated with evidence. Therefore, in my considered opinion, it is only initial statement and first letter dated 17.10.2008, which can be considered as true and uninfluenced indicator of total sale consideration and such consideration was indeed Rs.56,43,750/-. 8. So far as cost of acquisition is concerned, CIT(A) directed A.O. to verify cost of land and directed to grant deduction on indexed cost of acquisition. As per claim of exemption u/s 54F of Act, she has not filed any details in respect of claim u/s 54F of Act. He confirmed order of A.O. by observing as under: 08.2 As regards claim of exemption u/s.54F, it is seen that in her statement dated 17-10-2010, appellant had claimed same at Rs. 10,25,000/-. In her letter dated 16-10-2010, claim was raised to Rs.22,74,450/-, while in another letter dated 18-10-2010, appellant claimed Rs.24,24,530/- as deduction u/s.54F. variation in claims itself shows that appellant herself is not sure about claim or basis thereof. Even in course of appellate proceedings, no concrete working or evidence with regard to such claim could be submitted and it was only claimed that in view of certain case laws, either cost of all flats or at least cost of 2 contiguous flats should be considered as amount spent for acquisition of residential house. It is clear that despite such claims no evidence with regard to acquisition of such flats was given before Assessing Officer, nor has any evidence been sought to be admitted in course of these proceedings. It is clear that exemption u/s.54F is subject to various other conditions, such as 8 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam retention for specific period, etc. appellant has at no stage been able to establish that it had complied with all such conditions as have been provided u/s 54F. Accordingly, finding no infirmity in denial of claim u/s 54F, ground raised in this regard is also decided against appellant. 9. On being aggrieved, assessee carried matter in appeal before Tribunal. 10. We have heard both parties, perused materials available on record and gone through orders of authorities below. first issue that came up for our consideration is year of taxability of capital gains. facts which lead to issue are that assessee is entered into Joint Development agreement on 12.3.2005 with M/s. Vighneswara Constructions, Visakhapatnam and agreed to share built up area in ratio of 46% for land owner and 54% for developer. As per said joint development agreement, assessee has got 6500 sq.ft. super built up area in proposed apartment. During course of search and seizure operations in cased of Shri P. Rama Raju, proprietor of Shri Vigneswara Constructinos, assessee in her statement recorded on 17.10.2008 has admitted that capital gain in respect of joint development agreement is coming for assessment year 2008-09, accordingly, filed statement of computation of capital gain before assessing officer. Based on such admission, A.O. come to conclusion that transfer had taken place for assessment 9 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam year 2008-09. It is contention of assessee that she had entered into joint development agreement in year 2004-05 and builder has handed over possession of constructed apartment in April, 2006 and accordingly, transfer will take place either for assessment year 2005-06 or assessment year 2006-07, but not for assessment year 2008-09. assessee further contended that she had admitted capital gains for assessment year 2008-09, while answering statement recorded during course of survey, but facts indicates that transfer had taken place in assessment year 2005-06 if date of joint development agreement is considered as date of transfer within meaning of section 2(47)(v) of Act, or if date of handing over possession by builder is considered, then transfer will take place for assessment year 2006-07, therefore, A.O. was not correct in coming to conclusion that transfer is taken place for assessment year 2008-09. 11. Having heard both parties and considered materials on record, we do not find any merits in arguments of assessee for reason that assessee had categorically admitted during course of survey that capital gain arises for assessment year 2008-09 and accordingly, furnished statement of computation of capital gain, 10 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam however, retracted from her admission while filing return of income for assessment year 2008-09. It is admitted fact that assessee is entered into joint development agreement on 12.3.2005 which pertains to assessment year 2005-06. It is true that in view of various judicial pronouncements, long term capital gain on transfer of capital asset has to be taxed either in year in which development agreement is entered into or in year in which possession of constructed area is handed over to land lord. In instant case, on perusal of facts available on record, we find that assessee has entered into joint development agreement on 12.3.2005 which falls under assessment year 2005-06. However, no such gains were offered to tax in year in which development agreement was entered into i.e. in assessment year 2005-06. assessee claims that builder has handed over possession of constructed apartment in month of April, 2006 and accordingly transfer would taken place for assessment year 2006-07. But fact is that assessee claims to have received possession of constructed apartment in month of April, 2006 based on sale deed executed by her in favour of prospective buyer in month of April, 2006 on which date builder has entered into separate construction agreement for construction apartment for prospective 11 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam buyers. On perusal of said construction agreement, we find that builder agreed to complete construction of said flat and handed over possession of same within 18 months from date of this agreement. If you take date of sale of undivided portion of land and date of construction agreement coupled with period taken by builder for construction of apartment which falls within financial year 2006-07 relevant to assessment year 2008-09. Based on such agreement, assessee has agreed to disclose capital gain for assessment year 2008-09 at time of survey. However, she has retracted her own statement and claims that if at all transfer has taken place it will take place for assessment year 2005-06 or 2006-07, but not for assessment year 2008-09. Therefore, we are of view that A.O. is right in computing capital gain on transfer of land in pursuant to joint development agreement for assessment year 2008- 09 based n assessee s own admission at time of survey which is further supported by copies of sale deed and construction agreements. CIT(A) after considering relevant details rightly upheld order of A.O. We do not see any reasons to interfere with order of Ld. CIT(A), hence, we inclined to uphold CIT(A) order and reject ground raised by assessee. 12 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam 12. next issue that came up for our consideration is computation of long term capital gain. A.O. has adopted consideration of ` 56,43,750/- in respect of transfer of land in lieu of construction of 6500sq.ft. building and also cash consideration of ` 24 lakhs admitted by assessee at time of survey. assessee claims that she had not received cash consideration of ` 24 lakhs in addition to super built up area of 6500 sq.ft. assessee further claims that as per joint development agreement, she is supposed to receive 6500 sq.ft. super built up area, however, she had received 4325 sq.ft. super built up area and remaining 2175 sq.ft. has been surrendered to builder for which she has received consideration of 20,45,000/-. total consideration received towards transfer of land pursuant to joint development agreement is ` 42,07,500/- as against this, A.O. has adopted consideration of ` 56,43,750/-. 13. Having heard both parties and considered materials available on record, we find that A.O. has considered consideration of ` 56,43,750/- towards sale of undivided and unspecified share of land being cost of construction of 6500 sq.ft. built up area of ` 32,43,750/- and cash consideration of ` 24 lakhs over and above super built up area as agreed by assessee at time of survey. 13 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam A.O. has adopted such consideration as agreed by assessee at time of recording statement. However, assessee claims that consideration adopted by A.O. is not correct, because A.O. has taken consideration towards 6500 sq.ft. super built up area and also cash consideration of ` 24 lakhs. But fact is that she had received super built up area of 4325 sq.ft. and surrendered remaining 2175 sq.ft. constructed area to builder for which she had received ` 20,45,000/- We find force in arguments of assessee for reason that initially A.O. has taken cost of construction of 6500 sq.ft. area as consideration for transfer of 54% undivided and unspecified share of land and cash consideration of ` 24 lakhs. According to assessee, she had received only 4325 sq.ft. but not 6500 sq.ft. super built up area. Though assessee claims to have received only 4325 sq.ft. area, she could not substantiate her claim with any evidences. As discussed by assessing officer, assessee gave different version regarding quantum and manner of computation of long term capital gains on various times, however, none of such versions are substantiated with evidences. Therefore, considering over all facts and circumstances of case, we are of opinion that issue needs to be re- examined by A.O. in light of above discussions to find out what is exact amount of consideration received by assessee 14 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam towards transfer of undivided portion of land and surrender of 2175 sq.ft. super built up area. Hence, we set aside issue to file of A.O. and direct A.O. to examine issue with reference to evidences and re-compute capital gain in accordance with law. 14. next issue with regard to exemption u/s 54F of Act. assessee has claimed exemption u/s 54F of Act towards re- investment in purchase of another residential house property. It is seen from statement dated 17.10.2010 that assessee had claimed exemption of ` 10,25,000/-. During course of assessment proceedings in her letter dated 16.10.2010, claim was raised to ` 22,72,450/-. assessee has filed yet another letter dated 18.10.2010, wherein she had claimed exemption of ` 24,24,530/-. According to A.O., assessee is not eligible for claiming exemption u/s 54F of Act, as at time of investment, she had invested in more than one residential house property, accordingly, as per provisions of section 54F of Act, she is not eligible for claiming exemption. It is contention of assessee that in view of certain case laws, either cost of all flats or cost of atleast two contiguous flats should be considered as amount spent for acquisition of residential houses. assessee further contended that she had 15 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam received four flats which are situated in single residential complex and adjacent to each other, therefore, in view of judicial decisions, she is eligible for claiming exemption u/s 54F of Act in respect of all four flats. To support her case, relied upon decision of Hon ble High Court of Andhra Pradesh in case of P. Nageswara Rao Vs. DCIT (2014) 365 ITR 249 and also decision of Hon ble High Court of Madras in case of CIT Vs. V.R. Karpagam (2015) 373 ITR 127. 15. We have heard both parties, perused materials available on record and gone through orders of authorities below. A.O. has rejected exemption claimed by assessee under provisions of section 54F of Act. According to A.O., assessee is not eligible to claim exemption u/s 54F of Act, because at time of re-investment in new residential house, she has purchased more than one residential house property. It is contention of assessee that in view of certain case laws either cost of all flats or atleast cost of two contiguous flats should be considered as amount spent for acquisition of residential house. We find force in arguments of assessee for reason that when assessee transfers any asset other than residential house property, in pursuance to joint development agreement, assessee is eligible to claim exemption u/s 54F of 16 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam Act in respect of one residential house or two residential apartments which are adjacent to each other. In present case on hand, on perusal of facts available on record, we find that assessee has made different claims at different stages without any documentary evidence to show that she had made investment in residential house property. No doubt assessee is eligible to claim exemption in respect of one residential house property, however, on perusal of facts available on record, it is clear that claim made by assessee is inconsistent. assessee had made claim of ` 10,25,000/- at time of survey and same has been enhanced to ` 22,74,450/- and finally raised to ` 24,24,530/-. Though assessee is eligible to claim exemption u/s 54F of Act in respect of one residential house, in view of inconsistent claim made by assessee, we deem it appropriate to remit matter back to file of A.O. to consider issue afresh. Accordingly, we set aside issue to file of A.O. and direct A.O. to examine claim made by assessee with reference to provisions of section 54F of Act. In case, assessee has claimed exemption in respect of one residential house property or two contiguous flats adjacent to each other, then A.O. is directed to allow exemption as claimed by assessee. In case assessee has claimed exemption in respect of four flats, then A.O. is directed to 17 ITA No.247/Vizag/2013 Smt. D. Nagamani, Visakhapatnam allow exemption in respect of one flat according to choice of assessee. 16. In result, appeal filed by assessee is partly allowed for statistical purposes. above order was pronounced in open court on 20th Sept 16. Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBERVisakhapatnam: Dated : 20.09.2016 VG/SPS Copy of order forwarded to:- 1. Appellant Smt. D. Nagamani, C/o A. J. Mohan, B.Com, LLB Dr.No.47-12-2/1, Dwarakanagar, Visakhapatnam-530 016 2. Respondent DCIT, Central Circle-1 Visakhapatnam 3. CIT (Central), Hyderabad 4. CIT(A)-I, Hyderabad 5. DR, ITAT, Visakhapatnam 6. Guard file BY ORDER // True Copy // (Sr.Private Secretary) ITAT, VISAKHAPATNAM 18 D. Nagamani v. DCIT, Central Circle-1, Visakhapatnam