Rasiklal M. Parikh vs. ACIT (Bombay High Court)

DATE: March 10, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2006-07
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(i) Additional Evidence: Ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated.

(ii) S. 54F: The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. Humayun Suleman Merchant vs. CCIT is not per incuriam

The assessee submitted that the Tribunal ought to have first passed an order on the application allowing or rejecting the application for additional evidence and give reasons for the decision. It was also claimed that the judgement of the Court in Humayun Suleman Merchant vs. The Chief Commissioner of Income Tax, Mumbai in Income Tax Appeal No.545 of 2002 decided on 18th August, 2016; was per incuriam inasmuch as it had not appreciated the judgment of the Guwahati High Court in Commissioner of Income Tax vs. Rajesh Kumar Jalan (2006) 286 ITR 271. HELD by the High Court rejecting both contentions:

(i) No doubt ordinarily in an application seeking admission of additional evidence one would expect an order to be passed on the application. This would be the appropriate course of action so that parties are able to understand whether the application was allowed or not. In this case the appellant produced the additional evidence and admittedly after making submissions in support of it being allowed to be produced, also made submissions on merits. The petitioner/appellant did not call upon the Tribunal to pass an on order on his application to produce additional evidence contained in the AEPB before making his submissions on merits and therefore proceeded upon the understanding that the application has been allowed. The Tribunal has taken into consideration the submissions of counsel for the appellants based on the documents forming part of AEPB. There is no doubt in our mind that the Tribunal had permitted the appellants to make submissions on the basis of these documents. If that were not to be case, there may have been something to be said in favour of the appellants, however, in the present case the appellants were aware that the attention of the Tribunal had been invited to the documents in question and the Tribunal had in fact considered contents of the documents on merits and as to how it would affect the appellants’ case. Having done so, in our view no injustice has been caused to the appellants. Had the Tribunal declined to consider the documents in our view it would have been appropriate that some reasons will have to be given by them for depriving the parties the benefit of the submissions to be made on the basis of such additional documents. This, in our view is necessary since the rules itself provide for the right to seek reliance upon additional documents. We have no doubt that in the present case the Tribunal did not commit any error in the facts and circumstances of the present case in not having passed the order on the application for leading additional evidence contained in AEPB before proceeding to pass the order on merits of the controversy in the appeal.

(ii) In our view the submission of Mr. Shah that the expression ‘shall’ appearing in Section 54F(4) is not mandatory but only directory has no merit inasmuch as not only Section 54F(4) used the word ‘shall’ be deposited it is followed by the bracketed portion which reads : “(such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of Section 139)” In view of this clarification Mr. Shah’s submitted that the word ‘shall’ is not mandatory but only directory cannot be sustained and reliance placed on K.P. Varghese (supra) that in interpreting Section 54 we must eschew literalness in interpretation of the section and arrive at an interpretation which is not absurd, is of no avail.

(iii) In Aditya V. Birla (supra) the court observed that an exemption provision must be interpreted as the situation demands and not in a technical sense. We do not see how this decision assists Mr. Shah. As far as possible a beneficial provision should be liberally but not if to the extent that renders the intent of the provision redundant. The restrictions on the time within which the conditions of Section 54 have to be complied with are reasonable. If we were to take a different view it would result in dilution of the statutory provision and promote misuse.
(iv) In the fact situation at hand we are afraid the assessee can derive no benefit from the provisions of circular No.672 dated 16th December, 1993 inasmuch as the scheme contemplated in paragraph 2 of circular No.471 is not available to the appellant. The appellant has to obtain the allotment letter from the developer under the provision of Maharashtra Ownership of Flats Act, 1963 (MOFA) and not from the co-operative society. The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. In the present case, however, it is not in dispute that the agreement for sale was entered into only on 24th November, 2008 beyond the period of three years from the date of surrender of tenancy which was 13th September, 2005. Moreover, the developer had no approval for construction of the 9th floor of Wing ‘C’, wherein the assessee had booked three flats and such approval was received by the builders only on 7th September, 2010. Thus, according to us there is no question of assessee establishing the title over the property which was not been approved for construction at the material time.

(v) In R. L. Sood (supra) it was held that a substantial amount being paid, the assessee acquired substantial domain over new premises and merely because the builder failed to hand over possession of the flat within the period of one year, the assessee cannot be denied the benefit of the benevolent provisions of Section 54. We observed in that case, an agreement of purchase had been entered into within one year of sale of old residential home. On facts, therefore, it clearly can be differentiated. Moreover, the assessee in that case had the benefit of board circular no.471 which clarifies that under the allotment letter issued by DDA under the self-financing scheme, the allottee gets title to property which is not so in the case at hand. We are of the view that the issue pertaining to incomplete construction and that of contiguity of flats need not be gone at this stage since on very first issue, we are not satisfied with the eligibility of the appellant assessee to claim exemption under Section 54F. Such being the position, in our view it is not necessary to consider the aspect of non-completion of construction and flat being reportedly contiguous since these are aspects in any case did not arise in the assessment year under consideration. We must not lose sight of the fact that we are presently concerned with assessment year 2006-07 in which year these issues did not arise.

Case laws referred on additional evidence:

(i) Commissioner of Income Tax v/s. Asian Techs Ltd. 233 ITR 715 (Ker);
(ii) Commissioner of Income Tax v/s. Travancore Titanium Products Ltd. 203 ITR 685′;
(iii) R.S.S. Shanmugam Pillai & Sons vs. Commissioner of Income Tax, Madras 95 ITR 109 (Mad.);
(iv) Maruti Udyog Ltd. vs. Income Tax Appellate Tribunal and Others 244 ITR 303 (Del.)
(v) Zenith Ltd. v/s. Deputy Commissioner of Income Tax and Another 271 ITR 135;
(vi) Parkkot Maritima Agencies Pvt. Ltd. v/s. Commissioner of Income Tax in Tax Appeal No.37 of 2016 decided on 15th November, 2016;
(vii) Assam Hindu Mission Upper Nawprem v/s. Smt. Elaboris Tron AIR 1999 Gauhati 39;
(viii) Smt. Suhasinibai Goenka v/s. Commissioner of Income Tax 216 ITR 518;
(ix) Commissioner of Income Tax v/s. Kum. Satya Setia 143 ITR 486;
(x) Hukumchand Mills Ltd. Vs. Commissioner of Income Tax, Central, Bombay 63 ITR 232 (SC);
(xi) Arjan Singh Vs. Kartar Singh and Others AIR (38) 1951 SC 193
(xii) M.M. Quasim vs. Manohar Lal Sharma and Others AIR 1981 SC 1113
(xiii) Gopal Chandra Chaudhury v/s. LIC of India AIR 1985 Orissa 120;

Cases referred to on s. 54F:

(i) Commissioner of Income Tax vs. Rajesh Kumar Jalan (2006) 286 ITR 274;
(ii) Commissioner of Income Tax vs. Punjab Financial Corporation 254 ITR 492;
(iii) Commissioner of Income Tax vs. Kullu Valley Transport Co. P. Ltd. 77 ITR 518;
(iv) Humayun Suleman Merchant vs. The Chief Commissioner of Income Tax, Mumbai in Income Tax Appeal No.545 of 2002 decided on 18th August, 2016;
(v) K. P. Varghese vs. Income Tax Officer, Ernakulam and Anr. 131 ITR 596 (SC);
(vi) CBDT and Others vs. Aditya V. Birla 170 ITR 137;
(vii) Commissioner of Income Tax vs. J.H. Gotla 156 ITR 323;
(viii) Commissioner of Income Tax vs. Mrs.Hilla J.B. Wadia (1995) 261 ITR 376;
(ix) Commissioner of Income Tax vs. R. L. Sood 2000 245 ITR 727;
(x) Munibyrappa vs. Commissioner of Income Tax 265 ITR 560;

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