P.K. Bansal:-This appeal has been filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals)-XXXVI, Kolkata in Appeal No. 448/CIT(A)-XXXVI/Kol/Wd.55(1)/11-12 dated 27.02.2014 for the assessment year 2006-07 on the following grounds of appeal:-
(1) For that on the facts and in circumstances of the case, this re-assessment proceedings u/s 147 is arbitrary and bad in law.
(2) For that there was no default or failure u/s 139 of the I.T. Act on the part of the assessee as the ld. ITO has to have reason to believe that income has escaped assessment.
(3) For that the ld. ITO has no power to reopen the case since no tangible material was placed on record so as to show that there was escapement of income from assessment.
(4) For that the ld. ITO erred in disallowing the exemption claimed under section 54EC against capital gain for investment in REC Bond and assessed tax on LTGG of Rs. 11,07,079/- is unwarranted by the facts of the case.
(5) For that the ld. ITO erred in adding Rs. 32,570/- as accrued interest income on fixed deposit, and the same is unjustified by the facts of the case.
(6) For that the ld. ITO erred in adding Rs. 12,600/- as notional rent and the same is unjustified and unwarranted by the facts of the case.
(7) For that the ld. ITO erred in adding Rs. 64,396/- as income from rental, property at Narendrapur, 24-Pgs.(s) and the same is arbitrary and unjustified by the facts of the case.
(8) For that the re-assessment proceeding is vitiated by errors of law and as such liable to be quashed and/or set aside.
2. Grounds No. 1 to 3 are not pressed by the ld. counsel for the assessee at the time of hearing. Therefore, these grounds are being dismissed as not pressed.
3. Ground No. 4 relates to the not allowing exemption under section 54EC in respect of a sum of Rs. 11,07,079/-.
4. Brief facts relating to this ground are that during the year under consideration, the assessee sold his house property at Tara Road, Kolkata for a consideration of Rs. 23,00,000/- and the capital gain was computed at Rs. 9,42,079/-. The assessee claimed exemption under section 54EC amounting to Rs. 11,07,079/- in respect of the investment made in Rural Electri fication Bonds, which were purchased by the assessee on 01.02.2007. Since the conveyance deed was executed on 15.01.2006 and the investments were made after more than one year from the date of the sale of the property, therefore, the Assessing Officer took the view that the conditions for the eligibility of the exemption under section 54EC of the Act were not fulfilled and, therefore, he disallowed the exemption.
5. The assessee went in appeal before the ld. CIT(Appeals), who held that exemption under section 54EC is available only when the specified Bonds are purchased within a period of six months. Since the assessee did not make the purchase within a period of six months from the date of the sale of property, therefore, he sustained the order of the Assessing Officer.
6. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities. Before us, ld. A.R. vehemently relied on the order of the Hon’ble Bombay High Court in the case of CIT, Cent ral-III, Mumbai –vs.- Cello Plast reported in 24 Taxman.com 111 (Bombay), a copy of which was placed before us, in which it was held that if the bonds of assessee’s choice are not available throughout the period of six months as provided under section 54EC, time of invest in Bonds would get automatically extended till bonds are available in market and assessee can purchase the same and claim exemption under section 54EC accordingly. We have gone through this decision as relied on by the ld. A.R. We noted that in that case also, the assessee sold its factory on 22.03.2006 and during the period 22.03.2006 to 01.07.2006 the Bonds were not available on 30.06.2006. CBDT issued the Circular extending the time to invest Bonds upto 31.12.2006, and upto 22.01.2007 the REC Bonds were not available within six months from the date of the sale of the property. In that case time period al so expi red on 21.09.2006. The last date in view of the Circular of the Board for investment in REC Bonds was 31.12.2006 but the Bonds were available between 22.01.2007 to 31.01.2007. The assessee bought the Bonds on 311.01.2007. The Hon’ble High Court under these fact s allowed the exemption to the assessee when the matter travelled to the Hon’ble High Court. In the present case, we noted that the assessee sold his house property on 15.01.2006 for a considerat ion of Rs. 23,00,000/- while as per the provisions of sect ion 50C, the consideration as per the stamp valuation was Rs. 24,65,600/-. The indexed cost of acquisition of the property came to Rs. 13,57,921/-. The assessee computed the capital gain at Rs. 9,42,079/- but taking the stamp duty valuation under section 50C the Assessing Officer computed the capital gain at Rs. 11,07,079/-. The assessee could not make any investment in REC Bonds as the Bonds were not available. The Central Board of Direct Taxes vide Ci rcular No. 142/09/2006-TPL dated 30.06.2006 extended the date for making the investment upto 31.12.2006. Therefore, if the date would have made the investment till that date he would have been eligible for the exemption. But we noted after 31.12.2006 till 21.07.2007 the REC Bonds were not available in the market for purchase, therefore, the assessee could not make the investment in Bonds. The Bonds were available for sale only from 22.01.2007 and the assessee purchased Bonds on 01.02.2007 i.e. within 11 days from the date when the Bonds were available for sale in the market. In our opinion, the decision of the Hon’ble Bombay High Court is clearly applicable in the case of the assessee. The assessee had purchased the Bonds within reasonable period when the Bonds were available for investment. No cont rary decision was brought to our knowledge by the ld. D.R. even though he has vehemently relied on the order of the Assessing Officer. We, therefore, respectfully following the aforesaid decision of the Hon’ble Bombay High Court set aside the order of the ld. CIT(Appeal s) and direct the Assessing Officer to allow exemption to the assessee under section 54EC for a sum of Rs. 10,10,000/- Thus this ground stands allowed.
7. The next ground relates to the addition made on account of the accrued interest on fixed deposits. The Assessing Officer noted that the assessee has shown the interest on fixed deposit amounting to Rs. 88,390/- and from the details he noted that in respect of some of the deposit s, the assessee has not shown the interest income. The Assessing Officer, therefore, calculated the interest and added the same in the income of the assessee. The assessee went in appeal before the ld. CIT(Appeals) and ld. CIT(Appeals) dismissed the ground of the assessee.
8. We have heard the rival submissions and carefully considered the same. We find substance in the submissions made by the ld. A.R. that the interest income on FDR has been shown by the assessee regularly on the basis of the certificate received from the Banker as is included in the TDS. Similarly during the impugned year also, the interest has been shown by the assessee in accordance with the calculation given by the Banker. Since the assessee is regularly following the same method of accounting, we, therefore, do not find any legality in the method of accounting followed by the assessee. Accordingly we delete the interest amounting to Rs. 32,570/-.
9. The next ground relates to the addition of Rs. 12,600/- as notional rent.
10. The fact s relating to this addition are that the assessee offered notional rent for two properties, namely at Gariahat Road and Tara Road. For Gariahat Road the rent was shown for nine months. The Assessing Officer was of the view that the rent shown by the assessee is at a lower side. He est imated the same @ Rs. 4,000/- per month amounting to Rs. 36,000/- and after allowing the statutory deduction he made an addition of Rs. 12,600/-.
11. After hearing the rival submissions we noted that the notional rent has merely been estimated by the Assessing Officer without giving any basis and on what basis the rent has been estimated @ Rs. 4,000/- per month. The provision of section 23 lays down how the annual value of the property has to be estimated. None of the relevant provisions has been brought to our knowledge by the Revenue. We, therefore, delete the addition. Thus this ground stands allowed.
12. The next ground relates to the addition of Rs. 64,396/-. The Assessing Officer when enquired the assessee submitted that this property is utilized by the assessee’s family for weekend destination. But occasionally the property al so is let out for picnic, party or shooting and due to which the assessee got certain income. The Assessing Officer noted that the income from the said property varied from year to year. In the assessment year 2004-05, the rental receipt from the said property was Rs. 1,86,000/-, for assessment year 2005-06 it was Rs. 1,30,000/-, and for the assessment year 2006-07 it was Rs. 1,07,000/-. Therefore, the Assessing Officer estimated the annual value at Rs. 1,86,000/- and after allowing the deduction he added the difference of the income as computed by him and as shown by the assessee amounting to Rs. 64,396/-.
13. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities. Ld. A.R. before us, even though vehemently contended for allowing deduct ion, but could not convince us how the annual value of the property will get reduced. It is not a case where the assessee has claimed vacancy allowance. Sect ion 22 of the Income Tax Act clearly stipulates that the income from the house property shall be chargeable under the head “income from house property” on the basis of annual value. The provision of section 23 lays down how the annual value has to be determined. Section 23 lays down three basis and on the basis of which the annual value has to be determined. The first basis is the sum for which the property might reasonably be expected to let from year to year. The second basis is applicable where the property or any part of the property is let out and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or the third basis where the property nor any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable- Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.
14. The assessee before us claims that the property was occasionally let out and part of the property is being occupied by the assessee as weekend destination which means that the property remains vacant for part of the year but the assessee has not given any calculation how he received the rent and during what year the property remains vacant, so that the actual rent received or receivable could have been computed in accordance with the provisions of sec tion 23(1)(c) of the Act. In our opinion, the onus is on the assessee. In case, he want s to claim that the property was not let out during the whole of the year. Since the assessee has not given any detail s neither before the authorities below nor before us, we, therefore, do not find any illegality or infi rmity in the annual value being taken by the Assessing Officer on the basis of the rent which the assessee received during the assessment year 2004-05 amounting to Rs. 1,86,000/-. We, therefore, confi rm the addition made by the Assessing Officer.
15. In the result, the appeal filed by the assessee is partly allowed as indicated above.