Income Tax Appellate Tribunal - CochinLate P.J. Joseph By L/Hr Jose Joseph, ... vs Assessee on 25 July, 20131
                                                               ITA No.219/Coch/2013

                  IN THE INCOME TAX APPELLATE TRIBUNAL
                           COCHIN BENCH, COCHIN

           Before Shri N.R.S. Ganesan (JM) and Shri B.R. Baskaran(AM)


                            I.T.A No. 219/Coch/2013
                           (Assessment year 2008-09)

Shri Jose Joseph                            vs    The ACIT, Cir.1(1)
L/H of late P.J. Joseph Jr                        Kozhikode
Josco Agencies
Moonalingal, Calicut 673 032
PAN : ACGPJ8872R
      (Appellant)                                       (Respondent)

                         Appellant by       :     Shri R.V. Veeramani
                         Respondent by      :     Smt. S Vijayaprabha

                   Date of hearing       :        25-07-2013
                   Date of pronouncement :        16-08-2013

                                      ORDERPer N.R.S. Ganesan (JM)

             This appeal of the assessee is directed against the order of the

      CIT(A), Kozhikode dated 06-02-2013 and pertains to assessment year

      2008-09.2.     The first issue is with regard to reopening of the assessment. After

      hearing the ld.representative for the assessee and the ld.DR, it appears

      that the assessee accepted the reasons for reopening and agreed for2ITA No.219/Coch/2013completion of the assessment before the assessing officer as evidenced

from the observations made by the assessing officer at paragraph 5 of his

order.     Since the assessee agreed before the assessing officer and

accepted the reasons for reopening and agreed for completion of the

assessment, this Tribunal is of the considered opinion that he cannot re-

agitate the matter once again either before the CIT(A) or before the ITAT.

Therefore, this Tribunal do not find any reason to interfere with the order of

the lower authorities on this issue. The order of CIT(A) on this issue is

upheld.3.       The next issue is with regard to claim of exemption u/s 54 of the Act.

Shri RV Veeramani, the ld.representative for the assessee submitted that

the assessee claimed exemption u/s 54 of the Act.            According to the

ld.representative, major portion of the construction was completed. When

the Inspector of Income-tax visited the premises he found that finishing

work is going on and the entire work would be finished in another 20 days.

The ld.representative further submitted that admittedly, the work relating to

construction of lawn in the front portion of the plot was in progress during

the visit of the Inspector. Referring to the judgment of the Madras High

Court inCIT vs Sardarmal Kothari & Anr(2008) 302 ITR 286 (Mad), the

ld.representative submitted that the assessee need not complete the

construction of the house and occupy the same.            It is enough if the3ITA No.219/Coch/2013assessee established that the assessee has invested the net consideration

within the stipulated period. In view of this judgment of the Madras High

Court, according to the ld.representative when the assessee invested the

entire money in the construction of the house he is entitled for exemption

u/s 54 of the Act. The ld.representative further submitted that the CBDT

clarified that in respect of purchase of plot, when the allotment was made

by the development authorities and the sale consideration was paid to the

development authorities, the assessee is entitled for exemption u/s 54 of

the Act even though the construction was not completed. In this case,

admittedly, the building was completed and what remains is outer finishing

of the premise. In fact, the assessee was working on the construction of

lawn in front of the house.4.    On the contrary, the ld.DR, Smt. S Vijayaprabha submitted that for

the purpose of claiming deduction u/s 54 the assessee has to purchase

within a period of one year before or two years after the date on which the

transfer took place a residential house or within a period of three years

after the date of sale construct a residential house.    According to the

ld.DR, the assessee has to complete the construction for the purpose of

claiming exemption u/s 54 of the Act. The Inspector from the office of the

assessing officer who visited the premises found that the construction was

in progress.   Therefore, according to the ld.DR, the CIT(A) has rightly4ITA No.219/Coch/2013confirmed the order of the assessing officer.       The ld.DR placed her

reliance on the judgment of the Delhi High Court in the case ofDP Mehta

vs CIT(2001) 251 ITR 529 (Del).5.    We have considered the rival submissions on either side and also

perused the material available on record. The assessee claims that major

portion of the construction was over and what was pending was only

creation of lawn in front of the house. We have also carefully gone through

the report said to be filed by the Inspector, who visited the premises, copy

of which is available on page 3 of the paper book.             For clarity we

reproduce the report of the Inspector below:"     As directed, on 19/08/2010 I visited the premises RS
      No.68/1, 68/4, Ward 35, Vengeri Village, Kozhikode, where
      Shri Jose Joseph is constructing a house. The work s going
      on in full swing. Carpentry work, Plumbing work, electrical
      fittings etc. are presently being done.2.    Again on today, i.e. 23/12/10 I visited the above plot.
      About 90% of construction work has been completed. Outer
      portion of the house finishing work is going on. Work relating
      to construction of a lawn in the front portion of the plot is in
      progress. Looking to the pace at which the work is going on,
      all the work may be finished in another 10 or 20 days.5ITA No.219/Coch/20133.    In order to verify the details of construction of residential
      house of Shri Jose Joseph, such as date of submission of
      plan, issue of permit for construction of the building,
      completion report etc.       I visited the Corporation office on
      23/12/2010. On enquiry it is revealed that the application for
      construction of residential house at the above mentioned
      location was given on 02/06/2009 under one day sanction
      scheme and the sanction was issued on same day vide E-
      9/45841/09.   Completion Certificate from the Architect has
      been obtained on 10/11/2010, which was submitted to the
      Corporation office. On enquiry it is observed that assessee
      has requested for permit to water connection, electricity etc.
      for which no objection certificate from the Regional Town
      Planner is required, the work relating to NOC from Town
      Planner is under process."From the above report it appears that work relating to construction of lawn

in front of the house was in progress. The entire work appears to be

completed within 10 to 20 days. The Architect has also given certificate

with regard to the completion of the building. However, there is no finding

by both the authorities below as to whether the building was fit for human

habitation or not? The CIT(A) apparently placing reliance on the judgment

of the Delhi High Court inDr D.P. Mehta(supra) found that a habitable

residential house to be completed within the specified time. However, he6ITA No.219/Coch/2013has not examined whether the construction completed so far was fit for

human habitation or not?6.    We have also carefully gone through the judgment of the Delhi High

Court inDr D.P. Mehta(supra). In the case before the Delhi High Court,

admittedly, what was constructed was a garage and servant quarters and

the assessee himself admitted that the property was not worthy of

occupation. In the case before us, whether the building was worthy of

occupation or fit for human habitation was not examined by either of the

authorities below. Therefore, this Tribunal is of the considered opinion that

the assessing officer has to examine whether the building which was

constructed within the specified period was fit for human habitation or not?7.    We have also carefully gone through the judgment of the Madras

High Court inCIT vs Sardarmal Kothari & Anr(supra).The Madras High

Court, after referring to the judgment of the Delhi High Court in the case ofD.P. Mehta(supra) found that it is enough if the assessee established that

the assessee had invested the entire net consideration within the

stipulated period and completed the construction of the house. For the

purpose of convenience, we reproduce the observation made by the

Madras High Court at pages 288 and 289 of the ITR:7ITA No.219/Coch/2013"     The Tribunal has also taken note of its own earlier order
      in the case ofMrs.Seetha Subramanian v. Asst.CITreported
      in (1996) 59 ITD 94 (Mad), wherein the Tribunal has held that,
      in order to get the benefit under section 54F, the assessee
      need not complete the construction of the house and occupy
      the same. It is enough if the assessee established that the
      assessee had invested the entire net consideration within the
      stipulated period.   The said view taken consistently by the
      Tribunal has been applied in these cases also.The Tribunal
      has distinguished the Delhi High Court judgment in the case ofD.P. Mehta v. CITreported in (2001) 251 ITR 529, relied on by
      the Revenue in their favour to non-suit the assessees for
      exemption. In our view, the Tribunal has distinguished the
      same rightly because in the cited case, there was a factual
      finding by the authorities that the assessee himself has
      admitted that the construction put up was only a garage and
      service quarters and it was not fit enough for occupation of the
      assessee. That factual finding is totally absent in these cases.
      There is no material to entertain these appeals."8.    In view of the above, it is necessary to examine whether the

construction completed within the specified period is fit for human

habitation or not?    Since lower authorities have not examined and

recorded finding to this effect, this Tribunal is of the considered opinion

that the matter needs to be reconsidered. Accordingly, the orders of lower

authorities are set aside and the issue is remitted back to the file of the

assessing officer for reconsideration. The assessing officer shall examine8ITA No.219/Coch/2013the material available on record and record a specific finding whether the

constructed building within the specified period is fit for human habitation

or not and thereafter decide the issue afresh in accordance with law after

giving reasonable opportunity of hearing to the assessee.9.    In the result, the appeal of the assessee is allowed for statistical

purpose.Order pronounced in the open court on this 16th August, 2013.Sd/-                                             sd/-
   (B.R. Baskaran)                                 (N.R.S. Ganesan)
ACCOUNTANT MEMBER                                 JUDICIAL MEMBER
Cochin, Dt : 16th July, 2013
pk/-
copy to:
1. The appellant
2. The respondent
3. The Commissioner of Income-tax
4. The Commissioner of Income-tax(A)
5. The DR
     (True copy)                                  By orderAsstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench