Shriniwas R. Desai Vs ACIT (OSD) (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad, in a consolidated order, dealt with two appeals filed by the assessee, Shri Shriniwas R. Desai, for the Assessment Year (A.Y.) 2007–08. The first appeal (ITA No.1245/Ahd/2010) related to the quantum of exemption claimed under Section 54 of the Income Tax Act, 1961, while the second appeal (ITA No.2432/Ahd/2010) concerned the levy of penalty under Section 271(1)(c) of the Act. Both orders of the Commissioner of Income Tax (Appeals) [CIT(A)] were under challenge.
Quantum Appeal (ITA No.1245/Ahd/2010)
The assessee raised multiple grounds contending that the CIT(A) erred in upholding the Assessing Officer’s (AO) order without proper consideration of facts and evidence, and in rejecting the expenditure claimed for improvement of a residential house while computing exemption under Section 54. It was argued that the expenditure of ₹15,48,773 incurred to make the newly purchased house habitable constituted part of the cost of the new asset, eligible for deduction under Section 54(2). The assessee maintained that the house purchased was not in a livable condition at the time of acquisition, and the expenditure incurred up to the filing of the return (31 July 2007) should be treated as part of the cost of acquisition for exemption purposes. The assessee further contended that the genuineness of these expenses was never questioned by the tax authorities.
