Case Law Details

Case Name : Shri Shailesh Kumar Chaturvedi Vs ITO (ITAT Jaipur)
Appeal Number : ITA No. 1026/JP/2019
Date of Judgement/Order : 07/07/2020
Related Assessment Year : 2008-09
Courts : All ITAT (7309) ITAT Jaipur (226)

Shri Shailesh Kumar Chaturvedi Vs ITO (ITAT Jaipur)

The issue under consideration is whether the expense on electricity and water bill will convert the status of plot of land into residential property and accordingly assessee will be eligible for deduction u/s 54?

In the present case, AO in the assessment order held that the assessee had only sold plot of land and no residential house construction was there on the said land and hence he disallowed the claim about cost of construction as well as the deduction claimed u/s 54 of the Income Tax Act, 1961. But the assessee states that a house was constructed over the land sold by him having electricity and water connections. It was therefore requested that the claim of the assessee may kindly be allowed and the action of the ld. AO may kindly be quashed.

ITAT states that there is nothing on record in terms of buyers confirmation/affidavit or photographs of the property at the time of sale which can corroborate that what has been purchased/sold is not just a plot of land but a plot of land along with constructed house thereon which could then have been verified by the Assessing officer. The affidavit of the tenant in terms of past tenancy and past electricity and water bills cannot come to the aid of the assessee to demonstrate the existence of the constructed house at the time of sale. ITAT thus find that the assessee has failed to discharge the necessary onus placed on him in support of his claim and cost of construction as so claimed remain unsubstantiated and cannot be allowed. At the same time, where the AO is ceased of the information that the assessee has made fresh investment in certain house property and plots of land and is also accepting that such investment may be eligible for claim under section 54F, it is incumbent on the part of the Assessing officer that in such a situation, where he had denied the assessee’s claim under section 54, he should have allowed appropriate claim to the assessee under section 54F as per law. Since we have already quashed the notice u/s 148, no useful purpose would be served in setting aside the matter to the AO to allow the deduction under section 54F as the consequent proceedings stand quashed. The appeal is disposed off accordingly.

FULL TEXT OF THE ITAT JUDGEMENT

This is an appeal filed by the assessee against the order of ld. CIT(A)-I, Jaipur dated 27.06.2019 for the assessment year 2008-09 wherein the assessee has taken the following grounds of appeal:-

“1.The the order passed by the ld. AO is bad in law as the same has been passed without satisfying the conditions stipulated and without assuming the jurisdiction U/s 147 of the Income Tax Act, 1961.

2. That without prejudice to ground no. 1, the ld. CIT(A) has erred seriously in confirming the action of the AO in considering the sale of land and building by the appellant as sale of land only and making disallowance of construction cost of building and further disallowing the benefit U/s 54 of the Income Tax Act, 1961.”

2. Briefly the facts of the case are that on the basis of information received from DIT(I & CI), Rajasthan that the assessee has sold certain immovable property, notice U/s 148 of the Act was issued to the assessee and in compliance, the assessee submitted that the return filed u/s 139 on 25.07.2008 may be accepted in due compliance to notice u/s 148 of the Act. Subsequently, notices U/s 143(2) and 142(1) were issued and assessment was completed U/s 147 r.w.s. 143(3) of the Act on 29.02.2016. In the assessment so completed, while computing the income under the head “long term capital gains”, the Assessing Officer held that only plot of land was sold by the assessee and no constructed house was sold, hence, cost of construction claimed to be incurred in F.Y. 1990-1991 and deduction U/s 54 of the Act as claimed by the assessee were denied. Against the said findings, the assessee moved an appeal before the ld. CIT(A) who has confirmed the findings of the Assessing Officer and against the order of ld CIT(A), the assessee is now in appeal before us.

3. In Ground no. 1, the assessee has challenged the assumption of jurisdiction u/s 147 by the Assessing officer. In this regard, the ld. AR submitted that though the validity of notice u/s 148 was not specifically challenged before the ld. CIT (A) due to inadvertent error, however since the same goes to the root of the matter and is purely legal ground in nature, it is requested that the same may kindly be permitted to be raised before the Tribunal for which reliance was placed on the decision of the Hon’ble Supreme Court in the case of NTPC vs CIT reported at 229 ITR 383.

4. The ld AR further drawn our reference to reasons recorded by the AO before issuance of notice u/s 148 and submitted that the statement of the ld. AO that the appellant did not file the return of income is wrong in view of the fact that the appellant had filed his regular return for this relevant year vide acknowledgement no. 41006583 in the office of the ITO, Ward 6(4), Jaipur and in this return, the appellant had declared capital gain and therefore the very reasoning stated by the ld. AO while initiating action u/s 147 is wrong on facts and under these circumstances, where the return of income has been filed and the transaction has been duly reported, there is no escapement of income and therefore, the jurisdiction assumed by the ld. AO is illegal and bad in law.

5. It was further submitted that the correct jurisdiction over the case lies with ITO, Ward 6(4), Jaipur as the appellant was deriving income from salary from Indian Railways and it is not known as to how and wherefrom ITO, Ward 2(2) assumed the jurisdiction. Hence the whole process of reassessment is illegal and is liable to be quashed.

6. It was submitted that from the reasons recorded, it is apparent that the information about sale of property was received from the office of DIT(I&CI) and thereafter the ld. AO was mandatorily required to conduct independent enquiries to reach the satisfaction of concealment of income in which he has failed. Had he conducted proper enquiries, he could have easily verified the fact that the appellant had filed his original return and had declared capital gains therein. Further in the reasons, the ld. AO has mentioned that the appellant had sold a property at Rs. NIL which was valued by the registrar at Rs. 11,14,712. This also shows that the ld. AO did not undertake any exercise to verify the true facts as he mentioned about sale of a property but without any sale consideration which is not possible and hence the ld. AO proceeded in this case without assuming proper jurisdiction and hence the whole process of assessment has been vitiated and whole proceedings are liable to be quashed being without jurisdiction.

7. It was further submitted that in the reasons recorded by the ld. AO, he has stated about sale of a property by the appellant which was valued by the registering authority for Rs. 11,14,712 but neither could identify any such document executed by the appellant nor any such document was brought before the appellant and even same has not been discussed in the assessment order also meaning thereby that the ld. AO did not have any piece of paper evidencing such deal nor he tried to obtain the same during assessment proceedings and hence he merely acted on the piece of information without examining authenticity of the same and hence assumption of jurisdiction by ld. AO is illegal.

8. In support of his aforesaid contentions, the ld AR also placed reliance on the following decisions:

a. Smt. Kanta Chaudhary v/s ITO, Ward 7(3), Jaipur (ITA No. 878/JP/2018 vide order dated 06.12.2018)

b. Narain Dutt Sharma v. Income-tax Officer, Ward- 6 (1), Jaipur (ITA NO. 203/2017 vide order dated 07.02.2018)

9. It was further submitted that the ld. AO recorded the reasons for reassessment in the name of one Shri Shalendra Kumar Chaturvedi and even issued the notice u/s 148 in his name whereas the notice u/s 143(2) of the Income Tax Act has been issued in the name of appellant and assessment has been finalized in the name of the appellant, shri Shailesh Kumar Chaturvedi and on this account also, notice u/s 148 being issued in the wrong name is required to be held as illegal.

10. It was further submitted that the ld. AO recorded his satisfaction only on the basis of information received from the DIT (I&CI) without carrying out his independent enquiries and hence he assumed jurisdiction merely on borrowed satisfaction which is impermissible in law. Reliance in this regard was placed on the judgment of the Hon’ble Bombay High Court in the case of PCIT -5, Mumbai v/s M/s. Shodiman Investments P Ltd. (ITA No. 1297 of 2015 dated 16.04.2018).

11. It was accordingly submitted by the ld AR that the instant proceedings initiated u/s 147/148 may be held as illegal on account of various deficiencies pointed out above and all the consequent proceedings undertaken on such basis deserves to be quashed.

12. Per contra, the ld. DR submitted that the assessee cannot be allowed to raise the contention challenging the jurisdiction of the Assessing officer, the ITO Ward 2(2) for the reason that there was ample opportunity available with the assessee during the course of assessment proceedings to challenge the assumption of jurisdiction by ITO Ward 2(2). However, once the assessee has participated in the assessment proceedings before ITO Ward 2(2) and has not raised any such objections before the completion of the assessment proceedings, the assessee cannot be allowed to raise this objection at this stage of appellate proceedings before the Tribunal. It was submitted that there are enough safeguards provided in the Act by way of section 124(3) wherein the assessee could have raised the assumption of the jurisdiction by the ITO Ward 2(2), however, having failed to exercise such right within the stipulated period as prescribed and having participated in the proceedings, such contention cannot be accepted. It was further submitted that ITO Ward 2(2) was having the territorial jurisdiction as the impugned property was situated within his jurisdiction and therefore, there is no infirmity in the jurisdiction of ITO Ward 2(2).

13. Regarding the contention of the ld AR regarding issuing of notice u/s 148 in the wrong name, it was submitted that it was merely a typographical error though other particulars such as name of assessee’s father and assessee’s address were correct and subsequent notices as admitted by the assessee have been issued in his name only and thus, the mistake has been rectified during the course of assessment proceedings itself and the order thereafter has been issued in the name of the assessee only. It was accordingly submitted that for such technical breach in terms of name of the assessee being mentioned as Shailendra Kumar Chaturvedi instead of Shailesh Kumar Chaturvedi, the notice cannot be held as invalid in the eyes of law.

14. It was further submitted that it was not a case of borrowed satisfaction as the Assessing officer was having credible piece of information received from the office of DIT (I&CI), Rajasthan and given that the assessee had not filed any return of income, it was a clear case of escapement of income and basis which the matter was reopened and notice was issued under section 148 of the Act. It was submitted that from perusal of the reasons recorded by the Assessing Officer, it is amply clear that the AO formed his belief on the basis of specific information in his possession and for the purpose of reassessment proceedings, what has to be seen is whether there is any prima facie material in his possession on the basis of which the AO could reopen the case. The sufficiency or the correctness of the material is not to be considered at the stage of recording of the reasons. It was submitted that once the AO has received specific information from the office of DIT (I&CI), Rajasthan and on perusal of such information where he has recorded reasons for reopening, it cannot be held that the reasons were not those of the Assessing Officer but belong to other agencies of the Department. It was accordingly submitted that there is nothing which prevent the Assessing Officer to rely on the exercise undertaken by other wings/agencies of the Departments, if the material so collected provides prima facie information, which enables the Assessing Officer to form a belief that income has escaped assessment. It was further submitted that it would undoubtedly require application of mind on the part of the Assessing Officer when certain materials collected by other wings of the department is placed before him, however, there cannot be any straight jacket formula of the manner in which mind can be applied or shown to have been applied and the same may be gathered from the reasons recorded and other material on record. It was accordingly submitted that there is no infirmity in the action of the Assessing Officer in initiating the proceedings U/s 147 of the Act on the basis of information received from the office of DIT (I&CI), Rajasthan. It was further submitted that the notice u/s 148 has been issued after seeking approval from the appropriate authority which clearly show application of mind before granting approval on the part of the appropriate authority. The ld DR accordingly supported the order of the lower authorities and submitted that the ground of appeal so taken by the assessee should be dismissed.

15. We have heard the rival contentions and perused the material available on record. Firstly we find that the assessee has not taken this ground of appeal before the ld. CIT(A) and is therefore, it is an additional ground of appeal which has been taken before the Tribunal. In the ground so taken, the assessee has challenged the assumption of jurisdiction by the Assessing Officer U/s 147 of the Act. It has been contended that firstly, the reasons so recorded by the Assessing Officer does not satisfy the requisite conditions for assumption of jurisdiction U/s 147 of the Act and secondly, the correct jurisdiction over the assessee lies with ITO Ward-6(4), Jaipur and not with ITO Ward 2(2), Jaipur who has issued notice U/s 148 of the Act. We therefore, find that the ground challenging the assumption of jurisdiction by the Assessing officer on both these counts is a legal ground and even though the same has not be taken before the ld. CIT(A), the same can be taken for the first time before the Tribunal. Hence, the ground so taken by the Assessing Officer is hereby admitted for adjudication.

16. It is settled legal proposition that the satisfaction of the Assessing Officer for assumption of jurisdiction U/s 147 of the Act should be discernable from the reasons so recorded and the reasons alone should be considered for determining whether the Assessing Officer is in possession of the material/information basis which he has formed the reasonable belief that the income of the assessee has escaped assessment for the impugned assessment year. For assumption of jurisdiction u/s 147, the Assessing Officer must form a prima facie view on the basis of material in his possession that there is an escapement of income, the opinion so formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the reasons recorded and/or the documents available on record must show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income and the reasons are required to be read as they were recorded by the Assessing officer. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons that the income chargeable to tax has escaped assessment. In the present case, the reasons recorded by the Assessing officer before issuance of notice u/s 148 read as under:-

“In this case information has been received from Director of Income Tax (I & CI), Rajasthan, Jaipur that the assessee has sold plot situated at South Apart at PN 380-B Devi Nagar, New Sanganer, Jaipur for a sale consideration of Rs. NIL during the financial year 2007-08 which transaction was registered by Sub purposes. The assessee has not filed his return of income for the AY 2008-09 hence tax liability of capital gain is not ascertainable.

Since the assessee has not filed return of income for the relevant assessment year, the above transaction entered by the assessee is not verifiable. I have reason to believe that income to the extent of Rs. 11,14,712 has escaped assessment within the meaning of section 147 of the I.T. Act and for taxing the escaped income remedial action u/s 148/147 required to be initiated.”

17. On perusal of the reasons so recorded, we find that the Assessing officer had received certain information from the Director of Income tax (I &CI), Rajasthan, that the assessee had sold a plot of land situated at PN 380-B Devi Nagar, New Sanganer, Jaipur for a sale consideration of Rs. NIL during the financial year 2007-08 and the said transaction has been registered by the Sub Registrar VII, Jaipur at value of Rs. 11,14,712 for stamp duty purposes. On perusal of the material available on record, we find that plot no. 380B has been sold by the assessee through a sale deed executed and registered on 27.08.2007 for a sale consideration of Rs. 6,00,000/- and for the purpose of Stamp Duty purposes, the same has been valued by the Sub-Registrar Stamp Duty at Rs. 5,57,355/-. Therefore, the information so received by the Assessing Officer from Director of Income tax (I& CI) as so stated in the reasons is factual correct that the assessee has sold plot no. 380B during the year under consideration and therefore, there is a transaction of sale of an immoveable property. At the same time, it is also noted that the said plot of land has been sold for Rs. 6,00,000/- and valued by the Sub-registrar stamps at Rs. 5,57,355/-as against NilRegistrar VII, Jaipur at value of Rs. 11,14,712 for stamp duty sale consideration and stamp duty value of Rs. 11,14,712/- so stated in the reasons recorded by the Assessing Officer and therefore, to this extent, there is a factual inaccuracy which probably might have influenced the Assessing officer in arriving at the quantum of income escaping assessment. However, the fact of the matter is that there is information in possession of the Assessing officer that there is a transaction of sale of property by the assessee during the year under consideration and the same is thus a tangible piece of information available with the Assessing officer and there is thus no dispute in this regard.

18. Now, coming to the related aspect of as to how the Assessing officer has arrived at a prima facie view that income arising on sale of such property has escaped assessment. Again, we refer to the reasons so recorded by the Assessing Officer wherein he has stated that since the assessee has not filed his return of income for A.Y. 2008-09, the taxability of capital gains is not ascertainable and he has therefore reasons to believe that income has escaped assessment within meaning of section 147 of the Act. In this regard, we find that firstly, in the sale deed so executed by the assessee, the PAN number of the assessee as well as the buyer has been duly stated next to their respective signatures and secondly, the assessee had already filed his return of income on 25.07.2008 with ITO, Ward-6(4), Jaipur prior to issuance of notice u/s 148, a fact which is stated by the AO and acknowledged by him in the impugned assessment order passed u/s 147 r/w 143(3) of the Act and there is thus no dispute that the assessee had filed his return of income prior to issuance of notice u/s 148 of the Act. We therefore find that where the Assessing officer was seized of the copy of sale deed so executed by the assessee, he could have easily noticed the PAN number of the assessee and basis such PAN number, could have easily checked in the Department’s IT system as to whether the assessee has filed his return of income for the impugned assessment year or not and basis examination thereof, whether the transaction of sale of plot has been reflected therein or not. However, we find that no such exercise has been undertaken by the AO which shows that in spite of having information in his possession, he has merely gone by the information received from DIT (I&CI) and shows non-application of mind on his part and failure on his part to carry out preliminary enquiry on receipt of such information and thus, the reasons so recorded and the very basis, that the assessee has not filed the return of income and therefore, the income on sale of property has escaped assessment, is vitiated in the instant case. Further, on perusal of the original return filed by the assessee, we find that in the said return, he had computed and disclosed income under the head “long term capital gains” showing full value of consideration of Rs 25,00,000/ and after claiming deduction for cost of acquisition and improvement, has computed long term capital gains of Rs 13,39,612/- and has claimed exemption of equivalent amount on account of fresh investment. The said disclosure matches with the transactions and the full value of consideration (including the impugned transaction which is subject matter of 148 notice) which has been finally brought to tax by the Assessing officer and thus, shows that the impugned transaction which is subject matter of 148 notice was duly reflected and offered to tax in the original return so filed by the assessee and therefore, on this count as well, there is no escapement of income in respect of impugned transaction. Therefore, in our considered view, such action on the part of the Assessing Officer for assumption of jurisdiction U/s 147 cannot be accepted and the notice under section 148 is thus set-aside. We find the similar finding has been given by the Coordinate Bench in case of Smt. Kanta Chaudhary vs. ITO (supra) and the relevant finding in para 5 reads as under:-

“5. We have heard the rival contentions and perused the material available on record. On perusal of the reasons so recorded by the AO before issuance of notice u/s 148 of the Act, we find that on the basis certain information received from the Investigation Wing Mumbai, the AO has not just formed an opinion but has finally concluded that the assessee has benefitted by obtaining accommodation entries from M/s New Planet Trading Co Ltd. Further, the AO has stated that since the assessee has not filed the return of income as per AST system of the department, he has reasons to believe that income has escaped assessment. To our mind, such an approach of the AO where, based on information received in context of a third party, even before issuance of notice u/s 148 has concluded that assessee has obtained accommodation entries and income to that extent has escaped assessment is not a correct approach in the eyes of law. In the instant case, it is an undisputed fact that the assessee has filed her return of income on 31.07.2007 where she has shown purchases of Rs 36,64,300 and which are the only purchases during the year and which are alleged to be accommodation entry as per the reasons issued u/s 148 of the Act. The assessee has shown the corresponding sales of Rs 39,44,220 and reported a gross profit of Rs 3,41,752. As held by the Bombay High Court in case of M/s Shodiman Investments, the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment. In other words, unless the AO carries out the further examination after receipt of initial information from the Investigation wing, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed her return of income. The AO should have examined her return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. In the entirety of facts and circumstances of the case, the notice issued under section 148 cannot be sustained and the same is held to be bad in law. In the result, the reassessment proceedings are hereby quashed and set-aside. The grounds on merit have thus become infructous and are not adjudicated upon.”

19. Now coming to the second contention of the ld AR that the correct jurisdiction over the assessee lies with ITO Ward-6(4), Jaipur and not with ITO Ward 2(2), Jaipur who has issued notice U/s 148 of the Act and therefore, even on this ground also, the instant proceedings are bad in law. We are however not inclined to agree to the ld AR in this regard and we rather agree with the contentions of the ld DR that there was ample opportunity available with the assessee during the course of reassessment proceedings to challenge the assumption of jurisdiction by ITO Ward 2(2) and once the assessee has participated in the reassessment proceedings and has not raised any such objections before the completion of the reassessment proceedings, the assessee cannot be allowed to raise this objection at this stage of appellate proceedings before the Tribunal.

20. At the same time, a related question that arises for consideration is that once ITO Ward 2(2) was ceased of the information during the course of impugned proceedings that the assessee had already filed his return of income on 25.07.2008 with ITO Ward 6(4) and the PAN of the assessee lies within the jurisdiction of ITO Ward 6(4), whether ITO Ward 2(2) was well within his rights and jurisdiction to proceed ahead with the proceedings and pass the impugned order in absence of any order for transfer of jurisdiction over the case to him or in the alternate, whether it was incumbent on his part to transfer the matter to the ITO Ward 6(4). We find that this issue requires further deliberation and in absence of any contentions advanced by the parties and in view of the fact that we have already set-aside the notice issued under 148, we have left this matter open and have not adjudicated the same.

21. Regarding the third contention of the ld AR regarding issuing of notice u/s 148 in the wrong name, we agree with the contention of the ld DR that it was only a typographical error in first name of the assessee though other particulars such as assessee’s surname, name of his father and address were correct and which has been corrected during the course of proceedings wherein the assessee has participated and thereafter, the reassessment order has been issued in correct name of the assessee. Therefore, on this account, the notice issued u/s 148 cannot be held as invalid in the eyes of law.

22. It is also noted that the notice u/s 148 was issued on 27.03.2015 after period of four years from the end of the relevant assessment year 2008-09 and such notice has admittedly been issued after seeking approval from Add.CIT, Range 2 Jaipur which is not in conformity with the provisions of section 151(1) wherein such notice issued after period of four years from the end of the relevant assessment year can be issued after seeking approval from concerned PCCIT/CCIT/PCIT/CIT and on this count as well, where the notice is issued without approval of the prescribed authority, the same is vitiated and cannot be sustained in the eyes of law.

23. In light of above discussions and in the entirety of facts and circumstances of the case, notice issued under section 148 is vitiated on accounts of reasons stated supra and is hereby set-aside for want of valid jurisdiction and requisite approval. The ground of appeal is thus decided in favour of the assessee and against the Revenue.

24. Now, coming to the merits of the case and related ground no. 2 taken by the assessee. In this regard, the ld. AR submitted that the ld. AO in the assessment order held that the assessee had only sold plot of land and no residential house construction was there on the said land and hence he disallowed the claim about cost of construction as well as the deduction claimed u/s 54 of the Income Tax Act, 1961. The ld. AO reached at this conclusion after observing that in the sale deed, the assessee had mentioned that he had sold only the piece of land and there is no mention about the sale of superstructure also. The fact that the assessee had sold residential building however stands proved with
the following evidences:-

a) Affidavit of the Tenant: In this affidavit, one Shri Narain Singh has stated that he used to reside in house situated at plot no. 380, Devi Nagar, New Sanganer Road, Jaipur during the period from Feb., 2005 to Dec., 2006 and two rooms, kitchen, Lat Bathrooms and Pakka Floor was there on this land. The said Shri Narain Singh has also given his Aadhar Card also to prove his identity. This document clearly proves that a house was available on this piece of land.

b) Certificate issued by Jaipur Vidyut Vitran Nigam Ltd: In this certificate, the JVVNL has certified that a 3 KW connection was given by it on this plot which cannot be given on vacant piece of land and also certified that in absence of any construction on a land, no permanent connection could be given which was provided on this land. This document also proves that this land had constructed portion.

c) Electricity Bills: There are copies of the electricity bills bearing name of the owner as Shailesh Kumar placed as APB 32-36.

d) Water Bills: There are copies of water bills bearing the name of the owner as Shailesh Kumar placed as APB 37-39.

It was therefore submitted that with the help of all these evidences, the assessee has amply proved that a house was constructed over the land sold by him having electricity and water connections. It was therefore requested that the claim of the assessee may kindly be allowed and the action of the ld. AO may kindly be quashed.

25. Per contra, the ld. DR submitted that the plot of land has been divided in three sub-plots and have been sold through three separate sale deeds which shows that there was no constructed house at the time of sale of the property. It was further submitted that electricity and water bills cannot be accepted as proof of construction of house, however, what is relevant is the sale deed where the parties have entered into the transaction and none of the sale deeds talk about any constructed house and in terms of description of the property so sold and purchased, it talks about plot of land surrounded by boundary wall. Further, the ld DR drawn our reference to the findings of the ld CIT(A) which reads as under:-

“v) I have duly considered the submissions of the appellant, assessment order and the material placed on record. The appellant is claiming construction of residential house without bringing any evidence regarding construction and source thereof. No bills etc. have been produced either before the AO or during the appellate proceedings. The appellant has himself admitting that bills for construction are not in his possession. The claim of the appellant that the constructed residential house was given on rent is itself contradictory as no rental income has been disclosed by the appellant. The electrical bill cannot substitute the bills for construction of house more particularly, in absence of any explanation regarding the source for so called construction. The AO has examined all the facts in detail and has given reasonable findings on all the issues, therefore, no interference is required. As far as the issue regarding claim of deduction u/s 54 is concerned, it may be mentioned that it has been held in the preceding paragraphs that the sold property was not the residential house, therefore, the AO was justified in denying the benefit u/s 54 of the Act. Considering above, the appeal is dismissed.”

The ld DR accordingly supported the findings of the lower authorities and submitted that no interference is called for and the same may be confirmed.

26. We have heard the rival contentions and perused the material available on record. We refer to the findings of the AO which reads as under:-

“Perusal of sale deeds of assessee it is clear that the assessee has sold plots and not constructed house. This fact is clearly mentioned in the sale deeds as under –

However in reply filed the assessee has repeatedly mentioned that he has sold constructed house. In his support he has furnished some copies of electricity bills and water bills. If the assessee has sold constructed house then for what reason the same was not mentioned in sale deeds and only boundary wall was mentioned. Either the assessee has submitted wrong facts at the stage of assessment proceedings or he had misled the Sub-registrar to evade stamp duties,. If the registered deed had executed of constructed house then the sale consideration will also come on higher side for taxation purposes u/s 50C of I T Act, 1961. This fact is brought to the knowledge of Id. A/R of the assessee and asked that if the assessee has sold the constructed house then why not the same be mentioned in all sale deeds. No reply was given by ld. A/R on the query raised. It is asked in show cause letters dated 02.02.2016 and 19.02.2016 that the assessee has sold plots and not sold constructed house, why the deduction claimed u/s 54 may not be disallowed? The assessee has only furnished electric and water bills. It is. worthwhile to mention here that the residential address of the assessee at the time of sale of plots and at the time of assessment proceedings is 70, Suraj Nagar (East), Civil Lines, Jaipur. This shows that the assessee was living at 70, Suraj Nagar (East), Civil Lines, Jaipur. Further no rental income is also disclosed from the plots at 380, Devi Nagar. The assessee has not produced any vidence of construction of house at 380, Devi Nagar. The assessee has purchased the plot 380 Devi Nagar in the year 1989. The plot was not approved at that time. To show the complete possession on plot it is regular practice to obtain electric and water connection on plot. Perhaps the assessee had also obtained electric and water connections for possession purposes. Thus from the facts narrated above and examination of sale deeds the following points have noticed1. The assessee has failed to produce any evidence for construction of house at plot No. 380, Devi Nagar.

2. From the sale deed it is clear that only plot was sold. No constructed house was sold.

Thus the assessee has sold plot therefore no deduction can be allowed u/s 54 of IT Act, 1961. During discussion of the case the Id. A/R is asked that the assessee may claim deduction u/s 54F of IT Act, 1961. The Id. A/ R has denied to claim deduction u/s 54F of IT Act, 1961. Further the assessee has made investment of Rs. 5,61,000/- in house and the remaining investment was made in commercial and residential plots. This shows that the claim of the assessee u/s 54 of Rs. 15,87,604/- is clearly wrong. Considering all the facts narrated above the deduction claimed u/s 54 is disallowed. The assessee has denied to claim deduction u/s 54F therefore the same is not allowed during assessment proceedings.”

27. We agree with the aforesaid findings of the AO that what has been sold is a plot of land and no constructed house has been sold and the claim of cost of construction and deduction under section 54 has been rightly rejected by him as there is no mention of constructed house in the sale deed. Further, there is nothing on record in terms of buyers confirmation/affidavit or photographs of the property at the time of sale which can corroborate that what has been purchased/sold is not just a plot of land but a plot of land along with constructed house thereon which could then have been verified by the Assessing officer. The affidavit of the tenant in terms of past tenancy and past electricity and water bills cannot come to the aid of the assessee to demonstrate the existence of the constructed house at the time of sale. We thus find that the assessee has failed to discharge the necessary onus placed on him in support of his claim and cost of construction as so claimed remain unsubstantiated and cannot be allowed. At the same time, where the AO is ceased of the information that the assessee has made fresh investment in certain house property and plots of land and is also accepting that such investment may be eligible for claim under section 54F, it is incumbent on the part of the Assessing officer that in such a situation, where he had denied the assessee’s claim under section 54, he should have allowed appropriate claim to the assessee under section 54F as per law. Since we have already quashed the notice u/s 148, no useful purpose would be served in setting aside the matter to the AO to allow the deduction under section 54F as the consequent proceedings stand quashed. The ground is disposed off accordingly.

In the result, the appeal of the assessee is allowed in light of aforesaid directions.

Order pronounced in the open Court on 07/07/2020.

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