Case Law Details

Case Name : Manpreet Kaur Vs CIT (Punjab & Haryana High Court)
Appeal Number : ITA No 354 of 2014
Date of Judgement/Order : 17/08/2015
Related Assessment Year :
Courts : All High Courts (4171) Punjab and Haryana HC (215)

Brief of the case:

Punjab & Haryana High Court held in Manpreet Kaur vs CIT that if the assesse had claimed exemption u/s 54 for utilizing the sales proceeds in the construction of the residential house then the onus to prove that the sales proceeds had actually been used in the construction of residential house in on assesse. If assesse failed to prove that the sales proceeds had actually been used in the construction of residential house then the exemption u/s 54 would be disallowed and penalty u/s 271(1)(c) would be levied. Assessee was required to satisfy the AO that sales proceeds had actually been utilized in the construction of residential house by presenting the bill of construction, proof of completion of construction etc.

Facts of the case:

Assessee had sold a residential house on 15-02-2006 for Rs 27 Lacs and after claiming exemption under Section 54F of the Act thereby claiming to have utilized in construction the whole of the sale proceeds upto 15.10.2006, net capital gain had been declared at nil. The assessee had claimed to have invested 8,32,000/- in the purchase of plot on 2.6.2005 and in respect of investment in construction of the property at 24,30,000/-. However, the exemption claimed in respect of expenditure incurred on construction was denied by the Assessing Officer as the assessee had failed to furnish any evidence in respect of the same during the assessment proceedings and expenditure for the purchase of plot was allowed.

As AO disallowed the exemption by Rs 24,30,000/-, so he levied penalty u/s 271(1)(c) for disclosing wrong particulars in return of income.

Contention of the assesse:

Assessee was of the view that as he had presented true particulars with regard to exemption u/s 54 so exemption should be allowed to the assesse. Moreover as he had sold the residential house for Rs 27 lacs and also utilized Rs 8,32,000/- for the purchase of plot and Rs 24,30,000/- in the construction of property, so exemption u/s 54 should be allowed. As the exemption had been wrongly disallowed, so penalty u/s 271(1)(c) should not be levied.

Contention of the revenue:

Revenue was of the view that as no proof of construction was produced before AO, So the amount claimed by the assesse for claiming exemption u/s 54 to had been utilized for the construction of residential house should be disallowed. As assesse failed to produce bill, proof of construction, the date of completion of construction So the exemption u/s 54 should be disallowed. With regard to that penalty u/s 271(1)(c) should be levied because with that the income of assesse had increased and that would amount to undisclosed income.

Mere reflecting expenditure incurred on construction in balance sheet along with income Tax return was not sufficient to establish the claim. So the sales proceeds from the sale of residential house utilized for the construction of new house should be disallowed and on that penalty u/s 271(1)(c) should be levied.

Held by High Court:

High court held that as the assesse failed to produce the bill, proof of construction, the date of completion of construction so the AO was unable to compute the genuineness of the transaction so exemption u/s 54 would not be allowed. The assessee had failed to substantiate the averments made in the appeal in support of her claim. The findings recorded by the authorities were pure findings of facts. So penalty u/s 271(1)(c) would also be levied.

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Category : Income Tax (27629)
Type : Judiciary (11794)

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