Section 54 exemption cannot be denied for mere completion of construction in short period 

Smt. Parminder Kaur Bedi Vs ITO (ITAT Jaipur)

At the outset, it is noted that the AO has not disputed the purchase of residential plot by the assessee at Mohali vide sale deed dated 4^th February, 2008. The AO as well as the Id. CIT (A) has doubted the claim of construction of house by the assessee on the said residential plot. The claim was denied mainly on two reasons that the assessee has claimed to have constructed a house within a short period of 2 months through a contractor and secondly the assessee has failed to explain the source of cost of construction.

The AO has pointed out that there is no withdrawal of cash from the bank account of the assessee to establish that the assessee has incurred the said amount of Rs. 7,50,000/- for construction of the house. In the course of argument, the Id. Counsel for the assessee has pointed out that the assessee has withdrawn the cash of Rs. 7,00,000/- on 30^th January, 2008 and further an amount of Rs. 1,00,000/- on 2^nd February, 2008. He has referred to the bank account of the assessee with Punjab National Bank, Jalandhar. From the details of the bank account, it Is clear that there is an withdrawal by the assessee of Rs. 8,00,000/- on two days and, therefore, the said amount of Rs. 8,00,000/-withdrawn by the assessee from her bank account clearly explained the cost of construction of house incurred by the assessee.

Thus the said ground of the AO is contrary to the record and fact that the assessee has duly withdrawn the cash from the bank to meet the construction expenditure. Further, it is to be noted that the assessee is required to complete the construction of the house within a period of three years after the date of sale. Therefore, even if it is presumed that the assessee’s house construction could not be completed within a short span of two months and it took more than that time, once the construction could have been completed within three years from the date of sale of existing asset, the claim of the assessee is eligible.

The AO has not conducted any enquiry to dispute the claim of existence of the residential house. Once the house was actually constructed after purchasing of the plot of land, then the construction is possible only after the said purchase vide sale deed dated 4^th February, 2008.

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