Case Law Details

Case Name : Shri Lakshmi Narayana Prasad Vs ITO (ITAT Bangalore)
Appeal Number : ITA No.463/Bang/2018
Date of Judgement/Order : 04/02/2021
Related Assessment Year : 2013-14
Courts : All ITAT (7802) ITAT Bangalore (495)

Shri Lakshmi Narayana Prasad Vs ITO (ITAT Bangalore)

In this case, the claim of assessee u/s. 54 was denied on the reason that assessee has not filed any supporting evidence to show the sale consideration was reinvested in new residential property. Before us, the ld. AR pointed out to the copies of bank statements and submitted that the amount is accounted out of sale consideration towards construction of new residential house and deduction u/s. 54 has to be granted. However, the assessee has not produced the relevant bills, vouchers and receipts towards incurring the cost of construction of new residential property. The assessee pleaded for an opportunity to produce the relevant evidence in support of the cost of construction of new residential house.

The argument of the ld. DR is that there is no evidence to show that the original asset sold being a residential house. In reply, the ld. AR submitted that this was not the issue for denying deduction u/s. 54 by the AO. She also submitted that the Schedule of property in original sale deed dated 7.4.2017 itself shows that assessee has purchased the Site No.20 at Cholanayakanahalli Village, Kasaba Hobli, Bangalore North Taluk situated within Ward No.96 Guddadahalli Main Road, BMP, measuring East to West: Northern Side 37 ft, Southern Side : 45 ft., and North to South : Eastern side 78 ft. and on the Western side 94 ft. along with two squares A.C Sheet shed with electric amenity and the same was sold vide Sale Deed dated 29.8.2012. Being so, in our opinion, the CIT(Appeals) is not justified in holding that the property sold was not a residential house. We are of the opinion that the ld. AR’s request for opportunity to produce all the relevant documents has to be accepted. Accordingly, we remit the entire issue to the file of the Assessing Officer for fresh consideration and direct the assessee to produce all the evidence in support of his claim for deduction u/s. 54.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal by the assessee is against the order dated 20.10.2017 of the CIT(Appeals), Bengaluru-6, Bengaluru for the assessment year 2013-14 on the following grounds of appeal:-

“1) The Learned CIT (A) erred in passing the order in the manner that he did.

2) The learned CIT (A) ought to have accepted the explanation of the Assessee and refrained from confirming the disallowance of the claim of exemption u/s 54 of the Act.

3) The learned CIT (A) ought to have appreciated that no new residential property has been constructed cost was supported by an approval valuer report and consequently the existence of the new residential property could not be doubted and accordingly the learned CIT (A) ought to have held that the Assessee was eligible for the deduction u/s 54 of the Act.

4) The learned CIT (A) ought to have referred the Issue to the department valuer officer to ascertain the cost of the new construction in the principles of natural justice and decided the quotation of deduction u/s 54 of the Act.

5) The learned CIT (A) ought to have held that the Assessee was entitled to the deduction u/s 54 of the Act on the cost of construction declared by the Assessee in respect of new residential property.

6) Without Prejudice, the additions are excessive, arbitrary and unreasonable and ought to be deleted in fill.

7) The learned CIT (A) erred in levying the interest u/s 234B and 234C of the Act.

8) For these and other grounds that maybe urged at time of hearing of the appeal the assessee prays that the appeal may be allowed.”

2. The brief facts of the case are that the assessee filed his return of income on 30.1.2014 declaring an income of Rs.3,37,070/-. In the course of scrutiny assessment it was found that he had sold the property for the consideration of Rs. 79,72,000/- and the long term capital gains was determined at Rs.63,50,344/-. The assessee claimed the exemption u/s.54 of the Income-tax Act, 1961 [the Act] to the tune of Rs.62,77,000/- and also claimed brokerage of Rs.80,000/-. The assessee was asked to furnish the documents to support the claim of cost of construction of residential property u/s.54 of the Act. The assessee submitted that the residential property was constructed on a revenue site under his own supervision and for his own occupation and consequently he did not maintain the records in full and it was also submitted that there was no approval for the plan since it could not be obtained as construction was on a revenue site and the revenue authorities were only keen to collect the taxes and not providing any approval to the plan. However, the details of break-up of the cost was given. The AO, however, held that no part of cost of construction was liable to be allowed on account of the fact that the assessee did not produce any evidence by way of vouchers and documents to prove the construction. Even the valuation report submitted by the assessee from the approved value to support the cost of construction wherein the cost was determined by applying CPWD rates was not accepted. Consequently, the claim for deduction u/s. 54 of the Act was disallowed and a total income of Rs.66,14,070/- was determined.

3. On the claim of deduction u/s. 54 of the Act, the CIT(Appeals) observed that had sold Original Asset being a Vacant Site during the FY 2012-13 but relevant Sale Deed appears to have not been produced before the AO in support of the Proof of Sale for a consideration amounting to Rs. 79,72,000/- which was claimed to have been reinvested in construction of a new Residential Property on a Revenue Site which appears to have been owned by the assessee as seen from the Sale Deed dated 07-08-2011. In the absence of the Sale Deed it cannot be seen whether the Original Asset sold was a Land and Building being a Residential House for which deduction is admissible u/s 54 of the Act as claimed by the assessee. The assessee heavily relied upon the documents such as Sale Deeds, Construction Agreement, Valuation Certificate, BBMP Assessment of the Newly Constructed Property and personal spot inspection of the AO. The CIT(A) observed that disputed issue to be considered is whether the Appellant is entitled for deduction u/s 54 of the Act out of the Sale consideration of Rs. 79,72,000/- received on the sale of Original Asset sold in the FY 2012-13 relevant to AY 2013-14. The CIT(A) was of the view that the assessee appeared to have sold a Vacant Site not being a Residential House and therefore the deduction u/s 54 of the Act is not allowable in spite of the appropriation of the Sale Consideration in acquisition of a New Asset by way of construction of Residential House said to have been constructed on a Revenue Site. The CIT(A) noted that the construction according to valuation certificate had commenced in January 2013 and completed in December, 2013 and thereafter property was assessed to BBMP tax as per document produced by the assessee claiming it to be BBMP assessment. He was of the view that unless the property falls within the jurisdiction of BBMP, BBMP assessment would not have taken place and therefore assessee’s contention that it was a revenue site and plan was not sanctioned was rejected. The CIT(A) finally held that in the absence of any evidence by the assessee that the original asset was a residential house, deduction u/s. 54 of the Act was admissible and upheld the order of AO. Against this, the assessee is in appeal before us.

4. We have heard both the parties and perused the material on record. In this case, the claim of assessee u/s. 54 was denied on the reason that assessee has not filed any supporting evidence to show the sale consideration was reinvested in new residential property. Before us, the ld. AR pointed out to the copies of bank statements and submitted that the amount is accounted out of sale consideration towards construction of new residential house and deduction u/s. 54 has to be granted. However, the assessee has not produced the relevant bills, vouchers and receipts towards incurring the cost of construction of new residential property. The assessee pleaded for an opportunity to produce the relevant evidence in support of the cost of construction of new residential house.

5. The argument of the ld. DR is that there is no evidence to show that the original asset sold being a residential house. In reply, the ld. AR submitted that this was not the issue for denying deduction u/s. 54 by the AO. She also submitted that the Schedule of property in original sale deed dated 7.4.2017 itself shows that assessee has purchased the Site No.20 at Cholanayakanahalli Village, Kasaba Hobli, Bangalore North Taluk situated within Ward No.96 Guddadahalli Main Road, BMP, measuring East to West: Northern Side 37 ft, Southern Side : 45 ft., and North to South : Eastern side 78 ft. and on the Western side 94 ft. along with two squares A.C Sheet shed with electric amenity and the same was sold vide Sale Deed dated 29.8.2012. Being so, in our opinion, the CIT(Appeals) is not justified in holding that the property sold was not a residential house. We are of the opinion that the ld. AR’s request for opportunity to produce all the relevant documents has to be accepted. Accordingly, we remit the entire issue to the file of the Assessing Officer for fresh consideration and direct the assessee to produce all the evidence in support of his claim for deduction u/s. 54.

6. In the result, the appeal of the assessee is treated as allowed for statistical purposes.

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