2013 (11) TMI 415 - AT - Income Tax

Partial or incomplete investments, including land purchase, can meet s.54F exemption if date and amount are proven

ITAT HYDERABAD - AT held that discrepancies in the assessee's claimed investment for purchase/construction of a house and unexplained dealings under an ... Exemption u/s 54F - Investment towards purchase of land and construction of house property - Held that:- discrepancies with regard to the exact amount of investment made by the assessee towards purchase/construction of property has not at all been reconciled by the assessee before the revenue authorities. Further, the assessee is also required to explain why and under what circumstances the agreement executed with M/s Dhatri Constructions Pvt. Ltd. on 19/03/2008 was not acted upon and M/s Dhatri Constructions Pvt. Ltd., as claimed by the assessee transferred the amount of ₹ 64 lakhs to Fima Properties Ltd., Hyderabad. Once the assessee demonstrates that the consideration received on transfer has been invested either purchasing a residential house or in constructing a residential house even though the transactions are not complete in all respects and as required under the law that would not disentitle the assessee from availing benefit u/s 54F of the Act. Even investment made in purchasing a plot of land for the purpose of construction of a residential house has been held to be an investment satisfying the conditions of section 54F of the Act. Though there cannot be any dispute with regard to the above said proposition of law, the assessee is required to prove the actual date of investment and the amount invested towards purchase/construction of the residential house with supporting evidence. - Matter restored back for reconsideration - Decided in favour of assessee. Issues Involved:1. Erroneous order of CIT(A) on facts and in law.2. Rejection of the claim for deduction under section 54F of the IT Act.Issue-wise Detailed Analysis:1. Erroneous Order of CIT(A) on Facts and in Law:The appellant contended that the CIT(A) made errors both factually and legally in confirming the Assessing Officer's decision. The appellant argued that the CIT(A) failed to consider that the entire capital gain had been utilized for acquiring property as per section 54F of the IT Act. The CIT(A) did not clarify the factual position regarding the observations made by the Assessing Officer and did not refute the findings presented by the AO. The CIT(A) confirmed that the flat purchased by the assessee was under construction and hence did not meet the conditions stipulated in section 54F.2. Rejection of the Claim for Deduction under Section 54F of the IT Act:The primary dispute was whether the assessee fulfilled the conditions for exemption under section 54F. The assessee sold a property on 29/10/2007 and declared capital gains of Rs. 58,90,114/-. The assessee claimed exemption under section 54F, stating an investment of Rs. 64 lakhs for purchasing and constructing a residential house. The Assessing Officer noted discrepancies, such as the construction not being completed within the stipulated period and the investment not being properly documented. The AO observed that the assessee had not purchased or completed the construction of any residential house within three years from the sale date, as required by section 54F.Before the CIT(A), the assessee presented agreements and documents showing investments made towards the purchase and construction of the property. However, the CIT(A) upheld the AO's decision, noting that the property was still under construction and possession was not given within the stipulated period.Appellate Tribunal's Decision:The Tribunal reviewed the submissions and materials on record. It noted that the assessee had indeed sold a property and claimed to have invested Rs. 64 lakhs towards purchasing and constructing a new residential house. However, discrepancies in the investment amounts and dates were not reconciled. The Tribunal emphasized that section 54F is a beneficial provision and should be construed liberally, as supported by various judicial precedents. The Tribunal agreed that the assessee must demonstrate the actual date and amount of investment with supporting evidence.Given the unresolved discrepancies and the need for further investigation, the Tribunal remitted the matter back to the Assessing Officer. The AO was directed to re-examine the issue, considering all relevant facts, materials, and judicial decisions. The AO was instructed to provide the assessee with a reasonable opportunity to present evidence.Conclusion:The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for a fresh determination. The appeal was allowed for statistical purposes, with the AO required to re-evaluate the claim under section 54F, ensuring a fair and thorough review of all evidence and legal precedents.