ITAT upholds CIT (A) order allowing deduction under section 54F

The Income Tax Appellate Tribunal (ITAT) dismissed the department's appeal and upheld the Commissioner of Income Tax (Appeals) (CIT (A)) order allowing the deduction under section 54F of the Income Tax Act. The ITAT found the assessee's investment in the property valid, emphasizing the need for verification of advance payment by the Assessing Officer. The ITAT also rejected the department's argument regarding Rule 46A, stating that the CIT (A) had the authority to consider necessary material without involving the AO. The judgment was delivered on June 13, 2014.

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Issues:
Claim of exemption u/s 54F of the Income Tax Act.

Analysis:
The case involved an appeal by the department against the order of the CIT (A) pertaining to the assessment year 2007-08. The main issue revolved around the claim of exemption u/s 54F of the Act. The assessee had sold a property and claimed exemption by stating that he paid an amount to his wife for the purchase of a new property. The Assessing Officer disallowed the claim, stating that the agreement provided by the assessee was on plain paper and not legally valid. The AO held that the property was purchased in the wife's name, making it an application of income. The CIT (A) allowed the claim, noting that the assessee paid an advance to his wife for 50% ownership of the property, supported by municipal tax receipts and certificate. The ITAT upheld the CIT (A) order, stating that the assessee's investment in the property was valid, and the AO should have verified the advance payment instead of presuming otherwise. The ITAT also rejected the department's contention of violation of Rule 46A, stating that the CIT (A) has the power to consider necessary material without providing an opportunity to the AO under Rule 46A.

In conclusion, the ITAT dismissed the department's appeal, upholding the CIT (A) order to allow the deduction u/s 54F of the Act. The judgment was pronounced on 13-6-2014.

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